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tv   Bloomberg Markets Asia  Bloomberg  August 20, 2017 9:00pm-12:00am EDT

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♪ >> this is "bloomberg markets: asia." haidi: china drives against risk, new rules on overseas investments. day,scue soaring on a down full-year profit doubled on high prices and lower costs. the u.s. and korea launch military drills.
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wargames start this trading week , a few jitters, a mixed the session, msci asia-pacific --nding declines from friday extending declines from friday. the palace intrigue, steve bannon returning to breitbart, the latest in high profile departures from the trump administration. macro-like when it comes to asia and globally, but #54 or the eight, local central banks are what we are watching, culminating a week of fed speak from janet yellen and mario draghi in frankfurt this week ending up in wyoming, jackson hole, the central bank meeting, expect ring a cautious mario his comments about the balance sheet about interest rates and inflation taken wildly
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by the markets this year, but not expecting a massive policy surge from him, but there could be comments on how the stronger on inflationing expectations, and listening for janet yellen's comments, guidance when it comes to the richer directory and talents sheet unwind. the ecb, not expecting shock and all from mario draghi. 2014 had him using jackson hole as a symposium to indicate that policy change to go into qe, soent bonds for ecb a big week on passing the word of central banks. 30 minutes from the open in china and hong kong come of that singapore, malaysia coming online. let's get over to sophie. cautious monday. bonds tracking lower, stocks in asia on the back foot. the event risk of jackson hole,
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below capital calling it action list jackson, bankers likely to stick to the script. have south korean drills with the united states in focus, adding to geopolitical risks, but the won up .3% despite the pointn the kospi, down 1%, and the nikkei 225 sliding atpite weakness in the yen 109.34. the correlation for the yen with japanese markets is eroding, but not worrying one hedge fund manager mike j.p. morgan. gains in singapore, but that is the outlier in the asian session. stocks in sydney under pressure, leading the drop, not getting a boost from the commodities complex with copper, aluminum, and steel on the rise, gaining 3% and shanghai to date.
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a closer look down under with the earnings front and center, each energy, fortescue metals gaining after results this helping higher iron ore fortescue. take a look at leading laggards, focus group dropping 23% to the safed after the company ended this after eight has ended talks. bluescope steel sledding 18%, after doubling net profit, the company sees lower margins for the first half, but paul o'malley said it does face an investigation over potential cartel behavior from 2013-2014. paul o'malley also announced his retirement. be hitting 10 years of the company this november and
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has overseen the restructuring of bluescope. it has been a challenging bride, the share price lost 72% since he took the reins in 2007. >> thank you for that. let's get you caught up to date with first word news. police saypanish they are no closer to finding the suspected terrorist leader in barcelona. membersthe names of 12 of the islamic extremist group, but they remain unaccounted for. they gang plan to attack with three trucks packed with explosives and blow them up in barcelona. the u.s. and south korea begin wargames on monday, operations to announced by the north as reckless saber rattling. weeks of tensions, including threats to attack long, drawing a response from
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president trump. theater said he would watch training exercises before deciding whether to attack. want anmexico, with ambitious outcome from nafta talks. all three are committed to finding a deal that brings 21st century standards to the agreement. they want a quick agreement before politics takes over, mexico with an election in july, and u.s. midterms in the u.s. in 2018. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thanks for that. china has laid out new rules on overseas investment, making it explicit its campaign against irrational acquisitions from real estate to sports. tom mackenzie joins us from beijing. how much do we know?
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this is policy catching up with reality. andave seen these curbs they have started to bite already in terms of out founded dealmaking. this is the state council formalizing this, three categories they will be focused on, taking a hands-on approach to overseas investment from chinese firms. completely, banned casinos, gambling, military technology. there will be restricted areas, leisure, entertainment, sports, property. thirdly, the category of outbound deals that will be actively encouraged, deals focused on the health and road initiative, oil, mining, -- belt
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and road initiative, oil, mining, essentially a question of focusing on bread-and-butter dealmaking to underpin china's national economic priorities, less of the big, headline glamorous deals, and it follows on the extra scrutiny we have seen on the conglomerates here. some of the big private companies have been on a massive buying spree in the last few years and we have seen them scrutinized over bank lending. of this renewed focus on financial risks and the government asserting control. glamorouss investments and more into infrastructure, as you say. iticy is everything when comes to china, so what does it tell us about beijing's priorities? they are about risks and
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this broad focus across the board for regulators and policymakers on financial risks, and some of these big conglomerates have come under the spotlight over some of the dealmaking, some of the leverage. the powerful from planning commission saying that some of the deals had been badly thought through and risky and raised to the financial risks for the system, capital outflows, money laundering, all areas of concern, and this is about tailoring policy to reduce risks. will be deals encouraged, for example that cam china -syngenta deal worth $43 billion. it has not gone through completely, but it will likely go ahead, high tech, stillltural, likely to get approval, but domestically and internationally, this will have ramifications.
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year wereia, 40% last bought by chinese developers. single companies, they will have to change their business strategy. this is #eight 162 that shows capital outflows and the pressure on the renminbi. 2015, significant outflows. 2016, 800 $15 billion. this year, the first seven months have fallen off 45%, a trend likely to continue. going global has not been derailed completely, but they want to see a more rational approach to these deals. much. thank you so still ahead, can they walk the walk? the u.s., mexico, and canada
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pledging a new nafta deal on a tight timeline. a formere joined by white house trade adviser to assess what is achievable. plus, australian miners and earnings. westpac joins us next. this is bloomberg. ♪
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♪ the quick check of the business flash headlines. ll, 600,000 barrels from libya. the the is exempt from opec reduction curbs. output of one million barrels in july won't be restricted until it reaches one .2 5 million. a high court challenge against 260 $9 million in taxes and penalties saying it a reasonable
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resolution of the matter that could strengthen the position of chevron is a caves in on housing tax dispute. -- on australian tax dispute. aftercue metals jumping profit doubled. sydney,ck trading in upside of 6% at the moment, net income rose 112% in a year through june thanks to higher prices and a drive to slash costs. to twoue cut its debt point $6 billion and declared a dividend of $.45 a share compared with $.15 a year earlier. bhp reports tuesday, analyst sixfold,rnings rose that thanks to higher raw material prices. shareholders will want to know whether the minor can pump up
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henri terms and deliver. bhp shares are rising slightly ahead of those results by .5% in sydney. talk about the outlook for the mining industry with westpac in sydney. ite talking about bhp, will as theyasing pressure have reached this truce with elliott. if they don't deliver, will we see animosity continue? and what should they do? >> there is little they can do. we are going down a road i cannot answer your question. i have to give upon's on that one. haidi: let me rephrase that, given that we have seen resistance at $50, what more can opec do?
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does of business like bhp want to keep shale within its business given the environment? ongoingave this improvement and efficiencies in the shale industry with costs coming down. also, part of the story is shale will be undermining profits for oil going forward, so if the hp can be on the cutting edge of curbs, then it remains a profitable industry. opec will be in the background, but the shale play will be the ultimate price setter over the next few years that the risk for any company on the right side of that and at the cutting edge can continue to make good revenues from it. the other half of the
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assumption is what happens in china. 19the going into this already congress expecting policy towards stability going into that. this is not the right chart. that may bring that up for you. are looking at is potential downside and weakness when it comes to china. do think some of these expectations when it comes to where the aussie dollar is and iron ore is based on a rosy picture? >> there is. there are two assumptions. momentume positive commentary from china and ongoing expectation that the way the chinese authorities will manage themselves through the national congress and after that is more balance and control. that is probably a safe assumption. the idea that there will be a sharp crashing of chinese demand
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is too aggressive, but to assume you have to keep growth growing at the same levels when you see the pullback in the changing structure and nature of their economy, it's clear they have quick growth,d of and on that basis, you see a shift that leads to downside risks, particularly later in 2018. haidi: this is the chart, china pmi, which has come off the peak as we expect the second half to slowly come down, as well as the metals spot said index. this correlated do we expect that to start tailing off? >> that is the perfect example of chinese pmi strong through the year. global trade numbers has been
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strong and pmi globally has been robust and all look like they have reached a limit and are about to pull back. seen this positive stimulus fueled growth globally, which china has been feeding into and benefiting from. this meanthere is reversion coming on and slow growth coming through, and china has a limited ability outside of what it benefits from a stronger external environment to leverage it further, so we would argue there is a point of reference in terms of looking for downside risks around iron ore and the base metals. , recoverys growth comes stability story has played into the commodities story, but how much has been a lift from the weaker dollar? >> the weaker dollar has definitely been part of the story. lower commodity
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prices because we do see a further rate hike from the u.s.. -normalization in september, we will see of further rate hike, and possibly to more next year. we have seen ok growth, nothing rises will beate increasingly normalize, which will be of benefit for the u.s. dollar. you are talking about risks around too much optimism in europe right now. we will see further and those markets come a weaker euro, stronger dollar story, so that story andrt of the does suggest weaker commodity prices. with all that and play, does the aussie dollar had any business being as strong as it is? >> the aussie dollar fair far
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is probably in the top range of $.80. there is some optimism and enthusiasm for high-yielding currencies at this time, but if we think about where it could play out, even the worst case scenario, we are still only talking about low 70's, so you have that margin of about seven cents that will be played off, so that is the thing that gives the aussie dollar its volatility. if that sentiment shifts, you will get a rapid move. haidi: if you take into account stronger-than-expected growth, the i am rishaad salamat outlook -- the iron ore outlook? big miners are focusing on cost control as well, so there is -- haidi: fortescue has done an
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amazing job. >> and bhp. even vale. it has been shutting down production from more expensive sources, so you have seen this focus on cost control to help boost prices. about demand if it softened a little bit, because they are so efficient, they won't respond, so prices can fall further quickly. that is why we are looking further out for price falls because that is where you get ongoing times continuing even though demand has softened through next year. haidi: they are getting their financial houses in order while they do have these tailwinds. >> that leaves him in a fairly sound position. bhp out tomorrow, expecting a positive set of earnings. thank you for that. westpac commodity analyst
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joining me here in sydney. don't miss her interview later this morning to talk through those latest earnings with fortescue at 11:00 a.m. in hong kong in 1:00 p.m. in sydney. to resumeom set trading after announcing its privatization plan, all the details and a premarket check coming next. this is bloomberg. ♪
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♪ we are counting down to the open of markets in china and hong kong. the premarket session in hong kong, a pretty mixed the session at the start of this week. premarket up .2%, futures flat at the moment. some stocks we are watching, unac, a chineses
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developer, caught up in the deleveraging campaign. china unicom, the of $11.7 billion share sale there, announcing and a statement to the hong kong stock exchange a list of strategic investors when it comes to china unicom as lack lastand told ,eek, a messy announcement investors including tencent, china life insurance, as that company goes under restructuring. c, they 15k at suna fold job after a flurry of acquisitions and a positive profit alert issued this morning, gross profit up 80%, revenue up 25% on the counter deals and gross profit margins as well. its chairman had to come out and say he did pledge to come down on leverage as well.
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two stocks we are watching. easy e,ent, the fed and counting down to jackson hole, what the asia-pacific will be looking for as policymakers need in wyoming. this is bloomberg. ♪ ♪
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♪ 9:29 a.m. in hong kong. we are counting down to the open up markets. i'm haidi lun in sydney. a mixed downside start to the asian trading week. other geopolitical events kicking off the week as well. on politics, continued turmoil in the trump administration the departure of stephen bannon on friday, sending u.s. stocks
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recovering off session lows. global equities, we will be watching jackson hole at the end of the week, where global central bankers will be meeting, taking a close watch over policy, the fed balance sheet unwind, and where is the inflation? let's get over to sophie with a look at markets coming online. sophie: chinese stocks and the hang seng barking the regional trend, adding .3%, extending a 2-d advance as hong kong shares rise. won stronger given that fixed from the pboc. unicom, the stock resuming
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trade along with companies investing into the $11.7 billion share sale. its parent jumping 10% in shanghai. unac china jumping after forecasting first half profit has risen 15 times after a series of acquisitions. due to report earnings on august 31. the singapore logistics operator, hna setting a date for of vote on the take over cwt. it is a heavy earnings day for hong kong. the hang seng index breakdown by sector, of .5%, telcos leading gains, i.t. stocks also higher.
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slightly lower along with staples and utilities. for the most part, a bright spot when it comes to shares in hong kong and china. haidi: we will take it. thank you for that. let's get to first word news. the u.k. will lay out more of its rags it is edition, hoping to persuade russells away from divorce talks on to their future relationship. london will publish papers on data protection and judicial cooperation. the eu must be convinced that progress has been made on residency rights, the bill, and the border with ireland. doubled linelocks total return bond fund has taken on the wall street journal over a story about shrinking assets under management. the papers says they declined
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13% to $53.6 billion. good luck tweeted in response that i'm surprised they ran a story so pointless, illogical, and poorly written, and not that it matters, significantly inaccurate. thousands marching in hong kong supporting those jailed after occupy protests. they were originally given service and suspend and censuses, but an appeal sent them to prison. critics say hong kong's independent judiciary is under threat from the beijing backed government. ending ipo's heading for a they tappedas growing demand for financial assets. for ast for insurers and the totale sale, reaching seven point $8 billion,
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an increase from last year and topping the current record set in 2010. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: thanks so much for that. the economist and bankers gather at jackson hole this week amid tepid global inflation. that will be among the hot topics, but should they be so obsessed with price rises or take a bigger view of their mandate? debating at length with the number of guests about the role of automation and the structural changes in weather central banks in should change the mandates of the way they look at inflation. where does asia sit on this whole debate? the best having performance in world economy since 2011. why are this debate,
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central banks focusing so much on inflation? the mandates set up to the governing authorities is actually broader than price stability. they have multiple objectives. perhaps central banks are leading the debate on where monetary authority should go in terms of steering their economies, stability, currencies, and the like, so that whilefeeling there may be some inflation nutters, it is not in a state trooper central banks in central asia. haidi: what about the diversity between different mandates between banks? >> quite diverse. japan, headlines around 2% inflation target. the central bank has also been tasked with the stability of the banking system.
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, the boj has done a good job on keeping the banking system on track. in australia, they are mandated to look after implementing growth, but it has of third little-known tenant, to look after the welfare of their citizens. china just not just boost growth and look after inflation, but liberalizing financial markets and a rotor role in opening up the economy, so these egg centralbanks -- big banks don't just have a strict purview to look at price stability. they have a broad mandate to look at the economy through a much wider lens. is key as we look at the implications for asia as the fed begins its unwind. we could get that from janet yellen this week. shrinking of the fed
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balance sheet will be one of the biggest in maddux for the global economic debate for months. is a feeling in asia and emerging-market asia that there is wrong ability, especially when you consider how volatile currencies are in this part of the world and how auto capital lows are. -- capital flows are. is why these mandates are so important, being tasked with the stability of the exchange the overall stability of the banking system and capital flows, so if we do see a volatile reaction, on paper many banks in asia are task with the tools to react in the way they see fit. crucial as we go into
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that jackson hole symposium, listening to what janet yellen and mario draghi have to say there. thank you. we will be watching infosys after it approved a $2 billion share live back announced one day after the ceo quit and talk of personal attacks from the infosys founder. will these open hostilities make it tricky to attract outside talents to that top the job? it might have put off a few candidates. #1695, in the last three years since he took over as chief executive's, infosys has been outperforming its ears, but does lag the indian market. peers, but does
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lag the indian market. shares had gained 21% since 20 14, and revenue up by 25%. the outsourcing industry is transitioning to internet and thereased computing, and has been some hostility from the trump administration in the warm of immigration. then there is a battle with the founders that does not help any. backing hims been all the way as the first non-founder of helming the companies, but the founders have of a lack of corporate governance. the question is who is prepared to fill those rather big shoes and help the company grow while meeting the expectations of the
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founders and what they want for the company as well. spoke with a consulting chairman and former asian-pacific chairman of a consulting services company. had them without leadership for some time now. spine.rd has to get more someone to have selected from within the system, at least the next round. there may be a few candidates from within your the deadline is march 2018 for a new ceo. they have gone into damage control with the share buyback. what is the reaction to the? is it enough -- to that? is that enough to make things better? >> the share buyback was
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discussed before the ceo announced he would leave. day chart.ive on thursday, shares closed up 4.5% before falling friday on the news of the departure. had agreed to buy back 130 million shares at a 25% , more than some analysts had been expecting. than six plane dollars in cash, and there have been questions from investors when they would see some of that returned to them. this is one of the things that had been commented on, whether the founders have been wondering whether this cash pile could be whittled away on acquisition. in200 million acquisition
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2015 -- this share buyback should help to shore up the share price. thank you for that. coming up, great expectations indeed as the u.s., mexico, and canada round off nafta talks. a former whitey house traded pfizer next. this is bloomberg. ♪
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♪ this is "bloomberg markets: asia." i am haidi lun in sydney. u.s., mexico, and candidate end the first round of talks on the new nafta deal, committed to wrapping up negotiations quickly. our next guest was a white house traded pfizer and counsel to the
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senate finance committee. -- white house trade advisor and counsel to the senate finance committee. the first round of talks come the next round in september, is there cautious optimism coming through from that statement? >> may be with an emphasis on cautious. this first round, we heard three different versions of nafta. the canadian and mexican trade ministers saying we understand are ready to improve and modernize nafta, but nafta has been a success story. the u.s. trade representative gave a gloomy or view, saying it had fundamentally failed in the americans and needed major starkements to differences in the rhetoric, but early as you say and we have
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more rounds ahead of us. a sense of nohere appetite on any front, in particular the u.s. and mexico, to drag this out. to get this done before the mexican elections next year and the 2018 midterm elections. >> that is the desire. the united states controls how that can happen. ,f the u.s. looks for consensus consensus already agreed in the context of the tpp, then you could see how these things could be wrapped up quickly. puts forwardtes proposals that benefit the u.s. and adversely affect canada and mexico, that will not be easy to not up quickly, certainly before the mexican presidential election next summer. chart, 2191 on the
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bloomberg addresses the trump campaign premise that the decline in u.s. manufacturing jobs came because of nafta and the trade deficit is because of nafta. shows what wely were talking about before, maybe that the china joining bt oh, but a structural rebalancing when it comes to the global economy and the chinese economy as they are opened up. how does this get addressed? the u.s. can't step down when it comes to the deficit and u.s. jobs. >> that's right. nafta is not the culprit when it comes to u.s. manufacturing jobs. about one third of u.s. manufacturing exports go to canada or mexico, more than the next 10 to trading partners combined, so nafta is part of
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the solution for u.s. manufacturing. the competitive rise of china has had a significant effect and the president will be under pressure from the people who voted for him to deliver on that promise, challenging thing to do. be done and what changes made to look like they have fulfilled his campaign promises? >> china or nafta? ,aidi: with respect to nafta jobs, and the trade deficit with mexico. >> this is going to be a tricky thing to do. reduce trade deficits with markets that maintain high barriers. ers, youower barrio reduce the trade deficit.
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that is not the case with mexico. they will have to be creative in the positions they negotiate along with the president's objectives. a new labor chapter will be much stronger than currently and will commit parties to adhere to international labor standards and have those commitments enforceable. that way the u.s. administration can say we are leveling the playing field and giving a better chance for u.s. exports and making them more competitive , a creative narrative that will have to go around some of these new provisions. origin?ules of how does that get sorted? >> that will be very difficult. the rules in the agreement that set the minimum level of content that he good must have an order to qualify for duty-free access. rules.ncludes strict in the case of automobiles, more
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than 60% must originate in north america. the trump administration wants to take that higher, something opposed not only by canada and mexico, but u.s. auto companies that say if you make of these rules more burdensome, you will make us less competitive globally against other major car manufacturers. the more troubling, administration has talked about imposing a minimum u.s. content requirement, a perverse use of rules of origin to say canada and mexico, your exports to the united states must include a minimum u.s. content to be treated as duty-free. these stickierof issues, the idea seems to be this is a soft point in negotiations. rulesill have to address of origin, currency trade, so willnipulation,
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these parties hit a wall? >> they could. the nafta agreement allows a panel to review when nafta parties imposes an antidumping or countervailing duty order. this is chapter 19. the administration wants to get rid of this procedure, which has been important to canada, particularly in the context of this lumber dispute. so this and other issues like it could make negotiations more difficult and take longer than the u.s. and mexico would like it to. he has threatened to scrap the entire deal if he'd snack at the changes he wants to is that a possibility -- changes he wants. is that a possibility?
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>> it's not credible given it is the same threat in april when there was an executive order prepared and he was within a couple of days of signing it that would have wit the gun the withdraw process -- would have begun the withdraw process. sure enough, the president decided not to sign that executive order, but dissipate in this renegotiation. i expect further threats to with the draw, but there is so much of its in the trade relationships come the volumes of trade investment are so high that it will be perceived as not a credible threat if and when it comes. haidi: we are really appreciate your time. nafta negotiations wrapping up this round and another round of
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tpp talks in sydney without the united states. more to come. this is bloomberg. ♪
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♪ a quick check of the latest business flash headlines. shares in vocus group have plunged. madeal capital firms had $1.7 billion bids. with is optimistic financial outlook for next year and is confident of delivering a return to sustainable growth after a year of transition. a maintenance unit plans to race as much is 300 million dollars to fund overseas expansion. itsill offer 20% to 30% of equity to investors and is targeting an october listing in
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jakarta and plans to set up a south of singapore and seek partners for expansion in dubai, australia, and east asia. lufthansa will hire workers from air berlin at lower pay. the ceo says the staff will join wingedsa's low cost euro unit under cheaper contracts. air berlin only profited three times. it announced insolvency after the main shareholder withdrew support. a government loan will allow it to fly on for about three months. jeffrey and melt could be the next front runner -- jeffrey m immelt could be the next front runner for the head of uber. he is said to have the support of the board. coming up, the u.s. and south
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korea starting military drills, the possible repercussions. that is in a little over 10 minutes from now. this is bloomberg. ♪
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the start of a new trading week here in asia, the military drills taking place in south korea. the u.s. is involved, along with a number -- a number of allied parties. the last time we had these drills, we did have a reaction when it comes to north korea. they fired off a ballistic missile. we are bracing for potential rounds of favor rationing. look at this chart. we have been watching yen and gold. indicators suggesting that we are about to see a consolidated rally for both of these safe havens. yen and gold, in terms of their relationship to each other, they have been moving ever more closely. 93.98 on your bloomberg if you want to look at that chart correlating gold to yen. we have seen a real surge in strength.
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there has been a perfect storm. not just the -- geopolitical risk driving investors into savings and -- save haven assets, but persistent weakness in the u.s. dollar, at inflation, wage growth failing to keep up with the other growth indicators that have been more ositive coming out of the u.s. we also have a better than expected in proving economic feature out of japan, despite inflation being on the weaker end of what the bank of japan has been looking for. let's go over to sophie for a look at the market. it is a monday. we got a weekly from wall street. not a lot of macro data. everyone is on what -- on edge waiting to hear from janet yellen. sophie: we are seeing trading volumes. i like traders might be on the sidelines. we have bonds tracking treasury lower. -- heng hung saying
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seng, and the nikkei 225 extending for a fourth straight a. speaking of correlation, we are it among save havens. correlation between the yen and japanese stocks are also eroding, but that is not worrying to head for -- hedge fund manager of jpmorgan. i want to look at micro drivers when it comes to what is stock in the region. we have china unicom gaining over 10%. companies investing in a 3-4 plan on the events today. parent company, united network is rising over 10% in shanghai. the stock has not cut to underweight at j.p. morgan. going onout what is with china ever grand at second place in the region gaining 9%. forecast intelligent
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that chinese developer profit will turn a corner this year with ever grand expecting to triple net profit. today developer gaining with a 15. great it is to announce earnings on august 31. we have the likes of china resources gas filing over 8% -- falling over 8%. is leading the drop in asia, falling over 20%. dropping as much as 23%, the biggest drop since november 2011. we have outgoing ceo o'malley warning that a flood of cheap steel into australia, plus a stronger aussie. he does point out that the following six months looks a little more positive, given the potential rise of offshore steel prices. those are boding well for steel. shrinking imagery of searing of shanghai is the line
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in blue on this chart. they are jumping about 4%, getting closer to the 4000 level. they are climbing above $76 at the time. commodity is pretty good. peak whenmuch for the it comes to the chinese steel. let's get the first word news. spanish police say they are no closer to finding the suspected terrorist leader behind last week's attack in barcelona. they have been name of 12 members of the islamic extremist group and find a bigger outrage and say three people remain unaccounted for. they packed three trucks with explosives and blew them up in barcelona. u.s. and south korea began new wargames on monday, an operation denounced by the north
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that could lead to war. weeks of intention including kim joshun set to attack long guam -- guam. president trump warned of fire and fury. kim jong-un said he will watch the exercises before deciding to attack. canada, mexico and the usa they want an ambitious nasa outcome. they offered few details that said all three were committed to finding a deal that brings 21st century founders to the agreement. they want a quick agreement politics takes over. mexico holds an election in july and the u.s. midterms are in november, 2018. local news, 24 hours a day, powered by more than 27 hundred journalists and analysts in more than 120 countries. this is bloomberg. haidi: thanks for that. sailors are missing after an
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american warship hit a tanker off of singapore. has the latest on what is now the second collision involving the u.s. seventh fleet in just too much. -- two months. what is the latest we know? jason: good morning. there are a 10-12 ships from singapore, and some united states patrol vessels looking for these missing sailors in the area where it occurred. it up -- it occurred east of singapore and one of the busiest trading ports around the world. there is an intensive search underway. to -- as i.e. alluded uded to, it is similar to the uss fitzgerald. jason: just two months ago there was another similar collision of
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a u.s. navy ship with a merchant ship. in that incident, seven united states sailors drowned. preliminary investigation in that -- related to that incident is already saying to of the commanders of the u.s. ship were relieved of their command. too early to say what happened this morning. it does look like a very serious mishap for the u.s. navy, and what the possible tragic loss of life. it is a great concern. this coming as these wargames begin with the u.s. and south korea. can you give us background as to what ships like this are doing in this part of the world? i know a number of the ships, including the mccain are equipped with the missile be ase system that would
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possible defense option against north korea. jason: that is right. i think the u.s. seventh fleet has about 40 navy ships operating in this area, which includes not only the malacca straits, which is one of the busiest streets for merging king, but the whole south china sea. it has become one of the most sensitive sea areas in the world. we have north korea and south korea, there is also tension surrounding some of these land and sea features that china has been building its military on in the -- assets last five years. there are a lot of tension around those rocks and reefs, and the u.s. navy has maintained a strong presence here to try to safeguard a lot of merchant shipping, and also to be on hand to provide backup to south korea in the case of a lot of these
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testse taste -- missile conducted by north korea. it is a very tense area, and a lot of potential for mishaps. it is also very crowded with military ships and merchant ships, perhaps that is why we are seeing some of these difficulties in steering and navigation. indi: the second incident about two months. jason, thank you for that. just to recap the latest that we know, the collision of the uss john s mccain delighted with a merchant vessel just east of singapore at 24 minutes past 5:00 this morning. we do know that five sailors were reported injured and there are still five missing. but take a look at commodities. it is a big week when it comes to aussie miners reporting earners -- earnings. company's annual results were
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released earlier this morning. they are about a six and a quarter of 1% at the moment. paul allen is with us where fmg is headquartered. take us through these earnings. good set of numbers. 2.0 mine billion profit for the first year. they were expecting 2.2 billion, but still more than doubled this profit he recorded in 2016. the dividend was something we will be closely watching after the signal that this might be the right time to look at the remaining shareholders. the dividends for the year, $.45 well above expectations. right over the top of what was expected. that is the biggest beneficiary. the chairman, who old -- holds about one billion shares, he is $260 million richer this morning. haidi.
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haidi: he would be happy with that. miners -- we know prices this year, every year tend to be on the volatile side. they do tend to be a subject of speculation. the is something to escape attention. he is saying there is time to explore fix contracts between producers. pleased whileery the prices high. this is their only product. charts,ke a look at the we have g #bcb 6104, we see exports increasing. the amount of experts just keeps increasing. that leads us to the second #bcb 6103, where was the
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stockpiles near a record high. , competitorsntrol are doing all the price. shipments are looking at 100 70 million tons for 2018. that is reaffirming the shipping target and costs. very low cost producer targeting $12, and debt as well working on bringing that down. $3.6 billion down from 5.2 billion, looks like the days of their debt worry are well behind them now. inside that building behind me, we will be talking to them in the next half hour. haidi: we will let you go then. paul allen there for us in perth looking at what has impress the markets. as paul said, do not miss our conversation with the ceo later on "bloomberg markets."
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.t 11:00 a.m. hong kong just looking ahead to the rest of this hour, top-level reboot, we will assess what is in store after the ceo quits. will new wargames further inflame tensions? we will discuss that later. this is bloomberg. ♪
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thei: we'll south korea and u.s. start new wargames today. these are exercises denounced by the north as reckless that could trigger a new conflict on the divided peninsula. this talk about this with our asia government reporter. director of risk analysis for north asia control risk, joining us from seoul. -- a bit of a picture of what the military drills actually look like. onprobably not a lot to see
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the ground because these are computer simulations. like a football team, they need to practice, modern warfare is controlled by huge amounts of computers. it is computerized warfare. are simulated exercises, which would involve something like 300,000 troops. the u.s. army does not actually give out any details on the number of people who are involved. suffice to say, there are 25,000 in south any time korea. these arehere is that huge computer simulated exercises and these are clearly designed for potential war with probably north korea, which is precisely white north korea is upset about them.
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these are annual drills, they are routine and they routinely spark negative feedback and condemnation from north korea. also from china as well. this year, given that the increase and incendiary comments coming from both sides, are the risks of a potential misconduct -- calculation higher? -- miscalculation higher? andrew: i think they are. the military exercises i would not see as a trigger for conflict. i think what we are waiting to see is whether the north koreans actually use this as a pretext with one of their anniversaries coming up on the 25th. they direct some kind of missile test towards guam. i think that will test whether we had an low escalation will be broken sooner
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or later. haidi: i just want to get some clarity, there is a school of thought that says these kind of drills should never be used as a point of leverage for north korea. why is that? drills are really relevant in the discussion at the moment. china has proposed what they call a freeze for freeze solution here, or to bring north korea to the negotiation table. aat frees for freeze would be of military exercises on behalf of the united states and south korea. on the north korean side, freeze in their missile development program. policymakers say
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that this is just an unacceptable idea because it draws a false equivalency between the illegal missile missile-- nuclear program in north korea, and the completely transparent, and legal training programs and drills that the u.s. and south koreans are doing. the other thing they criticize is, they say, china coming up with this freeze for freeze proposal is china move it onto the u.s. to do something to stop the north korean program, when really it should be china that is the key driver trying to get north korea to denuclearize. or at the very least, freeze its own program. andrew, we talk a lot about leverage that beijing has over pyongyang, a lot of it is leverage that china has talked to themit is convenient
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to try to get more on the trade front from the u.s. realistically, how much leverage does beijing have? have --well, china does without a doubt, a cute theoretical leverage to cripple the north korean economy if it wanted to. the problem is, it does not translate into influence, given that china will not go that far. we will talk a lot about what the shy -- beside should do comic in terms of what they will do. i don't think they will fix the issue, they have limited it ability to fix north korea's behavior and get it off the trajectory it is on. which is firmly and rapidly driving towards completing its threat tod nuclear the united states. i do not think we will see a major shift from that coming from china player it -- china.
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what we will see is decision time for the united states, except they de facto that, or at least in the it.t-term, or try to stop it is many ways a stage that is already too late. andrew, how much has the risk really been escalated by the fact that you have not just decide on the pyongyang, but north korea saying that the u.s. president is a man draft of reason. is there a sense you have two inconsistent unpredictable -- inconsistent, unpredictable sides? a fundamental driver of the situation we have is the ine stage of development terms of weapons capability. it makes the whole atmosphere and calculations very different
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with the imminent capability, when for years and has been a future threat. definitely the increased uncertainty in terms of u.s. decision-making is a big factor here, and really changes the equation for those of us trying to see where the situation is going. even for those of us who may not take donald trump's twitter is a sign of policy. i think there is a real concern there. part of that concern is that pyongyang is listening and taking that seriously. part of the risk is where does that line sit between pushing pyongyang to take this much more seriously, and actually making them think the threat is imminent. haidi: thank you so much for that. andrew, director of control risk for asia. outng up, beijing selling tougher rules on overseas investments. we will take a look at the details. this is bloomberg. ♪
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newi: they have laid out rules on overseas investment, making explicit its de facto campaign against irrational acquisitions in set there's ranging from real estate to court. tom mackenzie joins us. what other details. formalizing these that we have seen taking place. the council putting this information out on friday. three categories. one category is basically outright banned. investments in casinos, investments in military technology. such asre are those property, hotels, sports. then those which will be encouraged. anything that leads to the belt and road projects.
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oil, mining, agriculture. we will get fast, fewer headline grabbing deals and we have had in the last few years. far more bread and butter deals that suits where the government sees it as their economic priority. the broader impact, we are very excited to see the deals, but what are we likely to see going forward? tom: one of the biggest impacts will be around property internationally. the bar has been raised higher as a result of policies that you have seen in the last few years. massive investment in sydney, vancouver or london from chinese property investors. then you have football clubs, then the impact on big conglomerates. ony spend $5 billion overseas deals. it is having to reform it strategy as a result of these changes. it tomcoming up next, thank you for that.
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minutes awayust from thailand. we will talk about where analyst see growth in the second quarter. this is bloomberg. ♪ whoooo.
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♪ these are the first word headlines. the iranian president rouhani has one backing for all but one cabinet member. he won another four-year term in may on a pledge to move ahead with boosting the economy and told lawmakers the country will achieve more by being united. president trump to address the nation monday on u.s. policy in afghanistan he and his defense team met at camp david on friday .
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it is thought troops may be sent back to train local forces. the president has demanded to know why the u.s. has in afghanistan for so long. china's biggest suv maker keen on buying the most famous name in the game. jeep andterested in this contact chrysler to open negotiations. deliveries have stalled this year has competition and china intensifies. singapore's prime minister has to urge annual speech people to prepare for the challenge of an aging population and embrace new technology and spoke of a cashless society where consumers use the payment systems. he took aim at singapore's diabetes problem, saying soft
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drink makers have agreed to reduce the amount of sugar and their products. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: thank you for that. quiet --arkets, a asian markets, a quite weak and data-wise. one of the key pieces of data for asia is thai second-quarter gdp, expecting it to across the bloomberg in the next few seconds. this chart could give tailwind to the thai baht, one of the best performers this year, up 8% year to date against the greenback. in comparison, that chart showing that thai stocks have been range bound, trading sideways. in concerned that
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southeast asia's second-largest economy has in norman's growth potential, but economic performance has an liking regional peers. months offter political unrest, the military seized power. beensince then, they have struggling to get growth off the seeing mildly positive growth, but large infrastructure projects that have been promised and planned, but difficult to get off the ground. we are expecting some easing when it comes to private investment and saying a lot of the spending -- as the spending to boost growth has not passed through. still waiting on that gdp number with expectations of 3.4% year over year, the first quarter just ticking up slightly there. we will bring you that as soon as it becomes available. let's talk about the currency
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and bring in our asian currency editor from singapore. you look at the fundamentals and the stock market is not moving in tune with that, what is driving gains in the thai baht? >> there are a lot of strong fundamental stories for the thai baht at the moment, relatively speaking. the currency is receiving inflows from three avenues. first, inflation is subdued and about 3%, you are getting bond inflows into the debt market. date, 6 billion dollars in inflows into the bond market, and there is an expectation the central bank could cut interest rates. that is one aspect. we also have the tourism revenues. tourism accounts for a big part ,f foreign currency earnings and that is doing well this year.
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tourist arrivals have rebounded to come a numbers this morning up about 5% in july. year to date, 20 million visitors have visited thailand to come up bringing in about $30 billion worth of tourism revenues, so giving quite a boost to the thai baht as well. finally, the current account surplus is widening thanks to trade exports. for an economy largely still reliant on export competitiveness on to resume come you would expect the authorities would be concerned about a higher thai baht. , and they are making it clear they don't want to see further appreciation in the currency. some analysts estimate the central bank has probably billion worth of inflows this year, and they come
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out almost on a weekly basis to talk down the currency. quite careful and don't want to give the indication they are resorting to capital controls to stem inflows. limited to tweaking the markets to stop the inflows from coming in, cutting supply of bill issuance in april because they thought this is where inflows dark their money before the bond market. the way to that encourage the outflows is to ease up on foreign investment for domestic entities so that they would be encouraged to invest overseas perhaps. so much for you that. we do have the thai second-quarter gdp year on year, a strong lead, three .7% growth year on year for the second order. 3.2%, andoking for
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that is an acceleration from the first quarter at 3.3%. still waiting on that quarter on quarter number, estimated at 1%, 3.7%, quarter tied gdp at beating expectations and accelerating from the previous quarter. this is a situation where we will keep watching the thai baht , because that has been a strong thatrmer, and looking at quarter number, want to see if we can break that down for you. quarter on quarter, also a beat on expectations. thai gdp is likely to grow 2017, so a% to 4% in strong beat there. let's get the latest on the markets from sophie. sophie: a mixed picture in asia. hong kong session,
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and chinese up, the nikkei 225 lower by -- by .4%, japanese stocks retreating alongside u.s. equities given the rising geopolitical picture. as markets brace for a ramping up of tensions come the second day lower for the kospi, down .2%, but the won trading higher. the dollar easing some of its advance. i want to highlight the thai baht, steady near a two-year high following the three point 7% growth for the second quarter on a yearly basis. the surgeonwhere, commodities still gaining almost 4%. iron ore also on the rise and thatt a one-week high, but
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is not helping the asx 200, falling .4%. losing steel players over 4%, bluescope leading the drop in that are despite doubling its profit in its latest set of results. telco and ip stocks propping up gains, and the honk saying, china unicom -- hang seng, china unicom shares jumping after resuming trade, so leading gains when it comes to the asian session here. haidi: thank you for that. we get that better than expected second-quarter gdp beat. infosys on the hunt for a new ceo. the company's board is rattling its founder and shares plunging on that news. let's get analysis with our bloomberg gadfly columnist with more. what does this sudden departure of the ceo mean for investors?
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you have written this signifies the need for a cultural reboot. >> yes. in fact, what it does mean is a uncertaintyriod of for investors, because there is that $2 billion buyback that they have just announced, but i don't think it will have much of an impact on sentiment in the infosys stock for much longer. we wereto remember that in the way looking at the fact that infosys was not making much headway with the embrace of the new digital tech knowledge ease. it was still stock and an application and maintenance mode. when its customers come the fortune 500 companies, are moving to the cloud, to social, mobile, and artificial intelligence, and infosys has been behind the curve on that.
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there have been great the $20ions, but with billion revenue target for 2020 and said it can't be done, and now the word on the street is that maybe 2020 revenue be will a $5d $15 billion, so billion miss on a $20 billion target, so that shows you the operational challenge that can only aggravate because this company has to tell customers that our board is fighting our founders, and our ceo has resigned and we are looking for a new one, but meanwhile, all of our work or you is going to be business as usual. how many customers will believe that? ?ow many will stay with infosys i don't have the answer to that, weigh onhing that will an investors minds as well. haidi: this is one that india's
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iconic companies. accusing theoard founder of running a destructive campaign. you have the cofounder accusing the board of governance lapses. thepointed out this is culmination of years of weakness and leadership at the company. that infosysknows was india's most respected company all the way to the 1990's and through until the start of this decade. about its questions strategy and leadership, otherally after cofounders taking turns at running the company and running it into the ground. nevertheless, there were not corporate governance questions
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about this company, and even is just a case of the founders wanting more of the company's money because they probably don't get what the ceo is trying to do buying an .sraeli tech company panaya he thinks they are wasting this money and want more of this money to come back to them. i wrote they were behaving like teenagers trying to buy their first pack of condoms. it is money you want, then ask for it, but now the cofounder has raised a pointed set of questions.
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there was the $200 million deal, and now there are serious allegations, a whistleblower's transpired,t what whether it was overpriced and there were kickbacks or not and whether #any was paid to company officers to keep quiet about it. these are pointed questions, and there have in investigations. shareholders have aid for those investigations, so why can't the shareholder see the output of the investigation, so those are legitimate questions coming from a large shareholder and the board on a collision course with the founder is only going to muddy the waters for some time to come. drama, butuch appreciate your insights on this ongoing situation at infosys, the leadership come the board, or watching that stock and how it goes at the open. , investors and
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state-owned enterprises, what to watch in asia's fixed income. that is next. this is bloomberg. ♪
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>> the quiet week that culminates with jackson hole. guest.ring in our next great to have you. all indications are an exceptionally cautious mario draghi and perhaps hawkish janet yellen. what are you anticipating? >>-you are right.
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mario draghi is likely to stay cautious. we don't expect the ecb to make significant policy announcements. janet yellen has highlighted she is cautious on inflation. we think she will mention the balance sheet. at some point, she needs to imbalances in markets. there is still that pressure to continue with the rate rises and start addressing some of those imbalances, some quite significant and credit markets. haidi: what could the implications be for asia? is it more of the same, things data dependent? so far the data has been goldilocks, hasn't it? >> it has. if she continues with the plots, thathe dot will put pressure on leveraged
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investors, so that will inch closer to a flatter yield curve. asian credit in particular we think is quite vulnerable to a flatter yield curve and further rate ricers from the u.s. fed. what do you see in terms of fat high yield, junk area? , we saw the week biggest outflows from high-yield in half a year. is this the beginning of the unwind we saw set up with for by everything rally following the election? >> potentially. high yield is an asset class in asia and the u.s. which has been quite overvalued in our you and the subject of significant low and leverage as a byproduct of
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qe and the simple hunt for yield. and we qe gets addressed get interest rate rises in the u.s. closer to 1.5% on 2%, then leverage comes under pressure and those overvalued asset classes are more vulnerable, and high-yield has run it extremely hard, asia included, so we see those asset classes as vulnerable going forward. as a blanket statement, you are cautious on asian credit in general. mainly due to valuation. as i mentioned, it is the byproduct of qe policy. market participants have rushed into wherever they could seek yield, fundamental difference in and credit across the region coming almost nonexistent outside of unique, rare,
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idiosyncratic events. there advising rations tightest since the financial crisis. the differentiation between high yield and some of the higher rated state-owned owned enterprises in china is small. the dispersion between different asset classes is at extremes. this is probably the first time since the crisis that we have had such low volatility because spreads are simply so tight and that extreme levels. me, do likein to china state owned enterprises, but are concerned there might be in the deleveraging campaign. >> sure. it is consistent with our bias. china has reduced the their ownership of the state owned are stickingso we
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to the strategic state-owned enterprises that will stay close to the government and maintain government support. there are less strategic companies in china that will slowly lose government support as china continues with that mixed ownership theme and tries to reduce moral hazard. the second key issue highlighting the value is the potential issue from the china sovereign over the next few months. the could also highlight value in this high quality state owned enterprises from china that we like in our strategy. fori: thank you so much that. that is part of our real yield segment. coming up, india posed for an ipo record. this is bloomberg. ♪
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♪ india headed for a record year when it comes to ipos, insurance companies looking to ride the rally and tap investor demand for financial assets. ally financial reporter joins us now from mumbai. you look at this well performing market, is that the only reason why they are coming to market right now? >> that is one of the main reasons for the companies to come into the market at this point.
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is close to record highs in terms of the benchmark indices. it is one of the best-performing stock markets in the global tonomy, so corporate's want use this opportunity to get high-value wish and's and tap the markets in this short window available before the bull market rally loses its legs. haidi: what is going on with the insurance industry? why are we seeing major insurers go to market? >> they are coming into the market to race about 5 a.m. dollars, -- five billion dollars, insurance as an underappreciated market in india , and there is a lot of interest in india. we are seeing insurance companies which have already
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done the regulatory filings to tap the market this year and could raise $5 billion, pushing the indian ipo volume to a record high. we are looking at four indian insurers looking to list by the end of the year. what is the outlook for these businesses? >> in india, insurance is one of the under appreciated sectors and has a growth potential. the government is pushing to give insurers a boost in this market, so we are expecting them to outperform. serviceshe financial will outperform over the next couple years and one of the there is new paper coming into the market over the next year. the banking and financial services, they account for one third of the benchmark indices, and insurers also see an
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opportunity to diversify their sectors. insurers and particular one he to get a piece of india, which is so far this year the best-performing major stock market in the world. ahead, updating the big stories of the day. rish, what you watching? singapore,oking at the latest from the lion city and analysis of what is going on. fortescue metals, the ceo joining us in 10 minutes, and the trial send tribulations of infosys. ♪ ♪
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rishaad: almost 11:00 in hong kong. 1:00 in sydney. i am rishaad salamat in the middle of the asian trading day. to "bloomberg markets." ♪ rishaad: asia-pacific stocks mixed, the markets counting down to jackson hole, oil holding on to gains, gold near a nine-month five. fortescue metals, full-year profit doubled, we are joined by the chief executive.
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indian ipos heading for a record year as companies cap a rally for demand. we are talking about fortescue metals. iron orek about goings, chart 610 four, higher at the moment, and there you have it, one direction since 2008, and up kick this year in terms of the iron ore price which could be explained by this chart, 6103, showing how china's atn ore inventories are record highs, highs not seen for a long time. that is what we have going on. having a look at the prospects for iron ore. the chief executive of fortescue metals joining us shortly.
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here's rosalind chin with first word news. rosalind: second worship involved in a collision at sea. the uss john mccain was heading to singapore. 10 sailors are missing with five more injured. the first collision saw seven ussors killed when the fitzgerald hit a container ship off the coast of japan and the captain was relieved of his command. police are no closer to finding terrorist leaders he the attack in barcelona. they have the names of 12 bigger that planned a campaign, but say three people remain unaccounted for. the u.s. and south korea again new wargames on monday, an operation denounced by the north as reckless saber rattling. tensions, heightened
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including kim jong owns threat to attack a qualm, drawing an aggressive response from president trump, who warned of higher in fear he. kim jong and the said he would watch the exercise you for deciding whether to attack. maker keengest suv on buying, great wall motor interested in jeep. aswants to move up market deliveries have stalled this year, rising to his 2% has competition in china intensifies. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. rishaad: it is the world's fourth biggest iron ore exporter
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out with results, fortescue metals group, profit doubling, higher prices and a drive to slash costs responsible. let's get to their headquarters in perth has we are joined by the group chief executive. walk us through the numbers quickly. >> good to be here. thank you. great result all around for fortescue metals in the last 12 months. we had 170 point 4 million tons of product shipped, an all-time record, only a million tons or we have last year as been focused on creating the greatest value for our customers and the company. , following our focus on productivity and efficiency to make sure we have long term low costs across the business.
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we paid down a further $2.7 billion in debt with the cash flows we have in generating and have doubled net profit after 2.1 billion dollars, followed on with the dividend of $.25 final dividend for the year. what are youright, actually going to be doing looking ahead right now? there is talk of you being a one described asd are an exploration specialists, so what are you looking for other than iron ore question more >> --iron ore? market is a good market to be income and you can see that from the cash flows we have 10 earning. our focus has been on being the very best iron ore company we can be.
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we are close to the markets in china and the broader asian region and have around 12 billion or 13 billion tons , so we areresource in a strong position and the iron ore will remain our core business. been successful as an exploration company and are success bythat taking tenements and highly perspective regions in australia are looking, and we to create options for future growth for the company. rishaad: i put up a chart earlier showing how iron ore, you have been exporting like crazy to china, but inventories are near record highs, off record highs at the moment. does that worry you? have 10 very high.
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weeks, wet three-four have seen inventories come down, which is a good sign because it means that supply-demand balance has been restored. in the past 9-12 months, we have seen increasing iron ore stock says supply overran demand during that period, so the market has been oversupply and we are recently seeing that reversed, a good sign for the industry. rishaad: he recently said that iron ore prices are uncharacteristically high. when will we see a correction in your view? is there going to be a correction? where should prices settle down if there is a correction, and i'm asking you for guidance on the price? what we have seen happen is because of the closure of a lot of the legal steel reduction in
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china, perhaps as much is 80-1 hundred million tons of thatction close down, and extra demand has gone back onto the big integrated steel mills, driving the price high, and steel meals have been -- mills have been buying iron or two maximize production, and that's why we have seen the high grade iron ore go up sharply and the big spread across the market. off andeeing that level start to close as steel mills he come focused on minimizing the cost of production and we think the iron ore price will come back to historic levels. supply-demand the curve globally, that is probably between $55 to $65 a ton range. rishaad: tell us something. we have a situation where the iron ore is very good and you
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are working with the numbers you have and the sun is shining for you. do yourts of the roof need to repair because it is best to do it when the sun is shining. absolutely. we continue to focus on improving the productivity and efficiency across our whole business, and that is focusing on things like oil processing facilities which we used to progress and upgrade our iron ore to product quality and allows us to mind more efficiently because we are able to mine lower grade ores. we are using technology around the mining areas, autonomous haulage on trucks and using relocatable conveyors to replace long haulage in some of our minds, and going further on from that, we are investing in future
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production by putting replacement mines in place well ahead of when we need them and maintaining around 20 years of production inventory ahead of mining operations. tell me about the dividend, moving data, ratio of ofn ore, suggested as part the guidance here, but is it a ,ea change in your policy now rewarding shareholders and perhaps paying less attention to the debt you have to pay down still? we paid our first dividend in 2011, and we have remained consistent with our policy since that time. we have had a priority on repaying debt and investing in our core iron ore business and have been disciplined about doing that. how are debt is at a level where we can increase returns to shareholders, and that is what
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we flag with this latest policy. to 80% means that we will ensure that shareholders benefit through the full cycle of the so not so much about coming away from debt reduction, but about debt in an area where we are comfortable for the longer term. we will continue to repay that come and at the moment, we have and will debt gearing continue to pay that down, but at the same time increase returns to shareholders. depletingou have this asset where you need to get a replacement and fund it. how will you do that? that out ofund operating cash flow's. we have estimated the cost is billion and $1.5 billion over a three-year period
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will2018-2021, and that become triple for us to fund that out of cash flows and still maintain our reduction in debt and commitments to shareholders. we are comfortable with that. aroundts to deplete 2020, and we want to bring in new production to supplement that from that point on and replace it as it depletes completely. rishaad: do you see more consolidation in the industry? or are we passed the worst of it and some of those unprofitable mines with the way they are? we have seen the industry rationalize quite a hit, particularly with high-cost producers that were only there because of the shortfall in production from the large, low cost producers. it is fair to say there have
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been a number of minds that have become profitable today, and going forward with prices are around the market average, we should see a good talents in the market. we have a good structure in the iron ore industry because it is by large, low cost producers, which means we have some shape to our cost curve allowing us to enjoyed margins at the end of the cost curve. will you still be a one commodity company if i top you in 12 months? -- if i talked to you in 12 months? >> we are looking at a number of strategic options for growth. the question is not each commodity specifically, but where we can add fat you and create shareholder value by the things we do, so we want to
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leverage our core skills and capabilities we have developed in our iron ore and apply those two other areas or other commodities, and fundamentally that will be through our exploration efforts, but could be other opportunities as well. we have not closed our mind to looking at other things, but whatever we select, we want to create greater value from it. rishaad: great talking to. have a good one. -- talking to you. have a good one. let's have a look at markets. , then it all went wrong towards the end on friday. some weakness when it comes to equities. , and looking iron ore at steel, and absolute flyer. up 4.2% andl shanghai, iron ore rising for a
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five-month high as supply tightens. fortescue does see that oversupply situation in the market, but starts helping to support gains in the chinese markets. -- stocks helping to support gains in the chinese markets. the breakdown for the region, fortescue trading at the highest since december 2016. other steel players, bluescope ceoing 21% in sydney as the warns of rising energy costs and rising competition. the outgoing ceo has warned for some time when it comes to the rising prices saying it will dent productivities and efficiencies. a quick check of what's going on
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very much aarnings key driver for markets today. rishaad: thank you for that. sophie kamaruddin there. still ahead, we get behind the turmoil at infosys come the stock plunging. u.s. the latest as a destroyer collides with a merchant ship off the coast of singapore. ♪
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♪ .ishaad: i am rishaad salamat 10 sailors missing and five injured from third they are american worship hit a tanker up the coast of singapore.
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it is the second collision involving the seventh fleet in two months. what happened? >> this u.s. guided missile was in patrol off singapore and collided with a large oil tanker. 10 sailors are missing, five injured. there are ships and helicopters from at least three nations working overtime now to locate those missing sailors. exactly what caused the collision we don't know, but there is grave concern as to the fate of those 10 sailors. you we know about the other ship involved here? >> it is a large oil tanker. about 30,000is
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tons and was held in 2008, so a .airly modern ship you would assume it would be equipped with all the latest navigation equipment. scheduled to take a load of oil from southeast asia to the far east. given that this is one of the largest trading ports for oil around 40% passes through singapore, you could assume this was a regular mission for the oil tanker. it is a very busy shipping lane. these kinds of passengers take place every day, it is still obviously difficult to navigate between all these different ships. the uss a john mccain
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did it play in this part of the world before this incident, and a like to say great we have these u.s.-south korea drills on the way. the u.s. seventh fleet has 40-60 ships operating in this maritime area at any given time. of thoseknow what each ships is doing at a particular time, but we have a general idea , helping to patrol this sensitive maritime area, the south china sea, where there are chinese ships always on patrol. military built up assets in the area. an area of great contention between the u.s., china, and some of the other countries in this neighborhood, so what those u.s. ships are
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doing, we are not sure, but they are always on patrol and doing these freedom of navigation operations in an effort to ofntain and ensure that all the commercial traffic in this area goes on unhindered by any attempts by china to claim the south china sea has its own territory. the usswe can assume john mccain is just part of those regular maritime operations in the south china sea. involvedther they are in the military drills starting today in south korea, it is too early to speculate. it would not appear so given the distance from singapore to the waters off korea. rishaad: thank you so much for that. let's take about what we have coming up, china's big trade , butus are well-known
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research undertaken by bloomberg showing dozens of countries selling more than they buy. find out who is at the top of the table. that is next. this is bloomberg. ♪
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♪ china's trade surplus may have the headlines, but in balances go both ways. more than 40 nations ran trade surpluses with china last year. ships food, raw materials, and tech between china and benefits the most? i'm going to guess australia. course with of minerals in food products, but keep in mind that a lot of these imbalances, we concentrate on the china-u.s. trade imbalance. china has deficits with
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other countries. >> with primarily 40 countries according to this data from the world bank and bloomberg. skewed because it is a re-exports story. rishaad: there we go. we have the chart. >> you are seeing the top 10 of the 40 plus countries that did run a surplus with china. south korea the biggest one given the technology and machinery for the factories in china. same with taiwan. and foundthe numbers they have a surplus with china of $29.9 billion, but $37.1 billion with hong kong. hong kong is a re-exports story as well. keep in mind that with some of this data, it also keeps countries like south korea
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buffered from any political backlash that aging might give in any geopolitical spat like haad antimissile system. china needs those imports of semiconductors and machinery to feed its export machine. it is an interesting dynamic. germany, malaysia, south korea, machineryg tech and exporters, then switzerland from a brazil food, and others for feel. rishaad: trade talks? >> nafta. concluding five days of talks. harmony i guess in the final statement after five days ago when they launched talks in washington, the u.s. trade representative saying they would not accept a simple tweaking, but robert lighthizer
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saying they could have a quick resolution. rishaad: nice one there. this is tokyo. next on ae re-open down day for equities. ♪
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rouhani told lawmakers the country with achieve more by being united. address theump to nation monday on u.s. policy in afghanistan. he and his defense team met friday. the president said decisions had been made but gave no details.
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it is thought troops could be sent back to afghanistan to train local forces. the president has demanded to know why the u.s. has been in afghanistan for so long. thailand's economy grew faster than expected, lifted by a recovery in tourism and exports. 3.7%, the median estimate was 3.2%. thailand strengthened on the back of global trade, but the economy still lags in southeast asia. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. sophie: a check on the markets, asian stocks with sydney shares leading the drop, trading files -- finds extending the drop in
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the afternoon session. to stocks,es bluescope steel slumping in sydney, dragging the most on the regional benchmark, but material stocks are supporting gains in china. an advance in the commodities complex. china unicom also helping gains in shanghai and in hong kong's hang seng that higher by tencent , one of the unit comes strategic investors, so both stocks favored in the asian session. tensions are subsiding a bit. the commodities space, rebar rising for a third day in shanghai, most base metals rallying with a nickel leading gains at the highest in 2017. iron ore is jumping. set for theore highest close while court inventories remain high and
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supply is tightening. earlier, fortescue ceo saying he sees iron ore trading at $55 to $65 a barrel given the oversupply situation in the metals market for iron ore. now trading at a six-month high in dalian. rishaad: some information on this collision near singapore, the uss john mccain colliding -- tankerl take her after another u.s. vessel was involved in a crash in japan, 10 , two ships ong the way to singapore with a damage assessment check to be done. a authorities, no reports of oil pollution after this collision. in the singapore straits is unaffected by this as well. let's have a look at the markets currency wise.
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we've had this decline in the dollar, the story of 2017 on the foreign exchanges, but a pullback of late. the betting seems to be, and this chart 992 on the bloomberg inminal, suggesting people positions for further declines, exceeding 100,000 contracts as more investors turn bearish on the dollar. these bars in red suggesting financial conditions have exceeded 100 thousand contracts, nearly 200,000 contracts here as well, so that is what we have at the moment with resistance for the greenback to the downside. guidelines, and not everybody is playing fair. there are concerns bad companies are benefiting while households
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have been saddled with the dep bt. are you seeing less corporate the stretch? has reduced the financial risks of china's companies. defaults this year have been , and then last year program has been growing with the total value surpassing $100 10lion since the launch months ago, but the key concern is whether the money has been saving deserving companies. the government has said some be companies are not allowed to be healthyrogram, only companies with temporary difficulties should be saved. the chart we have the distribution, 28 are sent of the and was in the coal sector, the steel sector, the two worst-performing sectors in
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china. rishaad: precisely, it was flagged up ages ago, so why would we swap bad debt for bad equity. >> it is a complicated process. thank a tanks over that company's debt from bank be, and bank a sets up the unit that has shareholders from pension funds from insurance companies to share the risks, then it takes over the debt and swaps and to act with the before it disposes of the equity, but the problem is banks are not experienced in managing equity shareholdings. more experienced in safer asset classes such as government bonds. second, if a company is healthy the company is distressed, why
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with the bank want to bail it out? they are better off being the debt holder then equity holder because equity can be wiped out easily. the program has fundamental flaws. tell me about this because it has been linked with these wealth management products , and that has raised alarm bells, suggesting this could be looked at by the regulator. >> china construction bank, a big participant in the debt equity swaps, has raised the capital from repackaging to swap to debt into wealth management products and that individual investors. the latest guideline has a clause saying banks should have at least a 50% stake in that unit instead of raising it from all kinds of parties come us of
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the government is encouraging private capital to be used in reducing corporate leverage, but also taking a cautious step two avoid households exposed that kind of risk. rishaad: thank you very much indeed. right, the world's top economists and central bankers gathering at jackson hole this week as we have this tepid global inflation story likely to be a hot topic, but should they be obsessed with fright rises or take a look at -- price rises are take a look at their entire mandate. let's talk about central banks here. how does it affected them and what do they look at? range ofave a wide mandates. d for and though we are having the best global growth story since 2011, bankers should
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suffering about inflation look at financial market stability and the like, asia is ahead of the curve. ,hey look at exchange rates stability of the banking system, areas including liberalization of the economy, so the central banks in asia already have a wide array -- rishaad: give me an idea of that diverse mandate. 2% inflation target gets a lot of attention, to japan also has a mandate keep the stability of the bank. the bank of japan has done quite well. in australia, the bank is mandated to remote growth and employment and the central bank is also mandated to protect the
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welfare of the citizen, a broad brush that allows them a wide expanse in terms of how they approach handling the economy. china's central bank, not least inflation employment, but the exchange rate, liberalizing the economy, opening markets, so it has a wide like campus. it makes you wonder what the ministry of finance does. >> rather than being inflation some central banks are perceived to be, asia has a wider lens when it comes to the economy. rishaad: we saw what happened when we had qe. as the fed things down that allen's sheet, how does that play out here? be one of the most dominant themes for the global economy in terms of how the central bank and fed balance
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sheets shrinkage flow into markets? with it pressure currencies lower? much of it is unknown. so far, asia has taken the fed rate hikes and stride, but there is no guarantee they will take the balance sheet normalization in stride. rishaad: this is it, isn't it? that will be one of the topics and jackson hole. we are in uncharted waters when we begin reducing the balance sheet, quantitative tightening. >> quite right. and we don't know how it will play out. announced the expansion of qe a few years ago,
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so let's see if we get any comments in terms of pace and how they will trim balance sheet and see how emerging markets react to that. rishaad: mario draghi as well. thank you very much indeed. a feature on the bloomberg, our interactive tv function. you will find it at tv . you can watch us live and go see revis and interviews and dive into securities or functions we talk about. instant messages during our show. it is for bloomberg subscribers only. check it out at tv . , quitting overh a feud with the founders, who could be set to take the home there? ♪
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♪ ashaad: i am rishaad salamat we check the latest business flash headlines. and civin clear the , convincingle holdouts to sail and reach the 75% needed for a so-called domination agreement, when people are forced to sell their shares. 600,000 barrels of oil from libya is the latest evidence of recovery in the country's oil industry. of onewas a fraction million barrels a day in july and won't be restricted until it
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reaches 1.2 5 million. bhp with earnings tuesday, analyst thinking underlining earnings rose sixfold, the year to the end of june, thanks to .igher raw material prices shareholders will want to know whether php can pump up returns and deliver on promises of strategic reform following a truce with active investors. shares up slightly, .9% ahead of those numbers. the stock had a rough time friday. a $2ys has announced billion share buyback after the chief executive quit. that has the board battles the company's founders. joining us now is the head servicest strategist
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in mumbai. >> thank you. this happenedate last week and the announcement of the ceo tendering his resignation because of the dispute. this has been in the public domain for some time. board hadr and on the been raising issues of corporate governance and the acquisition of a company called panaya. it has raised questions time and again in the public domain. just before the buyback announcement was made, the ceo had put in his papers. the board was also there giving
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out the reason for the resignation. because heurprise was appointed three years back and was doing a good job. the numbers were quite decent. that theies me is direction, and who will be the person in the driving seat, and , can it make it reach that destination? rishaad: he will be a tough act to follow, especially if you are andnvestor, returns of 25% appreciation of the stock. is there anybody on the shortlist who might replace him? >> there is lot of market talk
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and no certainty in absolute terms. is march 2018. understand isn to thinks he could be one of the earlier members on the board to come in replace the ceo. think you will .ave great numbers to look at rishaad: some comments coming , and he is concerned about how this company might be affected by this looking ahead. how will it affect the mood
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inside? and that could be potentially damaging. >> you had a challenge with leadership and they will find it difficult to get an outside candidate unless they result this issue between the founders and the board. the board has to get more spine and you need to have someone selected from within the system, at least the next round. rishaad: the shares taking a battering today as they opened, down 3% plus. mind, what do you make of it? >> my worry is more extended. might be a top-level t to take the exi
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he will be there to see the transformation and handover. the clients that are there, i wonder if they will want to continue their association with the company and products and services they offer? i hope and pray that some old name comes during this time and takes control of the situation. it is going to be a tough time. rishaad: the share price down hold,downgraded, cut to now a lot of concern about the board.
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what have they done wrong? , the you heard earlier board should have more spine. there was aing is press conference and that briefing. they told everybody they had absolute support and they were in sync. sync and haven the approval of the board, why did this happen? the earlier member had so much to say. holder, yourity should think of the company's growth and the employees of the company in the future of those people in the stakeholders big and small. like the earlier cast said, i think no outsider would want to come at this point in time. likely in theuits
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and more acquisitions from the respect the parties. rishaad: thank you very much. up, india heading for a record ipo year, approaching $8 billion. we had to mumbai and have a look at what is going on next. this is bloomberg. ♪
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♪ you are back with "bloomberg markets." the indian session underway. infosys taking a beating, 3.5% down. , butvance for the rupee the price overall showing
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positivity as the country heading for a record year of ipos. insurance companies looking to ride one of the best stockmarket rally's in the world, tapping investor demand for financial assets. it such a good time for corporate to come to the market? indianou pointed out, markets are seeing a world beating rally, one of the best performers in global markets. many believe the pricing of this market is down to perfection at this point and valuations of the costliest since 2010, so it is a good time for corporate's to raise the maximum money at the best fight wishon's. -- best valuations. rishaad: give us a sense of how
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much money they are looking to raise. >> the top four insurance ipos , governmentected owned enterprises racing $1.5 billion each, while the state raise aindia could taking iposamount to about $5 billion. rishaad: this is a country severely underinsured, is it not? the prospects must be rosy if they can get their act together. >> that's correct. upsideffers substantial
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if these insurers managed to raise enough capital to put back into the business. india has about 52 insurers at this point. looks very rosy prospects right now. rishaad: thank you very much indeed. bloomberg markets: middle east coming up. tracy will be with me for that. what have we got? we start off with a topic never far from our minds in the middle east, oil. print surging 3.3% friday. will it hold on to gains? we get the take of independent energy analysts and get interesting news as it relates dispute, a shake being embraced by saudi arabia.
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the guy has been on twitter for three days and has 250,000 followers. we will find out more about him. bloomberg markets: middle east up next. ♪
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