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tv   Bloomberg Daybreak Asia  Bloomberg  December 27, 2017 6:00pm-8:00pm EST

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♪ it is 7:00 a.m. and hong kong , live from bloomberg's asia headquarters. thursday,ories this another thin day. the s&p 500 halting a two day slide, the dollar weakening against peers, and the best year for equities since 2013. investors turn to what the new year will offer. >> from bloomberg's global headquarters, it is just past 6:00 p.m. today on this wednesday. pools, a light on dark the tokyo exchange concerned
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about trading in private venues. two figures joined the race to be deputy fed chair. we have the low down and their cvs. ♪ betty: it looks like a second month of disappointing industrial numbers from south month.up .2% month on expectations were for a rebound from that is small prior month in october. the expectation was again of 1.3%. also a decline of 1.6% year on year, worse than the no change expected by economists. and's. saw huge plunge
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factory output distorted by the holidays in south korea. the expectation was there might be a rebound from those numbers. it looks like there was, but still not what economists had expected. we know these numbers are choppy, but the chip boom and auto exports, that has been expected to help industrial output numbers, but looks like not quite what economists had hoped for or predicted. again, a lower than estimated numbers, up to 2% month on month. in the u.s., we saw markets edging higher at the close. changing nasdaq barely , the dow adding 30 points, not quite the decline we saw yesterday. hanging over the markets as we have been talking about, this
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flattening yield curve and how that is affecting investor sentiment in the bond market and equities. david: certainly. it will be a key topic in 2018. you look where the 2-10 is, new decade low. the dollar down. across the asia-pacific, uninspired, quiet. new zealand up .1%. nothing much there in the way of the kiwi-dollar. picture, .3% big short of the record. more important is that 2017 has been a stellar year for the risk trade. stocks have clocked in a monthly gain ever since january. have a look at the yield in australia. down three basis points at the open in sydney. ahead of the data in japan and
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the open in tokyo, some industrial production numbers coming out in 15 minutes from now. futures indicating a flat to slightly lower start. dollar-yen on the way down. some data coming out of tokyo in about 15 minutes from now. betty: let's get to first word news with courtney collins. first up, china's most powerful figures meet in the new year to discuss amendments to the constitution, the first since 2004. no details were offered on changes, but said the decision was made at a politburo meeting wednesday. the constitution was first adopted in 1982, and has been revised four times. the communist party central khamenei -- committee will review amendments. has one official permission to stand for another term in office.
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he submitted his candidacy to the election commission, seeking a fourth term. his most prominent opponent filed his papers on sunday. the commission banned him from standing as he has a criminal conviction. his supporters say the charges were politically driven. slipped below $15,000 after its biggest rally in two weeks ended a route that wiped away $9,000. futures on the exchange slipped more than 3%, volatility adding to the debate about how to value the digital coin, which has surged this year. companies linked to cryptocurrencies the seen as a safer alternative. charge of $1.3e billion due to the corporate tax changes. 35% tors the rate from 21%, and will benefit companies them a but required them to recalculate deferred tax assets.
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bank of america will take a $3 billion charge him a while credit squeeze is expecting a $2.3 billion hit and a third straight annual loss. a new gallup poll finds president trump beaten by his predecessor as the person most americans admire. it is the first time since 2008 that a sitting president has not won that accolade. others include the pope, john mccain, elon musk, and jeff bezos. hillary clinton was the most admired woman for a 16th straight year come although support fell to the lowest since 2002. -- straight year, although support fell to the lowest since 2002. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: two new names have appeared as candidates to succeed stanley fischer. kathleen hays has the lowdown for us.
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you, who are for they, and why them? >> those are two good questions. two georgey, these w. bush-era economist that the wall street journal appointed on today. was an assistant treasury secretary 2002-2000 three overseeing economic questions for the white house, then joined pimco as a money manager and advisor. he continues to do that job. since theniversity 1980's teaching economics. he is a well-respected scholar. --writes all kinds of fairy very detailed articles and is considered a true monetary economist. has also been at pimco as a money manager come a bond portfolio manager, things that rich would be a good choice.
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being an expert on the issues of monetary policy is important. think about ben bernanke, who is an advisor to pimco. he understood the great depression very well. it is important in terms of where monetary policy could fit in and what it could do. >> another economist is in the running as well. lawrence lindsey. he was one of george w. bush's top economic advisers 2001-2002, instrumental putting together that $1.3 trillion tax cut that was a hallmark of george w. bush's two terms in the white house. economics from harvard university and a fed governor from 1991-1997. what kind of fed chairs might they make? it is hard to say. a 2-3s now looking for
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rate hikes and said this on bloomberg television a couple of weeks ago. supporter of and thanks janet yellen's monetary policy path has been a good one, so i guess you make him a centrist. i think he is more of that camp. lindsey, people always point to the fact that in 1996, he warned of a possible stock market bubble. that did not happen until early 2000's. he said at the time that he thought the fed should be doing something to rein that in. would he be more hawkish? we shall see. again, to names in the running. they aren't surprising come up but is showing the white house is still looking at this very seriously. the presidentout of the boston fed seeing risks of financial instability next year? why? >> people say why is the fed
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going to lean towards rate hikes next year. eric rosengren was saying the fed would hike four times this year and was worried about commercial real estate. he continues to look at this question of financial stability. here is what he wrote on the boston fed website today. he said interest rates have been so low for so long that it can pose and instability risks. right now, the fed does not have rates very high, so it is hard to find a negative shock with lower rates and for fiscal policy to gain traction. risksnks the geopolitical and 2018 will be as severe as they have been in some time. atthings the transition year the fed is another uncertainty. this is chart 1777, a long-term look at bond yields and this long run towards lower yields. one big reason is the lower
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inflation am a but people are saying there is a lot of uncertainty, tax cuts, geopolitical risks, and even though we are off the low yields, we are still in an area that may be explain some of the low bond yields, even around the world. maybe it is uncertainty, and people in the back of their minds, stocks have rallied, cryptocurrencies going crazy mutt may be bonds look safe. -- going crazy, and may be bonds look safe. betty: how central-bank analysis continues. iron is yes looks at emerging markets and hikes expected by the fed. david: plus, the road ahead, can it keep investors happy. that is later. this is bloomberg. ♪
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david: ♪ -- david: this is "daybreak asia." betty: that u.s. yield curve getting a flattening push before the end of the year, the spread between two-year and 10 year treasuries narrowed to 50 basis points wednesday, a decade low reached on december 6. small part of the nehring is a function of the market shifting to a new benchmark two-year note, the move is one of the biggest shifts of 2017. i want to bring in the chief economist and head of credit portfolio management joining us now from los angeles.
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you say in version is just right around the corner. >> it is. if you look at technical parts of the market and the short end of the yield curve, the overnight index swap market, the inversion is there. it will likely spread out. the inversion is possible in the second quarter of next year. the fed on course for its gradual rate hike. we are going into a 2018 where it looks like many major central banks are in tightening mode, including the fed. yes, indeed. what this is doing is the combination of two things. uncertainty in the bond market up at the impact of the gop tax bill. if there was optimism, the unit would be steeper. that is one side of the flattening conundrum. the other side is the front of
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the yield curve is discounting this tightening happening. the market is expecting the fed will deliver to rate hikes. there are other central banks that will likely follow in fashion, so that will continue to keep rate hikes going, so the yield curve will end up in a flat and inverted state. betty: why are treasury investors and bond investors , uncertain i should say, about the impact that the gop tax bill? loserse are winners and on the tax bill. if you look at it specifically in the corporate investment-grade bond market, returns in sectors with high tax rates have in negative effects come in so the market is discounting that not every company and sector will benefit from this, and there is a general sense in public it opinion -- public opinion about
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whether this will go up or not, so there is an uncertainty factor. we don't know how much growth sol be coming from this come the bond market feels this uncertainty and said there is no reason for a steepening of the yield curve at this point. the taxld change if bill happens more efficiently, and more over a change in communication on the part of the fed that believes growth will pick up. certainlyarket is questioning the positive impact of the gop tax bill right now. david in hong kong. you were mentioning the overnight index swap back at zero for the first time in a decade. it does not happen often. it was four years in the making. we can bring it up for our viewers. the question is, who do i believe? do i believe the fed? do i believe every other
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cell-site analyst? or do i believe the bond markets and we are lucky to get two? >> i would put my money on the bond markets because the bond market has been right over the last 3-4 years when we went into this gradual tightening cycle. low inflation, subdued inflation, is a big factor in but even with inflation moving slowly towards target, the bond market has decisively said long-term growth potential in the economy has shifted down, and therefore we only get a temporary growth push from the tax bill, not enough to bring the economy higher, and therefore the bond market is saying this tightening you are putting into the system leads to an inversion of the yield curve potentially. janet yellen has said this may be different in the past. hows still a classic way
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the bond market judges the economy at this point to me. david: it is rare the yield curve is this flat mid tightening cycle. do you think the fed is looking at this and it is giving them room to pause? >> that is possible, because the fed look set this was some level of concern. there have been fed members like kaplan that have indicated this flattening of the yield curve is an opposing signal to what they are trying to achieve. the idea is they want the dual mandate in balance. the flattening of the yield curve does not say that is the case. i think there are some concerns within the fed. if we get to an inversion, it chair inllenge the fed the message of we are getting a
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different signal from the bond market than what our forecasts are indicating. david: i want to ask you about dollar funding. an issue as we approach year in. is there something -- year end. is there something apart happening? why are people hoarding u.s. dollars, especially since you just talked about the yield curve converting and there is no real premium at all? >> with this going on, people are anticipating the repatriation of dollars back to the states, although there is debate about how much there will be. market, the currency derivatives market you are citing come is indicating there is demand for dollars. people are somewhat short in terms of the dollars they need, not only to year-end, but 2018. it is a technical story, but it is another aspect of that
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uncertainty discussion we were having. why is this dollar hoarding happening against the backdrop of the economy? that does not make sense. betty: a couple of questions separately. fort, the vice chair news the fed. we heard about lawrence lindsey and others. who do you think will likely be appointed to that post? how much of an impact with that have on the markets? >> that is a great question. i work with two of those individuals, and i think both are extremely compelling candidates, very capable, but different candidates. if i had to put money on it i would say because of his experience that mohammed has the better chance because he has been in the leadership role and has more season. that is my own personal view, but i would not discount rich
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because of his economic excellent. excellence. differentt candidates coming in and out of the white house. what matters for investors is that this vice chair will complement the chair in the message of the fed. i think it will be very focused on growth. gdp to be higher. i think the trump administration is trying to convey to appointees to get a message out there that tax cuts are good them about we need higher growth and the fed needs to convey that message. when: you work with both you were at pimco. , on bitcoin, you mention the fact that we have introduced futures trading in bitcoin a few weeks ago, that will cap the value and you see lower in 2018? >> i think what is going on is
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that the futures market is a great way of making coin more efficient. are in a highly speculative market because of the limited amount of coins available, but if it is a price for virtual money come the futures market will make that pricing more efficient. you can see in the futures market that there is some sort of limit to how far bitcoin can go. because the price of money is low in low interest rates and there is a lot of money out there, why would the virtual price of money be so high in bitcoin? so i would expected to go down over the course of the year. david: do we expect the bid-ask spread to narrow? that is the other aspect of it. you get more efficiency in the futures market, so the bid-ask
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spread across the different exchanges the trade bitcoin spot aspect that is another of the good thing about futures markets. david: pleasure to have you on the program. happy new year. you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. this is for bloomberg clients. just go to dayb on your terminal, mobile, and bloomberg anywhere at. you can customize the settings to get the news on industries and assets you care about. top stories as we wake up this thursday morning. more coming up on the show. stay with us. this is bloomberg. ♪ ♪
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david: let's get you a check of
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the business flash headlines. has completed $2.3 billion deal, the first time a publicly traded equity firm has delisted. shares were halted before the announcement. the stock closed flat. agreed to the price back in february. tcw, taking half of the stake owned by nippon. more than the initial investment. tcw will still control 44% of the firm. coming up, shining light on dark
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pools and growing concern about the rising popularity. we will flesh out that story next and shed some light on it. this is bloomberg. ♪
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7:30 in the morning thursday in hong kong. , which looking at icc houses the highest trading floor in the world. 30 minutes away from the open of markets in tokyo and seoul, korea. betty: 6:30 p.m. wednesday in new york. markets just closing a touch higher. red and green on the empire state building still and holiday , a fewor holiday mood days away from 2018. i am betty liu in new york. watchingu are
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"daybreak asia." >> first up, consumer confidence fell from a 17 year high as people became less upbeat about jobs and the economy. theconference board said confidence index fell to a three-month low of 122.1 from 128.6 in november. even so, most people remain optimistic. respondents expect incomes to rise, it has risen to the highest since march. hedge funds may be the big loser from the 3% tax on investment returns in china. the vat v takes effect on january 1 and is part of a levy takesft -- effect on generally first and is part of a broader shift. it puts pressure on hedge funds already under public scrutiny. mutual funds are exempt from the new charge.
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india will increase its borrowing to shore up spending as income declines. the finance ministry says revenue collection from the recent sales tax should offset the $7.8 billion in borrowing. minister's advisers one hand to stick to fiscal targets them a while some relaxing toavor boost spending. the traditional survey of shale is facing competition. baker hughes weekly rig count is being challenged by a daily update on the number of explorers operating. the company says it put satellite sensors on 90% of land-based rigs to provide faster information from a wider sample than that of its rival. the next baker hughes survey is out on friday. orange juice futures in new york face a 15 straight day of losses, the worst rout since
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records began in 1967. u.s. demand for juice has been falling. investor interest is shrinking as fear people want to use futures to hedge. prices have slumped 17% this month, and 60-day volatility is at its lowest in three years. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am courtney collins. david: thank you for that. let's talk about copper, quite a pop. three-month contracts there in london. this after china ordered its top producer to halt production. the metal on track for the best performance since 2010. garfield reynolds is with us in sydney. very good morning to you. help us understand what is
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happening with the dr. copper. well, dr. copper got a boost as you pointed out from what is going on in china. in general ao been pickup in demand, so it was primed to go up. as china seeks to reduce pollution, it has said stop that factory. a similar sort of thing happen with aluminum earlier this month when they backed off on production. that has given a big boost two copper going into the end of the year. going forward, will that supply constraint continue out of china? china had to reverse some restrictions it had on coal because it did not have enough natural gas. will they have to do the same thing with copper production, and what will the market make of that? at the moment everyone is getting bullish come although it is a concerning time that the
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market is so dependent on the latest maneuverings out of the chinese government that don't necessarily have anything to do with standard issues of supply and demand, but more what the chinese government wants to see happening in the skies over beijing. betty: garfield, let's talk about volatility. you have the holiday season, thin trading come a but this season has been quiet with record low volatility. will that turnaround in 2018? , a lot of people doubt that it will. more than 2 trillion dollars of money saying that volatility will stay low because they are short volatility. however, we do have a chart we can show you which demonstrates that there are some people betting on an increase in volatility next year, so there is a split in the market, chart
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7470, a split and a market between those betting we will thosere of the same, and betting we get a return to normality. ,f we get a return to normality it may be a shocking wake-up call for people who have gotten very complacent about the idea that low volatility is here to stay. i tend to doubt we can stay this low for this long, and the longer we stay this low, the higher we will go in the final wash up. betty: garfield reynolds, bloomberg markets live macro strategist. tokyo exchange is growing aware of dark pools, trying to persuade region regulators to see the increasing use of these private venues as a threat to stability. dark pool trading, that is hear about in asia
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and know about in the u.s., so what is happening? dark elusive as the term pool sounds, it simply means private venues for investors to trade stocks anonymously. this has the coming creasing the popular globally, particularly in the u.s., as it provides a secrecy for investors looking to trade blocs of chairs -- of shares. the value of stocks on these platforms has risen to 5% in 2016. while that number might seems ball compared to develop to markets, that is almost double what the number was in 2011. david: good morning. david here in hong kong. we know it is becoming popular. how are they reacting to all of this? japan exchange group
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accounts for 90% of domestic trading. argued against what could be big competition for the boards. get the trying to financial services agency to take action by putting , liketions in place making firms publicly provide information about their dark pool operations. they have not had as much success on that front. what stock exchanges in asia will eventually have two acknowledged is that dark holes have expanded to be part of daily stock exchange trading. sharesu.s., more exchange hands and articles than even on the nyse. betty: this is why regulators are waking up to this. ii affect dark pools? >> the european union is facing
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in measures to limit dark pool trading, but you know how the financial markets are. quickly, so very firms have found workarounds and have introduced alternatives, one of them being services that allow orders to hide from others until enough volume has been accumulated to trigger an action , so they have set up alternatives for these measures that the eu is putting in place. betty: thank you so much. our asian equities editor in singapore, certainly something to watch as we head into 2018. a lot of people have been watching what elon musk is doing this year. he said he would be turning out model threes by the thousands. we will assess the road ahead for tesla in 2018. ♪
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betty: this is "daybreak asia." i am betty liu in new york. year: it has been a busy for tesla ceo elon musk. model three isd park and what he calls "production hell." so what is the road ahead and what does it look like? ivan who covers tesla and has a neutral rating on the stock. line is ae production problem, but they may be nearing full output. are planning to get to 5000 cars per week by the end of the first quarter. they were supposed to be there by december. >> where are they right now? >> they have produced 280 model
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threes since the introduction in july. >> a lot behind, i would say. >> they were supposed to have 1500 by the end of the third quarter, with a ramp up to 5000 cars a week by the end of december. >> what is the issue, the battery? >> the issue is the production line. elon musk says the production supply chain only moves as fast as their slowest a supplier. he said many times he is living in production hell. anything materially going to change in the next three months to allow him to get to this ambition target? theye issue with tesla is rely on a lot of single source providers for components. they are at the mercy of their slowest moving supplier, but once production kicks in, they do occupy a factory that at its peak in the 1970's produced
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1,300,000 cars a year, a pontiac factory, so the capacity of the factory -- they have taken that 2017ry and brought it to high-tech production levels, so probably one of the most technologically advanced factories, so the capacity and capability is there. organizing the thousands of components and parts that need to be in place. does nott matter if he reach that target by the end of the first quarter in 2018? >> yes, it matters for two reasons. one, shareholders have given elon musk a lot of passes on not meeting production schedules because he has built an incredible car an incredible company and he is a great ceo and visionary. however, investors are relying on the model 32 take it to a mainstream automobile manufacturer. in the beginning, they were a niche manufacturer, so to have
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the revenue and meet the earnings targets and expectations for cash flow to be cash flow positive and make money, they will need to get close to the production schedule from the model three. >> do you see the stock price cratering if they continue to go through delays? >> yes, that is the big risk. production,t meet they won't have revenue and money they need to get to cash flow positive and profitable, then they will have to raise more money, dilutive to shareholders. then over time, there are many electric cars coming onto the market in the next two years. by 2020, gm will have 23 electric models. of the mainstream auto manufacturers will have electric cars as part of their lineup. >> speaking about needing more they don't hit
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productions, they will still need money and they are burning money each month. offerings, debt offerings, expectations there may be another government loan in the works? six equitye had offerings and debt offerings since going public. so far the market has been receptive and they have been able to sell at the market and raise money in the debt market is pretty good interest rates, but that could change over time if the production schedule or cash flow projections are not met. the market may be less receptive to continue to fund the company. >> are we also discounting perhaps the potential of the semi truck he unveiled earlier 2017? perhaps this might be a line of business that might potentially be quite accretive to tesla? >> the new semi truck is also a game changer in so many ways.
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it is offering 300-500 mile ranges on the charge, and 0-60 in 20 seconds with an 80,000 pound payload. that is incredible. of of the biggest causes traffic jams is if you are behind a truck going from a standing still stop to 60 miles an hour. ,t can take a couple of minutes so the fact the pickup on these new electric semi trucks from tesla could almost eliminate traffic jams. >> indycar driver knows this pain. any car driver- knows this pain. that would be a game changer on the roads. >> i believe most people want to see tesla succeed, except for the other auto manufacturers ceos and a handful of short howlers -- short-sellers. it is making a car and starting a company, it is a major feat, admirable done an
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job. everyone admires his product, creativity, and ambition and ability as a ceo, so everybody wants to see tesla succeed. the truck is beautiful and the functionality is incredible. >> before we go, one last note on the semitruck. potential in this line of business, how big could it grow to become and how much is priced into the stock price? on then't think anything truck is priced in come up at the trucking market is huge. there are an number, walmart, j jb hunt, anheuser-busch, they are putting orders down for these trucks because they don't want to be left out. elon musk is one of the richest people in the world and richest people on earth, became better off in 2017, including
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jeff bezos, stock market setting new records, helping the world's wealthiest to pocket an additional $1 trillion in 2017. jeff bezos added $34 billion to his fortune, helping to knock bill gates off the top of the world's richest list. he had held the top spot since may 2013. elon musk is worth a cool $20 billion, and he is the 46th richest person in the world. bezos amazon and jeff added and elon musk and a half this year. i little bit more than 1.5 billion. betty: i want to pull up this chart that shows you. this could almost be a bitcoin chart, i guess, maybe. 978, where the
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world's richest adding $1 trillion to their fortune this year. is $2.7 billion a day that the world's richest added. can you believe that? david: it is unbelievable. guysworks out to 500 rich and $2 billion each. not bad. not bad at all. , sorry toe bloomberg interrupt, breaking news out of japan. industrial output up .6% on the month, and looking at 3.7% for the year so a beat on the year for your figure. retail sales 2.2% in the helped along by some of the billionaires in japan. chart see if i can get my up and give you a longer-term view on how that looks when it comes to retail sales and industrial output.
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it is certainly important to look at the trend because of abenomics and where it has come from. got was better than expected when it comes to retail sales, 2.2%. the average for the past 20 years was -.4%, the average for abenomics closer to 1%. andstrial output also out beating expectations. the average .1%. abenomics averaged .8%. as you can see, better than expectations. we will see where we go from here. on the program, we talked about rich people and retail sales, well thriving amidst a retail apocalypse. can the good times continues for luxury labels and 2018? that is coming up next. this is bloomberg. ♪
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inty: two more trading days 2017. time to look at the next 12 months. the luxury market is set to shine, consumer confidence and high-end retail forecast set to rise. has the three bloomberg charts we need to know. , 471.k at this chart if you had put your money in , basicallyin blue the most luxurious of the luxury brands, you would have gained 50% off that investment. severalbeing pushed by fashion companies. it is amazing what is happening here. ais is in part because of
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rebound in key luxury markets including hong kong. it is also the reach of all that e-commerce out there. just to put this in perspective, the s&p is up 19%. these top luxury makers together with the larger pool, that is up by about 30%. who is buying all this? let's put up a chart and i will show you who. are you surprised? in orange, mainland china there. the second-biggest binder is the u.s. at -- spender is the u.s. at a quarter of sales. japan just over 11%. up on 60% ing terms of all global sales. let's head back into the terminal, chart 566. beenng at what has happening in terms of performance come at this could
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be sweetening the pot for potential investors. white see the premium in for the most luxurious brands is up 14%. we can see in the past month or so since mid-november popping at 20.9 fortrading the ford price-to-earnings ratio compared to the s&p 500, 18.3, and the jewelry and watches sector is not performing as well , but still of 15% in terms of pe forwards. looking at currency fx, 584. when the currency of any country go slower, it is good and becomes more attractive. that as it pertains to brexit in the pound, down 10% today. we are expecting this will make the u.k. keep its crown as the top shopping spot in europe. is risingthe euro
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higher, so possibly chinese and american sooners -- consumers might not be going there. retail and howat it could be glowing brighter in 2018. david: thank you for that. a quick check of business flash headlines. , the remainder of this arbitration settlement ahead of the year end deadline, agreeing to pay $1.2 billion in two installments. 1mdb was set up by the malaysian prime minister and is at the center of multiple investigations linked to a legend corruption and money laundering. yourwork is renaming its office space. aroundow building lines -- product lines around the new brand and is exploring other
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services such as marketing and fundraising assistance. much more ahead. fitch ratings, head of sovereign ratings will join us in just a moment. ♪
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♪ david: it is 8:00 a.m. here in hong kong, live from bloomberg's asian headquarters. i am david ingles. welcome to "daybreak asia." face-pacific markets another thin day as we face the penultimate trading session. the best year for equities since 2013, something of a whimper as investors turned to what a new year will offer. betty: from bloomberg's global headquarters i am betty liu in new york, just after 7:00 p.m. wednesday. japan retail sales smashing expectations in november. consumers beginning to open up their wallets. two georgestanley,
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w. bush figures enter the race to be the deputy head chair. ,he lowdown and their cv's their resumes. ♪ david: good morning, betty. -- viewers just joining us and to viewers just joining us. the big story was the flattening yield curve and the story we will be talking about in a few moments. here in asia there is this affect in the bond market. between australia and new zealand, the 10 year yields of both. new zealand for the last five years has held a premium. that may just be a 2017 story. they are virtually gone, a 2017
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story, the kiwi over the aussie. betty: talking about that compression, partly the reason we have seen this interesting rise, the strengthening of the aussie dollar. that is going to pose an interesting issue for the rba in the next year. let's get to the first word news. figures's most powerful meets in the new year to discuss the first amendment to the constitution since 2004. they offered no details on changes but said the decision was made at a meeting on wednesday. the constitution was first adopted in 1982 and has been revised -- revised four times since. they will review any amendments later in january. official putin has won permission to stand another term in office. he submitted his candidacy to the election commission, seeking
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a fourth term as an independent candidate. the opponent filed his papers sunday. the commission banned him from standing as he has a criminal conviction. but his supporters say the charges were politically driven. slip below $15,000 after the biggest rally in two weeks wiped away more than $9,000. the currency exchange slipped more than 3%. there is a debate about how to vegetal -- there is a debate about how to value the digital according -- coin. take charge of $1.3 billion, due to corporate tax changes in the u.s. blowing the rate from 35% to 21% will help companies. bank of america will take a $3
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billion charge while credit suisse is expecting a $2.3 billion hit, for third straight annual loss. a new gallup poll finds president trump beaten by his predecessor as the person most americans in meyer. it is the first time since 2008 that a sitting president has not won the accolade. others on the most admired list include the pope, elon musk and jeff bezos. hillary clinton was the most admired woman for the 16th straight year, although her support fell to the lowest since 2002. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. ♪ david: we are getting markets underway in tokyo and seoul. it is the last trading session in seoul. sophie is watching the market. i was just checking, searching
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how to say happy new year in korean. i do not know why i said that, you are malaysian. sophie: we are all asian. but i have to check with shery ahn on your pronunciation. we are seeing gains extending this thursday. the kospi up 0.2%. the kosdaq following the gain on wednesday, beating the rally, pushing to its strongest level in the year as retail buyers are piling into the kosdaq index. korean investors on the lookout for that be ok monetary policy direction later this morning. we have a number of data points to chew on this morning. -- it is them is the not denting the sentiment in seoul. japan factory output beating estimates. the nikkei opening fairly flat.
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the topix marking lower. the yen gaining ground following the data. seeing the strongest level in a week. we do have energy shares sliding in tokyo and seoul, reversing what we saw yesterday. pulling up the board to see what is happening when it comes to the cost asset check, treasuries both flattening while u.s. stocks were listless. u.s. mining propping up the long end without any obvious catalyst when it comes to the trade in treasuries. trading at about 2.4 percent after capping a fourth session of declines. 15,000 gaining ground, of -- overnight. reports the amid libyan -- repairs to the libyan pipeline will begin next week. we are keeping an ion commodities. check out g #btv 1391. this shows you copper near a
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high in london. for a ninth session. copper is up 31% this year, gaining the most amongst the lme metals, after aluminum. betty: sophie kamaruddin with the markets. more signs of strength in japan and better-than-expected retail data in november. what do the retail numbers show? work muchail numbers stronger than expectations. as you know, retail sales fell in the third quarter, despite the underlying trend that private consumption is on the way up. ithink today's figure shows bodes well for the final quarter of 2017. for privateng trend
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consumption slowly recovering is still intact. betty: what about the recent corporate scandals we have seen, not just in japan but korea? any of this have any impact at all? >> in the previous months we have seen inventories build up, as a result of the auto inspections. overall, the automakers are saying they expect production to normalize, sales to normalize, in the coming months. gradually will be fading out as we go into 2018. have a look at retail sales, another bright spot that has emerged. we have a chart that shows us this, g #btv 1412. i want to show this to our viewers. 2.2%, we have taken this back 20 years.
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average, -0.4%. how does it look for 2018? kazunori: the underlying trend is that it is generally hitting in the right direction. that recovery is slowly but surely coming along. the big question is whether it is going to be strong enough to withup consumer inflation that element still relatively very littlel give impetus for the bank of japan to alter its monetary policy. at this point, it is hard to tell if 2018 will be the year. certainly in terms of spending, we are seeing things moving in the right direction. i think that trend will be intact in the coming months. david: hopefully big spenders, the japanese. thank you so much, our tokyo bureau chief.
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let's get more on the japanese authority. our guest agrees the economy has performed well. five years in, getting traction. with us in the studio, happy new year to you. >> happy new year. david: japan has punched above its weight the last year and a half. my question to you is whether an hasr not abenomics increased the strength of the economy? mics has been gaining traction. our own outlook is 1.5% this year, 3% next year. there could be upside potential. potential growth only 0.7%. some of the structural reforms are still lagging. missing in the japan story is the pickup in wage and price inflation.
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that is why we think they will keep their foot on the accelerator for some time. david: they will need to for several years. leading to potential growth, that takes me to the gap for six or seven quarters. how much more do we have to see all of that, for them to be able to achieve sustainable 2% inflation? stephen: they are still well short of the 2% inflation objective. it is puzzling why we have not seen inflation at this point. it is a bit of a global problem, not just in japan. problems for potentially the duality of the labor market is one. but we do not see any signs of wage inflation. we think it is coming we just have to keep waiting. it is anybody's guess how big that positive output needs to go to generate inflation. we think it will come, but it takes some time. we do not see inflation reaching the 2% level anytime soon.
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david: a lot of the critics of abenomics have labeled it kurodanomics, for obvious reasons. do you subscribe to that view? what happens when they take the training wheels off? stephen: the issue for us is the height public debt burden. at 230% of gdp, japan has the highest public debt burden globally. that is a big challenge. a couple years ago we put japan on negative outlook because of the twice postponed hike in the consumption tax. more recently we stabilize that outlook because of the improving --ro trend has but the jet put the debt to gdp ratio on a flat trajectory. to get it down, japan will need to take difficult fiscal measures, including that consumption tax hike, which we think the likelihood is rising, given the campaign elements abe
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himself had said. betty: i am curious, getting back to that inflation target and how we are so long off from reaching that. we had some of the minutes come out from the boj meeting in which one more member emphasized we are a long ways off from that. in 2018 are we going to see that rise again, whether or not the boj steps back from that target? stephen: our own view is that bank of japan will be the last global advanced central-bank to go into tightening mode. we know the u.s. is already doing so. on thect four rate hikes more aggressive side of expectations for the u.s. we see qe ending in 2018. we do not see an end to the bank
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of japan. they have a priced in quantity target at the moment. they might not meet their $80 trillion annual purchase objective. but we do not see any tightening in the cards for the for seeable future -- for the foreseeable future. betty: does not look like 2018 at all insights for that. for that.ts plenty more to come. this is bloomberg. ♪ ♪
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♪ david: this is "daybreak asia." i am david ingles in hong kong. inty: i am betty lou -- liu hong kong.
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more about the asian economies, following what you are mentioning about japan's and its debt levels, we know in many other countries and in china, the high debt level is managed well in japan. not so much in china, they are facing issues. with the fed raising interest rates more next year, how much more difficult will this be for asian companies as their debt costs rise? stephen: exactly. we have a pretty benign outlook for the aipac region. we have seen strong growth impact and substantial tailwinds from the improved global trade outlook. you are right. -- you are right. it is one of the key risks we are monitoring for next year. asia has seen a significant buildup in corporate and household that across the
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region, depending what economy you are looking at. that can see through the higher borrowing costs or more specifically if there is a resurgence in u.s. dollars strength -- it has been on the weak side. that could put pressure on external financing for a number of economies. betty: what is your outlook on what impact they could have on the dollar? it is a struggle to see the dollar like this. stephen: it is a more stable outlook for the dollar into 2018. , if thatsk again resurgence of dollar strength were to occur. the fiscal stimulus is coming with these tax cuts in the u.s., only likely to put more upward pressure on u.s. interest rates. a risingd with interest differential, cause the dollar to rise against the emerging currencies in asia by putting pressure on a lot of the
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capital inflows. one of the big macro risks we were talking quite a bit about this year was trade tensions. particularly trade tensions with the u.s. do you expect that to resurface in 2018, or have we seen the worst of it this year? stephen: with that you highlighted the other key risk we are monitoring for apac, geopolitics, uncertainty from the u.s. administration. trade.that, the risk of across a pack region, the u.s. the apacicit -- across region, the u.s. trade deficit. tensions in china are increasing is tension over north korea
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one of those that could spill over into the trade routes. david: i want to talk about the acute pressure points. short-term i want to bring up your purchase rating on china. it has been there for a while now. help us understand it is an area where you would need to be forced into placing china on a credit watch. stephen: stephen: we recently confirmed china's a plus rating. has theese authority lovers and has showed an ability to maintain growth momentum. we have up to our growth projections, 8.6% this year, slowing modestly to 6.4% next year.
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we are concerned about the buildup in the corporate debt. authorities are reluctant to ease off those high growth targets and that leads to higher leveraging up in the economy. and that is not base case? stephen: not our base case at the moment. thanks to our strong world trade outlook, it stays high without the need to put more stimulus into the economy. in our view, we are not seeing serious deleveraging just yet. there has been a reigning in of risks in the financial system. we have seen financial system deleveraging. but in terms of the real economy, it is outpacing the pace of nominal gdp growth, leaving the ratio. synchronizedalmost for the first time in more than a decade. who is the problem child in asia? stephen: in terms of the
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pressure, potential pressure on andtal flows, indonesia malaysia are among the more vulnerable because of their reliance on external financing. we just upgraded. we added the positive story. they have done a lot since the taper tantrum to enhance the external resilience. but a large share of the bond market -- david: indonesia is stable, but so are a lot of marriages. nothing seems to jump out at you when you talk about malaysia. stephen: the growth has been on the disappointing side in malaysia. we believe it will jump up to 5.4% next year, which is not bad. it does not put indonesia up there with the likes of vietnam and the philippines or china or india. but it has done a lot to improve the investment climate. they were hit hard by the collapse in commodity prices and
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are just coming off of that right now. tensions,mentioned trade tensions, and geopolitical tensions with north korea. how much is that being factored in your outlook? or do you believe what happened here and sanctions against north korea may work out for 2018? consider the korea peninsula tension more of the tail risk. it is embedded in our south korean rating as it has for a number of years. we take off a notch in south korea's rating because of that tension. our base case is that the risk of a military conflict remains low. but there could be spillover, as you said, to trade relations and investor sentiment. happen, we would need to re-examine ratings across the region.
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we put it more in terms of tail risk at this stage. that was a stephen schwartz, head of the asia-pacific sovereigns at fitch ratings. you can find in-depth analysis and the days a good newsmakers on bloomberg radio. you can download the app, bloomberg radio plus, or access it the this is bloomberg. ♪ ♪
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♪ betty: this is "daybreak asia." i am betty liu in new york. david: i am david ingles in hong kong. the $3.3has completed billion deal with fortress investment. they have delisted shares before the announcement.
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it closed its last day tuesday at 785, some 60% below its ipo price. $8.08 a share back in february. life taking almost half of the stake owned by the carlyle group. they reduced carlyle's holdings. the deal values tcw at 150 more than carlyle's initial investment in 2013. investors will still control 44% of the firm. david: let's have a look at a global car owner, the largest shareholder in the truck division. they agreed to sell their stake in a deal said to be worth more than 3.9 billion dollars. it is the first time the chinese carmaker has moved into the heavy truck and bus market.
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coming up on the program, we are talking about the fed story, who will be number two, and to replaces stanley fischer. the white house -- this is bloomberg. ♪
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cannot live without it. so if you can't live without it... why aren't you using this guy? it makes your wifi awesomely fast. no... still nope. now we're talking! it gets you wifi here, here, and here. it even lets you take a time out. no! no! yes! yes, indeed. amazing speed, coverage and control. all with an xfi gateway. find your awesome, and change the way you wifi. david: it is a: 30 in the
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morning in singapore. half an hour before the open markets there. --should be ending the year poised for the best year for equity markets. the 20% pop we got in 2012. i am david ingles, here in hong kong. in newi am betty liu york, you are watching daybreak asia. i know you have breaking news. david: thursday we are talking booze. what i wouldompany describe as gasoline.
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-- they arespirit giving guidance into next year, the total profit they see rising about 15.8% -- 58%. traded on the chinese mainland, shares open in about 10 hours from now. nostrils,clears the let's say that. [laughter] betty: it works. let's get to first word news with courtney collins. >> first up, hedge funds may be the big losers. the value added levy takes effect january 1 and is part of a broader shift in how companies pay tax in the world's second-biggest economy. it adds pressure on chinese hedge funds which are already under official scrutiny. rival products such as mutual funds are partially exempt from
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the new charge. india is to increase its borrowing to shore up spending its income declined. havesay revenue collection flowed and they plan to offset the $7.8 billion borrowing by curbing treasury bills. prime minister narendra modi's advisors want him to stick the fiscal target. economists favor relaxing goals to boost spending. earthchest people on became a little better off in 2017. the stock market setting new records to help the world wealthiest to profit a next her amazonlion this year, boss jeff bezos added more than $34 billion to his fortune. helping him knock bill gates off the top of the list for the world's richest. he held the number one spot since may of 2013. speaking of the wealthy, tim cook received at 74% rise in his bonus in 2017. apple posted higher revenue and
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net income. it totaled $9.3 million for the years in september. he took home 3 million in salary and an equity award. it takes is total for the year to about $102 million. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. collins, this is bloomberg. david: we are just getting warmed up, last trading day. korea on its last trading day of 2017. let's get a brief sense of where we are. have a look at the asia-pacific benchmark. [indiscernible] it, enjoy it, because 2017 has been stellar. hopefully we do not get another crisis, knocking on wood. breach, 2013.
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let's get an update on japan with sophie. sophie: looks like they are polishing that trophy, waiting to handed out for asian stocks. japan, not much enthusiasm, despite the strong data beat we got this morning. consumer stocks are under pressure even though we saw retail sales rebound in november. energy stocks losing their shine after leading the charge wednesday, citing 0.1%. treasury yields likely not adding to their a lower. look at the session in seoul. among the chipmakers biggest contributors to kush. to kospi.utors when you take a look at the laggards you have carmakers among the poorest performers. lg electronics leading after
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wednesday's event. risingg on movers, skc to an october 2016 high in seoul after announcing a plan to ymidee polymer might -- pol film. a last look at a broader move in the market. asian stocks, bitcoin flirting with the record high. the kiwi dollar leading gains against the greenback. that currency rising to a two-month high. that 78ie eyeing handle. keep an eye on that space. betty: thank you so much, sophie kamaruddin on the markets. two more names have the surface to replace stanley fischer as the vice had chair. kathleen hays has more. is person familiar to us
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clarendclare and the -- a. kathleen: not surprising he is in the running to be nominated as the fed vice chairman for stanley fischer, leaving the post. let's take a look. he was the assistant overseeing it the bush white house. director the managing to pimco. he has a sense of markets. a professor of economics and international affairs. a lot of his work focusing on foreign exchange and the very -- interesting economic research. and, a well-respected scholar. a money manager at pimco himself believes rich clarida would be a fine choice for the next fed
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chair. take a listen. >> being expert on the issues of monetary policy is important. think about ben bernanke, and advisor to pimco. he understood the great depression very well. it is very important in terms of where monetary policy could fit in and what it could do. kathleen: the other name, lawrence lindsey. let's take a look at things he has done. he was one of george w. bush's top economic advisers 2001 to 2002. an architect of the tax cut. and he was on the order governors from 1991 to 1997. how they -- how might they be different are the same? let's take a look at rich clarida. he sees maybe two or three rate hikes next year. and inflation starting to pick up. he has praised janet yellen's policies as effective. may be dovish, not sure.
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in 1996, they saw a stock market bubble forming. they did have stocks going down in the early 2000. two interesting names. david: and, the president of the boston fed, is he warning of a financial instability next year, or saying there might be something? kathleen: this year it was commercial real estate he was worried about. about lowtalking rates. they have been low for so long. the us could cause financial instability as investors reach for yields. they could have a hard time fighting negative shocks to the economy. geopolitical risks to him are getting more severe in 2018.
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in fact, on another note, an interesting transition year for the fed. here we have it, 2018, three hikes. we have these dots up here. will the vice chair be in this camp or this camp? i think the transition will be interesting. not just the fed vice chairman, but new governors and bank presidents. quite a year for the fed. david: and you will be on top of all that. half lean hays, from new york. let's turn our attention to southeast asia. hadindonesian president 2018 in a better position. our chief international correspondent for southeast asia, haslinda amin, joins us with more on the story. if you are having this conversation about president joko widodo at the beginning of
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the year, not a lot of people thought he would survive the first year. >> you are right. here he is, three years on. he said he was disappointed with the performance so far. perspective,it in not a good track record, not the 7%. the growth it did in japan of -- did inch above 5%. growthongest pace of next year. when you look at inflation, pretty muted. the 8% when he became president. the top of that, foreign investment is picking up. more people are having jobs. infrastructure is built in a concerted way. is preoccupied with boosting tax revenues to help pay for all the construction. given the strong growth, they have moved to hold off raising rates, despite the rate hikes by
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the fed. if you recall, that amnesia cut rates eight times from the beginning of last year. unless of course they raise rates in an expedited way. elections are looming. fair to say he is in a sweet spot for his second term. you are right, that is a fair assessment. the campaigning will start in september. the question really is whether or not joko widodo will run a second term. i caught up with him not long ago. take a listen. >> i am now concentrating on the job, on the task the people have interested me to do -- monitoring infrastructure, checking the indonesia smartcard
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and the family health program and world funds. they must be checked, controlled. the upcoming presidential election come i will leave that to the people. isn't it true, given the massive projects you would like to implement, another five years would not help? if i stay in the position of working as planned, i will focus on that. we expect the programs to be completed. but, if they are not finished, they will have to be finished in the next period. haslinda: joko refusing to say
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if he will run for a second term are notwi. some say the campaign may derail indonesia's reform agenda. they say he will stay the course, he is a president with a mission. betty: thank you so much, looking forward to seeing more of that interview. horizon what is on the for asia-pacific headlines -- airlines. this is bloomberg. ♪ ♪
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♪ betty: this is "daybreak asia." i am betty liu in new york. david: i am david ingles in hong kong. airways have apologize to passengers after this tokyo bound flight had to return to a lay because someone was on the wrong lane. intolight was four hours
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its flight when the pilot decided to make a u-turn and turned back to l.a. of thesebout how a lot airlines are having a difficult year. we talk about turnaround plans, but this is something else. [laughter] betty: it turned out it was two brothers both headed to tokyo. one of them was supposed to be on a united airline flight to tokyo. this seems to be a star-studded flight. kristi keegan and her husband john legend were on the flight. she tweeted out this whole ordeal, eight hours of live tweets. question a very simple which is what i was asking -- why did they not continue to fly? they were both going to tokyo, what is the big deal? metaphor for the state of the airline industry and how people feel about the airline industry.
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david: it certainly does. disappointing stuff. she was live tweeting as things were happening. eventually gets to tokyo. 230 passengers on that plane, one was wrong, but he was on the way to tokyo. why was everyone else punished? it obviously has made its rounds on social media. this was from the company itself. they tried to explain the turnaround plan. the pilot was presented with information about a discrepancy in the passenger manifest four hours into the flight. based on available information during the flight, he made the correct decision to return to lax. betty: still not enough for all those twitter followers. here to discuss the state of aviation as the year winds down,
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president, he thinks aviation will grow up to 9% in 2018. i hope you have never found yourself in that kind of situation on a cross pacific flight and had to turn around. usually a higher market ahead. what do you expect in 2018? the 2017 industry has grown in terms of 4 billion passengers globally. the cargo industry picked up. it is an encouraging year for the industry. , they can have a level of challenges for increasing growth and competition. conflicts.ional
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the industry looks great for 2018. biggesthere are the and who will face the biggest capacity issues? subhranshu: in this part of the southeast airlines will see capacity growth that will have a tremendous impact. airlines are making their businesses more efficient, control on the operating costs is a challenge for this part of the world. overall, as the industry is growing, the cargo industry has picked up. it will be better. but the operating cost will be challenging. betty: as you mentioned, the
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low-cost airlines. what is your prediction for the continuing rise of these low-cost airlines and how they will hit profitability of major air carriers? they have done well in terms of creating affordable buckets for passengers who can fly. if we look at the challenges they are facing [indiscernible] if you look at specific countries, capacity growth has given them a tremendous challenge. players. are new city forill be a little flexible these airlines to expand.
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but they have to be careful how they conduct business and making sure the operating cost is under their control. currently we have just under 6000 aircrafts in the asia-pacific. help us know where this number goes next time -- this time next year. there are tremendous orders in this part of the world. aircraft are coming into the fleet. fuel efficiencies and operational efficiencies, including the planning of the route are getting enforced. as long as these areas are improved, new deliveries will create more momentum, more efficiency and be more productive. speaking of efficiencies, if we had this conversation 10 years ago, we would have concerns over, are there enough airports out there?
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with all this big data, the current capacity of the airports has been improved because of the efficiency. that said, a lot has to go into infrastructure. give us a number, what needs to be put in place over the next five years? subhranshu: absolutely. airports are in integral part of this industry. china, india, indonesia, philippines, more than 500 airports getting built in these countries. there are airlines targeting [indiscernible] they are getting into a larger number of route planning. to make this efficient is key. we have seen a lot of the leading airports introducing,
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investing, to make things more efficient and productive. investment will be in billions of dollars. david: we have to leave it there. we are looking forward to the new year and what aviation will bring. don't forget, our interactive tv function, in case you missed that interview. you can catch all of the audience interviews. and the previous conversation with the indonesian president, talking to haslinda amin. you can dive into any charts or securities we bring up on the show. and be part of the conversation, send instant messages to me, betty, our producers. we will try to bring them to our guests. this is for subscribers only. this is bloomberg. ♪ his is bloomberg. ♪
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♪ betty: this is "daybreak asia." i am betty liu in new york. david: i am david ingles in new york. rising as much as 39% exit theling assets to debt restructuring program and cut borrowing by $6 billion. the stock more than doubled in
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the past six trading sessions, amid speculation they have obtained necessary agreements to sell assets. paid abu dhabi's sovereign fund at a year-end deadline. $1.2agreed to pay ipic billion in installments, with $603 million remaining. it is up a center of multiple investigations linked to corruption and money laundering. rivalwework chinese youwork with a trademark battle. youwork is hard to say. they previously said they should change the name back. exploring other services such as
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chineseg and legal, the firm now operates 120 locations in 35 cities globally. a quick check of how markets are trading across the asia-pacific ahead of the open in taiwan, malaysia and singapore. very interesting what is happening, 0.3% short of the record high. betty: we have one more day after this to see how we round out 2017. that is it from "daybreak asia." market coverage is next. this is bloomberg. ♪ is bloomberg. ♪
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rishaad: asia-pacific stocks flirting with another benchmark high, another direction coming from wall street overnight. the best year of equities since 2013 is ending with someone of a whimper. investors turned to what the new year will bring. at retail sales smashing expectations in november. consumers begin to open their wallets. this is bloomberg markets. ♪ rishaad:


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