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tv   Bloomberg Markets Asia  Bloomberg  August 12, 2021 10:00pm-11:00pm EDT

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a fairytale report from disney. david: that looks to be more a minority, really because other industries travel -- the obvious part, of course, but even by do, for example. the delta variant really starting to show. yvonne: i think it is less towards inflation and more about road concerns where these ceos are flagging the risk in the longer-term. when we talk about the bond market, there's a lot of calls out there that potentially yields have hit bottom despite these growth concerns. david: i will join you in a bit. in the meantime, not a lot of conviction with the exception of south korea where, by the way, i would not say it is only a samsung story, but that being the biggest story.
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the worst week at samsung going back to 2020. bond yields have been heading up. we've been talking about the fed , for obvious reasons. mexico delivered a rate hike for the second straight time. we might see new zealand next week, and it takes us into the broader picture in a rising rate environment. for investors, i guess, looking to place their money across asset valuation, it is really about having yields actually bottomed? yvonne: let's get more on that jp morgan called. you have this hawkish sentiment of the fed and evi prices looked pretty strong last night as well, so they are looking at why yields have bottomed, and they say that actually offset what we
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are seeing when it comes to delta concerns and how that could weigh on growth. that is the quant view from jp morgan. there's still a lot of people saying 1% for the u.s. 10-year, but we are leaning closer to that on .8%, that 2% level for the end of the year. david: i think it's also worth noting when you look at this forecast, they have an -- they are still higher than where we are right now. it is still a big debate. if they get the correct, that is obviously one part of the equation. there is an uptrend in the 10-year yield. that is your 10-day moving average. we are right at 50-day. watch that closely. beyond that, change things up, 1.34 percent, that is the level at which we then get a lot more selling and trigger.
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here are your forecasts, current forecasts from strategists. we put them on a graph for you. 1.8% by the end of the year. by the end of next year, we get to about 2.1%, but this reflation, that's where it starts to get reebok. jackson: that comes down to what happened in jackson hole, but we talked about baidu. airbnb was also 12 slowest forecast. you are also hearing it from oil commentaries as well. flagging how oil markets could be impacted from the delta variant. specifically talking about china demand as well, could actually
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shrink on the back of what we are seeing on the mainland. david: i guess how they actually moved very, very quickly, i guess, to contain some of these hot spots. we were talking about how they are looking to keep an outbreak from getting bigger. you get one case, and suddenly we are talking about the world's third busiest port suddenly looking at a partial lockdown. he had the shanghai port. just watch what happens very, very closely. cost pressures and supply chain disruption. that goes into the inflation conversation. yvonne: let's bring in our strategist with the latest. do you think this bond rally has
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ended? >> possibly in the mid part of the curve. my colleague had an interesting piece out earlier today talking about central bank holdings. obviously, it has been a conundrum once again in the past few months as to why treasury yields can stay so low. there is obviously the considerable amount of money that has shifted from central banks in particular. it is not just the fed buying government bonds, but there's many central banks around the world partly affected, and the u.s. dollar has seen fit recently as well. they do not very much go beyond that, so what we are to see if jp morgan are correct and the curve start your shift higher,
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the real pain will probably come in the very long and because that is where the active trade, the momentum trade, the leverage trade -- that is where they are the most active. they will take bearish positions. they will probably see they can get more bang for their buck in the very long end. david: also one of the things on the blog today -- we have had this conversation between the three of us here with our guests here, has value emerged in these chinese markets. i spent a little bit of debate on this when i put this on twitter. alibaba yellow, and home depot is now trading at a higher multiple than home depot. if someone told her that three years ago, they would call you crazy, but here we are in a world where we are rethinking really what a china growth stock
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actually is. where are we on this sort of relative value trade as it pertains to chinese equities? >> i think what it shows you is that even though in purely numerical terms you may think there's relative value, but when you throw in the uncertainty on policy issues, which is what is concerning a lot of people in relation to china, especially right now, they are not clear where government policy is going in relation to certain sectors, if something -- it means something that looks undervalued can stay that way for a very long time. we have seen in previous cycles, it can stay that way for a very long time. it could be there for one year or more. just because the valuations have adjusted, they may look a bit cheaper, it does not mean to say that confidence is going to return straight away. that's the big unknown factor for everybody around the world. when will confidence return for
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china shares? yvonne: you can follow more of marc's commentary and analysis on the mliv blog. if you have any kind of questions and want to submit any entries as well, feel free to let us know. let's get to first word news. we have vonnie in new york. vonnie: samsung electronics' vice-chairman has been released from a seal -- seoul prison. he apologized to the public for causing worries. the 53-year-old had been serving a 2.5-year sentence for bribery. he still faces prosecution in two separate cases. the pentagon says it is sending about 3000 extra u.s. troops to afghanistan to help evacuate the -- diplomats. the u.s. has more than 3000
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people at its embassy, many of them american citizens. the partial evacuation order has underscored how badly the u.s. has been caught offguard by a rabid taliban advance. hong kong's population shrank substantially over the past year. people left the city after a national security law that curtailed protest and dissent. hong kong's current population is about 17.4 million people. global news 24 hours a day on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. david: coming up on the show, we will talk about potential
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scenarios with the taliban's rapid advance raising alarms. we discussed the implications later on the show. yvonne: a university professor joins us to talk about china's regulatory crackdown and concerns about slowing growth in the second half. this is bloomberg. ♪
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avon: let's start with that -- yvonne: let's start with that alibaba news. quickly fully intend to comply with all the regulations. >> we are also learning that tiktok owner bytedance may be eyeing a revival of its ipo plans. >> local media in china, 21st century business news as well as bloomberg news saying that bytedance has denied that report, saying it is inaccurate.
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>> you have tencent being sued over their youth mode. >> investors for the past decade were basically pulling the wool over their own eyes. >> i think things will be much clearer under the new rules in one year or two years. >> the chinese authorities are in their long margin. >> rejecting the economy will be deep and sustained over the next five years. >> this will be the most significant of all the regulatory resets, as we call it, that china has done. we think it can reshape the landscape for china equities quite profoundly. david: that is a look back not at the last year, the last week. quite eventful, right? yvonne: our next guest is an
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expert on china's economy and specializes on chinese markets. also senior fellow at the carnegie center. always great to have you, especially on such a timely topic like what we have been dealing with over the last two weeks or so. how are you viewing the regulatory environment right now in china? there are some saying this is just an esg effort, a moral hazard issue that has been long in coming, and some saying china is on investable. where do you stand? >> it is pretty confusing for call of us, particularly since what is driving it is politics more than economics, but there is a real debate among policymakers and policy advisors within beijing about the direction they should go because at the same time that we have been hearing for the last several years rumors of more
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control, we have also been hearing that they want resources allocated more by the market. there is a conflict to try to figure out which way we are going to go, but i think the thing we have learned which we should have always known is that the chinese markets are quite different and you have to think about it much more politically, much different than you think about other markets. david: it brings to mind this 4-decade span of opening up the economy and letting animal spirits and capitalist spirits go. in some way, do you think this -- what has happened recently is beijing trying to rain some of that in? in certain parts like the education sector or private equity.
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>> i think that is right. i think there is sort of a deeper concern running here, and that is that the chinese growth model has relied, as you know, very heavily on investment, which itself has relied heavily on debt. as china began increasingly to overinvest in nonproductive projects, as it has the last 20, 50 years, one of the consequences has been an explosion in the country's debt burden. debt to gdp ratio has taken off. you mentioned moral hazard earlier on. there are parts within the regulatory groups that are very determined to eliminate moral hazard and to prevent the growth in debt. the problem is that the full growth model depends very heavily on moral hazard and the expansion of debt in order to
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deliver the high gdp growth rates that beijing wants. i think anything about two or three percentage points involves a rapid increase in debt. it is not clear how this will fall out because you have these completely incompatible aims. david: isn't what they are doing right now the correct way to go? i would argue because you are trying to get away from a debt-fueled infrastructure government spending model to a consumption-based model, you transfer back to the pockets of the middle class. >> that is politically very tough to do. it has always been the toughest thing to do.
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imagine households retain roughly 50% of gdp and governments roughly 25% and businesses roughly 25% broadly speaking because his is hard to distinguish between business and government, but imagine what those transfers require. if you want china not to become a normal country in terms of consumption but just to get half way to normalcy, you would need to transfer at least 10 to 12 percentage points of gdp from probably the government sector to the household sector, so we go from households of 50 two households of 60% to six to 5% of gdp and governments of 25% to roughly 5% to 10% of gdp. i would argue that implies a huge political transformation, one in which households retain twice as much of government into a system in which households
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retain six times as much as government. it is and policy exceptions that are the really hard part of all of this. yvonne: the crackdown on the technology sector, given it is such a significant portion of growth, this is not just about putting a risk premium on the stock. it has growth implications and potentially could weigh on growth. you are saying still your outlook is that china could continue towards the 8% growth versus 6%. why? >> i have always had a much lower growth target than i think the rest of the market. below 7%, those really concerned about that have the upper hand, and above 7% are those more worried about growth perhaps, but china can continue. as long as it has debt capacity,
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it can get any growth rate it wants. these are not real gdp growth rates. they are generated by a lot of nonproductive activity. the real issue is how much debt they are willing to tolerate, and i think those concerned about debt had the upper hand in the beginning of the year, but you will notice that growth rates have been slowing quite significantly, so my expectation is that in the second half of the year, we will see them step at little bit more on the investment accelerator and we will see growth levels pickup. my guess is we will probably get around 7.5% growth this year, but i always caution people that if the politics change, then expect gdp growth number two change. yvonne: real quickly, i just got a viewer question i want to ask
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you. they are asking, what is the most important driver of hong kong china stocks right now? is it simply down to liquidity measures? >> unfortunately, i do not follow hong kong closely enough to really give you an intelligent answer on that one. yvonne: ok. everyone has been talking about what is going on with the pboc that we might see some more liquidity coming in. what was your outlook on that? >> i think we will see an expansion of liquidity. i think a lot of numbers have been pretty weak. i think the withdrawal of foreign investors over the last couple of weeks from the chinese stock markets -- by the way, i think that is a good thing. i think one of the things china really had to worry about and was not worried about enough was that foreign inflows were still
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quite low overall but rising very quickly, and that creates a big problem for chinese currency policy and monetary policy, and they have been trying to counter that by encouraging outflows, but that has not been very successful either, so i think the slowdown of foreign inflows into chinese stock and bond markets is pretty good for china and should be a sign of responsiveness. i tell my clients that when the numbers are really high, they should not be coming in, and when the numbers are very low, that is a much more interesting time to come in because significant inflows undermine stability of the market. yvonne: thank you so much for joining us from peking university. coming up, more on the latest u.s. earnings results from the likes of disney and airbnb. this is bloomberg. ♪
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yvonne: disney shares have soared in late trading after reporting disney+ subscriptions beat estimates, which played a big role in those better-than-expected earnings. subscribers grew 150 million in the quarter, about 3 million more than expected. su: yeah, way more than forecast. disney stole the show. they beat across the board. huge increase in demand not only for disney streaming but also the bounce back in the park. disney subscriptions again 160 million direct to consumer business generating $4.4 billion in the quarter. that's already half the size of the linear network.
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big jump in shares. we did also here the ceo address the "lack widow" issue where scarlett johansson sued the company because they went quickly to streaming. they defended that strategy. david: airbnb, different story there. su: we had shares down after hours because the company projecting there will be a decline, just not something wall street wants to hear right now. if we drop into the bloomberg, you will see a number of travel-related stocks have all been hit by the fact that the delta variant is a significant sermon. while the number of bookings has declined, the value of those bookings, longer stays, actually higher. david: there we go.
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many staying home, unconcerned about the outlook going forward. apple out with some earnings and guidance not really meeting expectations. we have a whole earnings segment comcast nbcuniversal is investing in entrepreneurs to bring what's next for sports technology to athletes, teams, and fans. that's why we created the sportstech accelerator, to invest in and develop the next generation of technology that will change the way we experience sports. we've already invested in entrepreneurs like ane swim, who develops products that provide hair protection so that everyone can enjoy the freedom of swimming. like the athletes competing in tokyo, these entrepreneurs have a fierce work ethic and drive to achieve - to change the game and inspire the team of tomorrow.
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david: welcome back to the show. 10:29 in the morning. 10:29 p.m. out of new york. the benchmark as we wrap up the trading week. it has been quiet. price. action has been subdued. . the volumes we are looking at, about 1/5 of 1% on the downside. japan going into its lunch break. just on with earnings season. -- just john with earnings season. virtually fairly presented.
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it has been amazing. it has been an absolutely amazing earnings season. the portion of the market that is beating expectations, it is a different conversation how high the bar was to begin with. nikkei 225, has not beaten estimates. roughly in line with a quarter of action. if you had to pick a sector, consumer discretionary shares have actually been the outperforming when it comes to sectors. 82%. 29 out of the 30 companies were we have data was in that sector. these are are not bad, as well. yvonne: china coming up. we will see how that plays out. david: -- yvonne: at least japan looking good. apple's main iphone assembler seeing sales slowing in the current quarter. that forecast caught analysts by
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surprise, given the third quarter is often the peak reduction season -- peak production season. what do we hear on the earnings call? >> in contrast to what the company said in late july about frequent demand in the second half, the guidance says it expects the revenue to see little change sequentially. the smart device business is likely to go down this corridor. that is a bit unusual. the third quarter usually is the peak season for production. apple preparing to launch a new headset. apple did warn him july the constraint would hit the iphone and ipad in the current quarter. -- the delta variant in this
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region may affect product supply in the second half. david: what does it mean for the rest of the apple supply chain universe and the companies that depend on apple for their fortunes? >> we are looking at the stock movement this morning. shares have a little change. that is because of their second-quarter earnings being strong. but we are seeing some chipmakers go down. that probably has more to do with the fact concerns that winter is coming for chipmakers. more than 1% last night. so it could be what is directing chipmakers this morning. yvonne: debby wu, thank you. take a look at the stories out of southeast asia.
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singapore still about earnings. results do from cosco shipping. increase in business sentiment until visibility on border openings. gdp numbers coming out of malaysia. that is due at noon. today, they shrank 1.9% order on quarter, according to what economists say in a survey. the bank of thailand will release its weekly foreign reserve data. david: southeast asian market check at this point in time. flat across a lot of benchmarks. not really negative for the most part of the year. it has been a groove out of favor. i guess compared to developed markets. it is a really distinct and different story. also earnings, we are in that, too. shanghai, japan. we talked with aland earlier. they have talked about listing as primary. then it is singapore, the secondary there. we will get that later on for you.
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in the meantime, vonnie quin is in new york with your first word news. >> we will start with the cia. the secretary proposes to create an independent mission center for china to escape efforts against the top strategical -- the prospect -- the agency's china capabilities. preparations are housed in a broader mission center for east asia and pacific. san francisco has become the first major u.s. city to require proof of full covid vaccination for indoor kitchens, restaurants, bars, and gyms. it also extends to large indoor spaces like theaters and entertainment venues. new york city imposed a less severe mandate last week requiring indoor diners and gym goers to offer proof of one vaccine dose. -- the cdc says covid vaccine booster shots are not appropriate for anyone without a compromised immune system.
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the fda is expected to approve a third shot for high-risk people. talks of pfizer and moderna on supplies. the cdc director says nobody should seek out a booster shot on their own. canada's prime minister is expected to call a snap election this sunday. he's looking to capitalize on hold showing his liberal party with enough lead to retake the majority in the legislature. the vote will reportedly be held on september 20. public opinion polls show the liberals with about 36% support. near the threshold needed to regain control of parliament. the u.k. chancellor has promised the u.k. will not see the returns -- over the last decade. interviews following the reports of a risk for prime minister boris johnson over the approach to spending.
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-- wants to succeed boris johnson one-day. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quin. this is bloomberg. yvonne: the international energy agency cut forecast for global oil demand for the rest of the year as the resurgent pandemic hit major consumers and also predicted a new surplus in 2022. david: a reversal for the agency, looking at oil prices, just a month ago it was urging opec-plus to open the taps or risk damaging the spike in prices. let's see where we are in oil, energy, and demand with warren patterson. good morning. i trust you are well. thanks for coming on the show. i'm trying to put everything together. we understand opec-plus still
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has more supply, but coming up against the delta equation, square those for us. >> clearly, the delta variant is a real risk for the market. it was highlighted with the report yesterday. i think one issue over the last few months has been overly optimistic on the demand recovery for oriole -- for oil. there's going to be hiccups along the way with that recovery. opec plus have always been taking a fairly cautious approach, in terms of easing production cuts. for example, from all of this through until the end of december, we will see 2 million barrels in the market. even 400,000 barrels a day per month. i think that was really the fact
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that looking at the physical market, maybe demand is not as strong as the futures market suggests. so i think with the downside we are seeing in demand over the second half of this year, i would say opec-plus increasing output, although it is modest, i still believe the oil markets will be joined over the second half of this year. as a result, i expect prices to remain. we are forecasting over the next months. yvonne: $73 a barrel. you mentioned the demand picture the iea laid out. china still seems to be the big question mark. do you think with opec, if they start raising output, can the market absorb the outlook? can we see that economies like the u.s. and europe offset what
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we are seeing in the demand picture in china? >> the market will be able to do it, given the fact we will see deficits. the bigger question mark is over the course of 2022. the current pricing environment we are in, it has led to an increase in drilling activity. for example, we have seen quite a recovery in u.s. trading activity. expectations are that we will see substantial supply growth. the bigger question is 2022. that is where we could see opec-plus walking back on their easing schedule. so potentially, we could see them decide against increasing output in 2022. david: i want to ask about
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inflation. will costs go up? if i drag my coffee and i like it with sugar, will that go up, too? >> coffee and sugar, there is potential. we have had terrible weather conditions in brazil. we had drought conditions. that was followed by frost in a lot of the growing regions. if we look at something like sugar, we are seeing some pretty steep provisions to the brazilian crops. that does lead to show the market quite tight in q4 and going into q1. so for 21-22, we expect to see sugar markets in deficits. that should be supportive of prices. looking elsewhere, grains, corn, soybeans, we see the value on the upside, given the track. if you look at stocks for 2021,
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20 22, they will edge higher on the back of increased production from the u.s.. yvonne: we don't have much time left. what is your view on gold after the crash we saw earlier this week? your best and worst performers for the rest of the year when it comes to commodities? >> for gold, i struggle to hold a bullish view. we have seen some fed tightening. we will expect an announcement of fed tapering later this year. tapering likely -- at the end of this year, and tapering starts in 2022. also potential for a rate hike late 2022. our expectation is we will continue to see pressure on gold
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for the rest of this quarter. our view is basically we will see gold below $1700 over 2022. >> as for best performer, in the medium to long-term, we are quite bullish. we've got some structural deficits coming through in the markets. that should be in prices going to or three years out. in terms of downside risk -- not very constructive on copper prices. we do see the supply picture for copper improving into 2022. a couple of markets returning. next year, we see prices around $8,600. yvonne: thank you so much, warren patterson joining us out of singapore. coming up, the taliban rapidly
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gains territory in afghanistan. we dive deeper into the geopolitical impacts. this is bloomberg. ♪
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david: welcome back to the show. the latest now on what is happening in afghanistan with the u.s. sending 3000 troops to
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evacuate their embassy staff as the taliban are closing in on the capital. yvonne: a grim end to the u.s.'s longest war. in april, joe biden announced plans to withdraw troops by september 11. weeks later, the taliban launched a major offensive and gained ground. on july 2, the airbase effectively ended their involvement. the u.k. and u.s. are now sending troops to evacuate diplomats and citizens. the taliban now control almost one third of provincial capitals and is closing in on kabul. watching this closely is our next guest. david: dr. rudra chaudhuri is with us to talk about it. is it a matter of hours, or a matter of days? >> i hope it is not a matter of hours or days, but the unexpected traction of the
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taliban has been incredible. i don't think anyone in the u.s. or different parts of afghanistan would have expected the speed with which the taliban has been able to come together and now taken over 12 capitals above -- across the city. we are seeing american troops coming down to evacuate staff and interpreters in what can only be seen as a hasty withdrawal. yvonne: we were just talking about how it has been 20 years since the u.s. invasion, and it seems we are just back to square one in some ways. what is driving this stunning resurgence in the taliban? >> i think what is clear is there is a significant gap between the taliban sitting in doha negotiating with american negotiators, politicians, and special envoys, and the taliban
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on the ground in afghanistan who are cherry picking. it is a very complicated patchwork of networks. there is a clear disconnect between the two. there was a beat yesterday put out that interviewed those in doha compared to those in afghanistan. they themselves are at odds. the taliban in afghanistan want to fight. they see their mission accomplished with a hard military victory, which is not the way the negotiators in doha have positioned the taliban over the last 1.5 years. the u.s. negotiated -- some kind of deal within a deal, some amount of traction in afghanistan is expected. only time will tell. david: why does it matter for places like india? >> what matters for india, it is going to have to deal with the fallout of afghanistan in one way or another. it is not to say we are going to have associates across the
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border in india, but you will see the vast cocktail of non-safe actors who are now returning to afghanistan. if you look at militia groups from pakistan, there is clear evidence now that they are backing afghanistan. as those groups get in power over the next 1.5 years, what you will see is a shoot up in india. yvonne: we saw a warning this week from these regional neighbors. pakistan, russia, china, turkey, they said they will not recognize the taliban government if there is a movement to take power by force. how much leverage to get these regional powers have? is it a diplomatic effort -- is the diplomatic effort too little, too late? >> there is a degree of leverage.
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the key question is could these regional -- who could these regional powers have leverage with? there is a complete civil military disconnect within the taliban. i think it is those factors you are beginning to see. i think those factors resulted in this unexpected growth of the taliban across the board. touching many, even in the u.s., off guard. my own sense is the taliban are able to take a large swath of afghanistan. a lot of the regional actors have been long in bed with the taliban. so they all have their self centered interests. yvonne: there are also a lot of questions about the collapse of afghan forces, as well. where have these billions of dollars spent in training, troops, also when it comes to reconstruction efforts, where has all of that gone? >> this is going to be a big
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question down the line. political scientists will ask the question of if it was a failure when it came to training. the afghan national defense forces. i would like to think not. big pockets of resistance inside of afghanistan today. in the south, the government gave a good -- to the taliban and managed to beat them back. a lot of stories encounter hard -- but right now, those who got special forces training, those who god intends training, -- those who god intends training are able to fight back. what you are able to see down the line is a mitch match -- mismatch of militias, those who come out from turkey and other such places and are back inside of afghanistan. working with parts of the afghan government. but for the afghan sources on the ground, continuing to
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support surveillance reconnaissance with only the u.s. and coalition can provide. if it is going to be made available to afghanistan in the near future or not, it is looking like it is not. i hope i'm not right. david: i would imagine many people -- i know you don't take it personally. thank you for coming. thank you very much david: -- rudra chaudhuri. in korea, the equity and market story for the region. every single sector is down. varying degrees. might be down to the fact the market has outperformed, the virus situation. worst week for the kospi index. going back to about january. the first week -- the worst week for samsung. korea is in green. this has been one of your outperforming markets in the region. it has really taken a bit of a dip.
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10% year-to-date. before that, about 13%. we will see what happens. we will be watching it closely. plenty more ahead. this is bloomberg. ♪
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yvonne: you are watching "bloomberg markets: asia." some guess we will have in the
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next hour. have we reached the bottom in yield in the dollar -- earnings coming through, a lot coming through in the next couple of hours. also, taking a look at apollo hospitals, as we count down to the india open. he data to watch. looking at the second quarter gdp figures. the final figures for the second quarter for hong kong and taiwan. thailand set to release foreign reserves data, as well. china still very much in focus. monday, when we get the monthly data for july. still concerns about the impact of the spread in the delta variant on the economic growth. retail sales, investor output, assets alike. we spoke with michael pettis earlier about those challenges.
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>> a moral hazard, and on the expansion of debt. in order to deliver the high gdp growth rates beijing wants. i think anything above 2% or 3% requires a rapid increase in debt. it is not really clear how this will fall out. we have these completely incompatible aims. one is to bring debt under control, the other is to keep growth rates high in order to bulldoze through the various problems facing the economy, but you cannot do both. it is one or the other. david: you talked about south korea. we will leave it there for now. yields are on the way up. shanghai composite, 50 day moving out. watch it closely. 200 day this week. we were talking about this after what has been a manic last couple of weeks. jumping three standard deviations. that is your 10 day in to see out of china.
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a little bit below the average now. heading into the weekend, quiet. it is a nice way to move into the next two days. yvonne: tgif. then we have the monthly data dump, as well. plenty more to come. ♪
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