tv Bloomberg Daybreak Asia Bloomberg January 17, 2022 6:00pm-8:00pm EST
start as investors weigh corporate earnings. the yen is weakening ahead of the boj decision. haidi: let's get straight to the sydney open as we get started trading. trading across new zealand and australia as well. futures looking positive at this point. .3% higher. a lot of concerns over the slowdown in china and what more policy measures we could get from the pboc. we are seeing the impact of omicron hitting not just the financial centers but the political centers and tech centers and now impacting the winter olympic games as well.
david: no more ticket sales to the general public for the upcoming games in a couple of weeks. that is the latest. let's get more on the story. beijing reporting its first and hopefully only omicron case. yvonne man has the details. what are the winter games going to look like if we don't have the public celebrating the games, if you will? yvonne: yeah. i guess this is not a big surprise given china's covid zero policy. there's a lot of questions on who gets to go now that they have shut it off to the public and it is only people who got invitations were able to be spectators. organized spectators is what
came out from the organizing committee paid a lot of questions on what constitutes that. if you do become one of the lucky people get to be a spectator, it seems like you will have to go through quite a bit. you have to go through strict restrictions before, during, and after the olympics as well. this is something we are anticipating because of the person infected from the omicron variant in beijing. due to the current grave situation in covid, they had to halt ticket sales. you are seeing omicron shaking up the beijing olympics. they are trying to talk more about what led to omicron to seep through the tight borders. they seem to be pointing the finger at overseas male after the person who was infected did
not leave beijing for two weeks but had been dealing with international mail during work. with previous outbreaks, they have spoken about delivery of frozen foods. the w.h.o. has downplayed that. they are urging residents getting mail from abroad to wear a mask and gloves and try to limit your international purchases. with the winter olympics, it is quite a turn. originally, they were banning foreign spectators but allowing residents to still come in. that is changing as we speak. now the closed loop they were hoping to maintain which was isolating journalists, athletes, olympic workers, and spectators within three clusters in multiple venues, that is also set to change as well. haidi: yvonne man in hong kong
with the latest. there are speculations the bank of japan could change risks for the first time since 2014. we do see the yen weakening the most against the dollar out of the g10 currencies monday ahead of the decision. obviously, no change on policy, but do we see the inflation outlook getting bumped up? >> i think the biggest question is, do they change the inflation forecast for the next fiscal year, and do they change their language around the omicron case? if they do change the language, it might stoke speculation they are on the long road towards normalization. more likely they will reiterate
core inflation around 0.5%. if he does deviate from that message, there will be a lot of chatter around boj normalization. that is probably unlikely. the other thing to keep an eye on will be omicron and how he sees it impacting. no change to the negative rate expected today. it is all about what the boj says on inflation. david: after the decision, he will have to explain himself to the press. layout the case for us. what is the case on that side of the argument for the boj to at least acknowledge price pressures are present? >> when we consider that the yen
is the worst performing major currency over the past year, that speaks the idea japan is not immune to price pressures. we know in put prices for businesses have risen in recent months. there is a debate that business can only for so long absorb those before passing them on to consumers. there is a case that the margins japan is seeing rising inflation pressures. there is no sense of broad-based inflation pressures like we are seeing in the u.s. there is no hint of a major uptick in wage gains in japan just yet. while the price picture is somewhat different from recent years, i don't think it has
crossed the threshold where the boj has to get concerned about inflation. they remain a long way away from the 2% inflation target. it is more about optics. the language might change but there is no hint policy might change. david: enda curran, our correspondent. you can turn to your bloomberg for the latest on the boj. commentary, analysis, banter from expert editors at bloomberg. let me give you a quick glance across u.s. futures as we get underway. the 10 year future on the back of yields rising, a good case in point would be australia with the three year yield at a 1.7%. let's get to paul allen in
sydney and he has your first word headlines. paul: thanks. the tokyo government is seeking stricter covid measures in the japanese capital and surrounding prefectures. the governor says more than 20% of hospital beds dedicated to the virus were occupied as of monday. that is the level she has said she would consider implementing a quasi state of emergency. local media say she will make a decision as soon as wednesday. thailand could revive its quarantine free visa program for travelers. the country recorded a jump in new cases but infections are far below the peak during the delta wave. the task force may consider the proposal to restart the test and go program on thursday that helped attract about 350,000 visitors in just two months. the chinese president has called on nations to secure global supply chains and prevent inflation shock.
xi addressed the world economic forum via video link. china is seeking to minimize economic and diplomatic instability as xi prepares to keep our at the leadership congress in the second half of this year. >> the fundamentals of the chinese economy characterized by strong resilience, enormous potential, and long-term sustainability remain unchanged. we have every confidence in the future of china's economy. paul: brazil's potential next president may have to temporarily increase public spending. he leads opinion polls. one of his top advisors says spending will be necessary to fight poverty and unemployment. the growth of public expenditure is tied to the inflation rate. the advisor says the spending cap was created without effective mechanisms and needs to be replaced. global news 24 hours a day on-air and on bloomberg
quicktake. i am paul allen. coming up on -- this is bloomberg. haidi: the chinese president's wide-ranging address. a geopolitical expert joins us to interpret those comments. searching yields as investors ramp up expectations for rate hike. christopher smart joins us with his outlook. this is bloomberg. ♪
trading at the moment after the mining giant sees again in the fourth quarter when it comes to iron or production. down by over 1.5% at this point. the top iron ore producer in the world reporting an uptick in quarterly shipments for that enabled it to meet guidance. looking at the expectations for 2022, there were delays to one of the minds but also upbeat when it comes to the demand they expect to see for this year. certainly not upbeat when it comes to the share price performance so far in the early session. david:
broader conversation. commodity prices a big source of inflation and risks to inflation. a massive route in government bond yields. the german 10-year approaching positive for the first time in three years continuing to shape sentiment and strategy across markets. you have the fed aiming to quell price pressures. he says two hikes are more likely than the current four. joining us is christopher smart, chief global strategist at barings, who joins us to talk us through why two and not four. christopher: the market is edging between three and four and could easily be three. we need to be more humble about how quickly the data is changing. a few months ago, we were only pricing and one or two. things could change a lot between now and the end of the year. it seems to us what you mentioned before, what we are seeing in commodities companies, commodities prices, the companies our analysts look at, is firm demand around the world. that should continue through this year.
at the same time, supply chain disruptions should be moderating. the government support that drove a lot of price increases through 2021 and 2022 is also moderating. we think going into the second half of the year, inflation pressures will start rece ding. it will be strange for the fed to accelerate hikes going into the last part of the year if cpi is falling back towards more historically normal levels. david: with the case be them front loading in the first half? when do you think they will deliver the first rate hike? march? christopher: it seems they have signaled clearly they will start moving in march. tapering may continue. we may get balance sheet adjustments or declines towards the second half of the year.
i think it is unlikely markets will consider they are behind the curve if consumer price inflation is 4% in the third quarter and falling into the fourth quarter, there's not going to be much of a case for the fed to be picking up its hiking cycle at this stage. david: has the dollar peaked? christopher: it is hard to call the dollar. in that scenario where you have global growth recovering, normalization of economic activity broadening outside the united states, you have bond prices in germany, positive rates in germany, that is a headline for you, but that will put less pressure on driving the dollar higher. you should see a recovery of other currencies more generally. i think that is a normalization scenario we see playing out
through the third and fourth quarters. haidi: christopher, we were just chuckling. this time, it is real for emerging markets the rotation and recovering. what makes it different? it feels like we have been seeing this return to e.m. optimism for a long time. christopher: i don't know if we have been talking about emerging markets longer than value stocks. it should have tailwinds going into the second half of the year. as the economy normalizes, the headline we are forgetting about by focusing on important headwinds is there is still very strong growth. you talk to any company, i think we will see it in the earnings season we are in the middle of now, companies are reporting strong revenues. they should have good earnings this earnings season.
that i think will be the big story of this year, good, strong above trend growth in the u.s. which should benefit emerging markets and may just be the moment where we get sustained outperformance from value stocks. you did not ask about that, but i thought i would throw it in. haidi: [laughter] we spoke to you about oil and you were saying it is hard to see another 50% spike in prices and yet the market continues to tighten. you have brent trading roma highs of 2014 -- around the highs of 2014. have we underestimated that resilience? christopher: things still a good for oil on the demand side. there is also the supply-side. we expect open ask the left opec-plus to increase supplies. a hard one to call with any precision.
our analysts see it in the mid-70's over the next year or two. there is pressure on the higher side. i think there is capacity ready to be unleashed if the price gets too high. haidi: christopher smart, always great to have you with us, chief global strategist at barings. you can get around up of the stories you need to know on your terminal. bloomberg subscribers can also go to the bloomberg app. you can play around with the setting so you get news on the industries and asset classes that matter to you. this is bloomberg. ♪
the start of trading. some of the stories we are watching for you. the bank of japan meeting potentially adjusting its view when it comes to inflation risks. industrial production numbers for november expected out later. the new ceo has been named of the financial group with a big reform agenda. david: speaking of, let's stay in japan. the prime minister reiterating the outline of his new capitalism framework in his policy speech in parliament. let's go to tokyo for our politics reporter to talk us through this emphasis on what is to come. given the negative effects he has sometimes had on the markets, what was reaction this time? >> there was not a negative
reaction immediately in markets on monday. he did not give much detail about new capitalism. he said he would unveil a complete plan in the spring, so we still have time to wait for details. i think it is important to note that is not the end of the story. he did stick to the idea that relying on markets to decide things can be harmful. he wants to take the lead on resolving these in the international community. he will be taking these to the g7 and davos where he is giving a speech tonight remotely. he's going to be grilled constantly by opposition and ruling party lawmakers over the next few weeks. a lot of the key details tend to come out during the grilling sessions rather than the speech, so i think people have to keep a close eye on what goes on the
next couple weeks. haidi: in that speech, he could keep virus policy as the top priority. what is the impact of omicron on the country? >> the restrictions are decided by area at the moment in japan. we have three areas that have been worst hit and have mild restrictions. the main part is that bars and restaurants close early and are not allowed to serve alcohol in certain areas. tokyo has reached a trigger point with infections growing rapidly. the focus now is on hospital bed occupancy. that has gone over 20% in tokyo. that triggers the next level of restrictions. we are going to see tokyo and
eventually 10 other areas in japan going to new restrictions. that is going to mean shorter hours for bars and restaurants, possibly other major retail outlets as well, banking restrictions, and also restrictions on the number of people that can attend events. at the moment, restrictions in tokyo are almost nonexistent. in theory, there is a restriction on the number of people who can eat together in restaurants. i'm not sure how strictly that is being policed. haidi: our politics reporter, isabel reynolds, in tokyo enjoying some relative freedoms. a quick check on the latest business flash headlines. unilever's failed bid for glaxosmithkline's consumer health business could set up a race among private equity firms to help finance a potential bid.
we are told unilever has held talks about extra financing for a potential offer. the billionaire's fortune swelled last year after bluecrest capital management surged 30%. his wealth is expected to rise to $12.8 billion making him the u.k. third richest person. he focused on highly leveraged bets after returning client cash in 2015. oyo is said to be eyeing a valuation of about $9 billion in its ipo after early discussions with potential investors. that would be lower than the $12 billion initially reported last year. softbank backed startup is affected to proceed with the offering this week or next. we have lots more to come on "bloomberg daybreak: asia" as we get into the start of trading on
paul: this is "daybreak asia." i am paul allen. the governor says more than 20% of hospital beds dedicated to the virus were occupied as of monday and that is the level she said she would consider implementing a quasi-state of emergency. local media say the prime minister will make a decision as soon as wednesday. the chief white house medical advisor says it is too soon to say whether the omicron variant
will shift covid-19 from pandemic to endemic. anthony fauci told the world economic forum online conference that research should focus on vaccines that protect across mutations. an israeli trial found a fourth dose offered only partial defense against omicron. >> it is an open question as to whether or not omicron will be the virus vaccination that everyone is hoping for because there is such a great deal of variability with new variants emerging. paul: the taliban wants china to help its government gaining official recognition in the international community. along with the u.s. and its allies, russia and china are yet to recognize the taliban administration. concerns remain over a link to terrorism, human rights abuses, and bans on women's education. china's major securities
newspaper citing multiple analysts predicting a cut in loan crime rates after the pboc lowered both its one-year policy loan and its seven-day reverse repurchase rates. analysts seeing reduction in one year and five year lpr's on thursday to lessen financing costs for enterprises into prop up the economy. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. haidi: the virtual world economic forum kicked off this week with xi jinping delivering a speech via video link. he called on nations to reduce global supply chain risks and shared his outlook for china's economy. >> the fundamentals of the chinese economy characterized by strong resilience, enormous potential, and long-term sustainability remain unchanged.
we have every confidence in the future of china's economy. haidi: let's discuss all of the geopolitics at play at the start of this new year, bringing in a partner at global risk consultancy control risk. this is not the first time president xi has addressed davos. i always hark back to that speech he made. what changed between now and then and did he can all of the major issues that really threatened economic stability and geopolitical stability, not just for china but for its major trading partners as well? >> thank you for having me. it was an interesting speech. it is the first time he addressed the summit. he started in 2017. in each case, he has made the case for himself and china being really a beacon for multilateralism and economic engagement for globally together
addressing common challenges which would -- the last time he presented because that was such a counterpoint to the u.s. admits ration the time. he is making a contrast for what he is saying china is doing internationally. vaccine diplomacy, infrastructure investments, etc., versus what the u.s. is driving which is zero psalms an exclusive growth. while he is touting china's economic growth, the growth is slowing and the economic challenges are real for china. the pandemic purchases that have driven exports out of china are slowing. they just announced statistics were slowing down, 4% in this past quarter. there are demographic challenges as well. they had quite a lot of challenges with -- that he
wanted to highlight. haidi: even though he is addressing the davos crowd, there is this political audience he is speaking to as well. we know that he is dominant. it is not something that will be questioned going into the party congress and the two sessions but beyond that, do we expect to see the same level of dominance, the intensity of the ability to push through policymaking that we have seen in the previous year? angela: the party congress that is coming up, indeed, there is no doubt that he's going to get a third term, no doubt that -- he is front and center. it will matter less who is picked in terms of that changing policy rather than that it's going to reflect his dominance. i think the things to watch in this congress coming up later in the year are any possible succession plans, who exactly is coming up in the ranks. a real big question to watch for
is, you know, he has driven some pretty aggressive regulatory crackdowns in areas like tech, real estate, the education sector, etc., to move from the growth for growth's sake policy to a sustainable growth policy. as he has been taking short-term risks, is that going to continue? are we going to see you the rest of this year, is he going to double down on that aggressive crackdown on businesses or is he going to bring it back? those are the kinds of things to watch in the run-up to the party congress at the end of the year. david: also happening in november is another domestic political exercise, talking about the u.s. midterms. is it too early to start extrapolating the scenarios for that and what that might mean also for the relationship between the two? angela: great question.
it is a little bit early to forecast too strongly about what might happen in the u.s. midterms. it is true that biden is having a hard time. his approval ratings are down. he could not pass the bill back better plan. indeed, we may see a situation where republicans take the house and senate. we may see a mix. it's hard to imagine the democrats would hold both houses so i would think regardless, his hands will be a little more tired mystically. in the run-up to the election, while in the states, it is already a very strong and popular tone that we need to be tough on china. that is probably the only bipartisan issue where people agree. that is going to only ratchet up as we get closer to the election and candidates are even tougher on china. i do think that while we have seen u.s. and china relationship become more cordial since the
biden administration to power, the underlying drivers have not changed and possibly they could even solidify further so that is going to be an area of continued strong competition, that say, and their intention, which is going to -- can really hamper china and what it tries to do internationally as well. everything that happens including the business community, which is worried about these issues as well of course, everything is looked at through the lens of national security on both sides so it does -- trying to think about how they will expand and how both countries -- everything -- geopolitics. david: and the risk if this overshadows everything else, everything from elections in south korea, north korea, ukraine, almost impossible question. what else are you watching? angela: we look at the
geopolitical issues in 2022. there are a couple of events. the party congress later, the south korean elections coming up in march which, it's a very tight race and will take the country in one of two different trajectories. we just published our annual risk map for 2022. one of the broader issues is how our governments in asia and globally going to manage the covid situation, climate change and energy transition in what that means for economic recovery because that is where we see potential for domestic unrest, potential for government popularity issues, potential governments changing. economic recovery on the back of that, movement of goods or people. it's really those issues and how governments are going to capably or not manage those that is really going to drive some of
the geopolitical issues in 2022. david: thank you so much for joining us, angela mancini. also coming up, fresh turmoil within the properties sector. high-yield bonds continue to be high yield. investors really worrying about the scale of the hidden deaths of the industry probably bigger than previously thought according to some analysts. more on that, just ahead. this is bloomberg. good morning. ♪
haidi: this is "daybreak asia." we are tracking the fallout of the global supply chain crunch. omicron is exacerbating the supply crunch. output at volkswagen's joint venture remaining suspended because of a lack of parts from suppliers. the companies awaiting more covid-19 tests for its employees. new rules requiring truckers to show proof of vaccination when crossing the canada-u.s. border boosting the cost of hauling everything from broccoli to tomatoes. the cost of transporting produce out of california and arizona to canada jumped 25% last week.
fewer trucks available. a railway company avoiding los angeles county amid a rising cargo theft. widely tweeted footage showed extent of the security breaches. hundreds of opened pass a gauge -- package is booted and strewn around the tracks. david: taking a look at chinese trade, record-breaking export strength continued well into december, pushing the annual trade surplus to a new high and providing a support to the economy and the currency of that economy here being dragged down by a property market slump and sporadic outbreaks of the virus. for bloomberg terminal users, you can read more about those stories on your terminal on our newsletter, supply lines on your bloomberg terminal.
ok. let's talk about fresh turmoil rocking the property sector when you look at high-yield bonds continuing to move lower and we are looking at more names being added to the basket, if you will, these concerns about the nature and the scale of the hidden debt within the industry. let's look at stephen engle. he joins us out of hong kong. talk us through the details of that. why are we talking about this yet again? stephen? -- stephen: concerns are mounting about the transparency or lack there of of the so-called hidden debt across chinese developers and what that would necessarily mean for the liquidity concern. if you have more claimants coming in, more creditors are found in this hidden debt pile among developers, more potential claimants coming in, claiming for early repayment, and that kind of pushes -- the perception
is that pushes the overseas creditors down the repayment list of priorities of developers, especially as we, to the lunar new year holiday and up to the olympics when the central government is essentially mandating these developers pay their back wages to workers, migrant workers, as well as dating it finished and delivered to prevent social unrest. it is all mounting up even at the highest rated developers. country garden was the latest one. late last week, they failed to get much demand for $300 million convertible bond. that sent shivers to the bond market and the selloff in the bonds continued on monday after a selloff on friday. this is china's largest developer by contracted sales in the last four or five years, surpassing evergrande. we all know the problems evergrande has had as a default. country garden is one of the largest -- it tapped into the overseas bond market more than
anyone else. country garden watching quite closely. logan group, it is being reported that debt wire saying that the developer could be on the hook for some 812 million u.s. dollars of guarantees on outstanding obligations that are doing in 2023. there's a lot of hidden liabilities we simply do not know about. these private loans and also of course the consumer-products that might get a priority over dollar bond repayment. haidi: all of this falling into the various risks flagged by president xi jinping in his third davos speech. do we get any sense of the road forward as he looks to really consolidate his leadership this year? david: well, he wants stability
-- stephen: well, he wants stability. again, there are a combination of different risks all at the same time. property, we have talked about it. that is a quarter of gdp. gdp growth in the fourth quarter decelerated to 4% in large part because of that mandated slowdown in property as the government doesn't seem to be taking off, you know, the gas -- clamping down on excessive liquidity in the center. you have property, the text crackdown, crackdowns on online gaming, online video gaming. mikal. you have of course the supply chain shops that we have seen. we have seen slowing consumer spending. retail sales missed expectations. those supply chains -- there you go. right across the screen. a number of different headwinds to the chinese economy.
this is what xi jinping specifically had to say. did not really talk specifically about property but he did say we need to resolve various risks and promote the study recovery of the world economy. he goes on to say that the fundamentals of the chinese economy are unchanged. it remains resilient, sufficient potential, and long-term prospects are positive. it is the short-term issues that we need to know about because that is what is throwing the bond markets into a tizzy. throwing some cold water on the long-term potential at least right now. david: stephen engle there. 2014, that takes you back to the year when the deleveraging campaign, that is when that got started. that is when oil prices, as you see on your screens, were last trading at these levels. that is also the last time the boj was exciting, a brief look
across these ones. mainly driven by this rise in commodity prices. haidi: what does it say when you expect the central bank to stay on hold but we are so excited about the inflation guidance? let's take a look at commodities even more. the global steel industry under pressure. greenhouse gas emissions by 2050. china, a big player. it cap did steel output from an all-time high. they are finding ways to decarbonize the industry. bloomberg estimates the upgrade will cost up to 278 billion dollars. julie atwood tells us more and she is here with us. why is there so much interest in decarbonizing steel? what is the technology and how advanced are we in the process? >> the important thing to think about is that steel is 7% of
global emissions. how steel decarbonize is and how fast that happens has a big impact on whether we can meet our climate goals. what is even more important is the role that steel plays and a lot of countries that have pretty strict net zero targets. i'm thinking china, north korea, and japan. their total emissions, steel is a big chunk of that. it's 12% to 15%. the technology, there's really four of them that look like a complaint big role in the future. there is recycling which is pretty mature but also a finite limit to how much. there is carbon capture where you are just adding a new system onto your existing steel plans. and then there is direct electrification where you start to make steel in a way that looks a lot how we make aluminum. the thing that will have a really big impact is hydrogen and that is because our modeling shows that hydrogen could be the
cheapest way to make steel by 2050. it is pretty pricey, just under $800 a time and that is compared to the $540 a ton that you typically pay now with traditional processes. by 2050, if the hydrogen industry can scale up and you see a lot of steelmakers adopting it, it could be below $500 a ton so it's looking pretty competitive and that is why we have seen so much momentum. this is really pilot stage so you have people trying out the technology but it has a long way to go. david: it is a long time and time is on our side before it is not, i guess. map out what the next 10 years should look like for us to get to those objectives by 2050. julia: the first thing these companies need to do is put in place a net zero target because if you don't have a plan, you are not going to make any
progress. right now, we think about a quarter of the world's steelmaking capacity is covered by a corporate and zero target. the first technological step they need to take is to do more recycling. we have already seen that happening from a lot of steelmakers. that is the first part of their plan. what the steelmakers really need to take a hard look at is what kind of assets they are building new today because that determines what 2050 is going to look like for them. if they build a plant that can run on natural gas, that can be switched over to cheap hydrogen in the 20 30's or 20 40's. if they continue to build this traditional coal-fired steelmaking class today, they are locking themselves into either a relatively expensive carbon capture system or to having to retire early in order to meet the net zero target. david: julia, thank you. julia attwood, head of
it is bank of japan day and it has been a few years since we have been this excited over the prospects. some possible tweaks here. have a look at where we are in the inflation conversation and why we are here and the boj has been chasing that 2% inflation target almost as long as my dentist has been trying to get to my wisdom teeth. not quite there but getting close, as they say. this takes us into the yield story and investors hedging against higher yields over in japan. want to watch on top of other names we are tracking here. haidi: the reflationary effort just about as painful as getting wisdom teeth removed. let's take a look at some of the stocks we are watching. we will be watching travel on restaurant stocks. we will see as much of an impact when it comes to those fortunes as well. in korea, hyundai in focus.
>> good morning from the asia-pacific. welcome to "daybreak asia." i am david ingles in hong kong. haidi: i am haidi stroud-watts in sydney. asia's major markets are just opening for trade. our top stories this hour. we get a cautious start expected as traders way the pandemic recovery and advanced sovereign bond yields. oil is near a 2014 high. investors are awaiting that bank
of japan decision. the boj is expected to sit tight on policy but we are considering whether they will bump up the inflation projection. china scraps ticket sales to the general public over health and safety concerns. david: here we go. a pleasure to have you all join us this tuesday morning in the asia-pacific. tokyo coming online. nikkei and the topix index. dollar-yen as you were just pointing out. it is boj day and we are watching for any sort of tweaks in language and acknowledgment of price pressures. will they bump the inflation target? there you go as far as the 10-year jgb. 99 .62. -- 99.62. you have dollar korea and you also have the korean bond futures trading like this. 10 year yield is at 180 right
now. we are on 1% watch on your u.s. ten-year. u.s. two-year rather. rising yields elsewhere including in australia. haidi. haidi: yes, in fact, we are seeing with those treasury features holding declines, we are seeing the three year yield climbing in australia, the highest since may 2019. traders ramping up bets. early in more often than what has been expected so far, leading to the warning sign we are seeing when it comes to the trading in the aussie dollar. the record short position. we have seen that adding into the bets against the currency for months now but the danger is that the fed goes ahead and we see that scaling back of expectations for the rba to follow suit. this is what is happening when it comes to the equity session. we are seeing the asx a little bit tepid at the moment. leadership when it comes to tech. consumer stocks trading higher but interestingly, with brent
crude trading close to 2014 highs, oil is one of the laggards as well as financials on the back foot as well. kiwi stocks continuing to extend that decline. five out of the past seven sessions. the lowest in about a month. when it comes to currencies, very few changes when it comes to the trading in kiwi and the aussie dollar at this point. david: there we go. to yield bonds, 1% roughly speaking. let's talk about this because rising rates, that has been a story for two months now. do they go on further? how does that affect your investment strategy?. for analysis and the outlook ahead, our guest is joining us now, head of research. good morning. thank you for coming on the show. let's start things off with your general outlook on risk assets. last time i talked to you was about last month. since then, lots of change in
terms of the markets thinking the fed will bring forward some rate hikes. here is how that changes how you approach risk assets moving forward. >> i think the market right now is talking about for their expected rate hikes and record numbers of rate hikes in the market. this is also a strategy. i mentioned international banks. it is also very positive on the banks. david: such as what? our previous guest top about the return of value stocks. what do you favor as far as the equity market is concerned?
banny: the equity market is searching for some sectors in china. that would be some of the new economy stocks. if you pick a big rise in this year, we should be more focused on some things. i think that would benefit social media and game stocks. it's also positive. they open up a terrific year for investors around the world. i think a market is big. think the company's right now are seeking benefits from these trends. haidi: i find it interesting that one of your overweight pix is chinese construction and -- picks is chinese construction.
banny: i think you see gdp growth for last year. we see the fourth quarter number actually is not so good. if you compared to last year, this quarter, that may be is low. for the chinese side, if you want to keep the growth momentum going, one of the drivers for china is doing much better for infrastructure investments. i think china will pick up most projects and will allow some of the -- some bonds. also can finance those projects. that will be positive for
construction stocks. haidi: what are the big risks for 2022? do you think we are underestimating the potential future stocks, not just from omicron, but whatever other variant lies in wait when it comes to the supply chain? banny: i think for the rest of the world when they think of omicron, actually, they always -- the mindset his debts. maybe like two or three months. after that, actually, they will have a much better rebound. at the same time, because of omicron, there will be a slow down or cut back. i will see in the next few months the supply chain may not be improved so much. in the second half of this year,
we will see more improvement. this also keeps inflation going up at a high level for some time. we still have some inflation in the world. david: just a preference within chinese equities? banny: a-shares have a positive outlook. i think the growth may not be like last year. keeping mild growth. some of that is going up a lot. for the h-shares, remember that last year, hong kong is very weak. they received more than 14%. if you are from the investment
point of view, that would be positive to put more investments . rebounding much more he that perspective. haidi: always great -- much more in that respective. haidi: always great having you, banny lam. let's get you to paul allen who has headlines from sydney. paul: thank you. china's major securities newspaper citing multiple analysts predicting a cut in the loan prime rates after the pboc lowered both its one-year policy loan and seven-day reverse repurchase rate. reports quote analysts seeing a reduction in one year and five your lpr's to less than -- five-year lpr's. xi jinping has called on nations to secure global supply chains and prevent inflation shocks.
the third time he has spoken of the event. china is seeking to minimize economic and diplomatic instability asx continues toi keep power in the second half -- diplomatic instability as xi intends to keep power. >> enormous potential and long-term sustainability. remain unchanged. we have every confidence in the future of china's economy. paul: talk to government is seeking stricter covid measures in three surrounding prefectures. the governor says more than 20% of hospital beds dedicated to the virus were occupied as of monday. that is the level she said she would consider implementing. local media say the prime minister will make a decision as soon as wednesday. singapore financial regulator told cryptocurrency companies not to -- services to the
public. volatile digital assets. service providers should only market their activities on their own websites. mobile applications or official social media accounts. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. david: a brief look across your treasury markets but let me get started. 85 is the level you are tracking. above that, to levels of october of last year. have a look at where you are. in a very simple way as far as the two-year and ten-year treasury are concerned, pandemic is over. we are back above 1% onr one year. just coming up note, global bond markets under increasing pressure and yields ramping higher.
david: currency markets doing this. the boj on deck. when it comes to the chinese currency, trading at 6.35. the onshore rate is below that. the strongest since 2018. let's have a look at where we are in china here because the olympics, here we go. another snag here. china has halted ticket sales to the general public for these upcoming games, days after beijing reported its first omicron case.
bloomberg markets coanchor with the details of that story. yvonne, winter names, -- games, what are they going to look like now? haidi: it's going to -- yvonne: it's going to look a bit different but i guess not unexpected that china made this move given its covid zero strategy. they shut it off to the public now so you cannot by ticket sales. also, invitation only. they talk about these organized spectators that are only allowed to watch that winter games starting february 4. not much details on what this constitutes. anyone who wants to watch this year will have to pay price. you will have to undergo strict restrictions before, during, and after the winter games. but this as we try to see how beijing figures out how omicron was able to breach its borders in the first place.
the person who was infected did not leave beijing for two weeks. now, pointing the finger at the fact that overseas mail -- this person had dealt with international mail at work. they are urging residents to be careful when it comes to opening packages from abroad. as you mentioned about how this olympic game is going to look like, delegations from the likes of countries like australia, the netherlands, canada, urging athletes to leave your phone at home and bring a burner. cheaper phone to the winter games on concerns on spying. what we are hearing from beijing is they are leading to this unfettered access to the internet in the olympic games. athletes will be able to access youtube and facebook at hotel venues as well as sporting sites. that is raising some caution from cybersecurity officials, saying that state actors or criminals could be taking advantage of the so-called wi-fi bubble to track private messages
or even install malware which could lead to subsequent attacks. it will be pretty interesting. cannot bring your phones. that is what some countries are advising their athletes right now. haidi: truly an olympic village by the sounds of it. we are seeing a surprise delta case in hong kong. yvonne: right. this is interesting. we have been dealing with omicron recently. we tighten restrictions for another few weeks or so until after the lunar new year. we have been focusing on omicron and we hear about this 23-year-old woman that tested positive for the delta variant. it seems like delta could be spreading here. that is the concern from health officials right now. this is the one that worked at a pet shop. still a lot of questions about that. it is an unlinked case at this point.
we are seeing how the zero covid strategy is pushing supply chains to the brink, pushing health systems, and we are hearing more fallout from cathay pacific which has been singled out by carrie lam herself for may be causing or at least leading to the first few cases of omicron. we are hearing that hong kong has arrested two of these next crewmembers for violating -- ex- crewmembers for violating rules. we know airline staff are exempted from some of these quarantine rules in the city but now, they are seeing if they are actually -- if they did comply with these isolation rules. we heard from the chairman this week saying the carrier is cooperating with the government on this investigation. >> yvonne man in been laughing
all morning about the outsized amount of excitement during the boj meeting where they are still not expected to change policy. but is that inflation outlook really key? >> as you say, there isn't going to be any change on the policy side today so the discussion is whether or not they changed inflation forecast for this fiscal year and next and whether or not they changed the language around the outlook for inflation. it has been preaching this for so long now that it remains to the downside. there will be some excitement if they want to marginally change that. the core inflation remains around 0.5%. we know that one-off special
factors like phone chargers have been an issue driving up costs there. even if there is deviation from the boj, i would expect it will be tempered by a lot of qualifications and i don't necessarily think kuroda -- from the fed for example. david: that is a good thing to point out in terms of expectations, if you will. paint us a good picture. what would be the silver lining here? the boj has been yearning for any semblance of inflation. not even 1% inflation. are price pressures being driven by the rate factors? enda: a part of the story at the moment is the yen. it is their worst-performing major currency over the past year so japan is importing inflation, especially through oil prices, for example. that is a positive for what the boj is trying to achieve.
manufacturing costs also growing up. the question is how long can they continue to absorb those costs before they pass them along to consumers? at the margins, there is an inflation story in japan. like you are saying, there is still a long way from that 2% target. when you look at prices and strip out these one-off issues, it is still quite low, 0.5% as mentioned earlier. it is expecting inflation to take off in japan at least in the near term in a broad-based way in the u.s., for example. the other side, by the way, we should highlight, it is -- is what is going to happen with the virus in japan. we are seeing an uptick in cases in tokyo, for example. if that does result in more curbs being introduced, then you have to question what will that mean for consumers? what will that mean for prices?
i think the inflation story is picking up around the margins but there's certainly a lot of qualifiers. david: hopefully not. otherwise, we are in trouble. thank you. our chief asia economics correspondent. if you are getting giddy with it as we are, check it out. the boj decision. we are running a blog on our function. commentary and analysis. that should be beginning in a couple of hours. check that out on your bloomberg terminal's. there is plenty more ahead. this is bloomberg. ♪
>> we are continuing to watch crude today. we see oil prices continuing to rally. if you take a look at brent, it is nearing its highest level since 2014. the market is tightening. concerns about the impact of omicron are starting to fade. we are speaking to gas. it gets a 50% spike in prices that we had last year. what are the fundamentals telling us about? >> the big factor is when omicron first emerged and recalibrated thinking and factoring in some sort of demand which would be peaking about now so that has not happened. we have seen a few restrictions but there has not been any major impact. on the supply side, we had them continuing. crucially, some of the opec-plus movers have not been able to
ramp up production to hit the targets of increasing production. we are seeing u.s. shale not really coming back in a big way. all those factors are pointing to higher prices. but these things are still going to move higher in the first half. we have bank of america talking about $100 oil into two. david: in fact, just pivoting slightly away from the commodity market itself, even in the equity markets, investors have been chasing this long oil story. we are up 15% on that group of energy stocks. it takes us into what is happening tangibly within the energy market. things like jet fuel, things like diesel, for example. what is happening there? andrew: if you look at jet fuel,
that was the hardest hit oil product. that has been strengthening a lot recently. and again, it's mainly due to the fact that omicron has not affected things as much as people feared it would. it is an important indicator for jet fuel and that is the highest level since 2019. we are actually back to pre-virus levels there. diesel is very strong across asia, u.s., and europe. the caveat is that it's really china. oil and oil products. so far, these draconian lockdowns have worked quite well. whether they will continue to work with omicron and also with the winter of the fix coming up,
sort of the big question i think. haidi: andrew james with us. coming up next on "daybreak asia ," treasury yields are surging. the cohea every day in business brings something new. so get the flexibility of the new mobile service designed for your small business. introducing comcast business mobile. you get the most reliable network with nationwide 5g included. and you can get unlimited data for just $30 per line per month when you get four lines or mix and match data options. available now for comcast business internet customers with no line-activation fees or term contract required. see if you can save by switching today. comcast business. powering possibilities.
the global low-inflation environment has notably changed. and the risks of inflation driven by multiple factors are surfacing. as major economies slam on the brakes or take a u-turn in the monetary policies, there will be serious -- that would present challenges to global economic and financial stability and developing countries to bear the brunt of it. david: that was chinese
president xi jinping speaking out the world economic forum's virtual event and that address really coming amidst what is going on within the property sector. the focus of these markets right now. you have fresh turmoil rocking a lot of these offshore bonds. concerns over the true nature and scale of the industry's that. let's try and get a sense of where we are in the story. stephen engle, our chief north asia correspondent, has the latest on this. we are talking about the likes of concrete garden -- country garden. stephen: absolutely. xi jinping did talk about the various risks facing the chinese economy and perhaps at the top of the list right now, actually second on the list. the covid situation is number one for the immediate concern. property is an ongoing risk and the mounting concern among investors is just the levels of
hidden debt and the biggest rated firms and largest firms are being embroiled in this liquidity crunch. questions being raised about their ability to repay. who are the priorities in these repayment schemes? the government has put a priority on paying back wages and paying suppliers and contractors so there is not social unrest delivering apartments. there is more concerned if there's more hidden debt that we don't know about. that means there's more potential claimants, more potential radicals -- creditors who want repayment as well. overseas creditors often times are last to get paid. at least seven developers now since october defaulted including evergrande. country garden is the largest about upper in china. it is embroiled as bonds sank and continued to some bond monday after failing to attract much interest rate 300 million
dollars convertible bond. another company, it is a smaller developer, also listed in hong kong. logan group. those bonds slumping by a record . detwiler is reporting the developer could be on the hook for some 812 million u.s. dollars of guarantees on out pending obligations due through 2023. it is adding to the long list of these companies that are facing repayment pressures in addition to paying back wages, paying contractors, and the like this month ahead of the lunar new year holiday and ahead of the olympics. when the government puts a big priority on social stability and economic stability. haidi: justice stability. we know that is the end goal. to what extent this is potentially a factor into what the game plan is, the ultimate goal here is to achieve stability so what does the
property sector even look like in 5, 10, 15 years from now? stephen: the short-term pain, we understand. xi jinping, we can bring up the quote if you want to see that. he believes in the long-term prospects of the chinese economy and the long-term prospects. that is fine. the short-term right now is the big transitional period in property where many economists we have spoken to see perhaps a big return of the soe developer snatching up assets from these overleveraged, over indebted private companies like evergrande and sumac and others that we have seen. a long list of these companies that are in financial trouble perhaps because of the liquidity crunch. we might see, if they want stability and they believe in the state run model, the soe developer will take a larger chunk of part of the economy that is -- that counts for about
a quarter of the gdp growth and we have already seen in the fourth quarter decelerate to 4% growth so there are concerns. they are short-term but they potentially could be long-term in the structural framework of the chinese economy that is already seeing regulatory pressure on big tech, regulatory pressure on video gaming, online education, on macau, on supply chain issues. the virus outbreaks, flowing consumer spending as we saw a retail sales dip. it's a long list of concerns. real estate stress is a really big one here. haidi: stephen engle with the latest. going to stay with -- in the fixed income space, taking a look at treasury markets. the greatest bonds selloff continuing. still sees further room for that further rise in global yields.
that's bring in brad gibson at alliancebernstein. you expected this spurt higher in yields to have some more room to go. what is kind of the point where you take a step back and think that it is time for a breather? >> good morning. we do see that -- the 2.5% level which is kind of contentious there. you think about what drove the rise in bond yields this time last year, it was more about a repricing of the short end of the yield curve. the market made way for the fed to taper and start tightening policies. the next leg in this move higher in bond yields might be the return of term premium. it could be that the market is already pricing 150 basis points of hikes. we would not argue with that particular pricing. is it a return of term to the longer end? 10 year bond yields
could drift higher from those levels based on the term premium due to some tightening that could appear in the 2023. >> traders pricing when it comes to fed expectations is getting so aggressive. on the other hand, pboc expectations towards potentially a mix of more easy measures this year. how do you play that divergence? brad: that has been a very good position to hold. underway u.s. rates and overweight china rates. the yield differential between five-year china bond nus five year bond is around 100 basis points. particularly given the fed potentially becoming more aggressive. the pboc surprise the markets
yesterday. that was expected. the injection of liquidity i think is a fairly clear signal that the chinese rates are going to be well supported. there is some correction in the short-term but i see the pressure for china rates to hit lower relative to global rates. it is a position worth taking. david: just looking at the other side of the equation, how much of this backing up in global bond yields is also due to supply and whether your government or a lot of these corporate's are trying to lock in the financing costs before things, to your point, move up further? brad: that is the next penny to drop. the initial rising treasuries is about -- for the fed.
they start to reduce purchases first and then stop purchases and then potentially selling into the market. the corporate issuance is likely to be the main driver of this next move higher in bond yields. are the things that could generate a high moving bond yield is clearly inflation. it is priced into expectations in terms of breakeven in the high 2% and 3% in the u.s. and that seems fair to us. the fed has 2.6% inflation in 2022 so they should be somewhat surprised. the next move higher in bond yields manages the supply perspective. david: the concept he brought up earlier, i wanted to flesh that out a little bit more.
the term premium, do you see that moving into positive territory? alongside that tenure real yields, do you also see rates -- yields rising to the extent that we had a positive print on that one? brad: we push back against that. we get pushback against bond yields. i see the level of debt globally for -- it's unsustainable. it has risen about 50 basis points. what is surprising is that has not really coincided with a stronger moving in the u.s. dollar. you see real yields move higher but to get back to positive in markets like the u.s. or the
u.k. or europe, it is a bit of a stretch unlike in china. inflation in china is expected to be around 2% in 2022. their yields are around 2% to 3%. you are getting a positive real yield in certain large bond markets and that has implications as well. david: have a great rest of your week ahead. brad gibson, cohead of alliancebernstein. just about 15 minutes to the open of your cash markets here in hong kong and up on the chinese mainland. one sake don't need to watch out for. after resumed trade just on thursday, following the 50 plus percent collapse, you see on your screens. it has suspended trading in its shares here in the city to get that out there. one thing you can cross off your list but still to watch and why
david: -- paul: paul: this is "daybreak asia." the taliban wants china to help its government to gain recognition in the international community along with the u.s. and its allies. russia and china are yet to recognize the taliban administration. concerns remain over links to terrorism, human rights abuses, and bands on girls -- bans on girls education. the chief white house medical advisor says it to say whether the omicron variant will shift covid-19 from pandemic to end on the. -- endemic. anthony fauci said research a fourth dose of the pfizer biotech vaccine offered only partial defense against omicron. >> it is an open question as to
whether or not omicron will be the live virus vaccination that everyone is hoping for because there is such a great deal of variability with new variants emerging. paul: thailand could revive its quarantine free visa program for vaccinated travelers less than one month after suspending the waiver. the country has recorded a jump in new cases but injections are far below their peak during the delta waves. they considered a proposal to restart their so-called test and go program on thursday that helped attract 350,000 visitors in just two months. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. haidi: the top medical advisor to president biden says it's too soon to say whether the omicron variant will herald a shift in
covid-19 from pandemic to endemic. the vice dean spoke to us about that transition. >> the virus can be causing a lot of problems in one part of the country. and then in another part, it can come down -- the cases can really drop dramatically in the situation can look different. i think we have to think about the pandemic a little bit like we think about the weather. sometimes, it's really good. don't have to carry an umbrella around. right now, i think it is foreseeable that the cases will continue to drop in the united kingdom and as a result, it's appropriate to lift restrictions. just because they are doing it at this minute doesn't mean it might not be in some parts of the states. we are expecting them to go up on some parts of the west coast. >> if we see cases go up in the west coast, is the u.s. just behind the u.k.?
is there a scenario where a month down the road, policies might reflect more of that in the u.k. of this endemic strategy? joshua: absolutely. on the other side of the break search, it has got to look -- other side of the omicron surge, it has to look different. there's growing hospitalizations in the united states and in parts of the country, it is continuing to grow. it comes way down and we are in a different situation and we really do have to adjust. hopefully, we will get a bump in collective immunity from omicron and that will bring us some protection at least for a while. and that will allow even more openings. i do think that 2022 doesn't look like the future will be exactly where we are right now in the united states but our problem has been as soon as there is a little bit of light, we think thank god it is over and then everything goes away.
we will have to stay vigilant and be prepared to mask up again as things get worse. >> maybe we have been burned too many times to celebrate prematurely. we also see ac/dc that is starting to offer free rapid tests. how crucial is it that we have these tests more readily available as the u.s. combats this omicron wave? joshua: i think rapid tests are helpful but i think that they -- their use can be overstated. they had a huge omicron wave in the u.k. i don't think they are a magic solution. sometimes, people talk about it as if it is the only thing that matters. there are a lot of things that matter. i think that having access to a few tests is a good thing. if you are going to see the grandparents and you really want to take every precaution, then doing rapid tests on top of making sure people don't have
symptoms, it is an extra level of security. in general, cases come down. people don't want to be testing themselves every day. i just don't think the test will begin to define our life. i think it is a tool we can use to help us in certain situations. david: the vice dean of the johns hopkins bloomberg school of public health speaking to dani burger. it is supported by the founder of bloomberg lp and bloomberg philanthropies. let's pivot now to the upcoming winter games in beijing and experts are warning athletes who are worried about internet -- while china may want to leave their phones back at home for more on these growing concerns, let's bring in our bloomberg cybersecurity reporter, jamie, to talk us through the rationale and the logic and the reason behind why the advisors say to
leave phones at home and it's not just a focus on sport, is it? jamie: it's a question of personal data and how valuable that is to both the athlete and to anyone who might be able to get a hold of it. one of the reasons that people are being advised to leave their personal devices at home is that if you connect to the personal device to a network that is being monitored, it leaves open the possibility that everything about your medical to your training or your coaching information can be seen. if the athlete is someone who is high-profile and political, has political contacts, and those are stored on personal devices, then those also can be tracked. the u.s. olympic committee warned that in addition to all those concerns that there is a risk that malicious software could be installed on a personal device and that would attract a person for future use, not just while they are at the games. david: -- haidi: have we had a
response from the olympic committee in beijing? jamie: the committee has said that these concerns and actions are "wholly unnecessary" and that china has passed several cybersecurity laws lately that provide protections for privacy and data security for both chinese citizens and foreign visitors. one of the issues for those laws however is that companies are required to hand over data to the government if they are asked to do so and that is something cybersecurity experts say is part of the problem with knowing where that data is. there is also the matter that official sponsors of suppliers to the games include at least one company sanctioned by the u.s. department of commerce because their technology is reportedly being used to track and monitor the ethnic uyghur population. they are working on five gtech for the games and that company has been at the center of so many tensions between beijing
and washington because of national security concerns as well. david: jamie, thank you for the update there. jamie tarabay, are cybersecurity reported. a little bit more details now that we know about the breaking news. we mentioned a couple minutes back that it suspended trading today and we now understand why. it is unfortunately not good news. the resignation of independent nonexecutive directors effective today, that is one. it may proceed with -- here is the key line -- provisional liquidation today. january 18, that no definitive agreements on solutions have been reached. there is an inability to draw down the facility that impacts the company's financial ability and we might then see them proceed with a provisional liquidation today. the stock, as you pointed out,
lots of other things taking place. there's property, latest headlines on hong kong. haidi: that is really something we are watching for. proceeding potentially with liquidation filings on january 18. we will be watching for kind of the latest installment in this saga in this troubled crews operator. it will plunge by a record on thursday. we really do have the idea of it coming to a head. lots of warnings about potential defaults. insolvency in one of its german ship building subsidiaries. on top of that, you have the omicron risks. we get closer to the winter olympics. no general spectators. it seems we will be allowed. increasing concerns about how much omicron will start to encroach on major cities. david: tech hub, political hub,
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