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tv   Bloomberg Daybreak Asia  Bloomberg  February 22, 2022 6:00pm-8:00pm EST

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>> a very good morning, i'm heidi stressant in the end we are counting down to the major market open. >> i'm shery ahn in new york. they say a ukraine invasion is underway. traders are weighing the escalating tension in eastern europe. and a big interview with the
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hong kong deputy to tighten the covie. >> no doubt about it, we have a pretty uneasy open. really playing around with the correction territory. maybe that is why we saw the pull up off the session lows and we saw bargain-hunting coming into the session. the s&p and nasdaq 300 expecting to see some gains when it comes to the energy sector. in particular, the biggest beneficiary, seeing that rise in market expectations. that bit is starting to heat up. the bond yield is jumping to multi-year highs. it is jumping as much as seven basis points to a high of march 2020 and just shy of 2.3%.
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we are expecting further tightening measures and kind of hotter than expected growth. holding pretty steady and it has been a difficult few days. >> take a look at futures at the moment because we are seeing the s&p shortage gaining ground after we saw u.s. equities falling to correct territory. as mentioned, we do have those geopolitical tensions. there are concerns about potential damage from russian sanctions weighing on the market. this is as we continue to watch what is happening broadly at the moment. the wti coming in under pressure. we have seen again ground in the
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new york session and paring back some of the gains as the u.s. appears to avoid the harshest sanctions in russia. we are getting some earnings at the moment coming from the singapore lender. a fourth-quarter net income missing expectations coming in. the estimate was for net income to come in above one billion dollars. and we're hearing analysis from loans and other assets are at 873 million sing dollars. the ratio coming in at 1.5%. we are now hearing that they are appointing the nonexecutive director. in this coming from the singapore lender that has seen a huge run-up to share prices given that investors are really looking forward to prospects of higher interest rates and investor preference for so-called value shares.
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again, net income for the fourth quarter missing expectations. but let's go back to the geopoliticalons that have rattled markets. president biden is stepping up pressure on russia. president biden: this is the beginning of a russian invasion of the ukraine. so i'm going to begin to impose sanctions and response far beyond what the allies and partners implement it 2014. >> let's bring in jodi schneider. we saw oil prices paring back to the earlier gains. the sanctions were not the harshest that they could have been. >> it's interesting what the president said.
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that this was the beginning of an invasion of russia to ukraine. and imposing sanctions on russia that would include targeting the sovereign debt abroad. but what else is interesting is what he didn't say. and that they would be imposing harsher sanctions. and particularly, things like big banks that could be targeted. so depending on which analyst he talked to, some called it an incremental step and others called it measured. but they were not harsh actions. >> what do we conclude from the announcement out of germany? >> germany said there was no pipeline from germany to russia and there was a threat -- a step
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of threatening what happened. but what we are hearing from germany, from the eu, from the u.k. or more measured responses to the steps russia is taking rather than the harshest. it looks like these are fairly measured depending on how you see them. but basically much less harsh than could have been across the board. >> political director jodi schneider. hong kong will conduct compulsory testing of its entire population three times in march as the city pushes resources to the brink. the government is ripping a page out of china's covid strategy while maintaining strict social distancing restrictions until april. let's start off with mass texting. what are we expecting?
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>> testing 7.4 million people is a huge undertaking, heidi. china has done this many times. but for hong kong, it is certainly a first. and how they pull this off is a key question. is it too late given that this fifth wave has spread bigger than wuhan during the start of this pandemic? carrie did mention yesterday that they expanded their testing capability thanks to mainland china and the people coming in to help out. they are hoping when it comes to the testing campaign that they will be testing an entire population in a week. they are hoping if they can get this done in a month or so, and on top of that, we learned that there are more stringent restrictions, travel bans, as you say. they have been extended to april 20. school will be out for the spring.
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face-to-face classes remain suspended but they are pushing forward summer break to march and april. school campuses can be opened up to house isolated infected people. even the string we have seen in the health care system, they will expand some of these isolation facilities. we have seen very heartbreaking images outside, given that there is. are we going to have enough rooms? still maintaining. >> what are we expecting? >> we expected to forecast a
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fourth straight budget deficit in a row. about 74 point 5 billion hong kong dollars is what the consensus is for, about 1% of gdp. it is still smaller than the initial government estimates. it is the longest stream of shortfalls for hong kong in at least a decade. they are in a good position and they have the fiscal reserves to whether through a few more of these virus relief funds. but what we are expecting out of paul chan is anything like support for businesses. also how hong kong is going to whether a tightening path given that hong kong does import the u.s. monetary policy with the hong kong dollar. they say it's manageable at this point and local banks have the liquidity position to do this. certainly a lot on the financial secretary's played in the next few hours or so.
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economist are saying given how fast this latest outbreak is, they have limited boost to cushion the economy. >> we will be talking about the city's budget, the virus situation later this hour when we speak to hong kong lawmakers, asking him all of those questions. let's get to su keenan with the first word headlines. su: the u.k. is imposing sections -- sanctions on five russian banks and high net worth individuals as punishment for the kremlin's recognition of republics in the ukraine. other banks on the u.s. sanctions list and most of them are relatively small. prime minister boris johnson says he is prepared to enact measures from luke -- from u.k. lawmakers.
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the prime minister travels to russia wednesday for the first bilateral meeting in more than 20 years. it will have wide-ranging discussions with vladimir putin on his two-day visit. any conflict between russia and the west would be catastrophic for developing countries. he also wants to have trading relationships with all nations. the international agency says they are monitoring russian statements on the ukraine. their consulting with member countries. and these experts have $250,000 a day and facing the most immediate risk. they are ready to ensure that all markets are adequately supplied. european and russian diplomats expected conclusion to nuclear talks in just a matter of days.
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the u.k. tweeting it is time for them to conclude.officials havee the landmark 20 deal in exchange for sanctions relief. resolutions could be finalized later in the week. global news 24 hours a day on air and on bloombergquint take powered by 2700 journalists and analysts. i'm su keenan. this is bloomberg. >> how investors should position themselves as tensions between russia and the west escalate. this is bloomberg ♪
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>> we are seeing u.s. futures gaining ground after equities here in the u.s. failing -- falling into correction territory for the first time since 2020. a loss of 10% since the january peak. u.s. futures at the moment are gaining ground. we see futures up to that level. a mixed set of u.s. numbers with
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market pmi data beating estimates. u.s. consumer confidence falling to the lowest since september. wti seeing it rise, and we pare back gains with the u.s. appearing to avoid the harshest sanctions against russia. gold also paring back gains in close to the june 2021 hi. >> the ukraine tensions, head of asia-pacific financial markets, the eternal provocatuer joining us again. you described the last few days as a dissent into a multi-verse of madness. how do we navigate this multi-verse? how do we get out of it? >> it was dr. strangelove and the multi-verse of madness. that is the slightly insane
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geopolitical backdrop we are dealing with. how do we get out of it? that's a wonderful question. in response to the headlines you were just reading outcome of the market is wrong again. it is continually looking for every opportunity to use any belief to avoid the worst case scenario here. if we have seen yesterday, vladimir putin say that the territory that he has re-invaded -- because he has already invaded. declaring independence with all that he wanted, you would've had an offramp where the west could have imposed milquetoast sanctions, which is what they were. and russia could've said we've already invaded and we could've had us day for a while, and markets could have rallied thinking about the offramp. that will not be comfortable when you look at what putin has said, demanding far more
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territory and making impossible demands for kyiv to meet. the defense minister has to fight for every square inch. and they want to achieve what they want through diplomacy because russia won't give it to them. but the actual reality on the ground, it does not become market optimism. it has been time and time again. >> given this analysis always ends with there will be no market to close because everything is going to implode. how do you navigate this as an investor? is there an edge? >> i'm not saying everything implodes. you could have russian
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cyberattacks. and if they carry out cyberattacks, market functions could be disrupted. the u.s. stock exchanges don't work. they cannot be more wrong. how do you stay around this? every single time you see a dip, it will be ok because it is always ok and central banks. it is going to get more risk-off . that is my simple snapshot analysis. >> unalike investors don't like
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timing the market. the markets are looking for any excuse to rebound again. and we see the geopolitical tensions are not there yet. can you take advantage of this opportunity? >> we are not giving any specific recommendations. the market doesn't understand what is going on. i am giving you a market analysis here. we are over it yet. just as anything goes down, by it.
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>> we have seen investors crowd the space. and they continue to rise on oil? >> we absolutely agree that it is very bullish for quality. even though you get fluctuations out to save the day, if things continue, it is really misleading. it is one bullish step to put your money on. >> michael, always great having your insights.
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coming up, sanctions on russia and a global crunch for chipmakers. we had to micron headquarters for the supply chain. ♪
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>> we are tracking the fallout of the global supply chain crunch and these are the top stories today. orting the mobile markets will remain tight well into 2022. posing a significant challenge for global agriculture. it may have a significant impact on global supply. u.s. president joe biden announced the $35 million investment in materials to process heavy rare earth
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elements. the move is part of a push to challenge china's dominance in the field and strengthen potential u.s. supply chains. germany is halting the nord stream 2 pipeline certification process following russian president vladimir putin's recognition of breakaway republics in the ukraine. others surged this year as ukraine tensions have grown. >> sanctions and for the retaliation could also affect the global chip crunch. for nearly every sector, right? caroline hyde is at micron headquarters in idaho. the race for chip dominance continues. >> it certainly does. and what we are hearing with gas prices and gasoline prices with inflation so prominent across every industry group, the tension between russia and the ukraine is adding a complication
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the flood is already a stressed global supply chain. 90% of neon, they use a lot of global gases. you make one little wafer here at micron hq r&d. 90% of neon comes from russia and ukraine. 30% of palladium comes from russia and ukraine. and appoint part of the chip manufacturing process comes from this part of the world. and we are already seeing a supply chain influx when it comes to chips. this is an area that many thought would iron itself out in 2022 but as of q1, we are still seeing people saying there's not enough supply to meet that demand and that fundamental demand still rips higher. the internet of things, 5g, not to mention a worldly expense.
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>> do they need to boost chip production? >> that is something that we hear time and time again. the u.s. is looking to get $50 billion worth of incentives to make people secure with supply chains. if covid and geopolitics feature anything, they were talking about the fact that you really need to ensure that you have a globally diverse supply chain. and he will bring manufacturing home to the united states if it makes economic sense. i spoke to him about the price differential in making chips in asia versus u.s. take a listen. >> we can pinpoint a 45% cost difference between asia and the u.s. and over the course of the past 20 years, they have invested
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>> we are not having any issues attracting staff. and we are seeing continued tight supply in the hong kong property market. coverage is very good. we are and remain bulls in the hong kong market. >> we will hear more from that conversation in a few minutes. staying with hong kong, chinese officials have said that they think a lot done will be needed to contain surging covid-19
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cases. let's go to hong kong where stephen engle is standing by for our next guest. >> let me catch you up on the situation. more than 6000 confirmed positive cases confirmed yesterday with more than 9000 preliminary positive cases. health care system under extreme stress. in beijing last week, they said the government must do everything possible to contain this outbreak. that included carrie lam appearing on television saying that there will be compulsory testing that will last throughout the month of march. they are closing schools early for summer break, throwing a lot of family plans into disarray. that is the last of their concern. they have 32 deaths, 19 in critical condition. this is also a government that has deceived extreme criticism
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for its ill preparedness when the rest of the world was dealing with delta and omicron. hong kong was sitting back and saying we are safe because we have geocoded strategy. not so anymore. our guest is a lawmaker and the legislative council and a businessman as well. he is also one of hong kong's deputies to the national people's congress. michael, thinks for joining us. good morning. sent me what your proposal was late yesterday. it is interesting. it sounds hard line. you want to nine-day short-term pay lockdown. why is that a better plan than what carrie lam announced yesterday? >> i always have reservations about the complete lockdown because it costs everybody too much. the employers and the employees. you talked about wages, you talk
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about direct. who is to pay? will the government fork out more subsidy money? and also, i am a retailer myself. the reason why i have a change of heart is because i look at my retail numbers the last two weeks and it has dropped 70% from the weeks before. 70% drop. which means it does not need that much anymore. our plan actually is already about 30% lower than back in 2019 before covid. so we are operating at 20% of the pre-covid level.
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if this continues for a few more months, you will see a lot of bankruptcies, the local economy will be hurt so much beyond imagination. so i said it's time that we bite the bullet and just take a quick one. >> do you think nine months lockdown -- excuse me, nine weeks. nine days. nine days. i apologies. nine weeks, forget it. businesses will shut down. what can you accomplish in nine days that carrie wants to do over two months to three months? >> in nine days, government says that they can do retesting for each citizen. i want her to get more help and i think she can get it across
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the border and do two tests for all citizens of hong kong. and then the third test should be after the lockdown has come to a stop. so during that time, basically, all the businesses will shut down except essential services. people are not allowed to leave their home except those in profession. for example, medical workers. you have food supply. the supermarket needs to be open. everything else that is not essential needs to be shut down. the people you see on the streets are the ones providing these social services. and they should be able to say one worker is out for an hour or two a day to get groceries or
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whatever. it is easy for police to enforce. they will stop everyone that they see on the street. they are there and they just explain. i think it is manageable. it won't be perfect. but what happens is they tested positive. we will never be able to build 100,000 or 200,000 isolation units. right? so we build as many as we can. so if the number of covid cases goes beyond that, which i'm sure it will, then you have to set up a priority. i propose a priority of two lines. the first in line for covid isolation are the ones where they have household members that have received two destinations.
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and if everybody has received vaccinations, once they are over 60 years old, you complete the booster as well. so these three conditions, and if you are confirmed positive, you stay home. the whole family then stays home so it is not a strict lockdown, it's a home lockdown. they settle into get tested every two or three days. until everybody is cleared up. during that time, the situation worse is. -- worsens. then you send them to hospital. in that situation, i think there is enough way to balance limited isolation, limited emergency room, and people staying home.
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after a complete lockdown, people are still staying at their home because of family members becoming positive. >> but carrie lam says that there is not going to be room right now, at least for discussion about a complete lockdown even though mainland officials have been coming out and saying that this is something hong kong should consider. is there room for a proposal such as yours to be taken up and listened to by executive council and acted upon? or is the die already cast? it is this ad hoc knee-jerk reaction to a situation that this government, let's be very honest, the rest of the world is grappling with delta and omicron and hong kong sat back with hubris saying that we've got you covered. but they didn't. >> if you look at how the whole world dealt with covid, there has not been one case i have
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seen where a leader has said something and he or she could stick to it or buy it over the long term. everything is situational. all right? i don't think it is a setback now because i am sure that all of the buddies in business will tell her the economic costs are too high. we cannot afford it. people like me, for instance. even the week before, i would be vehemently against it. and now the situation is that businesses drop your point and it does not make any difference if you are open enough. so i would rather have a quick fix than long-term pain. of course, you talk about local businesses. what about international trade? it is not affected by the current situation. and let me tell you, half of my
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investors are already working from home. people can still work from home. businesses can still continue and there will still be meetings. it has changed tremendously. five to 10 years ago, it's not what we are doing now. the economic cost would be much higher, but not today. my stores are closed and the retail business -- the key is the landmark participation. a lockdown, who is going to pay for the suffering of the tenant? the businesses appeal to everybody in hong kong. it is not charge for rent. that is the key. and i'm talking about nine days straddling two weekends.
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we are losing five working days and two weekends. i pick a date. march 19 through 28. that is the second part of march that carolyn said is enough time for her to start this buildup and momentum to start the new testing. i want everything to be under a severe set of measures. that way we can open up the economy and hong kong. mid april is what i have in mind. >> is the hong kong community getting enough representation in the executive council? the business community's concerns, are they being heard by this government? i feel some frustration in your voice. the economy taking a backseat, which it should. it hong kong is built on its economy and a confidence that
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international investors have in governance or the hands-on government. >> that is why i am striking a compromise. other cities in the world, nine days is very short. they are talking about 14 days. in china and the mainland, we blocked out. nine days is very short. the impact on interest, if it is only nine days, i would appeal to them to voice that. it is for long-term sick.
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it depends on help from the mainland. >> do you think this will happen? do you think a lockdown will happen because there has to be preparation from the city? >> everyone i've talked to says mandatory testing caused so much disturbance to everyone and they are not having any kind of a lockdown to go with it. ok? it's just crazy. you know? it has to go hand-in-hand. >> you also say that we need to in this time of war. we are at war right now. do you think that they should
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throw away concerns about privacy? whether it is the tracking app. mask testing, you will have to send people's dna across the border to china which some legal experts i have spoken to say that there are some legality problems here. do we need to put these concerns aside while we tackle this outbreak? >> you are asking the questions that we always have a very high standard in times of peace. now we are talking about a time of war. and during such time, i'm not an expert in legality or in the law. i support trading in many cases and i don't know how far the chief executive order, privilege and power, would encompass that.
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there is no perfect solution. we just help to do our best. it is just testing capacity. so how do you divide that? do you cast people that insist on that testing? i don't know. >> last question for you. real quickly. you want short-term pain. nine days, lockdown, one test for everybody. >> two things. two tests. >> should hong kong adopt a singapore model? i'm not discounting the health impact. singapore went through a massive
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health crisis but they have learned to live with it in their teen is projected to grow 5% this year. ours is 1.6 and that is probably the high-end. can we move to living with covid after the short pain? >> let me clarify. we need three tests to make the mandatory testing meaningful. two tests during a nine-day lockdown and another after the city is unlocked. right now, our vaccination level is nowhere near singapore. the vaccination level for two shots, people above 70 is only 20% to 30%. and ba.2 seems to be much more threatening than ba.1. people used to say omicron deaths are minimal. it's not true anymore.
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it's not something that is mild. it's becoming a tiger. so forget it. without covid circumstances, we can afford not to continue with a zero covid policy. i'm not talking about politics. i'm talking strictly about health and numbers. >> we are going to have to deal with the politics. someone just wrote me and said it's the final straw. they are leaving. we have to deal with this eventually but we have to deal with the immediate health threat. michael, good to have you want. you talk straight and we need that from our government leaders in hong kong. back to you, heidi. >> stephen engle in hong kong with michael 10 -- tien. wall street banks are
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approaching the french lender. we get that story next. this is bloomberg. ♪
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haidi: the yield is up 11 basis points and almost a three year high. we saw a jump in the 10 year yield as well, as much as seven
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basis points. the highest since march of 2020. we see australian bonds extending their underperformance. unless the wages comes in under expectations for the strongest reading since 2014, that is really the last piece of the jigsaw puzzle for the rba to hike rates much sooner than expected. the 10 year yields, 34 basis points above treasury. that is a gap that has widened over the past week alone, sherry. >> wall street banks have begun approaching soft genta manage their russia transactions. it is among the biggest european lenders with a presence in russia. let's bring in sally, our finest coverage. these are starting to position around how to get around sanctions. what are we learning? >> we know that the banks have already sounded out by the biden
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administration on potential sanctions. the administration was concerned about any potential spillover from sanctions that could really damage the economy. and now we have seen the ceo saying that he's been approached by international lenders and u.s. banks because he was wondering if they would be able to handle some of the transactions that they might not low -- they may no longer be able to handle. now we've had those sanctions. biden came out with sanctions that target russia's ability to sell sovereign debt. it effectively cuts off russia from western financing. and what is interesting here is that for a lot of wall street banks, they have in their memories, whopping fines from banks like emp for violating sanctions. it is more likely they will air on the side of caution.
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and rather than looking for workarounds or their convention of sanctions, they will steer clear. >> i wish lenders had that exposure either directly or indirectly. >> with international lenders, in the u.s. particularly, the exposure was pretty small. i think city is the biggest one and has 5.5 billion loans tied to companies in the country. others have emphasized the minimal sides of their exposure. it's another reason why perhaps they probably won't look at alternatives to any sanctions of beijing in place and abide by the spirit and the letter of the sanctions. >> another angle on the ukraine russia crisis. this is bloomberg. ♪
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>> a quick check of the latest business headlines area reporting projected sales and earnings for wall street estimates. it is raising to investment grade. the next highest went to $4.7
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billion. boosting online sales are paying off. buying a majority stake, we have tia partners in british columbia investment management. that is an example of global infrastructure investing. they will give a significant minority holding which is one of the world's biggest manufacturers. hsbc having the bank's use of the annual report and it is cooperating with the investigation into the use of messaging platforms for business communication. and it is part of regulations first for all financial institutions. >> coming up in the next hour, the head of asia equity strategy tells us not to trade on his
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bullish outlook. we are looking ahead to hong kong's budget and crediting agricole. the market opened in seoul is next. this is bloomberg. ♪
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>> welcome today break asia from bloomberg's world headquarters in new york. i'm shery ahn. >> and i'm heidi strauss. the u.s. waste sanctions on russia saying an invasion of ukraine is underway. traders are escalating tensions in europe. and a hong kong lawmaker calls for a full lockdown terrain in
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the covid outbreaks. >> and japan away on national holiday, the cost beginning .8%. relievers -- really reversing the two sessions of loss we saw in the week. we are seeing a little bit of a rebound and we have heard that they are considering releasing oil from reserves in case of any disruption. we continue to see tensions around the ukraine saying south korea will be diversifying raw material imports. we will keep a close eye on the pandemic outlook for the country as well. we could be recording another record search of virus cases. the korean won holding steady at the 1192 level. this as we see u.s. futures rebounding right now. we have seen pressure on the new york session and the s&p 500 falling into correction territory.
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gaining ground in reversing losses from the session. the japanese yen holding steady after we saw some strength earlier in the week. right now, losing ground against the u.s. dollar. >> we are seeing a reversal of yesterday's losses when it comes to trading, a bit of a mixed picture sector and pointing out energy isn't doing very well. it is down as we see the slippage and some of those gains against russia, not really put through. the decision, they are expected to go ahead with tightening, looking at overtures of more hawkish this -- hawkishness. watching yields in australia and
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new zealand, bonds looking increasingly under pressure. we are seeing the tenure really jumping as much as seven basis points. highest since arch 2020. that three year on the shoulder -- since march of 2020. that three year on the shoulder of 2019. we have seen that widening gap between the 10 year yield in australia. we see downside when it comes to trading in new york, this even as $150 oil and wrapping up momentum in the market. but certainly, that slippage we see coming more than 4% or 5%, a bit of a cool down after those sanctions were announced. gold preparing some of those gains. continuing to weigh the impact on haven demand and development over the last few hours. bitcoin seeing some gains and we continue to see some of the
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industrial metals contributing. >> despite the downside you talked about, our next guest says he is bullish on those assets. it is good to have you with us. is this all about geopolitics and inflation? >> so we have two conflicting forces. you have ukraine tension, lower yield, the fed fighting inflation, and higher yield. and today, we are clearly in risk-off. they are taking the lead. and we have to look at what they want to happen more on the medium-term. and interest rates also maybe at
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some stage down the road, this is what is happening in china and seeing some globalizing. i think would be to major events in geopolitics. >> how is the energy inflation upside risk? many of these nations are energy importers. >> what we find is the different channel for the asian economies whether you look at trade and energy. the impact is real. asia, unlike the u.s. or europe, doesn't have such a big inflation problem. you tend to have a lower base. but the impact will be more a kind of indirect impact.
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this is the indication of the equity market. >> this is overshadowing concerns of a renewed crackdown in china that has been driving risk assets from that part of the world. are we in for another round of some pretty harsh measures from the government? >> there are a few things that we can look at. there would be the national people's congress, gathering later in the coming weeks. this would be intense regulation. then compared to where you were last summer, one is that we have a better understanding of the framework. also the policymaker and the regulator. one is going to be targeted for
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what is important. and you have the valuation which has come down a lot. incorporating some lower margins. and not the positioning of the market. the investor becomes much more underweight. it could be in the previous summer. so in some way, they are mitigating the negativity that you could see from tightening regulation. >> you talk about the major downside risk. you see them moving forward of expectations from the first rate hike well from the fed. how do you position your portfolio for that kind of slowdown risk?
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>> we have a portfolio which has been positioned for normalization in interest rates. that means we have that scenario in 2022. at that stage, we are not seeing any recession. it could change looking at the data, but it is not something we are seeing with data. so we are too early to go fully distanced. in the group portfolio, last june, we made the decision to move to a balanced portfolio. the u.s. equity into lower valued equity markets. looking at asia, looking at china. but it is just too early at the
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moment to go fully defensive. we are not seeing the market starting to be more worried. it will be 3% which is going to be about here. and this is where we would become more defensive for risk assessment. >> frank, always good to have you with us. let's get you to su keenan who has the first word headlines. >> the united kingdom and you improving sanctions on five russian banks. it is punishment for the two self-proclaimed republics in the ukraine most of them are relatively small. prime minister boris johnson says he is going to enact tougher measures. meanwhile, european and russian diplomats expect a conclusion to
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the iran nuclear talks in a matter of days. tweeting it is time for them to conclude. officials have been there for 10 months, trying to revive the landmark 2015 deal that would strain activities in exchange for sanctions relief. and the key organizer of protests against canada's covid vaccine mandates has been denied bail. the first lockdown in ottawa aims to prevent demonstrators from retaking downtown. they blockaded the area for weeks. they remain just outside the city. they are not giving up. to hong kong now, which is set to test the entire population of over 7 million people three times in march. this is a key covid containment
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strategy by mainland china. people will also have to take daily rapid tests, and schools will go to break in march. they are also extending the inbound ban on countries until april 20. global news 24 hours a day on air and on bloombergquint take powered by more than 2700 journalists and analysts. this is bloomberg. >> hong kong is expected to unveil another budget that takes it into deficit for the fourth straight year. we have the measure and the city that they are dealing with. this is bloomberg.
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>> wall street -- [indiscernible] for the escalation of crisis. >> there is no certification of the pipeline that can take place right now. and without certification, nord stream 2 and go into operation. >> the u.k. is following five russian banks. i understand the general banks, and the black sea bank. and there are three very high net worth individuals. >> this is the first trench. the first barrage of what we are prepared to do. >> europe is not afraid of russia's actions. we choose our partners and our partners choose us. >> i do think that this is an invasion. and i think if it is an
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invasion, the sooner the sanctions are on the ground, the better. >> european officials reacting to escalating tensions. we are painting a pretty cautious picture in asia at the moment. it looks like we are seeing some mild positivity or some calm being restored after the sanctions were announced. take a look at european futures at the moment. this after we had a volatile session of european stocks on these tensions. futures looking pretty positive at the moment. a little bit of a lag but still up by .5%. the euro is also holding steady. that session we saw a really ended pretty much unchanged as investors have the extent of possible economic tensions between russia and the west over ukraine. stocks closing less than 1% higher. this coming after 2%. it does seem like we are seeing
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a broader risk appetite across global risk assets and equities more generally. in the u.s., president biden stepping up the pressure on russia and sanctions shifting for the east. meanwhile, secretary of state antony blinken says the russian foreign minister meeting has been canceled. let's bring in our bloomberg reporter bruce. what do we make of these new sanctions? how far do they grow? >> the most significant of the sanctions came from germany. we just heard german chancellor olaf scholz announced that germany was going to halt the certification process to pipeline. this is the pipeline that's supposed to carry gaps from russia to germany and the rest of europe. it is a top priority for vladimir putin who has been involved from the beginning.
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in the u.s., the harshest of the american sanctions covering russian sovereign debt cuts russia off from western financing and means it can no longer trade. the u.s. also shane -- sanction several russian banks, state-owned banks and several russian individuals. the eu now sanctions 351 russian lawmakers. also, the u.k. sanctioned several banks. also sanctioned several billionaires close to putin and boris johnson raised the possibility that the uefa final that was supposed to be in st. petersburg in may, boris johnson said that that should be canceled. that could be one that hits hard to vladimir putin because that is something that means a lot to him personally. >> china is close to russia.
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how are they responding to all of this? >> it is a pretty tricky situation for china. china over the weekend, the foreign upheld ukraine's right to sovereignty, independence, and territorial integrity. that's what the prime minister said over the weekend. the chinese foreign ministry has also called to de-escalate through dialogue and negotiation. china is very close to russia these days. vladimir putin went to beijing to meet with xi jinping at the start of the beijing olympics. that said, china was also very concerned about the possibility of sending -- setting any sort of precedent. if russia can recognize parts of the ukraine as independence, then there is the possibility that maybe western countries could recognize taiwan's independence, something that china doesn't want to go down that road. this is something that china will be trying to manage in the days and weeks ahead.
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>> bruce einhorn with the latest intentions around the ukraine it around up of the stories you need to know to get your day going. bloomberg subscribers on your terminal. you can customize yours so that you only get the news that you care about. this is bloomberg. ♪
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>> our exposure to china and real estate is just over 20 billion. over half of that sits on the offshore book. $10 billion is about 1% of our overall property exposure. so we are sort of managing through and we do expect policy measures for some of the liquidity purchases.
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>> speaking about china's property specter -- sector. there was a report that the pboc has urged bank to accelerate property loans in shanghai. china is hoping to profit from the real estate market expansions. for more, we are joined by china's credit editor. we know that authorities have tried to loosen policy, but why the success? they have spread to cities like shanghai. >> we are seeing that it is accelerated with real estate loans and this desire to show growth. and we know, previously, we have seen similar moves in gong show as well. and i think we are trying to improve sales and improve and engineer the softer landing. though sales come from smaller cities. these large centers are
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considered a bellwether. and really it would be sort of the first that people would be looking for to see any sort of fundamental improvement in sales. it is sales, really, that will help developers lift themselves out of this crisis. >> what a difference three months makes. beijing is returning to support the property sector. >> it is extraordinary. right? that drama that was all play out, seeing it engineer the own the quiddity crisis. i do think that looking at amt, that rate is coming into kind of also offer support. that's important. it is particularly important as china tries to manage the financial risk of the smaller banks.
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about 40% of exposure is related to real estate. particularly for the regional banks, a default or even just made payment by more than one real estate developer, they can add quite a lot of pressure. i think that there are two options here. it is coming in and taking advantage of situations, gobbling up really strong assets. on the other hand, we might see a bit more on the white knight role, helping some firms survive in one iteration or another. and if we do see the latter, it will pressure financial health. >> when it comes to credit markets, we saw the dollar bond widening in recent weeks. what are you watching for in that space? >> i think really want to see is
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whether or not that type of role is going to be playing and how that pressures their own financial health. and they had gone through their own struggles. and they are returning to the original mandate. but they have expanded to other types of businesses. that has some of the financial risk helped. this is whether or not they've given the call to step up and play this role in the property crisis. it would be the astounding asset managers. and precisely what type of capacity they have to sit in and help. >> a quick check of the latest business lash headlines this hour. volkswagen is preparing a push into electric vehicles.
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investors could be offered about 25% of shares. it is by a minority blocking stake. they are estimating that the value is as much is $96 billion. they may revive the ipo in singapore after shelving it twice due to the pandemic. bloomberg has learned that they are gauging investment interest. they look to raise $2 billion and it could take place as soon as the second quarter. >> buying a majority stake in the bottling company from tia partners and british columbia investment management. it's about $8 billion and has an example of an infrastructure fund. they will keep a significant minority holding. it is one of the world biggest
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contract beverage manufacturers. the agency is being investigated overproducing services. according to the annual report, it is cooperating with the investigation into the messaging platform for business can indication. they say the probe is not specific and it's across all financial institutions. >> take a look at markets because we are seeing abroad upside. it is being led higher i some of the industrial names. when it comes to the asx 200, we are seeing education and consumer stocks leading gains. with the aussie dollar continuing to strengthen for a third session. we are awaiting the session
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today, and we are seeing stocks gaining .3%. u.s. futures also rounding after falling in the new york session. coming up next, we discuss hong kong's latest budget. this is bloomberg. ♪
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haidi: australian way -- wage price index coming through, quarter on quarter gain of 7%, in line with expectations, accelerating from .6%. wage price index he on your for the quarter coming in at 2.3%, expectations were 2.4 percent, still an acceleration of the third quarter's 2.2%. that we really have seen pressure when it comes to aussie bonds staying vulnerable to that
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wages number, suggesting that unless we saw that well under expectations, which it isn't, then we are really going to see vulnerability when it comes to those yields, leading to a steeper upside skew. that is close if not the strongest reading in the wage-price index since 2014. big news when it comes to the 10-year as well as the three-year. 10-year yields in australia are 34 basis points above treasury at the moment, the gap widened by 14 basis point in the past week. in the backdrop of all this, the ukraine-russia crisis, looking for safe havens. we continue to watch that but certainly a strong number out of the fourth quarter wage-price data. caroline: a similar picture for kiwi yields, the 10-year jumping at the moment as we factor in what happens. perhaps the new -- reserve bank of new zealand expected to push
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back against inflation when that's first rate hike of 2022. bloom blurred that bloomberg global policy and economics editor kathleen hays is here. it seems a given the rbn will move and it seems conflicted i how much. >> how much at how aggressive they can be. we spoke with a chief economist and that is where you started. i want to just look at inflation, highest and 30 years, big pressure for the rbnz right now. that is going to have to move. it is up to 5.9% year-over-year. you can see the key rate if you look at this bloomberg chart was raised twice last year, 25 basis points in october and november, a big gap now before the february hike. that is why everyone is keyed up for this. they were asked, won't you hold off, we have the rbnz roiling
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the market. the white line is the key rate, point 25 to .75 in the final couple months of last year. basically, the rbnz has to move with commodity prices and energy prices moving higher. >> it is going to see oil prices potentially rise more, and the dollar -- the new zealand dollar does sometimes trade with the risk aversion. both of those things are inflationary. this is about to have a negative impact on growth for our trading partners, and i don't think the bank will see it as a reason to pull it at the moment, not with inflation so i. kathleen: other factors are at play and i think we have the charts. autumn line, unemployment, 3.2%, lowest since the new zealand government started talking unemployment numbers in 1986.
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the rbnz said, what if we get a wage-price spiral was to mark that is important. wage expectation is really important because the one-your expectation, the turquoise line, 4.4%. the two-year expectation, three point -- 3.7%. still above the rbnz target. when i spoke to the rbnz government late last year, he said inflation expectations are going to be key and could force us to move faster. another reason i figure people think they will be aggressive. 50 basis points in one day? i think not. that is the consensus of economists who follow this. bloomberg thinks that as new zealand opens its borders, omicron cases are rising, that is going to hurt workers for some businesses. but they expect wage increases to slow, one thing that will make it did -- a difference. and they are also looking at the
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housing market cooling-off. mortgage rates has risen. that might allow the rbnz to move on rates without having to be ultra aggressive. haidi: on the other end of the inflation picture, we have the bank of america call that beckoned -- that bank of japan will have to reduce amulets. that is a big call. kathleen: and they are saying in october that the boj is going to go for that. the real rate is slightly negative, zero .1% or something like that. they will get it back to positive territory or at least get it to flat. they also think they will double their yield curve control. it is at -.2 and they would want something like -.4. they are looking at food and energy costs rising, and it is going to create a backlash against the bank of japan's ultra easy policy. that is why the governor will finally decide it is time to make a move like that and right
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now, we have the global bond yield increase putting pressure on the boj. but the governor said last week that they may have come in to buy bonds and keep the yield at .2 for the 10-year gdp. i don't see any hand from the governor that he is willing to moving in that direction just yet. caroline: our global policy and economics editor kathleen hays on all those moves affecting the macro picture. in south korea, getting confirmation of 171,452 more cases in the past 24 hours. a new record, and also the first time south korea exceeded the 150,000 case number, the first time in a 24-hour period. we had seen the previous case number at 98,000.
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korean authorities said the surge could peak in late february or early march and daily cases could reach 270 thousand. again, south korea confirming it exceeded 150,000 cases for the first time as the omicron variant continues to spread. caroline: let's get to su keenan with first word headlines. su: president biden announced sanctions targeting russia in response to what he called russian president vladimir putin's invasion of ukraine. the sanctions will target russian sovereign debt, the country's elite and could be escalated. biden is sending additional troops to the baltics to defend a toe countries. >> this is the biggest -- defend nato countries. >> this is the beginning of a russian invasion of ukraine. i am going to begin to impose
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sanctions in response, far beyond the steps our allies and partners implemented in 2014. su: russia's controversial nord stream 2 pipeline is being halted by germany. chancellor olaf scholz has frozen the $11 billion project in one of the strongest moves yet against russia for recognizing two separate republics in eastern ukraine. the natural gas pipeline from russia to europe took a decade to build and was awaiting certification to start operation. >> it sounds technical, but this is the necessary legal and administrative protection so that no certification of the pipeline can take place right now. without certification, nord stream 2 cannot go into operation. su: 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 su keenan. this is bloomberg. ♪
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caroline: hong kong -- shery: hong kong will conduct compulsory inoculation of its population three times in march. the government is ripping a page out of the china covert strategy. while maintaining strict covid distancing restrictions until april. let's bring in yvonne man. yvonne, what is the latest? yvonne: we are going to start testing 7.4 million people here in hong kong, a huge undertaking. china has done this many times, but for hong kong, it is a first. we heard from carrie lam. she is hoping to get this mass testing done within a few weeks. she says they can best the entire population in one week, hoping they can get it done by the end of march. they have already asked ended -- half already expended testing
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capability thanks to help from the mainland, but there are certainly questions about whether they can pull this off. and is it too late, given that this outbreak has spread end is bigger than wuhan at the start of the pandemic. we had 6000 or more cases yesterday, 9000 or more preliminary cases as well. we heard from carrie lam, saying she is still at this point ruling out the possibility of a full lockdown although sources tell us beijing has told hong kong they may need to do so if needed. but hong kong is saying it may just be more localized measures. but it is still unclear how they are going to do this. they talked about travel bans being extended until mid april and also, school is out, essentially, in the spring and they are pushing forward the summer break until march or april because they have to open up some of the campuses to isolate infected patients. that is all happening as we speak and ahead of budget day,
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it is going to be a big one. haidi: what are we expecting? yvonne: we are expecting a fourth budget deficit in a row here, at 75.5 billion dollars hong kong. that is the consensus, that is about 1% of gdp. still smaller than what we saw in the initial government estimates, but we are still talking about the longest shortfall we have seen in hong kong in at least a decade. we are expecting a raft of measures, including the likes of helping businesses, support for consumers in the form of consumption vouchers, tax rebates as well. there are a lot of questions among economists about whether this actually does anything to cushion the economy, given how stringent the covid measures are at the moment. a limited boost, it seems it could have, on the economy if you are extending these
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restrictions for another few months or so. we have already seen economists cut growth to 2.3% from 6% or more before. there are going to be a lot of questions with the fed tight policy and what hong kong is going to do, paul chan saying at this point that it is manageable, that local banks have robust, liquid conditions to ride through this, but a focus for all central banks including hong kong. haidi: bloomberg markets anchor yvonne man in hong kong. on the hong kong budget, a credit company says city officials will be giving short-term relief to hardest-hit businesses. this is bloomberg. ♪
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♪ haidi: taking a look at reaction in the markets, the aussie dollar may drop after wages data. looking at the fourth quarter weight-price index rising 2.3%, slightly softer than expectations. quarter on quarter actually met expectations but we saw the aussie dollar trimming gains, bond yields retreating as well after wage and construction numbers. wages, really the last piece of
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the puzzle to force the rbnz to hike rates much sooner than they have been willing to signal. investors were convinced we will see a hike come june. shery: investors also watching what is happening on the pandemic front, especially in hong kong is the city extends covid restrictions and prepares to mass test the entire city. one lawmaker said it should impose a nine-day lockdown instead. stephen engle was told a tough, long-term measure -- short-term measure is more important than strangling businesses. >> in nine days, the government says it can do testing of each citizen over a week's time. i think she can get it from the mainland across the border to do two tests for all citizens in hong kong, instead of 14 days, we set it at 90 day -- at nine
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days. and then come of the third test should be done after the lockdown has come to a stop. it will be easy for police to enforce it, because there won't be anybody on the street. police will stop everybody in the streets to ask why they are they and they just explain. i think it is manageable, but it won't be perfect. , now, what happens when people test positive, what do you do with them? we should build isolation facilities. we will never be able to build 100,000 isolation units in the short-term. >> the business community concerns, are they being heard and heated this government? i feel some frustration in your voice, that they want the economy to take a backseat to health, which it should. but hong kong is built on its economy and the confidence international investors have in the governance, or attend off government. >> stephen, that is why i am
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striking a compromise, you know? nine days is very short. they are talking about 14 days. on the mainland, we have locked down for over a month there and so, nine days is very short. if this is a complaint about -- if businesses complain about the impact on their interests, and it is only nine days, i would appeal to them to voice support for it. if all the landlords in hong kong stopped collecting one third of a month's rent, it is tenable. otherwise, they lose their tenant, so what is the point? you are going to have empty premises anyway. so, everybody needs to pitch in. but honestly, nine days is short. it depends on government and
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help from the mainland whether they can pull off this. haidi: hong kong lawmaker michael tien speaking to bloomberg. a tense budget day in hong kong thanks to the pandemic. we bring in bloomberg markets strategist eddie cheung. a budget day and a difficult set of circumstances for policymakers to be dealing with their. what are your expectations, given this is the fourth year we are talking about of deficits. eddie: given everything that is happening, you just talked about tightening of social distancing measures, and i argue the measures are tighter than what we saw when we first started covid. in terms of impact on growth, we see that at least being parallel
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to what we saw when covid started. on a quarter on quarter basis, we could see growth dip 5%. but in the first quarter of this year, if there is any extension of the current currents, which we hope and won't happen, on a q2 basis, we would see a potential for a -- for recession. that is not in our forecast right now but we are forecasting growth this year to be below 2%. clearly, this will have a much bigger impact on growth. hong kong is dependent in terms of the domestic demand side of growth. external demand is less compared to other asian economies, but if everyone is locked down and businesses can't open, it is up to the government to provide a lot more short-term relief to make your businesses don't go under. because once that happens, it is very difficult for the businesses to reopen in the economy to recover. haidi: these short-term
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measures, are they stop-gap measures? if we see a another round of consumption voucher incentives, how much will that help? eddie: it really depends. in the current situation, where you continue to have a massive lockdown, just getting lockdown vouchers now will not provide much help. but if we managed to survive this covid wait, cases would go down into the low 100s, closer to zero. the government has a lot of incentive to do that right now. if they succeed and do that and then we open up again, people will see a lot of support in terms of the spending wave when it comes back. but in the near term, we believe these one-off measures are needed. in terms of current spending, that is another issue that needs to be focused on in the budget. there has been more focused on sweeteners, one-off measures,
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but that has been needed. there is also the need for longer-term measures making sure the economy is not just being capped on life support. we need to ensure that the medium-term trend growth for hong kong is still there and that is what we believe not just this budget but in terms of government planning, that needs to be a break -- a big focus. shery: what does this mean to hong kong asset prices given that monetary policy follows the fed and we are about to see them move? eddie: what we will likely be seeing if the fed is frontloading rate hikes, we are going to see much higher rates in the near-term that tends to push up hong kong rates as well. in the near term, at the beginning when this starts, we expect hong kong rates lag behind u.s. rates. we are also -- we already think that in terms of the hong kong aggregate balance. that is already high.
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on a liquidity basis come in liquidity is not a major concern yet. but given that a lot of local asset prices are linked to hong kong interest rates, asset prices will continue to be under pressure. hong kong equity prices are very linked to what happens in china, so there is good news on that front given that we are seeing china turning to more easing. however, given recent news around the crackdown, that should also keep equity prices depressed in the near term. so, more pressure on asset prices. shery: renminbi -- eddie cheung, senior strategist at agricole . we have plenty more. this is bloomberg. ♪
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♪ haidi: heading to the start of trading in mainland china and hong kong. our stocks editor is here, we are seeing geopolitical tensions but asian assets so far seem to be gaining ground. how are we setting up? >> there is a perfect storm for big, chinese tech companies recently. from friday on, we have seen may
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tongue getting hit on the new food delivery regulation. alibaba got caught in the ant audit and tencent got caught in metaverse scrutiny. there is a lot of social media rumors about a new gaming crackdown, which tencent denied. in the last three trading days, those three giants lost $100 million in market value. interesting thing this time around, there is no consensus on market participants as to why beijing all of a sudden renewed the crackdown. it does seem some people are saying those companies are still the most profitable in the economy and they should do some national service as the economy slows, according to beijing. haidi: our asia stocks managing editor ahead of the open. in the meantime, what to look out for in the hong kong budget, ing bank's iris paying is coming
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up and also when he will -- winnie woo. that is it for "bloomberg daybreak: asia," stay with us, "bloomberg markets: china open" is next. this is bloomberg. ♪
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it's -- yvonne: you are watching "bloomberg markets: china open." on yvonne man with david ingles, bank of new zealand hike of 25 basis points, from central bank of new zealand. this was seen by most economists here. they were forecasting a 50 basis point hike. this doesn't seem as hawkish for the rbnz.


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