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tv   Bloomberg Daybreak Asia  Bloomberg  July 31, 2022 7:00pm-9:00pm EDT

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shery: you are watching daybreak
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asia coming to you live from new york and sydney. annabelle: we are counting down to asia's major market opens. covid outbreaks in strict lockdown continues. a struggling developer fails to deliver a preliminary restructuring plan feeling more investor anxiety. house speaker nancy pelosi heads to asia. annabelle: the start of another trading lent in australia but kicking off with pmi data -- the final reading for us trillion it manufacturing pmi coming in at 55.7. pmi data is that main story here today, particularly what we have from china, the sharp -- the shock contraction with the impact of covid zero policies and lockdowns and no more fiscal
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support forthcoming from beijing. in terms of the equity direction, a mixed open in japan. nikkei futures trading to the downside. new zealand a little higher. the yen sitting just under that key 50 day moving average level. we had seen 140 a few weeks ago but that is in the rearview mirror for now. the best month for u.s. stocks since november 2020. we can take a look at the direction with asian stocks. adding 1.5 percent, not the same story. we have been discussing that story related to the covid zero policies in china as well as the fiscal support we are not seeing there yet from officials but we do obviously see higher lows and lower highs. shery: the down trend continuing
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in u.s. futures as well. you are talking about the best month since april of 2020. s&p 500 companies reporting earnings beating expectations, feeding through the markets. when it comes to demand concerns, we are there. when you talk about april and wpi continuing, lower after two months of losses for oil prices but to keep and i on treasury futures because we have the shorter data yields and those consumer price wages accelerating faster than expected so traders pricing in a little more when it comes to that 75 basis point hike into number. let's bring in stephen engle and that chief rates correspondent for asia. we have concerns about demand
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when it comes to the market and lots to do with china, specifically with evergrande and the property market. stephen: a lot of investors were looking at this preliminary plan the end of july came and went without a preliminary restructuring plan. the company filing saying they have delivered more bullet points, preliminary that restructuring principles, far short of what they were promising. investors want more clarity on that extensions, asset sales and it will stoke further worries any collapse could spark financial contagion. all you have to do is look at the exposure that banks have and it makes you a little worried. no other sector of china's
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economy has as large an exposure to the property sector as banks. 5.8 trillion u.s. dollars in outstanding mortgages in the chinese banking system. another $1.9 trillion, a total of 52 trillion yuan. some analysts, especially s&p global ratings says 2.4 trillion yuan, 6.4% of mortgages are at risk. this is a big concern. bondholders are worried about getting paid but the broader implications are to contagion and financial risk to the bedrock of the chinese economy. the banking system as well as the property sector. haidi: manufacturing activity,
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it was a shock. what do the pmi numbers tell us about supply and demand sentiment? stephen: it tells us the recovery we saw after shanghai opened with pmi above 50 in june was very short-lived. by july, it slowed down well below the expectations by economists. we were expecting a reading of 50.3 and it came in at 49.0. anything below 50 indicates contraction and this is emblematic the pain we saw with the closing of factories through the shanghai lockdown and other lockdowns is not necessarily translating into a long-term recovery, at least in the july numbers. bloomberg economics has these hot picks -- chinese -- china's recovery is sputtering. there is an abrupt loss of momentum. the new covid outbreak as well
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as the property sector roles are taking a toll on the economy. they call it grim across the board. shery: is it surprising we are seeing so much pessimism return to the chinese market? garfield: unlike america where bad news can be good news because there is a potential the central bank will turn things around, in china, what came out last week from the politburo, the picture is strong stimulus as they feel they can, that means you are on your own. there's no central bank, no --
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all the indicators are showing the economy is in trouble. when you've got the economy in trouble, precisely because authorities are not coming to the rescue. haidi: when it comes to this highly anticipated trip by the house speaker, nancy pelosi, no official mention of taiwan on the itinerary? tony: i think not mentioning that there will not be a trip is different than not -- sensing there will not be a trip to taiwan. she's going to singapore, asia, south korea and japan. that's on her official schedule, there could be a surprise visit. president biden and president xi
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spent two and half hours talking about taiwan. it is something beijing has made very clear. haidi: is that why they held those military drills in the taiwan strait? tony: there's been a lot trying to signal how strongly they oppose this business. with xi jinping coming to an important party congress where he is expected to get a precedent breaking third term, there is less room to maneuver politically in china. it is a more sensitive time than most and that's trying to express how important it is for china to show a strong hand if speaker pelosi does make that to the timeline. shery: we are seeing this decoupling between china and the u.s., that they will have this listing in hong kong and they are looking to do that.
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also the fcc putting the company on its list of potential delisting. talk about the market impact of all of this. garfield: certainly this has been a concern, although there was a bit of a bounce when alibaba announced a hong kong listing because of the idea this would remove some of the dangers from the impact of delisting at the fcc. those dangers are still there. the broader outlook is grim enough when it comes to china tech that those gains, alibaba is getting closer to testing and we are talking about all the factors that her chinese stocks.
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alibaba was one of those that outperformed through the bull market and started collapsing before the general market did. it has led the way down. there is no real diversification benefit for alibaba, so they get rid of the delisting -- delisting threat. those threats are pretty overwhelming. haidi: we do have the chinese developer going to buy chinese state entities. they were amending 1.6 billion dollars of dollar notes including extending maturities. we are now hearing china south city has the requisite consent
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to extend those maturities and have gotten support from the vast majority of bondholders as well. those dropped to distress levels just as recently as two months ago. we heard the company was warning if consent was not given, it would not repay interest on those dollar bonds and this could lead to a default. we had chinese high-yield dollar notes with a record low given they are dominated by distressed developers. seeing those boycotts and some suppliers having trouble repaying loans as well. we failed to seat evergrande giving details of the promised restructuring plan. let's get you to vonnie quinn with the first word headlines. vonnie: president joe biden has tested positive for coed for a second consecutive day as he continues to deal with a rebound infection. the president position says he
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will extend isolation measures three days after he was cleared of the virus. biden took a five day paxlovid treatment course. neel kashkari says the fomc is committed to bringing inflation down to 2%. in an interview, he admitted prices are continuing to rise beyond the feds expect tatian's and wages are not keeping up. he says the economy is far from where the central bank would like it to be. >> we are going to do everything we can to avoid a recession but we are committed to bringing inflation down. we are a long way away from achieving an economy that is back at 2% inflation. vonnie: turkey says a ship of ukrainian grain may depart the country as soon monday. it would be the first shipment since an agreement was reached with russia to allow save transit. ukraine says it is close to restarting shipments, though it
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is linked to getting the go-ahead from the united nations. u.s. space officials are criticizing china about the lack of information sharing on its rocket boosters reentering the atmosphere. remnants of the rocket fell over the indian ocean saturday. the country's space agency claimed a majority of the wreckage burned up on reentry. china's space program continues to practice uncontrolled reentry of launch vehicles. 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 vonnie quinn. this is bloomberg. shery: still ahead, the cofounder and ceo of taylor joins to share his views about the prime ministers policy to support entrepreneurs. up next, a deeper look at china's shock contraction. this is bloomberg. ♪
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>> i think jay powell said things that, to be brent, were analytically indefensible. he cleaned twice in his press conference that the fed was now at the neutral interest rate, calling it 2.5. there is no conceivable way that at 2.5% interest rate in an
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economy inflating like this is anywhere near neutral and if you think it is neutral, you are misjudging the policy in a fundamental way. shery: former treasury secretary larry summers and plenty of other central banks to keep an eye on. the rba expected to raise rates by 50 basis points. the rbis and boe are set to hike their key rates. economists predicting a 50 basis point rate in u.k. and 25 basis point hike in india. haidi: we are still processing the shock contraction when it comes to china's pmi data. let's take a look at that and what else is in store.
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let's start with the print from china on the manufacturing front. what does it tell you about the weakness we see across supply and demand? >> what we had there was pent-up sentiment, not only pent-up manned. we all know there still a lot in china subject to mass testing and some of it even lockdown. i think what we are seeing is that china is not out of the woods, even as far as manufacturing concern. this is in line when the
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politburo met recently, a 5.5% target was unreasonable and the message that growth is not what matters and balancing that objective compared to the covid policy. it all comes together now that we know that pmi number was so negative. haidi: when you break down into the sub data points, it shows a continuation of the same story we've been dealing with, when it comes to supply-side disruption. we continue to see supply chain disruptions in china. does that mean going into the second half, these things will continue to be persistent? alicia: indeed, and it shows inflationary pressures from
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disruptions are not going to ease, which is a major issue for the rest of the world. what we are learning from these pmi numbers is we should not expect inflation to peak. we have seen some peaking in germany and we are far from global peaking. we can't expect any risk side because the supply chain disruptions are going to continue. that is what the pmi showed to us. shery: talk a little bit about the central banks because so many economies across asia are so dependent, especially when it comes to australia and the rba, expected to hike again. are there
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economy? alicia: absolutely. central banks are in a bind because what they see is more inflation coming from many sources. one is hero covid policies and supply chain disruptions. there are other inflationary developments that are not fully in control, including energy and ukraine. all of that needs to be taken into account. at the end of the day, inflation remains. on the other hand, the synchronized slowdown should make us think twice. where do you strike the balance? your call a minute ago on rba is still the call. inflation pressures are still not tame and we will talk more
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about global the celebration -- global deceleration, but not in the upcoming meeting. we are not there. shery: what about india? are we going to see a shift from the rbis? alicia: i think it is too early for india to shift. it certainly needs to step up and show strength as regard to controlling inflation. not yet, not possibly for our b.i. and 100 basis points. that effort is politically important because of food prices in india. global deceleration is important that central banks have more on that table.
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haidi: good to have you back. with all the top economics to raise you need to follow this week, you can go to today's edition of daybreak for a roundup up of all those stories. terminal subscribers, available on mobile. you can customize your settings so you only get the news on the assets you care about. this is bloomberg. ♪
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shery: we are counting down to the start of trading. trade data for july is due later. imports come up 25%. expecting s&p global manufacturing pmi they came out
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59 -- 51.3. korean automakers will release sales numbers. haidi: let's get a quick check of the latest business flash headlines. elon musk has to -- has filed his defense encounter claim against the $44 billion deal. it is set for a five day trial beginning october 17 in delaware. a judge agreed earlier this month too fast the -- to fast-track the trial from a lit -- by a request from twitter. the pilots union voted overwhelmingly in feel -- in favor of forecasts. lufthansa spokesperson said discussions are underway to discuss the conflict. boeing has received preliminary clearance to restart deliveries of its 787 dreamliner. the grounding over manufacturing
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flaws trained cash and dented the planes reputation for quality. in august 1 drake by 2500 machinists. coming up, president joe biden has tested positive again for covid-19 in a rebound case. we will get an data on that and asia's virus situation next. this is bloomberg. ♪
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>> it is apple pay were i think -- apple.
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underestimated demand cycles fulfill. you got a quarter that have not upgraded in 3.5 years. >> the economic data is mixed but not universally negative. there was some room from some of the systematic players for a little support. >> i think those companies that have diverse and durable business models are going to fare best in this environment. >> google and microsoft were strong. they have emerged as leaders during these challenging times. >> any tech monopoly is going to be a flight for safety, where investors want to put their money and the less risky places, they can still grow. >> some of our guests responding to the question, which of the touch i set the biggest upside? let's take into some of those results. when you look at the ones most
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likely to move over the coming months, we had 1500 respondents and those putting their money toward microsoft or amazon. we did have those results lastly, microsoft posting a strong sales outlook for the coming fiscal year, the best two game day for the sock. wedbush called adults results shockingly strong. amazon and alphabet as well, companies that are navigating through the economic headwinds better than others. you've got tesla, and let's see where most of the respondents see that stock going. it is the least attractive company over the coming months and a lot of this is on the expectation that elon musk will be selling more shares. whether that is to finance the twitter deal, we also have responded saying he is likely to walk away from the transaction. regardless of that, most people saying he is going to be selling stock in the months ahead. for the movement ahead, to look
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at whether we end your higher or lower for tech stocks, we are seeing a split in the respondents. 40% of them saying we will enter the downside. more saying upside over the coming months, reflecting that debate in markets, whether the words of the selloff -- worst of the selloff is behind us. we see most people saying that value will be the stoxx' best performance over the coming months. let's get to the first word headlines. vonnie: china's activity contracted unexpectedly in july as covid restrictions drag on the economy. pmi fell from 50.2 to 49. it decreased from the month before but only slightly before -- slightly below estimates. officials focus on stepping out covid outbreaks. evergrande has failed to deliver a restructuring plan that has
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been promised by the end of july. it handed down restricting principles for its offshore saying it will announce specific plans this year. investors are waiting for clarity on how evergrande plans to deal with $300 billion of liabilities. nancy pelosi scheduled her asia trip does not include mention of a stop in taiwan. the statement from her office says she will visit singapore, japan, malaysia, and south korea. beijing has warned there will be consequent as if nancy pelosi goes to taiwan, including a statement that implied military force. alibaba is on the roster of company that could face delisting from u.s. stock exchanges. the washtub cracking down on a law which says companies cannot trade on u.s. exchanges if their audits are not made available inspection for three consecutive years. china and hong kong have refused the review citing national concert he -- national security
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concerns. 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. this is bloomberg. haidi: president biden has tested positive for covid for a second consecutive day and continues to deal with the rebound infection. let's get the latest. the president is positive again after a few days. these rebound infections, are they coming? >> they are relatively rare. others including the chief of the covid response in the u.s., dr. fauci, have experienced them. this is not a new infection. paxlovid, the antiviral that president biden took, suppressed the viral load, suppressed the virus for a couple days for him to return a number of days of negative tests, but it came back once he stopped testing and
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moved on from that course of treatment. he is still testing positive now , though without symptoms, which is pretty common for rebound infections, but not common among the population. shery: what are we seeing in terms of restrictions? we had heard perhaps hong kong should be shortening their inbound quarantine. emma: a lot of foreshadowing by the health secretary in hong kong and the new chief executive that something is coming when it comes to the easing of quarantine. that could be as soon john the's meeting -- john lee's meeting tomorrow. it could be anything from reducing hotel quarantines from the current seven days if you test negative to five, plus a couple days in home quarantine or monitoring. the health secretary has flagged
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that hotel quarantine period. the reduced, a possibility only, to around three days in a hotel provided they are able to get the china style tracking app up and going and that people accept that one. definitely something coming when it comes to quarantine on hong kong. haidi: we saw data from japan showing they are seen the highest weekly covid cases in the world, over 1.3 million over the past seven days. has there been any policy reaction? we are starting to see some disapproval when it comes to how the government is handling this. emma: japan is experiencing the wave that a lot of other places are emerging from, the u.s., parts of europe, australia have seen a big uptick which is now easing off, it is not japan's term. opinion polls are showing their's displeasure with the way the prime minister is responding to this.
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they have not gone down the route of another state of emergency or those curfews that they used during the peak pandemic period, though we are seeing medical state of emergency in some places like osaka. japan has been faring relatively well compared to other countries with a lower death rate. that probably has to do with the fact there is almost near universal masking still and a strong health care system. haidi: emma o'brien there. astrazeneca has raised its revenue outlook for 2022 after results exceeded analyst expectations. they excelled in all areas including its covid-19 medicine. the drugmaker is seeing growth across the board. >> we have had a solid quarter and solid first half.
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our earnings-per-share was $1.72, which was a beat on consensus. we are seeing growth across the board in every geography and every market. oncology, which has been a great success story for astrazeneca, grew 22%. cardiovascular medicine screw 19%. -- medicines grew 19%. we also had an acquisition of alexion and we are almost at the one-year anniversary of that acquisition. across the board, 330. a curious, we are seen strong growth. >> as we weigh out the risks across the world, do you see that momentum holding up? >> i think our business is fairly resilient. we supply lifesaving medicines across the world. we are seeing the diagnosis rates that have gone down for
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oncology product in cancer, people are not getting screening done for cancer. that is coming back now. we are seeing patients go back more into hospitals through the covid period, hospitals were shut down. we are seeing the fundamental come back into our business. that being said, our focus has been on innovation. we spent 20% of our revenues in r&d. this quarter, we spent $2.4 billion in r&d. we announced results for one of our incredible medicines, which is the american society for oncology, it was the first time in a decade we got -- any company got a standing ovation given the results of that product. it comes down to innovation and continuing to innovate and
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supply. >> when it comes to covid treatments and vaccines, the momentum going would, is that going to wayne? >> covid medicines are two fold. one is on the vaccine front. we were the first to come out with a vaccine. we have saved, through the first year of supplying vaccines, 6 million lives. this has been independently estimated. we supply 3 billion vaccines in 180 countries, two thirds in low and middle income countries. millions of lives saved across the globe. then we have an innovative therapy in covid medicines, and that is an antibody, it is not a vaccine. what it does is provide additional immunity to patients who are immunocompromised. when you look at covid, even
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though the infection rates have gone up, hospitalization rates have not, but immunocompromised patients constitute 15% of people that get compromised -- hospitalized. if those people are protecting themselves, this offers additional protection. >> can gather has been a theme throughout the last few months. you expect that to be a drag? how does it impact these earnings? >> we have thought it impact on earnings. -- we have had an impact on earnings. we give guidance on constant exchange rates. we have said single-digit impact on our earnings as well as revenues as a result of the strong dollar. we are seeing that likely continue throughout the year. >> astrazeneca chief financial officer with bloomberg. come up next, why japan's
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approach to grow its startup scene may not see real results for a couple decades. we speak with yo shibata. this is bloomberg. ♪
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>> it is time for japan ahead. look at japanese markets and how we are setting up for a new
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trading month. we are seeing dollar yen holding study -- steady. we are watching the situation for covid cases given we have seen a huge upturn when it comes to covid numbers out of japan and that is starting to weigh when it comes to government approval. shery: let's look at the key stories. the final numbers for july manufacturing data do next hour. data a couple weeks ago showed a fall for a fourth consecutive month. it will carry out a plan to split its combustion engine businesses even without its japanese partner and we will see reaction to earnings after the bell.
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ana among those results on monday. the japanese by mr. is attempting to promote the growth of startups as part of his capitalism platform but a prominent entrepreneur is voicing long-term concerns. our next guest is a serial entrepreneur and angel investor. he says it would take 10 to 20 years for the policies to become effective. he is now the cofounder and ceo, yo shibata. for to have you with us. give us your rationale, why you say it will take so long for some policies to work on the ground and realize japan entrepreneurship. yo: yes, i have been doing startups for 15 years and things have gone pretty well. it is still small compared to the u.s. were china. i think kishida is trying to
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increase the number of startups by 10 times which i think is a good target, but you cannot intervene each company's performance. startups need to have multiple generations to build up, to get strong. i think it is going to take maybe 10, 15 years to become the global powerhouse of startups. >> i have been following japan for a while and we have talked about the startup scene and that government push from the economics initiative, not to mention by mr. koizumi's eire -- era. how big is the push this time around and why didn't those efforts were? yo: i think those efforts in the past have worked, actually.
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i am one of the founders who was influenced by koizumi's reform. startup is not built -- it needs to have a big ecosystem to support them to support multiple attempts to create global scale. haidi: what can give incentive for these new participants? does there need to be more capital injection to create a better opportunity of competition and more even playing field? yo: yes, i think there needs to be some -- there could be some reform in terms of taxation or stock options regulations, which is slyly different from what we have in the u.s. i believe in the power of
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example. so if more people around you are starting companies, you are more likely to do your own startup. even if that startup does not succeed, you can support other startups by being an investor an early employee of those startups. haidi: do you believe japan's start of culture could ever be something to vital -- rival silicon valley? the creation of silicon valley going back decades in the backdrop of the war is quite different to what we see elsewhere. yo: yes, i'm not sure if we could be the next silicon valley. but we are on the trajectory to have more startups. it just needs more time.
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it should be more accelerated because we are competing against not only the u.s., with south korea or germany or france, which have done a good job to support enhancing startups. that is why i think it will take more time to build a bigger side of ecosystem. shery: the world's largest tech investor is japanese softbank vision fund but they have not put money into domestic startups. how problematic is that? yo: i think something has to do with the size of japanese markets. the japanese market is not as big as the u.s. or china. but it is not as small as taiwan , where you should be default global to be meaningful successful in the international world.
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the japanese is like in this goldilocks zone in a bad way where you could be fairly successful, but it is not enough to take you to the global level, which you need for softbank's investment. shery: what -- haidi: what is the one change a think japan needs now? yo: more startups. accepting more favors i think would be a good reason to make them think they could start a new company. haidi: more innovation, more support. great to have you with us. yo shibata there, cofounder and ceo. you can watch us live and catch up on our passage of years at tv . you can also dive into securities and the bloomberg functions we talk about and join
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in on the conversation if you want to send us messages during our show. this is for bloomberg subscribers only. it is at tv . this is bloomberg. ♪
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>> a quick check of the latest headlines. pat gelsinger says the company will pull out of its struggles
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after the third quarter and ask for patience from investors. the chipmaker as forecast for the rest of the year after posting weak second-quarter results. revenue may slump by 13% from 2021. >> we expect 2022 and 2023 to be challenges. we feel like this is the bottom. that is what we communicated in the earnings call and we are off to the races to do better for ourselves and our shareholders. >> ledger, which makes hardware wallets for crypto investors, is in talks to raise $100 million in a new funding round. letter last raised $380 million in june 2021. the latest round comes at a time when crypto paddle -- crypto capital venture has cooled. in the u.s., we have
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caterpillar, a bellwether for the economy, construction equipment maker and we are watching it because they talked about a slowdown in china's demand. we are also watching airbnb, perhaps a rebound in travel, the re-opening narrative, especially in asia. interesting bank of america says corporate sentiment on earnings calls is deep into recession territory. we are watching that closely as we are also watching over and left, the uncertain write letter environment. alibaba to report its first year-over-year decline in quarterly revenue. haidi: it could be a day of reckoning for hsbc as well. executives will be meeting with their hong kong investors for the first time in three years in person. they will be facing tough questions over dividend issuers, questions over what happens when relocations are pushed to bring it back to hong kong as its main area of focus, as well as the push from the largest
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shareholder to consider a breakup. we are seeing a hong kong politician who represents 500 small investors, she will be attending. this is going to be interesting, particularly given seeing what has gone on with alibaba. he earnings report is at of: 30 p.m., you can also turn to your bloomberg for the latest analysis. we will have commentary and analysis from a team of expert cap editors -- expert editors. next, the market opens are almost upon us. this is bloomberg. ♪
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>> this is daybreak: asia.
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we are counting down to asia's major market open as his loom over china continues to grow. we are talking about evergrande not really delivering on that plane he had promised but the end of july. not to mention the shocking pmi numbers falling into contraction territory. chinese stocks are not doing well. >> some the pressure point when it comes to the chinese economy. this is a big week when it comes to the central bank as well. we have the rdi as well as the rba expected to continue. this is a great bellwether when it comes to macro pressures. >> the month of july is missing expectations and really falling into that single-digit growth. we are talking about seeing
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double digits. 21.8%. imports really soaring given the weakness in the korean won. we are seeing the trade deficit not surprising in contraction with the territory. $4.67 billion when it comes to the deficit. what does this deficit mean? we are already past that 1300 level across the u.s. dollar. >> we are seeing just a little bit more weakness here. in terms of the market open, we have seen signals navigating
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these economic headwinds. they are trading just a little bit flat here. we are really watching that key 1300 level. we have seen that strength in the end over the past few sessions. those biggest exporting names had seen a boost. we are around that 50 day moving average. maybe 140, very much in the region. the big focus really went into see any sustained measures, particularly from the demand side. we are also expecting a local advisory council to the labor ministry in japan. that was a just a hike to the minimum wage if that does go ahead, it would be the biggest
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increase seen on record. turning to what we have in australia. we had seen futures pointing to the stronger side. specifically, the surprise contraction we had, definitely a signal of the impact of covid lockdowns that are ongoing and we are not seeing much physical support from policymakers as yet. >> we are watching alibaba as well. they have an update on their status in terms of the u.s. market move, they are striving to maintain their status. this as we heard that alibaba was added to the fcc list of those chinese companies facing a delisting.
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we saw some extended declines in trading. bloomberg intelligence saying the proposed upgrade is one way that alibaba is trying to offset the escalation in that u.s. delisting risk. the delisting of firms is growing and the publication of that name starts at 3:00 from -- for alibaba from potential final delisting. just another thing to add to the wall of worry for the listers -- investors. they have rising rates and dollar strength. the chief equity strategists joins us now. as heidi mentioned, this is even without talking about financial decoupling political wrists between the u.s. and china as well. what do you make of the latest when it comes to alibaba and the broader impact on sentiment and chinese equities?
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>> it is great to be out again. let me tell you how to unpack that. we added some research added that if there is a move toward primary listing in the u.s. -- hong kong, that could also to quickly lead to inclusion in the southbound connect universe. that could potentially lead to inflows about 16 billion u.s. dollars if the ownership ratio there will move to equivalent with the current ownership. we see a trend toward primary listings.
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we can see outbound flows into those names. that is a bit of a buffer to understand will and very real concerns about delisting in the united states. >> is that why you are remaining over there in china? because it is one of the reasons. the overall construct for a review on china is we think we are seeing a recovery but a review to the third quarter was a support -- was a substantial standpoint. we will already see some improvement in that momentum. at the micro level, that
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translates into what we think is a pretty well discounted valuation set in china equities. we are looking about -- at about 10.7 times more. we have improving momentum. there is lots of evidence to support that. we think that the overall concert there is still supportive over the next few months. july, the story for the region was many parts of the rest of the region including india and korea recovering their relative performance. we think it is a bit early to take to soft overview on china. we saw some further upside ahead.
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the recent data points to suggest that china needs to step up in terms of the policy support. >> doesn't it seem like you are completely rotating out of growth and into the valley? >> we have taken a balanced view in the growth versus value dynamic. that is a strong and positive continuing view for us. we are also constructive in energy. that has been a theme that is one of the best performers right here. we think that given the amount to which the region has come off in terms of pricing, you should not completely throw growth out the window. you need to look at those parts
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were valuations have come down and do cash flow. finally, in terms of many parts of the internet space, we have some of the biggest for intensity they really drove the stocks down last year. we think there are some positive opportunities in that area. >> we were already talking about the challenging macroenvironment and the earnings revision. >> it is a great question and thank you for asking that. in terms of the earnings dynamic, we think this is something that you really need to be focused on. we think the region right now is trading with top-down fair values.
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we are below what we think is aggregate fair value. there has to be another line earnings delivery. these are the themes of upgrades versus downgrades. the markets were really rewarding. that continues to be a significant theme. that is indeed up on bloomberg and additionally, we like the theme of stable growth. the idea that in a world where economic growth is under pressure, given the recession risks. also, where you have continuing high inflation because input costs could impact margins. they will be really aware of the market. we have baskets on those that we are strongly in favor of. >> always great to have you with us. let's get some of those
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earnings. we did have that report that the u.s. could be fighting the access of china to the biggest chipmakers. that is according to two major suppliers here. other tensions between the u.s. and china at play here with early trading as well. we are taking a look at what softbank is doing. we had seen a decline with the report that alibaba which is at risk of being delisted in the u.s. says it will strive to maintain both listings that could be shipping its primary lens to hong kong but also watching sony. sony has cut its sales outlook. a lot of it is down to the weakness of the playstation.
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>> president joe biden has tested positive for covid for 14 consecutive day as he continued to try to rebound. he will extend his isolation measures three days. he took a paxlovid treatment course. minneapolis fed president says the fomc is committed to bringing inflation back down to 2%. he admitted that prices are continuing to rise beyond the fed expectations. he also said that the economy is far from where the central bank would like it to be. >> we will do everything we can to try to avoid a recession but we are committed to bringing inflation down. we will do what we need to do. we are a long way away from achieving an economy that is back to 2% inflation and that is where we need to get to.
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>> an agreement was reached with motion to allow safe transit. ukraine says it is starting shipments by the timing is given a go-ahead from the united nations. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. >> still ahead, we will talk about hsbc's possible earnings. nancy pelosi sets of asia with her itinerary mentioning a step over in taiwan. we get the latest straight ahead. this is bloomberg. ♪
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>> asian markets pretty mixed at the moment. really conflicted with where they go from here. we are talking about games were for as many sectors and losses. we heard a rally here in the u.s., we are talking about the best month for the s&p 500 since november of 2020. at the same time, you get these shocking pmi numbers out of china. the markets are trying to see where they go from here. click let's bring out stephen
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here. is that what we are seeing in the pmi numbers? >> we can see these are a pretty negative set of numbers. the weakness is pretty broad if you look at the demand. global demand, that is all we can look at. what is concerning is the sentiment. overall, the only bit of positive news is how they are holding up.
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suggesting these stimulus packages will network single handedly. >> what are we expecting for the second half? there was a lot of expectation that they would do more. >> yes. recovery will continue. the second half of 2020, we see a lot of challenges. they have gathered in different parts of the country. you can see the reasons for these mortgage boycotts and that adds another dimension of risk to the overall economy.
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we do see the government continue to support and the government indicated a 5.5% growth target but it is not going to let growth collapsed completely. there could be potentially some sort of strengthening stimulus package. >> there is that risk when it comes to the property sector that we did not get much clarity on. we were expecting the preliminary restructuring plan. instead, we got luminary restructuring principles. what did we learn? >> not a lot. investors are perhaps losing patient. the bigger picture is what would be the ramifications and the ripple effects across the
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economy? from the banking sector to all of those mortgage holders who are now boycotting in more than 90 cities across china. this is a tricky situation. we are expecting that preliminary restructuring plans by july 31, that was their own deadline that they missed. the new ceo telling the 21st century business herald that they are focusing on competing projects and won't sacrifice the interest of onshore investors. no mention of offshore investors. evergrande has about $20 billion in outstanding dollar bonds or offshore bonds as part of that number of liabilities. sean hughes went on to encounter complicated and challenging matters and is asking for more patients regarding that preliminary debt restructuring plan that they replaced with
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just bullet point principles. >> you mentioned the potential for this distress to banks and homeowners. how big are the potential losses we are talking about? >> we are talking about quit a big number. the known sector in china has a bigger exposure to the chinese property sectors in banking. look at these numbers. 5.82 u.s. dollars in outstanding mortgages in china right now. in addition, we have about nearly $2 trillion of loans to developers. about 7.7 billion u.s. dollars. it was in outstanding loans to the property sector. s&p and deutsche's among others are saying that about 6.4 or 7% of those loans, those mortgages are at risk. >> that was stephen engle with a
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view of the chinese economy. nancy pelosi visiting for countries on her trip to asia but the statement from her office skips any mention of a possible stopover in taiwan. let's get more from the senior executive. what do we know about her itinerary now? >> we know that she will be visiting singapore, malaysia, south korea and japan. we know on her official itinerary there is not a stop in taiwan. with as much tension as there has been, they are signaling from the chinese side that they would take some sort of substantial measure in response to a visit by nancy pelosi. there is obvious motivation not to telegraph her intent. even though she has included that -- he has not included that on her schedule, that does not mean she will be visiting. we may hear more from her later on but a lot of the tension on whether or not speaker pelosi
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will be there later this week. >> we also saw a military exercise taking place over the weekend. is this a little bit more of a show of force from beijing? >> i think china has put a lot into trying to signal to the u.s. that it feels extremely strong with about the situation. we have the call between president biden and president xi in which president xi essentially told president biden that if you play with fire, you might get burned. there has been commentary out of beijing. the former editor of the global times saying that they could escort nancy pelosi's plane with jets of their own. that would be extremely provocative. we have a carrier moving north, and that direction, obviously, the risk is substantial.
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lots more to come on daybreak asia. this is bloomberg. ♪
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>> let's look at how things are opening in europe. we are waiting for that bank of england decision to step up its fight against inflation with a rate hike. futures are looking like this at the moment. we are seeing a little bit of upside there. futures are up quaint modestly. but trading when it comes to european stocks growth. the biggest monthly gain since november of 2020. investors have to be optimistic when it comes to corporate earnings and also, the fed will slow their pace of rate hikes. >> take a look at the latest
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business flash headlines. pilots voted for strikes if necessary before a wage deal. the pilots union voted overwhelmingly on walkouts that could trigger more cancellations on top of the 7000 flights affected due to staffing shortages. they have at constructive discussions underway to resolve the conflict. boeing has received regulatory clearance to restart the production of the 787 aircraft. the grounding drained cash and identity plane maker's reputation for quality. boeing also boarding this flight for the 2500 mission. pat gelsinger says the company will pull out after the third quarter announced more patients for investors. they slashed their sales and
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profit forecast for the rest of the after posting week seven quarter -- second quarter results. >> we expect 22 and 23 to be challenging. some austerity helps to transfer my agenda more rapidly and thus we feel like this is the bottom. that is what we clearly communicate in the earnings call and then we are off to the races to do better for ourselves and our shareholders into the future. >> alibaba says it is striving to maintain it listing status in both new york and hong kong. we will have more on that next. this is bloomberg. ♪ when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo,
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>> this is daybreak asia. we have your first word headlines. activity contracted on his back
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to the end july has covid restrictions drive down the economy. manufacturing mpi was expected to rise. the nonmanufacturing game decreased from a month before but only slightly below estimates. officials focus on snapping a covid outbreak with tougher restrictions and lockdowns. this is the plan they had promised by the end of july. it handed down a set of restructuring principles for its offshore debt. it will try to announce a specific plan this year. investors are whenever clarity on how evergrande plans $300 of liabilities. the u.s. house bigger, nancy pelosi scheduled for asia does not mention a stop in taiwan. the statement from her office says possible go to singapore, japan and south korea. beijing has one of that there will be consequences if pelosi goes to taiwan.
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china held live military drills on saturday. u.s. space officials are criticizing china about the lack of information sharing on his rocket boosters re-entering the atmosphere. this rocket fell over the indian ocean on saturday. the majority of the wreckage burned up upon reentry. china's space program continues to find controlled reentry on launch vehicles. global news, 22 hours -- global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. >> let's look at these pmi gauges classic the bloomberg across the region at the moment. we had that shock contraction when it comes to manufacturing numbers out of china. we are seeing when it comes to japan pretty much unchanged, south korea seeing that big fall below.
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taiwan: the third -- further into contraction and the philippines also falling by significantly as well. probably one of the only bright spots is indonesia and thailand both seen a bit of encouragement when it comes to these factory pmi's. let's look at the state of trading when it comes to the trading month here in asia. >> it is interesting that those two countries, korea and taiwan are major exporters. we have seen another factor at play here. when we have that reflected in the pmi data we have over the weekend. that shock contraction, it was really a sign that we saw that rally losing steam or that rebound with the recovery from shanghai looking at those restrictions but they proved to be a little bit temporary because we did see it fall into 49, weakness on the supply and demand side in the service sector. the factors here at play is
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covid zero. it is just weakness we saw in the property sector with all of these risks, the tech crackdown. we did see policymakers moving away from that 5.5% growth target. let's change to check out equity trading. that movement away from the growth target not really throwing in the towel just yet. we could see more support going into the second half. we are seeing are pretty mixed bag across the board here. weakness particularly in japan and the dollar as well has been a factor at play here. we have seen a little bit of weakness but just holding firm this morning. >> we are talking about two weeks of consecutive weakness for the dollar. we are talking about those one month lows. we are still around those levels. the euro holding steady but just hanging on. we are seeing significant the more strength with the aussie dollar against the u.s. dollar. we saw a gain of more than 1%
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last week. but the risks are when it comes to china's economy, perhaps weighing on the currency but right now, what we are seeing is the strength of the japanese yen catching everybody's eye because we are talking about levels we have not seen since mid june of u.s. treasury yields falling on those concerns. they are really continuing toward the japanese yen. let's get more with bloomberg's mliv strategist, mark cranfield. where are we headed now? >> it looks like there are a number of traders leading into jerome powell last week. the fed is getting reasonably close to taking up its aggressive interest rate hiking. maybe we have seen the last of the 75 basis point hikes. there could be a few more to come. the rate differential between
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the dollar and the end space has been very negative. people are calling back those positions and since it has been a relatively one-way trade for the first half of the year, it is quiet a way to do it. it probably got a little bit more exciting if you can see the dollar-yen better. you will see a lot of people question whether this is a medium-term trade or not. you could see quit straight move down to something like 125 but now they are in the upper end of the trading range that we have seen this year. certainly people are getting a little bit more nervous and if they do think the fed is getting closer or taking a pause, the dollar-yen stands out on the big trade which people need to unwind. >> treasuries had their best month since march of 2020. i resilient is this rally given
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the uncertainty from the fed? >> not so resilient if you believe ed harrison. there is quit a good macro view that has been on the wires. the argument is that the policy and the u.s. -- financial conditions have become too loose even though the fed has been tightening pretty hard. what you are seeing in some of the data is you're looking at the job market that is very resilient. unemployment is very low. you can see the consumer sector holding up pretty well. the company result in the latest time have been very good as well. there is evidence that the u.s. economy is doing a lot better than the gdp headlines suggest and the argument is that in the short end of the treasury curve, they have been far too optimistic.
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they will need to keep up with large rate hikes some time. we could get another strong print in this month as well. as far as the treasuries go, we may have already seen the best of the rally and there could be more yield increase. >> we will be watching alibaba as well. the company says it is striving to maintain it listings. furthermore, we are joined by our asian stocks manager. we are watching the kind of playing out. >> just to be fair to alibaba, it is one of the 200 plus
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chinese adrs listed in the u.s.. nevertheless, this is adding to the pain that we saw for alibaba shares last week. that will be interpreted by the market as of july 2 and the idea eventually. the earnings are coming up on thursday and alibaba is expected to report its first negative revenue growth ever. >> small and medium-sized
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businesses are really trying to stave off bankruptcy. the covid zero policy is referring to a lot of blues for the chinese market. the csi 300 was down 7%, there worst since march. they underperformed by 15 percentage points. now the eyes are looking at whether the stimulus is going to come because of the bad economic data. >>, have spoken too soon about chinese market shifts going down today. we are getting the latest breaking lines out of macau that they will be reopening venues in gyms, bars, beauty parlors from august 2. macau will be allowing dining services from august 2 as well. maybe a little bit of optimism given the reopening trades. macau reopening some and coming
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up next, a fifth element research. this is bloomberg. ♪
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>> another big week for earnings with some of the biggest companies in europe reporting.
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we will also get results from alibaba. hsbc reporting instrument second-quarter results earlier today. there is a greater risk of high credit costs in mainland china. joining us is the director of the fifth element research. what are you expecting from these numbers given the focus seems to be what question will come up wendy executives may invest in person. >> the biggest concern is how excessive growth in china could translate into higher credit costs in the past two years. hsbc has expanded over 30% of -- it has seen 30% lending growth
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in china and china has not seen anything like that and the other larger markets. we have seen how credit costs in china can ratchet far higher and we also saw that with hsbc in the first quarter. this is probably the single biggest risk with the numbers that come out later today for hsbc. >> when you look at the stock at the moment, perhaps that's it's a little bit apart from some of these risks you are flagging because we are seeing analysts most bullish on hsbc in nine years. take a look at the chart. >> i would say this would make is even more concerned. when there is a gap between what people are expecting and what is
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likely to transpire, that makes us even more concerned. there are a host of other issues besides credit costs related to china, hsbc's pivot integrator china probably at the worst possible time, remember, possibly one of the most positive aspects has been share buybacks. we must remember that a spacey -- hsbc has seen this decline in ratio of 200 basis points. it is not likely that the bank can continue in a prudent manner. >> that probably won't sit well with retail investors. heidi mentioned that meeting coming up. >> i would imagine that hsbc will push back aggressively as it has in the past by digressing some historically profitable
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subsidiaries such as hang seng bank. it has shown that it does not want to do this and it has shown that in the past. i would not expect that to change immediately today so the risk now is that the bank comes in with underwhelming earnings at a time when there is greater discord about this global banking behemoth and it cannot give good returns to investors. >> could net income interest saved the day? >> that is the great question and that is what everybody has been hoping for. for a cash vision bank like hsbc, that is what everybody has been expecting. if that does not come through, we really have to reconsider all of these points. the reason we don't think that will come through is because the delta in interest expenses can be much higher than what people are expecting.
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>> you talked about this being terrible timing to try to push into the mainland chinese market and we have this report out suggesting that in the worst case scenario, you see a $350 billion exposure and losses to chinese banks. i am wondering what your assessment of the situation is and what your worst case or likely case scenario is. claims that is a very difficult one to quantify. a bank like hsbc might be a little bit more clear in its accounting like we saw and maybe like what we saw with standard chartered. a lot of times, banks will have some leeway with how quickly or slowly they recognize losses on loans or potential losses on loans and here we are talking about the mortgage loan. what is clear is that with hsbc and many quarters globally, the
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second quarter and the fourth quarter are the ones for you see a greater reality check and higher provisioning than other quarters such as first-quarter and third-quarter. this could come again for h best -- hsbc. >> you mentioned earlier that npl's may not have been flagged for the markets. >> that is right. they were up about $1 billion quarter over quarter. we have seen you will be take some of his china lender support. we know it is a geopolitical issue for hsbc. maybe they don't want to do that. from an accounting perspective, from a chief risk officer perspective and auditing, it is very unlikely that the bank will show a decline in bad loans. so you could see another billion-dollar rise and remember, over the past three or four quarters, hsbc has seen its
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loan loss down substantially. it is a buffer to absorb losses that keeps going down. >> really good to have your insights into the banking sector and hsbc. we will be speaking to hsbc at 12:30 p.m.. plus you can also turn to your bloomberg for more. you can get commentary and analysis from our experts. bill winters says asia could recover to drive political growth with the u.s. set for a possible session in an exquisite interview after delivering a strong set of earnings results, they spoke about the fed fight and the risk of recession. >> i think the problem that we have is great substantial and reasonable. i think the fed will have to hit pretty hard. i think that means a terminal
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rate of 3.5. is that what it takes to tip the u.s. into recession? i think so. speaking candidly. but we hope for the best. they have the incremental burden of energy prices. that is tough. the good news is china is probably still going to produce 4% plus growth this year and then better into next year. the inflation problem is a little less acute in asia. these trade flows within the asian region are very strong. we think that asia could pull the global economy back from the edge while the u.s. and europe are going through all of this. >> with that in mind, to deliver that engine of growth, do you see a much more significant policy diversions between pboc and the fed ecb? is that what stokes that engine?
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>> the engine has been suppressed by covid in a way that the west has not for the past year or so. they are coming out of that repression. interest rate policies will be reflected of the domestic economic situation and the domestic inflation outlook. the growth outlook in asia is on the cyclical upswing. together with inflation which is relatively contained. that is not said that inflation in the west won't impact asia. of course it will. to the extent that the u.s. has to hike rates materially, it will keep the u.s. dollar strong. but on balance, we see a little bit of a synchronization between the west and the east which has two effects. it should help us move through this economic cycle. >> that was bill winters there. we will be ready to hear more from the big newsmakers of the
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day. we are broadcasting live from our studio in hong kong. you can listen in via the app or overhead, this is bloomberg. -- more ahead. this is bloomberg. ♪
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>> a quick check of the latest business flash headlines.
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twitter's lawsuit under seal. the lawsuit against the cancellation of the proposed 44 billion-dollar deal absent for a five day trial beginning on october 17 in delaware. kathleen mccormick agreed only this month to fast-track the trial at the request of twitter. bloomberg has learned that they are in talks to raise at least $100 million in a new funding round. they last raised $380 million in june of 2021 an evaluation of more than $1.5 million. the latest round comes at a time when crypto -- crypto capital and measuring has followed. the d.c. league of super pets top of the weekend. this as the major summer movie is bringing them here. the film made $23 million in its opening weekend. lower than box over predictions. -- box office predictions.
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these are some of the things we will be watching when the market opens. alibaba will try to maintain its status in the hkex in the face of a possible u.s. delisting. some of the companies facing the same predicament. china, beijing and automakers also and focus with china planning to extend the tax exemption on ev projects. keep your eye on shares in macau as the territory sets to reopen gyms, bars and beauty parlor starting tomorrow. dining services will be allowed as well. also, the city is reportedly mulling cutting hotel quarantine to five days or less. >> we have the start of this trading month here in asia.
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the bank of australia is expected to step up inflation but we are seeing some moderately higher trading here. as we continue to see any price action when it comes to the yen. we are also watching australian gains of .4% for the asx. kiwi stocks are up by 3% or 10% as well. they are supported by stronger infrastructure exports. they will be more on china's newly launched paquin -- pension system. ♪
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