Transcripts For BLOOMBERG Bloomberg Markets Asia 20180109

Asia. Rishaad starting the program looking at the major benchmarks around the world. Index, lets have a look at what it has been going on since last anywhere he. January. White, last january. The green line, looks at the magnitude and speed of price fluctuations. 70 seems to be overbought or undersold. And we have the world index, showing the euphoria around the world is gripping the whole world, as opposed to just the msci emerging markets indicator, purple. And then we have the asiapacific index, the secondmost overbought one as well. There we have it, heidi. The party goes on for the time being. Heidi do these technicals part of something that could be in the way of a correction . Europe might be the only one that has a bit of room to move. A number of key events could pull this different directions. The u. S. Laterin this week. Japan is back in trading action after the threeday break. 24,000, Japanese Equities looking at the highest since 1991. Take a look at the action. We will see who is at the market front. What about the broader equity session . We have complacency rates by the likes of pimco and citigroup, but we are not seeing that with the equity sessions in asia. The advance and we have a bullish flak for japanese stocks flag for japanese stocks. Earnings and currency are following as the government reacts against exports rising. Taiwan, we have gains looking fairly flat. Exports rose to a record in december, thanks to strong Global Smartphone demand. Gains,have extended putting stocks back on the shopping list. Holding losses just above that four handle. Losses beating the most bullish estimates. Ssie share market, rising. Laggards being led by Retail Food Groups. Stocks selling as much as 11. 3 after flagging a profit target. Lg climbing after a local media in talksat is it is with apple regarding its camera, which tim cook promised to deliver back in november. This Company Announcing changes at the top effective immediately. The drag being offset. The Retail Food Group falling as much as 2 . But another record is to be expected. Rishaad a mixed bag. We will have a look at all that. Lets go to the first word news. Samsung shares are trading lower after fourthquarter profits missed estimates. The company is losing momentum in memory chips and hit by a strong yuan. The company rose to 48. 2 billion at the end of december, compared to an average of 15. 1 million. As prices forame benchmark memory chips level off after a year of gains. Regulators will tighten their grip on the markets. Authorities in china and south talks overncreasing cryptocurrency trading and mining. Bitcoin slumped as much as 17 , the most in two weeks. President has eishd his voice to dovi comments over a yield curve. The white house says it is very close to announcing a new fed vice chair after the departure of stanley fischer. There was a petro chemical tanker off of shanghai that could explode and cause an environmental disaster. The body of one sailor has been found. 51 others remain missing after the tanker collided with a petrol. Her on saturday. Carrier on saturday. Clouds of toxic smoke are hindering rescue efforts. Says she has no plans to run for u. S. President after a rousing speech at the Golden Globes. Demillethe sessile b Lifetime Achievement cecil b. Demille Lifetime Achievement award. Shares torive up Weight Watchers in which Oprah Winfrey has a stake. I am paul allen. This is bloomberg. 7 10 in seoul. North korea and south korea kicking off highlevel talks about now. Year, been a tumultuous in which the north korean regime accelerated its weapons program. Donald trump threatened to strike back with fiure and fury. Joins us from the communication bridge on the Southeast Side of the demilitarized zone. What is going on, steve . Stephen this is the dmz behind me. This is the reunification bridge, the joint security area that is demilitarized and jointly controlled by north and south. Village,at is bps where they will have 0 the peace village, where they will have these talks that have started, or should have started at the top of the hour. This is the first talks they have had in december of 2015. This direction takes you across the bridge into the dmz. Group, they have been coming by consistently for seeing the dmz. These talks will involve a range regarding peace on the korean peninsula. Agenda, butn ended at the top is the possibility, and all the branch, for the south to allow the north to compete the olympics as one korean team. It is not set in stone. That at least is a way to get the two sides to talk and have this openness in the months running up to the games, which start one month from today. The South Koreans say they will discuss issues related to improving interkorean relations. That is open ended. One other possibility is the resumption of the industrial complex, closed more than a year ago, due to the tensions over the missile test. North koreans have tested 23 andent missiles overs they have had 16 tests, including the most recent one in september, believed to be an h bomb. The Missile Program and the successes that have been lauded by kim jongun, giving North Koreans a bit of confidence to come to the bargaining table, with a few more bargaining chips. The South Koreans are wary as well. The United States to not want the North Koreans to drive a wedge between South Koreans and americans. We have been here before. We had talks in 2013, 2015, and 2009. Suppose the question is, what are the expectations . Are they being managed . What is different this time . Period of back a shotsrth rhetoric, cheap coming from the leaders of the two countries that have escalated tensions. North korea advanced their missile technology, supposedly firing them with the threat of hitting the United States. There has been rhetoric, backed up by the North Koreans, saberrattling. And the americans as well. South koreans are doing a joint military exercises with bombers flying over the korean peninsula. The fact that North Koreans took up the offer of talks from the South Koreans to discuss this face to face is significant. Prior to this, we seemed to be heading in the opposite direction, with a possible military confrontation. This is a good step forward. Specter ofuse the peace for the limbic games, the goodwill that has engendered olympic games, the goodwill that has engendered to find common ground. Heidi stephen engle. Talks should have begun by now. We will get more as developments become available. Still ahead, could Rising Oil Prices and tense competition block del ambitions to fly to chinatas detltas ambitions to fly to china . Rishaad we will be talking to david mann. This is bloomberg. Rishaad we are back with Bloomberg Markets. North and south korea are due to begin talks in the dmz. They should have begun at the top of the hour. They will talk about the upcoming olympics, and the Nuclear Program in north korea. Lets bring in the global chief china bank, david mann. The biggest risk to this benign outlook is complacency. Tensions geopolitical in north and south korea all of this was brushed aside by investors last year. The risk is we wont be able to brush aside these this year as easily as we did last year. It will be particularly difficult in the second half of 2018 because the activity of the major Central Banks are tightening up. Had we have been looking at the dollar delta of the Major Central Bank balance sheets. By 2019, it will be outright shrinkage. In that situation, it makes it harder to brush off his geopolitical risks. Heidi there is always going to be the central bank isnt there . There is no complacency of going too fast, given we still have this incredible structure if you well if you will . The lowinflation environment is there. There will be some rises in inflation here. Rising prices are flattering expert performances in 2017. That will be fading by the second half of 2018. We need to remember that in the case of the United States, that is the one that will matter the most if inflation takes off. That will hurt emerging markets and be fed will go into a much more aggressive mode. We doubt that will be the case and expectations of real acceleration have not materialized for years. This tax plan is reason the bulls will get more excited. With the amount of slack in the u. S. Labor market, and a serious theoff and wages in absence of that, you are looking at a more aggressive said, than the aggressive fed. Rishaad we are seeing Global Growth all across the world. Each one of these regions has a different economic cycle. Where are we in the respective cycle . David we are in that late stage in the case of the United States. Extra support from fiscal policy. In the case of china, it is about which part of the economy you were looking at, rather than the cycle. China, youd parts of know things have been stagnant for a long time. In the faster growing services industry, and consumer spending, that is growing above 8 . It is about which industries you are focused on. Thatr big driver and may stay positive is the electronics sector. The amount of demand for semiconductors with the internet provide northeast asia growth. Moreve had an increase of than 50 in semiconductor exports by korea. That will still be a factor, evenh the chinas with the chinese inventory cycle fading away. Isd talking to you inflation different this time . This is the biggest one you have to watch for. Will you get that spike in inflation . Maybe you will get the odd prints that might get markets excited. But we think we will see a flattening of the u. S. Yield curve, as we get an underperformance of inflation, versus what is expected. There is a story you will get a pick up this year, because the labor market is so tight. But there is a huge amount of flack hidden there. Measure of unemployment will be closer to 8 , it is even before you look at the impact of labor market thanks to automation. A fair amount of frictional unemployment in that scenario unless product pivot he takes a seriousont get amount of employment in the United States. Go into panic mode and trickery that same sort of panic you had with the emerging markets. That, you could still get 60 of the yield curve with less than a 2 yield. To see they begun beginning of inflows coming in over the next several years. Heidi does china worry you . They also want quality growth, to do that without adding risk in the financial system. Could they achieve that . And israel inflation in china something we should be worried nflation in china something we should be worried about . Good jobina did a very of stabilizing the corporate gdp ratio. It kept it flat, after a fiveyear average driven by corporate sector debt that had been running more than seven Percentage Points asterisk faster credit growth than gdp growth. At this stage, given the path of the economy without the need for more support, i would watch for the occasional accidents that can happen along the way, while trying to deal with the excessive leverage growth of the past. We think policy makers be facing a relatively simple task of seeing a 16. 3 growth rate between now and 2020. He will be focusing more on quality, sustainability, they will be focusing more on quality, sustainability, and deemphasizing growth targets. Contributor to Global Growth, even if we go down to 6 on a trade basis. It will still need that china is mean that china is the most important Global Growth driver when we look at impact on gdp growth. Quickly, is Global Growth in china being dealt lets . Dealt with . David gradually. Deleveraging as spreads more broadly to the corporate sector. I dont think you will see a sudden change, but the fact they being sog to stop gdp credit intensive is heading in the right direction. They will turn around and positive it is heading to hard. Toohard. Rishaad david, have a great day. Plenty more ahead. The Hong Kong Free market, 34 points. 47 points away from 31,000. This is bloomberg. This is Bloomberg Markets. China is being offered a production role in a super jumper for the first time. There have been talks on granting finishing interiors work. China is committing a significant order for the model. Discussions are to take place when the french president visits. Hong kong is exchanging considering rule changes to trading volume. Market makers simplified rules for using collateral positions. The Exchange Operator is eyeing businesses to battle from international rivals. Stock is being fund raised through assetbacked securities. The company has not sold any abs since early december. We are close to the open in hong kong. Will be talking to the head of the private investments for asias bank. This is bloomberg. Rishaad there we go. The coil harbor. 9 a. M. In hong kong. The free market on the way up marginally. Asian traders that to their desks in tokyo, so good gain taking place for the nikkei. This hot on the heels of records for gains in the s p 500. Every trading day this year has seen the s p score a record high. A bit of a mess from sands miss from samsung. Political concerns in the e. U. We have brexit carrying on. We also have confidence in the euro area on the way up. Meanwhile, in this part of the world, the north korean delegation chief says the goting they are having will well, according to the news agency. Haidi keenly watch that meeting. Looking at whether this diplomatic overture is indeed that. Where the progress can be made between north and south. A bit over two years. We are watching for a slew of china numbers. Sophie with the open in shanghai, shenzhen, and hong kong. Sophie pressure coming through for chinese stocks. The composite halting a sevenday advance. Trading closer to the 31,000 mark. Hshare indexe gaining ground. We are seeing gains led by Consumer Discretionary stocks along with energy when it comes to the group breakdown. Financials under pressure along with Consumer Staples. We are keeping an eye on property as well. Real estate gaining. 3 as Credit Suisse says the property boom is starting to cool with the risk of higher rates and rising Housing Inventory looking. Stocks in focus. The cryptocurrency craze have sparked move in chinese small caps. Things enough to set off. Blockchain suspended by u. S. Regulators. We are taking on the likes of these companies. Theave easy site extending gains. It rose 10 on that day. The rest of the stocks under pressure so far this morning. Flipping the board to check on other stock movers, Value Partners gaining ground after forecasting its consolidated net profit will rise to 2 billion hong kong. It is coming after expecting fullyear net to more than double. That is losing. 2 . Thehave telco leading laggards along with real estate, which is down half a percent. That stall when it comes to the rising Chinese Developers this year. We have Consumer Staples just on the bright spot, along with Health Care Stocks in shanghai. Rish. Rishaad sophie kamaruddin. Started off between pyongyang and seoul. That and more from paul allen in sydney. Paul north and south korean officials have begun a highlevel meeting. Their first in more than two years. They will focus on the norths participation at next month winterlivex olympics. They want to revive negotiations on the norths Nuclear Program. The pentagon says there is no indication a satellite launched aboard a spacex profit has made it to orbit. The payload was classified. Coden by the cone name name zuma. The u. S. Congressional aide says failed andpage had the satellite was lost. Bloomberg has been told saudi aramco is set to appoint banks to manage its ipo. And morgansbc, stanley, they are also expected to be named as global court maters. Some of the banks are tentatively valuing the company and one 1 trillion point eventually in. Mandates could be finalized this week. Thailands Prime Minister has avoided media questioning in an unusual fashion. They told reporters as they had any questions, they should ask this guy. In a militarywer coup and threatened to execute journalists and criticize government. Global news, 24 hours a day, powered by mother and 2700 journalists and analysts in more than 120 countries. Timeouts recent sovereign dollar that issuance that insurance debt issuance has done poorly despite overwhelming demand. Details on what happened with bloombergs guest. Underperform against asian peers, i guess. Tooi the pricing was tight. As we discussed on the show two months ago, when they price it, they priced it at treasuries plus 15 basis points. Exactly. That is much lower than what the Market Participants expected. This is lower than korean tworeign bonds, rated levels up higher than china lost sovereign. The very limited spread on china sovereign bonds provided very little cushion. This is the underlying u. S. Treasury move. Reason, thend record issuance from Chinese Companies also is leading to the underperformance of chinarelated bombs. If we could bring up a chart to sovereign nations dollar bond performance, china was the worst performer. Rishaad you got it there. Actually, the other chart. [laughter] china handed investors a 0. 70 loss. It is the biggest loser among all asian sovereign bonds. The biggest winner is actually mongolia bonds. Rishaad there we go. Haidi that is really interesting. What was chinas intention behind selling the sovereign bonds in october, and did it managed to achieve that goal . Good morning. The intention was to set up for its Chinese Companies, because as we know, Chinese Companies have a huge appetite to sell dollar denominated notes. They sold a record 200 billion on last year to fund various projects including one belt, one road project. The issue with the sovereign it was tooll was small. It was 2 billion, and the issuance was very infrequent. If we could bring up that first chart you guys brought up earlier, yeah. Rishaad the corporate, arent they here . Chinese soes. Soe spreads did go down in the lead up, but as you can tell, soon after it completed, the spread widened, so there was actually no effect at all in the end. Rishaad is it a case of once bitten twice shy . Actually, very likely. Market participants expected that to happen. It is not going to do the trick for the nations corporations. The news agency has reported the finance minister following the issuance. Exactly. Fund managers have told me that they expect china to be tighter because they can do it with the support from the state of banks and the soe and Fund Managers from china. Our next guest says growth of chinas new economy should increase the boost of global machinery, engineering, and tech companies. Joining us, our guest. Good morning. Rishaad tell us about this in a nutshell. We remain bullish on the new economy sector in china, given the strong growth performance in 2017. We dont get to worry about the high valuation. E expect them strong policy emphasis on Technology Innovation and robust Growth Initiative in the prices sector. New economy sectors are positioned. We will continue to deliver Strong Performance going into 2018. One of our high themes for the new year is to put it to asia. I mean, this surely has been going on from the beginning of 2017. But we expect a board run. We like to expand into 2018 because of the expected strong earnings performance in the new economy sector. We expect the industrial upgrade and the consumer upgrade happening in china would also bode well for the performance of this Consumer Facing Technology set. Sector. Haidi that is sort of the broad theme when it comes to opportunities in china. Consumer facing tech, innovation, some of the more environmentally leaning said us. Are these the ones youre looking at . Theres going to be paid across the old economy sectors as they try to rebalance. Cheuk in the course of the rebalancing, we identified attractive Investment Opportunities in the old economy actor. The supply side, reform, the accelerating soe reform. This will bode well for Investment Outlook for those industry leaders, particularly the quality soes. We have seen the tightening environmental recollections with severe soes to undergo restructuring. This would bring m a opportunities for the industry leaders, and we are positioned. Those are quality soes, which will be able to expand market share and improve profitability on the back of optimized supply. What about the deleveraging process . Cheuk the financial deleveraging is going to be a key focus for the governments to field financial risk in the coming year. We think that this is going to tighten the liquidity situation in china. On that hand, the Monetary Policy and susan cole policy susan cole policy will be made forthe deleveraging is financial risk in the capital market, and this is going to reheat. Think the price factor, particularly for many of the new Economy Companies which have low gearing, they would be less impacted by the financial deleveraging. Rishaad you probably are going to be getting onto the yearly roadshow pretty soon, and i suppose you have to then prepare yourself for the question you are anticipating the most few which is a question you are most anticipating . Cheuk a lot of questions from clients regarding the interest year. Isk in a policy normalization trend stepping out from the u. S. Towards other developed economies, and this would be a key question that impacts portfolio strategy for the year. We believe Global Central Bank will continue to stick to policy normalization. We dont expect aggressive Interest Rate hike. Inflation,ubdued this is the most frequently asked question raised by our clients. We think we have many good reasons to stay in a risk on Investment Strategy because of the synchronize global recovery. We see positive momentum in corporate earnings, improvement, and this is going to expand the equity rally for longer. This year, we also expect Global Equities to outperform global credit, mainly driven by them rishaad , the positive cyclicals. Your evolutionye 4. 0. Cheuk the Industrial Revolution will continue to drive strong earnings performance in the technology sector, but this year, we are actually predicting technology, our sector rally, broader as we expect the Strong Performance of Technology Companies would also spread over to the company which would be able to use technology as a business enabler. We have seen this happening in the auto sector. Other retail companies, financial companies, adopting technology as a key. This is going to reinvent the business model. To devisesing tack innovative applications and open up the new market. This is going to enhance productivity gains and also deliver new Growth Drivers for corporate earning expansions in the new year despite very strong share Price Performance in 2017, but we dont think this. Stopall run this will the ball run. Between theck word north and south on the korean border. The representative saying let us completeness successfully complete this successfully. Up next, Delta Airlines wants more business out of china. Slight of be in fancy . This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Shares Chinese Airline had a great day monday. The government gave airlines more freedom to set fares for domestic flights. The point is, how does this impact other players in the companys . Good morning. There is pricing power, and that shows you the well of demand. Im guessing. Of the a reflection market. First of all, there is obviously strong demand. China is a growing market after the middle class. Is a positive growth pattern youre seeing for travel in china. There is a sign of the government easing and being more marketbased. That is a reflection of the confidence or so being able to manage. I have not said that. There are also guidelines. It means 10 . Rishaad how does this affect you . You have a cochair with eastern as well. It is good news for us because we have a stake in it. We invested 450 million. It is primarily a domestic play. Compete amongst themselves to capture the markets that are growing. Rishaad what is your Partnership Like with china eastern these days . Who does what internationally speaking . Perhaps i may want to put this clear were right now. We have a partnership with china east. In order to be able to talk about divvying up the joint venture, we dont have that. Extent, it has been flourishing over the past two years. We have a lot of cooperation with china eastern. We have access to higher tier cities. Oft provides a lot connections to penetrate and access the markets of china, which is growing. Rishaad that brings me down to the next thing. We have got united. British airways have and putting away some of these secondary cities. How is that, in your strategy . Are you using the way of developing this . What is the deal . I think thats correct. I think our primary focus is on the two key hubs in shanghai and beijing. By the very center, we have a very strong partner. And that partnership is grown with china eastern. We are able to access without being able to fly. A lot of access on strong partnerships because no one single character, even though we have global ambitions, is able to cover every corner of the earth. This partnership in asia is doing very well for us, and with that, we are able to be abl accs them without flying directly. Haidi what is deltas Expansion Plan after the new beijing airport gets underway . Wong that its an interesting question. In 2019, beijing airport will come on stream. That is october, 2019, if im not wrong. China eastern has also had very strong ambition plans. Ub, ifuild a second h you like, at beijing. What we have been doing, together with our Network Departments on both sides, we have been working very closely to make that second one in beijing a Strong International hub. Delta has got tremendous experience. We have got many years of building hubs in the United States. We are able to share the experience with china eastern to be able to build that First Successful development in the near future. Haidi what would you say is the crux of your expansion or market share plan . Obviously, chasing for more market share from united and air china. As well. China southern do you anticipate what your strategy is in staying ahead . Wong i think the market is still very, very strong in terms of its growth patterns. We firmly believe in our product investments. , that isin that aspect how we choose to differentiate looking after our customers. I am very excited about this year, because in 2018, we see our new a350 aircraft coming into china, operating in both beijing and shanghai. That will give a lot of corporate travelers plenty to enjoy. It is a fantastic product. It is a new delta one sweet we have designed with private space and sliding door cabins, complete privacy, which is what corporate travelers really want. Delta premium select, which we have introduced. Aircrafttments on the have products to build to stay ahead. Haidi stay with us. Love how to talk about. Plenty more ahead on Bloomberg Markets asia. This is bloomberg. Rishaad we are back still with wong hong. Muchquickly, have not got time, tell me about how your load factors are. Pressure on yields. And also oil prices. Wong over the past year, there has been a lot of capacity injection between the u. S. And china. That has certainly affected yields, as you say. Rishaad they are under a bit of pressure. Wong a little bit. That, we are still very optimistic in the market, and you know, we believe that growth will still continue. The demand for travel to u. S. And china will still continue. Visas allow people to continue to travel. Rishaad very quickly. Load factors. Wong we are doing pretty well. Rishaad what percentage . Wong high 80s. Rishaad got that out the way. You are planning one was cory and wong yes. We have an announcement with korean. Plans with joint venture does require it to begin with. The condition of the antitrust immunity. That is something for the two governments to decide. Forward andng optimistic in the near future. We possibly might consider that. Rishaad in five seconds, oil prices hitting the bottom line . Wong certainly, if Oil Prices Start to move up rishaad you hedge . Wong no, we are almost finished. Rishaad you have your own oil refinery. In pennsylvania. [laughter] rishaad thats it with wong hong. More on the way. North and south korea hold their highest level talks in two years, we are live at the border with the latest. Gains galore, asian markets extending the record run, the yen is on the move as the bank of japan winds back its bond buying feud buying feud and slower chip sales below expectations. I am in hong kong. Haidi and i am in sydney. Crumble, crypto tightening regulations sending bitcoin tumbling feud tumbling. This is Bloomberg Markets asia. Haidi we are looking at a day where it is the start of earnings season, probably with the tech bellwether, samsung slightly more disappointing. It was a stellar year for most of last year, but the other part we need to talk about is the we saw a 7 appreciation against the u. S. Dollar. Samsung its a must 90 of its sales from abroad, so clearly a stronger currency avoiding overseas profits. Take a look at this, 4909. What we saw earlier this week, stern words from south korean authorities saying they would sternly deal with any onesided move in the currency. Winningpped the longest streak for merging currencies and a decade. The average threemonth costs of hedging costs, this is a good way to measure bearish sentiment. Falling to the lowest in almost five years. Ass investors investors remain bullish on the longterm outlook. We will be talking about the growth story and the heavy influence into asian assets we have seen as well. If you take a look at the impact of what happened to the yuan, you have to wonder if this is just the beginning, some of these currencies that have appreciated quite significantly, particularly going into the first fed meeting of the year. Rishaad looking at the dollar as well, some price gains. The boj not as much in the market as they were. Also, traders in tokyo back at their desks. Hot on the heels of another record for the s p 500, and on top of that the nasdaq. The trading season getting underway. U. S. Starts at the end of the week. Lets get to the action and see how your money is behaving itself. Sophie fairly well with the backdrop you described. We have stocks mostly higher, but with stocks looking this soundthat is going to alarm bells over complacency. The removal of centralbank stimulus is among the concerns and today the boj has pulled back some stimulus, which sent the end below the 113 handle, trading at session heinz and gaining the most at session highs and gaining the most ground in a week. We are seeing a steepening of the yield curve for japan. That means gains for japanese indices, but we have topics going on 2018 at best. Samsung, are with profit miss that could fire up intervention. Yuanne continuing the continuing to falter. In taiwan, we are seeing the taiex snap and a date rally even after taiwan reported record export growth in december. We are seeing record shares in china, but the large cap gauges up one third of a percent. In hong kong, the hang seng being Consumer Staples. , china eastern is resuming gains. Policy tailwinds for chinas big three airlines. Falling. The worst on the asian regional benchmark today. Rishaad a mixed bag from samsung today. Lets have a look at the first word headlines. Lets join paul allen for that. Paul Samsung Electronics has reported lower than rejected fourthquarter profits as it loses moment of and faces a strong you on yuan. The 5 surge in the korean currency came as prices of benchmarked memory chips leveled off after a year of gains. The atlanta fed president has added his voice to dovish comments from officials concerned by low inflation and the risk of an inverted yield curve. 23ays his base case is rate rises and less inflation picks up. Meanwhile, the white house says it is close to announcing a pick for the fed vice chairman after stanley fischers departure. There is no indication that a satellite launched of launched aboard a spacex rocket made it into orbit. The payload was classified. Spacex says the falcon nine booster rocket performed people familiar with the launch says the second stage of the rocket failed in the satellite is lost. Opel Oprah Winfrey says she has no plans to run for u. S. President after a rousing speech at the Golden Globes fueled and for fueled interest. Lifetimereceived the achievement award, she told bloomberg she does not plan to run. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am paul allen. This is bloomberg. Haidi thanks. North koreas delegation chief says talks with the south are now underway in the dmz and will go well. The meeting is seen as an opportunity to ease tensions after kim jong ends regime accelerated its Nuclear Weapons program and donald trump threatened to strike back with fire and fury. Lets get it over to our asia correspondent, joining us at the unification bridge. It sounds like there continuing a diplomatic overture. Thats right, you can see i have my chaperones over my shoulder here. Dmz. Leads to the to get the relationship back on track, if at the peaceoss house that started over an hour ago. The top of the agenda, the possibility of north korean , who qualified for the winter olympics, to possibly join the south korean team as a koreanrrine presence at the olympic spirit we dont have any resolution, but it has gone the two sides to start talking. Has been emboldened by a number of different missile but they Nuclear Tests have been facing extreme, harsh yuan sanctions from the security council, including somewhat of an oil embargo and restrictions on export of its biggest products it sells abroad, including coal and other products like seafood. Perhaps in the dead of winter that we are right now, with minus nine, 10 degrees right now, these sanctions could be biting and give us a reason why kim jongun accepted south korean overture to have these talks here today that started a little over an hour ago. From get a sense already the unification minister of south korea, talking to reporters prior to leaving sold eoul morning leaving s this morning plan to leaving. He said he will not be hasty and make the olympics a peaceful event and this is the first step to improve into korean relations. The first step to possibly improving interkorean relations. Me something, what is the atmosphere like, not just where you are, on the streets of seoul and the people youre been talking to . Steve there is hope. This is been the breakthrough for the last year or so, a little more than a year, ever since the rhetoric started ramping up from the u. S. , but also since the North Koreans really escalated or Missile Program. I believe there were 23 different missiles missile over 163 rockets fired missile tests, so they were definitely rattling the sabres. The people of south korea are hopeful this could ultimately lead to their goal, which is the unification of the korean peninsula. However, the olympics may be a different story. I spoke to one person, a taxi driver on the way from the airport to my hotel up here, and he says of course the ultimate goal for all koreans is to reunify the peninsula, not to have the North Koreans on the south korean team, i dont think that necessarily escalates the south korean chances. Rishaad thanks very much, steve dmz between north and south korea. We will be heading to shanghai for the best china conference throughout the show. We have a Nobel Laureate joining us about half an hour from now. China plans tow capture eating market share. We will be speaking to the companies. This is bloomberg. Welcome back to Bloomberg Markets asia. Haidi a quick check of the latest business flash headlines. And kongs exchanges clearing is considering role changes to increase training volume. The ceo says measures may include rebates for Market Makers to provide growth using collateral and the removal or reduction of charges. They are eyeing the changes as it battles for business with international rivals. Rishaad offering china a production role as it seeks a program extending order for its slow selling superjumbo. Were telling were told they are finishing work for china. Discussions are expected during this weeks visit by the french president. Been toldomberg has that gopro has hired jpmorgan to potential sale. The Company Revealed plans to cut more than 20 of its Global Workforce and exit the drone business after a disappointing fourth quarter. Than 33 clined more and the ceo said that gopro would consider partnering with a Larger Organization to help it scale up. The world is always changing and our job is to align gopro with Consumer Behavior and look for opportunities to scale both the appeal and the reach and relevance of gopro, and sometimes that is easier if done partner or acquiring company. At the same time, we have to build gopro as though we intended to run independently forever because thats how you build a strong business. Recently sent china said its 10 rebate for energysaving vehicles. Ofhinese electric car start recently raise more than 1 billion from investors, led by tencent. They started vehicle sales just three years after the company was founded and after the arrival of a rival model from tesla. The companys chief finance officer. We are joined by the cfo of the electric vehicle started company here in china, only operating three years. The already have a vehicle out, an suv. What is it looking like an terms of interest . We have had much better than expected interest. We are sold out of our first 10,000 founder units come all at a premium price over the market. We are very happy with demand. Tom and the year ahead . What do you expect numbers to be . Investors,guided they expected us to sell 20,000 cars this year in china. Tom how much of the help to have the facilities in place . Weve seen concept cars being launched at all this shows, at auto shows, but in terms of sales, it is different. Have the capacity for 150,000 cars. We are putting all of the robots and lines for sibling it. I dont for assembling it. I dont think we will have as part of the time. China is the king of manufacturing. It is a plant that knows how to manufacture cars. Tom you are squarely focused on the Chinese Market right now, but what are the biggest markets beyond china further along . We would like to be in the u. S. In 2020, and would also like to intereurope. To enter europe. Tom what are you seeing in terms of infrastructure, ensuring that you can get from point a to b smoothly and efficiently . We have battery swap, our car can swap out a battery in three minutes. We will set up every swap stations in every city this year. We have a target of 1000 swaps at gas stations. We also have trucks that run kilowatt 100 90 kilowatt batteries in the back. We provide all of that for a monthly fee. We are focused on consumer use. We are also tied into the public grid. If you buy in the usa day one, you can plug into 40,000 chargers. Tom do you see yourself as the tesla killer in china . Because they look to build a factor here. I wouldnt say we are tesla killer as much as they are a competitor in the premium sector. Until 2020, there is no other cars in our sector. Tesla is more than double our price. With the subsidy from the Chinese Government to our owners, we are about one third of a model x. Tom in a more broadly, we have others john by. Evealing other cars how competitive is the space . Will we see consolidation . Probably not as much consolidation as you would see for companies that funded and were running out of funding. Traditional manufacturers have partners in china already. They dont plan to have a car. 20. 2019 theres competition coming but it is not here yet other than tesla. Are such antories important part of this. Weve seen Real Progress in developing factories that provide enough power, and you are able to charge frequently. What you expect to see around the technology in batteries this year . See more and will more capacity batteries, but there is a lot of talk about rapid charging. Very rapid charging, you can charge a car in 15 minutes, versus it takes right now and hour or an hour and a half even at record at rapid charge. Densities are increasing, and our range in our cars, our next model, it will be able to go 455 or 500 kilometers. Its not long before you to 600 kilometers. Demise that will be the of the i. T. Car. Electricity is much cheaper than death. It doesnt van gas. It doesnt pollute. New modelsuched on coming up. What is the line of between now and 2020 . Every year in december we will launch a new car. The first two will be suvs. One, a five passenger suv. I cant tell you the third one yet, it hasnt been released. What are you getting in terms of support . We want to work with partners in china and overseas, and we have two very good oems in china, we are purchasing partnership and technology partnership, capacity we want to tap into, their capacity a strong. We also want to join order together so we can get better pricing for all of us on parts. We have electric Vehicle Technology i think they would like to license or work with us on. Tom another chinese start up in ,he space was future ferriday they are struggling to say the least. Have you taken lessons from some of the failures and disappointments run the company . Dont try to build a 2 million r d car. There is no market for it. Overengineered, and underfunded. Thats why we are so grateful to our investors, we have the best Investor Base of any private company i can think of, from , everybody. Equoia we have deep pockets. The industry requires heavy capital expenditures. You can design a car, but to get it to manufacturing and sales, it is a 3, 3. 5 your process and it cost 4 billion. Not many of these can do that to do that. Many countries will die away, there will be a few winners, and the industry as big enough to support a few winners. Tom thank you very much. Talking about the new suv model they have out and new models in the pipeline, ambitious for the Chinese Market. We will have more interviews coming from the Greater China conference ubs through the day, and we will be speaking with the Nobel Laureate. Haidi looking forward to it. Om mackenzie there a great conversation. Still to come, with Emmanuel Macron on his first visit to china, we will look at his goals, ambitions and how likely he is to achieve them. This is bloomberg. Haidi this is Bloomberg Markets asia, i am haidi lun and cindy in sydney. Rishaad french president Emmanuel Macron says he hopes to boost mutual trust during his threeday trip to china, pushing for stronger collective security and efforts against climate change. Thats as he met with the chinese president in beijing. Our government editor is with me now. Tell us a little more about this. Macron comingnuel yesterday and outline the broadvision a broad vision for euchina ties. Its not the similar to the one donald trump had, he wants more Market Access for European Companies into china, hes trying to crack open the market and to get these protections that western Companies Really look for, intellectual property being one of the major ones. That was his message, reciprocity on trade, using another trump turn trump term there, also saying they could Work Together on the else and wrote belt and road initiative. Haidi what is he likely to walk away with . Daniel we will find out later today. He is due to sign some agreements with companies that are within. He teased there would be some progress on nuclear cooperation. It is unclear what that would entail but there are a number of Different Companies in that space looking for a deal, and there is airbus as well. There have been reports that there is some sort of Cooperation Agreement on the a380 that will keep that line going. Without more orders, airbus might have to discontinue that youd hes looking for progress with that. Rishaad quickly, hes talking about taking the europe and china relationship into the 21st century, that will be a tough one. Daniel it will be. He is saying with belt and road, we are not suspicious of this, it is a big infrastructure push, but what we want to do is shape it and protect our companies and help everybody benefit, not just have china benefit. Rishaad thank you. Coming up, the latest earnings undershooting them are we looking at declining demand for chips or is it the strength of the yuan . Paul i am paul allen with the first word headlines. North and south korean officials have expressed optimism as they begin their first highlevel meeting in more than two years. Pyongyangs delegation chief says the talks will go well, while the south call for patients. The dmz summit will focus on the north participation in the next months winter olympics. Its also seen as a chance to revive negotiations of the on the norths Nuclear Program. We have been told saudi aramco is set to approve banks to manage its ipo. Jpmorgan, Morgan Stanley and others are expected to be named as global coordinators. Some of the banks are tentatively valuing the company 21 trillion dollars. And its could be finalized this week. Chinas mongolia region has admitted inflating key Economic Data. Its the latest blow to a campaign to improve the quality of statistics by beijing. Down 40 , output was and physical output fiscal output was down 26 from what was originally reported. Taiwans minister has appointed me to questioning in an unusual fashion, directing questions to a cardboard cutout. He said if there were questions should direct it to this guy. He is trying to exercise to excise journalists who question his government. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im paul allen. This is bloomberg. Haidi thanks so much for that. This is the session where we have looked at length, samsung earnings. At the end of the day you have to question how much of it is an fx story, we saw not intervention but jawboning from south korean authorities yesterday, its not the longest streak for currencies. Reduction shaking dollaryenhy and trading. Samsung,going back to is it an fx story . We should find out when other south Korean Companies to reporting. Its a bit of a test for samsung and beyond. Records for the s p 500 again overnight. Every trading day this year has had one thus far. Currencies rate and bond space and look at what is going on with japan. Mentioned,t haidi the boj pulling back stimulus, we saw the price and japanese stocks. All Industry Groups mostly gaining ground with real estate and tech stocks leading the rise. Japanese bulls perhaps finding some solace from the wage data, showing wages grew for a fourth straight month, although it looks like a temporary boost angst to winter bonuses. We look at septa some sectors, auto sales were under pressure. Honda among the decliners. Nissan is an outliner. Outlier. , it lost the most in which. Cuts, making the first cut for the First Time Since december 2016, its pushing up a steepening of the yield curve, you can see that ick up. That t last look at Broader Market moves of know, you have the taiex snapping in a day rally even after taiwan reported record export growth in december, but the taiwanese dollar is powering ahead for a fifth straight session, trading at a november 2013 high. Forwhere, iv shares are up the fifth day. The aussie dollar beating estimates. The hong kong dollar is softer for a six session. Is resuming and kening track as gullible global rates spike compared to the u. S. There was a pop in the yen following the boj is action. Haidi thank you so much. Lots of action and fx land today. Also crypto, lets check in on bitcoin. This is what is currently trading out after resuming its slump in the new year. A terrible end to the year after what had been a phenomenal rally up. 10 decline over the past two days for bitcoin. About coming amid a broader selloff in the crypto space, regulators stepping up. Also the move by china to limit activity by crypto miners in terms of how they use it. Lets get to our macro strategist. Mark, is it an extension of the cryptok that bitcoin or bears have warned us about . Mark absolutely. Beforerote about christmas, there was an expectation of a pullback in january, there has been a pullback every january for the last three years. It seems to perceive the chinese new year, when the Chinese Market dominated bitcoin, and they cashed out ahead of new year. We have seen the rocket shift away from chinese the nomination, but credit card bills come due in january from christmas. There was a pullback, it is a market dominated, the marginal buyer is the retail investor, is being squeezed. Its the usual volatility for bitcoin. Its normally a nonsensical asset, not really a currency, it will continue to have this volatility. It might go 50 higher tomorrow or 15 lower and it doesnt really matter too much. Rishaad what about samsung . How was that affecting sentiment, if at all . Mark samsung did miss on earnings this morning, and it is down about 2 at the moment today, but cosby is roughly flat, and overall ignoring this. Our Equities Team are in the stands that overall, this market probably can move on from the samsung story. It looks like the price action at the moment in the market is that overall, there is a little risk aversion generally. The market and of the year very euphoric, we might get a little bit of a pullback. In some of the with that, were seeing things like eurodollar, that pullback as well. Theall, its unlikely slightly disappointing samsung earnings will derail the wider bull market story. It will take something much more significant than an earnings miss even from a bellwether name like samsung. Rishaad thank you very much for that. You can find out more about what mark has been talking about and the rest of the days trading you can follow on our markets live blog. You can get a market run down in one click, also commentary and analysis from expert editors. You can find out what is affecting your investments right now. As we were talking about samsung, lets get more on this. Our senior tech analyst joins us now. What are the likely reasons behind this operating profit miss . As we all know, we talk about weakness, it hurts samsung, they generated lots of profits from components and the u. S. Dollar, and most of the production is in south korea. It hurt with the currency movement. At the same time, samsung had a very strong year. It has to be more generous in terms of employee incentives. They probably had some year end bonus and compensation for employees. That also hurt profits. In terms of memory profit, we dont think memory profits declined much, in fact a continues to be the biggest growth driver. Derivedmind, samsung ,lmost two thirds of profits and it continues to be very strong. Rishaad this is a tough question, sure you wont know the answer but i have to ask. Has a samsungs profit peaked . Anthea we dont think so. [laughter] it really depends on the currency move. It is hard to forecast. We dont think so. The fact is, supply is increasing this year, but the real impact wont come until later this year. Demand remains strong. Mobile maybe the well factor. Before we hear from samsung in a few weeks during the earnings call, we just believe what management has said, the yuan remains strong, and samsung calls a wildcard, they can decide on how much they allocate chips. New markett think thats the the market would probably consolidate for a moment but it wont be that disruptive. Not like the old days. Haidi there are ever more rising concerns when it comes to the memory market. Looking at a down cycle now. What is bloombergs outlook . Ramea we believe the market will hold stronger for longer. There are lots of uncertainties and new complications, especially on the acquisition intelligence. It becomes more difficult to make a forecast on the growth. Even though prices were coming term, the price decline, no one can have a very strong call on it. Once the companies migrate to new technology, they can cut costs, so profit impact might not be as bad. Haidi thank you so much for that. We will have to look at some of the other korean earnings as they come through a look at the to look at that. Samsung will certainly be one of the worst hit. Coming up, is it time the fed rethinks its 2 inflation target . We will be posing the question to a harvard economics professor laureate next. This is bloomberg. This is bloomberg. Haidi this is Bloomberg Markets asia. Rishaad we are looking at the latest is this flash headlines. Has stopped fundraising through assetbacked. Company has not sold any abs since early december, an abrupt shift after issuing a record 37 billion worth last year. Announced they will require micro lenders on their balance sheet. Haidi a chinese textile producer is emerging as a leading bidder for Luxury Leather Goods maker bali. Bally. Revealingbally was options to focus on its food and beverage business. Apple says it has always looked at the children. The iphone maker was asked to help curb smartphone addiction. The California State Teachers Association wrote that apple needs more choices and tools. The Teachers Retirement Association controls many apple shares. Should the fed keep its 2 inflation target . The atlanta fed president is the latest cooing with the doves. Lets get back to shanghai, where Tom Mackenzie is stepping by with our next guest, probably better put better placed than most to answer this question. Tom yes. A Nobel Laureate professor from harvard university. We are talking in the studio about the fed dilemma around inflation, if you can call it a dilemma, a debate about whether to lose the 10 target 2 target. We have numbers coming out later this week, what do you see say about the disconnect between growth and soft inflation . Strongave soft growth as far as outputs, but not in wages. My view is that as long as wages are not growing and prices are the pressure to raise Interest Rates seems muted fed willand i hope the appreciate that argument and take its time with Interest Rate hikes. Tom because they factored in three potentialyou would say hold fire for the moment . Eric i would. There is essentially no sign of inflation at the moment. Are about to be released, they might show otherwise, but assuming they dont, i would say dont worry so much about the price stability side of the fed date youd concentrate mandate. Concentrate on doing something for workers in making sure more of them are employed and making sure their wages rise. Raising Interest Rates is not good for workers. Tom should they consider dropping the 2 target on inflation . Is a i think the 2 target good one. Tom a lot of your research is for globalization and also inequality. Has there been any progress . You talked a few years ago about the need to better educate unskilled workers, that was a solution for tackling inequality. Has there been any progress in the u. S. Or other countries on this . Eric im afraid that in the u. S. There has essentially been no progress. It has been discussed. Politicians like Bernie Sanders part of a important political campaign, that it has not translated into practice in the u. S. , and in fact, the cutst tax act, the tax that were just enacted works against solving inequality. Thes likely to aggravate inequality situation in the u. S. There are other countries which have approached the inequality problem were seriously. Brazil, for example, introduced an additional Cash Transfer which has had some success in reducing their very high inequality rates. Tom what are the potential applications in inequality . Is this a top priority . Is this something that keeps you up at night . Eric well, i think it is important not just because it might keep me up at night but because social stability depends on it. Look at what happens in the American Election in 2016. A candidate who promised to take care of the little guy, the worker who was left behind by globalization, mechanization, was elected. But he hasnt done anything about it so far. In fact, most of his policy has worked against the little guy. For social good harmony in the u. S. It is likely to make things worse. And i think that is a very good reason to stay up at night worrying about the future of the country. Tom you have also worked and you are working on the clinical mechanics of systems, the u. S. System. Aberration trump an or is this a more fundamental shift, and what systems could improve the u. S. Political system in your view . Eric i think, speaking as a cautious optimist, that donald trump is an aberration. That is, he came to office because a very large number of ignored by so badly , but hetical mainstream hasnt delivered on Campaign Promises and i think that will be his undoing in the end. And i suspect that in the future, voters are going to want to see more concrete policy before they are willing to take a bet on someone like donald trump. Trumpt too worried about continuing into the indefinite future, but at the same time, i think the American Election system itself could use some improvement. The reason he got the republican nomination was because of a system called plurality rule. Itrepublican primaries, allowed trump to emerge as an outsider when all of the mainstream candidates cancel each other out under this plurality rule. Every voter votes for a single candidate and the candidate who gets the most votes, even if it is well short of the majority, wins. Thats what happened. But anyone of the major candidates he defeated, marco rubio, ted cruz, john kasich, probably would have won had a been a twoman race. But there was no way for voters to say that. I propose that voters be allowed to rank candidates, and you can tell from rankings who the most popular candidate really is. Tom thank you very much. Nobel laureate and professor of economics at harvard university, ws on some of the little political changes in the u. S. And concerns around inequality and what should happen around inflation. Rate hikes the fed if inflation remains a soft is his due. We will have another conversation with another Nobel Laureate in a little under one hour. Rishaad thank you, Tom Mackenzie there in shanghai. We need to get over to vegas, we have a conference coming through from the intel chief executive, talking at the Consumer Electronics show. There he is, explaining what is going on with the impact of the security glitch, as it were, in their chips and others. This has led to what people have been talking about as a chip industry meltdown, there has been no reports of Customer Data being access. The extent will vary. He is talking about, the impact will vary according to workload. Those are the lines coming through from the ces in las vegas. This is bloomberg. Strategyis a has a new and heavy hitting partners are interested in a new concept car. We are joined by our auto our auto reporter. Toyota is calling mobility is service. What does that mean . Basically all of the legacy carmakers have this problem in that they dont want to end up being what ibm ended up being in the revolution in software, when basically ibm ended up making the box in which microsoft and other Companies Put their valueadded software. Toyota doesnt want to be just the maker of the car or the van or whatever it is and other people are going to supply the services. Toyota wants to supply the services itself, it has set up a connected ecosystem with which it wants to do that, just basically plug and play. These other companies, the partners mentioned, amazon, uber , can use the platform, and it is meant to be open so that other partners in the future could come in. Uber might want to use this for people moving, ridesharing. Amazon might want to use it for using four moving freight. Heota has the idea that could be open to any kind of usage, could be a clinic on wheels that comes to your house, issue store that pulls up at a shoe store that pulls up at your door. They will have your data to a certain extent and use it to give you a very tailored experience in terms of the shops on wheels of the future. Thats the intent. Rishaad that is kevin joining us from tokyo. We will have the big stories of the day thus far, coming up. The day thus far, coming up. 11 00 s a must almost 11 00 here. Welcome to Bloomberg Markets asia. Bailed onan stocks records as japan returns, the yen gains on the dollar. The boj scaling back on filing. When you look at the equity space, stronger currency and slower chip sales, profits for samsung below expectations. North and south korea expressed optimism as highlevel talks begin and we are live on the border with the very latest. Coming up on the show, we will be live out of south korea a few minutes from now, and talking about the latest stories. We will also be speaking with the ceo of Td Ameritrade. Stay tuned for that. Of course, we will look at the markets. It is a new day and the same story, record highs for equity markets, eating a little bit of a competition coming out of the boj and the implication it is having on dollaryen. Lets move over to sophie was an update of where we are. Move is the yen, gaining ground of have a percent against the dollar after the boj cut super long bond buying for the first time in over a year. The yen is trading near session ares while jp g yields picking up, zynga steepening of the j. D. Hell yield curve. We are seeing a bounce overnight, but giving up the gains. In the treasury space to speak appeared in at queen markets, were seeing asian stocks mostly nudging higher. The taiex is stepping in a day rally even after taiwan posted record export growth in december. Elsewhere, you see the cosby gaining ground for the fourth day in hong kong, the hang seng is rally for an 11th consecutive session. Turnedghai, the mood has more positive as Consumer Staples rise with health care and property stocks. Credit suisse has turned more cautious on the stock but it has been a solid year. David it has gone from strength to strength. Thank you so much for that update of the markets. Just to call your attention, we are obviously in one of the best arts of the year when it comes to equity markets. Have a look at the bloomberg. This tracks a 12 month sort of look across, just a snapshot of major assets from commodities to fixed incomes to equity, equity futures, a currency column. Of the todays Edition Glass is half full. When markets look this good, they are worrying. We are hearing from citi and pimco that there are several things you want to watch at the moment. Have a look at what city is saying. When the economy is doing well, its early to into the bull market but we need to pinpoint we are where we are taking on more risks as more units of capital are being deployed. He is saying a slowdown in growth, there could be worse things when you try to compared to a pickup in inflation. Pimco is saying, what Central Banks, an old story but equally important. The tide of global Monetary Policy is turning, and when the tide goes out, we will find out who is swimming in naked. We know the bull market is aging, it pays to be more careful. That is a look at markets right now, lets head over to paul allen with first word news. Paul thanks, Samsung Electronics has reported lower than expected fourthquarter profits as it loses momentum in memory chips and faces a strong yuan. There was an average analyst estimate of 15. 1 billion, profit was 14. 2 billion. Levers memory chips level off after a year of gains. Draggedp in bitcoin down smaller rivals as concerns growth regulators will grip the market. Are increasing regulation and some additional token sales were cracked down on. Bitcoin slumped as much as 15 as 15 . Pentagon says there is no indication a satellite launched aboard a spacex rocket has made it into orbit. The payload from a defense contractor was known by the codename zuma. The booster rocket performed nominally, but a congressional aide says the second stage of the rocket failed and satellite was lost. Petrochemical on fire off shanghai could explode in sync, causing an environmental disaster. The media says the body of one sailor has been found, but 31 others remain missing after the tanker collided with a book carrier on saturday. China, south korea and the u. S. Have sent vessels and planes to help with the search, and clouds are hindering the effort. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am paul allen. This is bloomberg. David thank you. Its have a look at what is happening in south korea. The bond risk at a 10 year low because of the ongoing talks. South korea said the talks are and theyand the dmz will go well. This is after tensions with the because of the Nuclear Program and donald trump threatened to respond with fire and fury. Stephen engle joins us live from the unification bridge on the south korean side. What is the latest . The latest is probably the two sides have adjourned for lunch, it is 12 00. I know the fellow media court on vacated and gone into warmer environments and having lunch. Its just me and the police officers. Just the three of us right now. And joined the bitter cold. A few clicks away down the is, are thee dmz talks. I can shed some light on what has transpired so far. The first facetoface meeting between the north and south korean delegations since the summer of 2015. We have the chief delegation head of the south korean side, mr. Cho speaking to his north korean counterpart saying but be patient and resolve issues of by one, and mr. Lee north korea said lets clear this meeting successfully. You should beid broadcasting this live because we want to show the Korean People that we are discussing. It is being simulcast back to the blue house in seoul, but not broadcast live because of the uncertain nature of the talks in what might be said. Again, this might be the first time ever, i agree with the North Koreans, broadcast it live. Thats my journalist inside me saying it. David let me just quote him in english, there are High Expectations we wish to open this meeting to the public so it can be podcast live to all koreans. Aat means we are not getting live feed from the meeting, but do we have a sense of what time you are at a lunch break, but what time will it wrap up . Stephen we dont have any idea when it will wrap up, the agenda is so wide open. The agenda basically says, we will discuss issues related to improving interkorean relations. That is pretty wide open. Top of the agenda is the possibility of the North Koreans are dissipating in the upcoming chung chang winter pyeongchang winter olympics. It is perhaps a way for the South Koreans to initiate dialogue and say we will discuss that, we are open to that. Again, the bigger issue is what else can be discussed . Are the North Koreans really suffering from sanctions that have been opposed by the United Nations and United States, the japanese, the chinese . Are they suffering and coming to the table because of the middle of the winter hardships, or is it because north korea feels they have completed many of ,heir longrange missile tests six now, including the latest one possibly with a hydrogen bomb, are they saying they have more Bargaining Power now . There are a lot of issues to discuss, but as the north korean delegation has said, we need to bypatient and go item one one. David good reporting, stay warm. Stephen engle live for us at the unification bridge on the south korean side of the dmz. Coming up, we will be joined by the 2010 recipient of the nobel prize for economics. Global talk about the outlook and implications of more tech, ai and smart machines. His thoughts coming up next from shanghai. This is bloomberg. David this is Bloomberg Markets asia. In officials have penciled three hikes this year, but the atlanta fed president says the central bank should be patient as it continues to highspeed lets get back to shanghai, our correspondent is standing by with our next guest. First question to ask him, three or four rate hikes is the assumption. Is that more or less likely . Tom thank you. I will put that question to our next guest, a noble laureate and professor of economics at London School of economics. The studio was asking about a question on the minds of many viewers, around the federal 2018,e and rate hikes in proposed three, but we have a question of a lack of inflation, soft wage growth. In terms of Monetary Policy and what you seen from the fed, is it time to rethink the way tykes given what weve seen rethink way tykes given what we have seen . The time to bek raising rates across the global economy. Seeing some inflation because of currency movements. The fundamentals of the economy are good, generally across the u. S. , europe, china, but they are not that strong we do but think there would be inflationary pressures. If i were a central banker, i would maybe listen carefully about what is going on and what carefully but not doing anything right now. Tom geopolitics is the key risk . Christopher the key is geopolitics. We have north korea and a southeast asia. We have the German Government and brexit in europe. Trump. [indiscernible] and generally it is the right environment to provide stable, longterm growth in the global. Conomy [indiscernible] see somethingont that makes me feel completely confident. Economicee any [indiscernible] that i dont see. [indiscernible] the United States is growing well, china is going hightech. If you could isolate politics from economics to would be optimistic, but unfortunately you cannot. Tom that is a big conundrum. Complacent overly because they are able to factor in, price in some geopolitical risk . Christopher its always difficult to know if markets are pricing them in or not. Know. Nt markets could be moving forward even faster. [indiscernible] test, what do you do as an investor . Am investing as much as i can in safe assets as i can. Tom for the deadline, and this is a big part of your research, automation and impact on the market. The Significant Impact automation will have on jobs and wages. Christopher it will have a big impact on jobs in the sense that many jobs will close down. We are optimistic about new jobs being created, so the challenge is how to help workers make the transition from the old jobs to the new ones. The new jobs will be in the service sector, although some will be involved in development. [indiscernible] it will require not necessarily better skills but different skills. The government has a role to play in helping in the transition of workers, income support in the transition period to more training. The bigger picture, this new technologies coming on, it might thes significant as invention of steam power, of electric power, computers. We should embrace it and make without aves ahead section of the population having to bear the adjustment costs. Tom the preparation is key for policymakers, but also on the corporate level as well. How do you how big do you think the gap is between the need to prepare for companies and governments for the significant shift you expect to see . , whatopher companies , theyompanies are doing are aware of it happening in saying they are prepared to respond, but not everyone is doing what i expect them to be doing. In the Financial Sector especially. We know that fintech is going to be big. There is a very small fraction of Financial Institutions who to actually using fintech substantial degree. They are ready, looking to cooperate with startups, develop internally our own [indiscernible] but they are doing very little. I think those who are going to move ahead fast and innovate now will be the market leaders. Tom in the Financial Sector. Christopher the Financial Sector has problems different from other sectors in that the main asset of the financial theor, when it comes to customers, because you are trusting your financial position with the money you managed to say through many to save through many years of work. Its difficult for a new company to come up with an entirely new , to, whatever it might be generate immediately the trust needed to give the company your money. Blockchain,ng like which is been out a few years. It is to working like a transitional bank. [indiscernible] you would not think immediately, i am going to stop saving. The Financial Sector is facing the stick this difficulty, how do you embrace new time,logy and at the same you get the trust from your customers . Bankfore, a traditional has the reputation and name of despite 2008. Thy Corporate Giving a seal of approval if you like on this new ithnology, if you would like to be effective, but is not something we are seeing taken place very much. Tom briefly on china, what would you say to the automation there . It is notr china, following the Development Model we know from the u. S. There are many reforms they have to make to open up the economy more, the Financial Sector needs to be reformed, even architecture. The restrictions on movements and all that. Absorbingrprises are too much. [indiscernible] and rather than focusing on those [indiscernible] they are sometimes on the very frontier of technology we are seeing take place in the united ,tates, germany or south korea now israel is moving in that direction. It is a country with much larger much longer history of development, and the problems that might make the transition to the new technology we are seeing. Tom thank you very much. Nobel laureate and professor of economics in london talking about the opportunities and risks of automation and why china should essentially focus on some of their legacy issues before harnessing too much of the focus on automation. Interesting views from the ubs Greater China conference here in shanghai. David fascinating conversation. Thank you so much. We will be fleshing out the top business stories, the china lunch break is coming up. An eightday run for the china composite. Well get to the closing numbers for the morning session, coming up. This is bloomberg. David welcome back, you are watching Bloomberg Markets asia. Samsung the big story this morning, and with preliminary numbers, the headline, a little bit of a mess when it comes to revenue and income. Lots of things to talk about with samsung, a big businessate, lots of arms. The top story, when you look at slowdown in chips and currency, we dont know what currency it is, but 7 appreciation in the south korean yuan, you will get a hit. Chart,look at the stock a simple one. Moving averages, at the top, the white line is the target price from the street. , about a oneuan million cap suggested, it has been flatlining come at you can see from about november we have seen the consolidation phase in the stock price. We are currently at about the 100 day moving average, just below that as well as where you would want to look at for your next ceiling. One thing i want to point out, fundamentals, have a look at go. S fa you want to focus on this right here. You see this number . Let me draw that for you. There we go. Samsung getsount from sales in south korea, over 80 of its sales elsewhere. Not boder yuan does well. We are entering the lunch break, a days of gains for equities. This is bloomberg. It is 11 29 in hong kong. I am paul allen with first word headlines. North and south korea expressed optimism as they begin their first highlevel meeting in two years. The talks will go well, while at the south called for patients. Patience. Sons of the founder of a Dairy Company among princes detained last week. For what arrested authorities said was an unlawful protest over the governments decision to stop paying utility bills. Another prince circulated a voice recording challenging the official account. The atlanta fed president has added his voice to dovish comments from officials concerned by low inflation and the risk of an inverted yield curve. He says his base case is 23 rate prices and unless inflation picks up. The white house says it is close to announcing a pick for the vice chair after stanley fischers departure. Oprah winfrey says she has no plans to run for u. S. President after a speech at the Golden Globes fueled rumors. After accepting the Lifetime Achievement award, she told bloomberg she does not plan to run. The speculation helped to drive up shares of Weight Watchers. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David thank you. Data point out of taiwan. Have a look at my bloomberg. Globalthis is synchronous recovery. When you look at the currency strength, shipments are strong. ,hey just had a monthly record 30 billion dollars of exports out of taiwan. Samsung, weakness and chips, we are not seeing that here at all. The other line are exports to the chinese mainland. That relationship is at its highest, 30 of taiwanese exports go to the chinese mainland. There ift the story lateompare that to the 1980s, the taiwanese economy is dependent on exports to the chinese mainland than ever before. That is a look at that. Risk take a look at assets with sophie. Stalling asrally is Energy Stocks drag on the taiex. The green light may be for taiwanese stocks, although that stronger currency dampening the mood. In thailandhe rally continues, but indonesian shares are retreating from a record after a warning that the 27 gdp growth probably did not meet target. Growth probably did not meet target. You are seeing shares in manila pick up to a fresh high. 5 ase stocks adding the afternoon session gets underway, while the yen is near a session high after the boj trimmed superlong bond buying, pushing up jgb yields. Chinese large caps rising for an eight the day with Kweichow Moutai climbing to an alltime high after saying it will boost some wise for the chinese new year. Saw gains, clocking a new record. The stocks may join the party. David my question, im looking at the kospi up five points, samsung up 1. 8 here it how is that possible 1. 8 . Otherve samsung, lg, and stocks offsetting chipmaker losses. Lg is the best performer on the regional benchmark so far today, gaining 11 , rising the most in three years after announcing plans to invest in new technology. When you look at the other side the worstctrum, performer in the region is a chinese aluminum player, headed for the worst today decline since the end of october, tracking that drop in aluminum prices. When you look at the broader hong kong session, the hang seng climbing for an 11th straight session, i. T. Shares leading the charge, Consumer Staples down 1 . This is happening while the hong kong dollar is softer. Pacific, 181 on your benchmark. , theing of the markets implications of the industry itself, Td Ameritrade looking to make inroads in the region. We are talking hong kong. Their ceo joins us right now for an exclusive interview in the studio. Why only now in hong kong . Great question. 2011 in singapore. We expanded in asia starting later than i would have liked to. I have only been with Td Ameritrade for a couple of years. We are here now. We just got our license in hong kong. There thrilled for opportunities for growth in singapore, hong kong, and hopefully later the larger chinese mainland. Known and doe well well in the retail space, china arguably the most retaildriven equity market in the world. What is the longterm dream in china and how do you get there . At this point, crawl, walk, run. What id like about our offering well established in america and have a great , a combination of high tech and right touch, fantastic technology, and a wonderful education offering, because we think it is important for clients to be comfortable in the investments they are making. , a combination ofit is a larged model. We think in asia that there is a great opportunity to take that fantastic platform and technology that everybody globally loves, but augmented that with the education, then offer that here locally to help our asian clients become more comfortable in investing in american equities. David are you looking to partner with any of these chinese internet firms . I ask you that because a lot of people want to get into the Chinese Market and have no choice but to partner. Is that a conversation with having . Absolutely. There are a couple of reasons why you would want to have that conversation. Ill not get into pacifics pacifics. It makes sense for us. We are large in america, but tiny here. There are established layers to help us into the marketplace that we can run from an partner with them. David are you hiring . If you are, what are you hiring for . Stillare, but it is small. We just got our license and our first few clients. We have high hopes and we will be hiring in the future. David you have a unique perspective of this bull market. I would imagine given where markets are at these levels that interest in the market is perhaps at an alltime high. Are investors getting more sophisticated . With us taking on more risk, are they becoming more sophisticated . What are they trading . Retail investor is getting more sophisticated. , whichives, options previously would have been 10 years ago less than 10 of our overall trade, are now 20 and 30 . Many retail clients used derivatives for Risk Mitigation or for exposure to a particular market sector. The education level of our clients is going up. The market has seen this incredible bull run, and so there are opportunities we talked about cryptocurrency. There are market highs, and everybody is looking for the next best thing. David marrying technology with the underlying business, what should we expect . That anys a trend industry is playing with, big data, Machine Learning. A fascinating trend. It is transformative, not just to our business and industry, but to any business and industry. We have been playing around with voice recognition, bots. We Just Launched Facebook Messengers ability to do a trade. I was at a dinner table in new york city with my son and we used Facebook Messenger to trade stocks. It is part oftry, our philosophy to say investing and trading can be a service that we can bring to our clients where they are, whether it be the networks they are used to using, voice response, interactivity, chatbots, Machine Learning it is coming soon to every business near you. David speaking of technology, the more you are exposed, the bigger risk to glitches. There was a glitch across a lot of platforms this time last month. What happened there . The glitches you get generally are driven by volumes. For example, we have seen in the last few days almost record levels for a few days concurrently. You dont tend to design your systems are your Staffing Levels for the people. Sometimes you get slowdowns. To have aky enough couple of redundant platforms we can move our clients to to continue to trade come or they call us and have trades there. It is a huge area for us. We want to compete on the client experience, Available Networks so clients can be concentrating. David it was a capacity issue . Generally. For example, you might roll out a brandnew feature, then when you roll it out it has changed and you say we need to roll that back, so it might slow down activity for 20 minutes or one hour, but in this day and age with social media and the desire to be active in markets, there is usually an instant reaction, but relatively small. Rules, are you directly impacted by that . Are you concerned about anything that might come to fruition . There is no direct impact. There is a minor indirect impact. The industry in america is looking at those rules and saying what is that a precursor for something that might happen in the american markets on the Analyst Coverage come but generally it has been observing the new rules that came into play. David bitcoin, you guys recently offered that when it became available on the exchanges. Has the pickup in prime and trade met your expectations . Has it petered out since those initial days . It has only been a couple of days. It is not the coin itself, but the futures. We were careful on how we decided to roll it out. We chose the one product from the cboe. It is one coin as opposed to five, so this year nominal value is more appropriate for our particular retail clients, but not only that, we only offered it to a small subset of clients. They were already the most sophisticated futures clients we capped the have level of exposure to a level where we have two fuel our way through this. There is a lot of activity and interest in cryptocurrencies generally, and this particular product is important for us to get comfortable with and make sure our clients are well educated about as there are risks. You think we need more big exchanges to come up with their own futures contract or product so we get more signposts along the way . I dont know if it is the exchanges think about it, the blockchain currency fundamentally is a transformational technology. What comes with that of course has been the bitcoin phenomenon has week form a cryptocurrency. The has come with that is spinoff of tokens, icos, other thetocurrencies, which average investor is unclear as to whether there is fundamental underlying value, but because of the, being so enamored with what luck chain can do or the skyrocketing rise in blockchain come all cryptocurrency into be getting a high degree of interest. My worry would be that we have been to this movie before. There has been that type of euphoria it did not have a happy ending. This is why we are careful that our clients are well of the risks they are taking. Take ak it will just little more time for the Retail Investors and investors generally to become aware of the risks and rewards potential and cryptocurrency. Time, butare out of appreciate you coming on the program. Ceo,ameritrade president , td established here ameritrade president , ceo, now established here in hong kong. Chinas Economic Data is challenged again as another region admits to inflating their figures. This is bloomberg. David lets get you a check of the business flash headlines. Australian deepwater port must refinance or risk a rating cut. Repay 206ort has to million due in november. It has a triple b minus credit score and stable outlook. Warns of shortterm risks if it fails to refinance your it lets get you an up date on intel, the impact of a recent security flaw will very according to the workload of user systems. The company said it had no reports so far of data being accessed. Security is job number 14 intel and our industry. Intel andone four the industry. As of now, we have not received any information that these exploits have been used to obtain Customer Data. A Chinese Group is emerging as the leading bidder for bally. Negotiationsnced and has been discussing a price of 700 million. Owner said it was refocusing options to focus on its food and beverage business. Lets take a look at another story making the rounds. , the province has admitted to inflating its key Economic Data. The region revised down its 2016 , whileial output by 40 fiscal revenue was 26 lower. Do we get more of this is the bigger question . Thats right. This will be unwelcome news for beijing, which has said a fair bit about this fake data issue. You have had xi jinping weighing in saying the scourge needs to be throttled. This will not the good news for those regulators focused on this. Inwe had a supervisory body and april in china trying to crack down on this, but the second province or region in about a 80r to come out with some big revisions and admitting to this data faking. In the northeast come out with its fake fiscal data a year ago, so from what we are hearing there could be more to come of this, and what it means for the wider economic picture is anybodys guess. , and the two regions fortunately or unfortunately these are provinces that dont have a lot of clout when it comes to the economic high in china, which speaks to them being lessdeveloped. Did they say anything, why they did it . Inner mongolia has not. Wisehas come out trickle through the state media, the Inner Mongolia story, but officials a year ago were open about it and talked about how to reportincentivized positive and strong data and how it would advance their careers to show a turnaround in some of these economies, which you to rt positive and strong said as you said are quite poor, not the industrial or tech power houses of the east and southern central china. David Inner Mongolia known for its cows, sheep, and sprawling grasslands. Thank you so much. Howng up, speaking of cows, can a flatulence could help you save money. That is coming up next. This is bloomberg. Cow farts may have a new send. A company is using satellites to detect methane emissions. Correspondent our from singapore with this fascinating story. Help me draw the line between these emissions from the backside of cows and the price of my stake. How does that work . The company is looking to use satellite data to track methane emissions. One of the biggest is cows. They create methane when they digest food and expel it. A place which has shelters over it so you cannot see the cows, but this technology promises to detect how many are there from calculating methane in missions. You can look at the supply and demand of cattle herds globally in this new, different way and get a heads up on where prices might be moving. Is one of thep better words to describe it. A lot of this comes down to the technology, advances in satellites for example, helping Companies Like bluefield develop their ability to do this, right . Absolutely. The satellite industry is going through exciting changes. They are developing cheaper, smaller satellites giving companies more to do with them. Up theseputting microsatellites and take pictures of the world and update them more frequently than a private company used to be able to do because they are able to do it for tens of millions of dollars instead of hundreds of millions of dollars. David that is all the hot air , but whatstory other ways are satellites being used by traders . Oriole traders for instance are using the satellite images to measure how much oil traders for instance are using satellite images to measure how much oil is stored. You can use satellite data to figure out how many cars are in a parking lot on a given day and estimates sales from that. Become moreellites adapted and people use the data, there are no limits to what they might be able to tell us. David thank you so much. , thecinating story corelation, positive duration positive korea and corelation between cal flatulence and your money cow flatulence and your monday. Your money. We go, trading flat, valorrupee, a little unchanged dollarrupee, a little unchanged. If you are an indian bowl, you l,ll love this chart bul you will love this chart. Lots of over exuberance. Investorsretail coming back into the market last year. This is the expansion from 20 of , thisthe peak in 2015 correction, and a new leg up. From current levels, that is a little less than 10 . Bloomberg markets middle east is coming up next. This is bloomberg. Yousef the inflation situation, the latest fed official to get as others say it is time to reassess the 2 target. North and south korea hold highlevel talks, sounding optimistic. We are live at the border with the latest. Samsung struggles, slowing demand for memory chips. Saudi arabias transf