Transcripts For BLOOMBERG Bloomberg Markets Asia 20161205

Shenzhen link opens today. Gone . Is pokemon its rival leaving pokemon in the dust. Rishaad the currency markets, that referendum, italians voting no to thengly, 59 , constitutional changes. Haidi we were expecting a tighter race, but a decisive outcome came in quickly. Take a look at my bloomberg. This shows the plunge in the euro to lows we have not seen since march 2015. This poses a lot of questions in terms of regional stability, italys banks. Haidi that is one of the biggest concerns, eight thanks perhaps in danger, facing problems with balance sheets, haidi failing stress tests as well. Thats right. Not seeing Much Movement when it comes to dollaryen. Where is the safe haven demand . Rishaad gold. Anyway, the open in singapore, taiwan, and kuala lumpur coming online. It up, the to set demand for havens, coming down to the fact how the market was position coming into this week. The governor of the central bank scheduled to speak. That being said, money coming into u. S. Bonds, that is your yield right there. Gold coming off its highs,. 1 higher at the moment. Equity markets doing this, three markets opening up, so a bid for the three. That said, major markets, these are levels where we have been training for the most part of this morning, volumes picking up as well. This over lining is things have stabilized following breaking news coming in early this zealand, the only market open. Initially, a steep selloff when markets opened. Up, thensts ought quickly reversed itself, and now the yen is weaker. Have a look at eurodollar, a twoyear chart. Int to put it into context the greater scheme of things, thats about 105 right there, a twoyear low march 2015, thats a 20 month low. We are below that. You look at how things are shaping up into next year, a lot italy 2017, the netherlands, germany, so on and so forth. There is a lot of risk on the table for euro long investors. If wet be surprising falter those levels, so we will follow everything happening here at the moment. A risk off monday. Haidi thank you for that. A big warning. Rishaad right, yeah, lets get to first word news headlines. More political headlines, john key says he will stand down as leader and as a lawmaker before next years elections. After eight years, he says he is not a career politician and time for someone else to lead the National Party. Key said he expects the party to win and form the next government. He has backed bill angus to be his successor. A green party back left this will be the next president of austria, ending a run of rightwing antiimmigrant victories around the world. Must 52 of the vote and later said elections can be won a proeuropean platform. The results defined Media Projections of a tight race and an acrimonious election the polarized austria. Donald trump has used to twitter to criticize china after backlash over his phone call with taiwans president. The president elect tweeted that aging did not ask the u. S. For permission to devalue its currency or build up its military presence in the south china sea. Broke years of diplomatic protocol by speaking with tsai ingwen. Hsbc to raise hiring in the pearl delta. Hsbc launches a credit card business and china on monday. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Haidi thank you for that. The a tying Prime Minister matteo renzi a it set to resign after losing his referendum on constitutional reform. Falling to its lowest level since 2015. Bring inright, lets our rome bureau chief. What happened here . It was meant to be on a knife edge, but the no campaign seem to have convinced it time electorate . Thats right. People were frustrated. There are a lot of issues in italy, part read this global ,ovement for change, populism partly issues in italy, unemployment, frustration, the economy is not growing, and matteo renzi made it about himself and said he would resign, and people overwhelmingly turned out to vote. It was high turnout, and people voted against him. Haidi what happens from here . Some now he needs to go today to see the president. The president will have to appoint a Prime Minister, who will have to form a government, so there is a lot of instability in italy. This new government will have to vote on electoral law before elections, so we are looking at months of uncertainty, somewhat confusion, and the markets are not happy with that, and they are showing it. Rishaad what does this actually mean for italy and the tying banks ca italian banks . There is a read through here for them, isnt there . Of all, yes, because this uncertainty, the concern is investors are going to be negative about anything that concerns italy, and right now the big problem for italy is the directso it is not a link, but of course Investor Confidence is extremely important right now for the italian banks. They needed to save the entire system, and there is concern that wont be there. Naturally the president will try to form a stable government that can carry italy through to the next elections and then onwards. Italy has had many governments, so there is a chance it might work out. Haidi thank you so much for that from rome. Home, after months of anticipation, the Exchange Link between hong kong and shenzhen is set to open. Rishaad it should give Foreign Investors direct access to more than 800 chinese stocks. We are at the Hong Kong Stock Exchange. Happening right now, i cant talk loudly because the ceo of the Hong Kong Exchange is introducing all the dignitaries as they arent launching this longawaited Hong Kongshenzhen stock connect in a matter of minutes. The hong kong chief executive will be speaking. Thet now, were getting chairman of the Hong Kong Stock Exchange speaking and introducing what is going to be launched in a matter of minutes, or 25 minutes from now. Again, this is the further integration of hong kong and mainland markets. Shanghaihong the kong connect launch. This is hopefully introducing Institutional Investors to the new economy in china, consumer related to high, Health Care Stocks, about 40 listed in the shenzhen are consumer related. Further hoping to professionalize the equity markets in china with more foreign Institutional Investors who perhaps have started to shy staterom those loaded owned enterprises, the old economy stocks in shanghai, so i will toss it back to you because we will get some dignitaries talking in just a few minutes, and a few of my colleagues in the press corps are giving me the evil eye as im speaking over the dignitaries. Haidi we will let you go so you dont get into more trouble there. We will be catching up with him later. Still to come rishaad the long wait for the shenzhenhong kong connect, we find out what investors should be looking for. Goldman sachs on how the outcome on asia will change with the italian referendum. This is bloomberg. Rishaad you are back with Bloomberg Markets asia the latest business flash headlines, hong kongs richest man making a bid to boost his power assets. Li kashing offering for duet group, 28 premium. The offer has pushed shares up to the highest since 2008. Haidi president obama has blocked the sale of aixtron to a chinese country, the only third time in the quarter century that the white house has rejected a buyer as a risk to National Security. Recommendation should be upheld and should not go through. Hasaad indias adani received approval for a coal mine. The project faced opposition from environmentalists. To meetrman expected with Malcolm Turnbull to discuss funding. Asian stocks have dropped after the result of the of tying in referendum. He willenzi saying resign, falling on his sword. This was unexpected in terms of how quickly we have that outcome. Rishaad lets get Market Reaction to that. What is the readthrough on this . The nos a clear win for campaign, a broad coalition, some of them not creating as much Economic Confidence as a continuation of Matteo Renzis policies. Broadly thinking, there are a couple of readthroughs that we can look at. Obviously, developments have to unfold, and no doubt we will be updating our viewers. Fallve seen the euro significantly, bouncing now. This is something we have been expecting. Tohave a forecast of parity the dollar, so direction is not a particular surprise. Vote had beene no expected, perhaps not 60 , so i dont think it will be as much of our reaction compared to brexit or Donald Trumps victory in the United States. Thirdly, to your point, this does raise concerns about the growth path for italy, and given that one of the key themes markets are trading, reflation, does this mean perhaps italian growth and more broadly European Growth are looking less sanguine compared to a week ago . That is something to consider. Haidi also been cast doubts not just over italys Banking Sector , some looking uncertain at this point, but the broader financial trade . For sure. The reflation trade has been financials, commodities, certainly out of the higheryielding parts of the market. I think that is still very much in force in the u. S. , but it does raise questions in europe. Rishaad 6. 88, we are getting the yuan fixing, weakening again, partly down to the dollar story as the euro falls. We are seeing a pullback in the yuan, and now going up. We think things will continue to weaken for the chinese renminbi, so we still have 6 , and that is for chinaspecific reasons. There may be flowthrough from the european news, but broadly the renminbi direction will be a product of chinese fundamentals. About the concern outflows is why do downgraded china to market weight. Rishaad equities. Thats right. The view there is that chinas policy incrementally has tightened, and that in some ways is them taking a victory lap for having achieved the minimum threshold of 6. 5 growth. At sixk it will come in point 7 . Our read from policymakers in beijing with having achieved the over threshold growth, and as a consequence of that frothy nets in the property market, there is incremental tightening and policy. De think that shoul feedthrough ateneo last 5. 5 rate. So the market having done well, and with the sequential momentum beginning to moderate, that means the outlook for chinese equities we think in the First Quarter will not be as strong as some other parts of the region. Rishaad moving to where you are positive and accentuating the positive, india, australia, philippines, indonesia . You are overweight in 2017 on those. You mentioned the capital outflows, theres a ton of money come out of it. This is true. The philippines, we should not obsess too much because it is 1 of the overall region, the smallest of the bunch, but the reason why we continue to have a favorable view there is that the market has come off 21 from the highs earlier this year, so we think concerns over the administration have been priced in. Number two, we think the growth story is still powerful there. Rishaad 7. 1 that are than expected growth rate, everyone thinking you would be a terrible number. Absolutely, and we think that willg gdp Growth Profile flowthrough into earnings growth, so the market is not super cheap, but has come back a fair amount, so we felt the risk reward is good. Haidi your 2017 outlook ,trategy a, reflationary trade that is the trump trade essentially. Is the risk we are building into this narrative a lot of what we dont know . It is a great question. Theuld say it is fueled by trump victory, but it is not wholly reliant on it. In other words, there was evidence showing up in the broader global macroeconomic numbers of an improvement in growth, the cyclical upturn was already in the numbers, and i think the election of donald trump has accelerated that, certainly in the United States given plans for fiscal stimulus and so forth. Reflation was taking place and fromotten an additional Donald Trumps victory. In the last 23 weeks, we have seen a concerted move in the socalled rotation trade away from defensive yield areas in tech and into financials and commodities. That looks in the shortterm overextended. Could it pullback . Yes. Is there more to go in the trade . Yes. Why . Because there is a lot of money around the world that has not had a chance to reposition to be focused on growth. That does not happen in two weeks, so there is more to go in that asset reallocation trade. Rishaad does the reflation trade reflect the thought that gecre leaving the 2008 behind us . Yes, to a degree, but there are caveats. In the United States rishaad im not talking about europe. Globally, talking europe has long way to go in terms of reconstituting growth and the financial sector. Interestequence of low rates from qe, global debt levels are at the highest level now. The interest burden is still low because rates are low, but the risk is that as rates reprice upwards, that could be a price to pay for quantitative easing, so i think there are still some lingering aftereffects from the gen. Rishaad great to see you as ever. Next, new zealands Prime Minister steps down in a surprise announcement. The reaction just ahead. This is bloomberg. Rishaad you are back with Bloomberg Markets asia the new Zealand Dollar has fallen after the Prime Minister announced his surprise resignation a short time ago. To paul lets get over allen. John key, why is he quitting here . He gave a number of reasons, family reasons being one of them, saying it is time to step back and spend more time at home, but he also says he has nothing left in the tank after eight years. A good leader knows when to go, and it is time to go. He was the former head of Global Exchange for Merrill Lynch. He has made new zealands economy one of the fastestgrowing in the world and saw the country through the financial crisis and some devastating earthquakes as well. The new Zealand Dollar sank on the news, everybody caught by surprise by this. One of his Coalition Partners was interviewed and said he historic fourth term would be john keys goal, nobody has done that since the 1960s, but instead, he has gone out on his own terms and on top. Haidi who is likely to take over from john key . What is likely to happen from here . Bill englishuty will take over in the interim. John key has anointed him as his preferred successor. It will be interesting to see whether they listen to john key or go for a generational change, bill english led the party to one of its worst defeats in 2012 against what was then an unbeatable helen clark, but it certainly puts next years. Lection well into play with john t gone, all bets are off, and the Opposition Labor Party will be looking forward to the end of 2017. Minutes away a few from the start of trading in hong kong and shanghai. Rishaad just looking at the futures, the market going in opposite directions. In play,he euro retreating with riskier assets, all benefiting the u. S. Dollar. It is all about that Hong Kongshenzhen connect as well today. Haidi this is Bloomberg Markets asia i am haidi lun. Ishaad i am Rishaad Salamat we are discussing this Hong Kongshenzhen stock connect. New economy, the isnt it . Haidi thats right. We are looking at live pictures of the Opening Ceremony and shenzhen, a longawaited connect on the back of the shanghaihong kong connect. This is expected to give back rejuvenation when it comes to smallcap stocks. Today, the allocation northbound and southbound at 13 billion. Nearlythbound quota is fulfilled, both of them at 99. 8 , southbound 99 point 6 , so the daily quota pretty much all full up on the day of trading for the shenzhenhong kong connect. Seeingmoore unless interest in that northbound flow, being able to tap into chinas nasdaq, highgrowth Companies Listed intention. Rishaad right lets find out more as they get ready to ring or hit that kong, or bank the gong. [applause] haidi there you have it. Ringingp and ceremony in the launch of the shenzhenhong kong stock connect. Youre looking at live pictures of that ceremony underway in shenzhen. Again, 90 9 of the northbound and southbound allocation taken up at the moment. That is what we have. Lets tell you about what analysts are saying. This gives Foreign Investors direct access to more than 800 adding 100 smaller hong kong equities to the of traders inlist the mainland. Makes if you look at what up the shenzhen exchange, you see why the interest would be in that northbound flow. Tech stocks,ed by nonstate owned enterprises, highgrowth, consumer, health care tech, the new economy represented by the shenzhen exchange. Rishaad right, lets find out more. Weve been looking at the broader picture as well and the broader sentiment. Have a look, yeah, at markets right now. In thenk not happening most ideal of circumstances given what has happened over the weekend and the risk of puts on the table for investors. ,he shanghai composite down hang seng flat, a lot of markets lows,t trading at session like australia. Singapore has just turned red. Malaysia, philippines, just about flat at the moment. , not aed about the yuan big surprise from the fixing. That is for the offshore renminbi. And the yentronger even stronger, that has reversed. Have a look at the benchmark, chinaen, and also a index. Have a look at these two benchmarks. Those of the two you want to watch closely. The top one is the main index , thehenzhen, and china techheavy sector there, down. 9 . Have a look at this. ,e also have, there we go electric appliances, and of course the biggest Property Developer in china, not good. Underwater. Greeunderwater for electric appliances. To get a few months warmed up for the shanghaihong kong connect, so perhaps it will take some time given less than ideal conditions. Haidi thank you for that. Rishaad lets get to first word news headlines. Rosalind the of tiny and Prime Minister matteo renzi is to resign after losing his referendum on constitutional reform. The euro fell to the lowest since march 2015. The no vote had 60 support. The antiestablishment five star party leader was seen as the big winner. Donald trump has use twitter to renew criticism of china after backlash over his phone call with taiwans president. The u. S. President elect said beijing did not ask the u. S. For permission to do value its currency or build up its military presence in the south china sea. Beijing complained after trump flouted diplomatic protocol by speaking directly with tsai ingwen. A tinys mobile app maker plans to offer shares and its ipo. Thates tell bloomberg there have been an agreement on cornerstone investors. Potentially raising 710 million u. S. Dollars, hong kongs biggest tech listing in him was a decade. With the bankack and china, shanghai of authorities have warned the young and elderly to stay indoors with conditions described as unhealthy. The u. S. Consul ands reading of air quality was a fraction under 200 at dawn, eight time the internationally agreed danger level. Rated as air as also unhealthy today, although no quite as bad as shanghai. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Thanks for that. Haidi the stock link connect between hong kong and shenzhen giving Foreign Investors direct access to more than 800 chinese stocks. Rishaad lets discuss which sectors will see the most interest. To shanghaiying later. Take your gas mask with you. Haidi Health Care Stocks perhaps. Some Technology Stocks and shenzhen will be interesting now. We are all excited. Today the connect will be adding to the shanghai connect, so now Global Investors can fully ask them through the connect. Haidi i want to have a look into my bloomberg, this chart shows you the new economy versus the old economy, small midcap soes. Ess it is also more prone to speculative behavior. Is that something investors should be looking out for . Foreignnk from a investor perspective, if we look at the next years growth or eps expectations, we are expecting on average shenzhen will grow ,0 versus shanghai about flat so that drives the momentum for the stocks, but definitely there forore small and midcap the investor. Stocks in hong kong versus many more than that and shenzhen, so it is giving the foreign investor something. It is all about the foreign investor, not the retail mainland investor, right . It all depends. If you look at the southbound into hong kong, it has been significant, so we are expecting 100 billion renminbi money coming into hong kong through the connect in the next 12 months. This leads us to the next question, which is msci. Help with mscio inclusion for chinas indices and equities . Definitely. China should be included sooner rather than later. Haidi fourth time lucky . Came back from a u. S. Marketing trip, and Global Investors do have concern over stock suspension and such, but with the connect scheme and more accessibility for the interNational Investor, i think they make a strong case for msci inclusion in the coming june. Haidi i think we are expecting the northbound flow will be taken up more quickly. Thats what happened when the shanghaihong kong connect open. This particular chart, which shows you there is potential he some room to go when you look at small caps listed in hong kong. We are seeing the small cap stocks lagging. Is that potentially an area of interest . If youre looking at shares listed in hong kong in terms of that southbound flow of a what sectors are companies would you see most value in . I tend to agree with you. There are a lot of stock connect based funds being launched in china, anticipating the shenzhen connect, so i would expect mutual funds, domestic hedge funds will look to the small cap stocks in hong kong to deliver results in the near term, including sovereign wealth funds, pensions, and High Net Worth investor base, but at the ,ame time, for the northbound they emphasized the shenzhen connect and now they can fully access the markets, which give them the potential to play their strategy completely. Rishaad thank you very much indeed. Haidi donald trump has again taken to social media, this time on china, hitting back at criticism of his decision to take a phone call from the president of taiwan. What has the president been tweaking . Was it a faux pas or just naivete . Not sure anyone will be able to answer that question. Hes hitting them over currency, taxes, imports, and the south china sea. Callfollows of the phone with the president of taiwan, breaking four decades of diplomatic protocol and suggests that trump was stunned by criticism domestically and from china over that call. It begs the question, is this more bellicose rhetoric or does this signal that he will indeed take a tougher line on china . From the taiwanese perspective, this phone call was seen worth taking from tsai ingwens perspective, greater recognition of taiwan, even with pushback from china, which we have seen, though more muted than people had expected. s has fallen and the economy is expected to grow less than 2 next year, so she will be hoping to get domestic popularity boost from this, at least in the shortterm. Haidi weve had reaction from china come from the Foreign Ministry. What sort of tone was that struck in . Minister saying this was a trick played by taiwan, but keeping the focus on u. S. , rather than the apparently trying not to escalate this further. We did hear stronger lines from state leaders, saying taiwan would pay the price if it changed the status quote. We know there are a number of diplomatic, military, and economic levers that china can pull on taiwan if it wants to. Things like Chinese Tourists to tie one has decreased tsai ingwen since the election of president , the head of a proindependent party. China has cut off official communication. Flights start military in the taiwan straits. It could start to pressure some of the 23 agreements between china and taiwan on airline flights, investment, and could start to pull back on the 22 nations that recognize taiwan to grammatically. Haidi Tom Mackenzie wrapping up those lines from donald trump. Rishaad up next, the truth is out there. We will speak to the Technology Investor putting 100 million in the search for alien life. Rishaad the quick check of the latest business flash headlines. The crackdownsays on black money is sparking an investigation into two declarations totaling more than 31 billion, the family of four oning it has evaded taxes 29 billion, of fortune that would make them wealthier than indias richest man. Income,on of illegal both recommendations were rejected. Firm a french investment is the front runner said to be close to a deal for pioneer, valued at at 3. 5 billion. Beneer overseas it would its biggest acquisition and propel it into the top rank of Money Managers. Rishaad one of scandinavias biggest Asset Managers saying i lack of confidence in europe, but growing faith in the u. S. It is a Finnish Pension Fund that oversees 38 billion and plans to and just its investments, no longer under weight the United States, the reallocation affects real assets and equities to a lesser degree. Haidi Disneys Moana led the north American Box Office again. The tail generated just over 28 million in its second week, beating estimates by 3 million. Returning films dominated a lackluster weekend as fans await the new star wars picture on december 16. Incarnation was the only new release to break into the top 10. Right, 52. 4 and october, the index coming in stronger. The caixin number, coming on the back of the pmis we had last week, which suggested the older economy was gaining more momentum than the newer economy. Expansion, ok, lets have a look at gaming. The aim is to Save Humanity from disaster. I think we have visited that fame quite often. Haidi no big deal. The surprise is what a profit driver this game has been come. Has become. Has tradedkemon go such a buzz, but it seems this is quietly overshadowing it. Is not available in all markets. In japan, 2015, but in china as of thed near the top mobile apps rankings for revenue in japan. It has been downloaded more than 7 million times. Sony says it is doing well in china as well. Essentially this game is based , andtv series called fate players can travel back in time and become other characters to save the planet. Works like many games, the they sick version is free, and then you can pay to add characters. This game is driving some operating profits for sony. Under the radar and blowing pokemon go out of the water. Plenty more ahead. Rishaad the implications of this a tying referendum, austrian referendum going the other direction, and indeed politics set the stage. The hongbig day for kongshenzhen stock connect, finally launching today. This is bloomberg. Haidi silicon valleys top executives are celebrating the achievements in physics, science, and mathematics. One of the presenters is the russian billionaire yuri milner. Emily chang is standing by. Thank you so much. Thank you for joining us. You are a longterm investor and i know these prices is something you started with Mark Zuckerberg and sergey brin to empower scientists. What have you learned about the best way to encourage scientific breakthrough versus technological breakthrough . This prize really has another aspect to it, which is to reach out to the whole world. To emphasize that science is important. Fundamental science is very fragile and requires the supports of governments around the world. Without public recognition and understanding of what the scientists are doing, it is hard to count on continuation of the support. What is the single most exciting breakthrough we are talking about tonight . The special prize this year went to the collaboration of 1000 people for the discovery of gravitational waves. Us from twocome to black holes that collided of billion years ago, and it is s incredible we developed technologies to detect this. This verifies Albert Einstein 100 years ago. You are fascinated with space, launching by 100 million project to find extraterrestrial life. What progress have you made so far . I think we have a decent chance in our lifetime. The reason is that there are 20 billion planets like ours in our galaxy, and this 20 billion should be multiplied by the number of galaxies in the thatrse, so the chances all the opportunities only created one civilization are pretty minimal, so i think eventually we will find out somebody is out there, and maybe they are one billion years ahead of us, and then it will really be exciting. World,travel around the 40 of your investments are in china. Are you concerned this kind of innovation and funding for this kind of innovation and technological breakthrough might suffer under the new u. S. Administration . Days, but iy early think what is happening is an amazing global macro trend, which is empowering all of us with technology and software. His trend is overwhelming it did not start yesterday. 2the last 10 years, trillion worth of value created around the world, two thirds in the u. S. , 25 in china, then the rest and the rest of the world. So my prediction is that in the next 1020 years, this trend will continue and many more trillions of dollars will be created in this exciting space, so i am not good at shortterm predictions, what will happen next year, but i would bet that in the next 1020 years, we will coming out ofalue places like silicon valley, beijing, tel aviv, london, and bangalore. Do you have any concerns about the election of donald trump, whether it is ripping up the playbook, taking a call from taiwan, or potentially befriending vladimir putin, given that you are from russia. Bestain, i am not the scholar to find on this. I have really been focusing on technology around the world, and that is what drives me. There as opportunity, im trying to spend a lot of time there. Again, you know, the shortterm prediction is very hard for me to judge. Yuri milner, we have to leave it there. Thank you for joining us. Back to you. Rishaad thank you, emily. Next, growing old and growing the japanese economy. Haidi its a must 10 00 8 00 0 p. M. In singapore. Im haidi lun. Rishaad i am Rishaad Salamat. This is Bloomberg Markets asia. Haidi typical of people moves slides ass, the euro matteo renzi loses his referendum. Rishaad stocks across the asiapacific taking a hit as john key says he will step down. Haidi the longawaited shenzhen stock link is open. Rishaad new tensions over taiwan, beijing announcing trump call is at the medic trick. It haswhat a morning been for the markets to kick off the week, the euro plunging to the lowest since march 20 15, and asian markets feeling jitters as we get that italian referendum result. Rishaad just coming back a. Ittle bit, but sterling there thats what we have at the moment. Confidence lack of and read across my screen except for singapore. Haidi trading in indonesia getting underway. A moment,to david and but what is interesting is were not seeing a lot of money coming into traditional safe havens. Falling, theties broader concern we will get political instability and what it means for the financial sector. Rishaad you would think gold by 1. 70. P, but only so thats what we have so far. Lets find out whether we have any other particularly interesting moves out there. Taking a look at this is david. David an interesting session. A lot of the, elections in europe back on the table. Playingook at how it is out across equity markets. I will talk about china at the moment. Today is the start date for the stock connect in shenzhen. In focus given Political Developments there, john key saying he will not stand for reelection. Commodities, when you look at contracts and shanghai, some upside there, but two stories i want to focus on. When you look at the Shenzhen Hong Kong stock connect, this is a function of the terminal. You can shift between the shanghai and shenzhen kenexa with hong kong. If you flip it to shenzhen, what you get is this, how much of the quota has been used up. We are 30 minutes into the trading session, start at about 100. 30 minutes in, barely used up, 94 northbound. Frombound, mining coming shenzhen and to hong kong, 97. 8 , so lets give this time to warm up. If you look at the example from the shanghai connect when it started, it really took a few months for investors to get going, leading us to april 2015. The other story is europe. , two dayyour euro chart. That is your drop, just about 105. We are a little above that at the moment. To put thisce this into context with where we are at the moment, there is 105, march 2015, 10 4. 97, clearly a support level. Do we get below that . You have elections coming italy 2017, the netherlands, germany, something to watch, but again, the big story today, what is happening in italy. 105. 58 at the moment. For that. Nk you new uncertainty in europe after this weekend, the common currency at a 20 month low. We are looking at weakness and pressure on the euro after it tiein voters are rejected a referendum on constitutional reform. Rishaad Prime Minister matteo renzi conceded defeat and will resign. Resign. Reading thesic, italian newspaper, and i think you just translated it for me. Matteo renzi says i did not realize they hated me so much. Poor guy. Yeah, i think he underestimated. It was his mistake. He personalize this referendum by saying he would would take his toys and go home and resign, and that proves to be a bad mistake. Motley crewzed the of opposition forces. Everyone is talking about this fivestar movement, this populist movement gaining support. The only thing that unified them was to send a message to renzi, to vote against renzi. Rishaad fairly fragrant grouping according to one commentator. Politics makes strange bedfellows, but its ironic this referendum, not about italy and about making italy governor ball. It has not been so. We have had three in a row now. They cant form governments and maintain them because of the way the election works and how the parliament is structured. That is what this referendum was about, get rid of the power of the senate and give more to the house of representatives and make it a one chamber system. Right now, every law has to go through in identical form in the both houses. They have a bloated government, the biggest for a country that is not the biggest in europe. They are wellpaid paid, and matteo renzi was trying to clean them up. You have this Fivestar Party campaigning for the status quo. That is what we have. Haidi italy has had Something Like 63, 64 governments in 70 years. The caretaker government proceed with these reforms . The reforms remain to be seen. Again, the parliamentary system does not work very well in italy given the way the senate is structured. We will get a caretaker government, the finance minister is well respected, a technocratic government. Something that is common in italy because the system is so completely dysfunctional. Caretakerwe get a government and elections earlier than they would have been. We will probably get elections in 2017 come about the italy heads the g7, so thaey need a government in place. Rishaad thats all we have time for. This really is in about a threat to europe, but the reform has little to do with the european union. Heightened sensitivities given that this is 2016. Lets get to first word news. Rosalind more political headlines, john key says he will stand down as leader and quit politics altogether. He will formally resign next monday. After eight years in office, he says he is not a career politician and time for someone else to lead the party. Key has backed bill english to be his successor. A green party back left us will be the next president of austria, ending a run of rightwing antiimmigrant victories around the world. Tookn as independent and almost 52 of the vote and later said elections can be won on a proeuropean platform. The result defies Media Projections and ins and acrimonious year. Donald trump has use twitter to renew criticism of china after a backlash over his phone call with taiwans president. The president elect tweeted that asian did not ask the u. S. For permission to devalue its currency nor to build up its military presence in the south china sea. Beijing complained after trump flouted diplomatic protocol and speaking directly with tsai ingwen. Pollution back with a bank and china, shanghai of authorities have warned the young and elderly to stay indoors with conditions described as unhealthy. The u. S. Consul and reading of air quality was a fraction under 200, 8 times the internationally agreed danger level. Asjings air is also rated unhealthy today, although not quite as bad as shanghai. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Thank you for that. After months of anticipation, the Exchange Link between hong kong and shenzhen is set to open, giving Foreign Investors access to more than 800 stocks. Rishaad we go to Stephen Engles. Yes, the gong has been banged , meaning the Hong Kongshenzhen connect has officially launched. It has been some time in the making. Had some time to kill in the opening session and how a humorous tale of the whole thing came about with shenzhen regulators and stock officials. It was all scratched out on restaurant tissue paper in a tea house across the border a while back, and look at what we have today. The real integration, full integration, of the stock market, not full integration, bigger integration with the hong kong and mainland markets. Two years ago, we have the shanghai connect, now we have the shenzhen connect, which represents the new economy and china. 40 of stocks in the index or consumer related stocks, high tech stocks, Health Care Stocks, stocks that the chinese officials hope Institutional Investors from abroad will have a greater appetite for. Morekely will be a enhanced version of the shanghai connect. In fact, thats with the chief executive of hong kong called it. He said this shenzhenhong kong connect is an enhanced version of the shanghai connect. Talked about lee it being a major milestone for mutual Market Access for investors on both sides of the border here. Theaid Going Forward that etf connect could be a possibility, an important next step. Is thisow Significant Initiative in terms of the contribution to chinas economy . Servicesad the caixin pmi come in at its highest in months. Other hoping for a healthy uptake at this point . Are they hoping for a healthy uptake at this point . As far is multifaceted as the impact this will have. Institutional investors, but also individual investors able to invest in more than 800 stocks. The mainland investors, who have limited avenues to invest, they can come in now to hong kong, more than 100 Stocks Available to them. This furthers the internationalization of the renminbi. Msci did not include mainland shares in their global indices. The authorities are hoping that this, now that we have had the launch of the shenzhenhong kong connect, this could overcome one of the major hurdles for inclusion in the msci global indices, and impetus for further professionalization of the markets across the border and foreign Institutional Investor participation, more so than what we have seen in shanghai. Haidi thank you so much for that. Right, looking ahead, obamas order, how a chinese bid for a German Company triggered a white house rejection. Rishaad how chinas stock policies are affecting the markets. This is bloomberg. Rishaad you are back. The latest business flash headlines. Hong kongs richest man making of whos to assets. Offering 5. 4 billion dollars in cash for the duet grew. They say they are evaluating the offer. It did push shares to their highest level since september 2008. Setbacking suffered a in august when a bid was rejected on security concerns. Rishaad president aixtron obama has blocked the sale of to a chinese country. This is the first time in a quarter century that the white house has rejected the buyer as a risk to National Security. The president upheld the recommendation that the sale should not go through. Group securings final government approval for a ne inoversial coal mi queensland. Environmentalists say it will further damage the nearby great area reef. Is chairman of adani expected to meet with Malcolm Turnbull to discuss funding. Lets get back to our top touching 20uro month lows as matteo renzi quit after a referendum defeat. Rishaad political and financial turmoil for europe already grappling with brexit. Matt, thanks for joining us. Lets start things off with a look at this. People are suggesting this could play out quite badly for these a tie in banks. Where does it leave the ecb . Toi think it is important keep in mind with respect to banks that they can borrow thoughunlimited, even the Banking System needs to be recapitalize, i dont think it is at risk of unraveling and causing Systemic Risks in the european Banking System. View does it change your about the paradigm shift in terms of this reflationary trade everyone is piling into . Is the possibility of lower growth and instability playing into that . That is always a risk. Statesoutside the united has always been the issue when it comes to the reflation trade for the last couple of years, so it is something we are looking at, but i do think this is a paradigm shift. Onlation had already been the rise in the United States and elsewhere, and then youre seeing the limitations of quantitative easing and the addition of fiscal spending, and i think that will lead to higher rates down the road. Rishaad yeah, but where does this leave, well, Goldman Sachs was saying it leaves people with big debts because we have global debt levels at their highest ever, according to them. If rates go up, cost of funding them becomes a huge burden. You have to look at what is driving rates. Fed started tohe normalize rates goes back to 2013, and they ended up raising rates once. I think that was the first rate cycle. It ran out of steam because of what was going on then was inflation was declining, so you had real rates go up, the dollar went up with it significantly, and that cause growth to slow. You also had commodity bust. Today, the same conditions exist, but inflation is driving the rate rise rather than real rates. I think that will keep a lid on the dollar. The dollar will be stronger and that will keep a lid on it. I think that doesnt necessarily mean it will be a problem for companies in terms of their ,bility to fund themselves because presumably, if the economy is Strong Enough to pass through the rate hike. Aboutu have been talking the Economic Policy strategy china has been taking, by all indications we are in a tightening phase at the moment. Fairly unorthodox way they are doing it. Is this going to play into things next year . You are expecting Slower Growth coming in for the First Quarter. There will be a pause in growth. We mentioned the stop go. Was a big increase in lending last year to spur the economy higher. We are feeling that in terms of the economic stimulus. But now, they are implementing stop measures. That will take the steam out of the economy going into the First Quarter, Second Quarter of next year. There will be a cause and i think there will be an effort to revitalize growth again through i headead of the of the election of the Standing Committee members. You get to a point next year where both the largest economies in the world, the u. S. And china, will be growing, and i think just like in the u. S. , chinese policies are now turning to be more reflationary, and i think inflation might be talked as emanating from china rather than disinflation or deflation. Really, seeing a paradigm shift in the picture for inflation and rates around the world. Matt, thank you. Up, the primeg minister steps down. We are in new zealand next. The south korean opposition may have secured enough votes to impeach the president over the influence peddling scandal. Rishaad the ruling party agreed to support an impeachment. It has the backing of all 171 opposition lawmakers. For us, 29 members, which would just read reach the 200 votes to pass the bill. A busy morning. Haidi the new Zealand Dollar has fallen. A surprise resignation a short time ago. Rishaad paul allen joins us now. It has been obvious for eight years. Why is he going now . He gave a number of reasons in the press conference, among them family reasons, saying nows the time to step back and spend more time at home. He spoke of the need to refresh the leadership, and he said he has nothing left in the tank. A good leader knows when its timea good leader knows when is time to go, and this is time to go. John t came to the job with a fine pedigree. He was a former head of local exchange for Merrill Lynch and when he got to the top job, he and the finance minister are credited with making new zealands economy fast growing he should them through the financial crisis and the earthquake. Dollar sank on the news. It caught everyone by surprise. Analysts believe he wouldve hung on for a fourth term, not too many Prime Ministers win four elections but he wouldve been a favorite had he hung on until the next election in 2017. Maybe it was the traitor in him the trader in him telling him to get out while he was ahead. One of the longestserving leaders in the world. Who is likely to take over . John key mentioned bill english as a preferred successor. You would think his opinion would carry a fair bit of weight next monday when that comes time to hold the vote. Bill english was speaking to the buta, and was noncommittal he is the obvious choice, the deputy, a safe pair of hands as finance minister. He doesnt represent a generational change john key mentioned. Bill english has been a leader before, led the National Party into one of its worst defeats in 2002. To be fair, he was up against term and was first popular. To find out to the new leader is, maybe next week. Haidi thanks for that. Paul allen in sydney. Rishaad declines across the board when it comes to equity. Equity session negative political headwinds responsible. Haidi next, donald Trump Doubles down on his spat with china, using twitter to defend his communication with taiwan. Haidi in hong kong the italian Prime Minister is to resign after losing his referendum on constitutional reform. The euro fell to its lowest since march 2015 as they conceded defeat. The no vote had 60 of support with half the ballot, counted. The party leader is seen as the big winner. Mayh koreas opposition have secured enough votes from President Parker and high nhyes impeachment to impeach her. They said on facebook benefaction agreed to support impeachment. This follows the biggest protest yet over her influence peddling scandal. Hsbc will set up hiring in china next year, despite the slowing economy. By 57 in onetaff area since september, and the pace of hiring may accelerate as it expands. Hsbc launches a credit card business in china on monday, having Regulatory Approval to issue cards by itself. Environmental protesters won a landmark victory with the u. S. Denying the official permit needed to complete the Dakota Access pipeline. The army corps of engineers says there is work to be done, and alternative routes must be explored. Pipeline crosses land sacred to native americans and has sparked a standoff between testers and and soldiers protesters and soldiers. Im Rosalind Chin, this is bloomberg. Haidi this is Bloomberg Markets asia. Rishaad lets get a check on what is going on. Over in tokyo, david. David the lunch break over in tokyo, 6 10 1 . Pulling back overall for tenths of 1 . I want to focus on financials, the banks and the brokerages on their way down. I guess the session gets underway in italy and you get the banks starting trading, the best thing to do is close your eyes given the fact that we had on the table. Equities across the region, not as bad as earlier. Across green here, southeast asia, shanghai down 1 , first day of the shenzhenhong kong stock connect. We have the four biggest stocks in shenzhen, ping on, the biggest Property Developer, down substantially. 8. 7 . Flip the boards, take a look at the new economy stocks, the four biggest on the china next index. The four biggest constituents, not a lot in that, certainly want to follow. Quota even at 10 , of the. It does take a few months to really get under way. Look at whats happening was shanghai and hong kong, on average come on a good day, we are at 1520 of the daily quota in the city. Currencies in focus, the story tell you what the biggest market stories are of the day. Dollaryen, the governor speaking in japan at 11 45 hong kong time. The japanese currency, the kiwi dollar down about 1 . Saying he wont stand for reelection. 60 againstllar, 105 the u. S. Dollar. A lot happening in the markets, very much riskaverse. Rishaad thanks, david. Trump has taken on china via social media, hitting back at criticism of his decision to take a phone call from the president of taiwan. Tom, what is the president elect tweeting now . Twitter over to what he sees as the devaluation of the you want over over the criticism follows from china over a controversial call trump took with the president of taiwan. It obviously ended nearly four decades of diplomatic protocol, and trump has been stung by andicism, both domestically from china, some aghast at what happened. The big question is, whether this is empty rhetoric from trump, or whether it signals he will be taking a more confrontational approach with china. From the taiwanese perspective, the call was seen as something of a calculated risk. If they can get greater recognition from the u. S. Us fight knowing there was going to likely be pushed back from china on the back of this. We know the president is falling in popularity. We know the economy in taiwan is struggling. It seems to grow less than 2 next year. Will hope to cash in on popularity dividends, despite the risk of further push back from china. Haidi whats of reaction have we seen from the Foreign Ministry in china . Complainta formal lodged with washington from the Foreign Ministry here in beijing. We heard from the foreign minister, who described it is as a little trick played by taiwan. It seems china has tried to step away from escalating this any further. We have heard some strong comments from state media, saying taiwan would pay the price and the consequences if they did change the status quo. We know china has a number of diplomatic economic and military levers at its disposal when it comes to taiwan. We have already seen, since the election of the president , tourism, the number of Chinese Tourists to taiwan has fallen off considerably. China ended official communication between taipei and beijing. The president is the head of the dpp, a proindependence policy party. China could launch military flights in the taiwan strait, it could put pressure on the 23 agreements that have been signed between taiwan and china when it comes to things like investment and airlines, and it could put pressure on the remaining 22 countries that recognize taiwan diplomatically. Tom, thank you for that. Tom mackenzie in beijing. President obama issued a rare order blocking the sale of a German Technology company to a chinese buyer on National Security concerns. The recommendation to block china from requiring the u. S. Unit of German Company aixtron comes because of foreign foreign influence in the u. S. U. S. Businesses would be controlled by foreign entities and any impact on National Security thereof. With aixtron, it is based in california and employs 100 people. They make semiconductors that go into leds, solar cells, and more relevant in this case, lasers, satellite communication, as well as radar. In a statement, the company said the National Security risk posed by the transaction, which comes in at over 700 million, relates to the military applications of oneknowledge of aixtron. Client makes military jets. Ge, dow and merck are other customers. President obama weighed in with the sentiment, saying there is credible evidence that leads to a leads me to believe that Chinese Investment vehicle partly owned by the chinese government, through exercising control of u. S. Business of might take action that threatens to impair National Security of the u. S. Aixtron pushed back. The president ial order was limited to the u. S. Businesses. The bitter and the bitter and aixtron are evaluating. This the first time in a quarter century in which the u. S. Blocked a u. S. Acquisition of a chinese company. We look at the Share Movement monday, when the european trading begins. Haidi the spotlight is on europe. A week when the ecp holds the final meeting of the year. Italy injecting some uncertainty into the picture. Rishaad rejecting a shakeup as the Prime Minister is quitting. For iterally matters why it matters. A vote in the referendum means for a global market, more uncertainty. Uncertainty not only over the future of the government and markets in italy, but the future of the euro area, the eurozone. How the uncertainty was reflected in the Italian Company Government Bond market, this is bloomberg chart 5245, showing that this measure of available liquidity thats tighter. There was got tighter. There was less liquidity in the million of the the middle of the year. Goingme thing happened into the attire referendum vote. As the markets digest, will there be a move for the Italian Government . The new government, to bail them out . This will go along with European Central bank rules. The European Central bank in focus this week, not only because of the uncertainty from italy but because it is their final meeting of the year. , where many economists are saying the European Central bank will announce it is extending its cumulative Bond Purchase Program supporting the economy, especially at this time of uncertainty, with an extension of six months past march of next year, when it was supposed to end. We have a bloomberg survey, 89 percent of economists surveyed are looking for Something Like a tweak in that qe on buying program. Another chart shows expectations of the tapering. When that will start, how it has been changing. The blue bar shows that in the Previous Survey, the tapering was supposed to start in the Fourth Quarter of next year. The orange bars show the majority looking for that to happen in the Third Quarter as the euro economy continues to recover. What else is big of a global map . Three fed speakers on monday, three fed Bank President s concur with the markets assessment. Was strongorts enough to raise rates on december 14. Well be watching for the reserve bank of india on tuesday, disappointing Economic Data theyre suggesting a rate cut in india, while reserve tank of australia meeting on wednesday thomas seeing some disappointing status on the economy, hoping to hold rates steady. Coming up, the voice of experience. How japans older population is propping up the economy. Look at whats have is going on with business flash headlines. Starting off with a look at the chinese at maker, it plans to 9. 60 inres at about hong kong in its initial public offering. Ports international and the groupe developer king key has agreed to become the cornerstone investors in this one. This is a maker of selfie apps, 570 million to make shares. That would potentially raise 710 million u. S. Dollars. If that happens, it would be hong kongs Biggest Technology listing in a most a decade. A frencht Investment Firm is buying a global asset. They are close to a deal. It is valued over 3. 5 billion. They oversee about 214 billion. It would be the french companys biggest acquisition and propel it into the top rank of Money Managers with almost 1. 4 trillion in assets. Rishaad lets turn to football. It is the sale of ac milan to chinese investors, and it could be held up. An investor asked to delay the deal. Delay it until next year, as it is a waiting for the goahead to come from central authorities in beijing. The payment of an additional 100 million as a nonrefundable deposit is set to be discussed, and that is all designed to facilitate a delay here. The seller didnt have funding in place, but they agreed to the 750 the 750 million deal. Haidi the crackdown on but on black money means investigations into billions of dollars. A family told the government they updated tax on 29 billion in income. They would make them richer than indias richest man. Another man revealed 2 billion of illegal income. Rishaad whats been going on in japan, japans aging population are doing their bit to prop up housing spending and that is as the younger consumers hold back. Whats behind this . We talk a lot about the aging population as being a drag, but in this respect, they are adding to growth. That is right. Whats kind of happening is, the younger population, its not necessarily good news because in a healthy economy, the working age population would be driving consumption growth. In japan, because of the demographics and the large senior cohort, younger workers are concerned about the strength of the Pension System and retirement, so they are saving a lot more of their money and they are more reluctant to part with it. Looking at the seniors, breaking it down, they are spending more in aggregate, but when you look at a per household level, the spending drops quite a bit. It is not necessarily all good news. Rishaad tell me something. Is there an upside to all of this . There is some good news. If you look at what senior households are spending and money on, it tends to be things. Ike recreation and socializing they do spend more money on medical services and medical care as they age, so they are more focused, they are focused on staying healthy and enjoying their retirement. Which is good, that they are able to do that in a country that has one of the longest average lifespans in the world. There is some benefit to the economy. It is obviously not what you would hope to see, that younger consumers are tightening purse strings, but there is a benefit to this . There is. There is no doubt that the senior cohort, and their consumer spending, is propping up consumption growth, which is important to the japanese economy right now. It is one of the things that, one of the Economic Indicators that the government watches very closely, because they are trying to stimulate this Virtuous Cycle of increasing consumer spending, which will translate into higher inducing profits, corporations to raise wages and spend more, which gives consumers more purchasing power and on and on. To the extent that seniors are able to drive consumption growth, that does help the macro view, and it helps the government pass economic objective. Rishaad thanks for that. Connor joining us from tokyo. Coming up. From how saving humanity disaster turned into big business for one major japanese company. Haidi this is Bloomberg Markets. Rishaad lets look at the world of gaming. Aimonys grand order, the is to Save Humanity from disaster. Haidi so predictable. I guess. The surprises that it has become quite a significant profit driver for the company, rather than taking a look at this. Perhaps we are not gamers, we havent heard of this, but it is a big deal when it comes to gaming. Isin terms of revenues, this a keeping. Let me tell you about this game. Grand order is a mobile game based on an animated tv series. Players travel back in time. You can be anyone you like, to help yourself save the world. The game has been on or near the top of japans app revenue this year. It was downloaded over 700 million times. In japan, sony said it is doing well in china, but it is not even available in other parts of asia or in europe or in the u. S. Or other markets, which is a key factor because pokemon go was something we heard a lot about this year. That has been released in those markets. Like a lot of games, the basic version is free, but you can make purchases in the game. Rishaad i bet you have to pay to become one of those historic characters. Ask you can add bonuses. At . Aad have you played it is not available here. Annie, amongapp and are users the game made more money than pokemon go on 104 out of 130 days this year. For ios users, 50 days. Says it is above a pokemon go in terms of the amount of money being spent by people, and the level of intensity, the level of interest. Haidi in terms of what it does for the company, how significant is it for sony . Very. Essentially, sony is backing and putting its weight behind gaming to try and ill set offset struggles in other areas like phones or televisions. Gaming is one of the ways forward for sony. The game was singled out by the quarterlyt months earnings announcement, saying it continued to positively add to the divisions operating profits. The operating profits rose 23 in the last quarter. This game came from the division and theyalled aniplex teamed up with a game developer and his studio to make it. The challenge for this game is to keep going, is to create new narratives, new stories. Rishaad it is only available in japan, right . And in china. Rishaad can you imagine how popular it may be . Cognitive dissonance may lead to problems andt is sold in the u. S. Europe, but quite a story. Cracks it has been doing extremely well. The Games Division is sonys main earnings driver. They will try to leverage this. They launched a forward work unit which essentially will focus on mobile apps and content thierry at they may complete others in the same area, like vimplecom me ino, and a headset launched october. They are pushing this part of the business to make up for others. They may not be doing so well. This is a pretty big deal when it comes to games. Movied we have disneys leading a box office. The animated tale generated over week,llion in its second beating the estimates by 3 million. Haidi it dominated a lackluster weekend. Fans are awaiting the new star wars movie. Incarnate by universal broke the top 10. Rishaad in the asiapacific, pretty much the story, declines across the board. Perhaps we are not at the worst of it so far. Looking at the shanghai composite, 8 10 of 1 , the nikkei weaker. The euro retreating because of the italian Prime Minister conceding defeat and saying he will quit as a result of a bid to result to overhaul the constitution got shot down. Haidi potentially some further developments in the impeachment geunhye. Sident park patient gently launched, out of the ¥13 billion, it seems like a little bit of a slower uptake when it comes to that launch. Taking a look around southeast asia. Rishaad there we have it. Down seven tens of 1 . Also in jakarta. Haidi up ahead, angie will be with us to update us on the big stories. A big day for us. Angie the big story in hong kong, the hong kong shenzhen connect, and we will be talking to the man of the hour. Everybody wants to talk to him. What one of the chief ceo, charles lee, joining us about what it means to oversee investors and how mainland investors are given the opportunity to trade more hong kong shares. What does this mean longterm for hong kongs jumping off point for Mainland China . The italian Prime Minister has quit. The italy referendum has deepened, the euro has dropped. What does it mean . To john woods. India Money Laundering. The cash been having an opposite effect on Money Laundering. It is 11 00 in hong kong. We are in the middle of your asian trading day. Welcome to Bloomberg Markets asia. Making connections. The longawaited stock link is finally underway. Political upheaval moves the markets. The euro slides to a 20 month low as renzi loses his referendum. Asianpacific stocks are also hit. Uh,we have got two, leaders resigning. We have that referendum in italy failing. We have to check on the markets now because the Ripple Effect seems to be hitting asia. Outrter i feel very tired this morning. We are just midday here. Lets have a look at the markets on the gmm function. Very red across the equities column. Dollar see the kiwi and euro here. Call it a day of dollar strength. We have a few markets up. Singapore, indonesia, and mongolia are in the plannin winning column. And sovereign bonds, they have given a risk aversion out there. The other story, of course, is the euro. The two day chart, euro, here is friday. That is when we got news that renzi was conceding defeat. Isare down 1 and the euro down against every single one of its major peers, with exception of the polish currency. Have a look at your fiveyear chart. Where does this take us . At one point we were just above 1. 05. The low over the last five years 104. 97. The other thing i want to point out, when you look at the 200 Day Moving Average on the euro [ pound, the last time we were this close to the support level was 12 months back. Big marketthe other story is the shenzhen market stock link. And we are looking at mma, the regional market assets. You get part of this. We start the day at 100. How much has been used, essentially. In,t an hour and a half there is a lot more money flowing northbound, from hong kong to shenzhen. Southbound, not a lot. 95. 91, just over 4 of the daily 13 billion or 10 billion coming into the city. In the meantime, all yours. Angie lets send it over to Rosalind Chin now with the first word news. Reporter the south korean opposition might have secured enough votes to impeach the president this week over the influencing scandal. The Faction Party has agreed to support a motion for parliament on friday. It is backed by all 171 opposition lawmakers, plus 29 members, preaching the 200 votes needed. Park might address this on tuesday or wednesday to the nation. The new zealand from minister says he will stand down as leader next week and quit politics altogether. After eight years in office, he says he is not a career politician and it is time for somebody else to leave the National Party. Bill english for his successor. A green party leftist will be the next president of austria, of rightwing victories. He later said the elections can be won a proeuropean platform. An acrimonious year of campaigning that polarized austria. Donald trump has used twitter to renew criticism of china after a the reaction to the taiwanese president. He said they did not ask the u. S. Permission to devalue the u. S. Currency. Ofmp flauted decades diplomatic protocol. Global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. Im Rosalind Chin. This is bloomberg. Angie the Exchange Link between hong kong and shenzhen is finally open after months of anticipated. Stocks in shenzhen made a slow start. We have got Stephen Engles at this Hong Kong Stock Exchange. Steve, this has been a long time coming. Reporter it has been a long time coming, and it finally came to fruition this morning at 9 30 when they banged the gong at the Hong Kong Exchange. And our guest can tell me all about it. How do you feel now . I feel great. Obviously, this is part of a long march. This was the initial first leg. Now, it is the second leg. Now, the two legs can start walking and running. Beenter this has described as an advanced version of the shanghai connect. How so . Inthere are about 100 stocks hong kong that were not available under the original program that is available now. But i guess the most significant change is the removal of the overall quota. That initially was put there because there was a pilot and not a clear certainty as to whether this was going to work, whether this would create unintended consequences. I think the removal of the quota is the manifestation of the great confidence that this program is going to be great, investors tothe trade freely and easily, but at the same time, allow the risk management. Reporter have you had a chance with all the dignitaries here io trade freely and to see how everything is going so far . It is changing every minute. I am generally not obsessed with all of that because when you build a bridge, the traffic on the day when you open, and a couple weeks after that, is not really what you care about. It is the longterm traffic that can tell if the bridge was built in the right place. Now, you know, over the last wto two years we are trying to figure out with the original bridge if the signal and access works. Reporter what do you think National Investor appetite will be . Is there a little bit of buyer beware . And in chang shenzhen, you have new economy stocks. Is there a level of caution right now . I think there are a lot of things about china that people take the time to get used to, and china is growing. But if you want to find growth and new opportunities, you want to find things different from the big property companies, the big Financial Institutions that are dominating the shanghai stock, shenzhen is really the future. Part of that is the entrepreneurial and privatesector space in china. Obviously, coming with the is smaller cash, with the evaluation that vhigh, investors will have to tread more carefully. It is an investment. It is not something that immediately you are able to just embrace without a lot of the work you have to do. Reporter do you feel this removes an obstacle for msci . I think this is one of the key, the many key components, they will need to look at. The fact you have a huge market, like shenzhen, that was not available until today, now you remove one more big block of the few blocks that are still in the way between us now and the inclusion in the future. Reporter what is the next up. There has been a lot of talk about the etf connect. The next step is the connect we have right now is the secondary market. The next step is to see if the secondary Market Connect can be extended to a primary connect, meaning the companies can directly issue primary shares on that basis. This requires a lot of regulatory discussion. Abouthat essentially, is International Companies coming to and must. Coming to enlist. Allow thell chinese money to potentially, have a much broader area of diversification, entering into different sectors and regions and industries. Beyond equity, we are still working very hard, building a bond connect. We will also be working very hard in the commodities connect. The word connect in the different Asset Classes could mean slightly different things. Some of them could mean developing benchmarks. Others could mean mutual recognition. And a number of other things that could happen, but ultimately it is about connect. Reporter but thae etf is the next logical step. How much mark obligated is that, given the different regulatory bodies and frameworks across the border . And what is the timeframe . We are definitely going to look into that into 2017. The banks work very differently with the Security Company that is in china. It will take a while for us to sort through system issues, clearing issues, bank issues. Part is probably easier. Reporter step by step. Charles li, thank you. Back to you in the studio. Angie i appreciate it. There is new uncertainty in europe as the common currency at a 20 month low. Will minister renzi resign, saying the people have spoken. Lets bring in andrew davis, former bureau chief for bloomberg. Is this a surprise to you . Obviously, the polls predicted renzi would lose, but the margin has been pretty substantive. Polls runningn for weeks, thinking there could be a reverse trump effect. A veryalso very a strange motley alliance. Its not as uniform as it has been made out to be, and it has little to do with the euro directly. Angie lets take a look into our bloomberg right now. Andrew davis, this is an index you created on the italian 10 year. What is this telling us . We need to wait a little bit to see what bonds do today. The spread in the last week was not because people thought renzi out, but it was narrowing because it was priced in. We have seen the euro, today, down about 1 , trading at the lowest in 20 months. Yes, there is concern that the Fivestar Party, the populist party driving the no vote, had the chance coming to power. Resignation does not necessarily mean there will be earlier elections or immediate elections, but we expect elections in 2017, and they do have a chance to win. There would have to be a referendum to change the constitution before they could have a referendum about leaving the euro. Only a fraction of the italians want to leave. Angie that might be the case, but the momentum is certainly disturbing. Thank you, andrew davis. Perch. Insights from your still ahead, indias Money Laundering problem. Towill go live to mumbai discuss how Prime Minister modis crackdown created a new market. Next, the followup from italys reajection of renzi. This is bloomberg. Angie welcome back. This is Bloomberg Markets asia. Hong kongs richest man is making a bid to boost his power assets in australia, offering 5. 4 billion in cash, a 28 premium. Sydneybased duet is evaluating the offer. Li suffered a setback in august when his bid was rejected on security concerns. President obama has blocked the sale of the german Semiconductor Equipment supplier. It is only the third time in a quartercentury the white house has rejected a buyer related to National Security. The Treasury Department said the president of how the recommendation that the 715 chipon sale of the grand investment should not go through. Hasias a donnigroup secured approval for the 16 million project. They say it will further damage the nearby Great Barrier reef. Adani will meet the Prime Minister on monday to discuss 32 kilometer rail link. The euro drop to a 20 month low after italy said no to Prime Minister matteo renziz referendum. It does add political and financial turmoil to europe, brexit. Breitling wity grapplinh for the asianpacific region, europe is a huge market for this region. What does this clinical fallout entail . What does this political fallout entail . We think it raises risk premium. All eyes will be on the ecb, in particular what they will do with the bonds. Angie but they have made noises that it might be the last it is extremely important and this has knock on effect. We have very important trading relationships with that part of the world. Europe has a host of particle events playing host of political events playing out next year. I think we will see asia off the radar screen as far as risks are concerned for 2017. We will see concerns for risks in china. Angie you think people are going to ignore that kind of possible contagion effect and see it as a reprieve from this deal politicas geopolitical mese u. S. And europe . I think the u. S. Has more possibilities to impact asia. Indications of rising protectionism have much greater impact on asia than perhaps, our political turmoil in the eurozone. That is not to say they will not be an impact. But the u. S. Has a much good or influenced on this part of the world. Angie what do you think the ecb will be one thursday . Will do on thursday . And will they be forced to act in the coming year as a result of brexit and italy . Yes, i do. I think it would be remiss of them to ignore. I think they will be focused on increasing their purchases of italian sovereign bonds, for example. If there was a sense they would start tapering sooner rather than later, that will be put on the back burner. There are many potential political surprises next year. The italian story with the potential for elections in the First Quarter of next year, i think that could potentially roil markets. Angie the other part of the italian story we are not talking about, put the euro aside, put the constitutional reform and renzi aside, italian banks, they are not going to get the bail in or the help that this Constitutional Forum try to formulate for them. What happens then . They might get a bail in. Angie mattstill . Take banca monte dei paschi. There is a risk of it getting nationalized. But trying to raise 5 billion euros in this environment is very difficult. Is this dangerous for Market Sentiment overall . Phenomenally unpopular, to say the least. But there are these rules and regulations which exist in the eu, which dictate certain types of support for the financial situation. We know there is support with the right levels of approval from brussels, but i think the political overlay now is such that another focuse will go to the state. John woods, join us in 20 minutes. Coming up next, a political shock for new zealand. John key decides he has had enough of from politics and will resign as Prime Minister within days the kiwi falls. What will this mean for Economic Policy . We will discuss that on bloomberg. Angie welcome back. This is Bloomberg Markets asia. The new Zealand Dollar has fallen after john key announced his surprise resignation a short time ago. Lets get over to paul allen in sydney. John key was in office for eight years. Nobody was expecting this. Why is he quitting . Reporter nobody was expecting this. He really caught everybody off guard. He says he has nothing left in the tank and says a good leader knows when it is time to go. He was a former Merrill Lynch banker and maybe it is the is on in him that says he top now and it is time to get out. Lets listen to what he has to say. Leadership change for the right reasons and handled well is good for a political party. For all these reasons i told my cabinet and caucus parties of my as then to sit down leader of the National Party and as Prime Minister. It is my expectation that on monday the 12th of december, a special caucus meeting will be held to create a new leader. This has been the hardest decision i have ever made and i dont know what it will do next. For me, this feels the right time to go. Reporter well, he does go out on a high with enormous popularity. He shocked us all and john key will be Prime Minister nomar as of next monday, angie. Angie that is fast. The kiwi is responding, it is weaker, but politically, what happens from here . Who succeeds john key . Reporter he has already pointed to his finance minister and deputy as bill english as the man he would like to see succeed. He says the National Party would win awith bill as the leader. Billing which was the leader back in 2002 and lead the National Party to a defeat. Obviously, the party will have its final say. The 2017 election, which was going to be a lock for the government at the end of 2017, has just got more interesting. Angie you can say that again. Paul allen, thank you for that. And we are looking forward to the afternoon business in tokyo, where the italian vote has the yen stronger. As a result, the japanese shares are falling. We will get into the latest, next. This is bloomberg. It is 11 29 a. M. In hong kong and 12 29 p. M. In tokyo. This is first word news. Is to resign after losing his referendum on constitutional reforms. As euro fell to its lowest he conceded defeat, saying the people had spoken. The no vote has 60 support. The Opposition Party is seen as the big winner. A landmarkhave won victory with the u. S. Of denying the official permit needed to complete the Dakota Access pipeline. The army corps of engineers says alternative routes must be explored. The pipeline was to have crossed land sacred to native americans. Step up hiring in china despite the slowing economy. It increased retail bank staff by 57 in the pearl delta, and the pace of hiring may accelerate as it expands. Cardlaunches a credit business in china, having won Regulatory Approval to issue cards by it self. The first legal action over last weeks plane disaster in colombia has been launched. Anhorities have filed official complaint against officials at the airport, accusing them of allowing the plane of leaving medellin even though the flight violated safety standards. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. You can say it has been the big day in european politics, and the markets are reacting. Lets head back to david with more. , as youarkets reacted would expect, taking risk off the table at least for now. It is not a mad rush to the exit. A lessermarkets to extent off lows of the dale come about australia and japan, thats where we are getting the brunt of the selling. ,ave a look at ftse futures that should be an indication of how europe might take this, some pressure on futures,. 5 30 minutes back. Thew things, we just got , theg 15 minutes back funding costs have been spiking in hong kong consistently over the past couple of months. That is the cost of one year, 50 ips, so that extends that sixyear high. Not is something to watch very closely. We are just entering the lunch break when it comes to shanghai, shenzhen starting that stock connect with hong kong, how much of that has been used up . We have a daily quota, of course. Have a look at the bloomberg. We are tracking northbound and southbound flows, let me look at that. Go, 12 , 13 of the northbound flows, Foreign Investors are taking more advantages of it. Run mma and you will get everything you need to know. Let me wrap things up with a look at key currencies. Ae dollaryen perhaps reflection of risk aversion or risk appetite, just about flat. We started off strong on dollaryen. When you look at the euro, its down against every single one of its major peers. The cross between the euro pound, falling to its 200 Day Moving Average, 81, 82 last time i checked. Kiwi onlows here on the the back of renewed political uncertainty, shortterm at least. Yeah, lots to talk about. Angie thanks david. The fallout from italys rejection over the referendum to rein in the powers of the senate has dominated our discussions today, the euro falling to a 20 month low. The next Economist Says it is no time to panic. Weakens, bute euro it should because the u. S. Is showing signs of growth and the european economy is stagnating, with the exception of germany. I think we get a selloff, but i dont think it is an end to the european union. I think markets will be orderly, and we wait and see what happens with the italian banks. That is the real story. Us thematt egan told result will cause a Banking System meltdown. I think it is important to keep in mind with respect to the banks that they can borrow almost unlimited from their own central bank through the ecb support, so even though they Banking System needs to be recapitalize, i dont think it is a risk of unraveling and causing Systemic Risk in the european Banking System. Angie Goldman Sachs says the result does signal worries about italys growth. This does raise concerns about the growth path for italy, and given that one of the key themes that marks the trading weight, which is reflation, does this mean that perhaps attain growth and European Growth are looking less sanguine compared to a week ago, that is something to consider. Angie and thats the word from asia on the italian referendum result. On chinaump has taken via social media, hitting back at criticism of his decision to take a phone call from the president of taiwan. Tom mackenzie is here right now. Thanis the president elect tweeting now . Say, hittingyou out at china over what he sees as the devaluation of the yuan over what he sees as taxes on u. S. Imports to china, andover the south china sea. As you say, these tweets follow criticism from china over that controversial call he held with the president of taiwan. We have seen the offshore yuan versus the dollar traded lower following these tweets, and the question is whether this is more antirhetoric from trump or whether it confirms he will be taking a more confrontational line with china. He has talked about labeling china a currency manipulator. Analyst atrd from bank of tokyo mitsubishi that they accept him to do that and label china im manipulator early on in his first term. We have heard from our analyst saying that if he starts targeting china on trade and the one china policy, then we will certainly be in for a rough road. From the taiwanese perspective, the call was a calculated risk. They would like to see greater recognition from the u. S. But are aware that will be pushed back from china him a but president tsai ingwen has suffered in terms of popularity. The economy is not doing so well a there there so well either, so she would be looking to get some sort of dividend on this call with president elect trump. Angie what are we seeing from china . Tom evenhanded so far, particularly when it comes to the topic of taiwan. The foreign described it as a little trick played by taiwan, also official complaints launched in washington by the chinese Foreign Ministry. There are a number of steps they can take to punish taiwan, if they choose to do so. Seen Chinese Tourists to tie one drop since the election dropai ingwen taiwan since the election of tsai ingwen. China could target and unravel the 23 agreements that tsai ingwens signed like air flights to and from china and on investment prospects as well. It could take military action in that it could launch flights around and into the taiwan straits and ramp up pressure on the 22 remaining countries that still continue to diplomatically recognize taiwan over china. Beijings steps in arsenal as these tensions simmer. Angie china could, but will it . That is the question. It was designed to bring cash out of the black economy, but it banms indias banknote may not have the affect intended. Lets get more in mumbai. How are these cash cleansing networks operating . Launderingney networks are using various avenues. Flying crate loads of Bank Currency notes by private jets into india, where y dont pay any tax. They are putting them in contact with cash businesses where the exchange this money for a discount. Angie are these money launderers conceding the defeating the entire purpose of the cash ban . Yes, angie, they are. Government enacted the expectingwere only 170 billion to come back. With help of money launderers, these people are bringing back most of their money which was monetized. Zed de angie so what is the government doing in response . The government has been on privatetrictions jets taking off from unmonitored airfields to putting limits on the amount of money that can be deposited and withdrawn. They have been taking various steps, but the money launderers have found ways through loopholes. Angie we will leave it there. Thank you so much for that, the latest in that cash ban tsonga in india. Saga in india. The ecb holds its final meeting of the year. Italy has rejected the chance to shakeup its politics, and the Prime Minister is quitting. Kathleen hays tells us why this matters. It means more uncertainty, uncertainly not only over the future of the attacking government, markets, and banks, but over the future of the euro zone. Lets see how this uncertainty was reflected in the italian Government Bond market going into the election. Chart 5245 and shows this measure of available liquidity got tighter, less liquidity in the middle of the year, and that line spikes up around the brexit vote. On the right hand of the screen, the same thing happening going into the italian referendum vote. The markets will be wondering about italian banks, will there be a move toward the new government to try to bail them out . That does not exactly go along with ecb regulations, but the ecb in focus this week, not only because of uncertainty from italy, but also because it is the final meeting of the year, the meeting where many economists say the ecb will announce it is increasing and extending its stimulus bond purchases. Months extend it six past march next year when it is supposed to end. Economists are looking for some kind of tweaking in that qe bond buying program. Another chart shows expectations of the tapering, when that will start, how that has been changing recently. The blue bar shows that in the Previous Survey we took that the tapering was supposed to start in the Fourth Quarter next year. Those orange bars show the majority looking for that to happen in the Third Quarter as continuesrea economy to recovery. This week, three fed speakers on monday, will they concur with the market assessments . We will also be watching for the reserve bank of india on tuesday, disappointing Economic Data theyre suggesting a rate cut in india, while the reserve bank of australia meets on wednesday. Some disappointing data on the economy, and expected to hold key rate steady for now. Trump up next, donald takes on china via social media. We will take a look at the implications of the u. S. President alexa diplomatic maneuvers. This is bloomberg. President elects diplomatic maneuvers. This is bloomberg. Angie welcome back. This is Bloomberg Markets asia i am angie lau. The latest business flash headlines. U will offer shares in its 9. 60 hong kong. Aims tor of selfie apps offer 574 million shares, millionlly raising 710 dollars, all for a beauty app that could be hong kongs biggest tech listing in a decade. Firm is theestment pioneernner to buy valued at 3. 5 billion. 240 billion. As undi to theopel am top investors. A singalongchina deal may be delayed. Milanchina deal may be delayed. All right, joining me now, and of course john woods that Credit Suisse private banking. A lot of shakeup in leadership. Tooeo renzi, but john key in new zealand, and it is shaking up the markets in what way you think . And is it permanent . It will shake up the markets in any meaningful way. Europe haveanges in the potential to really shakeup, and lets not forget the next year we have legislative parliamentary president ial elections in germany, france, now italy, hungary, the netherlands, so there is the potential to meaningfully shape the eu as we know it today. Rishaad the matteo renzi defeat is not so much about the constitution change. Its about the opposition coming in and what they stand for. Alsoe in limbo, that is crucial because it has implications for the Banking Industry there. Well, i mean, i think it would be a brave person to suggest that the populism that appears to be sweeping developed markets or the developed world , look, by promising to resign he put himself into the antiestablishment camp. Either that was a mistake or by design. I dont know. It would be a brave person to suggest this will not transition austria did vote. It did, and that was against the grain. That was quite unusual. Rishaad hang on, the green against the far right threatou see a looming to the structure of the eu next year . With all these elections, the direction things are going in, we could see, we always talked about the possibility of brexit and that has not happened so far, so going into the future . You mention brexit and the Political Trends and themes ping europe at the moment. When these elections take place, it may be coming into power are a group more supportive of the aims of brexit, and i think you might see a different type of negotiation happen as a consequence of these elections. Government u. K. Appears to be making very little progress with concessions from the eu because there is a reasonably firm view by the eu establishment. Posted these elections, it may change and we will see different opinions in france and germany. Lets talk emerging markets. Looking forward, emerging markets dont like that, especially asean markets. Particular regard to the rate hike in the u. S. , increasing the number of great hikes they do. What does this portend for emerging markets and couldnt threaten a recovery . Higher rates, stronger dollar, and trade protectionism threaten markets. They seem to be facing all three currently. If the market is pricing in beyond two rate hikes next year, it will have a particular impact. One of the reasons i am concerned is because of the large spike in Consumer Credit as part of gdp that has hit southeast asia, malaise a, philippines, and thailand. Malaysia, philippines, and thailand. Out inse have been taken some size and force growth to slow, so yes, to answer your question, it has quite an important impact, a negative impact on emerging markets. Rishaad has the mood and markets change for you . Its so hazy given all the uncertainty. Everybody is looking for certain support levels. There has been a lot of touching m as well. Ermis were just looking for more clarity. I have to say our main focus will bep next year china, hong kong. We are seeing increasing signs of increasing Economic Stabilization in china, great from a fundamental perspective. We are seeing earnings momentum etc. Break momentum accelerate. From a technical perspective on the flow side, we think the connect will improve general levels of liquidity. We are generally overweight for china in 2017. Now. Lling it right remember it. Thank you so much for that. Next, the latest on the political scandal in korea as the opposition says it has votes to peachtree and president to impeach the president. This is bloomberg. South koreas president faces an Impeachment Vote on friday. Our sole, korea bureau chief. What is the latest on the impeachment . It looks like the impeachment possibility is increasing. Last night, the faction, the antipark faction within parks ruling party, one of the leaders announced that 20 mine members were going to vote in favor of an impeachment 29 members were going to vote in favor of an impeachment. The leader last night said that basically they change their mind because of what they saw with protests on saturday. Hey had a record turnout organizers estimated 1. 5 Million People showed up on the main streets of seoul, korea. Police say there may have been 400,000. Regardless, the turnout was a record, which indicated this faction should impeach the president , which could happen as early as friday. So friday is the date, but what does the parliament hoped to get out of the hearing . The hearing is tomorrow. They will be grilling nine heads of the largest conglomerates in korea. That are conglomerates gave money, tens of millions of dollars, in donations to two s longtions run by park friend, so they will be asking and trying to gather evidence against President Park, whether President Park pressured these people to donate, and whether they were pressured to do so and, you know, give evidence against them. Thank you so much for that. Political of people moves the slides ashe euro renzi loses the of time referendum. Asasiapacific stocks hit john key calls the day in new zealand. Economic datast shows strength, but the cheerleading at its fastest pace in three years. Donald trump takes to twitter, criticizing china