Transcripts For BLOOMBERG Bloomberg Markets Asia 20170306

Risks. Xi jinping isdent firmly in control, the message. Haidi a rate rise seems all but week, janet yellen warning danger if the fed acts too late. Risk aversion in this first trading session in asia. 30 minutes away from the open in china and hong kong. Looking at how those markets are digesting policy announcements from the npc. Rishaad the first time asia has had a chance to react to what janet yellen is saying. Sophie kamaruddin is having a look at the movers. Sophie quite a bit today. Korean stocks, the rosalind the kospi falling, Consumer Services falling over 1. 6 . A number of players falling today. Rising upperks are 1 . The kospi is asias worstperforming index and asia this year, falling nearly 5 . Hanjin we do havehanjin shipping on the decline over 21 . Hanjin shippings u. S. Creditors sellin given the nod to stateside containers. The judge overseeing the hearing rejected hanjins claim that it still had equity in the containers. In tokyo, the nikkei 225 slipping as the yen rises amid global tensions. Also dragging on the topix, seeing a retreat after highs last thursday. In australia, the asx 200 is recovering from the days earlier declines. We did get data from sydney, retail sales for january rising. 4 month on month after dropping in december. Rs fortescue metals rising. Gold waivers as janet yellen adds to expectations of a march hike being alive. Gold miner resolute here falling. We have an ecb and rba decisions this week. This will be the focus as the fed goes into its quiet period for the march meeting. Lets get to first word news with paul allen. James clapper has denied President Trumps claim that the Obama Administration ordered wiretaps on trump tower during the election campaign. Came via breitbart news. There are calls for a congressional investigation. However, James Clapper denies any wiretap was ordered. The french president ial n has rejectedo calls to step down, saying he is being attacked by those that want to block frances recovery. He has been accused of using public money for paying his wife and children for carrying out fictitious jobs. He denies the accusations. Dozens of rightwing politicians have abandoned him. Prime minister shinzo abe has strengthened his grip on japan with his liberal Democratic Party allowing its leaders to serve three consecutive terms. The vote came at the partys annual conference in tokyo and allows the Prime Minister to potentially remain an office through 2021. He came into power in late 2012 and is the longestserving g7 leader after chancellor merkel. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Right, well, looking at japan and south korea issuing protests and Holding Meetings after north korea fired Ballistic Missiles. Of fourave claims Ballistic Missiles, which could be i see bms. Rosalind thats correct. South korea said multiple missiles launched and flew about a thousand kilometers, twice as for as the missile that north korea launched last month. Four is saying that Ballistic Missiles, three fell into japanese waters. There have been no reports of damage is so far. The National Security Council Meeting will be held today. One happy news says it could be an icbm, but there has been no official confirmation of this. U. S. And come as the south korea conducted joint military drills, which north korea has called a prelude to an invasion. Un has been ratcheting up action and firing missiles, coming with this ban on north korean weapons development. The sanctions dont seem to have much effect on stopping his nuclear ambitions. It is interesting come the timing of this, because the focus on china. Move affect latest the relationship between pyongyang and beijing . Rosalind it is likely to increase tensions with china, north koreas closest ally. China has been increasing the. Ressure on north korea it has banned all coal imports in line with u. S. Sanctions are north Koreas Nuclear china is northt koreas biggest trading partner, so this eats away at the access to hard currency that north korea has, and will hit it economically hard. At the same time, china has its eyes on south korea and developments regarding the installation of terminal High Altitude area defense. China has said it is against this installation and any move the u. S. Military closer to its own borders. This is why it is unhappy about and installation of thaad south korea. We saw news that china had companies forour packages to south korea. Lotte group has offered land for thaad. So we expect tensions to behind as this goes on. Premier lichinese keqiang has delivered the economic targets for the year. He sent a clear message about who is in charge in china. Tom mackenzie has been watching the npc in beijing. You are there to witness this political pageantry, had a look at the document closely. What were the Key Takeaways from li keqiangs speech . Tom the softening of the gdp top thing6. 5 was the to come out of this work report, and as commerzbank analysts say, the focus is on risks and expect Monetary Policy to tighten gradually, but apart from that, li keqiang continue to talk about the need for Structural Reforms in the economy to shift away from heavy industry and manufacturing towards services and consumption. He used a bit of poetic writing to talk about Structural Reforms like a chrysalis transforming into a butterfly. He talked about getting some sectors closed off to Foreign Investors to be reviewed, possibly opened up. See morey want to foreign invested Companies Listing in china and issuing bonds, so some moves to open up the Capital Market here. They talked about the yuan liberalization and change the language around the currency, giving them more flexibility towards those fed rate hikes. Thatad some cynics say china is the only country in the world where they will grow for the full year. Its not quite as clear cut, this gdp target . Well, they are pretty good at hitting their targets as you allude to, and bloomberg economists say 6. 5 is likely by areend of 2017, but there risks looming over chinas economic prospects this year. Really these were appointed to buy li keqiang in his work report yesterday. He did talk about the grave challenges facing china in the external and varmint, particularly with the rise of antiglobalization of protectionism. On the domestic front, li keqiang points to those concerns around the debt bowles, the nonperforming loans rising, the bond defaults, the shadow banking, the online financing. Bloomberg intelligence says some key sectors of the economy pose risks. The auto sector that did so well last year is now likely to perform at a slower pace this year because of the tax cuts theyve been defended from last year are no longer in place. The property sector is still a risk, and then the fed rate hikes. If those hikes come, that would pressure the yuan. China already has capital controls in place and has burned through fx reserves, so it would pose a challenge to the pboc, which is already walking a fine line. Rishaad thank you so much for that. Tom mackenzie, our china correspondent. China leading out this road map. The question we will look at is how beijings policy decisions could play out when it comes to the economy. But next, the outlook for australian markets, the rba preparing for its Rate Decision on tuesday. This is bloomberg. Haidi this is Bloomberg Markets asia i am haidi lun in sydney. Rishaad i am Rishaad Salamat then hong kong. We have a look at the latest business flash headlines. M a talk, Standard Life in talks to buy Aberdeen Asset management, creating one of europes biggest asset pools of more than 800 pay in dollars, seeing Standard Life Share Holders owning 30 of the entity. Is said to cut costs and free salaries of higher paid staff. Worlds Biggest Pension Fund posted its biggest quarterly gain on record. Or 92 gpif returned 8 , billion in the months to january. A decline in the again boosted overseas investment. More than 80 of Stock Investments and strategies that track indexes and benefits from broader equity markets rising. Look at chinag a secondbiggest copper refiner, why . It is thinking that prices will rise this year and it would be down to a higher demand at home and abroad. A boost from speculation that President Donald Trump would spend heavily on infrastructure, 6500 dollars ag time this year. The chairman says he is relatively optimistic for the Metals Prospects in the year ahead. Fed president s, governors, and the chair herself has signaled an intent to raise rates at this months policy meeting. Traders are pricing in three rate hikes issue. Joining us more is the Market Strategist at ig. Great to have you. Futures,ok at s p 500 the worst start to an Asian Session in about a month. Ton also what happened treasuries, markets not liking this, even though we have had the complete turnaround and expectations in about five days. Thats the wayk i would talk about it as well. The movement in the underlying market, the probability of a rate hike has moved from two last week, to a third, now 94 . A guarantee that it will probably happen. Pretty much confirming that will be the case. It does put the brakes on the market. That is an easy conclusion. Looking at s p futures and dow futures, it is the worst i have seen leading up to the u. S. Elections in the last time i saw a Movement Like this on monday morning in u. S. Futures. Have a look in japan, australia as well. It will be a interesting period as we have this pushpull factor between monetary and fiscal policy, and where that filters through into the markets. Equity is still likely to be the main plays, but you can also see movement and the fiveyear bond and to your bond in the u. S. On the back of that expectation that rates will move higher by 25 basis points, and three is the base case rather than two, which is what the market was pricing and this time last week. Have essentially markets pricing in the start of the rate hike cycle from the fed. You have china neither here nor there coming out from the npc over the weekend, but earlier not many in the markets would want to say this because it is politically incorrect, but some participants are hoping for a Marine Le Pen victory because where do you make money and the markets right now . Yeah, ill take the last part of your question first. If you look even with what we discussed in the last five days, that fed rate hike, it is a market expectation for 2017, it is just coming sooner than most anticipated, so you have to work that much harder. Markets are still grinding higher over the last three trading days and today, but in the main it is still moving to the upside, and that is something a lot of people are not factoring into their targets and movement. Marine le pen would create volatility, and thats what you is whereat volatility trading houses get a lot of movement and make more money and dont have to work as hard to get the same return in a volatile market. You can also point to the fact that if you look at the euro, and look at year olddollar over the weekend, the talk around Marine Le Pen, fillon. That means there is an Inflection Point that may be the euro has been oversold and you are starting to see a return. We are concentrating on euro kiwi. There has been a vague disconnect and the kiwi dollar on then beat up on commodity story and the risk around the euro, so that is the trade we are watching. I think the european geopolitical story and 2017 will be smoother and so yes, the french elections will be interesting, but you have to go with the base case that the middle parties and candidates will get elected. Rishaad it is rishaad in hong kong. How are you looking at them. We have Rate Decisions coming out in the next 24 hours or so. Well, the Housing Market, it is a conundrum here, isnt it, for the governor . It is indeed. That is a great question. Tied. His hands philip lowe has a situation where he has debt to income of 160 and going higher, wage growth that is low, inflation well below the mandate of 2 or 3 before they can consider moving rates in either direction , so if he was to raise rates, which is the likely scenario considering gdp growth is good, consumption starting to pickup up, pmi data pointing to that come a he can create a Quick Reaction on the downside, a lot of movement away from any form of stimulus because that household that is quite high. If he was to cut rates, it would stimulate that Housing Market you alluded to and be a problem considering the frothiness in sydney and melbourne around housing prices and would just drive it higher, so from what we have seen coming you would have Monetary Policy completely out of the way inside the austrian market. The we look at is that aussie dollar is trading on the fundamentals. Look at the current account, trade balances for the last three months, and the bulk commodities story. . 72 why it has moved from to as high . 77, and it is likely to hold around that . 75 level. Number asen that gdp a fall. Rishaad the other part of my question is how does it affect financials . Investors must be getting nervous as well . It prettye managing well. They are getting nervous. If you look at their lending and their policy come it is moving that way. They also have an interesting scenario because they are more affected by the fed moving higher because they get a lot of funding for wholesale overseas, particularly the u. S. Market and europe, so it has an effect where they could see funding increased to be competition on the private side, so that is the risk, but in the main, there is a slowdown. If you look at growth and clearance rates, they have not slowed. So far, the big banks will be quite a place to be for the next six months anyway. Haidi thanks for that. From melbourne from ig. Coming up, President Trumps protectionist talk may push other countries to Work Together on new trade deals. That is the view from the eu, up next. This is bloomberg. Rishaad this is Bloomberg Markets asia i am Rishaad Salamat in hong kong. Sydney. Am haidi lun in a senior eu officials as President Trumps protectionist stance may push other countries into working with the european bloc. In an exclusive interview, the European Commission Vice President says the eu wants a trade relationship with the u. S. As soon as possible as it awaits details of President Trumps policy. Theell, we dont know substance of this policy yet. We have just read the tweets and heard the speeches and statements come up but there is very little on paper yet. As everybody knows, the eu is a trade superpower and the Worlds Largest single market, so it is in our dna to support freer world trade. Rulebased trade is a significant part of our Economic Strategy and wellbeing, so what we want to do with the new administration and the United States is to settle down tensions and tried to create as smooth trade relationship as possible. You want to see the detail of the policy, i understand. Are you hearing it is harder for european businesses to do business in the United States anh the dialogue around american first policy, even before new trade barriers have been put into place. Has he gotten harder for european businesses to sell into america already. Not heard any feedback yet, but anybody who has heard what has been said by the new administration has some concerns. It has not materialized yet. So we hope we could can continue discussions with the administration on trade. We look for opportunities to the our trade relationship. We have achieved a lot in these negotiations so far, so now we are waiting the response from the u. S. Side, what we could do more in order to open up our markets. That was the European Commission Vice President speaking to my colleague anna edwards. Sending aing up, message, how north koreas missile launches are reverberating through the region. That and a market check of the hong kong and shanghai open. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. 9 20 nine right here in hong kong p are we are counting you down to the start of the trading day here and shanghai, lots to play out when it comes to the position for equities, a mixed start to the day. Premarket hong kong, lets look there, a slight, light move to the upside by. 2 in the premarket auction. China, theing at communist Party Meeting taking place there. Li keqiang walking a knife edge there. Geopolitics not playing out when it comes to equities sentiment, but joining in on a down day. , bit of janet yellen fatigue fed fatigue, initially rising and expectations they will go this month. The question is how fast will hike cycle bp we are still by adjusting lines from beijing policymakers over the growth targetgdp for 2017 being set her around 6. 5 , or higher it if possible. Aboutiang was optimistic that, but really treading that knife edge of growth, stability, and longerterm growth and stability. Look at how markets in beijing, shenzhen, and shanghai are opening up for trade. Lets get over to sophie. Sophie we are seeing stocks in unchanged, but two days of losses through friday. Uphong kong, the hang seng. 3 , snapping two days of declines. Galaxy entertainment on the up by 1 . Is optimismere around gambling revenue improving in 2017. A closer look at chinese coal and steel stocks. China is planning to lower capacity this year after meeting reduction targets in 2016. Authorities are managing a balancing act to deal with overcapacity in coal and steel while minimizing the effects of layoffs, part of a larger fiveyear plan. Checking in on the yuan after li currency woulde be further liberalized and stability is a priority for beijing, the offshore rate of around the 6. 9 handle here, and the onshore rate did weekend. 4 last week against the dollar leading to the npc. ,hecking on the korean won strengthening somewhat against the greenback. Itomberg intelligence says is the bestperforming currency and asia after the yen. South korean authorities dont see any direct north korea impact on markets, although the weakest in a month earlier before erasing those losses. A delicateomes at time for south koreas relationship with neighbors such as china, so we will keep an eye there. Checking on the japanese yen, strengthening against the dollar. 2 , sliding below that 114 handle amid heightened geopolitical tensions. Take a look at the bond space, risk being taken off the table. Yields are falling across the board here. We are seeing demand for safe haven assets. We are seeing the yield differential between aussie rates and u. S. Rates, and earlier we spoke to j. P. Morgan talking about that yield differential between the u. S. , flagging concerns for the pboc where they perhaps have to consider a more aggressive easing or would they allow for to perhaps become more flexible, and so those with the news lines around the npc, the ability for them to better handle moves around the yuan. Rishaad thank you, soapy. Sophie kamaruddin theyre having a look at the market open in hong kong and shanghai. North korea, pound yang grabbing headlines and affecting sentiment. This is courtesy of paul allen. Paul south korea and japan have called urgent security meetings after concerns that north korea launched several missiles and confirm. Projectiles were nestled into the sea. China is targeting growth of about 6. 5 percent or higher this year and will focus on stability ahead of a twiceadecade leadership transition. The premier li keqiang outlined his aims at the npc. His target compares with last years goal of 6. 5 to 7 . The chinese economy has proved resilient and now want to reduce the dangers of excessive borrowing. The British Government has been warned that it risks producing the worst of all worlds if it tries to tailor postbrexit laws are specific industries. A sector by sector approach reportedly under consideration by theresa may would not reduce immigration, but push up costs. Make wants to start brexit talks by the end of this month. Hasdutch Prime Minister warned of economic can if the Freedom Party wins next weeks election. Opinion polls say the liberals are tied with the antieuro, antiislam party. The vote on march 15 is europes first major test since the u. K. Opted to leave the eu. Thee says it is time to end string of populism that triggered brexit and elected trump. This is the opportunity to stop the trend after the brexit and u. S. Elections and before the german and french elections, for the netherlands to vote for a policy which i want to deliver surentinuity, of making that this successful policies of the last four and a half years will be implemented over the next 34 years. Tom global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Haidi janet yellen has all but confirmed a rate hike of this month, and it appears only a disastrous jobs report could put that off. Kathleen hays is here to go through all of this. Is there still a little bit of wiggle room if we get a bad number on friday . Kathleen i think it would take a very bad jobs report and maybe even inflation that disappoints the day the fed meats and has to make this important decision. Lets let everybody judge for themselves. Lets listen to what fed chair janet yellen said in chicago on friday. At our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations. In which case, a further adjustment of the federal funds rate would likely be appropriate. Nohleen well, there is doubt that on friday this left many traders convinced that it is all but certain the Federal Reserve will make that move on march 15. Lets jump into the bloomberg and look at world Interest Rate projections, wirp. 94 if you calculate what the fed funds futures market is calculating, considering they may move that up to 0. 75 on the key rate. Is it likely . Lets take a look at what payrolls are supposed to do. Heart ofreport is the it. Lets look at 2530. You see nonfarm payrolls for the last year, all those turquoise bars. January was 227,000, healthy number. The yellow line is the six month moving average of 183,000. The forecast is for 190,000. Thats probably Strong Enough for the fed to say yes, the labor market is moving in the right direction. Two other numbers people will be watching closely. One is the Unemployment Rate, now four. 8 . It is forecast to move down to 4. 7 . And finally, paychecks, average hourly warnings forecasted to 2. 5 , again, aom move in the right direction for the fed come up more spending, more spending, so it would be hard to argue with that number. That is what the market will be speaking if we see a strong jobs report, the race right rate hike is all but a done deal. Rishaad they are looking at how many increases there may be this year. What about these tax cuts . Kathleen janet yellen said on friday that she was not responding to what trump may or may not do when she talked about the economy and the appropriateness of a rate hike. It is important to think about what the title of her speech was, from adding accommodation to scaling back. She is talking about the financial crisis, what the fed did and where they are heading now. It is clear the fed is on a path normalization. In terms of risks, bill dudley said before janet yellen that he thinks there is a risk of Donald Trumps fiscal policies being an upside risk to the economy. Lets look at what the fed will have on the table when they go into that. That meeting. Dot , six fed officials were saying we think there will be three rate hikes in 2016. What if that turns out to be more dots at the next meeting . In Janet Yellens speech, instead of calling for policy modestly stimulative, she said moderately. Even more stimulative than it was. Is that a reason to start looking . Have closed on friday mostly unchanged and expected janet yellen to signal the march rate hike and are not getting signals from the fed yet that more rate hike succumbing. If they do, that could hit markets around the world. Nice one, kathleen. Kathleen hays there. Lets get back to the top stories, north koreas missile launches, tokyo and seoul launching protest. Government editor is with me now. What do we know for certain if anything this far . We dont know too much about what type of missiles they were. Shinzo abe came out and said there were four missiles fired into the sea of japan, three landed in japans exclusive economic zone, which is 200 not ago miles offshore. So quite close to japan itself. This prompted their concern. Everybody is watching to see whether it is an icbm. Rishaad on that note, a south korean general tsonga are low chances. Have been they mediumrange missiles. The trajectory depends, the distance depends on the trajectory, so they have to do some more analysis, but it is looking like it is not an icbm right now. , this makes it increasingly awkward when it comes to china, doesnt it . They have been under pressure to do more. We had the announcement that it would be suspending coal imports to north korea. Can beijing do anything else . This is bad timing for beijing. They have the National Peoples Congress Going on right now, so the fact that these are shot the monday morning after the Prime Minister gets his big work report him a one of the highlights of the npc, will not go unnoticed in beijing. There is more beijing can do, but the concern is the same as always for china. Do you allow north korea to collapse, potentially leading to a refugee crisis and a unified korea on your doorstep that is allied with the u. S. . Happens from here really . You have the situation where the carrot and the stick to not work seemingly either. The International Community react from here . That is a very good question. Trump isresident certainly pondering that right now. Military not many good options, and the sanctions depend on china. They hold the most economic leverage over north korea, so howdy get china to come to the table to apply more pressure on the north to potentially stop this Missile Program . A lot of smart people are wondering that very question and dont have the answers. Rishaad when you dont have the stick or the caret, what do you do then . Thank you very much. China lowering expectations for growth this year, premier league reduce of risk. We look at his report to the npc next. This is bloomberg. Rishaad this is Bloomberg Markets asia. Haidi i am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. We have at the moment these global challenges and many things that Chinese Premier Li Keqiang has been taking note of and trying to counter act. He struck an upbeat note on matters in the npc, setting a growth target of 6. 5 or higher, if possible. We can just be cynical and say this is the only country where you set the target in march and that is pretty much what you are going to get. Andhere more wiggle room nuance this time . I dont think there is too much new out of the npc. The adjustment to targets are modest. We are not talking about reform. Were talking about an opportunity to rein in the credit side of things, the Bigger Picture is that china has a significant risk. We know they will take the knife to some sectors, such as steel and coal. Will be economic stability, and that is the main thing. There has been talk about this. There are lots of risks. This knowar about risk of systemic risk, so what is worrying him then . They are reasonably transparent when it comes to risks. They know there are homegrown internal ones. There are also significant risks outside of their control. Faster rateotential of and just rate hikes, having implications for the currency markets, and the yuan, the big issue there. On the other side, we dont know where we are going on trade from the Trump Administration. We dont know what concrete actions they will take. Those are two big unknowns hanging over china in the near term. Haidi that change in the wording when it comes to the currency seems crucial to me. Further liberalization. What does that mean in reality and the implications . Would signalit that perhaps they were allow more flexibility in the yuan and market should get ready, moving away from that language around keeping it stable. On the other hand, you can argue they are merely stating the obvious, that this is essentially the policy they have been pursuing for some time. I hate to say it, but there is an element of wait and see here. It is hard to think that china will step away from the yuan anytime soon and let the markets have their say. Especially as i was saying earlier, it is a year of political change in china, so stability is key, so the broad narrative around the yuan, even if they allow more flexibility in it, it is hard to think they will get too far out of hand. Absolutely. It does seem like this year would be the right timing for it. Thank you for that. Coming up next, more on the npc. Chinese leaders have their goals for the year, but how much will translate into policy action . About thatk more with asia and america, up next. This is bloomberg. Haidi this is Bloomberg Markets asia i am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. We are looking at arguably the most important legislative meeting for china with premier li keqiang outlining the governments goals, revising down growth targets. Is what guest says it is not in the report, and that suggests china is running out of policy options. Joining us now is all li na from asiaanalytica. What are you getting to hear . , the work report, the thing everyone is concerned Chinese Government is concerned about is the pressure on capital outflows. They have done everything practically reversed the freedom of money leaving china. They have done that in order to stop that, and yet it was not mentioned in the work report. So it is clear to me that this work report is a central government, government use of Central Planning coming inetoface with the world which things keep changing, so thing,e doing the same which is to repeat most of the goals they had last year, the same madison medicine, perhaps stronger. Takes time to become domestically focused and have a domestic economy, servicefocused economy, doesnt it . Is done out of the virtue of necessity. Things are very difficult right now. Theyd need growth. They did say the number one priority is employment. You can have jobs without growth, and growth requires resources directed to areas where you can have the shifting drivers of growth at the same switch toasically the consumption is going to slow down a bit. Is this beijing saying it in thisng to, or rather political climate, it is less willing to put into place longerterm reforms because it was to preserve shorter term stability, the irony being these longerterm Structural Reforms will keep longerterm reforms and economic stability . I agree with you. The focus is going to be quite short term this year. Jobs and the impact that any protectionist moves in the outside world might have on chinas exports, so yes, it will be a shortterm focus this year. Pauline, the markets are giving trump grief about not giving specifics and details and his address to congress. We never get details from the npc, but do markets care . I think they do, because if something specific is announced that would affect chinas exports and growth, markets would like to know that china has in place some sort of plan b if exports tank. Say it does. The market would feel more comfortable if they could see what else have you got to make sure that growth reaches at least 6. 5 . Haidi is that enough for job growth. Jobs, jobs hugely important to keep the people happy. Yes, 6. 5 is the minimum level of growth that government reckons is needed to keep most of the people mostly happy most of the time. That is the idea here, isnt it . Policy options, you say they are running out of them, but did they need others . Options thatcy they are repeating and repeating have not worked. With everything they do, every dose of medicine, there is a nasty side effect, so it is almost a case of choosing which side you want. Fiscal stimulus, you have credit problems. You cannot really deleverage, right . If you are going to shift to consumption, then you will move away from the only engine of growth left in the shortterm, which is the investment side, rishaad thank you very much indeed for that. Pauline from asiaanalytica. More on the report that north korea has fired of the stick missiles at south korea. Haidi it is almost 10 00 a. M. In singapore, 1 00 p. M. In sydney, i am haidi lun. Rishaad i am Rishaad Salamat in hong kong. This is Bloomberg Markets asia haidi south korea and japan protest after reports the north launching more Ballistic Missiles. Rishaad china lowers expectations for growth this year. Saying the emphasis is on reducing risks. Delivering a message, president xi jinping firmly in control. Abe tightening power in japan, but economic challenges remain. Without further ado, lets get to Sophie Kamaruddin looking at the state of play. A mixed bag at the moment, sophie. Sophie mixed bag indeed, weakness in tokyo, shanghai, and soul, and u. S. S p futures bearishness monday. There could be further to go on the downside. Looking at the decliners today, the nikkei 225 leading to drop in asia. Korean stocks in focus given developments on the korean peninsula. Taking a look at what is moving on the kospi. Decline is related to reports that china is curbing tourism to Korea Related to heighten tensions around the thaad missile system. On the other hand, we do have Korean Defense stocks on the rise. A closer look at what is moving in that space. As well as first , a weapons maker on the rise. In last time we saw a rise such a stock, it rose by a considerable amount when north korea launched a missile in february 2016. The south korean won earlier so easingmonth the day losses. South koreas joint chief of staff says there is a low chance the missiles launched by north korea were icbms. We still dont have a confirmation regarding the categorization of those missiles. South korean officials saying they do not expect impact on markets from north koreas action. ,aking a look at the dollaryen the broad dollar reaction to Janet Yellens speech was more bearish than expected, so the dollar finding it hard to gain ground against the yen. Bank of america said the pause in the dollaryen rise is due to lingering questions on how many rate rises may come after march and when they will be. 115 is a psychological point to break here. Checking in on the yuan following the npc kickoff on sunday, the offshore rate around the 6. 89 level, the fix slightly stronger this morning from the pboc. At the npc meeting, strategy and focus, officials saying that we could see some relativity, but that is expected in the shortterm. Rishaad thank you, sophie, right, getting back to what sophia was talking about with the south korean acting president saying the norths launch of the listed missiles is a serious provocation, tokyo lodging strong protests after the north fired four missiles and landing in the sea of japan. Bring us uptodate. Rosalind the south korean acting president has said the firing of Ballistic Missiles by the repeated warnings International Community is a serious provocation and frontal attack towards the International Community and has ordered the military to maintain readiness. The south korean joint chiefs of staff said there may have been four missiles and flew about 1000 kilometers. There was an earlier news report that said a serious matter for japan because three of the missiles landed in japanese waters, and japan is close enough to possibly be reached by any missiles launched. There have been no reports of damage so far and a National Security meeting will be held today. The missile tests come as u. S. And south korea go through joint military drills, which north korea has called a prelude to invasion, but nonetheless, the north has been rattling its sabers more recently. They say they are in the last stages of being able to create an icbm, and there is concerned they may be able to fulfill their ambition and reach the continental u. S. Latest move expected to affect the relationship with north koreas key ally, china. The bad timing for china to have to deal with this. Rosalind right, china preoccupied with the npc and the fact it has been trying to work its relationship with north korea and other powers at the same time it is putting pressure on north korea. We saw earlier this year that china decided to stop, to ban all coal imports from china in line with United Nations Security Council revolutions resolutions. While china has been putting pressure on north korea and saying lets talk about north Koreas Nuclear issue come in a way, it is trying to wield some influence over the issue, but also has its eye closely on any possibility that we could see the u. S. Military or u. S. Power in any sense coming closer to its own border. We have seen the u. S. Is missileng the thaad shield and south korea. China is unhappy and said it was said the military balance and risk undermining security. Chinas ambassador to japan told bloomberg on friday that the decision to deploy thaad is like stabbing us in the back. So when the news came out that te group had offered land to install the system, china was not happy. China banned all local agencies rs to south korea, and that has hit some south Korean Companies pretty badly. Seehould expect to increasing tensions regarding these issues with north korea. Chin with thed latest on that Geopolitical Development that happened this morning. Lets get to first word news with paul allen in sydney. Paul the former director of National Intelligence has denied President Trumps claim that the Obama Administration ordered wiretaps on trump tower during the election campaign. The claims came via breitbart news, the rightwing outfit formerly run by steve bannon. Aere were calls for congressional investigation. However, James Klapper denies that any wiretap was ordered. French president ial candidate fi to step rejected calls down, saying he is being attacked by those who want to block frances recovery. The conservative is accused of using public money to pay his wife and children for carrying out fictitious jobs. He denies the accusations, but his Campaign Director, spokesman come and dozens of rightwing politicians have abandoned him. Prime minister shinzo abe has a strengthened his grip on japan with his liberal Democratic Party changing its rules to a loud leaders to serve three consecutive terms. The vote came at the partys annual conference in tokyo and allows the Prime Minister to potentially remain in office through 2021. He came into power in late 2012 and is the longestserving g7 leader under after chancellor merkel. The chair janet yellen has left little doubt that she will raise rates this month, telling an audience in chicago that there are dangers of being too slow to move. She also declared that rates would rise, saying such a move could be expected if policymakers determine the economy is on track. She also suggested it would not be the only increase this year. At our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations. In which case, a further adjustment of federal funds rate would likely be appropriate. Paul global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Haidi thanks for that. Hasese premier li keqiang delivered the governments economic targets for the year, sang the emphasis will be on stability and reducing risks. He also sent a clear message about who is in charge in china. Tom mackenzie as watching the npc in beijing. What with the Key Takeaways from the speech from the premier . No big surprises at the npc yesterday, but two key themes are coalescing around the idea that the primary focus for chinas lawmakers should now be on the stabilization of the economy. Also, coalescing around the idea that president xi jinping is the core of the party and that all power rests with him. That gdponomic front, target of about 6. 5 percent does give policymakers hear some flexibility. Commerzbank saying it shows the tacklingnow on Financial Risks. Commerzbank expecting Monetary Policy will gradually tighten. Other key areas of note from this work report, li keqiang says he would look at sectors that are currently closed off to Foreign Investors and may open sectors, think financials, insurers, health care. Any move on that would be a positive for investors. They also said they want to see more foreign invested companies boosting operations in china and offering bonds, so moves to open up the Capital Market in china as well. Here,d tell me something how likely is it, that gdp target that they nearly always hit, will be achievable this year . Well, li keqiang did put some caveats into his work externalgarding challenges, saying they are grave and pointing to the uptick in antiglobalization and protectionist sentiment come in no doubt alluding to what we have seen with donald trump and brexit, and now in france as well. On the domestic front, there is the auto sector not likely to perform as well as it did last property sector, a difficult managing and balancing act for policy makers, and then debt andthe build up a credit, the bad loans, the bond defaults, the shadow banking, the questions and concerns around online financing, and as you have been talking about already, janet yellen. She will feature an this as well because fed rate hikes would put pressure on the yuan. Capital controls are already in the place, but it would make the pbocs job that much more difficult. Most analysts dont expect them rate,se the key benchmark but expect them to keep muddling through. It will be a tough challenge for the central bank of those rate hikes do come to fruition from the fed. Rishaad well, tell me something, we have a lot of political jostling. You mentioned xi jinping is now whichegarded as core, means his position is unassailable. As we go into the Party Congress, do we have any idea of what is going on and how the deck chairs are being moved around . Know, it is very ok, the system here. It is difficult to know poured to know. This anakin a stick term and accretive stick term tour, jinping as a ore, it was repeated time and again in the work report by a keqiang, li keqiang onetime rival to xi jinping, saying all the achievements last year were down to xi jinping. So itmmunist party seems like there is a coalescing around this idea. It is certainly a strong and symbolic message for provincial and local governments across the country to make sure everyone is in check ahead of what you say is this key Political Party congress towards the end of the year when resident xi jinping is likely to unveil new leadership, a new leadership structure, i love and out of 25 key positions, and five on the politburo security committee, all expected to change. Year, so faral everyone is playing ball, but we will see if these tensions bubble up between now and then. Lot for that. S a Tom Mackenzie our china correspondent. More on what is going on there and discuss the challenges ahead, and we would do that with Capital Economics. This is bloomberg. Haidi this is Bloomberg Markets asia i am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. A quick look at business flash headlines, the worlds Biggest Pension Fund posted its biggest quarterly gain. 8 , or 92ing billion, and the three months to the end of january. Stocks surging and a fall in the yen boosted overseas investment. Stockas 80 of its investments and strategies the track indices that benefit when broader economic markets are on the up. Coffeean indonesian Exporter Group says production will rise 10 in the next season thanks to favorable weather. A drought caused saw this seasons output fall the most in a decade. Indonesia will potentially curb a rally in london futures in the past year. Rishaad chinas secondbiggest copper refiner expecting prices to rise this year after higher demand at home and abroad. Copper earned a boost at a speculation that the new president in the u. S. Would be spending heavily on infrastructure. Jiangxi are seeing prices at 6005 hundred dollars a time this year. The chairman says he is optimistic on the Metals Prospect for the rest of the year. To our toping back story, china is targeting growth of around 6. 5 or higher if possible this year according to premier li keqiang during the npc in beijing. An more, were joined by economist at Capital Economics in singapore. Great to have you. 6. 5 percent, how much does it reflect the realistic aspect of what we could get in terms of growth in china . And more importantly, how much would come at the expense of the broader reform agenda . believe thee really economy has been expanding over six percentage year in recent years, and we think last year, it was probably closer to 5 him about what is important is what it signals to us about the priorities of the leadership on the fact that they have lowered the target of bit, allowed more flexibility, possibly allowed an official print below 6. 5 , suggests to us they are less concerned about growth than they were a year ago, more focus on structural issues, and likely to support growth less through on a terry policy as a result. Rishaad the thing is that if they are indeed going to be talking about though structural issues, they have not been talking about their structural issues and was so do we have any idea where we are going with them . There is talk in the report of structural issues, particular he focused on overcapacity, expected to reform, but the issue will be whether they are doing enough, not whether they are doing anything at all. They are obviously taking steps, but one of the big problems is the overcapacity, but that is a ofptom of the for symptom deeper problems, poor allocation of credit and china, and the fact that does not get allocated to the best economic reformers death performers. It does not seem like they are doing enough to address that. We will be looking towards the Party Congress towards the end of the year to see if there will be any change in the reform agenda after that. We may well see some reform after that meeting because the focus this year at least has been very much on the politics, but unless we see a shift in the reform agenda, even if we get better implementation of the current agenda, that will probably not be enough to resolve the underlying structural problems that are holding back chinas economy. Rishaad just, you know, what is your biggest concern with china . 6. 5 growth is just enough according to a guest we had on to create the jobs necessary to keep the people happy, but longer, how does that play out . You dontblem is if result the structural issues, the poor credit allocation, then you face to bring problems. You either get a financial crisis, a debt crisis, or if the government steps in to prevent a ist crisis and recapitalize the Banking System and bails the Banking System out, you can avoid a crisis, but you dont resources flow to other sectors, and you get lower potential growth and over the long run very sluggish growth, and if we dont see more progress on reforms in the next couple of years, there is a possibility within a decade of chinese gdp growth slowing to 2 , and that would be a major shift. They need to address these issues head on now, because even with the right reforms, it will take a long time to bear fruit, so they need to move as soon as possible. Haidi quickly, the change in the wording on the yuan, do you much weight on that . So i dont think that implies that they will suddenly slight the renminbi this year. Particular given the political environment in the u. S. And that it would inflame relationships ,ith the Trump Administration but it is suggesting they might make small changes to the way they conduct Exchange Rate change in thes a fixing regime or a widening of the band. Communicate this change properly to the market, we might get another case similar to two years ago when a change the fixing regime and the market misinterpreted the move and increased downward pressure as a result, so they will have to be careful even if they are only making small changes are they have to do it in a well communicated manner or you get out of pressure on the currency. A tough lesson learned. Thank you very much. Capital economics in singapore. Coming up, shinzo abe cementing his hold on japanese politics, but challenges remain. We will be live in tokyo next. This is bloomberg. Haidi this is Bloomberg Markets asia i am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. Could become japans longestserving Prime Minister after his liberal Democratic Party changed its rules to allow leaders three terms. Isabel reynolds joins us from tokyo with a look at how shinzo abe has managed to keep support stable for so long. I would be a cynic and turn it around and say he has no competition, has he . Of the majore reasons, yes. We have seen the Opposition Party failed to regroup after 2012, and it support rate is less than 10 . They have yet to come up with a compelling issue the public can grab onto. Shinzo abe has done things to contribute to his stable support. One was to win his upper house election in 2013. That has given him a grip over both houses and enabled him to push through policies rather than get stuck in rank erring wrangling. We can also look at the economy as a factor. The economy is not exactly sparkling, but unemployment is levels, soally low virtually anybody who wants a job in japan can get one, which is supportive of his premiership. Haidi how likely is it for shinzo abe to make it to 10 years . Right, his chances are pretty good, but he does have the challenges of winning two National Elections over the next few years, so there are barriers in the way. Haidi all right. Thank you for that. Isabel reynolds in tokyo. Coming up, more on reports that north korea fired Ballistic Missiles towards japan. Falloutat the grind politically across the region and in markets, which are Getting Started on the wrong foot at the start of this trading session. This is bloomberg. It is 1 29 p. M. In sydney. I am paul allen with first word headlines. South korea and japan have called an urgent security meeting after confirming that north korea launched several missiles monday morning. Japans government says four projectiles were fired and that they flew 1000 kilometers into the sea. Prime minister shinzo abe says he will launch a firm protest with north korea, and south koreas acting president calls it a serious provocation. China is targeting growth of about 6. 5 or higher this year and will focus on stability at ahead of its leadership transition. Premier li keqiang outlined his aims at the npc. His target compares to last years goal of 6. 5 to 7 . Chinas economy has proved resilient and the leaders want to reduce the danger of excessive borrowing. Tidelands popularity among Bond Investors is creating a headache for investors. More than 2 billion of foreign debt have flowed into thai this year, the most among southeast asias emerging markets. It makes the baht the best performer. The British Government is being warned that it risks reducing if itorst of all worlds tries to tailor postbrexit rules for specific industries. By sectorys a sector approach under consideration by theresa may would not reduce immigration, but would push up costs. Mate was to start brexit talks by the end of this month. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Haidi this is Bloomberg Markets asia i am haidi lun. Ishaad i am Rishaad Salamat we check in on the markets, tokyo on its lunch break. Sophie kamaruddin is having a look at what is going on, a mixed bag as we have been discussing. Certainly, japanese shares leading the drop in asia. The nikkei 225. 5 lower, a second day of losses the same from the topix, banks and utilities. We do have retailers here, one falling over 5 . Yamato sliding after reports saying it may compensate workers. 3 , supplyingover aluminum and copper products, so the conviction is being tested as mark cudmore puts it. We are seeing a shift in investor appetite when it comes to japanese equities. 645 zero shows you how smallcap stocks are gaining favor in tokyo. They see more of generally to overseas factors. Security strategy does said large cap structs are mired in uncertainties surrounding long awaited details regarding trumps tax plans. This chartine on rises to the highest since january 26 am a compared to the declines in the nikkei 225 and topix, the blue and yellow fives. The heavyweights on the nikkei 225 looking less attractive than counterparts in emerging markets. 6483, the nikkei 225 in blue. Also looking more pricey than the dow, the white line. Trading at ans average priceearnings ratio at 22. 9 compared with 19. 4 for companies on the dow come a but taking a broader view, the nikkei 225 pe ratio is only 6. 7 higher than its fiveyear average, while the dow is 26 above its longerterm. This could be a make or break week for bowles in japan. In japan bulls in japan. Japan and south korea have issued strong protests over the missile launches. Hasasian government editor the latest on this. What have we learned so far about all of this . North korea shot these missiles, four missiles, three landed within 200 not a comb miles of japan, so quite close. It is unlikely that they were the icbms, that is according to south koreas defense ministry. These are the icbms that could potentially hit the United States. Rishaad why waste four of them when they have so much trouble making one . They have shot off multiple mid range missiles in the past. They shot more than two dozen missiles last year. Routinely these things get shot into the sea of japan, so that is what it is looking like right now. Rishaad tell me something, are there any sanctions you can place on north korea which are not already in place . There are measures that can be taken. You can get stronger on thirdparty sanctions like going after countries that do do business with the north koreans. That would hit china in particular. China holds a lot of the cards when it comes to sanctions with north korea. They took a big step by banning coal imports last month. There is a lot more they can do. They can stop food and fuel shipments to north korea, which would be more devastating to the regime. That is what they rely on for survival. Haidi is beijing likely to take some of these steps . Prettyere talking, it is bad timing and there is this pleasure in beijing this morning. Thats right. This is during the npc, and that will not go unnoticed in beijing. It is seen as a slap in the face. We saw a rare public spat between north korea and china recently where the north was theycizing china, saying are dancing to the u. S. Tune. There are more measures china can take if they wanted to get really tough on north korea, but they are unlikely to do that because they dont want to see the regime collapse. They do want to see its nuclear program, which is causing the u. S. To put a Missile Defense system in south korea, which china is unhappy about, but will they take that extra step . That is pretty unlikely at this stage. Haidi thank you so much for that. Well, this is coming at a time when there are growing tensions between beijing and seoul, korea. This is the result, the result being that we have seen china restricted travel to korea. We have seen that reaction on some of these related stocks. Lets get the latest on this tokyo. The story in how much of a big deal is this . This is all unfortunate timing. A lot of news out of korea these days. About chinas ability to use economic measures against north korea. Tools they can use and has demonstrated it will use with regard to south korea, so the kindsa because of of missile tests we saw out of north korea is interested in a deal with the u. S. To set up a Missile Defense shield. China does not like this. China has taken measures that have included not only the lotte stores you mentioned, but putting a crimp on Chinese Tourists heading to south korea, and this in turn has hurt tourismrelated shares in south korea. Hotel fell more than 10 on friday, down again today, and in fact, down more than 40 since the Missile Defense shield issue cropped up a couple of years back. Thei what are some of other broader implications for chinas other trading partners . This shows the extent to which china again is willing an able to use its economic actions,a tool against diplomatic actions come up actions, security actions, and even trade ones, taken by its trading partners. We have seen this with norwegian salmon after norway gave the Nobel Peace Prize to somebody china did not like. We saw it against a japan when japan took action in the East China Sea did not like. It put a ban on rare earth metals to japan, hurt their Auto Industry in 2012. If you are in Donald Trumps administration and are looking at measures against china, you better be ready for retaliation. Rishaad what about any winners here . Are there any potential beneficiaries from the spat . Sure. Uob saying that if there will be fewer Chinese Tourists heading to south korea come he might want to look at thailand and japan and the which are likely to get more tourists spentult, more yuan being , and that will help some of the tourismrelated stocks there. General look at the rise in tensions on the korean peninsula. That seems to be good for the defenserelated shares. Chris. thanks, joining us there from tokyo. We have to take a break, but coming up, janet yelling all but confirming a janet yellen all but confirming a rate rise decision next week. We have that decision on the way. This is bloomberg. Haidi this is Bloomberg Markets asia i am haidi lun in sydney. Rishaad right here in hong kong, i am Rishaad Salamat. The latest business flash news, kingfisher air selling off property to recover money owed by the defunct carrier. Kingfisher house and mumbai and pricesher villa in goa, lower than 10 after previous attempts to sell them came to nothing. Kingfisher is vita at 15 million. Haidi the promotion of electric cars and china, targets are overly ambitious. Automakers were supposed to reach a new energy for helical credit score of 8 next year, and Companies Failing to do so would be fined. Average production may have been less than half that number with that target now seen as unrealistic. Rishaad Chinese Tech Company xiaomi saying it will be 510 years before Virtual Reality is truly popular. The chairman spoke on the sidelines of the nbc in npc in beijing. He said Artificial Intelligence will be widespread by 2020 and lower taxes and fees across the industry. Yellenfed chair janet has all but confirmed a rate hike this month, and it appears only a disaster he bad jobs report could move the needle ofn it comes on the back that. Kathleen hays filed this report in new york. Reserve of course fed officials had party said the case was stronger for a march rate hike based on a stronger labor market and rising inflation, but when the fed chair herself signaled that she is on board, the chances of a rate hike appear that much stronger, and that is what janet yellen did last friday. At our meeting later this month, the committee what if i wait whether employment and inflation are continuing to a ball to evolve in line with our expectations, in which case, a further adjustment of the federal funds rate would likely be appropriate. Kathleen the chances of a fed in 10, andre now one economists say only a disaster really weak u. S. Jobs report this friday could stand in the way. Our Bloomberg Survey of economists suggest it probably wont. Payrolls are forecast to rise by 190,000 workers, at less than januarys 220 7000 increase, but still above the six month moving average of 183,000. Unemployment is expected to fall to 4. 7 , an average hourly from 2. 5rising to 2. 8 percent. A big question hanging over Global Markets is how many Interest Rate increases will there be for 2017. The consensus remains at three . More lean towards four . The wild card may be uncertainty over President Trumps fiscal plans. Chair yellen says she does not base her view of the economy on possible fiscal policy changes, but if other fed officials are betting trump can get his way, that could be a catalyst for a rate hike in march and a boost in the number of fed rate hikes the fed sees this year. Now we have the Senior European Union officials saying President Donald Trumps protectionist stance may push other countries into working with the european bloc. The European Commission Vice President said the eu wants to once a trade relationship with the u. S. As an is possible as it waits details on Donald Trumps policy. Dont know the substance of the policy yet. We have just read the tweets and heard the speeches and statements, but there is very little on paper yet. As everybody knows, the eu is a trade superpower, and we are the largest single market, so it is in our dna to support free or isld trade, rulebased trade a significant part of our Economic Strategy and wellbeing, so what we want to do with the new administration in the United States is to settle down all the tensions and tried to create as smooth as trade relationship as possible. You want to see the detail of the policy, i understand. Are you hearing it is harder for european businesses are ready to do business in the United States dialogue around and America First policy, even before any new trade barriers have been put into place . Has it gotten harder for european businesses to sell into of america already . Feedback not heard any from european businesses, but everybody who has heard what has been said by the new administration has some concerns. It has not materialized yet, so could continue fruitful discussion in cooperation with the u. S. Administration on trade. Also, we are waiting to look to the opportunities to even our trade relationship. We have been negotiating for years and have achieved a lot in these negotiations amazon now we are awaiting the response from the u. S. Side what we could do more in order to open up our markets. That was the European Commission Vice President speaking exclusively to my colleague and edwards. Are focusing on the french elections with exclusive interviews out of paris later on. 7 30 a. M. London time, the ronnomics advisor to mac joining daybreak europe, then 9 10 gmt, we talk with fillons economic advisor. And if you cant stay up for those interviews or missed out, this is a feature that could help you. S is our and their active interactive tv function. You can find it at tv on the bloomberg, and their cs live interviews or bloomberg functions we talk about. You can become part of the conversation as well by sending us instant messages during the show. This is a function for bloomberg subscribers only. Do check it out at tv. China a coming up, can rival to Silicon Valley . We will hear what . 10 chairman has to say about that and more. Rishaad you are back with Bloomberg Markets asia. I am Rishaad Salamat in hong kong. Haidi i am haidi lun in sydney. Speaking on the thatines of npc, he said tencent proposes a south china tech up. What are the chances of this happening . The question is an interesting time for ma huateng to bring this up because it is already happening. A lot of what he is talking about is happening in shenzhen today. Areonn, most of the iphones made there, real hub of activity, a lot of innovation going on there, smartphones, software. Tencent are there. Why is he talking about it now . I guess he wants to get more Government Support to do the things that tencent once to do, especially content software development. Rishaad how innovative is this idea at the end of the day . It is not that innovative. Rishaad no, it is not. There is not a country in the world the does not want to do some kind of tech park. Taiwan, they been trying for years to get that type of ecosystem going. It has been going in shenzhen and elsewhere across the border in southern china, but what ma huateng is talking about is he wants to seek more to promote his type of business. Tencent content is key for. Hollywoodto buy more movies. He wants to bring in the capital, which we are already seeing, so i find his comments surprising. I dont know why he is bringing it up now. Fact,trying to fly the but what he is angling for is Government Support to promote the things he wants to get done. Rishaad you need that support, dont you . You cant do without it in china. Rishaad thank you so much. A quick check on the markets, this is what we have, a mixed bag. The yen gaining, and surprisingly not affecting the exporters too much. The nikkei 225 lowered, but not by exportrelated stocks. There asas gained well. The shanghai composite up by. 3 , a move to the upside when it comes to hong kong,. 1 up there as well. Sentiment, negative particularly tokyo and seoul,. Orea, the kospi these north Korean Missile tests, four apparently. We are also digesting with the fed reserve chair Janet Yellens comments, the first chance we have had to react to her comments on friday. Increasingly looking like Interest Rates going up again in march, a bit of a shoe in at the moment. Manila, andk of kl, jakarta, mixed. There we go. The philippine market on the way down by. 3 . Haidi truly a mixed bag. You wonder if markets have fed fatigue after an exciting market last week and a turnaround in fed expectations ahead of that march meeting. Ahead, david has the big stories of the day so far. So lets get a preview on what to expect. David right, north korea has our top story. It is a developing story at the moment. We will flesh out the latest from seoul, korea. When you look at what happened this morning, of course the pageantry in beijing, attention grabbing if you will. Out of the north, it may have fired four Ballistic Missiles at the moment. The south says there is a low , so wethese were icbms will flesh out that story of later on. Not getting a lot of reaction to that. We saw an initial pop in defense related stocks tied down as well. Mark franklinons, on his top picks and what he is watching this week. Ou have the ecb you have this foregone conclusion as far as the jobs data is concerned when it comes to what the fed will likely do. Is it time to get on the other side of that trade . At more, the chief economist on everything that came out of china over the weekend. Hugh jackman from the xmen series, topping that north American Box Office over the weekend. Logan taking more than 85 Million Dollars for 21st century fox, the strongest debut of the year so far. That is despite the film being given an r rating for its darker content. Withad get out was second 26 million, and the shack 16 million. We are in the middle of the asian trading day. Welcome to Bloomberg Markets asia. Reports that north korea has launched more missiles. Seoul and tokyo firing off protests. Is now stability and Risk Reduction in china. In singapore, they remain one of the easiest places in the world to find work. We will look at a new survey. A lot to talk about. You have the ecb, jobs data on friday. Are we expecting anything else to come . Is a time to get on the other side of the trade . There is a little bit of stagnation. Here is asia for you today. No consistency. Markets are generally mixed. Extentn reaction to some to what we saw on the weekend. Looking at the u. S. Dollar, some stagnation. The biggest movies the australian dollar. Commodities a mixed picture. Crude, a very tight range. Whenever we get more news of more opec cuts, you get a rise. That seems to be keeping prices honest. Is it time to get on the other side of the trade . We will be fleshing out the stories later on. In the meantime, first world news. A former director of National Intelligence has denied President Trumps claim that the Obama Administration ordered wiretaps on trump tower. The claims came from breitbart news. Calls for a congressional investigation. Wiretapyburn denies any was older. Shinzo abe has strengthened his grip on japan with his party changing rules to allow its leader to serve three consecutive terms. The vote came at the annual conference in tokyo and allows the Prime Minister to potentially remain in office. He came into power in 2012 and is the longestserving g7 theater after chancellor merkel. Janet yellen leaving little doubt that she will raise rates this month, saying there are dangers of being too slow to move. She all but declared that rates will rise, saying that such a move could be expected as policymakers determine the economy is staying on track. She also suggested it would not be the only increase this year. The committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations. In which case, a further adjustment of the federal funds rate would likely be appropriate. Reporter Francois Fillon has again rejected calls to step down, saying he is being attacked by those wanting to block frances recovery. The conservative is accused of using public money to pay his wife and children for carrying. Ut fictitious jobs he denies the accusations but his Campaign Director and other politicians have abandoned him. We are focusing on the french elections with some exclusive interviews from paris later today. The economics advisor to president ial candidate emmanuel macron, jean pisaniferry joins daybreak europe. Then, we speak with francois advisor. Conomic inbal news 24 hours a day more than 120 countries, this is bloomberg. Lets turn our attention to south korea. Th korea seoul has joined tokyo in protesting after the projectiles landed in the sea of japan. What is the latest . Rosalind we have been getting reports all morning from. Fficials in security meetings the chief japanese cabinet secretary has said that japan is on the highest possible alert. He says for missiles were fired at the same time, putting the threat that a new level. Kilometersout 1000 and three of them fell into japanese waters. South koreas acting president has condemned the actions by the. Orth calling it a serious provocation and an attack on the International Community. He has over the south Korean Military to remain ready. Their joint chief of staff saying there is a low chance that they were intercontinental Ballistic Missiles. This comes at a time when the u. S. And south korea are undertaking joint military prelude to an invasion. David has china responded . China increased tensions between the koreas because it decided to ban coal imports from north korea earlier this year, part of a un Security Council resolution because of north Koreas Nuclear program. China is in a difficult position. Couldkoreas collapse bring a south korean ally to the. S. Closer they are not happy about the installation of the defense shield. We saw that unfolding on friday when there was news coming out that china had banned local travel agents from booking tours to south korea. Companies impacted by that. Generally, tensions are high in north asia regarding north Koreas Nuclear ambitions. David of course, you have to consider the United States. You understand why the United States said they are not ruling out military action. That said, nothing is working to really just pull them back. Rosalind we have seen talks, sanctions. It seems that there is very little leverage at this point on trying to achieve anything in terms of stopping north koreas. Uclear and visions since kim jongil came to power, there has been a series of missile launches. There have been five tests in total. Three of them were under kim jong un. We know that north korea has has claimed to have the capability to reach the United States. Defense analysts say thattopher hill had said north korea can claim credibility within four years of hitting the United States with a nuclear weapon. So, that is a concern. Kim jong un said that north korea was in their last ages of. Reparing to test fire and icbm trump tweeted that will not happen. [laughter] rosalind on the latest from north korea. Our other top story has been china. The country lowering growth targets for the year saying that priorities are now in stability. Now 6. 5 compared to. Ast years 6. 7 chinas economy has proved resilient and leaders want to reduce the dangers of excessive borrowing. We have been talking a lot about china. Pfister in a politically sensitive year, they will do Everything Possible to achieve a 6. 5 target. I do not see any problems because now the economy is actually doing very well. You have the Property Market booming, Traditional Industries recovering. The Service Industry is also growing at a rapid pace. David we also heard from the capitalism. Red he is saying that chinese leaders are not focusing enough on debt. Targets are being met the Property Market is booming because of leverage. You can look at the output. You also have to look at the input, as well. The worry is that there is not enough focus on input. It is strong because there is an incredible amount of Debt Financing going into it. It smooths over the problems for this year, and this is a happy political year. We have a political transition later this year for xi jinping. That just postpones their problems. David another says china has shifted to a consumption economy , which may slow it down this year. Things are very difficult right now. They said their number one priority was employment. You cannot have jobs without growth. You to Channel Resources to areas where you have a shifting of drivers of growth at the same time. Basically, i think that the switch to consumptionled growth is going to slow down. David and that is the word of the National Peoples congress in beijing. Lets have a look at the markets right now. We are nearing the lunch break here in hong kong. Sophie, get me excited. Sophie it has been an eventful half of the day. Have the latest from china and janet yellen, along with two political tensions around north koreas launch of the missile. U. S. Stocks featuring quite lower, treasury yields slipping. Gold, little change. Oil, in the retreat. Nikkei 225 shares are falling as the yen is getting. We have been focusing on the drop in consumer and tourism stocks given reports that china is curbing travel to korea. Defense stocks have been gaining given political tensions. The yuan recovering. Hanjin shipping slumping almost 32 after creditors were given the goahead to sell stateside container assets. In sydney, the asx 200 looking study. Materials and telcos leading the gains. We are seeing shares in hong kong rising after its biggest weekly loss this year. Lets pull up this board to show you that stocks in shanghai and shenzhen are gaining and chinas index is leading the pack, led by automobile stocks. It is on the verge of a racing its yeartodate loss. Be a very bullish signal for chinese stocks. This coming after the premier said the government will actively develop the index. Is that enough to get you excited . David yeah, a little bit. Hinexyou look at the c market. The pearlng up, can river delta become chinas rival to Silicon Valley . We will tell you about the plans for tencent. Next, march rate hike, march rate hike. Why asia remains the most sensitive region in the world. That is next aired this is bloomberg. David welcome back. On theck check right now latest headlines. The worlds Biggest Pension Fund posting its biggest quarterly gain on record. Billion. 2 the fall of the yen boosting overseas investment. They have over 80 of their Stock Investment in strategies. It benefits when broader equity markets are rising. In indonesian coffee exporter since production will probably rise 10 during the next season thanks to good weather. Droughts caused by el nino saw a change. A bigger indonesian crop will nestlee supplies used by , potentially curbing a rally. Chinas secondbiggest copper refiner expects prices to rise this year on higher demand at home and abroad. Call burns a boost from speculation of President Trump spending heavily on infrastructure. Says that he is relatively optimistic on the prospect of the metal this year. Janet yellen has all but sealed the deal for a rate hike in march. Course,data, of cooperates. Mark franklin is responsible for equities and Portfolio Management act con a asiapacific. Everybody seems to think they will be a hike, suggesting it is time to get on the other side of the trade. Is there a case to be made . Thet if you look at where expectations are, we are still between 23 rate hikes. The dollar would likely come under pressure if the fed is unable to raise rates that many times this year. The indicators that we look at, narrow money growth that suggests that this spring, you might start to see u. S. Economic data start to moderate into the second half of the year. The rest of the Global Economy does well but u. S. Stocks slowdown, there may be a case in other economies move ahead. David as far as the jobs data is concerned, is there a number that we can get on friday that basically takes this rate hike off the table . Guest there is a range. If you go below 100,000, that may cause market shifts. It is more important to look at the wage growth. If we get a further growth moderation from that level, the question would be, are we really close to the full pace of momentum . David when you look at the bond market, when this does eventually rise, what does it mean for emerging markets . Do we see more outflows and where . Guest equity valuations have spread ofction of the Free Cash Flow over riskfree rates. That could put pressure on equity market valuations. I think to technical level to focus on is probably approaching 3 . If we get to that level, that not only places the 1980s, the rates were much higher. In the context of the United States, that multiple has been relatively extended, that percentage places pressure not on just emergingmarket equities, but Global Equities in general. David there is a difference between being overbought and overvalued. Are we seeing a structural change in the u. S. Equity market . If we get above 3 , do we take all that these valuations and ignore them . Guest you have to understand, why are we getting to 3 . Is it because Inflation Expectations are rising dramatically . Code inflation or bad inflation . That would be a driver in terms degrading we get a which could offset pickups in earning growth potential. David you brought up a technical bid. What does that mean . Guest a situation where large onshore chinese institutions, if you look at their Asset Management portfolio funds, they are not diversified. What we are seeing david that is very policy driven. Guest itsalso historical. Ontext, being inward looking youll see a theme of diversification, and foreignexchange, as well. We are those mainland institution starting to diversify. One asset class that does very well on an ongoing basis is [indiscernible] offshore bonds of chinese companies. That is relatively close to home. It allows you to diversify your currency exposure. David i want to talk about china. . Thee get the index up headline number was 6. 5 . This one tells you different story because you have freight, bank lending. What do you make of the numbers yet go do your necessarily have to believe the numbers to make a good Investment Decision . Guest that refers to the goal for gdp growth this year in china and i think that the idea that they would try to get above that if possible. It is a very small moderation in the pace of growth. That index is and that index is interesting. On realers to focus policy, growth. And also, consumption growth. Underlying activity which is not a coincidence, but also an indicator of market momentum. If you look at it index, there is a sign that maybe it is cresting. We had strong acceleration in china but that has been underpinned by some very aggressive fiscal stimulus. If that moderates and normalizes, that might have implications to commodity prices. My view would be to focus on the political side because we have the National Congress coming up a big power should transition. The chinese will want to consolidate power around president xi jinping. Any downturn in the index will be at the back end of this year. David stick around. We will continue the conversation later. In the meantime, coming up, we are going to be talking singapore, one of the easiest places in the world to find a job depends what kind of job you are looking for. This is bloomberg. David singapore has long been one of the easiest places to find work in the world, according to a new survey. We are live out of singapore year. When us to know about this . Reporter the survey, they have done a survey of 450 companies in singapore, looking specifically at Recruitment Trends in 2017. We know that the Singapore Jobs market has faced a tough time in recent years, even though it is one of the easiest places to find a job. The Unemployment Rate is currently at a sixyear high. What they have done is they had surveyed, looking at salary, trends, and employment trends. Saying that they plan to increase managers and senior level employees their salaries. That is pretty encouraging if think that average rages wages increased last year. David can you talk to us about digital and the Tech Industry . We have heard that the government want to push their. There. Certainlythat is being highlighted by the survey. Job increases are going to be in Digital Technologies and health care industries. We see the government putting a lot of attention into those industries to try and boost employment and growth. David fingers crossed. Well be looking forward to the afternoon reopened in tokyo. This is bloomberg. A. M. , and 12 29 p. M. In tokyo. I am paul allen. Have korea and japan called urgent security meetings after confirming that north korea launched several missiles monday morning. Japans government says for fired wererd fired and flew of about 1000 kilometers into the sea. Shinzo abe will launch a protest with north korea. Lawmakers were told china will coal output less aggressively this year after meeting 2016 reduction targets. They are planning to lower capacity by 150 million tons, and deliver 50 million tons less steel. Workers of thousands of face layoffs from rust belt industries. The British Government is risk it is being warned it can produce the worst of worlds if it tailors brexit rules for industries. A sector by sector approach currently under consideration would not reduce immigration, but would push up calls. Theresa may wants to start brexit talks by the end of this month. The dutch Prime Minister has warned of chaos. s aren polls say rutte ,irtually tied with the nteuro antimuslim party. Says it is time to end the spread of populism that triggered brexit and the election of donald trump. This is an opportunity to stop the trend after brexit in the u. S. Election and before the u. S. French and german Elections Come and for the netherlands to vote for a policy which i want to deliver of thatnuity of making sure the successful policies of the last four and a half years will be commended over the next 34 years. Paul global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. David good one, paul. Back to theiryo desks, algorithmic programs being switched on, lower. More details from sophie. Sophie the nikkei 225 coming back online. We do have shares in tokyo allingham. 5 , set for a second day of losses, same for the topix given what we are seeing with the yen. We have seen the dollaryen pause and terms of its rise, and bank of america saying that is nowuse there is anticipation of the timing and frequency of the fed rate hikes now that janet yellen has bolstered the case for an ides of march rate hike. A quick look at the won, we did see a spike earlier following developments this morning around the korean peninsula, coming back above those levels. Indonesia, the dollar holding losses. The rupiah appreciating as global funds by into indonesian bonds and stocks. Goldman sachs says hi gilt markets like indonesia are outperforming. Pacifico look at cathay in hong kong. 6 . Es of surging almost they have fallen 11 the past 12 months, but today getting the most since august 2016. The airline is trying to revamp the business and revive a earnings. In january, Cathay Pacific spoke of changes at the top, and there are questions of around the leadership given the struggles over the last three years. Cathay pacific now of 5. 8 . David very nice. 12 box a pop. 12 a pop. The Chinese Premier Li Keqiang has been laying out his plans. Lets get it over to beijing, where Tom Mackenzie is standing by. We have been trying to digest the top targets unveiled by premier li keqiang yesterday and his work report. Im joined by the chief c, chinasat cic most Influential Investment bank. Lets start with with that gdp target of 6. 5 . How realistic is the Chinese Government can hit that target by the end of the year . Government and International Community this year have more confidence they will be able to reach that target and probably surprise on the upside. Look at the global environment, global growth, it is in much better shape now compared with a year ago. Shoulde export factor give investors a little more confidence because it reached the target. Key challenges facing growth . We have domestic challenges and external challenges with protectionist sentiment that premier li keqiang mention in his work report as well. Isthe way we see it is there the old economy and new economy. I think this rebalancing has to a reasonable pace. If the old economy is too heavy, too fast, you get the overall economy dragging down, so again, still about how fast the new economy is growing, how fast the old economy is being restructured, that balance. On we heard positive words the need to focus on Financial Risks and rein in credit, but we have heard those words before and many would say there has been little action on the ground, jet to dgp debt to gdp is 620 , and a rise in default. What will we see as concrete action . You expect them to take concrete action . Good news,piece of if you look at that gdp ratio, that ratio has been accelerating since 2012, but last year was the first year that growth rate of that gdp ratio started to slow down. I think very much thanks to gdp growth stabilized and nominal growth has picked up, so the challenges facing the government looks a little bit better because growth has stabilized. I think they are moving on some of the structural issues, including local Government Debt swaps, bad equity swap restructuring of the old companies. I think hopefully this year with growth, they have more confidence in the growth stabilizing and can take more forceful actions against a zombie companies. Tom how much should we read into the change of the language around the yuan . The language was changed . That language was changed in the middle of december after the working committees meeting of the central communist party. It seems to be emphasizing more stability rather than the market maxim is some, and from that point onward, we have seen more stability in the currency. Am how can they maintain Stable Currency when the fed likely to raise rates in march . We may well get three hikes this year. That will put downward pressure on the yuan. Ofthat is just one dimension looking at what affects that Exchange Rate. The other side is how much confidence domestic investors and overseas investors have been the chinese economy. A stability has been much better, and i think confidence is coming back wretchedly the domestic and International Community about china being able to pull through this transition. Tom what you expect to happen with the capital outflows . Control hascapital been enforced. Is a less evil compared with the alternative, because the outflow and starteds about renminbi to threaten to mystic stability. To put a stop on that probably is the less evil at this time. So i think at this time this year we think as china gradually demonstrating its capability to manage growth, to manage reform, confidence will come back and capital subside. Y also subside. Capital flows will subside. Capital also subside. I think the word is we have created so much attention to real gdp growth, but what has been missing has china has moved 6 m deflation nominal growth at the end of 2015, and at the end of last year, it started to move back to 9 . It looks like it will go to growth,igit nominal gdp and at the moment they dont see much rate hike pressure, but if income continues to recover along the Global Economy, a rate hike, even currency appreciation, could be a topic of next year would talk about the chinese economy, they may be back on the agenda. Tom one key risk is donald trump and his threats of tariffs here at how significant with that impact the tariffs. How significant with that impact be . How prepared is china for that . So muchhas introduced certainty because this is the first time a republican allocate started to trade protectionist policies, but it even introduced more certainty in the china part of the response because china will of course try to work with the u. S. , but at the same time, they probably have to work harder how demand,tart domestic because what ever happens come at this is their best defense. On nother area focusd focused on by the investors in addition the property sector, prices have come down in beijing , excess capacity has been eaten up and third tear and for tear cities. You see them pulling back on the curbs this year . It depends on whether they can come up with more supply for the first year firsttier and secondtier cities. We have seen the property money surge, picking up, all the inventory starting in firstyear firsttear cities. The government has mentioned in the work report they will try to and at with more supply, the same time, they have one target, increase urban residents by 13 million. How would you house them . Betterve to come up with supply policy in cities were Migrant Workers come in. If they can do that, i am more confident that property prices stabilization will stay, otherwise same problem will emerge again. Government mentioned they would like to encourage foreign invested companies to list in china. How significant is that . I thought that got everybodys attention and excitement in our industry. They mention Foreign Companies can raise equity and bonds in domestic china. We have not seen that mention for a while, so lets see what will evil. I think the bond market is being opened up. The equity market was struggling with its own issues. If the governments policy and changes proved to be working, they may have the confidence to allow some of the companies to come back. Tom thank you very much. Giving communist of cicc her thoughts on the work report delivered by li keqiang yesterday. Sanguine on the question of debt, and moderately optimistic on the Growth Prospects for china and the opening up of Capital Markets here. David right, chinas leaders are also optimistic. We will talk about that later on. So, yeah, when you look at expansion in china, leaders are striking an upbeat note on the nation expand and as they would really come a but are systemic risks really under control . Our Group Discussion is coming up next. This is bloomberg. David welcome back. Im david ingles. This is Bloomberg Markets asia. Consider the sale of its struggling european unit. It is said to be worth about 2 billion. An exit would give gm from a business that has lost 9 billion since emerging from bankruptcy in 2009. Reports there say kingfisher air lenders will start to sell Company Property to recover money owed by the defined carrier. Kingfisher house and kingfisher be auctioned,ill prices 10 lower after efforts to sell them came to nothing. Kingfishers guide now at 15 million. The promotion of electric cars in china may be dialed back after feedback suggesting targets are overly ambitious. Automakers were supposed to year,a level of 8 next and companies have failed to do so would be fine. The target is now seen as being fairly unrealistic. Welcome back. Lets talk more about the markets. Our guests are here. One thing we have heard. Fund managers have said 2017 will be volatile. Measures ofk at the of pleasu e implied volatility, there is a spread. Isthe reason why volatility so low is because there is a next us of liquidity in the system. Remainsas liquidity abundant, volatility remains low. It will be a test for Financial Market resilience in the next couple of weeks. A super 15, it will be wednesday or black wednesday, dutch general elections, fomc likely to raise rates, theresa may will trigger article 50, and the debt ceiling expiring in the u. S. Come as a next week could be a real test. Q2 is richon in especially in europe. That will be a test for the resilience of the rally so far. It does seem investors are quite buoyant. Even with the north korean launch, collections in europe looming, higher Interest Rates, is there something happening beneath the surface were not so focused on . Retail has engaged in this rally in the u. S. Wednesday, and 8. 5 billion of flow into etfs in the s p and one day. That is real engagement in retail. That could see this rally sustain for a little while longer. Unit the Retail Investor comes in, Retail Investors head out, right . The political risks, how are you positioning yourself . We have been positive on risk assets. Do you say to this risk rally up at some point, my view is the pace of positive data surprise for the last few months starts to moderate the middle of this year, particularly the u. S. , but most regions seeing slowdowns on a monetary basis, so there is a prospect of taking profit that is premature right now. Im seeing positive reaction to the npc, so im curious on your take as to why. Does it look as if this will be steady as she goes and maybe not as much reform and they will cling to reasonably high levels of growth . The language employed out of the meetings over the weekend were fairly constructive, no negative surprises, and this is a year of consolidating authority around president xi jinping. Theres a big turnover for members of the politburo. It is about the stability of policy, the economy, so beyond that it is a question. Monetary stimulus has been elevated for the last couple of months. Saying shet was reckons the chinese have run out of policy options and she is getting worried about this. What is your view . You should be willing to expect policymakers come up with a new policy toolkit. Who wouldve thought of quantitative easing . So no one should ever assume the innovation around the lessee, that it stops here. There is always the potential to come up with a new way of keeping the rally going and monetary stimulus going. Now more than ever when you look at markets, to make the distinction, between being overvalued and being overbought. One has to do with momentum, the other with expectations. What are your takes on both concepts . Are both useful approach is to take in terms of buying and selling. Are elevated right now, so that is a reason to take pause in the shortterm, but from a valuation point, it is more important to build the portfolio on the medium to longterm basis. A valuations are not cheap in the u. S. Equity market, but there is a debate whether overly expensive or fairly forward. Its a must like bonds over the last few dears years. The risk between free rates in cash flow has been an important metric for valuation, and that continues. So long as riskfree rates behave themselves, thats before you start thinking about earnings momentum and growth. We get tax cuts and the u. S. , that adds a layer of growth into u. S. Equity markets. Bond seems like the markets are not joining in on this animal spirits reinvigorate edition reinvigorated market. We see the yields tightening, the curve, so what is the bond market telling you that is different than the equity markets . Flatteningseen the of the yield curve this year. That comes after a steepening of yield curves on the back end of last year. That flattening is saying Something Different to equity markets. If the fed for lings brings forward stabilization, that brings growth. It. E is also a technical there is a global search for yield, demographics, baby boomers retire, so there is a technical bit, but the bond market saying if the fed without too much evidence, then that could stave off the pace. Will some of that money flow to china . Some of the narratives you are seeing, particularly for u. S. Investors should be diversified beyond the u. S. If you get through the political season with fairly status quote outcome, then it is like a coiled spring, some of the best positive earnings revision ratios coming out of europe right now. You have very run corporate that theleverage for upside in economy, so there are opportunities beyond the u. S. , asia, europe, that investors can tap into. On that positive know, lets leave it there. Coming up, everyones favorite hask, tencent, the chairman a vision for chinas Silicon Valley. Details next. This is bloomberg. David welcome back. This is Bloomberg Markets asia boss ma huateng says china should create a tech hub in the river delta but should rival Silicon Valley. Speaking on the sidelines of the idea would help maintain stability and hong kong and macau. Really here is what are the chances of that actually happening . It is already happening. If you look at chen shen, it is the hub of manufacturing. So much of the worlds electronic products are made in shenzhen. Free much every mobile phone passes through shenzhen. Side, itsware happening. Then we talk about adding content, software, tencent the perfect example, more and more of that is happening. So what ma huateng is talking about is something that exists, but hes adding to it. China graduate enough skill i know there are lot of engineers, but whether there would be a skill mismatch at some point . In china. Re skills they are turning out some good engineers at all sorts of levels. We know they are not up to the western standards in terms of semiconductor technology. On the flipside, the chinese ofd to be a great example building apps, social networking, the technology there, and also cloud computing, so what ma huateng is talking about is taking that further not just connecting southern china, but hong kong and macau, making a trying triangle. David looks formidable. On . 10 you can check it out on the website. It is also on the bloomberg. Look at markets across the region, generally ok, a decent been bid. , shanghai composite, japan, south korea, stronger won in play. Down 2. 5 on the kospi. Aussie leading the weakness across some currencies in asia. A decent session there. Not the most exciting. Taiwan, singapore, malaysia, philippines. More next. Yousef the rise across asia, north korea set to launch more missiles. South korea and tokyo fire off protest. Lowering its growth targets. Stability and Risk Reduction are the priorities. Yousef relationships between turkey and germany sink amid accusations of problems with democracy