1990. Kim jongun tells the world north Koreas Nuclear weapons are a reality and a button is on his desk. Good morning to haidi and good morning to our viewers across the world. We ended 2017 year to date for equities on a high note but we are seeing some volatility possibly happening coming out of north asia with kim jongun. Taking a look at what happened in the last day of trading here, down by half a percent. If you were totally in from 1 through the end of the year, you were 1 through the ene year, you were up by 20 , as much as 30 if you are in the nasdaq. Haidi absolutely. We were talking to garfield earlier, 7 when it comes to aussie stocks, barely a blip in comparison to the heavy gains we have seen for u. S. Equities and across asian equities. In particular when it comes to japan. One of the markets not trading today is japan as we have a number of markets still offer the new years holiday. New zealand, tokyo, thailand and the philippines on a break today. We are setting up for a pretty holiday shortened week and thin volumes on the ground. We saw crucial data points out including chinas pmi. Of course, we are working our of dataugh quite a bit from u. S. Culminating in payrolls at the end of the week. Trading in australia is just trickling online. Mining up when it comes to the iron ore and the aussie dollar as we get the crucial reading on the economy. Ofpmi showing steady as she go. We are looking at more of the same when it comes to the private actor. Gold futures lower by 3 10 of 1 . We are seeing new york crude holding a 50 a barrel. Iron ore seeing a bit of an up. We are looking at the miners potentially seeing that positive support. Lets get you up today with the first word news. Haslinda . Haslinda President Trump has called for change in iran as protests turned fatal. He posted a series of tweets saying that country is failing on every level and denounced the 2015 nuclear deal signed with the west. The president wrote that the have beeniran repressed for years and hungry for food and freedom. He added the wealth of iran is being looted and it is time for change. Kim jongun has warned thathe ae north Korean Nuclear capability is a reality, not a threat. He revived his grandfathers message of a new years message, something his father dropped. He said the north has defeated its Nuclear Program and the launch button is on the table. Kim also wish to the south success for the upcoming Winter Olympics and called for improved relations. Expanded to exports its highest and at least six decades, boosted by semiconductors, machinery and chemicals. Shipments rose almost 16 from a wideningier, leaving to 96 billion from 89 billion in 2016. The bank of korea raise rates in november for the First Time Since 2011. The biggest change in European Investment industry rules in a decade take affect on wednesday as regulators seek to prevent another financial crisis by boosting transparency and shedding conflict of interests. A broad range of Asset Classes and products, including cash and derivative instruments, commodities as well is fixed income. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Ramy thank you very much. Two of asias biggest economies finished 2017 on a strong note, as chinese manufacturing shrugged off the initial campaigns against debt and pollution. While korean exports hit a 60 year high. Our policy editor Kathleen Hays has the numbers. Lets start with china. Can beijing maintain this momentum . Kathleen part of the question is how aggressively the Chinese Government can pursue these big policy changes like pollution and bringing down the inflated chinese debt. For now, 2017 and 2018 look good. Lets go to the chart because we want to look at the purchasing Managers Index that we got in the last day or so are. This white line is manufacturing at 51. 6 in december. Anything above 50 signals growth it is down a little bit from 51. 8 in november. Chugging along. Not spectacular but definitely some momentum. I would like to point out that we had good growth in output, new orders and jobs picking up as well. Now lets go to services nonmanufacturing at 55 in december, up from 54. 8 in november. Construction is the biggest driver. You can thank the chinese in government Infrastructure Spending and stronger global demand. A Deleveraging Program that was always promised it has not been hit hard yet. Bloomberg economics expects moderate slowdown in 2018. They believe the tailwind an instructor spending will help less and go less strongly. They see the headwinds from as theaging increasing Chinese Government gets more serious about this. The latest Business Survey, Fourth Quarter, painting a positive growth picture. Good expectations. Haidi in south korea, the trade picture start of the year on the high, continuing the high. A 60 year high when it comes to south korean exports. What is behind this . Kathleen i wish i was a south korean exporter, frankly. Lets jump into the chart. I want to take a look at some of these numbers in the context of these blue bars which are south korea exports. Of course, the yellow ones are imports. Pretty strong on both fronts. Here is the trade surplus that results. It has had some ups and downs this year. That is an issue for the economy and government as well. With trade surplus to 89 billion in 2016. To 89 billion in 2016. Semi conductor shipments jumped 57 . Lets move on to some of the dynamics because the trade is driving the economy which is also driving policy issues. Exports helped drive the rate hike in november. Maybe going to slow it down a bit. Big trade surplus,g that continues to be a little bit of an irritant for donald trump and his White House Team . Charge isanipulator still over south korea which complicates that potentially. In terms of statements from the government, the Global Economic recovery is continuing to see it demand rising next year. Those are some pluses. As for negatives, rising protectionism, the possibility of a stronger yuan, particularly of the bank of korea raises rates which they may that is something that it will take a chunk out of it. They could take a chunk out of their export growth and not t hat. Haidi thank you so much for that, Kathleen Hays. China starts news with critical battles against debt, poverty and pollution, president xi is expecting more modest economic performance. Joining us now is joshua crabb, head of asia equities. He thinks any efforts to reduce future risks and volatility is a positive for chinas markets. Lets get to how it is a positive when it comes the chinese equities in a moment thank you for joining us. Do you think they are finally gettingdo you think they are fiy getting serious, is there going to be a followthrough and how much correlated pain is beijing willing to take for that . This is an interesting question. We have seen the financial arena, but also aspects of older excess capacity. I think for the first time, for the last decade, we are seeing genuine change coming across those areas. Some people see it as two steps forward and one step back. I guess it is not occurring but we do believe it is happening and we think it is a positive. When you consider the context, taking the hsci as a proxy for the value of the market, there is not a lot for positive outcome. Haidi how does that involve your outlook when it comes to Chinese Markets going into this year . Because we speak to a lot of people and the consensus seems to be growth of some of the innovations, clearly if it is a financial risk being cut, you stay away from the developers what is your strategy when it comes to china this year . Joshua most people probably poorly last will do year. It was a very strong performing market and currencies would be negative. It has a positive turn by the end of the year. Poorly last year. Our perspective is we have seen quite a bit of performance out which means you have to be focused on what you are looking for. Reducing opportunities. If you look at the areas like which means you have to be focused on what you are looking for. Technology, and a lot of people still very excited about, we think it is important to look at some of the new areas. 3d sensing, rather than being focused on mobile internet where it is a very crowded space. You have seen good returns from even some of the Industries Like coal and steel. We think having an open mind and looking at the various opportunities will be positive. The backdrop of the market that people are still underweight and people dont like and is cheap with policy tailwinds is a great backdrop for the market. Ramy i want to get your reaction to what we got over the weekend for china ecodata with regards to manufacturing at 51. 6. Still growth but down by 0. 2 . How much does this dovetail with it seriousness about whether is really getting into the act or is it someplace else . Joshua i think it is difficult to look at the shortterm measures and try to predict what the future has. We are seeing a lot of closures and some of the capacity areas. That staying a positive for the stocks in that part of the market. It has ramifications for things like the Banking System and the bad loans as well which we think is quite a positive. The other sort of site is this is to have people tended to focus on manufacturing in china because that has always been a key part of the economy. We are seeing a huge transition not just in the chinese economy but many asian economies which moves much towards more towards consumption and the Services Side of things. We see that being a strong environment for china. Ramy with gdp coming in for 2018, it looks like consensus has incoming lower by about 6. 7 . It is about 6. 8 . Looking ahead, what do you think about this i have read that it could maybe go as low as 6 . Think this is one of those hard ones where people say there has to be a level of gdp because that will be a positive outlook. If we look at the u. S. Market, it is more like cap that level. The rate of the market is almost double what it is in china as well. I think it comes back to the eight old submission that gdp is not necessarily the most important thing when it comes to the stock market and i think that is the case here. Gdp has to slow. That will continue to happen over time. It does that mean the quality returns in the market and stock market given the valuation level cannot generate quite a reasonable return for the next. Of time. Ramy we have to leave it there worldsstill ahead, the First Virtual reality theme park is up and running in china. And we will have a firsthand look at the future of interactive entertainment. Haidi next, old mutual telling us how the fed outlook will affected strategy when it comes to asia. This is bloomberg. Haidi this is bloomberg asia. Ramy i am in new york. After a banner 2017, u. S. Equity markets opened to 2018 in just a few hours time. Will they repeat the highs of the last year and what challenges might they have to contend with . Very big question. Emma is here hopefully to answer some of these. What are you looking at . Emma i will try the best i can. Challenges might they have to contend with . Very big question. Emma is year. Every desks p 5002017 was inder and in every single month up every year. That is something that has never happened before. It was not just the s p. All the u. S. Majors did well. Take a look at the chart and you can see that all three, the dow, nasdaq and s p, all did very well. They hit simultaneous record highs 36 times over the current course of the last year. Those of the white lines on this chart. Itt was at a time where should have been more than it did. It is though coming from north korea in a way that President Trump responded. It was not just the u. S. But we also saw Global Equity markets did very well with mostit was nr indexes ending on a high. Haidi are we looking at more of the same when it comes to 2018 . As you said earlier, fed policy with tensions. Is there anything that will give investors part this year . Emaa i am looking at volatility. We know it hit his story close of 2017 bute investors are starting to bet that it is going to come back in 2018. Take a look at another chart i have for you here. Of 2017 but what we are starting to see is the relative cost of betting on an increase in volatility has surged to a peak compared to the bets on it declining. Some people spending a lot of money hoping to capitalize on a rebound of volatility. What we are seeing is a number of strategists are saying they are expecting volatility to increase. S. Economic strategy said a rise in strategy will pay off and we will see less global macro conditions. The fed is expected to tighten more in 2018. Ramy we are looking ahead to the fed minutes as well. Thank you very much. Bond traders see the specter of quicker inflation in the sweeping u. S. Tax legislation. Still with us is joshua crabb, head of asian equities. He thinks of the greenback is quite oversold shortterm. Any tax cuts will flow straight through to earnings. Lets talk about u. S. Dollar now. Hop onto the bloomberghop onto , guys. Because with this, we are taking a look at the performance of the u. S. Dollar. Take a look at this big white bar falling down, down about 10 for 2017. Up 9. 7 . Joshua, talk to me about what you expect for 2018 and possibly how far this might go. Saying theyanyone think this is going to rise. Take a look at this big white joshua i think if we go back to the beginning of the year, expecting a strong u. S. Dollar, expecting u. S. Rates to pick up. The fed to be ahead of the rest of the world and that is why we see this environment. That was the best Case Scenario but what we saw with the u. S. Dollar dropping, we have seen asian markets doing better than expected. 2007 go back to 2003 to which is very similar, the u. S. Market gets quite strong valuation. Expectations of a fed hiking u. S. Dollar first reacted by going up and came down again. I think we will see something very similar because the positives are not coming so much from the u. S. Anymore. The economic surprises coming from asia or even europe. You are seeing the money flow that people usually expect the Interest Rates in the u. S. Is actually looking for the cheap Asset Classes around the world. U. S. Dollarthose are markets la which is seeing the money flow to these markets and that is why you are seeing the u. S. Dollar be a not as strong as people may otherwise expect. Given the fall it has already had, we dont expect it to necessarily continue to fall away aggressively. Again, it is quite undersold at the moment. We dont expect that change to increase looking at markets in asia. We talked earlier about china with nine times earnings. The Global Economy is not that bad. It will continue to attract attention in 2018. Ramy the last time you were on bloomberg television, you were talking about the valuation gap between the u. S. And asian equities. Hop back into the bloomberg because you probably saw it three in a half weeks ago. S pred line is the pricetobook ratio. The blue line is the mx ip index. 1. 6 to 3. 29. You said you saw this closing in 2018. Talk to me about where you think this is after a month of seeing riffing seven going as well, and why you think so. Joshua i think the key thing is the valuation gap has been there for a while. What tends to make these things close is a catalyst and for us and that is earnings. Earnings in the u. S. Have been quite reasonable. In asia, were seeing downward earnings since 2010 to 2016. 2017 was the first year we started to pick up. 2018, 2019, we are seeing the forecasts starting to improve. We think that is going to be the key driver. There are risks around. We know the u. S. Is a valued equity market and that means there are greater risks, but we think that money will continue to go to markets like asia. The earnings backdrop is quite reasonable. The geopolitics, despite obvious paths, are relatively stable. We are seeing infrastructure spent in certain markets like indonesia and india. We think that is a very strong backdrop for asia. Haidi just a final word on the watercooler topic of bitcoin. You say there has been more great and people should be looking at blockchain technology. That technology is not actually driving the volatility we are seeing. Think watercooler conversation i dont like to get to any sort of function without this coming up. The simple reality is it is very difficult. It is quite speculative in nature. It has had a huge rise. It has obviously fallen quite a bit more recently. I think people that are invested do need to think about how much these things can go not just up but down as well. I think what is really important, but usually from the investors perspective, the blockchain impact will have on large amount of industries. Whether that is the impact of the financial markets, or bringing down costs in friction or, the way they occur and that will happen,. It will impact a lot of Business Models in asia and that is very important from an investment perspective. Haidi you look at the likes of Goldman Sachs looking to set up a crypto. Is there a fear you will miss out even if you dont know what is going on with this asset . Joshua i think anyone that turns around and sees an asset or speculative item with his level of volatilityd is going to try to take advantage of it. Some of the exchanges are making huge amounts of money around these transactions in the currency, so i would expect certain investment banks to have an attempt to try to make some profits out of that. You are seeing a lot of the investment banks, and we saw a recently with the Australian Stock Exchange talking about trying to establish a lot more in blockchain technologies. I think that is where we are going to see the mindset move over the next couple of years and the impact that will have. Haidi joshua, think you so much for that. From old mutual global investors, joining us from hong kong. Ple