P e ratios, in terms of valuations. We are in the downside. 11. 3 on forbes pes at the moment. Momentake a look at the that would us is going on. New zealand coming out with its budget. A quick word on the headlines. New zealand cut its budget forecast to 1. 3 billion new zealand kiwi dollars. It is just being brought down. Thats also facing debt falling to about 20 of gdp in 2022. Capital spending of about 10. Illion kiwis over five years operating spending over five years. Kiwid be about 15 billion dollars. They will also increase the bond program and launch a nominal bond, 2031 nominal bond, by the end of this year. That is currently the position. Lets look at what Morgan Stanleys ceo said. Dispute between the u. S. Doesnt think it will escalate, despite the anxiety caused by the markets. He spoke to us in an exclusive interview in beijing, where he is attending the Morgan Stanley china summit. 40 of the worlds gdp is tied up in these two countries. To have it major in this trade war would be very bad for these countries. I certainly hope they understand that. I spoke to, the chinese ceos i spoke to understand it. We have a resetting of this relationship, which makes sense. After 30 years of incredible Economic Growth in china, there needs to be resetting. There are certain things on the trade site that need to be addressed and are being addressed. Do i think it will devolve as a betting man, for a trade were . I dont. There is too much self interest on keeping this on the rail. People have said to me if it doesnt happen by the g20, late june im not sure about the exact timing on when we need a resolution, but clearly the negotiators need to come to the table and figure this out. Not everything, that will take decades. But we need to get the train back on the tracks. What are the Global Economic implications if we get a fullblown trade war, as in trump pulls the trigger on an additional tariffs for chinese goods. A lot of that is priced in. What you said about where the 10year is. Where the snp has been moving. Unfortunately, it is not in isolation. We have brexit in the background. There are other things in the political environment, the elections coming up. Theres a lot of macro noise. I cant predict what will happen, if the 250 billion of tariffs kicks in. The 2 largest economies in the world do not serve themselves well by engaging in a fullblown trade war. The u. S. Runs surplus and services, china runs surplus and goods. There needs to be more adjustment, more transparency. We need to get this back on the tracks. Rishaad Morgan Stanley chairman and Ceo James Gorman speaking in beijing. Lets go to what has been going on at pimco. The highpointing to likelihood of a recession in the next three to five years. Cautioning investors from chasing yield, and reminding them of softballs from market disruptions. By far, the area of most concern for us at pimco is the credit markets. Specifically related to Corporate Credit risks. We have probably the riskiest credit market we ever had. It is true that you look at both the size of it, the duration, and quality aspects. When we look around the world, we think credit spreads are pretty tight, particularly given the view that we will have a recession in the next three to five years. More are hoping for a difficult environment. Whether it happen in six months or two years, it is hard to call. Anwe are seeing the end of era. The last five to 10 years, we had a massive output of performance over the real economy. We think that era is coming to an end. We are now entering an age of disruption. Pimco executives speaking earlier on bloomberg. Lets get to the Market Action and get over to Mark Cranfield. What is going on . This is a correction we have for the msci asiapacific index. We have seen valuations drop. Many indices are now raising the gains we had so far. Erasing the gains we has so far. It was a stellar start, what a nonstellar Second Quarter of the year. A lot has changed, from an investors point of view, for the last couple of weeks. By the end of the First Quarter this year, we were thinking that the u. S. And china were becoming best of friends, that they would put their disputes behind them, and the world can get back to growing nicely. The figures we were anticipating would have all been hit and we would have all been happy. , this month ined particular. Now it looks like both the u. S. And china are getting ready for a protracted disagreement between them, which could mean even more tariffs put in place. It can be a titfortat situation. Im beginning to see the gloomy side of the forecast. It does not mean to say it will all come to pass. It is certainly disturbing when you think that we are coming whichs the end of may, has been a bad month for equities, and we dont even seem to be out in bounds. You would expect to see some recovery, that people would take off bearish positions. We do see a little bit of a rally into the month. That is not happening here. It can be a signal that people do not see a good outlook for some time. Mr. Goldman mentioned the g20 meeting at the end of june. It is a very important point for markets. President xi and trump not meeting with anything coming out of it, many think it can be a right off. It is not a pretty picture right now. Parts ofalso, certain the yield curve in the u. S. Have inverted. They have been inverted for a while. Is that being taken seriously by Market Participants . It normally is a predictor of the recession in the future, some say perhaps it even causes a recession . Mark it is certainly getting a lot of attention. They speak about it. They have models that show if they say the 90 day rate and the 10year rate go inverted. It has often led to a recession. It does not mean it is immediate. It may take 18 months or two years before that happens. Its also a reflection that people want to be in fixed income because of the safety value. The possibility that the Global Economy is not just going to slow this year, but it will get worse in 2020 if a larger amount of tariffs are put in place between the worlds 2 economies. We are getting way ahead to growth slowing, and the fed being forced into a rate cut, even though the data it sees may not justify the rate cuts. It may have to do so just because Investor Sentiment has become so bad that it needs to help out the situation. Thats really what people are looking for, a way ahead into 2020. That may not all come to pass. In the very short term, people are nervous. They are looking for somewhere to find a bit of safety. Obviously, the yield curve is one of the best and most liquid places to do that. Rishaad Mark Cranfield in singapore, thanks. Surrounding the 2017 election campaign, actually over with right now . We have some traction. Lets get to the first word news. Su keenan is in new york. Su we start with President Trump, who is tweeting case closed after Robert Mueller spoke for the first time about the russia investigation. He repeated his report finding that he could not reach a conclusion. And whether President Trump had obstructed justice. He said there was insufficient evidence to charge a broader conspiracy. The Trump Administration has escalated his battle with european allies over the iran nuclear accord. It is threatening penalties the financials, body created by germany, the u. K. , and france, to protect trade with the Islamic Republic from u. S. Sanctions. A Treasury Department letter obtained by bloomberg warns that they and anyone associated with them could be barred from the u. S. Financial system. Japanese qualcomm unit has selected nokia and ericsson as vendors for its nextgeneration wireless network, excluding longtime supplier huawei. The Trump Administration has been encouraging allies to ban the chinese company, citing security risks. The chinese have not made an official decision on huawei, but local media says its top shun huawei and zte. Onto the latest with boeing. They have outlined plans ge is the 737 max 8 back into commercial service. The ceo says it will take around three months before flights will resume. In the meantime, teams are preparing to take almost 500 jets out of storage, including around 100 new planes that cannot be delivered until the lifted. G is officially global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 100 20 countries. Im su keenan, this is bloomberg. Up, the activist Investor Capital founder shares his bets from the conference in hong kong. That is next. This is bloomberg. Youre watching bloomberg markets. As promised, we have sorted out our technical issues. We have Blue Orca Capital joining us. Last year, were talking samsonite, the ceo did not step down. Joining me on set at the Hong Kong Exchange for an exclusive interview is soren aandahl. A couple of ceos and investors have started listening in. First thing, they probably want to know what your new short is. We definitely have to say no. Thats what we are here in town for this wonderful conference. Its a great day for a great cause. Come down to the Hong Kong Exchange. I need to ask about the u. K. You recentlyorted started looking at that market. Are you willing to disclose anything . Not at this time. It is an interesting market on the shortsighted perspective. Theres a lot of opportunity. We are not quite prepared to announce our first idea. Hopefully soon. Here in hong kong, samsonite, it has been one year. You have ended that position . Capital markets are routinely humbling. When you take advantage of it, there has been a convergent of share price pretty much at what we valued one year ago. We are pleased and how that has performed. Fromthink the shares went 225 up to 445, back to 225. Have they said anything . A Planning Company that is not want to tell people. Were still waiting on that. The thesis is it is unclear what it is. Some connections, basically a going on. Sed merger the way we value is conservatively less. Is it zero . We value the equity at zero. Its a little more nuanced. A bit more tricky. A Bigger Company is pimm global. That was late last year. Last october. How has the thesis changed . It has come back down to about 19. Was mentioning, the Capital Markets being so humbling, that idea was hobbling. What gives income in terms of disclosure, is convergence of what we thought was the value of the company, and the cost for them to get what they needed. Theres a lot of disagreement in the market as to more Competitive Pressures they will face and how to value that. Thats what the debate is. Should i look at that company as an alibaba, a metric company . Contention. He we dont think thats the case. They will have trouble withstanding the third tier and forth your markets. These are companies starting selling fruit and she products, whether they can make is selling more expensive products and actually make money, thats a big question. Everyone is talking about japan for governance. That is a more mature market. The reason i bring it up, if any of these companies were listed on the chinese to the same the thesis, which do act on it . That is difficult. The practical matter of the markets being relatively closed to shortsighted. We haveto happen observed a maturation of Corporate Companies in asia since we started working 10 years ago. If it keeps working on that pays, part of what makes amateur and efficient market is to have a Wide Community of shortsellers, dissenting opinions, counter opinions to the voices already in the markets. We expect one day as chinas market matures, develops, where they reach it on par with other markets we work in, there will be opportunity. There should be a place for shortsellers. Right now, it is too difficult. Quickly, we talked about hong kong and japan, we know the u. K. , anywhere else around the world not exclusive to asia . I think it is those markets. Australia,active in the u. K. , the u. S. , those are it. Thats where we look. We appreciate it. We were looking for to the investment thesis. Blue orca capital founder and seattle, soren aandahl. He will be here later this afternoon. Stay tuned for that thesis coming up. Also coming up, we are joined by quintessential capital, and arch capital. Same thing, keep it here. This is bloomberg. Rishaad your back with bloomberg markets. Hong kong is getting a chance to land the one that got away. Alibaba getting a 20 billion in on the stock exchange. In an exclusive interview, Hong Kong Exchanges chief executive told us he happy alibaba may finally be coming home. Report isppy if this indeed correct. They are planning to come. If they do come, it is not a surprise to us. When you travel far, you come home. Everybody does that. That does not mean you give up your home. Im sure they will just come keep whatever they are doing in new york and other places and we will be coming back to asia. They could be here, or they can shenzhen, china has a new tech board. They arery happy coming back. We will be happy for whatever decisions they make. They made the listing in hong kong. That comes as the trade war is escalating between the u. S. And china. Are you assessing the strategy with this . This trade war is a global event. Deepll affect us all in ways. Nobody likes it, were almost watching on the sidelines praying that this divorce is not to take hold, and maybe there are ways to scale it back. We will have to see. What messages are you giving potential issuers to their ipo plans here in hong kong . Everybody is looking at this and asking the question what does this impact mean . It is not only about ipos, its ,bout a company, investment even somebody to start a business. This is the time to do it. Uncertainty of the this created. It is very costly to the entire economy. Leaders need to take the responsibility, quickly define what you want. Can probably, we agree. If you want to be, it is probably hard, but we can work something out. If you want something that you fundamentally no is on the other side, we are going to a divorce, then we should go into a civil and peaceful, hopefully processed atmosphere to allow everybody to get on with their lives. That was a Hong Kong Exchange executive speaking exclusively from hong kong stock exchange. Lets have a look at some of the business flash headlines. Soft group throwing its weight behind a 200 billion venture focused on finding startups in indonesia. Japanese powerhouse joining investors, including pavilion indys capital. They trade the largest ever indonesia up fund. It reflects to an increase in bullishness on what remains southeast asias largest economy. We have internet and mobile penetration expanding very fast. Total working company we work is in talks about rearranging a credit line of two . 3 billion. That goal ahead of a planned ipo. Bloomberg learning j. P. Morgan chase is leading the potential financing. We worked and rose to become one startups topowerful include softbank. In includes the years biggest offering since uber. Lets have a look at air asia. Talking to potential partners to build a need conference ecommerce it says what take the size of its airline business. Their budget earning 200 for 20 two hundred 4 million a year. Expected to make 20 million more 20 times more as it offers lifestyle goods and services. The ceo saying the reason ecommerce market will triple by 2025. We have air asia group at the moment trading in malaysia. About a 15 gain after it announced a special dividend to be increased. Now to whats going on what we have here. We head towards our close for a lunch break in japan. Some of those Companies Making headlines. Momentholdings at the off my half of 1 . Moving to the downside. We do have this company being told to bolster internal controls by japans finance regulator. Employees have been sharing sensitive stock Market Information with clients. Held aspany has been they have had setbacks as of late. A lot of that weighing on the stock. Headways for nissan selling the fiat deal to the company. This one of the reasons what we have probably not seen positivity. There we go. Lets get over to david. We will have a lot more coming up this hour. Some great guests. We just heard from blue arc a. Coming up, quintessential capital, we are talking capital cannabis, and also Ayrton Capital joining us. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. 10 29 a. M. In hong kong. Down on Growth Prospects down gdp slowing to a decade hampered by aar, downturn in the housing market. Will bethe only cushion an increase in commodity prices. A to cut itss the rb rate by 25 basis points by june. Israel will hold a new election after Benjamin Netanyahu failed to form a government by a midnight deadline. This is the first time an israeli Prime Minister designate has been unable to put together a ruling coalition. Partnersd with two unable to agree on a proposed military draft law. Condos will be sold as part of u. S. Forfeiture laws. By money was bought stolen from one indie. Db. 1m they jointly ask for Court Permission to sell another luxury mansion in los angeles. This is bloomberg. Risha