Who put him in office. Critics say it is a work of fantasy. Ourre continuing to watch , moodys announcing it has downgraded its rating on china. For comparison, were looking at the same rating help by saudi arabia, israel, estonia, and japan. Take a look at this chart. It encapsulates moodys reasoning for this downgrade. Debt to gdp soaring. 280 in terms at of the debt to gdp ratio, an increase from 240 from 2016 alone. You can see the diversions when it comes to gdp growth stabilizing, easing, but debt continuing to grow. It expects the financial strength of china will be eroded in the coming years as a result of the economywhite debt and built up. Slowing, andially even though you have financial reforms, deleveraging, particularly the financial sector, moodys saying that will not make a difference when it comes to this constant increase in contingent liabilities held by beijing. We will continue to watch that story. Singapore, taiwan, malaysia coming on line. We are really watching the aussie dollar falling over on that news. Take a look at what we are seeing across markets in asia. Have the aussie dollar falling. 2 . This after barely budging in the last couple of sessions. When we are seeing equity markets broadly in the green, the nikkei leading gains, not surprising given to sessions of , althoughen week has today we are seeing the yen clawing back of some losses. The korean kospi gaining, while the asx 200 is up. 2 . When it comes to singapore, up. 2 . Noble group making headlines throughout the day. They plunged more than 28 . Right now falling more than 10 at the open in singapore. Noble struggling for their lives in a sense. We saw s p saying it could see a default within a year. A lot of this as we see more optimism with the markets filter through wall street, pushing towards record highs. Two stocks you need to keep an i eye on glencore, a takeover bid. Ly traded in hong kong. Iny could be buying a stake proton. The malaysian owner of the carmaker had approved the stake sale. ,he offshore and onshore yuan the offshore fall as moodys downgraded china, clawing back some losses, but the onshore yuan against the dollar is not doing much. Against the basket of currencies, they have fallen to multiyear lows, but mark cudmore says the impact of moodys downgrade could not be felt for that long given the Chinese Consumer unexpectedly has more cash at their disposal. That could give a more positive outlook for the chinese economy, even as we see a bond squeeze. When it comes to this chart here, because we are seeing the onshore yuan falling against this basket of currencies, it is falling, but very gradually. That could stem the risk of outflows and lowered the shock of the impact that this has on the broader market. Stability is the name of the game when it comes to the yuan. Thank you for that. Lets get first word news with paul allen. Paul veteran msci ceo has told bloomberg that the inclusion of chinas ashares in the index next month is no means assured to. China was rejected for inclusion last year and is awaiting the mscis next classification review on june 20. Fernandez says the timeline is tight for all that needs to be done. Ashares rose strongly through march, but have since declined. Hard, process has been and there is still a lot of issues to resolve in a short time. Mnuchin is hiring, trying to fill top positions by recruiting financial industry figures with job titles that dont require senate confirmation. Aides withd for top the title counselor. The Senate Wont Vote on any of them. Administrations on both sides have used the tactic in the past. U. K. Police say it is too early to know whether mondays attack in manchester was part of a terror plot. Bombermed the man as the , and the times says he returned from libya three weeks ago. The socalled Islamic State groups said he was linked to them. It comes to weeks before the general election come and all campaigning has been suspended. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Haidi investors have been by governorpeeches kuroda and ben bernanke in tokyo today, but china has stolen the spotlight after that unexpected downgrade by moodys and the last hour. Kathleen hays is here with all of this. About the reasons moodys gave are well documented and well known. Why the timing . Why now . Just ran to the details for us, so we dont have to go into those, but for anybody just tuning in, moodys cut chinas rating. I would remind everyone that it a rating. They change the outlook from stable to negative. Once you downgrade at that level , may be the outlook is stable, but moodys like the rest of the worlds wondering what china is going to do with what some call its mountain of debt. That is what they cited in the following statement. Ongoing progress will transform the economy over time, it is unlikely to further the subsequenth increase in contingent liabilities for the government. Many china watchers still feel the government has more than enough reserves to step in to help companies and banks that have lent to them out of any trouble they might get into. That this interesting is not the only country in the world, leading country, with the same rating. Recently our Bloomberg Intelligence team in china has been talking about the fact that credit expansion has been slowing in china. There is not as much our ring and rising debt, and there has been more and more restructuring. Issuing, giving china a push, saying we are watching this problem, and maybe this is a warning to say, make sure you are addressing this. A small downgrade now, but something china has to address to stay on track for the future. Haidi right, lets move onto the previous story, which is top meeting of personalities in the central bank space in tokyo today. Governor kuroda did not adjust the bojs goal to hit 2 within the time they wanted, but he talked about how hard it is to shift Inflation Expectations, as did ben bernanke. It is animal spirits, being able to shake this off after some years of deflationary expectation. Was defendinge the bank of japan more or less. He said it is vital for the boj to pursue its target. Higherve to get an inflation rate. He said restoring the 2 target would restore stability. Is stillledge the boj some distance from achieving its price target. Thatso acknowledges Inflation Expectations has fallen short. Eight 007, the green bars on the far right after many little red bars showing negative inflation come a core inflation, bars, andmall green you can see when you look at the breakeven, you can see how they felt sharply. They have started to rise just a bit, but still not anywhere near as high as they once were. Also is saying that even he probably just did not think hard enough about their limits of Monetary Policy and how hard it can be to turn Something Like deflation into inflation. Here is what he said. Certainly did not get it all right. In particular, in earlier writings, i was too optimistic and too certain about the ease with which a determined central bank and conquer deflation, and i had little patience with the alternative view. Ok maybe some sympathy for governor kuroda, trying so hard to get that 2 target and still so far away. One of the things governor kuroda talked about was Inflation Expectations. He talked about a falling natural rate of interest. If it is falling, it is harder for Central Banks to gauge where is the level of Interest Rates that will help boost inflation or hinder the inflation rate, and he noted the uncertainty about where the natural Interest Rate is now, including for japan , leading Central Banks to adopt unconventional, aggressive monetary policies. Again, in defense of yield curve control, buying so many bonds that the government is issuing, which is under criticism in japan, but at the moment, egg, big support for prime ministers shinzo abe. Giving his friend a pat on the back and a little encouragement. Hand a little helping always appreciated. Thank you so much first thing on top of that story for us. China facing growing demand for better and safer food. We have a special report on an organic farm the size of new york city. Next, a look at the turnaround plan at sony and the challenges the Company Faces to stay on top of the game. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. A quick check of the business flash headlines. Singapore exchange is nearing a deal that would encourage local startups to go public. Under the agreement, the firmsge would help text and investors with the ultimate goal of securing a listing. It would allow sgx to engage earlier and allow for competition. The agricultural trader bunge jumped. Glencore is an contact and finished the london session down. E jumped, taking the fire above 11 billion. Toshiba and Western Digital are meeting on wednesday to resolve their dispute over the flash memory chip unit. Western digital is ready to make concessions in order to retain its share of the operation. Westinghouse creditors have dropped their opposition to a final bankruptcy loan, clearing the way for to receive 450 million to keep operating. Sonys Consumer Electronics division now enjoys a dominant role when it comes to the gaming sector. The ceo told sony Investor Relations day that movies remain a hugely important part of the overall business. The picture segment remains an important business persona and we are increasing the urgency with which we implement measures to improve the pictures business. Senior equities analyst at jefferies was at the event in tokyo and joins us now. Take us through what the takeaways were. Thank you. Threeit of context, we years back, we used to be very skeptical three years back in february 2014. We upgraded sony when they exited pc and the other Consumer Electronics business started to shrink. They were focusing on streaming, games, movies, and music. They have done a great job to turn around, taking painful decisions to reach where they are. This year, the second time in the last seven years they reached the target level of ¥600 500 billion yen. However, for the first time in the last three years, i have seen faint glimpses of the sony that was pre2014. We did not like that company before. It used to double down on the Consumer Electronics business. Oligopoly, but the Consumer Electronics businesses are fragmented. Did notthese things make sense, but overall, it still looks good to deliver and exceed this years numbers and grow next year. Looks good, but there are some glimpses of something going wrong. Down theybe five years track, the turnaround is complete. I want to throw this chart to see what the stock market has thought of this turnaround during his tenure. The stock has been outperforming the broader japanese markets, point, is but to your this the peak we are seeing . Given that gaming is something they are so reliant on come are they a one trick pony and desperate to find another hit in the space gaming space . Business could still grow because profit is what matters the most. Peak after 23ld years of earnings growth. The most important is how do you unlock about you that is sitting in mobile where they have viable patents which could be worth more to companies in china they cannot sell their products locally. Movie and music is similar, there could be Strategic Partnerships that unlock significant value. They may not want to sell that business, but a partnership with other companies could unlock value, and that is what could drive the stock higher. Earnings growth will be driven music, and their strategy is looking very good. Sense did you get the yesterday that he has had five years at the helm. Done well to steer the ship in terms of the turnaround. What is his strategy next . Will he go aggressively for growth or maintain and sustain what he has done so far . Preferred thee company stay the course and focus on three or four business areas where there is an oligopoly or duopoly, like games , movies, and music. Yesterday for the first time, i intent to grow the Consumer Electronics business again. If they go for that, there are serious risks out there. That is the one business that had destroyed the fight created by the group in the last 2030 years. Was bring inthing the cfo and give him nearly complete control. I would be worried if he takes a step back. Haidi thank you so much for oft comprehensive wrapup where sony goes from here after this turnaround. Coming up, the budget blues, breaking down the proposal facing resistance from both sides of the aisle, being described as fantasy. This is bloomberg. Haidi this is Bloomberg Markets asia. President trumps first Budget Proposal has been dismissed by critics on both sides of the aisle with 3. 6 trillion in spending cuts. Some of the biggest losers look to be social programs aimed at workingclass voters who put the president and the white house in the first place. Budget hast trumps gotten a mixed response on capitol hill. Republicans give him more leeway. House Speaker Paul Ryan said today that even though the budget itself is most likely dead on arrival that there are elements he is impressed with. For instance, republicans are focused on the fact that the president says he wants to balance the budget, something president obama did in something they want to drive towards. Also, military and defense spending that they will try to incorporate in their version of the budget. Democrats are far more skeptical, and so are many moderate republicans. In all likelihood, this bill does not have much of a life on capitol hill. What furthers that is the fact that the budget does include essential details like how the president s tax reform plan would play out, and those are the things that lawmakers are looking for guidance on, especially Going Forward with the president s legislative agenda. Is aesident trump, this document to show his supporters in the country what he is passionate about them about also something we will hear a lot of democrats seizing on. Deepwill look at these cuts, 40 to nondefense Discretionary Spending of the next 10 years and say the republicans in President Trump want to cut food stamps, increase the cost of college loans, want to go after the social safety net come so while it is something that one not have a legislative impact, it could have a political impact Going Forward. Was our White House Reporter there for us. Coming up, the route goes on. We ask about any hope of turning things around. That as noble fights for life. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Haidi we are counting down to the china open. We are looking ahead to the opec meeting in vienna on thursday. There is a sense that producers are starting to converge in terms of reaching an agreement cut deal. Oduction if it is six months, will that disappoint the market . Take a look at this chart. Some of the players that could undermine opec efforts. Most ofhad news that these producers are on board when it comes to extension of the curbs. A few may be prone to cheating, if you will. The other side of the equation is what happens to u. S. Production. That is arguably the greatest factor in terms of undermining any effort and advances opec makes to stabilize the oil market. Shanghai and hong kong, a crucial open, surprise news out of moodys. Seeing thate not much of a reaction when it comes to equity markets. We are seeing the hang seng index lose ground and some downward pressure. Reaction to the downgrade when it came to the offshore yuan, which fell. The hang seng down. 2 . It is being dragged down by real estate stocks. This is interesting because we securities journal saying they could see tighter regulations for Real Estate Finance when it comes to trust the businesses this year, so what we are seeing in this about. 25 fall of when it comes to Property Developers and so forth. Shanghaiomes to the composite, we are seeing further declines, now at the lowest level since october, but this has been a down trend for the Chinese Markets and a lot to do with deleveraging efforts in and so on,ncial risk and now moodys downgrading from aa3. 1 its not surprising given all the issues we happen shanghai. We heard the msci ceo fernandes saying in an interview this morning with bloomberg that there are lots of things to resolve before some of those innland stocks get included the msci benchmark, so what we are seeing is a huge lag when it comes to the emerging markets ,ndex before its inclusion which is surprising when you look at of stock markets like saudi arabia, which has been gaining ground before the inclusion. Not just saudi arabia, but that is usually what happens before mscinclusion, but now in says shows will be limited to large cap firms and accessible only through hong kong, so we are seeing that reaction in the shanghai composite and its relative performance to the msci emerging markets index. Y