premised her as the economy fails to respond to his landslide the dream. live in mumbai. aipping the switch on spectacular light show. we have a special report on the vivid festival from sydney. barbie is back in china. will the new model fair better than her predecessor? >> a very good morning to all of you. i am watching the markets for everyone this morning. those that are open if we do have a few closed. the highest level since november of last year mostly because of a strong morning session we saw japan. the nikkei is at a two-month high. the topix index rising to its highest level. the yen falling to 102.

southeast asia, commodities markets overall down for a second straight day must the because of indonesia and malaysia. malaysia is where we are seeing the damage, down about a fourth 01%. .hailand opening up perhaps a shift in our locations from the region back into the markets. the key driver, chinese , a veryuring encouraging read for me. >> of course, china's war of words with japan and the u.s. over security has moved up a gear. we have senior military and defense representatives in talks as various territorial tensions

heated up. >> we have john live in singapore and won ha, our bureau in singapore. >> a war of words, as you say it. in the hotel lobbies, a lot people talking, tense faces, whispering corners, delegates. but the u.s. defense secretary chuck hagel, in his speech about china's actions in the south china sea, he called it destabilizing and also promised japan's shinzo abe who does not welcome dangerous encounters, pla coldy chief of the the comments from chuck hagel as unacceptable. this beach was "full of words

and threat and intimidation. '-- intimidation." he is obviously concerned about the words and the rhetoric being used. here are his words. >> we oppose military alliances flexing their muscles against third parties, resorting to threats or the use of force or seeking absolute security at the cost of the security of others. will never allow the fascist and militaristic aggression to stage a comeback. abe talked about how he will supply defense equipment to southeast asians to defend itself against china. within that, you have taiwan and vietnam.

>> that's right, the war of words is a war on maritime waters. we saw the sinking of the sideamese vote, which each -- vme's boat -- vietnamese boat , which each side blamed the other. been trying to rally international support. we did have an expose of interview with the prime minister and he called for a stronger u.s. voice. kay told us he wants to see more effective, more concrete and more practical contributions from the u.s. in this region to aid in the stability and peace. it is likely that he would be in support of chuck hagel's comments over the weekend in singapore. cited specifically

the oil rig off the coast of vietnam, only it destabilizing for the region. many wondering whether vietnam will take legal action against china following what the philippines has done as well. we had a chance to ask the prime minister of that. here's what he had to say. vietnam will use all possible peaceful measures to defend and protect our sacred sovereignty over the sea, including legal actions. about two thirds of global marine trade is transported through this marine on east see so any irresponsible action that triggers a class will interrupt this huge global trade flow. that was vietnam's prime minister speaking to bloomberg in an exclusive interview.

when it comes to legal action, we heard the premised her say it is a matter of when. and we heard him talk about the important role south china sea to much which -- south china sea, which vietnam calls the east see, plays in international trade. innerime minister interview -- in our interview says it has felt some impact in sectors of the vietnamese economy because of this dispute. he also said that vietnam has addressed the impact to try to get it. there is a letter pressure on vietnam. its own citizens wants to see the government act. they want to see a stronger stance. they want to see vietnam stand up against china. at this point, vietnam doesn't have a lot of options. increasingly, there is pressure for vietnam to file legal action. >> the stakes are high.

there are fears that these simmering tensions will affect economic ties between china and its neighbors. clearly, they are ratcheting up things. whether they would allow it to actually escalate to the point ,f all-out confrontation military involvement, that would have a deleterious effect. but if it remains this low-grade thing, primarily involving fishermen and the like, then it won't be enough to put a dent in trade relationships. >> associate professor at the united states study center at sydney says china also has much to lose should relationships with its neighbors deteriorate. there is supposed to be a

dialogue. it has been more like a set of shouting matches or dialogs. you need to be behind closed doors. the temperature needs to be turned down. china has a lot of risk as well in these issues because it is doing pretty well out of the status quo and in needs to realize that, if it upsets the status quo and is seen as a nation that does not believe in international laws, it has a lot to lose here. >> dean of the quan you school of public policy in singapore. the former diplomats as the disputes will not be solved easily. improve a matter that -- that is to be a problem for china because you cannot defend that line under contemporary international lawl but having said that, i think the chinese,

at the end of the day, we'll go back to being careful and restrained in actions in the south china sea because they have too much to lose if these flashpoints become a bigger problem. time is on china's side. it is better for china to be patient and not push too hard in the short term. >> that is the word from asia. stories making headlines is mourning, south korea saw a surprise drop in exports last month. economists were expecting again. advanced milley 5% this quarter, making products more costly for foreign buyers nearly 5% this quarter, making products more costly for foreign buyers. sri lanka has been trying to

boost foreign investments as it recovers from a three-decade civil war. looking to expand in the u.s., daichkkei newspaper says willi. says dai-ichi is looking to move. asian stocksnext, rise after china's manufacturing hits a five-multi-. -- five-month high. more on that when "asia edge" returns.

>> welcome back to this monday edition of "asia edge."

the health check on china's economy shows a recovery in may. the slowdown may be over. >> hopefully it is over. we see the rebound to 50.8 for the official pmi from beijing. it is because beijing stepped in with targeted measures here and there. it gives you an indication that perhaps they are a bit worried. so they put this for for growth that they want to see happen. you did see an improvement from february. if you look at the various components, most of them were better except for employment because that dropped. many less of the people that were surveyed, some 3000 companies for the survey, expected to hire perhaps less in the future. not hire for the future. from a policy makers perspective in beijing, not what they want

to see happen. worth noting here, it is starting to filter into the smaller-scale the companies -- small-scaled companies. 51.4, issuinge expansion back in april, but much more for may. and the smaller firms, that is perhaps where you still need a bit more support. it is still showing contraction well below 50, which separates expansion and contraction. certainly, that is where support is needed. this all seems to stem from the has stimulus that beijing put into place to help these firms avoid a hard landing. >> more specifically allowing them to roll over debt. ,hey are trying to reengineer stu the economy away from that. you -- from debt -- steer the

economy away from debt. there is a slowdown. the cash flows are not there. down the able to bring cost of borrowing for the banks. whether or not they pass it on to clients is another thing altogether. says thatl statement most of the steps that china has actually taken is because the economy is facing fairly heavy challenges, their words here. they do admit it is a challenging environment right now. they want to make sure credit is there in places. that need it the most. . in her role provinces -- in example.vinces, for if you manage to lend out a certain amount to small places in or these

the rural areas, you can qualify, essentially be given a gift and be allowed to lend more. >> thank you for that. >> let's get more manufacturing figures from china. george is the chief investment officer at equity trustees live from melbourne. good numbers from china is good news for australia? >> yes, you are right. is alwaysfor china good news for australia. remember, they engineered the slowdown last year. that bumped the engineering target stimulus. for australia. there is no hard landing in china. , thisg through the data involves more of the state-owned

enterprises. when you look at the steal-producers in china, they need to import from australia. that is why the link is there. the volume growth is steady. they are producing still. the market is a bit of a concern second half of the year. too much steel. they may have to dump it somewhere us in a world. that's ok. oil prices are not expected to rise suddenly. with expanding volumes of iron ore coming out of australia, expanding volumes of coke and coal out of australia, just some outlining to catch up. they are producing something with it. this survey reaffirms that the steel producers are happy to take the volume and s -- the volume in still. be true at the

moment, but concerns in the property sector. home prices stoking a lot of concerns not only among chinese consumers and banks, but also the forecast and outlook for demand. >> exactly. i think this is unintended consequence by the policy makers in china. they had to slow that down. mustargeted stimulus always focus on more targeted infrastructure around airports and ports and must continue to do that for more durability. you are right. it has been a hot property sector and it will get more volatile. and there are more unintended consequences. look at the process of some of the gimme stocks and the rates

-- the gaming stocks and the rates. it has been well flagged, well engineered. you are looking at beijing, shanghai, some of the most expensive property in the world. then you have other regions the need to catch up in the next two to three decades. more volatility in that space but it had to be singled out and slowed down for what it is worth. >> and that is the case that is being made by government and policymakers. what are your asset allocations? what do you like and what don't you like? are invested decades ahead. we are underweight cash and fixed income. we are neutral global rates. we still like unbalanced, even

though the global central banks of the world, the ecb, the boj and the fed, even though they are in different stages of their cycles, broadly, there is more stability and policymaking right now a macro conditions versus a year ago, two years ago, three years ago. is obviously upsetting things the last couple of months and china with some noise. but policy is broadly steady. it is justifiable for earnings to develop. we like north american earnings that carry multiples. but there is a discount in china. equities still like financials, still like infrastructure. >> what a difference a year makes. >> on not date on the breaking

news of the last few minutes. intel has confirmed that it's managing director has died in a climbing accident in the united states. uday marty is one of many people believed to be hit by an avalanche. they have not been heard from since wednesday. the group may have fallen more than 3000 feet. conditions are said to be too dangerous for a rescue party. intel says it is in contact with the authorities and is providing support in this difficult time for uday marty's wife and family. he was widely respected throughout the country. building up, pressures on the new government in india. we will be live in mumbai looking at the challenges facing narendra modi.

>> let's check in on the india session futures. theting to a lower start to session compared to the cash close on friday. as we count down to the in the open, we are looking at economic numbers gdp that came in below forecast. live in mumbai, the latest on this and the pressure that is building on the new prime minister. >> absolutely.

news not too good emerging from the indian economy. gdp growth coming in at 4.7% below the crucial 5% mark. back at see gdp growth 4.6% below the 5% mark for the eighth straight quarter and a rope. -- in a row. the new government has a lot of challenges ahead of them. a hint of that coming in over the weekend in a blog that the new prime minister where he talks about moving towards an era of fiscal discipline where we can reduce the fiscal desk deficit andal doesn' curb inflation. higher fiscal at deficit going forward.

the newsaid that government inherited an economy where we see gdp growing by sub 5% over the last two years. watching out for market open. >> thank you. coming up, australia's hot issue. we will be a live in ostrava with more on why temperatures have been reaching record highs for two years running -- live in australia with more on why temperatures have been reaching record highs for two years running. .

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>> signs of recovery, asian stocks rise as china's manufacturing picks up speed. pessimistice saying, the mainland's golden age is over. feeling the heat, australia smelters through the two hottest years on record. let's take a temperature of the markets in this region. likeeast asia markets look this. in singapore, we are seeing some gains.

pale composite is the only one seeing pressure. philippines also seeing gains. we are seeing the regional benchmark climbing close to that six-month high today. this on the heels of that chinese manufacturing data better than expected through the weekend. over in indonesia and thailand we are seeing a mixed picture. thailand, that political intransigence with the military coup in place, not seeing collections for perhaps at least another 15 months. we are still seeing equity see some upside despite all of that. over in australia, on the heels of that china data, the top trading for australia, we are seeing gains there. the amount is slightly under pressure. in an exclusive bloomberg interview, the prime minister making comments about possibly identifying china in a u.n. court as it looks to fight over those maritime disputes. nikkei 225, it is climbing more

than 2%. well despite disappointing export figures coming out of south korea. the strong one bank. -- strong won. >> european companies are becoming increasingly pessimistic about china, with some saying the golden age for multinational's is over. stephen engle spoke to the to see what iser striking the sentiment down. the economic slowdown is a game changer. companies operate in an environment of 10% growth for many years and now they are down to 7%. same regulatory environment and slower growth. companies can operate better if the water is higher but now the water is sinking.

17% fromd m&a down to 41% last year. that is a huge drop off. what is going on there? >> the anticipation that assets are overpriced. people saw probably some sort of financial crisis around the corner. >> european ceos, are they starting to see the storm clouds of a financial crisis here? >> i think some do. it is very diverse. the legal sector is very much depressed about how they can operate in this market. we have a diverse storyline. machinery is still doing fine whereas other areas like chemicals are not so good for the time being. >> i am seeing anecdotally evidence of people saying it is not as conducive for business here. or we are moving our families out.

whether it is pollution, corruption, probes, what is your gut telling you about the business climate? >> the majority of companies are looking at china in favorable terms. the growth story is still there. of they see sort of the end what we can call the golden age of multinationals. >> almost half of the companies said the golden age is over. >> again, different segments. >> what about glaxo's former head, mark riley here? the corruption probe into glaxosmithkline is shaking the rafters. if he does see jail time, what message does that send to other ceos? >> the most important fact is transparency. if the prosecutor can prove what has happened, who was engaged, who was involved, if it is a deal behind closed doors then i

think it sends a message of insecurity to everybody in the european business community. we really have to put this case into the open, prove it, show the documents. -- ifure that everyone put a significant european business person behind bars, it sends a message. we also have to see it is rightfully done. >> president obama stepping up his fight against greenhouse gases with new regulations to be released later today. proposepected to cutting greenhouse gas emissions from u.s. power plants by up to 30% over the next 15 years. the cuts will apply to existing power plants. the proposals will be released by the u.s. environmental protection agency and will be flexible to allow individual states room to decide how the reductions are met. australia on the other hand is

winding back efforts to combat climate change, despite fighting through its hottest two-year period on record. let's head over to paul allen in sydney where things are heading -- heating up. it looks like the government is cooling down. that would be a fairly accurate summary. i can feel the heat on my back right now. we are today's into winter and it is 22 degrees outside. last month was the same. we had 19 consecutive days above 22. all these observations are backed up i this new report from the climate counsel, which says that australia has just posted its hottest two years ever. on top of this, the climate counsel makes a few other observations. the warming trend is continuing to intensify. we are expecting an el niño event. it is going to get hotter still.

what we saw last october was quite unseasonable. drought, which would have an effect on agriculture as well. the u.s. is ramping things up, trying to address greenhouse gas emissions, what is the australian government doing? >> the fact that this report came from the climate counsel speaks volumes. that is a new ngo which was rebranded government climate commission which was disbanded by the incoming tony abbott government. other things the government has walked away from include the renewable energy agency and the carbon taxes due to be scrapped and replaced with a direct action plan. because of the gridlock we have in the australian senate, the direct action plan is pretty unlikely to get off the ground. for the first time since the

1930's, we have no science minister in australia. strong give you a pretty indication of where this government is headed on the issue of climate change. >> paul allen out of sydney, thanks. >> checking some other stories. in thailand junta has deployed thousands of soldiers in bangkok to head off protests. demonstrators gathered at a shopping mall, calling for a return to democracy. the soldiers played loud patriotic songs to drown out the chanting. the coup leader says the army is in total control of thailand and it will be at least 15 months before any possible elections. the u.s. has defended striking a deal with the taliban to free the sole remaining soldier held prisoner in afghanistan. the sergeant is back in american hands after being held for five years. he was released in exchange for five detainees at guantanamo bay. the end ministries and said

concerns about his health prompted the deal. critics say the move could put u.s. troops in danger. with the world cup just 10 days away, a board member has called for a swift investigation into new claims of corruption surrounding the tournament in 2022. it is to be held in qatar despite summer temperatures in the 50's and a lack of football tradition. accusationsong been of impropriety. now documents have emerged accusing the former vice president paying african football officials millions of dollars to support that bid. it is sleeping beauty with a twist. ground thealeficent" box office. the film stars angelina jolie as an embittered ferry and it beat "x-men" in ticket sales. >> mattel has wheeled out the big stars to raise its image in china.

it has launched its first chinese barbie doll. let's bring in rosalind chan. breaking news. are there any little girls in china -- what is going on? >> it is amazing what it can do. this is very important for mattel. onis really trying to focus raising brand awareness and china gets its name out there in a market where maybe it was less familiar before. it has been working hard not just because it is a huge market, but also to offset lackluster sales growth in other places. strategy toheir target the local consumer in china, mattel's china manager had this to say. make this brand more relevant to chinese girls. thisyear we are launching

for the chinese girl. we believe every girl in the golden see with its own unique challenge -- >> this seems a little different. as i recall this is not the first time mattel has been in china. the first time it didn't work out so good. ofmattel did launch a house barbie concept store in shanghai in 2009. it had to close in 2011 because it wasn't shipping and. it had to cut by at least 30%. some people say that is down to mattel not quite targeting correctly for the market. also, consumers may be not quite ready for the brand yet. maybe mattel had to take stronger -- smaller steps.

sell in stores like walmart and toys "r" us to make sure its brand is out there. see the doll not just as a plaything but also perhaps as an educational tool as well. there used to be a soloist violinist barbie doll in china to try to bridge that concept. >> literally playing the world's smallest violin. rosalind chan, thanks so much for that. >> coming up next, there is a new man in charge. our next guest says indians' woes are unlikely to be fixed fast. we hope you will stay with us here on "asia edge." ♪

>> welcome back. , david andnow, ros

andrew farris. congratulations. you get a years subscription for pronouncing it correctly. >> what is the cognos is's prognosis? >> basically, a lot of globally oriented advisory and research, but with an asian sprinkling of flavor. is we can cover practically every class of assets. >> what is your prognosis? >> as far as asia is concerned, our first obligation, we like philippines, thailand and indonesia. we havease of thailand, survived a lot of things, but rather than get panicky at this stage i prefer to stick to a country who is inexpensive, has been performing well.

i am not disregarding the politics. happened,, a lot has i think it is great when this happened. have a surprise. thishear somebody saying is the most important election in the century, my first reaction is to sell. has only been 15 years since the turn-of-the-century. >> last time you came on, you said avoid india. now you are saying -- >> if anything, pair it down a little bit. i feel uncomfortable about this. the expectations are there. i think they can do as great deal of things. -- thereto take my cat is no economic reason why india cannot grow.

10% for the next 10 years. easy. restaurantu have a kind of menu and you have an expensive meal which is coffee and sandwich. very costly. >> sometimes your own worst enemy can be yourself. >> it is very easy to prognosticate that there is no reason why india can't do a china. are they getting unfairly blamed for the most recent gdp report? case, it is the same as the previous quarters. it is not dramatic. i am much more concerned with cpi inflation.

india irve bank of don't think will consider cutting interest rates. supply -- [indiscernible] >> it is very easy to pontificate from the outside area -- the outside. something like one third of all food supply simply disappears. it is absurd. this has to do with distribution. it has to do with roads. it has to do with centralized distribution points. that allows you to freeze and cool food. same type of problem we have been seeing in india for the past two years that has debilitated its economy. are you still sure you think this 10% growth can happen? >> remember, it is the restaurant meal.

it is going to cost you. it is going to cost you politically, economically. acceleration of gdp growth is also associated with working distribution of income. words, the wealthy are going to get wealthier. the poor are not going to get warmer, but the gap is going to accelerate. is the liftbut affect. you are inside the left. back -- the list keeps going up. that is crucial. >> infrastructure. they need this before they can build. >> they are getting it at a much faster rate. the current administration, they said three things are going to happen. we are going to hit corruption. taxes are being raised to tax

more. simply raise whatever the law allows. and now. not in 10 years time. that has made a significant difference. >> let's talk china with the time we have left. >> i talk too much, sorry. >> not at all. >> what i like about the pmi number -- the official ones are 50 point something. 50.5, 50.6, 50 .7, 50.8. it shows you that it is not getting worse. unofficial ones, are still below 40. but they are gaining. it is stabilization. also it is important to remember that these are not actual numbers. these are expectation on numbers. you ask people, are things getting better or worse?

if more people say they are getting better you have an index higher than 50. it is expectational. i don't want to get too obsessed about that. expectation-wise the chinese economy is getting better. nothing to do with the market. i still look at the the market and stay clear. --thanks for sprinting sprinkling and a lot of thought. good to see you. coming up next, we have more on india. >> we are going to take you live. the economy grows less than expected. we will take you to mumbai to talk about the week gdp numbers. ♪

>> will come back to "asia edge ." let's focus now on india where trading has begun. good morning again. let's take a look at the markets reacting to the week gdp report. it has been a marginally good start. the nifty opening in the green. between 100 and 107 points. weakness continues in the rupee. we have seen the rupee closing with weakness this morning continuing. on the back of that, news from the indian economy, one of the worst levels in the past 25 years for gdp. also, the finance minister of the weekend has said that there is a reality that we have to

continue to watch out for the monetary policy and inflation. >> thanks. sydney's vivid festival was launched as a way of attracting more visitors to the city in the off-peak season. now it has become a runaway success. paul allen looks at the dazzling display. >> it is sydney as you have never seen it before, lit up in a blaze of light. the vivid festival is underway again. exhibitors are under orders to make the city as bold as possible. >> the australian sensibility tends to be loud and brash. we have had to ask some of our partners, for instance the french master, we had two very gently ask them to get bigger and louder. creators of light and

retained some elements of cultural restraint and dignity. haveen's 59 productions turned their hand to the sales of the sydney opera house. not even one of the world's most iconic buildings was enough to attract many tourists. >> that is why vivid was born six years ago. it seems to have worked. on this first weekend alone, 270,000 people came down here to the waterfront. >> just in the first few days of vivid, we are hearing and credible reports of restaurants up 300%, 400 present. one of the ice cream vendors in the heart of the city, they were telling us they sold an extra 1000 ice creams on saturday night. >> let's hope this year the festival will crack the one million visitors mark.

word-of-mouth is overwhelmingly positive. >> it is absolutely wonderful. it is full of surprises. you could stand there for 20 minutes, 30 minutes and still get the wow factor. >> it is very good. it looks very beautiful. >> it isn't just a passive experience. the customs house building has been turned into a giant musical instrument. even the recycling bins are in on the act. as with any successful event, organizers are already promising the next addition will be bigger and better again. paul allen, bloomberg. >> want to talk like show? here is mother nature like show. i like display of another kind offered by mother nature. nasa has released pictures of a rare corruption on the face of the sun. >> remarkable pictures here.

the footage shows huge clouds exploding from the outermost and hottest layer of the sun. >> amazing.

>> from