s biggest rail signaling company getting the green light for the first major ipo since the mainland stock route. yvonne: also coming up this hour, that sinking feeling. delivered late and over budget, kuala lumpur's new terminal is now plagued by standing water and cracking taxiways. 49 countries agree to eliminate tariffs that generate more than $1 trillion in trade. plus, a losing bet. why korean shipbuilders are regretting their decision to go big on rigs. all that and more on this monday edition of "asia edge." juliette: asian stocks are lower. that selloff and commodities from oil to grains continues. let's have a quick look at the oil price. it has had a rebound today. it did spike a little higher. currently, the gold price around

1097. down by pretty flat on the day, but down significantly today which has had a big impact on those gold players particularly a lot of the mining stocks around the region. we've got oil and gas in china down around 2.5%. the shanghai composite is down 1.4% at the moment. the hang seng index down by more than 2%. japan went on lunch break down by 0.75%. around the rest of the region quite a lot of selling. have a quick look at some of the movers we are watching today. significant weakness coming through this morning in some of the hong kong stocks. gomei electrical down. analysts thinking it paid too much. hong kong exchanges having its biggest fall since july 8. still some weakness coming through from casino stocks.

sans china down 3.3%. a lot more weakness coming through in asia. commodity prices really starting to impact the nation. rishaad: getting a closer look at what is going on with commodities you've been looking at -- you've been visiting china. you've been looking at these metal producers. you would think it would be good news for them. the trouble is, they can't sell the stuff. is that the deal? >> it is good news maybe for the large producers, but bad news for small producers. amid the fall of commodity prices, the small-scale producers are seeing tough operating performances. rishaad: cheaper import prices in the form of the raw materials, but also the oil price falling. >> the oil price falling helps

with cost cuts, but not enough. if we look at the prices of the metals, they fall even faster. that makes the large steel producers have narrowing margins and small scales one, net loss. we expect some of them will be driven out of market soon. rishaad: we were talking about this earlier. at least one guest today suggesting there is light at the end of the tunnel. you are not seeing that. >> not yet. i was in china last week. from my checks with the metal producers are traitors, we expect a tough second half going forward. if we look at the supply, it is still increasing. chinese demand has still no sign to recover soon. rishaad: the thing is, if we are to get a recovery, what have we got there? >> i would say, once the

oversupply of the industry can get alleviated and we see some sectors support demand, that is the time when we see the metal market should improve. rishaad: thank you so much for that. indeed, just concurring one of the people i was talking to today was talking about what happened to base metals, saying there is potential for an upswing. dominic schnider from ubs says that many factors are driving the drop but don't panic. >> on the energy side, we do still have a market that is not recovered yet. i think that is one factor. on the other side some of the base metal weakness is more due to china. there is a demand story developing. property prices are not doing well. then we look into the precious metals. it has become very clear the fed will hike interest rates in the

second half. there are many factors at work. rishaad: investors are being too pessimistic and the fed may need to abandon plans for a rate left off if commodities don't bottom out soon. >> if the u.s. closes their eyes and just titans rates based on the employment data in the u.s., ignoring global conditions, that will be a big mistake. at the same time, from a sentiment point of view, this has gone way too far. either commodities will find the bottom soon or we are talking about a deflationary spiral. rishaad: mccarthy says the fed hike is already priced into the commodity markets. >> we are expecting a rate hike

in september. that appears to be almost a given. i've never heard such certain guidance from the u.s. fed. that seems to be a done deal. that is already in the markets. we saw the dollar index rally. since then, it has -- i suspect that at least one fed rate hike is in the price. that strong dollar clearly impacting commodities. if it doesn't continue to strengthen, we might see some easing of the pressure. rishaad: and that was the word from asia on commodities. yvonne: ipo's are once again in the news. a fairly big offering coming to china, or more so hong kong. bloomberg has obtained the listing for the upcoming communication core. david ingles, tell us more about

the company and how big this listing is. it is one of the major listings we've seen. david: it is just under $2 billion. this is based on the terms that we were able to gather. just to avoid confusion here, it is basically the product of china cnrcs. this is another tongue twister for everyone in financial journalism. this is -- that's it, ok. yvonne: train traffic control systems. david: yes, it doesn't make the actual trains. if it does price, you are looking at the range at the bottom of your screen. at the top end, eight dollars hong kong of pop. we will get more details on

this. it is going to start trading based on the terms on august 7. citi, morgan stanley, and ubs our partners here. i think this is going to be interesting to see. i think we have the volatility index in hong kong. it is going to be the first big dip into the water since the stock route. volatility has come down since then. we are at 21.5 now. it would really be down to how attractive this one is priced. yvonne: they talk about the massive volatility in the china market. china is still suspending ipo's at this point. they've shifted towards hong kong. you mentioned some of these people backing the deal. there's quite a bit of them. david: half, more than half of the dealers are sold to investors here.

cornerstone investors, i think we have beijing infrastructure investment, china shipping group, china life and i think you have 13 more mostly the state owned friends, getting into the deal. they have to market less than half of that $1.8 billion. yvonne: that price offering coming up this week. david ingles, thanks for that. rishaad: some of the stories making headlines now. dbs profit was up 15%, $816 million. that is due to higher interest and fees. they have allowed singapore in lenders increase charges tomorrow. they are facing weaker loan growth this year. the singaporean economy contracts. dbs shares under a bit of pressure, down over 1% in a declining market overall.

mitsubishi shares jumping in tokyo. its decision to stop making cars in the u.s. responsible for that. it is shutting down its only plant in illinois. mitsubishi only makes one model in the u.s., the outlander sport. the weaker yen makes it more viable to produce cars in japan for export. no plans to reduce production in china. vw responded after "der spiegel" said the company was considering cutting output numbers and workers' hours. in june, passenger vehicle sales fell year on year. growth slowing down. the stock market route putting some buyers off. yvonne: coming up later on unwanted headlines. problems for kuala lumpur's new terminal. a sea of red across asian markets this morning. is there an end in sight? we will discuss the outlook when "asia edge" continues.

♪

rishaad: checking some of the stories making headlines around the world. yvonne: joint development over oil and gas reserves in the east china sea. beijing's offer comes just days after tokyo released pictures of what it says are platforms close to median lines separating the two countries. china and japan agreed 10 years ago to jointly develop reserves and held official talks to years later. the discussions broke down. rishaad: the president of syria has admitted that after more than four years of civil war, he's running out of soldiers. bashar al-assad said the army no longer has the manpower to defend the entire country. he issued amnesty for deserters and called on people to sign up. assad denied the army collapsing but his remarks are a rare

public comment. yvonne: torrential rain in pakistan causing flash flooding and threatening to drive up food prices. at least 42 deaths have been reported since the monsoon began, with thousands of people forced from their homes. 173,000 acres of farmland have been inundated. the downpours could continue through most of this week. rishaad: the director of asia-pacific fixed income, this could be arguably part of el niño, but that is one of the things you would have thought would have the reverse effect when it comes to agricultural commodities. this has been a gradual and sustained decline across the commodities complex. what is going on exactly? >> i think the el niño effect really kicks in next month. as you know, that's probably about half the cpi basket across

asia. it is important for bond investors to get a handle on that. rishaad: how do bond investors get a handle around that? in the 1990's, it was coming and everybody went, it happened. while it was going on, you didn't know it was going on. >> bond investors aren't great predictors of rainfall. we want to see real evidence. we know that is going to roll in at some stage. we are watching monsoon trackers in india. at the end of the day, the cpi basket is predominantly made up of food and energy. you are getting the reverse on the energy side. it is all china-related at the moment. one of the interesting things we think right now, our property analyst is saying that of the top 30 cities in china, there are running out of properties. they need to kickstart,

otherwise the prices are going up. yvonne: hasn't that already been baked into the china story? in the u.s., we have seen rigs, fields, going down, but quite a bit of inventory still. they are still playing on whether this could delay the fed interest rate hikes this year. do you think that could happen? >> the commodities front was around china taking on way too much this year with new budgetary laws. the municipal market, that's the only legal way now that the local government financing vehicles can get access to capital. so if that's just happened money is just starting to flow in. we think the tap is going to really get turned down this year. rishaad: meanwhile, we continue with people looking at the glass being half empty. >> that's always the approach from global investors on china.

we start with a negative bias. we try to look at it in a more balanced fashion. we are watching cement prices. no matter what is announced, cement prices will go up. yvonne: this equity boom seemed to mask the weakness we saw in the chinese economy. we've been talking about this for quite a bit now. >> everyone is peeking through the weeds on the gdp numbers. there was a huge kick up in the gdp numbers to hit that 7% roughly from the financial sector. rishaad: it was too good to be true, wasn't it? yvonne: even the financial sector output seemed to outweigh the strengths. >> this is a natural part of the rebalancing. moving away from the heavy industrial economy, more to a domestica services economy. rishaad: which is why we always

look at pmi manufacturing when we should be looking at pmi services. >> and focusing on the jobs numbers. rishaad: are they reliable? >> we tend not to focus on the jobs number, which has been around that same level for the last decade. what we are focusing on more is the survey data. that is saying it is hard to find solid employment now. a lot of people are labor hoarding. yvonne: we talked about all these government interventions. we are seeing possibly, it seems like things are stabilizing a little bit. in the bigger picture here, could china's reputation be on the line? >> for me, china always plays the long game. i don't think the stock market is going to upset the five-year plan. the thing we are focused on is

september's meeting with xi jinping and obama. for us, that is the most important event this year. that will kick off how china gets back into the game. they want to focus on exports and imports, making sure they are not locked out of the protocols. if that's the case, xi jinping trying to negotiate that with obama, he's going to have a very steady currency, potentially a stronger currency going into that meeting. the band shouldn't be a band anymore. it should just be highly managed currency. some big events coming up in the next couple months. rishaad: well [indiscernible] yvonne: coming up next, it has been plagued i criticism, but is

the tpb about to pass? rishaad: more right after this short break. ♪

yvonne: trade ministers from 12 pacific countries get together in hawaii this week to push for agreement on the tpp. the deal aims to create a broad pact accounting for 40% of world trade. as paul allen explains it is

attracting plenty of criticism. paul: the setting looks idyllic the negotiations probably won't be. after five years of talks, the united states hopes a breakthrough will come this week in hawaii. representative michael from an says the countries involved are keenly focused on reaching an agreement on the transpacific partnership. it is a crucial part of the u.s. pivot to asia, a broad trade deal accounting for 40% of the world's economic output. the deal does not include china. >> it is going to open markets that currently are not fully open to u.s. businesses. paul: there are sticking points many of which have been causing concern for a long time. the united states is pressuring japan to open its heavily protected agriculture market. the u.s. has long protected its auto industry with tariffs on japanese cars and trucks. public opposition to the tpp is

rooted mainly in suspicion. the whole deal is being done in secret. one leaked chapter suggests pharmaceutical payments may be lengthened. copyright provisions are likely to be tightened, though details on that are secret too. defenders of the negotiations say the text isn't available because nothing has been agreed yet. once it is settled, it will be presented to each of the 12 countries. it is at that moment public opposition is likely to reach its peak. paul allen, bloomberg. yvonne: in other news first the financial times, now pearson is selling the economist. the magazine was not included in last week's sale of the ft. it appears it is now disposing of its holdings. it continues its transformation into an education company. the company is valued at about

$620 million. pearson's stake in book publisher penguin random house may also be up for sale. the chrysler is to buy back about 300,000 ram pickups as part of a deal with u.s. regulators on recalls. it is paying $105 million in what is the largest penalty ever imposed by the agency, topping hondas $70 million fine last year. the at chrysler recalled 1.7 million before a steering and airbag problem. documents show a litany of recall problems dating back to 2011. real madrid is the latest soccer club hoping to raise its game in asia. it is opening an online store on alibaba selling club merchandise including official uniforms and memory billion. it is the first deal of its kind. it gives real madrid access to 600 million customers.

rishaad: europe and the u.s. on friday having big losses. let's see what it looks like at the moment. we are off the lows of the day. a bit of a recovery taking place. we have asia pacific stocks down. the worst week for global equities this year. the selloff in commodities has been deepening. industrial profits in china also responsible for what is going on, and those industrial company profits decreased in june from the year before. quickly moving to what is going on in tokyo, where we are about to get the reopen, declining day of fortunes there as well. will it continue? the reopen in tokyo is three minutes away. ♪

yvonne:. stories this hour asian stocks have had a global commoditiesb selloff, and hedge funds are taking a net short position on gold for the first time, as expectation grows that the fed will raise rates this year. they show chinese industrial profits fell in june, the latest sign of a lowdown, also weighing on commodity prices. the world's biggest provider of train traffic control them getting as much as one point

billion dollars from an ipo in hong kong, becoming the first major chinese lifting since what wiped off money. shares have already raised more than $2 billion this year. cbs is up with profit, higher interest and fees and this has allowed singaporean lenders to raise charges to borrowers. the singapore economy contracts amid an asian wife slowdown, led by china. let's get the latest on the markets, and not looking like a particularly good monday, julia. julia: no. losses, as you mentioned, asian stocks down for a fourth session, and we have got the became in japan coming back online and falling even earlier,

down by about 1% mining stocks down by about 1%. energy stocks off following a fall in oil prices. and the shanghai composite is down, oil and gas docs down by about 3.5%. a lot of selling by the banks in china. in south korea, a big fall in health care stocks, and we have got oil and gas docs and also basic materials, the weakest it has been, off by about 4%. interestingly, australia, they are doing ok. gold having a bit of a rebound, but i want to go back to the oil price. of course, it has been really furthering the their markets, down about 10%, and the oil price is holding its losses in

the bear markets. that five point 4% fall in oil last week, there has been a rebound in u.s. drilling producers obviously continuing to collect the market with oil despite the fact we are seeing this significant fall, so as i mentioned, the big drop in oil prices weighing heavily on mining stocks and others leading to the weakness we are around the asia region. yvonne: thank you, julia and leading shipbuilders just one group of many to feel the pain of cheap oil. they have turned to offshore oil rigs in about five years ago in what turned out to be a bad that, and michael is in the studio. really good to see you. oil was back at $100 a barrel. is this just a tough market we are seeing, or was this just a that? michael: you had a glut of

ships. orders for new ships were falling, and the price of oil was high. they said let's leave the cheap ships to the chinese. they said there would be a lot of exploration. as it turned out, the price of oil fell, which discouraged exploration. at the same time, it was much more complicated to real these than expected, and they take about 40 months as opposed to 18 months for a ship, paid at the end, and now they can deliver these rigs. yvonne: we had headlines from the second largest ship elder in the world, saying how they were trying to get help from some of the largest stakeholders. earnings wise, what should we expect? michael: we are going to have at least two or three reporting including they will -- daiwu and

they are talking about a loss for them, as much as one trillion yuan for samsung heavy. there was a infusion from their major shareholder, and they're also in the midst of a restructuring process, but i think this quarter is going to be very challenging for all three of these companies. yvonne: in the end, how do you think this is all going to turn out? michael: that is a good question. as we mentioned, it could mean cutting staff, and i think down the line, we have to ask whether eventually we are going to be talking about a big two rather than a big three in korea. were shot -- rishaad: some are singing this drags them kicking

and screaming into the 21st century. housing significant is this? reporter: this was the original 1997 deal. all of those products, 201 products into the list, they are now subject to this, chips and the video game and gps devices so pretty significant. rishaad: 201 items? sherry: yes. the director of the wto is saying that annual trade in these 201 products is valued at over $1.3 trillion and accounts for about 7% of total global trade to date.

rishaad: not everyone was there. some of the people disagreed. sherry: some are unhappy that it does not include flat-panel displays. of course, that sector is very, very important. they could not persuade china to put those items on the list, and a lot of people have been criticizing china for not including a lot of items that they want to protect from global competition and some who did not agree to the deal, including turkey. rishaad: what is next? sherry: we have a very tentative deadline. there is a schedule for implementing the cuts and then by december, they are hoping they will conclude the agreement and that will be at the conference in nairobi, kenya, tapping officials, saying they hope this deal will enter into

force by july 2016. rishaad: on the fringes, like a delhomme around -- a doha round. yvonne: let's take a look at some of our other issues in the news. majority control of china's second-biggest electronic retailer. they have agreed to buy a company for almost $1.5 billion. a founder of they also own it through a holding company. it will give him 55% of the company shares. and galaxy it is betting on monaco to get 5% of a casino operator. neither the seller nor the price have been made public. they are 34% owned by the state of monaco and the portfolio

also includes restaurants and nightclubs, and looking at a scheduled to cut costs scrapping rome and los angeles flights but doubling flights to rome and london. the carrier has about 50 unprofitable routes, and they will also change some operations. they say the route changes will be temporary and will be reviewed once it regains competitiveness. rishaad: in malaysia, some headlines, being delivered late, way over budget. actually sinking. i was having a look at this and what is going wrong here? reporter: well, they start off in 2009. air asia, of course, at the center of all of that, and it is an impressive structure architecturally.

one problem is the area of the airport where it is built. rishaad: this is the problem, isn't it? reporter: it is flooding. there is uneven pavement, and these photographs prove it. this is a danger to aircraft. it pops tires, and there is debris that can be sucked into engines, there are problems with the taxiways and the malaysia airport says shifting soil is to blame. curious though why this section of this last airport is having problems, when the main section, the main terminal that malaysia airline uses is not having an issue. rishaad: airasia is one of the users, and they have been talking about it versa for going -- pacific risley -- vociferou sly. reporter: this was nothing more

than a shed in many ways, so airasia has had it concerns. the terminal is an excellent facility. it has taken time to build, and at a cost but this is something that are going to have to look at. the key concern is the safety of passengers and planes. rishaad: let's look at what has been happening. they are not the only one. bangkok, another airport. we talked earlier about japan. reporter: yes, let's begin with japan. we think of japan at being excellent with engineering. rishaad: that was quite the project, wasn't it? it is really a floating airport. reporter: it is an engineering marvel, built out at sea, and it was waterlogged, and they have been fixing that. in jakarta, there is that

age-old problem of infrastructure. the runway was long enough to handle the big just but not sturdy enough. then they could fly to london and, of course bangkok, a huge facility, as you know well, but it is built on swampland, reclaimed swampland, which has presented a host of problems cracking runways, and you will remember that bangkok was closed for months at the airport for resurfacing, and that was a nightmare for arrivals and departures. rishaad: as he said here in jakarta, problems, as well. they could not handle the biggest aircraft, as you are mentioning. reporter: and a myriad other issues, if you want to get technical. the airports have wind shear devices to protect pilots and passengers, and it really is a tale of each city and what they

chose to invest in across the asia-pacific. rishaad: i am sure we will be hearing more about that. yvonne: coming up stocks in tense of five. we will talk more about this as "asia edge" returns. ♪

yvonne: checking some top stories now. rishaad: they will now start tuesday, the stock market remaining closed with greece, any agreement meeting to be in place on the 20th, when they owed the ecb $3.3 billion. yvonne: president obama has praised kenya but warned them

about rooting out corruption. the imf expects them to improve to 9% this year. rishaad: nasa with an animated flight. information gathered by the new horizons spacecraft, headlining earlier this month, and it revealed enormous ice blows and temperatures at -229 degrees celsius. much of the ice is made up of frozen nitrogen. it might be soft enough to move like gases on earth. yvonne: joining us is david sherry, and our guest. we talked about china markets earlier, that let's talk about bond markets, your expertise and looking at interest rates, we tend to see investors in bond

markets overestimate inflation a little bit. what are you seeing things now? how gradual will we be seeing something? reporter: we have commodities heading lower, as you point out, and it looks like inflation will probably be heading lower your -- lower again. we will look back at the history of u.s. treasuries, and we go back 140 years, the real yield has been around 2.1%. so that still looks attractive to investors if you are chasing real yields. what we would say is that they are going into a rate hike and -- rishaad: in the last few weeks, september has become more pronounced as the time people are thinking. why? >> strategically linked or maybe

not strategically going, the letter from the fed, and i think the on market has taken that and said they have a more sanguine view. rishaad: trish: --rishaad: is that because it is so close to christmas? yvonne: if we do see a fed hike, how risky is that? hayden: i think we will get one out of the way, and then a the two, and the market still has not worked that out yet, and it will need more data. yellen is still looking at that so i do not think it is baked in the cake, and as you pointed out, the risk is really inflation, it is going to start then down those dots again. reporter: we are probably looking at dollar strength. given the dollar denominated debt we are seeing across parts

of asia, what are the weak pot -- parts you are seeing? hayden: as a construct, it is under pressure. commodities coming up, this is fantastic margin expansion for companies here, particularly for the chinese one. it import cost are going down. we are seeing this on the trade surplus side, which is then giving them flexibility for infrastructure. rishaad: and then the dollar then maybe it does compensate. hayden: you're absolutely right on it malaysia. they are all lows on the currency, and we have just seen over the last couple of weeks how much money they have been defending the currency with, so they have been eating into their foreign reserves. they have only got a few months of reserves up their sleeves

now, so that is a precarious situation. but it is really only a malaysia and indonesia in that part. yvonne: the stock market, how do you see the chinese government want market? hayd3een: i get this question all of the time. the market is reacting like the bond market should. it has been a positive capital return, so you got a negative correlated asset. i am not worried about the bond market, because the bonds are run mainly by the chinese banks, and the chinese banks are strategically important to the economy, and we think that is still going to be the case. you're going to have a liquid market here. after all, investors should be looking at it. but what are we chasing? positive real yields, and this is down, one .5%, 2%, which looks like developed market inflation, those are pretty attractive yields. yvonne we all seeing these

rates. do you see the inflation risk rising? hayden: now, because they are a net importer, and the chinese room and be is probably the only one that could keep up with a strong dollar rally, and that needs a trade surplus will be going up, all positive for the chinese were nimby -- the chinese remimbi. we have spoken to officials and to the imf, and they have intimated that look, it is probably on the low side and xi jinping is meeting with obama and he will come back with a laundry list of things he needs to do to keep the u.s. happy, and that will be part of the bilateral trade deal. at the end of the day, we think the main thing is that the governor of the pboc has done a terrific job of convincing xi

jinping that he needs to get in. at the end of the day, it is about liberalization. yvonne: what about the msci and their inclusion? do you think that could be an question now also? hayden: it was said they were going from 0% to 32%. in the and, you also need the global investors, and last week was a huge change. sovereign wealth funds and central-bank and super nationals can now go directly into chinese government on and just registering, so as far as i am can third, it is open right now. we are invested in chinese bonds already, and we have been recommending it to clients, and it has been fantastic and client portfolios over the past 10 years and probably will continue

to be, offering a high nominal yield and a high real yield, and it is aa rated. you cannot find many of them these days. reporter: and you already think risk is properly priced and so forth? hayden: it is not in the bond markets right now, and we think that is about to change, and we've introduced monetary policy over the last several years pre-we are starting to get a proper price on capital. that is why the government yield curve is sliding that's starting to go up. you are starting to see it be steeper. that is a positive sign, and we should demand a premium and some of the risks should go up and the next of those should be credit securities. as you start to break up state owned enterprises, you will need a different price on those securities, and that is likely to happen. rishaad: thank you for joining us.

yvonne: all right, coming up next, a warning from samsung. profits. ♪

♪ rishaad: ok, let's have a look at what we are watching out for in this part of the world over the course of this week. yvonne: erdogan will make his first state visit, saying he will raise the treatment of uighurs, where tensions have led to deadly clashes, and also looking at a potential purses -- purchase of a missile system. rishaad: recalling a product in may after authorities found excessive levels of lead, more than $2 million.

yvonne: and we will get a picture of who is winning the smartphone wars with second order earnings on thursday, and the companies warned that supply issues for the galaxy s six may miss expectation, and they are also likely to feel the effects. rishaad: and the international olympic committee, it's olympic committee meets to discuss who will host the 2022 winter games. it is a choice between beijing and another, and while -- the president says it will not be an easy decision. yvonne: antman maintaining the top position at the box office and there was the new release, pixel. rishaad: and the second-place

came in with about 20 or million dollars. yvonne: it was anticipated that pixel would be high, they're going to third place. rishaa

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