fundfund >> new year, new prospects. all change at the white house. and rate hikes on the agenda. we'll look at what 2017 will bring. >> china's factories and services closed out the year robustly signaling growth is strong enough for more economic reforms. >> and testing times. cross rate tensions continue to rise following the taiwanese leader's phone call to the president-elect in the u.s. >> and disappointing data. singapore is expected to post a

slower growth of any economy in asia this year. >> happy new year. this is daybreak asia coming to you live from u.s. edge asia headquarters. i'm betty lu. >> it's just on 7:00 a.m. here in hong kong. es, happy 2017 to you all. a lot to look forward to, betty. betty: indeed. it will be starting off with a big bang essentially with president-elect donald trump taking office and a lot of people wondering what he promises is going to be what really pans out. that is going to be a lot of the conversation going forward n the next 6 to 12 months. shery: yeah, betty at least when it comes to global factories, manufacturing has been doing well and ended 2016 on the high. we had china's stablizing

p.m.i., manufacturing data, and this morning we also had the manufacturing index just gaining for another month. take a look at this market right now trading in asia. slightly on the upside after falling in the last session. in the last session of 2016. the australian dollar though gaining 0.2% after two days of losses. a few markets remain closed in the asia pacific today. japan, new zealand, and thailand are still celebrating the new year. so that's an early look at what we can expect in the region this morning. betty, so how did it close with 2016 for wall street? betty: you know, we kao closed kind of with a little wimper i would say, right? investors didn't wanttake any big positions ahead of the cle out for 2016. but senchts is going to be a very -- 2017 will be a very different story, shery, under way with key u.s. economic sign posts. we are awaiting the fed's first policy meeting of the year. our fed watcher is here with a look at what we should be

watching for this week and beyond. >> well, let's just start 16 hours from now, tuesday, in new york, wednesday in hong kong. we are going to be getting the i.s.m.'s december purchasing manager's index. of course we get china's p.m.i., manufacturing is so important if you want an economy hitting on all cylinders. in fact, in the united states the p.m.i. has been above 50 for eight of the past nine months, betty. december should make it nine out of 10. let's look at the forecast now. 53.7 in december. up from 53.2 in november. that would be a very solid report. actually let me get to that right. 54.1 and 54.2. at any rate moving higher, staying above 50 is what counts. betty: the trend is right. kathleen: we want to glean some extra information. they asked for comments from 18 different manufacturing industries about what they're seeing. these are the purchasing managers. they have their finger on the pulse of what's happening in the company. they also sometimes ask special questions. i'll be waiting to see if they asked any questions about the strong dollar. that could be an issue for

manufacturers. also about donald trump. are they concerned they've got a new man in the white house with big plans for trade and other things or are they optimistic he'll boost the economy and help manufacturers? betty: what about wednesday? the fed is going to release their minutes of the december 14 meeting. what might we learn for the next fed meeting? kathleen: the big question is how many rate hikes this year and how fast? they've been talking about gradualism. markets looking for the first rate hike. in fact the first of three. december 14 meeting. they're not looking for that until june. it was a close call though. let's look at the december 14 meeting in terms of dots on your terminal. go just to the left-hand side. you can see that the median forecasters, six dots in that 2017 spot that are signaling three rate hikes. you know what? there are six who don't see three rate hikes this year. and there are four who see even more. so it's not a done deal. it's not a close call. or it is a close call. excuse me. now, another thing very important about the fed is

there is a rotation. there are 12 fed bank presidents. the seven governors always vote. there are 12 fed bank presidents and they rotate four of those seats. what is very interesting is 2016 there were more hawks that were in that rotation. loretta mester from cleveland, esther george from kansas city, a former dove who has been a hawk from boston the lone dove jim buller. now we get more of a hawkish tilt because we have two very, very doveish doves and that would be charles evans, from chicago, and the other from minneapolis, one of t newest fed members, kashkari and some centrists. harker from philadelphia and caplan from dallas. can't exactly call them hawkish. one more thing on this. the new york fed president always votes. that's bill dudley. we know that bill dudley like janet yellin has been tilting toward the doveish side. shery: at the end of the day it

is all about the data isn't it? we have friday's jobs reports. that is going to mean points for the fed. what about donald trump? kathleen: well, there are interesting angles in everything in the economy now when it comes to donald trump. of course it is important to the fed, january payroll up 178,000 for the second month in a row. that would be a very reinforcing number the fed looking to hike rates three times this year in terms of their median forecast. wages are rising 2.8% year over year. that would be up from 2.5% and would please fed members who want to see inflation heading toward the 2% target eventually. it might concern some hawks. they are wary that could move too slowly, if you get too much wage pressure and inflation will rise too quickly. intelligence pointing out what will be interesting to see in this report, we have seen confidence. we've seen confidence in a lot of the consur confidence reports. will confidence turn into hiring? will the trump optimism we've seen turn into more jobs and strengthen the economy? let's jump into the bloomberg now for one of our g charts. # 4941.

we got these numbers toward the end of december from university of michigan. post election optimism. go to the far right-hand side. the biggest two-month gain since january of 2012. there's been anecdotal comments from small business people, the national federation of independent business survey for the month of december. they were also looking to -- for trump to help strengthen the economy. so these are all very important. the data will be very interesting. a lot of signals that i think are going to have traders watching, particularly after the kind of bond market we've seen, the selloff we've seen in the final weeks of 2016. shery: and whether that continues. thank you so much for joining us, kathleen. now, china's official factory gauge ended the year in the new york post 2012 high indicating a strengneng in the eek oin the back of stronger executive sentiment. happy new year. it's great to see you again.

so how does this translate into the real economy in china? does this signal more improvements in 2017? >> i think it is showing china's economy ended the year on a good note and will start 2017 exactly where policy makers want it right on track to hit the growth target between 6.5% and 7%. it is giving policy makers space to maybe move away from the stimulation side of things and start looking from the underlying structural problems, some of the big changes that they have to push through to try and tackle the growing debt management. it is an overall confident picture on the economy in the near term and stablizing factory prices helping and time to start doing the harder, more painful things. shery: it looks like china is now focusing on controlling financial risk. now that could be a factor in sort of capping growth. what are the risks going ahead? >> i guess there are two. external and domestic.

external there is so much uncertainty about the donald trump administration and how it might play out with china vis-a-vis the potential for trade tariffs, punitive measures, and of course trade wars. we just don't know how it is going to play out exactly. that is the external side. of course the u.s., too, to hike more in 2017 that is pressure on the yuan. domestically they have concerns about the exchange rate. they don't want the yuan to fall at a pace they can't control and they don't want capital outflows to decelerate at a destablizing pace and they have to keep a look on properties in america. significant bouncing from both domestic and external pressures. betty: certainly a balancing act but what about the latest debate on the growth target? >> i mean, probably an annual debate but it is getting more interesting because recently reports from your colleague in beijing that the president is among those who is maybe open to a slower pace of growth if

it means reigning in some -- reining in some of the obvious risks we know about namely the debt and credit of things. we know china's economy is on track after a splurge of cheap credit. we had an adviser over the weekend saying he thinks the growth target should be lower and money sector economists would say the same thing that it is really a political target and doesn't serve much purpose in the real economy and the focus should be more on quality of growth, sustainability of growth, pushing through very hard and unpopular reforms in areas such as s.o.e.'s and debt and the like and lesser focus on hitting a headline target. it would be interesting to see with a big political year of change we have in china whether there is an appetite for actually eventually moving away from adjusting the growth target all together. while there is some debate we don't seem to be at that point yet where the growth target would drop. that's for sure. betty: thank you so much on the struggles for china in the coming year. ow to the first word news.

>> hi, betty. asia is selling a 20% stake for $1.3 billion. the australian lendor says the stake is being bought and sees no material impact on its net profit from the sale which will boost capital ratio by around 40 basis points. take a look at anz shares in sydney just up over 1% at the moment. he's restarting his career at a much smaller firm. jain is joining cantor fitzgerald as president where he will help oversee the expansion of trading and prime brokerage. jain helped build them into the biggest securities firm over the past two decades before stepping down in 2015 and with mounting legal and regulatory problems. he'll be working for cantor out of london. south korea has banned the sale of some cars made by nissan, b.m.w., and porsche after an investigation found the

automakers fabricated emissions tests. in addition the three have been slapped with total fines of $5.9 million. carmakers and components suppliers are facing increased scrutiny following scandals that companies including v.w., mitsubishi motors, and takeda. space x will return to satellite launches next monday four months after a falcon 9 rocket blew up on the pad. an investigation concluded that one of the three pressure vessels in the second stage liquid oxygen tank failed. the announcement of a launch date means the f.a.a. has accepted spacex's report into the explosion which found it was the company's most perplexing failure in 14 years. bloomberg news 24 hours a day powered by more than 2600 journalists and viewed in more than 120 countries. this is bloomberg. betty, shery. betty: still ahead what to expect from the foreign exchange markets in 2017. we'll see some guests forecasting weakness in most asian currencies and of course a stronger dollar.

how does that play for china? up next, the chief china strategist says the dollar/yuan rate is a benchmark for the year ahead. this is bloomberg. ♪

>> we're counting down to asia's first market open this morning. ading in sydney already up 0.6% after two days of losses. i'm shery ahn in hong kong. betty: i'm betty liu in new york. headlines at this hour, samsung electronics has warned of slowing growth in key markets and increasing uncertainty around trade and currency fluctuations. the c.e.o. used his new year's speech to urge the company to learn from costly failures and recover its pride. last year's flammable note 7 fiasco cost samsung more than

$6 billion and pushed smartphone profits to a record low in the third quarter. shery: south korea's biggest carmakers predict sales will jump 4.7% this year. according to regulatory filings, kia motors is targeting a combined 8.25 million deliveries in 2017. they are planning 10 new models between them to counter growing competition and concern about trade policies under new president donald trump. betty: tesla has given u.k. buyers a new year present postponing a price rise scheduled for january 1 by two weeks. vehicles ordered before january 15 will also benefit from the free access to the company's supercharger battery network before new fees come in. tesla's raising prices in the u.k. in response to the pound's plunge following last june's brexit referendum on leaving the e.u. shery: china will play a crucial economic role both at

home and further afield. as official factories gauge ended the year with a high indicating a strengthening economy. on the other hand the shanghai composite fell 12% last year and was one of the world's biggest losers. let's discuss all of that with our guest. so, we just listed what was ood and bad in 2016. still, you call 2017 a year of epic changes and volatility. why is that? >> yeah. i think in 2016 in general in 2016 we had the second wave of yen depreciation. i think since then the volatility originally relaying from china outward on to the global stage i think since june last year is actually coming in the reverse direction. so basically in 2017 i think the changes are coming from outside. for example, donald trump's

winning of the u.s. presidential election and he'll come into the office in january. it is very unpredictable what his policy toward china is going to be. so i think in 2017 we'll see more external volatility from outside into the domestic chinese market. shery: especially not only because of donald trump but because of everything that he symbolizes, including rising u.s. dollar. so when it comes to the chinese yuan, how much more weakness are we expecting this year and what risks will that entail? mr. hong: i think the weakness in the yen in part is determined by the authority's attitude toward it. last year, since 2015 we had two rounds of depreciation and it didn't work well for the market. ut now that there is continuing depreciation i think the market stablized.

so the attitude is not to upset the market even though we allow the yen to depreciate. i think this year we'll probably see further depreciation of the yen but then i think as long as the market is stable the authorities will allow it. shery: markets seem to be a bit more stable when it comes to, immune to the yuan depreciation these days. what about liquidity? we have been hearing some banking officials calling for say triple r to be cut. what is your assessment of liquidity in china this year? how will that affect markets? mr. hong: i think monetary policy on the balance will be more prudent than last year. even though triple r could be cut but then i think that is trying to offset the reduction in reserve accumulation. now, we've lost almost a trillion of accumulation in the past 12 months so i would say even though they try to cut the triple r in the best case scenario it's just going to upset some of those reductions there. then on the balance this year

we've got to have the macro prudential management framework so some of the commercial banks off balance will be brought back into balance and i think that will consume banks' capital and will put a limit on how much liquidity they can create. shery: what was interesting for me from your notes is that you said that we're seeing curbs ties just impose that doesn't necessarily translate into money going into equity markets. you would think money has to go somewhere. mr. hong: i think property transaction itself actually creates money. i think for the past six or seven years every time we had a property curve and the market doesn't perform, the reason being the property transactions tend to be money multiplied, not accelerate money speed in the economy. so therefore we know we probably will have less expansion and therefore less

liquidity for the market. bet >> i want to pull up a chart on the bloomberg terminal which is an interesting story we saw at the end of the year which is the shanghai composite index which is this white line here continuing to fall. but an interesting turn of events for the hang seng china enterprises index which actually began to converge toward the middle of, beginning and the middle of december. i wonder if that trend continues, what does that tell you? mr. hong: yeah, i think people are trying to use hong kong market as a hedge against currency depreciation. and also because the hong kong market here, 7% of earnings -- 70% of earnings actually coming from mainland china. if you want to buy chinese stuff, if you don't have necessary access toward the domestic market i think hong kong is a good property and that is why hong kong after a dramatic sell off seems like it is trying to stablize and

probably is going to receive more money flow from china. betty: you note that despite certainly the broader -- the the lobalization, that u.s. dollar rate is still going to be the benchmark, right? we still have to pay more attention to that than looking at the basket of currencies? mr. hong: yeah. i think because the counterparty in this trade is really the u.s. dollar. and i think as long as we depreciate against the u.s. dollar that then we remain on balance with the other currencies. you know, the authorities tend to use the basket as a reference rate rather than the benchmark but then in the trading market, traders only look at the u.s. dollar reference rate. betty: thank you so much for joining us on the future of china this year, hao hong, chief china strategist at bocom international. staying in the china region, much more ahead. taiwan hitting back at china

for its cross tactics. we'll be live in taipei. that is next. this is bloomberg. ♪

shery: this is daybreak asia. i'm shery ahn in hong kong. betty: i'm betty liu in new york. leaders say ties with taiwan are becoming increasingly sense. in her new year's eve address president tsai ing-wen said china hurt the feelings of the taiwanese people and destablized cross-strait relations. president: i did not wish for things with china as things used to be. however, we will not give into pressure. there are still important principles when dealing with cross-trade issues. betty: the rhetoric is heating up ever more since the phone call between the taiwanese leader and president-elect donald trump. what is she referring to when

she said beijing is now being coercive and intimidating? >> well, finally enough, betty. just as she -- strangely enough just as she was making these new year's eve comments there was a story out of beijing, military officials warning strong measures were being considered against taiwan and could include anything from war games to cutting off some of those direct links that were established under the previous president. so certainly the rhetoric is heating up and it's all come about because of the phone call between u.s. president-elect ing-wen mp and tsai at the beginning of december. since then taiwan lost one of the few remaining allies in the orld, now down to 21 in west africa. broke off ties with taiwan and china with no time to build ties, also in december. and then of course in the last couple of weeks we've had a

chinese aircraft carrier enter the western pacific from the east china sea, which is rather unheard of. the aircraft carrier pluft five war ships sailed into the western pacific. japan scrambled jets. it was a pretty jittery couple of weeks, so to speak. shery: also president attended the inauguration of the nicaraguan president and there is some intrigue surrounding that as well. explain that. debra: that's right. china has been calling for the past few weeks for the u.s. not to allow her to transit through the united states. it is long standing practice. there is no direct flight from taiwan to central america where a bunch of its allies aron so china has been asking the u.s. to prevent u.s. transit. but this time tsai will be stopping in houston on january 7 and coming back will be stopping in san francisco.

shery: debra, we have to leave it there. thank you so much for joining us. coming up, more politics. the latest on the impeevement the latest on the impeevement of south i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. hey, drop a beat.flix? ♪ show me orange is the new black ♪ ♪ wait, no, bloodline ♪ how about bojack, luke cage ♪ oh, dj tanner maybe show me lilyhammer ♪ ♪ stranger things, marseille, the fall ♪ ♪ in the same place as my basketball? ♪ ♪ narcos, fearless, cooked ♪ the crown, marco polo, lost and found ♪

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♪ >> happy new year, we have a couple of you to. any days and the first couple of days of 2017, we are 30 minutes away from asia's first major market open. >> really drey here. this is the rooftop hero bloomberg in the fog. that surrounding here in new york city. not that great. i am betty liu in new york. shery: and i am sharing in hong kong.

sherry in hong kong. >> a strong end to 2016, continuing to destabilize. the index was at 51.4 and december, that was a post-2012 high. economists had expected a reading of 51.5. input classes part -- classes in particular jumping. 54 point five, slightly down on november. an advisor says china should set a more flexible economic growth target for 2017 to allow policymakers to ramp up reform. propose a target range of six to 7%. he says china's long-term objective is 6.5% growth at an average rate. work still needs to be done to reduce the number of zombie companies in the economy.

pictures have emerged moments before a gunman killed 39 people submitting new year's eve. the so-called islamic state group says it was behind the attack. the killer escaped at his identity is unknown or had not been released. heavy smog blanketing parts of northern china as forecasts last until wednesday as a national meteorology -- on orange alert. the pollution returned as night fell. and provinces across north east are expected to be affected for the next two days. visibility may be less than 50 meters. global news tweet four hours per day powered by 120 countries. this is bloomberg.

>> singapore releases growth data in the next half hour or so and forecasts show the show -- forecasts show the slowest annual expansion since 2009. what we might expect -- it doesn't look good. continued weakness in the picture but a slight improvement in the fourth quarter anticipated on a yearly basis. .3% in the fourth quarter versus 1.1% on the fourth corner. 4% growth compared to a 2% detraction we saw. this on stronger factory output we saw in november. we saw industrial production growth the fastest in over 2.5 years. expansion isgdp anticipated to rise 1.4% according to the december quarterly survey. this is lower than the one point eight estimate, 1.8% estimate in september. the prime and esther say

the economy likely improved more than 1% in 2016. likely setting the tone when we see the numbers in the next half hour. this is the slowest growth since 2009, when gdp shrunk .6%. >> what are the implications for policy makers? >> it could relieve some and then turnt instead to fiscal measures this year. the reach here is there is more room for spending. but if gdp does soften it makes to monetary authorities lower the center of the currency band in april. wantedce in 2015 and 2016, it chose to maintain its mutual policy in october. this means they were taking appreciation in the same dollar, a dovish stance, signaling the policymakers were comfortable with a weaker currency. we maygrowth is weak,

see a resumption of monetary easing this year. betty: thank you. note, with on a high moody's upgrading its outlook from negative stable. marketk returning to the in the final quarter following that brexit vote. that theold bloomberg lender was also picking up the pace of hiring both in asia and in the market of switzerland. >> in general we are following where markets are growing and asia is our second home. >> where in asia? >> hong kong and singapore. >> the number out there is you have added 200 people. is that accurate? added 200 bankers globally and more than half here in asia. this comes with a lot of support functions, especially support

staff. added 200 this year. are you planning to add more? >> we are adding more people because we have integrated operations, so our headcount is up by 700 people. byare refinancing our growth cutting overcapacity. >> part of the expansion is being inquisitive. are you intending to do more? doesn't make sense? >> i think the market cycle is where acquisitions have cooled off a little bit. i don't exclude there could be some opportunities down the road. we kind of stinted the dial back to organic growth. a lot of bankers are looking for a new home. if you look at the financial services sector, a lot of companies are under pressure.

they need long-term people they are committed to. are you are saying you digesting and reassessing where you need to expand now? >> we are using all the different avenues of growth that we have. now a risk return, organic growth, hiring new people is a better alternative than making an acquisition. >> it is a tougher regulatory environment because they want to know that all the assets you manage are clean. impacting your -- >> is a general trend in our industry. know your client, anti-money laundering. you can only offset that cost by growing. to generate more revenues from your base.

ultimately this will lead to more reconciliation. >> can you confirm for us how much it is adding to your cost? >> i can only tell you that the department that is in charge of the entire control of value change that includes compliance and others are the departments that have the double digit growth over the last 10 years and i think it is there to stay. >> now if you are going to be -- a survey says foreign workers earned the annual equivalent of $188,000, the highest in the world and almost twice the global average. >> not a bad place to ski. a switzerland also tops the bank, a career ranking for a second year. the rink is close to last in

cultivating relationships while the cost of living is notoriously high. we knew it was too good to be true. >> there has to be some payoff. >> there is a catch there. much more ahead. credit suisse says the dollar will continue to stay strong. hear from the investment strategist next. this is bloomberg. ♪\

>> the stock market in japan closed, but take a look at that beautiful shot of tokyo. the japanese yen is trading daystly stronger after two of losses. in i stay to be off and enjoying the holiday. this is daybreak asia. i am betty liu in new york. shery: i'm shery ahn in hong kong.

the anon airline says 2016 was a good year, with pretax profit expecting to hit $110 million. it sees revenue climbing about 10% to $3.3 billion, held by passenger traffic, which road 19% to 21 million seats sold. view not met -- vietnam airlines has more than one million shares on the market today. a private survey indicates indian manufacturing has shrunk as the government's withdrawal of high denomination rupee bills hit demand. the nikkei purchasing managers index was at 49.6. the slowdowns could strip india of its position as one of the fastest-growing big economies and threaten a backlash against the prime minister. >> brazil has posted its biggest ever annual trade surplus. the surplus rose to $47.7

billion last year. more than twice as much as 2015. imports fell 20% from the previous period while exports declined 3%. brazil's trade balance jumped as and among aoyment prolonged economic downturn. still a lot of markets close in asia for the new year. the green.s in let's take a look at how the markets are shaping up. david: a very positive start to the new year. volumes are quite low. 57-12. 5700 on the asx 200. is there momentum? i don't know. let's see how this all pans out.

1.8 billion roughly. 9855. despite the fact we are seeing gains there, i wouldn't say massive flow back. keep in mind as we went into 2017, gold builds up relatively strong momentum. australia,ames in arguably hitting fairly extreme levels. they are pulling back despite the fact that you're getting a broad-based rally in australia up 4/10 of 1% overall. let's have a look at currencies very much in focus. to get ite forecasts out there, dollar-yen, this is a median forecast.

sterling, 122. not much deviation from various levels. be a lotnot going to of trading. hugh us dollar index of 4/10 of 1% just closing in on 1300 at some points. betty: what about what else is driving the markets? any specific data we need to watch out for? david: i think that data point is coming out less than 20 minutes from now. here's a partial list. you have inflation out of indonesia. private survey coming out. just a quick look at retail sales in hong kong.

for a variety of reasons it has been below zero. we are expecting a drop of 3.6%. that comes out roughly when markets shut at 4 p.m. highlights against the pain that retailers have been feeling for the past few years or so. to 2014, everyk single month it has fallen. betty: for any retailer that is a pretty scary chart. the dollar had a happy year rising against all major mark -- all major markets. index on the back of expectations. and increased fiscal spending under the incoming trump administration. i want to bring in the strategist at credit suisse. do's start with the dollar,

we expect more of the same and stronger for this year? guest: indeed. i would say this will still be a year of dollar dominance. it is a question of how strong or how soon the acid is at the opening. we have a good mix of fiscal stimulus. this is probably the best policy mix for strong dollar backdrop. >> does that mean a native market for asian currencies? >> our studies have shown that traditionally true are the different cycles, when you have a strong dollar backdrop, particularly when you have higher treasury use. asian currencies will tend to weaken as treasury use goes

higher, and that triggers outflow. >> how do you hedge this? i was reading a report from goldman sachs, where they noted if you wanted to protect yourself or protect yourself in an asian currency, that indonesia's rupiah may be your best bet. jump into a chart that shows the resilience of the indonesian economy, this gdp. it pretty much has smoothed out over the last several years. despite all the turbulence, despite all the brexit in europe , the into niche has been relatively stable. does that make it a relative stacy -- relative safe haven? guest: when they look at currencies, how do you hatch the

strong dollar backdrop against the asian space, we like what we call asian currencies -- from the total route -- total return point of view, you get a better return across the year. russian ruble play -- russian ruble pays about 10%. asia is the indian rupee. the attention is on the deep monetization of things. india has a strong basic surplus that is growing. even more stable than the rupiah. if you look at it for a total return basis, the rupiah would

be a good hedge against our strength. about the yuan. the pboc denied reports that many reached seven for the dollar. guest: we have a forecast which we think wes sooner than later before the chinese new year. is we would expect ongoing gradual depreciation in currency. the only tool the pboc can use to effectively stabilize the chinese economy. underlying the economy. chaos inn'expect any

earlier instances in yuan depreciation. though we have seen more resilience lately. >> one is if you look at the electoral exchange. that is clearly weakening. have at is whether you big drop-off like january. if you look at the currency stable it has been very since october and around 95, gradually going higher. i will show you the news before the year ends. 13 to 24 currencies. they're keeping the currency stable against the basket. that is what it is.

the economy of it is against the u.s. dollar. that is still a weaker path for the chinese currency. >> despite beijing emphasizing that. thank you for joining us. 2016 made a few headlines with brexit and the election of donald trump. we will ask what 2017 may bring. this is bloomberg. ♪

shery: this is daybreak asia. been askingberg has the biggest newsmakers in business and finance about the risks they see ahead area and in the year that brought us exit and trump, it is not surprising geopolitics loomed large on the horizon.

here's what they said. >> the biggest risk i see in 2017 are two, but first is the expectations that are so high all come inility -- with great ambitions and expectations and sometimes they can't achieve everything. >> democracies in europe and the united states, we are seeing a wave of right wave that right-wing populists. an attack on south korea, that is a risk. india and pakistan, the struggle between them is heating up, death on both sides. a lot for president-elect trump to think about. >> the biggest worry is donald trump makes good with his campaign promise, which really

starts to impose some kind of restriction or tariff. other than that 2017, the world economy is all on the pro growth side. about 2017.timistic i think growth would be better than 2016. i think the acid prices would be higher. >> the political environment are things i watch very closely. the other is obviously any kind whether it be a terrorist event or things of that nature, i could impact consumer confidence around the world. we are always doing that external look at the business environment and trying to understand the type of things and would impact consumers

government approaches, regulations and things of that nature. of aere is the possibility black swan, some foreign-policy crisis we don't anticipate. george w. bush came in to office. we don't know what will happen that is unexpected. unexpected is really the biggest risk. ifo we go, disney star wars prequel rogue one led the box office for third straight weekend. it was 20% lower than the forecast, but it is expected to ultimately generate $770 million globally. i didn't contribute to that amount but they say it is really good. >> not too late, disney's other successes, helping north american theaters to a new revenue record with total sales

reaching 11 billion. could have watched all of those with the time we have here. >> i watched finding dory. i loved it. >> i missed that one.

♪ >> a positive start as most major market step into the new year. servicesactories and closed at 2016 robustly signaling growth is strong enough for more reform. attentions with beijing continue to rise following phone calls to donald trump. >> and oil climbing as the global curve comes into effect. not all producers will comply

with the deal. >> this is the second hour of daybreak asia coming to you from u.s. and asia headquarters. i'm shery ahn in hong kong. eddie bank it is passive and p.m. in new york. we are just getting some headlines on singapore. the first major economic numbers. more on these numbers. >> certainly an improvement, the gdp numbers for fourth quarter: 1.8% on the fourth year. this certainly surpassing estimates where we are anticipating a 3% growth year-over-year. fourth-quarter numbers through 9.1%.

that is a sharp turnaround from the contraction. the estimate was a 4% rise of quarter on quarter. ,hen it comes to the gdp number a range up to the growth. it looks like the singapore economy is imagining it in the fourth quarter. >> a huge beat, what could this mean for policymakers. relief,may prove some given that we are looking to avoid a recession. to turn tohave monetary policies in 2017, perhaps more fiscal stimulus , given theicipated policy makers may not have to

pull the lever when it comes to monetary policy. what theave to see trade ministry has to say when we see their statement out. certainly a beat here when it comes to singapore's economy, growth, and the fourth quarter. the pace of double what was expected. we have only a couple of markets open in asia. most trading in the green. >> we have a few markets closed. looking at a little bit of a decline. markets are open. positive -- 9/10 of 1% in australia. 5700 now. that is the level for the index.

basically selling its twitty percent stake to china and cosco and another company for 1.8 billion. $.50 pop for shares. the goal produces here. towards goldpop prices and stock prices. 1151 per share. 2031, not much action so far. a lot of the south korean carmakers out this morning. bmw and porsche have been found to have played around with the omission tests.

it is really playing out as far as the stock prices concerned. very quickly talking about the ethics markets. it is a dollars story. watching anyo be reaction. the markets open up to the latest gdp. 1.8%, still the slowest pace of growth. >> i have not really ever heard that because it is really reaching a very low bar there.

let's get to the first word news for more. >> selling a 20% stake in the commercial banks. theus chilean lenders says bank has been bought by china cosco shipping. boosting its required capital ratio by 40 basis points. looking at shares in sydney. 1% at the moment. joining joe is president where he will help oversee expansion of trading and primer brokerage. the biggest security firm over two decades. and regulatoryl problems. he will be working for can't or out of london.

south korea has banned the sale bmw, and porsche after an investigation found the automakers fabricated and emissions test. the three have been slapped with total fines of $5.9 million. carmakers and component supplies are facing increased scrutiny following scans of the companies of bmw, and to cartel. he talked of progress while outlining military achievements over the past year. all shows no signs of an imminent launch. president-elect donald trump has suggested he will meet for nuclear talks p kelso just tweeted a north korean nuclear weapon will not happen. more than 120 countries -- i am heidi bloom, this is bloomberg. factoryhina's official

gauge and it the year in europe post-2012 high, indicating a strengthening in the economy on the back of stronger executive sentiment. great to see you again. seemsnufacturing sector to be pretty solid. that doesn't necessarily mean a solid economic recovery. guest: it is going in at a pretty strong order. there's certainly plenty of weak spots where i have to look properly at things. even though factory prices are picking up. not necessarily turned around, ongoing fragility. term andin the near comfortably on track to meet the target.

reforms, but it is not like they are out of the woods just yet. it won't go away anytime soon. >> where will all the challenges come from? onone big external would be top and the uncertainties around his plan to reduce the trade debt in china. steel andgo beyond ireland, kind of obvious exports. we don't know whether it will be a trade war. then domestically the exchange rate obviously and capital outflows, they don't want capital outflows to destabilizing the pace. betty: what is the latest debate on growth, on the growth target

given all of this? >> obviously as we are heading towards the gathering in march, had someh target -- we adjusting signals out of beijing. maybe slower growth in china, if it means taking the foot off the desk. we had a pboc advisor. he thinks the target should be lower. china dropping that growth target. certainly a growing narrative now. lest about hitting the target and china should be putting more attention on the quality and ability of that growth. too much debt in the system needs to be tackled. that is why a should focus less

on the target. >> thank you so much. still ahead on this program, the rally in reverse. why many forecasts think iron ore prices may see a tough time this year. a kapstream capital gives us his outlook onhe pace of fed hikes in 2017. this is bloomberg.

betty: this is daybreak asia. shery: a quick check of the latest business flash headlines. key markets.wth in increasing uncertainty around trade and currency fluctuation. co-ceo used his new year speech to urge the company -- last year the fiasco cost

samsung $6 billion and pushed smartphone profits into a record low in the third quarter. am a south korea's biggest carmakers are picking sales will jump 4.7 percent this year according to regulatory filings. 8.4 -- 8.25combined return in 2017. and uncertainty under the new president donald trump. buyers ahas given u.k. new president, a price rise scheduled for january 1 by two weeks. the enclosed order before january 15 will benefit from free access to the companies super charger battery network before new ones come in. tesla is raising prices in the u.k. in respond to the pounds the brexitowing

referendum leaving the european union. >> nothing can stay free forever. much more ahead. taiwan hit back at china for its taxes. we will be live in taipei. that is next.

betty: this is daybreak asia, i am betty liu. shery: and i am shery ahn in hong kong. ueling the dollar best quarter thee 2008, contracts show fed may raise interest rates twice this year. our next guest is urging investors tish -- investors to stay short duration. he has $7 billion under management. thank you so much for joining us. in sayingket is right we received to rate hike, does that mean investor should lock in their money right now?

you are right, the question is does the fed raise rates to three times in 2017? we thought the fed was going to raise rates more than once. this time i think the game is different because you have better stimulus from the fiscal policy side. i think the market is about right. why did you lock your money and for the five years at 1.9% in the u.s.? i think i would wait. >> if we see u.s. yields rising, we are continuing to see the u.s. dollar strength continuing to play out for 2017. what will that mean for markets in asia and how are you playing to that market? isst: what has happened since the bottom of yields at 1.4% in june of last year, a couple of things have changed.

big political use we were expecting and uncertainty from the marketplaces disappeared. had brexit, trump election, and other elections out of europe. now that the republicans control both the house and the senate and the executive committee, if they can get some of the tax reforms done and some of the fiscal stimulus in place, then the central bank doesn't have to do as much of the heavy lifting. strongerinds are a llar, but hopefully you get tax cuts on one side and spending cuts on the oth side that will be stimulated. betty: you used to work at pimco and they are being bearish of the u.s. economy. they're forecasting a recession anytime now. how do you stand when it comes to assessing the u.s. economy and how much does a donald trump play into your strategy? you are right, i worked

with pimco for 10 years. i'm back working with bill gross. we don't think the u.s. is going to go into recession. if you look at u.s. said u.s. economic growth, if you look at housing markets, equity markets, and unemployment rates, you would say it is nowhere near anywhere close to a recession. yes the stronger dollars going to slow the u.s. economy. most of gdp comes from consumption. if you think about the stimulus you're getting from europe and japan, that is going to continue in 2017. hopefully you get the political stability around it. but those things together and it is hard to imagine a slowdown. i can't see how the u.s. goes into a recession in 2017. betty: what are your preferred

assets? are a talking corporate, sovereign bonds, long-duration, short duration? guest: if you think of owning fixed income assets, yields rose about 100 basis points not only in the u.s. but in sympathy everywhere else. fed is going to go to or three times in 2017 and you are going to get fiscal stimulus, then you want floating rate assets instead of fixed assets. two, you would rather own corporate bonds and investment rate corporate bonds are paying you well compared to sovereign assets. key for 2017 is how do you not to lose capital, yet at the same time at the end of the year how to you get a higher coupon in your part leo? the question is how quickly do rates rise and how much pain does it cause? i think it will be slow and steady.

that giveny you see what we have seen in the last six weeks with treasury markets? guest: the treasury yield was close to its low in june. if you think the fed is going to go three times and fed funds by 1.5%, theend up about question you have to ask yourself is if the short-term cash rate is 1.5, what premium should i get paid to lock in rates for 10 years? 1% seems quite low to me. i think 10 year treasuries need .o yield at 3% rise and risewill slowly. let's say they don't and they continue at this rapid pace, could that cause a

slowdown? guest: absolutely. i don't think you are going to get the pace of selloff in treasuries that you had the past six months. i think that was too low for too long. now you are getting back to reasonable level. a little bit of a selloff from here but not the same pace over the past six months, compared to the previous six months. >> i wanted to bring up a chart where we take a look at how the equity markets have done. if you look at the different , tech in this smp white line has been a dominant force in the smp. it has been information technology.

>> we look at the broader equity markets. on a broader basis the market continues to go higher. expecting the stimulus to come through from the fed in the fiscal side of things. therefore it's hard to imagine an equity market area in the next week or two the dow's going to try to make the 20,000 mark. 20, the swearing-in of trump -- on the sector level i am not an expert on equities, so i wouldn't want to comment on that . betty: looks like a bullish market ahead. switching over to what is going on in china, particularly

taiwan, taiwan's leader says ties in china are becoming increasingly intense and beijing is using what she calls coercive tactics. -- heesident said destabilize cross strait relations. not -- we will not give in to pressure. there are still important principles. miao joining us now. the rhetoric has been heating up from the phone call taiwanese president to president-elect donald trump. what did she mean when she said beijing was being coercive and intimidating? referring to a couple of things that happened in the last couple of weeks. we had a chinese aircraft carrier sailing to the western pacific in the east chinese see.

that caused some jitters here in taiwan. there has been some diplomatic action and taiwan has lost one of its long-standing diplomatic allies. and china was in no time to rebuild ties with that nation. it is heating up a little bit here. was beingat address made, there was some news from the china side. strong measures were being against taiwan, which could include anything from cutting off truck links to taiwan's predecessor, to some more wargames going on. betty: there is some intrigue surrounding that.

>> some people may be meeting with u.s. president-elect donald trump. china had warned the u.s. ininst allowing her to trend the u.s., but unfortunately there are no direct flights from taiwan to central america were this government had several important allies, several diplomatic allies. u.s. said it is a long-standing practice to stop over in the u.s. and said they are going to make a couple of stops. and then no word yet on which u.s. officials she is going to meet with. you so much for joining us. deborah miao, our taipei bureau chief. next, could iron ores 2016 eanes melt away, or forecast is be surprised again by movements in 2017.

we will have all that when we come back. this is bloomberg. . .

>> it is 8:30 p.m. in singapore. happy new year. what a way to start to the year. the company saw the economy grow forecast in pace the fourth quarter. >> brighter on the economic front then the weather in singapore. i betty liu here in new york. you are watching "daybreak asia." let's get to first word news. as sherry said, singapore's economy expanded in the fourth quarter, although it

is still growing at the slowest pace in asia. annualized growth of 1.9% against estimates of just 4%. the economy has been struggling in the face of global trade and weaker energy prices. indications are there will be a and 22016 with-- the economy continuing to stabilize. had expected a reading of 51.5 on the manufacturing pmi. was 54ember services pmi point five, slightly down on november. a divisor to the emc says china should set a more flexible target for 2017. economists propose a target range of between 6%-seven percent. he says china's long-term

objective is an average rate and work still needs to be done. have emerged the fiesta bowl nightclub moments before a gunman killed 39 people celebrating -- of the istanbul nightclub moments before a gunman killed 39 people celebrating new year's eve. the killer has escaped and his identity is as yet unknown or has not been released. spacex will return to satellite launches next monday performance after a falcon nine rocket blew up on the pad. an investigation has concluded that one of the pressure vessels in the second stage liquid oxygen tank failed. the faa has accepted spacex's report into the explosion which was called the company's perplexing failure in 14 years.

global news 24 hours a day powered by more than 2600 to journalists and analysts in more than 120 countries. sherri coale in most markets in asia are closed, but the two that are open -- in asia areets closed, but to our trading. .ere is david >> considering the lack of news, it isital surprising to see markets trading the way they are at the moment. that being said, you look at where volumes are, 50%-60% lighter, compared to this time korea, again, it is not surprising. you look at all of these rumors doing enough. the highest to since june of 2015.

2031. these two benchmarks we are following into the futures. .9%. if that market was open, chances are we would be seeing something similar on the nikkei 225. soviet will be taking you through futures on the singapore market and the gdp numbers. of course, that economy is really in a lot of ways at the mercy of these swings in global trade. anyway, have a look at some of the other things we're following today. we talked about this earlier. kia and hyundai well off the highs of the day. south korea coming out with this , finding bmw khamenei finding bmw,che -- to haveand porsche

messed around with their numbers. we will let you know more as we know more. this is where we are at the moment. trading is halted for the company. maybe it has to do with this report out of australia that galaxy might be looking to sell its stake in south amida. and hunter resuming trade after the cio resigned. quickly, can we flip the boards? flat and slightly lower for precious metals. west texas up 54, highest level since july of 2015. copper also on the way up, .4%. much. thank you so singapore gdp growth is up. it came in at 1.8% for 2016, more than what economists estimated. sophie, what are they saying about this? sophie: not only did numbers come in better than what

economists expected, but also with the trade ministry was expecting. their projection was for 1.5 percent growth. 1.8% is more than that. still, the economy is growing at a slow pace compared to hong kong. when we look under the hood, as david said earlier, manufacturing really was the hero here. ly.6% growth on a quarter basis, a sharp contrast to what we saw in the third quarter. we saw the construction sector 4.7% quarter on quarter, extending the previous quarter's decline. rose 9.4%es industry on a quarterly basis. this is a reversal from the drop we saw in the third quarter. we will get revised numbers from the trade ministry in february when it releases its economic

survey. you.: thank sophie joining us with the latest on singapore's gdp. iron ore saw a solid rally in 2016 with prices rising about 80%, a phenomenal rally, in fact, but those gains could melt this year. overtake demand. commodities reporter david framer joins us from melbourne. really surprised. people are saying we may not be able to follow what happened in 2016. that was a phenomenal rally. david: absolutely. as you said, iron ore jumped about 81% last year off the back of three straight annual declines. it was quite an extraordinary turnaround for the material used in steelmaking. what is really concerning the iron or pessimist's now is that drove factors

that last year can be sustained. of course, we saw chinese economic stimulus support steel export in china. that needs material like iron ore and coking coal. we saw some signs of restraint on supply-side. we saw a little more discipline from producers like rio tinto and bhp billiton here in australia. the prospects for the year ahead are a little different. , we have follyt brazil, the largest iron ore -- vale brazil, the largest iron ore exporter. there is a changing picture on the supply side, but still uncertainty around demand. that's what it's on the mind of forecasters. morgan seen banks from stanley onward with a bearish

outlook for 2017. saw thatear, nobody rally coming. at least, nobody saw that huge rally. it be that in 2017, iron ore again defies expectations? david: absolutely. you are completely right. we even heard the likes of andrew forrest, a billionaire and one of the top producers, saying forecasters can always get it wrong. i mean, the facts are, on the supply-side, if producers continue to show discipline, even as they'll begins production of a giant new mind, we are expecting them to show some caution. begins production on a giant new mine, we are expecting them to show some

caution. quarter years before they reach capacity. certainly, and iron ore price could be -- it could be for years before they reach capacity. certainly, iron ore prices could be supported. stock prices hit a record at the end of the year. i guess the question is will they continue to import more of that material? betty: what about last year's price rally? for the they expecting year ahead? david: you would think they may be optimistic that the providence will be vastly transformed from last year. many mining companies were sell assets and shares. that has turned around. a report compiled by bloomberg shows the top four miners sought earnings hit a two-year high, and yet, there is still pessimism among the large miners. bhp, the world's biggest miner,

one of the best performers last year. likely to retreat. be things like restructuring in china of the stealing coal sectors. they see a real impact on prices from that -- steel and coal sectors. they see a real impact on prices from that. oil and gas are far more likely to show gains the seer than iron ore and coal. betty: thank you very much, david stringer on iron ore prices. let's stay on commodities. crude is higher by about .5 percent right now. coming off the highs of the early session here. as planned, output cuts go into effect at opec and an independent producer in january is going to give us the first indication of whether the landmark deal will be stuck to and respected. will they stick to the cuts? what do we know?

andhat is the big question, it's all about the cuts. we are probably going to get incremental news throughout the month from very is producers about those cuts. the first being kuwait. -- various producers about those cuts. the first being kuwait. are getting little bits and pieces of information. we will get a clearer picture towards the end of the month, maybe february, about what is happening collectively. sherry: we are talking about opec. what happens to non-opec producers? back and have a huge impact on prices. fort's a balancing act opec. anything over $55 for wti is probably going to see more pressure coming into the market brazil, and china. at the moment, forecasters are saying wti averaging at about $51 for the first quarter, $54 for the second. they are seeing an incremental gain.

it's whether and how they can manage those cuts with the producers. it's a big question, here. keepy: just below $55 will them in check. thank you so much. up next, how to build a business that lasts. we will hear from the faux town founders on the challenges of their 30 year history. this is bloomberg. ♪

betty: this is daybreak asia. i am betty liu in new york. sherry: and i am shery ahn in hong kong. vietnam airlines says 2016 was a good year. profit expected to hit almost 110 million dollars. revenue climbing about 10%. by3 billion, helped

passenger traffic, rose 19%. vietnam placed shares on the public market today. betty: a private survey indicates indian manufacturing has shrunk as governments withdrawal of high denomination rupee bills hit demand. purchaser managing index was lower than a year earlier. the continued slowdown could strip india of its position as one of the fastest-growing big economies and threaten of\-- a backlash against the prime minister. sherry: in brazil, the surplus rose to 47 point $7 billion last year, more than twice as much as in 2015. imports fell almost 20% from the previous time, while at boards declined 3%. is linked toalance

high unemployment. betty: the federal reserve signaling more interest rate hikes this year. a big, broad selloff at the end of last year. kathy hayes is watching all of this for us. we heard an earlier guest say he but it'sields to go up going to be slow and steady. craig's if it is, it's going to be something. on the final day of trading in the u.s., the law and index gained about .2% -- bond index gained about .2%. for the month, it was lower. let's step back and look at this big, big trend, because that is what we're watching now. the total return bond index.

you can see -- just look at the far right-hand side of your screen. that's november. you still see a small to klein of total returns for december. you have to go back to 2010 -2011, to see anything, this --e-month downed trend downtrend has been so severe. the dollar is rising in asia. gap between u.s. treasuries and the average yield on g7 bonds. it's something like 17 years. 150 seven basis points. good for the dollar, not a good , except the drg probably likes it. >> they would like a weaker yen probably likes. >> they would like a weaker yen. manufacturing, you have to have strong manufacturing

sector. the u.s. pmi has been above 50 48 of the past nine months. in december, it is also going to eight of 50 for the past nine months. in december, it is also going to be higher. betty: thank you for joining us from new york. behind one of china's most exclusive conglomerates is a friendship. three men have adapted their company to a series of seismic events from a global financial crisis to china's slowdown. but as they told bloomberg, the philosophy behind their business as the same today as when they started out.

>> to improve your way of living in a contemporary world, the only way is to learn how to improve the lives of others and provide services for others. our initial aspirations for a startup or to help the livelihood of our own families. as we continued, it became clear that if you want to achieve a goal, you have to learn to help others improve their lives and help customers do the right thing. the logic of these two things is connected. >> if you look back over the that you spent together, the financial crisis, the regulatory and political upheavals in china, what was the biggest challenge? >> we have encountered some problems in business development, but i think this can help us grow. just as a person comes across problems as they grow up. the benefit of for us is because we started this business as a team. encounter problems, we can quickly recognize them and work as one to find answers accordingly.

it always feels like we do have arechallenges, but they ones that can be solved. >> today, we're actually seeing the changes within the entire industry. if you take a look at the mobile internet, next up is the internet of things, and how it traditionalup the industry. even though you are a powerful player today, it's hard to say if you could survive in five or 10 years. for us, it's important to completely integrate with the internet of things, artificial intelligence, and find our way of survival. i think this is very challenging. >> is their disagreement? you want to invest in one asset. who is the boss? >> i make the decisions? [laughter] well, that's inevitable. you must have someone making the final call, but we have never had a so-called one man, one vote kind of thing. r was there ever a power play

has more shares. i don't think that's the best way to do things. i think the best way is communication. sometimes decision-making isn't about right or wrong. if every decision were like that, decision-making wouldn't be so difficult. >> you guys started out as friends. is that friendship the same? do you have time to do what friends do, have a beer, have a chat? >> basically, we have a really strong chemistry between us because it has already been some 20 odd years, 30 if you include our school days. it's a camaraderie. although we don't see each other that often, we have phone meetings every day. >> our partnership is the same. friendship bound us together. we would drink together, talked together. men have that kind of relationship. have partnered so

long, sometimes this friendship he comes familial, like something in your blood. >> for the next 5, 10 years, we .ave some big targets continue to work toward a world-class investment group. -happinessalth-health ecosystem. those are the big targets. betty: those were the three founders speaking to bloomberg. coming up, more than five years on from japan's devastating tsunami, wend soo are going to look at how a winemaker is using that experience to build something innovative. this is bloomberg. ♪

sherry: you are watching daybreak asia. much of japan enjoyed a tourism boon in 2016 thanks to a weaker yen and relaxed tour is a rules. however, thanks to the earthquake and soon on me, , visitso the -- tsunami to the region lagged behind. >> it's the only winery around. he is hoping it will be a catalyst for revival. >> when you demonstrate a successful business model through the winery and encourage

local people and business, we hope similar businesses can perish as well. flourish as well. >> the region was hard hit five and subsequent soon am nuclear meltdown. tourism was on the decline before the disaster, and has not recovered. the winery is a rare bright spot. just months after opening, the winery is swamped with orders from local restaurants, hotels, and local markets. for the time being, it is producing wine from grapes harvested elsewhere in japan. pumppects eventually to out about 30,000 bottles of wine each year. other entrepreneurs are now planning their own operations. we are starting to prepare the vineyards.

planting will start this fall. we are hoping to start the the next financial year. >> with wine increasingly in vogue, local business leaders are hoping to attract more workers and visitors, and crucially, young people to help revive the local economy. with young people in abundance, it could become japan's second wine had in the shadows -- wine hub, rightfully in the shadows of mount fuji. rosalind chin, bloomberg. betty: good for them trying to find a bright spot in the tragedy. much more ahead. sherry: markets are opening for the first time this year. this is bloomberg. ♪

salaam, coming to you from bloomberg's asian headquarters in hong kong. this is bloomberg markets: asia. rishaad: the last days of 2016 showing china closing the year in robust fashion. we will have the first survey of the new year later this hour. singapore expanded more than anticipated in the fourth