yvonne: asian-pacific markets was a flight in sentiment. stocks fell into the slow lane, dragged back by unexpected fall in auto sales. the rba meets. the aaa rating is at risk. lack of imagination. the u.k. chipmaker slums as apple abandoned its technology. world coverede

here on daybreak asia and we will be looking ahead to the market open in sydney in ingapore and we will be live seoul to talk about who may be south korea's new leader and how investors are reacting to those events. >> in new york, we will be discussing the prospects for the market after the slump on the otter numbers and ubs's latest warning on troubled insurer aig. it looks like row has taken another nosedive at the company. this is "daybreak laser," coming to you -- "daybreak asia." >> it is just after 7:00 a.m. in hong kong. i am yvonne man. breaking news this morning. you're on your figures coming out. it was a beach, up 2.2% for the month of march. the estimate was for the 2.1% on prices, so we are seeing that inflation hovering around the bank of korea's inflation target. month on month was pretty much

the zero, so nothing happening for the month on month. the cpi core year on year rising, so that was excitement on the cpi core numbers, but at the question is now the bureau bok will havethe to contend with the strengthening won. we are not sure how much more strength they can tolerate. we will be talking with someone investing and looking deeply in the korean market, says he's pretty neutral on south korea but thinks there are some opportunities, particularly in the banking sector and south korea, so you can forward to that interview and getting his take on this. meanwhile, you know, as you mentioned, the trade issue, the fed, household debt in korea, big headwinds for the outlook for the country. thingstake a look at how are playing out in the asia-pacific because there has been this risk off tone through

the market is trickling through in the asia-pacific. new zealand down. the key we pretty steady at -- the kiwi study. australia will trade ahead of the rba decision but chicago nikkei futures heading lower here. we are expected to see really slow and modest gains at the open. 110.85. playing intotone the moves. we will be watching auto stocks later on in asia when markets open. we saw u.s. car sales unexpectedly fall last month despite the big discounts. let us go to our auto reporter, joining us from detroit this morning. good to see you. could be a pretty rough open for auto stocks in asia today, so who is looking at the worst start to their day? .> it could be rough the korean automakers really had

a rough month in the u.s.. marketsuch an important for all the big five asian automakers, japanese and korean automakers. one of the biggest terms of their sale and profitability and hyundai and kia both were down considerably more than analysts were expecting, so that is a bad sign. they had not been able to shift to suv's the way the american shifted, tastes have and honda also had a really surprisingly bad month. they were expected to be pretty good. one of the best, right behind gm, at the top of the heap, but instead they posted a surprise decline and adra was way down. it was -- it could be a rough start for all three of those today. betty: it begs the question, jamie, despite the declines, are any of the asian automakers poised to benefit at all by what seems like sort of this turmoil among the big three automakers? was the only a

major automaker to do better than expected in the u.s. last was good.that they are really in a sweet spot with their rogue compact crossover. they added a third factory that is producing that and it is doing really well, priced right, good size, and they are doing well with their infinity premium line which has struggled in recent years, but they got more. that is where the demand is pure they are really feeding match and posting some nice gains, but ironically, shares were up for a while and they ended up down. sharess u.s. trade and did better than nissan's. a bit ofnow if that is a recession play because toyota has the skills to cope with the downturn better than most. thank you so much, jamie butters in detroit on the otter sales numbers.

auto sales were run factor in today's trading dragging down the indexes. su keenan with more on wall street. sue: we did have positive manufacturing data. the consumer household spending certainly weighed heavily on the market. stopped as we mentioned down across the board in the big movers of course were some of the auto stocks. there you go. although, it did not look like a major drop in the day. the pressure was clearly there. we go to stocks for gms mentioned. -- for gm, as mentioned. show herely stole the because as traditional cars are having some trouble, tesla has beaten all records in terms of a 25,000 delivery for the first quarter and let us going to the bloomberg if we can. what you had from the founder tesla, elon musk, was a tweet that pokes fun.

stormy weather. the stock targets minus where the stock is, the bottom of the stock price, a lot of analysts are unconvinced -- >> that is the wrong chart. bring up the tesla chart. su: in any event, that was the inventory. i think u.s. versus eight shows a drop. tesla certainly indicating, there we go. unconvinced. a lot ofne is -- analysts are unconvinced the stock could really come up and meet the expectations in target price. betty: there was also dealnews. this one involves another consumer stock. su: this has been a hot stock since last year. it was up some 25% and what you have is a report from people close to the matter. penelope has gotten takeover

interest. gotten takeover interest. the stock was up 12% and managed to lock and 8% gain. a lot of attention going forward. it took a big hit. a drop on the day. stallhas been sort of a in takeover talks. investors are starting to get antsy. >> the chairman did say they are on the right path. the stocks and the day lower. su: we did see it after the bell and the ceo had announced he was going to leave and this was the german really coming in. in his annual letter, supporting the ceo's to your goal.

i saw movement in the stock after hours. he agreed it would be a mistake to break up the insurer. you know the names. icon. analyst, by the way, after the bell, released a report saying it had he is the top of the list for insurers to show margin expenditure. that could give a stock a bit of a push going into tuesday trading. live from new york. first word news with nina melendez. on the st.plosion petersburg metro has killed at least 11 people and injured dozens more. security officials say a homemade device blew up in a trade beat -- train between two museums. the blast happened during a visit to the city by president clinton. police found a larger bomb at another station. president trump described the attack as terrible.

korea's opposition democratic party has named its candidate for next months presidential election. he is described as a liberal. his nomination makes him the frontrunner to replace park geun-hye. moon lost the 2012 presidential election best park and called her hard-line policy against north korea available. -- a failure. it cut the foreign currency reading to double be plus with a negative outlook following the cabinet part. s&p said continuity is at risk after the finance minister with someone who has no financial or business experience. frenzy of buying with people queuing for land and construction shares surging. the product between beijing and tengion echoes the growth of

shenzhen. core jumped in hong kong to lead gains among cement producers. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am nina melendez, this is bloomberg. ahead, the u.k. tech company one analyst now called "univestible." -- will the so-called trump phase turnaround once again? us aboutill talk to what to expect from the second quarter. this is bloomberg. ♪

counting down are to asia's first major market opened morning. japanese futures here looking soft there. down .4% and we are 45 minutes minuteslittle under 46 from the open. this is daybreak in shop i am betty liu in new york. this isi am -- "daybreak asia." i am betty liu in new york. yvonne: it is unlikely to be enough for cimb to avoid a downgrade. told bloomberg the lender will focus on cost discipline to boost earnings and the more rigorous -- be more rigorous in making investments. >> we have to build the foundations on the focus will be the five "c's".

we will look at where we are today at the company. we feel we have created a strong fundamental to build a business. lufthansa want to do the same elsewhere. they are banking on shoring up the hub in unit. fuel savings of 25% compared with four turbine models. they plan to use the 8350 on the mumbai route followed by other cities in asia. coca-cola time to add fizz to its presence in china by capitalizing on its most famous investor. you know who that is? warren buffett of course. berkshire hathaway owns 9.3% of

coca-cola. buffett, a heavy user. he says he drank about five cans a day. jericho, regular, or diet? not sure. look, like as, yet did a cruncher, he has to see any evidence that judging cokeing but cherry leads to anything but a long life. [laughter] >> he is like a 12-year-old. kicking off a braun a weaker april on a weaker note. at director of global macro joining usvestments now. we go from one day, my goodness, reflation is back, to the next day, my goodness, it is not. so where are we right now?

>> we are always only one tweet one end or the other, so, you know, we had the election, it was a game changer obviously, and with that came a lot of anticipation of fiscal reform. the market sort of met the president's agenda halfway, i think, so certainly not the whole thing is priced in. halfway. we are now at the sausage making part in congress and we saw how the affordable health care at thing went and that but the market a little bit on edge in terms of lives near enough -- is there enough momentum? the market is in a holding pattern waiting for evidence, and even in terms of what we on we do not know, what it will be and whether it

will be demand title supply-side and whether the fed will completely offset it through further tightening, so there are a lot more questions than answers right now and that is one of the reasons why in the first quarter, like a bellwether index might be as of 2000 essentially went nowhere because the markets are in a way to antsy pattern. to a: i want to pull -- wait and see pattern. betty: i want to pull up the russell 2000, which you said is a good real-time proxy of where investor sentiment i guess is on this trump trade. the s&p so far this year has outperformed the russell 2000, so again, what do you read into that outperformance by the s&p? >> so, last summer, the s&p was outperforming the russell by 13% points on a year-to-year basis. after the russell rallied 20%,

the russell was beating the s&p points on a year-over-year basis. that is a shift. the russell is really a pure deregulationuts, and a possible border adjustment tax which would boost the dollar companies.s. based are more of a play on the trump agenda than large multinationals are which tend to be represented by the s&p. the ratio of the two indices are a real-time barometer of where we are on the trump trade. >> it is interesting because it is not just the small caps but kind of this rotation into mega saw lastnames which we month. what do you make of this type of rotation where we see a return where investors are preferring the international and they growth type names? jurrien: exactly. last summer until the election,

the leadership groups were energy materials after the global reflation started up again, but also the bond staples,utility straigh and secular growers. when you do not have enough cyclical growth, investors tend to pay up for secular growth, which tends to be the trade, if you will, but after the election, the bond proxies got hit and so did the secular growers because cyclical growth was coming back and the market was unclear about the relationship between the tech sector and the new president and i think now that the markets are back to looking at fundamentals weq1, tech has taken off and know the story about the nasdaq and how big the whole trade has been in the first quarter. i would point out that beyond the fiscal reform agenda that the market is anticipating, we have been in a global reflation for a little bit over one year

now and it should be, it is worth noting that there is another narrative, and that is china, wethe help of are in a global reflation and this is why, actually, non-us stocks are outperforming the u.s., which is probably the contrary to what most people would have expected after the election. >> editor true. i'm glad you mentioned the bond market. i wanted to pull up my terminal here, the 10 year yield and where it has gone and you really here, thathe screen sort of spiked up or climb up, sharp climb up in 10 year yields the election, we have been hovering around this 2.3, 2.4, you know, between the 2.4, two point 6% gilt market. use a 10 year yields are right within you to the war where they belong? jurrien: yes. i have the bond chart burned into my brain so i know exactly what you are talking about.

[laughter] it was completely unjustified by the economic situation and we were down there because global yield around the world were going lower and lower and lower and then we had the set and reset after the election . the yield was at 1.7 on election eve and shot up to 264. contrary to the template antrim in 2014, it did not really do -- in 2014, it did not really do much. we have been stuck in a range of about 2.3 to 2.6 and really, most of the changes has been on the real side, not on the inflation side, and a lot of that has to do with again, how much of the agenda is going to happen, how much will be fed offset that through tighter policy, but my sense is that exactly.3 to 2.7 is

where the 10 year belongs if nominal gdp reverts back to andthing more normal, 4%, 5%, 6%, then that is where the tenure belongs and higher than that is unjustified and lower than that is unjustified as well. we continue to hear the calls are going to 2.2 before we bounce back to 2.6, so we will be stuck in that range. great to here from you. thank you. coming up, more on the tech whose shares tumbled 50% on badness from apple. this is bloomberg. bad news from apple. this is bloomberg. ♪

a lesson in diversifying your customer base. take a look at imagination technologies, shares plunge in more than 60%, the biggest fall since it went public in 1994. if this is all because apple is its biggest customer. ramy inocencio is planning the

link right now. --is excluding the link right now. relying too much on the company. >> that is exactly write. basically, if your biggest customer says it is no longer going to buy any of your products, then you are in trouble and that is what we are seeing with imagination. the company relies on apple for about 50% of its revenue, so it is no surprise here. apple saying "we do not need imagination because we got ourselves." it makes graphics chips for apple's mobile products, iphone, apple watches, and now, imagination has disclosed apple will make its own graphics chips over the next 15 to 24 months through that is the timeline. we are looking ahead to see what will be happening with imagination. you can bet they will be thinking of how to diversify their own portfolio. at theake a look

terminal. this is the analyst recommendations. the greens are the buys and the red are the cells. -- the sells. that is, wow. the yellow line chart says it is you can12 month target, see and expect that will fall as we go ahead. yvonne: any legal recourse here? imagination'sg to statement, they are potentially keeping it in the back pocket. they are saying imagination believes it would be extremely challenging to design a brand-new architecture without infringing on its intellectual property rights and they are in discussions for alternative arrangements. this is a lesson for others. yvonne was saying that for example, other suppliers do rely too heavily on what is happening with apple here. i log semiconductor in germany gue semiconductor germany relies on it.

>> it comes as a very big risk. thank you so much. ramy inocencio. up next, what president trump's tough talk on china's trade

.> sunday morning o 30 minutes away from asia's first major market open. china, india, and taiwan markets closed today. betty: those are off-line. we were online of course in the u.s. and almost too much online over andbears taking selling we saw here monday in new york. it is 7:30 p.m.. spring seems to have finally sprung here in the city. i'm betty liu in new york. yvonne: i'm yvonne man in hong kong and you are watching daybreak asia.

let us get to the first word news with nina melendez. ina: senate democrats assembling an of votes to block president trump supreme court nominee. georgecconnell had said neil gorsuch will be confirmed one way or another and that may mean invoking the nuclear option, change in decades of senate tradition by eliminating the 60 vote threshold and ending filibusters on the moneys. the models are making it harder for companies to get foreign workers to the u.s. using h-1b he's a process. the guidelines require programmers to prove their intended jobs are confiscated and require advanced knowledge and experience. outsourcing firms stand to lose the most. companies slipped more than 1% in new york. the chinese president arrived in finland later on tuesday. visits to the euro

areas northernmost territory a -- northernmost area. he says that you has china's support. e.u. has china's support. stocks led by reliance industries which climbed to its best close in more than nine years. shares were listed by news that its subscribers have converted to paying customers. mumbai is closed today for public holiday. global news powered by more than 2600 journalists and analysts in more than 120 countries. i am nina melendez. this is bloomberg. anchor: we are counting down to major market opens in the asia-pacific. for more, let us get to adam hague from sydney.

what have you been focusing on the most today? adam: good morning, yvonne. it is all kind of calm before the rba comes in. we are expecting them to keep rates on hold. the record low. the key will be the commentary around the house prices in the runaway price gains have been seeing in the housing market in australia. we had a report out which showed just how much of a problem this is for the rda. prices in the key capital cities were up 12% over the last 12 months so they really need to beat, you know, watching that and the rba, that is a key problem for them given how strong the aussie has been this year. it lends itself to add additional stimulus to the economy and you can see that in the sense that, you know, rate futures are indicating pretty much on hold through the rest of this year, just really the commentary around the rba we sydney.watching in

elsewhere in the stock market, locally in australia, we'll see a little bit of that followthrough from the weakness in the s&p 500. we should see selloff at the open shortly when the market starts trading, but it is not an aggressive selloff. there is not a huge amount of momentum and with many markets closed across the region, volumes may be limited as well in sydney. betty: adam, has had a sydney where you are in the rba, what else are you watching in asia? yeah, well, of course, plenty of markets closed with china, taiwan, hong kong, and india all shut, but we have interesting moves certainly in currencies that we are watching. the south african rand is extending those losses for a seventh day. it had its rating cut by s&p to junk, so that is an interesting move in early trading on tuesday. the ruble studying after that explosion in st. petersburg that

killed 11 people all. but elsewhere across the region, it is meant to be, yeah, a little bit of weakness for we look intohen tomorrow with the fomc minutes coming out and the big jobs on friday.he end no one wanting to put extra bets into risky assets at the moment given how strong stocks have aen of late, you know, such stellar quarter and trepidation creeping in now. that is going to be a very big number for the markets. at him, thank you so much, adam haigh in sydney. rules put america first. that was a key part of trump's campaign, but the picture is a little bit more complicated. joining us now is the executive editor of economics, then moss. it is never simple. it sounds simple sometimes, but it is not. let's it is extraordinary -- >>

it is extraordinarily complex. the two economies are enmeshed in so many ways. he emphasized the chinese economy is now driven as much or more by services than anything else and when you look at the ,elationship with the u.s. increasingly the states in the u.s. and provinces in china, are in meshing -- enmeshing. the third biggest export underscore, export, cannot import, market was china. when we think about chinese investment in the u.s., the stuff they grabbed the headlines and the things people wonder if this will retract congressional heat. what lobbying firm in k street has this person employed, it is very unglamorous. it is chinese companies buying things like glassmakers, upholstery makers in the

heartland, and he went to a place in ohio, deep red, went for trump. yet the glass company has acquired an old gm company and many republican officeholders are happy to have them there, ecstatic. mentioned it was a very complicated relationship, but later, we asked about the trade deficit which has shrunk a bit china burning through the reserves. a lot of the trade rhetoric we heard from trump does not have a lot of legitimacy. like we are talking about your grandfather's economic relationship here. [laughter] daniel: look at the trade more generally. supplye with the global chains. vested interests, be they

to useal, sort of tend around that. aside from withdrawing from tpp, which was never ratified by congress anyway, what has the trump administration actually done to disrupt the global supply chains? not a lot. anchor: all right, we're hoping this meeting actually moves beyond golf. anchor: yeah. daniel: that tells you something. anchor: it certainly does. dan moss, great to have you. big discounts. the prospects for the rest of the year. this is bloomberg. ♪

betty: this is "daybreak asia." i am betty liu in new york. in hongi am yvonne man kong. elon musk has been poking fun at

short-sellers. tesla stocks jumped to a record, taking its market value above the ford motor company. stormy weatherd " in shortville." short interest in tesla has risen to 29% of its free flow , up from 20% in october. upty: u.s. auto sales came short with forward and cheerleading the clients. plunging demand for sedans and compacts. forward deliveries -- short with ford and kia. plunging demand for sedans and compacts. bmw topped mercedes in the u.s. luxury market for the first time this year as sales of the x3 and x5 suv's sword.

suv's soared. the m w lost the title to mercedes last year for the first time since 2013 and aims to respond with its biggest ever rollout of new models. potential tariffs could be a problem when president and his chinese counterpart mov meet this week. michael, great to have you. i want to get your initial take on the u.s. car sales. there is a miserable report here. what does it speak about it? we talk about the consumer confidence numbers that don't translate to consumer spending. is this a problem with the american consumer or more of a supply issue? it is really a case of a terrific run for seven straight years, unprecedented, on interrupted growth in the auto market. we are at peak levels, never had

it better, so it is not a case of weakness, but can be pushed through to the next level, and right now, they are to bring indicators same with probably cannot. we should be happy to have a flat year this year. the two in th indicators -- the other one is incentives. incentives now account for, on average, 10% of the price you're paying for a new car, so if that is too high, it is indicating we're plateauing. probably reached a limit to growth. we should be happy to have a flat year. anchor: happy to have a flat year? what does that mean for the automakers than? they spend some much for incentives. do they have room left to do so or are we talking about production cuts in 2017? already, ford motor company among others had looked at production and that we are not going to continue to expand. we understand where we are in the cycle and we are going to be smart about it.

that cannot be said for every automaker out there going for market share. we will not know until the end of the year from has got it right in terms of matching demand with capacity. anchor: michael, i want to bring in a topic you mentioned as well in your notes. chinese automakers, the fact that they seems to be, you know, clearly some weakness in the u.s. auto market does not necessarily mean there is not room for other automakers. is there an opportunity for the chinese? michael: they have definitely set their sights on the u.s. market. more itself is growing slowly than it has in previous years and margins at home are not what they used to be. china, they are saying do we have a shot at entering the u.s. market? it is the most profitable market still and we would i do have a piece of that. betty: given their growing promise at the thought of shows their the country, --

growing presence at auto shows around the country, president trump would say you want to open up your chinese markets more. is there any chance of that? michael: the question, it will be on the agenda. last are, 96% of all vehicles sold in china were built in china, so president trump would be well within his rights to say, if you want to come to the unit dates to sell -- to the united states, i you have got to sell here just as we have enforced to in china. barring that, china, you drop your tariffs on imports to the level that we have them and we can have a two way street of trade. michael, i know you advised a lot of companies when it comes to, the third asia. when it comes to car markets in asia. are they seeing this as a real possibility? michael: they are genuinely

concerned, nervous, and holding on. should they put the next claims here in the units states or into -- into the united states? they do not know. they are in a holding pattern and no business like to be in a holding pattern for long. one thing automakers may do is to say, in china, trevor, our ,wnership in china, gm ford, and chrysler, we cannot own more than 50%. why not? why doesn't china allow us to own more than 50% of our operation there? look for that to be a key point in the talks between president trump and president xi jinping this week. we have seen the record high on the stock. what are the prospects of tesla and china? we have seen the tencent investment. all the prospects high in asia? michael: tesla is really

gathering nice momentum. china had record sales of over 10,000 units through the premium luxury market in china is already at 2 million. tessa has a lot of room to run and can grow its sales in the months to come. anchor: thank you. michael done joining us from ing. -- michael dunne join us from l.a.. the world's first virtual reality theme park. stephen engle got an exclusive hands-on tour. >> it is virtually impossible not to see the potential of virtual reality. when one is geared up in a deep space killing spree. >> it is like a combination of a movie and the game experience. stephen: all you are really doing is walking around a barren

foam padded basement. it is so real and cofounded by one of china's most renowned som visionaries who may transform some of his most iconic silver screen work into the are. -- into vr. >> he can be very imaginative. it is not flat. you can see color in 360 degrees and interact with it. it opens up a whole new world. stephen: they want to open up a whole new industry of thvr theme parks. it will become the universal of china. why universal studios? because it is backed by a wealth of intellectual property. stephen: the vr shipments will grow sixfold.

china's smartphone makers will allow their own devices. this year is pivotal. a shakeout is already happening. venture capital shifts to content providers away from the many initial equipment makers. world. is a whole other the startup does not want to be one of those left for dead. it is developing its own games vrd plans to have 10,000 arcades. >> we do not have a good enough content to get repeat customers. >> people who play our games for days tops but not longer. is for: vr right now companies that can afford it. >> when it becomes more mature and there are a lot of , it gets smaller, cheaper. vr once athe th

breakthrough. wants atry breakthrough. this is her first win. >> one more. . dead., boom , >> that looks too much fun. talking to these people in virtual reality, they are so sold on it. i'm worried. [laughter] betty: i'm already too lazy to get my food or drive my car. couch,p sitting on a traveling somewhere to virtual reality and do not do anything. so, i don't know. those are the social implications, i guess. yvonne: just for fun, not for shopping or driving or anything else. betty: a roundup of all the stories that you need to know to

get your day going in today's edition of daybreak. subscribers get the bloomberg anywhere at purity can customize your settings so you only get news on industries and that you care about. this is bloomberg. ♪

anchor: this is "daybreak asia," and betty liu in new york. yvonne: i am yvonne man in hong kong. affiliates banks could be big winners. australia losing its top rankings matter to the banks? banks areralian seeing sovereign reports for their own credit ratings and debt very heavy users of markets, that it's incredibly important, so if australia were

to use its top credit rating, the banks would be downgraded as well which we see finding costs figures, according to this could add 15 to 20 basis points to their funding costs. betty: national australia bank believes a loss of the top credit rating could see new demand for bank debt. why is this the case? ruth: yes, so having a lower rating would lead to banks paying investors more to hold onto the debt, so perversely in a way, that would mean some of the investors you might have skimmed over there debts before would look at them now. group funding at national australia bank says it is good for investor diversification. nab looks to be diversifying the lender base.

ruth: that's right. last month, national australia bank issued its third gender equality bond, so they are really pushing into this socially responsible investing space and the bank is looking to do more. it is great for divers subrogation -- diversification. anchor: thank you so much, ruth liew. corporate finance reporter ahead of the be a rate decision. plenty more to come with asia's first major market open now just moments away. yvonne. yvonne: we will be watching the with the car report we saw in the u.s. overnight. let us get to david to see what we should be watching about the open and australia and seoul. >> those two are corrected of

course. it would be a full there and -- a fool's errand. we are watching the automakers today. one and three depending on which one to look at. disappointing u.s. auto sales. we talked about this at this hour. more the upside here, but disappointed with the drop. one of the bigger ones in south kia, they were just out this morning with their overall sales for march, down 6.3% for yundai motors.- h up in aalia, that opens few minutes. we are following very closely here as well and overall, a

downbeat anyway. iron ore trading below $80. flip the board then have a look at the futures. tilt.ve nikkei 225, 19,000. a third of 1% lower, 45 points roughly speaking. about 30 points from yesterday's close, down five on the june contract. there we go, flat. negative tilt as well. inflation coming out of ford this morning. i will show you a very cool chart with market opens later on. very quickly, before i go, some live data out of the boj. 1%. guess what, the boj's target by next year is 2%. that is all fairly discouraging

sort of diversities of course. those are the things we are watching. when the korean market open up, australia, japan, and south

yvonne: asia-pacific markets see a muted day. betty: stocks fell in the u.s., dragged back by an unexpected fall in auto sales. yvonne: south korea's main opposition candidate leads the race to replace the ousted park next month. betty: this is the second hour

of "daybreak asia," coming to you live from bloomberg's headquarters. 8:00 int is just after new york. we have been talking a lot about the auto sales numbers. front and center here in the u.s. and bleeding over into asia, but one car the slideat trumped we saw in autos is tesla. i want to bring up this chart to show our viewers. it really demonstrates the bullishness behind tesla. look. the yellow line is gm, gunning looking atr gm, and that chart, you can understand why there are pretty big shorts building up against tesla. this is so new, he hasn't even made the model three car yet, and already investors say the company could be bigger than g.m. at some point.

yvonne: and we have heard it before. ,f you are buying tesla stock you are buying into elon musk. they just recently made the 23,000 deliveries in the first quarter. the question is are they going to deliver 500,000 year? perhaps that is why we are seeing short-sellers still quite short on the stock. asia, uc market reaction there. pretty ugly at the start. >> one note on tesla, you are kind of lying into future guarantees. all right, have a look at markets, a negative tilt at the open. there we go. slack start for south korea and australia. rba inflation up in just a moment. $.76 on they seeing

u.s. aussie dollar. let's bring it back here and have a look at the bond race. there we go, negative on the yields, which brings me down to my next chart on the u.s. 10 year yields. this is a one-year chart, trading at the bottom. 2.32%. 1.5 basis points from the close. now, bank of korea, of course, meets on april 14 or april 11. more importantly, inflation numbers were out earlier. urging to virgins. you have headline inflation on diversion.-- urging you have headline inflation on the way up. is very much driven by

commodity prices. 1.4% on inflation. the other thing we are following is the aussie rate decision. what this is sense a shows you thisery time we reach of like your sort peak bullishness. happens, each time we reach this point, you see a decline. we could exceed the previous two declines we saw in the aussie dollar from where we are. to be super, super dovish to get any declines there. there we go. betty? let's get to first word news.

>> betty, u.s. auto sales came up short with ford and kia beating declines as heavy incentives failed to stem plunging sales of compacts. ford fell 2%. kia dropped 11%. general motors, chrysler, toyota, also came in short of expectations. march was supposed to be when sales rebounded from declines in january and february. are pulling ads from foxnews because of allegations against one of its hosts. five women were paid not to talk about claims against bill o'reilly. the o'reilly says accusations are because of his prominence. president roger ailes was forced out last year amid another sexual-harassment scandal and is now facing a new lawsuit.

an explosion on the st. petersburg metro has killed at least 11 people and injured dozens more. security officials say a homemade device blew up between two stations not far from the museum. found and they defused another bomb at another station. president trump described the attack as "terrible." president arrived in finland late on tuesday, a significant stopover on his way to me president trump at the white house. is being seenisit as a counterpoint to trumps rhetoric against free trade and in support of brexit. he says the eu has china's support. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries.

ticking downock is for south korea to vote for a new president. the left-leaning democratic party has a new candidate. it looks like the field has narrowed to three candidates. tell us about them. peter: the leading candidate, as jae-in, of theon democratic party. he was likely to be the lead. second and position -- in is jae ahn-su, with the people's party. he has surged in popularity, going up about 9% in the polls.

if you could handicap it, we are seeing to candidate races -- a two candidate race with a third dark cores coming from the conservative party, that has been battered recently because the president, the leader of the party, was impeached. atty: i want to bring up chart and show the situation out of south korea. --have's team these surveys have seen these surveys of political evolution. quality,ulatory government corruption, effectiveness. those all have been falling, when it comes to corruption as well as government effectiveness. the yellow line showing that regulatory quality has improved. keep in mind this survey was before all these political scandals, but i guess you could say that a lot of the sentiment has worsened since the of president park.

the polls make moon the favorite, but as we have seen elsewhere, polls are often wrong. what is the likelihood he is going to win? heer: we originally thought was a shoo-in, but not anymore. candidate is coming on very strong. both candidates have divergent views as to how to deal with reforming the family-run conglomerates. example, hsu has said we need to boost regulations, as the poll has indicated, improve enforcement. it's not about changing business laws. we have to restructure the regulatory body, improve enforcement. hand, let's install some new business laws that

over improve governance corporate shareholders. different ideas about how to deal with the family-run can armor and's -- conglomerates. jae-in criticized president park on her hard-line policy. do you think that stance will be beneficial for him in this election? peter: that's a good question. conservatives, particularly those that supported the former president's stance against north korea, have come out against moan and said he is too soft, jae-inportive -- moon and said he is too soft, too un'sortive of kim jong-

regime. this is a tough unit, probably the best trained unit that was created to defend against north korea. he has a perception he has to fight. he has called for a softer line against north korea versus former president park. five weeks ago. peter, the gi. let's continue our look at correia up next. -- peter, thank you. let's continue our look at korea up next. and loaded., locked we are in china's virtual-reality themepark. this is bloomberg. ♪

daybreak asia. i am betty liu, here in new york. a quick check of the headlines this hour. reports from japan say toshiba will ask lenders for additional after filing for bankruptcy protection. it needs cash to cover what it sees as a temporary surge in losses. as the unit pass parent, it is likely to need the money to cover it guarantees -- that guarantees. kate's page tumbled in extended trading. tumbled inde extended trading. it has received an offer from coach and michael cores is also interested. is below the current $2.9

million valuation -- $2.9 billion valuation. betty: oprah winfrey received 206 the $4000 for her services to weight watchers, -- $264,000 for her services to weight watchers. south korean stocks are up about 7% this year despite the country's political and economic woes. the next guest had a neutral call on equities, although there might be some attractiveness in the banking sector. live fromjoins us singapore. great to have you. talk about the performance on the cost be compared to the rest of the region. compared to the

rest of the region. we have talked about election uncertainties. kospie have seen the cos near record highs. is there something foreign investors are missing at the moment? the global exports picture seems to have improved. if you look at exports, they have actually recovered quite being one of the most liberated economies in the world, stock market benefits from that. that's one of the reasons why kospi is up so much. if you look at the market on a u.s. dollar basis, the strength of the korean won has helped the performance this year. given the fact that we think the might see a- you bit of weakness in the second quarter.

that's something that happens almost on a year-to-year basis. yvonne: so it's seasonal, but you said you were quite cautious on corian stocks right now because of the reform we could be seeing -- korean stocks right now because of the reform he could be seeing after the election. >> absolutely. we think after the election, there could be reforms coming into play. whoever wins will need to embark on a series of reforms to try to break the stranglehold the conglomerates have on the economy. whether they are successful or not is up for debate. but i think stocks are praising some of that in on a short-term basis. on top of that, the market seems to have run ahead of itself on a short-term basis. shouldwhy we think you be more cautious on south korean stocks going forward. betty: they have seemingly gotten ahead of themselves. have you been surprised about in the market has digested

stride these remarkable events in south korea? not really. as far as politics and the , despitere concerned whoever is in charge, for example, the management they have will be more than enough to actually counter the short-term implications of what is actually happening at the company itself. 30% of the index. the fortunes of the company, the way it is run, the way it is moving in some markets will have huge implications on the kospi. we couldou mentioned be seeing a pullback in the second quarter and stocks. it's really dependent on where the juan goes from here. n goes from here. it has rallied somewhat. can it strengthen further to cover any pullback in equities?

>> no, i think on a short-term againstt is correcting the u.s. dollar. after that, it could regain its strength. is one of the economies the u.s. treasury has on its watch list to boost exports. we think the central bank in korea is under quite significant pressure to make sure the korean won does not weaken against the u.s. dollar. on a short-term basis, you might see some weakness. on a longer-term basis, the strength of the won is probably safe. it's not like the kind of gains you will see in later months. any gains from here will be incremental at best. you talked about china being included in the emerging

market index and how that might affect investors in south korea. how is that? >> we looked at the index in june. where the asian market is concerned, it is the second-biggest stock market right now. any inclusion will not be big. going to take some of the fortune, not big, but there might be some taken from their. -- there. yvonne: where else might we see some draining of capital into the chinese market because of this index? >> i think the index rebalancing will probably help korea the most in the asian index, actually. really quickly, i wanted

to bring up a chart because i know you have an opinion on the asian banks. it's hard to value them as a whole because they are so affected by local markets, but this shows that valuations of pacific banks, and they have shot up in the last several months, since mid-november. i wonder if that tells you there in banking good news shares, and now is also the time to pullback or stay fairly neutral? think asian banks are still trading at pretty attractive valuations. one of the reasons they have shot up so much is because pricing in the u.s. has

translated to better margins for asian banks. thegiven the fact that property market seems to stabilized, the economy is forecasterser, and are predicting china's economy growing upwards, i think this can be sustained going forward. again, i think gains made not just by the asian banks, but asian stocks in general, have been fairly strong. a technical pullback is probably what we should be getting, but the longer-term basis, asian banks are in a pretty good position. thank you so much for the cio of southern asia pacific ubs wealth management with his views on korea and asia. coming up, more warnings about

aig. details next. this is bloomberg. ♪

forecastbs has cut its for aig earnings, saying the insurers are becoming ever more discouraged, and that may be hurting their returns. this is interesting. ubs took a look at glassdoor that morale isnd getting lower and lower. >> we have seen analysts over time look at glassdoor. this year, the looming elephant in the room is aig. the ceo is stepping down. there is nobody who is a clear successor at the helm right now. strains this is causing in the company. we see from reviews that there are signs of strain in the operation as well, even after

years of low morale. betty: i was going to say, it's been a lot of troubled times for aig. it doesn't seem like the company can hold onto a cio longer than a few years. what's going on here? >> it's been really tough. right after ubs, a couple hours later, they put the chairman ceo l. -- letter out. the thing that kind of broke the camels back, if you will, was they posted for losses in six inrters -- quarter losses six quarters with a $5.6 billion reserve charge. these issues have continue to surface, and some of these problems go back years, years, and years. troubled by old

policies from prior years they continue to show trouble now. yvonne: ever since carl icahn stake and urged here hancock to split the company, it has barely budged. what kind of certainty are analysts looking for? >> we talked about the $5.6 billion reserve charge. they also want to know that these issues are behind the company. with that said, they sat down with outside sales analyst and that thesesure them issues r&d behind us. now, the chairman came out with a letter saying not only are us, we ares behind looking to continue our capital return plan of $25 billion. suggests a review of ratings agencies and regulators. our insurance reporter

live from new york on aig. coming up, friend or foe? japan finds it health under the u.s. microscope. -- finds its self under the u.s. microscope. we will find out what a. -- why. this is bloomberg. ♪

♪ yvonne: 8:30 in a gloomy singapore. every hour from the open of trading. betty: you are watching "daybreak asia." let's get to the first word news with haslinda amin. haslinda: korea's opposition democratic party has named its candidate for next month's presidential election. aon jae-in is described as liberal with ties to the north. he is the frontrunner to replace park geun-hye. residential the

election to park and called her policy against north korea a failure. anian markets closed at all-time high after capping their best quarter since 2015. stocks were led by industries of that plunged more than 4% to its best low. shares were lifted by news is that over 14 million of its subscribers have converted to paying customers. mumbai is closed for a public holiday. a news says apple has ordered 17 million of its low led screens for the new iphone. reportedly release eight models of its eighth iphone latest tier with a curved screen -- one with a curved screen. chip supplier imagination plunged 60% after apple revealed it will stop using its

technology in new products. imagination said it will abandon its graphic technology with iphone. imagination may lose a future royalty payments from apple which considered acquiring the company as recently as last year. local news 24 hours a day powered by more than 2600 journalists and analysts at more than 120 countries. this is bloomberg. it is time to see how the asian markets are shaping up. david, we did not get quite the great lead-in from wall read overnight and we got a lot of holidays. markets are closing in a lot of the countries in asia. volume is going to be like. people are at the beach, some of the pub, europe was on a 10th of up percent -- was up a 10th of 1%. we are getting the same pullback from wall street. you're seeing the same in the markets open.

rb is coming out with its decision. look at the other things we are following. the bond space very important with the big pullback in the yields. points, we're back at the 10 year, 2.6. we are back to levels of mid-november in the all the 10-year. -- in the aussie 10-year. i look to flesh out what is happening in sydney. r.b.i. and we're watching a lot orehe aren or -- iron prices. percentf one everything except energy and minerals are down. we have peaked at 95, we are trading about 80 is the first time last january. it is funny when we are peaked

at 90 or above, a lot of the big ore analysts, i remember than saying 79 is your level for these full-year forecast. they raised that 79 and we are fundamentally trading at about that middle. have a look at stocks here. one is a japanese mayonnaise maker. there, not a big surprise as far as earnings are concerned. that might be down to volume but that is the biggest job in the four-year. not going to get the details following the disappointing auto sales we saw for march. betty: let's talk more about these auto sales that he just mentioned. su keenan has more. run us through more of the numbers. su: the market was setting up

for a really strong sales. disappointment across the board. ford has a basic downturn but not by the amount expected. gm, where they expected a strong gain had a much smaller gain than expected and honda had a surprise drop. the entire industry group is lower. the suppliers, the equipment makers, manufacturers and auto parts. one analyst expressed concern that sales were below for cap when there were a lot of incentives. industry rebates and price cutting did not seem to have a difference and that raises questions about whether we will see production cut going forth. tesla of 7%, in fact it was up a 12% intraday. it hit a record.

tesla again having a very strong session. i'm just going to talk more about what is going on with tesla. ceo elontweet from the musk making fun of those who had shorted his stock or questioned whether it was worth its value. record,it surged to a boxing its market value passive that, past the century old rival ford. old school giving way to new school in terms of the electric car. if we go to the bloomberg, we can see that there are a number of analysts i'm not convinced the stock is worth at this level. you see a technical chart in terms of targets versus where it traded below the actual price. this chart ise on it signals that it might not be a stock that is going to meet targets at this point in time.

so if you are an investor, you might want to be careful going forward. at least today. betty: stormy weather in short bill. did -- isnder the under the u.s. microscope but tokyo's reasons it to argue that it should not be criticized probably because it is making money from investment in the u.s. and hence creating jobs. let's bring in our economy editor joining us live from tokyo this morning. has beenlly the focus about the japan-u.s. economic relationship after the u.s. ttp.ed itself from tcp -- how will the vice president and his trip to japan this month going to change all that? said, the relationship is quite contentious at the

moment. the u.s. is going to bring out their new currency watchlist sometime this month and maybe next week and you -- this listing of japan on this watchlist as a currency manipulator has annoyed tokyo -- as a possible currency manipulator has annoyed tokyo. we expect that that is going to be part of the discussion -- what japan is doing with its currency, should it be singled out by the u.s. like this is going to be part of the discussion with vice president pence when he comes. the prime minister said the discussion is not going to be that detailed because they haven't appointed most of the official who would be doing the negotiations yet. the deputy prime minister is playing down the expectations cecause he said apart from pen we have no one else is to. the issue of currency and

japan's trade service with the u.s. is going to be discussed but maybe not in much detail this time. betty: that is a source of tension between the u.s. and japan but an even greater source of tension between china and the u.s.. just in this week where we have about to meet president trump, help us fit in the u.s.-japan relationship? >> the problem is that the issue vis-a-vis has raised japan is the one he is raised the city china is in the united states is not getting a good deal with the trade arrangement. does the u.s. benefit from that trade? on the one hand obviously the relationship with china is a much more important because china is a bigger economy but the u.s. also have to be careful , especially japan

if they want to japanese assistance on security policy in out the beta -- security policy in asia. in theira difference respective positions. betty: thank you so much. next, ultimate payback, the rise in chinese corporate bonds is a no surprise for our next guest. he is joining us to explain. this is bloomberg. ♪

betty: this is "daybreak asia." i am betty liu here in new york. yvonne: the latest it is likelyt bank

not to be enough for cimb to get a downgrade from its target on equity. >> we have to build the foundation and the focus will be 5c's, customer, compliance, cost and capital. when you look at where we are today as a company, you can see we accrued a strong fundamental to build a business. a new study says a growing number of bankers at foreign firms in japan are unhappy with their bonuses and lowered expectations of pay rises. withwere dissatisfied their bonus payments and despite the gripes over pay, the bankers were more optimistic on japan's economic outlook than the same

time last year. he is looking to leapfrog japanese and european rivals to become one of the top 10 arrangers of u.s. corporate debt sales. city moment city is currently 16th or 17th in the u.s. the debt business. betty: as we saw yesterday, china seeing the worst default in a year. defaulted in the first quarter of the year compared with 29 for the whole of last year. let's speak with the head of nic see investment draghi. is this a huge concern? rating bigger notes, he said it

sounds bad but it sounds worse than what it really is. why? partshink there are two to that, one is putting it in context. we are talking about a default of the nine bonds in the world's largest bond market. if you look at it compared to europe, it is a default rate of 1% compared to the usual default in a u.s. market. in perspective. any number is going to be a new record high. betty: that's what people said at the start of the subprime housing crisis as well. just a few defaults in a big liquid market and they are saying the same thing in the also loans market as well -- auto loans market as well. could not agree more. but when you go back a year or two and we had the same

conversation about the market, one of the factors worrying ourselves was a lot of fundamental companies that should have defaulted were not allowed to default. they were artificially propped up. the good part is we seeing the fundamentally weaker companies being taken care of by market forces. ultimately lower cost of capital. i agree with you, if you think about it from an investment perspective, it doesn't make sense to take on excessive risk at this point in time and that from aneason we see -- investment perspective that is the reason why we favor higher quality bonds whether it is the offshore market or the offshore dollar market. betty: is there a knock on effect because especially when it comes to the financial sector in china, we saw some of these mueller banks unable to meet those interbank debt

obligations. that led to the pboc on this slip here. do you see effect -- a similar effect? >> we need to see what the total number of defaults are over time. there has to be a spillover effect. -- what is important is the overall quantum. it means to stay contained i contained 1%.-- we are trying to take a look at the fundamentals and saying, yes, there are some things to worry about even from an investment perspective. we are focusing on higher quality parts of the market and it makes sense. i want to bring up this chart that you pointed out to us

--ch shows the high yield you are looking at cba and cb double-a bonds. sea level bonds being much more junk so to speak or higher-yielding and it is interesting because if you compare the two, it certainly is a better performer but you have to take a lot of risks to that. it is not that much of a better goformer then you get if you a few levels up on the spectrum in terms of quality. is goinga look at what on here and say it applies to the chinese bond market how -- bond market, how? >> it is about learning the lesson from the u.s. we don't have that history here in asia. the point here is that quality pays. it is tempting in the kind of low yield we are getting to say

i'm going to take a bit more risk and hopefully higher yields. what that chart shows us is that works if you follow a disciplined trading strategy but every time it does not pay you in the amount of extra risk you end up taking on. maybe an interesting tactical china,t the lesson is in the fact that we are seeing defaults rise, keeping a focus on quality and high quality fundamentals is ultimately what pays. that is the lesson we take from the history of u.s. bond market. go, webefore i let you have been talking about since the start of the year -- some china and pboc about the possible hong kong and china bond connect. could that helps stabilize at the china bond market and the onshore? i guess we need to see what the specifics look like that in principle it is a very good idea.

we have always had discrepancy between the offshore u.s. the dollar bond market and the onshore renminbi bond market. we've seen a difference in the way companies issue, what kind of yield you can get on the two market area for the two markets to come together, you will see those imperfections being aren't out and hopefully -- imperfections being ironed out. betty: great to have you here. head of ficc investment strategy joining us live from singapore. you can get a roundup of the stories you need to know to get your addition of bloomberg daybreak. it is available at your smart phone in the bloomberg anywhere at. -- anywhere app. make sure to check out dayb . this is bloomberg. ♪

yvonne: this is "daybreak asia." betty: now to a lesson in diversifying your customer base. take a look at u.k. based imagination technologies. shares plunging more than they can imagine. more than 60%, the biggest fall since it went public in 1994 just because apple is its biggest customer and apple is no

more. --the link here is apple that imagination relies on apple for 50% of its revenue. this leaves its -- this leaves of this company in the lurch. what is imagination? they make graphics chips for apple's mobile product that includes the iphone, ipad, tvs if you have them. imagination hasn't disclosed that apple said it is going to make its own graphics chip in the next 15-24 months. you can see the timeline and the plunge. 61.6% down, over 24 hours here they simply it has been down as much as 71%. talking about this in real terms and real money, we are looking at a market cap of $150 million,

i now it is jumped by more than 600 million. 360 5 million is the market cap here. pop into the bloomberg because i want to show you what has been happening in terms of the analyst recommendation function. we are seeing the buys decrease while the sales are increasing. now the buys are at four, the sales area seven -- are at seven. you can see that plunging. that is the share price today. -- the 12k target month target is the yellow line. you can see it is probably going to fall after what has been happening over the course of the next 24 hours. yvonne: imagination, they are not giving up without a fight. what chance is there for any kind of legal action? statementd release a

threatening that they are going to protect their intellectual property rights but also on the flipside saying we're going to work with you apple if you still want to pull brak -- if you want to pull back from the brink. imagination says if it leaves it would be extremely challenging to design a brand-new gpu architecture from basics without infringing on its ip but then it tapers that back saying apple's notification is at the company did discuss alternative arrangements. they are talking about the current license as well as the royalty agreements. if those royalty agreements to stop, that would stop on the 15-24 month timeline. this is a study in diverse occasion. there are a couple of other companies out there, one in germany and one in the u.s. that rely on apple for more than 50% of their revenue.

semiconductor, about 65% and serious logic, about 85%. if you're the head of these companies, you're thinking, should i diversify? betty: thank you. one feature on the bloomberg we would like to bring to your attention is our interactive tv function. you can find it at tv . you can see prior interviews and to into any of the securities are bloomberg functions we just talked about and you can become part of the conversation by sending us instant messages during our shows. go.k it out at tv get -- tv yvonne: time for a quick look at what is coming up on the next few hours on bloomberg markets. heidi i know you're going to be breaking some aussie trade data. things trade data, we

are expecting to see a bit of an improvement but the biggest feature of head of the policy decision coming out a little bit later today. they are expected to stay on hold but watching out for any sort of commentary about the central banking being stuck between a rock and a hard place. they really are stuck. take us through some of the guessing you have coming up to this decision. we will be keeping out this korea story heading into the election. we will be speaking with a senior elector at a university about the implications for whoever takes the reins as korea's next leader.

>> it is an 9:00 a.m. in hong --g, 9:00 p.m. in sydney, 9:00 p.m. in new york. this is bloomberg asia. asia-pacific stocks declined, taking their cue from a weak u.s. session, the yen declining against the dollar for a third straight day. lane,riving into the slow brought down by an unexpected drop in auto sales last month. and the race to succeed