>> a mixed day on wall street. stocks closing near their all-time highs. also, draining away the vix at a 24 year low. they: j.d..com, one of winners. shares surging to a record as the eb taylor saw its first ever profit. south korea seems poised to a change in direction after months of political and corporate scandal. betty: australia's aaa rating back in the spotlight ahead of a budget seen as long on spending,

but short on spending. and we have the world covered on daybreak asia and we will go to solvi seoul. >> it is budget day in australia, just hours away from the revelation of details. we are going to head to sydney for the latest. this is "bloomberg daybreak: asia," coming to you. i'm betty liu in new york, where it is after 7:00 p.m. yvonne: it is just after 7:00 a.m. in hong kong. it seems like politics are going to be dominating the market. not the typical d.c. news flow to get out of the trump administration, but south korea voters, 52 million of them heading to the polls today, and budget day down under. betty: as we have noted, it looks like korean stocks seem to have priced in the volatility in those elections. they are just going higher. markets are actually quite attractive in south korea. topics is

going to be the aaa rating, and what the budget details on whether that rating is in fact going to be jeopardized, or is all that talk just much ado about nothing? meanwhile, stocks in the u.s., closing near the all-time highs. low.ility at a 24 year it is incredible. the french elections pretty much have got people complacent here. you can do wonder whether or not we are in a danger zone. are we lulled to much and all the gains? hurdle weter that whole gir got, there is not much that can spooked investors at this point. china remains a cautious market. no relief inside after we see the forest deleveraging coming out from the government and the trade data we got yesterday. it was decent, but softer than the previous month, so let us see how the rest of asia is performing here so far on this

tuesday morning. a little bit of weakness. we are down about a quarter of 1% right now. we did see dollar -- a lot coming back to the u.s. dollar after the fed. we are seeing gains against the g10 currencies. t -12 hours now until treasury -- treasurer scott morrison delivers his budget. will the credit rating be at risk?futures are pretty soft. slightly positive. the aussie dollar unchanged at 73.87, ahead of retail sales figures this money. trading has been robust on that monday morning in japan. 2.3% for the nikkei yesterday. the topix and the nikkei highest. futures seem to be pointing to continuing gains with dollar yen above 113 against the dollar. of course, korea is closed today, but definitely some big events that could shake things up throughout the asian session, and with wall street, it does

not seem like we got too big of a lead-in. betty: not at all. not a lot of direction from the u.s.. before we get to have the markets close, i have breaking singaporean bank coming out with their net interest income in the first quarter, coming in at 973 million singapore dollars. that is above estimates of 845 million noninterest income. course, we are waiting for more details on the company or the bank about their energy loans. the lending they have given to the oil and gas industry and how much that has affected the earnings here for the bank, so ocbc, first quarter net income, $973 million. that is above the estimate of $845 million. you mention the u.s. market. let us pull up the board to give you a sense of the numbers here. we did close the highs of the session, but cannot really tell.

much unchanged. ow unchanged. the nasdaq basically flat as well as the s&p. it might change this week with earnings coming out as well as retail sales numbers on friday, yvonne. yvonne: that is right. let us get to our top story in asia this money. south korea in the election spotlight today after a campaign dominated by political and business scandal, potential trade disruption with the u.s., and growing worries about its neighbor to the north. shery ahn is in seoul. give us the feel of what it is like on the ground at the moment. what can we expect today? yvonne, so polling stations have been open for about two hours, and it is a cold and damp morning here in south korea, but you can see voters are out and about. they are standing in line inside

this building. there are more than 13,900 polling stations across the country, such as this one. the reason we are seeing all of these crowds today gathered here is because the leading candidate, moon jae-in, will cast his vote right at this location in about half an hour. and now, this is an unprecedented election of course after that historic ouster of president park geun-hye. 's are usually in south korea, you would have the president-elect just prepared to take office with his or her transition team. that is not happening this time. will have to become the next president of south korea right away. voters have a lot to think about. a couple people i talked to here in their 20's saying that yes, of southsecurity korea is important, but the

economy is more important for them. youth here has been critical of the economy. we keep talking about a revival in the south korean economy, but they cannot feel it on the ground. others are still worried about north korea and the way that south korea and the u.s. tackles jogging. -- tackles pyongyang. >> they seem to have taken a backseat in the campaign. the u.s. is reviewing the free trade deals including the one in south korea. we know the deficit is double with the country. where do the candidates stand on trade? shery: yeah, i mean president trump called the korea-u.s. fta a horrible deal. vice president and said if they trade relationship was falling short -- candidates have been all over the place when it comes to their stance on trade. moon jae-in as a leading candidate, for example, opposes

the ratification of the fta with the u.s., however, since then, he has changed his position and he says the best deal is the pillar of strengthening ties with the u.s.. centrist candidate -- has suggested that it might be a good opportunity you to review some of the parts of the agreement that have concerned south korea, while the conservative candidate has said that it is not a good idea to renegotiate the deal. anchor: certainly we will be with you throughout the next few hours. get closer and closer to the close of voting. we will be discussing the election with our guest throughout this program. later this hour, the managing director, evan madero is joining us. medeiros is joining us. that is at 9:40 in sydney. choi joining, paul

us from seoul. he will be there with shery. 10:40 if you are watching in sydney. anchor: south korean markets closed here today. let us get to the first word news with nina melendez. nina: former white house officials say president obama warned his successor against hiring general mike flynn as national security adviser. the revelation comes as a former acting attorney general told the senate's committee that she feared that flynn, in her words, "could be blackmailed by moscow." she was testifying about budget interference in last year's presidential election. the u.s. navy says it will continue to contest beijing plus claim to most of the south china use andsisting a pa patrols did not mean the disputed waters are a lower priority for washington. scott swift told the briefing in singapore that the changing administration naturally meant disruption, but there was no change in overall policy.

china's biggest soft drink maker says it is worried about being watched from u.s. takeovers as it looks to growth through buying abroad. a company is in negotiations. the chairman told the trump us that heion -- trump administration's protectionist stance is a concern. impact on have a huge chinese companies, acquisitions in the u.s.. having spent a lot of money and energy on the early stage, we are rejected in the last minute. in fact, i think the u.s. should not be too worried by china. the world will be peaceful as long as china and the u.s. have normal trade ties. commonwealth banks, third-quarter earnings rose through tba reporting on audited third-quarter cash profits of 2.4 billion australian dollars, undercharges are just $200 million for the main domestic rival, commonwealth's

net interest rival fell on higher competition. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm nina melendez. this is bloomberg. anchor: as we have been discussing, it is budget day in australia. treasurer scott morrison preparing to deliver his view of the nation's finances. paul allen in canberra for the speech. lay it out. what are we expecting in the budget? the first thing we always look for is how big is the deficit going to be? estimates are that it may have narrowed a little things to the high prices we are seeing for iron ore and call, so the deficit may come between 25 to 27 billion australian dollars, between the 20 billion u.s. dollar mark. we will be looking at the growth forecast, which would get the budget there. the government things around 2021, we will see that mark reached.

the treasurer, scott morrison, arrives for what will be one of in biggest days in the year camera. he spoke to the media on his way in. let us see what he had to say. >> we have been listening. we understand. while australia has grown, ahead of the advanced economies in the world, and our national growth gets strong headwinds, has been impressive. all --rstand that in that not all australian have felt that growth personally. >> one of the other things we can expect to see, we have been talking about in the weeks leading up to this. big spending on of the structure . the government has a few plans in that department, including a second airport for sydney. betty, yvonne. anchor: it seems like it is a discussion of good debt versus bad debt. what will that mean for the triple-a credit rating, then? paul: that is the big question and we will be waiting for the ratings agencies to react to

this budget once it is released. has not for example, made any comment about the distinction between good debt or bad debt, but moody's did express potential concerns around growth forecasts, onectations for savings made efficiency drives, that sort of thing, and as far as movies is concerned, the australian postural a rating is on negative outlook, which means there is a one third chance of a downgrade over the next two years. from his bank point of view, looking in cheap money to spend on infrastructure, that is something the reserve bank of australia has in wanting the government to do for a very long time, so the announcements today could be welcomed by the rba. back to you. anchor: fair point. paul allen, thank you. looking ahead, we speak to advisert obama's former

about south korea's option to relations with china and the u.s.. anchor:, china's second-largest e-commerce company finally posting a profit. we will take a closer look at jd.com. this is bloomberg. ♪

betty: this is daybreak asia. i'm betty liu in new york. yvonne: i'm yvonne man in hong kong. a slice of the u.s. market. jack moss andd by financials and clinched a deal to let users shop at 4 million outlets. dominate thencent market with a combined 90% share. alipay want to leverage that to millions of chinese travelers abroad. betty: struggling dairy company has written a demand for a a loan.ent of

they are seeking $50 million that was due on april 28 plus more than $900,000 in interest. it has been frozen in hong kong since plunging on march the fourth. they may not return to trade without official approval. yvonne: marriott shares rising after the world's biggest hotel operator reported strong first-quarter results. growth inredicting 2% the north american revenue for the second quarter. between 2% and 4% and the rest of the world. strong demand in china and the asia-pacific as a whole is behind faster than expected growth predictions. let us go back to wall street now. the u.s. stocks ended virtually unchanged, near all-time highs. the vix hitting a 24 year low. joining us on set is su keenan with the latest. the fix up 10 right now -- the vix up 10 right now. su: we did have the s&p hit a

record, which has been part of a running series we had. we going to the close and you will see it is relatively flat. not much of a big changen the market as investors may be questioning -- digesting all of the information coming at it. let us take a look at the big movers and spotlight stocks. apple hitting another all-time high. a 200 plus price target put on apple. that means it is $1 trillion valuation if it its evaluation in the next 12 months or don't on the rise as it starts to integrate its 2.4 billion dollars acquisition of kate spade. they are doing a lot of different moves, promotions. investors seem to like it here charter along with comcast, their stocks have been under pressure. they negotiate better contract together to ward off some of the merger mania out in the industry. let us go into the bloomberg real quick. talking about records, do you notice that the dow has been lagging behind as the s&p shoots

to higher ground? we saw some correlation. to the beginning of the chart, they were all hitting new highs together. the s&p has broken higher in the dow just has not been hanging in as much. anchor: it has not been. ok, hanging on. even outperforming is jd.com, alibaba's closest rival. the stock just rocketed higher. su: big surprise in terms of the strength of the quarter. its first quarter profits since it has gone public, and of course one of the things that all a big difference was mine walmart and the chinese web business, really driving sales. so what we have is a chart showing a real strong -- what have we got coming appear? a nice year to date chart for jd.com. you can see how it really took off. it is alibaba's closest rival through the walmart partnership

with the online transactions, really climbing over 42%. 41% andsaw sales rising that was something that the jd.com chief financial officer said was a quarter milestone, but that is not something they have got to promise one forward. a lot of analysts are taking a lot of positives away from the quarter. they are saying that it puts them in good footing. we are also seeing that because alibaba is neck-and-neck, the battle between the companies could spread to indonesia and southeastern asia. said to be in talks to invest hundreds of millions of dollars. that will be something to look at going forward. anchor: we will certainly be watching this. thanks so much, su keenan. of next, we just talked about the stock market, but what about bond markets and how they are reacting to all of this news? sonings, geopolitics,

pimco's mark joining us. this is bloomberg. ♪

yvonne: "bloomberg daybreak: asia this is." i am yvonne man in hong kong. -- this is "bloomberg daybreak: asia." i am yvonne man in hong kong. betty: three rate increases this year even remains a possibility. they to look at this chart. bloombergs chameleon trend indicator. that is what it is. for treasury note yield, turning green as you can see in the circle for the first time in almost six weeks. an uptrendnning of that should be there to bond. bebearsates -- should perp on.hould be bears joining us, pimco chief overseeingofficer,

$300 billion in assets. good to talk with you again. are you a believer in the fed and what they see? we are not going anywhere in our rate forecast. hi, they, ity -- think it was week due to temporary factors. an inventorylly brought down, and a delayed tax refund. the second quarter will be much better. 60.saw bonds 10-year hit 2 basically, we reduced expectations for fiscal stimulus, but the fed is set to go. the economy is doing reasonably well. the labor market is very healthy. 4.4%ve a four part 4% -- unemployment rate. i'm confident we will get you been more height this year -- hikes this year. anchor: do you think the rates are going on the matter what happens in washington? mark: i would not say no matter what. [laughter] mark: under most states of the

world, thae best cases we see mildly improving rates. inflation should trend higher and the fed is such to raise rates in a big case and they are doing it because they want to normalize to a more neutral you know, obviously, the things i think could stop that would be more evidence that the fiscal stimulus could get delayed. there is the inability of the senate to put forth a package on health care that could get obviously, gop, and north korea, i can give north korean intentions were to heat up again, we could see yields come back down, but under most states of the world, i think the trend toward higher rates remains. anchor: how much higher, though? 230 level, the 10 year yields, has gone from support to resistance. it is mature to call it a bond market story? mark: there's reasons to believe

there is support, but it would 3%, justore around factors.demographics if you look at what the reasons why we should see higher rates, it is not just the economy. it is the fact that after the fed does raise one or two more times, the market has to place in the taper, so the fed is set over the next couple of years, to reduce its balance sheet. if we do get cap reform and we did it tax cut, remember that a lot of it will have to be financed. the market has to build in what i call more inflationary risk premiums as well as the term premium for more issuance down the road, and right now, rates are so low. the term premiums are so low. i think the risk is that we are going to see mildly higher rates overtime. anchor: that is

very interesting. we are watching the selloff in crude. we are below that 200 day moving average, but the impact when it came to the high-yield spreads has been minimal at best. i want to show you. spreads between speculative and investment-grade have continued to contract. why do you think that is? is this more complacency we are seeing or investors getting too hungry reaching for yields? mark: i think it is exactly that. investors have become a little bit complacent. there has been this reach for yields. we been selling a lot of energy in this farcical: risk. we have been going up in quality so we prefer to be more an investment grade than high-yield. clearly, the beach for yield is attracting investors. it is prudent to be more conservative today. we still see some select row, but overall, we have been de-risking. anchor: great to have you, marc keisel.

stocks fell as they pulled the biggest gaming market. more on th

anchor: the sun is shining. 7:30 a.m. tuesday morning in hong kong. just half an hour away from the first major market open. betty. betty: that is right, yvonne. all the action in korea and australia. ; 30 p.m. monday evening here in new york, where markets closed at the highs of the session. but basically flat. i'm betty liu in new york. yvonne: i'm yvonne man in hong kong and you are watching daybreak asia. let us get the first word news with nina melendez. south korea seems poised for radical change after months of political upheaval and scandal. the nation heads to the polls for elections triggered by the impeachment of former president park geun-hye. corruption have

dominated the campaign along with worries about youth unemployment and an increasingly belligerent north korea. australia's triple-a credit rating is back under the microscope as turnbull government appears to deliver short savings. the struggle to balance the books has been complicated by recession level wage increases, and weaker growth after the mining boom. economists predict a deficit in 2018 of about 21 billion u.s. dollars. a surprise 14% jump in first quarter profit thanks to higher income from of management and insurance. southeast asia's second-largest lender rose to 600 and 2 million u.s. dollars. ocbc is growing its private banking -- 602 million u.s. dollars. a cbd it during its private banking arm. 's governor haslam can

support. they will take write-downs. it is a chance for the r.b.i. to deal with an estimated $180 billion with that debt and revive credit growth that is expanding at its slowest pace since 1992. a proposal to create a bad bank has been dropped. philippine president rodrigo named the next governor of the central bank. topill succeed them on the -- the man who retires in july. he has been deputy governors of 2005. an economy is going more than 6% each year. among the fastest in the world and the currency under pressure. will this, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am in a melendez and this is bloomberg.

anchor: we are coming down to some of the major market opens in the asia-pacific are us go to our reporter adam haigh, from sydney. i guess i don't have to guess what you will be looking at out of australia today with the budget just a couple of hours away. att will we be looking from scott morrison speech this afternoon? >> devonte investors, the key thing is how much of the spending plans for infrastructure stacks up against worries about losing that key aaa rating. australia is only one of 10 to have the aaa rating, so it has been a key driver. you have been hearing about the yield differential between u.s. rates and australian rates. and hold to buy australian assets. the aussie has been weakening quite a bit lately, so it will be interesting to see how people the economyd how

will be shifting over the next few years. i think elsewhere today, the key thing coming is the vote as south koreans had to the polls. because the index is trading at a record high -- the kospi index has been trading at a record high. overnight, we have seen bonds continue to fall. we did not see much movement in the u.s. stock market, but australian 10 year have continued to decline this morning, following the declined to resign treasuries, so bond yields tick up equities just trade at record highs. there is a little bit of a sense that we need something as a next catalyst to compress on. there is plenty of worry of course in china and that part of the world. the chinese equity markets has been falling for a number of days now, and plenty of money is being wiped off the value of shares with the regulators stepping up their scrutiny of the financial industry. so, that will be the key thing

when the shanghai composite opens later this morning, just whether that selloff continues or we see some stability or any buying infamy so-called national team. anchor: speaking about catalysts us takeility, adam, let a look at how volatility has been doing lately. let us bring out this chart that shows the measures of volatility, several different measures from the merrill lynch treasury volatility index, the traditional vix we have been talking about, coming down to a 24 year low. all of them you see on the screen there, coming down. precipitously down. why is volatility so low? betty, i think ultimately, this is about in the economic recovery. it has been going on for some time to the latest job numbers from of biggest economy in the u.s. showing us last week that the unemployment rate was down to 4.4%. it is a story across the world and we are through that turtle

with the french presidential election. i think that kind of adds a more -- at what positivity to the sentiment. the worry is still around what chinese regulators can get and do what they are doing to restrain lending in some parts of the economy while at the same time maintaining the levels of growth that investors are expecting over the next two or three years, but ultimately, this is a signal of near-term volatility. one of the key things to look at is the vix futures pricing out and further into the future, it just pick up in applications for equities. for the moment, we are ok, but investors may be looking at relatively cheap prices to hedge longer-term bullish positions and equities.

anchor: adam, thank you. adam haigh in sydney. casino stocks were wanting a little bit less volatility today. union bay has pulled its atm's from the macau casinos and this comes as china third-highest official visit the gaming enclave. .a. m&a bureau chief -- out l bureau chief has more on this. >> they have been told by the to change thement way they are doing business. this is part of a much larger crackdown, multi-year crackdown on corruption and what they are doing is replacing machines with one set have a stricter scrutiny including facial all recognition technology, so they can track exactly who is taking the money. there is great concern. there has always been a lot of money laundering going on in macau, and this is one way to fight it. it?ow big of a deal is

we are starting to see more momentum building in macau once again, jerome by the gnp is as well. could this mean trouble for the casino operators out there? >> it does. it is something like 10 billion hong kong take out monthly of these atm's, about $1.2 billion, and a lot of that goes to gambling, so this is a short-term flip. you know, as you said, there has been a recovery. vip's were coming back to your is cold water on what has been a hot rally. yvonne: we have been i guess five years since the beginning of this election crackdown out of china. what has changed in the five years? has beijing's views on the couch aged -- on macau changed? guest: they have gotten the message that they are supposed to diversify and not just be entirely reliant on gambling and

the high-end gamblers that have all ofbeen suspect, so these new casinos they opened have a lot of amenities, entertainment, conventions, restaurants, things for families , so they are trying to diversify the business because they are being told that they should. >> thank you so much. as you saw or read across the board, the stock taking a pretty big hit. now, in a moment, back in asia, south korea voting in a presidential election dominated by regional tensions, transpacific trade, political and corporate scandals. the presidential candidates themselves are heading to their polls to vote for themselves. these issuesat all in south korea, next. this is bloomberg. ♪

betty: this is daybreak asia.

i'm betty liu in new york. yvonne: i am yvonne man in hong kong. south korea seems set for a change of direction after months of political and corporate upheaval. however, the leading presidential candidates for on critical issues such as north korea and seoul's alliance with washington. let us discuss all of that, the senior asia adviser. welcome. we have seen this discussion shift in korea from governance to reform to national security. went 42 million koreans had to the polls today, what exactly are they going to be voting for? >> they will be voting for a change. this is an historic election in south korea because it is the first election after an impeachment so they had a very short election cycle, 60 days. election afterst 10 years of the conservative leadership, so they are looking for change. yvonne: is a change in the economy, changing reforms? >> it is about changing

governance. people want a jobs, rising wages , better access to housing. they want a national assembly that brings about reform. that is the large conglomerates which have often dominated the economic landscape in south korea, squeezing out the space for small and medium enterprises, so that is another big area. >> you mentioned the domestic side of the economy, it turning 2% growth, youth unemployment a double-digit numbers. thegoing to talk about trade issues with the u.s. as well as korea because potentially, who becomes the next president has to deal with president trump, who has called the free trade agreement with south korea a horrible deal. we have seen the trade deficit 20 talk.ince we see the leading candidates do not really have concrete plans when it comes to tackling the

structural issues. why do you think that is? >> i think if you look at mr. , he has talked about increasing social welfare expenditure, so i think there are very general plans. does he have a sufficient political mandate to implement the plans for the national assembly? going to have a majority within the national assembly. he has 120 seats out of a few hundred member national assembly, so he will have to build a coalition if he's going to start spending more on welfare,, social public official to. of course, the great white well of south korean politics, which is reform. >> we are just seeing live pictures, the front runner up, the park geun-hye, moon jae-in, just voting for himself of course in seoul ahead of the polls closing.

i want to bring up the issue of effectiveness. he is considered much more talking about a much more sort of -- i would not say you year, but much more working to try to work out the situation, taking a less hard stance on north korea. i want to pull up, do we have a chart ?7238 on government effectiveness? this chart, which i think is interesting, shows how government effectiveness in south korea is now at a decade low. so, given that, look at someone , really is seen to let the be the winner here, what can he do to correct that perception in south korea? mantra, guys. -- wrong chart, guys. >> the most important thing he can do is change the economic

situation, so that means much more public expenditure on things like education, creating employment opportunities, creating more space for small and medium enterprises, going things.e big those are the issues the korean citizens are very concerned about, because they affect the future trajectory of the korean economy through the korean economy need structural change, and the question is, will the next president have the political mandate to bring about that kind of structural change? the korean economy is an export oriented economy in a world of growing protectionism, trump raising questions about the fda, growing competition from china. as the export orientation of south korea's economy going to persist? we the growth gradually declining to around sort of below 2%. betty: perhaps maybe that might even go lower if trump throws a

big wrench. you mentioned him a few moments ago throwing a big wrench in the relations with south korea. how do they handle president trump? >> that will be a critical issue, betty, both on the core fta and the north korea question. if the next president of south korea is not able to establish sort of a baseline working relationship with the u.s., it is going to eat up at an enormous amount of political capital, because the conservatives in korea who partially blame the centerleft government -- the centerleft candidates for going after president park are going to be looking for opportunities to the next government of south korea, so it is going to be a huge political liability if the next president is not able to establish a stable relationship with the united states. betty: does that mean korea might have to give up some

potential sweeteners when it comes to a trade deal? or could the u.s. strike a deal like it did with china? you help us rina north korea -- rein in north korea, and maybe you can help with a trade deficit. >> it is unclear how trump will approach that. he made a big statement about it but has not done anything. the candidates did not make it a big political issue, so if trump doubles down and wants revisions to the fta, it will become a huge political liability. the centerleft candidate, mr. moon has promoted korea first type policies, so having to it will be a real challenge. it is widely seen as the gold for the bilateral fta united states, so with the trump administration deciding to pursue this, it is going to have a ripple effect across the region. anchor: evan, if you were a betting man, would you bet that there could be a meeting, a

possible meeting at any point between president trump and a north korean leader? evan: you know, the last thing you want to do is take that on bets on trump's ability. it is hard to imagine a scenario in which he would do that because the advisors around him will try to persuade him about all the reasons why he should not do that in large part because it would provide a degree of validation for a nuclearhat is pursuing weapons and all of the human rights behavior and now, he did

detained it. there are plenty of reasons for trump not to do it ultimate reason -- -- after the south korean election, the next president of south korea will tell us a lot about the degree to which the u.s. will be able to work with them. if mr. moon decides to pursue a career-first approach, that is very engagement-oriented, that could create a challenges for the u.s. south korea relationship. anchor: without essentially be official to china? there is a lot of talk on whether they should continue to deploy in south korea as well. evan: the critical relationship to watch will be china-south korea because china has imposed sanctions. anchor: do you expect it to ramp

up than? evan: the chinese will wait and see who the next president is and what their approach is going to be. i think it is going to be very hard for the south koreans to walk away from that, because the program has advanced to such a degree. it is actually sort of de facto deployed right now. chinese are going to have to give it away from a very aggressive strategy because otherwise they are going to guarantee the next five years of china-south korea relations with the new president are going to be that. that is not in china's interest. anchor: when trump says on the stuff about paying for that, is that also off the cuff?cannot be negotiated as well ? officialsnistration including senior ones from the white house have sought to move that back. they sort of touch a very raw nerve in south korea about the

united states dictating to them, time what to do, telling what it is to be a good ally. if trump continues to engage in that kind of behavior, it is going to create real tensions, who will need to be seen as protecting the sovereignty of south korea. anchor: before we go, it is not just a president, but what about the south korean citizens? where have those opinions hardened, or have a? evan: that is exactly right, betty. they ever generation of south korean voters who have come of years, theyast 10 have articulated quite conservative views on the north korea issue. they don't have family ties or personal ties to north korea. supporters ofng imposing more sanctions on north korea. it is one of the reasons why i

think the next president of south korea is going to have a difficulty pursuing a so-called sunshine 2.0 policy because these domestic politics and south korea have changed. kim jong-nam himself is not like his father. he is pursuing a much more provocative strategy. anchor: thank you so much, evan medeiros, former senior asian advisor to president obama, with the eurasia group. you can get a roundup of this top story and many others that you need to know to get your day going in today's edition of daybreak. bloomberg subscribers can go to dayb on their terminals and also available on mobile and the bloomberg anywhere app. you can customize your settings so you only get the news on the industries and assets you care about. this is bloomberg. ♪

betty: this is daybreak.

i'm betty liu in new york. yvonne: i am yvonne man in hong kong. sale anda share concurrent repurchase. crown resorts leave their gambling joint venture. despite a positive history, he decided to terminate its and ll melco toand allow terminate the deal alone. it will use money to cut debt. betty: china's hna group said to be dropping out of the race. our sources say its withdrawal leaves six potential suitors commingling private equity firms, cerberus capital and apollo group. conflicting reports from japan concerning to she be a -- concerning toshiba. toto is inspecting them the following week on may 22. kyoto said toshiba is having

trouble securing a new auditor by the end of june, when it is required to release earnings. the ceo is said to be flying to japan for talks on a bid on toshiba's chips unit. betty: another company we are watching his mitsubishi. is open in a few minutes. let us bring in sophie kamaruddin, who is watching that stock and the opening of the major markets. sophie. sophie:betty, -- mitsubishi is said to report at midday, followed by mitsubishi motors this afternoon. following the news lines that you and yvonne just mentioned, we are keeping an eye on toshiba in tokyo along with crown resorts in sydney as this can casino operator is said to do the joint venture. the largest bank on the radar after its latest earnings update. asian equity futures are

pointing higher here after the stocks on wall street into tire and the yen is back above 113. that is a brief look at what we will be watching when trading

♪ yvonne: -- betty: shares hitting a record as the eu retailer saw its first-ever profit as a listed company. china says the internet is growing the -- is ruining the economy. alibaba and others are in a race to the bottom.

this is the second hour of "daybreak asia." yvonne man in hong kong. betty: i'm betty liu. -- i don't markets know. it seems likely be -- it seems like we are at the return of the market. pretty much closed right at the height of the session, but not a lot of movement. i think investors are waiting for more catalysts in the form disney, forlike instance, or the retail sales numbers that are out on friday. certainly it seems at this point the fed is set on its rate hiking. yvonne: pretty slow going here in the asia-pacific to start things going. let's get to the market check with sophie kamaruddin. sophie: australia also to

deliver its budget. plenty to consider. with the dollar back in fashion, that has pushed the dollar-yen back above 1.13, which is helping to make the nikkei 225 edge closer to that 20,000 level. we do see shares in sydney resuming the climb after monday's gain. take a look at the commodities space. we have that iron or rebound faltering. that has been a drag on other base metals such as copper and aluminum. copper wiping out 2017 games following that slump we saw in chinese imports of the metal for april. ore has weighed on the aussie dollar. it is not showing up right now, but we have the aussie just below 74. we're looking at the korean won down -- the korean yuan down about 2/10 of 1%.

overnight.s falling and show youry what is going on with chinese 10 year yields. those are trading at around 22 month highs. moving further above 3.6%. while we see a decline in treasury yields luring investors, that is not the case for china. speaking of treasuries, i want to show you this next panel showing you what is going on with the vix. equities look more attractive to investors as markets are putting their faith in that global growth story, so thinks is around 1993 lows. with the concerned about the chinese market among all this complacency, chinese markets have continued their march of the virgins from global equity march of divergence from global equities -- march of divergence from global equities.

thenew economy has helped china index is higher. the hate share index is by energy weighted and industrial stocks. we did see hate shares the gout ekes on much -- shares out gains on monday. betty: voting has been underway in south korea for three hours in a campaign dominated by scandals and worries about north korea. all that playing into voting today. what can we expect so far? presidential candidates have already started casting their votes ramy: just a few minutes -- they're both.

just a few months ago we had the leading candidate at this polling station. fugitive -- he took a few pictures with voters. there are more than 13,900 polling stations across the country. this is quite an unprecedented, historic election. this is a fourth one after the ousting of president park geun-hye. given that this is unprecedented and we do not have an elected president at the moment, the winner of this election is immediately going to take office as the next president of south korea. voters have a lot to consider. you mentioned a couple of issues. north korea, foreign relations. i talked to a couple of people here in their 20's. they say more than security for them, it is all about the economy, the income inequality. they think that although a lot

of media reports out there talking about a recovery in the south korean economy, they can't actually feel that on the ground. they are also very concerned about how they will manage to purchase a house given that it is so difficult to get a job. other people are still reluctant in considering how to do was north korea issues as a top priority. the economy seems to take in the back burner in this campaign, but the u.s. is revealing always free trade deals, including the one with south korea. who stands to benefit on their economic agenda at the moment? trump haspresident alled this korea-u.s. fda horrible to -- fta a horrible

deal. candidates have been all over the place on this one. a lot of experts say they don't want to give it away because that would take away their negotiating power. when it comes to the leading candidate, he was the first opposed to the ratification of the fta. the has since changed his tune, saying that this trade deal is a pillar that will strengthen ties with the u.s. the centrist candidate has suggested there may be room for renegotiating. he thinks this could be an opportunity to look into parts of the agreement that korea has worried about. the conservative candidate thinks it is not a good idea to renegotiate the deal. how did the candidates then find a deal with the national security issues, particularly with north korea, as well as china? this issue,

especially when it comes to north korea, they have been a little more divided. the leading candidate moon is open for communication with north korea. not surprising given that he was an advisor in a former liberal administration at the time when we had the sunshine policy of engagement with the north. this coming after nine consecutive years of conservative rule here in south korea. could be a huge shift from where south korea has stood in the past decade. the centrist has been a little tougher on north korea. communicationat is necessary, but calling for stronger ties with the u.s., especially on the military side, is key. in dealing with the u.s. for whoever becomes president will be more tricky given that president trump has said he would be honored to meet with north korean leader kim jong on, which is quite a deviation from foreign policy of the u.s. in

the past. thank you, live from seoul. within the first word news with ramy inocencio. ramy: in singapore, oh cbc -- ocbc has posted a surprise jump in profits. net income at their second-largest lender rose to $692 billion. they grow their private banking arm last year. in the u.s., former white house officials say barack obama warned donald trump against hiring general mike flynn as national security adviser. that revelation comes as the former acting attorney general sally eight told the senate committee -- sally yates told the senate committee she feared he could be blackmailed by moscow.

u.s. navy says it will continue to contest beijing's claims to most of the south china sea, insisting because of an so-called freedom of navigation patrols does not mean the disputed waters are a lower priority for washington. pacific fleet commander scott swift told a briefing in singapore that the change of administration naturally meant disruption, but there is no change in overall policy. australia's aaa credit rating is back under the microscope as the government prepares to deliver a government that is long on spending pledges and short on savings. attending to balance the books has been challenged by weaker growth after the mining investment boom. economists predict a deficit in billion -- 2028 billion u.s. dollars. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm ramy inocencio. this is bloomberg. yvonne: still ahead, our

-- ourve any of her exclusive interview with china's eighth richest man. betty: and navigating volatility in the market, we speak to someone who says they are not fazed at all. this is bloomberg. ♪

♪ betty: this is "daybreak asia." yvonne: let's do a quick check of the latest business flash headlines. commonwealth banks says earnings rose. the reported a profit of $2.4 billion australian. directorate -- main benefit rivals -- rosety: marriott shares after the world's biggest hotel operator were supported --

operator reported strong fourth-quarter results. strong demand in china and the asia-pacific has made for a higher-than-expected growth. alipay has clinched a deal to let users shop at 4 million american outlets served by payment processors. market ininates the china with a combined 90% share. alipay wants to leverage that to millions of chinese travelers abroad. betty: geopolitics continues to influence events and a wave of relief swirling for the markets today after emmanuel macron's decisive victory in france. things can change rapidly, not least with the election in south korea and the ongoing concern of president trump's trade stance

with asian nations. joining us now from singapore, thanks so much. firsttackle south korea and what value you might see in the market. let's bring up the bloomberg terminal chart here, number 6526. it shows you something we have been discussing, which is how south korea seems to be one of the most attractive markets despite these geopolitical tensions, and in fact has outperformed the broader asian markets. there is some value here in south korea. is it all priced in? guest: i think there is value still in south korea. one of the keeper stocks within samsungon is the bms electronics, which still offers decent value. i think the major concern

isrhanging korea's market not only political tensions, but it is also the structure of business within korea, the conglomerate structure that hasn't been the most shareholder friendly. there's been a long-standing korean discount due to corporate governance, as well as the knock we have seen from politics and china being upset about the missile systems. certainly that korea discount has been in place for so long, and that has just been part of this scenario when it comes to investing in south korea. i'm kind of curious about being an active investor, how you view the volatility we have seen. we have been talking all day today about the low amount of volatility, particularly here in the u.s. markets. volatility?u seeing

where are you seeing opportunity to take advantage of some of the market? guest: in a sense, that is frustrating here, too, as a lack of volatility. we try to be disciplined about taking little money off the top of the stocks when they run ahead for whatever reason. oreexample, we had iron stocks that ran ahead strongly a few months ago, see you take a little off then, than they fall back as they did quite sharply last week on the decline in iron ore. it is things like that we do at the margin. however, our underlying by,osophy is very much hold, and sit on companies, let the companies do the hard work. many of our holdings we have held for 10 or 20, 25 years within our portfolios.

you mentioned samsung, want to focus on ian tech -- on em tech. taiwan tech seems to be doing quite strong. is this going to be the big driver when it comes to em space? this chart shows what we have seen from em and commodities. they are no longer being held captive by commodity prices anymore. you expect a detergent's -- a divergence to continue? guest: as far as we're concerned, em looks in the global space relatively attractive. tore was a tendency for em track commodity prices on the way down, and people fell out of love with em. we saw huge cash flows out of emerging markets. we are seeing some of that reverse, and i think long-term, the markets anywhere in the

world will be driven by the underlying businesses, business grows, earnings growth, and of course, you are still getting across certain emerging markets, not just in the tech sector. it can be in the consumer sector, financial sector, even some areas of manufacturing are still doing ok in emerging markets. it stock buy stocks, sector by sector. no one sector dominant in particular. yvonne: would you be adding aggressively to tech right now given these investments? guest: correct. i'm not sure one should be adding aggressive to anything at the moment. one big frustration for us short-term is finding anything that's cheap. of course, that is because global interest rates still remain so low, and money is going into equities, which

homen't be as normal at where interest rates can be 5%, 6%, or whatever the historic trend has been. betty: i want to turn from tech to banks. just about an hour ago, we had the earnings coming out of the first quarter for ocbc. it seems like all the singapore banks are beating estimates. using these loan provisions we have been watching over the past year, particularly on oil and gas lending, do you think all of that is now flowing down to put it behind us? looking at the shares, we are putting that behind us because we are back, to a large extent, and the price. i don't think the reality is behind us, so there will still be some hits coming through from oil and gas throughout the year, one would suspect. but the singapore banks are pretty well provisioned, very strong. ocbc in particular has very

strong wealth management and insurance division and -- divisioning. that really does keep it going even when you have issues in oil and gas. ocbc has been warning for some time that the oil and gas issues are not over, but these results show how strong overall they are. i've got to ask you about china banks because we continue to see this forced crackdown from the government when it comes to financial leverage, the banks pulling away from some of these wealth management products. we are seeing half $1 trillion being wiped out of stocks and bonds just in the last three we. -- three weeks. do you see any relief? is this an opportunity for you to buy?

guest: anchor: i think what the -- guest: i think what the chinese government doing is good. they are being tight and tough on areas of concern, so that is very positive. and for us, any pullback in markets is that opportunity to buy. wish prices everywhere in the world were cheaper than they are today, but we are rather scottish and careful with the price would pay. yvonne: as you should be. great to have you here. hugh young live from singapore. what is going, right at the e-commerce giant. this is bloomberg. ♪

♪ betty: this is "daybreak asia." yvonne: j.d..com surprised

analysts with income of $35 million in the last quarter. the e-commerce company is second only to alibaba and china. this the fourth time since listing it has reported a quarterly profit. let's go to bloomberg's tech reporter live from beijing. david, is this a turning point for jd.com. are they going to be pulling in a regular profit from now on? reporter: yes and no. they probably will pull in more profit from now on, but they did warned last night there are a few more quarters of pain to come. basically, the reason why they have been able to start grabbing profits is investments in logistics. supply chains, warehouses, delivery networks. they will continue to invest. -- moreses to come warehouses to come in the coming quarter. the sorts ofre things that they are investing

in? aforementioned logistics, warehouses, for example, as well as delivery systems. but importantly, they are also investing in branding, and trying to boost up the number of suppliers. they are going out to farms, jewelry providers. trying to get those people to get out of those platforms to sell to their customers. they are also expanding overseas. they are looking at indonesia as a potential expansion point to serve as the base for all of southeast asia. yvonne: do they really stand a chance against alibaba, which is investing large amounts into different markets and delivery logistics? reporter: that is a key question. when it comes to things like indonesia and southeast asia, alibaba is already there. they have artie made big investments in lozada. they did you catch up when it comes to better quality services

when it comes to taking over, or at least investing more, and logistic networks. alibaba has the will and the money to pull it off if it wants to. betty: we will certainly watch at that rally continues for jd.com. let's talk about how markets are trading here in the asia-pacific. south korean markets are closed with the election there. right now a bit lower in japan, slightly lower. we were pretty much flat here in the u.s. the new zealand in the x50 is zxwer -- the new zealand n 50 down. iron ore drags on

finances. what that means for copper. this is bloomberg. ♪

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. yvonne: 8:30 in sunny singapore this morning. i'm a yvonne man. betty: i'm betty liu in new york. let's get to the first word news with ramy inocencio. seems poisedorea for radical change right now. the nation heads to a poll for the election triggered by the impeachment of former president park geun-hye. a former trader says he was trained to lie to customers in

order to boost company commissions. he was giving evidence to the trial of three colleagues accused of lying to customers about the prices of mortgage backed securities. witnesses said the tactics were commonplace. he intended to discredit his evidence, calling him a liar. to india, the r.b.i. governor urges top level support to tackle india's bad loan problem. the government has amended the law to give government the power to compel lenders and borrowers to take write-downs. it is to deal with an estimated $180 of bad debt and to revive credit growth that has expanded at its slowest pace since 1992. bankposal to create a "bad " has been dropped. indonesian president rodrigo named a new central bank governor.

he faces inflation risk for an economy growing more than 6% inh year, among the fastest the world, and the currency under pressure. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm rainy inocencio. -- i'm rainy inocencio -- i'm ramy inocencio. this is bloomberg. sophie: s&p 500 closed just below the 2400 mark. take a look at what is going on here. looks like the global equity valley has deflated this tuesday. we have japanese markets swinging between gains and losses in the tokyo trading session. we got some data showing that japanese average of wages fell for the first time in 10 months. take a look at what is going on. i want to draw your attention to what is happening with the yuan. we have it falling to near april lows.

this as we saw chinese trade data come in weaker than expected on monday. we do have aussie shares also resuming declines for a fifth day. the aussie dollar just below the mark.t mark -- the $.74 base metals are under pressure. we have banks leading the drive with 2% today. take a look at what is dragging. nab -- we have commonwealth bank dropping after its third-quarter trading update. shares are sliding after australia's biggest lender, cba, posted a rise in profit on increased mortgage lending. we have harvey norman also falling about 3.4%. closeays the retailer

lower after consumers cut down on spending. sales out our later this morning, so we will see if puts more pressure on these stocks. betty: thank you so much. certainly some stocks to watch today. watching the budget day in australia, the treasurer preparing to deliver his view of the nation's finance. for this. in canberra what are we likely to expect from the treasurer? the first q number we want to see is how big is the deficit? that is likely to have come down all thanks to what is going on and the price of iron ore coal over the past few months, a welcome boost to revenues. the other question is when is the budget going to return to surplus?

the government says that is , based on some21 possibly optimistic growth forecasts to get the budget to that point. the treasurer, scott morrison, arrived at parliament house a couple of hours ago. he spoke to the media. here is what he had to say. >> we have been listening. we understand that while australia has grown ahead of large advanced economies all over the world, we are rising against strong headwinds. we understand that not all australians who felt the experience of that growth personally. -- have felt the experience of that growth personally. reporter: another thing we can expect to see is a spending, particularly on infrastructure. that is going to bring some interesting things for debt. , then, isw vulnerable

australia's aaa credit rating? reporter: we will have to wait and see how the ratings agencies react to this. this is something the reserve bank of australia has been about for years, saying there is limit to what monetary policy can achieve in terms of stimulating the australian economy, a veiled dig at the government to do something and make the most of the money that has been sitting around to spend on infrastructure. we have heard the treasurer saying he is going to distinguish between good debt and bad debt in this budget. , whichdit rating agency already has australia on a negative output when it comes to their aaa, hasn't made a comment on this good debt/bad debt dichotomy. back to you. betty: thank you so much. paul allen reporting ahead of

the revelation of the budget in australia. in on, just a little more on the aaa rating, it is good to conceptualize this best to contextualize this on how it is compared to what other countries are doing. let's bring up this terminal chart, which shows you and white that while others such as switzerland, germany, canada, other aaa countries, have been paring back their debt, australia has been moving debtrd, and in fact, their is perhaps at one of the highest levels right now. is a lotee why there of concern about them losing their aaa rating. as we had discussed with prior guests, perhaps it is a little more of a source of political national pride to lose that aaa rating than actually catastrophic for the market. yvonne: it is kind of this obsession australia has had to

maintain, but compared to the other countries that do have it, they do seem to be any weaker position at the moment. the flip side, take a look at some of the things they could benefit from this. there is this global uptick in global growth that australia would benefit from. that havedity prices actually risen and spiked quite a bit in the last year should and help themem boost the corporate tax rate later on possibly. the focus will be on the iron ore and where that is going to lie and the australian budget when it is going to be released. reborn -- the rebound lasted just a few hours monday. experts are concerned over speculation that chinese traders are rushing to offload holdings. our asian mining and metals reported joining us morning. how low could it go? reporter: that is a key question.

as you say, one production we will hear later on from the australian treasurer when we get that budget in australia, there will be a forecast there for the price outlook ahead. as you say, iron ore has had a terrible week. we saw the price fall about 10% last week, and it continued losses on monday. as you said, there's a number of factors weighing on the price on the supply side. there's still more low-cost iron ore in the market from brazil and australia. there is a risk that is going to overwhelm demand, particularly as the credit conditions in china are seeing maybe tightening of the property market, reducing demand for steel and commodities like iron ore. some bleak outlooks out there. some see the price moving into the 40's and as low as the 30's. from the australian government

perspective, they said in january they see the price falling into the 50's this year. we will obviously get an update and a new view from australia later today. the outlook is for lower prices from here. major producers, do they share any of these concerns about the outlook for china? reporter: they don't. we heard from rio tinto they have no concern about the health of the chinese economy. the even thinks it is primed for a pretty good year in 2018. they see demand continuing to be fairly robust. towardso see a shift imported iron ore, which is of higher quality. they think that is really going to help shield them from some of the reductions on the demand side. , we have seen them suggest that iron ore prices are coming back, but we see them settling in a long-term range they are comfortable with.

a lot of these top producers say they have pretty low-cost, and s aren't fantastic, even at the lower prices. yvonne: david stringer, thank you. let's do a quick check of the yen. we are seeing it up slightly after these comments from the boj governor speaking in parliament in the last couple of moments, talking about inflation in particular. policy areustment of possible if needed. they said they need to continue the bank of japan's monetary easing. they expected it to percent inflation around the fiscal year of 2018. it seems like there are still maintaining this stance of being a very policy accommodative when it comes to japan. still quite upbeat when it comes going they are

to reach that 2% mark. they seem very optimistic about heading that target. investors, the more they see these policies in place, the more they say, where is the beef? yvonne: quite a bit of dollar strength trickling through. next, the korean economy has already started showing signs of a full loan recovery. could the outcome of the election change that? we hear from the company's head of korea research next. this is bloomberg. ♪

♪ this is "daybreak asia." i'm a yvonne man in hong kong. betty: and i'm betty liu in new york.

fund managers say the market is still cheap. sherry seoul is in seoul for the election. reporter: it is not just the ko -- the- the cos kospi at an all-time high. issues, northre korean diplomacy with a new u.s. administration. trade issues also in play. our next guest is the head of korea research at the sla. thanks for joining us out here in the polling booth. did you vote? guest: not yet. reporter: this is a good chance to do it. we just saw one candidate cast his vote. historically and south korea, we always see big supplementary budgets and aggressive fixable

-- aggressive fiscal options with new presidents come in. given this export rebound, the modest recovery we are seeing in south korea, will candidates have to launch these big supplementary budgets? they want to tackle jobs, even of the recovery is happening. job creation has been very subdued. i think that is the reason for purely economic views. the economy is already recovering. reporter: that is very interesting that you talk about the cyclical move, that we actually don't need that much of a supplementary budget this time around. we are seeing the kospi at an all-time high. there seems to be a lot of optimism out there on what is

going to happen to the south korean economy. when it comes to the equity market, is this justified? guest: if you break down the rally in cost, it is mostly driven by one stock, which is samsung electronics. it cap for 40% of the rallying kospi -- it accounts for 40% of the rallying kospi. it is actually that high if you take out the tech sector. the optimism is fueled by, first, economic recovery. on top of that, there is a big expectation on structural reform expected by the new administration. that is what is fueling the market rally. reporter: some people have talked to criticized the leading candidate's reform policies, and the way that it chokes growth. how do you carry out such an overhaul without halting economic growth? guest: i think one of the biggest problems in korea is inefficient capital allocations

because of the ownership structure. that, it will help the economy in some way. obviously there is some part where doing reform might reduce .ome investments it is not a perfect world. but his view is by doing more restrictions, you can stimulate more innovation. reporter: what about your view? guest: i would have to agree because korean reform has been delayed for so long. what was left off from the administration, we need to pick that up and change the health of the korean economy. reporter: the korean yuan has been strengthening this year

about 5% against the u.s. dollar. is that going to have a significant impact on exports and the overall economy? guest: it well, but the reason hisyuan is strengthening because of strong korean exports and global economy. the foreigners are buying korean bonds, as well as equity. there is a lot of capital inflow into korea. when it comes to trade issues, it is interesting to see that president trump taking a very hard line stance against south korea and many other countries. he has called the u.s.-south korea fta a "horrible deal." back when it was implemented in 2012, there's been a significant change in both economies. what makes sense to take another

look at the deal? guest: from the u.s. perspective, they would definitely want to read look at the deal. the truth is the korean products are more competitive, and americans want korean products. that's why it is strong, not certainly -- not necessarily because of the deal itself. i don't think there is going to be a lot of chain in u.s.-korea trade relations. reporter: head of korea research at csla, thanks so much for joining us. trade issues, one of those core themes that has been playing out, but not so much recently in this election given that it has taken a backseat to north korea and the income inequality gap here in the korean economy. thank you. you are watching "daybreak asia."

yvonne: this is "daybreak asia." betty: once china's richest man, the head of the largest soft drink maker, says the rise of the internet is ruining the economy. he is now merely the eighth wealthiest man in china. ma ands alibaba's jack

others are on the race to the bottom. we should encourage the development of the real economy, as it is creating real wealth. today the virtual economies over growing. -- the key tenet tenet of the virtual economy is money begetting money. now it is money out of the pocket of the real economy. it will not help accumulate help -- accumulate wealth, nor gain profits. is generated from the loss of others. i don't feel this type of economy is a good thing. reporter: service industries are growing well as opposed to larger manufacturers. china's economy is changing. you recognize that? >> the new economy you mentioned is the internet economy. it has created some jobs, but at the same time brought about unemployment. it has forced a lot of brick and mortar retailers to close down. i notice in the u.s., the retail

sales sector has also been affected. i think the internet, e-commerce, is a platform. it provides convenience to consumers. but some of its practices are not right. they are unfair competition. for instance, some of those in the industry are burning money in exchange for more traffic. productd a profit -- a -- 80100 yuan for 81 yuan. if they stick to fair competition, i think it is fine, but the problem is they have improper means of competition. reporter: for someone who wants to take your tricks empire global, what do you think about the protectionist rhetoric that is writing and many parts of the world, including the u.s.? does this sentiment or the threat of punitive tariffs change how you might look at an acquisition, say, and the u.s.? there are rumors you have been looking at a dairy company in

the united states. does it make you change the way you look at the risks associated with buying something in the u.s.? >> it will definitely have a huge impact on chinese acquisitions in the u.s. you are rejected by the government of the last minute. in fact, i think the u.s. should not be too worried by china. the world will be peaceful as long as china and the u.s. have normal trade ties. reporter: where are we in the progress, if at all, on that? >> my daughter is in charge of the negotiations. reporter: what kind of role issue taking now come? issue taking the company in an interesting new direction? >> she has been supervising 1/3 of our business. she is looking for new opportunities. her targeted firms are all relatively big ones.

that is almost it for us on "daybreak asia." time for a look at what is coming up in the next few hours on "bloomberg markets." anchor: we'll be talking about the french election. former president of the bundesbank, now president of the ubs, getting a spot on how europe goes next and what he would do if he was the head of the european central bank right now. ,e will talk about all that joining us from tokyo in just over half an hour. talking about the korean election, we will go through the challenges ahead. there are so many of them when it comes to korea, not least the corruption and cronyism in the

country. that's just a flavor of what we have come along. betty: another big story, the australian budget come accounting data that. i know you will be covering the angles on your show. anchor: indeed, we are going to be discussing that. if you have a one dollar decrease in the price of iron ore, that affects the federal budget by something like $300 million. 10:40 honga long at kong time. but reelection, we have a full analysis on the way. "bloomberg markets" after this break. ♪

>> it is 9:00 a.m. in hong kong and i'm heidi. headquarters this is "bloomberg markets." >> fall ahead of the government spending plan as seeing short on savings. contrasting and new economy stocks. >> they