>> 7 a.m. here in hong kong. we're live from bloomberg's asian headquarters. >> welcome! to daybreak asia. top stories this friday. from a day's break with equities set to decline in tokyo. most attention will be on china after thursday's sharp sell-off. >> beijing may turn up the heat on digital microlenders as well reduce risk in the financial services sector. for asumers gearing up black friday sales explosion. answer tona's congestion is take it to the skies! onhave a special report drone taxis.

>> and happy friday. happy sthafg a thanksgiving as r our u.s. viewers. europe was pretty muted as well, given the sell-off that we did csi 300, the worst we've seen in 17 months. kind of leads you to wonder happen next and is this really going to spread to the rest of asia in morning.r this >> i was actually on europe t.v. yesterday, so about an hour into close, things were normal. then things suddenly kicked off. >> probably throwback thursday. things started to kick off in the afternoon session. similar to come of the breadth

of the decline was more serious than any day during the 2015 dark days. we are looking at declines with china markets opening up. >> it doesn't seem like traders feel like there is a sense of panic we saw, at least not now. ,e see these rallies in china perhaps we are seeing profit-taking. in no way are they saying this is a meltdown, more so a correction we have been long overdue for. >> if you remember back then, people had no idea of the drop was coming. we are getting rick -- declines and things started to kickoff over a weekend people started looking for reasons why we saw the sell off. new holding steady. the dollar is happening.

>> we see at at four points a that isit there happening on thursday. we can see this down to the lowest level here in june. we are also counting down to the opening of japan and korea. are coming back from their holiday glitches and thanksgiving. they could be saying a catch up there. we are seeing a bit of strength here and the japanese currency. it is quite perplexing by the end has been so strong. grexit it is still continuing to climb, not ringing up a lot of the gains we saw back in october. that means it is all back in china. we will see this back. have a look at our chart here.

thinkur bloomberg, if you when i'm going to point out. we also this coming. what we saw back in 2015 was quite sudden. thing we want to point see can you look at this to how the decline compares to what we saw back in 2015. 100,000speaking, decliners. right here was much more than any of those back in 2015. that means this is how things look. what are we doing now? years.ooking at five we are on five years. out of 1100 here. this was the proportion yesterday. the only thing we want to mention is we talk about this

coming back but not in a big way like we saw back in 2015. it is certainly something to watch. level onst back to the monday. we are not quite there yet and hopefully we do not get there. >> fingers crossed, thank you, dave. ♪ trump used his think skipping address to take credit for progress in fighting abroad. that america's allies could be the enemies. they said it was a waste of time. he claims his policy turned things around. he also said they would come home to a good economy, big jobs and big beautiful tax cuts. germany is one step closer to a new government with the party they getting ready to talk. they were initially wary of

reviewing the so-called punish them and their inconclusive election. democrats falling apart from the weekend. looking at the declaration of independence to deal with spain. sameve the ousted prison to, could be if they agree they will have new elections in november. --sampling has pretty jacket samsung has rejected claims documenting a series of a legend health and labor violations. they say some workers including pregnant women were required to stand for their entire shift or face a pay cut. reports claim the 45 female

people were interviewed. global news 24 hours a day powered by more than 2600 journalists and analysts, in more than 120 countries. this is bloomberg. thank you. the top story, the chinese stock market is quite late to the session on thursday. turning to a stampede as many in the market were left wondering where was the usual support? to steve, he is here with us in the studio. where was all of this? >> perhaps there'll question is, how far will this anti-leverage crackdown on leveraging really go at the expense of stocks? if we can bring up the date chart. shanghai connections in 300 index. 30can see and the last

minutes it was three points. on average the market is usually up to .9% according to bloomberg data. yesterday it was a bit of a aberration. we saw the csi 300 and. this came down to percent. some analysts as you guys said, it started as taking part in the panic stampede. how far does this go are dosing go? the fundamentals against this are against the stock market. >> that really kind of surrounds the chinese market. level of margin trading, we are seeing that slightly pick up, that is really going to lead to war volatility. >> we are going to look at the volatility or the state of

marginalization. that has been a big problem in 2015 of where margin lending is. i did not have the exact stats back in 2015 which led to that crash. i will we have seen is a slight pickup. here it comes. there is the bubble when it first in july of 2015. the level of margin debt, it is slowly returning on the far right of your screen. when thelow up take stock market is going up. -- looking at the climb since 2015 there was more margin lending. this climbed above one trillion u.s. dollars. it is not to the levels that he

saw on that chart but it is slowly climbing. >> the market is up 25% when you see something like this. the other things that helps is the regulation, what do we know about that? >> this is a escalation of what we saw with financing. with the state financers. they said they are really going the 157 orn, perhaps so online en crote lenders. they could be absolutely purged from the market, with the big internet giants like alibaba. this could be a major shakeup because there has been a number of companies going in the space. them beforewe have york,liday halt in new

that is down 41%. bp was down 24% in one session. 34% in three sessions and a bad is the pipeline. .ll of them have ipo's planned >> this kind of volatility as well. thank you. coming up next, more on theology for specific markets. the chief aipac economist joins us in a moment. >> the u.s. has into black friday, we will look at how we are all catching hayfever. he joins us later on and the hour. this is bloomberg.

♪ we >> are >> counting down to the first major market open on this friday. it is not going to look pretty, down about 6/10 of 1%. be the culprito here, we can say the strength at 111 this is daybreak asia. >> we are going to talk about china. there, ourppening next guest says despite the improvement in these metrics china will need to continue solve theirs to debt issue greeted to put the a comment back on a more stable pattern. chiefare looking at the economist for our hong kong studio. good to see you. directionclear policy when it comes to reducing financial risks, there is a push for pollution, what we have seen right now is a little bit surprising, how do you see this all laying out does this become

a compromise for growth? >> we have seen about leveraging. some of the numbers of the little softer and some of the bank lending. economytion is, as the slows what of the authorities going to do? we have seen this, every time a click we are getting a meaningful slowdown we are wrapping up the government spender. there is a lot of this. what is this be limit, what is the growth in china that keeps this constant. we do not need to get there tomorrow. it is not a 2018 forecast. we would like to see a managing of these very high expectation. and thee down over time five and a half range. we may be tested on this in the next couple of quarters. have to see. >> i would imagine with the yield creeping up and know you

have this other avenue for financing which is this management area. to the bank step in or did they say let's see what happens? allocate this if you do not have a default risk? the whole thing about credit quality is default risk. lenders need something to say, it is relatively good credit and distinguish those from default risk. this trillionis dollar economy. we want to move to a model where the state controls parts of the economy. in terms of allocating credit we need to get more information than just defaulting on credit. >> you still think there is a lack of urgency with this? >> of a little bit. the model is self-funded. were forcedrts that to pull the plug. that may be a good thing. over time they have to deal with

this problem. they would from being a load that country to being a high debt country. we cannot have that. now is the opportunity to let things take hold of all of that. we did not get any hard numbers. weh the quality of growth, looked at some environmental growth. we looked at 304 definitions that were not consistent. the ideas with there. whether or not the authorities were able to seize the mantle. >> when things become disruptive they challenge what this is. they are being in debt for a new vacuum up of the debt. able toee them being capitalize on this? >> that is intentional. five years ago they were at a two balance sheet. now they are trying to put those

together. or financial guys look at this and they see it is pretty well-capitalized. lenders andlot of the model. they seem to be ok. that is really what i called the longtail problem in several factors. guys who aren't smaller and less diversified cannot measure this risk, can they see this, that is the question. bigger are inare pretty good shape. >> we have to look at 2018, that is looking pretty favorable. we just saw singapore with a three-year high. is still quite robust right now. it is looking pretty good for 2018, how much room for growth this their? mentioned, some of the tigers we have not mentioned

them. .e have seen a nice boost we have not put on the forecast yet that those guys are going to be marked up. the global backdrop sky. washington it is not hitting the ball out of the park. japan, the rest of asia, growing. if you are going to do something linking back to china this is not a bad environment to take a move. >> speaking of that, five weeks left before 2018. malaysia, what you think? to looks been very easy at this because nothing has happened. have three more weeks and 2018. a lot of this stuff is done on

the dollar. authorities are running against the dollar. if the fed looks at this for three more, you cannot mention the federal bank sitting still. we are going to start to seek movement but probably not until the second half of the year. below target growth. >> i was going to say about inflation chemical you see any kind of pickup in inflation next year? >> the inflation and way stories are missing. we do not outside except to china. there are many people scratching their heads with this. a straily a -- everybody -- australia is looking pretty tight. it is not supposed to happen. you would think this would check in, we would actually want this evil thing. japan in particular once a wage toce to get nominal growth

get things going. it would not be a bad thing if we got some wage growth inflation and continued to normalize. by 2025.efully thank you for coming here, paul. it the top stories to get your day started and going by looking at today's edition of daybreak. >> for bloomberg subscribers let's go to your terminal that is on your mobile. there you can customize your and look at the things that you care about. there is a shopping extravaganza happening at the u.s. china, we would say what comes here. this is bloomberg.

♪

>> this is daybreak asia. >> it may be what hundred 55 years old but tradition has not stopped the japanese cosmetic track from moving forward. they grew 15% last year and is eyeing more takeover target. >> we spoke to the president of the company about the push to become truly global. we needed a change. we needed to transform the company to have more growth. change in 515h a that help with long-term strategy. it is a strategy of the good to become a global company. >> is it enough though? it is a increasingly competitive market all looking for the biggest lies. can you see ahead with the strategy? >> after three years we are

proving that we can be ahead. >> goldman sachs has been pretty upbeat about the prospect of this. there is another concern still, when you think about the havetials, the companies to look at this. was that a mistake? >> there is a history between -- we believe we can still make these brands that are than they did today. grabbed ofhave not the potential of this trade that is what the group is trying to do to revive it and make it better. grexit is now constructing a manufacturing plant that it has not done and decades. what is the thinking beyond that? >> this comes from many markets actually.

we have three factories in japan. to havew capacity and another factory. that is a very good sign that we are expanding. >> talk to us about your brandgy, currently the needs to look at digital strategy, it is no longer enough to have brick-and-mortar business models. how are you approaching for a country that is deep in tradition? >> there have been big changes. a idea that 67 per percent of people are shopping online. in china, the business is very big. southeast asia it is going to be very big in the future. adopt, there are

these situations and the u.s. heree have people in asia to help the spots. i see a very big potential for that. it is going to be increasing in the future. we have calculated that we want to triple our contributions to the coming years. presidents the aipac speaking exclusively with bloomberg. >> finally, japan is going to open up. mind we are looking at the next hour. futures and they i am looking at my board about one fourth on the open over.

>> that is a good way to say that. a solution to gridlock. taking to the sky. the startup with drone taxes. this is bloomberg. ♪

♪ >> happy friday here in hong kong. a little chilly out there. make sure you keep warm. absolutely. happy hour is just a little bit away. it beautiful day over in sydney as well. market.e hopefully things to warm up there. market. hopefully things to warm up there. >> you are watching daybreak asia, a check on your first word is. >> the slump in chinese five cap

has looked at state support. points in the 52 final 45 minutes of trading. not happened since the crash of 2016. before the slump that had climbed 20 a present to the highest level since july of 2015. the margin rising for three straight months. beijing maybe on in a new crackdown on micro lenders. to reduce risk on the 40 trillion financial sector. 100 micro lenders the be purged leaving only biggest internet companies with licenses. that could really many people's hopes. the longest fault and living standard, some 60 years ago. isatchdog says the economy

going to be much smaller than predicted in march. wages will go down to pre-financial crisis level until 2025 once inflation is taken into account. developing countries. a increasing threat to growth created korea, canada and the u.k. lead the world and private borrowing. the organization says this does not necessarily in problems it does increase portability to shop. it has the issues that could trigger a down cast. global news 24 hours a day powered by more than 2600 journalists and analysts, in more than 120 countries. this is bloomberg. very, asian markets are we are going to look at how they

are looking in new zealand. christine a upside on the that he rebuilt staying steady at a percent. is very pretty down in sydney. on thursday not a lot of movement with the dollar. going down to takes today. it was back in june when we see this movement and has been on a steep downturn. shrinking yield they have there. japanjapan and korea, could see a bit of a challenge here and the market. they are seen futures moving lower. that is going to be the big thing. that is racing off to the currency. 22,000 405. taking a look at bloomberg,

looking at the graphic here. what you want to follow is this. the finest .4%. if you -- give or take. >> more than 100 points. >> watch how this is going underway. just under half a hour from now. that was your last quote. >> let's get back to some geopolitics now. the foreign policy newspaper wrote yesterday calling china irresponsible. from go now to our editor sydney here this morning. what has china upset? >> good morning from sydney. you are absolutely right china is responding to foreign policy that was released yesterday by

the prime minister and the foreign minister which was a re-articulation of our foreign policy. in it australia reiterates their long-held opposition of demilitarization which china has been reclaiming land and building up artificial islands on the reef. it also noted on the paper that the u.s. must remain engaged in the region. any retreat by the trump administration could lead to the balance of power shifting to beijing. nothing really new here. estoril he has long trolled dashcode that diplomatic tightrope. china had their biggest trading partner. they continue to and says that

they did not have to choose between the two. >> how much of this was actually a plea to donald trump? doubt thatre is no she trump administration' withdrawal from the transpacific partnership and the america first of roche really has left asian governments questioning his commitment to the region. that withouts note sustained u.s. support to the region than the liberal character of this space will decline. you know, i think it is pretty fair that australia is helping the white house will look into this policy. >> the prime minister talking about this conundrum with a balance of power. they say this is the first time in history that the dominant

trade partner was not also the dominant security partner. is this going to be a harder balance for australia and other countries in the region? >> that was a very clear articulation by him when he firmly set up on this juggling act that a straily has. it is a tough balance. we cannot underestimate this relationship we have with the have with the u.s. we have fought in every major conflict. there was a move by the obama administration to pay the two asia. meantime the chinese demand for iron ore and coal really helped that investment boom. it is a difficult balancing act.

we should not overestimate significance from china's response. languageairly typical calling for comments irresponsible. it does not indicate a ratcheting up of tensions between australia and china. >> thank you. our managing editor there in australia. let's take to the skies. superman comics -- is it a bird or a plane, it is a drum. -- drone. it is exhilarating plans to have these drones next year. i am not a fan of this. >> bloomberg has exclusive access to the testing ground for

they are raising money to start mass production. >> the drudgery of your daily commute is a thing of the past with this taxi. they plan to build a network of these drones across the world. the company founder says that vision will soon be a reality. fore are not just waiting our permits. then they will be flying in places like dubai. >> where do you see the biggest growth opportunity? definitely and the commercial space. if you look at this we are only at the beginning stages of drug use. -- drone use. it has cover the attention of the public. the company has shifted from

technology to the commercial side of business as we see huge opportunity and global markets t >> is that so a number one obstacle you have to get over? authorityil aviation have given us the green light. in china, the u.s. and many other places policymakers have put us at the center working very closely on regulation. this is already very unusual. focusshining your prime or are you looking overseas as well? the overseas market is indeed bigger than the chinese market in terms of purchasing ability. we are making our way in china. we have deals with two local governments helping using our like urbanareas patrol. huge changes with

a commercial deal and china. i expect our passenger drones to have more next year. we have a strategic partnership. a passenger drone will be a star in 2018. 52 millionived dollars in funding, are you still looking for investment or are you heavily funded? >> we will kick off a round of funding as the start mass production of our partnership -- of our passenger drones. we will also look at the large and you factoring in 2018. furthermore we have signed a deal and saudi arabia and several other european cities where we will need funding to support testing. >> putting their fleet for delivery when we visited. dropping off coffee to local

stores. if given the green light it is something they hope will take off. >> really amazing. i would like to see one of those flying taxis. next, we are going to look at why u.s. retailers expect a surge in sales this holiday weekend. this is bloomberg. ♪

>> this is daybreak asia. aren america, retailers looking at enough to kickstart the holiday. >> we have a closer look at

preparations for the biggest shopping day of the year. fair amount of optimism heading into black friday the traditional start for the holiday season are in the u.s. strong economic growth, low unemployment and skyrocketing consumer confidence include high conditions for the shopper. seasones growth over the could lead to up at $680 billion in sales did they are pointing to a string of popular earning results in a number of retailers are in a better position this year. or whether consumers want online and in-store retail. they havealso said been promoting early to make sure that customers know exactly what they are offering. there is a double-edged sword when you have a promotional environment. what we see is a number of retailers are cutting prices and that could impact the margin further down the line.

the others struggle is the traditional retailers have to provide services old in-store and online in order to compete with the e-commerce retailers like amazon. it is expected to go up about 20% this holiday season accounted for $100 billion in sales did that is just for e-commerce. amazon is likely to be the big winner from that. that is expected to grow this year. all right. sign's of a look at sales fever. more than if you expect with alibaba. we will take a look at china and what is happening with america. we are joined out in the city of.

i want to ask something simple, for decades we have had this vertical and horizontal integration, look at these deals with alibaba and amazon. would you call that? this is online. we call it digital, physical. of -- that islot something and progress. but with his next deal it is massive. you have mentioned how there is going to be the seamless extremes between online and off-line and the other way around. is that how you see things moving forward? >> it is a massive change. happened,k at what you would drive to the store and then you would make a business.

today's traffic is echoed to a store anymore, it goes to a website. that directs the traffic. that is a complete change. you can have a seamless experience -- if you can have a theness expense online and it can get delivered to your home. changing the way it is. it is still a work in progress. >> i was going to ask, where is the opportunity for this process to be perfected? where do we see a need for improvement? >> often one of the main elements -- i am going to talk about china in particular. it does not matter for the geography. is important. you want to give fresh food.

you do not want to wait for a website to deliver fresh food to you. toyou can deliver fresh food gather delivered with your groceries. then you have unlocked tremendous potential bid you can have something to make your home every day. fresh is a big part of this. >> i was is going to ask you about that. you said this is a model that is on china itself and with the population. can this be brought to a market like the u.s. and but amazon is doing? >> the difference in think we have in china is it is much higher than the u.s.. comparedbably retroactively to the market. quite so you get over this mindset?

i am broughtecause up that way, you go around the corner and go to a market. that is fresh food. how do you convince my grandma that is the best way to do this? i think i would rather convince you your grandmother has the right idea. >> there is a generational thing obviously. online,an check price you can check price everywhere. that is becoming transparent. the ability toe deliver with the supply chain. rather than just absolute price. >> how you make that cheaper is my question. if it is just around the corner. deliver whatever. you can have this in 30 minutes.

>> who stands to gain the most about -- out of this? is it going to be these large brands scaling more? jor winner ofe mag this is going to be the consumer. the consumer is the big winner of this. on the manufacturing site i branches ofthe big traffic. couldmall niche brands have a unique opportunity to reach consumers on a quest for him not exist before. you are going to have the entire physical store where you can look at these things. they will benefit from that. the one stuck in the middle will

be the second, third brand. >> thank you. little bit more about the chinese retail sector. we want to bring you attention to the bloomberg. just go and find that a tv go. >> watch live, look at any of the previous interviews you may have missed. with any of the charts and functions that we bring up here and they shall bid to take part and the conversation with instant messaging live. we are talking to cliff in about china.tes as skin about stay with us, check that out. this is bloomberg. ♪

♪

>> this is bloomberg daybreak asia. >> the are looking at the event that opens at the top of the hour. after a takeover for the dutch company. >> we proceed that likely at 3%. telecoms editor joins us from tokyo. you have had a day off with the markets. talk about what with this deal mean in the industry in general? them it would lead them right to the center of the american car market that does not have any penetration. they have been eight supplier of architectural paint, paint for structures. they have not been able to break into the car market except for a repainting supplier. this would give them access to that huge market and really

transform the company. that is a new market for them and that would transform it. in terms of the industry there has been a lot of stuff going on. as we know, this route out of the failure of the exxon mobil takeover. stopse seeing a lot of can that counts consolidation in the company. >> the market value is that $10 billion. this is pretty ambitious, how are they going to pay for this deal? >> that is a question everyone is asking. how could a company of this scale take on this. they have about $1 billion in cash on their balance sheet. that is not nearly enough. they will be borrowing heavily to finance this. even though the deal would value the company at 3 billion.

that would be a huge game for them. they have been able to acquire a number of companies quickly. without taking on a huge amount of debt. this would be transformative for them financing life. they would have to be pretty big into debt to finance a deal like this. us, they are set to ton, that is set to open minutes from now. more analysis on the sell off in china. if the markets are about to go off. just in about 10 minutes from now. to japanounting down and korea where it could be a challenging session in tokyo this morning. the market opened coming up, this is bloomberg. ♪

david: it is 8:00 a.m. here in hong kong, live from bloomberg's asian headquarters. i am david ingles. yvonne: i am yvonne man, welcome to "daybreak asia." japan's return, but most attention on china after the sharp slump to read david: beijing may turn on digital. a $40 trillion financial services sector. yvonne: the shakeup at the world central banks. how many in asia will stick or twist. david: hitting the street, china's answer to road congestion is to take to the skies. a special report on drone taxis, next. ♪