♪ host: emerging markets heading into the new year have stocks rising for a third straight week. >> china prepares for three years of critical battles with robust but cooling economy. forecasters see the slowest growth since 1990. starts 2018 with further decline. >> an old threat for a new year. worldng-un tells the

north korea's nuclear weapons are a reality and the button is on his desk. >> hello, from sydney. i'm haidi lun. we are one hour out from a just first major market. happy new year. >> happy new year to you. it is just past 5 p.m. in new york, still new year's day. in this neck hour, we will take a look at how wall street action could play into the very first asia-pacific trade date of 2018. let's get a quick reminder of how u.s. stocks ended last year. ended in negative territory with the s&p 500 down about half a percent. the dow about the same, losing about 100 points in the last 15, 20 minutes as traders try to close out the position for the year. year to date through 2017, the s&p,the dow, and nasdaq were up about 25%.

russell 2000, the was up about 14% year to date. green across the board. absolutely. looking for fresh drivers as we go into the brand-new year, tax reform getting done. interesting if trading does get underway in asia. it will be a truncated start because look at the markets that are still closed. no trading when it comes to new zealand, thailand and the philippines -- all close for the new year's holiday. it does look like a holiday start as it comes the volumes for the next year. points on the downside when it comes to sydney's futures, building on a very subdued end when it comes to the last trading day of the year. gains over thee

past year. aussie-dollar, 78.05. up 8% in the last year. it will be crucial to keep an eye on what happens to the u.s. dollar given the data off payrolls on friday. watching the aussie today as we get the pmi set of numbers through china. taking a look at commodities -- gold up almost 1%. up to $60 a barrel mark, gaining 1%. oil futures popping by 2.5%. little bit of positive support going into the open when it comes to the big miners. let's get you caught up to date with the first word news. has? haslinda: good morning. china is beginning three years of critical battles against debt, poverty and pollution armed with a robust but slowing economy. 51.6 in december,

down slightly from november, but signaling expansion. slowing to 6.5% for the year, china's slowest expansion since 1990. softerino revenues grew than expected ending to a year of recovery. 14.6% in december to $2.8 billion. that is less than the median estimate for a 20% increase in a bloomberg survey of nine analysts. theling rose 19% in 2017, first full year of growth since 2015. as said nuclear capability is a reality, not a threat. he's reviving his grandfather's tradition of a new year's message, something his father dropped. he said the north had completed its nuclear program and the large button is on his desk. kim also wished the south

success with the upcoming winter olympics and calls for improved relations. president trump has called for change in iran as street protests turn fatal. he posted a series of tweets saying the country is failing on every level and denounced 2015 nuclear deals signed with the west. the president wrote that the people of iran have been repressed for years and hungry for freedom. he said the wealth of iran is being looted and it is time for change. global news 24 hours a day powered by more than 2700 journalists and analysts. i'm haslinda amin. this is bloomberg. >> thank you very much. two of asia's biggest economies finished the year 2017 on a strong note as chinese manufacturing shrugged off the official campaign against debt and pollution while korean exports are seeing a 60 year high. our editor kathleen hays has the

number. let's start with china. can beijing still continue this momentum? kathleen: that is the big question. but howt as much, impressive that china is starting 2018 on such a strong footing, when we take into consideration the concerns you mentioned. btv 403. what you see is the white line, purchasing managers index at 51.6 in december. it had been at 51.8 in november but anything above 50 signals growth so this is pretty good growth. maybe not spectacular but solid. orders production, new -- very strong but not as strong as the month before. new export orders and jobs picked up as well. nonmanufacturing, services at up from 54.8.

construction is the biggest up from 54.8. construction is the biggest driver. that index hit 63.9. as we look over all, growth in china is being driven by stronger grip -- demand, deleveraging program. not aggressively pursued it yet. maybe we will see that finally. bloomberg economics expects tailwinds from exports and infrastructure blow strongly -- less strongly and headwinds from deleveraging startsbloomberg ec. -- they did china this quarterly survey of businesses and that is signaling expectations for positive growth in 2018. all in all, you've got not too much to be concerned about here yet. and maybe not all year. maybe a little less growth but still some solid underpinnings. haidi: we saw a lot of time last year talking about the synchronized global growth story. it seems like out of south korea that could be continuing. 60 year high for korean exports.

what is driving this? kathleen: this is going to be one of their hallmarks. what happens next year -- we don't know. we are going to jump back into the terminal now. #btv 3224. these are year-over-year exports by month, these are imports. there is strength and there is the trade surplus. in terms of detail, exports surged 15.8%. widened again,us $96 billion. on the month exports, up 9%. 13%.ts up even so come of trade surplus at 5.8%. what is really driving this is semi-conductors. shipment in december shows more than 13%. even so come of trade surplus at 57% -- for the year, 57%. $98 billion. have to be thanking those phones going overseas. exportstrade numbers,

are not just driving the economy, it has a big impact on policy now. the export surge helped drive the november rate hike from the bank of korea. this trade surplus, will this be an irritant to trump and the white house team with a look at that? exports in the u.s. were up in 2017. the surplus narrowed from $18 billion to $23 billion. the currency manipulation charge is still on the radar screen. korea has agreed to amend the trade deal with the u.s. official statement -- global economy continuing to rise. this has to be good for semi conductors. on the negative side, they are worried about rising protectionism, rising rates as well. these are things that could slow intotrade, but for now

2017, going into 20's 18 is a very pretty picture. haidi: very pretty indeed. kathleen hays for us2017, goin'a very pretty picture. , setting up the stories that will continue to be watched as this new year gets underway. joining us for more is chris weston. he thinks the focus would be inflation expectations, impacts on interest rates. chris, great to have you and happy new year. inflation expectations, i mean, we kind of close-out last year wondering where the inflation was an if there was a real structural, embedded reasons why we are not seeing it. do you expect that to change this it? year? chris: i think we are seeing pressures build. you are seeing that on the wholesale level. up the case in up the case in . we have seen that in china for some time now. china is exporting a little better inflation. we know inflation itself is very

much a lagging indicator depending on the country. i think we are going to see those prices build. no think we are going to see those prices build. no one is expecting 1980's type inflation, but relative to market pricing -- if you take a look at five-year in europe, they have moved up from 148 in june to 170 now. the u.s. had gone up to the 2% market and we think they will go up high, 10 years breakeven by themselves. butave seen a slow build, it is very gradual in inflation expectations. that starts to accelerate and that of it, but we are not expecting it to ramp up. if it does, relative to the

pricing,pricing, i think it will for an actual market conditions. i think this set of minutes this week we get from the federal reserve will be quite interesting because if you go back over the last three sets of minutes we are seeing from the fed meetings, they have had gradual concerned about gradual concerned about inflation potential meeting his next targets. a more positive outlook in this minutes and setting the tone for the year. haidi: where does that leave you on the u.s. dollar this year than? -- then? chris: well, i think the most interesting thing is the dynamics with the consensus. we go back to 2016, the beginning of 2016, everybody was expecting the dollar to rise on the idea of divergence last year was trumpflation. we are going in with the u.s. dollar expecting to weaken. everybody wants to be long euros. it is going to be interesting to see that the u.s. dollar is on the wall.

there is a financial position from the u.s. and take a look at the growing deficit and the balance of payment numbers we have been seeing. it is the first time in a while the u.s. dollar is unloved. i would probably stay with a view that there are downside risks for the u.s. dollar but knowing what we know with prior consensus calls, the idea is not to follow love with that view. very keen to change that and move it around. i think that really starts this week. we are seeing the u.s. dollar we cannot since mid-december but it has been since the whole year. shortis a clear trend and the u.s. dollar and long with commodities. with that trade being very long, we are seeing that this week. taking into consideration another big consensus view is being long commodities of 2018. that is one that i share but i will be looking for a little bit of a reversal this week to look for better entry points. haidi: long commodities always a

the part of the china story. i want to throw up a quick chart as we are getting pmi numbers for nonmanufacturing and manufacturing. this is on your bloomberg. gdp,is top level, china the bloomberg monthly gdp estimate and the target route. 6.5% toerging at that 7% level. is steady as she goes when it comes to china but we have heard about the three crucial ideas of poverty and pollution. do you think this will have much of an impact when it comes to growth and whether it is going to impact the china inflation story that is driving so much of the sentiment last year. i think that is absolutely right. steady as she goes is the way we have to think about china. we often hear there is confidence in the debt accumulation and the fact that

every time it does look like we might see a slowdown, we see the credit tax being pulled on. that is not a sustainable model for ever but coming forward, we expect the consensus will probably be right and we are going to see growth growing at a slightly slower pace but enough to keep us fairly happy. as long as it stays off the front pages for all the wrong reasons, i think the commodity trade and materials will continue working. we are aware of the risks but because they are so substantial for china, it is not going to be a one-day affair and we start seeing playing it through the points and we can start reacting. points and we can start reacting. at the moment, it is steady as she goes and we are prepared to put up a global macro and that means what happens to the u.s. dollar and rates. ultimately what happens to inflation coming through this year. as 10 -- china stays off

the front pages, we are pretty happy. >> i want to go a little further into debt with this chart. back in december, the central economic conference, president xi seemed to say they can tolerate more debt. what is your thought on that, with the reminder that the debt's gdp is 260% of the economy? chris: yeah, it is. i think that is something we are thinking about in the u.s.. we haven't focused on the fact the debts gdp dynamics of becoming greater and greater and that is keeping people from buying u.s. dollars. that is something we are looking asbut with china, as long they can roll over a little bit of the debt in the investment side of things, think that will go along quite well.

we are looking at the total debt it numbers but as long as does not become too much of a market issue at the moment and growth is the ultimate situation, i think commodity tradersand currency will be fairly happy. this is something, this debt issue will be a longer-term problem and traders will be fairly happy. something we don't get too concerned with this year. >> we will hold off on that conversation and continue with you chris weston, staying with us. we will have more reaction to the china data later in daybreak. next hour, we will be joined by old global mutual investors, joshua crabb. haidi: an hour later, we are oof,ing to larry h previewing the pmi numbers and a look at the year ahead beijing. ♪

♪ >> i think the biggest opportunity continues to be china and the likelihood that china makes further progress in balancing, assisted by an extraordinarily rapid pace of digitization, explosive growth in a.i., and e-commerce. >> the biggest opportunity for us would be global growth picking up stronger-than-expected. i think one of the key elements would be tax reform in the u.s. with trump. it looks like he can pass through the tax reform for next year, then global growth will be stronger than what we expected. asia would be the region who should benefit the most from this. >> one major benefit for the global economy would be a revival in trade. that is not just the chinese issues, but ited

is also really that will help other emerging-market economies, other trade dependent economies across the issues, but it world. >> those were some thoughts on the biggest opportunities coming for the new year ahead. still with us is chris weston, igg's markets strategist. he thinks the focus for the year ahead will be inflation expectations, impact on interest rates and markets and implied volatility. let's head over to the u.s. side of things. looking ahead to this week ahead, the first week of january in this new year, we are looking ahead to the non-form payrolls for december. pop into the bloomberg terminal because i want to show you -- block, it'so this expected to fall by about 14% or so. i'm wondering how much of a concern you think this is or whether this is just seasonal, especially we can look through

the past decembers, all in the negative here. : i am not too concerned at all. 188,000 is still a decent number. change the labor market picture which is 4.1% unemployment which is expected to continue going lower. markets are somewhat less that then we would see for other inflation. cpi has been the new non-form payrolls for the market for a while. it is the big blockbuster event that then we would see for other inflation. risk we have for a while. the fed minutes will be reasonably interesting as well. we have the service number which is certainly worth focusing on. we go into this week with the market expecting 58% chance.

the u.s. dollar is so unloved that if we suit -- do see some data coming in stronger and the u.s. dollar being driven by the political issues we see with the fiscal position and the market could be a little short here. this could come unwound a little bit this week. gold has had a very good run. the aussie dollar is up 14. as some of his data comes out, you could see a little bit of a reversal in the u.s. dollar position, little bit of moves in the interest rates markets and i think back and see some of these trades come unwound a little bit. it does not change the overall picture. not change that longer-term picture and the debate on whether the fed will raise 2, 3 or four times this year. ramy: looking ahead to 2018, we have to talk about volatility because in 2017, not so much

volatility. let's go into the bloomberg one more time. it seems investors are betting on volatility. follow the green arrow. this is looking ahead to the three months of volatility. what are your expectations for this moving ahead, do you agree? saw the average was over 11% for the vix. the next 30 days. i do expect that to pick up. sayoes not take a genius to that was the range last year was so narrow. but has to be a fundamental change to the picture that will the implicit and explicit volatility structures to be unwound and that is part of the reason which has been the corporate themselves have had buys of their own stocks. investment and the landscape has to be part of

the financial conditions which will be moved by higher inflation expectations of that causes these interest rates markets and the fed funds futures to move. i think the implied structures will become unwound gradually. that could raise cash levels versus bych could portfolios from what is effectively a record low across different positions. you arewhere we are but going to get those bounces of volatility in the second half of this year. and sell volatility at those levels. ramy: we will have to leave it there. chris: i think that is -- ramy: we are running out of time. thank you for your time. always a pleasure to have you. chris weston, thank you very much. plenty more to come on daybreak australia. this is bloomberg. ♪

haidi: we are setting up for a

subdued open as trading opens for a brand-new year. looking at downside for the asx despite the pmi number coming at thisighest since 2016 morning. morning.

haidi: it is 9:30 a.m. in sydney with the markets are opening for the first session of 2018 in 30 minutes. it does not look like a terribly spectacular entry into the new year. we have sydney futures on the downside of 4/10 of 1%. a pretty gray day in sydney. ramy: i'm in new york where it is 5:30 p.m. you are watching daybreak australia. let's get the first word news. you.nda: thank the biggest change in european investment industry roles in a decade take effect wednesday. regulators seek to prevent another financial crisis by boosting transparency and conflicts of interest.

a broad range of asset classes and products including cash and derivative instruments and foreign-exchange, commodities as wellthe biggest change in europn as fixed income. the longest winning streak in two decades for 2017's biggest increase in commodities and hedge funds seeing more gains in the coming year. of the nine components of the agriculture some index, wheat posted gains last year. cotton within 11% advanced on-demand. prices capped 2017 with 10 straight weekly gains, the best streak since 1998. turnbull hasr revised the debate of what sort of country revile -- our straily wants to be when queen elizabeth dies. he hinted at a postal poll, saying that australia needs an open debate with moving to the republic which requires changes to the constitution. will replacedent

the queen as head of state and that would require a referendum. the last jedi is giving movie theaters a new hope 2018. the latest chapter in the star wars saga was last year's top grossing film. $68 million in north america over the holiday weekend. that takes its domestic total to $533 million, beating the market set by beauty and the beast. di haside, the last je pulled in more than $1 billion. global news 24 hours a day in more than 120 countries. this is bloomberg. haidi: thank you so much for that. let's get a quick update on the markets. pretty holiday truncated session given it is a short week but a number of markets including japan still close for the new year's day japan still close for the new

year's day holiday. sydney futures, we are looking about 26 points on the downside, booting what was on a lower finish to the end of the year. looking at the aussie dollar, 78.04. we gained about 10% in the last year and watching out for how because he traded today. looking at the aussie us -- could change things on the fx side. china pmi japanese equities are not trading today but the yen holding at 11261 at the moment. japanese equities are not trading today butthe u.s. 10 ye. even though it was a stellar year for all three major u.s. indexes, record high after ,ecord high, for days in a row we did see the s&p finishing lower by half a percent with the majority of sectors across the board initially the year lower. let's get more as trading is underway in asia.

the aussie stocks climbing 7% last year. in any other year, that would seem impressive but compared to the rest of asia, it is a pretty -- >> 7% gain last year was barely a passmark. by.arely gotin any other there's not a lot around when it comes to australia to create optimism. a lot can happen going forward. china's influence on the wider region has gotten a little smaller but it is still a very strong influence on australia and what china is trying to do to slow its economy and move to a more steady and sustainable type of growth. that will hurt australia because it means they will need less iron or and coal going forward. that is most of what we have done the last 10 years, dig stuff out of the ground and sent it to china. e-dollar alsosi

climbed in 2017. can it make any more progress, especially with the rba seemingly stuck in the neutral? garfield: that is one of the big questions for the aussie, also built on the china situation. the aussie, you have a little bit of a tickcan it make any mo, especially with the rba seemingly stuck in the up at thf last year because people started to bet that the rba would raise rates at the end of 2018. that is what the current market is showing, expectations are priced in, that the rate will rise to 1.75% by the end of this year. however, there are a lot of dangers for the australian dollar on that front. first of all, that increase that has happened in somewhat of a vacuum because they are being -- rba has been on holiday since the 16th and will stay that way until the end of this month. in that vacuum, people build in expectations and it only takes a couple of cryptic words to send the aussie back down. there is also the prospect that

australia will be left behind even if the aussie bank moves to raise interest rates and maybe we will get stuck behind. the fed and the other central banks that are looking to raise rates, or in the case of europe that is looking to stop buying bonds. ramy: on the radar for 2018. garfield reynolds, thank you. u.s. equity markets will open for the very first time in 2018 and that several hours. 2017, theyl day of gains ine best annual four years but how do they fair across the past year and what can we look forward to in this new year to come? emma gains in four years but how do they fair across the past is here, what au lookingin friday, it was reallyd year. at? emma: despite that clip we saw for the first time ever, the s&p 500 ended every single month in the calendar year with a gain. that has never happened before. it has come close three times

before but last year we saw 12 straight months. it was not just the s&p. all three major indexes had great years. here. look at my terminal this is the three major u.s. stock indexes. you can see they were all rising throughout the year. these white lines you can see on this chart are the times they had -- hit simultaneous intraday highs and that happened 36 times. that is quite surprising given there were a number of headwinds we saw, the noises we heard from north korea and kim jong-un, a number of things that should have framed investors a little bit. they will take it right through. and so we have tax reform at the end of december. i want to show you what other chart. -50250. btv it was not just the u.s..

all the equity markets did really well last year. most ended in positive territory. this is showing we have had 14 straight months of positive gains for global stocks and it is unsurprising given that all 45 economies in the ecb are growing. ramy: that is a startling data point. we tell everyone that past performances are not indicative of future performance but what are we seeing -- what are you in terms of indicators in terms of indicatorsght for 2018 on where we might go? emma: one of the things that might give people some pause is volatility. we know that 2017 was the lowest volatility on record since the index begin. i know this is something you were discussing with your previous guestwe know thatwhat a number of people. historic low. betting that volatility will come back in 2018 and a number of people who are saying it is something to watch out for. if you look at morgan stanley's chief strategist, mike wilson,

he said more challenging conditions that could see volatility increase in the next year. he points to the federal reserve tightening coupled with some uncertainty with how the tax overhaul will go and a wider discussion on economic data. we are taking a look at the chart, 1183, this is showing you how it has been over the last year in u.s. markets. traders are hoping they will see the return of volatility because that is what they trade on. haidi: thank you so much for that, emma. speaking of volatility, bitcoin has been a boon for china, a country at the heart of the cryptocurrency economy. it dominates the mining of new bitcoin. ur tom mackenzie has have written access to one of the minest digital currency

in the world and filed this report from a goalie a. -- mongolia. tom: the world of bitcoin can mines seem abstract. here, the cryptocurrency comes roaring to life. bitmaine is operated by in. one of the largest in the world. this is really part of the central nervous system of the bitcoin economy. there are 25,000 mining machines transactions,ng and generating new bitcoins. the machines solve complex equations to record each bitcoin transaction to a decentralized ledger. miners are rewarded with bitcoin. difficulty increases, requiring faster processing power and more energy. something that comes cheap here in mongolia. >> in china, the cost for a farm is very low. when people make a decision to

have a money farm, you can do it asked at a low cost. tom: this mine employs about 50 people and generates a quarter of a billion dollars a day in revenue. many of the bitcoin and of traded on the currency exchanges, some of the biggest in the world. they come under the scrutiny of regulators and bitcoin being used to funnel money abroad, but for now the miners are being allowed to thrive. bitmain, which claims 20,000 customers and a valuation in the billions, is laying the groundwork for a possible idea. -- ipo. it is looking to spend up to $200 million expanding in the u.s. and5 million to $10 million to build the first mining facility in the u.s. it could expand.

tom: that is a serious bet on a cryptocurrency now synonymous with wild price swings. >> we have to accept if you were going to bootstrap a brand-new currency from zero, there will be bubbles. there will be a lot of volatility on the way to becoming a global currency. tom: he has little doubt that bitcoins value will continue to soar. tobitcoin price going up $100,000 is quite possible. tom: within what time frame? >> five years. tom: tom mackenzie, bloomberg, mongolia. ramy: oh, the wild rides of bitcoin. falling from $19,000 to $13,000 now. that was tom mackenzie on that bitcoin trail in mongolia. next, a look at with the coming year holds in store for the lion city of singapore. don't miss it. this is bloomberg. ♪

ramy: i'm in new york.

haidi: i'm in sydney. you are watching daybreak australia. the head of the world's largest caterer is paying tribute to a family member who died in sydney on the last day of 2017. the chairman is shocked and saddened by the news, claiming that cousins was respected for his humanity. the latest on this incredibly tragic end to the year, what more do we know? >> nas for the cause, we don't know much for the moment but we do know the flight took off on the last day of the year. mr. cousins and family members heading off to an exquisite restaurant. the sea plane landed, they had lunch and on the return come of it plane crashed. the on say, sons, her daughter and the pilot all killed -- everybody on board. we don't know what went wrong. sydney seaplanes extending its condolences.

the company has been running for 12 years during which time did not have a single incident. it has a great maintenance record. the pilot was experienced. the route many times before and the weather was great. nobody knows what went wrong and the plane itself was under about 50 feet of water so it might take some time to recover the ry times before and the weather was great. that and do a little more investigation. ramy: i understand that richard cousins was actually about to retire as ceo. 31 waseah, he was, march going to the end of richard cousens' 11 years in charge of compass, the world's largest catering company. during the time he was in charge, the stock rose about 500%. he commanded a lot of respect and had a reputation for turning around troubled companies. the harvard business review ranked him number 11 in the top hundred ceos in the world. compass issuing a statement saying how much he will be missed. chairman paul walsh saying it

was a great privilege to work with him and he was respected for his humanity and his no-nonsense style. ramy: we will be looking ahead to see if there is any cause of the crash. paul allen, thank you. singapore is going to release its advanced fourth-quarter gdp later today. our correspondent is here to look ahead to those numbers. strong data expected to kick off this year? >> you bet. q4.ty stellar data for in the new year's speech over the weekend, the prime minister said for all 2017 growth, more than double the government's strong 3.5%. a couple of reasons -- global economic recovery that china is gaining momentum. that means more exports. i want to show you this chart. more electronics shipped out of singapore as shown by this blue

line, the ip line. recent export and ip data has been pretty strong. looking at 4q gdp later this morning, expectations are for sii want to show you this chart. 1.6% growth on month. that is a lot of room to beat those numbers, but no room for complacency. economic restructuring and infrastructure projects must go on and to ensure future growth. remainsrnal environment -- tensions in the korean peninsula, terrorism, u.s. foreign-policy are all risks for 2018. haidi: of course, this plays into what mas does, and into whether we get any indication on tightening or not. signs pointing to a tightening sometime this year. possibly as early as april. we could be in for increases in lending rates.

boost not will get a just because of stronger economic fundamentals but on a weaker u.s. dollar story. we started 2017 with massive expectations of u.s. outperformance. that did not quite materialized. asian economists have been belowforming and slipping 1.33 for the first time in more than two years. the holiday to the u.s. may just becoming. haidi: thank you so much for that, haslinda. tells up, a film director bloomberg why he is excited about virtual reality and the opening of the world's first vr themepark. this is bloomberg. ♪

♪ ramy: welcome back. i'm in new york. haidi: i'm in sydney. you are watching daybreak australia.

a quick check of the latest business flash headlines this hour. south korean exports expanded last year to their highest in at least six decades, boosted by semiconductors, machinery and chemicals. shipments surged 16% from the year-earlier, which left a trade surplus widening to $96 billion. surging exports led the bank of korea to raise rates in november, the first hike since 2011. -- thailandast asia is expecting 2017 to show the economy's best performance in the past five years. although, that may be as good as it gets. gdpoomberg survey says probably raised 3.8% last year, the best result since 2012 before easing this year and then the next. thailand was once praised in southeast asia for straight but is now lagging its peers.

the anon and the philippines are growing at more than 6%. gets. as good as it has bitcoin feet? it is already having a bad year so far. gets. for the first time since 2015, the cryptocurrency started the new year by falling. it extended its live from the for the first time since 2015, the to $99 8. 2017 having gained more than 1300%. 2017 having gained more than 1300%. the rallies and a debut on wall street in the form of future contracts. ramy: no doubt, we will be talking so much more about that this year. meantime, china is rushing headlong into the future aiming to make fertile reality a reality -- virtual reality a reality. it is home to one of its first vr theme parks, headed by one of its most famous movie directors. stephen engle enjoyed this immersive experience in beijing.

>> watch your back all the time. stephen: it is virtually impossible not to see the potential of virtual reality. when one is immersed in a deep space killing spree. >> it is like a combination of a movie and a gain. stephen: all you are really doing is walking around a bear in basement. this is freaky. the vr venture is cofounded by one of china's most renowned may visionarieswho transform one of his most iconic silver screen works into vr. >> for me as a director, this technology is significant. you can be very imaginative. it is not flat. you can see color in 360 degrees. you can even interact with it. it opens up a whole new world. he was to open up a whole new industry. of vr theme parks. this 10,000 square-foot venue is a pilot project to a larger theme park to be built this year.

it wants to become the universal studios of china. why? because it is backed by a wealth of intellectual property. stephen: chinese vr shipment units will raise threefold, surpassing the u.s. to be the number one market by 2019 as smartphone makers roll out their own devices. this year's pivotal. idc says a shakeout is already happening as venture capital shifts to content providers, away from equipment makers. that is a whole another world. down the rabbit hole. the startup does not want to be one of those left for dead. it is developing its own games and plans to have 10,000 vr arcades across china by years end. >> the biggest challenge is we don't have good enough content to have her be customers. people will play our games for 10, 20 minutes tops but not longer. stephen: vr right now is perhaps

best suited for b2b applications, companies that can afford it. >> when these companies become can haverial, people classed -- cost down. stephen: those investors left because of the bottleneck will also warm back. when everyone wants to be in vr, it will be too late. stephen: unless the virtual space zombies, get them first. one more, hugh? h? dead. stephen engle, bloomberg news. haidi: that was stephen engle reporting on china's first vr themepark. it looks like they are killing space zombies pretty passionately. ramy: i remember the days when i would go to the shopping mall and put $.25 in and play pac-man. the children of the now and the

future totally have something so awesome and so amazing. i definitely want to get into it but i am curious about the price, especially affordability both in china and the u.s. haidi: i am just happy to have super mario on my iphone. when it comes to these things. ramy: we are in the same bandwagon. let's continue on because we have a couple of hours ahead for us. that is it for daybreak australia, but plenty more ahead for daybreak asia. we will be looking at into the future. we will be speaking to old mutual global investors about his outlook for the brand-new year. haidi: golf course, crucial to this year as every other year, china, the outlook for china. we will be hearing from head of china economics, larry hu, at 7 p.m. new york time. taking a look at what to expect

as beijing tries to juggle the de-risking and balancing a certain level of growth it wants. daybreak asia is next. this is bloomberg. ♪

♪ haidi: 7 a.m. in hong kong, 10 a.m. in sydney. welcome to daybreak asia. top stories this tuesday in this -- emergingew year markets heading into the new year with currencies rising for a third straight week. bitcoin though starting 2018 with further -- emerging markets heading into the new year with decline, extending the fall from the record seen in the middle of december. ramy: from bloomberg's global headquarters, i'm in new york where it is just past 6 p.m. on a monday. happy new year. china with three years of critical battles with a robust but cooling economy. folk after see