>> it is 7:00 a.m. in hong kong. i am yvonne man. ."lcome to "daybreak asia the top stories this wednesday, asian stocks heading towards a mixed open. oils gains helping overcome simmering trade concerns. biggestimbing to the drop in almost two years. pressure on allies to cut its forces from iran. kathleen: i am kathleen haze in new york. president trump -- canada joins the e.u. in preparing new steel quotas in response to u.s. tariffs.

trade continues to dominate concerns about markets. everybody is still wondering where this is going. you mentioned the report we should be getting at the end of the week. president trump clarifying he intends to use the committee on foreign investments in the u.s. to go after not just chinese investments and technology in the u.s. but other countries as law. yvonne: i guess darling back a little bit when it comes to the trade rhetoric. limbo on the trade fund. a modest rebound, as you mentioned. not seeing a lot of juice into the market, it is. kathleen: if it had not been for oil rebounding, we don't know who would have gotten that

rebound in stocks. let's take a look at where they closed. the dow gaining 30 points. after nine straight losses managing to rebound, the s&p 500 up six points. again, led by energy producers in the nasdaq as tech companies recover a bit from their brutal selloff on monday. let's move on to major markets and see what is happening there. i just mentioned -- let's start with the dollar. weaker today on the bloomberg u.s. dollar index. the 10 year note yield did not do much. 2.88%l rally yesterday at , watching for some reaction from the fed, which we really did not get today. brief comments. crude oil. brentn see it in crude. a big rebound after president trump said the world has to fall in line and stop buying oil from iran, yvonne. sent geopolitics

back into the oil price. let's take a look at how we are set up for asia. a pretty mixed open so far. sydney futures heading the other direction. nikkeiures we -- futures, we are inspecting gains just modestly. kospi futures with -- a lot of the action seems to be in currency land as well. a little bit firmer here. seeing weakness back above 110. the kiwi at 68.58. a bit of weakness at 133 at the moment. em currencies on my bloomberg right now. gains. seen some decent the turkish lira has been under pressure.

the indonesia rupiah, all falling overnight. pretty steep declines. the renminbi -- the offshore is what we have been watching. discountt a decent against the onshore. a-shares falling to that bear market yesterday and of course, eco-data on the pipeline as well with industrial buffet coming through. trade.alk about backhe seems to be dialing on these restrictions on chinese investments. how would this latest version exactly work? >> the way they would bring more on investors in u.s. companies with critical technologies, we go through the city us -- we go through the process with cabinet representatives. that havew deals

implications for u.s. security. what trump is doing is expanding that somewhat. this gives him some flexibility and does not explicitly target china, although it is probably true that china would be the main target for these reviews. this changes the process up little bit and makes it more active. they have the ability to block investments from overseas. in u.s. companies. yvonne: the steel tariffs, too, joe. those are starting to have ripple effects. steel imports and tariffs on that front as well. what exactly did we learn? joe: canada is said to be considering to put quotas and tariffs on steel, similar to what the european union has been talking about. steel that is that

would otherwise be destined for the u.s. is for canada and the e.u., depressing prices for their manufacturers. they export a lot of steel to but canada gets steel and aluminum from china, brazil, south korea, and they are concerned that there will be a sudden flood as those suppliers chase sales in canada, so they want to affect or bolster their as itmestic production shows the wide-ranging impact of the u.s. tariffs. kathleen: president trump just davidsonff -- harley is moving a plant outside of the country because of tariffs going on. how about the other businesses reacting to trump? joe: the shine has come off on

trump's economic policies for some companies. the trade policies in particular were a big topic of conversation at the world conference in washington. top executives from exxon and , bp, criticizing the administration on the tariffs. number one, it depresses markets, which hurts their investments. and they are really reliant on having the investor money to go out and explore. also, those industries are big users of steel, so it will potentially raise their costs for getting drilling equipment wells drilled. there was a fair amount of criticism coming from those companies. >> so far, he's telling them to be patient. thanks so much, joe. dig deeper into this u.s. stock rebound. a cautious one, even if it did

pick up steam. su keenan joins us now. a rally in oil helping to offset trade concerns. >> we shall see. we have got the technology stocks coming back. a lot of the momentum stocks that sold off. yvonne: we are going to adjust that. there we go. [laughter] su: go right to the chart and take a look at the echo of other days. we did see the dollar bounce up a slight bit. have bonds continuing in this way. the russell 2000 bouncing back, and all theasdaq major indexes. let's go into the bloomberg. where you can find these charts. the s&p 500 in front of you. it's rising back above its moving average. you can see it broke right below it on monday's selloff.

this is important because it is a level that many chart watchers say if you cannot get back above , you get an extended downturn for the index, the fact that it is right back above it is a positive technically for the s&p. let's go into some of the charts and take a look at the size of the moves because they were significant once again. harley davidson, we put on there, because it has been in the crosshairs of trump's wrath, because they are saying tariffs are causing us to go out of the country to produce our motorcycles. new ceo coming in with a plan to narrow its focused. -- its focus. investors seem to love it. macron technology pacing the rebound in semiconductor stocks which were so badly beaten up the other day. they are also affected by trade pressures. let's go to the next chart and take a look at the fangs. let's go to energy stocks. this was a big part of the

rebound we saw. they provided strength as we saw the underlying commodity back above $71 at one point. a very good rally. rally helps to drive energy stocks and commodities higher as well. the beauty i $70 right now. where do traders think we go from here? su: it's a very complex richer because what you have is the trump white house pressuring saudi arabia to raise production. let's go into the bloomberg one more time. gtv. time, that cost prices to actually go lower or dip a bit because what trump wants to do is keep oil prices from going higher. it came out that he is apparently pressuring our allies to block oil exports from huron. that means less oil supply. as 4%.rallied as much letter to the ch you have the one-week chart where you can really see the big move higher, and let's go to the bigger picture chart where you can see the wild ride oil has

been on. we are back there now. again, president trump has made it clear through tweets in april . he's not happy with prices being high. he said at one point it looks like opec is back at it again. this is not good. very high. won't be accepted. he apparently, according to reports, is asking saudi arabia to boost production to more than $10 billion per day. that would be a record in july, press ruling -- pressuring allies to limit purchases from is notd show it clear where it will go from here. i want to point out a lot of the are in washington for a meeting and criticized donald trump's oil trade policies. they believe it is bad for demand and bad for investor confidence. back to you. yvonne: su keenan. first word news with jessica summers, who joins us from new york as well. jessica: the supreme court's

decision in favor of his ban on people traveling is a great victory for the constitution. in a ruling, the court rejected that it exceeded the president's authority. the majority opinion agreed the president has substantial power to regulate immigration. pres. trump: we just have to know who is coming here. all of the attacks from the media and the democrat politicians are wrong and they turned out to be very wrong. what we're looking for as republicans, i can tell you, it's strong borders, no crime. 17 u.s. states sued over president trump's policy separating children from their parents. filedmplaints hav been states including washington, california, new york, and pennsylvania, and allege the border policy violates immigrants since agreement --

fifth amendment rights. a deepening sense of unease is rippling through china's financial market. the benchmark shanghai stock index tumbled 20% in just five months to officially enter a bear market. the offshore yuan headed for its longest losing streak in four years. 2015.reviving memories of it rocked global markets. in bitcoin is weighing on more than just the biggest cryptocurrency. the website finder says more than 80% of 1500 digital coins sell in price in the past seven days. in the weekend of june 25, they were down 19% on average. professor robert schiller told us cryptocurrencies are a social movement and epidemic of enthusiasm. the east coast is less into

it than the west coast. silicon valley is really into it. ais to me shows it is not rational response to new information. it is a social movement. it is an epidemic of enthusiasm, very much. it's a speculative bubble. jessica: global news, 24 hours a day on air and at to talk on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. kathleen: still ahead on "daybreak asia," we speak to a guest to says a lack of cohesion within the white house makes trump's trade policy anyone's guest. yvonne: up next, cmo capital markets on a path of fed rate akes, with the possibility of trade war rising. this is bloomberg. ♪ loomberg. ♪

yvonne: this is "daybreak asia."

i am yvonne man in hong kong. kathleen: i am kathleen hays in new york. trade war is still remain. joining us now is the head of rate strategy, ian lyngen. it's interesting that stocks rebounded after quite a substantial selloff yesterday, and we saw so little reaction in the u.s. treasury market. instead of a mighty rally, you got a small move, less than a quarter-point on the benchmark 10 year. treasures pretty much unchanged. why the disconnect? ian: what's going on in the treasury market is we are waiting for more information because a true trade war will have two prongs. the first aspect will that it that it will import pockets of inflation. whether it is dishwashers, washing machines, things we have seen. it will slow down the real economy. kathleen: today, we heard from a

couple of federal reserve officials. if i can distill it down, they tradere concerned about and uncertainty, although kaplan we are right to be concerned about nafta. if market volatility continues -- because it will take a while for the economic impact to show itself -- what about rate hikes? one of my favorite function stood pull up on the bloomberg shows us in 2018. the fed suggests for rate hikes. can they really hike rates? ian: that's the biggest question in the market right now. the fed has done a wonderful job of crafting the definition of gradual to mean 25 basis nine recorder, and they will be very reluctant to stop. on septembergo unless things get really bad. the market is debating whether or not they go in december or save up for 2019. yvonne: it's quite interesting

just how the outlook for the u.s. tenure has shifted so much in just a matter of weeks or so. we have reached a peak when it comes to hitting 3%, some have said. do you think that is the case? do you think it is just the pause? ian: we have hit a peak. it has proven a difficult level two trade through. all of the bearish things for the treasury market have come to fruition, and we have not been sustainably able to trade much higher. from here, we see the negative implications of trump administration and economic policy. that's going to combine with the seasonal tendency in treasury yields to drift lower throughout the summer, and we are probably 2.5%.closer to yvonne: i want to bring up a chart to see where we are. we are sitting around 34 basis

points right now. i am curious, though. are we overestimating how much more the curve could flatten and eventually avert? treasuries have not caught a huge bid. we have an economy approaching that. ian: there's a fair amount of flattening left to go. the curve is going to invert this year unless the fed stops the process. it really does come down to market expectatithe fe to continue along its rate hike and pass, and this contained trading range we have seen in 10 year and 30 year yields. the market we have in this cycle will be the front end of the curve, and a lot of that has largely run its course as well. kathleen: if i could follow on -- yvonne: what about -- sorry, go ahead. kathleen: i want to put up a continuation that in past recessions, they were preceded by an inverted yield curve.

some people say there is a question about term premiums that changed. arguably legal -- are you a believer in this model that once inversion, there is a recession? ian: i strongly believe that higher policy rates, tighter monetary policy, and a shrinking of the fed's balance sheet is putting us in a whole new world in terms of what it will mean for the real economy, so inverted curve or not, higher rates are going to do some damage. kathleen: is that the message for the bond market right now? think that is. i think that is what's going on at this moment. the market is trading past the current cycle, and we are starting to worry about what happens when the fed needs to pause or start to cut at some point? yvonne: ian, when it comes to continuey though, we to see u.s. treasuries. that supply continues to grow. to what extent does that offset

an increase issuance, the fed unwinding of the balance sheet as well? ian: the increase in supply story has largely run its course. that was a lot of what drove the front and yields higher -- front-end yield higher. in order to get the curve to be re-steepen, we would need to see the type of inflation that the fed cannot combat or the introduction of longer treasury securities, which seemed to currently be off the table right now. yvonne: how much does the ecb and boj play into all this? it seems that the ecb -- they talked about when they will be ending qe, but it seems like that rate hike is far in the picture. how does that play into your thinking? ian: i think that the biggest bearish implications were simply the announcement that they were going to wind down their bond

buying program. eventually, they are going to hike, sure. but if trump takes us into a global trade war and the economy starts to slow long before they can get their front end yields off the ground, you'll find the ecb with its -- in an un- and the opposition. i think that also -- an unenviable position. yvonne: does that further dollar strength for you? ian: i think that does. it's difficult to see a situation where the fed continues to hike regardless of what the rest of the market is doing, and does not benefit the dollar. that brings up questions about further em currency weakness and what that means for selling, and again, the broader global outlook. yvonne: ian, we will leave it there. ian lyngen joining us from new york. imo head of rate strategy. can browse the recent charts

featured on bloomberg television and catch up on some key analysis and save those charts for future reference as well. this is bloomberg. ♪

kathleen: this is "daybreak asia ." i am kathleen hays in new york. yvonne: i am yvonne man in hong kong. ge shares surge the most in more than three years as it announced plans to get out of the health care and oil businesses. breathesants to new life into the company by slimming it down and refocusing around power, renewable energy, and aviation. he told bloomberg ge is being refashioned that every level as it positions for the future. kathleen: richard lee is said to be laying the groundwork for public offering of his insurance company, as w d group. group. it is weighing a listing that

could take place in a couple of years. least 2.7 million customers spread across eight asian markets. yvonne: deutsche bank's morale has improved. according to our sources, an annual survey showed employees areommitted to the lender. the figure is unchanged last year after previous declines. morrell at the largest lender has been tested by three straight annual losses and a series of management changes. ashleen: oil prices surge the u.s. presses allies. in 20 -- to stop importing from iran. this is bloomberg. ♪

yvonne: 7:30 a.m. wednesday in hong kong. 30 minutes away from asia's first major market open. you can see the sun rising this morning. beautiful look outside the harbor. kathleen: maybe that is a metaphor to what happened in stocks. 7:30 p.m. in new york. a bright rebound after a selloff on monday. where does it go next? i am kathleen hays in new york. yvonne: i am yvonne man in hong kong. you are watching "daybreak asia ." first word news with jessica summers. jessica: president trump has signaled he may take a less confrontational path towards inbing chinese investments

sensitive technologies. trump says the committee on foreign investment in the u.s. may come into play. that appears to align him with treasury secretary stephen mnuchin's approach as the administration debates how to protect american intellectual property from china. canada issources say preparing new measures to prevent a potential flood of steel imports from local producers, seeking to avoid u.s. tariffs. the measures are said to be a combination of quarters and paris aimed at certain companies, including china. we are told the announcement could come next week. the e.u. is considering similar measures toward off steel dumping, which could he imposed next month. firmlobal ratings has a credit score at aa plus. the impact of ongoing political wrangling on public finances. on the a stable outlook rating and the says it expects

positive and negative factors to be balanced over the next two years. banks said bad debt is set to climb to a near to de high. a report that the industry's 12.2h may increase to percent by march 2019. that is up from 11.6% in the previous year and the highest this entry. india's banks are struggling with $210 billion of stressed assets. u.s. defense secretary jim mattis in beijing on the first init by a pentagon chief four years. he is expected to press leaders for continued cooperation on north korea's nuclear program despite simmering tensions over everything from trade to taiwan. he said he wants to do a lot of listening whout poisoning the well. he also plans to visit south korea and japan. global news, 24 hours a day, on air and at tictoc on twitter,

powered by more than 2700 journalists in more than a hundred 20 countries. i am jessica summers. this is bloomberg. we are counting down to some of the major market opens in the asia-pacific. sophie kamaruddin. we have been talking about this rebound, but it was the oil price that overshadowed some of these trade tensions that continue to simmer. is there any relief in sight? >> trade will dictate the direction for markets. given what just mentioned for canada preparing to brace itself for a potential flood of steel imports, given these u.s. tariffs, we are keeping a close eye on the commodities player at the start of the session, so across the region, keep an eye on steel and china. in koreast dealmaker also on the radar. market sentiment continues to with her around the metal complex. i want to highlight this on the terminal. the aussie tracking the weakness

we has seen. .t extended its bear market the metal fell for a ninth straight session, the longest 2015. losses since nickel also to give up ground in london, but it's the year's best metal, thriving while others have been floundering. the yellow line, nickel up 15%. it's getting a boost from supplies. it's the go to metal to gain exposure to the easy play. another big story of course, sophie, oil. commodities. asian energy stocks contractor u.s. peers higher on this. what else are you watching? sophie: the oil price rise might have helped stoke some of the optimism we saw in u.s. stocks. brent above the 76 dollars per barrel mark. we are keeping an eye on the dollar that did catch a bid on china. dennis told you guys he

expected the dollar to get better. on the flipside, you have the yuan slump and the offshore 659 edging towards the handle against the greenback. it is now a source of volatility, not stability, with more weakness to hit a whole em market complex. and it will wallop commodity prices. the msci yen index has slipped to a fresh low. with that, let's take a quick look at the futures to see how major markets in asia are set to open. we are seeing weakness across the board, but we have new zealand stocks gaining ground. this after seeing record exports from new zealand. kathleen. kathleen: sophie kamaruddin, thank you very much. onto washington, pressing its allies to stop all imports of iranian crude by november to send oil prices surging. let's get more from bloomberg energy reporter ryan collins in houston. so many forces.

connect the dots. and howart with iran that entered into the oil picture today. ryan: thank you for having me. this november 4 deadline is really important. we -- the u.s. is pressuring all allies to stop importing, and if that occurs along with china and india slowing down imports, the see $1.5t could million of oil per day of iranian oil taken off the market. the biggestof equations of the move in prices. kathleen: so how do you boil it down? demand disruptions? supply problem? what is it? ryan: it's a little bit of both, actually. that is the interesting thing today. at the same time that the iran issue is here, you had some libyan forces cut off ports which removed the good chunk -- 800,000 barrels per day -- and

then, there was an upgrade that when offline in canada, and that has pushed api, american petroleum institute, to really release a report saying it could drop by the most since september 2016. we won't know until tomorrow when the eia releases their data, but that is a pretty bullish event, if that is the case. yvonne: it seems like the situation is pretty different from what we saw from a week ago, since the opec meeting. is it likely that saudi arabia or russia could actually use their spare capacity to offset some of this? arabia issaudi already going to increase production to a record amount . but that next month, won't be enough. the market is under that feeling as well. thank you.

ryan hollins, our bloomberg energy reporter, joining us from houston with the latest on oil. moving on now to cryptocurrency meltdown. that continues. of digital coins tracked on finder.com have declined in the past week with an average drop of 19%. however, if not all bad news. facebook is loosening a ban on bans that- advertise for crypto currency. sarah frier is in san francisco for us. good to see you. why do you think these types of ads were banned in the first place from facebook? theh: facebook said that in course of trying to clean up advertising on its platform, overall, they were trying to get rid of these ads they saw as riches,promising people

promising people say they could get in on a great trade on their platform. an bitcoin is really just not a very regulated market, and so, facebook just all-out band those ads. -- banned those ads. a few months later, facebook has started its own crypto division, so it's hypocritical to not allow people to advertise the thing they want to do. they have to make sure they have this process where they make sure that the businesses that to get advertised are legitimate businesses, that they operate in some sort of legal structure that facebook and recognize, and make sure the users are not getting scammed. yvonne: it seems like even during the span, there were's -- this ban, there were some ads that were able to make it on the facebook site by using workarounds to get around the filters. what is this new process going to look like? some of the workarounds

were very sophisticated. tobing in a zero for an o get the word "bitcoin" through. these blockers were not that intense. facebook now wants to have this application process. the application process is going to evaluate, you know, whether the company is legitimate. they are still not going to allow initial coin offerings, or some of the other ones they considered to be more predatory. blockchain ads that have some sort of purpose that facebook users would not be completely confused by. so we will see what that looks like. it's going to be difficult for them. they do not have a very heavily-policed advertising ecosystem. yvonne: it can say that again. sarah, this kind of makes you wonder -- is facebook itself getting involved in the crypto space?

sarah: they have just started a division, a cryptocurrency division, that is headed up by their former product head of instagram. so it will be interesting to see what they explore there. is it payments? is it something else? is it some sort of decentralized way of tracking information? there's so many things it could be. i don't think they even know right now what they want to do in the blockchain space, but they are definitely looking into investing very heavily in it. yvonne: the former product head of instagram did pretty well with that. we will see what that person can do with looking into cryptocurrencies. sarah, thank you so much for joining us. sarah frier is our bloomberg reporter based in san francisco. we will speak to a guest that had volatility is the new normal in terms of u.s. policy on china. this is bloomberg. ♪

yvonne: "daybreak asia this is "daybreak asia." ime than -- this is "daybreak asia." i'm yvonne man in hong kong. kathleen: i am kathleen hays in new york. no surprise the trade wars are iconicmain page with american brands starting to feel the pain a president trump's tariffs. the supreme court decision to uphold trump travel ban is our top story. it ends of the also about that started at the start of his term in office and is being hailed as a "tremendous victory" by the president. bloomberg, one of the trending stories is the possible revival of toys "r" us, which could be brought back to life by a former ceo. you can check out those stories trending on bloomberg, online, or on the terminal. topne: getting back to our story, president has signaled he may take a less confrontational of roach towards curbing chinese investment insensitive europe --

conventional approach towards curbing chinese investment. advisor.e now a senior he joins us from washington. jude, good to have you back on the program. i'm focusing on the market backlash in china right now. stocks in the free fall. the renminbi under pressure as well. what do you make of china's grip on the economy and this trade fight right now? how firm is it? jude: i think one of the things that has been absent in our discussion is heating up conflict between the u.s. and china and what china's playbook is. where this leverage is and how much control it has over the economy and what we are seeing is the communist party, for all the tools it has at its disposal, is still mortal, and very much looking at uncertainty and volatility rippling through its markets as much as the u.s. is. it has a much better control over information

flows, the extent of it, and how much it will last. yvonne: are you saying that is likely that china could back down? we've talked about it ad nauseam about the options they have, whether it's restricting m&a deals, delaying licenses, boycotting u.s. goods, even using the yuan and treasury holdings as a trade weapon. don't they still have some letters to paul here -- levers to pull here? jude: we have to look at it realistically so it doesn't shoot itself in the foot. treasuries is a choice. that's not u.s. specific. that's just a measure to buffer some of the costs of the u.s.-china trade war. you can turn to qualitative measures. china has to be quite careful about which ones it uses. it uses china at the same time that it's talking about qualitative measures, also careful to talk about how china

is still open for business, the investment environment is still robust, and foreign companies are still welcome there. the broadase that strategic plans that china has, 2020ding made in china five, cannot exist if china really shuts down investment flows in and out of china, so to that extent, i think they are limited to what they can do. yvonne: you mentioned in your notes that you think made in must be a strategic disaster for beijing right now. what do you think china got wrong when it comes to the u.s. strategy in this trade war? did they underestimate the , not just inmoment the white house, but also in congress as well? jude: the first point i would like to make is this clash against made in china 2025 is specific.

our focus is on how the united states is pushing back against made in china 2025. if you go to capitals across europe, new zealand, australia, you would find similar levels of concern over techno-nationalism and the strategic state planning on behalf of china. one point to make here is that this is a much wider structural pushback against china that really transcends the trump administration. policy isc., the clearly gasoline on this backlash against china and driving it, but this goes much beyond washington, and that is made inhink made and -- china 2025 is a strategic disaster in terms of how much the party, the communist party, underestimated what the reaction to this policy would be, when it states very plainly that china is looking to use various tosures, predatory and non,

dominate these key strategic industries. i think we should really big in, because this -- dig in, because this will go on for a long time. kathleen: let's look at one of our gtv charts from our bloomberg library. china exports so much more to the u.s. than the u.s. is exported to china that they cannot go for -- go tit for tat on tariffs. chinese problems have problems on debt, bankruptcy, hurting exports to the u.s.. domestically. if the economy slows down, this is the thing that supports xi jinping's ultimate power, isn't it? jude: i think we should always remember that china has politics, too. even if we find that we are not able to get much insight into it. there are mortals. i should mention right now that the beijing government is undertaking one of the largest political restructurings in the past four decades.

it's completely revising and restructuring its entire governme. it's as you mentioned facing some economic headwinds, especially when it is looking at its exposure to trade here. so i think we would do well to remember that there is on the , theage side for china greatest leverage that china has is its ability to project a lockstep unified message vis-a-vis the united states. they do not have a free press wandering around the halls of its leadership compound interviewing advisors to the president xi jinping and finding out what the internal divisions are. that is its greatest strengtrig. kathleen: solutions. earlier on the show, we spoke to david kirkpatrick, the head of -- he has been covering technology for a long time. he says what we need is the u.s., china, and nations around the world to agree on a set of rules when it comes to technology investment. what do you see as a solution? what's going to happen?

sage i think that is advice. what i would say is a first immediate step is this is a national security discussion. this is not a discussion about trade. this is not even a discussion narrowly about technology. this is about national security which has drawn intrade and technology. i think before we veerff a cliff and have national security dominate the entire discussion between the u.s. and china and see a lot of collateral damage, we need the two countries and ande.u. to sit down define what is a legitimate national security interest and what is not. our imports of european automobiles -- are a they legitimately a national security interest? that is where they see i try -- eye-to-eye. that will be a problem for the global economy unless there is clarity. kathleen: what would you say is a national security issue,

particularly when it comes to technology? at the usesou look of ai, for example, i do not think we can discount that there are serious ones that. the words national security lose their power here. howne: jude, real quickly, quickly could things escalate from here? we are talking about restrictions, terrace. could this blow up to something that is marred geopolitical and get a little bit -- think investors and companies that are trying to look out six months from now need to be widening the options for what is plausible here. i would say that you are saying that -- seeing a convergence possibly of lots of security

issues that are now converging with this economic battle between the u.s. and china. if you are in beijing right now, one of the key concerns they are looking at is taiwan, and if you want to ask folks in beijing what the biggest fault line is, they would say on the issue of the south china sea and taiwan, we may see these issues sort of all get bundled together. your insight.iate jude blanchette, crumpton group senior adviser and china practice lead, joining us from d.c. you can get a roundup of the stories to get your day going in today's edition of daybreak. just go to dayb on your terminals. it's also available on your mobile and the bloomberg app.you can customize your settings so you only get the news on the industries and assets you care about. this is bloomberg. ♪ this is bloomberg. ♪

>> let's take a quick check of the latest business flash headlines.

partially reversing a policy that was put in place in january. oncein will now be allowed facebook can ensure users are not getting scammed. as for other risky financial products including binary options and ico's, it will remain blocked. 21st century fox says any comcast bid would carry more -- fox says regulatory concerns could derail a deal with comcast even after the at&t/time warner deal was cleared. they agreed to an improved offer to sell its entertainment assets to disney. that overlooked comcast for the second time in six months. hospitality going ahead with a plan to triple capacity in china over five years. controlled by china's hna group have 15 hotels in the country with new properties under development. the ceo's warning trade tensions between the u.s. and china could put pressure on room occupancy

for eight months to nine months. yvonne: we are counting down to the market open in japan, south korea, and australia. just about three minutes ago. a mixed picture when it comes to equities after the rebound on wall street. not a whole lot of solace when it comes to the trade front. yes, we did hear from president trump dialing back a little bit on how they plan to restrict still, investment, but it really was that oil price, wti surging to $70, that overshadowed trade concerns we have. the nikkei futures pretty much flat right now. kospi futures down .5%. asx futures up about .1%. in the next hour, you will be talking about chinesekets -- we will be talking about chinese markets. a guest joining us. we will discuss a potential trade war and get his outlook fo chinese stocks, especially in the in share market. we are at the congress in shanghai. steve engle is there to find out

how trade tensions could affect the tech and mobilephone industries. we have the director general joining us from shanghai. we also have the market open, coming up next. this is bloomberg. ♪

♪ yvonne: 8 a.m. here in hong kong, i am yvonne man. asia.e to daybreak the top stories is wednesday, asian traders hoping that the worst is over after wall rebound. oil gains helping to overcome similar interest concerns. the worries pile up for china, shanghai is in a bear market, yenults are rising, and the threatens to lose control as an economic anchor. kathleen: and i am kathleen hays in new york where it is just past 8 p.m.

canada joined the eu, preparing new steel quotas as more global barriers go up in response to the u.s. tariffs. ♪ yvonne: kathleen, we are hoping for some relief in asian markets, but the oil price is what has been dominating the trade tensions. we did see president trump dial back a bit on what he announced on friday, when it comes to investment restrictions from china. certainly, everyone will be watching what is happening in china today after the bear market. i think we will all be taking a cue from beijing. kathleen: the oil cuts so many countries. many it is great to see the price go up, if you export but if you import as so many do, it is a problem. with the trump telling allies that they can no longer after november 4, purchase anything from a run, he is hoping that

saudi arabia's pledge to boost oil production to a record in july will have to offset to those concerns. yvonne: we will see how things go, and we will continue to see what happens when it comes to e.m. markets, continue being pummeled overnight. sophie: ivanka, the set up so far, no relief for japanese stocks, the nikkei 225 dropping attempt of a percent, the topics looking down as well. we have aussie stocks gaining ground though, after a three-day decline, the asx 200 up about a 10th of a percent. check out the nzx 50, that is up about 9000, better than the forecast that we saw for may, exports jump in 10% on year for may. ,.e dollar is looking steady helped by the terrorist talk this is a way to learn the

details of what trump might perhaps be planning -- helped by the tariff talks, a way to learn the details of what trump might need planning in regards to chinese investment. this stock is set for the worst drop since the 2015 devaluation, mayh analysts are saying mean that china is gearing up for a full on trade war. it is said that china may be very about the slump, so we may be more aggressive fixing from the pboc of the currency in the coming days. we are also watching for industrial profits from may. oil, and brenton added to a 2% gain, going above barrel. you are seeing steel stocks, reacting to the report that canada is preparing to deal with a flood of steel imports.

it is looking mixed so far, with the measures from canada said to be a combination of quotas and tariffs. more attention on the chinese currency and the fixing these days. for more, let us bring in mark ,ranfield in singapore mark what parts of the news flow moved markets the most, overnight? mark: yeah, i think the chinese currency is capturing a lot of people's attention right now, although we were expecting china to do -- nobody was expecting china to do a full's get evaluation like they did in 2015. we have this devaluation by stealth going on, almost. the treasury to look for another $200 billion worth of potential tariffs, but what we are seeing in the past few weeks, is that the dollar yuan rate has risen.

so there is something going on with the chinese will yuan -- the chinese yuan, and there has been no chinese push back, they're not showing the market aggressively that they don't agree with the direction it is going. a classic example is yesterday, the onshore market. typically the central bank would try to calm the market down before the close of the day, but there was no such move. in fact, the dollar yuan ended at the high of the day. so he looks as though for the time being that china is along the currency to be driven by the markets, a bit of an unnerving thing for everybody in the investing world. kathleen: yes, everybody was hoping that the chinese would do -- arenipulation, but no receiving this and other parts of the world a as well? what about the impact of trade tensions? mark: there is definitely a bit of a disconnect between what you see in terms of how markets are

behaving, particularly outside of the united states. earnings growth by major companies is still pretty good right now, the global economy still pushing along very well, yet what you are seeing in asia and europe in particular is that the stock markets to agree with us. so investors are looking ahead and rain that eventlly, all issues willriff lead to weaker economies, even though it is not showing up right now. this major disconnect will be hanging over investment over the next few months. yvonne: i cannot believe we are talking about how the first half of 2018 is coming to a close now. what do think we should be watching for on the scorecard? today? what were the highlights for you? mark: you have investors -- they look backke stock and and say that it has really been a very, very tough six months. if you think about generate, particularly if you are an

equity investor, equities were blooming around the world, particularly in asia. it was a great start to the year. then suddenly from february, everything was wiped out. for a lot of people outside the u.s., they are now looking at either a flat first half, or even down first half, particularly if you invest in china. the optimism that we had that 2018 would be another great year for global markets, that is not the case, particularly in the markets. as you look ahead to the second half, people will be a lot more defensive than they were at the beginning of the year. that is not a great place to be if you are an equity investor. , even cloudy outcome before we take into account how negative the trade sittion is becoming. yvonne: yeah. back to where we started, it seems, if not worse. thank you, mark rumsfeld. joining us from singapore. -- mark cranfield. you can follow more on this on

bloomberg and on the bloomberg at live go. commentary, and analysis from mark and his fellow expert editors. you can find out how it is affecting your investments right now. jessica summers joins us from new york with the first word news. >> president trump says the supreme court decision in favor of his ban on people traveling from several mostly was them countries is a great victory for the constitution. in a 5-4 ruling, the court rejected a challenge that the muslims.a discrimination against the majority opinion agreed that the president has substantial power to regulate immigration. >> you just have to know who is coming here. the ruling shows that all of the attacks from the media and the democrats come out were wrong and they turned out to be very wrong. for as are looking republicans qamar can tell you, is strong borders and no crime. u.s. states have sued over

president trump's policy of from their parents, intensifying fight.ing legal the complaints are being filed by states including washington, california, new york and pennsylvania. they allege that the policy violates immigrants 's fifth amendment rights and equal dual process. they are sovereign credit score plus, citingn a aa a resilient and diversified economy, but also citing the impact of political wrangling on finances. they say that they expect positive and negative factors to be balanced over the next couple of years. the meltdown in bitcoin is weighing on more than the biggest cryptocurrency. the website finder.com, says 80% 1500 digital coins fell in price in the past few days. they were down 19% on average.

yearly economics professor and robert schiller, told us that cryptocurrencies are a social movement and an epidemic of enthusiasm. >> silicon valley is really into it, and this to me shows that this is not a rational response to information, it is a social movement, an epidemic of enthusiasm, and it is very mch a speculative bubble. jessica: global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. summers.ica this is bloomberg. ♪ trump says heent favors using a committee that scrutinizes foreign acquisitions of u.s. companies to limit china's investment in sensitive technologies. this up yesterday and hamlet treasury secretary stephen -- line him up with stephen mnuchin.

>> he have the greatest technology in the world and it.le copy and deal but we have the great scientists and brains, and we have to protect that. -- people copy it and steal it. we are going to protect it,. we have a lot of things we can do it through, through cifius. yvonne: for more, we have jodi schneider joining us in hong kong. this appears to be a less confrontational approach than we were hearing a couple of days ago. why do you think the change in strategy? jodi: there has been some pushback in market reaction, bet this does appear to a way to still go ahead with this approach of focusing on protecting american technology, but doing it through cifius, the --mittee to protect committee on foreign investment, which looks at investment cases by case.

president also says that this is not looking at china specifically, but other countries, and it also aligns with what the treasury secretary said in recent days, also partly to calm markets. yvonne: there were a lot of /drasticout an emergency legal measure that the u.s. was going for. what do you think is a fundamental difference between a, and the cifius? jodi: people had in spooked by the fact that it was an emergency power, it seems very geared toward china. yvonne: almost irreversible? jodi: right. sisi us is a review that has gone on somewhat routinely over the years -- cifius, about investments in u.s. countries,

an approach used more generally, and i think the whole ratcheting up of a confrontation with using the 1977 law was what had spooked some. i think this is probably what is behind this more measured approach. also, the president seems to be giving in a little bit to his treasury secretary, which is interesting, because the treasury secretary's approach had been different than others in the administration, including peter navarro. it appears that he is given a treasury secretary a chance to weigh in on this. yvonne: certainly a lot of back-and-forth in the white house, as peter navarro is considered to be the leading hawk in the white house. kathleen: taking a look at this chart on canada, they are preparing quotas on steel that would've been going to the u.s., they are worried about a flood of steel going to their country now. where is this going to go? jodi: they are worried about the

so-called, "dumping" of u.s. steel given that the u.s. has opposed the tariffs on steel. this could be perhaps an unintended consequence of some of the u.s. moves in terms of trade, but canada is looking at imposing both a combination of quotas and tariffs, to try to avoid that dumping of steel in their country. so, yet another round. targeted china, but other countries as well, from what we are hearing from canadian forces. kathleen: a textbook example of how these trade skirmishes and wars can escalate. jodi schneider, senior international editor. still ahead, shanghai stocks are in a bear market as the yuan slide.es to is china's role as an anchor for emerging economies at risk? we discuss that later. yvonne: plus more on the implications on the trade wars

in the tech space. we hear from the head of trade body gsma, next. this is bloomberg. ♪

♪ yvonne: this is "bloomberg asia, i ambreak yvonne man in hong kong. kathleen: nm kathleen hays in new york. stephen engle is standing by at the congress in shanghai with our next guest, steve? steve up good morning, kathleen -- steve:, we are at the we ares in shanghai, and here with our guests from gsm eight, thank you for joining us this morning --gsma. how much investors you have this

new report that came much showing that asia and china are going to be the markets to lead globally by 2025 in 5g. there are also promises of other technologies that 5g will facilitate, but we have this trade war brewing. >> right, we have a lot of things doubling at the same time, which is what makes this excited. nothing new for this industry, we always have things changing. but i think they are at an inflection point, with 5g improving connectivity power coupled by ai and big data analytics. these two things will provide us with what something we call "intelligence connectivity." intelligentlyll connect everyone and everything to a better future, and this better future is also the theme of this years conference. stephen: do you see between the

united states and china -- of course, u.s. has targeted many sectors in technology, the see this hindering the investment, ?as china looking inwards our: i can say that industries thrive on trade, and we need to have ubiquitous coverage, data beats all boundaries. so any type of fragmentation of the industry, from vendors or operators is not good. we thrive on scale. let us see what happens in the future, but i do think that having an open and fair system is absolutely the best. stephen: why do you see that trend in m&a's across borders? we have t-mobile and sprint looking at margin, then you also have restrictions on investment or the potential of further restrictions on chinese investments in the u.s., which could affect this more than it

already has? mats: all of us is -- all of that is good. we need to have an open platform and do business with each other, and i think the world needs as much technology as it can get. on interconnecting with each other and sharing technology, so ultimately, that is a good direction. stephen: telco is one area of china that is really not open to foreign competition. does it need to be opened up? is a lothink so, there of innovation going on elsewhere, even though asia pacific and china is in the real front right now, but there is good innovation coming out from india, europe, africa as well and the u.s., obviously, which china.enefit so having this cross-border facilitation is something that is needed going forward. stephen: where is china going to lead in the 5g revolution?

we know that 90% of the advancement -- of the semiconductors that china uses are imported? mats: that is true, but i think that by 2025, i think we will connectionslion 5g globally, more than half of them coming from the asia-pacific and two thirds of that, coming from china. so by 2025, china will certainly be the nation that has the biggest 5g connection, 5g population. that will of course, mean something, right? that will mean something spectacular and pretty interesting. stephen: in addition to the trade friction, what has been the biggest barrier for the 2020, 20 25?et to there was a lot of concern in a europe as well about new regulations not being as open at .acilitating telco operators

mats: i think the biggest roadblock or concern we have is security. me,ink you can see behind small world connect, o own authentication solution, building on the kyc, we are very stringent on that. wetification, security, when start to connect to a vacuum cleaner or your toaster, that a securitysly concern, and we have to build that in into the reassignment at the very outset when we develop the product, so security, integrity will be critical going forward. stephen: how much of blurring the lines of definitions of what telco is, what a manufacturer -- how much learning is going on right now? you have the same companies such as facebook, apple and amazon, they could potentially bid for 5g licenses in the united dates. are we seeing a complete redefinition of what telco is?

which tends to have a lower evaluation -- lower valuation as we are seeing with xiaomi and this ipo? mats: it is a business model that might change, and i think areus going forward, we seeing more interactions with the industry, especially through sensors, cameras, whatever. we're hoping to drive efficiency and improvement and bandwidth, doing analyst takes best doing analytics. the biggest thing will be 5g and artificial intelligence here at the conference, and china is trying to be a lead, they will be a lead, in 2025, no doubt. stephen:nk you so much, secretary-general of the gsma . yvonne: thank you, stephen

engle, for that wonderful interview. for breaking news or every are, we have teamed up with twitter to launch tictoc at number, the first global news network offered on the media, offering a lot of news reports verified by us. if you are on twitter, sure to follow tictoc. this is bloomberg. ♪

yvonne: this is daybreak asia, i am yvonne man in hong kong. kathleen: and i am kathleen hays in new york. johnf this company flannery once to breathe new life into the 126 your old company, my slimming it down and re-focusing around power, renewable energy and aviation. he told bloomberg that ge is being refashioned for the

future. yvonne: hong kong billionaire richard lee is said to be laying the groundwork for potential initial public offering of his which is company, backed by swiss right. there are weighing a listing that could take place in a couple of years. the insurance company manages about $27 billion in assets, with 2.7 million customers spread across eight asian markets. reversingfacebook is a policy put in place in january adds. cryptocurrency they will be allowed once facebook can assure users that they are not getting scammed. but other products like binary options and ico's will remain blocked. yvonne: coming up next, stocks enter a bear market in the chinese market. menonak with ocbc vasu next.

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♪ yvonne: it is a 30 a.m. in singapore, clouds are looming over asia, just a few minutes before the market opens. i am yvonne man in hong kong. kathleen: and this is kathleen haze and new york, you are watching "daybreak: asia." trump says the committee on foreign investment in the u.s. may come into play when making a decision on ,hinese investments in the u.s. as the administration debates how to protect american

intellectual property from china. canmberg sources say that is preparing new measures to a potential flood of steel imports from world producers seeking to avoid u.s. tariffs. it is said to be a combination of quotas on tariffs -- quotas and tariffs. the eu is already considering similar measures toward of steel dumping which could be imposed next month. >> this is an investigation which are probably take until the end of the year before we can get the full picture. but as you said, we are seriously contemplating provisional measures put in place, by mid-july. exactly in what form, the is still under discussion. jessica: imf boss christine lagarde says the threat of a global trade war breaking out is particularly frustrating now as trade starts to fuel global economic growth.

she says the world is in a reasonably good place economically, but tensions on trade could soon start curbing investments. >> bring in that level of uncertainty with which companies suddenly say, well i am not sure i want to invest in a particular country. name not sure i want to beef up my factory in that place, because i don't know where this is heading -- that is particularly frustrating for those of us who have worked hard to improve the system. jessica: india's central bank climb todebt is set to a near to decade high. the stability report says that industries bad debt ratio may by march,o 12.2% 2019, from 11.6% last year, and century.st this indian banks are already

struggling with $210 billion of distressed assets. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am jessica summers. this is bloomberg. ♪ yvonne: jessica, thank you. let us get an update on the china markets -- with asian markets with sophie, reading. sophie: yvonne, we are seeing gains in crude, brent up about .03%. -- techeeing textures shares leading the charge, and in the currency space, the dollar eased keeping steady. asian currencies are under pressure, taking a cue from the yuan which no longer serves as original an anchor. much in thes very driver's seat, and the korean won is said to be the most exposed in the trade war, as it involves korea's biggest trading

partners, the u.s. and china. it has slashed its a year and projections for the korean won 11.80 perlar. kathleen: we are watching chinese markets so closely when they open in less than one hour. there is a need -- investors say that there is a strong push to sell. sophia, what are the homegrown reasons for concern here? >> chinese markets have actually been quite week since they , because theuary government de-leveraging campaign is reducing liquidity in the system. that would not be a problem if the economy would hold up. the concern is that the mounting risks beyond china's control would hurt economic growth. and remember, economic growth

has artie been slow this year, it is growing more than its percent, but it is meant to slowest pace since the 90's. anything that could cause a credit crunch, which is becoming more likely, is what is making markets week in china. saw things start to falter even before the trade tensions flared up. what do you think the t could do -- what impact could it have? sofia: not only on gdp, most people are seeing the impact on that could be minimal, but it is the whole intangible sentiment damage, that it could cause. that would curb investment, it the impact in the financial system, that part is quite hard to gauge. rrrne: and we have seen the

caught that came in to weaken, but it did not really boost the sentiment and away -- in any way. is there anything else they can do? sofia: the rrr cut gave the banks essentially more cash to land, and this has all just been in june. they injected more cash into the financial system and broadened the type of collateral that tanks could use when they land. ascension it, that should spur lending. -- essentially, they should spur lending. they had front-page editorials calling for calm in the markets, a rare appearance from the pboc governor in may come as a invest financial markets were not really reflecting risks to the economy, it was all about sentiment. this sales in comparison to what they did in 2015 of course, when we had the restrictions imposed on the financial markets.

but it is different this time, because the declines we are seeing in equities, it is not the problem here, it is a sentiment of the problem. so that is what they need to tackle. yvonne: thank you very much, sophia, our china markets reporter. next guest,o our senior investment strategist joining us from singapore, from menon.nk, vasu we have seen the 3% plunge as sophia mentioned from the january peak, and the bottom is the relative strength index, showing that we are in oversold conditions right now. do you think that things could unravel further, or are we likely going to see some kind of town's back in the pboc steps in more? vasu: i would not discount the possibility of a bounce back, but even if it bounces back, i would be cautious. it is not very positive, you one the trade spat weighing

the chinese equity markets and the economy, and a domestic prices as well. the first quarter gdp in china was strong, but since the first quarter, if you look at the numbers of retail sales growth in may, investment growth and other indicators, it has come quite significantly -- come off quite significantly. so this is clearly hurting the china. in that is what has been a couple of years ago when the pboc unleashed 100 billion u.s. dollars of liquidity in the market to try to shore up the economy and shore up the problems in the economy. so i think it is still playing out. it is still early days, so any kind of bounceback may not be sustainable. i think that as long as a trade spat continues, there remains our dark cloud hanging over the chinese economy and stock market. yvonne: is this a much different asian market than we were seeing back in 2015, everyone is quick

to point the finger that it is reminiscent to what we saw then. but what is the biggest change you have seen since the casino days three or four years ago? , yes.no doubt things are a lot better today compared to back then, but having said that, the economy has done well in china for the last one year or so. it is slowing down. clearly, they are de-leveraging, and trying to deleverage a economy is weighing on the asian tokets as well -- trying deleverage the economy as weighing on the asian markets as well. there are micro-headwinds, something that investors should be cognizant off and be aware of, when they are making investment decisions about china. kathleen: we had a guest early on the show, dennis gartman, who publishes the gartman letter. he told us that he has seen emerging markets in china under russia for many months now.

of course, we can traced a lot of that to the federal reserve. i would like to quickly call up a chart we all love, it shows the fed expectation of for rate hikes this year. how much has the in driving emerging markets down? hitting china? and is that another factor not going away any times, just like trade? vasu: you are right, aside from trade, clearly, monetary policy, what the federal reserve is doing like shrinking its balance sheet and increasing rates, is a headwind for emerging markets and the chinese economy. i think the markets have discounted somewhat three or four rate hikes by the federal reserve, at the risk is, inflation could be and overshoot on the upside. the unemployment rate in the u.s. is very low, but at the same time, dald trump has unleashed tax cuts, government spending, into a very tight labor market. that could fuel inflationary rusher and force the federal

reserve to increase -- inflationary pressure, and forced the federal reserve to increase rates. theink that is weighing on markets in china as well. clearly, monetary policy is a key factor. , took shifting gears now a tighter monetary policy, a risk of perhaps tighter policy than what the markets expect. we could see inflation numbers pick up more than what we anticipate. . kathleen: so against this backdrop, where are you looking to put money right now? i read of these from someone earlier saying that cash is not really about place to be right now. that is a tough question, you see a lot of volatility in the markets, but i think that as long as economic growth and corporate earnings come through, as long as the trade spat

doesn't escalate from the current levels and result in a global recession or a sharp global slowdown, i think equity markets are still the right place to be. within the equity space, we like europe, asia, these are the two regions that investors can keep an eye on. the u.s. as well -- in fact, if you look at most asian markets, this will back you are seeing right now could present an opportunity, if you take a view that the transplant will not inult in a sharp slowdown growth. if you have a risk appetite, this could prevent interesting buying opportunities. but that is for investors with the midterm view that this trade but will not blow out of proportion. juncture, yous have to be careful not to throw all your money into the markets, because there could be a downside. go at some stage, we could 10% down from year, and that present very

interestinportunities as long as global growth doesn't fall off a cliff. yvonne: you mentioned those opportunities. i have a year to date chart of what we have seen when it comes to e.m. asia in particular. china entering a bear market of course, joining the philippines as well, and also, we can see that when it comes to corrections, we are seeing four out of 10, the latest ones coming out of asia -- indonesia, malaysia, south korea as well as thailand. some of these countries have strong fundamentals, they too have become victims as well. are you seeing any, themes as to why some e.m. are doing better than others? the: you are right, fundamentals are good relative to what we had in 1997 and 1998, when the asian region went into a crisis area singapore for example, is a pretty good strongntal economy,

reserves and strong financial position. asia -- they are going through quite a bit of , and india is another market which offers interesting opportunities. a you look at e.m. asia as whole, it is not in as much , orble as it was back then even a few years ago. fundamentals are much stronger. the philippines has been having its own set of problems, but it is not typical of what we are seeing elsewhere. which is why i think that the case for investors putting their that into asia, -- i think trade spat could way further on markets. that is my concern. but i think the markets still are attractive. kathleen: we were speaking with morgan stanley, they had a much more bearish view, saying that if you look at earnings and

valuations, they have deteriorated in the last couple of mons. we are talking 30% earnings growth in 2017. yvonne: things look like they could be heading in the other direction now. how supportive of the earnings story is that to you? vasu: yes, of course, 30% in earnings growth, that is over here we had 2018, the growth is decent, still in the low teens in terms of growth. we are not seeing growth falling off a cliff yet. asian markets have pulled back significantly, some are in their territory, but asian markets fundamentals, in terms of growth and earnings. as, they are not as rosy 2017, that we don't see an earnings recession or an economic recession yet. i think it boils down to valuations of the end of the day. how much of the bad news the markets discount. if they pull back another 5-10%,

-- some off that that bad news could have been discounted. we are not as bearish. clearly, there is an earnings slowdown, but no earnings recession, in our view. kathleen: you said that you are underweight japan, cautious. we have a story on bloomberg where and equity strategist in asia is saying, hey, japan is the time to buy, it is doing well, even though it hasn't shown up in the stock price yet. do you agree? vasu: when we say underweight japan, we don't mean that you areld sell japan, what we seeing is that there could be more interesting opportunities elsewhere. europe for example, has underperformed other major regions. if you put a chart of msci europe against other regions, you would see a big gap in terms performance. asia i think, the fundamentals are attractive as well. our concern with the japan, is

that the structural reforms have not come through in a big way yet. ,e need to see that resiliency the medium-long-term picture in concern.at is our on a relative basis, we think there are better opportunities elsewhere. we are not say that there are no opportunities in japan, just on a relative basis, other regions provide better opportunities. japan still is lagging as far as structural reforms. kathleen: thank you very much, vasu menon. cover the entire landscape. ocbc bancwest management to be the and syria investment strategist. just ahead, it has been a wild ride in china, -- ocbc wealth management and syria investment strategist. this is bloomberg. ♪ him andhim and

♪ kathleen: it is been a wild ride for china's investment, and ggv capital is taking a full it

advantage. as part of our venture china , the managing director told us what is driving investment in the economy this year. >> 2018 is also the year of china brands, meaning china products coming to market. we will see a lot more emphasis on new products in the form of hardware, whether it is electronic vehicles, cars, china robot manufacturers or china being able to show that they is helping to leapfrog some of those young tart ups into the next generation of unicorns. >> how do you think the xiaomi ipo will play out? how much is it going to affect the capital markets? jenny: i think it will show the world that there are good

quality products in chinese companies, made in china. i think it is a big company today, xiaomi, they have different products, not just phones, but the whole xiaomi ecosystem shows their capability to the world. >> do you worry about hot money in the vc's vector? jenny: we are not as concerned about hot money, if you have the ability to compete. i came to china in 2000. back then, they were about less than 1000 registered vc firms. in 2016, china has over 20,000 bc firms. marketgrown, yes, the definitely has more capital. but back then, china had less than 10 million internet users. . alibaba was a baby. [laughter] today, china has 1.1 billion users, tencent has one billion

we chat users. so the market did not just grow 20 times, it grew over 100 times , potentially 5-7 times larger than the u.s. market. here any sectors that look frosty to you? jenny: the valuations we were seeing in 2017-2018 have come down about 20-25%, relative to the week of 2014. but 2018 is still slightly higher compared to the global 2010.ial crisis in so it is not crazy, i do think there is a bubble, but i do feel that the market has rationalized. in terms of the hot sector, money going after aia and others, i would have to say that those are long-term sectors. other may be one tesla in the u.s., i think in china, you will find a lot more china teslas. vcgiven the amount of

funding and r&d spending, and the tenants china has, does china and of overtaking the u.s. in terms of tech and innovation? and in what time frame? jenny: i feel that china, if they haven't caught up, they are catching up very fast, because of exactly what you said. the local support, the policies to attract more talent back here, the largest market up here as well, it means that there was no more room for innovation and sustainable growth. more room for more unicorns to grow, even if it is just from china itself. chinese entrepreneurs are very driven, they are extremely driven. that level of drive is something that i think will allow china to sustain that type of advantage. when you have a huge population trying to make changes and do better, they are willing to put in the hard work, less chance of them surpassing the rest of the world is very high, very high.

capital'sat was ggv jenny lee speaking to tom mackenzie in shanghai. still not forget our interactive tv function, tv go. you can look over past interviews like the one we just did with jenny lee. this is for bloomberg subscribers only, make sure to check it out. at tv . this is bloomberg. ♪

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is "daybreaks asia," i am kathleen hays in new york. yvonne: and this is what is coming up next on bloomberg, .hat as bring in rishaad thi rishaad: this company is able to identify your face and can do vehicle license plate recognition. we have an interview from the mobile congress in china with the cofounder, steve will be doing that. also, we will be looking at where we are with trade. our guest will be along to give us his take on this and put everything into perspective. just over half an hour to go before we get into the all-important china profit key.rs, with jobs being we are looking at 21.9% growth

in the previous month, industrials intel nominal gdp growth, they will give us an idea of where economy is headed, and margaret young will be joining us. lots to lookhleen: forward to as always, rishaad. a quick look at how markets are trading right now, both are down , the kospi moving a bit higher index 200d the s&p also bucking the trend, showing a gain of almost .02%. yvonne: yeah, it looks like we will be seeing a bit more green as the markets in malaysia open up in just a few moments. this is bloomberg. this is bloomberg. ♪

rishaad: asia stocks for the open just a little bit higher. rout is over. oil on new supply pressures. shanghai is in a bear market. slump is threatening its role as an economic anchor. in hong kong, i'm rishaad. haidi: also coming up, trade concerns casting a pall over china's tech ico's. we will be tracking investment

flows.