>> very good morning. i'm in sydney where australian markets have just opened for trade. >> good evening from bloomberg's global headquarters in new york. >> and i'm in hong kong. welcome to day break asia. >> new optimism and expected presence at trade talks indicates how seriously china is taking the escalating disputes. and the shutdown and the wall. president trump planning a nationwide address on the issues that are dividing washington and the country. and chance to speak.

>> let's get you started with a quick check of markets. closed its first trading day of the week. markets higher with the s&p 500 gaining .7%. we saw retailers and automakers leading the gains. the dow also gained ground while the nasdaq gained 1.25%. we have amazon topping microsoft as the world's most valuable company, with a market cap of $797 billion. treasury yields rose and the dollar now at the lowest or the weakest level since october. we get a little bit more positive sentiment coming from the u.s.-china trade talks restart. s&p futures pointing higher. let's see how we're set insurgenting up for asia -- setting up for asia. >> taking a look at what's going on with asian stocks. we are seeing an increase of

about .1% for aussie shares. we are taking a look at some minors, for example -- miners, for example. we're also keeping an eye on the aussie dollar, holding its advance of a two-week high. the trade balance expected to narrow slightly in november. quick check on the offshore yuan which is trading at a one-month high. taking its advance since mid december to almost 1%. this is the dollar -- this as the dollar weakens and there is optimism over u.s.-china trade talks. the yuan has faced little downward pressure recently, reflected in the up tick of foreign reserves. we are looking for samsung's preliminary results for the fourth quarter. the stock is down nearly 26% over the past 12 months as analysts have rushed to lower their earnings estimates. the consensus is for operating profit to come in at 12.4 billion dollars, which would be the least for the first quarter of 2017. -- since 2017.

>> thank you. we're just getting news now, confirmation that the north korean leader visiting china from the 7th to the 10th. that would assume he's still there now. of january. that's according to the state news. of course beijing being a crucial element in the part of these talks to try and reach some sort of actual credible, i guess, denuclearization deal after that singapore summit between kim and trump. we are getting confirmation that he's still probably in china at the moment. that visit spanning january 7 to 10. it's interesting because we have this report out this week saying that the next location for the second kim-trump summit could be in hanoi in vietnam. >> yeah. that was really interesting local media reporting that the second summit could happen in vietnam, hanoi. we of course haven't heard from kim jong un during his new year address. reaffirming his commitment to

the denuclearization of the korean peninsula. but also warning that there could be a new way for north korea, for the administration, for the regime there if the united states continues their one-sided demand toward pyongyang. so it would be really interesting to see what happens as north korean kim jong un is now visiting china, according to the news there. >> yeah. absolutely as you say, that sort of a little bit of i guess frustration coming through in that new year's address. obviously president trump has been fairly distracted by some of the things on his own domestic agenda with the government shutdown over the border wall as well. certainly does look like we're starting to get a little bit more momentum there going on, given that we are hearing reports that this meeting could take place in vietnam. it's also kim's birthday today, coincidentally. north korea now the national broadcaster also confirming his visit to china. he's in china from the seventh to the 10th. that's according to news.

let's get you caught up with rest of the news. >> thanks. president trump is to address the nation tuesday. a trip to the mexican border as part of the drive for wall funding. the white house says he's going to meet, quote, those on the front lines of national security and the humanitarian crisis. although precise details haven't yet been released. the president's demand for $5 billion for his wall has led to a partial government shutdown in washington. >> this is not the way to govern. to pound your fist on the table and cause damage to millions of people, unless get my way. it's not what the constitution says. elections have some consequences. the president couldn't pass this wall when the republicans controlled the house and the senate because they knew it was bad idea. >> the head of the atlanta fed is trimming his rate outlook for 2019. saying one hike will be enough.

bostick admits he saw two raises in the coming months but now sees just one and the view could go to none. bostick is not an fomc voter this year and has been on the dovish side of the fence. he's frequently said the fed should remain cautious on rates to avoid inverting the yield curve. and india's forecast to grow at the fastest pace in three years in the next 12 months through march. giving prime minister a boost ahead of elections. the government says g.d.p. will expand by 7.2% this fiscal year, matching the prediction of a bloomberg survey. manufacturing output will rise 8.3%. that's compared with a 5.7% jump the previous year. and fallen nissan box makes his first public appearance in court later in tokyo. he's addressing claims he broke financial laws for the first time since his arrest two months ago. according to japanese law, he will enter court handcuffed and tied in ropes.

he's expected to deny all the charges in a 10-minute speech at the tokyo district court. his legal team is likely appeal for the release on bail. global news 24 hours a day, on air and attic tock on twitter, powered by more than 2,700 journalists and analysts in more than 2 hub countries. -- 200 countries. this is bloomberg. >> thanks so much. we have the latest breaking headlines on north korea, just adding to kim jong un news in china. the news agency confirming kim jong un's visit in china saying that it's taking place between january 7 to 10. that comes because of president xi's invitation. let's stay with china because hopes of a lasting china trade deal are rising on president trump's team after president trump xi sent one of -- president xi sent one of his top aides to talks in beijing. we have the latest. one of xi's most trusted

advisors, making a surprise visit to these talks. >> does seem important, doesn't it? the chinese had told the u.s. team for weeks and they had agreed this would be both sides, this would be midlevel officials. this is how you get trade deals started. we've seen meetings between president trump and president xi and in fact someone had gone to washington earlier with a trade deal the president rejected. but who is me? here's why we are so impressed watching this. he's the top economic advisor to president xi. he is someone who was elevated to this higher position vice premier, surpassing the head of the pboc and more. again, trusted, someone that the president of china relies on. no one knows how long he stays, what is discussed. but it did create commontary out there. this appearance is a symbol of xi's personal buy-in into getting this deal. it's not about xi in particular

but about the deal in general. the commerce secretary said that. there's a good chance we'll get a reasonable settlement that china can live with, that we can live with and that addresses all the key issues. very interesting. a trade deal, what will we get? maybe china says, we'll buy more l.n.g., liquefied natural gas. we will buy more soybean as we move on to the next part of this story. and in fact there are -- it's hoped they'll agree to some of these intellectual property reforms. very interesting story that bloomberg news reported today. the chinese, according to traders we could not quote directly, many of them, because these are private transactions, are said to be buying already more u.s. soybean. the top chinese buyer of grains supposedly buying or allegedly, reportedly, i should say, buying 11 cargos on monday. the head of global grain futures out in chicago saying last week the chinese state companies were dead in the water. today they came in with guns blazing. maybe this is another indication that they want to show that they

too are negotiating in good spirits. hoping to get a deal. and already moving in a direction that suggests they're still in the game in terms of trading with the u.s. >> yeah. you're seeing the market reaction and the optimism. stocks and oifment the yause dollar, commodities currencies, really rally. we're seeing the havens being sold off as well. is it really just snide >> we shall see. we know the -- justified? >> we shall see. we know the trade war is a threat to both economies. you don't see a big slowdown in terms of china g.d.p. in fact, it's not as weak if we look at this chart as it was, say, during the financial crisis. a recovery. but a steady move down in part due to china's deleveraging effort very, important. now down to 6.7% year over year. that's a long way from 12% or 14%. and the fear is if these tariffs get worse, this import-dependent country, dependent on exports to the u.s., do feel more economic pain. -- could feel more economic

pain. an argument that it's going to bite the u.s. now. this is why ethan harris and his colleagues say they see this. first of all, so far the trump team when they've put on tariffs avoided consumer goods. avoided things that could hit the u.s. consumer hard. the trade war, though, we can see it eroding business confidence, less investment. we can see it starting to perhaps hit consumer confidence. u.s., can they cut rates, lose monetary policy? probably not. fiscal policy? we've already had tax cuts. whereas china is using its full arsenal of stimulus tools. think b of a has an interesting point. two big reasons that boil down to one. economic pain, a reason for both of them to say, hey, we have a march deadline. let's make sure we meet it. let's get something done now. >> thanks. we're going to bring into the conversation rick, global c.i.o. fixed income.

he joins us this morning out of hong kong. great to have you. a happy new year. we're talking about whether this optimism that we're seeing and this couple of days of market reaction is really justified. are you banking on potentially getting a sustainable, meaningful agreement out of these trade talks? this overhang at least can be removed from the market sentiment this year? >> there are a few things that have created a positive dynamic in the last few days. one is we had a strong payroll report in the u.s. that showed the economy wasn't slowing as quickly as many anticipated. the other was, we had a fed that's changed its tune a bit in terms of a willingness to be flexible. we heard that on friday. so those are a backdrop. as you said, the china talks are encouraging. and what comes out of these having him s, attend those talks, is encouraging. >> how much are issues,

liquidity drawdowns, helping offset the risk of overheating? >> so, i mean, the big one, i mean, it's hard -- you can never score how much, what even event and each dynamic is driving the markets. the big one for markets has been, particularly for fixed income, has been liquidity in the markets and it's liquidity driven by the fed, reducing the balance sheet and raising rates simultaneously with treasury issuing. but the china talks are a very big deal. that back drop has definitely been married to some things that have been positive recently. the thing that markets are going to focus on going forward is you talked about china growth is slowing. european growth is slowing. now you're starting to see u.s. growth that is also starting to slow. particularly intersensitive parts of the economy. that's going to be a big deal to watch going forward. markets are not out of the woods by any stretch. certainly some better dynamics recently. >> in terms of the balance sheet reduction, jay poul on friday

made it clear that -- poul on friday made it clear what -- powell on friday made it clear what he meant to say. the feds set up this program to be a back burner tool. keep your eyes on the funds rate. it's an automatic accelerating balanced sheet reduction plan. he says, if things get bad, we can slow it down. are you in the camp that really thinks this is an issue for the bond market? you have the 10-year note yield down to 2.65. in spite of all that treasury issuance. is it really hurting liquidity? >> yes. in fact, i think there's something -- people don't -- when you put all the pieces together, you're seeing a draining of liquidity that is the exact antithesis what have went through in 2016, 2015, 2017. you can't just look at the balance sheet in isolation. the reduction of the balance sheet shapping simultaneous to the treasury issuing a trillion dollars of net debt. that drains liquidity. then when the fed raises interest rates, all that treasury debt that's come into the market, particularly short-term interest rates, and

short-term treasuries, become extraordinarily attractive. it draws money out of every other market. why would i buy high yield or loans or equities if i can sit in the front end of the yield curve at close to 3%? that's why it's such a big deal. people don't focus -- there's so much talk about the inversion of the yield curve. the big dynamic for markets and liquidity is you creating an alternative. when you run down the balance sheet, you drain liquidity simultaneous to raising rates and treasury issuing attractive debt. you change financial transmission. it's a very, very big deal. you can't just look at it in isolation. when people say it's on auto pilot, that's why the markets react so harshly to it. it can't be on autopilot when you have these other dynamics at play. >> so if we do have the environment where we're more likely to get weakness in the u.s. dollar, as we've had a number of saying that, jay powell even saying on watching and waiting, it gives more scope for weakness in the dollar this year. after the recent strength.

give you sort of more opportunistic view when it comes to emerging markets in asia? >> 100%. the big deal, people underestimate when the dollar appreciates, the pressure puts on emerging markets, the pressure it puts on markets generally. when you have a weaker dollar like when he for the prior years, foreign exchange reserves build. when foreign exchange reserves build, other countries put money back into u.s. assets, back into global assets. you create a broader framework that is so much more constructive in the global marketplace. with a fed that is going to be more flexible, more patient, potentially pause. i think they're going to pause. i don't think they're going to go in march or january. then you take the pressure off the dollar. it's a very big deal for emerging markets. it's part of why we've become more constructive on eamericanning markets over the last few -- on emerging markets over the last fee weeks. >> could this be a mini replay

of 2016, when we had janet yellen slowing the pace of rate hikes? what did we take away from all of that experience? >> that's a great auntil n'diaye and that's what jay powell said -- that's a great analogy and that's what jay powell said. that was a bit of a different paradigm when you talk about seeing some clear capital flight leaving china, was a pretty tough, dangerous time. you had markets going down drameds dramatically at that point in time. i would argue this is not as severe. but i don't think you can underestimate when this impact of the fed has, you said, on the dollar, the interest on interest rates and liquidity. and the fact that when they say they'll be more flexible, we'll be more receptive to looking at financial conditions, and economy in theu that's clearly slowing, a global economy that's clearly slowing, that's a very big deal. it gives you a lot more confidence when -- comfort when you know the can fed -- know the fed has their eyes open to these things and will react to them. >> i'm doing our producers --

throwing our producers a little bit of a curveball here. but i want to ask but the 10-year yield. a lot of people, even back in 2012, 2013, there were a lot of big houses on wall street who were ready for that 10-year yield to go to 3%. and it's back down, our latest tick is around 2.69%. is it going to continue to rally from here? is this it for the 10-year yield? >> by the way, we call the 10-year, 3.25% for 2008, it did hit it -- 2018, it did hit it. but you've had something that is -- but is really different now. i think it's over in terms of the move higher in interest rates up. think about where we were a couple of years ago with the 10-year, went to $1.30 -- .30%, went back to 3.25%. that was a dramatic move. you think about buying treasuries to help you against risk assets, but you couldn't last year because they were both hurting you. it's really different today. i would say the 10-year's in a range. if you have good news in china,

if growth starts to stabilize and improve, the 10-year can go back to 3%. but we're not going to see those big moves anymore. the reason why, you're going to see people going back into bonds again, and not just front end. not just two-year notes but out to 10 years, is actually it works in your portfolio again. it gives you good yield. real rates are attractive. and it works. you think about how it's worked in the last two months. when the equity market has gone down. the 10-year note has performed really well in your portfolio. that's going to happen going forward. i would argue the 10-year is pretty symmetric here in terms of where it goes, up or down. but in a portfolio, it works really well today. that was not the case last year and it wasn't the case the year before. that's a really big deal for fixed income and portfolios that own equities. the 10-year works again. >> do stay with us. rick is staying with us. we'll have more with him. but coming up, we'll break down samsung's fourth quarter earnings. we are expecting operating

profit to come in at $14 trillion. bloomberg intelligence expects it to be a little short of that. plus, we'll be speaking to the president of the u.n. general assembly. we'll be asking her whether the multilateral order can survive in the age of rising protectionism. this is bloomberg. ♪ . erg. ♪ .

> this is "daybreak asia." >> still staying on with us is rick, blackrock. one of the things you talked about in your outlook or your sort of i guess strategic preparation for 2019 is this idea of risk-reward. where are you placing most of that risk? you're sort of prefering to look more at equities than fixed income this year. >> the difference between this year and the past is part of

what i described before, is more balance. you have more balance in your portfolio. are you going to make more money in fixed income and interest rates? we don't think interest rates are going to rally significantly but they're going to hold in and carry well. equities still end up being attractive. you've seen a pretty good bounce from the bottom reentsly. in fixed income, we like some income-producing assets. we like securitied -- secured assets. things like commercial mortgages. nonagency mortgages. you talk abouted -- you talked about e.m. we like owning some of the income-producing parts of fixed income today. as sort of more of a balance in your portfolio than the last couple of years. >> in terms of geographies and where you're seeing the greatest opportunities. is there anything specific that you're looking at this year? it sort of feels like this is a

market at this point, still trying to find that space between the intense selloff we ended the year off and the rosyness we started off 2018 with, right? where do we lie in the middle of that in terms of being opportunistic but still hedging your bets somewhat? >> to go around the world. start with the u.s. the u.s. we like, we think treasuries fill a nice part of the portfolio element. we've been extending out the curve into 10-year notes. then you go elsewhere we talk about emerging markets. places like brazil that are exhibiting better stability now, better growth dynamics. we feel comfortable with argentina. mexico we feel generally comfortable with. a little less so than in the past. in terms of the other rates markets, there's more of a nuanced nature to it. we don't think european rates are interesting at all.

italy's the only place where you're now getting paid, particularly post-getting a fiscal deal done. italy is the place you're getting paid for taking risks. the rest of europe isn't that interesting. there's a nuance part of the arket where we buy things like j.g.b.'s and swap them back to u.s. dollars because of the cross-currency basis that works out to be a nice yield. but u.s. for rates, places like brazil, argentina, and then some of the things like swapping back into dollars. >> are you liking longer term debt, given the recession worries, the fact that the yield curve could invert? does that mean it could act as a portfolio buffer? >> that's exactly right. not to get too technical about it. if you strip out inflation, we think inflation is going to run under 2%. if you think about the 10-year, when you get close to 3%, you're getting paid about a percent in

real rates and it works as a really nice portfolio buffer to dime. we haven't been able to talk about that for such a long time. it works quite nicely in the portfolio. we think that global growth, it's still not clear, the european growth has been slow. solve some of that is driven by asia and china. the asian growth is still decelerating and maybe get good news and stimulus to stabilize that. the u.s. economy, the interest-sensitive parts of the economy, are clearly slowing and don't have the benefit of fiscal stimulus like they had in the last couple of years. it works really well. in an economy that is slowing, our projections for next year are not that we go into recession, certainly not in the u.s. but if you look around the world, some of these numbers, u.s. is going to grow. we think about a couple of percent slower than this year. europe is growing closer to 1%. so it works nicely in a portfolio with an economy globally that's slowing. we don't think recession, but slowing. >> we're just seeing volatility all across asset classes.

this chart showing exactly that. whether it's treasuries, equities or f.x. in this environment then, what are the investment strategies that you would recommend investors and do you expect the volatility to continue through the rest of the year? >> i do. if you got good news out of the china trade talks, it will certainly in the near term bring volatility down. certainly the fed being a bit more sensitive to financial conditions and a slowing economy, moderating economy. that's going to bring volatility down at least moderately. i think some of the things -- what we talked about earlier. people don't realize that when you go through this period of quantitative easing that we saw the last few years and you fuse the system with an immense amount of liquidity, the e.c.b. doing, it the u.s. doing it, bank of japan doing it, when you start to pull that back and then issue debt like the u.s. treasury's doing, the system is draining liquidity. and people underestimate that means more volatility. so if people think we're going

back to 2017, 2016, not going to happen. but are you going to see the extremes like you saw around christmas time? i think that -- >> we're going to have to leave it there. rick with us. ♪ place, the xfinity xfi gateway.

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>> you're watching "daybreak asia." first word news now. the house of commons returns later with just 12 weeks to go until the split from europe. prime minister teresa may has created a special committee to prepare for a so-called no-deal brexit. and a date for a parliamentary dothe vote on her deal will be set wednesday, with a final debate next week. may has repeated she expects further assurances from brussels on the terms of brexit. world bank president kim is unexpectedly resigned. more than three years ahead of schedule. that as the trump administration questions the global leader's purpose. kim issued a statement to staff saying the opportunity to return to the private sector is a way

he sees to make the largest impact on issues closest to him. that includes climate change and infrastructure needs in developing countries. amazon is now the most valuable public company in the world. edging past microsoft on wall street's list of the biggest corporate names. shares rose more than 3% to leave a market cap that's almost $800 billion. albeit lower than amazon's record of $1 trillion back in september. long-time leader apple now has a market cap of about $700 billion. that's down from a record $1.1 trillion in early october. and the u.s. judge has ordered kevin spacey to stay away from a man who accused the actor of sexually assaulting him in 2016. spacey appeared in court on nantucket island off the coast of massachusetts. he's been charged with indecent assault and battery of the then-18-year-old. a pretrial hearing was set for march. the oscar-winning actor faces a series of sexual harassment claims and allegations which he

denies. global news 24 hours a day on a air and on twitter powered by more than 2700 journalists and analysts in more than 120 countries. >> let's get you the latest news in terms of what's breaking across the bloomberg sensor. electronics fourth quarter operating profit coming at $10.8 trillion. -- yuan. estimates were for $18.8 trillion yuan which was still downwardly revised after that record-beating third quarter of numbers. fourth quarter sales coming in that also missed estimates. that fourth quarter operating profit again, $10.8 trillion yuan, miss on expectations. consolidated profit there missing expectations, despite analysts revising down those numbers for the fourth quarter there. we are looking at, of course, the end potentially of the supercycle when it comes to chip production. memory chip production.

it is samsung relying on 70% to 80% of their total profit on chip shipments. contracts of fallen shares over 2018 as much as 31% on those chip sales it. looks like that downward pressure coming on samsung. we'll be looking for more of that breakdown, of course, as the details become available to us. >> for today, though, only sales and operating profit are out. we don't get the division breakdowns but as you said, memory chip markets sentiment being really negative. we seen profits stalling on prices and we're now hearing from bloomberg intelligence that the chip prices will continue to diploer in the near term. of course we have seen some profit warnings from rival micron expecting a february-ending quarter to actually, their earnings to fall shy of expectations. we had a strong third quarter for samsung because of these prices. but that doesn't seem to be the case for the fourth quarter. et's now turn to more on these

numbers. samsung electronics so important for the south korean economy. but now we're seeing them stalling a little bit. >> that's right. to your point, about deram chip prices. i want to hop into the bloomberg terminal here. this is bloomberg intelligence go. you can see that for these prices, i've put this to 36 months here, those prices have really fallen to their lowest at least on this scale that i've put here. at first i put 12 months, then 24, then 36. bejust really haven't seen it at the low -- we just recentville seen it at the lowest here -- really haven't seen it at the lowest here. chip prices still at their lowest in the past four years. even looking ahead, bloomberg intelligence says that prices are going to stay soft until the first half of 2019. you also mentioned that smaller rival mike ron is expected to miss its quarterly earnings as well. in terms of other things. hand set division, profits may have fallen again. that's according to bloomberg intelligence.

as we wait for more information to come out there. b.i. is saying it's not expecting any change until 5-g models come out to buoy what's happening with the down turn or at least the saturation in 4-g. in addition the display division, b.i. says profit may hold steady and this is despite what has happened of course from apple, with the revenue revision downward there. they say that chinese smartphone makers actually could be a little bit of a lift there. dess play -- display division, possibly steady. hand set division falling. a major miss in terms of what they came out in terms of sales versus the estimate that bloomberg intelligence had of 14 trillion korean yuan which was 12ds.5 billion. >> you talk about the apple disappointment. we saw really the suppliers for apple feeling the after shock, perhaps the most. we know that samsung has the advantage of being more vertically integrated but what are we looking at in terms of

samsung suppliers. >> sure. earlier today i was looking at the supply chain function on the bloomberg terminal. if you are a bloomberg subscriber yourself you can do that in the splc function. let me walk you through some of the stocks that we will be watching as they do start trading, whether they're in the united states, whether they're in korea to are korea or taiwan. for example, semiconductors could feel the pressure here. lamb research, asml holdings, applied materials in tokyo, electron, these are the year to date or the one-year rather share price falls in these four stock prices. you can see right across the board, tokyo electron down 40%. all of these have revenue that they rely on from samsung on the order of about 23% to 27% for applied materials which is 13%. switching up to other things in the supply chain, cannon, look at that. down 29% in the past year. they only get 3% of their revenue there. a.u. gets 13%. you can see it's down 4%.

fanuc down by about 44%. it gets about 5% of its revenue. that is the smartphone producer, one of the world's biggest robotics company. of course this also has a question of how this knocks on in terms of south korea's economy, in terms of south korea's market. right now it accounts for about 14.8%, nearly 15% of south korea's market. >> yeah. a massive weight there. sometimes a headwind looking like a tail wind there at this point. ramy there with the latest on samsung, that miss in the fourth quarter numbers. let's get you the latest on the aussie markets now. we'll be watching samsung throughout the day. but in the meantime, aussie markets, how are we doing? >> we are seeing aussie markets to the down side. giving up the earlier gains. we are also seeing the yause dollar holding gains near the highest close in three weeks.

bond yields continue to climb, rising for a third straight session. take a quick look at iron-ore alling for the first time. from here, morgan stanley is turning bearish on iron-ore. expecting lower output. so we'll see whether this has a knock-on effect on the aussie dollar outlook as well. quick check on stock movers of note in sydney. galaxy resources earlier rose as much as 3.5%. now up by just .9% of. this after being upgraded to apple form and bluescope steel, earlier jumped as much as 4.5%. but easing that advance, the stock has been raised to buy at goldman which has the company trading at a deep discount to global piers and its long-term average. the company has wrapped up the $225 million acquisition of propeller health. i want to end on resolute

mining. the stock under pressure. this amid speculation of whether the company will spin off or sell its gold mine in queensland. this morning the miner coming out to say it has yet to make a decision in response to an article by the australian and the company says it is to undertake a strategic review of the ravenswood asset in the first half of 2019. >> looking at the -- [inaudible] -- we'll be watching korea, of course, when sam sungs begins trading -- samsung begins trading. samsung saying memory plan demand situation will improve in the second half. but that they will remain subdued when it comes to the earn agency -- earnings front in the first quarter. citing these pressures on the memory business which of course is 70% to 80% of their total profit for samsung. saying the earnings will strengthen on the second half when it comes to improvement in memory. we are looking at of course last year, about a 31% fall in

contract prices for these chip shipments. also deget -- also getting etails on that fourth quarter. samsung coming through with that. more details on that as that sales and operating profit number for the fourth quarter missed analyst estimates. coming up, the president of the u.s. general assembly joins us in the new york studio discussing trade, geopolitics and more. this is bloomberg. ♪

>> this is "daybreak asia." i'm in sydney. >> and i'm in new york. u.s. and chinese officials are painting a picture of some optimism on trade talks in beijing. but president trump's america-first program is seen as a mange risk and a stiff challenge to multilateralism. to discuss all of this, maria

espinosa. president of the united nations general assembly. thank you for your time. we're talking not only about protectionism but also nationalism. of course we have the ongoing partial government shutdown here in the u.s. because of a border wall with mexico. can nationalism and multilateralism co-exist? >> i think it depends, first of all, hello. very happy to be here. it depends how you define nationalism. sometimes we tend to confuse terms and think that nationalism is about caring for the people at a national level and look at the national interest. which is good. this principle of looking after all the people at the national level and national interest does not counter multilateralism. on contrary, they're mutually reinforcing. because multilateralism is about caring for the global -- for the planet and to address global challenges.

that's why we should foster proper national interests together with global interests and global challenges. >> the theme of your presidency is making the united nations relevant to all people. that would mean also strengthening multilateralism. so how do you plan to achieve that? >> we are working on it. very strongly. the idea is to bring the united nations closer to the people and the people closer to the united nations. to deliver better, to boost the work of the general assembly. the general assembly of the u.n. is the parliament of humanity, is the norm-setting body for international law, it's extremely important. we address issues of climate change, of international migration and refugees, of disarmament, end of nubling leier threat. we really address issue -- nuclear threat. we really address issues that are effecting the life of millions of people around the world and giving responses to them. so we need to deliver better and bring our work closer to the people. sometimes people do not understand what the u.n. is

about. we are the house of multilateralism, of collective decision making. >> of course trade is a big part of people's lives, whether it comes in the form of business or people. just migrating from one part to another. now, we're seeing this rift between the largest economies of the world and many people think that this is beyond just trade issues. it's more to do with cultural, ideological rivalries that could resemble a new cold war era. so what can the u.n. do to bridge this gap? >> i think that the multilateralism, the multilateral system provides a proper framework to have everybody onboard. 193 member states are members of the united nations, have the same voting rights, the same voice that know we're all equal. so this is the proper framework. and regarding a bilateral issue between two world powers, and we have to acknowledge that they

are big stakes there, i think we can provide a platform for better dialogue, better understanding, better coordination. i think that an trillion trade base on clear rules -- an international trade base on clear rules is good for everybody. not just the big questions like the u.s. and china, but for everybody. international trade is a survival issue to boost the economies of north and south, of east and west. so an international rules-based trade system is what we are aiming at within the united nations framework. >> but the united nations' beef with multilateralism, whether it's with the united states or the w.t.o., is that some of these rules really haven't been fair to the united states. and china has been playing by a different set of rules. how do you respond to that? >> well, precisely what i'm saying. we need to abide by the same rules. looking at common but differentiated responsibilities,

according to the level of development of different economies. let's look at the breaks, the emerging economies, the new trade and economy actors around the world. but let's also look at the ones that are really paying the price, the poorest countries that, the disinfranchised. the u.n. is also about meeting the sustainable goals, combating poverty, combating inequality. if you have a fairer world with less inequalities, with more rights for women and women in power -- empowerment, what you have is more conducive environment for better business, for better democracy, for more equality. that's what the u.n., you know, the u.n. stands for, these very values and principles. >> you have dedicated your presidency and your election to the general assembly to women, to gender equality. so what are you doing on this front? >> well, a lot of work because there's a lot to do. i think that the world needs to

come to grips, to include 50% of the world population. with greater economic inclusions, closing the salary gap between men and women, to provide opportunities for the empowerment of women in politics, to include girls in proper and good quality education. and we're working on that. i'm calling for a high-level meeting with female presidents on the 12th of march here in new york. we are working towards the sessment and looking forward beijing plus 25. and i think we should really work and push hard for the equality of genders. >> kim jong un is visiting china right now the at the request of

president xi. of course we have the north korea denuclearization issue. we have problems in yemen. in syria. what will be the top priority for the united nations in 2019 and where could we see some progress? >> i think that the united nations has a lot to do. looking at the humanitarian crisis, both in syria and yemen, we're really working hard. today the new special envoy in syria took office and mr. pederson, we have great hopes that he will be able to push forward a political solution in syria. we are looking at the new developments in yemen. the opening of humanitarian corridors, for example. these are very challenging situations. but the house and the venue to push for political solutions to international conflicts is precisely the united nations. you talked about the north korean leader visiting china. we have great hopes, we have

seen positive developments in both fronts. the denuclearization of the korean peninsula, but also the interkorean dialogue. it's extremely important that both processes go together. and i think it's going to bring peace not only to the korean peninsula, but to the entire world. >> u.n. general assembly president maria fernandez espinosa, thank you for your time today. you have the remainder of your term as the general assembly president. and good luck with that meeting in march with the presidents of the world, female presidents. coming up next, there's a new stock market on the street and it's taking aim at traditional exchanges. just ahead, we ask why the likes of morgan stanley and u.b.s. want to compete with the new york stocks he can cheaks -- stock exchange and nasdaq. this is bloomberg. ♪

>> welcome back. a group of big banks and brokers has message for the new york stock exchange, the nasdaq and the chicago board of options. move over. they're forming a new stock market. frustration about market costs is a big reason why. we have some big players in the group, including u.b.s. and morgan stanley. >> yeah. we've got citadel securities. power brokers. it aneers this has a lot to do with frustration about the cost of trading on these big exchanges. there's an old saying, if you can't beat them, compete with them. that's what appears to be going on here. you're looking at the floor of the new york stock exchange which is virtually all electronic, as are all the major exchanges. with the technology, it is now almost easier to compete and offer a new exchange. although it's a big undertaking. the nine founders are big names. morgan stanley, u.b.s., citadel security, virtu financial.

they're seeking to increase competition, further reduce the fixed costs and simplify the execution of u.s. stock trading. that's according to a statement that they released on monday here in the u.s. members exchange is what it's called. memx is the shorthand. and they raised about $70 million from the original group and they're opening up now to other investers who may want zwroump in. -- want to jump in. >> trading fire power is pretty significant. >> it is. we go through some of the members here i mentioned. a lot of banks like bank of america are in, schwab and ameritrade. they also bring their own clients. so trading volume is a big question. we can look at some of the tickers of the founders involved. the big question is, can they bring the volume? that is yet to be seen. but they can bring players and they save money by being members

of the exchange. they're able to cut costs. they're going to also view any success that actually through competition causes the big players to stop increasing the cost of trading stocks as a win as well. there will be many watching this and we'll keep you posted. >> sue there with the latest. all right. speaking publicly on tuesday when he appears in a japanese court. he's said to be planning a vigorous defense against alleged financial crimes, including underreporting his compensation. our chief north asia correspondent is outside the courthouse in tokyo. what do we know is going to happen today inside and outside of this hearing? >> outside it's getting quite crowded here with, of course, reporters and also onlookers. the public and journalists are applying for a lottery to get inside the courtroom where ghosn will be appearing, along with

his lawyers. the way it goes here, he will be led into court with a rope around his waist and handcuffed, as is tradition here in the japanese courts. he will not be treated any different from any other person who is in detention. and of course this is day 50 now since he was initially arrested back on november 19. the lawyers of ghosn will be allowed 20 minutes to make statements to the judge, followed by ghosn who will be given 10 minutes to speak. his lawyers are saying he will declare his innocence and also deny any wrongdoing. after ghosn speaks, which will be in english, and then offered a translation into japanese, the prosecution, if they so choose to do so, will be allowed 10 minutes to speak as well. they are not required to speak. but they also could. we're going to likely hear his profession of innocence and any wrongdoing. following this hearing we're

also going to have a news conference at the foreign correspondence club by the lawyers and we're hearing as well that the lawyers of carlos ghosn will likely ask again for bail to be granted to ghosn after this hearing today, this morning in tokyo district court. >> all right. we'll keep up to breast with latest. in tokyo today, watching and waiting for carlos ghosn. let's look at asian markets. here in australia we are seeing down sides, about .1%. really struggling as we had downward revisions to expectations of what iron ore prices would be doing throughout the course of this year. new england looking flat at the moment. in -- new zealand looking flat at the moment. nikkei is expected to start trading in the next few minutes. of course we're looking at samsung being a pretty major drag after that earnings guidance misthere -- guidance police this -- miss there. >> right. coming up next, we're live at the u.b.s. china conference in

shanghai with u.b.s. securities president talking trade, the financial sector outlook, and the bank's strategy in china. the tokyo open is next. this is bloomberg. ♪

>> good morning. in sydney, asia's major markets have just opened. >> from bloomberg headquarters in new york. >> welcome to "daybreak asia." scarlet: asia pacific markets look set for another gain the have renewed trade war. the dollar is at its lowest level since october. samsung is one to watch after fourth-quarter profits missed estimates. shery: carlos ghosn appears in

court later to give his first comments on the charges that brought him down. nissan will be one of the stock we will be watching in the japan open but also samsung as their operating profits missed estimates. we're setting up for the market open in japan and korea, here is sophie. sophie: we did see asian stocks a boost up $300 billion when it comes to market caps. this is how the nikkei and the cost be ended monday. we are seeing the nikkei up by .07% being led by consumer discretionary stocks. the kospi trading a 10th of a percent higher while aussie banks.are led lower by the yen staying below 109. the top japanese steel mill has come out to warn that it could

hit exporters at 110 to 120 against the dollar. ahead of the 10-year auction. the jgb space. tokyo securities sees the 10-year yield as jgb's are undergoing an adjustment phase. let's check in on samsung. a rough ride for the stock. down 24% in 2018, as analyst rush to lower the estimates. this morning off by 1.2%. hiaaidi: let's get more on samsung's earning disappointment. our bloomberg intelligence analyst joins us from hong kong. supply and demand will improve in the second half. still looking pretty meager in the first half. what is the basis for the expectations the super cycle can turn around? >> the basis is that the current disappointing in --

disappointment in demand is like inventory restocking. so, the end demand is little bit weak and also the customers are waiting for prices to come back, so they are using up their inventory for now. in seconds pick up half when new products, according to samsung, they will pick up. given the recent price to client, the recovery in demand may not be as smooth as expected. and the fact that the second half is seasonally strong, you saw that fourth quarter less year was a huge disappointment. which means that even with seasonally strong demand, it may not be enough to give samsung profit growth this year. the company itself saying the fourth quarter demand was weaker than expected. the earnings fell significantly.

let's talk about the mobile business. mobile profits fell, citing things like marketing costs. what are the expectations in that part of the business? what are we expecting from the galaxy x10 launch? >> the fact that samsung it not only miss profits, but on the revenue side. the sales estimate implies that they have a big miss in handset sales. we saw bloomberg yesterday that samsung -- guided down shipments for this year. when the galaxy s10 coming out in march, the expectation, as anniversary, they would have a lot of new exciting functions, including 3d cameras but that will be enough to draw shipments. it will be a very highly priced handset with 5g function which is very likely from samsung, but the problem is, how receptive

the customers are, the consumers are for such a high priced device. haidi: is that where new growth will come from, 5g, perhaps a.i. and even automotive elected vocation? -- electrification? e> samsung up, both thes continue to remain their drivers but that is a long-term story. this year, with the weakness likely to, first half. as we mentioned earlier, the second-half recovery remains uncertainty. that on demand recovery, this year the expectation we think the profit will decline. compared to last year a.i.-related, 5g related growth would come throughi in 2020. haidi: thank you so much for that. now let's get a check of the samsung shares trading at the moment. 1.6%, ofeing them down

course. theree seen a profit miss for the fourth quarter. shery: now let's go to the first word news with jessica summers. jessica: thanks. the head of the atlantic fed is trimming his rate outlook saying enough. will be he now sees just one raise. his downside view could go to none. bostick is not an foomc voter. comments returns later with just 12 weeks to go in tilde split from europe. theresa may has created a special committee to repair her no deal brexit. a parliamentary vote is set on weston with a final debate next week. may has repeated she expects if

assurances from brussels on the terms of brexit. boss carlos ghosn makes his first public appearance in court later in tokyo. he's addressing claims he broke financial laws for the first time since his arrest two months ago. according to japanese law, he will enter the court handcuffed and tied in ropes. he expected to deny all charges. his legal team is likely to appeal for his release on bail. president jim yong kim has on expected to resign three years ahead of schedule. as the trump administration questions the global leaders purpose. kim issued a statement saying opportunity to return to the private sector is a way -- he sees to make the target impact on issues closest to him. that includes climate change, infrastructure needs and developing countries. global news 24 hours a day on air, on tictoc on twitter, powered by more than 2700 journalists and analysts in over

120 countries. this is bloomberg. haidi: thank you. trade deallasting are rising after one of president xi jinping's top advisors join talks in beijing. the vice premier underscores china's keenness to end the dispute. chief asianour correspondent enda curran. when we are talking about the talks, we did not have much expectations given that there were pretty lower-level talks. could we expect something more substantive to come out now that nuhura's involved. enda: no one was expecting any kind of major breakthrough but it was all signals and the movement. it's somewhat on the upbeat side. the vice from your lu attended attendedce premier lu some of the meeting, a clear

side from the chinese side they are taking these talks a very sears like. -- very seriously. on the other side we have comments from wilbur ross making the point that he expects that boths dies essentially -- both sides come to an agreement. there is a broad view from an observer that it is possible some kind of deal could be made in areas such a shrinking goods deficits and opening up access to chinese economies. there's a feeling that whatever can be achieved by the march 1 deadline will not be enough to solve all the problems altogether. shery: that is the key issue, right? sorry. not onlycause it is about trading goods but also about intellectual property for technology transfer. any more progress on china, sort of regulating these areas more within their economy? enda: well, they are doing talking about doing more to protect ip.

it is in their own interest, but wilbur ross made an interesting point last night that even if a deal is reached in these areas, it is all about enforcement. e interest in to see whether or not there are some kind of attachment or conditions whereby china can be measured for tangible progress it is making and enforcing a protection of ip or not forcing companies into jv's. even if we get a headline agreement, the monitoring of this will be critical period in months and years after to see whether or not china's living up to the agreement and whether or not the u.s. and china can get their trading relationship on a more even keel. >> in terms of the timing, the countdown to march 1, how likely are we to get some sort of deal? or is it going to be a kicking the can down the road, do we get another extension of that grace period? both:: there's a view that

economies are slowing somewhat now. the market has become volatile. and each leader want time-out on this. they both want to call for a truce to continue, perhaps agree something on the good side of things by march 1. agree a broader framework for the more complicated negotiations in the months ahead. we should remember there was brought in political consensus in the u.s. and among, other countries too, who feel they do not get a level playing field in china. there's is support -- every chance, that just as though some kind of deal could be reach, it is just as possible the talks could collapse and we end up back where we started. >> and the global economic ramifications for that would be a norm is. we've spent -- would be e normous. we talked about apple as a macro story with the china slowdown and the flow-on affects the rest

of the region as well. enda: that's exactly right. what we are starting to see now is the trade of the trade war starting to -- the gain of the trade war starting to bit. e. as companies try to get ahead of the tariffs impact but now we're starting to see sentiment remain quite sour. manufacturers are feeling pain. we are starting to see slower demand show up a new export odors. several -- export orders. own domesticheir factors but there is no doubt there is a view that the real plane of the trade -- the isl pain of the trade war going to hit this year and we are seeing some early signs of it. >> later this hour, will be live in shanghai. the ubs credit china conference. we really joined by the ubs

president talking trade and what the bank strategy is in china. after two months in jail, carlos ghosn will be getting his first chance to defend himself in court later today. we'll be live in tokyo later on. >> up next we are live at the jpmorgan health conference to discuss the year ahead for pharmaceuticals. this is bloomberg. ♪

>> this is "daybreak asia" shery: i'm shery jan in new york. biggest names in health care are gathering at the jpmorgan health care conference in san francisco to set the agenda for the year. taylor riggs is at the conference with our next guest. taylor: we are joined by lisa, the senior analyst at jp morgan. we are at the jpmorgan health care conference. we're thrilled to have you.

i was reading through your note about your playbook for this conference. so much of it is driven by the consumer. how is the consumer going to be so disruptive and health care this year? >> the consumer is the biggest disruptor and health care. you think about how plants, more out-of-pocket costs, you are paying for itself. what do you want? quality, cost, convenience. we really believe those -- companies that can deliver on quality, cost and convenience in the way the consumer was a delivered are those companies that will win ultimately. taylor: you also talk about specialty drugs, being a key growth driver for the top and bottom line. what to weeks expect to hear about specialty drugs? lisa: specialty drugs are incredibly expensive, injected or infused. by near year, 2020, they will be 50% of drugs. it's a really big cost. think about this

conference, there is a lot of things that happen at this conference, especially around new drug innovation. as you think about that, the companies i've follow will provide services around that. think about how you will get paid for that product, how it will be delivered to the patient, how it will be administered. we think that there's going to be a lot of growth expectations. some of the companies are the biggest are big in other areas like cvs health. the largest specialty provider, argehave express, a l pharmacy company bought by cigna. and united health care. taylor: all of those names have one thnig in -- one thing in common -- massive an m&a. l overallour genera thought on m&a as we look to 2019? lisa: we are seeing incremental m&a. last year, you had cvs and edit

come together. -- and aetna come together. you're having companies become bigger. on the product side you are having those companies come together because size and scale matter in health care. youre not surprised here had tax reform last year and all of these copies have cash, looking to spend that cash. small see more in -- acquisitions because of what happened last year. taylor: your company covers cvs. we will speak with a ceo tomorrow. what more do you need to hear with regard to the aetna deal? you are in overweight with a price target of 106. what are the synergies you need to see from him this year. a story we love. it fix in the middle of that cost, quality, convenience, everything the consumer wants, deliver that cvs can

that over time. what do we want to hear from larry? about the strategy. we do not anticipate we will hear anything around numbers tomorrow. that will happen when they give guidance and fed very but we want to hear about the strategy of bigger? how are we going to think about the stores? how many stores will have anchor mental health care services? think about their minute clinics, their virtual care, think about the products and services around health care that they can deliver. i think we'll hear about that tomorrow and you will see the milestones were collective. and'll be at the conference talk about how they will consume the consumer. we will get to february and they will give guidance for 2019. at the end of april they will have the first quarter as a combined company and on june 4, they will host a combined analyst day as this new entity. if you look, the markets have been in turmoil. but, if you look at post them announcing the closing of the transaction on the 29 of november, the stockade $80.

-- stock hit $80. we do not think it is unreasonable for the stock to hit $160. >> talk to me about walgreens. lisa: cvs made a $70 billion acquisition by buying aetna. and walgreens is looking at doing things via partnership. they have got great relationships with humana. labcorps, where they will have it is 600 locations in four years. united health care with med express. capitalt going to spend on making acquisitions but we have really good corner store locations. we are convenient, we can bring down the costs, we can bring that quality to the individual.a n are a lotthink there of investors today that are skeptical about whether walgreens can perform or not going into 2019 and beyond. when we look at our whole

coverage universe, because we are focused on the consumer, we do believe in drug retail being at that annex of really being able to provide services at a lower cost. purer: i want to talk valuation because 2018 was a tough year. relative to the s&p, a lot of companies in the coverage area underperformed. absolute ore, relative standpoint, how do these companies look on the valuation perspective as we head into the year? lisa: my companies are pretty cheap and i think there are number of different tire opportunities. when you look at the drug destroyed is, they are trading at near trough multiples but we have changes going on. so, if you think what can happen with durg pricing -- drug pricing and there is a concern about what pricing does to the distribution model. because of that concern, you have multiples that are near trough levels. when you go to the drug

retailers, you have got cvs that needs to prove what they have bought make sense. you've got walgreens that can prove that they have to do it in a partnership. then you have the labs wher eyou had changes on the reimbursement side, around their medicare business and you had two large contracts open up. so, the question around market share and what that does to the cost, you knw, when you start thinking about revenue and profitability. i think it is around uncertainty more than anything. as to why a glut of my companies are trading at the multiples they -- as to why a lot of my companies are trading at the multiples they are. lor: we are live in san francisco at the jpmorgan health care conference. shery: thank you. haidi: taylor riggs with lisa gill. do not forget tv on the bloomberg. catch up on past interviews.

you can also do a deep dive into any of the securities on the bloomberg functions we talk about. join in on the conversation. send us instant messages, any questions for our guests during our show. this is for bloomberg subscribers only. do check it out.

shery: this is daybreak asia. a quicket's get you check of the latest business flash headline. eli lilly recovered by losses after agreeing to buying for $8. billion in cash. bloomberg intelligence says it adds two first class assets. s&p has put the company on negative watch because the future debt implications. shery: united continental will

take $160 million after-tax charge on his hong kong comedies said last quarter as it faces rising competition. that flights are generating higher costs after corresponding gains in revenue. beend routes have not reassessed at since it emerged in 2010. the cost ofiked its california theme parks by 10% ahead of the new star wars land. the price of a one-day ticket in the summer on holly at weekend -- on holiday weekend will jump to $149, the cheapest ticket at $104. disney aims to better manage demand. th emost expensive disney ticket costs $1949. let's take a look at some of the stories trending across the bloomberg universe. dominatingutdown

headlines. president trump has four days till many federal workers miss paychecks. softbank set to be downsizing its event to $2 billion. a japaneseic toc, billionaire giveaway tweets brakes on twitter record. 100 lucky retweeters will split 100 million yen. those stories trending on the bloomberg online or on the terminal. haidi: also making money, some investors in asia today, we are seeing some pretty good gains across asia. we're seeing gains when it comes to tokyo trading on the nikkei 225. yen weakness is the haven trade fades in the wake of optimism over trade and lesser concern over a hawkish fed. thsamsung the major drag. heavy weight. off the session lows, .09%

lowers. we're seeing sydney trading, looking more optimistic. tech mirroring gaines we -- gains we saw in the u.s. ♪ amazon prime video is now on xfinity x1.

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>> we are seeing modest gains when it comes to aussie equities shifting from flat to lower start to the trading day. we are just getting some numbers. the australian trade balance missing expectations. 1.92re seeing a number of $ billion for november narrowing from $2.316 billion, the number we had in the previous month. $1.92 billion is what we are getting for november, just crossing the bloomberg now. we are seeing a steeper than expected narrowing of that trade. a strain exports one of the classes we are seeing the impact of the trade war, the slowdown

in demand -- in australian exports. and a bit of a slow down on commodities prices. let's take a look at our markets pricing this in and reacting. sophe is in hong kong. sophie, we had that remarkable - bounceback for the aussie dollar. we are seeing more risk on sentiment. sophie: when it comes to equities you have currencies holding steady. for the greenback to aussie much,, not budging too despite the miss that we saw for the trade balance. the aussie dollar trading at 71.43 u.s. cents. aussie shareds, we are seeing gains up 1/3 of a percent with tech shares leaving the advance along with health care in sydney. now, looking at japanese stocks, the nikkei as adding .09%, building on mondays rally at a subdued place.

the yen near overnight lows. let's check in on some stock movers across the region, focusing on some movers in tokyo with olympus gaining ground. morgan stanley embrace the buy at ubs. olympus up 6.5%. and decayed of climbing to him a one month high. is heavilye pharma undervalued and has raved the stock to outperform from neutral. earlier rising by 4%. goldman sachs upgrading the stock to buy on the idea that inventories will be resolved. for factory automation equipment by march and april. a lsaast check on samsung which eased earlier losses, now down by .04%, as preliminary

results to disappoint. the stock has been under pressure over the past year, down 26%. now trading at 6.6 times estimated earnings. over the past three musk, analysts have been lowering their price targets to 15% for samsung. shery: thank you. let's now get the first word news with jessica. jessica: thanks. slowing chip demand in the u.s. china trade war left samsung with first quarter profits below expectations. 65erating income fell to $9. billion below the forecast of $12.3 billion and a third below the figure announced a year ago. trade tensions have hit demand with shares down a quarter last year. amazon is now the most valuable public company in the world. ging past microsoft on wall

street list of the biggest corporate names. shares rose more than 3% to lead billion,t cap of $800 lower than the record of one dollars trillion in september. apple now has a market cap of $700 billion. president trump is to address the nation tuesday ahead of a trip to the mexican border as part of his drive forwall funding. the white house he says he will meet those on the front lines of national security and the humanitarian crisis. precise details have not been released. the president demand for $5 billion for the wall has led to a partial government shutdown in washington. >> this is not the way to govern. to pound your fist on the table and cause damage to millions of people unless i get my way. it is not what the constitution says. elections have some consequences. the president could not pass his wall when the republicans

controlled the house on the senate because they knew it was a bad idea. boss elon musk is calling on chinese drivers to order a model 3now while warning the new she shanghai plant will not produce new inverses of the car. luxury model 3's will still be made in america. tesla expects the factory 3 to roll out its first cars in march. >> there has been a steady movement towards opening. we're feeling very optimistic about the long-term future. jessica: he a. incourt -- he appeared court. he's charged with assault and battery of with an 18-year-old. the oscar-winning faces a series

of harassment allegations, all of which he denies. global news 24 hours a day on air, at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. now, india is forecasting the economy will grow at its fastest rate in three years. a boon to prime minister modi's thetions hopes, sho why is government asking the reserve bank to pony up more cash? let's start with gdp because we expecting growth of more than 7%. >> of course that is not quite themst, but it still makes one of the fastest-growing countries in the world. 7.2% gdp forecast for fiscal year 2019 comes true. this is the latest forecast on the indian statistics ministry. let's jump on the bloomberg.

to get you the picture. speaks a lot of than words. here we are looking for this 7.2% growth rate. yes, it did pull back to 7.1 till recent, india's economy was growing at 8.2%. almost 10% in 2016. what happens? there was a goods and services tax that was instituted some would say rather not eloquently, i guess. before the demonetization, the cash ban, all things for the economy. it looks now let the economy is returning to growth, maintaining a very healthy growth rate. however, our bloomberg economics team in india is saying that this is a mirage. you are seeing faster growth because those two very there in important steps taken by the modi government is behind it. india will need more stimulus. these elections for prime minister modi this year, he's set to spend billions of dollars

on farmers welfare come on health care, and infrastructure. that takes money. they have a budget shortfall. that's where things start getting a little more dicey and interesting here. haidi: it brings us to the rbi. the decisions made over, not made over paying an interim dividend payment to the federal government. en: going back to something we were talking about a couple months ago -- how much do they owe the government? what about their capital holdings, how is that conduit? reserve bank new of india chief has not decided on an interim dividend payment the government wants. the modi administration facing a budget shortfall ahead of the election. ore dividend get m payments, a bigger payment from the rbi. and meanwhile at the rbi has d e ne, like the previous chief, they formed a panel to study

their capital structure. it was the same thing the rbi was doing that led to tensions with the government leading to him stepping down. haidi: k athleen in new york. 2018 ended well for ubs in china. the first securities firm to win the green light to control its local joint venture. what is next for their presence in china? we will get back to the conference in china. he's joined by the man who will have all of the answers. >> hopefully. by, very pleased i'm joined eureugene qiang. you have got that majority back to the end of november of last year. what has that been able to do in terms of change your priorities? you able to freed up to make the kinds of decisions that

you are not able to make prior to that? eugene: first of all, we were running as were so many of the ubs security's ever since 2007. however our economic interest were cap at 25%. now wer able to say that we majority the firm, which is a full license to become a first majority controlled, full license securities firm in china. that means a lot to us. our interest, group interest, ubs interest align. our domestic shareholders interest are served by this commitment or renewed command from the group and by ubs itself. so, we are ready to go. we are going to overtime gradually increase capital and focus on traditional business of underwriting and an advisory cross-border. we're also going to seek a way ore local brokerage business which has the capital-intensive nature such as chair financing, such as equity derivatives, etc.

where international firms like ourselves, with the balance sheet offshore, and with the expertise we accumulated through global business practices are able to bring to china. beare very hopeful we will the first one to kickstart a new phase of expansion for ubs in china. tom: you have added headcount, 600 new employees over the last couple years. what exactly are you diverting that headcount, which divisions are you specifically adding headcount to? eugene: as our group leaders announced more than two years ago we are going to double the staff in china. by that, we meant we will expand all three key business in china, investment banking, ubs, securities, but also wealth management. the world's leading business of ubs group. to your question, many of those head counts are into those business -- plus, the management businesses that were set up new entities in a shanghai free

trade zone. then, finally, with the front office expansion we need to increase the headcount in lead and back office. so, business solution center which has its own subsidiary in shanghai, are also adding on hundreds of staff to support the global and china businesses expansion. tom: are you looking to raise capital? if so, with that be private placement or potentially an ipo? ubs securities, that would be, we agree with all the shareholders including our group and also chinese shareholders through shareholder capital cash capital injection. we think it is the most optimal way of the firm's development to increase capital. the pledge buy into chinese policymakers have made to allow full ownership of, for financial institutions in china within a three-year timeframe?

our ourbased on understanding and latest medication from the chinese writing letters, come january 2021, all the foreign firms areh have been -- h old 61% able to apply to go up to the 100%. however, what a regular cannot force is the chinese shareholders, the domestic partners of these foreign firms, who may or may not agree to the sale. that is why you see some of our friends from the international firms exiting before they can reestablish new type of jv's. we were lucky because the shareholders we had, the partners we had in ubs from the beginning are not those from the same atmosphere as that. shareholders in china which made it much easier for group to increase the stakes in ubs securities. going for that shall remain the case. tom: which parts of your

business are facing the most pressure giving economic headwinds in china now? eugue: we are very nimble and careful about expansion planning when it comes to -- we're seeing the short-term, some uncertainty on the capital market front. we have also seeing some drop in volume. 8 is still the third largest -- in china for recent decade. we see someandpoint short-term uncertainty and headwinds but we are cautiously optimistic. if 2018 was a relatively low year with a low level of economic and capital market activity, 2019 could turn out to be a bit better than people think. tom: in terms of the stimulus, i know your team are expecting additional tax cuts, potentially corporate tax cuts and an increase in interest or for investment. your team predicted an increase

of 10% in 2019 in terms of successor investment. the problem many point out is that the corporate tax cut may not be passed on as it wasn't in the u.s. the interceptor spending, there are fewer investment ready infrastructure schemes available for china policymakers at local government levels. do you share those concerns? does it mean they have less bang for their buck? thene: yiour first part of question, the corporate tax cut is not across the whole corporate sector. i thas be -- it has been focus on the preferential tax rates and focused on sme. th emore medium-sized enterprises. those are private sector companies who are lacking investment. to the extent the tax cut comes through and become more bullish, they are held with more cash flow to be able to preserve the likelihood of them reinvesting in the business. those may not directly translate to the consumer spending

necessarily. ese peoplef th reinvest they expand the business and hire more people, which the individual salary tax allowance helps from that standpoint. comes to infrastructure, what we see -- two broad types of infrastructure. a tier one city like beijing and shanghai is still building, crowded airports, not sufficient subway stations. ier oneansion in these teir cities are increasing the demand. these are solid, bankable projects that government approved in the hundreds of billions of renminbi. then in the more remote areas, 30 or four -- third or fourth tier city. in order to get reach, you have to build a row. there is government led investment driven infrastructure to -- hopefully pulling out of

the local economy out of the necessary slowdown. now, some of this infrastructure are more to facilitate the local growth. so, initially may not generate sufficient cash flow. that is why the government sponsored or the development bank supported the infrastructure are also valued but in different categories. tom: in terms of the trade war, talks are ongoing in beijing at a lower level. chair attended one of the meetings. there seems to be a view and your team suggestion will lease get a continuation of negotiations, if not a big bang market at the end of all this. your clients presumably have to prepare for a longer-term prospect, just increased volatility between the u.s. and china. how do you advise your clients? eugene: as you rightly point out, talking is better than not talking. so are reasonably hopeful that something will come out of the end of the talks, but end of

march. the likelihood of extending the deadline is also very possible. but all within the first half of this year. advising our clients to be nimble and be careful and to prepare maybe for something as we called it, before things get better, tend to be in the short-term get a bit worse. however, in the medium to expecting, there second half of this europe beyond, they are likely to, some kind of deal is very likely. we are cautiously optimistic a deal will be done. tom: eugene qian president of ubs securities. at the greater china conference in shanghai. shery: we'll take it from there. tom mackenzie in shanghai. let's take a look at property because our nesxt guest says that investors should look for opportunities in china and india. joining us from hong kong is the head of asia-pacific research.

happy new year. we are looking down the barrel of a great deal of uncertainty when it comes to property alsots in australia, but the likes of hong kong and singapore as well. where are the patches of weakness you are seeing? and do you think some of the stress that is coming on real estate markets is likely to be alleviated if we have a more dovish fed? >> happy new year. and i think for 2019 a major thing for commercial real estate is all about investment. we are expecting to see three major trends. number one is investors. uptick of profits. level.e is at a pre-gfc investor should take a profit for early investment. if you deploy your capital into the commercial real estate market, we advise a client to focus less -- but focus more on the structure opportunities, the structure opportunities related to facilities, data centers,

family and decentralized office assets in a major hub. china, wething about counsel be investors, not to mention about china but also investment opportunities in china in 2019 is somehow different from the previous cycle. investors should take advantage of a weaker sentiment by looking for the bargain. apply the -- to create values. those are the major trends we are expecting to see in real estate markets. >> when you are talking about opportunities in china, what tiers, what cities are you looking at? we have seen huge discrepancies between first, second and third. types of cities in china. >> i tghhink, if you look at the china real estate market, two different fronts. if you talk about residential

markets, 2019 will be stable pricing on the back of the policy support. i also want to highlight here that shanghai stock at stages of an talking about a china -- for decades. during the holiday season, you can see them in talking about -- for china. so, potentially are worn to see some first china rates in 20109, you talk about residentials. if you look at the commercial real estate market, it is a completely different story. they outperform every other asset class. onby the stronger e-commerce and not just the demand, investors are pouring money into that sector. 2019 for commercial real estate spaces for china will be another solid year. from our point of view we do not see china as a major risk. >> so, if you have a strong e-commerce market, what does that do for retail, for example, shopping centers? are they doing as well as they

could? henry: yeah. this is an interesting question. in our view, we do believe e-commerce and the retail, physical store, will exist together within asia pacific. the stories are different in the u.s. that is why we talk to investors. they should apply holistic view to look at retail and a physical store as an omin -- as an omni channel. >> what about the macro stories? if you have rate hikes and the u.k. how can that impact -- in the u.s., how can that impact trade flow? henry: those of the major uncertainties, the risk for the commercial real estate market in 2019 in asia-pacific. i think the interest rateh hike it's going to impact liquidity and asset prices. we are currently forecasting three rate hikes for the u.s. in

2019. continuous trade talk is also going to have some impact on the investment sentiment, which creates the volatility of the financial market. also, potential can cloud investment sentiment. will be a019 relatively solid year for commercial real estate markets across the region. >> great to have your perspective. the head of asia-pacific research. carlos ghosn will speak publicly on tuesday when he appears for his first hearing in the japanese court. the former nissan chairman is said to be planning a vigorous defense against financial crimes including underreporting his compensation. north asia correspondent stephen engle is outside the courthouse in tokyo. are we have an hour away from hearing him speak for the first time in two months? right.that's carlos ghosn will be appearing

in court and 10:30 local time, coming up shortly. he is going to get about 10 minutes to lay down his view of thistory could of course, is 50 days since his initial detention on november 19. his lawyers we able to speak for about 20 minutes. then carlos ghosn will get 10 minutes and then the prosecution will also get 10 minutes. they are not required to speak at the court today. we are hearing from carlos ghosn 's attorneys that he will one, declared his innocence on the charges laid before him, against an. he will also deny any wrongdoing. the lawyers are also expected to apply for bail after the hearing. he has been refused bail so far to date. already three times. his detention has been extended. and, perhaps, the defense wants to hear from the court why the extensions have happened since november 19 on a consistent basis. but that is normal in japanese

court. we're hearing as well that up to 30% of the bail requests are actually approved. and his so far have not been approved. so, that is what we are going to get today. the crowds are studied together outside the tokyo district court. we're hearing as well there are 14 seats available for the public gallery and more than 1100 people over the last few hours behind me had lined up for seats. only 14 were granted. >> nissan dismissed carlos ghosn as chairman as soon as the allegations were made public. but renault was standing behind him saying they need to hear and see the evidence. are we still seeing a renault standing behind ghosn? steve: yeah, they are. they are standing firm. is running coeeo, he

the company right now but right now he is still domino c-- renault.minal ceo of perhaps if he is also detained for prolonged period in japan where he would not be able to carry out his duties as ceo. we heard from the french finance minister saying there is a presumption of innocence. i have nothing in hand that lets me demand ghosn's departure. this resumption of innocence in a democracy is not negotiable." right now the french government and also renault standing by carlos ghosn, but we don't know how long that long last. haidi: stephen engle in tokyo. our chief asia correspondent. let's take a look at what we're watching as markets creep ever closer to the china open. sophie: we're watching apple suppliers after applie is set to cancel part of the iphone

x orders. we are keeping an eye on-- involvingin a case chinese intellectual theft. a one month high taking it to 1%. this as the dollar weakens and there is some optimism over china-u.s. talks. so, that is the set up. counting down to the china open. we'll have more coming up next on bloomberg markets. that's it for "daybreak asia". we look ahead to the start of the china session. this is bloomberg. ♪

♪ rishaad: it is 9 a.m. in hong kong and shanghai, this is bloomberg markets china open. yvonne: japan leaves asia higher with renewed optimism about the trade war. futures in hong kong and china will add to gain. chip demand inng major markets and the trump turf issues are to blame for missed estimates. >> a chance to speak. carlos ghosn heads to tokyo to give the first comments released to us publicly on the charges that brought him down. this is bloomberg. ♪