>> very good morning. i'm in sydney where australian markets have just opened for trade. shery: welcome to daybreak asia. ♪ haidi: the top stories this wednesday -- u.s. stocks fell for the most in three weeks as pessimism in trade war and tech tumbling. oil fell and the yen strengthened. davos saying new winds are blowing across the world. mike pompeo says whether it is

fair whether or fo foreshadowing a storm. business community must tell politicians. shery: let's see how the markets close the tuesday session after coming back from a holiday. u.s. stocks falling the most in almost three weeks. industrials and energy companies led the decline. oil falling from a near two-month high. we saw caterpillar and dupont leading to the kleins. the s&p 500 fall into session lows after the report that the u.s. turned down china's offer for discussions, although we have heard later on from larry kudlow, the economic advisor, disputing that report. nasdaq fell 1.9%. s&p futures right now unchanged. let's take a deeper dive into u.s. market action. remy a since you is watching them movers and shakers. we should be ready for a fall? ramy: that is exactly what they are saying right now.

basically, the terminal is saying i told you so over the past several years. i want to show you my first bloomberg terminal screen. what you are seeing is titled one short. we haven't seeing over the past few days that the s&p has climbed above its 200 day moving average and its 100 day moving average. you are probably saying that sounds good. it sounds bullish. that is usually followed by a fall as indicated by the pink lines between 2015 and 2016, and between 2011 and 2012, and all the way back to the financial crisis. if you look at these technicals, the recent rebound in this rally we are seeing could suggest we might have some consolidation ahead. what we are seeing today in terms of the market fall could be just the first of many. also, i want to show you a couple market movers here. they do run the gamut, especially if they are sensitive to u.s.-china trade. chipmakers down the most in three weeks.

we did see some strength in the british pound after some resilient jobs market numbers coming. crude seeing the biggest fall. the japanese yen up through all this volatility, below the 1.09 mark. strongest over the course of today. quickly, ibm came out with its earnings after hours. we are seeing the stock up by little more than 6%. it had been as high as 70 -- 7%. the company beat its sales estimates and it is because of the cloud. haidi: thank you so much for that. we discussed some breaking news on new work airport. united airlines saying the faa has issued groundstop's. there is suspected drone activity. the faa has initiated a groundstop for all traffic at new work airport -- newark airport. not great given we are just a couple of days after the public

holiday. a lot of people still traveling at the moment. we are seeing tsa security wait times and a lot of delays at newark airport, worst than most other airports as a result of 32 days of the government shutdown. we are being told, according to united airlines, faa has issued groundstop for all traffic at newark airport. we are getting you more details on that situation as we receive them. let's take a look at how we are setting up for the asia trading day. we are getting a tentative start to the start of trading in sydney as the jobs come online one by one. down by a quarter of 1% with the stocks that are trading on the asx 200. weakness when it comes to the aussie dollar. also, the story of potentially u.s. trade talks being called off by the u.s. with beijing, despite being refuted by larry kudlow. we will be watching in particular some of the trade sensitive chipmakers and tech

names in asia as they have declined in the u.s. session overnight. downside trading when it comes to new zealand, and a bit of pressure when it comes to the open going into tokyo. shery: let's discuss those topics about larry kudlow. comments denying the financial times report that the administration has canceled preliminary trade meetings with china. it hinges on enforcement and structural issues, as he spoke to reporters at the white house. >> we are saying to them if you play by the rules, whether they are structural, technologically related rules or tariff rules or rules -- ifarrier you open up your economy and let americans come in, we will have a huge flood of export sales across the board. shery: white house reporter

joining us from washington. where are we right now on these trade negotiations ahead of next week? >> if you look at larry kudlow, everything is fine. it is a very simple deal as long as the chinese agree to abide by some simple rules and have simple enforcement mechanisms to ensure they are following the rules and everything will be fine. kudlow said that president trump is optimistic he can reach a deal, he has good chemistry with president xi and they are moving ahead with these meetings. that is the optimistic version of what may happen. we have seen other versions and we have seen this debate go on for months on end with president trump saying he is sort of happy the chinese economy is slowing down and he is willing to take the chinese to the mat with tariffs. this march deadline, if there is no deal, there would be an increase of tariffs to 25%.

it is being watched very closely by the market, because no one really knows how things are going to play out. president trump has been very unpredictable through this entire process. despite larry kudlow's optimism, if president trump does not agree to a deal we can hit that deadline with tariffs increasing significantly on chinese goods and that could cause turmoil into the market. haidi: we heard from the secretary of state mike pompeo who delivered a speech by video link at davos. the shutdown preventing u.s. representatives from attending the event this year. take a listen to what he had to say. >> you all know this, new winds are blowing across the world. the central question is this -- do they signal fairweather or a storm? is this patter of destruction a force for good or not? i'd argue that this disruption is a positive development.

tone of the speech harkens back to the sentiment, the messaging that came through from president trump's debate and campaign speeches. what was the point in making these comments at davos? toluse: secretary of state pompeo want to do show that president trump is still the same person he was when he campaign for president, saying he was going to disrupt the global order and change things on the global stage. he is saying not only as president trump doing that in the u.s., but it is part of a broader global movement of destruction. we have heard from secretary pompeo that the united states is somewhat in support of some of the disruptive politics we have seen in europe with brexit and with some of the far right populist parties that have sprung up in other places in the world. instead of being afraid of what that for votes, we are hearing from secretary of state pompeo that this is a sign a positive things to come. this is not necessarily a

message that the global establishment members gathering at davos would want to hear. not a typical message they would hear from typical u.s. politicians but it is a sign that things are changing and the trumpet administration is on board with a high level of destruction we are seeing in the global political system and donald trump will continue to support that even if it causes consternation among the global elite gathering in places like davos. shery: speaking of consternation, day 32 of the u.s. government shutdown. mitch mcconnell on the situation. a receiving any claims, potential progress? toluse: not very much. they are going to have some votes to potentially open up the government. two votes in the senate, but unfortunately, both of those boats do not have the adequate -- votes do not have the adequate support to pass. we could be at the same place next week where we are right now which is the government shutdown going far into its second month

with no end in sight. shery: government workers could miss their second paycheck. thank you so much, joining us from d.c. let's get the first word news with jessica summers. is calling oni the business community to speak out about the implications of the u.s.-china trade war. saying all sectors could be hit. the deputy chairman told delegates that the fallout is spreading and business leaders should give their opinions. huawei's at the center of washington's fight with china. it is accused of stealing technology and posing a threat to national security. it will expand to many other industries and countries. matter if it is large,or local, small or no matter what sectors, it will be affected. jessica: theresa may is being

membersf increasing -- are worried the government is sleepwalking towards a hard brexit. tuesday's cabinet meeting heard a call for threatening of no brexit at all. other ministers set a no deal outcome should stay on the table. brussels said theresa may should simply say what she wants. >> we continue to follow very closely the ongoing parliamentary debate in the u.k. we ask the united kingdom to clarify his intentions as soon as possible. at this stage, we are nothing new to say from brussels because there is nothing new from london. jessica: google is considering pulling its new service from europe as regulators work towards a controversial new law. eu's copyright directive will give publishers the right to demand money from web platforms when parts of the article shows up in news research results or shared by users. google says it is following the

debate closely and any withdrawal from the eu will be done reluctantly. global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries, i am jessica summers. this is bloomberg. haidi: thank you so much. let's get you more details on this developing situation at newark airport. a drone was spotted north of the airport at an altitude of 3500 feet. the drone citing has temporarily halted flights at the minute. conforming --man confirming that report that was initially announced by united airlines saying the faa initiated a groundstop for all traffic in and out of newark airport. this is according to reports that two drones were seen around 3500 feet, near the northern part of newark airport. at a hold when it comes to

arriving aircraft. the airport is not been a complete groundstop. not great when it comes to people who may still be traveling on account of the earlier holiday this week. shery, we have been talking about the impact on the shutdown on travelers and tsa staff, etc. it was actually newark among the airport with the longest wait times during the martin luther king holiday as you are traveling in and out of the area. this is really another incident that will create further delays and inconvenience if you are still on the road. shery: day 32 of the government shutdown. we are seeing tsa screeners missing work at triple the rate of a year ago. not really making the flying experience any better for people who have to take flights. the problem has been going on for the last few months. we have seen the same incidents around the u.k., whether it is he zero airport, gatwick airport around the holidays that really grounded so many flights. haidi: still ahead, we are

counting down to japan' latest trade datas. plus, the boj's first policy meeting of the year. we are live in tokyo with a former board member later this hour. shery: next, live at the final day of the globe and -- goldman sachs conference taking place in hong kong. we are joined by the chief equity strategist, peter oppenheimer. this is bloomberg. ♪

>> i think in terms of the balance and the things they are going after, i also believe that is important because politically, it is manifesting itself in this form of protectionism which not just the u.s. but most places in the world expect their politicians and government to go after. >> i think one of the most important things that most

people do not think about as they talk about those discussions, trade deficits, talk about tariffs, intellectual property -- one of the things that i think could potentially be a dealbreaker's compliance -- is compliance. the u.s. is very focused on making sure that anything that is agreed upon actually is enforced. >> some american means to china, but it is not near the volumes that they were before. they are being supplemented with south american beans. there were 30 million metric tons coming out of the country going into china. certainly, we are not back to that kind of volume. >> i think something positive will come out from the latest round before this two-month period expires. i'm not too optimistic about a lasting deal. ♪ haidi: the hong kong chief executive carrie lam not

terribly optimistic about a long-lasting truce between beijing and the u.s. we are hearing from other high profile leaders of this year's davos. despite trade worries at davos, goldman sachs does not see a recession this year so what does it mean for the stock ra lly? we are joined by peter oppenheimer. peter, you see a relief rally happening this year. you got to get in or fear of missing out. if you got in it is early new year rally, where do you go from here because we are seeing this conviction being tested by really the same old worries of last year -- the trade war, brexit. the macro uncertainty of a slowdown in china and that is being fed through to the rest of the global economy. peter: yes. i think many of the things you say were priced in as significant risk towards the end of last year.

the situations that people of christ in on some degree -- priced in on some degree. last year, markets became too negative about the outlook for growth this year. we saw a very sharp drawdown, a significant derating of assets and now a rally. i think that rally has limits because fundamentally, we do expect quite low profit growth over the course of this year. i think that will cap the upside as well. you take a look at where this trade war situation goes. i think most of the people we have spoken to, even if we get a kicking of the can down the road or short-term positivity, the long-term strategic competition between these two superpowers is going to be years, decades to try to work out. if you are an investor who wants to be opportunistic, who does not want to miss out but also

wants to hedge against some of that risk, what does that potentially look like? think it is right to say that the general recalibration of longer-term trading relationships, and to some degree, as news is likely to ebb and flow, there may be some warming in the nearer term and then some refocus on some of the issues that you were talking about earlier in the program. generally speaking, these kinds of things are difficult to price in because they are difficult to predict the outcome. generally, that results in higher risk premium on risky assets. that is what we have at the moment. if you look at the spread between the kind of yield you are getting on equities and government bonds, bond yields have come down a lot since the end of the last quarter. risk premiums are quite high. i think the markets are pricing a lot of uncertainty.

probably too much uncertainty on the economic front, which is why i think we have seen this recent rally. some of the data has not been coming through quite as badly as the markets were pricing. i think we are really in a relatively flat trading range over the course of this year. shery: talk about your point about the markets really pricing into negative headlines. this chart on the bloomberg for our viewers showing valuations have dropped to around the bull market average. the s&p 500 standing around 15 times forward earnings. when you are already seeing equities dramatically pricing in such negative expectations, what do you focus on now? do you look at data for guidance ? peter: yeah, i think what is going to be really important now is two things. first of all, whether the economic slowdown of the equity markets are already priced to a large extent really emergence.

or whether the data actually surprises a little bit on the outside. on the macro perspective, our view would be the macro data will surprise a bit on the upside. we will still get a big slowdown relative to last year, particularly in the u.s., but not quite as bad as investors were fearing. the other critical thing to be watching for are earnings. we are in the midst of the fourth-quarter earnings season now. the guidance is going to be important. and also a focus on margins. consensus expectations in every region is expecting margins to rise through the course of this year. we think that is too optimistic and earnings revisions will come down. what is interesting is in companies that have had to -- had disappointing earnings in the last week or two, some of those are not really seeing much negative price action which suggest not a lot of negative news is priced in. i think really a focus on growth

in the fundamentals around that in terms of profits is going to be the key driver of the markets this year in a year where we don't really expect big valuation moves, in contrast to the big appreciation of valuations we have seen over recent years as interest rates continually fell. shery: if we were to avoid an actual recession, does that mean we could see a risk rally? what would that mean to equity returns for this year? i think we are in the midst of that rally now. it has been one of the best starts of any year for a very long time. again, i think that is a reflection of markets pulling back on some of the very negative expectations that we were seeing build in towards the end of last year. goldman sachs risk indicator, for example, which looks at risky versus defensive

investments across many asset classes had gone from record highs in 2017 toward record lows at the end of last year. when you get down that far, you tend to get a bounce which i think we are in the middle of. i think this rally will continue for a little bit, but unlike the rally that followed the big drawdown in 2016, which saw a very strong appreciation of equity markets alongside a very sharp acceleration in global growth, this time, we think it will be more muted because profit growth is going to be low, moderate. that will support positive returns, but i think we will be in a more flattened, skinny trading range for most markets over the bulk of the year. haidi: we have been scratching our heads as to what actually changed between the last fed meeting in december and the early part of january when we activists,ring from

jumping on the same messaging that essentially will be a very data dependent fed this year. as anything actually changed? is the market getting complacent or do you think there is a risk of a bit of a surprise and policy? -- in policy? is this what they didn't want? peter: i think that is a very good question. my view would be that while the equity markets really focused on pricing in the downside risk of growth in the last two or three months, and alongside that bond yields fell quite sharply and expectations were pushed out. the risk now is not so much on the growth side, but rather that you do see higher inflation or the data is better than expected and the markets really need to price the prospects of further rate rises in the u.s. and

perhaps slightly higher bond yields. that would be our expectation. our economists who are expecting the u.s. fed to raise rates twice, that is more than the market is pricing. we expect values to rise not dramatically, but i think that adjustment is likely to contain the scale of the rally that we start to see at the beginning of this year. shery: last year, we saw the u.s. market joining china in that global market selloff. this year is a different situation when you have the fed continuing to tighten. also, the effects of the tax package starting to fade. on the other hand, you have china boosting stimulus measures. where do the two economies and markets go from here in 2019? peter: it's interesting. in december, you did see a decoupling. growth being price mainly to the u.s., which up until that point have been much stronger than

other parts of the world economically and in terms of profits. already, you started to see the emerging markets in china outperforming. i think that we are seeing something of a convergence over the course of this year with the sharpest slowdown in the u.s. and u.s. profits than in other parts of the world. as you say, we are likely to see perhaps more stimulus in the case of china, on the fiscal side. that is already something that has happened and is largely behind us in the case of the u.s. i think to the extent that the u.s. does slow a little bit and converges, we could well see the dollar weakening a little bit. that together with any kind of policy stimulus in china will be pretty healthy for risk appetite across the emerging markets in general. haidi: peter, thank you so much for joining us. peter oppenheimer, chief global equity strategist for goldman sachs. in a moment, huawei says the

trade war is hurting global tech and it is suffering the most. more on the company's ongoing troubles next. this is bloomberg. amazon prime video is now on xfinity x1.

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jessica: i am jessica summers with the first word news. wall street saw some losses after the white house denied reports it canceled trade talks with china. turn down the offer of discussion because of a lack of progress. economic advisor larry kudlow said the report was not true and meetings with the chinese premier later this month will be very important and determinative. grounded in washington. secretary of state mike pompeo delivered a video message to the world economic for a in davos. he talked about disruptive views around the globe and also claimed a string of

foreign-policy successes. president trump commented on his absence from the event, tweeting he was criticized for attending last year and attacked now for staying away. >> you all know this, new winds are blowing across the world. the central question is this -- do they signal fairweather or foreshadow a storm? is this pattern of disruption a force for good or not? i'd argue that this disruption is a positive development. jessica: star signs of a solution to the shutdown in washington. senate leaders elite -- allowing a vote to revive ways to bring over the government. a democratic plan would fund agencies until february 8. on president trump's proposal that includes funding for his border wall. the democratic plan has been approved in the house. hopefulys it remains the diplomatic standoff with saudi arabia can be resolved and

it is always open to talk. it cut physical and diplomatic ties last year, accusing them of being too close to iran. the qatari government may also reiterate -- irritate riyaad with supporting lebanon with bonds. news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. let's take a look at how markets are trading on the early part of the session. headwinds over trade. this report from the financial times that the u.s. is canceling trade talks with beijing. that was later disputed by the president -- economic advisor larry kudlow, but markets falling the most in three weeks. still lending a bit of downside to the start of trading in asia.

we are seeing downside of 4/10 of 1% when it comes to trading in sydney. new zealand up by one quarter of 1%. inflation for december but still under the midpoint of the inflation target. signifying some growth headwinds. we are looking ahead to the open when it comes to, bank of japan decision day. we are watching for conversations around the slowdown in growth and inflation. domestic factors as well, like the strength of the yen and how that plays into keeping inflation capped. futures looking a bit low. watching chipmakers today in south korea. tech and chipmaker stocks really fall badly in the overnight session. shery: really weighing on the markets with all that drama surrounding wh huawei. defending the legal proceedings in the case against the cfo.

not asking the united states to drop it extraditions efforts. our chief north asia correspondent stephen engle is following this story. this economic feud not going away anytime soon. stephen: the standoff is continuing with both sides, china and canada saying similar things that there are legal proceedings going on and these are not politicized cases. i am talking of course about the aggradation case in canada with meng of huawei, but also in china, at least two canadians who are being detained right now on allegations of spying. i will get to that in a minute. we did here at davos in an interview with bloomberg television, canada's foreign minister saying it would be absolutely wrong for the meng to be politicized. it is a criminal justice matter extensively. she tells bloomberg she objects

very strongly to the notion of it being politicized or being used as political leverage in any way. canada sticking to its same message to china and to the world, and that is the legal system is separate from the geopolitical world. reminded us as well that meng is out on bail in vancouver. also reminded us she has a couple of beautiful homes in canada and that she will have full access to the canadian judicial system, which is impartial and objective, she said. meanwhile, you mentioned at the top that the u.s. has told canada that it will proceed with those extradition proceedings. freeland telling us again that canada has not asked washington to drop those efforts, saying it is up to the americans to decide if the case is dropped or not. you have illustrated the more favorable conditions of meng being out on abil. two canadians being detained in

china on possible spying charges. recent efforts, including a high profile letter from former diplomats. has there been any sort of progress on this? stephen: i will not say it helped resolve the situation whatsoever. we got the letter dated on monday by 140 different signatories, including former ambassadors from the u.s., former ambassador to china, as well as the former hong kong, last governor of hong kong. all calling on china to release those two canadians. canadians thatr might be being held for political reasons. scoffs at thata notion. we got comments from the chinese spokeswoman saying that letter was a mistake. as well saying that canada's efforts on the meng case was

also a mistake, adding that canada has abused the extradition agreements that are in place. these efforts by including the letter have not necessarily moved the ball forward, at least publicly. shery: stephen engle, thank you so much. we have the latest lines. a response coming from the chinese embassy in canada, saying that within canada, some people are creating panic over travel safety, saying there are no obstacles to cooperation. stephen mentioned that two canadians are in detention. a third canadian has received the death sentence over some drug smuggling allegations. we had seen china's envoy to canada really in a fiery op-ed railing against white supremacy of those who criticized china for detaining the canadians. we are seeing a diplomatic feud

escalating with canada really reviewing their decision whether huawei fromor ban its 5g network. finally, this response from the chinese embassy in canada saying there are no obstacles to cooperation and some people in canada are creating panic over tribal safety. -- over travel safety. hong kong's chief executive among those seeing a difficult year ahead. she told us she is not optimistic about a lasting trade deal anytime soon. >> last year, when i was here, everybody was so optimistic and positive about 2018. less than half a year's time, everything seems to turn upside down. 2019 will be a difficult year, because there is a sort of aftermath of what has happened

in the latter part of 2018. in our case in hong kong, it is exactly like that. we have seen the moderation in our economic growth in the third quarter and likely fourth-quarter. i'm worried that is not -- for some of our businesses, they will still work on previous orders from the previous seasons. they will be hard-hit in the first part, at least, of 2019. frankly, it is confidence. this is something that is very difficult to control and improve. if people are losing a bit of confidence in business, then you know what will happen in terms of not investing and wait and see. that will bring some negative effects. >> are you suggesting that hong kong could grow at a slower pace this year compared to last year? >> last year, we are still forecasting 3.2% in growth which is not bad because on average,

the last decade, hong kong did 3.7%. the trend growth is actually below 3% even in our projections . making 3% and 2019 will be a challenge, but this is a job of the financial secretary. evil come up with a forecast for 2019 when he delivers his budget next month. haslinda: a lot hinges on the u.s.-china trade war and whether a deal comes through. are you optimistic a lasting deal can be done? >> the depends what you mean by lasting deal. i'm a bit prudent and conservative. i think and i hope something positive will come out from the latest round before this three-month expires. i am not too optimistic about lasting deals. in the last few months or so when i interacted with different people, u.s. officials and

business people, there was a general feeling that this is not a problem that has recently surfaced because of the trade deficit. there are fundamental problems that have yet to be addressed. i don't very much doubt fundamental problems can be addressed within a short period. let's wait and see. that was hong kong's chief executive carrie lam. board up next, former boj member joins us from tokyo. we are looking ahead to the bank of japan's first meeting of the year. this is bloomberg. ♪

haidi: this is daybreak asia. shery: the bank of japan is not expected to pull any policy efforts at the meeting today as inflation softens and a tax hike looms in the coming months. kathleen hays is in tokyo for the meeting. kathleen? anhleen: well, it's interesting day today because right now for the bank of japan, what is driving policy is not what is going on domestically, it is also the global environment. it is the trade war that still shows no clear end. the federal reserve pausing on interest rate hikes and when will it resume again? we have someone who can tied together. she was a member

of the bank of japan's policy board. great to have you back. sayuri: thank you. kathleen: let's start with this policy setting. domestically, inflation pullback a bit and we know the falling oil prices can be temporary. that is a big factor. is that tying the boj's hands right now? sayuri: underlying low-inflation, but that is always the system. very much worried about exchanging movement with the yen appreciation we have seen late last year. i think there is worry about that. kathleen: does it have any significance they are expected to lower their inflation forecasts? sayuri: inflation forecast, i 2019-2020, 1.5% inflation outlook, that is still optimistic.

percentage points. i think they will gradually adjust downward as they usually do. kathleen: there is a dichotomy in the financial markets right now because some people are saying we know eventually they want to normalize. if they want to send a new signal, they should do it now before they get closer to the tax cuts. but you were just in hong kong saying do they have something -- if they have to do more monetary easing? sayuri: everybody was talking about what the boj can do additionally in the case of inflation or appreciation of yen. i think the boj is better to maintain cutting flexibly and try to be more etf's or using etf's depending on conditions. range,ning the target 0.2%. that inflation is going up. boj would just make a cut.

kathleen: do you think there is more concerned about boj with the longer monetary stimulus, the more there are risks in the financial system? sayuri: i think people on the board who are quite worried about side effects on the financial sector. at the same time, i think the government and some of the boj people think the exchange rate is quite important. a guidance influx and those reflect on corporate profits. i think they have to balance between wearing about side effects on the financial sector, but at the same time what will happen if the yen appreciates sharply. kathleen: what kind of role are foreign investors playing in the japanese stock market? how will that play out in 2019? sayuri: for example, there was a

flash crash on january 3 and appreciation of yen. was bythink that investors. i think for investors, they looking for some flexibility. maybe considering yen's appreciation. if fed stop the rating, everybody knows they are not going to do it, then the interest differential between u.s. and japan will start to shrink. that could create a great opportunity. i think, especially for the next april to may, the markets will shut off and create another. between the terms relationship between the federal reserve and boj, how much of

this question of rate hikes that in aow much of force that works for or against boj policy right now? sayuri: i think last year until the fourth quarter of last year, people thought that the fed will continue to have a steady rate the next three times. that leads to higher 10 year yield or longer-term yields in the united states but that did not happen. now, there was pressure on u.s. stop,and if fed would there would be no more federal funds rate for an extended period. pressure on the u.s. dollar index. people speculate that u.s. data will start to weaken, it will make it very difficult for the boj to take steps towards normalization. kathleen: the governor made it

clear when i spoke to him, look at how many bonds are purchasing. it is not a policy tool. they are buying fewer and fewer. inflation is on the board. is that going to be an issue in this debate? they are the minority but will they say we are not buying bonds? we need to do more. sayuri: actually, bank of japan shifted from qualitative target, so it makes sense. they pay attention to the long-term yield and downward in orderfrom the boj to avoid extremely low yields. at the same time, they also pay attention to what is reacting. do they care less about quantity? we don't know that. kathleen: how does the japanese economy look to you right now? the trade war is still going on.

is that going to have more of a lagged impact on the consumption tax? i know it is designed not to hurt the economy, not to hurt spending. what kind of path you see for the rest of the year? sayuri: at this moment, there is no influx yet from u.s.-china trade issues. i think people started to worry if there is decline in sentiment. sluggisharting to see consumption growth again. we have to watch very carefully about what is happening between china and the u.s.. but also japan and u.s. rate is very important. kathleen: thank you so much for joining us. former member of the bank of japan's monetary policy board and professor of economics. we will continue to speak to people outside the bank of japan. of course, the decision comes in a couple of hours. very important press conference this afternoon. back to you. haidi: thank you, kathleen hays.

certainly food for thought going into that decision, the trade balance numbers missing the mark. we are seeing a trade deficit of 55.3 billion yen. that is coming at ¥183.6 billion. expectations were for ¥290 billion, trading from that nearly ¥500 billion number we saw on the month of november. taking a look at the nitty-gritty. exports declining by 3.8%, much worse than the 1.8% they were expecting. that suggests we are sending to see a strain from the trade war. imports also coming in at 1.9% growth against expectations of 4%, and slowing from the 12.5% import growth we saw in december. we know part of this is a sharp decline we saw in oil prices, as

well the strength in the yen that really causes a shift in the import, but that export numbers suggesting the external is not looking too good. shery: in december, we saw the stronger yen go to 109. that did not help the numbers. they look much worse than expected. for a look at some of the stories trending across the bloomberg universe, bloomberg.com has a story on brexit which creates personalized shopping orders to help her in stockpile food to survive a no deal brexit. users can select the level of angst which goes from a little concerned to properly panicking. for more stories, trump's economic adviser larry kudlow denies that trade talks with china was canceled and says a deal infringes on enforcement. pope francis launched a prayer app and website called click to pray where users can't find

prayers in six different light which is. check out those stories on bloomberg.com or the terminal. this is bloomberg. ♪

shery: this is daybreak asia. i'm shery ahn in new york. haidi: qualcomm has won the latest round in its fight for apple, forcing an admission from the iphone maker that it has nowhere else to go when it comes to key components when the industry moves to 4g. it has considered ericsson and -- but none can deliver to its best. qualcomm is defending itself over charges of bullying phone makers to pay inflated prices. haidi: tencent has been frozen out as chinese rigoletto screen like new online games. neither company is on the list of 93 domestic titles approved for licenses this month.

list inent on a longer december that ended a nine-month freeze. growing concern that china's largest gamers may be forced to wait longer than anticipated to start making money from hit titles. ahead of that bank of japan decision and the opening of tokyo before that and south korea, these are some of the stocks we are watching in tokyo. watching for moves in ana. it is considering investing about ¥10 billion in the holdings company that owns philippines airlines as part of the capital partnership expansion. also watching japan display. wall street journal saying there are against talks with tpa holdings and growth. investment sharing in japan about 30%. shery: we have breaking news at the moment. green rose making a takeover offer. we know that it is a canadian marijuana producer. now it is trying to take over --

it's offering 1.5714 shares per share. branding says the former takeover bid will take place on january 23. plenty more to come. this is bloomberg. ♪

>> good morning. i am haidi stroud-watts in sydney. the markets have just opened for trade. i am ramy inocencio in new york. welcome to "bloomberg daybreak: ramy: our top story, asia-pacific stocks are set to fall. pessimism about the ongoing trade war between the u.s. and china. oil also fell in this risk off session. the yen did then. davos is told new winds are

blowing. if they signals fairweather or storms. over to the bank of japan. it meets for the first time in 2019 amid softening inflation. 0.7%, far from the 2% target. weakening trade backdrop. live in tokyo. lots on the agenda. let's look at how we are faring as trading gets underway. australia and new zealand underway. we are joined by tokyo on the bank of japan decision of the year from the doj. b -- boj. signaling conversations around inflation. external worries over the trade war, which had trade numbers. 5%.are seeing downside of .2 nikkei coming online off by .08

8%. a led declines we saw in the u.s.. reports saying that the trade talk seven canceled by the u.s. -- top economic advisor to the president coming up quickly after still seeing some losses and a lack of conviction at this rally in the u.s.. let's take a look at what to watch out for in asian markets. our bloomberg live team is here in sydney. let's get through this trade numbers. we were watching for the export numbers. that is the trade war starting to play through. reporter: it adds to the bad news we have had this week. monday was korea and that was shocking. taiwan came along in the end of gdp, and now china

we have had japan. i was looking on a quarterly basis. trade balance is the biggest deficit since three years ago. ran bigaditionally trade surpluses. they switched their deficit around in 2015 and climbed back up. now it is back down. nevermind the world. it is all about painting a tough 's economy andia stock market. if you have a negative lead in the u.s., the question is not whether they will continue in the asian bank. had goldman sachs talking about the equity strategy for the year. he said you need to get on the relief rally. where do you go from here?

garfield: part of this is that there are so many binaries out there. once where if you guess right, you are golden and if you guess , if you can stand hand on heart and say you know how the trade deal will play out, then you are going to make a lot of money. very few people do know how it is going to play out. until you know that, you have to be very nimble. it is a good idea to look for those bursts of tactical strength we have had. especially going into the month when that has been a time some of the position goes to a reverse. thinkingant to be about whether you want to leave

your money on the table going into the end of this month. bank of japan had their first meetings of the year. last year, they were talking about self partnering. garfield: i ensure the governor will continue to talk about his willingness to keep up the system and to work toward the 2% goal. stealth papering has been forced, because they simply could not go on buying bonds at the pace they were buying them. even in japan, they just aren't enough. there are concerns about etf purchases, that they own too much of the nation's stock market. is becoming, how do you do it? ramy: earnings season is also

underway and the adjectives coming out our concerns -- well, that is a noun. headaches, and downgrade. not much positive here. where do we stand? garfield: part of it is that last year, there were a lot of banner earnings in various times, especially first half of last year. 2017set the bar high, and was fantastic. , theave got that hibor difficulty of sustaining the pace and at the same time, there are these downgrades. beingstill stands out as a particular concern, because it is a bellwether for the u.s., considering how important smartphones have become.

that is a concern and it is very much about the forward estimates. what people see going into the future. we had some figures out last 2qk about how 1q and earnings estimates have been drawn down genetically. that is adding to the clouds being cast by things like china gdp. of course, the global growth downgrade. ramy: looking at your most recent log in the blog, you're talking about the most overvalued g10 currencies. since last april, it is up by 6.5%. tell me about that. garfield: the difficulty is that been one offed has the few central banks raising

tightening,es and that helps to drive the dollar. there is momentum in the u.s. economy. the worry has to be that much like a lot of central banks and globales, since the financial crisis, once you start raising rates, your currency goes up too far, and that starts retarding effect on growth. that is playing out in the background with the whole fed policy. haidi: mliv -- , the mliv team leader latest on the currencies. let's look to the u.s. trade war. president trump's top advisor is denying that trade talks were canceled amid growing angst of a china deal. tom mackenzie is following this from beijing. a lot of mixed messages.

he said, he said. where do we currently stand? tom: we were trying to cut through the fog of the trade war. this is larry kudlow who denied this report. they were saying that preparatory talks which would involve conversations between the finance ministers this week had been mixed -- nixed. tehe ft was saying they were big disagreements between the two and that is why those talks were put on hold or scrapped. this is something kudlow is denying. around thelines disagreement on ip and tech transfer suggest, they build on the picture that there are fundamental differences. we reported on this the back of those january talks. you had three days of back and forth where u.s. and chinese

officials tried to hammer out different sides. they haven't made much movement on that. what we get to now is kudlow coming out to the white house and saying, these talks are substantial. they are moving forward. he said the key issue was reciprocity. listen to what he had to say in this briefing. them, if youing to played by the rules, whether they are structural, ruleslogical, or tariff or nontariff barrier rules, if you open up your economy and let americans come in, we will have export salesof across the board. stating the obvious, but saying that the talks expected between chinese vice premier and his rep counterpart -- his

europe counterpart, he told the nbc that these would be very important talks. certainly, many analysts and economists say we have to focus on whether anything substantive comes out of his conversations. think thet do we priority will be for this next round of talks in washington? it seems like china has to move beyond pledges to purchase more u.s. agricultural product and energy. table ands on the said we can reduce to zero by 2024. a raised a lot of eyebrows. says it is time to come forward and talk about timetables. these are things that chinese officials will find hard to stomach. they will not want to straitjacket themselves.

certainly, there is pressure building. he saw that tweet from president trump taking an opportunity around week gdp data to say was time for china to strike a real deal. trump is under pressure from republicans and democrats in washington, as well as a business lobby, who have been very negative on the prospect of tariffs, but have come around to the idea that they will extract something substantial from the chinese side. there is pressure building on all sides. the question is what kind of deal you may get. at the least, you may get continued conciliatory moves from the two sides. maybe a continued cease-fire. onterms of a long-term deal a lack of that deadline, that is still up in the air. we heard the chief executive

saying she is optimistic of a trade deal. a lot of skepticism about what comes out in terms of how substantive it is by that deadline. haidi: certainly a conservative take. there continuing to watch his developing trade story. let's get to new york. japan and russia say settling a long-running territorial dispute is a daunting challenge and admit little progress has been made. thesoviet union sees islands during the final days of world war ii. japan claims territorial rights to the islands, which are called the northern territories and the dispute has prevented the signing of a peace treaty. like to stress that delicate work is ahead to create conditions for reaching a mutually acceptable solution. our task is to invite a

long-term and broad element of russian japanese relations. to solve at easy problem left unsolved for 70 years. we must do that. we need to work actively together to achieve more trust between the citizens of russia and japan. >> washington secretary of state pompeo delivered a video message to the economic forum. he spoke of disruptive news spreading the globe, touted economic strength and claimed foreign-policy successes. president trump commented on his absence, treating he was criticized for attending last year and attacked now for staying away. >> you on the that new winds are blowing across the world. is, do theyquestion signal fairweather or storms? is this pattern of disruption a force for good or not? i would argue this disruption is

a positive development. >> there are signs of a solution for the shutdown in washington, with senate leaders agreeing to allow votes on rival ways of reopening the government. lawmakers will vote thursday on a democratic and that would fund agencies until february 8. it also includes funding for the border wall. the democratic plan has been approved in the house. huawei is calling on the business community to speak out about the implications of the u.s. china trade war, saying all sectors could be hit. the deputy chairman told delegates that the fallout is spreading and -- business leaders should voice their opinions. huawei is being accused of stealing technology and posing a threat to national security. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries.

ramy: thanks very much. we have an alert coming across the terminal. all clear at newark liberty international airport. the airport now tweeting that operations have resumed after arrivals were briefly held by the faa because of reports of drug activity. faa andting with the looking into more with federal law enforcement authorities. thel ahead, we will look at crate of ways some chinese companies are skirting official attempts to tackle leverage in the financial system. , goldman sachs has lowered its 2019 forecast for japanese equities. at the macroive conference in hong kong. this is bloomberg. ♪ this is bloomberg. ♪

ramy: welcome back. this is "bloomberg daybreak:

asia." i am ramy inocencio in new york. haidi: i am haidi stroud-watts in sydney. qualcomm has won the latest round of its fight against apple, forcing an admission that the maker had nowhere else to go for components. apple said it considered other suppliers in 2012, but none could deliver. qualcomm is defending itself against causes of bullying phone makers. a slump in zurich after warnings there may be worse to come. assetsput $13 billion in for the end of last year. the bank says withdrawals totaled a most billion dollars its last quarter. clients removed and 5 billion from asset management. the ceo says the global economy is facing a perfect storm. >> when you look at geopolitical

and geoeconomic tensions, they are clearly converging into a that can destabilize short-term market decisions. stanley black & decker is the latest to warn about the deepening global slowdown and telling investors it is reducing sales guidance. 2019 salesers said growth should be at the lower end of its long-term target of between four and 6%. black & decker forecast profits that would miss analyst estimates. ramy: you can get a roundup of the stories you need to get your day going on this edition of daybreak. , it isrg subscribers also available on mobile in our app. you can customize your settings so you only get the news that you care about. this is bloomberg. ♪

haidi: this is "bloomberg daybreak: asia." i am haidi stroud-watts in sydney. ramy: i am ramy inocencio in new york. canada's foreign minister is defending her countries legal proceedings in a case against huawei ceo -- cfo, asking that it is not -- adding that is not asking that the u.s. -- we are following the story with the latest. reporter: it is set to happen. at least the efforts to extradite her from canada will go ahead. the department of justice in the united states says it is going

ahead, but against the bedrock -- against the backdrop of a war of words with canada and china. the latest in the last hour, we have comments coming from the chinese embassy in canada, saying some in canada are creating a sense of panic regarding this travel safety aiming to deter educational and cultural exchanges. this comment coming after reports surface that the mayor of ottawa -- excuse me, quebec city, has canceled a trip to china. there is a war of words on both sides. the canadian foreign minister is speaking to bloomberg television and saying it would be absolutely wrong for this to be politicized. however, it is being politicized , because of this war of words. she goes on to say a criminal justice matter -- it is a

criminal justice matter exclusively. yesterdaypside, just we had the chinese foreign in atry spokeswoman sharply worded press conference saying canada should stop making irresponsible remarks. they seem to be both digging in their heels and digging bigger holes. haidi: you mentioned she is out on bail. time, at least two canadians are being detained in china on spying charges. high-profile letters from former diplomats and academics, have they helped the situation? stephen: i think it is adding to the war of words, because we had this letter monday from 141 signatories, including the last governor of hong kong, a former ambassador to china, they basically expressed in an open

about theeep concern detentions of the canadians. saying that it basically undermines china's other diplomatic efforts on this matter. we heard again from the foreign ministry spokesperson of china dismissing that letter as a andite -- as a mistake recalling what canada has done with the case as a mistake. adding that china -- canada has abused the extradition agreements between canada and the united states. sais getting mired in he d, she said. haidi: chief north asia correspondent. let's take a look at how these headwinds are continuing to wreak havoc on markets. rally,nce the new year we have seen a deterioration of

conviction. particular on wall street. that has been flowing into the asian session. done by 6/10 of 1%. energyseeing tech and leading that index lower. for the signaling as to how they feel about inflation. currencies, we seeing it hold steady. had anumbers earlier stronger yen and weaker oil combination. at 681.rading aussie dollar gaining ground after some weakness we saw overnight. ramy: a lot of volatility out there. up next, we look at a creative way some chinese companies are boosting demand for their bonds. this is bloomberg. ♪

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wall street pared losses after canceled trade talks with china. the administration had turned down the offer of discussions because of a lack of progress. economic advisor larry kudlow said the report wasn't true and that a meeting later this month will be very important and determinative. theresa may is being warned of increasing disquiet in her party. members are worried that her government is sleepwalking toward a hard brexit. hadday's cabinet meeting tory rebels threatened with no

brexit. a new deal outcome should stay on the table, they said. we continue to follow the ongoing parliamentary debate in the u.k. urge the united kingdom to clarify its intentions as soon as possible and to date, we have nothing to say from brussels, because there is nothing new coming. >> kotter says a remains hopeful its diplomatic standoff with saudi arabia can be resolved and it is always open to talks. the saudi red talks cut diplomatic ties, accusing of being too close to iran. the government may irritate riyadh by supporting lebanon with half $1 billion of bonds. even so, they remain optimistic. >> all these countries in the region are important to engage with. crisisn open with the

members that gcc, other , especially the blockade start to engage with their own region. google is considering pulling its news service from europe. regulators work toward a controversial new law. the eu copyright directive will give publishers the right to demand money from web platforms when parts of their articles show up in search results or are shared by users. google says it is following the debate closely and any which are all from the eu would be taken reluctantly. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. haidi: thank you. look at how the asian section is getting the day started. .e're seeing downside there

wall street stocks falling on that report. these preliminary talks between the u.s. china have been canceled when it comes to trade. we are seeing downside on japanese stocks. numbersgly set of trade . a slump in exports suggesting we are straying from the trade war. adding to the broader picture after disappointing south korean trade numbers. chinese gdp is all painting a somber picture of how trade is affecting these companies. ramy: we can see that red on the screen. analysts say chinese companies have found creative ways to secure funding, such as indirectly buying their own bond offerings and masking investor demand. we bring in our china editor. why are companies doing this? because chinese

companies have been facing this since 2017 on the deleverage campaign. they are forced to try to come up with ways to avoid default. , theys case, indirectly are creating this image that capital market demand is better than might otherwise be true. that might be misleading to the investors but also leads to better sales of those companies. otherors would believe investors are buying, so why not me? haidi: what are the risks? understand the risks, we need to understand how these deals are done. anse companies would set up asset management vehicle arranged by a chinese broker to buy structured debt. this vehicle is buying bonds issued by the company. othermpany would usually

investors who typically don't know about this arrangement would go in. the risk is, if the company defaults, not just the junior has been wiped out. the senior holders will also suffer severe losses. this is the least transparent way for chinese companies to arrange financing that we have learned about. it is crazy when you are trying to get your head around it. what are regulators doing at -- doing about it? lianting: we have contacted regulators of the bond market no one has gotten back to me. because of lack of data, we don't know how big the issue is. the regulators have yet to step in. they will only step in when they realize it is big enough. haidi: something to watch and see. thank you so much for that.

.loomberg china credit editor lots more to come on daybreak asia, including a look ahead to the first bank of japan decision out of the meeting later today. we will catch up with the goldman sees -- goldman sachs chief japan executive. her raid on the trade numbers from japan. that is up next. this is bloomberg. ♪

ramy: welcome back. this is "bloomberg daybreak: asia." i'm ramy inocencio in new york. haidi: i am haidi stroud-watts in sydney. a decline in in the -- in inflation, no change in policy is expected although a cut in the inflation forecast is likely. kathleen hays is at the boj with a preview. these latest trade numbers that just add to the general sense of disarray or dismay.

majority want to signal normalization, somewhere on the horizon, it is hard to see how they can do that now. we can take some comfort in the recent pmi, but the trade war could have a lagged effect. here in the first policy meeting with the bank of japan of 2019, the decision in just a couple of hours. press conference this afternoon. ago, things seemed to be moving toward target. the trade war was going, but not like it is now. we're looking more signals that the boj is getting closer to normalize policy. people are still looking for that, but more are saying no. dependent country watching this trade war would still have no and. it seems to argue for keeping

the status quo. some people are raising the there is an what if external shock of any kind, or an internal shock that hits the economy? what policy tools to they have left? also cut the inflation forecast for the year. some of theseme, factors are temporary. , cellularucation fees phone fees, those things depress prices, but they can be transitory. still expressed his optimism. another question is with bonds. 10 year yield at zero. anything, the governor will say i have tried to make it clear, the target is keeping the 10 year in the range around

zero. i think that is where we look at the interest of a market impact. back to you. ramy: it is all in the words and it seems to be global economics and policy in tokyo. goldman sachs has lowered its 2019 forecast for japanese equities, saying the yen has reached the strength we are seeing and is likely to persist. let's head to the bank's global macro conference. chief japan equity strategist kathy matsui joining us. let's dig deeper into lowering your forecast. essentially, we are now looking for the dollar to weaken against most currencies, including the japanese yen. at the beginning of last year, we were assuming 108, now we are

assuming1.05. a could be enough to shave some of the single-digit profit. japan has suffered a huge correction in the fourth quarter of last year. half of the talk is ari trading below book value. markets already got a lot of bad news. like i said, i think the earnings prospects will be relatively muted. fiscalings growth for 2019, 5% in fiscal 2020. there is still some upside. roughly 22,000 on the nikkei is the target. more muted concerns and what we have been accustomed to. ramy: a lot of this does hedge on what happens to the yen. one of the former doj chief economists was on bloomberg news saying it could hit to the 80's.

hop into the bloomberg terminal. i want to show our viewers what this looks like. there around 1.09 to dollar. you can see the ag-19 range is here. they were saying this could happen in japan enters a recession this fall. what do you make of that? of course, you can jot also its of scenarios, but in terms of our biggest case, for example you just mentioned the trade data was week. if you look at two thirds of japanese gdp, which is private engines ofh of those the economy are holding up well. -- that isre the por why the pmi is showing that. the aggregate employment income is growing at over 3.5% nominal. ,ecause of the labor shortage

we also have draconian limits on overtime hours being it lamented -- being implemented, companies are desperate to invest in i.t., ai, robotics, anyway to improve productivity and efficiency and replace human tasks with machines. that angle plus the consumption, which is two thirds of gdp will prevent japan from falling into recession. there are external risks. we are not denying those. in our world, we're looking at probabilities and think it is unlikely to fall that sharply this year. the two main routes i see for capex and investment sentiment is the trade war. when it comes to consumer sector, we are looking at the possibility of a sales tax hike. we know was disastrous last time that happened.

are these two being discounted by the markets? is there a chance we start to see a deterioration? we know they have taken so long to rebuild. like you said earlier, the trade tensions are not going to disappear anytime soon. we'll get a decision presumably in the near future by the white house about the report from that department regarding tariffs on auto imports from japan. aside from that, we said about the sales tax hike, we are assuming that the government is going to proceed forward with this tax hike and prevent a deja vu 14. the last time that tax was hikes, they were putting together a huge number of measures to mitigate the negative side effects of the fiscal tightening. they will leave food items at 8%, not imposing be 10% tax.

they will give additional members, like tax breaks if you buy consumer durable items, houses etc. after october 1. this is not to say it will not be negative for consumption. we think it will be alleviated by the steps the government plans to take. we are not super bullish on the market. we only see 5% or 6% up site, but there are interesting themes that investors should be paying attention to. if we are expecting another year that generates greater volatility, what you find in this market? kathy: touching the themes i i.t. capex has been one of our longest themes. in this arena, such as factory automation, have been crushed for the past 12 months. their exposure is quite high to

markets like china. analysts recently upgraded some of those names. their valuations have come up a on and the growth prospects a 1-3-year horizon. things look strong. that is an area we are fond of now. we like service consumption. not so much goods or retail, but service consumption does tend to drive small caps domestic plays. ,anging from tourism related leisure related, health care, educational services. that is where the pricing power will be seen and the demand will grow long-term. we think there are interesting themes again at the micro level. imy: before we let you go, want to ask about the interplay between the fed rate path. we know what is happening with

the fed in its pace of tightening. the purple is the boj. how does what might play out boj?in january help the think it will presumably help in so far as the doj may feel less compelled to taper. at the end of the day, the issue -- the issueutfit is, as we mentioned at the outset, the bank of japan facing the economy. we think the bank of japan is likely to stay on hold. they don't want to tie in fiscal policy with the hike and fiscal policy at the same time. if you ask the government, you have no cushion on the monetary side.

in the event that it does enter a downturn. that is true but we have a fiscal levers to pull if need be. there is not a state of panic. it is difficult to see how much , butforce the boj could do for all intents and purposes, it will stay the same. that does include continuation of the etf purchase program annually at ¥6 trillion. ramy: expectation is to stay the course. kathy matsui, chief japan equity strategist for goldman sachs joining us live. don't forget our interactive tv function, tv on our screen. watch us live and catch up on past injuries as well as dive into any securities or bloomberg functions. us, you can become part of the conversation by sending us instant messages. check that out. this is bloomberg. ♪

haidi: this is "bloomberg daybreak: asia." i am haidi stroud-watts in sydney. ramy: i am ramy inocencio in new york. president and the ceo has been talking about the company's first foray into the bond market. that as the oil giant prepares for the takeover. he spoke to bloomberg in davos. aboutare in discussion

the acquisition of 70% of the share of sabic. we are in discussion with regards to the price. >> do you have a figure with the price might be? >> not yet. comment.oing to is veryrstand, this critical at this stage to keep silent about the negotiation that is ongoing. reporter: the energy minister has not been shy about financing. he is looking at a potential bond issuance. could you comment on that? we have capital programs and also consider the sabic.tion of 70% of

we are exploring all options for funding, one of which is issuance. reporter: let's talk about the bonds. how much could come from the market? are: at this stage, we going to decide soon how much we would like to take from the bond market. in terms decided yet of how much we would like. reporter: do you know what tensions are with the other 30%? amin: of sabic? it is a publicly listed company. it is listed in the market. reporter: could you just buy the 70%? amin: we are in discussion.

the issue of whether we need to or not is in discussion. reporter: have you had any preliminary? not to gointention is from the public at this stage. reporter: if you were told you had to acquire the 30%, it would be a dealbreaker? amin: this is something that is in discussion. intention, our strategy is to acquire the 70% stake with public investment. all the discussion is about the 70%. we have no intention of acquiring the other 30%. reporter: the guidance we had from the energy minister is that that will come to market. you would issue some debt, like in the second quarter. a bond.also been that will come with financial disclosures. are you prepared to discuss

nhl's? amin: definitely it will be a financial -- an international bond. we are in discussion with regards to how much and all of that issuance. inrything is going well terms of anything that is required. ,n terms of disclosures financial disclosures or any type of disclosure required by the issuance market, we will comply. reporter: let's talk about disclosures. some reporting we have done has debt inat aramco has no your where of the most profitable companies on the planet. when you disclose, is that when you will reveal that you have no debt on the books whether you are incredibly profitable? amin: we will indeed, our balance sheets -- they have this

in the market. when we disclose, we will amco ine the whole of ar the kingdom and out of the kingdom. of saudi aramco will be issued. reporter: let's talk about potential for pricing. when hundred semi five basis points on the treasury. do you think when aramco comes to market, spreads will be tighter? amin: that will be decided by the market. we will seek the bonds, but i think aramco is a very successful company. we had a great 2018. ,ur history and our performance when we share that information, the market will decide.

we have to agree. i had of that -- reporter: ahead of that, you might have to talk to a credit rating agency. are you talking to them now? amin: we have all the information required. reporter: you will have a better credit rating than the kingdom? amin: we are maintaining the kingdom sovereign ratings. from the other rating agencies, we will go with the disclosure. ramy: that was saudi aramco president and the ceo speaking to bloomberg in davos. that is it from "bloomberg daybreak: asia." our markets coverage continues as we look ahead to hong kong shop -- hong kong. ♪

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>> 9:00 a.m. in hong kong and shanghai. this is the bloomberg china open. pacific across asia down. blowing. new winds are do they signal fair weather or storm.dow a we will ask where the fed goes criticism the central hand.have played a poor