paul: good morning. we are under an hour ole from the australian market open. kamaruddin inphie hong kong. welcome to daybreak asia. paul: our top story this tuesday, alibaba with a second listing in hong kong. companyo bring the closer to the homeland. president trump the u.s. is not ready with -- for a trade deal that china is.

part two of our think -- exclusive interview. shery: a quick check on the markets. thisve seen the u.s. mobile day. we had mixed messages coming from president trump japan talking about congress. not ready for a deal with china as of yet. euro is not able to hold onto gain that we saw against u.s. dollar after the eu election. we had antiestablishment parties performing well. that is putting pressure on the euro. week'sing after last losses. 5% slump in oil prices.

we are seeing investors more focused on supply concerns from libya to iran. that is helping oil prices. sophie: after regional shares barely nudged higher, we are looking at another modest session. risk for sydney. japanese features are hinting at a marginal advance. -- littleittle as else on the agenda. gauging consumer confidence, a drop, indicating that pessimists outweigh the optimist. kong.nd listing in hong sharpening focus on ai. transactions are set to take place on may 30.

thank you for that. let's get a check on first word news. to brexit party success leave the eu without a divorce deal. turning away from the major parties. won less than 10%. theresa may called the result disappointing. nine candidates are vying to replace her next month. commission could pave the way for a $4 billion penalty. deputy prime minister has indicated that he will push back against brussels.

bank isa's central overhauling its system. it is a move towards more integrated infrastructure. they will try to prevent shadow banking risks. . system will be developed president trump saying that u.s. is not ready to make a deal on trade with china. he has pleaded his threat to further increase tariffs on chinese imports. president trump: they probably beforeey had me a deal renegotiating -- they had made a deal before renegotiating. up veryer could go

substantially, very easily. president trump -- shery: president trump was speaking in tokyo. he was speaking about the recent missile launch. >> it is a little strange. he paid a visit to the new emperor. they spoke about the relationship being the cornerstone of stability. the issue of china and north korea dominated the press conference at the palace. as he rightfully said, we heard from donald trump saying that tariffs on china could very substantially -- vary substantially. many companies are leaving

china. surprisingly, the chinese foreign ministry are not seized ,ith president trump's comment characterizing them as walking away from the deal. the spokesperson said while the u.s. has flip-flopped on messaging, china has been consistent. >> sometimes they have had various voices on china and u.s. trade talks. the times it is said that any agreement will be reached soon and others, it is difficult to reach an agreement. china's position has always been the same. trump said isd not ready to do a deal with china, he had a similar tone about north korea. said, i am happy with the way that it is going. of dialogueprocess

with north korea. we are in no hurry. the tariffs are still in place. kimelieves that when jong-un tells him, he believes in the economic viability of north korea. paul: we have also seen a tweet from president trump. he is talking about what the coming day holds, but he is also talking about the meetings with shinzo abe going well in japan. twot from that subjective word review, can you tell us what he means by very well? shinzo,in mind that for he has ruled out -- ruled out -- rolled out the red carpet for donald trump. he wants to make sure that there are no gray areas that relationship. he wants to build this relationship strongly with the u.s. and prevent getting those

auto tariffs. he pretty much dodged a protectionist bullet from the white house. donald trump is an unpredictable character and he could have hammered them. he did mention how big it is, but he did not hammer shinzo abe on that front. he will go down and address japanese and u.s. soldiers. ,e will likely visit worship one of the biggest in the japanese fleet. it is a helicopter carrier. it can be and has been converted to accommodate u.s. stealth fighters that can take off .ertically from the deck donald trump said he fully supports shinzo abe and japan's efforts to improve defense capabilities. japan is likely to buy many of

those stealth fighter jets from the u.s. paul: stephen engle in tokyo. thank you for joining us. sources have told bloomberg that alibaba has considered raising $20 billion in a second listing in hong kong. it would bring them closer to investors in its home country. tom mackenzie has been tracking this. what do we know? tom: at this stage, we know that to listhas been looking in hong kong, potentially as soon as the second half of 2019. this is early stages in terms of planning. in 2014, that is when they listed in the new york stock exchange, raising $25 billion. that is after they failed to

persuade regulators about management structure. it looks like they are looking for a second listing in hong kong, as soon as the second half of 2019. shery: how interesting is the timing given the technological rivalry between the u.s. and china growing? tom: absolutely. that seems to be a factor. thatostile environment many companies are facing in the u.s. there are also regulation changes pushed through hong kong stock regulators that allow this shared class of listing. companies have been able to list with those share structures in hong kong. company isim by the

to diversify its channels and boost liquidity. there are a number of reasons why they are looking at this closely. bring us to the second half of 2019. those invested in alibaba shares are up since that 2014 listing. they are down this year about 15%. tom mackenzie, thank you. ambassador, a former joins us live with what he thought about trump's visit. up next, discussing the geopolitical risk from trade tensions and fallout from the eu elections. this is bloomberg. ♪

paul: this is "daybreak: asia." says heresident trump will bide his time and is in no rush to enter a trade deal with china. we will discuss all of this with a senior fellow at the harvard kennedy school from tokyo. great to have you with us. the president has mixed messages. we heard that he was seeing progress with trade negotiations with japan, but when he came to china, he said the u.s. was not ready for a deal there. can these bilateral negotiations

, if successful, help to offset --e of that certainty uncertainty? if there were some relief on the japan front and the eu front, that would help. china is in a different situation. distinguishant to the three elements going on from the u.s. point of view. the overall issue that president largedoes not like such a trade deficit. that is a more generic issue. countries with the biggest surplus are in the firing line. the second issue is around national security. the steel and aluminum tariffs.

protectionist,it but there is an underlying interest. this is the most difficult one. china'sncerns about intellectual property practices. about a tradelk deal with china, what is this trade deal. it has to be something that satisfies the president in particular. its statebe changing capitalism. it has led them to deliver. we continue to see these giants battle it out around the world. what would be the fallout for neighboring countries that depend on relationships between china and u.s.? they need to choose?

-- will they need to choose? these geopolitical tectonic plates are rubbing against each other and it is not going away. depending on their geopolitical and geographic location, choosing signs will be -- sides will be long-term. they will have to manage their relationships with both of these geopolitical giants. in terms of economic fallout in the immediate term, there will be some trade diversion, if there is continued threat in the u.s. and china relationship. overall, it would be a negative on the economy. paul: how long do you see this taking to play out? we heard from one official that this could drag out 2035.

are we looking at a decade long process? >> i think that is probably a better framework look at this. is that theproblem china issue goes back to the section 301 issue. abouts a major theme trade needing to be fair and free and balanced. he launched in august an investigation into china's trade practices. essentially accusing china of using various techniques to engage in forced technology transfer and outright technology

theft. out about it.e the issue is percolating along. u.s. puts pressure on china to change and china comes back with what it can do. it is not satisfactory because it is almost systemic in the chinese system. done much easier said than to change the basic behavior of state led capitalist model with technology issues. 2025 program china looking in the background, which has been a bit of a wake-up call for the u.s. --it does not stop how china can fudge

this. i do not see a short-term way in which the chinese can satisfy president trump, if he really has his teeth into the bone. paul: do you have any thoughts on how the aluminum community has been addressing this? he was talking about the -- behavinghaving like frogs in the water, not noticing that the water is getting hotter. >> i think i somewhat agree with that. investors are probably taking the two largest economies in the world are interdependent now. while they have major

differences, they will not allow those to spillover and completely destroy each other's economies. having said that, both china and sizedre large continental economies now. while they have a strong trading relationship, over the medium-term, even if there was an adjustment to the trade flows and investment flows between the countries, some countries are so large now that their domestic demand can drive their own growth. it needs to do that by raising domestic standards per capita gdp. it is more of a demand story. investors are also looking at that angle. two countries who can sustain their own economies, even if they do not have as strong of a

relationship at they have had. shery: so important for what happens in europe as well. trading underway for the top jobs there. replacing.ing about can we gauge where the policy tilt will go towards? is it too soon? >> you are right. it is an important turning point. the elections are not just for parliament. it signals the end of one of the commissions, which will stop in november. it is an important executive branch and the european union. the new commissioner will bring commissioners from its nationstates.

there are always other positions. is a long process. is,key point to focus on will the so-called -- this idea that the party that gets the biggest block of votes in the european parliamentary elections will be able to nominate the candidate for the president. the german candidate would be the front runner. it seems like that probably will not happen. there will be a lot of jostling around the rules of the game. from that point, another piece is about to fall into place. prepared to have a little bit of patience with how these play out. shery: thank you so much for

that. roundup of the stories that you need to know to get your day going. bloomberg subscribers can find it on your terminal. you can customize your settings so you only get the news on the assets that you care about. this is bloomberg. ♪

paul: this is "daybreak: asia." i am paul allen in sydney. shery: let's get a quick check of the business headlines. volkswagen is making changes to its battery plan. concerns that a deal with samsung might unravel. they merged during detailed negotiations between the company. the samsung unit pledged a cut.

say they are not pushing for nissan to join, but the japanese carmaker would be free to join the expanded group in the future, if it desires. 7.5% for nissan. shery: considering options, including a capital increase in the next two months. sources say tapping investors for fresh cash is the least favored option because it could cause a backlash. chief executive has signaled deeper cuts as germany's largest lenders struggled to make a profit. coming up next, huawei is isying ip theft and says it

more likely that u.s. is stealing from them. this is bloomberg. ♪

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shery: this is "daybreak: asia." u.s. ist trump says the not ready to make a trade deal with china, although he claims that tariffs on chinese goods could continue to go up substantially and easily. he says that beijing probably wishes that they had agreed to the deal. the chinese ministry said that beijing's position has not changed. >> we believed that any differences between two countries should be resolved through friendly consultations and negotiations. maintain that it must

be based on mutual respect, equality and mutual benefit. raising $20dering million via a second listing and hong kong had the commerce giant is working with advisors on the offering, which would bring china's largest company closer to investors in its home country. application asn early as the second half of this year. sebastian has started his campaign to return to power. an enron administration -- the 32-year-old says his company voters -- confident voters will back end in september. paul: let's head to hong kong

for what's watch in the markets. proposedn light of the yacht merger, nissan is in view, looking to gain voting rights. fiat is not pushing for nissan to join the merger anytime soon. tokyo who hadg joined the bandwagon after shares declined. the company will spend as much as $1.4 billion, which prompted the chipmaker to revised its financial model. 2015.s the first since we will learn more this afternoon. setting an interview with the an interviewiting with the chairman. possible locations include taiwan and vietnam. founder and ceo

has denied that his company ever stole intellectual property and says president trump is targeting his company because of it success. >> it is more likely that the rest steals our technology. whether we have a government background, we can audit. they can ask for a report. this unfounded conclusion may not be right. lagging behind, trump would not need to make so many efforts to attack us. he attacks us because now we are more advanced than then. -- than them. > if the government came to you and said we need your help and cyber skills because it is for the good of the country and the good of the chinese people,

how would you respond? >> we absolutely would never install any backdoors. we would never do that. we serve human beings, not intelligence services. why should we install backdoors? >> one of the practical steps -- what are the practical steps for denying a request that angina -- that in china? >> we have never done that. was under., huawei the strictest scrutiny, so that we could earn their trust. it was as if we took off all of our clothes to prove that we had nothing to hide. the u.k. agreed to use our equipment. founderat is the huawei and ceo speaking to tom mackenzie. much more of his exclusive ceo

-- interview with the ceo this weekend. the chances of a no deal brexit appeared to be rising with theresa may's departure. -- let's lookthe at the fallout of all of this with mark cranfield in singapore. mark, the rise of that brexit party could be leading towards that no deal brexit. what sort of pressure will that put on the british parliament? absolutely. boris johnson has made it clear that he wants to take the u.k. out of the european union by the 31st of october, which is the current schedule. he is willing to do so without a deal, should the need arise. he is the leading candidate to take over for theresa may, see you had to take his word

seriously. he is not the only person in the equation and still needs to push decisions through parliament, which is pretty divided. between a nooming deal brexit and a quick january election. that is something that he cannot control. what it means for investors is that the medium-term risk for the pound is skewed towards the downside. we might see choppy trading in the short-term, while they tried to decide who is the candidate for the toy party. -- tori party. people will be thinking that the upside to the pound is not that great and they might use the market as a way to play against the pound. that volatility is not particularly high. there is certainly room for people to jump in, should they wish.

shery: big questions on who takes europe's top jobs. we have seen the party seats drop. the liberals could become kingmaker in this process. how do the markets price that in? >> it looks as though investors need to rethink about what is going to happen with the ecb, prior to these elections. it seems that we would get another dovish candidate. that is up in the air the have been inconclusive and some of the power bases have shifted. there will be a lot of horsetrading in the next few weeks. one of the results is that the next european commission president is not from germany. fromtially, a candidate one of the liberal groups could take over. if that is the case, it could

open the way for a german candidate to take over. for a long time, he had been dismissed. we have to rethink about a german as the head of the ecb. that would be seen as a slightly hawkish twist. it is not something that investors have had to consider for a long time. there is a lot to be decided over the next few weeks. when thebe a nonissue ecb becomes front and center in the market. shery: you can get more on this story and all of the day's trading on the blog on bloomberg . you can get a market down in one click and there is commentary and analysis. coming up next, former japanese ambassador to the u.s. joins us live in tokyo to talk about

trump's visit. this is bloomberg. ♪

paul: a quick check of the latest business headlines now. the data center operator controlled by chinese investors is planning to file freight hong kong ipl as soon as this week. the london-based company aims to raise more than a billion dollars. it operates 12s data centers across the asia-pacific and europe. they: 30% more capacity in current financial year after fourth-quarter profit increased five fold. -- says it is hard not

to be bullish while looking ahead. he is trumpeting the deliverance of new aircraft. valuable of tencent's -- another of its online sites, targeted for allegedly distributing obscene material. high.low a record it is 45% below its ipo price. that het trump said will push very results well in advance before the deadline that he set out. engle is covering president trump's visit to tokyo. visit is being completed

today. possible visit to the worship, taking on the strategic side of the relationship between japan and u.s. yesterday it was about economics and the trade war with china and north korean tensions. .e want to bring in our guest much for talking with us. the front page of the japan times, no surprises as shinzo abe meets president trump in tokyo. this trip has been going perfectly. >> i think so too. a great trip. i agree with japan times. it is planned that way and very much expected.

it is a great success. >> one of the worries would be if donald trump went off script , as wellapan heavily as the threat that he has imposed on japan and you with these auto tariffs. they avoided that for the most part. i thinkt think -- they would accelerate. >> more pleasantries. yes. news.we have this

-- >> i'm sorry. we could not hear your question because there is background noise. one thing that did dominate the news conference is the china situation. obviously, this is a big issue ith the u.s., but was important for japan to show solidarity with the u.s. in light of the increased rhetoric coming from beijing? . -- beijing? >> yes. it is a situation where japan is in between. the u.s. onast with that issue. we will continue to trade with

china. mr. ambassador, how did the japanese people feel about how the u.s. is steadfast? president trump is in no rush to deal with north korea right the recent missile launches. he once something out of the japan and u.s. trade agreement by august. there was no such agreement. count the u.s.ly as its closest ally at this point? >> there is no doubt about it. with thehe u.s. situation with north korea, china and so on. for the two issues that you -- maybe thekorea

president would like to show that he is a good cop. he will let bolton and pompeo deal with the issues and he will step back and try to be a grandpa like figure. i do not know. i felt that way. as for trade, i do not think there was any agreement to accelerate. i think the president expected last time that he would like to see some agreement made this time. that is his feeling. there is no discrepancy. >> one of the reason the japanese and u.s. have decided to announce any kind of progress on the trade deal until august

is because of the july elections. the upper house and possibly the lower house. we know that shinzo abe wants to change the constitution. we have been visiting soldiers. visiting the warship, which can be refitted for fighter jets. craft -- not had our aircraft carriers since world war ii. in july --coming up will that solidify shinzo abe's quest to ratify the constitution? with the relations trade talks, i do not think that is clear. they wanted to accelerate the agreement. the president said he would expect something to come by august. i do not think there is an agreement.

the congo, it is not an aircraft carrier. of course, it can carry helicopters. constitution -- maybe mr. abe would like to address this along with other arguments. to see if that will be the main issue in the election. minister would not like it to be the main issue of the election. an issue.ing to be we will have to see how people will react to it. shery: the prime minister has its own domestic issues with the constitution. how much political capital is there left to push through a

free-trade deal with the u.s.? given that japan never wanted a bilateral deal. they had the transpacific partnership and the rest pulled out. how much capital does he have left? it was a great success that last september, prime minister and the president were able to put forward this , with theement agricultural concessions they would make. .ot taking unilateral action i do not think it will be a huge onback for japan agriculture. if the president said in a press conference that he will not be bound by tpp, that has nothing he iswith him, that means

not bound by the tpp agreement itself. .here is an agreement i think that stands. shery: thank you so much for your time. nice to talk to you. shery: if you missed part of that conversation, tv is your function. you can watch us live and dive into any of the securities or function that we talk about and become part of the conversation by sending instant messages during the show. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪

shery: fiat has proposed a merger with renault. it chrysler chairman says

learns from experience. >> we have been encouraged by this merger of p.r. and chrysler. this is the reason for our proposal. the automotive industry is going through changes. we have learned that deals can be done. will not be any facility shutdowns. shery: how well do these carmakers fit together? there is a range of places where they might overlap. a lotays, they are making of different cars, including competing brands. the key is, that is where they have a good fit. electric cars is a growing segment. very goodenault with technology and selling models. fiat, not so much. that would be good in terms of requiring -- acquiring the

electric car technology. nissan has great electric car technology. to the extent that they are brought into the alliance, those are good areas. bet claims that there will about 5 billion euros in savings a year from this merger. r&de will primarily be in costs. definitely areas where they fit well together. they both have some very well selling suv brand, the hottest market, where the profit margins are. there are some good reasons to make this fit. guideis history much of a in terms of gauging how these alliances work out? >> it is. paused on this, there is a history of challenges

for global carmaker alliances. the only have to look at fiat itself. the record is mixed there because fiat chrysler alliance has worked out very well. fiat has been able to gain access to the high-margin u.s. suv market with the chrysler brand, chrysler ram trucks and jeep models some very well in the u.s. at good margin. that has worked out for them. chrysler previously had an alliance that did not work out at all. there is a cultural component. sometimes there are clashes. it comes down to how long-term and short-term thinking is. you have markets with a cultural component to them and it can be extremely challenging to execute this kind of thing. you need a strong leader like carlos ghosn to navigate an

alliance like that. shery: very ironic. we have the markets opening in japan at the top of the hour. aphie: we are gearing up for tepid open with little direction from the u.s.. markets are closed for memorial day. markets muddle along. beatty --trump is not not ready to make a trade deal with china. we are watching the actions to reports of changes to the battery purchasing plan. one of its supply deals with samsung may unravel. brokers with a lower stock transaction tax set to take place on may 30 as they try to attract more investment.

executives from the china company visited to request memory chips. japanrade in korea and and australia. more coming up on "daybreak: asia." ♪

paul: good morning. asia's major market are about to open for trade. sophie: welcome to daybreak asia. paul: our top story, mulling a second listing in hong kong. more trays brace for turmoil. president trump says china is

ready for a trade. success exit at. here part two of our exclusive interview. the marketeady to action with sophie in hong kong. little shares opening changed, the nikkei 225 raising thatcherism resume losses. the and is holding steady. the kospi. in on we had a gauge of consumer confidence drop below the 800 level. on -- in on australia. morning,pickup this slightly to the upside opening

less than .1 of 1%. the dollar is drifting and kiwi stocks set for third day of declines while the kiwi is hanging on to handle against the dollar. we're seeing some moves this morning. to start a new investment fund. thefund will surpass [inaudible] paul: nigel farage says success for the u.k. to leave the eu. they turned away from the major parties. ministering prime called the result disappointing. candidates are vying to replace her this month. the eu is signaling they will white house interest

[indiscernible] dismissing the warning that he could seek quoting's -- quotas for national security reasons. the european commission is said to be considering disciplinary reaction against the plan to rein in debt. officials say the step could come next week as part of the regular budget monitoring process. success in the eu elections, the deputy prime minister has indicated he will push back against brussels when crafting his next budget. chinese government's first seizure of a bank in more than two decades is piling price small lenders. regulators control for a year citing serious credit risk. the bloomberg index listed as banks dropped to a four-month

loan monday while the purchase rate jumped to the highest in a month. >> alibaba group is considering aising $20 billion through second listing. the mega deal would bring china's largest company closer to investors in his home company -- country. peter elstrom joins us now. what is the plan here? peter: sources have told us that alibaba is looking at this offering in hong kong. it is an incredible number. alibaba had the largest a few fundraising of all-time taking in $25 billion in 2014. this would follow on that. raising another 20 billion for bringmpany and it would shares closer to alibaba's home market and china. it is not clear why why they

would want this much cash at this time in way they would sell stock to do it. their balance sheet shows they are $30 billion in cash so you need to ask the question why would they want $20 billion is this point. the: and why hong kong is -- bringing the company closer to its market or is there more to it than that? >> it is. there is the sense that investor demand for alibaba's shares in hong kong and also it would bring the company closer to the [inaudible] in the u.s.ey trade and this would give them something a little bit closer to home and closer to the greater china market. >> we saw the latest earnings

being solid, maybe not affected by the chinese economic slowdown but given the rising competition in the market in china, we are talking about not only tencent but the smaller startups. how well positioned as alibaba to keep up the growth? >> that is one of the areas where they do need cash. they are competing against tencent which has been a longtime rival for them across many different is this is. this for delivery giant that has been china is presenting different kinds of challenges. it has a strategic plan to compete with alibaba and taking goods from the real world and allowing people to use their smartphones to order a most anything. it is primarily for but they othero move into services. alibaba has been moving into that business because they see that as a strategic threat to their core e-commerce business

so they have been spending heavily. the two companies were spending $1 billion a quarter on expanding in this business area. very much a cash sucked and that would give them the money to expand aggressive -- aggressively and take the air out of the market of a want to go back and raise cash thiselves to keep funding i are engaged in with alibaba. >> president trump said the u.s. is not ready to make a deal with china on trade also he claims beijing is and he has repeated his threat to increase tariffs on chinese imports. >> as far as china is concerned they want to make a deal. they probably wish they made the deal that they had on the table before they try to renegotiate it. they would like to make a deal. we are not ready to make a deal and we are taking in tens of millions of dollars of tariffs.

that number could go up substantially very easily. >> president trump was speaking in tokyo where he is on a state does this and still there. the president not only talking about china but also about north korea and the recent missile launch. has one of the world's strongest alliances been overshadowed and sidetracked? >> those are pretty strong words, whether they were off-the-cuff or planned. but we are not ready for deal, that is what he said about the china-u.s. trade deal in that has broken down. that through the question about where the endgame will be on this. we know the u.s. and china are not made face-to-face right now but japan and the u.s. are meeting face-to-face. they seem to be in lockstep and coordinated on all issues including north korea, including

eventually a trade deal between japan and the u.s. and then also in china. on china, donald trump went on to say that u.s. tariffs could be, could go up very substantially and very easily and he cited the number of companies that are perhaps leaving china and going to more non-tariff countries like vietnam and he even cited japan. sneakers and toys will be moving to japan for manufacturer. this is how the chinese responded. the foreign ministry spokesperson cited the flip-flopping messaging from washington while beijing has been consistent. the u.s. has had various forces make comments on u.s. and china trade talks. that it issometimes

difficult to reach an agreement. china's position has always been clear. the two biggest issues in this region is north korea and china and both of those issues to trump signaled he is in no hurry to resolve either one. north korea he said, i am happy with the way it is going. he said there has not been any nuclear tests in a couple of years, the sanctions are still in place. no hurry. so it is the fourth and in japan. what is on the agenda? >> he will be in japan and visiting with u.s. soldiers and japanese self-defense forces and warship which the ship,elicopter flat aircraft carrier. to fitbeen refitted

fighter jets they can take off vertically. he mentioned it yesterday that japan will be buying these likely. the lockheed f and the f-35 be, 147 of them. we know that shinzo abe wants to andse the constitution donald trump supported japan's efforts to boost its own self-defense capabilities. this is another issue that will likely upset aging. paul: stephen engle in tokyo, thanks very much. let's check in on what is moving markets. sophie: in the wake of fiats proposed larger, the carmaker has not been invited to join for the moment. voting rights were suspended under the time -- terms of the renault alliance. given that the son had been opposed the question is whether

forcing one will work. i want to highlight caps on sdi. -- samson sti. the carmaker making changes to its battery purchasing plan. at 6.5% afterping announcing a share buyback. the company said it will spend as 1.4 -- as much billion dollars prompting the chipmaker to revise its national model. this is the stock repurchase and we will learn more at our recent scheduled report. also rio tinto shares are jumping the most in two years in sydney with iron ore prices seen rallying. the stock was up -- upgraded to a buy. shery: the need to recycle lithium-ion batteries and more.

aul: katherine young joins us in hong kong to discuss opportunities and her outlook for markets. this is bloomberg. ♪

>> the u.s. and china need each other, they are dependent on each other. ?> what are the implications asia."this is "daybreak: trump's comments will dominate the market as investors digested mixed messages.

of the latestke rhetoric, president trump says he is not ready for a deal, china says nothing is changed. where do you see the state of play? resolution,of the it is this ongoing issue that the markets have been experiencing. there was a sense of ownership across asia. waiting for some clarity, some certainty. a dusty see a resolution, the relationship between china and the u.s. at a different stage. this is likely to win market sentiment. paul: in terms of market sentiment are you surprised there has not been more of a reaction? wrote thiseld morning a column suggesting that investors have turned into frogs in a pot of water, the heat is

increasing and no one is noticing. is there too much complacency? there ist think complacency. what we are seeing is this ongoing uncertainty whether it is the trade issue between the americans and chinese, other geopolitical uncertainties such as brexit. in terms of what investors should be looking for, it is the underlying fundamentals of companies and ensuring visibility in terms of compounded earnings going forward and strong balance sheets as well as the income strength. theet's talk about fundamentals of chinese companies. the market has been linked with issues. it is interesting to see that fourmonth but have seen chinese stocks being delisted which is the same number that we saw in the whole of 2018. does the say something about regulators trying to clean up their markets? >> we definitely get a sense that the chinese authorities are

looking to open up their capital markets and in doing so you have to ensure the opportunities for global investors as well as mastic investors is there. the state look at owned enterprises we are seeing some improvement. management teams are focusing on the cash flow yield increasing the dividend yield to looking and paying attention to the total return strategy so that dividend yields, then come and the capital appreciation. cleaning up on the soa side expect further reform plus the support we are seeing by the regulators in terms of the private sector, increasing their capex and reinvesting businesses. should investors be about the banking sector? for the first time in two decades authorities are taking over basha bank. taking over a bank because of serious credit risks, what does

this spell about the future of the sector? >> like all sectors across china, asia globally, there are names that are winners and names that are struggling. you could see increased default relatedhina, not just to financials. when it comes to the big chinese banks, a lot of people think they are boring, not as exciting as the new china names but these companies are paying attractive somes and from -- they are of the cheapest banks globally. we do think we can find value across all sectors in china. you have to be very cognizant of the strength of the balance sheet and the quality of management team. paul: let's take a look at one sector. i have a chart showing china's industrial profits contracting. we are waiting on numbers outside of china later this week. in terms of the industrials, is

there anything to be selective about there? gain lead to- they the dampening of sentiment we to chineseated names. the chinese economy to see a pickup or an improvement in sentiment because it was heavily eroded last year, it is likely the policymakers will continue to remain accommodative in terms of fiscal as well as monetary but the focus is on the fiscal side. there is likely to be further support on the private sector especially the small and medium enterprises as well as the soa's and the manufacturers, the industrial related names. from a chinese perspective, it is all about maintaining and accommodative approach without injecting too much or flooding the environment or the economy with to much liquidity. there is a fine balance in terms of policy direction and of limitation. duration about policy

question mark everyone seems to have accepted that the trade dispute will be resolved but we have one chinese officials saying it might not be till 2035. what sort of measures will be put in place long-term if things and of dragging up that long? , what chinese authorities is key is protecting domestic sentiment and encouraging it. we look at the break up of gdp, you have the consumption drive and still have that private services contribution. the fiscal policy side is key for investors to look at area not playing it with stimulus in terms of a policy direction but tweaking it around the edges, ensuring that the considering somewhat buoyant as well as corporate's and investing in that cycle. paul: thanks for joining us. you can get a roundup of the stories you need to know to get your days going in today's

edition of daybreak. mobile also available on on the bloomberg and you can customize your settings so you only get news on the industries and assets you care about. this is bloomberg. ♪ [inaudible] [applause] [laughter] [inaudible]

all: this is daybreak asia. i am paul allen in sydney. shery: i am shery ahn in new york. [indiscernible] it success. he spoke exclusively to bloomberg at huawei's headquarters. u.s. is more likely the steals our technology. now we are leading them. whether we have a government background, kpmg can order it. the american auditors audited

us. it can ask for a report from them, right? this unfounded conclusion my not be right. we are leading the u.s.. if we were lagging behind trump would need to make any efforts to attack us. we are more advanced than them. >> if at a moment of national crisis, the government came to help,d said we need your we need your cyber skills, we need access to your network. because it is for the good of the country, for the good of the government, the chinese people. how would you respond? >> we absolutely would never extol any backdoors. we would never do that. we don't serve intelligence services. why should we install backdoors? >> what are the practical steps for denying were -- a request in china? >> we have never done that. a german newspaper released an

article saying they could not find any act or's ny waste systems. in the u.k., while weight was under the world's strictest scrutiny so we could earn the country's trust. under such strict scrutiny, it was is if we took off all are close to prove we have nothing to hide. the u.k. agreed to use our equipment. paul: you can watch more of tom's exclusive interview with what ways ceo. friday at 9:00 p.m. in new york. let's get a quick check of the business headlines. fiat is not pushing for nissan to perp -- join the proposed merger with renault. the japanese carmaker would be happy to join if it desires. says nissanei news

is taking a wait-and-see stance on the deal. >> volkswagen is making changes to its battery purchasing plan over the concerns that the deal might unravel. sources say differences and schedules and financial volume have emerged during negotiations. the unit pledge the supply cut [indiscernible] >> indian budget airline indigo said it will add 30% more capacity in the current financial year after fourth-quarter profit increased to $85 million. the ceo of asia's biggest budget carrier by market value said it is hard not to be bullish moving ahead with plenty of opportunities for profitable growth. he is trumpeting a robust strain of aircraft. china's second richest man prepares to hand his son his

empire. this is bloomberg. ♪ ♪

shery: this is daybreak asia. alibaba is considering raising $20 billion or a second listing in hong kong. the giant is working with financial advisors on the offering which would bring china's largest company closer to investors in its home country. aibaba could find -- file application as early as the second half of this year. president trump says the u.s. is not ready to make a trade deal with china although he claims beijing is. speaking during his visit to japan, the president said tariffs on chinese goods could continue to go up though he does substantially and easily.

he said beijing had wished they had agreed to a deal. the chinese foreign minister said the position is not changed. we always believe that any differences between any two countries should surely be resolved through friendly consultations and negotiation including differences between china and the u.s. and the economic fields. we maintain that the trade consultations must be based on mutual respect, equality, and mutual benefit. australianed chancellor has started his campaign to return to power. he also became the shortest serving as his estranged uplition partners backed bill to dismiss them. an interim administration will be named in the coming weeks. the 32-year-old said he is confident voters will back him in september. and in asia central bank is overhauling its payment system

in what governor perry says is a move toward more integrated and efficient infrastructure. the bank of indonesia will prevent a shadow banking risk. new mobile retail payment system will be developed to replace the current national clearing system known as cayenne b.i.. knbi. trimmed --an stocks drifted tuesday while two-year yields are trading near a low. japanese shares are swinging with food and electronic makers and autos are rising. theave gaining ground on share buyback. as tinto continuing to soar prices rally in singapore while the aussie dollar is nudging higher. randy wine global investment

says when the dollar rally approaches mend it is banking to short the greenback. also the aussie dollar. and the kospi is set to rise. some reports from the lower and we areaction tax seeing the korean won at a two-year low. haidi: china's second man is stepping down. as lee gets set to hand over power to his sons he told us in an interview that he is positive about the property sector in hong kong. me take our viewers through this gtb chart on the bloomberg. the index and a for past year has been underperforming. recently it picked up a little bit.

let's get started with why the succession is so important. the second richest man, and 90 euros old, one of the oldest chairman we have in hong kong still running a listed company, a major one. he is not really retiring. he is not going to be a chairman but he remains executive director. martin and peter will become cochairman after the agm today. then they will both run either the hong kong business and the china business. this is interesting because in the past year, we have other billionaires handing over their business to their younger generations. paul: hong kong famous for its eye watering property prices. we have another chart that illustrates this. the white line at the top, the upward march of property prices

in that flat blue line is the high. i'm wondering what he had to say about the future of the property market. on theaid he is positive property market and you are right, he also cited low interest rate being one of the factors. has hugeaid hong kong demand for housing so he remains positive. he also said in the chinese transition, chinese people are left to on their own properties. he also said because of china, there will china -- be greater demand so overall he is positive. to makee does how money. what advice did he have four young investors? >> interesting, he said there is no lenient relationship between

owning a property and the wealthy. he also said do not let a property limit your dreams. very hard to own a property in hong kong, it is so expensive. he advised don't change your dream, don't be limited by a house or an apartment. quite interesting. we will see more after he speaks after the shareholders meeting. paul: thanks for joining us. aitbank is doubling down on with plans to set up a second venture fund dedicated to the sphere through its early stage of vr. two-yearting a timeframe to get up and running. that about the fun, tell us about the ai fund. washe fund is deep core, he

wirelesstal for operations in japan as well as the acquisition of sprint. have been active and investments must the here in japan. the first fund has been asleep dispersed. 18 startups have been invested likeding startups [inaudible] and there is a second fund right now which will be the same scale and also focused on japan and ai. shery: the vision fund has reshaped venture capital landscapes all of the world. what is happening on his own home ground? they are huge for

development. companies like yahoo japan and gung ho interactive which is the maker of popular mobile games in the world. investments and japan have been none. limitedthe -- that is to local ventures. helping get started with the help of atm from india. vision fund could not make an investment here in part because the minimum investment size is $100 million in that puts valuations beyond reach form -- for what exists in japan. quite a bit above the state of the market in japan when it comes to startups and fundraising.

the connection between deep core in the vision fund? >> there is no direct connection at the moment. it will be sometime before there is a connection in terms of a deal flow just because of the tremendous valuation gap between the late stage in early-stage companies. one thing that is interesting is they are raising a second vision fund and has spoken about hiring another 200 employees for the second fund for the people he called hunters. outside of the pipeline of deals, he needs to create a pipeline of talent and it is possible that companies that fund -- with funds like deep core could be the trading round for the future of the vision fund wheelers and dealers. thank you so much for that. our asia tech reporter. coming up next, the fight for rare earth. we will talk to blue whale ceo as some fear the sector will become the next battleground in

the trade were between china and the u.s. this is bloomberg. ♪

paul: this is daybreak asia. the worldna's grip on rare earth market is in focus. made a visit to a rare earth processing plant fueling speculation that they could weaponize in this tit-for-tat trade war. ising us now from washington the blue whale ceo. give us a view of how much control china has over these critical materials. >> china currently processes in refined kobold in the world today.

so because of that fact, and because of their presence in the drc, the democratic republic of congo where they have a huge mining presence, they really do cobalt,the supply of which is one of the most important and expensive components of lithium ion batteries today. what your company does is recycling these lithium-ion batteries in order to get these materials so explain to us how this process works and why this is important. clue whale materials started four years ago and we are at lithium-ion battery recycling company and provide solutions for companies that deal with this emi on batteries and provide services thesep them do away with batteries once they are spent. our proposal is that we need there recycling of lithium-ion batteries to secure and to

provide another source of these metals which are very important aspect of the lithium ion battery. as we just shared, with the growing dependence on china and the trade tensions today, we speak with a lot of companies, consumer and look -- and alike the ideaompanies about and the process of securing another supply of these precious metals, ones that are done in an ethical and strategic way. does that cost of recovering these metals from the batteries compare with the cost of mining it in the congo and refining it in china? robert: that is a great question. i can share with you that it is a very economically viable theseion to recycle metals and to retrieve them and then put them back into the manufacturing of new batteries.

and today, there is a premium that is paid on recycled of thel because transparency and understanding the sourcing of these metals. and so, not only is it a viable investment and opportunity, but it is also a premium when compared to metals that are mind. mined. paul: where does your recycling take place, are you exposed to china? robert: we are in the process of building our first factory here in the u.s. we in the past four years, we have said all of those spent lithium ion batteries abroad for processing so we are excited in bringing that process here to the u.s. so that we can take care of the domestic supply of as we lookespecially

at the first generation of batteries that will be concluding their lifespan and coming off line in the near future. we see a huge volume of battle is the -- batteries that will be coming off line and we hope to provide a service in a sustainable way to process these batteries. in terms of our position with china, currently today, there are collectors who do send their material abroad. some to china. we want the focus right now on our domestic supply. shery: tell us about that ev batteries the that could come off market. how much of the demand in the world could these recycled batteries take up in the future? robert: that is a great question. benchmark intelligence, a think tank that looks at forecasting of metals, they say that we could see maybe 20% of the world abalt demand being met by

recycling here in the u.s. i can share with you today that the spent atof lithium-ion batteries are collected in the u.s. when you compare that to the eu, over there estimates of 40% to 60% of available batteries that are sitting in our desks and drawers that can be collected, you see that here in the u.s., there is great opportunity for growth and expansion in collecting these batteries. that we an association make -- work closely with. they are the largest collector of spend lithia and ion batteries in the u.s. -- lithium-ion batteries in the u.s. there is much to be done to collect these batteries. is there an awareness in washington for set -- for recycling these critical materials?

there is. the trump administration in 2017 created a critical materials list to secure, supply, and access to these metals and cobalt and graphite were added to that list last year. just recently, senator murkowski from alaska introduced legislation in securing an alternative supply of these by doing r&d and proposing funding for recycling of these batteries. and so, we do see the u.s. aning steps to ensure alternative supply, which is desperately needed today. am curious as to your visit, what. xi's did that tell you reading between the lines? robert: i am not an expert on u.s.-china relations, if that is

true what folks are speculating, this is the reason why there is such a going concern for u.s. oems and different companies that use lithium ion batteries. they don't want to be caught up in these trade tensions. they don't want their supply of material to be bound by the geopolitical issues of the day. and so, we are in conversations with them about how to collect their spent batteries and provide a recycling solution so they can close the loop on these materials and may be decrease their dependence on my material materials and foreign materials that will ensure their projections for production in the future. paul: thank you for joining us today. now forget our interactive tv function, tv go. you can watch us live and catch

up on past interviews as well as dive into any of the securities or bloomberg functions we talk about. you can be become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only and you can check it out at tv . this is bloomberg. ♪ ♪

>> this is daybreak asia.

paul: i am paul allen in sydney. a quick check of the latest business flash headlines. deutsche bank including -- considering options as part of a wider overhaul. tapping investors were fresh cash is the least favored option does it could trigger a backlash in light of deutsche bank's low in stock price. signaling deeper cuts as the largest lender struggles to make a profit. shery: a u.k. data center operator is set to be planning for higher -- to file for an ipo. reporting that the london-based company to raise more than $1 billion. global switch was founded in 1998 and its website says it owns and operates 12 data centers across europe and the asia-pacific. paul: one of tencent's most valuable investments is sinking is china expands its crackdown on online content.

tumbling to a new low in hong kong on monday as another of its online sites was targeted for allegedly distributing of seen material. the stock is more than 70% below a record high reached after its november 2017 debut and its 45% below its ipo price. firstinese government's seizure of a bank is piling fresh pressure on shares of small lenders that are trading at rock-bottom valuations. -- bloomberg index listed list of chinese banks dropped. citing serious credit risks. from our china credit reporter. tell us about the fallout from the seizure. >> as you mentioned, we see a lot of negative impact not just in the equity markets. we see that in the bond market and money markets in terms of

rights. the shares of hong kong listed chinese banks have dropped to a four-month low and interbank, the repo rate has hit of one month high and smaller banks also fell on monday. we are talking about the likes -- [indiscernible]ing and this is the first time they seized a bank since 1998. several market participants are nervous, they don't know what is going to happen next. especially when regulators say there were serious credit risks. the how bad is the situation and are we going to see anymore seizures? >> it is -- they did not really say how serious the credit risk is but what we know is the bank has over 60 billion yuan of

negotiable certificates of deposits and cds. yuan of tierllion two bonds so there could be concerns that the bank may not be able to repay the cds as there is a big market out there. if there is any fallout of ,osses with those sort of rates the government could be worried in the market could see selloff. in terms of other names that could follow, investors have mentioned some names but we have them.nfirmed any of regulators are serious in cracking down the financial market risks from this incident and some of the banks that have ramped up their interbank that significantly and sent and let them in disguise as investment product. those are risky loans. that practice will see a further crackdown. shery: great to see you. thank you.

we have a preview of what to watch and markets later this morning. inthat sparked a jump spending costs and chinese bond yields which sent the 10 year bond yield higher. and concern that smaller banks may sell or refrain from buying bonds that could pile on the pressure. on the upset, that may offer some relief for chinese tech theys as the move comes as face an increasingly hostile u.s.. 19% this year. we will be gauging reaction to the second richest man stepping down in hong kong. we are watching after the stock was cut to neutral. 2019 compared to its previous target of 3% growth

given the expected delay to the recovery and slower mass-market growth. the ceo saying he is not optimistic about first-half car sales but the picture me improve in the back half after subsidies take effect. salesnticipate difficulties. we will be watching reaction to vw making lives to revive smart city solutions including taxi [indiscernible] paul: thanks very much. markets coverage continues in a moment. this is bloomberg. ♪ ♪

>> is 9:00 a.m. in beijing and singapore. counting down the opening trade in hong kong and the chinese mainland. get to your top stories. alibaba's homecoming. china's largest company looking to raise another $20 billion, possibly in hong kong. tom: no end in sight for the trade war. president trump says the u.s. is not ready to make a deal with china. 's first bank seizure in 20 years is spooking investors and customers alike.