haidi: i'm haidi strand nods -- haidi stroud-watts in sydney. shery: good evening from bloomberg school global headquarters in new york, i'm shery ahn. sophie: i'm sophie kamaruddin in hong kong. welcome to "daybreak: asia." haidi: our top stories this monday. >> i think we are in good shape. we are making good progress. and there's no natural reason why it could not be. deal. deal or no

wilbur ross tells bloomberg the china agreement is near periods tries -- president trump wants this signing to take place in the u.s. the world's top oil company presses go on its long-awaited share -- shale. they brought five -- brush off concern and says the price is right. shery: all change at the golden arches are the ceo is fired after breaking the policy. markets have opened for trade let's. let's get you straight to the market action. sophie: shares opening higher by 2/10 of 1%. this happened with the drop we saw for the benchmark. keeping a close eye on westpac after a disappointing set of earnings. ozzie yields tracking friday's drop in treasuries, rising six basis points amid trade optimism and a stronger jobs report. the aussie dollar is firmer. offshorein on the yuan, trading below 704,

building on friday's gains amid signs of stabilization. asian stocks broadly looks to rises monday. japan is off-line for the weekend. semiconductor players will be on watch on a report that the u.s. government has urged them to stop this applying chips to huawei. here's where we stand as november trading warms up. the asian regional benchmark has outperformed the s&p 500 over the past two months. past 16 sessions, asian stocks lost ground on three. friday, chinese stocks had the best day since ms. -- since mid august. the nikkei 225, 150 points shy of 23,000. this rally has been supported by the recovery in asian tech hardware plays but credit suisse warning the potential for a reversal that cannot be ruled out. haidi: sophie kamaruddin there in hong kong, let's get you to first word news. su keenan is in new york -- in new york. su: we will start with saudi

aramco. the company may be worth $1.5 trillion or even less. that's according to research investors by the banks involved in the company's long-awaited ipo. it is well below the 2 trillion target -- $2 trillion target. it suggested the struggle to pinpoint a valuation. they will list on the stock exchange in riyadh and likely start trading next month. >> it is very safe. have full proof to that, you see the oil prices. oil prices went up the first two days by 20%. then it came down by 10%. in all the future traders saw this as an event. we have 1/8 of the oil production in the world. in the oil traders, they saw this as an un-event, and that

means it is really safe. su: okinawa, the governor there is warning the u.s. to look elsewhere as the pentagon hunts for sites to deploy new missiles. the governor says any attempt to place new weapons would be firmly opposed by local residents. he was elected last year on a campaign to move the u.s. airbase out of the area. he says okinawa carries an unfair burden by hosting half of the 55,000 u.s. military personnel stationed in japan. at least 200 people were arrested in hong kong as pro-democracy protesters clashed with police once again over the weekend. on saturday, police fired tear gas and deployed water cannons on demonstrators who had a built barricades across streets. more unrest broke out sunday when police and protesters clashed at shopping malls and a pro-democracy district counselor was attacked.

hasdelhi now, pollution worsened to levels that the government says should be treated as a public health emergency. the air quality index rose to 744 in some parts of the city over the weekend. that's according to the website monitor air visual. 50 as seen as safe. any reason -- reading above 300 is regarded as hazardous. the toxicity is blamed on a range of factors including agricultural burning and auto emissions. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm su keenan. this is bloomberg. haidi: thank you. the u.s. and china say they are close to agreeing to the first part of a trade deal. secretary wilbur ross spoke exclusively to bloomberg, expressing optimism that the phase i deal will be reached this month. sec. ross: i think we are in good shape.

we are making good progress. there's no natural reason why it couldn't be. but whether it will slip a little bit, who knows, it is always possible. haidi: let's get to our china correspondent tom mackenzie in beijing. no natural reason why it would not be done. let needs to be done before we have a signing? tom: it sounds like they are very close. we had that phone call between the likes of mnuchin and lighthizer on friday. the lead negotiators on the u.s. and chinese side on the back of the phone call, we got a statement from the chinese saying there was an agreement in principle on the call issues. the u.s. was more circumspect on the back of the phone conversation but they did say progress. been as you heard from wilbur ross, he sees no natural reason why there cannot be a deal signed later this month. in terms of what work needs to be done between now and any signing, the details around agricultural purchases and

intellectual property and exactly how china will be opening up its financial markets, all part of this phase one deal. ironing out the details is what is in focus for the that as the trade talks continue. president trump came out of the weekend sounding optimistic. he says he wants to see this deal signed in the u.s. as well as some point. as we have been reporting, this is the phase one deal. it includes those components i mentioned. it is the phase ii and phase three where there is skepticism in china and further fears as to whether or not progress can be made. we were reporting last week on the fact that china has and looks at president trump with great skepticism. they don't trust him to keep to his word. that's the key concern. they want to see the tariffs removed if they will. . deal. and then we have the age-old issue of whether or not china will really budge on things like industrial policy. in terms of a phase one deal, both sides showing there is progress the question is where they will sign this and when?

shery: have we heard anything on what will happen to the huawei front on selling components to the company? tom: wilbur ross talked about this to haslinda and suggested there would be in the near future a decision made by the white house to allow some of these u.s. companies to export some of these components, non-core components, to huawei. this is something president trump had pledged to do earlier this year. we have still been waiting for followthrough and huawei has been waiting for followthrough because they need those core components. particularly, the android software. there is a big question as to whether or not google can work with huawei. that is an area china would like to see some progress on before they get forward and moving forward on a conference of deal. i think they can get to phase one without those commitments on huawei. in terms of getting an all-encompassing deal, they will need to see progress in terms of the huawei situation. in terms of the location, we had

president trump saying he would like to see this deal signed in the u.s. he has expressed and communicated his preference for iol which is the state that produces the most corn and hocks in the u.s.. you would expect the chinese would be very cautious about to the president xi u.s. because of their concerns about the lack of trust around trump and whether or not he would pull back or make any last-minute demands. the u.s. saying may -- maybe iowa is in play. maybe hawaii or alaska. wilbur ross also saying china was an option for signing up -- signing off on this deal. tom mackenzie in beijing, we will have more on trade from the commerce secretary, wilbur ross in our interview coming up after the break. shery: saudi aramco's evaluation could fall far below the original target of $2 trillion. details coming up. this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery ahn in new york. haidi: i'm haidi stroud-watts in sydney. the 33,000 summit is underway with leaders from the 10 member states meeting in bangkok. among the attendees, the chinese premier and u.s. commerce secretary wilbur ross who says he is optimistic on a trade deal . our chief international correspondent haslinda amin is at the event. trade is front and center. they have been caught in the middle pair they have become collateral damage at this prolonged u.s.-china trade war. malaysia is on the verge of being imposed with sanctions on palm oil. we have vietnam being singled out by the u.s. for a trade surplus with the u.s. singapore has been dragged into it as well. it is among countries named by cf u.s. for its current

practices. estimations have been front and center, caught in the middle of it all. it is not surprising that over the weekend, we heard the leaders, the prime minister of singapore, saying they have to come together even more to do better in places like digital economy. they have to explore how to fund these initiatives to bring the economies together. organization, nation, a region of nations. what has been pretty challenging. we also heard from the prime minister of malaysia, he talks about coming together with one voice, responding with one action to all the measures being imposed on the region by the u.s. he believes that perhaps asean nations should put a tit-for-tat

initiative responsive to what ever they u.s. is imposing. i caught up with the u.s. commerce secretary to find out the safest of negotiations between the two sides. take a listen. sec. ross: i think you will see that -- there was a said yesterday about iowa, about alaska, there was a sub -- a suggestion about hawaii. i'm sure the chinese will have some suggestions in china. that should be the easiest part of the whole thing to negotiate. haslinda: the trade deal will be signed in november? sec. ross: you say it wonderfully definitively, i wish i could be as definitive. [laughter] sec. ross: i think we are in good shape, we are making good progress, and there's no natural reason why it couldn't be. but whether it will slip a little bit, who knows, it's always possible. haslinda: are there still obstacles? sec. ross: not so much obstacles but making sure that each side has a very correct and clear

detailed understanding of what each side has agreed to. trade deals are very, very, located. and this one is particularly complicated. haslinda: secretary ross, the huawei band, some kind -- some american companies are confused of whether they can do business with huawei. given the progress made through the phase one trade deal, is there a possibility that huawei could be removed from the entity league, whether restrictions can be eased? sec. ross:sec. ross: first of all, huawei, is an enforcement action. huawei is not a part of the trade negotiations. some 260here have been requests filed for licenses. the way the entity list works, is you need a license to sell any controlled product to them. that is a lot of applications. it is frankly more than we would

have thought. too, with entity lists, there is a presumption of denial. the safe thing for these companies would be to assume denial, even though we will obviously approve quite a few of them. haslinda: speaking of licenses, the special licenses for huawei suppliers, based in the u.s., which are not dealing with security link components, when do you expect the trump administration issue those licenses? sec. ross: those will be forthcoming very shortly. haslinda: what is shortly? could you quantify? sec. ross: it's shortly. [laughter] sec. ross: it is less than longly. [laughter] haslinda: asian economies have been pretty disappointed by president trump's absence for two years running now, and asian economies are on the verge of signing a trade pact backed by china. is there concern within the u.s.

leadership that perhaps the economies here, maybe even more economically dependent on china? sec. ross: first of all, asean is not much of an agreement. it is not a trade agreement, not anything remotely like tpp, nor anything remotely like our arrangements with japan and with south korea. i don't think you want to blow that out of proportion. it is a very low-grade treaty. second, in terms of our participation here, it is very, very wholesome. haslinda: u.s. commerce secretary wilbur ross. he is a keynote address earlier late -- later today. that will be the focus for leaders to see the direction of using engagement. there has been talk about how the u.s. has pretty much snubbed asean nations by trump's absence at this meeting.

everybody is curious to see what kind of engagement will be taken in the years to come, or in the months to come. shery: since we are in the second year pair thank you for that. our chief international correspondent for southeast asia, haslinda amin. we will have more from the asean summit later. she will speak with a guest . coming up next, tech is outperforming the broader markets as u.s. stocks hold as a record highs will show if there's any momentum left in the sector. this is bloomberg. ♪ ♪

haidi: this is "daybreak: asia." i'm haidi stroud-watts in sydney. shery: i'm shery ahn in new york. u.s. stocks are at record with the tech sector helping to lead the way. our next guest says we are at the top of a tech bubble. let's cross to san francisco ifc stone.t, at

great to have you with us. really, it'stack correlation with momentum starting to fade a little bit. this gtv chart showing on the bloomberg that there was a high correlation between the fangs and a momentum etf. that is fading as we continue to see bond alike sectors now gain more demand. how cautious are you about this sector in general? vincent: this is precisely one of the things that worries me. for the past three or four years, we saw a strong correlation between tack on long-term yields. that makes sense because if you think of a typical unicorn with a negative cash flows at the beginning, and hopefully high-growth in the next five to 10 years, it is a very high duration asset. saw theis dropping, we big unicorns rally.

that broke last summer. my interpretation of this money -- this momentum is the market is starting to question whether there is any letter -- level of rays that can make the unicorns work. if you have negative cash flows, you end up with a negative present value. shery: if you don't like growth, if you don't like tech, where do you go? vincent: obviously, the anti-growth, anti-tech trade has been international equities and value. we have seen a modest comeback of value. interestingly, value has not outperformed as much as growth or momentum has disappointed. which is another reason why i'm cautious in the market in general. we certainly have lost the leadership we had in the past three or four years, but we have not found the thing that will eventually pick up yet. haidi: he said emerging markets are looking more interesting. where specifically will you be

looking at? vincent: well, in general, i guess my core is out of consensus, i feel there will be a revival of inflation. it has to do with the debt. i hope we can get to that in a couple minutes. in general, inflation will have assets at midyear lows. commodity oriented emerging markets has been especially hard-hit. moreld probably avoid the -- like china and south korea in favor the more resource heavy emerging markets. at your'm looking notes, you are saying bay area companies would need to hike their prices by 40% if they were to operate under normal business models. vincent: yes, that's the part i wanted to go into. sixoked at basically the zip codes around san francisco

and silicon valley and i built and in that -- an index with market cap. and i looked at how much they pay in dividends and buybacks. close to zero. how much they pay on debt, close to zero. how much they collate -- pay on taxes, close to zero. so they don't have -- they have free p they don't pay taxes. they don't need to have earnings. perhaps most importantly, they pay most in stocks. if you think in terms of the cash leaving the company, there's almost none. it leaves them with a lot of ability to undercut on prices. and this is the model we have uber, wherework, you accumulate these losses early to build a consumer base. as the market for this model dries up, you are going to see very strong price increases. the question i was trying to answer is how much of a price increase? could that affect the cpi? my answer is yes.

companies would behave like normal companies? to price increases of 40%. haidi: it is a chicken and egg situation. vincent: correct. that is where i was trying to go at. for the past decade, we had the stories that inflation, thick it was bloomberg businessweek that had this with the dinosaur thing. inflation is dead. we have these very low rates. this big unicorn bubble and everybody wants to allocate to the pension funds. it is a mad rush into a very tiny asset class and then you have all of these entrepreneurs that are full of money and they have to justify that they are the amazon of this, the netflix of that. the best and easiest way to do that is to subsidize your customer and sell your on cost. we see less and less inflation and a keeps going again and again.

what worries me that i think this is breaking because valuation on the tech companies are starting to break down. , thankvincent deluard you so much for joining us. let's get a check of the latest business flash headlines. westech is raising money and slashing its dividend as profit missed estimates. it aims to raise $2.5 billion in a share sale as cash profits file 15% in the year. cut toidend is being $.80 from $.94 last year. they say they are raising money to meet new regulatory standards and give a -- give itself the flex ability to deal with any potential litigation. haidi: reports say federal officials are looking into accounting practices at under armour and whether the company manipulated the numbers to appear healthier. the inquiry is focused on whether under armour shifted

sales from quarter to quarter, with the justice department and fcc questioning people in the past few days. there has been no comment from the company or the investigation team. shery: the u.s. has launched a national security review of the popular music video app tictoc. according to sources close to the investigation. beijings owned by a company and is one of the most downloaded apps in the u.s., making it one of the few chinese internet companies to succeed. u.s. lawmakers have called tictoc "a potential counterintelligence threat that cannot be ignored." haidi: coming up next, mcdonald's has fired its cfo for breaching internal rules on staff relationships. the latest on his ousting ahead. we are looking ahead to the open and south korea. we have seen the kospi higher for the past two sessions. in futures also pointing to a higher open. korean stocks at the highest level since september. plenty more to come.

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su: this is "daybreak: asia." i'm su keenan with the first word headlines. we start with president trump. trump saying the potential phase i one trade deal with china is close to being completed, and he wants it signed in the u.s. he has previously suggested iowa as the venue for a deal, as it is the largest corn and hog producing u.s. state. wilbur ross on the other hand has hinted at alaska and hawaii as well as various locations in china for the two sides to formalize any deal. the trump administration has eased tensions with europe saying the tariffs on auto imports may not be needed.

commerce secretary wilbur ross welcomed what he termed good conversations and told bloomberg that duties may not be required t. the white house delayed tariffs on imported vehicles and auto parts. washington has reached an agreement with japan but has yet to clinch a deal with the eu. the u.s. and south korea will suspend a planned military drill for a second straight year, this to avoid raising tensions with north korea while denuclearization talks continue. codename exercise, the vigil a's, is scheduled to -- for december and involves hundreds of aircraft. make ay officials will final decision later this month. the european central bank enters what is being called the lagarde era. that will be later monday when the new president makes her first public policy address. we are talking about christine lagarde who will speak in berlin at a time when ecb policy makers are split over stimulus plans

with the eurozone economy teetering on the edge of recession. analysts expect her to call on governments to boost amanda and lift growth and low inflation. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm su keenan. this is bloomberg. shery: markets have been training for half an hour. let's turn to sophie for what to watch. 200 has climbed above 6700 points, lead higher by resource and tech plays. financials are under pressure this morning as westpac's earnings missed two and 8 -- to an oblique outlook. they report on thursday. checking in on the aussie dollar, trading at 6910 after the best weekly gains in september. it could be heading to somebody, the highest level since july as future traders cut their short positions. aussie yields are climbing to --

two basis points of retail sales. there's a release before the meeting on tuesday. trade data on thursday and home loans on friday. points it at 75 basis amid worries that low interest rates could be doing more harm than good for the economy which may be encapsulated by the consumer and business confidence. that is from the rba. cba's michael blithe points to other signs of the negative confidence affect with mortgage holders using their rate cuts and tax rebates to pay off debt instead of spending. haidi: sophie kamaruddin in hong kong. saudi aramco has kicked off its long-awaited ipo prices -- process. shares likely to start trading next month after re-out it said it would accept a lower evaluation to ensure the success. joining us is jim thornhill.

it is a massive range. jim: that's right. two things essentially paired firstly, saudi arabia's initial valuation of $2 trillion was a little bit too high. most of wall street banks have attained these details and their valuation is below that. the decision to pull the trigger on the ipo was faced, if you believe the sources, on an acceptance that they will not get that $2 trillion, that they are likely range.pt a $1.8 trillion we have not seen the details from what to riyadh is hoping for from this ipo. that is the indication. is theer thing it shows huge evaluation range is -- was around $1 trillion which is more than the market cap of some large oil companies. it shows that they are struggling to pinpoint a value

on the saudi aramco company. shery: somewhere saying that even if it was not for the prize, that it is not immediately enticing when it comes to saudi aramco just because of these investors not wanting to add more oil shares. how much of the problems that the company faces are more macro and more structural? jim: i think it speaks to the difficulty that banks are having in valuing the company. you just don't know what is around the current -- the corner. the company is so sensitive, fundamental to the valuation. when you have the price moving around so much, it becomes difficulty -- difficult to pinpoint the value. we have those drone strikes in september which had a massive irruption's in the crude market, which is what some people say derailed the ipo that was planned for earlier in the year. now moving ahead to december, and they will be hoping for some

price stability. the fact that they are going ahead to suggest they are reasonably constructive on the outlook for prices. who knows what is around the corner in terms of geopolitics. that region remains incredibly volatile. iran is an uncertain player, we don't know if they will ratchet up tensions or the u.s. as well. and underlines the difficulty for the saudi's in getting top dollar for this ipo. shery: jim thornhill, thank you for that, asia energy reporter. turning to mcdonald's because the company has fired at the ceo from -- for defying company policy by having a relationship with an employee. the board approved the decision after investigating the relationship and promoted chris to president and ceo. bloomberg editor ros krasny joins us with the latest. how big of a loss is this for mcdonald's? ros: it seems like it is a big loss because steve has been regarded as one of the best if not bid best ceo in the

restaurant segment of the stock market. he was the mastermind behind mcdonald's production of all day breakfast over the past couple of years and has really started to remake the burger company, the big mac company into a tech company. mcdonald's has bought some tech startups. the kind of companies that are helping them to target market -- do target marketing. also heat up lines with -- and beat up lines with voice recognition. easterbrook has been the spearheading that. there are few companies in the s&p 500 that have done better than mcdonald's over the past four and a half years. people are very much on alert to see if there will be any downgrades or just how the market will respond on monday to this news. haidi: it is a big loss in terms of the performance of the leadership. is there a deep bed of talent

where they can have the next day in terms of his replacement? it is commonly accepted that mcdonald's does have a strong bench of talent. crisco pinsky who now becomes the ceo had been the usa president of the mcdonald's. he had been with easterbrook through many of the changes. themselves,urants the menus. he is seen as someone who can step in. he gave a short interview earlier this evening saying -- promising continuity. by the same token, steve easterbrook was in his early 50's, and was somebody who was probably expected to stick around for quite some time. any kind of succession plan that might be put in place at mcdonald's, when he left, probably was not in play at this point. it is interesting about

mcdonald's, they have had big ceo changes all of a sudden over the years. if you look back to 2004, there ceo had a heart attack and died and the gentleman, charlie bell who replaced him was diagnosed with cancer and died at the following january. over the years, mcdonald's has dealt with things like this. they have had their ups and downs. and certainly, this is a major challenge for them. ros krasny, r bloomberg editor there with the latest on mcdonald's. central banks across southeast asia are forecasted to ease on the heels of the fed's rate cut. we will speak to our guest on whether the monetary moves will be sufficient. this is bloomberg. ♪

haidi: this is "daybreak: asia." i'm haidi stroud-watts in sydney. shery: let's get a check of the latest business flash headlines. berkshire hathaway has enjoyed the best quarter ever with operating profit topping a record of net income rising of $52 billion. that makes it the most profitable company in the world with $120 billion in cash. berkshire has a wide interest from energy and insurance to car dealerships and jewelry. class a shares are up 6% this year while short of the 22% gain in the s&p 500. haidi: top apple chip supplier

says it expects significant growth next year amid strong demand for 5g handsets in new iphones. the chairman says sales will rise from a year earlier as demand increases for the latest smartphone in the coming months. the trump administration in the meantime has urged chipmakers teamwork in the u.s. they say it is not a tenable solution for worries about security. shery: the chairman of thai airways has quit as they continue to stem deepening losses. the airline has instigated a tough plan that includes a review of 40 aircrafts and has been forced to rebuff liquidity problems. second quarter losses, more than doubled amid the widening global slowdown, regional competition, and the strengthening bond. black gina reinhardt is and bloomberg's top 10 of the world's richest women as a closely handcuffed company

showed improving prices. their revenue rose 39% through june with a net profit climbing 90% to the equivalent of 1.8 billion u.s. dollars. arisensonal wealth has to $17.9 billion. don't forget if you are away from a screen, find in-depth analysis and the newsmakers on bloomberg radio. now broadcasting live from our new studio there in hong kong. you can listen in by the app, bloomberg radio plus or over at bloombergradio.com. this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery ahn in new york. haidi: i'm haidi stroud-watts in sydney. westpac has had a tough year for straily and banks, the worse earning since the global financial crisis, the country's second-largest lender will raise

2.5 billion dollars in slash/its dividend as full-year profit plunged 60%. emily cadman joins us. it was a horror year for all of the lenses. emily: what we saw is a culmination of the trends we have seen coming through. it has the misconduct, low interest rates, and it is finding it harder and harder to have profit or's against an environment where regulators wanted more capital. we have grown accustomed to earnings keeping ground from all of the big lenders. now this year, we have had westpac, the first drop since 2009 when it was struggling with the aftermath of the global financial crisis. shery: give us more detail on how they plan to shore up their balance sheet. emily: what the bank is looking to do is it is looking to raise capital from investors and retail shareholders. it is doing the 2 billion share. that is why it will not be traded today.

shares have been frozen for today on the market. reflection on the need to attract new business. maybe just the fact that it wants to get away well. it is offering shares at a discount to market price. haidi: emily, thank you so much. emily cadman there on westpac. markets opening insole at the top of the hour. japan offline today. it is culture day in japan. what are we watching? sophie: in asia, keeping and i on what is happening in south korea because japan is off-line. we did have earnings from various industries in south korea. i want to highlight an agency which reported a narrower than forecasted loss in the third quarter. the outlook remains challenged in the face of slumping demand. thandelivered a weaker

expected set of earnings. city down road it -- downgraded to chemical after the third quarter fell by 50% as margins were squeezed in its business. before the results, they were -- there were 26 byes. this week, keeping an eye on the central banks with the rba up to bat on tuesday. a hold expected from governor low. haidi: sophie kamaruddin and hong kong. there has been a delay and negotiations for 16 nation trades deal talks. this is the agreement that had been expected later on monday. talks are set to continue in february to the next guest says a deal would help maintain asia's prominence when it comes to global trade. let's bring in head of india and southeast asia economics priyanka kishore. great to have you. at a time when we see an 11th straight month of declines, it is the bellwether for trade demand in the region. asia could really use a

fast-track asset. what has been the hold up? agree, regional trade deal like this at this point in time would be very beneficial because since the onset of the global trade war, all talk has been about a more regional integration and how looking inwards in terms of maintaining those supply chains within asia would help the region a lot. the hold up, as we are aware, has been india. it seems india has concerns about chief chinese imports flooding its market, and it is pushing for better safeguards against that. for now, it seems prime minister modi has had his way, and final conclusions are postponed until february of 2020. how much of a boon would -- we are seeing

everywhere from hong kong to that manufacturing. that it was surprisingly upbeat last week. the chinese pmi depends which when you are looking at. ae official pmi paints different picture. it helps to know that both of these pmi's actually gauge a different set of industries within china. looking at data itself, yes. in real volume terms, not only in china but south korea where there has been 11 months of decline. there are signs that export volumes have actually bottomed out, and showing some signs of even revival. how long that lasts in this current environment where we go from one deal to another, and the overall trade picture

remains worrisome. china seems more comfortable with growth coming off rather than trying to have it pushed up from these levels. it is a very different picture. in this environment, it is not something that will happen immediately. we will not see the impact of something as big as that coming as soon as 20/20. but over the next three to five years, as tariffs go down, for india, it would mean eliminating tariffs over 90% of its imports from ozzie on. it could mean a training boost. shery: if you are saying china will become more tolerant of slower growth, does that mean we may not see as much fiscal and monetary stimulus from beijing? view for a while has been that while beijing does want to support growth, it is not going to go overboard in terms of policy stimulus. and that is pretty much what has

been played out. even on the fiscal front, it has relied on tax cuts that have relatively less impact in terms of effects on the economy as compared to let's say a more direct and pronounced infrastructure push. yes, we do think growth could slip below 6% next year. and beijing would not let it fall off the cliff. but they seem to be fine with the slow deceleration. shery: how will india do this year and next? priyanka: what would india do? india is caught between either addressing supply-side, or trying to revive its ineffective demand at this point of time. a lot depends in terms of cyclical recovery versus structure progress as to what policy is happening. it seems to be a two trunk -- two-pronged approach focusing on lowering rates and growth,

whereas measures from the government have been more regulatory in nature and more geared to what medium-term supply-side concerns. but i think the hesitance to what is pushing on fiscal levers to revive growth seems to have gone down quite a bit in recent months. when push comes to shove, we could see more of fiscal stimulus coming through in india. haidi: in terms of monetary policy, the two big ones other than the reserve bank of australia, we are but watching other banks. you are expecting further easing on the back of that from both of those central banks. priyanka: yes. that's right. i think for bank of negara, that is out of a consensus call. we think they have been delivering preemptive cuts. in the current environment where the fed seems to have indicated what we read as a soft pause, there is still ample reason in the current growth environment

for central banks to take opportunity for a dovish fed overall, and push ahead with rate cuts. for thailand, inflation remains significantly below its target range. all the more given the slapdash of the downside risk to growth, that is where central banks appear to be leaning. haidi: if we do get a resolution when it comes to the u.s.-china trade deal or the phase one of the trade deal, how meaningfully impactful is it on some of the southeast asian economies? four is there more of a domestic demand story that will be the driver? if we get a meaningful deal, of course it is an upside surprise. what we consider in our baseline is not a very meaningful deal, that does remove some downside risk from the baseline. we are less worried about growth being even lower than what we

are forecasting than what we were in early august when there was a new outbreak of concerns on the trade war. alongside the fact that domestic demand does provide a somewhat cushion to the external headwinds. it tends to paint a picture of growth in this part of the world. the region is forecasted to grow 4.5% in 2020 compared to 2.5% world growth. quite a respectable growth outlook, i would say. shery: we have monetary policy decisions out of thailand and a bank of negara of malaysia. what are we expecting? priyanka: we are expecting rate cuts on both of those friends. shery: even malaysia, when we have seen some fiscal budget support? priyanka: yes, that's true. but they are limited in terms of what they can do from here in terms of fiscal support, given the overall deficit levels are

looking much more worrisome compared to what it appears in asean. they have focused on preemptive rate cuts. though as i said that they have indicated a soft pause, they will take advantage of the dovish fed and have preemptive cuts. shery: priyanka kishore, thank you so much for that. checking on asian markets now, we are seeing qe stocks gaining a ground at the moment. up 7/10 of one percent. this after three sessions of losses. the asx 200 up 4/10 of 1%. seeing materials and tax -- tech leading the gain. we saw a record highs in u.s. stocks. u.s. futures up to tenths of 1%. will: looking like we continue to push those record highs in the u.s. open for the brand-new trading week.

positive future in asia. coming up on the next hour of daybreak asia, the u.s. ozzie on business council head will be with our own haslinda almond live at the summit in bangkok. this is bloomberg. ♪

haidi: very good morning. i'm haidi stroud-watts in sydney. korean markets have just open for trade. shery: good evening forum in. i'm shery ahn. sophie: and i'm sophie kamaruddin in hong kong. welcome to "bloomberg daybreak: asia." haidi: our top stories this monday. good state,e are in we are making good progress, and there's no natural reason why it

couldn't be. haidi: deal or no deal? a trade agreement is near. president trump wants the signing to take place in the united states. bangkok.ders gather in malaysia says the group must speak with one voice about trade has between the u.s. and europe. shery: the world's top oil company presses go on the long-awaited share sale. saudi aramco brushes off concerns and says the price is right. straight to the market action with sophie. japan away for the long weekend. sophie: we are checking in on south and sydney, building on fridays gains, adding one third of a percent. we will see if the benchmark can close above 6700 after failing last week. losing ground. losing nearly 3% ahead of earnings tuesday. to thea report adding

pressure on australian banks. the aussie dollar could test 70 and aussie yields rising ahead of sales at the bottom of the hour. checking out soul this hour, the kospi up about 6/10 of a percent. the korean won is on the back foot. we are watching reaction do earnings with several weak report cards from korea think. chipmakers are also in view. the u.s. government has not asked the company to stop supplying huawei. haidi: let's get to first word news with su keenan. reporter: we will start with valuation concerns on saudi aramco. the company may be worth $1.5 trillion or less, according to research, said the potential investors by the banks involved in the companies long-awaited ipo. the is long -- well below

$2 trillion target initially set by the kingdom and suggests a struggle to pinpoint a precise valuation. aramco says it will list on the stock exchange in riyadh and likely start trading next month. >> it is very safe. if you want to have foolproof oil prices, oil prices went up 20%,irst two days by about then came down by 10%, and the future traders saw this as an effect, we have 1/8 of the oil production in the world, and the oil traders saw this as a nonevent. that means it is really safe. that's what the money is saying. reporter: to japan now. the governor of okinawa is warning the u.s. to look elsewhere as the pentagon hunts for sites to deploy new missiles.

the governor says any attempt to base new weapons would be firmly opposed by local residents. he was elected last year on a campaign to move the u.s. airbase out of the area. he says okinawa carries an unfair burden by hosting half of the 50,000 u.s. military personnel stationed in japan. meanwhilein new delhi has worsened to levels that the government says should be treated as a public health emergency. the air quality index rose to 744 in some parts of the city over the weekend. 50 is seen as safe. any reading above 300, again, 700 plus is the reading -- is regarded as hazardous. the toxicity is blamed on a range of factors including construction dust, agricultural burning, and auto emission. the european central bank enters the lagarde era as it is being called later monday. that is when the new president

makes her first public policy address. christine lagarde will speak in berlin at a time when ecb policy makers are split over stimulus plans with the eurozone economy teetering on the brink of recession. analysts are expected to: governments to do more to boost demands and lift growth and low inflation. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. the aswe are live at summit in bangkok. ean top of the agenda, the u.s. u.s.-chinade war -- trade war the regional partnership. mig haslinda amin is at the summit for us. what are you hearing? kicking off the

final day of the meeting. leaders are meeting with counterparts of japan, china, south korea and trade partners. tensions in the south china sea, ,hat needs to be ironed out given that quite a few member nations are involved in the tensions in the south china sea. front of centre's relations with the u.s. some insight with michael michalak, the regional managing director of the u.s.-asean business council. as far as asean is concerned, this is two years running where president trump has failed to turn up at this meeting. does not bode well for relations. > it is disappointing, quite frankly. every year, his advisers tall him he ought to go, everyone knows the importance of asean.

we know how important it is to show up. he has not done it. i would agree, it is not a positive sign. what does it mean going forward where asian members especially asean are on the verge of signing a deal? >> the deal is very important and we certainly hope it will get signed. but in terms of going forward for the u.s., right now, i think this administration has its mind on china. there's a lot going on. we have this phase i deal in the works and we will see whether that means anything. he's also talking about doing something in more detail with japan. those things are pretty much on his mind, not to mention the political issues back in the u.s. asean seems to have been pushed off the plate. willnda: also, the asean be turning more towards china and could be more economic lead

dependent on china going forward >> you are right. for a certain extent since china is showing up, china is here, they have a lot they want to talk about. they certainly want to talk about belt and road, and supporting the international trading system, even though in practice it may not work out more than thought. of course, wilbur ross is here for the secretary of commerce. we do have a national security advisor, so there is security discussion that can go forward at the asean, but you are right, overall it seems our engagement, which used to be extremely vibrant, especially with the tpp and other trade agreements, it is not going as smoothly as we would like. haslinda: we talk about how the u.s. is preoccupied with the trade deal. let's talk about that. phase i on the trade deal.

how significant is it? it is pretty much done to you, but it doesn't pick up things like intellectual property. >> we have to take a look at the language when it comes out. the consensus is that i'm hearing from people is it looks as though china is going to buy some agricultural products, but on their terms, and other words looking at the market, looking at what prices are, not in terms of trying to get back to anywhere near the level of purchases they had before the trade war started. in terms of intellectual property, that has been kicked down the road. . i would expect at this time, we will probably get some nice words saying we are expecting intellectual property and we think it is important, etc., but the deal has to be done on enforcement. what happens if after they sign something like this, there is no follow-through on the part of the chinese? we are right pretty much where

every president has been on china. haslinda: that will not stop president trump from claiming victory. >> of course not. [laughter] this will be the greatest agreement the u.s. has ever signed since the declaration of independence, but we will have to wait and see what is the bottom line for american companies, what is the bottom line for the american public? the economy so far seems to be doing very well, but as we do look forward around the region and the globe, the fact that the tariff wars and the attitude toward the free trading system is going down and causing whatems, and it's causing i call a synchronized slowdown around the world, and it hasn't led to recession yet, but everyone is afraid. haslinda: phase one itself has been challenging. phase two will be even more complicated. the questions out there are asking if phase two can be

concluded before the end of this. >> you are absolutely right. of course, everyone is wondering, is xi jinping just trying to stall until the election and hoping for a better administration after that? we will see. whoever will be the president of the united states, he will have to deal with china and many of these issues. world, iof the free hope it will be much better to workwith the allies to with a united front rather than do a one-off deal. haslinda: you were the u.s. headmaster to viet -- ambassador to vietnam. the u.s. has been singled out for trade actresses. how much of the relations shouldn't -- relations will be in the two sides right now? >> on the trade front, i would say that there are some red flags that are going up because of the injury to the trade

deficit. however, you have to look at what they are doing. the trade deficit has gone up. they are helping american companies who used to be sending american products back to the u.s. now they are complaining about that. , inerms of overall security terms of overall economic development, i still believe we have an excellent relationship with vietnam. we are looking forward to next year when the handle asean in vietnam. i think it will be plenty of ways in which we will be able to get over the deficit deal and move forward to continue to improve the relationship. haslinda: will that be the case for the rest of the asean member nations? we have seen really -- resistance from the likes of malaysia. they have said, why not tit-for-tat? if the u.s. causes us pain, we can cause the same amount of pain for the u.s. >> i suppose they can do that. person doesause one

something that's wrong doesn't mean somebody else has to do something that is wrong. andidea of the wto multilateral trading system and a rules-based trading system are still worth reserving and i think we have to work harder on making it happen. haslinda: one final question. asean is increasingly saying it needs to work together even more and perhaps explore all the other trading partners. what will that mean for the u.s.? >> it just means we are not at the table. tpp movingdea of the forward, they are increasing market access and we are not at the table. the rs f is going forward. it will not be the really high level agreement, but it will be better than nothing and it will have increased trade. we are not at that table. people are starting to get together to talk about asean coming together as a 650 million person per market. if we are not at the table, we will be missing out on potential deals and potential agreements,

which would increase and improve terms of trade. inward, wens turning will not be part on -- of the world going forward and it will not be pretty. haslinda: and until a multilateral wall. michael michalak former u.s. ambassador to vietnam, joining us at the asean in bangkok. are meeting asean with trading partners the likes of china, south korea, and japan. haidi: haslinda amin, thank you for that. we will get more at the summit in bangkok later today. we will be speaking at the u.s. chamber of commerce. still ahead, aramco kicking off the ipo process, but the oil giant may not be worth as much as riyadh hopes. shery: up next, tsn denies a

report that u.s. assets are stopping supplying trips to the second-biggest -- chips to the second-biggest customer, huawei. this is bloomberg. ♪

haidi: this is "bloomberg daybreak: asia." i'm haidi stroud-watts in sydney. shery: i'm shery ahn in new york. reports from washington saying the trump administration has repeatedly asked taiwan to stop leading the chipmaker tsn c2 apply --supply semiconductors to huawei. tsmc has denied the report to bloomberg. our china correspondent selina wang is watching this. what do we know? reporter: that's right. our reporting coming out just now that tsmc says it is denying the report from the financial times that over the past year, u.s. officials have pressured

the chinese government to get tsmc to stop selling the chip to huawei. they are the largest contract chip manufacturer, making trips for the world's largest technologies and the u.s. defense contractors. this is part of a broader effort from the u.s.'s part to stop loopholes on the banned from certain chipmakers from selling to huawei. it's part of the national security strategy. they do recognize a u.s. official who says that. in this case, if a partner is under direct military threat from china and is under a few places to make technologies, -- huawei has repeatedly denied the connection to the military. we also have a situation where it's unclear even if it was pressured to stop huawei selling chips to huawei, that taiwan would bend to u.s. demands, saying many of the trump administration's efforts to get

other governments to stop using huawei and 5g have not worked so far. in addition, tsmc have received a boost from the ban. it increased sales to china, moneysed to many -- since companies cannot sell. haidi: what does this say about the u.s. companies? reporter: there has actually been a lot of confusion from u.s. companies around what the status of these licenses are. we heard from trump months ago that he was ready to approve many licenses from u.s. companies asking to sell nonsensitive parts to huawei. you also had trump saying weeks later he would expedite the approval. but as of now, there have been no approvals granted. wilbur ross's comments to haslinda amin does clear up some of those confusions.take a listen to what he had to say here. >> it's a lot of applications.

it's frankly more than we would have thought. entity lists, there is a presumption of denial. the same thing with these companies is they assume denial, even though we will obviously approve quite a few of them. reporter: ross also said the u.s. government has received about 260 applications to get the special license. one of the big arguments the industry is making to the u.s. is that the band hurts u.s. industry and allows competitors to increase business, as mentioned earlier with tsmc, since they can shift to other countries whether taiwan, korea, or japan. haidi: thank you so much for that, selina wang, our china correspondent. coming up, when you're out to the 2020 election. some economic models predict trump is on course for reelection next year. we will be discussing that next. this is bloomberg. ♪

haidi: this is "bloomberg daybreak: asia." i'm haidi stroud-watts in sydney. shery:shery: i'm shery and in new york. monday marks exactly one year until the 2020 u.s. elections. presidentssue facing trump isn't joe biden or elizabeth warren or even impeachment, but the risk of recession, with several models predicting a second trump turn. let's bring in our senior editor. tell us about these models. reporter: these models look at the economy and how president trump would do if the economy remains strong. what they have historically done is they have compared what would happen if the economy and a strong sense would continue at election day one year from now.

given that, it shows president trump would decidedly win based on the fact that the economic growth remains strong, unemployment is at historically low levels, and also inflation has remained in check even with economic growth. tariffs wehe trade are seeing and manufacturing being affected, consumers have hung onto spending patterns. to of these models by oxford economics and moody analytics has historically been pretty accurate. they basically have predicted many of the popular votes have been wrong a little bit of the time, but based on this, they show president trump will win. of course, there are other kinds of things that can happen. yet, president trump does not have an opponent, so it is going on strictly economics against how he would do with this economy. shery: are there any flaws we should be aware of? reporter: first of all, it only

measures that. the fact that there could he scandals, we obviously have his impeachment inquiry, things happening on the world stage. they say if the economic models hold true, then he could win. there are other things. also, he has to be given the credit for that economic growth. that's the other thing. if voters going to the polls say the economy is strong but i'm worried about what could happen with the economy going forward, for instance the trade war, and he doesn't get the credit for it, that does not help him at the ballot box. about thet impeachment? how does that potentially play into the reelection campaign? reporter: it basically cuts both ways at this point. we have seen polls, including one from nbc, wall street journal, and another from fox showing 49% of voters in these surveys support impeachment and

support the removal of president trump from office. however, that is largely democrats. won poll shows 90% of republicans do not support that. there could be some blowback to democrats as a result of this. obviously, this impeachment inquiry, which at this point is not a vote, it is an inquiry, although it may lead to that, they are at this point dividing the parties. that is one of the reasons nancy pelosi, the house speaker, and other key democrats were reluctant to go on with impeachment, worried about possible effects on democrats. it could cut oath ways in the 2020 election. schneider, our senior international editor. let's get a quick check of latest business flash headlines. the ceo of steve easterbrook define company policy by having a relationship with an employee. the board is on the move after

investigating the relationship and later promoted someone else to president and ceo. the wall street journal says easterbrook sent an emailed to employees sunday acknowledging what he calls -- agreeing with the board that it's time "to move on." shery: airbnb banning so-called party houses and clamping down on unauthorized parties after a fatal shooting in california. five people died in the incident with police saying it took place in a home advertised on a short-term rental website. airbnb says it will create what it calls a dedicated party house rapid response team and expand manual screening of high-risk reservations. tycoonaustralian mining back in bloomberg's top 10 of the world's richest women as a closely held company reported improved results on prices. with net profit

climbing 90%, the equivalent of $1.8 billion u.s. her personal wealth has no reason $17.9 billion. haidi: coming up next, september data due to drop in a few minutes. this is bloomberg. ♪

haidi: data just crossing the bloomberg getting retail sales numbers for the month of october -- september i should say. retail sales month by month, missing expectations grown by 2/10 of 1%. we were looking at a gain of 4/10 of 1%. slowing from the previous month of august. retail sales excluding inflation adjusted quarter on quarter, that number a contraction of 1/10 of 1%. sing expectations for gains of 3/10 of 1% -- missing expectations of gains of 3/10 of 1%. this will be keenly watched by the r.b.i. head of their policy tomorrow.

they seem to stay on hold but this may add it to expectations that we will see easing from the rba. little bit of pressure taken off by the fed. we are seeing that reaction from the aussie dollar which has seen reason upside thanks to broad-based weakness in the u.s. dollar. certainly, this large mess on retail sales coming to that conclusion from the rba that we are not seeing demand side pick up when it comes to household spending, following the recent raise cut -- rate cuts. let's take a look at the market reaction in the aussie. sophie: in the wake of that data release, we did see the aussie dollar pair its earlier advance when it was at 69.17. 69.07 since right now. earlier, little change as well in the wake of the data. broadly speaking, taking a look at the picture in asia, stocks right -- stocks raising. i want to highlight this, climbing to a record on trade optimism. bonds under pressure. treasury futures nudging lower

implying u.s. yields will rise 1.5 basis points. getting back to the aussie retail sales, the soft number adding to the rba's conundrum as the numbers could encourage easing. the central banks track toward lower interest rates has yet to boost consumer and business confidence as the rba's moves could be perceived as a sign that is something going wrong with the economy. not a gentle turning point as officials are opining. households are holding back on spending, despite rate cuts and tax bases, choosing instead to pay down debt. the rba is expected to hold fire tomorrow. the market seeing a six percent chance of it when he five basis point cut with jobs growth among the bright spots for the economy. looking ahead, economists at the big four's are penciling in the next rate cut over in february. shery: thank you so much let's get to first word news with su keenan. su: thank you. we are going to start with president trump. he is saying the potential phase

i trade deal with china is close to being completed, and he wants it signed here in the u.s. he has previously suggested iowa as a vending for a deal as it is the largest corn and hog producing state. william ross has also hinted at alaska and hawaii as well as various locations in china for the two sides to formalize any deal. meanwhile, the trump administration has eased tensions with europe saying tariffs on auto imports there may not be needed. commerce secretary wilbur ross welcomes what he termed good conversations and told bloomberg that duties may not be needed. back in may, the white house delayed tariffs on imported vehicles and auto parts. washington has reached an agreement with japan but has yet to clinch a deal with the eu. the u.s. and south korea meanwhile will suspend a planned military drill for a second straight year. raising tensions with north korea while

denuclearization talks continue. deemed a exercise, co. vigilant ace, is scheduled for december and it evolves hundreds of aircraft including u.s. strategic bombers. officials will be making a final decision later this month. finally in hong kong, at least two hundred people were arrested over the weekend as pro-democracy protesters clashed again with police. on saturday, police fired tear gas and deployed water cannons on demonstrators who had to build barricades across streets. more unrest broke out sunday when police and protesters clashed at shopping malls at a pro-democracy district counselor -- and a pro-democracy good district counselor was attacked. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm su keenan. this is bloomberg.

haidi: thank you. saudi aramco has kicked off its long-awaited ipo prices. regulators have approved the offering with shares likely to trade next month. this after riyadh was accepting a lower valuation to ensure the deal success. joining us is our reporter jim thornhill in sydney. looking at the numbers, bank of america, the difference between the highs and lows is like $1 trillion. jim: that's right. probably the most interesting thing about the story we have had over the weekend. just a sheer variance in the level of their estimates. somewhat quite stark. talking a $1 trillion difference, that is more than a market cap. i think it speaks to the difficulty these things are having in pinpointing a value on aramco. crudedistinctly, the prices are volatile. it is the most important input into the company. it is hard to predict where that is going to go and that is why they are struggling to put a number on it. what we can include -- conclude is the $2 trillion valuation the saudis was ♪

were looking for was too high. these are generally coming in below. there was one or two above that to trillion dollar level. the consensus is that is coming high ones.-one and that is certainly confirmed by reports we are sick -- we are getting that the saudi will --ept a valuation of $1.6 1.6 trillion dollars to $1.8 trillion. shery: how much it's it is -- how much is it due to lower oil prices? jim: that is a good point. the fundamental reason they are struggling to put that accurate valuation, very difficult thing to value when the price moves around. part of the problem saudi's had with illustrated -- was illustrated in september when we had those drone strikes on facilities. it caused such a massive and ructions in the oil market which we are recovering from today. a defining feature of the market in the past few months. arguably, a reason why they have

not had the ipo until now. they planned it to be earlier. itse attacks did support -- did put back the timetable. what we are looking at is pricing early in december and hopefully the authorities will be hoping to get this listed on that adam market around mid december. shery: tim -- jim thornhill, thank you so much for that. are hammeringals home jerome powell signal that interest rates are on hold. that comes after another unexpectedly strong jobs report. inloyers add positions october. the data further validates the fed's new message and underscores the continued consumer resilience. told bloomberg exclusively that of both monetary policy in the u.s. economy are in a good place. richard: we have characterized growth as moderate right now. the global economy has been

slowing and that is a factor. the u.s. economy is very resilient. and these are good numbers. both the gdp number and the labor market number surprised on the upside. that's a good thing. >> are those gdp numbers that t -- numbers, are they politically acceptable to the nation? it is great to talk about 1.9%, but is not politically acceptable? richard: i'm not going to get into the politics. our job at the fed, we have a dual mandate. we have made some adjustments in our policy rate, we think they are and will continue to give significant support to the academy. we have a parable outlook. >> let's talk about the outlook. how would you describe the balance of risk around that outlook? richard: i would say for most of the year, the balance of risk had been tilted to the downside. not so much because of the u.s., but part of the global economy, we have a global slowdown. some pretty powerful global disinflationary pressures. as we said in july and september

and this week, we felt it was appropriate to make some adjustment in our policy to provide insurance or cushion against a softening global economy. you saw that at the emma -- at the imf a week ago. we think the economy is in a good place, we think monetary policy is in a good place. jon: the bounds of risk tilted to the downside? richard: somewhat. . jon: we are trying to understand what a material reassessment of the outlook would be to reach that benchmark. can you give us some clarity on that? what is a material reassessment? of the outlook? -- reassessment of the outlook? richard: the baseline outlook is for ongoing continued growth, a very solid labor market and inflation near our objective. obviously if we saw accumulating evidence we were missing on employment, missing on inflation, and we were missing on the growth needed to sustain full employment and price stability, we would have to factor that in. we will be data-dependent. our baseline outlook now is

policy is in a good place. every meeting is a life of meeting. jon: we are trying to figure out where the meeting will be. do you need three months to take another look at this? richard: we meet eight times a year. as we did back in october. if we need to, we have had meetings in between. we take the data as it comes in. haidi: i was fed vice chair richard claret is speaking to bloomberg. there is our interactive tv function. you can watch us live, catch up on past interviews and dive into any of the securities on the bloomberg functions. we talk about -- this is for bloomberg subscribers only. it is at tv . this is bloomberg. ♪ this is bloomberg. ♪

shery: this is "daybreak: asia." i'm sharing on the new york. haidi: i'm haidi stroud-watts in

sydney. alibaba reported a 40% surge in revenue showing chinese consumers continue to look online for bargains as a domestic economy slows. isning us from hong kong nina. great to have you with us. let me begin by throwing up this chart on the bloomberg terminal that illustrates how competitive alibaba is when it comes to topline growth compared to cohorts alike of tencent, jd.com being the major competitor. it is growing at a faster clip. reading through your notes, do you expect this to slow? do you expect margins to come under pressure? if so, why? nina: sure. indeed. the revenue growth for alibaba has been very robust despite that sector that has been showing topline slowdown. those are driven for alibaba by two key factors. it is not just only the increase of their active users online on

their platform. it is also the deepening engagement of these users from deeper penetration into different provinces and levels of counties within china. tot enables the company continue generating very strong cash flow. we do expect this kind of solid revenue growth to continue for alibaba, at least for the rest of the coming 12 to 18 months or for the fiscal year. we do expect they continue to generate cash flow in excess of 20 billion u.s. dollars over the coming fiscal year. much ain terms of how benefit i guess we will get from do alleviate and from some of these macro issues or geopolitical issues, do you think a given we are starting to see maybe at least a bottoming out of the economic picture in china, perhaps we will see the phase one trade deal being signed between the u.s. and china as well, do you think

there will be any upside for a company like alibaba? or is it so domestically focused that these are not factors that will be? playing in -- will be playing in? lina: like you said and correctly pointed out, all of these internet companies, alibaba included, is not that directly exposed to trade tensions between the u.s. and china in the first place. because most of their revenue is generated within china, there is only a small portion of external revenue on these trade platforms. an upside perspective, we have not factored in much upside. what we do try to incorporate into the estimates is if trade tensions were to continue and escalate, all these internet platforms may be indirectly confidencef consumer continues to decline. shery: investors are the most

bullish on this stock in about four years at this gtv chart on the bloomberg shows. i have to ask, how is the likelihood of more competition, especially from others, going to affect alibaba in the future? lina: actually, we have already seen as a factor, online more competition in the online sector for all the internet platforms, that are feeling the impact. less so on the topline growth front. but more so on the margin side. what we have seen in the last 12 to 18 months is for all large internet platforms to see a gradual decline in profitability, in the down margins. and that is partially due to a heightened competition. and also partially due to penetrate deeper into the lower tier cities and counties of china, where the consumers may want different things. and you may need to invest

first, to get to the service logistics services for example. networks of delivery, for example. those kinds of investments need to go ahead of time before you can reap the rewards of additional consumers doing more things, using their services more. a that respect, we have seen margin decline over the last 12 to 18 months. we do continue that for the sector as a whole in the coming year or so. shery: of course we will also hear from baidu this week. we have seen the company being pressured from short video platforms. what are you expecting? isa: forward 2019, baidu like what i just mentioned about the need to invest into growth initiatives, for baidu specifically, it is probably the ai related initiatives and also its online video project on i gtv.

those investments have gone in front of the early stage that have not been able to generate return in terms of cash flow yet. those will be dragging this company's -- this company's margins. from the rating perspectives, we try to rate through the cycle. we view this as temporary and a need to invest into the future growth drivers rather than structural changes. haidi: it is interesting, one of the most popular trade strategies we have seen trading in hong kong has been to go along alibaba in short tencent. -- and a short tencent. you would have done handsomely if that was a strategy you employ to given that tencent fell to a nine-month low in october. is the worst over given that we are not seeing this massive amount of gaming growth in china, but approvals have started up again. do you think the outlook for tencent is looking better? isa: our rating on tencent

at one and the outlook is stable. what is incorporated in our recent outlook as we do expect the company to continue and maintain a very solid financial profile and generate stable cash flow. in the last 12 to 18 months, anduse of regulatory events temporary regulatory licensing on some of the games, this company's cash flow has seen a little bit of volatility. but what we have baked into and what we expect in the coming for or so is indeed things -- things stabilizing for tencent. shery: thank you so much for that. that was lina choi. coming up next, mcdonald ceo was abruptly fired because of a relationship he had with an employee. can the fast food giant be able to continue its plan to revive sales despite the shakeup? this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery ahn in new york. haidi: i'm haidi stroud-watts in sydney. a quick check of the latest business flash headlines. berkshire hathaway has enjoyed its best quarter ever with operating profit topping a record and net income rising to $52 billion. that makes it the most profitable company in the world with $128 billion in cash.

berkshire has wide interest from energy and insurance to car dealerships and jewelry. shares are up 6% of this year, but well short of the 22% gain in the s&p 500. shery: report say federal officials are looking into accounting practices at under armour and whether the company manipulated the numbers to appear healthier. dow down says the inquiry is focused on whether under armour shifted sales from quarter to quarter. the justice department and sec questioning people for the past few days, there has been no comment yet from neither the company nor investigation teams. haidi: the u.s. has launched a national security review of the popular music video at tictoc according to sources close to the investigation. tictoc is owned by a beijing company and is one of the most downloaded apps in the u.s. making it one of the few chinese internet companies to succeed. u.s. lawmakers have called tictoc "a potential counterintelligence threat that

cannot be ignored." shery: mcdonald's has fired ceo steve easterbrook for defying company policy by having a relationship with an employee. the board approved the decision after investigating the relationship and promoted chris kempczinski to president and ceo. dave mccone shows us from took -- joins us from tokyo. how big of a losses this from -- four mcdonald's? dave: could he big. he was the key architect of digital ordering and delivery. those were key areas of growth for the company an important. he implemented a system where executives got bonuses based on the speed and breadth of the roll out of those services. it was seen as very key for the company, it remains to be seen whether his replacement will be able to keep the ball rolling on those areas for the company, to keep up with competition. the fast food sector has changed a lot. he has been at the forefront of those changes. he's been good for the company. we do not know yet whether the successor will be able to keep

that going. about yeah, and thinking those issues, how are investors likely to respond? know, thestors, you company had been on a roll. there are only a handful of other companies that have outperformed since he took over in 2015, in terms of companies on the s&p 500. investors have rewarded the company already. there could be some small upside to this and it shows the company is taking its policies very serious. nick donald's has faced an array of lawsuits and challenges on its harassment policy. it is focused on this. the idea that it would be top leaderhave its resign over something like this shows it is taking it very seriously. it could be investors would actually welcome this even though he is, as i mentioned, a key architect. they could consider that it is a good example of governance and

how the company has moved forward given it is under pressure from other quarters to have a harassment policy that is effective, and of course to be consistent in its application. much. thank you so dave mccombs there in tokyo. let's get a preview of what to watch and markets later on this morning. sophie:sophie: taking a look atg kong investors, they have to consider plenty after the economy fell into recession in friday's sales showed a slump, i'll be at at a softer pace. -- albeit at a softer pace. bloomberg economics warns there is little reason to expect a bottoming out consumption. with that, i'm highlighting what is going on with market reaction is that has been tempered. even with a string of poor economic indicators, markets are remaining calm, with the cost of hedging against more losses of the hung saying that saying subdued.

today, budweiser after morgan stanley initiated coat -- coverage with a 35 hong kong dollar price target. china open which is two by thomas cook for $14 million. i want to highlight the call. inmay rise as much as 12% 2020 thanks to a potential earnings growth and anticipated valuation recovery. it is overweight autos, health-care, s&p, consumer, as well as tech. haidi: sophie kamaruddin and hong kong. before we handed over to bloomberg markets: asia at of the china open, let's look at how the markets are opened and asia. this is how we are seeing the kospi trading upside. up 1%. really tracking the gains we saw on wall street. the s&p 500 gaining a fresh record high. japan will have to play catch up tomorrow. they are closed for culture day. ozzie stocks up by 4/10 of 1% ahead of the rba decision. retail sales coming in worse than expected.

trading new zealand also seeing gains of just over .5%. shery: let's check in on futures. u.s. futures gaining ground, up 1/10 of 1% after u.s. markets rose to fresh highs. we have energy leading the gains in the past session as we have oil jumping the most in six weeks. wti and brent at the moment under pressure. take a look at china futures. up .5%. this after those better than expected chinese manufacturing data we got last week. that is it from "daybreak: asia." standby for bloomberg markets: the china open. this is bloomberg. ♪ this is bloomberg. ♪ here, it all starts with a simple...

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>> it is 9:00 a.m. in beijing. welcome to "bloomberg markets: china open." i am tom mackenzie. yvonne: i am yvonne man. david: i am david ingles and here is your top story. >> i think we are in good shape. we are making good progress. there is no natural reason why it could not be. david: wilbur ross tells bloomberg a trade agreement with china is near. president trump wants assigning to take place in the united dates. yvonne: the world's top -- united states. yvonne: saudi aramco brushes off