>> good morning we are under one hour away from the market opening. >> i'm kathleen hays. close welcome to daybreak asia. ♪ >> our top story this wednesday, the senate moves to support hong kong's protesters seeking annual reviews and sanctions for those undermining freedoms. alibaba is still betting on hong kong.

investor demand is several times oversubscribed. >> sometimes people look at australia's market which has just opened what are you watching? slightly under pressure after the game we saw on tuesday. kiwi shares are gaining. the could see a softer open in seoul and tokyo. the nikkei stock average has more than doubled since shinzo abe took office. economic strategy still lacks traction. it is a busy week that session ahead with japanese trade and china's update on the docket this wednesday. as we are waiting on alibaba's

final pricing on an ipo. here in hong kong as schools reopen and we await more protests, housing futures have snapped a -- today advance. volatility has slumped over the past two sessions. acrosse sliding further -- there is optimism we might see a peaceful resolution to the protests here in the city. >> let's check in on first word news. >> boris johnson and jeremy overn repeatedly clashed policy in their first televised election debate. johnson said he would massively raise government spending.

jeremy corbyn said the health service would only be safer under a labour party administration. pg&e has lowered its estimate of the number of households that might need to suffer imposed power outages on wednesday. much of the san francisco area may be spared. pg&e is trying to avoid the power lines from sparking new wildfires amid hot and windy weather conditions. the u.s. has walked out of military talks with south korea. the foreign ministry says it is expected to discuss costs that were in the acceptable range for both sides. that thees questions stability of one of america's closest alliances. on twitter at tictoc

powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. a the u.s. senate has passed bill aimed at supporting hong kong protest. this is an amendment of the u.s. hong kong policy act of 1992. you can see chuck schumer on the screen. he is continuing to speak. america'slar of economic relationship with china and hong kong. the u.s. treats hong kong differently than china for trade purposes. now, there will be a review of china's relationship with hong kong every year. the senate has just passed this, something the president has not said he would approve yet. let's bring in our congress reporter.

also our reporter in hong kong. does this mean for the u.s. relationship with hong kong and does president trump have to approve it? yes the president definitely has to sign this into law for it to go into affect. we are still one or two steps removed from that. the house passed a version of this bill about a month ago. the senate did not take up the version but instead passed its own version of the law. what has to happen now is the house and senate foreign policy committees will have to come together and work out a compromise that could that be posed by -- passed by both chambers then go to president trump for his signature on this. president trump has not said one way or another whether he supports this piece of legislation. he is not said that he does not.

rubio has had conversations with the president on this. indication that this may have some support from the administration but we don't know for sure what will happen moving forward. >> you have covered the politics of washington, d.c.. how you expect the passage of this bill to reverberate? >> it was very much supported by the pro-democracy activists here. washington went to to testify in support of the bill. this will be very welcome from that camp. -- they haved that warned the u.s. against interfering in the issues and hong kong and have warned of countermeasures if this bill was

to be passed into law. comes amid the discussions of the trade war and trying to get to the phase one agreement. this could be a significant development in terms of china u.s. relations. >> china has previously complained against foreign interference pointing to the u.s. as what it calls the black hand. does the passage of this bill validate that claim? certainly, china is expected to see it that way. this is something that they have been warning against from the start of the protest. they have warned the u.s. against interfering. they have said that the u.s. should not be a player in the affairs of hong kong and at every turn of this bill passed through the u.s. congress have warned against the passage. and just passed the senate

it still has a few more twists and turns before it gets to president trump. we have not really hard whether he's like to sign it or not. i expect we will hear from china in the next day or so. againl see if they are threatening countermeasures. trump has president been quiet when it comes to the passage of this bill. how do you expect him to respond to this and does it make the picture around the ongoing trade negotiations, does it add a new dimension there? >> we have spoken to several experts about this issue who feel that they could at the very least complicate negotiating the first phase of the trade deal. that may be one of the reasons why president trump has been

reluctant to weigh in on this explicitly. has aecutive branch different calculation when it comes to for policy the congress does. sometimes, congress can play the bad cop when the white house is forced to play the good cop in certain situations. is thing to note on this that it has been passed by unanimous consent in the house and senate. that's not the same thing as a does- zero vote but it indicate there is strong bipartisan support in both chambers. we don't know if they be tell what happened but if it were, a cup of president trump in an awkward position pushing back against congress on something that a lot of people here on the hill view as an inch -- issue of

fundamental human rights. this will get more complicated over the coming weeks and again, there is still some parliamentary maneuvering that will have to happen in order to get this to president trump. i think it has a good glide path right now given the support in the house and senate. thank you to our guests. bloomberg sources say the near deal between the u.s. and china fell apart six months ago is now being used as the benchmark to decide how much tariffs should be rolled back as part of a phase one trade agreement. our china correspondent joins us from beijing. what if we heard and does this development change things? as the previous correspondence were saying, it makes the situation more complicated. we will have to wait and see how

this will end up going through the house and senate once the foreign affairs committee looks at it and then if president trump signs off on it. this is an issue the china takes seriously and is very frustrated about. it has warned of strong countermeasures if this bill does get implemented. it is something that adds another barrier potentially in terms of the relations between the two sides. talks, the trade fresh deal that we have had is in terms of the insight for the trade negotiations between the u.s. and china which is they are looking back at the initial deal that they had back in may which fell apart. iny have revived that deal regards to how much china implements it. that will be tied to how much of a tariff rollback the u.s. is prepared to implement. what we know from the chinese side is that if they are prepared to sign off on the

the tariffs from september would be rolled that completely. they also want the threat of additional -- tariffs in december to be taken off the table. ,n regards to the 2018 tariffs china wants to see theback as well. what where hearing is that now some officials in the u.s. are prepared to look at that. they wanted to keep the $250 billion worth of tariffs and play. now we are hearing there is a debate within the white house about potentially rolling back those tariffs. again, the exact amount is still being debated in the white house. we're still waiting to find out if the two presidents can sign off on this before the end of the year. >> the u.s. senate has passed of this bill aimed at supporting the hong kong protests. they passed it over china's objections. my question is, some would say

that the hong kong police have fought back against the protesters some say they have been accepted in force but china seems to be holding back and has shown restraint. what do you think this is going to mean with their relationship with the u.s.? how is president trump looking at this? chinese side, interfering in their domestic affairs is something that is incredibly sensitive for them. there are redline issues around this. there are a few issues more important to the regime here in beijing. it is very sensitive. in terms of how they are responding to the protest in hong kong, the view has been that they have been holding back and letting the authorities and hong kong, the police and carrie

lam, pleasant deal with it. they have been trying to wait this out. there is a view from china's senior leadership that if they were to take a more aggressive sending inr example the help of the hong kong police, that would cause such a major issue in terms of capital flight and business sentiment. it would cripple the city beyond what we have seen. the trade talks are part of the deliberations. china very much wants to get a phase one deal done so they can alleviate the pressure on the economy. all of this factors are being considered by officials in beijing. how donald handles this, we have noted he has been silent on this bill. whether or not he comes out and comments on it on the back of the senate passing it is something to be seen. we may get a response from chinese officials later today.

>> thank you so much for that. to finds go to sophie out if there is any reaction to this hong kong bill passage and if so where? the bill still has some hurdles to go. we are seeing the offshore yuan suffering. the yen has traded against its .ajor peers we are seeing u.s. futures come under pressure. still ahead, witnesses described trumps ukraine call is unusual and an appropriate as a second week of impeachment hearings begin. we will have the latest. next our guest says how he

sees the rally leading up to the 2020 elections. ♪

>> this is daybreak asia. are digesting trade headlines. our next guest says stocks will grip higher into the 2020 elections. it's great to have you. higher. 2020 elections we are still in 2019. we think we have done enough. they may get some not so good retail indications. how does this set the markets up

for a year when they are going to rip higher ultimately? you think the fed is going to cut rates? all of those things you just mentioned are economic fasters. -- factors. why we see the markets moving upward towards the next --sidential elections is the happen before then? the economy have to stay on track? does the trade deal have to get side? the trade war. there is no deal at all, you seen what is happening to china for slowdown there. this is not been good for u.s. manufacturers. the issue with that is the

trump will stop the trade war. it's the best thing he's done from the political standpoint. from an markets point of view, if you expect the momentum to keep moving forward, there is only one way we get from here to there which is an effect qe for. in australia, we are talking about printing money. we already going down the same path. >> your views contrast with a guest we had previously. he believes that we are getting near the end of this bull run

that after 10 years, we are do a correction. how would you counter the argument? >> the premise behind those points is that there is -- the issue we are saying at the moment is hyper convergence between fixed income. we sought earlier this year. everyone was saying there was going to be a recession which is an economic phenomenon. happening after the inverted yield curve in the u.s.. it didn't happen and we rallied on the u.s. markets. in australia, we have had 11 inverted yield curves in the last nine years and that hasn't been covered. principles that worked previously, call it what , if you understand what understand whating, the

should be happening, the premise of your last guest point was there is still a business cycle. as a theory invented in 1967 where we still have business cycles and the relationship between that and a natural markets is yet to be seen. sameu could argue with the qe for here in america what the ecb and bank of japan are currently doing will be very different to what our reserve bank australia could or should be doing. our yield curve and our relationship with fixed income markets is fundamentally different than any other market in the world. the propertywith market as we know in australia. it should not be forgotten that

australia is the only advanced aonomy in history to avoid recession for 28 years. there's nothing natural about that. premise, and for a lot of people who are not going to vote for president trump, they like the idea that if he does when -- had i make money? where are you going to put years? asked not of this is good. not a healthy scenario we want. what happens in reality, we want are always the same thing. moment, if you do believe this a disconnect between the two, number of us can guess when that is a cycle in the financial markets. mentioned,y as you the gets a second turn and he is

talking about amending the 22nd amendment going through a third term. what's important at the moment is to see what's happening but there's also some very boring nonmarket correlating opportunities. this whole geopolitical overtones at the moment for example, we're seeing the change in silicon. silicon carbide is a new fundamental science that is changing microprocessors. affected by the trade war, the relationship with korea, taiwan and china as well. >> thank you so much for joining us. >> that was the cio -- a quick programming know, we are going to be live at the new economy forum from beijing on thursday with a number of big names.

don't miss those big interviews and many others besides. if this is bloomberg. ♪

>> let's get a quick check of the business flash headlines. the regulator is -- that's according to indicate news report. the financial system council will suggest reducing the index to only large-cap stocks. australia's financial crimes agency is accusing a bank of reaching anti-money-laundering. the agency says the bank failed to report almost 20 million international fund transfer instructions over a five-year time. duefailed to do enough

diligence on some transactions. still to come, new details are revealed about due diligence on some transactions. -- we will bring you the latest next. this is bloomberg. ♪ everyone uses their phone differently.

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>> this is bloomberg daybreak: asia. unanimouslyate has passed a bill aimed at supporting protesters and hong kong. his warning china against violent suppression as a demonstration. it would require annual reviews of hong kong's special status. the health passed the bill last month but slight changes mean the house still needs to pass the same version before sending it to the president. mike pence said it would be difficult for the u.s. to sign a trade agreement with china if demonstrations in hong kong are met with violence. this is washington is taking a strong stand with china while

negotiating a deal. kong plan to hong block transportation. bloomberg has been told that the u.s. china trade deal that fell apart six months ago is now being used as the benchmark to decide how much tariffs should be rolled back. -- negotiators are under pressure to pass a phase one deal. the u.s. on it has misidentified the location of dozens of nuclear weapons. the audit failed to name the correct location of 79 rockets react about 1/5 of the stockpile.

global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. australian markets have been trading for 30 minutes now. >> has a snapshot of aussie shares. when it comes to stock movers of know, westjet is leading after its guidance update. als is rising the highest level on its solid first-half report card. 5.6%ocrat leisure rising this morning after boosting its final dividend on it stronger profit growth. let's look at the downside. on highlight westpac shares earlier. we sought off by more than 2%.

for 23k is being sued million and anti-laundering rules. want to highlight what's going on with the reaction to the news that the the u.s. senate has the bill about hong kong. we saw a reaction in the offshore yuan. we also have the yen trading. the bill about hong kong. it has been a reaction in u.s. futures as well. the s&p e-minis off this morning. >> moving onto alibaba's hong kong share sale. according to the latest dow --es report,

according to our sources, alibaba is telling investors that it is likely to price the institutional portion of the sale -- at around 176 hong kong dollars per share. that's a discount from the last close of trading in new york. taking orders from institutional investors. earlier, there were reports that strong investor demand. we know the taiwanese let's ensure is planning to buy as much as $500 million for the shares in this ipo. itording to these numbers, looks like alibaba is going to raise at least $11 billion in this share sale which makes it one of the biggest ipos globally of the year. it's a big deal for the hong kong stock exchange and a big vote of confidence for hong kong that it is still a global financial center amid the ongoing social unrest. it also shows the hong kong

exchange's efforts to ease the listing requirements are paying off and that they can attract the world's biggest tech giants to the exchange. why is alibaba doing this? does it really need the money? it has been a longtime dream. listing in hong kong makes it easier for mainland investors to buy and sell shares. it also curries favor with beijing. given this photo of confidence when there is so much social unrest in hong kong. additionally, the sentiment has been regrouping -- improving around alibaba. the stock is up more than one third this year. it reported blowout sales numbers. it also reported better-than-expected quarterly earnings.

this hedges against the risks that u.s. china relations continue to deteriorate. some lawmakers are pushing for chinese companies to do list from u.s. stock exchanges. alibaba has plenty of places to use this capital. it diverts resources away from competitor tencent. it is also rallying considerably internationally. >> thank you for joining us. has just passed legislation supporting the hong protests amid growing calls for a tougher response to the chaos in the city. one guest told us protests why n needs to take a tougher approach against china. onlythink it's the approach the u.s. can take because of the end of the day,

the u.s. says we stand for freedom, democracy rule of law and so forth. even as for member, hong kong is critical to u.s. investors. we have a lot of investments and hong kong in order to get into china. i believe that it is very critical in that regard. the u.s.saying that congress is doing may be the right approach but i believe it is the only thing they can do. they have to react to what is happening in hong kong. >> doesn't this pose a real conflict between beijing and washington? you must remember that the did specify that it has to be outside of chinese

influence. there's probably no real choice on the part of the u.s. other than to aggregate the law which would have tremendous implications for trade with hong kong. >> you know asia and china so well. what do you make of the trump administration's approach to china more broadly? military activities in the south china sea. >> there really is no choice. china has become much more aggressive in the south china andand expanding globally showing their military might. you have a situation where the u.s. has been a -- now you have a big competitor coming to play. i think the really is no choice for the u.s. but to respond the end of the day. otherwise, you are going to have the option to open to american

trade and other aspects threatened. if the routes going from the middle east to japan are interrupted in any way, going through the south china sea, then you have a real strategic issue. trump is a divisive figure in the u.s. you travel a lot around the world. how is president trump received overseas? >> the perception overseas is often not as negative as you would find in the u.s.. you find people who like his approach, like the fact that he is looking after america. it's ironic because you think people would say he is ignoring us and now he's just looking at america. america is a symbol of strength for a lot of people and they would like to see a strong america.

trump is perceived as enhancing the strength of america. moving on to week two of the public impeachment hearings. manykers are hearing from people. they called president trump's conversation with the leader of ukraine unusual and inappropriate. >> the military culture i come from, when a senior asks you to do something even if it is polite and pleasant, it is not to be taken as a request it is to be taken as an order. in this case, the power disparity between the two leaders, my impression is that in order to get the white house , president zelensky would have to develop -- deliver these investigations. go to our reporter who joins us from washington.

what were the most important takeaways from today? pulledy the testimony the entire investigation into the white house. of today's witnesses worked in the white house and were on the famous call between president trump and zelensky where president trump him for a favor. as you mentioned, two of those andesses jennifer williams that theypenman said found the call disturbing. one testified that he immediately reported it to the nsc lawyer. the other witness, timothy morrison said he was so concerned about the call that he asked the same counsel to move the call record onto a secure server so that it could not be

publicly released and could not be late. >> the other key takeaway i would point out is that both hadison and another knowledge of things they were saying themselves with the u.s. ambassador to the eu gordon sondland was linking $4 billion in assistance to ukraine to a biden investigation. that thatnto meetings investigation was called a deliverable. it was said that they needed to announce an investigation. the most important thing the republicans did was the fourth , heess, kurt volker

testified that he was unaware that there was a linkage between they and the biden investigation. he didn't know the burisma was been brought up but he didn't see the linkage. the important testimony they got from him was that he had had conversations with the president where he was aware that the interestedas broadly in corruption and wanted other allies to contribute more toward ukraine themselves. he was bringing up some point that they wanted. he also said he did not see real evidence of bribery. earlierre discussing how high the bar is for impeachment. anything so far that would increase the probability of the president being moved from office? >> the house can impeach the

president with a simple majority. then, it goes to the republican-controlled senate where it would take 60 votes out of 100 to remove him from office. there are only 47 democrats. if you presume everyone of them would vote to remove him, we don't know that yet but if you would presume that, you are looking at 20 republicans needed. you don't get to a number like that without mitch mcconnell or other members of the leadership team being on board with this. right now, they are dismissive. they say they see no reason to impeach trump. to remove him from office. they are banking on the idea that democrats will not want to spend too much on this trial in the senate early next year they realize it will happen but there are six democrats in the senate who are running for president and their primary contests will be going on at the same time. thank you so much for joining us. still to come, japan's trade

balance swung back into the black. figuresbreak down the and have a reaction in just a few moments. this is bloomberg. ♪

>> this is daybreak: asia. >> on paul allen in sydney. japan'sbe becomes longest serving prime minister on wednesday. let's assess his government's performance so far. shinzo abe has his own name for economics and japan. he will be the longest serving prime minister. arrow, itf the third is due to structural reform but he is not been able to effectively pull that off has he? it has been about seven years

since shinzo abe came back to power. we can see that the three hours -- arrows of his economics, haveble physical spending lifted japan's economy. it was see that japan's economy has been on a modest expansion. the unemployment rate is at a low of 2.4%. that's down from 2012. the japanese yen was weaker compared to levels in 2012. however, there are several challenges. there are some challenges in the structural reforms. whether japan's labor market has been tightening, it has been quite disappointing. it is been grappling with the sluggish with growth for many years. they are likely to be hampered by some structural barriers in

the system. are barriers as well for the first arrow of monetary policy easing. let's look at the bloomberg chart. this demonstrates how long it has had these ultralong rates, it predates shinzo abe. >> looking at the risks by the bank of japan, it has not quite -- sticking to its playbook of verbal interventions. the recent stabilization's and the market that provide the bank of japan with; room. the u.s. and china are working toward a phase one trade deal and the u.s. and japan have already achieved a trade deal. returned to yen has a level that is more comfortable with the bank of japan. see, we expect

the bank of japan to maintain its cautious stance with its current policy on changed. given the constraints of monetary policy because inflation is still low, we believe that perhaps it's important to tap into the cyclical space and provide more stability for the economy. >> we have numbers coming up. we are waiting now for the overall trade deficit or surplus however we do see that imports fell in the month of october in japan. the trade report down nearly 15% on a year-over-year basis. we have the exports down over 9%. the trade balance which was expected on it unadjusted basis to come in at a negative is at plus $17.3 billion. we will see what it does on an

unadjusted basis. that is supposed to turn the trade balance back into a surplus. that is what we are seeing so far on an adjusted basis. not quite as negative as the month before. get right back to our guest. get some reaction to this. japan'sontext of exports and the ability of exporters to manufacture and sell their goods fluctuations in the yen, is that one of the successes of the economy under shinzo abe so far? >> one of the achievements is the weaker yen that we see. boostld use that to help profits. given the extra environment, japan's exports are under pressure from the street tensions.

i think the contraction imports are not very surprising. we are expecting a deep contraction and imports in the month of october due to the fact that there will be pullback of the front load and demand and also disruption due to the typhoon in october. one thing that the governor of the bank of japan has been saying is that yes we have tools and they work but looking more for stimulus. do you expect to see more stimulus from the japanese government under shinzo abe and if so, what would be affected? -- effective. i think the shinzo abe government has been trying to tap more into the physical space

and announce more physical measures. --expect a sharp decline and and here due to the sales tax hike. the government plans to announce to let some temporary physical measures to offset or cushion part of the decline in consumption. we have seen that provision of preschool education. the will partially offset impact on the private consumption. >> thank you so much for joining us. we will be live at the new economy form from beijing on thursday with a number of big names including the ceo of and an investment vice chair. this is bloomberg. ♪

♪ >> this is bloomberg daybreak: asia. sydney.ul allen in

let's get a quick check of the business flash headlines. rio tinto faces more problems. they have been the set by delays. said court has upheld claims by an environmental group that mongolia did not follow process on the agreement. -- have artieady warned it may cost $2 billion more than forecast. reliance industries has eclipsed bp. indian conglomerate market cap was $133 billion at the close on tuesday over taking bps $132 billion. they plan to cut the company's net debt to zero in 18 months.

>> asian stocks look set to snap. e-minis our office much is two point -- percent. the senate passed its version of a bill supporting protesters in hong kong. this week, it is seen a solid gain up 3% since friday making it the world's best performer in that time with data indicating that short covering is helping to drive this rally. bargain watchers, don't expect the rally to last too long. even beaten down valuations are not proving lower -- low enough for some. he sold his stocks in may and has been short since september. much more ahead as we wait for the open in tokyo and seoul. this is bloomberg. ♪

paul: good morning, i am paul allen in sydney. asian markets have just opened for trade. kathleen: i am kathleen hays. sophie: welcome to daybreak asia. paul: our top story this wednesday, the u.s. senate passes a bill to support hong kong's protesters. alibaba is still betting on hong kong.

atres are set to be priced 22 u.s. dollars apiece. chinaen: the u.s. and revisit proposals that were abandoned months ago as pressure builds to close out a deal. let's get straight to the market action. sophie: a look at the mood in tokyo. the nikkei 225 off .5% this morning. the latest data showing exports down 9.2% on a yearly basis. double falling by digits, making for a much narrower trade surplus than forecast. is extending its drop for a third session. aussie shares off. bank faces allegations of breaching anti-money laundering rules.

the u.s. senate voted its version of a bill supporting pro-democracy probe testers in -- protesters in hong kong. cnh one continuing to rise. the dollar study, but under pressure once again as speculators -- steady but under pressure once again. checking 10 year treasuries, yields are off. paul: let's get first word news. u.k. prime minister boris johnson and opposition leader jeremy corbyn clashed over policy in their first televised election debate. johnson promised voters that the years of austerity are over and that he would massively raise government spending if conservatives win next month. corbin said britain would only be safe under labor administration.

pg&e in california has lowered its estimate of the number of houses likely to suffer power outages on wednesday, saying the san francisco area may be spared. 170,000 homes and businesses still face being cut off, down from more than 300,000. pg&e is trying to avoid powerlines sparking wildfires. the u.s. has walked out of talks with north korea. they balked at paying five times more to have american troops nations there. wanted ton minister discuss costs that were acceptable to both sides. the new york fed president john tempted has said he is to believe the economic outlook improvesen rather than

but he believes monetary policy is in a good place. he told the conference the domestic picture was being clouded by global factors. global news 24 hours a day and on tictoc on twitter powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg. paul: thanks. the u.s. senate has unanimously passed a bill aimed at supporting protesters in hong kong and warning china against the violent suppression of demonstrations. international editor joins us. jody, what does passage of this bill mean and what happens next? the hongs important in kong saga. this is a bill that pro-democracy advocates and protesters have supported and called for passage of.

joshua wong went to washington and testified in support of this bill. this bill, now passed by the house and senate, still has a few more hurdles before he gets too president trump's desk. congress has to pass the same piece of legislation so they will need to reconcile each aversion to come up with one that can be passed by both -- each version so they can come up with one that can be passed by both chambers and get to president trump's desk. was bipartisan support, overwhelming bipartisan support in both chambers. even if trump were to veto it, they may be able to override the veto. we heard from china in recent weeks. they said the u.s. should bow out and not interfere in hong kong's affairs and threatened countermeasures if this bill was to become law.

kathleen: what is the latest in the standoff at hong kong polytechnic? >> we have seen more protesters and students come out. carrie lam tells us there had been more than 300 students that had come out of there. we saw some arrests last night. some protesters try to escape and they were immediately arrested. surrounded by police. we are not sure how many people are left. wey have been there for days don't know how this -- for days. we don't know how this is going to end, but they are surrounded by police. it's unlikely they can get out of there except by being arrested and leaving the campus that way. the most chaotic clashes happened on monday. police tell us there were more than 1400 volleys of teargas

fired and almost that many rubber bullets as well. it was a very chaotic day on onday with cars being set fire and continuing volleys of teargas. the police are still surrounding the campus. it's just after 9 a.m. wednesday in hong kong. are we expecting further disruptions? protesters have said they intend to disrupt the transportation network here again. we have not seen much of that yet. it is early. we are bracing for that. .chools are back in session edsterday after things calm somewhat, the government decided to go ahead and reopen the schools, which had been shattered all last week and monday and tuesday as well. paul: jodi schneider, thanks for

joining us. sources say the deal between the u.s. and china that fell apart six months ago is now being used as a benchmark to decide how much tariffs should be rolled back. joins us correspondent from asia with more. tom, what do we hear about this? tom: there are fresh details being discussed between the u.s. and chinese sides in the first phase of what the u.s. would like to see as a comprehensive trade deal. they are using the agreement they had come up with in may as a template, as a benchmark to decide to what extent and how prepared to are roll back tariffs on chinese goods. it's going to come down to how quickly the chinese side is able

to implement some of the agreements. depending on that, the u.s. will rollback tariffs. that's a broad brush of what we are hearing at this point. china has demanded that the tariffs imposed in september of this year be removed immediately if they get a phase one deal. wanthinese are saying they $250 billion worth of tariffs that were imposed gradually rollback as well. those things are being debated by the u.s. side. they are also discussing to what and by what percentages they remove those tariffs. the u.s. is a little more reluctant. they had wanted to keep some of those tariffs as something of an enforcement mechanism. they have come around to the idea they can gradually roll those back.

it's being debated by u.s. officials and it will be reviewed by the chinese side, of course, but for beijing, getting relief from tariffs is absolutely essential for them to sign off on the phase one deal. that's the easy part of the negotiations. phase two is going to be complicated. trump wants that to start immediately after phase one, but we still don't have a location or a timeframe where phase one will be signed. the media has said trump is not -- has said xi jinping is not going to be traveling outside of china before the end of the year, which raises questions about how he will sign off on phase one. can the senate bill on hong kong's protesters affect trade talks? >> it can. we have seen a market response.

of course, now the bill has to be passed by both chambers and then go back to president trump. i don't think the chinese will be surprised that it happened even if it is a sensitive issue. they will hit back with strong countermeasures if the bill is implement it. what that means is a question of course. we will be listening for commentary from chinese officials on this. but certainly, discussions will be overshadowed. there is so much pressure to make a trade deal, i would be surprised if it derails it, but it complicates it. hard onwere to go in the protesters and use violence against the demonstrators in hong kong, politically, it would be very difficult for the u.s. to sign off on trade one.

-- phase one. , there is least progression in the talks. kathleen: a reminder, we will have the new economy forum from beijing on thursday with the ceos of goldman sachs, ubs, and the chartered, president of an investment bank. still toto come -- come, alibaba's new listing set to be priced around $22. up next, what is moving markets. this is bloomberg. ♪

kathleen: this is daybreak asia. i am kathleen new york. sydney.am paul allen in asian equities look to be facing

a down day after a three day winning streak. garfield reynolds joins us now in sydney. the news we had from the senate promised to be one of the biggest drivers today. garfield: it could be. a lot depends on whether anybody response. we always knew this was going to get through the senate. the only question was whether it would happen before the market , which would sort of increase the impact. the president has not made any signals of how supportive he would be. we have not heard from the house about what is going happen. and probably most important, does china responded all -- respond at all? they see the bill is unwarranted interference. as a driver.fade

it has been surprising this week, the level of resilience that equity markets have shown. among some economic data and other concerning developments in ,nd around hong kong and trade if this also fades out, it could just be another shock that indirectly makes equity stronger. kathleen: the asia-pacific index is looking at a third month of gains. cannot be sustained? garfield: -- can that be sustained? garfield: i may be setting myself up to look foolish on this, but i think the market is still looking strong when it comes to equities. a big part of that is because we theed back until next month decision day for what happens with the trade war. as long as the two sides are

rhetoricnd no vicious is coming out, the occasional ups and downs about whether or is more or less pessimistic about the talks, how often trump says china desperately needs to make a deal, all of that is just causing the market to take reassurance from the fact that the two sides are still talking. it's also allowing them to shrug off any of the less lifo data that has come out -- less delightful economic data that has come out. on,with all of that going the economy is in cruise control. unless we get some particularly drastic shocks on the trade of left something out field, i think we are going to merge onto november at least --

march onto november at least and then in december, they are supposed to meet & a phase one -- meet and sign a phase one deal. fascinating analysis. let's get some investor insight. joinsad of fixed income us from san francisco. great to have you back on the show. let's start with what you make of the continuation of the protest in hong kong. escalating and then capped off today with a vote in the senate. >> i think it's a very interesting development because the actual bill and whether or not a get signed into law by president trump, i think president trump may very well use this as a bargaining chip. consider if he actually decides

to to sign the bill due substantial domestic pressure. few things republicans and democrats can actually agree on, if he succumbs to pressure, it will be seen as an escalation. if he doesn't sign the bill, it will be seen as an olive branch, him extending and going out of his way to concede to president xi jinping. i think this is a very interesting development. not thisee whether or will unfold with trade first or if the president signs this first -- or not. as an investor, you see a discount in hong kong stocks. you trace that to the protests. how deep is the discount?

what does it mean for investors? kathleen: the discount we are the same company but it has shares on the hong kong market. we have seen this discount over a long time. however, today this discount is substantially higher than we have ever seen it, really over the last five years. now,xample you see right we think it has to do with a few things. theis the conflation of hong kong protests with the hong kong stock market even though the hong kong stock market is overwhelmingly chinese onshore companies. uncertaintytinued around trade between the u.s. and china. last but not least, the inclusion of china into the msd i index has opened channels for foreign investors to take a new look at foreign markets, so

demand may be relatively higher. for all these reasons, the discount exists and may be great for investors who have access to the onshore market as well as the hong kong market to do analysis and make sure they are buying in the right market. paul: one particular stock we are looking at very closely today is alibaba. 176pricing coming in at hong kong dollars. alibaba is not going to be traded in china, but is that an example of the hong kong discount as well? wax i don't think so. we need to step back for a moment. the big story is that this is the most important technology in china for the last decade. locally having access to this technology company. that would be like the u.s. not

having access to amazon. the big story is that alibaba finally has shares trading in hong kong, which is important to local investors. i think the discount that currently exist relative to the u.s. adr is about 3%. paul: one of your top convictions's asian high-yield. what do you like about it? wax i have talked about this for many months. i think if you look at asia high-yield, it really is one of the most compelling opportunities today in a world where yields are very low, and i will describe why. if you do an apples to apples comparison. relativeited states, to asia, the differential is the highest we have seen it. we think it will persist until

there is an actual truth in the current -- truce in the current trade talks. what we are really seeing is that this differential is being driven mostly by chinese companies, specifically by chinese property companies that have several technical factors in terms of the ability to and get the demand from offshore investors. many investors are standing on the sidelines. we think this is a great opportunity for investors who have the appetite to look closely at asia high-yield companies. kathleen: that is your top position. what is your number two? >> we like india, indonesia. the way to think about that is when you are buying a local currency bond in these come -- countries, you are capturing the currency as well as the interest rate. we think there is room because they still have issues with growth. they are going to be looking to

the monetary authorities to lower rates, and also some fiscal stimulus. you are able to capture 6% or 7.5% in local aeld curves, we think it is good opportunity to capture the returns as well as the potential appreciation of both currencies. , very, idollar is very think at this time peaking. paul: the portfolio manager of matthews asia. thank you for joining us. get the stories you need to know to get your day going. your dayb on terminal. it's also available on your mobile. you can customize your settings to only get news on the assets you care about. this is bloomberg. ♪

kathleen: this is daybreak: asia. i'm kathleen in new york. paul: and i'm paul allen in sydney. let's get a check on the latest business flash headlines. kirin's line operation will take full control of new belgium in an all cash deal. australia's financial crimes agency is accusing a bank of breaching anti-money laundering and anti-terrorism rules. they say the bank failed to than 23 million international funds transfers .ver five years westpac says it is reviewing the findings and will respond later. coming up next, qualcomm paints a rosy picture.

to investment in 5g started pay off? that story in a moment. this is bloomberg. ♪

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>> this is daybreak asia. the u.s. senate has unanimously passed a bill aimed at supporting protesters in hong kong and warning china against violent suppression of the demonstrations. the house passed a similar bill last month with slight differences, meaning both chambers still have to pass the same version before sending it to the president. the u.s.-china trade deal that fell apart six months ago is now being used as a benchmark to decide how much tariffs should be rolled back.

the size ofking rollbacks to preliminary terms that failed. negotiators are under pressure deal.clude the phase one japanese exports fell for an octoberaight month in as the trade war continues to drag on global demand. overseas shipments dropped more than 9% from a year ago, a decline dating back to 2016. the drop is the largest in more than three years. u.s. military audit has misidentified the locations of dozens of nuclear weapons. it failed to name the threat locations of 79 rockets. that's about a fifth of the stockpile. the audit has control and accountability over america's

fleet. global news 24 hours a day on on twittertictoc powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ kathleen: thank you. time for a market check with sophie. whatsit the top of your list? top of yourt the list? sophie: asian stocks are set to snap a three day gain. the nikkei 225 to the downside here. investors are considering the trades. bonds are mostly nudging higher. 10 year treasuries flipping for a third straight session. the yen has eased its earlier advance. we saw the u.s. senate voting in favor of a hong kong bill.

the hong kong dollar edging toward 783 this morning. on the offshore yuan, sticking at 703 against the dollar. the pboc is expected to maintain the loan prime rate for november. 2.5%ch falling as much as as the financial watchdog in australia has filed a suit accusing the bank of the biggest reach of anti-money laundering and anti-terrorism -- breach of anti-money laundering and antiterrorism laws in the banks history. very quickly, a last look at

makers. drug they continue to climb. the pharma sector rising the month -- most since november of 2018. paul: impeachment testimony still ongoing in washington. and even bigger day slated for wednesday. our politics editor joins us on the phone. what is the latest we are hearing from capitol hill? wax we still have two witnesses testifying -- >> we still have two witnesses testifying. marathon is a good word for what it felt like today. democrats and republicans are in perceptions around the event, president

trump trying to convince ukraine to investigate his political rival. we had a guest on earlier, a political scientist from columbia university, and she said that unless the testimonies show that the president committed something the equivalent of treason or if congress learns he has lied under oath, this does not rise to the level of impeachment. inappropriate, unusual, concerning doesn't seem to cut it. what are you hearing from your sources on capitol hill on both sides of the aisle about what they think they can get out of this? wax that's the central question because a lot of people agree on the a6 facts. they just disagree about what .hose facts -- basic facts they just disagree about what those facts mean. bribery is an impeachable offense.

we have heard democrats start describing the allegations as bribery, rather than using the latin term quid pro quo. that wasn't resonating with the american people as much. the constitution leaves high crimes and misdemeanors up to the interpretation of congress. as long as the house of representatives, which is controlled by democrats, decides the president committed high crimes and misdemeanors, that is not a legal threshold. it's a political threshold. it's up to the interpretation of the lawmakers. kathleen: when do you expect democrats to wrap this up and get this to a vote? hearingsly public scheduled in the intelligence committee are going to wrap up this week. they could schedule further hearings and hold more closed-door depositions next week while the house is in recess, but after the house intelligence committee finishes its work, this will go to the judiciary committee which will hear the articles of impeachment as they are presented and allow

the president to present his as well. that could wrap up by the end of the year. it could depend on how robust of a defense the president presents. if he and his counsel want to call their own witnesses and engage in this process a bit ,they want to delay they could. otherwise, it could wrap up quickly. good.hink it's it's really focused on the things the two companies naturally do well together, which is work on products. when you get engineers talking to engineers, things work out pretty well, and that's where we are today. >> the 5g relationship could be

a springboard, you think question mark >> i think so. it's a hallmark of our company. if you look at what 30,000 people do every day, its work on products. when you engage with a partner, whoever that partner would be, that's a natural relationship for us. everyone is so interested in driving 5g. it's a long road map do that. there are a lot of discussions going on in the product area. it's a comfortable place for both companies. >> what about the discomfort with the fact that they bought the intel chip part of the business question mark how long do you think the partnership will last between -- business? how long do you think the partnership will last between qualcomm and apple? wax i think a long time. we were not -- >> i think a long time. what we find is that if we are competing in the areas we are very good at -- modem -- we will figure out a way to expand our business or continue our business. that has been true for a decade

or a decade plus and i don't think it will be any different here. >> what about the competition coming from china? huawei is becoming more sufficient. -- self-sufficient. relationship with huawei. how is that? wax our china business is quite strong. -- >> our china business is quite strong. it is driven by 5g and the same kind of worldwide expansion of the opportunity of cellular. we have a strong business in china, a lot of partners, including huawei that we sell to. it continues to be a big opportunity and a big business for us. we are say in some ways actually isolated or insulated from the tray discussions. there a lot of expansion happening world -- trade discussions. there is a lot of expansion happening worldwide with huawei and qualcomm as part of that.

if you have a strong partner, you figure out ways to win and that has been the case for us. we have had a little bit of a change in the structure of the chinese market. the huawei handset business has really retention -- retrenched into china. it has changed the share of it. what people have done is say i am going to accelerate 5g and not spend so much time on 4g. what has happened is it has accelerated the intensity of the 5g rollout, and not just at the high-end. it has come down into several tiers below the premium tier. we are spending a lot of time getting the chinese partner successful. china is think that ahead of the u.s. in terms of 5g? >> not from a technology perspective. there's a behind the scenes look . we are all working together to make 5g. if the chinese don't make 5g to

an international standard, you miss an opportunity worldwide. you see people cooperate in terms of the technology. but if you look at the deployment, the speed at which stations are rolling out, china is going quite fast. there may be 130,000 stations by the end of the year in china alone. that's a tremendously large number compared to what you see in the united states. that doesn't mean the united states is not going quickly as well. you are seeing china and the united states launching in the same calendar year. you usually see separation. but everyone is trying to figure out how to do 5g quickly and that's good for us. >> what about negative revenue in terms of lack of growth? is 20/20 the turning point? wax we think it will be a good year for the topline aunt -- >> we think it will be a good year for the top line and the

bottom line. we are pleased to have that opportunity. do we know about the business? wax the opportunity we have outside the handset space. we have a tremendous technology pipeline as a result of being strong in that space. it ends up that technology is really valuable for us to industriesse big that are being disrupted by 5g. tos a great opportunity leverage the pipeline into the new industries. i think as people learn about that and see what we see, they will be very excited. you --o >> do you feel good about the share price? wax i am happy with where it is. sometimes -- >> i am happy with where it is.

sometimes the business is reflected in the share price and sometimes it is not read we just bought back 20 plus percent of our shares because we thought they were undervalued. that's going to turn out to be a good investment. if we keep driving 5g, we hope that is reflected in the share price. paul: a reminder, we will be live at the bloomberg new economy form from beijing on thursday with a host of big names including the ceos of and others. this is bloomberg. ♪

kathleen: this is daybreak asia. i'm kathleen new york. paul: and i'm paul allen in sydney.

be about to raise 11 billion dollars in its mega hong kong stock offering. the company is telling investors it will likely price shares at 176 hong kong dollars each. senior us now is a analyst. david, let's start with that guidance on the price. 176 hong kong dollars. we were expecting something more , eight oflines of 188 course being a very auspicious number. ?hat is your take away >> it's slightly lower than what i expected when i talked to investors. it was in the range of 181, 182. 176, ioes get priced at would be slightly surprised. isl: the offerings

oversubscribed. there is a lot of demand and interest in it. what are your expectations? the hongpretty sure kong listing is going to be trading very well. by the end of the day, it is fully fungible. , theree trading starts is a small gap the hong kong listing currency has. it should sell very quickly. they are talking about selling in hong kong and making the shares more readily available to people in mainland china. what does it mean for how many people buy the shares, the share price, etc.? ma is a veryjack ambitious person. he has big dreams and all of that.

to the investors, i think morestically, they have appetite for alibaba. they are familiar with it. give it a discount just because of the china risk like some of the u.s. investors. think a lot of people are looking for it to do well. you said you thought the price would end up higher than the latest guidance. another idea that has been is that alibaba management might be worried if things don't go well with the hong kong protests, there's this u.s. senate hong kong bill passed, there could be a point where chinese investors are u.s. listedt out of stocks. do you think that is a motivation at all? few risks havea been discussed over the last few months around u.s. adrs.

you have the risks you mentioned, chinese versus u.s. adr. u.s.e same time, you see investors potentially have issues with chinese adrs as well in terms of discussion on whether asia funds would be allowed to invest in chinese investigation of the chinese adrs overall. at the end of the day, coming back to hong kong is the right decision. the decision to make the hong kong listing in the u.s. adr fully fungible means there will be flow between the u.s. in hong kong. eventually, i believe or will come to hong kong. -- more funding will come to hong kong. paul: you mentioned and it is well-known that it is a dream of jack ma to have a hong kong listing for alibaba.

if we take a look at the bloomberg, we can see that recent ipos in hong kong have not done terribly well. and if you consider the current environment in hong kong, the street protests, the demonstrations, the uncertain future, is this particularly good timing? there was never going to be perfect timing. few reasons why the ipo's haven't been doing well, the primaryse market gives higher valuation and tends to wait until it's too late before they list the companies. confidenta, i am very in the performance because it is not a new company. familiar tovery

investors as well as chinese investors. i would not expect any surprises. paul: how important is this for the hong kong exchange? a number of rules have been tweaked for this to go in, haven't they? >> yes, i think it is very important for the hong kong capital market. $11 billion might not be that havebecause after all, we but00 billion market cap, the alibaba listing opens doors to the fungibility between hong i think the u.s., which is going to be the case.

likely givell alibaba shares a premium and that will be an incentive to the u.s. a successful alibaba ipo is going to open doors for more committees to come to the .ong kong market there are companies in china waiting to be listed. there are financials, and the list goes on. of successful listing alibaba in hong kong is going to make the hong kong exchange even more attractive to these companies. kathleen: more broadly, when you look at alibaba, first of all, their success in being so dominant now in e-commerce and achieving such great penetration , is this share sale just frosting on the cake, or is

there a way it's going to be used to continue to build that dominance? >> the dominance in e-commerce is apparent right now. there are still a lot more growth prospects following the hong kong ipo because online -- alibaba in china is only 85% penetrated, but if you look at rural areas, alibaba only captures 40% of users there. there are still 60% users in less developed areas yet to be captured. , the lesse time developed area has 80% of the population, so by my estimation, there could be another 600 million users for alibaba to acquire. so, the ipo is definitely not the end of the growth story. kathleen: not at all.

thank you so much. forget our interactive tv function, tv go. catch up live on past -- catch up on past interviews and become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪

paul: this is daybreak asia. i'm paul allen in sydney. kathleen: i'm kathleen hays in new york. with the preview of what to watch this morning, here is sophie. sophie: we are playing the waiting game with alibaba to price the hong kong ipo, which kong be guided to 188 hong dollars per share. bloomberg economics expects the one-year lpr will be cut by inther five basis points light of incremental and frequent adjustments to rates. , stock investors of earning for signs estimates that are less gloomy. we have seen upward revisions for hung thing firm -- hang seng firm, outpacing what we have seen in the rest of asia.

seng fell to its lowest level relative to the asia-pacific index last week. if the turmoil does subside, that could bode well for earnings. what's to check in with going on with the mtr given that there are train services being disrupted this wednesday adding extra travel times to some roots. operator say there has been on theat some stations west rail line and several stations on the east rail line have also been damaged. for those of you who are commuting in hong kong, keep an eye on what's going on with mtr. ♪

>> i'm tom mackenzie. >> i'm david anglos. we are counting down to the open of trade in hong kong. your top stories. the u.s. senate passes a bill, seeking annual review to the city special status and sanctions for those undermining its freedoms. -- shares ares said to be priced at 22 u.s. dollars a piece. it investors demand several times oversubscribed. david: talking trade. the u.s. and china revisit proposals