♪ paul: good morning. we are under one hour away from the market open in japan and south korea. i'm paul allen sydney. yvonne: i'm yvonne man in hong kong. welcome to "daybreak asia." ♪ paul: our top stories this friday, the power of public standing, japan ready to embrace big stimulus programs to boost the economy and raise inflation. hong kong protesters give thanks to u.s. support as china repeatedly threatens to hit back. the question is, how?

and president trump reit's troops in afghanistan and says the taliban is talking about -- is talking again. breaking data from south korea -- >> breaking data from south korea, industrial reduction from october not good, down 1.7 percent and seasonally adjusted month on month numbers. the estimate was for a fall of just 3/10 of 1%, certainly a negative territory fall after the 2% hit in september. the numbers were in line in what economists were expecting of a fall of 2.5%. looking dire when it comes to industrial production and marrying what was saw -- and mirroring what we saw in the china numbers this week. what else can the bank of korea do in a policy decision coming out and about two hours? it seems they will hold after we saw two cuts already this year, but a lot of questions on how

long they can actually pause when it comes to the easing cycle. more on that later on. we will have an economist join us in the next hour to count ton the bok decision, a lot look forward to including the forecast for south korea. paul. paul: thanks, yvonne. we just had the market open in australia. stocks coming online very slowly, looking flat at the moment, but that is to be expected. futures trending higher by 4/10 of 1% in the lead up. new zealand is continuing to charge ahead come around record highs, up about 8/10 of 1%. out of japan today, we will have jobs numbers, cpi numbers from tokyo for the month of november, industrial production numbers as well, and this is on news the ae government is putting up decent dollar fiscal stimulus as well. the u.s. is closed for the

thanksgiving holiday, futures looking flat right now. let's check first word news now and get over to tom mackenzie in beijing. tom. ♪ tom: thank you. u.k. prime minister boris johnson says he will walk away from a trade deal with the u.s. of president trump insists that the national health service is part of negotiations. johnson also refused to attend the tv debate on climate change with other party leaders, including labor's jeremy corbyn. away aadcaster turned substitute set by johnson. protesters gathered in hong kong thursday night for thanksgiving rally to celebrate u.s. legislation that requires annual autonomy. the city's hours earlier china repeated its threat to retaliate after president trump signed the bill into law. the foreign ministry says no one should underestimate china's

resolve to safeguard national sovereignty. japan may reimburse the power of public spending, with one of the biggest stimulus packages of the abe area. slowing growth, higher sales tax and a string of natural disasters have given the government reason to shift toward a mix of fiscal measures and ultra-loose monetary policy. that would be welcome news for bank of japan, which has been reluctant to ramp up its own long-running stimulus program. >> there is a space for the japanese government, so that so-called wide spending can go wider. tom: india is bracing for a growth stock friday, with data that will likely show the economy at its weakest quarter in more than six years. the figures are expected to show gdp growth falling below the

all-important 5% level. planting car sales and shrinking factory output and slumping exports are to blame. global news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. ♪ i'm tom mackenzie. this is bloomberg. ♪ paul: thanks very much, tom. stocks in asia look to nudge higher on the final trading day in november. investors continue to await progress on a u.s.-china trade deal. let's get perspective from our next guest. with antipodes partners. sunny, thanks for joining us let's get to this chart on the bloomberg terminal, one of my favorites of the moment. we have u.s. equities around record highs, getting expensive though. are we do a correction, and where do you find value in this environment? sunny: the u.s. markets, if you

go beneath the surface at look at stocks trading extensively, there is a dispersion amongst industries and within industries. i think it is ultimately a market where you try to find businesses which are underpriced for whatever reason. the domestic parts of most markets around the world are quite attractive and cheap. there are similar characteristics in the u.s. market. anything exposed to very long-duration growth, that has benefited from low interest rates, is actually very expensive and perhaps vulnerable over the next little while as u.s. global rates rebates and the talk of fiscal stimulus around the world. of the marketea to be cautious on. that is the new world internet type of companies, while some of the very strong thomistic businesses in the u.s. look quite attractive in terms of valuations, and some considered all tech companies in the u.s.,

microsoft, even facebook now, considered all tech, looks quite interesting. paul: we have a number of guests this week saying there are still opportunities, companies like amazon if you want to get long, but we have seen a lot of action in the small caps space as well after small caps got beaten down earlier in the year horribly. is there still room for that space to recover? sunny: yes, hopefully the market buys into earnings stories. there are very exciting things happening in the small-cap space, some very interesting business models. but as we see it is, in one shape or form, a lot of these products in the market in these individual companies actually can't fit within microsoft. largestt is one of the boxes in the world, a lot of products are within the microsoft franchise, and it

comes down to where these small companies find a nice, or does microsoft come in as the dominant player in that vertical. in most instances, you would find that the microsoft core position in various business analytical's. yvonne man in hong kong. you mentioned on the software side, it seems now markets are looking at the reflation trend right now, and maybe perhaps by fourth quarter this year we will see the chip cycle bottom out, and things are starting to look better. do you think that the hardware side is a good opportunity now to get into it now? get into it now? sunny: a lot of these hardware stocks have had a great run, semiconductor having great run, and the development of 5g in china, korea, and japan. that is fueling the rally. we think there are interesting stocks in that space to play on

the component side. we like a stock that is well-positioned in the nlcc space and has a nice rf business competing against other companies. huaweove we have seen in forhere is a tendency component makers to move away from u.s. components, and that is helping the chinese margin. yvonne: you look to e-commerce companies like tencent, alibaba, alibaba with the big ipo here in hong kong. do you think the ipo itself changed the dynamics of not only the hong kong market, but the tech space overall? and what rotation could we see in light of this? sunny: the interesting catalyst be asia connectivity included, were mainland

businesses are joined to alibaba stock, and that would be very positive catalyst, given it is such a well-known company. it is going to be one of the proxies for the domestic market on e-commerce over the next several years, so it could spur a lot of interest. generally speaking, the growth in some of these businesses still mains very long-duration. seenhen we have also interesting opportunities in j.d., starting to acquire lower tier users for the first time in more than a year, which is quite a positive move in their business, and ddd, also a controversial -- pdd, also a controversial name, growing at a fast pace, and they need to resolve when they will turn profitable, but i think the user growth is quite positive, phenomenal.

so we think the e-commerce space has a lot of opportunities with some of the companies mentioned versus some other digital areeting companies, which facing just headwinds because there is more competition, and the big company that has come the that space is doing, tictoc of china, monetizing its assets and putting a lot of pressure on industry in china. paul: i want to get your thoughts on trade war dynamics right now, because markets have priced in this phase-one deal. and the timing of yesterday's signing into law of the hong kong bill by president trump, just as u.s. markets close, everybody goes on holiday. your reaction? sunny: i think it was a hard one for president trump not to sign the bill if an bipartisan support. we are talking about phase one. we don't know how many faces, but phase i has quite a low bar. negotiation,ing

and the bar has been set low. i would guess china wants to exercise a lot of restraint, because both sides are showing white a lot of cooperation, at least in preliminary discussions . so my guess is they will work towards some kind of trade light deal, before we have further ongoing discussions into the presidential year, and after the presidential elections as well. partners deputy portfolio manager, sunny bangia, thanks for joining us. coming up, president's surprise trip to afghanistan, and peace talks with the taliban. tests andus, missile a challenge for the white house. this is bloomberg. ♪

♪ paul: this is global news, 24

hours a day, powered by more than 2700 journalists and analysts in over 120 countries. -- daybreak asia. i'm paul allen. yvonne: president trump is in afghanistan and says peace talks with the taliban have resumed. let's get to ross krasner -- ros krasny in washington. what did we learn? interesting trip to bagram airfield in afghanistan, the big u.s. air force base there. it has been ages since president trump scrapped box with the taliban, it was actually only september, so there is a sense within the administration it would be good to get those talks restarted. having said that, there are no details provided by the white house on exactly what went down with president trump today in his 45-minute meeting with the

afghan president. it certainly sounds like a positive development, but i think skeptics will want to see more details on exactly what was ironed out. hastily puts not together, it was put together over several weeks, but the president of afghanistan himself wasn't told until a few hours before president trump landed that the u.s. leader was coming. it is hard to imagine there has been a huge breakthrough just in those 45 minutes of meetings. president trump, as you know, often talks big after meeting world leaders, and leaves his aides and others to clean up the mess, or really come up with the details. that may have happened now. one other thing to consider, yvonne, the footage that came out of bagram today's campaign gold for president trump, a big public relations plus for him when he is certainly under pressure in washington from the democratic-let impeachment

inquiry. yvonne: you said this was a bit unexpected, a rushed planning here, and it was a closely-guarded secret. how did this unfold? ros: it was really closely guarded, and interesting and away way, sort of like a spy novel. almost everybody thought president trump was still down at his florida golf club. he played golf yesterday, but sometime yesterday afternoon was flown up to washington, not from the airport he usually flies from, in the dark to andrews air force base. the people traveling with him had no cell phones, and they didn't know where they were going. they thought that was the middle east but they weren't sure. paramountously of importance to keep the u.s. president safe, and to fly as stealthily as possible, and it seems like the white house really pulled that off this time. paul: we are getting reports from south korean media saying

tractor movements are detected around north korea's icbm sites, after the north fired what appeared to be short range ballistic missiles on thursday. at that forced -- and north korea walked away from sputtering nuclear talks with the u.s., and the president offered concessions. where are we with this? ros: at seems like our to our we are getting new details about yesterday's short-range missile launch. we have reports it was a super launch -- a super large multiple rocket launcher. the pyongyang really wants to keep the pressure on trump, it seems, with regular launches of short range missiles. even though trump has dismiss to the short-range launches and seems to have a red line in mind beyond which cam hasn't crossed yet, there are a lot of people that are very concerned about the pace of these missile launches. there were zero in 2018, and

there have been a lot here, and they just continue. so far trump has brushed them off. last time he spoke about kim in a tweet it was a very brief, see you soon. so it remains to be seen what happens going into the end of the year, and trump in-flight coming back from afghanistan, we haven't heard from him yet. possibly we will hear something tomorrow. keep listening. paul: watch this space, ros krasny in washington, thanks. will takecated it action following president trump's signing of a bill backing president -- bill backing protesters in honking -- protesters in hong kong. tom mackenzie joins us. tom, what steps has china taken? tom: the focus has been on rhetoric. we have had strongly-worded

commentary from officials at the foreign ministry, saying the u.s. is meddling in chinese affairs, again reiterating that they would push back with their own countermeasures. we are still waiting for exact details on those. we have some suggestion from "the global times" a state backed tabloid that the editor says there may be sanctions put in place as a result of this bill, on its authors, marco rubio for example, and the idea that he is going to be particularly upset not being able to travel to china is something may be lawmakers in the u.s. won't take seriously. recent history suggests china's bark is worse than its bite when it comes to the u.s.. you have the u.s. putting in awei,,measures around huw and of course u.s. arms sales to taiwan, china came out with very strong rhetoric didn't really follow up with any concrete measures. whether or not this case will be

different is what we are focused on, given what we know, that territorial issues, the territorial integrity of china, is of utmost importance. yvonne: we have heard that rhetoric before, strong countermeasures, and we heard it again yesterday. what tools could china use? tom: they do have some tools, that most of them are double-edged swords. think about delaying the trade talks, for example. the economy here remains under significant pressure, and we know beijing is incentivized to get that partial deal, to alleviate that pressure. so with trade talks, they could do that, but the flipside is the economic pressure here. in terms of other measures, they could restrict the import of u.s. goods, but most u.s. goods coming into china already have tariffs on, so its not clear that would have much effect. and chinese officials have been touting things that would, if

published, restrict some companies from the chinese sector. but china is going out of its way to attract fti and that would undermine their attempts to attract investment flows. in terms of diplomacy, they could do things to make it more difficult to impose those sanctions on countries like iran and north korea. so they do have some measures, but most of them have a potential four-ball black -- the potential for blowback on china. we are waiting for more details. yvonne: meanwhile, we hear that in hong kong police could be lifting the blockade at that university. we will get an update on that coming up. tom mackenzie, our china correspondent coming out of beijing, thank you. get a roundup of other stories you need to know in today's addition of daybreak for berg subscribers. it is at tv on your terminal. check it out. this is bloomberg. ♪

♪ yvonne: we are having some tough technical some difficulties with paul's mike. more on brexit, big moves in sterling recently on these recent polls. yougov is known to be one of the electioncall the correctly and it shows boris johnson's party on track for its biggest majority in more than three decades. but bloomberg was told, that could change. >> i know we are saying there is going to be a big conservative majority, but it doesn't need to be a massive shift if you look at the data in order to change things. there are 30 seats where we lead

the conservatives by less than 5%. if you see the labour party starting to close the gap, closing the 5% gap in those seats, it is very easy to see how we could end up and hung parliament territory. it is definitely possible. >> are voters voting on brexit or voting on policy? is it spending or is it just character of leaders? >> it is all of them. brexit is important. conservatives are getting a lot of new voters and labor is not doing so well and that is why we theseeing these big swings, league conservative seats in the north and the midlands, and the labor heartland's. but i think labor is going to try and the remaining weeks of this campaign to turn the issues back on spending because they know they pull better on that, the nhs being a key example. have been talking about that a lot. but they have the crucial difficulty that boris johnson is

significantly more popular than jeremy corbyn, the leader of the opposition, and they will be hoping to close that gap. yvonne: that was political resource manager chris curtis. let's look at your pound and the differences we are seeing. the optimism we saw after the poll result, things have waned a little. we are taking profit, it seems, these pound traders. there is concerned these polls may not be as accurate as we have seen before. options, investors are seen as cautious in the run-up to the election as well, something to watch for today. but it is very quiet out there, given it is thanksgiving. up next, big data coming out of japan, jobless rate out of october, inflation data, we break down the numbers next and talk about the planned fiscal stimulus that could be coming out of japan as well. and we are watching the japanese

yen, not a lot of action, quiet when it comes to the market. yourwn 9.52 for dollar-yen. , your dollar-yen. this is bloomberg. ♪

paul: we just got some breaking news coming out of japan. the jobless rate for the month of october entirely unsurprising, coming in exactly as expected at 2.4%, the same as the previous month as well. to applicant ratio taking up 1.57, the same as the months prior, but a little higher than expected. the expectation was for 1.56. have a look at reaction from the yen. there is none. it is steady at 10951. we have the nikkei open later in the hour. futures pointing to some very modest declines. we have had news from the

japanese government today that some fiscal stimulus is likely to be on the way, but that jobless rate holding steady at two point 4%. we are going to have more on the outlook for japan coming up. nicholas smith is going to be joining us from tokyo in about 15 minutes time. yvonne. the dollar, best run-up we have seen for the greenback. eight days of gains. that is what we are watching. looking to tom mackenzie to see how things are going in your first word news. tom. korean industrial production dropped on the previous month. much faster than economists were expecting. factory output for the month was down 2.5% on last year in line with predictions. more gloom on the economy ahead of the bok decision later friday. all the economists we surveyed expect rates to stay unchanged.

opec and its independent allies are sending more signals that they will stick with existing output curves at their meeting next week. a key committee indiana was told the oil market will be balanced in a year if the cartel maintains current production levels. they did not discuss any deeper cuts. a parallel meeting in moscow gave no indication of supply changes. president trump made a surprise trip to afghanistan to celebrate thanksgiving with u.s. troops. he met the president and said these talks have resumed with the taliban and that he wants to persuade the militants to agree to a cease-fire. the president confirmed he wants to reduce troop levels to around 8500 to 1200. he is facing an intolerance from north korea after the launch of a super large missile.

korea's news said they tested a rocket launcher having earlier fired weapons across the sea of japan. the firing comes as pyongyang threatens to abandon stalling nuclear talks unless the u.s. offers concessions before the end of the year. the new government of sri lanka says it intends to review the previous administrations plan to a venture in china. terms of the deal were changed in 2017 when the then government said it would be hard to pay the loans taken out to fund the project. it is symbolic of criticism that china's belt and road initiative all countries into debt traps. 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 am tom mackenzie. this is bloomberg. yvonne: thanks. we are counting down to that

bank of korea policy decision after interest-rate rate cuts this year. all economists surveyed seem to be ok likely to stand pat today. thomas.t to dan he joins us from singapore. lows when itd comes to rates in south korea. are they done, essentially? no.el: i don't think the idea that they are done would be standing a lot of domestic scrutiny. south korea's economy is in real trouble in this cyclical slowdown. thes being hammered by ripples from the u.s.-china trade, exacerbated by a mini trade war it is waiting with its neighbor, japan. interest rates can go lower. they should go lower. this has been a very conservative central bank. they waited until july to cut rates. everyone else had done it at

least once by then. they are showing no signs of wanting to be hurried. data is running ahead of them. we have industrial production numbers which were looking pretty bad as well. tell us how dire the situation economy, andean why isn't the bok concerned or doing all that again? daniel: we are used to central banks that have one or two mandates. is typically bound up in a target with a two there somewhere. others have a labor market mandate. the bank of korea has a mandate for financial stability. they may be worried that cutting too much, too soon will inflate bubbles. i think we are way past that in terms of where the korean economy is. the other thing, to give them credit, is korea's economy has long term structural issues,

principally demographics, that monetary policy is not really equipped to deal with. does not mean they should do nothing now. it cannot be just them. you see some potential in india as well. the growth has disappointed recently, hasn't it? what is your assessment? daniel: pretty much every major economy has gone through some slowing this year. it is hard to think of a major one where growth has come down to earth to quite the same degree. a little more than a year ago, indian gdp numbers had an eight in front of them. we are likely to get a number later today with a four in front. that is significant. what does it mean for the r.b.i., which means next week? cut, baby, cut. in some ways, whose job is the easiest one in the world. it is clear what he has to do.

just keep doing it. bloomberg opinion columnist dan moss. still to come, we are minutes away from the check on japan. we had unemployment numbers coming in as expected a moment ago. industrial production numbers are due. this is bloomberg. ♪

yvonne: this is "daybreak asia." i am yvonne man in hong kong. paul: i am paul allen in sydney. japan may embrace the power of the public purse with one of the biggest stimulus packages of the abe era. that is likely to be big news for haruhiko colluded. -- how haeckel kuroda. -- haruhiko kuroda. so-called wise spending.

i think it is acquired. joins us now.stey this package seems to have quadrupled in size. what is going on? chris: that's right. what you have is a hit to the japanese economy for the trade war that was apparent earlier this year. you have central banks around the world start to ease monetary policy, but the bank of japan found itself essentially unable to move and unable to follow the federal reserve and the european central bank. you had governor kuroda start to talk about fiscal stimulus, which is unusual for the bank of japan governor, who had endorsed the first of two sales tax hikes under the abe administration.

we had this big typhoon that hit at the start of fall, and then thatd a sales tax increase kicked in october 1. the official rhetoric from the government was it is not as bad as last time in 2014. people are not really ramping up theding in the run-up to sales tax hikes, and they are not cutting back quite as much. if you look at the data, we have retail sales for october earlier this week. it is pretty much on par with 2014. the economy is likely to shrink in this quarter, and what you are seeing is you put this all together, and the lawmakers are saying that economy looks like it could do so with some help. monetary policy is not in a position to do anything, so we are going to go for a bigger than usual supplementary package, which is kind of the whisper number has gone from 5

trillion to 20 trillion in a few weeks. yvonne: it seems like it is a whole change of thinking now after the boj did not do anything in the october meeting after that much policy decision. tot will this actually do the economy as well as markets? the history of fiscal stimulus in japan is something of a checkered one. but net-net, economists are starting to see a little bit n outlook fortive a growth next year. japan's potential growth rate at this point is still pretty limited. perhaps between half a percent and 1% a year. willwo years running, we be looking at sub-one growth. that increases the chance next year, we get perhaps as much as 2%.

although more so if we see a trade deal between the u.s. and china. what will this mean for markets? lately, japanese stocks have been doing even better than the u.s. there is an increasing narrative that japanese valuations are attractive. the u.s. economic outperformance relative to the rest of the world may have run its course. if you are looking for a reason to get up to the benchmark presence in japanese stocks, fiscal stimulus will add to that narrative for 2020. chris anstey, asia cross-asset editor, joining us out of tokyo. our next guest from tokyo, nicholas smith. he joins us from our studio as well in japan. nick, does japan need this big of a stimulus right now? tose expectations have got 20 trillion. unknown think it is breaking

any land speed records and economic growth at the moment, but remember last time we talked, what i said was in order to change the constitution, he has to be high in the poll ratings. to get the poll ratings up, he will need gdp growth, and therefore, we are likely to get a sizable fiscal stimulus. it's an interesting thing that the governor kuroda is supporting it. he is a ministry of finance guy. he does not like to do this kind of thing. the bank of japan has been firing blanks for some time now. is timeney printing, it austerity has proved a bad idea for everyone. yvonne: what does that mean for the market? how do you play that? are there certain sectors he can play on this given the fiscal boost we could see? nicholas: sure. obviously, your first thought is

how is he going to get the money into the economy? that is only one way you can put a lot of money to work very fast, and that is in construction spending. obviously, if you look at the labor market, it is eye-popping y tight. they were worried that demand would drop off after the olympics. demand afterker the olympics gives a little bit more room for the government to spend money on construction. i think construction is probably one of the areas that will benefit from that. notn, it looks like it does meet infrastructure. go and walk outside tokyo and it most certainly does. defense against quakes and typhoons need a certain amount of spending immediately. is a big spending program going to move the needle on inflation at all? nicholas: inflation is ti

cking along. i doubt it will move a whole lot higher in the three decades or so i have been in japan, it has times.t 2% three one with oil prices going to 150 relatedother two were to things like hikes. paul: you mentioned a minute ago that the prime minister commissions are abe, is seeking to boost his -- do you think that is part of the motivation between these extremely tough investment laws that have been passed? morelas: that's complicated. obviously, in its inception, it is very sensible. the u.s. passed a law for a law for foreign investment risk management act. in august, 2018, across g7,

people are doing this. my problem with the investment law in japan is it feels like every one got into the trough on this one. a lot of groups are associated with it. waspressure to get it done really starting with the u.s. the u.s. is sick to death with japan being a leaky sieve for information. now fixing the foreign investment law. it is just that perhaps the things that happened in agm have got people worried, so i am afraid there is nothing wrong with the inception. it is the implementation that worries us. yvonne: right. how can they get this right? there are risks when it comes to activist investors that look at

this market so closely. how can japan get this right without avoiding capital flight? nicholas: i don't think we will get capital flight. what it means is that you have to file when you have 1% or about to get 1% in certain stocks. we don't have the list yet. we will probably get it by around february time. bought a convertible bond, you can bump through 1% it has realizing it, so increased administration and compliance costs. but it is not a dealbreaker. it's just a frustration that does not make it any easier. the activists i talked to say they are not to worry about it. we did not want to put our people on company boards anyway. we are much more interested in putting independent directors on board, which is still an important issue in japan. you have done a

lot of research on how close japan is to it. how is it different from countries like the u.s., the u.k., or for example does it differ sector by sector, too? nicholas: japan is very open to this. this,ght scoff when i say but they got grumpy about not being allowed to buy it. turned around and said we are going to this. i looked at the restrictiveness index which looks at precisely this. stricter theuch average. it is amazing in the country where, for example, it is on the ring of fire for quakes. be pretty trusting to allow foreigners to own your oil companies. it is very open to it.

it is just the implementation of this law that has been a bit frustrating. to me what was the red flag was to see the leather industry given as an example of something that can be restricted under this law. we are seconds away from the industrial production numbers for the month of october coming out of japan. in fact, here they are. worse than expected contraction. 4.2 percent. the market expectation was for a 2% contraction from a 1.7% expansion in the month of september. on your figures, that number is even more bleak, down 7.4%. the survey was expecting a 5.2% decline on year. i know you have not had a great deal of time to digest these numbers, but they are worse than expected. what is your take away? >> as far as equities are concerned, we care much more

about the international situation van the backyard of japan. a lot of industries, electronics, and others make the vast majority of their profits offshore. it is certainly not good news in the rearview mirror, but you can guidance has been dropping. share prices are going up. the market is saying we knew about this. what this is changing is the outlook for the future as sino-american trade war seems to be reined in a little bit. forne: for your outlook 2020, what does this mean for japanese equities? we have seen a lot of equity markets globally diverge from the economy and the macro data. is that sustainable? nicholas: absolutely, it is. value has been a dirty word recently, but japan is dirt cheap. that makes it that little bit

are theecause not only companies cheap. the strong growth stocks are cheap in global terms, especially when you bear in mind that the cost of money is slightly less than free at the moment. have aone side, you kicker from global growth expectations picking up. on the other hand, you have got very interesting things going on with activist campaigns at all-time highs in japan. japan is catapulted to the second-biggest market globally for that. a lot of new firms being set up at the moment. people think that japan is a very target rich environment for activism. yvonne: have a great weekend. thank you so much. nicholas smith joining us out of tokyo. you can always find in-depth analysis and all the days big newsmakers on bloomberg radio, now broadcasting from our

brand-new studio in hong kong. listen through the app, bloomberg radio plus, or also bloombergradio.com. this is bloomberg. ♪

>> this is not welcome news. we see no need to change the system. and marketnkers petitioners i talked to, they feel that the immediate impact of the bill is not going to be huge. there is now outflows from the hong kong dollar in the past few months. let's do our work and make sure we keep our fundamental strengths in order. in terms of asset qualities, hong kong banking sector has been very strong. it has proven it will survive. different challenging periods for hong kong. yvonne: that was from our

conversation with the hong kong deputy chief executive, howard lee, talking all things in his response to president trump's talking about- how solid that is in the city. more from our exclusive conversation with howard lee in the next hour of "daybreak asia ," paul. paul: let's get a quick check of the latest business flash headlines. launching a cost-cutting drive after net income fell 20%. adaims to reduce -- lowering spending and reviewing the worth of some outlets in hong kong and macau. some have fallen more than one third since the start of october. yvonne: astrazeneca and roche are among major drugmakers slashing prices as beijing expands the number of treatments covered by national insurance. after months of negotiations, prices have been cut by 61% as

china produces 70 new therapies for state insurance coverage. drugmakers will offer big discounts to access china's multibillion-dollar market. paul: japanese beer exports to south korea have fallen flat amid a political dispute over historical tensions that have severely soured relations. exports fell to virtually zero in october following a 99% year on year plunge and a 92% slump in august. south korea was the biggest export destination for japanese groupers. brewers. of one person in the first hour of trade. nikkei futures looking weaker

after we had some disappointing data on the industrial production front. jobs coming in as expected at 2.4%. the bank of korea decision is later on as well. stay with us. this is bloomberg. ♪

♪ >> good morning. asia's major markets have opened for trade. yvonne: welcome to "daybreak: asia." ♪ paul: our top stories, japan ready to embrace a stimulus program as inflation remained stuck in a rut. the economy being hammered by the trade war.

markets await the decision. yvonne: the world's biggest auto market hits the brakes. we will see how japan is beginning to slow down in china. happy friday. we are taking a look at markets. we are wrapping up the trading month in a slightly positive note. the markets in japan open up here. a pretty good month. three months of solid gains in asia pacific at december looks to be a good one if you look at -- december is usually a good month when it comes to asian equities. it is quiet with u.s. markets closed for the thanksgiving break. are quite light. these moves are magnified a little bit given the low volume. south korea now. we have data coming out from japan and south korea. industrial production numbers from both countries not looking

good. quite sizable misses. a lot of questions on what the be ok is going to do. economists say they are not going to do anything after two cuts this year. the you and is pretty much flat. is pretty much flat. let's get more on south korea's economy. south korean industrial production slumped in october, falling .7% on the previous month and a slowing faster than economists were expecting. 2.5%, inutput down line with predictions. the data casts gloom on the economy ahead of a be ok decision. economists are expecting rates to stay on hold.

japan may reimburse public spending with one of the biggest stimulus packages of the area. and higherbal growth sales tax in a string of natural disasters have given the government reason to shift toward fiscal measures and a monetary policy. that will be welcome news for the bank of japan, which appeared reluctant to ramp up its own stimulus program. for the is a space japanese government, somewhat limited. >> tens of thousands of protesters gathered in central hong kong thursday for a thanksgiving rally to celebrate u.s. legislation that requires annual reviews of the city's autonomy. try repeated its threat to retaliate to president trump signing the bill into law.

the foreign ministry said no one should underestimate china's resolve to safeguard national sovereignty. there is a huge sigh of social media relief for millions of people desperate to upload photos of turkey dinners. facebook and instagram are up and running again after an outage due to software problems that prevented users from using the apps. the #instagram down was the second-most trending topic on twitter. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. thanks very much. what to get you up to date on the currency markets. it is very quiet. dollarthe bloomberg index looking flat.

the pound has been catching on the back of the pole, which shows boris johnson's conservatives getting a majority in the december election. we are seeing a slip back now. well on thursday. not a lot of change for the yen. data outmixed bag of of japan. on plummeted numbers as expected. the drop to applicant ratio ticked up a little bit. it was industrial production that was the big disappointment. n not really flinching. let's bring in our guest for his take on the currency markets. we have eric robertsen. i want to start off with the dollar.

you described 2019 as the year of the dollar. you are not so sure it will keep that title into 2020. the year ofas been the bonds. it has been a year of a big rally in global fixed income, especially u.s. treasuries. affects has been more challenging. our outlook for 2020 is this could be the year of the dollar. we expect bile depreciation in the dollar -- mild depreciation in the dollar. we are starting to shift our focus away from fixed income to fraud exchange next year. you: what currencies do think will perform well at a not so well? if we continue with that theme of fixed income, for us what is most compelling in a low yield, low growth world are some of the higher yield currencies.

in asia, currencies like indonesia, potentially india, moving further west, we continue to be constructed on the likes of the russian ruble, south african, in latin america, we focus our attention on changes in brazil, which should be more supportive for the currency. in terms of currencies we remain short, in asia, korea remains our top pick. the data out of south korea yet remains very poor, whether that is exports or the semiconductor space specifically, south korea remains a challenging economy and the currency should suffer. yvonne: you mentioned 2019 was the bond story. when it comes to affects, volatility is a big story. nothing has happened. xe have a chart that shows f

volatility has slumped. can it stay this way in 2020? there are so many risks out there. why has it stayed calm? interestingke an point. the divergence across all asset riskes and the increase in is an important story for .nvestors and corporate clients there is a potentially interesting transition in 2020. we have the u.s. elections, rate can be a cause of fx and volatility. we have elections in taiwan. we have the u.s. and china trade negotiations. it could be a source of volatility. another key factor is something we heard earlier with regards to

japan. in a number of countries, there is a sense of acceptance that monetary policy is reaching the limits of its effectiveness and there may be a shift toward fiscal. some countries are in a better position to do that. where we see a better balance between monetary and fiscal, that may lead to decent changes or decent moves in the currency market. that is something we are paying attention to. looking at your forecast. you have a dollar-yen forecast at 100. what is fueling that call? we happens dock in the wrench around one under nine for some time now. 109 for some time now. eric: in our opinion, one of the big failures in japan is the inability to lift inflation. this has been one of the key

objectives for the bank of japan. even with their balance sheet over 100% of gdp, inflation expectations continue to move lower. undesiredhe consequence of keeping inflation-adjusted interest rates high. that means monetary conditions stayed too tight even though they have rates at zero. that combined with the reasonable surplus will continue to keep support and strengthen the yen. that is a key part of our asian forecast. paul: the boj low on ammo. are they out of ammo? in terms of traditional measures, they are. there are certain things they can do to tweak monetary policy. they can shift their focus on the yield curve from the 10 year maturity to the five year maturity. that might help steepen the may be mildlyhich

supportive for their banking system. they can continue to purchase fixed income and equity assets and add to their balance sheet. at this stage, we don't view that as being a significant driver of a different pace of economic performance. they would have to do something more creative. fiscal policy would be a big change and an important one. we will see if they can't get enough stimulus. i would save the bank of japan is out of tools in terms of traditional policy toolkits. paul: eric robertsen stays with us. we will extend this discussion in a moment. we will look at the automakers facing be slowdown in china. why one top player is ahead of the pack. yvonne: more from our conversation with howard lee of the hong kong monetary authority

amid the protests. this is bloomberg. ♪

♪ paul: this is "daybreak: asia." yvonne: we will look more at the pound. we were talking about those gains. they have faded somewhat. pull showed that suggesting they may get a majority. we peter off a little bit. the euro pound hovering around 85. the bloomberg dollar index, what a run. a days of gains. that petered off a little as well. that is the longest run we have seen since february. let's get our guest eric

robertsen. tell me what to do with the pound. everyone is buying these polls. the polls have burned us before. should we believe them? eric: we think so. onremain fairly constructive pound sterling against the dollar. it is one of our top picks. we acknowledge the point you made, which is, following the polls, whether the u.k. or u.s., has been misleading before. investors are sensitive to that. there is some scar tissue. we believe the pound sterling at or below 130 is attractive. if we get a conservative majority in the u.k., we would imagine sterling is heading above 135 to 1.40 two next year. what if there is a hung

parliament? would that be a worst-case scenario? parliament is challenging. is you put anyre hope of a brexit resolution down the priority list. what we would like to see in the the is a move past political infighting, not only across the tory and labour parties, but within. a hung parliament does not result any of that. at this point, what markets are ofing for is some resolution the brexit uncertainty, which has hung over the u.k. economy and pound sterling for a couple of years now. paul: i want to bring things to a -- closer to asia. has confounded the bank of thailand with its strength. vaccodo you see it hidden

-- hitting? eric: i would share that sentiment in terms of market frustration with the bond strength. thailand was one of the top stories in asia over 2018 and 2019. the bank of thailand ran a very prudent monetary policy and combined with a strong current account surplus, led to persistent strength in the currency. the marketsond what were expecting or the bank of thailand was expecting. slowdownre seeing is a in some of that momentum. slowed, momentum has inflation is lower. the bank of thailand is easing monetary policy. we remain constructive on a thailand fixed income. the currency may have a bit more strength. the currency is staying below 30

for a time being against the dollar. i would not expect the gains to be as persistent or consistent as we have seen. calls is of your key the new zealand dollar against the korean won. that is a payout that would not spring to mind. can you explain your reasoning? it is a combination of independent stories. as i mentioned earlier, we remain concerned about the economic trajectory for south korea. we see very little evidence of an improvement in the semiconductor or broader electronic sector. we see very little evidence of an improvement in the semiconductor or broader electronic sector.

we have chosen new zealand -- we think those expectations need to come out and we see a more stable environment for the new zealand dollar. relativetory of two policy trajectories and economic trajectories that we think work well within asia and it has the added benefit of stripping the dollar out of the trade. i have to go to chile because according to bloomberg, you are the number one forecaster for chile. this intervention package we got currency fell to record lows. how are the ark it's going to wake up to that tomorrow? i think anything that

shows policy intervention in a market that has dislocated will be viewed positively by markets. we have seen evidence of that in brazil, in mexico over the last couple of years. fx intervention it done unilaterally can slowly pace of depreciation. i think the story is a more extreme version of what we were talking about earlier with the u.k. and brags. markets hate political uncertainty. we have seen social unrest on the ground in chile. that raises concerns for investor capital flows, especially enter the region. like we have seen in hong kong, the risk in the u.k., of political uncertainty tends to play itself out in currency

markets. until that gets resolved, the currency will struggle to make a recovery. thank you for joining us. coming up, we will talk about the automakers in china. why the demand for hybrids is kicking into high gear. this is bloomberg. ♪

♪ ."ul: this is "daybreak: asia yvonne: a quick check of the business flash headlines. australia real estate company has narrowly fended off attempts by gets biggest shareholder to force a preferred candidate onto the board. defeated when a 51.3% of investors voted against gary weiss. the proposal came during a campaign to change the business

strategy and booth share value. stanley fired or placed on leave for traders over mismarking of securities that security losses of $140 million. the bank is opened and -- at the bank has opened an investigation. this marking means the value placed on securities -- first-half net income fell 20%. it aims to produce outgoings by searching lower rent discounts and reviewing -- same-store sales outside mainland china have fallen more than a third since the start of october. a big headache for global automakers placed their bets on

the world's biggest auto market. one group is weathering be slowdown. that is japan. a business reporter is tracking this. hybrids are japan selling? >> they are doing really well. the buck the trend for what does become a bad market. the chinese market is the largest in the world but it has fallen. total sales are down 11% this year. if you look at japanese hybrid cars, they are up 30% this year. honda, and nissan. of thentrol 99% traditional hybrid market in china. they struck a sweet spot in the market. causing carmakers a headache. yvonne: they found this sweet

spot between traditional cars and the new vehicles. people are not quick to adopt just yet. how much of a window do the have to take advantage of the sweet spot? >> there seem to be a few factors driving this demand. there is a sweet spot for hybrid, middle ground. consumers who are happy to go down the electrification journey the government has encouraged, but not quite yet willing to give up gasoline. hybrid is a middle ground. there is also the range concern in a country where infrastructure is not fully ruled out charging infrastructure. it might be stuck when your battery runs out. with hybrids, you have that safety net. sharing fleet moving towards hybrid vehicles.

that is popping up the market. if the generation is choosing demand fora car, the hybrids pops up by the vehicles are those younger consumers heading two, which is sharing fleets. the chinese government has supported the e of the market but has also withdrawn subsidies for electric vehicles. what was once an attractive option is now less attractive. thanks so much for joining us. let's see how we are doing on the markets this final trading day of the week. thanksgiving, for so no analysts from u.s. equities. higher.a nikkei trading out of japan, unemployment steady. industrial action was a disappointment. weaker than a quarter of 1% as

we wait on the bank of korea decision. in australia, higher than -- by a third of 1%. more to come in a moment. this is bloomberg. ♪ whether you're out here on lte.

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♪ paul: -- >> welcome back. president trump made a surprise trip to afghanistan to celebrate thanksgiving with u.s. troops. he met the president and said peace talks have resumed with the taliban and he wants to persuade militants to a cease-fire. the president confirmed he wants 8500duce troop levels to from the current 12,000. president trump is facing a challenge from north korea after a launch of a super large missile. they have tested a rocket launcher, having earlier fired

short-range weapons across the sea of japan. the firing comes as pyongyang threatens to abandon nuclear talks unless the u.s. offers concessions before the end of the year. opec and its allies are sending more signals they will stick with existing output curves at their meeting next week. a committee in the b&r was told of market would be balanced next year if the cartel maintains current production levels. they did not discuss deeper cuts. gave nog and moscow indication of supply changes. the government of sri lanka intends to review the previous administration's plans to leave in southern to a venture china. in terms of the deal were changed in 2017 when the government said it would be hard to pay the loans. the port is symbolic of criticism that the initiative is

living poor countries into debt traps. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. more signs of financial stress by putting policymakers to the test. , bank runs to consumer indebtedness. and in precedented bond restructuring. for more, we are joined by chief asia correspondent. are policymakers doing enough? where are facing the biggest trouble spots? know theykstory is we have been worried about debt. now we are seeing the trade-off. you are going to get stress in your economy. we are seeing stresses in the smaller banks. we are seeing households under pressure. the takeaway is it demonstrates how china is struggling to control the amount of total debt in its economy while keeping

growth on track. doubt the pain in the financial sector is what policymakers need to push through. the problem is they are trying to keep the economy afloat. yvonne: the big question we have been asking, a company could be -- if theyfaulting do allow it to default, what would that signal? enda: the significance would be the government is happy to allow as oh east to fail but they are theyoing to be the way once were. one of the criticisms of china when it comes to productivity is the support for companies that should be allowed to fail at the cost of private competitors or foreign competitors. that is what people are watching. if they let the company go, perhaps they are getting more

stringent. this bond sale, what does it signal? increase earlier than expected. it is a sign policymakers are keen to get out the doors early in the new year. local government spending more money. it goes back to two things. a signed they are nervous about growth. 6%are talking about solve a growth. they want to make sure there is a floor. on the flipside, it indicates bes nuanced approach may coming under pressure. we know the central bank has -- the government has been leaning 20 supply-side. -- leaning to the supply side. we are still a long way off.

it is pretty nuanced. i think you need to look for the signals from the economic conference when they gather in december. much for that.ry don't forget, tv , you can watch us live and catch up on past interviews. you can also become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. you can check it out at tv . this is bloomberg. ♪

♪ this is "daybreak: asia ." let's get a check of the

business flash headlines. amongeneca and russia are drug companies slashing prices of medicines in china. cut by ane been average of 61% as china approves insurance coverage. drugmakers will offer discounts to access china's markets. paul: -- making licenses in singapore, sources say discussions include the insurance arm of banks and to createhe formation a banking license. a singapore plans to grant five licenses to boost competition in the banking sector. japanese beer exports to south korea have fallen flat on it a political dispute that has soured relations.

export fell to virtually zero in 99% in following a september. the year, south korea was biggest export destination for brewers.the wares -- it will take says action after president trump has signed a bill backing protesters. the question is how? let's go to our asia managing editor. whatever you heard so far? we heard the initial statement and then more yesterday. is, we will take strong countermeasures, you wait and see. pretty bad. tough sounding talk, but nothing specific. later, we had the editor-in-chief of the global tweetsewspaper with his

giving a sarcastic tweet saying, out of respect for the american people, china is going to prevent the drafters of the law from entering the mainland that is not on the level that would it of the economy, it suggests a political response to this. china really limited and how it can hit back? many of the potential responses are a double-edged sword. daniel: that is correct. anything they do, they have to make sure they don't also hurt their economy. it is going at the slowest pace in decades. president xi has a lot of things to worry about. we have heard these threats before. the u.s. blacklisted chinese companies, several tech companies over human rights abuses, weapon sales to taiwan. china will come out with the

statement saying, we will unacceptableis is and we will hit back. in those instances, we have not seen china due to much. they have responded immediately in this case, they have a to prepare. they knew this was coming. we have not seen much. get us up to speed on the hong kong situation. we are hearing they did not find protesters inside. is this blockade it done? daniel: it is pretty much done. it is not been declared completely over. the police might do more today. the university wants to reopen today. maybe a few more people in there. they did clear out a bunch of petrol bombs yesterday. they try to remove all the dangerous objects. we expect that to end imminently. yvonne: then what? daniel: we will see what

happens. this has abend flowed four months. it heats up and dies down. we will see what happens this weekend. hard to say if this is over and will move stage of reconciliation. some people want that. demands have not been met. protesters insist on having them all met. yvonne: thank you again. the hong kong monetary authority howard lee and asked about the mark of president trump assigning the bill. your is more from our conversation. >> it is not welcome news. beenarket reaction has pretty calm because a lot of to, they have talked

view the immediate impact of the bill is not going to be huge. a visibleve you seen outflow of capital and do you foresee pickup if these protests drag on? >> we have not seen outflow from the hong kong dollar since april. the unrest status -- there is no outflow in the past few months. ,f you look at other metrics deposits, it is pretty stable. yvonne: the economy has entered a recession. we see a threat from a global slowdown, this trade war, and now the domestic situation. is this any different? the markets are showing some signs of stress but nowhere near anything extreme. what would break the foundation? >> we are going through some difficult periods.

this is something we need to be concerned about. they have launched measures to we have aconomy, platform to discuss with banks how to launch a new scheme. yvonne: how would affect the banks? do see it hurting asset quality? >> not really. hong kong banking sector has been very strong. 20%, which ratio is is higher than the minimum. so far, -- this is very low by historical standards in hong kong and in comparison with other places. yvonne: would a weaker economy

force you to tweak your peg? how are you viewing this situation? >> absolutely not. pack was introduced 36 years ago. we went 36 years, through a lot of different cycles. we went through the financial crisis, the global financial period we went through a where hong kong went through deflation for six years. this pack has proven it will survive. was pretty chief executive howard lee and he will attend the china capital conference later today. still to come, we are awaiting a rate decision from the bank of korea any minute. we will have more on that next.

this is bloomberg. ♪

♪ this is "daybreak: asia." after two interest rate cuts, all 26 economists see the

bank of korea likely to standpat. we have a preview with krystal tan. she joins us from singapore. , it looks like we are likely to hold this time around. is the bank of korea done? krystal: i think so. we are not expecting a change. the policy rate is back at its record low. the be ok signaled it wants time far.sess the impact so tongs are starting stabilize. the urgency for further easing from a monetary policy has reduced. have we seen enough of these cuts into the economy? are we seeing signs of revival?

we talk about the chip cycle, which has seen signs of emergence. or is that optimism misplaced? i think for now, the be ok is going to wait and see. , recenttabilizing numbers, you see consumer sentiment starting to improve. export starting to slow. thee may be signs that worst is over. is not that strong impetus anymore. i think we will see fiscal policy take the lead next year. i want to bring up this chart. it shows south korea's economy has been underperforming for quite some time.

issues point, are these beyond the reach of monetary policy? what are you expecting from fiscal policy? what can it achieve? aboutl: there are doubts how rate cuts -- not only because of limited policy, but because there is high leverage. i think rate cuts will help reduce costs, but will it spur new lending? could be more effective in terms of how much spending goes into the economy. the 2020 budget is extension -- if you look at the fiscal impasse, the deficit the government spends larger than this year. the debt is going to be more

effective and lifting growth next year. we should see a stronger outcome. important to see a resolution of this dispute with japan? i think the reason it has been encouraging, as far as the extension of the military intelligence, it suggests we are inikely to see deterioration the near term. it is worth noting, production has not seeing significant damages imposed by -- significant damages. semi conductor data, there is no sign that has been it. -- that has been hit. they have not reported

significant damages. tourism has shown more of an impact. if production is not being affected, the overall economic impact should be limited. just in time, we are getting the policy decision. leaving the interest rate unchanged. 1.25%. record lows for the bank of korea. at that was no some prize. -- that was no surprise. little more. what are we expecting from the governor? when it comes to the outlook, any change when it comes to growth forecasts? what would that signal? the spending forecast

andhe moment is 2.24 2019 2.5 42020. 2.5 four 2020. the last time the be ok, they were members that called for a rate extension. either we see a unanimous hold or it would signal the appetite for easing has fallen. if we saw easing in 2020, what conditions would be required to make that happen? when do you think we would see it? i think it would come down to growth outlook. the trajectory of a u.s.-china trade war and global tech cycle will be the two key sectors to watch.

it would be difficult under such a consensus. there is so much talk about qed, unconventional -- qed , unconventional -- qe, unconventional policy measures. opportunity for totral banks like the bok embarq on something like this? embark on a like this? krystal: they did not relate out as a possibility. tohink they would stick unconventional measures. it would have to be cut further before it becomes a real possibility. not in the near term.

i know you say the worst is probably over for the yuan, that sounds optimistic. krystal: the currency has been trading in tight range right now. dependent ono be trade developments to strengthen significantly, you would have to see a look covering and global trade. i don't think that is going to happen. most likely, it will stick in the range in the near term. yvonne: thank you for joining us. up, yet not doing anything. keeping rates at 1.25%. looking forward to the press briefing from the governor later. let's do -- australia real estate company has nearly fended off on times by a shareholder to

force a preferred candidate onto the board. whenroposal was defeated 51.3% of investors voted against gary weiss. the proposal came during a campaign to change the business strategy and per -- boost share value. fired atgan stanley least for traders over miss marking up securities and can feel the losses as much as $140 million. the bank opened an investigation which involves traders based in london and new york. this marking means the value placed on securities not reflect their actual worth. net income fell 20%. it aims to reduce outgoing by lowering at a spending and reviewing the works.

chinas outside mainland have fallen more than a third since october. how: let's get a check of we are trading. byhave the nikkei higher .25% after disappointing industrial numbers. employment steady. keeping thekorea rates unchanged at 1.25%. looking bright in this part of the world. similar story in new zealand. almost 1%. both indexes floating with record highs. this is bloomberg. ♪

inl: it is 9:00 a.m. beijing, shanghai, and singapore. welcome to "bloomberg markets: china open." i am tom mackenzie. david: we are counting down to the open of trade in hong kong. let's get to your top stories this friday. trumpters thank president for his support in hong kong. markets wait to see how china will respond to the u.s. legislation. factoong kong's de central bank says there has been limited effect on the market. we hear from the deputy chief executive, howard lee. david: marching to the beat. asia's best performing stock this year highlights the importance of