>> good morning. i am david ingles in hong kong. we are counting down to the open of asia's major market opens. i am haidi stroud-watts in sydney. welcome to "daybreak asia." our top stories this hour. china hits back at criticism of its plans for hong kong, saying its national security push will not change the basic law. beijing insisting judges will remain independent. asian stocks look set to follow

u.s. futures higher as investors balance more economies reopening versus rising u.s.-china tensions. we look ahead to singapore's final first quarter gdp years. a bloomberg survey shows the expected contraction may not be as deep as first thought. david: which is quite a low bar because it was -10%, the pre-lim numbers, due out 16 minutes from now, but anything lower than that would help. equity markets looking like this. we are set up for gains today. u.s. futures up 1%. we are being called higher as well, just under 21,000 on the nikkei 225. the latest numbers out of brazil. you can read about them at the bottom of your screen. there we go. 800 deaths and 1200 new cases. thestory, when you look at equity markets, seems to be repositioning rather than a scaling back of the tensions

between china and the u.s., which we will talk about a bit later on in the show. part of that story, let's get into this top story right now, that china appears to be going to great lengths to reassure foreigng and its large business community that the proposed national security law is actually good for hong kong. that's bring in stephen engle, our chief north asia correspondent. he has been looking at the latest on this story. dohave more assurances, but we actually have details, have we actually seen the draft of this law? stephen: we have not gotten a lot of details, and that has been adding to a lot of the uncertainty and speculative nature of this story and why people took to the streets again on sunday, that led to some violence and of course nearly 200 people being arrested, but we are getting bits and pieces. hong kong's bar association yesterday came out with a fairly sharp worded statement saying the new national legislation coming out of beijing that could

be at least initially passed by the legislature in beijing, the national people's congress, later this week, they are saying that it is incompatible, the new law, with the basic law here in hong kong, calling it worrying and problematic. they cited the fact that the draft of this law that they have seen uses the term "judicial organs." an organ does not work independently. you have a number of different organs in your body that work for the better good of the body. that is why it is giving rise to speculation that if they are using the term judicial organs in the draft of this law, the judiciary could be instructed to act in certain ways, albeit by the communist party of china, so that is the big concern. the latest big official to, and assuage the fears of hong kong is the commissioner of china's ministry of foreign affairs here in hong kong. theasically was saying

legislation will not change the one country, two systems policy. and hong kong's capitalist system and high degree of autonomy will remain and it will not change the legal system or affects the independent judicial powers. another official from beijing trying to assuage those fears that the judiciary will not become just an arm of the communist party. beijing has repeatedly referred to these foreign forces as playing a large part in how they think descent is being -- dissent is being stirred up in hong kong. how is that justification for their next steps? stephen: if foreign forces are involved, anti-espionage, antiterrorism, all those laws could be more easily justified which pro-democracy advocates say it absurd. claudia mo says we do not have terrorism here so obviously, the

national laws are being implemented to iranian the protesters. the latest of hong kong officials to come out and try and, you know, assuage the fears of hong kong's legal profession and the business community. he says new laws are needed to forces.hostile foreign here is his quote. he says if you do not plan to engage in acts of secession, subversion, terrorism, or conspiring with foreign influence in connection with hong kong affairs, you will have no reason to fear, and that is kind of the overall message, even from carrie lam and also the foreign minister of beijing speaking on sunday, saying, you know, not a lot of details about what is in or what the scope and size of these powers that this new law will give to authorities, but basically, the overriding message is, hey, you can trust us. everything is going to be ok. everyone trusts them.

not everyone trusts them. haidi: steve engle with the latest on the back and forth between beijing and hong kong. we will continue to speak to all sides of the debate over hong kong's future. we will be joined by the former democratic party chairperson, emily lau. at 7:40 hong kong time, the former justice secretary. speakingt, we will be with the veteran pro-democracy campaigner, martin lee. in the meantime, let's get you to karina mitchell, with the first word headlines. karina: coronavirus cases continue to rise, albeit at a slowing rate, with global infections approaching 5.5 million and fatalities above 344,000. u.s. cases rose 1.3 percent, slower than recent days, while deaths showed their lowest increase in more than a week. president trump dismissed warnings to stop memorial day in baltimore despite the fact that the visit sends the wrong

message. progress in tackling the virus outbreak use concern over the economy. the sentiment index rose to 77.6 from just under 71 in april, the biggest gain in three years but below the 100 mark of pessimists versus optimists. the reading may affect thinking when the bank of. the european central bank is indicating more stimulus is on the way to tackle the fallout from the coronavirus pandemic. the bank of france governor says there is room to innovate and act rapidly and powerfully with current limits on ecb action being loosened. the next meeting is june 4 and economists expect it will use that session to add more stimulus. the u.k. faces political turmoil with boris johnson's top aide refusing to resign in a row about bracing lockdown rules. dominic cummings that he broke no laws by leaving his home.

the prime minister insists cummings acted within the law, but critics say it shows they have one law for the elite and another for everyone else. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am korea mitchell. this is bloomberg. -- karina mitchell. this is bloomberg. david: thank you. coming up in the show, we will preview the final first quarter gdp numbers out of singapore. a bloomberg survey shows the contraction might not be a bad -- as bad or deep as thoughts. before that, the head of dynamic markets comes on the show and he says the recession from this pandemic may be the deepest but it is likely also the shortest in history so that is all coming up. this is bloomberg. ♪

haidi: australian shares hit an 11 week high as investors focused on economies reopening and the shake off of geopolitical concerns. our next guest shares that optimism. he says the covid-19 the session may be the deepest in history but it is also likely to be the shortest. joining us now is the head of dynamic markets, nader naeimi. great to have you. you were just saying there was a theme song for your kind of mood at the moment and it is that things can only get better. why so optimistic when a lot of people are saying the worst pain for markets and economies around the world is yet to come? are coming from a full economic stop, things can only better. but you know, i agree. i think there is some subtle differences. first of all, markets, it is a direction that matters. direction of economic activity. and on that front, it is

unlikely that we go down in terms of levels we saw in march as he come out of lockdown and we have already seen improvement in high-frequency global activity trackers. from a level point of view, things are not looking good. off really depressed levels in most measures, including earnings, earnings policytions, but -- makers to continue with policy support. for the market, it is a direction that is heading higher. a lot of commentary has kind of been worried about the dislocation between the real economy and what we are seeing in exuberance in the market. we are up 30% from those february lows. is there a sense that -- the

peanut trade. there is nothing else, no other option? because yields are so low, property is not expected to do well in a recession, commodities are very volatile. if you do not put your money in equities, what do you do? nader: there is a bit of that. there is not alternative and equities benefit from that. that is just a reflection of the fact that equity risk premium is very high. equity risk premium is a measure of relative valuation so whichever way you put it, equities are better valued than most other assets. at the same time, you know, equities are forward-looking, so we had a massive economic depression like recession, but the response to it has been far, far stronger than any other time we have seen a recession, and we saw a strong response by governments and central banks in

2008. this time, the response has been five to 10 times higher and quicker, and on that basis, you have very strong liquidity support for the market, but at the same time, that equity markets are relatively better valued than most other asset classes and also, i should say, some of the long term measures, you look at equity markets after the recent fall, equity markets long-term returns are not that strong so there is time to build on those returns. david: i am looking at the best, i guess, you're outperforming equities sectors within the last month, and you know, as you have noted, things like consumer discretionary, things like materials, cyclical sectors have been outperforming defense and utilities, consumer staples, what have you. have we now actually seen market leadership here? do we not look back anymore from here? have the long as we

high-frequency economic activity continuing to head up, i believe we will see that relationship. when you see the cyclical leadership, it has economic growth hitting the lowest point in the cycle and start for momentum to turn up and that is what we have seen it now. as long as we have ongoing policy support, which i think we will, because bending all that money, -- spending all that money, do not let it go to waste. economic activity will continue to improve. cyclical leadership is likely to continue. when we talk about markets, a lot of people refer to markets as near all-time highs. a lot of the market gains have been by various tech heavy stocks. markets have rallied maybe 10% to 15% from their lowest so there is a lot of room for the

cyclical part of markets to rally. i mean, but valuations are pretty much back to pre-pandemic levels. we can talk about that next time. i want to ask you about hong kong because one of your if you are hedges, short hong kong, long singapore, but hong kong is so cheap. nader: so is singapore. singapore is also quite cheap, valuation relative point of view, the two -- the differentials are not that extreme. both are heavy in financials from a center point of view, very similar, but the problem of having hong kong is becoming chronic now. the recent move by the chinese to go for national security laws and potential retaliation by the u.s., it aaves hong kong in

chronic stage. singapore is a beneficiary of a possible relocation in asia. what does that mean for broader emerging markets in asia, if you take the yuan, chinese asset, as really still at anchor, do you expect more volatility? now, the potential source of volatility right now is that tension between the u.s. and china, and we cannot predict that. if that situation deteriorates spikes, but in the absence of that, what we are seeing for global policy support and emerging-market currencies is one of strength. emerging-market currencies, despite the recent turmoil or despite recent worries around

tension, it is starting to go up again. of theu look at the part economy that will probably respond quicker as we come back from lockdown is the manufacturing side. services can be slower because we start with a lower number of people and restaurants, theaters, what have you. on the manufacturing side, they can switch on and start working very quickly, so emerging-market are more likely to benefit. in the absence, if you consider u.s.-china a chronic problem, not an acute problem, emerging-market currencies and emerging-market equities are likely to benefit in the months to come as manufacturing sectors start recovering. everything we talked about there, your assumption is

-- we are reopening in many places. we will not get a second or third wave. it is not going to happen sometime down the road. nader: that's right. it could happen. will get some increase in numbers as we come out of lockdown. but it is not going to cause this massive freak out or panic anymore because we know the alternative of lockdown is a lot worse for people. are, as we progress through this, we are getting a potential vaccine every day. hearing news around the second or first trial. the potential treatment for the cautiousd being more as we interact with each other. i do not think -- if i am lucky, we will see a panicky second wave in the virus progression like we saw in march.

david: take care. have a great week ahead. nader naeimi, head of dynamic markets. coming up in the show, the risk of retaliation from beijing as washington expands the trade blacklist to cover 33 more chinese firms. we will get the very latest on the tensions, next. this is bloomberg. ♪ mberg. ♪

david: let's get the latest between beijing and washington, where china has condemned the latest salvo from washington, which has 33 entities.

they continue to deteriorate further. selina wang has the details and the context. retaliate, and in what form might they do that? is that on context saturday, the department of commerce added dozens more entities including 24 chinese companies and universities including a software giant and nine entities it accused of human rights violations. this would make it very hard for entities to reach an export license as well as u.s. software and hardware. bearings in internal affairs without retaliation but they said china could use its own unreliable entities with one option for retaliation. the others in china said that so

far, the country has refrained from using this list because it wants to leave some breathing space for bilateral relations. was preparingd it the blacklist in mid-march. we don't have any details on who is on it. more curbs were based on huawei, that it could retaliate, putting companies like apple and qualcomm on it. in the meantime, china has been quite defensive in terms of responding to the decision to put tariffs on australian -- what are they saying? china converts ministry said it is being prudent and restrained, based on evidence they found that australia has been subsidizing -- causing damage to local

producers. rejected its claims. the backdrop is australia has an independent investigation into the origins of the virus. fast worsening with relations. china's ambassador saying it could lead to a continued way caught of australian beef and wine. in addition to the tariffs, china had -- this month, which adds to the debate in australia over whether china is punishing the countries are asking for this indication that china has not ever said -- they said -- exports related to health and safety. we did not hear the comments minister mention any deterioration of bilateral relations between the two countries, sticking to the fact that they are doing an investigation into these imports. david: when this headline dropped yesterday on the npc and this discussion that they might

be revising the law, around pboc, it certainly caught my attention. do we know anything else at this point about what that is about? all we know -- selina: all we know so far is that it is on the tv list for 2020. this could lead to a wide-ranging discussion. we do not have any details or timetable although some delegates have suggested the central bank -- financial institution. pboc law was passed in 1995. further -- to loss. selina wang in beijing with the latest out of the npc. you a check of our

business flash headlines in the meantime. air new zealand is forecasting a first full year loss in two decades as they force groundings and staff layoffs. the carrier says it will post an underlying loss in the year through june but cannot provide report guidance to also an aircraft impairment charge of 200 million u.s. dollars as well as restructuring and fuel hedging costs. the german government has approved of a $10 billion bailout for lift onset, putting the state back at the heart of an airline that was taken private two decades ago. the deal gives the government a 24 -- 20% stake. it needs to be approved by the european union and is likely to face opposition from airlines that have not been offered state aid. coming up on daybreak asia, singapore is expected to announce a fourth stimulus package as it looks to limit the

fallout of the virus lockdown. we will have all the details, next. this is bloomberg. ♪

david: we have some technical issues. let me get started here and that's have a look at china now hitting back as these new pressures out of the u.s. when it comes to trade. relations between washington and beijing continue to worsen. the commerce department is expanding its entities list. the expansion includes companies and universities the trump

administration says has ties to the chinese military. china says it has proposed -- its proposed security law will not affect the justice system with the judiciary remaining independent under the one country, two systems policy. they fear that the 1997 basic law will become increasingly redundant. china says that is not true but it has yet to release details of how this law will actually change hong kong. -- second straight month for april as the coronavirus pandemic continues to disrupt local trade and demand. outbound shipments fell 3.7% from a year back, under $40 billion, slightly above the median forecast. .mports dropped more than 6% 17 months of straight declines. the trade balance improved to a deficit of 3 billion u.s. dollars. western australia is clearing up

after one of the most powerful storms in years. thousands of homes and businesses were left without power although police say there were no casualties. the storm was a combination of a weakening cyclone colliding with a cloud front in the southern indian ocean. torrential rain with the southwest reporting its strongest gust since 2010. haidi. let's take adi: quick look at markets. we are seeing it to point -- seeing it higher. trade data out for experts and imports, just shy of estimates. nothing too seriously to the downside to be impacting sentiment. we are seeing u.s. futures continuing to just hold higher as we get this kind of optimism, as we get more and more economies reopening, talk of potentially being -- seeing progress made on a vaccine as well. japanese shooters also tracking that sentiment higher.

we are getting a boost when it comes to oil demand. these hopes for a demand being reignited and we are seeing the wti rising in asia. the head of the international energy agency with prospects of a demand recovery as we get these restrictions being lifted and of course, restrictions for lockdown still underway with the circuit breaker in singapore. it is due to release its first quarter gdp numbers out this morning as we get the continued social distancing really putting a cap on the eventual recovery. densely packed dormitories housing foreign labor. let's get more from haslinda amin. what are we expecting from this gdp? contraction of 8% quarter on quarter -1.6% year on year. it could just come in better than that. a smaller contraction yet bonds estimate it is minus 2% and the it has pretty

encouraging export data. the expert and mr. said the government is quietly encouraged that not all domestic exports -- almost five times that of march. that has to provide some support to the members. as you know, singapore is one of the most open economies in the world and it has to be if it wants to punch above its weight, so not surprisingly, it has been badly hit by the lockdown. the slump in global trade and travel, and how it recovers from here depends on not on the external environment and the likes of china, the u.s. those are among its biggest trading partners. going forward, they will decide if and when the lion city roars again. david: part of that equation would be obviously all the stimulus the government has put in. we understand that another one

might be coming, another round of stimulus. what do we know? haslinda: we keep hearing from banks, whatever it takes, and for singapore, this is the hand that keeps on giving. given estimates of a contraction of 4% for the year, which is like the worst performance for the country ever, it is quite understandable. the deputy prime minister is also the finance minister. he is said to unveil a fourth stimulus package later today to further counter the economic pain. this package will target the social service sector according to his facebook post. workid the government will to accelerate its transformation and wants to scale up. if you recall, this was pretty this covide, using period to position itself. singapore has been very aggressive in providing stimulus. it was among the first governments in the region to

unveil measures to counter losses from the pandemic. in all, the amount comes to 12% of gdp. it has targeted everything from wage subsidies to encourage companies to keep job, to cash handouts. hospitality, tourism. they have all gotten help along with the sme. needless to say, it has been tough. june 2, singapore will begin easing the restrictions. hopefully, that will help economies in their path to recovery but it will be a long road to recovery. david: and hopefully, it can get back to these pictures we are just showing, file footage of the singapore that was an hopefully soon enough after this pandemic. haslinda amin, markets coanchor, and singapore gdp -- 25 minutes. coming up here, we are talking strategist about the outlook for the chinese

currency continuing and worsening tensions between the u.s. and china. this is bloomberg. ♪

david: just 20 minutes away from the open of the major markets. the asia-pacific state of play is looking ok. let's put it that way. u.s. futures up -- what are we doing now? up 1%.

closed in the cash markets. called higher on the nikkei. we are set up for quite a good tuesday. let's hope it holds as we move into the latter part. speaking of, tensions between the u.s. and china are yet again on the boil and have really pushed. , very close toan last year's lows against the u.s. dollar. let's get more on this with the banking group head of asia research. he joins us right now on the line. very good morning. >> good morning. david: i want to start off with the yuan, dollar china, again near these lows that we hit last year. a look at spreads between china and the u.s. ten-year, over 200 bips. moreu think china has appetite right now for a much weaker currency compared to that

appetite it had last year? it pulled it back. khoon: i believe the yuan has further scope to weaken and i believe the chinese authorities will allow this weakness because i think they have shown us they are doing the trade war. they are very open, and in fact, very willing to allow the yuan to weaken in order to help the export sector cope with the tariffs last year, and of course, this time around, with escalating u.s.-china tensions, plus the export markets for china has pretty much collapsed. that requires further weakening and the yuan in order to assist the export sector and help the economy recover. i believe authorities will be very open to that. they will not allow the currency to be too volatile. so it is more of a case of allowing a managed depreciation rather than an unruly, volatile

market. as you alluded to, a lot of these export markets are not fully open as well. china looksorrect, to aggressively push its exports . that comes at the expense of who? who do a short across asia fx? -- i short across asia fx? there if that happens, will be affects into the region. the currencies in asia that tend to have high data for the yuan, tend to be the singapore dollar and the malaysian ringgit. those two tend to move with a high correlation, particularly when we have periods of weakness in the yuan. the other currency that could have spell away factors as well is the korean won, more of a risk proxy for issue. if my view is correct, we have further weakness in the one, and that is further evidence of

weakness in exports, and you know, the fact that they are not going to be set to recovering anytime soon. yourwill start to hit export sensitive currencies a lot harder, and that definitely includes the korean won map. -- won. haidi: has the aussie fully priced in the extent of these trade tensions and the potential for, you know, i suppose, the contagion effect from the yuan? khoon: i do not believe it has at this current point in time. if you look at the aussie, it has been very strong, held up very well, and it looks to be supported by the positive yield differential it has over the u.s., plus the fact that the australian economy has started to open up, managed to contain the virus outbreak very well, so that positive sector has been reflected in all these strengths here and i don't believe it has

actually started to reflect ore price in the growing tensions, potential for the yuan weakness. between growing tension china and australia, of course. honesty so far has been resilient, but i do not think it will stay resilient for too long, as these factors will eventually come to the fore and lead to a contraction lower in the aussie. so your conviction, your top conviction, is taiwan dollar. what is your favorite pair to trade? khoon: you know, i believe we inl see general weakness asian currencies but i think the taiwan dollar will be very resilient and you will actually outperform in the region. i favor going long taiwan dollar versus the currencies i see vulnerable versus the taiwan dollar or even the korean won map.

-- korean won. david: the other thing that you think what we can is the philippine peso on the back of remittances perhaps being on the back foot. talk us through the thinking and what levels you think dollar peso is going to top. peso has been fairly resilient so far. we have not actually seen the currency weaken too much. i think part of that reflects the fact that the philippines economy does not have a lot of high ownership of or folio assets like korea, malaysia. at that point, you start the huge selloff of the outflows that hit asia in the last couple of months which led to the currency depreciation. uphas managed to hold reasonably well. we do know that the philippines economy, while not export

dependent, is domestically driven. household consumption is a high share of gdp and a large part of that is funded by remittances. is around 10% of gdp. given the locked down the global economy, the massive loss of jobs, that, i believe, will hit the remittances pretty hard this year, and that is going to come in the very clearly remittances data in the coming months and that will have an impact on consumption in the philippines on top of the lockdown, so i believe that will eventually be reflected in a much weaker peso, so i see the 52.52eakening towards the 53 level by the third quarter. david: just broadly, your outlook on interest rates. 12 months from now, do you think on aggregate, they will be the same level, lower, or higher next year? khoon: global interest rates

will stay very low for quite a long time. given how long it is going to take for the global economy to recover from this virus outbreak, and central banks around the world will be hiking interest rates for quite some time. long end rates will stay low. the front end, there is a possibility it might head lower because we have shown that negative interest rates, there no longer a lower bound. there is still potential for short-term rates in some markets. to potentially head lower and that includes ian asia as well, where shortened risks tend to be higher than advanced economies. there is scope for some central bank's to cut rates still have scope to go lower in asia.

haidi: do you expect the bank of korea to cut and what are the implications for the won? khoon: i expect to be ok to cut further. they have some policy space, and obviously, the central bank will want to do whatever it can to help to assist the economic recovery. serve to lead to for the yuan weakness although i do not believe central-bank action at this particular point or interest rate differentials in asia are the prime driver. for korea, it is largely a bleak export outlook that will be the main driver for further korean won map weakness. i am looking for the won to weaken back towards the 1300 level over the course of the coming months. haidi: anz banking group head of asia research, khoon goh. appreciate your time with us. we are seeing positivity when it comes to futures trading across the region including ahead of the market open in tokyo.

japanese futures trading in singapore, trading just above .8%, building on the rally and picking up from what we have seen across the rest of the region as the government of japan and did that nationwide state of emergency on monday, as we see cases continue to tail off in japan. lots more to come on "daybreak asia." this is bloomberg. ♪

haidi: we are just 10 minutes away from the market open in tokyo and we are seeing upside going into the start of trading. stocks in japan still down more than 10% on the year. one company out of those up around 100% from its march low. laser tech is a little-known company increasingly being seen as indispensable in the race to improve semiconductors. our bloomberg technology reporter joins us now. tell us about this company, laser tech. what do they do? pavel: just to give you an idea of what they do, you need a quick overview of the semiconductor manufacturing it i will make it short. there is a part where they project a circuit pattern for using stencils and the stencils are actually glass squares that are really complicated affairs, ,n matters of altering silicon each costing $100,000.

it is the reason why chips keep getting smaller, making gadgets slimmer while being cheaper. laser tech is a japanese company that pretty much cornered the market for machines that test those insanely expensive stencils that are necessary for making chips smaller. so how do they really managed to become so essential to the giants like intel and samsung? pavel: is process of shrinking chip sizes has been around for ofs, 1970's, and it is kind entering its final stages. at this point, using light to make these things smaller, they have to resort to generating plasma by exploiting 10 with lasers,- tin with extreme ultraviolet. it has been in development for 20 years of constant that backs

and only now coming into commercial use which allow them to make trips which measure five or three nanometers in size, really small. tsmc -- intel is planning to come out with products next year, but pretty much nobody else. very few suppliers have managed to hang on in the development process over the decade. simply taking a huge gamble that took them six years to develop the product and they ended up being the only one in this tiny little niche, and now, they are reaping rewards. haidi: investors -- david: investors who bought in up 500%. we are now up 50% this year alone. do you think future growth has all but been priced in really? knows theone really final size of this market. people kind of estimate each chipmaker will need at least two

of these machines which cost $40 million, but right now, it is only the largest makers. when they spin up their productions, it seems to be there's a lot more orders coming in, so potentially, this company could have a lock on this tiny little niche of the market until the next generation, which is probably decades away. good point. an entrepreneur once told me, i asked him how big is your market? he said how big is the problem he needs to solve? pavel alpeyev, our asia technology reported. let's get you a quick check of the latest business flash headlines ahead of the open in japan. the company will be reopening its stores in japan after being shuttered for months because of the coronavirus. two locations will open on wednesday. eight other stores will open, to be decided, with tokyo lifting

its state of emergency. apple says it's japanese stores will require temperature checks, social distancing. more banks to0 help manage its hong kong listing next month. the chinese online giant will seek approval for the offering at a listing committee and shares day -- on thursday. they are hoping to this 2 billion u.s. dollars to bolster finances and the state while increasing e-commerce competition. it is targeting a sale. mark your calendars to do and 18th. the companies largest online event. here, thelittle bit chinese food delivery company said it reported a smaller than expected 13% slide in revenue in the last quarter but now warned of the fallout from the virus that will affect performance by 2020. 2.4 billionto

dollars through march while the projected net loss was lower than estimated. shares rose in hong kong before results came out. we will see what happens when things open in hong kong two hours from now. stake at $13ing a billion, giving the french drugmaker more room to invest in cancer research. regeneron will repurchase $5 billion in stock. holdings worth $7 billion based on friday's close. the company said it would end its hunt for a new diabetes and heart disease dropped to focus on -- fiat chrysler is nearing approval for a $7 billion loan facility from a state backed bank as it looks to whether the coronavirus downturn. the loan, if approved, would be the biggest in europe. scheduledaid to have

a board meeting to rubberstamp the agreement on tuesday. the deal also will need the sign off from the italian government. checking in on asian markets right now ahead of the open in japan, we are looking up. futures are pointing up as well. singapore gdp coming up at the top of the next hour. stay tuned for that. the pre-lim data was -10% contraction. we are expecting to see a slowing number. 60 minutes after that, we get the market reopened over in singapore. very quickly, let me leave you with the charts. it basically shows you global stocks did bottom in fact here when conferees started to outpace new infections, and that is the bottom part of the chart, as you see. haidi. haidi: all right. wet hour of "daybreak asia," get reaction to china's security law proposals for hong kong.

we will be joined by the former democratic party chairperson, emily now, and the market opens our up next. this is bloomberg. ♪

haidi: i'm in sydney. ages major markets have just opened for trade. david: i am david ingles. welcome to "daybreak asia." david: top stories right now --

ok. we are trying to get into sink there. --sync there. beijing insists the judges will remain independent. are looking to follow u.s. futures higher as investors are balancing the opening against the tensions between the u.s. and china. scott morrison addressing the -- post-pandemic outlook. heidi, your turn. -- haidi, your turn. haidi: breaking news. the final reading for the first quarter, singapore gdp numbered not as bad as expected. a contraction of just 4.7% in the first quarter. much better than expectations.

expectation was a contraction of over 8%. a bounce back. negative, also better than expected. 1.6% contraction was expected. singapore downgrading its forecast to a contraction of 7% from -- they are now expecting a contraction of 4% for the full year 2020. in terms of that shrinkage, we are seeing overall better than out of singapore. the revision of the contraction 4% for a full year is pretty significant, david. david: yes, in a lot of ways it tells us we will be here for a fairly long time even though perhaps we are getting some revisions coming out of the current situation. in terms of the open -- japan is

standing out right now come up 1%. now, uping out right 1%. ulster you had a very good session yesterday. the 11th high had of the year. flip the boards. have a look at where we are in terms of commodity space. at $33.96, inching back towards previous levels. 36 -- under $36 now for brent crude. haiidi? with sian us speak oxford economics.

as bad asre not expected. in terms of that revision, i guess it suggests that given singapore is one of the most trade wind exposed country in the region, we would expect this country to suffer more than others. sian: that is true. -- numbers coming out for q1 singapore is very trade exposed. is not likelynt to continue. we will see a drop significantly primarily because we have had lockdowns globally but also because the kuroda outbreak is much more serbia's -- service oriented. we are going to see the economy fall into a recession and we are expecting double digits in the second quarter.

see these social distancing measures still in place in singapore, not taking any risk of seeing a second or third wave of infections, how quickly do you expect the rebound to be? and in singapore, is it down to the external circumstances we we arere as elsewhere talking potentially about the recovery being driven by the strength of the consumer? sian: i think it will be a combination of both. -- retail has collapsed. that is going to continue. when will we see the restrictions ease? eventually, things will pick up. when you have consumption at low underpin steady

growth. demandee consumer improving globally, that will benefit singapore. i want to ask you about what your thoughts are and what singapore has done to limit the losses for the unemployment side of things. arguably, if you get a lot of progress on that front, your recovery might be a a lot more quick. do you think singapore has done a good job in terms of limiting the losses for sme? sian: yes. they have implemented unprecedented measures. employeesly for local . and going forward

[indiscernible] it means people are still being employed and will still have incomes. the consumer though will still be cautious. the consumer demand is likely to modest. i want to talk about beyond 2020. 2021, 2022, i think what we have seen is many governments, not just singapore, they have spent a lot of money looking to blowout deficits. there is a lot of borrowing going on right now. should i be world -- should i be worried this brings growth forward and takes away future growth for these economies? economies arean

cyclically based. singapore hadht more room to implement fiscal deficits. elsewhere, [indiscernible] we are seeing falling revenues. there was concerned these could lead to credit rating downgrades. some of these things will be temporary. it will be hard to consolidate these fiscal measures going forward. haidi: how much more space and firepower due central banks have at this point particularly if we talk about troubles that will because i another round of trade tensions or diplomatic tensions between the u.s. and china were china and potentially a lot of other countries around this region?

unfortunate wey see tensions rising again and how that will negatively impact sentiment. how much firepower? we have are the scene at the moment across the region that interest rates are broadly at -- we are also seeing weak demand pressures. it means real interest rates are high in a number of countries. a number of countries will continue to reduce rates. the pace will have to slow. we are looking at a 50 basis point cut in indonesia. that will spark some currency concerns. further rateg for cuts in philippines and even thailand where we could see one more. malaysia is one country where we could be looking at then moving down to the 1% mark which would

be unprecedented. there is still room there. but they will take a more cautious path going forward. we do think based on some firepower. -- we do think they still have some firepower. haidi: is there greater flexibility for china to invest and does that translate into the upside for demands particularly the commodity side? national people's congress did not put forth a growth target but they are still on the economy and jobs. that the congress report indicated there is still room on the fiscal side. of action by the

pboc. in terms of liquidity and rrr cuts and other interest-rate cuts as well. we do think there will be a lot of support going forward to boost the economy. year -- it is how the economy rebounds in the second half of this year that will help china focus on how to go forward. david: can you imagine what the figures will be next year? sian: they will be great. david: sian ferrer, thank you. debrief the singapore gdp numbers. the japanese airlines -- in the case of japan airlines, up for a sixth straight session. that is on the back of the reopening story. outperformingt

the broader market. a couple of hours back, reuters reported on nissan and renault shelving the alliance. there forhe movers now and we will come back later on to give you a further update on those markets. karina mitchell has already been waiting a long time. time for you. any coronavirus cases continue to rise albeit at a slower rate. infections approaching 5.5 million. ..s. cases rose 1.3% deaths showed their lowest increase in more than a week. warnings trump ignored for a memorial day celebration. more stimulus is on the way to tackle the fallout from the

virus pandemic. the bank of france governor says ecb's next the meeting is june 4 and economists expected to use that session to add more stimulus. china says it's proposed security law for hong kong will systemect the justice what the judiciary system remaining independent. fears are growing that beijing's tightening grip on the city becomehe basic law will increasingly redundant. china says that is not true but has yet to release details on how the security law will not change hong kong. exports fall for a second month in april as the virus pandemic continues to disrupt global trade and demand. 3.7% to shipments fell just under 40 billion u.s. dollars. slightly above the median forecast. imports dropped more than 6% to report a 17 month in decline.

to 3rade balance improved billion u.s. dollars. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell and this is bloomberg. haidi? coming up, we get reaction to the proposals for hong kong. we are joined by emily lau. this is bloomberg. ♪

david: welcome back to the show. the open oftes from the major markets in the asia-pacific. the state of play is good, better in japan. the asx 200 which had a very

good day yesterday. u.s. futures, 31 points. japan is really the one in focus topixnow with the index. starting with tokyo, a lot of good news on the reopening of the economy there. has it been priced in? there probably is some room here. i think people are getting comfortable with the idea that the japanese authorities are putting as many strings as they can at the same time. we expect another relief package to be signed off on this year and a pretty big one at that. emergency measures have been taken off the country. the country is effectively open now at least domestically.

last week, the bank of japan announced a special program to help assets and companies and japan. there is a lot coming together at the same time and i think at last, investors are starting to see that japanese equities in particular have been underpriced compared to the rest of asia and the rest of the world and now the government and the boj are pushing together in the same direction. a good tailwind to get ahead of other countries and asia. things are looking brighter. even the yen is playing its part. fromollar-yen is not far one dollar zero eight cents. $1.08. haidi: aging has been warning for the u.s. not to push the

relationship into a new cold war. what are some of the ideas that participants are batting around? how do you trade a cold war? the: a lot are looking at offshore yuan. we saw a significant increase in activity in the dollar against the yuan, particularly trading for the offshore yuan. which is free to trade in any range it wants to. there is very little liquidity in the yuan market. all of the derivative activity is very liquid as well. when people think about how they want to react in terms of any changes between -- of any changes in the relationship between the u.s. and china, particularly the trade relationship, if companies are

being put under any kind of threat to their business, probably one of the first places we will see is the offshore yuan moving. and people are now getting fairly comfortable they can take significant positions in the yuan and the related product and they don't need to worry too much about sudden liquidity squeezes. it is a deep market which reassures people they can get out when they need to. we would expect to see quite a bit more volatility in the yuan and the yuan options if the relationship between the u.s. and china gets worse. david: part of that equation is the hong kong dollar. not long ago, we were hugging the strong end of that. what is the play of the hong kong dollar? what are the indicators and what are the triggers? itk: you're quite right that has come back into focus. there was no interest in the hong kong dollar and then in the last few days, we have seen

massive interest in the option market. on friday, hong kong options where the foe's -- were the fourth most traded options in the world. the hong kong dollar was fourth which is extremely rare. and a lot of interest in the and higher which is the top of the trading range as we know. when of the things we have not seen is the one year out right 75.e has not yet crossed during the peak of the protests when ever it reached 85 or above, there was quite a bit of interest for people that come and purchase the hong kong dollar. mark cranfield there with some of those trading ideas and you can follow more on that story and some of the other market stories of the day on our

blog on -- on our mliv the bloomberg. to get everything you need to know for your trading activities and commentary. this is bloomberg. ♪

haidi: australia's prime minister is about to lay out country'seshape the post-pandemic future. when it comes to the other economy, scott morrison had a speech in canberra to talk about a business friendly future. what are we expecting to hear from the pm today? focus is likely to be on vocational education. the prime minister saying it needs to be more responsive to the needs of business. he will be talking about the job

maker program which is distinguished from the job keeper program which pays employers up to $1500 every two weeks to keep on staff and make sure people have a job to go back to when things get back to normal. plan is toer simplify higher education systems and he wants to see more consistency between the states. he says the current system is bewildering and unresponsive, his words not mine. he wants more funding or the skills that businesses say they need and he wants more transparency in how that money is being spent every year although we are unlikely to see any new spending measures in this package because there was a $40 billion shortfall in the estimate needed. confusing. thank you for clarifying that. apart from job directed

measures, is there anything else we are expecting to hear? for: we will be listening things around tax reform. the prime minister has previously signaled he wants to reform industrial relations. we might hear a little more about the future of welfare payments. the prime minister has said previously it cannot go on forever and some will be allowed to expire later this year. it could be a little more vague. we may or may not see more details today that the overarching goal is to reanimate the economy by july when most of the lockdown measures should be eased. david: paul, thank you so much. paul allen live from sydney. this speech will be in about two hours. a quick check on the business flash headlines. air new zealand, the company is forecasting a first full-year loss. the coronavirus strangled travel

demand. layoffs. the carrier says it will post an underlying lost but says it cannot provide further guidance. the german government has approved a $10 million bailout for putting this date back at the heart of the airline that when private two years ago. government will rise to 25%. the deal needs to be approved by the european union. in about 90 minutes from now, we will see the hong kong markets follow the queue for the rest of asia. pointing up for equity markets. in mind, as hong kong waits for more details about beijing's proposed national security law, we speak with emily lau, a former democratic party chairperson. a very hot topic.

we saw it play out in markets on friday. yesterday was not as bad but certainly investors are on edge given this fast developing story. ♪

how are we going to live? no business can get done. we need to make sure we have a stable business environment. >> this is the kind of confrontational developments on both sides of the relationship you would expect in a cold war. >> i do think this is a major inflection point. convenientms to be a way to distract from domestic failures in both countries. with concern is that by drawing this special status, you harm hong kong.

to revoke some of that special treatment to hong kong come it you can only do that once. >> the u.s. and the ok will be taking the -- and the u.k. will be taking the lead on this issue. what you hear is we have to draw a line and it has to be firm. just some of our guests in ong it -- weighing some of the tensions between the u.s. and china. story. the hong kong reassure -- the latest is it is looking to reassure not just hong kong but a lot of stakeholders involved that the justice system will remain independent under this

new national security law being proposed. will is concern that it deter investors. joining us now is a former democratic party chairperson, emily lau. should i believe china? chinastion is, what does have to do for you and others to believe what china says? of all,y lau: first they need to drop this national security law which the rubberstamp parliament in beijing is definitely going to pass on thursday. if they would just cool it, stop it, and talk to the hong kong people and the political party, the legislators do what is needed, what are the concerns of not just the political parties but the business community -- i have heard some business people

saying they are rethinking their plans in hong kong. and i think one thing is you know the extradition bill which sparked off this year-long product -- your long protest last year is not just the concern of the political activists many of whom cannot go to mainland china anyway but it is the concern of the business people and the for vessels. they have some any dealings with the mainland. do you not think that now with withnational security law subversion and terrorism -- do you not think the companies, the professionals are worried? of course they are. china and i hope the international community will tell beijing to really calm down and stop bulldozing this thing through. the last governor said or suggested that the g7, the group

of seven, the most rich and powerful countries which will be meeting next week should put hong kong on the agenda and discuss it. i hope the international community will speak out. i do not support sanctions for hong kong because in the words of some business people, that means the game is over. why punish the seven odd million people? i do not think that is the way forward. to clarify, your issue is not so much the proposed bill itself but how it is being introduced? ms. emily lau: well, both. if they understand the way they are doing it is very wrong, they should stop it and then they should have a discussion with theyommunity and see why are having such violent reactions. why the people are so fearful and angry.

the thing to do is to engage the on thenot just beat them head and try to crush them. that is appealing feeling we have in hong kong now. there are thousands of police officers roaming the streets trying to beat people up and arrest them. it is a terrible, terrible feeling. just like we are living in a police state. emily, does it feel like beijing has lost its temper or progress hongthe kong is making and it is willing as at at risk its position global financial hub in order to maintain or consolidate complete control? ms. emily lau: yes, i think you may be right. quite a number of people have said that beijing has lost its patients because hong kong was handed by britain to china in

1997. 23 years. how come we still have not implemented this national security law which the basic law of hong kong said we should do it on our own. but for 20 odd years, we failed to do it in beijing saw all of these violent confrontations industry last year and they were angry which i can understand. but they must ask why, why did such a peaceful and safe city suddenly blow up like that? and the trigger of course was the extradition bill which carrie lam, the chief executive proposed and then months later she withdrew it but by then, the damage had been done and the pleased were encouraged, not just by hong kong but by mainland authorities to go out and beat up hong kong people. over 1000 people have been arrested.

not one single police officer has been arrested for assaulting people. so you see, this is a problem. if beijing is losing its patients, it should ask why? how come for 20 years nothing has happened? it was only when president xi -- it the head of the prc made hong kong so angry and frightened. there is no trust on either side, that much is clear. you do to communicate with beijing if you want to get the message across that what protesters are going for is not complete independence which is what beijing is most scared of? right.ly lau: you are

most hong kong people are not going for independence. they are not going for the overthrow of the chinese communist party. how can i get my message across? i do it through you, my dear. i'm sure they are listening to your program. i speak as someone who cannot go to mainland china. i have been banned for 20 odd years. but, through the news media particularly powerful voices in the news media, when you speak to me, i speak to you and i hope they listen. they can hear it whether they will listen or not is up to them. but i agree with you. we should have dialogue and engagement and not using brute force. and i tell you, although we are just a city of 7 million people, we are not going to roll over and play dead. emily, david here again.

objectively though, just looking at what is being proposed. would you agree that hong kong needs national security -- needs a national security law? is the purpose of the bill, what it is trying to address or the party that is suggesting it -- which is the problem? ms. emily lau: david, i guess it is everything but ok, it is i the nationa -- it is in the basic law. people are not completely against it. it is how you do it. in 2003, the legal profession in hong kong -- they accept there is a need -- they suggested there should be a white paper, a consultative document that should be published getting together views and then come together with compromises or a

consensus. that means we can move forward. and that is a very civilized way of doing it but nobody bothered to listen to that. and now, they are saying -- you did not do it so now we will do it for you in a few days' time. is that the way to behave in a civilized world? ideal world,in an no but there are a lot of them imperfections in the world which is why we are having this conversation and why we had the scenes we did over the weekend. do you expect the unrest to continue in hong kong? do you expect it to be worse than last year? is emily lau: anything possible, david. it is coming on wednesday. on wednesday, the legislative council is going to have to pass insultl on this national

because they say they will punish you if you insult the national system. many people are upset and now there is cause for people to go to the legislative council complex. now, the people are heavily deployed there and some roads next to the complex are already closed. and in the news today, it said that the police will deploy 350,000 police officers in the vicinity. the scene is set and coincidentally i'm a what is going to happen on wednesday? secondarys, the schools, the higher secondary schools -- their classes will reopen and some of the kids, the students are saying they will go on strike and some may even join the protests. what do you think?

i think this is terrible. and hong kong is again going to did generate into violent clashes this coming wednesday. what next, emily? what next for the pro-democracy movement? what is the way forward? ms. emily lau: well, my party does not support violence. we never supported violence. but, of course, we will fight with dignity and we will work with our people. those that do support violence and those that resort to violence, they are taking it into their own hands and they have to take responsibility for their actions but we just hope that the police will not go around using water cannons and tear gas on the people and beating them up so much and arresting so many again. very soon our prisons will be

filled. filled completely. so, it is a very sad state of affairs and there are many people from australia, america, kong., living in hong we have hundreds of thousands of foreigners living and working here. and i hope the international community will come up and tell beijing, tell the carrie lam andnistration to calm down not bold those things over the people. the people by and large are not violent. they want a dialogue. they want to talk. they want the government to come out and give some concessions which is something we cannot get and that is why you keep seeing these scenes of very violent clashes. it makes our blood boil. emily, we really

appreciate your time with us as always. ,ormer democratic party chair emily lau speaking with us and we will continue to speak to all sides of the debate. later today, we are joined by regina. city's guest will be the former justice secretary. and after that, we will speak to the veteran pro-democracy campaigner, martin late. we will take a look at why isjing's tightening grip causing u.s. companies to sell shares in the city. this is bloomberg. ♪

haidi: this is "daybreak asia. china is hitting back at new u.s. trade pressure condemning to a to add more companies blacklist as relations between beijing and washington worsen. the commerce department is expanding its so-called entities blacklist. the extension includes companies and universities the trump administration says has ties to the chinese administration. the tests on hydrochloric oquine haveori been halted.

who says tests may resume if new data warrants such a move. singapore is slashing growth targets this year as much -- by as much as 7%. the government is revising down its forecast and expects the contraction of 1% to 4% as overseas demand decline. final estimates shows growth fell in the previous three months better than the 10% drop that was expected. meanwhile, western australia is clearing out after one of the most powerful storms in years. many businesses were left without power though police say there were no confirmed casualties. the storm was a result of a weakening cyclone colliding with a cold front over the south indian ocean. global news, 24 hours a day, on air and on quicktake by

bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell and this is bloomberg. david? david: karina committee why so much. the potential implementation, at us put it this way come up new national security law in hong kong has sparked a lot of fears. columnisterg opinion says in one financial aspect at least, hong kong will benefit and she joins us now to tell us exactly what that aspect is. >> hello. don't get me wrong, the national helpful for is not a cosmopolitan city where growing investment is key but that get things

between china and the u.s., the more countries are looking for a hedge. since they are listed in dollars, they are looking for a listing in hong kong which is a dollar-based economy. this is the one narrow aspect in finance that is doing better as things get worse. take alibaba for example had a hong kong listing last november. does this suggest that this is a trend that will start forming? >> yes. we have already heard of several others in the pipeline as we call it. traded including jd.com. tease, another nasdaq

listed company. u, theen you have baid big search engine in china re-listto de-list and in hong kong. we are talking about billions of dollars worth of companies. a company like g -- jd.com has market cap in the u.s. -- it is not like they are looking to delist from the u.s.. but if tensions should worsen, they have options. great to have you. our bloomberg opinion columnist. next, the chinese food delivery company, meituan is warning of further challenges to calm. this is bloomberg. ♪

david: welcome back. a quick check of your headlines. reports from japan saying nissan and renault are shelving plans a full mergere -- and will strengthen their alliance in other ways. reuters says the companies will announce restructuring plans

this week that will serve as a peace treaty over ties of their previous boss, carlos ghosn. cost aspects may affect thousands of jobs. apple will begin reopening stores in japan this week after being shuttered for months because of the coronavirus. o on wednesday. two will open on wednesday. apple says there japanese stores will require temperature checks, the use of masks, and social distancing. twin: tictoc and its china rank top in the world in terms of apps in april according to new data. it excludes gains from advertising. did better than expected. let us get some analysis from

our asia tech reporter. how did meituan fair in the first quarter? we are having these pandemic or lockdown beneficiaries -- what does the outlook look like? >> we know meituan is one of the most vulnerable players in china. a large output as it is servicing food delivery and others. but for the first quarter come it did ok -- but for the first quarter, it did ok. into their new segment including -- building and a new online grocery platform, the revenue in that segment actually grew year-over-year.

and for the rest of 2020, the plan is not to make a profit. they have a lot of initiatives to help restaurants go through the pandemic for example they offered free traffic and .ommission to talk tictoc -- a massive surge given what is happened. it is doing quite well. is the opposite of meituan. it is a virtual operator. it is one of the beneficiaries during this pandemic lockdown.

aroundook at the revenue tictoc, it is mostly generated from users purchasing virtual currency and then using that currency to pay their favorite bloggers. sign the company is broadening. .arketing to e-commerce david: great stuff. thank you so much, our tech reporter joining us live to talk the latest numbers. is one of the companies we are tracking. a quick check of your markets. ahead of the singapore open. not as bad as initially thought. we look at the range for the full year. we will be here for quite a long time.

an up arrow story. i am heading out. as well. we are just getting warmed up. this is bloomberg. ♪

to bloomberg markets china vanke. i am atomic -- welcome to bloomberg markets china open. i am tom mackenzie. securing the independence of judges in hong kong. asian stocks rise for a second day. more economies we opening against rising u.s. china tensions.