>> a very good morning. we are counting down to asia's major market open. >> welcome to "daybreak asia." china since the usa message. it wants to discuss the potential ban on tiktok when the phase one trade deal comes up for review. cathay pacific will be a stock to watch when hong kong markets open. about soared is optimism

an eye watering loss. costsosses and rising mean bonuses are set to disappoint. >> we are seeing u.s. futures flat. this, of course, after we had the regular session seeing record highs. at one point, topping the record reached in february before the pandemic. every sector on the s&p 500 was in the green. we have nikkei futures moving higher as we have the japanese yen under pressure. we have seen it fall against the u.s. dollar for the past four sessions. right now trading around the weakest in three weeks. in sydney, futures higher. we have the aussie dollar listed a little bit higher. we have a softer u.s. dollar, not to mention higher commodity prices. we have kiwi stocks at the moment gaining ground after seeing the worst day in a month.

this as we have rbnz expanding their qe program. gains in the currency returns, commodity exports, unr holdings -- qnr holding steady. >> u.s. and chinese negotiators plan to discuss progress in the phase one trade deal. pushing toset to be widen the agenda to include president trump's crackdown on tiktok and we chat. expectations, our given that we don't have an exact date or agenda? >> look, on tuesday, donald trump off about how it was not necessarily that important, that a lot had changed. their view on china had changed a lot over the last eight months. we have had the coronavirus

outbreak globally. bands --ad these tech bans on tiktok and the ongoing issue of huawei. we have the issues in hong kong and the national security law still over effect. and we have taiwan with the health and human services secretary visiting taiwan this week. issues,e a lot of geopolitically, between china and the united states. the fact larry kudlow downplaying concerns that hit the market that perhaps donald trump was throwing cold water on the phase one trade deal, that it was in jeopardy, he is saying, look. the one area we are engaging in right now is trade. it is fine right now, kind of ironic, given that trade with the center for the past couple years. now these other issues have cropped up. so yes, with china trying to push into the agenda tiktok and wechat, we are not sure what

their ultimate aim is. obviously, it is a big concern. we don't know when those talks will be held. likely this week, perhaps next week, but they will be held virtually, not face-to-face. who knows what the result might come. because of the coronavirus outbreak and the overall global economic malaise, we have seen china's purchases of agricultural products in the first six months of this year well below what they pledged under phase one of the trade deal. ban, we that we chat have seen that overshadow tencent earnings despite their really solid performance. was the bestevenue in a couple of years. profits, net income, i believe through june, was what, higher than every estimate on the bloomberg terminal. but even though on the conference call yesterday the executives, the cfo as well as president martin lau, they

repeatedly said they were not going to get into hypotheticals about the wechat pay and -- we byt ban, they got peppered reporters and analysts repeatedly about it. they basically said, there should be a distinction made between we chat, the service that is provided outside of china, and the very similar app of there's, the chinese translation, a separate platform, kind of sort of. they would say if the ban applies to we chat, which is in the trump order, if the ban is on wechat, tencent is saying it will have less material impact on their business. they also acknowledge that their long-term goals are international expansion. keep in mind, if the ban comes to fruition, this cuts off a key communications tool between people of the largest economies

in the world, china and the united states. facebook andd by facebook are both banned in china. google platforms are blocked in china. the main communication tool between small and medium-size enterprises and larger businesses is through we chat. blowst is cut off, that -- deals a significant blow to china's exporters and businesses. -- north asiaorse correspondent stephen engle with the latest. still ahead, tcw investment management says the global tech supply chain is splitting in two. china against the rest of the world. the cio and co-founder joins us next. the, a company caught in crosshairs of u.s.-china tensions. why tencent says president trump's wechat ban may only have a modest impact. ♪

>> you are watching "daybreak asia." stimulus talks remained stalled in washington with each side blaming the other. nancy pelosi says she rebuffed steven mnuchin because the white house has not budged. he says it was she who will not compromise. pelosi says democrats will come down $1 trillion if the administration will raise by the same amount. joe biden and kamala harris have made their debut at the white house saying november's election will shape america for years to come. biden says harris knows how to make hard calls and will energize the black community. harris is african-american and asian american. their appearance was scaled down from traditional introductions because of the virus with an audience entirely of journalists and campaign staff. another leading hong kong

democracy activist has been released on bail saying she will not be stopped from speaking out. agnes chow was held along with jimmy why and others under china's sweeping national security law. -- and thearged with surrender of her passport. the hong kong justice department has failed to say why she was arrested. apple's top iphone suppliers as the days of china as the world's top factory are over. provisions say plans to split supply away from the mainland and will move to southeast asia. the proportion of iphone manufacturing outside of china has risen to 30% from 25% in june. hon hai chairman says china's days as the top producer are over. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. story,ing with her that

our next guest says the global tech supply chain is clearly splitting in two. joining us now is the cio and co-founder of t pw -- tpw investment management. a supply chain for china, a supply chain for the world. will that increase the cost businesses have to bear given this change in the supply chain and how they operate? is there a way to play that in the market? right, whatt is you just said. this has been in the process for a number of months. tpw 3.0, technology with a driver. away from globalization. what we are seeing in terms of the producers of hardware separating their china production from non-china production reinforces that and puts facts on the ground. some companies are going to be

hurt by this. others will benefit. accelerate,erves to the driveway from globalization, towards deepening of regional integration, what we call the trifold world. in this technology splinternet along with covid-19, it is accelerating the whole process. i think it allows asia to separate itself from the rest of the world. >> is that a good thing? decoupling asia from the rest of the world? where do you make your bets to increase your exposure to the asian tech ecosystem? mean, i think it is debatable, whether it is good or bad. it is more important investors recognize it. we have to deal with reality. the reality is the u.s. and china have a strategic rivalry.

covid-19 hass really hurt trade, down 20% year on year in q2, driving a renewed focus on domestic demand. we have created what we call a covid formula. that investment formula is the first. you have to get covid under control. getting it under control allows domestic demand to become viable again. that leads to a broadening of your stock market. that leads to outperformance. we have seen that with asia and china leading the rest of the world in terms of your today. within asia, we actually like to play several different vehicles. china itself is interesting. war,ink absent an actual u.s.-china back-and-forth is not going to derail china equity performance. asian etf which

, southyou 70% china korea, and taiwan, allows you to play that ecosystem in north asia. you also have australia. you have the resource opportunity with high-yield. you have southeast asia as a real laggard, down 20%. if you get that movement from china to southeast asia for production and consumption, that is probably a pretty interesting area as well. >> one last point when it comes to tech. is there a chance we could see a reversal of these post-the november election with a different administration setting the tone? did you think the structural supply chain related issues thrown up by covid are really a political an extent? to an extent? >> i think covid is apolitical. the politicians that get it right get that reopening is a

reward and that leads to better corporate and stock market performance. in terms of administrations and change in administration. i don't think so. it is not trade. it is tech. the u.s. and china both understand the importance of technology, the importance of ai. each wants to control it. china can go its own way for technology. the u.s. goes its own way. europe sits in the middle. -- 600lion consumers million consumers and they are going to play referee. regional integration, regional deepening. the trifold world of europe, asia, and the americas. first in, first out, it's asia with covid. there's a lot of opportunity to drive consumption with china's new strategy. therefore, china and asia is attractive.

europe is also very interesting. we are underweight the u.s. in our global equity. when are seeing a rebound it comes to japanese equities. i am wondering what your views are on that. why does japan not get much love? >> that is an excellent question. i meant to mention that in my --or roundup of the various we japan. ,w j is a major etf in the u.s. spoke out about the 200 day moving average since june. it is looking good. it has been a laggard. it is very under owned. it is also a cyclical play on economic recovery and a china that wants to drive domestic demand. china is a big exporter. there's a lot of private equity activism going on in japan,

which people don't really pay attention to. i like to see where private equity goes. we like japan. ski -- jay peloski. kellogg had's global head of reddit says the market is -- credit says the market is out of touch with reality. ♪

>> the economic fallout for the coronavirus pandemic is making it harder for credit investors like carlyle group to deploy fresh capital. the fund says it is having to project how long the crisis will last when considering new transactions. the head of global credit mark jacob spoke to bloomberg about the opportunities.

>> there's two things that happened. one is you saw this rapid shift in volatility in the market where you saw a drop off in demand quicker than we have ever seen before. then you saw a rapid recovery in the market because of the federal government in terms of stimulus. the has created noise in marketplace. we are trying to figure out the long-term trend. as the markets recovered, the financial markets, we are repositioning portfolios we can. on the liquid side, improving it upgraded the quality of those apps to reposition those. quid portfolios, we are repositioning to higher-quality assets that will sustain and come out the back end of the pandemic stronger. in the private more liquid side,

we are looking for opportunities and companies that we think are leaders in the fields they are in that are going to survive, that we are looking -- that they are looking to make acquisitions , situations where companies are looking to make acquisitions. they want to increase their position in the market. or they are looking to make acquisitions with respect to keep property plane equipment as they see opportunities coming up the back end of this section we are going into right now. those are the situations we are focused on as opposed to either the stress opportunities people have talked about, but there have not been many of them. mentioned acquisition financing. that is something we have seen banks additionally play in in a big way. to what extent when you're looking at the market are you seeing banks step back from the market? >> the banks going into this in

march and april, there was something north of 300 billion revolving lines of credit that were drawn by corporates as a defensive mechanism to bolster liquidity. clearly that puts a lot of pressure on the bank balance sheet. some of the has been refinanced from the marketplace. there has been north of 250 billion high-yield issuances. 17% of the revolvers that were drawn in the leveraged space have been paid back by some of that. the banks i enlarged over the past 10 to 15 years have actually been exiting the market with respect to extending, you know, large amounts of credit. japan, that has been happening since 1997 where the institutional loan market and high-yield market have taken on more than the banks have come out of it. regulators have regular did a lot of that off their balance

sheet. today they don't hold as much risk in credit that they did 10 or 12 years ago. migration was already happening. you are seeing folks like ourselves and the private markets who have less leverage or no leverage on restructures with more, i would say, patient capital looking to make these .oans the banks by and large are looking to the syndicated market where they can distribute loans more broadly to people like ourselves. today -- with this crisis in particular, have they stepped back in a better way -- a bigger way? >> they are not as aggressive as they were prior to the crisis. if you think about what they have not started to realize yet, and i mean realize in the balance sheet, but they have made provisions for, is the impact on the consumer side. consumer credit. they have broader issues to

think about from an overall balance sheet management perspective than just corporate credit. i think when you are risk managing you have to think about that. it is going to impact their thinking with respect to how aggressive they are going to be extending that. global head ofp credit mark jenkins speaking to bloomberg's wall street correspondent. she has been looking into balance sheet management issues for banks, mentioned in that interview, firms are facing loan losses and pressure on cost, which means even the best traders are likely to be disappointed by their bonuses this year. she joins us now. what will those look like? seenmember that we have some fixed income trading desks double through all the central bank creditease -- central-bank liquidity pushed into the system. the best could see 30% raises. 15%best of the best, maybe

raises. those are the only people. largely willore 10%.ecline that surpassed it's going to be pretty bleak. >> how much tension are we getting about staff leaving because of being upset about pay? that,one hand you have because it is such a bleak year, and because we expect things to start tightening, about maybe letting go of some people at the end of this year and the end of dachshund into next year, people should be ok. but the best of the best traders, there's a lot of tension in the biggest hedge funds, go over there. they have multimillion dollar paychecks. multiyear guarantees. some of them are offering them to come over this year and play

defense when it comes to hiring at this big hedge fund. >> our bloomberg wall street correspondent with us. let us get your check of the latest headlines. uber is threatening to close its ride-hailing service in california if it loses its fight over a state law that would classify drivers as employees. contesting the legislation and will ask voters to overturn it in november. it says the law would shut down the gig by raising costs. stills say a shutdown is a matter of last resort. yft had its worst performance since going public. the company reported 20% fewer rides than previously anticipated, but it is maintaining its forecast for an adjusted profit by the end of next year. the quarterly losses extending to $280ding tax, down

million. the former wine division of -- is a challenging u.s. market affected the result. while it is looking at asset sales, it sees positive plans of recovery in china. treasury wine scrapped fiscal guidance for fiscal year 2021. interviewmiss our with the treasury wine ceo. we will ask you about increasing tensions between china and australia and the u.s.. ahead of that, one of the world's largest food suppliers reporting results before the market open in singapore. we are speaking exclusively to the ceo. coming up next, we are looking at tencent. it smashed second-quarter earnings expect tatian's playing down the impact of the ban on we

chat.

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>> you are watching." asia."hing daybreak underual meeting is discussion with white house economic aid larry kudlow saying the deal is working well so far. china has agreed purchases of u.s. goods are behind schedule and deteriorating over security. the u.k. government's warning of hard times ahead as the economy slumped into its worst recession on record. is steepest among european nations.

more than 20% in the second quarter, the most since records began. roughly doubled the fall seen in germany and the u.s.. job losses are also on the rise area -- on the rise. iran says president trump has no hope of a new nuclear deal if he is reelected. the minister dismissed his claim of a new agreement saying it would require a total reversal of u.s. policy. trump said last week he expects a breakthrough with tehran if he were to win. the minister also said the u.s. would have to compensate iran for the damage caused by sanctions. global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. posted profits beating the highest analyst estimates, boosting revenue at the fastest pace in two years. the company has to contend with

uncertainty around president trump's ban on wechat. david and glace tracks the company closely. the earnings completely overtaken by that band. but numbers were really good. >> it is a good distinction to bring up. you have two stories in the stock. one is political. the others looking at the story. we are still looking at a solid business year. it is a massive company already, the topowing by 30% on line. net income beat the highest estimate out there. that whileinder there are -- there is some exposure or there might be some exposure when it comes to the political arena, what that might mean for the business itself, you are still looking at a verily solid foundation as far as, not your one-off businesses,

giving -- gaming revenue is up, advertising revenue is doing well. the heady performances across all lines including online games, social advertising, delivering a dose of reassurance amidst this u.s. ban looming large for we chat. >> the elephant in the room, question on question on we chat. did we learn anything? >> they played it down. they played it down in the sense that they made the distinction between -- and there is a distinction. and a similarat service they use in china. what they mentioned as far as their exposure in the u.s., it is less than 2% of their global

revenues. while that is small, some analysts are saying that might translate into something else. at the moment, they are still getting more clarity on what that band might include. so far it is only on wechat. they understand it. they came out with a new number on your screen. it is 1.2 billion. back to our earlier point, it is still a growing business. 1.2 billion, you probably have a couple of million outside of china, but pretty much everyone in china uses this app. it is pretty much the population. it is a good reminder that despite what is happening outside, what is happening inside his supporting the narrative that it is a good business. analysts agree. >> what happened to the stock price after that $280 billion rally since march? >> right. that is an interesting question.

stock because of these numbers i would imagine is not so much the business, but overall market sentiment. since the numbers came out, 12 analysts have reiterated. that is clear as far as the fundamental part of the business and the stock price. the other thing i'm going to point out very quickly, valuation. makeusly, the earnings forward multiples cheaper. what is perhaps more important to note, it did not make the stock more expensive. nothing the company could figure and introduce right now, actually takes away from future revenue. that is important to note as we make our way into the open. , the stock is going to go up.

we will see what happens there. that is back to earlier point. back to you guys. ingalls -- ingles. we will be hearing from citigroup later. coming up next, cathay pacific one of the worst hit by the pandemic seeing shares jump on wednesday on hopes of a resurgence. we will have a chat with an aviation analyst for the outlook on the industry. dustry.

>> let us take a look at the day ahead when it comes to the market. we will get over to sophie in hong kong. >> a lot of focus on gold. futures reclaiming that 19 hinge level. commerzbank with a return to recent highs. gold staying the course. u.s. real rates in negative territory. after u.s.ange stocks close higher with tech among the leaders. treasury futures lower. singapore opening just higher here over 1%. the yen is trading near a low

after a four-day drop amid this dollar weakness we are seeing. jumping into the terminal, hedge shorting dollars look like a crowded trade. given the dollar slide coinciding, that looks a little tenuous going forward. >> iec interactive is betting a billion dollars on mgm resorts with an eye to the future of online gaming. the ceo of iac spoke to bloomberg earlier. >> if you think about the things we have done, there actually can in anew growth story older company. we think mgm has that. care.com was not growing when we bought it. hopefully we can get a growing

faster again. it has been around for a while. we think there are startups within companies and even within companies that have been around a while, the physical assets of mgm we think are normally customersn delivering a real exciting 360 experience. >> let me ask you a variation of a question you have been getting the past two days. why it minority stake in common equity? why not for example partner with , invest different way directly in their only business, and benefit from the upside in an environment you know a few things about, digital world, as opposed to a company that has, again, physical assets, thousands of employees, and furthermore, a business that at the moment is sort of flat on its back because of covid-19? >> first of all, i don't think that opportunity was available to us.

the thing that is interesting about mgm is we think it is a great value opportunity for the reasons you just said. just ended the quarter with revenue down. that is not a good place for any company to be. but their underlying assets in that business are, we think, just as valuable coming out of covid if not more so than going into covid. we believe the world comes back to normal at some point. we don't know when. nobody really knows when. people are once again going to congregate again. they are going to want to be entertained, to travel. mgm is well-positioned to take advantage of that whenever it happens. >> your chairman told me back in late june, not too long ago, that he believes behavior returns to normal after the pandemic, whenever that is. i cannot tell you, and i'm sure you can't either.

i just heard some of that in what you are saying. how much of this thesis is the return to normal? as you know, it is a point of huge debate. do we go back? if we don't 100%, what percentage do you think we will go back to normal? >> you are right, there are degrees of normal. change relative to what 100% back to normal is, i think there are new behaviors around people's use of technology. i think it a business of ours where small businesses are using video to communicate with customers, i think people will do something like that. communicate with their customers through video forever. are they going to still have customers? yes. are they going to still have customers in their store, whatever it may be? absolutely. people are going to congregate. things that are fulfilling with

a physical presence. a restaurant is fulfilling with a physical presence. so our casinos, so is entertainment. it's really fun to be in the room. things, it won't be a digital replacement. people want to gather. people like to be with other people. >> iac's ceo there. turning to travel, cathay pacific reported a loss of more than one billion u.s. dollars in the first half with the coronavirus pandemic hammering aviation. the shares climbed the most in hong kong may restart transfer flights to mainland china. let's discuss all of that. we have this report from the global times. we had a separate report in the south china morning post seeing some of these flights may be reviewed to cater to chinese students. how much pressure would that

?ake off cafe -- cathay >> everything counts in this environment and any good news is welcoming. it seems to me it is only going to be allowing them flights from china rather than to china. maybe students returning to university, starting university as well as people who live overseas who want to go back to their jobs and families. but that is pretty limited one-way traffic. it is not your normal two way traffic. that is not going to happen anywhere to and from china or elsewhere for some time. it will help a little bit, but i don't see this as a huge impact for the short-term. will pursue for cathay in terms of its outlook. for cathay pacific, it is

hard to look past how they get past the pre-existing factors, the political situation, the process that had already been damaging to begin with. they don't have a domestic market. how did they get through the next 6, 12, maybe 18 months? >> the outlook until the end of the pandemic is obviously very forlenging, as it is domestic market like singapore airlines. in asia, there has been no reopening. in the uae we have had a limited reopening. really hindering the recovery process for cathay pacific, singapore airlines, and to some extent, the others. cathay pacific is uniquely positioned because of the situation with political

uncertainty. that makes it even more challenging. arguably, given all the factors, they might have the most challenging outlook for all the airlines in the asia-pacific. everybody has a challenging position. the good thing about cathay pacific is that the bailout from a couple months ago by the government, they have the liquidity to survive this. to be there when the market recovers. hong kongpe that recovers as well as the other markets. there is that political uncertainty with hong kong. >> this chart on the bloomberg they have bledh in cash already given the pandemic and the bottom panel. the blue arrow showing the protests, the yellow arrow is the pandemic. they are facing so many issues on different fronts. how much will it help they are trying to overhaul their costs

as best as they can? is it being effective? early to make a full comment on the effectiveness of the restructuring and their overhauling of costs and other areas, including fleet, network, and headcount. all of this is still in the works. they are in a very difficult position, that is for sure. they are going through a lot of the same reviews cathay is going through -- and they will definitely be better positioned in a year or so then relative to now. in some of the major moves later this year in terms of the fleet, that will be reviewed when those are announced. they will be a smaller airline for several years.

relying more on smaller aircraft. more on a leisure component with less business class seats because the nature of this recovery will be more challenging for corporate and business traffic. they have to adjust. there's the prospect of new composition in hong kong with low-cost airline in the wings. a difficult environment for sure. it is early to make full comment on their position. ?> how is cargo demand looking what will geopolitical tensions due to the cargo side? >> cargo has been a strength since last quarter. rates are already weakening. closer to normal, some of that is due to the geopolitical issue, some of that is related nowapacity in the market

cargo,ative demand for not only related to u.s. and other markets. cargo is not big enough to offset what we saw last quarter. it is relatively small, but still important. there are some markets that may be weaker. cargo will continue to be a relative bright spot for cathay pacific in the next year or so. nowhere near enough to offset the overall weaknesses and the passenger position. >> buyouts of cathay by a mainland carrier has been something speculated for years. and that starting to make more sense now as things get more desperate? is that something you would consider to be a possibility?

>> not in the short-term. this is going to be talked about for a long time and has been talked about for a long time. cr china having the stake in athay would be looked at over time. the smaller shareholders remain committed. they topped up their investment to maintain their stakes. during the process a couple months ago with the government coming in. it is status quo in terms of ownership. everyone is just trying to weather the storm and position cathay better for the future. a lot of key positions are coming up to position cathay for the next several years and hopefully the market will recover faster than we hope it will. hopefully this political

uncertainty will be resolved over time. again, a lot of uncertainties there. >> what has been the oil price impact on the company? know, fuel prices, you because of the hedges, they are not benefiting as much from the lower fuel prices. cathay had more hedges a few years ago. they are not as exposed as singapore airlines has been to the latest reduction in prices and also the huge reductions of capacity. you are committed to all of these hedges and you are rarely flying. overall, the hedge is still impacting them, or their hedges are still impacting them. lower fuel prices are not having a positive impact, even for airlines that don't have hedges.

cathay is at 7% of normal levels in terms of capacity. if you do not hedge, you are --efiting from fuel prices >> always appreciate your time. we will get more outlook on aviation later. we do have some inflation numbers coming out of japan. deflating is the scenario when it comes to producer prices before july. we are seeing more than expected contraction, 0.9%. the consensus was to see a 1.1% contraction in the month of july. that is an improvement given in june we saw a fall of 1.6% in that ppi you're on your number. 0.6%.on month, a gain of better than expected, which was 0.4%. that shaped what we saw in june.

we have been expecting a little bit of that pressure being given by the pickup we have seen in commodities prices in the month. plenty more to come.

cisco slump in late trade in a sign government buyers are

spending less in the current environment. the company expect revenue to fall 10% in its fiscal first quarter which ends in october. analysts have seen a decline of about 7%. ceo chuck robbins aims to cut expenses by $1 billion. through job cuts and early retirement. posse gold miner evolution has profits a 38 jump in until june 30. sought safe haven from coronavirus disruption. sales revenue from its five minds was sort of 2 billion -- just short of 2 billion aussie dollars. evolution says its production of gold will be lower this fiscal year. australia's woodside petroleum , aorted a first-half loss for billion dollar impairment of oil and gas assets triggered by

low energy prices and the impact of the coronavirus. the company made a net loss of just over 4 million u.s. dollars in the first half compared with a profit of 420 million u.s. dollars the year before. $303lying profit came in million. we will talk to the woodside ceo tomorrow about their outlook for the sector. the next hour of "daybreak asia." we will talk all things tencent and tech related going through stellar earnings and the political risk over wechat. we will be talking to morningstar's director of asian equity research on whether we will finally see this long-awaited rotation into value. the market open in sydney, seoul, and tokyo is almost upon us. ♪

♪ shery: welcome to daybreak asia from bloomberg world headquarters in new york. shery ahn. stroud-watts.di asian markets now open for trade. china sends the u.s. a message to discuss the potential ban on tictac and we-- tiktok at wechat during trade discussions. he was criticized for its handling of the pandemic. we hear from boston fed

president eric rosengren. apple's top supplier says it is moving more production away from china and warns the days of the mainland as the world's top factory are over. korea andan, south australia coming online, let's get straight to market action with sophie kamaruddin in hong kong. i rally in asian stocks to the highest level since february. how are we setting up? sophie: positive moves so far in japan, nikkei 225 adding more than 1% this morning while the topics is looking to -- topix is looking to extend gains as well. the benchmark has been a standout amid the pickup in yields. the yen is under pressure, one note 7, set for the worst losing run in six weeks. let's check the kospi this morning, gains for the korean benchmark ahead of the korea

exchange panel discussion this afternoon on shortselling, the band is to end on september 17 on local media is reporting regulators are considering a partial extension for six months. and there is a report a high-ranking chinese diplomat will visit the city as early as next week. australian shares are opening slightly higher this morning on a heavy earnings day with names reporting across sectors from amptar to evolution mining, shares climbing 12% after trading reports. and we did see the wealth manager say it will buyback part of a stake in it asset management firm from japan's nutb. aussie holding gains, kiwi under pressure, staying under 56 after recovering from a one-month low. the kiwi dollar is the worst

performer this year. switching out the board, the dollar holding overnight losses, flat after the benchmark flirted with a fresh record amid overnight rotation out of bonds. this morning, we are seeing the u.s. 10-year yield moving slightly this morning, seeing at hold above 67 basis points after rising to july highs with focus on supply and cpi data. footing asvous investors assess if it is a tactical flip. haidi: sophie. our next guest also has the benefit of value peaks. we get to morningstar asia researchof equity lorraine tan. if it goes at these levels, the msci index would raise 2020

levels, so in a sense we are back to square one. where do we go from here? enormous amount of geopolitical risk over the next two or three months. we finally see the rotation we have been talking about for a long time and to value, or will check continue to -- will check continue to donna -- well -- and value, or will tech continue to dominate. certainly think some sectors are priced in, but low interest rates and liquidity are going to support valuations in the near term. but having said that, looking at risk-reward, a lot of geopolitical noise is going on at the moment. we prefers shares where there are adequate risk buffers.

-- aimplies a preference for value picks. in addition, we prefer quality havingby morningstart as -- morningstar as having an economic note. haidi: i want to get your views i want to throw up the chart on the terminal, looking at two key technical inext.s ahead for the ch we are looking to see if it fails to hold above that level. domestically-focused chinese technology story get that impact from the political side of the situation, or does a domestic growth narrative prevail here?

lorraine: for the china part, obviously there is a lot of reduce reliance on global sources of tech. is stillxtent, there going to be positives. there is strong growth in some china, buteas of most of the tech sector at the moment is really just finding what is good value out there. that is probably where we would throw things into. earlier,s mentioning the market seems to have parts of the pandemic for the most part, but there are laggards, some stocks bearing the brunt of pandemic risks.

those are still lagging. we have a few key sectors still trading well below where they were previously, things like financial services mainly banks, energy for obvious reasons, real estate. for me, if we were to look into some of these undervalued sectors, our preference would be to pick up some of the better bank names. notably, we think japanese banks are exceptionally cheap at the moment. shery: give us some names. lorraine: we have what i would call deep-value picks. one of the names is sumitomo --ancial group there are financial group. there are several banks we have buy ratings on, but japanese banks are cheap. it has got a fairly lackluster quarter, but the current

, if you have seen credit costs eventually , and around 5.2% down the road, they are prices that book value and that will be 6% above share price. that is an example of the sector we think is looking attractive right now. thank you,aine tan, pointing us to gems out there when it comes to equity devalues, morningstar asia director of equity research. up next, china since the u.s. a message to discuss the potential ban on wechat and tiktok when the trade-want -- when the face-one trade deal comes up for review in a few days. details ahead. plus, we break down numbers with david dai.

this is bloomberg. ♪

♪ karina: you are watching "daybreak asia." i'm karina mitchell with first word headlines. inks remain stalled washington for a coronavirus relief bill with both sides not budging. sayser nancy pelosi democrats will come down $1 trillion if the administration will raise its ceiling by the same amount. meanwhile, democratic presidential ticket joe biden and kamala harris made their debut as a team, saying the election will ship america for years to come. harris will energize the female black community. harris is african-american and asian american. their appearance was scaled down because of the coronavirus, with an audience entirely of

journalists and campaign staff. iran says president trump has no chance of a new nuclear deal if he is reelected. the prime minister dismissed his claim of a new agreement, saying it would require a total reversal of u.s. policy. trump said last week he expects a breakthrough with gerard if he were to win. the prime minister also said the u.s. would have to compensate iran by damage caused by sanctions. apple's top iphone suppliers as the days of china's is the world's top factory are over. the taipei-based company says it will split supply away from the mainland and move to other parts of southeast asia. production of the iphone outside china has risen to 30% from 25% in june. hai chair says the days of china as the world's top action line are finished. global news, 24 hours a day, on air and on bloomberg's quicktake, powered by more than 2700 journalists and analysts in

more than 120 countries. i'm karina mitchell. this is bloomberg. and chinese negotiators plan to discuss progress on their trade deal in the coming days, with beijing pushing to widen the agenda to include president trump's crackdown on wechat and tiktok. chief north asian correspondent stephen engle has the story. steve, we heard earlier the talks would happen august 15 and are now told there is no exact date. what are we expecting? so much is up in the air. this is going to be a virtual meeting. it could happen this week, could be next week, we are not sure yet. and we are not necessarily sure the exact agenda, because the chinese are said to be pushing the issues of the bands -- the bans donald trump has proposed and initiated for wechat and tiktok into the agenda. the chinese want to discuss that. we are not sure of the result

they are aiming for, but ultimately they would like a reversal of that ban. donald trump tuesday poured cold water on the perspex -- on the prospects of the implementation of the face-one trade deal because he says our view of china has changed, the coronavirus, and donald trump has labeled china the instigator of that, calling it the china virus. security been tech issues, not just with huawei, but with wechat and tiktok, there is the hong kong national security law. there is taiwan, the health and human services secretary was in taiwan this week stoking tension between china and the united states, and larry kudlow, chief economic advisor to the white house, he is downplaying concerns that the face-one trade deal is in jeopardy because he says, of all things working between the u.s. and china, it is trade. i will call him. he says, "the one area where we

are engaging his trade, it is fine right now." so it leaves a lot of uncertainty on those issues that my cloud in the mood between washington and china has these virtual talks are said to begin. let me add, the chinese foreign ministry spokesperson yesterday said the chinese position on phase one remained consistent. they also waiting on tiktok, saying tiktok has nothing to do with national security. it is an entertainment and leisure platform. discusshina wants to the ban on tencent as well,, wechat i should say, meantime, parent company tencent delivering better-than-expected results in question after question built in about wechat. what did we learn? conference call after revenue was up 29% and profit was better than all estimates on the bloomberg terminal, executives repeatedly emphasized the distinction

between wechat, which is the messaging service used outside china, and a similar app. and the trump order specifically named wechat for the band. tencent officials are trying to figure out and clarify whether and means a ban on weixin wechat, or just wecap. if it is justcheck, it is not a material impact on their bottom line. ceo john low was on the call. >> the executive order is focused on wechat in the united states, and not our other businesses in the u.s.. we are in the process of seeking further clarification from relevant parties in the u.s. stephen: but you still have to consider if wechat is blocked in the u.s., it cuts off the key communication tool for

businesses between the united states and china. chief north asian correspondent stephen engle there. , head of the talks on the face-one trade deal, talk on how the increasingly tense u.s.-china relationship is affecting investment decisions. >> i don't think it is a healthy thing for the two largest economies of the world to be in conflict. i think the face-one negotiation's are still moving forward. we are still trading with china. there is a lot of talk about the and onglobalization, shoring chinese manufacturing. not are a major producer, only of every household good you can name, but also medical

devices and generic drugs. we are continuing to import from far as i know, the phase-one trade negotiations are still moving along, but phase two is off the table. my hope is that if there is a biden victory, we are able to restore more normal relations with china, and the hostile relationship that exists now will diminish. been friendlynot to china in his rhetoric either, so the outcome of the relationship between the u.s. and china is not clear. do youn, what signal look at to advise your clients to invest or not invest in china? byron: china is going to be a

major factor, but as long as the avernment is taking as long asic stance, the government to seems -- government seems to be opposed to globalization, it is very hard to make new commitments in china. but i do think there are growth opportunities there, and i just think we need to have more harmonious relationships with china before i am comfortable making new commitments there. techron, do you think u.s. companies have fully appreciated the impact of a conflict between the united states and china? do you think investors in u.s. have appreciated the impact of u.s. tech

companies largely being shut out of china? byron: to some extent, but not the full extent. i think u.s. tech companies are still attractive. ther earnings are growing, degree of innovation that is taking place here is still very impressive. i didn't like to see intel considering transferring its manufacturing operations to taiwan. i thought they were benefiting from having manufacturing and research and development taking place below the -- taking place in the united states. think the united states should be a manufacturer as well as an innovator, and i don't want to see that sidelined. think creativity in technology in the united states is still ahead of where

it is everywhere else in the world. but china is making major advances. they are putting more money into &d and technology than we are, and are making major strides. that was the blackstone group vice-chairman of private wealth solution. up next, the gold roller coaster ride continues, prices back up above $1900 after a two-day decline. the outlook, next. this is bloomberg. ♪

♪ check let's get a quick of business flash headlines. cathay pacific sword the most in 12 years after a tweet that hong kong might restart transfer flights to the mainland. cathay pacific recorded a 1.3 billion dollars u.s. law says

the coronavirus brought travel to a standstill. passenger revenue tumbled 72% with just 500 passengers a day average in april and may. gold miner evolution reports a 38% jump in profits for the full year through june 30 at just over 300 million australian dollars as investors sought safe haven coronavirus disruptions. sales revenue from its five mines was short of 2 billion dollars australian, which matched estimates. despite rising prices, evolution says its production of gold will be lower this fiscal year. companyalian petroleum report to the big first-half nearly $4 absorbed a billion impairment of oil and gas assets triggered by low energy prices and coronavirus. woodside made a net loss of just over $4 billion u.s. in the

first half compared to a profit of $420 million a year before. underlying profit came in at three had a million dollars. ceo peteretroleum coleman and evolution chairman jakeline caal will speak with that -- chairman j klein will speak with us tomorrow. haidi: the gold roller coaster ride, rebounding back above $1900 on a wild week that saw a record high before plunging below a key level. it still remains one of the best-performing commodities of 2020. crystal, what do we see trigger these moves. crystal: it has been a wild week for gold. some of the triggers, people point rising u.s. bond yields as and dollarigger, tree reasons as well.

and is up $2000 per ounce some investors may be wondering whether now is the time to take profit off the table. and there was news about the russian covid-19 vaccine. some analysts say that could ue for investors to take profits off their positions in gold and maybe move back into equities. this could be a high-risk strategy, when you are sitting on a bunch of profits, it is a sound strategy according to some analysts. shery: what is the price outlook than for the rest of the year? ystal: [indiscernible] that has been some debate may be the worst has been seen given the gold varies so much this year.

of the reasonsny for owning gold actually haven't changed much lately. real rates are historically low. the dollar remains weak. investors are worried about rising coronavirus cases. have bullish still forecasts, some are forecasting as high as $2000 per ounce. and one thing to take note is minesinds are posting -- are posting earnings, evolution, so it will be interesting to see the impact on precious metals. shery: the latest on gold. we will have more on commodities and gold in a couple of hours. interview with boston fed president eric rosengren. on the economic

impact of the pandemic and uterus stimulus. this is bloomberg. ♪ - [announcer] imagine having fuller, thicker,

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♪ you are watching "daybreak asia." first word headlines, china says it will table president trip's band ondent trump's ban on tiktok and wechat during talks this week or next week about the face-two trade deal. declining to higher chinese

tankers to ship oil and related products. sources say chinese vessels are banned from importing crew to india or exporting down the light -- down the line products. shipping has only limited use of chinese shipping. another leading hong kong democracy activist has been released on jail and says she will be stopped speaking out. she was held alongside media under jimmy li and others hong kong's sweeping new security law. ciao says -- passport has been surrendered. hong kong won't say why she was arrested. thisshows the decline year's steepest among european nations, with brexit adding to the coronavirus followed. gdp in the u.k. plunged more than 20% in the second quarter, the most since records began in

1955 and doubled the fall seen in germany and the u.s.. staying with the virus outbreak, top fed officials are criticizing the washington response, saying failure to curb the pandemic is undermining the u.s. recovery. boston fed president eric anengren is drawing unflattering comparison to other regions and told us what policymakers are doing to tackle the issue. eric: there will be an appropriate time to have forward guidance. at this stage of the recession and the pandemic, that forward guidance probably is only mildly helpful. and the reason is that the long-term treasury rate is still quite low, interest rates are quite low, and in that environment, i think people are already assuming it is going to be quite some time before interest rates rise again. so while it might be marginally helpful, i would say our lending

facilities and some facilities being run by the new york fed are probably providing more support because they are getting at the costs of funds to individuals and businesses, that i think are more than what the outcome to the economy would be. lendingwe talk about programs, chairman powell emphasizeds the fed can lend, not spend. is that the wrong prescription for the economy right now, your lending programs haven't seen a lot of take up? eric: no, but they have been quite effective. the announcements of our willingness by securities pushed our interest rates down and as a result, we didn't need to buy much because the market reacted to our announcement. i would say credit conditions are much better than they were in march or april, because of federal reserve actions. and that has been an important stimulus to the economy. in terms of spending, that has to come from fiscal policy. so the u.s. economy also benefited from a kind of very

quick and very significant stimulus provided, by both providing that are on, broader unemployment benefits, checks to low-income individuals. all those things have been very helpful in preventing particularly low-income being able to continue to make spending decisions over the course of the spring and summer. but many of those programs ended at the end of july. the pandemic has not ended, the infection rate is still above 10% and we need fiscal policy to continue and it is critically important that congress continue to provide support. ofhad you modeled the impact the ending of the fiscal stimulus? eric: some form of additional stimulus is going to occur. it would definitely be bad news both for my forecast and for the economy if we don't do additional stimulus at this time. the mainpervised

street program, perhaps the most controversial. according to your figures, 856 million dollars in loans and the system, but it is a program that could do $600 billion in loans. does that suggest modifications are needed to the main street program? eric: we have already made quite a few modifications. we had an initial term sheet -- term sheet, came out with a revised term sheet, it was revised again to make the program broader and more accessible to a wider range of businesses. we have also opened it to the nonsex -- opened it to the nonprofit sector. banks are perfectly able to start negotiations with nonprofits. it takes a long time to negotiate a bank loan. so it doesn't surprise me that we would start gradual and that he would pick up over time. i think that is exactly what we are seeing. and the reason we are seeing a lot of lending coming primarily from community banks and midsize banks is, they are probably a little more flexible and able to

act more quickly. i would expect the larger banks over time to start using the facility more. the goal is to make sure businesses that actually need it and are creditworthy in february and that had their cash flow disrupted and are likely to be viable business is after the pandemic is over, are able to get back into cash flow financing. we are seeing a pickup in that activity as borrowers and banks get more familiar with the program. we will continue to see increases. boston fed president eric rosengren speaking to us earlier. let's check markets with sophie kamaruddin in hong kong. sophie: global stock rally building momentum in asia with msaa pack index set to raise losses for 2020 after four straight months of gains. energy and materials have been leaders in that rally since the march low. there seeing in japan

nikkei 225 adding nearly 30% this morning. samsung insole leading the kospi higher, epics trading so far to march for five. in sydney, the a6 200 resuming 200 switchingsix to gains. after postingcus its biggest first half year loss in most -- in more than a decade. the pain inis on the australian energy sector because of its performance. asl delivered week performance while also flagging payouts. revel shares have pared losses as much as 12%, the home appliance makers boosting dividends and while revenue grows -- revenue growth did increase, profit after tax took

a hit. goodman group rising on logistics demand, amp shares rising the most since 2003 as the wealth manager announced plans for a share buyback and 50% stake buyback in amp capital. treasury wine gaining ground despite off during -- despite offering soft guidance. areructuring initiatives underway at treasury wine. wine ceo tim for joins us later today for an exclusive interview. ahead of that, one of the largest food suppliers, oldham international, reporting results before the market opened in singapore. we speak exclusively with the ceo.

up next, tencent plays down the impact of a u.s. ban on we chat after better-than-expected results. 's david daiernstein gives us his take. this is bloomberg. ♪

♪ tencent's second quarter earnings beat the highest

estimate across all business lines. and sociale games, advertising, delivering some reassurance to investors as the u.s. threatens to ban wecheck. ,oining us now is david dai senior analyst at sanford c. bernstein. overshadowedcall what was happening in the ban, focusing on very strong earnings, strong performance. i will also start there, david. did you have a better picture of how tencent could be expect -- could be affected by this? : on that call, that wechat wanted someent clarification on the scale of the impact.

and they say that we chat is ng, that ishan weixi for chinese business and the executive order only applies to ,echat under u.s. jurisdiction and the exposure for tencent in the u.s. overall is less than 2% . shery: that is what they are saying, do you believe it? --c: chat and weixing are two completely different products. if they looked at the company reports and earnings, u.s. officials would know that these are different product. just like how tiktok is a different product.

it wasdo you think accurate for them to downplay the potential risks of the ban? david: that is a good question, because the risk is still there. i don't think the risk is completely gone. risk, it isk a definitely going to be contained within 1% of the total. thereer the next 45 days, is going to be more clarity for the -- more clarity from u.s. government to identify exactly what is the scale of the ban. at the moment, when we don't have any clarification from the u.s. administration, i think some clarification from the company is helpful in getting some domestic confidence

restored. haidi: do you expect this internet resurgence that has been one of the key things in the pandemic to continue? beating analyst expectations by tencent, does that mean every pullback is a reason to be adding to positions? is that a sensible move? good question. i have spoken to a lot of supply-side analysts and it is clear sentiment was very strong prior to the executive order on the wechat-- on ban. the company is very strong and set up for share buyers. after the executive order and potential wechat band, there was a lot of concern that investors might pull back on this.

but the clarification will help the share price in the near term , and again, over the next 45 days, a lot of, a lot more clarity is going to be released. would not expect a significant outperformance. but after that, once we know specifically what the scale of it ispact is going to be, going to clear the path for a better performance of the share price. shery: david, what happens after the pandemic is over? we have seen huge gains during the pandemic because of a surge of internet use and gaming, what happens afterwards? david: the pandemic has helped tencent a lot especially on gaming. games second quarter, grew 62% year on year. from growthcoming

in gaming revenue. before, the revenue was up 73%, so it is very, very strong. the pandemicime, negatively impacted some other businesses, like advertising as well as business services. so after the pandemic, i would expect business to be softer it won't be at falling off the tree picture. and further revenue is going to smooth revenue growth and that the same time, the slow down and gaming is going to be offset by the acceleration from the advertising business. so overall, i'm still white confident in the outlook, even after the pandemic is over. there ise same time,

no telling when this is going to be completely over, and it is still looking right now like a gradual recovery process. haidi: so it was really the theng route that propelled earnings, despite headlines over wechat and all that. when are you expecting in terms of being able to sustain that interest become out of the pandemic, and sustain new content, new games? eric: -- david: the second-quarter headline, you are right, the biggest beat, the biggest impact was from gaming. but that is going to lead us to which seemsipeline, to be very strong. having said that, there is a delay in one of the most important game launches this

quarter. the game was supposed to be released yesterday, but it was delayed. and there was no official announcement what the new date is. under anid that, earnings conference call, management said it expects to bring the game to market quickly, so it definitely is a short delay of they q. week store may be one or two months. it shouldn't impact the performance too much. , great havingai you with us, sanford c. bernstein senior analyst with the latest on tech. we will get more on that in the next hour with citigroup's alicia yap. lateect listing for september, a private data mining secretive.mously they are going the route of direct listings where existing shareholders can sell their shares. alantir has been in the process

of raising more than $900 million, $500 million they already secured. was founded by billionaire peter thiel into thousand three, and the private data mining company is now expected to plan a direct listing for late september instead of an ipo. could china's days as a factory to the world be over? we will tell you what the manufacturer of the apple iphone is going to do about it. this is bloomberg. ♪

♪ haidi: a quick check of business flash headlines. trade on as in late week forecast that the government and buyers are spending less and the coronavirus. the company expects revenue to fall 10% in its fiscal first quarter that ends in october. analysts expected a decline of 7%. the ceo expects to cut expenses by $1 billion through job cuts and early retirement. -- by $1 million through job cuts and early retirement. microsoft says its new smartphone is available for preorder, with a 360 degree hinge for full rotation. underl cost a fraction

$1400 and will be available to buy on september 10. shares in hong kong media tycoon jimmy li's company slumped after his arrest and subsequent release triggered an 1100 percent rise per the pro-democracy activist's new digital fell 41% after the regulator advised investors to exercise extreme caution. thees rose after opening trading week at nine cents. ♪ , a key maker of the apple iphone, says the china's days as the world's maker is over. it announced new plans for its supply chain after beating estimates for quarterly profits. joining us from hong kong is matthew counterman, bloomberg analyst. matthewew counterman --

kanterman, bloomberg analyst. matthew: the cost of manufacturing and china has steadily risen. on the flipside, you have rising tensions between the u.s. and china. manufacturers and customers like apple and other "daybreak asia," companies areech looking for alternatives. over time, we are looking at southeast asia and india the next two years taking more capacity in incremental investments shipping to those country. so over time, china will be deemphasized, but it is not a short-term fix. shery: as far as reaction to results, what stood out? aside fromxconn, commentary with shipping and supply chain, was that their margins were very, very strong. a couple of factors in play. it shows a strong demand was in

the quarter, especially for remote working and learning products for people stuck at home. they are buying home networking appointment and servers. that plate well. we also saw product next, higher-margin products as opposed to lower end smartphones, that helped. and there were some one-off factors. but overall, it sets them up for a very strong second half of the year, especially with the iphone refresh. haidi: we can't talk about hon hai without talking about apple. did we learn anything new? matthew: we didn't get too much from hon hai, but they tend to be very cagey. that we have seen comments coming out of the supply chain. it looks like hon hai is going to get a very strong share of the upcoming iphone in terms of assembly orders, roughly 80% is what is reported in chinese media, versus roughly 60% share they had in 2019 of all iphones. and if that is the case,

especially getting all orders for the high-end premium phone, that is going to be very good for hon hai in the fourth quarter and into 2020 one for their profitability and their top line. and it speaks to their position as the marquis assembler in the supply chain amid rising competition, rising particularly in china, local companies trying to step into the iphone supply a high position with expertise and molding as well as all the internal components gives it a leg up on competition. we have a long way to go to catch up. haidi: we continue to see tech dominating when it comes to top markets. you described a pretty strong outlook just now. what would be the biggest risks you see? >> the biggest risks, unfortunately or fortunately, our out of their hands. if we get a second wave of covid

in china, that is a risk for them because 70% of their manufacturing capacity is still on mainland china. and also, it would be worsening u.s.-china tensions which we are watching, but no one can accurately predict what is good to happen there, because they straddled the line between lots of western customers, manufacturing in china and being located in taiwan. they are at the forefront of the trade war. ittensions worsen and if becomes difficult to move products between china and western customers, that becomes a risk for foxconn. but it is very difficult to predict what is quick to happen then. bloomberg intelligence and equity analyst matthew kanterman. uphave big guests coming later including treasury wind

ceo kim ford to talk about earnings. that is it for "daybreak asia." our market coverage continues in shanghai just ahead on "bloomberg markets: china open." what happens when a wireless carrier

puts its customers in charge? well, the good news gets shared. and it gets rated #1 for customer satisfaction. but don't just take our word for it. take theirs. it's your wireless. your rules. only with xfinity mobile. call, click or visit a store today.

♪ is 9:00 a.m. in beijing and shanghai. david: we are counting down to the open of trade in the chinese mainland and in hong kong. our top story today, the u.s. and china prepared to review , and beijingeal expands the agenda. it wants to discuss president trump's potential ban on wechat and