haidi: a very good morning. i am haidi stroud-watts in sydney. we are counting down to asia's major market opens. shery: asia is expected to extend the global rally amid expectation of loose monetary policy and optimism about the recovery. oil markets brace for upheaval gatherscane laura strength. concessions in a bid to lower tensions with the u.s.

washington has been demanding business transparency and threatens to delist mainland companies. protests against police shootings spread to the nba. playoff games are canceled as refused toee bucks leader court. haidi: we continue to have that lackrnaut rage despite a of very meaningful headline developments on the positive side. we are getting incremental positivity when it comes to u.s.-china trade as well as daily developments on the search for a coronavirus vaccine as well. we are seeing futures flat at the moment, lower by .1% after both the s&p and the nasdaq hitting another all-time high. optimism being seen in the fourth straight day of record highs for u.s. stocks. the nikkei 225 just erasing some of the earlier moves, flat at the moment when it comes to futures trading in chicago.

we wait to hear from president abe's press conference tomorrow. the focus being on his health and the future of auburn onyx and where dollar-yen goes from here. it is holding at 105.91 at the moment. the dollar seeing broad-based weakness in the overnight session. we are continuing to watch the crude patch. for new york traded oil as hurricane laura against steam, becoming the category four hurricane, poised on the texas/louisiana border and we are looking at potential economic damage and losses and also impact on oil output. a day 3 million barrels of refining capacity has already been shut down as a result of the hurricane. tensions shery: flaring between china and the united states over the south china sea. china has conducted missile drills while the u.s. is

imposing sanctions on chinese companies with alleged ties to beijing's expansion in the region. stephen engle is taking a closer look and joins us from hong kong. what exactly is happening right now? tellen: it is tough to whether this is political theater ahead of the election or actual publication on the two sides ratcheting up the tension which has mounted from technology to hong kong to taiwan. business interest as well. we are seeing footage here. what we do know from the u.s. ballistics that the missiles were fired and they paid land in the south china sea between hainan island and other islands. the missiles were actually fired deep from within the mainland of china. including one, so-called carrier

killer, medium-range ballistic missile, so quite a provocative move here, but it's part of broader military exercises that the chinese had planned throughout the south china sea that will run through saturday. earlier yesterday, we heard vietnam had protested china and their intentions to have those drills around the islands, which of course, a number of those reefs and islands in the south china sea are claimed by multiple claimants including vietnam, the philippines, and others. separately, we are also hearing from the u.s. commerce department that they will be adding 24 companies to the so-called list as well as imposing visa restrictions on the family members of those 24 new companies that are allegedly to beijing's expansion in the south china sea. those companies include units of state owned china communications, the construction company, massive construction companies, state owned belt and

road contractor as well as the communications group. it makes gps systems as well as other digital telecommunications equipment. 24 companies added to the entity list of the commerce department. this is what wilbur ross had to say. haventernational community rebuked the communist party sovereignty claims to the south china sea and have condemned the building of artificial islands for the chinese military and it goes on to say that the entity is desert -- the entities have played a role in china's construction of the artificial islands and must be held accountable. also hearing the u.s. blasting hsbc for allegedly siding with beijing over the future of hong kong. interesting timing here because this is an issue that of thed a while ago

national security lobbying. in the initial days leading up to the imposition on june 30, july 1, that hsbc remains silent. they were put is sized by some here. then they were criticized after peter wang, the deputy chairman, signed a joint statement with standard chartered and other banks supporting the national security law. mike pompeo is coming out now, the u.s. secretary of state, basically saying, you know, hsbc is helping the crackdown of freedoms in hong kong. he cited reports that hsbc had stopped executives of jimmy lies next media from accessing their credit cards and personal bank accounts following the arrest of jay under the national security law and blasting hsbc for continuing to offer banking services to those officials in hong kong were sanctioned by the united states. accountsmaintaining for individuals who have been

sanctioned while shutting accounts for those seeking freedoms. hsbc, we contacted them. they have declined to comment. haidi: our chief north asia correspondent, stephen engle. let's get to karina mitchell for the first word headlines. in australia law will allow the government to force states and territories to cancel agreements with foreign governments in a move seen as ramping up tensions with china. the legislation will be introduced next week and will cover infrastructure, trade, tourism, and other fields. it comes after victoria agreed to join the belt and road initiative against canberra's wishes. the coronavirus pandemic has forced the world economic forum to delay its annual summit until mid-2021. we gathering is normally held each january at the ski resort. this year, it drew 3000 participants from 90 countries. next year's event, titled the

great reset, was intended to discuss how to shape the post virus economy. a storm system rated as the worst in 160 years is approaching the coast of texas and louisiana with warnings of a dangerous surge and .5 million people being told to leave the area. hurricane laura, surprised by gaining 70% in strength over 24 hours and is a category four storm. packing winds of more than 200 kilometers per hour. it is expected to hit land early thursday morning, local time. mike pence is the headliner for day three of the republican national convention. he will make the case for a second term for himself and donald trump, cap being a design for law and order and patriotism. he will address the convention mchenry. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell. this is bloomberg.

china makes concessions to let u.s. regulators audit some of its most sensitive companies. we have an exclusive interview with the vice chairman, next. right after that, we will be speaking to our vice president about her conviction trades and why she thinks investors should take a close look at china's state owned enterprises. this is bloomberg. ♪

haidi: china says it has made concessions from that u.s. regulators audit some of its most sensitive companies. the vice chairman says beijing is sincere in wanting to resolve the standoff over accounting issues. in an exclusive interview with beijing, he also underlined that

more open markets benefit the mainland and foreign investors. a opening up has always been key strategy of china's growth. true for thelso financial sector. tensions, theese opening up of the financial market has accelerated during the last year or two. since the beginning of this year , in terms of lifting the equity cap of foreign financial firms they made a china, huge stride. >> do you think that pace will accelerate? what do you think of the pace of opening those approvals? >> that is a good question. i think it will accelerate. for several reasons.

the chinese company -- the chinese economy, despite the , hasenge of covid-19 actually recovered quite nicely. over the last three weeks or so, i went to hainan, shenzhen, and guangzhou. i went to four cities in the last three weeks, and based on my own observation, the economy seems kind of quite fully recovered. all the hotels were full. incredible. the consumer power of the chinese economy is just amazing. about six months or so.

againinese economy will be the locomotive. so i think, you know, the capital markets in china will and alsoto be -- continue to expand. that provides the basis for falling participation. that's one reason. for our capital markets to really progress, to really develop into an effective capital market for high-quality economic growth, we need foreign participation in our market. we need higher quality financial services and that is something firms can provide. in terms of a stock market and the interesting thing -- china is a high economy. behind active trading

in our equity market this year. retail investors, they don't know -- they are not very good at determining the value. we need a lot more institutional investors in our markets. the foreign money is usually coming from institutional investors. we have seen that they have a much better sense of what stock is worse. it presents foreign investors in our market which have provided kind of an anchor in the valuation of the market, so they promote -- it will help we quality of the market, so welcome more participation. he demand in the supply point of view. i do expect the foreign participation in our market,

whether it is in providing service or capital, will accelerate. chairman -- speaking with john new. moreng us now for insight as the vice president of china equity sales. great to have you with us. transparency has been a big issue when it comes to chinese companies. even much more so when it comes to state owned enterprises. when you advise your clients, what role do soe's play in the portfolio? >> thank you for having me. when i am recommending soe's to my clients, a lot of investors do -- like it because soe's are they have less transparency compared to private companies and management has less incentive to grow their business. we saw soe management getting

more incentives to its employees such as stock options. also, during a pandemic, we believe that it's much easier for soe's to get big projects from the government which helps to boost their own revenue. it's easier to get funding from soe's have cash flow problems. soe's may be less risky than private companies. it rose sharply from 20 to 80. that means sometimes, soe's are enjoying stability compared to private companies. shery: let's talk a little bit about private companies. you mentioned some cash rope -- cash flow problems paid what are smaller businesses in china doing in terms of both issues

given the pandemic and how much support are they getting from the government? jenny: government is really trying to help this sme, which is true. when you look at the prospectus from the loan officer, it gives the loan to smart enterprises. not expecting them to take back the money. it will be on the fed's balance sheet. whether there is a policy, it does not mean it can be implemented in the lower level. in the banks. the kind of debate over soe's, the lack of transparency, really quite interesting and a bit perplexing because isn't it a one-way bet in the sense that they will always be too big or too important, too much of a national champion to fail? see a usually, you don't lot of soe's fail.

if you see the household appliances companies like banks, soe's are the leading companies. private companies like tech companies, alibaba, tencent. in most traditional businesses, is soe's doing better. haidi: what about the consumer sector? we see the strength of the chinese recovery really dependent on the revival of the chinese consumer and all of that will be domestically focused now, right, with travel restrictions and borders continuing to be closed? what are some of the names other than duty-free retail you expect to benefit? jenny: sure. for consumer centers, i'm looking at small household appliances and china domestic cosmetic brands. education is basically targeting students aged from 15 to 21 and we expect the population of this age group

to increase rapidly from 2020. in china, which will help to enlarge the number of prospective students. china industry operating will be to increasing demand for skilled labor and a large gap between supply and demand as skilled workers increase the salary level, attracting more people. the final reason is government policy driving the growth. the second topic i'm looking at is household appliances. small appliances are less correlated to the sector. some small appliances such as food processors, cleaners, in effect it from the pandemic. given more people are staying at home and cooking and cleaning. middle-class in

china are buying small household appliances to increase quality of life and maintain good health. the third topic will be china domestic cosmetics. the spending is about $30 to a number is less than a quarter of korea and japan. the cosmetics brand is dominated. the market is very fragmented. it's much easier for a company to grow quickly and be disruptive. we saw that made in china products were getting popular among chinese mainland consumers so we are looking for companies -- and goodrong marketing. these are the three topics i'm looking at right now. really appreciate your

time. jenny xiang joining us with some of her pix within the domestic chinese space. we did have some breaking news crossing the bloomberg. once again, for a third straight day, we are seeing new zealand's stock exchange prices and the index unavailable. if you missed what happened earlier this week, we had on wednesday and tuesday, on two consecutive days, interruptions to the website as well as stock and price trading for the new zealand's stock exchange, and on both of those days, we heard from the operator saying it was a denial of service attack that came from an offshore entity. that was the case for both yesterday and on tuesday. continuing to see if we get more from the new zealand's stock exchange as to whether this current interruption is to the same effect. coming up next, one of the strongest storms and 150 years is approaching the coast -- in

150 years is approaching the coast, hurricane laura. this is bloomberg. ♪

>> hurricane laura has grown into a powerful category four storm that is poised to be one of the strongest ever to hit the western u.s. golf. -- gulf. our energy reporter joins us now. more than 80% of oil output, nearly 3 million barrels a day refining capacity being shut down, how has this affected investor sentiment? >> thanks for having me. this is a really amazing event because you have to remember that, prior to this 1.5 weeks before the storm came, you know, oil demand has been crushed given covid-19. people were not driving, were not flying, so oil had -- oil and gasoline prices dwindled and --are trading back above

back at march levels. obviously, with supply taken off line and the refiners not producing -- gasoline and diesel, it's been bid up. people are buying as much as they can and bullish in the market. haidi: what kind of response have we seen from the energy industry themselves? catherine: you know, earlier today, the national hurricane center had said this was an on survivable storm. -- unsurvivable storm. that is not what you hear much from many agencies. we have seen, not only has the offshore producers, who were the first to respond by mandatory evacuations and shutting the production, most of the refiners are down at the skeleton crew or have evacuated. we have seen most points along

the path of the hurricane. those are being shut. there is no transportation. everyone is being asked to flee if they are able to. this is a mask sort of scale evacuation for one of the most important parts of the energy industry. haidi: our energy reporter, catherine ngai, with the latest on hurricane laura. let's get your business flash headlines this hour. air new zealand reporting a loss for financial 2020. the coronavirus continuing to hammer aviation. the shortfall is the equivalent of 57.6 million u.s. dollars, compared to a profit nearly four times that a year earlier. the losses deepened by the grounding of the fleet. it could ask another loss in the upcoming year. tesla touched a valuation of 400 billion dollars after wall street decided to be a little less skeptical. jeffrey's more than doubled its price target, saying the company will broaden its competitive edge in multiple areas including

battery capacity and industrial efficiency. plenty more to come here on "daybreak asia." this is bloomberg. ♪

haidi: this is "daybreak asia." againhina tensions rose as the pla fired missiles into the disputed south china sea, and washington acted against companies that helped beijing build outposts in the region. launcheday the pla rockets during military drills and it is not clear if american warships were in the area. 24 chinese companies are being sanctioned for building literary bases. -- bases in the south china -- building military bases in the south china sea. china says they offered concessions, proposing to let regulators audit some sensitive mainland companies. washington has threatened to

delist alibaba and other top chinese companies after initial inspections failed to yield agreement. beijing says some information will be held back for national security but expects foreign business links to survive. >> for all the u.s. investors who have invested in these chinese companies, they have made a lot more money than the average market in return. and it's good for the chinese companies as well because they have -- international capital and listing in new york also helps erase the standard of these companies as well. it is mutually beneficial. i hope there will not be a decoupling. trade chief is resigning after criticism about his attendance at a dinner in ireland. it violated coronavirus instructions. phil hogan saying his response undermines public confidence. his technician comes as the e.u. faces pressure from president

trump's america first policy. hogan had led the e.u.'s rebuttal of the u.s. policy. haidi: the bank of korea is not expected to cut its key rate again as it wraps up the meeting today. with the virus research and threatening growth, it could consider bond purchases instead. kathleen hays is here with a preview. so what can the bok do with rates already so low? the virus continued to threaten the economy. kathleen: that is what remains to be seen. 22 out of 22 economists surveyed by bloomberg said they are not going to move on the key rate. let's start there. it is the july meeting. the bank of korea kept its key rates unchanged. at that point, of course, the virus cases had researched again. -- resurged again. you can see the orange line, the key rate at 0.5%.

there is talk of the bok buying some bonds again in an ad hoc fashion. people wondering if they will because you can see the three year bond yield coming up a bit but still looking pretty well behaved one thing that is in focus is the bank of korea is going to slash its gdp forecast again. told the minister parliament last week -- excuse me, it was the bok governor himself. he told parliament he could see gdp, rather than just rising a little bit or falling 0.2% in the current forecast, it could fall more than 1%. not as big as some other countries but very bad from a korean point of view. he also said recently, as recently as july, that they could use non-rate tools if needed. that has a lot of traders talking again about bond purchases. will they go in that direction? look,erg economics says,

because it is definitely the virus, the resurgence of cases is threatening the recovery. the bank of korea is more pessimistic. so is the government now. they still have room to wait and see. how quickly do they get them back under control? bond yields have risen a bit because of the extra need for stimulus. people are expecting a lot bigger bond sale. that is a reason they expect to be ok to step in and start doing that. number economics is saying wait and see. , but someo changes important signals. shery: of course, kathleen, we are looking ahead to the kansas city feds annual symposium. jackson hole, wyoming, normally, but this year, being held online. what did they tell us to expect when you spoke to him an hour ago? kathleen: of course, we know that everyone around the world is watching this kansas city fed symposium. normally, we would be showing

you pictures. , theed chair walking along head of the kansas city fed -- that's john williams from the new york fed. many times, it's a wonderful place to be. not because of the virus. year ofll, after a looking at the policy structure of the federal reserve, the policy review -- he's going to come out and say yes, we are looking at a new system, slightly changed anyway, where we will allow inflation to go to 2% and stay there because it's been too low for too long. he indicated when bloomberg television spoke to her earlier that she, like so many on the fed, is on board with this idea. >> i never thought of 2% as a ceiling, but to really stay focused on what anchors inflation expectations in the economy -- from a communications standpoint, i think we will be

talking about the kinds of things that help us to do a better job of achieving our objectives. very interesting to contrast what esther george just said with her predecessor, tom, who told me he thinks, whether the inflation rate is above or below 2% does not matter so much. it's considering the long-term impact a very stimulative effect on the u.s. economy and how you are going to shift out of them when you need to do so. let's listen. >> are your policies going to have allocations for the effect of resources on your economy? are they going to spur inflation -- acceleration someday in the future? are you going to create further miss allocations in terms of the distributional income? those are the questions i think the central bank and policymakers have to pay attention to, whether the fed

let you down by having 1.8% inflation or 2.1% inflation. kathleen: very interesting, very important, at a time when there is so much discussion of inequality of wealth, racial wealth, inequality, more. stock prices soaring, your key groups in this society benefit a lot of lower income people. that is something you have to address. it kicks off thursday morning, wraps up friday afternoon. we will have more guests on bloomberg television to keep you on top of all of that. hays there.een stay tuned for our coverage of the virtual conference over the next two days, including jerome powell's much anticipated speech. still to come, show me soared -- xaomishao soared. this is bloomberg.

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haidi: we are just getting an update on the situation when it comes to the new zealand stock exchange. they say it is due to system connectivity issues. we are not getting much or else out of them on this issue but we know of course over the past two days we have seen two separate denial of service attacks,

cyberattacks, on the new zealand stock exchange that prevented trading, prevented pricing from being available and also shut down the website as well, so disruptions continuing when it comes to trading in new zealand. is in new zealand, but overall, we are looking at a global stock rally extending gains into asia but markets largely ignore the latest developments in the south china sea and the u.s. announcing new sanctions against 24 chinese companies paid with the offshore yuan holding below 6.19, trading at the highest since january 20, with the breach opening a path. citigroup expecting the first 4.57.at 68 in world meeting rally chinese stocks did stall with the shanghai composite flipping below its 30 day moving average. that has been a key support since june and a further decline that signals more downside for

stocks in china. concerns grow over liquidity, which has not been used by pboc funding as pressures rise on the mainland in that space. switching out the chart, we get a pulse check on china with industrial profits due. plus more to report. profit growth at china's industrial companies looking to accelerate in july, picking up to 13% year on year compared to the 11.5% that it registered in june. haidi. earningsaomi reported of better than expected cracking the chinese market and growing its share abroad. the cfo says overseas business has recovered to pre-covid-19 levels and shipments to france and spain rose almost 65%. joining us now for insight is the founder and ceo. great to have you with us. it seemed pretty positive across the board.

domestic market share growing as well as strong european numbers and i think, critically, continuing to make way when it comes to the indian market as well. >> it is very nice to be here. this result actually, i think -- if you look at the market share in the first half, the first half -- because of what china -- they gained 3% of the market share year-over-year. the second quarter, they gave back a little bit but still gained about 1.5 year-over-year, so it is a pretty solid results. the market share in china and beateas -- the profit mostly comes from investment gains. the market right now is mostly trading for the possible share from huawei. here? where to from

we continue to talk about the consumer needing to drive the global recovery, right? are there headwinds ahead when it comes to the fact that in a lot of these markets, we are not seeing the amount of discretionary spending we would like? eric: yes. i think, demand wise, it will be a huge issue, but i think what the company has expressed in the conference call is they are pretty confident on shipments. a lot of the shipments -- people gainseparing for possible from the difficulties of huawei. factoring themy to gain for percent global market share away from huawei. that's a tentative. huawei has 17% to 18% global is -- inare so that

terms of what is happening this year, the market has been pretty bad overseas. outside of china, the smartphone declined 7% in the second quarter. looks like it will be similarly bad for countries out of china. come is probably going to back to positive growth, so among this backdrop, the shipment going to the second half is taking some market share, as you mentioned, from europe, from huawei. it is going to stand out for them to gain market share and achieve some slight growth. >> but what are the long-term risks here? we continue to see the pressure from the trump administration on chinese companies doing business overseas, not to mention that india has already banned several

chinese apps. does xiaomi run the risk of facing the same space as some of those companies, as huawei is gaining market share? think at this point, i don't think xiaomi will be subject to the same sanction like huawei. huawei is a complicated issue. they have a number of intellectual property issues. competition in the semiconductor with u.s. companies. they had to rely on u.s. equipment for most of their semiconductor surprises. in xiaomi's case, they basically it did rely heavily on u.s. technology. been up atock has lot, but previously, the companies largest issue is -- they spend 85% of their hardware revenue on procuring semiconductor components for

qualcomm and other u.s. cananies so unless they lower the cost down so that they make their own chips like apple they willsamsung did, not get their valuation up. on the other side, it put it into a safe spot. i think, in the near term, we don't consider too much the same fate as huawei. haidi: where are xiaomi shares going? they mostly traded below their ipo price. i think they have recently passed that. shery: it seems we have lost

eric wen. that was the blue lotus capital advisors founder and ceo. we will have to leave it there. plenty more to come on "daybreak asia." this is bloomberg. ♪

>> the nba and major-league baseball's milwaukee brewers are boycotting games wednesday night, protesting the police shooting of a black man in kenosha, wisconsin. other baseball teams are

reportedly canceling games as well. joining us on the line is the , jasonk bureau chief kelly. you have followed the stories, both in sports and broadly in u.s. society. how significant are the latest developments? >> this feels significant have not really seen players, as it were, walk-off the job. i do think it is not surprising to see nba players, pro basketball players, specifically take this stand. it has been the most vocal lead when it comes to issues of social justice for sure. they know they have the backing of the league and they know they have the backing of their owners as well. this is the league, as you guys know, that has been playing in a bubble in orlando. they are playing on courts where black lives matter is painted onto the court. many of the players where warm

up shirts, social justice passages on their jerseys, so this is true to form and these players are really upset. to that, let's take a look at this twitter quote from lebron james's tweet, really showing how fiery he is feeling about the situation. you interviewed lebron at the height of the protests over george floyd and we talked about how that was a turning point. is this another turning point? what could potentially be his role as this goes on? >> it's interesting you ask that because lebron certainly has come to the four at this moment as someone who is arguably one of the most powerful voices in sports, but beyond sports, we know he transcends he is a sport. one of the things i would note is that this is coming, as you

guys know, at the height of a presidential campaign, and one of the ways that lebron james and a number of other players and entertainers have been especially vocal is around voting. he started a group called more than a vote shortly after the killing of george floyd. that is meant to -- state-by-state, city by city, voter suppression. they have been successful. it seems like, so far, in establishing new ways to educate voters to open up new precincts and to really raise awareness, it feels like that will only increase, and certainly, as younstrated by the tweet reference, he is not being quiet. jason, really appreciate your time. we will continue to watch this developing nba story. it seems to be getting more and more dramatic by the hour.

speaking of delays, the sports director of tokyo 2020 spoke exclusively with bloomberg about how to keep athletes motivated after the games were delayed by the pandemic. how preparation for next year's event are going. ever,s is the first time that postponement had been -- since the olympic games started. , six monthseveryone that thisso, we said olympics and paralympics will be the best ever and preparation is already done almost. the situation had been changed since covid-19. of course, people -- it's a kind of nightmare not just for us, but for everyone. it is a kind of panicked

situation, of course. now, we set the competition schedule and we are moving forward to it. for -- we are sure to make good progress in year.ing athletes >> many people have wondered if the games could realistically take place and what does this mean for the athletes who had been planning their whole life around the summer? if there is a message from you to the athletes, what would that be? >> i don't know if i understand their feelings 100%, and we really need to understand their feelings. we all have to work together with the team. sometimes, people are thinking

they have a negative thought about it. -- everyonet to say in thesee advice situations. i would like to say that the same type of people keep motivating themselves, and that is what i want to say to them. it is for us, also the same situation is unprecedented, but you know, we set the goal for next year. >> what do you think is the biggest challenge for the athletes and the sports federations around the world? >> do not quit. continue doing sports for a long time. whenever, you know, even if you do not compete in the top level. that is fine. but you always need to challenge with yourself. will easee that, you the situation now.

whether you get a gold medal or know, you have something if you do your best. that's a message i want to send to them. >> what do you think needs to be hold thecifically to game safely for everyone? committee,nizing it's very much limited for us to do alone. togetherto collaborate under the guidance of national , scientists, medical practitioners, so on. covid-19not know about 100% yet. but we know how we can protect the people.

probably, we will find the way to protect athletes or whoever wees to tokyo, but you know, are still on discussion for that for the national government. shery: the tokyo 2020 sports director speaking to bloomberg. let's get a quick check up on how markets are trading at the moment. we are seeing u.s. futures under a little bit of pressure. this after we had another record high for the s&p 500 and the nasdaq composite. you are seeing kiwi stocks but they are actually halted. the index prices are available. nzx saying markets are halted due to system connectivity issues and we had the same wording when it came to those cyberattacks earlier in the week. this as kiwi stocks are approaching a record high. kiwi futures, nikkei futures also higher as we continue to see the japanese yen gaining ground against the u.s. dollar.

coming up on the next hour of "daybreak asia," jeffrey will join us to discuss the markets. this is bloomberg. ♪

shery: welcome to daybreak asia. asia's major markets have just opened for trade. extend theset to global rally on expectation of loose monetary policy and expectations of a recovery. hurricane laura gathers strength. more headaches for the new zealand stock exchange. two days of suspected cyberattacks, follows news today

that stock prices and index are unavailable. concessions, urges whether u.s. urges transparency and threatens to delist mainland companies. let's get straight to the market action. >> we are seeing divergence at the start of cash trade. trading firmer back 1.06. let's check in on what is happening in south korea. we are still on a watch for the shortselling band decision, an announcement of which may be announced for some exclusion. the kospi gaining, but if imposed, ites are

may expand because worst case and a rios have been priced in. trading, they hold is expected along with a cut to the gdp forecast. we have had new zealand stock trading disrupted yet again in a possible repeat of a cyberattack. just opening flat this morning while the aussie dollar is building a three-day gain pointing to solid demand for an upside surprise in australian demand. the offshore yuan could make a beyond.ard 6.85 and little market reaction seen to the latest military actions in the south china sea in the u.s. sanctions of 24 chinese companies. broadly speaking, the global stock rally could be chugging

msci in asia after the world index rose to a fresh record on wednesday. haidi: yes, all right. taking a look at that chart. we get more market analysis from sean darby who joins us from hong kong. up chart that we just put showing that the stop juggernaut story is one not just of u.s. market exceptionalism, the rest of global markets have continued to show up. it really perplexes me. we have had record high after record high, the positive news flow when it comes to vaccines, when it comes to the macro picture seems so incremental, why are we seeing this? markets priced to perfection? sean: it is a really good question. i think it really does mean we are in the grip of in part -- [indiscernible] because until the long end of

the u.s. bond market starts to recognize the same thing that the equity market is discounting which is better growth, vaccines, covid pretty much being eradicated, the equity market is going to continue to be detached from fundamentals. in a sense you are going to need the 30-year and the 10 year toasury yields to rise introduce some discipline toward valuations and also in terms of putting in perspective of where we are in the cycle, which i think at the moment unfortunately the bond markets are still relatively subdued. if anything, they still feel we are going to be in a very low inflation, low rope world for some time. so, does the slump in real yields and treasuries finally force investors to look

toward em and asian debt? sean: that is probably now the most obvious place to sort of recycle profits, particularly out of the u.s. and indeed pour fresh money into asia and em. one of the interesting statistics that did not get highlighted over the last week or so was that global trade has finally picked up. and the data that comes out from the netherlands on monthly global trade was actually quite illuminating and it does recognize that the fact that when you do get a dollar depreciation, as we have had since late april, that it does mean a very big pickup. dollar is actually very well documented. for every one dollar drop in the greenback -- [indiscernible] -- an improvement in global trade by 0.75 percent.

that really plays into em and overseas markets. certainly, the valuations side of the argument is always on the em side as well. , guess in the short term markets becoming increasingly correlated to the u.s., so any pullback will mean everyone suffers the same fate. basis, on the fundamental basis, asia and em come out extremely well now. shery: to your point, the chart on the bloomberg showing how 26 emerging-market market cap have reached a record when he 1.8 trillion dollars and they have added more than $6 trillion by the market rout. two thirds of the increase has come from china, south korea, and taiwan. when it comes to the chinese stocks trading in hong kong and new york, but given the chinese tensions and how the trump administration is trying to target some of these chinese

companies, what is the long-term risk? sean: well, i think for markets overall, we are really discussing idiosyncratic risk, not necessarily macro or interest rate or foreign exchange risk, which is the normal parameters that investors work around. order, you arer coming into an election where the vix index is already quite high, which is unusual. you mentioned the tensions between the u.s. and china particularly toward certain segments of the economy. thirdly, we are still dealing with the fact that it is only likely that we will get a vaccine sometime early next year. that will really mean that the global economy has been under the grip of covid-19 for 12 months. it does sort of question how

long some of the stimulus measures from governments can continue. arell three of those nonconventional macro issues, which again means that investors are going to have to really be quite careful coming into year end because it is not clear that those issues are going to disappear very quickly. how carefulquickly, do investors have to be watching jackson hole tomorrow, fed chair powell's speech? sean: i think the average inflation targeting is pretty now well accepted by markets. i think a group of people would have liked to have seen discussions over yield curve control, but it is way too early perhaps for that. again, i think really what we essentially how forward guidance is going to work over the next few years

because that is going to be critical for the short end of the bond market, which is already signaling that rates will start to move up sometime in 2023. darby, always great having you on. let's get to karina mitchell. >> we begin with u.s.-china trade tensions rising again as the pla files missiles into the disputed south china sea and washington acts against companies that help build outposts in the region. rockets were launched. 24 companies are being sanctioned for building military bases in the south china sea. in the u.s., a storm system rated as the worst in 160 years is approaching the coast of texas and louisiana with warnings of a dangerous sea surge and 500,000 people being told to leave the area. hurricane laura surprised by gaining 70% in strength over 24

hours and is now a dangerous category 4. it is expected to hit land in the coming hours. nba teams are boycotting playoff games to protest the police shooting of a black man in wisconsin, putting the season in doubt for the second time this year. the milwaukee bucks where the first time to say they would sit out game five of their playoff series with the orlando magic. the leak confirmed that all wednesday's matchups were postponed. 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'm karina mitchell. this is bloomberg. back to you. shery: still ahead, the bank of korea is expected to keep rates -- [indiscernible] that will discuss decision. up next, china calls for talks -- calls for talks. we have an exclusive interview

with the csrc vice-chairman. this is bloomberg. ♪

shery: china's security regulator says it is making concessions to let the u.s. audit some of its companies listed in new york. in an exclusive interview with bloomberg, the vice chairman fang xinghai told us he is hopeful both sides can resolve the issues. i hope there is not going to be a decoupling. cooperationncial between the u.s. and china is good for both sides. in number of chinese companies listed in the u.s. right now, numbered about 215. the weight of total return of

these companies from the nownning of 2019 to right is 82%. s&pe at the same time, the rose by about 35%. for all the u.s. investors who have invested in these chinese companies, they have made a lot more money than the average market return. it is good for the chinese companies, as well. they have access to international capital and listing in new york also helps raise the corporate governance standards of these companies as well. >> this threat of delisting, a lot of this has to do with the dispute over how to audit chinese companies. example, been a recent a chinese company listed in the u.s. revealed that it inflated its revenue.

the u.s. would say we need to protect the investors, so we and their job is that audite companies check listed companies very carefully, but they can't do that for chinese companies at the moment because china is not giving them access to the documents they need to do the inspections they need to do. how would you describe the situation? >> that is an extreme case, luckin coffee. fraud occurs everywhere, not just with respect to chinese companies, but with companies from other countries that have similar problems. something thatis we have worked on quite a number of years. right to inspect the auditing papers, the auditing

companies that do auditing work for the chinese companies listed in the u.s. and we want to facilitate their work to make sure that they can have a satisfactory inspection of these auditing firms, as well as the auditing papers. manye other hand, because of these chinese companies listed in the u.s. have do withns that have to government and in some cases have to do with the chinese military, so we want to make sure that in their inspection of these auditing papers, we want to protect national security sensitive information contained in these auditing papers. >> in april, a proposal was made on how to facilitate that cooperation.

part of that proposal was that wascsrc said that china willing to let chinese companies directly send auditing papers to approvalafter they got from chinese regulators. obis is something that the pc rejected because it said this requirement for this preapproval by chinese regulators was an attempt to limit access. how would you describe that situation? , they rejected that out of hand. they want to make sure they can have an effective inspection, right? shippedse papers are for the exam either when they , we want to make of these national

security sensitive information have already been filtered out, right? most listed companies, they have nothing to do with national security issues. so for example, we have already examine two companies without any reaction, without ,ny filtering -- redaction without any filtering. -- generalenuine manufacturing firm. households. in that was in 2017. but there are a few companies, ,ompanies like alibaba or baidu they have a lot of contracts sensitiveovernment

agencies in china. so if these companies that we are still working with the pcob to find an effective way -- i guess the pcob's complaint is have taken out too many papers that they may confer theiro goals, but this is an issue we can work out. that was the vice chairman of the chinese securities regulatory commission speaking to our greater chinese executive editor. we continue to see these tensions rumbling in the south china sea, even as from the csrc you are hearing more of a conciliatory tone. how does this all kind of wash out in the broader relationship? particularly as we see the u.s.

continuing to sanction and restrict companies that have participated in these reclamation acts in the south china sea. >> i think the confrontation that is happening between the u.s. and china is happening on so many different front that you are getting different reactions in each different sector. when it comes to the financial sector, i think there is a sincere wish on the chinese side to get something done to avoid potentially the delisting of companies. other big chinese companies listed in the u.s. on the military side, there is less room at the moment. we saw the chinese fired four missiles in the south china sea as part of a broader military exercise happening at the moment. we have seen this continue to pressure from the u.s. try to show that the trump administration is being tough on china in all fronts. getting some positive news on the trade side,

some more soybean purchases are taking place. >> so, the first phase trade agreement has it seems to put at least a floor in of the relationship for the time being. the chinese are continuing to buy. we are expecting them to buy about 40 million tons of american soybeans this year, that would be a record. as long as that trend continues, it would seem to suggest that the trump administration and that beijing would not let things deteriorate too much. john, great having you on. ating up next, a look ahead what to expect from vice president mike pence on day three of the republican national "land ofn, themed heroes." this is bloomberg. ♪

from: we are not long away

our special coverage of day 3 of the republican national convention. on the schedule, vice president mike pence end of the theme is land of heroes. one of these speakers will be chinese dissident and civil rights activist. joining us now to discuss is our bloomberg contributor. great to have you with us. this also coming at a time where we are seeing these race issues, police brutality issues at the forefront. we have seen protests against police shootings spread to the nba. how have these issues featured at the rnc this week? >> they haven't featured prominently at all yet. although we are hearing that vice president pentz, who is giving the keynote address tonight is likely to address this issue and it makes sense because it is very much in the news. it is going to be interesting to see how he threads this needle.

the trump administration has been very hostile to the black lives matter protest. we are quite clear. i have not seen any indication from his remarks how they will address this, but we hear he will and i suspect it would be in the context of law and order, contrasting the trump administration approach to policing and support for what they call the men in blue versus what they say will the sort of dystopian universe if joe biden is elected. and we are expecting one of the high-profile speakers to be a high-profile chinese dissident. what is the angle on having him? what are we expecting to hear? jeanne: we are expecting to hear from him and i think it is going to be very much what republicans in theirwholly absent view from the democratic convention last week, which was joe biden's approach to china. they want to make the case that

donald trump has been tough on china and he will continue to be and under donald trump the united states is winning. it is all over the airwaves here today, republicans touting his record versus china and saying that in contrast if you go back to under the obama administration, that joe biden would try to bring us back there. they are going to make the case that donald trump has been tough on china and he will continue to be and that is not what we will somebody who does not exercise or act on that tough talk, joe biden. shery: we are hearing house democrats are requesting a acting -- a probe of homeland security secretary chad wolf over the hatch act. >> there is a lot of frustration among democrats last night in the way the trump administration used the power of incumbency and

blurred the legal hash -- legal and ethical lines and the most prominent of those was the head of homeland security, who many people say has taken the job illegally -- chad wolf -- and they are going to be looking into his conduct of the naturalization ceremony last night. because of course the president and vice president are not subject to the hatch act, but he is. contributorloomberg jeanne zaino going into the next rnc evening. let's get the latest check of business headlines. tensions arehina behind the decision to ipo in china and not new york. the company says geopolitical risks such as u.s. exports and sanctions are key issues. google says it has ruled out buying the u.s. operations of tiktok.

when asked whether it would require the -- acquire the video sharing app, they said they are not. microsoft and other tech firms are working on bids after president trump ordered the sale. this is bloomberg. ♪ ♪

karina: this is "daybreak asia." china says it offered concessions in the latest trade talks with the u.s. proposing to let regulators audit some sensitive mainland companies. regulators threatened to delist alibaba and other companies after initial inspections failed to yield agreements. beijing says some information would be held back for national security but expects or in business wings to survive. investors the u.s. who have invested in these chinese companies, they will make a lot more money than the average market return, and good

for chinese companies as well because they have access to and aational capital listing in new york helps raise governance standards as well, so it is mutually beneficial, so i hope they will not be decoupled. summit the annual davos has been delayed until 20 21 because of the coronavirus pandemic. next year's event was intended to discuss how to shape the post virus economy. jong-unrean leader kim has returned to the public eye, theing about the economy, coronavirus, and a looming typhoon. the reclusive can -- reclusive has suffered this month

after the typhoon wiped out farmlands -- massive swats of farmland. the new zealand stock exchange has been interrupted once again by a possible cyberattack with stock prices and indexes unavailable. the exchange first reported troubled tuesday when data went blank at about 4:00 p.m. it resumed trading wednesday before a similar attack saw it go off-line shortly before lunch. all three disruptions came from the same source offshore. i'm karina mitchell. this is bloomberg. shery: we are seeing a bit of a asia.picture across here is sophie in hong kong. sophie: the kospi and nikkei losing ground. the jackson hole symposium in -- the stock climbing

on the back of results, plus speculation that vega could be in the running to buy light and airy a deal was covered for that acquisition. we have oilon oil, trading near a five-month high as a u.s. gulf oil facilities brace for hurricane laura. new york crude trading 40 three dollars plus a barrel and coil $1916. trading about checking in on the offshore yuan six morning, trading below .19. it could surge toward 6.85. we could get a check on that with industrial profits due later this morning. the korean yuan is firmer, but some advising caution should

policymakers impose stricter social distancing measures in south korea, which could see the economy shrink to percent in a worst-case lockdown scenario. guy's, pressure is ramping up on the be ok to increase debt purchases as we see the yields have steepened in south korea. globally, coronavirus cases have passed 24 million with 822,000 deaths. presented new findings showing its vaccine is effective on all people. what do we know about the latest safety data that was presented in terms of the stimulation of antibodies in some of the older people that were surveyed? this phase one trial, modernity is saying they are conceding -- they are seen consistently high levels of neutralizing antibodies in older

adults. the antibody levels in people older than 85 were comparable to those seen in young adults. the results were sent to the u.s. centers for disease control and prevention advisory committee. this is important because older adults often do not respond as well to vaccines as younger adults. shares of the company rose, as you might expect, more than 8% in new york. we continue to learn something new about how this virus is spread. we have seen covid-19 in the bathroom of an unoccupied apartment in china. what is this telling us? study thatis is a just came out from the chinese center for disease control and prevention, just published, that indicates or suggests that the airborne pathogen may have wafted upward through drainpipes

through this apartment. this is an echo of the sars outbreak in hong kong 17 years where a private housing estate saw 329 residents catch sars in fault -- in part because of faulty sewage pipelines. this really tells us that this is another way that the virus could be spread, and this is concerning,at is sars and the coronavirus have been spread largely through .espiratory droplets something else to be thinking tout as communities try control the spread of the outbreak. as progress continues to , thede on vaccines

philippines waging a tough battle against the virus, also , butg to secure vaccines it's really on the back foot here. the worst outbreak in southeast asia, so they are trying to do whatever they can to control them, though other regional countries like indonesia have already come up with efforts. buts banking on a vaccine is having trouble being able to do that. haidi: that was senior international editor jodi schneider in hong kong. more on "daybreak asia" ahead.

this is bloomberg. ♪

breaking news out of south korea -- we are getting the bank of korea policy decision right now. they have left he interest rates ofhanged at a record low .5%. 22 economists surveyed by bloomberg forecast no change in the be ok rate, so this is just

as expected. of course, we have seen the governor in the past emphasized that if they needed to do anything, they would actually use non-rate tools if further easing as needed. we have seen the economy recover from the coronavirus pandemic, but at the same time, we have a resurgence of the virus, so this is, of course, a downside risk for the economy. we are expecting an update for the outlook, and perhaps we will expect a downgrade of their forecast. they have said they anticipated a larger decline in 2020 gdp than their previous forecast for that slowergiven recovery when it comes to consumption. let's get more on the bank of korea's policy decision with bloomberg's top rank economist for south korean rates. thank you for joining us.

bank of korea keeping rates the .ame, as expected what can we expect from the korean government in order to deal with the economic fallout from the pandemic? >> now the attention will be focused on what the revised forecast will be for 2020. if the new number is for a larger than 1% contraction, we would see appreciation in the outlook and likely see a more aggressive policy response. economiesook at other , asset purchasing programs we've seen tools that have been employed and this could be under consideration, but for now, our toectation is for the be ok

ease rates to stop market volatility but to stop short of a more aggressive stance for now. haidi: tell us more about the korean economy. i mentioned the coronavirus pandemic and the resurgence of the violence, but we -- the resurgence of the virus, but we have also had massive floods, haven't we? >> yes. the korean economy had been showing pretty encouraging signs of recovery. if we look at surveys that were conducted earlier before social distancing restrictions were tightened, they show further improvement in both consumer and

business sentiment, but now that spike in virus threat to thea economic recovery, this escalation is also concentrated in seal and surrounding provinces, which are .conomically important of theent and duration social distancing regulations and plummeted are a key factor. apparently social distancing guidelines have been greatest nationwide. authorities are actually considering if restrictions need to be tightened even further.

even at the height of south korea's initial outbreak in march, the restrictions imposed than were not quite as stringent as level three measures. the guidance from authorities is they will watch virus cases before deciding if they will go ahead with tightening, and if , we expect more policy support to arise. this chartave showing what economists see as the contractionary feature and we see the real data deadly underperform even some of these fairly bearish assumptions from economists as well. what about the external demand side of the story? obviously, south korea is an export or bellwether. >> overall korean experts have at least been showing signs of

recovery. didntioned earlier exports show some signs of improvement. there aretioned, signs of recovery in the chinese economy. korean experts in china are pretty much at pre-pandemic levels. we have tor hand, consider the existing downside risk, the risk of new waves globally, escalating u.s.-china tensions, so it is hard to be overly optimistic about the outlook so far. still ofhe picture is a gradual recovery. ok is it is clear the be not overly optimistic, either. we are seeing projections of a

contraction of .3% versus a contraction of two point 1% they had back in may. really, it is that gdp growth forecast that is being cut -- projections of a contraction of 2.3% versus a contraction of 2.1% they had back in may. >> it signals that the outlook is pretty weak, so i think that would increase the odds of more stimulus coming online, in which case the be ok would probably have to play a complement to -- complementary role. time asppreciate your always. that bank of korea was just crossing the bloomberg. investors looking at cues from the fed's jay powell and other central bankers at the jackson hole symposium, which is taking place virtually this year. we spoke to esther george about why she said it is premature to

judge if the economy needs or support from the central bank. also getting her thoughts about event.tual nature of the >> i will just offer you from my perspective that this has been, i think, a useful process. been a process to ask of ourselves what we have learned the past decades, to try to think about how the economy may have changed and more importantly, to think about how we communicate to the public. the process and in of itself i think has been a useful one and i will lead to the chairman to talk about what we have learned from that. anyou have been considered inflation hawk. where are you on this idea of average inflation targets? be true to as to price stability mandate, that our 2% target really has to represent what is happening in

the real economy, so as we think about ways to better communicate to the public, i've never thought of 2% as a ceiling, we should really stay focused on what anchors inflation expectations in the economy. from a communication standpoint, i think we will be talking about the kinds of things that help us to do a better job of achieving our objectives. >> many people on wall street are betting the fed will change its forward guidance in september. some of your colleagues say there's no need to do that yet. where are you? >> i would agree. when i look at what the federal reserve has done since march in terms of interest rate policy, in terms of asset purchases and the credit facilities we have, i think trying to gauge what else the economy needs is probably premature. i think we are beginning to see signs of a recovery. we are beginning to see where the economy may have shortfalls, where it may be doing ok, but

that's going to take some time, thinking about what those other things are i think has been a useful discussion. if it's time to activate those things is something we will be debating. in the run-up to your conference and chairman powell's speech, there's a lot of conversation about inflation going on on wall street. do you think that all the stimulus has been pumped into the stimulus- all that has been pumped into the economy is perhaps a danger down the road? >> i think we always keep our eyes on inflation and what impetus they come to that. i think importantly, what we see today are really generally deflationary types of sources. until demand comes back, until we see the economy regain its footing, it's hard to see in the near term, but as you point out, there's a lot of stimulus that

may be out there at the point that the economy regains its footing, and we will have to look and see what impact we see through prices at that point, but today is probably not that day. on your district, the 10th district. how would you describe the economy there right now? >> i think we see some encouraging signs. this region, of course, has experienced the virus in different time frames and different levels of spread over the last five months. what we see overall is there has been some improvement in the job market. we have seen some businesses that are beginning to come back, but of course, that is coming level.om a very low particular to this region, of course. things like agriculture and energy are very prominent. has beenhe farm sector under some stress for some time

with low farm income, and this episode puts further stress on that, causing the farm sector to have to rely more heavily, for example, on giving them support. energy, too, with the rapid decline in energy prices. productivity. producers had to lay down their rigs. those two sectors in particular in our region already under some stress. some time for them, to come back. what are employers telling you right now? do they need more people? can they find more people? are they sitting back at this point and saying we have to wait and see where the economy goes? >> we hear a variety of things that will not surprise you, but very important -- as we talk to our contact in the region, again, it is often a function of the sectors that are in. they are in a part of the economy where they are dependent

dining.tainment or they are struggling and having a hard time, and bringing people looks tohose sectors be sometime away. we also hear that some are having a hard time bringing people back because they felt like they were competing with jobless benefits. if that's true today is less clear. there are a number of dynamics affecting the labor market, and that, of course, is why it will take us some time. where does all this shake out in terms of how that labor market feels? shery: stay tuned for our two days,ver the next including fed chairman jay powell's much anticipated

speech. next, trading in new zealand upset for a third straight day. we take a closer look ahead. bloomberg. ♪

haidi: trading on the new zealand stock exchange has been disrupted for a third straight day. investigatingre what they suspect is an offshore cyberattack. three days in a row -- what do we know so far about these

attacks? that it is a so-called distributed denial of service account where somebody uses a bank of computers to saturate a system. the operator's response is because it's website and platform do not work, news that is relevant to stock trading prices is not available, so there's no option but to stop trading. theyems the system is ok, just cannot stop the incoming of information. it comes as the stock indexes near record highs and we have companies reporting. it is certainly not a good look for the index, three days in a an hour orges of similar at a time. doing aboutare they

saying?hat are traders >> they are looking at it from a number of aspects. they are contacting market regulators, but beyond that, they are not answering questions regarding its knowledge about the source or motivation for the attacks, and it leads to [indiscernible] the latest on the disruptions on the nzx. coming up, an exclusive interview with leading chinese s ofy services provider holding.- sf stand by for "bloomberg markets: china open." this is bloomberg. ♪