haidi: a very good morning. welcome to "daybreak asia." sophie: we are counting down to asia's major market opens. shery: good evening. i'm shery ahn. our top stories this hour. engine stocks look set to follow the u.s. higher after the s&p 500 eked out again. fears remained that the delta variant could cause weakness for

global markets. the fomc's u.s. voting members say a tapering and lift off could come earlier than expected with the u.s. economy beating forecasts. hear what chris wallace has to say in our exclusive interview. china inc. is in the spotlight ahead of the commonest parties 100th anniversary. we will get you the latest on the financial troubles. breaking news out of south korea. we are getting the may industrial production numbers. output falling .7% month on month. the estimate was for a gain of as much as this will be also the third consecutive month of declines when it comes to factory output. when it comes to the year on year numbers, also missing expectations, a rise of them .6%. the estimate was for a gain of more than 18%. it is still a bigger gain than the previous month less than expected. perhaps not surprising given that the higher yield will start

to crumbs the pace of increase. strong numbers coming at a time when we have seen the korean gdp numbers being upgraded by the finance ministry just this week to 4.2% this year. let's turn to sophie for what to watch in the markets. sophie: we are waiting on the bok's first quarter intervention data for the currency market and we have seen the korean won falter going into june. the kospi has climbed steadily to test fresh records. taking note of foreign buyers selling korean stock holdings with the outlook for memory chips looking reasonably well priced. pulling up the board to see how we are faring with futures so far, usc minis are pointing -- u.s. e-minis are pointing higher. nikkei futures, little changed

as we wrap up a three-month stretch that may halt a fourth quarter gain for the nikkei benchmark and this is the countdown to the olympics which has been fraught indeed with the japanese government planning to extend virus quarantines for two weeks to four weeks. waiting on pmi readings for june. we are likely to see a cooling recovery for the month when it comes to the headline readings. key metrics will have input costs as well as new export orders. we have seen moderation which could signal -- haidi. haidi: let's get to one of our top stories. it's auditors need more time to complete its financial report for 2020. the manager saying that there is no event of the terms and conditions of its securities. let's get the details from tom mackenzie. this is not helpful for investors looking for anymore certainty because we knew they were not able to give an estimated completion date.

daniel: -- tom: certainty is the point. investors have been looking for clarity and they have yet to get it, as you rightly went out. there was reporting around the likelihood that huarong would come out with its results by august and then there was reporting suggesting they may be able to do that beforehand. now, as you say, we have these lines dropping, saying from huarong, and this is to the hong kong authorities, by the way, that auditors will need more information. and time to complete the necessary audit procedures of those financial reports, which we have been waiting for since march of this year. and the question of course is what is going on within huarong, which is the country's biggest bad debt manager? the largest shareholder is a finance ministry. they have yet to come out with any clarity on what is going on. we do know that huarong is going

through its books with the help of the likes of citigroup more recently according to reporting and we know that they are trying to unwind some of that assets to raise liquidity. they have assets they could unwind between now and 2022 that could cover them up until 2022, $7 billion of assets that bloomberg intelligence thinks they could dispose of to help with those liquidity problems but it is that clarity that is missing here and something investors will be watching very clearly. they want to see these results. >> in the meantime, we could be seeing a bailout for a retail empire. tom: yes and this is just a reminder that in terms of the indebtedness of these conglomerates and the challenge it is posing to policymakers, this game of whack-a-mole, it is significant indeed. it's not just huarong or china evergrande. it is also the company you were talking about. this is a retailer of electronic

goods and appliances and we are hearing now -- it's a bloomberg scoop that they will be partnering with alibaba to lead a consortium to invest in it. alibaba has a 20% stake and we may get the details and confirmation of the deal this week. it is still being discussed so it could fall apart and it is worth pointing that out as well. a major conglomerate pushed into areas like real estate, finance, and sports. the founder is likely to lose control as a result of this deal as it goes through. shery: tom mackenzie in beijing. let's turn to vonnie quinn with the first word headlines. vonnie: foreign ministers called for multilateral solutions to global crises such as the pandemic and climate change. this after -- one-day gathering in italy. most nations sent their top diplomats for in-person meetings about foreign ministers from china, brazil, and australia

joined by video. germany taking issue with china and russia's so-called vaccine diplomacy. the ecb says china's progress in developing a digital you want is a key -- yuan is a key risk. the minister is urging policymakers in europe to act quickly on their own digital efforts or risk an erosion of monetary sovereignty. he has highlighted the declining use of cash and the rise of crypto assets as another risk to the ecb's control of payments. taiwan and the united states are set to control trade talks wednesday. they say the meeting will play a key foundation for collaboration. discussions are likely to include supply chains, investment, financial services, and intellectual property. the last trading meeting was in october of 2015. >> our support for taiwan is

rocksolid. we are committed to the importance of the trade and investment relationship and we will continue to strengthen our trade relationship with taiwan, which is why we are looking forward to the upcoming council meeting, which was recently announced. vonnie: 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 vonnie quinn. this is bloomberg. haidi. haidi: still ahead, we will hear from the top-ranked commodities forecaster. they will be telling us of the rally has legs going into the new quarter. coming up next, we will discuss market strategy with our guests. they will have increasing differentiation. this is bloomberg. ♪

>> shares of moderna climbed to a record high after they said it produces antibodies against the delta variant. let's get more from our health care reporter, michelle cortez. we know that this in delta variant is bad and that is why there's been a lockdown really affecting half of the population of australia now, right? what do we know about it? michelle: the delta variant can spread -- it is even more transmissible than the variant we fly out of the united kingdom. now that delta is there. -- there, you are seeing a huge outbreak in the u.k. when you look at places like australia and other countries across asia, they are completely vulnerable because they have not had a lot of coronavirus so once that delta variant gets in, we are seeing exponential increases in cases and then the virus is spreading even easier, even

faster than what we saw originally so if those countries do not take immediate action to lock things down, they can be truly looking at a crisis and that is why we are seeing these kinds of reactions. shery: we still continue to see the global vaccination rollout chugging along, right? how big is the divide between poor countries and rich countries? michelle: shocking how much we are seeing the divide between the poor and the rich countries. not only that, we are seeing significant divides within countries themselves. certainly in the u.s., we are seeing very few vaccinations happening, especially across the south, but when we are looking in other places, in poorer countries, some parts of africa, there have not been any vaccines at all. the world health organization's program designed to get vaccinations out to low income countries has basically been shut out of a lot of vaccines because they were going to be making them in india, which is grappling with its own outbreak,

so we are seeing some countries like the u.s., many places in europe, that have so many vaccines that some of them are having to be thrown away now where other places, in africa, latin america, india, asia, where we have people who are lining up, trying to get access, especially to these more potent mrna vaccines from pfizer and moderna. shery: michelle cortez. we are approaching another trading quarter. our next guest says she is rotating back into tech names and still thinks that risk assets can perform. we are joined by the multi-asset ravages and portfolio manager at pimco. this gtv chart on the bloomberg showing how we have seen mega caps reacting to those rates. the 10 year yield being a directional driver for those faang stocks. what is your case for rotating back into growth? >> prior to six weeks ago, we had seen tech really

underperform and it really made sense. you saw yields rising but that was largely on the back of higher inflation expectations, and that really favored a rotation into the value sector. as we started to see yields level off and yields actually fall a little bit, we started to see the u.s. reach peak inflation. we have now started to see the growth sectors of the economy like tech and biotech start to be well again and as we look forward into the second half of the year, given how oversold the tech sector ones and given how on a valuation basis relative to value sector, it has really underperform. we think back is right to buy. shery: we are still seeing inflationary risks, whether it is transitory or more permanent. are there any real assets that you like? erin: we think inflation is speaking but is going to remain

high through year-end and certainly, where we are going to end the year in terms of inflation, it is certainly higher than where we were back in 2021 -- 2020, rather, or even 2019. you want to have inflation protection in your portfolio. that environment tends to be very favorable for commodities sectors. we like the hard commodities like the material and mining sector. given the underperformance that we saw in the sector last year, on the back of the pandemic, we think people are going to start rotating back into real estate. in the residential housing market, we have seen it. through year-end, you will see it in more of the commercials base as well. that is an asset we like owning. haidi: you say there is

undervaluation and emerging-market currencies. how does the delta variant and potential new flareups play into that? erin: i would not put all of your eggs in the emerging-market yet. we have to get past this peak to start to really materially rotate into emerging markets. right now, we like buying emerging markets where we think they will have to tighten rate. three last week alone hiked rates and we think there's more of that to come. that does favor emerging-market currency. we like eastern europe which has better vaccine availability. we think we will start to see emerging markets more broadly outperform as we move into the back half of the year. shery: what do you like and the government bond space, particularly your views when it comes to the duration play? erin: right now, we think that

duration is likely going to be range bound. particularly if you look at u.s. duration, somewhere in the range of 1.5 to 2% so given where we are today in terms of 10 year yields, we prefer being a little bit underweight duration and we will look to buy duration as we get closer to 2%. we think em duration does offer some value and you really have to be selective in terms of where you pick your spots. so when looking across the entire category of asset allocation, duration is one of the places we are slightly underweight. shery: great to have you with us, erin browne, portfolio manager at pimco. all right, one of the questions we continue to ask is this meme stock roller coaster. there is concerns that the fed may start to taper as the easy

money start pullback but in that wash up, you are going to see some of these popular game stocks and amc type names and the investors that have pegged their success on them start to suffer as well. shery: speculative investments, those speculative names. you can take a look at these stocks right now because they are now -- there is a new crop of the meme stocks as well. online advertising -- they are trying to collectively again pushback against potential short squeeze but of course, not really trading on fundamentals. let's hear from the ceo of investing's website, who spoke to bloomberg about these meme stocks. she said she is opposed to trading on fads. >> there is a structural shift in terms of retail traders. we are focused on retail traders that are very anxious to learn, to be informed. we have a lot of educational content around that. our interest in terms of growing

ambitious retail traders around the world is very much in line with trade. as we look at the growth in terms of the structural growth, we see that we have been able to handle -- interest in our business. the content we provided through ig academy has been consistent with that. we have not had problems. it takes on appropriate clients around the world. >> in 2021, it is impossible to talk about retail equity traders without talking about meme stocks. how much of a systemic risk to you think that this phenomenon of unprofitable companies getting soaring prices just because they become a meme stock, or just become there are hedge fund shorts out there? do you think it is a sad? -- fad

? do you think it is here to stay? june: hard to tell whether this will be a structural change. we see that in general, there is a huge interest in equities in terms of learning more about these types of shares. what we are doing is trying to ensure that people get an education in order to trade responsibly. meme stocks will come and go because it is a social media trend. we are looking at making sure people get the right information. as opposed to just trading on afds. haidi: that was june felix speaking with mark cudmore. coming up next, one small nation continues be a model for cyber security a string of high-profile attacks. our conversation with the president is just ahead. this is bloomberg. ♪

shery: high-profile cyber attacks have targeted critical sectors of the global economy in recent months but one country that has become a model for cybersecurity experts is a small baltic nation of estonia. strong digital connections are key to a democratic future. >> i think they are now recognizing that the ones who command connections -- is the one who commands the agenda of the 21st century so if we want that democratic world as the winner, we really need to make sure that our connections are safe, trusted, transparent, and smart. for example, in estonia, we developed a smart --

they all try to build infrastructure in the technology which is used which cannot be used against us to harm our country. we are building back a better world. they are called slightly different but the objective is the same. we want to make sure that technology supports democracies. >> is china trying to dominate key technologies in a way that threatens democracies? kersti: it is possible. we don't know because it is not so trans parent. we need to set standards for technology to explain itself to us so that we could really trust. we should not judge by the country origin because many of the technologies from china are made by germany and other countries and indeed, it's much better to set a standard than stigmatize particular places. it is true that right now,

distrust is with countries who are gaining in economic might and have not made it very clear how they intend to use this economic power globally. >> the g20 is next week. what sort of message do you want to see from world leaders when it comes to something that they need to tell these nations that provide safe harbors for hackers? kersti: definitely, that has to be well developed in an international legal space. it's not on g20. united nations clearly has rules. estonia has managed to discuss -- cyberattack. just today in the security council, a meeting on cybersecurity. it's not only technology. security is also the legal space and we have managed to convey this message to the security

council in these two years. we should exactly do the same with cyber conflicts. this is an important development. >> russia holds a veto vote in the sukhumi cancel and e.u. members -- in the council. what is the best way that the west can actually deal with mr. putin? kersti: percent, it is not a good idea because they give the image that things have returned to business as usual, which we don't want to do. ukraine is partially occupied. nothing has changed. lateral meetings between the leaders where we all convey messages according to the principles in which we have agreed, if necessary because it has to become indication. indeed, it would give a different perspective and this therefore indeed, estonia would not support. shery: -- belarus having

meaningful effect when it comes to engaging with belarus? kersti: there is misunderstanding that the full sanctions which goes against him in companies which provide the regime with money will have an effect. she was here about a month ago and i asked specifically, do you think economic sanctions will hurt people in belarus? do you think this is the tool? she was adamant that sanctions to help because lukashenko simply will not have money. >> the president of estonia speaking with shery. for mark's elusive interviews ahead, we hear from a chinese bubble tea chain as the company makes it debut in hong kong. the cofounder of a chinese company -- leveraging agro tech. -- agritech.

his use on tapering. this is bloomberg. ♪

shery: we are counting down to the start of trade in tokyo and seoul. i'm stories we are watching today. in japan, the government is planning to extend virus curbs for tokyo and other areas by two weeks to four weeks to coincide with the early days of the olympics. that is according to the newspaper. on the corporate front, toyota and nissan now saw global sales soaring on u.s. demand although output fell from pre-pandemic levels. we will beginning may industrial output numbers soon and we will break those as they come.

in south korea, we will be watching for reaction after those weaker than expected may industrial production numbers and the bank of korea will be releasing its first quarter fx intervention data and watch for any liens from the finance minister when it comes to its weekly meeting to review housing markets. it signaled that the bok's hawkish this will slow liquidity into the markets and we are watching south korean bonds because they have been consolidating after the government and the ruling party agreed to that 29 billion dollar extra budget but let's talk about the bond markets and bring sophie and because japan also, we are watching the jgb's after the boj updated their issuance guidance. sophie: with the boj shifting to a quarterly plan from monthly, trimming bond buying, and likely to see that weigh on jgb's in the superlong segment with 25 year maturities. any pickup in yield will likely be met with demand and that

should reign in any sharp yield curve steepening later this session. when it comes to stocks, nikkei futures in singapore pointing higher. the yen little changed. the icn crossed around the 83 handle. at his -- mizuho, they do see upside. they could see a move higher in copper prices and the yield differential between australia and the u.s. that may narrow. we could see upside for the aussie versus the yen. haidi: the federal reserve governor sends a better than expected performance warrants the scaling back of asset purchases sooner than expected. i spoke exclusively with our global economics and policy editor, kathleen hays. >> i tend to have a very optimistic outlook for the economy so things have been proceeding pretty much according to the way i thought that they would so i did not feel any need

to move my docs forward. but other committee members have clearly taken note of the improvement in the u.s. economy and felt like we are making much better progress towards our dual mandate goals. i will not tell you what i have. i have a very optimistic outlook. kathleen: ok, we are showing our dot chart now. what would you have to see to move it up? still, a bigger group. that first rate hikes could come next year. chris: i think we would have to see very good improvement in the labor market. gdp growth is back to trend, which is what we wanted. inflation is above our target, which we wanted for a while. inflation expectations seem to be anchored around our inflation target so really, the only remaining thing is the labor

market has not quite come back so unemployment is still much higher. even though it is in good shape at 5.8%, relative to other sessions, you know, we are at 3.5% unemployment in february of 2020. we are still a long way off of that. we still have a lot of people who are in the labor force. those will come back. those have to come back very quick. the unemployment rate would have to drop early substantially or inflation would have to really continue at a very high rate before we would take seriously a rate hike in 2022. we are not ruling it out. kathleen: not rolling it out. you said inflation expectations were well anchored around -- about the target but if you look at consumer-based measures seven nation expectations, they are way over, averaging about 2%. what kind of numbers on

inflation expectations would you have to see? maybe i am going to look for the rate next year. chris: i have long been a fan of market-based expectations because in those cases, when you are looking at tips, you are putting your money on the table in terms of what you think inflation is going to do. when you look at the michigan survey of consumers, it's very highly correlated with the actual inflation rate. if inflation is high today, move up expectations for inflation five years out. there is too much noise in the michigan survey for me personally. they do provide a signal that you have to pay attention to. at the end of the day, i much prefer to look at the market-based measures for inflation expectations. kathleen: this is also the talk about tapering meeting. is it time to start drawing up a plan for that? do you see a situation where the taper could start this year? chris: we said we wanted to see

substantial progress and this year has been a surprise. none of us back in december would have thought the economy would be where it is right now and so it has moved faster than expected and we may better progress than we anticipated. as chair powell said, we are starting to talk about this. there's a lot of things that have to be decided in the process of making a tapering decision. when is the appropriate time to taper? one is -- what is the pace of tapering? is there a sequence we want to pursue? there seems to be a wide range of opinions on how to do that so these are the sorts of we all have to your out. given the way the economy has progressed, i think everybody anticipates that tapering could move up earlier than when they originally thought he had whether that is this year, we will see, but they certainly could. kathleen: what is driving the

tapering decision right now or pushing you to this point? is it that the economy is growing so fast? let's take some of those bond purchases out. we don't have to buy mortgage-backed securities in such a hot housing market? chris: i would say the general view -- i should not speak for the committee but the economy has done much better than we thought. the vaccines have been extremely successful in helping us ring what i think the pandemic is over, the crisis is over and now, we are dealing with the aftermath of the pandemic so we are now in a different phase of economic policy so it is appropriate to start thinking about pulling back on some of the stimulus. i am much more sympathetic to tapering mbs first before treasuries. shery: chris waller speaking

with kathleen hays. not miss another exclusive interview ahead with gold capital partners. the firm invests heavily in the u.s. and the u.k. in addition to hong kong. let's get to vonnie quinn with the first word headlines. vonnie: maduro nash shares rose to an all-time high in new york after its vaccine produced protective antibodies against g. the land-based daddy shows its shots should protect against newly detected covariants. india -- covid variants. the world health organization urged fully vaccinated people to keep wearing masks and taking other precautions to guard against the delta variant. it spread to at least 85 countries since it was first identified in india and it is responsible one in every five cases across the united states. the british government says senior executives who traveled to the u.k. can temporarily leave quarantine if their work

is likely to bring major benefits to the economy. the exemption applies to multinational executives. looking to make an investment or set up a new company. critics questioned why the rule was not also extended to smaller firms. israel's new foreign minister is in the uae for the highest level -- establishing relations nine months ago. he met his counterpart in abu dhabi and inaugurated israel's first embassy in the gulf. the historic trip comes weeks after the war in the gaza strip and amid nuclear talks in iran. they travel to do i on wednesday. -- dubai on wednesday. 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. this is bloomberg. shery: goldman sachs planning a new campus in dallas, texas bloomberg learned that executives are in advanced

talks. this coming at j.p. morgan chase cuts the ribbon on its european trading hub in paris. su keenan joins me now. what is behind all of these big moves? su: let's start with goldman. lower taxes and lower costs in a time when goldman has recently been in the spotlight, welcoming all of its workers back to its lower manhattan headquarters. a gorgeous two on hudson river. what is going on here? the fact that sources say goldman sachs executives are in advanced talks for a new office campus in texas and this is a state that has been luring companies of all kinds to their state do lower taxes. it underscores how the ceo, david solomon, is seeking to reshape the company geographically terrain and expenses for one thing. thousands of jobs will be placed in cheaper locales and while the bank has been adding offices and workers for years in a number of strategic locations including in

texas, a goldman spokesperson continued -- they will continue to grow their presence in dallas but did not want to comment on the specific expansion plan. we know that goldman is also in line with other hedge funds and financial firms, looking at florida, also known for no income taxes and no corporate taxes to relocate workers as well as. >> we are taking a look at j.p. morgan pushing into paris. brexit has given the banking industry some pause when it comes to london. kathleen: london, which was the focus for all of europe -- su: london, which was the focus for all of europe, is no longer so. it has changed things and london again in the spotlight as they see their office workers return to the financial district. the big story in the paris thinking world is that jamie

dimon, the ceo of j.p. morgan chase, inaugurated the new banking headquarters there. which makes this the trading hub for the european union. it will have six trading floors, up to $400 billion in trading volume each day according to jamie dimon. stocks, bonds, and derivatives will take place there. jamie dimon says they are hoping to have 800 staff members by the end of 2022. j.p. morgan chase was initially reluctant to put a trading hub in paris because of the french labor laws. it made a big difference. in the ceremony in tuesday in paris, macron said to jamie dimon, i love the idea that you the fact that your putting money and people your, "this is the best evidence of love." there is the quote for you. you hub in europe for j.p.

morgan chase. [laughter] >> su keenan in new york. we have breaking news when it comes to -- they are pricing their hong kong listing at 155 hong kong dollars a share area new york traders election filemaker exxon looking to raise as much as $1.97 billion, the estimate we had earlier for that hong kong listing. it is on track to be the first producer to complete a homecoming share sale which has gained popularity in recent years and that 106 five hong kong dollars share is a little bit less than the maximum price that we had heard that was $180 a share and that was reserved for hong kong investors according to the filing with the fcc and that would have been a premium of 11% to wednesday's closing price. this puts us further ahead in terms of the chinese easy makers, aiming for a dual

listing. we will continue to update you on those listing plans. 165 hong kong dollars a share -- we will talk commodities, oil, and currencies with bloomberg's top-ranked forecaster, jason, who joins us with a look at what lies ahead for commodities and the new quarter. this is bloomberg. ♪

shery: we continue to see wti extending gains from the new york session and we have a little bit of pressure given we had a stronger u.s. dollar but bill, a little bit of caution given we are headed towards that opec-plus meeting but we have to put into context of that we are talking about a 50% climb for oil prices this year alone. gold futures falling to the lowest level since mid april. we continue to see a little bit of pressure. not surprising given that we did have the strength in the u.s. dollar, as i mentioned. iron ore right now in the singapore session looking up point 2% after we had some pressure given that china's curving back on iron ore and steel production given that we are headed towards that communist party 100 year centennial anniversary. corn prices rallied in the new york session and we had soybeans

rallying, not surprising given the heatwave we are seeing, concerns about how that will affect crop output. haidi: lots of those concerns as we ramp up what has been a torrid quarter. let's get more insight on commodities. let's bring in the top-ranked forecaster, jason, who joins us from austin. let's start off with this kind of big picture across asset views. commodities are on track for the worst months that we have had since march last year but still on track for a fifth straight quarterly game. what lies ahead in the quarter ahead? do we continue to talk about this and who are the losers going forward? jason: this is a really great question and not just one thing the commodities are. we have seen precious metals, under pressure, especially in the past month.

if we look at oil and natural gas, it has moved up a lot. a lot to do with returns of fundamental demand and industrial metals, it has been a mixed bag. copper prices coming under pressure on chinese regulations designed to take a little bit of the speculative -- metals markets but then you look at aluminum and it's up a lot and of course, if you look at steel or other prices, those are up quite a bit as well. we have seen some movement recently. those are down quite a bit from the beginning of the year. it's not just one thing in the commodities world that's driving it. it is weighing on the precious side and the fundamental oil demand, that's really boosting and industrial metals, some of them were up this past month. looking forward, continued any

capturing strength, and a further upside for oil demand. very fundamental, and as for the dollar, we might need that weaken later in the year, which might give a boost as well. haidi: jason, i want to talk about this heatwave. i don't know how hot it is where you are but in many parts of the u.s., even parts where you generally see a milder summer, there's talk about this dome and locks of -- lots of concern for natural gas. this chart shows just the amount of pressure the national gas futures have been coming under for the upside. a lot of people saying that this will supersize the rally. is this something that is likely to continue as we talk about the impact of climate and extreme weather on commodities prices and outputs? jason: there could be a longer-term piece of it. there were three big pieces driving the natural gas price. it is being driven by the

upcoming winter strip and the winter strip is impacting what the previous winter was like and the most recent winter, horrifically cold weather. there was a huge freeze in texas and other parts of the country had the coldest weather they have ever had in history. that really drained some of the natural gas inventory. we are in an inventory deficit year on year and a deficit over the five-year average. we are down on inventories. next winter could be just as cold as the past winter and now hot weather and strong demand. all of that against the backdrop of the expectation that we might see more natural gas demand for power going forward as the u.s. tries to push further away from cold. an administrative goal to reduce the co2 put rate and replace that with natural gas which up until now has been very cheap. there is a lot of upside through

the end of the year. that could keep pressure on going into next year and beyond as well. haidi: we are getting some breaking lines coming through. when it comes to japan industrial production. you're seeing that month on month number coming in at a contraction of 9% when it comes to industrial production and that is much worse than expectations of the contraction of 2.1% which was surveyed consensus. that number is a gain of 22%, a miss on 27%. these preliminary numbers -- these are pulmonary numbers as well. shery: surprising -- these are preliminary numbers as well. shery: jason, as we continue to get these factory output numbers, little bit softer than its active. what is the outlook for metals productions and prices when you have potential fed tightening faster, potential -- more measures coming from china in order to tamp down the commodities rally? jason: the most important data

to watch is yet to come out this week. the purchasing editor and the chinese manufacturing pmi, the euro zone manufacturing pmi, and the factory index, are likely to show expansions. we will continue to see expansions for the year, moving forward into the pmi surveys on average and that's going to be positive and supporting demand. we have seen physical goods demand has been very strong coming out of the pandemic and this year and it is likely to remain strong. even with today's number out of japan, we have seen weakness. weaker than expected. that is likely to be more optimistic and we are going to get those numbers out this week and that's likely to be supportive for that metals demand because manufacturing is absolutely on fire.

shery: are you factoring and potentially more restrictions when it comes to output in china? not only because we have the centennial celebrations this week but also because of broader climate concerns. jason: i think that if anything, we can see some of the regulations we have seen have an impact on copper, for example, where there was an attempt to take some of that froth out of the market. we could see those sorts of things impact prices but the physical demand is being pulled from the entire global economy where interest rates remain very cheap even if we are past the maximum said fed accommodation. a couple interest rates -- very small, very modest, but expectations that it will be cheap for going forward and the fed is not going to move quickly and neither are the central banks. money is cheap and you have to remain strong for goods demand. should be solid for industrial metals demand as well. shery: opec-plus meeting this

week. your expectations? jason: i think we are going to see them reduce their production cutbacks. they will allow more production to come to the global market. half a million barrels would not be a surprise. the truth is is that the fundamental demand for oil is coming back. people are traveling again, commuting again. the consumption is back up so it's opec will that more production come back to the global market, there is unjustifiable fundamental demand reason to do so. shery: jason schenker, always great having your thoughts. chief economist. we have plenty more to calm on "daybreak asia." -- to come on "daybreak asia." stay with us. this is bloomberg. ♪

vonnie: you are watching "daybreak asia." here are some stocks to watch. we are watching and energy company -- it raised $2.1 billion from a 49% stake sale and we are keeping an eye on korean shipping stocks and watching a company in seoul after the e.u. identified five promising therapies. haidi. haidi: market opens are coming up in sydney, seoul, and tokyo,

next. pretty steady after more record highs overnight. lots more to come. this is bloomberg. ♪

jong-un. kim jong-un. kim jong-un. says grave incident caused by quarantine lapse. hsbc documents contradict case for meaning extra dyings. meng. meng extradition, lawyer says. growing gaps in u.s. vaccination rates show regions at risk. moderna's covid shot produces antibodies against delta variant. 80 yoarld japanese firm may be key to next next general. next general. next general. next again. next genen. nexon. next genen. next gen. next gen. >> hello and welcome to

"daybreak: asia." i'm shery ahn in new york. sophie: i'm sophie kamaruddin in hong kong. shery: and i'm haidi stroud-watts in sydney. taking a look at the major markets opening across asia our top stories this hour, asia stocks look to set to follow the u.s. higher. the s&p 500 eked out a gain to hit a record but fears the delta variant could set back the global recovery. corporate china's health is in focus ahead of the communist party's 100th anniversary.

contagion fears grow after bad debt manager another possible delay to its earnings results. and the fomc newest voting member says tapering liftoff could come sooner than expected. with the fed governor chris waller. sophie: major markets opening and we still have pressure in the last session. the worst day in about a week for asian stocks because of concerns of the delta variant. how are we setting up today? shery: we're seeing some consolidation for asian stocks at the start of trade this wednesday. the nikkei 225 gaining ground but at the 29,000 level and keeping an eye on vaccine-related plays and tokyo and elsewhere after the moderna shot produced antibodies against the delta variant. this amid speculation that the japanese government may extend the virus curbs in tokyo. the areas ahead of the olympics. the yen trading steady. and we're seeing j.b. -- j.g.b. move to the downside after a bond issuance plan for july it

would reduce buying and shift to quarterly buying instead of monthly. we got japanese factory output today. missing estimates, 5.9% on a monthly basis. and in south korea industrial production rebounded in may and while missing estimate, it was a solid set of data. we are seeing that push the kospi higher by .2%. the korean won on the back foot extending yesterday's losses here. we're seeing downside moves in the face of a stronger dollar. and we have a korean bond futures just consolidating this after some of the recent declines that we saw for yields as markets priced for b.o.k. policy. normalization. switching out the board to check in on the open in sydney the staggered open for the asx200 the board, we do have gains higher .2%. and shares losing 2% this morning in the wake of its demerger announcement. and the aussie dollar trading near a one-week low with half of the population in the country under lockdown. but c.b.a. says the impact on

the economy is likely to be limited. and we have the kiwi dollar staying below 70. set for a decline. so while the offshore yawn is holding steady consolidating around its 100-day moving average ahead of june p.m.i. data cue out -- due out from china later today. key metrics like input cost and new export orders. when it comes to the remini pulling out of the next screen on the terminal the yawn set to see itself and -- in the first half of this year. and in the third quarter, bloomberg intelligence says the yawn looks more resilient than other asian currencies vice vee the greenback given that we do have a fed tapering talk on the rise and speculation there, haidi. -- hayed haidi. haidi: mark, key to so many emerging and asian currencies, an economy going forward, what's the outlook for the dollar then? >> i think we can see that the dollar get a bit stronger again

in july. it's finishing this month on a pretty good note. and i think people are getting used to the idea they may have mixed views from whether the fed is hawkish or not. but the stickiness and the interest rate sector is certainly helping the u.s. dollar. we did see a bit of a spike up in short-term yields in particular. and that has stayed the case even though we've had a lot of fed speakers the last couple of weeks. some of them have been trying to moderate their views. but the u.s. rates market is quite determined that short-term rates are going to stay relatively high in the u.s. and that is certainly helping the dollar. and if you look at the technical picture as well, the performance of two key currencies. euro and the aussie, as we come toward the end of june, both of them are finding it very hard to make any gains on the upside. and that just tells you that traders are looking for opportunities to get short of those currencies against the u.s. dollar. and they are very big swing factors in the foreign exchange market. so when people see the momentum

shifting lower for the euro and the aussie that certainly makes people have a more favorable outlook for the u.s. dollar. haidi: how does this set us up for asian markets this second half of the year? because the first half, they really underperformed european and u.s. peers. moork i certainly am going -- certainly going to be tricky because of the delta variant which is increasing the lockdowns across asia. we've gone from a situation where at some point last year people were very optimistic on asia because they seem to be coping better with the outbreaks of the virus. we seem to be having lower numbers. and more freedom of movement. that seems to almost be reversing now. where there's a bit of a backtrack in that respect. and the countries like the united states are actually in a better condition at the moment than some part of asia. so that will weigh on asia to an extent. although the u.s. market is just continuing to grind higher. and that's overall that's good news for global equities when

you see the united states stocks still being very resilient. but what we will probably get now is a bit of an underperformance in asia until the picture is a lot clearer for freedom of movement. and that the data supports the fact that asia has come back together. shery: an outlook for asian stocks. entering the second half, you can follow more on this story and all of the day's trading on our market live blog. that's on the bloomberg at -- sophie: g-24 ministers hold for multilateral solutions to crises like the pandemic and climate change after a one-day gathering in italy. and top diplomats in meetings but foreign ministers from china, brazil and australia joined by video. vaccines became a point of contention. germany taking issue with china and russia's so-called vaccine diplomacy. the c.b.c. says china's progress

in developing a digital yuan is a key risk to the euro's international role. governing cowens members urging policy members in europe to act quickly on their own digital efforts or risk an erosion of the block's monetary sovereignty. he's also highlighted the declining use of cash and the rise of crypto assets as other risks to the e.c.b.'s control over payments. israel's new foreign minister is in the u.a.e. for the highest level visit by an israeli official since formally establishing relations nine months ago. he met his counterpart in abu dhabi and inaugurated israel's first embassy in the gulf. the historic trip comes just weeks after the war in the gaza strip. and amid nuclear talks with iran. lapid trasms to dubai wednesday. -- travels to dubai wednesday. opec and its allies have delayed preliminary talks by day to allow ministers more time to foind a compromise. the allies had been due to convene its advisory body on wednesday but that session will

now take place on the same day as the main policy meeting on thursday. the group is considering whether to continue reviving oil supplies as global demand bounces back from the pandemic. global news 24-hours a day on air and on bloomberg quicktake powered by more than 2,700 journalists and analysts in more than 120 countries. i'm von von. this is bloomberg. sherfy. shery: still ahead we'll look ahead to china's latest manufacturing p.m.i. numbers with liu li-gang. but up next how hong kong has changed a year after china imposed a national security law on the city. this is bloomberg. ♪

haidi: auditors will need more time to complete its financial reports for 2020. the bad debt manager also says there's no event of default under the terms and conditions of its securities.

let's get the details from china government reporter. so it's been three months. what's the latest on this? >> yes. so again saying that the auditors will need more time. no doubt probably fraying investors' nerves once again. and we know that their initial delay concerns about its financial health investors will have to sit on the edge of their seats a bit longer. shery: do we have any expectation as to when we finally do get the audit results? things are going to look like for investors? >> it's -- i mean, very hard to say right now. i think everybody is waiting for the results. and a lot has happened in the interim. and there's been some deals that have been made. but these -- eub -- you know, these are results that people are anticipating.

shery: so what are we expecting in terms of support coming from the government? of course, that's what investors are looking out very very closely. >> yes. that's the big question. bailouts or no bailouts. and it's -- it's been a question that the government has had to deal with. and in the past, of course, many times, and so far we've seen that. essentially the government does come to the rescue. and that this is one case where there seems to be more debate over whether they will. and how long they will make investors wait. and maybe the haircuts that people have to take are going to be a little bigger than in the past. shery: china government reporter there. the national security law in the meantime imposed on hong kong exactly one year ago has transformed the political and legal landscape of the territory. for more we are joined by china north asian correspondent david engel and truly what a difference a year does make. >> yeah. i mean, of course, there has

been changes. obviously here compounded of course by the pandemic and some of the world's most stringent restrictions including of course those lengthy quarantines which are now being semi related -- relaxed. but yes, a very difficult year for some in society and for the government. well, they think it's -- was necessary. the national security law to bring stability back to the city after all those protests. and i remember talking with michael teen, a hong kong delegate to china's legislature. he said on the day, a year ago, he said it is more difficult, more tougher law than he had anticipated. and his bottom line was just stay out of politics. well, this is a city that has prided itself on having, you know, a vibrant pro-democracy camp. used to have a vibrant pro-democracy camp and also a vibrant media. the question right now after 365 days under the national security law, has there indeed been a

chilling effect on the pro-democracy camp? well, yes, that's probably not debatable. but has there been a chilling effect on the press? has there been a chilling effect on the arts? and expression? because there's a new censorship law as well for movies. there's been broad application of this bill which government officials a year ago said would only affect a small minority of the city. but it -- it's pervasive in all strata of society. these are the four main crimes under the national security law. inciting secession, subversion, collusion with foreign forces, and terrorism. and these can be used broadly. and that's why we're looking at the court cases that are now finally trickling to the high court. that will -- we'll have to watch. but here's a stat i'll leave you with right now. out of the four fifths of the 117 people so far arrested under the national security law, they've been accused of offenses

related to the things that they say, chanted, public leshed or held up on a banner. so many people here say that is a direct challenge to their freedom of speech which is protected under the basic law. so you can tell, i've only scratched the surface of the main issues here, 365 days under the national security law. shery: when you have a very vague and broad law sometimes courts can really help clarify where those -- you know, the borders of that law are. given that we have that first trial under the national security law, could we get some more clarity? >> well, that's why we are looking at this case which started last week for kit, the 24-year-old former restaurant worker who allegedly rode his motorcycle into a police barricade carrying a banner that incited revolution if you will. there's interpretation as well of the actual chinese meaning of

the banner that he carried. which the courts supposedly will, you know, decipher, of course. but again, there's no jury here. under the national security law, the justice secretary can request that this be -- the trials be preceded by a panel of three judges. so we have three judges deciding his fate. and there will be of course lots of -- watching of this case. for the other people who will come next, like jimmy lai presumably and others who have been charged under the national security law if their cases hit trial. what are the procedures of the court? there's no precedence. there's no legal press den here with a national security law and whether it contradicts the basic law. shery: north asia correspondent stephen engel there joining us from hong kong. coming up next more of our interview with the c.e.o. of chinese automaker giley and his thoughts on tesla in china and the possible apple car.

this is bloomberg.

shery: chinese automaker geely is exploring its fundraising option after backing away from missing on shanghai's nasdaq style board. and since becoming c.e.o. daniel li told bloomberg his confidence about consumer demand in china. daniel: what was decided that we will seek the opportunity to be listed in stockholm, nasdaq stock exchange. but we didn't have any time

requirement. we believe with the market and its regulators we will come wit. >> will you be looking for evaluation -- valuation above daimler? >> we cannot say. we are targeted to beat daimler because of the g.e. investment stake. but we have a very good valuation by the market. >> and an i.p.o. in september of this year? >> we will see, you know, the communications between our team with the regulators and also potential investors.

and we don't have any pressure on the time line. but we believe we can move quite fast. >> could you make apple's car? >> i think-the-possible -- it's possible new car development ideas. >> including apple's car? >> the apple car itself, smaller cars with all the best features with connectivity, shared mobility and to provide the best user experience. >> ok. have you or any of the team at geely had any conversations with apple? >> no.

>> but you would welcome that conversation? >> yes. for your information, we are open to -- with our strategic industrial and internet leaders to form the strategic partnership as you have seen, a partnership with bidou and we're very open to introduce these kind of partnerships with any potential strategic partners. >> tesla has faced a few headwinds and had to do a software fix for almost all of their vehicles in the chinese market and protests at the auto show and security about security features. is china turning on tesla? >> i believe chinese government

and consumers are quite open. but in the end, the product should set aside the fundamental rioter -- requirement of customers including not only the connectivities, modern design, but also -- i don't think anybody tried to make any obstacles deliberately to tesla. just the market. shery: daniel li there. and with the chinese auto industry bloomberg has learned the details of the plan for secondary listing in hong kong. will be guiding its pricing at hong kong 165 a share. that is a discount of about 4% of the closing price in new york. our equity capital markets reporter has more. so this is off the maximum price

that we had been expecting. what more do we know? >> yes. so it's actually a discount to its close in new york last night. it's worth noting that the price went up quite a bit on monday. so that might be why the discount is a little bit wider than might have -- than we've seen with other such homecoming listings. but it's going to raise $1.8 billion roughly if the price comes in at that number. and so this is -- will add certainly the warchest with e.v. makers it's all about being the first, and lots -- and not that xpeng will not be the first to list in hong kong. so that will give it a lot more money to start. sort of keep on develop anding and building -- developing and building cars and make a profit. haidi: we heard about didi's i.p.o. give us the latest.

>> so that has priced. at the top of the range. so it suddenly shows that the investors did buy in at that valuation. we know that the -- that $14 it will basically have a valuation of about $67 billion. so this is still at the lower end of a range that has stretched up to $100 billion a few months ago. but obviously prices of its comparables have come down. the markets have been a little bit more jittery since then so didi has had to adjust the target valuation so that might be why coming with a lower valuation it can still now price at the top and hopefully upsize the share sale. shery: equity capital markets reporter julia fioretti in hong kong. more on the outlook for i.p.o.'s later as a debut in hong kong an exclusive conversation with the company's executive director. and the co-founder of x.a.g.

china will look at how the country's biggest agricultural drone maker is leveraging ag retek for farming. a con core schum led by alibaba group and the jung-su provincial government will near a deal to buy a stake, bloomberg saying the sources could be announced as soon as this week. the empire is one of china's biggest retailers of electronics and home appliances. post the bailout, junking would no -- jung would no longer have control of the arm. a.i.a. group has agreed to buy a stake in china post life insurance for about $1.9 billion to bolster its china expansion. the deal is still subject to regulatory approvals and will present -- will represent about a quarter of the chinese company. it also marks the second year of a.i.g. boosting its distribution network as china eases restrictions on foreign

insurers. j.p. morgan is set to have raised pace for its junior bankers. a source tells us that first-year analysts are being offered starting salaries of $100,000. that comes before bonuses. and will apply acrossies global -- its global workforce. those outside the u.s. would get comparable raises in local currencies. j.p. morgan told staff in april it was adding almost 190 workers to its investment banking ranks. coming up next our exclusive interview with the newest federal reserve governor, christopher waller discusseses his outlook for tapering, hikes, and why he's optimistic on the u.s. recovery. this is bloomberg.

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vonnie: this is daybreak: asia. new york city's democratic mayoral primary has tightened dramatically with eric adams holding a two point lead over kathryn garcia. progressive mayor wiley had been in second place. 125 thousand absentee ballots are still to be tallied. opec and its allies have delayed preliminary talks by a day to allow ministers more time to find a compromise.

the alliance had been do to convene on wednesday but that session will take place on the same day as a meeting on thursday. the group is considering whether to continue revising halted oil. the world health organization has urged fully vaccinated people to keep wearing masks and other -- and taking other precautions to guide against the delta variant to the highly infectious form of the coronavirus has spread to 85 countries. it is responsible for one in every five cases across the united states. north korea's leader kim jong-un has said a grave incident stemming from quarantine negligence has created a crisis. the news was reported by state media, which did not rip -- which did not provide details. kim reportedly told a meeting party officials neglected to execute important decisions. his comments come after more than a year of official claims north korea has avoided covid.

global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. haidi: staying with the pandemic, but dharna says it's -- pandemic, moderna sends its vaccine produces antibodies against the delta variant of covid-19. it's get more from michelle cortez. we know the concerns are this is more transmissible. that is why half of the australian population is under lockdown. what more we know about the variant? -- what more do we know against the variant? -- about the variant? >> this particular variant is more transmissible than earlier variants that drove outbreaks across the u.s., u.k. and other locations. the risk is great. that is why australia is locking down. we are seeing the u.k., 90% of their cases are coming from this variant.

there is a lot of concern it is going to spread and reach all of the people who do not have any vaccine protection. the good news is we do have data coming in the vaccine -- in that shows that the vaccine is put effective against the variant, particularly if people have gotten both doses and are a few weeks out from the injections. it is prickly important people continue to get vaccinated and we know if you are vaccinated, not only are you less likely to get the infection. you are dramatically less likely to have a severe case or to die from it. shery: it is great news we have more than 3 billion people around the world vaccinated, but how big is the divide when it comes to those shots between rich and poor nations? >> the divide is a significant concern. we have some areas of the world where they have not been getting any vaccines at all. the crisis in india over the delta variant emerged, that has

led them to not export much of the vaccines they were making. instead, keeping them for their domestic economy, which they desperately need but that has left a lot of people scrambling to get access. even in places like the united states, we are seeing some counties, especially across the south of the country and in the west and in the central part of the country where fewer than 25% have gotten any vaccination. we need to be getting people well above 50% completely vaccinated, preferably in the 70 to 80% range to get the herd immunity working. have every country in the world that needs to continue working on this. haidi: our health care reporter with the latest. the federal reserve governor has said the better than expected performance of the u.s. economy warrants scaling back asset purchases sooner than expected. he is favoring starting with

mortgage-backed securities. he spoke with kathleen hays. >> i tend to have a very optimistic outlook for the economy. things have been proceeding pretty much according to the way i thought they would so i did not feel any need to move my dots forward but other committee members have clearly taken note of the improvement in the u.s. economy and felt we are making much better progress toward achieving our goals. kathleen: you are still looking for the first hike in 2024? >> i am not going to tell you what. i have chaired -- what dot i have. kathleen: i think it could be in 2023. another question. what would you have to see to -- given the camp, a bigger group that says the first rate hike could come next year? >> we would have to see very good improvement in the labor market.

gdp growth is back to trend, which is what we wanted. inflation is above our target, which we wanted for a while. inflation expectations seem to be anchored around our inflation target. the only remaining thing is the labor market has not quite come back. unemployment is much higher. even though it is in good shape at 5.8% relative to other recessions, we were at 3.5% unemployment in february of 2020. we are a long way off. we have a lot of people who are not in the labor force. somewhere in the neighborhood of seven to 7.5 million. they will have to come back very quick. the employment rate would have to drop fairly substantially or inflation would have to continue at a high rate before we would take seriously a rate hike in 2022. i am not ruling it out. kathleen: you said you thought

inflation expectations were well anchored around the level you would want to see above the target. if you look at consumer-based measures of inflation expectations, they are way over averaging above 2%. what kind of numbers on inflation expectations you have to see to say maybe i am going -- looking for the rate hike year? >> i have long been a fan of market-based expectations because in those cases it when you are looking at tips, you are putting your money on the table in terms of what you think inflation is going to do. when you look at the michigan survey of consumers, it is highly correlated with the actual inflation rate. if inflation is high today, people move up their expectations for inflation five years out. there is too much noise in the michigan survey for me. they do provide a signal and you have to pay attention to it.

at the end of the day, i would prefer to look at the market-based measures of inflation expectations. kathleen: this is also the talk about tapering meeting purity is it time to start drawing up the plan for that? do you see a situation where the taper could start this year? >> as we said, we wanted to see substantial progress. this year has been a surprise. none of us in december would have thought the economy would be where it is now. it has moved faster than we thought. we made better progress than we anticipated. as chair powell said at the last meeting, we are starting to talk about this. there are a lot of things that have to be decided i the process of making a decision. when is the appropriate time to taper? what is the pace? whether there is any particular sequence we want to pursue. there seems to be a wide range of opinions about how to do that. these are the sorts of things we have to figure out. given the way the economy has

progressed, i think everybody anticipates that tapering could move up earlier than when they originally thought. whether that is this year, we will see, but it certainly could. kathleen: what is driving the tapering decision right now or pushing you to this point? is it the economy is growing so fast we do not need so much stimulus? is it the fact that you are wondering, we don't need to buy so mortgage-backed securities in such a hot housing market? >> i would say the general view of -- i should not speak for the community but -- the committee about the economy has done much better than we thought. vaccines have been extremely successful in helping -- i think the crisis is over. no we are dealing with the aftermath of the pandemic. we are now in different phase of economic policy.

it is appropriate to start thinking about pulling back on some of the stimulus. in terms of nbs, i am more sympathetic of tapering first before treasuries. shery: the federal reserve governor speaking exclusively with kathleen hays. for a look at how the fed's normalization could impact asian currencies, stephen joins us. great to have you with us. let's start with the u.s. dollar and see what that means for asian currency. when you're talking about potential rate hikes of the fed tapering, we are you seeing the biggest impact echo -- where are you seeing the biggest impact? >> it is about the expectations and focus of other rate hikes instead of the hike itself. as you know from previous experiences, dollar uptrends tend to be more sustainable. on the contrary when we are talking about the expectation

about tapering, that will help the long end real yields but does not support the dollar. if we are looking back at last cycled, even when the fed stopped tapering in december 2013, the real yields did not rise that much. the market is now starting to focus on the rate hike after the fomc. that will provide a step -- a temporary support for the dollar. when you look at the dollar index, that will go higher in the third quarter. we are looking at mixed possible resistance of 92.5. after that, 94.5. haidi: does the attractiveness of the yuan make it more resilient to a fed taper? >> definitely. especially over the last week we know china has been doing

various things including introducing policy. the u.n. has been -- the -- it is stabilizing their 6.45. -- stabilizing their 6.45. near 6.45. everything has become less stressed. the yuan is more neutral. the yuan is definitely one of the better currencies to hand her the -- to hundred -- to handle this dollar strength. shery: we may be seeing potential movement in the currency market entering the second half. asian stock trading pretty muted with volatility at 2019 lows. sophie, what are you seeing today? sophie: given the quietness we

have seen, consolidating in a range that has been stuck in since march. despite this lacking momentum, global stocks are set for the second best since 1998. at black rock, they see the develop and market at a better position tactically to capture -- to caption -- pulling up, tests -- to turn to some stock movers. shares are extending gains, flirting -- pull up the board right now. shares jumping this morning. gs holdings is considering a minority investment by a consortium. turning to yields in australia, switching out the board, checking in on shares this morning jumping as much as 5% this morning to a february 2020 hi.

gh. this after confirming it is going ahead with a merger that will split retail businesses. iron ore miners, seeing a pickup. some investors are losing enthusiasm. drop in price. holding some php for diversification. checking in on to guy -- checking in on a drugmaker. cutting the profit forecast after reporting a first quarter loss. keeping an eye on softbank shares, which are rising as we get guidance for the dollar bond offering. haidi: some of the stocks we are watching. coming up next, we are going to take a deep dive into some of the biggest challenges facing chinese economy ahead of the

communist party's centennial celebration. citigroup chief china economist joins us next. this is bloomberg. ♪

shery: china's brokers and money managers are grappling with the highest short-term money cost in five months.

it shows how i cash squeeze could be taking hold as beijing prepares to celebrate the coming is party's anniversary -- the communist party's anniversary. joining us from hong kong is the chief china economist at citigroup. always great having you with us. this chart on the bloomberg showing the volatility and the funding cost coming at a time when we have the 100 year anniversary of the is party. the pboc stepping in, injecting more than $4 billion of short-term funding. what is your view of what the central bank will do going forward? liu: i think this volatility is mainly driven by the end of quarter effect. you are at the end of the quarter. commercial banks will have to fulfill requirements. we tend to see this volatility. the pboc's policy has been they

like to inject ample liquidity as much as possible to ensure the interest rate stability. in a recent media report, they even disputed the market speculation that liquidity will tighten in the second half of the year. we think this moment, china's want to terry policy will be -- china's monetary policy will be too premature. inflation will remain. growth in the second of the -- and it is half, we start to slow again. it is no urgent reason for the pboc to exit at this moment. shery: tell us about the different sectors of growth.

we have seen the old drivers, property, industrials really performing well. what will that look like going into the second half? liu: we think that china's property sector will slow in the second half largely because the pboc and other authorities are quite concerned with rising property prices. it is likely more restrictive mortgage lending policies together with restrictions to lend more to the property sector will be there. that will slow china's property investment growth in the second half. we are still quite enthusiastic about a bigger boost in china's consumption in the second half. we think the consumption rebound will be a very important thing

that will further suspend china's growth in the whole year. haidi: you talk about the need for a holistic exit from monetary pboc support in china. what does that look like for policy? liu: here, we mean that the pboc should not only look at its own domestic economic conditions that is price outlook and the growth momentum in the second have but also take into consideration china's rising leverage ratio. as you have been showing, china's copper debt is that historic high. -- is at historic high. big centrally owned asset management company huarong,

investors are quite concerned about whether it has ability to honor the debt. if pboc were to exit too fast, the interest rate will continue to rise. that will probably create some kind of default in the central market. that will then endanger china's sustainable growth in the second half. in addition, we think the exit this round should also consider external extremely relaxed monetary policy conditions. if china were to exit too fast, the onshore interest rate would continue to rise. china could receive a large amount of capital inflow, which will put a lot of pressure on the renminbi and fast

appreciation. we think the capital inflows will also go to the speculative sectors that could infuse the property bubble even bigger. haidi: with the centennial celebration for the party, what are the implications of industrial policy and the strategic rivalry? what are the benefits and opportunities that come from that? liu: we do think the risk of technology decoupling is getting higher and china is engaging its own indigenous innovation. we do think in many aspects china does have the potential to catch up. for example, in green energy, in 5g, in some other area.

the government would like to push it to compete with the united states. for investors, those sectors should have a long-term investment opportunity. shery: thank you very much for that. we do have an alert right now. tokyo's governor has left the hospital. this according to snn. she had been hospitalized since june 22. she has been discharged this morning. she is feeling better according to people they are citing. we have heard from local media she was being treated for severe fatigue. this coming at a time when we have the tokyo olympics coming up. this is bloomberg. ♪

haidi: a quick check of the latest headlines. demand for cars in the u.s. is boosting global sales numbers for japanese automakers. sales gain 28% last month led by demand in north america. global production for the first five months of 2020 more than doubled. australia's biggest telco has raised $21 billion.

it was purchased by future fund. -- by future fund. it plans to return half the proceeds to shareholders. atl energy is separating its power generation in retail businesses. the retail business will be called agl australia. the company expects to complete the merger in the first quarter of next year. sophie, what are you watching? sophie: new listings in asia totaling $82 billion, the most ever. eating a record set in 20 beating a record in 2010. concerned about interest rates. tachy leading the charge. -- tech leading the charge. a 4.1 percent discount to the

u.s. listing. that is it from daybreak: asia. our markets coverage continues as we look to the start of trade in hong kong, shanghai and shenzhen. this is bloomberg. ♪

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>> it is 9:00 a.m. in beijing and shanghai. i am tom mackenzie. david: counting down to the open of trade. vaccine optimism is the narrative. equities on the up on hopes that most shots can counter the infectious strain of the coronavirus.