haidi: good morning. we are counting down to asia's major market open. shery: welcome to "daybreak: asia." we speak exclusively this hour with a fed governor. central bank hawkish this is said to weigh on asian risk

appetite. plus, evergrande avoids a default. haidi: let's get you straight to the start of trading in sydney. we continue to watch for the impact of omicron as we see the national cabinet meeting. the president saying some of the transport workers that are key to the supply chain will be exempt from the rules. we are seeing -- so much of the livermore -- labor force has been taken out. we are watching qantas when it comes online. they are saying they are slashing one third of capacity as omicron continues.

we are also watching new zealand. nikkei futures are looking positive. also watching currencies as we see the dollar heading for the steepest three day drop since may. shery: federal reserve board governor is the latest policymaker to signal a fed rate hike as soon as march. kathleen hays is here with news from her senate confirmation hearing. he is nominated to be the number two official at the fed. how much did she say about the march rate hike? >> she did open the door. just as jay powell set a couple of days ago when he was at his senate confirmation hearing to remain as chair for four years, brainard said whatever it takes

is fighting inflation again. joining the big said chorus of voices getting more hawkish. >> inflation is too high and working people around the country are concerned about how far their paychecks will go. our monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone. this is our most important task. >> when it comes to the first rate hike coming in march, brainard didn't say that, but she did say that the taper will end and that opens the door. let's listen to what she was saying to the senate banking committee. the fed has projected several rate hikes over the course of the year and will be in a position to do that as soon as the asset purchases are terminated on the bond taper ends. we will have to see with the data are doing.

if the labor market still strong? it's important it has been on the dovish side. she is joining with the hawks. if inflation is still a problem, maybe fourth hike. then, charlie evans from the chicago fed who has long been known as a dove is seeing two to four rate hikes this year. it sounds to me like there's a lot of uncertainty, but the certainty is they are going to do what they need to do however many rate hikes it takes this year to get the inflation rate steady and going back down. haidi: kathleen's exclusive conversation with the fed governor coming up in just a few minutes. meanwhile, the bank of korea could lead asia's rate hike today. let's bring our chief asia

economics correspondent. what are the factors as we wait for that decision? >> it's all about inflation. it's well above the 2% target in south korea. it's all about the fed signaling rate hikes and high house prices and household debt. most economists think the south korean bank move today. that will be the third rate hike since it started to exit emergency policies last summer. i suppose the reasons to pause are all about omicron. the cases continue to spread in south korea and that will continue with frictions on movement. that is a drag on the consumer. there is also the expectation of fiscal stimulus ahead of an election. that is another possible reason for the bank to hold. most economists would say that

if they don't hike today, they most likely are going to do so in february and possibly again in march. shery: we will be watching for that decision in the next two hours. here in the u.s., we are focused on the supreme court's decision to block president biden's push for 80 million workers to get shots or periodic tests. let's bring in our political news director with more on this. what we the practical effects of this decision? >> it will start taking effect right away. osha rule that companies with 100 or more workers to have their workers vaccinated or test regularly already went into effect partially so. osha was not going to start citing people, giving them citations until february 9. there were already requiring people to show vaccination to come into workplaces. this will now disband that.

companies and estates go ahead and require it on their own, but it will not be a federal policy. except for health-care workers. the court ruled that today. haidi: what was the response from the white house? >> we heard clearly disappointment from the white house that this has been an important tool in their toolkit to try to get more pedal -- people vaccinated. they said this was going to be very important to do that, yet they said they hope that states and individual businesses will continue to do the right thing and stick with this even if osha cannot require it anymore. we heard later today that they will not appeal this, they will let it stand and they will try other things to get the vaccinations and booster rates higher. haidi: coming up next, our

exclusive interview with the fed governor who has already signaled that arch will be -- march will be -- this is bloomberg. ♪

>> welcome back to "daybreak: asia." with price pressures in the u.s. the highest since 1982, a number have called for in interest-rate increase as early as march. joining me is fed reserve governor christopher waller. the timing couldn't be better. we just got the big move in inflation. as early as december 17, you said you can see a march rate hike, you could see three rate hikes this year.

now, we have at least three fed bank presidents saying they could see four rate hikes. are you leaning in that direction? >> i think the three hikes is still a good baseline. we will have to wait and see what inflation looks like in the second half of the year. if it continues to be high, the case will be made for for five hikes. if inflation falls back in the second half of the year as many of us think it will, then you could pause and not even go the full three. it will hinge on the inflation data of the second half of this year. you can't rule these things out. >> i want to underscore what you said. play something that jay powell said. measured, but definite when he testified to the senate banking

committee a few days ago. >> if we see inflation persisting at high levels longer than expected, then if we have to raise interest rates more over time, we will. we will use our tools to get inflation back. christopher: you just said you can see possibly five rate hikes this year. there could be a pause after a great lift off, then in the second half of the year go further. is it sort of like do whatever it takes especially if you don't see inflation starting to respond after you do see the first three rate hikes going for four or like you said five maybe? >> it depends on what happens with inflation. if inflation is stubbornly high the first half of this year, we will have to do more. that's our job and is what we are committed to do. if we have to do more, we will do it.

we also have the balance sheet. that will take some pressure off of longer and rates and lead to a tightening of policy and more accommodation. >> i want to ask you something, could you see conditions where the fed might do a 50 basis point rate hike this year? if you want to impact inflation, could you see a 50 basis point hike in the mix? christopher: as the data has come in, i still favor a march lift off. i don't see a 50 basis point hike in march. we have not prepared markets for anything that dramatic. one of our key themes has been not to surprise markets given well enough advance in terms of what we are trying to do. a move up 50 basis points would be a shock. i can't speak for the committee, i can only speak for myself.

i really don't see a 50 basis point hike in march. down the road if inflation does not look like it's coming down, it would certainly be in the toolkit, but it would be a lot for us to move in that direction. there hasn't been a rate hike basis points in a long time. >> you just said the balance sheet runoff could come sooner. in december, you seem to imply that the balance sheet runoff could start in may. we have to see the taper before the march meeting, then rate hike. what would be sooner base -- balance sheet runoff and the fed is moving more aggressively than it did on the balance sheet runoff than it did at the end of the lifecycle -- last cycle. what should we expect? christopher: certainly by summer, we could start shrinking the balance sheet. it is very large. at almost $9 trillion.

the economy is in a much better place than we did this before. about 1.5 trillion to $2 trillion per day is pouring back into the facilities of the market doesn't need that in liquidity. that wasn't necessarily the case before. have a lot of room to do it. we will do this because we think it's the right thing to do for policy and reaching our goal mandate. -- dual mandate. >> from the fed minutes, the fed thinks may be there is a problem that the yield curve will flatten and invert as you start raising rates. is this another reason to start running off the balance sheet earlier then you might have otherwise? how are you going to do this? christopher: certainly if you

have a large balance sheet and you're putting pressure on the long end of the yield curve by starting to drain, you can take some pressure off. how much with the 10 year move? i can't say. that makes the policy a lot easier. at this point, we are most likely going to shrink it. we just aren't going to reinvest possible payments that come in. we can decide how much of that reinvestment we want to do. the last time we did cap with a maximum cap being $50 billion per year. we could do more this time given the sheer size of the balance sheet and the state of the economy and the state of liquidity in the markets. i'm not sure exactly what those caps could be, but they would be larger than last time. >> would you do more if you see yield falling?

you could see it in the fomc markets, concerned that the bond markets are already low. if you start raising rates at the short end, even if the long and stays the same, your yield curve is going to flatten. depending on how much you have to move up the short end, you're going to run up the inversion. >> that is certainly the case. global central bank policies have done a lot to keep pressure on the 10 year and long-term yields. they are still want to keep the pressure on. if we start lifting off, it's not obvious you will get a lot of movement, 10 years and later in the maturity structure. again, we can take action on the balance sheet to prevent the yield curve from flattening too much if we feel that's problem. >> again in your december

remarks, i found them pretty interesting and important when you made them so i want to go back to something you said. that starting the balance sheet runoff after lift off and continuing this would reduce the number of rate hikes the fed needs to do this year. how would you gauge this? how will balance sheet reduction and raising rates work together? christopher: if we start running off our balance sheet and a significant way, and we see longer-term yield to stop -- responding to that, that's going to remove accommodation and tighten conditions just like an increase in the short-term rate. we will see whether that action occurs or not when we start doing it. the key thing to remember, the policy rate is our main policy tool. that's how we want to tighten policy and affect inflation and try to achieve our dual mandate.

but we can't ignore it, we have used it for the last two years to try to put downward pressure on rates. if we undo that, were going to have some impact on rates in the opposite direction as they go up. that will help us avoid any yield curve inversion problems. >> do you have a target rate for inflation now? do you have a sense of when you want -- you know you will have done enough to rein in? what kind of guidance can you give on that? christopher: like i said, inflation has stayed higher for longer than any of us thought it was going to. we still have a lot of expectations that inflation pressures are going to drop off the second half of this year. my own view is inflation would be down around 2.5%. once you get to that point, it's not as pressing to do rapid rate

hikes if you get inflation onto that number by the second half of the year. by 2023, it will move closer to the target and that will take a lot of pressure off of having to raise rates. >> you also talked about the uncertainty of forecasting in an uncertain time. should we surmise that means you think that the fed should move more slowly and gradually? make sure you don't do too much? or maybe the fed does need to be ready to go faster, be more aggressive, to make sure inflation doesn't get more entrenched in this time of uncertainty? christopher: chair powell said we have to be nimble. we have to move in response to the data. that might mean quickly accelerating rate hikes if the

data starts coming in bad. that's what i think he meant by nimble. we have to be able to make quick changes in direction and speed depending on what the data comes in. we will know that as we get closer to the summer. >> one thing i want to ask you about is the framework, the inflation targeting framework which many people say because there were such a focus on letting inflation get over to percent, being careful to get to maximum employment, some people think you're behind the curve. at some point, will it be warranted for the fed to take a look at the framework and maybe adjust it to the new reality of the pandemic, post-pandemic economy? christopher: this ball hinge on what happens with inflation the second half of the year. if it stays stubbornly high above 3%, then clearly we have to do more.

and potentially rethink what we did with the framework. going forward, if her going to do averaging and inflation is running 3%, we aren't going to let inflation run 0% to 1% to make up for that down the road. these high numbers caught us off guard and what it means for our policy and framework. we always thought mabel -- maybe it would get up to 2.5% after a decade of not being able to get it up to 2%. this is thrown a wrench of -- into a how we look at things moving forward. we will have to think about if we continue to pursue flexible average targeting down the road. >> i don't want to take up any more of your time today. christopher waller, thank you so much.

haidi: you can watch us live and see our past interviews at our go function. this is for bloomberg subscribers only. this is bloomberg. ♪

shery: citic securities wants to raise 28 billion yuan in a rights issue. it says the proceeds will be used in the development as well as strengthening information systems and replenishing working capital. trading will be suspended from

january 19 two the 27th. one investor was said to inject almost a billion dollars into the company. it is withdrawing from a share subscription agreement announced in december without is closing a reason. it would have invested $943 million for a 20% stake. sources say boeing 737 max could resume commercial flights in china as early as this month. two hour test flight was conducted last week. china is one of the last companies -- countries to resume flight. china is boeing's largest overseas market. ford market value topped $100 billion for the first time. it now exceeds gm and rivian.

it is still well short of tesla's $1 trillion. ford is ramping up production of its electric and battery powered mustan haidi: let's take a look at the markets. we are 30 minutes away from the start of trading in japan and soul. just about every single sector is trading in the red at the moment. information technology, tech shares following the losing tech stocks overnight. we are down 3.5% in that sector alone. this could potentially be an opportunity to buy the debt. one fed governor saying officials could move as early as march to combat inflation. that is affecting some of these

highflying tech stocks and the high risk premium stuck -- segments of the market. coming up, tokyo raising its covered alert level. -- covid alert level. and there you have it. woah. wireless on the most reliable network nationwide. wow. big deal. we get unlimited for just 30 bucks. sweet, but mine has 5g included. relax people. my wireless is crushing it. that's because you all have xfinity mobile with your internet. it's wireless so good, it keeps one-upping itself. take the savings challenge at xfinitymobile.com/mysavings or visit an xfinity store to learn how our switch squad makes it easy to switch and save hundreds.

shery: tokyo has raised its covid alert to the second highest level. the omicron variant is quickly taking over as the dominant type of infection. for the latest, let's bring in a bloomberg managing editor. how are hospitals in japan coping right now? >> more and more patients are being hospitalized.

tokyo recorded over 3000 cases yesterday. that is up nearly eight times over the past week. the tokyo government has laid out guidelines implementing countermeasures should the bed capacity rate rise to 20%. as of yesterday, it was about team percent. we are edging closer to the level where business restrictions on restaurants and bars could be restricted at some point. haidi: in addition to some of these potential restrictions, what are other policy measures being discussed particularly when it comes to providing more support to the economy if needed? >> the government has said that it will support the economy throughout and it has been mulling cash handouts to those

eligible. that has yet to be finalized, given the impact of the initial handouts, they can't quite figure out whether that was effective or not. in terms of visits restrictions, one of the measures that they can do is restrict the business hours of restaurants and bars. possibly limit the number of capacity at stadiums or theaters. unlike europe or other countries, japan does not have the power to implement a full hard-core lockdown. they're trying to balance that with preventing the infection from spreading further. shery: joining us from tokyo. we are counting down to the start of trade there. in japan, the latest producer prices are due this hour.

economists are expecting the number two slow in december after a year of acceleration. we are also watching fast real tailoring -- fast retailing. the company says it may need to raise prices due to higher material costs. hitachi selling half of it stake in construction machinery units as part of its restrung -- restructuring process. it is decision date or the bank of korea. bloomberg sees it holding its benchmark rate at this point. 14 of 19 economists surveyed expect a rate hike. lg is expected to set its ipo price. this could be a record for south korea. the eu vetoed attire between two companies. the blocks concerned it would

harm competition. haidi: evergrande has avoided what would have been its first onshore bond default. for the latest, let's bring in stephen engle hong kong. we have talked about this ticking of the proverbial can. would we know? >> it essentially gets them six-month reprieve. had a vote by investors. they needed a majority to get that, and they did. the domestic unit of china evergrande, they had a january 8 deadline to meet investor demands for early repayment on a particular bond. $4.5 billion note. then the developer essentially said we need postponement.

we essentially can't pay it right now. there are other liabilities heard they asked for a six-month postponement and they got it with the majority vote yesterday. it has already been labeled a defaulter on its dollar bond coupon payment in december. the chinese stressed developers are facing huge obligations in 2022 to the tune of 197 billion u.s. dollars. not just for repayments for trust, to pay contractors, to pay suppliers. to pay the bulk of that is deferred wages which the government is requiring them to pay before the end of the month, before the lunar new year holiday, before the olympics to avoid social unrest. right now, evergrande's priorities seem to be meeting the government mandates to pay their employees, pay contractors, get the more than one million unfinished units out the door figuratively and

literally to those who have paid down payments ahead of the bond payment liabilities which are wrecking. shery: what is the endgame for private developers or xi jinping and the central government? >> for the developers, it is a survival. you have to get through this. it was a game of largess for the private developers over the last decade. evergrande was the poster child. we can roll the video of as far as i can see, the apartment blocks being built all across the country and that was the name of the game. under common prosperity, a billionaire overleveraged tycoons in the property sector are not necessarily in favor. what we have already seen and we have seen it in the past is when the private developers,

distress, a bigger more financially healthy developers come in with the checkbook. sometimes pennies on the dollar and cherry pick the assets. at this time, we are seeing state backed developers getting first pick. those perhaps the endgame for the state. they want to knock these big private indebted tycoons and developers down to size and perhaps a return to the state driven property model. this is what one fund manager in beijing had to say about it. if we call the past decade a golden age for the real estate industry, it is now trapped in an age of rest. i'm not saying there's going to be a lot of white elephants around china, but you get the picture. shery: coming up next, more than one third of australia's largest listed companies have poor

modern slavery disclosures according to a new report. we discuss that and other esg themes. this is bloomberg. ♪

vonnie: i divided u.s. supreme court has blocked a key part of

president biden's push to get more people vaccinated amid the covid-19 search. it rejected a rule that would have required workers to get shots or periodic tests. a vaccine requirement for nursing home and hospital workers was approved. the decision is a victory for 26 business groups and 27 states that sued. interest rate rises could start from march. she chances a smooth confirmation. she told lawmakers the fed will be in a position to hike rates once the tapering ends. >> people are concerned about how far their paychecks will go. our monetary policy is focused on getting inflation back down to 2% while sustaining a

recovery that includes everyone. this is our most important task. vonnie: unofficial in china has warned foreign companies could face boycotts from chinese consumers. firms removing chinese products will face resistance with consumers. the u.s. has passed a law barring companies from selling goods from zhejiang. the taliban wants the international community to work with its government to distribute humanitarian aid flowing in. the u.n. is asking for a record $5 billion in assistance to address catastrophic levels of need with afghanistan's 40 million people. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn.

this is bloomberg. haidi: it's becoming critical to include these esg standards in portfolios. top esg themes are decarbonization and antislavery. 2021 was a banner year for focusing on some of these issues especially the environmental and rain ones coming as a result of cop26. human rights businesses caught between the u.s. and china. what will be the big themes for you this year? >> i think it will be a continuation of the trends we saw in 2021. three things, one is decarbonization. that has been a long-standing

esg theme. that means risks and opportunities. the speed has accelerated in the last 12 months. if you look at this issue from an australian perspective, more than 50% of the companies have got net zero commitments by 2050. some earlier than that. the second one is culture. we have seen a number of cases in the last few years where poor culture, sexual harassment, bullying, a number of other cases have led to value destruction. companies don't typically self-report these issues until it's too late. then the third one is slavery and human rights. that is driven largely by the

modern slavery act. we see a link between this issue and sustainability. if you have a business model or supply chain that relies on underpaid workers, weak regulation, or even illegal activities like slavery, those earnings are not going to be sustainable over time. what's interesting in 2022 is we all know what covid has done to supply chains in terms of swaptions. a lot more people -- in terms of disruptions. we think this is going to be a bigger thing in 2022 than last year. haidi: we see this shift in escrow you funds management where a lot of these funds are starting to consider esg negatives and positives alongside of returns. is there no longer split between mainstream -- mainstream fund

managers and impact funds? >> investors who don't look at esg do so at their own peril. we have seen what can happen if companies don't manage these risks. at the same time even if it goes mainstream, there is still a role to play for esg specialists. they can dig deep into these issues because even if analysts take into account some of this work is nitty-gritty and you have to dig deep. those companies are not always reporting these issues adequately. you need to do your own homework basically. this is not -- we can act on that proactively.

there could be a slight reduction in terms of mainstream and impact. impact is all about achieving certain outcomes while for most investors it's about generating high financial return. shery: doing your own homework comes a lot more difficult when you are a small company. how do you mitigate that? >> it's more about corporate access. every year, we discussed these issues with companies. around 170 companies we discussed these issues in company meetings. as the one thing. the second is it depends on how you do your research. we have chosen to do proprietary

research because that's how we feel we can get insight that we can capitalize on. it's interesting work. it is time consuming, but when you find the insights you can capitalize on that that will really pay off. haidi: what's more effective in your breath of experience in dealing with companies? a punitive approach or a more constructive approach? the caret or the stick at this point? >> in terms of engagement, i certainly think the carrot is more useful. if you want to go back to modern slavery and human rights, it comes back to earning sustainability. we think companies dealing with this in the right way -- then it's up to us as investors, do we point the finger or try to be constructive?

this is a systemic issue. it's a most impossible to come up with a portfolio that is slavery free. the best thing we think we can do is to engage on this issue. we also collaborate with other investors on this. the key thing is related to -- really to encourage companies toward what leaders are doing. what they're doing on responsible sourcing for instance. this comes back to field trips we have done. we have visited factories and southeast asia. you get to speak to workers on the ground and see what the leaders are doing internationally and you can take the information back to australia and encourage companies here. by doing it that way in a very constructive way, we do feel like companies are listening. they are coming to us to seek advice and the result is they should raise -- reduce the risk

in their supply chains. it's a win-win for everyone. haidi: it was great having your insight. shery: we have an alert on the bloomberg. south korea is deciding to allocate an extra budget according to the administer, the government will submit the proposal to parliament before the lunar new year holidays. we were expecting the party, it has been flagging an extra budget would be coming forth come -- forthcoming ahead of the election. this is in order to help small business owners. we hear that the over ash omicron variant may become the dominant variant and want to do weeks. we continue to watch the virus developments there and the big question, what happens to the rate decision? a lot of analysts had expected this extra budget to give a push

to another rate hike. this is bloomberg. ♪

haidi: we are tracking the fallout of the global supply chain crunch. the world's biggest chip foundry is allocating $40 billion to address the semi conductor shortage. it is investing heavily in

plants. truckers are warning that the move may worsen the labor shortage and disrupt trade between canada and the u.s.. the alliances estimating 16,000 drivers could be forced off the road. australian transport and freight workers in close contact with those infected with covid-19 will no longer be required to isolate. this is to combat supermarket shortages across the country. shery: restrictions are also causing lockdowns at chinese ports. a suspension of trucking services for ships to reroute. it is causing congestion at the world's biggest container port. bloomberg terminal users can

read more about those stories on our newsletter supply lines. haidi: retailing -- the announcement coming as the owner puts earnings above expectations. what are these plans in the works? >> what we are seeing from the ongoing pandemic, omicron specifically, they are definitely uncertainties in terms of the cost structure or many of the companies out there. i do agree with management given the uncertainties that we are seeing to the demands at this juncture itself.

it may be that any of the spring or summer price hikes they are looking at may not be that significant. shery: what does that mean for the rest of the year going forward? is it all up to the virus contagion that we are seeing around the world or what could provide meaningful upside? >> i think there are definitely bright areas that we have seen that have been reported specifically the rebound in the profitability and markets outside of japan and mainland china. i think we are coming from pandemic lows and we are off to a good start in late 2021. it's going to be a little bit of volatility coming through again from omicron, but at this juncture itself, as long as there are no major lockdowns or

major changes when it comes to zero covid strategy for some of these markets outside of mainland china, i think we will continue to see the profitability improving. shery: these are some of the stocks we need to watch as we had to the open in japan and south korea. $25 billion equity routing could extend. we are seeing concerns over state sales by some executives. also, to companies could move after their -- the bank of korea is set to deliver its latest rate decision. bank of america securities will

have more on what to expect. first, we will break down the biggest moves of the day so far with one market watcher who sees chinese stocks playing catch-up after lester's weakness. -- last year's weakness. the open in seoul and tokyo is next. this is bloomberg. ♪

shery: welcome to daybreak: asia. haidi: asia's major markets have just opened for trade. our top stories this hour. central bank hawkish news is set to wear on -- after triggering a realm the nasdaq. the be ok is hiking its key rate today. the fed governor tells us he sees inflation easing by year

end. and the consequences if that does not happen. >> three hikes is still a good baseline. we will have to wait and see what inflation looks like in the second half of the year. if it continues to be high, the case will be made for four or five hikes. haidi: securities planning a 4.4 billion stock offer and in the face of rising wall street competition in china. shery: japan and south korea coming online under our little bit of pressure on line with the nikkei being led lower by every sector of the index. materials and tech stocks are leading the decline. this as we are seeing strength for the japanese yen which continues to gain ground this week. we have sluggishness for the dollar. seeing its worst since may. have the ppi numbers out of japan. coming below expectations with

an 8.5% acceleration for factory prices year on year. the cost be right now losing ground as well. this of course as we are announcing a second session of losses. the korean yuan is also under pressure after seeing four sessions of gains for south korea. you can see what is happening with the kospi. this as we heard from the prime minister south korea's government is deciding to allocate an extra budget to help small business owners. a big question is what happens with the be ok rate decision. it was the consideration of a potential budget and more fiscal stimulus that 14 out of 19 economists surveyed by bloomberg think the be ok will rate -- the bok will hike rates.

haidi: taking a look when it comes to a down day trading in australia. largely on account of a fellow the loser did -- a follow the loser. just about every sector trading on the index in australia is firmly in the red. take a look at the aussie dollar. we did see a little bit of an impact when it comes to the weakness for the past three days. also watching kiwi stocks where we are seeing weakness. as we get this easing of isolation rules when it comes to key supply trains -- supply chains, we are not seeing that pass through to the consumer or retail stores. qantas stocks saying they scrapped capacity by a third. let's bring our next just who says he prefers the rally

despite buying the dip mentality still in place. joining us is the ceo of s gmc capital. the carry through to asia, is this another buy the dip opportunity or we starting to see a market that is assessing what the medium-term outlook? >> definitely the environment is worse than what it was two months ago. we have seen the big change from the fed. what we are seeing is when everyone is going to see a strong correction in the market, the global investors are going to buy the dip. we have turned into a selling the rally because it is unlikely new hires are going to be held on. given the changes we have seen. in the medium-term and especially over the next 23 marked -- two to three months,

we think equities will find it harder to sustain gains. haidi: if you were to be specific about the segments that have an inflation shield but still growth opportunity, what would they be? >> you have to look at what are the themes that are going to work in the medium-term? in this kind of environment, you have to look at the medium-term because the short-term can be noisy. what we believe will continue together strong demand and continue to grow. we have to look at the cybersecurity space. will be increased demand in that theme. you have to keep looking at everything which is the development of health care. you are going to keep seeing a lot of demand from their pit -- from there. you have to look at the development of everything which gives energy from esg perspective as well together with the semi conductor, which

you are going to continue seeing strong demand in. over the medium-term, we believe those themes are likely to continue being supported as well as everything went to data management should shery: can they outperform despite the fact we are seeing more tightening around central banks? the bok is expected to hike rates today. >> when you have a risk off because of the change in monetary stance as you start looking at reduction of the balance sheet, everything is going to come down eventually because you are going to see that correlation. over the longer-term, the winners are going to be pointed out. the winners are going to be the ones you need to be invested in in the long-term. it is going to be a bumpy ride. what that is why we are also looking at the futures -- that is why ridley at the futures to have your long-term position. shery: have chinese stocks found a bottom? can they start coming back this year? >> it not look like they have

found a bottom and there is some buying coming. they have a lot of underperformance they have to recuperate from last year. if you look at the u.s. versus china, it is a nearly 50% underperformance. they do have a long way to go back to catch up ted we tend to like the names. what kind -- we tend to like the geographic area. you have to take a diversified approach. only focus on the large tech darlings. take a diversified approach. shery: we continue to talk about the federal reserve actions. governor chris waller saying inflation does not start moderating after three rate hikes this year. the four or even five.

kathleen hays is here with her exclusive conversation. two is ready -- he is ready to do whatever it takes to bring down inflation. kathleen: both of you, we talk about the fed all the time. everybody on our show does. we know on our december meeting, there was a shift. september, hardly anyone was talking about rate hikes in 2022. in december, everybody is on board. every time i turn around, -- chris weller was the first fed official after the meeting to say he saw a march right hike but even today, i was surprised how readily -- i asked him about the possibility of four after three fed bank president said they could see four if inflation does not see -- does not respond

to higher rates. he thinks inflation is going to come down. the question is what if it does not? let's listen to part of what he told us. >> three hikes is still a good baseline. we will have to wait and see what inflation looks like in the second half of the year. if it continues to be high, the case will be made for four, maybe five hikes. if inflation falls back in the second half of the year as many of us think it will, then you can actually pause and not even go the full three. it is going to hinge on the inflation data the second half of the year. you cannot release things out. kathleen: let's dig into that deeper and to underscore what you said, i want to play something jay powell said very measured but pretty definite when he testified at the senate banking committee a couple days ago. >> if we see inflation persisting at high levels longer

than expected, if we have to raise interest rates more overtime, we will. we will use our tools to get inflation back. kathleen: you just said you could see maybe five rate hikes this year. i believe the december 17 remarks, you said there could be a pause after rate left off and then in the second half of the year go further. is it sort of like do whatever it takes especially if you don't see inflation starting to respond after you do see the first rate hikes going for four? you said going for five maybe. >> it really depends on what happens with inflation. if inflation is stubbornly high through the first part of this year, we are going to have to do a lot more. that is our job. that is what we are committed to do. if we have to do more rate hikes, we will do it could we also have the balance sheet. we can have the balance sheet

one-off earlier. that could lead to a tightening and policy and removing accommodation. kathleen: this is -- i would say if he did not watch it, watch the whole thing because i think chris weller lays out so much of the fed's new landscape. you're going to be raising rates but you are going to be letting the balance sheet runoff. that should put some support under long-term rates. i would say the question is at some point, will they have to get more aggressive and start selling some bonds? so that they can push yields higher. at the end of the interviewer, when i asked him if the fed may have to rethink the average rate target, he said yes, he thinks they may have to look at that. i think that is a very important thing for the governor of the federal reserve board to say. haidi: bank of korea.

are we expecting a move today? kathleen: bloomberg economics is not. you are looking at a couple of different things. two thirds of majorities surveyed by bloomberg to. let's take a look at the chart. inflation is well above target in korea. 2%. that is the greenline. they .7% on the cpi. look at the ppi. a lot of inflationary pressures in korea. there is high housing prices. there are several reasons why the bank of korea might want to move. on the other hand, the omicron variant. fires cases, all of these kinds of things that put uncertainty into any central bank's plan of what they're going to do next. there is a possibility of fiscal stimulus. governor lee of the bank of korea has opened the door to a first quarter rate hike. if they don't hike today in january, there is a lot of that is they will definitely move in

february. we will see what they do on the rate. if they don't move, we will watch the language of the press conference from the policy statement. governor lee recently has been clear about what his intentions are when it comes to moving rates. shery: our global economics and policy editor kathleen hays. you can turn to your bloomberg for more on this. you can go to tliv go to and that preview -- tliv . vonnie: a divided u.s. supreme court has blocked a key part of president biden's push to get more people vaccinated. it rejected an occupational safety and health administration rule that would have required 18 million workers to get shots or periodic tests. a vaccine requirement for nursing home and hospital workers was approved. the decision is a victory for 26 business groups and 27 republican states that sued.

the u.s. is said to be pressuring european allies to agree on sanctions against russia. sources say the white house is worried about slow progress with the going concern president putin concern -- president putin could soon order and invasion of ukraine. washington met this week with moscow. those talks failed to shed light on the kremlin's intentions. the russian defense ministry says its troops are pulling out of kazakhstan. the soldiers were deployed to the x soviet nation. protest over a sharp rise in fuel prices started in early january and quickly became violent. the government requested assistance from the collective security treaty organization, a russian led military alliance. the british real family says prince andrews military affiliations and patronage is of been returned to the queen. the bbc reports the principal and a logo go by his royal highness in an official capacity. prince interfaces u.s. civil

action over sexual assault allegations linked to jeffrey epstein. buddy him palace says they -- says he will defend the case as a private citizen. novak djokovic has been entered into the first and is ran slam of 2022 despite doubt over whether austria will allow him to compete. prime minister scott morrison says the decision on djokovic's visa is still ongoing. ill trillion open is set to begin monday with crowds kept at half capacity. 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. shery: still ahead, we are coming down to the bank of korea's rate decision. the bank of america joins us for analysis. next, evergrande joins us for what would have been its first onshore default. this is bloomberg.

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shery: retailing habits must -- having its best day since march of 2020. beat on the first quarter earnings. we are talking about a quarterly profit rising in the first quarter and showing resilience despite weaker sales at stories in japan. we still have the coronavirus pandemic and warmer weather weighing on the sales. operating profit did come in above expectations at around a billion dollars for the three months ending in november. at one point surging more than 9%. let's turn to property developer china evergrande. it has avoided what would have

been its first onshore default by winning investor support for repayment delay. let's bring in our china credit editor in hong kong. how will curbing government finance vehicles affect the broader crisis we are seeing as these were just one of the tools local government could keep off their balance sheet? >> we have seen estate firms have been crucial in managing the fallout of the crowd -- the property crisis local government financing vehicles have been used to cover the shortfall and by up land -- and buy up with. that will on the one hand make sense. lg ses are often very financially risky once.

it will have significant consequences for local government if this kind of policy becomes much more widespread. shenzhen about 80% of his land sales were by lg ses in november. you can see they are being used to come in and fund a lot of the financing to local government that was coming from developers. haidi: what is the end game when it comes to the broader property sector from a political point of view? what does president xi jinping -- what is president xi jinping going to do? >> as one analyst puts it, we are entering this age of rest after 20, 30 years and a golden age of cheap access to credit and debt field spending across many private developers. the real state sector was one of the few sectors in china

dominated by private developers. what we are seeing is state funds increasingly come in pit in that landscape where state funds begin to dominate, one big question investors should be asking themselves is where the opportunities are and where the risk is if state farm's come in. there is a risk we could see the return of this issue of moral hazard. this is a fundamental change in the nature of the moral landscape. it will have far-reaching consequences for investors. shery: we know they dodged on onshore default so what is next for them? >> evergrande kicking the can down the road again. most investors are expecting some kind of unavoidable haircut on the bond appeared all this means is investors are docketing

paid still. what we are looking for is any kind of findings or results from the risk management committee. any details on what type of restructuring, what type of haircut we may be seeing both on the onshore and offshore bonds. haidi: the latest 10 civic securities is planning to raise $4 billion to strengthen its capital billion. -- it's capital -- its capital. what do we know about the growth and aim of the capital raising? >> the company is raising 4.4 billion u.s. dollars from the shanghai and hong kong stock exchange. it said in filing a plans to use the proceeds to develop strength in its capital base and optimize its capital structure in the face of rising competition. specifically that it will spend up to 19 billion yuan to develop

the so-called flow-based business. the rest will be used to upgrade its information system and replenish the capital. the foreign competition is heating up. the competition is heating up under the chinese securities industry. most are companies like goldman, jp morgan have set up joint ventures in china. citigroup is planning to do the same. that is why the company is trying to trend a capital base of the rivalry. shery: how does this play into beijing's plan for the industry? >> citic is a state run company. the chinese landscape is -- there are too many players in the market.

quite fragmented. it is in the interest of the central government to have -- to develop a holmgren champion before all the wall street companies set up their business and get a bigger piece of the market. shery: our shanghai bureau chief. we have plenty more to come. this is bloomberg. ♪

haidi: a quick check of the latest headlines. the commodities desk at goldman sachs has been a comeback with revenue expected to top 3.2 billion in 2021. the compares to 300 million in 2017. the turnaround -- profiting from the wild drone in

oil and then from the power crunch. goldman sachs is said to be doing ads returned to the offices as it looks to without the covid surge across the nation. the bank has been an aggressive champion of having its offices filled. it had already mandated the covid-19 booster shot for anyone eligible to enter the offices. a consumer finances and it has left and investors set to inject billions of dollars into the company . it would have invested 943 million dollars for a 20% stake. coming up next, china's unbending approach to covid-19 has left the world's second largest economy all but shuttle from international travel. we continue to await more data in the coming hours. this is bloomberg. ♪

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>> next week, we will announce how we are making high quality must available to american people for free -- high-quality masks available to american people for free should i know we all wish we could be done with wearing masks. i get it my but there is a really -- but they are really important to me to stop the spread of the highly transmissible omicron variant. shery: president biden later said he was disappointed with the u.s. supreme court decision to block his push to acquire 80 million workers to get

vaccinated or face frequent tests. i didn't is calling on the business community to step up faxing requirements. china's unbending approach to covid has left it practically shut off from international travel as it tries to eliminate the coronavirus pea ridge fewer than 500 inbound flights were scheduled this week compared with 10,000 this time two years ago. despite the fact that covid has agreed to have up on the global airline industry, we always thought china was a little more resilient because we have continued to have those domestic flights. what are we seeing now? >> you are right. the saving grace for the chinese airlines is the market. the figures have told us flights are actually much higher than what they were pre-covid levels.

a lot of focus on the chinese carriers are being focused on the domestic market well pretty much the international market as close because of the stringent border measures china has imposed since the outset of this pandemic. haidi: when could we potentially start to see a reopening of borders? >> everyone is expecting that the winter olympics as it is just around the corner, china will for sure keep orders closed until the olympics. the winter olympics are very important to china. after the olympics, when we could expect the borders to reopen, that depends on how comfortable the chinese government feels about the pandemic being in the community in china. the consensus i have been hearing is pretty much the --

much of that it may be as long as next year that china starts to reopen the market. it is a lot of questions -- it is a question a lot of people are asking should shery: china is now allowing the mac to fly again to -- the max to fly again. how big is this? >> china has a very big order for the max. for the chinese government to allow it to fly again is significant because boeing will be able to resume deliveries to the chinese airlines and that will help them on their financial statements itself. it is good because china has been the first country to ban the max when the two accidents happened in 2019 and 2018. that will build up some confidence on the max and allow other airlines in other

countries to fly their max because right now, they are really not flying anywhere because of covid but also restrictions with china because a lot of those planes are used to fly to china. haidi: the latest on the international border situation. we have breaking news when it comes to a big deal at you ob. the lender to acquire consumer business in southeast asia. to buy assets in indonesia as well as vietnam. a net asset value of 2.9 billion u.s. dollars. saying that the asset value of the acquired businesses of 4 billion singaporean. we are seeing they will be paying 915 million singaporean. the net asset value of

businesses at the completion of that deal. this coming as we see uob's recovery looking robust. the profit outlook according to bloomberg intelligence is looking rosy as well. singaporean banks looking to have a lightless property related risks and exposures compared to their chinese counterparts. let's return to china. the property town turn -- property downturn one of the factors being considered. let's get more on what we are expecting including a potential mlf cut. what is the balancing act here for the pboc particularly as we start to look at what the end game is for the property sector from the leadership echo >> --

leadership? >> the government has pivoted to april goods stance. the pboc is part of the picture. going forwards, we are likely going to see more easing from the pboc. the pboc has acted already aggressively buy china's standards in december cutting their rrr, cutting the lpr. the more rate decisions coming out, the timing is not clear when it is going to be. to announce the mlf rate. and later next week, it is going to be an announcement on the

lpr. we think potentially the pboc might cut the rate. the two rates are not necessarily going to be moving stack by stack in technical terms. one is a policy rate. when is a market rate. we think given the economic uncertainties triggered by the property market, it is more likely that government is going to follow the lpr cuts. shery: the economy is still supported by strong external demand. especially when we look at the export numbers in china. what are we expecting in terms of the shipments? we are expecting the data soon. >> indeed.

the external sector is -- we have been talking in recent discussions a lot of weakness in the domestic market. by external sector. a lot of strong external demand. the rest of the world and shifting a bit more. that would mean even bigger demands for china's exports. a lot of the other exports, the production -- going forward, we do see stronger support. we can also think of the asset agreement can give the extra left.

shery: let's get to vonnie quinn. vonnie: chicago fed president charles evans says rates could rise up to four times this year. officials have three increases. he says that may change if inflation data don't improve quickly enough. the philadelphia fed president also sees up to four hikes and favors a march left off. the richmond fed president says officials should be ready to normalize by them. fed governor with lael brainard says interest rates should begin by march to ensure inflation is brought under control. his chances of securing a smooth confirmation as vice chair appear good. she told lawmakers the fed will be in a position to begin at hikes once asset purchases end but which is scheduled for mid march. >> inflation is too high and working people around the country are concerned about how far their paychecks will go.

our monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone. this is our most important task. vonnie: an official in china has warned companies could face boycotts from chinese consumers. removing chinese products while profiting from the markets will face resistance from consumers. western governments accused beijing of human rights abuses. 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. shery: the bank of korea has raised its key interest rate as expected way 14 out of 19 economists surveyed by bloomberg. the rate at 1.25%. this would be the third rate hike since the pandemic started of 25 basis points.

we have seen inflationary pressures in south korea. cpi coming in above the central banks to percent inflation targets for nine consecutive months. let's discuss with a korea economist at bank of america securities. it seems to be pretty much expected especially as we get more confirmation from the prime minister we might get that extra budget as well. >> you are right. there has been an announcement the supplementary budget would come before the lunar new year. or importantly, the bank of korea just raised the rate, which gives room for the bok to breathe a bit from here now that the government would step in to support the economy even with the third rate hike kicking in on a fast pace compared to the previous hiking cycle. shery: what does that mean for the inflationary pressures?

we are talking about cpi as this gtv chart on the bloomberg shows. >> inflationary pressure has been building up and we have seen over 3%, well above 3% in the cpi basket. when we took a closer look into the inflation, the breakdown shows there is a lot built up from the supply side story including the oil prices and the food price increases, which we think on the base effect will kick in from the second quarter this year to be able to push down the headline a bit. at the same time, the demand side inflationary pressure is still showing a steady increase, which we think could be an upside risk to our forecast of 1.8% for this year. haidi: what do you make of the

decision not to give itself a little bit more of a buffer space given the and or miss uncertainty of open -- of omicron? >> i think there has been a concern about the high level of uncertainty of omicron. has been a list of distancing restrictions from early december. we have seen consumer sentiment falling in december because of this. at the same time, the bok thinks the negative impact on consumption from social distancing implementation compared to previous days has gone down another government is stepping in to discussing the supporting of the consumption and small businesses, i think the bok could overlook the negative effect this time to complete their normalization back to the pandemic level. haidi: there is a more aggressive -- does a more aggressive fed force the hand of

the bank of korea to follow? >> i think the bok has started the rate hike a earlier than the fed. that gives them the room to pause even if the fed hikes from here. at the same time, we are now seeing a much faster cycle and much more of a number of hikes than we expected. that could give a risk just looking at one rate hike this year to another one in the second half. i would not expect bo thek -- expect the bok to follow in terms of the rate hike numbers. shery: how healthy is it right now? any time we think about south korea, with thick about household debt, youth unemployment. where we at right now? >> the household debt issue has been a pressing problem for the

economy. when we see the size of the debt, it is over would hundred percent of the gdp, especially during the covid pandemic. we are seeing the hospital and corporate sector debt building up. the government has been concerned about the surging rate for those who need to pay the higher interest payment from here and onward. at the same time, the immediate risk to the economy is slow because the breakdown of the borrowers, especially among the hospitals, we are seeing more middle to high income families having the -- the new borrowing from last year. the vulnerable households with low credit ratings does compose 6% of the total household debt right now. i would say the bok could focus

on slowing down the debt curve. we would not be worrying about immediate risk posed to the financial system over the overall economy. -- or the overall economy. haidi: you can turn to your bloomberg for more analysis on the bok's policy direction. get policy analysis and commentary from expert editors as we continue to get you that analysis. ♪

shery: take a look at some of the stock movers across japan. fast real telling -- fast retailing continues to gain ground. we are also seeing seven and i gaining ground. hit catchy construction down the most since october of 2020. they are under pressure. we are watching tsmc shares indicating more than 3% higher in taiwan. the world's biggest ship -- biggest chip founder is allocating $40 million to address the semiconductor

shortage. tsmc is investing heavily in new fabrication plants. our asia tech reporter is in taipei with the details. tell us more about tsmc's spending plans. >> tsmc is spending as much as $44 billion this year to capture growth. most of the spending will be used to develop technologies including most cutting edge two millimeter chips. they can determine their leadership against major rivals. spending is at least 40% higher than what intel plans to spend

this year. tsmc -- you have seen the spending spree in the hope to maintain its technology leadership. haidi: when do they expect to come other this massive spending and what are we seeing as a response in the markets to this? >> tsmc has also raised its sales growth forecast for the next few years. it has as much as doubled its forecast to as much as average 20% annual growth for the next few years. it has said margins will grow to at least 15% of gross margin over the next few years.

tsmc closed 5%. haidi: our asian tech reporter in taipei with the market reaction to tsmc's plans. we have more to come on daybreak: asia. this is bloomberg. ♪

shery: ford's market really topped $100 billion for the first time as it doubles down on its ev strategy. general motors and electric trucks. ford is ramping up production of its electric pickup and utterly powered mustang. shares are at a 20 year high. securities wants to raise 28 billion yuan, about $4.4 billion. they say the protein -- the proceeds will be used for the development of its subsidiaries and strengthening information systems and replenishing working capital should trading will be suspended from an array 19th to 27 -- from january 19 to 27th. haidi: take a look of the stocks

we get into a half an hour away from the start of trading in hong kong and mainland china. we will be watching citic securities on the fundraising plans. an effort to compete against wall street's presence in china. watching singapore air. this coming as we continue to see the renewed pressure on the aviation sector with the omicron wave to tech -- the omicron wave. we'll be watching for that sector as other markets joined the fray. under pressure with the selloff. including the chinese listed adrs -- chinese adrs listed in the u.s. we'll be watching the property sector, the developers including evergrande, the property developer of letting its first default on a public onshore bond as the story continues to develop.

shery: we are seeing broad downside from markets. the nikkei, the kospi all down. the nikkei being led lower by industrials and real estate. the kospi is down by 9/10 of 1% to the asx 200 down by as much. the korean yuan not moving as much despite the fact we sell the rate hike because it was pretty much expected kid 14 out of 19 economist had expected the bok to hike rates. inflation continues to be an issue around the world. haidi: our previous guest made a point when it comes to the bank of korea. perhaps it is better they get ahead of the curve. there were the ones to raise quite early. even if the fed does get more aggressive than with the market is pricing in, perhaps some of the banks with the likes of new zealand will not be forced to make that decision to follow the

hawkishness. central banks continue to dominate sentiment. continuing to watch for what the virus developments are. speaking of central banks, pboc in focus next. are we going to get more stimulus next year?

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>> happy friday morning from the asia-pacific. it is 9:00 in beijing. welcome to "bloomberg markets: china open." we are counting down your last sessions of the week here in hong kong. yvonne: the bank of korea hikes again as inflation melts.