>> you are watching "daybreak: asia." >> we are counting down to inches major market open -- asia's major market opens. hong kong marks 25 years of chinese rule. in asian markets, the second half begins. recession fears dampening risk appetites and bolstering sovereign bonds. wti marked its first monthly decline since november as opec-plus signals further production and increase. >> we are in the second half of trading, but the first half miserable anyway you look at it. we will be looking for a better direction into the second half. in terms of the direction for trading this friday, we will be looking were cash market opens for treasuries.

for now, with the opens of japan, korea, and australia. we did see the drop in yields in the previous session so we will be opening up to a cautious start to trading. eyes on the asx 200. futures point to a moderately brighter start but we did close the financial year with a 10% drop for the asx 200. in japan we will be keeping an eye on the end. we were nearing -- on the yen. that 137 out of play for now. we have chicago nikkei futures coming online, fractional weakness at the start. >> we have seen strength in the dollar. the best quarter since 2016. really having to do with haven flows, higher rates as well. u.s. consumer spending really today falling for the first time this year. we are seeing u.s. futures under further pressure in the asian

session after the s&p 500 lost ground for a fourth consecutive session. we are talking about the worst first half since 1970. tesla seeing its worst quarter ever. amazon seeing its worst quarter since 2001. the 10 year treasury yield fell below 3%. what a reversal after the decade high of 2.5%. just a few weeks ago. we have seen the downside on oil prices. right now we are seeing a little support. still around the $106 a barrel level. we have seen not only the opec-plus meeting, but also president biden expected to ask for more supplies when he visits the middle east in july. really it is all about the recession and demand concerns. >> we are watching hong kong with chinese president xi jinping declaring the city reborn after arriving in hong kong for his first visit in five years. the first since beijing's

sweeping crackdown on the pro-democracy movements. >> after the storm, hong kong has been reborn from the ashes. hong kong is showing vibrance. the one country to systems policy has strong vitality. >> as the countdown to this morning's ceremonies in hong kong, let's get to our chief north asia correspondent stephen engle. this idea of a rebirth is fascinating given how much we know the city has changed over the past five years. >> it feels like this is almost like another hand over, if you will. 25 years ago in 1997, that handover happened at the hong kong convention center. that of course was a rebirth if you will under chinese rule from the british. this time of course after the last three years of turmoil under carrie lam, that really started from the embers, if you will, of the umbrella movement and the occupy central.

there was some grace period for carrie lam in 2017. when xi jinping last visited the city. but he did make a warning there that any threat or challenge to chinese rule of hong kong would be absolutely impermissible. that was a warning that played out the last few years after carrie lam introduced the extradition bill that led millions of people onto the street. then we had the national security law, the complete overhaul of the electoral process allowing only patriots to serve in the legislative council. we saw hundreds of pro-democracy supporters and activists arrested. still awaiting trial. then we have the pandemic response which carrie lam was widely criticized for, not making hong kong that prepared during earlier this year. this fifth wave that killed some 9000 people. it has been tumultuous. i guess i can concur with xi jinping, a bit of a rebirth because they have implemented two years ago on this day the

national security law. to be fair, it did calm the street violence, but there is still a chill. there is an erosion of civil liberties and there is also the threat, not even a threat, it is written into the basic law the legislative council must pass article 23 of the basic law, which is hong kong zone security law. in addition to the national security law we are going to get emphasis in the first year of john lee's term of this article 23 which will add onto the national security law. we will get more signs from xi jinping when he speaks later this morning within the next hour or two. on the security situation. but also any sign of that hong kong perhaps could relax its strict quarantine policy. >> good point. we saw reports that carrie lam had planned a dinner for xi jinping but that had to be canceled because a virus concerns.

what celebrations are we expecting today? >> it is my understanding that xi jinping and his wife did have dinner with carrie lam last night. it was just not the large banquet that was planned because of the number of cases in hong kong. a couple of the incoming cabinet members, executive council members of john lee's cabinet came down with covid. they are having 1500 plus cases a day. granted people are not dying like in the fifth wave in february and march, but still there is a presence inside -- a presence of covid in hong kong. xi jinping came off the high-speed rail wearing a mask. he did not take that mask off. only when he gave the press conference at the station. that's why he did not stay the night here in hong kong last night either. security as well as the covid situation. he went to shenzhen. from my understanding he should already be back here in hong kong for this morning's

proceedings, but yes, there is a security threat. john lee as the new chief executive, the former security chief and the former chief secretary who was in charge of the covid response, and the security secretary was in charge of implementation of that national security law. he has still talked about the terrorist threat that persists here in hong kong. chinese leaders including carrie lam have always talked about foreign power. they keep saying there is foreign interference in hong kong. there is a threat, xi jinping has taken the precautions, but he is still here to stamp his approval for the turning of the page of the next 25 years for a stable hong kong. stability, number one priority for xi jinping and for hong kong. >> bloomberg's chief north asia correspondent joining us from hong kong. we have plenty of analysis and commentary on what is coming up including the former democratic chairperson emily lau and the ex

ceo of the hong kong exchange charles lee. here is an the u.s. the selloff in stocks steepened after weak consumer spending data fueled worries about a recession with the s&p suffering its poorest first half since 1970. garfield reynolds joins us now. could we see a rebound like we did in 1970 this time around? >> well, it could be tougher this time around given consumer spending and also the previous data showing gdp had shrunk by more than expected. there's a lot of nasty data points that the economy is cooling quite rapidly. people are looking past the idea that the fed is likely to do it on the 75 basis points and

perhaps more because they want to see inflation noticeably cooling down. now, there are some potential reasons why inflation might start to fall but it is going to take a while. until it does the fed is going to keep hiking interest rates. interest rates are a blunt tool and they take a while to take effect. so it is hard to see an easy road to a rapid recovery. then again, there are plenty of occasions where stocks have taken off well before you would think they would, even in the face of things like earnings downgrades. i suppose the thing is bond yields have come down and bonds also down. not quite as cheap as they used to be. if you had money in bonds and they start to calm down, money flows into equities, we could get a rebound. at the moment, there are a lot

of that need to come together before that can be the picture. >> we saw oil seeing its first monthly drop since november. the first drop in a year. there has been talk about how this narrative could be broadened to the volatility and recession fears we see across other asset classes as well. >> very much so. oil has been -- you know, oil is very closely linked to what has going on with russia's invasion of ukraine. that has been the single biggest unexpected or less expected disruptor for this year. we came into the year, inflation was high. the fear was hiking rates. but there are a few investors taking into account the idea

russia would actually go ahead and invade ukraine. also the idea this would be a long drawn out conflict, which is what we have ended up with. so russia has been banned from large parts of the global economy that have understandably impacted oil prices, sending them very high for quite some time. now the combination of demand destruction, i see prices getting so high people start buying less fuel, and some sign that production is starting to pick up a bit in places as people invest and oil is so much higher as well as the fact that people are adapting to russia being shut out of markets. with all of that, there is the potential crude oil does not rise as far in the second half. that should cool down volatility, should help to feed the idea inflation may be peaking.

>> garfield reynolds with the latest. let's get you the first wheeler -- the first word headlines. the u.s. supreme court has restricted the environmental protection agency's authority to curb greenhouse gases from power plants siding with coal companies. it is a blow to president biden's climate change agenda. the majority said the epa can regulate emissions but cannot try to shift power generation from fossil fuels to cleaner sources. president biden says he would support changing the senate filibuster rules to pass legislation ensuring privacy rights and access to abortion. it follows the recent supreme court decisions including the overturning of roe v. wade. biden has been under pressure from liberal democrats to respond more aggressively to the court's ruling. >> we have to codify roe v. wade in the law and the way to do that is to make sure congress votes to do that and if the filibuster gets in the way, we

should provide an exception for this. >> colombia's central bank delivered its biggest interest rate increases and over two decades at 150 basis points, potentially putting it on a collision course with president-elect gustavo petro. the bank signaled future hikes may not be so steep. annual inflation is already above 9%. the head of japan's bank industry lobby group is warning that the boj should pay closer attention to its ultra easy monetary policy. the japanese bankers association chairman says the time to -- says it is time to weigh other factors after the yen hit a 24 year low. it is rare for the group to dissent from policy measures than public. >> still ahead we will discuss hong kong's political future with emily lau as today marks the halfway point of one country to systems -- one country, two systems.

mainstay capital's david joins us just ahead. this is bloomberg. ♪

>> this is a point of great uncertainty. >> uncertainty. >> uncertainty around inflation.

>> significant changes since the pandemic. >> transition point in the market. >> how far rates are going to have to rise. >> the fed acted too late. >> the question we have is growth. >> the question is on earnings. >> margins must come down. >> volatility is likely to persist. >> we need a different strategy. >> we still have a long road ahead. >> guests on bloomberg tv talking about uncertainty as we head into the second half of the year. our next guest has a balanced portfolio of growth and value stocks which will be important for this year. always great to have you with us. we continue to see the outlook for the u.s. markets, for the u.s. economy, dimming ready fast. how do you hedge this? >> it has been important and you said the balance between growth and value. the important thing in the

u.s. and many markets around the world has been to move away from the indexes and find areas where you still have opportunity. we did that earlier in the year. we have scaled back wait a bit now. -- quite a bit now. we shorted bonds the first half of the year. looking forward with the chance of a recession, with defensiveness that we need to have in the markets -- we are looking more at health care, utilities, consumer staples. defensive components of the portfolio. >> i'm surprised you have pulled back in the energy investments. we continue to see tight supplies. is your concern about recession outweighing that? >> certainly if we have a full-blown recession, a deep

recession, we have -- and that is what the fed is doing. the fed has a blunt tool. they can with interest rates reduce demand and potentially launch us into a recession. but certainly slow economic growth. energy demand should come down. but energy demand has been running very high this year. when we look at the energy stocks, whether it is the integrated oil companies, bnp, those companies are enjoying considerable free cash flow that is falling right through to the bottom line, making these stocks very attractive. we have had quite a bit of a selloff in june in energy stocks. we look at that as a buying opportunity. >> do you think valuations have fallen to a point where there is not going to be enough when earnings do disappoint? >> i am not sure they have fallen enough yet. they have come down a lot from just six months ago. you know, the guidance we are

seeing now, the guidance we have seen from chipmakers, technology companies, there is concern there that there is further downside in some areas of the market. that is why we want to have these defensive components in our portfolio. outside the traditional place. -- plays. >> the commodities theme continues to be an opportunity for you. >> earlier this year we had the highest waiting in commodities ever in the history of our firm. we have cut that to a third of what we had a few months ago. the concern is in a recessionary environment, slowing economic growth, there is slowing demand. we are seeing demand destruction. maybe even the areas of fossil fuels, petroleum products, but as we look forward we think it is still a good diversifier for

a portfolio. but just in a smaller scale than where we were a few months ago. >> talking about demand destruction with a jump in mortgage rates, we have seen housing demand fall. what do you think of real estate? >> are concern has been just that. we started the year above 3% on a 30 year mortgage. we have been approaching 6%. depending on what the fed does on two fronts, continued increased rates and when they start to sell mortgage backed securities, roll those off the balance sheet, we see mortgage rates moving even higher. there is an etf we like, are ek, which shorts -- rek, which shorts the housing industry. we think it has further to run as we see continued softening in housing in the u.s.. >> david, always great to chat with you.

david kudla, founder and ceo at mainstay capital management. you can catch up on key analysis and save charts for future reference. this is bloomberg. ♪

>> some of the stories we are watching, over the and japan we have a ton of eco-data. pmi numbers for june set to be released in the next hour. around half an hour or so, the boj's tankan survey and japan's jobless rate expected to hold steady at 2.5%. also over -- we will get trade numbers, economists predicting

the second-biggest deficit in june. because of the impact of the weakening of the won and of course soaring import costs. also do in four to five minutes is the s&p global south korea pmi number and we are keeping an eye on south korean equities after that mass exodus of foreign investors selling off over $9.6 in the second quarter. -- $9.6 billion in the second quarter. >> micron shares slid after a week forecast for the current period. the maker of memory chip says consumers are cutting back on spending. the outlook reflects a slowdown for two key markets, consumers -- computers and smartphones. consumers and businesses have been raining in spending on recession fears. insider between 2011 and 2016. they admitted to profiting from controversial revenue and earnings information over his

decade-long career at apple. he was one of the most senior executives reporting directly to the company's general counsel. he will be sentenced in november. an x fund manager has one of $52 million settlements, one of the largest arbitration awards of its kind. he was seeking $600 million for defamation than the hearing. the fund fired him after an investigation prompted by employee complaints acknowledged offensive conduct. tencent cutting more jobs as the economy slows. dow jones reporting tens of thousands of jobs were already asked last year after beijing's regulatory crackdown. previous losses were focused on units but now the company is said to be extending those. coming up, more special coverage of hong kong's 20 for handover

anniversary including a look at china's tightening grip on the city -- 25th handover anniversary including a look at china's tightening grip on the city. ♪ mom: how was school? dad: wow! ♪

vo: music can help you express how you're feeling. when you can't find the language, find the lyrics.

>> we are getting breaking japan

eco-data. we are seeing the numbers for tokyo cpi inflation numbers including fresh food year on year coming in at 2.1% for june, including fresh fruit and also volatile energy prices. we are seeing a gain of 1% extending the reflation picture we have seen over the past couple months. we are also getting the jobless rate. just a little higher at 2.6%, higher than expectations of 2.5%. just a touch higher than the 2.5% we had in april as well. jobs at a good ratio for the month of may coming in at 1.2 four, on expectations as well. this as the boj continues to stick to its ultra easy monetary policy despite pressure from the markets, as well as from other policymakers as well. including the yen sitting close to a 24 year low.

let's take a look at how we are setting up for this final friday session in asia. >> we are just watching the market reaction to those numbers. pretty muted here. the yen moving fractionally against the greenback. it really is about that boj policy, whether they are going to keep with the courts here. and the yields we have to be watching as well because they ar pointing to weakness. we have seen the 10 year reaching the upper end of the target range over the previous quarter. the boj did just release its bond buying program and it is keeping its policy settings here unchanged, but the showdown between bond traders and the boj , what could exactly change -- force the boj to switch attack? -- switch tack? we are hearing from j.p. morgan it is not going to be the bond vigilantes. what might force boj to

capitulate would be some kind of move in service inflation, which has been muted. the cost push factors pushing us above the 2% level for the national cpi, strategist, the boj does have enough firepower -- strategists at j.p. morgan saying the boj does have enough firepower, and already owning about half of the jgb's, but sharing a very big for japan eco-. >> we will be watching what business sentiment looks like especially with a weaker yen. but also a big hour in terms of hong kong and the celebration of the 20 for handover anniversary. -- 25th handover anniversary. xi jinping already in the city and the celebration kicking off in the next hour. he spoke as an hong kong declaring the city being reborn,

expressing confidence in its future. stephen engle is by hong kong harbor with a special guest. >> of course he was referring when he said reborn from the ashes, essentially to the last three years of turbulence. that was of course capped by the national security law exactly two years ago on this day. yes, it has calmed down the protests and violence on the streets, but it has left a chill in the society obviously and things are different 25 years into the experiment known as one country, two systems. someone who has played a critical role pre-and post handover 1997 is emily lau, former ledge light of councilmember and the former head of the democratic party of hong kong. she joins us now harborside in front of the building where the handover happened 25 years ago. what is your initial feeling halfway through one country, two

systems, the 50 year experiment? >> it is very sad. in initial years of the handover , people did enjoy freedom. personal safety. the rule of law. there were huge demonstrations, very peaceful and orderly, and no one was arrested. but the last few years, many of my party members and many activists have been arrested and they are languishing in jail. some have been locked up there for now coming up to 600 days with no trial. this is not the hong kong we know and love. now that xi jinping is here, i hope the central government will know we are most of us patriots. we are not fighting for independence or revolution to overthrow the government. we want the promises in the final british joint declaration in the basic law so we can return to the days of safety, of freedom, rule of law, and developed democracy. and of course, we would love to

have a peaceful, stable, prosperous economy. >> do you think there is room for political healing in the city or is the damage done? will the democrats ever have a say in hong kong politics again? >> of course there is room. we do not want and we cannot use violence to solve the problem. how can you be more violent than the people's liberation army or the national security police? >> why is 2019 and 2020, why did it turn violent? was it provoked? >> i do not know, i think it is very tragic and very unfortunate that it happened. my party, many of us did not support it and we asked for an independent inquiry to find out how it happened, why it happened. some said it was cia money. ok, let's find out. we are not just investigating the police. there was police brutality.

there was brutality on the other side as well. so let us find out. what we need is a commission of inquiry for the authorities to reach out, to have dialogue with the opposition, with the hong kong people. this is the city that is split asunder. there are those who are very pro-beijing and there are those who are very angry, very disturbed. how do we heal this wound? >> by voting? >> choosing paint has the key -- xi jinping has the key. if he allows engagement with not just my party, but the opposition. >> will he do that? carrie lam came in with an olive branch following the obvious disruptions of the umbrella movement and occupy central. it quickly turned sour when she introduced the extradition bill.

she even donated to the democratic party out of her own pocket. >> $30,000. she went to the civic party gathering, she has visited the hong kong journalists association. what did she say? president xi jinping said it was a very good beginning. he said beijing approved. but then in her misguided way she introduced the extradition bill and even when one million, 2 million people marched peacefully, she refused to withdraw the bill. that is why some people call her -- she should be held responsible. so now we are turning over a new leaf. i agree with john lane. let's -- with john lee. let's start fresh. >> he is a career law official, he wants to push article 23, there's going to be more security. >> i tell you i optimistic -- i

am optimistic. people will say my head needs examining. i was not born yesterday, but i am positive and i will do my best. i stepped down from the ledge late of counsel. i will never step down from the fight for human rights, rule of law, personal freedom, and democracy. i will do it in a peaceful and nonviolent way. i will continue to speak out until i'm not allowed to are not able to. >> we talked about the erosion of the civil society. maybe the self-censorship that is going on because of the vaguely written national security law. is that the new normal for hong kong? in an international financial center where we need transparency, we need weird dialogue as well. >> i agree. but civil society has not completely collapsed but it is

strengthening -- it is shrinking. you are right, to continue to be an international center we need the freedom of movement of people. the freedom of movement of assets and money. and the free flow of information. we need all of that. i hope president xi jinping understands that. hong kong can and should play a critical role in the development of china, but for him to appreciate that we are not a threat. do not listen to say -- to people who say we are a threat, that we are trying to overthrow the communist party. that is not true. have confidence in the people. then maybe people will have confidence the authorities. >> we have heard the marching orders for john lee, number one is correct implementation of one country, two systems. is that bridging the divide between the rich and the poor, doing the economic reforms while on the same side you are going

to have the political lobotomy? forget politics, concentrate on economics and hong kong will be stable. do you buy that? >> no. politics and economics are two sides of the same coin. although we have never had democracy, the right to elect our government, hong kong people enjoy so many political freedoms. for so many years. that is why we have been vibrant and free. the level of freedoms and personal safety we enjoy over the years, it is much higher than many places which have periodic elections. even if we can return to that and then developed democracy, that would be good for hong kong. >> i want to give the final word to pro-democracy supporters who are in prison because they have not had their day than court yet. they are bogged down in the procedural matters of the national security law and court proceedings. you visit them a lot. how is their spirit, generally

speaking? >> i do not visit all of them but quite a number of them, and they are tough. they are holding up. spiritually they are tough. but they say it is so unfair to them and their families, their relatives. their supporters. they are very unhappy. so on this day, this 25th anniversary, people are celebrating but some of these people, and there are friends and relatives, they feel so bad. we want to turn over a new leaf, new page. give everybody a chance so that hong kong can emerge as a phoenix. >> we are all using the same language. even xi jinping is talking about that. i guess it is a different method to reaching that goal. emily lau, thank you for your time and your candor as always. we are going to be here harborside all morning and throughout the day as hong kong commemorates the 25th

anniversary of the handover of hong kong from british rule to mainland chinese rule. back to you. >> stephen engle, north asia correspondent. we will have commentary on hong kong's future throughout the day. as steve mentioned, we are going to be talking to leading figures from the city's political and business sectors as well. you can get real-time analysis from bloomberg's experts as hong kong marks 25 years since the handover and gets a new leader at tliv on the terminal. this is bloomberg. ♪

>> you are watching daybreak: asia. here are the first word headlines. ukrainian officials are said to be exploring debt restructuring as funding options are at risk of running out. multiple scenarios are being considered and no decision is expected until the end of august. ukraine has until at least september when it faces a $1.4 billion redemption and interest payment. a federal judge in manhattan has thrown out a lawsuit followed by -- filed by apollo double management co-founder leon black alleging a conspiracy by former colleague josh.

the judge called racketeering claims glaringly deficient. catania brown jackson -- ketanji brown jackson has been sworn in to the supreme court. jackson follows democratic appointees elena kagan and sonia sotomayor in the court's liberal wing. >> the u.s. supreme court decision to overturn roe v. wade that protected abortion rights lead to public fury. it is a reminder of what president biden had to say. >> the one thing that has been stabilized is the outrageous behavior of the supreme court of the united states in overruling not only roe v. wade but essentially challenging the right to privacy. we have been a leader in the world in terms of personal

rights and privacy rights and it is a mistake in my view for the supreme court to do what it did. >> our next guest says the court approach threatens not only row but many other precedents protected under the constitution. joining us now, a professor of law. we appreciate your time. a judge from the florida court has said he will temporarily block the ban on abortions past 15 weeks on the grounds of privacy. does this kind of development, something that is encouraging? >> i do not think it is going to proceed very far because if the judge is relying upon the u.s. constitution, the supreme court is the supreme arbiter of the u.s. constitution and the supreme court has just announced there is no constitutional right to privacy protected in the text of the u.s. constitution. if the florida judges relying on

the florida constitution that is different. states can have their own constitutions. they can interpret the terms of their constitutions, a court has the power to do that. if we are talking about the federal constitution and the federal interpretation by the u.s. supreme court, it is the supreme law of the land. >> you talk about the slash and burn approach taken with roe v. wade. to be fair it was just justice thomas who pointed out these other precedents of griswold, lawrence. a lot of people picked up on that as increasing concern that these are other rights to do with contraception, with gay rights, that are going to be threatened. is that your view as well? >> yes it is. although the court majority written by alito tries to reassure it is not going to affect any of those other rights. so the same methodology, if you take it logically, applies

equally to those of the as well. >> that is what the dissenters say in the opinion. the dissenters accused the majority of being hypocritical. i would say deceptive in suggesting the methodology applies only to abortion and not any other rights. either they don't believe in logic and principal or they are lying. one or the other. they cannot have it both ways. >> you mention states having the ability to counter some of those ruling. at the same time of course we have those back to back rulings, especially involving gun legislation as law. that actually went against states like new york. what could be targeted next? >> you are correct. support has seemed to apply a different approach. the court would argue it is consistent because there is a constitutional right than the second amendment to bear arms

which is why they have taken away the power from the states to enact their own regulation. but in the area of abortion, they think there is no constitutional right and that the state has full power and authority to enact whatever laws they see fit. that the democratic majorities believe in. >> aside from abortion rules, what could we see from the supreme court when it comes to rights being reversed? >> you could see contraception. many states believe life begins at conception. there are many forms of contraception that operate after conception to present -- preventing plantation. contraception could be first in line. but also same-sex marriage. even the right to choose your sexual partner without being convicted of a crime. all of those rights are protected under the same rubric of privacy and unenumerated

rights. if the court thinks there is no constitutional right to abortion it is hard to think of a principal reason why there is a constitutional right to contraception or same-sex marriage. >> there's a lot of talk about the codification of roe. is that a misnomer in that roe is a supreme court decision and overruling? does it work in the sense of codification or does it end up right back at the supreme court? >> it could end up at the supreme court. but you are right. roe v. wade is a judicial ruling but i think what they are trying to do, what some members of congress would like to do is an active federal law that would protect a right to abortion all across the country. the problem is they do not have the votes to do that and if they did get the right number of votes to enact such a law, it

could be challenged as unconstitutional and encroaching or going far beyond congress's authority to regulate interstate commerce perhaps, some members of the court actually believe congress does not have the power to regulate in this area. >> professor of law at uc hastings radhika rao. thank you very much for that. breaking news out of japan we are getting the large manufacturing tankan survey coming in at a weaker nine level. the expectation was for around 13 which would be a slight easing for the second quarter from the first quarter, but still much higher than the nine we got. the nonmanufacturing tankan, stable or according to expectations. large companies are expecting to increase 18.6%. this is a bigger increase than

what economists had expected. remember we are trying to seem the yen's impact on business sentiment right now. given the 24 year low against the u.s. dollar, not to mention the lockdowns we continue to see from china. tankan is now seeing the dollar-yen at 118.96. that is full year 2022, which is of course much weaker than the 111 level had projected for the first quarter. we are also getting lines from the boj right now saying the japanese companies seeing 2.4% year on year inflation in one year, the rate continues to decline for the three year and five year time spread at 2% and 1.9%. this is bloomberg.

>> it is a momentous day and a momentous period to come when it comes to hong kong, the commemoration of the 25th anniversary of the handover from colonial rule to beijing. we are seeing the incoming leader john lee and congregating

ahead of the flag raising ceremony at 8:00 a.m. hong kong time. we will also be getting the celebratory recession. we will be hearing from xi jinping as well, possibly. we did hear from the president talking about the rebirth of hong kong, the changes have taken place since his last visit five years ago. of course the enactment of the national security law. so many question marks as to what the city looks like in the future. >> especially given how much has changed in 2017 when president xi jinping delivered a tough message. we saw thousands joining the annual march, not the case anymore. we will continue to bring you more from hong kong. this is bloomberg.

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>> you are watching daybreak: asia. we are lives and hong kong is the city marks its 20th anniversary of chinese rule. -- 25th anniversary of chinese rule. >> xi jinping is in town to attend these events. john lee will be inaugurated as the new chief executive. we are watching the beginning of that flag raising ceremony in hong kong. officials including john lee in attendance. we have heard from the chinese president in terms of talking about this idea of a rebirth, a rebirth for hong kong. so much has changed since his last visit five years ago. we have had the pandemic which the city continues to contend with but a lot of questions for the future of this financial hub. >> our chief north asia correspondent stephen engle is reporting. this is such a momentous occasion. especially at a time when this

is the halfway point of china's 50 year promised to maintain hong kong's liberal institutions and capitalist markets. how things have changed. >> absolutely. the wind is picking up just in time for that flag raising in the building behind me as you can see on the live footage. we have a flyover of military helicopters with the hong kong flag and the chinese flag. the coram dictates the chinese flag is larger than the hong kong flag -- decorum dictates the chinese flag is larger than the hong kong flag. xi jinping was fairly upbeat saying essentially that hong kong had been reborn from the ashes and has been proving its prosperity and stability is intact. john lee will be sworn in as the next chief executive and he is all about stability. he is the former security chief, the former chiefry.

now he will be chief executive taking over the embattled and fairly controversial carrie lam. >> we were talking earlier about his idea of the grand bargain. the trade-off was the removal of a lot of political and social freedoms, but they have to deliver on the economy. how much of a challenge is that? >> it is what has plagued every single chief executive, the four previous chief

something none of the previous chief executives have been able to do in meaningful fashion. that is because much of the power is in the hands if you will of the large property developers, the tycoons. a previous guest essentially said in the next 25 years and beyond,, this experiment, you could see a lessening of the power of the operative tycoons. -- property tycoons who have been able to hold sway over the legislative side of the government. of course there is legislative reform now. there is a new man in town as far as the chief executive, who will be taking marching orders from xi jinping. we will have to see how that plays out if they can bridge the divide. there is a yawning gap between the rich and the poor in hong kong. that is something beijing wants to alleviate. >> for our viewers watching live -- you are watching live pictures of hong kong at the harbor. we continue to see the flag raising ceremony happening now. you can see the chinese flag and the hong kong flag. the chinese flag raised above. you see officials waiting for the flag raising ceremony including incoming chief executive john lee.

steve, tell us about how much the city has changed since the last time president xi jinping visited in 2017. we have the new national security law imposed as well. >> 2017 was the -- dare i say the calm before the storm. earlier in that decade we had the occupy central and the umbrella movement and there was some unrest here in hong kong. things calm down a little bit as -- did not seek a second term, a highly unpopular chief executive. carrie lam who was his deputy came in with an olive branch to the democrats and the opposition pledging to bridge the gap and bridge the divide. we talked with emily lau, the former chairwoman of the democratic party, carrie lam met with all the different parties here in hong kong, but met with the democratic party even

donated 30,000 hong kong dollars out of her own pocket. things really turned sour in 2019 when she introduced that controversial extradition bill that led to millions of people going onto the street, subsequently leading to the national security law and the overhaul of the election process to require that patriots only conserve in the legislative council. we only have one candidate, john lee, for the latest chief executive election, and of course the pandemic response. there has been lots of turmoil in the city and xi jinping in 2017 alluded to the bubbling discontent in the city. he said any challenge to communist party rule, chinese rule of hong kong, would absolutely be impermissible. he put a stark warning to those democracy supporters saying do not push it. sure enough after xi jinping left on his visit exactly five

years ago, thousands of people did take to the streets for the annual july 1 holiday here on the handover to protest. that is not happening this time around. five years later, no protests are allowed. any gatherings of more than four people are considered illegal. it is a very different situation here. some would say a dismantling of the civil society as well as underway. this is a city that beijing would like to see prosper but through economic means and being a conduit for chinese and international investors, not a political hotbed. >> stay with us as we see the conclusion of that flag raising ceremony this morning and hong kong. officials out in full force and we see more ceremonies this morning including of course the inauguration of the new leader. john lee will see a reception and speech from xi jinping and

the oath taking of the new leader. let's bring in a political commentator on hong kong and macau for his views. stephen just took us through comprehensively the promises that were made when the british handover to the chinese -- so much has changed and so much of that has morphed into the hong kong and the legal framework of policies that we have. what do you see for the future of hong kong? can it thrive as the financial hub when there are these restrictions, particularly when it comes to freedom of information? >> the future of hong kong remains optimistic because the chinese government focuses on utilizing hong kong as a new technological hub to mainland china and the outside world, emphasizing hong kong's economic

integration with the bay area. we are expecting president xi jinping to talk about hong kong's closer integration with macau and the greater bay area. in other words hong kong's role as a financial hub will continue, but hong kong as a political city will have to be sacrificed, will have to be diluted to a certain extent. >> this is the -- a momentous visit for xi jinping, the first time he has left the mainland in 900 days. he is one of the world leaders who has maintained isolation as a result of covid-19. the fact he is there in person, what does it say about his confidence than the city and the way -- confidence in the city and the way beijing is playing out? >> the visit is significant in several aspects.

first of all because hong kong has had a relaxed version of the zero covid policy compared to mainland china. his visit signals beijing's full confidence in hong kong policy in tackling covid-19. as such we can expect mainland china to open its door to hong kong a little bit further, after president xi jinping's visit. secondly, president xi jinping's speech yesterday afternoon emphasizes the role of hong kong and china's new renaissance. hong kong is going to play a continuously important financial and integrated role in china and especially the greater bay area. president xi jinping's visit to hong kong is extremely important

because the next part of unification will undoubtedly be taiwan. >> when do you expect that to happen, targeting taiwan? >> we have to listen very carefully to president xi jinping's speech today. if he talks about taiwan. if not, hong kong is regarded as a success by mainland china and we will have to observe in the october party congress whether xi jinping will have a new policy on taiwan. in other words, one country two systems according to the late chinese president with a stopgap measure for china to deal with hong kong and macau first and later taiwan. we can expect president xi jinping will use the success of the one country two system model

to deal with taiwan sooner or later. >> this is stephen engle to the harborside at the festivities. what is the recipe for hong kong to be more attractive with a lot of emphasis on the international exodus, but how about for the young people in hong kong? a lot of them feel they are priced out of the city, there are not opportunities, and let's face it, i have been here 31 years. the city has not created its own tech billionaires. i still pay my monthly parking in cash. it has left behind -- it is left behind technology wise. there do not seem to be homegrown industries. if hong kong is going to be more of a financial center minus the politics, what is the bread-and-butter going forward? >> the chinese government is calculating quite skillfully by

number one implementing the national security law and national education in hong kong. we are seeing a younger generation of hong kong who has stronger mainland chinese identity than the earlier generation. some of them who protested in 2019. china is using these five years to speed up the process of mainlandizing hong kong, making hong kong identity more attuned to mainland chinese identity. in terms of financial, technology area, we can see an unprecedented secretary for innovation and technology who was mainland born and we cannot see the situation before -- we have not seen this situation before. the ideas they can bring in

mainland people to govern hong kong and more and more mainland born people governing hong kong. >> but mainlandizing hong kong and integrating it into the bay area, how difficult will they be when you are trying to maintain autonomy for the city to keep that international credibility as a hub for financial markets? >> i think the fine balance is struck between that kind of internationalization and mainlandization. from the mainland, the balance has to be struck. for those people, especially the internationals who attach importance to the old hong kong, of course some of them are unhappy with the hong kong developments. but for the mainland officials, mainland authorities, and for

people who live in hong kong, they are calculating that there has to be that kind of balance and for those people who support -- they need to sacrifice to have a more politically patriotic civic society. the media here are expected to be politically loyal to the central government in beijing. the and other words, -- in other words, the coming 25 years of one country, two systems is going to remit hong kong to be a more mainland city but at the same time, maintaining the internationally financial status and this is the challenge the chinese authorities with hong kong. >> get real-time commentary and analysis from bloomberg's expert

editors as we continue to watch celebrations around hong kong marking 25 years since the handover and also swearing in a new leader. that is all at tliv on the terminal. of course we are following the market opens in japan, south korea, and australia as well. >> i'm going to kick it off with trade numbers out of korea. the deficit in the month of june widening still on the month. coming in at 2.4 7 billion dollars. imports, we cite gain of 19.4% on a year that was lower than what estimates had been for a 22% rise. exports, we saw a gain of 5.4% on the year. that was versus expectations of growth of 3.8%. korean exports is a bit of a bellwether for the health of the global economy and does indicate

to us the global economy are global demand is remaining resilient. let's change now to take a look at how we are looking for the start of trade in korea. we are seeing weakness -- sorry, the won trading like this. strengthening in the korean won, trading around a 13 year low against the greenback. that does complicate the picture for the be ok -- for the bok. that does inflate import costs. and of course there is a weight on inflation. we are hearing chatter of 50 basis point hike. in terms of the markets we are keeping an eye on the caused act -- the kosdaq. japan, a busy day for eco-. we had the tankan survey coming out. we did see confidence among japan's largest manufacturers deteriorating in the previous month more than economists

expected, coming in at nine versus estimates for 13. the survey does -- for the case of the boj to continue with easing. markets as well we have the nikkei coming online, trading fractionally higher. the yen looking like this. let's move now to the asx 200 coming online to the upside. perhaps being bolstered by those moves we see in the three year yields. the weakness or that drop rather, a boost to equities across the board. keep your eye on brent crude. fractionally higher at the start of trade. still we are on track for the third weekly drop. that would be the longest run of losses, bit of a tongue twister, this year the. -- this year, though. >> president biden says he is for changing the senate filibuster rules to pass legislation insuring privacy rights and access to abortion.

he calls recent supreme court decisions including the overturning of roe v. wade destabilizing. biden has been under pressure from liberal democrats to respond more aggressively. kentucky brown jackson -- ketanji brown jackson has been sworn in to the supreme court to replace stephen breyer. jackson is likely to be -- likely to be joining sonia sotomayor and elena kagan in the liberal wing. that restructuring and funding options are at risk of running out. multiple scenarios have been considered as note decision is expected until -- ukraine faces a $1 billion redemption and interest payments. those are your first word headlines. >> we are watching also plunging

13%, the most since january 2020. they have cut forward guidance. they are a retailer and wholesaler of muji, a very popular brand in japan and also across the world. they now have cut their forecast and are falling the most in two years despite the fact we are seeing upside for the topix. >> still ahead, more on hong kong's future after beijing's crackdown on political dissent and years of tough covid restrictions. charles lee joins us later. first, time to focus on inflation counters like consumer safety -- consumer staples as recession fears loom. this is bloomberg. ♪

>> we are taking a look. hong kong markets closed today but it is the 25th anniversary of the handover from britain to

mainland china. this chart looking at the performance of equities, the hang seng. markets closed today but we did see a drop for performance overall under carrie lam. we see that 13% loss under the past five years. that does compared to what we saw in previous leaders with gains over the past two leaders. it is not just a course about covid zero. it is about other factors as well. we did have protest measures here as well. we also have that divergence between the pboc and the fed. hong kong has been caught between. we are seeing a change in the terminal chart now ending carrie lam of course, ending here on a good note as i said, the hang seng just outperforming in the past month or so. we have a lot of investors turning bullish on the outlook for hong kong and mainland stocks.

there is the expectation we will see further fiscal support. we have china easing covid measures and further integration we can expect between mainland china and hong kong. we do have an etf fund being added to the stock connect scheme. >> we have seen 70% of fund managers now saying they will maintain or boost their holdings in china and hong kong in the next three months. we also see chinese indices rising at least 4% by year end. for marlis bring in -- for more, let's bring in a richard harriet . will china be the more stable bet given the outlook for the chinese economy and markets? >> can you repeat the question? you cut out for a second please. >> i was asking whether china would be the more stable and

safe bet given of course the outlook we are seeing now, dimming for the u.s. economy and markets. >> i think that is tough to say. china has so much tied up in the u.s. economy in terms of needing growth. china is a very big export. not only to u.s. but also europe. i think china cannot resist a global slowdown and a fall like that. but it has been said what goes down must come up and vice versa. chinese markets have been quite poor performers over a number of years now. in terms of stability yes, you might say there is more stability. but if we are going to continue to see a slowdown in the u.s. and the rest of the world, i do not think china can avoid that. >> what about the hong kong market and economy, given of course we have seen concerns about beijing's firmer grip on the city?

>> obviously hong kong's economy is more attuned to the mainland than it ever was. that chart you showed, a different chief executives, how the market performed under them, it is interesting if only because the first two chief executives, the hong kong market tended to be well followed -- tended to well follow the u.s. and global markets. the last 10 years, hong kong has followed the chinese market more. it will continue. the two economies are going to become inextricably linked. >> do you expect hong kong will be able to maintain its status as a global financial and trading hub? >> the short answer is no, but it will maintain its status as an international hub. by that i mean hong kong was always very global. almost agnostic to parts of the

world where it dealt with and where it traded. certainly covid has accelerated this dramatically. now it is more likely to be a gateway to china. in a way it really was not before. before it had a lot of third-party trade, nothing to do with china. i think we are looking at hong kong being a source of business for china and in that sense a lot of hong kong's future, in fact entirely hong kong's future -- is going to be dependent on the chinese economy and how the leadership field china should be operating in the economic mix. >> when you trade hong kong now ongoing in the years to come, do you have to make the regulatory hedges and assumptions one makes of mainland markets? >> no, i think the advantage in hong kong is the one place where one country, two systems still

survives is really in the economy. hong kong has so many advantages. that is its strength. but we have to wait for the borders to open before that picks up area -- we have to wait for the borders to open before that picks up. >> richard harris, port shelter investment management ceo. next we talked to former hong kong chief executive charles lee as we watch celebrations for the chines -- the 20 for the anniversary of -- 25th anniversary of the handover. ♪ psst. girl. you can do better. ok. wow. i'm right here. and you can do better, too. at least with your big name wireless carrier. with xfinity mobile, you can get unlimited for $30 per month on the nation's most reliable 5g network. they can even save you hundreds a year on your wireless bill,

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haidi: hong kong marking 25

years of chinese rule. as we reflect on the changes in the city not just over the past 25 years but even the last five years, which is when xi jinping last visited the city. he speaks about this idea of a rebirth, a rising from the ashes. we know hong kong has endured all the challenges of the pandemic, the lockdowns, quarantine restrictions are still under play, but a lot of historical economic challenges. the widening poverty gap, wealth inequality, the concerns over the political crackdown, the freedom of information issues, all really issues for the new leader john li to contend with. his inauguration is later on today. it is a momentous day but there are so many questions as to what this magnificent city will look like in the years to come. shery: especially as we continue to see very stringent order

restrictions with local covid cases not topping 2000 a day -- now topping 2000 a day. stephen engle is standing by with our next guest. stephen: yes, of course it will be a full. day of coverage here. harborside here in hong kong. behind me is where the 1997 handover happened and it is where the swearing-in of john lee will be happening. we are expecting momentarily. we wanted to get to our next guest, charles li, the former chairman of the hong kong exchange and clearing, the stock exchange here. he is the founder and chairman of micro connect as well. great to see you. you escape to down here in the wind and the rain. how optimistic, or is there a sense of trepidation a little

bit from your perspective as we turn the page on this 50 year journey of one country, two systems? charles: i am very optimistic long-term that we do have a short-term reset in many ways that is driven by geopolitical tension, monetary policy and the u.s., and also pandemic policies. and obviously certain policy realignment of china. so there are pains in the short-term but hopefully that is behind us. in the longer term i am absolutely confident that china -- if you are an investor, china is your biggest diversifier. because everything else around the world now is pretty much correlated with the u.s. one way or another and china is the only large exception. so if you wanted to put your money into a diversified board, china is a place you cannot avoid. still, china is the best world

market and that will not change. stephen: obviously when you were the chairman of the hong kong exchange you served a vital role as the bridge between east and west and institutional and private investors going in and out of china. but there has been a lot of rhetoric about hong kong's isolation right now, whether it is pandemic policy or actually more assertive policy for mainland china which has kind of put a bit of a freeze on ipo's in the capitol raising in the hong kong capital markets because of national security concerns and national security reviews. when are we going to resolve these issues and let hong kong do what it does best, which is capital raising? charles: in many ways our market, like every other market, has been affected by the pandemic. i think this lockdown we have experienced has impacted particularly local real economy,

for ordinary people's lives. but i think for the financial market around the world, a few people are actually in the officer work, i think financial markets still operate very smoothly, and that is the same case here. yes, the lockdown has impact, whether the ipo's, the market activity. it hasn't been affected that much but it's the investment sentiment which has been obviously going through some challenging times as we go through all this realignment period, and also when the geopolitical tensions hopefully subsides, the pandemic subsides, and monetary policy settles in. that will bring some stability back into the system. i do not think the lockdown itself necessarily is the primary driver for the market.

it is a combination of what i just talked about. going forward, we're turning the corner. the lockdown clearly is going to be removed as far as international travel is concerned. and i have been quarantining here for 17 days, but i understand it could be meaningfully shortened, all changed very shortly hopefully. obviously opening up with china requires a lot more time because that is not really up to hong kong, it is up to china, domestic policies, pandemic control. but i do think hong kong is going to be back on their feet and we are going to march forward. but i hope in the future we are not just equity market per se. a real financial sector. hong kong needs to move on to become a currency center, a commodity market center, and

ultimately over time a data center and data market center and crypto market asset center. a lot of this will require new technology foundation. stephen: charles, you piqued my interest when you said the quarantine might be reduced in the coming days. this next question is two parts. what are you hearing? you are well-connected. is it going to be reduced to five or three days imminently? what are you hearing? the second part of the question is, what do you want from john lee? he has unproven politically and unproven financially in the business community. he is a lifetime police officer. charles: well, i certainly do not really have any insight on the specific changes in pandemic control. i think common sense dictates

that we have to come down and the next level is five plus two, maybe two at home, or maybe the entire duration at home. this is not insight this is just common sense. i am sure the government will follow common sense because there is not a whole lot of room for us to really move. hopefully after this big day we will begin to turn the corner on that. in terms of leaders, our city has unique characteristics of being a one country to system, and therefore our leader has to have the ability to make sure we strike the right balance between the two. i think -- shery: what is your outlook for political and civil liberties under john lee and what will that do to the attractiveness of

hong kong for businesses also for talent? charles: i think clearly hong kong today is different, and is different not necessarily for a good reason what we know over the last few years. so this is a new norm. in terms of financial services, in terms of attracting technology and science and technology, it is really about the totality of our city and operating in a free and open society we continue to be. we all need to adjust to changes and financial services strives on stability and open society. and we need to strike the right balance on that. haidi: issues that have arisen from the pandemic but also

historical economic challenges as well. what you see as the top, top policy priority? charles: i think the most important one single thing to do is hopefully project confidence. and hong kong really, really needs our leaders to be confident. and the need to really give the world reasons to be confident. and i think i am fully hopeful that is going to come. stephen: charles li, thank you so much as always. great to talk to you, great to hear your candor. enjoy the rest of your quarantine, as we are out here getting blown away by the t3, the tropical storm hitting hong kong. this always happens in july for the handover. we always get blown away. thanks a lot for your time. haidi: continuing with the weather analogies on this day,

you can get more, hong kong, 25 years since the handover, and getting that new leader inaugurated today. that is all on bloomberg.com. let's take a look at some breaking data just crossing the bloomberg. we are looking at some asian pmi numbers coming through as we see headwinds continuing for asian economies. we are not just talking about recession risks for the u.s. by the same inflation as well as policy misstep risks for asia as well. this is a picture in japan coming up rima -- coming in pretty much on expectations. we are seeing some softening when it comes to the south korean numbers. taiwan seeing below the key 50 level suggesting we are seeing some contraction when it comes to this forward indicator of the manufacturing index and malaysia seeing a bump up. further into southeast asia we are seeing a slight bit of

weakness when it comes to the philippines as well as thailand and vietnam. let's look at how the markets are taking all of this as we get to this last trading day of the week. annabelle: we were looking better friday before he got the pmi numbers but since, we're seeing the equity space losing steam, noticeable in the asx 200. the kospi as well coming down. we had export numbers at the top of the hour and they did show shipments expanding 5.4% on the year. but slowness coming through in the month of june. there is another asset class doing pretty well on the start of the second half of the year and that is cryptocurrencies. we are seeing gains across the board. bitcoin about the key 20,000 level. it has struggled to break beyond that range so we will see if it heads beyond that to around 822 to 25 level.

some analysts have been saying over the last few days we could be near the bottom for cryptocurrencies. jp morgan is one of them indicating it is deleveraging across the industry really. may not have much further to run. also venture capital, the inflows into that space will continue at a pretty healthy pace. shery: let's now get to the first word headlines. confidence among japan's large manufacturers fell more than expected in the second quarter, supporting the central bank's argument for maintaining easing monetary policy. the boj survey found sentiment falling to nine in june from 14 three months ago. that is the worst slump since the peak of the pandemic. sentiment improved among large non-manufacturers as covid related restrictions the the u.s. supreme court restricted the epa's authority to curb greenhouse gases from power plants, siding with coal mining

countries. the 6-3 ruling is a blow to president biden's climate change agenda. the epa can regulate powerplant emissions but cannot try and shift the power generation from fossil fuel plants to cleaner sources. colombia's central bank delivered its biggest interest rating increase in over two decades at 150 basis points, potentially putting itself on a collision course with president elect gustavo pedro. the bank signaled the future hikes may not be so steep. colombian policymakers are bracing for another spike in annual inflation that is already above 9%. a federal judge in manhattan has thrown out a lawsuit filed by apollo global management cofounder leon black alleging it is -- a conspiracy to destroy his reputation by a former employee who accused him of sexual assault. the judge called has racketeering claims glaringly deficient. black says he will contest the decision.

and those are your first word headlines. haidi: coming up next, chinese stocks listed in the u.s. top in the s&p 500 with their best month in three years. we take a look at whether the rally has legs to continue despite mounting recession fears. this is bloomberg. ♪

shery: take a look at how markets are trading. we are seeing downside for japanese equities, reversing some earlier gains we saw today to trade down .2%. this would extend those declines this week for three consecutive sessions. this is the japanese yen continues its downside trajectory, very near to that 24 year low against the u.s. dollar. it was really about what comes with the u.s. equity selloff, and where we go from here as well. because the s&p 500 now seeing its worst quarter since 1970, or

worst first-half since 1970, down 21%. perhaps some optimistic point here, the upside could be that in 1970, the second half was a rally of 26%. haidi: we are really struggling to find some upside. i like how you keep bringing that historical example up as a reason to be optimistic. in asia, we did not do much better, despite having more idiosyncratic drivers for some of these markets outperforming. indonesia for example. the energy storing was really strong for some of these markets in particular. the first half for asia, the worst first-half in 30 years as well. the bond markets did not fare much better. that was the worst first-half on record here in asia. of course we have to quickly talk about currencies as well because the yen has been such a strong narrative. the biggest first half weakening

on record for the japanese yen. i don't think that surprises anyone given the price action we have seen. the first six months of the year are want to forget, but for the rest of the world, except if you were brave enough to be long china. you strong rally in the second quarter meeting the country's stocks provided a haven in the storm. can it continue? we are joined by david ingles. the only thing you can be certain about when it comes to chinese equities is that lack of certainty and that things will always be interesting. where do you think things are going to go from here? david: it was a relative trade, wasn't it? when you look at how the narrative changed between china and the rest of the world, and it's very important to put that in context, because it is a completely different place as far as the business cycle is concerned. obviously the reopening play. china's first-half, or 1970, the first half of china was the last two years. on a relative basis it is easy

to understand why you got a lot of inflows into the big u.s. listed etf's. we did a survey of 19 investors and analysts and they expect the gains to continue. 17%, roughly 13 out of the 19, think they will maintain or increase exposure through chinese equities. we also asked tem to what extent they think this rally could go further from current levels. at least 4%. i know that doesn't sound a lot, but juxtaposed against everywhere else that seems to be a decent place as things stand. and who knows if they are correct, really. shery: so it all comes down to earnings. how do valuations look going into the second half? david: that is a very good point. we've already seen economists start to incrementally ratchet up very low expectations and growth. the follow-through will be whether that comes through in earnings and so far we have not,

to be more specific, have not seen analysts move on earnings expectations here. i will land on this last point. people talk about how these valuations are achieved. on an absolute basis, yes, but certainly when you include in those calculations the fact that premiums are still high and interest rates globally are moving up, maybe we need to recalibrate those lenses a little further. a good example, the hang seng enterprises index compared to the 10 year average is right now, one standard deviation above that 10-year mean. back to you guys. shery: get real-time commentary and analysis from bloomberg's expert editors as hong kong march 25 years the handover and gets a new leader. that is all at tliv on the terminal. and of course don't miss our bloomberg special, a conversation with carrie lam, friday, july 1 5:00 p.m. hong kong time, 7:00 p.m. sydney.

this is bloomberg. ♪

haidi: a quick check of the latest headlines. an ex-manager won a settlement and will -- he was seeking $600 million for

defamation in the hearing. the fund fired him in 2018 after an investigation prompted by employee complaints over alleged offensive conduct. china great wall asset management missed a second deadline to publish its 2021 earnings report. it renewed concerns about the health of china's state-controlled bad debt managers. they said they cannot finalize valuations of some transactions with -- before thursday's deadline consists operations are normal. the u.k. described as its most ambitious global partnership. the brand will launch and build in india. as many as 100 shops are expected to open in india over the next five years. shery: we continue to watch the latest on hong kong. any time that we could be

getting the swearing-in ceremony of incoming chief executive john lee and his administration. just a while ago we had the flag raising ceremony in hong kong and this as we are now of course celebrating the 25th anniversary of chinese rule. president xi jinping is expected to give a speech and of course we will be looking for any signs on how hong kong can loosen its border policies as well. we heard from president xi earlier about how hong kong had been reborn since he last visited five years ago. and we really are awaiting those comments to get any more insight into his stance on hong kong. this symbolic visit to the city by president xi jinping. haidi: do we see a revitalization when it comes to hong kong equities as well? the visit really coincides with hong kong stocks seeing their best month since october 2021. that confidence projecting some boosted sentiment, and the

market believes, according to some analysts, that the central government will carry out more relaxation policies, according to imperial financial group. we are of course seeing the big boost to mainland china shares as well, benefiting from the shortening of the amendatory quarantine period, as well as that divergence with the underperformance we have seen in u.s. equities. shery: still ahead, we get more analysis on hong kong's future from s&p global ratings and the european chamber of commerce. that is it from daybreak asia. markets coverage continues as we look ahead to the start of trading in hong kong, shanghai, and shenzhen. standby for bloomberg markets china open. this is bloomberg. ♪

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