shery: you are one "daybreak: asia."

coming to you live from new york and sydney. haidi: an unexpected visit by house speaker nancy pelosi to taiwan further stirs tension between the u.s. and china. australia on track for the steepest tightening of monetary policy in a generation. shery: exciting numbers out of south korea. we getting the july print right now. given that we've heard just last week that the cpi numbers will come in about 6% or so in that range, but now we are finally getting that confirmation. in the previous month it was 6%. we have not seen above 6% lately.

still above expectations. the core cpi number, and acceleration from the previous month as well. it just makes you think what will it be ok to do? we've seen that record basis point hike in july. they will continue to be focused on inflation, and we saw the deficit, making inflation and imports more costly. it seems like a vicious cycle but we continue to watch. we are set up for the market opens across asia. what are you seeing? >> it certainly does solidify that hiking path ahead. it does depend on what we see in the growth for economic outlook as well. downward pressures are rising in

the economy in the second half, a lot of concerns around the exports whether we will continue to see that weakness that we did see it hold up in those latest readings as you mention yesterday. the other big news we got today is from the rba, we're expecting a 50 basis points move, that we the third straight move of such magnitude. combined tightening here, were now expecting 175 basis points higher since march, the fastest pace we've seen since the 1990's. we are just seeing the aussie dollar sitting around a six week high. volatility is rising here, the yen meanwhile is trading below the 132 level, 130 and focus now really. we did have those moves in the u.s. session overnight,

recession fears rising as well as geopolitical tensions. shery: we actually saw the s&p 500 fall for the first time in four sessions. investors are really watching geopolitical concerns as well. the china index losing as much as 2.5% with economy concerns. we're watching treasury markets breaking through that 2.6% level, although the two year yield was down but it was still not as much as much as the 10-year yield. investors still focused on the fact that we might be seeing the fed ready to hike rates due to inflationary concerns. demand concern is a key question, especially as were seeing geopolitics play a part

in the markets. u.s. house speaker nancy pelosi said to be planning a visit to taiwan, defying chinese authorities. the white house says a trip by poulos he doesn't signal a change in u.s. policy. >> the speaker has the right to visit taiwan and the speaker the house has been to taiwan before without incident, as have many members of congress, including this year. nothing has changed about our one china policy. shery: let's bring in bloomberg's emily wilkins. we have the office statement from speaker pelosi, and taiwan was not talked about. so where are we in this potential visit? emily: from the speaker's office herself, there have been very few details about this trip to taiwan. they have not even firmly -- formally confirmed it at this

point. we know she will likely be there on tuesday. she will be going to taipei and meeting with the president and officials there. the big question at this point is that we've heard the drumbeat from beijing promising some sort of tally asian to the speaker visiting taiwan. the question is exactly what will that look like. is it going to wind up being a lot of talk? we've seen john kirby there in that clip trying to lower the temperature and we also saw president biden speaking with chinese president xi jinping stressing that the u.s. is not trying to change the status quo around taiwan and that status has not changed. it's the third-highest ranking u.s. official going to the island, something that has not happened in the last 25 years.

haidi: in that same phone call, the chinese president said those who lay with fire will get burned. there has been a lot of escalating morning from beijing. what is the risk in assessing what's happening with washington? emily: there were mornings last month when reports of the trip first started percolating, saying they had concerns about the speaker safety. any time they're going overseas or domestically, there are concerns about their safety when they are right here in the nation's capital. to do a trip like this means you have to up the security, you have to up the preparedness. you're going to a sensitive area at a very sensitive time for u.s. and china relationships. this is not the first time we've heard about pelosi planning this trip. she was initially talking matt going back and april.

that was stymied because she got covid. this is something she has communicated with the white house about. there has been time to prepare and plan and i think there has been plenty of preparation. shery: speaker pelosi has positioned herself as a china halt for a long time. give us an idea why this is such an important issue for her. emily: this is something she has always been passionate about. in san francisco, about a third of the constituent she serves are asian or have asian heritage. she went to tiananmen square in 1991 and held up a pro-democracy banner, not something beijing was pleased about. but she has been vocal throughout her career. she had to put a lot of her attention to more to mystic issues but she has always spoken out strongly against the chinese

commonest party. there were discussions that perhaps at this point this will be her last year in government, it will be interesting to see her in her time as speaker with this one last major trip. haidi: bloomberg's emily wilkins there with the latest. let's a good how markets will potentially react to the imminent taiwan visit. were also waiting that big rba decision later. we talked about how difficult it is to be able to intelligently monitor reactions to this geopolitical risk. >> markets have a tendency to price in worst-case scenarios and i think that is part of what is going on here. the taiwan dollar falling, the won falling, because as far as markets are concerned, the key influences remain, which is that both china and the u.s. are

facing concerns about the economic outlook. theyuan was already weakening and this has helped extended. as far as the taiwan dollar goes, it was tending to be stronger recently because the u.s. dollar has largely weakened , given the expectation the fed will slow down rates. within those trends, you could expect a sort of return to -- once his visit is out of the way . although equity was surprised and a lot of places by outperforming last month amid all the economic gloom. the geopolitical risk is helping to give traders a chance to exit some positions that are little rich after the july rally. shery: i would could be seeing

some central bank risk as well. what are we expecting from the rba? >> the reserve bank is expected to increase interest rates by 50 basis points today, that is the expectation for more markets and economists. markets for pricing in 55 basis points last week but inflation came in slightly under expectations and that's why pricing has -- there is unanimous expectation so we will see. haidi: is it the path of least resistance? >> aussie swap rates have been trending down. the rba is definitely catching up to the rest of the world. the rba rate is 50 basis points, in the space of two or three

months time. next month the fed does not meet, so the fed has gone 150 basis points down since june and so will the rba have done. it is kind of catching up and starting to get closer to where the endpoint is now, both for this year and in general for the aussie rate curve. so there is an expectation that the pace of rate hikes will slow down. that does add plenty of potential excitement to today's rba statement because there is a chance that the rba actually signals it is getting ahead of where some economists and some swap traders are starting to see. it did have a strong reading relatively -- relative to history, the cbi they came out late last month, even if the market looked at it and said for the first time in a year, inflation did not surprise to the upside.

so the market has reacted a lot more calmly to inflation then general australian society has done shery:. and the economy is starting to react as well. there are charts on the bloomberg showing how australian housing prices r-star -- are starting to decline. take on these rate hikes? >> i think the biggest impact is in the housing market. prices started dropping off beasts -- before rate started to tighten but they have accelerated since that happen. that is a worry, like how hard and how fast the housing market goes. there are expectations of 15% over the next year, and if that

comes to pass, it will be a difficult situation for millions of australians who on a house or who have loans with mortgages. the cost of the been has gone up -- cost of housing has gone up. so it is a question on how they respond to further increases of interest rates. so far it looks like they're able to withstand consumer spending being reasonably strong. we have a very strong jobs market, there are more jobs, wages and growth are picking up as well. generally speaking, the economy is going well, but we will have to see how it goes from here. shery: joining us with some of

those key wrist in the market today. let's get to vonnie quinn with the first word headlines. >> watchdog says they will review papers even if the company voluntarily leaves the nyse and nasdaq. officials are trying to reach a deal before the deadline of 2024. they are kicking out businesses that don't comply. a counterterrorism operation has been carried out against a significant al qaeda target in afghanistan. according to the associated press, the strike killed the leader. president biden is expected to give an address about the operation at 7:30 washington time. a late survey shows china's economy weakened in july over response to fresh covid outbreak's.

retailers are tracing it to restrictions with revenue growth falling for four straight months. hong kong's economy has contracted for a second straight quarter. it is under pressure with covid restrictions, rising interest rates and weaker global trade. gdp fell from a year ago. national secretary said the city will meet its growth forecast of 1.2% next month. a man who died in india after testing positive for monkeypox in the united arab emirates may be asia's first link to the outbreak. the 22-year-old july don't july 30 after being treated -- july 30 after being treated for fatigue and encephalitis. the world health organization has declared a global emergency over the monkeypox outbreak. global news, 24 hours a day, on air and on quicktake by

bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm vonnie quinn. this is bloomberg. haidi: still ahead, andrew gillum will be joining us talking about nancy pelosi's expected visit to taiwan. and some say the fed will stay on its current pace until the end of the year. ♪

haidi: let's get more on the markets, continuing to fret about potential fed pivot and potential risk coming from high interest rates and inflation globally. house speaker nancy pelosi is expected to visit taiwan today and potentially meeting with the president tomorrow. one of the ways were seeing this geopolitical risk manifest in the markets, this is looking at implied volatility in the time when market, the highest since 2020. elsewhere, not much of a reaction. does it speak to the challenges of broader markets to be able to read them to flee price and handicap this kind of risk? >> i think certainly from the

taiwan perspective, the geopolitical tensions, they keep talking about this even before this happened this morning. just from the china and u.s. point of view, they cannot afford for this geopolitical tension to escalate. when i'm more worried about, what is happening in the u.s. and the message coming from china, i'm more worried about market supply. haidi: where do you see the greatest exposure in the region and does it make you want to increase potentially bond exposure? >> given how wide the impact

would be, for example australia definitely will be impacted. in terms of japan, is still struggling with the economy. there will be other areas, but putting that aside, the most impact will be on the u.s. and the china economy. hong kong g -- gdp reported a sharp decline last night. shery: bad economic news is not good for the market. despite the fact that we didn't get any fresh stimulus on the politburo meeting, traders are thinking it has to come.

are we expecting more upside from the bad economic news we see coming out of china? >> what i feel for the chinese economy is that the impact of the covid central policy has nice will more likely be longer than most people expected. there has been a 1.4% decline. the long covid effect just started for -- started to resurface in the second quarter. shery: let's talk about the tech sector. we talk about the risk for taiwan. there was anticipation of this happening, but at the same time they're facing a stronger dollar

and also facing outflows because perhaps the semiconductor, taiwan is not the only one that was hit. south korea was also hit. where do you stand on this sector? >> in the asian region it is different, inflation wise, if you look at taiwan or china, inflation mice it is still lower than the west, which gives him more room to stay with current monetary policies. the korean central bank will have to be more hawkish like austria. there is less room for them to change monetary policy to boost

the economy. shery: get the stories you need to know in today's edition of daybreak on the terminal, also available on mobile and the bloomberg app. you can customize your settings so you can only get news on the issues you care about. this is bloomberg. ♪

shery: we are counting down to the start of trade in tokyo. we continue to keep an eye on the japanese yen after extensive rally. growth concerns, geopolitical risk over taiwan providing further momentum. and the bank of japan releasing data later this hour.

mitsubishi among the companies reporting. inflation numbers coming in above 6%, the bank of korea releasing the minutes of its july meeting when all members unanimously voted for the 50 point base rate hike. it's a busy day for the markets across asia. stay with us, we have plenty more to come on "daybreak: asia." this is bloomberg. ♪

bonnie: this is "daybreak: asia." u.s. house speaker nancy pelosi is said to be making a visit to taiwan, defending chinese

authorities. it would be a landmark move by u.s. official. the white house urged china not to escalate tensions with the u.s., signaling that the biden administration is preparing for possible retaliation from beijing. the pboc has said it will keep growth stable in the loan industry and facilitate financing for the property sector. in a statement, the central bank also pledge to keep activities reasonably and as china grapples with the range of issues across the economy. ukraine is laying out plans to ramp up grain exports. it isn't -- hailed as a first step to unlocking millions of crops. the first two weeks will be treated as a trial period with no more than three vessels passing per day.

moscow is said to be leaning toward objecting to the exchange of two russians for the two americans. asked about claire brittney griner and former u.s. marine paul whelan. sources tell bloomberg moscow is reluctant to agree to the deal. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. haidi: earnings growth better in the second quarter but the forecast may not be as rosy. great to have you with us. it's all about guidance and a lot of companies have flagged that things will get worse before they get better. >> thank you for having me. what has happened so far, even

though if you're companies are beating expectations and the norm, nonetheless there is better growth than expected on the second quarter. in contrast, analysts are capitulating on the third quarter fourth quarter, and 2023 fiscal year. estimates are following because analysts are starting to go down on where there revenue forecast were. shery: and what sectors are you seeing the biggest changes? >> is across the board, but the biggest weakness is communication services. the outlook for communication services is really coming under question because of long-term growth process and margins are weakest in that space. consumer sectors are generally pretty weak. consumer save -- consumer staples than less so, starting to stabilize. consumer discretionary is certainly quite week as well.

energy, industrials and material space, the outlook is pretty steady. haidi: it is hard for analyst to find these opportunities, for strong balance sheets and the potential for upwards earnings momentum when the macro is also challenging. >> i think that is very true. in general, we have entered a technical recession in the united states with negative gdp. it remains to be seen if the national burial of economic research -- it's enough to suggest the outlook has weakened and the economic environment has weakened materially. what we've seen in the market is some repricing of that weakness. the s&p 500 down more than 20% to a trough in the middle of june. it anticipated the weakness in the broader economy emerging.

it's a question of where is the weakness priced in and where is it not. that is creating some challenge. we got to the point in june where utility companies had traded at a record premium, suggesting investors were at maximum defense in terms of their overall sector allocation. in the environment where earnings estimates are following lower, you have to wonder where it was not anticipated. it seems it was a little less anticipated in the consumer space and the communication services space. but someone anticipated for the market at large. shery: when it comes to all of these companies reporting, some companies are more exposed to certain markets. there has been a lot of optimism that perhaps china could be doing better going forward than europe that is expected to go into a recession.

>> where we see the most price reaction is companies that had already seen a 20% downdraft. there is a market divergence in price-performance after the earnings results. for the year-to-date winners, the market has not forgiven everything. the best poster child example of this was walmart. when they preannounced earnings it really shocked the market. walmart was not anticipating, walmart is generally a stock that does not experience any downdraft but it had not sold off so far this year so investors were caught off guard. there's little difference between companies with exposure to china and exposure to europe. stocks with the most exposure to europe were trading in a slight

premium l2 vince up -- to those with exposure to to china. investors generally are migrating to how the stock performed in the market rather than the fundamentals. shery: gina martin adams, chief equity strategist, joining us from singapore today. president biden speaking right now the white house, delivering remarks on what was expected to be asked this -- a counterterrorism operation. we heard from u.s. official that a leader was killed in a -- an airstrike. now hearing from president biden about this counterterrorism operation. we heard from one official that there was no indication that civilians were harmed in the strike. the u.s. has now killed the al qaeda leader on july 30. we are hearing oppressed

confidence by president biden on that successful counterterrorism operation. pres. biden: we never give in. we never back down. shery: these comments coming at a time of heightened geopolitical tension as well. we are expecting speaker pelosi to go to taiwan on tuesday, despite warnings from beijing. our next guest says if the visit does go ahead, he doesn't expect anything too provocative from either side. he said it's more undefined muddling through the situation. he joins us now. >> yes, that's the bottom line. i think we've seen a lot of headlines in the past few months about the increasing risk of a visit to taiwan and that is definitely the trend. but the big constraint on both sides here is still the risk

reward that it would be to costly from either sides perspective, despite all these drivers of escalation that we are seeing. shery: so what is the point of this visit? andrew: well, i think now that the visit has become so high profile and got so much attention, i think that the point has become perhaps even greater than originally intended, and that is largely as a symbol of u.s. determination to standby taiwan as washington sees it, and to demonstrate that the strength of u.s. political will and resolve to support taiwan, obviously from the chinese perspective, it doesn't look like that from nancy

pelosi's perspective and the perspective of -- of most people in washington, it's part of the response to the increase in the threat from china. the problem of course is not china, it is seen as a proactive move from the u.s. and china sees it as a potential change in the u.s. position, despite all those denials of that from washington. so it is one of these cycles where both sides see the other is being provocative and is responding in kind. haidi: how do the dynamics of the situation play out here? we know that xi is not having the year he wants with the consolidation of his power. ultimately, do the long-term constraints of both countries

play more powerfully here? andrew: i think that constraint, the bottom line of wanting to avoid the conflict that would be extremely damaging to everybody involved, that is still a very strong deterrent here. but on both sides of domestic politics, it is driving a lot of this. that is the concern, that risks will be taken because of domestic drivers. there have been a lot of suggestions that president xi jinping has put some sort of timeframe or deadline on the taiwan issue. that is actually exaggerated and really preventing clear or explicit or specific timeframe on this, but there is an urgency there, a domestic timetable with the party congress coming up later this year in china. and on the u.s. side as well,

the biden administration is constrained in being able to, for example, speak against pelosi's visit because i don't want to look like they are backing down or appeasing china on this. so domestic politics is a big driver on both sides and that's going to remain the case in the coming years. it is more driven out of beijing and washington. haidi: we see almost on daily basis these airspace incursions, the live drills that would solve the we can, a test of taiwan's military capabilities. that doesn't necessarily mean there will be an altercation, but does that heighten the risk that there could be a mistake that leads to something like that? andrew: it does, yes. the bottom line dynamic there is

simply the laws of probability, in a way, the more traffic you have in these sensitive and contested areas, and the more tension involved, the greater the risk of an accident or miscalculation. we have seen accidents over the years, there have been several both in the air and at sea. there been incidents between u.s. and chinese naval assets. that is always a risk. when you have enough of these operations going on in enough traffic in the region, over time, there is always that risk that sooner or later we will get an incident. where is in the past, those have been managed quite well in u.s.-china relations, it would be much more difficult to manage that kind of accident or

incident in the current context of more badly strained u.s.-china relations. haidi: andrew, great to have you with us, we appreciate your time. coming up next, the latest on natural gas. one of the top lng importers in australia coming under pressure to limit exports in the demand stick steel crunch. we will get more analysis, next. this is bloomberg. ♪

haidi: australia's government is under pressure to curb natural gas imports to avoid a fuel crunch. about 18% of the country would face a supply shortfall by next year. what are the possible outcomes here? >> is a great question. the watchdog in the interim gas report has a forecast for 2023 and found the supply of gas in australia will fall short of demand by about 3% of total demand. they have recommended the federal minister enact or trigger the gas security mechanism. he has enact -- it would allow a

minister to pressure or force exporters to prioritize gas for the local market. this is because about 75% of all gas produced on australian coast are destined for export cargo. in the forecast for next year, about 11% of all lng exports would not be covered under long-term contracts. those of the cargoes this mechanism is trying to target. shery: the government introducing a new climate change policy, 43% emission reduction between 30 and zero by 2050. how realistic are these targets? >> it's a difficult one to answer. overall, if they pass the legislation would give some sorely needed clarity to all strain investors and consumers

in terms of the counter production target ahead of us. it is down two years of political uncertainty in australia. at least in our analysis, the policy in and of itself simply doesn't go far enough. you look at the largest sources of emissions across australia, last year australia generated roughly 20 -- 23% of electricity from renewable resources. an additional 43 gigawatts would still leave australia shy of the ambitious 82% reduction target. we think it might increase to about $.23 -- 23% of passenger vehicles. there is an 89% target for all new sales, and that is simply

unlikely to happen. the standards would force automakers to import dvds to australia. haidi: you can browse those recent charts featured on bloomberg tv to catch up on the analysis and for future reference as well. this is bloomberg. ♪

shery: hsbc's top executives will meet later on tuesday with the largest shareholder to spin off the most profitable side of its business, its asian operations. >> there's only one portfolio globally, the offshore book of real estate exposure, about a third of it is substandard. we've taken about another 150

million dollars this quarter for that. as you know, the outlook for chinese real estate continues to be weak. manas: you use the word bleak, the s&p put a number on that saying the mortgage market will go underwater. is he going to get tougher and harder for china going forward? >> it depends very much on chinese government policy response, which is beginning to have an impact on the sector. we are some quarters away from saying -- we think we will see some further impairment in the second half on that portfolio. but we are managing it and an overall percentage of our overall book so it is very modest. manus: is it 5%, 10%? ? how bad can it get? >> we have signaled for the full

year we expected to approach toward 30. so we definitely see some uplift coming in the second half. it is definitely weakening at the moment. manus: a ceo said to me they see leveraging bottoming out in china. do you agree? >> what we are seeing is a stabilization in terms of what had been in recent quarters. when we look at all the structures, it's accommodation of upfront cost. it would take 3-5 years to implement structural changes, and we haven't completed our work, but based on what we see today, it's been very hard to find any matching things to put

in front of shareholders. manus: you are actively talking about a separation or chinese listing for hsbc. >> not at all, actually our conclusion is that doesn't stack up. we don't see the value case to do it relative to the plan that we see for near-term value for shareholders. manus: is that part of why the dividend narrative is in the release today? >> we've been keeping costs flat and reallocating capital and people throughout asia. all of that together with the normalization of interest rates is beginning to come through in the results. we've raised our equity target

next year from 10% to 20% and have committed to pay half of that return out by way of dividends. mathematically when you run that through, you will see a step up in dividends for next year. manus: what kind of dividend, do expect to reward with the special dividend to -- how do you set up the dividend narrative for 20 between three? >> we've announced today that -- for 2023? >> we are conscious of the fact that we were paying out at $.51 a share and we want to get back to that as soon as possible. we expect the bank to be back there in the next couple of years. haidi: the hsbc see -- cfo speaking with manus cranny. a quick look at the eight is business flash headlines.

pursuing opportunities and battery charging and energy storage. china's ninth richest person holds just over 10% of the world's biggest maker of ev batteries. rotors reporting an internal memo claiming he would remain internally but there would be a management restructuring for each of the country -- companies individual business is its own ceo. the market open in sydney, soul, and tokyo is next. this is bloomberg. ♪

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>> this is daybreak asia and we are counting down to the major market opens, watching for

reaction from the markets. nancy pelosi's potential visit to taiwan, the fastest inflation in decade four south korea and a rba rate decision today. haidi: do not forget the backdrop of what central banks are doing and interest rate risks. we are expecting a third consecutive months of 50 basis point hike. let's get to annabelle. >> this is something we saw leading into the war in ukraine as it is difficult and something that can't be done with foresight but where are just at the open in japan, australia, korea and looking at the start of treasuries because bank of america says yields on treasuries could top 2% in six months. the focus going to grow

fundamentals and widening yield gap between treasuries and counterparts in japan and in front -- and reflecting moves in the japanese yen this morning. it has been strengthening against the daughter but broadly -- against the dollar but broadly we are seeing the biggest unwind. hedge funds are settling down yen positions and turning more to the yen as a haven. strength has been negative for japanese stocks and we see that in the session today but this is all about geopolitical tensions. nancy pelosi plans to visit taiwan. let's look at the open in korea. mostly across the region we are risk off in markets today and we see that in the kospi at the start of trade. watching the korean won around the 1300 level. the other major focus in korea today is inflation data, we see it topping 6.3% in the previous

months. the open in australia, rba decision is front and center and we expect another 50 basis point move for the third consecutive move. the aussie at a six week high. implied volatility rising across the board. asx 200 taking direction from wall street overnight and brent crude online to the downside. this is still all about fears of a global slowdown. shery: slow down, geopolitical tensions, a lot to watch. and next guest says china's economic slump last month was temporary. always good to have you with us from j.p. morgan. the news we get out of china, we are hearing that investors are optimistic about fresh stimulus measures coming from beijing, which we have not seen. so how do you position in a

market where you are expecting stimulus that is yet to come? >> the way you think about the china macro is the first half was really bad. it has less to do with global developments and more about lockdowns and china. in the second half we see a natural recovery in growth in a half on half basis. it is you need to the rest of the world. -- it is unique in china compared to the rest of the world. the announcement of the bureau meeting last week if you look at what they have already announced, if they implement that in the second half it should be a significant recovery in growth. shery: adding to the uncertainty we have geopolitical tension. should markets position for this or it is -- or is it already priced in in the sense that we have been waiting for the trip for a while and u.s.-china

relations do not necessarily seem to be going anywhere at this point. >> the relations do tend to have a significant impact on the china market model. when they are improving, it can lead to three or four turns on improvement and when deteriorating, uc declines. -- you can see declines. trade negotiations, delisting concerns, geopolitical and restrictions, putting it together in may and june we were looking at a situation where it looks like relations were improving but in the last five weeks they've been going the other way and it looks like it will not improve soon. this was an upside optionality going for us year ends but it looks like chances have reduced at this point.

haidi: when it comes to how markets deal with geopolitical risk, is it safe to say whatever knee-jerk reaction we see peters out quickly? looking at the initial reaction of the war in ukraine, it led to substantial inflation and supply chain concerns. >> there does tend to be near-term overreaction. it is not specific to any issue it's just the way markets are structured. when you see change, there tends to be uncertainty premium priced in and that leads to a larger model than what you would see compared to that chain happening. and the uncertainty fades over time. so the overreaction is natural with unexpected events that markets had not previously priced in or prepared for. haidi: i find it compelling that

for you, going for growth over value, there has been crowding in value. what gives you confidence with growth names and what are you constructive on? >> i would say this is probably the highest conviction rate at this time, rating growth over value. we like quality in the region as a long-term anchor and our reason has been there since may, a combination of where we are in the cycle, what we have seen in terms of macro variables like bond yields moving lower and what looked like a value crowding at that point. the crowding has started to unwind with the underperformance we have seen since midway but -- mid-may but we would still not say it is uncrowded. this will be the next big question for investors in terms of positioning when to rotate back from growth into value.

our structure preference for value has not changed since early 2021 and we think this will be eight multiyear outperformance of value with phases of growth doing well like we see now. like in months and years before when value was underperforming for a long time and there were bursts of outperformance, we see the same for growth now. haidi: we saw hbc vying to restore dividend payouts. do you see yield trades more compelling in parts of asia? >> indeed. lower bond yields makes stocks look more attractive -- attractive. they are really attractive now across the region. dividend yields have kept pace and outpaced the increase in bond yields we see. so it's been rising this year. if you look at multiple stocks, many have yields of more than 6%

and they are outside commodity and transportation. many names and banks and tax that investors are paying attention to. yield stocks perform the best last week and we think that will continue near-term. haidi: always great to have you with us, especially on this interesting markets day. asian energy stocks are being watched. >> brent crude coming online to the downside. a lot of this is concerns around global growth outlooks and concerns deterioration will eat into fuel demand. energy players in asia are trading lower at the start of trade.

the drop in oil prices has eroded the gains we saw since russia invaded ukraine earlier this year so we are watching the energy and food producers. this with the report of the first green shipment leaving ukraine since russia invaded and that is bringing prospects of relief to the market. wheat is still dropping down at 2%. improving supply with good harvest numbers coming through to the u.s. and brazil. shery: let's get to vonnie quinn with the first word headlines. vonnie: u.s. auditor watchdog says [indiscernible] even if the company voluntarily leaves nasdaq. officials are trying to reach a deal before the 2024 deadline for kicking out businesses that

do not comply. pboc is keeping growth stable and facility -- facilitate financing for the private sector. they pledged to keep liquidity reasonably ample as there are challenges across the economy. the latest facebook survey showed china economy weekend in july over fresh covid outbreak. retailers face the brunt of covid restrictions with revenue falling further a fourth month. hong kong's economy has contracted for a second quarter. they are under pressure from covid restrictions and global trade. gdp is much weaker than forecast. the city [indiscernible]

global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: getting more details potentially about the movements of nancy pelosi. the national newspaper in taiwan reported she is expected to arrive at 10:20 p.m. local. according to one person who spoke with us, they will be meetings on wednesday. the white house is trying to dial back tensions between washington and beijing that rose in result of the trip and urging beijing to refrain from

aggression. we do expect her to visit taiwan . she would be the first sitting speaker since newt -- newt gingrich to go. still ahead, a casino in focus and we will speak with a consultant to discuss how the gambling hub could stage a recovery. this is bloomberg. ♪

>> the speaker has the right to visit taiwan and she has before without incident, as have many members of congress, including this year. world has seen the u.s. government be clear that nothing has changed. nothing has changed about our one china policy. >> we would like to once again warned the u.s. that we are prepared and waiting. the people's liberation army will never stand by idly. haidi: you just heard from john kirby and the chinese minister

of foreign affairs. speaker pelosi has a potential trip to taiwan. shery: we have already seen market reaction. taiwan dollars the highest since 2020. not just overnight volatility, up significantly over the last week. the taiwan dollar had already touched the important level of 30 for the first time in more than two years. we see persistent rise in the green back and add political tensions and we are not surprised the see weakness in the taiwan dollar and we will be watching the currency as the market opens. haidi: haven yen also in focus as we see the safe -- we see the demand play taking effect in the market for currency trading.

let's bring in stephen engle and our next guest. what do we know about pelosi's next -- about pelosi's trip? >> many media reported she is expected to arrive in taiwan tonight so this is a move of great significance because it's the first time in 25 years someone in her position would visit that island and previously china has warned the china of consequences should she visit and biden made the comment that it's not a good idea for her to visit at the moment militarily. so it is a surprise and not a surprise that she decided to

come in the last minute. her visit could possibly spark the rising tension after chinese rhetoric that there would be great consequences. the question now is how china will react. despite rising tensions, both parties and u.s. congress have voiced support for her visit to say the leader of the congress should visit taiwan and not cave into china pressure. shery: we see continued weakness in the offshore yuan, the weakest since may. what do we expect from beijing? steve: we heard from the foreign affairs spokesperson saying the people's liberation army would not sit idly by and as cindy just said, various levels of rhetoric amplified in the last week as talk of the visit escalated. the rhetoric has escalated as

well. so we do not know exactly what kind of reaction would come from beijing but we know there were live fire drills off the coast of a province directly opposite of day one. state media has been saying there could be some sort of incursion from the air force if she arrives in taiwan. i find what makes it more interesting is the report from the liberty times that perhaps she will arrive under the cover of darkness tonight. if that's the case it will either be trying to slip in or possibly amplify the possibility of some conflict. we just do not know what the people's liberation army might do. but the fact that the ministry of foreign affairs yesterday said pelosi is second in line

for the presidency after the vice president makes this a highly sensitive visit. haidi: cindy, do we know at this point what is on pelosi's agenda and what her motivation is to go on this trip? cindy: i think we have seen from the briefing with reporters last night that there are possible options china would do. that includes a missile test in the taiwan strait or warplanes crossing. that has happened before when u.s. officials visit taiwan. so these are some possible scenarios of how taiwan officials could react to her

visit. some reports are that china could have a no-fly zone over taiwan. some news media outlets in china suggested the pla could send warplanes over taiwan. these are all possible actions. if pla sent warplanes it would be taiwan's decision to decide if they should shoot them down. if they did it would create a wider crisis or heighten the tension in the taiwan strait. haidi: outsized risk for taiwan being played out on the volatility receipt for the taiwan dollar. steve, we heard the presidents.

what are longer term for their relationship? steve: it won't help. xi jinping has an upcoming party congress and he does not want to give off an impression to the chinese people that he is weak on this matter so it is really a game of high-stakes poker. john kirby who just heard from, national security advisor spokesperson essentially saying nothing has changed and how the u.s. views taiwan under the u.s.-taiwan relations act and this is a normal visit and he has stressed it is not actually a visit but essentially saying we will not take the bait. the bait from beijing. we will not engage in saber rattling, essentially alluding

to what he perceives as saber rattling coming from the ministry of foreign affairs. it will be an interesting 24 hours. if she arrives in taiwan and if she meets with taiwan's president tomorrow as reported. shery: steven and cindy on the potential visit. you can get a roundup of all of the stories. bloomberg subscribers go to tv . you can go to the mobile anywhere app and customized so you only get news on the industries and assets you care about. this is bloomberg. ♪

shery: every sector on the asia-pacific index right now under pressure.

health care, materials, industrials leading the decline. broad risk often. you can see the haven flows going into treasuries, sovereign debt across asia. japanese yen strengthening and unwinding one of the hottest macro shorts of the year. haidi: we are really is seeing that risk when it comes to the taiwan dollar with implied volatility the highest overnight since 2020 and watching for price action on the chinese yuan. we will have to see if the broader risk of sentiment flows through the european segment. euro stocks slightly after the biggest monthly gain since november 2020 and traders continuing to reassess earnings outlook and outlook for potentially a global recession.

shery: here's a quick check of the headlines. apple has tapped that u.s. high-grade bond market. we learned the largest portion of an offering yields 118 basis points over u.s. treasuries but down from initial discussions around the 150 basis point range. the sale is set to have peaked at more than $23 billion. pinterest jumped more than 20% after reporting resilient sales and user numbers. the stake as the company's top shareholder. a 9% increase in sales. retaining the average of 433 million monthly act users. hsbc shares jumped the most in more than a year and a half in london after posting better than

expected offsets. climbing 13% in the second quarter to almost $6 billion. the lender present missed to resume -- the lender promised to resume paying to the investor base. up next, the rba expected to hike by another 50 basis points as it raises to rein in inflation. more on that next. this is bloomberg. ♪

haidi: this is -- annabelle: this is "daybreak asia." 30 minutes into the trading

session for japan and korea. mostly the mood today in the markets is risk-off. a lot of attention turning to the visit from u.s. house speaker nancy pelosi. local media reported that she will arrive later this evening in taiwan. we will be keeping an eye on the taiwanese dollar. it slipped below the 30 year level in the previous session. volatility now spiking at its highest level at two years. a lot of this is down to that expected visit by nancy pelosi, but also, given the economic weakness -- -- we saw the manufacturing pmi slipping further into the contraction territory on monday. growth fear is also playing out in yen trading as well as geopolitical risk. take a look at where the yen is trading, very close to the 130 level, a far cry from 139, the recent high that we had from before. our mliv team pointing out that perhaps on a near-term basis, it looks oversold.

if history is a guide, it will overshoot to the downside before finding some equilibrium. allies also on south korea. two rate decisions as well as the bok meeting later this month. inflation rising 6.3% on the year in july. it solidifies the case for the -- for the bok to continue with its hike program. shery: and we are also expecting policy action from australia as well. the rba is expected to hike its key rate by 50 basis points as it races to rein in runaway inflation. our global economics and policy editor kathleen hays is here. the rba has been criticized for being behind the curve. how much will this help? kathleen: it will help some, but probably not enough. they will need to go higher. their inflation is at the fastest pace since the year 2000.

last year the inflation rate rose 3.5%. in the first quarter of this year it jumped to 5.1% year-over-year. and in the latest quarter 6.1% through the month of june. and it is not supposed to peak into the guts gets to 8%. let's look at what is expected in terms of interest rates. they are seen hiking the key rate by 50 basis points today, the third 50-basis-point rate hike since may. they'll you see that cpi. rate hikes, if they do 50 today, it will be a total of 175 basis points. it will be the most tightening, most rate hikes in any six-month month period since 1984. so you say, what about recession? consumer spending is flowing in australia, home prices are falling. people's mortgage rates will rise. earlier we spoke with our guests from rbc capital markets, the chief economist, and she said, yes, that is true, but the big

fight for the rba is inflation and there is no pivot insight. let's listen. >> the rba is lagging global central banks. the cash rate at 135 is still little. inflation is way too high and extraordinarily strong labor market. i don't think we will see a pivot from them for some time. kathleen: the rba is expected to signal opening the door to another 50-basis-point rate hike in its september meeting, the key rate expected at 3% by the end of the year. nomura holdings think it will be 3.5% by the end of the year. so it is clear that they are a long way from done, until they see inflation starting to come down sustainably. . this is the big fight for all central banks around the world. annabelle: especially the fed. the debate continues. can it avoid recession and achieve that soft landing? what is the latest we are hearing? kathleen: this is the debate.

i have to simplify it because this is high-level economists arguing. larry summers, former treasury secretary, noted harvard economist and professor. what happened was that larry summers and two others wrote a paper attacking the fed, saying, there is no way you can have a soft landing. you can't get out of inflation without getting into recession. so then chris waller and another economist at the board of governors wrote this paper about job vacancies. we're talking about all these jobs that don't get filled in the u.s. economy, why don't people take them? he said, that is the focus. rate hikes will start slowing the economy and demand will weaken so companies will hire fewer people and job vacancies will fall. that will ease pressure on the labor market and help reduce inflation. so today in the paper by larry summers and his colleagues from the peter slen --

peterson institute, they say this is wrong. data shows that job vacancies will not normalize or come down until there is a big jump in unemployment. now, increase waller came back and argued, look, we are in an unprecedented labor market. these job vacancies are so high that it opens the door to unprecedented, atypical results from what you would expect in the past. larry summers is still on record saying that he sees it 75% chance for a recession in the next two years. so i say, dive right into this debate. they still disagree. soft landing is possible according to chris waller. larry summers says it will never happen without a recession. haidi: [laughs] kathleen hays, there, as the debate rages on. another pressure point for the global economy, home sales in china the top 100 developers

slumped further in july. the mortgage boycott crisis is continuing to weigh on buyer confidence. let's get more from our bloomberg chief asian economist, enda curran. at the same time you have lack of clarity from the poster child of this crisis, china evergrande. is there any hint of a bottom in the property market? enda: not quite yet. the property sales for the top 100 developers came down 40% last month, that was a slight improvement, but still a big gu lf to fail. the problem is developers need to raise revenues to finish development that they promised to those who have bought them. that is why we are in this vicious cycle. share prices continue to decline. property sales remain soft according to analysts. sentiment in the economy is down. authorities are taking steps.

last week they talked about the need for stability in the real estate sector. they talked about bringing down borrowing costs, trying to encourage banks to get the money through to developers who may be in trouble, to make sure unfinished projects get completed. that is behind the whole mortgage boycott story. but what is going on at the property sector is that it hasn't yet turned the corner and is spilling over into other sectors. we have the bloomberg story this morning worrying about the impact on steel. the sector of the economy that makes up around 20% of overall activity, it is still not headed in the right direction and that will remain a key concern for the authorities heading into the end-of-the-year. shery: the hong kong economy is perhaps also not heading into the right direction. we saw another quarter of contraction. enda: that is an interesting morning for the mainland as well. the story is that it is officially in recession now,

despite the fact that on the ground restrictions have been eased significantly. even though obviously the quarantine process continues for those who are arriving. so it goes to show you how far confidence has to go among consumers before it is backward should be. and of course there is the global angle, the fact that the fed is raising interest rates and that is tightening financial conditions. that is impacting hong kong. and of course, all the supply complications that were happening in china in the second quarter, that obviously spills over into hong kong. getting goods into shenzen and hong kong has become expensive and complicated, a key complaint of the factory people all the time. there are domestic issues, the hong kong consumer remains downbeat. you have the trade issues with china, and of course, the fed raising interest rates. it is coming together to put pressure on the hong kong economy. the governor said they will downgrade their forecast. i think you could say that is

something of a warning for where china's own economy is headed, too. shery: chief economic spurs pointed for asia. enda curran there. let's get to vonnie. vonnie: thank you. command who took over the leadership of al qaeda from osama bin laden has been killed during an operation in afghanistan. i meant killed in a house in kabul on sunday. president biden approved the strike and confirmed the kill. ayman al-zawahiri oversaw the attacks on 9/11. a top u.s. watchdog says it can still demand review of business papers even if the company leaves nasdaq. officials are trying to reach a deal before the deadline of 2024, for kicking off businesses that don't comply. the latest survey shows china's

economy weakened in july, over its response to first covid outbreaks. factory output and new orders slowed to the weakest level since 2020. retailers are facing the brunt of tough covid restrictions, with revenue growth falling for the fourth straight month. a man who died in india after testing positive for monkeypox in the u.a.e., bb-8 shows first fertility links to the global outbreak. the 22-year-old died on july 30, after being treated for fatigue and encephalitis. authorities subsequently learned he tested positive for monkeypox on july 20. the w.h.o. has declared a global health emergency over the monkeypox outbreak. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn. this is bloomberg. haidi: coming up next, casinos in macau are reeling from their worst month ever as officials

put measures in place to stem a covid outbreak. we look at their outlook. this is bloomberg. ♪

shery: japanese equities leading asia lower at the moment of the japanese yen continues to strengthen.

one of the biggest macro trades and really one of the biggest shorts of the year is unwinding now. china is asking whether that be ok will do more. . cpi is coming up the fastest in more than two decades. we are heading towards the rba rate decision, haidi. haidi: we will take a look at the macau casinos, suffering their worst month ever. gaming revenue in july was the lowest on record. the city's covid curves have hammered the gaming hub. they will be a loving venues such as bars and gyms to reopen today -- they will be allowing venues such as bars and gyms to reopen. our next guest joins us. you are based in macau. give us an idea of what things are like on the ground. >> good morning.

it is still very quiet on the ground. some of the establishments will be allowed to open up again today, but if i want to have a copy in my local cafe, i have to get a pcr test. but before i can get a pcr test, i have to do another test. so whilst it has technically opened up, we don't expect that to be much in the way of significant traffic over the next few days, until the stabilization period is over. haidi: you have called the impact on local small businesses death knell by the latest lockdown. how quickly do you see a recovery for the casinos? ben: it will take a little bit longer for the casinos, because it relies on a lot of sentiment. in terms of the tours from

china. they have to be confident that when they come in, they will not be locked down, which has happened a couple of times. they come in, a local cluster develops and all of a sudden they have to move out of the hotel. and if it gets shut down again as it has in the past, they would find great difficulty in returning back home to china. so over the next couple of months, there will be a lot of caution for the businesses to return from china. but overwriting that, there is a bigger movement in terms of social re-engineering of the type of visitors we used to get coming from china to macau. but that is another story. shery: macau already lost its title as the top gambling hub to vegas, recently. . do you expect the city to regain the title anytime in the future? ben: without. yes.

whilst we have had the lowest month on record since the liberalization of the gaming economy in macau, 95% down from july last year, it is only 1.6%. but the fact is we are still situated next to the single-biggest market in the whole world. and now that china has dismantled our gaming industry, we expect them to allow us to rebuild it over the next several years. shery: for foreign players in the city, how are geopolitics affecting them at a time when we are also expecting a new gaming concession terms to be awarded by the end of the year? ben: that is a very good question. there are six concessions at the moment. there will be a maximum of six concessions on offer with the current new tender process.

a lot of analysts are expecting that the original six, the current six will be returned. but my belief is that, they have not priced in the risk that at least one, if not two of the foreign operators stand a very, very high chance of not getting a new concession. especially with the geopolitics shift over the last few years. on top of that, i stress that the number is six. there is possibly that there may be fewer than six. if you think about it, china has dismantled their fintech industry, they have gone after the education sector. here, we have the gaming industry which is seen as a vice by beijing. therefore, with the amount of revenue we have, some people may say that it may not be enough to sustain six. in that case there is the risk of them reducing the number.

shery: ben lee, it was good to have you with us igamix , management and consulting managing partner there. hong kong hsbc is under increasing pressure to spin off its business. we will hear from the bank next. this is bloomberg. ♪

shery: we will be watching hsbc shares at the open in hong kong. they already rose in london and in the previous hong kong session, after they pledged to return to paying dividends. the bank executives will face investors today amid increasing pressure to spinoff their asian business. we spoke to one executive about how the company is pushing back. >> there is only i think one portfolio globally that we are paying close attention to, which is really the offshore book of our china commercial real estate exposure, $12 billion. one-third of it is substandard or impaired. we have taken another $150 billion this quarter for that. as you know, the outlook for chinese real estate continues to be weak. >> you used the word bleak.

snp put a number on that. 6% of the mortgage market will go under water. is it going to get much harder in china from here on, beyond weak? >> i think it depends very much on the chinese government policy response, which is beginning to have an impact on the sector, but i do think we are some quarters away from saying that we are through the worst of it. so we think we are going to see further impairment in the second half on that portfolio. that we are managing it, and the overall percentage of our book is fairly modest. >> do you think that is a 5% uplift, 10%? how bad can that get? >> we had 17 basis points of impairments in the first half. we have signaled that for the full year we expect that to approach towards 30%. so we definitely see some uplift

coming in the second half, consistent with global macro, which is definitely weakening at the moment. >> numerous ceos have said that they see de-leveraging bottoming out in china. do you agree? >> what we have seen across hong kong and china is really a stabilization i think, in terms of what had been a de-leveraging going on over recent quarters. but when we look at all the alternatives, it combination of upfront costs, a lot of complexity. it would take us three to five years to implement any form of material or structural alternative. together with high ongoing synergies, we have not completed our work, but based on what we can see today, it is very, very hard to find any value case that we can put in front of shareholders. >> so three to five years before a material change. so you are actively talking about a separation and a hong kong or chinese listing for

hsbc? >> not at all. actually, our conclusion is that the structural alternatives relative to the original plan do not stack up. we don't see a value case to do anything. the plan we see is beginning to deliver material upside for shareholders with an execution risk that is totally in our control. >> is not part of why the dividend narrative is in released today? >> we have been keeping costs flat, reallocating capital and people down to asia. all of that together with a normalization of interest rates is going to come through in the results. we have raised our return on equity target for next year from 10% to 12% and we are committed to pay half of that return through a dividend. when you run that through, you

will see that it is a very material step up in dividends next year. >> what kind of dividend do you expect to reward, would a special dividend hold investor'' nerve with you? how do you set up a dividend narrative for 2023? >> we have announced that we are returning the quarterly dividend. you're very conscious of the fact that pre-covid, we were paying out at $.51 a share. we are keen to get back there as soon as possible. we would expect based on the earnings trajectory of the bank to be back there in next couple of years. shery: the hsbc chief financial officer, ewen stevenson, speaking with bloomberg's manus cranny. in the next few hours, catch our interview with the hong kong district council district counselor christine fong, who represent hsbc investors in the bank's battle with ping an. haidi: the mainland open is about half an hour away.

defense shares are in focus as china signals military action if u.s. house speaker nancy pelosi makes that landmark visit to taiwan. we are hearing reports that she will land later this evening. and the pboc is budging to keep growth stable and facilitate financing for the property sector. macau is reopening gyms, bars and beauty parlors today. services are allowed as part of the broader easing of covid restrictions. that is it for ""daybreak asia"." our market coverage continues. "bloomberg markets: china open" is next. this is bloomberg. ♪

david: good morning. it is 9:00 a.m. in hong kong, taipei, beijing and shanghai. welcome to "