haidi: welcome to daybreak asia. i'm haidi stroud-watts in sydney. where counting down to the asian market open. a risk off muthu's dart -- mood

to start the week with investors awaiting a clues from jackson hole later this week. a chinese bank is expected to trim key spending rates for the first time in a month as the economy battles a severe headwind. should young province is said to extend some industrial power supply limits by five days. u.s. future pressures under pressure. 2 trillion dollars in options with volatility in the last session. we had the vic's back above 20. it is really about what fed officials were saying across the week. we are looking ahead to jackson hole. what will they say when it comes to the coming rate hike? the 10 year yield on the a lot of volatility already, heading towards 3%. we had a concern of an economic slowdown because of central-bank action around the world and pressure on oil prices extending

in the asian session, now below $90 per barrel. we continue to watch what is happening with iranian supply as well. haidi: definitely that could be something that could send oil prices lower. in terms of jackson hole, that's the major event on the calendar for us. just how hawkish fed chair jay powell will be. there is expectation starting to come in that perhaps investors have been underpricing moves of where the fed will go from here. in terms of equity direction, futures low for japan and australia. for the dollar, a little mixed. the yen yen is like this. we could see the dollar retesting a july high by the end of the month. let's turn to this charge. we have more than 300 companies reporting in china this week. the question is whether they hit

the profit indicated in the data. in terms of direction for stocks, we have seen outperformance for chinese stocks in the second quarter versus the world index now well and truly reversing into the third quarter. we are down around 8% for chinese stocks, 12% growth. gains are like 80% for world stocks over the past couple months. in terms of where we go from here, this means that officials in beijing will have a lot of trouble to revive investors' spirits. shery: let's bring in our global economics and policy editor kathleen hays, chief north agent correspondent stephen engle and andreea papuc. jackson hole, what can we expect on the policy side? kathleen: weekend expect fed

bank president speaking with bloomberg television. jay powell is more of a question . how hawkish will he be on inflation? what will he say about how hard they will have to push? remember, jay powell has not spoken since recently, the last couple of weeks. the headline cpi breaking from 9.1% in june year-over-year to 8.5% in july. that is one of the reasons markets may ease up and not hike rates as quickly. a couple weeks before that, u.s. payrolls in july were double what was forecast. the labor market is still strong. that's a green light for the fed to push as hard as it needs to. the big question is, is jay powell ready to risk recession? how high, how fast will he

signal willingness to take the funds rate higher? you can see from the bloomberg chart the forecast from inflation. you go from the bottom up. as traitors and economists look to the future they have gotten steadily higher. the fed is signaling they will go up to 4% by the first half of next year. that does not always jive with what the market is expecting. haidi: what are we hearing from other fed speakers? the latest speaker on friday todd barkman's head of the richmond fed. exactly what he said is we are committed to bringing inflation to the 2% target and we will do it takes to get there. there is a path to getting inflation under control. he means you have to may be raise rates aggressively. but, a recession could happen in the process. other fed officials have said the same thing ended the last

months. jay powell will not signal 50 or 75 basis points. there is no q&a here. this is not public or televised. these are private sessions on the friday and saturday morning. we will all report on them, but he will not hear what he says. he will give a speech i assume that looks at inflation and how it got out of control and a broader spectrum, may be historical, of what they need to do. maybe they will talk about the fed neutral rate. is it really to .5 or something higher? -- 2.5 or something higher? and what it takes to get to a soft landing. that could be seen as dovish. for people to think he is hawkish and really get markets to reprice, you will maybe have to have him come out more definitely anteriorly hoping for assad -- and clearly hoping for

a soft landing. that may be his baseline. but, he is ready to push hard and keep pushing like paul volcker did in 1979, 81, 82. shery: going in the other direction is the pboc in china, not surprising seeing the economic challenges. the power crunch continues. stay send: absolutely. that adds to headwinds on the chinese economy. july data last week came in well below expectation. we are awaiting the prime rate later today for bank lending. that has trailed off considerably in july. the power crunch seen in sichua n, one of the most heavily populated provinces in china and heavily industrial. power cuts has been extended to factories that were exposed --

supposed to expire saturday. because of problems with power levels and hydroelectric dams, they extended the power cuts to industrial areas through this thursday. chengdu has not seen a smidgen of rain for more than two weeks. other cities have been in drought for 18 days. other cities have not had any rain this month. that is really taxing the power grid now. that will be taxing the globo -- global efforts to try to some -- stimulate some growth in the overall economy in china. haidi: are we expected to see the trimming of the benchmark cost on chinese banks? will that help given we know there is a lot of liquidity and perhaps not as much demand? stephen: him to his more than

expected and then the bank lending and aggregate spending in july was well below expectation and trend for this time of year. this is a problem. corporate and households are reluctant to borrow now. 16 out of 16 economists surveyed by bloomberg expect that we will get a cut of at least 10 basis points in the one year loan prime rate. they are a little more split on the five-year. it is more closely tied to mortgages. six of the 16 expect at least a 10 basis points cut. the last time it was cut was in may, 16 basis points. we could get an even bigger one on the five-year. again, it comes back to what we saw on this chart here. earlier last week we had the one-year mls cuts at the pboc, a surprise cut that paved the way

for banks to potentially today cut the loan prime rate. shery: you have more policy support from china. perhaps, the u.s. going in the opposite direction. andreea: one of the main focus points for the markets is what the yield curve will do, especially going into jackson hole. we note that the flattening trade has been a winner for most of the year. will that last? will that curve invert even further? what that says about the likelihood of a recession in the u.s.. we heard from kathleen. investors will be very closely looking at that. we saw longer yields, the 10 year yields jump sharply and lead the selloff friday. that highlights that this is a very complex space.

equity investors will be obviously listening to what is coming out of jackson hole and also closely looking at what the bond market and yield curve is signaling in terms of a more hawkish fed and the prox spec -- prospect of a recession. shery: andrea pablo, kathleen hays, and stephen engle with our top stories today. we will be live at jackson hole later this week for the crucial powell speech and interviews with fed presidents from kansas city, cleveland, st. louis, and atlanta. now, vonnie quinn with the first word headlines. vonnie: japanese prime minister fumio kishida has tested positive for covid and has mild symptoms. he developed a cough and slight fever saturday night and came up positive on a pcr tests. he is resting and will resume duties remotely monday.

china's latest covid outbreak is worsening with cases jumping by more than two thousand over the weekend. the southern island of hainan saw the most infections with 1000 reported friday at ramallah by tibet and changing. in hong kong cases rose by the most in four months sunday. the city is reopening one of its biggest isolation facilities as the surge puts pressure on hospitals. the singapore prime minister says removing the legal ban on sex between men the right thing to do and something most singaporeans will now accept. they stopped short of allowing same-sex union. australian prime minister anthony albanese says inflation is a key priority for his government. headline inflation was at the fastest place that space in 21

years by the second quarter. an echo device from the treasury department, inflation will not hit 10%. global news 24 hours a day on air and bloomberg quicktake powered by more than 2700 journalists and analysts in over 120 countries. shery: a look at japan startups. speaking with incubate fund that has invested in more than 400 new ventures. and, looking at key central bank decisions with a invest cheap economists. -- chief economist.

shery: here is the week ahead. china's loan prime rates are said to be released monday with banks likely to follow the pboc decision to cut a key policy rate. on tuesday bank indonesia makes a decision with most analysts seeing the key rate unchanged at 3.5%. then singapore gets to live -- july cpi data. demand is rising on factors including higher prices for food and fuel imports. on thursday traders expect the bank of korea to raise its key rate by 25 basis points and the jackson hole economic symposium begins. for clues on the path ahead for

the fed and other central banks, that's ahead. haidi: jackson hole will be a key determinant for market sentiment the next trading week. our next guest says inflation data is not showing any strong signs for the fed to declare a victory on inflation. richard yetsenga joints me now. so, we are getting ahead of ourselves? richard: if you think back to last year the question was, is this transitory? this question in different forms has been asked all along. we can probably say inflation is speaking somewhere around here. singapore later this week has a similar story. the real question is if policies are consistent with inflation returning to and staying around target. haidi: when you look at chair

powell, does he use this week as a reset in communication? richar: if there is a reset probably the reset needs to be to tell everyone to take a step back and look at the broader picture. i think people are getting focused on individual data releases, whether inflation has peaked or not. we had a negative quarter of gdp growth in the u.s.. we still have rates at 2.5 below the fed estimate. the mutual on the back of the unbelievable policy stimulus from 2020 and 2021. the labor market, we have still have jobs for every unemployed person. wage growth and core inflation is still double the inflation target. i think the fed has quite a bit of work to do here. shery: richard, same issue, different set of circumstances. the pboc tries to support the economy.

are they doing enough? richard: it depends what you mean by enough. there are still things to be concerned about. i think, justifiably, adding more liquidity to a system that already seems to have excessive liquidity. there have been issues around banking sector deposits and mortgages the last couple months. let's not forget the ongoing adjustment in the property sector around debt, credit exposed. which companies are viable in a more slowly growing chinese economy. they could definitely do more. i think it is a trade-off between short-term stimulus and long-term trend. it looks like we could expect china to be a more slowly growing economy over the next few years. shery: what do you think about the narrative forming around a liquidity trap because of the issues you mentioned? what can policymakers do to fix

this? richard: i do not know there is a liquidity trap. monetary policy seems to get less traction that it has in previous cycles. we also saw that in europe after the gse. in the u.s. during the gse. in australia before the pandemic. this is not that unusual. as i suggested, i don't think china is trying to juice the economy up and generate much stronger growth through monetary alone. the liquidity trap, elements of the policy landscape are not happening -- helping but i don't think there is a primary problem there. haidi:h will there b a -- will there be a labor transition or a prolonged. period slower growth? structurally there are impediments to higher growth, right? richard: we don't have many historical parallels. to me the defining feature for

china is what it did two demographics. the structural demographic story is poor. we know of two very low arthritis years. this year is likely to be another year of very low birth. that means china has gone from growing quite quickly to in a very short time growing slowly. housing is likely to have peaked because of that. what things will fill the whole on the others? shery: the spending, not to mention the social aspect of it. how do you see the government being able to handle that? where does that potential future growth come from? is leverage still a concern? i think leverage is still a concern because the corporate sector is reasonably leveraged. the housing sector has gone from effectively nowhere to more like an advanced economy.

we can see that if the housing sector accelerates its problematic for the economy. there is nothing to fill the hole thus china has focused on the quality and distribution of growth. in aggregate terms, china will grow more slowly than what we have seen in modern history. shery: today we have the pakistan central bank decision. we followed very closely the expectation that they will hike rates. the reason i bring it up is we face these issues in emerging frontier markets where you have tightening central bank policies around developed economies and a slowing chinese economy on which they depend very heavily. will we see more vulnerable nations spiral into crisis? richard: i hope not. but, i don't think fed funds will give them much respite either. the other key data i am looking is export out of taiwan. that is a good monitor of the

trade cycle that is almost certain to decelerate sharply, signaling we are at the end of the many export boom we have had the last over 18 months. if the fed fund finishes the year at 4%, our current expectation i think economies like pakistan, turkey, argentina, sri lanka, will feel the pinch because of that. shery: we appreciate your time, richard. there is more to come on daybreak: asia. this is bloomberg.

shery: we are counting down to the start of trading. so car makes a trading debut. the car trading backed by softbank has its ipo fundraising target pricing shares well below their market read. we will get to read on the korea 20 day trade balance for august.

exports and imports double-digit gains in the past 10 days. so will begin its biggest joint military exercises with washington after a five-year hiatus that failed to convince north korea to make concessions. here is a check of the latest business flash headlines. berkshire hathaway approval from u.s. regulators to buy as much as 15% of occidental petroleum. rupture spend the year wagering more on occidental after first making a bet on a houston bet oil company three years ago. occidental stock had its biggest again in five months. billionaire ryan cohen pocketed a $58 million profit from the sale of his stake in bed, bath & beyond, and investment he held for seven months. he scored a 56% gain. other retail traders are feeling the pain. bed, bath & beyond shares tumbled as much as 43% after his

exit. hiring asset management will be in focus when china opens for trade after the movie investor service put a release for possible downgrade. the manager faces increasing asset quality strength after its projected first half lost for a forecast worse than expected. u.s. futures continued their slide, extending declines in the friday session. the worst day since june. we are talking about snapping the longest weekly rally since november. the vix above 20. we had options explorations that added to volatility. in asia we continue to see the downside. all of the fed speak last week pointed to more rate hikes to come ahead of jackson hole. you are seeing futures down .4%. q. week stocks down .1%.

even nikkei futures are under pressure despite a weak japanese yen against the u.s. dollar, at the 137 level. coming up, singapore drops most rules on wearing masks indoors. we have the latest. this is bloomberg.

>> this likely recession that we are heading into is largely supply driven. to this recession is a potential cure. >> the medicine is probably supply-side-related, supply problems require supply

solutions, not something that monetary policy is good at. driving recession is really a poor and suboptimal outcome. >> there is no need for central banks to ram every session down the throats of economies. >> we just need a period of absorbing and also allowing some of those mechanisms to work through. >> i think the u.s. economy can withstand much higher interest rates than i think people dividend credit for. shery: some of the discussion on whether recession is necessary to rein in inflation. annabelle: quite a few takeaways. recession is the mostly watched indicator. we have the question of whether it can be brought in without hitting consumers, companies, or whether the fed will need to be more aggressive. in terms of our survey, the vast majority of respondents said we have seen the peak of price pressures in the economy,

despite the fact that jay powell is expected to take a hawkish message into jackson hole this week. let's look at what that means for whether we go from here heading down to the 2% target. we are at 8.5% in the latest survey. we had about 900 people responding. 418 of those said it is going to take two years. what that means for company profits, is whether it will be a negative for stock prices because respondents say the fed has a lot more work to do to bring inflation down. what it does mean for negative businesses here, we are going to see stocks really declining, as inflation takes a big toll on company profits. our survey also found that treasuries should be higher one month from now. haidi: annabelle droulers there in hong kong. let's get the latest from singapore, moving to ditch the

rules when it comes to mask-wearing in most indoor settings as it moves further away from the pandemic you are restrictions. emma o'brien, our editor for asia global business transit is here in sydney with the details. we have come to this point from singapore having the strictest covid settings in the world at one stage. emma: it is really an interesting example, compared to china for instance. a year ago, singapore was trying to eliminate covid as well, very strict border curbs. and internal curbs as well. they have kept a lot of those, shutting them just gradually when it comes to the internal staff. -- internal stuff, prioritizing opening the border in that, you can come and go pretty easily from singapore. the last vestiges of those internal curbs, the indoor mask-wearing mandate in singapore, being done away with,

you will still need to wear it in hospitals and nursing homes and other vulnerable situations, but otherwise, it is a step towards normality for singapore. haidi: china, meanwhile, continues to battle an outbreak, 1200 cases in the latest testing. is it all coming down to what is going on in that one region? emma: when you are at a month-high, most of them on hainan island, the vacation and to pre-hotspot. we are seeing a lot of the cases are coming up in tourists, hotspots in tourist places, tibet, xinjiang, guanxi, was another one a month or so ago. we are seeing lockdowns coming, trapping travelers and holidaymakers in the process. you have to think that that is going to have a hit to consumption and to sentiment around domestic travel, which is

the only sort of travel that chinese people can actually do right now. shery: and of course, we continue to see those cases in japan. we are hearing that permits turkey sugar has tested positive? emma: that's right, japan seems to be at the peak of their wave. every country on sort of slightly different waves. they are seeing thousands of new cases a day, exemplified by keisha's infection -- by prime minister kishida's infection. apparently, he is doing ok, isolated. shery: emma o'brien with the latest on the pandemic across asia right now. let's get to vonnie quinn with the first word headlines the chinese province of such one is extending its industrial power cuts to deal with what it calls extremely outstanding deficiencies in supply. vonnie: officials say blistering temperatures and surging demand for ac have caused gaps in the generation of power.

an order limiting power supply to some industrial users will be extended to thursday from sandy's original end date. the richmond fed president has said the central bank is committed to taming u.s. inflation, even if that means risking recession. he says policymakers will do what it takes to bring inflation to the 2% target, while acknowledging recession can happen in the process. resent fed speak has agreed that more rate hikes are needed, well debating the size of the next move. . india's food department says there are no plans to import wheat. supply declined to its lowest monthly level in august. bloomberg sources say government officials are now discussing whether to cut or abolish a 40% import tax on wheat to help lower miller's in some regions get supplies -- to help flour millers in some regions get some prize. europe's worst energy crisis in

decades has forced politicians to look at alternatives, including atomic energy, which germany had decided to exit permanently, by year end. 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. shery. shery: coming up closer look to the japanese startup scene with a company that has invested in hundreds of them. our guest will join us next. this is bloomberg. ♪

>> time for "japan ahead" on "daybreak: asia." we have a pretty weak japanese yen against the u.s. dollar. remember, this is after the biggest weekly decline in two months for the yen, given the strength of the u.s. dollar. we look ahead to jackson hole, we expect fed officials to talk about the rape path forward. we have already had pretty hawkish fed speak, pointing to more rate hikes. for now, japanese features are under pressure as we continue to look ahead to the open. let's delve into japan's startup scene. the government has put together

a 10 year plan that will see increased investment by ten-fold. joining us is paul mcinerney of incubate fund, which has managed $4.5 billion, and invested in hundreds of startups. paul, good to have you with us. you specialize in pre-and post-seed stage companies. tell us about the environment for startups right across japan. paul: good morning, and thanks for having me. as you noted, the incubate fund is a seed stage fund based out of tokyo. in japan today, the investing environment is exciting for a couple of reasons. one is that the primitive capital to vc has increased nine times, just south of 8 billion u.s. dollars. as noted before, the japanese government has aspiration to take that up 10 times in the next five years. and the scale of the economy,

being the third largest economy, but also having massive upside in terms of capital and labor productivity potential, is what makes me excited about vc in japan. shery: how do you feel about prime minister kishida's initiative to have more direct purchasing by the japanese government as well, when it comes to playing an active role in this space? paul: i think it is probably the most exciting of the initiatives that have been announced. many governments around the world have made different attempts to spark and drive vc, but one of the most successful is the small business association research program in the u.s. which is what japan has modeled this program after. and direct purchasing by the japanese government from startups in space, health care and cybersecurity can make a massive difference in just getting started. haidi: what do you think the biggest change japan needs right now is, particularly in the

context of being able to create and foster a greater level of innovation? paul: there is a couple, into addition to direct purchasing. one is direct capital allocation. there has been an increase in allocation from jpif, but i think the japanese government as well is planning to invest more in venture funds. that will create a flow in capital. the other big space is in continue to make japan an attractive destination for both funders and vcs from overseas, in addition to helping with talent domestically. i would say those are the big as i can further drive this -- big ones that can further drive this. haidi: i understand you have a collection of ideas and businesses that you would like to fund. i think you try to find the

funders that might share that? paul: that's right. typically, a venture firm may take 500 companies and work through stages to establish the best opportunity. we take the reverse approach. each of the general partners in the firm has 12 to 15 business we would like to build. we search for funders who are passionate about those ideas. it very much pre-seed seed. it takes a certain skill set, but it has worked very well over the past decade. shery: tell us a little bit about the startup culture in japan we know that one of the best ways for people to accumulate wealth in japan has been the corporate way, becoming a salary man, having those employment jobs for life for a japanese people. what have you seen so far when it comes to risk-taking and innovation for young

entrepreneurs? paul: that is an excellent point. i think what has happened under the radar that people don't realize in japan, is that the notion of an elite path has changed. 10 years ago, i was at a consulting firm, and young colleagues would leave for multinationals. in the past two to three years, i would say 60 percent or 70% of people leaving top-tier firms are going to startups. this notion of mba lifetime career has shifted quickly to people wanting to get experience in business, but quickly moving to startups. . i am excited about that shift. shery: do you then have the talent pipeline needed in order to find these businesses? are educational facilities actually helping these young entrepreneurs to get into the field and be able to make something out of their ideas? paul: more and more, there are

more accelerators and incubators, more university programs around entrepreneurship. importantly, there is also a massive gap in japan around digital programming and data science and engineering. so you are seeing an ecosystem built around the talent side of it to provide more talent. clearly, there is a big gap, vis-a-vis the u.s., for example, but it is heading in the right direction. shery: what else can the government do at this point to get japan to that point? we have seen not only with this administration wanting and pledging this five-year plan, but it started from a long time ago. we heard these ideas coming from other administrations. what has changed so far? how much progress has there been, and what else needs to be done? paul: i think that shift i have

seen today is the willingness of the government to be more direct and in a sense, intervening to give venture companies a head start. if you think about the sbio program in the u.s. and other programs like that, if you look at that most successful tech firms in space and cybersecurity and other areas, they got their start through that direct program. that has been something that traditionally in japan, i think a fair process and options has been a big emphasis, but people are starting to realize that if a company has technology that is valid, the direct purchasing and a more efficient purchasing process will make the difference. that might be the biggest shift. shery: paul mcinerney, general partner at incubate fund, good to have you with us. you can watch this interview and others through our bloomberg interactive function for

subscribers only. check it out at tv . , next south korea's biggest car sharing business is making its market debut. more on its opening day straight ahead. this is bloomberg. ♪

shery: the latest infection numbers in china or on the bloomberg right now.

the numbers have fallen to 550 cases sunday. remember, tourist destinations have been among the worst hit areas in china infections are surging to a three month high. shanghai is reporting for local cases on sunday. 550 cases. we continue to watch developments closely in case we might see more lockdowns, given the infections rising across the country. take a look at bitcoin, rebounding in the asian session a little bit, this after suffering a selloff as markets turn risk-off, as the fed reiterates its resolve to keep rising interest rates until information is contained. let's get more from our cross as team editor joanna. what is going on with crypto prices? we're seeing a lot of volatility, but it seems to me that it is all about how risk assets do at this point.

joanna: it is. generally with the macro environment, there is a lot of uncertainty so crypto is going with risk assets. but it is volatile generally, and friday we had a big drop in the span of a few minutes. bitcoin went from making a move higher to being back below its 50-day moving average. other crypto-currencies also have been depressed in the past few days. a lot of them down 10% to 60%. so there is a bit of suffering right now. haidi: we have been hearing about ethereum's big merge. does it change things in terms of the big power structure? joanna: the merch upgrade is supposed to make ethereum less power consuming and that sort of thing, but it will also make the overall structure of influence change. we will have builders, instead of just miners.

these builders will be able to send transactions around to different groups. and there is some concern that they could send everything to one validator, something like this. and there aren't a lot of builders at this point. there have been a lot of different miners. so the builders and other people affiliated with ethereum have said this will not be a problem, that it is going to work out and they will spread everything around, but there have been concerns around, initially, whether the builders could make things more centralized and consolidate power. haidi: our cross acid team editor joanna ossinger there with the latest. let's get you the latest business flash headlines. unitedhealth, amazon, cvs health and others, are said to be among the bidders for signify health. unitedhealth has submitted the

highest bid, in excess of $30 a share, while amazon's offer is close behind. signify health is holding a board meeting on monday to discuss the bids, which could be announced as early this week. japanese trading house matsui has reportedly decided to keep its investment in a natural gas venture in russia. the nikkei says that the company saw no damage to its interests, and wants to make a formal notification as soon as this month. hang seng index is adding constituents and that would take the number from 69 to 73. china pacific insurance also. changes take effect on september 5. paytm's ceo is staying

in charge despite calls for him to be replaced. 90 9% of shareholders voted at their annual general meeting to keep him. earlier there had been a boat called against his reappointment. paytm lost more than 60% of its value since the november initial public offering. shery: speaking of ipo's, a korean car sharing provider, socar, is going public after the softbank startup cut its ipo fundraising target in half because of worsening market conditions. let's bring in. pushing ahead after cutting the size of its ipo. the current market conditions do not bode well for the company. >> good morning morning. socar was one of the big beneficiaries during the pandemic and it saw its user base grow. despite the growth during the pandemic, the ipo process was

pretty disappointing. it's our disappointed results during the ipo. both institutional and retail competition was pretty low, even after cutting the price. that shows the big change towards tech ipos since last year, when we saw many large-scale share flows. socar right now is valued slightly lower, at one trillion won. that is about less than half or half of the 3 trillion won valuation that was expected. the company still decided to go ahead despite having to slash its ipo size due to lackluster demand. and also despite the drop of its large size ipo in south korea, as mentioned. haidi: what are we expecting in terms of the debut? youkyong: it would be a big

surprise, given their low demand during the initial public offering. the company is also listing when many companies that went public during the pandemic are trading far below their offering prices. companies such as kakao bank, many of them went public during the pandemic but they are now trading far below their offering prices. it shows how investors' view on companies with high ambitions but little cash flow or profit have significantly changed for the worse during this market, during this stock market. haidi: youkyung lee there with the latest. later, we will be speaking to socar's ceo on the company's trading debut on bloomberg markets: asia.

in the next hour, we will look at the trading day ahead. our next guest thinks beijing has what it takes to prevent a hard landing. plus, our other guest will join us to talk about adding growth exposure for china, policy easing becoming broader and more aggressive, in their view. and of course, we have the market opens in sydney and tokyo next. a limping session into the start of asia trading, with the correction starting in the u.s. session on friday. the market opens our next. this is bloomberg. ♪

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♪ hey: this is "daybreak: asia."

we are counting down to asia's market opens as we look at the low prime rates from china certified, following the pboc's surprise rate cut. couldn't have come at a better time. the energy crisis continues in sichuan, and we are seeing more indications that global demand could be slowing. haidi: you were talking about the liquidity trap in the last hour and that is the concern, that we would lose more liquidity, but not so much demand. you talk about the demand picture globally. we did just get the august import-export numbers out of south korea for the first 20 days. imports rising just over 22%. let's look at how the market is putting all of this together. annabelle: we are just keeping an eye on the recession fears at the start of trade. what we are seeing in treasuries, it has been putting pressure on yen trading. it is a bit weaker this morning. what that means for the stock's outlook, a weaker again generally has been supportive for the country's exporters. that could also be a

supportive factor for buybacks. we are expecting buybacks in the country to hit a record at some point in the second half. let's turn to korea. we got the trade numbers, the weakening picture we are starting to see for exports. in terms of what that means for the won, much weaker this morning, back to the lowest levels we have had this year. korean stocks, quite significantly to the downside at the start of trade. certainly a backdrop of deteriorating market conditions. one. in particular we are watching is socar, you can see it at the bottom of the screen, trading higher in its debut. of course, it is the number one car sharing startup in the country, that was forced to really significantly halve its listing target. a reflection of the weakening

macro economic outlook. we still have a lot of earnings coming through. in terms of what else we are seeing in australia, crude steel the downside. oil is falling as follows the headlines we have coming out, potentially some deal with iran for more iranian crude, could be making its way into the markets very soon. shery:. shery: let's bring in our next guest, who says china has the tools to prevent a hard landing. joining us is david chao, asia-pacific strategist at invesco. you talk about potentially avoiding a hard landing in beijing, but the chinese economy is slowing down. the latest headlines out of south korea, 20 day export numbers, exports to china falling 11.2% year on year. are you at all concerned about the latest economic data, whether it is from within the country or from neighboring countries, signaling of a slowdown?

and does beijing have the means necessarily to offset this? david: i am not surprised export numbers were weak because of the covid-related measures and also the property market slowdown. i think that chinese markets will fight the economic headwinds that the country is facing. i think korean and taiwanese equities also reflect a slowdown as well. i think china's amplified economic headwinds right now could have wider ranging impacts around the region. shery: i am still a bit surprised by the numbers. south korea first 20 day cheap experts falling. the market was so pressured in the past few weeks, concern about tech exports from south korea, and of course, taiwan, heavily dependent on this sector, the chip sector. how does this set us up when it

comes to northeast asia trading? david: if we look at inventory levels in the u.s., they are back to normalized levels. i think this is part of the business cycle that we are seeing. when you think about it north asia and south asia markets, i think north asia will continue to see a soft patch, given that global growth is slowing. but if i look at southeast asia and south asia, i think there continues to be a lag, especially as those economies reopen and places like thailand, malaysia, and indonesia should benefit from the wintertime peak tourist season. haidi: when you look at the longer-term growth outlook for china, it looks like we are in for this new normal, slower structural growth. when do you see -- where do you see the opportunities for

sectors to do well in that environment? david: i think the sectors that receive policy support, especially in green energy, alternative energy like wind and solar, electric vehicles, electric vehicle batteries, high-tech manufacturing, these sectors will continue to do well . haidi: we are also seeing the korean won trading the weakest since 2009. a fresh high for the dollar- won pairing, extending the loss for a fourth day on the back of the trading numbers. how do you see the currency playing out? the currency headwinds? either favorably or unfavorably? david: there continues to be economic headwinds for the korean market in the korean economy. a lot of it will depend on how quickly the chinese market and

economic starts to see a bit of a base and to start to see a rebound. that will certainly impact the korean economy and also the korean won. also, it lucy additional fiscal measures coming out from the government. shery: how closely are you watching jackson hole this week? how do we hedge in asia? it will be a volatile week, went kuwait? david: -- won't it? david: i will be watching with jay powell is saying. the expectation is that he will be dovish. but i am not sure. the message he wants to send is that inflation remains too high in the u.s., and the fed continues to focus on bringing inflation down, which means the fed will continue to tighten liquidity.

shery: when it comes to financial conditions we have seen them ease again, not necessarily what the fed wants to see if we get more commentary about how much more needs to be done, what will that mean for risk assets? david: it will be dependent on the trajectory of the fed tightening path. i think right now the narrative has moved from a 70 five-basis point hike or 100-basis point hike to a 50-75-basis point hike. i think markets will interpret that and try to suss out what is the pathway going forward. i am of the camp that i think it is more 50-75-basis point hike, and equities can do well in this environment. haidi: david, always great to have you with us. david chao, asia-pacific strategist at invesco.

let's get to vonnie quinn with the first word headlines. vonnie: the chinese province of sichuan is extending industrial power cuts to deal with what it calls truly of standing deficiencies in supply. surging demand for air conditioning have caused gaps in generation. eliminating supply to some industrial users will be extended to thursday from sundays original end date. china's biggest covid outbreak may be easing, with cases in hainan island falling to 450 -- 550 on sunday. it had been leading in infections, followed by a bit and xinjiang. hong kong is reopening one of its biggest isolation facilities, as the surge puts pressure on hospitals. japan's government says prime minister fumio kishida has tested positive for covid, and has relatively mild symptoms.

he developed a, cough and slight fever and came positive on a pcr test. he is currently resting and is expected to resume duties remotely on monday. singapore is repealing a colonial era law that criminalizes sex between men. the prime minister says removing the legal ban on sex between men is the right thing to do, something that most singaporeans will now accept. he added that the constitution will be amended to protect the definition of marriage as being between a man and a woman. 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: let's get you to annabelle for a look at the early movers. you are looking at some of the energy names. annabelle: that's right, we just had brent crude coming online. further losses as investors really weigh these macroeconomic conditions, versus more iranian supply coming into the market.

president biden said he spoke with the leaders from france, germany and the u.k. about reviving a nuclear deal on sunday. we have seen energy stocks higher. let's turn to the biggest solar producers trading right now in japan and in korea,. because. we are starting to monitor the power crunch we just heard from vonnie that china could be extending industrial power cuts in search warrant, a very populous region, but also very important for manufacturers, sichuan. turning now, we're still monitoring the earnings from australia. at the start of trade, we have one developer who is a little bit lower. it missed its estimates for full-year net losses. . the company says it is resetting the organization and addressing some legacy issues. we are also keeping an eye on

star entertainment because of fourth-quarter revenue trends continue into the early first half. it is still difficult to ascertain the impact on covid on operations, particularly in sydney. also watching socar, the number one car sharing startup in seoul, making its trading debut here in sydney after it h alved its listing target. shery: south korean ipos are really not treating greatly this these days. but we have the socar ceo, talking about the company's trading debut. don't miss that still ahead. and chinese banks are likely to cut crime rates for the first time in months, following a rate reduction by the pboc. up next, what that could mean for markets and the economy. this is bloomberg. ♪

haidi: quite a lot of variables when it comes to the fx front, and actually expected. we have seen the yen slumping.

the rate differential between the central banks is widening. we saw on friday there was not much of an intention from the pboc to lean against the yuan business. -- the yuan weakness. we will be watching the prime rate for august. if we get a lower lpr, that potentially goes into further weakness. dollar-yen, the dollar strength has been a big part of the story. we did see a decline in dollar strength this morning. the best finish since early june. we are seeing potentially further downside pressure for the yen, given the resurgence in u.s. yields as well as potentially concerns about a more hawkish fed and that risk-on sentiment is lessening a little bit. gains for the aussie dollar, but firmly under 69 u.s. cents.

the u.s. prime rate is set to follow. that pivot from the pboc. let's bring in our chief north asia correspondent, stephen engle. this is billing the picture for aggressive and broader stimulus. will it be enough, given that the demand side for more debt is not terribly strong? stephen: exactly. the authorities feel that the economy is slowing and they see that in the data. we saw that with the surprise rate cut monday. that paves the way for loan prime rates to be cut by a similar margin, 10 basis points is the consensus. 16 of 16 economists expect the 10-basis point cut the loan prime rate to 3.6 percent. and the five-year rate, which is also tied more closely to mortgages, many economists expect at least a 10-basis point

cut, and perhaps even more. so again, you said it rate. the loan demand has fallen off a cliff. aggregate july financing was down. but the broadest measure of liquid he is up higher than expected. there is a lot of liquidity but nobody borrowing right now. economists are saying that perhaps we need more stimulative measures, more rate cuts and more action. we got a late note coming from three ministries, the pboc is the housing ministry and the finance ministry. they had a joint statement published by a news agency that essentially, they will be allowing special loans to troubled developers to ensure that unfinished housing projects are delivered to buyers. this is a key issue with the

mortgage boycotts and potential unrest, and key stimulating factors in the property sector ahead of the party congress later this year. the property sector is also such a big pillar of this economy. shery: the power curbs in central china will not help. stephen: not at all. sichuan province is highly populated, has lots of manufacturing and suppliers to the big manufacturers based in shanghai. there are big problems. we have already heard from toyota catl, the big battery maker. they will be suspending some of their production because the authorities in sichuan will be expanding these power cuts to manufacturers through this thursday. could even be longer. it was supposed to be through just this last saturday but, the

power grid is being so overly taxed by the low water levels going to the hydroelectric dams. there is a big drought, the world's worst drought on record. chengdu has not seen rain in two weeks. others have not seen rain all this month, so that is a big tax. shery: over chief north asia correspondent stephen engle there with the latest on china. let's look at how yields are in china right now. this is the treasury yield as we continue to see the 10-year yield rising towards that 3% level. it is already breaking through the 50 day and 100-day moving average. we continue to see it climb higher in the asian session. and of course, the yield curve is flattening again. it last week. we continue to watch it because a flattened yield curve has been the winner this year. in any remarks from jackson hole would be viewed seriously by

investors. let's talk a bit about what to expect at jackson hole when fed officials and central bankers from around the world gather in wyoming. they are laser focused on chair powell's speech on friday. our global economics and policy editor kathleen hays is here. what can we expect? kathleen: we can expect a lot. we are expecting fed chair jay powell on friday when he gives the opening remarks at the kansas city annual symposium, their 40th year in jackson hole, wyoming. back in 1982, paul volcker battled down inflation with rate hikes so aggressive, they push the economy into a big recession. 40 years later, that is what the fed faces now. in his speech, we are hoping to get a message about what -- when he talks about inflation and how aggressive they have to be, frontloading, and the recession

risks. jay powell has not spoken publicly since we got those cpi numbers. remember how they were better for the month of july, 8.5% year-over-year. ppi numbers softened up a bit. in the labor market was looking strong, payrolls were high in the month of july. if you thought the fed might slow down because inflation looks better, they might not do that. what will jay powell signal, how much will he signal that he is ready to risk a recession? that is a big issue here. looking at the fed funds rate forecast, you can see how it has had to steadily climb as they realized inflation was not going to be transitory. that is their forecast now. markets would like to see it coming down. how strongly will he signal that it is going to go so high as 4% and stay there, or will he be

willing to look at it differently by the end of the year? haidi: we are also hearing from the rbnz, and this speaks to the level of flexibility that central bankers are trying to keep for themselves, given the data still remains, telling different parts of the story. we are hearing from the rbnz deputy central governor, that they are open to hiking the cash rate above 4% due to inflation. quote, "it could be 4%." they are being ambiguous to reflect the uncertainty about where the endpoint could be. could be a balanced range around 4.25%. definitely wants the cash rate comfortably above neutral. what does that tell you about the scenario that all of these central banks, including the fed officials, are working with right now? kathleen: how timely. adrian orr will be one of the central bankers at jackson hole,

and i will be sitting and interviewing him at the end of the week. at last week's meeting, it was very clear from him that he would not even, to like 50 points or 25 points. 4% was what he was looking at that. for him to say they are looking at 4.25%, seems to me like the deputy governor is taking it a step forward. will jay powell opened the door to something as aggressive as 4%? he has talked about a soft landing. we know that it could cause a recession, but he still seems to be holding the soft landing in his back pocket, which might be another reason why some people have found him to be rather dovish. one final thing, you know the reserve bank of new zealand is under investigation for, how can you let inflation get so high? there is a certain element of that for all central bankers. we will see if jay powell

addresses that question as well. haidi: it will be a big week for global central bankers. thank goodness we have kathleen hays across all of that. [laughter] and we will be live and all over jackson hole later this week for the crucial speech from, jay powell as well as interviews with fed presidents from kansas city, cleveland, and atlanta. this is bloomberg. ♪

haidi: let's look at how futures in europe are opening up, as recession fears continue to mount on uncertainty ahead of jackson hole, as well as the potential divergence between stocks and bonds. we are seeing steeper declines ahead of msci europe and german dax futures ahead of confidence gauges expected from germany, france, and italy.

dax futures is down 0.3%. . we will also be getting pmi's later this week. none of that data from europe is likely to be very positive. shery: perhaps that is what investors are waiting for from the markets, there is a lot of negativity in trading and equities. the nikkei is being led lower by attack and materials. and really most encz schmucks are losing more than 1%, although kiwi stocks are gaining. we heard from the rbnz deputy governor that there is some certainty around the peak of the cash rate. the latest business flash headlines, hang seng indices are adding baidu and other companies to the benchmark. the hang seng index will take the total number of constituents to 73 from 69. it -- the changes will take effect on september 5.

japanese trading house mitsui has decided to keep its investments in natural gas company, after president putin ordered a shift in the project operator to a russian entity. the company will make a formal notification as soon as this month and next, we discuss the power crunch in china, and how it is adding to manufacturers' millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network and most recommended wireless carrier. that's a whole lot of happy campers out there. and it's never too late to join them. get $450 off any new purchase of an eligible samsung device with xfinity mobile. or add a line to your plan today at xfinitymobile.com

vonnie: i am vonnie quinn with the first word headlines. the richmond fed president says the central bank is committed to taming u.s. inflation, even if it means risking a recession. he says policymakers will do what it takes to return inflation to the 2% target while

acknowledging the recession. could happen in the process. resent fed speak has agreed that. more rate hikes are needed. the australian prime minister says taming inflation is the key priority for his government. it is forecast to works even more by year-end speaking with sky news, he echoed advice from the treasury department and reserve banks that inflation will not hit 10%. india's food department says it has no plans to import wheat, with current stocks. sufficient to meet requirements. reserves declined in august, where prices have surged 12%. fed officials are discussing whether to cut or abolish a 40% import tax on wheat to help flour millers in several regions get supplies. germany may have to resort to nuclear power. the chancellor says there is an

option in discussing the lives of the nation's three remaining reactors beyond september. 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: china's sichuan province is reportedly extending industrial power cuts and it has activated its highest emergency response to deal with what it calls an extremely outstanding electricity supply deficiency. let's get more from our energy reporter. how did we get to this point and how bad is the situation? >> the situation is pretty tough. we got to this point because it has been two months now overextended extended, extreme heat in china, and the forecasts call for 40-degree temperatures

through wednesday. it really doesn't start to cool off with rain until next weekend. that has increased the power demand because of everybody using air conditioning. sichuan says the man who jumped 25% from last year's levels. at the same time it is drying up china's rivers. sichuan is very reliant on hydropower, 75% of capacity is giant dams along the yangtze river and its tributaries. a lot of them are plummeting in their levels. that means power generation is down about 51%. there is just not enough power left. so they are continuing to cut power off to factories for the rest of this week to make sure that there is enough for people to stay cooler in their homes. shery: you mentioned this is extreme weather, dan, an extreme

situation. could this prompt the sea chewing government and the national government to make some changes and try to diversify its energy sources, given these unprecedented elements right now? dan: i think so. one thing they have tried to do is maximize the amount of electricity imports to sichuan which is normally a big electricity exporter because it has so much hydropower. one thing china has talked about a lot this year is improving the interconnectedness of its grade that in a situation like this, they would be able to bring excess power from other provinces that have more coal power plants. that is one thing i think you will see. another thing might be that china has a massive solar industry, and putting floating solar panels on some of these reservoirs is a nice way of pairing the two renewable

sources so that when you have extremely sunny days, you get at least a little bit of solar power out of the reservoirs while you're hydropower levels are falling. haidi: what are the flow-on effects if we see unfulfilled demand into: gas, especially as we have seen power station gas inventories are quite low as well. dan: earlier this year because of covid and because of the rainy start to the year, hydropower generation was soaring, 17% in the last half of the year. that meant cold flower plants reduced their generation. but that has completely reversed in the last couple of weeks. coal uses 15% now. china still has a pretty healthy level of coal because they have been boosting mining to a record level. but if this keeps up, we will be getting to peak heating season in china.

if china has to go back out on the market to purchase coal and gas, it will make things worse for everybody, especially europe, where they have already cut levels. shery: dan murtaugh. bloomberg intelligence has been looking at the implications of the power crunch in sichuan. we have a function for you to find the research. let's go back to annabelle for a check of the markets. how are retrading? annabelle: looking fairly risk-off today. research has gotten out from bloomberg intelligence highlighting a bit more of that now. there is focus on the shift away from hydropower and what it means for coal and lng. as darren said, we already have some pretty good inventories for coal, but still, if we see more stockpiling, it could raise prices. lng prices have been correlated with coal prices and they could

also rise in tandem. we are fairly risk-off today, seeing strength coming back into the dollar. for what that means for the yuan moving forward, we have two key notes in the next hour, the fix and the loan prime rate. our markets live team says the fix will be more significant today, given that the pboc did not give any strong indication. as well, we are keeping an eye on the korean won, now slid into a 13 year low. let's turn and talk about china now, we have a very big week ahead for chinese earnings, three hundred companies reporting. foreign outflows have really been tested. we have seen them gaining speed in the last six months. we had the promise of an economic miracle in china but it is very much being tested by the macroeconomic conditions that focus on covid zero.

one of the many worries facing investors, certainly a big thing for us to be watching. haidi: let's get more on that. clsa says chinese downgrades are running ahead of other regions. and that broader policy easing should help support china risk assets. the head of research joins us now from hong kong. there are between risks from property, what we have seen from covid zero, there is always -- i am wondering what chinese stocks you see coming out of that and doing better. guest: i guess a key message from china is that we essentially led the world into this process. for china it was around policy and that led to a slowdown. the policy in the internet sector, where we saw that more than a year ago now, and the

property sector. these have been areas of key weakness for china. there is no evidence that the property weaknesses are over yet. on the internet sector, there is quite a lot of evidence in the price. and we talked about the tightness of power supply. we have seen some very strong earnings in areas like e.v. . we would suggest that carbon-based energies can produce better returns to capital. we have seen a huge push for esg , completely understandable, and the right inspiration for markets in the world at large. but it sometimes leads to assumptions around the degree to which we can transition to things like wind and solar which are perhaps listed. the transitions sometimes take up to 20 to 30 years.

haidi: you talked about the regulatory support in chinese markets and broad-based easing, where does that feel tore through? we talked about whether this is a classic liquidity trap because you are not seeing that level of demand for what banks and what the pboc is offering. shaun: from our perspective, we would argue that we are coming to the end of a 3-stage bear market. that means that the first stage of a bear market, there is a dramatic slowdown. then you get the fundamental downtrend. people look to the signals of easing and say that is the beginning of the bottom. but the reality is easing is a reflection of the problems central bankers are trying to manage. that takes time. this is the end of the beginning, not the beginning of the end. that means easing is important, but its role is to help

companies facing financial difficulty to manage that transition and create the resolution that can form the bottom. the fundamental bottom will be signaled by fdi picking up. shery: but that has to do with covid zero, right? especially given that we don't have certainty unaware that the egos. meantime, how do you position for those opportunities across chinese asset classes? shaun: from our perspective, given that we have a bearish event in terms of the overall markets, not china-specific, investors are better positioned to be defensive. that means the utility sector, despite the cost challenges, they have more traditionally performed. staples is obviously an attractive area. investors are looking to not anchor on previous things. one of the mistakes we are seeing from retail investors

specifically, is looking into historic multiples that were achieved previously in what was essentially a global bubble, and anchoring that as the direction of where stocks can go. the reality is that we are in a persistently inflationary environment where interest rates outside of china will continue to go up. that means multiple compression everywhere. shery: we are of course looking ahead to what will be said at jackson hole, a time when economists will continue to tighten policy. we are seeing em risk premiums rising, given the divergence. when we have a chance to bring the chart up. i want to ask about emerging markets. we have vulnerable nations, the likes of sri lanka defaulting, russia, pakistan and so many others coming up, what are you watching? shaun: we have to make

distinctions. there are smaller markets that have been dependent on foreign debt or have executed policy that is not done well, for example, sri lanka, that have unleashed significant stress and put those markets in an unlikely position to perform at all. however, broader emerging markets includes markets like china and korea and you have a scenario where these markets are attractive from evaluation perspective. we have to support the fundamentals which are unlikely to bottom in the near term, versus actual prices. emerging markets represent interesting value insofar as there is a clear understanding of the problems embedded in the price. the other point you mentioned was credit spreads. traditionally, em has been seen as the place where risk is greatest and capital comes in depending on how bullish investors are and how strong the

fundamental outlook is. however, we are in an environment where the rest of the developed world has taken on so much debt to sustain global growth, that the distinction between these markets is not so stark. as a result, we think there is long-term value here. none of this changes the short-term experience of markets. investors tend to trade off of their experience and what has worked in the past will dictate short-term price action. but in the long term, em is better positioned, respective to valuations than history would present. haidi: we have seen this rotation intertec. even to unprofitable tech. shaun: absolutely a head fake, in our view. let's look at the drivers of this and where we might have a signal to either confirm or refute the position that clsa

has taken. the seeds of this were sown in china joining the wto in 2001. we see aging global societies, which slows overall gdp growth, and the rising debt to keep it up slows the long-term outlook for growth. that combination of low inflation, low growth, it means people pay a premium for growth and with interest rates down, they pay more for longer duration. we are now in the world were too much demand simulation at the same time as a supply shocks as exacerbated by the ukraine conflict mean that the growth will struggle and value outperform it and that is sustainable. shery: shaun cochran, to join us again soon. clsa group head of research, thank you. next, singapore is upping the ante to attract more global talent, announcing the move to

decriminalize sex between men. that is just ahead. this is bloomberg. ♪

>> in this global contest for thailand, singapore can't afford to be left behind. this is an age where talent makes all the difference to a nation's success. we need to focus on attracting

and retaining top talent in the same way we focus on attracting and retaining investors. haidi: the singaporean prime minister during his annual national day rally speech on sunday. let's bring in asia economy editor michelle jamrisko for more, including that announcement about repealing these colonial era laws when it comes to sex between men. what exactly did he announce with regard to lgbtq people in that speech? michelle: that leaves us with a few questions, but this was highly anticipated, this repeal of a law that he mentions was instituted in the 1930's the british. it is something that they haven't owned over the years, but it symbolizes something further. he talked about a lot of stakeholders in this debate would talk about wanting to preserve family values, the idea

of family being a man and a woman and children. he then did decide to enshrine that definition inside the constitution as a concession to the other side in this battle. a little bit and inspected in some ways, but balanced his push forward last night. it leaves businesses wondering if there will be any changes to the way visas will be provided to same sex couples coming in. you talking about still attracting foreign talent. a lot of next-generation industries that they want to expand to might have same-sex couples coming to work and live here. questions remain about how that might change. singapore said they will deal with those on a case-by-case basis. shery: bloomberg spoke to the singaporean prime minister, and he talked about people having to compromise for the law. we did not get any clarity as to what might happen here. what moved singapore to make

such comments by the prime minister, and what can we expect when it comes to attracting that talent that they so need right now? michelle: i think the prime minister was trying to balance, as the government has been for a while, two strong feelings. the lgbtq community wanting to feel welcome here, the classic debate between those who want to appeal to foreign workers and others who are more focused on family values and the social fabric inside the country and that might have conservative views on that front. really a tough balance to strike. compromise leaves both sides dissatisfied, so i think this will not be the last you are hearing, but remember just over a decade ago, they did say 3 emily: emily: a -- that 377a

would not be enforced. so it is a little murky how each side will feel on this front. shery: bloomberg's michelle jamrisko, joining us from singapore. the u.s. and south korea are about to begin their biggest joint military drills in five years after an earlier pause failed to get concessions from south korea on -- from north korea on disarmament talks. let's get more with our east asia government editor. obviously, it is important because it is the first time in five years. but i also wonder if this has rather significance unaware talks with south korea are actually going, or if they are not going anywhere at this point. >> talks with north korea have been pretty much stalled for about three years now, and it has been no indication that north korea wants to go back to the table. in fact in the past week, kim

jong-un's sister used some pretty serious lung which to dismiss the fact that north korea is ready to talk this out. north korea has been staying away from talks. these large-scale drills were put on hold as a result of the issue between kim jong-un and donald trump started in 2018. the u.s. and south korea have seen that in person drills as essential for maintaining an alliance and mutual defense priorities. haidi: it has been an environment of heightened tension, particularly around what was happening around the house speaker's visit to taiwan. how does this build into the broader geopolitical risk now?

jon: the u.s. and south korea are unified front for the various issues going on around the region. with the u.s.-japan and south korea on board, it helps by putting up these security alliances, bolstering the region and u.s. strength there as it looks at threats from north korea, china, and others. before south korea had a change of administrations in may, they had been a lot of bickering between japan and south korea which sent relations on a downward spiral and also hurt, in terms of the joint coordinations of things like intelligence-gathering, and keeping track of north korean missiles that are always flying through the region. haidi: bloomberg's east asia government editor, jon herskovitz there. we do have more ahead. this is bloomberg.

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shery: a quick check on the stocks we are watching at the in hong kong and shanghai. the four companies set to join the benchmark hang seng index are in focus. cctv is also reporting that china will extend tax exemptions on electric car purchases until the end of 2023.

we are watching those as well, including li auto. haidi: we will be speaking to the socar ceo on the company's trading debut later on bloomberg: asia. plus another ceo will be joining us to talk us through the latest numbers. it is happening at 11:30 a.m. in hong kong, 12:30 p.m. in sydney. coverage continues with the start of the trading day in hong kong, shanghai, and shenzhen. this is bloomberg. ♪

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>> good monday morning. it is not :00 a.m. in the city. here is the bloomberg markets china open. i'm david ingles. let's get your top story. esma