>> from the world of politics to the world of business, balance of power with david westin, news and analysis, insight from the power players weekdays. this is bloomberg.

shery: welcome to "daybreak: australia." we are counting down to asia's major market opens. haidi: the top stories. asia's stocks after a positive start after the late rally on wall street. over tightening will trigger a hard landing sending treasury yields higher. zero covid poses -- the world bank urges increased production to help cool inflation, warning rate hikes a higher recession risk. shery: u.s. futures extending the gains we saw in the new york session. the s&p five -- s&p 500 moved further. thanks rising higher against the fomc decision, not to mention the tech rebound. . . the treasury selloff continued the 10-year yield topping the 3.5% level for the first time since 2011. we are very much watching the sugar and yield leading the gains.

still at the highest since 2007. we had a rebound for oil prices. here in the asian session, we are seeing downside around the $85 a barrel level. we heard from the u.s. that they will be offering an additional 10 million barrels from their strategic reserves. haidi: we are watching out for energy pricing throughout the course of the asian trading day. we are seeing asian stocks set for a positive open following the late rally we talked about. australian future setting up for a gain of .7%. japanese equities coming online after the long weekend. we are watching in terms of currency, dollar-kiwi. aussie-dollar kiwi, i should say, nearing the 2017 hot. when it comes to asian equities, we could see the window of opportunity for some bargain-hunting to commence, given the asia-pacific is at its lowest level in more than two years. investors are expecting china's banks to keep loan prime rates

unchanged. the covid zero strategy poses a growing threat to the bottom line of local government. for more on this story, let's bring in our correspondent, stephen engle, energy frates correspondent, garfield reynold. what are we expecting when it comes to the lpr? the adherence to covid zero and summoning different ways has been drawing down government coffers. stephen: yes. that is true. the coffers are being drained at the local levels across china. we are seeing that and we know the chinese economy is slowing down. yes, the august numbers were better than july. that is why we got in august on the back of the july numbers that were so bad, the medium-term lending facility from the pboc was cut. and then we had to follow on suit the following week with a

loan prime rate being cut. one year cut being put -- being cut by five. the second cut this year after january. we had the five cut i 15 basis points. that is more closely tied to mortgages. we know the mounting problems in the property sector there. again, the august numbers following the dismal numbers in july were better. sure, there was some one offs that were tied to retail sales for electric vehicles, and awful power consumption was up. that helped drive industrial production. however, the economy is still weak. most economists surveyed by bloomberg expect, because the september operations on the mlf was kept unchanged, we are not expecting another move, at least this month, with of the loan prime rates later today. but, most economists surveyed by bloomberg, i, think 16 out of 17 including bloomberg economics, believe the easing cycle, more

easing for the pboc on the mlf and the loan prime rates to happen in the fourth quarter. shery: when it comes to the chinese stock markets, we could see another grim milestone. this chart from the bloomberg showing how the indexes are just below the 20% mark when it comes to the fall from the june peak. what are investors thinking about the chinese markets right now, given all of the economic challenges that steve just mentioned? garfield: the challenges on the economic front, but there are also political challenges. no concerns about china's multifaceted policy toolbox, and the way that it is reluctant to pursue the kind of massive easing that it formally carried out more than a decade ago or other central banks have carried out in the face of severe economic slowdown. china has difficulties kickstarting its economy, it

keeps getting slower and lower in each time it does, there are a bunch of tweaks but there is nothing anybody can see as definitively solving the difficulties that face china. one of those is the continuation of the covid zero policy. there is also the tension between investors looking for an earnings turnaround in china, and china's somewhat more fractured attitude towards whether or not profits might be a good thing. you think of the common prosperity campaign, and we have the communist party congress later on this year, which is getting close. there is no guarantee that that will create a turnaround, because there is that misalignment between what investors want and what the

chinese government wants. haidi: staying relatively calm one we talk about emerging assets going into the fomc. this is perhaps one indicator where we are seeing the risk aversion. traders dumping out of the most liquid emerging markets etf's. garfield: and i think that gels with the concerns that are mounting, that the fed's hawkish policy might be right for america to tame american inflation. but the fed is the world central bank because the u.s. dollar is the world's reserve currency. for the rest of the world, the kind of levels the fed is going to go to look very dangerous indie. especially for sustained currency weakness and the pressure that that puts on asian economies, asian currencies. in that situation, why buy em

etf's? if you are going to buy stocks, why not go into american stocks that might be passed in the american markets, that might work better in this situation? both sets of shares look cheap. u.s. and em, relative to the expense of levels investors have become use to. when the fed is concentrating on finding america's problems -- fighting america's problems, when the dollar keeps rising, that sucks money into u.s. assets, including stocks, and out of the most vulnerable, em's . probably doesn't help by the fact that there has been a reluctance to go into europe. there has been a lot of outflows to europe, both em and dm, earlier in the air, given what has been going on. the vulnerable area is the em etf's, and the money getting sucked out of that, and into the u.s. in particular. shery: garfield reynolds and stephen engle with our top stories today.

. was good to vonnie quinn with the first word headlines. vonnie: thank you. ukraine is calling on western governments for more weapons, as it presses ahead with his counteroffensive against russian foreign's -- russian forces. then i russia any strategic advantage. >> sometimes being asked whether there is enough weapons that we have received, and i always say that i will be able to say it was an of only after ukraine wins. until then, we will be asking for more. vonnie: a typhoon is expected to dump as much as 400 millimeters of rain on parts of southern japan, as people return to work after a holiday weekend. the flood warning is in place for tokyo. the storm ripped through the southwest island on monday, killing two people, and leaving 70 others injured. queen elizabeth ii has been

buried following a state funeral of more than 2000 global leaders at westminster abby. crowds on the streets as it made its way to the restingplace. the funeral was described by government officials is one of the biggest international events the u.k. has ever held. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm vonnie quinn. this is bloomberg. shery: still ahead, how private capital and infrastructure can play a role in supporting the net zero transition. jun-bei liu joins us for that discussion. up next, we will look at the latest of the markets, and why they see volatility continuing ahead of a brighter 2023. this is bloomberg. ♪

>> one way for the government and the central banks to go is to focus more on production. how do you get more things out in the economy? that makes -- it means you will not have to do as many rate hikes. shery: -- haidi: david malpass speaking with us earlier. and i guess -- our next guest, where the valuation or earning risks are not pressed. with us now is jun-bei liu. we talk often, but i want to talk about your opportunities at the moment, given we are getting multiple warnings to the impact on valuations. jun-bei: absolutely. at this point, you are seeing pockets of weakness where earnings might go in the consumer-related names. that goes across consumer tech or consumer. and what is interesting in the

current market is from time to time, you have this brief moment of rally of investors, short-term investors, piling into those names, given the things that are going well. whether it is in australia, globally, in the u.s. things are going quite well. . this is the opportunity that you can use for technical investors like ourselves, to take short positions for those names, because we know earnings are slowing down and what the multiple downwards shifts we are seeing in the u.s. it is generating a lot of returns. haidi: talk to me about buffett madigan investing you are doing. whether it be the u.s. market or here in australia. jun-bei: the current theme is that you have to be cautious with consumer related businesses. there are a couple reasons. the first is that they have been a huge beneficiary of the covid impact, people not traveling, the purchase of goods was

strong. we have seen that reversing in the last six to 12 months. it will be a huge headwind for those businesses. that is going to be very challenging. the second factor is that we have had a huge amount of pressure on consumer, the u.s. consumer, the rate increases have been more. the lower end of the consumer is certainly falling away. that will drive some of those discount environments to come through in the next couple quarters. if anything, we will get for the december quarter or march quarter. the pressure could be enormous. that -- those are areas that you need to see the weakness coming through. what is worse that the consumer is sitting on so much inventory at this point. the supply chain shortage six months before, no one could get and a stock, and now they have. it is going to be quite difficult in the next few quarters. shery: with the gradual

reopening of china, do you expect the consumers to make a comeback across china, especially with revenge spending a theme? jun-bei: absolutely. i love the term revenge spending. absolutely. chinese consumers have been in lockdown for a long time. the chinese government has tried to stimulate the economy. with the policy stance in place, it is difficult for the economy to get there. we expect by the latter part of this year, things should start returning to normal. as we have seen, as evidenced across other markets, consumers will go on these spending sprees, on things that they were not allowed to do. all of that together, it does make that market pretty strong the next 12 months. shery: i know inflation is not necessarily a problem in china. this chart on the bloomberg showing how asian inflation has been rising. we have central bank decisions in three asian economies, hiking rates or expected to hike rates this week.

how is that going to affect the investment picture? jun-bei: for the asian markets, they have been impacted by the risks of the world, inflationary pressures, given parts of it supply chain, the product shortages, as well as stimulus. if you look at the inflationary pressure, none of these are as much -- are as bad as some of the western economies. as the border reopens, as the supply chain pressure eases, which they are, we expect some of those prices to come off, inflationary pressure to come off. china is a different story. it is more of a negative story, where the economy starts to create activity. haidi: how are you playing energy at the moment? energy alongside volatility, the two winners we have seen right now. does it change your interest and opportunities you see in the transition? jun-bei: it doesn't. but it does prolong that

transition. because energy shortages are so severe at this point, particularly for the european markets. it is very difficult to really see how any short-term supply can come online, to supply some of those demands. especially if you look at the air travel demand and the backlog and the like, things that are incredibly robust. if anything, energy equities is very undervalued at the moment, if you look at the way oil has been priced. shery: when it comes to corporate earnings, where are we headed across asia? if we don't see the growth of -- that these firms want to see organically, could we see more m&a's perhaps? jun-bei: absolutely. that's a good point. they are sitting on good balance sheets. as we can all see, the organic earnings growth story will gradually slow down, particularly for the western economy, for the u.s. market or european market. because they will have been

reopened for quite some time. as that slows down, you will be going out and buying assets and growth. what is also interesting, if you look at the valuation for the equity markets, it is actually looking as a reasonable value. that is why we of m&a and privatization to come through. haidi: always great to have you with us. jun-bei liu. you can get a roundup of the stories you need to know to get you going in 10 days edition of "daybreak." it is available on the mobile, and the bloomberg anywhere app. you can customize the settings as well, so you can get the news on the industries and assets that matter to you. this is bloomberg. ♪ if you wake up thinking about the market and want to make the right moves fast... get decision tech from fidelity.

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haidi: as we said earlier, the world's biggest economies need to boost production to help cool soaring global inflation. let's get you more from that conversation. >> inflation is a real problem, so i am not saying it is easy. but i think the central banks has more tools than just the interest rate hikes. one way for the governments and the central banks to go is to focus more on production. how do you get more things out in the economy? that makes -- it means you will not have to do as many rate hikes. >> how will you make that work, though? you need right now bring down inflation. you are going to see the economy globally getting hit hard. investing money cut -- to make the economy more productive plays out not over weeks, not

over months, but over years. david: that is true. investors look ahead. if you can create the right environment, there will be a positive response from markets. you would see, for example, bond yields would go down even as equities went up in price. . that would be a stabilization signal for markets. that takes more production, and the systems that can actually produce more. and i think the central banks themselves can use regulatory policy and also their bond policies better to encourage supply. central banks have fallen into this idea that they only affect demand. but in reality, the financial systems and the central banks have a massive impact on supply and investment. kathleen: you are making an interesting argument that there is a misallocation of capital, you need to have more capital out in the world for it to go to emerging markets, small

businesses, women, etc. using to be saying that the fed should not just slow -- let the bonds roll off faster, they should be selling bonds, the ecb should be selling bonds. what do you mean by that, and wouldn't that be disruptive to bond markets and disruptive to the economy? david: at first, the bond markets will say that. at some point, you have to have more capital outside the bond markets. that makes them more credit worthy. you might see a situation where the yield curve is higher, but the risk curve is better than it is right now. that would be the goal of having a growth oriented monetary policy. i think even more powerful is on the fiscal policies that. the governments are borrowing so much, that it means there is not much -- there is not enough capital left in the productive sides of the economies around the world. shery: david malpass speaking on our show earlier today. we are kept in down to the start

of trading. tokyo and seoul, some of the stories we are following. in south korea, a sign of heightened monitoring of the yuan continued drop, the authorities will make with companies to discuss ways to stabilize dollar supply and demand in the market. we are watching president -- the president deliver an address at the u.n. generally simply. overton japan it is about the weather right now. we have a typhoon expected to drench major cities including tokyo. at least two people have died. we are watching construction shares, given the powerful storm. at the bottom of this hour, we are going to be getting august inflation numbers. bloomberg economics expecting an acceleration in prices for the month on the back of higher food and energy prices. haidi: let's get a check of the latest business flash headlines. the new york times reporting more than 200,000 frontier

pickups after the u.s. national highway traffic safety administration said the defect can cause the vehicles to roll away while parked. the vehicles produced between december 2019 and august 2022 are involved, according to the report. ford tumbled in late trading after warning its supply costs are running $1 billion above expectations in the current quarter. automaker confirmed guidance, but signaled shortages of key parts will keep inventory of have completed vehicles elevated. for to says it is facing higher supply-chain expenses. in talks with investors over about $300 million in shares in its hong kong lab. the chinese ev maker could raise as much as $1 billion in the listing, with orders beginning as soon as tuesday. they focus on the mid to high-end segments of china's ev market. south korean prosecutors have

asked help interesting someone who is blamed for the $60 billion cryptocurrency by tell. his whereabouts are unknown. it will take about a week before it is issued. still ahead, a powerful typhoon that barreled through southwest japan has triggered flood warnings for tokyo. we get an update from there as japan markets reopen after the long weekend. this is bloomberg. ♪

>> breaking news out of japan.

we are getting the consumer inflation numbers, core cpi prices whining 2.8% year on year for the -- widening 2.8% your idea from the previous month. when it comes the headline number we're talking about consumer prices gaining 3%, higher than estimates. also a celebration from a previous month, you get the core cpi, also surprising on the upside on .6% growth for the month of august year on year. it is not that surprising that the core cpi number stays elevated above that 2% target given the higher prices of food and energy, august had mobile phone charges had a lower ace compared to last year -- base compared to last year. it beat analyst estimates, now

we are seeing 2.8% wrote, of course a weaker japanese yen does not help with the inflationary pressures. they believe they had the -- the bank of japan think they need consistent wage growth to improve ahead of the boj decision next week. >> some of the data points to come weekend expect the impact of climate and weather events. it will dump as much as 400 millimeters of rain in parts of southern japan. east asia editor, joins us, give us an update how bad the damage has been in the southwest and what they are setting up for now? >> the total so far, there has been 2 reported deaths 1 one reported missing and 122 injured

according to nhk. bloomberg intelligence reports we see hundreds of millions of dollars in insurance claims coming from this. they scrambled transport, hundreds of flights canceled, trains and affected roots are also canceled. almost every part of the country is under some sort of weather advisory from floods, landslides, storm surges, high winds. the storm has hit mostly japan, right now it is north of tokyo, it should be off to see over the pacific ocean later today. >> people in japan coming back from a three-day holiday, how bad could get in the tokyo region? >> tokyo is under a flood advisory for today, we are getting heavy rain off and on tokyo this morning. it made the morning commute far more difficult. people that were overseas for the holiday, or traveling within

japan it slowed things down. flights were called off in many parts of the country. it was a bit of a scramble to get back to tokyo and other parts of japan. because of the way that flights or trains were cut off. >> east asia editor, joining us from tokyo let's get the vonnie quinn with the first word headlines. >> hurricane fiona strengthening as it moves back into atlantic waters after hitting the dominican republic. they say catastrophic and life-threatening flooding continues in puerto rico. it knocked out their entire power grid, the damage done to the island could top $2 billion. a magnitude 7.5 earthquake affecting -- killing one person and propping evacuations. they said that -- prompting evacuations.

it was felt just after 1 p.m. in the capital where an annual drill was being held to commemorate big quakes in the same day of 19 75 and 2018. the u.s. will release barrels of crude ahead of their ban. awards will be made no later than october 7, oil prices retreat to levels seen before russia's invasion. the market regulator and finance concern about ringback senior staff working abroad. the securities and teachers commission, -- the city seeks its status as a global financial center. 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

number. >> coming up we discussed how important capital plays in its important role getting to net zero transition. this is bloomberg. ♪

>> renewable energy has seen a boost in investment as more country set net zero goals and more capital flows into sustainable financing. this year might be an exception. there has been a lot of talk about what this really means for wind energy given that we do have a crisis ongoing right now. what are we seeing in terms of investment? >> let's start with the good news. if you look at investments in renewable electricity the first time of -- half of this year compared to last year, it is up. the value of electric vehicles sold the first half of this year's doubled to last year. this is all good news.

the problem is it is not geographical uniform. looking at investment value, china led the world while u.s. and europe saw declines. in the case of the eu, and in the u.s. the inflation reduction act should get us to a growing trend although that will take them time. i mentioned china saw growth and australia as well as south asia. bigger markets such as india and japan had bigger declines in renewable energy this year compared to last year. >> does that seem effective to drive change? >> the good news there, over the last five years we have seen the scale of markets -- of carbon markets, and by and large rising. the initial trading scheme, the market is open to outside of --

investors is a start to be treated as a troll to -- tool to track energy transition. in some of those cases you see retail investors get in. if you look earlier this year, the value, the length of the assets reached a record $3 billion back in february. before the war in ukraine, started to initially decline. you look at the net value of carbon etf's, last august, a month ago that value was $350 million, almost seven times the value in august 2021. you are seeing significant growth. it depends on the geography in the market. >> infrastructure has been drawing increased investor

attention, and some of the largest policy momentum in the space. speaking with some of the world's biggest infrastructure investors, we are joined by ben. talk about the structure of these investable assets should be taken place. in asia private partnerships are really prominent. less is the availability of these assets here in australia. >> the exciting thing, around the world no matter what investor you speak to there is a huge appetite to invest in energy transition. the unfortunate energy crisis of the last 12 months has accelerated that. more than for the percent of people working in the energy markets today are involved -- than 50% of people working in energy markets today are involved in renewable energy. they are solving what suits particular market, some markets are using more public-private

partnership. others are more bent towards private investment. that is starting to capitalize capital that is needed for those markets. appetite is only accelerating. >> given that you mention, the asked that exact question, when you have an energy crisis particularly in europe, and across a number of areas as well, how does that impact the transition for you? >> in the short-term it has affected the world not particularly positively, emissions go up a lot of governments were prioritizing energy security over transition and eight period of crisis. -- a period of crisis. there was an increase in investment, to trillion of the next five years, a lot of it is focused on finding solutions. they are being looked at on two levels, one, how do we expand

and scale up traditional renewables like wind and solar? two, how do we scale and unlock new technologies, things like battery storage and hydrogen. one of the few sewer linings of the last 12 months has been this notion, clearly we need new -- more sources of energy, in every country for my diversification view. the best way to do that is to build, build, build and scale, scale, scale in terms of renewable energy. >> in new york, they are committing $7.1 trillion to managing that paris goal, how do you pack is -- package that investable opportunity? how can they possibly recycle? -- reach that goal? >> i think there are two ways, in terms of that particular community group, how good is it

that we have business capitalizing that -- catalyzing that capital to be a part of the opportunity. they are looking to partner with people to match that capital to the opportunity. people like ourselves that are developing or constructing 50 gigawatts of renewable energy to bring opportunities to them. what we are seeing is a whole range of investment managers, people like ourselves, not just identify the opportunities, but valid the -- develop the teams and the know-how to match capital to opportunity. the fact that more capital is thinking about renewable energy, that is really wanting to be part of the journey to transition our economies to net zero more quickly is a great thing. >> when it comes to interest, how much are you getting it from the institutional side of things, and possibly individuals as well? >> i have just been traveling around, more than 60 clients and

partners over the last three weeks. clearly we are talking about things like stagflation. the other dominant theme we are talking about, not only energy transition, how do we practically get capital into those institution markets, but also invest around the world. the appetite has greatly increased and i think that is the same for high net worth individuals as well. the understand where the world is going, not only is the right thing to do and there is good returns, there will be no dichotomy in the future between a great investment and the investment that is in stable. the best investment will be aligned with sustainability. >> you have been traveling around the world right now, when it comes to the asian region, what is the biggest drive in terms of the focus on the energy transition? >> one of the great things about asia, it seems to be less affected by stagflation. the fact is, particularly for

emerging markets it making an attractive destination for investors. what we are seeing across the region, increasingly good government policy and more mature frameworks to invest in. everywhere from indonesia to korea, china, obviously there is significant opportunities to build traditional renewable opportunities. those markets need capital and is a -- there is a big opportunity develop capacity. there is an opportunity to get around the beyond traditional renewable technologies. that is exciting, we see asia as a exciting place in terms of traditional renewable asset place, it also helping to catalyzing newer technologies that need scale now that they are reaching commercialization from a technology point. >> does asia have a opportunity to be a leader?

does knitting a late start and that? -- getting a late start impede that? >> i think every country can and every country can take a leadership position. we have to acknowledge that some economies are more geared towards fossil fuels in terms of trade or their own energy mix. every country needs to understand the magnitude of the issue and is moving towards a plan, and also a practical implementation of renewable energy that will help accelerate to net zero. given where emissions ended last year, are we moving quick enough? the answer is no we are not, that is where we need to catalyze private capital with public capital to accelerate the rate of investment. from our point of view that is something we feel we can help every country including australia, get moving on, get

momentum. therefore everyone can think of themselves as a leader. >> we have been talking a bit about the broad underperformance of the esg fund. the idea of culture wars, if that esg label has become something that is harmful. do we need to get away from esg towards mainstream investment and at the end of the day you want productive investments for your capital? >> i think that is a great point, what you need to stop focusing on is putting esg but -- investments into one bucket. you think about whether the best companies -- what are the best companies in the future? you roll forward 10 or 20 years, they will access the market, they will be companies regulators give a social license to. those companies will be sustainable, if you want to make an investment publicly or

privately in a business you think we'll have a good terminal value i think those companies will be sustainable companies. what that means is you are right, every investment needs that think about both the financial returns, but also how that business or how that particular -- can be more sustainable. there will be no dichotomy in the future. >> great to have you here in sydney with us, ben way. coming up, central bank is expected to raise borrowing costs across 20 central banks. we look ahead for the yen. this is bloomberg. ♪

>> a quick check of the latest business headlines, america expressed is adding 1500 employees to its technology arm. they told bloomberg that roughly 60% of the hires would be in the u.s. without a -- with a third in india and the rest in europe. 3600 tech workers hired in the

last year. the surgeon post-pandemic revenue allows for new investment. apple is working for a new update to fix a bug in the rear camera. users complained about the camera when used with snapchat, tiktok, instagram, facebook. the new camera system is one of the main upgrades for this years device. rumble, the conservative video network band, surged 40% on its debut in new york, it became a publicly traded company, with its deal with a blank check firm. it is one of the growing number of alternative media sites to attract users as political division identifies. >> we are counting down to markets open in tokyo that come online at the top of the hour following an extended rake. if i was -- break. if i was only looking at asian

stocks i would say japanese equities have to catch down, but we did have that rebound in new york. >> it there -- there is some positive momentum going into -- japanese futures going online and less humans, it does -- it does paint a rosy picture. there is a bit of the downward pressure on the u.s. dollar. giving bargain hunters the opportunity as well. of course volatility is the name of the game ahead of the fed decision this week as well as the key beating with the boj as well -- meeting with the boj as well. you see that consistent improvement on inflation and timing peak fed rates. speaking of inflation we have numbers from japan in the last 20 minutes or so.

the surprise on the upside on a moderate basis, all three beating the consensus here by a small fraction. it is unlikely to move the dial at all. it is the macro picture we are looking at today. >> of course with the boj, i have to say it has been a bit boring. i have jinxed the decision. are we expecting more volatility? >> it is interesting to see what happens, we have been keeping a watch as well. treasury yields opening with cash markets beginning trade at the top of the hour. we have been watching what's happening to the 10 year and the two-year has been spiking. the year differential has been one of the factors leading into yen weakness. the bank of -- bank of japan outlier status coming to focus even more. one of the last central banks in the world a onto negative rates. we will see what happens at the

end of trading today. >> will see what she has the countdown to, lots happening in sydney, seoul, tokyo coming back online after the three day weekend. several construction related companies might be active after heavy rain causes disruptions particularly when it comes to the airlines. we are watching tokyo marine, q shoe electric, and the likes of japan airlines. ford motors could move after the carmaker warned the carmaker spending $1 billion above expectations and a current quarter as well as supply shortages going on as well. >> take a look at how u.s. futures are trading at the moment. we are exceeding -- seeing extended upside or the early trading session after u.s. stocks move decidedly higher in new york.

bank stocks gaining ground ahead of the fomc meeting, tech giants gaining ground and the dollar is mixed. oil gaining ground as the dollar slightly weakening towards the and of the you'd -- of the new york session. the bti around the $85 barrel, wti around the $85 a barrel. they discuss their acquisition of the indonesian commercial bank, the market open the city, seoul, tokyo is next. this is bloomberg. ♪

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shery: this is daybreak: asia.

investors come back online in japan after a long weekend. they are facing inflation numbers accelerating the fastest since 1991. haidi: we are looking ahead to the fomc, boj as well. the china covid zero strategy. lots of risk aversion. the strong lead from wall street. shery: we are headed towards the market opens. four seconds ago. global central banks and focus, thursday a busy day. we're seeing the nikkei gaining 8/10 of 1% at the open, we are

watching the japanese yen very closely because there is no relief for the yen. we are expecting yield curves to be unchanged despite the august inflation numbers, the fastest inflation acceleration since 1991. watching 10 year very closely because we are at this take a look at how korean stocks are coming online. we're seeing it happen that helped by wall street gaining ground, risk on, strength for the korean won, really pushing away from the 1400 level. shery: take a look at the set

up. the staggered open. more of the stocks come online. watching energy stocks in particular, we are watching the selloff when it comes to australia and new zealand bonds. the aussie dollar had about 67 u.s. cents, the q. week is looking quite interesting. watching the stresses on the yuan intensifying. the road situation continues. shery: this is thanks to the dominance of cheaper commodity stocks, not to mention

domestically focused bonds. joining us now is our guest. good to have you back. the mastic stocks. where are they? guest: that makes sense to be domestically focused. that would include areas in parts of asean. we still like indonesia, singapore. those are the markets that are much more defensive. heading into the party congress, you can also see some support. china, parts of ossian is something we like.

on the other front in terms of things that are much more globally sensitive, north asia, even hong kong is something we are more cautious about. shery: interesting you mentioned the party congress. are you expecting conditions to get better or worse? sunil: we are not expecting any major changes in terms of the zero covid policy. i would say on the margin, they should be a better implementation once the issues are being sorted out. from that standpoint, that could be a signal for the markets. haidi: when you take a look at valuation risks, where are you seeing vulnerabilities when it comes to asia as we see outflows

from em etf's at the moment? sunil: that was happening in the market, we are seeing an unwind of the summer rally which in our mind was basically a bear market rally. slowing growth, higher rates, the stronger dollar will continue to conditions on the dollar in general. we like to longer-term growth story, that is something where there is more risk. the long-duration part of the market could continue to be under pressure with higher rates, especially with the pickup in real rates. haidi: how are you feeling about consumers at the moment? if you take a look at the stress

in the u.s., does that mean we see that carry through in asian economies where we are seeing the heightening rate environment as well? sunil: that's right. we have been more cautious, somewhat more balanced in terms of pockets of growth and a bit more defensive. energy is something we like as well, given our views on higher oil prices. in the growth bucket, things that have been eliminated, we

are more defensive. consumption we are underweight on. shery: how much more is that call evident in economies like korea or japan we are seeing multiyear lows for the currency against the u.s. dollar and spending power being eroded? sunil: if you look at higher frequency data, it's clear in korea you see export data. if you look at export data, you are starting to see a continued slowdown in ship spending. -- chip spending. in general, that's the reason for being cautious on these markets, the fact that the higher frequency data is slowing

and that should lead to further earnings downgrades. we see strong trended both and if you look at domestic demand, from a fundamental standpoint, that's a market we like. looking at the market at elevated valuations almost 22 times, compared to the region, trading at record high valuations close to 80% of the index and when you strip out china, even then we are at 70% loss. valuation risks plus macro concerns.

haidi: always great to chat with you. let's get into vonnie quinn. 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. japan's inflation quickened in august for the fastest pace since 1991. consumer prices -- analysts forecast to 2.7% gain. higher electricity was a factor. it heads to the challenges the boj faces. the u.s. will release 10 million barrels of reserve crude. awards will be no later than october 7.

ukraine is calling on western governments for more weapons as it presses ahead with its counteroffensive. the foreign minister told bloomberg ukraine month to add to its recent territorial gains and deny russia any advantage. he is in new york. a typhoon is expected to dump as much of -- as 400 millimeters of rain on tuesday as people return to work. a flood warning is in place. the storm ripped through the southwest, killing at least two people. hong kong stock market regulators are talking to staff working abroad. it comes as the city seeks to

resurrect its status as a global financial center. 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. shery: still ahead, a founder and ceo joins us to discuss the fintech landscape and the acquisition of an indonesian commercial bank. china's covid zero policy is draining funds posing a fresh threat to the economy and bond investors. more, just ahead. this is bloomberg. ♪

shery: the president of the world bank is calling on policymakers to address rising prices by focusing on production rather than just monetary policy. speaking with us, he sounded a warning about hiking rates to tame inflation. 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.

>> central banks have more tools than just the interest rate hikes. one way for the government and central banks to go is focus more on production, have you get more things out of the economy? it means you won't have to do rate hikes. >> how does that work? you need to bring down inflation. you're going to see the economy getting hit hard. investing to make the economy more productive plays out over years. >> that's true. investors look ahead. if you can create the right environment, there will be a positive response from markets. you will see bond yields go down as equities went up, that would be a stabilization for markets. i think that means more production, the systems that can produce more.

central banks themselves can use regulatory policy and bond policy better to encourage supply, central banks have fallen into this idea they only affect demand. in reality, financial systems and central banks have a massive impact on supply. >> you are making an argument there is a misallocation of capital. you seem to be saying the fed should not just let the bonds rollout faster, they should be selling bonds, ecb should be selling bonds. what do you mean by that? >> first the bond market will say that, but at some point, you have to have more capital outside of the bond market.

you might see a situation where the yield curve is higher and the risk curve is better than it is right now. that will be the goal of having a growth oriented monetary policy. even more powerful is the fiscal policy side. the government has been borrowing so much so it means there is not enough capital left on the productive side of the economy around the world. >> the world bank president speaking to us earlier. the dollar is trading mix. let's bring in annabelle for more. what is the set up for the yen? annabelle: it seems like the yen continues to slide, what fed officials say, how fed officials indicate the end of next year because if it's worth expected

markets, we could see weakness for the yen. another complicating factor is inflation data. it's hitting a 31 year high ahead of the key meeting later this week. it's the fastest pace we have seen since 1991 when you exclude tax hikes. that adds to the challenge because the governor has been steadfast in keeping with easy monetary settings, they could struggle to explain why, he indicated it will be unlikely to change taxes until the end of his term. we're also watching japan, the return of trading. we are looking for a more positive session. shery: we're also watching the chinese yuan trading at the $74 level, despite repeated

authorities -- warnings from beijing. annabelle: one of the key countries morning, certainly distressed we have seen in the yuan are intensifying. you have the overall weakness in the economy, you have the policy divergence, the pboc is needing to try and shore up economic growth and tame capital outflows. the pboc has struggled. we are seeing a record of the longest streak of strongest yuan, the pushback and verbal warnings and fairly holding back. when you take a look at the currencies, look at the onshore and offshore spread of the currency. we can see it's worsened while the currency reserve drawdown

suggest more broad-based weakness could be ahead. when you take a look at the longer-term trends and historical bounds of weakness, the two previous ones, the central exchange rate are up 15%. the current pressures are seeing a drop around 11%, looking at the currency -- shery: annabelle joining us from hong kong. let's delve into china's monetary policy, widely expected to keep key loan prime rates unchanged. allowing perhaps forepaws. the chinese economy is in no way out of the woods. most economists expect easing to resume in the fourth quarter. for more, let's bring in stephen engle. that's one of the reasons we are seeing the amounts pressure on the chinese yuan. what are we expecting today?

stephen: we are expecting not much. we some medium-term lending facilities, mlf holding steady. likely the loan prime rates closely tied to mortgages are likely also to stay unchanged at the september operation. that is after there was easing in august following the dismal july ego data where every single economic indicator was much lower than expectations. august numbers were better than expectations and july, however there were some one-off that boosted the numbers, retail sales, there has been a lot of stimulus. there was more power generation. there was some a mellow maze -- anomalies that help boost the data.

keep in mind the one year loan prime rate pops up for the second time. probably a bit of a pause and most economists expect the easing to continue in the fourth quarter with at least another 10 basis points of the mlf. haidi: covid zero has been policy -- costly. what is the situation? stephen: coffers are running dry. we saw 31 governments excluding shanghai sub budget deficits. they have to pay for the covid zero policy of xi jinping, they have to pay for the testing, they have to give tax breaks.

because of the ongoing property markets slow down, land sales have dried up. we went up to the party congress were no local officials want to make any mistakes or have any kind of covid outbreak. they have to pay to make sure covid outbreak's do not happen on their watch. coppers are wanting -- coffers are running dry. haidi: stephen engle with the latest. we have more to come on daybreak asia, this is bloomberg. ♪

shery: here's a quick check of

the latest business flash headlines. ford tumbled after warning supply costs are running $1 billion above expectations in the current quarter. they reaffirmed full-year earnings guidance but signal shortages of key parts. ford says it's facing high supply chain expenses. chinese electric vehicle makers are looking to raise as much as $1 billion in an initial share sale in hong kong. five investors have agreed to purchase around $309 million of stocks. the offer should give an indication of investor appetites seen as largely unscathed by the scrutiny of chinese regulators. south korean prosecutors have asked interpol for help in arresting -- blamed for a $60

billion cryptocurrency wiped out. whereabouts are unknown. interpol needs assistant to make an arrest. it can be weeks before notice is issued. haidi: let's take a look at what we are seeing in fx. pretty restrained session when it comes to trading on the greenback. we are seeing more strength in the yen sitting above the 143 handle as we get closer to the boj, this could be the calm before the storm if we get any signals, kuroda holding and further policy divergence. we're watching the aussie dollar , the aussie-key repair is looking interesting, close to levels we have not seen since 2017.

when it comes to broader equities, concerns about valuations, the positive read from wall street, looking like we are getting bargain hunters coming back into the fray even though the msci is hitting lows. we have seen gains in the nikkei up by a percent. strengthen the korean session as well, 1.3% higher in sydney. shery: it's being helped by the tailwind we saw from wall street as stocks moved higher in the late afternoon session. we are seeing futures accelerate those gains. plenty more to come on daybreak: asia. this is bloomberg. ♪

vonnie: world bank president

says the world's biggest economies should focus more on boosting productions as another. way to fight soaring inflation. taking that route would mean central banks don't need to pursue as many rate hikes. malpass told us central banks can use regulatory and -- >> one way for the governments and the central banks to go is to focus more on production. how do you get more things out in the economy? that means that you won't have to do as many rate hikes. vonnie: hurricane fiona is strengthening as it moves back into atlantic waters after hitting the dominican republic. the national hurricane center says catastrophic and life-threatening flooding continues in puerto rico. the storm knocked out the island's entire power grid and officials say the damage bill on top of everything else could top $2 billion. queen elizabeth ii has been buried to her husband following a state funeral with more than 2000 level leaders at

westminster abbey. the funeral was described as one of the biggest international events the u.k. has ever held. 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'm vonnie quinn. this is bloomberg. haidi: let's take a look at broader markets. we are seeing the broad risk appetite returning to the asian session. this as some bargains to be had given the index is at over a two-year low. strongest gains from the australian market, in particular utilities and energy biggest gains, almost over 2% apiece. health care just about the only laggard. we're seeing risk-off when it comes to certain commodities as we get that positioning ahead of the fomc. when it comes to currencies, the yen is stuck at about the 143

handle. investors pretty cautious against taking big positions ahead of the fed. and of course we are watching the yen, the yuan, potentially a further slide possible as we see these intensifying stressors continue to build. shery: we continue to see stress in the treasury market. the selloff continuing. the pressure point really very much on the shorter end of the yield curve. we are talking of two-year yields at the highest since 2007. even in asian trading we see the gains in two-year yields, despite the fact the 10 year yield is down slightly and moving away from the 3.5% level. it touched that level for the first time since 2011 in the new york session. let's bring in mark cranfield. this really seems to be just positioning for that potential jumbo rate hike coming from the fed this week. mark: it is not just about the big rate hike from the fed, it

is about what comes in the months afterwards as well. we have been having a bit of a reappraisal in the treasuries market in the past couple of weeks. people are pushing a psyche idea that there'll be a pause from the fed, that rates will plateau around 4%. now people are thinking we could be going quite a bit higher before rates peak out. the fed announces dot plots in this week's decision, we could be seen some numbers around 5%. there could be some higher numbers where people are forecasting that the peaking rates will be something like 5% sometimes next year. that is something that has not been on the radar previously. that is particularly why you see the two year yield on close to 4% this week. people are not just thinking the fed will hike 75, possibly 100 basis points this week, it is the fact they're going to keep up the pressure and that now the terminal rate for next year is a lot higher than people were

thinking just a couple weeks ago. haidi: what are the implications for asian bonds, then? mark: generally of course it means higher yields across the region, which you are already seeing. the big one is japan. we have a bank of japan meeting this week. the consensus is the bank of japan are not actually going to do very much. but of course time is running out. this negative rate policy japan has really looks out of place compared with the rest of the world. eventually they are going to have to decide it is not in their interest to continue to pursue it. we saw cpi today came in at a 31 year high for japan. it touched 3% on a year on year basis. even though the bank of japan is formation of that inflation is not the climb they want to see. it is not being driven by domestic wages. it still takes away from the fact that the difference between

yields at 0.25% and 3% cpi is way too much for a country the size of japan. so clearly there are people willing to bet on the fact the bank of japan is coming towards the end of its negative rate policy. my not happen this week's meeting, but october is certainly a possibility people are building up. the bank of japan are really getting close to the end of this and will have to throw in the towel and do something and f -- in some form. haidi: goldman sachs says the communist party congress might fail to give equity markets a boost as code restrictions and a property slump market weigh on the economy. typically around these big events you sometimes see sentiment getting a boost. but it looks like markets will need to see more solid policies to do that.

sofia: exactly. goldman's analysis centers on the key thing that historically growth momentum leading up to these big political meetings has been strong. this is very much not the case right now. we are not in a typical historical moment for china when it comes to the economy and markets. market sentiment is particularly weak, and what goldman is saying is the status quo suggests that covid zero, the property downturn, all of that will continue and they do not expect a big policy shift immediately after xi jinping is expected to secure that third term. shery: no wonder we are seeing pessimism across chinese assets. this chart showing how the hang seng index, this is close to the 20% downside from the june peak. could we enter a bear market today? sofia: we could. we certainly did yesterday in intraday trading, down 19.7%.

this is the second bear market -- this would be the second bear market for this index this year. it really captures the mood that has been in chinese markets this year. if we do take out that march as you can see on the march -- on the chart, the mid-march low, that is when sentiment in chinese assets was the worst it had been in years. if this level is breached before the party congress, then policymakers will really have to do something to restore confidence in the markets. it is not just stocks. the yuan is also in focus, and that 7.2 level in the offshore rate would be the lowest level since the currency was deep pegged from the dollar after the global financial crisis. anything beyond that is uncharted territory for the currency. so we could get a boost from that overnight session in the u.s. today. maybe the index is safer another

day. shery: very much looking forward to the yuan fixing about half an hour. coming up, hong kong for index continues to expand its presence across asia. simon loong joins us next. this is bloomberg. ♪

haidi: hong kong fintech company welab has completed its full acquisition of bank adjusted jakarta. this is this year's largest digital bank deal in southeast asia. let's get over to hong kong, where david ingles is standing by with a key player in the deal. david: absolutely. we are joined here onset in hong kong, simon loong, founder and ceo at welab. haidi was just saying it is the biggest deal in southeast asia. how big is the deal? simon: both parties invested more than half $1 million u.s. into this. this shows our commitment and optimism. david: expensive. simon: it is not just that. it is acquisition and we want to build scale. there will be investment in technology, customer

acquisition, and training of everyone. david: you virtually own all this, right? when do you launch? simon: we are hoping to launch first half next year. david: do you have a name yet? simon: not yet. we will come up with something innovative. david: initial plans on the initial product on up --line-up? what should competitors be looking out for? simon: a couple advantages. we have already built the welab bank in hong kong so there are products we can readily port. we just launched an innovative investment product. that is something very suitable for indonesia. that is a very strong competitive advantage. the second one is astra. i think by combining both, it will be a permit of a partnership. david: -- it will be a formidable partnership. david: any targets for the

business, number of clients, growth rate? how are you going to measure your success initially? simon: the number of customers. you look at a market like indonesia where there is a large population. we will aim to go for financial inclusion, different from hong kong. shery: i was going to ask, given that indonesia we have a central bank decision this week expected to hike rates, we have a rate environment globally. simon, how does that affect digital banks and platforms? simon: this is a very interesting question. for us, we have been operating in hong kong the last two years. we have factored in the rate hike when we did budgeting. it affected us in a few ways. one, we will have more margin. second, consumers, consumer lending, i do not think it will

affect us too much. we will try to manage our balance sheet more proactively through the period. haidi: how do you find the regulatory side of things? has it been conducive and kept up-to-date with technology and what you are trying to achieve with this business? simon: absolutely. what we have seen is regulators around the region have been studying digital banking licenses. hong kong was forward thinking and issued a license two years ago. these couple of years we have seen singapore, malaysia, philippines, a couple of markets in indonesia as well thinking about this and how to manage proactively and adapting both traditional and digital banking lessons to offer digital products. david: you are an early player in hong kong. how would you compare, say, singapore has their own players who launched earlier this year, we have been in this business in

hong kong for several years. who is more advanced? simon: it is a very interesting market, southeast asia. culturally, economically, pretty diverse. i would put people into two different pockets. their markets is a smaller population but more concentrated for gdp. i think these are markets where digital banks have a good opportunity to roll out high revenue products like prime lending or wealth products. if you look at larger population markets like indonesia, i think the initial opportunity is largely for financial inclusion, credit-led product. both have to be very conscious on the path to profitability. david: potentially in the lower gdp per capita, places in southeast asia, is the target the unbanked, or people already with traditional bank accounts who want more convenience? simon: both.

we did a lot of analysis in indonesia. four of five individuals we surveyed, young individuals, are quite willing to change to a digital bank where they offer a different user experience. specifically for indonesia. there is an interesting segment of the gig economy, people who have different side jobs. the financial services needs are quite different. that is what we are targeting for. savings, lending, stuff like that. shery: it is also a very young demographic in indonesia. when it comes to the people who actually make use of your platforms, are we talking about the younger generation, and how do you reach the older generation who prefers traditional banking? simon: i think in indonesia, jakarta, there's opportunity with that. jakarta has 11 branches, so we will maintain those branches and look at how we combine digital services and a physical service. we are trying to see whether the

physical service can be something slightly different as well. the existing customers of course can also use new digital banking services that enable them to do financial services more efficiently. david: i am curious then, this is a new one, so in a lot of ways you have a new set of competitors or opportunities. how have you seen traditional banks adjust their product offerings to almost meet you in the middle and cater to that common ground? simon: traditional banks around the region are not giving up. they are fighting furiously. david: are you worried? simon: we are not word. number one is traditional banks are doing a great job. they are lowering entry barriers, increasing interest rate. some of them opened up a new customer segment product to compete with digital banks in the younger segment. at the end of the day, it is the consumer who is benefiting from it, which is great for consumers. the second part about what we

like about this is additional banking, doing everything online, requires customer education. what we find is more players coming to the market to educate customers, the easier it is for new entrants to promote services because they see similar services across the region. david: give us an update of your business here, and to pivot a little bit, what is the update since we last spoke? i think it was in december. simon: the business is doing well. we see the hong kong business up 1.5 times year-on-year. that is going really well. to china, of course we are little more conservative on the china side earlier this year but we are slowly switching from conservative to optimistic in the second half of this year for mainland china business. indonesia, we continue to grow. i think we also see emerging opportunity in asia, especially

on the enterprise side of the business. david: i was going to ask you that is the final question. what other market are you actively looking at right now, apart from hong kong, gba, and indonesia? simon: we are interested in a couple markets in asia. we are looking at, as well as the right entry model. we've done the indonesia deal. to be honest, this is a happy deal to get to where we are today. getting to the next market might be quite a long journey. we are thinking of how we can put it's a markets earlier without the two year lead time. mediatech solution part is something that can take advantage of what we do. we have enterprise business in mainland china that is working well. now it is about how we scale that regionally. we are getting a lot of interesting inbound inquiries from people in asia and middle east about whether we can help them with the technology side of financial services. david: simon loong there. we will speak again soon.

shery: great conversation. plenty more to come. this is bloomberg. ♪

haidi: take a look at how asian equities are trading. we are seeing the nikkei up .8%, being led higher by tech and

consumer discretionary stocks. the kospi is also reversing four sessions of losses to gain .6%. even the korean won strengthening slightly against the u.s. dollar. while the asx 200 is also gaining about 1%. of course the aussie also really moving away from that multi-year low against the greenback. we are expecting the rba september minutes as well from the rba. kiwi stocks up .4%. haidi: let's continue to watch these market because it is interesting to me that we are seeing this risk rally ahead of the fomc. not just the fomc, but we have about 20 central banks globally announcing policy this week. so we will be continuing to watch how quickly potentially this risk rally pulls back again. you are seeing s&p futures i about .2%. a little more strength when it comes to nasdaq 100 futures after we saw that late session

rally on wall street. six years ago, they embarked on the goal of becoming china's version of lvmh. like many who overreached on foreign assets, they have now found itself in hot water with some of the world's largest financial institutions. our deals reporter joins us now with more. this is a familiar refrain. tell us about their woes. >> definitely familiar. we have seen this multiple times. now another great example of that. outbound acquisition spree by chinese companies years ago were snapping up assets left and right in europe and the u.s. and then they found themselves

overleveraged and with a lot of trouble trying to sell those assets in a fire sale. a very interesting story here definitely. shery: how much is this a company-specific story and just a broader trend we have seen in many of the chinese companies? and what is next for them? manuel: there is a lot of litigation going on with creditors. there is part of that taking place as we speak. more interestingly from a corporate level, they need to weather this storm. they were badly hit by the covid-19 pandemic. that was a factor affecting your operating businesses. then they found themselves with too much debt. they were funding those acquisitions with a lot of debt.

then when the economy went down, slowed down, they could not repay some of that debt and time. so it is a bit of both. they have been affected by over leverage and the slowdown in the economy. it is a great example of companies overreaching with acquisitions, but it does not mean every company is china -- inchon is doing the same-- it does not mean every company inchon is doing the same. shery: plenty more ahead, including our live conversation with the ceo of the philippine stock exchange. he will discuss the ipo pipeline coming up on marcus asia in just over one hour. this, as we are seeing a bit of a boost and rebound in asian equities and currencies. we had some tailwind coming from the wall street close.

haidi: perhaps we are seeing some more open to risk bargain hunters coming back into the fray with the regional market trading at the lowest in more than two years. that is about it for daybreak asia. markets coverage continues looking ahead to the start of trading in hong kong. and also continuing to watch for these risk factors for the yuan. is there the potential for a further slide given downside risks continue to build for the chinese economy? all that and more. stay with us. this is bloomberg. ♪

david: