>> welcome to "daybreak asia."

we are counting down to asia's market opens. >> a weaker open after declines on wall street. treasury yields hitting multiyear highs as investors position for a hefty fed hike. markets are expecting a 75 basis point rate increase tomorrow but some observers think that if or point jump -- the former head japanese currency policies -- the yen intervention situation could come at any time and without u.s. approval. shery: given everything that is ahead for the week including the fomc rate decision, not surprising we are not seeing a lot of movement in the futures space. perhaps a little bit of upset after the s&p 500 fell to that two month low. we even heard -- calling a 40% sinking of the stock market. this coming at a time when treasury yields are rallying for multiyear highs. with the rate decision

expectations, we have the 10 year yield surpassing 3.6% at one point today for the first time since 2011. the two year yield also at the highest since 2007, close to the 4% level. haven demand for the u.s. dollar as well. coming out with the outside hike in the interest rate of one full percentage point and that really surprised economists who spooked investors today. matt leading to strength in the greenback. we are seeing a little bit of a rebound in the asian session, haidi. haidi: when you take a look at this prospect of more bargain-hunting coming through, we do know that the regional index is trading lower. it doesn't look like today and perhaps even tomorrow might be the day for it. they are looking like they will get downside of just over 1% when we get into the cash open and in some downward sure when it comes to australia and new

zealand bonds as well. kiwi stocks down by .5% in trading at the moment and watching the yen and the yuan in particular, the vulnerabilities of these two currencies which have been playing out over the past few weeks and months will be in focus when the fed raises rates on wednesday. just really the policy divergence between the pboc and the fed. the boj and the fed will be in full force for moves ahead of that. that risk-off play evident when it comes to a little bit of softness when it comes to the aussie dollar well, shary. shery: we are watching what the federal reserve would do. it is expected to step up its inflation with another jumbo rate hike and new forecast showing rates moving even higher next year. our global economics and policy editor, kathleen hays, here with a look at how hawkish they may get and of course, the big question, 75 or 100? >> the markets saying 75 seems

more likely and don't forget, that is also a very large interest rate hike. it will be the third hike they have done over the last three meetings. dennis agrees. he thinks the fed does not want to panic people if they are too worried about inflation. >> i believe they will do 75. that i cannot fully rule out 100. there is no justification for dialing back at this point. but i really think the highest probability is 75. paul: important to know that at the last meeting in july, jay powell did open the door to a 75 basis point rate hike. he said that he would definitely consider doing an even larger rate hike than the 75 basis points they did in july if it were appropriate. maybe it is not appropriate, people say, because they have this china slowdown, the european energy crisis. that is raising the risks of recession in europe, bringing

that possibility much closer. that is why so many people think 75, enough for now. in terms of the dots, the revised economic productions, gdp is supposed to be lower. inflation is supposed to be revised higher. the dot plot, which suggests what governors are seeing looking out over this year, next year, and beyond, that is where we may see some of the dots moving higher. the president for the atlanta fed told us it will be interesting to see because right now, the terminal rate for this year is around 3.8, 4%. will the fed boost it even higher by the end of the year? that would be very significant and something people will be watching closely. could there be someone looking for the funds rate? he said it is possible but he expects dispersion.

very hawkish people on the fed -- there's more dovish ones and he thinks that may show up, too. >> setting the tone if you are looking at a mammoth move. again, it is this worry about entrenched inflation expectations here. kathleen: they are stepping up their inflation. remember, they are the second g10 country that has done a 100 basis point rate hike in the couple of -- last couple of months. that is the question i want to see answered. you can see the white line where their key rates jump. people are looking at something more like a 50 basis point hike. they are getting worried about entrenched inflation. that is what they said in their official statement and they see the key rate up to 2.5% next year. continuing to raise rates at a slower pace. it is interesting to see. they have not done that since the 1990's when they meet their

2% inflation target. now, we are beginning to look at, well, cannot rule it out. it is still possible. haidi: kathleen hays. the dollar's rise is leaving some emerging markets exposed to capital wealth let's bring in mliv contributor garfield reynolds. we continue to talk about how this is different. it is not the taper tantrum. the vulnerabilities of emerging asia are different this time around but there are vulnerabilities there. garfield: definitely, haidi. when it comes to a capital outflows, most markets are seeing capital outflows right now. the question is how well can you cope with that and if you are a developed market by definition, you can cope better with capital outflows because you have your own currency and you don't borrow too much on u.s. dollars,

for example but for emerging markets, that is always the concern. what is your -- what does your current account look like? what do your foreign exchange reserves look like? how well can you cope with those outflows? emerging asia has a lot of potentially surprising resilient economies on that basis because they are terrified by what happened back in 1997 and they have done a lot to shore up those fundamentals i talked about. when you look at some of the more vulnerable places like turkey, she lay -- chile, hungary, all of those have problems. in turkey's case in particular, inflation is a major worry and they have on conventional policies. they might have geopolitical backstop because as erdogan was emphasizing, they want some sort of revolution. hungary is on the other end of that. it has done its best to alienate

both its european neighbors and it has those difficulties. those are the potential canaries in the coal mine for emerging market and the concern would be if any or all of them showed some further capitulations from here that you would see some contagion for the rest of the emerging markets space. for some investors, they will be looking at that and saying this could be a great time to buy because some of these emerging markets that we expect over the longer-term to be resilient are suffering more than is appropriate in the short-term. haidi: one role with china given its -- garfield: china is the ailing elephant in the room when it comes to any emerging-market discussions. until you can see a clear resolution to its economic and

covid zero induced difficulties, that is going to weigh on emerging-market equities in particular and emerging-market currencies. the yuan has been declining against the dollar. along with everything else. this is despite the pboc's best efforts to slow that decline down. that reinforces the pressure from the stronger dollar across the eem space. haidi: garfield reynolds with want to watch in the markets, especially in the em developing markets complex. let's get to su keenan with the first word headlines. su: we start with antonio guterres. he has had a stinging assessment of global affairs at the opening of the general assembly. he criticized the inability of world leaders to take urgent action on a range of issues. from climate change, inequality, the war in ukraine. he says the world is imperiled

and paralyzed. >> the ideals it represents are in jeopardy. we have a duty to act. we are gridlocked in colossal global dysfunction. su: ahead of currency policy, japan's finance ministry says officials can intervene in market and a time as needed to support the yen. authorities are ready to take action even without a green light from the u.s. he told bloomberg the ministry of finance must show the public it will not allow speculation on the yen. >> -- forecasting on the movement of exchanges. if there is -- i think it is time -- speculated movement.

su: hsbc says the massive correction of china's commercial real estate market may last another two years. the ceo told the conference there correction has been faster and more decisive than expected. last month, hsbc said it would take further changes against its more than $12 billion of exposure to the sector. china property developers -- worst first-half warnings in over a decade. 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 su keenan. this is bloomberg. haidi: still ahead, our guest joins us to discuss why the trimmed exposure to chinese debt -- they trimmed exposure to chinese debt. wondering just how hawkish they

will be against inflation. this is bloomberg. ♪

>> our next guest says that with -- persistent inflation makes

sense peg let's bringing christopher smart. great to have you with us. this is the key question of fed expectations for the bloomberg intelligence is expecting to see before .5% saw another 200 basis points to go by march of next year. we spoke to dennis lockhart earlier. 5% is also possible although not in base case when it comes to the dot plot in those expectations. what does that tell you about how much of this is baked into expectations and how much we are going to see that balancing act between how long they hold that level as well? >> that is the big question you just asked. the rate tomorrow is baked -- the rate hike tomorrow is baked in and there will be a couple more beyond that but the hiking is not the news. the big question is when will the fed stop hiking and when might there be some cuts in the cards?

a lot of investors are betting that by the second or third quarter of next year, some of that will start to come into view. our view is that this is a little bit optimistic right now. want to make sure inflation pressures are headed decidedly lower before they start easing up and the messy dataflow we have seen lately suggests it is going to be a while before there is enough confidence that is entrenched. >> we are seeing outflows across almost everything. is there a strategy and opportunity that is not taking cover? you look at the likes of energy and trading volatility seems to be one of the few winning trades at the moment. >> certainly, energy continues to do well because of all of the reasons we know around the disruptions in supply chains. disruptions of commodity markets out of russia and ukraine and those are what we have seen over the last few days and are likely to get worse rather than better

as tensions escalate but i think the other place where investors can find good opportunities are in the credit markets, companies that have good business models, strong balance sheets. and will continue to service their debts even through a downturn. equity markets may feel a little bit more of the challenging period because they will see their margins squeezed right now. >> could that mean we could see some opportunities elsewhere like high-yield credit as well? >> investment grade in high-yield, my colleagues are finding a lot of opportunities on days like today where there are some selloffs. the fundamentals of the u.s. economy we think are very strong. they need to weaken a little bit to cool some of these inflationary pressures but you can find a lot of companies that have strong balance sheets, that have debt profiles that they will easily be able to rollover over the next 36 months.

and in the same time, you have banks that are ready to lend again. once we hit the moment where we think the fed hike can stop. >> we have more and more u.s. and wall street strategists warning about equity valuations, earnings risk as well. where do you find some of these defensive calls? >> equity markets are going to be under a lot more pressure than credit markets because of the new pressures on margins. valuations have sold off a lot. but when you compare dividend yields for equity that may be facing headwinds to investment grade debt that's trading, you know, with yields above 5% in some cases, you know, that is a trade-off that is much harder for equities to live up to. haidi: christopher, the other big unknown is what is happening

in china, right? do you think the loss of expectations are set? is there an opportunity for a rebound for more positive news flow once you get through the party congress? christopher: it is hard to imagine the new slow turning more negative from here. the hopes are pinned on the party congress. a lot of people are still focused on the property sector. even if the damage is contained here, i think that seems likely and i would say that with my fingers crossed. the property sector has been a real driver of chinese growth over the past several years and that is not going to be there until the government not only stabilizes losses but injects more capital into that part of the economy so i think we are concerned that the headwinds will remain or at least they will not have the tailwinds to deliver acceleration growth from here. maybe a little too soon for china. shery: after the party congress in china, we have the u.s. midterm elections for what sort of geopolitical tensions -- are

you factoring into the markets as we head toward the end of the year? christopher: for all the drama in u.s. political elections, i'm not sure the markets can expect much change the matter what happens in the midterm elections, even if both houses tilt republican, they will not be able to unwind much of the biden spending agenda so far or tax agenda so far. if for some reason the democrats maintain control of the senate or perhaps in some scenarios, there's some hopeful ideas that they would keep the house as well. they are not going to be up to push there any significant change over the next couple of years so i think markets at least will not be looking for that result for the next direction. the geopolitical tensions with china, with russia, those i think are going to be much more dynamic in terms of what they do to market direction from here. >> christopher smart, chief

global strategist at barings. you can get around up of all the stories you need to know to get your day going in today's edition of "daybreak." bloomberg subscribers can go to dayb on their terminals, and it's also available on mobile in the bloomberg anywhere app. you can customize your settings so you only get the news on industries and assets you care about. this is bloomberg. ♪ ♪♪ this... is the planning effect. this is how it feels to know you have a wealth plan

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>> dennis lockhart says the u.s. central bank remains determined to tame core inflation could we asked him how he thinks the fomc will move tomorrow. >> i think they will do 75. i think they will stay the course that they have been on. i don't think they want to have another departure. it might signal a real panic

setting in about the inflation situation. i think that they want to be deliberate so i believe they will do 75. but i cannot fully rule out 100. there is no justification for dialing back at this point. the highest probability is 75. >> what about their outlook for the economy? everyone is accepting that the rates will be higher at the end of this year and go further next year. 2023. what are they going to signal there? >> that will be very interesting. we will look at the summary of economic ejections that comes out tomorrow to see if they are more hawkish. in june, they had a year and policy rate setting -- end policy rate setting of 400 basis points so let's call that 4%.

it will be interesting to see whether a number of the people on the committee feel that they need to go well beyond 4% by year-end, that would be an interesting development. and then of course in all likelihood, we get some indication from the 2023 policy-setting but it doesn't tell you -- during the year. >> is it possible we are going to see some dots? the highest dots in june for 2023 i believe were definitely in the sightly above 4%. could we see anybody throwing out a 5% dot do you think for 2023? dennis: i think it's possible. there are a range of views on the committee. some people are very hawkish. some are less hawkish. i don't think there are any doves to speak about this moment

so it would not surprise me if we saw a 5%. but i would -- what i look at would appear to be the consensus. we use the term central tendency of the dots and how tight or help spread that central part of the committee is. whether it is getting tighter or the consensus is stronger or whether there is a wide variety of opinions. we pay attention to the median but sometimes, it does not tell you what the spread is around median. >> dennis lockhart speaking with us just a little bit earlier. a quick check of the latest business flash headlines to get goldman sachs started putting investment banking jobs in asia. they are involved in deals in greater china including equity

capital markets, health care, and pnc. goldman is said to be planning to eliminate several hundred roles globally starting this month. elon musk will face questions from twitter lawyers next week in the deposition hearing. alex spiro will have to sit for his own deposition a day earlier, all a prelude for a trial due to begin on october 17. plenty market, here on "daybreak asia -- plenty more to calm here on "daybreak asia." this is bloomberg. ♪

>> a two year yield now almost

close enough here. they surpassed that 3.6% above for the first time since 2011. all of this selloff without pause since we got that stronger-than-expected u.s. inflation data last week. let's bring in our next guest who says rates will and higher but not in a straight line. given all of this volatility in the treasury space, are you making any recess of your cause in the space -- resets of your cause in the space? >> around this 3.5% level in the u.s. treasury, we are going to trim some of this.

the path is higher. both of them are expected to be higher. >> this bread is easing a little bit in today's session. especially after they buried deep in version we have seen in the past few weeks. what cause are you making when it comes to the treasury curve and how are you positioned in the short and? the market is going to be about growth. in our minds, that is unlikely. investors are working about --

looking at premiums. they require a higher reward. in our mind, it could be a bear speaking with the long and rising. that might be my fault. >> you also talked about the pretty toxic culture that has been building up for ages. there is still plenty of scope to some damage and volatility. >> corrected. investors, there are a number of central bank's that have been very creative with their hiking cycle.

global conditions are tightening. they have to be a bit cautious in some of those asian markets. >> they have seen the inflows really hold steady. are there opportunities there? cripes we talk about the bank of japan. the pbmc, the second largest economy in the world. we don't think there is much room for them to cut rates because their focus has shifted from some credit growth with

lower rates to concern about the pace of the appreciation in the currency. all of this without seeing for the currency. we think that niche is one where bates and china to drift higher and they are likely to fight the trend in the u.s. dollar. it really is a bit lower. >> while we are speaking, are there any themes when you see that sort of policy diversions? we are talking about the fed but there is also the doj and other global central banks. >> they are. the bank of japan, even likely they are unlikely to move anytime soon, the fact that the

10 year bond is capped at .25, it is unlikely there going to do that record high inflation. there unlikely to move anytime soon. that could be somewhere here. the pressure on the end remains at this stage. the bank of korea has been quiet preemptive. there might be room for that market. they have been playing catch-up. >> i was also pretty curious about you taking some of that profit on overweight australian markets. tell us a little bit about that before i let you go. >> yes. if you look at the level of yields between australian and u.s. bonds, they have moved well under.

we can lock in some of those gains. the rv i intensity could be a little bit more dovish. australia does not have as significant of an inflation problem. there could be bonds outperforming u.s. treasuries. >> let's get you to suu kyi and who has our first read headlines. >> pressure is moving quickly. ukraine has denounced to the referendum. the kremlin move will only worsen the conflict.

>> they don't change the nature of the conflict. this remains an independent nation in ukraine. this will only worsen the situation and we need to provide more support to ukraine. >> jamie dimon is taking aim at capital climates ahead of congressional hearings this week. the global economy warning of harm in capital requirements. this sweden central bank has delivered a big one after a

surprise 100 basis point rate hike. define the predictions of most economists for a small move. it is the most aggressive tightening in almost three decades for the bank. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am sue keenan, this is bloomberg. >> the war in ukraine has taken center stage. this as they tried to preserve peace and they face the biggest test in decades. bloomberg reports from u.n. headquarters. >> russia's invasion of ukraine as a descend upon new york city. what we know now is that putin will be holding sham votes as soon as this weekend to absorb

four regions into pressure that are part of ukraine. we spoke to the nato secretary-general who says this has not changed tacked on the ground. >> they don't change the nature of the conflict. this remains aggressive. this will only worsen the situation. >> by them will be addressed on the assembly on wednesday and according to the national security advisor, people push back against aggressors who seek to intimidate their members. >> coming up next, the end is that the risk of moral weakness

with the doj sticking to its easing policy after more fed hikes. we get more on that next. this is bloomberg. ♪

>> this eve of japanese currency policy says the government is not ready to intervene in

currency markets at any moment. we were taught exclusively that the finance ministry is wood for the green light for the u.s. to support the end -- yen. >> this is the exchange rate. it is a very excessive movement. >> as we have the fed meetings

coming up and we have the b or j meetings, how likely do you think any interventions would be if there is a significant move by the fed and that we are seeing those high daily movements in the yen question mark >> we are focusing on the movement. >> there is a level of the yen that is going to warrant. >> you do not see that the end was at about level. it is 145 or even 50.

this is a large move daily in the end. especially if the fed hikes by more than expected. does that warrant intervention? >> this is the movement here. this is a big party here. >> what do you think the u.s. reaction would be if there is intervention? is there any scope as opposed to coordination with the u.s.? >> i am already in the private sector.

>> given that share and the coincidence about the foreign exchange. i think there are no impediments to conduct. >> this week, the biaggi governor is at risk of pushing the end into further weakness. even after the fed's expected hikes. we are seeing everything on from

hedge funds piling on here. >> it is an incredibly hectic week. and the end just keeps coming. that makes it that much darker. this is expected to raise 75 basis points here. all 49 economists expected doj to keep this alive. there is that much more ammunition. it could go there quickly.

>> how low do we see the young going? >> it is incredibly hard to find any yen. they would not be surprised to see the end falling to 150. and interestingly, a bloomberg survey found that the doj want adjust policy until the end weakens. >> that is the head of the fed and the doj. what are we seeing in terms of

crypto? >> we actually got to the levels that we last had seen. this is the fed right decision. bitcoin was pretty much the proxy here. this is the expectation that bitcoin could be hedging inflation. this is not the case. it is looking at dependability. it is not something that is going to be changing. when you look at the correlation

that we see, we see bitcoin prices. this is closer to record. bitcoin client also tracking those declines that we see across the board in u.s. stocks as well. >> they are also looking a little bit jittery right now. >> that is right. god is fractionally higher as wti brent crude is coming in at the hour. this is looking like a pretty volatile market ahead of the bit rate here. this is already priced in this decision. we are unlikely to see any sort of thing to drop out. we could actually see a rally including ubs. that level is looking at that rise there.

there are 1800 by the end here. this is looking fractionally higher. brentford is coming online. this is the relief here. >> a little more there in hong kong. let's tune into bloomberg radio. this is broadcasting live here.

plenty more ahead. stay with us. ♪

>> we are counting down to the start of trait here.

we are watching this in south korea. this is near the top of the next hour. the reason we continue to watch these numbers is because of the potential of a big trade deficit in september which could weigh on the korean one. they are meeting with president biden on the assembly. they are also expected to meet but the japanese prime minister. we are also watching the market open. this did -- this after the economic daily's report. >> let's get a quick check of the business/headlines. the sec alleges that they failed to secure the personal data of millions of customers while

revising hard drives and servers. the u.s. federal communication commission has a specific network for the national security threat list. they will protect u.s. communication networks. $.10 has denied a report that is considering selling thumb sticks. they will bank will share buybacks and new businesses. they had known the rates for such divestments. >> these are the stocks that we will be watching here. they have attracted the highest level winning bid. we are also keeping an eye on core lithium and metals. japan -- japan still works on the income guidance which dismisses the average analyst estimates. bitcoin heading for a four day

slump ahead of the fed rates. >> there catching a speech here. what is happening live from the sydney office today. they should be reflected here on the easing programs that were reviewed just this morning. 10:00 a.m. if you're watching in hong kong. we do have the market open in sydney and tokyo next as the asian markets are looking pretty lackluster following wall street overnight as we get to the day of training before the fed decision. lots more to come on daybreak. this is bloomberg. ♪

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>> this is daybreak asia.

we are counting down to asia's major market opens. they are continuing ahead of the fomc rate decision as we have already seen that global action being taken off with that most aggressive tightening in three decades. >> setting the tone, you see this list here. nobody really at 100. the question is pick out in terms of these cross asset sellers here. let's get straight to the markets. it is not going to be an easy session in asia. >> especially when we get all of these divergent stories here. where does the japanese yen go? it was a pretty tight range recently.

we are seeing a little bit of strength here. this after rising in the previous session. it was the first time that they failed to trade here. this is the biaggi cap sealed. let's look at what the cosby is doing at the moment. this is .7%. the korean one also continuing to weaken at the 1400 level. this as we are watching those trade numbers. we are talking about the 20 days of trade for the month of september. exports falling 8.7%. why is this important. there was more pressure on the korean one. we continue to watch a current account.

materials were down here. just try to club back to that u.s. 67 level. but look at the broader asian-pacific.

>> this is another rate hike forecasts showing even higher than next year -- showing even higher next year than expected. kathleen hayes is here with her preview. the big question, 75 or 100? >> that is it. it did hike its key rate by 100 basis points. it makes it a little bit more readable to ask the question. what we are seeing is that we are thinking probably not. the doors are probably open as

far as they are concerned. one of the reasons is since that last meeting two months ago, what has happened? the china slowdown has gotten worse. europe's energy crisis has gotten worse. that is why when we spoke to dennis lockhart, he is the former president, we started with this question. this is what he said. >> i believe he will do 75. i think they will stay the course from then on. they don't want to have another departure. it might signal a real panic setting in about the inflation situation. they want to be deliberate. i believe they will do 75 but i cannot fully rule out 100. i can't rule out 50. there is no justification for

dialing back at this point. i think the highest probability is 75. >> what about the outlook for the economy? everyone is accepting that the rates put it higher. it goes up further than next year. 2023. what will they signal their? >> that will be very interesting. we will look at the summary of economic projections that come out. in june, they have a year and policy ratesetting of 375 to 400 basis points. it will be very interesting to see whether a number of the people on the committee feel they need to go well beyond 4% by year end. that would be an interesting development.

we will get some indication from the year and 2023 policy setting but it does not tell you what the path is during the year. >> it is possible that we will see some dots? the highest dots for june were slightly above 4%. could we see anybody throwing out a 5%. for 2023? >> the committee is now 19 people and there are a range of views on the committee. some people are very hawkish. some people are less hawkish. i don't think there are any dubs to speak of at the moment. it would not surprise me if you saw a 5%.. but when i look at is what appears to be the consensus. we use the term central tendency of the dots and how tight or how

spread that central part of the committee is. and whether it is getting tighter or the consensus is stronger or whether there is a wide variety of opinions, we pay attention to the median. sometimes the media does not tell you what the spread is around the median. >> one thing that does seem to have a consensus is that the fed will clearly signal higher or longer in 2023. if you look at this bloomberg terminal, you can see the rates for march of next year is around 4.5%. that is higher than the dots we are seeing for this year when they were last revised back in june. that is what makes this so interesting. how many dots we see. they could be all over the map.

this idea that we could see a wide dispersion of dots suggests the fed members themselves are uncertain about how high they will have to go. they are going to push things up and they will have to keep them there for a while. this is not like a lot of past inflations where dings went up. a lot of people have market shortages where it will go for a much longer time. crank the unevenness of that inflation, kathleen hayes, a global policy editor here. this is the first half of 2023. great to have you with us. this is what bloomberg intelligence expects. the fed getting to 4.5% of march

of next year. they floated the idea of 5% for the dot plot. what are your expectations in terms of this peak? >> good morning. it is very possible because tendency has shown the fed to overshoot and under should the rate hikes. we are still pretty confident as we look at rate hikes to return for the first half here. there are a couple of reasons why we don't expect that to move along here. this is a slowdown that starts to be a key concern by then. we also think that there are a few factors.

the covid situation in china will impact the supply chain. this turns on capital good prices. you are asking me about asia. the shipping was white volatile. -- quite volatile. >> there are possibly some peaks -- is that something that was possible? maybe that volatility is something you could give a try. >> yes, there are a few key events coming up. the rate hikes are an ongoing issue. we have expectations here.

it is slated for mid october. there are a few announcements expected in november. there are expectations lined up on that front. there could be some disappointment if there is not a lot of development in china in terms of covid policy. that does probably remain one of the key factors to watch out for. >> what are you expecting? could this help or hurt the markets? quick the tendency is this is not a country that has done a big u-turn. on the regulatory front, there may be something different. we think that the zero covid policy remains.

we are looking at relaxation in terms of quarantine. in the testing. there are some indications to living with covid. we are looking for that to happen in 2023. >> what does that mean for the chinese you want? it is not only the policy divergence from the fed but also that uncertainty. >> yes. the u.s. dollar will be dependent on what the fed does. hopefully we start to see inflation indicators, the key inflation drivers. that is in the form of the labor shortages.

obviously, energy costs and supply chains. i think we should start to see the instances for the u.s. dollar diminished as well. >> when we see the pressure from a stronger u.s. dollar on these asian currencies, what you think is the follow-up for the equity market? we used to think that weaker currencies mean exporters are actually helped in these asian economies. are you seeing that? >> it is a lot more mixed of these days. a lot of them are more diversified locally. we have a lot of the key japanese exporters that set up manufacturing facilities globally and a lot of companies have hedged the assets. there are also positives and negatives from volatility.

that is part of why we don't see a lot of that. the translation gains are there when it comes to overseas earnings. the translation games are there. -- gains are there. >> could we get more bearish? is there a possibility for an upside surprise? >> it is always possible. sometimes they come out with greater detail. the shift toward living with covid policies. i think it would be a huge plus to sentiment. i think one of the good things is we have already started to see some of the regulatory action taper off. we saw the approvals for $.10. that is a positive sign.

we see the big sweeping regulatory issues that weighed on sentiment. i think a lot of that is complete. >> good to have you with us. still have, $.10 denying a report it is considering selling down investments and companies including bankrolling share buyback. we have more of that later. first, we hear from the nato secretary-general. we have the details, this is bloomberg. ♪

>> you are watching daybreak asia. i am sue keenan with the first would advise. a former head of currency policy at japan's finance ministry says officials can intervene at any time. if needed to support the yen. last week's rain check means that are ready to take action even without a green light from the u.s.. the ministry of finance must show the public it will not allow speculation on the yen.

meanwhile, hsbc says the correction of china's commercial real estate market may last another two years. the ceo said they have been faster and more decisive than expected. hsbc -- hsbc said it would take further charges. the property developers just posted the rest first happenings in more than a decade. and the united nations secretary-general has given a stinging assessment at the opening of the general assembly.

he criticized the inability of global leaders to take action on a range of issues from climate change to inequality and the war in ukraine. he says the world is in peril and paralyzed. >> we have a duty to act and yet we are gridlocked in colossal global dysfunction. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. we spoke at the united nations in new york.

quickly ended legitimacy and therefore they don't change the nature of the conflict. this is against the independence of the nation in ukraine. it also worsens the situation. >> is he using this to get support at home after what we saw this counteroffensive in khaki from the ukrainian side? >> he has not changed his ambition when it comes to ukraine to take control of ukraine. you have to remember that this is not only about ukraine but also changing this. it is about ukraine security and our security and therefore it is just another way of making the

situation even worse. >> but that is legal territory to the kremlin. that means putting more voters there, using nuclear weapons, chemical weapons. how concerned are you that is the path they are willing to take? >> that does not change the national recognized borders of ukraine. that is why the nature of the conflict remains exactly the same. we have made absolutely clear that nuclear war should never be fought. >> do you get a sense when

talking to nato allies that they will send more weapons? >> nato allies are providing unprecedented support to ukraine. this has actually enabled them to stop the russian invasion and now we can liberate this territory. >> we have already seen the impacts of the policy across the world. how sustainable is this? how long our nato allies prepared to send weapons?

>> we have to support ukraine as long as it takes. the alternative is much more dangerous for all of us. we provide support to them because we have a moral obligation for self-defense. they say they can use military power to achieve political goals. that makes us more vulnerable. it is in our interest to help ukraine. >> we will continue to watch the japanese yen. the yield curve setting is unchanged. this is bloomberg. the signal

>> let's check in on some of the still moving on the first part of commodity trading. they are attracting the highest winning bid ever. this is after just a time of 10 weeks. we are seeing slow down when it comes to money materials, energy in particular. we did get the warning when it comes to the copper outlook. they said that remains a challenge. bitcoin continues its lump ahead of the fed rate decision.

we are seeing these challenging conditions going into the day before the fed. perhaps the shipments were more flat. here is the downside when it comes to trading here. peewee stocks are looking pretty soft as well. -- peewee stocks are looking pretty soft as well.

haidi: we have australia's

leading index gauge coming through another contraction of 0.05% from one month ago for the month of august. slater contraction compared to the previous month. this is the six-month annualized growth rate which essentially indicates a projected pace of economic activity elect six to nine months. we have seen in previous readings it capturing an indicator of the impact of the rba's tightening cycle, as well as the impact of what the fed is doing. the indicators include the life of u.s. industrial production, u.s. equities, the yield implications as well. really a mixed picture when it comes to the impact of the accelerated pace of the tightening cycle. expectations have been that the growth rate will continue to ease. let's get to su keenan with the first word headlines. we su: start with hsbc which had the massive correction in china's commercial real estate

market may last another two years. the ceo told the conference of the correction has been faster and more decisive than expected. last month hsbc said it would take further charges against its exposure to the property sector. china property shares posted -- posted, calling and upcoming increase for his bank "bad for america." he is set to appear in washington along with other bank ceos. in his prepared remarks, he tells the world jp morgan plays -- in the global economy. wall street banks are poised to realize roughly $600 million of

losses after offloading financial commitments for buyout of citrix systems to investors. the estimate is based on bloomberg calculations and market participants familiar with the deal, and could ultimately be conservative. the swedish central bank meanwhile, delivered a surprise 100-basis point hike. it lifted its policy rate and defied the projections of most economists a smaller move. it is the bank's most aggressive tightening in more than three decades. the swedish krona erased its initial gains after the jumbo rate hike. 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 su keenan. this is bloomberg. shery: traders are bracing also for a hawkish federal reserve, as we are seeing the treasury selloff easing a bit in the asian session. we had seen the 2-year yield very close to 4%.

let's bring in mliv strategist mark cranfield joining us with more. the most aggressive tightening campaign in 30 years. the bar has been set pretty high. mark: it is not often that the swedish central bank sets the agenda for both of the world, but they certainly got their 15 minutes of fame yesterday, and it has brought into question, with all the central banks this week, something like so many central banks meeting in the next 24 hours or so. the 100-basis point hike certainly puts the attention on the fed, will they do something similar? even if the fed sticks with 75 basis points, i don't think there's any question that the message jay powell will want to give is that this is a hawkish decision. whether it is through the rate hike itself, whether the statement, or whether it is in his address when he meets the

president afterwards, he will not want to wake up the following morning and find markets in a risk-on move. people want to make sure everybody gets a very clear signal that the fed is serious. . they are fighting inflation. they have a lot more work to do. they will raise rates as far as they need to and he will put all levers to make sure people see this as a hawkish decision. haidi: mark, when it comes to what we are watching out for in asia, how vulnerable are the likes of the yen and the yuan looking? mark: certainly rising u.s. yields have been a problem for both those currencies throughout this year, and it will continue to be so, particularly when you have a bank of japan that is not expected to defend the yen through interest rates. they make through interest rate intervention. we had the interview earlier today with a former minister in japan discussing the fact that the ministry of finance is

getting much closer to giving the green light for intervention. that could come if the fed decision pushes dollar-yen high, you may well see the ministry of finance sectioning intervention against the yen. but that would be very much on their own, nobody is going to support them in that case. china has got so many domestic issues, trying to get their economy back on track and trying to stimulate growth, and there isn't too much they can do about a very strong u.s. dollar, unless they want to suspend a huge amount of their reserves. so the yuan is being managed on a basket basis. it's not weak compared to other currencies. it is strong against the euro and against other partners as well. but in terms of trying to fight the strong u.s. dollar, there isn't a great deal any major central bank can do when u.s. central banker outperforming others around the world. haidi: mark cranfield there with a look at what we are bracing

for here in asia. we will get more on the currency , particularly the weakness in the young. a former chief of japanese currency polarized the government is ready to intervene in currency markets at any moment. he says the finance industry doesn't need to wait for that we live from the yen. >> yes. actually, when i heard the news that the ministry of finance last week conducted a so-called rate check, i they were serious to make the intervention. but they did not. even if they had done the intervention, it wouldn't have been a surprise to me because at that time, the yen exchange rate moved three to four yen in a

couple of days. so it is very volatile. excess movement, i think, which is just fine for market intervention. >> as we have the fed meetings and the boj meetings coming up, how likely do you think any intervention would be if there is a significant move by the fed , and we are seeing those high daily movements in the yen? how likely would there be intervention from the fed? >> if there is a five yen or more movement in full days, a think it is time to really show the public that the japanese government will not allow such speculative movement. stephen: is there a level of the yen that is going to warrant an intervention? i believe in a previous

interview that you gave when the yen was about one point 30, he didn't feel necessarily that the weakness was at a bed level. but at 1.50, if we are seeing large moves, especially if the fed hikes by more than expected, does that warrant intervention? if we get back to one point 50, with big changes in the yen? >> what matters is the movement of volatility. that is why regardless, i think if there are big volatility or excess movements in the exchange rate, it could justify intervention. stephen: what do you think u.s. intervention would be if there is intervention? and if there's any scope as opposed to what we saw in 1998, any scope for coordination with

the u.s. question mark or would they be flat out against it? >> i am already in the private sector currently and i am not directly communicating with our authority. so i don't know. however, given our shared commitment about the exchange, and given that the ministry of finance already conducted exchange rate check, which is i think already at preparatory stages or nearing intervention, i think there is no impediment to conduct the intervention. shery: japan's former vice finance minister speaking with bloomberg's stephen engle. coming up, optimism that hong kong may be easing quarantine

measures spurs markets, but bloomberg economics says it may be a short-lived boost. more on that next. this is bloomberg. ♪

shery: malaysia's largest public services and china fund says it is embracing market volatility as an opportunity to buy.

as ceo told us about plans to diversify its national divestment base. >> indeed it is a perfect storm that we are facing now, even the interconnectivity that we have in terms of globalization, in terms of the supply. information is now everywhere, so everyone is facing the same issues. we have a vision 2025, and intention to expand and diversify our investment international footprint from 20% currently to 30% by 2025. so right now we are already in over 40 countries in terms of our investments and we want to go from $8 million $15 billion in comparison to our $40 billion fund size currently. that is almost double in terms of value. because of that, we must embrace

and view the current weakness that we are facing as an opportunity for us to enter into new investments and at a much lower level and at a much more attractive valuation. eva: so where are you seeing these opportunities? what is looking cheap both in terms of sectors and in terms of sectors and in terms of markets? > if you look at comparisons from the perspective of motility , we are looking at stronger volatility, from the public market space. so it is always our intention to diversify into the private market space. right now our market accounts for 10%. the private market for us covers the private equity side, the property with a stateside, at its infrastructure. so we intend to double the exposure to about 20% by 2025.

haslinda: is china looking attractive to you? valuations here are very cheap, a market in deep bear territory. is there anything attractive? might tech be what to pick up right now? guest: we look at china from our total international portfolio perspective. note specifically for us to look at one country-specific, but as a part of the total portfolio. so it is looking very attractive. haslinda: you talk about the new normal. might the new normal in the investment world include digital assets? we are seeing the rise and fall of digital assets. going forward, might you look at crypto-currencies as an asset to invest in? >> for us right now, it is not one of our approved asset classes. it is still very new, so we

don't view currencies, for that matter, any currency as an asset class. i will put it way, it is essentially a currency, more transactional, so it needs to fall back on fundamentals. so for us, rather than investment, it is more transaction for that purpose. haslinda: how are you being hampered by the strong dollar as you look to put money to work in other markets? >> the stronger dollar is good for our international investments that are currently in u.s. dollars. but of course, we have to take into consideration, we have done, for example, 50% of our exposure is hedged because a strong u.s. dollar would also entail some of the costs that would be rising. haidi: the ceo of relation

pension fund kwap there speaking, with haslinda amin. court records reveal musk will face questions from twitter's lawyers next week in a deposition hearing. 's attorney will have to sit for his own deposition a day earlier april lewd, to the ticket which will begin in october 17 in which twitter will try to force musk to go through with his takeover. china's regulators have said they have held talks with boeing officials in a sign that the 737 mask could be closer to returning to service. the regulator will issue an updated review of the planes. that should clear the way for the jet to be reintroduced in china. however, no timeline was provided. beyond meat suspended its coo doug ramsey after his arrest for allegedly fighting a man's nose. according to a police report, he

was involved in an altercation at a parking mart following a college football game the. executive is also accused of threatening to kill the other man. ramsey joined beyond meat in september. shery: coming up, we look ahead to the market opens in hong kong and mainland china as asian stocks are under pressure, the offshore yuan also at the two year low against the u.s. dollar. this is bloomberg. ♪

haidi: tencent is denying a report that it is considering selling its stakes in companies it has invented in -- it has invested in. tencent is said to be trying to bankroll investments in other businesses. stephen engle, our chief north asia chris pratt in hong kong. the report keeps coming back to tencent. what is going on? stephen: against the backdrop of regulatory pressure against platform companies for anticompetitive behaviors, it looks as though beijing is behind-the-scenes, forcing companies to unwind some of their vast array of different investments in some of china's startups. you mentioned some of the companies like meituan, he endured will, -- pinduoduo, ke holdings, and others.

we have heard since last year that tencent was going to start divesting some of its shares in jd.com. then there were a number of different reports coming out since last month that even the chief strategy officer at tencent had to deny a report coming from reuters that tencent was interested to sell at least part or all of its stake in may -- again meituan, the food-delivery giant in china. than there was a report that tencent was looking to raise $14.5 billion in stopped investments this year. again, this is being denied by tencent. in the statement essentially tencent says they have no need to raise funds, no need for a timeline for such divestment. you can see the quote there, quote, "we don't have any targeted investments. we have always invested with the goal of generating strong returns to our company but not

according to a timeline or target." many of these companies potentially in the divestment scope, they pared some of their losses. shery: chief north asia correspondent stephen engle there. now let's look at the impact from hong kong's moves towards relaxing covid rules, including mandatory photo quarantines. kathryn lam joins us with the latest. what could we see at the market open? >> thanks for having me. this is kind of like an at long last to see some of these reopening moves. however, the market has not been necessarily pessimistic but also not excited about this. the relaxation of the opening has been talked about. we reported it first. lots of media talking about hong kong trying to get

rid of quarantine starting in october. media reports saying that hong kong's government has finally decided this and it is coming together. we saw yesterday and the day before when some of the leaks came out that the moves, we saw 1% or 2% in the stocks across the board for reopening, but nothing to write home about. haidi: there is reopening, and then the other big risk event is the party congress. furthering the sectors that might benefit or recover after that? catherine: obviously all eyes are on the party congress next month. we are all watching to see the resolution of the party sector that was heavily hit. will there be this big rescue plan? we have seen a lot of local governments in china, out with some sort of support, we have seen government officials at the highest level saying that they want to support the sector, but

there hasn't been an all encompassing national level support able to turn around the sector. that will be closely monitored. and depending on how you believe the significance of this will be, obviously, traders are positioning around that. the other part is tech. after an almost two year crackdown, it looks like there is some attractive opportunities in this space. people trying to watch for signals to see the easing of regulations in the space and if it allows for some buying. haidi: bloomberg's asian equities editor, catherine ngai. . let's look at some of the stocks we are watching ahead of the market opening in hong kong and china. country garden is talking about a potential policy relief of the property sector after the party congress. the mortgage boycott, meantime, it may be gaining steam again,

even as authorities in support measures. continued downside, even with some of the biggest developers, the likes of china vanke there, one of the biggest laggards in the session. and bitcoin is heading for a four-day slump, we are seeing potential downside with some of the crypto related stocks. shery: shery: we continue to watch commodity-related stocks. the lithium auction attracted its highest ever winning bid. it is really all about that e.v. battery-metals. we have seen the incredible shortage for the energy transition. the electrification of the world as well. how those minerals are in high demand. also watching japan steel works, cutting its full-year operating income guidance. despite that, it is gaining more than 4% in trading today. haidi: risk-off is the trading mood at the moment.

not surprising, as we get into the last trading day before the fed. we are expecting 75 basis points. the question is how long we will he be able to hold rates at that level? where will we end up next year? a lot of questions when it comes to fx vulnerabilities in this side of the world. downside of about 0.9 percent when it comes to trading in japan. the kospi a bit soft. not great export numbers coming through earlier in the hour, as well as heavily weighted down in sydney by materials and energy. shery: and we are seeing upside for the u.s. futures at the moment. that is it from "daybreak: asia." our markets coverage continues. this is bloomberg. ♪

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