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>> you're watching daybreak asia coming to you live from new york, sydney and hong kong. >> counted up to the major market opens. >> the top stories this hour, asia set for a risk offer, from the july minutes touching intraday highs not seen since october and the end at its lowest level this year. the central bank policy makers are still seeing significant upside risks to inflation, which could require further interest rate hikes, and reports of rare protests in beijing as one of china's biggest shadow banks skips payments on retail investment products. >> let's switch -- look at u.s. futures, stocks to get on the chin today after the minutes from the fed's july meeting shows that the vast majority are resigned to at least considering the possibility that more rate hikes will be needed.

some mixed close, but seven at -- seven lead to the downdraft with some big tech names like amazon and tesla. you could see again, right on the screen, still there, but i would call this unchanged. markets, the whole world now digesting the fed news for and cash and for a lot of on investors, it's not really news. they have been wondering if they were on the verge of cutting anytime soon. we saw treasuries lower across the board and the yield rising, some record levels here for the year on the five, and the two year yield. to nearly 5%. with that kind of pressure, you could see looking at currencies with the pound, again, it is an inflation story, because the inflation number for the latest read came out much higher than expected, reinforcing the idea that the u.k. or the boe is going to have to keep hiking rates. and oil is at a three week low,

west texas futures down 4.5%. >> as you say, it was a hawkish fed minutes feeding that sentiment as we look to the openings of sydney, seoul and tokyo. it is as well for that broader rates outlook we are assessing, we saw the rbnz staying on hold and indicating perhaps that one more hike could be ahead as we look at qe2 year yields at the start of trading. other essential banks, we see the gap between u.s. and japan and the boj, very much and focus given we have the yen pushing past levels where the government first intervened in september of last year. that was 145 point 90, and we will be monitoring for any intervention. we are setting up for a weaker start to the day's trading, following what came through on wall street. and there's also ongoing concerns on china. let's look at some of the superlatives we are monitoring,

because we have significantly eroded market cap for the china stock market, and reversed those gains from the end of july 2024. we had the politburo meeting when they spelled out their strategy. as for what can stand that slide it is clear -- not really clear. there are investment funds to avoid being that sellers of equities, but there are so many negative headlines facing the chinese economy this morning. >> and protests, something we almost never see, reported in beijing, against one of the biggest shadow banks after it skipped payments on several investment products. this is really underscoring how troubles in the property sectors of china's weakening economy are spreading deeper into the financial industry. our chief north asia correspondent is in hong kong. what do we know about the protests? >> it is rare, obviously, particularly in beijing, the

nation's capital, obviously, where they prefer stability and it is very right to see these kinds of protests. what we hear is at least a dozen, maybe jilted investors, gathering outside of this shadow banking the shadow banking industry provides they could go part as well as loans, and also private households. but they also -- offer a number of investment products, and we are hearing from one of the main investors in the bank, the boards secretary, earlier this week saying and admitting that they have missed payments on a batch of products on august 8 on top of missed payments in july, at least 30 products are overdue, and the secretary also said that it has halted redemptions and that board secretary is saying they don't have an idea to cover payments

as liquidity has dried up in the short-term. has been a tsunami of inquiries from investors as well as their own wealth managers, as to why this was happening, it shows that the troubles in the property sector and the overall economy, as we just talked about, are spreading to the financial sectors, and that report is honestly coming from sources saying that authorities have asked certain private financial institutions to not being net sellers of equities, showing concern at the higher echelons of power. >> more development around developer country garden, as well, a lot going on. >> country garden is the latest poacher child -- poster child of the indebtedness cash crunch, and china evergrande used to be at, but country garden has four times the number of development across china and used to be the

largest developer just a couple years ago by sales. now, number six. it missed interest payments early last week and it has a 30 day grace. otherwise it will default. it is warning of major uncertainties in redemption of its bonds and says trading in some of its local bonds will remain suspended. 11 of those onshore notes have been suspended since earlier this week, it missed those interest payments on the dollar bond last week, and again has that grace. -- grace moment. the past poster child also announced to the stock exchange that is being investigated by the securities regulator, the seat src -- csrc. possibly for scorcher violations. that's not rare, many companies get investigations into information disclosure violations, however, it is

another indication of the scrutiny and risks that are spreading across china. >> our chief north asia correspondent, stephen engle. fed policymakers are seeing significant upside risks to inflation which might merit more rate hikes according to a policy meeting. to fed officials are in favor of living unchanged, but there are cracks in the consensus. it's an interesting backdrop as they had to the jackson hole symposium next week. now we have our guest, the head of advisory at iti. >> great to be here in the studio. >> especially today, or for timing, because you are focused on what the fed is going to do and will do, and the minutes show that they realize they are in not saying they're going to hike rates but they may have to and they are not going to hesitate if they do. >> the fed made it pretty clear in june that they were going to

raise rates two more times, so we had july, possibly september and november, and we have had two pieces that have caught up. number one, inflation readings are better than expected, unit labor costs are coming in at 1.6% at -- and the cpi is better than expected. on the not good news side, and the reason they might raise rates again, and keep them higher for longer, is that it feels like the u.s. economy is set up -- accelerating to the third quarter. the housing market, industrials, all of those have perked up here. this might be a summer phenomenon, with people getting back out and spending, we will have to see. it does feel as if the third quarter is accelerating. with that balance, better inflation news, but the u.s. economy is quite solid and the fed will raise rates again.

>> global ceo, alti, you can't just analyze it, you have to do something with it. you have to put money someplace. what does that mean for investors? with equities, is it going to be a market leave if they do get the rate hikes done? is it going to be saying that's it, we can't really get into the bull market we are hoping for until they are done? >> you have to have a different time, if you look at the here and now, trees don't grow into the sky, we had a great first seven months, and declines are expected to pull back consolidation, that would be healthy, low volume coming, there's always something that causes a bit of a wobble with the news. that's healthy. this could be tricky for markets near-term, but we have been constructing -- constructive looking forward to 2024, because we think that inflation will grind slowly lower and the fed

will remain higher for longer, we don't expect cuts this year, but if we look forward to mid next year, if we are able to get inflation down, then they can easily bit and cut rates, and that leads to me recovery halfway through next year. we try to look ahead, we are not trying to do this year and now it and out, we are not traders, we are trying to build resilient portfolios for clients. >> we have seen yields pushing higher off of the back of those fed minutes, the 10 year yield at 10 .45%. how much higher do you see that yield moving? is that sucking up a lot of oxygen that might have gone to equities? >> yes and no. our sales we lengthen immaturity because we thought the 4.2 mark was a good entry point for the long end of the bond market on the 10 year. let's be clear, if inflation comes down as we expect, you

have a real yield of 2%, you have a term premium of 50 basis points. 430, 450 is in and around fair value for the long end of the bond market, so, yeah, could get worse, there are concerns about -- around treasury issuance, and they have to not only refinance the deficit but they have to build some cash balances that the crypt -- treasury drew down during the debt ceiling negotiation. this will spook markets but growth is better-than-expected and we are not seeing yields sitting out too well at 4.75% and beyond. at least not currently. >> and you see us heading for a soft landing, are there any risks? >> our view is that the soft landing narrative has definitely improved, in other words, the possibility has improved, there are concerns around china. that is a risk. there is a lagging impact of tightening which is a risk,

there are so credit conditions in regional banks. we recognize the risks, but what is really interesting about the growth scenario is not just that the consumer has remained solid, but something we have been looking at is that we seek it pickup up investment spent in the united states. that's important because investment expense the productive potential of the economy. basically it lets you grow with less inflationary pressure. investment spend typically comes with improvements in labor productivity and that is what we saw in the second quarter, labor productivity 3.7%. that's a good number. we have to keep an i on this investment spend, and if we can see that obviously the economy is going with investment and labor productivity, that could be the beginnings of a soft landing. there is no certainty here. we are watching the data, but we certainly think this has improved. >> another hot story that's going to carry over, tech,

people say stay away from big tech and the valuations are terrible. don't even bother. and ai, one of our guests who worked in the eye engine street she became a portfolio have chad all that work really really well. you see in longer-term investment angle, would you go right there -- go there right now over at the near term, underestimate the long-term. we think with these next bots and generative ai is a fabulous labor product of the enhancer, we see this as a very very significant technology transformation. and i'm going to put aside the valuations, but let's face it, the u.s. tech companies are in pole position to take advantage of this white? they have oodles of cash and lots of data to train the models. those two things are really, really important. i would not be shorting these stocks. i think the valuations are

height and they are discounting a lot of good news, particularly because these tech companies now need to invest. we have to invest before we can get the benefits. and spend, the structure layer -- infrastructure layer, they require more fiber-optic some more towers i more centers, we need to build that digital infrastructure layer and investing gpu's. expect -- to increase first. you have to think long term. once we get past the digital infrastructure layer, we think a lot of what we call destructive use cases will happen in the venture market. we are a barbell approach, we are not underweight on anything, and we have private equity as well, and a lot of really interesting things in the use case will be happening there. stay tuned.

christ thank you so much. the global cio and head of investment advisory at alti. ahead, we speak to the head of the rbnz governor -- the rbnz, and whether -- on whether the inflation dragon has been slain. this is wilbur. ♪ -- for financial insights from merrill. is he hailing a ride to the concert hall? no. he's making sure his portfolio and retirement plans work in harmony. they want to adopt a child and build a new home. so they're talking numbers with their merrill adviser. she's not researching her next role. she's learning how to handle market ups and downs without the drama. personalized advice so impressive your money never stops working for you with merrill. a bank of america company.

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>> let's take a look at corporate stories, jd.com's u.s. trading shares fail -- felt after they changed -- they change their merchandise. profitability of the core retail missed estimates as they boosted marketing expenses to fend off challenges from rivals like alibaba. goldman sachs also expressed concern about the quarter growth. a security's regular has built a case against hengda about real estate disclosures, and they say they have cooperated and will fulfill their disclosure obligations. the agency inquiries are common and do not necessarily lead to penalties. >> we will be watching hong kong shares of tencent later on thursday after the company reported disappointing second-quarter earnings, let's break down those results now with our executive editor for each of technology either

elstrom. -- peter elstrom. what does this tell us about china's economy broadly? >> all eyes are on the chinese economy at this point as we have reported over the past few days. there are many warning signs around the economy, so growth has been very important within china for the rest of the world and a big part is coming from tech companies. tech companies have reported the results over the past week, and we had tencent yesterday, it's a piece of the puzzle to see how the economy is doing. and tencent's results were disappoint. avenue growth came in slower than expected, they are having a few soft issues in the business, it was not a disaster but it was slower than expected. they are seeing growth in online advertising in particular. they are also having a strong result in their cloud business, but their games business is soft, and it's not clear exactly whether chinese consumers are going to shop to be able to help

drive the economy and pull it out of this trouble. that it is in right now -- this troubled point that it is in right now. they talked up their online advertising in particular, they have a strong video business which has been doing quite well and they said that there was some technology they applied there to be able to take advantage of the opportunities in revenue growth and online advertising which group and helped that 11% growth. they are softer in games. games has been a big driver of growth for tencent in the past but they said they did not try to push the commercialization of their games this year. this past quarter. as forcefully as they have in the past. that was soft and the cloud computing business is going for them. they said that yes there are a lot of uncertainties in the economy at this point and there have been uncertainties for a long time, and they expect to be able to grow through these difficult times.

>> tencent had exciting things to say about its ai strategy, what is the news there? good point, tencent is one of the biggest companies in china, but they have been slow on the draw when it comes to ai after we saw the excitement around chatgpt and openai. we saw other companies come out very aggressively, including alibaba and other big tech giants, but tencent had not said much even though it owns a messaging service which creates a lot of data and use them to abilities to work at ai. yesterday, they said they are planning on introducing their large like which model later this year. they also expected to be one of the best in the industry. there were high hopes that it was going to go beyond just chat and bots, they expect to be able to apply a number of different areas, including advertising, cloud computing and a number of

other areas they are expanding -- extremity with at this point. -- experimenting with at this point. >> plenty more to come on daybreak asia, this is bloomberg. ♪ the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

>> a power struggle is shaping up inside the top ranks of goldman sachs. bloomberg has learned that managers, frustrated with the leadership of the current ceo, have been looking to his loyal deputy to sue -- for support. we have more on this scoop, it seems that the growing disquiet inside of goldman is not a good thing when it starts making headlines. >> it certainly has found its way, this frustration of senior managers, into local financial newspapers. into magazines. and it is all over the cocktail

circuit and -- in the hamptons. and what a lot of the managers who are upset with ceo solomon appeared to be doing is turning their focus to the number two, 54-year-old john waldron, who has worked with's -- side-by-side with him for decades, going back to bear stearns. he is widely viewed as the ceo in waiting. bloomberg's most read story on this topic describes a sense of mutiny within the bank. internet is festering in the ranks this year over solomon's leadership. and his deputy being pressured to pick sides, either trying to win over disgruntled executives or being seen as the affable cologne of the ceo. early tying his feet to solomon. and the issues with david solomon are unique to goldman because if you drop into the bloomberg, qc profits have been very significant.

the -- they have been doing well overall, there was that disastrous foray into consumer banking, the turnaround has been a struggle, the source of criticism really seems to be focused on solomon's personality. he is not the executive that gives you a pat on the shoulder and many are saying that various concerns about his personality and the way he is handling this tough patch for the bank are starting to take a toll. >> what about those outside of goldman? >> there are a lot of different views, including from former goldman alum bruce heyman, who said that there are all kinds of alliances that tend to form within a bank but those alliances most likely get tested if publicity continues at this level. again, it is rising to a fever pitch, the publicity. goldman has right behind pierce in terms of profit recently and

the difference between solomon who is a bit of a jet setter and hardcharging executive, not well-known to give people a pat on the shoulder is in stark contrast to waldron, who is viewed as affable or more likable, the faint macro investor matt miller says that he finds him -- waldron smart, humble and low-key, not flashing. people want to see what happens, and if solomon will stay in place. >> the questions, su keenan bringing us that. plenty more to come on daybreak asia. this is bloomberg. ♪ so... i know you and george were struggling with the possibility of having to move. how's that going? we found a way to make bathing safer with a kohler walk-in bath. a kohler walk-in bath provides a secure, spa-like bathing experience in the comfort of your own home. a kohler walk-in bath has one of the lowest step-ins of any walk-in bath for easy entry and exit.

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>> 30 minutes away from the

opening here in australia, also japan and south korea, taking a look at futures, the story is that they're not doing well. weakening by a third of a percent, the index closing down by 1.5%. the worst day in seven weeks in terms of market breadth. new zealand training by lower than 1.1%, teachers thereby .5%, we saw a lot of weakness in u.s. equities after those hawkish fed minutes. let's look at the again, 146.31, the blog saying without intervention the spot rate could hit 151 point 95, but in terms of intervention, it's a great deal of points. markets open in 29 minutes. travel globally continues to pick up, and samsonite's next sales -- net sales made a stronger park -- recovery. it was driven by sales in china due to the recovery of domestic

travel following the listing -- lifting of covert related restrictions. they reported a net income of $32.5 million, 56.3 million the year before. annabelle joins us now. >> i would like to bring in the ceo of samsonite joining us for an exclusive interview this morning. call, welcome back to hong kong. usually you are based in the u.s.. we just heard from paul very strong earnings in the first half of the year. what stood out to you the most from those numbers? >> thank you for having me. happy to be back in hong kong we spend a lot of time here. our neighbors have been to venice a strong, and i know there has been focused on the china recovery, which will feel this for the rest of the year, but all of our regions are performing amazingly well. within asia, our first numbers are 86% to last year, which is really tremendous. and a lot of that is china catching up from being down 50%

last year. >> when he think about the base effect, compared to the corresponding. in 2019, what do you think then, would you make that comparison? >> giving china, then i'll give you the rest of the story. the china numbers in q1 work down 10% but then q2 was up 10% with restriction starting to lift and consumers moving largely domestically. in july, it's up 18%. this really rapid movement in chinese travelers, domestically, and i think it will happen is that we go to the end of this year and next year with international travel starting to move. we could go, they announced a global to a group or 70 countries which helps us. not only in asia, but in the countries they are visiting because they often by luggage when they are there. we are quite excited for that. when you really look at the overall growth story, the overall company is up 60%

compared to 22019. and markets are up 30% from then. tremendous growth across every part of our business. china will bring good benefits for the rest of the year. >> interesting in china, because there's so much focus on markets on the deteriorating macro backdrop. so retail sales at this week and we are starting to see consumers really tightening their belts, particular pulling back on nonessential big-ticket items. how do you see that playing out over the coming months? do you see a resumption of travel to some extent or a downshift in terms of spending and preference on certain brands within the group? i think we see the opposite on the shift. i think we see are higher brands -- and france, like samsonite, which is a premium brand in asia, performing better. it's the consumers at the lower end that are being more cautious.

i think it has plenty to go. are higher and france, when you look at china business and the growth you're talking about, margin profile is to medically improved as the consumers that are further up on the chain are actually performing a bit better than consumers at the entry level. so, i think it will be fine. i would say that china is going to do very similar, and they have been feeling pressure on the consumer side. the travel demand is tremendous, and the pent-up travel demand, not just for chinese consumers, we could it domestic travel, but the pent-up demand is going to do like the rest of the world which is really surprise you, it just continues. markets are still delivering 30% growth prior -- compared to prior to 2019. and i think china will do the same thing. >> let's look at the investor perspective, because you have been listed for more than a decade now and the shares have been thinly traded, around 13 million changing hands for day,

compared to others it's a sixth of that, and that's a big maker listed here. you're looking at ways to rectify that at all? >> long-term we have been happy with the hong kong exchange, liquidities have been a challenge. bloomberg put out a story looking at we are listing venues. there are no plans in place, but any -- like any company or board we are constantly evaluating and we think that we will continue to evaluate and think about that. but the exchange is a good market for us other than liquidity. >> how do you plan to broaden out your investor base and attract more international -- >> we have a broad investor base already, you might be surprised, more than half of our investors, close to 70% are in the u.s.. over time, how do we brought in that and bought an analyst coverage? it's really part of the story, how do you bringing coverage for your company so that people can get to you?

one of the challenges is that not everyone can get to you, but there are plenty of folks that can get to you and i think from a holding on the stocks. we are not actively planning now, but you should not think that we are not evaluating venues. >> what about the strategy for the company on mna? you have made two acquisitions which are high-profile. >> it was a terrific accusation. we have some the -- so many good things in our work right now we are not actively pursuing mna. that doesn't mean we not listening, this plenty of things available. we continue to monitor, but when we look at our profile for next year we are going to deliver an amazing story without m&a, but we continue to monitor and there are things that would be interesting over time, but at the right value. there has been a correction in value expectations and we are watching that as we look at assets that might be interesting to us in the long term. >> when you look at

acquisitions, are you looking into the grade, given what you saw? >> i think premium is important and adjacent categories are important for us. we are good at travel luggage, i feel like some of the actions -- acquisitions that we have done, even with non-travel sales that i have carried into the meeting, a gate -- adjacent categories are good for us. we are having german to success with samsonite and there are other brands that are in our wheelhouse as far as being able to run them and give them global access or distribution. more adjacent categories are where we are probably looking. >> thank you so much free time, joining us for an exclusive interview, that was the ceo of samsonite in hong kong this week. >> but you were to come on daybreak asia, this is bloomberg.

-- plenty more to come on daybreak asia, this is bloomberg. ♪ 76% of 23andme health customers surveyed reported taking healthier actions. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme.

>> the reserve bank of new zealand kept its interest rate as expected at 5.50%, and joining us now is the governor of the reserve bank of new zealand. it's good to have you back with

us, you have made a big shift in your policy approach, you are one of the leading aggressive central banks when rates had to be turned around and in july you made a very dramatic dovish move. at the meeting, one of the big questions i came out that you are asked about in parliament is this increased in the official cash rate track, the basis rate of 2.2 5%, and markets return to figure out what you and what the message is here, how they are supposed to interpret this, beyond the fact of saying it's a technical move. it is something that people think suggests may be another nuance here in how the rbnz is approaching things. >> thank you kathleen, it's great to be back again. i would say to the markets be confident that we have time to

watch, worry and wait for the interest rate levels now. the forward tract that you talk about is a projection, it's not us trying to provide a signal or a constraint. the projection really reflects that over recent months with some upturns on economic activity and inflation, some of the pressures have been slightly stronger than we thought, but it will come out in the wash. what have we done? we have a official production two years out, that it will look very little from 5.05%, and that nicely balances the risks to the upside on inflation and growth versus the more medium-term downside risks. >> is it fair to say this sorta of opens the door a little wider to another rate hike if it

proves to be needed, you are not trying to signal anything, but in terms of making this small shift, despite everybody, does it at least do that for you? if you do have to do something to bring down inflation, even if it is just a little bit more. >> we never say never. monetary policy is a repeat gate, we get new information, and reassess the outlook -- outlook and our stance. a straight line could be read as exact forward guidance, we can provide that exact forward guidance because there is always too much uncertainty to manage and retain that optionality. at the moment,a it has some risks to the upside, and inflation has proven to be more sticky, a global phenomenon, upward growth with a strong net inward migration could prove

stronger than what we have for the next one or two quarters ahead. but we are very confident about 1-2 years ahead that we are being restrictive with monetary policy and in a position where we could tighten or loosen as needed as the information unfolds. kathleen: at this point, it seems like or inflation is still high, and that is one of the things that you pointed out. is it fair to say that right now you are still seeing more of an upside risk, especially in the medium-term, to inflation given the core inflation staying high and the headline coming down slowly, then you would see a risk of lower-than-expected inflation? you can always have both options on the table. but sometimes, the option on the table is a bigger, more important option than the rest. >> i do truly believe that we have a balanced forecast ahead

for the ocr based on what we see. i do not see the balance of it going further down. the more challenging part is the risks in the near-term and medium-term. in the medium-term, is the risks that when the day because that is what we can influence, but we have to be robust around what we can expect to see over the next couple of quarters. i don't want to suddenly spook ourselves with growth turning out stronger-than-expected or inflation more persistent. there's nothing we can do to manage that over the next one-two quarters. we have to stay focused on the medium-term. so this is what that is signaling, that we believe that if we stay where we are for long enough, inflation will be back inside the target mid next year, and stay there. but, you know, as always, there will be risks. >> governor powell allen in sydney, -- it is paul allen in

sydney, i'm not inviting you to talk about the currency but it is weak at the moment. mostly due to forces beyond your control, of course. do you see and inflation risk coming from weak currency? >> yes. so all currencies are weak, the u.s. was strong is the story, i think the challenge here is not just what the exchange rate is, but why isn't there what does it reflect? on the view of the view of weekend global commodity prices and a narrow interest-rate margin we can comfortably explain why the exchange rate is at the moment. it's not unusual, given the economic drivers that are there. whether it is inflation or not really depends on what is the weaker exchange rate reflected. does it reflect weaker global earnings because of commodity prices for some kind of portfolio shift? it's not as simple as just looking at the label and is that

inflationary or not, it's about what are the drivers underneath. for our projections we deliberately provide a straight line with the extreme rate -- exchange rate, and we look at monetary policy, asking can be explained where the exchange rate is, and it is that inflationary or not over the horizon as is? >> there is an election coming up in october, and again, i'm not invited you to comment on politics. want to keep church and state separate here, i'm sure the reserve bank must be confident that the physical environment could be changing. what do you think about those potential scenarios. >> government expenditure is a big part of any economy, and at the moment we deliberately and always will use the official projections from the government of the day, which is the budget 2023 for the numbers that we have, and our forecasts are

dependent on the budget activity occurring as projected. that is one where some near-term increase and upward pressure of inflation and over the medium-term it tailors -- tails off as the government shows fiscal restraint. any deviations from that will be important to us around that balance of risks to inflation, the fact that the government is shrinking is -- its share of the total economy provides us less concern around the inflation environment. >> governor, are you forecasting recession -- you are forecasting recession coming up quickly, if the new zealand economy is clearly dipping into recession and something that is even a mild contraction, will that be enough to start cutting rates? >> it's the bare minimum that we need to see, because without a doubt demand has been well

outstripping the pace of the supply capacity of the new zealand economy. this is why we are constraining spending through the interest rates and we need to see subdued consumer spending, business investment, and government constraints. these are critical parts of the inflation process moving through. one swallow will not make a spring. we have to observe the persistence of the slowdown to give us the confidence that we are on a path to achieve our inflation target. kathleen: and i'm glad you touched on that, because how are you going to prioritize the need to start giving the economy more stimulus against the need to reassure inflation target? >> it's hard to talk about more stimulus, we have to see a continued level of economic activity being below the

potential growth rate of the economy for a while. it's the level of activity rather than the growth rates of these activities that are porous . we are talking about recession, but we are saying about the same level of -- seeing about the same level of economic activity, it continued strong labor market, employment growth, that's a great combination, at the same time as we are also achieving disinflation. >> governor, a lot of central banks, some, anyway, they are talking about seeing the end of rate hikes, but they are talking a lot about higher for longer. are you in that higher for longer camp? >> we have been sitting there for quite some time, we would, as you mentioned earlier, we would be quick to the chase on tightening rates. we have got this restrictive level and we are in no rush to be, we don't feel a rush to be

needed to changing rates at any time. kathleen: one more big picture question. i started about how the rbnz was to lead the world in rate hikes, quick and aggressive, and even so, even for inflation fighting war -- moyers like you, inflation got out of control. what lessons have been learned from central banks? >> i think the real critical lesson is that the simple capacity of the economy matters as much as monitoring demand, and the supply-side of the global economy shrunk beyond any expectation through covid and then again with the invasion of ukraine. and with our own idiosyncrasies,

these have impacted the supply side the economy. we can only influence the demand side. we have to -- so, a lot of our work is how to wait get a handle on this supply capability capacity of the economy to really have the full picture in front of us when we are working out what the excess demand is. kathleen: always good to have you with us, you have such patients for over questions taking so much time. it is very much appreciated. that is the governor of the reserve bank of new zealand. now, watch us live, see our past interviews on our interactive tv function tv , and you can dive into any securities or bloomberg functions we talk about and become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only, check us out. tv . this is bloomberg. ♪

how can you sleep on such a firm setting? gab, mine is almost the same as yours. almost is just another word for not as good as mine. save 50% on the sleep number limited edition smart bed. plus, free home delivery when you add a base. shop now only at sleep number. >> just want to get some data coming out of japan, let's check out the trade balance of the month of july, interesting numbers, expecting a surplus of ¥40 billion, but we have a test deficit of ¥48.7 billion, and

the numbers are quite informative. japan's exports to china contracting 13.4% on the year. meanwhile, july exports to the u.s. rose by 13.5%. some upheaval there for japan's trade in the month of july. elsewhere, let's take a look at machine orders as well, machine orders month on month coming in weaker than expected, two point 7% growth there on the year, which has resulted in a contraction of five .8%. let's take a look at the yen, meanwhile, 146.32, getting a new the levels that we might expect intervention in kathleen. kathleen: it does, and these of the stocks we will be watching shortly and it's all about earnings this morning. japanese discount store operator

pan pacific forecasting full-year operating income which missed average estimates, and telstra boosting its income forecast for the year from 40.6 million u.s. dollars to $15.9 million. the average annual assessment be there, meanwhile, the market opens in sydney, seoul and tokyo next. keep it right here, this is bloomberg. ♪ ♪ every business deserves a great deal.

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>> this is daybreak: asia. u.s. stocks closed down the board anywhere from eight half percent to more than they 4%. it is all about the july fomc minutes. >> we had some trade numbers out of japan, an unexpected deficit for the month of july. we are counting down to the open. what are we anticipating? >> numbers coming out, concern around china about economy. we have the open now for japan, south korea and australia. we are starting -- watching the yields in particular. a reflection of what came out

from the meeting minutes indicating fed officials see inflation risk on the horizon. there is a chance there are further rate hikes to come. the question not necessarily about how much i we go but how long rates will be elevated. that is really playing out in the japanese currency this morning. pass the level where the japanese government officials first intervened in september of last year. still the debate about intervention starting to intensify. something back could put further pressure on the japanese yen are the numbers that came out. exports, the contraction we saw. the question is around the trade balance, big contraction there.

let's take a look at korea. the kospi coming online. the move in tech stocks played out through the session. track and moves in the korean one. we are already around them made low against the greenback. very sensitive to what is going on in china is that continuing question about the health of the property sector and how that is playing out across the rest of the economy. it also played out in australia because material stocks are the ones to be focusing in on. focusing on what we are seen in the bond space. we had the interview with the rbnz governor.

the governor saying he does not feel a rush to change rates anytime soon. we will have a lot more analysis from the interview ended the hour i had. kathleen: the governor of the rbnz said they decided to move their official cash rate by 25 basis points. let's get to our next guest. let's continue the conversation about emerging-market bonds. bringing in now ben luk from state street bank and trust. to a certain extent, the developed nations are not so much in rate cutting mode, but some of them started early and were aggressive. is that the scenario you are looking at?

how do you invest on that? >> we have seen rate rise being much earlier for em central banks because they are always worried about capital outflows when it comes to a dollar liquidity environment that is much tighter. what we are seeing from our data right now is that most em markets are in an at this inflationary environment. we are seeing it in the latin american space, their overall monthly inflation much lower than long-term trends and seasonal averages. this is where we see most central banks being the most active. what we would prefer is the lower currency sovereign space which remains to be an area we

prefer because valuation is still attractive, positioning still very late. we can get a little bit of the currency exposure as well. for investors who are more cautious in terms of the dollar trend, they can actually consider the dollar denominated bond space. in terms of which emerging markets you like best, is asia? is it latin america? where do you pick and choose? right now -- >> right now, latin america is the most preferred space for us. in asia, a little bit more of a different story because aggregate rates are not too high in asia even though they started

an aggressive cycle last year. in terms of total rates there is so not much they can cut often. hungry is another area we see is a potential favorite as well. in the asia space, most of the interest will remain in places like indonesia and malaysia. given how the central bank has allowed for more currency appreciation overall in the last couple of months it remains unless attractive opportunity. we are sticking with latin america is our most preferred region. paul: let's take a look at the u.s. dollar. how much of a factor is this in your decision-making? the strength continuing to endure there. is this the main factor influence your opinions on em? >> we have recently downgraded

our dollar overweight view back to neutral. august is an exceptional month where it is a very high volatile , low liquidity months. what we are focusing on right now is the fed remains the biggest risk in terms of driving yields higher. when you look at recent price action, it is due to treasury issuance being higher than expected. the q3 numbers we are tracking is around 270 billion higher than what we saw previously in may. but that is priced in now in terms of what investors are expecting. we are seeing quite a steady foreign demand in terms of institutional investors buying back into the treasury space. if the yields are under control,

dollar will move higher which is why we lowered back to neutral. paul: i want to circle back to latin america now. technically one country there, argentina. i am sure you have been following the news there. we had an interview with javier millet about closing the central bank and described the chinese government as assassins. what is your attitude toward argentina? >> it is obviously more of an idiosyncratic story. what we are seeing from speeches there. we are personally not focused in that area. we are predominantly concentrated in high liquidity, high liquid markets in general and that is not really where

argentina stands. it is an idiosyncratic story. he has not actually filtered through too much of an impact to the rest of em. we are still sticking with the more positive view in terms of em. kathleen: thank you so much for joining us, ben luk from state street bank and trust. let's take a look at the currency markets. we just have paul talking about the dollar and let's take a look at the korean won. the dollar continues to rise. it is the lowest since november versus the dollar. we are also seeing the dollar up against the chinese one and that has been an ongoing story.

we can see the new zealand the dollar actually getting a little weaker against the dollar. quite a thing to watch. the currencies telling a left of the story for us. annabelle: certainly reflecting dollar strength concerns around china's economy. so far we have the session online and it is a story of high heels. a stronger dollar and that hurts the tech sector -- in particular. we are broadly risk off so far. 10 minutes under way for tokyo, seoul and sydney.

sony has been raised at citigroup. near-term share upside, they have raised the target to 13,000 yen apiece come up from 12,000. profits will grow gradually and be reflected in the share price. that is another stock we are keeping an eye on. paul: still to come, rare protests in beijing as one of china's biggest shadow banks skips payments on several investment products. new worries about the financial sector there next. this is bloomberg. ♪ health customers surd reported taking healthier actions. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme.

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paul: rare protests reported in beijing against one of china's biggest shadow banks after escaped payments on several investment products. what do we know about these protests in beijing? >> this involves this big shadow lender and they offer these trust products. this is zhongrong international trust.

sources are telling us and we have seen a video of about a dozen protesters surrounding a beijing headquarters of zhongrong and demanding explanations. they said they had a profit, why are they not paying back redemptions on those investment products that many people had bought? zhongrong is properly -- is partly owned by a very large company that provides shadow lending as well as trust products. earlier this week, the board secretary was candid about the situation, saying they must payments on august 8. at least 30 products are overdue. they also said they have halted redemptions. the board secretary went on to say that they do not have an immediate plan to cover payments.

short-term liquidity has dried up. he admitted to receiving a tsunami of questions from investors and their own wealth managers. this is looking at a very critical part of the chinese economy that offer these trust products. they do not have these implicit guarantees to depositors like the big state owned banks. this is just another sign of financial stress from the financial woes in the chinese economy from the property sector. kathleen: it is the last thing china needs now. financial stress is for companies like this would start with things like what happens in the property sector. we have interesting developments with country garden. >> country garden is the latest poster child of the property

sector woes. it is long seen as pretty much immune to those liquidity issues because of its size and because of its profitability. it was the number one chinese property developer by sales as little as a year ago. it is now number six and facing a severe liquidity crunch. the company is warning of a major us some tea and their redemptions -- major uncertainty of their redemptions of some of their bonds. 11 of their bonds have been suspended. earlier last week, a missed interest payments on a dollar bond. it has 30 days before it is considered to be defaulting. this is a company with four times the number of developments as china evergrande. it is the latest example of the issues facing the chinese

property sector. paul: in terms of the property sector, let's dig into the housing slump. can you tell us why investors are concerned? >> official data have severely understated the decline in the market. if you remember, prices announced by the bureau showed home prices in china have fallen 2.6%, that is new home prices. and the price of existing homes have dropped 6%. based on private data providers and real estate agents, the prices have fallen much more sharply. in shanghai, they have fallen

about 15%. in other areas, the problem was even bigger, down more than 30%. unlike some western countries which uses transaction-based data, china uses samples from selective projects instead of all houses that have changed hands. for regulators the advantage of doing that is avoided large swings in prices. the downside is those who completely rely on such date i will not be able to make informed decisions when it comes to property measures. for investors, if you are waiting for prices to drop

further, they will probably have to wait longer. it takes time. we'll have to wait for bailey clearer signal -- a clearer signal from the market. kathleen: this could partly be the way the data is collected. if prices are falling so sharply to what extent is it because people are saying let me get out of this house because the price will fall even further. what is the momentum right now? has the market started to bottom out? what is the outlook? >> good question. based on what we heard from analysts, there is no end in sight because of inadequate demand and oversupply. chinese developers have built way too many houses.

based on a report from goldman sachs, there are 27 trillion yuan worth of inventory which would take five years to clear. in terms of demand, the picture does not look great. to get people to buy houses, you have to have cash, you need to have confidence about future income and you need to have expectations that prices, home values may increase. you do not have these kinds of things at the moment. over the long term, the demographic issue is also a concern. china's population is shrinking, people are not getting married or having children. demand will probably drop nine units from 17 or 18.

kathleen: what is going on with missed payments for onshore debt? things like this have a way of snowballing. corporate defaults. >> in june and july, we had the two highest months of onshore bond defaults, the highest level since last december and january. about $1 billion in total have been missed payments in the past two months, much less then dollar bonds. dollar bond defaults this year averaging around $5 billion. corporate's have been focusing on paying onshore debts since the beginning of 2022 versus offshore debts. that is why we have seen a spike. we might see a change where even

companies abilities to pay their onshore debts might have stress in their. paul: what are some of the debts we need to be watching in the near term? highlight this -- how might this affect the dollar bond market? >> country garden is a 3.9 billion dollar yuan bond. it is the biggest bond maturity the company has left stand and the rest of the year. if they are able to extend the bond at the same time they have to dollar bond payments they did not make, it would give them some room to make payments before another bond comes due in january. kathleen: keep it right here.

plenty more to come on daybreak: asia. this is bloomberg. ♪ at cdw, we get the importance of clear communication. and when your teams are spread out, that's not always easy. our experts can help by implementing poly audio and video solutions to keep you connected. from headsets to collaboration tools, poly solutions offer simple setup and eliminate distracting background noise,

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china's struggling recovery is becoming a headwind for the united states and the globe. china's back in inflation -- deflation. he thinks the u.s. is better prepared to deal with the fallout. >> china made a set of different decisions and it presents a headwind. but we are better prepared to deal with that the many economy

in the world because of the policy decisions we made that are alone our economy to grow. paul: wto says china violated its fundamental trade commitments when it imposed tariffs on u.s. products in retaliation for former president donald trump's steel deals. the panel agreed chinese tariffs denied them treatment as a so-called most favored nation. they said beijing violated other concessions and made when he joined the wto. argentina's leading presidential candidate has pledged to close the nation's central bank if he wins the election. she will also slash spending before 2025, downsize public works. he told us abolishing the central bank will require making the u.s. dollar argentina's official currency.

>> i think there is a previous discussion about dollarization. it is to get rid of the central bank. dollarization is an instrumental issue. there are four arguments. one has to do with a moral issue which is that stealing is wrong. paul: we have plenty more to come on daybreak: asia. stay with us. this is bloomberg. ♪

paul: some breaking news out of

singapore. nonoil domestic exports for july, a contraction of 20.2%. a contraction of 14.3% was the expectation. if we break down those numbers, we have electronics exports decline in 26.1% in the month of july. nonoil exports declined by 3%. -- 3.4%. annabelle: probably another signal of the weakening economic outlook. recession concerns a in the session. we are currently scoff today. every single sector in the red

at this point. what is leaving that? the fed meeting minutes told us officials are still concerned about the outlook for inflation. we are going to be staying higher for longer. let's change because when you take a look at apac stocks we have only been up for two days over the course of this month. this is something turning low. apac stocks heading toward the lowest. we are taking a look at the 30 level. stocks also looking undervalued. part of the story is the dollar strength. we have been seeing the dollar move above its 200 moving average. some big losses in this region. the japanese yen one of the

standouts. the third worst performer. you also have the korean won, the biggest standout down nearly 5% over the course of this month. it is not just the story of dollar strength because a key trading partner of korea is china. kathleen: let's get more and china's economic woes. let's bring in our markets coanchor, david ingles. china's credit rating at risk, i guess we should not be too shocked? >> i ask that very question at the top of the interview. they were all in panic mode, i am kidding. the short answer was absolutely

no. they laid out the conditions that would precipitate a re-think of the outlook of debt for example. let's play that part of the interview. i asked directly is china's credit rating at risk. here is the answer. >> the factors that would move it are if there is some kind of increase, not in government debt, but if some of these contingent liabilities in other sectors become a real liabilities for the government. so if it really does extend its balance sheet to support the economy. i would not say we are expecting that. then we might think again. >> it comes down to numbers and 60% is an interesting number and they use it to measure government debt.

here is where it gets interesting or here is where assumptions matter. here is where potential changes to the fiscal reality matter. where do you draw the line between government debt and other types of liabilities? what is the road between that official number, let's say 60%, and where does that then become the responsibility of government or government entities to service the debt? fitch ratings said that is not the base case for them. they do not see the expansion of the balance sheet taking place. this has been the rating since 2007. the reality right now though is we have seen either our

reporting or economists have told us -- i will give you two examples. there is this debt squad that is being talked about, transforming liabilities onto the balance sheets of provincial governments through bond sales for example. that transfers the debt onto provincial governments. number two, we were speaking with bank of america a few days ago. this conversation around cash transfers or cash cook islands -- cash coupons, that is not the base case for many, but if we get to that point, they said it would cost 1000 remnant be pursed person -- revenue and be per person. it is part of the conversation right now.

the reality somewhat merits more support from the government. paul: separate to that, but related to the overall issue is the pileup of the distrust assets. what is the latest numbers on that? >> there is a really cool function on the bloomberg terminal that allows you to parse parts of the public market. about 60% right now of offshore property bonds, 116 billion is now distrust. we are down eight straight days on the high-yield index. the credit default swap's are now trading near where you would

be for triple be rated countries and nations. they are treating at levels that would suggest this is already a downgrade. does a downgrade matter? how big of a deal is a downgrade? we had the u.s. a couple weeks back. if indeed we do guess something potentially down the road on china, it would widen the spread to 15 basis points. our colleagues do not think we will get that much of a widening. short answer, not so much a big deal. paul: china's equity markets

looked set for further declines as worries mount about the countries economic recovery and its property and financial sectors. garfield reynolds joins us. is the stage in china now set for the entrance of the national team? >> that does seem to be the standard operating procedure. the question is how much sustainable oomph can they deliver, especially when david outlined for example how the debt keeps growing relative to gdp and get gdp growth is slowing and that reason is the concern that -- raises the concern. and how sustainable is it?

they might do a favor to a few people who want to get out of positions but do not want to suck up the losses at the moment. you might set up another wave of selling once you give people a more attractive exit point. we still have ongoing concerns about the property sector, about shadow banking, about the chinese economy and whether it can gain traction and whether authorities have a clue on how to manage that. short term fixes are not really working. they need more than the occasional meeting or meet and greet with foreign investors to

say we are going to play nice now. the more they show they do not have a comprehensive solution to turn around the economy that is facing so many headwinds, a lot of which were created during the big booms of the last decade or so when they allowed property investment to go to levels they did, and they also came in with measures that hurt particular sectors on the basis of this is what we need to do to make society better. kathleen: no comment. let's move on to the fed minutes. the fed has been saying for the longest time, signaling more

rate hikes, but when the minutes came out today, stocks sold off. what do you make of it? >> that is the crux of the difficulty for both bond and equity investors. they still see this as being how the fed has operated over the past 30 years. the fed is concerned about what happened 40 years ago. what happened today is not some sort of exact replication, but inflation got higher than it had any time since the 1980's and that has the fed on the alert for making sure they get inflation under control.

the concern came through strongly in the minutes. it is a contrast with china and a lot of other places around the world, singapore exports out right now, other signals that various economies are under strain because of what is going on. the u.s. economy is traveling along just fine. we have very low unemployment rates and still sticky inflation. kathleen: our chief rates correspondent for asia, garfield reynolds. there is plenty more to come on daybreak asia. bloomberg. ♪

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paul: tencent at but shares dropped almost 3% after they missed estimates. they posted first half revenue growth of 11%. it was well short of analyst estimates. let's get more from esme pau from macquarie capital. thanks for joining us.

we did see selling of adrs in the united states. what are we anticipating when we get going at the hong kong open. what sort of decline do you expect? >> in terms of tencent, i believed they were decent. i think it will be a bright spot for the capital markets. we can see several drivers ahead of us as well, especially when it comes to ai. i think the soft spot would be for gaming. at the same time, i expect more games being launched over the next two quarters and those will be key drivers. paul: let's take a closer look

at the revenue miss. we have a chart that illustrates that games fell short, but tencent saying it is a temporary phenomenon. revenue was a bright spot. do you see that trend continuing? >> yes, i do. if we look at second-quarter revenue it was up over 30% year on year. that is primarily due to two drivers. tencent is incubating in-house. we expect more upside. to quantify that opportunity, the video counts ad revenue tripled over the course of the past six months. we are on a very steady growth trajectory.

i think overall with ai and -- the trajectory will potentially moderate slightly, but that will be longer-term sustainable growth. kathleen: who are tencent's biggest competitors? how much does it vary by sector in all the various aspects of their business? >> in terms of tencent, they have the largest china internet ecosystem within the country and also globally for its gaming network. i still see the tencent ecosystem strength.

for ai being a driver and a growth modifier. kathleen: what do you think about the economic backdrop? we know china's economy is going through a difficult time. the global economy though. all of these product lines are not just about china. where do you see the headwinds? and where do you see the tailwinds? >> in terms of tencent being a conglomerate, it is very diversified and is a bit more defensive compared to other players. i would say one of tencent's largest revenue exposures will be on games and it is less

cyclical compared to other verticals. when we see consumption gradually improving, not as quickly as investors were expecting, we can see consumers potentially spending more time from purchasing luxury products into games. also on the global front, we see the covid knee-jerk negative reaction has already processed. apart from just looking a revenue growth, there is a lot of new games to be launched or has already been launched. kathleen: finish your thought. >> i would like to comment on the expansion front. the markets have been overly focused on revenue growth. tencent has done well when it

comes to same quarter margin expansion. kathleen: esme pau from macquarie capital, thank you so much. paul: let's take a quick look at bonds around the region. we have the 10 year cracking .3% for the first time since 2011. the current approach to policy balances risk to growth and inflation. he spoke to us after the reserve bank kept the rate at 5.5%. >> i would say to the markets, be confident that we have turned to watch, worry and wait to where their interest rates are now. the track is a projection, it is not us trying to provide a signal or constraint. the projection really reflects

that over recent months there have been some turn on economic activity, inflation. some pressure is stronger than what we thought, but it will come out in the watch. we have an official cash projection that deviates very little from 5.5%. we think that nicely balances the risks. kathleen: this opens the door a little wider to another rate hike if it proves to be needed. you are not trying to signal anything, but in terms of making this small shift, does it at least do that for you? if you do have to do something to bring down inflation. >> that is right.

the important thing is we never say never. we get new information, we reassess the outlook and we reassess our stance. a straight line could be read as exact forward guidance. there was always too many uncertainties we have to manage and retain that optionality. output growth could prove stronger than what we have for the next one or two quarters i had. we are very confident over the horizon that we are being restrictive with monetary policy and in a position where we could tighten or loosen as needed.

kathleen: that was the central bank governor adrian orr speaking to bloomberg. on tv you can dive into all kinds of securities, bloomberg functions and you could become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. check it out, tv . this is bloomberg. ♪

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watching i of markets markets opening in hong kong and china. china evergrande says regulators built a case related to disclosure violations. keep lenovo. some of the big names reporting earnings today. that is it for daybreak: asia. market coverage continues, standby for bloomberg markets china open. this is bloomberg. ♪

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