>> you are watching "daybreak asia," coming to you from new

york, sydney, and hong kong. >> we are counting down to asia's major market opens. paul: the top stories this hour. the dollar inching lower against major peers. earnings and central-bank policy set to take center stage. the chinese bank set to lower their prime rates on monday. beijing calling for them to boost loans to support the economic recovery. investors turning their attention to jackson hole. the fed's inflation flight far from over. vonnie: if you want to calm the bond market down, please stay at jackson hole. we have had a massive relentless selloff in the bond market and if we look at futures, it looks like it might continue this week although it is very early going and very hard to tell. the next catalyst will certainly be the fed chair's speech and all of the supply, not to market this week.

in terms of stock index futures, they look to be holding onto a small gain for the open but obviously, we are in the very early going at -- and we will see if we have another down week. it is late august so there will likely be some volume issues to deal with as well. no real movement at the moment for crude. we did have seven up weeks for crude and last week was a down week. annabelle. annabelle: looking to take those cues from the wall street session on friday because we did sell off slightly into the close so we are seeing fairly cautious trading. new zealand online to the downside. in terms of what else we are watching, it is the moves we see with the dollar strength coming through and the japanese yen holding at the 145 level. the offshore yuan above 7.3, just fractionally. we will be looking ahead to data coming out because we have got the mlf decision. loan prime rates expected to be

reduced by 15 basis points following moves by the pboc last week but certainly a lot of concerns around china's economy. those concerns are starting to hit broader sentiment and there is also that realization that the fed perhaps, there are more hikes to come. inflation is still at risk of becoming further entrenched so that is setting the stage for further risk-off trading. globally, when you take a look at stocks, we had the worst week since march in the prior week so not a great starting point especially when you other factors like seasonality's -- you add other factors like seasonality. paul: china has renewed its push to get banks to offer more learns. officials urging lenders to make adjustments to policies for home mortgages. john joins us now. what are the details of the plan? >> regulators, including the

central bank governor, called ian executives from banks, insurance companies, from the stock exchanges into a teleconference on friday. they did not announce this meeting until sunday and in that announcement, they outlined that they asked those banks to lend more to the economy to support the real economy by financing more activity and they also asked those banks in a contradictory way -- suggesting how difficult a task to have in front of them, they asked those banks to reduce risks and this comes after new loans in july were out of 14----- were at a 14 month low. there is the loan demand out in the economy to get this growth going back to a sustainable level again. annabelle: it is a multipronged approach, it would seem. we are anticipating after last week's supply cut that we will see a mirror cut from the one year and five year lpr later today. is that going to happen? john: as you say, the central

bank did cut its mlf rate last week. are expecting a cut to the lpr this week today when it is announced this morning with the issues that we have had in the property market, with the issues with trust companies. i think there is a lot that the authorities wants to do to try to stabilize this economy. i think we will see that show up this morning with the lpr. vonnie: thank you very much. investors eyes will turn to jackson hole, wyoming, later this week, where fed chair jay powell will speak. kathleen hays is here and since she will be there, kathleen, he will speak. it is not always a given, but he is going to this year. kathleen: it is not a given that he will say anything important to markets if they have a big move after he gives this speech but let's put it in perspective because it is a three-day symposium sponsored by the federal reserve bank of kansas city.

we see the famous walk, jay powell, john williams, new york fed president, and the former president of the kansas city fed, esther george, walking by reporters and video teams so they can get this famous picture. thursday night, that is u.s. thursday, a dinner, a reception. friday morning, opening the reception -- the symposium. powell speaks and he can say anything. he will welcome everybody. he can talk about the economy. frequently, the fed chair does that. ever since this conference started in 1978 by the kansas city fed, it was an agricultural kind of conference and then it was morphing into a broader monetary policy conference and they could not get paul to attend, the former fed chair, so they decided to move their conference. it was in the greater kansas city area, to jackson hole, the beautiful jackson lake lodge in the shadow of the tetons and famous for flyfishing and that

was the first year that paul finally attended with his buddy, the former president of the new york fed, jerry corgan. meanwhile, it has grown in its stature, it has grown in scope. dozens of central bankers attend in addition to all the fed officials, fed presidents, governors, etc. many top economists from the u.s. at one point, they started making that speech that was given on friday morning. not just a welcome and here is how is everything -- here is how everything is looking. a signal that does not have to be absolutely spelled out but something the markets can easily understand. he is one of the notable examples of this back in 2010. that was still in the throes of the great financial crisis. he gave his speech and talked about what the fed could do in order to do more easing and at the top of his list was further bond purchases. this opened the door to qe2. initially, people may be thought there was -- it was quantitative

easing. they did not realize there was going to be two more rounds. at any rate, that is why everybody was wondering what will powell focus on? what kind of signals will he send? paul: i guess that is the question, the history of the speech suggests we are going to get something out of it. what questions are investors hoping to get answered by chair powell? kathleen: they are hoping for, maybe not unduly expected, something in that specific realm, not just broadly about how monetary policy operates or what their tools are, but something more about what is going to happen next. unprecedented rate hikes, the economy still holding up quite nicely. so will powell been signal, you know, we -- then signal we have to do more? the labor market is still too strong? that would be hawkish speech he could give. will he focus more on we have had so many rate hikes and they can work with a lab. we need time to see how they are

working out. we can tighten further, but put it in the middle ground. maybe they are looking to cut rates. there have been a couple fed officials who sat next year, if inflation is falling, than they could think about cutting rates. these are the forecasts that fed had earlier in the year for 2023 and so far, unemployment is still lower. in other words, labor market is hotter. real gdp is growing much faster. look at these two main inflation numbers. they are pretty much above that. you can see that -- mostly, it's not going to be so much about forecast potentially. it's going to be about the strength of the economy, the height of inflation, and what that means for coming up in the next moves. paul: global economics and policy editor kathleen hays.

still to come, we are going to take a closer look at japan's archaic gaming sector with an amusement company. up next, we preview asia's big economic data which releases this week with natixis. this is bloomberg. ♪

paul: here is a look at the week

ahead. on monday, china's central banks are expected to cut their one and five year loan prime rates. we are watching for second quarter gdp figures coming from thailand. wednesday, the latest reading on europe's economic recovery with flash pmi's from france, germany, the euro zone, and the u.k.. the pressure on the euro area economy with services activity moderating in july. central bank of south korea, indonesia, sri lanka, and turkey all going to announce rate decisions on thursday. bloomberg economists are expecting a hawkish hold by the bank of korea as the region deals with the threat of another inflation flareup. other economic data to know, cpi prints from singapore and tokyo and ppi numbers from south korea and japan. later on this week, investors will be watching for any clues on the fed's policy plans and

fed chair powell's speech at jackson hole. other central bank's from around the world will be there, too. markets will be looking for any shifts in their approach to tackling economic challenges including inflation. vonnie. vonnie: joining us now is the chief asia-pacific economist at natixis. asia is obviously front and center along with jackson hole this week after the gathering storm of china clouds. the latest being that there may have been pressure put on banks to loan out more and to do things with mortgage rates in order to incentivize -- you can incentivize people but will they borrow and will it be enough to gin up gdp? alicia: indeed. of course the rate cuts are going to come on loan rates because they are following the mlf and that is not news. the news is whether there's going to be demand for that

cheaper borrowing. that is where i believe we are slowly but steadily getting into liquidity trap in china. there is no demand for borrowing and the cuts will not be enough to create that demand. we need to see some structural news here. so i don't think the market will react very positively to the cuts that we are expecting today. vonnie: surely, officials can see that coming. liquidity traps have certain signs to them. if that is what is going to happen here, i'm sure there is some way they can avoid that. why choose that path? alicia: well, the cuts are necessary in the sense that that is the most immediate signal that china can do. on the fiscal front, it is so much harder. a public that has already reached 100% of gdp. so for them to make space for some fiscal stimulus, it might be on the consumption front. they need to cut elsewhere. they need to cut subsidies which

they are not doing especially on ev's. so they don't have that room. cuts are easy because interest rates are still high compared to where the west or japan for that matter went all the way to qe. that space is what determines this cutting cycle that we have already started, but that does not mean it will be the solution. annabelle: -- paul: traditionally, in moments like this, when we see a lot of selling on equities markets as well, the national team often arrives to put a floor onto things. do you anticipate that happening this time or is it a bit pointless? would that just provide a more attractive exit point for people looking to get out of these markets? alicia: well, we have seen periods -- we need to remember 2015, early 2016 when china announced a stimulus on the sidelines of the g20 at the time -- we had the national team.

we even had a kind of preannouncement -- it was 3000. so that is something that we tend to see and i don't think this time will be different. i actually think it has already happened and it will continue to happen. the floor will be there in my view. paul: i just want to pivot to japan if we can because we are expecting tokyo's cpi numbers out a little bit later on and inflation in japan continuing to be outside the target band. the consensus is that inflation is not enduring in japan. would you agree with that? alicia: yes, i would. for the time being. it is changing. i think ppi is going to come down around 3% inflation -- sorry -- cpi, 3%, coming down a little bit. the thing is, even if it comes

down, that persistence of that level above target to me is already a signal that it is coming thanks to wage increases. the problem is that wage increases in japan are very asymmetric. you look at small and, mediate -- small and medium enterprises. what japan is going to face is more of a segmented inflation which means a big chunk of the economy is not productive enough to have stricter monetary conditions, basically moving out of negative rates actually at the end of the curve. the other part of the economy is getting much more productive. bigger firms need to look at their results. which could cope with that. that segmentation of the economy is what the central bank and the boj will have a hard time dealing with. vonnie: how does the boj continue with its wheeled curve control policy? when do we hear more about it? how concerned is it about the

yen right now? alicia: well, i'm sure the boj is concerned about the yen. as we see slightly less cpi -- it increases slightly less. it was feeding that inflation, eating up on households, disposable income. i would say that a little bit less than before. knowing that this is a problem they need to deal with, they started dealing with it. we all fear that move away from 0.5 at the boj 10 year yield. they are starting to move in a reasonable way. quite impressed by the fact that it is not long. which we all feared. i would say to end that, is not going to go to three or five. that yield curve -- that 10 year yield for japan cannot go beyond

1.5. the market knows that. i think so far, it will be slow but steady -- steadily getting to a rate around 1.5, at most may be an overshoot at 2%. paul: i just want to get your thoughts on one of the big central-bank decisions this week, the bank of korea. we are expecting to see a hawkish hold there. do you see inflation regaining traction in korea or on the other hand, one of its biggest trading partners, china, is in deflation. how finally balanced is this a decision? alicia: well, you know, if i were the bank of korea, i would think twice before they hike again because the level of inflation is actually not so high compared to where we are globally. number two, we thought we would have kind of an improvement in the semiconductor cycle in the second half of 2023. we are not there.

we have our own index of pressures in the stock -- in the stoppage of semiconductors in the world. it is actually increasing. the oversupply is increasing, not decreasing. so for korea, the second half of the year export wise will not be any better, plus china. they need to be very careful with a move this week. paul: all right. alicia garcia herrero, chief asia-pacific economist at natixis. you can get a roundup of 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 -- that you are interested in. this is bloomberg. ♪

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paul: some political stories around the world that we are watching. china's ambassador to south africa expects this week's brix summit to provide an avenue for dialogue between beijing and -- brics summit to provide an avenue for dialogue. he expects direct talks to happen on the sidelines of the event. china and india are locked in their worst territorial dispute in four decades after a deadly clash in 2020. bloomberg has learned in the kremlin pressured russian central bank to raise rates to stabilize the currency. sources say it is part of efforts to tame inflation as vladimir putin prepares to secure a fifth term in next year's elections. the government is also said to be working on a three-year budget that will offer an additional stimulus as a pre-election sweetener. guatemalans voted in a presidential election on sunday after a campaign marred by u.s. criticism and raids on the

electoral authority. anticorruption campaigner bernardo lead polls into the vote despite repeated attempts to disqualify his party. he faces the former first lady who campaigned on boosting welfare spending for the poor. vonnie. vonnie: ecuadorians are voting in presidential election -- one candidate was actually murdered during this campaign. bring us up-to-date. are we going to see a runoff for the eight candidates? stephan: it is looking that way. there are two exit polls that produce data and the data was confirmed later on.

we will confirm that polls protected a runoff. and the businessman is the son of a tycoon who himself ran for president a number of times in the past. paul: whoever winds this runoff is not going to have a tremendous amount of time to address ecuador's problems including the deteriorating security situation. is there any bipartisan appetite to get on top of that problem? stephan: there has been some movement amongst the presidential candidates to back the eventual winner. several candidates said they had

to find some sort of national unity to be able to address the national assembly which is being elected today in order to get greater political stability. the incoming administration -- they're pressing problem. >> it is becoming a narco state in many ways. is there a candidate more preferable to the climb element and do you anticipate violence between now and the runoffs as well? stephan: it would be odd. there would not be any further violence considering it has affected all of the parties. they experienced some sort of violence. every candidate has said they are going to be tough on crime. one can see campaigns with more

experienced races -- the number one person on the list. that is the former interior minister. the question is having a very brief period, only 18 months, until the next election. [indiscernible] -- to actually be able to tackle this problem. paul: all right. plenty more to come on "daybreak asia." wow, you get to watch all your favorite stuff. it's to die for. and it's all right here. streaming was never this easy, you know. this is the way. you really went all out didn't you? um, it's called commitment. could you turn down the volume? here, you can try.

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and take advantage of it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. we have been able to reach over 100 million people impacted and affected, and at risk of hiv. the rocket fund takes all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. pres. biden: i will just say this. this summit was not about china. it was not the purpose of the meeting, but china came up. not to say we don't share

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maryland, which is a very important venue for some of the most important u.s. diplomatic events in the past, and the major deliverables would be that president biden announced plans for annual leader level summits with south korea and japan and south korean -- the south korean president has followed up saying he is looking forward to the next trilateral summit in korea next year and the leaders also established a trilateral hotline where they can share intelligence and hold annual defense exercise which is also a key and very milestones event for these three countries, specially provided. all of his predecessors have been working to have japan and south korea work together on security issues. it was very difficult for them. it is a milestone and landmark summit, we would call it, for biden and the two allies. paul: over the weekend, we did

have a story about north korean hackers targeting u.s.-south korean joint military drills. what more do we know about that? sangmi: that's right. a north korean hacker group, they have been sending emails from last year to a company that is involved in joint military drills and they were able to obtain an account of one of the employees of the company. they were sending out emails to obtain more of that sensitive information, but there was no indication that they got any sensitive material but it is just one of those signs where north korea has this army of hackers and for years, they have been conducting cybercrimes to procure funding for the weapons program that they have. and we know from a lab that they have taken in about $200 million in crypto theft so far this year. that is 1/5 of the entire crypto

heist from 2023 alone, so this is an ongoing campaign that north korea has. this comes exactly right before the 11 day joint military drills between south korea and the u.s. . freedom shield which involves computer simulations an actual field trainings as well as civilian defense practices. paul: sangmi cha, thanks for joining us. let's get over to annabelle now. we are half an hour away from the opening of trade in sydney and tokyo and seoul. what are you watching? annabelle: charting the different prospects we are seeing because futures in singapore just coming online for the nikkei here and you can see them looking fractionally firmer ahead of the opens, as you say. tokyo, seoul, and sydney. the picture today is one of caution throughout the session

because we are seeing futures here. he restocks down to the downside. range bound -- kiwi restocks to the downside. we will get the loan prime rates coming up for the five-year rate and those are expected to be reduced by 15 basis points. more measures coming through, more rhetoric from chinese officials to try and boost the economy. the other is jackson hole. we have the annual gathering of central bankers taking place in wyoming toward the end of the week. a lot of focus on what is going to come out of jay powell whenh. given that we just had the fomc minutes last week telling us that a risk to inflation is still tilted to the downside. essentially what it tells us is that we could see the need for further rate hikes and also the question of how long the rates are going to stay elevated for. so any clues as to what can come

out of that will be watched very closely but in terms of the market reaction, what we actually do typically, this chart looking at the one week return for the s&p 500 after the fed chair speak and you couldn't see going back to the year 2000, the vast majority of cases, the s&p 500 has continued to rise to that is sort of a bullish indicator toward the end of the week, paul. paul: thanks. they are seeing a modest increase in customer stress while inflationary pressures are causing expenses to rise off the extremely in -- off the australian lender. let's bring in adam haigh. what do you know about these inflationary pressures and how they are affecting westpac? adam: this is impacting staff costs. the pressure they are seeing in the labor market just means they are having to continue to lift staff costs, increasingly having to pay their staff more so that is one element really of what we are learning here but really, the broader westech story here is not just the way that

inflation is impacting the business but the impact on inflation generally across the economy and of course, it is creating quite a lot of extra stress for borrowers, but at the moment, that seems to be relatively contained and westpac were very clear that although the mortgage delinquency rates are ticking up slowly, they are at a low level. we are not in a situation where banks are seeing a big uptick in consumers struggling to pay back their home loans, but of course, as we go into the back half of this year, the rest of those fixed rate loans that people signed up to during the pandemic will rolloff onto the much higher variable rates because rates have gone up so much in the last 12 months. there is still an application that that will continue to tick up from here. for westpac, this is a story about margins, a really competitive environment still in the home loan market and housing market. and as that goes through to the maybe one or two more rba rate

hikes, it continues to be a lot of pressure on business. vonnie: exactly. severe margin pressure. what happens next? what is the outlook from here? adam: in a sense, a lot of the margin pressure is already baked into the stock prices have not just westpac but the broader big four banks in australia. it has been pretty widely flagged that we are already over the peak of where margins are going to be and it is a question of how much they get constrained from here, really, going into a potential more tricky outlook for the economy into next year. especially if the rba gets into a situation where they will have to start cutting interest rates. clearly, the move from here is more around who is better positioned of the big four to continue to either take market share in home loans away from the biggest lender and/or look to other business ventures to find growth in an increasingly difficult and fairly fragile

economic environment where it is getting harder and harder to find growth. paul: all right. adam haigh watching westpac. another stock we are going to be watching in the energy sector is australia's woodside, the company facing labor issues of course. workers at one of its key facilities saying they are going to strike if they cannot reach an agreement by wednesday. the offshore alliance, a group representing two major labor unions, says in a social media posted that workers have unanimously endorsed giving woodside seven working days to take action. unions have been locked in discussions over demands around pay and other conditions. the company also releases earnings on tuesday and we will be discussing that as well as the strike threat with the ceo, meg o'neill. that interview coming up just after midday tomorrow in hong kong. up next, we are going to take a closer look at japan's arcade gaming sector with the amusement company. our interview with the

president, coming up in a moment. this is bloomberg. ♪

vonnie: it is time for japan ahead on "daybreak asia." japan markets will open up at the top of the next hour. we saw a little bit of strengthening and the yen on thursday and friday which would have relieved members of the

bank of japan no doubt and the ministry of finance officials as well watching that very closely. we'll see what happens this week, and then we have nikkei futures pointed to two -- pointed to a higher open. as you can see, there's also some other assets that are pointed to a higher open as well including lng, for example. we may get word of a strike action by wednesday and that could sound global lng prices a little bit higher. new zealand's nzd down about .7% so that looks to be a more difficult open and of course the australian dollar is 64.09. we have a bank of korea decision. paul: our next guest is a former goldman sachs director who founded a japanese arcade operator. the company went public in july at a valuation of $484 million and now operates 250 one arcades

in japan and five overseas. joining us from tokyo now is the president, mai shin. thank you so much for joining sp or when i think of arcades, i think that is very much a late 20th century phenomenon. how are you competing with online and council gaming -- c onsole gaming? mai: thank you for having me today. genda has grown through m&a in the amusement industry over the past five years since the establishment. m&a is what we want to do to further expand our business. amusement arcade business in japan is growing at a rate of about 5% and top five players only consist of 40% of the market and it is still fragmented. so there are opportunities for us to aggregate small players to create into a bigger platform.

paul: you also noted that sales of prize-winning games, the crane type games, are increasing as well. what is driving this? how do you attract people to the arcade? mai: um, on the background, there is a huge, huge uptick in the popularity of anime, japanese anime. and there's so many new customers coming into our stores to get the prize of their favorite anime characters. vonnie: what is the outlook for growth? are you anticipating more acquisitions? are there decent things to acquire out there? mai: um, actually, there are no other players actively engaged in this amusement arcade industry, and there are many players who were founded in the 1970's and are facing the timing

of business acquisition, so i have high expectations for m&a for the small players. vonnie: so you're saying that you might be interested in acquiring some of those? or that they will cannibalize each other? mai: we want to acquire these small players to aggregate them into bigger platforms. paul: so you are working on any new games and ideas? what sort of expansion plans do you have outside of japan? mai: outside of japan, we are currently operating in mainland china, taiwan, and the united states. in particular, the united states has a large, wide space for a newsman arcades, so we want to focus on the united states in the near future.

paul: -- vonnie: how is yen weakness impacting your business right now, mai? mai: sorry, what? vonnie: what we are seeing in the yen, how is it impacting your business? is it helping or hurting? mai: it is mixed, but we have so many -- to japan. we expect a positive side of weakening yen. paul: mai, before we let you go, i just want to ask you, what change do you feel japan needs the most right now? mai: as a society? paul: at a countrywide level, what change would you like to see? mai: we have opened our country

to travelers and we have -- we don't have enough accommodation for them. so there is huge growth capacity for them. so we want to invest in that area. as a society, i think. vonnie: all right. thank you so much. such a pleasure to have you speak with us. that is mai shin, representative director and president at genda. i want to bring you an alert. the wall street journal is reporting that bill has upped their bid for sculptor capital, the hedge fund, to more than $12 a share. the wind stream -- the weinstein group is funding this from personal money and not firms,

according to reporting that is coming out from the wall street journal right now. that group raising their bid for sculptor to more than $12 a share. watch us live and see our past interviews on tv . you can also dive into any of the securities or bloomberg functions we talk about plus become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪

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paul: the cofounder of investment management firm gmo says the fed's hope for a soft landing is almost guaranteed to be wrong. jeremy grantham told us why he things the slow-moving influence of rising interest rates is going to lead to a recession. jeremy: deflationary forces from the tech stocks breaking in 2021, probably too big. the power of interest rates rising and depressing the real estate market, very negative, slow-moving influence. i expect they will once again dominate and we will have a recession running perhaps deep into next year. and a company with the decline in stock prices.

>> the recession is probably not going to happen in 2023. germany: it may start in 2023. >> the federal -- jeremy: it may start in 2023. >> that are really project a recession any longer. do you disagree with the fed on that? jeremy: the fed's record on these things is wonderful, almost guaranteed to be wrong. they have never called the recession, particularly not the ones following the great bubbles. they prided themselves in stimulating the bubbles. they took credit for the beneficial effect of higher asset prices on the economy. they have never claimed credit for the deflationary effect of asset prices breaking. and they always do. >> now, you have said not too long ago that you are not a big fan of jay powell and the way he has been handling inflation. is that correct? jeremy: yes, that is correct. >> do you think he has done a better job recently and getting things under control?

jeremy: it is largely out of his hands. the forces work. i suspect inflation will never be as low as it averaged for the last 10 years. we have reentered a period of moderately higher inflation and therefore moderately higher interest rates. in the end, life is simple. low rates push up asset prices. higher rates push asset prices down. vonnie: and you can see that full interview with gmo cofounder jeremy grantham on bloomberg wealth with david rubenstein. that is coming up on september 5 on bloomberg television. let's get a check now in u.s. futures. of course, it is a big week in the united states with jackson hole coming at the end of the weekend we are seeing futures pointing a little higher right now. we are in the very early hours. of course, it is a huge recession and it has been three down weeks for stocks so let's see if we can make back some of that ground in what is sure to be very much of a lower volume type week, it being the end of

august and so on. we are also monitoring some severe weather stories as well. president biden planning to visit hawaii on monday to see the destruction caused by recent wildfires. authorities say the trip aims to provide a sense of hope and assurance that the state has the federal government to support. the hawaii governor has said authorities are still investigating what started the deadly fires. fema says growing extreme weather risks mean president biden's expected request for billions in disaster relief funding may not be enough for next year. according to fema, biden's $12 billion quest would only cover until the end of september. the president intends to submit a fund -- supplemental request to congress. british columbia has declared a state of emergency as good breaking wildfires head for key population centers. officials in the canadian province have placed about 15,000 people on your evacuation orders. tens of thousands more are under other it possible evacuation.

asked week, the entire population of the northwest territories's capital was told to leave due to fires. paul: these are the stocks we are going to be watching when trade opens in korea, japan, and australia shortly. defense shares in focus. the u.s. announced it will launch annual military exercises with south korea and japan, taking their trilateral defense cooperation to unprecedented levels. machinery stock as well after shares slipped on friday, on slumping crop prices and demand concerns. australia's woodside energy and its peers, workers at one of australia's key lng facilities say they will take strike action if they cannot reach an agreement with woodside energy by wednesday. of course, we will have woodside earnings out this week along with a number of other big names as well. about a quarter of the asx earning this week, releasing results this week. as we look ahead to the open here in australia, in about five

minutes time, a little bit of weakness. futures off by .2% right now, perhaps not unexpected after we saw a soft close in u.s. markets towards the end of last week. elsewhere, nikkei futures very modestly in positive territory, better by .25% right now. we had new zealand trading now, coming onto a couple of hours time. if we take a look at how we are doing on the nzx at the moment, we are a little bit softer there as well. he restocks off to the tune of about .7% right now, so the selling seems to be worsening there. aussie dollar at the moment, .64 against the greenback. it will be a big week for central banks as well. the bank of korea among those out with a rate decision. we are expecting to have a hawkish hold on the bok at 3.5% as inflation pressures threaten

to have a bit of a resurgence there. kospi futures meanwhile also a little bit softer ahead of the open at the top of the hour. keeing a -- keeping an eye on the n. market opens coming up next. sydney, seoul, and tokyo, about to get the trading week underway. this is bloomberg. ♪

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>> this is "daybreak asia." we are counting you down to

asia's major market opens. of course, it is jackson hole week and that will be one of the features of trading this week. what happens with the yields as high as they are in the united states and globally. but of course, the other is what happens with china in the next several sessions. do we get more news, more detailed news, and do we get lpr cuts? paul: a number of things we are watching for out of china including is going to be a bit easier to get a loan there. a big week in australia as well. a quarter of the asx reporting and a potential strike at woodside which could make life interesting on energy markets, annabelle. annabelle: that's right. quite a lot for investors to be getting through as we kick off another trading week after we have seen the biggest slump for global stocks since march in the week prior but the open for japan to mess south korea, and australia in the start of trading for cash treasuries -- this week, the focus very much looking ahead to what we get around inflation. and what we get out of jay powell when he speaks at jackson

hole later this week. are we going to be hearing this chorus that inflation pressures are contained or will it be -- the risk to inflation tilted to the upside? we could be to stay higher for longer. so that sets the agenda for the week coming into it but broadly in the session, we are also watching for other signs of price pressures and inflation becoming entrenched in japan. you're getting a bit of a response to that as well because we understand that a level has been proposed -- japan is going to be raising the minimum hourly wage to an average just over seven dollars an hour so that is the biggest increase since records of wage rises began in 1978 so that is the state of play for japan has become into the trading session. the nikkei 225 just fractionally higher and we are continuing to see weakness in the japanese yen above the 145 level. let's see what's happening in korea at the start of trade because we just had breaking data coming out at the top of the hour and it does relate to

the exports and imports data for the first 20 days of the month. exports, we saw a slump of more than what had been forecast with a drop of 16.5%. the estimate had been for a reduction or contraction of 15.2% but looking at the numbers in more detail, you can see exports to china really are down here around 27.5%. chip exports off nearly 25% in the first 20 days of the month. certainly tells us just how much of a deteriorating outlook there is for the chinese economy. those weakening demands that we are continuing to see, what sort of impact that is having on south korea's biggest industry, the chipmaking sector. imports as well, we saw a decline of 27.9 percent. and the trade deficit coming in at 3.56 billion dollars, so that is the state of play for korea. we do see the kospi here just a little bit higher as we get trading underway and we are continuing to see that weakness in the korean won she is trading around its weakest levels since

november -- which is trading around its weakest levels since november of last year. we also have the open for australia. there's a couple of stocks we will be noting at the open, staggered start, so not seen trading quite yet for woodside. as you said, paul, we have -- the commodity producer. they are prepared to take strike action if their demands are not met later this week. and then the other stock in focus, we had a trading update from westpac and they are seeing a bit of an increase in stress among consumers. inflationary pressures are also starting to cause expenses to rise, paul, at the aussie lender, so we are watching westpac when it starts trading in another five or six minutes from now. paul: thanks. let's get over to our global cio at a financial services company. i want to look ahead to one of the big macro instances it a lot of central bankers will be there at jackson hole and this is a

bit of a contrarian view. you admit yourself that few are worried about recession risks. do you feel the fed might have overdone it? isaac: there is a really good chance they have overhyped, and on top of that, there is a real chance that they overstayed their welcome with rates at the current levels. it really seems increasingly obvious that the economy is slowing. inflation is really collapsing in the u.s. we are seeing revisions to the labor market data that looks strong that now do not look so resilient, so really right now, i think the fed is probably at the end of their rate hikes. no more to come but they are probably already gone too far. paul: i know that you like short duration treasuries, but also on the same hand, if you think the fed is done, how long do you expect the u.s. dollar to remain so strong? isaac: i think we could see the dollar continue to maintain its

strength and even add a little bit. there's a couple of reasons for that. one is that rates are elevated at the short end of the curve and that is pretty attractive just on the rate perspective. but the fed has got this a desire to hold them out there for a long time and i think those rate differentials might just start to play out and put a little bit more upward pressure on the u.s. dollar. but more importantly than that, if we do see a recession, if we do see the economy begin to turn, you will see massive safe haven flows coming back into u.s. treasuries. i think that will put significant upward pressure on the u.s. dollar. it is the risk currencies that are going to get belted. the aussie dollar could fall further. the canadian dollar could fall further. some real opportunity for upside strength to the u.s. dollar over the next nine months or so we think. vonnie: your call was a bold one, shared by many, including bob michele of jp morgan. plenty forecasting recession and saying it might be a good time

to buy bonds but you would have been badly bruised if you have done that up until now so what starts to reverse that? isaac: i mean, that's right. that long end of the curve is where the pain has been and that push from 4% up to 4.25% has been painful. but from here, we have now got real yields at levels that are just really painful for the real economy come up around the tens. that is going to impart some genuine pain on economic growth. the fed will acknowledge that overcoming month speed we will see that the rate hike cycle is entered and that will begin to be a catalyst for euros to well and truly top out and start to move lower and what we will see over that -- those next few months is the beginning of -- and the 10 year rallying, perhaps underperforming. what you have is this real opportunity to make significant

returns for the treasury market. vonnie: so i was also reading earlier about the fact that -- and it is quite clear for the markets -- that when equities rise, bonds rise, and vice versa. we have seen three weeks of equity declines, so what happens to the equities universe? isaac: could be in for some further pain. volatility for sure is going to be a hallmark over the coming months because we will have -- we are at an inflection point potentially in the yield market. and that will cause some volatility in equities and we are starting to see the start of that over the next couple of weeks and particularly a bit of an unwind which will be the real leaders this year that the backup in real yields in particular has been a pressure on those over the last few weeks but if we look forward -- if the fed has got rates to very restrictive levels and they say that for a long period of time,

you are going to see genuine economic pain. and that is going to be difficult for earnings over the next six months. that is going to be difficult for investors to digest and it leaves some real downside for the equity markets. and it is perhaps a good time to reflect after some significant gains and consider moving to a more underweight position. paul: what is your cash allocation at the moment, isaac? isaac: we have been adding a little bit of cash recently, but not massively overweight because you can push out a little further into bills. you can push out to the one you're part of the curve come out of the 22-year and three-year part of the curve. and while there has been a little bit of pain, there is real downside protection. so yes, it's then appropriate to add a little bit of cash, but moving out the curv just a little bite is additive for

investors right now. vonnie: just getting a line in from ubs cutting its 2023 china gdp growth forecast to 4.8% from 5.2%, so that is a .4% drop in ubs's forecasts for china's 2023 growth. yet another house that has china growth below the target of 5%. what can china achieve this year given that we are seeing crises that we were not even sure where there, like the shadow banking crisis? isaac: there's been some risks uncovered in china's economy. as you say. and that is putting downside risk that they can achieve their 5% growth target. that said, it is not the end yet and we are seeing willingness on behalf of china's authorities to cut rates. we are seeing monetary policy action. the next steps, we think, over the coming weeks, will be fiscal support. that may not be -- that doesn't seem a bridge that chinese

authorities are willing to cross yet. but we could see other fiscal support really helping to boost consumer spending. and that does mean that the 5% is attainable. and if it is not achieved, as ubs has said, perhaps it falls in just a little below. from here, we will see action really begin to pick up because there is still time to hit that growth target and carry a little bit of momentum into 2024, particularly if the rest of the world is slowing at that time. paul: i would just like to dangle a little bit of bait for you here. we have a chart on the bloomberg terminal showing china banks trading at one third book value. tempting? isaac: [laughter] i think if you have got the right risk tolerance, perhaps you might dabble in there. but more generally, chinese -- the chinese equity market has suffered. we saw underperformance again. that doesn't mean you want to be loading up right now. but china's authorities are

gearing up to do more action, right at the time where the rest of the world is slowing. we think the u.s. in particular is slowing. so this is probably not the time to be selling out of all of your asian positions in china in particular, the perhaps called on -- but perhaps hold on because there could be positioning with the policy action coming through. vonnie: you are extremely optimistic. maybe we will get something on that in the next hour or so. isaac poole, global cio. thank you. optimistic, obviously, on china. not so optimistic on recession calls in the united states, but all of that is playing into markets this week. annabelle: that's right, and you can see just 10 minutes into the session now for tokyo, seoul, and sydney, and so far, the broader index is sitting flat which just tells you that there is perhaps a level of uncertainty in the investor psyche as we get trading underway. trading volume is also very thin. the tokyo stocks index around

25% less than where it would be on the 20 day moving average, so certainly, investors perhaps a little bit wait and see. in terms of what we are watching, we have a couple of movers to note in australia because we just had the net profit for westpac coming in. it was $1.2 billion, the company says, for a third quarter, but it is seeing a modest increase in customer stress coming through. inflationary pressures are starting to cause inflation to rise. a2 milk is another one. that is the wellington listed milk producer but we saw earnings essentially coming in line with estimates. but we are still seeing the stock under pressure. given the outlook that it had for china, it is saying that the market is becoming more challenging. in terms of other movers, we saw bluescope steel reporting a profit mace for the four year, even though that stock is just marginally higher. and woodside energy and focus, not on earnings, but we did have lng workers at the plant or

facilities in australia saying that they are going to be taking strike action later this week if they cannot reach an agreement with woodside by wednesday, so we have seen that real escalation building around pay and conditions. that stock still a little bit higher. that's change on. other movers and focus so we are taking a look at some of these equipment makers as well. defensive stocks in asia, given that we saw china carrying out more drills around taiwan over the weekend, and it says that this is essentially a response or stern warning. that is what beijing says, to the island's independence. that's the words from china. we are seeing a mixed reaction from defense stocks. we do have the machinery and equipment makers in focus as i said and that is after we saw them listing profit -- lifting profit outlook on friday. also third-quarter earnings surpassing analyst estimates, but essentially, farmers are a little bit likely to slow

purchases as soon as grain market prices start to normalize. keeping an eye on those. you can see the slump we had in deere, not really translating to the machinery stocks here. paul: still to come, china's property market is continuing in freefall. or on the country's housing sector crisis, coming up later in the hour. chinese banks set to lower their loan prime rates by 15 basis point later on monday following the pboc's lead. we will have a preview, next. this is bloomberg. ♪

>> china has renewed its push to get banks to offer more loans. officials are also urging lenders to make adjustments to policies for home mortgages. for more, greater china senior executive editor john liu joins us now. why this push to push people to borrow when companies clearly don't want to spend and houses don't want second homes at this point? is this a wise strategy? john: well, the authorities need to get lending and credit going again if they want economic growth to rebound to the level

that they see sustainable. obviously, we have this 5% growth target for 2023. you had the news earlier, ubs is the latest bank to cut its estimate below that target. so when we get bank lending at low -- at a 14 year low in july, you would see why authorities feel they need to do more to try and get that credit going, to try and get the economy back on its feet. paul: we are expecting 15 basis point cuts to both -- the five loan prime rates. to vonnie's point, is this the right medicine for the symptoms? john: i think the metaphor is if the house is on fire, you got to put the fire out first before you think about anything else. and obviously, with the situation in property, with this big trust company not being able to pay dozens of its products, people out in the street protesting in beijing -- not a

big protest, but still, a very rare occurrence. there is a lot of pressure on authorities to do something and do something quickly and that is why we saw the surprise cut in the mlf asked week and why everybody is expecting the lpr to be cut as well this morning. vonnie: how serious is this shadow banking crisis going to get question are how widespread will it be? we don't know all that much -- get? how widespread will it be? john: a lot of the trust companies raise money, offering relatively high returns. they have to earn more themselves so they put a lot of that cash to work with the real estate developers. if those developers are not able to pay their bets, not able to pay their loans back, we will see more trust companies run into trouble. vonnie: -- paul: we just had a story that the bloomberg big take released a few seconds ago, talks about xi jinping not really pulling all the levers he could. why the reticence to do more?

john: the number one reason is there is a lot of debt in this economy already. over the last 20 years, a lot of the growth that china has seen, the unprecedented boom in terms of infrastructure, construction, that has all come on the back of a lot of lending, bond sales, debt that is piled up at the local level, and now, with the economy performing less than expected, not as well as we thought it would after covid zero ended, adding on more debt -- it looks like she's in p and his team is thinking it is better for the long-term health of the economy that we avoid that and try to get growth going in some other way. paul: bloomberg's greater china senior executive editor, john liu in shanghai. chinese assets have been under tremendous pressure and to get us set up for the new trading week, our coanchor, david

ingles, is with us. what is your starting point this monday? david: thaad to that very briefly, our starting point is november of 2022. we had a horrible week for most benchmarks in china. the second worst week in most cases. we are in a three-week skid. on price, we simply retraced all the gains of this year. we are very close on the shanghai composite. msci china is the next one retracting 58.05. we are 2% away. below that, we are back to also levels of november last year and i think what this simply shows you is for one, you guys have talked about sentiment. -- sentiment remaining wanting, if you will. the money that went into this market during the brief rally post politburo was simply the fast money. unconvinced of what they heard so far from authorities or what we have seen so far from the data, guys. vonnie: obviously, there's the

loan prime rates. are there any other specific companies or potential news to track today? david: the developers, as we tracked them anyway for obvious reasons, given the weakness in the sector, country garden really or so because it got removed from the index, the hang seng index. that is one stock to watch. i mentioned a developer coming out with a profit at 16 to 15 billion renminbi was the loss that they flanked. x, came out with earn -- xcomm came out with an earnings miss so we are watching that closely. 4.3% was the drop on friday. vonnie: you have had three down weeks for china tech but we do get some major tech earnings this week. can you give us a quick update on them and the earnings season in general? anything standing out to you? david: on tech itself, that so far has been really one of the

bright spots. we have several more names coming out. we are pointing to several days where we have the banks coming out with earnings as well. provisions will be key because it gives you and indication of their expectations of how much bad debt they might take on those books moving forward. so far, it has been almost split right in the middle. what is interesting is, to your point, the market has not reacted very well to earnings, not that they were -- that there were a lot of positive learning surprises to begin with -- earning surprises to begin with. nine out of the 12 have seen a drop in the stock price one day after those companies released their earnings so we will see what happens today. back to you guys. paul: david ingles there. as we mentioned just a moment ago, today's big take is out in the last hour, takes a deep dive into china's economic challenges and why president xi jinping is

steering clear of big stimulus despite the risk of deflation. subscribers can read that story on the terminal and at bloomberg.com. plenty more ahead. stay with us. ♪

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my circadian rhythm is kicking your circadian rhythms butt! it's not a competition. i know, but i'm still winning! so, it is a competition. 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. paul: singapore's prime minister has promised measures to keep housing affordable amid concerns over soaring property prices and the cost of living. in his annual speech, he sought to refocus the agenda on core issues after controversies involving his ruling party. our reporter in singapore has the details. what did he say about these scandals and his succession plans? >> the main message was really that these political succession plans are back on track after

the pandemic and that these recent scandals which include a correction probe involving a minister as well as two lawmakers resigning over an affair that these recent scandals that have put singapore's image as a place of clean governance to the test. that these are not going to derail the country's succession plans. have a listen. >> several controversial issues have drawn singapore's attention. i have spoken about them in parliament and in my national message. we have dealt with each of them thoroughly and transparently. and let me assure you, these incidents will not delay my timetable for renewal. we are on track. avril: now, for context, this is a prime minister that had previously said he wanted to step down before his 70th birthday. that would have been before february 2022 and this was

disrupted by the pandemic, so now that covid is behind us, the idea is that things are back on track. he wants to hand over the baton to the next generation of singapore's leaders. vonnie: thank you so much here that is bloomberg's avril hong in singapore. futures here in the u.s. point to a slightly higher open. we are also waiting on news out of china. loan prime rates, the one year and five year, coming in more than 45 minutes. plenty more to come here on "daybreak asia." this is bloomberg. ♪

vonnie: a look -->> we will look for the jackson hole symposium for the duration. >> he will reiterate that we can

stay higher for longer. >> i don't think that we are going to hear a big change in narrative. >> i don't think chairman powell can deviate from the current situation where we are waiting for more data. >> probably comes down to what the inflation data looks like. >> we are data-dependent and there is nothing else we can say until we get more data. >> probably not a real reason to rock the vote at jackson hole. >> in tone he is likely to sound on the hawkish side. >> there is not a lot to say at this point. inflation is coming down and that is a great thing. vonnie: some investors responding to the survey looking at what fed chair jay powell will be saying at the jackson hole symposium taking place in the days ahead in wyoming. jay powell, we are counting down to his speech on friday and what exactly he will be saying is a big question.

given we had the fomc meeting minutes last week telling us a lot of policymakers are seeing risk to inflation tilted to the upside. there is that prospect we are seeing building could see it further rate hike and the question shifting to duration. how long are we going to see rates staying elevated for? also dissent is coming through. what message is jay powell likely to impart later this week? a vast majority say he will be reinforcing a hawkish hold when he speaks on friday. in terms of what else we are seeing, a lot of different survey responses. more than 600 people giving their say. as we change to the risks to the global economic backdrop it the fed, whether it is inflation, the vast majority saying no. we could see that risk of further rate hikes and the moves in treasuries. that selloff across the bond space really reemphasizing that.

what else we are watching today, we have china as well due to make its loan primary decisions for the one and three year rate from the banks. given what we had last week pboc officials cutting key rates by 15 basis points tells us we can expect further reduction today. investors very much in wait and see mode. taking a look at trading volumes. this dotted blue line is the projection for the course of the day. the one and darker blue is the 20 day moving average. that big gap presents a more than 30% reduction in trading volumes. so it does seem a lot of people sitting on the sidelines waiting for more details to come. vonnie: or the beach. sitting somewhere. annabelle, thank you. president biden has announced plans for annual leaders meetings with japan and south korea plus a new hotline for sharing intelligence. this is all after his summit

with the south korean president and japanese prime minister at camp david. let's get more tells now from sunbeam shot in seoul. what were the key takeaways? >> there are some key takeaways, establishing of the hotlines and making the leaders summit annual. the three leaders getting together every year. the south korean president has said he is looking forward to the next summit in korea next year. but the most important thing would be it is so small in the sense it was the first standalone summit between the leaders of the three nations as well as the first time president biden has invited world leaders to camp david, the presidential retreat in maryland, which is a key venue where some of the most important diplomatic events took place in the past. biden said these steps would help all three countries as they

confront mutual threats. by neutral threats he is probably talking about china, russia, and north koreans nuclear program. biden is hoping through this annual leader level summit to institutionalizing these summits to make it more irreversible so despite any changes in different countries they can work together with cooperation especially on the security front. paul: over the weekend we had a story about north korean hackers targeting u.s. and south korean military drills. sangmi: a north korean hacker group have been sending emails to a group of employees and a company involved with joint military drills. they were able to seize an account of an employee who they then started getting more information. there was no indication they got

any sensitive materials but it is in line with all the crypto theft and hacking attempts they have been pushing for to fund the weapons program that they have. we know that they have taken in about $200 million this year alone from crypto theft, which is 1/5 of the entire crypto heist in 2023 alone. this is all to get in the details of the joint military drills which just started today and will run for 11 days. it involves the computer simulation as well as civilian defense exercises, but also some actual field training between south korea and the u.s. militaries. paul: all right. bloomberg's sangmi cha theere. negotiations are underway for australian to host australia --

the meeting is being planned as relations improve. for more, let's bring in ben westcott. how is australia juggling improving ties with china while maintaining defense links with a u.s.? ben: it is a delicate balance absolutely. we have this proposed meeting to come to australia. the prime minister is expected to go to beijing either later this year or early next year, prepending on how the diplomatic winds are blowing. at we are seeing a hype up in australia, u.s. military lectureship. it is a delicate balance but so far it is one australia is pulling off. we have seen those tariffs on bali lifted and there are reports there might be similar potential advances in the future for wine as well, and of course rock lobsters. it appears so far the balance is bouncing out.

vonnie: rock lobsters. the u.s. has plans to sell rocket systems to australia. is this purchase part of a larger strategic rethink by the australian government? ben: absolutely. this is part of what the strategic review recommended earlier this year which is australia move away from a conventional military defense strategy towards something a bit more focused on denial of access. something that focuses on long range ability to deter any potential aggressors at the entry points to australia's waters. so, things close to the western indonesia or eastern indonesia, and trade routes especially. this purchase of missiles as part of that strategy, which is designed to move australia into a place where it can protect its trade routes in the event of a war. paul: ben westcott joining us there. still to come, a deep dive into

china's economic woes with rm capital research. here why they expect the property market to continue. this is bloomberg. ♪

paul: major chinese banks reporting earnings to the end of august.

the economy and the property market wobble. china construction, bank of communications, and china merchants bank may face heavier provision burdens in the second half after country garden failed to pay dollar bonds on time. vonnie: let's discuss all of the stress hitting chinese banks with our next guest who is also the author of, shadow banking and the rise of capitalism in china. with us is andrew collier, managing director at orian capital research. you literally wrote the book on shadow banks and they have reared their heads. do we need to see how bad things get -- andrew: that is the point. there will be a dangerous dance going on between the shadow banks and the banks themselves and that will play out in the second half of the year and it will be very messy. it will be messy for the small regional banks than it is for the state owned banks. there obviously much larger.

i expect to see contracting margins in all the banking sector and probably an increase in the faults among some smaller banks or at least mergers to cover up the default. vonnie: we have seen banking crises happen at rapid speeds in the past. how long do you think this one will take to play out? andrew: there is a big difference. in the u.s. with the financial crisis you had a lot of money coming from wall street which was very market oriented and the minute people market things to market the market crashed. capitalism in china is mainly to the banking system and the government has some control over the degree and pace of slowdown. i expect it to be a long, messy negotiation between the regulators, the central government in beijing, and to a great extent the provincial officials who are in charge of the deleveraging process for the property sector. paul: where would you place the odds of a lehman moment in china? andrew: well, we're kind of

there already. the evergrande default was huge. two years ago. now we have country garden. and yet we are not facing a lehman moment. obviously lehman was a bank and not a property developer. nonetheless you have these huge property companies no one thought would collapse three years ago, collapse. yet the system is not failing. similarly for the banks, i don't think the banks themselves will collapse. these local government financing vehicles are not really banks, they are more like investment companies that borrowed from the banks. but they have been fueling a lot of the bubble in the property sector and there are several hundred of these. i wrote about them extensively and visited a lot over the last decade or two. they are the ones who are very risky and sitting on the balance sheet of a lot of regional banks because of the lending and that is what i am really worried about. because we are not very transparent it will not be the

same as lehman. paul: is the pboc going to end up having to backstop all of this? if so, when you see that happening? andrew: the pboc does not want to do that. they have been very strict about deleveraging in the property sector for the past three years. a recent collapse of an lg fe called zoom he wrote enbridge, they managed to negotiate a 20 year extension on their loans. the pboc has quietly told the market that that is an unusual event. they will not allow the bank to give 20 year extensions. so there will be a haircut somewhere between the banks and the provincial officials who have to come up with some cash to try and refund investors and people with savings and the banks. vonnie: ultimately, might it be those savers that have to take the haircut? andrew: they are already taking a haircut because the banks keep lowering the returns they get on deposits. there has been a real squeeze

going on the last couple years because beijing is worried about the financial system. and if you can lean on the poor people with no power, that is the easiest way to pull it off. now we are also gettering -- getting a squeeze in the banks. yes, both sides will get hurt in the economy is going to slow. basically the pain will be felt by a lot. the pboc will certainly step in if some large entities get hurt and if there are protests. but failing that they will not step in. vonnie: it felt like in it feels like still that president xi does not mind if there is a housing crisis. that perhaps that is maybe too mild of an expression of what is happening. but he certainly knows it maybe is necessary. what is the similarity between that and a shadow banking crisis? it feels like that is something very different and ultimately could even be very humiliating for xi jinping. andrew: shadow banking crisis in the united states, a lot of money from the property market

came from shadow banks. they were doing shadow banking basically off-balance-sheet stuff. most of the capital is really in the banking system in china. it is a little different. the problem is the government treats the banks without much clarity. they do a lot of stuff that is not very transparent to investors. but it is a different animal. it is actually fundamental to the entire economy. they have been subsidizing the property market through shadow banking and a leverage bubble for 20 years. now it's coming home to roost so the whole economy is suffering, not just individual parts of it. paul: when we have the rent, the property psych -- crisis in the u.s. and the banking crisis that followed, we did see contagion, risk, collapse, turning up in all sorts of unexpected places. if this continues to deteriorate in china, can you anticipate any international contagion?

andrew: obviously if the chinese economy starts slowing and moving into negative growth, that will impact demand for commodities globally. that will be a problem for much of the economy, the world. there are issues of global geopolitical instability that could occur, although i am more skeptical of that because i think china has been a relatively rational actor despite some of their militaristic and and sees. -- tendencies. then there's the question of exports. will there be enough capital to churn out exports for the global market? i expect that to have an impact but probably not disastrously so because it will be slow to work out. vonnie: andrew, thank you so much for your time. andrew collier, managing director at orient capital research. staying on china, where aside from banks, the earnings spotlight will be on tech giants.

let's get more from felix tam. china's economic -- will china's economic uncertainty affect tech earnings? felix: yeah. we are saying the chinese economy is weakening and recovery is uneven. we saw alibaba report a rebound. for tencent, we see it go into international gaming business offsetting. this week we have earnings reports. we are still focused on the gaming business but with the weakening economy and rising yield unemployment rates. the company might need to expand its overseas market from his current 10% of revenue. basically we are seeing the recovery in china is uneven.

we have still seeing a slowdown in spending. paul: what are we watching for with other chinese tech companies? we're going to be hearing from baidu and meituan as well. felix: some of the chinese tech companies are still enjoying the pent-up demand after the pandemic. just not meituan. we expect them to have a rebound for this quarter of earnings because of consumer spending in retail. baidu, we may see a strong recovery in advertisement businesses. the company may report the first net income. we can see the name skate of chinese tech is still uneven. we did not see the strong rebound after the pandemic we previously anticipated. paul: all right.

bloomberg's breaking news editor felix tam. want to get you across an alert on the bloomberg. we have course have been watching the elections in ecuador. looks like that will be heading to a runoff in october. we do not know who the runoff will be between, however. probably gonzalez, the socialist candidate, and either the entrepreneur daniel or businessman jan. they all have major problems to deal with in terms of trying to get a lid on the violence which is really getting very severe in ecuador at the moment. of course gunshots, shootings come all sorts of violence has been causing violence in the lead up to this election. about 20% of the votes counted at the moment. vonnie: watch us live and see our past interviews on our

interactive tv function tv . you can also dive into any of the securities or bloomberg functions we talk about. become part of the conversation by sending us instant messages during our shows. this is were bloomberg subscribers only. check it all out at tv . this is bloomberg. ♪

vonnie: leaders of bricks

nations will gather in south africa to expand -- jennifer is up as takes a look at why more than 40 countries want to join the club. reporter: brics, or result, russia, india, china, and south africa. it has gone from an acronym to a powerful club dozens of countries want to join. the term was coined by economist jim o'neill in 2001 and was meant to highlight the rapid growth seen in these emerging economies. initially bric, the s join ed in 2010, extending the africa to africa, to four continents, nearly a clue it -- quarter of global gdp and 1/5 of world trade. these nations saw their collective voice as a way to ask her greater influence in a u.s. dominated world. much like other multilateral forums such as the g7, producing

an agreement at its annual gathering has become one of the biggest challenges. now, more than 40 countries have expressed interest in joining the club, many of which are african. >> the brics partners are significant investors in africa. reporter: among the items on this year's agenda will be how to boost the influence of a so-called global south in multilateral institutions such as the u.n. brics accounts for 42% of the world's population, but still only 15% of voting rights at the imf and world bank. with the imf addicting these nation's growth rates will soon surpass those of the g7, brics wants a bigger voice in these bodies. and that is why some say this year's summit could prove critical for the future of the brics in an increasingly multi-polar world. paul: here are some political stories around the world where watching.

bloomberg has learned the kremlin pressured russian's central bank raise rates to stabilize the currency. sources say as part of efforts to tame inflation, as vladimir putin prepares to secure a fifth term in next year's elections. the government is also said to be working on a three-year budget that will offer additional stimulus as a pre-election sweetener. what a mullins voted in a presidential election sunday after a campaign marred by u.s. criticism and raids ont h-- on the electoral authority. the anticorruption -- he faces former first lady who campaigned on boosting welfare spending for the poor. vonnie: developers are still in focus. country garden will be removed from the hang seng index while sinopharm will be added. keep an eye on lenders after

china's fpr decision. bloomberg economics expecting banks to lower prime rending rate i 15 basis points for the one year and five year. right now we have u.s. futures pointed to a higher open. that is it from daybreak asia. our markets coverage continues as we look ahead to the start of trade in hong kong, shanghai and shenzhen. standby for bloomberg markets china open. this is bloomberg. ♪ with everything you have on your plate, earning your degree online seems... impossible. but at grand canyon university, we specialize in helping you fit a master's degree in nursing into your busy day. achieve your goals with a plan and team behind you. balance online coursework and in-person local clinical, practicum or immersion hours, as you work towards graduation

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all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them,

to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. david: happy monday morning. 9:00 a.m. here in hong kong, beijing