hello, everybody. welcome. you're watching worldwide exchange. >> here are your headlines this morning. >> an improved offer for sab miller would create a brewing titan that sells one in three beers worldwide. >> a plunge at tesco. but the ceo maintains full year targets. >> shares of yum brands sinking

as they warn that trade in china is not recovering as quickly as hoped. >> shares in vw rally to the top of the dax today after the car makers new ceo vows to wrap up a recall of vehicles effected by the emissions scandal next year. >> midweek in the markets. so we get to talk about beers, don't we? it's a little bit early but there's a big takeover battle brewing right now. sab miller and ab imbev. this is the third attempt to try to buy up sab miller. they have a 34% premium to sab's last close when they first made this announcement to the markets. we have gains today up 3% so

far. and actually ab inbev seeing good gains as well. it's hoping to get lucky with with an improved public offer for rival sab. they have offered 42 pounds a share for the british beer and that represens 44% premium to sab's closing price on september 17th. they rejected the two offers by the way at 40 pounds and 38 pounds a piece but the major shareholder is urging the board to try to accept today's offer and it is going to combine brewing giants, isn't it? >> third time lucky. first i was there and now i'm here. the magic of television. >> i love that. >> like lightning. well, a combination of these two drinks makers, though, they would create a company that

would sell one out of three beers globally as susan was indicating. raking in half of the industries profits. together they would employ over 230,000 people worldwide. this is a big deal. it's a really big deal and also we're looking at ab inbev. small brazilian brewer. >> small? >> they were compared to what he they are now. they really upped the ante with the takeovers they have been doing. >> it makes you wonder what about the regulatory hurdles they have to clear. i was looking at the american markets and americans drink only two beers, really. budweiser and what else do they drink? budweiser and miller. so if you combine the two i would imagine the u.s. authorities would probably take a second look at what this combination whether or not it

oversees too much market share in the u.s. alone. >> massive. have been looking at the european beers and i'm wondering are we going to have to see more consolidation in the industry. the likes of heineken and some of the danish brewers, some of the good old brewers, whether the smaller ones will be left out and have to make moves as well. a third offer. they went from 38 to 40 to 42.50 per share and they're saying you need to act this time. there talking to shareholders. >> the two largest shareholders in sab are thinking about whether or not this represents enough of a premium but let's get more analysis and andrew holland european u.s. beverage research. what do you think? doesn't seem like that much of an increase. you're offering 2 pounds more? >> they're going up in pretty

modest increments as you said earlier. 38 to 40, now 42. most people would say that the next number in that sequence is perhaps 44 and that i think is maybe where we're going to end up with an agreed offer. >> is it an offer that the shareholders should be pleased with? they didn't react as much as ab inbev would have liked to see them react on the other two offers. what about this time? >> it's interesting. you mentioned them also going public this morning. they're encouraging sab to engage with abi. they haven't said they want to accept the offer at the current level but they want the two boards to engage. i think that's telling you that they don't want to miss out. they don't want this deal to disappear. i think we can all sort of speculate on where sab share price would be without the bid

and i would say probably nearer 30 pounds a share. so i think the shareholders and all the stake holders are keen to insure this doesn't go away. i don't think they're going to encourage sab's board to accept the current offer but we're getting very much closer to the end game. >> i'm just talking about governments and their views because as i mentioned to you you're combine twog together, one out of every three beers drunk in this world will be an sab miller beer. you try to combine bud and miller the u.s. government might take a look at it. >> nobody expects that bit of the deal to remain intact. the combined market share is about 70%. that's clearly unseable so the way sab's u.s. business is managed and owned is through a joint venture with coors.

they have 42% of that venture and it's expected they would buy the remaining 58% and solve the antitrust issue in the u.s. >> as mentioned, ab inbev going from a small brazilian beer maker to now the world's largest, especially if the deal happens. do you think we'll see more consolidation in the sector? if so, where? >> i don't think it necessarily follows. beer is sort of a country by country business so the fact that, for example, abi might have a dominant market share in the u.s. is of no great relationship vens to for example the u.k. structure. i don't think it automatically follows but you'll see the european brewers looking a little bit distant from the industry leader now. the problem with those two is that most of them have

controlling shareholders, the heineken small and foundation committed to maintaining control of the company. it's unlikely we'll see anything in the short-term. >> thank you for joining us. now shares in tesco have been trading lower after report of a 55% drop in first half profits amid a challenging market environment. now the super market maintained it's full year outlook adding it's on track to deliver on its cost savings program. >> so lots of earnings and that includes the parent company of kfc and pizza hut. shares in yum brands down more than 18% in after hours trading. >> well, it wasn't yummy at all. yum brands is mostly a game of chicken in china and over half the revenues come from that china and while same store sales

went positive they only rose 3% and they were looking closer to 10%. end of the quarter was better than the beginning. still that has the company saying earnings per share growth will be well below the previous target of at least 10%. overall for the quarter yum grew the top and bottom lines but missed expectations. revenues were almost 7% below estimates. eps was 7 cents below the street. they all missed expectations except for taco bell but india same store sales were down 18%. three times worse than the street expected. on the plus side, taco bell had 4% same store sales growth and just opened it's new taco bell cantina, a big experiment we hope to learn about more on the

conference call. pizza hut had positive sales growth and colonel sanders is in a d.c. comic coming out. kfc same store sales up a little bit more than expected. maybe those norm mcdonald online bits in the u.s. are working. but they are also fighting for your dividend which yum announced will increase 12% for the quarter. >> who would have thought colonel sanders as a super hero. >> stranger things have happened. >> let's talk about what's happening with the uaw negotiations and the clock is ticking toward a possible strike with afghan chrysler. the united auto workers union sending a notice to the auto maker warning it's workers are prepared to walk off the job at midnight eastern time tonight unless there's a new contract agreement. the uaw reached a tentative deal last month but then it was rejected by it's members and

it's unclear whether the union will call a strike at all or some of fiat chrysler's 37 u.s. plants. trade in italy, we're seeing gains of 1.25%. staying with auto news, renault and nissan are discussing a plan to lower their stake to down under 40%. the car makers are also considering possible changes to their alliance structure going forward and that includes a plan to give nissan voting rights on renault's stake. >> now volkswagen will start a recall for cars impacted by it's diesel emissions in january. that's according to the company's new ceo. so they're saying the process should be completed by the end of 2016. nancy is with us. so the recall, they're going to

start it? they're going to be able to wrap up in the course of the year? >> they are giving us more information. they hope to get it by january, this recall. they're optimistic it will be complete by the end of 2016 but we don't have the full details of what it will look like. most should be simple software fixes but also we're looking at hardware fixes so that could up the costs. we just don't know exactly what the costs will be but we're getting an estimate today from ups, they have cut their earnings estimates for volkswagen. they reduced from 30% this year all the way to 2019. it's not just the penalty and the costs but they're saying price pressures of course because as part of winning back this trust to get customers back in the show room we're likely to see volkswagen try to get more market share from competitors. but some developments today we're expected to hear the new

chairman to the advisory board who was of course the cfo and now becoming chairman, he should give us more information but when the ceo was speaking to employees yesterday he noted and stressed that every single brand will have to be fully examined and suggested that cost cuts were on the way. he did say jobs were fairly safe for now and did not expect to have any lay offs but that could all change. >> they have to decentralize the company. >> they want to make it more streams line and easier to communicate. the decision to implemented the devices are down to a few engineers. so they're saying we have to make sure that communication is all the way through the top. but plenty of questions here still in terms of what the recall looks like and how they're going to proceed with it. we are expecting the ceo to travel to the u.s. and of course the head of volkswagen in the

united states is due to testify tomorrow as well. >> thank you very much. >> all right. let's check in on the ipo markets and ipo demand. digicel founded by the irish millionaire dennis o'brien is citing market conditions. they were expected to raise as much as $2 billion from a u.s. listing but now it's seen a number of listings priced at a discount recently and they don't want to join the action just yet. meantime, pure storage priced it's ipo at $17 a share which is the middle of the price range. it raises $425 million for the company valuing it at just around $3.1 billion. shares will trade under the ticker symbol pstg. >> last week alone five companies which debuted cut

their offer price below the expected range. 46 companies with drew their ipo plans in 2015 versus 38 companies with hold of last year. now 60% of ipos that went public in 2015 are trading below their offer price. meanwhile the renaissance ipo etf dropped by almost 20% during q-3. it's down by almost 10% year to date. susan, here the other day, the plastics division of bio, they were up something like 12 or 13% in the first day of trade despite the fact that they cut the size of the ipo considerably because of the turmoil and vw and the dax not helping of course and we're looking at german ipos alone. this past recent months cutting their ipo again due to market turmoil. they're saying the buildings

material makers are spending their plans indefinitely. part owned by goldman sachs. >> it's global, right? it's not just in the u.s. i was looking at some of these winning streaks here. we just came off the first five day winning streak in 2015. dow was up three straight days and nasdaq was up four straight days but in the current conditions and people look at the most successful ipo in the last 12 or 15 months or so and alibaba is trading below it's ipo price. it just shows investor concerns out there and the volatility so why not wait for a better opportunity. but is there going to be a better opportunity if the fed is hiking interest rates soon? >> exactly. people keep talking about this correction that we're still in need of. we've had some what of a correction. >> i'd say. >> the dax down 20%.

correction territory. >> so i don't know. i don't know if there's a better opportunity but i guess they'll hold off and get to a point where people feel more confident about the market and you can head to our website as well to get more analysis on the freeze of the ipo market. there's a great piece right there on our website cnbc.com is the address. >> so with these numerous companies pulling out of ipos we're asking you would you ipo now or wait until a different time and source capital from elsewhere? there's a possibility. you can get money from somewhere else. e-mail us worldwide@cnbc.com. it's on screen right now. you can also find us via twitter @cnbcwex or our personal handles on the bottom of the screen. >> we got breaking news on this developing story, third attempt

by ab inbev and we're getting headlines from sab miller itself and they're saying that there's a proposal by ab inbev on the 7th of october and rejection of a previous proposal are saying the board unanimously has again rejected that as soon as practically possible. trying to get the rest of that headline but in rejecting these proposals the board sab miller has taken into account they're saying all possibilities of this take over approach. >> they rejected the 40 pound approach but they're looking to consider the 42 pound proposal as soon as practical. they put through a 38 pound, and then a 40 pound offer which they're saying they rejected and now they got this offer on the table for 42 pounds 15 and our

analyst is saying it sounds like somewhere in the region of 44 but it might just work. they're going to be formally considering this proposal and meeting and a further announcement will be made there after. >> but they're saying also it's opportunistic because sab miller says this approach 42 pounds has been timed opportunistically to take advantage of the recently depressed pricing. >> they're smart. >> that's what you do. that's how you make approaches. you have to be opportunistic to make money on the markets. so this is something we'll continue to track but we're heading to break here on worldwide exchange, coming up on the program, leaving a bad taste in the mouth. find out why yum brands disappointed their investors. we have analysis later in the program. plus starbucks finally smelling the coffee when it comes to

tech. the company's latest move to harness technology. and could a pumpkin shortage squash your thanksgiving plans. >> squash. >> i hope not. we'll take a look at crop figures that could leave providers with pie on their face.

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hi, everybody. welcome back. we're still watching worldwide exchange. yesterday at the market close you'd remember we were talking about how our european equity markets closed higher up about 1% following on another day of significant gains. we were higher as well. the stoxx europe 600 up by 1% and we're looking at our main european equity markets and seeing quite a bit of green out there. the dax in germany up by 1.3%. the ftse mib higher by .4%. sri joins us live. we haven't done the show live. usually you're through the wall. >> yes. but i thought i'd come and visit all of you and what a better time to talk about asia and japan. the nikkei 225 and japanese equities in focus right now.

this is where we closed off a trading day up by 140 points. now a policy from the boj squarely in focus we saw no move by the bank of japan in their policy meet chg wrapped up today but the ball is very much in the court of prime minister abe. that's what he implied in his press conference. there's a couple of things that i took away from this. he was upbeat about the trajectory of foreign inflation and the broader japanese economy despite fears of a technical recession. he was also talking about a labor market that could translate into wage increases during negotiations next year. so all in all, quite hawkish. he is probably keeping his powder dry to see whether there's already further stresses from the japanese economy. especially the pressure points from china. october 30th is the next key

data from policy susan. that's when they will update us on long-term growth projections and the inflation. >> i have it circled on my calendar. let's talk to an investor and see what he thinks of the boj and the rest of the global action. joining us here in london, charles, october 30th you have that circle on your calendar, right? so with the boj expected to cut their economic forecast but does that mean they'll add more stimulus? >> they are expanding their balance sheet. the highest rate that anyone ever had. so they don't have to make any changes at all. just by carrying on what they have been doing which is quantitative easing at a rate of 15 to 20% of gdp they will at some stage manage to create the inflation they want and that's when the real trouble starts. >> no, no, recently in august we saw the first deflationary read

and we're on the brink of the second technical recession in two years. that doesn't sound hike a healthy economy. >> no, but the fact is the first quarter is strong, second quarter down, third quarter probably same again. overall there isn't much growth. of course you're right but when you devalue consistently as japan does you get inflation and also eventually get a little bit of growth and that's what they're going to get. if they carry on at quantitative easing at 15 to 20% of gdp the real risk is that inflation is going to spiral out of control. >> do you think there's lessons to take away from the quantitative easing that japan has done from such a long time now? we're here in europe. some days we're similar to japan and other days we're told not at all and it's a different environment all together? >> no. i don't think so. i think that the japanese

experience is unique and not at all like europe. the europeans are defensive. they're dealing with a unique economy. the japanese are not doing anything of the kind. they're making an aggressive attempt to create inflation when deflation was the only thing that made their level of debt tolerable for the last 15 years because when you have deflation you can have very low interest rates and get away with the massive debt. >> very briefly, the equity market in japan. >> i don't think the equity market sees much beyond the end of its nose so it will probably go up for a bit. >> charles, thank you very much. >> still to come on the program, it's a year on since drastic dave took on the daunting task of reviving tesco. how have the turn around techniques played out so far?

we'll find out. that comes your way next.

welcome back. we're still watching worldwide exchange. the board of the british brewer will consider. >> profits plunge at tesco as the cost of rebuilding the business takes it's toll at

first half earnings but the ceo maintains it's full year targets. >> shares in yum brands sink as the owner warns shares in china are not recovering as quickly as hoped. >> shares in vw rallying to the top of the dax after the new ceo vows to wrap up a recall of the vehicles effected by the emissions scandal hopefully by next year. >> let's check in on european markets. gain across the board. looks like the ftse 100 seeing gains. a rally for the german dax. up 1.3 in the cac 40 and we have the ftse mib with gains of .4%. the stock of the day has to be sab miller. >> most definitely. and of course we're hearing that

they are considering this third time possibly lucky offer for sab miller. again recall they had an offer for 30 pounds on the table an an offer for 40 pounds which they rejected and they are considering this offer for 42 pounds, 15 per share. would be selling one out of three beers worldwide if indeed these two companies team up. it would be a massive, massive company together. ab inbev starting off as a small brazilian brewer and then becoming the world's largest and becoming bigger in this grouping. so that's the reaction that we're seeing ab inbev up by 6%. >> now shares in tesco trading lower after reported a 55% drop in first half profits amid a, quote, challenging market

environment. the super market maintained it's outlook adding that it's on track to deliver on its cost savings program. shares down by some 20% over the last six months or so. it's one year on since the ceo dave lewis took to the helm, so-called drastic dave as some people call him. he was appointed to turn around tesco's fortunes amid profit warnings and stiff competition from the likes of aldi. they were also recovering from an accounting scandal. expected profits had been overstated by around 250 million pounds but since then dave's turn around plan according to some hasn't been as drastic as what people have been hoping for. they posted a loss of 6.4 billion pounds. what's important is the long-term strategy to claw back it's dominance in the sector by cutting costs and debt. most recently it off loaded home plus for 4.2 billion pounds.

costs though weighing on the first half profits. richard is a retail analyst at rah advisory. good morning. >> good morning. >> so tesco coming through. not pleasing on these first half figures. they're keeping their targets though. >> i think the problem here is the old disconnect between the real world of business and the rather surreal world of investment community and this is a very long haul. there is a huge reengineering, restructuring task to be done here. it can't be done quickly. i think that investors have to be very very patient. these are disappointing numbers but there will be further disappointing numbers i'm sure. i think the key story here is that drasticish dave is following a very sensible path. he's not trying to do too much too soon but what he is doing is

solid progress. >> profit warnings which is linked to the supply chain. are they continuing to lose market share or is the market share stabilizing? especially to the discount retailers? >> no, they are continuing to lose market share. they're in the same boat as morriso morrisons. it ebbs and flows. and aldi and little and the general merchandise discount have been underrated by everyone and they're still going to be underrated. i reckon over the next five years those four major retailers. they're still going to have a smaller share than they've got now. >> so i guess i know you don look at the stocks individually but you probably consider continuing selling them and maybe shorting them but i'm wondering if this is the entire

industry. expansion too fast overseas. they expanded overseas when they should have focused on their domestic markets and this is an industry looking at slim margins, right? >> you have put your finger on a couple of really, really key points there. by the way, u.k. retailing is ahead of retailing anywhere else in the world structurally. what's happening here is going to be happening pretty much everywhere else over the next 2, 3, 4, 5 years and then the other thing you mentioned which is absolutely key is slim margins which means that small changes in volume have a very disproporti disproportionate impact on profitability. it's tough. >> you betcha. now staying with retailers, this

comes from the american side with yum brands cutting it's full year profit outlook after reporting disappointing third quarter results from china and india operations. the parent of pizza hut, taco bell and kfc posting an overall profit for the quarter and same store sales in china rose a mere 2% which was well below analyst forecasts calling for sales growth of 9.6%. sales in india a much smaller market in china in comparison for yum falling 18%. analysts expected a 5% decline. they expect 2015 earnings to fall and hence the stock got hammered in after hours dropping some 18% over in germany. not doing any better. we're down some 15.5% and yum brands, you know, they are, i guess, the company that put all of their eggs into the china

basket. and when the economy isn't growing so quickly, when you suffer from a tainted meat scandal. >> i was just about to say. >> that will tarnish your image and continue to bite on the bottom line. the positives as well, they suffered through four quarters of declining sales plus 2%. at least you're in the plus column. it's less than analyst forecasts. >> the meat scandal, that's a hard one to recover from. they're known for kfc, right? >> finger licking good. they're in the meat business. something that really scares consumers if you're accused of selling meat that's past the sell by date. taco bell is doing relatively okay compared to kfc. >> there aren't that many taco bells in china yet because i think it's the mexican market or the mexican food that still hasn't really caught on in the market but you have to love those new kfc commercials as

well. they're trying to sell the new colonel sanders. >> from chicken to planes. i don't know how to make that -- they both have wings. but the aircraft manufacturer airbus is no longer exploring business opportunities with bombardier. they were in discussions focused on the c-series jets. stefen is in paris with the latest on this. no more talk between them. >> absolutely. this is what airbus said yesterday. without further come mepts on the nature of the they gaucnego. the development of this aircraft which is the biggest ever for bombardier has been impacted by significant delays in costs.

the group also did admit it's target and it was unable to secure any single order at the paris air show in june. in a statement it says it will continue to explore initiatives such as the participation in consolidation in the industry and according to a source close to the company it could try to revive some contacts with chinese investors or to talk to boeing. this aircraft would have helped the company to address more efficiency and perhaps most people believe it would have kept ait away, which is considered the next long-term competitor and the timing of this negotiations just a few months ahead of the first delivery could indicate that the management is getting more concerned about the debt level of the company, $9 billion.

>> stefen, thank you very much. good to see you. we'll chat very soon again. now nokia announced that it plans for the organizational structure and leadership of the nokia and alcatel-lucent company. they bought them in a share deal worth 15.6 billion euros. it will be split into four divisions. mobile networks, fixed networks, applications and optical networks. they'll continue to operate separately. did you know that they started nokia in the rubber business. they made tires and stuff like that. >> they built on that technology, huh? >> yeah. massive. >> yeah. from what i understand nokia was a large provider of jobs in finland for a long, long time and because it cut back, the unemployment rate has gone up

and we've seen some declines in the finish economy in recent years. >> yeah. everybody had someone in their family that was employed by nokia. extended family too. >> interesting. well now looks like microsoft makes lumia phones because they just unveiled the new offerings yesterday. maybe this is a year to try to be thankful then. thankful for what we have and for years passed because one item could be missing from thanksgiving this year. can you believe it? pumpkin pie might not be on the menu. i love pumpkin pie. it's delicious. >> this is an american thing. thanksgiving is an american thing. so pumpkin pie, you don't really have that in europe. >> is this a way for you to tell me that you don't want to be invited to miika nad juy canadi

thanksgiving dinner next week? they're saying crop deals are off this year and could be off by a third in 2015 in the state of illinois alone where 90% of pumpkins grow in the u.s. that's where most of them come from. so farmers are blaming record rainfall from washing out the crops. they are confident they'll have enough but once it ships out the 2015 crop there won't be any more canned pumpkin until next year. >> have you ever cooked with pumpkin? real pumpkin? because i have. it's hard work. by the time you're done taking the pumpkin out you're ready for bed. >> you're too organic for me. we need to get you the canned stuff. what does that mean for christmas? none for the rest of the year. i don't like that idea. >> well, hurry up. >> canadian thanksgiving is next

week. don't forget. and then u.s. thanksgiving comes in november sometime. but i'm going to bring in some pumpkin pie for those that haven't tried it. apparently we have a few in the newsroom that say they never had pumpkin pie. >> that's my point here in europe. you can roast the seeds. i tried that too. >> but getting back to the agriculture business, 90% of pumpkins are grown in the state of illinois and we have been reporting a lot of companies that deal with agriculture trading and the rest having and yesterday we were just talking about this change at the top of dupont because they have been having problems with the production in brazil. same thing is happening with noble group which is an asia listed trading company as well. so i think there's just a -- there are some conditions that may not be the best. >> and you always have those kind of commodities to look at as well.

i haven't spoken to a soft commodity analyst talking about the pumpkin market yet. but you think about soybeans and things like that. >> since we're looking at commodities, oil markets, by the way, oil back up to a one month high. >> yeah. huge rally this week. oil was up by a percent and by the time we went on 20 minutes later it was higher by 5%. >> we're going to go to a break. the reason why we seem depressed oil pricing is a concern from china but bull in a china shop. our next guest is overweight on beijing shares despite concerns of an on going slow down. you want to find out what's behind his investment rational. that comes your way next.

2016 profit and revenue forecasts and that's due to what else for the strong u.s. dollar. adobe has earnings. they're looking at $3.19 a piece. and 5.9 billion in sales. adobe has been switching on to these web based subscriptions to

try to generate more recurring revenue contracts. adobe falling 9% in after hours. >> starbucks is hiring it's first chief technology officer as the coffee house giant makes a big push into mobile. they're plucking away for the role. 20% of all u.s. transactions are made by a mobile device. 20% off 9% just years ago. they launched a new appleting users order and pay for drinks and food before they get into the starbucks store. >> i do have it on my phone. they have been doing well going on to instant messaging. they launched this app, like this wake up call to wake you up for your morning starbucks coffee. >> i haven't seen that. i'm still trying to get used to them calling out my name which i always give them a fake name. >> what do you use? >> lucinda or something like

that. >> okay. let's talk about samsung. are people using more of their galaxies? samsung shares are pricing in a turn around for the company on track for their best daily percentage gain in four years and this is after the electronic giants forecasted a close to 80% jump in profits beating estimates. several analysts pointed to the weakness in the korean currency as maybe the main driver behind the companies figures. if actual sales prove to match their guidance this would be the first poorly profited gained in two years for samsung and samsung has been hampered by slowing sales of galaxy. they're losing market share and dwindling profits. we're looking at 8 straight quarterly declines when it comes to profits but i found interesting they're making money elsewhere. when you're a big conglomerant

you can sell chips. chips is the biggest contributor to the bottom line. >> they have done well in terms of making a name for themselves outside of asia and particularly in the u.s. market and especially here recently. they are really back up there again. especially with the galaxy line. >> they paid lebron james -- i don't know what they're paying him but i assume it's a large price tag to get him to endorse their galaxy devices. that gets brand recognition. let's talk about china. foreign exchange reserves are continuing to fall for china. they were down to maybe 3.51 billion in september. or they lost 3.51 billion in september when the central bank devalued the currency and they had to step in with a lot of their foreign exchange reserves to help prop up the markets and that sent their fx holdings down

to a record low. now, em asian equity strategist at jp morgan. good to see you here in london. so china with the foreign exchange reserves down and people are thinking how much longer can they prop up their own currency, is that a point of concern for you? >> not really. the number is 3.5 trillion, not billion. >> that's what i was thinking. >> so they have gone down by 50 billion which doesn't even make it 1%. the name is fx reserves. they save money for a rainy day and they're using a fraction of them. i find the language around the capital flight from china that you read about seems so inappropriate relative to the data. what the chinese government is trying to do is persuade corporates to get rid of external loans and refinance on shore so that is going on. we think about 550 billion of

that will go on over the next 12 months so big number. but they have the fx reserves to offset that flow. we're still running a big account surface as well. you'll watch the reserves go down but on the balance sheet, the external liabilities go down so the balance sheet is lower risk. >> i have been talking to you about china for a long time but this past summer, in fact, you went bullish on chinese shares during that downturn. >> yeah, we have been pretty bullish on china since november of last year. so it worked well. obviously the third quarter it's been pretty painful and there's a confusion about what are we talking about here? we're talking about the shares that international investors can buy. as opposed to shanghai, chinex or shenzen and the big opportunity now is the bubble bursting brought down 8 shares

so they're trading more than one standard deviation. they're offering you high earnings growth. is that a high number? it is in the global economy today and i they people don't understand what the bench market, only 1.8% of the bench market cement companies. come november 25% will be tech and that's mainly going to be e-commerce companies. >> people forget that china's economy is more than 50% services. so i don't understand this obsession with pmi numbers. >> the great thing about the index is the index is reflecting the direction the economy is going in. so let's not dismiss the fact that there are very serious issue with the chinese economy. the transition is going to be painful but the stock market has been doing a good job of discounting that change. >> so i hear from china investors think that we're still going to see more of a correction in equities, if

chinese equities. do you agree on that or have we corrected enough? >> we're talking about on shore asia equities. if you look at the valuation in the shenzen market it's still far too high and i think that bubble will continue to deflate. the question is, does it then push 8 shares even cheaper? what we cruised to have is very little correlation between h and a. when you are preventing from shorting on shore you shorted offshore and that took down hong kong. >> and also the pboc, are they going to be continuing to step in with stimulus measures or cutting our -- you know, whatever is qe-4? is that going to continue as well? >> well, they have pledged supplementary lending system and there's a lot of assets that are eligible for that. the most important one is local government bonds.

so the target for this year is to raise 3.4 trillion of local government bonds. in theory banks could take those bonds and place them with the central bank to free up liquidity. so they have a lot of tools in order to manage the liquidity situation but if we look at the market price of interest rates it's being very consistent around 2.5%. we'd like to see that go lower but i think around on the 11th of august when you have the move on the currency the policy makers have been struggling to balance the whole story and the currency is not a big devaluations nor do we think the currency will rally. we think it was all to do with the sdr and the imf requirements. >> i'm running out of time but i wanted to ask you specifically you mentioned new china is a

better bet than old china. >> but also insurance. people are spending more of their income on services and part of that is ensuring their home and ensuring their car so we're seeing very high underlying growth in insurance and if you look at the msci china insurance sector it's up by 25% in the last 12 months. >> everyone is looking for yield in this low rate environment. adrien, good to see you. keep flying around the world more often and come visit me. >> i will. >> try. we're going to break in and get you more on ab inbev sab miller. (singing) you wouldn't haul a load without checking your clearance. so why would you invest without checking brokercheck? check your broker with brokercheck.

good wednesday morning. welcome to worldwide exchange. i'm susan li. >> these are headlines from around the world. >> ab inbev hoping to get third time lucky with an improved offer for sab miller which they will now consider. >> shares in yum brands sinking by 18% in after hours trade as the kfc owner warns trade in china is not recovering as quickly as it hoped. >> digicel shelves it's ipo plans. the