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tv   Asia Edge  Bloomberg  December 6, 2015 10:00pm-11:01pm EST

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at terror, obama says the california shooters were radicalized and called on congress to get tough. dollar, down with the china takes the reins of the g-20. claims calls for indonesia's speaker to step down. the biggest loser, australia's gambling addiction the coming the world's most expensive. that story and much more on this monday edition of "asia edge." we are seeing a broadly higher session here in asia. so far this morning, strong gains out of japanese stocks on the back of a weaker yen.
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energy coming under pressure as the price of crude continues to decline. we are seeing positive gains. 1%.hang seng up by 3/10 of angie: oil is back in the headlines today after opec ministers abandoned any pretense of unitive and a chaotic meeting -- pretense of unity in a chaotic meeting in vienna. it is all down to this -- saudi arabia won the day. zeb eckert is here with the economics and politics behind it all. there is only one boss in town, apparently. zeb: there is a bit of tension
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between saudi arabia and russia. saudi arabia does not want to give up market share until others do. it has been maintaining the production levels despite the glut of global oil. no one wants to see their market position eroded. it shows opec is in a free-for-all environment. there is no target, they are breaching the target about 31.5 million barrels a day. will bes output tolerated, that is the message out of this meeting. that is what we see in saudi arabia because the key concern for them is that oil is so cheap, they cannot make enough money to break even. they extract it so cheaply out
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of the ground. that is the market reaction. angie: clearly, they have very deep pockets to continue to pump out this policy. but at what point does it begin to hurt saudi arabia. zeb: we have seen the government tightening its pocketbook, if you will. saudi arabia subsidizes a lot of social services, many elements of life. one of the ways they have maintained power and stability is to increase social services in times of economic peril. the paradox is despite the real threats to the saudi government budget and the kingdom's finances, most ordinary people would not feel it or no the oil situation is so critical because the government insulates them so well. the key concern politically and economically is how long that will continue.
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this is not just about oil. it is about stability in the middle east and long-standing alliances between the west and kingdom. angie: money can only be a buffer for so long. obama described last week's shooting in california as an act of terrorism. in a rare speech, he addressed the threat of terror at home and abroad and called on congress to pass tough gun laws. he asked lawmakers to strengthen the screening of immigrants and new authorizations of force against islamic state. president obama: we have no they were part of a broader conspiracy here at home. it is clear that the two of them had gone down the dark path of radicalization, embracing a perverted interpretation of islam that calls for war against
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america and the west. they stockpiled assault weapons, ammunition, and pipe bombs. this was an act of pair -- terrorism designed to kill innocent people. takata cut off access to top executives and downplayed the crisis. the management was no longer trustworthy, says the investor. it is unable to contact two of its executives, adding to the turmoil at a brokerage being investigated over possible links to china's august stock market. exchange filing made on sunday, they could not be reached.
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citic cited media reports. shipping is having its worst year since 2009 and that is leading to consolidation. what are the numbers question worth> the deal could be $2.4 billion and it could come as early as today. shares already halted in singapore, pending an announcement. this would merge southeast asia's biggest container shipping company with the world's third-largest and the expectation is this will strengthen their positions against rivals at a time when there is very much a need for a boost for both companies. neptune has posted losses in five of the past six years.
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.he net income plunging 75% there are expectations that the buyouts will help these companies gain some ground in their industry. rishaad: it is also the product of a merger, several mergers. this comes at a time of great difficulty. tell me what the competition is doing. ry: this is an industrywide problem. we are seeing oversupply, all of that eating into shipping rates. we are seeing the average freight rate falling to historic lows. global shipping companies have average operating margins of -1.8%, compare that with a profit margin of more than 3% a year earlier.
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mediterranean shipping liners -- all in an attempt to stem years of losses. they are out with this pretty the margins saying are expected to worsen further in the fourth quarter. rishaad: thank you. backhaidi to get the markets. we have haidi standing by. this is a nice change after that terrible week we had last week. shanghai rejoining the positive session. we are setting up for another volatile afternoon session ahead. let's take a look at some of the
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stocks in focus today. are under the spotlight for all of the wrong reasons. extending losses. this is the shanghai listing. it is faring a little bit better in hong kong. these two top investment banking heads, they cannot contact them and this is the latest in china's escalating crackdown on the financial sector. they have been investigated for shortselling. we are seeing a bit of a reaction after its president and vice chairman resigned for personal reasons, speculating he has been pulled into this broader crackdown as well. . do want to check in we have seen further downside in the session after the weekend. opec standing its ground.
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rishaad: just go to you can watch some of the interviews you may have missed. angie: still ahead, under pressure, the malaysian minister faces a crucial political test. will you get the support he needs after the recent funding scandal? rishaad: finding room to maneuver, the boj's governor. ♪
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angie: checking some of the stories making headlines around the world. rishaad: after activities have been suspended until wednesday, a new smog warning.
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an orange alert has been issued for the capital. stationsssy monitoring , dangerous particles. 10 times the internationally accepted levels. angie: a day of mourning for 29 people missing after a fire swept through an oil platform in the caspian sea. a gas explosion blamed on high winds. 33 workers were rescued from one vote, but a second cap sized in the stormy weather. the fire should be extinguished sometime today. rishaad: myanmar's former army chief has endorsed or as the future leader. it is unclear whether he is --
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his endorsement will lead to the constitutional change needed for her to become president. like cheap oil is here to stay for a while. what does it mean for asia? does it change the equation? >> with a low of $40, that is a new low. help north asia. -- it does emphasize a point we have made for some time. it is not a favorable environment. angie: it would be a negative for malaysia. but indonesia? >> indonesia is more balanced than it used to be. we were anticipating for next
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are the commodities remain weak. this is a big headwind for emerging markets broadly speaking. rishaad: it is down this time because of opec. a lot of people said opec was dead. opec itself just confirmed it. >> right at the start of my -- this is very much to do with shale gas. dynamic. the same this is a very dangerous
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game of chess saudi arabia is playing. they have tied geopolitical events to this. they have declared price for on russia and the u.s.. there is political dimension to it, but the other one is to maximize the long run value of the oil asset. four vladimir putin, f -- vladimir putin,or it is part of russia's strength in the world. the geopolitical shadows of this, really big. 14% of gdp. there is no doubt about it, you should stay underweight that
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energy. rishaad: it has been quite resistance the show producers have put up in many ways. they've been able to withstand it. backe supply has ratcheted to some extent. that movie will still play out. of sharesave a number that need to drop. -- a number of shoes that need to drop. angie: another shoe that needs to drop. merry christmas, everybody, from janet yellen and friends. >> this is not fully discounted in markets.
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to be truly cheap, we would mean a million times forward. ,f you look at equities overall after the first multiple fed pees, the pet numbers -- the numbers go down. isdo not think this fed hike fully discounted in equities. we have yield going up a little bit. >> investment-grade spreads are somewhat above the typical levels you see going into thought hikes. .- into fed hikes equities, the valuations are
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somewhat rich. getting back to how we $38 ad, we will see barrel in a couple of weeks. we could see much lower oil for longer as result of this, which does some of the heavy lifting for janet yellen. headline inflation. if you look at inflation, food and energy, that has been drifting up in the u.s. super easingera of central banks is coming to an end. we saw that with the ecb. we think the fed is beginning the hike cycle. the bank of japan thinks the boj -- the consensus thinks the boj will do more using.
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-- do more easing. we do not. angie: it is not even about when. it is about how long and how much in terms of the rate hikes, right? >> we moderated our views slightly. we will just have to see what happens on the incoming data. the first time in 10 years, we are in a rate hike environment in united states and we think that matters. angie: it matters found it will be interesting times ahead. i want to get your view on the outlook ahead. would a secret recording shift a shakeup? angie: we will be live in jakarta with all the details. ♪
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ofie: the speaker indonesia's parliament is facing calls to resign over secret recordings and claims of corruption involving a mining giant. let's get all the details. tell us about the scandal. about the forced
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investment of shares. a recording surfaced featuring the voices of three people. one is the speaker of the formerian parliament, a indonesia chief, and a wealthy businessman. they discussed the divestment of shares. he has denied any wrongdoing. but the parliament initiated an investigation into him and he will be speaking this afternoon. angie: what are all the implications, help us figure this one out. i guess the major implication is that the career of the parliamentary speaker is on the line. the vice president said he should resign and he has lost
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his credibility. the parliament has become slightly more supportive of him. this is a chance for him to cement his leadership over the house. say at the does this end of the day about indonesia politics and corruption? especially in the resource sector. >> at first blush, things look pretty murky. no charges have been laid. the main participants have denied any wrongdoing. sector is prone to corruption. level, i think it has made that more apparent to every
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indonesian. the nature of the recording is interesting because it was behind closed doors. up until now, this kind of thing has not been exposed. it has been left upon by reporters and opposition leaders. angie: alleged corruption at the highest levels and caught on tape. thank you for that out of jakarta. are taking a look forward to the afternoons business in tokyo where we are seeing asian stocks rise as the u.s. dollar strengthens. we will get the very latest. ♪
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rishaad: a look at our top stories. asians stocks recouping some of last week's losses. shares from tokyo to sydney have made gains. all but two of the major industry groups climbed. opec dave up all pretense of limiting production in the chaotic meeting in vienna on friday. the decision sparking a record
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number of bets that crude will fall below $38 a barrel. president obama says last week's san bernardino shooting was an act of terrorism. repeated his call for congress to pass tougher gun laws and also asked lawmakers to strengthen the screening of immigrants and run new authorization of force against islamic state. day, let'ssy news get the very latest from haidi. haidi: at least it is looking like a broadly positive day after that awful week we had last week. a are off session highs for number of these markets. the afx, in particular. strong gains from japanese markets as they come back for the afternoon sessions. we are seeing shanghai after some swings this morning,
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sitting in the positive territory. i do want to take a look at other stocks. we are seeing quite a divergent picture. we have strong gains across financials. some of the basic materials names are holding up. rio tinto doing quite well. take a look at oil and gas. then is one of the most sold off areas of last week. we are seeing that pain continue, that sector is down by 3.5%. we are keeping and i on brokerages -- an eye on brokerages. we had news the two top investment banking heads for citic securities, they cannot be contacted. this is the latest chapter in this ongoing story of regulators
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investigating the financial services sector. crude,quick look at because we are seeing these losses being extended to the asian sessions. looking at oil in a bit more -- with a bit more detail. a chaotic seven-hour meeting in vienna. the cartel will continue to pump oil until rivals are squeezed out. why and why now? >> the iraqi oil minister probably put it the best, the u.s. does not have a ceiling, russia does not have a ceiling, why should opec? their ability to control the market through cutting supply is
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severely diminished. if they cut someone else, it will kill the void. rishaad: have they found a new ceiling? ceiling hasnse of a been abandoned. it was a token ceiling, if that. data, look at bloomberg the past six month it has been about 32 million barrels a day. , iran isok at iran coming back after the international sanctions have been removed. about this part of the world? malaysia is clearly not a winner here. winner might be china. it is the world's second-biggest importer of crude. the other company could be the
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refiners. those buying the crude might find they might get a discounted rate. rishaad: look at this opec decision to abandon these targets, it has been dominating our discussions today. >> the news is good for this region. especially northeast asia. it is good for the commodity importing economies, especially japan and korea. commodities global managing director says the system of curbing production is flawed anyway. >> at the end of the day, a ceiling on anything is
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dysfunctional reality. russia, they do not have a ceiling. it is like joining a nightclub just before they turn the lights on. unless there is a political motive, otherwise, opec is everyman for itself. rishaad: traitors do not see a major boost to the oil price -- traders do not see a major boost to the oil price. >> in the near term, oil prices are very little incentives for an uptick. there seems to be little incentive to rebalance in the short-term. rishaad: that is the word from asia on oil and opec. latestford is the
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automaker to issue a recall that could affect more than 450,000 cars in the united states. it is due to concerns that fuel tanks on its 2010-2011 ford fusion may crack and leak gas. ford says it is not aware of any injuries related to the defect and will not charge owners if their cars need work. chinese drug researcher is buying an australian private operator for $688 million. it will be able to take advantage of opportunities expected from the free trade agreement recently passed. the transaction is expected to be completed in the first quarter of next year. the president of the agricultural bank of china has resigned for personal reasons. media reports he was demoted by the communist party. he joined the bank in 1985 and
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became president in 2009. sources said he had been taken -- for an investigation. among them, making them less reliant on the dollar. how is this shaping up? >> china is expected to use the g-20 as another opportunity to step its footprint on the global economic landscape. they have had one big victory so far this year. they are expected to further the agenda. they are pushing to mix things up a little bit. -- that is one example of how they want to challenge
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the dollar's dominance. it is all about china making a footprint to be felt around the world. really achieveey any of this? >> is going to be a challenge. it is a tall order. they will have to get the u.s. on board and all of the other big economies on board. they have floated ideas in the past, but have gotten nowhere. they got the yuan into the basket, as we said. who's to say a few years down the road, they will not succeed? they will have to be able to persuade people. that credibility has taken a shake in 2015. >> they are their own worst
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enemies. world, youide deregulated, devalued your exchange rate with no warning. your reaction to the stock market crash inspires little confidence amongst global investors. china will need to ensure these global policymakers that they are in control of their own domestic economic agenda. that is their challenge. malaysia's anticorruption commission has questioned the prime minister about millions of dollars in his bank account and says he was cooperative. officials spoke to him for 2.5 hours, but gave no details. it has been five months since the scandal first broke. where are we now? the attorney general says he
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the probe to be over by the end of the share. based on the anticorruption commission spoke to him over the weekend for 2.5 hours, so we may be near the end of the investigation phase of this saga. holds the party annual meeting tomorrow. what will he -- what will the atmosphere be like? officials want a --ceful and tension free after the turmoil in recent months. -- thell be looking deputy prime minister of the party is the same one he fired a
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few months ago. he will be prevented from speaking. i think this meeting will provide some clarity. the meeting will be watched closely. everybody will be scrutinizing what they are saying and this might be the -- the worst might be over for him. angie: thank you so much for that. rishaad: up next, morgan stanley remained underweight on emerging markets with 2016 almost upon us. we look at the year ahead. ♪
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rishaad: let's check on some of
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the stories making headlines around the world. angie: more heavy rain is forecast for southern india. the region struggles with the aftermath of once in a century storms. the airports have partially reopened. at least 450 people are known to have died in the floods and police expect the number to rise. 14 patients have died in a hospital intensive care unit when the power failed. rishaad: the opposition has claimed victory in venezuela for the first time in 16 years. soaring inflation and crime have left many voters wanting change. venezuela is a member of opec and has been hurt the falling oil prices. diane -- the imf expects the economy there to shrink 10%. angie: antigovernment protesters and korea are planning more rest -- more mass rallies this month.
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protest will be held in 16 cities on december 19 urging the government to tackle rising unemployment and food crisis and to abandon plans to make it easier for companies to fire workers. police in the government tried to ban the rally, but a judge ruled it could go ahead. thank you for sticking with us. five years of underperformance by emerging markets. there is no reason that losing streak should end in 2016? >> a new performance relative low in the last couple of days. all of the cocktail that caused the problem is still in place. at our forecast, earnings will decline a double-digit percentage.
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it means we are trading about 12 times. we are not particularly cheap. angie: the valuations are cheaper than developing markets right now. at one point would you turn to emerging markets? it is optically attractive. this is the problem. cheape optically valuations. 2016, how do you feel about the china story? >> broadly speaking, we are underweight the commodity markets.
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for china, we emphasized selecting the right sectors. we have been resolute bowls on ulls onr -- b consumers and health care. >> are we better prepared this time? against any extenuating circumstances? >> the emerging world was defending indefensible currency parities. from a corporate earnings perspective, we have the same picture. it has fallen from 16% five years ago down to about 10% now. on our forecast, it falls further next year. angie: what about china? >> the growth trajectory is broadly slowing.
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we still have confidence in these new economy sectors. one key point of difference is we think the remember the is going to -- rmb is going to weaken against the dollar. is the largest part of the index. that currency had went -- headwind. version 6ell me about >. specific names. if you look at the theme, which is quality, it is about not playing the indices. that quality approach is dominated -- has dominated over the last five or six years and we think it is the right thing
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to go. iny are more represented i.t. and consumer health care. angie: a very crowded space. at all of the hugemy of china, you have balance sheet issues. you had a story on this on your terminal today. they are still beating earnings estimates. angie: based on that premise, would you agree, let's to the mental exercise, based on your premise, is uber worth more than g.m.? right now, the market says it is. the whole point is we are talking about new tack, new -- new tech, new economy versus old
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economy. let's go back to 1999 and 2000. i was doing the same job. the new economy stocks reached 50 times.s 1 notvaluations broadly were where they were in 1990 and 2000. the old economy, there is no new china that has been industrialized. >> what about india? >> india has the potential longer-term. near-term, it cannot -- rishaad: india has a great future. in 10 years time, it will still have a great future. >> that is a little bit unfair. rishaad: this time, it is different -- that is what you
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are saying. >> there is no way india can offset that shortfall. >> there is a market, a big market for retirement living, nursing care, health care, in general. cancer centers across china and the region, it seems there is a big market for this business. >> you will see a lot more ipos and that sector. that population?ging >> you can play it through financial services, tourism, luxury travel. are all young at heart here. thank you so much for that.
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rishaad: we take a look at australia's gambling problem. ♪
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rishaad: australia has a new world first, but not one they would want. angie: it is not really a reality television show. our economy editor is in sydney. ,his huge surge in gambling equates to $700 for every man, woman, and child being lost their in australia. -- lost there in australia. recordlosses got to a $24 billion.
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australians love betting on all sorts of things. they like slot machines, there are 200,000 of them in the country. they are increasingly using online websites to gamble as well. is the government concerned about this increase in gambling or is it just, join the windfall? >> the government gets quite a bit of revenue from gambling. time a time -- this is in where they badly need extra revenue. the federal government has launched a review. they're concerned about illegal offshore gamma sites -- gambling sites. they are concerned of the social impact of problem gambling. they think there might be 400,000 problem gamblers in australia, mostly men.
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it affects their families as well. the government has commissioned a report on what could be done and it is due to be delivered sometime this month. angie: ian mcdonald, thank you so much for that. australian dollars for every man, woman, and child. we are looking at the nikkei. the warm glow of that jobs report on friday. angie: we heard from guests about oil dropping, pretty much good for north asia at least. it is really paring back severely. well, some big games at the start of the season
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and now we are in the red. rishaad: vietnam is down half of 1%. that is it for this edition of "asia edge." and you will be
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