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tv   Asia Edge  Bloomberg  June 28, 2015 11:00pm-12:01am EDT

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euro weekend negotiations collapse, there are growing concerns for the future of the currency. the human effect, banks are closed capital withdrawals are limited. coming up in this hour, the chinese trillion dollar penny stock. the shanghai composite treats investors to another wild ride. all of that and much more this monday edition of asia edge. >> keeping an eye on the markets, we have white a wild swing coming through once again today. the banks have a bit of a good rally on the bank of china cutting rates and dragging the market lower. selloffs continuing on those
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concerns, down by close to 2% in australia. the read this morning down by 1.5. >> thank you julia. greece has been making headlines for month now but surely not as badly as today. the debt drama has he come up old lung rices with capital controls in place and the euro taking a hit. let's go over right now where our anchor is then it i. great to see you this morning. tell us the mood here this morning. >> i think we will find out the mood in a few hours with athens slowly waking up this morning. it 6:00 a.m. here less three hours into capital controls. a lot of people not awake, they will be finding that there country is a different one from the one that they left yes they.
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capital controls imposed at 3 a.m. after an emergency meeting we can see limited money being able to come out of the country. we have daily limits being imposed on the amount of money that can be taken out of atms. pictures snaking around the block over the weekend. 60 euros is now the limit. a very different country for the greek people a very different story for them to vote on as they think about how to cast their votes on sunday in the referendum. currency controls until that point. acta you, yvonne. >> even the greek creditors themselves were shocked by this referendum that is set to happen this sunday. what can we expect out of today as well as the remaining eight days coming up to this vote? >> today will be interesting to say the least. there will be a lot of
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explaining to do by politicians. talking to the greek people at lunchtime, we will start to get a series here at around 12:30 greek time in which the government spokesman will direct the press, it will be an absolute packed session with the international media here as well as in questions about what happens now for greece. as you say there are a number of days before the referendum takes race with a lot of ground to cover between now and then. there is still talk of a last been a deal being reached. talk that the geopolitical enforcers will outweigh the economic problems they are facing right on the edge of europe, right next to some of the most critical areas in geopolitics right now. we will be watching carefully to see how that story comes into play later on. >> any talk on these payments due tomorrow to the imf? what is
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the outlook on that? >> the expectation here is that that will not be made, that haman will not be made triggering a series of events. the greek representation of change with their relationship with the imf changing until the payment is made. christine lagarde has been taking a harsh line but no one here expects the payment to be made as it sets the tone of the rest of the week. greece is now in default with the imf, that's the story that will be very much in play tomorrow. >> guy johnson, thank you so much. the crisis in greece has been a the top of our agenda today. fred newman said that while athens has heard the bank imposed capital controls it does not mean that greece is about to leave the eurozone.
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>> it is extensively on the bailout terms, but we are from the table and we don't even know what's on the table. it's not clear what this referendum is about. one thing to remember is that this does not have to end there is no provision within the treaties that a country could be kicked out. cyprus has remained for example, with capital controls. potentially even greece could remain for some time. >> greece may read -- may remain in the common currency but one diplomat said that the crisis will leave scars that will last for generations. >> this will split families. friendships. is this is. right down the middle. it will be very, very difficult. these groups will hate each
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other for generations. it is a really, really difficult decision and it is about not only greece and europe but about you throw the nation. >> pine ridge investments will cause more turmoil in greece. >> he was unprepared and uncooperative. they did not communicate well with these decisions. i think that the longer-term implication is the european community suffering more. >> that was the word from asia on greece. in other news, the crisis over faulty airbag is weighing on
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honda from last year it's down by 7% because of the cost of recalls with operating profits coming in at five ill you and dollars, maintaining their forecast for this year they have affirmed and eighth fatality in a honda quick with a tech, airbag -- honda equip with a to caught up -- takata airbag. suzuki has told investors that arbitration will force volkswagen to sell back stake and that has completed. relations between them soured after suzuki agreed to purchase engines from arrival. apple is set to have started an early production of new iphones and sources say that they will
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include a feature called force touch sensing how hard users are pressing on the screen it can be adjusted to bring up different functions. the phones are likely to be similar in does -- in design to the iphone six. let's get back to the markets now. a busy day harrowing declines, another typical day for chinese stocks in the wake of the chinese interest rate cuts of the weekend. >> as you say, another wild ride on the asian market. we currently have it down 3.5% with fluctuations continuing and at one point earlier this morning at was in positive territory. now they continue to sell off as they get close to bear territory. $150 billion have been lost from
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asian market this morning in japan down and closed by a two to three month low, selling off ridiculously in london on friday night, really hurting the us trillion share market as well. if we do have a quick look at the shanghai concept, what we are saying is that most of the week this is coming through from the technology stocks and we are seeing a positive momentum coming through as you can expect, though we do have the banks down by 6.1% with a lot of the banks looking quite strong as we know that investors like cheaper money with the bank rate cut over where we are seeing them coming through today in china for most technology stocks with communications down by 8% and it is anybody's guess what
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will happen in the next 20 minutes to an hour. >> thank you so much. david, painting a wider richer i stopped reading the updates on whether it's up or down. starting in mid sentence here at this point we just don't know where it's going. paint is a picture. >> what we do know, let's just get this right we have the small cap. basically the chinese index and to a lesser extent these components are the bigger ones. that said, let's take a look at some of these effects that you have seen from the rate cuts. >> too much of a coincidence there, i think. >> i think that maybe last week
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there was speculation that they would not move anymore because they had already injected something into the system. here they had a plunge on friday. we had a cut with interest rates on saturday and a further cut across some of these. we have seen a drop in the money market rates for the first time in one to two weeks. i think it is a chart with rapid check asus instead has managed to alleviate liquidity concerns as we approach the quarter area did if we could get that up as well, it is the daily quota hitting 13 billion monday meet. there was a big drop on ride a the quotas a drop on friday
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that basically meant that people have these funds rushing into the market. what we have seen today is that foreigners are selling as well. over two days 14%, don't take -- don't pay attention to the percentage 14.5 billion, there actually is more room for the lota because people are selling and talking about the drop on friday down to 9.8. we are actually seeing people selling, if you want to put it that way. where do we go from here? bank of america, merrill lynch, the latest cuts triggering a sustained rally with the balance being temporary of this link. we could drop between 2% to 30%
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and jonathan gardner, the chief strategist in asia. bank of america this morning he comes on the show and pacific we talk about what might happen today, specifically saying that the ferocity of the selloff on friday did not manage to and we could see more coming into play. >> even despite what they did over the weekend if they continue to not get balance of market, we are clearly in a bubble. >> what else could it be? >> exactly. thank you so much on that. coming up later in the show, mission to the moon, we have a special report on the google plan to get private enterprise into space. next greece where they even invited to join the euro in the first race? ♪
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>> 400 people in the half bital, 200 in intensive care after a fire engulfed the partygoers in taiwan at a party. the colored patterns thrown into the crowd accidentally ignited. park workers and the organizer are being questioned. asia has launched a nationwide sought -- nationwide hunt for the suspect to have massacred partygoers in susa. at least 30 people died in what has been the worst ever of such attacks. the student was shot dead by security forces. the interior minister says that he acted alone but had accomplices. no motive has been suggested.
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the latest space acts -- space x mission has ended in an explosion. the unmanned rocket was carrying cargo when a block went off in cape canaveral 2.5 minutes into the flight when it exploded and the cause is not yet down. this is the second u.s. resupply mission to fail in less than a year. closer to home, asian flip on monday as they shut down the banks and became concerned that the country might leave the european union. victor, we talked about this for so long now every time that you come onto the show you talked about this and you talk about the experience at lehman brothers and the greek fallout. is this something unimaginable or something that people are
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expecting? victor: if you remember, their problems started early in 2008. the expectation was that everybody knows what's going to happen. that is what everybody says today, that they know that they will have an -- what will happen and that we can let greece go. when the second or third derivative will happen, they will a -- we did not think of that and there is another pipeline or product affected. that we are so interconnected through various instruments that you do not know the impact yvonne -- impact. coupon: how effective will this be -- yvonne: how effective is
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this going to be? victor: cash already left. that has been happening for months and months. the question is, what do you do going beyond this point? how do you continue functioning as a country, a banking system and economy? it is just a question of what you do beyond this current juncture. yvonne: what do you do? eight days into the referendum, how is the government going to navigate these days? victor: people want votes. they want their cake, they want to eat it too. they want to be part of the eurozone but don't want austerity. they want to be part of the union but not with the same rules. there's not much of a point in asking people they will
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probably say they want to be part of europe but that does not mean that they are prepared for austerity. the key question is -- should greece deleverage at all? it may be just too dangerous. that is exactly the position we are in. ecb recognizes that it is no longer possible. no politicians seem to fully the idea. in which case you need to leave greece alone and just keep going. try to author some of the structural aspects, but it is to complicated to detonate any country on a regular basis. after all, what will happen to cyprus eventually? slovenia? it becomes a never-ending story.
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yvonne: it really does. victor, thank you so much for talking to us again about greece. coming up, sign a prenuptial. and a gathering in beijing as indonesia becomes one of the top new lenders and investors. ♪
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yvonne: the founding members of
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the asia infrastructure bank are in beijing sign an agreement today. 50 nations committing to the project despite warnings about government transparency. financial involvement was announced but the levine's said that they would not join just yet. good to see you. this is a big day for china area >> indeed. beijing in the drivers seat they won't have what they were looking for what prior to this you cannot say that this shows chinese ambition in asia getting support -- like you said -- with members sign up the largest shareholder investing over $670 million over five years with
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australia saying -- yes, never mind key allies have resist it. that means that they have also said no for now and worry that china will not adopt the best practices to super ortiz object and the thing is that china wants us to work and it is in their own interest to make it accessible and successful with the bank expected to start up next year $100 billion of capital. >> today that is her, that both were but what do we know about the structure of the banks? there have been a lot of questions about that.
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and essentially what happens in the aai be, so reporters are ready to cut their lights to last known order of a mile if the u.s. decides to become members as well. speaking of voting rights, indonesia wants some as well. i want a lot of people and a lot of say. >> for now they are getting us live. they queue. we are looking forward to afternoon business in tokyo. the latest after the break. ♪
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you will will
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yvonne: asian markets are tumbling after reese impose capital controls to a bird financial. banks have been ordered to remain closed to stop people from withdrawing cash at a record rate. and she will see him in 30 measures after the talks broke down the avenue friday and china
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has taken action to halt the biggest stock route into decades. the central bank cut the lending rate to a -- to a record low over the weekend, but it has not top volatility. shanghai shares have been lurching all session and are currently in bear market territory. the impact is not just limited to equity market and that is offshore trading and a dollar with the yen. let's get the latest on the markets right now. julia, how is that you? >> the shanghai coppice it is apparently down 3.3401 percent with a lot of selling coming through. where we are seeing a lot of and
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i have fallen quite a few technol this technology -- we had quick movement coming through on the financial sector by the bank of china on the weekend. they like the fact that their money is going to a little bit cheaper in the financial sector which is already in the red territory with banks up by .7 per month. this is a lot coming through in the asian region. >> what impact that you have a currencies and we have a lot of volatility in the euro continues to tumble by 1.4% with a big mark around it :00 as we continued to see volatility
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coming through in the currency market. the futures market in a think he can articulate where his and that is of course in europe. >> all eyes are here this morning. thank you. let's get more on greece with guy johnson, who has been there all week. a lot of greek people waking up to the shocking new about this referendum. what is the mood so far? >> it is going to be one of shock. everybody knew that this was a distinct possibility. this is a fairly fresh piece of news as they wake up this morning. but over the weekend you have
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seen lines of people at the atm anticipating withdrawal restrictions. import -- it's interesting to notice that these do not supply to tourists or anyone with a foreign issue credit card. the critical terms sector has hopefully been isolated from the capital control story that we are seeing in athens. but i do think that people find themselves in a difficult situation without knowing the financial system they will be operating. >> we have eight days left until the referendum on sunday do the greek people really know what they are voting for this ointment? >> either you will be halt tell -- hard to tell, to be honest. yesterday we saw the european commission publishing its proposal for the administration in brussels.
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and that maybe the offer being put on the table before the people is not necessarily the one they will be voting on. there are some here this will suggest that it won't even take place, that one week in is a very long time and we are about to find out that that is the case here in athens a lot of twisty turns before we get to that referendum. yvonne: tell us about the timeline and what we should be at affecting. >> we will be seeing some big press conferences today, as well as one here in germany. remember that they have spoken in the last 24 hours, the treasury secretary talked about
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the class as well. geopolitics and economic very notably interest -- involving the story with three months in the country of energy storage stored up. that will he an issue over the next few days but the energy story powers the country to become something that we can talk about. yvonne: guy, thank you so much. talk about capital controls cash machines across the country have run dry as people try to get their money out. hundreds of millions of euros were drained from the system at a record rate. bloomberg has been gauging reaction to the rice is on the the. >> we did not find money anywhere.
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>> i want to get my money before i lose it. >> i went to the bank and i got no money area my pension. i have not got a house. i pay rent. it would be so many things around me. here we are, worried about our job? nobody knows. >> did you take money out today? >> no i kept my trust in the greek government. l serious situation i have ever experienced in my life. i'm 25. >> we had a way. yvonne: the board of ebay has
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formally approved splitting the company in two, focusing on online commerce and the digital payment system being separate. trading on the 20th under pyp l, some will be free to forge relationships with financial operations. foreign oil ownership, the government hasn't up rate to emerging markets that is from september. investors will be able to increase their holdings in a number of in this these. ownership of banks remains cap. we are trying to play a bit harder, that is what the japanese government is telling civil servants. telling current employees to come into the office earlier to make sure that they leave by 9:00. participants will be encouraged
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to forget about unnecessary overtime. current japanese employees on average take half of their time off in a year. we are talking about the cost of group today, just one that has been accused of false roof orts of violations. and krueger is looking into this for us. talk about what these groups are used to doing. >> fate -- 14 state-owned firms they have been accused of. look at your cost guard, major shipping. major electricity and energy providers. these are big names to see the government will after these individuals and now the big-name corporations are looking into the balance sheet. the focus has been in violation on the a public funds, the uses
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a. with due diligence and mismanagement. so, big names. the audit, it was a national audit of china put out a work or for 2014 that was just released on sunday with egg names coming to the forefront. >> there is also some violation of the financial sector names as well? >> again, the bank of communications -- what they should do that should have done was go right back to april 2005. they have not followed the rules. the credit insurance group basically found her to be giving a loans to the unqualified projects. orders are saying that they have
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identified fit its particular aces that will be reported. we don't know exactly what the details are but seeing what happened in the pace we will have -- in the past we are likely to have big names. >> next, a roller coaster ride and an is some why chinese stocks are up and down. ♪
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yvonne: sri lanka, phasing early elections in august as they attempt to drive through roof warm after taking office in january with a parliament remaining largely loyal to the predecessor. updating the electoral system. presidential support for the investigation of the final stages of their civil war. in vienna they are close to an historic deal to curb the
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iranian nuclear program according to the eu foreign-policy chief. negotiators say that they have overcome one of the most contentious issues and they will be waiting sanctions until after they have verified have been implemented. they will gather again once the deal has been drafted. attempting to fly around the world powered by the sun setting off on its most dangerous mission yet they were going to go last week of bad weather intervened going to japan after leaving china on the first. the flight to hawaii is the riskiest because there is nowhere to land in an emergency. joining me now are david and julia and victor. no emergency landing on the solar impulse. is there an emergency landing in
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china? >> it depends on what you define as an emergent landing area certain rates we should not be worrying about, but we should be worried about others. everything that they are doing right now, everything that china is doing is trying to avoid contraction beyond 5% or 6%, which had been reported in the last three months. if you define lending as trying to maintain 5% to 16% nominal i think that china has a good chance through the balance of this year. >> we talk about the markets all-time, they have done well in china, but how real could an impact this be on the economy?
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>> everything that we do these days has nothing to do with the real economy you have to sort of understand that when you have three to four times more that then the underlying gdp, that's not the critical. what is critical? how do you measure the underlying economy? everything that we have discussed is making sure that the leveraging goes on without creating massive systemic risk trying to keep the nominal gdp at day as much as you can. >> it is interesting to think about the dynamic of of worth rate cut the fourth correction in ways with a first rate cut and three corrections where it is easy to think that these are all coming to my rescue and fundamentally we would highlight some of the same things -- part
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of having an equity market that is performing is that you can raise equity, allowing the corporate to deleverage. that is a part of an underlying presumption of why maybe regulators are doing what they are doing. let's that's right. -- >> that's right. equities have a number of buses. including recapitalization in investments. there is a whole range of reduction on foster capital. reform cannot really progress unless you do we -- deregulate the bond market. what we should be concerned with is not china mobile we should be concerned about 10,000 state owned enterprises across china. equities perform many roles, but one of the key roles is it there has to be an asset class going on.
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you cannot have real estate not doing anything with management not doing anything. you are not really opening capital accounts. you are trying, but not really. the only thing the you have got left is the equities and the bond market. take it to do three years from now. china will do what americans have done financial eyes every single -- every conceivable instrument in china. mortgages will securitized. receivables will get securitized. eventually there will be more to play with, but not today. eventually we will get more but not his wild swings. looking at what happened on saturday it has not had as much of an impact, but we should be looking more long-term? >> you also have to take consideration from the macro.
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we did have a risk on, risk off mr. miyagi tight situation here. if that had happened this weekend maybe this move would have had a different impact. >> i would say that the pboc have not fully cap did that deleveraging is not possible. therefore every thing that they do is relatively small in nature. for example should chinese interest rates be a zero? absolutely. should the reserve requirements be a 5%? absolutely. should you have a more forceful fiscal policy? absolutely. what they are doing, they are not fully at something that there is no way out. you have to continue whatever it is. one of the reports that we contact -- compared them to was donkey crossing the law for flow in the shrek movie -- just don't look down. just keep going. i would go beyond that, anyone
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repaying those debts should be imprisoned for criminal offenses. you need to continue leveraging. i don't think it is the method. i think we are getting there. one of the things that could have been more on saturday than what they have -- apart from greece i think they are too timid right now. >> the donkey says don't look down, but we talked about what was ahead. greek banks, finance ministers -- how big of a deal is it to open the banks? >> there are two solutions. you wanted structural reform. or you get yourself a new currency. you cannot have it both ways. can they send it for another 12 months? they might find a patchwork of solutions to carry on but fundamentally the order of the structure is within the rinsing
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or you get yourself a new currency. that has always been the case since 2010. today you could argue that the banks have been disconnected from greece. at the very least deutsche bank does not have to go bankrupt today. neither does the bnp or french banks have to go bankrupt. the. the bad news is that the public sector has already absorbed those losses. are you prepared to expend lives without real structural reform in greece? what you have therefore is a country and culture can lifting with your monetary policy. >> it is not so much a move, i guess as one you think of policymakers having between now and the referendum -- it is tough on the assistance on friday. chicken and the egg.
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what role do you see them playing this week? will they come out to support these comments? >> the thing is, you have to separate something like greece from something like china or other independent. in the case of greece you are dealing with a relatively small part of the union and the eurozone. because you have a political construct rather than the union you have to be careful as to how far you will push it. ultimately there is unified disco he and monetary. they will never fall into line with those. far better off, getting out. the concern is that you don't know the consequence. every piece of security these days tense to have tend to 12
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other pieces of security attached to it. it might freeze and unrelated market. it was actually a corporate market. that was not anticipated at the time that it would be one of the concert is, so that's one of the problems. yvonne: we will see what happens there. thank you so much for joining us. coming up next, the moon private enterprise joins the race to make living in space a reality. special report. ♪
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yvonne: space exploration has always been costly and funded by government, but now private companies are being encouraged to venture into space. we took a look at some of the teams taking part.
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>> the rules are simple, the race to and on the meat -- on the moon. the google prize challenge has history to be made with test to be one. $20 million for the first privately funded team to land on the moon, drive a short distance and transmit back to earth. one of the teams taking part he's hoping that this carefully designed robot take the top it weighs only three kilograms and has views created by a 3-d exam. the team has been testing it inside and outside to gauge mobility and range. the team leader says that such complex machines offer plenty of new possibilities.
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>> there is already a demand for that. it is also more interest to collect more data. we know that american companies have signed contract with nasa to gather the information. >> they are part of one such company taking part in the competition. >> i put the cost with the teams and ultimately's lit the price so when we land on the moon and it would be early. >> you want to see the moon turning into that. it would be a place for economic development and pushing the sphere of humanity outward. >> private enterprise and a new safe feature.
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yvonne: that is it for us. next we have special coverage on the crisis in greece and at the
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