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Quest Means Business

Shanghai Selloff Spooks Stock Markets; China in "Patriotic Fight" to Save Stock Market; Proposed Grexit Plan Shocks Greece; Turkey Steps Up Fight against ISIS; Zimbabwe Hunts Iconic Lion's Killer; Ryanair Reported Higher Earnings for Quarter; China Lifts Video Game Ban; U.S. State Dept. Releases Human Trafficking Report. Aired 4-5p ET

Aired July 27, 2015 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


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[16:00:00]

ISA SOARES, CNN CORRESPONDENT (voice-over): There are new ways down for markets right across the world. Hello and welcome. It's Monday, the 2th

of July. Tonight, Shanghai sparks a global selloff as Chinese markets tumble yet again.

What might have been for Greece the secret plan B of Yanis Varoufakis is revealed.

And trading with the traffickers: I'll speak to the senator who says the U.S. is going easy onto the world's worst human traffickers. I'm Isa

Soares, in for Richard Quest and I, too, mean business.

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SOARES: Good evening. Tonight China's stock market seizes and investors across the globe as casting, really catching a nasty cold and we're not

even in autumn yet. The bottom simply dropped out of the Shanghai Composite. It tumbled 8.5 percent, enough for its worst day in eight

years.

As the world, the great world spins, the selling quickly spread right across Asia. Markets in Hong Kong, Japan and India all suffered losses.

Then, if you can imagine, move it onto Europe, China's biggest trading partner, where losses on the major markets there got even worse. Now

trading the Wall Street to shift come to a close as you saw, the Dow tumbled more than 100 points at the open and never really recovered. You

see 126.

Let's get the view from the floor of the New York Stock Exchange, Ben Willis of Princeton Securities Group, is standing by.

And, Ben, let's talk a bit about the trigger for this because I've been trying to get down to the bottom of what exactly caused this massive drop.

Is it fears over the economy? What are making of it? How do you read it?

BEN WILLIS, PRINCETON SECURITIES GROUP: It is China, make no doubt about it, it's China. But the stock market selloff in China is a symptom of

their economy. It's -- so the stock market selloff is what rattled the cage of the rest of the world, if you will. But we are pricing the Chinese

economy based on the data that we are -- we can extrapolate.

We know that the data that we're getting from the Chinese government is not exactly accurate, where they declared a 7 percent GDP growth rate in the

last number they put out. We know from what we're seeing, that's not true.

So we're taking our acts from companies like Apple, that indicated they were expecting a positive growth in China and actually saw negative growth.

So that's where the stock market in China comes in. That idea that those people have the money to trade are not buying iPhones.

Take a look at Cat Tractor, down dramatically from its high. It's again on pressure from China. So if you're trying to trade the Chinese market, if

you will, in the United States, I think it's a far safer bet to trade the likes of Cat Tractor or Yum Brands or Las Vegas Sands or MGM or Apple based

on the expectations of China's economy rather than trying to trade their stock market, which is a very, very immature marketplace. It was only down

8 percent because 1,500 stocks were halted from trading.

SOARES: Yes, and Ben, on the question of the data, I know today we also had some industrial profits showing from China, that fell in June.

Obviously that's ratings speculation that market invention cannot be sustained among this weak growth.

But let me ask you this, I read an interesting quote from a Chinese strategist, who said that Chinese investors are acting a big like birds

startled by the sound of plucked bowstrings.

How much of this is just panic behavior, shaken confidence?

WILLIS: Well, first of all, you have to take a look back to where the Chinese market came from. So there are some -- some of their market

indices like -- are the equivalent of our Nasdaq are up 150 percent in a year's time. Not a year today but over a full year. So a 20 percent

correction, a 30 percent correction is certainly something that that market can afford to absorb.

It's just as I said, it's rattling the cage. You need to take a look at how important those companies are. What we're watching is a centralized

government trying to control their marketplace. They don't know quite how to do it. Today's market recovery and the Dow Jones, the American market,

we had a little bit of a bounce when the Chinese stepped in front of the microphone and said we will still try and support this stock market. We

got a little bit of a reprieve.

So again, if you're trying to understand what's going on, you need to take a look at some of the less likely indicators that are not giving to you by

the Chinese government. Take a look at automobile sales in China. Take a look at the iron ore car loads of their train transport. Take a look at

electrical use. To give you an idea of what's really going on inside the Chinese economy and what that's telling is that it's still growing but not

at 7 percent GDP.

SOARES: And Ben, very finally before I let you go, how worried are you about China?

Is this the biggest concern for traders and investors there?

[16:05:00]

WILLIS: It has been my concern for quite a while. On a sister station at CNN, I was quoted as saying Greece means nothing. It's all China a few

weeks ago. Greece was a distraction and kept your eye off the all- important China. China's the second largest economy in the world. It's still in the infant stages, if you will, Their government is trying to

figure out how to manage it. So it's a very dangerous place.

You've had major indices motivators; MCI is a proceed that was willing to invest in Chinese stocks and decided not to. I think that was a great

indication of what's going on. You need to keep an eye on China as far as the world growth.

But again, keep in mind, it's not in a depression. It's not in a recession. It's just not growing as fast as they're telling us it is.

SOARES: Indeed. Ben Willis of Princeton Securities Group, Ben, always great to get your insight. Thanks very much.

WILLIS: Thank you.

SOARES: The Shanghai Composite is still up more than 15 percent so far this year, despite those concerns you were hearing from Ben. This chart is

nearly masking the utter turmoil that's rocked the Chinese stock market, these past weeks. In that time, take a look at it, how really how much

it's risen but in the last couple of months in fact, it's taking quite a toll.

In that time, the government in China has launched an all-out offensive, trying to say what Ben was touching on that just now. It's issuing tens of

billions of dollars in stimulus, essentially offering brokerage firms cash to buy stocks. The government has allowed mass trading suspensions.

Over half of China's stocks have halted trading and authorities have threatened to throw short sellers in prison. On top of that, they're doing

all they can to really boost confidence with a massive new infrastructure spending program.

So government trying to prop up confidence, trying to do all it can.

Joining me now from our New York studio is Patrick Chovanec. He's chief strategist at Silvercrest Asset Management and former university professor

in Beijing.

Patrick, great to get your insight on this. This is remarkable for many of us coverage this, because this market's an almost manipulated market. By

that I mean, IPOs are suspended, big stakeholders are banned from selling.

How is all this happening?

PATRICK CHOVANEC, CHIEF STRATEGIST, SILVERCREST ASSET MANAGEMENT: It is a very heavily manipulated market right now and that's why it seemed to

stabilize and recover for the past three weeks. But that relied on the assumption that the government would continue to be basically the buyer of

last resort.

And two things that you need to keep in mind, the first is that according to CICC which is largest investment bank in China, the government directly

had already bought up about -- over the past few weeks about 5 percent of the total market float. And that's not even including the brokers and the

companies that it pushed to buy up their own shares. So that was a major intervention.

But they were also buying in at what was still a very, very pricey market. Last week, half the stocks in Shanghai were trading above 49 times

earnings. Half the stocks in Shenzhen were trading above 75 times earnings. So they were intervening to support a market that really needed

much further correction.

And the moment that they take their foot off the gas pedal or even hint that they might take their foot off the gas pedal, then you get this kind

of downward movement.

SOARES: Let me ask you this in that case, Patrick. Less than a month ago, we saw the government intervene with some of the measures we've pointed

out.

Is there a fear another government intervention won't prevent a crash?

Or is this, in fact, a tactic as some have been suggesting by the Chinese government to really reduce support and keep the market as firmed up can

really stand on its own two feet?

CHOVANEC: Well, I think they hope that the market can stand on its own two feet. But I don't think they want it to go down, either. And I think that

it's interesting that the reaction that they had today, the CSRC, which is basically China's SEC, posted a hotline that you can call in to report

malicious sellers, not short sellers, malicious sellers.

I don't know what a malicious seller is but I guess we're probably going to find out.

SOARES: And let me ask you this then, what options does the Chinese government have left? Is there something they can do indefinitely?

CHOVANEC: They could buy up the whole stock market, I suppose. But I think the real question is what does this mean for the rest of the world?

Because really that's what is making investors around the world nervous. And I would argue that actually -- we're conditioned to think that all

growth is good growth and that any slowdown in growth anywhere in the world is a negative thing for the global economy.

But in fact, a lot of the growth that we've seen in the past several years in China has been bad growth. It's growth that has built out over capacity

that has contributed to oversupply in the global economy. And actually needs to be reined in.

So this economic adjustment that China's going through, it's something that needs to happen and it's going to be --

[16:10:00]

CHOVANEC: -- be something that produces winners as well as losers in the global economy. And I think that's something that people need to keep in

mind.

SOARES: And on that front, do you think we'll be seeing a loosening of monetary policy, interest rates being cut even further?

CHOVANEC: In China, they've tried that. But the problem is that without market reform, all that money that's injected into the Chinese economy

either goes towards speculation, either in property or in a stock market, or it goes to roll over bad debt.

So China needs fundamental reform, the kind of reform they've been talking about for the past two years, not more money injected in.

SOARES: Patrick Chovanec, always great to get your insight, is chief strategist at Silvercrest Asset Management. Thank you very much, Patrick.

You are watching QUEST MEANS BUSINESS. Coming up, stunning revelations from Athens. A leaked phone conversation shows the dramatic steps the

government considered if Greece had to leave the euro. We'll have a story just ahead.

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SOARES: Welcome back to QUEST MEANS BUSINESS.

Raiding central bank reserves and hacking taxpayers' accounts, those are just some of the startling measures allegedly proposed by former finance

minister Yanis Varoufakis at the height of the Greek debt crisis. The so- called "plan B" involved hacking into the Greek revenue services computers and then creating a parallel tax system, which the government could control

in the event of a Grexit.

In a statement on Monday, the former finance minister said the following, that reports were erroneous and part of a media campaign designed to

tarnish his legacy. A leaked phone conversation between Varoufakis and a group of hedge fund managers shows how far he may have gone. Take a

listen.

(BEGIN VIDEO CLIP)

YANIS VAROUFAKIS, FORMER GREEK FINANCE MINISTER: I authorized him and you can't tell anyone that, this is totally between us --

Norman Lamont. former U.K. finance minister: There are certainly others listening, yes, but they will not tell it to their friends.

VAROUFAKIS: I know. I know. I know they are. And even if they do I will deny I said it, so we decided to hack into my minister's own software

program in order to be able break it all, to just copy, just copy the code of the tax system's website onto a large computer in his office so that we

can work out how to design and implement this parallel payment system.

And we were ready to get the green light from the prime minister when the banks closed in order to move into the general secretariat of public

revenues, which was not controlled by us, but is controlled by Brussels, and to plug this laptop in and to energize the system.

(END VIDEO CLIP)

SOARES: That is Yanis Varoufakis, the former Greek finance minister. Well, those revelations have drawn sharp criticism in Athens, as you can

imagine. Opposition parties are now demanding answers.

For more, I'm joined by Anna Michelle Asimakopoulou. She's the shadow finance minister of Greece's New Democracy Party.

Anna Michelle, once again great to see you. Let's talk about this contingency plan that was reportedly being hatched by Yanis Varoufakis.

I'm getting that's taking many surprise, creating a bit of political storm. What has been the reaction within your New Democracy Party to these

allegations?

ANNA MICHELLE ASIMAKOPOULOU, SHADOW FINANCE MINISTER, NEW DEMOCRACY PARTY: Well, this whole thing is shocking, really.

[16:15:00]

ASIMAKOPOULOU: We've immediately called for the prime minister to give us some answers because the allegation is that the prime minister actually

ordered and authorized this plan even before election time.

Now if you had asked the prime minister and in fact when we talked to the Syriza Party before the elections and we said well, what happens if Europe

doesn't blink when you ask them to give you a better deal? What's your plan B? They would categorically deny that there is any plan B and

certainly anything that would jeopardize Greece's stay in the Eurozone.

So firstly, we're dealing with a big lie here on the part of the prime minister but we need some answers. So we've asked him to immediately come

to parliament and give us these answers and tell us, what did he know, what did he authorize, when did he know and how far did this plan actually go?

Because we don't know. I mean, apparently he says they managed to take control of the hardware. I'm not sure what that means.

But there's now an investigation in the Ministry of Finance to figure out how far this plan had gone.

SOARES: Anna Michelle, what have you heard from the prime minister, reflecting on all that, calling for answers, what have you had to say?

ASIMAKOPOULOU: Well, frankly, the prime minister himself hasn't spoken officially. What we have at the moment are leaks from his environment that

say that it was never his intention, his government's intention to lead us to a Grexit. But this is very, very troubling. You know, we're now in

this surreal parliamentary environment, where Mr. Tsipras has lost his parliamentary majority. And we are supporting his efforts to put together

this deal with the creditors. And it's -- believe me, I don't want to support Mr. Tsipras. What I'm supporting is Greece staying in the Eurozone

because we want to avoid a Grexit.

Now when I hear that there's been a plan for the past six months that has to (INAUDIBLE) taking us to a Grexit, you have to realize we're a little

bit worried to put it mildly in my party. And we need some answers immediately because our support is not a blank check. And certainly our

support aims to avoid a Grexit and not to help somebody who's planning this all along.

SOARES: Yes, especially in light of the fact that 75 percent of Greeks did not want to leave the single currency.

Let me ask you this, we know, our viewers know that Yanis Varoufakis has resigned. But it begs the question, of course, have the contingency plans,

do you think, been torn up? Or just shelved?

ASIMAKOPOULOU: Oh, well, that's the big question. The big question is did they want this from the beginning? If not, why were they planning for it?

And in any case, why didn't anybody know about it?

And I'm not talking about party politics. I'm talking about the Greek people. This is something the Greek people should have known and they

should know now, what did the prime minister do, when did he authorize this, if he did; how long has it been going on? And frankly, is it still

going on? Because that's a question on the table too.

So we're hoping to get some answers, too. And I'm sure the Greek people are hoping and I guess Mr. Varoufakis got jealous of the fact that you're

paying too much attention to China now and needed to put the spotlight back on Greece. Well, he's certainly managed to do that.

SOARES: Anna Michelle Asimakopoulou, always great to get your insights out of Greece and the time is now 23 minutes -- 18 minutes past 11:00 at night.

Thanks, Michelle.

Now the Turkish lira has fallen to its lowest level in history. The country finds itself more deeply entrenched in the fight against ISIS.

Turkey's currency fell to around 36 cents after reports of government forces bombed Kurdish rebels in Iraq over the weekend.

As you can see, the increased political uncertainty has weighed heavily on the Turkish currency over the past few months. Look at the tumble here

it's taken. Earlier Christiane Amanpour spoke to Turkish Prime Minister Ahmet Davutoglu. She asked how he planned to turn the tide against ISIS.

Take a listen.

(BEGIN VIDEO CLIP)

AHMET DAVUTOGLU, FOREIGN MINISTER OF TURKEY: . ISIS is a product of the crisis, not on the cause of a problem. They are cause of problem now; it

is a much bigger problem than Syria. It is a threat to Turkey. It is a threat to Europe. It is a threat to United States and to the world. But

now in order to eliminate this threat, we have to fight against ISIS, yes. But we have to create new situation in Syria so that there wouldn't be any

base for any terrorist organization to reactivate this type of terrorist activities.

(END VIDEO CLIP)

SOARES: In the last 24 hours, the Turkish government confirmed --

[16:20:00]

SOARES: -- they will allow the U.S. to use its airbases to launch attacks against ISIS. Ankara also called a rare emergency meeting of NATO members

to discuss the country's -- what it called deteriorating security situation. It's all part of a renewed effort to combat the growing threat

of ISIS, which Turkey says is now right on its doorstep. Arwa Damon has the story.

(BEGIN VIDEOTAPE)

ARWA DAMON, CNN CORRESPONDENT (voice-over): The sidelines are no longer an option. Turkey cannot afford to maintain its controversial albeit cautious

approach to the Syrian war raging next door.

UNIDENTIFIED MALE: There has been a reassessment in Ankara that this policy cannot continue in order for Turkey to be able to persevere and to

maintain its own regional influence. It had to be part in a much more visible concrete way in the entire ISIS coalition.

DAMON (voice-over): Turkey is now bombing ISIS targets and after lengthy negotiations with Washington, conceded on some of its positions, such as

demanding strikes on the Assad regime and agreed to open Turkish bases and airspace to U.S. aircraft, to create not a no-fly zone, but a so-called

"ISIS free zone."

UNIDENTIFIED MALE: The weakness of the spin is essentially about who is going to be on the ground to protect this zone of -- this zone free of

ISIS.

DAMON (voice-over): And can Turkey protect its own population against ISIS retaliation? Some people even stopped taking the Istanbul metro after

unsubstantiated reports that certain stations would be targeted. Turkey also reopened the front with it domestic battle against the PKK, the

Kurdistan Workers' Party, which it deems a terrorist organization, a move that severely heightened tensions between the Turks and the Kurds, tensions

that in the past three decades have claimed some 40,000 lives.

Turkey needs to ensure that it has the capital to launch this multipronged contentious anti-terrorism campaign, calling on fellow NATO members to

convene a special meeting of the alliance on Tuesday.

UNIDENTIFIED MALE: What Turkey wants to do with this is essentially two things, one is to communicate with its allies the new security environment,

its new threat assessment after its decision to become a much more visible and active player in the entire ISIS coalition and, secondly, it wants to

get the political backing within NATO for what it's called its campaign against terrorism, which on the one hand includes ISIS and on the other

hand the PKK.

DAMON: These are all very intricate maneuvers when it comes to the regional game of chess, ones that may not lead to the defeat of ISIS but

could help diminish its capabilities. These moves not necessarily a game- changer, but they are changing how Turkey is playing the game -- Arwa Damon, CNN, Istanbul.

(END VIDEOTAPE)

SOARES: A star of the Zimbabwe safari industry is killed as a trophy. The manhunt is on for the suspected tourist who shot Cecil, the lion. We'll

have this story after this break.

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SOARES: Tonight, the hunt is on for the man who killed Cecil, a 13-year- old lion and tourist attraction in Zimbabwe's safari industry.

Cecil was lured away from the protection of a national park and then shot. Safari tourist is suspected.

[16:25:00]

SOARES: David McKenzie has more from Johannesburg.

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DAVID MCKENZIE, CNN CORRESPONDENT: Cecil was perhaps Zimbabwe's most famous lion. The majestic male, 13 years old, with the famous black mane has been

killed by hunters, according to conservationists. They say the lion was lured out of Hwange National Park and shot with a crossbow and then

tragically stalked for many hours and then killed with a gun.

They say that the head and the skin of Cecil has been put into evidence; the head of the safari company arrested and the operation suspended,

according to the Hunting Association of Zimbabwe.

Trophy hunting in Southern Africa is legal and as animal populations have been decimated in West Africa and hunting made illegal in Kenya, trophy

hunters from all over the world flock here to pay top dollar to kill animals.

Now conservationists say that the lion population throughout Africa has dropped by more than 80 percent in several decades. And they say even, oh,

if it brings money to the local communities, it's not worth it, particularly in cases like this, when famous lions that bring in tourists

are killed -- David McKenzie, CNN, Johannesburg.

(END VIDEOTAPE)

SOARES: Well, you just heard there from David McKenzie and two operators off the range of hunting safaris in Zimbabwe. Hunters can go after

everything, from leopards to buffalo. Laws on the game hunting in Africa do vary from country to country. Let me talk you through slightly.

This we're looking at Zimbabwe, hunting is actually legal in Zimbabwe, very poorly regulated. Zimbabwe's government is pushing for tougher penalties

against poachers, especially those who go after elephants.

Let me take you to Kenya now, because Kenya banned all big game hunting in 1977. Today is a thriving safari industry and brings in a roughly $800

million each year.

And Zambia banned big game hunting in 2013 but recently it actually lifted the restrictions on hunting leopards and lions. The government says

revenue from hunting permits will fund wildlife conservation or some communities in Zimbabwe are caught between government conservation efforts

and the lure of money from game hunters.

Jeff Flocken is North American Director of International Fund for Animal Welfare. He's also an author of the 2011 petition to enlist African lions

as endangered under the U.S. Endangered Species Act. He joins me now from Washington.

Jeff, let me begin on that very point we just made. How much pressure are communities under, divided over that lure of money from game hunters and

the importance of conservation?

JEFF FLOCKEN, NORTH AMERICAN DIRECTOR, INTERNATIONAL FUND FOR ANIMAL WELFARE: Well, groups agree that in order to save these species, we have

to work with local communities. But there are ways to do that besides killing these animals particularly when you're talking about species that

are endangered, extinction, like rhinos or lions or elephants. Revenue brought in by non-lethal safaris, where people take pictures and view

wildlife are counted in the billions in Africa; whereas lethal safaris, where they kill them for sport, only brings in millions.

SOARES: Let me -- talk me through that a bit more detail because, of course, it doesn't make any sense morally but some would argue that perhaps

it makes sense economically. How much of a percentage would some of these communities be receiving?

FLOCKEN: Well, data have shown that local communities only get between 3 percent and 5 percent of the revenue that comes in from these lavish safari

hunts. The real money is going to the central government. It's going to the outfitters from other countries.

SOARES: OK. Let's talk a bit about Zambia. We mentioned it there earlier, takes -- it's take -- it's banned big game hunting in 2013 and

then lifted the restrictions on leopards and lions to fund wildlife conservation.

How does that work, I mean, not just from a legal perspective but also from ethics? Because many of the animal populations are dwindling, are they

not?

FLOCKEN: It's true. Wildlife across Africa is suffering and declining with lions, we know that populations have declined at least 60 percent in

the last three decades. That is a significant decline for the species.

And when it gets down to that individuals matter. When we're talking about what just happened with Cecil the lion not only is it a tragedy because

this iconic beast was killed in what appears to be a brutal and prolonged manner, but individuals matter. This is a robust, virile male lion and

when it's taken out of the population pool with a species that is under great stress right now from habitat loss, from being killed by retaliation

or from unsustainable trophy hunting, it's important.

SOARES: OK. Help me understand and help me argue this case for those who believe in this. How about those who believe and argue that hunting helps

with conservation, helps to save the animal from extinction? We saw that with U.S. hunting Namibia this year, who bid $350,000, I believe, for a

permit to hunt and kill a black rhino in Namibia.

What's the thinking there? How can you argue that?

FLOCKEN: Well, this is throwing money in order to do what somebody wants to do. They are killing a lion and -- sorry, killing a rhino in that case

and calling it conservation, even though it was one of -- there's only 5,000 black rhinos left in that country. And killing this for sport and

throwing money at it to make it seem like conservation is certainly a contradiction.

You can call yourself humanitarian but if you're killing people and then paying money to cover it up or to make up for it or compensate it, it

doesn't make you a humanitarian just like killing an animal and throwing money at the cause doesn't make you a conservationist.

We know that more money comes in from sustainable ecotourism, that there is better ways to make money than killing animals, especially imperiled ones

in this situation. This is 2015 -

SOARES: Yes.

FLOCKEN: -- we don't have to kill an animal to save it.

SOARES: Jeff Flocken, you've made perfect sense - I couldn't have said it better. Jeff Flocken, the North American director of the International

Fund for Animal Welfare.

FLOCKEN: Thank you.

SOARES: You are watching QUEST MEANS BUSINESS. Still to come, Ryanair has posted an impressive profit, with it comes some good news for budget

flyers. Ryanair thinks lower ticket prices are on the horizon. We'll hear from the airline's CFO just ahead.

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SOARES: Hello, I'm Isa Soares. Coming up on the next half hour of QUEST MEANS BUSINESS, Senator Bob Menendez says he's profoundly disappointed by

the new U.S. report on human trafficking. I'll ask him why he's so concerned.

Plus, hackers manage to take control of a smartphone just by sending you a text message. First, these are the top news headlines we're following for

you this hour. Turkey's prime minister tells CNN that defeating ISIS is quote, "A

strategic objective." After be criticized for inaction, Turkey's now taking an aggressive stand against the militant group. It has repressed

(ph) an extraordinary NATO meeting to stop the violence in the region. U.S. President Barack Obama's urging the African Union to keep up the

pressure on the militant al-Shabaab. Mr. Obama spoke from Ethiopia which is playing a key role in the campaign. The President says African forces

have made advances but al-Shabaab still threatens of death and destruction. The Taliban says it has released more than 100 African police officers who surrendered in North Afghanistan. A provision policies police spokesman

said the local commanders struck a deal with the Taliban after days of heavy fighting. An advanced investigation is currently underway.

A court in Trinidad has delayed an extradition hearing for former FIFA vice president Jack Warner. The United States wants to extradite Warner over

allegations of corruption. He appeared in court today to fight those plans. A judge pushed the case back to the end of the month.

[16:35:04] Cuba and Saudi Arabia are among 18 countries who are doing more to fight human trafficking. That is according to the U.S. State

Department. Secretary of State John Kerry released the Trafficking in Persons Report early on Monday which tracks how countries are tackling the

problem. He also honored the executive vice president of this network Tony Maddox to

recognize "CNN's Freedom Project" which shines the spotlight on the issue. Mr. Maddox said companies like CNN were working together with charities to

end modern-day slavery.

(BEGIN VIDEOCLIP)

TONY MADDOX, EXECUTIVE VICE PRESIDENT, CNN INTERNATIONAL: One of the things that we have been able to do is to tap into the group so we were

already out there fighting this fight and continue to fight on a day-to-day basis.

And highlight and publicize their efforts, we've used them very much in helping to find stories for us and helping us with the logistics and

getting things set up on the ground. I think Secretary Kerry mentioned today that this is a partnership, and it is.

There are many different groups of different types, of different places, all with the same common cause - that human trafficking exists, that human

slavery exists today is awful.

FEMALE REPORTER: Yes.

MADDOX: It is truly terrible. And you watch CNN and there are many bad things in the world. But the human beings take the decision to trade other

human beings and to treat them like that is abhorrent and we as a collective human society, a human group, we have shared values and we all

need to just say this is just wrong and we're all going to work together to stop it.

(END VIDEOCLIP)

SOARES: Let me take you back to top business stories. Europe's Ryanair reported higher earnings for the quarter. Profit after tax was up 25

percent in the three months to the end of June. Passenger numbers were also up from a year earlier, even as airfares fell.

The budget carrier says prices could drop even (fast) in the second half of the year. It is expecting aggressive price cutting from competitors

because, as you can imagine, of lower oil prices. Nina dos Santos spoke with Ryanair's CFO Neil Sorahan. She asked him about the latest results.

(BEGIN VIDEO CLIP)

NEIL SORAHAN, CFO, RYANAIR: Yes, it's a strong set of numbers, Nina. We saw our profits after tax up 25 percent -- $245 million and key drivers of

data are a 16 percent increase in passenger numbers to just over 28 million customers. And indeed our load factor is 6 percentage points stronger at

92 percent. We kept a very strong focus on costs in the quarter. We saw our unit costs

down 7 percent. A big element of that attributed to fuel but equally our non-fuel costs were 1 percent down as well in the quarter at a time when

we're continuing to grow in primary airports. So it's a combination of driving the passenger numbers (AUDIO GAP) sure

that they're always getting program and the schedules that we have and keeping a strong focus on the costs.

NINA DOS SANTOS, CNN ANCHOR AND CORRESPONDENT: We've also seen a big trend, haven't we, obviously because of the security concerns away from

North African countries like for instance Tunisia, Spain and other Mediterranean destinations benefitting from tourists that otherwise would

have gone to the Middle East but are deterred now because of the security fears.

Is that also helping to boost those kind of routes? Which ones are your most popular routes for this summer's destinations?

SORAHAN: To be honest, all of routes are very-heavily booked where we're 4 percent on average better booked this summer than we were at the same time

last year if you look at the August, September, October bookings that we have in the system.

And this across the network is not particular to any one industry. We've been working very hard in stimulating demands down in Greece at this time -

keep Greece flying with their economy in trouble. Italy is very, very strong, Spain is very strong.

So it's across the network. I think, you know, our fares were clearly loaded, our schedules were loaded two months earlier this year than they

were last year, and this is giving great choice to the customers.

DOS SANTOS: And you're going to have to sell off that Aer Lingus stake - how is that going to affect your finances from here?

SORAHAN: Well, the board made the decision that we would accept the IAG offer. We've clearly been trying to sell these shares for some period of

time. A lot of what we had originally wanted to do with our Lingus has been achieved to the always getting better program whereby we're now flying

to primary airports and we've got a much enhanced customer service offering for our customers.

We expect that the proceeds will be received most likely the middle to the end of September, and at that time the board will sit down and consider

what they want to do with the funds.

DOS SANTOS: I want to ask you about this price comparison initiative here that your CEO Michael O'Leary has started talking about. How exactly would

this project work and why are you deciding to try and ask other airlines to partner up with you to create this website to show each other's prices?

SORAHAN: Well I think this kind of ties in with the customer charter which we launched last February where we promised to have the lowest fare in

every market. [16:40:05] And we're rolling out a new website, a new personalized website,

in the autumn. And one of the key features of this is what we call a comparative fare feature where we're so confident in our own fares that we

would like to show our fares compared to the competition on the various routes and destinations the customers are booking.

I think in time, this will be something that a number of airlines probably do and it will get rid of a number of the - I suppose - the flight search

scanners that are in place at the moment. But we're so confident in our numbers and our fares that we believe this is the right thing to do for our

customers to show them what the competition are charging on a particular day.

(END VIDEOCLIP)

SOARES: You are watching QUEST MEANS BUSINESS. Still to come, the U.S. State Department releases a report on the fight against human trafficking.

And one country's rating raises controversy. I'll be talking to a senator about that next.

(COMMERCIAL BREAK)

SOARES: In China there's great news for console manufacturers. China announced it's lifting its nationwide ban on consoles and games. After 15

years, gamers in China can finally buy a videogame console legally. But old habits seem to die hard (AUDIO GAP) as Will Ripley explains. That

might mean the videogame black market is going to stick around for some time.

(BEGIN VIDEOCLIP)

WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: On this street in Beijing, well known to hardcore gamers, you'll find plenty of shops openly selling

gaming consoles even though they've been banned here in China for more than a decade.

This shop's been around for 11 years, and you can see they have the latest consoles from Nintendo, Microsoft and Sony - all of these were technically

illegal. Before the ban was lifted, they were smuggled in from Hong Kong, the U.S.

and sometimes Japan. But buying from the black market does come with risks.

These machines come without a warranty, and pirated, unlicensed games on DVD may or may not work. That's all changing now that China's lifting its

long-time ban on consoles after a successful pilot program last year. Shop owners like Su Yoon Ping (ph) will no longer have to sell smuggled

consoles or do all the maintenance themselves. And Chinese gamers will now be able to register their devices and play on international gaming

networks.

MALE: They screen you - screens for the Chinese gaming market. I'm a gamer myself. If there is an official Chinese version, I'll go for it.

RIPLEY: One thing that's not going away - Chinese censorship. The government will still be heavily regulating content. And you know a lot of

the most popular games are quite violent and so they probably won't be sold legally here in China, or if they do want to sell something like "Grand

Theft Auto" or "Call of Duty," they'll have to censor a lot of the content. Gamers say getting rid of China's outdated ban on consoles is long overdue. Manufacturers are certainly more than ready to tap into the Chinese market

which is on track to become the number one gaming market in the world. Will Ripley, CNN Beijing.

(END VIDEOCLIP)

[16:45:04] SOARES: Well Android users are being told to beware - hackers may be able to infect your smartphone just by sending a simple text

message. The stunning new report suggests that 950 million phones worldwide could be at risk.

CNN's business correspondent Samuel Burke has the details and joins me now from New York. And, Samuel, this is the biggest smartphone flaw ever

discovered. Explain to us, very simply, how this - how they'll actually be able to pull this off.

SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Isa, for this one, all the hackers need to know is your telephone number. They just simply send you a

text message with a photo attached. You don't even need to open it, you don't need to click a link and then the hackers can take over your phone.

They can wipe your device clean, they can take over your apps, and the scariest thing of all, Isa, they can actually take over the camera on your

phone. I want to show you a piece of video that I have from when I was in Israel

just a couple of months ago. I was visiting AVG, a cybersecurity firm, and at their Tel Aviv offices, I was using an Android phone and they actually

took over my web camera without me using it. So what you're seeing right now is interviewing the chief technology

officer of AVG and I had no idea that using a message similar to the one that you and I are discussing right now - they just took over the camera of

the phone that I was using and were recording everything. Now, Isa, remember the vast majority of users use Android not Apple even

though we talk about Apple so much. And the security researchers that discovered this say 95 percent of all of Android's phones are susceptible.

So 950 million people are at risk.

SOARES: So let me get this right. You can get a text message with an image or just a text and you don't even have to open it and straightway

they're hacking into it. So that's very dangerous of course. What can users - Android users - do to protect themselves against something like

this, Samuel?

BURKE: This is where it gets really interesting, Isa. Because unlike Apple which makes both the phone and the operating system - IOS - so it's

easy for them to push out an update or security patch - Google acknowledges this problem and Google of course owns Android. Google has issued a patch

but unlike Apple, these updates have to go through the phone manufacturers - like Samsung. And they even have to go through some of the phone

carriers. So even though a patch is out there, we don't know if people are receiving this yet. So if you get offered an update, take it because you want to

keep yourself safe from this one.

SOARES: I've got so many more questions to ask you and no time, in particular I want to talk off - once the TV's over -- the show is over --

about Zimperium, the cybersecurity company that flagged this concern about some 100 or so days ago. Samuel, thanks very much, always great to see

you.

BURKE: Have a great evening.

SOARES: Thanks. Now, one country's rating stands out in the United States' new report on human trafficking and one U.S. senator is not happy. I'll

speak to Senator Bob Menendez just ahead.

(COMMERCIAL BREAK)

SOARES: Who exactly is fighting people-smuggling? It is a big question. Today the U.S. State Department released its annual Trafficking in Persons

Report rating 180 nations on their efforts to combat human trafficking. Now 18 countries were upgraded to a higher tier this year. See, as you can see here in yellow - those are the ones that have been upgraded. The

change reflects improved efforts to fight human trafficking. Eighteen other countries, as you can see in red, were actually downgraded.

They include six countries that were dropped to tier 3 status. That is basically the lowest rating you can get.

[16:50:08] U.S. Secretary of State John Kerry announced report findings earlier. Take a listen.

(BEGIN VIDEOCLIP)

JOHN KERRY, U.S. SECRETARY OF STATE: Throughout, we have to be true to the principle that although money may be used for many things, we must never,

ever allow a price tag to be attached to the heart and soul and freedom of a fellow human being.

(END VIDEOCLIP)

SOARES: But one country's upgrade from the lowest status to tier 2 has sparked controversy - or shall I say is sparking controversy. Human rights

groups have objected to the decision to change Malaysia's status. The change comes despite the discovery of mass graves thought to be of Burmese

migrants. Similar graves have been found in Thailand which remains on tier 3 - that

meaning the country did not change tier. Right activists point to a new U.S. law that prevents trade deals with tier 3 countries were being fast-

tracked through Congress. Malaysia is currently in talks with the U.S. as part of the Transpacific

Partnership RTPP. Well U.S. Democratic Senator Bob Menendez wrote a letter to John Kerry

earlier this month saying Malaysia's upgrade would quote, "Be a cynical maneuver." Today he says he's profoundly disappointed by the decision.

Senator Menendez joins me now from Washington. Senator Menendez, thank you very much for taking the time to speak to us on

this. Let me first get your reaction to the is decision to lift really, upgrade Malaysia and indeed Cuba.

BOB MENENDEZ, U.S. SENATE DEMOCRAT: Well look, it is a perversion of the Trafficking in Persons Report. It undermines the power of the Trafficking

in Persons Report which is to hold countries abroad to a standard to help them fight human trafficking.

And when the report can be politicized, then it loses its credibility. Our own United States ambassador to Malaysia in April of this year said that

Malaysia would have to do much more if it wanted to be upgraded. Well, here we have a upgrade that is totally unmerited. The human rights

and anti-trafficking groups that are engaged in Malaysia have called this an outrage.

And I think to listen to Secretary of State Kerry's words that we should not put a price on another human being - unfortunately it seems that there

was a price put here in the context of Malaysia.

SOARES: Talk me through, if you may, Senator, the concerns you have with Malaysia. How bad is the human trafficking situation there?

MENENDEZ: Well it's pretty horrendous on sex trafficking, on forced labor, on a whole host of issues which is what ultimately got them in tier 3 - the

worst level of human trafficking. And so Human Rights Watch and other groups that are involved in Asia and particularly in Malaysia, have the well-documented history as did the State

Department before the perversion of this report. The reality is, is that you see the Rohingya refugee crisis, you find

hundreds of mass graves - you see how the government dealt with that. And so I don't know what Malaysia did that earns it an upgrade and it certainly wasn't necessary in order to consider them for TPP because as the

author of the amendment that includes human trafficking and says that those in tier 3 cannot get preferential access to U.S. markets, the United States

could have negotiated with Malaysia and they could have even concluded a TPP deal with them -- what they would not have been allowed to do unless

they cleaned up their human trafficking history -- would be to get that preferential access as a result of the deal.

SOARES: Very, very good point you make there. Let me say this to you - the U.S. Under Secretary of State for Civilian Security, Democracy and

Human Rights Sarah Sewall who you'll know - has rejected the notion there were any political considerations for the upgrade and said that Malaysia

had made efforts to reform its victim protection regime and its legal framework.

Do you buy this?

MENENDEZ: No. First of all, we have been told time and time again and public statements have been made by the assistant secretary that this

report would only cover up to March of this year. Well the fact of the matter is if you're not going to consider the Rohingya crisis that I just

described because it came - or was discovered - somewhat later, then you can't consider the law that was passed by the Malaysian Parliament after

the same reporting period, number one. Number two is the Malaysian Bar Association - the legal experts in Malaysia - said do not upgrade Malaysia because we have seen a history of passing

laws and doing absolutely nothing to enforce it. [16:55:00] Last year they had three convictions only and well over 100 cases and so the reality is this certainly did not merit an action.

And it's either one way or the other - either you include the way Malaysia treated the Rohingya crisis because it happened after the reporting date or

you don't or you include the reality of passing of a law or you don't because it already extended beyond the reporting period.

You can't have it both ways. You can't say the good things we'll consider about Malaysia, the bad things we won't.

SOARES: Senator, always great to get your insights. U.S. Democratic Senator Bob Menendez there joining us live from Washington.

MENENDEZ: Thank you.

SOARES: Thank you very much, sir.

MENENDEZ: Thank you.

SOARES: QUEST MEANS BUSINESS will be back in just a moment.

(COMMERCIAL BREAK)

SOARES: French farmers are hitting back against their German rivals by using farm equipment to block the roads between the two countries.

Hundreds of trucks carrying German meat and milk products have been forced to turn back. You're seeing some of the footage there.

The farmers and their powerful union are angry over falling food prices in France and say cheap imports are to blame. A French farmer from Alsace -

the Alsace region - explained why he was taking part in this demonstration.

(BEGIN VIDEOCLIP)

FRENCH MALE, VIA INTERPRETER: Supermarkets are taking advantage of us at our expense. Also, seasonal workers in Germany are paid 7.4 euros an hour

but we pay them 9.8 euros. I don't think that's right. And salaries for seasonal workers should be uniform across Europe.

(END VIDEOCLIP)

SOARES: And before we leave you, let me show you how European stock markets fared during Monday's session. The contagion for China's

spectacular stock route has sent European markets into a tailspin. Markets across the continent were down. You can see their FTSE down 1 percent,

Xetra DAX, wow, quite a bit - 2 and almost 3 percent. Similar with CAC 40. That does it for us today. Thank you very much. [17:00:01] This is "Quest Means Business." I'm Isa Soares in London --

thanks for joining us. And the news continues right here on CNN, the world's news leader.