tv Bloomberg Markets Middle East Bloomberg May 15, 2016 12:00am-1:01am EDT
midday in hong kong. companies are taking advantage of the debt market. $37 billion worth of debt. chevron. and bp and take the oil markets and give it a check and you see the credit swaps. ensuring against default. the blue line is the u.s. energy producers ramping up their debt. that has dropped quite percent precipitouslyuite . investment-grade debt down by 3% over the quarter. dividends, that is the holy grail for the oil market. $40 billion to be paid out. bob dudley midpoint.
think about the leverage ratio. first the dividend on the other hand. there's a wonderful headline about big oil gobbling up debt. did a little bit at the end of the week. a less a bully and tone of the market. andeople he these of the u.s. closing prices. the s&p 500 dropped for third week. the longest losing streak since january. a three-day slide on the s&p 500. nordstrom down 19%. let's take you to the middle east. way too fast on the draw.
we started the trading week with news from saudi arabia. the top.f the imf was saying goodbye will indeed exhibit growth through 2020. the middle east and markets had a little bit of a time down one of base for the week. up one half of 1%. onse of the finishes thursday. egypt up 1/8. chicken on those benchmarks. iran was back at record
production. canada is back online. the movie's story impacts the middle east. >> china's economy resumed its rise. way down by overcapacity in industries such as steel and cool. down 6% in april from a year earlier. retail sales also mr. the forecast. a rocky start. china's economy stabilized. a rebound in the housing market. a good week for sodastream international's.
the company beat earnings estimates. the strong demand in europe helps lift earnings. the shares are down 15% over the past year. the french leader is planning to sell the banking assets to recover funds from $1.1 billion loan. they have the right to put it out under the asset deal. manus: downgraded middle east oil producers. what is this mean for saudi
arabia and bahrain and oman? they are playing catch-up with the other companies. >> the big surprise for this is that it's taken so long. late october they moved to downgrade saudi arabia. movies was really playing catch-up. within the next two months were going to downgrade. that is what happened. feeling the force of that. we've got to put this downgrade in context. the second-highest investment-grade rating the debt
to gdp is still extremely low. aboven reserves are still $500 billion. what kind of impact is going to have. given the scarcity of saudi arabian debt it increases the impact on cost of funding. it is just a bump is in it. i think it is a speed bump. the investors of these kinds of debt issuance often more than 50% of the debt goes to the middle east.
they have their own rating announcements. level into junk to two levels and to john. supported by the saudi arabia and government. , the investment profile is still very strong. dhabi.alked about apple dobbabu in a slightly different context. there isportant thing that they have the world's largest sovereign wealth fund. no one knows how much money they actually have. like saudi arabia is into the hundreds of billions of dollars.
you are seeing a very wealthy backstop. the plunge in the price of oil. joining me from jakarta is the president and ceo of the state owned oil company. try to make sense of everything that is going on in the oil markets. what is this new environment of , what does that mean for oil and gas production.
process and we think the goodtion is going to be for the performance of those companies. has not changed a lot. >> i hear what you are saying about efficiencies. that is something that every oil industry analyst is talking about. capital expenditure for this year going forward. will you cut capital expenditures at how much week headed by. >> we cut it by about 20%.
we get a good performance on that. getting a low price for others. manus: a global player in the oil markets. the state owned oil company. we'll be back in just a couple of minutes. we will take a very short break. if you want to know to go with her to go for your daily digests is in our digital destination. tailor-made for you. getting the latest data from the region. you can watch all of our reports in our interviews only available online. ♪
manus: let's get back to the director and presidents of the state owned oil company. he joins me. thank you for sticking with us. what about the stories this morning and the big issue is how the saudis plan to keep market share. saudi arabia and kuwait are two of your biggest suppliers. prices areducing they doing better deals to keep
your business. other other people knocking on your door to keep your business. is the question to me? manus: getting good and better deals from society and the effort to hold market share. are you seeing other countries approach you with better deals? >> i think our position with a we got increasing crude supply.
we position of the company have to improve and invest in the refinancing. upstream we'vehe already made more than 3 billion u.s. dollars. 50% of debtout investment will be good for that. we're doing a deep dive on those companies. we know that we can get 60,000 barrels per year. with death and investment this year.
manus: how will that affect your business? will that make a change? your non-core businesses in the ipo. how would that new structure affect your operation? we are bringing the activity now. we bring down the personnel costs. that will create a lot of movement. that is the way of how to get to and can we gety
one last question. your perspective on the world. one of the big stories that we've had is that 130 oil and copies of gone bust. $44 billion worth. of losses. morexpected to be many companies going bust in the oil industry in 2016? i believe if the price is then you see more and more of these companies will be calling. if the price goes above $50 a barrel then everything will improve. we are awaiting the judgment of the market. we believe will be between 40 and $45 per barrel.
manus: only ceo who is managed to answer a question with a question. good man. thank you very much. is opec no longer the swing producer? is it the fractures in the united states that on the swing producers? question about fracking. price will be great good to the market mechanism. indonesia has the opec. other forces.
is this a flash in the pan? elliott: too early to sell in terms of the company's turnaround. this was a very good week for the company. back about the hundred million dollar mark. by more than a third. the shares popping over the course of the week. increasing its value by one quarter. strong demand in europe. the and wellness company. they consolidated their operations in israel into a factory in the south.
in the desert. closing that controversial factory in the west bank. manus: kim's help them? turning it around in the united states? elliott: there's got great penetration europe. one of three households have a .oda stream machine they of a new marketing strategy in europe. if hired these services and an actor called the duke of bjornson. he plays the character the mountain in the popular game of thrones series. controversial ads and exploding areas. they also got scarlett johansson. manus:
arabia's plan to ease restrictions for foreign thestors could increase chances of being in the imf for 2019. she is our emerging markets editor. have you read this? 2019 is three years away. earliest it would be next year. it feels like the saudi's haven't moved as fast as they might have. now with these recent changes that they announced earlier this month credit suisse has said that they suspected might be part of the and cia index in about three years time. manus: we've got a huge number of hurdles between now and then. we are the changes seeing in terms of declining markets actually built the story up. wanted tof investors
see these changes. a lot of these changes with some of them were entering the field for the market. this is very positive change. it does put saudi arabia in line with a lot of other markets worldwide. this is very positive. manus: the aramco is the cornerstone of this puzzle. >> they say if the ipo happened that saudiinclusion arabia would account for about 5%. otherwise more like 2.9%. receivedissue is we our in that range. to theit comes down valuation on that. thank you very much.
a quick round up some other stories. downgraded middle eastern oil producers citing the collapse in the price of oil. the ratings agency cut the ratings of saudi arabia and bahrain and oman. arabia,ase of saudi moody's said that lower oil prices may lead to a material deterioration in the nation's credit profile. than it was in 2015. saudi arabia led a decision by defend keep pumping to its market share. in spite of the swelling of the inventories. buyout is leading a group of investors making a and theyinority stake are in discussions to team up with other investors including middle easterners to buy it for as much as $35 billion.
the stake that size would be valued at approximately $2.6 billion. it reportedly doesn't include the diamonds. he said he was waiting a bid for the company. planning to sell to buyer groups banking apparatus. a $1.1 billion long. worth nearly $400 million. they have the right of the assets up for sale under a restructuring agreement that was made with the dubai government and its creditors some two years ago. guest is based in frankfurt. he leads the banking sector for the india region. he is in the nine states to speak at the main digital banking event. every ceo talks to me about the
digital proposition. the digital revolution. a huge amount of changes going on a global banking. deutsche bahn. what is digital, where does it fit in in this new landscape. >> industry gives the incumbents a chance to transform their business models. something much more efficient. taking out costs. customerg the overall orientation. a lot of these countries will use that chance to change their business model. minas: i speak to a couple of ceos every day. there was fascinates me because the next generation is a digital generation.
70% of the customers will only ever operated the online banking. that is the challenge is that? >> absolutely. one of the restrictions that we see on this is that a lot of managers are part of that generation that can really think wast how the new generation acting with digital tools. none of our kids will step into a branch. when it comes the real complex problems. mortgages and investment plans, retirement savings. that is probably also the future that our kids will go into branches for that. from the bank and advisor.
demographics is out there. manus: reinventing the economy. region ofin this embracing the digital program. some very senior figures. the use of digital. are was still in transition? >> is a very interesting point. the region here is very digital already. it is still pretty low. the question is why is that so. the financial technology industry driving the innovation in this industry. intense as it was in
singapore. they still haven't sorted out exactly what they are doing. they're taking a big chance. to evolving within the region. a wonderful gathering that it did. connecting that visage with electronic version. that is the great issue. we got the big barclays story. the africans are much more accepting of digitalization and are acting dish actually jumping the rubicon.
is that still the case or they still setting trends? this is a very mature market already. , what you seerica in other emerging markets is banking populations. they're just doing two steps in one. of course with digitalization you don't need a branch network to infuse customers banking accounts. manus: trying to explain what digitalization really really means. >> not for mature markets. banks have these huge costs and say have customers who have other issues in the branches. they are already banks. it is hard to compare. nevertheless, you see strategies in africa where telecom companies are penetrating the
banking market. we see that in europe as well. orange is stepping into the banking industry. telefonica just announced that they are doing banking strategies. we see that trend. manus: one of the issues must be culture. each region of the world has its own idiosyncratic culture. it is always like balancing the scales for change. >> from our perspective digitalization, if you think about it you think about information technology. onlyrms of change this is 10 or 15% of the overall change. means the biggest change now and -- and management
challenge is that you have to get to the bankers. especially in their hearts. to mobilize for that. this will be the biggest challenge of the industry. manus: you seem to discover the banker with a heart. it is driven by the profit motive. thank you for joining us. up, we get into regional markets. that is coming up next. ♪
manus: let's check in on some of the other stories making news. king has recovered after a long infection. the 80-year-old has an infection in his right lung and quickly developed a fever. his condition has returned to normal. but he will remain in the hospital to treat that infection in his knee. is being watched closely in thailand where he is revered as unifying presence during a seven decade reign. president nicolas extended the government's special emergency powers. said hisof caracas: he
opponents are orchestrating foreign military intervention in venezuela. he says it will prevent them from preparing for any scenario. the opposition is controlled country congress since december. they say he is moving to extend his power and that is illegal. ukraine has won the eurovision song contest. about a melancholy tune the deportation of todd harris by soviet authorities. singers came in second. be focus on crimea could considered a slap at vladimir putin. they said there was no clinical subtext. the rules of the competition prohibit little statements. -- political statements.
manus: major middle eastern oil arabiars such as saudi have had their ratings downgraded by movies. movies all of this based on lower oil prices. let's get some context for this action. of the firm.ctor our emerging markets experts saudi arabia being yswngraded and oman by mood will not have a major impact. >> i don't think will have a major impact on us the deficit keeps on growing. i think the challenge now is that the effort to change things, reforms are happening.
wars consuming lots of cash. egypt here and there. oil prices. all the expenses are happening left right and center. it's a rich region. capable of handling things. manus: getting included in the organization by 2019. a little later than some expected how you view the outcome? what does it mean for you? trying to double or quadruple actually the level of the initiative.
not a hot discussion for the saudi's. a doubling of tripling quadrupling of their markets. investors actually very interested in that. is a big problem for everybody. it is not an easy issue especially with international activity. money, putoffer the in a bank account we end up being a broker for those transactions. manus: i would love to know what you charge those clients. we had a first-quarter profit of $1.21 billion. doubt a great deal of that this can continue. it very great company.
you have to give them credit for that. in good times and bad times they deliver. the margins of increasing. almost half of the revenue of the company. this will continue growing. the fixed cost area. many of the things in the boulevard at the moment. retail that will come up through the use of these. i think they have the balance right. fromf the revenues to come
rental income. they capitalized on the demand in south asia. it is a prime location. thatve a great history in area. it wasn't selling the way used to sell a few years back. but had a few conversations with the banks. issues on the agenda. one is nonperforming loans. i understand that symbiotic relationship. there are potentially store the problems with that? is it all depended on oil having a floor at $40? it affects the revenues of the governments and businesses in the region. few banks actually have an issue
on that. revenues are down. is not a problem only the nonperforming loans. demand for lending has decreased. manus: one of the themes is the of the dubai market. your clients except that? do they traded to that bullish market as well. it has moved from a certain area. are you a buyer? >> it doesn't happen all the time. a translation of what is happened with the larger market.
may is the worst performing month in the region. for the past two years. the matter how good the markets are. i would focus on companies that are focused on the exports for 2020. any companies are going to stake in that i would follow. they're already talking about 2021 as legacy planning. managing director of the company forcesup, under pressure the dubai group to sell some of its assets under a restructuring agreement you are watching the sunday edition of bloomberg markets middle east.
♪ drake and skull there was slated to deliver the numbers today. this engineering company acting here. first-quarter revenues coming in at 4.03 that is down from last week. that income came in at 9.8 million euros. this time last year. 50% of what than the analysts were expecting 9.8 million for the first quarter. net income remains cautious on the prospects for the region. it continues to be a critical market for them. and all of the changes that are
going on with them. how they benefit. we will of course be covering that story. go to bloomberg.com for the very latest on that. with talk about the french the dubai group's banking assets. $1.1 billion. they have this loan with the dubai group. the law has not been paid. >> they waited a long time to get their money back from this loan. the height of the boom in dubai. now the deadline has passed. in march. they said we want to get back is much we can. they have said we're going to try something new.
cover what we can from these assets. they look sick about $400 million. it could leave the french bank with a big shortfall. about $700 million. they said we had enough we know we are not going to get all of our money back but we will try to get will be can. some areas of ready made provisions for the default on the loan. manus: take week and get at this stage. it's better than nothing. thank you very much. the very latest on that situation.