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tv   Bloomberg Markets Middle East  Bloomberg  May 16, 2016 12:00am-1:01am EDT

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♪ >> it is sales season, bond auctions lined up across the gulf just as moody's downgrades several sovereigns. >> the bank of turkey under army from owners. >> more signs of a slowdown in china, retail sales. as china's group writers- uber car
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>> -->> it is a cyclic across the emirates, 5:00 in -- it is 8:00 in the emirates, and 5:00 in london. >> thank you for having me on this show. what are you looking at today? enough. strange i'm going to check in on oil primary something interesting going on with the markets. -- but i want to show you the oil market. when we have is traders not missing a beat. this is the white line -- excuse the pun -- but they are pumping up positions. they are taking advantage of the rally to contribute to the net short positions. short positions are the highest in 4.5 years.
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traders are adding to that for the third straight week. nigeria. this market rally, nearly 4% in know --d april but not only a couple of percentage points in may. do not be left behind. he recited? world awashee the with oil. just too much for some of the players coming out of china. production slumping to the lowest in 14 months. that was a 5.6% drop. certainly bringing on the we look toward rebalancing because that decline rate we see in china, the most since november 2011. in march, we heard from the
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president of metro china who said he shut down fields because there was no hope of turning a profit so we have seen that reflected in the figures in april now they are forecasting petro china the first drop in production in 17 years so that could be a boost in terms of production for the u.s. and could push up prices. let's check the markets in the asia-pacific. month i has been trading for 20 minutes. seng, up it is despite the china data coming in. a miss on all fronts when it comes to fixed assets. gdp contracting in hong kong. weaker yen boosting stocks today in japan. let's go to the middle east -- just under two hours away from the opening of the emirates markets. 10:00 local time. this is how the trading session
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looked on sunday. dubai, down 1.2%. cuts are pretty much flat. let's take a look at saudi arabia. investors shrugging off the debt dynamic. pretty much flat on the benchmark. this time, it was moody's with that downgrade. 8.1%. as much as the benchmark has gained about five last six weeks. kuwait down a fifth of 1%. let's take a look at egypt. down 2%. tel aviv down one point 4%. that is the bluest we have seen there in two months as trading resumes following the holiday. manus: thank you. let's check in with other stories making headlines around
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the world. stocks at ainese two-month low after data shows a deepening economic slowdown. the u.s. also showing those. commodities less in shanghai. trying tors are sustain growth while cutting overcapacity. lastly, apple put $1 billion into didi and that helped boost valuation. alibaba and hang seng are also key investors. the iraqi central bank chief has told us that a possible that from the imf could unlock aid this year. the finding could help opec's second-biggest producer with finances into one with the
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islamic state. iraq is expected to receive $10 billion in assistance from the world bank with a further $5 billion coming later. asia's biggest aircraft has rejected from an investment fund for an ipo in hong kong. towardwill be sound investors, taking up to 52% of the base offering. is 100 million u.s. dollars for private equity firms will invest. this is bloomberg news. manus: thank you. more companies in the middle east are tapping the bond market trying to assure their finances.
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our expert. in it is as if they have had a light switch on. reporter: it is interesting, isn't it? this week could be one of the busiest we have had. we exclusively reported yesterday dp world will come to market. -- two -- bahrain reasons, really. first of all, we have interest rates still low. the fed has yet to raise. in june coming up, robin on is coming -- ramadan is coming up. what you have is obviously muslims are fasting from dawn until dusk.
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a lot of the decision-makers are .ot at work for full days it does not mean a deal cannot get done but it makes it harder. manus: where are we on pricing yet, we have -- they are we on pricing? -- set thatto me aside. we then have these culprits -- so what the pricing is possibly going to look? wereter: the predictions that gcc spreads could only widen. what we have seen in the uae, spreads have narrowed. partly as a response to the butease in oil prices the market has calmed down. a lot of the borrowers are suffering-related. manus: great reporting. let's see what they end up
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being. let's talk about sovereign reasons during moody's has downloaded the credit rating of several middle eastern countries in the lowered oil prices are to blame. what has changed? saudi arabia was downgraded, you are back again. reporter: on saturday, we announced retractions for all gcc sovereigns. we confirmed the uae, kuwait, qatar. arabia and by rain -- bahrain -- manus: scion trying to
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understand -- what has changed -- i am trying to understand -- what has changed? decided to review in march following the drop in oil prices. to assess the impact in the fiscal reaction of the government. what we found is that saudi -- very high,rain double-digit deficits in the next couple of years and a in thoseal increase countries. oil prices- yvonne: have stabilized from january. is there a floor that you look at that could push you to move again on the readings? -- ratings? reporter: we acknowledge that
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there was an increase in oil prices recently. that does not change our view that there is a structural change in the oil market. we have seen a substantial change since last year due to several factors, namely on the supply side. manus: we have more to get through. fromon those changes moody's. let's get the latest on the asia-pacific markets. reporter: things are looking a lot better here. the nikkei 225 leading the game on the regional index which has rebounded from those of us. close -- those
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there is speculation that the tax hike in japan could be delayed. good movement in australia led by health care stocks. health care and industrial higher. the hang seng index by 1.2%. we have seen some energy players coming off of those highs that we have seen for the past couple of sessions. on the lunch break, the shanghai composite slightly up despite the economic dad over the theend -- economic dud over weekend or goldman sachs upgraded their oil forecast. due to the fact that we have seen impact to production, the wildfires in canada, also that .igerian pipeline shut down we are seeing upward pressure on the oil price are they are now
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targeting -- goldman sachs -- not by 1.3%. by 1.3%. this is in response to that weaker copper price that we saw in the disappointing economic data. the korean yuan down. you can get more on that and the rest of the news that our brand-new digital destination tailor-made for the middle east. you can watch all of our reports and special content online. up, investors in turkey central-bank are demanding the board honor their initial deal. the more on moody's decision to downgrade several middle eastern
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countries. we will continue our conversation. ♪
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manus: you are watching bloomberg markets middle east. moody'san analyst from on the show with us. let's talk about the difference across the region. that is something which comes to play. how do you look between the producers in the exporters? guest: we have two categories of ratings. have the uae, although dobby, kuwait, and qatar in that aa category.
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a negativeto assign -- to you to them for slightly different reasons that are related to the execution of risk that we see in terms of their fiscal reaction. -- is that did achievable? gust: there are severalab risksu plan andtional division -- 2030 but what we say in our report is that at least under partial implementation of the plan, the reading would be resilient. were to be plan achieved, that would put upward -- sure so that is what manus: what does saudi need to deliver?
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guest: there are several reforms that were outlined. reforms of the labor market, reforms in terms of diverse purchasing, new sectors, fiscal think that is positive. we think it will be implemented. is the framework we are looking at for saudi arabia. manus: the other big news is the foreign exchange reserves. the peaked a short time ago. you expect that to fall by 2019. is this driven by capital sliced
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from society or driven by fiscal support? guest: it is driven by fiscal pressure. the financing will change to debtmore on external rather than reserve financing. because of that, we expect the debt to increase by 2020 and the getign exchange reserves to down to 50% of gdp. says: what does your model that accelerates? bitt: all models are little -- it is difficult to forecast oil prices but if they were to longer a lower level for , so fall back to $20-20 five
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dollars, we would consider that -- put some pressure on middle east sovereigns, gcc sovereigns. manus: the one piece of the jigsaw is abu dhabi. the imf were here in the thatced a report saying there were large fiscal buffers. to emphasis for abu dhabi pull back a from the fiscal restraint. do you agree? guest: there is definitely a trade-off between supporting and fiscal consolidation. we have seen a strong start in abu dhabi in terms of fiscal conservation. we think that this year -- and i it was lowrward -- because there is some pressure. manus: abu dhabi is cutting
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spending more than saudi, 70% projected cut this year versus 14% in saudi. that is outpacing your neighbors. guest: there is always room for maneuvering in saudi arabia. expendituresin during times of high oil prices were larger here than in saudi pressure to maintain spending is lower in uae dan in saudi arabia appeared here, you have a higher per capita income then saudi arabia. workmuch more expatriate days. manus: you have been talking --ut bahrain going silver in sovereign -- there is a rush to
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issue here at the moment. is that going to escalate, do you think jacob is that a constructive think the market code does it bring more liquidity? guest: there is definitely a liquidity squeeze in the region. we started 2015 with ample liquidity in the banking system domesticovernment has banks to finance their deficit, causing this green spirit going for it, if they want [indiscernible] governments will have to rely on external debt. is significance. if we take just saudi arabia as an example for the next five years with the financing requirements, about 50% of the
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current gdp. that is a significant amount. manus: thank you very much. thank you very much for joining us. coming up, equities, , and metal taking a hit from signs of china's slowdown ♪ .
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yvonne: disappointments in china highlighting the challenges facing policymakers trying to reform the economy and excess credit. tom mackenzie joins us from beijing. it looks like all engines locked.
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some of the ps cogs in in engine grinding slower april and of course, an about face from large where data was beating many forecasts. the overall picture and we look , in april, gdp slowed. 7.1%was down from around in march. if we break that down on saturday, industrial output, in% in april, below 6.8% march. they bureau of statistics saying the reason was the slowdown in sectors.and steel chinese consumer spending a little bit less, particularly on automobiles. downales were up in april,
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from march. then you have private fixed asset investment. that was also below forecast, beeny as low as it has since 2012, showing the business leaders are reluctant to put their money on the table. one area seeing growth is property sales. the one reaction can we expect from policymakers? this is part of a problem. we are getting mixed messages from policymakers in china as they wrestle with the pressures of china to maintain short-term growth in making sure that financial risks are contained. we heard from the pboc that the credit slowdown on friday is not a problem due to the effects of bond swapping. so that could be just a one-off. that thelast week
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government wants to restrain credit and cut back on those overcapacity issues in state
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degrees in singapore today after three leaves of nonstop declines, the benchmark just in the green there. ♪ >> the market moved into deficit earlier than expected. china's refineries reaching record profits. revolt, whytors in
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shareholders in turkey's central bank on a dividend of just $140. yvonne: big bond auctions across mideast states as downgrade several states. --us: reporter: good morning from london. two and half hours until the start of european trading. let's talk about what we are covering today on european programming. over the weekend, plenty of stories surrounding the brexit. mark carney spent time defending the independence after members of the the campaign called for him to leave his post after the bank of india's governor said that the brits it could lead to a recession. could be to a recession. , the day business lobby
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in the u.k. speaking out in favor of staying in the eu, cutting forecasts, echoing the trends we have seen from others. it is going to be a big week in the u.k. labor data coming on wednesday. i took a lot of uncertainty over the u.k. manus: there is one market always and focused, oil. is nigeria -- more than saudi you go this is going to cause contention. >> i can imagine. this is what people talk about on a daily basis but according to our colleague, talking about how actually what is happening in the niger delta, attacks leading to output -- he says that matters a lot more than
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what is happening in the king of saudi arabia right now. new generation of militants once again coming to lots with the president in his attempt to clamp down on corruption. exxon and shall introducing force majeure. its needs nigeria to meet obligations in terms of not allowing this market going into haveit to goldman sachs already sent an perhaps we are in deficit in the oil market. we will carry on that conversation during "countdown." manus: i see this story you are looking at about dividends. the dividends -- the dividend hopefuls are still there? >> absolutely. this latest reporting season, we have seen profits dropping by 20% over the past year. dividends holding up well. 3.7% since 2013.
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have a investors -- i chart that shows how expectations around dividends as 50,ared to the european top we are at a three-year -- we are at a high so more specifics around the. relative to the euro stock, 50. dividends are still kicking expectations, we are going to have dividends continue just how sustainable are they? if we see companies limited in their ability to continue their drive -- all of that -- with up with that to our guests. manus: thank you very much. oil gaining as goldman sachs says the market has moved into a deficit earlier than expected. trading about $48 a barrel. we are seeing oil at its highest
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since november. what is the reason? goldman is forecasting the deficit. expected.ier than there are a couple of factors at play here. you have seen production, off in the u.s. and we have those supply outages in nigeria and more recently, data from china showing that domestic production there is the lowest in 14 months. the other factor is demand. it is a lot less talked about. we had the iea saying they are in that is largely built on demand, so demand and supply working to cut that third supply deficit and we are now in a deficit at the moment for the market. yvonne: we are around $48 a barrel. is there an argument that this rally could sustain? reporter: oil has done a lot of
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work since february. we are offering around the area are in q4.forecasts we are theravance earlier than expected. there are a couple of things in the play. stockpiles in the u.s. -- over 500 million barrels there. a cap on the market, rather than there is the prospect of shell coming back into the market. a lot of the companies are debt-distress. in a sustainability around $50 might bring them back into the market. yvonne: you're going to watch out for that. thank you. check in on the other stories making headlines around the world. beijing saying -- the
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defense ministry says the pentagon's annual assessment and resource china's national defense policies adding that is suspicious. they report handed to congress says china is weaponize in islands in order to have control over the area without visiting to conflict. theincoming president of philippines since they must understand -- philippine territory. roderigo to tear to his usually the chinese ambassador today and says he will not relent on territorial claims or rely on a also toldtch -- they a news conference that he will alert lawmakers to reinstate execution by hanging in criminal cases. washester united, traffic abandoned because of what is not described as a security training device. to stands were evacuated before remaining fans were told the match would not go ahead. a bomb disposal team carried out explosion.d
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he was accidentally left in the stadium by security company. this is bloomberg news. yvonne: in the wake of world war ataturk -- the prophet was $5.6 billion. original investors got a dividend of $140 between them. our middle east economy and government reporter. why did bhumibol adulyadej resort -- why did ataturk resort to the public? modernr: he founded turkey from the ruins of the world or any need capital to build his republic so he turned to the public -- he also turned to foreign investors -- he got
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sweetened to invest in his -- he got sweden to invest. the central bank debt cheated -- last year was the most profitable joint stock company in turkey making five point 6 billion dollars but because none of the shares are traded, the treasury gets the lion's share in the rest of the shareholders get nothing. yvonne: we saw quite a bit of an emotional meeting. did the defendants of the original investors stand any chance of getting a bigger share? the emotional scenes -- you are quite right about that. our reporter attended that assembly and there were people who were brought to tears in one of the shareholder said that her father bought 42 shares in 1931 and deposited around 4000 lira and she says in today's terms, she is -- those shares are worth more than a million dollars and she had to queue for hours to
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get pennies. will they ever see their money back? it depends if the settlement can be reached because there is no market for these shares retreated unlike the other central banks. yvonne: switzerland and a few other countries with a are publicly traded peerless talk about the economy in general. one challenge is that turkey's efforts met capital shortage today, right you reporter: that is true -- i don't know -- it is not -- it is at [indiscernible] the still need foreign capital. it is one of the main vulnerabilities of the economy. turkey depends on foreign influence and then markets to finance -- it is not acute but it is ironic. yvonne: thank you. coming up, is the rally
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over hurricane oil sustain the gain? we take a look again crude. we're going to talk markets right here. ♪
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manus: you are welcome back. let's get you up to speed, now. dubai port in operator has selected a dozen banks.a dozen it is maybe announced on monday. proceeds will be used for an offer. bond sales climbed 4%. iraq's possible on from the imf
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could unlock $15 billion in aid. their central bank chief says it will help opec's second-biggest producer with finances into one with the islamic state. iraq is expected to receive $10 billion in assistance from the world bank with a further $5 billion coming later. john kerry has held talks with --di arabia's king solomon king salmon. his visit comes amid efforts to rein in fighting and encourage dialogue. is trying to sure up a trachea -- shaky truce in syria. he travels next to vienna for a series of meetings about the three war-torn countries. yvonne: let's get the latest
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from the markets now. reporter: it is looking a lot better than it was on the open around this region. most majors -- markets tracking higher. off a tenseas come of 1%. that the the fact plant failed tax hike could be very combined. gains coming through on health care stocks in australia led by primary health & at this is on land from the current government malcolm turnbull's government that if they get reelected they will keep rent controlled and that is going to be a boost coming through to their bottom lines. some gains coming through from the philippines which had a solid week on the back of the election. the hang seng index is up by a
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1.2%. certainly leading the gains in the region. despite that data out of china, the a share market also higher by 2/10 of 1%. bread up contract for by 1.3%. $48 -- 45 at the moment. of course, we have seen this around from oil. deficitmarket slipped has gone earlier than expected. the wildfires in canada, also a nigerian pipeline. strong demand for crude. raised has actually their forecast to $50 a barrel for the second half. brent rising. that is where we will leave it for now. a little bit better in
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the afternoon session. let's get into a discussion, let's look at what the rise of the region, the wider world, what does it mean? oil is on the march. sovereigns are moving. thank you for joining me. a very good morning to you. demonstrates from moody's. we want to see partial execution of vision 2030, keeping the rating pretty much in check. do you get worried when you see these moves? guest: not really. to a larger extent, moody's aretive alex -- outlooks expected. manus: we have abu dhabi telling the chair ofng,
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the department of economic development, talking about $60 or $70 oil. this is optimism gone awry? guest: that is a bit optimistic. our best case scenario is more between $40-$50. oil markets are driven mostly by the production in the u.s. the uae is well-positioned for $50. manus: as we circled the wagons a little bit -- you are going to 2020.owth here, up 5% by let's talk about what this means for clients. talk me through the biggest .pportunities
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guest: let's start by where you should not be investing. in this environment today, where you have liquidity, and where muchee government finances tighter, you should stay away from companies that rely on government spending to that sounds obvious but that is what you should be doing. are plenty of companies in that space. what you should be looking at is sector, the 2030 plan. you should be looking at companies and health care, , companies that can benefit from these structural changes that are about to happen in economies like saudi arabia. manus: are they uae-based? european-based? how do i play that? david: i think you playing it in
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saudi, definitely. that is where the transformation of the economy is happening. it is a very ambitious program and i agree with moody's that is imitation is going to be challenging but i think that to a larger extent, at least partially executable. health care will definitely benefit. education spending will continue to increase in saudi arabia and you want to position yourself there. benefit companies to from regulatory reforms -- you see that in the insurance sectors. manus: so, regulation and infrastructure. kuwaithift our focus to because they are part of the equation here. you see the remained best-positioned in the middle east? kuwait is not
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really fragile at this point in time even with loyal -- lower oil prices. and they vast reserves are unlikely to dip them because spending has been constrained over the last 5-10 years. they have not been funding long-term projects but at the same time, in this environment, that has proved to be good for the economy. i have talked to asset managers about the banks here -- you are not so keen that the uae -- dealing with that is a ?ifferentiated quality in the uae's number with the slowdown. the consumer spending is slowing
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down, etc. banks are in the early stage of feeling the slowdown in the economy. i would not rush to invest in the uae and. , they have been relatively good. these are not reflective of the long-term outlooks. they have -- you have seen a lot from workinging did i do note's think that is sustainable. that will the to a deterioration of assets. manus: one other subject that keeps coming up. that liquidity and funding constraints, how does that reflect the way you look at the market? cyborg has increased more than doubled since last year and i think that liquidity
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continuent is going to to be tight and that means that the funding costs of many businesses will increase in will impact the bottom line. he wants decision yourself businesses that are not highly-leveraged, not depending on short-term borrowing. that is a full analysis -- manus: thank you very much. in.t to have you yvonne: coming up, could the race for the white house in the dollar's strong run -- britain may provide clues. ♪
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yvonne: welcome back. we are one hour away from the market opened in emirates. , on theirror, mirror
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wall, where does the volatility show dustin will? -- best of all? happens when we called him a referendum. this is what our bloomberg is talking about her debut trump is saying that china is a grandmaster at devaluation, clinton saying she will take on foreign countries. i think dollar risk is going to talk about the agenda. yvonne: we have seen trump talk quite a bit about this, saying that the country is killing the u.s. on trade, that it is damaging american competitiveness. the strong dollar could be potential victim. forould see more downside the dollar after the election been jpmorgan saying investors yenld favor the euro and
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should any trade conflict emerge post-election. wobblepect a pre-vote when it comes to the dollar, but expect a 20% slide within months if trump are to win the white house. manus: this plays into the federal reserve. min could put the fed on i-pause. it could interfere the ability of the fed to move. june is like it is right off the table. that could be a big move there. that is it forch us here on "bloomberg markets middle east." manus: in the meantime, i will be back with anna edwards at the top of the hour. .rexit at the top of the agenda
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♪ anna: china's slowdown grinds on. andth in april slips, retail sales and investment numbers miss estimates. eu cbi says the british referendum has put a cloud of uncertainty over growth. the biggest british business lobby cut its economic forecast. chinese car hailing service didi is considering a u.s. ipo after receiving a $1 billion cash injection from apple last week.


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