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tv   Bloomberg Markets Middle East  Bloomberg  May 17, 2016 12:00am-1:01am EDT

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a saudi secret revealed. admits howfinally much comes from react. not as much as one might think. the sovereign wealth fund is undergoing a major overhaul. oil is trading at a six month high. ahead of official data that should show u.s. stockpiles dropped for a second week.
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the israeli economy slowed and much more sharply than expected in the first quarter. exports plunged nearly 14%. >> it is 8:00 in the emirates. if yvonne: i'm in hong kong. what you he looking at today. ? manus: we finally find out how much the saudi's have got in u.s. treasuries. don't forget the $.8 billion. the foreign holders of treasuries. saudi arabia is still in there with a pretty substantial amount. what shocks me is that they are way behind. $1.2 trillion for china.
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we didn't know what these words -- numbers were since 1974. a critically important point. this is a big part of the story. how much else to they actually have? 20% of their foreign reserves are in u.s. treasuries. that is rather strange. states havereign around two thirds of their dollar exposure in u.s. treasuries. i don't know whether this answers more questions or raises them. what happens next in the treasury market? yvonne: that story is not quite solved. talking about china's debt. we are speaking to him quite a bit about the mainland. what he thinks is the outlook for the chinese economy. he is very bullish on china.
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looking at leaders from the mainland. trying to transform this manufacturing export driven economy. into one that is services oriented and domestic. when it came to china's mounting debt he did listed as a concern. larry: we're all worried about it. he couldn't continue to grow at six plus percent. 6% and haveow at your balance sheet grew faster. from hime'll hear more later the program. a quick check on it comes to the commodity futures. we are seeing oil markets looking pretty good. an uptick in about 6/10 of 1%. oil futures up about 1%. natural gas also up. holding up the six-month highs on oil prices.
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we will get information later today on u.s. oil stockpiles. mumbai has been trading for about 20 minutes time. right across the board. hong kong up about one third of 1%. japanese yen also giving a boost to japanese stocks. under two hours later. take a look at dubai. they were down. manus: get up to speed. some of the major stories. rosalyn: the australian dollar dumped more than its value. what is behind this months surprise rate cut?
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after us really is in the first quarter for the first time since 2008. to itscore growth slowed weakest number of years. hong kong is on heightened security alert after a visit by the number three in the chinese congress party. he is the most senior figure to come to hong kong since the president was here in 2012. he is also the most high profile official on the protests a few years ago. he said he would listen to different opinions about the little slogan one country to systems. the israeli economy slowed much more radically than expected in the last quarter. exports plunge. gdp expanded at an annualized revisedpared with a 3.1% in the previous quarter. sluggish growth and demand has hurt overseas sales. which cast for about one third of gdp. the bank of israel has been reluctant to use unconventional
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tools to spur the economy. yvonne: the united states has shed some light on a 41 year secret. how much of its debt is held by saudi arabia? not as much as many thought. $116.8 billion that is how much saudi arabia owns in u.s. government debt. like a small number for the world's biggest exporter of oil. holds fewer u.s. treasuries that at least 10 other countries and territories. japan arechina and the largest treasury bond holders. countries hold bigger debt and saudi arabia. hong kong, taiwan, belgium, luxembourg. raiseakes you want to
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your eyebrows. another angle from the imf point of view. the imf rules on this for a country that two thirds of its reserves in dollars denominated assets. saudi arabia actually has about 20%. that begs the question where is the rest of it? if there is more than it could be another assets. it could be futures. it could be in belgium. it could be in corporate debt. saudi arabia case, would need to hold more than $450 billion elsewhere. final question. whether saudi arabia actually has as much in foreign reserves as it is telling the world. manus: let's bring our guest. does that answer more questions
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were raised more questions? i was surprised by the figures. >> this is good news for the global economy. that the saudi's are selling everything. it is not inconsistent with the notion that the saudi's and oil was falling that they were divesting some of their global equities and putting some money into bonds. the question that raises is what are the treasuries that are owned by saudi's. not identified by saudi's. those that are held under the name of the hedge fund. manus: they place money with huge hedge fund. this is something that is got to be very complex. going back to the new york times article about congress found the liable. $750 billion worth of bonds.
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>> why wait for 42 years? the stabilization in u.s. bonds? the fear of the retaliation that may be taken the saudi's in case the reports may be arisen or not. i think this is a good start for the story. i would like to know how much saudi arabia has to sell in u.s. and non-us stocks. manus: the sovereign wealth funds were accused of divesting during that quarter of 2015. what about the complex in terms of typically countries having two thirds of their reserves in dollar-denominated assets? this is where the question gets raised. >> this imf data. that is interesting. that is before china is going to
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start to make its contribution. the chinese data is going to come into play. that proportion may change. i think the saudi story will tell us everybody will be the bloomberg charts and see the debt is going down and oil prices going down. this is backed by this notion. petrodollars are less than the basic trying to invest in a more secure u.s. market. manus: we got the freedom of information act. we will come back and talk more beloved later. yvonne: while we are the subject qatar isholdings undergoing a major shakeup. matthews following this story. what are the key changes?
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matthew: what the investment authorities doing is ring fencing all of its domestic holdings which are going to put into a new subsidiary which will qatar investments. a bit more oversight over those assets. the oil price of government revenues are not what they were a few years ago. the same sort of cash levels coming into it. the oil prices were a lot higher. yvonne: how active is this fund likely to be given a lower oil prices? matthew: what we've been hearing aom sources is that the q i has been told it is not going to get any new money. it is not going to withdraw any money as well. either through dividend income
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orch could be substantial through asset sales and using proceeds to buy other assets. or bonds from leveraging some of its interesting equity holdings. that figureto see moving from a very active international acquirer of assets to a much more slow-moving institutional type of fund going forward. yvonne: what about the investments in the u.s.. invest 34ng to billion in the next five years is that still the plan? matthew: this will be a very interesting thing to watch. they were going into the u.s.. making these commitments.
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that is all part of this wider shift in maturing and away from places like europe and into asia. engine to the united states. strategically it is going to be in focus. does it have $35 billion to invest in dry powder. to be able to put it to work. i think this will be very difficult. we may not see that level reached for quite some time. still to calm a lot of investments in the united states. yvonne: thank you so much. that on at more on website. special content only available online. manus: white kitchen investors
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are so desperate for dollars. the emirates report their highest ever profit. coming up next on bloomberg markets middle east.
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yvonne: asian stocks are rising for the second straight day. juliet: a pretty good day across the region. we did have china lower. a switch of consumer stocks there. elsewhere we're seeing pretty solid buying. the fact we have crude oil at that six month high. particularly those oil players here. on the mining stocks in australia as well.
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8/10 of 1%. that weaker yen certainly helping. data coming out of japan tomorrow. the steelworks has been affecting that market today. they cut their forecast. just trillion dollar. basically showing that it failed to record lows. of may. the month mix this whether they would cut rates. whether we will see an interest rate cut anytime soon. manus: fuel prices are lower. emirates reporting its biggest ever profit last week. it is more than fly passengers around. it also handles cargo.
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chapman is the president of emirates group services. national air travel agencies. great to have you with us. record profits. crushed the billion mark. >> i'm confident we can. the trouble is organizations tend to get measured in terms of financial performance. that isreat believer the actual delivery of the service or products that the customer wants. it safely.ght and do we pray much focused on doing that. delivering a very strong consistent product. get it right and they will fly in. beenof your strategy has
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you are a cash-rich company. are you deal hungry. we see you do more deals? we are not what i would call hungry. that suggests we might be less than cautious. we are looking for good opportunities. one that we believe we can integrate into our business. we don't make sure erode the quality and the quality and standards that we aspire to. yvonne: cargo and freight. our yields under compression right now. >> sorry mr. bit of that.
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if you're talking about where our cargo and freight going in general we are seeing a bit of a soft thing the airlines are structuring. the airlines are struggling. air freight is normally assigned that if it is doing well the new economies are going to do well globally. we are seeing some weakness there. having said that when we look at our market share what we've done with it we have invested a great deal of new facilities. we would be number one in the cargo handling business so we are seeing strong growth in that area. in general air travel has been softer than we would like. yvonne: we're also seeing a low jet fuel price. you usually hedge. isn't the right time to hedge? speaking for the emirates group we are not hitched. we don't intend to.
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the trouble is you can get caught up in the day-to-day movements of it and looking at the fundamentals. those airlines the date hedge in the past have suffered for it. we don't see a great deal of upside to oil prices right now. but time will tell. this is bloomberg markets middle east. back after this.
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manus: welcome back.
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we're speaking with gary chapman. loans, what is the complexion? gary: the thing about 36 aircraft is that it is the size of many airlines so it is an immense number of aircraft. a massive number of capacity. we haven't actually made in each plans to enter the bond market on that but we've already mandated or had rm offers for all 36 aircraft in place. we're in a good space. manus: what is next for you?
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gary: we're in a pretty good position. i think as long as we deliver strong financial results we are always can find the markets willing to react. manus: we chatted a little bit about the acquisitions. not one of these hungry mad dealmakers. whatt to get a sense of it's like to do a deal in iran. you set up a new partnership there. easy to setup up a business there? gary: we're going with a local partner. we've been there before many years ago. they have an airport there and around. unfortunately we couldn't get her license transfer over. we set up a travel business there. you don't need to put a lot of capital into it. we don't see any issue with that at all.
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we are doing that on the back of several airlines. we think it is a good time to do that. that really depends on the circumstances. the ability to get the licenses. one of the things about this region is that as much as i would like to see us doing a lot of that it is actually very difficult for the politics of the region issued a nonissue. a lot of protected situations there. major airlines have their own grounding operation. we are hopeful that they can keep plugging away trying to get there. manus: everybody's talking about recession and slowdowns.
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where is the slowdown? it is real. we've seen a slowdown in the far east but also in the united arab emirates. a lot of the traffic we used to was verygh an airport strong cargo was based on the military activities in the region. that has been the major impact here but the commercial cargo into by has actually been very strong. traffic. globally have grown our cargo by about 46%. from acquisitions and organic growth. manus: gary chapman is of course the president of group services. dollarsp, desperate for that is why traders are snapping
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up shares from the bank. only to sell them at a loss. why? there's only one place that has the answer. bloomberg markets middle east.
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manus: the imperial palace in tokyo right now. entering the last hour of trading. ♪ shrieking stockpiles. oil surges to a six-month high ahead of u.s. data expected to show an easing in the stockpiles. ejection traders are so desperate for dollars reselling
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bankshares at the loss of up to 30%. china, black rock's larry think says we should all be worried about rising debt levels. our exclusive interview coming up. it is a 30 a.m. in dubai. anna: it is 530 in london. yvonne: just after 1:30 p.m. in tokyo. these of the industrial production figures the final numbers for the month of april. second to arise at the 10th of 1%. still enough for the first quarter. they look ahead to the earthquakes as well.
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looking pretty weak for the second quarter. anna: let's have a look at the european show. to hear a lotng martin gilbert in aberdeen asset management. in days ahead. the asset management industry was less effective in other parts of the financial services industry. ready the sense of separation there. talking about whether there is volatility and markets. they said it would be a lehman moment but some very uncomfortable aspects for a few days. she remained in the european union.
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we have numbers due out in today's program. manus: industrial production better to be up at 1.2%. previously just 1%. month onl production month 3.8% up and over. let's get straight to yvonne who has the back story on this. industrial production was a major beach. yvonne: it looks like better numbers for the month of march. 3.8%. the prior number was 3.6%. if you take over the first quarter i don't think it is enough to show that anymore improvement is coming. quarterhe second
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economists are still not too optimistic. they think it is going to look weak. we have the impact of the q shoe earthquake of course. brisk air. a sustained rebounded production. gdp numbers coming tomorrow. that will be a big one that everyone is watching. possible recession in the fourth quarter. that economy contracted. what will japan and the bank of japan do. that leaders meeting is coming on in 10 days time. let's head back to oil now. it is trading at a six-month high ahead of new data that is expected to show crude stockpiles have fallen for second week. anthony: good morning. yvonne: what is leading this rally?
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anthony: u.s. stockpiles are going down. we've seen some recent data showing u.s. production going down so far this year. that is the result of really opec's market share strategy in november 2014. they decided to pop the market full of crude to try to drive some higher costs producers out of the market. that is showing signs of working. there are also some outages. we saw the wildfires in canada. we saw some strife and unrest in nigeria. taking barrels off the market. that is helping to keep the crude price up. yvonne: we do see this range of factors coming in.
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anthony: iraq is facing a lot of problems. we about islamic state taking over parts of the country. unrest in northern iraq. despite all that, the oil fields in the south are still pumping great guns. they are really hitting those records. that might slow down later this year. the people that are benefiting from all the investment in foreign companies have put into those fields that the government has put into infrastructure now that investment is in place. if the government can keep it up and they face all those other difficulties taking it off the market. showing high demand and declining supply for some of those other factors we discussed. yvonne: are we really going to see a tightening when it comes to the supply and demand dynamics. most analysts are pointing to
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that supply-side and they're saying there is that potential for tightening. degree the nigeria outage. which is expected to go through towards the end of the year. some of those factors have been keeping supply elevated have been pushing the market from these outages which normally would be pushing those markets actions.also adding to a lot of the analysts are looking at those countries and saying they are kind of running a stain. we will not see a lot more growth. the debbie minister of iraq told reporters that they a.m. to hold their southern production stable for the rest of the year. they are not even looking for more growth. a lot of challenges facing that. that could be an issue for them as well.
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yvonne: thank you very much. manus: question again on the other stories. -- rosalyn: that of the embattled administration met more than 20 nations indiana. government has little real control in libya says been in chaos since the 2011 death of muammar gaddafi. the united states and russia have held talks in vienna ahead of the effort to deal with syria. made after the meeting came at the international serious support group gathered and try to shore up the cease-fire. john kerry is in another marathon around the world session of diplomacy.
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the international space station has completed 100,000 orbits of the earth. the says the distance is equivalent of 10 round trips to mars. they've been living continuously on board the complex. 200 and 20 people have stayed or visited, the vast majority men. the current crew celebrated the moment by slapping a 3000 picture taken from the iss. this is bloomberg news. manus: egyptian markets right now are guaranteed to be a money loser. clients have been stepping up shares in the country's top bank.
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>> we're seeing investors here and is not talking about some investors talking about companies with operations in egypt they are so desperate for dollars that they are willing to buy shares of this bank and sell them in london the next day because they buy them in local currency which is what their revenues are dominated them and they sell them the next day in london for dollars. manus: it is ironic. this are we in terms of being stopped her this trade running out of steam. being intervened upon. >> they have no option but to
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send their employees out with plastic bags to collect dollars from the black market. egypt is going through pretty tough time right now. a severe dollar shortage. there are capital controls in place. although the central bank has tried to keep it under control. code-7 to find a way to repatriate their money. the machinery of the need to keep production going. it is still difficult.
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none of these clients have been able to do what they were expected to do. so far. this canal that opened last year the russian plane getting shot down over sinai last october. these are two major earners of foreign currency for the country. investments that is especially portfolio investment in the stocks and bonds because they expect other currency to be devalued.
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if you are one of those companies that is engaged in this kind of trading. much more to come. we will talk global markets. where you place your money? he is the ceo of intermarket strategies. after this commercial. ♪
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we're seeing a pretty good session across asia today. china still on its lunch break down by 4/10 of 1%.
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there has been a switch out of consumer stocks which is weighing on that shanghai exchange. throughd gains coming from the energy players in hong kong. also seeing some good gains the factorygh numbers were little bit better than what the market was expecting. it jumped by almost 1%. the royal bank of australia
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really showing that the cut to australian interest rates is coming. you can see that the stocks ever covered. up by about 3.2% after tumbling yesterday. manus: let's continue our conversation with intermarket ceo. big u.s. we in the equity markets. >> george soros reducing his holdings in putting more into gold. today's 17th of may. we are very close to the 21st of may.
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it is the one-year anniversary of the all-time high in the s&p 500. we have been 12 months without a market high. this is the longest. since the. between october 20,007 and march 2013. around 2013 we did hit the high the federal reserve had just started to accelerate. right now the federal reserve is trying to convince the world that is going to do more rate hikes. many attempts trying to take the high have failed. intermarket strategies look at the relations between the markets. one of the correlations that is still holding his yields continue to fall while the dollar yen relationship continues to fall. that may need to program by itself. at 120, we did say that we would be heading further down.
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the reason the bank of japan is thaty the securities there are not enough gg bees out there. to 118.from 80 not just because they were buying more quantitative easing but because they convinced the pension funds, the world's largest pension funds were switched from bonds to equities. there are not enough funds out it was morepurchase of a cell story.
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there is a great division in the fed about what happens next. i look atility kremlin -- christmas. fed moving in an election year. i find it unlikely for janet yellen to buy the further decline in the unemployment rate. an increase in the cpi for the move in. what i'm quite concerned about is that the job market is the last one to know. we are getting the private data
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of s&p 500. manus: great to have you with us. yvonne: coming up, everything can speak exclusively to bloomberg about china slowdown. the bank of japan's implementation of negative rates. you're watching bloomberg television. ♪
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♪ yvonne: larry think remains bullish on china. he says despite reforms china's debt remains high. larry: i would give the chinese leadership some of the best marks in terms of trying to
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transform their society. we in the fourth year of the plan. to reorient china wafer manufacturing, away from export dependency toward much more resilient domestic economy. a greater service economy. that is very hard thing to do. it takes many countries 50 years to do that. and they have recessions during the transition. the mac is saying -- the market is saying the china's dependency on debt and the rest of the balance sheet is a continuation of the unproductive state owned companies is not a good long-term solution. i would say is not a good time with long-term solution but hopefully it is a short-term remedy where we can get back to the basics of trying to build a better domestic economy.
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we have to be worried about the debt in china. but if the economy can continue to grow 75% you can grow out of your problems. havean't grow at 6% and your balance sheet growth faster. the future i would much prefer seeing the economy growing at 6%. trying to reorient their economy. empty suitcases and gilded hong kong and tokyo new york london. they come back with full suitcases. can you imagine if there was a better service economy for tourism in china. can you imagine the china will reimported goods at that rate. as it is in hong kong.
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that is one of the structural problems with china today. this is what we need to do. china has been so reliant on importation that they are going to have to reject how they get the revenues and they needed china in which those things happen. yvonne: you were just in japan yesterday. you've been very critical of negative rates. have the politicians abdicated reform to monetary policy. larry: what we've seen a last three months his last action in instituting negative rates was negative results. an increase in the value of the end. you see more savings.
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manus: we should all be worried about china. we should all be worried about a lot of things. have a look at this. mr. bloomberg at gold index. it is rocking. one of the best quarters since 1986. the stocks with a dog stocks of 2016. they are the rock stars of this year. you've seen a nice rally. think harmony gold. george soros, what is he doing? drop in u.s. stocks by 37%. dollars. of a billion yvonne: that is it for us here on bloomberg markets middle east. manus:
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i will be joined by anna edwards. after these messages.
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anna: asian markets continue their two-day rally sealed right oils climbed to a six-month high. bullish in the long-term, black rocks larry fink tells us that we all have to worry about china's debt but the country's leaders have done a good job. solving a mystery. saudi arabia's u.s. treasury holdings are unveiled after 41 years. it is among the top dozen holders. the toughest job in european banking. martin gilbert says deutsche bank has it difficult road ahead. -- has a difficult road ahead. martin gilbert: a lot ofm

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