tv Bloomberg Markets Middle East Bloomberg July 13, 2016 12:00am-1:01am EDT
angie: economists say it is stop propping up a losing industry. yousef: it is 5:00 a.m. in london. i'm in dubai. angie: i'm in hong kong. welcome to bloomberg markets: middle east. right now, we are seeing a rift across asia as people are flooding back into equities. japan on a tear. safety havens are off. the japanese yen is holding steady at the 104 level. how is it looking with the risk when it comes to commodities? yousef: well, let me get you up to speed. the focus has been on the rally with a record of the dow and the rally in asia. what you might be missing is what is happening with gold. it is coming under pressure. we put this on a chart for you.
the emerging market line and the gold line. you can see for those clamoring to conventional correlations, this would be your chart. investors betting on accommodative actions. global economic growth can be pushed, stimulated from the bank of england, policymakers in japan. also, some analysts revising their revisions for quarter 32016, now meeting, quarter three, 2016 -- for quarter three, 2016. if this will continue is the biggest question of the day. angie: interesting range. of theo a quick check state of play in markets right now. mumbai has been trading for almost 20 minutes but you can see it is risk on right now. the regional benchmark gaining
index,fter japan's top 1.6%. the yen slid further against the dollar. you take a look at the other markets. just another two hours away from the opening of the emirates markets. let's do a quick check of the last close. there you have it. it is a reflection of this optimism where we are seeing post-brexit levels at pre-br exit levels. checking in on the headlines from around the world, let's go to rosalind chin. rosalind: china can achieve its risk target of 5.5% for innovation. speaking at the eu china business summit. he says china's economy has shown great resilience and the country's economic growth will benefit european companies. he added china firmly support eu integration.
beijing accused the philippines of occupation and the south china sea. china is refusing to recognize a un court ruling rejecting its claims to most of the waterways. a says a tribunal decision is political farce. beijing protesting against washington. bank of england governor mark carney has denied undermining the institution's independence on the run up to the brexit vote. the central bank chief was criticized for warning during the referendum campaign that leaving the eu could weaken the pound and cause a recession. carney told the committee he was not trying to scare anyone. sanders has formally endorsed hillary clinton as the democratic nominee. the senator joined the former secretary of state at a rally in new hampshire, saying although
they disagree on issues, she is far and away the best candidate in the u.s. global news 24 hours a day powered by more than 2600 journalists and analysts. i'm rosalind chin. this is bloomberg. il is falling in london after surging for the most in three months. prices have recovered more than 70% since the 12 year lows. opec is forecasting higher demands for crude in 2017. for more, years are middle east energy editor. anthony, how does opec and producers like kuwait see the markets for the rest of the year? anthony: opec put out there monthly report yesterday and they are seeing demand staying firm for the rest of the year and continuing pace in 2017 as well. they are looking at increasing demands for their oil. we spoke also recently with the
kuwaiti oil minister any echoed what the group said in the report that he sees it staying firm. safetytting up to $50, dollars over the next few years -- $60 over the next few years. yousef: what i'll stood out from the numbers and the data -- what else stood out from the numbers and the data? anthony: that is expected because they have higher demand for oil to run their power plants and the air-conditioning in the hot summer in saudi arabia. that is the issue people are watching. how much will saudi arabia produce. how high is the domestic demand and how that impacts their exports. that is what people will be watching going forward. yousef: thank you. let's pick up the conversation. joining us is national bank of abu dhabi's security managing director. it is always great to have you in the studio. let's continue from there. your response on oil and women
goes from year -- and where it goes from here. do you agree with that? >> i think everybody believes towards the end of the year, it will be higher than it is today. on average for the year, it will be in the top 40's. 50ds to be in the range of to 55 by year end. i think what we saw in terms of correction in the past few weeks is related to the brexit issues. morenk that is seeing positive movement. opec: we just heard about member kuwait forecasting oil to get to $60 levels. we are seeing an environment globally where it is very tepid. economic growth really muted. where is this demand going to come from? mohammed: i think really these
views have been changing every couple of months. one report was talking about maybe 1.5 percent growth for 2016 and maybe 2.5% for 2017. some of the bigger economies in the emerging markets like india will be higher. some of the movement that we are seeing in terms of the oil prices is not just related to supply and demand, it is also a capital markets kind of function. therefore, i think these kind of moving within the range of 5% to 10% is not a big deal related to supply and demand. yousef: let's go back to the region. we have seen a lot of restructuring in the back of oil prices. upjust walked out of the tie dhabin the bank of abu and other examples of
consolidation. will that trend continue when it comes to banks? mohammed: i think the phase we are in now is the consolidation and cost efficiencies. we have seen that in the banking sector. we heard that also in the announcement of the ipec kind of merger. i think there are other banking sectors. i think outside the financial markets, a lot of various departments we are expanding over the last five years where oil was $100. consolidating to smaller ones. i think this shows a good management and good planning for the future. many people talk about, for example, governments trying to plan like some of the oil companies to aim for an oil average cost of $25 for the future. anything outside of that is a surplus. yousef: plenty to get through.
angie? angie: thank you. we've over join mohammed after this break. right now, the japanese prime minister abe's saying stocks in the a nation's oversold. the so-called helicopter money would be a risky gamble. there was a lot of speculation that the helicopter money would come. it was really lifting trading higher but where are we right now? juliette: you can have a look at the strength we have seen in the yen since hamada has been speaking. up by a third of 1% after having that biggest two-day blunders since i -- plunge since october 2014. the chief cabinet denied about one hour ago there was no truth to these reports. hamada says helicopter money would be a very risky yen will.
theyte these week rallies, have been sold below fundamentals. japanese investors, not the doj, ar e showing cowardice. we have seen solid rallies over the past few sessions. holding onto a gain of more than 1% in the nikkei. up over 7%. the best rally we have seen in japanese equities in about six years. certainly there is still some investors buying these rumors of the fact we are likely to see some stimulus. we don't know in terms of what form, but helicopter money downplayed today by hamada. looking around the rest of the region, we have regional stocks holding near their highest levels since 2016. we know they have recouped what they lost following the brexit vote. a very solid session across asia. angie? angie: thank you. coming up later, is there
angie: a quick check of the latest business headlines. airbus is cutting output of the a-380. the european company once predicted carriers would by 1200 over two decades but has delivered only 193, with only about 126 more on its order books. it reached a break even rate last year but will cut that to only one per month in 2018. corpsnational chemical may try to get the acquisition. it is planning to sell $10 billion of its preferred shares.
we have been told it plans to raise another $15 billion in cash, bringing the total equity contribution to $25 billion. it still needs approval in the u.s. fielded the biggest u.k. take over since the brexit vote. ac is majority-owned by chinese billionaire. the acquisition would widen his lead is the world's largest operator of movie theaters. the company has been negotiating for three years. the plunge in pound helped the deal. yousef: rejoining us now is national bank of abu dhabi's security director mohammed. we were talking about bank consolidation. that brought us of the mrr function which our viewers can pull up on their bloomberg to
get an idea of how banks have been under pressure and the worst and best performers. on the basis of that, and given the fact we have spoken to a group of people who have been cautious about the prospects of this round of quarterly earnings, what is your view? mohammed: i think one year is a long time to look at performance these days in markets. it is going to be much closer. if you asked the question two to three weeks ago, you would get a different answer than today. we see a very optimistic view coming about performances of companies, compared to the past two weeks of declines and fears. q1, we expect the banking sector to lead. i think abu dhabi's would be the first. we all look at the equivalent of q1 2016 or lower.
yousef: what is your feeling on this in terms of performance? they are under pressure. they are likely to follow a lot of their western counterparts. mohammed: i don't think banks are as pressured as we fear about them now. i think a lot of the fear has been out. when we talk about the quality of the assets in terms of taking provisions, we've seen that higher in q1. maybe a little less in q2. i think we have seen the constant stability of currency markets, banks with good treasuries and good global markets have made good money in terms of hedging in the short amount of time whether it was on the saudi or the pound. i think q2, we are neutral. i don't think we are going to see amazing fireworks. we may look at the uae which may be one of the stronger ones. now with the merger, they will
try to show big numbers. we have seen results that showed about 13% growth yesterday. that is raising the bar. the bank collecting 3 billion in just last month because of it. that would be put to good work. we will see the effects of q3 but q2 will be strong. some smaller banks will continue to struggle. angie: i want to ask you to comment on this upside down world of ours, taking a look at the dividend equities outperforming major indexes on the s&p. it is like people are looking for you for dividends because there is negative yields in bonds. what gives? really what wenk see today in terms of looking, investors looking for yields definitely has increased in terms of liquidity in the equity market, especially with the flat
yields we see in the treasuries. therefore, we see more flows into the equity markets. it will come down to the regional markets in the short-term. i think it is a bit longer term because dividends in this part of the world are the end of the year so you feel them in march and april of 2017. i think the valuations are looking better now. pe's in the region, for the big inpanies, probably are below terms of price-to-book. probably 1.1. valuations are strong. looking for safe havens or less volatile areas -- i think this area is becoming a prominent area. because it is dollar denominated, it is tempting. all of these elements are becoming strength points which are helping to see inflows that are a bit stronger in the past two weeks then we have seen during may and june.
angie: what are your thoughts about financials, not only in the gcc but around the globe, as central-bank suppressed interest rates into negative territory? mohammed: i think what is happening in the world now is every time a central bank says they want to either lower interest rates or not increase them like in the u.s. -- we see the markets reward them by going up. we are talking about bull market in the past two days. qsa hitting new highs. therefore, if this continues, if there is more confirmation of no increases or going into negative, i think you will see the stock markets go up. i worry, frankly, because i don't think the growth in earnings and revenues is actually justifying some of those going forward. i think for the short-term, maybe the next to three months, i don't see big major changes unless it is outside the
markets. yousef: back to the region and invitations -- implications i look at. values. what is the catalyst that pushes that forward? mohammed: i think less fear and uncertainty. i think we are looking -- may was a very weak month. july looks a little better in terms of average daily value, although there will be less days to trade because of the holidays. we are in the summer season also, but we are seeing an increase in the last two sessions. some have moved 5% in some stocks. about $150 million a day, closer to $180. have this continues, we will attempt to go to the highest of the markets we have seen for this year. if we can go a bit higher, we may break them. that is really what has driven it, by for institutional money
looking for lower evaluation emerging markets. yousef: when you look at those numbers, whe would it make absolute sense to combine the two exchanges in dubai and abu dhabi? mohammed: a lot of people in the industry believe that merger is needed. we should be trying to create the biggest exchanges next to the saudi one. in saudi, they are trying create a second exchange for smaller companies. i think it makes sense financially, but i think in terms of other concentrations in this part of the world and competition between the markets is seen as healthy for an alternative. yousef: thanks a lot for coming in this morning. always a pleasure speaking with you.
angie: welcome back. this is bloomberg markets. struggling exports and a slowing economy have left some of israel's top businesses clamoring for state help, but some leading economists say it is time for them to adapt to a stronger currency. we have our middle east editor here. first, the problem for the mighty shekel. time peoplere was a were saying that, but there is no question it is a very strong currency in the world. dollar,kels to the
about 3.8 right now. whenever we get around them four level, the bank of israel intervenes and tries to weaken it to help israeli exporters. exporters are suffering right now. it decline from 13% in the first quarter. they are expected to decline 1.5% i the end of the year. from the manufacturers' perspective they are concerned if the bnk of israel were not to intervene, that means their product is less competitive, more expensive for a longer amount of time which could result in plant closures, mass layoffs and israel into recession. yousef: why is the government becoming less inclined to help exporters? elliott: there are a number of reasons. one is the israeli economy is not doing that badly at all. there is record low unemployment, below 5%. other arguments are they say the
exporters ought to become more efficient so they can better so they strong shekel, can make products that have better or more innovative than other countries so they are not just competing on price. some say maybe israel should embrace services wholeheartedly. shares in exports account for one third of the israeli economy. i think the pillar argument, this is an astounding fact, that something like 10 israeli companies account for more than half of all exports from this country. companies like intel, a big chip manufacturing plant. companies like israel chemicals. one of the arguments by people at, may be sector specific rather than companies as a whole in israel. yousef: thank you, elliott.
angie: it is 1:30 p.m. in tokyo. the last 90 minutes of trading. topics are leading gains in the region as expectations of stimulus props up the market, but there is a denial paring back some of the gains as the chief cabinet secretary says helicopter money, do not expect that. ♪ angie: the top stories on bloomberg. opec is predicting higher demands for its crude oil next
mayor as global supplies shrank. saudi arabia pumps near record levels. the 14 members say they have to produce 33 million barrels a day next year. production from non-opec nations fall and it has recovered since it's low. output in the u.s. has retreated. yousef: kuwait is taking steps to settle minority stakes in as many as four units of the state's oil producer in a bid to cap markets for funds and improve efficiency in its most important industry. the oil minister told bloomberg there is a four-year plan for sales of shares in the international unit and the shipping and chemical arms of kuwait petroleum. angie: japanese shares are in the biggest three-day surge in years as investors are waiting for shinzo abe's stimulus plan. remains in good
territory. it is 12:30 p.m. in hong kong. i'm angie lau. yousef: it is 8:30 a.m. in dubai. i'm yousef. anna: i'm anna edwards in london. we are counting you down to the start of the trading day in europe. let's talk a little bit about u.k. politics. it is one of the things that is dominating european coverage today. ready toay is becoming become the uk's second prime minister of the u.k. she will take office later today as david cameron holds his last parliamentary prime minister's questions. she will start to name her brexit czar. the focus will be who that person will be. loyal to the new leader, but somebody who campaigned on the side of rex it so that will be -- brexit so that will be a focus.
david cameron will speak at parliament around noon. and then he will go to buckingham palace to inform the queen of his resignation. meanwhile, the opposition labor party is in disarray. jeremy corbyn will get an automatic place on the labour party's leadership vote. thursday is the start of the process. he gets an automatic entry which is relevant because he would struggle to be had to rely on the support of his parliamentary team. he was swept out 10 months ago by the grassroots labor party. yousef: looking at where sterling is trading at. what has been reaction been in the currency market? anna: the pound on its longest winning streak in its two months because of the closing of the political vacuum. an end to political uncertainty -- at least a pause, giving some
lift to the pound. mind, economists are expecting 55% from the bank of england tomorrow. that will be crucial if the cap is put on the pound. one strategist saying the pound is supported by theresa may not rushing to the brexit door. she will not be in a rush. ship,g her candidatcy she was talking about how she would not rush to octav activate article 50 which sets into motion the bit of archer. she will wait until 2017 to trigger that. yousef: economic political and market uncertainty has created a volatile trading environment. commodities and foreign exchange, we are joined by marshall, head of investment strategy. let's goes straight into what
anna was talking about in terms of what is happening with the sterling pound. you say we are in a. period of total uncertainty but there is still money to be made? marshall: yes. what i'm certain is we don't even know what the landmass of britain will be two years from now. scotland and northern ireland could spin off. we have never been in a situation like this. as a result, sterling is likely to be extremely volatile and that is good for traders. there are lots of opportunities to make in rallies right now. i expect to move down at some point as the uncertainty heightens and people get more worried about britain. a lot of volatility and opportunities. angie: a lot of opportunities, including pairing the sterling-japanese yen trade, right? marshall: yes. i think that would be the way to play this because sterling is the focus of risk right now.
when people are risk of sterling isf, the source of the wrist. they will buy the yen. when it is risk on, they will be selling the yen and buying sterling. i think that is the most volatile pair. we saw 2.8% range yesterday in that pair. amazing. angie: i know you have spent 18 years in japan. i don't know if you kept yen under the mattress, but when you take a look at the forecast, we want to take a look at the yen's levels and the year-end forecast of analysts. it looks like they are at the closest since june of 2015 here. think everybody was very surprised. if you look at the beginning of the year, everybody was forecasting 125,. maybe 130 all of a sudden, things turn around completely. there was a lot of shock in the markets. now with this risk off
environment and the increases, the japanese investors are hedging their overseas assets and that sends the yen much higher. there was a lot of this agreement now and uncertainty about where the yen is heading. i think it is one of the most controversial currencies. they themselves do not like the yen at this level. when it gets around 100, the government starts intervening and that leads to another level of uncertainty. yousef: i like to tie down specifics. what do i buy in global currencies, what do i sell? shall: on a short-term trade, i think you would be buying sterling today and selling yen. right now, we are in this. i don't even say this will last until tomorrow. medium-term,
uncertainty means a stronger dollar. we have seen it consistently in history. when things get tough, people by the u.s. we saw that in 2008. i'm still pretty confident in the dollar right now. also, think emerging markets carry trades. we are seeing an environment where people just want to buy anything but cash. it is amazing we have both stocks at a record high and bond yields at a record low. normally these things do not go together. people are really looking for some sort of return. i think right now emerging like thearrying trades mexican peso against, i would say, the euro would be a good bet. angie: we are also in uncharted territory when it comes to politics and monetary policy in centra banks across the board. suppressing the interest rates into negative territory.
when it comes to -- where do you find yield? l, you don'ts, wel find it in switzerland where yields are negative up to 50 years. this may be the lowest interest rate environment in recorded human history. that is one reason why people are so continuing to buy stocks, at least to get a dividend from the companies. also, some of the emerging market currencies have relatively high yields. within the g 10, the australian dollar and the new zealand dollar -- it is not much but more than negative. i think those other currencies to watch out for as long as the feds on hold and things are relatively stable. those kinds of trades will perform. angie: i don't think you can even keep your money under your mattress anymore. it depends on the currency at play. marshall, we will leave it there.
thank you for joining us. let's check in on the first word headlines from around the globe. here is rosalind chin. next centralia's bank governor will face a tough task. june, 30mped 5.7% in much in line with estimates. the outgoing chief wants to ease inflation by this time next year. the government will announce the replacement this week. shares in messaging apps are popular ahead of the trading debut. investors are willing to buy shares at $36, 15% above the ipo price. on thursday.ut billion.aised $1.3 nissan is rolling out its take
on the autonomous car. system to becamera able to drive itself on a single lane highway. it will be available and in a minivan next month in japan. global news 24 hours a day, powered by more than 2600 journalists and analysts. i'm ru rosalind chin. yousef: oil exporters are struggling to adapt to the new reality of record levels of pumping from opec. kuwait's acting oil minister says crude still rise up to 30% by the end of the year and stay there despite the cartels politics. implemented in 2014 until now is successful. it has been working well. the balancing of the oil market, i think so far, the oil market is reacting positively to the
strategy. see.rice of $50 that we -- we will probably see barrel a $50, $60 per starting from the fourth quarter all the way to 2017, 2018. he said the government is also trying to boost the efficiency of its oil industry by selling stakes in some units of the oil producer. for more, here is our reporter. what exactly are they planning to sell off? >> this was a new plan for us to hear about. unlike saudi arabia, and is thinking of selling off minority stakes. some of the support of units of the main oil company. which produces around 3 million
barrels a day of oil output from kuwait. the minister was saying they are looking at companies like national tanker company that transports oil. they have about 20 tankers and oil vessels. looking at other companies that do support the services, they are not the downstream or upstream inside kuwait. outside, they are looking at companies that work in exploration. owns gas stations in some parts of europe. angie: how is this different to what sadui is doing with -- saudi is doing with aramco. asked -- they we were talking about 5% of the national old companies. that surprised a lot of people.
ipoaid kuwait would never the main company or the main assets inside the country. right now, they are talking about assets inside the country or assets that are supportive. they won not touch the main exploration or the actual production capacity within the country. they will not sell their own oil, let's say that. angie: ok, lots of aspirations. zainab thank you. . searching for something new. is the middle east struggling to hold on to its ex-pats? we will have the latest data from linkedin. this is bloomberg. ♪
last quarter, 10% more of what analysts were expecting. a record $190 billion extra growth and revenue. in saudi arabia's biggest telecom operator may be waiting infrastructure assets. saudi telecom has approached potential bidders for towers. they spoke to competitors about merging their towers. saudi telekom said it was considering selling assets to make the company more efficient. the kingdom holding company has a 5.8% stake in hotels. $3.2ays the deal is worth billion. this involves the investment billionaire. fairmount and swissotel grants. theef: nations across
middle east are trying to kick their addition of fossil fuels. one of the knock affects his job uncertainty. joining us now is the head of talent solutions for the region. good morning. i have been trying to make sense of your report to get the key takeaways. one being do you see an exodus of ex-pats leaving the united arab emirates? >> thank you for having me here today. as you probably know, we have over 433 members globally. there are around 5 million members globally. we have crossed 18 million members. as a matter of fact, for the last two years, we have been doing talent migration reports and it shows uae has been ranked globally as the number one country in terms of extracting talent. yousef: do you see people
leaving the country? can you tell there is an expected exit is underway or are things stable? ali: it is the opposite. people are coming rather than leaving. angie: you say that but where are they looking? within uae or globally? ali: they are coming from different countries. specifically from india and the u.k. angie: what kind of jobs are they looking for though? ali: they come to different industries. andifically, industry telecommunications. sales, engineering and marketing functions as well. yousef: the uae is the perfect place for aspiring professionals. in terms of the impact lower oil prices have, we spoke earlier about consolidation on a state level. are you seeing an impact on
lower oil prices in these numbers? ali: that is a valid point. when oil prices have dropped, the oil and gas industries they are not hiring as much as they used to be. these organizations have switched priorities. they are enhancing employment standards, building their employees. they are trying to get the right talent for their jobs. yousef: the original survey is there interested about a new job opportunity. that is not a surprise. what is interesting is you are seeing a reversal in activities. where else in the gulf region is there a search or a growth -- a surge or a growth and job searches? ali: we surveyed 133,000 members, and we did over 3000. over 94% are open to the opportunities that are present
in the right way. 50% of them are actively seeking a job. we are seeing the usual suspect countries like the uae, saudi arabia and qatar. angie: they are open to jobs, but what kind of response of the getting from employers? you are saying in terms of global counterparts, professionals in mena do not hear back as frequently as they would like. ali: yeah, there are some challenges indeed. the main challenge is our members have indicated almost 30% of them indicated they don't hear as they want to hear from companies. when they apply for a job, they are not receiving responses. they have indicated that in terms of negotiations for the salaries they want, it has not been an easy one. which is in line with our findings when you have 50% of our members searching for a new
job, it takes the bargaining power more difficult. yousef: this is very brief -- challenging to negotiate salaries. how does that compare to the global average? ali: if we look at the global actively seeking a job compared to 30% of the global scale. yousef: thank you very much for coming in and sharing those keys . ali, head of talent solutions for the mean region. qatar airways is trying to expand internationally, agreeing to buy a stake in a south american carrier. we have all the details next. this is bloomberg. ♪
in south america's lantham airlines. deena, what does this mean for the airlines growth? what does it mean for its expansion plans and the year ahead? deena: this is a major move for qatar airways. it highlights the global ambitions. this is the second investment they have done since the british airways parents. they are signing up with latin america's largest carrier. are members of the oneworld alliance. and brings them together. and allows qatar airways to bring more passengers from latin america. yousef: you say that qatar airways would raise its stake in iag, which has not materialized. any other investments? deena: qatar airways is considering increasing its stake in iaq, but also looking at 49% ly'se purchase anin ita
carrier which is complicated because of job cuts. it is eyeing a potential investment in royal morocco. another strong growth market for them. yousef: we have seen a similar strategy in terms of buying up stakes and airlines around the world. is this going to contribute to qatar airways success or are they going to see the same kind of challenges? deena: there are no guarantees that buying a stake in these carriers will necessarily be a success. their influence in these carriers is limited by laws restricting foreign ownership in these carriers. they don't really have a major say in how these companies are run. companies that are struggling, not top airlines. it is remained to be seen if
they can turn around the airlines given their limited space. yousef: thank you for that update, deena. now, angie, what is coming up? this equity to say, rally we have been seeing -- when you don't have yields in the bond space, you are looking for yield and equity space, aren't we? yousef: absolutely. i have been looking at a chart that shows germany is selling 10 year bonds with zero coupon for a rallyt time as pushes investors to forgo the annual interest payment. you can see this previous coupon. this is a negative yield world we are living in. it keeps surprising us over again. that is going to be one of the bond stories you have to keep a close eye on throughout the day. that is the end of this edition of bloomberg markets: middle east.