tv Bloomberg Markets Middle East Bloomberg July 14, 2016 12:00am-1:01am EDT
allergan deal. i'm angie lau in hong kong where it's just past midday noon here in hong kong. welcome to bloomberg markets middle east. we have a mixed bag in the asian markets today. , we it comes to volatility are seeing it in asia. a spot ofnding civility though, a bright spot. a little bit, angie. you've had that rally in asia. let me show you a chart that caught my attention in the last few hours. we've been keeping a close eye on developments in turkish stocks. there may be more momentum in the pipeline. basically equity investors are boosting their bets. turkish stocks still trading near the deepest discount since
2009. withumber of companies cell signals was 57. that has dropped to one. you're looking at signals waste on the moving average. what is playing into this, why are we seeing this momentum? number one you have the likelihood of the u.s. that rates staying low are lower. then you have the political developments which include resolving the dispute with israel and russia, and on the other hand, domestically it has been quiet for sentiment improving. mumbai has been trading for almost 20 minutes right now and there you have it, just fractionally lower. of flight flagging at least.
the middle east is just two hours away from the opening of middle east markets. let's do a quick check, this is essentially what it looks like, seeing some gains across the board there. let's check in on first word headlines from around the world right now every >> the bank of korea has kept its interest rate on hold but cut projections for growth and inflation. the governor is expected to explain in a briefing why inflation has trailed the 2% target for six months. the bank of england makes its most hotly anticipated rate call in years on thursday. most economists expected cuts after the brexit shock and governor mark carney statement earlier that easing would be needed. prime minister theresa may has , includingabinet boris johnson as foreign
secretary. david davis becomes that minister in charge of brexit negotiations and philip hammond becomes chancellor of the exchequer. bloomberg is being told that ubs flag suspicious transactions to singapore authorities, triggering an investigation. the monetary authority of singapore has previously said it is reviewing several institutions and accounts over suspicious and unusual transactions. reportedly very talks to buy 49% of paramount pictures. the wall street journal said of up is seeking a deal to $10 billion. studio had reported the was controlled by 93-year-old sumner redstone. this is bloomberg. new signs that opec
strategy to defend market share is working. the international energy agency said middle east crude production has climbed to a record. anthony, where is all of this coming from? the two main countries are saudi arabia and iran. saudi arabia was producing near record levels in june. back of seasonal summer demand where people are using a lot of air conditioning and they burn extra crude oil to make up the difference. iran is coming back from sanctions that were lifted earlier this year and have been speeding oil that to the market. they have been the fastest grower this year in terms of oil production growth in opec. and of course that opec numbers additional that came back, adding 200,000 barrels to production, so that
is boosting the numbers there. angie: but where will it go from here? anthony: opec, which put the report out the day before yesterday, they are talking about increased demand through the rest of this year and into next year. so the ideas that demand will continue on pace with this year into 2017. opec thinks it will have a market. we had the kuwaiti oil minister on earlier this week saying he thinks prices will go up to about $60 a barrel on the back of that demand. opecf: you can see how the reduction numbers are developing with the opec auction. we can tie that part into the conversation. in terms of the broader market, what is the impact their? anthony: we have been holding
around $50. there was a declined yesterday because the u.s. inventories were quite high. part of the story we are talking about is that opec production is increasing while the u.s. output is going down, and that's a market sharehis strategy that opec adopted in 2014 to die -- to drive some of those are produces off the market and maintain their market share. we are seeing the oil price stay around $50. staying there and even moving up a little higher toward the end of this year and into next. now is joining us achieved strategist for the middle east and asia in luxembourg. great to see you again. let's see how much upside there is in oil. what is your outlook? >> we think it will be tough for oil to go much above $50.
we had some supply disruptions andany parts of the world you had production decline in the united states. some of these factors are disappearing. think a range between 45 and 50 for the next few months will probably be about the right strategy. angie: what about the commodities space? when you look at the commodities space, what do you see in terms of demand? >> commodity prices have come down, obviously. we will see more of a range down market in the next few quarters. isiously the global economy slowing down. consumption -- the consumer
part of the chinese economy is slowing down. we don't see much in terms of demand. we don't see too much upside potential giving the slow economic environment globally. there is a lot of pressure on this part of the world. you have moved to dubai. where's the opportunity as these governments try to navigate a very tough time historically? >> let's take saudi arabia, the biggest economy in the region. it's something that had to happen sooner or later. we had reached a point where there is no alternative. this time around and has to succeed. they made attempts in the past. we think it is a tremendous opportunity for the region. yousef: let's cross over to
juliet for the markets update. >> we are seeing some upside to asian equity market but it does look like the rally has slowed just a little bit. most of the good work being done by japan, we're still waiting whatews of the stimulus in form it's going to take but japanese equities are on track for their longest winning streak since april, up or four days. in unemployment rate australia ticking up to 5.8% but a good pickup in the number of .2%.time jobs added, up by interest rates staying on hold at 1.25% and in shanghai there as wegns of weakness
seeing overbought signals on that market. here in hong kong pretty flat heading into the lunch break. some of the stocks we been watching, nintendo continuing on this massive tear on the launch of pokémon go. before yesterday's opener it added about 54%. we are hearing unconfirmed reports that the emperor of japan may abdicate. that means all the printing of that era would have to be redone. separating praying stocks getting a good pickup in tokyo. there were some downward pressure today due to downgrades from ubs and credit suisse. the rally hitting a bit of a speed bump today. later, to opecp nations could join forces to test investor appetite for about
angie: the aussie dollars on track for it best round of weekly gain since 2012. bolstered by a big increase in full-time employment. exporters will not like the currencies 5% jump this month. singapore's economy grew at a faster pace in the second quarter following a rebound in the services industry. what is not to like? there are concerns the recovery may be difficult to sustain. gdp expanded from the previous
period in line with forecasts. sluggish demand both at home and abroad. both imports and exports fell from a year earlier. straightpost a fifth drop last week, his longest losing streak this year. yousef: hans, let's pick up the conversation, when it comes to the bond markets, where in the middle east it has been largely underdeveloped. we've been trying to push more liquidity and action and no governments are tapping the bond market. we put up a chart for our viewers to be able to conceptualize this a little bit. , youan pull this up easily
can adjust it and get a good idea but putting it on the first half of the year to see the push that's been coming out of the gcc, and more is expected. how does that compare to other emerging market bond opportunities? space that is not very known internationally, but that is going to change because these are -- all these governments here are going to cap the international bond market. that will broaden the market here and increase transparency and liquidity. have government and government related entities of 250 basis points, which we think is a great opportunity. yousef: we've got quite a few big decisions on the global monetary policy front.
the bank of england decision is the one we are looking forward to today. what is your expectation, for the most part the expectation is there will be a rate cut and further accommodation. >> there might be a rate cut but -- all not bet all my up my money on it. governor carney talked about increasing rates not too long ago and declining the pound. the pound has done a large part of the bank of england job but there's probably a high basisility for a 25 point cut today. malaysia taking advantage of it, cutting interest rates today. indonesia expected to do so again. how do emerging market economies here in asia take advantage of this? >> the other thing is with
emerging market bonds, developed market sovereign bonds are not giving you anything anymore. they had negative yields in many cases. bonds still have yields. orthodox monetary policies and yield curves and you don't have these boondoggles that the western developed central banks have. is on a a world which chase for yield, that is a great opportunity, in our opinion. angie: and also relatively stable currency so you can boost assets in terms of equities in that space as well. >> that is correct. in order to get a bit of an id on the way forward you have to look at the u.s. dollar. it holds the key. weaken,ollar were to that would be extremely positive
for emerging markets in general. there is a good chance for the dollar not to strengthen from here because we've seen the fed do a 180 degree turn on interest rate hikes. when things that something that could be supported for emerging markets. downf: you have pinned it to two fundamental reasons. on the one hand, the fed pushing out the likelihood of raising those rates, and only other hand , the hopes of it in to an earnings recession is coming to an end. what is going to happen, we are about to get into full swing for those earnings. what do you expect? second-quarter earnings will probably be on the weak side. the third andd to fourth quarter and the expectations are for a pickup. evaluations are a bit of a problem.
you probably have to have 25% earnings increase in 2017. we think that is not very likely. you tend to get these jobs when you come out of a recession, but we are not coming out of a recession so it will be a bit challenging. these are relatively short-lived. angie: what about eight black swan event like deutsche bank, like an italian bank crisis? >> this is clearly a possibility, but the european union has to rule when it comes to bank ll. italy is a great example. they are not shy to bend the rules or whatever it takes. we think there will be a solution found for a bailout of italian banks and in the banking
system, this is pretty much still managed by central banks and governments. i'm more afraid of a black swan that no one can see coming. speaking of other systemic events that could derail the rally we are seeing, brexit weighs heavily on your shoulders even know it is slightly improved in terms of sentiment. as a market, you're still very anxious. >> it's not page-one news anymore. usually when you have a political decision like this, it can often morph into an economic event and a financial event. a great example is the asia crisis. 1997ld enough to remember when the thai baht devalued. the fed havewe had to cut rate when it was talking about raising rates.
that's why we think this is not closed by any means. yousef: how do you position yourself from an investment perspective when it comes to europe? .est germany is very cheap it's about 11 or 12 times earnings. i think you want to buy equities when you want income. that is the major reason for european equities. yousef: coming up, egyptair is planning a big money revamp after the deadly mediterranean crash in may. we have all the details for you, next. this is bloomberg. ♪
thee: breaking news, singapore exchange halting all stock trading on it securities market. it stopped at 11:38 local time. word as to why the measure was put in place, only that the measure was temporary. the board saying in an e-mail, and it did not provide further details or even say when trading would resume, but as you can imagine, it is causing a lot of frustration there. can be put in, taken out or amended during a time when the market is closed but orders will only be matched when the market reopens. so once again, singapore has halted all trading on the securities market. at 11:38 a.m. and there is no word as to why it did that when trading would resume.
in an attempt to overcome slumping tourism has revealed air revamping its fleet. ordering nine boeing in at 864 billion dollars. are there any plans to buy more planes? >> absolutely. the jets they were ordered were for purposes of replacement of some of the older jets in the fleet. they have plans to row by 105 aircraft like 2021. that includes ordering more planes and they are considering regional jets, medium and long like the boeing dreamliner 787. they are also looking at narrow the 737 max.ing
egyptair has had a tough time over the last few years. you had the crash in the mediterranean. how is that affecting demand? >> that had a really tough year. they suffered a series of setbacks. they just wrapped up their june.ial year in the numbers are not quite as bad as you expect for the load factor, which is the number of passengers. occupancy was about 70% versus 72% on the year before and they carried 9 million passengers versus 8.6 million. yousef: it's an unprofitable airline undergoing restructuring. routes in the middle east, africa, and europe would turn it around. yousef: still coming up on the
it's 1:30 in tokyo and we are entering the last 90 minutes of trading their. back into rally mode across the asia-pacific region. the top stories on bloomberg markets middle east, oil re-were -- rebounded, with crude stockpiles falling as still inventories grew. production from the middle east climbed to a record while the
u.s. slumped. is being seen as a sign that opec strategy of defending market share is succeeding. bank of england makes its most hotly anticipated rate call in years on thursday. .ost economists expect to cut prime minister theresa may has now named her brexit cabinet, including boris johnson as foreign secretary. extendinganese shares gains for a fourth day, heading for the longest rally since april. the regional benchmark is separate smallest gain this week. bank of korea held rates as expected. it's 12:30 in hong kong. i'm angie lau.
>> its 5:30 here in london. let's talk about what's happening in the u.k. boris johnson getting the nod for the cabinet. let's preview what's going to happen to the bank of england because that is on the agenda very much for today. will we get a cut in interest rates for the first time since 2009? economists seem to be split on this. 50% think we will get a cut in interest rates 2.25%. -- will theym restart the asset purchasing or what -- will they wait to see what the data tell them and how the town performs we will have analysis throughout programming today and a live report from the
bank of england all the way through the program. let's move away from central banks for a second. what else are you looking at this morning? >> people telling us that monsanto is once again in talks to combine their agrochemical businesses. it seems by some on the monsanto board as an alternative to a takeover. why does it matter because of buyer takeover would be the largest deal this year and the biggest ever by german company. it's a sector that has seen a great deal of consolidation. february to the acquisition for $43 billion and to pot and dow chemical said to be in merger talks. a lot of talks about how
monsanto shareholders would react if monsanto issued shares to do some kind of deal like this. teva search the most in the year after investors were presented with a rosy outlook. eastiddle east -- middle editor elliott god can has more. it's been a pretty good week for .ivo, hasn't it -- for teva elliott: it has been a great .eek for teva preliminary earnings came in ahead of analyst estimates. analysts were expecting $1.17. the ceo in a conference call investor i laid
concerns about possible hiccups are delays to the takeover of allergan, saying it was imminent . he said there will be more divestment and less cash in the deal. they are expecting the deal to be completed in the next couple of weeks. on top of that he gave projections out for the next three years that also gave the shares of big boost saying that by 2019, they could be posting revenues of $28 billion. 2019 of over $8 billion at its height and estimates are about 5.3 billion. tevall of those reasons, shares at one point rising almost 9%. angie: making it work is going to be really tough. elliott: that is the top part.
it was number one and had fallen behind. when you do a deal of this size, one of the big reasons is cost savings and synergy. the synergies will now take longer to realize. , there is one brand of drug that brings in about 1/5 of revenue. they have the visibility in the allergan pipeline. it's making projections based on incomplete picture. you have potential cultural differences and things that could slow down or reduce the benefits you get from a deal of this size. angie: elliott gotkine, thank you so much for that.
let's check in with rosalind. >> sources say the bank is increasing salaries while eliminating analysis that have come under scrutiny. closely examining allowances that might cap bonuses at twice the fixed salary. they will leave the group of 22 bond dealers on friday saying it art of a move to optimize sales and trading businesses. as the first financial institution to withdraw since negative interest rates calls yields to crashed below zero. test flights came as beijing rejected an international court
ruling. planes from china southern in landedirlines and it -- in the islands in china. hours a day,4 powered by more than 2600 journalists in more than 120 countries. this is bloomberg. kuwait and saudi arabia appetites for middle eastern debt. both countries seeking to raise around $10 billion from bond sales. the kuwaiti finance minister has told bloomberg he's open to working with the saudi's on the timing of the offers. here is our reporter with more. been a recurring theme throughout the year. now talk of cooperation, what is the rationale behind this? >> this year we are expecting to
basically sell bonds out of this region to the tune of $36 billion. when you're looking at the context of this, it's a small , a lotand interest in it of people are interested in it but some people think it may be too much to be selling at a short time. >> it's great to know which bonds are selling and for what kind of premiums. what has the appetite been here? they are all very in appetite. expectation that kuwait and saudi arabia would also the strong appetite as they both have strong reserves. a lot of those countries also have high credit ratings so we expect them to see strong
appetite. the issue is really the timing and whether they need to issue in tranches rather than the entire amount. the have a committee that is deciding how to do it. they have not done it -- they're not decided yet. angie: we have seen record bond sales this year. give us some perspective on how different this is to previous years. will we see a record in total bond sales this year? >> absolutely. we are looking at sovereigns that have not issued in many years. this year we have a tar -- and saudi arabia
business flash headlines right now, terrorism and slumping energy prices are proving a toxic cocktail for turkish banks. add loans surged to the highest in five years. bomb blast are hurting visitor arrivals and struggling to repay loans. with qatarrtnership airways. south america's biggest ways agreed to sell shares for $613 million. the carrier says it will be using the funds to pay short-term liabilities. cia director john brennan says saudi arabia must modernize its traditional society. he said while re-odd is a
it has notrtner adapted to the 21st century. so-called islamic state represents a serious threat to saudi arabia as well as what -- western countries. yousef: overall sovereign creditworthiness and north africa has continued to worsen this year. the average's sovereign rating is close to triple b, one notch lower than last year. thanks for coming in this morning. let's go straight to the meat of the matter, if you will. lots of excitement about on issuance, but i've looked at the five-year for a lot of these gulf countries and they have crept up. how will this affect their ratings going forward? >> there's a number of ways it can affect ratings.
it compounds the amount of fiscal deficit that needs to be covered. really the meat of what it's about. it's more to do with the fact that there has been a continued decline in the region. yousef: who are the most vulnerable here? >> it reflects lower levels of ratings already. the impact of the oil prices through those ratings, but they are at much lower levels already. angie: benjamin, we are looking at record bond issuances from that region. do you think in this low yield to negative yield environment that any kind of downgrade in terms of credit worthiness is going to have an impact on investor interest?
benjamin: we don't really comment on investor interest in terms of bond issuance. we are more concentrated on the fundamentals that go into our ratings. for example help fiscal policy matters, so the amount of consolidation and the speed of consolidation will reduce the amount that governments might need to oral or rundown on its assets. we think it will predominate as we have been hearing this , but the international market volatility we have seen is likely to remain elevated. angie: that may be true, but in terms of the outlook and the headwinds you see coming into is region, how much of it
geopolitical as well? grexit geopolitical impact we see in our ratings, particularly on egypt and jordan from the continuing regional conflict is quite significant. you might expect investor interest would be slightly curtailed given that ongoing regional tension. fiscal deficit still need financing. so average lower oil prices, what are the main options for sovereigns to get their hands on that money? >> there is debt issuance that we have been talking about a lot this morning or running down assets when they are available.
i'd like to get your input in terms of who is the most vulnerable here because that will be key from a rating perspective. the most exposure to integrating oil prices. >> a lot of that has already fed through into our ratings. stableings have a outlook. at that point we are not peeking out those that are more vulnerable than others. we have kuwait and abu dhabi maintaining their ratings so we think those are less vulnerable. our earlier guess said you are discounting brexit way too fast. it's going to come back and hurt markets. the gcc to the grexit story?
it's not going to be particularly hampered by brexit. inputsre loads of other into market volatility that might impact their ability to issue large ticket items. angie: we talked about deterioration. what about any possible bright spots here? betteration is doing it than the others in terms of diversification away from oil and the like? ratings, the on exposure to hydrocarbon prices 80% only uniform, average of fiscal revenues related to hydrocarbon receipts. we think the ability of the government's to diversify that revenue base is a long play. it's going to take a while for those consolidation measures to read through.
but we've seen quite a lot of action in many sovereigns. actionst a scale of that's required to try to reduce expenditures that have been increased during times of high oil prices. it is tough to go into. it's more to do with the amount highertaining ratings at levels. they have wider fiscal deficits to try to cover. yousef: bank of england will decide on interest rates today. expectations are there will be cuts by most of the people we surveyed. the federal reserve expectation there is lower for longer. how does this feed into the gcc monetary picture? >> in terms of overall liquidity
and interest rates generally in the market, it could potentially be good news in the short-term. to we are not really here comment on market trends and the like, it's more the fundamental macroeconomics. getef: it's always great to big picture ideas from you. that's benjamin young. still to come, foreign companies have been trying to buy controlling stakes in israel he in sure is but the deals have fallen through. will the latest chinese bid be any different? this is bloomberg. ♪
it's all about transparency or lack thereof. in the past couple of years, for foreign companies from hong kong to new york have tried to buy as aolling stakes, as well competitor, only to have those deals fall through. chinese companies are said to be of particular worry to regulators in israel. let me get into the reasons why. the latest attempt is from a chinese group which has made a $478 million in for phoenix that represents a 55% premium to the phoenix share price. yet the shares have barely risen, as analysts say the deal risks a similar fate of other attempted bids in the israeli insurance face. feeding shares have risen just 3.9% since the bid was announced on july 3.
another has been in the crosshairs and yet it's stock has traded pretty much down so far this year. the main hold uppermost transaction is that the israel regulator is said to be reluctant to hand over citizen control -- control of citizen savings. myers later at bank of jerusalem in tel aviv said past attempts have shown that the israeli regulator doesn't want to controlling holder of an insurance company to be chinese, as the transparency of these companies is problematic. so is this scrutiny being applied to the chinese and other israeli industries, or is it just in the insurance space? >> chinese have been successful in other industries in israel. i can give you a couple of examples.
one price tag with about a half billion dollars in cash. and an israeli dairy producer was acquired for about $2 billion. the failure is in the insurance area, that raises all these red slacks. phoenix shares lost 27% in the last two years since it was first pursuit. dealof $460 million collapsed in february, then china's metrolink holdings in january walked away from a deal to buy it because of the regulatory uncertainty. here is something i've been looking at over the past hour, it's a chart and i'm going to bring it up for our viewers as well. you can discover on this track that indonesia has overtaken malaysia and china as the biggest emerging market in
anna: will mark carney cut? to the bank of england reduce rates the first time since 2009? we are live at the bank of england ahead of the most hotly anticipated decision in years. boris is back. theresa may appoints the controversial former mayor of london as her new secretary. and taking off what is expected to be a difficult earning season for the banking sector. ♪ a very warm welcome to the countdown program. this is live from london. i am anna edwards.