tv Bloomberg Markets Middle East Bloomberg August 21, 2016 12:00am-1:01am EDT
sparking the strongest suite for oil in five months. it is 8 a.m. in dubai, midday in hong kong. the program. what better way to kickstart the week than to put our finger on the pulse of how the u.s. dollar has been performing. it has been an interesting two weeks. we have had -- of course we have the fed's minutes that show divisions on the labor market from, but also comments john williams, the san francisco fed president who said a rate hike is on the table. you can see what has been happening the last few weeks. the u.s. dollar trending downwards year today. down 5.3%. import and to note that williams does not vote on policy this is viewed as an important thought leader.
goldman sachs telling clients not to fret about the sharp selloff. the reasons for this, the dovish monetary policy is thought to be priced into the current rate. it will be interesting to see how it is priced going forward. the u.s. market is lower off the back of some of that turbulence. let's bring you through those numbers. the s&p -- let's bring that up for you. a 10th of 1%. also the dow jones that 18,552 and the nasdaq closing -- almost a flatlined of their, pretty much. here in the middle east, we are two hours from the opening of the emirates markets in dubai and abu dhabi. let's run you through all those markets did in more detail. they were closing at .4% higher. it's important to note that
arimidex was one of the chief laggards on investors. abu dhabi almost down of fifth of 1%. in egypt, tel aviv, let's get these up for you as well. egypt down .4%. course, the exchange heavyweights leaving those laggards, tel aviv closing to the upside. time to check the forecast around the world. here is beverly. >> thank you. uber executive say they would not pay more than $2 billion to acquire rival lyft. the ceo is said to oppose acquisition at any price. that's due to antitrust concerns. lyft soughted that
as much as $9 billion, but failed to secure a serious interest. it willding signals loosen its grip on the riau. earlier this month, the bankers allowed banks to buy foreign currency. is current exchange rate seen as an obstacle to foreign investment. as the rio olympics come to a close sunday, the head of the ioc say that brazil has hosted what he calls "an iconic games" that still manages to confront the reality of life in the country. he insisted no public money has been used. >> there has been no public money in the organization of these olympic games. the budget of the organizing committee is privately financed.
there is no public funding for this. news 24 hours a day, than 2600 the more journalists. this is bloomberg. yousef: the way to find out who 'sll become the head of india central bank is over. our reportere is from mumbai. however investors reacting to the new boss at r.b.i.? reporter: hi, yousef. of investors.ling two months ago he announced he was not going to continue, not going to seek this, and there is some apprehension among investors about who would get
the top job. but investors are very, very happy. yes, they got the best man they could have got under the circumstances. and hethe lieutenants, was involved in some of the biggest reforms we have seen and 51 years. yousef: would you say -- reporter: and also part of the mpa cycle. yousef: would you say he is more of a compromise candidate or compromise selection given that the government arguably does not jeopardize theor political base, while at the same time seeing the link to international investment they are insisting on stability here? compromiseot a candidate. he is the best candidate. investors are telling us he is the best for the job. wasdifference is that rajan
very vocal about social issues, commenting -- he is as good as rajan as far as monetary policy and fiscal policy is concerned. he maintains a low profile. he is an introvert. rajan was seen as very vocal and sometimes critical of the government. that is one difference between the two. otherwise, investors are very happy. they said that this is signaling to global investors and rating agencies. yousef: tell us a bit more about how patel is different from rajan. is seenioned that rajan as this rockstar central banker. is patel going--
to be able to fill his shoes? rajan's: yes, he was spearheading, during most of the work. in one case, it is the biggest comforting factor. there is no change in policies. on he is going to focus .ontrolling inflation is only difference in style rajan is more vocal, while urji take a steps to backward, is an introvert, and
does not like to give many media interviews. yousef: all right, we believe in there. we can get more on this and all sectionews on our tailor-made for word -- tailor-made for news about the middle east. still ahead on bloomberg markets middle east, qatar's oil product of a record high, despite the impact of lower oil prices across the region. we take a look at what is driving consumption later in the show. coming up next, the ceo of nomura asset management middle east will be joining us to discuss the economic outlook for this region. that interview is coming up next. this is bloomberg. ♪
management middle east. we are picking up with the latest developments from the u.s. side of things. showcases what will what is happening with the u.s. dollar. the market is more confused than ever. the hawks ande the doves in the fed. janet yellen is trying to play the balancing role between them. is aboutt role probabilities. in all likelihood, it's going to be one more hike before the end of the year, probably december rather than september. yousef: we are up to 51%. our viewers can look at the interest rate expectation. we are up to 51%. you agree with that?
i do, i do. we continue to see the economy growing, consumption increasing. i think another hike by the end of the year is not such a difficult thing to imagine. the cases that really though? when you look at the retail sales numbers, it's not the kind of rigorous spending you would need to fuel the economic growth you would need for a hike question mark tareke? we have been at emergency levels for quite some time, so a degree of normalization is required. jpmorganhat is what talked about as well, at least some of its analysts, that there is a risk of the fed waiting too long to hike those rates. would you say the fed is even willing to let the economy run hot before making a move on rates? think so.
economic cycle this past time has been so different to anything we have experienced before. i think the fed is willing to take that risk. you can see that with the development of policy over the last four or five years. yousef: when you look at monetary policy and the credibility -- and you have said this before -- the credibility of central banks under scrutiny, and the view that that credibility has been lost. you look at the boj, the boe, and everyone else chipping into this conversation in terms every juicing rates, trying to add more easing measures -- in terms of reducing rates, trying to aid -- add more easing measures, is there going to be a point when somehow all of these san a new period of economic growth? tarek: exactly. so far, the markets have played the long. we talk about central banks being unorthodox and doing
policies that are not really from the textbook. but in reality, the economy continues to benefit from these policies and come as you say, at some point we will reach the tipping point. where the economies will create their own momentum. yousef: how about the evaluation off different markets? when you look at the rally we have seen has also been spectacular. with not seen this kind of rally since 2009 effectively. is this space overvalued? would you put work -- would you put money to work in these? tarek: i think i would. the reason why is, the stock eriod ofent through a p overvaluation. what we have seen from the last month or so is a correction from that overselling. those are not stretch valuations by any means. you are not
optimistic about achieving real returns. i will quote one line from your latest note -- you say the asset pricesn challenges our zero worldview, which parent dies -- which guarantees no real growth in a world of no growth and zero inflation. as an investor, where do i find returns in this environment? tarek: it is very difficult. theoretically, it should be impossible to generate real returns an environment where the economy is not growing, where you have no inflation, and where interest rates are very low. the only way to do that is to trade. this year has provided a perfect example of how you can generate these returns. and february sold off very sharply. if you had bought at the bottom of that decline, you are aobably up 10% or 15% on
balanced portfolio. now our argument is as you rally , or if this rally continues to lose momentum, as we think it will shortly, that's a good opportunity to sell and waited to buy again. bond trade is still a hot one. and there are some analysts who contend that even in the environment of a rate hike, u.s. treasuries are going to outperform. i disagree with that. yields are thed full straight at this point. if you look at a five or 10 year view, this is a lossmaking trade. yousef: we will talk about this part of the world shortly and a second, but in terms of the global view, what would your asset allocation look like? tarek: i am quite bullish on the
u.k. market. i do not think it will slow down as dramatically as has been forecast. the dollar value of the ftse is down about 35% over the last seat of years. so we are very keen on the u.k. markets. arek, you are staying with us. how thisso looking at will impact to the region and influence the shape and the health of the saudi economy. stay tuned. this is bloomberg. ♪
earnings to improve. the sales outlook remains graham with oil production to decline 5% this year. and we will be watching hong list its shares of the giant glencore on friday. debt bybe cutting its $50 billion. glencore may have gained market share in asia. morehursday will bring us notes on the health of the hong kong economy. it will give us an idea of whether the slowdown is deepening. the mainland imports from hong kong rose 131% in the first half of the year. we will also give an indication of how the strong yen is waiting on thursday.japan economists tell us core cpi fell
.4%. that is the same as in june. the stronger currency means lower import prices. investors will be watching janet yellen's remarks at a two-day .onetary symposium it is a busy week for economic data and earnings in the u.s.. su keenan has a preview. wall street will probably see investors very much focused on the jackson all policy conference, an annual event with fed chair janet yellen set to speak at the end of the week. her remarks, as always, will be carefully listen to and regarding any likelihood of a fed rate hike in september. there will be fresh data on both housing and factored -- factory activity. economists certified by --
surveyed by bloomberg say that the u.s. economy will likely remain on fairly stable ground. and purchases of previously owned homes, a report due out on wednesday, probably rose to a nine-year high, they say. thursday, we learn about durable goods, and the forecast is for those quarters to have advanced in july, as the result of more bookings from commercial aircraft. in new york, su keenan, bloomberg news. back now to the chief executive officer of nomura asset management in the middle east. let's get back to the region, as it were. has been quite focused off the back of some of the liquidity stresses we have seen, but also because of the incredible divergence and how equities have performed. you look at what is happening on
the dubai exchange. we put this up on the charts for our viewers. you see how the two move in totally different directions. , saudiring the euphoria arabia was on the brink of transformation, reforms were m&a, new ideas -- you don't really see that in the equities, do you? don't.no, you i think there are a few reasons for that. first of all, earnings from saudi arabia have not been inspiring so far. the economy is much, much lower than the uae economy. i think the forecast by the imf is 1.2%. we think slower still. the dubai economy is growing faster. there's definitely a gross divergence. i think there is impatience inngst investors to change saudi arabia and now that the transformational plan has been
announced, i think investors want to see the start of action and development on that land. see saudi banks being particularly vulnerable right now? we discussed this last week with decision-makers, and again, based on the data you are seeing and we are all seeing, is there reason to be concerned? arabia monetary agency would not be able to provide the kind of liquidity measures to ease those constraints? tarek: i think concern is a stronger word than i would use. if you look at the loan to deposit ratios, they have been trending up fairly sharply in last 12 months. saudi arabia has become a large net borrower. so you see the private sector in is having difficulty raising capital, and the capital markets, frankly, have not developed enough to allow them to find alternative sources of
capital. there is some reason to be cautious. but at this stage, i think the banks are in a very strong position, still given their capital buffers. we brought this chart up for our viewers. your today, your benchmark showing -- your today, your benchmark showing the pressures on liquidity that are taking -- a in the saudi kingdom lot of it has to do with our oil goes from here in terms of that optimism. where do you see oil going from here? prices havenk oil had their rallying correction and we think the trend is very much up your the year-to-date average oil price with the wti measure is $40. so, pretty low still. but at $50, $60, we start to get pretty comfortable and i really do not think we go back below
$40 for the foreseeable future. we are pretty positive. yousef: ok, you see that improving. what about additional measures by opec? do you see them coming together and taking a stand? tarek: no, i don't. i think for a variety of little dull -- political, economic, and geopolitical reasons, opec is going through a bit of a -- yousef: identity crisis? says does notec matter. it is what they are doing. their capacity to surprise the market with increased output is very much limited. on the other hand, you have the potential for supply disruption. i think the risk is always to the downside, not to the upside. yousef: thanks a lot. always a pleasure having you on the program. tarek: thank you very much. yousef: the chief executive officer at nomura asset management middle east. still to come, we continue the oil conversation as opec is seen
more likely to strike a deal. some say it could be less worthwhile. we will get you the details we will get you the details there as oil prices range at hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business. you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business.
not spend more than $2 billion to buy lyft. they have not made a formal offer. oppose an said to acquisition at any price due to antitrust concerns. bank, theyral allowed banks to buy foreign currency using rates set by the market rather than the central bank. the exchange rate system is seen as an obstacle to foreign investments. u.s. oil and gas producers have increased the drilling activity for an eighth week, the longest gain since july 2011. we put that on the chart to get
a feel about the latest string of gains. 10 total number rose by 491 last week. crude prices are up over the last six months prompting producers to expand activity. those gains are adding. anxiety thatng to this could feed into oversupply, right as the market begins or gets around rebalancing. ede its gains. for more, anthony dipaola. what does the output at these levels mean for the market rebound? >> output could push the rebound
back. what the point of opec is trying to do is keep the market share for itself while forcing out higher cost producers. they continue to put oil into the market and that will make this process of getting supply to equal demand longer. we have the overhang of inventory in the market and thele are saying that freeze at this level will not have that much of the difference. if they keep putting oil in it will take longer. maybe they will talk up the market a little bit. we have seen oil up 10% since iny would meet informally algiers. we will see if those gains can hold or if the fundamentals of the market will eat away at those gains. yousef: what are you watching
in terms of production or supply that could be a catalyst that could push the equation either way? all we have seen so far has been increase production. the group as a whole is up one million barrels. mainly saudi arabia and iran. weeketail came out last that confirmed what we knew, that it is near a record for june. we already knew july production was up 10.7 million barrels. what that data showed is the .xports are continuing exports of refined products as well. saudi arabia has a refinery system they want to keep turning over. yousef: it shed light on the fact it was not being affected
by domestic demand. happening.what was >> they increase production to keep the exports high and you would expect a lot of extra oil goes into the mastec market. but the product exports were also high in june. that's going to have to keep going through the rest of the year. products bucking a trend of slower consumption growth. high in theecord first five months of this year. bloomberg joins us on the line. what has been driving the consumption? >> good morning. basically what we are saying is
the divergence of economies in the region. your previous guest spoke about this. they are growing faster than the gdc. it is at 3.4%. activity,ore economic more drivers on the road. themain push is coming from new airports which opened in 2014 and the expansion of qatar airways. they added 29 aircrafts the last two years. you have more passengers coming doubledfuel alone has since 2014. that is the big push. yousef: qatar is one of the smallest producers and a small consumer. matter?s demand
>> we need to see stronger demand in the larger consumers because we are seeing slack demand in saudi arabia. we are not saying as much crude brand as we expect. qatar is a small consumer 228,000. it doesn't do enough to actually remove the glut in the market but it is helping to offset the unexpected contraction we saw. that helps expand consumption but it is not going to be able to alter prices on the global market. cut's, we hear about job and electricity prices. how are these developments
affecting oil systems? >> it helps us understand what is going on in qatar anyway. it and gloomy outlook to job cut's are the smaller ambitions. there is a growing economy. consumers who have to face higher prices because of the removal. they are still buying and going out and buying oil. that is a reflection of the high purchasing power of the population of qatar and their ability to consume products. plan until the world cup will keep the economy churning even though there is a slowdown in terms of the growth they expect when they were
growing over 10%. they are still faster growth than other countries in the regions. yousef: thank you for that update. the recent rebound is good news for the emerging markets. in an earlier interview the managing director said oil prices have probably bought amount -- bottomed out. >> what that means coming into 2016, prices were low. you always want to get in and a good price. hit a lot ofne emerging markets hard. the slowdown hit emerging markets hard. the cases that oil has probably bottomed. is five or 6% growth. the fed is saying there is no hurry to hike. they have been less worried
about it as a good entry point. >> the yield value you are slowly is.4%, that going to erode. at what point do they get expensive? >> we always talk to clients about staying relevant to values. there has been a huge move in brazil equities and declining yields. you do need to rotate exposure. in locals investing currency? >> we would recommend they separate the two. you will find that eliminates a lot of the kerry -- carry. >> there just aren't enough debts to buy answering countries. particularly with russia. you just can't find it. >> are we talking about debt
investment or equity, or long-term? >>. talking about long-term. we have a big focus on the debt markets but they will be constructive for the equity markets as well. one thing markets have become reacquainted with is the individual countries tend to rise and fall in tandem. you need to be aware you are not getting diversification by a lot of these different countries. >> time to check in on the first world headlines around the world. >> officials say 22 people were killed in a bomb attack targeting a wedding in southeastern turkey. 94 people have been wounded in the incident. the deputy prime minister said the attack appeared to be a suicide bombing.
turkey has been hit by a series of attacks, even claimed by kurdish militants on the islamic state. mark zuckerberg has made his move for philanthropy. at $95 shares valued million. mark zuckerberg and his wife pledge to give away 99% of their wealth during their lifetime. blocks the cell of the largest electricity grid. they follow the conditions set by them and found a hard to understand why they'll be rejected by such a late stage. buy the great on friday siding national security reasons. taiwan has urged china to do its part to maintain peace saying it
is a shared responsibility. consistents to have predictable and sustainable ties in china. frosty.s have been the president has refused to accept that china -- taiwan is part of china. scarlet: coming up, winning back investor's confidence. egyptians have been doing to boost training activity. that is next. this is bloomberg. ♪
a quick round up of the stories around the middle east. execute is to destroying turkish american relations. he made the comments ahead of a visit later this month. israel and turkey have taken another step toward repairing diplomatic relations that broke down over a clash at sea six years ago. benjamin netanyahu called for the return of ambassadors. israel promised to pay $20 million. reaffirmed its
rating on egypt. the slower than expected implementation of fiscal and economic reforms, pressures on the rating are balanced. ae preliminary agreement for $12 billion three-year loan from the imf is credit supported. now on the line, the general at at egypt stock exchange. thank you for joining us. are you concerned that egypt will not be able to secure what it needs to cover the full funding in terms of raising money either from gulf investors or creditors? >> good morning. thank you for having me. economy suffers from many deviations. it represents almost 13% of the
gdp. the public debt reaches more 30%. oila remarkable decline in affects currency. be takenects need to in a creative fashion. it may give us some oxygen until we stop a serious move to start leaking. it might give the egyptian roadmap and internationals civic economic reform program accredited by the most respected in the world. there are no guarantees it will not be added to the 30 billion collected and wasted. let me just jump in here. it brings up the issue of the evaluation.
many economic advisers have pushed for it. it's expected egypt will move again on a devaluation. , what hasnversations the feedback in light? what devaluation would help liquidity and volumes? >> nobody knows. it is huge between the black market,nd the formal the declared exchange rate. what would be a fair exchange rate? what would you like? information, you do not know the actual. you cannot assess the actual price of market until you have an open markets.
if you don't have an open market until now. there is asymmetric information. this may distort the real value. valuation.ter of it puts more pressure on the inflation rate. decisionan easy especially at the moment where it is the result of the foreign currency being not efficient. >> in terms of what you are doing to make sure foreign investors remain interested, because participation is arguably lower, they are opening up their stock exchange. what kind of reforms are you planning to undertake to make sure you can bring in foreign capital?
>> we need new products in the market. we need fresh products. we need green bonds to attract u.s. dollars. we need to attract more investors. reform in our markets. we need the political will to support these actions. yousef: what about the potential for more ipos? it has been a slow year for most parts of the middle east. do you see more companies? >> if you ask me i don't rely much on ipos. the government is not looking for making a good example of that.
they need returns and need to collect revenue. it is not a matter of giving to the market as they said before. investors might need to be strategic investors in some of these projects and some of these companies. this will not happen. >> we will have to leave it there. thank you very much. coming up, as lift looks for a buyer we take a look at the structure in the right handling space. this is bloomberg. ♪
new one to the list. investors. few key rivalors with its biggest , they generally don't back competing startups. what is raising eyebrows? >> ride hailing has seen explosive growth making it one of the most lucrative segments in the tech startup space. they are valued at $116 billion. all kinds of backers have a slice of the pie even on -- nontraditional investors. investorsoup of 15 are in deep with not one but several stakes in the biggest
ride handlers. -- hailers. , the leading rider taylor -- ride hailer in china. interest in every major ride hailer including uber. it was an attempt to fight back against the dominance of uber who operate in 76 countries lending firepower to rivals in regional markets. why does it matter? the sale of their business in china was explored by investors who wanted a truce with dd and after that deal the global dynamic is in flux. investors could see competing interests clash and more deals and consolidation.
can uber win big if it is sharing investors? day to go butast you can get the latest on the real olympics on our website with the bloomberg olympic traffic -- tracker. the net it states leads the medals tally followed by great britain and china. you can have a look inside of the business of the rio games. it byn of course sort population or per $100 million of gdp. make sure you take a closer look at that. that is it for this edition of bloomberg markets. live from the region again tomorrow. this is bloomberg. ♪