tv Bloomberg Markets Middle East Bloomberg September 1, 2016 12:00am-1:01am EDT
report and what it means for the fed. i am yousef gamal el-din in dubai. angie: i am angie lau in hong kong. welcome to markets middle east. what are you looking for today? oil prices taking a bit of a break after the steep declines we have seen in 24 hours. it is all about the inventory. this is what happened overnight. let me show you this chart that outlines the latest data from the eia that showcases the struggle to cut through the overhang in terms of supply. 8t actually increased by 2.2 million barrels last week. that means inventory stays at
the highest seasonal level in three decades. the forecast bloomberg had for 1.3 million barrels. we have been in a bull market since august 18. your reference line is the wti oil price. also weighing into the conversation is the comments by the saudi energy mnister, saying they are not looking to flood t he market. the oil tells a different story. angie: the saudis are here in asia as they signed deals for more storage in japan and china. this is a visit we are watching closely. let's do a quick check of the state of play in markets. tradingeeing mumbai
fractionally higher after better-than-expected pmi figures out of china. we are seeing gains on the hang seng and offshore yuan reference rate. topix seems to have found firmer footing right there with positive territory for topix. yousef: in the middle east, it is just under two hours away from the opening. broadly a negative picture. this was the picture in more detail. dubai down .25%. 2.78% off of the ftse inclusion. also to know what is happening in saudi arabia, the lowest trading volumes of all year. 62% of the three-month average there.
not a lot happening as the week comes to a close. a quick check on commodities, futures as well. brent crude at $47.16. a aholding just under $45 barrel. let's check in on first word headlines from around the world. rosalind: republican presidential nominee donald trump has reiterated a pledge to build a wall and send mexico the bill. he plans to increase border control and deport illegal immigrants. ,e met president pena nieto where the plan was discussed. rousseff has become the second brazilian president to be impeached in three decades of democracy. the senate found her guilty of
bypassing congress in government spending, a charge she denies. michell be replaced by end theho promises to recession. saudi arabia has promised not to flood the world with oil ahead of opec talks. although the kingdom has increased output, they do not save -- see the need to do so in the future. in july, production reached almost 10.5 million barrels a day, 2 million short of full capacity. g-20 counterparts must be urged to tackle overcapacity. he says it distorts employment prospects. he also says china has yet to make tangible progress despite
calls for change. global news 24 hours a day powered by 2400 journalists in 2020 countries. angie? angie: chinese manufacturers are showing opportune -- optimism. we have stephen engle crunching the numbers. not bad. 49.8.re expecting we were expecting deteriorating sentiment. lo and behold, we got a boost in optimism, which tells us july was an aberration from flooding in china. affected production, manufacturing, transportation. we dipped to affected 49.9 in j.
we expected that to continue, but no, 50.4. an analyst said the number was quite surprising but still supportle following key measures in some sectors. this probably does not change the pboc. they are probably not going to ease with monetary policy. yousef: what about those services industry? the new economy, as a lot of people call it, is it still powering ahead? stephen: it is. we talk a lot about the slowing economy. jack lew talked about overcapacity. this is in old industries like steel and coal. pminonmanufacturing continues to show robust strength. above 50 still well
and showing resiliency to the slowdown. this is banking, telecoms, real estate, tourism, i.t. it is the new economy showing lots of strength. the old economy, we tend to talk about that first because of the historical elements. it is suffering, but showing a glimpse of hope. authorities are trying to put a floor on the slowing economy right now. keeps theinese pmi conversation going for a lot longer. stephen engle joining us from hong kong. japan is expected to deepen energy ties with saudi arabia as the crown prince visits his country's second-biggest oil buyer in asia. aaron clark is following this from tokyo. what is saudi arabia trying to accomplish with this visit? there is a said, delegation from saudi arabia
that includes prints s -- prince salman. they will return to china for the g-20 summit. somely, they are hitting of the biggest customers in asia to deepen ties. one way they are going to try to do that is through the ipo of saudi aramco. bloomberg reported japanese financial institutions, including mitsui, are going to extend lending to the saudi aramco. the trade minister has requested that they list shares. this gives them leverage with some of their largest customers. everyone is going to try to get a piece of this ipo. that is one way to deepen the reliance on oil they supply to china and japan. angie: what is interesting here is that saudi arabia also signed an agreement to expand and her
new an agreement for storage in japan. how does this play into strategy? >> it is quite interesting. saudi aramco has been leasing a store site on okinawa for a few years. they plan to renew that and expand it. it gives them incredible logistic flexibility and lowers allows them to meet pockets of demand in china. the saudi press agency reported a senior -- similar deal in china that would expand logistical flexibility in asia. that is important when you have low prices in the $40 or $50 range. the name of the game right now is to maintain and expand market share. when you have the logistical flexibility the store sites provide, they are able to do that. angie: aaron clark come alive
for us in tokyo. banks are trying to extend lending. rett ellis joining us right now. what deals are banks looking to sign? >> we saw last night that the there was ayo, memorandum of understanding that will be signed between the three biggest banks. they are all intent on getting a piece of this major ipo deal coming up. they have signed the deal with saudi aramco. it supports japanese companies going into saudi arabia and tries to take advantage of the , untapped market for
japanese companies as they head out into new frontiers. yousef: what can japanese banks realistically achieve from here on forward? >> after the signing agreement spokefternoon, bloomberg to the chairman of mitsui financial group. he is very keen to get to the underwriting deal, one of the most monster ipo's we will see in the next few years. they are keen into getting into project financing and general financing. that may be financing of government, large companies. certainly, the three big banks see the middle east and saudi arabia as a hot market.
they are in a position to provide funding. they have had a presence in saudi arabia for several years. they will be looking to get involved as they can. alan joining us from tokyo. moving on to the latest from the markets, let's get an update from juliette. juliette: we are seeing gains on the nikkei, up .25%. the yen is holding near the one-month low. we are seeing good gains from interest rates. september is here, putting speculation of another rate hike from the fed coming through. hang seng up .5%. in hong kong, banking stocks
doing most of the good work. manufacturing looking strong. followingen a dip crude inventory in hong kong off by 1.3%. weakness in commodities has affected the australian markets. we had the china pmi number and are seeing weakness on the shanghai market at lunch break. but generally, weakness coming through except from singapore and hong kong. yousef? yousef: thanks. a reminder in terms of what you can get from our website. you can get the rest of the day's news. you will find in-depth reports and market data from the region. plus, you can watch our reports, interviews, and special content only available online. there later in the show, is a post summer market rush for
25 basis points. six months, let's do it again. realize that capitalism can do well withn't do negative interest rates. yousef: let's stick with the actions of the central bank and bring in the head of investment strategy for abu dhabi commercial bank. you heard the latest comments from bill gross. do you agree? does the fed need to move faster and more aggressively? >> i am not so sure. we have seen in the past that the fed hiked rates. the dollar went up and created problems in china. i am not so sure the situation in china is not good. i am not so sure the pickup in the u.s. is not sustained.
rates have to go up, but they will have to go up through a combination with fiscal policy. we are seeing indications of that. the political economy has to work out. you can call it helicopter money. you can also say that central banks will continue to expand their balance sheet even if inflation is rising. these things have to work out. we have the u.s. presidential election coming up. know, hiking rates, you you are not taking into account that monetary policy by itself is not working anymore. that is what we have seen in the past whenever the feds try to hike rates. it needs to be accompanied by higher inflation targets. that can only be accomplished when monetary and fiscal policy work together. yes, higher rates. in on a longer horizon,
combination with fiscal policy, something that is only going to work out sometime in 2017. yousef: you agree with the framework in terms of higher rates eventually. when do they need to hike rates, and by how much? would you say 25 basis points by september? >> i just think that one rate hike will be in the cards sometime this year. does not matter if it is september or december. at that point, it will be over. markets will not be able to digest it. we will be where we were before. that is why i'm expecting one rate hike. that will give some temporary relief to european and japanese equity markets. it will be more difficult going forward for those emerging markets. china, malaysia, brazil, russia.
that,ou know, more than the fed will say overseas problems are going to complicate further rate hikes. we will be back in this loop. i want to take a look at the bloomberg dollar index. specifically, look at the 55 day moving average. momentum,raders gauge for whatever reason, as a powerful indicator of market sentiment. august, pretty much closed above the moving day average. does that mean the trend line for the u.s. dollar is expected to continue? you know, the dollar has had a remarkable performance over the last weeks. i think it has to do with the
rate hike talk. they could go up a little bit more. at some point in time, that will create some concern. we have seen with the higher dollar did to manufacturing in the united states. we see what it did to china last year. i think there will be a threshold that will be hit at some point. for the moment, i definitely see it going further up in the short-term. into a stance on the side of the federal reserve. i see significant upward movement in the short-term. but, you know, if you look at it, i think there are threshold levels. ollar is ate euro-d 1.05, things get problematic for the federal reserve. in whichhat is a band
out of the world's biggest natural discovery of natural gas in the world. prize for delek was the leviathan natural gas field, which has enough to keep israel self-sufficient for years to come. the concern of regulators is too delek would be dominant in the natural gas market. finally, the regulatory regime has clarified an agreement to get out of tamar in five years. is totion being mulled sell off a 31% stake. they could then have an initial public offering in london and sudan.
no final decision has been made. they have had discussions with hsbc and jpmorgan. angie: the energy minister is in london to drum up support for the energy sector, too. >> he spoke with bloomberg on the eve of his visit. he is keen to get investment into the energy sector. far, a few small greek energy companies are the only investors to the sector. traditionally, israel did not have any. then, investors invested in other parts of the region. there is aly, problem that israel made by itself of the regulatory regime. israel now feels itself in a position to go out and get investors.
yousef: it is 2:30 in sydney. 90 minutes left of trading. of amarks almost one fifth percent lower. ♪ yousef: top stories on bloomberg markets middle east. japan is expected to deepen energy ties with saudi arabia. a deputy visits the country's second-biggest oil buyer in asia. an opportunity ahead of the
saudis biggest ipo, aramco is expect to raise $100 billion as part of the crown prince's plan to expand the nation's economy beyond fuel. saudi arabia is promising not to flood the world with oil ahead of upcoming opec talks. markets are saturated and although the kingdom has room to boost output, they do not see the need to do so in the near future. production reached almost 10.5 million barrels a day, 2 million short of full capacity. china is showing further signs of stabilization with the effect gaugeofficial factory rising in august two times level since 2014. it came in at 50.4.
july datags suggest showed weakness due to flooding in the southeast of the country, causing production cuts. sat on the gauge fence at exactly 50. i am yousef gamal el-din. angie: i am anna edwards. to thecounting down start of european programming in london. let's start with brexit means brexit. what does that mean? that is something we will be wrestling with going through september. it means parliament will not get to vote on it. perhaps that makes brexit more likely on the market side. has not moved the pound this morning. but parliament will not get to vote. that was one of the conclusions that came out of the gathering of the cabinet yesterday, the first since the summer recess. anyone in scotland or northern
ireland thought that another opportunity to stop brexit from happening might be there, it does not look likely. we will not see an off-the-shelf solution. there is not going to be any sort of canada solution for the u.k. or a norway solution. those options will not be on the table. theresa may making it clear it seems to be a unique agreement, not off-the-shelf. the other key conclusion after the meeting yesterday with the cabinet, immigration seems to be shaping up to be the big red line for the u.k. government. they said brexit must mean control and a quality outcome for those who wish to trade goods and services, suggesting immigration will be the red line for the government. yousef: we still have more earnings expected to trickle in. are celebratory drinks on the
cart? a company has been trying to overcome the clampdown in giftgiving. this is the world's second-largest distillery. they report numbers at 6:30 u.k. time. pernod's a third of revenue comes from china. anything they have to say about alleviation in that negative trend would be interesting to investors. they could market, have been hit by a distributor reorganization. absolut vodka has been struggling in recent years. as a result, they have been reorienting the business. they have been buying brands and tryingkey 47 gin to increase midmarket sales amidst the clampdown on giftgiving.
back to you. angie: anna, thanks. qatar stocks tumbled on wednesday ahead of the ftse announcement including the nation's stocks in developing nations gauges. qatar seems to be one of the overlooked gulf markets. what is the impact of the ftse move? >> let's take a step back for a second. willannounced that qatar be promoted to the emerging market index starting in september. it will happen in september and half in march. it is a big deal for qatar. more than a billion dollars of passive inflows will come to qatar.
in the buildup to this change that will start happening this month, we saw a rally in qatar stocks, up 15% this quarter. yesterday, it seemed investors were ready to start cashing in on the gains. ,he index was down almost 3% the biggest drop since january. as i say, seems to be one of those cases of buying in advance. once the market was propped up, people decided to cash in. angie: it is not the only factor at play at the moment, is it? >> no, indeed. the biggest contributor to the kleins was -- declines was qatar national bank. the loan to deposit ratio client 4% in july, an increase
from 126% in june. the rate has been growing solidly for a month now, liquidity tightening. they alleviated it a bit with a government bond sale of $9 billion, the largest in history. june.uced the low in but it is back up to 130. issue, anduidity therefore pressure on banks. tosef: i pulled this off show the interest this story has generated around the world. that is foreign investment year on year in blue. that bill that happened year today. that happened march 2016. capital inflows what drupal in the span of six months.
looking at the region as a whole, the other big driver, the bond story, is not about to start? >> we have been talking about the liquidity situation and pressure on banks. this is the story across the gulf. there is less money in the system. government is taking more money out of banks. that cash has to be replaced. issuanceeeing bond increase. it has been quiet. slowed to, issuance virtually nothing. this week, sales have taken off. emirates break the silence with a 2021 bond. we have qatar, bergen. these are just some in the
pipeline. we are awaiting the saudi arabia sovereign issuance, which could be $10 billion. yousef: thanks, sam, for that perspective. let's check in on first word headlines. is setd: telecom egypt to become the nation's fourth largest mobile carrier. says trial operations will begin within six months. telecom egypt gave up early gains wednesday. korea is picking up with imports and exports rising after a prolonged period red.e shipments are up 2.6% in august. climbed .1% after two
years of declines. a south korean court has appointed a law firm as the official guardian of the lotte group founder. the court says he has limited mental capacity due to illness and age. they decided against appointing someone from the family, due to a bitter power struggle. news 24 hours a day powered by 2600 journalists in 120 countries. yousef: stocks took a dip on wednesday despite qatar's trade deficit narrowing. figures.down the is the take from economists on the latest data? the narrowing of the deficit
was driven primarily by a lowering of import prices. importer.an energy the decline in oil price has benefited the economy greatly. even though exports fell in july, the decline in imports fell faster. that was the driver behind the lower deficit last month. angie: is this likely to continue? what are economists saying? down: oil prices are still year on year. they expect that to keep filtering through to the trade deficit. at the same time, there is a slowdown in exports. one of turkey's biggest services is tourism. angie: constantine, thanks for that. got you. thank you so much.
yousef: you are watching bloomberg. i am yousef gamal el-din. angie: i am angie lau. a check of the latest business headlines. power struggle in egypt is upending wheat markets. yesterday, there was a failure to buy their grain needed. the ag minister says they will ban imports with traces of fungus.
qatar airways is adding to its list of 340 outstanding orders for boeing airbus planes. cceo says the carrier will place a large order soon but did not provide details. reigned in expansion plans due demand lagging. resumed in abu dhabi on wednesday on a skeleton basis for careem after suspending services for four days. uber's services remain suspended. hasef: united arab emirates a aims to grow the insurance
industry. joining us now is the chief executive officer of abu dhabi national capital. great to have you on the set. profits increased 70%. what are you going to do in the second half of the year? >> i think we will continue on our journey of success. upper darby national capital since 2010 had a year on year increase in profitability. yousef: what would you be targeting for the second half? a 20%would be targeting 5 in net profit01 and revenue. yousef: what is going to drop that profit? where do you see interesting trends in your profile? >> the market is saturated with insurance companies.
the main issue is price competition. , we have adopted a strategy since 2010 to not allow ourselves to be dragged into price competition. idenook at market niche, w distribution channels and product offerings. with that, we are optimistic for continuous growth. yousef: you mentioned intense competition. i looked through exchange details. 16 insurance companies listed on exchange, a lot of them with less than .25% in terms of the total index. togethertime to bring some of these players as we have seen the banks take the lead in other sectors for consolidation? opinion, with new
regulations that address solvency margins and reserves and all of this, some smaller know, the you market is ready for consolidation to strengthen the market. considering difc, all the infrastructure, the market is unique. it is the largest insurance market in the arab world, the for organized, and is a hub earnings by offering insurance across boundaries. angie: part of the business is allocations right now. this year, we have seen much volatility. i guess everybody is expecting another move to -- by
the federal reserve year. how much of that are you incorporating in your allocations strategy? >> can you repeat the question? i am not hearing correctly. can you say that again? sorry. can help me yousef out. maybe we have technical issues here. yousef: in terms of your allocations, how is that spread out? insurance,in diversification geographically across lines of business is important to sustain good results. example, we have onnessed fierce competition medical. policy to diversify between life insurance products, diversification in
the region of 20% to 25% of the portfolio would be healthy. yousef: i want to go back to consolidation. you say the sector is ripe for consolidation. are you looking at an acquisition or in talks to merge ? >> we are not in talks with anybody. we are watching the market. if there is an opportunity that improve ourense, distribution channels or add value, we are willing to consider. yousef: would you say that is likely to happen in the next year? expect market consolidation. national abu dhabi capital, we are watching the markets and examining. yousef: you have seen the conversation and events that unfolded as a result of oil price pressure and the state pushing consolidation, the
mergers when it comes to the banking industry. would you say there is additional pressure on insurance companies to come together? >> sure. there are signs of global crisis. umbrella to the economy. if there is an increasing economy, there will be an increase in insurance. there is pressure. there is another reason why it could drive consolidation. yousef: love having you on the storm -- show this morning. angie? angie: we have breaking news right now. u casino revenue is rising for the first time in 27 months. it rose 1.1% year on year. the estimate was for a 1.5%
drop. this is a surprise and will no doubt be moving casino stock today. it is rising for the first time in 27 months. a lot of factors coming into play for the headwinds overcoming that. for the past 27 months, macau h as been plagued with slowing numbers in the vip space. casinos have been trying to prop up mass-market customers in the face of the anticorruption drive not only in china but in macau. coming up, south african politicians have the reserve bank in their sights. ♪
the finance minister is under police investigation. now the reserve bank is in the spotlight. let's go to johannesburg. how did the reserve bank get caught in the crossfire? yousef, it is one of the last institutions in south africa with a credible reputation in the country. it kept on going about its business without anyone bothering it. it has not been influenced by politics as of late. seems like every other instance of government has been captured. treasury is in trouble. it seems like the last place to go to was the treasury, rather, the reserve bank. seems to be a scathing attack against financial and state institutions, which has become a big issue. the issue is whether this will affect independence for the reserve bank, which has been quite independent.
moody's was set to deliver ratings of the country soon. yousef: south africa asset classes are under pressure. they are among the biggest movers in the last 24 hours. that includes sovereign bonds. how will this affect a weakened rand? what can we expect from the market? >> in the past week, we have moves from the rand, at six-week lows on news of the finance minister being asked to appear before a special investigative unit here in south africa. it is a big deal in that regard. i think if this continues to be an issue and this continues to play in the top six of the political party that rules, this may begin together steam.
certainly not good news. for now, it is just rumors. the leadering that of the ruling party -- angie: one of the biggest fixed income market managers is stopping investment to some of the largest state companies. it appears things are going from bad to worse there. >> they certainly are. speaking to an analyst yesterday, they believe this is bound to continue. perhaps it will happen again from another asset manager. future growth itself, one of the largest asset managers, certainly pulling back. the cio says they have to reassess. this will be looked at as a political statement, particularly within the ruling party and the government. andrew cantor says
china's official factory gauge gains the unexpected boost lifting asian stocks. double down, billionaire investor bill gross calls for two rate hikes from the fed as others march, and says central banks are too addicted to negative rates. and the republican presidential nominee reiterated his pledge to build a wall along the southern border into mexico. a very warm welcome to countdown, everybody.