tv Bloomberg Markets Middle East Bloomberg September 5, 2016 12:00am-1:01am EDT
people to walk. it is 5:00 in london and 7:00 here. welcome to the bloomberg markets middle east. stocks.ion for saudi one of the best performers in the gulf states. you are there right now. what drove it ye? a lot of different variables in this equation coming from the comments we are getting from vladimir putin. also, the saudi deputy crown prince showing signs but they are willing to cooperate in terms of putting in a production freeze but part of it has to do with the kingdom continuing the pursuit of diversification. the latest series of reforms
comes from foreign investors. this is the second time they have done this in 15 months, reshuffling the rules when it comes to how foreign investors can fund the stock exchange. the last time they did that -- take a look at this chart. what you are looking at is the number of shares that foreign investors are holding. what happens is that -- [indiscernible] they are around 1% of totals. the interesting part is that the analysts make it clear that this could be a new beginning for foreign capital coming into the country. angie: thank you. let's check in on headlines around the world.
hanjin jinping -- hanjin shipping plunging since news emerged file -- the korean court except of the filing on thursday. they want a plan to be submitted by november 25. turkey has said it will provide evidence that the failed military coup was planned by the exiled cleric. presidentobama met erdogan and said that washington would continue the investigation into what happened. erdogan acidity would travel to the u.s. because stronger case for extradition good beijing critics are poised to win seats , the firstslator
time after record numbers of people voted in hong kong on sunday for the first election since the pro-democracy -- reported to have reached 50% turnout. turnout. results are expected later today. powered by more than 2600 journalists, this is bloomberg. saudi arabia and russia on oilto work together price stability, stopping short of issuing concrete proposals. our commodity reporter anthony has more from dubai. what did they agree to and what did they not agree to at the meeting at righter: you said it there, the agreed to work together. they said it is possible that the oil markets can downs and
maintain stability. they stopped short of making any strong proposal at least publicly for the upcoming meeting of opec producers and other oil producers. see anyot publicly-agreed proposal or position coming out of a meeting . there were comments from president vladimir putin what he said that he hoped there would be a freeze any thought that the parties could get around the position of iran. that was the stumbling block. iran says it wants to keep producing to get back to its pre-sanctions level but saudi arabia said no. vladimir putin says he hopes iran would get a buy.
going into yesterday's meeting and vladimirarents putin, there was a strong proposal from president vladimir putin -- we didn't see that the adopted in the public comments after the meeting. so far, they have agreed to talk. we are going into september so we will see what happens there. what to thef: latest comments two to the likelihood of reaching a freeze agreement? does it change anything? it doesn't change anything so far in the public perception that we have. members, saudic arabia, iraq, iran will all be there. they are discussing these things. we do not have anything more than their public comments.
saudi arabia saying they want participation. the iranians say they need to keep working towards presenation levels. russia saying they would like .ooperation we have that going into it. there is always behind-the-scenes talks going into the meetings to prepare their positions. there may have been more of that behind-the-scenes yesterday. we do not have any sign a coming out of the meeting. yousef: we have a chart that shows the current levels of production and how aggressive these countries are pursuing their market share. one is the market telling us in terms of how saudi arabia sees saudirket reporter:?
arabia yesterday raised its october 01 oh price differentials for the oil that they sell to their customers in asia. aramco since these deals by in a they sell the oil price the oil based on the global benchmarks each month. they increased the priced level so that is an indication that pc better demand. we saw the oil minister in china saying they are not concerned about demand. increase toprice asia as well as the u.s. from indicates that fundamentally they do see some better demand from some of those refineries in asia and better profit from those refineries. thank you so much for that. the leaders of china and japan are geared to hold face-to-face
talks later on the silence of the g-20 and hangzhou. it really comes at a time that if increased tension over disputes in the south china sea. the latest headline north korea season.hat the eastern let's go to hangzhou right now. what are we expecting from the talks? that action by north korea now going to be any helpful here at the g-20 summit where already we are seeing growing diplomatic tensions between the two countries also with china japan and south korea so from the summit here in chinaou between japan and we are expecting some talks there a sources say the president xi jinping and shinzo abe will have a formal sitdown. this comes at a time when there
has been a lot of tension over territorial disputes in the east china sea. beijing taking more assertive measures towards these uninhabited islands controlled by japan, sending more vessels close to them. the latest tensions have not impacted trade dented chinese tourism to japan. it does complicate the relationship between the two countries at a time when these nations to face some economic challenges. this morning, we had some talks between president xi jinping and president obama -- and president of the. their relationship has taken a hit after she said she would deploy a missile shield over how country. given that this is the final day of the g-20 summit we are expecting several closed meetings and in a wrapup statement by president xi
jinping, a draft of the g-20 communique obtained by bloomberg saying that leaders would mention financial market volatility, the importance of a fiscal measure, not to mention the markets as well. warnings of populist backlash against trade threatening global recovery is also on the agenda. definitely and not surprising that this is an essential theme at the g-20 fathering ofn the the transpacific partnership deal that by the u.s. not to mention growing anti-trade rhetoric around the world. i spoke to the head of the oecd and they weren't of the consequences of protectionism. longer ais no locomotive of growth.
actually lagging investment. no surprise why the world economy is growing at 3% even below the rate of growth pre-crisis. is aade in general positive for the country. deal with those forces of unemployment with anti-trade measures. you would be shooting yourself in the foot. the challenge for leaders will be to pay attention to these protectionist moves around the world but at the same time trying to spur economic growth in their countries. it is something that every country needs to take a closer look at. thank you. let's get the latest on the markets right now where you
stocks are flying out of the gates on monday. looking very good with the exception of the hong kong leather. -- weather. there is a contrast between what is happening outside and inside. take a look at the hang seng index. asia basically extending on friday. up, money on the way is coming back into asia and we are seeing a lot of highly cyclical sectors. ,inancials and mining stocks rising substantially. i want to talk more about the hang seng index. the mostck to overbought levels going back to the rally we saw in 2015. this is the index. , roughly atrsi
about 76 at the moment. back then, it hit 89. anything above 70 is considered overbought. this has taken all come to the highest levels within 13-14 months. let me wrap up with the japanese yen. the boj governor talked about that he did not believe that there are limits to monetary policy. they cantalk about -- take them further into the negative. in my columns of a bit of an impact for some parts the see someut they do advantages from taking rates further below zero. later in the show, billion dollars fix, this handsome recall of calix a note
you lately numbers at 54.7 in july..53 a slight softening but still more importantly above the average. egypt coming in and 47. low.is a four-month let's take of the conversation with ahead of research at emirates and beatty. let's kick things off with saudi arabia. little sign that oil prices are waiting on sentiment. guest: it is nonsense so much prices rather than production driving activity. we have seen particularly over the summer going into the oil meetings, saudi arabia has ramped up crude oil production.
saying 10.9ial million barrels per day produced in august and that is a new record high. and fees through to the oil related manufacturing sector which is captured in the pmi. it is not surprising to see the pmi rising in saudi arabia on the back of those increased oil production numbers. would you say that saudi arabia is currently the strongest performer off the back of the latest series of reforms when it comes to the stock exchange and trying to bring in more foreign cash and of the anticipated saudi aramco listing ? how positive are you? i think the reforms that they have announced are pretty ambitious. relaxation in foreign investors is really in
preparation for privatization down the line and that is going to be a key component of the economic reform plan. execution of that strategy is the biggest issue. this is one step towards executing a privatization strategy. bring egyptwant to and because the contraction seems to have sped up. what do you attest to that? could it be that currency weakening? guest: certainly. beenack of currency has one of the factors that has consistently been cited by businesses in the pmi surveys. a lack of access to foreign currency to pay for exports. i believe that the program that is about to be approved by the imf is going towards alleviating at issue but we are also in the summer. and, which is weak for torres
and. security issues continue to be a factor preventing further growth. those of the concerns that need to be addressed before we start to see a real improvement in the pmi. the imf program will go a long way towards addressing some of the growth of investors as well as the issues faced by businesses on the ground. yousef: one about the softening we are seeing in the uae? it is still expanding but it could be the beginning of a continuous softening. guest: it is not likely that it is going to get softer. we had a strong reading in july ramadan spending supporting activity across the services sector. it is not that surprising to see a little bit of softness in august but as you mentioned, there is still fairly soon -- robust growth. domestic demand is growing
exceptionally strongly. when we have seen weakness was really external demand, so, exports were showing a bit of but overall, firms are increasing their purchasing activity which tells us that they are probably building up to expecting further improvements down the line did so, a little bit of softness after a strong july is not that much to worry about. angie: stay there for us because we are going to get back to you. bad, the latest developments in the oil markets. this is bloomberg. ♪
head of research in senior economist for emirates nbd. when it came to the pmi in saudi arabia and egypt, much of it was driven by oil. i want to look into bloomberg right now and look at the chart i have pulled up. you can find this on your terminal for subscribers. you can see the wti price and ,he change in long positions this is if the end of last month. the oil rally drop in the most in two years. i guess this russia, saudi -- that isaboration not being believed? i think most people in
the market will recognize that even if there is an agreement, it is really going to freeze output at record levels. what really needs to be addressed is the excess supply in the market at the moment. we need to see demand picking up in a meaningful way before investors buy into the view. overview is that prices are going to stay there for the next 6-12 months. the discussion around an agreement between oil producers is going to provide some support the we do not see very much upside. to what extent would a rebound in oil prices -- let's assume they come to re-freeze .greement in algiers would that take away from plans from the gcc to issue sovereign
bonds? guest: i do not think that those plans are going to change because where the oil prices are now is below the break even price for most of the gcc. if saudi arabia wanted to balance a budget, we are looking at $90 per barrel. we are quite a way off from that. a rebound or an increase in the oil price from these levels would be welcome in terms of alleviating the pressures on the budgets going forward but our view is that they still need to find alternative sources of finance. angie: thank you so much for that. coming up, and we review the new foreign investment rules and saudi arabia. look into that story and
and russia after they stopped short of announcing coordinator proposals. a similar proposal was derailed earlier this year after iran declined capping production. boj governor says no ideas are off the table as policy makers review strategies. he said there is still room for more monetary easing in quantity or quality. he and the sized review will not result in any reduction in policy accommodation to the review will become did this not. hong kong will get a new vocal faction in its lawmaking body, candidates challenging the authority of beijing winning seats in the cities legislature for the first time after record numbers voted on sunday. turnout is reported to have reached 58%.
yousef: it is 7:30 here in riyadh. angie: it is 12:30 here in hong kong. london.31 here in we are about to start the trading day in europe. let's start with the politics here in europe. we talked about the spanish chaos at the top of the spanish voting electoral system. now we have germany in the spotlight. angela merkel facing a humiliating defeat in some regional elections in germany, specifically in her home state. the area in question is her home region and her party has come in behind the alternative for
deutschland, which is a further right into it and immigration party. they capitalized on disquiet over the refugee policy. beena merkel had campaigning during the run-up to this vote, campaigning in her own state and she said that she will not back away from her open border policy which she adopted one year ago. intoed refugees passage germany from hungary and her popularity has plummeted. there in mind that these original elections in the pattern of voting that we see is often not the same as we see in national elections. one of the biggest questions is what she is going to stand for a fourth term in december. the decision will come as to whether she will stand for a fourth term and get the backing of her party. politics,aying with
.heresa may is talking brexit anything that we can watch out for? anna: everyone is trying to work out when the start of negotiations will be. around easter next year. ,heresa may at the g-20 discussing promises made by the brexiteers. some of them are on her cabinet now. by borise claims made johnson who is now foreign secretaries of the u.k. did introduce an immigration system bitehat is is being touted theresa may. she said, do not get me started on the merits and limitations of such a policy. she said there are questions
over whether a points-based system would work. immigration has been the other part of the political fear being able to pin down the government so far -- they have talked about putting controls in place on how citizens can settle in britain and many intricate that is being, the u.k. government is not going to go for free market across the eu. theresa may pouring water on that is suggesting that many things are still on the table saying i am going to get the best possible deal, suggesting that she is not ruling it out and we're going to here from the brexit secretary in parliament. let's pick up the audio conversation. russia and saudi arabia stopping short of a formal agreement. talks have given an air of stability to the oil markets. let's continue with that discussion. joining this is the cio for
franklin templeton investment. you have any chance to digest the latest commentary. what are your expectations as to what russia and saudi arabia can achieve the head of the meeting in algiers? the question is really whether anything at this stage will of the fundamental impact what ioil market and mean by that is that these oil-producing countries are capacity,oducing at so, saudi arabia is producing 10.7 million barrels, iraq reducing over 4 million barrels, iran almost close to capacity. potential freeze of oil production will actually do very little to change the fundamentals of the oil market. it is however important from a sentiment perspective -- clearly
the breakdown of talks in doha has created distress among oil-producing nations and as a result, a lot of effort has been expended in trying to restore the trust and credibility. in your action of just getting together and showing unity on policy could be quite positive in establishing a higher equitable price. yousef: while all of this is happening, saudi arabia has been pushing on with its reforms to diversify away from loyal and part of that story is the saudi's talk exchange relaxing restrictions for foreign investors to qualify. , the interestnd muted. this chart shows the amount of shares of total percentage -- around 1% around redline. do you expect the latest reforms
to be enough to really kindle the interest of foreign investors who have so much choice in the emerging markets? guest: we think that these changes are substantial and we welcome these changes. the first set of criteria that came out in 2015 were too at as aive and complex result, that meant that very limited foreign ownership happened in saturday a compared .o the uae and qatar these new policies address a lot of concerns from an infrastructure perspective, trade supplements and from an investment minutes perspective. insuch, we expect an uptick the qualified financial investor interest in saudi arabia. angie: the thing about the is in the interest of saudi arabia.
one idea the that they are speaking this up now? could be in the face of oil? guest: i think that is a great question. reality is that saudi arabia is facing its most serious challenge since the 1980's. of oil prices has considered -- has forced saudi arabia to consider life after oil. this is a serious bid to attract foreign investment and portfolio flows. and more pragmatically speaking, saudi arabia has announced plans to list saudi aramco, the largest company in the world, in 2018. even if a party that is listed in saudi arabia, the exchange would be at a much deeper investor pool to accommodate that. those the realities of why this has been accelerated today. got there are soft or considerations at play.
the authorities made it very clear that they want to institutionalize the market, bring in foreign investors that can smoke that the volatility in the market, bringing in sophistication, majority, better disclosure and transparency standards in the saudi market. we think this is really symbolic of the proactive and ambitious policymaking that the new government is seeing and we wholeheartedly welcome it. doubt the regulatory environment is more welcoming for saudi arabia but you were looking at these opportunities, fundamentally, if -- is saudi arabia a good bet? guest: no doubt saudi faces some short-term headwinds. economic growth is weakening with impact on earnings growth. saudi is also facing a removal of subsidies which is creating uncertainty and of course a domestic liquidity challenge. all of that does not change the long-term investment story.
saudi is a country whose economic importance is growing quite rapidly. it is supported by an attractive demographic base which creates money across the many areas of the economy. this is an economy that is in transition and reform is key to its success. as we have said, for their vision 2030, and it has been clearly articulated that they will push their agenda forward. i would add that having declined by over 40% in the last two years, valuation in the market has started to look attractive and has to do to reflect the economic realities on the ground. saudi arabia is also an member of the g-20 and central bankers around the world have begun running dry in terms of the policy tools that they have.
what would you want the g-20 to do given the current state of the global economy? what we would like to see ise out of the g-20 meeting more coordination and better articulation of global monetary policy. also, some concrete plans to revise fiscal spending. to growth remain tilted to the downside and in that regard, we cannot expect monetary policy to spur growth. that really highlights the need for fiscal action amongst governments. specifically, we think that progress on things like the transpacific trade partnership led by the u.s. would be quite important. we have only seen signs a collaboration between the u.s. and china on things like when a change and ratifying the paris accord. overall, what we would like to see come out of this is better cooperation and fewer
accusations. in regard to the region, it is notable that the deputy crumpets of saudi arabia has spent the last few months japan, china, and the u.s. will encourage foreign investment into saudi arabia. these endeavors mean that the fate of the region is inextricably linked to the global economy and only with a stable economy can we see regional prosperity. asia playing a large part in that. thank you so much for that. let's check in on the first world headlines right now. the global recall of the note 7 smartphone will not be cheap good estimates compiled by bloomberg say the decision to replace all devices shipped may
top $1 billion. some of the funds have batteries that can catch fire and exploded . the timing could not be worse with the new iphone seven launching later this week. sampson says the estimated cost is heartbreaking. >> $1 billion is not a lot compared to their profits that we have to realize that investors have a lot of faith in the brand name. so, this could be a more long-lasting impact. managersber says his have indicated there is a prospect of saving it from its jet for in an e-mail statement by berg says major suppliers and creditors are willing to work with kpmg to help sweater
complete current projects. the company saw management after applying for liquidation and its demands for payments to creditors. north korea has sent a message to the g-20 firing three ballistic missiles into waters off the eastern coast. joint chiefs of staff confirming the launches but did not identify the rockets nor out for the flu. north korea came up when president xi jinping met the president of south korea at the summit. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries, this is bloomberg ahead, the impact of the rate hike on middle eastern economies, we are going to discuss that with fitch ratings next. this is bloomberg. ♪
♪ welcome back. lau in hongangie kong. let's check on the health of the global economy. our next guest says that macro risk is shifting from emerging markets to politics in advanced countries. joining us now is brian colton. every leader at the g-20 including christine lagarde is worried about this attack of populism and anger amongst middle classes around the globe against globalization. andlobalization in danger politically, if, in democratic countries, it is rejected, the politicians have to listen. has become ak this
very important issue with the rise of populist leaders across europe and the u.s. the debate stirred by immigration but also the growth we have had since 2010 has been pretty anemic. the share of the growth has gone down, the share of labor income has fallen. .ithin that, inequality rises that is the context in which the voters feel they have not been getting their fair share of the system growth. globalization is already slow. has alreadyimports find off as china becomes more self-sufficient. there is a risk that he would go back. that would be bad for a world growth in the long run tire inflation globalization has been
keeping prices down. angie: can you blame them? report for the past couple of years shows that since 2011, this massive gyration of jobs figures in the latest showing definitely lower-than-expected. take a look of the markets we are still in bull market territory. we still have equity markets buzzing along. wall street feels very disassociated from main street. disconnect. is a not so much in terms of job growth, it is on the wages side. what you are seeing is that real wages have not kept up with productivity. that means that the share of profits, the slice of cake actually going up. that is why the markets have liked it.
what is not happening is that the prophet has not been recycled into investment spending which is why you have not been getting the benefits of growth and you have not been getting growth in wages. that is something that g-20 leaders are going to focus on. two things that we might see as a result, one, probably more fiscal spending. and probably more wage growth. the imf is recommending an income policy in japan to boost wages because for all of the monetary easing, we have not seen wage growth picking up we might see us of the is better for growth but not necessarily good for the profit share. that probably net better for the economy. here towe came out riyadh to speak to some other decision-makers in the kingdom as this country tries to bring in foreign investors.
from your vantage point, are you sold on the investment is for saudi arabia? saudi, overnk several years, has been too focused on oil in resources and there is indeed to develop the nonoil economy. foreign investment is going to be a crucial part of that adjustment. it will take a long time but that is the reform needs to happen. yousef: how does the wider middle east fit into your outlook at the moment? since may 2014, the oil price collapsed and has been under a lot of pressure has current account deficits have widened. and oilseen governments companies slashing their n inding to try and reig
the deficits. the oil price looks like it has stabilized this year because u.s. oil output has started to decline. those pressures are getting a little bit less severe the we're still seeing the effects of those spending adjustments. they will still be with us on those economies going forward. going to 2017, the fed is going to raise rates. that is a new headwind which would offset some of that benefit from the stabilization in the oil price. angie: that stronger u.s. dollar in play next year and thank you. district, developing a , a look at a $20 billion project that includes a rare feature for dubai. stay with us. ♪
dubai is pushing ahead with the residential and hotel district on their main highway. we have the latest on this ambitious project. what we know is basically it is going ahead. the design for the project in the plans were being worked on for over one year. yesterday the company, dubai holdings, announced that the first phase of the project was going ahead, making up one third of the entire strategically located land on the main artery -- it is going to be developed in 2017. we are talking about a major development, 3000 apartments over 2800 hotel rooms, cultural centers, almost one dozen
commercial offices. there is a lot to be built and dubai is planning to push ahead. dave, juicy price tag. how will it be financed? reporter: the entire project will be around $20 billion but the first phase which will be starting next year will be around $6.5 billion and that is going to be financed mostly through investment. they are talking to investors from the region and investors from outside, from asia, from europe, they are saying there is a lot of demand for it to the true test is whether the money will come into the market and as investors start with the catch needed to build the project -- they are also saying that we are going to see some bonds being issued. .ngie: ambitious
trade trouble. economic leaders warn the g-20 that the rise of protectionism is threatening the world economy. initiatives to soak inflation. says britain has rejected the free movement of labor, but the european commission vice president tells bloomberg.uk cannot pick and choose -- tell the bloomberg that the u.k. cannot pick and choose brexit conditions.