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tv   Bloomberg Markets Middle East  Bloomberg  November 1, 2016 12:00am-1:01am EDT

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♪ yousef: in a month on opec division and rising stockpiles. officialchina's factory gauge adjusts to a 10 year high. yousef: former capital markets its first finance minister in almost 20 years. trimming its inflation forecast as a key's monetary policy unchanged.
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yousef: it is 8 a.m. across the emirates and 5:00 a.m. in london. angie: it is just past noon in hong kong. welcome to bloomberg markets: middle east. we have gotten a lot of news coming out of asia. really thing that is threatening the markets is oil. manus: it absolutely is. when you look at the oil price, just eeking out a small gain this morning. have a look at the chart. combining the relationship, oil and equities. the white line is the world index. oil is the other one. dropped over 5.5% since opec officials got together on friday. growing quotas discord. a lack of confidence in terms of
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the oil market. doing a deal, getting everything together with opec. $40 if the deal does not go through. the bank of japan this morning, i love their opportunism. $60 for the bank of japan. the secretary of general spoke to was yesterday and you are focused on that. angie: calling for unity for the organization as it will have a supply deal next month. took anptember 20, opec all-inclusive decision to restore stability to the markets. all our member countries agreed to limit production. angie: deal or no deal. if barkindo had anything to say
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about it, that was his view. let's check the market. mumbai has been trading for 20 minutes and it has been gaining. stocks speaking, asian really reversing losses today. zinc climbing after unexpected pick up in chinese manufacturing. rba making that decision on rates at 1.5%. we saw the aussie rise as well. what about the middle east? two hours away from the start of trading. let's check it in terms of dubai and abu dhabi. we focused on the cross yesterday. this is how the equity markets finished the day. oil up this morning. you have a nice gmac -- chinese data, the pmi data -- that will shift the dial in terms of discussion on what is going on
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in the markets. we have a look at the u.s. equities closings of last night. you look at the index in the states, that is drifting higher. i will call it flat. down by a 10th of 1%. we are building up, a stronger dollar. we are building up to wednesday night where no change is expected. let's get up to speed. we have some headlines. haidi with the first word headlines. good morning. haidi: hey. governor has keptasla it unchanged. it was held at a record low rate at 1.5%. it isntral bank says accounting for inflation. the bank of england governor mark carney says he will hold
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the top job until 2019 to guide the economy after brexit after months of speculation. philip hammond welcomed the decision. some conservative lawmakers criticized carney, calling them political. pulled backuse has against accusations from some democrats that the fbi case isn't a very with the presidential election. the president obama spokesman says he does not criticize comey reopening the e-mail case of hillary clinton. >> he is a man of integrity, a man of principle and a man of good character. the president does not believe that director comey is intentionally trying to influence the outcome of the election. he does not believe he is secretly strategizing to benefit one candidate or one political
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party. he is in a tough spot. haidi: officials have arrested the editor of a major newspaper on suspicion of involvement in july's coup. renewedt erdogan has his purge after the uprising and promising to restore the death penalty for treason. they say it is the end of media freedom in turkey. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. angie: china's stabilization continues into the fourth quarter as official factory games rise. services also advanced. here to talk us through it is tom joining us from beijing. what is behind this rebound? tom: i think it is a story about
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it gaining traction. at the end of 2015, the rate cuts. beginning of 2016, we had booming credit numbers. we have had loosening in the real estate sector throughout the year. all these factors together have now finally started to gain some traction in restoring a bit of momentum heading into the final month of the year. there is a wonderful story you guys have written. the benefit and boost from a lower yuan. what is the next policies that? is it fiscal, monetary, currency? what is next? tom: i think we are at a moment of policy transition, manus. the start of the year, china was still very much in stimulus mode.
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they were focusing on supporting growth. what we are seeing now is as the stronger numbers are coming through, the focus for policymakers the shifting towards controlling more medium-term risks. we have had major cities introducing controls on speculations in the property market. we had the bureau announcing the main focus was no longer going to be supporting growth. it was going to be controlling asset price bubbles. there is a shift in policy away from program towards -- pro-growth towards controlling risk. manus: it will be interesting to see how they control their growth. tom, always great to get the input of your analysis. let's get a perspective on the data and the chinese story. we have our guest, the ceo of namura asset management. thank you for joining us.
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factory orders, two-year high. services improving. it is a good global story. the relationship of the uae with the world and how that ranks in terms of china. china is the second biggest relationship for the region. good news today? >> absolutely. i think the chinese economy has been on the upside this year it back in january, we had the yuan depreciation, and there were lots of stories of how that would drag down global growth this year. that has not happened. we see the chinese economy has managed to outperform all expectations. i'm particularly impressed by the factory and pmi numbers of thatcame out because outlines the shift of the manufacturing and nonmanufacturing. good news for the region. i think you saw earlier this month -- last month, the uab
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changed its policy towards chinese visas, or applications. there is definitely an opening up to the chinese economy. angie: well, tarek, when you take a look at the chinese economy, it does show stabilization. but the question really is the policy outlook right now because the first half growth was all about that investment led infrastructure and the like. at what point when you have such a debt ridden nation that that will continue? tarek: very good question. clearly at some point with debt to gdp running north of 250%, that is a very difficult situation to maintain. i think the key is how quickly we can transition in china from
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a manufacturing led economy towards domestic demand. i don't know many economies that have done that successfully quickly. at some point, there will be a hiccup in china. we expected this year but it has not happened. it is definitely something we have to watch out for probably in 2017. angie: thank you for that. stay right there. that is the chief executive officer of nomura management. right now we get the latest in the markets with david. is thevery decent day best way to describe what is happening. the things we just talked about, pmi data out of china. in some ways, it is really helping to keep thing stable. if you do look at the 51 number. before the numbers came out, it was in the red. now we are mostly on the way
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out. in the hang seng, it is really leading what is happening across the region. that being said, there are several weeks spots. australia, down 8/10 of 1%. you always have to think about volume as well. right now, you are actually getting volumes between 8%. a little lighter compared to this time of the session. generally speaking, a 30% drop in volumes. an uptick compared to what we do get in november. hang seng, i mentioned that. 23,200. the nikkei 225 going about. it cannot write right in the middle of the lunch break in japan. it is opening higher. a lot of this comes down to the japanese yen. now, that said, you look at these two things -- very
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interesting graphic because you rarely see this out of japan correlationve the between the yen breaking down. for the first time in a year, for only the third time in the last five, both of these things are correlated. very interesting development. much of a risk appetite here. manus: all i want to know is whether you had a winning ticket on the gold cup there. david with the very latest on the markets. chairman wanted, that is the call. we look at the candidates for the top job. next, change in saudi arabia. why has it replaced its finance minister? this story is next. this is bloomberg. ♪
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angie: welcome back. you are watching bloomberg. i'm angie lau. manus: i'm manus cranny. saudi arabia has replaced its finance minister of nearly two decades. he has been ousted in favor of another man who used to head up the capital markets authority. let's bring in andrew. are you surprised by the move and what do you make of the new man? andrew: i'm surprised by the move that it was not telegraphed. at the same time, we kind of knew this was in the cards. we had a changing of the old guard. of the positions were held for years. is replacing a lot of these old guards with younger, often
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less experienced but more energetic, more ambitious to try and bring the change he needs to get through quickly. angie: can this man help saudi arabia? andrew: that will be a big part of his job. we had the bond sale of $17.5 billion last month which was the biggest for emerging markets. saudi arabia ran a budget deficit of $100 billion last year, 16% of gdp. they need to bring investors in. they are trying to get more qualified investors to come in. they may start with the bond program. not only do they have to sell it to external investors, but they have to sell it domestically. ministering finance was on tv last month to talk about his austerity package. it did not go so well. he was criticized.
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a large part of the job will be to sell this domestically and get people on board. manus: the honeymoon period may be over for vision 2030. thank you for joining us. let's bring our guest back into the conversation, tarek. changing of the guard is about appealing to a broader base. there is a lot going on in saudi. give me your perspective. tarek: it has been a very challenging year for saudi arabia. one of the issues andrew touched upon his we had an offloading of the austerity program which has led to a very difficult fiscal situation, a challenging fiscal situation for the kingdom. i think perhaps now we need to see some positive catalyst for the markets and i think the new finance minister has to offer one side of the equation, but the other side which is the benefits that accrue from the
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vision 2013 plan. this isow much of really optics? of three officials who turned up on a popular saudi talkshow talking about austerity, talking about this new age in saudi arabia. he's got a lot of criticism. how much of this is now, you know, payback? tarek: i think part of it is optics of course. there has been some bad communication perhaps recently, but also, the reality is that we have seen salary cuts. we have seen higher bills for the average household. that needs to be offset at some point by some positive catalyst. i think it is time to deliver some of the promise of the vision 2030 and the national transformation plan. these are very long for rims --
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programs that we need to get some milestones in the interim to give people some encouragement that this is the right plan. .ngie: tarek, stay with us he stays with us. next, the bank of japan appears to be prioritizing its inflation. when it might reach the target. more on the outcome of tuesday's meetings. this is bloomberg. ♪
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manus: welcome back. i'm manus cranny in dubai. angie: i'm angie lau in hong kong. panasonic has slashed its profit forecast because of falling profitability. it's expecting an operating profit of $2.3 billion, 12% lower than analysts were
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expecting. panasonic is struggling with a stronger yen. manus: honda raised its fully profitable the band of suvs in china. net income is nearly $4 billion, 6% above the previous outlook. over 7%. upgraded the company says it is open to possible joint ventures. angie: we are watching shares of japanese airlines. its targets by 15% because of lower international demand. jal maintains its yearly target. shares of both companies looking like this right now. >> the bank of japan says it will not hit its 2% inflation
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target. we already knew they blew past the two-year mark. what was significant here? the inflation forecast for 2017 and beyond that as well -- it seemed to push back the timing of when it will achieve its target. ohe full forecast for 2017 t 1.7%. it pushed back the projected timing. 2% inl increase towards the second half of the projection period. the language is quite cautious. it may not even happen in that period. that was the second half of a period in 2019. theterm of the ehad ohead of
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boj will end in 2018. been leading, has you can see how inflation has been doing. cpi pushing higher but it is coming back. the inflation target is someone weaker than the previous outlook. he said getting to 2% inflation could take some more time. manus: thank you very much. rosalind with the very latest on the bank of japan. let's bring in tarek, ceo of nomura asset management for the middle east. if you take six weeks ago, there was this level of expectation going into september. kuroda is not focused on expanding the monetary base. how could they control this yield? tarek: one of the issues the boj has, they really have put
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themselves into the corner because they have gone into negative interest rate territory. that has not really worked. it has created problems for the financial sector. on the other side, the purchasing program, it has become so huge that it is distorting the markets. going any further at this stage does not seem reasonable. angie: is credibility at risk for kuroda and shinzo abe? tarek: i think so. angie: is credibilityi think moe he launched this program sometime ago and the third arrow has not delivered yet. i think the bank of japan is certainly one tool. there are lots of other tools that abe should have utilized by now. i think foreign investors have become somewhat disillusioned by that. you see that from the selling we
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have seen in the markets in the last year or so. manus: talk about the global bond perspective. i was looking at the global aggregate. it rose despite being smacked in october. it raises a moderate form of equity. do you really think that is global? can bonds deliver like it did this year into next year? tarek: i don't think so because inflation is picking up. let's look at the u.s. data for example. you have unemployment coming down, health care costs going up dramatically next year. you also have oil which is almost double where it was at the beginning of this year. so, come december and january, the numbers will show an excess of the fed targets of 2%. under those circumstances, it is difficult to see how the fed can avoid raising interest rates. manus: tarek, ceo of nomura
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asset management joining us right here. goldman sachs sees oil. you have to stay with
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angie: it is 12:30 p.m. in hong kong, 3:30 p.m. in sydney. the bank of japan sees inflation slowing in the coming fiscal 1.7%, but itfrom targett its monetary unchanged. asset purchase programs. analystsmajority of say they have expected no change after the boj reset its monetary program in december. the stabilization of china's old economy appears to be taking hold. it might lead to a two-year high. estimates nomists'
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with it rising for the first time since 2012. the central bank may hold off further measures after keeping the key rate at a record low for more than a year. saudi arabia has replaced the man in charge of the finance ministry over the past three decades. a royal order stripped him of his post and he was replaced. was appointed as state minister and will remain a member of the cabinet. it is the latest move to reinvent an economy that has an battered by low crude prices. barclays cut 25% of its london office space, highlighting the risk of weak demand of developments currently under destruction -- construction. developers started work on a record number of central london office projects in the first half. ubs says oversupply is a bigger threat than brexit.
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global news 24 hours a day powered by more than 2600 journalists and analysts. this is bloomberg. angie: the australian dollar climbed on the decision by the reserve bank of australia to keep cash rate on hold with a record low 1.5%. let's go to paul allen in sydney right now. what reasons do the rba give? inflation is very much top of mind at the moment. been proceeded by week inflation. last week, we had third quarter cpi which showed improvement to 1.3%. it did not file in with what the governor has been saying recently. inflation matters which are words which made to find them. the rba expects inflation to remain low for some time.
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there is some willingness of the reserve bank to tolerate inflation. in that respect, 22 of the 28 economists got it completely right. the reserve bank said holding the rate was consistent with sustainable growth and achieving that inflation title at the time. angie? manus: i will pick it up from here. aussieking at the dollar. what did they have to say about the currency? paul: well, there used to be a day when the currency would feature very loud and proud in rba statements. those days have passed so the language has been different. the reserve bank saying the lower exchange rate has helped the sector but it could complicate the economy making adjustments. we have seen the aussie creeping
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up over the past few months. it did jump when the decision was released a while ago. some comments on housing is one of the reasons for them not wanting to lower the exchange rate -- the cash rate any further. the statement saying considerable supply was coming on strength. they have strengthened standards. it was lower than it was a year ago. we will be hearing more from the rba this week when it releases its growth and inflation targets for 2017. we may get more clues on whether the easing cycle is over or not. manus: thank you very much. oil is never far from our focus here. it is leveling out. failedetween producers to produce details on an output agreement. opec's top officials say the
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organization is on course to clinch a supply deal next month. goldman sachs is not so hopeful. tracy alloway joins us. very good to see you. we looking at the same bloomberg first word. why is goldman sachs so negative? acy: it is quite interesting to see the bank come out to say an opec deal is looking increasingly unlikely. they are citing a lack of progress, growing discord between opec producers ahead of the big november 30 meeting we are all waiting for. the bearish sentiment is not as much as an outlier. we have seen some analysts talking about whether or not if we do get a production deal announced, whether it would have an impact on oil prices at all. we had adam from morgan stanley talking about how his big case
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is we get a group production announcement and that could be easily overwritten by producers. the bearish sentiment is beginning to creep into the market and we see oil markets go down to $40 a barrel off of that. --ie: does this mean goldman why do they think a deal is looking more unlikely? tracy: right. as i mentioned, the difficulty is agreeing on what exactly this production cut looks like. you have three major obstacles. not only do you have to decide who is exempt from a production deal, you have to decide on an actual quota and decide whether or not opec nonmembers will be involved. that is clearly a decision opec cannot have that much influence on. that is what really worries the markets over the weekend, the technical meeting indiana. we saw not opec meetings like
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brazil saying they were not interested at all in a production deal. that weighs heavily on members. within opec, you have discord. c members that refuse to engage in this production deal, the more pressure weighs+++ looks like a cut in production for saudi arabia. manus: that takes us back to the swing producer state. if you look at the stockpile story in the u.s., it will weigh
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very heavily on saudi arabia. when you look at the bank of japan statement expecting $55 to $60 a barrel towards the end of 2018, is there anywhere that it would get above $50 before november 30? tracy: i think it is fair to say the market is in stasis until november 30. we have seen short positions. those rose for the first time in five weeks last week. other than that, people are waiting and watching to see what opec comes november 30. the big question is whether these minor things over the next few weeks. royal dutch shell earnings, iae stockpile data out tomorrow. here next week, we also have the big conference, one of the biggest meetings in oil and gas of the year. we are having some very high level people, including the opec secretary-general attending the meeting. people will be waiting and watching to see if we get more discussion on the opec production deal. the discussions we have had so far have been disappointing to the market.
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angie: it is a highly anticipated meeting absolutely. tracy alloway there for us live. coming up, property sales in dubai lunch for the first time in a year. we will talk to the head of one company that has managed to increase its income. this is bloomberg. ♪
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angie: welcome back. i'm angie lau in hong kong. manus: i'm manus cranny in dubai. let's get a quick business flash in terms of the headlines. the egypt prime minister says the central bank will unify the official black-market exchange rate. he told parliament the regulator would be the problem and act in the right time.
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expectations of an official valuation ahead of the expected imf loan. about 40% in the black market alone. angie: the world's biggest operator of onshore oil rigs is growing its venture with saudi aramco. it will be an equal partner with the oil company. they own, manage and operate oil and gas rigs. the deal cements nabors is one of the industries biggest markets. saudi telecomith on its power portfolios are going. the tower says its extended a memorandum of understanding for 30 days. the companies are jointly exploring options for extracting value from the portfolios. mobily says the objective is to produce capital and operating expenditures.
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in dubai bysales nearly 7%. oil prices weighed on the economy in the region. there were signs of a revival. anding me now is the ceo deputy chair of emirate reis ret based right here in dubai. thank you for joining us. i read your numbers yesterday. a lot of people who run reit would be totally envious. you have year over year of 12.13%. the rental income is up nearly 20%. how sustainable is that in the region? >> i think it is extremely sustainable. portfoliobalanced with very long leases. we also invest a lot in our property to improve them.
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, we haverrent market nice property and we do it for them. the macro environment, just taking a look at this, you have a slumping oil prices, property prices in the region have been dropping. yet, you still manage to increase your total property income in nine months ending september. is it understanding the culture and the desires of the local consumers? think it was, i towards a few things. first, in the current market, that you can buy property. we are very heavy on equity at the moment. that clearly helps us. this is in such markets that you buy property at a good deal. as i said previously, we
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invested a lot in our existing property. and leasethem out them at good rates. your: still, just checking performance here. despite all that you have said, despite this increase, despite the strong results, stocks were up less than 1% on monday. i'm just checking here in my bloomberg terminal. if you want to go into it right now, year to date. you still see it pretty much, you know, investors not really believing this story, so what is the message you need to get across to investors then? sylvain: it's true, the stock market is still challenging. if you include the dividend
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performance year on year is about 11%. it is good we are still trending with our value. us like the global stock market and don't differentiate it a lot. manus: let's talk about the cash on your balance sheet. you have nine blockbuster properties here in dubai. are you in acquisition mode? how much money do you have to spend? sylvain: we are very much in acquisition mode. we have $900 million to spend. atare very much looking building new schools and buying existing buildings. we think it is a great time to do that. manus: i want to talk to you about saudi arabia. it has seen a shift. is that an opportunity for you? willext time we sit down,
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you tell me you have done a deal in saudi arabia? is that on the cards? sylvain: we are not spending in saudi arabia. we only looking towards the united arab emirates. we are very much looking at saudi arabia. it is one of the big local markets. all the markets shift to reit which is a sign of risk and investment. we are really interested in looking at it. has acquired property in the emirates. would it be commercial, retail, education? talk me through the agenda. sylvain: first, as you know in the uae, foreign investors can invest in several areas which are quite restrictive. have -- we are working
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very well the government at the moment. we are looking at the sector. we are looking at the residential sector which is also quite promising. angie: you have got a world decree allowing reit managing parent to acquire some property in emirates. what is the value or the size of any roger -- project there? sylvain: it is very volatile so we are very careful when we talk about acquisitions. 100 million to 200. so we are in the sweet spot. angie: it is all about the sweet spot for investors. on the property that you can tell us about, what is the
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outlook for 2017? stable: the outlook is and increasing. organicr-year, we have growth of our rent of 5%. in our contracted rent, we have an increase of 2.5%. we usually manage to beat that. last year, we did 5% and we expect something similar over the next year. manus: the introduction to you coming here is you have a great set of numbers. the region is under pressure. from the length of time you have been in this business, are you seeing signs of recession in dubai? what is going on out there in terms of the reaction to global forces? sylvain: the market is very volatile here, especially the residential market. it is more volatile in terms of
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the price of the asset as opposed to the rent. if you work in a long-term strategy, sustenance, a good product, you have a fairly stable cash flow. since the beginning, we focused on that. it is average of 8.5 years. you can have a lot of movement in the market in 8.5 years. y withs where you can bu an attractive price. manus: what kind of discounts -- when you say there are good values and opportunities, what kind of discounts are you seeing on commercial property? where is the greatest discount proposition in 2017? sylvain: we don't talk about discount. what we're looking at is a long-term deal in property. manus: what kind of yield uplift can we expect in 2017?
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i'm looking at the cap. what are the yields that are achievable? average ae tried to yield of 10%. that's our target. manus: and in terms of the other forstory is ubs are calling hot box like london to come under pressure. you have been in this business for a long time. let's just -- we will draw a line there. the clock has beaten us. you were just about to tell us where the next hotspot is for properties. thank you for being with us, sylvain, the deputy chairman and chief executive of emirates reit
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. coming up, it is the countdown to find the new chairman of -- this is bloomberg. ♪
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manus: welcome back. you are watching bloomberg markets: middle east. i'm manus cranny. angie: i'm angie lau. the clock is ticking for the new search of a chairman of the tata group. the interim chair set a deadline for four months to find the next person to run the $400 billion conglomerate. who are they looking at? >> we understand the looking at a number of candidates. local media has talked about a person who runs pepsico and some internal candidates.
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so, there are a lot of candidates floating around. is thencluded half-brother of the current chairman. manus: very good day to you. one of the things from the part of the world i have just traveled from, tata's interest in the u.k. this secession, this change, what might that mean in terms of the global ambitions and the brexit impact for the company? >> so, tata still has a big operation in the u.k. brexit,l be affected by although we will see what that impact will be. dcs which gets a lot of business from the u.k. has talked about how there may be a slowdown because of brexit. also, tata motors has a big
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operation obviously. there is potential impact pre-brexit and we will gauge it as it goes along. angie: i have to ask you about this broader trend that perhaps is starting. another slate of executives resignations. indian hotels here, its nonexecutive director resigning. what does this mean for the broader market? part of the group executive council. we understand that three members have quit. this will obviously have an impact on the group companies as well because a lot of people have resigned from their positions. although, the chairman remains director on the boards of different companies.
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it is actually going to be a battle brewing with mystery in charge of some group companies. we are seeing other companies with appointees leaving. manus: what is the risk? it is a line that we call a civil war. what is the risk the company breaks up? >> we don't see a big risk at the moment, but we have to wait and watch because as i mentioned, the group companies -- we have to look at that going forward. thank you so much for joining us on the very latest on tata. and the charge for a dynamic change. angie? angie: let's take a look at the markets opening in this region right now. we see asian stocks climbing.
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shanghai with games especially after the stabilization latest dat
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>> that it is a one in hong kong. and up they. it is keeping monetary policy stance unchanged. the board voted. the stabilization of china's economy appears to be taking hold with the official manufacturing pmi jumping to a four-year high. expansion steady. afterl bank may hold off keeping key rate at record low. check out


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