tv Bloomberg Markets Middle East Bloomberg November 21, 2016 11:00pm-12:01am EST
>> donald trump lays out his policy aims for day one, dumping t.p.p. and scrapping restrictions on energy. a third daybs for on renewed optimism that opec will clinch a deal on output limits. a powerful earthquake hits japan but there's little damage and warnings have now been downgraded. china's bond market braces for a triple whammy. next few weeks may be termed dark december. a.m., 5 a.m. in london.
i'm tracy in dubai. hong kong, where it has just gone midday. to bloomberg markets: middle east. >> all right. this, it continues to be dollar story-- dollar story. because we've seen the index a little breather today. still rallying in asian stock continues. >> that's exactly right, heidi. the dollar has come off a little today. but over the past few weeks, the rally has really been quite stunning. a chart here. take a look at this. we've had a more than two deviation, appreciation in the u.s. dollar over the past two years. actually, two standard deviations, two weeks in a row, something that's only supposed 2,000pen about once every times, assuming a normal distribution of probabilities, perhaps we shouldn't be assuming that much anymore. but still, quite stunning. development that has a
lot of impact on the rest of the world, as you know. >> yes, tracy. the asianmes to session, we do have quite a bit of upside. in thefluctuations morning. the tokyo session, we had that hit early this morning. 2/10 by 1%.p around that 1/10 handle. got the sensex bouncing back. ofre seeing a little bit bargain hunting driving those gains. how are things shaping up for trading day ahead of that open in the middle east? in the middle east, it is just under two hours away from the opening of the markets,
.ubai and let's take a look. so a mixed picture in saudi 1%.ia, down dubai and ab dhabi basically water at this point. we've still had speculation we will getr or not continued consolidation. be the bigto question mark this week. let's check in on the first word around the world. stories this top hour, donald trump has outlined his policy priorities, including moving to dump the trans-pacific partnership on his first day in office. he also promises to lift restrictions on energy to create of high-paying jobs. into morelooked
potential cabinet members, including rick perry, scott brown, newt gingrich and mary fallon. it's the first time in 13 days it's raised the rate from the preceding one. one former advisor has called on the bank to abandoned and accelerate depreciation before donald trump becomes president next year. iranian banks are trying to catch up with the rest of the world. the bank has instructed local lenders to set up compliance risk management programs and to implement globally accepted accounting practices. of isolation have left them with outdated practices which pose additional hurdles for foreign banks. british prime minister may prepares for negotiations for e.u.ng the
raised concerns about a so-called hard brexit. he said his party would campaign continued access to the e.u.'s market. ofcertainly, we have plenty concerns. every business i've met, every ofde union, every group resident and workers i've met are concerned about it. the problem is, the government not set out what it's not set out aill proper timetable for it. up so far areme the words that brexit means brexit. brexit meanswhat in that context. >> global news 24 hours a day, by more than 2600 journalists in more than 120 countries. ♪ >> thanks for that. president-elect trump has
released a short video outlining his political priorities, as he continues to meet potential members of his administration. indicated his intention to follow through on some key campaign promises. trade, i am going to issue a notification of intent to from the trans-pacific partnership, a potential disaster for our country. we will negotiate fair, bilateral trade deals that bring ontoand industry back american shores. >> all right. on what all of this mean's, america's withdrawal from the t.p.p. and when it comes to asia. david is with me. david, great to have you. mean, so much to talk about out of that video. the video itself, is thing to talk about, because is this a precedent for how we're see any announcements made out of the trump presidency? are they going to come on videos? that's pretty unusual but this
is a guy who likes to tweet stuff as well. an hour agoabout that he tweeted that many people think it's a great idea that had become the next ambassador. i wonder what mrs. may thinks that suggestion, i wonder what she thinks about the fact that the suggestion was that's prettyause outrage as well, but then everything is going to change right?rump, >> a brave new world ahead of trump moving into the white house. the ramifications. said that he was going to pull out of the t.p.p. >> i think the interesting thing theseit, there's been asian leaders, people in asia, hoping against hope that it wouldn't happen. >> the rhetoric coming through from japan. >> right. australia. saying the same thing. they hope that eventually trump can come through, and some other negotiated. i spoke to the head of the school of public policy. i'm a hindu.
reens believe in carnation. but the thing is, the u.s. is itsgoing to be under present guise. the implications are more geopolitical than economic at stage. what it is doing is signaling to asiahe military leaders in is ceding power and influence. there's a big country just over we're sitting there in hong kong, and that is china. >> david, it's tracy in dubai. i was just going to ask you, two ways that china could view this. on the one hand, the reduction in trade is a potential head wind for the economy. it does givehand, china the chance to increase its influence in the region. how are authorities there going to react?
>> well, china doesn't need to do anything in order to increase its integration into the region, signaledhe u.s. has it's going to exit. china, which has already gotten fta with the association of southeast asian nations, they've a free trade agreement with them. they've got another agreement which includes countries like india and other countries, 16 altogether. off, thatn bring that is a huge political, you know -- job for china,l because it will influence and integratesh china or china into those asian economies. but let's face it. without the u.s., china has really got open here anyway, because china is the biggest trading partner for every country in asia. get political influence. it's a win-win for china, even off some ofpull these other trade agreements its
working on. >> thank you so much. well, let's turn now to to ourng very close hearts here in the gulf. oil is continuing its climb, a three-week high on renewed optimism that opec to cut will agree production next week. our reporter joins us now for more. anthony, i want to start with a chart, which really highlights some of the uncertainty currently happening in markets. if we take a look, this is speculative positioning data cftc, showing that money manager positions in total highest sinceir 2007. that is both long and short. essentially that no one seems to know what's going to happen. should we be on the lookout for, in terms of what opec might week?ce next >> well, we're all looking for the potential that they will deal to decrease production. that would take some output off
of the market and opec says they're really targeting the stockpiles, the extra crew in storage. acts as a break on price,brake on the because there's all that additional oil that could come into the market and that limits the price increases we could have. opec has specifically said they're really targeting those stockpiles to get those off the market and give the price kind of more of a write-up. we saw goldman sachs yesterday theyg even without opec, think the market will probably bounce towards the end of the year. opec deal would kind of take those stockpiles off the market in the first half and accelerate a little bit. so, you know, as the future positions show, the market is looking for volatility. they're up on both the short side and the long side. looking for kind of a wild ride next year, as deal, we'll know
by the end of the month, as that kind of plays out in the next and we see if opec agrees to that and how much they stick to it as well. drill down -- that's an oil pun for you -- that he is into thatl down uncertainty. we do have positive noises coming out of opec. what is actually driving that uncertainty? >> well, the uncertainty really will get theey deal, first of all, and whether they'll stick to the deal. also u.s. shale oil out there. so that's a big question for oil as to at what price does shale start coming back? will the opec decision create in the market. have?rice will we and then, you know, how quickly will shale react, and how long market?y stay in the if the price comes up too high, potentially that brings more go back down we again, or opec gets into a situation where they feel they've lost market share and we
get back to the same situation we were two years ago. ande are all hypotheticals the market doesn't know. that's the reason for this uncertainty as well. talk a lot about iran and iraq as the major question marks. where do the saudis come down output?comes to that >> the saudis want a cut. this is the reason why goldman and some other market prognosticators are being more they're seeingse a real motivation there. there's also positive signals or signals coming out of russia. russia, of course, not an opec wants to bring some of those non-group board to help take supply off the market. russia was saying they'd be freeze, of course they're at record high levels to a freeze doesn't do that much. opec might be looking to get a little bit more participation
nonmembers. but a lot of the analysts are take theudi having to brunt of cuts. they're obviously the biggest producer in opec. seasonal draw juan, after we get out of the ammer months when saudi uses lot of extra oil for air conditioning. usehe winter, they tend to less. but really, other producers are expecting them to come down additionally. iran and iraq, they don't want a cut at all. iran says we're coming back from sanctions. iraq says we're battling islamic state. take oil off to the market. so that's really kind of the decisions that they're looking work out. and now, in light of the meeting at the end of the month, heidi. reaching fever pitch, as usual, ahead of that meeting. dubai. in let's get the latest on the
is one ofhere energy the driving stories. latest.he >> yes. so is the higher oil prices all over again. and boosting those energy stocks in asia, as they did over in wall street. so we're seeing asian stocks gaining for a second consecutive session. reversing those losses and gaining 1.3%, even the cost reversing two days of losses to gain 8/10 of 1%. the composite extending in gains, now at the highest level january. the index is also gaining 1.3%. data fornflation october coming out of hong kong in just a few hours. that's expected to slow the growth to 2%. it's up 2/10 of 1%. earthquake not having such a severe impact on
the facilities in japan, especially when it comes to nuclear facilities that have affected by the 2011 earthquake. we heardpiked since the earthquake happened in asia. we're now seeing the yen strengthening slightly, but that also has to do with the u.s. see thetory, as we dollar weakening against most asia,currencies in including the korean yuan. take a look at japanese stocks that were affected because of noise.thquake tokyo electric power, down 1.6%. insurers losing half a perfect, some travel stocks as well, picture across asian stocks, especially those in japan, being affected by the earthquake.
commodities'the different grades. >> very high-grade material, 65.8%. we've never had a problem finding a market for our product. look at some of the lower grade products, so the standard 62%. is sub-60%, particularly coming out really doia, which struggle to find a home. setthey are the ones that their stockpiles up in ports causee beijing and trouble for the market. >> tell me something. we do see these iron producers, likes of rio, producing more and more iron ore. cynic inside me would say they're trying to drive other people out of the business. i being far too cynical? >> i don't think it's for me to comment on rio -- >> i'm saying generically, big overproducing? >> i think definitely there was amongst thegreed
ore companies. lays thehe goose that golden egg in terms of the a periodion, suffering of very bad health. geese were those destroyed. but you've now reached a period of consolidation, i think. you've seen the price tick up a bit. think always said, and i a price beneath $60 a ton is not sustainable. have prices in the 80's. and these are exciting times again. maybe.you it's 70 at the moment. now, what is it telling us about the market at the moment? view?leveling off in your what are you seeing on the demand side of things? that's crucial. >> from my point, it goes back to our specific window into the market. for a high grade material, there has never been an issue in terms
demand. for the low-grade materials, there have been more complications. stem fromlications your ability to take that material, your ability to find that material. one of the biggest impacts on the iron/ore market has been able to find credit. it's a lot easier to find credit for a high-grade product. >> looking ahead, what's the like? size looking will we see ramping down? anticipate? >> there has been a process of slowing of supply growth. which is definitely set probably for the next five, 10 years, in my view. the ability for the market to to take mines offline has definitely been proven in the months. some of the majors have been taking off mines. think, is a good thing for the supply and demand.
>> chinese property... welcome back. you're watching bloomberg. >> and i'm tracy in dubai. that again. >> i was getting ahead of myself. >> let's start over again. very excited about this story, because we talk a lot about these ghost towns in china. chinese property developers are megasizedat these farm projects will upset the buying slowdown. a $100alking about billion city. we've been covering this story. the optimism? >> as you said, there is a concern that there are ghost
towns that could pop up offshore, given that chinese developers are looking at 2017 about 5% in to 20%. what they're seeing in the south of malaysia, around the city of johor, they're looking at 2.0. what they're attempting to do is projects,e massive looking to invest $100 billion decades, intotwo attempts to lure chinese overseas buying. >> so when you talk to people about this development, real development, do you think there are grounds for concern? consensus? >> as we see these developers building on they're the ground in the south of malaysia, we're seeing a supply deepening. thousands of homes are to come online. concernedbservers are there's going to be a
supply-demand mismatch. they're not seeing the market to absorb this, at least for the next five to 10 years. while we have players seemingly this, given the proximity to singapore, you cannot deny the fact some of the ground, there are still units left unsold. >> a fascinating story. toldg up, saudi arabia is it needs more foreign investors market.its stock
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>> it's 12:30 p.m. in singapore. i'm haslinda amin and these of the first word headlines from around the world. opec members have made progress toward opec cuts. it is nowchs says technically bullish. complicated by iran's commitment to boost production and iraq's request for an exemption. donald trump has outlined his policy priorities, including moving to dump the transpacific trade partnership on his first
dan office. he promises to live restrictions on energy to create quote many millions of high-paying jobs. brown, and newtt ginter -- newt gingrich. action at thelied banks december meeting reached 100% for the first time, according to bloomberg calculations made from fed bond futures. also betting that donald trump's inflationary policies will mean a quicker pace on money tightening. the p boc enters of record run of weakening against the dollar. that's the first time in 13 days it has raised the rate from the preceding one. the currency traded and eight year low on monday. one former advisor has called to abandon intervention and
accelerate depreciation before donald trump becomes president next year. this is bloomberg. >> japan has lifted all soon army alerts after a magnitude 7.4 earthquake off the coast of fukushima. and looks like things have settled down. there were no reports of major damage being done. >> that's right. japan's meteorological agency has said all soon on the warnings and advisories are live ago japan40 minutes time. there have not been any reports of major damages. transportation services are resuming again. delays.e still some there were some travel disruptions for people who were flying and they canceled a couple dozen flights.
it was reported that about five people were injured. earthquake didde strike in the early hours of the morning and there were warnings issued for a possible three meter tsunami. people in the area had been asked to evacuate. in 2011 of course we saw a very big earthquake hit the area, reason enough to bring back memories of that time when thousands were killed back in 2011. this was the most severe tsunami warning that had been issued since then. in the end it was a one meter tsunami reported and some smaller waves in other places. aftershocksned of
because a similar size one hit the region back in 2011. and it doesn't mean that just because one is over it doesn't mean another will not happen a few days or weeks down the line. >> you mentioned the 2011 earthquake and synonymy, part of .he devs -- and tsunami what is the word on the state of japan's power plants after this particular earthquake? >> there are two nuclear power plants in operation out of the something like 44 that japan had. one where the cooling system was knocked off-line temporarily. it triggered a motion sensor which basically said the water levels are falling and that forced the cooling system to shut off, but there are at least and then they started
resume cooling the rods. authorities are looking into it, saying stopping the system would not have immediately led to the release of radiation. the nuclear regulatory authority said it would be about a week could reachratures the upper safety limit. so there is an ongoing investigation into that. they want to try to get as many nuclear reactors back on track as soon as possible. thank you, we will keep a close eye as that's tory unfolds throughout today. ,ut coming back closer to home msci has told saudi arabia it needs to attract more foreign investment to seek market rules
are working effectively. our middle east finance reporter has more on this. matthew, set the ground for us, what stage is saudi arabia actually at as far as reformist markets? >> what has happened so far is investors have given feedback and said these are the list of some of the problems we got coming into this market. one is upfront funding that people have to have to buy all the stock exchange and also from the size of the asset managers coming in, they are very large. they are starting to change the rules to encourage more people to start coming into the market. it's kind of digesting those reforms and they're still working through to see what the response of investors is going to be like. sometimes how important index inclusion can be for a particular market or
economy. what is at stake in this particular decision for saudi arabia? -- >> privatizing a lot of state assets, a big part of these two things being successful is attracting more foreign money so that people can buy the state assets that are being sold. things like the stock exchange itself which will ipo later this year. thing for the saudi stock market and the expectation is this could bring as much as $40 billion of foreign lows in just through msci inclusion onto the emerging markets. >> it's interesting because we've had a similar situation and they've been rejected three years in a row. what are some of the challenges and off gold in terms of them approved, ist this
it kind of a status symbol as well? >> it definitely is a status symbol, to a degree. the big challenge for them now the reformsng done and changed some of the rules to appease foreign investors, there just are not enough more investors investing into the saudi market to give feedback to msci for them to make a decision. the last time the saudi regulator disclosed how many foreign qualified foreign investors there are, there were only around a dozen. at the moment, that's probably not enough to say it has critical mass to form an opinion based on feedback from foreign investors about how well the regulations are working and the attractiveness of the saudi market. that is still the big challenge they have, to bring more of these on board and reach that critical mass.
>> thank you so much for that, matthew. let's get a check of the latest headlines. creating a 50-50 joint venture to operate and manage offshore rig in the kingdom. two more will follow when it completes its current contract in late 2018. joint venture is expected to start operation sometime next year. is seeking a cash injection with a plan to buy a stake in the german airline. the evaluation will be carefully watched, suggesting it's trying foreignmvent the initiative of the airline. lost $1.4 billion since 2013. alibaba has open for new data
-- accelerating inflation in china is one. .lso the weakening yuan the overall trend down 6% against the dollar. the third one is the end of the year cash crunch. this is hurting the bond market right now. 10 of 19 traders surveyed by bloomberg say 10 year sovereign yield could reach 3% of the individual. the 10 year is watched very closely as the benchmark for mortgage rates. it could reach 3% by the end of the year. 2.885% right now. one analyst says all the factors are negative, the market is time sincee darkest the 2013 cash crunch.
detail, so walk us through what specifically the data tells us about the forecast for those dark days ahead for chinese bonds. stephen: i'm going to drill down into the bloomberg terminal so we can see, first of all inflation. inflation in china is at a six-month high. also ppi was deflating for four straight years and is now inflating on the back of commodity price increases. that is a leading indicator when commodity prices are rising. that's what you are seeing there with the blue line indicating the ppi and the white line is the 10 year yield. let's change the page and we can see the second reason why. you wind causing outflows from china. the white line and blue line correspond to the yuan.
it has narrowed to 56 basis points and that narrowing premium is leading to tighter liquidity due to those outflows i mentioned, it makes further easing in china kind of tough. , there is the 6% decline hours talking about. the last one is the cash crunch, authorities want to prevent the property bubble. what you are seeing here is a little bit hard to see, but the one your interest rate swap advancing to a 19 month high on november 17. so there you go. the terrible trifecta. indeed a terrible trifecta, definitely something to watch, especially ahead of a potential rate rise from the federal in december.
", the market implied chances for a fed rate hike next month have now reach 100% for the first time. bond traders we spoke to say it's easier to raise rates as inflation expectations have shot up following donald trump surprise victory in the u.s. election. joining us is the head of fixed income for emirates ned. lead andfollow steve's begin with the chart. this is something that speaks to the rising interest rate and potentially rising inflation expectation. it's the result of the $26 billion sale of 2-year note that we had yesterday. in that option we saw the highest yield cents 2009 for 2-year note's. we also saw big participation , obligatedy dealers to participate in those auctions. rising you look at
inflation expectations, 100% certainty for u.s. rate hike and higher interest rate. what is your outlook for fixed income, especially in the middle east? >> the middle east is a dollar-denominated market. if rates in the u.s. will rise, obviously there is only one way for the bonds to go. i guess a rate rise in the u.s. is something the world has been talking about are the last 12-18 months or even longer than last -- longer than that. about all ofking 75 basis points increasing over the next 12 months, it is negative for the bond prices but we think overall the return for the bondholders will remain positive. that dollartrike me
from's win in the u.s. election has turned on its head the fixed income investment environment that we've had for some time. slow expectations for economic growth, low inflation, a relatively sedate pace of rate rises. when you talk to your clients, how much change to they see on the horizon and how many queries are you getting now about this potentially new investment outlook? >> there's a lot of exuberance on just assumptions and promises. even articulated how all those policies are going to be implemented -- donald trump has not articulated how those policies are going to be implemented. if we look at yesterday's reaction, the 10 year yield closed three or four basis points lower. it is going to be a wait and see
, even going forward. clients are asking about where to go from here. array rises one of the big factors. we are looking at other factors as well. there's obviously the direction of the credit ratings and new supply. there are quite a few things to worry about there. having said that, on relative value terms, clearly because investment,rated clearly there is still some value. >> if you look at the fixed income universe, would bonds in your part of the world represent some of the biggest opportunities, particularly if the markets do get a rise and we have this super inflationary fiscal landscape when it comes to u.s. policy next year? >> it does represent
opportunities, but i think we're probably going to go through some kind of volatility, so there will be cheaper entry because theicularly region that used to be capital surplus before now has become capital deficit, and it's not but when you get that kind of supply coming in, obviously it creates deflation for the prices. there is relative value, but you need to be more selective about the stocks you are picking and what time you are picking them. >> if you take a look at some of the descriptions of what we are seeing over the past couple of tantrum, atrump seismic shift. there are winners out of all this.
pension funds will be breathing a sigh of relief. if you're a long-term investor, this is what you're looking for. >> you are right. in our part of the world, duration is reasonably short. roughly 75% of our universe is less than 10 years to maturity. it's not the pension and insurance sector that's the big investor. .t's private clients their approach to this is slightly different from what a traditional investor from the u.s. works on. >> i want to pick up on the supply point. that has been the big story in middle east capital markets of the year. what is your outlook for the rest of the year? will we still get a flurry of issuance as we head into
december and have you change your expectations at all? >> we started with the and we have surpassed that already. 70expect to close at about billion of new issues this year. for the next year, i'm expecting a similar number. i think the government which is been liquidating foreign reduces may actually selling the foreign reserve to fund the budget deficit and cap the market. my overall estimate is probably in the same range. we have about $70 billion in redemptions coming up over the next few years and that will need financing as well.
>> it is an hour into the tuesday session. let's take a look at the indian markets. they are actually up from their recent lows, recovering a little bit, but they have been hit by this big story in the indian economy, which is the anticorruption measures attempting to stem the black money in the financial system there. ,et's get to our correspondent
has haslinda amin, for more on this. how bad was the hit from india's the monetization program on indian stock? has linda: it's been bad. despite gains today, it's still down on the year by about 1%. stocks are at multi-month lows so they are still trying to recover from that. and certainty spooking investors, they don't know the extent of demand destruction and the impact of the new currency issuance. what is for sure is that there is a cash crunch right now after scrapping 86% of the current circulation, at a time when investors are expecting company profits to pick up. people are talking about
expecting a cut in gdp for the next two quarters instead. this is prompted one comment from a former treasury secretary, larry summers. what did he have to say? definitely attracted attention, larry summers saying india's cash band will not fight corruption. is hurt ordinary citizens, you're mom-and-pop businesses. in his words, those were the largest amount -- those with the largest amount of ill-gotten gain do not hold their wealth in cash. converted itdy into foreign exchange. it's the penny fortunes that are being targeted, not the most problematic ones. pretty much targeting the wrong people here. >> thanks for that. breaking news just crossing the at 100rg, were looking
p.m. in hong kong. i have an update of the top stories. -- the first time in 13 days that china has raised the rates from the preceding day. it traded at an eight year low on monday. abandoning intervention measures and accelerating measures before donald trump becomes president next year. japan has lit it also -- has lifted all tsunami alerts. people living on the coast were warned to move to higher ground but no major damage has been reported.