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tv   Bloomberg Markets Middle East  Bloomberg  December 20, 2016 11:00pm-12:01am EST

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>> the world bank approved a new loan for egypt, the second portion of free trade, creating thousands of new jobs. >> asia-pacific builds on wall street and new high. brazilians with the geopolitical event. >> stocks climb on the back of bank merger news. access worth $44 billion. >> units cancel shareholder meetings as the chairperson takes india's biggest
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conglomerate to court. :00 a.m. across the emirates. i am in dubai. >> i am in hong kong. welcome to "bloomberg markets: middle east." we bring with breaking news out of malaysia. rosets of inflation, cpi 1.8% in november from the previous year. they were expecting an increase of just 1.3%. let's do a quick check of the malaysian currency. at its lowest level since 1994. right now, it is that the four spot for seven levels. is happening over here in asia. what about in the middle east? let me show you what has been happening with the stocks. the remarkable story, you are looking for the market that boasted the biggest gain. this is what has been happening.
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feeding and, with of 543a.de these are the biggest flows since 2011. that means the index, that blue line, has a discount of 34% to value.-flowed we will keep on that story throughout the show. let's go to first word headlines. >> berlin police have stepped up the search for the truck driver who attacked shoppers in berlin. the 23-year-old refugee was released, because there was no proof he committed any crime. witnesses admitted they had not had an uninterrupted view of him.
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cooperating on ending the war in syria. the body of murdered ambassador karlov was flown home. aleppo --f the city fighting president assad. offer fewerhey will bonds than originally planned. -- governments while auction will auction $16 billion. 40% less than previously announced. the ministry failed to meet its sales target for the first time in 18 months. higher funding costs above the average. interest rates unchanged, keeping it at 8%. overnight lending rate at 8.5%, and barring rate at 7.25%. economists expected 25 point
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basis rate increase. sales have declined since the military coup. this is bloomberg. >> let's get the latest from the markets. we see green is the color of the day. >> it is the color for most markets. compared to yesterday we are seeing a little more traction, especially across developed markets. when you talk about the em indices, you see some pressure, especially for the philippines. two markets are closed, we're entering the last leg of trade in the east of asia. australia, let's see what is back to theighs levels of august, 2015.
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india, bobbing around gains and losses. we are still very early in the trading session, the sixth straight day of losses. we are seeing a decent game there. hang seng and shanghai, we are getting an update. very decent session and shanghai, 1% better in the morning. hang seng, 0.7%. thailand, rate decision later on. gains. continuing to see we are now looking at 11 of the last 12 days. you look at the charts, it is getting scary, blowing past the ceiling. indicators,momentum 80-81, close to the dollar. let me wrap things up, not much happening in this market. the bond market, this will get interesting. look at the spread between the 10 year.
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some point, something has got to give. the boj will have to address how they plan on entering the tenure as zero when the to the two at the spread reaches further extreme levels. at the moment, that is back to the highest level in six years. that is something to watch for, something has got to give. that is your chart. >> staying with the markets, let's get up to speed on what has been happening in this part of the world. we are under two hours away from the opening of the markets in dubai and abu dhabi. apache picture across the board. lower for the most part, dubai, down .75%. volatility has gone higher than the 30 day volatility. in terms of saudi arabia, pressure coming through from big names like ncb, saudi basic
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industries, there was a selloff of a lower than expected dividend announcement. qatar, surgedat as much as 7%. the bank led that higher after they announced they began merger talks with international banks. let's get more on that story. joins us now. how optimistic are you about this deal? >> i think the deal will happen somehow because of government pressure to consolidate the banking sector and increase the size of the remaining banks. a merger,xpecting probably a two way makes sense.
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having themistic on merger of two large banks. that equation, could be a problem. >> did i hear something that needs clarification? the reality, if you look at the theserecord in qatar, deals have not been successful. and the theme of consolidation and pressure to merge has been there for quite a while. we have not seen the traction, regulatory resistance, and many other variables. why will it work this time? simply, the government have , semi-control over these banks.
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that would be the main reason for this to go through. understanding that, most of the board members have government ties. so they have to abide by that. it is a question about whether or not it will work, and the culture of these banks in this environment of consolidation, which is sweeping across not just the banking industry, but sweeping up a lot of other industries, as well. yes, indeed. we are looking into the banking sector in particular. the center of gravity for the mna in 2017. we hear more news from the uae, emerging banks, even saudi arabia. witharket there is clouded local petitions.
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we hope to see an announcement intwo from the saudi arabia 2017. noted, investors like this possibility. it is still in the early stages. what kind of value can this mna excrete for shareholders? the bank and ibq are both private and nonlisted. at the same time, in terms of size, they are the largest. would most likely be an acquisition type, not a merger. and losing their extensive a stock price to add the currency for that. you mentioned there were
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some other banks second come into the crosshairs of mergers and acquisitions. talk us through what you are seeing on the radar, in terms of the saudi market and the uae market, which you say are in focus. , there are some banks that got hurt because of the lack of growth from the government. and low oil prices. we have been hearing a lot of news of merging the smaller, weak banks. by smaller banks were hurt, the weakening economy in the uae . we're expecting a couple merger announcements sometime in 2017, probably the first quarter of 2017. at the same time, in saudi arabia, because of the and lack of ability to grow, most banks have reached
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their limits. i believe the creating synergies entities ining saudi arabia might work well for shareholders, and make sense for the manager of these banks. yousef: we will leave it there. joining us live this morning. production cuts have lessened oil for the moment. could they challenge their effectiveness? we will ask later with that story. it has been a tough year for saudi arabia. does oil rebound a turnaround -- signal a turnaround? ♪
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angie: welcome back to "bloomberg markets: middle east ," live on bloomberg tv and radio. i am in hong kong. yousef: and i am in dubai. australia has extended the shares as it negotiates with key suppliers, and that is after the stock price collapse to this month. the third time in 10 days that bellamy's had time to review its business. december 9 the company had him market value of $470 million. angie: volkswagen has reached a deal where car owners and fixlators will buy back or 80,000 vehicles that had emissions achieving the software on board. this covers volkswagen, porsche, the settlement- was about $1 billion, including
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$225 million for environmental damage. yousef: wall street delivered to contrasting stories overnight. fedex slump after they fell short of estimates. the chief financial officer described the result as a bit shocking. nike jumped after hours with a better than expected results. not losing ground to adidas and other sporting rivals. angie: to markets right now, our chief economic adviser says sustaining the trump rally is not just about implementing his domestic policies. he says the u.s. has a better chance of enduring if the president-elect can coast nations like japan, china, and germany to embrace reform. he also cautioned against overlooking the threat to global markets. in no policyiced mistakes. we have priced in no market
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accidents. and we have ignored all sorts of political issues. of the reason why the markets are reacting so well is that we are getting an endogenous political disruption in the u.s. which seems to be positive because we will unleash congressional action. but you're also getting political disruptions elsewhere that are not so positive. angie: let's stay with that story. we have the ceo in dubai. region is tiede to u.s. dollar. where does that leave everyone, regionally? especially with president-elect an inflationtoward story and triggering concerns about trade wars. i think the main issue for the region is the dollar peg. we have seen regional currencies
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go up substantially against all their peers, globally. that is causing pressure on profit margins in the region. we see pressure on the tourist industry. it has become expensive for tourists to visit dubai. property prices have become very expensive for russian ex-pats, u.k. ex-pats. the currency has been a huge headwind for the region. no doubt about that. how does the fed play into that, with expected more tightening coming from janet yellen and friends? >> it looks as though we are moving into a stage that we call inflation fright, and that is likely to get worse as we see the year on year increases head
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toward a 60%, 70% range. a $30 oilget we had price at the beginning of this year and we are closing in on $60. this will lead to a cpi number in the u.s. which could be as high as 2.5% as we get into january. that will cause people to second-guess the feds and perhaps look for further tightening. no, i: on that tightening pulled up this chart which shows the u.s. financial conditions index which bloomberg compiled. we have seen those conditions improve. you can see the blue line as at rallies, and you can see the decline in volatility. we are seeing the tracking of stress and equities. the positive value indicates there are accommodative financial conditions. at 2017.egins to look are we going to see a reversal of them?
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>> i think that is very possible. a lot depends on the economic policy of donald trump. a lot has been written about it, but it is not clear at this stage whether or not his agenda will be enacted by the congress. there are lots of uncertainties going into 2017, and that makes me nervous about the outlook for the markets, generally. yousef: how many rate hikes are you planning? i would like to hear something along the lines of not 2.5%. what are you expecting? get 2.5% for certain next year, but if we get further, that depends on policies we see from donald trump. will continue our conversation in the applications for the region. he stays with us, and we will continue the conversation and expand on what is happening with the story and saudi arabia with the potential height in petrol
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with the saudi budget and focus, and plenty more. with the saudi budget and focus, and plenty more. this is a high-stakes conversation, so stick around. ♪
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angie: you are watching bloomberg, i am angie lau in hong kong. yousef: and i am yousef gamal el-din in dubai. egypt's.ement to cairo has been negotiating billions of dollars to help revive its economy and ease the crippling dollar shortage that has been plaguing the economy since 2011. let's get more on the story and thoughts across the region. we have a middle east ceo still with us. egypt's becoming more interesting, the largest gains of any stock market since the fed hiked rates. is that on your radar, at all?
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>> i think egypt is a very interesting market, a cheaper market than it used to be. moreover, the depreciation we have seen in the egyptian pound has made the economy more competitive. i would like to see more regulation and market reforms and egypt's. but the potential is great in egypt. yousef: this you would agree is an inflection point for the country? you can look at the data, foreign investors are a lot of the buyers of these stocks. egypt has some well-run companies, historically a great place to invest. now that we have seen the depreciation in the currency, it is a reasonable entry point. yousef: a fascinating chart we put on bloomberg this morning shows how those can benefit. dollars,a look at u.s. put it into play with saudi arabia and currency. it is aook at that,
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very unlikely trade, but some of the best in the world. thehat a reflection of turnaround story and saudi arabia? tarek: i do not think so, but there's been pressure on the saudi riyal for most of this year. you see higher rates to attract deposits in the region. the market is now telling us peg the pressure on the tee -- is off for the time being. saudi arabia, from what i understand, it is considering increasing diesel and gasoline prices for a second year in a row. , as it takes a look at -- trying to diversify their economy? tarek: yes, it is exactly the type of policy we need to see in
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order to get the budget on the right track. i suspect that when we see the budget come out in a week or for a muchl be smaller budget deficit that we had last year and the year before. these are the types of measures we should expect to see in that are actually very progressive and positive for the economy. why are you underweight in the region than? tarek: at the moment, the uae continues to be our favorite market. a continues to be most peoples favorite market for the year. a relatively defensive market even at these levels. the patrol, chemicals sent -- sector should do well. especially if we see expansionary policies in the u.s. and elsewhere. the banking sector has probably been through its worst period over the last 12 months. that is a fairly defensive area.
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i would not underestimate saudi arabia these levels. for 2017, we shape up the geopolitical scheme, unpredictability, changes in governments. what is it that keeps you up at night? tarek: 2017 may be much more volatile than 2016. if you think about this, and 2016 we had a very steady monetary policy. we had a very steady economic policy in terms of knowing what obama's objectives were. as we going to 2017, there are so many changes taking place geopolitically, that that maybe causes me to be a little concerned about where the markets may go. we have seen a rally in equity markets, a slight decline in the bond market. but i think 2017 may be even more volatile. yousef: we will leave it there. always a treasure having --
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always a pleasure having you on. unchangedst rate after the gdp fell for the first time in seven years. ♪
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angie: it is 12:30 in hong kong, a: 30 in dubai. we have the first word headlines. southwest airlines website has crashed, blocking access to booking at the start of the holiday week. noaffects all customers with idea of how it could be fixed. they have to check in using kiosks or the counters. a similar problem happened back in october. the u.k. prime minister theresa may says the country may enter a transition phase to ease its parts are from the european union. she said the government plans to adjust to relationships outside
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the block. prime minister has set out in 18 months timetable. she may need parliamentary approval. by thick smog, forcing authorities to cancel flights in order vehicles off the roads, and tell people to stay indoors. countries wereer under red alert, the highest warning. almost half a billion people are affected. it is above internationally accepted levels. powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. the world bank has approved a $1 billion loan to egypt's. it is the second portion of a $3 billion deal to support job creation. where does this leave egypt reserves now?
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>> egypt's reserves of jumped significantly after the imf $12 billion loan deal that happened early. the last number, $23 billion, that is the highest level since 2011. with of the central bank saying it will not intervene again in the currency market after abandoning all controls, we would likely see reserves jump up again by the and of this month. that would put them at the highest level we have seen since 2011, and that eases a lot of pressure on the country. yousef: what are the remaining challenges going forward for egypt's currency situation? there are still plenty of hurdles ahead, right? >> the biggest challenge that is expected and may take time to be addressed, the central bank says, we are not intervening in the currency market. we are going to build up our reserve cushion. commercial banks are trying to attract dollars that were
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outside the official system, and that is why you see the pound weakening to record lows. they are competing still with the remaining strains of the black market. up enoughs build dollar deposits and we see more inflows coming to egypt, we will thely see the pound, expectations of the pound still finding its floor and clearing level. yousef: a lot of the sentiment is reflected in the equities market. you can pull this out on the bloomberg for our viewers. line in yellow is a devaluation. you can see how they have made gains in the line in blue. ratese fed hike best-performing in the world. this, aresting part of lot of the investors, egypt has been targeting. alaa: it has become a bargain
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when you have a move it from a peg situation to a free flow. again, one of the key benchmarks that we will keep an eye on, and the data comes with a lag, egypt needs more fixed income markets. this is where you had serious foreign money before. that was about $12 billion. the last we had, $900 million that came back into the market. we need to see more inflows. there is a significant investment sentiment. and then you have fdr, which depends upon a lot of factors, also security. you are right, egypt needs foreign investors. part of it comes through the portfolio money in the stock market. and we see a significant rally since that quotation. yousef: always great having you
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on the program. turkey's central bank unexpectedly kept all of its three main interest rates unchanged. the one weekly purchase rate is 8%, overnight lending rate, a .5%, barring rate at 7.25%. bloomberg's owner on the line from and kara -- ankara. -- stopannot keep surprising the markets, can it? >> no, it cannot. from yesterday, that decision, it is obvious the central bank is worried about the sharp slowdown in growth. that will be the reason they chose to keep key interest rates unchanged yesterday, which was a surprise decision. it defied market expectations for a hike. turkey last week announced the first contraction in its economy
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in seven years, due to a slowdown in both consumption and investments, following a failed military coup attempt back in july. alsodomestic demand, fought by the central bank counterforce a upsetting the impact on inflation. that basically is what gave the central bank the opportunity to make a policy unchanged, at least for now. then, what is it say about monetary policies going forward? they will wait to see if weaker than usual demand will be enough to rein in inflation.
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at least, that is what the bank said yesterday. analysts in the financial community say it is a strong possibility of higher interest rates in the u.s. that will increase pressure so much the turkish central bank might eventually be forced to raise its own lending costs. economist said yesterday that pressure on the bank could be unbearable. signaling the bank is that it is not intent to rush into action anytime soon. the global backdrop might very soon force a rethinking of that strategy. angie: all right, we will leave it there. thank you so much for that. malaysia says it will not introduce capital controls slump to its lowest since the 1998 financial crisis in asia.
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the pledge was made in an interview with bloomberg. was the drive to clamp down on currency speculators, what concerns do investors have? investors have long memories. the asian financial crisis and when theyned in 1998, kept control, that is in the back of their minds. we had to listen what the minister had to say this time around. forhere are no more rooms option to talk about conservation. we will see it through, this turbulence. i would not call it a crisis. it has weakened 5% since mr. trump was president, what did he have to say about that? >> a 5.6% the klein the dollar in the past month or so.
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he sees no reason why the ringgit has weakened so much in such a short period of time. he thinks it should be a better ,alue for them -- the ringgit but he would not say what the figure should be. yousef: what is the government doing to improve its finances and boost the economy? year, theast plan tont implemented a help boost revenue at the time of declining oil prices. oil coming up, they will have government finances even more. they are also looking at selling land to boost their revenue. yousef: we will leave it there. joining us live from kuala lumpur.
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our next guest says of oil goes higher, it could improve global demand. we will hear the reasoning behind that. also, very interesting calls from other investment banks. the complete story. ♪
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yousef: welcome back, you're watching bloomberg, i yousef gamal el-din in dubai. angie: and i am angie lau in hong kong. a chain may be selling a controlling stake. their advisors have contacted potential bidders, which are likely to be large, family-owned company's in the region, and private equity firms. it could fetch half $1 billion. geant has stores in the uae, saudi arabia, and kuwait.
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yousef: they have reopened two of their oil fields and may load its cargo. they plan to double the output next year. it will boost oil production by 175,000 barrels in a month. by 275,000 barrels a day in three months. saudi arabia may be considering increasing retail oil prices for a second year. the move will be announced this month. the government is looking at two scenarios. they are either a linking oil prices to benchmark prices, or average oil and gasoline prices. to pursue plans to reduce dependence on fossil fuel energy. i guess that starts with cutting the apron springs -- strings.
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think of that? considering the rising oil prices into 2017, as a turning point in its economy and the future of saudi arabia. is that evenlls me in saudi arabia, money is tight. government needs to reduce its amount of money to subsidize the fields. that explains why saudi arabia worked so hard to get opec to reach this agreement in vienna in late november. saudi arabia needs to show that opec is back in the game to manage supply. saudi arabia needs to boost revenue from oil because money
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is tight, that's what it tells me. angie: money is very tight. at risk of losing credibility. that was the sentiment going in before opec surprised us, before saudi arabia surprised us. even after that, saying it would cut production more. do you think that that is actually going to help trigger demand, and why? >> i think when this agreement is reached and we have seen prices rise a bit, and we are seeing oil prices in the mid leastand if producers at partially agree, we are likely to see prices supported in the 50 to 60 range. that means revenue will increase in two regions like the middle east, africa, and latin america.
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and that will boost the demand in those regions. 50's prices in the mid should not negatively impact oil demand in the emerging markets like china and india, too much. overall, higher oil prices could boost the demand in the middle east. yousef: higher oil prices, we have quite a few bold calls in the last 24 hours. $70 a barrel on the horizon. in 2017.ing to happen this chart tells a story of the variable we are watching in terms of libyan oil production. in yellow. line we have compared it to the current output from opec to read you can see the political turmoil in libya, why the two , the elephant oil
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fields libya, is a concern. how are you factoring that into 2017? the possibility of these exceptions like libya derailing the opec plan? own price forecast is not as bullish as the others. we forecast a branch to average about $54 per barrel in 2017. you mentioned libya. libya and nigeria are places to watch in 2017. their output could swing up or down significantly by several hundred thousand barrels per day, in a matter of weeks, depending if the domestic uses -- use intensifies. i do not forget about oil production. countries, it will boost confidence among u.s. and other producers.
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title is about to rev up in 2017 as prices strengthen. there are factors we need to watch carefully in 2017. and likely, these events could of thethe efficacy opec-agreed cuts. some of the biggest discrepancies for 2017 that we are getting from the feedback among the movers and shakers in this business is what is happening in the united states. u.s. inventory data, forecast show a drawdown by 2.5 million barrels last week. how quickly can shale come back online with oil prices where there are at right now? shalehink for the u.s. area we have seen a production with prices in the
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mid 30's. if we look at the breakeven prices for most, most production-efficient fields in the u.s., they are really in the 40 to 60 range. is going to grow on a month-to-month basis in 2017. a big question is, how fast it will come back. they are certainly at risk. the trajectory of u.s. title production is a key event to watch next year, as we try to forecast the direction of oil prices. angie: do you think that is going to paint opec into a corner, and force it to continue -- cuts to offs cast those shale producers
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coming back online? agreement isat the going to be good for six months. it can be extended for another six months. if prices are strengthened in the first half of the year, likely, opec will expand these production cuts forward for the second half of the year. fall, i think the opec countries will likely drop this agreement. they will start to ramp up theut in order to get needed revenue. angie: thank you. it is always about the prices, isn't it? thank you for joining us from
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singapore. coming up, the chairman's challenge. the battle in court. we will take you live to mumbai. ♪
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angie: you are watching "bloomberg markets: middle east ," i am angie lau in hong kong. yousef: and i am yousef gamal dubai.in a lawsuit against falling conglomerates. we are tracking this from mumbai. tell us about this case here. >> the chairman is shifting the battle from courtroom to courtroom. they will file a petition before aata group,
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tribunal. the case will be held on thursday. talked about the demands of the affairs of the company. he also wanted the investigation to be done into the company, he proved that tata was wrong. angie: what about the search for a new chairman at tata? were focusing on the atms. stepped down from all tata-listed companies except for tata sons.
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the chairman shortlisted nine candidates in india and outside india. the end ofntil february to finalize the new name for the new chairman. angie: thank you, we will leave it there, live from mumbai. making the stories headlines, they sell a mouse $800 million of shares for shipping. 22% premium in hong kong. proceeds used to replenish bad loan manager's core capital. the banking securities regulator has approved the deal. shares,check of cosco 1.5% higher. sell inmay be able to long beach, nearing the end of sales of key assets, after that liquidation.
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approve their stake in the operation, but no details of been released. also -- already owns a 46%. angie: fiscal year earnings, a surprise third-quarter profits handset tofrom software. earnings per share was two cents, compared to a one cent per-share loss. margin was almost 70% of revenue, the highest ever. the ceo says blackberry can do even better. before we go, we have to tell you about the embassy in washington, plans to hold its national celebration at the new trump international hotel. it is cool.ause investors saying they deny the choice the venue was made after pressure from resident like donald trump's business managers. interesting the ambassador said
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he wanted to go there because "i thought it was exciting." that is interesting. yousef: what i would say is key, you put yourself in their shoes. if you are going stateside, what you like to try something different and exotic and in line with the times? he might have predicted a win if that was a decision in september. good on him. and it was brand-new, why not? i would give it a shot, for sure. that is all we have for this edition of "bloomberg markets: middle east." american futures are mixed, s&p 500 slightly lower. next earnings from fedex and nike. angie: all very exciting news. and then all the stories coming up on bloomberg tech. we will have the top headlines for you coming up. ♪
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>> it 1:00 p.m. hong kong. asia-pacific markets have been holding on wall street's overnight highs. hong kong has rebounded. stocks keepna climbing from six-week lows. sydni saying its highest level since august of 2015. he is also filing a lawsuit. india's biggest conglomerate

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