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tv   Best Of Bloomberg Markets Middle East  Bloomberg  December 22, 2016 11:00pm-12:01am EST

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angie: it is mounted here in hong kong. i'm angie lau with an update of your top stories -- it is noon here in hong kong. a civil penalty from the justice department for deutsche bank, with a provision for consumers. meanwhile, the justice weretment suing barclays allegedly deceiving investors who bought mortgage-backed andrities between 2005 2007. it alleges the bank repeatedly deceived investors about the quality of the loans. 's offer of aid to the
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--est bank monte dei paschi the bank has confirmed it will continue to seek assistance after a failed bailout. global news 24 hours a day powered by the more than 2600 120nalists in more than countries. this is bloomberg. let's get a check of the markets for you. before the long christmas weekend holiday, here is how we are trading in the morning session -- we are seeing this across the board, asia-pacific shares down the last day before christmas. this is bloomberg. ♪
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>> welcome to the best of bloomberg markets middle east. the world bank approved a new loan to egypt worth $1 billion. it will help create thousands of new jobs. we spoke to an investment manager about the implications for markets. that is coming up. havehree qatari banks announced they are in initial talks for a merger. and president putin called for a crackdown after the russian ambassador to turkey was shot dead. he was murdered at and arcs -- at an art exhibition on monday. our correspondent took us through what happened. reporter: he remember last year, the turks shot down a russian warplane that crossed briefly into turkey.
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that really damaged their relationship. turkey suffered. the turkish economy suffered. more recently, they of worked hard to bring the relationship back to a place where they are talking about the area, in part because the situation in syria has changed. both are saying they do not want that to change. they need to continue working together, especially in view of the situation in syria. the relationship just beginning to recover. a real headwind. what does this imply for the relationship going forward, this event? partly economic. turkey has been hit by terrorist attacks, from kurdish separatists, but also isis related attacks. turkey has been fighting separatists in southeast turkey itself and has put troops inside the separatists
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there and to push isis away from the border. economically, it shrank, the economy shrank in the most recent data, and tourism, which is a very important part of the turkish economy, has been hit hard, so more effects like this is not likely going to be a good thing. >> is turkey going to change policy regarding syria? d: turkey has changed policy most recently. they supported rebels in syria -- they continue to support rebels in syria. however, their aim will be much more limited. before it was rizzi -- regime change. verbally they say they want to get rid of assad. much more about trying to limit kurdish separatists on the border and trying to push isis away from the border and that is where
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they are working with the russians. in aleppo, for example, they are working on trying to get people evacuated. our guest, jean-paul. good to have you on the program. let me bring up another chart. our viewers can do the same on the bloomberg. this is going back all the way to 2012. stocks and bonds. you can see the trend has been a downward trend. and this is taking a little bit of a breather, not only because of the slightly improving relations with russia over the last few months -- again, this event, what does it mean for turkey? how big a setback is this for turkish authorities? >> it is a tragic event for the russian ambassador. it continues this trend in turkey of elevated security risks, which really defined 2016 for this economy. even before what we saw
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, the data has been horrible. whether that is isis attacks of the failed coup in july, i think confident has followed out from under turkey. gdp figures released last week, they were terrible. there is nothing to like. first contraction, i think, since 2009. you look at a lot of high-frequency indicators, retail, pmi see, all of that is still pointing to an economy that was fundamentally weak in the fourth quarter of the year. it's just another setback for turkey. jean-paul, i would to bring up another chart here. just go into my terminal. these are bullish signals we have seen on the turkish benchmark since august. the last date i put in was december 20. we are seeing a strong buy signal.
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what do you make of this? is this one side of the story that counters the negative one that you have just relayed? jean-paul: you know, angie, that is a great question. it's a difficult outlook for turkey headed into 317. on top of all of the security risks that are quite prevalent through the economy, you have the broader outlook for turkey in terms of its relations with haseu and how policy flipped us here. i do not think the next 24 months will be conducive to a turkish economic recovery. number one, we have oil prices starting to trend higher. and we have the global environment in terms of the u.s. rates perhaps more aggressively than anticipated. that is negative for turkey and
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every other emerging markets economies were they have these laws -- large deficits. it's not a great outlook for 317. yousef: you mentioned the functionand the wrcs really lays it out. the turkish currency down 9% this year. we saw additional weakness off the back of the reaction overnight. how is that going to complicate the decision the central bank has to make today? jean-paul: going to bed last there was a lot of trust fall for myself. ultimately headed into last met, i thought a 25 basis point rate hike was in the cards just to protect the turkish lira. waking up to the news of the russian ambassador, i think that is effectively a done deal. i think they are concerned about the weakness of the turkish lira because of the size of the
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external debt piled outside turkey. coming up -- jpmorgan's expecting britt to average $1500 a barrel next year. this is bloomberg. ♪
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welcome back to "the best of bloomberg markets: middle east." wilkinsgy reporter sam reported -- take a listen. the bloomberg survey -- it has driven the price down. it has come down just modestly. what we have seen is a consistent drawdown of stockpiles is the opec deal was reached -- november 30 with opec, and a week later with non-opec producers. that part -- that supply has not come off the market yet.
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again, it's about sentiment in the market and also the effects on the price for that deal, which means it makes sense for the u.s. to draw down on is stockpiles rather than by oil from elsewhere. what about supply next year from countries not taking part in the opec cut? news,e have interesting angie. one of the u.s. and then in the u.s. again. present obama is considering a law to protect certain areas of the arctic and the atlantic which hold oil, and this looks like an attempt to protect those areas in a durable way that will continue to have effect after he leaves office and president-elect trump takes office. so, what we see here is a move by the obama administration to try to create some durable and that will have an interesting
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impact on supply year where we might expect the supply to .ncrease under president trump also in iran, we need to think about whether they can get foreign investments into the to increase oil production next year. they have basically achieved their pre-sanctions output level. exemption fromn the opec field to pump more. can they do it? we think they need investment to do so. we have seen a little interest from foreign countries, but nothing solid. you have to think how much can iran actually add in the next year? angie: all good questions, sam wilkin. to next guest expects brents average $62 a barrel in the third quarter. he is the head of regional oil and gas a jpmorgan.
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we are ending with a little bit of a gift from opec and also u.s. suppliers downgrading their crude stockpiles, but how sustainable are we at these prices? >> we think that there will be some adherence to opec cuts for non-opec members. that is why we have arising outlook for the next few quarters. you are also counting on saudi arabia and everyone else to meet your production cuts. >> we think there will be some adherence -- not all?t >> not completely all. the u.s. is a good point. we did some proprietary analysis. we think it's around $50 where we are today, they can add to it a thousand dollars a day. if we got to above $65, you
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could see almost a million barrels per day being added from the proprietary work we have done. scott, i pulled up this chart, which shows the point you have made more vividly, if you will. this is the forecast of the decline in u.s. crude stockpiles. reference here, the blue line, the price on wti. how quickly can u.s. production come back, u.s. shale specifically? we think at least six months. when i quoted those things for angie, that is the second half of next year. if we are right, you could see a .7 milliont of barrels a day in stop drawdowns.
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scott, i was looking at a note from morgan stanley and they say the saudi's need to cut million barrels per day to make sure this deal works even in a worst-case area. is that something you can join as well? look, i think saudi production could well be cut anyway. if you look at where you are sitting, we believe there will be better gas supply, better power generation in saudi arabia and less need for oil. although exports may not change, production could come down. scott, what about the libyan variable? they have been exempt from the opec agreement. could that be a black swan, and extraneous barrel that could
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going intoopec deal next year question rick scott: i think some of the producers if you look at the three conference calls remember the same thing, visibility, the outlook -- for what it is worth, jpmorgan 700 millionaverage can seeper day, but we that we have plus or -2000 barrels to that. turkey still to come -- kept rates unchanged, but gdp fell. we have reaction from ankara. this is bloomberg. ♪
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"thef: welcome back to best of bloomberg markets: middle east are come -- "the central-bank
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best of bloomberg markets: middle east." turkey central bank kept rates the same this week. we asked why the bank stayed put. from yesterday, it is obvious the turkish central bank is worried about the sharp slowdown in growth. that is thought to be the reason all of itse to keep key interest rate unchanged. which is defying the market expectations for a hike. there was a slowdown in following the failed military coup attempt in july. also, there was the turkish central bank yesterday as a
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,ounterforce of the week lire and that is basically what gave the central bank the opportunity to maintain the policy unchanged -- at least for now. then,, onur?at now what does it say about monetary policy moving forward? see theey will wait to weaker than usual demand, whether it will be enough to rein in inflation. at least, that is what the bank said yesterday. but analysts say there is a strong possibility that higher interest rates in the u.s. will increase the pressure so much that the turkish central bank might the forced to raise its own lending cost to the currency.
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and the pressure on the bank to hike might be unbearable. , it does not intend russian action, but the global backdrop might force a rethink of that strategy. toie: all right, we're going leave it there. thank you for that. malaysia says it will not introduced capital controls despite the lowest since the 1998 financial crisis in india. chiefala lumpur bureau was at a statement. with the drive to clamp down on speculators, what insurance to investors have? >> angie, investors have long memories.
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1998, that isin always in the back of their minds. it's interesting to see what they have to say this time around the. >> there is no more room to talk about options. i don't call it crisis. has weakened more than 5% since trump was elected president. what did the minister have to say about that? >> that's right. a 5.6% to klein. reason why it has weakened so much in such a short time. the fundamentals have not changed for the economy. he thinks that there should be a better value, a fair value. the world bank has
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approved a $1 billion loan to egypt, the second portion of a $3 billion deal to support job creation. we have our middle east econy editor standing by. where does this leave egypt's reserves now? >> egypt's reserves jumped up significantly after the imf deal. the last number was $23 billion, the highest level since 2011. central-bank saying it is not going to intervene again, we are likely to see reserves jump up again at the end of this month. that would put them at the highest levels we've seen since the revolution and that eases a lot of pressure on the country. what are the remaining challenges for egypt's currency situation? a lot of the knots have been undone, but there are plenty of hurdles ahead.
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the central bank says we are not intervening in the currency market. we are going to build up a reserve cushion. commercial banks are trying to outside thears official system, and that is what you see the pound weakening to record lows. they still have the remaining strains of the black market. build up enough dollar deposits and we see more egypt, weming into will likely see the expectations of the pound finding its floor, it's clearing level -- its clearing level. out thewe can pull benchmark index, and you can pull it out on your bloomberg for the viewers. there is the valuation. you can see the line and blue, the gain since the fed hiked
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rates, the best-performing indices in the world. a, how stable is this? foreign investors -- this is what egypt has been targeting. alaa: true. true. from a packed situation to a free float -- again, not just devaluation. one of the key benchmarks we will keep an eye on, and the data unfortunately comes with a , are the fixed income markets. the local fixed income markets. this is where you had serious foreign money. ,o, the last numbers we had that was like $9 million that came back -- $9 billion that came back into that market. say yes,o see more to there is significant investment sentiment. you also have on the other hand
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on otherh depends factors, security. but egypt investment, part of it comes from the portfolio in the stock market and we are seeing a significant trail. bpsef: coming up next -- underpins its presence in the gulf with a $2 billion deal. we will hear from the ceo. this is bloomberg. ♪ we haveld like to think shown what we can do technically in management capability. we will move and work with adnoc , who are going through their own transition and we will bring our
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here in hong12:30 kong. i'm angie lau with your bloomberg news updates. lockheed martin fell after tweets from donald trump. oflier boeing said the cost the new air force one could come down after eight from tweet criticized is price tag. the president-elect says the united states should greatly expand its nuclear arsenal. comes hours after
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president putin reiterated his call for russia to reinforce its own nuclear forces. and speaking of which, president putin postponed his news conference so he could attend the funeral of the russian ambassador to turkey. that if it was put back .4 hours to allow the president an opportunity -- 24 hours to allow the present an opportunity to pay his respects. his funeral was held in moscow. funding hassino been put on hold, raising questions about the project's future. we are told be company wanted to raise up to $400 million, but potential investors wanted a higher yield than the 10% to 11% willing toong was offer. global news 34 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. let's get you a check on how
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markets have been trading in the asia pacific today, i day ahead of christmas. >> right, the day before christmas weekend, before i get to the equity markets, a quick look. we have the pullback and the nymex gold price, that is a tight range, give or take, one or two u.s. dollars a day. other currency we are against the u.s. dollar for the first time since march. equity markets, japan is closed for the emperor's birthday. eastern markets are shut. the rest of the region is looking like this. two markets i want to note. hang seng after a correction, india, the market opening up after the eighth straight days .- day optic lines
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so the magnitude of the drop is not as much. it is the streak though. fell. fingers crossed. yousef: welcome back to "the best of bloomberg markets: middle east." bp has cemented its three quarters of a century relationship with abu dhabi with a stake in one of the emirates' largest oil concessions. it will issue shares to pay for 10% of the deal, giving abu a 2% stake in the coming. tracy alloway asked ceo bob dudley why the deal has taken so long? working herebeen for 75 years, important work that bp has been doing, a strategic relationship with abu
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dhabi. to be honest, given the strategic framework and our obligations in the u.s., it took a while to get to the point where we could make this investment with abu dhabi. dhabi will be an owner of about 2% of bp. anotherit will mean 160,000 barrels a day. continues aes of -- very, very long-term relationship. and for bpit brings in a strategic owner of the company, which i'm very pleased about. bp has worked here a long time. i would like to think that bp has shown what we can do technically. with adnoc which is going through their own transformation as a company and
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we will bring resources into it and we have got a lot of experience managing really big flooding, and the technical things we will bring and i think that's one of the things we bring, as well as a deep sense of responsibility at about the privilege of working with the national resources of abu dhabi. -- in many, the ways, the crown jewels off of a dobby. tracy: is this an indicator that investors should be ramping up investments? said we would balance our funds in 2015. a year ago we were saying 16 -- know we can do it at 55. it is clearly insights. i think we will remain very, very disciplined about the capital we spend.
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but it's time for bp to start working -- start growing now. i think the company is well positioned for growth toward the end of the decade. saw an historic deal by opec and potentially more historic he'll buy non-opec producers to join in with as well cuts. how do feel about opec and the deal at the moment? countriesave non-opec reducing discussing their output. some have discussed that opec is not a real organization anymore, does not bring things together. i think opec is important organization. this agreement is significant. you can see it in the curtailment notices going out. i know, because we work in russia, there is a schedule of reducing output. i think it's very serious.
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i think oil prices between 55 and 60 seems very, very realistic. and growth continues in china and north america for demand. donald trump has of course nominated rex tillerson as a potential secretary of state. you think he is the right man for the job? knows leadership around the world. he knows how to get things done. he's a very serious person. a great job.ll do not just because i'm in the oil and gas industry. this is a man who really knows the world and knows how to manage global organizations. tracy: on a more broad basis we know that donald trump is potentially more friendly to the oil and gas industry than his predecessor. what does that mean for you and other top oil companies? bob: surprises have been happening all over the world. a lot of the world has been surprised with what happened in the u.k. even the referendum in colombia.
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i fake we are in for more surprises in 2017. we're a very long-term industry. we have to think 50 years out. bp has is financial framework and discipline back and we will adapt to the circumstances. right we will pick up where we left off, getting more on the bp deal with abu dhabi. robin, we were just talking about the structure of the deal, the fact that bp is trading its a stake in this offshore deal. walk us through the strategy. saw something very different when it took its own stake. they paid in cash in 2015. that was a point where they went very far into the clumps of oil
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prices and companies felt they had more cash on hand. i think that is a defensive move to structurecash the deal in this way and to bring in one of its largest investments. corollaryuppose the is bp gets a long-term investor with potentially deep pockets. we were that the abu dhabi stake will actually be held by one of the biggest sovereign wealth funds in the world. robin: that was interesting. also a major investor through its own account. i think it makes sense to give it the bp stake. and they are merging with another oil, energy focused sovereign wealth fund in of a it makes sense for all of those interests to be held there.
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tracy: right. before we go into more detail, let's step back and talk about the history. a share in adco that expired in 2014. they let it expire. why did they let it expire and wait for two years to buy a new stake? what was the background there? robin: well, it's an incredibly interesting concession. early days ofvery the oil industry in the middle east. and these were real legacy assets. when a concession expired, exxon .ecided not to bid for the new to talk, bp, and i saw more in the process. it has taken much longer to bring bp in, and potentially there is still a stake out there and show continues to be interested. tracy: ah. my next question.
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we have 12% of the 40% stake up for grabs. will we get another sale announcement anytime soon? but i felt itdo, was necessary to have another super major in their to balance re to balance the partnership. .here have been smaller stakes obviously they do not have the same weight. now whether another large company will come in i had -- will come in, it is open for question. i thought it was important to at least have to do. tracy: in my discussion with bob dudley, he said now is a good time to ramp up investment. the company is going to be quite "considerate" i terms of deals and ramps up. we've seen the historic deal with opec and non-opec
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producers. should we take this particular deal as a sign we might finally get that big upturn in investment? we have seen pretty much three consecutive years of spending cuts by industry. that is unprecedented. at some point, capital spending has to turn around. now oil prices have recovered. this year on the back of the opec deal. yes, we will be seeing more spending next year, but i don't think the floodgates will open. i think we can be cautious there. tracy: let's talk about that outlook a bit more. bp in particular saying it can cover it spending and dividends without having to borrow. it's down from an earlier estimate of $60 per barrel. how is bp achieving that spending? robin: well, like all of the major oil companies it has been
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a focus on cost switches. also there has been a lot of cost deflation. so the cost of high drilling rigs has come down dramatically. i think this will be a long process of continuing to squeeze out costs. it does take a long time. i think some of the cyclical costs will start coming back -- cyclical costs versus return. on the other hand, there is the cost of investment and the industry has to invest in its future at some point. so talk about the deep water in the arctic and so on. adco and obligor the is the wouldte opposite -- and i dobby is the complete opposite end of the spectrum. of course, the operating position is very, very large.
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they are kind of unique. -- reservese more like this in iran or iraq, but there's far more political risk. yousef: coming up -- uber's mid east rival, the latest so-called "desert unicorn." we will year from its cofounder next. this is bloomberg. ♪
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yousef: welcome back to "the best of bloomberg markets: middle east." raised three to $50 million from investors including saudi telecom cover and the coffee is valued at $1 billion. -- and company is valued at $1 billion. we talked about it with the
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cofounder mudassir sheikha. mudassir: there are about 20 countries and there are a lot of cities. we cover a lot of countries. there are at least nine that still need to be talked into. how manyhen i look at countries you entered in 2016, i .lways say you might be looking put some meat on the bones. mudassir: there are three or four and afternoon it might be open. yousef: which ones? jury a, tunisia. those running list. we just launched turkey a month ago, which hasn't been in the news. -- algeria, tunisia. we just launched for cities in egypt. cities in egypt.
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we are launching five cities and pakistan. that is a large part of what we are going after. angie: huge fundraiser expected. you also have a lot of foreign in to invest in careem, and certainly other middle east technologies, but what other exit strategies do some point to offset that and maybe sell to a foreign investor? so, the way that we is really toess remain independent and the a thriving local business. that is the way that we built it. we are not necessarily focused exits.
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we are looking at the potential listing. that is the path we are on. angie: what makes careem different from the borough or other ridesharing apps -- or right hailing apps? mudassir: the first difference is the region is different than other parts of the world. there are two big things that make this region different. the first is unlike places like europe and the u.s., which have a public infrastructure of 100 years ago and the cities have trains, buses, and for chalie kimball we did not get to build those in our cities accept dubai -- except dubai. most regions are building these. can start building that infrastructure in a very crowd funded way. that is one thing that makes the region different. the second is the region is a bit conservative, which means
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that in most parts of the region, women are not comfortable driving, and in some they do not even drive. big need to a provide women with a safe and reliable means of transportation. our services cater to those differences in the region, and overall if you look at the service, you will find that it is the better service for this region. yousef: we understand this might last fundraising round before an ipo? should be.t at that scale, we should not need more money after this. yousef: when with the ipo come? mudassir: we haven't thought about that too much. the focus is on building and growing the business and at the right time that will come --
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become a possibility. if you want an estimate, probably 2018, 2020 when it becomes more feasible. yousef: and the dubai listing would make the most sense? it is hard to tell. yousef: that is an open invitation. and some of the services and abu dhabi were suspended. is this a tougher market to open in? are the restrictions more that you have to take into consideration? more and more the region is open to right hailing. i think the regional governments understand the potential of this platform. --sef: coming up next carriers under pressure to adapt as growth slows. this is bloomberg. ♪
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yousef: welcome back to "the best of bloomberg markets: middle east." cutting jobs after years of slowing growth -- how difficult is the challenge facing regional carriers? we asked our middle east regional reporter. >> it has been difficult for the gulf airlines. they are not seeing the same pace of growth they used to before, and part of that, they are going through a process of restructuring. they are looking at ways that do that, they will reduce the headcount or parts of the business. they cite the petition and a weaker global economy. let's run through the
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numbers, or give us a sense of the extent of these cuts. >> the range of the total layoffs could be from 1002 3000 3000 jobs.0 to that could not be confirmed. if you put that in the context of employing about 20,000 core staff and that goes up to subsidiaries and employees abroad, and these cuts are coming across units of the business -- i.t., hr, commercial sales, that is what we are hearing from sources. yousef: is this part of a wider trend in middle east airlines, are way, way
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overextended, we need to rein in things a little bit? >> that's right. there is a broader picture of slowdown. we saw a couple months ago emirates airlines announced that their process had dropped considerably. there is the demand from the oil and gas industry that has also been softening. and this comes within the general context of the gulf economies facing slower growth because of oil prices. ad even here, we have seen general trend of job cuts. yousef: that is it for this "best of bloomberg markets: middle east." reaction to more the saudi budget announcement with gary dugan and as this
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turbulent early 16 draws to a close, we discuss how investors are positioning themselves -- turbulent tray 16 draws to a close, we discuss how investors are positioning themselves.
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angie: i'm angie lau with an update of your top stories. deutsche bank has agreed to settle an investigation in the united states for $7.2 billion. that includes a $3.1 billion civil penalty from the justice department and the provision of $4.1 billion in relief to consumers. the justice department is suing barclays for allegedly deceiving investors who bought mortgage backed securities between 2005 and 2007. it alleges that bank deceived investors about the quality of more t$3


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