tv Bloomberg Markets Middle East Bloomberg January 4, 2017 11:00pm-12:01am EST
♪ >> donald trump was on the fence lives last month, and officials discussed the pace of future hikes. rishaad: the latest reading of the circumspect in china. libya holds its drive as boost production. output well last month ahead of the opec curb. rishaad: and the vast majority of rupee notes have been handed in, seen as a blow to the anticorruption campaign.
>> it is 8:00 a.m. across the uris. -- emirates. i am yousef gamal el-din. rishaad: i am rishaad salamat. welcome to bloomberg markets middle east. the federal reserve, we will delve into that, the finer points. and the narrative seems to be , about to change looking at the prospect of more growth and probably higher inflation. u.s. treasuries. yousef: quite remarkable what happened overnight. if you look at the fed minutes, fed officials are talking of economic growth accelerating. that is possibly putting pressure on the rate hikes. it has to move faster. let me show you a chart, the kind of song we saw. i know it looks like an ekg on steroids, but you can see the
ups and downs. you sell reaction on behalf of of the fed. we did not get many ideas on when the next rate hike will be. and also the undershooting when it comes to the jobless level, it keeps prices stable in the long run, which is ironic considering not too long ago, you were talking about a slack in the labor market because of the dollar. officials took many takeaways through the next data point, but that will be the jobs on friday. what are you looking at? rishaad: equity action dictated to some extent by the fed. mumbai exchange. it is up 0.6%. hong kong 0.13%. lackluster change leading to the hong kong shares. the topics has been -- topix has been gaining most of the day.
that is down to the yen at the moment, coming back against the dollar. it is depressing some of the exports, which are quite heavily weighted on the topix. looking at the slightly flat picture don not even two points -- down not even two points. part of thehis world, it is two hours from the emirates opening. time.10:00 a.m. local let me run you through what is significant. look at the mixed picture, dubai up 0.2%, emirates mdb driving most of those gains. we saw stocks going down on abu dhabi. let me show you saudi arabia. chemical stocks under pressure. we did see egypt hitting the yield record high. that is right, a new record high, on the back of strong volume. let's get a big check on the
bloomberg dollar index. there was some weakening. you can see how that is playing out with the other currency pairs currently down 0.3%. the lira still holding steady from the record lows it hit. it is currently down 0.2%. so president-elect donald trump's plans is something to watch out for. we will get into that conversation shortly. let's check in on first world headlines. here is sophie. sophie: as you alluded to some trump's plans put for tax cuts in focus. minutes of the december meeting show policymakers saw an increase for the growth forecast, and they are worried they will have to quicken the pace to head off inflation. traders are betting on to hikes this year, the first by june. donald trump has taken a wall street journal insider to be --
he has nominated cromwell lawyer jay clayton to head the fcc. things.een in numerous truck criticized opponents for ties to wall street and other goldman sachs names. there was a demonstration at the bank's headquarters as protesters unfurled bounties -- banners. is a housing crisis and a history of the former executive in government. bsi banker will appeal. he was given 30 mounts of jill -- months of jail. he is the third to be found guilty in singapore and faces charges of money laundering. how are former manager has been
indicted -- the former manager has been indicted. he faces 60 urges and intends to plead guilty. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. kamaruddin, this is bloomberg. rishaad: china service sector is at an 18 month high with the rebalancing. steve is looking at the numbers here. [speaking simultaneously] service is showing again the strength. rishaad: this is interesting to see it. [speaking simultaneously] stephen: basically this is the survey, private survey of the small indian enterprises where the official ones are the stable behemoths. the services, let's start there. $53.4 billion in in december.
anything else is expansion or improving conditions. fresh 17 or 18 month high, 15.1 in november, showing the two speed economy being powered by the services sector. we have the composite index that came out with caixin, the two speeds of the economy at one composite index, that shows robust shrank. the manufacturing we got showed a record high of 50.9. the composite at 53.5, quite healthy, the highest since march 2013 for 10 consecutive months of expansion. new orders, the highest since march 2013. input prices are going up. the rise in raw materials and commodity prices him of the highest since march 2011. so that easing we have seen over the last few years is really working in to these manufacturers. yousef: what about the liquidity
crunch we are expecting ahead of the new lunar year? havel that affect recovery? stephen: we have another liquidity crunch coming in with the chinese lunar year holiday in a few weeks at the end of this month. it is earlier than expected. we had the pbmc inject some cash at the beginning part of this year to ease that liquidity crunch, but now they are worried there will be another cash crunch and liquidity crunch through the new year holiday. for all of those bills in the chinese new year, that is quite high. you will have two consecutive liquidity crunches in a few months. ,ishaad: offshore yuan absolute, on a roar. stephen: there is more capital control in place by the chinese authorities to really limit the outflow and to slow the
depreciation of the renminbi. look at the offshore and onshore renminbi versus the dollar. it is strengthening over the last few sessions including today. rishaad: it is something affecting the markets across this part of the world. let's get the latest, here's david ingles. david: to keep you updated on news out of the nikkei, we are really seeing the shares take off. the biggest reporting, the company sharp is a consideration -- considering listing with its lcd screen. it is backed by both companies, and announcement for $9 billion backing from china in guangzhou. the latest is that it is considering the nikkei listing the lcd joint venture. and sharp shares took off sharply. we will get you when that is
ready. let me talk about markets first, that is happening on a day when japan is on the way down. i will talk about the yen in a moment. asia, veryt of strong rally. volumes are especially heavy when you look at south korea. southeast asia has been bumping around, sharp gains and losses for the most part the last few weeks, hard to make a trend out of these markets, essentially the philippines. it has really been going around, now up 1.8%. energy producers in hong kong, china, shenhua, e.g. technologies, up 3%. i looking at companies on the back foot, mom be a accord going to buy modern dairy. on the way accord up. shanghai composite up 0.1%.
india is also up. australia at a 19 month high. that seems to be very early on of jim so far of 2017 -- gem 2017. it might get to a point where you ask, where do i shift my money? afx 200, the guy have that for you. dollar-yen, that is really what is waiting in, very quickly. asx 200, let me have a longer-term look at this market. all straight up. and we have the chart, what is the chart now? last we checked, there we go, 8.5% on shares of sharp out of the nikkei news. yousef: thank you, i will take it from here. we mentioned at the top of the show we want to back right into it, taking a closer look at the impact happening in donald trump and the administration coming
together. let's bring in the chief ratings officer at standard and poor. great to have you on the program and in dubai for a change. talk to me about the fed minutes, talk to me about the fed. we are seeing a tighter employment situation. on the other hand, talk of economic growth accelerating faster than we would have anticipated. are you confident about the health of the u.s. economy? >> good morning. indeed, for the u.s. economy, it looks like it is a fairly good shape. you have, over the years, you have employment gains, slow recovery, but a gradual recovery, much greater than what we are seeing in europe. in that sense, it is not a surprise we are seeing the divergence in the monetary trends, the u.s. and europe and also japan. all of this is interesting. we see in the context of the change of the white house and
new administration coming in, this fiscal expansion is one of the hallmarks of the policy agenda as seems to be shaping up. you have a fiscal expansion, the fiscal stimulus and an environment where, you know, you are getting close to full employment -- this of course is something that puts the central bank on guard. that is not a surprise. rishaad: the thing is, you talk about a bifurcated world also where there are spreads between various bond yields where they will widen. ultimately do they get to the point when the alarm bells are to go off, what is that point, and what are the implications? moritz: the last couple of years have been extraordinary, also for the government bond market which is the busiest -- biggest asset class in the world. looking at the valuations, you can only conclude that the
prices of the yield that you observe are driven not primarily from fundamentals but larger -- monetary policies that have gone over a number of years. so once this accommodation is received and the fed is taking the lead on that and probably the next g3 central-bank might be the ecb sometime down the road, and of course the german epi numbers suggest this will happen soon, then you see some sort of reality of what the real are ofinvestors' minds holding government bonds. yousef: the other thing is the strength of the u.s. dollar. you can see the fundamentals. you are looking at the yield gap. technical difficulty is suggesting the dollar bull run
has to go for a really tight thing. you have not seen anything to the actual dollar strength and 2017. given the state of the greenback, how much can the federal reserve really hike, given the amount of fiscal stimulus that will come in? constrainedre not by the exchange rate. this u.s. economy is pretty closed and large. does not trade that must with the rest of the world. the fed is much more independent than most other central banks. maybe not as it was decades ago, years ago, but it still is. but what the exchange rate movement does, it hurts exactly those sectors and regions that have been attracted to the trouble program -- trump program in the rest bill. isthe tradable sector, that
the factor if the dollar strengthens to much. this is almost an ironic fight affect of what the trump victory, we are seeing a strengthening dollar. yousef: if you had to pin down a number? moritz: between two and three. it is hard to predict. yousef: we will consider this. he is staying with us. cmib'sk to see him -- ceo. seemsd: and britain still ill prepared for brexit. we will talk about the global economy. ♪
hong kong. timesa may may have named bowers as the new ambassador to the e.u. that is barely 24 hours after his other disaster resigned. mountinge this as a criticism that she has no plan for brexit. there was a lack of preparedness for leaving the european union. morris is still with us. last year you downgraded the u.k., the institutional strength from the years passed wasn't there. that was your argument. now it has been a few months. we are seeing the positions if anything, digging themselves deeper, becoming more of a polarized conversation. it is hard, brexit becoming more uncertain. moritz: we maintain the negative outlook even on the downgrade. in my mind, the likelihood of a
hard brexit has been increasing over the last couple of months, hard brexit meeting the u.k. would leave the e.u. without any sort of substitute an agreement in place. the agreement for that is the lack of time. there is an awfully short time to negotiate such a complex web of relationships. the second is really the starting positions of the negotiations being so far apart, but struggling to see overlap. the u.k. seems to be saying, what i hear, if we want to ,ontrol immigration, full stop the european side seems to be suggesting that that the e.u. is basically not a buffet where you can pick and choose. it is a set menu. all or nothing. if you want to control your borders on immigration, that
means the customs union and the single market will that be available for you either. how you can square that circle is difficult. it seems to be going rather slowly in terms of the u.k. defining its strategy. ishaad: the thing is this political positioning, really. people will not show their hands before negotiation begins. at the end of the day, we have got to wait until the article 50 is presented. moritz: we will see. they are showing a hand. we want immigration control. it is not a secret that this is going to be very, very difficult to reconcile with access and free trade to the e.u., but what many people actually overlook is not so much the trade in goods and cars and stuff. the thing that matters to the u.k. much more than industry is service because the u.k. is a
major service exporter. if you get some free trade on goods and services, this would benefit countries like germany or france which are exporting mostly goods to the u.k., but the u.k. is much more dependent services,s, financial that is their strength. that is the advantage of the u.k., and that is much more difficult. there is no preset arrangement you could adopt. so i think the time is really very short, and we have not really seen any clear formulation of the road the u.k. wants to travel rishaad: thank you. do stay with us. we will have more from him with ratings when it comes to china and the asia-pacific. ♪
back to thes get chief operating officer for more on the impact on emerging markets in asia specifically. you said the pre-campaign rhetoric of donald trump, it was too early to understand the impact on emerging markets. then you said it may not be that much or as much as people think. as you see the administration coming together and where growth is in emerging markets, what is 2017 going to look like? moritz: the biggest risk we need to try and engage is protection. there are some denominations were appointments donald trump has been suggesting seem to suggest this is a real risk. we need to remember the u.s. system of checks and balances, and while republicans holding majority in both houses and in -- senate as well, it is not you know, the president can
degree any sort of policy. it needs to be either in the republican dominated congress, there needs to be some negotiation on the white house with where things are going. we are seeing much of the agenda that has been presented during the campaign on trade is a centerpiece of his presidency. southeast asia in particular is a trading region. they are very open, trade oriented economy. if we move into a more protectionist america, these economies could suffer. rishaad: we have got a huge change with what is going on when it comes to the world, possibly. we don't know. we have got a move to fiscal policy and monetary policy, inflation from deflation, geopolitical risk as well and protectionism, which is what you are talking about. how do you feel as someone who
is rating individual countries and sees the globe as a whole? moritz: we have to recognize this change of government or presidency probably comes with more uncertainty than any other change in our living memory. i would venture to say that. this comes with a lot of risks obviously, make him with opportunities as well. -- may, with opportunities as well. case deal with this on a like case basis, but if you see where the vulnerabilities lie, you will see that if you look at the outlooks of sovereign ratings which indicate where the ratings are going over the next year or so, you see the negative outlooks suggesting down risk going over positive outlooks 4-1. so overall there is a pretty negative trajectory for sovereign ratings. rishaad: thank you very much.
sophie: it is 12:30 in hong kong. u.s. automakers enjoyed another lastyear at a cost, in the two months pushing towards a seventh straight annual sales gain with all manufactories in december. the sales will stop the record of $17.5 billion, but the road ahead is rocky. it was the first decline in years. apple is investing $1 billion in soft banks new technology fund, adding a name to a growing list. they plan to launch the vision plan in london, taking qualcomm and others into contribute.
in donald trump was told half of the money will be invested in the u.s., investing 50,000 jobs. china and india have helped drive digital currency to an all-time high. according to bloomberg data, it hit $1140 and $.64 on wednesday. bitcoin beat every other currency, stock index and more as an investment last year, due to its popularity in countries with capital or currency restrictions. boeing rounded off 2016 with new geers, reaching a deal with on a jets. this is for several -- eight jets. it boosted ge's leasing unit to 170 aircraft. the revamped 737 is on track to make its debut later this year.
1% up.closed at global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. back to welcome bloomberg markets: middle east, i am rishaad salamat in hong kong. yousef: i'm yousef gamal el-din in dubai. opec plans to start production cuts this month, but the plan already felt in december. 3000 barrels per day, due to nigeria. we have the story. what is interesting about this latest? anthony: things are going in the right direction, opec trying to cut. these are the moving parts that are going to affect reduction going forward, namely nigeria as you mentioned. it was down.
continued the pipeline and field issues. we saw libya up. those are the two factors that will be impacting the market here. those countries are exempted from the cuts, so they don't need to cut the opec quota. there idea is that they can bring up production to levels without disruption. that depends on how much market oil they bring back, and whether the oil members comply with the cuts. we did see data yesterday, should tracking that showed iranian exports were down in december, so that can be an example of slowing. we will have to see if these comply with the cuts. rishaad: what are the key risks associated with this cut? tell me about the price action generally, what are people telling you about the longer-term codeword what do people think about shale
? how much does it provide a cap with where we'll prices go? -- oil prices go? moritz: oil is the -- anthony: oil is the potential cap. people see that there is less production coming out, markets are drawn, stockpiles. high. that is to the upside in price. the opec cuts are aiming at creating a deficit of supplies of people draw on the stockpiles. goldman sachs said they do see those stockpiles growing in the first half of the year, they see prices getting up to $59 a barrel in the first six months. they do see some impact there. real factors are going to be, do these factories -- countries actually cut? saudi arabia was cutting very aggressively to get back into
the market. we will see how they react. yousef: thank you, great to have you back to the program. back.go the oil story i brought up, the cps function. i know you use it every morning. show us where analysts think the price of oil will be. if you look at the first quarter of 2017, 50 two dollars a barrel, that is not bad, going to $68 in the fourth quarter. moritz: it is like reflation. we see pretty similar prices from the house view as well, where we will be for the medium term, $55, $60. i think the caps that anthony just mentioned, they are probably real, though much beyond that, supply reactions would kick in. yousef: the other thing is how to bring this part of the world
and budget. saudi arabia passed a series of reforms. how can you argue the changes they are making, the latest in a few days, eminent reforms when it comes to tax on the energy tanks and tobacco? are they doing enough to offset the fact they are quite a bit far away from the break in oil price? moritz: saudi arabia is making great efforts to try and deal with this challenge, and i think we knew to do great credit to them for what they have done. on the other hand, the budget is very dependent, the economy is very dependent on oil. drive is aification very long-term strategy. it will not happen overnight, not even a decade. this will happen over a long time. but the change of authority will be while you adjust the budget
to try to reduce the budget deficit. it was still remain, but reduce as. you need to do it in a way that secures the future of the society. this is the real challenge. it is a great change from the prices and high oil social peace you could buy with that to a much more austere environment. this is a very difficult balancing act they have in front of them. rishaad: from a ratings perspective, putting that cap back on for you, who do you think is doing the best work at the moment, and he was garnering more favor? who needs to do more in particular? moritz: we have the last two or three years have not been a happy picture in terms of sovereign rating. that has to do with oil.
in some places it is political development. those sovereigns that have the strongest balance sheet, starting position like abu dhabi or kuwait or qatar run a better position. others which are more vulnerable are experiencing downgrades. weakest we have seen in the ,egion, in the gcc, is bahrain which is not investment grade. but also a month in particular, -- oman in particular, more is needed to react to the challenges of low oil price environment brings for the economy. the saudis are somewhere in between those groups. rishaad: and the latest report here as well, the direct report. protectionism
exposing this. you think about the caribbean and central america as the worst , but looking at the asia-pacific, how do those nations figure in that index? moritz: when you look at vulnerability to potential, the trade dependency, trade exports, we are looking at dependency on the work from the u.s. factor back to the home countries and also foreign and direct investment of u.s. companies in the markets, you clearly see central america and mexico is by far, they are the most exposed to the risks. in you also have a program asia, south east asia, they are very open trading economies which show impact. you also have places like the philippines which receives a lot of remittance of ex-pat community in the u.s. onpared to mexico, it is not
the same scale, but you have countries in asia -- china is this different story. china is more a bilateral issue that will, the trump presidency will and already has commented on that they will take head on. yousef: we want to go back to political volatility. key function. i have shown the ratings we have had over the last week and in terms of the year, 2016. you get all the different details of the ratings. what i would like to know from you, we have quite a lot of elections. 2016 was rough for europe. how much will this be on your radar? how much concerned are you that the integrity of europe is going to be even more at risk? moritz: we have brexit which
doesn't start for real. 2017 is when we see the real action. that is one big factor to look at. then we have big elections in europe, the biggest of them all is france. it is so big not only because of the country, germany is a bigger country and has an election next year, but in france, there is of course the tail end of ability of marine le pen becoming president of the french republic. this is not what the poll suggests, and i think the electoral system in france is quite unlikely. donald trump not have won the presidency in the french election. it may be at a price. if this unlikely event were to happen, i think the ramifications for the european project would be very significant. marine le pen has been saying she wants france to come out of the e.u. and the eurozone.
i cannot imagine what that would mean in real terms. this is something we need to keep a very close eye on. anthony: we did get some fresh comments from marine le pen saying trumps victory proves protectionism works, and that she would want to issue a new national currency as well. strong current -- rhetoric. the chief ratings officer at standard and poor. now let's talk about another regional story, buying stock exchange. planning to introduce regulative trading in the next few months. this follows on the heels of abu dhabi which may start next year. let's go to tracy. top us through the details. . reporter: good morning. as you know, this announcement comes hot on the heels of the announcement we had from adf
last week saying they were considering looking at shortselling equities. which everyone gets the their first, it could be a milestone for the region. they would likely be the first stock exchange in the gcc to offer shortselling. the distinction here is if you are trying to trade or boost trading volumes, we have seen those languishing somewhat over the past year, this is trying to boost liquidity in the markets, getting short-sellers in, getting two-way trading in the market particularly in institutional players and hedge funds, would be a good way to do that. the big question is the pace of the adoption, whether or not this actually takes off anytime soon. rishaad: that was going to be my question, tracy. will it be a flyer? yeah, again this is the
big question. if you look at the makeup, it is remains dominated by retailers who don't have the desire or ability to short sell. shortselling is something used by bigger guys to hedge their portfolios or bet against further price increases. whichever way you look at it, there is definitely a push by the stock exchanges to rule out new products. when i spoke to the president, .e was talking about adx this could play with retail investors. he was also talking about derivatives. some of the recent product launches we have had from nasdaq dubai, they launched futures trading back in september, the adoption of that has not been strong until four months later. look at that as a precedent, you would imagine shortselling might be an uphill battle. rishaad: thank you.
supposedly? yeah, i do agree the difficult market [indiscernible] compared to the global market as a whole. we have seen the trend continuing from 2016 where in the early part of last year, 12 months ago, everyone was saying 2016 will be a tough, rough year for sukuk. globaln we saw in the sukuk market in 2016, we expect the momentum to continue. of 2017.ay to q2 we look at the sukuk market as a whole, the lines on malaysia and the middle east in the mirror to have basically come up with a
prediction of 100 billion and get, which is close to -- ring ringgit.ht --rin -- and sukuk historically has 75% of that. in gcc last year we saw very good year, and based on what we have heard, this year will be another decent year in gcc as well. that is the key though yousef: -- that is the key though. that have anntries islamic political systems that conventional bonds. for a great year, what will be the catalyst that really helps the industry get ahead and were ead? had? ah mohamad: looking at market
finance as a whole, we are seeing the early days of basically doing islamic banking as a whole. if we look at the market as a whole, we have seen new markets issuing sukuk such as the u.k. and hong kong, luxembourg, south africa. in this year, i would not be surprised if we see new markets, and new kids on the block, coming up to issue sukuk for the first time. , there are some culprits in china doing sukuk out of china. success forf the the summer and sukuk issuances -- sovereign sukuk issuances. sovereigns have seen the benefits of doing sukuk. for the first time or second
time, back to back in the case of hong kong, they have been able to do the onset market, malaysia and the gcc markets as a whole. rishaad: sukuk, where do we go with this then? in terms of the industry groups that you are looking at right now, which is one thing where you will have a better year raising money, and which ones will have a poorer year, let's put it that way? mohamad: as i said earlier, malaysia is expected to see a very good year. we are expecting between 70 billion or 80 billion of sukuk issuances. and gcc, we are expecting $13 billion to $15 billion of fresh insurances.
-- issuances. of thear we saw a close primary issuances in the market. conservativelye expecting between three 5 billion, through 45 billion. that is a pretty decent number considering all the events. i think you mentioned the brexit event, which is going to be interesting talking point this year. mohamad: when you look within the industry within sharia accords and islamic jurisprudence, what is there for unifying the business, to add to credibility and the gravitas abroad? sure, i guess that
question was extremely relevant for five years ago -- four or five years ago. especially between the two media markets, gcc and emerging markets. or the so-called discussion debate has abated. we see more convergence between the two major sukuk markets. now we see less and less of sharia issues. we do expect that this sukuk emergence in the sharia structuring will grow, will be marketsoint for the new to proposition in the near to medium term. cimbad: the cm ib -- banker. let's get you a preview. modi's hunt for cash, notes end
♪ india's deadline for the goals of the bills passed through the end of this year. all of the band notes have been put it in the bank. people are saying this is actually a big blow to mr. modi's anticorruption drive. >> a little bit disappointing. rishaad: does it highlightrishaad: the black hole in the economy? notesning the 1500 rupee will help with corruption, tax evasion, unaccounted money, but it adds to the bigger black coal. -- hole. actuallye money has
been deposited in banks. banks received about 14.7 trillion of the notes as of the 30th of december. the estimate a lot more will actually be lost in the black hole. mohamad: what about the latest services of tmi numbers? what about the quest and india's economy? the latest services pmi shows the sector, what hasn't been moving, it has contracted for the second month. it was 14.68, barely moving from november 6.7. this affected a number of that part of the economy. we got manufacturing data earlier that showed it shrunk for the first time in a year.
1:00 p.m. in hong kong. i'm rishaad salamat with an update. china's services sector grew the most in 17 months in december. the reading is 53.4, up 3/10 of a point from the previous month. is it assigned the chinese economy is perhaps showing stability? reading weighest have seen since july 2015 and the fourth consecutive expansion. an executive is jailed for witness.