tv Bloomberg Markets Middle East Bloomberg January 16, 2017 11:00pm-12:01am EST
♪ measures, thef pound the trades near three decade lows with theresa may set to advocate for a hard brexit. vietnam's prime minister promises greater access to lenders and securities. switch, saudi the arabia 650 billion dollars for a massive renewable energy program. >> china's president set to take center stage at davos as donald trump stays away. across theis 8:00
emirates, 5:00 a.m. in london. i am yousef gamal el-din. i am sherry and in hong kong. welcome to "bloomberg markets: middle east". risk off sentiment, the dollar gaining, the yen trading near one-month highs, but the question comes to gold, now rowling for a seventh rallyingve session -- for a seventh consecutive session, but investors in a tricky position there. is in thee excited he gold trade. they are not expecting that much. gold has rebounded 6% since december lows. let me show you the chart you should pull up on your bloomberg, the implied volatility for that gold trade, two-year low, your line in white. we have added the 10 year
breakeven rate, the key gauge for inflation. and the world,st but it is a de-correlation, the biggest of urgent sense december 2014. as the data shows, expectations relatively neutral given the talk we are seeing in this market. we are seeing markets a ia, confused across as trading all over the place, although the regional benchmark declining. .2%, hang seng gaining four point first -- gainingp .2%, hang seng as well. intohaven plays coming action. everything has to do with that brexit speech from theresa may
later on tuesday. theresa may set to announce the u.k. will pull out of the eu single market when she sets out her brexit plan later today. the british prime minister will say she has no interest and a half in, half out approach. let's get more with sophie kamaruddin, so we are bracing ourselves for hard brexit. sophie: the pound has been moving ahead of this speech. theresa may has kept her brexit cards close to her chest. the next tract released by the prime minister's office preference for a partial membership in the eu. here are some excerpts from her speech. do not seek to adopt a model already enjoyed by other countries and do not seek to hold onto bits of membership as we leave. signal plans to
quit the eu single market and take a new trading relationship lock.the bal bold 12 point plan is what will reportedly be announced. what do we know about this 12 points? sophie: the telegraph reported key objectives amount to one big goal, a new positive and constructive partnership between britain and the eu, gaining control over immigration, protecting rights of british ex-pats, restoring power over lawmaking to the parliament, theng the u.k. out of jurisdiction of european courts, and signing major free-trade deals. deal foron was a big voters, and without free movement, the u.k. cannot remain part of the single market. today's speech is being billed as theresa may's complete and andl plan for negotiations
is expected to be a disappointment for business groups hoping to maintain the classical ties. jobs ande a shift in operations from london, so in a nutshell, theresa may is to make it clear that a watered-down version of brexit is not acceptable. thanks, sophia. let's add a few more elements and see what's happening with the markets. juliette saly has all the details. juliette: i'm watching the pound, gaining back some of yesterday's losses, up .2% against the dollar, but still handle, the level it felt to yesterday following that sunday times report which essentially leaked a lot of what to reason may is likely to say later today. this is the first time in the last couple of days that we have seen the pound at this level since that october flash crash.
it has traded in a tight range and has been unable to push through a dollar 30. a lot of analysts saying that if we see more shockwaves from theresa may speech, you could see the pound get back to that 118 level we saw immediately following the october flash crash. having a look at the euro against the yen, we have seen some strength coming through in the euro's relationship with the yen. you are saying it stronger their against the dollar, up like .2%. in terms of asian markets, a wasd picture as shery indicating, strength from hong kong, reversing losses from yesterday, and that index back to where it was on friday, but look at the shanghai composite, down .5%. session of sixth
losses from chinese equity markets. yesterday, that big plunge in shenzhen, falling 6% before theecting, the longest losing streak since 2013, concerns about the quiddity there. of the in this part world, two hours from the opening of the emirates markets at 10:00 a.m. local time. a mixed picture, earnings from bd, not giving reason to be positive. downside pressure and saudi arabia, down almost 1.6%, the biggest drag on major world gauges. each of slightly lower from turkey's central bank draining cheap funding to support the currency. it has reduced that cheap source offered banks and attempt to
provide a floor at 3.807. let's check in with first word headlines from around the world. rishaad: the imf cutting its outlook for saudi arabia, expanding .4%, lower than the october production, which was 2%, the imf pointing to challenges in the kingdom. the reserve bank of india has raced limits on withdraws from atm and currency accounts, 10,000 rupees per day from machines, 100,000 from accounts. prime minister modi's cash tockdown may lead to's stennis measures and next month's budget. vietnam to allow greater ownership in banks. --an exclusive mentor view
interview with the prime minister, he said the new team will be introduced this year, indicating the government may sell out completely from its more troubled lenders. he is expecting even higher growth beyond this year. the economic growth of 6.7% for this year, and then and even higher growth rate for years to be able tot we will achieve an average growth rate of 7% for five years. of course we see some sentiment and tendencies of protectionism around the world, however, that is not the major trend. i believe the main the trend and tendency is still economic integration. investigations under way into the crash of a 747 cargo plane which killed 37 people. operated by istanbul based company flying from hong kong and was attempting to land.
the cause of the crash is not yet known. the company has had its aircraft in its fleet since december 2015. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. thanks. let's get you a preview of what is coming up. we are live" for the world economic forum. for the worldos economic forum. we will hear what xi jinping is about to say on climate change, but first, the u.k. likely to pull out of the eu single market. we will discuss the consequences and implications, up next. this is bloomberg. ♪
kong. a sons wants to boost its stake in listed units to protect them from takeovers. cementing control over the companies is said to be one of the incoming chairman's main priorities. natarajan chandrasekharan takes over next month after heading tata consultancy since 2009. the former chairman was ousted in a boardroom coup. yousef: we will be watching reliance when trading kicks off in mumbai after earnings beat estimates. third quarter profits, a nine-year high, jumping 10% to one point $2 billion thanks to higher petrochemical earnings and investment games. this comes as the country's richest man invest billions in 4g mobile services and retail. malaysia airlines ceo
says he sees an opportunity to break even in the fourth quarter this year. speaking exclusively to bloomberg, he says the worst is behind the airline and expects to post profit next year. key rolexplained the he sees china playing in the carrier's business plan. >> for us, there is massive opportunity in china. the government has targeted 150 million more people to have a passport. them, 30%t country to of the population of malaysia speaks chinese. i think we have a massive opportunity to get another 4 million or five main people in the next 5-6 years. yousef: theresa may said to her announced her country's plan for the exits from the european union later today. let's take a closer look at this story and what is ahead.
great to have you on the program. this speech, lots of anxiety in the market around what to expect , the prospect of a hard brexit keeping everyone on edge. could this be an negotiating tactic to establish a strong position for the next two years? >> i think it makes a lot of sense to not give away too much before formal brexit negotiations have been started, so it does make sense from that perspective, but also make sense from the point of view of doing justice to the brexit decision that was made last year. the u.k. population, the electorate there, wanted a clean break from the european union, and a lot of the discussion about hard and soft brexit has made the situation, or the fromrance, of an exit europe look a lot less clear.
the points it looks like theresa may will make regarding because some's and single market makes sense. yousef: the british pound has taken the brunt, becoming a political currency according to analysts we have spoken to. the state of play when it comes to analysts, showing you where analysts are at depending on the range, 1.1 5-1 point 17, and tells you which banks are making those calls's. you can switch it back to the first quarter and see how that is slightly lower. what is the trajectory here for the pound, as difficult as it is to make a call ahead of the speech? next three months will be difficult for the pound. we have a one point 18 forecast for sterling against the dollar. i think that reflects a sense that the pound can go lower. it may go lower still
historically. it has fallen in the last 30-40 years, the lowest point was 1.05 in 1986 due to an extraordinary situation due to oil prices. this is equally uncharted territory in terms of the negotiations and the event risks occurring. them threether for months, the grounds are there for the pound to recover. i don't think it will stay there for the whole of the year. as we go through the rest of the year, the realization will gone that the u.k. position is not bad as perceived, and the boe may raise interest rates towards the back end of the year, giving the pound lift as well. shery: great thing you mentioned the boe. we are now hearing from mark carney talking or being worried about post-brexit growth. take a listen to what he says about investment in the u.k. are in a situation right
now where for understandable reasons business investment has been dampened by uncertainty, not because, there is access to finance, but uncertainty about ultimately what our relationship will be with our largest trading partner, and that is weighing on business investment. conundrum much of a is the boe in given that we are seeing growth prospects falling, but inflation continuing to rise? >> the inflation aspect is something the bank will have to consider as the inflation rate approaches the 2% target, so i suspect that they will be in a situation where an interest rate the looks quite probable further you go into the rest of the year. growth outlook i think is less certain. been caringou have is upgrading its forecast for the u.k., the boe indicating
got it wrong over brexit, and the imf is indicating the same thing, so the negative growth outlook being pushed further down the road for the u.k. into 2018, having seen 2017 raised, i think that is still subject to uncertainty. i think it is a situation where organizations like the imf are underestimating the potential growth in the u.k. shery: we are also seeing euro area inflation gathering pace, the ecb policy decision this week. markets not expecting much. when do you expect them to act and what will they be focusing on? >> a lot of the inflation in the energyne is coming from and commodity price increases, overall, be transitory
so inflation going up a little bit at the moment because of those factors. whether they become more entrenched will depend on whether growth picks up consistently. the upside for growth in the euro zone is limited, lower than perhaps some of the other developed world economies, so the european position or the ecb's position will certainly be to build policy steady at this week's meeting him a but i imagine they will remain on hold with its qe program in tact through the rest of this year. yousef: briefly, how much is the risk from the fragile at tying banking system? >> that has been a factor rumbling on for a number of months. it is one other area of vulnerability within the european patchwork you are seeing, greece still stumbling through its reform program, no real solution provided there.
in terms of the italian banking system similarly, that focus will likely remain until there is a deal that i suspect the impact will be felt. yousef: always a pleasure to have you on "bloomberg markets: middle east". tim fox. vietnam's prime minister expect stronger growth in the coming years, but admits there are challenges. that exclusive interview, next. stay tuned for it. really worth it. this is bloomberg. ♪
early as this year. banks are among the biggest gainers on the benchmark index. bank of foreign trade for , 4.5 percent for vietnam joint stock commercial. while there are plans to open up the economy, the country still faces big challenges. , 4.5 percent for vietnam joint stock commercial. years of reform, the vietnamese government and vietnam has achieved a lot of accomplishments, however, we are still faced with many challenges , namely that our economy remains small in terms of scale, macroeconomic stability, restructuring of the economy, they are making slow progress, and that leads to low productivity, some issues with the income of the people and poverty, and all of these outstanding issues lay out the
coals and the mandates for the government in this term. that requires us to improve the restructuring of the economy and all sectors, reduce corruption strongft, and develop a force of officials who are able to better integrate the vietnamese economy into the thed and implement commitments vietnam has made and all the free trade agreements we have signed. haslinda: as you have indicated, it is a challenging environment. what are the prospects for vietnam this year and next year given the slowdown in the global economy and rising anti-globalization sentiment? >> the economic growth of 6.7% this year, and a higher growth rate for years to come, so that we would be able to achieve an average growth rate of 7% for
five years. sentimentse see some and tendencies of protectionism around the world, however, that is not the major trend. i believe the main tendency is still economic integration, especially in this region, and that also includes the united states, so that's why vietnam aims to capitalize on this tendency to ensure our economic expansion. haslinda: are you saying you are not concerned about the rising anti-globalization sentiment which has already derailed the tpp? now there are reasons why i am not too much concerned about protectionism, because we have a growing business community that is reaching one million enterprises in 2020. our people are very dynamic and love doing business, and we have more than 20,000 projects to be
implemented with total capital of $300 billion, and those are the important foundations for building an independent economy. its general term in definition is not against global trade for an independent economy. that was the announced prime minister talking to haslinda amin. stay tuned this is what is coming up on "bloomberg markets: middle east". saudi arabia's master plan to and more on oil renewable energy. we will take a look at the blueprint, coming up. this is bloomberg. ♪
this is a look at the first word headlines. theresa may set to announce the u.k. will pull out of the eu single market tuesday. the british prime minister will say she has no interest in a half in, half out approach. start shifting jobs from london to europe. urging nations to join the tpp as soon as possible. donald trump campaigned on opposition to the tpp. speaking in hanoi, shinzo
obvious that it should pave the way for partnerships. achieving tpp as the foundation going forward, i should like to strive towards high-quality and ambitious agreements such as rcep. japan would like to be the standard bearer for the free trade regime at all times. donald trump has met martin luther king jr. the third to discuss what king described as america's broken voting system. the son of the murdered civil rights leader said the talks on the holiday honoring his father focused on boosting voting rights. boycottof congress will the inauguration after criticism by donald trump of senator john lewis. ,oble buying clayton williams the merger creating the second-biggest operation by acreage in the southern delaware basin of the permian shale formation.
deal provideshe more than 4200 green locations with resources of more than 2 billion barrels of oil equivalent. this is bloomberg news. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. yousef: welcome back. you are watching bloomberg. i am yousef gamal el-din. shery and in hong kong. breaking news out of japan, the final industrial production number for the month of ,ovember, growing 1.5% o 4.6% on year. both of those figures are in line with estimates. exports are helping the manufacturing sector with the stronger for seven consecutive days. yousef: in this part of the
world, the top story a, saudi arabia says it will solicit bids and the next few weeks as part of a first phase of a renewable energy program. it is worth up to $50 billion. >> we are also driving within , a 15 year 2030 plan, also energy diversification, so bringing renewables and a big way. phase one of our renewables program is significant. yousef: for more on the plan, our executive editor for the middle east and africa, $50 billion, bold programs we don't hear everyday from the saudis. they said they want to diversify energy resources. right now, they are heavily dependent on oil, the biggest user of oil to generate energy and the world.
toy have said they want diversify the economy and want to diversify the sources of energy, solar, wind, and nuclear as well. we are talking big numbers. they have also said between now and 2023, they want to generate up to 10 gigawatts from renewable energy from these various sources. yousef: a huge amount being offered in terms of new projects. biggeres back into the themes of the 2030 vision and the ambitious programs the kingdom is pursuing to bring momentum back into this economy. >> absolutely. they are saying quite bluntly that the way they have been working on spending, the way they have been using their own oil, it is simply not sustainable and they have to change, so again, diversification of the economy, looking to shift the model away
from taxing oil revenue and look for a return on investments, and in terms of energy, they are looking at reducing consumption, proud of the fact that this year was the first year where energy consumption as not increased because they have cut subsidies. subsidiesoing to cut further and look at ways to reduce consumption and at the same time diversify the sources of energy. imf has slashed its 2017 gdp growth forecast for saudi arabia because of cuts in government spending, lower oil output, not great news for the kingdom, but not surprising. >> exactly. it is not surprising. it will take time. if you are shifting an economy from one way of doing business to a different way of doing business very rapidly, it will take time. i have just mentions the cut and subsidies that has impacted growth last year. it's not just low oil prices,
but that they are giving saudis less money to spend. they are going to continue cutting subsidies, putting a program ford and made it clear that subsidies will disappear over the next few years, however in the middle of 2017 when they did the budget, they did say they are going to start releasing cash to lower and middle income earners, looking at ways to normalize the payment of contractors am a so you will see some of that money flowing back into the saudi economy, and the imf itself critics and acceleration of growth in 2018. shery: thank you for joining us. our executive editor for the middle east and africa. continue the conversation, because with saudi arabia's government cutting spending, will the new commitment to spend 50 billion dollars on renewables be the shot in the arm for that saudi economy? of ae joined by the ceo
bank int dubai. there are concerns that although the imf says saudi arabia it will grow by .4% in 2017, that we could be headed for its first recession in 15 years given how much it is cutting when it comes to oil production. what is your take? >> again, what happened yesterday was that it was assessed that the cut in production will not be more than six months long. not only that, but the investment in renewables is probably good news for saudi arabia, because now they can really internalize the cost of co2 emissions into every single feel. -- every single fuel.
if you do internalize those costs, the fuel affected the most is cold, then oil and natural gas. that arabia has to clear it will produce 70% of its 30rgy with natural gas by 20 -- 2030. that is great news. that would be the one thing that would stabilize the price of oil at that sweet spot that saudi has said is $85 to $87 per barrel. yousef: what is key is to put this all in context, the imf downgrading its growth forecast for saudi arabia by quite a margin. extent is this a surprise for you? how do you expect other investors to react? this came through after market close in saudi arabia. of, is your call in terms
again, how much of a surprise that is? >> it is not a surprise. that's what the imf does, make forecasts, then take a year to explain why the forecasted not come through. not a surprise to the region, mexico and brazil, they have failed year on year, so as you said, if you put it into context, is this bad news? i think this is great news. i think saudi and opec did a marvelous move in cutting production. this cutting in the perceived economic growth is based because of that production, however, now that they can really lobby europe and the u.s. because they have made a commitment to become the greenest nation on earth, , andatural gas, 30% solar the nuclear. that is as green as you can get.
now they can go to the u.s. and say put your wallet where your mouth is, hello europe, now become green. let's see how it goes. the price of oil will reach $89 and they will be swimming in gold. talk about the saudi debt market, the kingdom planning to spend $15 billion this year or borrow as much on its international markets. how practical is that? >> they left the lot of money on the table the last time they went to sell bonds. they were oversubscribed by more than 300%, so i think they have nothing but blue skies ahead of them. much money as as they want. we can see with the floating of saudi aramco, 2018, i would say they can actually do it earlier if they wanted to, but they can just survive with government bonds.
shery: welcome back. you are watching bloomberg. i'm shery and in hong kong. yousef: i am yousef gamal el-din . turkey, the latest effort to support its battered currency. funding offered at the one week repurchase rate fell 41% on friday, the lowest amount available since an emergency rate hike in january 2014. lira around 3.8 to the u.s. dollar. sety: home prices in dubai
for a decline. the drop will be in line with the fallout of 2016. transactions fell 20% last year compared with 2015. haveential values in dubai been falling for three years as weak job growth and learning supply drive prices lower. yousef: a maritime border pact with saudi arabia has been dealt a blow by a court ruling. be two islands to transferred to the kingdom of saudi arabia remain egyptian territory. the effort came with a promise triggeringd, the egyptiannst presiden president. itsy: the imf has raised forecast for some of the world's
biggest economies. ramy inocencio has the details from new york. ramy: the imf has released its quarterly update, and the good news is that it is raising its 2017 growth forecast for the u.s., china, and the u.k. when it comes to the world's impendingonomy and an donald trump white house, caution is in the air. keeping its global forecast unchanged since october, 3.4% for 2017, 3 .6% for 2018, but we see a revision with the u.s. 17, rising to 2.5% in 2018. the chief economist explain the reasons and the risks. take a listen. the new u.s.ect
administration together with congress will bring in some tax reform, some lowering of tax rates. , andwill impart stimulus some of that will flow to the rest of the world. one risk we worry about is the stimulus will be so great that the fed will have to raise interest rates rapidly, leading to a very, very strong dollar. in the u.s., a hit to manufacturing, for emerging markets, raising borrowing costs for dollar-denominated debt. as for china, they kept 2018 unchanged, and for 2017, 6 .5%, up from 6.2% in october. there is expectation of government stimulus to keep the country stable ahead of the communist party leadership meeting this fall, where president xi jinping is expected to consolidate his power.
been at that china has a level of 163% that has triggered crises in other countries. the imf reversed a cutback and halfer thanks to a second of 2016. one point 4% from 1.7% for the u.k. the imf releases its next quarterly update and april with more clarification on the u.s. and the u.k. after 100 days in office and after theresa may speaks this tuesday, where she is expected to advocate for a hard and clean brexit. yousef: let's get more on some of those figures. our guest is still with us on the set. you were not impressed,
surprised rather, of the downgrade for saudi arabia, but were surprised for the u.k. forecast. i have this chart that shows the pound from a relative stre ngth perspective. mark would indicate that it is moving away from the oversold territory. where does this currency go from here? >> we predict that it will be a good year for the british pound. 2017, all the politics on brexit the economicsut of brexit will show that the u.k. is very much a part of the one of the biggest economies of europe and will continue to deal with europe. so that is our prediction. we think it will stabilize. i think the brexit hit or the
brexit result was priced in on june 20. brexit rice was added up in september, so right now, nowhere to go but up. nomura saying look for 1.118. is that something you subscribe to? 1.18 is right. when you start dealing with less talkingbps, you're about the market pricing in movement and were just talking about daytraders. shery: let's talk about china, 2017mf bumped their forecast, but warned about the credit-fueled recovery. on my bloomberg,
china's corporate and household debt as a percentage of gdp is continuing to rise. percentageing as a of gdp, the yellow bar, still high. how will the recent capital outflows we have seen in china and the yuan depreciation complicate matters for policymakers? >> i think that will continue to rise. transferring away from a purely exporting economy to now more of a spinning economy. , whichwill consume more is a great time for donald trump because now china will be importing more and exporting less. what will that mean within china? that means more debt. how they will deal with it, it will be hard obviously. ,he chinese have a pot of tools because it is a changing economy and going from a producing ,ation to a consuming nation
they have a lot of history, and i'm sure they will be doing ok, but it is great news i would say more for developing nations. that rebalancing and china continuing. thank you for joining us. coming up, president xi jinping taking the stage at davos and a few hours, why the chinese president is creating a buzz. this is bloomberg. ♪
now on the line from davos, a real opportunity in china. set the tone for the year and climate change specifically. >> it is a huge opportunity. is the first this time a sitting chinese president addresses davos, so something quite important in itself. he will go very big picture. just as trump, who is a climate change skeptic takes office, his counterpart in china coming out and setting up china as a leader in climate change, and that matters, because that is what everybody is talking about. we had a story yesterday saying that the biggest risk in the world is climate change, and a lot of the panels and talk and the core doors will be -- core doors will be about
opportunities there. as we quote the head of our new energy finance, there is a story today that is a politic angle behind this. back, chinapping coming into the void, investment opportunities come out reach around the world, so it is really trying to fill that space. yousef: a lot of the movers and shakers are in davos, and that means people from that arena immediately stand out o. i'm thinking donald trump. who else is standing out? >> in fairness to donald trump, he has a good excuse and not coming. i have found that a lot of the people shaping politics around the world for the past year weren't invited, so i'm thinking ,f marine le pen, nigel farage populist leaders who are not
necessarily in power but driving the agenda. they did not get a new invitation to come here. as matt campbell wrote in his story to set up our meeting, you wonder whether this is the world's most expensive feedback all talk, ort is whether it is part of the problem. of wef,, theyt have picked up on this. there will be panels on populism and whether we should be focusing on living standards and not absolute growth, but the key people who are absent, angela merkel also comes to mind in a category. to you.reat to talk joining us from davos. thank you. bloomberg television will have special coverage of the annual world economic forum in davos, continuing that coverage with panel barden, including a
that is coming up at 3:30 p.m. this afternoon in hong kong. on wednesday, a discussion of the crisis of the middle class, francine lacqua hosts christine lagarde and others. live andring you those in full on television and radio. of course we are counting down to the market open in the emirates and just over an hour. what should investors watch out for? yousef: we are not just looking at the emirates. saudi basic industries, the petrochemical behemoth currently with four buys, 12 holds, and one sell. watch out what is happening with cement, earnings overnight, q4 missed, a drop in sales and prices as well. bank as a financial you
shery:. update of the top stories. chinese stocks have fallen for six days with the shanghai composite with its longest losing streak since december 2013. tremors in the nation's financial markets, spurring selling. brokerage and real estate firms have led decline. theresa may says they will step out of the eu market. the british prime minister will say she has no interest in the approach.alf-out sources