tv Bloomberg Markets Middle East Bloomberg January 25, 2017 11:00pm-12:01am EST
♪ >> the rally rolls on with asian markets climbing to an 18 month high. earlier in the dow closed above 20,000 for the first time ever. president trump's on inflation -- the japanese 40 year yield surgeon. -- yield surgin. kuwait sees the market back in balance in the coming market -- in the coming months. chief crude ringing the alarm. a record low profit.
it is 8:00 a.m. across the emirates. is just goneng, it midday. welcome to "bloomberg markets: middle east." sinceg the highest levels july 2015. in rising, japanese markets gaining on the back of what happened in the u.s. overnight. >> that is what is right. the big news yesterday is that a 121-year-old index with questionable ratings made it over round number. do we care? take a look at discharge. i prepared for you. it shows the dow jones industrial in white versus the market cap waiting in blue.
weighted00 index is according to caps. the dow jones is a bit different. on a market cap waiting basis, we are not close to 20,000. how much should investors be reading into this? it is psychologically important perhaps, but does it mean anything for the market? despite 20,000 record in the dow, we are seeing the dollar continuing to fall for a second session, despite the fact that treasury yields continue to rise. right now they breached the 2.5% level. take a look at the chart. we are seeing the positive correlation with u.s. treasury yields and the dollar, which touched the highest levels november, which has climbed to about 50%. high-yielding commodity
currencies in asia like the aussie and kiwi dollars are gaining ground. of course we have the opening of the markets in the middle east in recent -- middle east very soon. take us through what we should expect. >> here in the middle east we have a mixed picture in terms of trading. we have the dubai stock index down over 1%. abu dhabi stocks were probably the biggest losers, down 5.5%. then if we move onto currencies, you were just mentioning the u.s. dollar, of a post important importance to those in the region. the dollar not gaining traction, trades come trump
back. >> the dollar losing ground, the japanese yen strengthening. let's look at what this means for equity markets. we have details on that. >> it is on the back of that dow, isn't it? regional stocks higher for a second consecutive session. the asian pacific index is holding at levels we have not seen since july 2015 strong movements from japanese equities, led by mitsubishi on the broader topix index, which is also higher for a second consecutive session. hong kong is seen good financial news from retailers ahead of the lunar new year. noting, stocks in thailand up for a fifth consecutive session. a rally in emerging markets
getting a good leg up on the back of that dollar weakness, which has given a strong boost to em currencies and markets. australia and india closed for public holiday today. 1%,ghai index of 1/10 of even with reports that china is in to audit banks to curb the next quarter. 1%, down by 1/10 of $200,000 per ounce. in the contracts in the u.s., it is gaining ground by 9/10 of 1%. study,n the 10 year nude 2.52%. if we have a look at the aussie yield, contraction coming through, 2.73%. certainly a strong rally coming through into equities money out of the bond market.
>> we are going to check in on the first word headlines around the world. haad: the pboc ordered chinese banks to control lending afternoon loans surged in january. they're banks lent increase mortgage lending or the rates of outstanding mortgages, at least relative to the fourth quarter. the pboc may punish noncompliant lenders by making them pay more for composite measurements. a rentrak for a record low profit, china's biggest listed oil and gas producer. onm planning this slump drastically low prices for domestic oil and gas. prices are set to rise and have promised crosscutting. that is helping shares in the hong kong session.
egyptian ministers saying stocks will not deter investors, telling bloomberg the rate will be low enough to ensure demand while full equities remain strong. egypt attracting investment to help a recovering economy. the government is committed to a 30 -- three-year delay on capital gains tax. postponing another three years according to the supreme council for investment. >> that is the cg team. >> yes exactly. we have to take it to the parliament as well. the project is to postpone it for three years. we have all options on how we do it. profits, reaching a fresh altitude. filling seen profits climbing to a record. -- boeing seen profits climbing
to a record on the back of this 737uee jet headed workforce. boeing says it has three years of dream liner orders. it was named the best performer when it games to be the dow jones industrial. an ever important 20,000. 120 countries covered by 2600 journalists, this is bloomberg. ♪ >> mexico's president says his country will not be paying for any portable after donald trump pushed ahead with his campaign pledge, signing in order to direct federal funds to the project and curtail immigration to what he calls "terror prone countries." we have the details from new york. when donald trump said he
would build a wall on the us-mexico border, a a lot of people rolled their eyes. now he has taken the first step toward that reality. while visiting the department of public security, he finding an executive order for the 2000 --e project, including 500 including 5000 more border agents and immigration and customs officials. a nation without borders is not a nation. beginning today, the u.s. gets back control of its borders, gets back orders. in an interview with abc news says the wall would begin "in months" and that mexico would reimburse the u.s. mexican president nieto stressed that mexico will not. we have seen stocks moving in the building materials sector. cement makers of it record share
prices. -- both hit record share prices. aside from that, mr. trump signed another executive order to stop the flow of refugees into the country. it focused on countries linked to terror in the middle east and africa, including syria, yemen, libya, somalia, iraq, and iran. if enacted, they would go through extreme vetting, a 30 sixwaiting perio sixd, and months stop for all refugee commission. it would be cut in half from 110,000 now, to 50,000 people each year. mr. trump focusing on national security, pushing ahead controversially on his campaign promises. reinstating the global economy and global trade deals -- there is a link for investors. that is donald trump.
kathleen hays is here. bond markets around the world seems to be sending a signal. are they on the right track? >> this is a bet we have seen for a while. a a lot of ebbs and flows. a a lot of bond markets are buying the story that donald trump will stimulate the global economies. tax cuts and spending hikes is what we are looking at.i want to look at the bloomberg chart to show how these yields are rising from germany to japan to the u.s. the white line is the japanese 30 year. the blue line is the german 30 year bond, above 1%. today,e bit lower yielding higher price. is that people are
still wondering and watching every hotline on donald trump. yields said further biggest monthly jump since october 2010. they are trying to pull back on some of the leverage in the chinese economy. you don't want consumers to lend as much. at the same time, they have to provide liquidity for the new lunar new year. goldman sachs saying yesterday they think china's move is toward a heightening bias, which has had another hit on the chinese bond market. host: you mentioned headlines. we have japan releasing its december data for cp tomorrowi. the tradesupport also? kathleen: i don't think so. you will understand why when you look at discharge -- at the start, japanese inflation year-over-year.
this is still taking this into account. this chart is a downward trend in inflation, no matter how much the bank of japan said around. not much relief tomorrow. up 1.4%.ine is not the right signal. driving theon is japanese inflation to a standstill, if not at least stagnation. host: theresa may meeting donald trump. what do we expect out of that? kathleen: theresa may hopes for a trade deal. she needs some exports going as she leaves the european union. like, she wants to put her nation first. >> we will be looking for a uk-u.s. trade deal that improves trade between the countries, that brings prosperity that will ensure we can bring jobs to this country as well. i can ensure the gentleman u we
will put u.k. values first. host: it seems that the trump team will be helping her. she will be the first foreign leader to meet donald trump at the white house friday. today she is talking to republican lawmakers in philadelphia about bringing the two nations together ahead. a a lot of handholding rebuilding ties. host: thanks for the lead on donald trump and theresa may, among other stories. we look at the global market. issuance fell short of expectations last year. will 2017 be any different? s&p global ratings joins us next. >> first, china's crackdown on new loans as it curves excess leverage. -- curbs excess leverage. this is bloomberg.
>> back to "bloomberg markets: middle east." live on bloomberg television and radio. let's get you a quick check of the latest business/headlines. one of china's units has outbid for a plotevelopers of government land in and old airport area. hna won with a bit of 709 million u.s. dollars. >> profit of the world's biggest casino operator missed activists -- missed estimates. $.62h-quarter profit fell
per share, as revenue rose 7% to over $3 billion. >> they say the casinos missed because "lucky" gamblers kept winning, causing up to 20 million and lost profits. after hoursslipped after warming sales of profit for the current period may miss estimates. revenue could be low as $5.5 billion, missing the analyst average projection of $5.9 billion. qualcomm on the page to defend its most profitable unit from regulatory and legal challenges around the world. set-top 20,000 for the first time. asian markets continuing the rally. our next guest is puzzled why equities outside the u.s. are gaining. let's bring in the asian head of financial markets research at --
bank. did you wake up this morning going, wow, 20,000, we saw this coming. it was just a matter of when? >> we had to get to the forecast eventually. i have been teasing my daily note readers for ages. what does it mean? nothing really. it is a psychologically round number, but it is not particularly significant. -- isse it strange that it strange that the dollar is losing ground? we are seeing the dollar reversing on this divergence with yields. michael: to be honest, not a lot of sense at the moment. treasuries going up, equities going up and the dollar going down does not make a lot of sense. not to me anyway. the good news about the
dollar going down is that any theory, it should help ease pressure on emerging market economies. do you see that as a benefit? michael: no, not really. we have two scenarios. is serious about being protectionist in trade against everyone else, we will get either a strong dollar, which will be painful for a lot of countries around the world. or it will be done through a weak dollar to make sure that the u.s. is more competitive. that will still be bad for a lot of countries around the world. i don't understand how we go past 20,000 on the dell, and everyone puts on their caps. the americans should, but everyone else shouldn't be. host: i don't have the dow base ball cap.
i guess this is all down to animal spirits. the looming trend for asian is trumpet and -- trump and trade. how is the tpp going to play out in emerging equities? michael: in the long run, it will be hugely negative. the u.s. is at the forefront of the global economy and financial markets. as i just alluded to, if we see the u.s. take a protectionist stance, which was completely normal since world war ii and hasn't been since. if we do, it will disrupt everything we thing as normal in terms of clinical training -- everything we think of as normal in terms of global trading. many companies are in the green today when trump is talking about the law with mexico. a very different reality. >> that thought.
host: welcome back. you are watching bloomberg. >> let's continue our discussion with michael every. i have to float this idea with you. we are seeing the korean yuan gaining highest levels since seven weeks in the dollar. we had an analyst saying that the korean yuan could be attempted to depreciate their currency just before gaining just -to appreciate their
currency--before talking with donald trump. i can understand that doing that now to avoid depreciating it going forward. it will be tough for businesses to deal with this on a day-to-day business. tothe near-term slot is depreciate to compensate for a potential terrorists area. tariff barrier. i don't think any asian exporter is in a strong position to the u.s. they are the buyer. the countrythe country with thes the one that has ammunition when it comes to these talks. host: you are a huge yuan bear as well. we are seeing profit growth and industrial firms in china rising at the slowest pace in a year.
that is as prices surge. michael: demand in china at the up.nt is picking it is being driven by borrowing from the government using various forms of tactics. of course that will work if you throw more credit into the season. unfortunately, it is not being borrowed. everything is reversed and moreso. enjoy it while it lasts. it won't last. host: we can debate the reality of china' economys for a long time. if you assume that china has to keepomestic levers the economy going at a reasonable rate, it seems like all the risks are on the external side. things like the federal reserve raising rates. michael: the ones that you just
flecked are huge external risks. trump is another one too. that plays into the domestic issue. if we see a negative external environment, china will want to stimulate the domestic economy even more. we are on outright bubble territory in many areas. they will have to blow that bubble even bigger to compensate for a negative external environment. that is very worrying. the downside is obvious. got: we can't let you talking about china without digging deeper into the bubbles. which ones do you see as potentially the most worrisome for 2017? michael: the credit picture overall. the housing budget -- housing bubble is enormous. the government will not allow a housing crash one way or another. you can't keep growing credit
>> these are the first word headlines from around the world. china described as "an anchor of stability with a consistent reform towards free-trade." china has been billing itself as a champion of globalism as donald trump scraps the transpacific partnership and says he will renegotiate nafta. since july.ing the up, but not
enough to make up for sales of mobile games. oldest stocks exchange was 51 times oversubscribed for his initial public offering. singapore exchange and george soros among the sellers of shares. india has drafted ipo shares attempted to top $1.1 billion, the biggest in six years for india. we have news each day every day, 2600 journalists working in 120 countries. we have the tip of the world covered. >> thanks so much rish. egypt's finance minister says the stand on stocks will be low enough to ensure demand for equities remains strong.
riadyh, walk us through what the minister might be trying to achieve in talking down that duty. >> they need to stand because they need to reduce the deficit. at the same time, they need foreign investors to come in. we had 7.5% highest since 2001. to talk to scare away national investors, who are trying hard to track. it has risen since the devaluation last year. host: tell us a bit about the bond sale from egypt.
what was the reaction from investors? ministeri said, the told us they are quite happy. i believe he calls it the sweet spot. it is true that the coupon they are handing out is the highest in quite a while, but it is worth staying in -- worth stating that a year ago, the yield on a previous bond was 8.5%. higher now. from their perspective, they may not be doing too badly. what we have heard from analysts and investors is that it was quite generously priced. they wanted to make sure that it will attract investors. the minister also said this is the first of many. people keep coming to the market. host: it has only been a couple months since egypt floated its currency. give us the impact and its
effect on the economy so far. riad: it depends who you ask. for the common egyptian, it has been difficult, because inflation has shot up. 25% now. keith they managed -- if they manage to keep that under control, probably the base effect after a year or so should start working its way through the economy. , the stockr hand market shows that foreign investors seem to be coming back into the market. egypt as a tourist destination hit byism is so badly terrorism. now it has been quiet more recently. the russians have indicated they may come back. egypt is cheap. that might help.
host: executive editor for the middle east and africa. thank you so much. in this talk about oil part of the world. china's biggest listed oil and gas producer says net income in 2015 fell as much as 80%. this could central china on a record low -- petro china on a record low profit. taking a hit on oil and gas prices? china is going to see profits tumble this year. 20% year onstl year. they have this refining sector which will get a boost in oil holes. they also spun off pipelines and got a chunk of cash at the end of the year, which helped them to stabilize. they have a big drop in oil, but you get a bit of a buffer.
even at an 80% drop, some analysts have said that is better than what they even expected. host: we know that fellow state owned energy giant will probably benefit from more refining. it is one of the biggest fuel makers. how will the list of china's big 3 do? hand, they are completely exposed to oil prices. as oil falls, they will have to go with it. half of the analysts we have heard from this moment expected them to be posting those. -- posting a loss. they are cutting costs, but they are still exposed to prices. they had a list they wrote down
in canada. first fall in output. they are making less while producing less. they are much more exposed to this drop in prices. host: thank you so much. we will stick with energy and oil. kuwait's oil minister expects global crude markets to move into balance as oil producers comply with supply restrictions. however middle east -- o middle eastur energy reporter is on now. it seems like we ask this question every time you are on -- arkham producers complain -- are producers complying with the opec agreement? >> they are about 80% of the way there. 5 million barrels out of the 8 million they need to cut. the minister in kuwait says they
will get there. the countries that we thought i'd be difficult,, seems to be getting -- that we thought would be difficult, namely iraq, seemed to be getting there. this is also purport. test this is self reporting. we need the official numbers. arabia, algeria, and kuwait have already exceeded. there is a lot of momentum going in. host: we are hearing different timelines the oil market rebalancing, some saying it will happen by the end of the summer. when can we realistically expect that? sam: there is a lot at play here. what they mean by rebalancing can be difficult to know. the qb ministers has it should be rebalanced in the early part of the year. saudi minister says it
should be drawn to normal levels by the end of the year. we need to keep an eye on the u.s., a big part of the picture. president trump, a lot will be changing, new pipelines, the looser regulations on and it energy companies. we could see production in the u.s. we need to see whether or not these industries come down as many opec members expect them to. host: we were ready to show that eia data, growing the most sensitive. thank you so much for joining us. remainbal ratings subdued in 2017. find out why with the agency's global head of islamic finance up next. this is bloomberg. ♪
host: welcome back. s&p global ratings says sukuk issuance should fall on higher interest rates and weaker growth prospects in key markets. let's get more from s&p's global head of islamic finance. mohammed, i have a colleague who theped that sukuks are fixed income instrument of tomorrow, and they always will be. it seems like every year we talk about why issuance has not built up, people building of expectations. why aren't we seeing more growth in the market? >> thank you for inviting me. target market performance in 2016, first it was up compared to 2015. best case scenario for 2017 is total issuance between 60 and
$65 billion. market seen in the bond for example, it is much better compared to the conventional bond. it is the complexity of the process and time it takes to issue a sukuk leads to some of the issuers go to the conventional route. host: how the complexity point, what?ere any efforts of to standardize the process -- on the complexity point, are there any efforts afoot o standardize the process? there has been islamic is agreement for thousands of years. we have standardized legal documentation. standardization covers two things.
if you look at issues in the past, for example comparing the sukuk issued by luxembourg and south africa, the documentation would be very similar. on the syria interpretation side, there are efforts to move forward with mobilization. year moving the toustry from sharia approval extended sharia. that could help the industry moving forward. there are too many stakeholders and emerging views and differences in interpretation. still, what the market is proposing in between is to have large programs of sukuk-- host: shelf programs essentially. mohammed: exactly. host: we are seeing that the fed
expected to hike rates. that will squeeze liquidity. we still have ecb and boj remaining dove-ish. could that leak into the sukuk industry? mohammed: absolutely. best case scenario in terms of an interest rate increase in the u.s. is a 50 point basis increase in 2017. that would lead to lower liquidity.in the capital markets . we think some leakage from the ecb welcome to emerging markets and to sukuk, especially with a good credit story to tell. the sukuk issued by pakistan last year was subscribed around 40% by european investors. what let's talk about crude gulf countries will take. if you don't expect the sukuk
industry to see a significant revival, will this be a combination of conventional bond issuance, plus islamic finance? i think we underestimate the financing needs of the gcc countries, $5 billion for the next three years. the worst-case scenario is that 50% of this number would be financed through market insurance, the response in sukuk . because of the complicity of sukuk issuance, that would benefit primarily the bond market. example, we saw an increase of the volume of bond issuance in gcc that almost 100%, while we saw a drop in shortage gcc. host: thank you so much for coming in. the global head of islamic
finance at s&p global ratings. the latest check of the business flash headlines. bets on china's new silk road forcing pakistani shippers to triple its capacity by 2025. it will by at least 22 vessels, adding to its nine pronged fleet. million toaside $600 fund current prices. china has promised pakistan billions of dollars in loans investment. >> the date for turkey's controversial referendum may be announced this week. the vote would controversy -- would concentrate more power in the presidency, allowing president erogan to dissolve parliament. a decided date must be before november 20. he was will be released after the order is signed by the president. >> abu dhabi in india signed new agreement on strategic cooperation, defense, and cyber
security. the crown prince is on a three-day visit, including talks with prime minister modi. that you want to deepen ties, working on transport, agriculture, trade. indians are the largest expat worker groups in the emirates. qantas ceo says the push into china will continue enjoying the field by chinese tourists. benefitshere are big from the open skies deal between the two nations. gingerly in how we remold the international business and making sure we don't overcook it. that is what we have been doing. this will be an exciting year. we don't only have beijing started. withe taking dreamliners
the first expansion link between australia and europe. qantas international is doing a lot of growth as its cost basis prices, its profitability is right. >> how specifically will you compete with the chinese airlines like air china? how will you take them on? >> we have a great partnership with china. they are working with us. we wouldn't have gotten a slot in beijing. they are willing participants. we are one of the top airline brands in the world. we are seen as trustworthy, the safest airline on the globe. we know our business product and investment is one of the best in the world. china has at, air $50 lead in airfare. qantas kept demand premium, because people are willing to
pay for the services qantas offers. >> the open skies agreement signed between australia and china, will that do for yields? >> it has allowed this market to grow even further. capacity does have an impact on yields. we are calling airfare to come down genetically. -- down dramatically. we have efficiency through our business. with this open skies agreement with china, a lot of chinese traffic make domestic trips. trips.three domestic we get that huge benefit that have asinese travelers they move about the country. >> how concerned are you about the weakening yuan? we have seen these large tourist
numbers, but the economy is slowing. that will impact the pockets of chinese consumers. >> we talked about the scale of large numbers. defend the chinese president says it could grow to 400 million over the next decade if australia keeps its 1%. the total to the market is 7 million. we have huge growth occurring. there is a lot of pressure on the instrument in dollar -- on the australian dollar. it is much the case that the government will want to see a weaker dollar there we have our currency moving, which is making australia more attractive compared to some other competitors in the region. >> that was qantas ceo speaking to tom mckenzie. coming up, president trump's
>> welcome back. the rift between the trumbull white house and news organizations grow is the religious presidential order -- the latest presidential order. how are those in the middle east reading these presidential tactics? it has only been a week that trump has been in office, and already we have seen his combative attitude to the press solidify. that is not something that is necessarily unfamiliar to people in the middle east. how are media here in the gulf reacting to president trump?
>> it has been an amazing week. there are two thoughts in terms of president trump. in gulf media is very much terms of his nuven ministration and what it means for iran. the rest of the region is mixed around his stance on muslim immigration, and what is stance on israel means for the new administration. host: social media played a historic role during the arab spring. this is a social media region. w welcomee interactions with politicians. i think the way that he communicates directly with the public is something we are used to from our leadership here, not something that we have from politicians and the u.s.,
especially in how he deals with mainstream media. we are fascinated in how he engages with the public. host: the other theme that has emerged in his use of social media is its impact on markets. trump tweets something about a particular business, and the stock tends to react. how are communications professionals feeling that challenge? >> i think we will have a trump crisis book. he puts things down in 140 characters, which is difficult to defend against. these agenda is pro-u.s. how do you counter that? you can basically retell old stories, or you can step back and look at your values, this is what we are about as a company, and this is what we stand for. either we are with or against the administration. this is the us, and you have to
either like it or loathe it. it will be interesting on the pr side how they deal with president trump. host: quickly, how are middle eastern policy makers viewing trump's approach? alex: it will be very much wait and see. there are a lot of things happening in the first weekend. things are moving quickly in the u.s. there will be a lot of lobbying in washington on behalf of the gulf countries. for what it means in terms of the stance on israel and immigration, it will be interesting to watch. i think we will have our eyes peeled on the situation. >> thank you so much, chairman of the middle east affairs association coming to terms with trump. that is it for this edition of "bloomberg markets: middle east ."
♪ kong.0 p.m. here in hong sources tell bloomberg that pboc has ordered chinese banks to strictly control lending after new loans surged in january. they have been told not to increase new mortgages of outstanding loans. one source says pboc may punish noncompliance lenders by hiking insurance cost. a stake in part of its recovery program. it is planning to sell 20-30% to multiple investors. not including a partner western digital. toshiba may withdraw from