tv Best Of Bloomberg Markets Middle East Bloomberg January 26, 2017 11:00pm-12:01am EST
>> it's noon here in hong kong. an update of the top stories. let's start things off with toshiba. reversing its losses. spin confirming plans to off its chip business, the board approved the move today. target date for that transaction, march 31, following shareholdersary meeting. plans on outside capital are still undecided at this point. holding ay will be p.m.ing, 4:30 p.m., tokyo consumer prices fell in december month.0th straight inflation was down 2/10 of 1%. a weaker yen. higher oil, of course. likely to drive up inflation
this year. worries remain over growth and consumer spending. now, the trump government has a 20% import tax in mexico to fund a wall along the u.s. border. the white house spokesperson, sean spicer, said that the tax easily pay for the wall but didn't explain how it might it wouldnsumers or how fulfill the president's pledge bill forexico flip the that wall.
>> kuwait is a latest country from the gcc looking to tap the global market. we hear from the finance market. 7, withd a tougher 201 passenger growth expected to be the slowest in a decade. we spoke to the ceo. saudi arabia said it would work with the trump administration to contain iran, and make sure that it sticks to the nuclear agreement struck under president obama. we spoke to the head of middle east research for credit suisse about trump's impact on saudi arabia and the rest of the middle east. >>'s trumpet going to deliver on fiscal reform -- is trump going to deliver on fiscal reform?
it seems like full steam ahead. >> re-think he will make good progress in some of the premises -- i think he will make good progress on some of the promises he has made,. the question is which will he make good on. deregulation, and others, these areas where we have high confidence. talking about foreign policy and trade, its art get g little more difficult. there is a lot of aggressive talk. we feel that what is more likely is for a more pragmatic outcome to come through. simply because, once you start engaging in trade restrictions, there is a big risk of retaliation. >> let's talk about saudi arabia. we just got their fiscal budget. saudi arabia is historically at how the saudi
government has consistently overspent every year between 2000 and 2015. 2016 is the only exception because of low oil prices. given that we are seeing this rebound in the price of oil, do you think we will see another time when saudi arabia goes back to old habits and puts reform on the back burner? guest: i think there is certainly scope for some level of overspending to come back. lester was the first year on record we saw that overspending disappear. -- in keeping has spending under control. if thatbe doubtful overspending would go back to that 24% average. >> we have had a batch of earnings across different sectors in saudi arabia.
this is the first opportunities for all of us to be able to gauge the health of saudi corporate after the austerity measures have begun to take affect. what is your call where they are at the moment. a lot of them missed expectations. >> you are seeing the impact of that austerity measure coming into force. there are much higher provisions that is not necessarily a huge surprise. traditionally, q4 has been the --iod where the saudi banks tends to be higher than expected anyway. thingd point out that one we have been keeping an eye on is the overall trend of earnings. we had a very solid quarter in terms of earnings.
certainly from quarter to quarter you might see some deviations. there is a fairly positive trend coming through. >> when can we see nonoil revenue in saudi arabia? >> that is the big question. how much success can the saudi government push through in growing the non-oil revenue base? the big push will come beyond 2018 when vat is targeted to be introduced. in the initial few years i think it will be a slower buildup in nonoil revenues. >> this tells us addressing story. this was a big theme when oil prices were lower. ins drop here is the lowest
60 months. that is your line in white and your line in blue is brent crude. stays stuck ine the $45 to $50 range, could there be downside pressure again? >> we have already seen bank rates come off a little bit on the back of liquidity injection. the currency bet was a was cheap for the market to make. now that oil price is managing to sustain a lot better than the market was anticipating you are seeing those bets fadeaway as well. expects itsports slowest growth in 2016. we hear from the ceo but what he
>> will correct the best of bloomberg markets middle east. the dubai airport predicted that passenger growth would be the slowest in a decade. this underscores the challenges facing the aviation industry in the region after aggressive extension. >> interesting start to 2017. a new administration in the united states. protectionist policies seem to be in full swing given the campaign rhetoric from donald trump. how can you sleep at night? >> we are not that worried the cause we know that open sky's policies, such as the one we operate in dubai are good for consumers. free marketas a globally consumers can vote with
their wallets and elect to choose the best to most convenient and best value way to complete their journeys and that is what opens guys are all about. protectionism flies in the face of that concept. there are plenty of examples. u.s.. canada is particularly will restrictive. tourism has increased, the economy has increased. the consumerod for and good for the country. >> you have united states threatening to pull out of trade agreements and you have brexit breaking away from the european trade union. are just disruptions to global trade flows and passenger flows. can that you are in dubai your straight in the crossfire host a >> there are so many markets. 200-odd cities connected directly between dubai and the rest of the world. if one or two markets are going through a few problems that is an issue but, we are so well
spread with so much of the world's population that there are plenty of markets. usually what happens is that the market finds a way to react to these conditions because consumers are looking for value, for good service and i believe we provide both of those. >> you are currently the world's number one airport for international passengers. will that be threatened in your world of protectionism? >> i don't think so. we're comfortably ahead of heathrow which is the number two world for international passengers and 7.5 million ahead and we are increasing that lead every month. if some .5 million through dubai international and the course of 2060 and i think that the lead is going to increase because our rate of growth is some in like four times the rate of growth of other major international
airports. >> where are all of these people coming from? >> they are coming from all of the different markets around the globe. it coming from india in the from europe, from the united states, south america, and asia. we have over 230 cities served direct from dubai international. the number of airlines bringing capacity into the airport is also increasing. air travel market is our markets so we are pretty well spread. we have competitive airlines and high-quality airlines from around the world. we're definitely a global player. >> your annual passenger numbers are just coming across to bloomberg. a gain of 7.2% from last year with 83.6 million travelers through the airport. those gainstill slowing in
saudi. why is th and what will you do to accelerate growth? >> the growth is very significant compared to other airports around the world. averageree times the rate of growth for our competitors. the growth is still very significant. we recorded 7.7 million passengers in december and six times during the course of 2016. passenger numbers reached over the 7 million mark which is a high water mark for us. another significant part is our movements are not growing quite so quickly. we are now, getting something like 224 four people -- 224 people for every flight which is up from the record. we're using that capacity more effectively and efficiently at
the same time. >> to put this in context, our viewers and clients can pull this up under bloomberg. on the top panel here, you can see those are the passenger figures as they come in every month. at the bottom, that chart is urine year. you can quite see how the growth is not as aggressive as it used to be. what is going to help you unlock that to make that next jump to get back to the china kinds of and vicious -- kinds of ambitious numbers you are keen on sticking with? >> mostly it will be improvement of facilities improvement of us and your flow and improvement in level of service. like 48% of our traffic could use an alternate have. we are investing very heavily not just in capacity expansion
but in the quality of service that our customers receive when they come through divine international but investments in airport expansion will be a major factor. by the end of q3, we will have extended the capacity at dubai world central from the 7 million passengers to something around the 26 million mark. there is major headroom for expansion which is before we get to stage two. >> can you give us a breakdown of that stent -- spending question mark a much will be debt and how much funded by bonds? natural not release a information. the government of dubai is responsible for raising debt. we are making sure that our income and costs ar very carefully controlled and monitored. we are boosting our commercial
income. in fact the majority of our income is from commercial sources. fees down inser order to encourage airline growth and we maximize the income from the concessions operated at the airport. >> we will see how the rest of the year plays out. that is paul griffith, ceo of dubai airports. >> we get you goldman sachs on where while prices are heading this year.
this year. >> when we look at compliance, our expectation into this production cut was you see significant compliance out of the gulf states. like saudi, uae, qatar. the regions such as libya and iraq that we expect to see supply increases. we are on target for 85% compliance. in terms oftion thinking about prices is how does the u.s. respond? last friday we saw an increase in oil rig counts at 29. this is likely to lead to more supply in the second half of 2017. look at the upside price risk we have a price target on wti of $57.50. further out we see prices moderating to 55. getkey is if prices cannot to the far above 50.
in thee case is 55 second half of this year and 55 and 2018. >> so 55 is enough to get that supply balance ok? >> that is the key issue. you listen to opec rhetoric. it's not about price trading ranges but the normalization of inventory. create backwardation in the curve. why is this important? going into the production cut announcement we had the opposite. back end 55 for risk capital. if opec can get that done to the curve by lower normalized inventory they benefit tremendously and it reinforces their market share strategy. the other reason is lower volatility in oil prices. they are issuing $70 billion of
debt and the potential for an ipo. lower volatility leads to higher valuation of assets. >> had you see this shale rebound continuing supply up tick? >> the base case is the quarter over quarter increase is likely to be 500,000 barrels per day. there is room for that due to stronger demand growth in some of the higher cost duion around the world. if you get nuers too much higher than that which you are likely to do it starts to become a problem. the key is in 55 to 60, the system can accommodate the type of supply increase we are seeking -- seeing out of the u.s.. >> let's get more context. it's great to have you back on the program. always in line with expectations. blue, by thead nor republican or democrat. first 48ald trump, the
hours have been hectic. are you surprised by the speed and the insistence on trying to stick with the promises from the campaign trail? >> i think it is a sign of weakness because he has taken a couple of executive orders trying to say i am consistent with what i announced during the campaign. because you still do not have a cabinet together. still don't have a clear idea of what policies will be like. we're entering a period of great policy uncertainty. there are a couple of items on the agenda that are worrisome in particular for this part of the world. if you look at the three items of the agenda you have a fiscal stimulus. you have a change in terms of monetary policy and deregulation. if you look at the fiscal stimulus, that is going to be mainly on defense spending and infrastructure.
a tightening of monetary policy. the anticipation is that you're entering a period of higher interest rates. higher bond yields, we have already seen that and it will mean a continued strong u.s. dollar. both of those have implications for our region and we can get into that. the main one is going to be on the question of energy. this is going to be an illustratn thatill -- and administration that will go for drill, baby, drill. >> what struck me about trump's inauguration speech was the america first theme. it reminds me of the old debate we used to have about whether or not the u.s. could go it alone. can the u.s. going alone when it comes to economic growth is well
as monetary policy? how much can you delve into economic nationalism for you get blowback from other nations. there are some he questions. >> we start to think about it in terms of trilemma. globalization, national sovereignty, or democratic politics. you have to choose two, you cannot have all of them. donald trump seems to be sing he is not only nationalistic and sayingic post-up is also i'm going to be engaged not internationally. globalization is the longer on the agenda. if donald chump pursues a highly protectionist policy the implications will be bad for the united states itself above all. if you take the country like mexico, mexico has 80% of its exports going to the united states.
but 40% are american content. what you are doing is hurting u.s. industry and manufacturing by raising the cost of imports, many of which come from the united states. the same is true for the technology sector. the answer is that the u.s. cannot go it alone. it can pursue a policy on the monetary side is likely to be pursued because of domestic reasons. >> one of the present -- one of the pervasive stories we talk about is the impact of the higher dollar on dollar pecks. do you see that changing anytime soon? problem they areacing is that they are trying to diversify. it means services like trade, tourism and the like. if you dollar starts appreciating at the same time you have inflation, your rate of exchange appreciates and that hurts are known oil sector. we're going into a period of
monetary tightening which a probably going to strengthen the dollar. which means you will get hit in terms of your nonoil sector. the question is, do you want to maintain the strong baked to the dollar at a time when you should be tried to revitalize your nonoil sector? i am an advocate of not completely de-pegging, but moving to a currency basket. >> next on the best of bloomberg markets: middle east, we hear from the kuwait finance minister on the country extra plans to hit up global bond markets for the first time. ♪
>> am here with an update of the top stories. google's parent company missing fourth quarter estimates after -- $33 billion in capital spending. up 46% from a year back. paypal says it is talking to byzon about letting shoppers music as part of its online giving system. they have 200 million users which makes it hard for any retailer to decline its services. they may be able to attract new partners after making the split with ebay.
bloomberg data shows that the thatt company of subaru is and company most exposed to tariffs from the u.s.. followoyota and nissan in that order. a quick look at shares right now. chinese soccer clubs pushed the global transfer market to a record $4.8 billion last year. the is they spend more than 450 million in foreign players up about 100 from 170 when you're back which makes china the fifth biggest spender in the global market. colin's toy four hours a day powered by more than 26 for journalists and analysts in more than 120 countries. time for a check of how our kids are doing across the region.
>> a little bit mixed. we had that weakness coming through from the u.s. equity markets last night. we are seeing some coming through on the nikkei by about 0.3%. very thin trading across the region in japan. we are seeing some solid was coming through from the export stocks. hong kong is pretty flat. we have the hong kong market coming in on the lunch break closing ahead of the lunar new year as most of those other markets it will be closed for that lunar new year break as well. australia has had a pretty good session. bellamy's getting a pretty good run. having a look at the gold price as well because it has been falling for a fourth consecutive session. we have seen old down by about 0.4 percent.
as well reversing the japanese yen which is a little bit weaker down by one third of 1% and we're also seeing a little bit of movement coming through in the oil price. china is closed but we will have an update on markets shortly. back to the best of bloomberg markets middle east. kuwait primes to cap international bond markets in 2017. the average -- the emirates finance minister outlined his plan for that sale including how much the country will be seeking. >> said to cap into the markets in kuwait and now we are soon going abroad. we are targeting 2017. it will definitely be a year will go to the international markets. figure to theed a amount that needs to be raised -- floated a figure to the and
at that needs to be race. if there is demand, will you consider a larger issue? >> i leave this to the advisors. they are giving us their recommendation on the best way to finance our deficit. that depends on the market's condition. >> levy hired advise you question mark >> oliver wyman. >> you need a bank as well? >> we will have that pretty so. >> who is in the running? >> a number of them. >> what is your outlook for oil prices? from january to january, we were 100% up. levelthink the $50-$60 would be acceptable for the coming period. coming six to 12 months.
>> do i interpret that to say you are satisfied with the results of the opec production cuts? >> i am satisfied. i was there when the deal was made. today, i was on the phone with my colleague. arriving to head the auditing committee which will be supervising the commitment. >> of the auditing is exceedingly important. there are a number of people who do not believe that the opec members and non-opec members will sign -- will honor their commitments. >> i have never seen the commitment. kuwait has stopped doing it. another amountd of countries outside of opec. i feel there is a commitment. >> if oil stays at its current level, brent is at about $55.
will your budget deficit widen or narrow and by how much >> it depends -- by how much? >> it depends on our expenditures. >> if you meet your target. >> the budget was 9.6 come up then when we closed the account, it will be less for the simple reason that we budgeted the barrel on 35. definitely our deficit is less. budget.ds how we in the coming budget how do we price the barrel? anywhere from $40 to $60 would be something we are looking into. , ifut for argument's stake
it stayed at 55 could does it average 55? 50%get>> we will definitely haa reduction in budget deficits. >> the s&p global rating says that the issuance should fall on higher u.s. interest rates and weaker growth prospects in key markets. let's get more from mohammed who globalhead of the s&p's finance. thate a colleague who says this is the fixed income uk,trument of tomorrow, suk and they always will be. every year, people told up expectations for issuance to pick up. why are we not seeing more growth in the market? guest: if you look at the performance of the market in 2016 to my first it was 6% up. totalsic scenario is a
issuance between 60 and 65 billion dollars. the reason why we're expecting -- it is much more complex to issue compared to the conventional bond. there is a complexity in the process. the time it takes leads some of the issuers to decide to go the conventional route rather than the cyclical route. >> are there any efforts to try to standardize the process? what is the chance that we get agreement on standardization? on islamic theory there is often disagreement. are we going to solve the problem in financial markets? efforts toe some reach a point where the market would really have legal documentation.
if you look at some of the issues in the past, the legal documentation is very similar. just replace the names of africa by luxembourg. summary on the interpretation side, there are efforts to move forward. year, behind, late last moving the industry. to the real audit. that could help the industry going forward. we know that some things are fickle to succeed. still, with the market is largeing is to have programs to on the the issuer. to allow the issuer to approach
the market at the right time. >> we are seeing that the fed expected to hike rates. we still have the ecb and the boj remaining dovish. could we see liquidity leaking into the industry? >> absolutely. are based case scenario in terms of interest rate decrease in the u.s. is 50 basis point decrease in 2017. that would definitely the to lower liquidity in the global capital market. we think some leakages will go to emerging markets and will go to the sukuk market. example, theyou an sukuk issued by pakistan last year was subscribed at about 40% by european ambassadors. >> mohammed, talk about what route gulf countries will take. if you don't expect the sukuk
industry to see significant revival, will this be a combination of bond issuance plus islamic finance? >> think we estimate the financing needs for the countries at around $275 billion for the next three years. our best case scenario is around 50% of this denver would be financed through market instruments and because of the complexity of the sukuk issuance most probably that would benefit primarily the bond market. increase inaw an the volume of bomb issuance by almost 100% while we saw a drop in the volume of sukuk issuance by 6%. ceooming up, we asked the of this hotel management about his ambitious plans to double
>> welcome back to the best of bloomberg markets, middle east. rotonda is originally grown -- is a regionally grown hotel group who has found to double their assets by 2020. we spoke with the president and ceo. >> our plan for 2020 is that we will operate 100 hotels. where it's going to be happening will be places like saudi arabia where there are hotels. ander reopened three hotels this we will open another four hotels, taking our rooms to about 2000. we signed four new hotels to
open last year. saudi arabia is a lot of bandwidth. >> we had a ceo of dubai airports. against global free trade. and tourists as well. how concerned are you, how much of a problem is this for your plan? uae travel is always stronger than always will be. i feel that we have a lot more to do. a lot more to open and a lot of new markets to attack. you're talking to me about iran. it is a market everyone is heading to at the moment. we have four hotels being built
today. we signed two new hotels last year. that is a market that the likes of the multinationals, and regional hotel chains are tried to get their hands on. there are a lot of people coming from iran into the uae. >> despite these expansion plans, we are seeing the key flagging of properties last year. trend that concerns you? how much of an impact will this have on your business? hoteling the cycle of a management company's life, there will be times when you signed great hotels, and times when you let go of great hotels. we had a long period of time running those hotels. the owners decided they wanted their own management company.
is it because they wanted to save on costs? i'm not sure. it is to be expected. with the market and the region being affected by a major dip. a --is the third yea rin third year in a row where we saw rev par dipping. is it a bad thing for the company? .r any company losing those hotels was set for us but we are moving on with another 5000 hotel rooms only between the eu and the uae. >> with this rebound and oil prices, are receiving any change ? >> so far no. starts crossed that we seeing the prices get higher. we are starting to see companies readapt their thought process in
terms of how they are booking and what they are spending on hotels. it has developed a bit of another angle for us for business. when the price of oil does get better we will benefit from that too. >> turkey's central bank has launched a series of extraordinary measures to support the liraaf ards speaking in dallas. >> so excited about turkey. turkey's deputy prime minister told francine lacqua what action the government is taking to shore up the currency. >> it is a cause for concern. even though we do not have a level target, clearly we are not indifferent to what is happening. we are taking measures to see if we could stabilize. clearly the regional volatility has been excessive.
we're watching very closely. >> how much of an impact does it have on the turkish corporate sector. position?x >> corporate ethics position is sizable. the short-term component meeting up to one year maturity is only $1.5 billion. much of the corporate to have fx debt happen to be exporters and haven't asked ethics strategy. we are looking at the corporate portion. we're thinking about macro prevention measures going forward. consumerse band borrowing from fx and that was a great decision. india has done something along those lines so we're looking at level best practices some a we
>> kuwaiti stocks are on a world rally. the index has risen for 13 straight days and is up about 15% since the start of this year. for more on this rally and how long it might go on for let's go to tracy alloway. what is driving these gains? >> if someone had asked me what the best-performing stock market this year was i would not have necessarily thought about the kuwait stock exchange index and yet here we are. seem to have had this perfect
confluence of various factors and events that have combined to take a positive environment for kuwaiti assets. one of those things is rising oil prices which is more .enerally the case for the gulf if you look at what saudi arabia and the uae are doing to make their markets more attractive, reducing trading costs, standardizing resettlement time, you could nationally -- naturally think that kuwait will begin to do a similar thing this year. promising to buy domestic equities and you have pakistan. they were one of the best-performing stock exchanges of last year. it will boost itself to emerging market status this year which leaves a big hole in frontier markets that kuwait could ostensibly phil. a laundry list of things pushing up kuwaiti equities right now. >> i am looking at some of these
valuations. it is reminiscent of what we saw in the moroccan stock market. sitting collective euphoria and people start bailing when that valuations get stretched. which ones stand out? saying thatthe markets can stay rational for quite some time. if you look at some of the technical indicators around the kuwaiti stocks there is another record that it holds right now choose the exchange in the world with the highest percentage of overvalued stocks based on something called the relative strength indicator. some thing like 70% of the 182 stocks in the index are flashing the overbought symbol. volumes are main pretty healthy. volumes in kuwait are quite strong at a time when a lot of
other gulf markets have been struggling to boost activity. we've seen some money managers, one in abu dhabi saying he thinks that the index is a further 20% to go. it seems like this will be an interesting story to watch in the coming months. >> let's widen out the conversation. reported aarket bank 1% rise. the first quarter profit that met analyst forecasts. our acquisitions on the cards or can investors expect to be rewarded with a boost in dividends? us onyou for joining bloomberg markets, middle east. before we get to the balance sheet specifics cannot let me ask you about the liquidity situation. we spoke to the governor who said he was comfortable with the easing interest rate --
interbank rates. what happens to the massive shift in government spending and for the affect it kingdom? >> thank you for having me in your program will stop regarding liquidity. already the government decided to make all payments for the last two months which is -- having good liquidity in the markets. billiond more than 100 public the government with continue spending for their that isand definitely one key item for helping the liquidity in the markets. >> that is it for this best of bloomberg markets middle east. we will be bringing you some big interviews including the ceos of the transport and logistics company and dubai investments.
>> at 1:00 p.m. here in hong kong. toshiba shares are reversing earlier losses after the company said it spinning off its chip business. is march 31, following an extraordinary shareholders meeting. it says plans are still undecided at the moment. the company will hold a press conference at about 2.5 hours time. hastrump administration touted a 20% import tax to pay for the wall, but stop short of explaining how it