tv Bloomberg Markets Middle East Bloomberg June 18, 2017 12:00am-1:01am EDT
♪ yousef: he clears his desk to mediate in the gulf. the side washington wants to deescalate the attention. general electric is on track for new openings in the middle east after signing a big deal in egypt. kareem hells new investors. they now have a billion dollars in funding. they talk exclusively with bloomberg. 8:00 a.m. in dubai, 5:00
a.m. in london. this is "bloomberg markets: middle east." for a week it has been local markets. especially if you take into consideration it was a week when we had the interest rates moved by the federal reserve. they hiked on that front. we had an attack on congressional representatives in washington. political uncertainty that continues through the markets. and the market moving for whole foods by amazon. if i told you that this would -- this is how the u.s. would close at the end of the week, you would of called me crazy. theselloff did not prevent s&p 500 to end the week unchanged. i will get you a quick run through of the markets. the nasdaq, 100, 2 week drop. that is the worst slide since november. netflix and microsoft, you can cbs and p 500 early about the flat line. we did have some interesting moves on some of the bigger companies.
let's cross over to this part of the world, in terms of key asset classes and focus on brent crude. $47.37, that was late trade on friday. rent down 2% for the week. -- brent down 2% for the week. expande continuing to those oil rigs up to 747. ounce. a $56,000 an up all trade at 12783, fifth of 1%. we have wrecks it negotiations just around the corner. ongoing political anxiety with the uncertainty of the credibility of the new government. are saying it is unlikely the sterling will be able to record financial gains. is at 217. in terms of the polls, the rhythm for this part of the world, we have pulled up the s&p
index for the gulf cooperation council. it's get up bit of a different feel about what has been happening. this is your mrr, the best-performing and worst-performing companies. i will flip this across to a five-day horizon. that is some of the key stocks here. that, a .3% in the face of a lot of the volatility that we have seen there. about 5.6%.t of dubai investments at 3.8%. on the downside they are mounting those losses at 10.7%. ismercial bank of kuwait also down about 4.8%. let's check in with the first word headlines from around the world. says it is still an clear if the so-called islamic state militant group was killed in a bombing raid in syria last month. is still to have been among a
group of fighters target in no russia in the early hours of may 28. he appeared in a video 2014. he announced islamic state's intention to form across the middle east. they reach the final lap today. the main question being how big of a majority will president emmanuel macron enjoy? people emerging for the first time in two months. the party has had as many -- may have as many as 476 and the 577 the national assembly. that would be the biggest landslide in the quarter of a century. french markets have rallied macron won the first ballot on april 20 third. oil posted its longest run of weekly losses since august .15. as libya raise production and u.s. stockpiles remain strong.
crude fell to its lowest closing last week on consumer -- concerned that rising u.s. supply would offset opec's attempts to drain. oil faces further pressure with ,anadian oil output set to rise to be behind the u.s. is the biggest contributor to supply growth. egypt has been struggling with rising consumer prices since its currency control. the government expected inflation to remain well above 20% next fiscal year. at the aiiblusively meeting in south korea. he's dead, taming inflation remains is top priority. -- he says, taming inflation remains his top priority. cominge succeed in that month, we will be in a position to deal with it.
not handling it is more risky for us. hours a dayws 24 powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. of a, rexs. secretary tillerson has canceled a state to mexico to focus on resolving the crisis in the gulf. he state department said will try to d escalate between qatar and saudi. the first confirmation that he is trying to make a solution between the neighbors. i want to show you what has been happening on the newspaper front , in terms of getting a sense of the tone of the conversation. i am going to hold the septa the camera. -- hold this up to the camera. this is the uae paper. it says here, the uae's position is the trust in qatar is zero. look at that graphic. cutting up the arab world.
it is similar for other papers. will not let forces from turkey come on to its land. let's get more context on labor diplomatic. newspaper, ine terms of diplomatic progress, are we really seen green shifts for a possible resolution? >> verily. what we learn from the weekend is that the saudi alliances going to present a list of proposals or demands. that official said, at that , it is still very high. the hope is that this proposal, or these demands would make negotiations a little easier. you bring up tillerson's announcement. -- being beenis former ceo of exxon mobil has
excellent relationships across the gcc and in the uae. to an extent he can actually deploy these relationships. as long as the ceiling of demand, the gap is wide, it could be too early. yousef: in terms of possible scenarios, and speaking of trying to get a direction the story could take. 14 scenarios being a relatively -- four key scenarios is a scenario. quick on the hypothetical, pulling up a quick graphic to show to our clients and viewers, the break down in terms of the armed forces and whether this escalates further. disproportione set up your, defense spending, $57 billion versus 4 billion for qatar. 900 battle tanks, versus 30,000
for qatar. happening ont is the combat aircraft one. which scenario is the more likely? not the military one at the moment. you have also a large u.s. base in qatar that acts as a buffer. all parties so far really just count the military solutions. we are now about to enter the third week in review can take up the click resolution part because we are not seeing a quick resolution. trying to drag this on as long as possible in order to get the best terms. the question is, how long can qatar tried this on, and at what cost? to be dragging their heels and securing alternative routes for imports and trade. there were open and up could southeast asia. yousef: it is always great
having you on the show. let's widen out this discussion and bring in some context from riyadh. john, let's pick up straight where we left off in terms of scenario. which one you think so most likely here? john: i think this will be issue and conflict between the two sides. we can see a click -- we will not see a quick resolution. it is going to be pushing it to at -- brink. i think the saudi's and iraqis will have a long list of demands. us intogoing to take the other months of 2017. yousef: how long do expected to
take? you are saying they are both digging in their heels. the wiserit mean for region -- wider region? john: at all the pens on how far it goes in to what extent to find the solution. iraqisly the saudi's and are very convincing. the americans want to find a solution, but at the same time show there is some kind of a national coalition, a natural sense of unity. eventually there has to be some time constraints. this will take a lot of negotiating. this will not be a quick resolve. yousef: we will pick up a conversation.
we still have plenty to get through. we will also talk about getting gas in the program. theyslamic bond market as declare their own unlawful. exclusive our elliott asked the ceo about investments from saudi .rabia as $1 billion valuation where did they see growth and where they go next? this is bloomberg. ♪
yousef: let's get you up to speed with key stories we are following for you. starting out with massive blm thing they will try to keep whole food for premium quality. acquisition goes through, we are told is expected to cut him's and change some project to help whole foods compete with walmart and big-box retailers.
the company has cut prices and the pace of its were sales price since going public in 1992. unlawfuln by dana gas has bats -- baffled investors eye $2 trillion in the finance industry. -- ato longer considered sharia compliance under uae law. produces most of its --dana gas produces most of its energy in iraq. general election wants more transport opportunity in the middle east and africa after signing a hundred $75 million deal in egypt. vice chairman says ee is interest in turkey and algeria. ge isirman says interested in turkey and artillery a -- algeria.
libya is producing -- rather u.s. inventory is higher than expected or that will happen on the crew oil front. ofkly losses since august 2015. let's bring back in the director of the economic research center -- golf research center. i just want to pick up briefly on the qatar and regional impact, specifically on how that might be real. all the efforts and -- efforts to diverse ally away from crude. this is hardly going to help. john: it definitely impacts qatar and its land to build infrastructure. eventuallybe delayed . how does qatar supply all of its
of materials.inds it impacts the region because we did ask questions. it does impact interception in some places with the freedom of labor. of course, politics is above everything else. that is the issue right now. impact, it will be felt through qatar even if they say this will not happen. what about the msci division that is coming up about inclusion?review for will that change of a look at saudi arabia? i don't know. there are consequences on saudi the impactcifically
of its image and economics of the country. that this will right now be a factor. what we have seen his qatar being downgraded, not saudi arabia. think the 20th of june is a very important date for equities and saudi arabia. i think the qatar situation will not interrupt that story. let's circle back to the crude oil conversation. we did have data out late on friday and we put this up on a chart. your top panel is the u.s. crude production. you can see how it is expanded. this is over the last two years. you can see how that has kept to 747. up a six 22nd consecutive increase. how is opec going to dig itself out of this? john: it seems that opec will
have to consider for a cut again in the coming months. i think oil and 47 is ok but not great. it goes further down, you have to make a decision. analysts are beginning to question the ability of opec to go for another cut. my guess is that, over the next asked month opec will need to find a solution. otherwise, what we have been told, a year ago is that inventories will go down in the supply is going to be reined in by opec. now we are back to the same argument. they need to find a solution. yousef: in terms of what the fed has been doing with the latest rate hike, we heard from the , he isolis president basically dissented against the central bank's decision to make
a move they did. what he says, when has-been the latest softening, i want to talk about a transmission mechanism and how it affects audi economic projections. is this much of a an issue and light of growth being under pressure? absolutely, i think it feeds into the challenges. liquidity was a concern, now we do not have liquidity. banks have liquidity, they are not lending is much. it could create some challenges and obstacles when you want to so that is not helping the situation for saudi and the rest of the gulf. dosef: what can the saudis of the fed continues on its future windingof
down of the balance sheets and possibly more rate hikes? can they delay that or reconsider? think that cannot be an option right now. the government and the authorities have been very clear in the past, especially the central banks. i think this is the right policy at the moment. problem the stimulus needs to begin with that process andrder to stimulate growth build on confidence. that is very important. this is going to be an arbitrage in this is not what you want when the economy is in a slow growth momentum. yousef: good to see you this morning. the director of economic research for golf research center in triage -- riyadh.
egypt has been struggling with rising consumer prices in selecting current controls. finance ministers spoke exclusively to bloomberg at the aiib meeting in south korea. he says inflation remains the number one challenge. we are basically trying to bring down the inflation to the teens. we are at their to present of last month. month to month it is 1.6%. on a yearly basis it is still high. , ormost important fact challenge we are facing is inflation, something that we need to bring down very quickly.
>> what impact would tightening have on your budget deficit? >> it would not be of good worry -- it should be a temporarily until we see inflation level coming down to a more manageable level. that is for any investor or for growth, or for those with money. thatll not be something lives for long. we will not live with it for long. when it comes to investment, is a short-term thing and people are looking for long-term investments. they should not worry about that. they should worry about high inflation level because it disturbs the market. this is our first challenge. >> look at standard the wave your inflation target? our price is now at a level that is manageable. our commodity prices are at a
manageable level. increases oil prices and oil inc. -- produce a big risk. we need to bend down the inflation. if we succeed in that in the coming six-12 months, we are under control and will be in a position to be able to deal with any external shocks. it is more risky for us. >> there are concerns about reform fatigue and high inflation you were talking about. will that impact your growth target? >> not really, in the third quarter this year we have in atwth -- yesterday it was 4.3%. next year four point 6% is manageable for us. the number one thing that we are coming from -- next year 4.6% is manageable for us. that we arene thing coming from -- also the issue with the current he and the andcts regime during 2015
2016 closing the economy to's -- causing the economy to slow down. now, the economy is kicking back up. remember one thing, tourism has been very strong since 2015, october 2015. that also affected our economic growth prospect. inflation has its effect, but we .re seeing a better momentum also, the rotation of the currency is resulting in more economic activity moving higher in a much stronger way. that is the finance minister speaking exclusively to our haslinda. i want to show you quickly what is happening to the egyptian pound. bit. widening a little
>> these are the first word headlines. u.s. secretary of a trip to mexico on monday to shine results of the qatar crisis. this eight department says he has already had more than a dozen on conversations with gulf and regional leaders in what is the first confirmation that the u.s. is attempting to mediate. washington faces a delicate situation with saudi arabia, its biggest gulf ally, but qatar closing its middle east headquarters are it barclays is said to be ready to plead guilty to u.k. charges that it filed -- failed to make proper disclosures about a multibillion capital raised during the
financial crisis. the bank is racing for a fine of as much as to enter million pounds, or $250 million. the office is expected to announce any charges against the bank and firmer executives involved in the deals this week. says the twitter account of its arabic channel has been restored after it was briefly suspended on saturday. it went off-line around 10:00 a.m. local in what the networks says teams to be an organized campaign. engineers talking to twitter say the account was object to "a storm attack of mass report, which forced the algorithm to temporarily suspended." twitter has yet to comment. the turkish lira has shrugged as this intro bank remains unchanged and indicated it will remain a monetary stance until inflation in crude. lira traded lower.
president said his government will continue to intervene on interest rates to ensure stability. he said high interest rates would hurt production and employment. news 24 hours a day powered by more than 2700 journalists and analysts in more than 100 that -- 120 countries, this is bloomberg. ♪ recorded as gas has unlawful. that has baffled investors. it has sent shockwaves across the board. they plan to replace its $700 million worth of sukuk. they offer a lower price but on theother hand there is convergence. founding manager and. great to be back on the program. ?hat is going on is there precedents for this kind of move? >> sure, you have to go back to the financial crisis.
there was a kuwaiti company and they were the owners of aston martin, along with the liquidity pressures up the time they became distressed. one of their instruments was an issue in compliant finance. as sure he a company, they are not to be engaged in interest-based transaction. when it came to repay this transaction, they said we should not have to pay you back. obviously the bank was not impressed with this and it went to a prehearing in terms of the court. the judge said, maybe you have a case for nonpayment of interest, but you have to pay back the principal and the capital. the tid was not interested in paying that back so it never went to court. they are coming out and saying this is unlawful, we have to -- restructure this. number legality point of view, is there a solid foundation for them to be getting on in making that claim?
sukuk: for most documentation, it is not a defensive fall. there is a reason -- no distress or acceleration contingent on noncompliance. partiesa matter for the at the transactions to agree it is complying, then it is taken off the table. also in the uae, it is not sharia law that takes precedent over banking or transactions. it is a civil law jurisdiction. you have to look at this specific documentation, but these sorts of things are unlikely to happen in most sukuk's transactions. yousef: i look at what the market is pricing in in terms of is dana gas, sukuk definitely pricing in quite a bit of volatility. it is remarkable how some of it shot up. expense of the sukuk holders.
for the industry, more broadly, does that mean there is now a flaw with a regulator needs to move in and patch things up? khalid: there is a definite in sukuk and they tend to be complex. when you try to fit a square peg in a round hole, which is sharia compliance and debt capital markets, you have these compromises in the structure that cannot expose these instruments that cause a challenge. i think you are right. where the uae has made noises around having a central surgery aboard -- central sharia board, it could improve transparency in the market. there is some regulatory involvement in what is an immature market to date good -- date. yousef: this is the leak function that breaks down -- in this case i have brought up the issue of 2017. the king of saudi arabia has
been leaving, in terms of 50% of total issuance. go through that. you have your issuer and so forth. great history. a graphicso prepared in terms of how this could have implications for some of the other sukuk out there. if you look at the islamic bonds issued by uae borrowers based off contractors, seven that are out denning. -- outstanding. dhabi islamic abu through dpthe way world, what kind of implications does this isn't have for them? a concern is more of for investors, but you have to look at the credit spending of the issuer. bes is something likely to tested upon the fault of distress.
the issue you mention have a relatively strong credit profile. it is not really a concern for the highly rated r good credit standing there. depending on how the court ruling goes, this could be an avenue in future. i would anticipate, like the investment dark age, it was unsuccessful. we would have to wait until the court ruling to see the outcome of this before forming anything about the future. foref: the last thing uncertainty about possible repayments of structure, how long could this drive on? khalid: as i understand, the court hearing is towards the end of the year. i do not think there is much substance or rationale given what we have seen so far in the uae. indeed, it could be a negative
implication. i would expect it to go the same way. yousef: we have been trying to get a sense engaged at reform possible. the impact of the gulf crisis on asset classes and so forth. and terms of the impact on the sukuk market. it has already been suffering from a lack of momentum. this is not going to be of any help, is it? khalid: no. sukuk instruments should really have more equity type features or acid type tangible features or it on the market as it exists today is really compromise between two different that capital markets and sharia compliant ones. there will always be that issue, but as mentioned, infest your's and issuers agree it is compliant. that risk should be taken off the table. as investors reprice
risk for this part of the world, what with the spread look like now? how much more are investors going to be asking for from qatar or saudi arabia? i dod: to that question, not think the sukuk element is that relevant. it is about the credit in the region. you still have lower prices, although there has been recovery from the previous year. not expected to be as high. there has been a lot of structural changes and developments. are betters, things than last year, but the political risk is a concern for investors in the region. yousef: thank you for coming in this morning. managing director of a credit investor. qatar tv, the foreign minister has been speaking saying that received any demands. has not received any demands from gulf nations. showing that the further entrenchment is very much in
yousef: a quick roundup of stories we are following. starting off with boeing, boeing is such a -- said to be closing in on 5 billion -- $5 billion sets of orders. we are told it is in talks with about 20 max, 10 planes. indonesia's line is looking at 22 as many as fit the. it was announced at the paris air show where boeing is announced to release more plans. asia airline says it is nearing a yield for the wide-body plane.
they are still haggling over a price. of carrier wants details other parts including delivery times, they say there is no chance in order will be placed in paris this week. there was a booking slump that followed to fatal disasters in 2014. is theillionaire prince latest to bet on the by base company. he joined others, including the $500 million funding run. exclusively, the founder and ceo. great to have you back. in the months since we last met, a bit of the change in key investors. how will that have a bearing and how you move the company forward? new backers and maybe new ideas? ,> thank you for having me back it's a pleasure to be here. two new backers. both of these investors bring
unique regional and global perspectives. in the case of kingdom holding, it is an investor that is very aligned with our mission of improving lives of people in the region. they have global technology .iews with their investments we are excited to have them on board and believes their presence on the board will make us a man's more resourceful regionally and locally. this is a big investor in inility, they have invested new mobility platforms. very advanced a economies program. yousef: this comes back to creating scale. that is a big challenge for companies like yourself. what new markets are you looking at? what markets would you like to focus on more to drive some of that growth? mudassir: the opportunities are massive.
we are still less than 1% of the opportunity in the region. enteringot just mean new markets, but even in cities your income you are less than he percent of the opportunity. our focus in, let's start building a lot more scale in our existing cities. second, let's open a lot more new cities. there are 200 cities in the region. the last 30 of them have come forward in the last x month, last week andllah kuwait a couple of months ago. lastly, a lot new services that we can launch for the platform. him -- launched careem in dubai as well. the issue of scale -- yousef: the issue of scale is one thing.
from is a great column bloomberg this morning. there is no way to know whether or how much value changes from quarter to quarter. they assume it has not. as a result the risk adjust looks fantastic, at least on paper. mudassir: are you profitable yet? we -- are you profitable yet? mudassir: we are not profitable yet. the idea is to keep scaling in the market. if you look at some of the earliest cities in the network like to buy, we have achieved possibility. there is a timetable in place. yousef: when do you think that will be? mudassir: it will be another year or two. right: would that lead into an ipo, possibly in 2018 or 2019? mudassir: the only time i think of an ipo is when i am on the show. the opportunity is so big and there is so much to grow into
the opportunity and to focus 200% which is on growth. is a natural milestone for a fast-growing company like ours. mudassir: it would be the next logical milestone. 2019. yousef: would that be in dubai? mudassir: this is not a topic i am an expert in. of some of thes challenges you are racing, the regulation has been an issue. what is the biggest obstacle for you? outside of the cash burn and trying to achieve profitability, in terms of moving in hard on those markets, what is the issue? were two issues from the beginning, talent and capital. on the capital front we are secure. the backers have come in the have a long-term view on it. we are fine with that now. the other topic is talent.
the plat for an we are built -- platform we are building provides need -- needs data scientist. we have to get more of them to start building the platform with us. that really is the only problem for growth. yousef: i want to get back to the markets issue. you talked us through expansion plans that you have. in terms of new areas for consideration, because you are trying to build scale. you have been moving pretty aggressive from market to market. h you impressive to growt have achieved from market to market. in terms of market expansion, there is a lot more expansion happening in existing come -- countries. the last six months we have doubled up in pakistan and egypt . we continue to be interested in other parts of the region that we are not present in your in north africa we are not fully
covered. even parts of the middle east we are not fully and. we just open kuwait. the other spaces that we still me to be present in. yousef: what about getting back to the financing issues? mudassir: i have not thought of it too much. is the equity funding way we are going. will that be more of a priority going forward?? -- will that be more of a priority going forward? is it 10%, 20%? current version of boxes is a pilot. as you know it is an add-on delivery service. and it will it deliver from point a to point b. we are seeing people using it to -- for getting coffee, getting food. we are starting to understand these cases and ideas that we
institutionalized all these cases in the product. over time, the view is that it should become as big as our writing service -- riding service. best of luck with the remainder of the journey. that is the founder and ceo of careem. getting started. the latest on brazil's corruption scandal and how the escalating drama could affect emerging markets. this is bloomberg. ♪
political anxiety in emerging markets goes hand-in-hand, but this is a level once again in brazil. there are accusations that are coming out almost on a weekly brace -- basis and the president is having to defend himself in the most extraordinary way. what is encouraging investors is the fact that he is ill going ahead with these economic reforms that they love so much. everyone is watching the developments closely. we are looking to see what is going to happen next. yousef: in terms of how emerging-market currency perform coming -- perform, this is i-5 day basis. you could see the mexican base -- mexican peso has outperformed by .1%. 1%.russian ruble down the story out of turkey and the central bank and the president, they all go hand-in-hand. investors so far like what they are seeing in turkey. they are telling us that they like it trades, even though
there is some concern over interference. they are fine with that, for now. it seems like people cannot get enough of turkish assets. yousef: as we do our emerging markets tour, our stop in south there isere, yet again another political event that shakes of consumer and investor confidence. dana: this time it has hit the business community where it hurts. mining is one of those tentative topics in south africa. topics in south africa. the economy relies on mining. any interference in mining is aree sensitive to investors concerned about this and are waiting to see whether or not this will actually be implemented. yousef: great to see you. this move came out of nowhere by the president and his administration in terms of limitations for the mining industry. let's check on some of this rocks. in the middle east, we have a few to get through.
the downgrade of the stock recommendation there to reduce. you do not see that every day. to justrice raised about 8.7 from 8.04. analysts still have 11 buys on this. nigeria, they are expected to reach a resolution next week. on bp says it would lend us the defense stage. the shareholder development is exiting the business. , let's widen out the story and bring in our markets reporter and see what else is in the pipeline for the gulf. yousef this is a very interesting week for stocks in the gulf. we have talked about this during the show here today. there is a lot of expectations regarding -- diplomacy and chop
-- and talks coming from the u.s. and re-add. any's -- riyadh. any signal that we might eat that shows resolution should boost stocks this week. to 0.2%, was up close which is a slight increase compared to the slump of 7% the week before. this should be the focus of a lot of people in the region. if we shift to saudi -- yousef: saudi is important. for investors were net sellers once again when it came to the qatari market. as we cross over to saudi, what is on the radar? has the decision this week. there is a lot of expectation of what exactly my come for saudi, if they will be added to the watchlist or not. that means a lot of money that can just enter the saudi market. $5have estimates of about
billion just in the influence to saudi stocks. a very important investment they cure in the region upgrading saudi to overweight last week. all of that is on top of the decision that is supposed to come on wednesday. we are waking up with a decision here in the markets. this is probably the main driver for the whole week. yousef: in terms of dana gas, and on the bloomberg, the rally has been phenomenal. this is come at the expense of the sukuk holders. that is exactly the point. it is a very complicated case. the stocks were up 40% last week. shareholders will benefit from this whole restructuring. there is a lot of talk in the justt about how the stocks rose so fast in such a short amount of time.