tv Best Of Bloomberg Markets Middle East Bloomberg July 14, 2017 7:00pm-8:00pm EDT
earnings.t half net we spoke about the outlook for gulf finance. six percent to 8%, we don't see changes from those levels. as you know, qnb is a diversified institution. our diversification is really working to overcome any crisis. yousef: last time we spoke, you were very bullish when it came to your expansion in april -- in asia and africa. was this an additional incentive to be more aggressive, to push harder into those markets? toour 2020 strategy is become a top player among middle east and south east asia and africa. change in the strategy going for. to recap, the strategy is built
around two pillars, net organic growth and levying the network. net organic growth, we are very fortunate. we're not looking for acquisitions as we speak but we are very opportunistic. leverage ofillar, the existing network, we will take spending in the existing fashion. in an organic we have branches opening in kuwait. and of this month, we will be establishing our business as a full-fledged branch in india. we also plan for a license in hong kong. ourhina, we are changing position there. we will continue this strategy. yousef: you focused on your
strategy any say little has changed. but you have reality on the ground in saudi arabia and egypt in the latest political dispute. how are you going to reallocate resources or be prioritize a little bit, refine your strategy to adjust to what is happening there? this presents less than 5% of our balance sheet. the impact we see is very little , if any, for our strategy going forward. you know, we are going to be pushing more into east asia, but even if the situation continues forever, to diversify 5% is easy. yousef: what are your funding or financing plans for the remainder of the year? will this see some of the , howbank rates move higher
does that change the funding strategy? hike as a result ratee fact rate -- fed increase. it started last year and this year. , we show growth of egyptianution of the currency itself. we are continuing to grow. we are repricing our assets at the same speed as liabilities. diversified, don't have a concentration of funding anywhere. ,e get our funding from qatar from u.s., from europe, from asia, the middle east. we are diversified and we don't have a concentration and we don't see any abnormalities. qnb is a highly rated
institution, a aa institution. our customers love the story. you don't have any plans to tap the international debt market? , $17.5ave a program billion, and we have only used half of this at this stage. we have the room to move in this area. yousef: qnb is the biggest lender in this part of the world. i want to capitalize on that and get your topline thoughts on how confident you are that this crisis will be resolved anytime soon. >> this is not for me to comment on, but i can tell you one thing, qnb is very strong and we are prepared to work even on a standalone basis. qatar is a very strong economy. billion ofes, $340
flows is we have seen some recycling of liquidity back into saudi arabia and into the uae, and that would explain the performance of the uae and saudi bonds in the middle of all these situations. qatar has been affected. qatar is slightly wider than it used to be, but considering the expense and seriousness, if you compare market performance to that seriousness, i think market performance in qatar has been performing quite well considering the seriousness of the situation. we have to bear in mind that we are talking about incredibly wealthy countries with strong river -- strong reserves situation come and that has limited the market impact of the political standoff. think those reserves are helping in cap tar him a but we have seen a parallel emerging
and trading at a weaker rate. how big is the pressure on the currency and will there be a time frame when qatar will have to give up the dollar peg? there isdon't think any pressure on the dollar peg. it is a very small economy. it is a small country with a --ll local population you'd population. they can also use other measures to sustain the peg. the last thing they would want to do is have an additional source of uncertainty regarding the regime position. i believe the egg is sustainable. can they keep the peg and do they want to? i think the answer to both of these questions are yes. they can keep it, and absolutely they would want to keep it in the middle of this uncertainty.
>> let's talk a little bit about what janet yellen said. there was not much change, a inflationhasis on outlook. nothing really on the timing of the balance sheet readjustment. anything that caught your eye, that you thought was particularly interesting this time around? >> there was nothing really new from janet yellen's comments, and that is good news and to be expected. unemployment has fallen. it should eventually lead to higher inflation, but we are not really seeing inflationary pressures right now. her comments have left her with a lot of room to decide how fast she is going to be hiking later on. the fed has left the option open. i think the fed will be hiking more this year and next year there were probably be another three in total.
i think it is clear that emerging markets can take this pace of hikes, and i think that's why emerging markets are reacting positively to the comments. nothing new, but she is confirming a careful and gradual pace of hiking. what is important for emerging markets is not just what the fed does, but what long-term interest rates are doing. i don't see a reason why we will see a spike in long-term interest rates. for that reason, i think emerging markets will be meaning being supported going forward. yousef: it has been a tough year for the u.s. dollar. i am looking at the index. year-to-date declines of 6.7%. where does the yield go from here? >> i don't think we will see much more strength coming for the u.s. dollar. it had a fantastic year in the past, it was driven by divergence of interest-rate
policy from central banks. that has been already priced in. to see much further appreciation in the dollar, we need to see a shock from the fed, we need to see the fed hiking much more than what the market think and we need to see long-term interest rate yields in the u.s. rising much more aggressively. i'm not convinced we will see any of this, and for this reason, i expect the dollar to remain mostly range bound, and i don't expect to see another wave of dollar strength. it is fantastic news for the u.s. and the fed. the fed is hiking, but financial conditions and not tightening because long-term interest rates are not really rising and the dollar is not strengthening. that makes it easier for janet yellen to deliver the hikes. yousef: what is unclear is what they will do in terms of fiscal reform and how that will impact the overall economy.
the know you have strong views on crude oil. is the market getting ahead of itself in terms of errors momentum? is that -- bearish momentum? is that an indication of the feeling out there? >> you have to of knowledge the prevailing sentiment and you cannot go against it for a very long time. at the moment, there is a very strong bearish sentiment on the oil market globally. what is happening is at this sentiment is dominating fundamentals. when we look at fundamentals, despite comments from opec that suggest we have hoped for better compliance, when you look at the inventory data, from the u.s. it is bullish but being ignored. we might keep seeing bullish data, or sing bullish data for the market to get out of this bearish sentiment right now. potentialh will the
reduction cap's for libya and nigeria help in reducing this glut? >> they can help, but the point i want to make is that despite this lot, inventories are declining. wanted to focus on something positive for oil, it is already there. inventories have been declining for some time, that is the most fundamental for the oil market. i think the caps could help. better compliance from opec, that would be an additional fundamentals that could come into the equation, but we are seeing a somewhat divergence between prices and sentiments on one hand and the fundamental situation on the other. yousef: let's look at the bloomberg briefly. opec it shows you the daily production and how it has increased recently. on the other hand, you have u.s. crude supplies that have come down. if you were opec, would you do
some policy adaptation here? maybe it is antiquated to put policy in stone and leave it like that and expect the market to work around that. the challengek for opec, and it is something we've seen from previous meetings, when people were discussing further cuts, many members were saying never mind cuts, let's comply to the cuts we agreed on. i think the key right now is to show strong compliance and show the market they are actually delivering on what they said they would deliver. that is a key challenge for opec , i think that is what they will try to achieve, and if they achieve that by a time inventories are declining, they should eventually come into price action, as well. next, the take on the crisis in the gulf. which assets stand to win or lose in the long-term.
♪ yousef: welcome back. with the gulf a diplomatic dispute in its second month, what have institutional investors been doing with qatari assets? market fell about a thousand points from the 10,000 point level when the news came out about a month ago. it seems to have stabilized over recent days. i think until there is greater outlook for the current situation, it is very difficult for investors to get excited about buying or selling of these levels, because it clearly they are depressed relative to a few weeks ago. so far, qatar seems to be
able to weather the impact from the isolation, they're getting food imports. how sustainable is this? tarek: it depends on how long the situation is maintained. businesses have been hit across the region. clearly in qatar, businesses have suffered, but more generally across the region, exports into qatar from neighboring countries have suffered. businesses have lost opportunities. i think from a macro perspective, the current situation is not great, and hopefully it will be resolved shortly. yousef: look at the saudi story. you were impressed initially by the commitments to those reforms. some ofreversal on these reforms, how does that change your view on the saudi economy, especially with additional measures? tarek: i'm still impressed with
the reforms or at least the plan 2030 ism, vision something that needed to be done and will be implemented. my concern is the time lag between the announcement and implementation. also, the effectiveness of the execution. those factors make me somewhat cautious for the next year, let's say, because there is inevitably going to be a different and a time lag between what is wished for and what happens. yousef: it makes it tricky for investors to get their heads around not just the economic story but the corporate story. some of the key industries. to you all mys bloomberg. this is a period of one month and you can see how foods and staples have performed. banks are up, as well. in terms of what sets the tone for the quarter that we are now
in the early part of, where do you expect story to go in light of what we just discussed am the economy is and where the reforms are? tarek: i think consumers will be very cautious because we had salary cuts and benefits with strong last year. those have been reversed. i think the psychology has changed. consumers are now aware these maybe taken away or they may have to save for the increases coming through. i think, notwithstanding the reversal in that particular policy, there is a little more aution from the investment am corporate capital investment and consumer spending. i am somewhat cautious as we get to the year end. i think we've seen anecdotal evidence of terms of retail sales and property transactions recently which give us reason to be a little more careful about investing at current levels. as a 90 day volatility, it has spiked to the highest
level since february. quite a different picture than when we talk to last time, about a month ago. is this heightened volatility the new normal or just a reaction to the latest developments concerning the inclusion into the e.m. watchlist and the political development? tarek: i think it is both. i think you have a situation where clearly over the last month, there has been increasing geopolitical tensions, oh prices have fallen about 10% from their year-to-date average. you're seeing a foreign exchange reserve decline, seeing economic growth stalling, corporate profit outlook is clouded, interest rates have been rising. you have a number of factors which frankly have deteriorated over the past four to six weeks, and that leads to higher volatility, greater uncertainty and probably a trend flattish or
down as we go to the year-end. angie: we have a new crown prince. we know that his foreign-policy has been pretty aggressive, he has been fighting a proxy war with iran in yemen, we have the qatar situation, how does that about the outlook for the kingdom? tarek: as i said, it adds to the uncertainty. i think more generally for investors looking into the region, into the wider region, this kind of geopolitical news cause unease.does i think it can be offset by positive economic development, that as discussed, those are not likely to be seen this year. to that extent, it is difficult to get motivated about buying into the region at current levels and in the current environment. yousef: we see a lot of downside pressure on crude oil, which is key to the saudi eco-story.
2017 forecast, nine dollars per barrel to $51 per barrel. where you see the crude traded go? tarek: we went positive on oil prices in january 2016 when prices went through the floor. our expectation is that prices would rebound to $60. that has not happened. we got into the 50's and we have come off sharply since. the market is telling us what tracy alluded to earlier, that there are now alternative sources of energy. the electric revolution is worrying investors. we saw out of volvo recently, they intend to be all electric by 2019. toyota, volkswagen are accelerating their programs to electric vehicles. that and other reasons are playing into the oil story at the moment. yousef: next, turkey speaks out
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delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. yousef: welcome back to the best of bloomberg markets middle east. it is a year since the failed coup in turkey. >> the failed coup attempt was a big shock for turkey, the turkish economy. turkish people. looking at how fast, how strong the recovery has been in every single sense suggests turkish people are resilient, the economy is resilient, and the
fundamentals were strong. the economy is back on 5% growth trajectory. strongest. the we are experiencing a reshaped recovery. this year we will create significantly higher numbers of jobs, possibly one and a half million jobs created. politics is concerned, i believe turkish democracy is stronger because people stood up for their future, for the legitimate government, and i think if you look back, history will write turkish people have hown an amazing example of people who believe in their own future can prevent rogue
elements within the army, disrupting democracy, destroying rule of law. we don't stop there. we have done a lot of reforms. we have improved civilian oversight of the army. we have done institutional reforms. i think turkish democracy is now stronger. finally, [indiscernible] has diminished. the question about the system has been set up. turkey has had a referendum. that is likely to ensure , and thatand fairness is good news in the long run in terms of investment and growth prospects. 150,000 purges took. some critics would say that this
is a step back for civil liberties. what is your reaction to that? >> the turkish case is so complicated. i can understand when you look from a broad from outside. unless you are a turkey as expert, it iskey hard to understand. ordinary,een an classic coup attempt you would go after rogue army officers and that would be it. going only after smoking guns. turkey, you are talking about a religious called that turned into a criminal network. a religious called from the 1970's onwards, recruit eating ,rom early ages, trained them
infiltrated and various government sectors, and grabbed the power increasingly in judiciary, police, and the army. last year, they tried to take over the country. this is a criminal network. this criminal network has massive infiltration into government agencies. has a business empire. handling ofturkey's the aftermath of the coup attempt is complicated. from our side, it is hard to understand how to explain. turkey should be given the benefit of the doubt. have reports to the democracy isf --
stronger because we are going after these rogue elements. it is not -- it was not an ordinary coup. therefore the response has not been limited. that is why you have such a separation from the state and the efforts in the aftermath. once you understand that, even if you are not going to show solidarity or empathy, you need to give the benefit of the doubt. how do you think investors feel about turkey in a climate where people are being arrested and detained pretty easily? >> you need to understand that all the arrests are only limited of theselitants terrorist networks behind this coup that caused -- cost 250th
cost 250 people's lives. they and that destroying democracy and rule of law. cost 250 people's lives. the turkish economic outlook is stronger on the back of this. turkey is recovering. the 13th largest economy in the world. 18 million people. i don't think investors can afford to ignore turkey. short-term i can understand some questions. it as we go along, as the place at ours forms become more visible, as turkey gets it right, i believe it's people understand and go beyond giving the benefit of the doubt. recovery. turkey is on the verge of
another major reform push. we have this rebuild opportunity to get things right, to do right things. i think this will ultimately help persuade investors. you have narrowed the gap between reality and perception. turkey is a reality. it is much better than the perception. yousef: coming up on the best of bloomberg markets middle east, we hear from the health insurance president for international markets about plans for the region. this is bloomberg. ♪
in the middle east with the acquisition of zürich's regional business. we talked about the deal. ourhe middle east is one of go to regions for us. what we are seeing in terms of the trends mean we are excited. this a critical milestone for us in terms of enabling us to further grow our presence across the middle east. >> how much did you pay? >> i can't disclose that. us licenses here in the uae and we are very excited about what this enables us to do. >> let's talk about the breakdown of where your revenue is coming from. if you take a look at the financial analysis function on the bloomberg, you can see $39 billion of revenue, most comes from the united states.
internationally, 3.6, three point billion dollars. how much of that chunk comes from the united -- the middle east? >> we have been serving customers through local relationships for the past 15 years. particularly we have seen strong double-digit growth. we have high expectations in terms of the middle east becoming a bigger part of our international portfolio. >> given the uae is one of your largest markets, how is the acquisition of zürich insurance going to help boost your market share in the region? >> it is really important for us. this is going to enable us to offer a range of products and services with the sigma brand. what all the dynamics in terms of what is going on in the region, we are really excited about this.
>> let's dig deeper into saudi arabia. the more interesting market by size and scale. how are you went to tackle the saudi story? >> the saudi market, the developments there but clearly very interesting. we got a local partnership there . we see a lot of opportunity for growth. the health agenda now is something all of the governments priority. accessing affordable health care across the region's top of everyone's agenda. entity, seenas one as one entity. much of the evaluations would have traded along those lines. way in yourt broader plan? how worried are you you're going have to separate in your plans
-- you are trying to expand any region that is splitting up area >> a key part of our strategy is go local. our ability to offer local solutions that meet the needs of individuals in the local markets its critical theory leveraging local talents, the middle east is a range of different markets. we believe with our long history here we are positioned to meet the needs. >> the markets though in the gulf are very fragmented. you have more than 60 players in the markets. how'd you differentiate yourself to compete there? >> sigma is not just another health insurance company. our mission is to improve their health, and sense of security. we spend as much time and resources keeping people healthy, keeping them away from having to visit the doctor.
we give them peace of mind, should they fall ill, they can have access to quality health care anywhere around the region or around the world. someve a network of million health care professionals that can help our customers. >> asia has been a big priority. we are saying changing demographics is helping boost your business. one of the -- what are the prospects in the region, especially china? presence inad a china for close to 15 years. that is a very important part of our portfolio. there, thentals growing middle class, we are well positioned to take full advantage of that market.
>> we have talked about the middle east. but as you look at the global map, what is the other highlights that is going to drive a lot of attention and revenue? particularly -- >> particularly it is the the rise of, chronic diseases. india has the highest proportion of individuals with diabetes. that means a company like sigma with its focused on health and wellness is well positioned to take advantage of those opportunities. once those opportunities -- >> those opportunities come with partners. >> we already have a comprehensive footprint outside the u.s.. we've got some well-established partnerships. excited about the
opportunity that lays in front of us. takee well-positioned to full advantage of that. that one to be the model going forward, growth aside, we are going to buy a more. >> we had a meeting yesterday. , comingd with investors from a position of capital strength. the international markets outside of the u.s. is one of those areas we are targeting for investment. >> africa, very briefly. >> we've got a partnership in africa with a local insurer which gives us the ability to offer our products and services across the africa region. another market we are excited about. yousef: coming up next, the -- [inaudible]
>> welcome back to the best of bloomberg markets, middle east. big data is changing the way businesses compete and operate with investors piling into the technology. --using more on our artificial intelligence, machine analytics.d advanced >> it is an advantage we are not affiliated with amazon or alibaba, or google. it is an advantage for us. these advanced techniques, they will be solving problems fundamental to insurance companies, banks, agriculture companies, even governments.
these organizations don't want to be dependent on just one big vendor like amazon might jump into their business at any point in time. acrosstform is portable all of these environments. the same logic, the same machine learning, it will run in the other environments. it is portable. our platform is open source. you can get to see the internals of this evidence, your own intellectual property, which makes sure amazon just can't jump into your business. >> what a lot of analysts are saying is that hyper skill vendors can bundle data processing into their cloud platforms at a lower cost. does that mean that you will need to rethink your market pricing? >> no. i don't expect us to rethink market pricing at all.
we are priced competitively. our platform is richer than what they have. amazon has 1000 different services they provide. ,e provide just one service machine learning and ai. mastercard orlike british telecom, that depend on us, they realize the value that we have that provides teachers like security, governance and so one for machine learning that amazon doesn't have. amazon -- at how companies are positioned, what are going to be the key business drivers for revenue going forward? these reason why you have analysts making such ratings, the normal size of the opportunity -- the enormous size of the opportunity in front of us. they expect this market will be
more than 200 billion u.s. dollars. the reason why the expectation big, two to grow so key trends. the internet of things trends, leading to everything around us being instrumented. lights in the street, even trees and agricultural fields will be instrumented. we are not because of a major evolution, the ai revolution. which is how we are going to use data to replicate the decisions human make. doctors assess and diagnose diseases. the skill us to have better than we have today. was bullish on egypt. you have been an investor in egypt with the startups there.
how do you trade the -- treat the egyptian recovery story at the moment? >> this is my personal egyptian ofery and origin. i have been in the u.s. for 20 years. i go back to egypt every year because my parents are there. startup system in egypt is showing early signs of what i have seen in the silicon valley in the u.s.. very passionate, very talented young and more experienced individuals trying to solve real problems in new innovative ways. i am bullish about the market in egypt. they are not just solving local problems for the country. some of them, one of my investments in the region solving problems worldwide way outside of egypt. bloomberg it for this
♪ >> coming up on bloomberg best, the stories that shaped the week in business around the world. any mail trail raises questions for the white house. janet yellen takes questions on capitol hill. reports. with earnings >> it is almost an embarrassment listening to the stupid --we have to deal with in this country. >> exclusive insight into monetary policy. >> at that low level you would have seen more inflation pressures. flex we will implement -- >>