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tv   Bloomberg Markets Middle East  Bloomberg  November 27, 2017 11:00pm-12:00am EST

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♪ jerome powell it defends the status quo and says he wants stability in fed policy, not a top-down shakeup. >> janet yellen is due on capitol hill, defending her record in the postcrisis recovery. arroyo is snoozing through middle east tensions ahead of the opec meeting. softbank plays hardball.
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a 30% discount. yousef: it is 8:00 a.m. across the emirates. i am yousef gamal el-din in dubai. here: markets in hong kong have gone into the lunch break. have a look at the broader picture across the asia-pacific. this gives you a simple look at how asia is doing. more red than green. india has just opened up. southeast asia feeling more of the pan. malaysia and singapore leading declines.
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there is not a lot of conviction to the upside here. yousef: some other assets showing downside pressure. brent crude extended declines. u.s. crude inventories probably shrank for a second week according to a bloomberg survey. gold, flirting heavily with $1300 an ounce. u.s. tenure paper, choppy trade, the curve steepening and dollar-lira there. u.s. equity futures showing a decline.
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we have been in the sideways grind for some time. let's check in on the first word headlines. japan has raised its alert level after getting indications north korea may be planning a new missile tests. kyoto news has said radio signals have been intercepted that suggest preparations for a possible launch. satellite images showed nothing abnormal. there had been concern the north would fire a missile during president trump's recent trip, but nothing happened. jerome powell expects the raisingbank to continue the interest rate. in the text of remarks he will protect he pledged to financial stability, while refining post crisis regulatory reform. indicating hep
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intends to take a prominent role in the tax reform debate. senate republicans are hoping for a vote on the legislation this week. lawmakers have not have anything committed to supporting phil. -- to supporting the bill. the gates has praised of a leadingrk saudi prince. he says i am only aware of what i have read in the press and cannot speculate. has been an important part of my work. his commitment to philanthropy is inspiring. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg.
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david: a big week for investors. trump is scheduled to address senate republicans ahead of that potential vote on tax reform. janet yellen also testifying before the congressional joint economic committee in washington. also do is the confirmation hearing of jerome powell. among all those things, let's try to flesh out what is important and get a sense of risks investors need to be paying attention to. u.s., the fed,he and the potential for tax reform. what do you think is more important. tax reform is more important
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on a month-to-month basis. there is a lot of focus on the federal reserve and the likelihood they will hike in december. that is pretty much baked in the cake. potentially much more long-lasting impact on u.s. yields. gets that long and much higher. i've seen you raise the probability of the passage of .ax reform what has changed for you? were pricing in a 25 percent chance this year and have increased at the 40% recently because we've seen strong momentum in congress in terms of trying to get this
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year in. particularly in the context of an alabama election which could impact our congress looks. is given -- our base case is given the hurdles congress faces in trying to get a unified bill that both sides agree to in a relatively short best case is we will have u.s. tax reform early next year and something markets are not pricing in. yousef: we put this up on a chart, 2153. trumpws the move after tweeted his optimism that tax up .1% in going well,
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terms of u.s. dollar strength. the conversation around the federal reserve, jerome powell taking over, what is this going to do for the world post-december in terms of rate hikes? >> the emphasis from jerome recent comments seems to be policy continuity. we would disagree with the idea that powell is automatically a dove. if you look at his voting record, he did not want to vote against the chair. he always voted with the consensus in with the chair in both cases. we don't know whether he is a hawk or dove, but from his the emphasis is policy continuity and gradual normalization of policy settings , gradual reduction in the balance sheets, and a watchful
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eye on growth and inflation. yousef: morgan stanley is warning investors that i completely flat yield curve is just around the corner. they are making it clear that the spreads between five-year and 30 year will continue to narrow. do you agree with that outlook? and what will it mean in terms of rates? >> the normal message in terms being flat0's is the u.s. economy will slow and with an inverted yield curve a recession at some stage. beenield curve has significantly distorted by the legacy of quantitative easing. also we are seeing a lot of tension fund activity at the long end ahead of u.s. tax reform in terms of buying longer there are a, so
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number of distortions in that yield curve which suggests the normal message is not necessarily the correct one. from: there is a question one of our viewers. if tax cuts are passed, what are the prospects we see bilateral tax adjustments plug the cap? i -- gap? >> from both bills we have seen so far, and those could change, but it seems likely this will be deficit finance, so it will increase the deficit and the debt burden. as such, that is something the u.s. treasury market is likely to respond to buy pushing up yields. david: they do still have to agree and perform the single uniform bill. with us and we
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will continue our conversation in a few minutes. if you have more questions, send .through tv this this is for bloomberg subscribers only. check it out at tv . ♪ check it out at tv . ♪
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yousef: this is "bloomberg markets: middle east." i am yousef gamal el-din in dubai. david: our guest is still with us. the bond story in china gaining traction. given wherely so yields have climbed two.
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chances are this moves higher. do i stay worry free outside china? short answer is anything that happens in the second biggest economy in the world is going to have spill over affects. we would have to take aways. there was a huge easing of monetary conditions that is starting to reverse and will have a real economic impact next year. in the 19th party congress there was a focus on the quality of is theare expectation chinese government will tolerate a lower level of growth focusing on quality rather than pure numeric targets.
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less good news for those used to the old model of digging things out of the ground. affectthe followthrough is perhaps we get more corporate defaults. that being said, do you think china will allow enough defaults without being disruptive? , butwant to do something you do expect beijing to step in if it becomes a little messy. >> it could get messy. in china we have managed markets. au will not be allowed to see huge wave of defaults. it will be very selective and specific and the will be greater pricing of market risks and companies will have to incorporate that.
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fromll not see a big bang one day to the next in terms of a wave of defaults. yousef: you are quite anxious about this escalating in the months to calm, aren't you? >> that's right. just because the north korea situation has been quiet, it does not mean it has gone away. is north korea will test fire another missile ahead of the winter olympics to show its icbm capability. wonou look at the korean market, it's as if it has been resolved. that is not our view. ideal: what would an
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investment strategy look like around this key themes you talked about? year has been a positive here for emerging markets and asia specifically. next year will be more challenging. country-specific, sector-specific focus next year, focusing on how far rather than long beta. you will have china slowing down, u.s. tax reform, more intermarket volatility. news for active management rather than passive management. be focusing on individual stories rather than buying the market for most of the year. inid: it is hard to imagine an etf you get 30% again next year. i have to bring up bitcoin. up, if it keeps going guess, but theoretically if this
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comes crashing down, is there a hint or slightest hint of theemic risk baked into cryptocurrency were of that spills over into other asset classes? hard to tell. if it goes from $9,700 to one dollar, those losses, there is no safety net. bitcoinand the con of or fellow travelers is that it is relatively opaque, but there is seemingly no safety net. this is happening because people have concerns about fiat currencies and central-bank policies, but the idea you are going into an investment which is going up exponentially every day seemingly could well come
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down. when it doesn't has a major correction, there will be no one there to save you. yousef: the struggle here appears to be that there is no accepted or mainstream way to quantify a proper valuation. the traditional metrics might not apply here. upside toe is more this story than a lot of people give it credit for. who knows how far this could go. comparing it to the two look crisis 200 years ago seems to be a bit out of place. ulip crisis 200 years ago seems to be a bit out of place. many investors have concerns with the existing financial system. where investors should be are two areas.
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there seems to be no safety net in terms of the potential for downside. , win or if authorities get concerned about the threat in my post to the financial system, they will crack down on it. when that happens, there will be no safety net. david: moving into 2018, is there something we should be talking about that has not garnered enough attention in your of you. -- in your view. tax reform, china slowing down, the italian willion come all of these cause more volatility across markets family have seen so far this year. david: germany, should i worry about it? >> you shouldn't. there seems to be a likelihood of a coalition and an economy doing pretty well. david: thank you very much. coming up, softbank looking for
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a cyber monday discount on uber shares. find out why they are driving a hard bargain next. this is for bloomberg subscribers only. check it out at tv . ♪ ♪
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david: let's get a check of the business flash headlines. toray falsifying data at a unit that makes car tires. it makes carbon fiber for boeing. the company is not affected by the fake data. fiat chrysler denying a report that it it manipulated diesel test. it's of the vehicles comply with the law.
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it appears in a report from a fraud office, but the carmaker has not been charged with any offense by french authorities. china, eight $2 billion company to dominate the sector. it is remarkable u-turn for companies a month ago accused each other of underhanded tactics. and will now seek funding expansion in an industry said to be worth $750 billion in china alone. the other top story, softbank may offer to buy uber shares at a lower price than expected. 30%ces say it could be a discount from the most recent valuation. peter l stremme has the latest from tokyo. -- peter else from uber has had a challenging
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year and softbank with other investors who are putting in money see an opportunity to get in at a price much lower than the last round of fund raising. investors arether tender for existing investors and beginning 30% below the previous price. they have said they want to get a substantial stake in the company, at least 14%. they're supposed to get to board seats also. they need to see whether investors will take a substantial discount. successful,ey are what do they plan to do with it? >> it is a good question.
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softbank is run by masayoshi son and has its roots in telecommunications and runs a wireless business in japan and the u.s., but has been investing aggressively and startups. to invest$100 billion in startups and has put money into ride hailing companies around the world. there are opportunities for these ride hailing companies if this deal goes through with uber , opportunities for them to elaborate through softbank. you may see some combinations between the businesses and certain places. they are aggressively recruiting drivers. they may be able to play matchmaker in some of those cases. yousef: thank you for coming on
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the program. let's get a recap of the middle east markets. a lot of markets trading sideways. what response are we going to get from foreign investors to the events over the weekend? we did see negative reaction on monday. -- sunday. monday did not bring the selloff that was expected from investors thinking the government can contain the security situation in the sinai. region, somehe e ji downside and barely above the flatline for saudi. staples and industrials featured on the upside with pressure on energy and consumer discretionary. let's get a preview of what is to con. goldman sachs warning of a slide in oil prices.
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we have more on that very important start next. this is for bloomberg subscribers only. check it out at tv . ♪ global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ♪
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yousef: 8:30 a.m. in dubai. the bloomberg dollar index is flat. aboutts from shinzo abe the target of 2% being appropriate when it comes to inflation for now. no need tos there is revise the joint statement made with the boj. specific policy measures should be decided by the boj. the yen has been in focus for the last several hours. let's get to debra mao for first word headlines. expects thee powell
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central bank to continue raising its benchmark interest rate and trim its balance sheet under his leadership. in the text of remarks he will deliver to the senate banking committee, jerome powell also acknowledged to protect financial stability as the banking regulator while refining post-crisis regulatory reform. president trump intends to take a more prominent role in the tax reform debate. senate republicans are hoping for a vote on legislation this week. several gop lawmakers have not publicly committed to the bill. passes, partytion leaders will try to reconcile differences in their two bills. authorities have been warning that the volcano is about to explode with 100,000 order to evacuate. thousands of tourists are stranded with the airport closed until wednesday morning. indonesia raised its threat warning to the highest level. travel and tourism account for
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10% of gdp with a bali as the most popular destination. ireland is facing a growing political crisis that could bring down the prime minister. y faces a no-confidence vote over the handling of a police whistleblower. more about thewn plans to discredit the source than it appeared earlier. the controversy could mean a snap election. turkey remains on course to avoid inclusion on the european union list of tax havens after addressing issues brought up by the block. eu experts have concluded that turkey does not meet the definition of a harmful tax regime. the blacklist is still subject to revisions and updates before the eu finance ministers approve it on december 5. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg.
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david: thank you for that update. two days into the trading week, two days of losses. .ession lows let's get over to juliet than singapore. please seem to have taken a cue from the s&p 500. another day of jitters. staples,s and consumer utilities, and flat on health care. dragging on the overall benchmark index after that warning from morgan stanley yesterday although we have seen a turnaround in samsung which would be expected after that you selloff in korea yesterday. the energy space under pressure, down .9% as we see crude fall for a second consecutive session ahead of that opec meeting later this week. if we look at individual markets
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, new zealand and the philippines coming under pressure, but once again hong kong on the lunch break, down .9%. tencent amongst the worst performers. there had been concerned are's that china could limit investor flows. we are seeing large-cap stocks in china being sold off again, a selloff that started thursday, a recovery on friday, then a big selloff yesterday. we were speaking to bnp paribas on bloomberg radio. they were saying the fundamental aspects of china remains intact. this is profit-taking from big names. they have been strong performers over the coast of the year. in terms of foot else has been a strong performer, we can't get away from the bitcoin story. bitcoin could narrow in on
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$10,000. this chart shows a big verizon bitcoin which has risen by as much of 17% during monday's session and up again in the asian session today. have a look at the blue line, which is gold. it has been rising this year, but nowhere near what you have seen in the bitcoin price. ayving a look at tor industries, the latest with a data rigging scandal. yousef: let's get back to one of our other top stories, crude oil, the energy complex trading lower. just above $63. the markets have been calm in terms of volatility. the consensus trade is towards a nine-month extension of the supply cuts between opec and non-opec.
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hit is not clear whether russia is fully 100% he hide a nine-month extension. also, how the geopolitics could play out in the negotiating room. tension ine ongoing standoff between iran and saudi arabia. that could make it more difficult to get that kind of agreement that saudi arabia is striving for, pushing for an extension. as toget more perspective how these meetings later this week could unfold. i guess joins us now. welcome to the program. let's dive right into your expectations for this meeting. will we get nine months? it could be geopolitics more than an extension of the good mood we saw last year. i expect it may be less than nine months.
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seen canure we have extend. yousef: you're seeing disappointment from these meetings? there if wenside is get six months for example? the market is in a goldilocks area on the oil side. if you want to make a list of all the risks from external factors, it is unlikely we see a common ground in this opec meeting. it would be interesting to observe how the negotiations go ahead when the meeting starts next week. your notes said the gulf cooperation council, this region, will be in focus for 2018. you are concerned about the geopolitical waves.
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we have uncertainties around saudi arabia, the back-and-forth with iran. talk us through some of your thoughts, and more importantly, how that will affect investor sentiment. year we had the first the bond market opening up. one year later, we have all this uncertainty for investors. saudi aramco, when will it happen. it is a wait and see game and lesswill translate into flow in the region, a flow i anticipate to be significant this year. i found this market for stable and very interesting. some of the glow has disappeared somewhat this year. david: i'm looking at one of
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uc energy prices falling 50% over the next 10 years. understand why you think that is. >> the story is really about electrification. china has two stated goals in the five-year plan, growth, and the environmental and pollution side of it. pollution,s fighting they need to go to electrification. electrification will look like a bitcoin chart over the next five years. volkswagen has committed over 60
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billion euros over the last two months for this project. inhave a change in dynamics terms of the car industry. that happens at a time when we are coming into a market with high prices based on a deal and which will face geopolitics. david: is there any country you see having the advantage in this long-term phase of electrification? >> when you talk about industrial processes, it is about the amount of consumers you can reach. clearly china will be a leader. china is already one of the major investors. want to sell cars in china, you need to do it with the electrical rather than
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combustion engines. we have seen how the air pollution has been 50 times the levels, so countries with higher levels of pollution will have to engage in this. as you have just over 2 billion people in india and china engaging and getting better air quality, these two countries will benefit the most. yousef: you are sticking around. let's get a preview of what is to come and why you should stick around. the oil route sending emerging markets to a two-month low. we get the pulse of what to expect the next after the opec deliberations. 20 more to get through here. this is bloomberg. ♪ ♪
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♪ david: emerging-market equities
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now. after the drop we got yesterday. after the oil slumped spurred a slide in energy producers. tracy alloway joins us with more from abu dhabi. what is happening? tracy: the sharpest fall into months. , so not a huge collapse. the index is still up 32% for the year, and astounding rally. when it comes to the oil price feed through, that his not entirely clear. movers, it is the mostly hong kong stocks, south korea stocks, for idiosyncratic reasons, as you know. if you look at the correlation with oil for the past year or so , not negative, but definitely less than an has been recently.
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talk abouti have to emerging-market bonds. equities tend to get all the attention, but we are still seeing a phenomenal amount of strength. year, 10.5ance this billion dollars in bonds sold last year, including a 3 billion issue from nigeria. worth of$11 billion orders for that 3 billion dollars issued, so that kids you an example of the appetite for emerging-market assets. especially with low interest rates and a softening dollar. yousef: quite a lot of variety. what stood out to you? thing i find fascinating and hopefully you will as well, the petro currencies. petro currencies have not been .ctive
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in fact, if you look at the correlation between the oil price and wrubel, it is the lowest in two years. the 90 day correlation the twin currencies from latin america, the commodity rich area of latin america, turned negative last month for the first time since 2014. what is going on there? prices are rising, you see the correlation weaken a little bit, but people are talking about political factors in play and the central bank policies and the interest rate differentials mattering farm more for the petrol currencies in the oil price rally. we are seeing some disappointment beginning to build in the oil market, potentially some profit taking ahead of the opec meeting where expectations are high. if we see a negative price movement post-opec meeting, we will have to wait and see whether the historic relationship between crude and
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petro currencies begins to reassert itself. yousef: excellent reporting. let's stay with the emerging markets theme and tight back to the region. the egyptian government will seek proposals to arrange an international on sale here at egypt expects to sell dollar-denominated bonds. speaking to bloomberg in london, the finance minister said the maturities would range from 5-30 years. -denominated 5-10 years. to deepen the yield curve as well. yousef: let's bring back in our guest. hear from the egyptian finance minister and look at the situation on the ground, does that kindle your interest,
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either equities or the government bond trade for egypt? >> although there is not a fixed income culture in the middle east, that is where i want to be. the egyptian story is an interesting story. we have the issue with currency isvertibility, the region deepening its ability to trade him a but we are pretty much a fixed income story because the ownership structures in the middle east for a simple guy like me is too complicated for now. david: i'm looking at your notes here, i can't let you go without asking you about this. you are saying u.s. interest 3%.s are headed to 0% or i guess you're talking about a 10 year yield. help us to understand a scenario where u.s. rates would be headed to 0%? impulseok at the credit
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, the change of the change of are in and right now we the single biggest selloff since 2008-2009 driven by china's deleveraging process, but also in the u.s. you have noticed a couple of headlines. net lending in the u.s. is going straight to zero, so u.s. banks or are ready seeing negative lending growth. negative lending growth creates inflation. of money comes from net demand on the banks and drives inflation. as we have less net demand, you first have an inflationary impact, which is why we see a theng treasury market, and negative credit growth, 50%. the argentine peso and
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the malaysian bring it at the top here -- malaysian ringgit at the top here. what is your play for the next three months? will be a crystallize or of new movement towards better and more shared power. the mexican peso is a place where i want to be. the last one is probably the chinese renminbi. yousef: great to have you on the show. , the outlook for businesses in the region and beyond the acting ceo for grant thornton. this is bloomberg. ♪ g. ♪
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david: some lines coming out of adobe data. the online sales
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day in history, $6.6 billion, that if you discount and takeaway singles' day in china. markets in the middle east half in our away from the open. what are we watching? yousef: moody's said an english courts ruling his credit positive. the credit rating agency says the decision means investor claims are enforceable and it is credit positive for the islamic finance industry. it at certainty around documents which tend to be complex in order to comply with sharia principles. those shares are up this year. abu dhabi bank has been upgraded by goldman from neutral to buy. the company shares last traded at 10.10.
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the price target implies a 17% increase. rand come inican terms of what is in store, quite a bit of potential there. the rand had its best in two years after moody's came out with the decision to keep south africa's local rating investment grade. they say there is little to reverse the trend before the ruling african national congress between december 16 and 20. let's talk about sentiment. grant thornton is a leading business advisor and its business survey has looked at 2005 hundred businesses in 36 countries. outlook isit weakening, but apparently there is optimism in the gcc. thank you for coming on the program.
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it's important we don't beat around the bush. this part of the world has had a very tough time. businesses are adapting to it where is the optimism coming from? optimism comes from the fact that businesses are changing today. there are new opportunities in all businesses. leaders todayss see that opportunity and try to transform the business that way. opportunities in the future. in terms of geographies, there are different stories. do you buy taking the limelight in terms of opportunities, saudi arabia following suit, but to cc optimistic, what are your top two standouts and what are the biggest pressures? >> i'm taking on this role as a global ceo from the first of
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january so this is my first trip to the region and i'm here to see what the potential is in this market. i am going around the world and seeing different things going on. i will spend a couple of days here and meet clients here to understand the economy here. so far i am here because i want to see the transformation in the economy and learn more about that. your sensessaid optimism in the gcc, the rest of the world given where earnings are at and where some valuations are, that optimism would be shared, wouldn't it? we are asking businesses what they think about the future, and they are very optimistic about the future, and that has been going on for quite a number of years now. i'm not surprised by that.
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that is what i meet one of declines and companies around the world. the thing putting pressure now is they think there will a problem with the profits going forward. there are a couple of things that put the pressure on profits for companies today. yousef: what are you most worried about as you sit down with clients or to mark they most worried about? >> the only thing they talk about his the transformation in their industries and business and how they should achieve fat and how that will affect their business. of course the technology change that will affect the business. so that is the number one thing that they talk about. we also ask about the big tocerns, and one of them is find skilled people in the workplace. yousef: a key challenge. good to have you on the show. futures still under
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pressure. that's all we have for this edition of "bloomberg markets: middle east." bloomberg technology is next, as well as updates of your top stories. markets in the asia-pacific not doing well. we will get you an update next. this is bloomberg. ♪ this is bloomberg. ♪ retail.
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>> at its 1:00 p.m. here in hong kong. i am david ingles. president trump said they. expect the federal reserve to keep raising rates. jay powell promised to protect stability through the fed's role as a banking regulator. over in tokyo, japanese maker, tori has admitted to falsifying data. its clients include boeing. it says neither companies affected by the ta


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