tv Best Of Bloomberg Markets Middle East Bloomberg December 15, 2017 8:00pm-9:00pm EST
choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. ♪ yousef: welcome to the best of "bloomberg markets: middle east", i am yousef gamal el-din. ipo, theoff with the state owned giant lists its fuel retailing unit. it is one of the biggest offerings in a decade in upper darby. also, following president trump's decision to recognize jerusalem as the capital of israel, it is called a brutal and hard full move. also, why saudi arabia is set to allow movie theaters for the
first time in 35 years. we begin in the united case with democrat doug jones this week delivering a stunning upset by defeating roy moore in alabama. it trims the senate majority for the republicans to just one. and we by two guests discussed the election moments after the results came in. -- he isporters were supposed to come out and address his supporters right now. the republican majority in the senate is down to one vote, that is the number of votes republicans can lose in their hopes of passing major legislative reform on a host of issues such as the infrastructure, regulatory policies and amending dodd-frank. with tax reform coming, this is the bottom line. doug jones will likely take office sometime the week after christmas and before january 3.
tomorrow president trump will meet with a bipartisan group of lawmakers from the house and to finalize the details of the tax reform package. if republicans want to get this done by the end of the year they have to do it before doug jones gets up to washington to finalis of the tax reform package. dc. because the razor thin majority is now down to one vote. unified on are not plan by any means, people like senator susan collins have concerns about it at a blitz a lot more pressure on them to get this done before doug jones takes office. us af: kevin, can you give little bit of a view of how this plays, the razor thin majority. might this still fire up other conversation and begin a domino effect that could actually swing the outcome of the tax vote? guest: we are hearing from top democrats already including that dnc chairman tom perez who has
praised doug jones for his victory. the first am in more than a generation that a democratthe fa generation that a democrat has won a senate seat. in addition to that, i would note that you are absolutely right, there is tension between senate majority leader mitch mcconnell and republican steve bannon, it isve palpable. campaign was stunningly defeated in a deeply, deeply conservative state, a state that president trump carried against hillary clinton easily come up by double digits. significant really blow to steve bannon and his political coalition. i think republicans will be scratching their heads and trying to regroup tonight especially as they had toward that end of the year. as expected, the federal
reserve raised rates this week. we also saw forecast for theymic growth in 2018 but stuck with their projection for three interest rate hikes in the coming year. in a news conference, chair janet yellen said the committee express neighbor market to remain strong with ample opportunities for workers and rising wages as well. but we got the thoughts from someone at ubs asset management. >> it misses a lot of that demographics, influences on markets, one thing you should think about though as you look across japan, have a record lows in unemployment but they still cannot see wages or growth picking up. they are facing the same issues with the demographic if worse. problem with technology and demographics around the world today and we are globalized. up, they could
move to other countries around the world, companies can. so this year we have some influence coming through from the oil prices, the appreciation, but it will start to peter out as we get to. the back half of. is a lookagain, julie across europe, you could see lower inflation. they are rethinking their whole process. tracy: let me jump in here and talk about what we are seeing. yousef: investors trying to get their head around it. considering we had a rise in we are getting the additional perspective about the greenback lagging even as traders are pricing in that rate hikes. you also have the u.s. one your rates here for additional context. is the rally going to continue with a rate hike which is pretty much set going forward and a possible tax cut being viewed
into that equation as well? >> the u.s. dollar has been this way, the same range since 2015 so, so we are at the bottom of it. the market is still quite bearish, that tax cuts did not overdeliver which people were looking for. going tot is probably be bullish once we get the realization that the tax cut and once we get into the first quarter and start talking about rate hikes again. the rest of the world is not catching up at the moment so the force you are looking at there, it has an influence on the way the dollar plays out. the only downside at the moment is that people will start thinking about the fiscal deficit and again which is starting to build up, is it going to be mutual, this tax plan. we have had the recent bounds, are we going to get back in the trend again?
so understanding whether it will be fiscal neutral or not will be key to the long-term perspective. yousef: how confident are you that inflation figures will pick up in 2018? so far it has not come as expected? is aboutthink it commodity prices, this is the headline number, we do not have enough evidence that we have the wages building up. it has bottomed out but we are not seeing a germanic lift across the board. we are focused on the headline numbers but this is more about commodity prices. we also so that momentum is not going to be there going forth, we will start his the headline numbers tapering down to the core measures again. yousef: let's talk about this from a marketplace active. about janet yellen talked
the flattening of the you curve curve but it is not going to indicate any kind of recession. trump is talking about how we are on the verge of an economic miracle, and janet yelling weighing that she does not see a gigantic rise in the economy. taxes wayking about too much in terms of propensity on the retail or consumer side? guest: the way that ice think about this -- the way i think about it is that we had flooded the market with money previously and the one thing they did not think about was that the velocity would collapse. the money did not get into the real economy, it stayed into the financial markets which is where we had asset price appreciation. if this money is going into the corporate side, is it going to get into the real economy or will this break stay in the financial economy. we are hearing ceos saying that
there are going to do stock buybacks again but that means it is staying in the financial markets again and not actually getting out into the real economy. obviously there will be some benefits for households but there are some offsetting factors around state taxes as well where they may not get as big a deduction. we need to see whether this will actually get into the real economy and give it a boost. next, i wouldup that be gets its biggest deal in a decade with the listing of a distribution unit for this company. we hear from their ceo next. this is bloomberg. ♪
deputy ceo of the company. >> we're bringing in international investors, a first-time an ipo in upper darby has been this successful. years, first time in 10 we had the biggest ipo in 10 years. we are very happy. host: the investors you have attracted, what percent is international? guest: we have investors from around the globe. storyterest around our has been hugely replicated and we are doing very well and it allows us to accelerate our business plan. that level of international invest meant and also local investment has been huge. it is a great sign for our and for abu dhabi as
well. >> i think the ipo shows a lot of confidence in abu dhabi's stock market. it was really a strong signal by fromeans, by all investors governments and also from institutions. one third of institutional investors is foreign money who really showed a lot of interest and also in the ipo. what growth do you expect over the next year? guest: [indiscernible] we expect less of investment from oil and gas and other sectors. we have other ipos coming in shows that there is a lot of interest in the market. host: actual ipos?
accelerate and drive ownership forward, showing confidence in our business and our market. ourllows us to build business into an international benchmark and that is important. tracy: you're talking about driving the business forward, can you give us an investment figure? guest: we have declare that we are going to invest between 5% of our turnover and we were growing in dubai. we are looking at extension into and also more opportunities across the region and outside the region as well. debbie we are also taking our individuals through a learning curve -- in weer darby -- in abu dhabi are also taking the business
through an individual learning curve as well. we are very competitive, and we -- for abu dhabi it is the first time that we have opened up the market and our first time trying this and it shows that we will have good success in time. it is a transparent way of doing things, and whatever institutions -- [indiscernible] yousef: saudi arabia's northern push got another drive this week after they said they would allow movie theaters back into the country for the first time in over 35 years. the kingdom is also trying to raise gasoline prices in january as part of a program to
gradually eliminate energy subsidies. the overall economy should also balance the budget. i spoke to the head of equities at a saudi investment bank. >>i spoke to this comes as parte reform programs, lifting the usage ofroving government resources, the liquidity of the government. it was let's say coming sooner whether he wasn't utilities, few will or other subsidies, so it is not that it was something -- fuel are other subsidies. they did not forget about it, it is a multi-year program and you will see changes like these every little while. and that is how it should be, and should be staged -- if you bring all of these reforms at once, you could put the economy in a shock which is what the imf and some of the other experts had pointed out.
the easing of the implementation of these reform programs was pointed out. we have seen it happen in other parts of the gcc, in the uae, and it hasn't this discomfort among retailers in the beginning but it gets better. yousef: in terms of the market, we put up a graph, this puts it all into perspective in terms of dividend yields and gives it a valuation score. if we go to the saudi tadawul it thisgative .51 which means is actually expensive in the region. would you agree with this assessment and how specifically of these sectors -- which sectors would you invest in specifically in the kingdom? guest: i agree and disagree at the same time. we look at saudi as a long-term story, extremely attractive.
the reforms the government has embarked on our interesting and the valley will generate lots of business for the private sector and have a trickle-down effect, which is something to we have when and other parts of the gcc. it needs to be quantified better . the social reform as well that comes on top of the economic reform, whether it is the cinemas which you mentioned earlier, or the housing programs. the housing programs would not only just create demand on building materials and new --ses, but you also think all of those fridges that will be installed need to be stocked. so this financial reform is just another layer in the increasingly attractiveness of the reform. yousef: in the area. yousef: we had that budget announced meant, compared to the year before it was quite different and it could make a lot more companies more
attractive for investing in in the basis of locking in more projects? guest: exactly. your multiple things within the uae particularly in upper darby which -- in dubai which have been going pretty well. the expansionary budget, we think it is needed, it comes as no big surprise. the magnitude is basically something that has surprised some market participants but i think that as dubai gears itself theost expo 2020, infrastructure spending and all of that expansion need to happen in time for that to happen, for that to take place. yousef: we have had countless claims around this building and the property story has been a softer story. downside pressure. you were concerned yourself about it, can you give us a finger on the pulse on this particular sector?
will there be a turnaround anytime soon? guest: the real estate sector is like any other sector, governed by supply and demand dynamics. there is a change we are seeing in the dubai market in particular, which is the more relaxed. payment plan. hasou know, any project three sources of financing, customer advance which you collect from customers, the banks and basically the equity developer. so when you delay customer payments, it means the banks will have to lend more and i think there is a limit as to how much they command. the other part -- how much they can lend. that also puts pressure is on .he r.o.e. and profitability my bigger concern is their ability to bridge the gap. yousef: if i could make one trade in the middle east right now as we head into 2018, what would you be telling clients? guest: i would be telling them
♪ yousef: welcome back to "best of bloomberg markets: middle east.". i would debbie has confirmed it was a mystery buyer of the da vinci masterpiece last month -- has -- abud debbie dhabi has confirmed it was a mystery buyer of the da vinci masterpiece last month and is defending the $450 million price
tag. >> we have been eyeing the peace for quite some time, it was showcase the us to painting especially after we had the painting on loan from our -- frenchners partners. it is astonishing to know that there are 19 da vinci's in europe and there was one in the united states and now there will be one here in the arab world. it is not just anyone, it is a very important portrayed that will broadcast our essence of acceptance and tolerance. it is going to be sitting side-by-side with them of the greatest art pieces from all over the world. we tend to forget that over the last 10 years we have continued to collect fantastic art. we are not the type that basically goes out there and broadcast what we have not whether it is monet or gaugin,
we do it quietly and we do it for a reason. and the reason we do it for is to showcase these fantastic pieces of art to the world. they are not purchased to be put in a house or hidden or reinvested, it is done to showcase beauty to the world. >> so you about it directly with a specific strategy in mind? >> yes, we worked very closely with the broker on the peace and we bid on it and it was a quiet process. thank god, with the price, we thought it was right. it was an exceptional piece. a lot of us wait for something astonishing, but that does not happen every day. fly asw, you see people close as possible to the sun to get a glimpse of the sun. we see people wearing glasses to see a closer view of the eclipse. we thought in our life time we would never see a da vinci come up on the market so as far as we
♪ yousef: welcome back to "best of bloomberg markets: middle east.". putin made adimir stop at russia's air force base in syria to declare victory in the military campaign over the past two putin made a stop at years, part of a three nation middle east. the bloomberg reporter the foreign minister and began by asking whether it was really a win for putin. notion ofamerica's victory which has been tied up by the overthrow of dictators and state building, put in was just trying to bolster one, keep
its standing and he actually did. if you remember, president obama's redline on syria was a sad that he must go. well, obama is gone and bashar assad is still there. we have kept our men, we have not spent all that money, that is what vladimir putin can say. the russians definitely look like winners there. it is interesting. he signed a $30 billion deal with egypt, he went to three countries in three days, putin-middle east relationship, is it filling a vacuum that the u.s. had stepped back a little bit from? guest: it is definitely doing that.
think about it, the russian ability to work with the iranians, who are geopolitically ascendant in the region particularly on syria but on other issues has been very high. the americans cannot work with the iranians, given the nature of their relationship, the sanctions against them. the russians also welcomed king salman and are also coordinating with the saudi's on the reduction of oil production to keep prices for oil relatively high. are the russians long-term going to be seen as most important player in the region? no, because it is a pretty light touch. but in terms of who was seen as an external actor as the them more relevant today than they were a couple of years ago, the russian trajectory is obvious. >> you touched on a run. your assessment of what president trump wants to achieve --h iran, will he provoke or
that seems to be his foreign policy at the moment. do you think you will go to that point? guest: his policy so far has been -- this is a horrible deal but not actually pull out, throw it to congress but refuse to certify the iran deal. having said that, the u.s.-iran relationship under president trump especially after this decision on jerusalem is definitely putting things under pressure. if trump pulls out of the deal by himself, he will be by himself which is not good for the americans in a national security perspective. whether or not the u.s.-iran nuclear deal stays in place, that is a coin flip. host: let us talk about the position on a jerusalem, hopefully -- identifying jerusalem as the capital. thebritish argument is that u.s. has lost any capacity to be the independent broker or arbiter of peace.
has he done that? is that your conclusion? guest: it is certainly true that the americans cannot do that but implying that jerusalem -- the jerusalem decision is the reason that mean thedoes best people thought that palestine-israel peace was possible before this? it was not. it is clear that they were not a top priority for anyone outside the region at this point, and for very few in the region. if you talk about the saudi's, the emirati's, if you ask any of them what their top priorities are, they will tell you iran, isis, syria, yemen. is not even in the top five. so it is true that the americans are truly by themselves, in the security council, no one else would support this recognition of jerusalem as the capital of israel, but ultimately it does not matter that much.
israeletanyahu went to yesterday and said he is part of the reason that isis is being kept in check, i am part of the reason there are so much defense. why the argument? guest: it is certainly true that one of the reasons the israelis have a better relationship with -- with egypt, the saudis and the emiratis is because they can have shown everyone that they can protect their borders, they can do country surveillance. even in israel it sells, the israelis had given up on the a two-state solution and it was no longer a priority. unfortunate from the human rights perspective, the palestinians but they do not have much of an impact on israel. talkingknow you will be about the geopolitical risk of 2018. in 30 seconds -- china will be
the topic of conversation. why, from a political point of view does china matter so much? trump'secause president presidency provides so much space for them to operate. they have and are mostly strong president, they have a global economic strategy, they are developing architecture in a world where no one else is able to do so, which will have an enormous impact over the coming years. yousef: up next, brutal and harmful. 'se former french president assessment of the jerusalem decision. our interview with him next, this is bloomberg. ♪
and harmful because it was unilateral. taken thisrump has decision without consulting your rope or the u.s. congress and even consulting the palestinians. it is harmful because it will not lead to any negotiations. host: what should that initiative be? should it be discussion around the world? guest: france has already taken some initiative. the initiative was to previously invite all of the stakeholders around the table for discussion and create solutions. also be between israeli and palestinian counterparts. the decision by trump is stop the colonization, and that is good but it is also up to israel to solve that problem. reporter: global politics is about relationships, mr. trump may not be offered a state visit
to the united kingdom. other euink france and or should be as friendly to president trump? the united states has always been a friend and ally to france. the u.s. is our partner in nato and/or relations will continue however this will not keep us from expressing how we feel toward his heater and actions, especially when he takes unilateral decisions without consulting anyone. especially what we feel toward his nuclear agreement with iran, climate change, his exit from unesco -- we need to encourage him to have more dialogue and make more multilateral discussions. reporter: you have dealt with many world leaders, what would you say in a phone call with president trump today? guest: i would talk to him about two main points.
the climate issue, taking place right now in paris, there was some engagement regarding the commitments made in 2015 which need to be honored. i would also tell him to undertake more investment in the paris agreement. i would tell him that on the middle east, we also need to put our hands together to solve the problem not only in syria and iraq, that also provide wider security and stability in the region. yousef: the qatari airwaves launched a new service to thailand -- qatari airwaves this week launched a new service to thailand. the ceo spoke to bloomberg's stephen engle. >> we are not going to slow down, this is exactly what qatar airways wants to prove, the blockade will not have any negative impact on our airlines or our growth. we will continue to grow, it will of course affect our bottom line because this was completely
unexpected, this illegal blockade. however we are on our march ahead and we will continue. we will make people very envious when they see how many new destinations we are announcing in order to defeat our adversaries. >> can you give us an update on how the blockade is affecting your business? a month ago you gave a full year -- fiscal year profit warning. are you having to reschedule more flights, cut more routes? can you give us an update? guest: we have not cut any routes other than the blockade countries which prevented us from operating in their countries. we will keep on expanding and i will have to fill the vacuum which of those 19 destinations had created and we have been successfully doing it. we will continue bringing more
passengers on board, however the issue is like you said, our bottom line will be affected and we are still giving a profit warning. but as a matter of fact, we will have a negative year, regarding our bottom line but as for our passenger numbers, we're hoping that we will be very close to the number of passengers we carriedsaid, our bottom line wie pre--blockade. >> how are you coping with the backlog? i know you had sold some plates to a leasing company here in hong kong, the bank of china, boc aviation. there are other triple sevens you have ordered from boeing. what are you doing about your order backlog? guest: let me be clear, we are not selling our airplanes because of the blockade. we are selling the current option triple sevens in order to 777s that will
be delivered. we want to keep our average age of our fleet down to five years and the only way to do is to sell and lease our older aircraft in order for us to make place for the new is to sell andaircraft on our . you give us an assessment from your perch as the head of qatar airways, how the qatari economy is doing? i was reading a story on the budget deficit which is expected to decline actually, as the economy observes the blockade. perhaps this is an impotence for further diversification of the local economy, how do you see it? guest: please do not listen to a lot of fake news that our adversaries keep on putting out about our economic performance. our economic performance is robust and diversification and investment and the expansion of
the economy will continue over the next few years. yousef: the bahrain-based alternative asset manager company told bloomberg this week that it is looking to double its asset management over the next 5-7 years. the co-ceo spoke to tracy .lloway she began asking whether the u.s. tax reform plan would have an impact on its real estate investment. >> we are one of the top foreign buyers of real estate in the u.s. over the last decade so yes, we are definitely long on real estate in the u.s.. the implications of the tax reform for our real estate sector is limited, i think the broader implications on our equity activity in the u.s. is more important frankly. from a relative perspective, i think there will be a slightly theer tax burden but given fill up that it will give to the expect thingswe
to go well. tracy: let us talk about private equity, you have a potential boost from tax reform and also a lot of concern about valuation right now. guest: no doubt. the valuations are a bit low, definitely. good thing, ases that a opposed to just being an outright challenge is because this is the time when focus is measured. we can differentiate -- buying right now blindly will not work out over the medium-term and i think that much is clear. there is more risk on multiple contractions looking into the future than there has been over longer period of time. the companies within those actors that have the opportunities to grab shares in
answer to uber that they are branching out. they launched their retail venture this week which features and hurley locally sourced products. tracy alloway spoke to the ceo and asked him why a ride hailing company is starting up a retail business. >> the name of the venture is basically an online platform for creators to boldest come to our platform and showcase their products and creativity. is a mission aligned on three dimensions, the created has opportunities for a lot of people in the region to come and earn a living. in the same way we want to give that same opportunity to the creators in the region who has we know, are not the best recognized and paid. brand somegives the more visible presence in the market. now with this platform, we will start seeing things more.
the third thing is that we have built advanced logistics network company, sonsport this platform will showcase our abilities for the transportation all things and will start experimenting with on demand logistics on the platform. tracy: is that of future business for you, logistics? guest: the movement of people has been our business for the last five years, the movement of things is going to be a feature in the next few years. tracy: how does that feed into the actual revenue stream? when will you be profitable across major markets and when will you start disclosing some of your finances more importantly? guest: we are still a private company. [laughter] so we try to keep that information closely guarded, but is not thebility
core objective at the moment, we are still in the very early stages of this opportunity. the mobility opportunity in is e region and the broader internet opportunity of the region is worth hundreds of billions of dollars and we are still in the phase of landgrab as they call it, get as many people onto the platform as quickly as possible so that they can start using mobility and over internet products in the future. just give you a time frame, it is probably 2019-2020, that is what we are looking at in terms of profitability. tracy: maybe i am wrong, but i feel like the date keeps getting pushed back. let us talk about fundraising, there has been lots of interest, the softbank investment in saudi aabia, abu dhabi doing similar thing, is it time to raise more fines? do you need more fines? guest: it has been a great last few years for technology businesses in the middle east -- the you need more funds?
region spends about $1.8 trillion in products and services. only 2% goes online today. it becomescent, if 20%, we are looking at 500 billion dollar opportunity for online businesses, so it is not surprised that more money's becoming available to technology companies in the region. that helped by the fact we've had some successes recently so i think more people are becoming confident in investing in technology with locally and globally with investors looking at the middle east. tracy: very quickly, speaking of fundraising. one of your investors is prince walis who has been arrested in saudi arabia -- prince walid. have you heard from him? guest: it is business as usual in saudi. the things happening on those levels are not impacting the business in the ground.
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