tv Bloomberg Markets Middle East Bloomberg May 11, 2016 12:00am-1:01am EDT
schemes on the agenda as the world of islamic finance gathers. reworks its india militia to prevent investments using the island's double taxation tax. is 8:00 a.m. across the emirates, 5:00 a.m. in london. i'm manus cranny in dubai. inhaad: i'm rishaad salamat hong kong. welcome to bloomberg markets: middle east. manus? manus: rishaad, the question is this, who was the sharpest of them all -- the effects were trader, the fx equities trader, or the bond trader? take a look at this. what we've got is society reality under a bit of pressure, spiking higher. , mpeg at 3.75.e it ratcheted higher.
asian is, a devalue highly spectrum -- a devaluation is highly speculative. we have the central bank governor, but 12 months, that's what you're seeing, ratcheting higher, jumping the most since january. this closed. we saw a spike yesterday as well at 50 bits on the market yesterday. it comes down to this. the fx traders are going to be pushing the agenda here in terms responsibility. we also see bartering rates at a three-year high. we see the highest level of bartering rates since 2011. the squeeze on in the market. rish? rishaad: absolutely. the strategies are there. goldman saying they are now seeing the bombing of the dollar happening. rallying, thehis greenback having its biggest advantage in six months last week. they are suggesting this goes on
for another 15% per movement to an upside against a basket of currencies if we actually get the normalization of monetary policy in the united states. if that happens, we will see this move up and up. let's talk about what's going on elsewhere. let's move from fx markets in the dollar to what goes on with equity trading. we have had 20 minutes of trade so far for india, mumbai up i-19's of 1%. the topics are largely -- 9/10 of 1%. the topics are largely negative. the hang seng losing ground as well. in the middle east, about two hours away from the opening of the markets in the emirates, dubai, and other dobby. this is what we saw in the last section. dubai finishing out the session on tuesday, i don't want to say in decline, up 3/10 of 1%. looking at what is going on in
down, nearlyally 2/10 of 1%. manus. manus: lovely, rich. if they focus on the rally in the u.s. or if we look at the price of oil. meantime, there are other stories making headlines. the yvonne man has special news. yvonne: donald trump has won the west virginia and the brassica primaries, a week after driving his competitors out of the race. ted cruz's name was still on the ballot in nebraska, and he hinted he might reenter the contest if he performs well. bernie sanders won west virginia, his 19th state victory. he has just 37 delegates up for grabs. president -- the brazilian president is facing what may be her last day in office.
entering an impeachment trial she looks unlikely to win. suggested that the president's opponents have 50 votes, more than they need to move towards impeachment. japan trading houses seeing no recovery on the horizon for commodities, despite oil's improvement. some of the first annual losses from mitsubishi championed the nation's economy. is -- and fries efficiency prices are sliding 19% in the fiscal year. rochu, upis 29%. and reports from india say that u.k. has turned down requests to
extradite a tycoon accused of walking away from as much as $1.4 billion in debt, connected to kingfisher airlines. he has also asked interpol -- interpol has also been asked to issue a red notice for his arrest and extradition. he has denied being a to falter and has shown several sums showing that he intends to pay up. this is bloomberg news, i'm yvonne man. has reported its first annual sales decline in a decade. for your revenue fell 3% and came in at $25 billion. much of that can be linked to a stronger dollar. the airline says it is facing fewer bookings, the oil industry, and the uncertain global outlook. however, the ceo remains upbeat. he told bloomberg radio he is
not worried about overcapacity. isas far as overcapacity concerned, that's a view held by many carriers. we don't share that view. >> y? >> because our network brings strength. we have 150 cities on our network. as we issue subsidy paris, we turn on business with other city pairs. remove business around from one city pair to another. that's the beauty of it. we are not concentrated on the north atlantic, south america, the middle east, or north africa. we are a very diverse, well-spread operation. manus: dexterity i think is the up some on that take away. let's run through the results. it is our bloomberg news middle east aviation reporter. we were both in that room, listening to him. for you, the global story seems to have impacted these numbers. reporter: that's correct.
emirates has seen the first drop in revenue for the last 10 years, which is really telling of tough times of the airline. that can be attributed down to three reasons. first and biggest is the strong dollar. as you know, their currency is tapped to the dollar, so it has wiped out and made a major impact. you also have the lower bookings in the oil and gas industry, because of the drop in oil prices. --y are traveling rest traveling less, reducing premium bookings, said the drop in oil prices has been a double-edged sword. manus: they are being punched from every direction. you and i concluded that this yields compression. he was very forthright. this is going to continue, not instantly turn around, is it? reporter: exactly. they will see yields treasured
into the next year because of the strong dollar, also because of the drop in sales out of europe. that fell 5%. that is going to continue. they will have to be agile and find alternate markets. they are seeing growth in asia. they are turning towards the ledger market there, where they are opening new markets in asia. manus: thank you very much for the very latest on emirates. our bloomberg news middle east aviation reporter. let's get to the global islamic finance. germany is set to open its first islamic bank in july, where turkish finance could provide banking services. we are joined by the director of banking supervision and the german financial supervisory authority. with our correspondent was an been -- he is with our
correspondent. islamic backing is being embraced by non-muslim countries as well, the likes of the u.s., u.k., and china, if you believe it. germany is now expecting -- expressing interest. why is germany interested in islamic banking? it is the first time for germany to participate in this kind of seminar. short time ago, huge potential was recognized because there are more than 5 million immigrants in germany, so we believe there is potential for this in germany. the reason for coming is to find out what we have to change in germany to support this. reporter: so into regulatory framework and play -- is
regulatory framework and play to adopt this? >> yes. but the banking industry has to be profitable. mightd to find out what change in the future. reporter: you talked about how the migrant population, the drives islamicon banking in germany, but it islamic banking is for non-muslims as well. is there as stigma attached to islamic banking because of the refugee crisis? moment, there are problems with the refugees, and some part of the population is against this development. we have to change the ideas of the people. not only muslims will use this, other people will as well. reporter: you were talking about
how the regulatory framework is enslaved. -- instance [indiscernible] bank regarding the federal regime, settlements pay into it as well. [indiscernible] reporter: what do you think of the growth of islamic banking? we talked about double-digit growth, but that amounts to only 1% of assets. conventional thinking is 99%. >> in the whole world now. you are talking not only of europe, the whole world.
in relation to the other banks, they would not decline. it is a limited market. there is more liquidity in the market, more opportunity. it will: what you think take for more non-muslim countries to embrace islamic backing? we have seen germany interested, the u.s., the u.k., china. many bankers say it -- as athis opportunity business opportunity rather than ideology behind it. they need more information. rish, back to you.
correspondentve a -- she is there today and will be there tomorrow, manus. manus: rish, thank you. when we are back, we will talk about saudi arabia and jordan. i want to bring you quick breaking news. loss, as low oil and gas prices hurt its revenue. biggest oilof the producers up there in abu dhabi. revenue came in at 3.9 billion, had revenue from oil and gas comes in at one billion. these are disappointing numbers. much more to come. we will talk about saudi arabia and jordanian relations. we have a very special guest joining us after this break.
manus: it is lunch time in hong kong. hong kong exchange is coming with this first quarter. 1.4 billion hong kong dollars works out to about 185 million u.s. dollars. let's look at what is going on here. hong kong exchanges, $185 million in the first quarter. that is news breaking right now. thank you very much for that. saudi arabia has committed to invest billions of dollars into jordan to joint council that will oversee money from the saudi public investment fund. let's take a closer look at what's going on. of the the vice chair
arab bank in jordan. great to have you with us. john: thank you for -- guest: thank you for having me. that thethis news saudis would get involved in jordan. you know -- we know what they have done for the egyptians. can you give us a guess of the size of the front? guest: that is to be decided. we are in the first step right now. -- government of jordan and government of saudi arabia will get together at least once a month in order to workout agreements. the objective is to reach agreements on the number of things, including the investment fund. on role the cooperation energy issues, on trade, on transport, and also a commitment the publicn
investment fund of saudi arabia in key sectors of jordan. that obviously has to be worked out. the saudi fund has to which sectors are competitive in jordan, which are the sectors to invest in, and which are the promising, commercially viable sectors. manus: and that's bridging the gap, isn't it? where is it in jordan's interest to say that these are the strategically important entries for us? guest: if we really think about this, this is a huge departure from the way conventional business was done in between arab states. in the past, jordan was, is still used for assistance given from the united states, the european union, and particularly saudi arabia, to help its budget and finance key public sector investment projects -- roads, bridges, etc. now we are moving into a different age altogether. the saudi's are looking at
investing in key commercially viable projects which would egypt, jordan,in and other countries, which would increase exports. this is quite a departure from the way that business was being done in arab states in the past. manus: it's a big cultural shift. in vision 2030, the key saudiple's focus -- the prince's focus, everyone is talking the huge change that is being invoked in saudi. do you see big risks in terms of what they are trying to do in saudi? how do you see vision 2030? guest: i see it as a trinity. it is a big change from concentrating on public funding to enhance growth in a huge economy like saudi arabia, to on private funding, on the private sector, in order to stimulate growth and grow the economy in saudi arabia. privatization, whether it is
setting up the public investment fund in a different way, looking at issues other than oil issues, i think this is a big departure in the way that the saudi economy will be much more resilient, much stronger taste on private funding, instead of public funding that is hostile to oil. guest: a big poultry shift that he is trying to push through. guest: is -- manus: a big cultural shift he is trying to push through. guest: there is no other choice. ways, oil producers in the middle east are addicted to assistance. we will shift that. it is a big paradigm shift right now, and there are going to be enormous opportunities. manus: hold that thought, because when you talk about that change in mentality of the middle east, we will pick up on that team after this short break. envoy to the saudi
♪ in dubai.is 8:24 here let's get back to our special guest, the king's personal envoy to saudi arabia, vice chair of arab bank in jordan. break, wewent to talked about structural change, social change. but there was a physical dimension to the middle east that really is important. saudi is pulling back, abu dhabi is pulling back, the imf has warned that abu dhabi could pull back on the list. how do you see this fiscal decelerate or in the region? it's a big risk, isn't it? guest: i think it's a big
opportunity. these are collective measures that must be addressed in order to provide the correct pratt form for economic -- correct platform for economic growth. we will never be able to achieve the kind of objectives targeted in 20 30th public finance is in order. i think the central component -- public finance is not in order. that15, that was the proof people in saudi arabia are wanting to address these critical issues through smaller subsidies on low income brackets, on middle income brackets. manus: one thing we like to try and do here is take the six story in the region and talk about how it plays into the world. what i want to know, as an irish man who lives in london and talks about europe all the time,
is who is going to benefit from this revolution, bringing foreign investment into saudi arabia? who are the industries benefiting? guest: first and foremost, the people who are benefiting are the young people of saudi arabia. they represent 70%, those under 27 years old. they are the ones actually looking for meaningful employment, and those who have aspirations. today, the demographics of saudi arabia are very interesting. manus: is that when we should be focused on from the north european perspective? absolutely. creating jobs. this is the largest cohort of young people coming in in the middle east in the world today, and they are all technologically advanced, all using smartphones and all connected to the web. it is extremely important for these kids to know that in 10 years time, they are going to have meaningful lives and aspirations for phil. i think projects like the ones announced in 2030 are calling
for saudi's to work on their own, but also in local cooperation models, providing employment opportunities for other generations. resetsvery briefly, this the social fabric of the middle east. guest: it has the opportunity, yes. it is badly needed. i think at a time when we are totally immersed and overwhelmed by what happens with isis and terrorism in all these terrorist groups attracting young people who feel alienated and desperate, we need opportunities for these young kids in order to provide them meaningful hope for the future. manus: the next time you are in town, come in and update us on those five meetings. i expect to have you here on five occasions with five updates. thank you very much, sir. that is the personal envoy of king abdullah the second. rish? markets coming up,
india renegotiate the financial treaty with investors using it as a tax shelter. 12:30 in hong kong. i'm rishaad salamat. manus: eight: 30 a.m. in dubai. i manus cranny. 8:30 a.m. in dubai. i'm manus cranny. reporter: good morning, rish and manus. manus, when we take over at 6:00 and "countdown" takes the airwaves, we will have a host of earnings coming through. we have a lot of german companies reporting this moment. any company specializing in delivery these days needs to work out how much it can offset weakness. key things the cfo will have to speak about when he speaks later on this morning.
looking at numbers from metro, the retailing space, from a neon the editing provider, and also alley on. the german parent company there, will they say anything about negative interest rates, that sort of thing. you have a lot of reports as well, manus. manus: i do indeed. i've got compass, the biggest food company in the world. you and i were chatting earlier, i just don't know what to believe. jpmorgan wants us to buy great stocks, and goldman sachs, it's a rehash of a rehash. they are calling time on the dollar drop, aren't they? reporter: yeah, that's an interesting one. the dollar on dubai gold. -- the dollar or by gold. -- buy gold. a hedge fund billionaire says the best quarter from 1986 could be the start of something
bigger. talking about greek gold, jpmorgan has a call there. the ceo talks about how greek stocks are about to erase their 2016 losses. the stocks in athens are not the best performing in western europe. the jpmorgan is saying it is teed up late to get into the greek stockmarket rally that we see. contrast, morgan stanley and the like, they had been recommending greek stocks or greek banks later on this year, had it all comes back to the finances meeting we saw in brussels on monday, where we saw for the first time ever plans for debt relief in greece being seriously put on the table. they are trying hard to keep the imf as part of the bailout talks. todoubt greece will continue be important as we head towards the summer months. manus: i will be back with you at 6:00 a.m. we have a feast on our show
"countdown." rishaad: saudi aramco says it is looking to expand internationally due to rising demand for oil. let's speak with our bloomberg news energy reporter. what is the message they are trying to get at? is there any change in policy as you try to filter down the company? message we are seeing from the kingdom and the ministers, there is really going to be no change in policy. they want to keep focusing on this marketshare policy, targeting enough customers and selling volumes of crude oil, rather than targeting a price, as opec has sometimes done in the past. seeceo is saying they demand increase this year by about 1.2 million barrels a day, and they are going to meet that demand, whether it comes from inside the kingdom -- we often see higher crude burning in the summer because it is hot there,
and they need the extra power for air-conditioning -- or whether it comes from china or india, the big demand centers that the ceo mentioned. he says they will meet that demand and continue pumping crude oil. we do not see a change in supply policy. rishaad: the thing is, what are the expansion plans they had in mind? guest: -- reporter: part of the expansion plan of the kingdom in general is to go beyond relying on crude oil sales for revenues. they want to expand into things like petrochemicals, manufacturing and downstream industries. as part of that, aramco is going to be the spearhead of the operation. intove already worked expanding joint ventures within saudi arabia, and into countries like the u.s., japan, and china. of those expand some petrochemical deals, and they want to do that globally, doubling the amount of refining capacity they have, and they want to become an integrated oil, chemical, and refining
company. they will be looking at acquisitions in joint ventures all over the world. rishaad: and this off energy company came out with it figured -- this abu dhabi energy company came out with figures earlier. what else is catching your i? ka feeds into the saudi and global energy story. the saudis have been increasing production to put higher cost consumers in the market. taqa came onto the scene at a time when it hurt their earnings. it is that kind of dynamic. low cost producers are coming on, adding supply, purging earnings across the corporate energy space, and so taqa has been cutting costs.
we will see them refinancing some debt by the end of this quarter, so they have a $1 billion bond coming through that they will refinance. we see that dynamic coming across the energy industry, of companies having to cut costs and companies like saudi aramco increasing production and fighting for market share. yvon: thanks for that -- rishaad: thanks for that. let's talk about oil. may be at a golden moment, at least from a technical perspective. david inglis is having a look at this. one key indicator, david? , the: the golden cross opposite of the death cross. this is one of the most closely followed, bullish signals, if you will. perhaps that is because it is easy to understand. what you have is a short-term average and a longer-term average.
this is very textbook. you have the 50 days and 200 days about the kiss for the first time. -- about to kiss for the first time. we are very close right now. you see that spread? $45.32 is the price. -- 4005 hundred $32 is the price. 45.3 two dollars is the price. for us to actually get there, that is maybe going to take to move up in the actual price for that to actually cross. if that does happen, a lot of people see that as a change of , towards the price and the assets. this actually happens more often than you think. crude prices had this a few days
ago. the s&p 500, emerging markets, copper was also be in. we just talked about the risks in the previous section. not everyone is convinced. have a look at this. these large japanese trading houses. long story short, this is what those companies think oil prices will do this fiscal year. a 29% decline. of these note, some companies reported their first annual loss. not saying they are doing this because of this, but we have seen it happen. when you start dialing down your assumptions on your underlying assets, and you suddenly see prices stabilizing further, then you realize -- just getting that out there. but this is what the charts are saying. a bullish signal. the golden cross. manus. manus: thank you very much.
david inglis with the latest. studio.oined now in the welcome to the program. they have been setting up the tone of oil. i am interested in the bond markets. we've got a chart which is the compression in bonds. are ready to come to the bond market. 40 want to be in the bond market? they were quite elevated at the start of the year, and they have come in significantly, even though there is an acute understanding that the funding requirements are substantial. we expect that out of the gcc, the combination would be to the tune of 15 billion, and that would be front-loaded, right?
if i look at the relative value between sovereign and corporate's, there's not much pickup incorporates. k-up in corporates. on thei think the rate bloomberg index is single a. the other day, put very much squarely in my box. i was told the relationship between oil price and bond risk was not correct, and it is down to fiscal constraints. would barclays say the same? guest: at the end of the day, of dictates the fortunes sovereignty. as you have discussed, there is great plans to address that in balance to a great extent. having said that, we need to look at corporate's and what they are doing in terms of restructuring the businesses,
dealing the existing balance sheet, etc., in an environment where they are under pressure. at've got to look fundamental analysis. that is key. i like a chart. you will find this every time i come in, i will get charts for you. this is talking about the funding in saudi. when we chat in the office, is it just the media finding a chart and saying the boys are playing up? great indicator. it's about sentiment for saudi arabia. beyond that, it is up to interpret. the fact of the matter is, saudi has tremendous sovereign wealth, but first it has the ability to go to the capital markets, to raise funds. it's got multiple sources of
funding still available. it goes and teachers with exchange rates. that requires a different mindset. it does. let's go more global. we are romping through the reporting season. morningar called this from goldman sachs. deja vu, isn't it? oute fair, they closed their trade. look, we are under pricing on a global basis, the fact that the fed would be able to move more. rp, w.i.r.p., wi saying that the possibility of a 4%. rate hike is down to would you agree with goldman's this morning that we are under pricing? guest: bradley, yes. two points, we believe the fed will move.
uptick is out of the equation. september is more likely. that is our point of view. with respect to the rates across the board, look, it is not so much what the fed up once, it's also what the ecb and bank of japan end up doing. a strong euro or strong yen is not good for corporate opportunity. let's watch out for their actions as well, although they disappointed the markets recently. manus: time has run out. that is our markets guest today. he is head of global investment for barclays wealth. rish? why do this now? we've got details coming from mumbai. ♪
manus: welcome back. time to get a market update. let's get to julianne moore. good afternoon. reporter: it has been a choppy session here. gains fromng good japan, even though the yen has started to rebound. the nikkei to 25 -- the nikkei 225 is up by 9%. that is supporting the regional index, even though we have hong kong on its lunch break, down by 6/10 of 1%. stocks lifted in hong kong are at two month lows. you can see there is still good movement coming from the energy prices, taking a rally on the crude oil rebound that we saw in european and u.s. markets on tuesday. in china, we are seeing the shanghai composite up by 6/10 of 1%. korea actuay come tough with its unemployment rate,
miss.was a bit of a and we are seeing mixed movement from india and southeast asia. the philippines and australia, both these markets are trading at levels we have not seen since mid august of last year. australia is boosted by the rebound commodity prices. the philippines on its best back-to-back win since january as investors digest the election. mixed session, a but certainly hong kong is weighing in on the index, and japan is trying to lifted high up. manus: thank you very much. juliette saly with the latest. let's check in on headlines around the world. the yvonne man is here. canadian officials say for mcmurray has largely survived the devastating wire buyers. -- wildfires. almosttwo and a half --
2000 buildings have been lost, but schools and hospitals are intact. companies that took production off-line, including, go, are already planning a restart. conoco phillips, are already planning a restart. the navy is having a dispute in the south china seas. china has created an island out of a reef by dumping thousands of gallons of sand and coral, also building an airstrip. they say the voyage was a freedom of navigation operation in what they consider international waters. the investigation into the cyber theft of $80 million of bangladesh has found three hacking groups, two from nationstates. hackers say it is the third identified group that full off the highest. -- the heist. digital fingerprints of those from pakistan and north korea have been found, but it is unclear if the third is a criminal gang from another
nation. powered by over 2400 journalists in over 150 bureaus around the world, this is bloomberg news. i'm yvonne man. india is being used as a tax shelter. let's go to mumbai. why is this? one word, transparency. it's an historic move by the government to stop investors from misusing the tax treaty, using it as the root to have a taxes. in 1983, india signed a tax treaty to promote investments and trade. nearlyhen, you have seen $90 billion coming to india in
the last 15 years alone. fishyere was such thing -- something fishy. realized these were coming from indian entities routing their money. theirwas a need to plant loophole, exactly what the government has done today. what has it done? investmentat any coming from these entities will have to pay capital gains to the tune of 50% of the prevailing tax rate from april 2017 to april 2019 all stop after april 2019, they have to pay the full tax rate. this brings a lot of credibility and transparency into the regime. rishaad: it seems innocuous and a nonstory, but you explained it so well. there are huge implications on investment into india, i'm assuming. guest: yes. experts say that
in the short term this will mean higher taxation costs for investors, but in the long term this will mean credibility for india's taxation regime, and also levels the playing field. india is going to go after similar text treaties with both singapore and cyprus, and you will see many say this will level the playing field. .his is not knee-jerk this has been in the works for a long time. india has given enough time. this will come into effect in april 2017. issues cane with make their investments comply with the law of the land. up, we take a look at that goldman sachs call. they say that dip in the dollar is over.
rishaad: welcome back. we are just a little bit of an hour away from the market open across the emirates. we are looking at the dollar. manus: i am looking at the dollar. it is that speculation on the fx market. but one only take a look at this. my big fat greek wedding, and then there is my big goldman's call. this is it. they are saying the dollar's drop is over. we dropped 1% of the year. they say there is another 15% left in the straight. that is debatable. p functionto your wir on your bloomberg, jane has a 4%
probability of a rate hike -- june has a 4% probability of a rate hike. the dollar hike was the biggest in six months, and for the month thirdil, we had this month of losses, the longest losing stretch since july 2014. i want to focus on july 2014 because after that, we saw a 20% rally. it has to be said that goldman sachs said last week's reaction, the reaction to the numbers was interesting for them. they said we had disappointing jobs numbers and the dollar actually buys. they had the position back in february. they closed some of that thread. they are back on it again. rish. are talkingyou about goldman, goldman has come out and said, because goldman is in the opposite direction of the dollar more often than not, the historical trend. goldman has come out and become more bullish on gold while
actually rotating their bearish stance, if you know what i'm getting at. they have raised their price targets, so they are still below what they are currently. a billionaire fund manager is saying after the best quarter we have seen for gold in terms of where it has gone in 30 years, we could be in line for some huge moves up. it could be the beginning of a huge bull run. how does that stand? how did it also sit next to the bullish call for the dollar when it has that inverse relationship with gold? there we have it. we will discuss it and more in the weeks to come. that is it for this edition of "bloomberg markets: middle east." manus: thank you very much. we will reset the agenda, and hop across to europe. we have countdown with anna edwards and myself. oil is just a slip order as we go to the end of "bloomberg