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tv   Bloomberg Markets Middle East  Bloomberg  August 14, 2016 12:00am-1:01am EDT

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♪ plugging the gap, egypt is confident in finding $6 million in additional funding for the bailout. ♪ host: and oil has its biggest weekly advance since april and saudi arabia is ready to talk about market stability. and turkey will officially ask pressure-- ramping up on washington. a.m. in to buy and
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midday in hong kong. i am -- i am yousef gamal el-din . what a week it is looking set to be with the moves we are looking at. the big moves in oil and of course the news on a staff level agreement in egypt. all eyes will be on the egyptian assets across the board. let me show you what has been happening with egyptians docs -- stocks. agreement has been reached, but more important the stock exchange is extending a rally that has been going on for the most part of the month. you can see the line in purple, that is the egyptian stock exchange and you can see toward the right, the rally in the circle highlighted for you. against theed this
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200 index, which is a good gauge of how the stocks in the gulf are performing. you can see the stock exchange and how much it has performed. gainse looking at 20% in this year and a good 12% of that course of one month. -- take a look at wall street. the s&p 500 went to lower on at a -- on friday. mean all, the dow finished the week under 40 points. and the nasdaq rose to a new all-time high. in this part of the world, we are just under two hours from the opening of the emirates market and abu dhabi. and i become become a two stocks there among the top gainers, double-digit gains, but for all of the negative picture across the gulf here with the by down about a fifth of 1%, there are
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also earnings from air arabia come away to be the estimates for the most part. the estimates for the most part. currently, they have three holds, but still the analysts are pending to deliver an update or their interpretation of the latest batch of results. air arabia looking at the second quarter profits fall 13%. and this is the remainder of the it downudi arabia is half a percent, but remember this is before oil went on andar into thursday friday. it will be interesting to see how they digested the rebound. here is tracy. tracy: private equity firm kkr is said to be considering a bid for entertainment one, the tv distributor behind cut the cake. pig.llows -- peppa
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they are studying a potential growth basel -- potential proposal. it would help kkr and their goal in expanding media and entertainment. and what has been called a landmark move for china, they are getting set to sell the bond in the imf special drawing unit. they say they have approved 2 billion units of bonds for the market. that is the equivalent of $2.8 million payable for the u.n. this is the fifth global currency in their basket. and the imf has highlighted $2.9 trillion of high risk credit in the shadow banking system of china. they say that investment projects from security firms could pose a bigger risk. the so-called shadow credit is based on equities or debt that is not treated and the imf says that default could it lead to the quality -- to liquidity shock.
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receiving --ies have nothing to fear from brexit. they said that those approved before the budget autumn statement will receive full funding. the chancellor also says that the government will match agricultural funding until 2020. the farmers of britain are said to lose almost $4 billion a year in subsidies from europe. global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. this is bloomberg. yousef: breaking news hitting the bloomberg, aerotech, a key company on the to buy exchange -- dubai exchange, reporting losses. revenue, second quarter coming in at 2.6 billion the rooms -- durams. and earnings out from dumac
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properties, the second quarter revenue coming in at about 1.7 billion durams. at 87the net coming in million durams. and if you comments, the levels -- a few comments coming up, the levels they say remain healthy. and also that the dubai market remains solid. we will keep an eye on this story and we will move to the other top story, egypt confidence that it can secure the more than $20 billion in funding it needs to revive growth and ease a crippling foreign-exchange system. now, what has egypt agreed with on the imf and what are the details? you are looking -- you are looking at?
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imf said that there are many ways to improve the punch body of the foreign exchange market and easing, going for maybe a possible devaluation and moving the exchange rate. other key goals are reducing public debt, the budget deficit, trying to get growth and momentum. and and portly, restored the confidence -- restore the confidence of foreign investors that they can put cash into by ands and stocks large. the deal was reached on thursday and the imf mission chief says he expects the board to consider it within a matter of weeks. some of the finer details we are looking at is basically not egypt must rise -- raise additional financing. that is before they go to the board. the imf said this will be between $5 million-$6 million.
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yousef: this could help the economic issues? >> it gives them momentum. egypt has had several problems since 2011, but major among them is perhaps the lack of trust him of the confidence that investors have -- trust, confidence that investors have, they look at revenue falling and different challenges. also, the big overhang with the exchange rate. now there is an agreement and it could convince people that they can go back, albeit some might wait to see what will happen with the currency. i spoke with a debbie prime minister about the remaining -- deputy prime minister about the remaining funding, and he said that the imf will help egypt sick or the bilateral agreements to bridge the gap. the executive board have to consider a fully financed deal. yousef: it is pending approval
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from the imf, but also from egyptian lawmakers, this is not the first time we have seen a staff level agreement. is there risk that this euphoria in this agreement gets derailed again by the obstacles on the political front? >> we asked that question to a foreign minister on thursday and he along with others say that this time could be different because more or less, there is consensus that the situation is dire, it cannot -- egypt cannot afford to reverse the course. the challenges that he said was to monitor and have an effective dialogue to make sure that -- do not bear the brunt of the economic measures that the government will take. the subsidies, that could lead to inflation. this is important. is goingf is that this to pass this time. yousef: thank you.
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we will see you later. we will get additional perspective from a professor of economics. thank you for joining us. we were just talking about the egypt thewmakers in reeling the latest staff level agreement. do you see any reason to be concerned, that it would not make it to the finish line? if we look at the egyptian parliament, the parliaments for the to pass this with imf, because there is not much time to waste. they understand that this is very critical to the egyptian economy. approve it, this is number one. the second challenge is, the current government should be
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implementenough to the deal's program with the imf. this program, the economic and social reform program is a very strong one them of because it has -- one, because it has three major elements. to address the financial imbalances, the balance of payment. and the exchange rate issue. in addition to the second the -- toddressing reform the structure of an egypt.ent in and third, to secure the port -- poor and low income people. the program is strong. so, the current government should enhance their capacity to
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implement the program. say that thecan a bridge, since he has with the people, they welcome and support the program. yousef: the government is targeting $21 billion over three years, is that going to be enough to fix the frontcourts the -- foreign currency dilemma? >> it is not enough, because the financial cap -- gap is almost $30 billion. so, $21 billion through borrowing, and the other nine from other sources, like the world bank and the african development bank. and the united arab emirates.
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and the ability to issue bonds in the market. so, it should be forthcoming. the nine borrowing from other imf,es and that from the $21 million is not enough -- $21 billion is not enough. but this deal gives confidence to investors to be forthcoming to invest more in egypt. in this case, you sent -- see, they are looking for another $9 billion over the next three years yousef:. this -- years. yousef: this begs the question on how the central bank will proceed. they did the first devaluation in march. where do you see the devaluation coming and where should the traded? punound be >> in the exchange rate, to
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--alue the injection pound egyptian pound, it would be devalued to be valued at the level of equilibrium. equilibrium will be at the real effective exchange rate. the exchange rate means that it would be devalued by 15%. it would reach almost around 10 a egyptian pounds per dollar, but this depends on it should they -- depends on if they have enough reserves. that is what people need in egypt. yousef: that is a professor of economics at cairo university on the line. still to come on the program, to talk aboutteps coup on ther the
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united states. and do by doing us -- dubai joining us next. stay tuned. this is bloomberg. ♪
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♪ yousef: welcome back, you are watching "bloomberg markets: middle east." a quick round up of the main stories from around the middle east. turkey is submitting a request for u.s. authorities to arrest fethullah gulen over his latest involvement in the queue attempts. -- coup attempts. erdogan is asking for him to be arrested. he runs a global network of charities from self-imposed exile in pennsylvania. he denies any involvement in the coup. washington says they will find evidence before they act. and iran will present products
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to international oil companies, expect major contracts to be signed by 2017. the oil ministries news agencies says that companies have showed interest with preliminary agreements already signed. the agency has set a roadmap for cooperation with a german cup in he come did not name any other companies. egypt's deputy finance minister says he is confident in getting additional funding from the imf, which has agreed to lend to cairo $12 billion. they told bloomberg that the additional funding will be found in the coming weeks. egypt needed to line up $5 billion-six ilion dollars in bilateral -- $6 billion in bilateral funding before the package. and let's look at how a loan to
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egypt could impact the financial markets. -- migrate toby have you. -- great to have you. we were talking about this story a few weeks ago. now the staff level agreement is here, so what is your take on the first details. >> in terms of the reforms, people know what the reforms need to be done. subsidy reforms, that is another thing we have been talking about. basically raising prices. the more important thing, the next step is implementation, how will the government? do this for the past five years, they knew what had to be done and what the mf needed -- imf needed it to do, but they were reluctant. now with the exchange, they have agreed. it means they have to implement the reforms. yousef: which you say this is a
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result of desperation? we put up a chart that shows egyptian stocks and how they compare to the region in terms of price and so forth. also, the egyptian reserves are under massive pressure. we saw the decline in july. was there no other choice? >> yes, they had to do it. some people would argue that it is late. i think it is just about time. yes, egypt needs to do that now. and there is a political thread through that. nowe is a political world to do that. yousef: do you think it will be derailed? >> there is always a risk. in parliament, there is always a risk. but the president, if you saw his speech, he handed at devaluation -- hinted at devaluation, so they are much more confident this time. yousef: what is the central bank
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going to do? we saw the differential between the egyptian pound and those going forward, those are massive. where do you see the central bank moving? the imf must take into consideration. wasy argument is, if there no agreement on the devaluation, that there was not going to be in imf deal. eventually, i see the devaluation or a floating of the currency. when it will happen, that is the question? i would say it needs to happen asap. where you have the market, the black market trade, between 12 and 1260. obviously, you need to devalue. and there will be speculation in the beginning. rates will be high and is sometimes unrealistic. we saw that in 2004.
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but the argument is, devaluation will be inevitable. yousef: you are sticking around, not just to discuss the imf story, but we will be taken a broader look at the gulf markets in light of the rebound we are looking out with oil prices. stay tuned. this is bloomberg. ♪
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♪ yousef: the ceo and head of renaissance capital in dubai still with us. here, just the graph to get perspective on how the egyptian equities compared to some of the peers. after the latest rally, the devaluation score that bloomberg has assigned to the exchange is quite expensive compared here. abu dhabi in the middle. how would you rate the egyptian
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equities? are they interesting? >> historically, they have always been expensive. theuld put them beside devaluation arguments for now. on how the market reacted, the day that we started talking about the possibility of having a deal, the market has been running. it is running because of the economic reforms expected. and the du valuation -- the evaluation itself, it must be priced before it actually happens. in terms of the attractive sectors, the banking sector is still attractive and we still have interest in the stocks. if you look at it, even with all of the economic challenges, you have had the banks going in excess of 20%. this is a very underpenetrated market, less than 10% of households have bank accounts. and health care is another one,
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so we have a lot of interest in health care. the sector will be the consumer sector that will be lagging. yousef: let's shift away from egypt. how does egypt compared to the rest of the region? and where do you see the opportunity in the coming months in the area, with oil rebounding , it is less likely to be a catalyst in itself. >> there is not much upside in dubai. two weeks ago, i said i thought there was a lot of opportunity with the saudis. there is a lot of opportunity in health care and education. yousef: where is the big risk for saudi arabia? >> i think the big risk for saudi arabia is the implementation of reforms, as well. a similar story with implementation of the actual reforms. it is how they will be
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implementing them, how they will move from hydrocarbon-based economy, that is the challenge. in terms of the budget deficit, they have enough reserves to cover it. yousef: any other plays apart from the mainstream for the big economies in the region? anything in kuwait? >> we do cover those markets, but there are no immediate capitalists there. basically, we will see a lot of info. -- inflow. apart from that, not much unfortunately. yousef: thank you. thank you for joining us, ahmed. coming up, turning up the pressure on the u.s. over the failed coup as the president of turkey renews ties with russia. we take a look at turkey's tactics.
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this is bloomberg. ♪
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♪ yousef: the top stories on bloomberg markets. egypt confident of securing funding by next week. the imf agreed to lend the country $12 billion. saying that they need to line up $5 billion-$6 billion before the imf approves the bailout package. and oil with their biggest weekly advance since april.
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saudi arabia is prepared to talk about the stability in the open talks next month. talks next month. the minister reportedly said that is good result in action to stabilize the market. in turkey is submitting a request for u.s. authorities to invest -- arrest fethullah gulen over his own legend involvement -- alleges involvement on the military coup in turkey. he wants him to be arrested, but washington says they will need evidence before making an arrest. we have been following this na, whatn a -- and an happens next? >> this is no supplies that
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turkey blames fethullah gulen. they arrested thousands of suspected followers, so it is no surprise they made this request. we know that there is a justice department team going to turkey and joe biden is also going to turkey. there will be discussions. in sayings adamant that they need to see evidence before they take the process forward. turkey is ramping up pressure on washington to act, and also politicians in turkey have domestic constituents to satisfy given that they openly blame fethullah gulen for the coup. yousef: president erdogan had his first meeting with the head of state since the coup attempt. we talk about the pivot from the west to russia, it is too early
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to make that statement. it is kind of -- >> yes. it is not a total surprise. the tie between those two countries deteriorated after turkey should -- shot down a russian aircraft last year. there was a reconciliation, however, following the seismic shift or this is you know, this is a huge move, it but it is an exaggeration because if you want to pivot to russia, you need a lot of pivot. if you look at trade ties, the eu is by far the biggest market for turkey, by far. if you look at's turkey -- look at turkey's military, they are the second-biggest after the u.s. again, shifting that to maybe they will do a deal or so with
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russia, over all it was take years or even decades for a significant pivot. and we have seen similar examples in the middle east, ties for eight years that have not been the best, but military deals have improved, and with saudi arabia and the u.s. saudi arabia did some deals with france and russia, but still the u.s. is the biggest partner. these things take a long time to change. yousef: we will see. thank you a lot. ok, we will check in on the first word headlines. here is tracy. tracy: officials in yemen say that an airstrike on a school killed at least 10 children and waited dozens -more- wou -- and wounded dozens more. peace talks collapsed earlier
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this month. doctors without borders condemns the attack, saying that the victims of rape between 8 -- saying that the victims were between 8-15 years old. and it took two months of heavy fighting, killing more than 1000 people and displacing thousands in syria. they had held the city for 2.5 years. libyan u.s. back government forces are fighting to push the islamic state out of their last point. they launched an offense of to take -- offensive to take back the city. hours a day,24 powered by more than 600 journalists in more than 120 countries. this is bloomberg. yousef: oil will begin a new
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trading week coming off their best week since april, after saudi arabia signaled that they were ready to talk with opec. we will bring in anthony, what are the saudis telling the market ahead of the opec informal talks? the message keeps the evolving. >> they are telling the markets that they are ready to talk. this is the saudis saying what opec said last week. the main thing that the market picked up on was that the saudis are ready to talk and they are willing to do something and they are willing to do something potentially -- potentially in september. the main message is that they are on the case, that is what they want to tell the market. they will not let the market run wild. they can potentially intervene, they will not say what they might do or when.
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there are a couple other things in a statement from the minister, which could impact the market. they say that demand is good, we saw their crude production in july, increased to 10.7 million barrels. that is according to the iea and the reports to opec. they say that there is demand for the crude and the prices that we have seen, dropping into the 40's, that is not sustainable. it should pick up by the end of the week. yousef: the moves we see with production, the countries are trying to position themselves as strongly as possible for the informal talks. and it is at the high levels that they want them to be at. so where does production go until the end of the year? i am already looking at the gains. where do you see the production going until the end of 2016?
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>> that is the key question. the oiltors affecting prices, we have supply and the big overhang of stored crude and products coming on the market. has beenis what pushing the price down. so that will be important because, if there is not an agreement and opec decides to keep of the really hard market share fight, what is implicit in the statement from the saudis is that we are at the record production, we are at record reduction because the demand was high. when the summer demand is not there during the winter, that means there is potential for more crude to be on the market and they will be using less at home. isan is trying to -- iran trying to ramp up production.
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they want another 200,000 or 300,000 barrels. we will see what the talks yield. yousef: an exciting showdown. thank you. adam, he spoke with francine lacqua and it says that the demand is rising. oil andt's talk about natural gas. gas, we have record high financial indicators, we are burning up a lot of natural gas that is beginning to slow down the climb in the gas inventory. we are generating a lot of electricity from natural gas. and on the oil side but we do have demand on a global -- side, we do have demand on a global basis and we are starting to see the supply and demand rebalance
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and by the end of the year, going into 2017, i think the oil markets on a global basis will be more balanced. >> we will look at the chart. global oil prices from west texas, down. and of we go with the today moving average. demandell me what the gloom crew gets around? where are they wrong?/ adam: where they are wrong, they are not looking at the supply side. the problem is not demand, it is too much supply. and as that type is off -- tapers off, the saudis cannot go much hyper -- higher. and in libya, things not going very well there. so supply is not growing as much as it was a year ago. with demand continuing to go up on the economic growth, it will
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rebalance. >> the dynamics between the micro and macro view, but also the upstream and downstream dynamics, particularly in the u.s. >> they are important, tom. but to go back to adam, it will rebalance. expects a, but it keeps getting pushed back. time thes trying to exact nature of the supply and demand side. task.it is an impossible the trends are taking us in a direction of rebalancing. on the consumer side, gasoline is down around $2.20 a gallon this summer in the u.s. that should help. it will continue to get the miles driven going up. opec tou expect actually stabilize the markets?
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they do have a pumping record. adam: most of the opec countries understand the global markets have been pretty clear. what will affect this is more demand and lower supply. and lower supply is more likely to come from the impact of lesson drilling, then it is to come from political deals for production. speak: still to come, we to one investment group in london as the rivals wait on the sidelines. and a chief officer of the abu dhabi financial group joins us next. this is bloomberg. ♪
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♪ yousef: welcome back. you are watching "bloomberg markets: middle east." awaiting the fallout for brexit,
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one group says it there is plenty of opportunity as there is a surge in gulf-based buyers. joined by the ceo of the abu dhabi financial group, thank you for coming. exciting times for you by the look of it. talk us through what the demand has been like. >> absolutely. over the past two months or so, we witnessed a 15% drop in the pound. what it means for investors, it is 50% cheaper for them to purchase property in london. months, thisf two has generated huge inquiries for real estate in central london. we have been making progress in this. yousef: you mentioned the
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british pound and we have a chart to show how hedge funds are positioning themselves. they are betting on further declines on the british pound, so what does that mean for opportunities in terms of purchasing additional assets? opportunists are , but we do have a long-term view. having said that, a decrease in the pound will only make us be more demanding for such investments. in my opinion, the pound is almost bottoming out. and it will stay at those levels for a wild. i do not think that a further severe decline is on the way. yousef: any properties you are looking at? what is close to your heart? of the neweveloping
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scotland yard site. and we are interested in hyde park, also. hopefully, that will come next year or this year. yousef: in terms of interest outside the u.k., which countries do you find interesting? china, the u.s.? >> we have a lot of interest in eastern europe and also the gcc. and saudi arabia is an interesting market at the moment. place we are watching. yousef: which new market would you consider? >> that is an interesting question. i would consider, as we have done over the past six months, we have added more resources and effort into the ua market.
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we think it reflects the best risk versus reward for the investors today. yousef: in terms of investing locally, you have roughly a 48% stake in foreign capital. what do you plan to do with the firm? they just reported earnings. what or where does that fit into the portfolio? >> we are waiting for regulators , for their go ahead and the which will be soon. and -- ahead, which will be soon. and we specialize in turnarounds. over the past year, this has been our forte. capital will have a massive turnaround and hopefully we will make it marketable again. yousef: you're also buying stakes in other firms.
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like andour warchest how much it would you be able to deploy locally? >> over the past 12 months, we have spent millions in various companies, most of them around the market cap and below. stake, took a sizable working with shareholders, making changes to the company and so forth. havehankfully the prices appreciated. yousef: how much money do you have to spend for further acquisition as you look into the second half of the year? >> it is not how much we invest or what we plan to invest, it is how good of an opportunity is out there? yousef: for $2 billion, could you stomach that? >> absolutely.
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yousef: you are partnering with gfh, what is the vision for that plan? what are you looking to achieve. ? in thatve a stake company and we have been working with them to turn around the company. we reported yesterday the results, they are conservatively better than last year. so this is a way to expand and with this new venture that we are doing, we are creating a platform in the abu dhabi global market to attract capital from in theand deploy it area. yousef: how do you stand out in a country that is already over banked? >> we do not think what we will be offering is or has a lot of competition at the moment.
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what we will be offering is offshore banking. and offshore banking capabilities while you are in the country. plus, management and so forth. today, competition is great, it means that the consumer or climate -- client look at the best. and we do not shy away from competition. ,aving another offshore bank and the first in on the debbie global markets -- abu dhabi global markets, it leads to further expansion in the banking sector. yousef: i would like to get your view on where you see oil ranging, how do you feel about the prices? just because of the impact it has on this part of the world. >> absolutely. the early part of the year when it was pushing 27 and so forth,
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this was the highest amount of investment we invested in the local markets, since six years ago. we strongly believe that oil is going to end of the year between $50-50 five dollars, and next year it should be around $65. because we are conservative, we do not think it will go beyond that in the long term. but we definitely see a difference. yousef: we will have to leave it there. thank you for joining us for the insight on the u.k. and beyond. still to come, after a volatile 2016, china was able to arrest their economic slowdown. but the loudest data shows that stability -- but the latest data shows that stability could be faltering. that is next. this is bloomberg. ♪
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♪ yousef: welcome back.
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you are watching "bloomberg markets: middle east." the loudest data from china shows economic stability beginning to falter in july. highlighting the continued was of china's banking sector. we will discuss this with tracy. we got the data on friday, so how are people interpreting it? tracy: it really showed that it seems like in the third quarter is off to a week footing -- weak footing and a lot of people are reacting by pointing to the economic stimulus. should the government continue to fuel economic growth with cheap credit, or should they do something else? judging by the credit data which was weaker than expected, it seems like a are pulling the put off of the gas pedal. they are opting to deleverage the system and slowdown growth.
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yousef: what about the chinese banking system? are there any indicators that give us a level of clarity? is a massive issue. we had a really good note pointing out the huge problems remaining. they say that china has already started bailing out banks and they have been raising trillions for the new capital and writing off the debt. the bad news, there is more to do. and back to the credit issue, the problem with chinese banks, is if they are raising capital to fuel additional credit, that does not solve the problem. yousef: what about the week ahead? prices areerty coming up on wednesday and all eyes will be on that. you will remember last week the big story was the bank of england with quantitative easing and next week we have data on the u.k. and we get the first
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hard data posted brexit, so we want to see if inflation is rising off of the back of brexit. and we have u.s. inflation data, that will be important for the fed. and we also have the ecb publishing a meeting. yousef: are you watching the a x mpics?- oly tracy: i have not. hasef: well, michael phelps closed out his career. butterfly ofpening the medley relay. phelps got his fifth goal of the rio games and he finishes his career with 23 gold, three silver, and two bronze medals. i always like to think that any different career i would have been a swimmer. that is it for us.
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we will be live at the same time tomorrow. ♪
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