tv Bloomberg Markets Middle East Bloomberg December 29, 2016 11:00pm-12:01am EST
♪ >> is new in here in hong kong. donald trump says the u.s. should move on after president obama punished russia for allegedly hacking the election. intelligence agencies are being sanctioned and 35 russian officials are being expelled. russia rejects this and says it will introduce outer measures later today. the euro surged 1.6% against the dollar early friday as they surprised the market. fx traders say the move below one dollar and ordered a snowball. it will drop against all of its major peers.
oil is heading for the first gain ahead of the global production cut to reduce the glut. they are also seeing the biggest full-year rise since 2009 despite stockpiled at the highest level in three decades. producers have agreed to cut output sunday. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. let's get a check of the markets now. it is a mixed day, but hong kong, china doing better than the morning session. asian stocks are fluctuating. singapore, tokyo, mumbai. back in half an hour. time now for the best of bloomberg markets middle east. ♪ yousef: it is the end of the year that saw the end of opec.
welcome to bloomberg markets middle east as we wrap up 2016 with this special holiday edition. i'm yousef gamal el-din in dubai. lows,barrel, 13 year record stockpiles, supply outweighing demand and i ran back online. something has to give, and it did. opec agreed to the first production cut in eight years. we have more from singapore. reporter: going into this meeting, the real differences were between iraq and iran. going up to the meeting, iraq and iran argued they should be exempt many production cuts because iraq needed money to fight isis, iran was lifting production from presented levels. -- pre-sanction levels. i ran finally agreed to be a part of this, it had the second
highest production cuts after saudi arabia, and the two of them accounted for more than half of the group. that leaves wiggle room for iran, instead of now trying to push oil production to the pre-section limits will now -- sanction limits will now have more. everybody gave a little and took a little. those three were able to bring everybody else and behind this is 1.2 million barrels per day reduction in oil output starting next year. that lifted wti prices as much as 10% yesterday. the big winners are oil producers, the rising oil prices all over the region. singapore,s in seeing uplift. energy giants in china are benefiting from this. airlines and recliners are having rougher go of things.
there are questions in the oil market about how this will play out. morgan stanley said hiler -- higher oil prices mean you will see investment in u.s. drilling from shale and other players. that could add to the second half of next year, leading to price instability this time next year. we will see how everything shapes itself out over the next year or so. in the game is back of defending the price of oil, and russia among other non-opec reducers followed suit. kuwait chairs the monetary committee and says it will begin in january. i spoke to the ceo of color energy and the founding partner of morton frisk after this was done. >> i don't think it is going to be very sustainable. two things are going to happen. there is a lot of oil out in storage, both floating storage in logistics as well as official
storage. with these high prices and the forward curve, some of that will not come into the market, and it will go quickly under pressure. this is christmas coming early for shale producers in north america. is this deal,able 1.2 million barrels a day, given that you will give shale in the u.s. quite a significant floor? they will put more oil into this market. >> the car as a couple of questions there. -- there is a couple of questions there. saudis demand lower. after six months it will be summer in saudi arabia, production will have to go up and the deal will go under strain. and then she'll is coming back, starts cominghale back, will opec stay with the cuts will it be stronger than anticipated? >> another person we spoke to
again, it isd done, the execution. they put together a community, they are supposed to oversee the agreement it stood by. are you optimistic given the track record we have had from opec? it does not speak to a very significant degree of compliance . are they going to be able to turn things around this time? >> for opec, it would be good if it happens. >> do you think it would happen? >> the man is already outlining it. he is already skeptical, and i'm with him. .> you will get with that how about you, robin? you may comments over the weekend about not implementing the deal. u.s. shilique recovery -- shale recovery will tip the balance against opec. , but: it will be cheap
everybody went cheap on their quotas. ofwill be secondly because one million barrels per day or something like that. with one mentor start cheating -- member start cheating, two or three isn't far away. if all the part. a beautifuls him chart clients can pull up on the bloomberg, this really shows you the latest numbers in the index. look at the uptake, we are up once again. lou parts indicating builds in the red, and the red is declines. the yellow line really shows you u.s. crude output which has jumped accordingly. again, where does this go from here, the u.s. shale story? some say you see games until 2018, then things slow down because of permits. what does it look like?
morton: i think the sale story is just getting done. this is going to expand tremendously. when you look at the chart here, one very important thing, back these -- that is not the case today. in addition to the increasing rate convenience, -- rig convenience, there is a lot of stuff in this system where riggs can be more heavily employed in the field. manufacturinga is crude, which needs to be rebuilt and expanded, and they need higher prices to do so. generally speaking, i see shale in the u.s. at the beginning. they could add another one million barrels. reporter: this from riverside energy, while shale has proven to be resilient, only 1.3 million barrels are going to
2016 compared to the yearly average of 10 billion -- 10 million barrels. morton: we are likely to see a strong rebound in shale. the question is, over the next three or four years, how much non-opec production will have been lost? we are looking at material areas like mexico. how much will shale they got for that if prices go higher? we have a much longer leave time than shareholder projects. i am optimistic it will bridge that gap, but there are other concerns raised by the ia and some kind of gap. yousef: a healthy dose of skepticism about whether this will work and the global shale. david ingles take a look at how the market played out and what needs to be thought about in 2017. david: let's start with a look
back at oil industries. oil is talk, a need for a need for- hawk, agreement, below $30 per barrel. prices have risen since. we did get the deal between oil producers that sent oil prices to the range we are in at the moment. before the q1 of next year, it will be about global inflation. that is what we see the base effect come into play. that is really what people are talking about. let's have a look at market dynamics moving ahead, looking at interesting relations as we enter 2017. a very interesting trend, as we noted. let me have a look at the daily change in oil price. this will take you back to 2012. i think what it shows you his 2016 was still about a wild year in terms of price swings. swings got exacerbated, but not
as bad as 2015. for the most part we were stuck between $20.45 and within that range, 4% to 5% daily swings were not uncommon. sort of died down in the next year. is your oil prices, the second one is a relation between oil price and equity. the essentially the positive relation has returned. the benchmark for using it to buy index, as we did with foreign sentiment, historically it looks like this. it is positive, this is a five-year chart. historically it has looked like this. the past two years has been positive. it didn't a little bit in november -- dipped a little bit in november and did come back up. the thing that is positive that may not go for equities in the region if investors get skeptical, a first risk of theympliance to that deal,
will go the other way. that is how things look. he has been a rocky 2016, and it looks to be a more interesting 2017. yousef: bloomberg's david ingles there. looking at the slumping oil prices, saudi arabia announced sweeping reforms this year including changes to the capital markets. hear from the kingdoms finance minister in a moment. this is bloomberg. ♪
♪ yousef: welcome back to this holiday edition of bloomberg markets: middle east. i'm yousef on community. -- yousef gamal el-din. the new man in the job had been running the kingdom's capital market authority overseeing a series of reforms to open up markets to foreign investment. i spoke with him in september in
his former role and began by asking how much money the kingdom hopes to attract. >> well, as much as we can. generally it is what the market can take, what investors are willing to put, what is happening in the region, what is happening in the world. the foreign investment is concerned, so it is a jersey -- journey. yousef: looking back to summer 2015 when the first series of reports came through, you realized restrictions for foreign investors, and there was a lot of euphoria and expectations were high. reality is those expectations have not met -- been met. why will it be different this time? d: we are a bunch of entities. diligencee doing some
, asking around, but they will not put their money if they are following international entities . we are international entities. stakeholders are attracting investors. we have an investment forum in new york -- next month we have an investment forum in new york and another in london to promote .fforts on showing it is to relisten to investors and their requirements. yousef: an inclusion by the nfci would bring millions more. you think the reforms you have undertaken that you intend to do in the future is going to be enough for the emerging markets classification? mohammed: yes. we have been in discussion with
nfci and other investment and did see his. -- investment agencies. we are in continuous discussion with nfci. we believe discussion has taken place. implement in 2017, should be enough to put the target markets hopefully in 2017. and then four quarters of that for inclusion. yousef: another country being buffeted by the ups and downs in energy markets and its own economic program is kuwait. under periods of overspending, it has plenty of stuff in reserve. now the oil minister told us this in may. >> [indiscernible] it is quite substantial. yearse by the coming five
it will be measures of fiscal and economic reforms that have been announced in the 15th of april by the degree, that after five years we will be able to come back and cover all of the gdp nominated. we will close up [indiscernible] tremendously. >> i know this is your six-point plan, you are a man of reform. my question is, a brave man enters brave reforms. you are up six points, corporate tax reducing subsidies and privatization. for you, what is the priority of those? i know the stakes, but what is the priority? anas: to focus on issues, i would say closing on my deficit, the financial deficit, and then i have to divest by have a more
private sector coming in locally and internationally leading up to the call. and i think we are willing to do that. i believe some of the rating agencies that have just issued the ratings realize this very we haved that is why turned our existing rating, which we were happy to hear and receive this news. long-term -- and the negative visions they see out of this, negative outcome vision is something we have to deal with in the coming eight months to show our reliable and determined level of doing positive firms. yousef: up next, the follow from turkey's failed to.
♪ yousef: turkey's economy is failing the fallout from the failed coup, retracting gdp for the first time in seven years and the lira tumbling against the dollar. the faction in the armed forces try to take control, leaving a sustained period of political instability. here is how the prime minister defended the economy after the initial unrest. he was speaking to our reporter in ankara. at an coup attempt economic impact on the turkish economy. immediately cut our ratings, and that was not ethical. it was taking advantage of the situation. .e have overcome a coup attempt
we have struggled to keep democracy running, and these agencies should not be rushing their decision. this was saddening for us. the turkish economy did not deserve this if you look at the indicators. it is an ideological and political decision, we have no doubt about that. all we are saying to global investors in this has come and gone, and the national will and the will of the citizens has destroyed them fires. you can continue long-term investments. we will eliminate long-term investments before you. we have all kinds of tax incentives, investment incentives, and we are given irt to add and edit investment -- priority to add added investment. >> is this putting pressure on the turkish economy, the currency can't deficit which remains -- current account deficit which remains the
third-largest inclination? >> we will continue with our large scale investments without putting our break on. before the religious holidays we opened a bridge on june 30. july 26, we will have another. in the beginning of 2018, we will have the first terminal in the largest airport in europe, which will be inaugurated december 20, and we will have the celebration under the bosporus. foundersill they the -- cornerstones of another bridge, the longest in the world. turkey will continue its investment. riad: you mentioned the government would increase investments more than on social spending. that would mean it would reinforce the growth of the
economy has seen dependent from government spending. are you planning any measures beyond what you just mentioned to encourage private investment and indeed for investment rather than just bonds and stocks, but maybe direct foreign investment to the turkish economy? a wealth establishing management funds. it will finance large-scale projects. we will go through this fund instead of the general budget which will be cleared of problems. when you became prime minister, you said changing turkey into a presidential system was one of your priorities. has anything changed in that in the last week? for example, especially regarding the timeline of that change. are you still considering a referendum should parliament not pass it as you desire? is there a possibility of early
elections? binali: early election is out of the question. i am underlining this and being very clear about this. there are some circles trying to confuse the situation saying the ex parte has come out strong after this and will have an ambush election. this is not even doing through our minds -- going through our minds and we don't find it difficult -- ethical. we have power for the next four years, and we will use that for the next four years. if anyone is trying to seize authority, they will fall on their heads again sledgehammer, and we did. from now on, if anyone is thinking about doing such a thing, they should watch their step. why a presidential necessary, it is necessary for stability and security. under the presidential system, there would be no one attempting such an adventure, because then an absolute political will be in
charge, a weak government would include coup plotters. we have always succeeded in thwarting them. how we succeeded, because the nation was backing us. yousef: still to come on the program, egypt's booster economy. the reform including a inflation surge. we hear from the finance mr. next. this is bloomberg. >> we expect to use inflation gradually. we are going down to 10%. some
>> it is 12:30 here in hong kong. china says it intends to further relax foreign investment banking, futures and mining. the vice chairman of the national development and reform commission made the announcement during a briefing in beijing. he said beijing wants to encourage foreign companies to list and issue stocks in china. culture and rethink the way it does business with global uncertainty in 2017. shenzhenold staff in that it has risen over 32% in the last months, reaching $75
billion things to strong performance across all of the business platforms. bailout of the world oldest bank has won the green light from brussels. the european commission will use public money to rescue this bank to the tune of more than $9 billion. lenders are struggling. japanese prime minister shinzo abe's approval rating is at a three-year high following his visit to pearl harbor. that is from a survey. 64%, butsix points to 84% agreed with the decision to visit pearl harbor, 9% opposed. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. let's get a check on how the
markets are trading in the asia-pacific today. here is david. david: the last few hours of trade, we have the last few shots of 2016 in japan. it is interesting the last few minutes or so. we are as of now, looks like we are ending this year on a fairly bright note. but the has done for japan and hong kong, it managed to edge upward push up the indices for a yearly gain. it has been flat for the most part, you have the hang seng levels barely up for the year, but japan, it does look like we will continue to see abenomics working everything a year. set -- 7/10 of 1%. we are tracking oil next year, the holiest -- highest number in months. chart, let me just hit
you with this, 22,000, we are on lunch break of course. we will see what happens in the afternoon. hopefully the gains halt. ♪ was a big year for each of the economy culminating in a $12 billion loan package from the imf, the biggest ever in the middle east, but securing it involved reforms including cutting subsidies. our reporter spoke with egypt's finance minister in cairo just after the deal was signed. >> it is going very, very well, even beyond our expectations, especially with the currency, the feedback and when you have seen already. it is very encouraging in terms of going back the markets and supporting the markets rather
than the foreign market, which was harming to the economy. so this is very positive, and the central bank and banking system is doing a good job. reporter: talking about momentum of conversion. i understand $3 billion approximately has been converted . is that growing? amr: it is gathering. basically the central bank and the banking system are including all the stakeholders into the system. when you are all the way, it will take some time, but performance so far is great, really, really good. manus: but you have to have a bandwidth of where you see the egyptian fines. where do you see that for next year? amr: we are not calling that result right now because things will take time. talks happening so far is very
encouraging, not just from [indiscernible] currency into the banking system but feedback from investors with equity and bonds as well. manus: how do i participate in the upside of egypt? it is either bond markets -- next year, if this goes well, how much more can we see you come for next year? amr: it depends on our financing needs and the development of basically one thing like how much investment will come into the country. investment or not. we would come to the market. $5 billion? $10 billion? amr: we envisage a number like that between now and the next year, 2018.
inus: i put my money in, but want to be solid -- and to that and that is where my confidence is. where are we with the backlog demand for dollars lower -- dollars? how long will it take to get that update? amr: i think the banking system is working on this in a good way. it is again jurisdiction of the central bank of egypt, but so far we are doing this in terms of what they need and the backlog as well. this is taking place in a very positive way. manus: confidence, it is an interesting world -- word. talk to me about the biggest question investors have had for you, authorizations with foreign investors. confidence.ll about the entire thing is about confidence. it is what you would.
-- it is the policies that you put. if you do something for the last 30 or 40 years, floating the currency such a way that gives a lot of confidence, when people see that the system is credible and transparent, that gives confidence. when we take this into consideration, it gives confidence. manus: and when you get involved with the imf, there are many issues, discussions. what additional taxing will be necessary, subsidies are coming for egypt in 2017 after the new relationship with the imf? amr: it is not a matter of when and how but the standards of the country. for in 2014, a plan was put this. it was a plan to happen every year for five years over or 15
years over, have you. happened 2014 and 2015 because of the sharp induction in oil prices, the action was not good this year. we are addressing this issue, because we know this has really hurt egypt for a really long time. we are serious about dealing with, re-addressing the subsidy and really getting the subsidy to the people to help the most and not give absolute subsidy to everyone. manus: other investors will look at egypt and want to know about your foreign exchange reserves. is there a flaw in the fx reserves as a part of this relationship with the imf? amr: look, i will not talk about imf numbers, but prior to 2011, we were having a good year. figures, we were
in very good shape. we are reaching like now a sort of, all we have reached is a soft curve. remember we have like a trade deficit, a current account deficit, and don't forget we have taken a big hit from the industry. this is something that will take place in a very good fashion. manus: let's talk about the economy. what is it the reality of what you have done is monumental with the currency and with drawing subsidies? what is the realistic growth model for 2017 for egypt? amr: we should expect this year something around 4% give or take. you are in a transition time, transition period between action that might take -- create some sort of, not the fastest
way to go, but you need to see investment coming to the country. this is the most important issue. now we are seeing investment for equity. the next step is to see the real economy function at full steam. one of the hangovers on the economy was the situation of the currency. now this issue is being resolved. we expect to see more, and we are working on this investment so that probably will encourage and bring more investors to the country as well. manus: inflation is the other issue for you as well and as a nation. 25% at the level on the street. what is your primary driver for succeeding and tackling inflation? amr: look, we have reached, i mean we peaked at inflation. the currency situation faces and manufacturers who are closing their foreign currency out of
the foreign market has been also affecting the inflation by really -- it seems that the budget deficit, we expect to reduce inflation gradually. we are starting to go down to 10%, sometimes -- some time next year. yousef: a new year, a new u.s. president. a billionaire tells us what you think about donald trump. this is bloomberg. ♪
america,elected by the and we have to accept that. he has promised to dismantle the nuclear agreement, agreement and arrangement between the united states of america and iran. he will meet this commitment, i will take the first step, my first personally. there is a lot of things he promises to do. you would forget him for extreme vetting of muslims? talks, political talks. manus: there is a business partner already in business with trump. do you think that by trump not becoming president, that would make the sale of the properties easier, that relationship with trump? khalaf: we have to address him as the president of united states. [indiscernible] manus: investing in america,
trump in the white house people say will go for infrastructure, america will grow. would you invest in america? khalaf: i will look and see, maybe september next year 2017, nine months, to see what he is going to implement from his promises. he has a lot of promises, which we would like to see it. hereditary more than anything in the world especially with iraq and iran. manus: iraq and iran, what do you want to see with iraq? khalaf: the current administration gifted iraq to iran. iranian people -- we want iran and iraq to come back to the arabs.
manus: i don't know if that is 100% representation. some people say obama changed policy, no more bits on the ground, he brought troops home. let's talk more about you, your business, and markets. you move a lot of money into cash for this election. did you take any preparation for the risks the market was assuming on a trump victory? are you surprised by how the markets have reacted? myself, i am thinking, positively thinking, i have three months to think and make this steady or look into a new project. i will see what he promises. then i can salute him. manus: if he does what he promises, you salute him. let's talk about the dollar. theing behind me, we have
city behind him. but you see the old hotels in the region, one is a w just beside the hotel. the cranes at work are pretty much going to this man. let's talk about the dollar and the impact on the region. has a strong dollar hurt your hotel occupancy? khalaf: just remember [indiscernible] it is not affecting us at all. manus: but that affects tourists coming into dubai. this trip is costing me a fortune. khalaf: yes, but if you look at how cheap that you -- the hotels here are compared to anywhere in the world, then [indiscernible] manus: let's talk about that. you say the peg is cheap. you think the pegs will hold in the society, the pegs will hold against the dollar? in your region, society pegs, do
you think these will hold? khalaf: they will hold. manus: as i said, i have come down from london. it you seen any impact on brexit ? there is a drop in sterling. when you look at u.k. assets more? khalaf: we are looking for property in england, we found some property in england, we bought also a lot of pound. manus: you bought a lot of sterling at this level. will you see it go lower and make it work just? -- warchest? khalaf: we brought property there now already. we are looking for other property as well. manus: will you be looking in central london? do you think central london is good value? khalaf: it is all packed, everybody taking money. manus: where are you looking? khalaf: maybe outskirts of
♪ yousef: the fed's decision to raise interest rates in december for only the second time in a decade signaled a steeper path are borrowing costs in 2017. people wasted little time in following the fed. you had saudi arabia, kuwait and all raising benchmarks within hours of the decision. we have the chief economic advisor at all he and. my colleague asked how much this pressure is putting on emerging markets. >> it differs, like in this region, pegs to the dollar, others are free-floating. it differs from country to
country, but it is tighter conditions for the emerging world. it is not a disaster because they can upset that through other means, but they have to pay attention. a lot of people have been interpreting yellen's comments as more hawkish than we experiencing. i found this particularly on the idea she does not want to run a hawk economy as an experiment. what was your take on this? mohamed: if i was to put it in one phrase, it would be beyond data. the fed took a small step beyond being just a to defendant. it was not independent. if you look at when markets moved, they moved to the press conference, and that is partly what you said, she walked back to the notion of high pressure. people say, wait a minute. are we not just seeing a slight hired expectation of a rate hike, but in addition, this could be a fed that is tighter
than otherwise. it wasn't really much the statement as the press conference. reporter: have you been surprised with the swiftness with which architect reelected -- have reacted to this? seems like a switch was flipped, switched from the low inflation to something new. mohamed: no because i have always had this notion we were at optimal levels, the notion of youachable -- beach ball hold underwater, and it shoots up much faster. levels.t artificial now there is clear indication the fed is less willing to keep interest rates artificially low and the markets are reacting. most of the reaction has been as you say from the interest rate front and from the currency front. it will be interesting to see what are the consequences of all that. reporter: where does this leave equity markets? mohamed: what i think is clear
is we are in the midst of a big romance right now with three elements, high-growth, high inflation and more liquidity for the markets. why? because of the policy announcements of donald trump the president-elect. he has focused on elements that are progrowth, pro-inflation, and if possible, you will bring back money to the states, part of which will end up in the market. that is what they are falling on. has taken hold in such a big way. reporter: now that trump is heading to the white house and we have the potential for fiscal stimulus, how comfortable do you feel with not just equity markets but the wider equity stability? pivotd: i think that this from over relying on central banks to a more comprehensive policy approach is way overdue, way, way overdue.
why? because we have seen the benefits of monetary policy come down and the costs go up. the market is sensing this event, and we have only had announcement. we have not had implementation. that is a good thing for the economy. reporter: is there a potential that the market has gotten ahead of the agenda? we don't know the details or if it will actually happen. mohamed: there is potential if announcements do not translate into detailed design. it is tricky. yes on the markets have gotten ahead. there is another stability the markets have gotten ahead. we have only looked at the growth. there has been no repeat of rhetoric the markets heard so much through the elections. reporter: i wonder how much doubt you are giving donald trump and all of the energy related appointments we are seeing especially sitting in your seat in dubai there as oil is really front and center to that region and truthfully
around the world. mohamed: i can only comment on the economic appointment, because they are the people that i will know, and i will give more than the benefit of the doubt. he has gone to people who are experienced. they are progrowth. as long as he surrounds himself with colleagues who knows how governments work, that would be important policy team. on oil, the major issue is supply-side at this point. is the extent to which opec has forged this agreement in two ways. one, it has a much more explicit inclusion of non-opec members with russia, which a crohn's for half -- which accounts for half of the cuts. and second, within opec, this is a much more flexible agreement. it differentiates much more on opec members. the major change on the oil side is really from the supply side rather than the demand side. yousef: prices are rising, how
>> it's 1:00 p.m. here in hong kong. donald trump said the u.s. should move on after president obama punished russia for allegedly hacking the election. intelligence agencies are being sanctioned and 35 officials are being expelled. russia rejects the accusations and says it will announce a series of countermeasures later today. early friday and mx traders say the move started below $1.05 in order snowballed above that level. the dollars on track to drop against all its major peers. oil heading for first major