tv Bloomberg Markets Middle East Bloomberg February 22, 2017 11:00pm-12:01am EST
♪ >> fairly soon, the fed minutes show rate hikes are coming. warnings the bond market is underestimating a march move. >> south africa budget target the wealthy to plug a budget shortfall. we will hear from the prime minister. ceo alan joyce says he is optimistic about china. >> for iran, money talks louder
than trump as it gains a foothold in the global energy market. >> it's 8:00 a.m. across emirates, 4:00 a.m. in london. welcome to "bloomberg markets." >> i'm in hong kong where it has just gone midday. we are seeing the asia regional benchmark falling for the first time this week. you can see right now a bit of a mixed picture. the nikkei is trading on the downside after we saw that game against the u.s. dollar although the dollar index is gaining right now against the yuan. the be ok leaving its key rate decision unchanged. we also heard from the governor there's a low possibility the u.s. will name korea a currency manipulator.
this is a snapshot of what is happening across markets in asia , but it has more to do with the amongd more uncertainty investors. >> especially the terminology. fairly soon is how they described the possibility of further rate hikes. let's see how the market is looking at all of this. very interesting. what you're looking at here is how the market was positioned hikedime around the fed rates in december. three weeks out from the ,ecision, that straight line that's 100%, the expectation for the rate hike. if you look at the blue line, aat is the expectation for march hike. we are back down here a little bit over 33%. very different set up and lead up than what we had back in december. this part of the world, we are edited of hours
away from the opening of the emirates market. what a day it was. a lot of upside pressure in dubai, up 2.4%. idolizing key terms of the recapitalization plan by the end of march. 's leading gains. we did see weakness in property stocks as well. egypt, we are seeing foreign investors taking profits, following the index down a little over 2%. headlinesow taken on from around the world. >> president donald trump delaying the release of his revamped immigration plan until next week. official terms said the new executive order would be announced this week. causedginal plan
confusion or u.s. air force, triggered protests, and was blocked in the courts. treasury secretary steve mnuchin dollar jirga's confidence in the u.s. economy and its appreciation over the long-term is a good thing. gains in theent dollar to support for donald trump who said before winning the election that he favored a weaker currency. independent french president candidate emmanuel macron has agreed to an alliance with his rival. polls show marine le pen leading . >> i believe that if he wants to for french politics,
he should abstain from being a candidate. he represents only for the time being 5% or 6%. alreadythe situation is complete and i don't believe it will be very positive to have another candidate. >> south korea's central-bank left its interest rate unchanged for an eight-month. the be ok holding the seven-to purchase rate at a record low, pretty much widely expected, though. meanwhile, the economy looked to be improving. the scandal surrounding the continues. we've got the world covered, the world of business, that is. 2600 journalists and more than 120 countries. >> thanks. the minutes of the last fed meeting show members anticipate
raising interest rates fairly soon in light of an improving economy and the possibility of higher inflation. joining me to talk more about this is our global economy editor kathleen hays. let's jump into these minutes. far from really a nugget of information. what struck you? >> he get 15 or 16 pages of carefully written minutes. there's not a sentence, not a putse that the people who these notes, these minutes together do not choose very, very carefully. that's why there was so much focus on this one sentence. many participants -- that means probably more than half of the people, the fed officials at the meeting -- expressed the view it might be appropriate to raise the federal funds rate again fairly soon -- those are the words that made all the difference.
mean? does that more than one beneficial including dennis lockhart last ,eek and i interviewed him also, it is a live march meeting. live does not mean the fed walks through that door that is now open to a march high, but it means the fed is thinking about it, looking at it, and that is what is so important. j powell, a governor at the board for the fed in washington speaking in new york today said all these same things, but he added that he does not see the economy overheating. he still sees some slack in the labor market. he said one thing the fed can do -- it can be patient, so seeming to say to me he's going to watch the data between now and the march 15 meeting and again, get
some strong data, get a big consensus, maybe the fed moves, but maybe they don't. markets are on notice now that the fed is thinking about it. >> am curious about the market reaction. what took the biggest hit? >> the reaction was muted generally. there was hope it would deliver something different than the statement said last month. the reaction was slightly dovish. you saw the yield come off of it and the dollar get hit slightly, so the slightly dovish interpretation and then markets are aware that march is possible but not probable. in fact, very improbable. very hard to get enough of a pricing in for the fed to deliver in march i think at this stage. >> what struck me was the
opinions on the back of these fed minutes, we see a shift downward in terms of expectations for a rate hike in march, but the reality is there are contrarians out there and those who say that the market is ms. pricing this, like mohamed el-erian. >> exactly. i'm so glad we are pulling our world interest rate projection page up on the bloomberg. we are looking at the odds of a hike. they are only about one in three for march. you have to get to me before you see anything above 50. most say june is more likely and importantly, bloomberg intelligence is saying the same thing because they are waiting for trump to take what he will actually do. not get a sense of urgency from the fed minutes, and finally, they say they will be content to wait until the second quarter. that would mean jim would be
more likely. mohammed said the odds of a hike are up to 50% or 60%. when he read the minutes, he sees the bond market underpricing the risk. about three weeks for us until .he fed can decide again, you have to watch inflation, retail sales, the jobs report, and maybe more fed speakers if they are really serious about making that move, giving us stronger signals than these minutes did today. marketsre currency taking all of these developments that kathleen has told us about? the dollar index right now .eeing a little bit of strength >> i think generally, you are asset pretty tired classes, particularly in currencies, but also rates. rates have been in this range for a while. they threatened to break down for a while but never did.
short treasuries come along dollar have come out in the last couple of months. kathleen mentioned trump plus speech next tuesday. i think that is critical now. if trump doesn't deliver something concrete and really in terms of a clear, detailed plan, that risk premium for march to get priced out entirely and you could see a capitulation in dollar yields. >> thank you so much for joining us and also kathleen hays from new york. you can get a market rundown in 1-click, and there's all the commentary and analysis from
point. this rally had been going a little bit too hard, and of course, we had those fed minutes . ,e see the dollar, of course trading higher. we're still seeing property developers very much supported by these hopes we are seeing property curbs coming through from china, and of course, still very strong demand. in shanghai, you are seeing weakness to the tune of around strongd of course, effect on the nikkei. no surprise from the bank of .orea of korea saying there is a very low possibility of the u.s. naming korea a currency manipulator.
audit leisure is a stock that has been coming under pressure during today's session. we also had some disappointing numbers out of australia as well. that has weighed on the aussie dollar. a quick look at the yen because that is the main focus. in terms of currencies today, a .ittle bit stronger i guess, a little bit of a retreat. a very strong rally we are seeing across asia. >> thanks. let's talk a little bit about south africa, specifically the budget statement. we did have that announcement and of course our interview with the finance minister who presented the statement that was designed to plug their revenue shortfall. gordon has been at all its with president jacob zuma. this is key to the country's finances. >> forecast, by definition, is a
forecast. you work out your expectations and work out the positive factors. we pointed out, jobs, commodity prices, and so on, and then you do the best possible prediction that you can. economists are often condemned for not quite getting it right. as professionals, we have to keep our focus on our job and try to minimize the kind of disturbance that all these other and take a lot of encouragement from the kind of support we have from our own in the kind of people who appreciate the work that's just
treasury does. there said in the speech, will always be distractions. you just have to ignore them. secondly, for historical reasons, nothing to do with this country. base. narrow tax you have to do the best that you can buy not overtaxing the narrow base on the one hand but at the same time finding opportunities on the other hand. our plan has probably the least number of exemptions in the world, so that is what makes it good. we will see how we can enhance and take a count.
there were finance ministers before me and there will be finance ministers after me, so i do not think it is the individual that matters. it is the policy that matters. if we keep good policy, i think we will keep people happy. people come and go. we do not do things on our own, as i was explaining earlier in the morning. we made all the right choices, despite all the difficulties that we had. >> that was the south african finance minister. let me show you what has been happening with the local currency. this -- this is your total return. this is in the emerging markets over about one month. you're looking at leads from the peso, the lira.
ist is even more interesting when you switch the bottom left to volatility. take a look at that. the south african rand with the highest volatility at the moment, just under 18. >> it has been one of those big movers in the currency market. right now, though, the index gaining .2%. coming up next, how will higher interest rates in the u.s. play out in the middle east? .e asked the ceo this is bloomberg. ♪
possibility of raise rates in the united states. great to have you back on the program. last year, this was a verily -- a fairly straightforward play for you. your argument was lower oil prices, you got more disruptions in markets, lower assets, so a lot to choose from. now you have rebounding oil prices. arguably, this makes things a little more complicated and we opened up this chart for you here, which shows the in thetion twin stocks price of brent crude oil. you can see we returned to a positive correlation in january, although taking a little bit of a breather. how does your strategy change with this rebound in oil prices? >> sure, great question. i think the fiscal cycle remains very much contractionary, which means that consumer demand will
continue. the cost of doing business will go up, and as a result, corporate profit margins are going to be squeezed out. it's really important to note that our universe of investments is not just equities. much deeper universe, and we invest across the capital structure. >> in terms of sectors and what you prefer because research has come out that made it clear pointing to this transitional transformation process currently under way and saudi arabia, and they say you should be looking at petrochemical and health care as well. is that something you can get on board with? >> sure. in terms of the distress opportunities, the big source of distress for us continues to be the construction a general contracting space, where essentially you're looking at
corporate's that are on the one hand directly exposed to the fiscal consolidation and on the way -- on the other hand are being starved of credit, so that continues to be the biggest focus for us. we're spending a lot of time particularly in the health care space where we are working with hospital operators and service dire need of working capital solutions. we also look at the education space. there's a lot of school operators that have overextended themselves during the boom days and are now struggling to fill seats, so that is an area of focus for us, and more generally working with banks around identifying capital solutions for them as well. some legislative and regulatory amendments are happening. >> let's talk a little bit about those banks. in the uae, they have seen a lot phase ofs since the limitation. what are you seeing their?
>> nothing new, but the phase implementation for us is divergent priorities between stakeholders in the banking sector. on the one hand, you have regulators putting pressure on .he banks with that, they are being forced to rethink business models and kind of what their product offerings are, and on the other hand, you have shareholders who are still expecting higher dividends from the traditionally high dividend paying banking stocks, so what we have seen that create is a flight to safety in terms of how they are building their asset books today. all the banks are fiercely competing for the large blue chips, the gre's, and they have almost abandoned entire segments . >> that's what i want to ask.
the flight to safety also means there are those startups and midsize businesses they get left behind. what is the problem their? >> the problem is exactly that. it is no longer welcome business for the banks. strategybout the beyond saudi arabia and the uae? any more exotic places? you have a very wide geographic footprint. >> our universe is about 21 countries. extends all the way from turkey down to south africa, from bahrain to morocco. >> any picks in that space? there is no particular pick. our investment process is quite rigorous and exhaustive. we're spending a lot of time right now in south africa, in turkey. there is a lot of distress. >> we will have to leave it there, and of course, we will have to follow up. thanks for joining us. still to come in the program, we
the firm has been trading hong kong stocks for the fund. the benchmark age is among the top performers. astronomers think they have discovered a system of seven-sized planets orbiting a star, many of which could have liquid surface water and therefore possibly life, life as we know it. the planets are circling a dwarf star about 45 years from earth. three fall in what is called the goldilocks zone where conditions like water and temperature make life theoretically possible. >> if we get a hint that finding a second earth is not just a matter of if but when. protesters opposing the dakota access pipeline are setting fire to tense and
buildings as the deadline passes for them to leave. about 20 others say they plan to stay. environmental activists oppose president trump building the with energy transfer partners. 2600 journalists in 120 countries, we have the business world covered. you are watching bloomberg. >> singapore's second-largest developer was out with earnings before the market opened today. how did they do? for the fourth quarter, profit was down 40%, but that's because of a one time boost a 2016. when you look at revenue, it was up almost 40%. mind more homes, and never the challenging environment. it was pretty resilient. the executive chairman joins us
today. thank you for joining us. a rare opportunity. when you look at the resilience of you and your rival, is there a sense that the worst is over? >> i do not believe the worst is over, although i think it has slowed down. we do what is considered most important. >> we spoke to the minister last week, and he suggested demand has been resilient, so there's the propertyift cuts. do you share this view, and has impacted your business? >> i think we have already countriesd to various including japan, china, australia, u.k., and to some extent, u.s.
we think it is going to last a little while more. on a newity is initiative like technology and ie way we do business, so feel that this is already laying the foundation for us. >> you said a while more. when do you see prices picking up? they have been down for the last three years. >> i think they had been down for more than the last three years. a lot of it depends on how much more we will supply. the developer will try to hold on as long as possible. at a certain point, they have no choice but to cut the price. going down the road, i believe
you have to wait a little while more. maybe six months or eight months or nine months. more importantly, the country is , theto improve the gdp demand for housing offices will come back. >> the luxury market in particular, how bad has it been hit? >> there has been a lot of complaints about the gap between the poor and the rich getting wider and wider. me represents a good purchase because it has gone down. it has gone down one and 35%. there are not many luxury developments.
we have seen real estate has gone through the roof. to me, they're limited in number, but people don't talk about it anymore because they makinge concerned about payments. >> you talk about good buys. it does seem like you have been on a buying spree, buying properties in the u.k. is this a good time to get into the london market in the u.k.? >> it depends how you look at it. the english do not believe the brexit will create a debt to them. i believe the worst is yet to come before things are much better in the u.k.
after a certain point of time, i am decisive enough. they will give you a chance to buy the right price. -- anymiddle east opportunities there? >> because of certain rules and , we have never bought properties in the middle east. we have plenty of operations in and plenty in the pipeline. >> we thank you for your insights today, and there you have it. >> i will pick it up from here. thanks.
happening. equity group investment's sam zell says crude producers will not go against saudi arabia's push. >> if you look at the crash and the price of oil, what you really saw was saudi arabia showing the rest of the oil-producing world what life could be like with an uncontrolled product price. effectuated a significant amount of pain, recent think led to the opec agreement. i think that is positive for oil and oil investments all over the world, and i think it is unlikely that the other going to cheat as prolifically as they did in the past because of the fear of saudi doing that again. >> here in the u.s., do you want acre for $60,000 or place a bet on midstream assets
because we need some infrastructure buildout? >> i don't think anything was economic. >> maybe the oil thing in your car. you had great confidence that you could get that, but at those prices, i don't think there was much of a deal for anybody. i think what is going on is positive for the u.s. energy business. i disagree with him. i think shale is capable of bringing on supply much more .apidly than he suggests the number of wells that have entry will do the last few years that are laying there ready to run them is and enormous compared to historical levels, so i think shale could and supply much more rapidly
than most people understand. >> how do you square though state of things? on the one hand, you have an administration program energy, prodevelopment, pro-production of oil, and on the other, you talk about the need to control price. is there a danger that this new approach will overproduce and actually drive the price right back down again? >> i don't think so. i think that the natural limitations that exist on , you know,n mid-level pipelines and all this other stuff limit how fast the united states can go. we have six or eight pipeline proposals currently all over the united states and canada. rapidlys a limit on how oil can affect flow. i don't think that the u.s. represents a risk to oversupply
the way saudi arabia does. cash do you have ready to deploy? >> a lot. >> what would it take to put it to work? >> i'm an entrepreneur. i have always been optimistic. you don't get to where i am by being a pessimist, so the answer is that we are constantly looking for opportunities to ,etter invest our capital particularly in an environment like this where the alternative rate.fixed it is or if it. i had a conversation with one of the major banks recently complaining about the fact that we had $200 million and they were paying us 18 basis points. that it was crazy, and he asked where wanted him to send it. me aid they were doing favorite 18 basis points, and he was, but that does not change
the fact that at 18 basis points, i and going to get rich. >> that's our interview with the founder and chairman of equity group investments. let's talk a little bit about crude oil. let's get more on the story. on thefor coming program. again, the situation is such that the level in terms of inventories is hardly encouraging, and i have hold this chart together which shows the state of play in the united states. pull up on your bloomberg as well for extra context. you see the white line moving upward? that is what has been happening the last couple of months. that is still the highest seasonal level in some three decades. deal atpec/non-opec risk of collapsing basically? >> we're not really looking at a collapse, i think. looking for a total washout in the system anymore,
but everybody looks always at this chart that is u.s.-centric, but the rest of the world is growing and growing rapidly. india, our lasted of years, we had 2.5 million barrels, and i think that is where the growth is coming from, so people should start not worrying about the u.s. and should look at supply and capacity globally. >> let me dig into that a little bit deeper. down as well to his there is a need to extend this agreement beyond the summer. would you say that there is a need? look a coupleyou of years out, we don't really have a lot of new capacity coming on stream. you have basically just an exxon
writing off energy, you have companies saying to be more careful on. growth, produced output just about even on replacing your existing capacity, so i'm not really looking now at three or six months, where we are going to stand, but if you look at 18 months cheat of years out, the market looks very healthy. >> talking little bit about gold. at thewers, if you look bloomberg, you can see gold prices are stuck in a range in the last 30 days around 1215. trying to balance out the outlook for higher u.s. interest rates on the dollar but also safe haven appeal. when will this breakout of this very tight range?
think timing is probably the most difficult task people are facing. we have options expiring this week and early next week globally, so i would not expect anything to happen in the next couple of days. after that, i'm looking at the lead structures. is at a hugerket digital pace on the supply side. the dollar looks like it is rolling over because your pmi in the united states is falling while in europe, it is going up. >> what will be the trigger for iron ore? china plus commodity exchange just this morning saying they are sticking to futures trading this year to make the market more active. will this have an impact on iron
ore prices, which have been rallying? where do you see the metal going from here? >> if you look at iron ore, it is only a small little part trading in the futures market. shuttinghina, which is down low quality production in the country. importss replaced with of high quality. in order to mix it, to improve the environment and ceo levels in the country, which as you know, with the pollution level, it sort of it. different pockets of quality and high quality will continue to see very good growth. >> you were going to talk about donald trump and the impact on precious metals. in terms of how precious metals have performed since donald trump was elected, they are relatively close. be down 3.4% since the trump election. take a look at that line in
blue. it's not silver. that is palladium. is this going to stay on this path? who could be the next key one to watch out for? >> the one which is really my point of from view is silver. my that will be on silver in order to be outperforming. gold is a central bank asset. you look at debt and currency rebalancing, but i think that will be probably one of the keys , when it comes to renegotiating trade. he calls everybody a currency manipulator. gold will be a very key component of the portfolio. i think you might want to have multiple plays for different reasons.
the company says it has a number of tools to protect its credit ratings, including, sources say, the option of selling its branded generic business. >> chevron has appointed a saudi arabia and executive the president of its operations in kuwait. the neighboring countries are preparing to resume production with capacity of more than 500 million barrels a day. >> saudi aramco going up against oilbaijan's state-owned company. sources say both companies have submit a bid for growing the in a deal that could be worth 1.6 billion dollars. bloomberg hopes to conclude a deal by the end of
the year. the company operates almost 1800 -- stations in turkey and owns its largest fuel storage and logistics business. we are counting down to the market open just over an hour from now. what are you watching? >> am taken aback from all the information on the bloomberg. we have information on a possible roadshow from the sultanate of oman according to people familiar with the matter not authorized to speak to the media. you have details on that front. qatar's telecommunications company holding its fourth-quarter overnight. revenues came in at 8.2 billion reals. six purchase, fivefold, one so. arab tech should be also one of the key stocks to watch in trade today.
again, after that , anditalization mandate also changes to the board to reduce the number of board to seven from nine. let's cross over to president trump again. sitting on an estimated $7 trillion of gas reserves, iran is opening its doors to all those who want to help with depression. sam, how the is the trunk threat to iran, really? >> the iranians are playing it down, but donald trump clearly is an opponent of the nuclear deal that was signed under the obama administration, and therefore, that could be under threat, and even if it's not, donald trump, who is quite hostile to her ran could seek to impose new sanctions that could deter investors, and even the threat of those further sanctions could deter investors,
and that is what iran needs, that influx of foreign money and expertise. >> is there a reason why iran has so far failed to capitalize on huge gas reserves? >> there's a few reasons for that. first, gas is a lot more export asthan oil to a commodity. it is harder to move. if you want to exported across the sea, it needs a very technical process to get done, and iran does not have that capability, so iran has managed to keep its oil industry going through the sanctions. gas has suffered a bit. furthermore, iran's domestic consumption is very, very high. it is not a very efficient space, and therefore, it is consuming a lot of what it produces. >> always great having you on the program. the commercial bank of dubai is seeking approval for 40%
>> is going to invite p.m. in hong kong. ivan update of the top stories. think of korea has left policy rates unchanged. it kept the benchmark at a record low as inflation upset concerns over a political scandal. the fed signaled rates may rise fairly soon to keep the economy from overheating. smaller chinese banks sold smaller amounts of short-term debt this month. before roles that would make it harder to do so. they sold $233 million of negotiable certificates. even as deals jumped to record highs. that is the first since they