tv Best Of Bloomberg Markets Middle East Bloomberg September 15, 2017 7:00pm-8:00pm EDT
♪ yousef: welcome to "best of bloomberg markets: middle east." here are the major stories driving headlines from the region this week. 100 days and counting into the gulf that, qatar -- gulf spat, qatar and the saudi led bloc of your into a solution. south african president jacob zuma's grip on his party felt a blow by the country's high court. it seems the saudis made a longer one regime change in syria.
editord our executive what is going on. reporter: the goal for the kingdom is to keep iran out of syria as much as possible. what is supporting that regime are the russians dominantly, but also the iranians. there's a logic iranian syriance in that the saudis don't want and don't want to accept. the seem to be moving towards the russians. they see it as a way to limit the iranian influence in syria. yousef: the relationship with russia has been very difficult. is it too early to call it a arente that the saudis looking to open with the russians in the interest of the saudi arabia priorities? reporter: we will see. it remains to be seen how far this will go. there is clearly dialogue.
when it comes to oil policy, energy policy, opec, they talk. they have common interests. it is not like the russians and the saudis stop talking to each other and say, you are our enemy, or whenever. the does seem to be an opening. the saudis to see the russians as potential partners to find a resolution to the syria crisis. maybe not exactly the way they wanted to have it, but better syriaaving iran dominates for the foreseeable future. shery: how much of it is serious russia ast steppingresident trump back and saying it is all about islamic state? reporter: i think it was a policy even under the obama administration. ispping back from the rebels more of accepting the reality
that with the russian intervention, the assad regime has gained the upper hand. basically all of this is really reflecting the military reality on the ground. if you look at the map, you see the control of the assad forces increasing across syria. you see basically what has happened more recently is the defeat, the imminent defeat of a islamic state in syria. you had a rock and syria basically -- had iraq and syria making some of venues movement on the islamic state. it is looking like it is not going to be a force to be reckoned with. what is coming up, then, is how do you resolve the core syrian problems, which wasn't necessarily an islamic state problem? that is what people are looking at now, a post islamic state issue. defendants that assad, for the moment, isn't going anywhere.
yousef: geopolitics aside, there could be more dangerous for the global economy today than there were 10 years ago. that is the view of william white out of the chairman of the economic and irrelevant review committee at the oecd. guest: looks to me to be very similar to the way it looked in 2008, which is that we are seeing all sorts of odd developments in financial markets. the prices of metal for -- of many financial assets are very high. house prices in many countries have continued to rise very strongly. equity markets are very high. all of these things i think are a source of concern. let's dive into our bloomberg right now because i want to highlight what you are talking about. markets' deing the bt? take a look at the biggest
economies in asia, china and india. we often talk about china, the huge debt pile that could be a concern if it pops. but take a look at india's back loan ratio as compared to its total gross loans. it is more than quadruple china's. what is going to happen if this gets out of control with mark -- control? guest: the acer is that we don't know anything of certainty. things could work out all right, but i think there are enough dangers there that one should be thinking about the downside. problems ofdia's debt go back a very long way. there are significant government problems there, not least of which having to do with state-owned banks. china is not an awful lot different, except that the acceleration in the loans and credit growth has been absolutely astounding.
i don't think anybody has ever seen anything like it before. of course, it is not just the level of debt that is worrisome, but the speed at which the debt is accumulating emily leads you to believe that perhaps the vetting of the loans has not been really as careful as it might have been, and that some of these are loans that never should have been made, will not be repaid, will not be resurfaced, that is going to create problems going forward. yousef: william, you are putting out all these warning lines. the worst or more difficult conditions since the last financial crisis. let's talk a little more about the solutions. as a person of your track record, what would you recommend in terms of policy prescriptions some of these central banks should adopt to try and address those risks? guest: i think the fundamental problem is that we do not have a liquidity problem that central banks can solve.
if the underlying problem is too much debt, we have a debt resolution problem, and insolvency problem. the honest truth is that only governments can address problems with like that. although we have been trying to do so for the last 10 years. my prescription -- and unfortunately it seems less attractive today than it might have done five years ago -- is we need more fiscal expansion for those that have got room to do it. we need structural reforms to allow faster growth and a greater capacity to service debt. greater willingness to actually look at the debt beast in the face and say some of these will not be serviced and have to be written off, and maybe financial institutions recapitalize in consequence. i think something has gone seriously wrong in many countries in terms of the mix between wage income, labor income, and capital income. i think we should be doing a lot
more thinking as we have already started in china about whether wages ought not to be higher at the expense of the income of the people that have invested capital in various businesses. i think all of those things need to be done, but they are going to be much harder to do today than they might have been 5, 6, 10 years ago. yousef: exactly. look at the degree of execution from some government in terms of fiscal reforms, they have been arguably lacking in the expectations of many analysts and decision-makers. at the fed meeting later this month, i want to get some insight from you. your pointing to the government to take action. what should the guys at the fed be doing now that they are not getting the inflation they are looking for? you are saying they have already done far more than they should have. guest: i think that hopefully in the context of changes undertaken by governments to
move into the space of the central banks, the central banks can then move out as the governments move in. having said that, it is not just simply a question of reversing the easing of monetary policy. because there have been side effects of that easing that have been a team-leading over the last eight or 10 years, we cannot ignore that we have developed a new reality. we have to understand. i think the tightening of the central banks that is inevitable, the movement upward in bond yields which is inevitable, must be done very carefully. that being said, if the care is excessive, we build up still more of these underlying imbalances which will make the resolution even more difficult. honestly, we have to be very cautious, but we are in a very tough place. anchor: bond connect in hong kong open to foreign investors.
is this safe? guest: to be honest with you, i am not all that familiar. the one thing i would say is that virtually everything we do comes with unintended consequences. the reality seems to be historically that people are totally unprepared at the policy level to deal with new developments that they themselves have actually instigated. -- do what yoube are going to do, but be very cautious about the possible side effects. yousef: coming up, saudi arabia's catch 22. reforms are being slowed down. we ask what investors should be doing. this is bloomberg. ♪
its government structure. the original was overshadowed by the crown prince's vision 2030, a broader blueprint for life after oil. the capital is still overweight on saudi stocks. >> it could be both. you are pushing the responsibilities towards the ministry to reach a lot goal outcome of the reform program. it could also coincide with a slower implementation of those reforms because they were very ambitious. secondly, we raise the point could see a change in power. this could make that transition easier for the consensus to accept the upcoming changes. yousef: so the crown prince basically taking over from his father as part of that consolidation. in terms of what that means for the investment strategy, i pulled up the grr on the bloomberg. these are the sectors and how
they have performed in the kingdom on a one year time horizon. overall, the index of 20% in terms of returns. 28.5% in terms of gains. we took a bit of profits on the saudi banks after a strong rally, but we are still pretty positive because of the index. by the end of the month, we are theg to have probably outright news of ftse. if you take that into consideration, rates have come down almost 2.1%, that still offers a lot of upside, but less so after the 28% rally. shery: i want to ask you about the reforms there in saudi arabia. when we take a look at china, a
lot of investors are very frustrated at the slow reforms they are seeing implemented here. in the same way, we could criticize saudi. are you worried that the reforms aren't quick enough to identify and address what is a massive industry issue? guest: for sure. reforms are always difficult to implement and put forward, but the direction remains very positive. i think that is pretty clear. the practice of it is going to be a bit more challenging. you have to bear in mind that historic growth was only driven by government spending rather than the structural economy. it is increasing labor participation of the female population as one key, improving
educational standards. it is going to take a generation. aboute to be realistic how quickly those benefits will accrue in society. it may take a generation to see the full change. angie: it would be worth it. privatization, aramco and other moves to privatize a lot of his assets, what sort of opportunities are therefore investors? guest: the good thing is that privatization program is accelerated. you have $200 billion worth of privatization. , itthe banking sector enhances its liquidity profile of the system. squeezely we saw a big on liquidity that created a credit crunch in the company. that is not happening.
so this is key to free up the liquidity and also improve corporate governance going forward. yousef: coming up on "best of bloomberg markets: middle east," the topi makes it into 25 most attractive places for financial service professionals. about what is driving that interest. that's ahead. this is bloomberg. ♪
exciting news for companies here. i have to say expanding the financial center here in the emirate is a big part of the government's plans to boost the private sector and diversify the economy away from oil, but it is a tough job. abu dhabi is competing against big centers like london, zurich, and to buy just down the road -- and dubai just down the road. take a listen to what he had to say about some of the competitors in the gulf region. $1 trillionve almost assets under management. we have seen by focusing our strengths, looking at our legacy and building financial institutions in the past, we think that will make us win. region, including saudi arabia, it is growing, so the
economies of the gcc will provide multiple opportunities for investors and others to come in. there's going to be multiple listings by aramco. these and other opportunities will provide the underpinning of growth in this region. i think that within this, we [inaudible] number is why a robinett 25 in this index is a testament thehis is why arriving in top 25 of this index is a -- the whole region i think is stronger and more accessible to financial institutions. tracy: what are you doing to
attract those big financial companies, those asset managers? do you have any big names coming on board? what are you doing specifically to lure them over? guest: i think you will see a aboutnouncement soon this. i believe we will focus more and big ansys, those are announcements we will makes it. tracy: you mentioned cooperation amongst gulf countries. we do have the ongoing dispute with qatar. how has that affected you? is that a problem for gulf financial centers? guest: the stability of the gcc economy is not a question. i think growth in the economy of is not in question.
[inaudible] hopeful that our growth and -- [inaudible] tracy: it is a centerpiece in the saudi government effort to diversify its economy and boost the private sector. alongside that, we have seen some consolidation recently, notably between abu dhabi first bank and national bank of abu dhabi. is there more to come? thet: i think in terms of present of players like first are [inaudible] we look forward to be your country should from our national banks. the same thing happens in as they built their
financial center, consolidated their institution. we made it bigger, give the more opportunity. hope will use financial centers to grow internationally. rules come ourur doesations, common-law make a difference when it comes to that. i look forward to more consolidation, two more conservation from insurance. has been in creating an ecosystem for -- [inaudible] we want our national banks to compete on this futuristic platform. yousef: next on "best of bloomberg markets: middle east,"
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♪ welcome back to the best of bloomberg markets: middle east. the beer between cuts and thehbors has been -- diplomatic process appears to be taking two steps back. we get an update from bloomberg's -- to be goingikely anytime soon. most business people tell us -- a bankers are being forced to choose sides and companies are being forced to do business
across the region. they have operations in most of the countries and at the same time, they want to ensure that conduct business in a way that is profitable -- acceptable to them. they kind of look at it as the best way to do business. that is changing now. >> it is changing and how are they adjusting? is it working so far and is this a long-term adjustment question marks it is very tricky because the companies are looking at this as a temporary thing. you seeing a lot of companies with new friends and trading partners in many ways those are very unlikely they will change once a solution is found because some of these relationships are
going to be gone. companies are looking at setting up offices, small ones to timece and at the same trying to service some of the companies in europe and the u.s. so it is very difficult. they're trying to work it by day. politicals of the implications, but jump into the have stocksow perform? best performer since the onset of the crisis would have been the dubai index. kuwait has barely changed and most of the downside has been happening with qatari stocks since 2013. back to the program.
>> where you telling clients at the moment has to how to invest what is going on. >> i think the interesting picture is looking at the -- we out so it is showing the sector is really leading an environment where the oil sector is detracting from growth dynamic. have betterg to quality and more sustainable growth in the long run. >> what you really excited about at the moment? of politicallot uncertainty, even in saudi arabia with some of the political conversations on the side? you have qatar as well.
you have iran. >> despite all of the little headwinds we are seeing across the region, there is a persistent focus by policymakers across the region and you see that in saudi arabia. that it doesus actually work and it is more structured so policymakers are more aware. thee is this focus on private sector on developing that in the long run despite all these pressures. >> we are seeing a delinking of the crude oil with how saudi equities are performing as well so we are seeing that disconnect, but of course opec is the name of the game in that
region and there's talk of a three-month extension. talk to us about where you see that impacting the markets there. >> i think in terms of extensions, it is still a bit premature to look at that. the region has been going cutsgh almost two years of in production. we need to give it another couple of months to see if the strategy is working terms of -- or the region will go back to .ighting market share is anou're talking about interesting point because across the region there's a lot of focus of the privatization commitmente in the
taking place in this is where a lot of the growth is being driven. everyc is on four out of barrels the world consumes. >> it is also forecasting that demand is going to weaken in first and second quarters of next year i'm about why telegraph right now the production cuts. would it not be more effective to keep the markets -- >> i think looking at reality in the markets, if you look at supply this year, another 600,000 barrels largely because of constraints i russia. if you look at 2018, seared you will have another million barrels of oil. across the region, there is this realization that you need to start building of the future of all of these inputs and oil
prices are pressuring governments to push further and further on the diversification. >> we put all of this up on a chart. opec output in your -- story to be told, yesterday cuts are there, some of it is offset by higher production in the united states. i'm looking at an analysis and he is saying there will be plenty of oil in 2018 with the need for all caps through all of next year. >> you agree with that assessment? again, he would likely be at this point it would be quite difficult for opec to go to another for the year of cuts after march 2018. i think potentially they do not
see that move up in prices. takere going to go back to the market share from the non-opec producers. >> i want to ask you about the non-oil pmi's. here ill really showing pmi survey showing of course there's a lot of headwinds still. >> there are headwinds and they are largely from the oil sector, but against the interesting richard is the non-oil sector is not taking any of that. you see the outlook over the next six months by most businesses looking quite strong so there is confidence in saudi arabia executing. >> coming up, south african issident jacob zuma
>> welcome back to the best of bloomberg markets: middle east. south africa's high court's has overturned the reaction to jacob zuma. the decision could sway the outcome of the race to leave the party and the country. more from johannesburg. >> a very important decision because it has the power to sway the outcome of the presidential race. what we know now is the tide seems to be turning. it seems as though the deputy president of the country may be garnering more support,
particularly as it is quite divided at this point in time. have said they will look at the ruling yesterday and consider whether they can appeal the decision are not so we are waiting to see as we go towards the conference in december. will the comforts get postponed until this is resolved? >> that is really the paramount question is whether there will ,e an election of a new leader possibly someone who will take elections.l they do not see a postponement and they will advise in the way true, so it does anticipate thean
performance itself. may adopteral reserve -- that is reducing riskier assets. welcome to the program. i want to jump to the bloomberg. >> key takeaway being that stocks are cheaper and chairs. basketlook at the in outside of asia, where are the opportunities? >> there's a couple of opportunities in the equities space. specifically, diving into some of the market that we currently have. the economy in turkey is doing fantastically well.
some reasonable growth, evaluations and that is one area. >> we do have the central bank decision today widely expected showingthe latest data, it remains elevated. .olitical risk is reduced where else should investors be looking? market,ng in the other quite a bit is russia. then, there is also in russia the russian economy is finding its way, especially its growth celebrating -- accelerating. >> let's seven bloomberg to talk about this wealthy basket of
natural resources. precious metals, it is lagging industrial year today. that blue line underperforming. does that mean it is going to be headwinds for a lot of your africa -- and wean 50 countries point out in some of our ,esearchers there is one block some of them producing precious metals. there are several economies like nigeria, but then there is a range of countries for example, he sat africa, and it depends on different drivers. >> coming up next, twitter has announced 35 new partnerships across asia. archbishop chat is just ahead.
>> welcome back to the best of bloomberg markets: middle east created twitter has announced partnership deals in the asia pacific region. -- we spoke to the revenue and operations. >> we show the world what is happening and what people are talking about right now. i'll live tragedy really complements all the strength and leadership. it immediately shows people what is happening and what is different is it puts the high-quality video in the same screen as a live conversation happening in twitter. 10 livehed with the nfl
streaming gains. expended that partnership and that approach across the world. australia and we had an amazing success there. did they drive a trending topic in a stroller, -- livestream turned in marketers love to have that as well. >> it has been really powerful for marketers. also in digital consumption, video content consumption treated >> is that how you hope to grow as well? >> absolutely. >> you look at the numbers. it will be over 2 billion users consuming mobile video by 2020 in the region. toare really excited
announce 35 different deals. i think it shows breadth and depth of content, but it shows a real vision. >> a great example is our partnership with bloomberg. >> matt, tommy more about what the most difficult part is of ?rying to configure growth >> i think the market has been incredible for us for years and it is very large and complex, but we are really excited about it. we are investing in doing incredible things. our teams are developing incredible relationships. having incredible success
. we had the arab chechen -- air championship -- arab championship. -- analyst say you guys are a niche platform. >> how are you going to attract more monthly users? >> you have held the city in the second quarter. how are you going to grow that? >> if you look at the numbers, we are really confident about what is happening. focus that jack dorsey has brought is clear about who we are and what we stand for.
confident and as users go, you're going to see our business continues to grow as well. user growth will be in indicator overall. we are really clear on where we had unique strengths and we're doubling down on that. on ourartnerships strength. >> really come up what are your top three markets in terms of geography? i'm in charge of all around the world so we don't breakout specific markets in terms of revenue. >> we are thrilled that -- of some of the activity and the