tv Bloomberg Markets Middle East Bloomberg October 18, 2016 12:00am-1:01am EDT
angie: oil maintains games, despite increasing doubt that opec can increase the production cuts. >> pressing ahead with reform measures and a global bond sale even after the dissolution of parliament. angie: red flags for saudi banking. the banks are threatened by the slowdown in production. >> historic trip to china,
looking for a closer regional ties in beijing. this is for infrastructure improvements. dubai.cy alloway in angie: it is just past noon. and i'm angie lau. we are talking about how the equity market is performing tonight and noting that it is opposite day a little bit. you may have noticed yesterday, it is completely reversing yesterday's losses. asian markets are actually gaining. one of the key factors is stanley fischer, the vicechair of the federal reserve. he is a most walking back what yellen was saying about being hot accommodative of a economy. in his point of view, it is all about slower growth.
the slower growth trend caused by low productivity. there is slower labor force to growth. and higher shaveings are connected with the aging u.s. population. and also weak investment and lower global growth dragging on u.s. exports. let's take a quick look quickly at asia, the state of the markets trading in mumbai. japan, though, notably just a little bit off. tracy, how about your part of the world? tracy: sure, so in the middle east we are just under two hours away from the opening of the emirates markets. we saw interesting moves yesterday. take a look at dubai, down .89%. we had the bank reporting third-quarter profit late yesterday, missing analyst estimates. , down, one abu dhabi
of the worst performers in the world supposedly because of banking stocks. we will be trying to figure out whether this has to do with liquidity or banking. for more on that, we are joined by felipe. when we see a drop like this, does this say something about where he is, abu dhabi banks, or the quietness of markets? as you are pointing out, we have seen not that much volume. >> that is exactly what we hear in the market right now. it tends to be a problem of low liquidity. we have had several sessions in the region trading well below their average for the last 30 days. that is exactly what we saw in abu dhabi yesterday. for example, 75% of the
companies traded within the index. they simply did not trade. there was no deal with them. we just see the markets very quiet. tracy: i want to press you on this point. we have a chart included from your story yesterday that shows the number of unchanged stocks within the abu dhabi index. it is above 135. this is a market mystery for me. we are in the middle of earnings season. why are people not trading? filipe: that is also a good point. earnings are not good at all. there are many concerns about banks, the increasing number of loans. all across the region, and mostly in saudi. everything that comes from saudi affects the region as a whole. it seems like people were waiting to see the numbers to see how much worse the results can become by the end of the year. they are just not making decisions.
we don't see people positioning. that is literally reflected in the volume of trade we see on a daily basis. when we talk with analysts and investors, they are just li ke, why would i make a decision now when i don't see a clear signal that things will improve? i might as well stop everything i am doing and watch things happen before i start a new strategy. indexes are all declining and we saw sharp declines yesterday. sge lost almost 5%. they did not even present their earnings yet. we just know this is taking a toll as a whole. tracy: to your point, the banking results we have seen so far have been disappointing. the union national bank's inet income fell 15%.
are we expecting more of the same from other banks? angie: yes, we are expecting an increase in provisions and nonperforming loans, which is the big point for investors in the region right now. especially in saudi. many of the austerity measures that have been taken yesterday, they are going to take a toll on local banks. there are big expectations regarding the bond sale. many people think this could bring some breath to the local companies, the local market, to inject liquidity within saudi. that could have a positive impact on stocks as well. so, there are many concerns regarding nonperforming loans, but at the same time, our expectations could just get better in the near term, mabye. angie: filipe pacheco, thank you. word check in on first headlines from around the world with haidi lun. haidi: samsung says it will
fully compensate component manufacturers affected by the note-7 recall, including for inventory issues involving partly finished products and raw materials. new smartphone contracts will be allocated to make up for any losses. the latest carriers to ban the note-7 phones within the cabin or in the hold. has a way of cutting its capital requirements. three government officials support a restructuring that could involve shrinking deutsche bank's u.s. involvement. deutsche bank is struggling with banking costs. saysalia's central bank prospects for growth are reasonable with headwinds appearing to wane. uncertainty remains over jobs and housing.
loweew governor philip inflation targets. we are keeping inflation between 2% and 3% at all times. given the uncertainties in the world, something more mechanical is neither possible, nor desirable. haidi: kumal trump has stepped up his attack on the integrity of the u.s. elections, claiming large-scale voter fraud is already underway. he has focused on fraud specifically since his poll numbers fell after the debates with hillary clinton. 30 instances of a voter fraud have been found dating back to 2011. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. this is bloomberg. let's thank you, now,
get the latest with the markets with david ingles in hong kong. david: let me get started with the bond markets. for the most part of our morning, we have seen a risk on sort of trade. but the last few minutes have seen these yields coming back up. let me look at u.s. 10 year. just watch out for the aussie 10 year, 2.34%. generally when it is green, the yields are on their way out. on prices are on their way down. with the exception of one or two markets, we are generally on our way up. i will talk about new zealand in a moment. yes, the tide is rising. square one to essentially, if you take it back all the way to friday. let me just have a look at one
specific group of stocks we are following across the region. casinos, given the development in crown resorts, where we have heard from james packer. he is really concerned at the moment with the employees detained in china. deutsche bank by the way, raising the stock to a buy. star entertainment, also lifted in sydney. now, morgan stanley put out a note. what it said was the declines yesterday had already priced in 12% to 18% per minute pullout for these companies, which is fairly steep. in other words, bad news is priced in. now, looking at what is happening across currency markets, the dollar is on its way down. footollar is on the back
against just about every single currency. the kiwi is in the mix, getting a little bit more of a boost because of inflation not really falling as much. we were expecting 0% for inflation, but we got a .2% increase in the third quarter, boosting the kiwi dollar. dollar-yen, just to show you where we are, further declines against the euro, and the ringgit. let me show you the oil price, on the way up. not quite back to the levels of yesterday, but one thing i want to note, it is called the golden cross. there we go. we are looking at crude, by the way. the 50 day is inching its way above the 100 they average. guy-- 100 day average. >> i love to start my tuesday mornings with a little bit of
afterflix surged 20% hours as it shows "stranger things" added more than 3.5 million subscribers, easily beating the 2 million expected and earned 12 cents a share. still, netflix scrapped its plans to debut in asia this year. and disney is said to have abandoned its pursuit of twitter, partly over image. images of bullying could spoil the wholesome family image. disney had gone as far as hiring jpmorgan, and had received a presentation by twitter executives. twitter is losing money, but is still worth over $12 billion. >> sales of doubling in japan. -- sales are doubling in japan. the chief executive told
bloomberg that the label will expansion in china and southeast asia before moving on to europe and the u.s. the company plans to open 100 new stores in greater china every year, including two in hong kong. guwe would like to see achieving a total revenue of one trillion yen in 10 years time. right now we have 341 stores in japan. i believe we still have room for growth. reporting season is upon us and the region banks are taking a head. joining us now is the managing director. we saw saudi banks in particular 1.2%down the currency by yesterday. when you see the disappointing results, do you view that as a systemic issue.
is that due to the headwinds, the saudi economy, or does it have to do with the banks? >> the problem could be systematic for a while. beenovernment spending has going around. they are cutting costs left, right, and center. most of the banks posted a drop in the fourth quarter earnings. we all know it is an oil-centric environment. so, having the prices at $50, $40, or even $60 will keep them at this level for a long time. snp came out with a report yesterday saying the region $60 billion until 2019 and the biggest chunk will go to the saudi's. >> this morning, we had muni warninoody's warning about
construction risks. and we have this ongoing saga of liquidity stress. let me bring up this chart showing the interbank lending rates for saudi arabia. they are much higher than some of their gulf brethren. when you look at charts like that, how concerned do you get? >> of course you get concerned that the borrowing costs will continue to increase. when you lend to somebody the first time, the balance is clean . when you lend the second time, there is a previous debt. when you keep on monday, the risks keeps -- when you keep on s keep onthe risk mounting. they are highly relying on the government in saudi. government is not paying those contractors, the loans will not be paid for the banks.
therefore, the debt will keep increasing. angie: that is a concern, especially as this bond sale marks a pivotal year for saudi arabia. there is a push back with oil, as you have related as well. and also, on bloomberg, we have our reporters covering this roadshow, saudi arabia trying to sell its bonds to a foreign community. theof the things noted is geopolitical aspect. summary brought up the saudi engagement in yemen and syria. governmentst the more and expenses are going to increase. that is also a little bit of a concern. >> it is definitely a big concern, angie. the yemen war is extremely costly. we do know that by now. the instability in the whole
region is costly and it will cost saudi more when they keep on borrowing. the collateral is basically the oil prices and the prices don't seem to be going upwards in the near future. not only from supply and demand, but from a global economy issue. when you see opec trying to meet and agree and work the oil prices up, that means there is a real issue. in my opinion, the issue is beyond the regular supply and demand. the dependence on oil globally will keep on going down from now until the coming 20 years, with all of the new technologies coming out that do not depend on oil consumption. angie: that is a great point. also, concerns about potential fallout of that 9/11 bill in the united states. there was much concern there among saudi arabia officials and the like, tryingto figure out what this impact is likely going
to have. my opinion, this is a deep hole. nobody could know how deep this would go or how badly it would affect the saudi government. you have thousands of families that could claim this. know until we see that rolling out. angie: so, it seems like investors are faced with a choice. they can go into saudi stocks, which have their own problems. they can look at the saudi international bond, which has legal issues, such as the 9/11 bill. how are the people you are speaking to weighing those decisions? topeople are, i don't want say scared, but they are trying to be careful. this environment is really risky. things could go worse from here, but this could create an opportunity. stock prices in saudi arabia are
about 50% from the peak in 2014. so, this could create opportunities for investors in the future who are interested. >> thank you to nabil al rantisi , great stuff. coming up, the philippine president begins his historic trip to china. what is on president duterte's agenda this week. this is bloomberg. ♪
tracy: welcome back. i'm tracy alloway in dubai. angie: i'm angie lau in hong kong. the philippine president rodrigo duterte is starting his first full day on his historic trip to china. he is leading a business delegation to bolster ties. tom mackenzie is watching this unfold for us. agenda,on duterte's
tom? tom: angie, top of the list, really, is an attempt of resetting ties between manilla and beijing, which have been strained over tensions about the self china sea. an earlier this year, the ruling that went in favor of the philippines, duterte has been going out of his way to make friendly noises to china. the fact that he has been invited here, the first leader of the philippines to have a one on one meeting with the president of china is historic in itself. he comes with 400 business leaders and this is in the context of 17 straight months of slowing exports. they are looking to strike deals. they are looking in particular at agriculture and tourism, which picked up 25% last year, but they still want to see more visitors going to the philippine. and of them there is infrastructure financing. they are hoping the infrastructure investment bank
could underwrite loans. we are expecting to get more detail on these deals when the president's meet on thursday. >> anybody who has spent a lot of time in the middle east knows there is a big filipino population here. a big chunk of that population is working and sending money back home to the philippines. so, does a slowdown in the middle east mean a slowdown for the philippinesto economy? -- for the philippines economy? tom: it does. but also, as you pointed out, as a result of the weak oil prices, and saudi arabia is the top destination for the philippines when it comes to their workers going abroad. already this year 8,000 have lost their jobs. 10%pino workers account for
of the economy around the world. these filipino workers are being merhcantslowdown in and crude. it is another burden for the president duterte and it adds incentive to try to seal some concrete deals. tomy: thank you to mackenzie for connecting the dots between the philippines in the middle east. coming up, investors are doubting egypt's willingness to do what it takes to get a loan from the imf. this is bloomberg. ♪
think there is any danger in that. but saying we should keep going until the inflation rate assures us we are wrong, then you are going to change too late. gains oil is maintaining above $50 per barrel. u.s. stockpiles have expanded for a second week. the average rose above the 100 day counterpart. brent meanwhile, is near $52, opec willoubts that be able to resolve differences regarding production cuts. abu dhabi rose the most since march with investors pessimistic about bank lending. the union national bank reported a 15% fall in income after the close. and james packer says he is
deeply concerned about the crown resort employees being held in china. detained.ave been crown board members met to discuss the situation after shares plunged 14%, the most since december of 2007. crown is modestly recovering in losses ofing, packing $360 million on monday. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. i'm haidi lun. this is bloomberg. in hong kong and i'm angie lau. in dubai and8:30 i'm tracy alloway. a edwards.ann let's talk about the u.k. data.
we are getting inflation later on today. when you consider what we heard from mark carney last week, the governor of the bank of england said he would tolerate faster price gains to support the u.k. economy. as a result, bloomberg has done a survey and 70% of economists belief interest rates will be cut to a record low of 0.1% on november 3, the next mpc meeting. many say the bank of england will leave contemplati quantitae easing unchanged. we have seen an 18% drop in the value of the pound against the dollar since the brexit vote, fueling expectations. carney has to decide on the right time for more easing if he wants to support the u.k. economy. this is the latest survey information from the economists at odds with the market. markets are factoring in only a
5% chance that we will get that rate cut. that was a 17% back in september. that leaves the bank of england with another problem. do they want to make a move on interest rates? and what that will do to the pound could be interesting as well. later today, we get that cpi number. we have seen a much talked about fact between tesco, the big retailer in the u.k., and unilever. we've also seen apple putting up their prices of the new iphone of 11% to reflect the weakness in the town. tracy: that is right, anna. now we have people talking about this even more. you mentioned across europe we have at least one bank that is bullish on european stocks. tell us more about that. anna: we have barclays talking about how european stocks,
according to their investment case, a buy. they say buy european equities regardless of whether we get a fed interest rate hike. they say generally the condition, in terms of how loose monetary policy is around the world, the bank of england, the fed, and the pboc, generally, the picture from central banks remain supportive of stock markets. european stocks have posted a loss of 17.8% year to date. barclays says even if profits remain stable to the year end, then they see room for stocks to gain. which sectors do they like? they like financials, which could be controversial given the headlines, consumer discretion, and technology. later today, we look at numbers from the european numbe companies, such as burberry. tracy: yesterday, egyptian stocks fell the most in almost
four months with traders concerned about the willingness to weaken the country's currency. for more, here is sam potter. sam, it feels like we have been talking about this potential devaluation for many months. does the fact that we have been talking about it for so long tell you about the willingness of reform in egypt? sam: egypt had a lot to do before it was ready to implement the devaluation. not least is the negotiations for some $12 billion loan from the international monetary fund, which is very much the lifeline and will provide the backstock for a potential devaluation. just over one week ago, christine lagarde said the negotiations were almost there. all that remained were measures related to the exchange rate and the two subsidies. this is where the crunch and the
problem comes in. in egypt, inflation is running at something like 14% or 15%. you devalue the currency and cut subsidies? many of these people live under the poverty line. it is a very difficult thing for the egyptian authorities to implement. hence, it is not instantaneous. it will take some time. >> will the devaluation be large enough when it comes? we have seen the currency exchange rate move a little bit since the imf started the first negotiations for this deal. >> you are talking about the black market. in the black market, we have actually seen a clear acceleration in depreciation. it has pulled back in the last couple days, but last week we were pushing 16 pounds. far andevel, which is above the official exchange rate
of 8.88. the pressure is clearly building. in many ways, it is textbook currency crisis on the way. you can see the pressure building on the black market, all of which makes the devaluation even more inevitable. tracy: leaving the currency aside just for a second here. the saga of the investment banks continues. tell us what is going on there, if you could. sam: yeah, this is a sort of bizarre situation in a country looking to attract foreign inflows. that is what the devaluation is all about. thenvestment bank owned by billionaire has been locked in a disagreement with egyptian authorities. the stock market regulator, since about april, it started with the stock regulator canceling or preventing the takeover of another investment theren the basis that
was some transgression related to the holding company. it has been back-and-forth. valueday, beltran's fair was revised a day after its submission to the stock market. executives say they were not aware of any mistake. nonetheless, they say they made a mistake. they advised the fair value. all the trading in belton have the camp for by board. it is the latest in a series of cancellations. when you are talking about a country that is trying to attract foreign investors, you have these canceled share traits, the spat between the regulator and a prominent egyptian investor, it is very hard to persuade foreign investors they should be taking interest in egypt.
>> you can say that again. samuel potter, thank you for joining us. well, the global hedge fund industry is facing an investor backlash over poor performances. investors are pulling out as volatile markets lead to u nspectacular returns. one of our partners is one of the biggest chairman advisors. investors have had a raw deal recently, he says. there is a particular motion about what share of the offer are they, the investments, getting to keep? up until about one year ago, they were typically, investors would keep 70% of the excess returns. in the end of 2015, that came down to 50%.
payingrs do not mind fees, as long as they feel like they are winning. in the 2015 structure, they did not achieve that. >> some people are throwing out the idea of a rate where you pay a second fee, only when well, fund managers manage to reach a certain level. >> absolutely. and i have to say, there feels like there is a natural justice about that. for a long period of time, many whichdid not charge that, was the unusual feature for the market. hurdles.ht be simple we think there are slightly more complicated hurdles. our structure is that you pay a performance fee. then, if you beat a predetermined market meter. as eliminatings
the angry dollar, which is what you pay out when you feel like you are losing. >> given the surrounding environment, smaller hedge funds are emerging and charging much less, do you see investors flocking to these smaller hedge funds for their investments? >> a lot of our clients have been investing for a very long time. they are in very famous and traditional names. many of those names have been the least open to setting new terms, or lowering prices. these investors have to know and be aware to be able to calculate how much of a premium are they effectively paying for being in more traditional funds. they have to think and positively affirm to themselves that the premium is appropriate and sufficient. i think you are right. it is the new managers that are shaking up the structure. i would be a little surprised if
that alone leads to a big rotation from the old names to the new names. ee structure is one issue. the other is the scrutiny of hedge funds themselves. some feel hedge funds are not thing scrutinized the way banks are, and that should change. what is your take on the question mark >> on the whole, the practices are fairly strong within the hedge fund industry. whole, i think the standards are pretty good. you have to be pretty vigilant. these hedge fund managers have a degree of freedom. when you allow them that much freedom, you have to work through this very carefully. i think scrutiny of the banks have improved. i think there is still a lot of room to improve that some more. i am not sure hedge funds are the worst within the
tracy: welcome back. i'm tracy alloway in dubai. angie: i'm angie lau in hong kong. opec's abilities to cut output has weakened with the rand questioning the cartel's data. official figures were not acceptable, they said. iran is pumping 3.9 million barrels a day, 300,000 more than what opec investigator. iran and venezuela have already criticized the data. posted ad turkey
record low estimate on how low. -- on outflow. this is more than 20% more than the same period last year. this is more evidence of turkey's slowdown after the failed coup attempt in july. maybe the u.s. says people could0,000 be forced to flee mosul. thousands of iraqi troops and kurdish fighters are dancing by advancing to the city. it could be the largest and most complex humanitarian situation in the world this year. kuwait says it will push ahead with economic reforms and a bond sale, even after parliament was dissolved on sunday. let's look at the implications of that. what does the dissolution of
parliament actually mean for kuwait? what does it say about its political system? >> this is the irony of kuwait. while it is the most in the democratic of the gulf nations, whenever there are any disagreements over economic reforms, subsidies and so on, sometimes you can end up with a gridlock. in this case, the drop in oil prices shows us the problems are much deeper. we are hearing that basically, disputes over fuel price increases are what has led to cutting the subsidies, leading to this decree coming out on sunday. and the cabinet was dissolved. the cabinet resigned and parliament dissolved. now yesterday, the deputy prime minister said that the
government might use executive powers to push ahead with this fiscal reform program. >> how does the kuwaiti public view these reforms? what will be the outcome of the next public elections? zinab: these reforms are not very popular at all in the country. to give you an idea, they are talking about increasing the prices for fuels and cutting subsidies on many things. they are talking about imposing , trying torate tax actually cut some of the wage bills they have, trying to privatize government the state entities, and they are planning on trying to issue $10 billion of sovereign bonds, to try and help the deficit that has been continuing to widen.
prices -- oil is basically the main commodity and the main generator for kuwait. >> absolutely. we are going to leave it there. thank you so much for that. global trade is making headlines again with the future of the transpacific partnership under scrutiny. australia's trade and investment minister says the deal cannot be renegotiated and is helpful the deal can be ratified. >> i am cautiously optimistic, based on advice i have received from scores of u.s. congressional politics. i am very hopeful that the lame duck situation does create the opportunity for the u.s. to ratify the tpp. there is not scope to renegotiate this agreement. we have fought hard to reach the agreement we have reached.
the agreement is what the agreement is. we are calling on the u.s. to ratify. australia is making solid steps toward its ratification. other members of the 12 countries are either ratifying are making steps toward ratification. we are hopeful that tpp goes through. >> it has been quite extraordinary watching australian politics over the last few months. you have had the rise of the resurgence of a number of anti-immigration politicians getting another run. how worrying is this trend, particularly when it comes to the impasse on key areas like tourism? well, australia has a vibrant economy. i think they understand there viewifferent points of represented. ultimately, what matters is what
the government policy is. the coalition, of which i am a member, is very focused on australia's relationship with the world. we are very focused on making sure the policy settings that help to facilitate trade and help to drive tourism and focus on comparative advantages for australia when it comes to the international landscape. we are also focused on the continuing reforms of the australian undertake in terms of fiscal consolidation, as well as on the bigger picture, and how we can continue to engage the world in a way that has significant benefit for australia. ciobo. was steven coming up, we have the chinese billionaire wang jianlin. he has grand plans for hollywood and we will discuss that next. this is bloomberg. ♪
>> welcome back. you are watching bloomberg. i'm angie lau in hong kong. tracy: and i'm tracy alloway in dubai. the chinese billionaire wang jianlin is in los angeles, courting the industry's they players. he is promoting his huge studio complex under construction back home. rosalind chin joins us for more on this. what has he been saying? >> he has been saying, use the facilities at my new complex. he is building a new complex. part of that will be a movie studios. he is offering filmmakers a rebate of up to 40% on some production costs, which adds up to $150 million a year, to shoot movies there. soundstages.
and many are eligible for this rebate. you can see here the signing fewmony that happened a hours ago. companies have agreed to use the facilities, legendary will shoot indao, andovie in q also "godzilla." he has big ambitions. a part of this is the metropolis, which will start operations in 2018. as well as a movie studios, it will have an animation studio, underwater studio, a museum, a hospital, and a yacht club. he says he expects china's box office to grow 15% a year. china's box office revenue has
fallen this year, about 16% in the third quarter. he is forecasting box office growth this year. as wang jianlin says, china will be half of the global market. if you want to make money in this market, you have to understand. essentially, that is what the hollywood makers are trying to do. >> i was waiting to see the dancers come out at the hollywood signing. it was a very chinese aesthetic there, but let's talk about variety here. of wang jianlin 's big ambitions. he is purchasing this production house, which makes awards shows, the globa golden globe awards ad the american music awards. it is essentially worth about $1 billion. >> thank you for that.
anna: the fed warned there are risks to running a high pressure economy. barclays bullish best. the bank says european stocks are a by in 2016 with or without a fed move. class a streaming success. netflix shares jumped 20%. the company has beat wall street estimates. ♪ a very warm welcome to "daybreak: europe"