tv Bloomberg Markets Middle East Bloomberg December 6, 2016 11:00pm-12:01am EST
tower. >> bright and early here in abu dhabi. >> welcome to bloomberg markets middle east. usef: a very big day. this is the first time that the bloomberg markets' most influential brands summit conference comes here to the region. you are looking at the event being hosted in europe and hong kong and london. but the first time in this part of the world underscores that this part of the world has come to the forefront of a lot of investment decisions that are being made. where aa one-day event lot of the movers and shakers in global finance will talk about the potential of this part of the world, the ongoing
challenges. it's been an incredible journey. if you think i could january, oil was at $35 a barrel. that has a huge impact on sentiment. people had written off almost the potential of the saudi -- saudi asset classes. look at that rebound. 26% so far this quarter in gains. then you look across to other of markets like egypt, where they finally made the move in terms of fleet -- free-floating the pound. that has unlock some of those nuts in the system and access to u.s. dollars. we have seen more foreigners come in. but how much more potential is there? plenty to look forward to as we ramp up the trading day. angie: incredible lineup.
as you said, the timing could not be better. let's do a quick check right now for you. we've got mumbai trading from us 20 minutes right now. extend this global rally . asian stocks rising the second day here. we have japanese shares in the topix index. really there's this commitment -- to global growth that investors simply believe in when it comes to stimulus from central-bank action. in the middle east, it is two hours away from the opening of the emirates market, dubai and abu dhabi, 10 a a.m. local time. let's look at the last close. gains as a result of the opec deal. that is what is really driving. could there be pressure today?
forecast to gain this year and extended to 2017. of course, we will be talking about that and all of it in the next hour. but right now, let's check in on first world headlines from around the world. heidi: talks in bahrain about security. the king of bahrain said the leaders would talk about security to combat extremism. in 2015, french president firstis holland was the leader from outside the region to attend. theresa may will say that the nuclear agreement with iran is largely important and stress that britain remain vigilant.
>> some man has been elected in america and he -- in america. any plans he might have will be revealed later. but we will continue on our path. he may desire many things. he made his to weaken the nuclear deal. he may desire to rip up the deal. do you support -- do you suppose we will allow that? ? -- will our country allow that? shrank from the previous quarter. that is the worst contraction since 2008. australia must never take a growth for granted. >> the number obviously disappointing. making sure all we can do to
boost australia's economic court -- economic growth. focus on locking into place high-quality trade deals between australia, south korea, china and japan. the number is down. not what we would expect is ideal. but it's the second-highest out of the g7. heidi: the woman in the middle of south korea scandal has been ordered to appear before parliament. they began a second day of hearings. she refused to obey. she agreed to accept the outcome of an impeachment vote on friday. yusef: let's narrow in on the
oil story. of theoff the back decision from opec to pull 1.2 million barrels out of the system to try to ease the glut. beenof those games have [indiscernible] big event coming up. is it going to be an agreement between opec and on opec ? how realistic is this? will be difficult because opec is asking non-opec to -- very important to note, opec is cutting first of january. the non-opec, i don't know how much they are going to produce.
will they be able to put on paper another 300,000 barrels a day? you look at countries like mexico. they production was coming down a matter what. mother nature is bringing down production because the fields are very old. they going to say, well, our production is coming down in any case. so let's call the cuts. well opec be happy with that? it's not what opec is expecting. yusef: how much is priced in? javier: it is essential. even with the opec cuts, you don't balance the oil market next year. probably not until the third or fourth quarter of next year. non-opec countries, then you get the rebalancing and then you can really sustain prices. so i think the differences
between we have 60 to $70 next year to $50. the turkish lira surged 2% on thursday, prompting speculation that short sellers are unwinding their positions. it enjoyed its biggest advance for more than a year, making it the best performing emerging market currency at the time. however, analysts say the rally the lira's woes tune anand and remains the worst performing emerging market currency this quarter. was raised byrate 50 basis points last month. but it could not drop the lira's guest monthly fall since 2008. yusef: bloomberg markets most
influential, major, major event. of decision-makers here. sheila patel is one of those people. she has had an interesting view on the emerging markets and some of the rebound. we will get her take as well on what it all means for the region. we have the recovering oil prices and recovering sentiment. to puttelling clients money to work in this part of the world, including saudi arabia and other markets. so we all get the perspective now. thank you very much for joining us on the program. we are here in of a dobby. areare of the now -- we here in abu dhabi. you are upbeat now about this part of the world. thehen you look at some of trends, particularly in the opening markets of the saudi,
hopefully that continues, and the developers here in the emirates, there are interesting investments to look at. yusef: talk to me more about saudi arabia. i mentioned how many had almost written off the kingdom. going?s it what are you telling your client about the seti transformation story? >> since vision 2030 was announced, many people are turning their eyes to saudi and afghan. the key is reform, opening of markets, and msci inclusion. steps beingcan see taken towards up in has long as you progress on the type of things that will develop in msci inclusion, like more free flow access to the markets, that inclusion will go well for the entire region. it is the big market of the region and it needs to be open.
yusef: there are other interesting stories. is that of interest? to seer will continue the political situation and be a bit concerned. here in the emirates, it is a lot to be interested about. many people look at this region and see just oil had when they get more educated, they get excited. dubai and abum in dhabi is growing by leaps and bounds. you start to see that out of india's well. alone,d abu dhabi tourism from the chinese has gone up 23%. the transformation is thought to be quite. analysts tell us that it's going to take time. risks as you try to move away from dependence on oil? because this doesn't happen overnight. it takes years and years to actually execute. >> absolutely. it takes time. what we have seen over and over
again in every emerging market or developing, trading economy is that the fits and starts often come from changes in policy to changes in reform. the more that you look at this region and you look around the world, take a look at india, when the pace of reform is clear, when investors feel they opportunitiesir fitting and how they will be judged, when they think the market is fair, the calm. so what are the opportunities? as tourism continues to develop, that's one. tech is certainly another. you voiced some concern in the past, a lot of concern actually about this rising tide of anti-globalization. we have seen that with donald trump. now the politics in a lot of countingeurope will be the referendum as well, continuing in that strength. quantify political risk as we draw 2016 to a close? >> political risk is one of the hardest to judge.
what we have to do consistently probability of things to happen versus reality. we found good trading opportunities around brexit and around elections in the u.s., despite the fact that most prognosticators come include myself, were wrong about the outcomes. volatility is trading opportunity. you will see 2017, more dispersion in the emerging markets. that means solitary is key, running out where there are domestically-oriented stories that will grow with the emerging markets economy will be critical. yusef: that sounds great, but you have a strengthening u.s. dollar, which my cut into any dramatic euphoria you might have >> emergingfor the market space. i think we see continue dollar strength. years look at the last 10 , growth has come from earnings growth.
there are ak at em, few factors. u.s. experts are not -- u.s. exports are not that big. is about 10%. europe comes into play and that is a concern. secondly, there are some industries and businesses within em that are less exposed. those things, we think selection by selection, there are opportunities. yusef: thank you very much for joining us on the program. still to come, plenty more we will be talking to black rocks terry keeley. and coming up on the program, a roadmap to recovery. why saudi arabia's post oil at theion will start higher ring. this is an interesting story. stay tuned. this is bloomberg. ♪
welcome back. you are watching bloomberg markets middle east. we are here in abu dhabi bloomberg operate -- abu dhabi bloomberg's most influential. angie: first, let's get the latest in the markets. david: it's a good day for equity markets. up for a second day. volumes are quite light. 4/10 of 1%. when you look at the forex markets, a few stories to follow. that may start with the south korean won. policymakers came and said, we are looking at the potential impact of yields. we might step it with something bold if things get a bit hard to manage, if you will.
story is theket chinese renminbi. we see some weakness here. the other one is the aussie dollar, -- like i said, just about everything will currency on the planet today. the follows they shocking gdp report coming in below estimates , the most bearish forecast out there. equity markets have been a story all year. good news for the markets. that is a remarkable performance. let's cross back to the set a transformation story as the economy tries to wean itself off oil. that's what the government has in pushing. ntp is part of that story. what is being affected dramatically is the corporate sector. lower past, they have had
oil prices. but let's look at how this is playing out. we talked with sheila patel about saudi arabia and this german addict a turnaround story in the second half of the year. now the corporate sector is under massive pressure. the private companies as well, not just the government companies that are making the change. the private sector is reacting, seeing the difference. this time is different a previous times when the oil prices were low and the government had to borrow and money was tight. they just waited for oil prices to return and it was business as usual. this time, they are looking for a change, a change in the way they operate. they are no longer comfortable. it is a difficult time for saudi arabia. i think sheila mentioned it. how long is a scored to last? yusef: we see oil prices recover relative to where they were at the beginning of the year. is that going to stop this
transfer mission story? just when you thought the crisis-induced changes going forward, the prices come back. >> in the short-term, that would be these way. but i don't think they are going to do that. there is the realization that, even if oil prices go back up, they have to change they can as they have a huge bulge of young saudis coming onto the markets where they need to educate, they need to employ. youth unemployment is very high etc. rabia come around 30%. just relying on oil revenue is not going to hack it. -- youth unemployment is very high in saudi arabia, around 30%. just relying on oil revenue is not going to hack it. angie: will the art -- yusef: will the r.b.i. be forced to cut? stay tuned. this is bloomberg. ♪
yusef: welcome back. the reserve bank of india is widely expected to cut its key rate when it meets later today. there are calls for a cut here. quite -- why? >> of course, there is a lot happening this morning in monetary policy. they will become vital he five basis points. that is on the back of slowing on the cpi inflation of october, which was the slowest in 14 months. moved by the government is seen putting pressure on asia's third-largest economy and will hit growth for the next couple of quarters. they've already seen global
ands like credit suisse standard chartered lower their forecast for india. could the government currency recall, anything beyond interest rates that investors should be watching for? , these: as you mentioned notes are defunct now and thanks -- and people have been rushing to banks. it has created a surge in bank wing -- in banking liquidity. obviously, investors are going to look forward to any commentary on how the central bank is going to manage this excess liquidity in the system. at the same time, the rupee fell last month in the wake of the outlooks for emerging markets, including in get, given the
impending interest rate hike we might see in december. yusef: the rupee getting hit and getting hit hard. what happened to the bonds in this case? what is the outlook there? shikhar: india has seen an amazing rally in the bond market, sibley because of expectations of interest rate cuts. at the same time, because of the defunct notes flowing beckoned to the system, it has led to a rush of funds in the bank, creating more demand for bonds. so while markets have been 25-point rate cut, there are some more gains to be seen. again?is it r.b.i.
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will agree to cut another 300,000 barrels a day. one investor says he is bullish. >> i think the market is a bit complacent now. all the improvements since may have been priced in. good pretty fast a $60 or $70 next year. the economy contracted more than expected last quarter as government spending a fell and imports rose. gdp shrank half of 1% from the previous quarter when it had gained a 6%. that is the worst contraction since 2008. since 2008. almost $26 billion of the currency left china november.
corporate bond yields are rising as liquidity [indiscernible] widening to a 17-month high. president-elect donald trump has focused on a new target. air force one. he took to twitter to say that a replacement order should be scrapped as the $4 billion cost is ridiculous. boeing has been in contact with the transition team saying specifications have pushed up the cost of the plane. angie: we are heading back to the bloomberg markets most influential some men in abu dhabi right now, where erik schatzker is standing by.
: thank you very much. i'm here with gary keeley, the head of the institutions group at black rock. here in the middle east, in the gulf region, visiting some of blackrock's most important institutions. what have you learned in these meetings? >> the principal saying is that investors in the region are welcoming the changes in washington. i would just say that supporters of donald trump globally are right now projecting their greatest hopes into the future and detractors are projecting their greatest fears. and there is an interplay between those fears and those hopes. we haverisingly, since arrived, there are more people that are hopeful about the unit
to fiscal, which blackrock has been calling for, the lessening of the reliance on monetary policy globally. so there is brought optimism, i would say. erik: does the optimism surprise you? if you were to sample opinion, say, either in new york city, perhaps in san francisco, you might not come to a similar point of view. >> no, you wouldn't. i find it surprising, i would say, that international investors in particular are abroad looking at the united states seem to be supporters are are are giving the incoming administration the benefit of the doubt with regard to new changes. that is not what is being felt at home. erik: interesting you should mention it because i heard the same thing in saudi arabia three weeks ago. i heard the same thing in mexico slim including from carlos , mexico's richest man, last week. there is a difference between optimism and expectation. >> correct. erik: when you meet with
sovereign wealth fronds and other sovereign institutions, what type of expectations do they have for the performance of the global economy? >> there is a broad expectation in actualation that fact to the overreliance on monetary -- i think we have to go back 10 months. just remember where we were at the beginning of the year. we were concerned about global deflation. we were concerned about a messy devaluation of the chinese are nimby. renminbi. that's not where we are today. we seem to be romancing the ideas of an inflationary environment, a genuine fiscal stimulus, clarity in terms of in theporate tax regime united states, which is broadly favorable for u.s. assets, surly for the u.s. dollar, and i think that certainty, that increased certainty in the united states is particularly welcome. so these institutions are
beginning to invest with an anticipation that global growth is going to pickup and we are going to see returns favoring, say, equities of her bonds? i would put it somewhat differently. i think a lot of investors came into that year with a lot of cash. they were very scared at the beginning of the year. there was a story this morning i read that donald trump sold all of his stocks in july. a lot of investors are underinvested. they have way too much cash. and this market move has been relatively painful and unexpected. erik: these investors, petro dollars solid wealth funds have two met -- too much cash. >> i don't like to talk generically about the whole segment. it is different from institution to institution and country to country. the broadly speaking, there is a sense of relief here in the gulf with oil prices back into the 50's, with the realization that, for example, in case of the -- the that they can
debt markets if they want. federal starting with balance sheets that are virtually pristine. they have the ability to borrow. they have the ability to tap huge reserves. that is what those reserves are for. of course, that is what they have been doing. erik: nevertheless, a big differenceerik:, say, compared with what is happening in russia. >> well, russia has very different circumstances. erik: just to draw the contrast. your point is the dollars is ofk into the $50's, but half where it was in 2014. over the longer term, how has the drop of 50% in oils prices change the way that these institutions are committing capital?
>> there are a number of countries that are oil-based that have had to liquefy assets come up with those acids into more usable form for precautionary purposes. number of, for example, central banks in the gulf to increase their reserves. reserves are a very important policy tool. act allow institutions to very great way. so there's been a move towards equivocation in some cases. i would say those institutions have the benefit of longer-term thinking, longer-term investing. they are now try to ask a couple of questions. emerging markets versus developing markets. what does a much stronger dollar and more importantly why does the future path of future rate increases by the fed portend for repricing assets all across the capital stack and globally? if we are going to move to 50 basistes
points, that's one thing. but if it's moving to 200 basis -- if we are going to move risk-free rates to 1.5 quickly, we will have to reprice that, absolutely. erik: and how does that are not change the mandates? >> if you have a longer-term horizon, subsequently, you are willing to take some volatility. we see a normalized volatility environment. financial repression, which has dominated since the global financial crisis, does seem to becoming to an end. something that is clearly coming to an end, which has not already end ended -- has already ended unceremoniously is the bond. i hate to break it to you, you are not the first a call the end of the bond market. in these meetings that you have had with these sarin institutions, how much concern is there or not of what appears
to be the resurgence of populism in western economies? and i'm not just talking about trump. defeatking about renzi's this we can come of the situation in france, a delicate situation in germany. >> i think there is genuine recognition of that problem. i think there is genuine concern. but there is just as much concern about the possible removal of the united states in terms of leadership from the global stage, which many international actors see others more than willing to fill that vacuum. china coming in to fill that vacuum. so there is a great desire on behalf of particularly golf members to see the united states not lose its assertiveness and not lose its position of i would say power and influence. erik: but they have to have to -- but they have to have a plan b. >> they have to speak out investments for an wide. blackrock has done a great deal
of work on the infrastructure public-private partnership. infrastructure is one of the more attractive asset classes from both a global macro standpoint as well as an investor standpoint. erik: do you expect to see flows out of public markets and into private investments, such as, say, infrastructure or commercial real estate? >> it already has. commercial real estate is a mark.on they had long operated like long-term fixed income investments. making a 4% yield and the risk-free rates are going back 1.5, that commercial rate is overvalued. not every year -- not every single asset class in that old space should be treated similarly. erik: so more flows -- again, speaking of the sovereign funds,
particularly in this region, flows at a public markets and to private equity, into infrastructure. but then within public markets. will those assets move out of active vehicles ended to passive? /passivenk the active debate is important right now. there is a clear case to pivot from passive to active in the environment we are moving into. been of sectors that have long despised, banks, other financials, are suddenly being loved. stock went up yesterday 10%, i heard. there is belief not only for u.s. banks, but global banks. erik: it is great to talk to you. we are in average be. -- we are in abu dhabi. erik schatzker, thank you so much for that. you are watching bloomberg
yusef: welcome back. live here in abu dhabi. let's get you a quick check of the latest headlines. saudi arabia is ready for remco share sales in the domestic markets. market regulators say additional work will be needed to sell shares more -- in more than one country. foreign considering offices in london, hong kong and
new york. stake sale could value it add trillions of dollars. i.s. took country role of the coastal city back in 2014. forces have been battling them for six weeks. it is another defeat for the jihadist group. market clerk is indicating the decision to take the world's biggest currency devaluation in two years. these so-called yield inversion is welcome because it points to slower inflation and lower interest rates in the future. worst quarterly
contraction in gdp in seven years. that's what has been pushing the aussie dollar. let's get some more perspective. paul allen joins us from sydney. a slowdown or contraction was expected, but hardly this kind of scale from the numbers we are seeing. paul: no, it really surprised everybody. half a percentage point of contraction in gdp growth in the third quarter. the market was expecting .1%. and a huge reversal of the .6% gdp growth that australia saw in the second quarter. so it gives us and analyze number of 1.8%. as you mentioned, the estoril in dollar fell steeply on the back of that. to be fair come -- the australian dollar fell steeply on the back of that. on tuesday, the bank of australia said it expected it to be week at the end of the year. the third quarter did span a
period where we had a tight election. period that missed out on the resurgence in iron ore prices. the hope is that the third quarter was a bit of a one-off. yusef: treasurer scott morris has been talking about additional insight you have been able to give about the slowdown? >> he called a press conference shortly after the figures got released. as he often does, he tried to put a positive spin on things. than1.8% a year is better a bus average. the cd average. he said australia should never take growth for granted. let's listen to what he had to say. >> despite 25 years of consecutive annual economic growth, we can never take our growth for granted in this
country. ever. growth that supports our jobs, and our incomes, and our wages, the number of hours we can work, the sales our businesses can achieve. revenue that is needed to support our schools and hospitals, support medicare, our pensions and our social safety net. it all comes back to growth. on to useorrison went this as an opportunity to engage in some politics, attacking the opposition for standing in the way of the government's agenda for jobs and growth and urging them to be a little bit more collaborative. the government has a huge stake in this. you heard scott morrison mention that there has been no recession in australia for toy five years. if there is another period of contraction in the fourth quarter, that is the technical definition of a recession. scott morrison doesn't want to be the treasurer who saw that
long period of economic strength broken. angie: thanks for that. we are seeing major aussie dollar weakness as a result today. let's get the latest from the markets are now. what else is driving markets, david? david: it's interesting. let me start things off with the aussie dollar. that's really where we are seeing some price action. equity markets not really doing -- you can see very clearly where the drop was. what some of these economists have said is let's wait until we see the latest jobs number out of australia and whether that has filtered through it the labor market. once we get a fairly weaker reading, expect the aussie dollar to trend lower. the other currency we are following is the korean won. south korean authorities have fired a warning shot, saying,
when you look at writing yields and rising interest rates, we are prepared to step in with bold action to smooth the mood. as rates continue to go up, a lot of these korean conglomerates are settled with foreign-currency debt. so rear -- or your -- reversal debt, secondrrency straight day, have a look at the offshore renminbi. the reason to bring this up, at some point today, we will get to the report on forex reserves. a drop.xpecting lesskes us to one trillion compared to the peak. that will give us an indication of how far the drawdown was and how much they are really investing to smooth out these flows.
the standout seem to be the aussie dollar pushing things higher in a stroller. in japan, we are getting a weaker japanese currency. everything else is flat. the nikkei to 25 doing ok. a lot of that -- the nikkei to 25 doing ok. angie: coming up, softbank's ceo does the hard sell with president-elect donald trump, $150 billion in investments. this is bloomberg. ♪
, creating thousands of jobs, we understand. company met the with the president-elect in new york. what do we know at this point? fair0 billion, which is a amount of money to be investing, that will be in startups and new companies. that says the ceo of softbank. that will create 50,000 jobs in the u.s.. this is all music to donald trump sears. ears.ald trump's a $150ey will come from billion tech fund and is not intended for m&a deals. this early meeting with the help int-elect does
some way to but softbank in a positive footing with the donald trump. of course donald treated -- buyinglooked at t-mobile, but the obama administration regulators had balked at to the merger of the three or four biggest companies in the u.s.. angie: what exactly will this investment fund entail? bond,s a $150 billion tentatively called the softbank vision fund.
they have been trying to rally up investors to get to the total to $100 billion. they are close to tying up that number. he said in october he planned on being the biggest investor in technology over the next decade. to be aas been known prolific investor in technology and technology company so far. he invested in yahoo!, alibaba, sleeper cell, [indiscernible] angie: thank you so much for that update from trump. trumpent-elect donald taking terry branstad as china's newest ambassador to the u.s. -- from the u.s. rather. this is a longtime friend chinese president xi jinping. back in 1985, hosting china's
kong.is 1:00 p.m. in hong 1% from thealf of previous quarter as government spending rose. treasurer scott morrison said growth could not be taken for granted. outflows from china are starting to raise funding costs for banks and companies. the equivalent of almost $26 billion was taken out of china in november. it was the 13th straight month of such outflows. the people's bank of china