>> before producers meet at the end of the month. >> cheap oil takes its toll. petrochina is said to be offloading nonenergy assets. >> looking overseas. saudi arabia's sovereign wealth on may sell local stakes to pay for expansion abroad. expands the obama

nuclear deal with iran. >> welcome. we're at the minsk foundation. i'moon here in hong kong, angie lau. angie, welcome. we're at the minsk foundation. this is all part of the deputy crown prince's objective, communicate with the youth of saudi arabia, join me in the grand bargain that is a reformation of the future. it's about technology, education. butave a great show for you let's get to global markets -- have a look at the inflation trade. . thought this was interesting inflation protected assets are

outstripping lows that are inflation affected. a paradigm shift. bonds have delivered nearly 60% we are talking about a paradigm shift in the bond market. have we gone too far, too fast? that's the debate, checking in on the middle east closures. you've got a couple scenes at play. funding rates are dropping for the 12th day, saudi stocks recovering from a bear market. and the investment, the wealth fund may be selling. a bit of a move on the emerging dubai down and abu dhabi down. those are the big themes from the middle east. angie: ok.

and for what's happening across asia, let's go to david ingles. david: right. have a look at msci asia-pacific index. that's the three-day chart. we're consolidating at these levels. if you measure it from thursday last week, when you had that big spike up, we are still down 1.5%. looking at today, markets are looking like this across asia. fairly mixed. when you look at the split is almost 50-50. 40% of stocks are on the benchmark. are unchanged or on the way down. put everything together and it is hard to make any sort of consistent. let me show you the main theme across currency markets. the dollar is on the way down ever so slightly after the surge overnight which took the

bloomberg dollar index to the highest level so far in 10 months. the other story i want to point out is with happening across the bond markets. you have a few picking up. , noting market on routes happening across some areas like india, reopening today. that is so far leading to dropping yields. when you look at the other side of the equation, at indonesia and malaysia, they are still continuing to see the page. q talk about developed markets, we're seeing yields on the way down . u.s. 10 year dipped below 2.2%. same story across japan and australia. ds, when you have a dropping yields you have a spike, or vice versa. compared to yesterday, not as

bad, but i wouldn't say it's a party across the markets right now, especially when you look at equities. yeah, i think that's the debate, whether we have over arched in the bond markets. let's talk about why we are here. ae foundation for 2016, gathering of technology, the years and business. we have news overnight on the sovereign wealth fund. joining us now is the managing editor for the entire region. let's kick it off -- welcome to the show. good to have you. let's talk about this. i read the front of the mission statement, but bring it in line for me. what is this about? >> it's very simple. there are a lot of young people in saudi arabia. they need to get people jobs. youth unemployment is extremely high, which is surprising to

some people. it is considered a rich country. 30% youth unemployment. the government can't do it on its own. they need to bring in the private sector. this is part of that effort to join the private sector, especially technology. they are really focused on technology and creating new industries, diversifying away from oil, creating jobs in the private sector. angie: why reach out to the user now? is this a sudden moment of change we are seeing? >> well, it's not sudden. saudi arabia has for a long time said that they need to do more to educate their youth. they have built universities. they have said saudi youth outside to study abroad, up to 70,000 students per year are sent abroad. to pull thatrying back because it's a problem that the government, only 40% is private sector, the government

can't afford to keep doing that. they need to bring international companies to create new industries, to bring them on board to do something that they have been trying to do for a long time. there's such a thing as saudization, which means to get companies here, to employ saudis, and to help reduce unemployment. but to do that you need to make sure the skills are there, the education is what companies need. manus: i have been talking about saudization literally since i came to the region back in the very early 1990's. maybe this is an evolutionary moment. let's talk about the sovereign wealth fund. we've got a lovely story overnight, the growth and evolution of the severn bond fund. they may sell some of the gold. put it in context for me. what that scale up to? what are the ambitions ?

you have had conversations with key members here -- where do we go? >> the pif -- they are building up the pif as a proper will fund. they're building it up no. us thathey have told only 5% of the investments outside saudi arabia are very much holding, and they have said that as part of the decline, diversification includes their investment portfolio. fromwant to shift away taxing their oil revenue. most government revenue comes from oil. they want to move towards return on investment. what is best on them, and if that means investing abroad, then so be it, that is what they will do. and if they want to take the 100

now, on top ofe that, there's iranco, for the plan is to ipo, which would make it the biggest sovereign oil fund in the world. manus: thank you so much. looking forward to a cracking day here at misk. angie, is going to be a great, great day. angie: sure as. thanks, manus. japan's biggest banks posted bigger than expected earnings last quarter. they remain cautious. shares are surging. our banking reporter is live in tokyo. what can we read from japan's mega-bank earning reports yesterday? closed, the market they exceeded analyst estimates by 20%. that on the face of it looks like a big result, that when you

shift into the items driving it, it's quite concerning to see that net interest income is still down from core businesses. five straight quarters now they have been down year on year. and the income is not growing as the banks would like it to, down again this quarter. they have a really pushing the free income side to make up for the profitability on loans. what are the gains this year? acrossading, sales shareholdings, which banks pledged to do as they improve governance. the a one-off gain from assets related to it. manus: let's talk about the perennial issue, which is that interest income. if i look at the japanese government bond market, we will

talk about the bond investors searching for you, this has really hit the banks quite hard in terms of the negative rates and the negative rates. is it still going to impact the rates? is it into next year? >> yeah, pretty much. the bank ceos said as much today. they don't expect any change in the negative interest rate policy for the time being, which means that, as you say, they will have this problem -- they have such a bad lend to deposit ratio, that model doesn't work anymore. they have a problem of where to put all these exit deposit, which is not going to go away. banks are cautiously growing overseas, but a lot of those overseas earnings have been erased this year. positive in the last couple days since trump's election, but

there are certainly some big headwinds for japanese banks. manus: thank you so much. headwinds ahead. we have had a rocky couple sections. let's get across the haidi lun, with your bloomberg first word. good morning. haidi: good to see you, manus. a goldman sachs partner is said to be a favorite for the role of treasury secretary, with the choice awaiting donald trump's plan of approval. we are told the transition team has him as the number one choice for finance chairman. he'd be the third goldman sachs executive to chair it. doubtsnt obama says he that donald trump will follow-up on his threat to scrap the nuclear deal with iran. during the campaign, the tycoons of the agreement was bad and he would force them back to the negotiating table, but he has

not addressed the subject since winning the election last week, and he said it would be hardest groep deal -- hard to scrap the deal. >> my suspicion is when he comes in, consulting with his parties on the hill, that they will look at the facts. to unravel a deal that is working, to prevent iran from pursuing a nuclear weapon, would be hard to explain. haidi: today's planned meeting between the south korean president and the main opposition leader has been canceled, but she has appointed ahead of the influence peddling scandal that threatens her position. huge rallies have demanded her resignation, but they lack the required 2/3 majority to force her out. samsung electronics shares paring earlier gains after a

billion-dollar move into automotive technology. they had an instant relationship with the a, volkswagen, and general motors. two thirds of the revenue now comes from auto technology. samsung's offer was 28% over the closing price. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm haidi lun. this is bloomberg. weie: later in the show, will speak to someone overseeing saudi arabia's plan to create an industrial city in the desert. that is coming up next -- the man who predicted the crash and oil prices, now saying opec will collectively agree to cut output this month. find out more, details next. number bill -- this is bloomberg. ♪

manus: it's bloomberg markets:

middle east. we are live in riyadh. angie: let's get you a quick check of your business flash headlines. mumbai afterng in the bed bath & beyond distance itself from the indian batting supplier. the company says it will not sheets because of independent audit shows they cannot guarantee the fibers are egyptian cotton. target and walmart have also cut ties over concerns about the product's origins. australia's competition and consumer commission has file criminal charges against the japanese container shipping company, kawasaki tyson. between 2009 and 2012, the accc

says the investigation into other alleged cartel members is continuing. angie: apple is said to be weighing a move into smart eyewear. they say a potential device would connect wirelessly to the iphone, flashing insulation to one field of vision, possibly incorporating augmented reality technology. class scrapped its project in 2013 while snapchat introduces low tech spectacles. china's national petroleum corp., the parent of petrochina, is planning to spin off most of its nonenergy assets as cheap oil forces. we have our china correspondent, tom mackenzie, looking into the story for us. what are you hearing, tom? tom: this is one of the world's largest gas and oil producers, and as he said, it is looking to spin off the non-core units. we're talking about things like utilities, hospitals, even

schools. they are targeting these as they try to streamline. the headcount of around 140,000 people, because china national petroleum is a massive employer. it is the sixth largest employer on the planet, employing around 1.5 million people, compared to exxon mobil's 73,000. these units are likely to be taken over by prudential government, but also taken over joint ventures backed by outside investors. most of these units fall under the wholly-owned company, not petrochina, which is the listed entity. petrochina is feeling the pain itself as a result of these low oil prices in the first nine months of the year, where profits were down around 95%. it was forced earlier this year to selloff its pipeline assets to try and meet profit targets set by the government. how does --

manus: when i talked to guests about state owned enterprises, tom, where does this fit into the broader context? many people are saying that this is china getting ready to clean up the state owned enterprises and readiness for the next step in the china evolution. give us your take. >> manus, that's interesting. there is certainly a big push before the next meeting of the communist party next year, which is a big political event here. but this is part of the streamlining for cnpc of their portfolio businesses, and it's a fairly easy soe to tackle in that regard. if you're talking about schools and hospitals, they are not core to the central business of oil and gas. as other state owned enterprises with their complex web of businesses are more difficult to reform, but this is part of a larger restructuring of enterprises. we have seen mergers and asset

combinations worth around a trillion usd. there is this broad push. interestingly enough we heard from the news agency today saying that they wanted to see systemic and institutionalized barriers smashed down, to help them compete in the marketplace. but these plans are expected to come to fruition by the end of 2019. tom, thank you very much. not much time to really radically overhaul the company. tom will have the latest on this out of china. let's ever it back to one of our core subjects, oil . opec members are on the last diplomatic rut. a few days left until the last meeting. three countries are said to be leading a push to overcome the division. amongst the producers, everyone is looking for exemptions. everybody is carrying what

happened with iraq and iran. let's get to abu dhabi. racy, -- tracy, two weeks to go. what still needs to be ironed out? is it iran, iraq? are the concessions the core issue? >> i can save you some anticipation, manus. it's both, of course. we are really seeing the posturing pick up ahead of that highly anticipated meeting in vienna at the end of the month, and we are getting some signals, i would say, from saudi arabia in particular. they are the de facto leader at this point. it increasingly looks like a burden of production cuts will fall on them. but the things they are saying they want to see, in particular, according to one delegate we have spoken to, is that they want to see collective action. they want to see equal participation from all opec members. but in particular, they want to see the issue of third-party

estimates of oil production resolved. they want to use third-party estimates of oil production to make those cuts. so far we have seen iran and iraq resisting that notion. iarn says it -- iran pumped about 4 million, iraq close to 3.7 million. 4.6 million's that is a key sticking point. angie: all right, tracy, thank you so much for that. tracy alloway. coming up, prime minister may becomes more assertive as domestic plans take shape. this is bloomberg. ♪

manus: it'bloomberg marketss: middle east. 7:25. good morning. angie: good morning.

it's afternoon here in hong kong. a quick market check across asia. let's take a quick look at what has been happening. we're seeing stocks rise just a little bit after a two-day drop. we have the seeing it basically selloff as a result of the trump president-elect coming in january and there is an expectation of increased inflation, the fed rate hike. right now it is down but you are seeing some gains in hong kong and the topix. let's get you a quick check of the latest business flash headlines. america's number two cigarette maker might be looking for a better offer from a bigger rival, british american tobacco.

sources say reynolds american has rejected a $47 billion nd thatas too cheap, a they are willing to raise the price lately. the transaction would make so business is as the that already owns 42% of reynolds. nstee lauder is bidding o millennials to buy cosmetics for one play $5 billion, its biggest acquisition ever. it's expected to talk $220 million in sales this year, and estee lauder is hoping a deal will help boost online sales. th ambitione was for 2 million people to reside in it, the city known as king abdullah's city. that's the objective, that's the ambition. what has been achieved? we have a conversation with the

ceo. what has he delivered for the kingdom of saudi arabia? this

angie: 12:30 in hong kong. these at first word headlines from around the world. oil rebounded from its lowest growth and eight weeks as opec nations were said to be making a final diplomatic push toward securing a deal to curb production and stabilize the market. a delegate has told us that guitar, algeria, and venezuela are leaving efforts to finalize the deal. saudi arabia, iraq, and iran are at odds over how to share the output cut. sources are telling bloomberg that the saudi sovereign wealth fund may sell stakes a local companies to raise stakes for international expansion. it has about $100 billion in its

companies, and could reduce the holdings but retain control. the kingdom plans to make the world's biggest transfer of ownership. china national petroleum might be looking to spin off some of its nonenergy assets and cheap oil forces to streamline operation. sources say concludes everything from hotels to hospitals and employ about 140,000 people, or 10% of the workforce. the company may offload the division by hitting over control to local government or through joint ventures by 2019. its quarterly operating profit margins fell, and shares are also down for a second session after an slumped to a second quarter loss. had anmes as tata extraordinary meeting to push out the group chairman. global news, 24 hours a day,

powered by over 2600 journalists and analysts in more than 120 countries. i'm haidi lun. this is bloomberg. angie: emerging asian currencies has dropped off after a seven-year low following donald trump selection. robin -- where can we expect this to go? >> so far we have seen a lot of consternation about what trump's victory actually means for oil markets, especially emerging markets. we have seen it not going up one day, down the other day, back up again. we are starting to see the declines happening, the what they are looking at is more how the fed will pace it, rather than what trump will do right

away. there may be expecting something with immigration, but as far as his threat of 45% tariffs on chinese exports and other punitive measures on china, we are seeing that happening right away. for the moment we are expecting a pullback. a great piece has been written at bloomberg -- this might see china quite nicely. let's talk about the markets. what are the factors are at play? i am looking at the cost of hedging, and it is nowhere near what it was when we had the china meltdown at the start of the year. what else is at play, because not all e.m. is created equal? >> absolutely. this time around it is very different from what's happened in january when the market had literally no clue about what the pbs he was trying to achieve, whether there was going to be a regional or global

currency war, a retaliation to what the central bank of china did. but this time around things are far more predictable. the pbo c has communicated one way or another what it intends to do. they will step in at some point to control declined in the currency, although this time we see the yuan slipping faster to the lowest level since 2008. however if you look at the figures, the pbs he has weakened, which controls daily -- on either side by less than 1% since trump won the election. in that time, the bloomberg dollar spot index rose about 3.1%. if you analyze that, you see that the pbo c hasn't quite let the yuan go completely. it's controlling the decline, to an extent, but there will be some depreciation in the short-term. manus: absolutely. it could be, perhaps, the

biggest weapon of all, couldn't it? great piece ina "the guardian." let's talk about india. the prime minister, narendra modi, has helped transform the country into one of the fastest-growing major economies. many people label it as the next china. but in terms of taking the box, turning his attention to foreign policy -- we are joined now from mumbai. harsha, talk to me about foreign policy. we saw the british prime minister last week, theresa may, it was rather spiky. give us a context of how modi wants to reach out to the world. l claimway through, he'l success on his foreign-policy initiatives, and here's why. everything he has done, he used foreign policy as a tool to enhance opportunities.

he was telling investors to come into india, with the possibility of a booming economy. he will tell investors that i am walking the talk. started in the neighborhood, followed it up, and then under his leadership, they got integration with washington improving dramatically. china, the most important upding partner, he struck negotiations with xi jingping. he's enjoyed a blockbuster order. except for pakistan, i think his foreign-policy clip has gone very well. he has visited nearly 40 countries in the last 2.5 years, and business interest has been

at the forefront of his foreign-policy. angie: but pakistan, i mean -- could this be considered modi's harsha? failure, >> one could argue we didn't go down the way he wanted it to. he was invited to the inauguration. he followed it up with a visit. clearly not expecting a hand of friendship. india-pakistan relations are at the drop bottom. they conducted surgical strikes on pakistan, which was in the telly asian to an attack on an indian army camp. there is no business happening. the fact of the matter remains that this has reached a point of no return. but it's not on top of their priority list.

but from a strategic standpoint, it hasn't quite played out the way modi expected it to. well trade is important, there have always been suspicions --out suspicion angie: hard to ignore your neighbor. harsha in mumbai. coming up, samsung makes an $8 billion play in the automotive tech sector, that will its buyout be music to the ears of investors? details coming next. this is bloomberg. ♪

manus: i'm manus cranny in riyadh. good morning. angie: i'm angie lau in hong kong. let's get you a check of the business flash headlines.

units of one of turkey's biggest holding companies sank after a column in a local newspaper fueled speculation that it will be caught up in the president's nationwide crackdown against his opponents. the article did not name the traders seem to think it was the subject of the story. - amongegypt's currency - the european investors returning to short-term domestic debt, yielding up to 19%. the egyptian pound has tumbled since the surge earlier this month, which could help unleash a windfall for the government if it recaptures the $10 billion that fled the local bond market after 2011 popular uprising. angie: egypt is to invite foreign gold miners to search for the metal for the first time in 2009.

the resources authority expects concessions to be issued early next month,, with more detail due out soon. plc operates a gold mine and shares have doubled this year. manus: angie, we have a very special guest here at the misk foundation. part of the deputy crown prince's big project, but there's another important man attending, geraldo rashid -- far ahd al rashid. welcome. when i was reading about this -- when you do things here, you try things that such a scale. besides washington, the ambition was to million inhabitants. give us an update. where are we in this? >> this is a fully private

project, so we are building a project for the future of saudi arabia based on a nonoil economy. we are a thet capacity of 3.5 million containers, becoming the largest port on the red sea. an industrial zone focused on nonoil industries, 120 companies. we're today the largest development in the country in terms of sales, although we are at a remote site. it has been going really well. manus: those numbers are up on the last update. talk to me about the complexion -- i know the big names. take me up to date. am i looking more at industrial, services? where is the ambition? >> the industrial component is focused on another oil industry, in pharma and other industries. but clearly it's for saudi

arabia to be a global manufacturing hub focused on the region. the 23 countries around the red sea that are leveraging as a global trade route. we are focused on logistics. manus: life is sweet when oil is at $100, isn't it? everyone can tap on your door. but where are we with the financing of this project? are you going to need additional financing? where are we on the finance? >> very good question. the project has built on being nonoil, so we have built a strong financial position in terms of over the past 12 months, securing over $1.5 billion. all of the banks believe in a strong model, and the liquidity has been fantastic. we are in strongest financial position we have ever been. manus: you have raised $1.5 billion in debt.

when you go to the debt markets again, there's a reach -- cash, wee too much will probably lend money. manus: [laughter] one of the most ironic answers i have heard. tell me this. the biggest obstacle to achieving the ambitious -- what is that being? >> overtime, it has been private arabia, building a port from scratch, an industrial zone that is nonoil focused. all these new industries we went to have been difficult to crack, but now that we have done it, we have a strong business model. manus: i don't want to get drawn into trump, but i do want to talk about global trade. there's a new discussion, isn't there, whether we talk about trump or others, about global trade. do you worry that the world -- the imf has said they are worried about protectionist policies. is that one of the biggest risks for your project? >> in trade, you will always

have -- today, 90% is transported by marine vessels. i think the issues are more social. how do you protect those affected by trade? each country will have to come up with its own social policies. but trade will go up eventually. manus: heart of what we have the miskthe vision, foundation reaches out for technology. how can vision 2030 and the deputy crown prince help you deliver more effectively? is there a joint? >> the vision is really focused on the nonoil economy that diversifying away from oil,. we have been doing that for the past 10 years, focusing on the position of the kingdom on the red sea. we have been focusing on nonoil industry. there is a huge alignment, and the biggest is on tourism.

we are building 40 projects on tourism, two theme parks, safaris, zoos. we believe saudi arabia can be huge. manus: the -- the other thing is this. we have seen the deputy crown prince get quite strong in terms of wages. cutting wages for ministry staff, etc., and government employees. does that close the gap for you? in other words, a reduction in state wages, does that help you? does that set a new tenor in terms of expectations of saudi arabia, potential employees in terms of wages? >> it's a restructuring of the economy. you are talking about new revenues, cutting costs, but really the opportunity is making the kingdom more competitive for the private sector. you will see much more domestic flows, more international flows, as the government shrinks and becomes more competitive in

terms of delivering services and regulations. manus: one of the themes our managing editor and i talked about while we are here -- this is about reaching out to the young people of saudi arabia. when i came to the region, going back a very long time ago, tway five years, i talked about saudization. it was about empowerment. here we are with vision 2030. do you think there is a material difference between saudization and 2030? what stands out for you? >> the saudi economy the study to focus on industrialization, on industry. the reality of the world today .is that it will reduce jobs what we need to focus on is the knowledge base. before 10 years ago i would have said this was almost lipservice. today, i see that millennials are the product of the economy. you don't really need to do anything with them; they will create the economy

all you need to do is focus on entrepreneurship, creating a sense of belonging to the community, giving them the opportunity to unleash their potential. manus: that draws to mind with where we are at the evolution of the chinese economy, and the chinese don't want to make jeans. tech want high-value, high- services. you are both going after the same business. how does china fed into your relationship? have you courted the chinese? >> we have some chinese companies doing manufacturing. i think the link with china will be on the coast. the idea of linking them between us and china, the red sea becoming a hub. manus: well, we wish you well. one ceo who has more cash. enjoy the foundation, and thanks for joining me. fahad al rashid.

angie? angie: thanks. samsung is making a big bet on the auto industry. a billion dollars for audio and tech. we have rosalind chin the story. this is samsung's biggest ever purchase. significant, too. rosalind: i think it shows how injurynt it is and is into the auto sector. deal,illion dollar closing sometime in the middle of next year. samsung offering $112 per share in cash, a 28% premium on the closing price. the deal does carry a $240 million termination fee if a pullout. he fast 5goping that t

network they are building on, and the kind of electronics and connectivity you get in car dashboards. this is what they are hoping they can do. in the smartphone? it's pretty much saturated. it is very much last century, so this is into the future. it's not really about cost-cutting. samsung has said it's not about that, it's about synergy. it will let harman operate, although it is better known for its high-end audio equipment, but does get 35% of its sales from the auto sector. angie: what they were very clear about is that they are not getting into the automotive sector as a manufacture, per se, but really focused on the technology. rosalind: exactly. it doesn't want to build cars, and emphasized this.

this is important because there are others in the tech industry who are looking at cars -- there areer, apple, other tech companies who want to do this. samsung says it is not. they wanttant because to go with the company to provide connectivity in which they will be processing a lot of data and information about the car and how would works, letting it go to people or companies like google who want to mind that data. there isn't that kind of risk from buying from samsung. perhaps a bonus. angie: thank you so much. looking to the middle

east to facility needs for foreign cash. the rhetoric starts to spook investors. details just ahead. this is bloomberg. ♪

manus: welcome back to bloomberg markets: middle east. we are on the road. good morning. angie: i'm in hong kong. the philippines is setting its sights on billions of dollars of investment from the middle east. the government is preparing vast tracts of land to be used for foreign investors, and it has been marketing the plans at roadshows across the world. what kind of projects are we talking about here? >> hi, angie. the philippine economic zone authority is identifying sites that can hold qatar's oil

beerves, and land that can planted for crops with export to the uae. they are also preparing land for manufacturing, tourism, and mining, after they came home from a recent roadshow covering qatar, abu dhabi, and dubai, saying they receive proposals for billions of dollars. we don't have much more concrete details than that. they are in charge of hundreds of industrial parks across the country and are readying a roadmap by early next year to identify other pockets of opportunity. there is even talk of breaking into untapped markets like russia and iran. the president has said several times he wants to build economic ties with russia, and is planning a state visit, possibly by early next year. regina, manus here. why the sudden interest in the middle east? why the sudden interest in these kinds of markets?

>> hi, manus. the numbers alone tell the story. improved investments in the economic zone software to percent in the first 10 months of the year, to just about $2.2 billion. but the larger point is that we are living in highly uncertain times. they have me to show if pivoting away from the u.s. and toward china, and they continue to dish out harsh words against washington, although many are expecting he will be friendly with president-elect donald trump. he says no one has pulled out of the country as yet, but we did hear the president of the electronics industry on the show this morning, saying investments have been held back. business contingency plans are triggering and orders have been canceled. there does seem to be some pullback from the businesses in the country. angie: regina lay.

that's it for us on this edition of bloomberg markets: middle east. manus: it is, indeed.

>> it's 1 p.m. in hong kong. set the yuan is at the weakest since 2008. 6.8495 is the latest. it will set for an orderly depreciation of seven per dollar with makers only looking for excessive shorts. natural petroleum will try to streamline operations. we have sources telling us the assets include hotels,