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tv   Best Of Bloomberg Markets Middle East  Bloomberg  November 17, 2016 11:00pm-12:01am EST

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>> it is new here and home -- it is moved here in hong kong. here are your top stories. shinzo abe the first world leader to meet donald trump, saying that they had fake discussions and a warm atmosphere. he says that he is confident that trump will be a success and a man that he can trust. he would not comment further as the talks were informal. of 6.8 96 extend the currency's decline. goldman sachs and has raised its
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forecast for the year one. chinese real estate curves cooling in october. the government push to prevent a property bubble caused price rises in only 62 of 70 cities. it had risen to 63 in september. prices fell in seven cities, compared to six month earlier. breaking news justin, the malaysian central bank saying it is intervening in the currency market -- breaking news just in, the malaysian central bank saying it is intervening in the curtain market. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ♪
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tracy: welcome to the best of bloomberg markets middle east. i'm tracy alloway. making headlines this week -- we were live in saudi arabia. -- king abdullah about investment in an era of cheap oil. imf finally approved a loan forr $12 billion the egyptian government economic reform plan. can policymakers in cairo deliver on the tough terms asked by the lender to secure it support? tolddi billionaire supports he fully iran's proposed ipo -- bronco's proposed ipo. create more transparency, it will create more liquidity, very badly
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needed. so, really a deficit of 5%, or even 10% -- and if it is well understood by this committee in saudi arabia and the region, they will appreciate it. >> will you buy the stock? if it goes public, do you want to own part of it, or do feel as though -- >> let a go public first. i will do anything to support support the and to correct policies of the prince, i do so wholeheartedly. this is linked to that. we talked about citigroup before. citigroup would love a lead managing role in that ipo, and it had a lead underwriting role in the bond sale. is there anything that you can do as part of the royal family to win citigroup that managing role?
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do not interfere much in the politics of this deal at all. i'm a private citizen in the private sector. i never use my contacts for inflows. citigroup has to do it and went on their own merits, not on my push. -- erik:u are building you are building the tolerance tower in the world in jet up there is a model of it here, in fact, on the red sea. i understand there has been difficulty hitting banks to lend against it. where do things stand? >> let me correct you. there are problems that they had previously. now things are ok. yes, we have a few months of delay. but we have signed already with the local bank. so, financing is completely guaranteed.
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we are back on track and we are going to finish it in seven days to 10 days. you in anyway need to scale back the project or do you t being completed as originally envisioned? >> oh, no, with the lowest 5, 6 months ago, with loans that will take us to complete it completely. arabia's 2030 economic shakeup has ambitious targets, but they expect goals to be cleared along the way. the plan is to reduce the kingdom from reliance on oil. thes cranny discussed project with the finance minister. remember the idea of establishing the vision is a finish line. now the targets can be very alltious, it could be
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overstretched. but we have the mining, 95% of our mining resources have not been explored, and there are so many ideas of tourism. and we have the logistics services in the red sea. not leveraged that it is not how much we achieved we have beenuch initiated, what are the areas that have been initiated, and hopefully we will catch up as we go. ask what new incentives you can offer to the chinese? what are you going to offer to make foreign direct investment better and more enthusiastic? oni think we are working more than one front. the first front is we are doing
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partnership directly with global with china,tners, with japan demo with the usa and america. we have established a special task force -- like if we're talking about china, there is higher permission between china and saudi arabia. the third in china and we have identified potential opportunities between the two countries, and also identify the working teams that could be established -- manus: can i ask you one last question? are you ready to do a trade deal with britain after brexit, sir? >> i think britain is a great country. we enjoy a strategic partnership with britain. we have already communicated
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with minister liam fox, who was supposed to come here a few days ago, but he could not. and we are working to have a special deal to negotiate. up on the best of bloomberg markets middle east -- our exclusive interview -- this is bloomberg. ♪ >> this is a project for the future of saudi arabia. we now have a report with 3 million containers going to pull .5 million containers, becoming the largest port on the red sea by -- ♪
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to the bestme back all of bloomberg markets middle east. we were on the ground in riyadh at the summit and manus cranny spoke to the king of camp villa
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city and talked about investment in the era of cheap oil. >> this is a fully private project. we are building a project for the future of saudi arabia based on the nonoil economy. we have the capacity of 3 million containers, going to 4.5 million containers becoming the .arge -- the largest port we have almost 120 companies we have attracted, building 130 million square meters. we are today the largest developer in the country in terms of sales, although we are a remote site. so it has been going really well. alls: so those numbers are up. tell me about the complexion of the complete. i know some of the big names. take me up to date. am i looking more at industrial? are we looking at services?
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where is the ambition now? >> we are focused on pharma, other industries. the goal is to be a manufacturing hub focused on the red sea region. there are 23 countries around the red the that basically are are looking ate logistics -- focusing on logistics of this point. manus: everybody can tap on the ministry's door and go, we are here, help. but where's the financing for this project? are you going to need additional financing. where are we on the finance side ? >> we have built a strong position. we are over $1.5 billion in debts. all of the banks believe on the strong business model behind it.
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-- believe in the strong business model behind it. we are in a strong financial position. manus: you have raised $1.5 billion in debt. will you go to the debt markets again? >> we have too much cash. manus: [laughter] probably one of the most ironic answers that i have heard. tell me this. the biggest obstacle to achieving ambitions -- what has that been? sectors that have never been privatized in saudi arabia. we're talking about building a port from scratch. all of these new industries that we went to as private sector developers have been difficult to attract, but now that we have done it, we have strong business models. manus: i don't want to get into trump and the election, but i do want to talk about trade. there is a discussion about
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global trade. do you worry about that? the imf has said they are worried about protectionist policies. is that we're the biggest risks for your project? >> 90% of global goods arches areded by marine -- transported by marine vessels. i think the world has to come up with its own social policies. there are different needs. part of this is the deputy prime minister's vision. and that is part of 2030. andcan you envision 2030 how that help you deliver more effectively? is there a code join a question workshop but definitely there is. it is focused on a nonoil economy. we have been doing that for the past 10 years.
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we have been missing on the red sea and the nonoil industries. so, this is a huge alignment and the biggest alignment yet is on tourists. projects.lding 40 we believe that saudi arabia can be huge for tourism. the other thing is this it get reallyn strong and wages, cutting the wages for ministry staff, etc., government employees. how does that close the gap for you? the reduction in state wages? does that help you? does that set a new tone in terms of saudi arabia? >> it is a restructuring of the economy. you're talking about new revenues.
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really the opportunity is making the kingdom more competitive for the private sector. you will see much more domestic shrinks the government and becomes more competitive in terms of developed -- delivering services. manus: one of the things that our managing editor and i chatted about -- why are we here? this is reaching out to the younger people of saudi arabia. region,ame back to the and that is going battle very long time ago, toy five years, it was about in part -- empowerment. do you think that there is a material difference? what is the standout for you? >> the economy has been focusing on industrialization my focusing on industry. to reality is it is going reduce jobs. what we need to focus on is really the knowledge-based economy. theuld say this was almost
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service because we did not know how to get to the knowledge-based economy. today, you don't really need to do anything. they will do it. all you need to do is focus on entrepreneurship and creating a sense of belonging to the community, giving them the opportunity to unleash their potential. that brings to mind where we are with the evolution of the chinese economy. they do not want to make jeans. they want high-value, high-tech value projects, high services. you are both going after the same kind of is this. where did the chinese fit into your relationship? have recorded the chinese? >> we have some chinese companies during manufacturing. i think the link will be only silk road and the idea of --king them, the marina link the marine silk road between the red sea and the hub for china. tracy: next, more of our
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plus, headom riyadh, of investment -- this is bloomberg. ♪
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tracy: welcome back to the best of bloomberg markets middle east. the trump shock seems to be fading from global markets. marketse in global bond used off. we spoke to cross bridge capital's head of investment. >> equity markets have gone too fast in the short term because we did not see what other people were getting worried about. in my view, if you look at the treasuries,d on the i think they are fairly rated. there is a lot of concern. are trump's policies going to be? while it may be positive in the longer medium-term, short-term, people do not know,
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to be honest in what his policies are going to be. equitylook back on the market, if you go back to 1945, s&p does better under a democratic party that republican president. 9.7% compared to 6.7%. however, republicans do better when they have a republican house and senate and that is what we have got now. more businesse really, more deregulation. but things are going to come back later. to me, the excitement that we have seen in the short-term is too far too soon. it is not backed by any policy or something that president-elect trump is going to do. i would say in the run-up to equities, this year will be at what the fed is going to be and what the rate of inflation will be, well and good. a 700%there's almost
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possibility of a hike in december. i want to springboard the debate -- if there are inflation expectations, what does the fed need to do? next year? the fed skeptical that was going to raise rates, but looking at it now, we might get that. but obviously, we see growth coming up, real gdp growth, you will not see the fed really worried about it. i would not be. however, having said that, the yields are looking to go higher. manus: we will pick up yields in a moment. angie, join the conversation? angie: yes, let's jump into my bloomberg. that premium showing what investors are looking at when it
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talks about risk. are we in a stage of normalization again despite years of quantitative easing? that's an interesting question. not just the fed, but if you look in europe, people have a doubt about whether the ecb will follow up into more qe. there is the sense that if central banks are not going to buy, should you be the buyer of the bond? ago, you had this 50-year bond auction, italian bond auction. i don't know how those guys are doing because clearly yields have gone up a lot. i don't see a runaway yield problem. let's talk about currencies now. of the dollar -- will it continue? what does history tell us? do you have any impact evidence in terms of the dollar under republican administrations? continue? >> why can
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tell you -- if donald trump was to follow up on things he has said -- he wants corporate's to bring their offshore money back, it's a very powerful thing. 20%, thet from 35% to reason for the corporate's to keep that money abroad that exists -- that could feed into even 4% gdp growth. that would be more the second half of next year. a. you would really see the euro-dollar come under huge pressure, to the fact that it could come to parity or below parity. you have the french elections, the german elections. of 3%.e a differential of my bets is the euro dollar could really be week going into the second half of next year. that is my theory. /yen,respect to the dollar
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you will not see an acceleration that some people talk about. if you look at the dollar/sterling -- driven by the sterling as well, what happens with the article 50 trigger or the autumn statement next week -- if they have to do more fiscal spending, that's not possible in the short term. but if it can drive up growth, clearly it will help the sterling. we think the strength for the dollar is going to continue. >> you are seeing what has been happening the last couple days and certainly the past year where you see u.s.-dollar strength weight on the yen, which is a good thing, because this is what boj wants. but what about corporate's?
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doesn't a strong u.s. dollar hurt corporate's when it comes to drop its? -- two profits? >> i think you would have a short-term head. let's look at the u.s. economy. 90% of the consumption and the sales that come from u.s. at based economy -- u.s. consumers in the u.s. economy. it's not like you have to sell to the rest of the world. the rest of the world sells to the u.s.. it will all be predicated on what gdp growth you get in the u.s. so what you might see in terms of corporate losing out -- that will be more than made up by what you will see in the domestic growth. i think that's a very powerful story. people are discounting what president trump can do and you look atut if what he has laid out, it's business friendly. you're talking about repealing
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obamacare, or parts of it at least. that's a recipe for growth. if he can implement all of that, we will say. i'm not going to be a very strong dollar bowl. we will see what happens. next on the best of bloomberg markets middle east, a big deal in middle east e-commerce and the philippines' plans to cap the gulf for billions of dollars in investment. that is ahead. this is bloomberg. ♪
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here hong kong. here are your headlines. rank dropped fortunes of 1% in kuala lumpur -- kuala lumpur, the weakest since january. capital controls are "baseless." shinzo abe is the first leader to meet donald trump, saying that they had frank discussions of a woman mr.. he says that he is confident trump is someone he can trust. promoted the transpacific
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partnership, while trump once america's allies to pay more for protection. to dominate likely the summit in peru. is in lima for what will be one of the last global meetings of his term. i direct challenge to netflix -- it announced the move in a post saying its new show in 120 countries. it has been billions licensing original content for its prime service. global news 20 euros a day, powered by more than 2600 journalists and analysts say more than 120 countries. this is bloomberg. let's check out the markets have been trading in the asia-pacific. there is haidi lun. trump we are seeing this
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risk of age -- risk aversion again.lay out the malaysian central bank had intervened when it came to the currency and this is the reaction we see, stabilizing somewhat after that move was announced. but if you look over the past week or so, since the trump news came through, we are actually down 5% and it is not the only one when it comes to these agent conservancies -- currencies thing the downside. they're really having to step in today. we are also seeing some declines today -- we looking at a five-month low. what we are at seeing for oil as well ahead of the delhi meeting. we are seeing some risk aversion's come all the break is doing better. a quick look at how the markets are doing and we're looking at a
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pretty mixed session. take a look at japan. this is the leading gainer of this week. they are heading for the bull market if we managed to close in that territory. in real,nto the close hong kong, and china. tracy: welcome back to the best of bloomberg markets middle east. i'm tracy alloway. wealthrabia's sovereign fund is to invest in a project to tap the fast-growing middle east regional market. >> they're hoping to tap into what they estimate is a $3 billion market in the middle east of online sales. this is obviously a huge market in the arab world. you have 300 million people, a large population. a demographic of young people who are increasingly doing all of the shopping online.
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so, there's plenty of opportunity here. but there are also -- there's also established competition. >> what markets are they focused on and what are they going to be selling? they essentially go live in january and they will be looking at the uae and saudi arabia markets. they also went to roll out to the wider region after that, and they are going into iraq. they are going into egypt, sometime in 2017, 2018. and those are big markets to stay and be competitive in. there's a lot of competition for online retailers. it will be interesting to see how they play out in that market. >> be philippines is setting its sights on billions of dollars of investments.
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they are marketing plans at roadshows across the gulf. let's bring in regina lay. what kind of projects are we talking about here. >> hello, angie. kuchar's oil reserves as well as slanted the exports to the uae. they came home from a recent roadshow covering the tar, of a dobby, and to buy. of hundredscharge of industrial projects. they are identifying projects -- pockets of opportunity and breaking into untapped market like russia and iran. buildrse, they want to
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economic and defense ties with russia and are planning on a state visit, possibly next year. manus: why the sudden interest in the middle east? why the sudden interest in these kinds of markets? >> hi, manus. the numbers alone till the story. the improved investment and at $2.2 billion. we are living in highly uncertain times. they have made a show of pivoting away toward china and continues to dish out harsh words towards washington. many are speculating that he will be friendly with resin -- president-elect donald trump. we did have the president of the electronics industry body on the show this morning. held back, have been and american firms have been
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contingencyusiness plans and orders on the ground have been canceled. there does seem to be some pullback trump form business operating in the country. the bloomberg commodity interest saw its biggest drop after the possible effects of a donald trump presidency. the white house in january. talked a great game. welcome to the show by the way. what does donald trump mean for the emirates in terms of oil and american supply? give us your perspective this trying to> he was portray himself as being more pro-oil. so making it easier for them to drill in offshore water or federal lands. could also do things like make pipelines easier to get authorized. but a lot of the things that mr. trump has been talking about
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would probably increase the supply of oil in the united states and really what oil companies need is higher prices, not more supply. tracy: i am old enough to remember when geopolitical uncertainty meant that with prices went up during instead we saw them go down must week. is that a testament to how much supply markets and could come onboard now that we have trump in the white house? fundamentals before and after the election are the same. ultimately it will be down to what happens at the opec meeting in a couple weeks. -- it would have drawn less interest. you can see more political risk premium back in the oil price, but we would expect that to be more of a long-term play in oil.
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we just had that conversation and his key point moreou are looking at much political risk. there is a downside to oil. it makes the break evens harder to achieve which makes fiscal aggression in the region much higher. what can opec agree that will solidify oil prices about -- what? 55 seems to be what we are talking it opec? the bar forsetting themselves that much higher. they need to be talking about a much more sizable production cuts, back to the end of september. we're talking maybe between 752 -- 750ion -- one million million -- one million barrel. we might be talking about 1.5
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2 million barrel cap. in our view, that is of the question. tracy: we saw opec reaffirm they are still talking about the same cut. >> it raises the question of whether they would cut production going into 2017. an agreement is hours away. they're just rated inuit and nothing has materialized. it also raises the question what adherents to a deal is being implemented.
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on a net basis, you have to be sure that opec as a loc is -- as a bloc is reducing coverage rather than on the headlines. up, we speak to the sea off the middle east's only listed airline on how he piloted the carrier. this is bloomberg. ♪
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back to the best of bloomberg markets middle east. earlier this year, air arabia reported a 30% jump in carrier income. rabbits andlining four of the last five quarters. we spoke to the ceo on how he managed to turn around. >> i think we had good results
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for the quarter. it is mainly driven by two factors. we are in a business where you can keep on managing your costs under pressure, and that really was the key factor driving this particular quarter. let's talk about shareholders. you have the honor of being the only airline in the region. it's a great mental to have. what is the possibility on the timeline -- what is the possibility on a pay out? >> i think we have followed a policy. , backwe have gone public made these profits and every year, we have had the
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lowest diffident paid since 2008 going on from 7% to 10%. last year was a 9% dividend. april, the board meets and decides how best to use the profit. and shareholders enjoy the dividends. >> was talk about the operating factors here. oil among some. there's a lot of anticipation we will see airline orders drop as a result of lower fuel prices. how have you been able to factor affectingw is that your strategy to expand your >> weft moving forward? have oil price in this region,
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and you probably know a good oil price is good and low oil price does not impact the economy. budget carriers tend to do well. we have grown the business 14%. 2017, we are getting to deliver six more airplanes, particularly 20% in morocco airports ande 20 much of this will be done regionally and focused on 2017 focus. as i think the expansion will continue this year. and we 12% expansion
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will be opening about seven new roots. so we will continue with the , anythinge have had between 10% and 12% expansion. and we will see the number of passengers flying has not changed in the region for all of the carriers. -- itup forever percent is up 7%. the market is growing on the news. is good to hear that from you. obviously the chairman of emirates was warning us to get ready for lower for longer. that you are looking for partnerships. give us a sense of where you will focus in terms of partnerships in 2017. do you have any eminem -- any m&a plans? do you have a stake in another
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airline? will there be consolidation? >> we have a home base. we have morocco. we operate out of three airports in morocco. we operate out of egypt. we operate out of alexandria. and we opened up a new hub last year in jordan. i think being a publicly listed company, we will be happy to look at opportunities as they come up, so long as it fits our business philosophy and our expansion and has a good bottom dollar for our investment. we are open-minded to what comes up in the market. up on the best of bloomberg markets middle east -- egypt finally managed to win the imf's approval for its $12 million -- $12 billion bailout plan. a look at the road ahead. this is bloomberg.
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tracy: welcome back to the best of bloomberg markets middle east. can i do for tile cc's government keep the promises it has made to secure the loan? we got some insight. al-sisi's government keep the promises it has made to secure the one? >> how can the banks attract those dollars from investors? do i, as a depositor or an go to the bank i and exchange my dollars or go and buy those from the bank? and that is what we are seeing gradually happen. them starting to wen up letters of credit and are seeing depositor say, ok, the black-market trade and the official rate are almost the same.
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maybe i will go back and exchange my dollars? and that is how the process will work. >> is it a question of striking while the iron is hot? you have investors enthusiastic about the country and reforms. or do you wait and give investors the assurance that everything is going according to plan? >> now that they made this deal last week, which was out of the blue -- we did not know it until that day -- i guess what is on their mind is, do we absolutely need to go and raise more money, which will add to the debt and everything, or let's wait. and -- ill improve anus: you have just thrown me huge fish. rate upgrade? what possibility is there of that? surely the rating agencies want to see more on the table? >> yes, we saw the s&p on friday
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revived the outlook from negative to stable. again, it is still early days. the process is still in early days. itd you, the real economy -- could, under significant pressure now because of the exchange rate flotation. it's early days. joining us on the line, a vice president of strategy -- let's deal with a very basic fact. first of all, where will this money be put to work most expediently that we will see result? >> good morning. i think the key thing is trying to fund the budget deficit at much lower rates in the local economy. are funding the deficit at 18%, 20%.
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it is the total budget spending. this.ou are going to fund and then there are lower funding costs initially. that this bank had come through banks with some quite painful measures by egypt .- the currency devaluation how will the impact authorities question mark how are they dealing with that? >> i think the move on the form exchange was actually quite a relief. obviously as much of it as is inflation generating, it has already been happening for a while in terms of the floating of the pound. so, i think to a great extent, it is coming, and now it will be more of a relief to the business ammunity in terms of setting
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stable and functioning economy. it makes sense. to a great extent, i think this is a big relief to the economy and we will see foreign money rolling in, again, just in the first week. it is improving the system for the currency and the keeping is expanding on the cash subsidy. on onelet's just touch of the things you raised there, which is the inflow of money. you have the finance minister saying we expect foreign investment -- t bonds -- to be around a billion dollars to $10 billion over the next 10 months.
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is that achievable? we have a bond sale, to billion dollars of papers come to the market. how important is it that that ,ond sale as well? >> obviously it is important. it is a key part of the government's funding plan. government has authority from to $5binet to issue up billion of bonds. i think the key as well is to authorize inflows into the local debt market as well. the dollars obviously are needed. it would help the market to and so farhe funding the indicators we have seen the first week of quite promising on that level. the key thing here now is, before they start to pay off in economicthe pickup in activity across the board -- it's really looking for the pickup in the economy. the economy has been underperforming for the last
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three years. all of these forms are being -- these reforms are being done. tracy: that is it for the best of bloomberg markets
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♪ >> it is 1:00 in hong kong. i have an update of the top stories. malaysia is intervening in the currency market. policymakers contend with exchange-rate volatility. to theggit dropped .4% lowest level since january. fears of capital controls are "baseless." has become the first world leader to meet donald, saying they held frank discussion. the prime minister is confident trump will be a success. he would not comment further.


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