♪ >> welcome to the best of "bloomberg markets: middle east. " i'm yousef give it a mean in dubai. >> i'm shery ahn in hong kong. president trump gave his first address to congress in a special joint sitting where he took a more measured approach. the speech was light on detail about his plans on tax and regulation. yousef: american crude stockpiles hit a record, stalling price gains as other

producers cut output. saudi arabia's parallel market index surged on sunday. we asked of the capital market authority how it plans to attract more foreign money. yousef: first, to the most anticipated of events this week. executive editor craig gordon summed up of donald trump's speech on capitol hill. craig: i think this is one of the more closely watched presidential addresses to congress i've seen. we have heard a lot from donald trump on the campaign trail. we haven't heard much from him as president filling in the details on key promises like repealing obamacare, like his infrastructure plan, like boosting defense spending. he almost gave no details. a lot of folks in washington are going to be frustrated by that. shery: how frustrated will they be with the fact that we are still wondering how he will pay for everything he has talked

about? is the simple biggest question that comes out of tonight. we are talking about a $1 trillion plan for new roads and bridges. we are talking about repealing obamacare that will have some costs. about $30 billion for 2017. i am not sure where this money comes from. i know republicans in congress who have built a reputation of being budget hawks don't know where the money comes from, and donald trump gave us know answers. yousef: there was quite a bit of expectation there would be downside pressure, more downside pressure in some of these asset classes. the question becomes, going forward, how does donald trump start to put these ideas into actual action? craig: that is the question that is going to occupy my time. they are talking to congress about obamacare. they cannot, for the a plan that

republicans agree on. forget the democrats. plan, hestructure talked about a private-partner partnership. oft's a question a lot republicans are asking. on defense spending, a lot of republicans are very pro-military. they don't want to see the national debt go up. they're asking donald trump these questions. you'll have to spend a lot more time working with republican stop get answers to these questions. us here isning riyadh. we will be broadening this out as we go along. what is your key takeaway in terms of additional details or the lack thereof when it comes to trump's speech? i think the lack thereof is the key word here. he didn't really say much about

the middle east. he said a little bit about immigration where he restated his position. when it comes to the middle east, there were three things he mentioned. there was half a sentence on iran and half a sentence on israel. really nothing new. this was very much a domestic policy speech aimed at a domestic audience, but he wasn't stating any new policies. just the unbreakable bond with israel, and by the way, i've put in place more sanctions on iran. isis, a little bit of a new one. he mentioned muslims being hurt by isis, as well. >> you wouldn't go so far as saying that there was a withdrawal in the fiery rhetoric, on iran, on isis? riad: it's hard to tell. you could say there was a

withdrawal. he didn't mention much about it, but may be because for him the audience. it wasn't a foreign-policy speech, as such. positionsiterated his in simple terms without saying, here's what we are going to do. on isis, to be fair, there was a little bit of nuance by mentioning isis is hurting muslims as well as christians. shery: president trump's speech was very much focused a domestically, and given all the ,ssues president trump faces will these issues overshadow president trump's of and his relations with asia? >> i think it is a domestic speech mainly,nd he needs to do this. i think he came off well in terms of showing himself as a presidential person. he's off the presidential

campaign trail. he sounded more like a president, and he's reaching out for cooperation across the aisle. in that sense, i think a lot of people are relieved, that they were expecting him to be more competitive. shery: the markets seem pretty relieved. >> the town, i give him good marks. it is what has been said about the detail. people are expecting more clarity about what he's going to propose. he's now in a dance with republicans in the congress. leadership, but he wants to push the burden onto the congress to come up with a plan in many of these areas. he's playing a little game here. he's saying, i can be presidential. you have to come up with the details. shery: do you have any sense of how he's going to deal with china or the rest of the world.

>> nothing very specific. he only mentioned china once with regard to wto. shery: wilbur ross talking about china. ross coming in today, he's a key guy for the administration, and he knows china very well. even talk much about nafta. clearly, the trade issue has to unfold. why is bilateral better than multilateral trade? there are big questions that have been left unanswered, and he's throwing the ball back to the congress to his colleagues to say, you guys have to sort this out. it's unclear whether he's going to be the referee, whether he's going to push aggressively from the white house to get the deal he wants, or is he not sure what he wants? that is unclear. from a tone standpoint, he's done well.

yousef: here's the issue. the market was waiting for details in this speech. the details were not provided across the board. what is the next milestone event we need to watch out for that is going to give us that detail, that reality as to whether this stuff is going to go forward or not? >> i think it's going to be playing out over the next two or three months on the congress in terms of the various committees coming forward with papers and policies on obamacare, on the military, on the infrastructure ,eal, on the whole immigration the replacement of the travel ban. these are still to be sorted out. a new administration. they have mostly people who haven't been in the trenches before. relationship with the legislative side is still to be developed.

think the key people are still not even in place. investingill to come, in saudi arabia. this is bloomberg. ♪

shery: welcome back to the best of "bloomberg markets: middle east." saudi arabia's parallel market index surged in its first day of trading sunday. yousef: speaking to us shortly after the launch, the vice-chairman of the saudi capital market authority explained how the gulf's biggest exchange was to attract more foreign money. benchmarks the same we used in setting up the ratio for the market, and those benchmarks will show that on average, within about a year from launch, you would be targeting about 30-35 companies.

our aspiration level is also that number. we may exceed that level given the amount of interest we have seen. yousef: i was looking at a chart on the volumes, and they are not where they used to be back in the day. what are you doing to bring in more foreign investors to bring more liquidity to the system? yieldse trying to offer to a yield-hungry investing world. take the saudi market, it is by far the largest and most liquid market not just in the gulf region but in the broader middle east. we are the 23rd largest by market cap. we are the 13th largest market in the world in terms of traded volume come even with the volumes you are mentioning today , and if you take the narrower gcc region, the saudi capital region is larger than all gcc regions combined. or we can see the saudi capital

markets playing a role as the de facto gateway to the region, not just for foreign investors, but also for issuers looking to issue in the local market. the regime is one step towards that. we believe change in the settlement cycle and changing technical parameters are going to be the final requirements that will lead to most international investors wanting to invest in them. yousef: is this going to be the catalyst for those capital inflows? even since the reforms, the amount of foreign investors hasn't jumped massively, a minute percentage of total market cap. mohammed: the percentage of foreign investors today is about 4%. from the discussions we have had with international investors, we have found that while they have been encouraged with the change in regulatory regimes in terms of investors, most of them still

require the change in technical infrastructure and settlement cycle in order for them to be able to invest in the saudi capital market, because that would bring it in line with what they are used to. , as they moven is to a settlement cycle, that would be the conduit to attracting more foreign investors from what we have seen from investor interest, that has been the key timeline they have been looking at. yousef: do you have a target in terms of percentage of total transactions? ?0%, 20% what is a healthy percentage? mohammed: much larger than what it is today. yousef: 10 times that? mohammed: much larger. other big story we are watching is the listing of the saudi aramco company. what steps are you taking to help facilitate and bring it home and roll out the red rpet?

mohammed: in terms of regulatory infrastructure, and that is our domain as a capital market in place -- it's fully to accommodate the listing of saudi aramco or any other .orporations as an independent regulator, we approach privatization were listing of saudi aramco as we do the listing of any other corporation. the same rules apply. the same technical parameters apply. in the event that saudi aramco chooses to have a dual listing in other capital markets, there may be some additional requirements that will need to be made in terms of linking up the local exchange with the other exchanges that will have a dual listing, but that is mainly a technical parameter. it's not a showstopper in terms of the listing of regulatory requirements. yousef: no conversation could be

complete without discussing the of the election of donald trump here is what the vice-chairman had to say. mohammed: i think our plans have not changed materially. we have been running on course in terms of the strategy we developed, and we believe, if anything, timing is actually opportune, because one of the things that has been ironic, saudi arabia has been opening up to foreign listers and foreign investors in the context when the rest of the world is closing down. cutelieve if anything, this -- this gives companies in saudi arabia more access to opportunities. yousef: let's get more on this story. matthew martin joins us in riyadh. great to have you on the program. let's talk about this change. what does it mean for the kingdom's plans? think the message

they are trying to send is they are getting back on track. about howsome talk this would affect the timeline for all of the bond programs going forward, and the kingdom said it wanted to get an issue out. now there's an acting head who's been appointed. this is the government trying to get some momentum back into that process. the question will be, is he the full-time head? at the moment, he's named as the acting head, or is someone else going to come in and continue to drive this program forward? the kingdom had a massive issuance program and wanted to get done this year and over the next few years. yousef: how does this fit into the broader strategy of vision 2030? we are here to celebrate the link -- launch of the parallel market. one of the big things the

kingdom wants to do is bring in more fdi. the parallel market is created to try to institutionalize the stock market. it's the most liquid in the region. most liquidity is coming from retail investors, often speculative, trading on rumors. this new market will only be open to institutional investors. that will exclude some of the volatility you get from having a retail-driven market. and hopefully bring in more institutional money from abroad. they see potentially a more mature market. shery: matthew, you mentioned the importance of fdi to saudi mature market. arabia's transformation strategy. when they sold that $17.5 billion mega bond, we did see a lot of demand. is there anything -- any clue that if they tap the debt market it will be as successful as it was in october?

>> i think the sense so far, if yolook at the trading around the issue they did last year, it indicates there is still a huge amount of demand their for saudi. -- there for saudi. and the way they place the previous offering, it was placed into the u.s. and europe with asian investors taking a small part of it. we see asian investors, there is a lot of demand there. and this will appeal to a different set of investors from the previous ones. we should still see good demand therefore saudi. shery: up next on the best of bloomberg markets: middle east, we talk about the outlook for middle eastern stocks as the fed looks increasingly likely to raise rates this month. ♪

yousef: welcome back to the best of bloomberg markets: middle eas governor reynard says a rate hikes likely to be appropriate soon. shery: the latest economic report reveals a modest to moderate growth in the u.s. economy. the beige book sees further tightening in the labor market with no significant raises in employment or inflation. here is what they see the fed to doing. >> it has dominated markets over the past few quarters. that is set expectations and trade tensions. to escalate between countries it -- and the u.s.. the new u.s. administration is not likely to call china a currency manipulator at this stage. we are seeing the taiwan dollar do well since the start of this year. since these are not as sensitive to currency -- u.s. currency movements, it is because we have this reflation story that is

very much part of that. if we were to see a fed move in march and dollar strength would look to be in currencies like dollar korea, dollar taiwan on the back of a reflation story we think entire the next one to two quarters. we have seen an increase in trade tensions. at this stage the reflation story will dominate markets in the short term. yousef: jonathan, this shows the spread between two-year and 30 year. i have highlighted that for you. a strong indicator about how the market feels about economic growth in the united states.

where do you see the dollar heading from here in the short-term? >> that is a good question. i think generally the dollar should be doing quite well against some of the funding currencies. we have seen political uncertainty see -- rise in europe. we cannot have this kind of move into year yields in the u.s. without positive spillover. the dollar will do well in the short term. but i think the longer term dynamics around the dollar still have question marks around it. in a reflationary government -- environment that will do well. we will see what happens to ecb and boj policy as well in the second half of this year. yousef: with the lack of details we got from president trump

speech, the focus will be on the fed to drive the direction and the u.s. dollar. we had goldman sachs up their expectation for a march rate hike. what is your expectation on how many rate hikes and how soon it will be? as soon as march? >> we think the next one will be in may. the way in which the market pricing has shifted, there is risk we get that sooner than expected. in terms of the march meeting. we are still in a situation where the overall trend up in u.s. interest rates is a steady kind of adjustment path. the market is not pricing anything aggressive at this stage. if that would change under a scenario where we saw a jump higher in terms of u.s. expectations, it would be a more supercharged u.s. dollar environment. but that is not our central

projection. yousef: saudi arabia, malaysia, indonesia, and a big visit. ♪

yousef: welcome back to "best of bloomberg markets: middle east." saudi aramco will invest $7 million in a project. >> that deal was announced why saudi arabia's king salman has visited kuala lumpur. is significant for several reasons. firstly, it gives the malaysian project update financial boost. malaysian needs the funds, having grappled with weaker oil prices. two national oil companies will work together to develop and operate in all refining hub and -- a l refining hub and the

company sits on the border of the oil refinery center which has previously been the hub for asia. every firm to the malaysian prime minister's twitter you will see a selfie he took with the saudi king. he tweeted how close their friendship really is. saudi arabia, as you know, is the world's biggest oil exporter. and saudi aramco will extend his long-standing strategy of locking in demand for its crude. it made the same moves and the u.s. and japan and south korea. has to especially with the u.s. shale producer challenging its standings. there is also competition from russia, not to mention from the rest of the opec members. in short, this deal benefits both sides. both need a boost. a pretty symbiotic relationship. of that calling

that selfies diplomacy. in the spotlight recently thatse of -- one mdb, scandal, has anything changed between them? haslinada: the selfie says it all. nothing seems to have changed. saudi king salman brought along avisit. malaysia rolled out the red carpet and gave the king a 21 gun salute. if anything, the visit symbolizes stronger bilateral ties. saudi arabia was dragged into the imdb scandal. as part of the trip going forward, king salman also plans to visit the rest of asia, indonesia, china, japan, where he intends to discuss common issues, though no details have been given about the issues he will be wearing -- bringing up. yousef: from our men in abu

dhabi, the head of wealth management. i know you cover saudi arabia closely. put this tour of asia from the saudi king in context. ryan: this is, i think, a very positive visit, and i think it shows that saudi arabia is really opening up to new perspectives. new saudi arabia is transforming, it is going in the right direction. so, this move towards asia is a diversification from saudi arabia towards new partners, opening new highways and it is definitely a positive. yousef: we have the issue of the u.s. dollar strength that has been a theme throughout this program. how is that going to impact the growth story there? growth story in saudi arabia is happening because there is a complete reform taking place in saudi arabia. this is a complete change of mentality taking place. so, the plan that is coming forward will transform saudi

arabia. shery anh: coming up on "best of bloomberg markets: middle east," oil prices have been stuck in the range of rising stkpiles. opece sting out of the led supply cut. this is bloomberg. ♪

yousef: welcome back to "best of bloomberg markets: middle east." oil remains range bound as a rising u.s. stockpiles count is the impact of opec's supply cuts aiming at training the oil supplies. >> opec deal, the joint agreement with opec and non-op ec, take 1.8 million barrels a day of supply. and even though u.s. production is increasing, we do not expect levels.ach these consensus expects the new supply from the u.s. might be between 400 to 900,000 barrels a day. so, we still expect to see this opec deal helping to rebalance

the market. however, there still remains a number of headwinds, industries remains high. the higher production from shale producers that you mentioned, and, of course, this opec deal is for six months. we believe it will have to be extended. for more of this rebalancing to happen. there is still a lot of questions out there. we, you know, at the moment there's some support to oil price with greater discussion of compliance, but a lot of questions still. >> is that why you haven't made any significant revisions your base oil price? rude,re quoting brent c just slightly above where we are at right now. >> absolutely. there'll be a number of critical point. we a seen u.s. production already increasing. those tend to something like a six-month timeline from the investment happening for that

oil production to come on stream. we could see gratis u.s. production coming in and the second half of the year. for us, if you see this opec agreement being extended and strong compliance, that might be a change in the scenario for the second half. but we need to see signs of that happening before we make any upward adjustments for the oil price. yousef: we are now joined by the vice president for the middle east, he joins us live on the site. lukoil is russia's a second largest and a has big plans for this part of the world. i want to start with perhaps one of the key challenges over the last six months, which is the reduction in supply after this opec, non-opec agreement towards the end of last year. how is that affecting your investment in iraq? >> good morning. the decision by opec to cut production at the end of tlast year is impacting all the

members of opec and also non- opec countries. in terms of our opportunities in iraq, we are working according to the commitments and decisions made by the ministry of oil that decide which oil fields are to produce how much. at this stage, lukoil is producing 400,000 barrels of oil a day. and we're maintaining that. so, no real impact for now. youref: what about the, broader strategy for the rion, because iraq is a key part of that you also said iran is on your radar. a concern is the new administration under donald trump and what that could mean with relations with iran. does that detract at all from your ambitious plans to make business with iran? >> you mentioned at the start that lukoil's russia's second-largest oil producer. in fact, we are the second

largest private oil company in terms of reserves and sixth in oil production. in the middle east, more than orf of the world's reserves are located in our main operations ar in iraq and egypt. we have taken decision to grow our business in the middle east. and one of the new opportunities is iran. we are working with the iranian national oil company looking at two particular field. and we are presenting to them are proposals in terms of how we would develop those field if we were awarded the contract and what would be the economics both for the iranian side and for l ukoil. not the only country are working up and we are actively in discussions with the government in oman for opportunities that exist there. we're looking at opportunities here in the united arab emirates. as you know, recently i've not extended the license on the

onshore fields, and we'll be looking at finding new partners for the offshore fields in 2018. we're looking at opportunities in kuwait and other parts of the middle east, as well. yousef: would you be interested in bidding for the next round of offshore oil concessions in abu dhabi? >> we believe that all opportunities that are being brought to the table at the moment are of interest to us. the key priority, number one, is that the economics need to make sense for both sides. we have certain targets for the econoc return on the investments that we make. we have expertise and abilities both onshore and offshore that we can bring to the national oil companies to develop their resources. so, yes, we will be looking very actively at that arises.ity when it shery ahn: i want to get your

take on maybe a little more about these opec cuts, because we've seen low production, 90% compliance ratight now. does this push room for pushnies like lukoil to for more clients and how big of a threat is the revival of u.s. shale right now? >> i think the decision by opec in december was critically important, because it gave stability to the market. indeed, there was an increase in the oil price and today, many people are wondering what's happening? are we going to go much higher, lower? not forget that over three years ago we had three years of stability around the $100 mark. today we will have stability barrel,he $55 and $65 a which the currents cuts have develop-- have enabled the markets to take her the significant oil stocks need to be worked out and that is what will be keeping a lid on price, but not only that, the shale oil, as you mentioned, increase

in production in the future of the u.s., is going to maintain a lid on increase in price. so, i think we're in a period of stability. we have a lid because of the shale oil and we have a bottom because of the already proven decision and willingness of opec to maintain prices at a reasonable price, both for producers and for consumers. >> do you think the market is underestimating the revival of u.s. show now -- u.s. shale now? chart, they did show about how u.s. oil production may have bottomed in december. now we are seeing production rates up 125,000 barrels a day production each month. could the second coming of u.s. shale be more powerful of the first? >> i think it's important to look at what happens when prices - once prices reach the $50 mark.

there was a significant increase in hedging and it was predominately by the u.s. shale producers, who went in and fixed prices at those levels. so, i do believe that production will grow and will grow stronger maybe then we anticipate. see priceswe coming closer to $50 and above. but i don't think we will see a wematic change the way saw more than 4 million barrels of oil production increase over three to four years. >> one man not interested in talking about oil is the former saudi oil minister. this is a man who, of course, can move oil prices and even currency with his words for over two decades. so, what's his focus now? we are joined by our reporter in singapore. in your city, what is on his mind? >> yes, shery.

al-naimi was in singapore last week because he wanted to launches, for his launch of his autobiography. q&a session started during the event, he clearly stated and told the audience that he has left the oil market and as well as oil prices behind him. the startat's contst from his previous days as the oil minister. how has naimi's words impacted the oil markets in the past? sharon: well, over the past, mr. al-naimi is the architect of the that oil pact to pump and to get their market share, to secure their market share. so, every word that he spoke has moved the markets, as shery said, it moved the market from the oil market to the stock

market and even wall street. so, wherever he went, all these journalists will follow him around. he would draw the biggest crowd he would ever see. he's a man who has a $2.00 per oil.l oil to $147 a barrel he has been the oil minister of the world's biggest crude exporter for two decades. so, i think that tells it all. shery ahn: coming up on "best of bloomberg markets: middle east, " our exclusive interview with f navigationgul holdings. how he has turned around plans are faring next. this is bloomberg. ♪

yousef: welcome back to "best of bloomberg markets: middle east .:" gulf navigation was struggling to stay afloat because of rising debt. of shareholdere activism, the company has become a turnaround started. i spoke to the ceo. >> so far, we managed to almost

most if not all the existing legacy issues are sorted out or about to be finalized. and we are in the process of growth. we are in the process of looking into -- into expansion and at the same time, you know, we have to ensure we have different streams of income. so that -- diversification is one of those. yousef: we will get into your growth plan and a second but first i want to follow-up in terms of the settlements. when do expect to close the chapter completely? >> we have two settlements are done and many others which are small settlements, is done, too. we have only one outstanding and we believe this is, as we s peak, it is in the process of closing within this month or the coming month. yousef: in terms of your growth

strategy, there is something you are excited about. what is the plan exactly? how much capital do you have to invest and where are you looking? >> well, we are looking into differences of potential and capital coming in -- different streams. at the same time, we are already decided there will be a number of acquisitions that will happen. processes, expansion especially in the northern emirates. and also, we're looking at expanding our fleet. that is why we have the new plan, because it is critical for us to look ahead and look what will happen by 2022 around that region, because we have cerain contracts that will expire in 2023. so, it's all expanded part of our in and out growth process. yousef: in terms of acquisitions, what are you looking at specifically? >> we're looking at a number of

comical and pro-dex tank - -product tankers. we're looking also at acquiring certain offshore support vessels, which will help us to expand our fleet and also direct our different income streams as we look at expansion and diversification. yousef: how much capital are you going to need to be able to find that investment strategy? that is the first part of it. and how are you going to raise the capital? >> there are different modes of financing, whether you issue -- share capital. 1 you know, we have approved billion share. we can raise that if we want our we can issue -- a short period of time. and the middle ground i believe we have a number of good investors who are strategic, and that helps the company to look

ahead without having different, you know, investors. at the same time, we have a huge potential whenever we look at our partners. a number ofade partnerships weather with china or around the region that also created for us a new outlook of that financing will be available if needed to support. such as lease to buy processes and so on. yousef: in terms of growth, what you targeting in 2017? >> we're looking at the acquisition that is critical for us, because that will, we need leet, tripleur f our fleet by 2020. we have already started this. approved by the d. and, erefore, it is a cycle of just letting the company to go into a modest growth process and also creating value,

an added value to the shareholder. and, at the same time, to the company employs. , perhaps,at brings up the opportunity or lack thereof with a new administration under donald trump. does that change anything in your strategy? is that a net positive or a net positive? >> i'm one of the person of supporting donald trump being there. i believe a businessman can have a different cycle of thinking. we, i'm not interested in the political fight. i'm interested in the economy. the thought process of growth. because that, to me, is more important. and i remember in dubai there was a conference, and during that time, i said, i believe the next president should be domiciled. -- be donald trump. yousef: that is it for this "best of bloomberg markets: middle east." a busy week ahead. andspeak with the cfo - -

cover all the big regions at the start of the trading week in the gulf. shery ahn: that is sunday morning at 8 a.m. in the auuae. thank you

>> coming up on "bloomberg best ," the stories that shaped the weekend business around the world. >> the dow topping, 21,000. respond tos president's optimistic tone in his first address to congress. president trump: we have undertaken an historic effort to massively reduce job crushing regulations. >> did his message fan the program flames? >> healthier markets are something he is hoping for. >> the public equity market enjoys what the president is doing are talking about. >> will recent economic growth translate to a rate hike? the ides of march