♪ >> welcome to the best of bloomberg markets middle east. let's get the major stories driving headlines this week. president trump signs a new travel order. iraq x-games the ban this time around. upplies from libya are interrupted. retalk to hyperloop one about its plans to bring a futuristic transport system to the gulf. plus, a property developer has

garnered international attention. it is business at home, will be in focus. we spoke to the group chief financial officer. >> i would like to start off with your sense in terms of the operating environment. this chart on bloomberg tells the story in terms of high-end dubai property. this goes all the way back to 2009. can you see the downside pressure. this is the paris per square foot. this is for high end villas and apartments. what is your take? >> i think to understand where we are today, we need to take a step back and look at it precrisis, going into the crisis and coming out of the the crisis. up until 2008. the tube mark had been growing. in 2008, not unlike the rest of the world, dubai had a tough financial crisis in which property prices and other asset prices crashed. it took dubai around about four years to come back.

if you compare to some of the other areas, london, early 1990's, it took them 9-10 to recover. it took dubai four years to recover. then dubai had a great run in 2013 and 2014. >> we going to see more down pressure? >> i think it is healthy for markets. what gets always worrying is when prices go up strongly in a short period of time, especially when products are sold on an off credit basis. >> we are seeing a strengthening u.s. dollar, one of the keep themselves last few weeks. how is that affecting your business? you are concentrated in dubai, and this is a place that gets easily affected by changes in the strength of the green back. >> i think the strength of the dollar reflect the strength of the economy, and it reflects dubai and dubai real estate as

a safe haven for investment on a long-term basis. our core marks remain juicy. doctor our corvo markts remain juicy. that doesn't impact the strength or weakness of the dollar. the asian markets, we have seen more demand when the dollar is a strength. ar is a great motivator, and fear tends to make a flight for safety. >> how much cushion do you have in the downswing in the dubai market where you are highly concentrated? are you planning to expand? are your assets from beyond the city more than you have already? >> i think if you look at our history, we have been predominantly dubai focused. 90% of our deliveries came from dubai over the last 10 or so years since we started delivering in 2016.

dubai will continue to be a core mark. our land bank, assets and operating professor its will continue to come from dubai. i get asked this diversification all the time. but it is very difficult to find a mark as attractive and rewarding as dubai on a risk adjusted basis. >> some analysts have downgraded your stock on concerns that rising costs will eventually impact your profit margins. will this be a problem? >> this industry in its very nature, the development business, is cyclical. what you cannot do is wish it away. but you can prepare and run with it. you can acquire assets at very interesting prices when markets are down and deliver and position your products in a way to alou you to achieve financial rulls. obviously when you are in a down cycle, it will come under pressure. but it is a function of how you

have bought your land, thinged your land and developing your land. the way to look at business is on a long-term basis as opposed to short-term cycle that a business goes in and out. the key thing is to manage your liquidity to be able to weather any cycle. >> that is critical. you have a cash balance of 8.5 billion. what do you man to do with that money? maybe some exotic adventures could be on agenda? >> i think not. we are very conservative. in good and bad markets, we have had cash balances higher and we have done what we have always done. that balance is split into what is set aside for projects. project and to a can only than spend on that project. we have healthy cash bags. we have $2 billion to $3 billion in cash. >> the latest ban, does that

concern you? do you regret having had the tie-up with donald trump? >> it is our business to create value for ourselves and our ommerce. we have severing companies and the trump organization. it adds value to us. we had a great sfwegration of the first golf course in dubai. it was a great success. >> so you are not reconsidering any of that? going forward, you may have had some new projects on the radar, but perhaps those are no longer a consideration? >> i think wil president trump coming into -- i think with president trump coming into office, what the cannon cannot do would be a decision for the trump organization. however, we are very proud of the association, like we are with all our brands, and we continue to create value through that. >> does that mean you are looking into other partnerships ? >> we continuously look for

partnerships that are consistent with brand and brand thingsing that will add value to our customers. >> just to again give our viewers a bit of an overview of where you stand in terms of peers. this is blended forward earnings. the orange line is where your peers stand. you are trading at an average of 4.9. is the market mispricing or misunderstanding what damac is about? >> i think the market will do what it wants for do. it the for me to comment whether the market understanding or does not understand the stock. for our investors, we have been a fantastic investment. people came in and we recently add a shareholder day. they have been more than doubled their fortune since. going forward, we feel strongly about the returns we can

generate for shareholders. >> still to come on the program, our interview with the c.e.o. of highway loop one on plans to bring the super fast transport system to the middle east. this is bloomberg. ♪

the best of k to bloomberg markets middle east. the vision for a super fast transport system he calls a cross between a concord and an air hockey table is inching closer to reality. it says it is in talks with funds in this part of the world to bring the project to the region. here is the hyperloop one c.e.o. >> i have pulled up this function, b-map go. this shows the map of the g. c. c. with a lot of the different country. well have added here as

are the road networks, which are scarce. the u.a. b., the network slightly more dense. how long would it take me with your system to go from dubai or abu dhabi to riad? >> we could go to any city in less than our hour. considering the gulf region really doesn't have a developed rail network, considering some of the challenges we have with road systems and their develop, it really is a new mode of transportation that has the speed of an airplane, a very safe environment and allows us to do that at the cost of a bus ticket and transforms the potential of making the g.c.c. an economic powerhouse in economics and logistics. >> you said thaw are in talks with several funds from four of the six gulf states. what else can you tell us about

your efforts to raise $200 million from global investors? what else can you tell us about these ongoing talks? >> well, we are in talks with investors around the world. obviously some of those are here in the gulf region. but we are a very interesting investment hypothesis. we are a technology company. it will take a lot of money to develop this new mode of transportation. we have already raised $160 million. we are in the process of raising more now. not only are we going to develop technology, but we are going to create partnerships with sovereign funds and pension funds to finance those projects. we were recently joined by the c.f.o. at uber and in a very similar phase of their development. joined the company with 300 employees, grew it to 3,000, raised over $4 million in that period. before that he was the treasurer at google, where he invested in green energy.

we are kind of an interesting unique investment done. >> clearly in line of the expansion. but just to pick up on what you are doing in this part of the world. again you are looking to set up a subsidiary, a local presence, a bigger one. how big is that presence going to be? give us some meat to the story? >> we do see the region as one of the areas where highway loop could happen first. our business plan is to find an environment in which we can sthrect 0 route. we have been working extensively with the road and transport authority in dubai, and we are now continuing to have talks with other transport authority in the emirates and across the region. we have to start with something that makes sense in the beginning, to build the first leg of a longer route of a gulf-wide network. it may be 50 to 70 kilometers, the first leg of the hyperloop. it will take a partnership with

the government, a partnership with the regulator, a partnership with the transport authorities and a partnership with those that would be required to fund an infrastructure project of this magee you had too. the gulf could be the first places it happens first, and the u.a.e. could be a place it happens first. we see some of those factors aligning in a positive way. there is a lot more work to do though. >> rob, when you mentioned in an executive from uber that actually helped the company grow, does that mean you are also planning to add staff to your business? >> we are growing at about 25 employees a month right now. we just passed the 250-employ dwri . we will probably double by the end of 2017. we do expect that we will have significant growth of our team here in the emirates, and we do plan on opening up a subsidiary here as the projects that we are working on continue to

develop, and we hope they will. then we will need engineer. we will need people developing the technology around the world. that is really one of the most intriguing opportunities for any country that moves first, is this first mover advantage, to actually build that ecosystem, create jobs, partner with the universities and actually develop part of the system that will be built over the next 3-5 years. >> let's cross over to one of our top stories. china's number two telecom makers is being fined on restrictions of technology to iran. it will pay guilty and pay as much at $1.2 billion. let's get more on the story from peter joining us live from tokyo. first off, tell me the details of this settlement? as you mentioned, z.t.e. is agreeing to pay as much as $1.2 billion in this settlement. they are pleading guilty to three felonies, including

violating export rules of the united states and interfering with the investigation. the u.s. is trying to make an example out of z.t.e. in this is came. you saw government officials, including wilbur ross come out and say they are trying to make an example of comes that violate the export laws. z.t.e. was contrite. the c.e.o. gave a statement admitting wrongdoing and a long list of changes they are going to make in the company to scrutinize more carefully how they comply with regulations. >> the payment is $1.2 billion. what are the allegations behind this? >> that is the question. z.t.e. is a chinese company, and how it falls under u.s. export rules is important. the company buys components from companies in the u.s., including qualcomm, and packs themselves in its technology and sexorpts them to other

place. in this allegation, it exported equipment worth about $32 million to iran without getting the proper approvals from the u.s. government to ship that technology out. >> so what does all of this mean for z.t.e. going forward as a business trying to grow? >> well, it is interesting to see you reaction to this news. shares are up as much as 9%. they see this as a positive move because the company is getting some of the uncertainty behind it as to how it will deal with u.s. authorities. it has been going on for a while. it is important to get access components in the u.s. such as call come, and number two, it wants to sell more gear into the u.s. like communication equipment and smartphones. we will see if they are able to use this to be able to build the business in the u.s. >> up next on the best of

bloomberg markets mcaffee, egypt he is private sector cracked for 17 months, but declines are slowing. we will tell you all about it next. this is bloomberg. ♪

>> welcome back to the best of bloomberg market middle east. the latest t.m.i. date made for interesting reading this week. the non-oil private sector extended 17 straight months of deadline, although the deterioration rate is improving. we went through the numbers with a chief economist. >> as you know, some of the data that came out in terms of p.m.i., surprise. it looks like there is strengthening happening in the underlying drivers for this economy. tim, i am going to bring out this chart that i have put together just to showcase what has been happening with the p.m.i. figures, and our viewers can pull it up on the bloomberg as well. fascinating this change in terms of sentiment. this is yet another milestone on what has been a remarkable turnaround story in a very short time. >> that is right. i think we have seen -- still

looking at a cracks in activity or an indication in terms of the p.m.i. showing that activity is still in cracks territory around 50. a pronounced change from january when it was just above 43 to february now sitting just at 46.7. the headline index. the last two or three months, end of last year character igsed by pessimism and vis-a-vis the exchange rate. the initial impang because one of concern and i think uncertainty. but coming out of that you are start to go see benefits of ch a bold step by way of renewed confidence and inflows into the country and export orders as well. >> where does that leave us? one of the best performs currencies has been the egyptian pound in the emerging mark space. quite a few analysts are saying hey, this is going way too far, and it needs to scale back a

little built. where do you see a realistic level for the exchange rate. is it 16, 17 or 18? >> i think as it consolidates over the course of the year -- clearly in the first few weeks and months of such a dramatic changes, flows are going to be coming back in at some point. interest rates are high. the down side risk is perhaps much less now on rate. it is understandable thaw are getting flowing back into egypt. but at the same time, there will be demand for foreign currency, which has been pent up for sometime as well. these kind of alternating flows are going to criminality, we think, to some consolidation between that sort of 16 to 18 area. >> david here in hong kong. obviously it was a dramatic pick up as you well know, we are still in cracks. i guess that is what you would expect. if the currency is down 40%, you would hope you would get some improvement. what i would ask is what sort of measures from the government can we expect should they put

in just to solidify this momentum and hopefully get us above that 50 line? >> i am not sure the objective of the government is to get it above the 50 line per se. but i think growth will naturally start to recover. what you are seeing in egypt is not isolated as well. you have to recognize that p.m.i.'s globally and regionally are looking very good. the export order index rows to just short of 49, indicative of two things. one, obviously an exchange rate benefit coming through, but also i think global environment looking that much better, allowing exports to flourish. further steps of course, steps to boost confidence, steps to -- but at the same time reforms which will be ongoing as well in terms of subsidy reform. these kind of things are still head binds to? extent. so it is going to be a slow

process, but i think the con text of global recovery is a good one and steps taken are starting to show a little bit of fruit. >> how would you describe the employment situation there? we are still seeing the rate of firings if you will or the rate of job losses, but it is not as bad as say a few months back? >> well, that is understandable. you are not going to see a dramatic turnaround in that sort of outlook immediately. the employment picture will change with quite a significant lag when you start to see a more persistent trend of improvement in activity. i think that is -- so i am not expecting a dramatic change in the employment situation, but it will take place over time. so long as forces are maintained to promote stability. >> we will talk about the fed more in a second. but first in terms of the inpact of the strengthening u.s. dollar in this part of the world, you have places like

dubai that are dependent on tourists and foreign investors. what is your take on the u.a.e. economy and the saudi economy? >> i think the data which have a complete expect, expect orders, you would expect those to be showing perhaps some vulnerability to the strength of the dollar, strength of the local currencies. but in actual fact, export order growth has been pretty strong, one of the stronger parts of these surveys. so what you are saying is that companies in the region are withstanding the current firmness of the dollar. that is not to say that any further strength in the dollar would make things -- clearly that would make things a little bitougher. but at the moment at least, the dollar appreciation we have seen over the last few months is something that has been managed reasonably well. ordonez look good, but the

sexorte order side looks particularly again. >> next up, we have new york yards developer, and he will give us updates on his yousef: welcome back to "best of

bloomberg markets: middle east," i am yousef gamal el-din. already grappling with the impact of oil prices, they now face brexit and stronger dollar environments. tracy alloway spoke to mall magnate, president ceo in abu dhabi. >> currently in the process of building very large properties here in the uae, including a $1 billion shopping mall in abu dhabi. can, thank you so much for joining us today. >> happy to be with you. >> let's start with outlook for property developers. we have had some caution in the industry here in the gulf. are you seeing that? >> i think everyone has gotten more cautious over the last few years.

the price of natural resources, world trade, and a slowdown in economies in many parts of the world. tracy: what about retail, specifically? you are building that mall very close. it will house the gulf's first macy's store. is now a good time to tap into retail demand in the gulf? ken: we think it is a particularly good time to develop something of this scale. the reason is, this is part of a mixed-use project, which is what we love to do. it is not just about retail or department stores or entertainment and restaurants. it is about two great hotels, rosewood and four seasons. a major center of commerce here. as you can see the abu dhabi , global market where we are standing today. mixed-use is key to the success of our projects and it will be

the key to this project's success. we are developing a project here combined with a galleria that we opened three years ago. when finished, it will be the premier platform for luxury, for midpriced, for family, for entertainment, food and beverage. it is a true destination here for abu dhabi and the uae. tracy: give us some color on the consumer demand you are seeing right now. we have the drop in oil prices that is hitting government budgets in the region. is that feeding into local consumer demand? ken: i think it has hit everyone. if you were to gauge and poll all of the regional retailers you would see many of them are down. one can say that about retailing around the world at the moment. i do not think it is generic to just this particular region. i think it is cyclical and temporary. in this part of the world, one

of the incredible things we know about how people shop, eat, entertain, is that they spend on average between four and six and a half hours in a shopping center. many times they come for two meal periods. engaging the success of a project like this, you have to look at these local trends and local profiles. i think what we are going to do is change the number of trips people make from abu dhabi to go shopping and dubai. yousef: just give us additional contexts. when you look at the global property market it is hard to find markets in different parts of the cycle. where would you deploy additional capital right now? ken: in addition to abu dhabi, which is the only location here in the middle east that we are deploying this kind of capital, because we believe so strongly in abu dhabi, with its airport expansion, cultural facilities,

and the commitment the government has made to quality growth in tourism, we see that as the pillar, the foundation for why we are here. the other parts of the world where we are investing a lot of money happen to be in the united states. two of the key places, west side yards andan, hudson , silicon valley, santa clara, california. two of the major markets we are going into. plus, investment in southeast florida. tracy: one of the things i am interested in in the wake of the grand avenue project in l.a. is whether you see more potential for teaming up with chinese investors and companies, especially here in the gulf region? ken: we have not seen that much interest in investing in developments here from the chinese. not as much as in the united states. we were fortunate at year end to find a great partner in cccg who

joined us in developing a frank gehry designed project in los angeles, it is just getting underway. there has been a lot of interest. the chinese have been going into major cities in america, gateway cities they are looking at. but i cannot tell you how long that cycle will continue. it is not something you can predict that carefully. tracy: let's stick with the u.s. property market. we have had worries about a slowdown in commercial real estate. now we have a fed rate rise next week looking all but certain. what is your outlook for commercial real estate? ken: the industry is gravitating to core quality asset development. that is as simply as i can put it. that means best developers, best markets, best locations, best programming, best design. it has to move to the top of the chain in terms of quality. otherwise you are not going to attract the tenants and users. you want to attract the

consumer. it is about bringing the right programming for these projects once you have the design. there is still opportunity in our markets. it is very selective and you have to be very careful, but there is still opportunity and we are seeing it on the west side of new york, southeast florida, silicon valley in california. tracy: it is difficult to talk about u.s. property without talking about trump, who of course has been vocal about infrastructure spending, fiscal stimulus. how would that affect your business? ken: i am not going to talk political persuasion, but i will tell you, there are some things i do not agree with what he is doing. but the things i do agree with what he is doing, involved deregulation, infrastructure investment, and encouraging foreign investment in our country, and further exports. those are things that are going

to be very helpful to our industry. i am pretty bullish. yousef: coming up on "best of bloomberg markets: middle east," oil prices saw of brief dip. -- brief spike as militants captured libya's main oil imports. we look at the conflicts impact on crude. ♪ yousef: welcome back to "best

of bloomberg markets: middle east." plenty of clashes between libya's armed forces and a militia group known as the benghazi defense brigade have interrupted oil supplies this week. the rebels that seized oil terminals and infrastructure in the divided country, east. we have the details.

>> to begin with, walk us through the actual impact on production. we did see a price rise. are investors getting ahead of themselves and misjudging the impact? >> this is a very volatile situation in libya for production and exports and oil prices. it is a big, unknown situation where we know production can increase. there is uncertainty about how damaged fields have been through work there. one of the main blockages is the exports. when these ports switch between hands of one group versus another, or they are blocked for political reasons or to get leverage, that takes the knees out of production because they cannot get it out of the country. it is a very fluid situation. it will continue to impact the market because more production is bad news for opec's plan to try to cut production and increase prices.

we will see that going back-and-forth. yousef: how is opec doing with the program in terms of cutting out oversupply in the market? as the article points out, you have this shale 2.0 come back, they are leaner and faster. >> there are pressures on opec. some pressures within the group, as well. the group needs to comply with a -- the cuts. according to our survey of production for they did meet the february, cuts. the members of the group that agreed to reduce production did what they said they would do. but some members libya, nigeria, , iran, are left out of the agreement. they do not have to reduce production. they are allowed to increase because they were at artificially lower numbers prior to this agreement. they brought opec's overall production up because those countries are increasing output. that is an issue within opec.

you have shale coming on more strongly. that will put pressure on the market because we still have those stockpiles out there if production does continue to ramp up. delays are drawing down those stockpiles and that will put pressure on prices. we will see prices bounce back and forth, especially with strong news like out of libya last week. yousef: let's lighten up the conversation. this rising tide of u.s. oil, the latest numbers up seven to 609, that is the sixth straight week of gain. how concerned are you that this won't derail opec? >> they are now above 9 million again. they are sort of where they were. i would say that opec is still having critical impact on the overall oil market. they have been somehow able to decouple the oil price from the

dollar over the last month. that is quite remarkable. i would say overall, i see somewhere a cap to the oil price, not too far away where it is now. you have increasing production in the u.s., as long as oil prices are above 50. going forward, we will see some slowdown in the global economy. we will see a stronger dollar, you will see china back down. europe and japan are ultimately more recessive than anything else because they run massive commercial surpluses. it is wise to be prudent, rather than too optimistic on oil price. >> and want to pick up more on the oil price. we have seen oil trading in a really tight range. >> that is correct. >> what is the prospect we actually get some sort of break on the downside or upside before opec meets in may? >> that is very difficult to say.

i think i have to pause on that. frankly speaking, those margins are very limited. it is difficult to forecast the oil price in the very near-term. i think it is important to have in mind there is a cap there. it can't go too much higher. in the region, the governments are prepared for that and taking fiscal measures to that extent. to exactly time it, that is very difficult. yousef: still to come on "best of bloomberg markets: middle east," s&p 500 cut its outlook to negative from stable. we look at the reasons why. ♪ yousef: welcome back to "the

best of bloomberg markets: middle east." s&p global outlook revised its outlook from stable to negative. they say it reflected the external position that could deteriorate further. we spoke with a managing director. let's kick off with the story. are you surprised, given the amount of the sovereign wealth? just an example of changing times. >> it definitely times have been changing. you look at what is going around region, falling oil prices, wars around us political , instability. you do not expect to be surprising for countries like qatar when their income is non-diversified.

it depends on liquid gas and oil and we know what are happening with those plus, they are two. spending, hosting the world cup hopefully soon. they still have to keep things going with no diversified income. this could keep on going in this direction for a while until you see a change in the way things are done. whether oil prices come back to where they were a couple years ago, or we see a long-term plan where income starts to be diversified. in qatar or similar countries. >> one of the big stories has been sales of middle eastern debt. most governments and companies -- we have this qatar change in the outlook. will that knock the appetite for qatari debt or gulf debt in the region? >> i think the rates will go higher. they will keep skyrocketing. i mentioned that earlier. the first time you borrow, your balance sheet is clear.

the next time you borrow you have previous debt. the third time, you are a risk to the borrower. your rating goes down and then the premium you have to pay will be higher. yousef: also, the recapitalization plan. they have laid out details about what they will do in the next few years. you spent some time digesting this plan. what is it mean in terms of how you see this company? btec has aknow, ara great legacy. they built many of the prominent projects in dubai. i think starting with selling non-core assets, which was outlined in the new business plan is a good start. you do not need non-core assets. you will have operating cash flow and be able to get bank guarantees to submit and apply for new projects. they do have projects in the pipeline. i believe this company could make a comeback if the restructuring plan goes in the

right direction. but selling non-core assets is a good way to raise cash and release burden on the company. >> let's broaden it out to one of our big themes for the show. that is the possibility of the said raising rates as soon as march. what do you think the impact of fed tightening will be on this region, given we still have a dollar peg from a lot of countries? >> the first one or two increases i do not think will affect us much. on the short term, i do not think it could really affect us. medium or long term if they keep hiking the rates by three years, or every year, you will have problems in borrowing. yousef: i want to start off with this story before we get into dubai volumes. how will this bring momentum back into people looking for

proxy trades? >> it is very clear to see this is an intention that goes along well with all the different measures the stock exchanges are taking in the region to bring liquidity, to present to investors alternatives they can have to have exposure to stocks in the region. etf's have never been popular among investors in the uae. but the authorities and stock exchanges are doing everything they can to promote them and make them more popular. this new platform is integrating all of the market players as they are supposed to be together in order to hold market functioning as good as they can. there is one etf being traded. there are intentions there are , many signals that they are

presenting more products and options for investors to come and put their money into the uae. >> let's take a step back. another product investors have access to at the moment. there is obviously some argument about the levels that we see getting exacerbated. that is another topic. what i want to ask you, what are the first highlights of the trading session as we count down to the open of markets over there? >> liquidity is an issue here in the uae market at this moment. we saw a very slow day of trade here on sunday. the average volume trading in dubai and abu dhabi was around 50% of its 30 day average. it is quite low. interesting to see, most of the trade was done with a small and mid sized gaps.

we do not see a lot of trading happening with the gold chips recently. that is natural. sunday is the day we do not see a lot of foreign investors in the market here. starting today we should see a pickup. it still was a very slow start. yousef: what else is catching your attention when you look at equity markets? >> an interesting point right now, qatar was closed yesterday. s&p changing the outlook for the sovereign region from stable to negative. some people say this could bring some sort of pessimism to a market that has not been very exciting recently. qatar resumes trading today. it could be the focus of attention. yousef: that is all we have for this "best of bloomberg markets: middle east." we have a busy week ahead in this part of the world. we will be right here for the start of the trading day in the gulf, sunday at 8:00 a.m. and the united arab markets.

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>> coming up on bloomberg best, the stories that shaped the week in business around the world. in the u.s., fears over a travel ban and health care plan. >> members of the united states senate have said it is a nonstarter. >> it is dead on arrival. >> talk about the coming brags it. >> i call it cautiously optimistic or upbeat with few giveaways. jamie dimon fires from the hip in an exclusive interview. draws the battle lines on trade. >> we have been in a trade war for decades. >>