tv Bloomberg Markets Middle East Bloomberg March 26, 2017 12:00am-1:01am EDT
a direct challenge to amazon. kuwait, 7:00 a.m. in .:00 a.m. in london i'm yousef gamal el-din coming live from kuwait city where opec producers will meet with some of the non-opec counterparts as well to figure out what the road had looks like. >> and i am tracy alloway coming at you from a rainy to buy where it has just turned 8:00 a.m.. i have a feeling oil is going to be the big theme for our show. over .5%i up a little on friday at $47.90 a gallon -- a barrel. 80 cents, up almost half a percentage point. it has not been a great week for at $51ving brent opened and $.80 a barrel on monday.
with that in mind, tell us what you have been hearing. i know there is a gorgeous sunrise, clouds are definitely gathering for opec. inventories,rude friday, up toof 652 rigs. you have libya described as a red herring. since 24 hours in kuwait city, it will be about measuring the pulse of compliance. compliance is what it is all about. that has been in excess of most estimates. the issue has been the non-opec factor. .ussia has yet to fully live up
you're looking at compliance of 64%. it sets the scene with may 25 meeting where they will actually be making the visit about the extension. do they need to do more? are they rebalancing 2.0? are they trying to take more oil out of the system? a focus as well. here is what the oil minister had to say. >> markets will decide. we hope the prices would improve quickly. complying with opec. dimensions compliance 2.0. , whathe algerian minister shape it might take. win we decided for a six
month cut, we had already considered the possibility of an extension. it is now clear that after examined in the amount of ,tocks, the speed of reductions one should not forget market demand is being increased. all of these elements, at least in the algerian position, that we speak about the possibility that we extend this agreement, even if this is not the role of the monitoring committee. we will address this question and see if we make the recommendation. we will make this recommendation to extend by three or four months. that was the algerian energy mr. -- energy minister.
analysts do it the extension to happen. yes.: some fascinating opec dynamics. we are going to dig into those more later in the show. we sought u.s. stocks with generally little change. s&p buried that barely moving. almost down a third of a percent. the big news was the failure of trump health care reform bill to go to a vote in the house. the russell 2000 is up a tiny bit. people are now looking forward to tax reform. here in the middle east, we are just under two hours away from the opening of the emirates markets. let's take a look. we did have the dubai index down
over two thirds of a percent. before we had news of a potential did on soup.com. things may be changing this week. between a third of a percent and almost half of a percent. arabia, tatasaudi l up.is up 2% -- tadawu we're going to be talking about those more with philly paper check out later in the show. let's check in on the worst world headlines from around the world. the u.s. has a knowledge there was an airstrike on the city of mosul that killed at least 100 people. officials would not confirm the reports of civilian casualties but have opened an investigation into the march 17 attack.
earlier, the military had said they were unsure whether u.s. forces carried out the strike. yousef: republicans are putting the failure of health care behind them. moments after the health bill was pulled in the house, that president met speaker paul ryan and steven mnuchin to discuss strategy. ryan told reporters the health care failer would make -- failure would make tax reform or difficult but not impossible. tracy: turkish president erdogan likehe may have a brexit referendum on whether to pursue european membership. these is the deteriorating relations with europe might require a change in policy. he has been willing to fill in as a lot of important players
. of talking about sort establishment corporate players, financial players who support a more secular vision for turkey and erdogan does not. i think that fight is not going forward.th this going ultimately there is a lot going on in turkey. the vote is seen as the exponential secretary. is thoughtandidate to be very much in third place. it has been overshadowed by media campaigns. the results should be known within the hour. has left itsan
benchmark unchanged for a fifth straight meeting. lefttate bank of pakistan the rate at 5.75% in a move predicted by all 19 economists surveyed by bloomberg. say the economy is gathering pace thanks to improved output and private sector credit. later in the show, we are going to be discussing oil curbs and the saudi economy. that is still to come. yousef: saudi arabia will hear what they have to say about some of the big business deals signed by the kingdom around the world. this is bloomberg. ♪
markets: middle east. i am yousef gamal el-din live from kuwait city. tracy: iron tracy alloway. free trade and the threat of protectionism were amongst the main teams at this year be a form inrum -- boao china. most businessed meetings since the election with china amongst those promoting trade links. the recent visit to beijing saw millions of dollars of deals agreed. saudi companies must build on that. >> this visit by king solomon to beijing -- salmon -- king salman will help strengthen the relationship between both nations. we need to take advantage of that, extended to expand our -- our existing business. we have had a network of
marketing and a resurgent technology. with our joint ventures. now it is best we have extended our agreement. strategic agreement with sinopec where we will have three major project. this is a very important visit. we would like to leverage it. free trade is going to be a important topic that we need to leverage on to having all business leaders, some regulators. they need to hear our voice that free trade is good for the market. still want to go ahead with a potential investment in shale gas in the united states. will trump deter you at all? >> i don't think so. we look first of all at north america's strategic place in our strategy.
we have been there for more than 50 years. this is like a second home. at the same time, this is something we need to leverage. our view and long-term is very positive. it is number one world economy. you can't afford not to be there. >> i heard algeria possibly an adventure -- a venture with their petrochemical. >> we have a clear growth strategy we need to accelerate. we need to strengthen our global position. in africa and latin america and of course china and southeast asia as well. north america. we're looking at all options and algeria as well. >> how challenging will it be for your company? on the one hand saudi arabia was
downgraded by fitch. there is the finances of the government in question. that could be helped by a rise in the oil price. petrochemical, you would rather have a lower oil price. >> it is not necessarily lower oil price will be good for us. we are a long-term producer. we look at the long term. it is going to strengthen our future financial positions. us. reflects on from our side we look at this as an investment where sometimes challenges as a business community to leverage it. and 16.better than 15 yousef: >> --
>> already see oil prices? sabic is what it is paired we need to focus on our internal challenges. the crude oil price is the real estate. we have looked the last six months and it is stabilized. >> is there a chance for the prices to go down on a global basis? >> it is a government issue. we look at the global, how is it going to be reflected in our industry? heard -- >> we are a global company.
we look at our financial positions and try to leverage it. >> what about other opportunities? >> there are opportunities not china but alsoin the kingdom of saudi arabia. at the same time, in china, we have seen this very strong willingness between both governments to bring the trade between both countries to the next level. there are great opportunities to push your business. yousef: that is the ceo of sabic there. there are some changes in the settlement cycle at the end of last week. you look at the bigger strategy to diversify the economy away from oil bringing a lot of opportunities and challenges.
of a capitaleo company. thank you for coming on the program. let's begin with the saudi transformation story. how convinced are you giving you have the likes of fish saying there are execution risks on what is a very ambitious change. >> obviously with any large plan, execution rates are always there. we are seeing a commitment from the government to move ahead. these are painful changes. believe the majority of the project and the shift in the changes will probably take place. obviously some won't or will be delayed. this is something that is required for the saudi economy and the gcc as a whole. >> what are you telling your clients? guest: you'd mention some of the
changes structurally in the market. we have an increase in trying to attract these to the saudi market. on the investment banking side, we believe there will be interesting opportunities for consolidation in certain sectors. we also believe there will be significant opportunity. that is what we're focused on with clients. again, the themes of the government reducing its footprint will play into the public sector. we are seeing interest and looking at sectors that would benefit from the move such as health care, education, some of the sectors of the government that is trying to unwind or privatized or increase privatization rates. since you are sat there
at the opec meeting, i have to ask -- we know that saudi arabia has borne the brunt of the production cut agreement. do you expect it is in a good position to extend it later this year? i am not an expert, but generally speaking i think there is a lot of high in from the key producers at today's meeting. i think everyone's alliance moving forward with the initiative taken late last year. jury will be out. we have to see what happens and then u.s. oil production. you are also talking about the transformation of saudi arabia's capital markets. got to be the ipo of saudi aramco. how do you see that unfolding and how excited are you as an investor? i think everyone is
excited to see that. think it will take some time for the details to be ironed out. have been advisers that have been announced on the deal. it is moving. how it is done, when it is done and where it is done are questions that need to be clarified over the next six to nine months. the public sector coming into the saudi market and the jcc regionally. tracy: thank you. please hold that thought. you are going to be joining us for more. coming up after the initial hype of the trump trade, are they actually turning into absolutely trump trade? this is bloomberg. ♪
tracy: welcome back. you are watching bloomberg markets: middle east. i'm tracy alloway. yousef: i'm yousef gamal el-din in kuwait city. let's talk about donald trump. they have renewed their argument citing eight favorable ruling by a judge in virginia. the ban was blocked in honolulu. the state of hawaii has not offered sufficient evidence to support the blocking of the order. let's get more perspective about what is going around. as you look to the trump administration and the latest setback in the health care policy attempts to reform that, how concerned are you this can get from bad to worse? i think all the investors
are looking at the u.s. markets, broadly europe as well. they are bracing themselves for a round of volatility. think the focus will be on taxes and trade. depending on what happens there, the markets will react. if you look at the markets broadly speaking, they were somewhat down. they took a bigger hit. how -- yousef: how much wind is this take out of the sales of the trump administration trying to pass any meaningful tax reforms? i think itdone -- does take some wind out of the sails. they have stated this is just a bump in the road. there are key initiatives over the next three to six months.
yousef: what about the scale and term of the reforms? good may be as big as he has often said on the campaign trail? guest: the u.s. economy is a very large economy and the changing direction of that is not as easy as it would be for a smaller economy. i think there will be changes, the scale of which will be determined by how successful the politics are. things out of the control of investors dictating where markets go. whether it is the central banks we were dealing with or geopolitics, we see this trend of having markets and to try to react to what is happening. liquidity around the world remains high. you can't argue that two pillars of the reflation trade since november seem to be fostering -- faltering of it. one is trumps ability to push
through his political agenda. commodity prices are a big part of that. leg of theanother inflation trade out. how should investors be viewing that? guest: i agree. we are looking at those developments. the thought process was with reflation, equities would be the place to be. given the valuations we are seeing in markets, people are looking at the asset allocations and trying to adjust accordingly. it is bit too early for us, but for our investors, if they are medium-term investors, the asset allocation agreed upon and to tweak around the edges. thank you so much for joining us today.
and an exclusive encore performance by kelsea ballerini following the show on xfinity x1. the acm awards. live on sunday, april 2nd 8/7 central on cbs. tracy: welcome back. you're watching bloomberg markets middle east. i'm tracy alloway. yousef: i'm yousef gamal el-din live from kuwait city. let's get you up to speed. we need more malls, because the company is said to make a bid for soup.com challenging an existing office of -- offer from amazon. they have offered about $800 million for the online retailer. is also converting a deposit on $500 million.
souq.com could not be reached. uber has -- tracy: uber has suspended its self driving vehicle after it was involved in a high profile crash in arizona. the company's is they are not responsible for the accident. tests until it can complete an investigation. brazil accounts for 20% of global beef exports and 40% of chicken. the industry has been accused of bribing health inspectors for products. china is due for monday. china dairy holdings, the largest cattle arm operator
plunged as much as 91% in hong kong. four months ago, they said the company was worth close to zero. the crash remains unexplained became a day after they met local lenders. the plunge wiped more than $4 billion off the company's value. >> our report looks like it started a chain reaction which, that is the goal. we tried to knock over a bunch of dominoes. it has been reported the chain reaction led to a number of an audit of the company's books and discovered that a bunch of money had been misappropriated. concerns will increase about the risk space of investors in hong kong. yousef: the central bank governor in turkey says stability is the main policy.
it will continue to work on structural challenges. turkey reported reflation rose more than 8% in february. story,alk about the oil which is part of the reason we are inchoate city. -- we are in kuwait city. there has been a bit of a concern about the lack of supplies. let's get our energy reporter in. it looks a little bit tilted towards iraq in terms of what is going on within the opec group. allegations.en they keep pointing to secondary sources to find the culprit. reporter: there is a long-standing issue between iraq
and the secondary sources that independently monitor production. they were underreporting the production and now they're saying they are overreporting. big melting the full extent of the cut. they are saying that despite the fact it is not part of the monetary -- the monitoring committee, it shows that centrality in the opec deal and whether that will succeed. iraq has so much stake. it's got all the fighting in mosul. rock needs to succeed as much as anyone. ofsef: russia's level compliance is not yet where it needs to be.
is there any truth in them? reporter: the way the russian oil sector is there is a lot of private companies and it takes a while for the states to force compliance, much more so than say with saudi arabia. have 185,000 barrels a day. they have full cuts by april. that brings us on to the bigger extended --ll they extend it? yousef: let's get back to tracy. tracy: thanks yousef. some fascinating discussion. i have to bring up what i'm going to call opec's nightmare chart.
this shows the recent trends in u.s. stockpiles versus the wti oil price. you can see that is only really now as stockpiles are reaching a sickly a record high that we are seeing an impact on the price of crude oil. that should be worrying for people in opec. the oil prices slipped up. remember saudi arabia is targeting stockpiles. the oecd stockpiles to come down to their five-year average by the end of the first year. it does not seem like we are getting close to that. we see oil prices rise, we get u.s. shale production coming back on stream and we see supplies rise once again until the market catches wind of the supply increase. then we see prices fall again. it seems we are in this vicious circle right now. of course the oil story
has been front and center of the latest discussions in kuwait city. ony said time is not really opec's side. the longer this drags on the more likely you're are going to have unintended consequences in the united states with bill in inventory. it is all coming back. we will see what they come up with in the conversations. that brings up the discussion around fiscal breakeven points and how it affects this part of the world. there is no way to sugarcoat this. far far away. that is how far we are from the breakeven prices for gcc countries. close to $100 a barrel. is still not anywhere near the current level of oil prices we are seeing on brent and wti.
faison, as you look to what is you look at the local story here in kuwait. look at the kuwaiti stock exchange. best-performing index in the middle east and north africa. you are up over 20% this year. a lot of investors look at the valuations and are not really sure what it is like either. is this something happening with the fundamentals of the kuwaiti economy? guest: the indices are somewhat deceptive. to 8%,ket is up closer 8.5%. it is onebeing said, of the best-performing markets worldwide. .his is back several years what happened last year was a lot of factors. .here was some big trade
that created a lot of liquidity. the liquid market has taken a hit. that also creates less channels for people to put that liquidity in. there were some good results from big companies such as the banks. all of these factors came together and drove volumes and drove positive sentiments, especially on the back of saudi bond issuance. yousef: a lot of the gains we are not capital flow driven from outside the gcc. a story ofeen investors from this part of the world, are we going to see more of an interest from investors outside gcc borders? guest: we have seen an increased
interest. executed thelly trade that brought in a significant amount, $50 million from within gcc and outside. from the rights names, we are seeing interest. we follow the changes in saudi, i think you will see more and more interest from outside of the region coming in. tracy: when it comes to code we stocks, we- kuwaiti have seen some stretch valuations. that a lot of kuwaiti stocks are considered overvalued even though we have the rally continue. how do you feel about kuwaiti is
valuations right now? guest: i think we have reached the value overall. i still think pockets of opportunities, but this is off the back of the significant rally. i would not be in any of these markets. you need to know the local pockets of opportunity. tracy: we are going to have more with you in just a second. coming up, are talk with one of the leading risk consulting firms. find out what they have to say about the cuts and prospects for saudi arabia. this is bloomberg. ♪
say kerry lambn has become that has one of landslide. to has taken 772 votes overwhelm her former rival. she is a former deputy chief executive and her campaign was overshadowed by immediate claims she was beijing's favorite runner. it was political and business elites. the public had no say in the choice of their new leaders. we are going to stick with geopolitical events. they are heading towards a fourth month. some are calling for an extension when it runs out in june. they have joined kuwait in proposing curbs he maintained to stabilize the market. is bremmer said saudi arabia
key to any decision. >> we have a fair amount of compliance. more people were expecting. it is really a saudi initiative. saudi's are now needing to focus , whichth and the budget means that it is hard to imagine that this deal was going on that much longer. needately, what the values -- what saudi's need is the 2020 plan, the vision 2030 plan. they need to diversify their economy. they need to unlock the economic potential of 50% of their economy -- of the population. i am talking about winning. leadere do have a young who wants to make a difference, they're starting late and there is conservative push back within the government. tracy: you mentioned the deputy
crown prince. did fly tolman washington this month. is that about building a good relationship with the u.s. or is it about building up his political profile? time the king has been traveling to asia, they are focused on money, they're focused on the case of the united states. , thewant defense contracts relationship to be good. the saudi's were shocked of the legislation which allowed for litigation against the government. were citizensere that were involved in the terrorist attacks. it is clearly always a bad thing to do. when i think about the u.s.-saudi arabia relationship, they like trump.
they like trump because he does not talk about human rights so they're not going to get that criticism domestically. they like trump because he does not like iran. it is a balancing that happens to a degree under the obama administration. they are not focusing as much on is the fact that people like steve bannon who play an outsize role in the administration believe the problem is global jihad. in that regard, the middle east and gulf arabs are part of the problem, not the solution. russians are more reliable as a near-term ally because they support judeo christianity. god for bid when we have terrorist attacks in this part of the world, you are going to have trump using that for his domestic base. while security here matters to the americans, much more important to the trump
administration and how anti-islam plays for his popularity at home. i don't think the gulf in general appreciates that. yousef: let's dig back into our conversation. he is a ceo at capital. you have the geopolitics to consider. then you have the transformation story around lower oil prices. where are the best opportunities right now in the middle east and north africa? guest: it is a challenging environment. we see opportunities around sectors that benefit. as i was saying earlier, sectors that are going to focus on privatization drives will have opportunity. we also have opportunities around private credit as the banks deal with liquidity issues and additional regulatory issues.
we are seeing a requirement for lending and an asset class a look at. we are also seeing interesting opportunities unlocking liquidity from balance sheets. these are also interesting for us. are lookingty, we aggressively at. we believe that multiples will contract and this is probably a good time to start thinking about it. yousef: what about bond issues? mighthe rising rates, it be too late for some of them. what might we be looking at? guest: i think a lot of the sovereigns in the region issued last year, early this year. everyone hit the market. i think we will see less issuances this year. there are rumors around the
saudi's coming to market again. there is some speculation around kuwait coming to market. generally speaking, we will see less than last year. tracy: what would you expect demand to be like if we did get issuance this year? saws have risen, but we overwhelming order books for the bonds that did come to market earlier. i think demand will be solid. it is all interrelated. i think demand will continue to be solid relative to yields. it is pretty good for these issuances. you are seeing a lot of demand on the books because of the yield environment we are facing today. i don't think that will change in the next couple quarters. tracy: you mentioned yield
there. of private credit perhaps playing a larger role in certain economies. we have seen private credit direct lending become a very take trend in europe and the u.s. why has it taken so long for it to take off in saudi arabia? a variety of reasons. from a regulatory's dan point, there's not a way forward. borrowers are not necessarily aware of the potential funding. frankly, there weren't many practitioners in the field. i see that changing. have talked about upside opportunities and so forth. what about downside risks? something that keeps you up at night. guest: markets are driven by sentiment. oil pricesf collapsed again, we are back to
square one. if oil prices drop, we will have some significant challenges. the transformation plans pulled significantly, we will have a crisis of sentiment. yousef: a real pleasure having you on bloomberg markets: middle east. plenty to come on the program. we will take a closer look at some of the key trades ahead of the beginning of the market action, and plenty more. this is bloomberg. ♪
publicly traded property developer made a bid for online retailer souq.com. a challenge to amazon eight which was also potentially bidding. some interesting dynamics. also nba d. they are into their last week of separate trading. and of an era. they are going to be merged into the national bank of abu dhabi. finally, since we have all this financial consolidation, take a look at capital shares. still a look at potential majority stake sale. another big story we are watching our the ongoing great latorre changes in the kingdom of saudi arabia. they are looking to those shortselling moves and as well to liberalize the settlement.
to -- t plusid d+ 2. move.r big it has been fast-paced change. important to see this happening right now. there are indicators that they were going to do it, but they are doing everything in time for them to actually be included in major benchmarks. exactly what international investors are expecting from the country at this moment. we know that the saudis are expecting as much influence as they can. there is too many challenges for foreign investors to actually act within the saudi market. within the are bronco deal in every thing they have kept on the markets is included within
the bigger saudi story. yousef: that is one element. what is another theme that is going to figure highly today? reporter: it is big news for devise market. is quite liquid within the stock exchange. we should see an interest in that. gsh and sure capital in dubai. any indication we could see a deal happening this week should move stock in dubai. here in kuwait we have a big conference going on held by the capital markets authority. that is happening today. as we just spoke, there are a lot of interesting markets. the stark exchange will be there. topics like liquidity and regulation will be brought up.
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