tv Best Of Bloomberg Markets Middle East Bloomberg March 31, 2017 7:00pm-8:01pm EDT
[captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org ♪ >> welcome to "bloomberg best." the major stories driving headlines from the region this week. owl proers gathered in kuwait to assess the effectiveness of their production curves. there were calls for it to be extended to bring the mark back into balance. they enjoyed a boost ahead of next year's i.p.o. a change in tax bill has some observers valuing aramco at
more than $1 trillion. >> a row between the finance minister and the president. he hauled him home from an investor road show. and the u.k. has signed, sealed and delivered the divorce notice to the e.u. but they are not fazed. the sorenstam fun is ready to expand, and it is really to spend billions in the process. they say long-term opportunity outway any political uncertain. >> the u.k. has always been a very important market for us. it is still a number one destination for our investments. we have more than $35 in foreign investment in the u.k. we are putting additional five billion pounds in the next three to five years. these investments will be through our investment authority and subsidiaries. ur main focus is going to be
infrastructure, technologies and some real estate sectors. >> you are making this announcement in the same week that the u.k. is going to trigger article 50 to start the brexit process. is there any scenario, any kind of deal that britain might make with the e.u., or indeed if there isn't a year before the two years is up that would make the u.k. less appealing to you? >> the way we look at our investment is purely on a commercial basis. if you look back the last 10 or 12 years, we have been invests in u.k. and europe during the financial crisis. most of our investments are very much long-term invexes. we are not looking at a short term up side or down side. that is the what we would like to carry on, on our investments. >> there have been reports that you have been discussing a bilateral free trade deal, to be activated when the u.k. does
leave the e.u. is this indeed in the works, and are you working on it to be ready as soon a the u.k. dipotos? >> we work among the g.c.c. community. and i think if there is anything that is gone gun l, it is going to be on the g.c.c. and u.k. >> globally you have made a big commitment to the u.s., $35 billion of invexes by 2020. his excellence, the sheik, has already said that 60% of those investments are under way. has the election of donald trump changed anything for you? i know you say you are not impacted by politics, but has that change the anything? >> well, i think, as i said, once we announced the 35, we put a course of five to seven years. we are really ahead of our schedules. we have invested more than 50% of what was committed. if you look at the investments
we have done in the last ye years, we are doing very well. the market is performing very well. i think we would look at it as economic policies of the u.s. >> when you look at that 5 billion pounds in the u.k. versus the 35 billion in the u.s., it doesn't look like that big an amount. >> you have to look at it as what we have. the u.k. is the largest single december nation. we have more than 45 billion in investment. you top this off with another five, that makes it 40-plus. we feel that come pairs to what we have in the u.s. >> elsewhere globally, how much do you expect to increase your investments? >> as i said, we are always
very active. we are looking now for opportunities. also part of our mandate is really to have a good diversification. we are not only going to focus on one country or one region. we are being very active globally. i am not saying only europe or the states, but even far east. these are some of the areas we are looking, north america even and some of the latin americas. we are looking at opportunities. as i said, we will keep our eyes open and look for good deals. >> still to come on the program, oil producers quather in kuwait to discuss prolonging productions. ♪
output cuts. have a listen. >> we are not surprised right now that the prices have fallen back. the prices have fallen back not because there is non-conformity. but they have fallen town because the storage has not moved yet. as we said earlier, there are reasons why the storages have remained as high as they are to today. we will see the differences in the third quarter, maybe later in the second quarter. as we stated in our press release today, conformity was very satisfy for the committee. conformity overall is good. we are urging other countries to follow suit to fulfill their requirement, and hopefully that will happen soon. >> when you talk about inventory levels, which inventories do you usually look at? -- t u.s. inventories, or e
or oecb invin doris? >> now what we were hoping actually at the beginning was that the u.s. inventories would slowly come down. not drastically, but slowly come down. however, because of the refinery maintenance nowadays, because of the slow season in the first quarter, we have sorbed the fact that those are not going anywhere. in fact, they are increasing slowly. so what we are looking for is a five-year average of inventories, and that stand ot now at around 285 above that five-year average. so once the inventories start going down, hopefully we would go toward the five-year average of which we hope to reach around the end of the third quarter. >> and you are not concerned about the rebound we are seeing in the u.s. shale.
the inventories might come down, but then production may come back on line in the united states even more than it is now. >> i have always said that tting 1.million barrels -- 1.8 million barrels per day, if you calculated with regard to an increase of about 1.5 million barrels daily this year -- 017, subsubtract ubtract that and about 500,000 increase in non-decoration countries, i think we are on the way of consuming that excess in storage. >> where do you see prices going in 2017? what range do you expect them to land in or to move in? > the prices are averaging $45
in 2017. 50's veraged in the lower in 2016, and i think if we can tain $50 to $55 throughout 2017, i think we will be in good position. >> of course russia was leading the charge from the non-opec front. was 100% ance level for opec, and 64% for non-opec. they are going to get this up soon. do you extend this agreement? i sat down in a conversation with alexander novak. here is what he had to say. >> we have discussed such a possibility. i would like to remind you that in the decoration of corporations signed back in december, there is an option. so there is option a lot there to extend the agreement if we
agree to do so for another six months. but we have decided that in order to make any decisions like this or even any recommendations there needs to be a minute sterile meeting. we have asked the secretary to prepare more materials on the current state of the market and or this material to be communicated to members. when this is done, we are going to have more data on conformity, more data on how markets and indoris are reacting, what is the reaction in opec and other non-opec countries. this will give us the information to make a decision. then in the minute sterile meeting the decision could be made. it is too early today, especially considering the fact that not all participating countries are present today. this topic needs more time, more looking into it and research before a decision can be made. >> energy aspect put out a
notice this morning saying that if a deal is extending, then you are looking a lot $60 a barrel or higher for the second half of the year. there is a complex delay involved with the reduction in inventory. i talked to an oil minister, and here is his view as to why those delays were happening. >> i think comes the spring when people start to move a lot, gas in demand, the refinery turnaround is over. we are going to see some positive inventory reduction as we expect. an extension of this agreement in my opinion is highly likely that it will happen. it is needed as well. >> the biggest names in u.s. oil have been gathering in new orleans for the annual energy conference. michelle was there, and she was talking with some of the country's top producers.
>> big question in the oil market continues to be is the opec, non-opec mark cut financing the shale players in the u.s. the answer appears to be here at the conferences yes, to a certain degree. you see where he cease cash costs going and how resilient he is. >> we have an $8 finding cord, $4 production cost, and you ack on interest and g.n.a. burdens, we are under $20 a barry melrose. >> the c.e.o. said look, the industry is still losing capital at around $50 a barrel. continental resources headed by harold, they are not hedging into provide. they are watching prices clairefully. i asked them what a $who to $45 ice would mean for
production? jack stark gave the answer. >> at that point we would start rethinking investment. we have so much option a lot with the assets. we talked about the uncompleted wells we would complete. we would probably continue on with completing those wells, but we may consider backing off on the rig count. >> the tone here at the conference has been more cautious. capex than spending more foofing in 2017, but companies aren't exuberant yet. opec's production cuts are heading to a forth month. geria has joined kuwait in proposing the curbs maintain to stabilize the mark. saudi arabia is key to any decision. >> we have a fair amount of compliance from a lot of opec
members, more than people were expecting. but at the end of the day it is a saudi initiative. the saudis are now increasingly needing to focus on growth. they are needing to focus on their budget, which means it is hard to imagine that this deal is going on that much longer. look, ultimately what the saudis need is not an opec agreement. 2020 ey need is the plan. they desperately need to diversify their economy. they need to unlock 50% of their population, which is nowhere in their economy right now. i am talking about women. and we do have a young leader who wants to make a difference. they are starting late, and there is a lot of conservative push-back in their government. it is clearly a risky proposition. >> you mentioned the crown paris. he did fly to washington earlier this month. is that more about building a
good relationship with the u.s., or is that about building up his own political profile within his country? >> look at the same time that king has been traveling to asia with a group of over 1,000, they are focused on money. in the case of the united states, they want the defense contracts, the intelligence cooperation to be good. the saudis were shocked by the ssage of the jasta legislation which allowed for litigation against the government if it was seen that there were citizens that were involved in terrorist attacks. clearly you are empowering lawyers here, which we know in the united states is always a bad thing to do. , they hink of the u.s. like trump. they like him because i doesn't talk about human rights.
they like him because he doesn't like iran. they feel that balancing that happened to a degree under the obama administration, but overstated in this part of the world is something they don't have to worry about anymore. >> coming up, the world's biggest oil company gets a potential 300% boost to its bottom line. we look at saudi and what that means for itsism p.o. that is next. this is bloomberg. ♪
>> you're watch can't "best of loomberg markets" meester. sanford and bernstein said the market could be more than $1 trillion when it goes public. it slashed its tax rate from 85% to 50%. we caught up with neil to discuss what is expected to be the world's biggest ever i.p.o. >> it very significant. what is does in that sense is takes the profitablity of
aramco so a very little margin company to margins that are similar to what we see in an international oil company. what the saudi government is trying to do through the tax cut is to increase the value for aranco to triple the profitable. they are also going to raise the value of the company significantly. as we move forward to the listing of the company next year, the proceeds from that listing are going to be very important to the saudi government several given the deficits they are running at the moment. >> neil, this latest move what, does it mean for market bulls and market bears? the irony is there is a take away for both ends of this market. >> i think for the bulls, what it means is that we are moving closer towards the i.p.o. intent irms the saudi's to move forward with it. the thinking is that saudi doesn't want toism p. offerman
i.p.o. its most valuable assets in a $40 barrel climate. you are going to see a continuation of policy, one in which price max myization is emphasized over markets share. as we move to the opec meeting at the end of may, i would expect the saudis to be pushing for an extension of the cuts we have seen. the way to look at it from the bears' perspective is is the proceeds that come from the i.p.o., which would be $50 billion to $100 billion, could e important in plugging the is saudi's financing if we keep running a lower for longer world. 's target is to keep debt to g.d.p. below 30%. the proceeds from the i.p.o. are going to be important to ensure the saudis hit financial
target. >> when i look a lot this neil, and i brought this up yesterday with other guests what saudis are doing with aramco is reminisce sent to what beige was doing with the big state-owned companies, gearing up for the massive i.p.o.'s. all the investment banks were jostling for position for a piece of that deal. what in your view is the next step here, the next structural adjustment. we have the tax adjustment that sort of brought it in line with global standards. is there anything else we should be expecting saudi to do when it comes to aramco? >> well, i think you are right in what you say in that this is about reform in saudi. this is about the 2030 vision. when you have a share price to worry about, what it tends to do is drive efficiency. we have seen it with chinese and russian oil companies. the listing of saudi aramco is
going to drive productive improvement, which is beneficial for them. what you are going to watch in terms of the next steps, clearly we are going to have to wait until the end of the year, early next year before we see the financial rulls for 2017, and i think that is going to be critical for the evaluation of the company. but i think the next thing is reserve audit. saudi sits on over 260 billion barrels of oil reserves. there has been speculation about what those reserves are. they haven't moved in the last 30 years. so i think the disclosure that well see as part of aramco listing is going to be one of the closely watched data points in the market. >> where are are we there? >> our sense is there is nothing to worry about on the serve side, and they probably are there. so my gut feel is saudi does have the reserves, and it will back up those numbers. if they came in significantly below what saudi was quoting,
then clearly that would be very bullish. if they came significantly larger, that would be a bearish signal. it will be one of the most important data points. >> what other risks could derail a smooth start to this i.p.o.? >> well, i think the biggest risk is probably the oil price. if we did see oil prices trade down into the 40's, it could mean that saudi will pull thism o., or defer it -- the i.f. defer it, if the environment is not right to do that. that is probably one of the biggest risks to moving ahead at this stage. but i think what you are going to see from opec, is to reinforce the production cuts we have and try to get oil back into the $60 range or higher,
which is where saudi wants it. >> next, hear from the emirates c.e.o. and how the carrier is being affected by president trump's new travel regulations. careful joe, they've got you outnumbered. the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here. something for everyone is awesome. find your awesome with the xfinity stream app. more to stream to every screen. thank you so much for that down home welcome. show me female vocalist of the year. thank you so much. thank you so much acm's, i appreciate it. show me acm best moments. i could never have wished for, asked for and dreamt of anything more than this. catch your favorite moments from the acm awards
>> this is the "best of bloomberg markets middle east." the emirates president tim clark says the airlines saw bookings fall after the trump travel been. they hope to mitigate followed, at least from the laptop ban. >> has a cumulative set of issues that have affected demand for travel, we are dealing with those. as you rightly say, those executive orders, more recently the laptop ban -- the situation is that we will be watching
those commands for the cities -- those commands for those cities carefully. we have had changes in visa requirements for passengers traveling outside the u.s. in visa waiver areas. we are looking at almost twice a day to make sure there is no diminishing in demand. there is a degree of adjustment going on. i can't tell you whether that is of any great significance. the middle of next month, people would be making plans to visit the united states during the summer months. all of this does not help, but we will have to wait and see. i will put this reasonably delicately, do you think this is more than a security issue? the reason i ask the question is
the u.s. carriers have been lobbying aggressively against colts carriers -- against gulf carriers. there is not complete overlap between the united states and the u.k. yes, i think in the first question, the state of crossover into the commercial world and taking sides on these issues makes no sense to me. i hope that has not been the case. states has reacted accordingly. on the issue i would say if it is as they suggest it is and there is a concern, it should be applied to the airline industry universally. in other words, if there are concerns about activities of terrorist groups using laptops,
these devices can be carried on any airline anywhere. that really needs to be looked at carefully. the notion that they should be confined indefinitely to these countries as described by the united states is a worry. said needs toas i be more universal. as were the liquids and gels were, the shoes situation. there are a lot of interdicted terrorist activities. as far as the united kingdom is concerned, they make their own call regarding the procedures they require the dividing -- the dubai security airport officers to do. there is some upgrade of surveillance, let's say detection on both hand baggage and whole check package.
senaid theyt actually have all of these devices as a whole. fore seems to be concern the time being that these things need to be dealt with. . we notice that the germans don't seem to be too concerned about it. we are waiting to see how that works. i believe that if it becomes a global concern that all airlines will be faced with the same restrictions as those carriers in our region face today. yousef: fed officials have said they had see two more rate hikes this year. if the boston president has his way, it will be more than that. the benchmark they need to be raised 4 times in 2017 to guard against overheating. gradual.uch more it will be much less than what
we did in the last period coming out of the recession. at that time, we were raising it at every single meeting. relative to that, this is much more gradual. i vew 4 over the course of this year, and we have already done one, as being gradual. once a year in december is a very gradual pace. as we get to full employment, closed-door 2% inflation, we don't need to make up much more ground. i would indicate that we have to raise rates more quickly to make sure that we don't overshoot where we want to be. yousef: coming up on "best of bloomberg markets middle east," with hundreds of thousands of citizens living and working across the gulf, the philippines has deep ties to the region. the country's finance minister tells us how they plan to attract more eastern money. this is bloomberg.
>> imd chairman of the land bank of the philippines, and we have been mandated by the president to establish a banking presence in the middle east for ease of transactions with our osw's there. our people have been surveying the areas. we have looked at dubai and bahrain. days ago, i had a meeting with a chairman of the bahraini chamber of commerce.
he was saying it would be very good for us to establish a bank there. wendy think a decision would be made? carlos: august of this year. by the last quarter of this year we will have a banking presence in the area. >> i understand you are trying to attract oil in middle east companies. is that happening? carlos: yes. we are looking at improving investments in the philippines, probably an oil refinery would be perfect for us. >> how about brexit? 200,000 filipinos in the united kingdom remitting $1.4 million every year. there has been the falling pound sterling, which will reduce that. what will be the direct impact from brexit, worst-case scenario? carlos: the philippines, we get around $29 billion per year from
ofw's. every dollar counts. certainly we are worried about the past -- about the pound. and of course the filipinos there. we believe they are very resilient and they will continue to support the families in the philippines, although probably at a lesser amount because of the severe changes in the value of the currency. there aree filipinos in the health care business, health care jobs like anderson's. -- jobs like nurses. when prince philip was in the hospital, he had a bunch of filipino nurses taking care of him, as well as in the hotel industry. they are pretty good money. money. earn pretty good
i think they will continue supporting their families in the philippines. >> how confident are you that tax reform will go through this year? what is the biggest priority? carlos: i and confident that our bills will pass both the senate and the house this year, probably around october. we will get our first package of bills passed. that will involve the lowering of pass rates for individuals , and32% to 15%^ increasing the amount of that our country can avail of, up to 250,000 pesos. the first 250,000 pesos will not be taxed. the last tax reform the
philippines went through was in 1998. we have to update our text tables since they have been overtaken by inflation. we are also part of that package. to increaseis our tax stake. we are doing that by updating the taxes on fuel. our taxes were set in 1998. also the tax on automobiles. we need the funds because we are going on a big infrastructure push. the only way to really finance basis is toonsible improve our tax collections. aside from the tax bills we have pushed, we are also pushing very hard on tax collections.
taxave gone after very big evaders. are veryeams successful in gathering the evidence of tax evasion. >> on the domestic front, we don't know who the next central-bank governor is going to be. he will finish his six-year term in july. normally we would know. what is holding it up? i know that you have a say. can you give us some insight right here on bloomberg television? [laughter] carlos: yes, it you listen to my first choice which i announced last october, you will come to the conclusion who my second and third choices are. thate going to make sure the president has all the information to make the proper choice, and it will be a
responsible choice and a choice of that person who is eminently qualified to fill in the shoes that are very large. dominguez, thank you so much for your time. yousef: coming up next on "best of bloomberg markets middle east ," presiden jacob zuma steps up his attention with finance minister. we will have the reaction straight ahead. this is bloomberg. ♪
yousef: welcome back to the "best of bloomberg markets middle east." the feud between south african president jacob zuma and finance minister continues. expectations ended for the first rate hike in years. we have the economic publications and the market reaction. >> this dispute between the president, the finance minister
has erupted again. where we go from here is interesting. of an attended a funeral anti-apartheid campaigner, to which he was applauded, and applauded calls for zuma to resign. you get a sense that the lines of battle have been drawn more starkly than in past episodes. it looks like it is reaching some kind of conclusion. the market won't like that, clearly, but after that it depends where south africa goes. >> you mentioned that battle lines have been drawn. this is a spat we have been covering for months now. are there other bodies that get to have a say, or can he outrightly dismiss his finance minister? >> key can do what he wants, but if you does, other finance ministers or part of the civil service can throw in their hat
as well and create a split in the anc heading toward the december conference. that is going to upset investors, and a background of uncertainty at a time when south africa has been doing pretty well. the inflation rate has been falling. that is why some people have been positioning for a rate cut up until this whole thing blew up again. now all of that has been taken off the table. yousef: justin, you are sticking around. let's go to another emerging market, turkey. thanks saw a record plunge on wednesday after a senior executive was arrested accused of helping iran beat u.s. sanctions. isabel, tell us more about what happened exactly. isabel: on tuesday it emerged
the deputy ceo of this bank, he was detained in jfk airport on accusations of evading iranian sanctions, or helping others do it avoid iranian sanctions. a baby faced iranian trader was arrested in the u.s. on the same case. he is accused of running this gold smuggling ring. us back home.ngs david: everyone loves a good surprise, not of this sort though. everyone was caught off guard by this, just looking at the stock price as well. isobel: the region it plunged as it plunged -- reason
as much as 19%, the day before it emerged that this gold trader i mentioned, his defense team had in some capacity hired rudy giuliani. his role is not clear, but perhaps to intercede on the case. rudy giuliani was meeting president erdogan in uncovering. -- in ankara. people were caught offguard. the reason that this executive was never named in the original corruption in 2013, these are wide-ranging corruption allegations that encircle turkish government ministers -- he was not one of those people. onwas on a new york roadshow a cattle raising exercise. this was not a man on the run. thank you isobel.
justin is still with us on the set. we are looking toward a 2016 referendum. this is a smaller part of the tricky story. battle lines are being drawn between the presidency and central-bank. justin: that is right. it is not quite as start as what we are seeing in south africa, but over the past 12-18 months, it has been a division in terms of how to manage borrowing costs in turkey amid a pretty unpleasant economic backdrop. the story now is all about the lira and inflation. as we go towards this referendum, president erdogan is desperate to keep the lira under control.
wants to keep that stable. that is the key thing to watch as we head toward the vote. yousef: from an echo perspective, lower oil prices, and a good time for the turkish economy. -- macro perspective, lower oil a good time for the turkish economy. justin: turkey does not have a whole lot going for it at the moment. it has this political situation. its ties with the eu are weakening. it has the syrian issue to deal with. it has terrorism incidents at home to deal with. the back growth is not good. -- the backdrop is not good. it is the economy that erdogan is looking at presently. he wants those votes. yousef: that is it for "best of bloomberg markets middle east." we will speak to the --
>> coming up on "bloomberg best ," the stories that shaped the week in business around the world. the u.k. triggers article 50, d-two years to brexit. years to brexit. -- samsung rolls out a sleek new phone. president trump rolls back climate change rules. u.s. energy executives are pumped for the future. italy's finance minister insists the country's banks are back on track. >>