Dubai this week for the world government summit. The event brought together officials, policymakers, thought leaders and private sector trail blazers to explore the future of government in the face of a changing world. On sunday, Tracy Alloway spoke with the secretarygeneral of the oecd, angel gurria, and began by asking for his take on the recent market volatility. angel the experts say it was a correction, but i think it is a warning. I think it is very important to take heed and say, listen this is the kind of thing that happens when the stock market or any other indicator takes off without a linkage to the real economy underground to react trac. This is the kind of thing that happens. Therefore, it is a warning against complacency, against patting yourself too much on the back. I think that we should acknowledge that there is a recovery going on. That there is a synchronized recovery, that is good. But we are running out of Monetary Policy room and as well as on the fiscal policy. Therefore, we have to focus on the structural changes. We have to focus on education, innovation, competition, on regulations, on the labor markets, the private markets, the product markets, on education, the Financial System we have to focus on those traditional things that take so long to produce results, and which therefore politicians are a little adverse, because they do not give you a lot of votes in the short term. Sometimes they take votes away. Tracy right, i want to press you on this. Because we have had years of unconventional Monetary Policy. Lots of people have been saying that we need fiscal policy fiscal stimulus, we need , structural reform. And we have not got it. Why not . Angel we did get some stimulus, fiscal stimulus, but we are running out of the room because we all want to reduce deficits. And in the terms of, i think central bankers are heroes. We owe them a lot. We probably would still be in the doldrums of the crisis without the central banks. But that has a limit. And we are reaching the limit. The fed is going back to more normal, which is good. The u. K. Is announcing they will go back to more normal. Hopefully come of the European Union will stay a little bit longer on. In the case of japan, hopefully a little longer also. The whole point is, we are running out of room there. Fiscal had a role, they did it. Even at the expense of bigger deficits, they did it. But that again has run out of steam. The question now is structural, structural, structural. And unfortunately, we have measured, we have observed that there is a fatigue for reform, just at the time when we need it more. Tracy right. On this fiscal deficit point, are we constrained, does it into constraining Economic Growth when we have deficits where they are right now . We just saw moodys warning on the u. S. Aaa rating for instance . Angel listen, the u. S. Does its own rating apart from everybody else. Tracy they are special. Angel i always say that perhaps other than the u. S. , maybe instance . Germany and japan, we all belong to the avis club. You remember when you got to the avis counter and wanted to rent a car, and that people have assigned that says we are number two so we try harder. Ok, everybody has to try harder these days. The markets are very unforgiving. Given what has happened in the last few years with the crisis, even more unforgiving than they were before. So you cannot slip. And you cannot show weakness. And you cannot show lack of resolve. This is very crucial to give confidence Going Forward. Tracy ok, lets talk about the broad economy, because the imf upgraded its Global Outlook in january. Do you share that optimism . Angel i think the numbers show that we are better off. Our own numbers since last november showed that we were going in that direction, so yes, there is a better economic performance, but it is paradoxical. We are showing 2016, 3. 1. Perhaps 3. 6, 3. 7, 3. 8. Then it tapers off in 2019, so it does not just continue unabated for the future. So the question of investment. Is it investment recovering at the speed that we need . Trade is still about half the growth that we would require. The confidence level was hit. The legacies of the prices are crisis are low growth, high unemployment, growing inequalities, and the destruction of trust. And the question of trust we still have not fixed. And this is giving, among other things, the results that we see in the number of elections, or even worse when people move away from elections, they do not even go and vote. This is why we lost brexit. Tracy right. How do, forgive the term, but how do global elites such as that risingdle populism . Angel the question is to deliver results and to recover those that were left behind. We were so focused on the recovery. I think it was appropriate. But now it is a different time. G populism . Now it is a time of reckoning. You see, we left so many millions out of this recovery. Now, let us go back. It has to be productivity and growth, slash inclusiveness. The link between the two of them is what will make the future strategies work or not. The lack of the link between productivity and inclusiveness is what has so many people angry. And the proverbial backlash against globalization. Yousef up next, air arabia flies high as it beats out earnings. The ceo laid out the carriers ambition for 2018. Against globalization. Our exclusive interview is next. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. Air arabia this week announced that they had beat on fullyear net income and the ceo believes that the carrier can fly even higher in 2018, thanks to oil prices and growing demand for travel. Speaking exclusively to bloomberg, he told me about his predictions for growth. Adel we have budgeted for 7 of growth. And that growth is easily achievable in terms of passenger numbers. Obviously, one extremely difficult to predict exactly the bottom line for the airline in 2018, because we are still in month two. But overall, there is no reason for us to believe that it will not be as good if not better than yousef what are some of 2017. The bright spots that you are looking forward to in 2018 when it comes to markets . Is it size of scope and scale like saudi arabia, for example . Adel i think that the saudi distribution is extremely low and we offer it at 12 airports and we have seen the whole economy is changing. Obviously again, i go back to the improvement in oil price, increasing that market size. We are seeing some of that coming back. More importantly, we have grown our business. The good spots would be places like morocco. It is growing for us from strength to strength. And we are putting more capacity on those lines. Egypt is another one that we have grown 100 yearoveryear and we may grow more this year. Particularly, the tourism coming back. The world cup will bring some business, probably for a month or two in that market as well, given that they have qualified. Equally, morocco has qualified for the world cup as well. That will sort of bring additional unexpected business that will do good. Yousef how comfortable are you with where you are over the next 34 years, given where oil prices are . Adel i think one, obviously if one had a crystal ball, we probably wouldnt be having this conference. Or this interview. I would have been more focused on oil and prediction. But, you know, we hedge oil for an operational reason. So far, for the last five years, we have been doing it and it has helped us. 2017 again, had a good impact over all on our result. I think what we look at, we continue to hedge at 50 . Around that figure. At the figure that we feel that either way that oil goes, we will end up with a good positive result for the company. So therefore, oil hedging is not necessarily done for the profitability of making money out of oil, it is done to make sure that we buy security and insurance of the operation. Having said that, i think oil, the good oil price we are seeing, it will fuel the economy in a positive manner and will gain us an overall improvement of business. Yousef hsbc put out a Research Note a few days ago and they were making the argument that there is some consolidation plays in the market. And we are not talking about interregional, but we are talking about cross region. And air arabia was one of the names put on the note. Any discussions ongoing or ideas as to whether m as is a way to push forward . Adel you know, being a public listed company, obviously we have the publics money and we need to make sure that there is always, whether there is an opportunity of investment, if it means good for the company and for the overall business, we should consider it. We are honestly always looking, there is always discussion going on with multiple people, but 99 of those do not really work out because they do not necessarily meet our needs or the synergy that benefits our business. At the present, i can be honest that nothing is going on. But if something comes up that we feel it matches our dna, then we would be more than happy to look at it. Yousef the story around sentiment, you told me that the oil price was supporting Consumer Confidence and people have changed, they want to travel more. There is the other side of that coin, which is the reality of higher cost of living, vat, that is dampening sentiment as well. Are you seeing any evidence of that and what are you doing to offset some of that as thehighet governments roll out more taxes and reduce the amount of money theyre spending . Adel with the technology around us, we see everybody wants to travel in now. Everybody wants to travel now. We find that the one time traveler is becoming the 23 times a year traveler. We are finding the younger generation, their thoughts and minds are very different to taking holidays than to staying home. They do not want to take one trip a year, they want to be always on the road. We have opportunities. We see quite a lot of short breaks. We carried half a Million People last year. And i think we will probably end up carrying another halfmillion this year. Yousef another company that beat with its latest result was saudi telecom, the firm also announced a 1. 8 billion agreement recently for the right to broadcast soccer matches in the kingdom and one of the in one of the biggest such deals in the middle east. I spoke to the ceo and began by asking, what sort of growth he thinks the company can capture in the next few quarters. Khalid 2017 brought aggressive for our cost efficiency and optimization. You may know, our fourthquarter profit increased by 27 year on year and for the its else, we had a net profit of almost 14 . That was really a very intense costefficiency program that we carried out through 2017. Saw a decrease in revenue, which is a reflection of the challenging Economic Conditions and environment in the kingdom. Yousef saudi arabia has been at the forefront of reinventing innovation, if that is the right way to put it, because you have been lifting a lot of rules, removing a lot of red tape, i am thinking along the lines of the removal of the voip, the voice over ip ban. You have a lot more competition now. What can you do to overcome that more in the remainder of 2018, the fresh competition and intensity of it that is chipping away at your top line . Khalid true, lifting the ban definitely impacted our revenue, especially the International Calls revenue. We have two options. Either continue as is and live with the decline, but i think as a Telecom Industry we have two things to do. One, is to start capitalizing more on data. Data consumption in the kingdom is one of the highest in the world per capita, therefore it can be a good source of revenue to continue with investment. Can be a good source of revenue the other is by diversifying in revenue through investing in an adjacent things. I think that is what we have been doing over the last year or so. Yousef you look at the Balance Sheet, you have strong cash positions, perhaps an opportunity to use of some of that and go acquire one or two new innovations. Khalid yes, we have actually on one front, in 2017, we announced a 500 Million Technology venture fund which will make investments in emerging technologies, virtual reality, a, things of that sort. Reality, ai, things of that sort. Yousef right. So are we going to see more of that . Khalid definitely. You know, we have actually announced a new strategy which will see us actually investing more in Digital Financial services, ip services, the different platforms we have been investing in the last few years, like cloud and iot. And i think that you mentioned that we have already announced a major investment in the Digital Rights for the saudi foot allleague. Saudi football league. Yousef what about the fate of turk telecom . Is there a chance that stc buys them out . Khalid i will not go into the details of that, but i think we have been discussing this with the banks on the debt, and the discussion is ongoing on that front. Yousef why is it taking such a long time to resolve the fault the default on the loan that happened a year ago . It is a complex deal. We have so many entities involved, especially from the bank side. It does take time to really get and discuss things with all of them. We will continue to think that we are putting a proposal on the table. Yousef up next, saudi arabia presses ahead with its plan to become a tourist hotspot. We speak with the company hoping to benefit from growth in the red sea area. Our interview with the dp world ceo is next. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. The dubaibased port operator dp world told bloomberg this week that it is ready for Major Investments to take advantage of wait for it, the Red Sea Market and growth expectations in saudi arabia. The chairman and ceo spoke with Tracy Alloway of the world at the world government summit. Ahmed in our case, dp world, we are the largest port operator in saudi arabia in key locations that have strategic and supplychain opportunities for us. And indias importance is the growth in india is probably one of the best in the world. India could be the fastestgrowing market in the world today. There are many initiatives by Prime Minister narendra, and making india, manufacturing investment market, and so on. That is good news for us because we are set to take advantage of that. That is why we signed with the National Indian infrastructure fund, 3 billion, which will be used to basically remove inefficiencies in the supply chain. Indias problem is not the availability of ports, but taking the cargo to the end customer and vice versa. Tracy now, one other area of opportunity for you is saudi arabia. Do you have plans to transform the jeddah port into a red sea hub, has the Saudi Ports Authority approved the plan yet . Ahmed yes, we have been discussing it for many months actually, and this is part of the saudi plan for jeddah. Is one of the main ports in saudi arabia, especially at the red sea, it is the most important route between the euro and the far east. The potential is big, but unfortunately the infrastructure in jeddah port itself was not developed. Now we are getting to develop major investment deployed for jeddah port to take advantage of the Red Sea Market, but alsoin t developed. Now we are getting to develop most importantly, the growth expected in saudi arabia. Vision 2030,has which is a huge opportunity for us. Their budget for this year was the largest in their history. A lot of investment in infrastructure that can help jeddah port to really develop. And expand. Tracy and the Port Authority has approved your plan . Ahmed the plan has been approved and we are in the final stages of actually talking with the ministry on a day to start our expansion. Tracy lets segue to russia, because you have also made an offer for a stake in far eastern shipping company. Having you heard back from russias antitrust regulator on that one . Ahmed we are in discussion in russia for awhile about many opportunities, one of them is this. This issue of of course, the of course, government approval for Infrastructure Investment is something of a procedure that is followed. We could actually start, but we are waiting until we get a green light that this eventually will be removed. Potential in russia will be transportation, not just by boat, but the interesting thing russia. There will be a lot of cargo that goes by train. That will be what we want to do, linking of course. We have not been to the russian market in a big way, we have been to a small port in vladivostok, which we basically exited some years ago. Tracy so we just discussed india, saudi arabia and russia. How are you financing all of your expansion plans . Are you selling more bonds . Ahmed let me tell you, we have a very strong Balance Sheet and we always keep enough funds to take advantage of opportunities that we see as potential. We do not want to be in a situation where we see opportunity and the market will be too expensive to finance it, so we are able to finance through our resources the expansions that we have. Yousef up next, u. S. Oil inventories expand again. Where does that leave opecs Production Cut . We discuss that next, this is bloomberg. We use our phones and computers the same way these days. So why do we pay to have a phone connected when were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. Yousef welcome back to the best of Bloomberg Markets middle east. Fresh Industry Data this week shows yet another expansion of u. S. Crude and gasoline inventories, undermining efforts by opec and its allies to clear a global glut. However, the iea says the surplus has almost been cleared. I asked hootan yazhari, the head of mena and Frontier Markets at bank of America Merrill lynch, how serious a threat u. S. Production is to opecs goals. Hootan Global Production has been stalling, exu. S. We have seen decline rates accelerating in 2016, decline rates were at 5 in 2017, 5. 4 . So really the big question right now is, what happens outside of the u. S. . Because the u. S. Is clearly expanding supply a lot more than the market was expecting, especially the data last week showed the more than 300,000 barrel a day increase in production. And looking forward from here, i think the biggest questions really focus around what will opec discipline be like in the coming year, will they exit out of this deal very quickly and reengage in the market share war with russia, or will they keep to the agreements they put out. I think this is really the biggest question that we have to ask. Yousef what do you think the answer is to the critical question, are they going to recalibrate aggressively, go in full on with confrontation . What is the best Case Scenario . One could argue that they will lose either way. Hootan we have seen demand globally improving, partly on the weather factors, partly on global growth, so we cannot really overlook that. Yes, we have seen the u. S. Surprising on the upside, but nevertheless demand and production outside the u. S. , there has been some pleasant surprises as well. So the big question really is moving forward, can they maintain this cohesive agreement that they have come to . We think they can because it is in their best interest to. We think the most likely scenario is they will gradually exit out of this accord, with a gradual increase, rather than an aggressive market move. Yousef you listen to the venezuelans. They are putting proposals on the table. Thinking that this is working, talk about withdrawal as far as reaching the table at the moment, as far as how it is playing out to the region. You put out a report, 60 a barrel is relatively strong for the gulf. We put up on the chart what is happening. I know that you fill strongly i know that you feel strongly about saudi banks, a lot of people keep raving about them, but in this case what we have done is we have taken the bloomberg dividend yield on the saudi shares, we put it up against the emerging markets and u. S. 10 year yield. The standout in blue, the saudi dividend play, this is all the way back to february of 2017. How much additional value can be unlocked from the saudi financial story . Hootan post the release of the 2018 budget we have seen a number of stimulus measures being introduced by the government, which we believe will be supportive for the saudi banking story. We think that asset quality has some way to improve and that will be reflected in the higher earnings. We think that capital generation will be very strong, lending will pick up in 2018, relative to 2017 and certainly the largest bank in the country, yesterday on their conference call, was making a very big deal about this for their 2018 outlook. I think you will see it reflected in other banks as well. As we see continued strong profit generation and the like, we think given the strong Balance Sheets the banks have that they can release further capital for dividend stories. And we think that the dividend is one of the attractive parts of the story, but not the only attraction. Yousef coming up next, as property giants report earnings we hear from the cfos. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. We had earnings from the u. A. E. s biggest Property Companies this week, including Abu Dhabi Based aldar. Tracy alloway broke down the numbers for us and spoke exclusively with the companys cfo. Greg these are aldars 4th quarter year and results. As we do every year, we fair value our portfolio, causing an adjustment of millions running through the net income this year. Reflecting about a 2 decline in our Overall InvestmentProperty Portfolio value. Which we think sits very well against the wider market backdrop, which hasnt seen price declines anywhere from 5 10 , and underscores the robustness and quality of our portfolio. Tracy talk to me about the wider market, because that suggests something of a soft market. Greg we are seeing elements of softness, but we have more reasons to be bullish. What we see this year , so Going Forward in the Development Management business, we see strength, we see an undersupplied market in certain segments, a middle income market for the off Plan Properties that are underserved, and we believe we will sell more product in the market they must steer. Then we did last year. Tracy you have a hefty cash stockpile. Do you have plans to spend that . Greg we do, we had a strong 2017 with 1. 6 billion of net operating income. And we plan on growing that. One plan to grow that is we have increased allocation of capital toward acquisitions. We have guided in the past and we plan on growing the investment portfolio by about 3 billion being allocated to it and we want to grow to 5 billion. And we see good opportunities in the market and those are highlighted by the Fourth Quarter closing, we purchased a very important building, International Tower for about 650 million and we see those opportunities in the market and we have allocated capital accordingly. Tracy you are also raising the dividends from 11 to 12, why not raise that more, given the share price has been moving sideways in recent months . Greg we think it strikes a good balance between rewarding our shareholders for the performance we have had and reserving capital for growth, and we see both of those are important. On the dividend, we are updating our dividend policy, this is one area we have really led with. We have updated it this year, we will pay 20 40 of all of our Cash Management business to the shareholders as a dividend. Yousef the cfo of the by based dubai basedf Property Developer damac told bloomberg that profits were hit by lower bill of sales. The fullyear net income at short of estimates. I spoke exclusively to adil taqi. Adil if you look at last quarter, we have done less of bill of sales, which allows us a higher profit recognition. Than we had in prior quarters. We focused on new launches in the business buy area. From a sales perspective, we were satisfied with the quality of sales we had in the quarter we had. These quarterly variations in earnings appeared at times, as you can recognize, there is a gap between cells and recognition in our business. Between sales and recognition in our business. Yousef what kind of growth are you targeting for 2018 . What do you think is realistic . Adil look, this is an Earnings School and i wanted to keep it at the results, but i would say a little more than i think we are looking at another side, we will go sideways, looking at defending our turf and solidifying our position in the market, and hopefully look at growth in q3 adn q4. Yousef what is the key driver of demand for you this year and where the demand more importantly is coming from, mostly from residents in dubai, what kind of nationalities are purchasing your properties . Give us a sense of where you see the interest coming from. Adil the demand for properties comes from a large number of pockets of demand, they solidify into the total picture. Having said that, you have core markets that are imported, the Resident Market is important to us and then some of the neighboring countries to us, saudi for example being a key market, india is a key market for us. We have seen a healthy and positive and encouraging growth from china. We will continue to focus on that market, actually get more out of it. Yousef off of the back of those earnings, i spoke with the equity strategist at and asked how companies are adopting, despite a softer 2017 . Market development is doing well on the primary sales and we see results. The parent sees the benefit. I think the market is softer, but for developers, as long as they can build the properties and hand them over, this is stronger than the primary sales and they should be doing fine. Highquality developers will remain the most in demand within the dubai Property Market. Yousef you are not concerned with the shifting global landscape, when it comes to tightening liquidity with possible Additional Market volatility, where you see the outflows, maybe less investor interest in divide . Interest in a market like dubai . Property is sensitive to that. I agree, but one thing that is helping is the dollar weakness. Dollar weakness your today has been good for the divine market. You also see stronger demand from the chinese investors as well in the Property Markets and i think the demand from investors remains a strong. I think that there is some specific dynamics to why the specific dynamics to the dubai Property Market are not as sensitive to the Global Development as one would think. On the primary market, things are fine. Secondary market, things have slowed down. Yousef as i have looked at united arab emirates, there is the issue of it is underperformed Global Markets, so maybe there is a reason for a reallocation of capital that would support another bull run. The other side of that is, where are the pockets of opportunity . You mentioned property, where else . I think in the u. A. E. There are two stories, more development and abu dhabi banks. Both benefit from strong fundamentals, high dividend yield of 6 , 9 for more development, and at the same time you have the potential for passive inflows coming in on the back of index events, and more development on the back of inclusion and doubling of the weight. For november which will drive around 2. 6 million of interest. There are stories in the u. A. E. Where we will see interest. Despite the valuation, u. A. E. So technically speaking, finding room for stocks is hard. It is 30 owned by foreigners, so it is very close to the limit. It is very well owned, that is an issue. Yousef i looked through your research and u. A. E. Is not your top conviction call, is it still saudi arabia . For key reasons. Saudi arabia has a clear path, the index, the largest inclusion market for saudi arabia will be important. The ownership in that market is very low. I think that in march and june respectively it will be announced that saudi arabia, we expect that they will be upgraded and it will drive 30 billion or 45 billion into the market over the next 1224 months, and that should be supported for multiple expansion, which could deliver to the market. Yousef what is the biggest risk . Is it what happens with Global Market as they open up, because maybe they are not ready yet . The biggest risk for saudi is the selloff of oil prices and geopolitical concerns in the region. Maybe later on for the local market, the impact of the aramco ipo on local liquidity, because when you bring a big listing to the market you have to see what that does to the large caps as investors try to fund the ipo allocation, they have to sell some stocks in saudi arabia and or the region, so these are the things we should be looking up. Yousef coming up, despite nervous anticipation, index rallies. Are investors finally accepting the reality of the fed rate hikes . We will break it down next. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. After all the recent turmoil, in the face of quickening inflation, and in turn rate hike expectations, markets were remarkably calm following a highly anticpated u. S. Cpi reading this week. Year on year, hitting 2. 1 in january, higher than 1. 9 that had been expected. I asked the head of asia pacific macrostrategy at state street Global Markets for his thoughts. Dwyfor inflation is what everyone was looking at. The retail Sales Numbers were probably more noise, realistically. What we looking for is a semblance of a trend of the Inflation Numbers and price trends more generally affirming, as was noted in the report just now. You cannot really extrapolate too much from a few months worth of data, but i think there is a realization now that talk of deflation and disinflation has fallen by the wayside and we must focus on the extent to which prices are rising and that is as an upward trend on inflation. That has been amazing for markets and i think it is by some considerable distance been far more important than the retail Sales Numbers. Not just for the u. S. , but globally in terms of if this is a reflationary environment for markets. Yousef something that does not add up, we do not see a rational reaction and specific Asset Classes to inflation coming in hotter than expected, maybe the fed having to hike faster than priced in. A piece written by the team here looks at some of the disconnections, dislocations in these markets. Inflation may have come out and investors may have decided that they are not interested in it after all. That is the reality. So maybe they told themselves to the market is strong fundamentals. Wait, or weak fundamentals. Was it the Companies Buying back shares, or it may be even the chinese zodiac, what is making sense in these markets for you . Dwyfor one thing we need to be aware of is there seems for some time now to have been a breakdown in the traditional correlations when we look at markets, so expectations that the fed is going to be more hawkish and will hike more aggressively this year and to have a dollar in the opposite direction, that is the obvious one that has gone contrary to expectations. Again, the move in terms of the yen and Japanese Equities is a correlation breakdown that we are not familiar with in recent years. The main point is if we are going to setback on fundamentals, we must understand that first, the volatility environment seems to have not w changed, we have become accustomed to low volatility it would be wrong in the opening of 2018 is beyond to now consider low volatility of last year as the norm, that is not the case, we have seen a different environment now and it is causing different strategies. We should understand that this is an environment that is strong in fundamentals, we talk about growth, earnings, and how that feeds through into equities and so i think what makes sense in this environment is to actually look at the firming up of inflation in an environment where fundamentals are strengthening, and to look at it in the context of asset class preference. This is people are looking at it now from that perspective. Stocks have done well in recent years and obviously the bond market has been on a tear for quite some time. Now we are looking at a rotation from bonds into equities. Yousef that is a critical point. I want to pick up on that. The signposts are getting difficult to read. The narratives are becoming squishy, and i want to bring additional context to this. A lovely chart. G btv 2048. The eps revisions have been going up, stocks have been going down, the rally has been supported in the past, showing you the disconnect that is happening. Bloomberg economics put out a note saying as long as the u. S. 10 year stays below 4 , you will not see the kind of rotation that you mentioned, do you agree . Where is the line in the sand for u. S. 10 year . Dwyfor there is a psychological line at 3 , but we have to look at it in another context, which is looking at yields. If we look at relative yields between equities and bonds, at the moment you have to say that equities are offering higher yields, and they are more attractive. We have to put that in some sort of context, because we keep hearing about how the equities are overvalued, the story has been well played. However, it looks like there is value still to be squeezed out of the equity markets, maybe from a more nuanced perspective of looking for regions that could outperform in this market, we are looking at cyclicals of course with the strong recovery in global growth, that should play out well for the markets that tended to go well with a cyclical recoveries, such as japan and emerging markets. Both of those are still undervalued. I think that there are areas in pockets of the equity markets, notwithstanding valuation concerns, where there is value to be gained. From that perspective, where the absolute level of the u. S. 10 year is maybe a secondary effect, but obviously as the 10 year rises it will have an adverse effect in terms of risktaking. We are not there yet. We are probably nowhere near there yet. I still think equities have a better value than the bond markets at this junction. Yousef that is it for this best of Bloomberg Markets middle east. We have another busy week ahead in the region, and we will be right here for the start of the trading week in the gulf, sunday morning at 8 00 a. M. On bloomberg television, join me then. This is bloomberg. Jonathan from new york for viewers worldwide, i am Jonathan Ferro with bloomberg real yield. Jonathan coming up, treasurers close out the week on a firmer footing after 10 year yields hit for your highs. More cracks appear in credits, investors head for the exits in highyield and investment rate bond funds. But the easy money set to continue in japan as governor kuroda gets another term. We begin with a big issue, the return of inflation. I wouldnt read too much into one print, but there is clear accelerationn