Transcripts For BLOOMBERG Bloomberg Markets Middle East 20161011

Valuation to secure an imf loan. Yousef and saudi bank stocks have never been so cheap. The pricetobook ratio for lenders at its lowest level bloomberg started tracking in 2006. It is in 00 a. M. Across the emirates, semiclock a. M. In istanbul. Im yousef gamal eldin. Angie and im angie lau in hong kong, where it is just past noon. Welcome to Bloomberg Markets middle east. What were watching here in asia as charles 11 make some comments for us in sydney in australia. We are also watching that u. S. Dollar strength really impacting the asian markets. We did start off strong when it came to oil, but we are paring those gains now. How about your neck of the woods . We were off to a slow start at the world energy congress, and then things kicked up when the heads of state walked in, including russian president Vladimir Putin, including rizzo erdogan, his turkish counterpart. Whether nonopec will join the conversation. This is what happened when the russian president started speaking about what he thinks russia is going to do, what role he thinks russia is going to play in a potential freeze potentially happening in november. Joinys they are ready to output, and that a freeze is the only decision. The key question will be whether this is just talk, giving his track record and what we have seen in the past from russia in terms of comments and promises to help the oil market. The Saudi Oil Minister was also speaking. He said that 60 a barrel was not an unthinkable target. We are not on the home stretch. There are a lot of variables that still need to be ironed out. To add some broader context here, but theyre still a lot of work to be done. At the end of the day, this might not happen before dismissed, or before christmas, or even early 2017. It was about oil, now it looks like the u. S. Dollar strength. It does reflect what were saying across the board in singapore. Hang seng dropping to a low. Topix in japan japan at its highest level in a while. In the middle east, just under two hours away from the opening of the emirates market in dubai and abu dhabi. Just taking a look at the last check as you can see, it looks like the bullish oil rhetoric is supporting equities across the region. Or freezeng oil cut is the only proper decision for the market. Angie, also starting to see there is a new ceo ends. In scotland. Singapores Monetary Authority has honored a private bank to cease operations in the city after arresting its local manager. Is also finding you bf charges have been levied against two former bsi bankers. Sachs is raising the alarm on money leaving china. Its warning that outflows may be larger than thought. It would affect the yuan rather than dollars. Purchases have fallen, but nearly 30 billion in you on payments and abroad in yuan payments went abroad in august. Twitter shares plunged almost 12 on news that google, disney, and salesforce have dropped plans for a bit. All three have hired bankers to consider an offer, but none are likely to proceed. Ceo jack dorsey has tried to rally the troops. He says the company is the fastest place for news and information, and that twitter is only limited by a sense of urgency. House Speaker Paul Ryan is the latest senior republican to drop donald trump, saying he will not defend or campaign for him after his vulgar comments about women. Poll showedtreet Hillary Clinton enjoying a 14 lead going head to head. Paul ryan says trump says paul ryan should focus on legislative issues and stuff tried to fight him. This is bloomberg. Angie. Angie samsung has all but given up on its flagship smartphone, telling Global Partners to stop selling the device altogether. It is also urging owners to power down and stop using the note 7. The stock is way down on the regional benchmark. They got hit bad, and now it looks like it is even getting worse. Shares are down more than 6. 5 at last check. There are some of the questions. Is there going to be a second recall . Is samsung and we questioned over the earlier investigation into the note 7 . It is said it was down to a factory supply and was no longer using of supplier. With im has been working areas authorities. One of them is a u. S. Consumer product safety commission. At at least five new instances at which the note 7 allegedly caught fire. Cpsc is saying that samsung said yesterday, with the korean authorities, the agency has confirmed the possibility of a new defect on the note 7. The advice is basically to stop using the note 7. The faa has weighed in, saying you should not be using these phones. Samsung is urging all stores to stop selling. Yousef given all that has happened, what is next for samsung . Of analysis plenty about this. Many say that samsung should probably start moving forward and looking to the future. So in new device, and perhaps dropping the note 7 altogether. Goldman sachs saying they expect larger damage to the smartphone business for samsung if there is a recall. They do not rule out the complete discontinuation of note 7. It is meaningless to continue producing the note 7 according to some. Lets take a look at what analysts are saying right now. Oneselfe five holds and one south and 40 buys. Out what iss check going on in the markets. David, what are you looking at . We just talked about samsung, so lets get this out of the way. Samsung is a big part of the equation here. Where that stock goes, chances are youll get declines as well. The rest of asia are way off highs for the day. Japan is reopening and playing a bit of catchup. The rest of asia pulling back from highs. Have a look at hong kong, the philippines, and singapore. They have now reversed those earlier gains. We are seeing yields on the tenure of 1. 7 on the u. S. 10 years. What is happening across the currency market, nearly every currency across the asian back trackon the against the u. S. Dollar. Housing dollar down 7 10 of 1 . The assistant governor there, despite multidecade lows, the assumption is qualitative easing will still be required in the months ahead. Policy, will he have the rbnz saying this and the fed saying that december should be fine. That will not move the needle as far as the trajectory for inflation will go. Angie thank you david. Oil is trading near a oneyear high as the two leading producers said they will cooperate on limiting output to stabilize prices. Russian president Vladimir Putin says he supports saudi arabias freeze plan. You are there the thick of things in istanbul. Is there a sense that a concrete deal can actually come together this week . Yousef that seems to be the feeling on the ground here, as i have been speaking to a lot of the decisionmakers, the movers and shakers of the industry. There is optimism that changes can be made because of the urgency of the situation, because of the extent of oversupply. The russian president making it more clear than he has a past that they are willing to join an output freeze, or even a cut. Nonopec supply through russia, initial data showing 11. 2 Million Barrels per day. Getting them board was going to be critical to the steel to this deal. Then you have the individual production quotas for opec members. Andpproached Vladimir Putin asked where he thought talks are going to go. We approached someone about what he thought. Im not expecting anything anytime soon. The next couple of days, primarily consultations and getting through that. That 60hey also added a barrel by the end of the year is not unthinkable. This is an opportunity to continue this conversation before making a formal decision in the and a later on in november. Target as agreed on by opec is up to 33 maryland Barrels Per Day 33 Million Barrels per day. Chances ofutting the an agreement up to 80 . That really underscores that positive energy were saying. It doesnt take away from this challenge that is very real. Not those cutsor will get you to 60 a barrel, or more needs to be done. , someto come on the show familiar names get a slap on the wrist from singapores central bank. Well have details why. We are just minutes away from getting the latest snapshot on the health of dubais economy. We read the numbers life on the next. This is bloomberg. Yousef welcome back. You are watching bloomberg. Im yousef gamal eldin inestimable. Angie i am angie lau in hong kong. Turkey and russia have signed a deal to build a gas pipeline, resurrecting a project that was suspecting went to rate desk to y relations twowa relations soured last year. It will send oil under the black sea from russia to turkey, where will the destroyed it. Total assets increase of a most 195 billion. Ord that was helped by a surge in new loans. Bank liquidity has tightened in copper qatar. Ceo will step down by the years end. Subsequently resigned last month. It is poised for its first loss in 30 years. Some breaking news heading bloomberg. We have the latest data on the dubai economy. Lets run through the state years. A slight contraction from august. The latest read is 55. 1, down. Rom 35. 7 in august 55. 7 in august. Lets get more perspective on those numbers. Im looking through some of the details here in the latest report. New business finds increased sharply, Staffing Levels increasing for the third consecutive month. Wheres the optimism coming from here . The think a lot of improvements inactive and he that we saw on the Third Quarter was on the back of the travel and Tourism Sector in particular. We had a bunch of holidays. I think that in particular has helped keep the index supported through september. Yousef what is the key risk Going Forward . Is it perhaps a lack of recovery in oil prices . I think oil prices are actually fairly supportive at the moment. Dubai is it really driven by oil prices directly, but it clearly has an impact because of the impact on the rest of the gcc. What we have seen is the Third Quarter showing improvement in momentum, particularly from a weak start in q1 and q2. We would like to see that sustained into the fourth quarter, which is a high season for travel and tourism in this region. Isthink overall the outlook pretty optimistic. In fact, the optimism index for the tracker was pretty much at a record high in september, certainly much higher than what we saw earlier in the year. Wasef in the past, dubai has it been able to diversify away from the ruble, away from the remedy to other renminbi to other currency . We have seen a shift away from the traditional key market for device hospitality sector. Dubais hospitality sector. Saudi arabia is a big source of where we get visitors from. Qatar also in the top 10. Russia and china have fallen in the rankings, but they are still try quite significant. A drop inso been visitors from the u. K. Consistent with the drop in the sterling. Airlines in the uae are adding new flight routes two different continents and outside the region, and devoting flight business in that way. Increase in an noneuropean and nonrussian visitors as well. Human yousef you mentioned saudi arabia. We are things stocks, although there was a recovery, they are still under pressure. Liquidity strains a major concern. We also have saudi arabia now forming up its plans to issue a sovereign bond. Give us your top line analysis of where the saudi economy stands today. We are reasonably comfortable with the way things have been called. I know that the markets have not taken particularly well to the announcement of Public Sector wage cuts and saudi arabia. At the end of the day, this is what they set out to do in vision 2030. This is an indication there is executing thatn strategy, which we always said was a big can serve in saudi arabias concern in saudi arabias ability to reform. We think long term, what they have announced over the last weeks and months is positive in terms of keeping the budget in control, and also helping potentially to their five the economy later on. There is a short impact on companies and on profitability. This is something it will have to work through. There will be a shortterm squeeze. So far, the indications are white positive in terms of the quite positive in terms of what the government can do. If they go ahead with the bond issue of about 15 million, that should really complete their financing for the budget deficit. We are looking at 100 billion deficit. They have run foreignexchange by about 55 billion. They have raised another 30 billion or so in domestic its bids. A bond issue would basically compete complete their financing. Growthlooking at 1. 5 this year, and then hopefully picking up slightly towards 2 next year. Is goingterm outlook to be tighter than it has in previous years. Yousef a lot of that will depend on where oil goes from here. The Oil Ministers from opec and others are going to be up not far from our offices in istanbul. You expect them to make more progress as they continue to discuss . The discussion so far has been surprisingly encouraging. The fact that russia is on board for potentially freezing or cutting is important. The prospectsed of a deal. As you know, it is quite difficult when it comes down to the nittygritty of who is going to freeze output, and who is going to cut, and then making sure those agreements are actually executed. We also dont forget u. S. Shale oil, which is a substantial producer. Yousef we will have to leave it there. Not many volunteers when it comes to production cuts. Thank you. Coming up next, bargain hunters swooped on saudi banks. We will look at why they are moving in. This is bloomberg. Angie welcome back. You are watching bloomberg here and i am angie lau in hong kong. Yousef and im yousef gamal eldin in istanbul. Lets take a closer look at this saudi stock story, with the price to book ratio with 12 lenders now at the lowest level since bloomberg started tracking the data in 2009 2006. What is behind the selloff, and what money can be made in this trade . Lets get some insight. What is driving a lot of this . Is it liquidity in the market over there . This is a very interesting situation, yousef. Nine of 12 banks that are part composing the Banking Industry and saudi arabia, and their they are trading closer to their assets value. That is the result of a lot of concerns that the investor class regarding the Banking Industry right now in the country, especially after a series of measures that have basically taken their toll on the average saudis. I worry that over performing loans will increase. Theyre treating a lot cheaper than they used to in the past. Thing what causes some relative price would you say . This is attracting reaching to this level is attracting bargain hunters to the market, and theyre looking for the best opportunity, the best banking stocks to be bought. For example, we saw yesterday when Saudi Company increasing the most in six months. It was the biggest contributor wulthe to dowell tada index. Other banks were also rising to a considerable level. We do see investors are buying the stocks in a way they didnt in the past few weeks. Angie thank you so much for that. Egypts core inflation reaches its highest level since 2009, ahead of the anticipated devaluation and an imf loan. All the details for you next. This is bloomberg. Angie it is 1 30 in tokyo. We see japan reaching the highest level in four months thanks to oil. Entering the last 90 minutes of trading there, topix up. 5 . The top stories on bloomberg market middle east samsung had it just daytoday fallen a month after asking all Global Partners to stop handling the 7. E handling the note Authorities Say there may be a new defect in the phone, and are devising owners not to use it. Samsung has now lost 20 billion in market caps this week. Yousef oil is near its highest Closing Price and almost 15 months after saudi arabia and russia said they will cooperate to limit output. Saudi Energy Minister said other producers are also ready to freeze or cut. He said it would be no surprise to see crude at around 60 a barrel by the end of the year. Saudi banking stocks are the cheapest they have been. An index of 12 letters has sunk to its lowest its bloomberg started tracking the data in 2006. That is under increased pressure to reconsider loans after the kingdom scrapped onus is allowances for many state employees. 7 30 in istanbul. Im yousef gamal eldin. Angie it is 12 30 in hong kong. Im angie lau. Anna lets look at what is going to be coming up in european programming a little later on. We will have live coverage of the meetings that take ice and luxembourg. They your group has been meeting. They will give 1. 1 billion to greece. Meeting forup then greeces third bailout since 2010. You needed a reminder of some of the negative headlines around the greek story , we still could see debt restructuring. The imf said for some time now that needs to be a necessary involvementr future by the International Monetary fund. Eu,s talk about the broader which still encompasses the u. K. Noda, a lot of the attention will turn to brexit. The secretary talking in parliament yesterday. He was talking about some of the advantages he sees in the paul in the pound falling. It has fallen 70 since the u. K. Left the eu. 17 since the u. K. Left the eu. He has been saying that something the bank of england echoed later on, that it would be a welcome change. That weakness in the pound has not in the past benefited to create an export revolution in the u. K. We will keep talking about that no doubt. Yousef . Yousef i hear you have luxury goods on the agenda. Lvmh is working. What you expected a . We had numbers out from lvmh, that is the biggest luxury goods maker. Shoppers in both asia and the United States snapped up the celine handbags in particular and new Louis Vuitton perfumes as well. They are based in paris. They also own hennessy cognac. The paris slowdown in market, after demand remained subdued there and tourists not spending as much there because of the terrorist attacks in recent years. Sales increasing a family and asia. Louis vuitton also entering the perfume business just last month. Just last week, they said they would buy a german suitcase maker. Since they are saying a better picture coming in the United States. Were looking at singapore right now, because monetary authorities said it has told falcon bank to cease operations in the city after arresting its local manager. An investigation into flows linked to the troubled malaysian investment. Und one and dd 1mdd what is going on here . You can see the military authority in singapore is taken a heavier hand than usual in dealing with this. They kicked out falcon bank. They had already picked out another bank. They find falcon 44. 3 million. Four. 3 million. They find the biggest local bank for 1 million for failure of oversight of moneylaundering laws in 2014. Bit ofs come as a little a surprise even though ubs was being probed. The fact they were find is surprising. Fined is surprising. They are very sorry. Lets see what happens next. Did it impose penalties on other institutions here . Yes, as i said, they find fined ubs, and falcon bank as well. , singapore is it being quite heavyhanded. Central authority is also getting involved. They came out and said falcon has done this and this that was wrong. You can expect some more fines and movements from the central authorities coming up as well. Angie what are banks saying here . Generally, theyre very sorry, which is what you would expect them to say. To truth is, when it comes 1mdd, this is a neverending saga. It just keeps giving. I would not be surprised if there are more banks involved in the future. No names have surfaced yet. The department of justice in the u. S. Continues to investigate, and authorities in singapore continue to investigate. There will be more pain for the banks. Angie i suspect sorry is just the beginning. Thank you so much for that. Theef time to check in on first word headlines from around the world. There are new signs of life in japan. Data shows the trade balance and current balance is given above estimates despite the weakening yen. The current account surplus widened 23 from a year earlier to 19 billion. After seeing no decisions they made on a chapter 11 filing, the wall street journal said tk holding may file for bankruptcy. There is a stable supply of its product. Ls fargo says it will reap regain lost eight and businesses within a year following the fake accounts fiasco. Some cities suspended dealings after the bank was caught opening legions of unauthorized customer accounts. There is a 185 million penalty to settle. Bank of shanghai says it plans to raise 1. 6 billion dollars in an ipo. It is among the Smaller Banks lending to Fund Expansion as regulators closed loopholes that allow socalled shadow lending without extra capital provisions. It will shape it will sell shares at just under 18 you on a piece 18 yuan a piece. Yousef core inflation in egypt had a sevenyear high last month. All of this ahead of unexpected devalue asian that would help trigger a multibillion dollar loan from the imf. Lets get the late thats the latest on this. This topic is the situation for the Egyptian Government doesnt it . Yes. It has been going on for maybe six months. Inflation has been going up. Is probablyconcern why the deal has not been finally approved. The government has been preparing the public for the measures to come, which include the devaluation of the pound, and cutting subsidies. The president himself said that the government will be pumping , andgoods into the market that the prices will go down regardless from the exchange rate. Yousef yousef as much as we han hearing from policymakers and market participants, what is going to happen imminently, it looks like theyre pushing it out a little bit too possibly november. Do we have any new information that could tell us when it will happen . The devaluation can happen basically anytime. Today in foreign currency trade from the central bank, from dollars to local lenders over the weekend. The imf said that the lesser board could approve it by the end of october or the beginning of november. The central bank has been of 3 billionoal last month. The conditions are there, but essentially, this is now more a political question that an economic one. There also have to be subsidy cuts. It will be a big challenge for the government undertaking these measures without backfiring. Yousef that is a method a half angie the russians and saudis joint forces on oil output. Is it enough to stop prices slipping in a longterm . Analysis next. This is bloomberg. Yousef it is 8 00 a. M. In dubai. Angie missing people start to talk about the beginning of some change in the region. Were seeing analysts over welcome back. Im angie lau in hong kong. Yousef and im yousef gamal eldin in easton bowl. How much truth is there really to it . Lets get some further insight. One cannot help but think that we have heard these pledges before. We have heard them before. Perhaps opec and nonopec becoming a little bit more clever in how they job on the oil market . I think the mood seems to be shifting. What happened overnight was reaffirmation of an understanding that they reached in algiers to cut production. Of course, there has been a whole lot of skepticism, and rightly so, among market, especially after the debacle of the freeze efforts that we saw earlier in april. Opec could actually get its act together this time. There does seem to be a lot more real determination, and i would say they seem to be more serious this time. There is definitely a uturn and saudi policy compared with november of 2014 when they took that rather and this decision to let Market Forces do the rebalancing. What next . I think the market is waiting to see action from the group now. Yousef so who is going to bear the brunt of these cuts . Is it just saudi arabia . Who else could be on the list here . The is exactly where stumbling block is. Who is going to cut back . I think therein, to my mind, lies the weakest possible hurdle biggest possible hurdle to open going to solve two opec pulling this off. The reason for a lot of cynicism in the market, opec discarded a few years ago the individual member country cortez desk quotas. Uote ties they have to give individual countries quotas again. Days, we have seen a lot of analysts come out and say they would not accept the baseline that opec seems to be moving them towards. Does saudi arabia actually come out with another surprise policy , where it says that it agrees to bear the brunt of the cut . Saudi arabia within opec is the biggest producer. They have also been amongst the members that have increased output the most. That is quite likely. Here. let me jump in what about u. S. Shale production . U. S. Bank and Merrill Lynch saying it will bottom out by the First Quarter of 2017. How could that cloud any plans have . C with russia might the skepticism the market hassm had by any efforts of opec to rein in production have first and foremost been around opecs history are not really being compliant. The second has been what, if u. S. Ing, how would the production react . We have seen more hedging in recent weeks. Ofhave seen several months increased shilling in the u. S. , despite it being around 45. That does remain a big . Going for that does remain a big question mark Going Forward. They do not want to squeeze it too tight either. Know how they will actually adapt to any increase in u. S. Oil production. U. S. Is every chance of production, which is declining a must 800,000 Barrels Per Day lower, it might actually start creeping up. I do feel that it will take some time for that production to come back up fully to what has been lost. For itly a longer time to grow again. Will that be enough time for the opec too catch up, for have the desired effect, and prices creep back up towards 60 . Angie as you have noted, and as we have said, the expert tatian of the Saudi Oil Minister is that it will reach 60 by the end of the year. Where we have opec production levels and crude as well. If were going to make it to 60, last time i checked, production levels at that price was at 32 Million Barrels a day. They are looking to cut to 33 million, maybe a little off of the current production level. Does that suggest we could see even further cuts . I think they have given themselves a lot of elbow room as an ultimate of the fact that it is going to be difficult to return to individual member quotas. As a mentioned earlier, it could be as little as 200,000 Barrels Per Day. I think the market would probably discard that. I think they go more towards the big side of this range cut by 70,000 per day. 700,000 Barrels Per Day. Going forward, i expect the market to have a ulla schmidt sponsor once again a bullish response once again. Again, the focus will shift to fundamentals. Destroyingually supply, and what is it doing to stock levels . Globalit is also about hunger, appetite, for the black gold. Those 2017 look like the fundamentals globally will support that picture . Personally, i have been quite bearish. I have seen estimate demand 2017 around 1. 2, 1. 3 Million Barrels per day. I think that is not low enough to account for first of all the huge drop in chinese demand. Chinese demand growing at 6 right up until 2015. This year, it is flatlining. 500,000 a good 400,000, barrels being lost from china alone. India gets mentioned quite a bit as the new engine of demand growth. I keep whining out that we should keep in mind that chinese demand of 11 Million Barrels per day is a very different growth story of india demand of 4 Million Barrels per day. Theso keep an eye on economic headwinds that seem to be gathering. Harris onnally quite demand catching up. It will have to be a supplyside reform. Toie a supplyside response drive the price even higher. Thank you so much for that insight. Coming up, saudi arabia and joins the middle east, but it couldve hit the sweet spot only hit definitely take a closer look. This is bloomberg. Yousef welcome back. You are watching bloomberg. Im yousef gamal eldin in istanbul. Angie i am angie lau and hong kong. Saudi arabia is meeting investors for a major bond deal to help plug a budget hole due to oil prices. Tracy, we have been talking about this potential 10 billion bond deal for months. Why has saudi arabia chosen this particular moment to launch it . Good morning, angie. The excitement has been building, and it looks like it is finally here. As you mentioned, the timing is interesting. Just like that just last week, we had the delhomme doha ceo saying he missed the boat of this First International bond sale. What has changed in the interim . We seem to have a growing sense of optimism around this opec cut that helped push the price of oil to above 53 a barrel for the first time in many. We also have a beneficial macro environment. We have seen the global search for yields continue to pay. That is bullish for emerging markets. We also have political risk. Hillary clinton doing better in the president ial polls could assure investors in the bond deal that some of the political risks we have been talking about our fading away slowly. He getting saudi arabias hitting a sweet spot with the sale. Supportas much as these the bond issues, theyre still a bunch of hurdles for the pricing very give us a sense for how investors are going to respond. Saudi arabia and its representatives will be meeting with investors over the course of the next few days and weeks. I have been reading the perspectives for the bond deal. It is 220 pages long. If you look at the risk factor, as you might imagine, there is a lot about the price of oil. There is nothing in there about potential opec production cuts, a russian production freeze, that is not entirely unusual for these on to prospective deals, but it is certainly something that investors are going to be having to think about and asking if they are getting the right price to compensate for the risks. Yousef thanks a lot tracy for that update. That is all we have for this edition of Bloomberg Markets middle east. Angie anna edwards will have all the top stories from london. Daybreak europe is next. A 15 oil holds a mirror month high as russians and saudi pledge to join efforts and limit production. Yuans image. Take note. Ers