Investors had jitters about the risk of rising Interest Rates. Tracy alloway had an interview on this in a wood of the. The market is a market. They have done a great job in stimulating the economy. President obama had started the Aircraft Carrier to move slowly, and he did a good job at it. The market is always dangerous. It is always dangerous to take too much credit for it on the way up as you also have to take the blame for it when it goes down. Anchor what actually sparked the volatility . Have you seen Something Like this before . Guest sure. The quantity of course is frightening, but now we are dealing with etfs and computerrelated programming. I think the nervousness and markets is in the anticipation of Interest Rates rising. I think it is significant and we will see what happens in the next couple of years what happens in the overall economy. Also, the emotional transition. Jerome powell coming into the fed, the world being maybe not as transparent as we hoped i think economies all over the world are in very good shape. I think it was a momentary pause for longterm gain and im not really concerned about it. Tracy the other big news today is the ceo of his own company stepping down is trump going to ask you to become chairman of the rnc finance committee . Guest i do not think you would punish me that bad. Tracy has he asked you . Guest it is a job i am not interested in. Steve did a great job added. It is a very political job. I am not really political and i am not really interested in spending my time doing the great things that stephen others do in raising money. Tracy do you think it would be good at it if you . Who do you think would be good at it then . Guest if you are talking about tom ricketts and other people who are really involved in the Republican Party the access to powerful men and women, those of you have the time to that cause, that is what it takes. I have a day job and i am really happy with my day job. Tracy we are hearing that she are here in the middle east talking about the Political Developments happening in the gulf favored some people say trump has churned up sentiments around iran. How are you viewing his middle eastern policy . Guest his middle east policy is brilliant. In a very short period of time he has taken on one of the most difficult historic paths ever. We all know that there is no arab world the middle east is a culmination of tribes and flags and a very competent manner. Icated but, i think what president has done with Rex Tillerson and Jared Kushner is trying to expedite what has to happen in the region, which is a Real Development of a diverse economy, to give hope, faith and confidence to a growing young population, without which we will have a real problems. In this day and age, the country is coming together, and the president of the United States showing up it is a return to the elegance of what it should be. Not a defiance of radicals, but a realignment of how great countries like the emirates, saudi arabia, now with israel, and align can align and bring a more powerful balance to the region. Tracy what about u. S. Politics . We have republicans and democrats still hashing it out over immigration. President trump saying things like he would welcome a Government Shutdown on thursday if democrats do not meet his demands. Is that a policy that is divisive . Guest no, i think it is a negotiating tactic. The president has a negotiating style which is to take things to the extreme and allowing them to mediate the issues that way. Politics is boys and girls playing badly in the sandbox and i think that is what is happening. I think they are all better than that and if they will step up and do the right thing with so many goes into his use, it is complicated. I think the president s strategy is startling emotionally to a lot of people and we are all getting used to that new vocabulary and cadence. Tracy going back to the markets, i would be remiss if i dont ask you about your own company. We have market turmoil mostly on the equity side. And meanwhile we have people in credit still talking about cross evaluations . Guest it is quite complicated. In public companies, investors want yield, low leverage, increased valuation all of those things in a zero Interest Rate environment are very complicated. What you see in the corporate world as a result of everything that is happening on the regulatory slide is consolidation and a drive to capturing cash from all over the world. What happens to that cash would not just be dividends and buybacks, it would be reinvested. I think the market in the longterm is sorting through the equity side or the debt side as compared to Interest Rate yields. We as a Public Company are suffering from the Interest Rate fear of what happens when Interest Rates go up. But the longterm effects, is that real estate as a postage stamp, private equity as an asset class is always up for always outperformed over a 10year period. Tracy there has been a lot of scrutiny over particular products like the etfs. Do you think that should cause President Trump to increase some of his rollback . Guest no. I think his policies will drive various market factors, probably. As he drives toward 4 growth and full employment, which is all we wanted i think his job is in addition to being commander in chief, to be a cheerleader. Which is what he is doing. It is good for america and good for business and it should be good for the globe. Yousef up next, dubai airport regains its crown as the world Busiest Airport. We hear from its ceo next. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. Dubai global airport retained its fourth Busiest Airport ranking with more than 18 million passengers passing through in 2017. It is hoping to hit 90 million this year. I got more with the ceo of dubai airport. What we had is a shortage of capacity. We may be the Largest International airport in the world, but we have one of the smallest footprints. So we have to make better use of our quite rare slot now. Fortunately, with the strategy around thea3hd, we are seeing a much more efficient use of socks of slot. We are 40 passengers ahead of the most efficient user of airport slots around the world. I think it is because we are Getting Better efficiency from scarce resources which means growth may be slower, but the quality of the growth and the actual key markets we serve, will continue to forge ahead. Yousef weve for up on a chart the basic trend on a month to month basis there. In terms of the growth remaining intact, and what has been happening with the figures, the question becomes, how much can you replicate that success on the cargo front . Guest cargo remains quite buoyant. What we have seen is traffic numbers of about 2. 6 5 million tons during the course of 2017. The gxb has performed really well. At the new airport, we had Something Like 7. 9 growth over all. So, it has been quite a buoyant year for cargo as well as passenger numbers. Yousef one years and President Trump came into office. How much of a negative impact have you seen in the numbers . We had you on set in previous quarters and we were talking about concerns on rising protectionism and more security measures which may impact of the free flow of passengers through the airport. Where do you stand on how this administration has been doing . Guest 2017 was definitely a game of two cards. It started with restrictions on tour of all, the laptop been. We are pleased to see now that most of those problems have been quickly overcome. The second half of 2017, we saw record growth and significant numbers throughout the year where we were well over the 7 million passengers per month. It is Something Like 100 people 180 people per minute who go through the airport. Growth targets may be more modest but our quality targets and Customer Service delivery is really the main focus. Yousef i travel a lot as well. If you are traveling at peak hours, Early Morning hours on the night, it is actually very difficult to get through the airport. What are you doing to address some of that . Are you facing capacity constraints . On the one hand you are trying to increase capacity, but as you do so, are you taking capacity offline . Guest we have one of the older terminals at the airport going through a major refurbishment. The gates are being upgraded to accommodate that terminal. We are also seeing an open gate concept which is much more passenger friendly. It is an opportunity for us to showcase all the different innovations. The main focus is actually investment in new passengerfacing technology which you may have noticed as you go through the airport the new smart gates which are meant to reduce immigration gate times. We are also focusing on ways to remove some of the intrusive processes that passengers have to experience as an airport, automating them and basically leading the way in showcasing some of the technical solutions. Yousef i have spoken to a few investors who say that dubai runs the airport so well that they should be running other airports. We understand there was part of the airport in riyadh that is up for sale . Guest we have been asked this question, but at the moment that airport in dubai is quite a challenge. And we are about to open a significant expansion of that airport, to almost four times its current capacity over the course of the next few months, so we pretty much have most of our resources for the utilized resources fully utilized at the dubai airport. I am not sure at the moment, that there is a capacity to do such a great job elsewhere. Yousef as global and political leaders gather in abu dhabi for the summit, we hear from the chairman himself. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. Hundreds of Global Business and political leaders gathered in abu dhabi this week. We spoke to the events chairman. When you look at how young the region is, the u. N. Has projected there will be 4 billion People Living in africa at the end of this century. So, the major growth in the worlds population will take place in this region it is a very young region. I have been visiting for 20 years, and we made the decision to launch here in the uae. Tracy when you zoom in on the gulf region in particular, there was a lot going on. Lower oil prices are posing a challenge to the economy but you also have on the plus side, attempts to diversify. On balance, are you positive or negative about the future of the middle east . Guest i am very positive. When you talk about the future of the country, over the last 40 years, as i have visited Different Countries around the world, i always visit. The schools you can see the future of a country in the schools. When i was going to china in the 1990s, i was focused on what was going on in the educational system and visiting schools. In particular the uae, i have been visiting schools in the past 20 years. Tracy i want to segue a little bit to the market. We did have some drama early in the week, a big fall in stocks in particular. What do you think happened, and . How concerning is the decline of this week i think relative thing is relative. Guest if you are talking about an index, a change of 1000 is not an enormous. When the index is 25,000. That when you are talking about 4 or 5 changes some of which is already on the rebound come i think we have come through a. Of very little changes in Interest Rates for a very long time which has reduced volatility. But, you had a number of different instruments traded which are unwinding. That created a lot of volatility. A lot of people look at it and think we are volatile. At this conference and around the world at our 250 events, we have something called the Global CapitalMarket Investors and they are still at 30 trillion in the world, yielding west of 1 . Yielding less than 1 . They are here. Insurance companies, tension funds, endowments, all of them are to figure out how they can meet their functions and how they can invest. And you have record liquidity in corporations around the world. So, these might create opportunities for them to invest. Tracy i need to press you on this point, the low yield point. We have heard about the search for yields for years. How difficult is it for investors . You come from a highyield background. It is not looking so highyield at the moment . Guest i would say, rates are very low to start. But as you go around the world, in japan for example, the are around two point 75 . 2. 75 . Are around the chairman of the Milken InstituteGlobal Markets group is having an assumption on the Japanese Pension Fund of 1. 8. They are looking for four to 5 if you converted to u. S. Dollars. So youre able to achieve some of those rates. It is not necessarily the rate that are making things are attractive, it is the lack of provenance. The last few years, you do not have maintenance covenants which have allowed private equity to flourish tremendously. In the United States today, private equity now owns more companies that are then our listed more companies than are listed. Longterm borrowing is that fixed rates, so you can ask yourself, if i can borrow noninvestment grade in europe at 2. 75, is that a liability or an asset . Longterm debt at that level . You have to look at the entire structure. These low rates have substantially reduced interest expense which flows for the equity holders. Tracy in that case, what happens to credit went rates start going up . That again was one of the things that spark to the falloff on in the equity markets. We did not see that bleed into a credit which was surprising to some people. Guest you had in january, a tightening of spreads as governments increased rates. You had little change in the highyield market. 99 of all the companies in the world are noninvestmentgrade. When you look at europe today, its highyield market yields are 12 below what the u. S. Market yields today. You are seeing a number of companies more attractive to finance in in europe, or raise money in euro dollars or even pounds, then dollars today. Tracy is that not an odd situation, cried spread credit spreads tightening . Guest engine were you had less issuance, but it picks up by april or may. February will see an opening of those spreads and as a result, the underlying Economic Activity is what ultimately people are looking at. Will you be paid back . What is going to happen throughout the world . And throughout the world at this moment, the economy looks strong. Tracy david benson has supposedly sent a plea for donald trump for you to be pardoned. Have you heard anything about that . Guest know, we have talked a number of things with the president , but not that. We have been focused on opportunities for growth. The relationship with latin america, which is important to the United States, but that has not been a topic we have discussed. Yousef , could the saudi spending spree the good news for the nations lenders . We will hear from a ceo who thinks it could. We hear from him next. This is bloomberg. Yousef the ceo of this bank told bloomberg this week that he expects saudi arabias expansionary budget will help drive it growth this year. It comes as the lender announced fourthquarter profit of 160 million riyadh topping even the highest analyst estimates. We talked to him. It is the fastestgrowing for the last five years. We have achieved many records during 2017. Regarding the financial numbers as well as the products we offer to the customers. I am very optimistic about 2018 and this growth will continue, inshallah. Yousef when you look at the change in policy with the government, will this move away from the harsh austerity to a more expansionary budget, more investment, more spending what could this mean in terms of a boosting your bottom line . What kind of lending growth are you looking ahead to . Guest as you said, the spending is essential for the economy growth. I am leaving the budget for 2018 i believe it will have many opportunities for us. Ae, there are many megaprojects coming, as well as we hope to finish the bigger projects that started a few years ago. That includes our role to fund those projects. Yousef give me a sense of what the impact could he from the ongoing selloff we are seeing in Global Equities and bonds, especially the rising and surging bond yields around the globe. Could that impact your operations in any shape or form . Guest we are focusing in the bank on at the local markets and trying to satisfy our type of investment opportunities. That is clearly from the financials if you see our finance portfolio, it has grown by four times in 2017, and our Investment Group by more than 100 in 2017. Governments started issuing sukkuk in 2017 which also presented opportunities for the shariarun banks. Yousef this is an idea from some of the analyst, if you look at your performance and your ambitions, and you want to grow your branch network, perhaps mergers and acquisitions are a way to go into the new year with some innovation. What do you think . Guest there are already two banks in saudi arabia which announced that they are looking for a merger, which has become public information. Perhaps we still have very strategic hopes to increase our network. We added 14 branches and merged our atms network which added more than 90 atms in 2017. Today, we have one of the largest Bank Networks for atms in saudi, exceeding 1400, more than 148 branches, and i believe we still have the potential to grow even without mergers or acquisitions. Yousef bond yields are not an issue, and governments are spending again, crude is close to 68 a barrel, is or anything that could stop your growth in 2018 . Guest i think we have many opportunities, not only with government spending, but also the private sector as well. In fact, when the government has spending, that creates other opportunities for the private sectors to jump in and fund those projects, this is where the opportunity comes from. Yousef any change in the dividend payout for next order . Next quarter . Guest about 5 , last year. This year we announce were going to do 8 , and inshallah, that will continue. Yousef , how that winkle voss brothers are keeping their faith in the cryptocurrencies. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. The head of the world bank expressed doubts this week about the legitimacy of cryptocurrencies, comparing them to ponzi schemes. That is not stopping that winkle voss brothers, founders of the gemini exchange. They told bloombergs Tracy Alloway that they are in it for the long haul. We remember bitcoin when it was eight dollars. So, we are pretty happy with the price right now, around 8,000. We have seen this cycle happen , and i have lost track of how much it has happened, probably over 20 times. There is a lot of excitement, new interest, new money coming in. It gets frothy and that it kind of creeps back. But it always comes back healthier and higher than the previous one, and i think this will be the same. Tracy does the volatility concern you at all though . I feel like it would be difficult to build Business Plans around an asset that is so volatile . Guest i think volatility is something to expect with a new asset class. We launched a futures contract with the currency in december which creates a twosided market and now people can start to short bitcoin. But it is still only about six weeks old. It is a great step in creating that twosided nature of the market. Tracy do you think it has played a role in the recent market price declines . Guest i would say there has been an increase in price discovery. We are seeing more sophisticated traders expressing viewpoints on it. Tracy do you have an idea of what would be a fair price for bitcoin . Tough question, i know . Guest we use the framework of gold. When we look at gold, what makes it so coveted, on the merits, bitcoin matches or is better then gold in all of those nine characteristics. The market cap for gold is about 100200 billion. We think bitcoin is gold 2. 0. An appreciation of anywhere from 100 billion to 7 trillion, anywhere from 30 times to 40 times from here. It is sounds like a lot but we think it is the most sensible framework for of what the value of bitcoin is and what it should be worth. Tracy i have to ask, how do you protect your Bitcoin Investment from the prospect of tax . Do you go analog . Guest that is a good question. It involves cutting up our bitcoin and dispersing them in involves around the u. S. We have now moved our assets around the gemini, and we eat our own dog food. Tracy are you still bitcoin billionaires after the recent price drop . Guest we have our portfolio of cryptocurrencies and we invest bitcoin with early on. We are long on the space, we do not sit there and watch the price they today. To day. Day we are in it for the long haul, whether it is one decade or many decades. We remember when bitcoin was eight dollars, so as far as we are concerned, it is all gravy from here. Yousef oil suffered its sharpest fall in two month this week with u. S. Crude production surging to a record 10. 25 Million Barrels per day. It is raising concerns on global supply, that it could slump demand. I got more with the senior economist of global research. I would like to start it off with the Global Markets. Our view is that it will continue to consolidate around 61 a barrel for 2018, still lower than the prices are right now. I think there is some disconnect between fundamentals and market rising. The view from our communities is that we are looking at double demand of over 1. 6 billion barrels a day in 2018. So, even accounting for the supply from north america, nonopec, we still think that on the fundamental space, the market will continue to be supported over 2018. Yousef we put it on a chart, the latest figures. I have the perspective of u. S. Output. We put the lines in a yellow and blue for russia and saudi arabia output. The question on the other side of this equation is the demand. China data showed imports are still strong. Is that going to help opec this year, more than the supplyside . Guest absolutely. For us, the question about demand is something that markets will be taking more seriously. Rising prices have been driven by the demand story more than anything else. If you look at the Global Growth for instance, the forecast of gdp growth for 2018, much of it coming from asia and china in particular. In that context, we are looking at Global Oil Demand growth of over 1. 6 billion barrels per day. Even though we are asking for increased production from the u. S. , we think the demand story will play a significant role continuously and the market will be supported. Yousef analysts are saying they see a risk aversion party, the one commodity that has not gotten hit, i want to ask you what this means for rising bond yields and inflation, and ultimately implications for this art of the world. Is the gcc in a much better place right now with this tighter Monetary Policy . Guest in terms of the Federal Reserve outlook for instance, we still are looking for two base point hike. In the context, we think the fed will lean against higher growth in the United States and we see the risk for a short hike. But the base is remaining at around 2. I think we will see the Federal Reserve hit a target of around 2 by midthis year. Over the last week we saw bond yields rise significantly, particularly the 10 year yield. We saw a flat u. S. Yield curve around 2 , and we have recently upgraded that, and we think but by the end of 2018, we will remain a flat yield curve, but we are looking at something around 2. 35 for the end of the year. To the second part of your question, what it means for the gcc. Tighter Monetary Policy around the region, with the exception of egypt area not only in support of exchange rates, but also for countries like jordan for instants. Yousef egypt is one of your calls, you are pointing the quintessential question as to whether these highyield returns on government bonds are sustainable or whether the recovery story will have the same kind of momentum this year . Guest absolutely. Egypt has always been the biggest nonconsensus calls for 2018, and we were calling for higher Interest Rates. The central bank might actually not respond to the pressure. We have a similar view for 2018 in terms of the reversal of this tighter Monetary Policy stance. There is a lot of noise in the market as of the end of last year that the central bank will cut Interest Rates as inflation has started moving down. We think the central bank will indeed ease in a 2018 but the easing will be gradual than the market expats. Yousef we think the pakistan story has been undercovered why is pakistan the top highlight in your coverage right now . Guest if you look at the middle east region, north africa and pakistan, pakistans runs out to us as the one where growth is accelerating. For both Oil Importers and exporters in the middle east and north africa region, even though it is slowing for them, pakistan is seeing an up tick in growth. We are forecasting 5. 5 growth or fiscal year 2018. So we think from that perspective, given the size of the economy and the impact it has for the border region, we think pakistan has Significant Growth coming. Yousef , Commodity Prices continue to drop in dubai. Can anything halt the slide . We discuss that next. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east riyadh the Property Market in dubai has been struggling lately. Prices are as much as 71 of below their 2008 peak. Tracy alloway and i got to talk to the head of research at a Real Estate Investment firm there. I would not necessarily use the word recovery to describe the Property Market. Values have been sliding for three years, and as you pointed out, there are several markets remaining well below the 2008 peak. The escrow affect is something we have been waiting for and we know the government has plans to invest up to 300 billion in a project to host the expo. We hope that will increase demand for residential and commercial property we had we are still waiting for that effect to come through 2. 5 years out. Location is still very important to potential buyers. We have also seen the resilience in places like Discovery Gardens city, at theonal other end of the spectrum. It tells us that price volatility is an essential in this market. Tracy what is causing the prices to slide . Guest lack of demand, tracy. Tracy is that a way of saying oversupply . Guest in a way, yes. We have 80,000 units due to complete in dubai by the end of 2020. If you project the required amount of housing in dubai over the next three years, our calculations ls that we will see 105,000 new households created in that time. So, demand is actually going to come in less than supply, but the problem we have is that a vast majority of the supply is geared toward the top end of the price spectrum, so we are likely to see luxury values continue to slide. Yousef i want to know what investors are currently doing with their capital, if they are not investing in the middle east. Is london still a prime destination for middle Eastern Capital after the brexit dilemma . Guest london remains front and center in the minds of regional invest yours as a place to invest beyond the region. We have seen a currency slide since brexit which is helped to boost the appeal of london to investors that we also have a changing economic dynamic here in the region. You have that inflation rising, a real squeeze on Household Finances with the new taxes. So there is a need to change in the mindset of the way that people are investing. It is less of a generational investment and more about seeking returns. So we are seeing interest in other Asset Classes he on to in thend london southeast and perhaps even scotland, where we have seen lots of investment activity from middle east investors. There is a distinction between High Net Worth individuals who are often will do more by their hearts than their mind. Tracy yes, i cannot imagine someone buying a Office Building in scotland . Guest yes, we are seeing families chasing highyield in the regions, looking at Office Buildings, Hotel Investment for example, and in particular, industrials, and warehouses in the u. K. , which are offering 20 returns. One of the bestyielding Asset Classes at the moment. Yousef has frankfurt become a prime destination with uncertainty around the united kingdom, what else is on the agenda for investors in this part of the world . Guest we have people buying distribution warehouses owned by amazon in germany. Within london, we have carried out a study with the University College of london and we know that 50 of households in a london are tenants and 60 of those are tenants by choice. They are choosing to rent, opting to forgo homeownership for period of time. One of the hotspots we identified for the future was home to the lords cricket ground. Meadowvale. It sits on the doorstep of 200 n and has had over growth in the last two years. There are no investment sites left in the area which tells us that demand will be strong going forward. Yousef that is all for this edition of best of Bloomberg Markets middle east. We will be right here for the start of the trading week in the gulf sunday morning at 8 a. M. I am yousef gamal eldin, do join me then. This is bloomberg. Coming up on bloomberg best, the stories that shaped the week in business around the world. Volatility returns with a vengeance. We are on the verge of markets getting a little bit disorderly. It is a global contagion. The first product is blowing up. Does the weeks wild ride signal danger ahead . Leaders of finance and Monetary Policy offer insight. The correction was waiting to happen. There were people looking for buying opportunities. So far, this is small potatoes. The u. S. Government stays open. A lastminute compromise comes together