This hour. Yousef first, european governments this week agreed to assemble a Naval Mission to provide safe passage for ships through the persian gulf. That is after iran seized a British Oil Tanker in the region. The act was condemned by the the u. K. Foreign secretary jeremy hunt, but defended by his iranian counterpart. Under international law, iran had no right to obstruct the ships passage, let alone bored her. Board her. It was an act of state piracy which the house will have no hesitation in condemning. Even more worryingly, this incident was a flagrant breach of the principle of free navigation on which the Global Trading system and World Economy the u. K. Ship had turned off it signaling for more than the time that it was allowed to do so. It was passing through the wrong channels, endangering the safety and security of shipping and navigation in the strait of hormuz, for which we are responsible. Yousef we have more with our executive editor for the middle east. Reporter we dont know much yet. We know the u. K. Has announced it. Its not surprising that the u. K. Is going to its european allies and asking for help. And that they would join in an effort to try to make sure that the strait of hormuz stays open, limiting irans ability to disrupt it. I think in terms of extra pressure, you may be referring also to the u. S. Move against the Chinese Company, to put sanctions on that Chinese Company for dealing with iranian oil. I dont think the two things are necessarily directly linked. Because the u. K. Seems to be very keen to separate itself from what the u. S. President is doing, jeremy hunt was clear about that. Saying they are sticking to the policy of wanting to ensure that a nuclear deal sticks and continues, and are not aligned with President Trump on his policies. Tracy good morning. Lets focus on that naval escort. Would you expect that to deescalate tensions between the u. K. And iran . Or would the involvement of the military there end up ratcheting those tensions . It depends on what iran the sites to do. If iran decides to try to disrupt navigation further, to get another oil tanker, then yes, having more military ships in the gulf may lead to extra tensions. From the u. K. Perspective, the european perspective, the idea really is to make it harder and thus avoid some of these tensions. Yousef great to get your insight. Thats our executive editor for the middle east and north africa. Lets get some additional context with shane oliver. He is the head of investment and chief economist at amt capital investment. He joins us from our studio in sydney. You dont think a war is likely. You look throughout history, we were in similar situations where war wasnt likely and happened anyway because others dragged certain countries into that. Is that what could happen this time around again . It certainly could. The risks are high. President trump has been using what he calls maximum pressure on iran to get them to renegotiate the nuclear treaty. But by the same token, a ron iran might decide, why should we get into this . Tensions continue to escalate. Tensions escalated over the last month or so. If that goes on, theres a risk of a war in the middle east. It will be contrary to what President Trump was elected on. That was the basis of not getting into further wars in the middle east which tend to bob the u. S. Town. Im hopeful that there will be a negotiated solution here. But you have to say the risk is pretty high. Tracy on that point, there are a lot of Trump Supporters in the u. S. Who care a lot about gas prices. When you see provocations in the gulf region start to drive those up, you can imagine a lot of Trump Supporters arent necessarily going to be happy about that. Do you see maybe trump trying to deescalate the situation because of pressure from his base . Thats an important point. It is a similar argument that could be applied in relation to the trade war with china. That yes, his base wants to see him standing strong. Against china, iran, so on. They dont want to see they wont be happy of unemployment goes up and they have to pay more for their gasoline. I think trump is driving a fine line here. If you want he wants to see progress in terms of improving the situation with iran. By the same token, he doesnt want the oil price to go up too much. Because that would really threaten his reelection prospects. The worst thing for him would be warscalation in the trade with china and a war in the middle east pushing oil prices to 100 per barrel. That would really dampen his hopes for reelection next year. Yousef up next, a 29 rise in firsthalf profit following what the ceo of Peter England called a solid six months. Hear our interview with the with him next. This is bloomberg. Yousef welcome back to the best of bloomberg daybreak middle east. Red Bank Reported a 29 rise in firsthalf profit following on what the ceo called a solid six the ceo, Peter England, called a solid six months. He joined us on the line on tuesday. Theres two factors driving it. One was that we repaid our bond program at the end of june. We were actually carrying a lot of excess liquidity for the last couple of months of the quarter. So that had some impact on them. The other main one is that we have continually been changing mix gradually over the last four years. The whole approach really is to rebalance the portfolio and take a little bit of risk out of the book. Basically balance things out. Things will continue to decline a little bit. They were adversely affected by this excess liquidity we were carrying in the second quarter. But you will see them continue to graduate down over the next couple of years. Tracy peter, its so good to talk to you again. You mentioned the loan mix in your overall portfolio. We have seen some investors and analysts expressing some concern over loan quality in the uae region. Im curious if you could give us some color on what you are seeing in terms of bad loans. What are the trouble spots right now . Last time, we had a big default cycle in the uae, it was mostly sme lending. Are you seeing that again . Or is it an issue with Real Estate Lending . We are the largest sme bank in the country. We struggled, to be frank, four or five years ago with sme default. What we have seen over the last 3. 5 years is gradual improvement rather than things going in the wrong direction. On the sme side, we are seeing improving asset quality. Part of that is because we changed the way that we lend quite significantly about four years ago. The benefits of that are starting to come through. In our case, across the board, we are doing a lot more Financial Institutions. Lending and wholesale banking. We are not seeing real signs of stress. In the longer term, real estate, if we continue to see this downward pressure on prices, you would assume that could start to bring some challenges through. In our case, we are in a probably slightly different space because of our loan mix. We are gradually improving asset quality rather than the other way around. Yousef the fed is expected to cut at the end of the month. At the end of the day, a cut is a cut. How is that likely to affect you . Interestingly, rakbank seems to be in a different space than most banks in most areas. Its the same when it comes to Interest Rates. Globally, generally speaking, banks benefit when interestrate rates rise. We benefit marginally when Interest Rates fall or are flat. That is simply because a very large portion of our loan book a fixed rate contractually or by practice. Credit cards, personal loans, so forth. A largely fixed rate for the time they have been written for. In our case, we do a little bit better when Interest Rates fall. I think its fair to say globally most banks would find the reverse, they tend to do better when Interest Rates rise. So in our case, i dont see it as an issue. We are thankful that this pot on pause on rates is happening. Not only from a new perspective, but also from asset quality. If they continue to rise, it would become increasingly difficult for clients. Tracy im curious. How would you expect those lower rates to actually feed into loan growth . I believe you forecast Something Like 4 loan growth for the full year. I think you said that back in april. Do you think you will be able to meet that forecast . Do you think that lower benchmark rates will encourage more businesses to take out loans . Yes and no. The thing is, it probably wont discourage. Rates were heading upwards, and people were starting to be more cautious in terms of borrowing money. Thats not a bad thing. With the expectations that rates would remain flat or come down, for some time, it may improve loan growth a little bit. Our numbers are not misleading, exactly, but we have a relatively large Financial Institutions book we have built up over the last three or four years which is not shown in our gross low numbers. Gross customer assets. That has grown about 3. 1 for the year. That has added to loan growth, higher than what you see in the peer groups lines. Yousef m a has been a big thing in the united arab emirates. Are you currently looking into either being acquired, making an acquisition, or being part of a merger . The way i think things will probably can now, it is not uncommon. It just happens there are four very large banks in australia and a number of niche players. I think thats the way things are going to pan out for the uae. They will end up with four or five, maybe six relatively large players. And some players that have a leash. In the case of rakbank, we are the National Bank which has relevance. But we also are the largest Small Business bank in the country. I think that is really our niche. In the sme space, and to support the ongoing growth of the economy as well. Now, at this stage, theres nothing on the table. We always look at the situations. There certainly nothing being considered actively at all. Yousef up next, President Trump attacks the fed again. His take for the central bank he is backing a half percentage point rate cut this month. This is bloomberg. Yousef welcome back to the best of daybreak middle east. President trump backs a half percentage point cut for policymakers. The president attacked the fed again, tweeting that the central bank was misguided in keeping rates so high. Elsewhere, the bank of japan governor says hes monitoring concerns about Global Growth. Uncertainties regarding the Global Economy have been heightened. And some nervousness has been seen in Global Financial markets. The bank needs to play close pay close attention to the tracks of these developments on the grounds of Economic Activity and crisis. Yousef we got more with shane oliver. I think one should see this as the fed taking out insurance. Such as they did, say, in 1998. Bottom line, u. S. Growth is still strong. Unemployment is very low. Inflation is below target, but not dramatically so. 1. 7 compared to 2 is not a massive shortfall. I think this is about the fed saying, there are threats to the growth outlook. A lot of which relate to President Trumps on policy and terms of trade. We still have low inflation, below target inflation. Theres a case for us to take out insurance. That is the way i see it. When you are doing an insurance cut, you can afford to do the 25, not the 50 that some have been talking about. Which i think is what they will do, 25 points. Id say it is proactive. It is proactive to the extent that the u. S. Economy has not slowed down dramatically in terms of private demand. I think its a proactive move. Taking out insurance, basically. Yousef im looking at a disparity between Asset Managers and speculators that is growing. We put together a fabulous graphic for our clients. This is a story of Asset Managers that have stuck to their short positions and increase them. There is some skepticism about increasing the amount of easing that has been priced in. Which side of the conversation are you on . Im skeptical about the degree of easing that has been priced in. I think it is still about 100 basis points on a 12 month horizon. That seems excessive to me. I suspect that what the fed will do is 25 next week. Another 25 in september. And their september meeting. Its possible that will be it in terms of this easing cycle. That said, a lot depends on what happens on the trade front. If the trade war escalate from here, sure, you will get the monetary easing that the market has been talking about. I suspect that there will be some sort of deal. It may take longer. Ultimately, there will be some sort of deal. Therefore, i would stick to 50 basis points in total. And therefore, i think the money markets are factoring in a lot more and its way too negative. Tracy since we are talking speculative positioning, i have a chart of my own. Using the most recent data. This one shows short positions on the volatility index. Those have been picking up again as it has been trailing test relatively lower. Its in an environment of lower Interest Rates with the Central Bank Put fully in place now. You would expect to see lots of investors betting that low volatility is going to continue. My question is, do they risk complacency at this moment in time . Are we getting too used to the notion of that Central Bank Cut . Possibly. Im also conscious of the saying, dont fight the fed. That applies to other central banks, as well. That little sign says, if you stretch it out longer, the fed will ultimately win. Share markets will go up in response to interestrate cuts. As long as theres no recession. My view is that theres not going to be a recession in the u. S. Anytime soon. Therefore, on a six to 12 month horizon, if the fed cuts a couple of times this year, it will contribute to stronger share markets on a 12 month view. On a six to 12 month view. There is a bit of complacency in the short term. Theres a risk we could go through a correction. Theres plenty of potential triggers out there. The trade situation could take a turn for the worse before gets better. Before it gets better. There are the issues around iran. Yesterday, there were issues around the debt ceiling. There are plenty of issues out. Out there. We are going through the Earnings Report that says we did have upset around that. We could see soft Economic Data out of the u. S. And we are in the seasonally weak September Quarter which is also worth mentioning. Yes, we could have a shortterm correction. But i think on a 12 month horizon, in the absence of a u. S. Recession, i think share markets will hit higher. Yousef we have the u. S. President meeting with top tech ceos. We understand that the Chinese State media hails progress when of progress when it comes to huawei. The rhetoric is improving on both sides of the conversation. Is it time to get more bullish into some of these Asset Classes . Go along, perhaps, on some of the equity calls. Just be more risk on generally in anticipation of a breakthrough. Perhaps. There has been so many swings in the story. And roundabouts in this story. It could almost go either way. I think its a good sign that it looks like they will have facetoface meetings next week or same. Or soon, anyway. Its a good sign that they are talking about buying more soybeans. And likewise, the u. S. Is doing something about the bands on huawei. Lets all positive. Its all positive. It was positive six months ago as well. Look at where it ended up. Theres a long way to go on this. There will be lots of volatility around it. Im hopeful that there will be a deal. But you want to look at it on a sixmonth horizon. I think a positive but will bet will pay off. In terms of the next two months, its incredibly risky. Yousef lets get more on the rising regional tensions now. We spoke to the head of equities at rocksolid investment bank. We asked him how his clients are reacting. The spectacular performance we have seen from the market until the end of april. The events or escalation of geopolitical tensions with iran was a good reason to derisk on those profits. Its understandable when you think of all the paper profits investors are sitting on. Coupled with the fact that we have to ongoing wars in the two ongoing wars in the region. People have all the reasons to take money off of the table. When you look at valuation, that also supports taking money off of the table. The pullback or derisking was understood. Its just that it happened to happen very quickly in one month. Thats what we saw in may. There was a little bit of rebound in june. We continue to see that small rebound in july. But we are nowhere near where we ended in april. Yousef i think back to the first gulf war and second gulf war, it was a series of dominoes. Once it got going, it was hard to stop. If you asked most players a year or two before hand, most of them wouldve said that wouldve not there would have not been a war in iraq. With this iran and United States tension, standoff, we are seeing gulf markets come under pressure. This graphic tells the story powerfully. Do you stay back and see how this plays out . Or could this be a buying opportunity . Because ultimately, a lot of these assets rebound. Give or take. Volatility on one hand, definitely creates dislocations and prices. Creates some opportunities. But then basically, the impairment of visibility is the problem. How do you go from here in your forecasting ability in case of a war . Really, its completely impaired. What we look for is the chances of how things are escalating, where are we in the process. Really, trading some of the core names that we own becomes something that we look at very closely during such times. Manus msnbc, taking oneoff items for the ipo. Their profits still rose by 8 . You say uae bank names are where you want to park money. Why . There are a couple of reasons. One, the valuations are relative to the region. They are basically justified parking some money. When you look at the dividend yields, you think its not a bad idea to park some money, earn something around 6 until the market rerates. A lot of money has left the market from a trading perspective to focus on saudi, kuwait, qatar for business related events. Hopefully we are coming to the tail end of that trade. That came at the expense of uae. Lone growth in the system is not exciting. Around 2 , 3 , 5 . But that is more like extending lines to your existing clients. I dont mind being paid 6 . And waiting for rerating. Yousef your top view is kuwait . Kuwait has been one of our favorites. We continue to like it. The Banking Sector repeatedly mentioned that it is completely over provision, very safe. No skeletons in the closet. Retail remains strong. Government Spending Continues at a healthy clip. They have the lowest breakeven point in terms of budget. Yousef up next, trade talk optimism lifts market. Robert lighthizer and his team are prepared to head to china for facetoface negotiations. This is bloomberg. Yousef welcome back to the best of daybreak middle east. U. S. Trade officials are set to fly to china on monday for the first highlevel facetoface talks since may. Robert lighthizer and his team will be in shanghai for discussions that are expected to review the issues dividing the two sides. We got more with our china correspondent, selina wang. We are trying to dissect the playbyplay here without a lot of windows and to what it all means. We have heard positive sentiment leading up to this point, including reports that Chinese Companies are looking to buy more u. S. Agricultural products. Looking for exemptions from chinese retaliatory tariffs. That being said, we heard u. S. Officials tried to downplay the significance of these talks. With wilbur ross, saying its unclear how long its going to take to reach a deal. And that a quick deal is not likely. At the same time, we are hearing from the china side, the commerce minister will be playing into these discussions. The reason why this is significant is that hes been a hardliner. H. E of a hardliner than leo they may bring a more hawkish sentiment to the table. Weve heard from sources that this is likely going to be a chance to feature wideranging, broad discussions on where things stand now. Its not likely to be a venue for substantial talks. Remember, there are structural issues that there are disagreements on including the very structure of beijings economy. On the other side, china wants the complete removal of tariffs completely. The complete removal of tariffs. The two sides are very far apart on those issues. Yousef lets talk about huawei. They have been able to grow their revenue by 30 in the first half of 2019. How is the Company Going to feature in these discussions . Huawei has been featuring quite heavily in the discussions. The huawei licenses, agricultural purchases. Those have been a lot of the discussions up to this point. Now, we did have some positive news around this. At least it was interpreted as such, when trump invited the ceo of big tech companies. Qualcomm, intel, micron. They were asking for timely acceptances of their license applications to sell their goods to huawei. They argue its more harmful to u. S. National security to block them from selling to huawei. Their argument goes that huawei could get many of these components from other companies. That means they are missing out on a big chunk of revenue which will be used to increase their r d spending and make sure the u. S. Stays on top in the leadership of the Semi Conductor industry. But again, even if these licenses are doled out quickly, thats not a quick resolution. Trump is facing backlash from congress, which is heightening with reports that huawei worked with north korea. On the other side, china wants huawei completely removed from this blacklist. Yousef meanwhile, the ims this week imf this week again lowered its forecast for Global Growth. Brexit could derail a projected rebound. They now expect the World Economy will expand 3. 2 this year and 3. 5 next year. Both down a 10th of 1 from the forecast in april. That lowers expectations from what were already the worst since the financial crisis. Global growth is to some extent selfinflicted. Its an outcome of prolonged uncertainty on the trade front, escalating tensions on technology, the prolonged uncertainty with brexit. These factors are weighing on growth. Yousef we got more with our guest from singapore. Its a combination of factors. Weve had 10 years of economic expansion in the u. S. Typically, 10 year has been the longest. Were almost there. Its natural that the economy slows down. Theres natural momentum here. The trade tensions add fuel to the fire. Trade talks are not just about direct impacts, but direct sentiment. Its also impacts sentiment. It results in business is businesses delaying investments, postponing investments, and that impacts the Global Economy as well. The imf is not completely wrong. They highlight the try factors trade factors and the other factors as well. The longevity of this expansion and all parties must come to an end up some extent. O some extent. Yousef you could argue that. Another chart adds additional perspective to the story. Heres tv for our clients. Gtv for our clients. Just maybe, the imfs new forecast is still optimistic. We have prepared it here with the Bloomberg Economics forecast and pulled it back all the way to the year 2000. Do you think the imf is still too upbeat about where this economy is going . Its possible. They lowered their growth forecasts for trade quite significantly. By almost 0. 9 to 2. 5 . Terms of the forecast, its possible that if this trade war continues, lingers on, it affects Business Sentiment and consumer sentiment. The imf may be forced to bring its numbers down further. Lets see whether the u. S. And china will agree when it comes to trade talks. A lot hinges on the trade talks. Between the u. S. And china. Also, a lot hinges on what the u. S. Does with auto tariffs at the end of this year. And of course, brexit. Quite a lot of uncertainties. Its hard for the imf to be too precise. But i think if this lingers on, its possible it will take their forecast down. Tracy on that note, we have seen imf and other economists be structurally overoptimistic over the course of history. You mentioned brexit uncertainties. Im curious, how you see the new Political Climate in the u. K. Actually impacting that process . Which has now been going on for two years. And how do you see the overall plethora of uncertainties that are out there for Global Markets actually weighing on Investor Sentiment . Brexit is still playing out now with Boris Johnson in charge. It makes it even more uncertain. The big question, will we see a no deal brexit . If that happens, that will be bad news. As the imf highlighted. We will see. Whether he will be able to bypass parliament. Our best case is that its possible he will kick the can down the road, call for reelection, and then perhaps the u. K. Might back out of brexit. That will be much down the road. I dont think he will pull a no deal brexit. It is going to linger on and cast its toll on markets. Yousef allow me to circle back to where we started on trade. What exactly is priced in in terms of scenarios as we go into next week for those meetings . Whats been priced in, its the tariffs imposed so far. What has not been priced in is, if donald trump decides to impose tariffs on the remaining chinese imports. The markets are hoping he will not go down this road. If the trade talks do not pan out very well and there are indications that trump may put impose additional tariffs on the remaining imports from china, that will be bad news for the markets. I think the markets have been optimistic since the last june 20 meeting. Markets are not pricing in the additional tariffs. Lets hope it doesnt take place. Yousef next, the imf may have downgraded its Global Growth forecast, but is reviving saudi arabias prospects upwards. We look at that next. This is bloomberg. Yousef welcome back to the best of daybreak middle east. Saudi arabia might well be the loan bright spot on the bleak economic picture painted by the International Monetary fund for next year. The imf this week lifted its forecast for the biggest crude exporter. Saudi arabia, thanks in part to Government Spending this year and a projected pick up in the oil industry in 2020. We got more with the Senior Executive officer at ross on it investment bank. Weve seen a good rally at across the gcc equity market. Saudi arabia very much participating in the share price rally. We think there are Economic Reforms taking place in saudi arabia which are paving the way forward for stronger Economic Activity. And investment. Nearterm, we think that the most important aspect to affect the Regional Equity market, markets, saudi in particular, is the cuts in Interest Rates we are about to see from the Federal Reserve bank. Interest rates rose here given the currency peg to the u. S. Dollar over the past year. Yearandahalf. With the Interest Rate cuts likely to come, we will see Monetary Policy which is more appropriate for the Economic Activity for this part of the world. Tracy eric, its Tracy Alloway in hong kong. Its good to see you. I wanted to pivot to fixed income. We have seen a stunning rally across the gcc. You point out that we have seen equity like doubledigit returns for bonds with duration over seven. That is something you would not normally expect to see. How long can those suits sorts those sorts of returns be sustained in fixed income . When will the natural order of equity returns reassert itself . The bond markets have very much benefited by the overall bond market rally. The rally in the region is not isolated. Its part of a much larger move in terms of yields declining. We have seen 10 year u. S. Sealed yields drop towards 2 . And weve seen regional yields follow u. S. Government bond yields. We are getting to the point in the Interest Rate cycle where we would expect to see a pause in a further rally in terms of declining Interest Rates and rising bond prices. That said, with the fed about to cut Interest Rates, our expectation is for 25 basis points. But we think the markets will continue to expect further Interest Rate cuts through the balance of the year. With this environment in place, the bond market generally and the bond markets of this region should continue to offer investors quite good returns. Yousef what is your read on Risk Perceptions with tensions in iran . There was pressure with assets in the region. You look at saudi, the oil price, both of them are moved. Maybe not as much as you would have expected. We wouldve expected a greater response in oil prices given the tensions we have seen in the arabian gulf. That said, with markets seeing being somewhat complacent at this point in time, and investors seemingly focusing more on interestrate cuts, then we would expect to see at this point in time lower Interest Rate cuts leading to stronger Economic Activity that should lead to Higher Oil Prices. We remain bullish on oil prices from this level and would expect to be testing the higher end of the ranges before years end. Tracy what matters the most for gcc sovereign profiles . Is it the Higher Oil Prices or the geopolitical tensions weve been talking about . At this point, it seems to be the oil prices and the upward pressure to oil prices as a result of those geopolitical tensions. We have other circumstances around the globe, be it trade tensions, u. S. China, brexit negotiations, and how sterling performs. How the European Union performs postbrexit. These things are weighing on markets, as well. The regional tensions do not seem to be gaining a high ranking in terms of investor investor and allocation at this region. Yousef in terms of other recommendations, your conviction calls are focused on kuwait and the united arab emirates. Run me through your thinking. Kuwait is an a strong position at this time. Fiscally, they have been prudent with Government Spending. They have the lowest breakeven level with respect to oil prices for their budget. The demographic position in kuwait is very strong, as well. We have recently seen indications that the kuwait equity market will assume a bigger position in the emerging market indices. That should lead for attention, global attention towards the kuwait equity market at this point in time. Yousef up next, Libyan Central Bank governor warns that nations the nations oil revenues could drop sharply this year. They continue to deal with the chaos unleashed in the spring. This is bloomberg. Yousef welcome back. Libyas Central Bank Governors says the nations oil revenues are expected to drop by as much as 17 in 2019. As a result of disruptions in production stemming from the nations political crisis. The opec member has been unable to break free from the chaos unleashed. We work according to a political agreement signed in morocco. There are some Financial Arrangements which are approved. We spend according to that arrangement. The problem we face is that libya, since 2013, has struggled with oil revenues. Oil revenues are not enough to cover all the needs of the public, which moves the central bank to use other resources or other savings of the central bank to cover the deficit. So, that allegation is not true. There is this rival central bank as well in the east. What funds does it control . And what kind of impact does it have on you and your job in tripoli . The central bank in the east, the perilous bank invader, doesnt have its own sources. But they have expenditures. The total expenditures exceed 43 billion through the past years. That, of course, obstructs the progress of the country, the development. It increases the deficit and disrupts us with regard to liquidity. They also printed money in russia, and all of that. All of that contributes to the Economic Situation in libya. The United States, for years, used to support tripoli a unequivocally. We have seen that. But, we have seen them go a little bit silent. Have you lost trust in washington . Of course not. We still deal with the central bank, with the americans. The embassy of the United States. I do not think we lost trust in them. Probably some changes in the gulf took priority over libya. But we hope libya will get adequate care. Some people say you are the most powerful man in libya. What is your response . I do my work. Professionally and responsibly, and accountable as much as possible. That is my role, which i do. In addition to that, i have a role of protecting the savings of libyans, and to keep the currency rate, the Exchange Rate as much as possible and prevent the suffering of the people of libya. Yousef lets continue the oil seen now. The oil scene now. Kuwait said its working with saudi arabia to resume crude production in the neutral zone between them that has been shuttered for four years. They could yield half a Million Barrels per day. U. S. Factory activity fell to the lowest since 2009. We got more with the Portfolio Manager at swap asset management. We havent seen in extreme an extreme volatility in oil prices despite whats happening in the geopolitical scenario. Thats because all the gains are getting capped because of weaker Global Demand growth. It does appear to me that the risk premium, its all factored in the cost. In the gulf. Tracy its good to see you. Its Tracy Alloway in hong kong. I wanted to ask you about kuwaiti equities in particular. That is one of the big Success Stories this year. Im looking at research. They say they still see 20 further upside over the course of the next few months. Is that something you would agree with . Do you think most of the gains have been priced in at this point . As a Portfolio Manager, we are actually trimming acquisition in kuwaiti banks. The story is extremely intact. I understand the cost of risk normalization story will eventually make the banks register a doubledigit Earnings Growth for the next two years. But i guess the valuations are rich. All the improvement in the r. O. E. Is going to factor into the valuations. Yes, you have msci play 10 months down the line. Trade too early to be played and too expensive as well. Yousef we have quite a bit of data coming in from abu dhabi. In the last 24 hours, we had the Economic Growth figures coming up on the back of oil in abu dhabi. Also, Abu Dhabi Bank earnings. You are going heavy on uae banks. That is what you are doing with the repositioning . Run me through your thinking. Right. We are very bullish on uae banks, real estate as well. Just not because of it being one of the places were you have cheap valuations but because of attractive easing. If you look at lending growth, it has been very soft in the uae so far. But abu dhabi is a place, the only place in the gcc where you can see investment activity strengthening. Adnoc distribution. Railroad projects. We have not seen these kinds of activities. I think this will be supportive of the nonoil gdp growth and lending growth for a couple of years to come. Tracy yousef and myself have been talking about another cycle of global Monetary Policy easing. All this morning. Walk us through what a fed rate cut would mean for the gcc region. As we have seen, some incredible performance in the emerging market bond space, anywhere between the Investment Grade and nonInvestment Grade, were talking about 9 to 11 . Can the fed tighten further from here . Thats a big question from the market. To me, it does look really limited. If you look at gcc in specific, it will be a function of oil and geopolitical risk. If oil has to break the 70 handle, without the geopolitical tension which is very important, its very positive. Yousef shinzo abe won japans upper house election as expected, but he fell short of a super majority that would have let him push through revisions to the constitution. We got more from tokyo with our north asia correspondent. Theres lots of issues here on the diplomatic front that shinzo abe must tackle. Hes already considering whether or not to join the u. S. Led coalition in the strait of hormuz. No decision has been made on that front. Of course, we are hearing that National Security advisor john bolton will be in tokyo this week. This is ahead of a real, indepth discussion with the United States and japan. Theres auto tariffs being threatened. The agricultural Market Access at state for the japanese. The south korea issue is front and center right now. Theres been a lot of heightened rhetoric that is damaging relations and trade. How is this going to be resolved . Its a decades old rip dating back to the colonial era. I put this question to an upper house lawmaker. When i mentioned, what can you shinzo abe do to assuage this anger, she says, no. This is a south korea issue. Theres real heated issues right now. Yousef you can catch daybreak middle east every sunday to thursday morning right here on bloomberg television. That is that 8 00 dubai time. Join us then. This is bloomberg. Haslinda hello and welcome to luxembourg, the location of the asia Infrastructure Investment bank. Often referred to as chinas world bank. Opened in 2016, is been one of the biggest supporters and financiers of chinas controversial belt and road initiative. It is on target to count almost 100 countries among its members. This is a conversation with its president , jin liqun. Haslinda thank you for joining us today