Transcripts For BLOOMBERG Bloomberg Markets Middle East 20170207

Be the worlds biggest ipo. Tata sons votes cyrus mystery off the board. It is 7 00 a. M. In doha. I am yousef gamal eldin. Shery i am shery ahn. Waning, off seems to be safe haven plays, easing and that section, cold and the japanese yen reversing that rally earlier. Investors right now looking for cues on where to go. Taking a bit of a breather. The trumpfueled enthusiasm , and if you look at that data when it comes to consumer confidence. Caught myf things attention and the folks at goldman sachs. Initial hopes for that pro growth drive in terms of fiscal policies, initial euphoria, but since then this massive gap between the soft data and the measures of real economic activity. That is the whitest in six years, that exuberance is probably peaking. Goldman sachs cites the Retail Investment preference for stocks over bonds has almost fully reversed. This tells the bigger story at play here. Confidence may be starting to wane, as well as the reflation trade. Functionhe gg on the bloomberg. Trading flows in fx markets have been erratic. Traders seeking fresh cues. The dollaryen was closely tracking treasury yields. Now we are seeing sovereign bonds in asia following treasuries higher, the australia kept cash rate steady at 1. 5 , the yield losing seven basis points, but we are hours away from trading in the middle east. What you watching . Yousef absolutely. It looks like we are gearing up for an interesting day. A mixed picture for the most part, moves to the upside in dubai. In abu dhabi, we expect interesting numbers from the company. N saudi arabia, up low volumes, pressure, report sales were car weakening in egypt, the lowest 456 years. Kuwait had been standing after the massive selloff and profit taking, 20 in less than 60 days. That market taking a break. Shery thank you. Lets check in on first word headlines from around the world. Franciscos Court Hearing on tuesday, considering the trump administrations appeal to reinstate the travel ban, saying that the decision to suspend the ban was vastly overbroad. The European Central Bank President has criticized donald trump, saying rolling back financial rules would be worrisome. To the european parliament, mariota drug he hit germanyinst claims that is taking advantage of an undervalued euro. The European Central bank has not intervened in the foreign currency market since 2011, and that as part of the intervention to stabilize the yen. Rishaad the aussie Dollar Reserve Bank of australia cash rates on hold at 1. 5 . The decision was foreseen by 27 of 28 economists. It eases the impact of slower economic growth. Inflation remains below target range, but cutting rates could feel overheated home prices in sydney and melbourne. Israeli Prime Minister Benjamin Netanyahu has tried to drum up support for harsher sanctions on iran. Characterized iran as a menace and welcomed President Trumps imposition of new sanctions following missile tests. Theresa may says she recognizes concerns over iran, but the 2015 nuclear deal remains vital. Benjamin Netanyahu Netanyahu will meet trump next week. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Shery thank you. Chinas lending for january may have exceeded the previous monthly record according to sources citing government data. Tom mackenzie has more on this. We are expecting authorities to curb financial risks. What are we hearing . This is true and likely to raise eyebrows and questions over this deleveraging process that chinese policymakers say they are embarked on. Officials telling bloomberg that new loans may reach or exceed yuan in january 2016, and of course it raises questions then about these attempts, these policy statement saying we are going to tackle leverage, the bubbles in fairies asset classes. Credit expansion is double gdp. Anothergdp is 264 , so worrying sign for many looking at this. To actions, point including telling banks in the First Quarter to take strict control of the loans, and also rates raised. This will be a concern for some. We have got important data fromign exchange china, psychologically critical 3 trillion mark in focus, what are economists forecasting . Right. Ats it has become something of a gauge as to how much pressure there is on the yuan. Now the estimates are for it to be around that 3 trillion dollar level. It may, slightly above the previous month, that is because capital controls are having an impact and the yuan is stronger against the dollar, and the euro and yen are stronger as well. We are expecting that data to break, the number 3 trillion. Yousef thank you. Tom mackenzie there. Lets cross over to one of our top stories, the largest producer of lng looking to expand further, Qatar Petroleum. , one ofmore importantly the most powerful people in the global gas industry, and rarely gives interviews come up here is what he had to say. The successes and learnings areave in qatar significant. We think we can leverage to expand internationally. We would like to see that in the next 510 years, Qatar Petroleum becoming one of the leaders in lng in the world. Would you say there is more appetite for investment this year compared to 2016 . Inwe will invest much more the past, specifically the upstream business and gas and oil sectors. Any specific preference for geographies, africa, south america, anywhere else, or are you looking for Economic Opportunity . We are looking for the most economic barrels, external investments come a investors to come in, and we will be going jointly with some of the most Reputable Companies to do that. You have spoken about your experiences through the Economic Cycle in lng, and when you look at forecast from the iea, this glut in the market will persist past 2020. Isnt that an opportunity to follow the opec lead in terms of Touching Base with major producers like the united states, australia, maybe accelerating this rebalancing a little bit . Isthe gas business completely different than the oil business because you have helen g, pipeline projects, Different Countries producing in different areas. , pipelinee lng projects, Different Countries producing in different areas. So you cannot do that, and what we see is this is a longterm business. If you want to be in the lng longtermyou need a perspective, and if you want to develop a project today and have the reserves to do it today, reduction will only come 710 years from now, so if you dont invest and plan today, you will not have the Gas Production available to you to make use of in the future. Have seen a remarkable recovery in the u. S. Shale industry, and thats bringing a bringinggs online and the u. S. Crude output back up, putting pressure on this opec deal. Do you think they should have been more aggressive about the amount of oil they are taking out of the market, or do you think him summer that they need to extend this further to help the rebalancing . Higher oil prices have done is encourage more producers to bring more oil to the market. The u. S. Gas and oil, the , the shale oiln and gas you have in the u. S. Is abundant, something we can bring on and off very quickly. I think the u. S. Has become the swing producer of our industry, and this is something we have to deal with and we expect it to happen for the longterm come up at this is something that is not worrying to me. I think there are ups and downs in the business that we have to as awith and move on, but business, which you need to control is what you can control, your costs and develop the best reserves you can. Closing question, a new administration in the white , toe, a volatile few weeks what extent does this disrupt your plans for International Expansion, the fact that you are looking at more protectionism possibly and more countries looking inwards rather than in bracing more and more Foreign Investment . For us, what is happening in the u. S. Is internal to the u. S. In theas investments u. S. , we will continue the same plans be had in the past because we see our investments are longterm investments, 2025 the u. S. Has always intoopen to investment being very liberal in that sense. I dont think any shortterm events or political events have anything that will change how are mine. There could also be upside for the donald trump story for natural gas . For the oilhappened and gas business, they have approved some of the pipelines that were on hold for some time, and i think because President Trump is a businessman and as a background, he will promote Foreign Investment and physicist and make it more inviting for businesses to come into the u. S. Yousef that was the ceo of Qatar Petroleum. He also told me that International Expansion would be in the billions of dollars in terms of financing and they would not issue any bonds. All of it will the self financed. He said money was basically not an issue. Stock exchangere operator looking for a piece of the saudi aramco action. We will flesh out the conversation for you. Nz for next, we ask a i the outlook on oil. This is bloomberg. Shery welcome back. Asias regional benchmark has turned a slightly positive, but individual markets mixed. Lets get the details from sophie kamaruddin. Asian stock rally stuttering today after a fourday advance. Trade near a twomonth high, gold near a threemonth high, Energy Shares the biggest drag on the regional benchmark. Ix falling,the top and the nikkei falling as well. Latestrs wait for the foreign reserves data from china, the shanghai composite down. 3 . Stocks paring losses with industrials leading gains. We had the rba holding on the cash rate at 1. 5 . The aussie dollar falling, but now reversing losses, up 6. 5 this year. We, look at the key kiwi jumping. , falling on the yuan in the onshore and offshore markets. Thanks. We are keeping a close eye on oil, Holding Around 53 a barrel. Of moreoff the back rigs coming online in the u. S. When it comes to the shale industry, and of course we have the report we are looking forward to from the iea which forecasts of build in crude stockpiles. Lets get more on this story, daniel hynes is a senior commodity strategist at anz. Read on theur ongoing build of inventories in the u. S. And what that means for the broader crude market. Look, i think when you go back historically, you tend to see a build at this time of year, so we are not overly concerned about it now. With the build up injuring activity in the u. S. , the market is extrapolating that continued build to continue, and i suppose derail some of the good work that the reduction in opec output in particular is doing inventories outside the u. S. , but for the moment, we dont see it as a significant issue, but clearly won the market is keeping a close eye on. Daniel, how confident are you that this deal will hold . Most of the movers and shakers on the ground say yes, it has helped a lot in the rebalancing process, but come summer, and you will have to restart it again because of the oil coming on lined and shaky Global Demand as well. What is your take on the health of the opec deal and where we are at . Look, for the moment, it does appear that producers are adhering to that Production Cut agreement. In fact, some have gone beyond the call and cut further. Certain the from our perspective, the way we see it playing out is this reduction output is less about making the this reduction output is less about making the market, bringing the market back into balance. It is more about accelerating the decline in global inventories built up over the past couple of years. That one point 8 million barrel a day cut extended through the first half of this year, then we think of the global inventory situation will be back to a more normalized level, so that will put the market in a much better position to i suppose with stand ongoing pressures and issues about potentially weaker demand u. S. Output over the longerterm. Its about repositioning the market for a sustainable level, which will Keep Oil Prices relatively elevated. Shery right, but lets factor in president donald trump. Some of his policies could lead to a boost in production in u. S. Gas and oil. What will that mean for prices, specially if you factor in a potential border adjustment tax . What will happen to brent prices . Yeah, look, there are so many unknowns i suppose within his policy, and it is difficult to get a good read or gauge on how things will play out in the been initially, it you could potentially see higher prices, particularly in the u. S. Domestic market, as that additional tax on Refined Products drags up u. S. Oil to that international standard, but longerterm, clearly the u. S. Beenor some time transitioning to a more energy sufficient status, certain the imports have been falling for quite some time. Accelerating,s longerterm, it is a bearish issue for the market to deal with. Shery right, do stick around. We want to continue this conversation on other commodities as well. We will be talking about the political bandwagon, gold enjoying a rise. All of that, next. This is bloomberg. Lets continue discussing commodities with our guest, daniel hynes, anz senior commodity strategist. Lets talk about gold now, paring some of those gains come up it still trading at that level, 1233. Take a look at my bloomberg, the recent rally taking gold above its 100 day moving average. The last two times that happen, we saw gold rally 10 in the following five weeks. Should we be expecting that to happen again . Look, technically it looks good, but the headwinds we saw a late last year and that have abated, has given the price leeway to push forward. From our perspective, demand is weak at the moment, and that will be an issue to overcome, but investor demand driven by safe haven buying has shown growth over the past two weeks, and we expect that to continue in the shorter term. Shery it is interesting you say that, because in 2016, etf flows led the rally and plunge in the price of cold, and when you talk about physical demand, this has not really picked up in the last three years, so how much amandas out there, especially countries such as india wear jewelry demand is high . Obviously,h, well, that banning of the 500 and 1000 affectedes have demand, and we are seeing falls of 1520 at the moment according to data we collect, so that is significant for a major consumer like that. For the moment, investor demand is making up for that, but not to a huge amount over the top, so it will be a slow grind higher for us, but for the moment, that physical market is certainly going to be a headwind. About otherel, what metals . Bloomberg intelligence said it tough to call for other metals like zinc. Has it run its course . Daniel , no, the stealrelated have good demand side environments or outlook at the moment, although clearly there are some concerns about what President Trump will do around u. S. , sots into the that remains a question, but certainly the stimulus measures and china will boost demand for those products. Thanks, daniel. That is daniel hynes from anz. We have singapore offering incentives for getting a piece of the action for the saudi aramco ipo. This is bloomberg. Is 12 30 p. M. In hong kong, 8 30 a. M. In dubai. Amnesty international saying bashar alassads government executed up to 13,000 prisoners. The Rights Group Said the killings happened outside damascus and most victims were Political Prisoners killed under what are called a policy of extermination. French president ial candidate fillion apologizing to voters for using taxpayer money to employ his wife and children. He emphasized the practice was entirely legal. With less than three months to go to the first round of voting, the front runner is trying to halt the slide in the polls. Polls wont make me change my mind. I took my decision. Nothing will make me change my mind. I am a candidate in president ial elections and i am here to win. Philadelphia fed president says march should be on the table for a rate rise from the fomc. He said that he still supports three hikes this year, with the pace to depend on the state of the economy and the fiscal policy of the new administration. He said the fed must ensure it does not get behind the curve. Togoing back on its pledge shut more than half of the countrys metal mines, gina lopez telling bloomberg the land must be given arrest. She insists the crackdown would get the backing of the philippine president , even if it hurt the economy or put all foreign investors. Time would be happy this cut,. Why should they come . You dont want those kinds of investors. We want investors who care about us and not the money they make. The government is supposed to play a balancing act. Rishaad you are watching bloomberg. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. We have the world of business covered. Yousef thanks. Been told by sources that saudi aramco has picked four banks for its first bond sale. Matthew, i just spoke with the petroleum, another example of a large, powerful, influential state owned gas company. When i mentioned bonds, he was surprised. They have the cash flow to finance whatever expansion they need. Why does saudi aramco need to issue a bond . Saudi aramco has a lot of thing on the cards. They are looking at doing at what will probably be the worlds biggest ipo. The government is restructuring itself and trying to diversify away from oil, and aramco in itself is trying to diversify away from oil as well. The company is looking at investing 5 billion into Renewable Energy companies, so some of this money they are looking to raise could go towards that, and also going out to the bond market is part of saudi aramco opening itself up in preparing to be more transparent to investors and preparing to share more information about itself and its strategy. Door to saudi aramco starting to open to international investors. That is part of the reason they are going through this process, getting themselves internally prepared for the sorts of questions they will be asked on an ipo roadshow. That toe are expecting happen next year. Tell us more about how all of this would fit into that huge ipo we are expecting . Matthew saudi aramco in the last couple of weeks has been meeting with banks to appoint Financial Advisors for the ipo. Now, Real Progress happening there. The banks should be appointed later on, in the information that we have heard from the banks pitching on this process is that an ipo could happen in mid2018. This will fit into that process of raising money, of becoming more transparent come of looking to do things in the Renewable Energy sector, so aramco has a overamount of initiatives the next 1218 months, so they will be very busy people. They deftly are. Matthew martin, thank you for that. They definitely are. Matthew martin, thank you for that. Stock exchanges from new york to tokyo are flying for a piece of the action, but sources telling x since aingapores sg team to saudi arabia to court the oil giant. Ours get more from Bloomberg News editor. It is a huge listing, so im not surprised they are trying to get a piece of the action with singapore getting ready, so what are they doing . As you said, it is a big deal. Is four times the size of alibaba in 2014. They are keen to get a piece of it. A decision, but singapore is trying to offer a full package of incentives, including Cornerstone Investment from the state investment theany, as well as singapore government agreed to cooperate with the saudi government on future investments. Things like that. What else is the singapore government and exchange willing to offer to bring them on board . What may be more important than that is the ability of the singaporean aramco to to convince list on an exchange that if you look at the trade volumes compared to new york, london, hong kong, it pales in comparison, so they have to come at them with some supplementary incentives that may not be on the table if they go to some of the other take exchanges like new york, tokyo. Kong, you mentioned hong so singapore has a lot of competition out there. Tell us about this . Timothy we have heard that aramco has received a pitch from hong kong for the ipo, and hong kong like singapore is looking to make an offer that is not just the exchange itself, so hong kong could come to the table with incentives like chinese Cornerstone Investments and similar things that singapore can offer. Ousef thanks, tim lets cross over to this part of the world, Lower Oil Prices have taken the wind out of the sails when it comes to economic momentum in the gulf. The other part is the austerity measures off the back of it which affected bank earnings, which is why we have been taking a very close look at Balance Sheets coming out for the fourth quarter. We are now joined by an additional voice, joining us now. Thank you for coming on Bloomberg Markets middle east. Talk to me more about the impact seeour numbers and how you that road Going Forward into 2017 and the latter part of it. Good morning. Thank you for inviting me on. There are a number of things to look at as far as last year. The key thing to focus on from our site is the operating, slightly positive on the year. ,n the context of the economy we look at that as a satisfying result and a testament to the strength of our overall business. If you look at the Overall Economic situation in the kingdom, there are a number of different factors playing in and the verdict is still out on exactly where we are going. You look at the official forecasts out recently talking tout gdp growth between 1 2 in the nonoil sector that is. If you drill down on the details, December Numbers for cash withdrawals at atms, the point of Sales Transactions we 4. 5 and fell between 6 respectively. Inflation is very low, coming in at 1. 7 in december, and that is even when we take into account the subsidy cuts you discussed earlier, and if you drill down on certain sectors, food in particular, negative territory. Combined with credit card spending, which is up by 7 , to early to call that a trend. Yousef im going to jump in here. Im looking at what the analysts are saying. Threeve three buys, holds, one sell. What can you tell investors that the road ahead is a solid one and you would not see further deterioration in your margins . Looking andt is focusing on the operating result of the banks, the core business veryve is very solid and much in line if you look at the overall picture in the kingdom. , theu look at loan growth that there isnt anything gives me particular reason for concern there. What we did see last year were a a credit environment that led us to take prudent provisions in the fourth quarter. If you look at the stock last year, we were right in line with our peer group, so a month into the new year, so im not concerned about shortterm swings. Lets see what will happen over the full year. Im pretty sure we will be in line with the peer group. Shery when investors are concerned, the fact the board has recommended not to pay a dividend for fiscal 2016 to so thisyour finances, is giving a different signal to investors. Is there going to be a change here . Beno, i think we will looking at, the board recommended that on the basis of the overall result last year, the economic environment we operate in, so a very sensible decision, and what you will see when you see the full numbers later this year, later this month, our capital base as a result of that plus a base in the fourth quarter, it would look very healthy and we have seen a significant jump in our capital base, so that is on the positive side. Shery when you say you will focus on diversification of income sources and expansion of business, what exactly are you talking about . So that it actually is a strategy to goes back about three years now where we have looked to diversify the business overall, in particular growing the retail part of the business. If you take over the last three years, we have increased our network by 50 , increased atms time, , doubling and that and the overall contribution on the bottom line on the Retail Business now is between 20 and 25 , so that is a significant change to the bank you looked at 34 years ago, and it has been a conscious strategy to diversify the revenue base, and diversifying the funding base of the bank, and having a strong Retail Business is part of that. It feeds into the question you asked earlier in terms of the focus Going Forward. If we look at the demographics in the kingdom, a very young techsavvy population, 70 under the age of 30. Some optimism there for sure in terms of the demographics and potential upside come up what about your , how much thatdi is and how you looking to result that . I wont comment on any particular but overall, we are comfortable with the credit position we have. That goes for the funding and capital aspects as well. Overallook at the concentration to individual sectors, we are comfortable that they are well within our risk parameters, so we are we are with any particular credit areas , we are very comfortable. Shery thank you so much for coming on Bloomberg Markets middle east. The managing director there. Business signals, china smartphone users hang up on apple. We will look at what they are using instead, next. This is bloomberg. Shery welcome back. Youre watching bloomberg. Im shery ahn in hong kong. Yousef and i am yousef gamal eldin. The latest business flash headlines, the National Bank of abu dhabi sources have told us 60 senior managers will run the new combined company, the emirates two biggest lenders are working to complete a merger worth 175 billion. Abu dhabi wants to compete with rivals and bolster its ability to lend as it grapples with Lower Oil Prices. Foreign investors bought more than 250 million in egyptian treasury bills and equities in a single day, the moves of further sign of growing confidence as egypt secures that trail billion dollar loan from the imf. Investment slowly returning since the pound was floated in november and the currency lost half its value since then. Stock exchangear working to implement shortselling by the end of this year, following plans by abu dhabi and saudi arabia. Most shorting is done by hedge funds and institutional investors. Discussions on the benefits of ipos with local familyowned businesses are bearing fruit. , we haveu know, qatar a lot of familyowned companies in the oil sector, and if i can convince them to come, and we to trying to find a way bring them to the stock market, and we will soon in the next three weeks a listing of a familyowned company that was closed last week. To get moreou want context on this story, pull up 5788. Hart, g btv it shows net inflows into the qatar exchange. Again, now with the shortselling plans, it will be interesting to see if further momentum builds in the light of market volatility. Tory right, lets head over china, because the big question right now is whether apple is losing its grip on that market. The latest numbers from ibc show the tech giant had its first annual drop an iphone shipments there. Stephen engle is here with more. Apple is losing that piece of that pie . Be looking atan people who are in the replacement cycle and tended to be early adopters. They like the cachet of the apple and the highend features. Waiting for the iphone eight. Also, newer screens expected from that, but what has happened on the fringes in the meantime is the domestic players taking over the top spot, like oppo, huawei, vivo, lenovo. Take a look at the top three, 48 of the, vivo smart phone market, so nearly half of the market. Look at that unit growth in 2016. , 122 han doubling, oppo up. Apple sinking 23 in unit growth , 9. 6 market share. Yousef what about Companies Like samsung . It wasnt too long ago they were among the top vendors. What has gone wrong . Stephen the numbers for xiaomi do not look great. Shipments were down, 40 in the year, down 36 . These competitors like oppo, which offer higher into features in the phones like curved or flexible screens. They have been outselling. They also have a widespread Retail Network where xiaomi has been online and tends to be cheaper phones, so you have to keep your eyes in the Rearview Mirror to keep an eye on the competitors. The darling upstart, but is starting to slip back. Samsung is not even in the top five. Shery cut throat market there. Coming up, the end of the month long corporate drama after tata y from thecyrus mistr board. This is bloomberg. Shery right, welcome back to Bloomberg Markets middle east. Lets talk about tata, the boardroom soccer has finally come to an end as cyrus mistry was officially ousted. Trustees and shareholders approved the removal of the companys fallen leader. Our conglomerate reporter has more from them by. And months ofs this corporate drama going on, it is finally come to an end. Tell us what happened. Yes. So it has finally ended in terms of the corporate soccer of it. We still have to see what the courts say, but for the moments, cyrus mistry has been ousted from the board of tata sons, a decision that was called for by the trustees, who control about 66 of tata sons, which is the Holding Company of indias biggest conglomerate. Right, and also tell us a little bit about mistry saying than 17 billion in writedowns for the group. Yes. So that was a letter that mistry sent a day after his shock ouster in october, where he said the company faced all these writedowns, and those issues are still unresolved with the various group companies, those , thes, but for mistry battle will remain in the courts for the moment. Us af why dont you give better sense of what exactly the road ahead looks like in terms of what to expect and what is likely to happen from a legal standpoint . So mistry has filed a case at the National Company law tribunal, where he is arguing that his ouster was an oppression of minority shareholder interest, and they refused tourt prevent his ouster and they are hearing the case, and that case will come up for hearing after the middle of this month. Once the court takes the decision, they may see what his for the moment, in terms of the corporate battle and his board seat, that is gone for now. Shery right. We will be looking forward to what happens there. Joining us from mumbai with the latest on the corporate soccer. Aga. Theai starting to trade, sensex down. A bit of a mixed picture for regionalkets, the benchmark swinging between gains and losses throughout the session, not clear direction out there. Unchanged as we see the japanese yen losing ground and reversing the gain in the last session. We saw this rally as haven asset plays, the yen writing to the highest level since november. After that, a slight reversal, but still around 111. 92. , we areshery ahn looking ahead to earnings from egypt to the united arab emirates. That will be in focus for the next few trading days. Aftern eye out for qatar comments from the ceo of about shortselling Going Forward. Thats all we have for this edition of Bloomberg Markets middle east. This is bloomberg. Francisco Court Hearing on tuesday will consider the trump administrations appeal to reinstate a travel ban. The white house says that seattles judges decision to suspend the ban was vastly overboard. If the administration loses the appeal, the case will go back to the seattle court. Aussie dollar spiked after the rba was at a record low. If thethe decision was foreseene economist we asked. It comes as rising Commodity Prices ease the impact of slower growth. Inflation remains below the target and may further