Burst. But first, coming to terms with an attack in egypt that left 300 people dead. Of the sears this could be in a function point. A is a truly shopping truly shocking event. Think the thing you have to remember is egypt has gone through a series of proposals on the political side as well as i thinktreet for now, we should view it as an isolated event and see where it goes. They will clamp down hard on this. I think we should take a moment and see where things progress before jumping to too many conclusions. The question is how should investors should look at the story. Market sold off. Egyptian assets remain firm. It is an interesting one. If you look at it and go back a year. You have to view this as a timeline situation. Few foreign, very investors had an appetite for egypt. Bitsecurity situation was a of a mess. Last october or just over your go, 20 billion dollars. Today, they are 36 billion. Half of it has been dispersed or approved something to looking good. ,ven if we talk about ourselves we have participated in both and on thecurities fixed income side. We have participated from august onward in the local market. Every week, there are two treasury options on tuesday and thursday. Interestingly, today is the ninemonth auction. That and be a key month to look at in terms of foreign participation. Yield last week was 18 so that will be an interesting one to watch great we will watch that for sure. We know that the egyptian president has already reshuffled his top security. That thesee chances Security Issues become a distraction for him and maybe he takes his eye off the ball . That danger is always there. If you look back to the other story, they have got a similar situation in terms of security. One of the things that helps pakistan has been improving the security situation. That is one thing that agrees with you. See if where we have to this remains and i slid event or there were are more followups. There was zero negative reactions terror attack. I asked the ceo of Renaissance Capital whether that meant drawn to have to be fixed and when it comes to egypt. Yesterday that is a very important point. Uncle messieurs have attempted to ignore the president. As said as it sounds, it has been going on for quite some time. Thick skin might be one way of putting it. Isolatedore of an territory and hope it will sort itself out. Are Foreign Investors going to react differently when the market comes online today . This is the most violent incident in egyptian history. The way they are looking at it now, some of them will be putting more money into the market. I dont think youll see money really coming out of egypt on the back of this. What has been happening with egyptian stocks . Stocklly, the Egyptian Exchange story is one of the few remaining positive patches in the region, which is filled with some of the worst performing stages in the world. Almost 30 ocks up year to date. Performance above the flat line. How much more meet is in the story . Egypt isds the fact the strongest in the region. If you look at the earnings season, it has been very strong even through the consumer sector. It is showing very strong signs of recovery, so if anything that is fundamental. You have the recovery story translating into results. Has anything change your view on the other markets like qatar . Are you kidding interested in either valuation . Attractive. Ons are political the situation remains the same, basically putting money to what about the rest of the gulf . It is showing a lot of positive sign. If you look at the Marcus Thomas it is actually switching. That was the ceo of Renaissance Capital. , jay powell saying there is no sense of an overheating economy just yet. We discuss that next. Welcome back to the best of Bloomberg Markets middle east. The fed chair nominee jay powell said the case for raising rates is quote coming together. He says the economy does not appear to be overheating. We asked the founder of ht research if there is anything that could derail a rate hike. Theres only one thing i could think of. That is the pce coming up tomorrow. Below, that or could sway the fed. Again, there is an outside chance here that if you have a weak inflation, the fed will hold the fire for now. This issue of a flat yield curve, many have put it off as being down for other things. Had he subscribed to the view that it is not signal a slowdown ahead . The yield curve has flattened and we are a little bit more than two rate hikes away from men and rooted yield curve and that is usually a precursor of a recession a few months later. That is something we have to watch for carefully. I think that is the most important data point. Another one is high yields which have widened. These yellow flags that you have to be complicit of and it looks like 2018 will be a lot more volatile than 2017 was. We put that yield different on the bloomberg as we speak and the spread between we have added gold futures. As it comes down, it could be a headwind for gold or it a lot of discussion about the world post. Hiking rates, reducing the Balance Sheet do you think the fed is making a policy error question mark error question mark policy error . That is possible. Which seems to not want to materialize and i think the reason for that is strong disinflation. The other one is robotics and automation that replaces labor and excessive debt levels and Interest Rates go to high, the feds will be too high. Taking it to a certain extent and i think the fed will on ratebe dependent hikes in 2018. How convince are you that we will get something meaningful in terms of tax cuts . Possibly the biggest source of upside as we had to 2018. It is a strong likelihood that some type of tax reform will be pastorate the question is, how much of an impact will it have . Not had the, it has same impact as monetary policy. Policy in the 1950s had a lot of Infrastructure Spending and recessions. Im not holding my breath when it comes to this. Bitcoin goes ballistic, reaching 10,000 for the first time. Is this a bubble waiting to burst or just the beginning . We discuss that next. This is bloomberg. Welcome back to the best of Bloomberg Markets middle east. From many investors who think we are into bubble territory. Letteres really one for one four letter mo, fear of missing out. Next . T is people are looking at whether u. S. Regulators are going to improve futures, which of the coinilestone acceptance and also bitcoin acceptance and whether banks will offer that. I think what people are looking at is bitcoin really going to go mainstream . Absolutely, thank you very much. He is still with us over in singapore. If you ask about the corn, what have you told them . Everyone is talking about it right now. It seems bitcoin is in a bubble and if everyone talks about the it would gouess is higher before the bubble bursts. I think at the end stage it will be thrown in the towel and Everyone Wants to get in. That could be a turning point so you can control the prize the of the futures market. You have the futures and 500 times more futures on the line. The same may happen with bitcoin and then the market will be more controlled. The team here at bloomberg makes an argument that human psychology is ultimately going to bring those valuations down. It is only human nature to put itself at these levels. We have to rhetoric, this is not a normal market. How much more upside could we see before the bubble burst . S . That is anyones guess. 20,000 or to 100,000. Nobody really knows. Ittral banks still look at different from country to ntry, but want to bitcoin once bitcoin gets to a certain , then you will have directions could be directions could be anything from clamp down to acceptance. Maybe even creating their own [inaudible] have been labeling bitcoin digital gold. Should investors put their securities in one of the oldest or newest . Expert who chipped into the conversation. You see a lot of money coming in. Im not sure what is driving it up. You see people taking money off the table and theres a lot of money going into the crypto world. We see it in the longterm going up, but it will reach saturation at some point. We are talking about volatility. I have to ask the question, so much motility in bitcoin. Does that make it a stored value . 250think theres about billion now in cryptocurrency, so in that respect it does make it a stored value. Compared to gold, it is a baby. I think theres about 8 trillion of physical gold in the world. Im wondering if we will have to put a divider between both of you. Let me see if i can get more reaction from you both. Is ounces ofind me gold required to buy a bitcoin. I feel a little bit silly every time i bring up this story. Also, if you look at the amount of bitcoin that will be in , the coin would have bitcoin would have to gold. 350,000 to equal what do you say to that chart . One of the things we talked about, it is new. You see people that are looking at gold and saying even Digital Currency is better way. It is a faster transfer. It is something people are as you and that can see, it is succeeding. Just to show our viewers what is happening with one of the newer cryptocurrencies. Rivalsls its two biggest and bitcoin cash has quadrupled. Either has been the best year today to date. Associate withld bitcoin and now there are others out there. Are we going to need consolidation . Onlyat is not the cryptocurrency out there. While bitcoin was designed to be youth. E, tokens. Get utility theres lots of utility when it comes to the new cryptocurrencies. You have things outside of traditional borders and other utilities that can be used to buy Services Available in the future. What about the security question . Last year we saw a 30 million hack by that said, our member gold in the 1930s. The government confiscated gold. How should we be thinking about bitcoin and gold as a safe haven question mark safe haven . Gold has been a safe haven for 5000 years. 1990s,er in the late the Younger Generation in india saying they would not be interested in gold. Trust me, every indian that gets married has a lot of gold. Is that safe havens you. Say gold was the cryptos. I have no problem with bitcoin or the other cryptocurrencies because they are an alternative to paper. Its not an alternative to gold. Love is the instant transfer of ownership. You take gold and added block chain, then you have an interesting topic. Collect some have been doing that. Reaction to the hacking. I think it is on the mind of everyone who owns their own currency or an investor. If you own bitcoin, you can hang on to your own key. Ofis about the security where your bitcoin is and who is providing or services. If you notice, the hacking is taking place at individual companies and bitcoin is being securely to the wrong person. Debt downgrade. South africas what does that mean for emergingMarket Investors . All of that next. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Welcome back to the best of Bloomberg Markets middle east. We begin with Market Investors south to news that south africas that score has been cut to junk. We begin by asking whether a move by moodys was only a matter of time . I think it is natural politics again. You need a big change in south africa on the political side. The sores of corruption are still there and that is affecting the economic outlook. Investment is down to historical lows in terms of investment. Im talking Real Investment and fbi. Youre not going to have any upturn. How do you look at the emerging markets and some of the developmentsrecent from south africa to turkey and others as well . It is fantastic. The outlook continues to remain on a fundamental basis, pretty solid. Just like i was referring to earlier, most of the projections keeping that remains there. From my a political point of pakistan you just got on the roadshow. This is a country which has had problems in the past but has been from a Security Point of view, very stable. 90 have the issues coming up over the weekend, as well as the finance minister has just been replaced. To derail things a little bit, you will have to watch. That is one of the things that always remains a risk. Speaking of risks and the rally we have seen in the space so far this year, i put together a chart that shows ,mergingmarket stocks currencies and a bloomberg dollar. All of these are up, but the bond space absolutely remarkable. Im old enough to remember two decades ago when a bunch of african countries were burned by their overseas borrowing. In terms of those liabilities, should we be worried about the end being able to pay that back russian mark pay that back . Somember, e. M. s were sold the 2017 story is a story about europe which is growing again and a story about e. M. s. Remember, what we missed out is china, asia and the developed world. What china is doing is nothing short of phenomenal. We look at egypt, pakistan and much of africa, turkey as well. The real story of emerging markets is asia. Asia is keeping up. Look at all the countries that into chinasng economy, they are doing extremely well. The debt side is understandable. You have record low Interest Rates on a global basis. They can tap the market and the end has not pulled back. Benefiting what about the soft dollar . That is the interesting thing. Part of the reason that e. M. s have struggled historically or if you go back in history, as erode, emerging markets continue borrowing bigtime in dollar denominated upt and as Interest Rates go , that is where they struggle because revenues are coming. Look revenue, you have to pay in dollar. This time, a lot of the countries have managed to get the Structural Reforms on their side. Think increasing dollar will not hurt them as much as it has in the past. Secondly, the absolute levels of where Interest Rates are much lower this time so you will not get to the high digit levels anytime soon. This is part of the emergingmarket conversation. We are watching the ongoing development. You were saying earlier you disagree with some of the other comments. We saw is much more significant. It is simple. You look at the rise of isis in syria and iraq. We are talking about 30,000 to 40,000 fighters. Those are likely to spread across the region, so expect trouble not only in egypt, the other surrounding countries. I dont see this as an isolated incident. Willhappens is they disband and then terrorist attacks all over. Is for most interesting once, we have a Political Coalition between saudi, uae, turkey, egypt and others. This is going to galvanize the efforts of all those countries to fight ext extremism and thata positive thing for the region. Up next [no audio] welcome back. One of the most high profile suspects in saudi arabias crackdown said to top 1 billion. A prince was released tuesday and at least three other suspects have agreed to deals. I asked the head of macro strategy if these deals could be a catalyst for the kingdom . It would be and it will go online with what the saudis have been saying. We are committed to Structural Reforms and have taken the adjustments needed towards transparency and men show a strong sense of commitment by the authorities. As you have more positive news this will uplift markets and put market. T back on this is year to date. Food and staples really standing out. Consumer services down 27 . A lot of the selloff comes from stocks that are said to be linked to some of the people arrested. That is why we could see pockets of upside. How would you see positioning for these sectors . Go andink investors will zero in on fundamentals on these sectors. It is an economy that is in growth mode. It is still investing in growth. I think foreign Investor Sentiment should pick up in all these factors should pick up over the next year. Story other interesting coming out of egypt, aggressive reform. It has increased its guidance 20 in 2018. Are you as positive as egypt question mark we have seen just yesterday the egyptian andorities take back deposit caps that were there on foreign importers. That effectively removes what is seen as the last step that has been applied and goes in line with what we have seen in terms of improvements with the agreement with the imf. Improvements have been made over subsidies, cuts and spending and we are starting to see inflation in egypt start to level off. I think the sectors to watch out for are the tourism sectors which could say there might be an impact over the last week, but traditionally events south of seen i do not have much percussions repercussions. What is the biggest risk . Is it the availability of u. S. Dollars . In terms of liquidity, the biggest risk is deviation from reforms. They have been moving forward on that. The last step is further removal of energy prices. Blipmight be one potential but beyond that, the addition egyptian authorities committed to reform in the long run. Spoke at of this weeks crucial oil meeting and asked for his response over the Production Companies are it i think it circles around the ideal oil price. Russians have been pushing back, saying if we cut too much reach anly they will agreement potentially for cuts into the year, but with a caveat that those cuts are revised in june of 2018. Geopolitical tension we have seen. Im thinking a run, qatar it is e a ran a the oil prices are becoming more sensitive to political tension. We are starting to see that materialize right now so political tensions are feeding into oil prices during the would this up on a chart. Highis near a twomonth and we have circled some of the events. On are looking at 4. 1 monday. We might not get what the market is baking in around the ninemonth mark. In terms of where the story goes, the exit strategy is the other unknown.