Nation can survive the gulf crisis. Opec and russia saying they will maintain curbs through 2018 and ready to cooperate beyond that. We spoke exclusively to the Saudi Energy Minister and his russian counterpart, Alexander Novak. We assume cooperation between our two countries is longterm, and regardless of whether in terms of the markets, market stabilization, or other areas. Our cooperation is based on agreements we signed in china. Over the past one and a half years we have been implementing this, we have shown a lot of success. We had a successful run. Yousef that was Alexander Novak speaking. Why are they already talking about 2019 . The Saudi Oil Minister opened the floodgates when he said he did not think the market would be rebalanced by the end of 2018, possibly 2019, and this talk of could the deal be extended into 2019. For opec and nonopec, it is status quo and they are looking at what happens when the deal expires at the end of this year. The Saudi Oil Minister says they hope they dont have to extend cuts, but are open to it. The Saudi Oil Minister sitting down with the Russian Oil Minister Alexander Novak, together they gave a joint interview. We hear sometimes they drive in the same car when they meet. They could not stress the fact enough they want to cooperate in terms of rebalancing the market. Take a listen. We need to have enough producers ready to intervene at the appropriate time to adjust production to deal with fundamentals and market shocks. In the old days, it used to be opec. Today, given the fact the market is approaching 100 Million Barrels a day oil demand, opec is about 54 court so, so we dont feel opec alone can do it. That is why we waited until we had enough nonopec countries led by russia to come to gather in late 2016 and announce the declaration of cooperation that started in january 2017. That is the main line, the Saudi Oil Minister saying opec alone can not do it sitting next to Alexander Novak. It looks like the relationship will continue beyond 2018. Yousef the voices in the market urging opec to face market realities will take a lot from that iea report on friday. What were the Key Takeaways . It definitely was a discussion point. They understand. They read the report. They know what people are saying about them and what is happening in the market, but he made it clear, i am not concerned at all about shale. He said you need to look at the net picture. While we have growth in u. S. Shale, you have to that with the declines in venezuela, canada. The iea report says they are seeing explosive growth in the u. S. , but he is taking it with a grain of salt, he said. Yousef saudi arabias Energy Minister traveled to davos, where he said it would take place when the time is right. That appears to be the first crack in the kingdoms plan. Saudi aramco ceo told Francine Lacqua the decision on where to list the company is still being made. As a company, we are ready to be listed in the second half of 2018. The Transaction Team that will carry that is currently waiting for the decision from the shareholders the venues that will be listed, because there is work that needs to be done in preparation for listing on the Stock Exchange, definitely in saudi arabia, but outside saudi arabia. As a company, we are ready. We are hopeful we will be listed by the second half of 2018, but it is all depending on the decision. Do think the government is nearing an agreement . What kind of things are they looking at to make a decision . Where we are going to list saudi aramco is a major contributor to the gdp of saudi arabia. The decision is not like listing in the company. The Government Committees are looking at listing saudi aramco, different Stock Exchange decisions, and each need to be evaluated, then ultimately somebody needs to come up with a decision on the pros and cons on each listing venue. That is a lot of work considering the size of saudi aramco and what it means for saudi arabia. Is this a choice between two things internationally, or listing internationally or only domestically. Definitely we will list domestically. We want to list internationally. That is where the consideration is happening. We did a lot of work on the different Stock Exchanges, london, new york, tokyo, hong kong, and each one has its pros and cons in terms of them. The committee is looking at all that information. The decision will home into course will come in two course. Is there a risk this is not a global listing . This was sold as an international listing. Nothing about listing only in the kingdom or going back on saying the committee is still evaluating the option of listing in the kingdom and internationally. What do you think the committee is looking at . Is it regulation, advantages of negotiating with the Stock Exchange . A lot of the work is done by us and our consultant in terms of the different Stock Exchanges and information, but you need to appreciate the information passed to the Government Committee looking at all of that. There is a lot of information. And a lot of views. And all of that needs to be looked at. The decision will come into course. When you look at the listing and the pros and cons of different exchanges, if this is too late on the international stage, do you think it will be less attractive for Foreign Investors investing in saudi aramco on the tadawul . A lot of things will happen when we do the roadshow. I think a lot of investors will be interested in aramco regardless of the decision. A lot of information will be sure to our prospectus. We know we are competent how strong is saudi aramco. We know the performance and costs, Environmental Performance of the company, safety, and technology, so we are not concerned about the impact on saudi aramco, because we are confident the Company Performance and all of that will attract a lot of attention. Yousef up next on best of Bloomberg Markets middle east, qatars economy minister brushes off the saudi standoff and says the nation and business are doing just fine. This is bloomberg. Yousef welcome back to best of Bloomberg Markets middle east. Qatar can survive the impacts of the embargo forever. We are always ready for dialogue and to solve any issue on the table. Any agreement applies to all. On the other hand from an economic point of view, despite what has been said in the beginning of the embargo, the qatari economy will collapse in a few days, the qatari economy did better than expected and also in the 2018 forecast is even the forecast is better. So we are opening up our economy, and we open a new destination for our goods and trade, and also we expected all our contracts with even the blockaded countries when they blocked everything from qatar. Our gas for example is still flowing to the arab emirates, respecting our contract. How much has the government had to spend to mitigate the effects of the blockade . At the beginning of the blockade we had to interfere to help the private sector to enter a new market. It took around 23 weeks, then it is all the private sector. We opened a new route which makes it feasible and we can import goods from all around the world, like turkey, all patient and the whole world. Youre saying Government Support was minimal . It was minimal at the beginning. How much in dollar terms . It was merely logistical costs. We stopped this and now it is fully private sector and now it is business as usual. In fact, we open up new routes, new markets. Would you say the blockade is failing . Definitely. From an economic point of view we cant live forever without those countries. Yousef the ceo of doha bank said the company can grow despite the crisis. That came as it put out earnings in line with estimates. He told me that dividend may come under pressure. We have done a profit of 1. 1 billion. Our expansion is 3. 5 to 93. 5 billion. Our loan book has gone up. Deposits have grown by 6. 7 . Yousef the operating conditions have been challenging to say the least. Has your liquidity situation improved . How are your deposits holding up . The loan to deposit ratio has been 100 . It has improved a lot. The Banking System has improved by 10 . If i looked at combined systems, 10 deposit expansion come so it is also the stability of the qatari Banking System. Yousef what kind of Profit Growth can you achieve for 2018 . Your colleague is looking at 5 to 7 . Is that something you can match . I think so. They have new accounting rules. The funding has to be procured from multiple sources. Still the blockade is on. If the crisis gets diffused, many will have their outlook turn positive and that will be a different ballgame. Otherwise, the cost has moved up, so that is trekking the net interest margin. Otherwise, 5 , 7 growth is possible in terms of profitability and the market momentum, the project expansion is on. Qatar has come out with a good budget. Nonhydrocarbon growth will contribute. Yousef what about the dividend payouts . Will those be held at roughly the same level . It is that what you are targeting for the year, or there could be a reduction in the payout . I think it is better to be cautious in the coming days. The banking Business Model is changing. The dividend payout compared to the rest of the world, the qatar and gulf states are generous. We have to manage it through the risk profile, and the dividend is likely to go through a bit of a downward trend. That is the momentum i see. Yousef are you planning to issue bonds for q1 and q2 . It is likely to be. The government itself will fix the deficit by borrowing. As of may 2016, they have not borrowed. Commercial banks can look at opportunities to see how we can bring in longterm yousef up next on best of Bloomberg Markets middle east, where do unpredictable oil prices and the weakening dollar leave fixed income strategy . This is bloomberg. Yousef welcome back to best of Bloomberg Markets middle east. We have talked about the risks for bonds when banks withdraw liquidity. For the region, it is an oil play. A lot of commentators are expecting low oil prices. They were not expecting oil prices above 55 a barrel. We had an adjustment in gcc economies in sources of other income. On top of that, we have a Higher Oil Price, and this has an positive for regional bonds, particularly on the higher risk spectrum, and outperformance has been bahrain and oman. Yousef we put up a chart, 4645. The total return index, and we have added this for perspective, total return for emerging markets. A story of underperformance. Even compared to a regional gauge would show outperformance. Where do gulf bonds go from here, in a time of shifting Global Market dynamics from the withdrawal of liquidity to the Higher Oil Prices you pointed out. Those are not trades that happen every year or two. Those are some major inflections. You need to break down certain bonds in the region. If youre looking at uae bonds, there are is little margin for those to absorb credit spreads as rates go up. If you look at bahrain or oman bonds, there is a larger buffer in a Higher Oil Price environment. There are two sides. If rates to go up, that will be positive. It is an indication of growth in the Global Economy, meaning more demand on the oil side that should support the oil price. That would the good for the highyielding bonds, but not good for the lower or higher grade bonds, i. E. Abu dhabi. You have seen the outperformance of oman and bahrain and the underperformance of abu dhabi bonds in 2017. By and large on the volatility, you have seen outperformance by regional bonds than International Emerging markets. Yousef we have seen the story of oman strong in 2018 with the issuance. Do you expect other sovereigns to follow with that kind of enthusiasm . Is this a good time to issue with oil where it is and other variables . I do think it is a good time. We could be in for a bonanza . Oman has significant funding for 2018. They came out and had the demand and took 6. 5 billion out of the market. That has performed very well in the secondary market. What they have done is they have funded themselves for 2018. Investors know there will be limited issuance from oman in 2018. We have other sovereigns lining up. Saudi mentioning 20 billion here it abu dhabi funding in the first quarter. Qatar sending out an rsvp. So everyone is trying to get in on Higher Oil Prices. There is a lot of demand out there. Yousef what do you make of this weaker dollar story . Pretty much everybody struggling to get their head around it. We are as well. You would think you would see a stronger dollar with higher interest rates. There is speculation that there is a change in Central Bank Activity away from the dollar as one of the reserve currencies, but we think that is at the margin. The dollar weakness may be symbolic of maybe Donald Trumps presidency and some of the erratic decisionmaking there, but ultimately investors are looking for yield. So as we see yields moving up, you will definitely see investors rotating into buying treasuries has an investment. Yousef at what point does the weaker dollar become a problem for the gulf . I think it is not a big issue. I think they were looking for a weaker dollar, especially in dubai where you rely on tourism and trade. It is great. The weaker dollar has helped those issues for many of the gulf countries. Yousef up next on best of Bloomberg Markets middle east, downturn talk at davos. Global ranking ceos warn soaring stock prices may be stoking complacency. Investors could be wrongfooted by rising rates. Are they right . That is next. This is bloomberg. Yousef welcome back to two best of Bloomberg Markets middle east. Global finance executives warned of parallels between todays soaring stock markets and precrisis years. Speaking at the World Economic forms meeting and davos, the leaders fretted that the strongest Global Economy since 2011 was leaving Financial Markets complacent. I ask one strategist whether he agreed. I must say that as long as Economic Data points north, which is positive, i think we are likely to see more risk on or carry trades in Financial Markets. We can see in terms of their currencies face, as long as the cyclical synchronize Global Recovery picture remains intact, the dollar is likely to outperform, including asian currencies. Yousef lets set the scene as to why there is the concern that valuations are stretched. This is a fabulous indicator that incorporates 18 metrics across a broad range of markets, and this is the level we are at. That is the Risk Appetite we are pointing towards. What is the biggest risk here for these markets . Yes, no doubt there is a lot of risks in Financial Markets, whether technical indicators suggest Asset Classes are overbought, or whether the potential negative impact of trade protectionism behavior, whether or not Central Banks are withdrawing liquidity that could affect sentiment, but we are looking at data and economic indicators. We are looking at exports and asia. As long as they remain above trend, we are confident the positive Global Outlook remains intact. You look at financial conditions in various parts of the world, the u. S. , the eurozone, and japan, where market speculation is the boj could be the next bank to withdraw stimulus, and all financial conditions in various parts of the world remain accommodative, so we are confident the positive Global Outlook remains intact. Yousef the of their big risks that came from decisionmakers was the possibility of an escalation in protectionism. Why dont we listen to some of the voices. Protectionism historically has never been good for trade and growth in the world. Protectionism is not a good thing to apply in this world for open trade. I think are have to be some corrective measures, negotiations, renegotiations, but i dont see anything leading to significant protectionism. We are always concerned with protectionism. In order for canadians, or citizens around the world, to see the benefits of trade, they have to see it themselves personally. Obama had solar panel tariffs. This is not a new thing. I thought it was wrong when obama did it. I think it is wrong when trump does it. It is bad for the environment, the american economy. It will not change our approach. We are generally free trade. It will not change of direction developing solar projects. Yousef our guest is still with us on the program. As you heard those decisionmakers talk about protectionism and tariffs, how does that fit into your risk radar . Are you making it a priority, or is it just more of a flash in the pan, more rhetoric . This is a risk markets have been aware for some time, and perhaps digested into the price. Overnight we have seen the u. S. Duties on solar and washing machines, and i think markets are still up, partly because the duties are slightly less than what markets were expecting. So far right now we are not at least seeing any retaliation measures by various countries. The ongoing talks on nafta will be crucial, but at least we are encouraged that 11 countries will sign the amended tpp and march, so as much as there are risks on the horizon, there are some bright spots in the world. Yousef lets shift to emerging markets. S p Global Rating says the balance between negative and positive outlooks on the top 20 emerging markets sovereign ratings has improved. I began by asking about china and whether authorities have done enough to address the nations deficit situation. No, not yet. We have lowered the rating on china, which is still high. This was on the back of concerns for Financial Stability if this credit boom, which if you look at it is the largest in history in financial terms they have been trying to slow it down for some time. My expectation has been after president xi jinping gets his new mandate and is enthroned to a more probable position that they would step up the measures to in this balancing act between growth on the one side and stability on the other, so i still think we have not seen that sign a want to bring growth down more quickly to more sustainable levels, so what is true is that credit growth has been declining, but it is still growing, right, so people convolute that and say credit is going down. No, it is the rate of growth that has gone down, but the overall ratio of indebtedness continues to inch upward. Yousef the key conclusion from your report if you had to pin it down to a few sentences would be emergingmarket resilience for the most part in a wave of normalizing rates for now . Mostly, mostly. There are lots of shades of gray. Remember all this talk a couple of years back . Many of the fragile fives, which probably never belonged in the first place, like brazil, they have used that time in between to prove their defenses. There is this wide gulf between those that have little to fear, which are countries with high savings rates, mostly asia, and those that depend a lot on capital inflows, and therefore those capital inflows become less affordable going forward, not that they are close now, but more expensive a Central Banks normalize rates. They will have many more challenges at hand, and the number one of the big sovereigns is always turkey, which depends on capital inflows more than any other large emerging market. Yousef egypt and south africa, how do they fit into the broader equation . Who is in a better position come and especially egypt with the reform process . Egypt depends critically from capital from abroad. What has improved recently, and that is why we have a positive outlook on egypt, is the Reform Program seems to get more traction and is supported by the imf as a credibility anchor, if you like, but those funds still need to come in. There are external deficits to be funded. There is still a huge government deficit to be funded, so we are in the early stages of a longterm Reform Program. We think egypt is in those countries that have more risks. Much of egypts debt is funded through the Banking System. If there is a crisis, it yousef very briefly, we could have more downside on the Credit Ratings from your competitors when it comes to south africa. Your view has not changed . Thats right. We lowered the rating last year. Yousef there is positive momentum in the story. Maybe there is more upside . May be, but nothing has happened yet. We are not in the transition yet. We have had a leadership selection of the anc candidate will which in all likelihood will become president. We are still far away from having a clear outline on what policy will be. This is not black or white. The anc needs to bring the factions into government. We will wait for that. Yousef up next on the best of Bloomberg Markets middle east, saudi arabia set to surge. Why the imf thinks there will be a good than expected boost to the kingdoms coffers. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. The imf this week raised its growth expectations for saudi arabia, seeing gdp expanding 1. 6 , up from 0. 5 . The imf thinks growth will accelerate to 2. 2 in 2019, helped by stronger oil prices. I got more on that. To a large extent brent at 70 is a game changer for saudi. The imf provision is widely expected. Now the question is what will drive that growth. In 2018, no doubt, government spending. We have an expansionary budget in december announced, 6 increase year on year, focused on infrastructure. However, we should not expect a revival in Consumer Spending. A lot of reform has taken place in saudi. You will see the vat levy on expat dependence and other subsidies will cost saudi households roughly 55 billion. You will see Consumer Spending subdued in 2018. I also dont see private investment will take the lead shortterm. Yousef we put up a chart what is happening with saudi economic growth. This is 7273. Saudi gdp back to 2011. Those are gains. Growth story, but then as of 2017, if you saw a contraction in the saudi economy, then brent crude there. In terms of sentiment, i want to get into what you said about private investment. We have an anticorruption probe. Investors i have been speaking to have been worried this probe come even if they are trying to make it transparent come is sending the wrong signals about how they go about their business. You say they are doing the right thing now. The shortterm effect from my perspective is negative because the Saudi Business Community has been hit hard and surprised by what has happened. I think it is good long term, but shortterm brings uncertainty. I dont think the end of the probe means the sentiments will recover quickly. Why . Even those outside the ritz are worried about the next step. We dont know. We dont know whether it could be wave two, wave three come a so i think it will take time for the private investment to come back. 2018 is the year where the government has to spend money and play the countercyclical role, and overtime you can expect private investment to come back and consumer to follow through but not 2018. , yousef where does that leave us for positioning . Initial earnings should weakening and what you were saying about consumer sentiment. How do people at the moment make money on saudi stocks . Very simple number, the government expects 205 billion capex expenditure in 2018, and one of the potential beneficiaries of this is credit growth, lending coming back, and banks a good space to be in. Saudi banks are well capitalized. Compared to peers in the emerging markets, they are trading at an attractive valuations. There is a theme of more dividend distribution, which is attractive to investors, so a good space to be in. Combined with the big event, everybody is following the potential inclusion into ftse and msci, this is a big event. Yousef a major catalyst. Absolutely. At the end of march, we hear about ftse inclusion, 4 billion, 5 billion of inflows. Msci is another 16 billion of inflows. The flows are dramatic. Yousef up next on the best of Bloomberg Markets middle east, as saudi arabia winds down its corruption drive, go to top 100 billion . We will find up next. This is bloomberg. Yousef welcome back to the best of Bloomberg Markets middle east. As saudi arabia winds down its anticorruption drive, a senior Government Official told bloomberg that officials are likely to recover more than 100 billion in settlements from detainees. I asked how significant that would be for saudi arabias outlook. I dont think it will affect the budget numbers. Those funds will be directed to a separate committee that will contribute towards projects that the government is defining. Those projects will focus on the social aspects of spending come up but they will be outside the budget. That is key. Yousef in terms of the return to strength for oil. Brent crude still short of 71 a barrel. How does that change the landscape from where saudi arabia stands . Is it incentive for reform and good news for saudi aramco . It is quite complicated. There is the immediate positive impact of Higher Oil Prices for saudi, which is they are getting more money and the fiscal outlook is significantly improved, but if we look at the tone of the conversation across the gcc countries and the Oil Exporters and look at the recent budget round, we are seeing expansion come back in with an emphasis on spending, on growth rather than fiscal consolidation, and that is motivated by the fact that there is a view that oil prices are rising and we are not as tight as we thought we would be and we dont need to try as quite as hard as we thought we had to on the fiscal front, and from our point of view clearly yousef my conversations with a lot of ceos, and we just heard from the qatari economy minister, there is resilience of qatars economy of pressure from the gulf, and the resolution is not necessarily around the corner. Do you agree with both of these narratives . Absolutely. It has been our view this would be a longterm crisis and the conflict would be frozen for many months, if not years, ahead. We are not taking into account any resolution precisely because of the resilience of qatar and all parties to this. The economic pain was shortlived. The real economic pain was shortlived, and therefore the incentive to resolve the crisis wasnt there. The financial aspect is slightly different, and there is always the potential for an escalation going forward, although that is not our base case view. Yousef are investors overlooking the possibility of a flare up in tensions between iran and the United States . They are already sensitive to begin with. President trump wants to redesign this agreement, throw it out the window. Is that your top concern for 2018 for the middle east . From a headline geopolitical risk perspective, we dont think that risk is priced into markets. You have a very clear signal out of the United States from the white house that there will be no signing of the next waiver in 120 days of these sanctions waiver. That is obviously going to have a great impact in terms of the likelihood of the continuity and viability of the Iran Nuclear Deal going forward. Yousef that is it for this best of Bloomberg Markets middle east. A busy week ahead in the region, and we will be right here sunday morning at 8 00 a. M. In the United Arab Emirates on bloomberg television. I am yousef gamal eldin. Do join me then. This is bloomberg. Coming up on bloomberg best, the week and conversation from the World Economic forum in davos leaders in business, economics, politics and finance share their insight and outlook on critical global issues. You have markets in global high but we know that these things do not go in a straight line. It feels stupid to own cash in this kind of environment. I think it is one of the big crimes that we do not talk about. 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