economy is weak and vulnerable. angie: welcome to "bloomberg markets: middle east." we are seeing yen weakness drive the market, but it was the janet yellen comments that impacted not only u.s. markets, but we are seeing that in asian stocks today. that is what is playing out here in asia, what is playing out in your neck of the woods? yousef: we are keeping a close eye on what is happening in audi rate yet as they prepare for the first international bond sale. what caught my attention this morning is what is happening with of the liquidity situation in the kingdom. take a look at this chart. you're looking at a three month side for. this is how much they charge each other for lending. we also added the type or and ibor and inner sa bank rates. they've already invested an estimated $5.3 billion. your sing deposit ratios up to 90.8 does -- 90.8% since august. how much more does the country's central bank need to do to relax some of those nerves? that is what we will be looking at throughout the program. -- take want to quake a a quick look at the state of markets here. fractionally -- it is fractionally higher in hong kong. are bouncingcs around. broadly speaking, we're seeing asian stocks decline with the asia pacific benchmark heading for the lowest month. how about the middle east? yousef: we're just under two hours away from the opening of the emirates market. here is what happened yesterday in what you are looking at the dubai exchange, down 1%. loggers -- key laggers there. benchmark bloomberg index down half of 1%. are trading at the highest level in a year. back to the kingdom of saudi arabia, the biggest decliner in this part of the world. the benchmark was down. but get more perspective on what has been a driving them in their apart from the liquidity issues. i reporter joins us now. talk us through some of the numbers. analysts are looking very closely at the earnings were now. what people are basically seeing is that the numbers not good. everyone was expecting the season to show us lowdown economic activity and expectations are low stock prices are reflecting that. saudi arabia was the biggest inclining yesterday session. we see the austerity measures are taking a toll on the revenues that companies are showing. one good example of that is the national commercial bank that just posted results yesterday and it had a decline of more than 5%. it was the biggest dragger. it was because they miss the estimates. yousef: talk to me about volume. reporter: volume has been below all kinds of historical averages if you look at a 30 day average, volumes are low. it seems like people are being away from their trading, they are not making trading decisions. everyone is expecting to see some sort of improvement in the environment. there is a general pessimism. it is like people are not trading, they are just waiting for a good time to make a decision. yousef: we will talk more about middle east they can earnings in a few minutes with the managing director of a capital company. let's get a check on the first word headlines. >> donald trump is taking a hit at the polls as allegations of sexual misconduct and an old tape of him making over comments damages but for the white house. women 80 battleground states are increasingly preferring hillary clinton, giving her a 6% lead in the states. donald trump technologists he has lost women but blames media for rigging the election. it is one of the global economy is weak and vulnerable to the problems that could trigger a new financial crisis. at a summit in goa, he said that the threat remains weak. the economic recovery remains fragile. global trade and investments have slumped and commodity prices are fluctuating. the underlying problems which could trigger a new financial crisis have not been solved. >> italy's biggest egg merger and almost a decade could be just a one-off for now. it was approved by shareholders on saturday and marks the first up in a process of consolidation urged by regulators, investors and politicians. could slowbad debt banking and nearly. to oh led screens for the next iphones is pressuring japanese manufacturers. tole is in talks with sharp cure more of- pro these screens. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. angie: let's get the latest from the markets right now as we see some flip-flopping. here is david. speaking, it is fairly mixed. you are seeing money come out of the equity market moving into the dollar, moving into the bond markets. when you look at what is happening right now, we are looking for a catalyst, and what we've got -- we have trade numbers out of indonesia, they fell. -- a 5/9%h, a 59% drop. generally, the index is getting pulled down by a number of factors. the u.s. dollar is pushing of exchange rates across the region. ,ou have the offshore renminbi and 7450 is your level. this is generally cyclical, risk long currency. you see that getting pulled out quickly. let of you a sense of the bond market. we woke up with yield at 1.8%, we roughly at that level, although yields are pushing up. we are noticing casino stocks in focus today, what is going on there? david: it is one of our top stories on what has been happening. 18 employees being detained, that stock is being pulled lower. thisis really costing casino stock around the region. not just in australia. 2%-3%.re back of saying -- with their what they are saying is that it might be a crackdown and that it perhaps reflects that china and macau don't want to see these revenues going to foreign investments. angie: thank you. later in the show, more telecom names sign of war 4g in egypt. the latest reaction from cairo. yousef: plus, the latest on inc. mergers in the middle east, including plans to create the regions biggest merger. this is bloomberg. ♪ ♪ welcome back, you're watching bloomberg. angie: a quick check for you right now, the latest business flash headlines. china construction bank agrees million framework deal to cut their debt ratio. this is the second debt relief program they have revealed in the past week from state owned enterprises. china released guidelines for reducing corporate debt. gold producer evolution says they will buy a mine. $7.6 million but the still -- the deal still needs regulatory approval. its finalwill set price for its upcoming ipo today, about $23 per share. that would be at the top of the range. the company will debut in tokyo on the 25th. they are seeking to raise $4 billion and aims to reduce its alliance on japan, investing in residential property across southeast asia. yousef: gulf stocks retreated on sunday as more companies meet -- missed earnings expectations. saudi arabia's biggest privately , about 50% less than analysts had perspective. total operating expenses up 90%. -- 19%. stock 5.5% after the results came out. we have the managing director and head of equity research for our come capital. what you make of these numbers? it was obviously too optimistic, as we've seen in a number of cases. what is key is that provision i ing is spiking. 167 basis points is the highest in the saudi sector them up from 59 basis points a year ago. the sector as a whole, we expected to hold at 74 basis points for this quarter. yousef: what about the broader banking sector as a whole? this is something we've been looking forward to for some time. eight out of 12 saudi banks on the watchlist here. what is your key take away? provisioning is not spiking across the board. significant quite increases in provisions for some banks. they had enough capital gains to push in two provisions. part of that could be the turkish exposure, it doesn't have to be saudi, because that is where 44% of the number of loans are sitting. it's about 11% of the loan book. yousef: we brought up the charts to show the increasing interbank rates and saudi arabia, liquidity pressures are still very much there. it is playing into the cost of funding for a lot of these banks. how concerned are you by the saibor levels right now? monitoringy -- agency seems to be trying to ease those levels. guest: for the banks is not a bad thing. they are stabilizing year-over-year, as opposed to the rest of the gulf, will receive margins coming down. it is actually very subdued. a lot of gold banks have to manage expectations carefully. you see earnings coming down. -- for the saudi banks, it is more stable. have done the right thing but it has not been enough. i think more needs to be done. for example, the restrictive loans, which have to be 90%, a lot of eggs are close to that hurdle, so they are getting out. in my mind, that should be let go and you need to include bonds in the ratio. international bonds are very important, you don't want to tap the restrictive the quiddity -- liquidity. angie: how much of that is a promise for saudi banks, international bonds and tapping into that market? guest: it is not so much an opportunity, the global banks are all over the issue, so it will not be that massive. let's say,atter of, the drainage of the liquidity going forward. yousef: i brought up a chart. c benchmarkthe gt index. how do you make money here? where's the opportunity? guest: there only a few of you are in an emerging market, there are a lot of opportunities in china, china is doing better than expected. you see rebounds in brazil and russia, and the gulf is definitely lagging behind. that said, there are always opportunities. this is ideal for mergers in my mind. it is not a severe stress scenario, it is just a slowdown. yousef: do you have a specific merger at the top of your list? a specific target. i think umb will be next for murder. -- merger. .t is trading half the price it is extremely attractive to constantly. could be, let's wait two years. it would take a year to do it, a year to integrated. two yearsly, it is that you can setback, but it would probably be preemptive the cap this company would be a powerhouse. it would be the biggest in the region with very low funding cost and could eat with everybody. angie: i want to ask you about aramco. this is a very closely watched ipo here. just what is the impact going to be for the region? guest: the impact is quite material. it makes a lot of differences for the indexes. seeou include aramco, you it will be more significant going forward. that really put saudi arabia on the map for global investors. i think that is the key difference. angie: and what is the impact or wouldt or ripple effect you say for saudi arabia and the rest of industries, including the banks, if any? guest: obviously, there is a lot of value to create liquidity in the system. launching international bonds, china tapping foreign markets, bringing in dollars into the economy is going to be quite helpful to stem liquidity drainage in the system. that is the biggest advantage. there are some significant revenues from aramco. revenues will also be lower, it scenario.ull win-win angie: thank you so much. ofaging director and head capital. reversing losses, but isn't enough to signal an industrywide come back? i'll have the details, next. this is bloomberg. ♪ ♪ yousef: welcome back, you're watching bloomberg. china focused hedge funds are bouncing back as the stock market recovers with bullish bets on china starting to pay off. but this is me the industry will soon be making come back? shery ahn is taking a look at some of the big players. what are we seeing here? relief for the economy as a whole. when it comes to the markets, we're seeing such shocks, volatility of for the past year, and finally these china focused hedge funds could be seeing a solid rebound. they were the worst performer since 2011. they were trailing, their global accounts for the first time. now there is bounceback getting in june, a could continue. take a look at this data from eureka hedge, you can see this uptake -- uptake of more than 5%. less couldof more or be just because market volatility last month fell to the lowest in two years. right now we're seeing gains in ine sectors such as tech china and u.s. listed companies, consumer stock. this fund is one of the biggest in china focused hedge funds come up than $1.5 billion. you can type in golden china fund, which is run by greenwood. they have met some big bets on internet, tech and consumer stocks, and you can see that rise as the middle of this year, four consecutive month of gains, rising 3.3%, giving the return of 3.3% in september. -- weg some smaller funds are also seeing some smaller bullish betssome on materials companies, metals, mining, doing pretty well. yousef: to what extent can this be seen as a signal that a recovery for the whole industry is underway? guest: it is still a bit too early to tell because we have two months to go before the end of the year, but for now we are seeing the index down about 1% per hedge funds focused on china. according to eureka hedge, we're seeing the number of funds with positive returns are more than tripling since june, and that would account for 34% of these china focused hedge funds. , ite is a positive sign now could be the start of the hong greenwoodct management created the golden china fund that has surged in the last few months and they are saying as of this connect, we might see an upside for at least hong kong listed stocks. right now we are seeing some sectors performing well, these hedge funds that were trailing global peers are starting to bounce back and they are receiving some solid gains threat the year -- throughout the year. come, air on to looks to attract foreign investors help is to oil production. i will get you the details on that story. stay tuned, this is bloomberg. ♪ angie: looking in on the first word headlines around the world. chinese authorities detained 18 authorities of the crown resort. south china and galaxy entertainment are among the biggest losers in the region downthe intelligence -- 2.5%. publiclyom's biggest traded nash released their forecast. national commercial banks third-quarter profit of $532 million was below what was predicted by analysts. group has bought a refinery for about $13 billion in india. it is india's second-biggest foreign investment. set to surpassis japan for the world's third-largest oil producer. are two --nd tesla the company say they have signed a nonbinding letter of intent contingent on shareholders approving teslas acquisition of solar city. if that happens, panasonic will stop making the cells next year. this just crossing the bloomberg, japan's industrial august.on rose in taking a look at how we're sitting, we sing a move about 1/10 of 1%. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. hang: -- is 1230 and hong kong. -- ef: best-selling >> it is great to see rates. deutsche bank will be one of our main stories that we focus on here at the european opening. every step, every nuance that is being considered by the board is under focus. we understand goes global aspirations for the bank may change. is the bank reconsidering its retrenchment from the u.s.? they could echo from their u.s. footprint. this is part of a broader strategy review, or is being enforced in part by the department of justice settlement as we inch toward a deal? radical changes to the business model, that is something that is tied with the doj decisions. what they do that rather than sell the asset management business? if you want to understand the bank int of deutsche the u.s. is more than 10,000 people. versus --al-intensive i'm also looking at where the pound is trading at the moment, lower against the u.s. dollar. it appears there is one buyer out there. >> yes, we find them, a flagship fund. as aare using the pound funding currency against a couple of major traits. -- trades. week,s at the end of last the brexit vote, so the pressure , they've leveraged funds the most short since 2013. fund, the city devaluation has been priced up and they started short commodity currencies and that of that, looking a little bit pricey. they are shorting the australian and new zealand dollar. , we have a guest at 7:15 joining us here, it will be martin beck from ernst & young. we are going to talk about post-brexit blues, delusion and the data, right here on "daybreak." yousef: money managers are the most lish -- bullish in two years. joining us now to discuss how investors are reacting is tracy in abu dhabi. --k us to the positioning through the positioning. >> if you want to see how dramatic the opec announcement was come all you have to do is take a look at this positioning data. we've seen short positions in and options fall 20% in the past three weeks, we've seen loads up 1.2%, but the combination of those two moves means net longs are up something like 13% over a three-week. -- three-week period. now there is debate as to whether some of the shoretel come back into the market ahead of the meeting in vienna next month. that could be risky trade, you're basically betting there won't be any sort of announcement on specific quotas at that meeting, which seems rather unlikely given the importance of that to the oil price right now. angie: we still have more than a month to go before the opec meeting in vienna, what will the market be watching until then? you both know that everyone is keeping a close eye on actual production oil. last week we sell russia confirmed that he was at a post-soviet record in terms of production. we've seen iraq say that it was to keep pumping. today we have sources thing that libya is pumping up in like 500 --000 barrels per day 540,000 barrels per day and is set to increase the number two 900,000 by the end of the year. production is important but it can only tell you so much because of its people are going to try to get their money's worth ahead of any reduction cut , specific quotas it would be announced in vienna. have seen asng we analysts dusting off the old history books, which is interesting. a lot of people looking at previous opec production cuts to try and read into the current situation. for instance, i was looking at son at morgan stanley, he's looking at the 1980's opec reduction cut parallel. he says if you look at that particular instance, it doesn't bode well for oil prices. well only recovered something like 65% of the drop that it had sustained before the production cut. in never recovered to the full degree. certainly a lot to chew on before we head over to vienna. angie: tracy, thank you so much. iran is stepping up its efforts to move past years of sanctions and attract new foreign investors to its oil industry. we have our markets reporter here to explain press. what will be the first field tendered? reporter: good morning. the iranians have said they are looking at the shared fields as a priority. they are on their border, they -- they want to get them auctioned off first and get the right tendered out. international committees won't own the oil under the ground, that remains with the iranian state, but they will bring partners in who can bring in part -- bring in technology in other -- older products off the ground. aey will probably tender certain field first, they said they would like to get that done by the end of the year, which is in march. they will prequalify companies by december, and that should be the first tender according to what we hear from iranian officials. what challenges are still facing the iran plan? reporter: the big challenge from a technical point of view is the technology and the money, they need to bring those foreign companies in who can bring that needed investment and bring the technology that will allow iran to increase production from those fields. they are fields, many of them have produced before or are producing very little now and they need new techniques to bring more oil out. on the political side, there are still some u.s. sanctions in place linked to iran's regime areas the usse are supporting terror. notle have to be careful to partner with any companies that are on u.s. tensions less -- sanctions lists. we have elections coming up in may in iran, so it may be a contractsto get many away before those elections. yousef: another key question, yes iran is moving forward in terms of their production, but how is this all going to fit in with opec's plan to freeze or cut production? i addressed this question to the qatari oil must -- oil minister and he didn't have an answer at the time. reporter: i'll think anybody has the answer yet because opec itself is not yet decided how the cuts will be parceled out between the members we don't know a length that the cuts will be in place. perhaps opec has some ideas amongst themselves, but we don't have any information. i think the good money is on six-month to a year that they would be in place. really is a question of timelines because iran we understand has been exempted from this cuts, people are taking into account the via been under sanction and have not been able to produce as much as they would have. but then of course to bring those fields on the we were talking about, this new investment, that will take a longer. of time -- a longer period of time. it could be this peeling of cuts of cuts-- this period happens. i think iran's intention is to do that, but there is an inherent conflict with opec's plan to cut. yousef: thank you. program,come on the the government is struggling to airportinterest to the most populous nation. it is hoping a telecom deal will help change that. sis bloomberg. ♪ angie: welcome back, you are watching a bloomberg. yousef: a quick check of the latest business lash headlines. operation tod reclaim modal from the so-called islamic state eared -- state. in 2014.fell policearamilitary are involved, backed up by the kurdish region. angie: a $16 billion lender in him on has collapsed, they were unable to reach agreement on uncertainty issues. ecision to walk away comes after -- it would've created the second largest lender in the area. yousef: more carriers have signed deals to acquire licenses in egypt. -- fone paid they had rejected the terms citing the lack of the spectrum, but regulators say new terms could launch an international license auction. joining us now from cairo, the director of research at holdings company. give us perspective of what kind of right through the latest developments represent not just for egyptian telecom, but the wider region. , what the market was expecting with a deadlock. so the deadline had already expired, and they had to accept by the 22nd of september. it was sort of an international license auctioning already. they're probably getting another mobile operator in addition to the four. the mobile operators to come back to the table, they have the additional spectrum that they are required. this as ak at development for each of, but the payment terms are what have changed this time. i think the mobile operators are off $1.1 billion within a month. i'm talking about the three mobile operators. yousef: so what kind of opportunities does this open for the telco operators there? guest: the only upside is for telecom egypt. in our view, it makes it soft, although not legally binding. egypt owns about 35%, so we view this as a precursor for telecom egypt -- to raise money for an ipo could also raise more dollars for the government. isn that could happen anyone's guess, but i think it is positive for telecom egypt. the other mobile operators will have to wait and watch because we expect competition to get more heated, especially on the private side with telecom egypt coming on board to compete, we expect price wars quite heavy going forward. angie: intense bidding expected, how much of that heat is also been contributed by offering this license and pricing the license in u.s. dollars, especially with an expected devaluation of the egyptian currency? guest: egypt right now is looking to, just to give you a perspective, egypt is looking to attract $10 billion the next fiscal year, which will be june. $6.63ear we had about billion. up,hey are trying to rate which egypt badly needs. deficit.$10 million definitely, by $5 million, which is already done -- the only thing that has changed in my view is the addiction pound -- the of the license egyptian pound portion of the the terms of the same. yousef: let me jump in here, just to get your view, you mentioned the eminent devaluation of the egyptian pound. when do you expect the central bank to move of the currency and by how much? now, in less we see another $5.6 billion of additional funding that comes it up,e cbe, taking until we see that, you don't see a devaluation that has been the case, state devaluation, we so unless we a -- see -- yousef: how can i make money in egypt right now as a foreign investor? guest: you have to look at stock selectively. is -- telecom egypt is a favorite pick. the rates will go down for a short-term, but we expect the spinoff to be egypt raises more money. like export oriented groups. most of these companies i'm talking to are using u.s. dollars over foreign currency, so all of them would be transactionally and translational he powered by the -- yousef: we will have to leave it there. joining us down the line from cairo. still to come on "bloomberg markets: middle east," the purchase of sr oil and the biggest deal in india. we will be live in a mumbai, next. this is bloomberg. ♪ --ie: welcome back humor welcome back, you are watching bloomberg . yousef: russia's biggest listed refinery is expanding into india. they are buying as oil for $13 billion. we've been tracking all the developments from mumbai. what is the latest? this is the biggest foreign investment into india for a long time. producerbiggest oil along with a consortium of investors has picked up sr oil for about $13 billion. -- the deal was announced over the weekend at a summit, underscoring the importance of relationships between india and russia across many sectors. it is significant for two reasons. it reduces that on the books by merit -- nearly $10 billion. portion of that will go into investing into these state -- the state. secondly, india is an oil consuming nation, it will eventually overtaken japan. angie: what are they going to do with the money? reporter: i don't know if they , but ase on the record i mentioned there are two important things going on. inia is increasing importance as a consumer, and the value being made available. this is a diverse conglomerate, it operates over several areas. has an affiliate, a power plant. the debt on the books will come down significantly and this could make them an important player in the market. -- assets inindia india are getting attractive from a valuation standpoint. angie: thank you so much. before we go, china has successfully sent a manned rock et into orbit. it was the third launch of the year with two astronauts heading into the laboratory. they will spend the next 30 days there carrying out experiments. they plan to send a crew to the moon by 2017 -- 2025. back on, that does it for us here on this edition of "bloomberg markets: middle east ." yousef: "daybreak europe" is next. his is a bloomberg -- this is bloomberg. ♪ it could fix growth problems. security.nse of the uk's post-brexit economic strength could be deceptive. we speak to the co-author of the report at 7:15 london time. plus, capital crunch. deutsche bank is said to be exploring shrinking its u.s. operations as it deals with legal expenses.

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