♪ >> oil slides, saudi arabia says there may be no need for a cut. to reassess production numbers, while russia prefers a freeze to a cut. one of the world's most conservative investors finds an

unlikely ally in one of the most flamboyant politicians. >> it is 8:00 a.m. across the emirates, 4:00 a.m. in london. >> it is just past noon and hong kong. welcome to "blommberg markets: middle east". opec.lly is all about we are seeing a mixed market as loyal being driven by your part of the world. >> it sure is. while opec nations are making a icst-ditch diplomat push, saudi arabia is now contemplating if the oil club needs to curb output. the billion writing on decision, a rocky ride for oil companies. according to bloomberg, this

year has seen the combined market value of oil companies around the world increase the most since 2010. 1.2 trillionhat dollar loss value last year, 700 $90 billion loss in 2014 as the price of crude hurt the bottom line. beenil majors have tightening their belts by cutting jobs, canceling projects, and taking on debt, becoming leaner and meaner than ever. we all know the oil companies will be hoping for a decision to cut from opec this week. right.certainly that's let's give you a quick check of the state of the play. rbi actioning, because of currency come asking banks to take it off the table what prime minister

narendra modi is doing. dragging down the index fractionally. of the regionest is seeing asian stocks advance as we see gains in chinese shares overshadowing declines in energy producers as the result of opec. , two hoursiddle east away from the opening of the markets. yesterday, stocks rose ahead of opec talks. saudi arabia climbing for a fourth day. first word headlines from around the world -- rosalind: donald trump has claimed without evidence that the general election saw fraudulent voting. he said he won the popular vote

if millions who voted illegally for hillary clinton are removed. clinton has joined a campaign for recounts in three states. donald trump says that his fraudulent and called his critics "crybabies." a leader for the french republican party beat another former p.m. in a primary vote. supporters preferred his pledge of tough economic reforms and french invitees to lead the party against the far right front national. indian prime minister narendra modi has reiterated that benefits will be seen from his ban on high domination notes. he says the cash crisis caused by withdrawing the notes should ease by the end of the year. usingned against people -- to recycle the money. app meetslfie

investors this week ahead of an ipo that might value it at $5 billion. funds like it's perceived growth potential, while international investors are more skeptical. they have tested demand for hong kong share sale, which could be the biggest tech listing in a decade. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. oil may see renewed volatility a last-ditch push for a deal on output cuts. the cartel meets wednesday to finalize terms. in the austrian capital for the summit and joins us now on the line. activity been a flurry ahead of the meeting, what is the latest? st ditch efforts

by opec ministers. there have been surprises and unusual moves. first, the saudi's pulled out of a meeting, a preparatory gathering. , thecirculating last night market could balance without an opec cut. tolooks like he is trying balance the saudi arabian position. more he is preparing the market if talks collapse. this is why we could see oil under pressure this morning. , theer unusual move algerian minister is traveling to moscow with the venezuelan oil minister.

are offering a cut to those outside the cartel, and it looks like these ministers are trying to get pressure on board. theya has repeatedly said prefer a freeze rather than a cut. deal has been talk about a , but also it seems like they are trying to shore up the russian delegation to join some sort of deal. , theat about inside opec biggest hurdles now? a, this finalria stretch will be about how to defied -- divide and conquer.

to recap algiers, they agreed to cut production. some perspective, the output for october was 33.6 million barrels , so not quite there yet. it looks like the saudi's are split with iran and iraq. insisting restoring output to pay sanctions level, 4 .illion barrels for them to cut more, and that's what opec wants them to do, cut below 4 million barrels a day. that will be a hard sale. , so notl cut output clear how much they are prepared to cut. it's key that these countries were together in order to get a

tangible deal. >> got you. on the phone from vienna. china has been quietly hiking borrowing costs through pboc operations that reinforces the view that beijing has moved away from monetary stimulus. we have our corporate finance reporter right here. how has the pboc been doing this? is lengthening the terms of the money market operations, cutting the seven-day reverse repo operations and injecting funds through 14 day and 28 day contracts. financingnger-term with higher funding costs. that is how the pboc effectively tight 25 basis points. angie: why would policymakers tighten now, especially when some say we are seeing stabilization when it comes to data of a but it is still precarious. to cut is intended

average in china's financial markets, especially the bond markets. as we have been talking about this for the past half year or so, there is a huge buildup of leverage in china's bond market because the yields have been coming down significantly. fund managers have no other options been to use leverage. for the central bank to discourage the use of leverage by increasing the funding costs. manus: interesting. angie: how will be tightening affect china's bond market? this is a question investors have been asking. with the potential deleveraging, the bond yields are likely to go up, so prices will come down. return next year is likely to come down as well. yield look at the chart

premium of three year corporate aaa rated bonds over government bonds, there is already a 14 basis point this month alone, headed for the biggest jump in seven months. we are seeing other signs of stress in the bond market. two companies have defaulted this month, although they have made repayments one day later was so investors are likely to have a tougher year next year. that was our corporate finance reporter. thank you very much. right, let's get the latest from the markets. here is haidi lun. haidi: it is hard to get around the core of the narrative when it comes to how markets are trading in asia as markets open up on your side of the world as well. it is all the oil story. some gyrations, saudi arabia saying the supply cut may not be

needed after all. is what wes, this are seeing. we are off the session lows when it comes to crude prices. of uti is looking like, not as bad as where we were earlier. will be the key and terms of managing the event risks going into the week. we are seeing this flocking back to safe haven assets. of .6%,eing that jump although we are off session highs. the dollar index is the other part of the story. --are seeing some risk fight rspite for asian currencies given the second day of decline. ,he u.s. jobs report potentially derailing that u.s. dollar move we have seen over

the past three weeks or so. the japanese yen is the unfortunate benefactor of the dollar weakness, 112, and that is weighing on equities. the japanese yen weighing on exporters in particular, the oil and energy names, explorers and producers tracking the declines. seeing gains from greater china, shanghai up .5%, banks doing well on perhaps the pboc is doing some stealth tightening, good for profit margins. the losses are tokyo, that profit taking session, snapping 11 straight days of gains. >> thank you. later in the show, chaos over india's cash band. to assureodi a seeks the country the crisis what he's and 50 days. angie: opec makes a last-ditch effort for an output deal.

what happens if they fail to get an agreement? we would discuss all the ramifications next. this is bloomberg. ♪

>> welcome back. you are watching bloomberg. isie: the price of oil volatile as opec makes a last-ditch push to reach a deal on output cuts. oil checking right now, prices in the past couple of days, the deal looks less certain. if they don't make a deal what will be the ramifications here? it will not be good if you are an oil producer. and let's are saying if they do not come to a deal, prices could fall below $40.

one analyst said it could get below $30 a barrel. near-term outlook. longer-term, saudi arabia said regardless of what happens with see 2017 being a tightening in the oil market and a rebalancing of prices. asr the last two years prices have been in the sticky dollar range, output outside of opec has fallen while demand increased. not-term, even if there is a cut, you will see the market rebounds and prices stabilize. they are ableif to come to a deal come what happens to the oil prices then? >> morgan stanley came out with a note saying oil prices could go up five dollars a barrel on news of a cut.

kind of majorny cut from the organization that controls a third of the world's output, it will be strong for the market, but opec runs a real risky game, because they don't want prices to strengthen too much. if prices jump above $60 a barrel, producers outside opec, especially u.s. shale drillers, they get profitable again and you will see master plumbing of rigs and duction start rising from outside opec. you have a possible worst-case scenario for opec, price is not returning to super high levels, but then also losing market share, selling less oil for a low price. thank you. for more on this, where joined by our next guest. great to see you. you heard our energy reporter talking about the impact of a deal to the oil price.

are not particularly confident we will see an opec deal. >> i don't think we will see an opec deal, and not even in the future. the cartel itself has struggled for work wells loo and good days, but when prices are $40 or 45 dollars, everybody has different interests and needs to do the sale and the money. you can see what is happening, opec members, including libya and iran, libya opted out, and iran hopes to opt out. the deal will happen. if it does, it will give an opportunity to non-opec members to produce more oil and fill the gap. if the cartel only has itself

to blame come i want to bring you inside the bloomberg terminal, a chart pulled up that have seen asat we oil price in relation to the opec out put over a five-year time. look, back here, of course they are happy, $80, $90 come out put andat 32, now we are 34 they're talking about what are 33.mal cuts to 32.52 frankly, why should markets care about that? sorry, did not hear the question. >> it was a long question. ok. in a nutshell, they're talking about production cuts. so fractional in the grand scheme of things, why

should markets care? >> the market is just waiting for any news. the market is desperate in my opinion. everybody is looking for any piece of news that could actually help the prices, and yes, you make a point. last year, they've produce 38 million barrels while -- so whether they cut the million or don't, there is an to be any difference. market is desperate for any kind of good news, hope, where oil prices could change or pickup from here. the initialfly, impact, your thoughts on the oil price if a deal happens on wednesday? >> if the deal happens, you will see a spike in the price, then we go back to where we are because somebody is going to overcome the cuts and provide extra supply to the market from

the non-opec members. this.y with we will speak with you in a moment. coming up, can equity markets in the middle east withstand the uncertainty surrounding opec? we will have more next. this is bloomberg. ♪

angie: welcome back. you're watching bloomberg. i am angie lau and hong kong. inley: i am desley humphrey dubai. to continue our discussion on the opec decision, you bought shale. it has not been focused on this much this time around. a cut in output puts the shale producers in a better, worst position?

>> in the increase in prices in oil is good for them. their cost is higher than regular oil producers, but opec has an then taking them into consideration for a long time, and they should have a representative of the shale oil producers in opec along time ago. elaborate,w me to liberat the commodities super cycle is ending. the demand is not there. that is why prices are lower. interventions do not work in these markets. pumping billions of dollars are trying to cut production is not the right way. this is a market that deals with supply and demand. there is no demand. it is simple. the technology is changing less dependent on oil.

the problem is bigger than cutting 2 million barrels a day. your view is that it is the disruptive technologies. >> look at tesla today. you have big production of cars that do not depend on oil. mercedes-benz said they will launch their fall of electric car in 2019. the big players, the big boys, they are going to get into that business. this is coming and will keep decreasing the demand on oil, unfortunately for the oil producers. does opec even have legitimacy anymore? you have production caps communicated that are not even being met. the production cuts have not been communicated, but even if they cut one million or two, it is not going to change the

situation. the demand is not there. the slow growth globally as a problem. the global economy, countries need more money, then they have to sell more oil, then the lower the prices will be, so it is a vicious circle. whatever you try and do will not help the situation. you need demand to come back come of the global economy to pick up, so one million or two could be subsidized by canada, russia, any non-opec reducers who are not obliged to adhere to an agreement. angie: we will leave it there. thank you. kuwaitup, a shakeup in over government austerity measures. that is next. this is bloomberg. ♪

rosalind: these of the first word headlines from around the world. loyal little changed after pulling the most in two months on friday amid increasing doubts that opec will reach agreements. non-opec producers today were canceled after saudi arabia pulled out. the cartel has called another meeting to resolve differences, including whether iran and iraq will agree to cut production. gold rebounds, paring its biggest monthly drop in a year. demand for the precious metal to get a hit after the u.s. presidential election and donald

trump boost spending on infrastructure. asd tumbled 6% this month investors price in a 100% probability that the fed will raise rates next month. tightens effectively monetary conditions without an official announcement. an analysis of transactions show back on has cut seven-day market operations, instead injecting funding through 14 day and 28 day contracts, raising short-term borrowing costs and bond yields, a sign of selective tightening. elect donald trump has claimed without evidence that the general election had fraudulent voting. he launched a twitter offensive saying he won the popular vote if millions who voted either legally for hillary clinton are removed. clinton has joined a campaign for recounts in three states. trump says that is also fraudulent and called his

critics crybabies. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. desley: thanks. one of the world's most conservative investors has found an unlikely ally in one of the most flamboyant politicians, donald trump. our asian stocks reporter joins us now from tokyo for a look at how japan's giant pension fund could get a helping hand from the president elect. what is happening here? gpif, the japanese government pension fund, is benefiting in two ways. they are the biggest investor in stocks, and that rally comes time forerrible

japanese shares. another way they are benefiting invests home us half of its assets overseas. at global equity market rebounding, as well as the japanese yen falling substantially, gpif's returns from abroad should be doing quite well this quarter. desley: is a fairly passive investor. what has been going on over the past year for gpif? wass we said, gpif conservative and passive. a couple of years ago in 2014, they decided to move away from their traditional pond investing and they boosted their equity then,tion to 50%, since global equities have been struggling, japanese equities were doing especially badly and gpif came under criticism saying

they have taken on too much risk and are gambling away japan's pension finances, so a tough year for gpif. starting toy are see a recovery cents shipping that i location, which should prove a relief for the fund. angie: will this stop the criticism then? the conservative people will always be saying that shinzo abe has pushed of too much into stocks and is still risky. on the flipside, a lot of analysts say we have seen japan equities rallying and the yen dropping, but it is still too early to say this is a substantial recovery and we will get back to the levels we saw at the heights of abenomics, so what remains to be seen is whether we can get strong consumption in japan and boost long-term,s over the

otherwise they will see a lot of gyrations from quarter to quarter in the returns. angie: all right. thank you for that. indian prime minister narendra modi has used his monthly radio people thatssure they cash crisis caused by withdrawing high denomination notes will he's. -- ease. he remains confident the chaos will be over soon, but he's not bearing the brunt of the pain. it is the nation's poor. longe: atms are drying up, lines at banks as folks tried to 1000 notes, 500 and but prime minister modi of assuring the nation that there will be success from his demonic does a show and move -- from his de-monetization move.

halfway through the transition. 86% of notes are out of circulation, unused cash flooding the banking system. we are seeing 75 billion dollars worth of holdings in deposits at banks, prompting the rbi to introduce temporary managers -- measures to manage this cash. about these to us temporary measures to are the details? raise thee rbi incremental cash reserve ratio. effective starting november 26 and means banks parking those reserves will see negative returns. today, banking stocks falling.

this morning, 10 year bond yields climbing on concern that demand for debt will app. ebb. as excess liquidity has boosted demand for debt. desley: thank you. kuwait'sity of parliament has b out as voters made their unhappiness about the government austerity measures known loud and clear. at 70%, andstrong only 20 of the 50 lawmakers retained their seats. on this.ore good morning. was this move a surprise? >> it must have been a surprise for the government. its parliament serves out full term by mid-2017. the observers called for

end of the parliament before the opposition gets time to regroup and join in. -- last parliament parliamentary election was boycotted, so the makeup of the parliament after that and lawmakers were perhaps too friendly with the government. that is a what a lot of on pleased about. -- displeased about. desley: what does it mean for the economic reform? >> a lot of these people are new and a lot of them are opposition figures that were not part of the previous government, previous parliament, so right now mainly we would expect them --being trying to expose oppose the government. however, one of the things we

will probably find out later is if there is a way to work with the government to allow some reforms. however, we know there is a cabinet that is basically appointed and this captain has the right to vote. saying somes are measures may pass, even without the parliament agreeing to it. where does the parliament go from here? what is the next step? formation see the a of a 16 member. -- a 16-member. those guys can vote on a lot of the reforms. after that, it is wait and see. a lot her worried that we may go back to pre-2013 parliamentary proceedings where the parliament

mainly obstructed a lot of the reforms that the government was trying to do and stalled economic development, even the development of the oil sector in the country, with the country -- which the country heavily depends on. angie: thank you for that. coming up, our oil producers in a no-win situation as opec nations meet to discuss an output deal? that is the question we will attempt to and stir -- to answer next. this is bloomberg. ♪

desley: welcome back. i am desley humphrey in dubai. angie: i am angie lau and hong kong. israel's group hit a high after financing to develop the country's biggest natural gas field.

it will pay for the first stage of expansion. noble energy holds almost 40% and is yet to raise its portion of financing. desley: iran talking to asian companies to raise $1 billion for expansion. the plan includes a methanol for china. iran need $60 billion to upgrade from the years of sanctions. japan agreed to provide $10 billion of projects involving japanese companies. angie: nurture dany cabinet has approved next year's budget, $12.6 billion. the projected deficit of 2.8% of gdp. grants are seen it $1.1 billion.

in 2017 atxpenditure 7.5% higher than 2016. desley: china is spending billions of dollars on its space program, and it is not simply a state-led effort as tom mackenzie reports. desert,e in eight china's private space ambitions are taking flight. technicians are putting the final touches to a capsule 2 connected tor a giant helium balloon designed to climbed to near space 20 kilometers above sea level. the projectbehind has lofty ambitions. it wants to commercialize manned near space travel by 2020. first though, they have to test of the flight controls and the

life-support system. probably heard about monkeys and dogs sent into space, the traveler 2 will be transporting a two inch terrapin. the chairman is hailed by some as china's elon musk. he wants to make near space travel accessible to as many people as possible, and by designing a craft with reusable parts, heat hopes to keep tickets below $100,000 per person. to make normal people to go to near space. if you go by rocket or some other technology, you either gives you a crazy speeding up or process,pping down which is very difficult for normal people to go. what we want to develop is that it goes smoothly and fast, like taking a space elevator.

tom: i am visions dovetailed with china's bid to compete in a space race with the u.s., india, and japan. the country aims to build and operate its first space station 2. 2020 year and -- 202 sent to askedina him not into orbit for china's longest mission yet. company, it ise backed by state money. the final frontier is still dangerous. it is a long way off. half an hour after launch at 12 kilometers above earth, traveler systems failed, mission aborted, and the fate of its turtle crew is sadly unknown. up, skepticism

over a possible opec deal. our oil producers in a no-win situation? that is the question next. this is bloomberg. ♪

angie: welcome back. i am angie lau. inley: i am desley humphrey dubai. opec nations are in parking on a last-ditch push to reach agreement on a production cut, including flying to moscow to get russia on board. our next guest says producers are facing a no-win situation. .e joins us from abu dhabi you have been skeptical of an opec agreement, even algeria,

you were surprised they manage to come together to formulate this agreement. his your position still that there will be zero-some out of the meeting on wednesday? good morning. thank you. i'm happy to be back on the show. i was live during the algiers meeting, i said a deal was unlikely. they reached some understanding, but that is not a deal. it is difficult for them to reach a deal. it is a no-win for both sides. for the opec members, if they actually agree to a cut, that is losing market share. for non-opec countries, producers, if they agree to a freeze, a future cut for them because they are increasing production overtime. desley: the one thing they had

in algeria was that everyone was that the table. it seems to be fractured at the moment. going into wednesday, we have got a full-court press, but now we are hearing from the saudi energy minister saying that perhaps a deal is not necessary because he feels that the market will balance itself out next year. takeu agree with the saudi on the projection for the oil market now? >> well, i would agree. i would forecast an oil price 46 to $60 in the coming months. i would expect those oil prices. saudi arabia is moving in the right direction in

diversification plans for their economy, economic plans and financial plans, so saudi arabia can be in a comfortable position going forward. they have big reserves, foreign currency research, big assets, low debt to gdp, so they have margin to maneuver within this context. we seem to be focusing on the supply side of the story with the opec meeting, but as our last guest said, look, global demand is just trending downwards regardless, so whatever they do, it is a moot point. >> indeed. weakemand side is quite and can potentially go down more. the longer-term term, demand will have to increase. regardless of green or renewable

energy alternatives, which will take substantial time before they start competing with oil, demand for oil over the longer-term will have to increase. at the moment, there are no investments being done in exploring new oil fields. inwill see a decrease supply, a natural decrease in supply due to the lack of exploration and investment in new oil wells. on the supply side, it can create some angie: push up on prices. angie:do you see any recovery in this market? i do think that we are in the new normal for oil prices between $40 and $60. i do not see oil prices going up to $100 or even $80. this is the new normal, and all countries have to adapt to it.

saudi arabia is aware of that come and that's why they have put in ambitious plans to diversify their economy. have been on the forefront of diversification when 90% of thewas coming from oil in 1970's. to 35% from oil, the rest from nonoil sectors. $40 to the new normal, $60. i don't think it will change anytime soon. desley: the range is a lot lower than the $100 that countries like saudi arabia has been used to. an equities and investor point of view, how'd you look at especially where international investors on the markets,yield,

especially saudi arabia, equities are undervalued at the moment. how are you advising investors to approach the market? >> from a relative die you perspective, i see great equities, so u.s. equities are at absolute record highs at the moment. can they go up further? as, absolutely, but from relative value perspective, i will invest in the region where perspectives for growth are quite sensible given the diversification efforts by the government. the plan for saudi arabia are really quite and dishes, and if they are relies, this can transform saudi arabia's economy aand the region can become

a world economic growth driver, so i am a big believer of the market, but also the fixed income market, which is in line to grow quite sensibly going forward. gccs not forget that around 5% or 7%, so interesting to own from a relative value perspective. desley: thank you for joining us from abu dhabi. just before we go, lufthansa pilots are stepping up their pay demand. this week. therefore-day action ended sunday, but pilots on short-haul flights walk out on tuesday, and all pilots stop work on wednesday. the strikes have led to thousands of flights canceled and the lufthansa seat e o says the airline -- ceo says the airline cannot survive if it caves into pilot demands. angie: mitsubishi to recall 25,000 vehicles.

china's quality control watchdog says it involves 21,000 suvs built between 2010-2012 found to have flaws in their rear doors. another 4000 vehicles will be recalled over defective airbags. recalledi has already 100,000 vehicles in japan for airbag fixtures. ocbc purchase has been priced at nearly 30% below estimates. the final offer is based on one point 75% of barclays assets being transferred to ocbc. asset baserease the to more than $75 billion, letting it compete more equally ubs.rivals such as dbs and that is it for this edition of "blommberg markets: middle east"

. angie: we will have the top stories from around the world coming right up. bloomberg tech is next. this is bloomberg. ♪

>> it's 1:00 p.m. here in hong kong. i'm angie lau with an update of your top stories. on fridayhe most after doubts that opec will reach an output agreement. saudi arabia pulled out. the cartel has called another internal meeting in a bid to resolve its own differences. -- china has effectively tightened monetary conditions without any official announcement. they have cut back on their seven-day open-market operations. they are raising short-term borrowing costs and bond yields by injecting more funds to 14

and 28-day contracts as opse