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DELOITTE 2016 MIDDLE EAST TMT PREDICTIONS: VIRTUAL REALITY TO BECOME A BILLION DOLLAR NICHE

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In its 4th year of releasing TMT predictions with specific relevance to the MENA region, Deloitte continues to supply industry insights based on deep analysis, built around meetings with industry experts and field executives, as well as Deloitte’s proprietary programs of research with tens of thousands of consumers worldwide. Global TMT predictions focused this year on virtual reality, women in IT jobs, cognitive technologies, mobile ad-blockers, mobile games, and Gigabit Internet, European sports, and e-sports.

“A lot of energy has been poured into these predictions, as there are few other industries that are as exciting, fast-evolving, and game changing as TMT. More exciting than this is witnessing the Middle East adopt and create their own trends in the TMT space. Over the past five years, this region has made significant forays in broadband connectivity and speed, which have in turn enabled new categories of service to become mainstream,” said Emmanuel Durou, Partner and Technology, Media & Telecommunications (TMT) Leader at Deloitte Middle East.

“In 2016, we look forward to seeing some evergreen ideas finally take flight in the Middle East. These include virtual reality corporate applications, hybrid cloud adoption, or the take-up of cognitive technologies in enterprise software. We also see mobile everywhere – taking over in gaming and now payment with touch commerce,” he added.

The Deloitte TMT Middle East predictions explored in the report include four areas:

Virtual Reality

Deloitte predicts that most MENA revenues from Virtual Reality (VR) devices and services in 2016 will continue to be driven from video games. According to industry sources, the estimated MENA computer gaming market is currently around US$1.5bn and forecast to grow three-fold by 2020, the majority of which will come from the GCC region.

GCC countries have already witnessed companies beginning to sell commercial enterprise VR solutions and corporates incorporating VR solutions to help sell their products and services. Although currently at a low base, the VR market in the region is expected to grow at a rapid rate, driven as much by the corporate sector as by gaming.

Development of VR technology has spurred a global race to identify and capture the next major market opportunities. However VR still faces technological and user experience challenges before it can make the transition to mainstream adoption. So, will VR crossover from niche to mainstream? It is predicted that it eventually could, but not yet.

Touch Commerce

Deloitte predicts that mobile driven commerce will enter into mainstream in 2016 in the Middle East. The early success stories of app based payment such as mPay seem to be a case in point. However, the pace of adoption of mobile enabled commerce will differ greatly depending on the underlying technology. While Near Field Communication (NFC) is taking time to gain traction, Deloitte predicts a promising customer uptake of touch commerce, depending of the pace of rollout by ecommerce and payment platforms in the region.

However it will take some time before touch commerce becomes mainstream and displaces cash-on-delivery as the number one payment method for online shopping in the region.

Hybrid Cloud Computing (Private and Public Cloud Services) adoption in Middle East

Deloitte predicts that in 2016, the market for cloud services in the Middle East will exceed US$1 Billion. Customers migrating to cloud will start with hybrid cloud models than full-service cloud deployments. Further, software as a service is likely to grow much faster than other cloud technology vectors with growth being fueled mainly by the Small and Medium Enterprise market compared to large enterprises and the public sector.

Governmental organizations will continue to maintain and promote a private cloud deployment due to regulatory requirements and a conscious decision to protect confidentiality and integrity of classified information. Non-governmental organizations (Large Enterprises and SMEs) will explore options of using the public cloud for both Learning-as-a-service (IaaS) and Software-as-a-service (SaaS) offerings considering the maturity and stability of major productivity software in this space as well as ease of provisioning for infrastructure resources.

Music usage rights

Currently there are at least 240 collection societies licensing music, spanning across 129 countries and six continents. The Middle East and North Africa region is in stark comparison to the rest of the world, with only two collection societies (Lebanon and Egypt) and approximately 5,000 total members.

Deloitte predicts that one or more GCC countries will consider the introduction of Music Rights Licensing regime, and in effect this could catalyse the development of the regional music industry and generate indirect economic benefits across the MENA region.

To view the whole report go to: www.deloitte.com/metmtpredictions2016

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Analysis: Central banks say no tapering. Markets aren’t buying it

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Analysis: Central banks say no tapering. Markets aren't buying it 1

By Sujata Rao and Dhara Ranasinghe

LONDON (Reuters) – Central bankers worldwide have been unequivocal: There are no plans to cut back on money-printing any time soon, let alone raise interest rates.

Markets don’t seem to be buying it.

U.S. 10-year Treasury yields rose on Wednesday to one-year highs above 1.4%, extending this year’s near 50 basis-point jump that has dragged up sovereign borrowing costs in Europe, Japan and elsewhere.

The reckoning is that the spending step-up by U.S. President Joe Biden’s administration and post-vaccine economic reopening will fuel a global growth-inflation rebound, forcing central banks to “taper” or withdraw stimulus ahead of schedule.

A brighter outlook may indeed justify higher yields. But what has started to spook markets is a sudden move up in so-called real yields, or returns in excess of inflation. That shift can tighten financial conditions, suck cash from stock markets and in general, hamper the recovery.

It’s spooking policymakers, too. From the Federal Reserve’s Jerome Powell to New Zealand’s Adrian Orr, many have weighed in this week to stress policy will remain loose for some time.

But the mantra they have chanted for years seems now to be falling on deaf ears.

Powell, the world’s most powerful central banker, knocked yields just a couple of bps lower even after commenting that the inflation target was more than three years away.

Euro zone yields only briefly heeded European Central Bank chief Christine Lagarde’s warning on Monday that the bank was “closely monitoring” the recent rise in yields.

(GRAPHIC – Who’s uncomfortable with rising bond yields?: https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrdbewve/de2402.png)

(GRAPHIC – Powell reassures bond markets but yields stay high: https://fingfx.thomsonreuters.com/gfx/mkt/xlbvgdmzapq/US2402.png)

The reason, according to ING Bank is that markets are pricing “with an increasing degree of conviction” the end of ultra-easy policies.

“Market confidence in the strength of the U.S. recovery is so strong and widespread that the tapering boat has sailed already,” they said, predicting “tapering” to happen by the end of 2021, earlier than the early 2022 predicted by Fed surveys.

“We expect consensus is converging to our view,” they added.

Money markets show investors expect a Fed rate rise next year; some bet on an even earlier move. Euro-dollar futures suggest a roughly 64% chance of a 25 basis-point rate hike by the end of 2022. A week ago it was seen at 52%.

If travel, dining out and shopping fully resume in coming months, it could unleash trillions of dollars in pent-up savings worldwide. Just in the United States, personal savings totaled $2.38 trillion at a seasonally adjusted annual rate in December, higher than at any time before the pandemic.

(GRAPHIC – U.S. savings: https://fingfx.thomsonreuters.com/gfx/mkt/azgpoeylypd/Pasted%20image%201614185996035.png)

That makes it an inflection point of sorts for the economy, according to April LaRusse, head of fixed income investment specialists at Insight Investment. At times like this, even strong forward guidance can fall flat, she said.

“Markets hear central bankers saying ‘Stop it, markets, you are going too far’, but they are worrying central banks might change their mind as new data emerges,” LaRusse said.

“Markets are saying: ‘Yes, we believe what you are saying, but conditions could change and could necessitate a change of policy’.”

ELSEWHERE

It’s a similar picture elsewhere.

In New Zealand, Orr’s highlighting of potential downside risks to the economy contrasted with the buoyant picture painted by data.

Bond yields shrugged off his comments to hit 11-month highs. More importantly, overnight index swaps (OIS), instruments allowing traders to lock in future interest rates, have started pricing a small possibility of an end-2021 rate hike.

Not long ago it was seen cutting rates below 0%.

BNY Mellon noted across-the-board rises in one-year forward inflation swaps — essentially gauges of future inflation — from Canada to Australia.

“Risks are now more toward further removal of easing prospects,” they added.

There is of course the possibility that the pledges to keep policy ultra-loose in the face of recovering growth only fan inflation expectations further. So, could markets force central banks to act rather than just jawboning?

Here the Fed faces less of a dilemma than its peers.

Japan’s 10-year yields are near the highest since late 2018 at 0.12%, posing credibility issues for a central bank that aims to hold yields around 0%.

The ECB too, already struggling to lift growth and inflation, may have to step up bond purchases under its emergency asset-purchase programme to combat rising yields.

“At the moment it’s a tension between markets and central banks rather than a conflict, though that might come,” said Jacob Nell, head of European economics at Morgan Stanley.

“The attitude of the Fed is that if markets think growth is stronger than we do then that’s fine, it will help growth and inflation expectations. So the Fed won’t fight the market — it just doesn’t believe it.”

(Reporting by Sujata Rao and Dhara Ranasinghe; Editing by Hugh Lawson)

 

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Energy, bank stocks drive FTSE 100 higher

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Energy, bank stocks drive FTSE 100 higher 2

By Shivani Kumaresan and Amal S

(Reuters) – Britain’s main stock index recouped early losses to end Wednesday higher, as gains in commodity-linked and banking stocks on investor optimism about a post-pandemic economic recovery outweighed losses in defensive sectors.

After falling as much as 0.8%, the commodity-heavy FTSE 100 index closed up 0.5%, with oil heavyweights BP and Royal Dutch Shell providing the biggest boost with gains of 5.4% and 3.3%, respectively.

Mining stocks including Rio Tinto plc, Anglo American Plc and BHP added between 0.7% and 1.5%, boosted by higher metal prices.

“One of the main drivers for the FTSE over the next few months is going to be investors’ interest in a possible commodity super-cycle,” said Andrea Cicione, head of strategy at TS Lombard.

“If commodities continued to perform as strongly as they have over the past few months, well that’s going to benefit disproportionately.”

British bank Barclays jumped 3.4%, while other lenders rose as Bank of England Governor Andrew Bailey said Britain will resist “very firmly” any European Union attempts to arm-twist banks into shifting trillions of euros in derivatives clearing from Britain to the bloc after Brexit.

Defensive plays such consumer staples, healthcare and utilities were among the top laggards.

The domestically focused mid-cap FTSE 250 gained 1.2% and marked its best day over a week, on hopes that speedy vaccination will help ease coronavirus restrictions faster.

In company news, Metro Bank fell 9.9% as it posted a much bigger annual loss and said it expects defaults to rise through the year as government support measures set in place due to the COVID-19 crisis are wound down.

Consumer goods maker Reckitt Benckiser shed 1.5% even as it capped 2020 with the strongest sales in its history, while Aviva slipped 0.5% as it agreed to sell its 40% stake in a joint venture in Turkey for 122 million pounds ($173.2 million).

(Reporting by Shivani Kumaresan and Amal S in Bengaluru; editing by Anil D’Silva and Emelia Sithole-Matarise)

 

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European shares end higher on upbeat German data

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European shares end higher on upbeat German data 3

By Shashank Nayar and Ambar Warrick

(Reuters) – European shares rose on Wednesday as sectors primed to benefit from economic recovery were supported by strong German growth data, although concerns over a possible rise in inflation and lofty equity valuations kept gains in check.

The pan-European STOXX 600 ended 0.5% higher, with Germany’s DAX adding 0.8% as data showed bullish exports and solid construction activity helped Europe’s biggest economy to grow by a stronger-than-expected 0.3% in the fourth quarter.

Travel stocks jumped 1.9% to near one-year highs, leading European sector gains on optimism around major countries lifting coronavirus-induced lockdowns.

Still, global airline industry body IATA flagged further headwinds for airlines in 2021.

“The market has fallen recently due to lofty valuations, but investors are becoming more accepting of the fact that as European economies slowly reopen and earnings improve, the current equity valuations could be justified,” said Chris Beauchamp, chief market analyst at IG Group.

The benchmark STOXX 600 has rebounded nearly 50% from its March 2020 lows, also led by historic stimulus measures, but it has still far underperformed a 75% jump in the U.S. S&P 500.

U.S. Federal Reserve Chair Jerome Powell reiterated on Tuesday that interest rates will remain low despite indications of rising inflation, assuaging some fears of a sudden tapering in monetary stimulus.

“While another stimulus package will certainly be welcomed by market participants, inflation fears are still present, despite those concerns being downplayed by officials,” said Milan Cutkovic, market analyst at Axi.

“As more countries are planning the reopening of their economies, the focus could slowly shift back to value stocks.”

The rotation out growth-driven stocks was apparent, with the technology sector losing nearly 4% this week, lagging all of its regional peers.

In company news, AstraZeneca dipped 0.2% after it told the European Union that it expects to deliver less than half the COVID-19 vaccines it was contracted to supply in the second quarter.

Norwegian salmon farmer Bakkafrost was the biggest percentage loser on the STOXX 600 for a second session after it posted a fourth-quarter loss due to the pandemic.

German sportswear company Puma dropped 2.1% after saying it expects a heavy impact on its results from lockdowns through the end of the second quarter.

Telecom Italia surged 9.2% after it said profit and sales should stabilise this year.

(Reporting by Shashank Nayar in Bengaluru; Editing by Saumyadeb Chakrabarty and Uttaresh.V and Kirsten Donovan)

 

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