We Are Never Ever Getting Back Together!

We Are Never Ever Getting Back Together!                                         23 September 2021

For the past week, ending 23 September, Dubai Land Department recorded a total of 1,835 real estate and properties transactions, with a gross value of US$ 1.85 billion. It confirmed that 1,249 villas/apartments were sold for US$ 708 million, and 157 plots for US$ 327 million over the week. The top three transfers for apartments and villas were all for apartments –  US$ 86 million in Burj Khalifa, US$ 73 million in Marsa Dubai, and US$ 52 million in Palm Jumeirah. The top two land transactions were in Al Hebiah Fifth for US$ 52 million, and in Um Suqaim First for US$ 14 million. The most popular locations were in Al Yufrah 2, with 36 sales transactions, worth US$ 8 million, Al Hebiah Third, with 31 sales at US$ 21 million, and Hadaeq Sheikh Mohammed bin Rashid, with 19 sales transactions valued at US$ 90 million. Mortgaged properties for the week totalled US$ 817 million, including a plot for US$ 187 million in Wadi Al Safa 5. 76 properties were granted between first-degree relatives worth US$ 56 million.

Yesterday, 22 September, was a hectic day for the Dubai Land Department, with 266 sales transactions, worth US$ 232 million, and mortgage deals of US$ 91 million; there were also 21 gift transactions, amounting to US$ 7 million. The daily total of realty transactions was US$ 327 million, covering 227 villas/apartments, and 39 land plots, while the mortgages included 51 villas/apartments and 17 land plots. Chesterton’s latest UAE Q2 2021 Market Report, showed that, on the quarter, total Dubai residential transaction value increased by 49.4% to US$ 8.5 billion.

An indicator that the property market is returning to some form of normalcy, and that investors, including a marked increase in those from overseas, are back in force can be gleaned from the fact that off-plan sales are now almost the same as secondary sales, compared to a 30:70 ratio seen in recent times. Another interesting feature is that the average August transaction, at US$ 339k, was 52.9% higher on the year, with villa/town house up 12.1% to US$ 495k, and the median price for off-plan apartments 47.6% higher at US$ 300k. The overall average August sales transaction value increased 1.57% higher to US$ 705 million, with secondary average transaction value 5.91% higher at US$ 858 million and off-plan average transaction value down 1.3% to US$ 519 million. According to Property Finder, the five leading locations for villas/townhouses last month were Dubai Hills Estate, Arabian Ranches, Palm Jumeirah, Damac Hills 2 and Mohammed bin Rashid City. For apartments, the top five were Dubai Marina, Downtown Dubai, Palm Jumeirah, Business Bay and Jumeirah Village Circle. YTD, it is estimated that about 32k units have been completed of which 26k (81%) were apartments, well short of earlier estimates by so-called experts.

The latest report by Zoom Property Insights expects the Dubai villa segment to be 50% higher in Q4, based on trends from the previous three quarters, with one of the main drivers being investors and end-users looking for best options in areas near to the Expo 2020 site. The Dubai-based real estate portal listed Arabian Ranches, Dubailand, Dubai South, Palm Jumeirah, MBR City, Dubai Hills Estate and Damac Hills 2 as prime areas for increased sales in Q4. Sales in the ultra-luxury sector has seen the likes of Palm Jumeirah and MBR City posting price hikes of 18.5% and 10.5%, over the past six months; growth levels in Arabian  Ranches and Jumeriah Park were higher at 21.2% and 19.3%. Zoom expects the market, especially for villas, to continue its recent strong performance, noting the low inventory may result in price increases. The report concluded that Q4 villa prices could be as high as 10%, and, with the economy opening up next year, a sharper up-trend in 2022.

Dubai Holding Real Estate announced plans to sell about 6k units over the next fifteen months, (1.5k this year and 4.5k in 2022) to capitalise on the continued recovery of the UAE property market; it will also start new phases of master developments. The developer is an amalgam of the consolidation of Dubai Properties and Meraas as well as two other entities – North25 and Ejadah – last year. It has several master developments under construction, including Port de la Mer, City Walk Central Park, Mudon, Villanova and Madinat Jumeirah Living. In the first eight months of 2021, Dubai saw sales transactions totalling 37.5k, (35.4k in the whole of 2020), worth US$ 24.0 billion, up 22.6%, compared to last year’s twelve-month total.

HH Sheikh Mohammed bin Rashid Al Maktoum has created the Dubai Integrated Economic Zones Authority, an independent legal entity, with financial and administrative autonomy, which will take over the supervision of Dubai Airport Free Zone, Dubai Silicon Oasis and Dubai Commerce City. Effective from 10 January 2022, the law will take effect with HH Sheikh Ahmed bin Saeed Al Maktoum as Chairman and Dr Mohammed Ahmed Al Zarouni as CEO. The aim of the exercise is to introduce new frameworks for further improving services provided to businesses and investors, which in turn will help accelerate economic growth, with objectives of making Dubai the destination of choice for global investors and a major focal point for global commerce. Under the new DIEZA, with a company base in excess of 5k employing 30k, those with licences will be exempt from all taxes, including income tax, for fifty years, and will not be subject to the regulations of Dubai Municipality or Dubai Economy, with minor exceptions.

The Dubai Ruler also issued Law No. (18) of 2021, regulating the services related to the mediation of disputes applicable to anyone involved in the business of settling civil and commercial disputes through mediation. The new law seeks to encourage the adoption of alternative dispute resolution methods and enhance the speed and efficiency of mediation procedures. The law also outlines the procedures followed by the ‘Centre for Amicable Settlement of Disputes’, with the centre hearing and adjudicating disputes referred to it by a decision issued by the President of Dubai Courts. The court will delegate one or more judges to supervise mediation procedures and hearings and approve settlement and agreements.

The Dubai Chamber of Commerce and Industry estimates that the retail e-commerce market will reach US$ 8.0 billion, by 2025, from its current balance of US$ 3.9 billion, a year on year 53% rise; in 2020, the sector accounted for 8.0% of the country’s GDP, driven by a change in consumer shopping habits, arising from the impact of Covid and subsequent restrictions. The forecast growth will be aided by numerous other factors, including high incomes, government support, a more enhanced digital payment protocol, higher internet penetration and a young IT-knowledgeable generation.

The Department of Economic Development expects Dubai’s economy to grow by 3.1%, this year, nudging 0.3% higher to 3.4% in 2022. HH Sheikh Hamdan, Dubai’s Crown Prince, noted that “Dubai has successfully overcome the pandemic’s global shockwaves,” and that Dubai’s position as a major economic capital has been supported by clear goals, flexibility and speed in responding to changes.

In line with the recently announced federal government’s NAFIS programme, Majid Al Futtaim is planning to employ up to 3k Emiratis across its group companies in the ME, Africa and Asia. The programme is that private companies will have to employ more Emiratis in their workforce so that within five years, ‘locals’ will make up 10% of every private company’s payroll, employing 2% a year until the figure is reached. The government initiative is expected to see up to 75k Emiratis joining the private sector.

Following an agreement between Empower and Mitsubishi Heavy Industries Thermal Systems, the Dubai district cooling company will double the number of its centrifugal chillers, equivalent to a cooling capacity of 200k RT, over the next two years. The new units will be located in plants being built in Zabeel, Business Bay, Madinat Jumeirah and Dubailand.

There is no doubt that the UAE is positioning itself to become a global leader in blue hydrogen, with Adnoc already producing 300k tonnes of hydrogen a year, as it looks to achieve self-sufficiency in natural gas and tap the growing market for low-carbon fuel. Dr. Sultan Ahmed Al Jaber, the federal Minister of Industry and Advanced Technology as well as the MD and Group CEO of Adnoc, noted that “by leveraging our existing gas infrastructure and commercial-scale CCUS [carbon capture utilisation and storage] capabilities, the UAE can and will become a major player in the emerging blue hydrogen market”. In 2020, eighty trillion cu ft of shallow gas reserves were discovered in an area between Abu Dhabi and Dubai – the biggest discovery in fifteen years. With a global Covid recovery gaining traction, LNG and broader gas markets are tightening and prices moving north at an alarming rate – 36% higher on the month and 96% YTD. Almost 25% of the global energy supply is down to gas and this will continue to grow in the future.

To boost sustainability and achieve its water security goals, the country is developing three new water desalination projects in Dubai, Abu Dhabi and Umm Al Quwain; they will have a combined daily capacity of 420 million imperial gallons of water per day. All three will be commissioned within two years and will increase the country’s daily water desalination capacity to 1.69 million imperial gallons, in line with the UAE Water Security Strategy 2036. Three main aims of the strategy are to reduce total demand for water resources by 21%, increase national water storage capacity by up to two days and increase the reuse of treated water to 95%.

In a bid to speed up its expansion plans, the Gargash Group has acquired Deem Finance for an undisclosed amount. Its MD, Shehab M Gargash, commented that “this is a transformational transaction that will allow us to reimagine financial services in a way that the success of our brands is aligned with the financial success of our customers.” The Abu Dhabi-based digital financial services supplier provides a range of financing solutions, including personal loans, credit cards as well as wholesale deposit products to UAE corporate clients. The acquisition will complement Gargash subsidiary, Daman Investments, which also provides investment management and advisory services, including asset management, securities brokerage and wealth management.

As part of its strategy to support the SME sector in the UAE, the Emirates Development Bank is joining with UAE-based fintech, YAP, and has indicated that it will extend US$ 8.2 billion (AED 30 billion) in financial support to SMEs over the next five years. The EDB Business Banking app, launched earlier in the year, offers SMEs access to 24×7 secure, convenient, on-the-go digital banking services. The account, with no minimum balance criteria, is free to all, without paying additional fees.

Amazon announced that it would be adding 1.5k new jobs in the UAE, where it currently has two fulfilment centres, eight delivery stations, three sorting centres and a network of delivery service partners. The US tech giant did not disclose the value of the investment but did note that its latest expansion plan includes creating a “pipeline of new openings” and “closure of older buildings and upgrades, designed to deliver a better experience for customers”.

In June, Dubai developer, Hussain Sajwani announced plans for his investment company, Maple Invest, to take over Damac Properties, the listed company that he launched in 2002 and was the principal shareholder. At the time, it was stated that the offer would remain at US$ 0.354 (Dhs 1.30) per share, and that Maple Invest “plans to own a minimum of 90% and up to 100% of Damac”. This week, it confirmed that was relaunching a bid to take Damac private and at close of Thursday trading one share was worth US$ 0.338 (Dhs 1.24). The company has a market value in excess of US$ 2.0 billion and that in H1, it had delivered 2.7k units and had booked sales of US$ 708 million; revenue was 35.5% lower at   US$ 200 million.

In a US$ 114 million deal, Union Properties has signed an MoU with an unnamed real estate developer to take over the ownership of a shopping centre under construction in Motor City in Dubai.

The DFM opened on Sunday 19 September, 11 points (0.3%) lower the previous fortnight, shed a further 61 points (2.1%) to close the week on 2,840. Emaar Properties, US$ 0.06 lower the previous fortnight, gained US$ 0.02 to close on US$ 1.11. Emirates NBD and Damac started the previous week on US$ 3.88 and US$ 0.34 and closed on US$ 3.81 and US$ 0.34. On Thursday, 23 September, in a very low trading environment, 55 million shares changed hands, with a value of US$ 30 million, compared to 192 million shares, with a value of US$ 127 million, on 16 September.

By Thursday, 23 September, Brent, US$ 5.18 (7.3%) higher the previous fortnight, gave back US$ 2.43 (3.2%), to close on US$ 73.25. Gold, US$ 42 (2.3%) lower the previous week, lost US$ 12 (0.7%) to close Thursday 23 September on US$ 1,740.  

Partly funded by the German government, BMW has developed a hydrogen prototype car based on its X5 SUV and will build a test fleet of up to one hundred vehicles by next year. Furthermore, Audi has assembled a team of more than one hundred mechanics and engineers to research hydrogen fuel cells on behalf of the whole Volkswagen group and has already built a few prototype cars. There is no doubt that hydrogen is currently far too costly and is so far behind battery-powered vehicles, but it must be remembered that not so long ago, diesel was the future until the 2015 Dieselgate emissions scandal put it on the back burner and into virtual extinction. Battery power may be the current frontrunner to become the car technology of the future, but do not rule out the underdog hydrogen.

The latest report from the OECD forecast that prices in the G20 bloc of developed nations will rise quicker than pre-pandemic levels for at least two years, driven by higher commodity prices and shipping costs, constraints on the supply of goods and stronger consumer demand. It is expected that the UK will have the fastest rate of the advanced economies – at 3% – whilst there will be declines expected in the US, France, and Germany.

Following its latest US$ 1.5 billion funding round, including Abu Dhabi’s Mubadala Investment Company, Goldman Sachs-backed CityFibre, will use the funds to support and accelerate the rollout of full fibre to a third of the UK market by 2025. (Full fibre networks run fibre optic connections directly from an exchange to the home, allowing much faster transmission speeds). CityFibre, now the UK’s third largest national digital infrastructure platform, behind BT and Virgin Media, provides broadband to 650k UK homes and is aiming to hit a million by the end of 2021.

A JV between Next, (51%) and struggling Gap (49%), sees the US fashion giant’s UK website being managed by the UK retailer. Last July, Gap announced that it would close all its UK outlets but now Next will manage some of their concessions in several stores, keeping some sort of physical presence in the country. Next will expand its ‘Total’ platform where it will run

 other fashion brands’ e-commerce operations, including customer service, payment systems and logistics. Victoria’s Secret and Childsplay are two brands already on board.

During the first lockdown, Pret A Manger Pret had to make 33% of its 9k staff redundant and now eighteen months later, with the economy almost at pre-pandemic levels, the coffee and sandwich chain has announced that it will open two hundred outlets, with many located in train stations, bus stations and motorway services, over the next two years and recruit 3k by the end of 2022. Furthermore, it is planning to expand into five overseas markets over the next two years. Last year, it posted a 57.8% fall in revenue to US$ 407 million. To finance this latest growth strategy, Pret has received a US$ 137 million funding from JAB and Pret founder Sinclair Beecham. Earlier in the month, it announced that café workers would receive at least a 5% pay rise, which will raise their hourly rate from the legal minimum of US$ 12.14 to US$ 12.91, and that all team members, including managers, will get a raise.

August was the fourth consecutive month that UK retail sales fell, this time at the slower rate of 0.9%, compared to a much higher 2.8% in July. One of the main reasons proffered for the 1.2% decline in food store sales was that with the lifting of restrictions, people spent more time eating and drinking in bars and restaurants, but other drivers were ongoing labour shortages, (mainly lorry drivers and fruit pickers), and supply chain problems which will be a sector disruptor for some time. Pre-pandemic online sales in February 2020 were at 19.7% and since then, have risen to 27.7% last month, (27.1% in July). Department and clothing stores were the two more badly hit by the disruption, down 18.2% and 11.1% respectively.

Last week’s blog indicated that the ‘Just in Time model’ was struggling to remain a viable management tool for many companies, amid disrupted supply chains that leave the end user with little or no stock. A similar problem is rattling the UK energy sector with the classic law of supply and demand – a theory that explains the interaction between the sellers of a resource and the buyers for that resource. There has been a surge in UK gas prices, exacerbated by the fact that the UK has scant storage facilities amid surging demand. How dramatic the shortfall in supply can be seen when comparing UK’s gas storage of 8.9 terawatt/hours with Spain, Germany and Italy storing 166.2 TWh, 147.1 TWh and 113.7 TWh respectively. The UK imports more than 50% of its pipeline gas and LNG, with the four main providers being Norway, Qatar, US and Russia, with totals of 266k Gigawatt hours, 97k GWh, 53k GWh and 25k GWh.

The demand surge for gas is not unique to the UK and is seen all over Europe, where demand is also rising. Last winter was one of the coldest on record which resulted in increased demand which in turn depleted supplies; these have not been replenished because suppliers had to carry out major maintenance that had been curbed because of earlier lockdowns. The situation was worsened because calmer weather reduced the amount of electricity generated by wind power and the deteriorating situation just became worse. Consequently, wholesale gas prices have more than quadrupled over the last year and with the UK being one of Europe’s biggest users of natural gas, with 85% of homes using gas central heating, the country has been badly impacted. It is expected that there will be no let up until Q2 next year because prices will not fall until storage facilities fill up again. Any effect from Brexit – and the UK leaving the bloc’s Internal Energy market – has been minimal. It so happens that the country will be hit by more than a double whammy, with gas prices skyrocketing, labour shortages in certain key sectors, higher food prices, empty supermarket shelves and inflation topping 4.0%, this could turn into a winter of discontent.

With real estate accounting for 10% of its GDP, Chinese administrators and global economists are closely monitoring the fallout from Evergrande, failing to repay US$ 84 million in interest payments, exacerbating the possibility of a default. If this were to occur, its impact would have global implications affecting foreign direct investment. However, it seems that analysts have been premature to announce the demise of China’s second-biggest property developer by sales, and despite all its financial woes, and being on the brink of default with a huge US$ 300 billion debt, it is unlikely to spread globally. S&P considers this to be a domestic Chinese problem and is more than likely to be settled locally. Property has always been a problem in China, with lax regulations, loan sharks, dodgy building standards and a host of other illegal activities associated with a massive property bubble.

Even before the announcement, earlier in the month, that warned that it may default on debt repayments if its efforts to refinance and sell assets fall short, the company was already talking with creditors and stakeholders trying unsuccessfully to sell their debt by up to 70%. The fear is that in a fire sale, Evergrande may have to sell its vast portfolio of apartments, at heavy discounts, which in turn could really damage the industry by undermining prices and putting smaller competitors out of business.

Last year, Beijing introduced what it called the Three Red Lines Policy for property developers, so as to reduce debt within the industry, curb runaway property prices and lift standards. This was a belated government attempt to take more control over a sector that was running wild as the government were more concerned with economic growth at all costs and turning a blind eye to the excesses seen in relation to the building industry.  It is apparent that the housing boom in China is in the throes of an implosion and the hope is that the property bubble is deflated slowly and methodically so as not to leave its debris scarring the rest of the economy. Considering Evergrande owns more than 1.3k projects in 280 or more cities in China, serving about 12 million homeowners, with its property services arm, which listed on Hong Kong Exchanges and Clearing in December 2020, having about 2.8k projects in more than 310 Chinese cities, this will not be an easy exercise.

It appears that most banks have limited exposure to the troubled developer except for the affiliated Shengjing Bank and national Minsheng Bank, which may go under without government support. Other stakeholders impacted include home buyers, investors, bondholders, suppliers and contractors. There is a belief that if a contagion effect were to occur, the government would get involved if that were to cause a systemic risk to the economy; it would also look at reducing the risk to home buyers and minimising economic losses. However, the high-net-worth individuals, and institutional investors, may see a bigger percentage of their investment disappearing.

According to its Chair, Jerome Powell, the Federal Reserve could start tapering its asset purchasing programme as early as November, with complete closure by mid-2022, whilst emphasising that this was not meant to be a direct signal on the timing of the beginning of interest rate hikes. At this week’s meeting, their updated quarterly projections were released indicating that officials are now evenly split on whether or not it will be appropriate to begin raising the federal funds rate as soon as next year; their previous forecast in June had indicated no rate increases until 2023; their projected median rates rose by 0.4% to 1.0% for 2023 and to 1.8% the following year. It also unanimously voted to maintain the target range for its benchmark policy rate at zero to 0.25% and continue purchases of Treasuries and mortgage-backed securities at a pace of US$ 120 billion per month.

From early next month, the UK government will scrap its controversial traffic lights system, seeing the end of the green and amber lights, whilst retaining the red-light list, in England. People who have had double jabs will not need to take a pre-departure test before leaving any country not on the red list and will also be able to replace the day two PCR test with a cheaper, rapid lateral flow test. The change in policy has been a “shot in the arm” for the sector and mostly welcome in the travel industry, with Airlines UK noting that it “moves us much closer to the reopening of UK aviation”. The acid test for Dubai is to see how many UK travellers visit for the next school half-term in October now travel restrictions have largely been lifted by the Johnson administration.

The day after the announcement of the so-called Aukus pact, between Australia, UK and US, that rattled the Chinese administration, the country has applied to join CPTPP, a key Asia-Pacific trade pact, as it attempts to strengthen its position in the region. The focus of the tri-nation pact is for Australia to build nuclear-powered submarines for the first time, using technology provided by its two partners, with China describing it as “extremely irresponsible” and “narrow-minded”. The Chinese foreign ministry commented that the alliance risked “severely damaging regional peace… and intensifying the arms race”.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed in 2018 by eleven countries, including Australia, Canada, Chile, Japan and New Zealand; since then, both the UK and Thailand have expressed their desires to join, with China now indicating its wish to be added. It started life as the Trans-Pacific Partnership, promoted by the then US president, Barrack Obama, in a move by the US to challenge/counteract China’s growing economic influence in the region. If the Chinese application is accepted by the current members, it will be a significant boost for China’s position on the world stage and comes less a year after it joined the Regional Comprehensive Economic Partnership – the world’s largest free trade agreement, with fourteen regional nations, including seven members of the CPTPP, Australia, Brunei, Japan, Malaysia, NZ, Singapore and Vietnam.

In 2016, Naval Group, a global and major French contractor, and an industrial group that specialises in naval-based defence, was awarded a contract by the Australian government for the design of twelve future submarines for the Royal Australian Navy; the contract was cancelled last week, and the decision was not well received by the Macron government who were set to lose a US$ 90 billion deal.  The French company issued a statement “taking note of the decision of the Australian authorities to acquire a fleet of nuclear submarines in collaboration with the United States and the United Kingdom”. Meanwhile, French Armed Forces’, Florence Parly, indicated that the government would look to ensure any financial hit to Naval Group from a cancelled Australia submarine deal is limited.

To the outside observer, it does make sense that a nuclear submarine is more preferable to diesel and Australia has made the right decision, even though the decision is bad news for some Australian companies who were lining up for contracts worth over US$ 1 billion from Naval Group – and employing 500 – in Q4. Even though the design phase of the project had not yet started, some work was already being contracted and hundreds of people employed in Adelaide. There is a warning of a ‘valley of death’ relating to these companies and how they will survive until work starts in 2024. Questions are being asked why the French contractor was not asked to switch to the existing nuclear version of the Barracuda design, especially because there were lots of companies that already had Naval Group’s contracts. Furthermore, France will not be in the mood to be offering any contracts to the UK and this may have repercussions for the UK defence sector.

It is reported that the EU is contemplating the postponement of a major cooperation summit with the US on trade next month. The reason behind this comes on the back of the US entering a new alliance involving the UK that would deliver Australia at least eight nuclear-powered submarines which led to Canberra cancelling an existing contract with France for twelve diesel-powered submarines. The EU-US Trade and Technology Council (TTC) was announced in June and was meant to signify a new era of cooperation between the two sides. So much for the EC then stating that the TTC “will serve as a forum for the United States and European Union to coordinate approaches to key global trade, economic, and technology issues and to deepen transatlantic trade and economic relations based on shared democratic values.” It seems to the outsider that the other 26 members are bowing to the whims of a furious, upset and bitter French administration. An irate Emmanuel Macron seems to be of the opinion that We Are Never  Ever Getting Back Together!

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It’s Just Only Begun!

It’s Only Just Begun!                                                          16 September 2021

For the past week, ending 16 September, Dubai Land Department recorded a total of 1,610 real estate and properties transactions, with a gross value of US$ 1.75 billion. It confirmed that 1,081 villas/apartments were sold for US$ 583 million, and 119 plots for US$ 379 million over the week. The top three land transactions were in Palm Jumeirah for US$ 138 million, and two in Saih Shuaib 2 for US$ 19 million and US$ 14 million. The most popular locations were in Al Hebiah Third, with 20 sales transactions, worth US$ 17 million, Al Yufrah 2, with 15 sales at US$ 5 million, and Hadaeq Sheikh Mohammed bin Rashid, with 14 sales transactions worth US$ 69 million. Mortgaged properties for the week totalled US$ 545 million, including a plot for US$ 87 million in Al Safouh Second. 93 properties were granted between first-degree relatives worth US$ 76 million.

The International Schools Market in the Mena Region’s latest report notes that enrolments at the 2.3k international schools (1.83 million pupils) in the Mena have seen a 20.1% increase over the past five years. It also confirmed that the UAE – with 725 international schools of which 333 are in Dubai – has the highest number of students in the world at 697k. Some way behind are China and India with 419k and 316k pupils. Within the region, there is Saudi Arabia, with 292 schools (320k pupils), Egypt, with 279 (120k), and Qatar, with 207 (182k). Over the six-year period to 2021, the number of teaching staff has risen 21.4% to 153k, average tuition fees have increased 10.0% to US$ 7.7k, and total fee income by 36.8% to US$ 13.48 billion.

With travel restrictions being eased, and Emirates returning to some form of normalcy, it is reported that the Dubai carrier is planning to recruit a further 3k cabin crew and 0.5k airport staff over the next six months. For the past three months, the airline has been recalling pilots, cabin crew and other operational employees who were stood down during the early stages of Covid in Q2 2020. The current schedule sees Emirates flying to 90% of its pre-pandemic destinations and hopes to be flying at 70% capacity by year end.

Within the next six months, the country is preparing to be the leading global destination for travellers during Expo 2020 Dubai. Last month, the total number of passengers travelling to the UAE was 207% higher, on the year, at 2.5 million, while it is reported that local hotel sector has regained its pre-pandemic reservation rates, with hotel reservations in the UAE showing a marked growth prior to the opening of Expo 2020 Dubai. “Wego” registered over 500k searches for flights and hotel reservations for Dubai during the event period. The country, although surprisingly still on the UK ‘amber list’, is seen as a safe haven by many travellers, more so when 79.3% of its population has been fully vaccinated and 90.1% having had their first dose. Another driver has been the government’s decision to allow fully vaccinated individuals to apply for an entry visa, and this could be a real game changer.

H.H. Sheikh Mansour bin Mohammed bin Rashid Al Maktoum opened the four-day 42nd edition of ‘The Big 5’ exhibition The region’s largest event for the construction industry has attracted 1.2k exhibitors from fifty countries and is the only live in-person event to connect the global construction industry in 2021. Sheikh Mansour noted that the strong momentum witnessed in Dubai’s events sector was the result of the emirate’s long experience in hosting and organising international events, as well as its prudent handling of the global pandemic.

Following this week’s two-day Dubai Digital Economy Retreat, a new plan has been established, with the help of the one hundred industrial experts who were attendees, to develop Dubai’s digital economy strategy. The scheme revolves around three pillars – enhancing the digital business environment, supporting digital firms and attracting leading digital companies to Dubai. Some of the topics aired included:

  • the need to attract more international digital companies and specialised talent to Dubai
  • high costs for companies operating in this sector
  • encouraging more digital start-ups
  • enhancing investments in growing these businesses
  • widening acceptance of e-commerce payments
  • removing barriers of entry
  • enhancing the quality of services operating in this space

Currently, the digital economy contributes about 4.3% to the country’s GDP, equating to  t  the US$ 27.2  billion action plan that lays the groundwork for developing Dubai’s digital economy strategy and ecosystem, which will lead to many new jobs and growth opportunities. It is estimated that the UAE is home to 1.4k start-ups, (estimated to be valued at US$ 24.5 billion), ninety investment funds in the digital sector and twelve business incubators.

Following last month’s start-up of Unit 2 of the Barakah Nuclear Energy Plant, the Emirates Nuclear Energy Corporation confirmed that its operations and maintenance subsidiary, Nawah Energy Company, had safely and successfully connected the unit to the UAE grid. This will add a further 1.4k MW of clean electricity capacity to the UAE grid and takes the facility halfway to its target of supplying up to 25% of the country’s electricity needs; it will also drive reductions in UAE’s carbon emissions. The project, started in 2012 and which is more than 96% finished, will boast four APR-1400s, with Units 3 and 4 in the final stages of commissioning at 95% and 91% completed respectively. It is expected that the plant will produce 5.6 gigawatts of free carbon electricity for the next sixty years.

On Sunday, the government released thirteen policies, being the second batch from the UAE’s 50 Projects for the Future, first announced earlier in the month. One of its more striking requirements, in a thirteen-policy package, was that UAE private sector employers must ensure 10% of their workforce is Emirati over the next five years, with hiring having to show a 2% rise each year; this would boost the number of Emiratis in the private sector by 75k. The government confirmed that “unskilled labourers will not be counted, only the skilled labour will be within in our target”. Other projects include paid training programmes, subsidies for Emiratis working in the private sector and support for local entrepreneurs looking to leave the public sector and start up their own companies. A further US$ 341 million will be made available to train Emiratis and prepare them for specialised private sector roles, as well as a monthly US$ 2k payment for university fees to support the cost of training citizens in the private sector for up to a year. Furthermore, pensions for those in lower paid jobs will also be supplemented by government funds for the next five years.

In a bid to encourage Emiratis to set up their own businesses, rather than working in the public sector, newly introduced incentives include:

  • a monthly US$ 1.4k top-up, for five years, for Emirati university graduates who take a role in a privately-owned company
  • six-month state support for Emiratis who lose their job in the private sector
  • a fixed five-year US$ 1.4k monthly bonus for nationals working in specialised fields in the private sector, such as programmers, nurses, accountants, and others
  • federal government employees can take a six or twelve-month sabbatical on 50% pay so as to start their own business, and employees aged over fifty can take early retirement to do the same

In the eight months to August 2021, Dubai Chamber reported a 21.8% jump, to US$ 40.1 billion, in the value of exports and re-exports year-on-year, driven by a rebound in trade activity in Dubai; on the year, the growth was 43.9% higher. Last month, the Chamber issued 58.2k certificates of origin – 20.8% higher compared to July 2021. The GCC region accounted for 53% of the total exports and re-exports of members in August – 37% higher on the month, at US$ 3.1 billion, and up 16.4%, year on year, to US$ 22.7 billion. The Chamber is to support the five-year plan, announced by HH Sheikh Mohammed bin Rashid Al Maktoum, to boost Dubai’s foreign trade by 42.9% to US$ 545 billion.

Latest figures indicate that the value of the UAE’s 2020 non-oil foreign trade jumped to US$ 382.3 billion, including a 10.1% hike in year-on-year non-oil exports at US$ 69.4 billion; imports, accounting for 56% of total trade, were at US$ 213.9 billion and re-exports at US$ 99.0 billion. The top five trading partners – China, Saudi Arabia, India, US and Iraq – with bilateral trade amounting to US$ 47.4 billion, US$ 28.3 billion, US$ 27.9 billion, US$ 21.9 billion and US$ 14.4 billion respectively. These five accounted for 36.6% of total trade, compared to 44.1% a year earlier. In relation to exports. the top five nations were Switzerland, Saudi Arabia, India, Turkey and Italy with totals of US$ 8.0 billion, US$ 7.0 billion, US$ 5.4 billion, US$ 5.0 billion and US$ 4.9 billion. For imports, the leading five were China, US, India, Japan and Germany, (accounting for 41.6% of all imports), with figures of US$ 39.3 billion, US$ 16.5 billion, US$ 16.5 billion, US$ 9.5 billion and US$ 7.3 billion. Re-exports saw Saudi Arabia the leading nation, with US$ 14.9 billion, followed by Iraq, (US$ 11.1 billion), Oman, (US$ 6.6 billion), India, (US$ 6.1 billion), and China (US$ 5.3 billion).

At a meeting at 10 Downing Street today, an agreement was signed that expanded the UAE-UK Sovereign Investment Partnership. This framework for investment was signed in March that saw Mubadala Investment Company tie up with the UK Office for Investment, with the former committing US$ 1.10 billion (GBP 800 million) and OfI US$ 275 million (GBP 200 million) to be invested in UK life sciences. Following today’s meeting, the UAE-UK SIP will receive a major boost by a further five-year investment of US$ 13.8 billion (GBP 10 billion) by the Abu Dhabi partner not only in life sciences but also in three more sectors – technology, infrastructure, and energy transition. It was also decided that the UAE-UK SIP will become the central investment platform under the new Partnership for the Future bilateral framework, attracting many UAE and UK entities to invest under the UAE-UK SIP umbrella.

The UAE’s Central Bank has issued  new guidlines on transaction monitoring and sanctions screening for its licensed financial institutions that requires them to demonstrate compliance with CBUAE’s requirements by 12 October. Among LFI’s obligations include to:

  • develop internal policies, controls, and procedures that are commensurate with the nature and size of their business
  • manage their identified money laundering and financing of terrorism risks
  • put in place indicators to identify suspicious transactions and activities
  • file suspicious transaction and activity reports or other report types to the UAE’s Financial Intelligence Unit
  • regularly screen their databases and transactions against names on lists issued by the UN or by the UAE Cabinet 

The Federal Tax Authority has reminded impacted registrants to benefit from the June Cabinet Decision No. 49 of 2021 which includes reductions on administrative penalties. The aim of this latest Decision, which sees reductions in sixteen types of administrative penalties, seems to enhance the legislation to encourage self-compliance. To benefit, certain conditions have to be met, including the:

  • administrative penalty must have been imposed under Cabinet Decision No. 40 of 2017 before 28 June 2021
  • administrative penalty due was not settled in full until 27 June 27, 2021
  • the registrant should settle all due payable tax by 31 December 2021
  • the registrant should settle 30% of the total unsettled administrative penalties imposed before 28 June 2021, no later than 31 December 2021

If these conditions are met, the administrative penalties will be redetermined to equal 30% of the total unpaid penalties that will appear on the FTA’s electronic system after 31 December 2021.

Amanat Holdings has invested over US$ 12 million to acquire the real estate assets of Cambridge Medical and Rehabilitation Centre in Abu Dhabi – the Dubai-listed company’s first foray into healthcare sector real estate investment. Earlier in the year, the company acquired Cambridge Medical for US$ 232 million, in one of the region’s biggest healthcare sector deals, from TVM Capital Healthcare, a private equity company. The company, that specialises in healthcare and education sector investments, plans to further invest in developing its portfolio of companies by either owning the underlying real estate assets or investing in technology.

Although still in the “early stages”, discussions have started that could result in Dubai-listed courier Aramex acquiring Turkish transportation company MNG Kargo. Its final decision is dependent “to satisfactory findings of the due diligence process” and “the company’s senior management and board of directors’ approval.” Although “the total value of this transaction has not yet been determined or agreed upon at this early stage,” the deal may top US$ 500 million.

This Sunday, 19 September, the DFM will introduce three new equity futures contracts, bringing the total on the bourse to 33 on individual stocks of eleven listed companies, with tenures of up to three months. First launched in October 2020, the total value of trading on contracts has topped US$ 32 million. The public is able to trade DFM equity futures through eight local brokerage firms.

The DFM opened on Sunday 12 September, 4 points (0.1%) lower the previous week, shed a further 7 points (0.2%) to close the week on 2,901. Emaar Properties, US$ 0.01 lower the previous week, lost a further US$ 0.05 to close on US$ 1.09. Emirates NBD and Damac started the previous week on US$ 3.81 and US$ 0.34 and closed on US$ 3.88 and US$ 0.34. On Thursday, 16 September, 192 million shares changed hands, with a value of US$ 127 million, compared to 148 million shares, with a value of US$ 55 million, on 09 September.

By Thursday, 16 September, Brent, US$ 0.90 (1.2%) higher the previous week, gained a further US$ 4.28 (5.9%), to close on US$ 75.68. Gold, US$ 16 (0.9%) higher the previous week, lost US$ 42 (2.3%) to close Thursday 16 September on US$ 1,752.   

Late last week, the US Energy Information Administration revised downwards its Brent 2021-2022 price outlook by US$ 0.10 to US$ 66.04 this year but maintained its 2022 forecast at US$ 66.04.  This year, it expects a 5.0 million bpd increase in supply, and 3.6 million bpd in 2022, resulting in a daily 101 million bpd and this despite lower-than-expected demand. It expects “growth in production from Opec+. US tight oil, and other non-Opec countries will outpace slowing growth in global oil consumption and contribute to” oil price declines in 2022. Next year, the agency sees Opec adding 1.4 million bpd, to reach a daily total of 28.34 million bpd, but that Brent prices will remain around the US$ 71 level in Q4.

The International Energy Agency confirmed that the recent Hurricane Ida shut out an estimated 1.7 million bpd, along the US Gulf coast, (equating to 44% of the area’s oil supply), with total losses in the region of thirty million bpd; this is expected to erase the additional supply that is being added to the market, following Opec+’s latest initiative. Last month, global supply dipped by 540k bpd to reach 96.1 million bpd, with this figure to remain basically the same this month and nudging higher in October, as the oil cartel continues unwinding cuts, resolving outages and increasing production. At their planned 01 October meeting, Opec+, will probably sanction a further 400k bpd, rising to two million bpd by year-end. The energy agency expects oil demand to grow by 5.2 million bpd in 2021 and 3.2 million bpd in 2022.

A money.co.uk study studied a plethora of fine dining restaurants, high-end designer shops and elegant 5-star hotels, to rank the world’s most luxurious cities. The top five cities in the study were Paris, London, Tokyo, New York and Seoul, with five Asian destinations – Hong Kong, Shanghai, Singapore, Bangkok and Beijing – making the top ten. Dubai was ranked 16th in front of the likes of LA and Madrid. Dubai scored well in several sector including having the most five-star hotels, (112), compared to say the Paris number of 95. However, the French capital with 108 luxury stores, (with more Cartier stores than any other city in the world) outscored Dubai’s 76. Rather surprisingly, the emirate does not have any Michelin-star restaurants whereas Paris has 427 of them, followed by London’s 156.

First applied by Toyota in the early 1970s, Just in Time is a Japanese inventory management philosophy which was first developed as a way of meeting consumer demand, with minimum delays. The main thrust of the system is to ensure that goods are received from suppliers only as they areneeded, with the main objectivesbeing to reduce inventory holding costs and increasing inventory turnover. The system, which requires careful planning over the whole supply chain, increases efficiency and increases profitability, and among its benefits are reducing inventory wastage and decreasing warehouse holding costs. Other advantages are that, as essential and stocks are required, less working capital is required, and the manufacturer has complete control over the manufacturing process which works on the demand-pull basis. It also gives manufacturers 100% control over the manufacturing process which allows them to quicken production for an in-demand product and, at the other end, reduce production for slower-moving items.

Supposedly the panacea for all manufacturing inventory problems, many companies failed to read the small print.  Its two main drawbacks are that in case of disruptions, there is no excess of stock to fall back on and the other is the environmental impact of the model requiring a lot of transporting between supplier, manufacturer and customer, with the resultant over-use of fossil fuel and packaging. Covid has probably rung the death bell for JIT, with the problem further exacerbated in the UK by Brexit, which has seen 100k HGV drivers returning to their respective European countries. The UK’s farm-to-fork supply chain is currently missing around half a million of the four million people who usually work in the sector – again mainly attributable to the ‘Brexit exit’. The end result is that many companies, including the likes of MacDonald’s, KFC Heineken, Hardy’s wine, Iceland, Nissan and Boots, have experienced supply chain difficulties that have seen empty shelves and restaurants having to cut back on their menu items. What is apparent is that the labour shortage has probably put the final nail in the coffin of JIT, as the system is no longer working and highly likely not to recover.

On Tuesday, Apple released its latest updated iPhone 13 and its success will ensure the tech giant will become the world’s first three-trillion-dollar company sometime in 2022; currently, its market value hovers just under US$ 2.5 trillion, having climbed 12% YTD, having only reached the US$ 2 trillion mark in August 2020. Apple did take a hit last week when a US court ruled that it must not block app developers from guiding users towards making payments outside the Apple app system – a blow to one of its most profitable services. Apple’s service division, which includes the app store, accounted for 20% of the company’s US$ 275 billion turnover, with the iPhone driving 50% of its revenue stream. The new iPhone does not differ that much from its predecessor, although its camera lenses and battery capacity are much improved. Two drivers will push sales in an already saturated marketplace – the global rollout of super-fast 5G networks, and the fact that about 300 million iPhone owners have not upgraded their phone in three and a half years. How long Apple can rely on its iPhone – of which over one billion have been sold – as its principal revenue driver remains to be seen.

In an antitrust case, a Californian district judge has ruled against Epic Games confirming that the Apple 30% App store commission for subscriptions and downloads does not violate state or federal law. The judge summarised that “the court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws”. The long-standing argument saw Apple claiming the App Store’s fee system was an essential operating charge, with Epic calling it a monopolistic tax. The spat came to a head in August 2020, with Epic introducing a replacement payment system in its popular game Fortnite to go round the App Store’s transaction fees, following which Apple retaliated by deleting it from its app gallery. The court found this action to be a breach of contract and ordered Epic to reimburse Apple 30% of all revenue it collected through direct payments, thought to be over US$ 3 million. The judge also noted that “while the court finds that Apple enjoys considerable market share of over 55% and extraordinarily high profit margins, these factors alone do not show antitrust conduct. Success is not illegal.” In her summing up, the judge said that “the court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice.”

The Commonwealth Bank of Australia will plead guilty to charges that it sold junk insurance to 165 customers, as the Australian Securities and Investments Commission brought charges relating to the sale of CreditCard Plus and Loan Protection insurance as add-on products from 2011 to 2015. The allegations surround claims that the bank misled customers in branches, online and on the phone into believing the policies had uses or benefits when they did not.  The bank has apologised for their “unacceptable conduct” and will get the proverbial slap on the wrist, with no individuals facing prosecution; the bank will pay the penalty and its current customer base will pay the tab. It is also reported that the watchdog is chasing Westpac for selling junk consumer credit insurance, and ME Bank for making dodgy representations to its customers.  Old leopards never change their spots!

Having just raised a further US$ 200 million in a fresh round of private equity investment, Canva is now valued at US$ 40.0 billion, becoming one of the world’s biggest privately-owned companies and the fifth most valuable global start-up behind ByteDance, which owns TikTok, payment platform Stripe, SpaceX and Swedish financial technology firm Klarna. Having doubled in value over the past five months, the Australian graphic design business, founded in 2013 by Melanie Perkins and Cliff Obrecht, who now own a 36% stake in the company, have announced that “the vast majority” of their stake would be used “to do good in the world” through a foundation.  The Sydney-based allows customers to design everything from T-shirts to business cards and is becoming more popular with large companies to use as a tool to run collaborative design projects. Around 130k non-profit organisations are said to get the premium version of Canva for free.

In the UK, the Johnson government has set out plans to invest US$ 900 billion in public and private infrastructure over the next decade. Launched on Monday, it is expected that the investment would support an extra 425k jobs over the next four years, creating new opportunities for thousands of apprentices, technicians, graduates and skilled workers. It is estimated that US$ 123 billion would be spent on social infrastructure to help communities, including US$ 3.5 billion on 165 major rebuilding education projects, as well as US$ 41.5 billion of planned procurements over the next twelve months in social and economic infrastructure. The PM also noted that the furlough scheme had so far cost US$ 94.8 billion and had helped 11.6 million people, including protecting 910k jobs in Scotland, 470k jobs in Wales, and nearly 290k jobs in Northern Ireland.

One of the anomalies in the UK labour figures is that although its unemployment figures dipped 0.1% to 4.6%, in the quarter to July, and August payrolls rose by 241k to 29.1 million, job vacancies hit a record high at over one million. The Office for National Statistics confirmed that numbers were back at pre-Covid levels in August, but despite this, there remains high demand for more staff. There were labour shortages in certain sectors, which will inevitably dampen growth, as well as the impact on firms’ ability to fulfil orders and meet customer demand. Figures may be skewed because it is estimated that one million people are still on furlough which comes to an end on 30 September. The number of vacancies in the six sectors with the highest numbers were social work, hospitality, technical professions, retail, manufacturing and administration services with 167k, 134k, 98k, 83k, 75k and 75k. 

Driven by higher prices in its various eateries, August UK inflation has risen to 3.2% – its highest level in more than nine years – with prices moving higher, following last summer’s discounts under the government’s ‘Eat Out to Help Out’ scheme that lasted throughout August 2020. With a record monthly 1.2% hike, from July’s 2.0% rate, the inflation figures were skewed by the US$ 14 discount offered by the government to help out the hospitality sector.  There were also price rises in computer games and fuel, (now at US$ 1.86 per litre), but restaurant prices represented more than half of the 1.2% rise in headline inflation. The higher than expected inflation rate hike may see the BoE considering phasing out the stimulus package, first introduced at the onset of Covid in March 2020, and/or even nudging interest rates marginally higher.  Some analysts will let you believe that this inflationary surge is just a temporary blip, but with the global supply chain in disarray, Brexit bureaucracy, higher energy prices and higher food costs all combine that point to inflation rates continuing to head north to reach at least 4.0% by year end.

According to the UN Conference on Trade and Development, the global economy is expected to expand, this year, at a quicker rate – 5.3% – than initially expected, followed by 3.6% in 2022; this follows the worldwide 3.5% contraction reported last year. (Globally, international trade is forecast to grow by 9.5% in 2021, after dropping by 5.6% in 2020). The usual caveat applies – that the overall global economic recovery will be uneven across geographies, income levels and sectors. The report highlighted that “these widening gaps, both domestic and international, are a reminder that underlying conditions, if left in place, will make resilience and growth luxuries enjoyed by fewer and fewer privileged people.” Many developing economies are being held back by very limited access to vaccines and constraints on fiscal measures, with the resultant economic damage being more felt in Africa and South Asia. It is estimated that, within four years, developing countries will be US$ 12 trillion poorer owing to the pandemic.

The Institute of International Finance estimates that, in Q2, US$ 4.8 trillion was added to global debt increasing the total balance to a massive – and unacceptable – level of US$ 296 trillion. Having moved lower in Q1, the latest balance came in US$ 36 trillion higher, compared to its pre-pandemic level. To the observer, it seems that governments, corporates and households continue to borrow almost unabated, as the pandemic keeps reappearing under different guises. 

Emma Radacanu was not the only tennis player in New York to have a big win this week when she won the US Open, without losing a set in her seven matches, to become the first ever qualifier to win a major. The other winner was not on the tennis court but Roger Federer-backed running shoe company, On Holding, jumping 46% on their New York debut yesterday, 15 September; by the end of trading, the Swiss firm, founded in 2010, had a market value of US$ 11.0 billion, after selling 31.1 million shares in its IPO raising US$ 746 million. The company, which teamed up with Federer to develop the Roger Pro tennis shoe, (which retails at US$ 200 a pair), also makes a 100% recyclable brand of running shoes, called Cyclon, made from castor beans.

For the twelve months to August, the Swiss tennis ace made only US$ 1 million from his sport but netted US$ 91 million, ensuring his position as the highest-earning tennis player in the world, with most of his income from endorsements. The trend continues when the top ten tennis earners are assessed with a collective total of US$ 320 million, 6.0% lower on the year, of which US$ 281 million, (87.8% of the total) originates from endorsements.  It can only be a matter of time before big hitter Emma Radacanu joins the big earners, having just won US$ 2.5 million for her victory in the last major of the season. With the top nine global female sportswomen all being tennis players, there is no doubt that the Canadian-born teenager has all the right credentials to become the highest ever paid female athlete – with the usual caveat that she has to keep winning.  Her current business manager is IMG’s Max Eisenbud, who formerly managed world number one, Maria Sharapova, who was the world’s highest-paid female athlete for 11 years running. Radacanu already has a shoe and clothing sponsorship contract with Nike, a racquet sponsorship with Wilson and is on the front cover of October’s Vogue. There will be major brands falling over each other to try and get her signed up with lucrative deals – for Emma Radacanu, It’s Only Just Begun!

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Make Hay While The Sun Shines!

Make Hay While The Sun Shines!                                                    09 September 2021

For the past week, ending 09 September, Dubai Land Department recorded a total of 1,944 real estate and properties transactions, with a gross value of US$ 1.96 billion. It confirmed that 1,371 villas/apartments were sold for US$ 744 million, and 111 plots for US$ 152 million over the week. The top two land transactions were both in Island 2 for US$ 16 million and US$ 14 million. The top three transfers for apartments and villas were all apartments in Business Bay, Marsa Dubai and Burj Khalifa selling for US$ 108 million, US$ 54 million and US$ 50 million respectively. The most popular locations were in Al Hebiah Third, with 28 sales transactions worth US$ 19 million, Al Yufrah 3, with 22 sales at US$ 6 million, and Saih Shuaib 1, with 8 sales transactions worth US$ 2 million. Mortgaged properties for the week totalled US$ 817 million, including a plot for US$ 114 million in Al Raffa. 73 properties were granted between first-degree relatives worth US$ 225 million.

It would be no surprise to anyone to read ValuStrat’s comment that the Dubai property sector had staged a strong recovery this year. The consultancy also added, “excluding any unexpected economic or global shock, we expect the current positive trends in the Dubai property market to continue in the short to medium term and to broaden out into some areas currently not seeing an uplift in values”. Many believe that current prices still represent good value and that there is a mid-term undersupply in some in-demand districts and segments, such as villas and prime apartments. Valustrat concluded that, “it can be expected that some of the highest year-on-year percentage gains recently seen will moderate, as buyer price ceilings are neared, and more moderate house price inflation is seen”. Some will be more bullish, more so if the Covid virus were to dissipate.

For only the second time in six years, all 13 villa locations and 21 apartment areas monitored by ValuStrat’s value price index (VPI) have seen their capital values either stabilised or improved in August, compared to a month earlier. There was a mixed annual capital value performance of Dubai’s apartments, which represent 87% of the residential market, split roughly equally with a third growing, a third flat and a third contracting. Latest figures see the top annual performers for VPI apartments being Palm Jumeirah, JBR, Al Furjan and Al Quoz Fourth-Al Khail Heights, with annual capital gains of 6.8%, 6.1%, 4.6% and 4.1%. For villas, the highest annual capital gains were found in Arabian Ranches 22.0%, Jumeirah Islands 20.8%, Dubai Hills Estate 18.5% and The Lakes 18.3%.

The report also noted that the following four developers accounted for 42.3% of sales – Emaar (21.5%), Nakheel (8.6%), Damac (6.1%), and Dubai Properties (6.1%). In relation to off-plan, the top locations in August were in Dubai Harbour (11.8%), Business Bay (9.2%), Jumeirah Village (9.0%) and Sobha Hartland (7.8%). The most transacted ready homes were located in Jumeirah Village, Business Bay, Al Furjan, Dubai Marina, Downtown Dubai and Dubai Hills Estate, with returns of 8.4%, 7.5%, 7.2%, 6.9%, 5.0% and 4.5%.

Property Finder reported that Dubai property sales transactions rose again in August, with 5,780 sales deals valued at US$ 4.08 billion – its highest ever August level since 2009.  Of the total transactions, 55% (3,181 units), valued at US$ 2.73 billion, were in the secondary market, with 2,599 deals, valued at US$ 1.35 billion, for off-plan sales. The overall average monthly sales transaction value increased, month on month, 1.57% to US$ 703k. The five most popular locations for villas/townhouses for transactions were Arabian Ranches 3, Dubai Land, Dubai South, Tilal al Ghaf and Damac Hills 2 and for apartments – Business Bay, Jumeirah Village Circle, Dubai Harbour, Mohammed bin Rashid City and Downtown Dubai. In the eight months of 2021, there were 37,537 transactions, worth US$ 24.0 billion – 22.61% higher than the total figure for the whole of 2020. With rising consumer and investor confidence, along with the imminent opening of Expo 2020, the current bullish property run is expected to continue. Covid has been a driver behind property prices being on the rise, as many have upgraded to larger homes, with outdoor amenities, amid a remote working and learning trend.

EFG Hermes has indicated that Emaar’s 2021 property sales could top US$ 5.85 billion this year, driven by a boom in the UAE’s real estate market and a marked economic recovery. It noted that “ED’s business model has proven resilient amidst the challenges posed since the 2009 real estate crash in the emirate.” The local market has seen a revival in its fortunes, with many end users looking to upgrade to bigger properties, initially driven from the need to work and learn from home remotely. EFG Hermes forecast that that property sales in 2022, 2023, and in the next five and twenty-three years would be US$ 5.85 billion, US$ 4.8 billion, US$ 25.9 billion and US$ 115.8 billion respectively. It would appear that sales in Dubai Creek will contribute the most to the total development portfolio, although over the coming five years are more evenly scattered between projects in the company’s portfolio.

In his bid to achieve top levels of service and dedication among public servants, and also to enhance the competitiveness of the UAE at the global level, HH Sheikh Mohammed bin Rashid Al Maktoum directed an evaluation of the government’s digital services earlier in the year. At the time, he confirmed that more than 1.3k services, provided by ministries and federal government agencies, would be evaluated. True to his word, the Dubai Ruler announced that the UAE’s five best and five worst government digital services would be published. Following assessments testing how easy it was for the public to pay fees, the accuracy of procedures and the speed of service, as well as polling 55k citizens for their opinion, HH Sheikh Mohammed announced the findings. The best performing agency was the Ministry of Interior, followed by the Federal Authority for Identity and Citizenship, the Ministry of Foreign Affairs & International Co-operation, the UAE Ministry of Climate Change and Environment, and the Ministry of Community Development. The five agencies at the other end of the scale, in no particular order, were the Ministry of Education, the Federal Tax Authority, the Securities and Commodities Authority, the General Pension and Social Security Authority, and the Ministry of Energy & Infrastructure. The Dubai Ruler indicated that they all need to improve and gave them ninety days to do so.

This week, the country’s leaders announced ‘The Principles of the 50’, as part of the ‘Projects of the 50’ campaign, to chart the strategic roadmap for the UAE’s new era of economic, political and social growth, over the next fifty years. The ten principles will act as guidelines for all UAE’s institutions and, according to HH The Ruler Sheikh Khalifa bin Zayed Al Nahyan, with the target “to provide the best possible life for citizens and residents of the UAE”. Meanwhile, HH Sheikh Mohammed bin Rashid Al Maktoum noted, “The UAE is one destination, one economy, one flag, one leader, and over the next 50 years, everyone will work as one team to achieve our goals.”

The First Principle states the key national focus shall remain the strengthening of the union, its institutions, legislature, capabilities and finances. The development of the urban and rural economies throughout the nation is the fastest and most effective way to consolidate the union of the Emirates. Other Principles include developing the educational system, ensuring that the economy provides a better life for the people of the Union, and working on stable and positive political, economic and social relations with its neighbours. Others cover consolidating the UAE’s global reputation as well as its position as a global hub for talent, companies and investments Another principle, based on openness and tolerance, sees the need to promote peace, openness and humanity, and sees the country’s foreign humanitarian aid available to any country in cases of disasters, emergencies and crises. The Tenth Principle “calls for peace, harmony, negotiations and dialogue to resolve all disputes is the basis of the Emirates’ foreign policy. Striving with regional partners and global friends to establish regional and global peace and stability is a fundamental driver of our foreign policy”.

New legislation sees children, aged between 15 and 18, now able to take up part-time work in the UAE, when the government announced this the first of fifty new projects that will mark the country’s Year of the 50th celebrations. The Ministry of Human Resources and Emiratisation clarified that the employer has to apply for the ‘juvenile work permits’, with the application costing US$ 27 (AED 100); an additional US$ 136 (AED 500) would be paid once approval is given and the visa will be valid for twelve months.

The two leading regional economies both continued to improve in August; having steadily improved over the past twelve months, Saudi Arabia’s IHS Markitt PMI grew at a slower pace, dipping 1.7 to 54., as did that of the UAE which slipped 0.2 to 53.8. The UAE’s figures were the second-fastest improvement in the country’s non-oil private sector for more than two years, with output growth driving the fastest rise in employment since January 2018. Although August’s data for new orders was slightly lower, it did show that business activity grew at the quickest rate since July 2019, driven by an improvement in demand. There is hope that the recent pickup in the economy – allied with the Expo boost – will continue until year end. Despite the global supply chain problems, the data indicates that supply-side conditions are improving, with overall delivery times shortened for the first time since January.

Dubai’s seasonally adjusted August’s IHS Markit PMI nudged 0.1 higher, on the month, to 53.3, as Dubai’s non-oil private sector grew at its quickest rate in almost two years, driven by output growth among travel, tourism and construction. Consequently, Dubai companies, that needed to accommodate greater sales volumes and backlogs of work, have increased their payroll levels at the fastest rate since November 2019, as they need to rebuild staff capacity to pre-pandemic levels, in response to greater sales volumes and backlogs of work. With the economy beginning to move into top gear, both tourist numbers and consumer demand have headed higher. Furthermore, there is every hope that Expo 2020, opening in another three weeks, will be another fillip for Dubai economy which will also benefit from easing Covid-19 restrictions and the ongoing vaccination programme.

Emirates is slowly returning to some form of normalcy reporting nearly 1.2 million passengers, in July and August, compared to 402k in the corresponding two months last year. YTD, it has slowly restored former routes and currently travels to 120 destinations, from almost nil last year; by the end of October, it will have added a further twenty to its schedule.  In 2020, it was the world’s largest international carrier, carrying over 15.8 million passengers.

For the fourth consecutive year, Dubai finds itself fifth globally in the International Shipping Centre Development Index, behind Singapore, London, Shanghai and Hong Kong for global freight. According to the ISCD index report for 2021 it ranks above the likes of Rotterdam, Hamburg, Athens / Piraeus, New York / New Jersey and Ningbo / Zhoushan. The index evaluates three primary indicators (port infrastructure, shipping services and general environment) and 16 secondary indicators, along with the competitiveness of attracting maritime businesses and the extent of development in maritime centres around the world, as well as their impact in advancing the growth of the global shipping sector. It also considers government transparency, within each country on the list, while also taking into account the ease of doing business, the performance of logistics services and capabilities of the departments and e-governments of the countries.

DEWA has confirmed that its Seawater Reverse Osmosis (SWRO) desalination plant is 92.4% complete and when completed by year end, it will have a daily production capacity of 40 million imperial gallons of water. Its current SWRO production capacity is at 13% but targeted to reach 42%, totalling 303 MIGD, by 2030. The power utility is hopeful that, by this date, desalinated water will be 100% produced by a clean energy mix that uses both renewable energy and waste heat by 2030.  DEWA also announced that its Hatta hydroelectric power station is 29% complete; it will have a production capacity of 250 MW, a storage capacity of 1.5k megawatt-hours, and a life span of up to eighty years.

H1 witnessed a 59% increase (492 companies) in new company registrations to 3.3k at Dubai International Financial Centre. With these figures, DIFC has reached its 2014 target of tripling its size within a decade, three years ahead of schedule. According to Global Financial Centres Index, the DIFC is the biggest financial centre in the MEA and the 19th biggest worldwide. It has also teamed up with the Mena FinTech Association to develop an innovation forum and other initiatives to advance the financial technology sector in the region.

Amazon Web Services has announced that it will launch its cloud infrastructure in the UAE in H1 2022 – a move that will benefit the Dubai corporate sector, by boosting trade and investment, as well as attracting global talent into the country. With Covid boosting the advent of digital transformation, allied with government support and investment, there is no doubt that the country has become a major hub for cloud infrastructure players, such as AWS, Oracle, Microsoft, Alibaba, SAP and Google.  According to Cloudwards, the cloud computing market is estimated to expand 224% to US$ 830 billion by 2025 and that 48% of global businesses currently use cloud storage for storing classified and important data – a figure that will surely move higher. Meanwhile, the public cloud services market in the MENA region has more than doubled to US$ 1.9 billion, over the past five years, whilst the GCC public cloud market is expected to grow 246% to top US$ 2.35 billion by 2024.

Attending the 108th meeting of the Arab League’s Economic and Social Council, the federal Minister of Economy, Abdulla bin Touq Al Marri, reiterated the UAE’s keenness, to achieve the development goals of Arab countries, in line with the Council’s recommendations. Last year, trade between Arab countries and the rest of the world amounted to around US$1.27 trillion, with the UAE accounting for 25% of the total. In H1, the non-oil trade between the UAE and Arab countries grew 29% to US$ 52.0 billion. The Minister also detailed UAE’s bid to host the 28th session of the Conference of the Parties (COP 28) to the United Nations Framework Convention on Climate Change (UNFCCC) in Abu Dhabi in 2023.

The Minister also expects the UAE economy to grow 4.0% this year, 1.5% higher than the estimate put forward by the Central Bank last December, and higher than the IMF’s 2.9% forecast last April. Furthermore, the Minister indicated that the UAE will be seeking US$ 124 billion of inward foreign investment by 2030, (from the likes of Russia, Australia, China and the UK), as well as aiming to be among the ten biggest global investment destinations by then. He also confirmed that the country will be strengthening economic partnerships with South Korea, Indonesia, Kenya, Ethiopia, India, Israel and Turkey.

Last week, this blog noted a study by New World Wealth that ranked Dubai as the 29th most popular global city for ultra-wealthy residents. In H1, it is reported that the number of Dubai’s HNWIs increased by 3.8%, (2k), to top 54k. It also splits the group of HNWIs into billionaires, (those with reserves of more than US$ 1 billion) centimillionaires, (those with a net worth of US$ 100 million), multimillionaires, (with a personal fortune of US$ 10 million or more) and millionaires, (with at least US$ 1 million in property, cash, equities and business interest). It estimated that the number of billionaires increased by two to 12, centimillionaires by thirteen to 165 and multimillionaires by fifty to 2,480. The combined private wealth held by all Dubai residents, with at least US$ 1 million in property, cash, equities and business interests, increased by US$ 13 billion, (2.5%), to US$ 530 billion.

Expo 2020 Dubai will host the two-day 7th World Green Economy Summit next month, organised by DEWA and the World Green Economy Organisation (WGEO), in collaboration with the Dubai Supreme Council of Energy and the UN Development Programme. The theme for this year’s gathering is ‘Galvanising Action for a Sustainable Recovery. The summit’s targets are to advance the green economy and to review the latest digital platforms and international best practices in the green economy and sustainable development. It will also address four main pillars -Youth, Innovation & Smart Technologies, Green Policies and Green Finance.

The Central Bank of the UAE confirmed that the gross assets of banks in the country nudged 0.8% higher to US$ 874.4 billion, on the month, to 31 July. Over the month, total bank deposits increased by 0.3%, increasing from US$ 521.8 billion, driven by rises of 0.1% and 2.3%, in resident deposits, (attributable to a 3.5% increase in government deposits), and in non-resident deposits respectively. Money supply aggregates, M1 and M2 both decreased, on the month, by 0.8% to US$ 178.2 billion and 0.7% to US$ 402.7 billion, whilst M3 increased by 0.1% to US$ 483.7 billion. After 1.4% declines in the previous two quarters, gross credit extended by banks in the UAE rose 0.9% in Q2, at US$ 48.2 billion.

ServeU has won a US$ 5 million contract to provide human resources and staffing services at fourteen of the 190 country pavilions and themed exhibitions during Expo 2020 Dubai. The subsidiary of Dubai developer Union Properties has also secured a deal to provide the UK pavilion with manpower at the Expo 2020 site. ServeU is one of three subsidiaries that UP is planning to list on the Dubai Financial Market, as the parent company attempts to boost its revenue and wipe out accumulated losses. As part of the group’s strategy to cut accumulated losses, it had, last year, agreed with Emirates NBD to restructure an outstanding debt of US$ 258 million, as well as agreeing to divest a 40% stake in its Dubai Autodrome subsidiary for US$ 109 million. To an extent, it has succeeded, with a 2020 profit reducing accumulated losses and increasing shareholders’ equity; in Q2, it posted a US$ 7 million profit, with revenue 19% higher at US$ 27 million.

With no financial details available, Trukker has acquired Pakistan’s TruckSher in a push to expand its operations in that country and boost growth. Only last year, Trukker raised US$ 10 million venture debt from Silicon Valley’s Partners for Growth and it could well be a candidate for an IPO on Saudi Arabia’s Tadawul stock exchange in a bid to tap into the region’s growth potential.  This is the first acquisition by the Dubai start-up to expand within the land freight sector. Trukker, established in 2016, operates a fleet of more than 35k trucks here in the UAE, Saudi Arabia and Egypt. The Pakistani purchase, only set up earlier in the year, has a presence in Lahore and Karachi.

The Securities & Commodities Authority has approved the merger move initiated last March between Emaar Properties and Emaar Malls. This arrangement reinforces Emaar Properties’ position as Mena’s largest integrated and diversified real estate company and will boost its financial and operational performance through full consolidation of Emaar Malls’ earnings and cash flow generation. Emaar Malls shareholders will receive 0.51 Emaar Properties shares for one Emaar Malls share at a premium of 7.1% to the closing price of Emaar Malls on 01 March 2021, the last trading day prior to the merger announcement and 3.5%on its 01 September price.

The DFM opened on Sunday 05 September, 208 points (7.4%) higher the previous seven weeks, shed 4 points (0.1%) to close the week on 2,908. Emaar Properties, up US$ 0.05 the previous three weeks, lost US$ 0.01 to close on US$ 1.14. Emirates NBD and Damac started the previous week on US$ 3.79 and US$ 0.34 and closed on US$ 3.81 and US$ 0.34. On Thursday, 09 September, 148 million shares changed hands, with a value of US$ 55 million, compared to 149 million shares, with a value of US$ 44 million, on 02 September.

By Thursday, 09 September, Brent, US$ 0.82 (1.2%) lower the previous week, regained US$ 0.90 (1.3%), to close on US$ 71.43. Gold, US$ 61 (2.9%) higher the previous three weeks, shed US$ 16 (0.9%) to close Thursday 09 September on US$ 1,794.   

With Iraq in the midst of a severe energy crisis, there was some good news this week with TotalEnergies signing a US$ 27 billion contract to invest in the country’s oil, gas and solar production. No immediate details were available as to the value and duration of this mega agreement, but it seems that the initial investment will be US$ 10 billion, to be spent on infrastructure. The contract covers four projects which aim to:

  • pipe seawater from the Gulf to southern Iraqi oilfields, (with the water used to extract oil from subterranean deposits)
  • increase production from the Artawi oilfield from 85k bpd to 210k bpd
  • construct a complex to exploit production from the sector’s gas fields so that any excess can be utilised for use in electricity generation
  • Install a solar farm in Artawi that should produce 1k megawatts of electricity

Because of lack of investment, OPEC’s second biggest oil producer is currently facing an acute energy crisis and chronic blackouts, with the country’s economy tanking as oil revenue accounts for 90% of state revenue.  It is reported that 33% of its gas and electricity requirements are being supplied by its neighbour, Iran, to which it owes at least US$ 6 billion for past supplies.

With the financing needs of Gulf sovereign wealth funds being boosted by rising energy prices, and a brighter economic environment, the consequence of which is that sukuk issuances this year will be marginally down, around 5%, on the 2020 return of US$ 205 billion. Driven by continued economic recovery, improved liquidity in debt markets and strong investor demand, H2 issuances may be just shy of the US$ 100 billion mark. It expects that issuances in Malaysia and Indonesia, still reeling from the Covid impact, will be higher, because the need for funding remains high. Moody’s Investors Service noted that H1 sukuk issuance in the GCC fell 19.0% to US$ 35.3 billion, with Saudi Arabia remaining the bloc’s largest issuer accounting for around 62% (or US$ 22 billion) of the total volume – down from US$ 24.5 billion in H1 2020.

A US judge has ruled that Boeing’s board of directors must face a lawsuit from shareholders over two fatal crashes involving its 737 Max plane, indicating that the first crash in December 2018 in Indonesia was a “red flag” about a key safety system on the aircraft “that the board should have heeded but instead ignored”. It also noted that the real victims were the 346 who died, and their families, but investors had also “lost billions of dollars”. The 737 Max was then grounded in March 2019 following the second crash in Ethiopia, with investigations later finding a flaw in an automated flight control system, known as MCAS.

In another blow to Prime Minister Narendra Modi’s hope to bring in foreign manufacturers, Ford has joined General Motors to pull the plug in India and will stop production at plants in Gujarat and Tamil Nadu in Q2 2022. The car giant, which has accumulated losses of US$ 2 million, over the past decade, will continue to make car engines for export. Ford makes five different models in India but is ranked ninth on the list of the country’s biggest car makers, with a paltry 2% of the market.

After acquiring William Hills for US$ 4.0 billion in April, Caesars Entertainment, the owner of Caesars Palace, decided that it only needed the seller’s US operations and that it would auction the non-US side of William Hill’s business, which includes online operations across the UK and Europe. Five months later, 888 Holdings announced that it will take over the business, which includes 1.4k UK betting shops, in a US$ 3.0 billion deal.  The new combined group, which will be one of the world’s largest online betting and gaming groups, will have 12k employees and the merger will result in annual savings of US$ 140 million.

In a bid to strengthen its presence in Asia, particularly in Japan, the world’s third biggest e-commerce market, PayPal, is planning to invest US$ 2.7 billion to acquire payments platform and provider of buy now, pay later solutions Paidy. A PayPal spokesman noted that “Paidy pioneered buy now, pay later solutions tailored to the Japanese market and quickly grew to become the leading service provider in Japan”. The Tokyo-based platform has more than six million registered users and enables Japanese shoppers to make online purchases and then pay for them each month in a consolidated bill. Only last month, it was reported that Paidy was planning an IPO, but its immediate remit is to continue to operate existing business, maintain its brand and support a wide variety of consumer wallets and marketplaces. (Although Q2 revenue was 19% higher on an annual basis to US$ 6.24 billion, and a further 11.4 million new active accounts, its net profit dipped 22.4% to US$ 1.2 billion).

Following the demise of some of its U.S. investment funds in 2020, Germany’s biggest financial company is being investigated by Germany’s financial regulator, BaFin. Allianz, which is already facing a slew of investor lawsuits by the US Department of Justice and Securities and Exchange Commission, over its Structured Alpha Funds, has a massive US$ 2.9 trillion in assets under management. These funds, catering to US pension funds for workers such as teachers and subway employees, were also marketed to European investors, and were under the management through bond giant Pimco and Allianz Global Investors. The insurer closed two funds in March 2020, valued at US$ 2.3 billion at December 2019, after the losses from bad bets on options became so extreme, as the onset of Covid sent global markets tanking and funds losing up to 80% in value. The end result is that Allianz is facing twenty-five lawsuits, claiming US$ 6 billion in damages. The investigation is looking at the extent to which Allianz executives, outside the fund division, had knowledge of, or were involved in, events leading up to the funds, racking up billions of dollars of losses.

PAL Holdings, the holding company of Philippine Airlines, has had financial problems for some time and had reported losses for every quarter since 2017; the carrier posted a US$ 1.4 billion loss last year, compared to a US$ 200 million shortfall in 2019. Having cut its work force by 35% earlier in the year, and with a proposed restructuring plan, which needs court approval, Philippine Airlines has filed for Chapter 11 bankruptcy in New York. The eighty-year-old embattled airline aims to slash US$ 2 billion in borrowings – and with a further US$ 505 million in equity and debt financing from its majority shareholder, as well as US$ 150 million of debt financing from new investors, it already has support agreements from 90% of its lenders. Philippine Airlines is the latest international carrier to reorganise in the US, under the US bankruptcy code, following the likes of Chile’s Latam Airlines, Aeromexico and Colombia’s Avianca Holdings, all being badly impacted by Covid.

Having invested US$ 9.4 billion to acquire Asda last year, the Blackburn billionaire brothers, Mohsin and Zuber Issa, announced plans to open nearly 230 convenience stores at UK petrol stations, owned by EG Group, the brothers’ business. After a trial at five petrol stations, 28 ‘Asda on the Move’ shops will open this year, with a further two hundred at petrol forecourts, to launch in 2022, in a belated attempt to catch up with Tesco and Sainsbury’s, which have long operated smaller format shops. Asda indicated that shops would be up to 3k sq ft and stock up to 2.5k products; it would supply goods to EG Group on a wholesale basis.

The UK has a new cheapest supermarket, with Lidl taking over the mantle from fellow German interloper, Aldi. Last month, a basket of 23 essential items bought from Aldi came in US$ 0.60 and US$ 12.50 cheaper than Lidl and Waitrose. Lidl, the world’s fifth largest retailer, has 11.2k global stores of which 762 are in the UK.

The seriousness of the ongoing semi-conductor chip shortage can be seen with news that General Motors has had to halt output at most of its North American plants – four in the US, three in Mexico and one in Canada; it is expected that the closures could be for up to two weeks. The vehicle maker reported that the closures will affect some of its most profitable vehicles, including sport-utility vehicles and midsize pickup trucks. Earlier, both Toyota, (slashing global production by 40% this month), and Ford announced output cuts for this month, as chipmakers struggle to meet the high demand from various industrial sectors. The current problem is down to Covid, as car makers slashed orders at the start of the pandemic, fearing a long downturn in sales. At the time, chipmakers saw a demand surge from tech companies and the consumer electronics sector to take the semiconductors that normally would have gone to the car manufacturers. Now with business conditions improving, carmakers, that had previously cancelled orders last year, find themselves at the bottom of the queue.

There has been another monthly improvement in the OECD’s unemployment rate, declining a further 0.2% in July to 6.2%, which is still 0.9% higher than reported in pre-pandemic February 2020’s returns. The bloc, encompassing eurozone countries as well as the US, Australia, Japan and the UK, saw the number of unemployed workers declining 1.6 million in July to 41.1 million. In the eurozone, the unemployment rate fell 0.2% to 7.6%, with Spain knocking 0.7% off its rate, but it is still at a worryingly high 14.3%. Other major economies – Canada, US, Australia and Korea – all saw 0.3% monthly declines to 7.5%, 5.4%, 4.6% and 3.3%, whilst Mexico and Japan were flat on the month as unemployment levels remained at 4.2% and 2.8%.

Despite the US August unemployment rate dipping 0.2%, on the month, to 5.2%, the US economy only added a disappointing 235k new jobs, compared to the 1.05 million created in July. The number of people unemployed edged down to 8.4 million, remaining well above the pre-pandemic level of 5.7 million seen in February 2020. This could be an indicator that the economic recovery may be running out of steam, but it may only be a blip caused from rising Delta variant infections that have impacted spending on travel, tourism and hospitality. This month’s figures will probably be worse considering the devastating effect of last week’s Storm Ida on the east coast and the Californian wildfires.

August saw the lowest figure for proposed job cuts, at only 12.7k, for seven years, despite the imminent end of the UK’s government’s furlough scheme – a year ago, firms were looking at figures of 150k; it now appears that the predicted surge in unemployment this autumn may be smaller than expected. The furlough scheme ends this month so that by then employers will have to make the decision whether to keep staff and pay all their wages, for the first time since April 2020 or let them go. At the end of June, the number on furlough had dropped to 1.9 million. The latest unemployment rate at 4.8% is 0.9% higher than before the pandemic, but 0.2% lower than the previous quarter. It is expected that the rate will keep heading south because of the high labour demand and fewer people in the labour market due to the crisis and Brexit; there is every chance that staff shortages in certain sectors will continue until the end of 2023.

First it was MacDonald’s milk shakes, KFC chickens, beer, Hardy’s Australian wine, Iceland products and flu vaccines in short supply, and now joined by Ikea, as a combination of a shortage of HGV drivers, (some estimate that the figure could be as high as 100k), Brexit issues and a global supply problem, combine to dry up the supply chain. The Swedish furniture giant is struggling to supply about 1k product lines and reported that all 22 of its UK and Ireland stores were having supply problems, with 10% of its stock. To make matters worse, Ikea cannot serve the higher customer demand – and so are losing revenue – as more people are spending more time at home.  For what it is worth, the government noted that it was “working closely with industry to address sector challenges”.

Many Brits put their shortages down to Brexit and do not seem to realise that it is a global problem not getting any better. In Australia, the global supply chain crunch is badly effecting wholesalers and retailers either unable to receive goods on time and, if they can, costs are rising higher. Most of the imports originate in Asia, and specifically China, where one coronavirus case was enough to shut down a critical part of the world’s third-busiest container port, at Ningbo in China, for a fortnight.  Currently, outbreaks of the virus have also closed down factories and ports in Vietnam, which is now known as a major global apparel supplier.  Another cost problem is that freight rates see Australia also competing against more lucrative markets for products, like the US, where consumer spending is soaring and driving up shipping rates. Australians sometimes forget that the country accounts for only around 0.3% of the global population and so has little or no clout compared to the bigger and more populous nations. Before the pandemic, about 80% of air freight to Australia was carried on passenger flights but because of Covid, this has been drastically cut as there is an almost total travel ban that ensures that citizens can only leave Australia for essential reasons, (that does not include holidays). Other problem areas are port congestion and landside inefficiencies which tie up huge amounts of capacity.

With its property market still firing on all cylinders, Australian lenders have slashed variable mortgage and short-term fixed interest rates to attract new customers, even though the RBA kept rates on hold at 0.1%. Latest data from RateCity notes that over the past two months, the number of variable rates on its database under 2% had risen from 28 to 46; the cheapest rate on offer was at 1.77%, with the average at 2.72%.  However, on the flip side, longer term fixed rates are heading in the other direction – at the start of 2021, there were 32 four-year fixed loans, with a less than 2% interest rate, now there are none. The Reserve Bank also extended its monthly US$ 3.0 billion bond buying stimulus program, until at least mid-February, to counteract the negative economic impact from the latest lockdowns in the ACT, New South Wales and Victoria.

As Chinese companies come under increased pressure in the western world, as well as in China itself, it may be more than coincidence that President Xi Jinping has announced that the country will have a third stock exchange in Beijing to serve the country’s SMEs; its two other bourses are located in Shanghai and the southern city of Shenzhen. The China Securities Regulatory Commission confirmed that it would be similar to Shanghai’s STAR market, which is seen as China’s equivalent to the technology-heavy Nasdaq. Already this year, the Chinese regulators have introduced a myriad of tough measures to curb some activities of companies, including tech giants, tutoring firms, TV companies and streaming platforms, both at home and overseas. To make matters worse, the SEC will now require more detailed information on Chinese companies selling shares in the country, whilst back home the government signalled that this crackdown would continue, as it unveiled a five-year plan outlining tighter regulation of much of its economy.

The financial problems of Hong Kong-listed China Evergrande may have a negative impact on Australia’s future economic wellbeing. Although it is China’s biggest property group and the world’s 122nd largest company by sales, it now has the unenviable title of being the most indebted company in the world, owing creditors and other stakeholders a mouth-watering US$ 300 billion. Its fall from grace has been rapid, having been the world’s most valuable real estate group just three years ago. Two years ago, its chief executive, Jiayin Xu, was China’s third-richest person, with an estimated wealth of US$ 30 billion.  Even before this week’s announcement, that warned that it may default on debt repayments if its efforts to refinance and sell assets fall short, the company was already talking with creditors and stakeholders trying unsuccessfully to sell their debt by up to 70%. The fear is that in a fire sale, Evergrande may have to sell its vast portfolio of apartments at heavy discounts which in turn could really damage the industry by undermining prices and putting smaller competitors out of business.

In the past, it was felt that the Chinese administration often turned a blind eye to the industry’s excesses, with its principal target being to stimulate economic growth and introduce an unprecedented free market system away from the previous agrarian-based market, at the expense of tougher regulations. Dodgy building standards, sales and loan sharks and a host of other illegal activities have been prevalent in the industry. This laissez faire approach has seen China transform into an urbanised industrial powerhouse, over the past forty years, on a scale and speed never before witnessed in history. The end result has seen millions of farm workers flock to newly built cities, the rise of property moguls, sky high rents, unaffordable housing and younger generations locked out of the market. Last year, Beijing introduced what it called the Three Red Lines Policy for property developers, so as to reduce debt within the industry, curb runaway property prices and lift standards. It is apparent that the housing boom in China is in the throes of an implosion and the knock-on impact in Australia could be grave, bearing in mind that property developers account for 50% of all China’s iron ore demand; Australia supplies 60% of China’s requirements, with the country buying about 70% of the iron ore Australia exports which makes up about 60% of Australia exports. With iron ore prices declining some 40% since May, and the distinct possibility of China cutting its demand forthe metal, the conclusion is that Australian exports and its GDP will take a big hit and could push the lucky country into its second recession in twelve months.

It is interesting to see how much tax the tech giants actually pay and how they can shift profits to low-tax locations. Amazon posted a Covid-driven 50.3% hike in 2020 revenue to US$ 28.4 billion but only managed to pay US$ 678 million in direct taxation; last year the two figures were US$ 18.9 billion and US$ 404 million. The company’s 2020 indirect tax bill came in 24.1% higher, to US$ 1.46 billion, driven by VAT on increased sales and employee taxes, as it took on more people and increased wages. When both direct and indirect taxation were taken into account, its total “tax contribution” was 34.8% higher at US$ 2.13 billion. Amazon reiterated that it was “proud” of its contribution to the UK economy and that it had invested US$ 44.1 billion in UK infrastructure since 2010 and had added 22k to its UK workforce to bring its total payroll to 55k. Amazon – along with its tech giant peers such as Facebook, Google and Apple – pay tax on profits not sales, whilst last April, the UK government launched a 2% tax on digital sales amid concerns that big tech firms were re-routing their profits through low tax jurisdictions. Their reporting is in line with legal requirements, but it does lack crucial information, such as intra-group transactions, so it is impossible to ascertain their actual economic profit. One thing certain is that Amazon’s tax bill is lower than its competitors such as supermarket chains.

Uber Australia’s latest accounts confirm that it has continued its longstanding practice of sending revenue to its head company in the Netherlands, described as a Dutch “cash pooling arrangement”. Some analysts consider this arrangement as a model to minimise tax, but the ridesharing and food delivery says it pays all taxes it owes in each jurisdiction in which it operates. In 2015, the platform acknowledged that 25% of each transaction in Australia was routed to its Dutch parent company in the Netherlands, Uber International Holding BV, which then paid Uber Australia a fee for providing service support in Australia.  The 2020 accounts notes that “the Group has a cash pooling arrangement with Uber BV and all cash at bank is transferred to Uber BV at the end of every day,” with US$ 4 million of interest expenses for having this money in the Dutch “cash pool”. The Australian company posted revenue of over US$ 750 million and a US$ 5 million profit as well as noting US$ 474 million of “service fee paid to related companies”, which could be Uber BV or another related offshore entity; it paid US$ 5 million in Corporate Tax.  Furthermore, Uber Australia notes a US$ 4.4 billion “collection on behalf by a related company” largely offset by a US$ 3.9 billion “payment on behalf by related companies”. This entity — Uber’s Netherlands-based wholly owned subsidiary called Uber International Holding BV — then paid Uber Australia a fee for providing service support in Australia.

This week, Australia became the world’s biggest gold producer taking the mantle, for the first time, from China which had been the global leader since 2007. Surbiton Associates noted that in H1, Australian producers mined 157 tonnes, four more than China. Over the two previous years, Australia had produced 321 and 328 tonnes, its best ever two years’ results. It does seem, however, that China may soon regain its title once it has sorted out some safety problems in mines, that have resulted in fatalities, which have been closed for further investigations. IBISWorld estimates that the US$ 19.1 billion sector will see an 11.6% revenue hike “due to continued uncertainty about the effects of the Covid-19 pandemic on the global economy”, as well as an anticipated surge in industry output and higher gold prices, currently hovering around the US$ 1.8k level, 25% higher over the past two years.

101 Economics teach that the price of gold, considered a safe haven asset, increases when there is political and economic instability. This is exactly what has happened with the pandemic and global unrest, most notably with the Taliban in Afghanistan, but currently the two biggest factors affecting the gold price is the US Federal Reserve and a weaker US dollar. Although the RBA, (and the ECB), have started cutting back on their QE strategies, the US Fed has yet to move with its tapering of bond buying, which would normally result in less global support for the greenback – and that could see the yellow metal moving higher at least in the short-term which would benefit both gold investors and the Australian economy. The warning to those with investments in gold, (and also cryptocurrencies and global tech shares) is simple – Make Hay While The Sun Shines!

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Take Me Home Country Roads!

Take Me Home Country Roads!                                                              02 September 2021

For the past week, ending 02 September, Dubai Land Department recorded a total of 1,667 real estate and properties transactions, with a gross value of US$ 2.56 billion. It confirmed that 1,080 villas/apartments were sold for US$ 613 million, and 146 plots for US$ 613 million over the week. The top two land transactions were for a plot in Marsa Dubai, selling for US$ 179 million, and another in Al Murqabat for US$ 89 million. The top three transfers for apartments and villas were all apartments in Marsa Dubai, Burj Khalifa and Business Bay selling for US$ 63 million, US$ 54 million and US$ 45 million respectively. The most popular locations were in Jabal Ali First, with 40 sales transactions worth US$ 24 million, Ras Al Khor, with 30 sales at US$ 188 million, and Wadi Al Safa 5, with 14 sales transactions worth US$ 19 million. Mortgaged properties for the week totalled US$ 1.09 billion, including a plot for US$ 545 million in Al Kheeran area. 61 properties were granted between first-degree relatives worth US$ 128 million.

Asteco has carried out a summary of the leading Dubai property locations, and their price movements, on a quarterly and annual bases and some of the results were quite surprising. Of the twelve “villa locations”, four showed double digit rises over both periods – Arabian Ranches – 19% on the quarter and 24% for the year, along with Dubai Sports City (14%:11%), Dubai Hills (13%:20%) and The Meadows (10%:15%), with Mirdiff recording annual growth at 15%, and on the quarter 9%.  On an annual basis, Palm Jumeirah and Dubai Silicon Oasis both saw prices up 10% but posted single digit quarterly growth of 6% and 8%. Of the remaining five – Jumeirah Parks, Jumeirah Village, Umm Suqeim, The Springs and The Lakes – posted annual figures of 9%, 8%, 8%, 2% and 2%, with quarterly returns of 8%, 9%, 8%, 4% and 2%.

In contrast, the fourteen “apartment locations” showed mostly subdued growth and, in six cases, annual losses The top six annual growth locations were The Greens, Dubai Marina, Business Bay, JLT, JBR and Palm Jumeirah with prices up 6%, 4%, 4%, 3%, 2% and 1%. Both Downtown and Jumeirah Village were flat but the six remaining areas – International City, Discovery Gardens, Dubai Sports City, Deira, SZR and DIFC – saw yearly values move southwards by -12%, -11%, -5%, -3%, -2% and -1%, although but one, International City, recorded growth levels of between 1% – 7%.

According to the latest New World Wealth report, Dubai’s total wealth climbed 7.8% to US$ 529 billion by the end of June, compared to the same period in 2020; it also maintained its position as the 29th wealthiest city globally. There are reports that a large number of ultra-high net worth individuals have been showing interest in the emirate’s high-end properties and that many millionaires have moved to Dubai, seeing it a safe and secure location in which to live.  In H1, Palm Jumeirah saw the highest selling price for a villa, at over US$ 30 million, and the highest rental for a villa, at over US$ 1 million. The three most popular places for the emirate’s twelve billionaires, (nine last year), and 54k high net worth individuals, (49.4k last year), were Emirates Hills, Jumeirah Golf Estate and Palm Jumeirah.

In its latest quarterly report, global consultancy Colliers estimated that Dubai will open about 40% of 2021 forthcoming supply to coincide with the 01 October opening of Expo 2020 Dubai. By 30 June, it reckoned that the country’s branded hospitality market, with Dubai the main contributor, topped 108k keys. Over the next two years, it expects that supply will increase by an 8.0% compound annual growth rate. Some estimate that the number of hotel rooms in Dubai could reach 160k by the time of the Expo opening and, even with the Covid cloud hanging over the event, the target is still an optimistic 25 million visitors. Occupancy rates continue to cause concern, as the current level is 23% higher than the same month last year, but it is still 16% lower than in July 2019. On the same lines, revenue per available room has increased 23% on the year but is still 16% lower, compared to 2019 figures.

Dubai Media Office claims that the emirate’s sports sector contributes US$ 1.1 billion to the local economy every year and its contribution to the national and local economy will continue to grow, as the emirate attracts investment and creates more jobs. Some of the contribution derives from a number of national and international events which attracts global visitors. In addition, there are more than 20k people employed in Dubai’s sports sector, along with five factories manufacturing sports equipment and sportswear in the emirate, and more than 2.5k outlets that sell training equipment and merchandise. In addition, there are more than 350 registered companies that organise various sports events and training camps.

Between now and November, Emirates will receive its last three A380s, bringing its fleet size to 118, (almost half of the 248 total ever built); six of this number will be a four-class configuration, with the introduction of Premium Economy seats, which can be found on its London Heathrow and Paris Charles De Gaulle routes. The Dubai carrier expects to be the largest operator of the A380 for the next two decades. As travel restrictions ease, the jumbo will be reinstated on twelve more routes – including Cairo, Frankfurt, Guangzhou, Los Angeles, Manchester, New York JFK and Zurich – by next month.

The latest public auction of Dubai’s special car plate numbers, organised by the RTA, raised almost US$ 10 million, with the five most expensive numbers – E55, W29, X35, V88888 and BV9999 going under the hammer for US$ 994k, US$ 681k, US$ 676k, US$ 270k and US$ 234k. One hundred various numbers were on offer.

The UAE fuel price committee has announced petrol and diesel prices for the month of September 2021, with the three petrol grades all US$ 0.008 higher, on the month, with Super 98, (US$ 0.703), Special 95 (US$ 0.673) and US$ 0.651). Diesel prices will head in the opposite direction – down US$ 0.019 to US$ 0.649 per litre.

Established in 2002, DMCC recorded 204 new member companies – its highest ever August figure, two months after posting its best H1 returns, of 1,230, since 2013.  The free zone is on track to top 20k members by the end of the year. It has recently launched DMCC Crypto Centre – a comprehensive ecosystem for businesses operating in the cryptographic and blockchain sectors.

A new law sees the UAE enhancing transparency in government by holding ministers and senior officials accountable for wrongdoing, allowing the Public Prosecutor to investigate complaints against any senior official. If found guilty, any minister, or an official under investigation, can be banned from travelling and have their money frozen which will also apply to funds of their wives and minors, if necessary. The potential penalties for violators include censuring, forced retirement, job termination, or relief of duties, along with deprivation of pension or bonus at a maximum of 25% of the total. In announcing the decree, HH Sheikh Mohammed bin Rashid Al Maktoum commented, “we are a law-abiding country. The integrity and transparency of our federal government is a top priority.”

The July IHS Markit PMI sees an improvement in the country’s non-oil private sector and confirms that the country’s economy continues to improve, with the index hitting a two year high of 54.0. Three contributing factors pushing the economy are the easing of restrictions, (and the increasing of capacity), at local restaurants, cinemas and malls, cases trending downwards to their lowest since October 2020 and the resumption of tourist visas; rising oil production and higher oil prices have also helped boost the recovery. Output and new business rose at the quickest rates since July 2019, with firms reporting their sharpest rise in new orders for two years, amid soaring domestic sales and strengthening market confidence. One possible drag would be the fact that local banks continue to struggle with rising bad loans, resulting in credit to the private sector being stuck in negative territory.

A Dubai farm, with more than 1.2k date trees, has teamed up with Terraplus Solutions to implement an underground watering system that is claimed could save the UAE an annual one trillion litres of water, equivalent to the amount of water used by half the emirate’s population. Since 2019, experiments have been carried out at the Al Awir farm which sees a 30% reduction in water usage by implementing an underground watering system that saves up to 50k litres of water per tree every year. The new subsurface technology, which has pipes inserted into the ground, allowing water to directly find the trees’ roots, results in the farm now losing 86 million litres, compared to the prior total of 170 million litres. Apart from the water saving, it appears that the amount of crop each tree produces increases by up to 10%. It is thought that there are twenty million date trees in the UAE and that the global agricultural sector uses 70% of all the world’s potable water every year. With such facts, if the technology were installed in the UAE, there is no doubt that it would not only transform the sector but would also allow the UAE, (and the world), to use the money saved on many projects that are currently unaffordable.

Mainly because of the global economic uptick and increased demand, Emirates Global Aluminium, posted a record H1 net profit of US$ 474 million, compared to a loss of US$ 57 million a year earlier, and is 166% higher than the US$ 178 million figure of H2 2020. EBITDA for the half year was 111% higher on the year at US$ 951 million, with revenue climbing 20.0% to US$ 2.94 billion. With the global demand for aluminium high, the future is positive for the country’s biggest industrial company, outside the oil and gas sector, jointly owned by Abu Dhabi’s Mubadala Investment Company, and the Investment Corporation of Dubai. Aluminium was trading at US$ 2,245 in H1, 41.0% higher than a year earlier, as October aluminium futures currently trading at US$ 2.6k.

Kamco Invest’s latest GCC Banking Report noted that gross loans of GCC’s listed banks jumped 4.6% by the end of Q2, compared to the previous quarter, and up 7.1% on the year, driven by broad-based growth seen in all its markets. Total bank revenue for GCC banks increased 3.5% on the quarter, driven by higher net interest income, partially offset by a decline in non-interest income. The two GCC countries, with the lion’s share of the regional balance sheet, were the UAE (with total assets of US$ 840 billion – 29.9% of the total) and Saudi Arabia, with 26.7% of the aggregate. Gross credit came in 0.9% higher at US$ 482 billion, marginally higher than the pre-pandemic gross credit of US$ 480 billion. UAE banks registered their biggest increase in profits in Q2, at 11.8%, after nine out of the sixteen listed banks reported rising net profits.

As widely expected, more than 95% of NMC Health creditors have approved its proposed deeds of company arrangement, (DOCA) restructuring process, resulting in the 34 companies of the UAE’s biggest healthcare provider to exit administration; it is expected that NMC Healthcare will remain in administration in order to pursue potential litigation claims on behalf of itself and the other DOCA companies. The creditors, owed more than US$ 6.4 billion by NMC Health, will see US$ 4 billion of their debts being wiped out in return for equity instruments. In H1, gross revenue for its UAE and Oman businesses beat company expectations by 10% to reach US$ 611 million.

As from 03 October, the DFM will extend its trading time by one hour and will remain open from 10.00 hrs to 1500 hrs. International interest in the local market continues to increase, with latest figures showing that international investors account for 48.2% of its trading activities and own 18.5% of the market capitalisation by the end of June 2021. Interestingly, foreign investors accounted for 69% of new investors on the DFM. Furthermore, in a bid to further promote investors’ participation in the market, the bourse has announced that the minimum trading commission will be waived, with immediate effect. The result was swift, with Wednesday’s trade witnessing a 161% increase, along with the highest level of daily trade count since the beginning of this year, which jumped 146%, YTD, compared to its 2,740 average.

The DFM opened on Sunday 29 August, 196 points (6.8%) higher the previous six weeks, rose 12 points (0.4%) to close the week on 2,912. Emaar Properties, up US$ 0.03 the previous fortnight, gained a further US$ 0.02 to close on US$ 1.15. Emirates NBD and Damac started the previous week on US$ 3.79 and US$ 0.34 and closed flat at US$ 3.79 and US$ 0.34. On Thursday, 02 September, 149 million shares changed hands, with a value of US$ 44 million, compared to 233 million shares, with a value of US$ 44 million, on 26 August.

For the month of August, the bourse had opened on 2,820 and, having closed the month on 2,903, was 83 points (1.6%) higher. Emaar traded from its 01 August 2021 opening figure of US$ 1.11 – up US$ 0.03 – to close August on US$ 1.14. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.37 and US$ 0.35 and closed on 31 August on US$ 3.57 and US$ 0.35 respectively. YTD, the bourse had opened the year on 2,492 and gained 411 points (16.5%) to close the eight months on 2,903, as Emaar traded US$ 0.18 higher at US$ 1.14   NBD and Damac started the year on US$ 3.33 and US$ 0.35 and closed 31 August at US$ 3.77 and US$ 0.35.

At their meeting this week, Opec+ confirmed that it had started to taper a historic production restriction pact, planning to bring two million bpd back to the markets by the end of the year. The bloc, headed by Saudi Arabia and Russia, will begin by increasing output by 400k bpd during the month of September. The fact that the oil supply pipeline is being ramped up saw oil prices fall, whilst the oil market is expected to remain in deficit for at least the next four months, with a six million bpd oil demand growth forecast.

By Thursday, 02 September, Brent, US$ 3.77 (10.9%) higher the previous week, shed US$ 0.82 (1.2%), to close on US$ 70.53. Gold, US$ 50 (2.9%) higher the previous fortnight, gained a further US$ 11 (0.6%) to close Thursday 02 September on US$ 1,810.   Brent started August on US$ 75.19 and lost US$ 3.37 (2.6%) during the month, to close on US$ 71.82. YTD, it started the year trading at US$ 51.80 and gained US$ 20.02 (38.6%) to close on US$ 71.82 during the first eight months of the year. Meanwhile, the yellow metal opened August trading at US$ 1,817 and shed US$ 2 (0.1%), during the month, to close on US$ 1,815. Over the year it has lost US$ 80 from its opening year balance of US$ 1,895.

It is estimated that 835k new UK companies were registered in the twelve months to January 2021 – 42% higher than a year earlier, and despite the period covering the devastated economy caused by the onset of Covid; in the US, the figure was 4.4 million, 24% higher. In this day and age, not only do they all need a distinctive name but also a domain name, more so for the many e-commerce entities set up in tandem with the expansion of people shopping online. A stand-out name and domain name will often be the unique selling point that ensures that it will often become the “first to go to company” as similar entities vie for the same business; in days gone by, this would not necessarily have been the case. There is no doubt that demand for business names has soared and that a host of websites has sprung up that can help them both to pick one and register a connected domain.

Amazon is planning to extend its current 275k global payroll, by a further 55k, for corporate jobs and roles in robotics, research and engineering. 72.7% of the total will be in the US, with a further 2.5k being added in the UK, where it has recruited 10k already this year. A big percentage will be required in the company’s new satellite launch programme – Project Kuiper – to widen broadband access. In the past, the new chief executive, Andy Jassy, had commented that the company needs more staff to keep pace with expansion of its retail, cloud computing and advertising arms.

Covid has claimed another victim, with Marks & Spencer announcing that the retailer will no longer sell men’s suits at more than 57% of its 254 bigger stores, as men’s preference has shifted to “smart separates”, such as chinos and shirts, with an increased demand for casual wear. M&S reckons that they only sold 7.5k suits in the first two months of the pandemic – 80% lower than in the same period a year earlier. Market research consultancy, Kantar Group, has estimated that suit sales last year were 54% lower, at two million, compared to the 4.3 million sold in 2017. The study also noted that the average spend on men’s suits was 62.1% lower, at US$ 219 million, to the twelve months to July 2021, compared to five years earlier.

Zoom Video Communication posted a 70.6% rise in Q2 net profit to US$ 317 million, driven by a 54%, year on year, revenue hike to US$ 1.02 billion. It has updated its full-year revenue forecast to over US$ 4.0 billion, which would be 55% higher than their 2020 return. It put the revenue increase to “acquiring new customers and expanding across existing customers”. The tech company is confident that, even if the pandemic threat were to go away, the demand for video conferencing will not decline, as companies continue to adopt hybrid work models. During the period, it invested US$ 82 million in R&D, as well as acquiring, cloud call centre software provider Five9 for US$ 14.7 billion, as part of its strategy to adapt to the post-pandemic world; this was the fourth purchase by Zoom since the start of the Covid-19 pandemic. With total cash and marketable securities of US$ 5.1 billion, Zoom has enough finance to acquire new start-ups and competitors in the same space of video conferencing.

In July, coffee prices had surged to seven-year highs, after reports that frost had damaged crops in the world’s biggest producer Brazil, with the price for arabica coffee rising above the US$ 2 level, or 60% higher, YTD. Lower-quality robusta coffee prices performed likewise – up 40% YTD – to its highest level since October 2017. Late August saw reports that the world’s second largest coffee producer, Vietnam, was having to deal with similar problems faced by all global producers, including a dire shortage of containers, soaring freight rates and various climatic issues, including frost and rain. In addition, the country has had to deal with a fresh outbreak of the delta variant which has led to stringent travel curbs in the country, badly impacting some key producing areas of the Central Highlands.

Exactly ten years ago, when Tim Cook took over the reins of Apple from its co-founder, Steve Jobs, he struck a deal that has already made him a billionaire. A company filing with the US SEC confirms that he has sold most of the five million shares, he has received as part ofthe deal, for more than US$ 750 million.  Part of the agreement was contingent on the value of Apple’s shares, over the past three years, surpassing at least two-thirds of companies in the S&P 500. Cook silenced all those critics, who thought him to be too technocratic to match Jobs’ success, by the fact that Apple shares have returned more than 1,100%, its revenue has doubled, and its market value has topped US$ 2.5 trillion.

Even though most member countries posted Q2 expansion, averaging 1.6%, compared to 0.6% in Q1, the OECD economies still remain an average 0.7% below pre-Covid levels. The bloc includes a group of major world economies from the Eurozone, the US, Japan and the UK. Q2 growth levels varied, with the UK top of the list, growing 4.8%, (following a 1.6% contraction in Q1), ahead of Italy with a 2.7% growth, compared to just 0.2% the previous quarter. Five other countries that make up the “Major Seven” – US, Germany, France, Canada and Japan – recorded the following growth levels of 1.6%, 1.6%, 0.9%, 0.6% and 0.3% in Q2. Four months ago, the OECD upgraded its 2021 growth forecast from 4.2% to US$ 5.8%, whilst noting that many member states will only return to pre-pandemic levels by the end of 2022. (After declining 0.3% and 0.1% in Q1, the euro area and the EU posted GDP growth of 2.0% and 1.9% respectively).

As its central bank raises its base rate from a record low of 0.50% – set three years ago – to 0.75%, South Korea has become the first major Asian economy, and the first G20 nation, to lift rates since the pandemic began. The country’s household debt and home prices have recently soared, and it is hoped that this move may improve the situation and curb the risks that high inflation and surging public debt may bring to the economy. It will not be too long before other nations follow suit by raising their own bank rates and curtail their massive stimulus packages, introduced to save their economies in the first eighteen months of Covid.

Despite mining stock returning impressive returns, the Australian market traded relatively flat on Monday, with the ASX 200 trading at 7,490 points; the standout performer was Fortescue Metal, up 6.3%, at US$ 15.51, with the world’s fourth largest iron ore miner posting a 117% jump in annual profit to US$ 10.3 billion, after shipping a record amount of iron ore to take advantage of soaring prices. Those prices topped a record US$ 233 in May, attributable to Brazilian supply problems and high Chinese demand, but they have since dipped 32.2% to US$ 158 a tonne; the current price is expected to nudge slightly higher for the rest of the year. With a final dividend of US$ 1.54 expected, the total annual payout will come in at US$ 2.61 per share, equating to a total of US$ 8.0 billion, of which its major shareholder, Andrew Forrest, will take home US$ 681 million.

The latest CoreLogic report notes that, in August, Australian property prices moved 1.5% higher to US$ 491k, with Darwin, Canberra and Hobart posting annual rises of at least 22.0%, with Melbourne reporting the slowest price rise at 13.1%. Regional property rises of 22% were higher than those seen in capital cities, with an 18% increase.  On a monthly basis, the plaudits go to Hobart, Canberra and Brisbane, with increases of 2.3%, 2.2% and 2.0%. Although housing values are still heading north, they are moving at a slower rate than of late. Sydney and Melbourne median values rose to US$ 766k and US$ 567k by the end of August, with the number of properties advertised for sale 5.8% lower than the five-year average, pushing prices higher. Australia’s median property price has risen by over US$ 76k in the past year, equating to US$ 1.46k per week. Another interesting statistic sees house prices rising almost eleven times faster than wages growth over the past year.

An ABC report discovered that 20k companies, (of all sizes), tripled their turnover yet accrued US$ 275 million in JobKeeper during the first three months of the pandemic, with a further 15k entities doubling their turnover, earning US$ 236 million, whilst receiving government support through JobKeeper. It is obvious that thousands of profitable companies qualified for the subsidy based on projected turnover falls that never eventuated. It also estimated that US$ 4.4 billion was received by companies that increased turnover during the first six months of the pandemic. An earlier ABC report previously noted that over 16% of JobKeeper businesses did not suffer a downturn during the three months of the pandemic, racking up nearly US$ 3 billion in subsidies. When first introduced, most businesses with US$ 740 million, AUD 1 billion), revenue were required to show or predict at least a turnover fall of 30% to qualify JobKeeper, with a 50% turnover threshold for big companies and 15% for charities. Once accepted into this government scheme, companies continued receiving payments until around the end of September, when turnover tests changed. At no stage did the legislation, which has cost more than US$ 66 billion, address what would happen if companies were not impacted or actually “benefitted” from Covid so there was no mechanism to recoup money from such firms. By the end of the week, there were reports that because tax commissioner, Chris Jordan, had failed, with a Senate request, to forward details of large private companies, with a turnover greater than US$ 7.4 million, (AUD 10 million), that received JobKeeper payments, he could be fined or sent to jail under the Parliamentary Privileges Act.

Finally, there is good news that its economy has bounced back from the COVID recession, as national growth rose 9.6% over the year to June, and 0.7% to the June quarter. However, economists note that the data is “inherently backward-looking” and expect that the real impact of the recent lockdowns may only be felt this month, where some analysts are looking at a 3.0% quarterly contraction. The country’s terms of trade rose 7% in the quarter to its highest level in history and that strong export prices for mining commodities were the main driver, contributing to a 3.2% increase in nominal GDP. Domestic demand was also a key factor in the GDP figures, with household spending 1.1% higher, but still 0.3% down on the figure in December 2019. Public spending came in 7.4% to the good.

Reports from China indicate that the government has unilaterally banned children, (i.e., anyone under the age of 18), from playing online games for more than three hours a week, citing their concern about youngsters getting addicted to gaming. Online gaming companies will be barred from providing gaming services to younger users, in any form, outside those hours, and authorities will increase the frequency and intensity of their inspections. Prior to this edict, the hours were restricted to an hour and a half per day and three hours on public holidays. In a notice published by the National Press and Publication Administration, juvenile playing time will be restricted to between 8pm – 9pm on Fridays, weekends and on public holidays, starting today, 02 September. With this latest news, and the ongoing crackdown, by the regulators, on the tech giants, there is little wonder why their stocks are falling on the world’s bourses. 

The Federal Reserve’s chairman, Jerome Powell, has been reading from the same script for some time and confirmed again that the bank was in no rush to raise interest rates, despite a recent spike in inflation, and that any increase would be based upon the economy returning to maximum employment and inflation returning to the bank’s 2% target. lf the US economy continues to improve for the rest of the year, it seems highly likely that the Federal Reserve will begin the tapering of the Fed’s bond purchases, that has reached US$ 120 billion monthly since the onset of the pandemic in March 2020. In his annual speech, at the Jackson Hole Economic Policy Symposium, earlier in the week, Powell noted that, “we have said that we would continue our asset purchases at the current pace until we see substantial further progress toward our maximum employment and price stability goals.  .   .    My view is that the ‘substantial further progress’ test has been met for inflation. There has also been clear progress toward maximum employment.”

Latest figures see the country’s GDP – at 6.6% – growing at a faster rate than expected and that last week’s jobless claims had risen to 353k, with its July unemployment rating slipping to 5.4%, with 943k jobs created. One fly in the ointment could be the current rise in the Delta variant that may put these plans on hold.

Last month, British house prices rose 2.1% on the month, to an average US$ 343k, driven by robust demand and a shortage of homes for sales, despite the tapering of the stamp duty holiday on purchases; the price increase is the second largest in fifteen years, with the biggest increase – at 2.3% – seen in April 2021. On an annual basis, the pace of growth accelerated by 0.5% to 11.0%; current values are now 13% higher than before the pandemic. Although the consensus was that the tapering of the stamp duty tax break would see reduced demand, this was not to be, as the key driver turned out to be limited supply.

There is no doubt that Covid has fundamentally changed the way cities are viewed and there has been a marked interest, on a global scale, in emigrating from cities to the country. In the light of the pandemic, many city dwellers are re-evaluating the importance of larger (and generally cheaper) homes, green spaces and a less hectic lifestyle. For example, an August 2020 survey by London Assembly, polled 450 Londoners and the response was that 4.5% of them would definitely move out of the city within the next 12 months; this equates to 416k people. Take Me Home Country Roads!

Posted in Australian economy, Commodities, Covid-19, Dubai economy, Dubai property, Finance, Global Economy, UK economy, US economy | Leave a comment

Take Me Home Country Roads!

Take Me Home Country Roads!                                                              02 September 2021

For the past week, ending 02 September, Dubai Land Department recorded a total of 1,667 real estate and properties transactions, with a gross value of US$ 2.56 billion. It confirmed that 1,080 villas/apartments were sold for US$ 613 million, and 146 plots for US$ 613 million over the week. The top two land transactions were for a plot in Marsa Dubai, selling for US$ 179 million, and another in Al Murqabat for US$ 89 million. The top three transfers for apartments and villas were all apartments in Marsa Dubai, Burj Khalifa and Business Bay selling for US$ 63 million, US$ 54 million and US$ 45 million respectively. The most popular locations were in Jabal Ali First, with 40 sales transactions worth US$ 24 million, Ras Al Khor, with 30 sales at US$ 188 million, and Wadi Al Safa 5, with 14 sales transactions worth US$ 19 million. Mortgaged properties for the week totalled US$ 1.09 billion, including a plot for US$ 545 million in Al Kheeran area. 61 properties were granted between first-degree relatives worth US$ 128 million.

Asteco has carried out a summary of the leading Dubai property locations, and their price movements, on a quarterly and annual bases and some of the results were quite surprising. Of the twelve “villa locations”, four showed double digit rises over both periods – Arabian Ranches – 19% on the quarter and 24% for the year, along with Dubai Sports City (14%:11%), Dubai Hills (13%:20%) and The Meadows (10%:15%), with Mirdiff recording annual growth at 15%, and on the quarter 9%.  On an annual basis, Palm Jumeirah and Dubai Silicon Oasis both saw prices up 10% but posted single digit quarterly growth of 6% and 8%. Of the remaining five – Jumeirah Parks, Jumeirah Village, Umm Suqeim, The Springs and The Lakes – posted annual figures of 9%, 8%, 8%, 2% and 2%, with quarterly returns of 8%, 9%, 8%, 4% and 2%.

In contrast, the fourteen “apartment locations” showed mostly subdued growth and, in six cases, annual losses The top six annual growth locations were The Greens, Dubai Marina, Business Bay, JLT, JBR and Palm Jumeirah with prices up 6%, 4%, 4%, 3%, 2% and 1%. Both Downtown and Jumeirah Village were flat but the six remaining areas – International City, Discovery Gardens, Dubai Sports City, Deira, SZR and DIFC – saw yearly values move southwards by -12%, -11%, -5%, -3%, -2% and -1%, although but one, International City, recorded growth levels of between 1% – 7%.

According to the latest New World Wealth report, Dubai’s total wealth climbed 7.8% to US$ 529 billion by the end of June, compared to the same period in 2020; it also maintained its position as the 29th wealthiest city globally. There are reports that a large number of ultra-high net worth individuals have been showing interest in the emirate’s high-end properties and that many millionaires have moved to Dubai, seeing it a safe and secure location in which to live.  In H1, Palm Jumeirah saw the highest selling price for a villa, at over US$ 30 million, and the highest rental for a villa, at over US$ 1 million. The three most popular places for the emirate’s twelve billionaires, (nine last year), and 54k high net worth individuals, (49.4k last year), were Emirates Hills, Jumeirah Golf Estate and Palm Jumeirah.

In its latest quarterly report, global consultancy Colliers estimated that Dubai will open about 40% of 2021 forthcoming supply to coincide with the 01 October opening of Expo 2020 Dubai. By 30 June, it reckoned that the country’s branded hospitality market, with Dubai the main contributor, topped 108k keys. Over the next two years, it expects that supply will increase by an 8.0% compound annual growth rate. Some estimate that the number of hotel rooms in Dubai could reach 160k by the time of the Expo opening and, even with the Covid cloud hanging over the event, the target is still an optimistic 25 million visitors. Occupancy rates continue to cause concern, as the current level is 23% higher than the same month last year, but it is still 16% lower than in July 2019. On the same lines, revenue per available room has increased 23% on the year but is still 16% lower, compared to 2019 figures.

Dubai Media Office claims that the emirate’s sports sector contributes US$ 1.1 billion to the local economy every year and its contribution to the national and local economy will continue to grow, as the emirate attracts investment and creates more jobs. Some of the contribution derives from a number of national and international events which attracts global visitors. In addition, there are more than 20k people employed in Dubai’s sports sector, along with five factories manufacturing sports equipment and sportswear in the emirate, and more than 2.5k outlets that sell training equipment and merchandise. In addition, there are more than 350 registered companies that organise various sports events and training camps.

Between now and November, Emirates will receive its last three A380s, bringing its fleet size to 118, (almost half of the 248 total ever built); six of this number will be a four-class configuration, with the introduction of Premium Economy seats, which can be found on its London Heathrow and Paris Charles De Gaulle routes. The Dubai carrier expects to be the largest operator of the A380 for the next two decades. As travel restrictions ease, the jumbo will be reinstated on twelve more routes – including Cairo, Frankfurt, Guangzhou, Los Angeles, Manchester, New York JFK and Zurich – by next month.

The latest public auction of Dubai’s special car plate numbers, organised by the RTA, raised almost US$ 10 million, with the five most expensive numbers – E55, W29, X35, V88888 and BV9999 going under the hammer for US$ 994k, US$ 681k, US$ 676k, US$ 270k and US$ 234k. One hundred various numbers were on offer.

The UAE fuel price committee has announced petrol and diesel prices for the month of September 2021, with the three petrol grades all US$ 0.008 higher, on the month, with Super 98, (US$ 0.703), Special 95 (US$ 0.673) and US$ 0.651). Diesel prices will head in the opposite direction – down US$ 0.019 to US$ 0.649 per litre.

Established in 2002, DMCC recorded 204 new member companies – its highest ever August figure, two months after posting its best H1 returns, of 1,230, since 2013.  The free zone is on track to top 20k members by the end of the year. It has recently launched DMCC Crypto Centre – a comprehensive ecosystem for businesses operating in the cryptographic and blockchain sectors.

A new law sees the UAE enhancing transparency in government by holding ministers and senior officials accountable for wrongdoing, allowing the Public Prosecutor to investigate complaints against any senior official. If found guilty, any minister, or an official under investigation, can be banned from travelling and have their money frozen which will also apply to funds of their wives and minors, if necessary. The potential penalties for violators include censuring, forced retirement, job termination, or relief of duties, along with deprivation of pension or bonus at a maximum of 25% of the total. In announcing the decree, HH Sheikh Mohammed bin Rashid Al Maktoum commented, “we are a law-abiding country. The integrity and transparency of our federal government is a top priority.”

The July IHS Markit PMI sees an improvement in the country’s non-oil private sector and confirms that the country’s economy continues to improve, with the index hitting a two year high of 54.0. Three contributing factors pushing the economy are the easing of restrictions, (and the increasing of capacity), at local restaurants, cinemas and malls, cases trending downwards to their lowest since October 2020 and the resumption of tourist visas; rising oil production and higher oil prices have also helped boost the recovery. Output and new business rose at the quickest rates since July 2019, with firms reporting their sharpest rise in new orders for two years, amid soaring domestic sales and strengthening market confidence. One possible drag would be the fact that local banks continue to struggle with rising bad loans, resulting in credit to the private sector being stuck in negative territory.

A Dubai farm, with more than 1.2k date trees, has teamed up with Terraplus Solutions to implement an underground watering system that is claimed could save the UAE an annual one trillion litres of water, equivalent to the amount of water used by half the emirate’s population. Since 2019, experiments have been carried out at the Al Awir farm which sees a 30% reduction in water usage by implementing an underground watering system that saves up to 50k litres of water per tree every year. The new subsurface technology, which has pipes inserted into the ground, allowing water to directly find the trees’ roots, results in the farm now losing 86 million litres, compared to the prior total of 170 million litres. Apart from the water saving, it appears that the amount of crop each tree produces increases by up to 10%. It is thought that there are twenty million date trees in the UAE and that the global agricultural sector uses 70% of all the world’s potable water every year. With such facts, if the technology were installed in the UAE, there is no doubt that it would not only transform the sector but would also allow the UAE, (and the world), to use the money saved on many projects that are currently unaffordable.

Mainly because of the global economic uptick and increased demand, Emirates Global Aluminium, posted a record H1 net profit of US$ 474 million, compared to a loss of US$ 57 million a year earlier, and is 166% higher than the US$ 178 million figure of H2 2020. EBITDA for the half year was 111% higher on the year at US$ 951 million, with revenue climbing 20.0% to US$ 2.94 billion. With the global demand for aluminium high, the future is positive for the country’s biggest industrial company, outside the oil and gas sector, jointly owned by Abu Dhabi’s Mubadala Investment Company, and the Investment Corporation of Dubai. Aluminium was trading at US$ 2,245 in H1, 41.0% higher than a year earlier, as October aluminium futures currently trading at US$ 2.6k.

Kamco Invest’s latest GCC Banking Report noted that gross loans of GCC’s listed banks jumped 4.6% by the end of Q2, compared to the previous quarter, and up 7.1% on the year, driven by broad-based growth seen in all its markets. Total bank revenue for GCC banks increased 3.5% on the quarter, driven by higher net interest income, partially offset by a decline in non-interest income. The two GCC countries, with the lion’s share of the regional balance sheet, were the UAE (with total assets of US$ 840 billion – 29.9% of the total) and Saudi Arabia, with 26.7% of the aggregate. Gross credit came in 0.9% higher at US$ 482 billion, marginally higher than the pre-pandemic gross credit of US$ 480 billion. UAE banks registered their biggest increase in profits in Q2, at 11.8%, after nine out of the sixteen listed banks reported rising net profits.

As widely expected, more than 95% of NMC Health creditors have approved its proposed deeds of company arrangement, (DOCA) restructuring process, resulting in the 34 companies of the UAE’s biggest healthcare provider to exit administration; it is expected that NMC Healthcare will remain in administration in order to pursue potential litigation claims on behalf of itself and the other DOCA companies. The creditors, owed more than US$ 6.4 billion by NMC Health, will see US$ 4 billion of their debts being wiped out in return for equity instruments. In H1, gross revenue for its UAE and Oman businesses beat company expectations by 10% to reach US$ 611 million.

As from 03 October, the DFM will extend its trading time by one hour and will remain open from 10.00 hrs to 1500 hrs. International interest in the local market continues to increase, with latest figures showing that international investors account for 48.2% of its trading activities and own 18.5% of the market capitalisation by the end of June 2021. Interestingly, foreign investors accounted for 69% of new investors on the DFM. Furthermore, in a bid to further promote investors’ participation in the market, the bourse has announced that the minimum trading commission will be waived, with immediate effect. The result was swift, with Wednesday’s trade witnessing a 161% increase, along with the highest level of daily trade count since the beginning of this year, which jumped 146%, YTD, compared to its 2,740 average.

The DFM opened on Sunday 29 August, 196 points (6.8%) higher the previous six weeks, rose 12 points (0.4%) to close the week on 2,912. Emaar Properties, up US$ 0.03 the previous fortnight, gained a further US$ 0.02 to close on US$ 1.15. Emirates NBD and Damac started the previous week on US$ 3.79 and US$ 0.34 and closed flat at US$ 3.79 and US$ 0.34. On Thursday, 02 September, 149 million shares changed hands, with a value of US$ 44 million, compared to 233 million shares, with a value of US$ 44 million, on 26 August.

For the month of August, the bourse had opened on 2,820 and, having closed the month on 2,903, was 83 points (1.6%) higher. Emaar traded from its 01 August 2021 opening figure of US$ 1.11 – up US$ 0.03 – to close August on US$ 1.14. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.37 and US$ 0.35 and closed on 31 August on US$ 3.57 and US$ 0.35 respectively. YTD, the bourse had opened the year on 2,492 and gained 411 points (16.5%) to close the eight months on 2,903, as Emaar traded US$ 0.18 higher at US$ 1.14   NBD and Damac started the year on US$ 3.33 and US$ 0.35 and closed 31 August at US$ 3.77 and US$ 0.35.

At their meeting this week, Opec+ confirmed that it had started to taper a historic production restriction pact, planning to bring two million bpd back to the markets by the end of the year. The bloc, headed by Saudi Arabia and Russia, will begin by increasing output by 400k bpd during the month of September. The fact that the oil supply pipeline is being ramped up saw oil prices fall, whilst the oil market is expected to remain in deficit for at least the next four months, with a six million bpd oil demand growth forecast.

By Thursday, 02 September, Brent, US$ 3.77 (10.9%) higher the previous week, shed US$ 0.82 (1.2%), to close on US$ 70.53. Gold, US$ 50 (2.9%) higher the previous fortnight, gained a further US$ 11 (0.6%) to close Thursday 02 September on US$ 1,810.   Brent started August on US$ 75.19 and lost US$ 3.37 (2.6%) during the month, to close on US$ 71.82. YTD, it started the year trading at US$ 51.80 and gained US$ 20.02 (38.6%) to close on US$ 71.82 during the first eight months of the year. Meanwhile, the yellow metal opened August trading at US$ 1,817 and shed US$ 2 (0.1%), during the month, to close on US$ 1,815. Over the year it has lost US$ 80 from its opening year balance of US$ 1,895.

It is estimated that 835k new UK companies were registered in the twelve months to January 2021 – 42% higher than a year earlier, and despite the period covering the devastated economy caused by the onset of Covid; in the US, the figure was 4.4 million, 24% higher. In this day and age, not only do they all need a distinctive name but also a domain name, more so for the many e-commerce entities set up in tandem with the expansion of people shopping online. A stand-out name and domain name will often be the unique selling point that ensures that it will often become the “first to go to company” as similar entities vie for the same business; in days gone by, this would not necessarily have been the case. There is no doubt that demand for business names has soared and that a host of websites has sprung up that can help them both to pick one and register a connected domain.

Amazon is planning to extend its current 275k global payroll, by a further 55k, for corporate jobs and roles in robotics, research and engineering. 72.7% of the total will be in the US, with a further 2.5k being added in the UK, where it has recruited 10k already this year. A big percentage will be required in the company’s new satellite launch programme – Project Kuiper – to widen broadband access. In the past, the new chief executive, Andy Jassy, had commented that the company needs more staff to keep pace with expansion of its retail, cloud computing and advertising arms.

Covid has claimed another victim, with Marks & Spencer announcing that the retailer will no longer sell men’s suits at more than 57% of its 254 bigger stores, as men’s preference has shifted to “smart separates”, such as chinos and shirts, with an increased demand for casual wear. M&S reckons that they only sold 7.5k suits in the first two months of the pandemic – 80% lower than in the same period a year earlier. Market research consultancy, Kantar Group, has estimated that suit sales last year were 54% lower, at two million, compared to the 4.3 million sold in 2017. The study also noted that the average spend on men’s suits was 62.1% lower, at US$ 219 million, to the twelve months to July 2021, compared to five years earlier.

Zoom Video Communication posted a 70.6% rise in Q2 net profit to US$ 317 million, driven by a 54%, year on year, revenue hike to US$ 1.02 billion. It has updated its full-year revenue forecast to over US$ 4.0 billion, which would be 55% higher than their 2020 return. It put the revenue increase to “acquiring new customers and expanding across existing customers”. The tech company is confident that, even if the pandemic threat were to go away, the demand for video conferencing will not decline, as companies continue to adopt hybrid work models. During the period, it invested US$ 82 million in R&D, as well as acquiring, cloud call centre software provider Five9 for US$ 14.7 billion, as part of its strategy to adapt to the post-pandemic world; this was the fourth purchase by Zoom since the start of the Covid-19 pandemic. With total cash and marketable securities of US$ 5.1 billion, Zoom has enough finance to acquire new start-ups and competitors in the same space of video conferencing.

In July, coffee prices had surged to seven-year highs, after reports that frost had damaged crops in the world’s biggest producer Brazil, with the price for arabica coffee rising above the US$ 2 level, or 60% higher, YTD. Lower-quality robusta coffee prices performed likewise – up 40% YTD – to its highest level since October 2017. Late August saw reports that the world’s second largest coffee producer, Vietnam, was having to deal with similar problems faced by all global producers, including a dire shortage of containers, soaring freight rates and various climatic issues, including frost and rain. In addition, the country has had to deal with a fresh outbreak of the delta variant which has led to stringent travel curbs in the country, badly impacting some key producing areas of the Central Highlands.

Exactly ten years ago, when Tim Cook took over the reins of Apple from its co-founder, Steve Jobs, he struck a deal that has already made him a billionaire. A company filing with the US SEC confirms that he has sold most of the five million shares, he has received as part ofthe deal, for more than US$ 750 million.  Part of the agreement was contingent on the value of Apple’s shares, over the past three years, surpassing at least two-thirds of companies in the S&P 500. Cook silenced all those critics, who thought him to be too technocratic to match Jobs’ success, by the fact that Apple shares have returned more than 1,100%, its revenue has doubled, and its market value has topped US$ 2.5 trillion.

Even though most member countries posted Q2 expansion, averaging 1.6%, compared to 0.6% in Q1, the OECD economies still remain an average 0.7% below pre-Covid levels. The bloc includes a group of major world economies from the Eurozone, the US, Japan and the UK. Q2 growth levels varied, with the UK top of the list, growing 4.8%, (following a 1.6% contraction in Q1), ahead of Italy with a 2.7% growth, compared to just 0.2% the previous quarter. Five other countries that make up the “Major Seven” – US, Germany, France, Canada and Japan – recorded the following growth levels of 1.6%, 1.6%, 0.9%, 0.6% and 0.3% in Q2. Four months ago, the OECD upgraded its 2021 growth forecast from 4.2% to US$ 5.8%, whilst noting that many member states will only return to pre-pandemic levels by the end of 2022. (After declining 0.3% and 0.1% in Q1, the euro area and the EU posted GDP growth of 2.0% and 1.9% respectively).

As its central bank raises its base rate from a record low of 0.50% – set three years ago – to 0.75%, South Korea has become the first major Asian economy, and the first G20 nation, to lift rates since the pandemic began. The country’s household debt and home prices have recently soared, and it is hoped that this move may improve the situation and curb the risks that high inflation and surging public debt may bring to the economy. It will not be too long before other nations follow suit by raising their own bank rates and curtail their massive stimulus packages, introduced to save their economies in the first eighteen months of Covid.

Despite mining stock returning impressive returns, the Australian market traded relatively flat on Monday, with the ASX 200 trading at 7,490 points; the standout performer was Fortescue Metal, up 6.3%, at US$ 15.51, with the world’s fourth largest iron ore miner posting a 117% jump in annual profit to US$ 10.3 billion, after shipping a record amount of iron ore to take advantage of soaring prices. Those prices topped a record US$ 233 in May, attributable to Brazilian supply problems and high Chinese demand, but they have since dipped 32.2% to US$ 158 a tonne; the current price is expected to nudge slightly higher for the rest of the year. With a final dividend of US$ 1.54 expected, the total annual payout will come in at US$ 2.61 per share, equating to a total of US$ 8.0 billion, of which its major shareholder, Andrew Forrest, will take home US$ 681 million.

The latest CoreLogic report notes that, in August, Australian property prices moved 1.5% higher to US$ 491k, with Darwin, Canberra and Hobart posting annual rises of at least 22.0%, with Melbourne reporting the slowest price rise at 13.1%. Regional property rises of 22% were higher than those seen in capital cities, with an 18% increase.  On a monthly basis, the plaudits go to Hobart, Canberra and Brisbane, with increases of 2.3%, 2.2% and 2.0%. Although housing values are still heading north, they are moving at a slower rate than of late. Sydney and Melbourne median values rose to US$ 766k and US$ 567k by the end of August, with the number of properties advertised for sale 5.8% lower than the five-year average, pushing prices higher. Australia’s median property price has risen by over US$ 76k in the past year, equating to US$ 1.46k per week. Another interesting statistic sees house prices rising almost eleven times faster than wages growth over the past year.

An ABC report discovered that 20k companies, (of all sizes), tripled their turnover yet accrued US$ 275 million in JobKeeper during the first three months of the pandemic, with a further 15k entities doubling their turnover, earning US$ 236 million, whilst receiving government support through JobKeeper. It is obvious that thousands of profitable companies qualified for the subsidy based on projected turnover falls that never eventuated. It also estimated that US$ 4.4 billion was received by companies that increased turnover during the first six months of the pandemic. An earlier ABC report previously noted that over 16% of JobKeeper businesses did not suffer a downturn during the three months of the pandemic, racking up nearly US$ 3 billion in subsidies. When first introduced, most businesses with US$ 740 million, AUD 1 billion), revenue were required to show or predict at least a turnover fall of 30% to qualify JobKeeper, with a 50% turnover threshold for big companies and 15% for charities. Once accepted into this government scheme, companies continued receiving payments until around the end of September, when turnover tests changed. At no stage did the legislation, which has cost more than US$ 66 billion, address what would happen if companies were not impacted or actually “benefitted” from Covid so there was no mechanism to recoup money from such firms. By the end of the week, there were reports that because tax commissioner, Chris Jordan, had failed, with a Senate request, to forward details of large private companies, with a turnover greater than US$ 7.4 million, (AUD 10 million), that received JobKeeper payments, he could be fined or sent to jail under the Parliamentary Privileges Act.

Finally, there is good news that its economy has bounced back from the COVID recession, as national growth rose 9.6% over the year to June, and 0.7% to the June quarter. However, economists note that the data is “inherently backward-looking” and expect that the real impact of the recent lockdowns may only be felt this month, where some analysts are looking at a 3.0% quarterly contraction. The country’s terms of trade rose 7% in the quarter to its highest level in history and that strong export prices for mining commodities were the main driver, contributing to a 3.2% increase in nominal GDP. Domestic demand was also a key factor in the GDP figures, with household spending 1.1% higher, but still 0.3% down on the figure in December 2019. Public spending came in 7.4% to the good.

Reports from China indicate that the government has unilaterally banned children, (i.e., anyone under the age of 18), from playing online games for more than three hours a week, citing their concern about youngsters getting addicted to gaming. Online gaming companies will be barred from providing gaming services to younger users, in any form, outside those hours, and authorities will increase the frequency and intensity of their inspections. Prior to this edict, the hours were restricted to an hour and a half per day and three hours on public holidays. In a notice published by the National Press and Publication Administration, juvenile playing time will be restricted to between 8pm – 9pm on Fridays, weekends and on public holidays, starting today, 02 September. With this latest news, and the ongoing crackdown, by the regulators, on the tech giants, there is little wonder why their stocks are falling on the world’s bourses. 

The Federal Reserve’s chairman, Jerome Powell, has been reading from the same script for some time and confirmed again that the bank was in no rush to raise interest rates, despite a recent spike in inflation, and that any increase would be based upon the economy returning to maximum employment and inflation returning to the bank’s 2% target. lf the US economy continues to improve for the rest of the year, it seems highly likely that the Federal Reserve will begin the tapering of the Fed’s bond purchases, that has reached US$ 120 billion monthly since the onset of the pandemic in March 2020. In his annual speech, at the Jackson Hole Economic Policy Symposium, earlier in the week, Powell noted that, “we have said that we would continue our asset purchases at the current pace until we see substantial further progress toward our maximum employment and price stability goals.  .   .    My view is that the ‘substantial further progress’ test has been met for inflation. There has also been clear progress toward maximum employment.”

Latest figures see the country’s GDP – at 6.6% – growing at a faster rate than expected and that last week’s jobless claims had risen to 353k, with its July unemployment rating slipping to 5.4%, with 943k jobs created. One fly in the ointment could be the current rise in the Delta variant that may put these plans on hold.

Last month, British house prices rose 2.1% on the month, to an average US$ 343k, driven by robust demand and a shortage of homes for sales, despite the tapering of the stamp duty holiday on purchases; the price increase is the second largest in fifteen years, with the biggest increase – at 2.3% – seen in April 2021. On an annual basis, the pace of growth accelerated by 0.5% to 11.0%; current values are now 13% higher than before the pandemic. Although the consensus was that the tapering of the stamp duty tax break would see reduced demand, this was not to be, as the key driver turned out to be limited supply.

There is no doubt that Covid has fundamentally changed the way cities are viewed and there has been a marked interest, on a global scale, in emigrating from cities to the country. In the light of the pandemic, many city dwellers are re-evaluating the importance of larger (and generally cheaper) homes, green spaces and a less hectic lifestyle. For example, an August 2020 survey by London Assembly, polled 450 Londoners and the response was that 4.5% of them would definitely move out of the city within the next 12 months; this equates to 416k people. Take Me Home Country Roads!

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The Boys Are Back In Town

The Boys Are Back In Town                                                                     26 August 2021

For the past week, ending 26 August, Dubai Land Department recorded a total of 1,345 real estate and properties transactions, with a gross value of US$ 1.69 billion, and is heading for a bumper month. It confirmed that 1,163 villas/apartments were sold for US$ 668 million, and 215 plots for US$ 327 million over the week. The top two land transactions were both for plots in Hadaeq Sheikh Mohammed bin Rashid, selling for US$ 9 million and US$ 8 million. The most popular locations were in Jabal Ali First, with 75 sales transactions worth US$ 86 million, Hadaeq Sheikh Mohammed bin Rashid, with 35 sales at US$ 20 million, and Palm Jumeirah, with 11 sales transactions worth US$ 13 million. Mortgaged properties for the week totalled US$ 510 million, including a plot for US$ 109 million in Al Khairan area. 99 properties were granted between first-degree relatives worth US$ 207 million.

As Dubai’s economy bounces back to life, along with the emirate’s residential property sector, a Reuter’s poll of eleven housing experts sees the market on a steady course, with prices expected to rise modestly over the next couple of years. Three months ago, their estimate was that house prices would rise 3.0% and 2.5% in 2021 and 2022; this has been upgraded to 1.1% and 2.8%. To an observer, these figures seem to be on the light side and will come in a lot higher, especially when other global locations, such as Australia, New Zealand and Canada have had property hitting record high levels, but Dubai prices are still around 36% lower than in the bull market of 2014.

Another week and another report by an international agency. This time, CBRE Research noted that total transactions in H1 surged 69.2% and 46.4%, compared to the same periods in 2020 and 2019, as demand for bigger homes increased; it estimated that average home prices only increased by an annual 2.8%, led by the demand for villas and larger homes, with the apartment segment lagging somewhat behind and even recording price reductions. Secondary market transaction volumes jumped 148.4%, while off-plan transaction volumes were at a much-reduced figure of 13.4% in H1. When it comes to the supply issue, CBRE indicated that 18.6k units were handed over in H1, with a further 37.5k expected to be added to Dubai’s property portfolio by year end. On that basis, 56.1k will be handed over in 2021, well down on an earlier estimate pf 83.0k – but expect the figure to be on the south side of 50k. (In the past, it was common to see some consultancies overestimate new property forecasts, sometimes by 50%, which may have encouraged potential buyers to delay their purchases). One of the reasons for the current boom is that new supply coming to the market also remains lower than expected. The consultancy also noted that for the rest of 2021, “prime prices will be in positive territory but not at the same growth levels that we’ve seen to date”.

Union Properties announced the launch of Motor City Views, featuring 880 residences, comprising 313 studios, 427 one-bedroom, 133 two-bedroom and seven three-bedroom apartments. The apartments will be divided into three buildings, each with seven floors, and are serviced by recreational areas designated for residents such as air-conditioned sports halls, a covered children’s playground and swimming pools. The development, which will cover an area of 857k sq ft, will also have a retail area, including a shopping mall, with diverse shops, restaurants, and various recreational activities.

This week saw the sale of a Dubai luxury villa for over US$ 27 million – the third time this year that a property sale has exceeded the AED 100 million mark – and a sure sign that the market is on a strong recovery curve. The luxury villa, sold by Luxhabitat Sotheby in less than a month, became the highest value property ever sold in Dubai Hills Estate, and was bought by an anonymous buyer.

As would be expected, the chairman of Danube Properties, Rizwan Sajan, expects demand for Dubai property to pick up, as foreign investors continue to snap up unsold units, amidst a steady recovery in prices. He noted that “a good number of high-net-worth foreign investors from India, Russia and other countries are flocking to Dubai to buy real estate assets at a very attractive price.”  To take advantage of the bullish market, Danube is planning to launch its first project, in Arjan, since the outbreak of the Covid-19 pandemic, before the end of October. The Danube chairman also noted that “in the last 28 years, I have seen three ups and downs. But whenever there is a crisis, Dubai has emerged stronger because its fundamentals are very strong.”

Dubai Electricity and Water Authority has announced the completion of its Water Pumping Station project at the Mohammed bin Rashid Al Maktoum Solar Park. The project, which has a daily capacity of 7.5 million imperial gallons of water, cost US$ 6 million. DEWA confirmed that all electricity and water infrastructure expansion plans are developed based on demand forecast in Dubai until 2030. The station uses clean energy from the solar park and can be operated remotely.

Dubai-based Emirates Central Cooling Systems Corporation will invest US$ 234 million, in a deal with Nakheel, to acquire the developer’s district cooling assets which they will also manage and operate. Empower’s new portfolio serves more than 18k customers in 17 major urban projects through 19 plants across Dubai, in locations such as The Gardens, Nakheel Mall, Dragon Mart, Jumeirah Islands, Souk Al Marfa on the Deira Islands, The Circle Mall, Al Khail Avenue Mall and others. (District cooling companies deliver chilled water through insulated pipes to properties). Similar deals have occurred over the past nine months, including December’s purchase of two Saadiyat Island district cooling units by Tabreed from Aldar Properties in a US$ 262 million deal and the more recent April agreement that saw Emaar sell its Downtown Dubai district cooling business, for US$ 676 million, to Dubai’s Tabreed.

The Emirates Tourism Council notes a 13.1% H1 rise in hotel revenue to US$ 3.08 billion, as occupancy rose from 53.6% to 62.0%, driven by the country’s rapid Covid-19 vaccination campaign. Some 8.3 million guests, a 15% hike in year-on-year numbers, stayed in the UAE in H1, with the number of “local” hotel guests 77% higher, at 2.3 million. The UAE has seen 80% of its near ten million population inoculated. Another major improvement is expected in H2, during the six-month Expo 2020 Dubai starting on 01 October – which is only five weeks away. The economy of Dubai has shown positive indicators of a quicker than expected rebound and tourism is one of the drivers for the July improvement in the emirate’s IHS Markit PMI.

Dubai’s Crown Prince, Sheikh Hamdan bin Mohammed, has noted that the recovery of the tourism sector is “gathering pace”, despite the challenges currently faced by international markets. With the twin aims of increasing the inflow of international tourists, as well as targeting new source markets, the Emirates Tourism Council has approved a joint action plan of the Ministry of Economy and local tourism departments. Furthermore, the plan includes initiatives such as large-scale campaigns promoting several “promising destinations”, introducing long-term and multiple-entry tourist visas, (including the possibility of a five-year tourist visa), and marketing the country’s major tourism spots.

According to the RTA, marine public transport, (ferry, abra, water taxi and water bus), transported 5.7 million riders in H1 – 20.5% higher than the comparative 2020 figure.

A strategic alliance sees Outlet Mall join with the Lulu Group to form the region’s first and largest regional megamarket concept; targeting both B2B and B2C customers, and encompassing an area of some 200k sq ft, it will introduce the region to the cash-and-carry concept. This alliance will focus on bulk buying prices and will offer UAE residents exclusive bargains, as well as a broad range of low-cost, high-value products at competitive prices. Furthermore, with the expansion, Dubai Outlet Mall, which first opened in 2007, will spread over 3.5 million sq ft, to become the largest outlet mall on the planet, with a catchment area of 1.2 million customers.

Dubai’s Sharaf Group is to build an ultra-modern ‘Used Lead Acid Battery’ recycling facility, built on a 250k sq ft area, in Dubai Industrial City. The project is in line with the emirate’s vision of “Clean Environment” and “Zero Waste” by 2050 and the fully automated facility will process 21k tonnes or 85% of the ULABs generated in Dubai every year. The facility is being built by Italian battery recycle plant manufacturer, Engitec Technologies, and will commence operations in Q1 2023.

In the seventeen months to April 2021, it is reported that local Emirati authorities, assisted by HP staff members, conducted three major raids on several large-scale counterfeiting storage facilities in Dubai and Ajman, resulting in 207k illicit items being confiscated. Over that period, multiple major counterfeiting schemes, designed to assemble and distribute illegal HP printer cartridges in the UAE market, have been permanently closed down – a win win win situation for the government, HP and consumers.

The top ten UAE banks, including four from Dubai – Emirates NBD, Dubai Islamic Bank, Commercial Bank of Dubai and Mashreq – posted a healthy Q2 Return on Equity of 10.9%, its highest level since Q4 2019 when it reached 13.3%. The main drivers behind this improvement were a 2.8% quarter on quarter increase and lower impairment charges. The Central Bank notes a strong, ongoing domestic credit demand across all sectors of the economy, but the US Fed’s commitment to maintaining the current low level of interest rates is expected to keep domestic banks’ income streams under pressure. Q2 also witnessed deposit growth outpacing loans at most banks, as consumers and businesses cut spending, which in turn saw a boost to liquidity; the asset quality of these banks has also  stabilised overall, after deteriorating in 2020.

Embattled Drake & Scull International announced an H1 net profit of US$ 21 million, with revenues of US$ 22 million, with a stable order book of US$ 96 million; it has ongoing operations in the UAE, Algeria, Tunisia, Palestine, India, Kuwait, Iraq, and Germany. The Dubai-based construction firm expects its 600 creditors’ approval of its restructuring plan by the end of Q3 and noted that its financial restructuring was progressing positively. As part of the restructuring plan, the company’s capital will be raised, and priority in subscribing to new shares will be given to existing shareholders.

Majid Al Futtaim posted increases in both EBITDA, (US$ 436 million) and net profit (US$ 18 million), despite a 10% decline in H1 revenue to US$ 4.25 billion. The privately held company, which owns and operates 28 shopping malls, 13 hotels and four mixed-use communities, noted that the 2.0% increase in earnings was primarily down to stabilisation of the retail market and steady asset valuations. The company’s retail business registered 12% declines in both revenue and EBITDA at US$ 3.6 billion and US$ 170 million respectively. Its property arm posted 6.0% rises in both revenue to US$ 436 million, and EBITDA to US$ 300 million. Revenue from the company’s hotels unit remained flat, year on year, at US$ 40 million, whilst there was a 25% jump from the company’s leisure, entertainment and cinemas businesses to US$ 137 million, albeit from a low base last year. The ME’s largest mall operator noted that there had been “encouraging signs of recovery” across its markets, as consumers gain assurance in resuming their pre-pandemic activities, and appeared confident in returning to pre-pandemic levels over the next two years.

ENBD Reit announced that its net asset value declined 3.3% on the quarter to US$ 174 million, mainly attributable to sustained valuation pressures and softening real estate market conditions. The Shariah-compliant real estate investment trust, which posted gross rental income 11.4% lower at US$ 7.5 million, managed to reduce operating expenses by 16.9% and saw occupancy dip 1% to 75%. The weighted average unexpired lease term increased 0.77 years to 3.97 years as 30th June 2021, compared to the previous year. Shareholders will be paid the equivalent of an 8.6% annualised dividend return of ENBD Reit’s share price.

Islamic Arab Insurance Company reported a net H1 income of US$ 11 million, driven by a solid performance in improving core business profitability and investment income, up 87.5% to US$ 9 million. The company, listed as Salama on the DFM, posted a 1.2% rise in net underwriting income to US$ 23 million, attributable to measures to revamp and restructure operations and processes and related IT infrastructure, as well as to tighten underwriting controls. Its subsidiaries, in Egypt and Algeria, also posted positive results, but their combined profit dipped 20.3% to US$ 4 million. In Q2, the insurance company’s focus on the local market saw Gross Written Contributions at US$ 179 million and an 11.7% increase in invested assets to US$ 348 million. The Board will meet next week to discuss the distribution of semi-annual dividends to shareholders.

The DFM opened on Sunday 22 August, 134 points (5.0%) higher the previous five weeks, rose 62 points (2.8%) to close the week on 2,900. Emaar Properties, up US$ 0.01 the previous week, gained a further US$ 0.02 to close on US$ 1.13. Emirates NBD and Damac started the previous week on US$ 3.68 and US$ 0.34 and closed at US$ 3.79 and US$ 0.34. On Thursday, 26 August, 233 million shares changed hands, with a value of US$ 44 million, compared to 99 million shares, with a value of US$ 50 million, on 19 August.

By Thursday, 26 August, Brent, US$ 8.16 (10.9%) lower the previous three weeks, regained US$ 3.77 (5.6%), to close on US$ 70.53. Gold, US$ 38 (2.2%) higher the previous week, gained a further US$ 12 (0.7%) to close Thursday 26 August on US$ 1,799.   

On Monday, Bitcoin topped the US$ 50k level for the first time in three months, trading at US$ 50,267. It had fallen to US$ 27.7k in January, and to under US$ 32k mid-July, following a crackdown in China and a decision by Elon Musk’s Tesla not to accept it as payment. However, with more mainstream financial companies beginning to utilise the digital currency, and an announcement by PayPal saying it would allow UK customers to buy, sell and hold a range of cryptocurrencies, Bitcoin reacted with prices heading north again. It also continues to be helped by the Fed holding interest rates at record lows and making riskier assets more attractive to investors, with its ongoing support of the post-pandemic US economy. Any newcomer to the cryptocurrency market is advised to wait until Bitcoin declines to US$ 30k again before taking the plunge.

The amount raised by start-ups in the MEA region has topped US$ 2.1 billion, YTD, and is more than double the figure of the annual funding raised over the past three years, driven by the growth of the region’s fast growing digital economy; the two leading sectors, with the strongest investor backing, were fintech and food services. Management consultancy, RedSeer also expects the size of the region’s consumer digital economy to more than double by 2023, led by the online retail and travel sectors. Meanwhile, Bain & Company expects that MEA online sales will top US$ 28.5 billion by the end of 2022 – more than triple the 2017 total of US$ 8.3 billion.

There is no surprise to see that q-commerce is gaining traction in the region, with the fairly new business model being defined by very fast delivery from local shops, restaurants, and dark stores, and usually characterised by an under 2-hour delivery. Latest Redseer research indicates that q commerce – with the most common example being online food deliveries – has already taken up 20% of the Mena region’s digital economy and will contribute US$ 20 billion in gross merchandise value over the next three years.

A Spac (special purpose acquisition company) announced that it has entered into a Merger Agreement, under which Virgin Orbit will become a publicly traded company, utilising its parent company, Vieco US Inc, and NextGen Acquisition Corp.  On completion, this transaction will provide finance of US$ 483 million, comprising US$383 million of cash, held in the trust account of NextGen (assuming no redemptions), and a US$100 million fully committed PIPE, (Private Investment in Public Equity). This will value Virgin Orbit at approximately US$ 3.2 billion and the process is expected to close by year end. The ownership will probably comprise Virgin Orbit’s existing shareholders base, including Virgin Group, Mubadala Investment Company, management and employees, holding an 85% stake, NextGen – 10 %, PIPE investors – 3% and SPAC sponsor – 2%.

Only recently, Morrisons’ directors had recommended investors accept a US$ 9.2 billion offer from a consortium led by US-based investment group, Fortress. Now it has changed its mind and accepted a better US$ 9.7 billion offer from another US private equity group Clayton, Dubilier & Rice, who, in June, had put a much lower US$ 7.6 billion bid which was turned down then.Fortress said it was “considering its options”, amid signs shareholders think the battle is not over. The latest offer represents a 60% premium to Morrisons’ share price before takeover interest emerged in mid-June. However, Morrisons’ shares, which jumped 4.4% on Friday, after the latest news, are trading above the new and improved offer price – a sure sign that there is more to run in this saga. (It seems that UK companies are the flavour of the month for overseas investors, as indicated by the fact that they have spent more buying UK listed companies in the last eight months than they had in the past five years; maybe sterling should be trading at a higher level).

Marks & Spencer announced that, over the previous nineteen weeks to 14 August, revenue from its food business was 10.8% and 9.6% higher compared to 2020 and 2019. It posted that clothing and home business had seen a “good recovery”, with revenue up 92.2% from last year and down just 2.6% on 2019. On this rare piece of good news for the retailer, as well as it issuing a profits upgrade, there are signs that its latest turnaround plan – “Never The Same Again” – is working; on the news, its share value traded 11.0% higher.

Staggering figures from the UK see that the country has lost 83% of its main department stores in the five years, since the collapse of the BHS chain, and that 67% of these remain unoccupied, with 237 big stores still empty. A study by CoStar noted that in 2016, the country was home to 467 stores, with the current figure now dropping to 79. Of the 388 stores that closed, 237 are still sitting empty, with a further 52 having plans in place for a change in usage.

According to CelebrityNetWorth, Charlie Watts, who died this week, was worth in excess of US$ 250 million, most of which came from ownership of shares in corporate entities of The Rolling Stones, which include royalties, album sales and tours, as well as other business ventures. The Rolling Stones’ member, since 1963, was considered to be one of the best drummers in the rock era and was the sixth richest drummer behind Ringo Starr (The Beatles – US$ 360 million), Lars Ulrich (Metallica – US$ 350 million), Dave Grohl (Foo Fighters – US$% 320 million), Larry Mullen Jr (US$ 300 million – U2) and Phil Collins (US$ 300 million – Genesis).

To see how bad the situation was in the seventeen-year Sepp Blatter FIFA era, one has just to see that the US Department of Justices has criminally charged fifty defendants and returned US$ 200 million to the global football body, five years after it started its corruption probe. Of that total, twenty-seven people and four corporate entities have pleaded guilty, with two people convicted at trial, with the money “raised” from the bank accounts of former officials, who were prosecuted for corruption, being used by the FIFA Foundation, an independent foundation, to help finance football-related projects. Blatter’s successor, Gianni Infantino, who earlier had been Secretary General of UEFA from October 2009 under the disgraced Michel Platini, commented that “I am delighted to see that money which was illegally siphoned out of football is now coming back to be used for its proper purposes, as it should have been in the first place.” It may be a bit rich of him to further claim, “we have been able to fundamentally change FIFA from a toxic organisation at the time, to a highly esteemed and trusted global sports governing body.” There is still some concern of Infantino’s involvement in the European Super League talks he has since distanced himself from. Corruption will probably never escape from football, with the latest scandal being Swiss prosecutors continuing a corruption investigation into two individuals, who worked for UEFA in the run-up to EURO 2020.

One of the biggest casualties of the pandemic was the global travel and tourism sector, battered by lockdowns, travel restrictions and border closures. It is estimated that its contribution to the global GDP almost halved from 11.4% to 5.5%, and more than US$ 4.5 trillion was “lost” last year because of the impact of Covid; over that time, 62 million jobs were lost in sector.

With Sydney under another lockdown, latest figures see payroll jobs continuing to head lower. It is estimated that payroll jobs have fallen 8.9% in Greater Sydney and 3.8% in NSW since lockdowns first began and that the negative momentum is accelerating; the main sector impacted is construction, with a fall of 22% across the state. Payroll job losses in the accommodation and food services, retail trade and construction industries accounted for 44.3% of job losses across Australia in the second half of July, and 45.4% in NSW. This is in direct contrast with the national unemployment rate falling to a thirteen-year low of 4.6% because of thousands of workers leaving the labour pool altogether, resulting in the labour force becoming smaller on a national scale.

It seems incongruous that Australia does not have to follow the leads of US and UK governments and reveal how many multiples of the median worker’s wage that is paid to the company supremos. The “CEO pay ratio”– that compares the average employee’s wage to how much the boss gets paid –  is not mandatory but many are now calling for its implementation to clarify who gets what in major Australian entities. It is reported that in the US, Brian Niccol, the chief executive of US fast food chain Chipotle, has this ratio at a staggering 1,129:1. It has been estimated , utilising  publicly available figures from before the coronavirus pandemic in 2019, those CEOs who out-earned workers by more than one hundred times included Alan Joyce, the Qantas chief, (126:1), Woolworth’s Brad Banducci, (143:1) and Goodman Group’s Gregory Goodman, (169:1). It is suggested that one of the top fat cats was CSL’s Paul Perreault, with a CEO pay ratio of 380:1. Critics want it a legal requirement so that observers can consider whether there is a “fair” split between the workforce and the management team and to emphasise, in some cases, the soaring gaps between executives and workers. Since being mandated in the US and UK, it has exposed the well-paid leaders of listed companies, boosted the income of minimum wage workers and increased macro remuneration transparency. After a decade-long slide, last year wage growth nudged a record 1.4% higher but what the Australian CEOs actually received is another story.

With the surprise election last week of Hakainde Hichilema as President of Zambia, Africa’s second biggest copper producer, there is increased hope that US$ 2.0 billion of expansion plans can start, once an agreement in the long running dispute over royalties is settled. The copper industry and the outgoing president, Edgar Lungu, had a fractious relationship that saw the industry stagnate, despite recent high copper prices. The slowdown can be seen from comparing production in Zambia and the Democratic Republic of the Congo. In 2010, Zambia produced nearly twice as much of the metal than the DRC – now its northern neighbour produces twice as much as Zambia. In the later stages of Lungu’s six-year presidency, some of the larger players, such as First Quantum Minerals, which accounts for more than 50% of the country’s copper output, and EMR Capital have the finance to fund their projects, while others have to spend “hundreds of millions of dollars” that have been held back since 2019 because of tax changes that deterred investment. The new incumbent may have to allow miners to deduct mineral royalties from the tax they pay on profits, as well as sliding-scale taxes that are levied on a pay-as-you-earn basis.

In the twelve months to May, copper prices jumped 123% from US$ 4.8k to US$ 10.7k but has since declined to US$ 9.4k by 26 August. It is estimated that Zambia is the seventh largest global copper producer, mining 882k tonnes of the total output of 18 million metric tonnes. Its importance to the country’s economy can be seen that it contributes over 26% to its GDP and accounts for over 70% of Zambia’s exports. Last year, it became the first country to default on an external debt and is still awaiting IMF’s approval of a US$ 13 billion bailout, which is probably dependent on reforming the mining industry. There is no doubt that mining is the key to the country reducing its 14.4% budget deficit to GDP and creditors restructuring its US$ 12.5 billion external debt.

Any cuts to Australia’s iron exports have a significant impact on the economy and government budgets. Two interesting facts about the commodity are that it accounts for 20% of the country’s exports and 5% of Australia’s GDP; China also buys about 70% of the iron ore Australia exports which makes up about 60% of ore Australia exports, which in turn makes up about 60% of all the iron ore China imports. For the fiscal year, ended 30 June 2021, the total company tax paid by miners was around US$ 24 billion. Needless to say, any cuts to Australia’s exports – or major price falls – will have a significant impact not only on miners’ profits but also on the economy and government budgets.

With the country in almost total lockdown, and its international tourism non-existent, the Australian economy needs increased exports to keep moving forward and that iron ore has played an important role in ensuring Australia’s economy remains buoyant. Prior to the onset of the pandemic, iron ore prices hovered around the US$ 100 a tonne, but when May 2020 arrived all bets were off and, in the twelve months since then, its price has more than doubled to top US$ 220 by the end of May 2021, before falling 27.4% to US$ 160 by 26 August.

There are reasons behind this boom/bust saga. When the pandemic first hit in China, its response was fast and positive – once the lockdown was eased, the Chinese started building apartments and infrastructure which requires steel, (pig iron, one of the main raw materials to make steel, is made from iron ore). The second factor was Covid in Brazil which led to many of its mines being closed down, with the subsequent cut in production from that country, that led to higher prices. Now twelve months later, the Brazilian mines have all reopened and it is estimated that, so far this year, it has shipped about 12% more iron ore than at the same point last year. In the meantime, this returning supply is coming into a market of falling demand, as the Chinese economy – specifically property and infrastructure – has slowed markedly, with the negative knock-on impact on prices, as the infrastructure and property sectors account for up to 25% and 30% of China’s steel demand respectively. Another point is that China does not want to increase steel output this year, as it has already produced too much in H1. Furthermore, China will almost certainly cut back on iron ore, as next February Beijing will host the Winter Games and the administration will not want two weeks of smog dominating the global media, so will cut back on construction work, weeks before the event.

There is no doubt that Australia has ridden the crest of a wave over the past year, but with the double whammy of reduced demand and falling prices, iron ore will no longer be able to carry the economy as it did last year; the government budget is looking at iron ore price falling back to US$ 55 by the end of Q1 2022. It is estimated that for every US$ 10 per tonne decrease in the iron ore price, relative to the budget forecast this financial year, Australia’s nominal GDP and federal government tax receipts are expected to fall US$ 4.6 billion and US$ 931 million respectively.

For the year ending 30 June, Qantas turned in a US$ 1.83 billion loss, slightly down on the previous year’s deficit of US$ 1.96 billion, and this despite revenue tanking 58.4% to US$ US$ 5.93 billion. The Australian carrier estimates that Covid has cost it over US$ 16 billion in lost revenue – because of a full year of closed international borders and more than 330 days of domestic travel restrictions – and the reduction in this year’s loss is mainly down to an aggressive cost-cutting campaign, (already at US$ 650 million), and staff stand-downs, mainly in the worst hit states of NSW and Victoria. The airline is hopeful that some international routes could open by year end and is planning to bring five A380 aircraft back into service next year. Over the financial year, Qantas paid down around US$ 500 million of debt and is currently discussing a potential land sale in Mascot, near Sydney airport, to raise even more finance; at year end, the Aussie carrier had US$ 3.8 billion in cash and available debt facilities.

With all this economic turmoil, there is no surprise to see the Aussie dollar tanking, trading at US$ 0.7244 on 26 August, 8.5% lower from its US$ 0.7913 mark six months ago in February. Normally a low dollar would be manna from heaven for the tourism sector, but with no international travellers allowed in the country, no benefit has accrued. One other major sector – international education – cannot gain from a lower dollar when there are only a limited number of overseas students in the country. To complete the trifecta, a lower dollar will inevitably increase prices of imports, resulting in what is known as cost push inflation.  This, in turn, will reduce consumer confidence and consumer spending and what the Australian economy needs for full recovery is the complete opposite.

Although July UK retail sales dipped 2.5%, partly due to weaker food sales, following the end of Euro 2020, they are still 5.8% higher on pre-pandemic levels; food sales were 1.5% down on the month, after climbing 3.9% in June. Non-food stores reported a 4.4% drop in volumes, driven by declines at second-hand goods stores and computer/telecoms equipment stores. There was also a drag on fuel sales, caused by rainy weather earlier in the month, with declines also noted at clothing stores and household stores. Department stores were the only sector to show a rise but that was only 0.2%.

The UK’s Competition and Markets Authority is becoming increasingly concerned that the US$ 40 billion proposed takeover of chip designer Arm, owned by Japan’s Softbank, by US firm Nvidia, would stifle innovation in several areas, such as gaming and self-driving cars. Consequently, it is requesting a more comprehensive investigation into whether the takeover is warranted. Not surprisingly, the US suitor, the world’s largest graphic and AI chip maker, has reacted by indicating that the deal would benefit Arm, licensees and competition in the UK, but the watchdog is not too impressed. The takeover will now likely be subject to a deeper “phase 2” investigation, which increases the likelihood that it could be stopped altogether.

As UK July car production declines 37.6%, on the year, to its lowest July monthly, total of 53.4k units, since 1956, second hand car sales are soaring of the main drivers to these disappointing numbers include shutdowns, the global microchip shortage and staff being affected by the so-called “pingdemic”. YTD, car production is 20% higher than in the corresponding period last year – but down 28.7% on 2019 returns. Exports dipped 37.4% on the month to 45k, whilst more than 25% of the vehicles made were either battery electric or hybrid electric. It is estimated that the UK industry, with a US$ 109 billion turnover, employs 180k in manufacturing and 864k in supply chain; there are thirty manufacturers in the UK building seventy different models. For the remainder of 2021, the man drag on production will continue to be the shortage of microchips (semiconductors), with Goldman Sachs’ analysts estimating that this will cut the global carmakers’ profit by US$ 20 billion.

Although the stamp duty holiday must have played a part in the latest UK property boom, there are some who consider that more important contributors were low interest rates and moves to bigger housing units. According to the Resolution Foundation, the stamp duty holiday was unnecessary and has cost the government US$ 6.1 billion in lost revenue, indicating that prices will continue to move north because of the other factors in play. Not surprisingly, the Treasury has rebuffed these claims, saying the policy saved jobs by stimulating the housing market and that the cut introduced for first-time buyers estimated that between 50-70% of the value fed through into higher house prices. The think tank also noted that similar house price rises occurred in the US, France, Germany, Canada and Australia, even without the tax holiday. For the twelve months to June, UK house property prices jumped 13.2% – its fastest rise in seventeen years – equating to an average price increase of US$ 43k. The four locations, showing the fastest rises, were the NW, Wales, Yorkshire & the Humber and the NE at 18.6%, 16.7%, 15.8% and 15.3%, as London came in at the bottom of the listing at 6.3%.

With the easing of most Covid restrictions, and the subsequent boost to the UK economy, government borrowing came in 3.0% higher, year on year, at US$ 14.4 billion – the second highest July return since records began. Because of the economic impact of Covid, government debt – the difference between government spending and tax receipts – has expanded to over US$ 2.2 trillion, equivalent to 98.8% of GDP. Last fiscal year, to 31 March 2021, it is estimated that the government borrowed a total of US$ 411 billion or 14.2% of GDP. The Office for National Statistics also calculated that because of the need to support individuals and businesses, day-to-day spending by the government more than quadrupled to US$ 1.3 trillion and that interest payments on central government debt were US$ 4.7 billion in July, compared to US$ 1.5 billion a year earlier.

August’s IHS Markit/CIPS Composite PMI fell to a six-month low, dipping 3.9 on the month to 55.3, mainly attributable to staff and supply shortages and indicating the bounce-back from the pandemic is losing momentum. This comes despite measures easing to the lowest since the pandemic began, being offset by rising virus case numbers, whilst the number of companies reporting that output had fallen due to staff or materials shortages has risen far above anything ever seen by the study. As from last week, the rules changed yet again absolving people with double vaccinations from self-isolation requirements for contacts of people with Covid.  If this trend were to continue, it is inevitable that forecasts of the economy returning to pre-pandemic levels in October will be wide of the mark. Other surveys pointing to a slowdown in the economy include manufacturing output growth easing in the three months to August, and stock levels weakening to a new low for the third consecutive month.

As the UK economy continued to reopen, the July Consumer Price Index slipped 0.5% to 2.0%, which has been the BoE’s target for some time. The dip was driven by price falls in clothing/footwear, as well games, toys and hobbies; package holidays also fell slightly. On the other side, transport prices headed in the other direction, with average petrol prices 19.0% higher, year on year, at US$ 1.83 per litre – its highest price in eight years. It is widely expected that the annual inflation will continue to hover around the lower side of the 2.0% mark, but will drift higher later in the year, driven by the removal of the temporary VAT cut for the hospitality sector and bigger energy bill hikes.

Commission President Ursula von der Leyen confirmed that the EU has yet to recognise the Taliban and is not holding political talks with the militants, a week after they seized control of Afghanistan – not to their surprise but to that of the rest of the world – by walking into Kabul, without firing a shot. She added that “we may well hear the Taliban’s words, but we will measure them above all by their deeds and actions.” The EU is considering a US$ 67 million increase in humanitarian aid, which the Commission had allocated this year, for Afghanistan, and confirmed that it was ready to provide funding to EU countries which help resettle refugees. There must be questions asked on how this debacle could have taken place in the first place and why the world’s best security, defence and armed forces were apparently caught napping. To their embarrassment and shame, after twenty years, The Boys Are Back In Town.

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Year Of The Fat Cat

Year Of The “Fat” Cat                                                                                   19 August 2021

For the past week ending 19 August, Dubai Land Department recorded a total of 1,367 real estate and property transactions, with a gross value of US$ 1.20 billion. It confirmed that 1,163 villas/apartments were sold for US$ 595 million, and 204 plots for US$ 263 million over the week. The top three land transactions were for a plot in Jumeirah First, sold for US$ 10 million, and two plots in Al Nahda First selling for US$ 9 million and US$ 8 million. The most popular locations were in Jabal Ali First, with 78 sales transactions worth US$ 75 million, Al Hebiah Third, with 37 sales at US$ 21 million, and Hadaeq Sheikh Mohammed Bin Rashid, with 19 sales transactions worth US$ 51 million. Mortgaged properties for the week totalled US$ 272 million, including a plot for US$ 87 million in Al Barsha South Fourth. 66 properties were granted between first-degree relatives worth US$ 94 million.

Yesterday, Wednesday 18 August, Dubai property sector had a bumper day posting 283 transactions valued at US$ 158 million and 48 mortgage deals totalling US$ 29 million. According to the Dubai Land Department, the sales covered 194 units, 31 buildings, and 58 land plots, while the mortgages included 20 units, 5 buildings and 23 land plots; in addition, there were 12 gift transactions amounting to US$ 6 million.

Chestertons’ latest property report concludes that consumer confidence, and ongoing international buyer interest, were the main drivers behind a marked increase in Q2 residential transactions in Dubai. Their Observer: UAE Q2 2021 Market Report indicated that total residential transaction value jumped by 49.4%, on the quarter, to US$ 8.45 billion, with volumes up 35.5% to 14.4k units; completedproperty sales accounted for 71% of total transaction value and 59% of volume in Q2. It estimated that average villa prices were 5.7% higher, on the quarter, and 9.1%, on the year, with The Meadows/The Springs recording the highest quarterly rise, at 6.6%, with average prices reaching US$ 241 per sq ft, followed by The Lakes, 6.5% higher to US$ 290 per sq ft, Jumeirah Park rising 5.4%, Palm Jumeirah 4.9% and Arabian Ranches 4.9%. On an annual basis, the leading villa locations were Palm Jumeirah, The Lakes and The Meadows/The Springs, with increases of 12.4%, 8.7% and 8.6%.

In relation to apartment prices, the average quarterly rise was at 0.8% but a 3.7% decline on the year.  Only eight locations recorded quarterly price increases –The Views (5.3% to US$ 290 per sq ft), Downtown (4.5%), The Greens (3.0% to US$ 234), JLT (3.0% to US$ 208), Dubai Marina (2.2%), Motor City (1.8%), Business Bay (1.5%) and International City (0.7%). All other locations posted Q2 declines of between 1.0% to 5.1%, with the two big losers being Dubailand (-5.1% to US$ 161 per sq ft), followed by Discovery Gardens, (-2.6%, to US$ 138 per sq ft). Only four “apartment locations” recorded price rises – Downtown Dubai, The Views, The Greens, and Business Bay with increases of 4.4%, 3.3%, 2.9% and 0.3%, with all other locations posting price declines of between 0.2% to 12.4%.

According to the latest EFG Hermes report, Dubai’s luxury residential market registered a 360% year on year growth, to US$ 730 million, in July. Luxury property sale prices rose 40.3%, year-on-year, to US$ 597 per square foot, (while affordable real estate sale prices increased 26.1% to US$ 326 and the budget segment 7.1% higher to US$ 195). It estimated that Palm Jumeirah – with a 76.9%, year on year, increase to US$ 584 per sq ft – was the best performing location, with Motor City at the other end of scale, with annual prices falling 45.6% to US$ 184 per sq ft. Despite rentals falling, both Downtown Dubai and Palm Jumeirah bucked the trend, with an average 2 B/R luxury apartment seeing rents increase by 31.8% to US$ 50k and US$ 44k.

In the rental market, average villa and apartment rents were 2.6% higher and 0.5% lower, quarter on quarter, and up 3.5% and 8.7% lower on the year. Palm Jumeirah saw the highest increase in villa rents, at 3.9%, on the quarter, followed by Jumeirah Golf Estates, Victory Heights and The Lakes, which reported respective rises of 3.4%, 3.1% and 3.0%; all other locations posted quarterly increases of between 1.6% to 2.3%. For apartments, the three best locations were Downtown Dubai with a 1.7% quarterly rental increase, followed by Dubai Marina at 1.5% and JLT at 1.1%.  DIFC saw the highest quarterly decline, at 3.4%, followed by Discovery Gardens at 2.8%, with Dubai Silicon Oasis and Dubailand both recording 2.5% declines.

Meanwhile, Asteco reports that Q2 demand for villas climbed and that villa prices were 23% higher, with rentals up 10%, as residents continue to seek bigger homes and take advantage of historically low mortgage rates. Notable increases of 52%, 39% and 46% were witnessed in Jumeirah Park, Dubai Hills and The Springs. Rentals also moved northwards in Arabian Ranches,(up 24%), Dubai Hills Estate,(20%), Meadows, Mirdif and Dubai Sports City.

There was no surprise to see that Dubai’s H1 residential values grew 4.2% on the availability of good quality stock, affordable prices and strong transaction activity. Savills latest report notes that the recent surge in property prices can be attributed to the government’s success in handling the pandemic and its proactive policy measures to jump-start the economy. The global property consultancy also expects “the return of international travel is likely to provide an increased supply of buyers for prime properties.” It anticipates the prime residential sector is likely to remain strong through the rest of the year. Dubai was ranked 11th in their thirty property markets in the Savills global index, with the index rising on average by 3.9% – the fastest growth rate since December 2016. The top four positions were taken by China’s Shanghai and Hangzhou, with the US cities of Los Angeles and Miami in third and fourth places.

The first phase of Souk Al Marfa, a new waterfront marketplace stretching 1.9km along the shoreline, was opened in Dubai’s Deira Islands. The indoor shopping and trading hub, with 400 outlets – such as small kiosks, retail stores, showrooms, and street food outlets – across various categories, will see a further 600 outlets open by the end of the year. When fully operational, it will become the country’s largest wholesale souk and waterfront destination, with 4k onsite parking spots.

The Ithra Dubai “One Deira” project, wholly owned by the Investment Corporation of Dubai, with the aim of rejuvenating the emirate’s historic heart of commerce, was launched on Monday. It comprises an office building and a 131-room Days Hotel, along with a two-level retail podium; it also features a state-of-the-art integrated transportation hub, including an RTA Bus Terminal, taxi ranks, the metro station and an additional 158 podium parking spaces at one central location. As the hub of the Deira Enrichment Project, District 4 follows each of Sherina, Osha, Afra, Maryam and Hind Plazas already handed over since last September. By the end of the year, Districts 5, 8, 9 and 10 will be launched. The One Deira will serve the thriving residential and commercial communities of the surrounding phase one Districts, comprising 2.2k residential units, 700+ retail units, 700k sq ft office area, F&B outlets and 1.45k keys in eight international brand hotels, including Adagio, Wyndham, Super 8, and Days Hotel.

This week, HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President inaugurated the 300-megawatt first stage of the 900MW fifth phase of the Mohammed bin Rashid Al Maktoum Solar Park, which is the largest single-site solar park in the world. On completion in 2030, it will have a 5k MW capacity, with the Solar Park becoming one of the key pillars of the Dubai Clean Energy Strategy 2050, which aims to provide 75% of the emirate’s total power capacity from clean energy sources by then. The consortium led by ACWA Power and Gulf Investment Corporation as the Preferred Bidder was appointed in November 2019 to build and operate the fifth phase of the MBR Al Maktoum Solar Park, using photovoltaic (PV) solar panels, based on the IPP model. The fifth phase will provide clean energy to over 270k residences in Dubai, including 90k residences by the commissioned first stage, and will reduce 1.18 million tonnes of carbon emissions annually.

When it comes to air and sea, the UAE is already one of the world’s largest logistics and transportation centres, and now it is building an extensive rail network across the region to speed up the transport of freight – and people. Etihad Rail is building a 1k rail network that extends from Ghuweifat at the border with Saudi Arabia to Fujairah on the country’s east coast and on completion, in 2024, it will connect Abu Dhabi’s Khalifa Port and Mussaffah with Jebel Ali Port in Dubai and the Port of Fujairah.

DP World Limited has posted H1 gains in both revenue and EBITDA – 21.3% higher at US$ 4.94 billion and 18.2% to US$ 1.81 billion; the gross margin was at 36.7%. The improvement was helped by acquisitions and strong growth in India, Australia, and the UK, compensating for lower growth of 9.0% from like-for-like revenue. Profit attributable to its owners increased to US$ 475 million. Cash generated in H1 was 32.6% higher at US$ 1.49 billion and capex was at US$ 687 million, in line with its earlier 2021 US$ 1.2 billion guidance, with investments planned in the UAE, Canada, Jeddah, Berbera (Somaliland), Sokhna (Egypt), Luanda, P&O Ferries, London Gateway and Callao (Peru). Over the period, the company acquired syncreon and Imperial Logistics.

There is no doubt of the UAE’s conviction to fight money laundering and the financing of terrorism/illegal organisations, and that includes the involvement of Designated Non-Financial Businesses and Professions that include professions outside the financial services sector that have higher anti-money laundering and combating the financing of terrorism exposure. The federal Ministry of Economy is keen to be a leader in the global fight against money laundering and terrorism financing and has undertaken to comply with the obligations of the International Financial Action Task Force. The Ministry is liaising with seventeen registrars of companies and has taken on board a hundred inspectors to ensure compliance across the DNFBPs. Another step sees the requirements for all pertinent companies to forward UBO (Ultimate Benefit Owners) details to their registrars of companies.

The government’s 2012 Global Star Rating System saw its first ever six-star rating with Fujairah Traffic and Licensing Department, and Federal Authority for Identity and Citizenship (ICA) Al Barsha branch in Dubai, being placed in the coveted positions. The fourth edition of the Global Star Rating System for Services saw the evaluation of sixty-nine centres in twelve federal government entities. Of that total, 14 centres received five-star ratings, 32 – 4-star ratings and 21 centres – 3-star ratings. On Saturday, HH Sheikh Mohammed bin Rashid Al Maktoum announced that, “Today, we approved the results of the Star Rating System for 69 government service centres, 14 of them have achieved an increase in their classification”. He congratulated the two 6-star rating centres and noted that “for the 3-star centres, we say that technology has advanced and offered better services.” He also stressed that “serving people and facilitating their lives will remain the main pillar in the UAE government’s work and the ultimate goal of all its plans and programmes.” The Dubai Ruler commented that more than 1.3k services provided by ministries and federal government agencies would be evaluated and reiterated that the five best and worst federal government agencies would be revealed in September.

Apart from the six-star Al Barsha Licensing Department and Federal Authority for Identity and Citizenship, other Dubai entitles ranked included – Al Rashidiya Center for Customer Happiness – Dubai (five-star),  three four-star Customer Happiness Centers  – Ministry of Industry and Advanced Technology, Ministry of Energy and Infrastructure and Communications and Digital Government Regulatory Authority: Three other government offices received a three-star rating – Ministry of Foreign Affairs office, the Ministry of Health’s Customer Happiness Center and the Ministry of Education’s Community Development’s Jumeirah Center.

Network International surprised the market when posting a 16.5% hike in H1 revenue to US$ 156 million, driving a 17.2% jump in EBITDA to US$ 60 million, with recovery seen in all its markets, including the UAE. The Dubai-based payments giant invested US$ 288 million to acquire a leading African services provider which will continue to operate under its own name

DPO Group, a payments services provider for African businesses. The acquisition, which is expected to be finalised in Q3,  will see DPO Group continue to operate under the same brand and will help boost H2 revenue.

By acquiring the 8.7% stake for US$ 505 million from the Abu Dhabi Fund for Development, Etisalat is now the 100% owner of Etisalat Investment North Africa which in turn increases its effective ownership of Maroc Telecom Group by 4.6% to 53.0%. The UAE’s biggest telecoms operator will fund this purchase through a bank loan which will help boost its future consolidated profit. Its recently Q2 profit came in 0.4% higher at US$ 651 million and in H1, it successfully raised US$ 1.2 billion through bond issuance to repay a maturing bond tranche.

With no financial details available, Swvl has agreed to buy Shotl, an Uber-like service in Barcelona for bus and van operators that caters to municipalities, corporations and educational institutions. The Dubai-based mass transit and shared mobility services will use this acquisition as a base for further European expansion. Founded in 2017, Swvl allows commuters to reserve seats on private buses operating on fixed routes and pay fares through its mobile app, with a strategy of transforming traditional public transport to make it more accessible, convenient and sustainable. With a US$ 1.5 billion valuation, the Dubai tech company expects to go public in Q4 through a special purpose acquisition company, (SPAC), with a listing on the Nasdaq.

The country’s third largest developer posted a 35.5% decline in Q2 revenue at US$ 200 million, as it narrowed its loss to US$ 27 million, compared to US$ 76 million a year earlier. Damac also posted a H1 loss of US$ 79 million (compared to a deficit of US$ 105 in H1 2020), but it did see an increase in H1 booked sales at US$ 710 million and delivered 2.7k units in the period.

Property developer Deyaar reported a 165% rise in Q2 profits to US$ 6 million, as revenue came in 70.3% higher at US$ 81 million. Last month, the Dubai developer launched it US$ 272 million, 70-storey Regalia Project in Business Bay.

Yet another Dubai developer returned to profit on the back of a booming Dubai property market. Union Properties posted a Q2 profit of US$ 9 million, (compared to a US$ 10 million loss in H2 2020), with revenue 19% higher at US$ 27 million. Its H1 contract revenue was 1% higher, at US$ 54 million, driving it to a half yearly profit of US$ 9 million. following a US$ 44 million loss in the comparative 2020 return. The profit was helped by a US$ 22 million gain on fair valuation of investment properties, with finance costs also declining. It still has to account for accumulated losses of US$ 523 million and is taking measures to address the situation, including restructuring its outstanding debt to reduce the finance cost, taking legal action to recover its outstanding debts, reducing its operating costs and developing its land bank and assets with recurring cash flow. It is also planning to list three of its subsidiary companies to reduce losses and focus on cash-generating activities. During H1, it reached an agreement with Emirates NBD to restructure an outstanding debt of US$ 258 million and also agreed to sell a 40% stake in its Dubai Autodrome subsidiary for US$ 109 million.

Amanat Holdings posted a massive 906% surge in H1 income to US$ 70 million, compared to a year earlier, with income from investments growing at a similar rate to US$ 69 million. The health and education provider reported a US$ 64 million profit compared to almost break even in H1 2020, driven by the US$ 44 million gain on its April sale of its stake in Taaleem, and strong returns from its new healthcare investment, Cambridge Medical and Rehabilitation Centre. Its total H1 expenses stood at US$ 6 million, 26.8% lower, year on year.

Amlak Finance managed to turn a H1 2020 loss of US$ 21 million into a US$ 54 million profit in 2021, as revenues decreased 19% to US$ 32 million, excluding fair value losses on investment properties and a gain on debt settlement. The leading Islamic real estate financier saw revenues, from financing business activities, marginally lower at US$ 23 million, with rental income declining by 48% to US$ 4 million. Amlak’s 2020 debt settlement arrangements continued in H1, with successful agreements with four financiers. During H1, the company also posted a reduction in operating expenses to US$ 12 million, with amortisation costs almost doubling to US$ 23 million.

Gulf Navigation Holding posted a H1 net profit of US$ 22 million, compared to a net loss of US$ 14 million a year earlier, even though revenue dipped 8.8% to US$ 17 million. The DFM-listed shipping company also reported US$ 27 million operating profits in H1 (US$ 7 million operating loss in H1 2020). Having incurred a gross US$ 736 million loss in H1 2020, the company just crept into positive territory with a return of US$ 4 million. By 30 June, it saw a US$ 32 million increase in net cash flows, whilst its assets stood at US$ 235 million.

The DFM opened on Sunday 15 August, 111 points (3.8%) higher the previous four weeks,  rose 23 points (0.8%) to close the week on 2,838. Emaar Properties, US$ 0.01 lower the previous week, regained US$ 0.01 to close on US$ 1.11. Emirates NBD and Damac started the previous week on US$ 3.65 and US$ 0.33 and closed at US$ 3.68 and US$ 0.34. On Thursday, 19 August, 99 million shares changed hands, with a value of US$ 50 million, compared to 103 million shares, with a value of US$ 35 million, on 11 August.

By Thursday, 19 August, Brent, US$ 3.61 (4.8%) lower the previous fortnight, tanked US$ 4.55 (6.4%), to close on US$ 66.76. Gold, US$ 79 (4.3%) lower the previous fortnight, regained US$ 38 (2.2%) to close Thursday 19 August on US$ 1,787.   Oil prices sank to their lowest levels since May on concerns the US Federal Reserve may taper its quantitative easing programme before the end of the year. So far this month, Brent and WTI have slumped 8.2% and 10.4% respectively. Fresh Covid outbreaks around the world, as well as the world’s third-busiest container port at Ningbo-Zhoushan in China being closed, further weighed on demand for crude, probably by around 250k bpd, from the world’s top oil importer, China, along with a 220k bpd demand decline from the US, the world’s top consumer.

Thanks to a 14% H1 growth in its stock portfolio, driven by its investments in energy, finance and technology companies, Norges Bank Investment Management generated a 9.4% growth, equivalent to US$ 110 billion. Norway has the largest sovereign wealth fund, at US$ 1.4 trillion, with its equity portfolio accounting for 72.4% of total assets at the end of June. It recorded a 16.8% rise in tech stocks in H1, dominated by stakes in Apple, Microsoft, Alphabet and Amazon, with US stocks accounting for 45.2% of the total. The fund’s biggest threat going forward is inflation which will impact future returns. There is also concern whether the current price growth is “transitory” or is becoming more entrenched. It was also inevitable that the mega fund, built on the country’s past oil and gas revenue, would eventually be “forced” into investing in renewable energy infrastructure and this has happened in H1.

As BHP and Woodside Petroleum have signed a US$ 14.5 billion merger agreement of their oil and gas businesses, Australia will he home to one of the world’s top ten biggest energy companies – and the largest oil company trading on the ASX. The merger will see Woodside holding a 52% majority stake in the new entity and they will also issue new shares to BHP shareholders. BHP, with oil and gas fields in Australia, the Gulf of Mexico, Trinidad and Tobago and Algeria, saw its annual net profit 42.0% higher at US$ 11.3 billion, driven by record iron ore prices.

Since the first car rolled off Toyota’s production line in 1966, the motor giant has  produced fifty million Corollas over the past fifty-five years. The model, now in its 12th generation, started life as a two-door saloon, with a 1.1-litre engine and was built as a practical family car with reliability and usability. In 1974, it became the world’s best-selling car taking the crown from the Volkswagen Beetle, and since 1997 became the world’s best-selling model when cumulative sales reached 22.65 million. By the ninth-generation model in the 1990s, it was made available, with nine different engine sizes, and hybrid options started in 2012, with a new Corolla expected to be launched next year. It has been estimated that a Corolla is bought somewhere in the world every forty seconds.

The world’s largest gaming company, China’s Tencent posted a Q2 29% increase in year-on-year net profit at US$ 6.6 billion, on a 20% rise in revenue to US$ 21.3 billion, attributable to increased advertising revenue and gaming demand. It is noted that profit on a quarter-on-quarter basis was 10% lower and that the revenue climbed at its slowest pace in two years because of increasing regulatory scrutiny by the Chinese government. The gaming and social media giant saw its Q2 gaming revenue 12% higher at US$ 6.6 billion, mainly driven by the increase in revenue from games such as Honour of Kings and Pubg Mobile.  Over the period, its fee-based VAS (value added services) subscriptions grew 13% year-on-year to 229 million, video subscriptions 9% to 125 million, and music subscriptions 41% to 66 million.

Despite objections by Mastercard, the UK Supreme Court has approved former financial ombudsman Walter Merrick’s case to take a collective US$ 14 billion action against the international card provider. If successful, it could result in some 46 million people receiving an average US$ 410 in compensation for Mastercard charging interchange fees – the fees retailers pay with credit card companies when consumers use a card to shop – between May 1992 and June 2008. This legal decision also sets a precedent for a string of other proposed class actions that have been stalled in its wake. This unwelcome news for Mastercard follows it being banned in India from issuing new credit and debit cards for not complying with the country’s data storage rules.

In the hope of a rapid rebound of leisure travel from the pandemic, Hyatt Hotels is to invest US$ 2.7 billion in cash to acquire resorts operator Apple Leisure Group from private equity firms KKR and KSL Capital Partners. With its latest purchase, Hyatt will double its global resorts footprint, as it takes over luxury resort brands Zoëtry and Alua hotels and will be able to expand its existing and new markets, including in Europe. With leisure travel expected to recover faster than other segments, with pent-up demand for holidays after months of lockdowns, Hyatt’s position of targeting wealthy travellers will be further boosted by this deal. Over the next three years, it expects to raise US$ 3.5 billion through the sale of various hotels, with cash proceeds used to pay down debt, including debt incurred to fund this latest acquisition.

Authentic Brands Group has agreed a deal with Adidas to acquire its underperforming Reebok business for a reported US$ 2.5 billion. A large slice of the deal will be via cash., (most of which will be distributed among the German sportswear company’s shareholders), with the balance coming as deferred and contingent consideration. Authentic Brands already owns numerous bankrupt brands, such as Barneys New York, Brooks Brothers, Forever 21 and Aeropostale, and will maintain the brand’s global footprint across retail, wholesale and e-commerce channels. Reebok currently operates in eighty countries, with around 70% of its business coming from outside the US and Canada.

Being part of a sector that was ravished by the impact of the pandemic, as its foot traffic was decimated, coffee chain, Pret a Manger, is planning to open 200 outlets outside of major UK urban centres. One of the strange features of the pandemic was that whilst city centre outlets had barely any traffic, its regional outlets had never been busier. The new openings will be a mix of franchised operations and outlets owned and managed by the coffee chain. That strategy has already started – earlier in the year, it made an agreement with Tesco, with their outlets now being seen inside many of the supermarket’s stores.

By the beginning of the week, the value of the cryptocurrency market once again topped US$ 2 trillion, with rises among most of the players, including Bitcoin, topping US$ 48k. Over the previous week, Cardano, Binance Coin, XRP and Dogecoin all posted marked increases of 47%, 14%, 61% and 18% respectively.

Australia’s July unemployment rate dipped 0.3%, month on month to 4.6%, and now stands at the lowest since December 2008. The Australian Bureau of Statistics notes that the official unemployment rate dropped early on in the latest round of lockdowns, as the number of people looking for work fell, and that a massive decline in NSW labour force participation was a major factor in the fall. The ABS pointed to the fact that many people gave up looking for work during lockdowns, with the participation rate dropping 0.2% to 66%.

Following the release of the minutes of the Fed’s July meeting, and an indication that there is a distinct possibility that there will be a roll back of its quantitative easing policy, ongoing over the past eighteen months since the onset of the pandemic, oil prices continued their downward spiral. Some consider that the Fed would start phasing out the current monthly US$ 120 billion programme of purchases of Treasury securities and agency MBS mortgage-backed securities, as early as November if the labour market can keep generating around one million jobs a month. If that were to happen, the tapering will take about ten months.  This would see the greenback move northwards which normally results in oil prices heading in the other direction, as the commodity becomes more expensive in the international arena.

Latest figures see the UK’s labour market “rebounding robustly”, with the number of vacancies hitting 953k in the quarter to July. As the annual growth in average pay rose 7.4%, the unemployment rate fell to 4.7%. Although July payrolls jumped 182k, month on month, and 500k over the previous quarter, with 28.9 million now in employment, it is  still 201k down on pre-pandemic levels. Most of the increase has been attributed to labour improvements in the arts, leisure and food service sectors. Recent data seems to signify that there will be no major problems when the furlough scheme being finally phased out next month, and that employment figures are positive on all counts, including unemployment rates lower and vacancy numbers of over one million.

Although 17.2% lower on the year, at US$ 3.7 million, mainly because of the impact of Covid, the median pay of a chief executive of a FTSE-100 company was 86 times that of the average full-time wage last year; their average bonus shrank 24.7% to US$ 1.14 million. By 3pm on the third day of a working year, the fat cats will have earned the same as the average annual pay for the rest. It is thought that in the UK, the gap between rich and poor is greater than in most other European countries. The top three highly paid executives were AstraZeneca’s Pascal Soriot, Experian’s Brian Cassin and CRH’s Albert Manifold at US$ 21.3 million, US$ 14.2 million and US$ 13.7 million. For the lucky few, 2021 could be the Year of The “Fat” Cat.

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Do You Believe In Magic?

Do You Believe in Magic?                                                                             12 August 2021

professionals are starting to bear fruit. Incentives to support entrepreneurs and the private sector, proactive safety measures to combat Covid-19, and visionary thinking for events such as Expo 2020, have underpinned investor appetite for real estate in Dubai. While nothing is guaranteed, we expect that confidence to continue to grow for the remainder of the year,” said

For the past shortened week ending 11 August, Dubai Land Department recorded a total of 1,188 real estate and properties transactions, with a gross value of US$ 1.28 billion. It confirmed that 1,072 villas/apartments were sold for US$ 621 million, and 116 plots for US$ 178 million over the week. The top three transfers for apartments and villas were an apartment for US$ 76 million in Marsa Dubai, a villa sold for US$ 62 million in Wadi Al Safa 5 and thirdly, an apartment sold for US$ 45 million in Um Suquam Third. The top two land transactions were for a plot in Island 2, sold for US$ 15 million, and a plot that was sold for US$ 8 million in Hadaeq Sheikh Mohammed Bin Rashid. The most popular locations were in Nad Al Shiba First, with 21 sales transactions worth US$ 16 million, Jebal Ali First, with 19 sales at US$ 15 million, and Hadaeq Sheikh Mohammed Bin Rashid, with 15 sales transactions worth US$ 9 million. Mortgaged properties for the week totalled US$ 545 million, including a plot for US$ 59 million in Al Hebiah First. 47 properties were granted between first-degree relatives worth US$ 29 million.

As Dubai economy continues to recover from the impact of Covid-19, July property prices in Dubai rose 15%, year on year. Property Monitor noted that the average property price was US$ 256 per sq ft – 15.0% higher over the past twelve months – and that YTD, Dubai prices were up 11.8%, and 1.9% higher in July. Emaar accounted for 23.1% of all property transactions, followed by Sobha Group with 15.1% of the total.

A report by SmartCrowd confirmed what the market already knew – that Dubai’s residential property sector had witnessed a V-shaped recovery in H1, after finally bottoming out late last year. In their “Dubai Residential Property Report,” it noted that the market had recorded a 74%, year on year, increase in overall volume of transactions, with the value of property transactions rising 113%. The report also added that “with a lack of new supply in Dubai’s most popular areas, and pricing at levels last seen in 2011, there is positive sentiment in the market and a resultant boost in demand for existing properties.” Other interesting points indicated that H1 growth for ready and off plan villas came in 19.3% higher, at US$ 247, and up 9.3% to US$ 204 respectively, whilst ready apartments and off plan apartments increased by 8.7% and declined by 9.5% respectively.

According to Knight Frank, Palm Jumeirah is not only registering new record high villa prices but also posting the highest number of home sales in almost five years. It estimates that the average transaction prices, of US$ 572 per sq ft, are at their highest levels since 2016, and 40% higher than four years ago. Furthermore, 19 of the 34 US$ 10 million + homes sold in Dubai were on the Palm Jumeirah; in H1, the highest price paid for a villa was One100 Palm sold for US$ 30 million in March – this was surpassed by a July Jumeirah Bay Island villa sale for US$ 33 million. Although only accounting for 2.0% of total Dubai sales in Q1, numbering ninety transactions, Palm Jumeirah sales accounted for 13.5% of the US$ 4.31 billion value. Palm Jumeirah apartments, of which 300 were sold in Q2, are selling at an average US$ 490 per sq ft – its highest level since 2016.

Dubai’s hospitality sector is gearing up for what promises to be an eventful end to 2021, as the country celebrates its golden anniversary, Expo 2020 starts in October and 80% of the country is now vaccinated, with international travel restrictions slowly being lifted. Global demand for travel to Dubai is beginning to ramp up, with Wego reporting that its website had seen 533k searches last month on flights and hotels for the six-month Expo period. Indeed, hotels have started offering packages and special deals for visitors to the exhibition. Figures from Dubai’s Department of Tourism and Commerce Marketing showed that the emirate welcomed over 2 million visitors in the five months to May 2021 and that there will be no problem with coping the expected surge in demand in Q4; the emirate has a portfolio of 128.5k hotel rooms spread across 715 hotels, 134 of which are five-star.

In July, Dubai’s non-oil private sector economy, as measured by the HIS Marketing PMI, rose 2.2, month on month, to 53.2 – its fastest pace in a year – as demand gained traction, driven by an uptick in customer numbers that boosted sales in the travel/tourism and wholesale/retail sectors. New employment numbers for Dubai rose at their quickest rate in eighteen months, whilst businesses recorded a rise in new orders in July, with increased consumer spending, leading to the joint-fastest rise in output since July 2020.

An interesting move by Abu Dhabi Department of Economic Development sees the introduction of a new professional licence that gives foreigners 100% ownership of businesses related to over six hundred different activities; they include accounting, training, consultancy, beauty centres, computer and internet network companies. Furthermore, a local service agent will be responsible for managing licensing requirements, if there is no Emirati partner, and the new licence holder can also open an additional branch “if the business activity is consistent with or complements the professional licence issued”. Existing businesses can amend their legal status from a commercial to a professional facility. Currently, this new regulation only applies in the emirate of Abu Dhabi.

Having raised US$ 50 million in its latest Series B funding round, bringing its total financing to US$ 130 million, Dubai-based Tabby is now valued at US$ 300 million. At this price, the buy now, pay later provider has become one of the most valued start-ups ever in the Mena region. The money raised will be used to expand both its product range and also to enter a number of new markets. Tabby, which boasts over 400k active shoppers, integrates with 2k retailers, including Chalhoub Group, Al Futtaim Group, Landmark Group, and Apparel Group, to allow their customers to shop at their online and physical stores with interest-free instalments.

On 01 September, creditors of NMC Health, who are owed more than US$ 6.4 billion, will meet to discuss proposals from joint administrators relating to future financial restructuring of the UAE healthcare group, founded by BR Shetty. Having already agreed to US$ 4.0 billion of the debt being wiped out, and replaced by equity instruments, the creditors will discuss “revised” proposals and the proposed Deeds of Company Arrangements. NMC Health had been placed in administration in April 2020 when an independent investigation uncovered more than US$ 4.4 billion in previously unreported debt.

Shuaa Capital reported over a 1k% jump in H1 profits to US$ 15 million on the back of higher net fee and commission income, with net fee and commission income increasing 52% to US$ 43 million. However, Q2 profits came in at US$ 8.0 million, compared to US$ 73 million a year earlier, as operating expenses jumped 37% to US$ 23 million. The Dubai-based investment bank, which merged with the Abu Dhabi Financial Group two years ago to create a business with both an asset management and investment banking platform, has assets under management worth US$ 14 billion. The company also plans to establish three SPACs, with a capital of US$ 200 million each, in a bid to tap into the growing market for blank-cheque companies – development stage entities that have no specific business plan or purpose or have indicated their business plan is to engage in a merger or acquisition with an unidentified company.

Emaar Malls posted an 80% hike in H1 profit to US$ 169 million, with revenue climbing 23% to US$ 452 million, with Q2 witnessing a steady recovery from the pandemic’s impact on the global retail market. Its wholly owned subsidiary, Namshi, saw Q2 sales 65% higher, on the quarter, at US$ 116 million, with H1 revenue figures at US$ 186 million. The e-commerce fashion and lifestyle platform added 240 new brands in the period and saw strong growth in the GCC.

Despite H1 revenue increasing 52% to US$ 3.4 billion, Emaar Properties posted an 8.0% decline in net profit to US$ 425 million, as operating and other expenses headed north. During the period, property sales were 229% higher at US$ 4.49 billion. In Q2, Dubai’s largest listed developer posted a 17.0% decline in net profit, at US$ 246 million, although revenue was up 125% to US$ 1.8 billion. Since 2002, Emaar has handed over a total of 77k residential units and has currently 36.7k units under development, of which 25.7k are in the UAE. Meanwhile, both H1 revenue and net profit rose at its Emaar development arm – by 61% to US$ 2.1 billion and 46% to US$ 411 million.

The DFM opened on Sunday 08 August, 106 points (1.9%) higher the previous three weeks, dipped 5 points (3.9%) to close the shortened week, (because of the Islamic New Year), on 2,815. Emaar Properties, US$ 0.03 higher the previous week, was US$ 0.01 lighter at US$ 1.10. Emirates NBD and Damac started the previous week on US$ 3.65 and US$ 0.33 and closed flat at US$ 3.65 and US$ 0.33. On Wednesday, 11 August, 103 million shares changed hands, with a value of US$ 35 million, compared to 86 million shares, with a value of US$ 44 million, on 05 August.

By Thursday, 12 August, Brent, US$ 3.50 (4.7%) lower the previous week, dipped US$ 0.11 (0.1%), to close on US$ 71.31. Gold was US$ 26 (1.4%) lower last week and lost a further US$ 53 (3.0%) to close Thursday 12 August on US$ 1,749.   

Even with an extra 400k bpd hitting the market for the rest of the year, as Opec+ nations raised the output limit imposed on five countries, including the UAE, by phasing out 5.8 million bpd production cuts by September 2022, it appears that the market will be in deficit by year end. The current proposed 1.6 million bpd hike will not take immediate effect and will probably be enforced by a redistribution of quotas between members. This minimises the risks of any future supply hikes and a possible flooding of the market by some members. There are fears that the market may see a downturn if the Delta variant spreads more quickly, which would see China’s energy demand reduce, or there was renewed Taliban unrest in Afghanistan.

Meanwhile, Aramco – in line with many other energy giants – posted very healthy Q2 figures, with net income climbing 288% to US$ 25.5 billion, on the back of a 30% YTD rise in oil prices as demand recovers, with global lockdown measures easing and businesses returning to some form of normalcy. The Saudi conglomerate noted that “we are heading into the second half of 2021 more resilient and more flexible, as the global recovery gains momentum.” In July, US energy giant Exxon Mobil posted a Q2 rise in income of US$ 4.7billion, compared to a loss of more than US$ 1.0 billion a year earlier.

It is reported that Virgin Atlantic Airways, founded in 1984, is considering an IPO on the London Stock Exchange later this year, as international air travel shows promising signs of recovery. The airline, founded by Richard Branson, has received a “positive” reaction from institutional investors, whilst Citi and Barclays have reportedly been hired to oversee the listing. Currently, Branson’s Virgin Group holds a 51% stake in the airline, and it is likely that if the IPO goes ahead, its founder will relinquish control. Because of its dependence on the UK-US transatlantic routes, Virgin has been badly hit by the pandemic which has decimated demand for air travel, particularly for long-haul trips. Now the airline is keen to raise funds to return to some form of operational normalcy.

Following news that online food delivery firm Delivery Hero had paid US$ 393 million to buy a 5% stake in its rival, Deliveroo shares jumped 11% on Monday to US$ 4.98 – its highest level since it went public in March at US$ 5.40.  Niklas Oestberg, Chief Executive of the German Delivery Hero, commented that his investment was acquired “at a decent gross profit margin”, and that he considered Deliveroo’s stock to be “undervalued”, due to being “oversold at IPO”. Interestingly, despite rising revenue figures, bought on by the pandemic, neither company has yet to make a profit.

Paddy Power owner Flutter has exceeded expectations by seeing H1 revenue 28% higher at

US$ 4.1 billion, as its average number of gamblers rose 40% to more than 7.5 million. There is no doubt that there has been a general uptick in online gambling since the onset of the pandemic in early 2020, as many countries closed physical shops, with gamblers moving on-line. Flutter, which owns brands such as Betfair and Sky Betting and Gaming, posted that it had 59% more online customers than in the same period in 2019 before the coronavirus crisis. In the UK, numbers (rising 44% to 3.3 million), outpaced the 30% revenue grow to US$ 900 million.

Fortress Investment Group has raised its initial offer, by 7.1% to US$ 9.3 billion, to acquire Morrisons, which has been agreed by the UK supermarket chain. UK’s fourth largest grocer has attracted interest from several private equity groups, including former Tesco boss Sir Terry Leahy and Clayton Dubilier & Rice, because of its large real estate portfolio, with the company owning about 90% of its almost 500 stores; CD&R had earlier submitted a US$ 7.66 billion offer which was rejected by the board. Morrisons is attractive to potential buyers because it generates large amounts of cash and has low underlying debt, as well as a pension surplus. Because of this, it is highly unlikely that we have seen the last move for Morrisons, but even if that is the case, perhaps Sainsbury’s could be next supermarket up for grabs.

Australia’s largest lender, Commonwealth Bank of Australia, posted a 19.7% jump in annual profit, (to the year ending 30 June), to almost record highs of US$ 6.5 billion, driven by a sustained economic recovery from the coronavirus pandemic. It also saw its impairment provision reduce to US$ 408 million, (down from US$ 1.9 billion last year). Its profit would have come in higher at US$ 7.5 billion, if discontinued operations – such as the sales of its Colonial First State, CommInsure Life, Colonial First State Global Asset Management, PT Commonwealth Life divisions – had been included.  CBA also declared a final US$ 1.47 dividend and announced a record US$ 4.4 billion share buyback.

With gains in the leisure/hospitality, education and professional services, the US economy saw July employment numbers jump by 943k. However, as the rise in the number of Delta variant cases only surfaced towards the end of the month, there are concerns that if new restrictions are imposed, this would have a negative impact on August employment data. Although the July unemployment figure dipped 0.5% to 5.7%, the total number of employed at 8.7 million is still much higher than the pre-pandemic return of5.7 million in February 2020. However, a month earlier, US job numbers had hit a record high, up 590k, on the month, to 10.1 million – a sure indicator that the country could be facing a labour shortage, particularly in the leisure and hospitality sectors. The shortfall has been attributed to various factors such as lack of affordable childcare, generous unemployment benefits, and pandemic-related retirements and career changes.

Mainly because of the hospitality sector opening in April, along with non-essential retailers including gyms, hairdressers and outdoor dining, the UK economy grew by 1.0% in June and 4.8% in Q1; this was the fastest quarterly growth of the G7 countries. In addition, schools were fully opened as well as restaurants, cafes, theatres, galleries and cinemas. Although the GDP figure was 22.2% higher than at this time last year, it is still 2.2% lower than in February 2020, just prior to Covid. There was a 2.2% June decline in total exports of goods, excluding precious metals, attributable to a 5.6% fall in exports to non-EU countries, mainly because of declines in medicinal and pharmaceutical products and cars. Whether the pace of the recovery continues into Q3 is debatable because of staff shortages, caused by self-isolation requirements, and the government’s over-zealous contact tracing rules, along with global supply-chain bottlenecks. Furthermore, the government’s wage support scheme is set to end in September, and this may have a drag effect on the economy.

On top of the US$ 1 billion package, that will see infrastructure investment in roads, bridges, airports and waterways, US senators also began voting on a follow-up US$ 3.5 trillion spending package that Democrats plan to pass without Republican votes. The main beneficiaries would be companies in the energy, industrial and material sectors and so there was no surprise to see the share prices of Caterpillar, Deere and Vulcan Materials each posting 2%+ rises. Energy shares also moved higher, as crude prices rebounded more than 2%. With daily new coronavirus cases rising by 35%, to over a 100k in the country, progress on the infrastructure package should support the recovery in the world’s largest economy.

This week saw record highs on the blue-chip Dow and the benchmark S&P 500 in the US as well as the ASX in Sydney. Driven by gains in economically sensitive value stocks, after the Senate passed a US$ 1 trillion bipartisan infrastructure package, but still to go through the House of Representatives, the Dow Jones Industrial Average rose 172 points, to 35,274 and the S&P 500 gained 7 points to 4,439, in Tuesday trading. Again, on Tuesday, the ASX 200 rose for the sixth time in August to close on 7,584 points – over 15% higher YTD – driven by the banks and the mining companies, (although the price of iron ore has tanked 30% since May). There is no doubt that the market will turn probably before the end of the year and when it does, it will not be a pretty sight. If you do not think so – Do You Believe in Magic?

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Robin Hood – Prince of Thieves!

Robin Hood – Prince of Thieves!                                                    31 July 2021

According to Property Finder, July sales transactions in Dubai hit a 12-year high, registering 4,384 sales deals, worth US$ 3.05 billion, and this despite the fact that July is normally considered a “quiet” and slower month for the market. Last month, 59.4% of sales, (2.6k at US$ 2.11 billion) were in the secondary market – and the balance (1.8k at US$ 937 million) off-plan; the average transaction value for secondary or ready property increased by 4.62% to US$ 790k and off-plan units by 33% to US$ 518k. It reported that the top locations for villa/apartment sales were Dubai Hills Estate, Arabian Ranches, The Palm Jumeirah, Damac Hills and Mohammed bin Rashid City, with Dubai Marina, Downtown Dubai, The Palm, Business Bay and Jumeirah Village Circle for apartments. In the first seven months of the year, 31.8k sales transactions took place, valued at US$ 19.93 billion; the whole of 2020 saw 35.4k sales worth US$ 19.58 billion.

For the past week ending 05 August, Dubai Land Department recorded a total of 1,581 real estate and properties transactions, with a gross value of US$ 1.91 billion. It confirmed that 1,083 villas/apartments were sold for US$ 689 million, and 91 plots for US$ 195 million over the week. The top three transfers for apartments and villas were all apartments – one was sold for US$ 138 million in Marsa Dubai, a second sold for US$ 82 million in Burj Khalifa and thirdly, an apartment sold for US$ 45 million in Palm Jumeirah. The top two land transactions were for a plot in Me’Aisem First sold for US$ 17 million, and a plot that was sold for US$ 11 million in Madinat Dubai Almelaheyah. The most popular locations were in Hadaeq Sheikh Mohammed Bin Rashid, with 18 sales transactions worth US$ 75 million, Jumeirah First, with 15 sales at US$ 42 million, and Nad Al Shiba First with 11 sales transactions worth US$ 9 million. Mortgaged properties for the week totalled US$ 1.09 billion, including a plot for US$ 253 million in Palm Jumeirah. 35 properties were granted between first-degree relatives worth US$ 34 million.

Having resumed international travel three months earlier, in October 2020, Dubai became one of the first cities in the world to reopen for international meetings, conferences and conventions. Going into H2, it has built a healthy list of high-profile events, the most notable being the hosting of the delayed six-month long Expo 2020 Dubai, starting on 01 October. Some other major events include the Congress of the Société Internationale d’Urologie, Society of Petroleum Engineers Annual Technical Conference and Exhibition, International Astronautical Congress, World Chambers Congress, LPG Week, Gastech, (having been relocated from its originally planned host city of Singapore), and Africa Oil Week; the latter is usually held in South Africa but has been transferred to Dubai to coincide with Expo. Major incentive groups visiting the city will include AFC Life Science, Amway, Sunhope, Jeunesse and OMNILIFE. To build on this momentum, Dubai Business Events will continue to engage with meeting international planners, both here in Dubai and in their own overseas market, to highlight the city’s business events infrastructure and rapidly developing knowledge economy.

The Business Registration and Licensing (BRL) sector of Dubai Economy posted a 77.0% hike in business licences to 31k in H1 – a figure that surpassed pre-pandemic returns. Since the onset of Covid in March 2020, the Dubai economy has recovered a lot quicker than many had expected, mainly attributable to several rapid and effective government actions. H1 also saw the entry of 246 new investment firms and the establishment of twelve new holding companies, with the ‘Invest in Dubai’ platform attracting 10.6k foreign investors from 117 nationalities.

It is estimated that 51% of UAE’s wealth is in the hands of those individuals whose net worth is more than US$ 5 million, which in turn accounted for 26% of the GCC’s financial wealth last year. According to BCG, this wealth is expected to grow at an annual compound 4% rate to 2025, by which time the country’s wealth will have grown an extra US$ 700 billion, whilst the GCC total will have reached US$ 63 trillion. Saudi Arabia and the UAE account for 71% of the bloc’s total wealth.

Business activity in the UAE’s non-oil private sector continued to improve in July, posting its highest level in two years of 54.0, (52.2 in June), as demand rebounded from the pandemic-induced slowdown. Furthermore, employment rose at its fastest rate since January 2019, whilst both the output and new order indices also followed last month’s upward trajectory, driven by soaring domestic sales and strengthening market confidence, hitting their highest levels since July 2019. However, on the flip side, delays to shipments resulted in the worst lengthening of suppliers’ delivery times in over a year and contributed to a quicker rise in input costs. Business confidence indicated that the future economic outlook was bullish helped by the upcoming Expo 2020 and the easing of lockdown restrictions.

On Sunday, the UAE took over the mantle from the Seychelles to become the world’s most vaccinated country, having administered 18.8 million doses, equating to 78.3% of the country’s population.

In order to further promote Dubai as a regional and global hub for 3D printing technology, HH Sheikh Mohammed bin Rashid has issued a decree to regulate the use of 3D printing in the emirate’s construction industry which has already built two buildings; The Office of the Future at Emirates Towers was the world’s first 3D-printed office and Dubai Municipality’s Centre for Innovation the first 3D-printed two-storey building in the world. This decree is further support for the 2016 Dubai 3D Printing Strategy, aimed at ensuring that 25% of Dubai’s buildings will be constructed using the technology by 2030. The new law further aims to enhance efficiency in construction projects, boost the competitiveness of local industry, reduce waste and attract leading companies in 3D printing to Dubai.

The Dubai Ruler has also issued a further four decrees involving government-related entities including changes to board members. The first sees Sheikh Ahmed bin Saeed chairing the board of trustees of the British University in Dubai, while the head of the university will serve as vice chairman. Other members include Hussain Al Sayegh, Ahmad Al Muhairbi, Sheikha Hind Ali Rashid Al Mualla, as well as a representative each from Dubai Holding, the British Council in Dubai and the Northern Emirates, Emirates NBD, Rolls-Royce International, the British Business Group and Atkins.

The second decree appoints Reem Al Hashimy, Minister of State for International Co-operation, as chair of Dubai Cares, with Tariq Al Gurg as vice chairman. Other board members include Sami Al Qamzi, Abdulla Karam and Sultan Al Shamsi. Another appointed its MD, Mona Al Marri, as chairwoman of the board of the Dubai Women Establishment, with Hala Badri as her deputy. Other members of the board include Huda Al Hashimi, Huda Buhumaid, Khawla Al Mehairi, Mona Bu Samra, Fahima Al Bastaki, Aljoud Lootah and Moaza Al Marri, in addition to the chief executive of DWE. The fourth decree saw Tamim Al Muhairi appointed as chairman of Watani Al Emarat Foundation, with Saeed Al Aweem as vice chairman, and other members being Mohammed Al Theeb, Mohammed Al Hali, Dherar Belhoul, Abdulla Al Jatbi and Mohammed Al Tayer.

Dubai Airport Free Zone Authority, which supports more than 1.8k companies across more than twenty sectors, came up with some impressive H1 financial figure, posting an 8.3% hike in sales revenue, driven by an 88.4% annual increase in the number of registered companies and a 24% rise in leased areas. Over the period, the number of multinationals jumped 23.5% while the number of registered SMEs climbed 96.4%. To further support SMEs, (which make up 95% of all companies in the emirate and contributes 40% of Dubai’s GDP), Dafza also launched Scality, a start-up programme aimed at attracting local, regional and global tech start-ups to set up and grow in the emirate. H2 results will be bolstered by Dubai’s economy bouncing back quicker than expected and the opening of the six-month Expo in October. Following an agreement with the Securities and Commodities Authority earlier in the year, companies will be allowed to trade with crypto assets and cryptocurrencies within Dafza’s jurisdiction.

In Q1, trade rose 4.7% on an annual basis to more than US$ 39 billion and recorded a US$ 664 million, whilst accounting for accounted for 11% of Dubai’s trade. Goods including machinery, televisions, electrical equipment, pearls, semi-precious stones and metals accounted for 94% of the authority’s total trade. Trade with China surged 56.4%, year on year, and remained Dafza’s biggest partner, accounting for 31% of its total trade.

Dubai Economy has already fined 148 firms US$ 4.1k (AED 15k) each for failing to register their ‘Beneficial Owner’ data by the 30 June deadline. This followed several reminders from its Commercial Compliance and Consumer Protection division about the deadline and the importance of registering their Ultimate Beneficial Owner data with the commercial registry.

There was no surprise to see a PwC UK report claiming that Dubai is the leader in the world when it comes to workers taking home 100% of the total income earned, placing it ahead of peers such as Hong Kong, Singapore and New York. It seems that this was a no brainer considering that the emirate ‘s residents do not pay tax or social security payments and because of this Dubai has long attracted high-income individuals and multinational corporations.

THE RTA reported that it had collected US$ 805 million, via digital channels (e-payment portal and smart kiosks), last year, with the number of digital transactions reaching 527.1 million, the number of registered users on digital platforms 2.2 million, and the number of smart apps downloads was 6.1 million. The introduction of digitalisation has seen numbers at customers happiness centres fall 64.5% in 2020 and that the rate of digitisation of RTA’s transactions exceeded 91%. It does appear that the RTA is doing its bit to contribute to transform Dubai into the smartest city in the world. The authority is currently updating and following-up the implementation of 111 projects as part of its digital strategy 2020-2024.

Dubai-based venture capital firm Vy Capital, along with Alphabet Inc’s Google Ventures, led the funding round that raised US$ 205 million for Elon Musk’s 2016 brain-chip startup, Neuralink. Funds raised in Round C will be used to take its first product, N1 Link, to the market, and for research and development. The company aims to implant wireless brain computer chips to help cure neurological conditions, including Alzheimer’s, dementia and spinal cord injuries and fuse humankind with artificial intelligence. According to Elon Musk “First @Neuralink product will enable someone with paralysis to use a smartphone with their mind faster than someone using thumbs.”

 A Dubai-based fintech start-up, baraka, has raise a further US$ 4 million in its latest seed round. It has officially launched its mobile investment app, whose aim is to educate, enable and empower retail investors in the ME. The money raised will help target a large and underserved segment of investors in the region, in an industry which focuses on the higher income segments. It has also received regulatory authorisation from the Dubai Financial Services Authority and its commission-free investment app allows its users access to over 5k US-listed securities, with no minimum investment requirement.

Dubai Investments reported a 47.3% hike in H1 net profits to US$ 82 million, mainly attributable to enhanced performance of the manufacturing and contracting and investment segments. Total income for the period came in 50.9% higher, at US$ 469 million, mainly driven by increased margins in their property sector. During the period, DI acquired an additional 15.19% stake in National General Insurance, bringing its total shareholding to 45.18%.

Although there were declines in both its H1 revenue – 6.8% lower at US$ 167million – and net profit to US$ 18 million, down 49.0%, Dubai Aerospace Enterprise still announced that it was looking for early redemption of an additional $1.25 billion this month, following its March’s redeeming of approximately US$ 456 million of high coupon debt. In H1, operating cash flow rose 15.2% to US$ 498.5 million. DAE had 99.1% fleet utilisation rate and confirmed that in the coming months it would sell 27 aircraft and purchase 26, including 15 new 737-8 MAXs from Boeing.

The DFM opened on Sunday 01 August, 52 points (1.9%) higher the previous fortnight, was up a further 54 points (1.9%) to close the week on 2,820. Emaar Properties, US$ 0.01 lower the previous week, was US$ 0.03 higher at US$ 1.11. Emirates NBD and Damac started the previous week on US$ 3.65 and US$ 0.34 and closed at US$ 3.65 and US$ 0.33. On Thursday, 05 August, 86 million shares changed hands, with a value of US$ 44 million, compared to 126 million shares, with a value of US$ 46 million, on 29 July.

By Thursday, 05 August, Brent, US$ 1.87 (1.6%) higher the previous week, shed US$ 3.50 (4.7%), to close on US$ 71.42. Gold was US$ 23 (1.3%) higher last week but lost US$ 26 (1.4%) to close Thursday 05 August on US$ 1,802 Brent started July on US$ 73.31 and gained US$ 1.88 (2.6%) during the month, to close on US$ 75.19. Meanwhile, the yellow metal opened July trading at US$ 1,776 and gained US$ 41 (2.3%), during the month, to close on US$ 1,817.

Driven by an uptick in the global economy and higher energy prices, BP posted a Q2 profit, US$ 2.8 billion, after posting a massive US$ 16.8 billion loss a year earlier. It announced that it would raise dividends payment by 4.0% and it also will start with a US$ 1.4 billion share buyback programme. Its H1 profit at US$ 7.7 billion compares with a US$ 21.2 billion loss in 2020. BP joins other mega energy companies, such as Chevron, Royal Dutch Shell and Total Energies, to start share repurchases amid a favourable environment for crude commodity prices, currently hovering around the US$ 70 level. – more than 50% higher YTD.

Although revenue dipped 7.0% to US$ 25.7 billion, HSBC posted a 112% leap in H1 profit to US$ 11.9 billion, attributable mainly to the effect of the 2020 interest rate cuts. Of those figures, Q2 accounted for US$ 12.0 billion of revenue, (down 10.0% year on year), and US$ 5.6 billion of profit, (up 124%).  The three main drivers behind this drastic improvement for Europe’s biggest bank by assets were the return of growth in its main markets, an increase in lending and a drop in bad loan charges; its bad loan provision dropped from US$ 7.2 billion last year to US$ 719 million. The bank noted that all its regions had traded profitably in H1, with Asia driving the strongest growth in profitability. The bank declared an interim US$ 0.07 cash dividend but advised that “reflecting the current improved economic outlook and operating environment in many of our markets, we now expect to move to within our target dividend pay-out ratio range of 40 per cent to 55 per cent of reported earnings per ordinary share in 2021.”

Standard Chartered posted a higher-than-expected 57.0% jump in H1 profit to US$ 1.24 billion, as its Middle East and Africa (MEA) region’s operating income more than quadrupled to a five-year high of US$ 476 million, mainly attributable to a “significant” drop in provisions for loan losses, down on the year to US$ 40 million from US$ 370 million. The bank’s strongest returns were seen in its Asian region where profits were 75.0% higher at US$ 1.0 billion, driven by “fantastic results in Hong Kong and in China.” However, results in Europe were not as good, with a 5.0% decline in profit to US$ 337 million.

The Johnson government confirmed that it would be “closely monitoring” the planned US$ 8.8 billion takeover of Meggitt by US company, Parker-Hannifin. It added that “under the Enterprise Act 2002, the Business Secretary has powers to intervene in mergers and takeovers which raise national security concerns”. The Coventry-based defence and aerospace firm employs 9k globally, of which 2.3k are in the UK. Meggitt’s shares climbed 55% in Monday’s trading when the takeover bid was announced but still traded some 10% lower than the takeover bid. On the same basis, the government is also monitoring the proposed US$ 3.6 billion takeover of UK firm Ultra Electronics by US private equity-owned company, Cobham.

Despite having to pay a large anti-trust fine, Alibaba Group posted a Q1 (to 30 June) net profit of US$ 7.0 billion, slightly down on the comparative 2020 figure of US$ 7.4 billion; revenue was 34.0% higher at US$ 31.8 billion, driven by growth in the company’s China commerce retail business and its international retail and Cainiao logistics businesses. Alibaba has 1.18 billion annual active consumers of which 265 million are from overseas and the balance from within China; the total number increased by 45 million in the quarter.

It appears that the Chinese authorities are continuing with their recent policy of tightening their control over technology and private education companies and this is having a negative impact on the share value of Chinese online gaming firms. This week, a state media outlet labelled them as “electronic drugs”, following which the shares of Tencent and NetEase declined more than 10% in early Hong Kong trading. Investors are becoming increasingly concerned about the Beijing crack down, with the state-run Economic Information Daily reporting that “no industry, no sport, can be allowed to develop in a way that will destroy a generation,” and likening online games to “spiritual opium”. The latest government move is seen to be an attempt to tackle Tencent’s dominance of online music streaming where it controls more than 80% of China’s exclusive music streaming rights. Last week, the US$ 120 billion private tutoring sector was stripped of the ability to make a profit from teaching core subjects in China, with the new guidelines also restricting foreign investment in the industry.

The growing influence of players in the “buy now, pay later” market was brought home by the announcement that digital payments platform, Square, is to acquire Australia’s Afterpay for US$ 29.0 billion in an all-share offer. It valued Afterpay’s shares at US$ 92.91 each, a 34.1% premium on the market price last Friday but this is still well down on its February high of US$ 198.97. In Monday’s trading Afterpay shares were trading 29% higher at US$ 91.82. The US company has realised that there has been a shift, particularly in the younger age market, away from traditional credit and it now plans to integrate Afterpay into its consumer Cash App and its Seller product for small businesses. The sale will also see Square’s customer base increase from 70 million to 86 million.

Despite the impact of Covid-19, the UAE managed to boost its financial wealth by 3.0% to over US$ 600 billion. The report by the Boston Consulting Group noted that investable wealth accounted for about 69% of the total. On a global scale, financial wealth climbed 8.3% last year to US$ 250 trillion, whilst following the 2008 GFC it had actually declined 8.0%. 2020 witnessed both equities & investments funds, (driven by a strong stock market performance fuelled by supportive central bank policies, as well as cash and cash deposits both growing by 11.5% and 10.6%, the latter due to pent up savings). Over the period, governments pumped in over US$ 16 trillion in fiscal stimulus measures and global central banks a further US$ 9 trillion to bolster worldwide economies.

According to figures from CoreLogic, Australian house prices are going through the roof and, with July prices 1.6% higher, climbing at their fastest rate since February 2004. Although the monthly growth rate has begun to trend lower over the past four months, when the national index rose 2.8%, a continuance of the current trend of higher prices is pushing an increasing number of Australians out of the house-buying market. The current regime of low interest rates and generous tax breaks for housing will ensure that prices will continue to skyrocket. Darwin recorded the highest annual increase in house prices at 23.4% with Sydney, (still the country’s most expensive city), Brisbane and Melbourne posting increases of 18.2%, 15.9% and 10.4%. Houses continued to record much stronger growth in values relative to units – 18.4% against 8.7% – in every city except Hobart where the trend was 21.7% against 23.0%. With 42% of borrowers now having a loan-to-value ratio of 80%, the highest on record, when the market does implode, there will be a lot of mess to clear up.

The eurozone’s economy escaped the shackles of recession by a 2.0% Q2 GDP growth, following a double-dip recession, but it still remains 3.0% lower than its pre-pandemic level.

All countries in the 19-nation bloc recorded growth with some – such as Portugal, (growing at 4.9%) and Austria – performing better than others.  Whilst the likes of Italy and Spain saw growth hovering around the 3.0% average, the two powerhouses reported only moderate expansion – Germany (1.5%) and France (0.9%). One of the main growth drivers was household spending, especially noticeable in France, (which reported a 29% jump in its hotel and restaurant trade), Germany and Spain. Similar figures in Q3 are expected which would bring the eurozone economy almost to par compared to its pre-pandemic level.

Last Friday’s IPO, Robinhood shares dived to end its first day of trading at US$ 36, as some bigger investors shunned the trading platform for being too risky, along with fears it could face a future regulatory crackdown. Since then, its shares have surged and by yesterday 04 August, were trading as high as US$ 86, as speculation mounted that it could be heading in the same direction as Gamestop which earlier in the year saw its shares skyrocket as users of the social media platform Reddit bought them up to drive up the price. The same ‘meme stock’ phenomenon could well happen again with Robinhood. Interestingly, retail investors held a third of its shares at the IPO and on Tuesday it was estimated that retail trading in Robinhood shares was up tenfold, according to Vanda Research. Robin Hood – Prince of Thieves!

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Bottleneck Blues

Bottleneck Blues                                                                               29 July 2021

For the past week ending 29 July, Dubai Land Department recorded a total of 1,617 real estate and properties transactions, with a gross value of US$ 1.47 billion. It confirmed that 1,135 villas/apartments were sold for US$ 619 million and 88 plots for US$ 169 million over the week. The top three transfers for apartments and villas were all apartments – one was sold for US$ 110 million in Marsa Dubai, a second sold for US$ 67 million in Business Bay, and thirdly, an apartment sold for US$ 62 million in Palm Jumeirah. The top two land transactions were for a plot in Island 2 sold for US$ 33 million, and, interestingly, a plot that was sold for US$ 14 million in Palm Deira. The most popular locations were in Nad Al Shiba First, with 19 sales transactions worth US$ 18 million, Hadaeq Sheikh Mohammed Bin Rashid, with sales at US$ 36 million, and Jumeirah First with 9 sales transactions worth US$ 17 million. Mortgaged properties for the week totalled US$ 417 million, including a plot for US$ 84 million in Marsa Dubai. 24 properties were granted between first-degree relatives worth US$ 20 million.

Mo’asher, Dubai’s official sales price index, posted 6,388 real estate sales transactions in June totalling US$ 4.03 billion – the highest value of sales in eight years; compared to the previous month and June 2020, the figures were 33.2% and 44.3% higher. Q2 saw figures of 15.6k sales transactions, valued at US$ 10.04 billion – 33.3% (volume) and 46.8% (value) higher than in Q1. YTD there were 27.4k sales transactions totalling US$ 16.89 billion. For the whole of 2020 the figures were 35.0k, valued at US$ 19.58 billion. According to Property Finder, the top areas of interest in terms of sales transactions for villas/townhouses in Q2 2021 were Mohammed Bin Rashid City, Dubai Hills Estate, Dubai Land, Green Community and Town Square; for apartments, the top five locations were JLT, Dubai Marina, Meydan, Jumeirah Village Circle and Downtown Dubai.

According to Luxhabitat Sotheby’s International Realty latest Q2 report, Dubai’s prime residential market posted a 43.8% hike in sales volume, quarter on quarter, as property prices rose 1.4%. In the three months, there were sales of 4,681 apartments and 818 villas, valued at US$ 4.55 billion. The top five areas volume-wise were The Palm Jumeirah, MBR City, Downtown Dubai, Dubai Marina and Emirates Living, with sales of US$ 1.14 billion, US$ 662 million, US$ 657 million, US$ 430 million and US$ 390 million respectively. Although the Q2 sales volume was 48.0% higher, at US$ 1.61 million, on the quarter, the average prime villa price was slightly down, by 1.65%, at US$ 2.2 million. Apartment sales were 25.0% to the good, at US$ 2.23 billion, with an average prime apartment now costing US$ 572k, equating to an average price of US$ 392 per sq ft. In H1, the top four property sales in Dubai were all on the Palm, with three residences in The Palm Jumeirah XXII Carat selling for US$ 33 million, US$ 30 million and US$ 29 million and another on Frond N going for US$ 22 million.

According to Knight Frank, the average Q2 price for Dubai property was 1.0% higher at US$ 315 per sq ft – the first time since 2014 that the market has recorded a consecutive gain. One sector that performed well was houses valued at more than US$ 5.45 million (AED 20 million), with 128 such deals recorded in the six months to the end of June; this was higher than the 75 deals recorded for the whole of 2020 and was the highest level since 2014 when 137 sales were recorded.

French transport company MND has signed an early stage working agreement with the RTA to develop a network of high-speed suspended passenger pods in Dubai. Similar in design to those already presented by the Chinese Zhong Tang Sky Railway Group and USky Transport of Belarus, the MND Cabline is flexible, energy saving, and has only a minor impact on the urban environment. It is a fully automatic, driverless transport system, with self-propelled cabins moving along ropes at speeds of up to 45 kph. The RTA is hoping that it will be able to achieve their target of 25% of all trips in Dubai to be self-driving by 2030.

Dubai Economy has started imposing fines on companies that have not registered their Ultimate Beneficial Owner data with the authorities by the end of last month. An earlier 2020 Cabinet Decision had required all registered businesses in the UAE to reveal the identity and furnish details of their Beneficial Owner to be included in the commercial registry. The data required includes the name, nationality, gender, passport number, residence address and mobile number of the owner, with the law applicable to all categories of establishments, commercial, professional or industrial.

HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum issued Executive Council Resolution No. (19) 2021 on waivers and reductions of fees for a total of 88 services provided by various Dubai Government entities. They include Dubai Land Department, Dubai Maritime City Authority, Roads and Transport Authority, Dubai Municipality, Dubai Tourism, Dubai Courts, Dubai Economy and Dubai Health Authority. The decision will cut costs for many Dubai businesses, stimulate economic expansion and further enhance the emirate’s attractiveness as a business and investment hub.

The latest decree, No (27) of 2021, issued by HH Sheikh Mohammed bin Rashid Al Maktoum, sees the establishment of the ‘Emirati Human Resources Development Council in Dubai’. Including representatives from the public and private sector, it will oversee the implementation of policies, plans and initiatives aimed at enhancing the employment of Emiratis in the private sector. Emiratis will also be mentored and offered career planning advice and guidance on working in the private sector. Its first chairman will be HE Sultan bin Saeed Al Mansoori, while the Director General of the Dubai Government Human Resources Department will be the Vice Chairman. Other members, from the public sector, include the Directors General of the Knowledge and Human Development Authority, the Dubai Department of Economic Development and the Dubai Chamber of Commerce and Industry. Other members from the public sector will be from the Dubai Free Zones Council, the University of Dubai and the Director of Zayed University, whilst representatives from Emirates NBD, Emirates Group and Al Futtaim Group will represent the private sector. The council will work with companies to “increase the number of UAE citizens employed in some fields”.

The Dubai Government’s Department of Finance is to organise the Dubai International Public-Private Partnership Conference. The two-day event, set for 10-11 October, will help advance Dubai’s development strategy and raise its profile as a commercial and investment hub that plays a pivotal role in both global and regional economic growth. The international conference, under the umbrella of Expo 2020 Dubai, is in line with the vision of HH Sheikh Mohammed bin Rashid Al Maktoum.

Two Dubai companies – the sixty-seven-year-old Al Fardan Exchange and digital banking start-up Jingle Pay – have agreed a partnership that will offer instant remittances for workers who need no-fee accounts and low or no-cost cross-border money transfers. This buys into the recent trend of money exchange providers tying up with FinTechs to cater to the growing need of customers relying on apps, rather than having to go to physical outlets to remit money. Currently, Al Fardan’s total business is skewed 90:10, for retail:digital remittances, but this will become more on-line in the future. Last year, remittances by foreign workers in the UAE dipped 5.0% (US$ 2.3 billion) to US$ 43 billion, with transfers through exchange houses falling by US$ 4.93 billion or 13.8%, while outward remittances through banks increased by US$ 2.67 billion, or 28.8%. At the same time, Al Fardan has tied up with contactless mobile payment app Empay, which will allow the latter’s customers to utilise the exchange’s facilities to immediately transfer money to a bank account or withdraw instant cash.

Led by regional investors and venture capitalists, Udrive has raised US$ 5 million to be used to accelerate its growth over the next twelve months. The Dubai-based start-up aims to double its fleet size in Q3 and to target 500% revenue growth in the next 12 months. Its founder, Hasib Khan, commented that “as people return to work, we’re once again seeing an increased need for mobility”.

It will only be a matter of time before Dubai sees SPACs (special purpose acquisition companies) becoming a common occurrence. Colloquially known as blank-cheque companies, they are formed with the intention of raising funds through an IPO and then seeking to acquire existing companies. They start with no commercial operations and trade without business fundamentals. The Dubai-based Swvl will be the first ever tech start-up in Dubai and will list on Nasdaq, via a SPAC. The mass transit and shared mobility services provider is set to go public through a merger with Queen’s Gambit Growth Capital and has a US$ 1.5 billion valuation. Swvl, which was co-founded by Mostafa Kandil in 2017, in Cairo, allows commuters to reserve seats on private buses, operating on fixed routes and paying fares through its mobile app. It currently operates in Egypt, Kenya, Pakistan, the UAE, Saudi Arabia and Jordan, and to date more than 1.4 million riders have booked over 46 million rides through the app. Last year, it earned approximately US$ 26 million in revenue and is expecting to triple that figure this year.

A JV, between DP World and nuclear energy and technology company Rosatom, has been established to develop the Russian Northern Transit Corridor as a “viable and sustainable” route between Asia and Europe. The new entity will invest, build and operate transport and logistics capacity along the route that connects South-East Asia with north-western Europe. Apart from cutting nineteen days from the journey time between the two continents, there will be two other significant benefits – it will speed up trade flows between the two continents, that account for over 30% of global trade, and the shipping time saving will see a major reduction of carbon dioxide emissions. In 2020, a record 33 million tonnes of cargo were carried along the Northern Transit Corridor, and the forecast is to expand to 80 million tonnes by 2024. DP World has already committed to invest US$ 2.0 billion with the Russian Direct Investment fund. The Northern Transit Corridor aims to enable the development of ports and transport links along Russia’s north coast to sustain economic activity.

DP World Limited posted healthy returns, as it handled 19.7 million TEUs (20’ equivalent units) across its global portfolio of container terminals, with gross container volumes increasing by 17.6% on the year, on a reported basis, and 17.1%, on a like-for-like basis. Growth was seen across all regions, notably in India, Europe, Australia and Americas, with Jebel Ali reporting a 4.2% increase, handling 3.4 million TEUs. In H2, DP World handled 38.6 million TEUs, with gross container volumes increasing by 13.9%, year-on-year, on a reported basis and 13.3%, on a like-for-like basis. Group Chairman. Group Chairman Sultan Ahmed Bin Sulayem commented: ”Looking ahead, the near-term outlook remains positive, but we do expect growth rates to moderate in the second half of 2021. Furthermore, we remain mindful that the Covid-19 pandemic and geopolitical uncertainty could once again disrupt the global economic recovery.”

Etisalat Group posted a 3.2% hike in H1 revenue to US$ 7.19 billion, driving a 3.9% rise in consolidated net profit to US$ 1.28 billion, equating to a net margin of 18.0%. Consolidated EBITDA reached US$ 3.65 billion, with a 51% margin. Its global subscriber base climbed 7.0%, year on year, to 156.1 million, whilst its UAE subscriber base reached 12.1 million subscribers.

Emirates Integrated Telecommunications Company (Du) posted a year on year 11.4% hike in Q2 net profit of US$ 65 million, driven by cost-saving initiatives and lower provisions. Its revenue came in 7.0% higher at US$ 778 million, with EBITDA of US$ 308 million. Because of a 27.5% hike in capex to US$ 177 million, its operating free cash flow decreased 11.7% to US$ 131 million. Its customer base grew 2.2% to 6.6 million, as fixed revenues grew 6.5% to a record US$ 187 million, with its mobile revenue stream stabilising at US$ 353 million. The Board of Directors approved an interim dividend of US$ 0.027 per share.

Emirates NBD posted a 22.0% hike in Q2 net profit, attributable to equity holders, to US$ 670 million, with impairments for credit losses declining by 48.0% to US$ 232 million and allowances for bad loans coming in 52.0% lower as Dubai’s economic recovery continued to gain traction because of ongoing monetary and fiscal support and a successful mass inoculation programme. H1 profit was 17.0% higher at US$ 1.30 billion and 66% up on H2 2020, with expenses declining 6.0% to US$ 1.0 billion and impairment provisions falling 38% to US$ 711 million. Assets at the end of June remained flat at US$ 189 million, as both loans and deposits fell by 1.0%. The bank’s 2019 Turkish acquisition, DenizBank, contributed US$ 902 million – or 29% of group income. The bank expects “the recovery in the non-oil sector to gain momentum in the second half of 2021”, with a 3.5% growth forecast for 2021.

Dubai Islamic Bank, posted a Q2 net profit of US$ 274, almost identical to the figure last year, helped by declining impairments, (down 29% to US$ 5429 million), and stronger top-line growth, with customer deposits rising 6.0% to US$ 59.5 billion. The UAE’s biggest Sharia-compliant lender by assets also posted a H1 profit of US$ 518 million. It remains “committed to applying digital tech in every aspect of banking,” with “a singular focus to make remote banking easier for our customers.”

Dubai Financial Market registered an almost halving of H1 net profit at US$ 11 million, compared to US$ 21 million during the corresponding period of 2020, as Q2 profit sank 65.4% to US$ 4 million. Consolidated revenue was 24.6% lower at US$ 37 billion, of which US$ 24 billion was attributable to operating income and US$ 13.o0  million to investment income and others. Expenses were 3.3% lower at US$ 27 million.

The DFM opened on Sunday 25 July, 30 points (1.1%) higher the previous week, was up 22 points (0.8%) to the good to close the week on 2,766. Emaar Properties, US$ 0.08 lower the previous three weeks, was US$ 0.01 higher at US$ 1.08. Emirates NBD and Damac started the previous week on US$ 3.57 and US$ 0.34 and closed at US$ 3.65 and US$ 0.34. On Thursday, 29 July, 126 million shares changed hands, with a value of US$ 46 million, compared to 67 million shares, with a value of US$ 17 million, on 22 July.

For the month of July, the bourse had opened on 2,811 and, having closed the month on 2766, was 45 points (1.6%) lower. Emaar traded lower from its 01 July 2021 opening figure of US$ 1.14 – down US$ 0.06 – to close June on US$ 1.08. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.65 and US$ 0.35 and both closed lower on 29 July on US$ 3.57 and US$ 0.354 respectively.

By Thursday, 29 July, Brent, US$ 3.67 (4.8%) lower the previous four weeks, clawed back some of that loss, gaining US$ 1.87 (12.6%), to close on US$ 74.92. Gold prices also moved northwards, having been down US$ 23 (1.3%) the previous week, regaining all that deficit, trading US$ 23 (1.3%) higher, by Thursday 29 July, to close on US$ 1,828.

For the first time in two years, Boeing posted its first quarterly profit, as deliveries of its 737 Max model rose and air travel demand improved; sales were 44% higher at US$ 2.4 billion. Q2 profit came in at US$ 567 million, compared to a US$ 2.4 billion deficit in the same period in 2020. Cash and investments in marketable securities decreased by US$ 400 million to US$ 21.3 billion, mainly driven by operating cash outflows. In Q2, the plane maker delivered more than 130 of its bestselling 737 Max aircraft, whilst global airlines have returned more than 190 previously grounded planes to service since the safety ban was lifted last November. Currently, Boeing is producing sixteen 737s a month and expects to almost double this number to thirty-one by early 2022. Having to deal with structural defects in 787 jets, Boeing plans to reduce production levels to less than five a month and expects to deliver fewer than half of the 787s currently in its inventory this year.

Meanwhile, Airbus posted a 70.0% surge in Q2 profit to US$ 14.18 billion, with a net profit of US$ 2.01 billion – a big jump from the US$ 1.23 billion loss a year earlier. For H1, its revenue jumped 30% to US$ 24.6 billion and profit was at US$ 2.7 billion compared to a loss of US$ 945 million in 2020. For the first six months of the year, it delivered 297 aircraft, 100 more than in 2020, and expects that figure will be 600 by 31 December, as well as launching an A350 freighter. It also doubled its EBITDA forecast to US$ 4.0 billion.

The same day Tesla announces a record Q2 revenue and profit, its shares rose 2.2% on the day to US$ 658 and have surged 113% over the past twelve months. Capex increased by 176% to US$ 1.5 billion, as cash balances decreased to US$ 16.2 billion, attributable to “net debt and finance lease repayments of US$ 1.6 billion, partially offset by free cash flow of US$ 619 million”. The electric carmaker noted that it met its production targets despite the negative impact of a global semiconductor shortage because of post-Covid supply chain disruptions. In the quarter, it delivered a record 201k vehicles, 8.9% higher quarter on quarter; of that total, 199k units were Models 3 and Y, with the 2k balance being the more expensive Models – S saloons and X SUVs. Tesla is forecasting a 50% average annual growth and is set to build its first Model Y vehicles at its Berlin and Austin factories this year and has decided to move its lorry launch until next year so it can focus more on these factories. In 2020, Tesla was the leading global manufacturer of electric vehicles producing over 500k of the global total of 3.2 million which was a rise of 43% from 2019.

Another carmaker feeling the double impact of the pandemic and the global semiconductor shortage is Jaguar Land Rover’s owner Tata Motors. The worry to the Indian owners is that the chip supply shortage is likely to worsen in the short term and that the impact on JLR may see production halved in Q3; this would be a major hit to the company financials as JLR, accounts for most of the group’s revenue, with quarterly sales 68% higher year-on-year. In H1, Tata’s losses have  almost reached US$ 1.6 billion, of which more than US$ 1.0 billion occurred in Q1.

Following reports that Softbank is planning to sell a third of its stake, (45 million shares, worth US$ 2.0 billion), in Uber, the ride-hailing firm’s shares have fallen about 5% in Thursday trading. The Japanese technology investment firm is reportedly trying to recoup some of the US$ 4 billion it has lost in the Chinese ride-hailing firm Didi and other investments after a series of actions by Chinese authorities spooked investors. Three years ago, Softbank invested US$ 7.6 billion in Uber and a further US$ 333 million a year later and is also Didi’s largest investor with a 20%+ stake; Uber also owns almost 13% of Didi. With Chinese authorities tightening their grip on their local tech giants, their stock market value on various international bourses has suffered, including Didi which has lost almost 40% of its value since it started trading in New York last month.

It seems that an increasing number of shareholders is against the proposed US$ 8.8 billion takeover of Morrisons by US firm Fortress Investment Group, which was backed by Morrisons’ board of directors. They include the likes of Silchester International, which owns a 15.14% stake in Morrisons, and is “not inclined to support” the agreed deal, and Hambro, which owns a 1.9% stake, indicating that the proposed price per share is too low. Next month, the shareholders are due to vote on the offer of US$ 3.52 per share, as well as a conditional special dividend at US$ 0.028 per share for investors.

Pfizer has raised its full-year sales forecast by 29%, for the Covid-19 vaccine it developed with Germany’s BioNTech, to US$ 33.5 billion, as countries continue to stock up on supplies. The updated sales forecast is based on signed deals of 2.1 billion doses – to date, it has shipped one billion doses since it received regulatory approval in the US, Europe and other regions. Some of its rivals have fallen behind, including AstraZeneca and Johnson & Johnson (J&J) who have faced global manufacturing and safety hurdles, whilst US mRNA vaccine maker Moderna Inc, has had trouble scaling up production; J&J has estimated full-year Covid-19 vaccine sales of US$ 2.5 billion, while Moderna has forecasted sales of US$ 19.2 billion. Pfizer and BioNTech plan to test a version of the vaccine specifically designed to take on the fast-spreading Delta variant next month, with the first batch already manufactured. The more transmissible variant now accounts for more than 80% of new US Covid-19 cases and has also become dominant in many other countries, including the UK.

India’s first listing, 38 times oversubscribed, of a local unicorn resulted in a spectacular opening day. Zomato Ltd saw its shares surge 82.8% last Friday which valued the food delivery firm at about US$ 12.0 billion Its two principal shareholders of the company, founded in 2008 by Deepinder Goyal, are online technology company Info Edge (India), with a 18.55% stake, and China’s Ant Group with 16.53%.  It operates in some 525 Indian cities in India and partners with 390k restaurants. The company had posted a US$ 92 million loss for the year ending 31 March 2021, on revenue of US$ 226 million. This was the first of several Indian internet start-ups going public, with the likes of Berkshire Hathaway Inc-backed Paytm, hospitality company Oyo Hotels and ride-hailing firm Ola, hitting the market in the coming months.

Chinese listed companies on the various US bourses had their biggest two-day fall since the 2008 GFC. Shares listed on the Nasdaq Golden Dragon China Index, which follows the 98 biggest US-listed Chinese stocks, have fallen by almost 15%  in Monday and Tuesday trading – and a 45% slump since its February record high; over the past five months, the index has shed a massive US$ 770 billion in value. Over the past few months, the Chinese administration has cracked down on its technology and education industries and only this week unveiled a massive overhaul of China’s US$ 120 billion private tutoring sector, under which all institutions offering tuition on school curricula will be registered as non-profit organisations. Other on-line service companies are also being hit hard by regulators with both Tencent and Didi losing 7% and 11% in Hong Kong trading on Tuesday. The former follows a ruling that it must end global exclusive music licensing deals with major record labels and the latter because of reports that it faces heavy fines because of allegedly illegally collecting users’ personal data.

A shortage of available property, allied with historically low mortgage rates, has sent Australian prices skyrocketing, with six cities recording record prices for the third consecutive quarter. Real estate Domain reports that Canberra prices rose more than 30% and Hobart by 28%, as well as   Sydney, and Darwin rising by over 20% in the last year. With experts warning the increases are “unsustainable”, as property becomes unaffordable for many, with the Domain House Price Report highlighting a “perfect storm” of rock bottom borrowing costs, a small number of properties on the market, strong demand, and government stimulus money amid the pandemic. Despite most of the country under some type of lockdown, the Australian economy has rebounded to be above its pre-pandemic level, with growth being attributed to soaring demand for commodities around the world and spending by consumers and businesses. It is obvious that the recovery is dangerously uneven and will lead to economic hardship for a large slice of the population in the future and an inevitable fall in property prices.

According to the latest EY Item Club report, the UK economy is experiencing its fastest growth, at an estimated 7.6%, since the WWII, and could recover to pre-coronavirus pandemic levels by the end of 2021, with a slight growth decline to 6.5% next year; the main reason for this unexpected improvement was a smaller-than-expected fall in consumer activity after England’s third national shutdown in Q1. Last year, the UK economy tanked by 9.8% and was then the worst performing economy in the G7. Even though it had “more lost ground to make up” than other countries, its economy has been boosted by the success of its vaccination protocol and the large pent-up savings, (estimated at US$ 275 billion), accrued over the lockdown. Following last week’s lifting of the remaining lockdown restrictions, the economy is expected to grow at an even faster rate, although the report warned “should increased production be required due to higher demands, rising prices and inflationary bottlenecks could occur.” The economy can do without any further Bottleneck Blues.

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