The Only Way Is Down

DSS 2019 Dates

From 21st June 2019 to 3rd August 2019

dubai Summer Surprises

The Only Way Is Down                                                      16 May 2019

Bayut reported strong interest in off-plan residential projects near Dubai’s Expo 2020 site, with particular focus on Dubai South, Meydan City, Mudon and Town Square. The real estate portal noted that ROIs are higher in such areas, with some Dubai South properties having rent yields of 11%; in that location, studio apartments can be bought for US$ 105k and a 3-bedroom villa for US$ 272k.

The locally-based realty portal reckoned that Q1 saw a total of 9.3k transactions, worth US$ 5.8 billion, were registered – 7.9% and 0.7% (in value) higher than the same period in 2018. There were 5.0k and 4.3k deals, accounting for US$ 3.7 billion and US$ 2.1 billion, involving secondary market and off-plan deals respectively.

After announcing a 78.5% surge in 2018 sales, five-year old Danube Properties will launch three new projects this year to add to their current portfolio of over 5k residential units across twelve developments valued at US$ 1 billion. The first project will probably occur after the holy month of Ramadan. The Dubai developer claims that it has more than doubled its market share of off plan sales to 10.5% of the total.

The One Palm is an exclusive address, with the second most expensive penthouse, covering 20k sq ft, ever sold in Dubai has been bought for US$ 20 million. The most expensive, encompassing 30k sq ft, three floors and a 25 mt lap pool, was at the same address when US$ 28 million changed hands in 2017. The developer, Omniyat, is hoping that the third and last one goes for a similar amount.

In the first four months of the year, there were 37 commercial property deals, each worth more than US$ 13 million; according to Property Finder, most involved schools, hospitals and land plots acquired by master developers, with Emaar involved in eight transactions – three Arabian Ranches land plots for a cumulative US$ 89 million and five relating to the five Address hotels sold to Abu Dhabi National Hotels for US$ 463 million.

It is reported that Jawad Azizi, the managing director of Meilenstein Developments, is being held by police in Dubai. The German-based real estate developer entered the Dubai market last October, with plans for eight projects worth US$ 327 million.

Dubai-owned P&O Ports has signed a 25-year agreement (with a further 25-year option) to manage the Serbian port of Novi Sad; this will serve as a link between DP World Constanza, Romania, and Jebel Ali Port. The development, situated on the Danube, is on a 24-hectare site, with a 500 mt quay; it has an estimated annual throughput of around 1 million tons. P&O Ports will retain exclusive rights to undertake all waterside operations, container handling and project cargo activities.

The Bulldozer Group’s latest entrée into the local restaurant scene is planning to open its second outlet in Monaco, only six months after starting operations in the emirate. GAIA, the Dubai-grown concept, will also expand into London, Miami and Moscow but will not be franchised, as all new restaurants will be run and managed by Bulldozer.

Dubai Festivals and Retail Establishment (DFRE) announced that the 22nd edition of DSS (Dubai Summer Surprises) will start on 21 June and run for six weeks to 03 August. An array of summer deals, across the emirate’s shopping outlets, will be on offer that will also include attractions, hotel staycations, live concerts and family entertainment.

In March, the Central Bank of the UAE pumped US$ 2.0 billion in cash to the financial system, as bank deposits fell 5.0% (US$ 1.9 billion) to US$ 379.3 billion over the month.

The UAE’s Securities and Commodities Authority is investigating a case that an unnamed listed company had inflated its value and has referred it to the public prosecution for possible legal action to be taken. The independent body, set up in 2000, noted that this action was taken “in light of the investigations conducted by the SCA with regards to acquisitions and transactions of one of the public listed companies, and given that these acquisitions are suspected to have included errors that led to inflated value.”

The Federal Authority for Government Human Resources reportedly discussed plans to set up retirement investment funds for expatriate workers. If implemented, it most probably result in the introduction of a private sector savings scheme to replace the current gratuity system. At the beginning of May, the Dubai International Financial Centre reported that it might change to the DIFC Employee Workplace Savings (DEWS) Trust savings scheme. It is not currently mandatory for companies in the UAE to set aside payment for end of service gratuity.

At the recent meeting of the Dubai Free Zones Council (DFZ Council), chaired by Sheikh Ahmed bin Saeed Al Maktoum, there was a preliminary agreement to facilitate companies to operate in multiple free zones. The One Free Zone Passport initiative will allow companies licensed at a single free zone to also operate in other Dubai free zones, utilizing only one licence. The meeting also agreed to implement the requirement of an insurance policy instead of a bank guarantee for free zone-based companies, which will boost liquidity for the companies and attract greater investment capital.

Talks are on-going that may result in the merger of Dubai Islamic Bank and its smaller rival Noor Bank which, if it goes ahead, will result in a lender with assets of US$ 76 billion; of that total, the former bank would hold 81.6% of the total. The state-owned holding company, Investment Corp of Dubai, is the largest shareholder in DIB, with a 28% stake, and is also one of the largest shareholders in the eleven-year old Noor Bank.

Shuaa Capital has confirmed that talks are progressing with Abu Dhabi Financial Group, (with assets of over US$ 20 billion), about a possible merger that would see both entities form a publicly listed company. ADFG, whose chairman Jassim Al Seddiqi is also the CEO of Shuaa, already own 48.4% of the Dubai-based company. In Q1, Shuaa posted a 66.9% hike in revenue but recorded a US$ 7 million loss compared to a US$ 3 million profit over the same period in 2018; the deficit was a result of “certain one-off provisions and a change in accounting standards”.

Dubai-listed Gulf Navigation Holding saw revenue jump 29.0% to US$ 12 million but still recorded a Q1 loss of US$ 3 million, compared to a US$ 1 profit in the corresponding period last year; the loss was attributable to its last petrochemical tanker being in dry dock for maintenance for a period of time. During the quarter, Goldilocks Fund became an 18.32% shareholder, with the shipping firm also enhancing its fleet, with the acquisition of livestock carriers. Its assets now include six petrochemical tankers and four livestock transport vessels.

Union Properties has again disappointed the market by producing poor Q1 results – just breaking even after a US$ 50 million profit a year earlier; revenue also fell – by 11.1% to US$ 25 million; accumulated losses stand at US$ 681 million. The company would have gone into the red if it were not for a US$ 20 million attributable to “other income”. Little wonder then that the stock continued to trade at one-year lows of US$ 0.082.

Emaar Developments saw revenue 3.0% higher at US$ 872 million whilst profit dipped 11.2% to US$ 281 million; total assets were at US$ 8.4 billion. It was also confirmed this week that the company had maintained its position being included in the MSCI emerging market index, contrary to market expectations.

Its parent company, Emaar Properties reported flat results, with Q1 profit at US$ 619 million, on the back of revenue at US$ 1.6 billion. By the end of March, its total assets stood at US$ 30.5 billion, along with a cash balance of US$ 2.2 billion.

The day it announced a 54.1% slump in Q1 profit to US$ 8 million, Arabtec’s chief executive officer, Hamish Tyrwhitt, stepped down from the post. (It will be interesting to see the Australian’s next move). Revenue also slid 16.0% to US$ 544 million, with the developer reporting a US$ 2 million loss from investments in an associate, Depa. Citing “lower revenue from a slowdown in awards in the construction sector, coupled with a number of legacy projects closing out in the coming months”, its profit margins dipped from 2.7% to 1.5%.

Another major developer, Damac, also posted major declines in both revenue and profit with falls of 52.8% to US$ 244 million and 93.6% to US$ 8 million respectively. However, one bright light is the fact that the developer has a strong sales pipeline (with Q1 sales of US$ 327 million) and had managed to scale down its debt level on a US$ 272 million sukuk. The company estimates that it has a relatively strong cash position with US$ 490 million in free cashflow and US$ 1.4 billion in escrow although gross debt was at US$ 1.4 billion.

Amanat Holdings posted a 43.0% improvement in Q1 profit to US$ 6 million, as revenue came in 30.0% higher at US$ 10 million, 85.3% of which was attributable to investments in associates and subsidiaries. The health care and education investment firm, a Sharia-compliant entity as it follows the Dubai bourse’s Sharia principles, expects to see its investment portfolio, along with its geographic footprint, expand during the rest of 2019.

In the midst of a major restructuring programme, struggling Marka, posted a US$ 81 million Q1 loss, 21.9% higher than the deficit in the previous quarter. Year on year revenue at US$ 26 million was 22.7% lower than the same period in 2018. The Dubai-based fashion, sports and food retailer, which has not made a profit since its 2014 stock market début, counts Reem Al Bawadi and Morelli’s Gelato among its brands. it continues to consider all available options for capital restructuring, including seeking a strategic capital investment partner; in March, it agreed a 95% planned share capital reduction of US$ 95 million that would decrease its capital base to US$ 14 million. However, with over 90% of shareholders attending a SGM this week, Marka decided to liquidate the business, after a last ditch attempt at turning the company’s finances around failed.

On Monday, the DFM posted its worst session of the year, falling 3.5%, as it saw both the “sabotage” attack of four oil vessels near Fujairah port and a serious hitch in US/Chinese trade talks, as China introduced its own tariffs of US$ 60 billion. Having already shed almost 7% this year, it did fall 3.66% to 2,522 with heavyweights such as Emaar down 6.11%, with Damac and Shuaa Capital hitting their lower limits.

The bourse opened for trading on Sunday 12 May, at 2673, and, having shipped 114 points (4.1%) the previous fortnight lost a further 98 points (3.7%) to close by Thursday, 16 May, on 2575. Emaar Properties dropped US$ 0.07 to close the week on US$ 1.16, whilst Arabtec, after a tumultuous week, was US$ 0.09 lower at US$ 0.44. Thursday 16 May saw marginally higher, but still wafer thin, trades, at 130 million shares, valued at US$ 42 million, (compared to a week earlier of 89 million shares at US$ 33 million).

By Thursday, 16 May, Brent, having dropped US$ 12.65 (17.0%) the previous fortnight, regained much of that loss, up US$ 10.92 (17.7%) to close on US$ 72.62; gold nudged US$ 1 higher to US$ 1,286.

Steel is in the news this week with reports that the long-proposed JV between Tata and Thyssenkrupp is close to collapse. The German steel-maker has indicated that it did not expect regulators to approve the agreement, whilst the Indian company is still looking for a solution to its European interests, after being badly hit by the 2016 commodity crisis. In that year, Tata sold most of its UK sites to British Steel, whilst keeping its Port Talbot plant. Now that the company is facing possible administration, it is seeking a further US$ 98 million from the government to help it address “Brexit-related issues”. This comes just two weeks after the steelmaker, which employs 4.5k at four sites, secured a US$ 130 million loan from the government to pay its EU carbon bill.

The EC have fined five international banks a total of US$ 1.3 billion for rigging the foreign exchange market between 2007 – 2013. Two of the banks, Barclays and RBS, were in cartels, known as “Banana Split” and “Essex Express”, with Citigroup and JP Morgan also involved in the former and MUFG in the latter. Although UBS was also in on the act, it was not fined, because of its role as whistle-blower to reveal both cartels’ existence to authorities. It seems that traders, using online chatrooms, exchanged trading plans and occasionally co-ordinated their market strategies.

Reliance Brands’ owner, Mukesh Ambani, has acquired the iconic British toy retailer Hamleys from China’s C Banner International for an undisclosed sum. India’s richest man will take control of 167 global toy stores, 88 of which are located in his home country. The company, founded in 1760 and the world’s oldest toy retailer, posted a US$ 12 million loss last year.

Pharmaceutical is one of the highest US profile lobby groups and they will be called into action now more than 40 US states have filed a lawsuit accusing some twenty pharmaceutical firms of conspiring to artificially inflate the cost of about one hundred common medicinal drugs; one firm indicted is the Israeli Teva Pharmaceuticals, the world’s largest producer of generic medicine. It appears that a five-year investigation has found drug companies being involved in a scheme to boost prices – in some cases by more than 1,000% – in a multi-billion dollar fraud.

By the end of last week, the Turkish lira had hit the rails, trading at seven-month lows of 6.246 to the greenback; this would have been even worse if the central bank had not injected US$ 4.5 billion to keep the currency afloat. The main driver behind the recent decline was last Monday’s decision to re-run Istanbul’s mayoral election that had been narrowly won by the main opposition party.

Q1 saw the UK manufacturing sector grow at its fastest pace since 1988 with increased stockpiling ahead of the 31 March Brexit deadline (which never materialised). At 0.5% (up from 0.2% in Q4), one of the main drivers behind the improvement was pharmaceuticals, expanding 9.4% in the three-month period. Because of the surge in imports, the trade deficit more than doubled to US$ 24.0 billion, with marked increases in gold and motor vehicles. The caveat behind the good news is that trade in goods widened by 11.8% to a record US$ 56.7 billion.

China’s economy was on the downslide well before Donald Trump announced the latest sleuth of tariffs starting earlier this month. Most economic indicators were moving southwards as April data indicates. Retail sales grew at their slowest pace since during the SARS outbreak in 2003 and although sales were 7.2% higher, it was somewhat lower than the previous month’s 8.7%. Industrial output was down from 8.5% to 5.4%, as housing-related consumption — including furniture, home appliances and construction & decoration material — slowed dramatically, as did sales of clothes, phones and cosmetics. May’s data will prove interesting and if authorities do not take urgent stimulatory measures, then there will be more headaches for the Chinese administration.

The UK economy is resilient if nothing else, as Q1 unemployment figures, at 3.8%, are at their lowest level since 1974; even more impressive was the fact that female unemployment of 3.7% is the lowest since records began in 1971.The downward trend started six years ago and probably will not be bettered. With average weekly earnings (excluding bonuses) for employees rising 3.3%, the rate is higher than the national inflation level which means that the man in the street will have more money to spend.

Uber shares had a disappointing start on their first day of trading on the New York Stock Exchange, with shares ending the Monday 7.6% from their listing price of US$ 45; by Thursday, their value had fallen further to US$ 41.50. The firm had sold 180 million shares (about 10% of their total) and was expecting to raise US$ 8.1 billion. Only last year, Uber, which has never made, and may never make, a profit, (and has racked up US$ 9.0 billion in losses, since its 2009 formation), was valued at US$ 120 billion. For Uber, it seems The Only Way Is Down.

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Wake Up Time

Uber New 2018 Logo First Look App Application Book Taxi Driver

Wake Up Time                                                          09 May 2019

Three separate reports this week seem to indicate that the turnaround in the Dubai economy may have started. Driven by new publicly-funded investments, and higher energy prices, the IMF pointed to a “turning point” which will also see an additional “Expo boost”; the world body is forecasting a 2.0%+ growth this year and 3.0% in 2020. The economy has recovered well from two years ago when the growth was at 1.7% – not helped by weaker external demand and intensified geopolitical tensions.

Another positive indicator came from the Department of Economic Development announcing it had issued more than 2.8k new licences in April – 60% up, year on year; the agency estimated that this added an additional 8.4k jobs to the Dubai employee numbers. Two sectors dominated, with professional and commercial sectors accounting for 49.0% and 48.1% of the total. April business registration and licensing transactions totalled 29.8k – a 13% growth.

The latest Emirates NBD Dubai Economy Tracker Index was also the bearer of positive economic improvements in Dubai, with business conditions advancing at their fastest pace in four years; the main drivers behind these figures were a boost in new business and an improvement in wholesale and retail sector activity. The composite index moved 0.3 higher to 57.9 and, for the fourth straight month, was above its long-run trend level of 55.2. However, discounting, that has continued, with prices falling for the twelfth straight month, masks the real problem that there has been no actual improvement in underlying demand. On the plus side, the level of incoming new business, at 66.6, increased at the fastest rate since January 2015, new sales growth at wholesalers and retailers hit a record high of 70.8, while construction firms registered 55.7 – its strongest level this year. However, employment in the non-oil sector remained flat at a disappointing 50.0 – the threshold between expansion and contraction.

JW Marriott Dubai in Deira will close its doors next week due to “circumstances” beyond the control of the hospitality group. The four-star hotel’s management has reported that events had “interfered with our ability to continue to operate the hotel.”

Q1 figures show that Dubai attracted 4.75 million visitors, 2.2% higher than the same period in 2018. The top four source countries continue to be India, Saudi Arabia, the UK and China (up 13%), with numbers of 565k, 412k, 327k and 292k respectively, accounting for 35.3% of the total; surprisingly, Oman came in fifth as numbers from the emirate’s neighbour climbed 27%.

By the end of March, the emirate’s hotel room portfolio was 8% higher at 118k encompassing 717 establishments; of that total, luxury five-star properties continue to dominate with 34%, four-star account for 26%, and one-three star 19%, with the remaining 21% taken by hotel apartments.  Occupancy continues to be high on a global scale at 84%.

There was a 2.2% decline in Q1 passenger traffic (22.2 million) at Dubai International, attributable to the late timing of Easter, compared to 2018, and a reduction in flights as flydubai’s Boeing 737 Max aircraft remain grounded. Cargo traffic was 4.1% higher at 641k tonnes.

April’s UAE’s purchasing managers’ index (PMI) recorded its highest reading (at 57.6) since December 2017, as business conditions improved, driven by higher output, increasing at its fastest rate in over four years, and new work. However, just as in Dubai, with discounting still driving sales (and reduced margins), hiring is still flat and there has been no apparent improvement in job expansion. Furthermore, with weak wage growth, household consumption remains in the doldrums. One ray of light saw business optimism reaching a series high in April, as the future output index climbed to 90.8.

There are reports that twelve-year old Dubai-based Arqaam Capital Ltd and Abu Dhabi’s The National Investor could merge, creating a business with an equity value of US$ 250 million. If the deal were to go through, it is expected that Arqaam investors would retain managerial responsibilities, along with a 40% share. Financial institutions are leading the way forward in the region with consolidations that, in theory at least, lead to reduced costs and increased market share.

Driven by its biggest ever fuel bill and a strong greenback, Emirates posted a 69% year-on-year decline in profit to US$ 230 million, although revenue was 6.0% higher at US$ 26.7 billion. Operating costs jumped 8.0%, with its fuel bill spiralling 25% higher at US$ 8.4 billion, equivalent to 32% of total costs (28% a year earlier); the strong dollar cost the airline a further US$ 147 million. Over the year, Emirates passenger numbers remained flat at 58.6 million but with seat capacity increasing by 4%, fare increases resulted in a 3% hike in passenger yields.

The group, which also includes Dnata, posted a 44% decline in profits to US$ 626 million, with revenue 7.0% higher at US$ 29.8 billion; its year end cash balance fell 13.0% to US$ 6.0 billion. Dnata itself saw revenue 10.0% higher at US$ 4.0 billion (of which 70% came from its ever-expanding international business), resulting in a profit of US$ 381 million, inflated by a one-time gain from its divestment in the travel management company Hogg Robinson Group; when this one-off transaction is taken out, profit would have declined by 15%. It is expected that the group’s parent company, the Investment Corporation of Dubai, will receive a US$ 136 million dividend.

Dubai Aerospace Enterprise, owned by the Investment Corporation of Dubai, posted a 3.1% increase in Q1 profit at US$ 99 million, as revenues rose 2.2% to US$ 360 million. The Middle East’s biggest aircraft lessor, having acquired Ireland’s Awas in August 2017, is now one of the top ten global jet lessors, with 301 owned aircraft and 52 managed jets.

Drake & Scull International confirmed that it was being investigated by a forensic audit committee formed by the UAE’s Securities and Commodities Authority for “floundering financial position and accumulated losses”. Some files, relating to questionable projects between 2009 and 2016, are currently being reviewed. Furthermore, the federal public prosecutor is still studying fifteen legal complaints, alleging offences by members of the company’s previous management. Last month, DSI, which has incurred losses of US$ 1.6 billion over the past two years, terminated both the CEO and CFO and this week saw the departure of its chairman, Obeid Bin Touq, and a director, Khamis Buamim.

Amlak’s fortunes have not improved in Q1, as it posted a 71.4% slump in profits to just US$ 1 million on the back of a 24% hike in revenue to US$ 33 million which included an unrealised fair value gain related to investment properties. The Sharia-complaint home financier, with Emaar its main shareholder, also booked a US$ 12 million impairment. It hopes that 2019 will see improved economic conditions, that would boost its revenue stream, and that it will be able to finalise restructuring its debt; it had previously reorganised its US$ 2.8 billion investment deposits and settled US$ 769k in cash with financiers in 2014, before revising the terms of the 12-year deal in 2016.

Impressive Q1 results were posted by Emaar Properties with a 7.2% hike in profit to US$ 463 million, on the back of a 123% jump in booked sales to international clients at US$ 708 million and quarterly revenue 53.0% higher at US$ 1.6 billion. By 31 March, its sales backlog was 3.5% higher at US$ 13.2 billion, which fares well for future dividend prospects.

Meanwhile, its development arm, Emaar Development, recorded a healthy 51.0% jump in revenue to US$ 910 million, with profit coming in at US$ 204 million. In Q1, the developer launched eight new projects with a value of US$ 1.2 billion, as its total sales backlog increased to US$ 10.3 billion. Interestingly, sales to non-UAE residents accounted for over 45% of total sales.

Although Dubai Investments saw a 44.2% slump in Q1 profits to US$ 55 million, it was not as bad as it looked compared to the same period in 2018 when the figure was inflated by a US$ 91 million overall gain on the acquisition of a stake in Emirates District Cooling. Its total assets nudged 2.9% higher at US$ 5.5 billion. Its share value dipped 2.14% lower to US$ 0.337.

The bourse opened for trading on Sunday 05 May, at 2758, and, having shed 29 points (1.0%) the previous week lost a further 85 points (3.1%) to close by Thursday, 09 May, on 2673. Emaar Properties dropped US$ 0.06 to close the week on US$ 1.23.  Arabtec, having shed US$ 0.03 the previous week, lost the same again and by Thursday closed on US$ 0.53. Thursday 09 May, saw similar trades to the previous week at 89 million shares, valued at US$ 33 million, compared to a week earlier of 90 million shares at US$ 42 million.

By Thursday, 09 May, Brent, having dropped US$ 3.60 (4.8%) the previous week, lost a massive US$ 9.05 (12.8%) to close on US$ 61.70; gold reversed its recent downward trend – up $ 15 to US$ 1,285.

The downward trend in ME air cargo activity continued into March, with a cargo increase of 1.3%, offset by a 3.8% jump in capacity, driven by weakening volumes both in and out of North America and Asia Pacific. Capacity growth has now outstripped demand growth for 11 out of the last 12 months. Although an improvement on February’s return of a 4.9% contraction, it is still 1.5% lower on an annualised basis.

Driven by a marked improvement in its Asian operations, along with lower costs (down 12.0%), HSBC posted a 30.5% hike in Q1 profit to US$ 6.2 billion – and this despite a dismal performance from its investment banking sector and the drag of its US business. Cost reduction was helped by one-off sales in its retail and commercial businesses and the non-recurrence of US regulatory fines for past misdeeds.

Siemens is set to slash its workforce by 10.4k in a major restructuring programme which will involve the spinning off its oil, gas and power generation business and cutting costs in the region of US$ 2.7 billion. The German industrial equipment maker has been under pressure due to a broader trend toward renewable energy such as sun and wind power in a sector that has seen its global rivals, General Electric and Mitsubishi, struggling as well. The company is expected to maintain a significant stake of less than 50% in the spun-off company and hold a majority stake in its renewable energies company.

Uber Technologies Inc priced its initial public offering at the low end of its targeted range, valuing it at US$ 82.4 billion, after seeing rival Lyft losing 23% in value following its March entrée into the market. The company hopes to raise US$ 8.1 billion tomorrow, 10 May, after offering 10% of its shares at US$ 45 each. Only last year, analysts were expecting a valuation north of US$ 120 billion. Whether the company can deliver this amount remains to be seen and tomorrow will see what happens on the New York bourse.

BMW posted a 78.0% decline in earnings before interest and tax to US$ 673 million, with the automotive division reporting its first loss in a decade, as legal provisions over alleged collusion on cleaner car emissions climbed to US$ 1.6 billion. To improve both revenue and profitability streams, BMW announced a US$ 16 billion savings strategy that would see culling models and cutting development time; in H2, it will also introduce a new 3-Series and a X7 SUV. With Donald Trump once again using the tariff threat on China, the German car maker expect earnings before tax to fall “well below”, year on year, while deliveries will rise slightly – this would see return on sales drop to between 4.5% – 6.5% from an already lowered target of 6% – 8%.

At last, Debenhams’ creditors have agreed a plan that will see the closure of fifty stores and rent reductions for others. Having rejected all takeover bids for the struggling firm, UK’s biggest department store chain, with 166 shops and 25k staff, is still owned by Celine, a consortium of the retailer’s lenders.

A six-year-old New York company has been bought by the owner of Wilkinson Sword for US$ 1.4 billion. Harry’s is an on-line retailer of men’s razors, as well as face washes, lotions and women’s products and revolutionised the sector by selling goods direct to consumers via subscription. In its short history, it has captured 2% of the global US$ 2.8 billion men’s shaving industry.

A decade later, Didier Lombard, the ex-boss of France Telecom (now Orange) and six other former executives have gone on trial in Paris, accused of moral harassment. At that time, in 2008, the French telecom was cutting 22k jobs, whilst retraining a further 10k. The tough measures then taken have been linked with 35 staff suicides at the time – some of whom left messages blaming the callous actions taken by management. M Lombard was quoted as saying “I’ll get them out one way or another, through the window or through the door”. The surprising factor in this story is that, if found guilty, the defendants can only face one-year imprisonment and a US$ 18k fine and Orange a fine of only US$ 90k.

To those who thought that Trump would not get past first base and that Brexit was only a pipedream comes the news that Bitcoin has passed the US$ 6k level – 90% higher than its December 2018 value but some way off its artificially high 2017 mark of US$ 19k. However, Binance, one of the largest cryptocurrency exchanges in the world, lost US$ 40 million this week when hackers withdrew 7k Bitcoins.

Having already returned US$ 57 million, (used to fund the blockbuster The Wolf of Wall Street), to Malaysian authorities, the US is to remit a further US$139 million in relation to illicit funds from the 1 Malaysia Development Berhad fund (MDB). The sovereign wealth fund was set up in 2009 to boost Malaysia’s economy, through strategic investments, but US$ billions worth of money was illegally used, including US$ 4.5 billion that ended up in the US. The country’s former prime minister, Najib Razak, and his wife, Rosmah Mansor, are facing charges of corruption. including pocketing US$ 681 million from 1MDB.

As it strives to reduce its budget deficit and debt levels, Bahrain will receive a further US$ 2.3 billion from a 2018 US$ 10 billion five-year support package provided by its Gulf Arab allies – Saudi Arabia, UAE and Kuwait. The package has helped the Kingdom slash borrowing costs and restore investor confidence, so much so that it is now planning to sell bonds later in the year.

Despite all the negative economic news surrounding Brexit, April UK house prices were up 5.0%, year on year – its highest level in two years and better than the 2.7% recorded last month; it was also 1.1% higher compared to March. The news from mortgage lender Halifax seems to be in contrast with other indicators and appears to reflect factors such as unusually weak April prices, increased sales of more expensive newly built homes and a bigger proportion of London sales, where house prices are above average. Recent Bank of England data indicates that mortgage lending was at its lowest level since December 2017 and that consumer borrowing had slowed sharply in the run-up to the original Brexit deadline of 29 March.

Even without the problems surrounding Brexit, the UK economy has once again confounded critics as the UK April services sector expanded by 0.5 to 50.4, after recording its lowest level in March in 32 months. With subdued domestic consumer and business spending, new business decreased for the fourth consecutive month, as exports continued to head south – as it has for the past eighteen months – with European demand flattening. However, the composite Index jumped 0.9 to 50.9, as the manufacturing sector improved with the IHS Markit/CIPS UK Construction Purchasing Managers’ Index, or PMI, rising to 50.5 from 49.7 in March.

In April, Chinese exports dipped 2.7% (after a mega 14.2% expansion the previous month), whilst imports headed in the other direction – up 4.0%, compared to a March contraction of 7.6%. This resulted in a US$ 13.8 billion trade surplus – with that with the US up US$ 0.5 billion to US$ 21.0 billion, as both exports and imports declined – by 13.0% and 26.0% respectively.

In a bid to support companies struggling, amid an economic slowdown, China has cut the reserve requirement ratios (RRRs) for 1k small and medium-sized banks to 8%; currently, the rate is between 10% – 11.5%. This should release more than US$ 41 billion in long-term funding that will boost the country’s SMEs. The cut comes at the same time as Donald Trump sharply escalated trade tensions between the world’s two largest economies, threatening to raise tariffs on US$ 200 billion of goods from 10% to 25%, starting as early as tomorrow – Friday 10 May.

Donald Trump is doing something right with the April US unemployment rate falling to its lowest level for more than 49 years, as the jobless rate fell 0.2% to 3.6%. Impressive figures showed that 490k joined the work force in April and that the average earnings grew at an annual rate of 3.2%. The number of people working part time, because their hours had been reduced or because they were unable to find full-time jobs, remained at 4.7 million. As good as the figures were, it is unlikely to prompt the Fed to consider hiking interest rates.

At the start of the week, the President’s mind was on China but by Wednesday he had moved his attention to Iran. His predecessor, Barrack Obama, had signed a deal with the country but on the anniversary of him pulling out of the “horrible” accord, the US deployed an aircraft carrier strike group and nuclear-capable bombers to the area, accusing Iran of “imminent” attacks. He also threatened to introduce further sanctions on the mining industry as Iran retaliated with threats – aimed at other five parties to the 2015 agreement, (China, France, Germany, Russia and the UK).

The RBA has finally faced reality – that Australia’s economy is to go through a rough patch and it will have to cut interest rates sooner rather than later. In February, it indicated that the country’s economy grew 2.75% last year only to downgrade that to 2.3% this week. Last November, it was hoping that 2019 growth would be 3.35%, only to reduce that to 1.7% for the year ending 30 June. Better late than never, for the lucky country that has never witnessed a recession for three decades, it’s Wake Up Time!

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Suspicious Minds

The "skybridge" that will connect old and new Dubai. Courtesy Dubai Media Office
The “skybridge” that will connect old and new Dubai. Courtesy Dubai Media Office

Suspicious Minds                                                               02 May 2019

HH Sheikh Mohammed bin Rashid Al Maktoum was in Beijing this week, attending the Belt and Road project, at which China’s President Xi Jinping tried to ease concerns, promising to ensure transparency and the “fiscal sustainability” of all projects. Some critics are concerned that China is trying to exert its geopolitical influence which has already seen some countries becoming indebted to the world’s second largest economy. The initiative is expected to have a final investment of over US$ 1 trillion and has already chalked up some mega infrastructure work in several countries. Sri Lanka has already had to hand over control of one of its ports to repay China some of its foreign loans.

Following HH Sheikh Mohammed Bin Rashid Al Maktoum’s visit to the country there are plans for China to invest in two Dubai-located trading facilities. A US$ 2.4 billion investment will see the building of a sixty million sq ft (5.6 million sq mt) facility, that will be used to store Chinese products for shipping around the world. DP World has also signed an agreement for a US$ 1 billion project to import, process, pack and export agricultural, marine and animal products. These two investments should benefit both parties – it will enhance China’s influence in the Gulf region and will boost regional and international trade.

The Dubai Ruler also unveiled a federal Ministry of Possibilities, a new branch of government, with the “unconventional” ministry functioning “without a minister” but with input from the whole cabinet. He stated that “the virtual ministry, administered by the cabinet, will address pressing national portfolios and build future government systems.” In its first phase, it will oversee the Department of Behavioural Rewards to develop an approach for incentivising positive behaviour through a point-based “rewards” system.

Following Sheikh Mohammed’s displeasure at the service level of some government services, the Ministry of Human Resources and Emiratisation has penalised nine Tasheel government service centres and revoked the license of another. The crackdown followed an investigation into slow service by the Dubai Ruler after he received an anonymous complaint, with a photo, of long queues at an Emirates Post branch. He tweeted that “I received this picture through an anonymous shopper with regards to the level of service at Emirates Post… This is not our level… or our service… and those who continue to provide this level of service will not remain within my team…”

HH Sheikh Mohammed also approved several infrastructure projects on Tuesday, including a 380 mt long, 60m high “sky garden” footbridge, soaring across Dubai Creek, featuring cycling and running lanes and shops. It will connect the redeveloped Al Seef area in Bur Dubai across to the Deira side of the Creek. Other developments include new bike-sharing schemes, beachfront areas and three new promenades.

The 2.5km Sheikh Zayed Road promenade, linking DWTC and the Financial Centre, will feature green spaces for walking and cycling. The second, “sunset promenade”, at Jumeirah Beach Walk, will include several floating islands, with a total 107k sq mt beach area. The “Umm Suqeim promenade”, linking the Mall of the Emirates and Madinat Jumeirah, will comprise a 110 mt pedestrian bridge above Jumeirah Street, including more cycling and running lanes.

The bike scheme, to be managed by the RTA and Careem, will include the provision of 3.5k bicycles at 350 separate locations around the emirate. Users will be able to rent bikes with their credit cards, metro cards or smartphone apps.

More details about these exciting initiatives will be announced in the coming months.

Damac awarded US$ 120 million worth of contracts in Q1, 41% of which were for their master development, AKOYA, 16% for work at Damac Hills and 12% for the completion of the four-tower Damac Towers by Paramount Hotels and Resorts.

Yet another mega development was announced this week which involved two of Dubai’s biggest players – Emaar and DP World (through its subsidiary P&O Marinas). The developer is to use land made available by the ports operator to regenerate an area around Mina Rashid. The Riviera-style coastal development will include residential and the likes of an elite waterfront retail, dining and leisure destination, a floating yacht club (with 430 berths), a sandy beach of over 12.6k sq mt and Dubai’s longest swimming pool. Mina Rashid will also have ‘signature’ hotels, a private beach club, interconnected parks, a 500 mt palm tree-fringed canal, art galleries, a theatre and a museum. Sirdhana, the first residential units for sale, will be launched shortly.

The latest Creek Harbour development was unveiled this week – Creek Edge. Comprising two towers – 40- and 20-storey structures – they will house 560 1-3 B/R apartments, with a very limited collection of waterfront duplex townhouses on the podium level. Located near the premium luxury Address Harbour Point Hotel, as well as the Ras Al Khor Wildlife Sanctuary, it will have a wide range of leisure and recreational facilities.

It is reported that the Dubai Land Department is studying a proposal that would see residential and commercial rents frozen for three years, once a lease agreement has been signed by both landlord and tenant. Nearby Sharjah has already implemented such a scheme.

The Andaz Dubai The Palm will open in Q4 this year following an agreement between the hotel operator and Wasl Asset Management Group; it will be Hyatt’s second branded property in the UAE, following in the steps of Andaz Capital Gate Abu Dhabi. The twin-tower, 15-storey beach-front building will house 217 guestrooms and 116 serviced apartments, along with four restaurants. Hyatt will also open another branded hotel a year later – Hyatt Centric La Mer Dubai.

The 25-year old Jumeriah Group boasts nineteen overseas properties and expects a further nine more before the end of 2020; these will include two in China – in Guangzhou and Hangzhou – one in Bali and others in Italy and France. Owned by the Ruler’s investment arm, Dubai Holding, the hotelier has not forgotten its local roots and is currently developing Marsa Al Arab, a four million sq ft leisure and hotel development on two man-made islands near the Burj Al Arab; completion is expected by 2022. Longer term, it is considering an ultra-luxury brand – The Burj Collection – which would be exclusive global properties built in the manner of its Dubai flagship, the Burj Al Arab.

Dubai becomes the fourth global location – after London, Berlin and Milan – for Warren Buffet’s Berkshire Hathaway Home Services real estate brokerage firm; only six years old, it boasts 1.45k offices in the USA and has 50k advisers. The firm will focus on property above US$ 870k and is confident of success in a market that has seen steady growth in the number of overseas buyers.

Details of some ticket prices for Expo 2020, were released this week, including a one-day pass for US$ 33 and a three day one for US$ 71; more ticket options will be made available later. The site will host pavilions from 192 countries and will have 22 performance venues, hosting 60 different events each day over the six-month period. International travellers will also be able to purchase tickets through hotel, airline or tour operator bundles, with details currently being finalised.

Emaar Malls recorded a 7.0% hike in Q1 net profit to US$ 159 million on the back of a 4.0% increase in revenue to US$ 300 million, helped by the input from its newly acquired e-commerce retailer, Namshi; there were also strong returns from its shopping malls portfolio, including Dubai Mall and Marina Mall. The unit of Dubai’s biggest listed developer Emaar Properties also posted strong occupancy levels touching 92%, with a 3% rise in visitors to 36 million, of which 22 million visited Dubai Mall.

At this week’s Arabian Travel Market, flydubai’s CEO reiterated that the airline remains confident in the Boeing 737 Max aircraft model and that it is still committed to its Boeing orders. However, Ghaith Al Ghaith, said the financial impact of that grounding may be “significant” if it lasts much longer, with 17% of the airline’s seats being affected by the groundings.

HH Sheikh Ahmed bin Saeed Al Maktoum, the carrier’s chairman indicated that flydubai, is in talks with both Boeing and Airbus. The former in relation to seeking compensation for its grounded 14 737 Maxs and the European manufacturer about its A320 Neo narrow-body model in the absence of a timeframe for the return of the troubled Maxs to the skies. Sheikh Ahmed said he hoped the aircraft would be in operation “soon” and “that it’s safe to fly” but commented that Boeing’s communications to its customers, about its software upgrades for the jet and pilot training, “could be better.”

Also, at the Arabian Travel Market, Emirates finally confirmed that it would be introducing a premium economy class for both the its new A380 planes and its new Boeing 777 jets. Sir Tim Clark, president of Emirates, also indicated that ticket prices would be “well below business class fares.” Not many details were made available, but it will have sleeperettes, rather than fully lie-flat beds, and will offer more legroom, along with enhanced food and beverage services.

According to Visa’s latest UAE Travel Snapshot, cardholders spent US$ 6.2 billion (up 4%) in 2018, when visiting the UAE, as the number of transactions climbed 22%. Despite a stronger greenback, which makes the dirham more expensive, the country still continues to be an attractive tourist attraction. Saudi visitors remained the biggest spenders, accounting for 21.5% of the total, at US$ 1.3 billion, followed by the USA, UK and China.

Last month saw the cost of Special 95 jump 9% and yesterday the May price rose a further 10.9% to US$ 0.707 per litre. Diesel prices fared a lot better with only a 1.6% increase to US$ 0.689.

Having earlier forecast 3.6% growth last October for the UAE, the IMF has downgraded its 2019 outlook to 2.8%, as well as cutting its 2018 figure from 2.9% to 1.7%; next year, growth is expected at 3.3% driven by a 4.0% expansion in the non-oil sector, assisted by Expo-2020 spending. The wider GCC bloc is expected to see 2.1% growth this year, slightly up on the 2.0% seen in 2018. Lower domestic liquidity growth has arisen because of pressures from tighter global financial conditions which has resulted in net regional capital outflows.

Notwithstanding negative currency fluctuations, Aramex turned in a 4.0% hike in Q1 profit to US$ 29 million, on the back of a similar revenue increase to US$ 327 million; the percentage revenue would have doubled to 8% if it were not for weaknesses in the Australian dollar, Libyan dinar and the rand, which cut the bottom line by US$ 3 million.

Dubai-based Deyaar Development posted a 54.6% decline in Q1 profits at US$ 5 million, although revenue was only 0.4% down at US$ 48 million. The developer, majority owned by the Dubai Islamic Bank, is hoping for a better 2019, as it will hand over several projects, including the Millennium Atria Business Bay hotel and units from Afnan and Dania districts of its Midtown mega development. It also plans to launch its second hospitality development – the Millennium Al Barsha.

The bourse opened for trading on Sunday 28 April, at 2787, and, shed 29 points (1.0%) to close by Thursday, 02 May, on 2758. Emaar Properties, having lost US$ 0.11 the previous three weeks, was flat at US$ 1.29.  Arabtec shed US$ 0.03 to close on US$ 0.56. The last Thursday before the start of the holy month of Ramadan, 02 May, saw reduced trades of 90 million shares, valued at US$ 42 million, compared to a week earlier of 233 million shares at US$ 56 million. Over the month of April, the bourse was 132 points (5.0%) higher at 2767, with both Emaar and Arabtec down US$ 0.02 at US$ 1.31 and US$ 0.56 respectively.

By Thursday, 02 May, Brent, having traded US$ 6.53 (8.0%) higher the previous month, shed some of that gain this week by closing US$ 3.60 lower (4.8%) at US$ 70.75; gold also headed south again, losing US$ 10 to US$ 1,270. In April, Brent gained US$ 3.50 (5.1%) to US$ 71.60 whilst gold went the other way, down US$ 10 (0.8%) at US$ 1,272.

Australia has witnessed some sort of retail history, as Ikea moves away from its traditional giant out of town warehouse model, opening its smallest store in the world. The first opened in Warringah’s Westfield Shopping Centre and, at only 100 sq mt, is a world away from the traditional Ikea floor space area of 37k sq mt. The Swedish furniture retailer is set to open a further twenty such Australian locations over the next twelve months.

Although widely expected, it was still as shock to see Samsung Electronics report a 56.9% fall in Q1 profits to US$ 4.3 billion (its lowest since Q3 2016), as the global chip market weakened, driven by slowing demand and increased competition. The world’s biggest smartphone and memory chip maker is rapidly losing market share, as the likes of Huawei can make and sell similar products at lower prices; the Chinese rival is now the second largest chip maker in the world surpassing Apple. Another South Korean company, SK Hynix, the world’s second-largest memory chip maker, saw profits nosedive 67%.

With Q1 revenue coming in 17% higher at US$ 36.3 billion, Alphabet’s profit slumped 29% to US$ 6.7 billion, with earnings taking a US$ 1.7 billion hit from an EC fine over alleged abuse of its dominance in internet search, advertising and its mobile system. The market reacted badly with Google shares falling 6.1% to US$ 1.208k, after revenue was not as high as expected. Over 80% of the revenue came from its lucrative advertising platform but the company had losses on its “other bets”, including the Waymo self-driving car project, Verily life sciences and services for internet for remote parts of the world and drone delivery; losses for this sector climbed to US$ 858 million.

Another tech giant going well is Spotify returning a quarterly profit of US$ 106 million on the back of a 33% hike in revenue to US$ 1.7 billion, as the music-streaming entity reached 100 million paid subscribers for the first time; shares climbed 5% on the news. Even now, its subscriber base is twice as much its nearest rival Apple, with the gap expected to grow even further as recent launches in the ME, North Africa and India start to make an impact; already, it has over one million unique users in India across its free and premium tiers, only one week after its release.

The latest tech unicorn planning to go public is the fast-growing office-sharing start-up WeWork, that could be valued at US$ 47 billion. The nine-year old company, a leader in the co-working space sector, has filed documents for a stock market listing to help fuel further expansion plans. It has hundreds of thousands of customers from individual entrepreneurs to major companies, requiring either temporary or permanent office space; among its investors is SoftBank which placed US$ 2 billion with the company earlier in the year.

There is no doubt that US sanctions, as well as its curtailing of the country’s oil exports to zero, are making lives miserable for many Iranians, as its economy sinks deeper into recession. Its inflation rate has almost quadrupled over the past two years from its 2017 level of a manageable 9.6% to its current 37.2%. The country’s economy contracted 3.9% last year, with an even worse scenario set for 2019, not helped by Washington’s decision not to renew waivers that were initially granted to eight nations importing Iranian oil when they expire today, 02 May. Last year, the rial hit record lows, losing 60% in value to the greenback, and the loss of oil revenue has cost the country in excess of US$ 10 billion in revenue.

It seems that the Australian economy, which has not seen a recession in well-nigh thirty years, is finally set to hit the buffers. Q1 saw the country’s inflation rate at zero – a sure sign that all is not well in the lucky country. Deflation will result in a reduction in spending as people wait for prices to fall further and this has a knock-on effect that will soon see unemployment levels head north. The RBA has been targeting an inflation level around the 2-3% level but has failed and now sees stymied growth. When there are other signs of economic weakness – such as falling house prices, weak wage growth and a much too high 8% underemployment rate – then is the time for some drastic action. One would be to cut interest rates which are already at record lows of 1.5%. The other is the bazooka approach and the government to bring in a much-needed stimulatory fiscal policy which would include tax cuts, increased public spending on infrastructure and the like, along with higher pensions/welfare payments.

The eurozone economy continues to disappoint as an EC report noted another fall in its economic sentiment index down 1.6 to 104 in March. All this week’s indicators headed south, including the industrial confidence index down to -4.1 from -1.6, (with expectations for a -1.7 reading), the consumer confidence index lower at -7.9 from -7.2 and the business climate indicator declining 0.12 to 0.42.

The latest Commerce Department indicated that the Q1 US economy fared better than expected, expanding by 3.2% (following 2.2% the previous quarter) – and much higher than the 2.1% forecast by analysts. The main drivers were exports, up 3.7%, and imports falling 3.7%. It will be interesting whether this growth spurt can be maintained but it will silence critics who have been forecasting a major slowdown for some months. Another positive indicator was manufactured durable goods which were 2.7% higher.

Yesterday, 01 May, the S&P 500 hit record highs, with 61% of the listed companies (305) having already posted Q1 results with 76% (232) of that number beating market expectations. One of the best performers of the day was Apple – jumping 6.4% after announcing that Chinese sales were steadying as well as a US$ 75 billion company share back. The current buoyant state of the US economy has also helped push the stock market higher.

Despite the President‘s protestations, the Fed kept rates on hold this week, with borrowing costs remaining at between 2.25% – 2.5%. Donald Trump was hoping for a reduction to just 1% which he said would see the US economy “go up like a rocket” and, if the Fed cut interest rates “with our wonderfully low inflation, we could be setting major records”. However, it is becoming increasingly likely that there will be no further cuts in 2019, with the Fed indicating that global economic risks had moderated; indeed, economic data – especially from China and Europe – has shown marked signs of improvement, with progress being made over the trade tariffs issue.

Meanwhile the Bank of England maintained its rate steady at 0.75%, with its governor, Mark Carney, stating that increases could be “more frequent”, if the economy performs as the Bank of England is expecting; so, if there is a Brexit resolution of sorts, as well as inflation and growth moving higher, rate hikes will result. Currently, the market expects but one rate increase over the next eighteen months.

A leaked report claimed that in a top-secret meeting, the UK government had had agreed to allow Huawei limited access to help build Britain’s new 5G network, amid warnings about possible risks to national security, with three of its main allies, US, Australia and New Zealand warning that the Chinese firm was a security risk. Now the Chinese ambassador to the UK, Liu Xiaoming, has come out saying that “countries of global influence, like the UK, make decisions independently and in accordance with their national interests”. Apart from the security aspect of allowing a Chinese state-like company to help build the new network, is the fact that one of the five ministers present must have leaked the information. On Wednesday, the finger pointed to the Defence Minister, Gavin Williamson. He has subsequently denied he was responsible for any leak, although he did acknowledge an 11-minute call to a Daily Telegraph reporter, minutes after the secret meeting. No wonder there are many around with Suspicious Minds.

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The First of May

The First of May 25 April 2019

HH Sheikh Mohammed bin Rashid Al Maktoum was in Beijing this week attending the Belt and Road project at which China’s President Xi Jinping tried to ease concerns, promising to ensure transparency and the “fiscal sustainability” of all projects. Some critics are concerned that China is trying to exert its geopolitical influence which has already seen some countries becoming indebted to the world’s second largest economy. The initiative is expected to have a final investment of over US$ 1 trillion and has already chalked up some mega infrastructure work in several countries. Sri Lanka has already had to hand over control of one of its ports to pay China back some of its foreign loans.

The Dubai Ruler also unveiled a federal Ministry of Possibilities, a new branch of government, with the “unconventional” ministry functioning “without a minister” but with input from the whole cabinet. He stated that “the virtual ministry, administered by the cabinet, will address pressing national portfolios and build future government systems.” In its first phase, it will oversee the Department of Behavioural Rewards to develop an approach for incentivising positive behaviour through a point-based “rewards” system.

A Damac official indicated that the Dubai property market “will balance out” before the end of next year, as the sector is already experiencing the bottom of the cycle. This year, the developer expects to deliver 8k units – the most in the company’s history and double the amount handed over in 2018. Last year’s profit was its lowest since going public in 2013 and is one of the reasons why the company’s share value has plummeted 56% over the past twelve months.

According to Cavendish Maxwell, Dubai house prices have fallen 12% over the past twelve months, with bigger declines seen in locations such as Arabian Ranches, Dubai Sports City, Dubai Silicon Oasis and Jumeirah Islands. In March, month on month prices dropped 1.7% and 5.1% over Q1, as average house prices fell to US$ 708k. Q1 saw a marked decline in apartment transfers (14% lower on the year), as March average prices stood at US$ 490k.

Khoory Hotels is to open two sharia-compliant hotels in Al Qouz – as it taps into an ever expanding hotel sector. The 3-star 92-key Urban By Al Khoory and the 4-star 158-key Al Khoory Courtyard will open before year end. A third property, the 258-key Al Khoory Sky Garden, located near Dubai International Airport, will start operations mid-2020 and bring the company’s portfolio to seven Dubai hotels and 1.2k rooms.

An agreement between Meraas and Singapore-based Chinese company Samanea Group will see yet another mall opening in the emirate in 2021. Costing US$ 272 million, the 570k sq ft outlet, located near Dubai International City, will focus on home appliances and furniture from small, medium and big Chinese companies. This will further enhance bilateral relations and boost China’s number one position as Dubai’s largest trading partner; annual trade currently stands at US$ 37.9 billion.

There was a marginal 90k improvement (1.3% to 3.14 million) in the number of international guests visiting Dubai during first two months of the year. The emirate’s three main markets continue to be Western Europe, GCC and SE Asia, contributing 57% of the total at 22%, 18% and 17% respectively. Country-wise, India is still top of the table, although numbers have dropped 9% to 386k, whilst visitor numbers from the UK, Germany and the US all headed north by 4%, 11% and 4%. However, most hotel indicators came in lower, with Occupancy falling 3% to 84%, Revenue per Available Room 13.8% to US$ 118 and Average Daily Room Rate 10.6% to US$ 140.

Dnata has opened its first of five new US operations for 2019 – a 4.7k sq mt catering facility at Houston’s George Bush Intercontinental Airport; it will have a capacity of 10k meals a day and employ up to 150. The ground handling division of Emirates Airline is expecting to open similar facilities at Boston, Los Angeles, Newark and San Francisco by year-end. Having acquired 121 Inflight Catering last year, it already has three operations in New York’s JFK, Nashville and Orlando airports.

It was a sluggish Q1 for DP World with gross container volumes falling 0.6% year-on-year in handling 17.5 million TEU (twenty-foot equivalent units). Gross-like-for-like volumes declined 0.1% due to higher year-on-year comparables and softer volumes in the UAE and Australia. Due to the loss of low-margin throughout, the UAE posted an 8.8% decline when handling 3.5 million TEUs which was offset by marked growth in Peru’s Callao, the Egyptian port of Sokhna and Mumbai.

Last year, Dubai became home to 2k HNWIs, (high net worth individuals – each with at least $1 million worth of net assets) – 2% up on the previous year. This could prove a welcome boost for the local economy.

A good week for Union Co-op as well as for its customers. The chain posted a 26.3% hike in profits to US$ 38 million and then announced that it had set aside US$ 30 million towards price reduction of more than 25k basic food, non-food, and consumer goods during the holy month of Ramadan, starting within a fortnight.

This week saw the 192nd country to announce their participation in Expo 2020 Dubai, with all indicators pointing to “a truly international event and platform for all of humanity”. It is expected that numbers attending the six-month extravaganza will top 25 million – less than the 73 million at Shanghai in 2010 but more than the 21 million at Expo 2015 in Milan. It is expected that the emirate’s GDP 2020 growth will jump to 3.8% and that foreign investments will be up to 20% higher at US$ 13.6 billion because of the Expo impact.

Having put its proposed Six Flags Dubai project on hold, DXB Entertainment has decided to use some of the funds raised in a 2106 rights issue to expand the offers at its existing Bollywood Parks and Motiongate.

Having divested itself of five of its flagship hotel assets to state-backed Abu Dhabi National Hotels (ADNH), Emaar Hospitality will continue to expand its hotel management portfolio while remaining asset-light. Over the next year, it will add a further five properties and 1.7k rooms to Dubai’s total portfolio. They will include two under its premium Address Hotels + Resorts collection, both in Downtown, and two under its upscale Vida Hotels and Resorts brand in the new Creek Harbour scheme. A fifth, a JV with Meraas, the Rove At The Park hotel, will be located at Dubai’s theme park destination Dubai Parks and Resorts, and feature 579 rooms.

Arabtec is planning to take advantage of “growing market opportunities” in the UAE, Saudi Arabia, Egypt, Bahrain and Kuwait, as it expands its footprint regionally. The Dubai-based contracting giant will also continue to diversify its backlog into infrastructure and industrial sectors, which accounts for 50% of current projects. It announced a US$ 0.014 2018 dividend, having seen its annual profit more than double to US$ 71 million.

Dubai Islamic Bank posted a 12.0% increase in Q1 profit to US$ 249 million, beating market expectations. The country’s biggest Shariah-compliant lender is currently considering the acquisition of Noor Bank and expects to submit a report to the local bourse by the end of the month. Its biggest shareholder is the Investment Corporation of Dubai, with a 28.37% stake, who also has a 22.85% share in Noor Bank – and if the deal were to go through, it would result in a lender with US$ 75 billion in assets.

Embattled Drake and Scull International posted further dismal results as 2018 losses more than tripled from US$ 381 million to US$ 1.4 billion, as revenue fell 69.3% to US$ 217 million. Consequently, its total asset base sank 72.5% to US$ 518 million over the year. The company’s shares have been suspended on the Dubai Financial Market since November 2018 as it continues with its restructuring efforts. The fall-out sees the departures of three of its executives – its chief executive officer, (who only started in January 2019), chief financial officer and chief legal officer.

Etisalat’s Q1 profit rose 5.0% to US$ 599 million on the back of consolidated revenue topping US$ 3.5 billion, driven by a 2.0% expansion in its subscriber base to 12.6 million, as its aggregate subscriber base reached 143 million. Its EBITDA (earnings before interest, tax, depreciation and amortisation) figure came in at US$ 1.8 billion.

Mashreq posted a 5.0% improvement in Q1 profits to US$ 171 million as there were increases in both total assets (up 1.2% to US$ 38.6 billion) and loans/advances 0.8% higher at US$ 19.0 billion; however. customer deposits dropped 3.1% to US$ 22.0 billion. Overall loan impairment allowance fell 13.6% to US$ 71 million, with the non-performing loans to gross loans ratio at 3.6%, as total provisions for loans/advances reached US$ 1.0 billion, equating to a 123.3% coverage for non-performing loans.

Following an eighteen-month drought, it is reported that three companies are preparing IPOs on the DFM; no names have been made available, but the companies are involved in the industry, oil and gas services and health care sectors. The last IPO was the US$ 1.3 billion issue by Emaar Development back in late 2017.The bourse has had a relatively good start this year jumping over 11%, following a dismal 2018 when the market sank 25%.

The bourse opened for trading on Sunday 21 April, at 2814, and having gained 240 points (9.3%) the previous month, shed 27points (1.0%) to close by Thursday, 04 April, on 2787. Emaar Properties, having lost US$ 0.05 the previous fortnight, was down a further US$ 0.06 to close at US$ 1.29.  Arabtec, having gained US$ 0.04 last week, surrendered most of that by falling to US$ 0.59. Thursday 25 April saw reduced trades of 233 million shares, valued at US$ 56 million, compared to a week earlier of 233 million shares at US$ 60 million.

By Thursday, 25 April, Brent, having traded US$ 3.80 (5.6%) higher the previous three weeks, continued its upward trend to close US$ 2.73 (3.8%) higher at US$ 74.35; after a recent downward trend, gold moved US$ 4 higher to US$ 1,280.

Amazon posted impressive Q1 results with a record profit of US$ 3.6 billion (almost double that of one year previously), on the back of a 17.0% jump in revenue to US$ 59.7 billion; this was driven by 40% gains in cloud computing, other revenue including online advertising 34% higher and a 10% hike in revenue from online sales. The market was not too impressed, dipping 0.6% on the news.

Microsoft’s book value briefly topped the US$ 1 trillion level when it announced a Q1 14.0% increase in revenue to US$ 30.6 billion, largely attributable to its cloud computing business. Facebook went even better with a 26.0% increase in its quarterly revenue to US$ 15.1 billion.

Generally, US companies posted better than expected Q1 results, 3M was a notable exception. Having cut its full-year outlook and noting that it will reduce its payroll by 2k, the industrial manufacturer saw its share value plummet 13% – its steepest drop since Black Monday in October 1987. The company is famous for ‘Post-it’ notes, along with a wide range of adhesive products.

Tesla again disappointed the market as it announced a US$ 702 million Q1 loss on the back of a 31% slump in revenue. However, CEO Elon Musk is as optimistic as ever forecasting future growth in both demand and profit margins as the company rolls out updated products and pricing for its three models and sells more battery storage units. Tesla has to start moving more of its three models – S, X and 3 – as it only delivered 63k in total over the quarter, only half the number ordered. After a US$ 920 million bond repayment, its cash reserves fell 31.8% to US$ 1.5 billion by the end of March. Whether the company can produce its expected 400k vehicles this year remains to be seen – and if not its retained losses of over US$ 6.0 billion since its 2004 inception will only get worse.

Having posted a further bail of US$ 4.5 million, the 64-year old Carlos Ghosn, has been released from a Tokyo jail. The former Nissan chairman was first incarcerated last November, charged with under-reporting his post-retirement compensation and breach of trust in allegedly diverting Nissan money for his personal investment losses. Prosecutors were reluctant to see his release, fearing he could tamper with evidence or influence witnesses.

As widely expected, the Sainsbury’s US$ 9.4 billion purchase of Walmart’s Asda has been rejected by UK regulators citing concerns the deal would have increased prices and reduced the quality and range of products available.

Having put its airline up for sale in February, Thomas Cook has received interest for both other parts of the business, as well as the Group in its entirety. To cut costs, it is planning to close 21 UK outlets (but will still have 566 operating stores), with the loss of 300 staff. An early entrant for the company’s tour operating business is Chinese investment firm Fosun International which already runs a JV with Thomas Cook in China. Since September, it has issued two profit warnings – the first indicating that profits would be hit after the summer heatwave, with many deciding to take holidays at home rather than overseas, and the second profit warning in November, stating winter bookings were also down.

Australian banks seem to be able to have their cake and eat it, even after the industry was savaged by a royal commission for its unethical and fraudulent behaviour over a long period of time. For the past decade, even though the bank rate has declined, credit card rates have remained static. Currently, the average Australian will pay a rate of 19.77% on credit cards, even though the official cash rate is only 1.5% – the gap of 18.27% is at its highest ever level. In 1995, when the cash rate was 7.5%, credit card interest stood at under 17% (a 9.5% gap). In those days both interest rates (cash and credit card) rose and fell in tandem but that practice has fallen away for the benefit of greedy bank coffers.

By Wednesday, the Australian dollar dipped below the US$ 0.70 mark for the first time since the 3 January ‘flash crash’ – and before that was in early 2016. The main reason for the slide was the release of the weakest core inflation figures on record. This will probably see the Reserve Bank cutting interest rates within the next two months, with another reduction later in the year.

The eurozone economy continues to cause concern, as the latest Composite Purchasing Managers’ Index declined 0.3 to 51.3, with April manufacturing contracting and the service sector growth slowing. Although still in negative territory, the manufacturing PMI rose 0.3, month on month, to 47.8, with the services PMI 0.8 lower at 52.5. Furthermore, new export orders fell yet again whilst new order growth remained stagnant, as employment growth remained at its lowest since 2016.

The euro area government debt to GDP declined 2.0% last year to 85.1%, with the lowest ratio recorded in Estonia, at 8.4%, and Luxembourg with 21.4%. The bloc’s government deficit halved to 0.5% on the back of increasing revenue, up 0.2% to 46.3% of GDP, and expenditure declining 0.2% to 46.3%. Luxembourg posted the highest budget surplus at 2.4% of GDP followed by Bulgaria and Malta, both at 2.0%, with Germany slightly behind at 1.7%.

The US Commerce Department recorded a 4.5% March annualised increase in new home sales at 692k, following a 5.9% increase the previous month – its highest level since the 712k figure of November 2017. Median sales prices – at US$ 303k – were off 4.0% on the month and 9.7% lower than in March 2018. The number of new houses for sale slowed to 344k, equating to a six-month supply at the current sales rate. After jumping to a revised rate of 5.48 million in February, existing home sales plunged by 4.9% to an annual rate of 5.21 million in March.

The Trump administration has decided not to renew waivers that let eight countries – China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey – buy Iranian oil without facing U.S. sanctions. This decision will upset many but should boost oil prices in the short-term at least, with other suppliers, including the UAE, offsetting the loss of Iranian crude on the market.

Emmerson Mnangagwa has fared little better than his predecessor, Robert Mugabe, in controlling Zimbabwe’s inflation crisis. After 37 years of economic mismanagement, it was hoped that the incoming president would revive the country’s economy but after the introduction of a new currency in February, prices of goods and services have skyrocketed at rates unseen in a decade – and topping 300% in some areas. However, it is still some way off the 500 billion % rate seen in the Mugabe days

Mouvement des gilets jaunes, which only started in November last year, is increasing its power base and worrying the Macron government. Driven by surging fuel prices, increased cost of living and their call for the reintroduction of a solidarity tax on wealth, they donned the yellow high visibility vests; this is in response to French law requiring all drivers to have them in their vehicles and to wear during emergencies and is seen to be “a unifying thread and call to arms”. Their protests over the past six months have involved demonstrations, blocking roads and fuel depots, that appear to have become more violent. Wednesday will see May Day and it is hoped that their protests – and the police reaction – do not get out of hand on The First of May.

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When The Going Gets Tough, The Tough Get Going

Wynn Las Vegas

When The Going Gets Tough, The Tough Get Going      18 April 2019

According to Asteco, and despite the current oversupply in the market, there has been a marked increase in Q1 hand-overs, estimated to be 6.7k; reports indicate that 23k residential units were handed over in 2018. The figure is more than double the figure handed over in the corresponding period last year because of previously delayed projects being delivered. The company also estimated that there were 3% falls in Q1 rents for both villas and apartments, with prices declining between 2% – 4%. It did warn that “the real estate market is expected to come under further pressure until economic conditions improve.”

Meraas has announced that its fourth and final La Rive residential building was sold out, even before the official launch. The project, based at Port De La Mer, comprises 250 high-end 1-4 B/R apartments, with prices starting at US$ 354k.

Azizi is set to invest US$ 272 million by expanding into the Abu Dhabi market where it is currently acquiring blocks of land, with a view to either building villas or apartments. This comes the week that the national capital’s government introduced legislation to allow foreigners to own freehold land in designated areas. The Dubai-based developer, with US$ 12.3 billion of projects under development, mainly in Dubai and Afghanistan, recently cut its sales force by a reported 60% to generate efficiencies and control costs.

Property Finder has acquired the five-year old Bahrain Property World for an undisclosed amount. Last November, the Dubai-based real estate portal raised US$ 120 million from General Atlantic for the purpose of expanding its operations throughout the region. Recently, the company announced it will acquire rival platform JRD Group and that it had also increased its stake in Zingat – Turkey’s second largest property portal – to almost 40%.

Tuesday saw the 45-day closure of Dubai International’s southern runway for upgrade work, including resurfacing and replacement of ground lighting and other infrastructure; this will result in a 29% reduction in the number of available seats. Emirates estimate that 48 of its aircraft will be grounded, with the number of flights 25% lower. However, with some flights moving to DWC, the total number of flights across the Dubai Airports system will only drop 19% and the number of seats by 20%.

A MENA EY report estimates that the upcoming Expo will boost the UAE economy by US$ 33.4 billion and support 905k job-years through to 2031. Over the six months (October 2020 to April 2021) of the event, it is thought that it could add as much as 1.5% to the country’s GDP. Having won the bid to host the event in 2013, the construction sector has been the main economic beneficiary, with major spends on roads, bridges and the Metro extension, along with buildings on site. Nearer the opening, travel and tourism will feel the benefit as visitors coming from outside the UAE will account for 70% of the total 25 million visits expected. From April 2021, the site will be transformed into District 2020, an integrated urban development that will house the Dubai Exhibition Centre. It is the post-Expo “legacy” decade that will see the biggest gains garnering US$ 16.9 billion for the local economy, with the main beneficiaries being events organisation, business services, retail, restaurants and hotels.

A mix of higher oil production (and prices) and increased government spending will ensure that the UAE economy should grow at a faster pace than its regional neighbours this year. According to Oxford Economics and the ICAEW, the economy is on course to rise 2.2% this year (2018 – 1.8%), with the oil sector growing by 2.5%, and the non-oil GDP up 2.1%. Real GDP growth in the Middle East (including the GCC) is projected to reach 1.3% this year, (2018 -1.0%).

There are plans afoot for a second Dubai Investment Park, as the first 2.3k hectares site is nearing capacity. The probable location will be in the Jebel Ali area. Despite posting a 34.9% fall in 2018 profits to US$ 177 million, the company declared a 10% dividend, totalling US$ 116 million. Over the year, its total assets were 14.6% higher at US$ 5.3 billion. Its financial services subsidiary, Al Mal, expects to establish a mixed-use real estate investment trust (REIT) to be listed on the local market this quarter.

Etisalat is expected to invest US$ 1.1 billion this year on digital transformation, mobile and fibre networks. The telecom wants to enhance and build one of the most advanced networks in the region and expects its “pioneering efforts” in 5G to pave the way for the “future of connectivity”. Although ready, it is expected that the first 5G devices will arrive in the country this June.

Shuaa Capital Saudi Arabia is to acquire six income-generating real estate assets valued at US$ 80 million, in Riyadh, as it announced plans to launch a US$ 158 million real estate investment trust (REIT). All properties are freehold and the firm expects a return in the region of 7%.

Arif Naqvi, the founder and ex-chief executive officer of disgraced Abraaj, along with his former managing partner, Mustafa Abdel-Wadood, have been charged by US courts for defrauding investors. A third executive, Sev Vettivetpillai, has been held by UK police on similar charges. Abdel-Wadood is already in police custody in New York, whilst Naqvi was arrested last week in the UK and is now awaiting possible extradition. The once powerful asset management group, with over US$ 14 billion under its control, was forced into liquidation last June after a group of investors, including the Bill & Melinda Gates Foundation, alleged mismanagement of money in its healthcare fund. It is thought that both defendants were involved with inflating the value of the firm’s holdings, by more than US$ 500 million, and stealing hundreds of millions of dollars. They are also accused of conspiracy, wire fraud and securities fraud.

This week saw Olivier Harnisch stepping down from his role as Emaar Hospitality CEO “to pursue new interests”. Business operations will be taken over by Chris Newman, the current chief operating officer. The change has come at a busy time for the company which will open five hotels in Dubai and three in KSA, as well as having a further thirty projects in its pipeline.

Although the Emaar chairman has resigned from the Aramex board for “personal reasons”, he still owns a stake in the Dubai-based international logistics company. Three years ago, its founder Fadi Ghandour sold his entire 9.9% shareholding to Gulf investors – including Mohammed Alabbar – in a deal thought to be worth US$ 142 million. He also owns shares through some of his holding companies, including Joana Investments and Boson Ventures Corporation. Aramex had a good 2018, with both revenue and profit moving higher – by 8.0% to US$ 1.4 billion and by 13.0% to US$ 134 million. 

The banking sector continues with impressive returns in a sluggish economy as both Emirates NBD and its sister bank, Dubai Islamic, posted their Q1 returns. The former saw higher revenue with, 15% year on year, and 9% quarter on quarter, increases at US$ 1.3 billion and profit up 15% for both periods to US$ 736 million. There were also hikes in total assets, customer loans and customer deposits by 5% to US$ 143.3 billion, 3% to US$ 92.0 billion and 3% to US$ 97.9 billion.

Meanwhile, Emirates Islamic recorded its highest ever quarterly net profit since its 2004 inception – a massive 97% year on year hike at US$ 112 million (54% up, quarter-on-quarter); its total income came in 12% higher at US$ 181 million.  There were smaller balance sheet increases for total assets (4% – US$ 16.5 billion), and customer accounts (4% – US$ 11.8 billion).

The other major Dubai financial institution, CBD also reported better returns, with Q1 operating income up 17.6% up at US$ 211 million and net profit 21.6% higher to US$ 93 million; operating expenses were down 3.7% to US$ 56 million. Subsequently, there were year on year hikes of 8.5%, 10.3% and 13.3% in total assets, loans/advances and customers’ deposits as at 31 March.

The bourse opened for trading on Sunday 14 April, at 2790, and having gained 216 points (8.4%) the previous three weeks, gained a further 24 points (0.8%) to close by Thursday, 04 April, on 2814. Emaar Properties, having jumped US$ 0.26 the previous fortnight, lost a little impetus to close US$ 0.05 lower at US$ 1.35. Arabtec, having been flat for the previous six weeks, was up US$ 0.04 to US$ 0.62. Thursday 18 April saw trades of 233 million shares, valued at US$ 60 million, compared to a week earlier of 168 million shares at US$ 81 million.

By Thursday, 18 April, Brent, having traded US$ 3.01 (4.4%) higher the previous fortnight, continued its upward trend to close US$ 0.79 (1.1%) higher at US$ 71.62; gold continued its recent downward trend, shedding a further US$ 17 to US$ 1,276.

Troubled Jet Airways, 24% owned by Etihad, having failed to secure emergency funding from its lenders, has finally closed all operations. The 25-year old airline, founded by Naresh Goyal and whose family still own a 52% stake, has debts of over US$ 1.2 billion; it has been unable to pay its 23k employees, including pilots, engineers, and ground staff, since December. What used to be India’s second largest airline has witnessed dozens of its planes being recently seized by creditors.

In a US$ 2.4 billion cash deal, Nippon Paint has bought Australia’s Dulux Group, giving it access to that country’s biggest sales channel for paints and coatings; the sales price was at a 28% premium and was the biggest acquisition yet by the Japanese company. In a global market, estimated to be worth US$ 100 billion, the Australian business ranks only 22nd in the world; the top ten players account for over 50% of world-wide revenue.

A simple error could have cost James Packer up to US$ 10 billion, as Las Vegas casino operator Wynn cancelled a merger with Crown Resorts because of a “premature disclosure of preliminary discussions”. If the deal had gone through, the Australian magnate, with a 46.1% stake in Crown Resorts, would have walked away with about US$ 2 billion and a 10% stake in Wynn Resorts. The market was a lot happier than Mr Packer – with the Australian casino shares jumping 20% on the news.

The latest “unicorn” to test stock market reaction is Pinterest and, like other similar companies that continue to make losses, fancies its chances by pricing its shares at the top end of market expectations. At US$ 19 per share, the online scrapbook company, which admitted in its flotation documents it may never report income, will see whether investor appetite for such companies has diminished. Uber, another loss-making tech company, expects to see its value top US$ 100 billion in a Q4 IPO, whilst its rival Lyft, which went public last month, has seen its share value drop 22% since then.

To “provide confidence” to passengers over the peak summer travel season, American Airlines is extending the cancellation of its Boeing 737 Max 8 flights until mid-August. Last week, Southwest Airlines made a similar move and United Airlines also cancelled 737 Max 8 flights until June. The on-going investigation is focusing on the plane’s anti-stall software, the Manoeuvring Characteristics Augmentation System (MCAS), whilst Boeing is developing new software for the jet’s anti-stall system.

During Q1, there was a 4.6% decline in the shipments number of global personal computers, to 58.5 million, driven by central processing unit (CPU) supply problems, sluggish consumer demand and political instability in some locations. However, the three world leaders – Lenovo, HP and Dell – did increase their volumes and now account for 22.5%, 21.9% and 17.6% of the total market respectively.

Mark Wintekorn, the former chief executive of VW, has finally been charged with fraud, along with four others for their roles in the diesel emissions scandal. The 71-year old is lucky in that he is unlikely to face the music in the US courts because Germany does not normally extradite their citizens. He is accused of not advising consumers sooner about the manipulation of diesel emissions and also approving a “useless” software update, designed to conceal the true reason for the cars’ higher emission levels. Because of his inaction and apparent fraud, the company has already incurred costs of a massive US$ 28 billion – with more to come.

It seems highly likely that the German economy will see its weakest performance since 2013, with the latest forecast of only a 0.5% expansion this year (compared to a 2.1% projection this time last year). The usual suspects are being rolled out why this is happening – slowing global momentum, Brexit concerns and trade disputes. Such forecasts see the country second only to Italy, as the euro area’s worst performer this year. It nearly fell into recession at the end of last year with Q3 showing a 0.2% contraction followed by zero growth in Q4. (Two successive contractions indicate a technical recession). Although business confidence has improved, the March manufacturing PMI continues to plummet. There are signs that the Merkel administration is investing into infrastructure, education and research at record levels to try and spend itself out of this crisis.

China’s Q1 GDP expanded by 1.4% (6.4% at an annualised rate) driven by yearly rises in both fixed asset investment and retail sales, up on the March year at 6.1% and 8.7% and 0.2% and 0.5% for the month. In a move to boost the economy, the Chinese government continues to announce massive tax cuts and other fee reductions to help struggling companies. If it fails, the private sector will continue to labour unless the new credit policies make a positive impact on consumer spending. Growth has dipped but is still within the target levels, although down on the 6.6% 2018 comparative figure.

Meanwhile, the US$ 250 billion US trade tariffs, introduced in the hope of China slashing state subsidies, continue to hurt the economy (as well as having a negative impact on global trade). Since subsidies and tax breaks are an integral part of China’s industrial policy, it will be interesting to see whether President Xi Jinping will do anything dramatic. Negotiators will focus on other aspects where they think that will give them more chance of success; these include improving access to China’s markets, ending forced technology transfers and improving protection of intellectual property.

The US Commerce Department reported a 3.3% decline in February’s goods and services deficit to US$ 49.4 billion largely due to a 28.2% fall in its goods deficit with China to US$ 30.1 billion; exports rose 21.1% to US$ 9.2 billion and imports fell 3.8% to US$ 39.3 billion. Overall, monthly exports were up 1.0% at US$ 209.7 billion, with imports 0.8% higher at US$ 259.1 billion. Such figures indicate that a 2.0% increase in Q1 GDP is all but inevitable.

In a retaliatory move over the Boeing subsidies, the EU has published a list of goods, including video-game consoles and ketchup, that will total US$ 12 billion on US imports; this is in response to the US threatening a similar amount in tariffs over EU subsidies paid to Airbus. The bloc has already implemented tit-for-tat tariffs of US$ 3.2 billion on American goods in response to Donald Trump’s metal duties imposed last year.

It is obvious that Amazon has not had its own way in China and now plans to downsize its presence in the country by closing its online store. It will mean that in future, Chinese customers will have to buy from Amazon’s global store after 18 July. The company bought, a Chinese books, music and video retailer, for US$ 75 million in 2004 and three years later rebranded the company as Amazon. Now with intense competition from local rivals such as and Alibaba’s Tmall, Amazon just like Uber and Didi and other US companies finally realise that for China, When The Going Gets Tough, The Tough Get Going.

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My Way

My Way                                                                             11 April 2019

March off-plan sales topped 1.8k and were 7.7% higher than a month earlier. This welcome uptick in sales has seen developers, including Sobha – releasing 360 units in its second MBR twin tower project – and Emaar’s Creek Vista to bring forward their launch or new release dates. The realty sector is also getting a boost from China, with forty members of the country’s leading real estate portals,, investing US$ 6 million in fifteen units. More Chinese visits are expected and local agents are gearing up to meet more property investors.

Emaar have unveiled ELIE SAAB at Emaar Beachfront – a tower project comprising 1-3 B/R apartments and some 4 B/R penthouses overlooking the Arabian Sea and The Palm. The Lebanese fashion icon will be responsible for all the project’s design aspects that will focus on the 1930 Art Deco era.

One of Dubai’s leading travel consultancy agencies, Gulf Reps, headed by industry veteran Leo Fewtrell, has formed a partnership with Dubai Tourism in a bid to attract more Gulf holiday visitors; last year, the number of GCC overnight visitors contributed 18% of the total number of Dubai tourists. The arrangement will see Gulf Reps open a GCC representative office, with the main aim of developing relationships with the various parties in the region’s tourism market so as to promote Dubai as the preferred destination of choice.

There was bad news for South African expats living in Dubai with their government indicating it will introduce a tax regime, with the upper limit of 45%, for those earning over US$ 75k (1 million rand) per annum. As from March 2020, the new legislation will take effect for all South Africans who used to escape the taxman if they lived outside the country for more than 183 days.

According to figures released by the Department of Economic Development, over 9.6k jobs were created as it issued 2.5k new licences in March – 35.4% higher than the corresponding month last year.

Embattled Drake & Scull is planning to sell its stake in Abu Dhabi-listed development company, Wahat Al Zawya to Tabarak whose majority shareholder is also the leading shareholder in the Dubai developer. Drake & Scull has had a torrid time and its shares are suspended on the DFM. Despite a 2017 restructuring, that saw 75% of its capital expunged, it has posted several years of heavy losses so that by the end of Q3 last year, it recorded a US$ 134 million deficit and had accumulated losses of US$ 300 million, with liabilities of US$ 109 million.

This week, Bayut acquired its rival portal, Middle East Internet Group’s Lamudi, for an undisclosed sum; the deal will see Bayut taking ownership of all of Lamudi’s GCC assets. In 2012, Lamudi, which became the first real estate portal in Saudi Arabia and started operations in the UAE four years ago, will help boost Bayut’s presence in the kingdom. This deal comes just days after Dubai-based Property Finder announced it will acquire rival platform JRD Group and that it had also increased its stake in Zingat – Turkey’s second largest property portal – to almost 40%.

DXB Entertainments announced that Dubai Parks and Resorts attracted 760k Q1 visitors – a 10.7% drop in numbers compared to 2018. In Q3, it posted a reduced loss of US$ 74 million, as well as restructuring a US$ 1.1 billion bank facility and receiving new funding from its 52.3% shareholder, Meraas Holding. The park will open two new hotels – Rove and Legoland – over the next twelve months which will bring its total rooms to 1.3k.

Emirates NBD has confirmed the sale of 127.5 million ordinary shares from its stake in Network International for US$ 724 million through a secondary listing of its shares on the London Stock Exchange and to MasterCard. It will still retain a 25.5% stake in the company (rather than its previous 51%).

There are reports that the country’s biggest Islamic lender, Dubai Islamic Bank, (of which Investment Corp of Dubai has a 28% stake), could be in the market to buy out Noor Bank PJSC. If a deal did happen – and it is still some way off – the combined financial institution will manage over US$ 75 billion in assets, of which Noor would contribute 18.5% of that total.

Marka is planning to reduce its capital base by cancelling 450k of its 500k shares to make good losses that have occurred since its 2014 DFM debut. The Dubai-based retail and dining operator’s shares had a par value of US$ 0.272 at issue date but sank to just US$ 0.076 before being frozen; this equates to a market value of US$ 37 million.

The bourse opened for trading on Sunday 07 April, at 2776, and having gained 202 points (7.8%) the previous fortnight, gained a further 14 points (0.8%) to close by Thursday, 04 April, on 2790. Emaar Properties, having jumped US$ 0.11 the previous week, closed US$ 0.15 higher at US$ 1.40. Arabtec, flat for the previous five weeks, was US$ 0.01 lower at US$ 0.58. Thursday 11 April saw  trades of 168 million shares, valued at US$ 60 million, compared to a week earlier of 124 million shares at US$ 64 million.

By Thursday, 11 April, Brent, having traded US$ 1.90 higher the previous week, continued its upward trend to close US$ 1.11 (1.6%) higher on US$ 70.83; gold continued its recent weeks of marginal ups and downs, shedding US$ 4 to US$ 1,293.

A strong message has been sent to global mining giants by 2k Zambian villagers who have taken UK-based Vedanta to court for alleged pollution. In a ruling by the UK Supreme Court, the case will be held in the UK because of “the problem of access to justice” in Zambia. The case revolves around allegations by villagers, living near the huge Nchanga Copper mine, that the miner had poisoned their water supply and destroyed farmland. It will not be the first time that mining companies have been involved in similar unethical and anti-social behaviour.

It has taken a long time but Boeing has finally said ‘sorry” for the lives lost in recent accidents in Ethiopia and Indonesia. The plane-maker continues to defend the safety features of its 737 Max model but has promised to undertake changes to eliminate future risk. In both accidents, preliminary findings showed the pilots had followed procedures, but the planes continued to nose-dive despite their attempts to wrestle with the anti-stall system, known as MCAS. The company has seen Q1 net orders fall 44.7% to 95, compared to last year, with none recorded last month, whilst quarterly deliveries dipped 32.6% to just 89, most of which were in January and only 11 in March. In a bid to reduce spending on the 737 and preserve cash, the US company is to cut output by 19% to 42 aircraft a month.

As a direct response to Airbus subsidies, that have stretched some fourteen years, the US is looking to hit the EU with tariffs totalling US$ 11 billion; this comes after the WTO (World Trade Organisation) found that such subsidies have had an adverse impact on the US. It seems that a myriad of goods – including aircraft, cheese, salmon, virgin olive oil and lemons – will be caught in the tariff net. Furthermore, there could be additional import duties levied on listed goods, which include helicopters, undercarriages and fuselages, from four specific countries – France, Germany, Spain and the UK. These charges are in addition to previous levies on the imports of steel and aluminium from the EU.

In a bid to report a lower average emission figure, Fiat Chrysler has teamed up with Tesla tohelp them avoid paying fines for violating new European Union emissions rules which impose an average emissions limit of 95g per km. Under the new regulation, car makers are allowed to pool their models within their own companies to come up with an average emissions figure, and also to form so-called open pools, with other carmakers. Since 2016, Tesla, which has made over US$1 billion selling emissions credits to other manufacturers in the United States, has yet to confirm the deal that could bring it a further US$ 1 billon.

Standard Chartered has been fined US$ 1.1 billion for violating US sanctions against Iran and over inadequate financial crime controls, in relation to various misdeeds dating back to before 2014; the bank had already set aside US$ 900 million to cover these costs. US$ 639 million related to breaching US sanctions on countries, including Cuba, Iran, Myanmar, Sudan and Syria, as well as US$ 132 million for “serious and sustained shortcomings” in its anti-money laundering controls in the UK.

Lei Jun, the founder of Xiaomi, has received a US$ 962 million “award” for his eight years of “devotion” to the company in the way of a stock transfer involving some 636.6 million shares; he has promised to donate the money to “charitable purposes” after tax deductions, The company, which only made US$ 980 million in 2018 profits, is the world’s fourth biggest smartphone maker; although the global handset market dipped 4.1% in 2018, the Beijing-based company saw shipments up 32.2%.

Debenhams has finally rolled over and is now in administration in the hands of its major lenders – Barclays and Bank of Ireland, as well as hedge funds Silver Point and GoldenTree. This comes the same week that Primark opens its biggest ever store, covering 161k sq ft and five floors, in Birmingham. Costing US$ 95 million, it is focussing on the younger market and if it can attract a new generation to ‘bricks and mortar stores’, it could be a lesson to the likes of Debenhams and other failing retail giants in the UK’s high street.

There is another potential pension scandal brewing in the UK, with news that the Regulator has been investigating a potential shortfall in train company pensions. In a warning made to lawyers representing the rail industry trade body, the Rail Delivery Group, it appears that the deficit has increased 56.3% over the past three years to US$ 9.8 billion. Meanwhile, Virgin Trains has been barred from bidding for three franchises which may accelerate its demise. The operator is majority owned by Stagecoach which has blamed the barring on its refusal to shoulder responsibility for unquantified extra pension contributions.

The Australian housing bubble has continued to deflate with forecasts of capital city property prices falling – houses by 7.7% (1.8% in 2018) and apartments by 4.3% – at the same time that February home lending figures show an increase in both owner-occupier and investor borrowing. Melbourne will see the biggest falls as houses and apartments are expected to witness 11.4% and 5.0% declines in value; Sydney’s prices are expected to be in the region of 9.3% and 5.9% lower.

For almost five years, Japan has posted a current account surplus and February proved no exception with a positive US$ 24 billion balance – and a massive 25.5% increase, compared to a year earlier. The main driver behind this was primary income (mainly returns from foreign investments) accounting for US$ 18 billion. Furthermore, and helped by falling energy prices and improving export figures, Japan registered a goods trade surplus of US$ 438 billion. During the month, there were declines in both imports and exports of 6.6% and 1.9% to US$ 56.6 billion and US$ 52.2 billion respectively.

China, with the world’s largest forex reserves, saw a month on month hike in March to US$ 3.1 trillion, as hopes rose for a mutually beneficial trade settlement with the US. Having fallen 5.3% last year, the yuan is rebounding slowly and has gained almost 2% so far this year. The country saw its gold reserves 1.8% lower at US$ 78.5 billion.

Once again, Donald Trump has called for the Fed to cut interest rates and reiterated his confidence that an agreement can be reached with China; he indicated that a deal could be on the cards within a month, although there are still some issues to be cleared. If all goes well, there will be a summit with Chinese President Xi and that it would be “an epic deal” and “the Grand Daddy of them all”.

March saw U.S. consumer prices 0.4% higher – the most since January 2018, – driven by increases in the costs of food, gasoline and rents. However, slowing domestic and global economic growth meant that underlying inflation remained benign at 1.9%, the smallest rise in thirty months. Despite tightening employment conditions in the country, wage growth has been slower than expected.

All is not well in Germany were February manufacturing orders slumped 4.2%, month on month, when analysts were expecting a modest 0.3% increase. There was not one factor behind the decline but both domestic and overseas fell – by 1.6% and 6.0% respectively. There was also a 2.9% fall in demand from the euro area whilst there was a 7.9% slump in bookings from other countries. On an annualised basis, factory orders were off a worryingly high 8.4%, following a 3.6% drop a month earlier in January.

Despite the scaremongering tactics of many “experts”, the UK economy has performed relatively well since the June 2016 referendum. Surprisingly, the IMF expects the UK to perform better than Germany with a forecast 1.2% expansion, compared to just 0.8% for Europe’s leading economy. However, this will see the UK grow at its slowest rate in a decade, whilst wage growth heads in the other direction, rising at its highest pace in a decade. This could be a portent for a BoE rate hike later in the year.

Flummoxing many experts, UK’s economy unexpectedly grew by 0.2% in February, driven by stockpiling ahead of Brexit (whenever that may or may not be); month on month, manufacturing output was up 0.9%. Over the past quarter, whilst exports have dipped 0.4%, (not helped by a slowing global economy), imports have jumped 6.8%. Meanwhile there were 0.1% and 0.4% increases in the services and construction sectors.

Meanwhile, the Brexit farce continues with yet another extension granted by the benevolent EU to 31 October, with the previous deadline falling tomorrow 12 April. With her prime ministership hanging in the balance, May will be gone by May. After thirty months to arrange a formal departure, with abject failure, it seems highly unlikely that she can convince anyone that she can push any sort of deal through. After parliament has repeatedly rejected her withdrawal deal, negotiated with the EU, for Mrs May it is time for the highway not My Way.

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Land of Hope and Glory

Land Of Hope And  Glory                                                   04 April 2019

Damac Properties reported a record number of homes handed over last year, with many of the 4.1k total in its Damac Hills community. The developer posted revenues of US$ 1.7 billion, whilst net profits came in at US$ 331 million, with booked sales totalling US$ 1.2 billion.

Last year, Danube Properties sold nearly 1.9k residential units, a 78.5% increase, which the developer estimates to be 10.6% of the total market share of off-plan sales, compared to just 5.0% a year earlier. Over the year, Danube recorded a 19.3% hike in revenue to US$ 266 million. The company continues to be confident in the local realty sector and to date has awarded contracts valued at US$ 436 million, covering twelve projects.

The RTA have extended the Serco contract to operate and maintain the metro transit system for a further two years in a US$ 185 million agreement. The UK company has been with the RTA since the Metro opened and has performed well, with a train service availability of 99.9% and punctuality of 99.8%: last year, there was a record 204 million journeys. Under the new contract, Serco will recruit and train Emirati employees. A recent study has shown that over the first eight years of the rail system to 2016, it had added an estimated US$ 18.0 billion to the economy.

This week sees the hosting of the second annual Future Blockchain Summit, a meeting that will bring together all the sector’s stakeholders from governments, industry and academia. The two-day event will see a global pool of technology visionaries, government bodies, the world’s biggest brands and industry first-movers pushing blockchain forward and championing its adoption on a global scale. It is expected that over 8k interested parties will attend the meeting. Smart Dubai has been working on over twenty citywide blockchain use cases in partnership with the government and private sectors, as it strives to become the world’s first government to execute all applicable transactions using blockchain technology by next year. If this venture succeeds, it will result in savings totalling US$ 1.5 billion and eliminate 100 million annual paper transactions.

The UAE administration is carrying out a joint study with its Saudi neighbours to discuss the “addition of new goods to the selective tax list”. It was only in October 2017 that both governments implemented an excise tax of 100% on tobacco and energy drinks, and a 50% tax on carbonated drinks. The impact of this excise duty has had a detrimental impact for some businesses, with sales of energy drinks plunging by as much as 65%. Whether such companies have taken enough “punishment” remains to be seen but if they have, it is a good bet that the likes of sweets, fast food and crisps could be on the taxman’s menu.

As noted last week, the country’s GDP expanded by 1.7% to US$ 393.0 billion, over the year, driven by growth in oil revenues (because of increased energy prices towards the end of 2018) and a strong performance in non-oil activities. The energy sector, which accounts for 25.9% of GDP, grew an impressive 35.1% over the year. The non-oil sector was 2.9% higher at US$ 307.2 billion, with major contributions from retail/wholesale accounting for 11.2% of GDP, financial services (9.2%), manufacturing (8.9%) and construction (8.3%).

Tristar is interested in a London IPO later this year, as it seeks to raise US$ 250 million. The Dubai liquid logistics provider, co-owned by its chief executive and founder Eugene Mayne, Agility and Kuwait’s Gulf Investment Corporation, has the likes of ADNOC, ENOC, Shell and BP amongst its customers.

Emaar Economic City in Saudi Arabia incurred a net loss after zakat and tax of US$ 37 million last year, compared to a  2017 net profit of US$ 67 million, driven by lower backlogs of residential and industrial projects. `The results were not helped by higher administrative, selling and marketing expenses.

It seems that Network International could be valued as high as US$ 3 billion, based on the pricing range issued ahead of its London IPO. The Dubai payment processor is 49% owned by Emirates NBD, with the balance by Warburg Pincus and General Atlantic. This is a welcome boost for Europe’s lacklustre IPO market, where recent volumes have been at their lowest level since the GFC.

Emirates NBD revised its deal to acquire 99.85% of Denizbank. Although the deal was arranged mid-2018, because of the 17% fall in the Turkish lire, the value of the deal is US$ 2.75 billion instead of the earlier announced US$ 3.2 billion. It is expected that the Turkish bank will contribute up to 15% of Emirates NBD’s 2019 profit. At the end of 2018, the asset value of the combined banks was US$ 173 billion, with the Dubai financial institution accounting for US$ 136 billion.

The bourse opened for trading on Sunday 31 Mar, at 2631, and having gained 57 points (2.1%) the previous fortnight, had an impressive 145 points (5.5%) weekly gain to close by Thursday, 04 April, on 2776. Emaar Properties, having closed US$ 0.03 lower last week, was up US$ 0.11 to close at US$ 1.25, with Arabtec, flat for the previous four weeks, nudged US$ 0.01 higher to US$ 0.59. Thursday 04 April saw increased trades of 124 million shares, valued at US$ 64 million, compared to a week earlier of 208 million shares at US$ 98 million. For Q1, the index was 4.1% to the good at 2635, with corresponding rises for both Emaar and `Arabtec – US$ 0.24 and US$ 0.07 respectively

By Thursday, 04 April, Brent traded US$ 1.90 higher to close on US$ 69.72; gold continued its recent weeks of ups and downs, gaining US$ 2 to US$ 1,297. For Q1, Brent was US$ 14 .30 (28.5%) to the good at US$ 68.10, with the yellow metal US$ 14 higher (1.0%) at US$ 1,298.

Saudi Aramco became the most profitable company in the world when reporting an EBITDA (earnings before interest, tax, amortisation and depreciation) of US$ 224 billion; this figure easily surpasses Apple’s US$ 83 billion surplus. Even though Exxon Mobil pulls in a lot lower profit at US$ 40 billion, it does earn slightly more cash generated per barrel than Aramco which is stifled to some degree by relatively high tax payments; Aramco pays 50% of its profit on income tax, plus a sliding royalty scale that starts at 20% of its revenue.

Another Saudi company in the news this week was Prince Alwaleed bin Talal’s Kingdom Holding that received US$ 333 million from its stake sale in Dubai ride-hailing firm Careem, which was bought out by Uber in a US$ 3.1 billion deal. The investment company will utilise the funds in up to five businesses in Saudi and Europe, with 30% being targeted for technology and potential growth entities and the balance for income-generating, dividend-distributing investments. It has been estimated that it almost doubled its money on its Careem stake.

Tui has warned that the grounding of its 15 Boeing 737 Max planes could cost it up to US$ 340 million; the travel firm was also expecting delivery of a further eight before the end of next month. The tour company has had to use spare planes in its fleet, extend leases that were due to expire and hire in extra planes, many of which may be less fuel efficient and bigger than what is actually required. It seems that the company is not covered for this type of event – no wonder then that its shares fell 8% in Friday’s trading.

easyJet confirmed that it still expects to post a H2 US$ 360 million loss attributable to Brexit jitters and a slowdown in the regional economies. The British low-cost carrier also had concerns about a weakening consumer mood and softer ticket yields across the continent, along with higher fuel prices. Its shares sank 8% on the news, as it expects “the overall environment in Europe to get worse”.

As it tries to cut annual costs further (from US$ 1.0 billion to US$ 1.5 billion), and introduce “significant restructuring”, US-owned Boots has warned of possible closures of some of its 2.5k outlets in the UK. The pharmacy chain, which employs 60k, reported a 2.3% decline in like for like sales and profits 14.3% lower, in a “most difficult quarter”. In February, the pharmacy chain indicated that 350 jobs were at risk in its Nottingham head office, as it planned to reduce costs by 20%.

In a US$ 5.4 billion deal, that will create a technology and security giant employing 80k, French defence electronics group Thales acquired Dutch data security firm Gemalto, a global leader in digital identification and data protection. The deal will result in Thales’s seventh global division being known as Digital Identity and Security focussing on the group’s civil and defence customers. The French government has a 26% stake in Thales and is their biggest single investor.

Months after DSV walked away from a US$ 1.7 billion deal with Switzerland’s Ceva Logistics, it has now acquired Panalpina in a US$ 4.3 billion deal. The price is at a 43% premium, based on the market value on 15 January when the offer was made. The sale will not only boost DSV’s air-cargo volumes and ocean-going sector but also complement the Danish group’s strength in road shipments.

There are growing voices proposing that the UK’s Big Four accountancy firms – Deloitte, EY, KPMG and PwC – should not only be separated into audit and non-audit businesses but should also face a full structural break-up. The four firms carry out 97% of big companies’ audits and at the same time often provide them with other services. The Competition and Markets Authority Chair, Rachel Reeves, said: “For the big firms, audits seem too often to be the route to milking the cash-cow of consultancy business”. There have been concerns about the auditors’ modus operandi on the back of high-profile company collapses such as Carillion and Patisserie Valerie. Not surprisingly the Big 4 seem in agreement to many of the changes recommended and that “trust in audit is in urgent need of repair”. No need to watch this space because nothing major will change.

There is something wrong with the financial world when three world bodies have different opinions on global growth prospects over the coming two years.

The WTO reported that Q4 world trade fell by 0.3% but expanded by 3.0% last year. This year, growth is expected to come in lower at 2.6% and well a below a previous 3.7% forecast. The usual suspects were cited by the world body – new tariffs, slower economic growth, volatility in financial markets and tighter monetary conditions in developed countries. Whilst uncertainty is around the economic environment, trade will always suffer.

Meanwhile the World Bank expects annual MENA growth for this year and next to be 1.5% and 3.4% on the back of a weaker global economy and financial-market volatility. The 2020 improvement is expected to come about because of “ongoing policy reforms to diversify the economy and strengthen the business environment”. However, despite this recovery its long-standing low growth in per-capita GDP will be flat.

Three months on from its January forecast, the IMF has indicated that the global growth has lost momentum since the start of the year, leaving the world economy in a “precarious” position; however, the IMF chief, Christine Lagarde does not expect an immediate recession.  Next week, it will issue its new World Economic Outlook and it will be inevitable that the 3.5% global growth forecast made in January will be downgraded, although there could be an upturn by the end of this year.

At last, Malaysia’s ex-Prime Minister Najib Razak has gone on trial for his role in a financial scandal involving the country’s sovereign wealth fund 1MDB. He faces an initial seven charges, including pocketing US$ 681 million from the fund, out of a total of 42. The government has also filed criminal charges against Goldman Sachs for defrauding investors by raising money for 1MDB – a fund that was supposedly meant to boost Malaysia’s economy through strategic investments. However, some of the money was apparently used to fund lavish lifestyles, a Hollywood film and a super-yacht.

After being arrested last November and then released on US$ 9 million bail in March, disgraced former Nissan chief Carlos Ghosn has been re-arrested in Tokyo. Initially, he was charged with underreporting his pay package the five years to 2015 but a new case implicates him in suspicious payments to a dealership in Oman.

Two former Barclays swaps traders, convicted of manipulating a benchmark interest rate, were sentenced to as much as five years in prison by a London judge who warned those still working in the finance industry that misdeeds would bring jail time. The charges against the two men were in relation to manipulation of the Euro interbank offered rate, which is related to trillions of dollars’ worth of loans and derivatives. According to the judge, Michael Gledhill, the way the Euribor rate was calculated “was an open door for those involved in the conspiracy to manipulate, or attempt to manipulate, the Euribor rate for the advantage of their own bank’s trading positions.”

Latest figures indicate that global e-commerce sales surged 13.0% to US$ 29 trillion, driven by a 12.0% hike in online shoppers to a total of 1.3 billion. The US led the way, as the number of internet users buying goods online from abroad grew to 21.0%, as their cross-border business-to-consumer sales expanded 4.0% to US$ 412 billion, equating to 11% of total sales in this segment. The three largest markets were US (US$ 9.0 trillion), Japan (US$ 3.2 billion) and China (US$ 1.9 trillion). It seems strange and rather ironic that these figures issued by the United Nations Conference on Trade and Development are for 2017 – a little out of date!

According to the UK’s trade body, Ukie, the country’s gaming market is worth US$ 7.5 billion on the back of the very successful releases of games such as Fortnite and Player Unknown’s Battleground that only came out last year. Of that total, US$ 5.3 billion is spent on software, with a further US$ 2.1 billion on hardware; the remaining balance is from “game culture” which includes toys, merchandise and books.  The software can be further broken down into four segments – digital/online, mobile games, boxed software and pre-owned – accounting for 50.1%, 29.1%, 19.1% and 1.7% of the US$ 5.3 billion total. The sector is now worth more than the movies and music segments combined.

Latest figures from Saudi Arabia show that the Q4 unemployment rate has dropped 0.1% to 12.7%; the unemployment rate men stood at 6.6%, compared to 32.5% among Saudi women. There were 3.1 million males in employment, with a further 1.0 million actively seeking employment.

The country’s budget deficit is a little over US$ 150 billion which will rise to US$ 181 billion by the end of 2019, equating to 21.7% of GDP; 46% of the total debt is in US dollars. The further issue of US$ 31 billion this year will be used to help finance the national budget deficit.

It is a good time to go Turkey for a holiday as its lira sank 5% in just one day, and over last week the stock market shed 10% of its value. After several years of noticeable growth, the economy has done a complete turnaround and is now experiencing a recession, accompanied by high inflation at over 20%.

There is no doubt that its President Recep Tayyip Erdogan led the country through fifteen years of almost continuous growth of an 5.6% average (excluding just one year, 2009). Having doubled in size over that period, the economy has had two quarters of contraction, the unemployment rate stands at an unwieldy 13.5% (4.3 million). Things are bound to get better later in the year but do not expect much annual growth of over 2%.

President Abdel Fattah al-Sisi’s government has increased Egypt’s minimum wage level by 66.7% to US$ 116 a month, whilst pensions will rise by 15% to US$ 52, with immediate effect. Consumer spending has been impacted by recent government measures including the introduction of VAT, cutting energy subsidies and devaluing the currency that has left many of the 100 million population in dire straits.

Everybody’s favourite, Jean-Claude Juncker is now not happy with Italy wanting Giuseppe Conte’s populist government to do more to boost their flagging economy – some hope. The EC President’s warning came a day after the OECD highlighted Italy’s urgent need to take control of the fiscal situation and reduce its worryingly high public debt. Now in recession, the country’s output has never returned to its 2007 high.

The man who got all his post Brexit referendum forecasts wrong is again in the headlines warning that the risk of the country stumbling into a “disorderly” no-deal Brexit is now “alarmingly high”. Mark Carney, the Bank of England governor, is no stranger to controversy and some may see his latest remarks as once again pro-Remain political intervention.

There are signs that the Chinese economy may have turned the corner after following recent government intervention that has seen five cuts in bank reserve requirements over the past year along with other fiscal and monetary stimulus measures. China’s Caixin/Markit Manufacturing PMI moved back into positive territory recording a reading of 50.8, following the previous month’s 49.9.

US Commerce Department figures show that January business inventories rose at a quicker rate than expected, when climbing 0.8% – the same level as a month earlier and higher than the 0.5% market expectation. There were also increases in wholesale, retail and manufacturing invoices – up by 1.2%, 0.8% and 0.5% respectively. January sales saw increases for business (0.3%), retail (0.8%) and wholesale (0.5%), whilst manufacturing sales dipped 0.4% over the month.

Manufacturing improved in March with the ISM PMI 1.1 higher at 55.3, driven by gains in new orders (up 1.9 to 57.4) and employment with an impressive 5.2 hike to 57.5.

Construction spending came in 1.0% higher at an annualised rate of US$ 1.32 trillion, with the market expecting a slight downturn. There were increases in four construction segments – “public”, up 3.6% to US$ 325.8 trillion, highway – up 9.5% to US$ 111.1 billion, educational, 0.8% up at US$ 325.8 billion and private up 0.2% at US$ 994.5 billion.

With Brexit turmoil showing no indication of going away, the latest Markit’s services PMI showed that the country’s huge services sector shrank for the first time since mid-2016, with export demand noticeably weaker. In March, the reading of 48.9 (any number under 50 indicates contraction) was 2.4 lower than the 51.3 recorded in February. The construction sector is also decline, whilst manufacturing, with a 50.0 reading, would have been lower if not for stockpiling.

It is surprising to read that there are now 2.9 million UK children living in poverty after housing has been paid, with mortgages and rents continuing to spiral north. 70% of the total were in working families, compared to 67% a year earlier and more worryingly, 53% of children were under the age of five. Just like previous governments, this one has said that tackling poverty was its priority.

Two million UK workers on minimum wages are now receiving a pay rise (which may not be enough as other costs are rising), ranging from 4.9% to US$ 10.26 for 25-year-olds and over to a 3.6% rise for 16-17 year olds to US$ 5.50. Women represent an estimated 60% of those who are benefitting. It is estimated by the Living Wage Foundation that the wage level needed to “meet the costs of living” is US$ 13.75 (in London) and US$ 11.70 elsewhere. However, minimum wages in the UK are among the highest in the western world and of late pay rises are coming in at a higher pace than inflation resulting in a slight increase in consumer spend.

It seems an anomaly that the UK manufacturing sector was one of the few in the world that headed north this month, to a 13-month high, whilst the likes of France, Germany, Japan, Malaysia, South Korea and Taiwan went in the other direction; indeed, eurozone manufacturers posted one of their worst monthly figures since 2013. These returns seem to confirm that a global slowdown is on the cards.

Equally worrying for the eurozone was March’s PMI declining for the eighth straight month to a six year low of 47.5, down 1.8 month on month. With backlogs of work being run down at their fastest pace since late 2012 and new orders falling at their fastest rate in over six years, allied with the fact that both German and French manufacturing are in recession, there is no doubt that the bloc faces a turbulent period.

As Dubai’s winter comes to an end, summer is on the horizon and the same could be said of the local economy. Despite so much negativity in the air, there are signs that it may be picking up. Careem’s US$ 3.1 billion acquisition by Uber, Network’s US$ 3.0 billion IPO valuation, Emirates NBD’s US$ 2.8 billion purchase of Turkey’s Denizbank, Brent reaching the important US$ 70 threshold and the DFM up by over 10% this year are all portents that the worse may be over. Just weeks after Dubai Opera hosted the Proms, maybe it is time for the emirate to  become  yet again The Land of Hope and Glory!

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