Ridin’ The Storm Out

Sheikh Hamdan Bin Mohammad Bin Rashid Al Maktoum launched the 5-day Gitex Technology Week on Sunday. Now in its 37th edition, the event hosted 4.1k exhibitors and 100k visitors from 70 countries; this is another example of how the emirate’s MICE sector proves a welcome fillip for the local hospitality and retail industries.

JLL’s latest report points to the possibility of a 16.4% rise in the number of residential units to 567k by 2019. That would indicate 40k handovers for the next two years 2018 to 2019 – despite the fact that Dubai property portfolio has only risen by 40k over the past thirty months to June 2017, equating to just 16k a year. The consultancy did state that actual deliveries may be less than the headline number quoted but even if this were not the case, the emirate’s population growth will probably require that number. Since 01 January 2016, Dubai’s population has risen by 14.2% to 2.86 million over the past 21 months – this equates to an annual growth of 8.1%. If that growth rate were to continue to September 2019, the population would have increased by 480k. How many extra residential units will be needed? Furthermore with a swathe of lower priced realty entering the market there will be more buyers available, compared to earlier in the cycle when most of the property available was beyond the range of most residents.

The luxury end of the villa realty sector ticked over in Q3 with the two biggest deals being in Emirates Hills, selling for US$ 26 million and US$ 16 million, whilst The Palm saw two deals worth US$ 7.5 million and US$ 6.1 million. According to Luxhabitat, the overall villa market recorded Q3 deals totalling US$ 187 million, with 71% of the sales occurring in the Emirates Living areas.

Skyview Levels at Golf Vita – with views of the Trump International Golf Club – is the latest Damac Properties’ launch. Located on the 42 million sq ft community site, the project includes 1 – 2 B/R apartments, with prices starting at US$ 157k.

With a focus on revitalising the sector, Al Ghurair Properties is to spend US$ 1.4 billion on 58 buildings, including 3k residences and 350k sq ft of retail space. Spread across the whole of Dubai, including Barsha, Bur Dubai and Deira, work will be completed by 2020.

Al Qabdah Building Contracting has been awarded a US$ 109 million contract by Jumeirah Golf Estates for its Alandalus development comprising 715 1-4 B/R apartments in six apartment buildings (two more are already under construction), 95 villas and a retail centre. The first two towers will be handed over in Q2 next year with phased handovers of the other six buildings from Q3 2019.

Nakheel has awarded a US$ 45 million contract to APCC Piling for the construction of six marinas at Deira Island that will accommodate 614 craft. The developer has already invested US$ 2.0 billion on the project which, when completed, will have a 250k population and will add 40 km to Dubai’s coastline.

Ishraqah has announced that its US$ 350 million The Onyx is completed and handed over. The development – located on SZR – comprises a 4-star hotel, two towers (one commercial and the other residential) and three podium levels for retail.

Dubai-based Hospitality Management Holding (HMH) has added to its property portfolio by acquiring the 5-star, 337-key Coral Dubai Al Barsha Hotel from Faisal Holding; it was formerly known as Auris Plaza Hotel.

Kingston Holdings International Limited has signed up InterContinental Hotels Group to develop and manage Holiday Inn & Suites in Dubai Business Bay. The development, set to open in 2021, will comprise 350 keys, 400 residences and a small boutique shopping arcade. The hotel chain already has three properties in the area – Hotel Indigo, Crowne Plaza and an InterContinental Residences.

September was another disappointing month for the hospitality sector, with STR’s preliminary data indicating a 14.8% decline in RevPar (revenue per available room) to US$ 104 as the ADR (average daily rate) fell 10.6% to US$ 136. Although demand nudged up 0.6%, this fell well short of the 5.6% increase in supply.

The latest addition to the ENBD Reit Ltd’s portfolio is The Edge in Dubai Internet City, bought for US$ 60 million from developer Sweid & Sweid. It is expected that the 7-storey office building, with tenants including McGraw Hill, Oracle and Snapchat, will deliver a gross yield of 7.4%.

The world’s first government entity to adopt blockchain technology is Dubai Land Department which has been developed in co-operation with Smart Dubai. The system, with a secure database, keeps a record of all realty contracts and related documents / details and is linked with other entities such as DEWA, du and etisalat. With the tenant database recording Emirates Identity Card, bank records, visa details etc, online payments can be made from anywhere in the world.

On Tuesday, Uber introduced the Tesla, to its Dubai customers, at a base rate of US$ 2.72 and US$ 0.52 per km – the same rate as UberBlack.  Both Model S and Model X of the electric vehicles are available for hire.

Having signed a three year contract in July, P&O Ports (part of DP World) plans to start operations in the French Port de Sete in Q1 next year. The contract sees the Dubai operator managing a container yard, with a draft up to 14.5m and 457 metres of quay. Strategically located, the deep draft port forms part of the network of feeder routes to Italy, Spain and France, with ready access to major Mediterranean hubs. The port is also the location for a new superyacht marina to be run by another DP World subsidiary, P&O Marinas, in association with IGY Marinas.

According to September’s Emirates NBD Dubai Economy Tracker Index, expansions in both new business and output indicated a welcome improvement in the emirate’s business environment. Although the index declined by 1.1 to 55.2, month on month, the indicators point to on-going improvement in the economy, driven by construction and retail/ wholesale. Firms in the non-oil sector continue to reduce their prices, so as to remain competitive and to boost demand in a demanding market.

Good news for the local economy came with IMF’s latest forecast that sees UAE’s growth double to 3.4% come next year and the bigger region of Menap (Middle East, North Africa, Afghanistan and Pakistan) up to 3.5% from 2.6%. This latest global forecast indicates 2018 growth at 3.5% (well up on this year’s 2.6%) but the advanced economies are set for a paltry 2.0%.

Whilst maintaining a stable outlook for the country’s banking sector, Moody’s Investors Service has indicated that because of sluggish 2017 growth, NPLs (non-performing loans) will rise from its June 2017 5.3% level to up to 6.0%. Meanwhile the topsy-turvy credit growth has seen levels of 8.0% in 2015, 5.8% last year, an expected 2.0% this year and a forecast 5.0% next year, as faster economic growth returns to the market.

The Federal Tax Authority (FTA) has announced that online registration is now open and has encouraged companies, that have taxable supplies and imports surpassing the mandatory registration threshold of c US$ 100k, to register early. Businesses with taxable supplies and imports from abroad that are below the mandatory registration threshold and exceed the voluntary registration limit of c US$ 50k can optionally register for VAT. All businesses, however, must be registered by 01 January 2018 and should submit their registration applications before 04 December 2017.

Etisalat is to spend US$ 817 million to modernise its infrastructure, expand its fibre optic networks and implement new technologies. The telecom is targeting 2020 to complete its 5G network so that it becomes “one of the fastest, smartest and most advanced networks in the world”, by the time Expo opens in October of that year.

Dubai Islamic Bank reported impressive Q3 numbers, with increases in both Islamic financing and investing transactions – up 21.0% to US$ 545 million – and net profit by 25.6% to US$ 300 million. The main drivers were an increase in customer deposits and growth in financing assets, although impairments doubled. The emirate’s largest Sharia-compliant lender has posted a 10.0% jump in YTD profit to US$ 899 million, with financing assets14.0% higher at US$ 35.8 billion and deposits up 17.0% to US$ 39.1 billion.

Marka’s shareholders have approved plans to continue business but will restructure the business, and introduce a strict cost control programme, whilst existing underperforming fashion and sports sections will be closed. Since its September 2014 listing, the retailer has accumulated losses of US$ 98 million of which US$ 34 million arose in Q2.

As it broadens its range of capital investments, Dubai-listed Amanat Holdings announced that it plans to invest US$ 272 million in the Saudi healthcare and education sectors which would bring its total external investments to US$ 472 million; this equates to about 70% of the company’s equity. 80% of the spend to date has been in the UAE and Saudi Arabia but the company will invest in other GCC countries when circumstances so direct.

The DFM opened Sunday (08 October), at 3564 and by the end of the week had risen by 96 points (2.7%) to close on Thursday, 12 October, at 3660. Volumes also improved this week, with trading of 467 million shares, valued at US$ 144 million, (cf 245 million shares for US$ 108 million, on Thursday, 05 October). Emaar Properties was up US$ 0.04 at US$ 2.38, with Arabtec also higher by US$ 0.02 to US$ 0.82.

By Thursday, Brent Crude was US$ 0.75 (1.3%) lower on the week, closing at US$ 56.25, with gold reversing its recent downward trend, adding US$ 24 to US$ 1,297 by 12 October 2017.

This week, 9.2% of the 9k employed in the two Lancashire sites (Warton and Samlesbury) of BAE Systems have been retrenched, along with a further 1.2k jobs in other locations. Workers at the defence contractor’s two sites are involved in the production of the Eurofighter Typhoon jet, which has seen a marked slowdown in orders, not helped by increased competition from the likes of the new F-35, the US F-16 and France’s Rafale.

It is reported that its chief executive Tom Enders has written to all 130k Airbus employees warning them of “turbulent and confusing times” in the wake of fraud and corruption investigations by both UK and French authorities. Senior management had reported anomalies in the 2003 US$ 2 billion sale of Eurofighter combat jets to Austria to UK investigators, with the possibility of illicit payments being made in other deals, now being investigated.

Not satisfied with slapping a 220% tariff on Bombardier last month, the US Department of Commerce has now ruled again in favour of Boeing and added a further 80% levy for alleged below-cost selling. The so-called subsidies are in relation to the Canadian plane maker’s C-Series, the wings of which are built in a US$ 690 million factory in Belfast, where a work force of 1k could be impacted by an adverse decision.

The Organization for Economic Co-operation has reported that Q2 growth was up from 0.5% to 0.7%, Q on Q, driven by improved investment (0.3%) and private consumption (0.5%), with net exports dipping 0.1%. The major economies of USA, Japan, Germany and the UK registered movements of 0.8%, 0.6%, 0.6% and 0.3% respectively, with German growth softening, UK flat and Japan’s real growth doubling.

September saw some weak economic data coming out of China with the Caixin/Markit services PMI falling to 50.6 (52.7 in August) – its lowest level since December 2015 – and one of the weakest since the survey began in 2005. Recent expansion in both manufacturing and services softened last month with new business (at 52.0) moving at a slower rate. Indicators are that there will be continuing downward pressure on growth in Q4 as China moves its economy from the traditional heavy industry and investment to more emphasis on high value-added services in finance and technology. Meanwhile the central bank, in a bid to add extra finance to SMEs and boost the softening private sector, has cut the reserves that some financial institutions hold, in a bid to ease liquidity.

The Organization for Economic Co-operation has reported that Q2 growth was up from 0.5% to 0.7%, Q on Q, driven by improved investment (0.3%) and private consumption (0.5%), with net exports dipping 0.1%. The major economies of USA, Japan, Germany and the UK registered movements of 0.8%, 0.6%, 0.6% and 0.3% respectively, with German growth softening, UK flat and Japan’s real growth doubling.

The latest US company to seemingly flout the UK tax laws is Airbnb which, despite a revenue of US$ 870 million, managed to pay corporation tax of only US$ 250k last year! The nine-year old Californian accommodation website uses an Irish platform to book commissions (3% from landlords for each booking and fees to users) earned in the UK; last year, it had 5.9 million travellers and 168k listings in the country. Airbnb, valued at over US$ 24 billion, estimated that it boosted the UK economy by US$ 4.6 billion over the year.

It has not been a good year for Japanese business when it comes to product defects. Takata started the eventful year by misleading car makers about the safety of its exploding air bags, followed by Toyo Tire & Rubber admitting that it had falsified data on rubber for earthquake-proofing building. In June, Shinko Wire, a Kobe Steel affiliate, admitted that it had misstated data on the tensile strength of stainless steel wires for springs. Only last week, one million Nissan vehicles were recalled because of unauthorised inspectors approving vehicle quality. The latest revolves around Japan’s third biggest steel-maker, Kobe Steel, falsifying data related to the strength and durability of some of its aluminium and copper parts products.

Despite all these troubles, Tokyo’s Topix index hit a ten-year high at 1,695 on Tuesday with the Nikkei 225 recording its sixth successive daily gain to close on 20,824; it closed on Thursday on 20,954, with Softbank reaching a 17-year high. Investors were heartened by a cooling in the North Korean crisis and improving economic data from home and the US.

August  growth in German industrial production expanded at its highest in six years as it jumped 2.6% month on month, having declined 0.1% in July; Q3 figures should prove interesting reading. The growth would have been even better at 3.2% if energy and construction had been stripped from the data. On an annual basis, the growth figure came in at 4.2% and is in line with last week’s factory orders growing by 3.6%, driven by strong foreign interest.

UK’s retail sector continues to improve with September retail like for like sales 1.9% higher, as August figures were adjusted up to 1.6%; food sales were 2.5% higher whilst non-food lagged somewhat behind at 0.5%. It appears that the main driver is focused on essential purchases rather than the big-ticket items. Another sector going well is tourism with a record 40 million visitors (spending US$ 34 billion) expected this year; this is estimated to be worth US$ 168 billion to the country’s economy.

On the flip side, August saw UK’s trade deficit hit an all-time high at US$ 18.9 billion – 10.9% higher than a month earlier. Imports rose by 4.2% but exports, despite the fall in sterling, increased at the much lower 0.7% rate. Despite this, there is every chance of a rate hike next month so as to keep rising inflation in check.

With the 2017 hurricane season nearing a welcome end, Morgan Stanley expects overall insured losses this year to be around US$ 100 billion. Insurance companies have had to bear the brunt of the cost. For example, AIG estimate that the three major storms – Harvey, Irma and Maria – has cost US$ 2.7 billion with Morgan Stanley estimating losses of above US$ 2.6 billion and Chubb US$ 1.3 billion. Unlike PM Theresa May, these entities will have no problems Ridin’ The Storm Out!

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Sign Of The Times

The latest Cavendish Maxwell report has pointed to a decline in both Dubai property sales and rentals in Q3 but an upturn in Q4 or early 2018 is anticipated. With regard to sales, villa and apartment prices dipped 1.4% and 1.2% respectively whilst rentals declined 3.5% and 2.8%. The usual drivers are still in play – new project handovers (especially at the budget end) and job losses in certain sectors. Over the past nine months, the consultancy estimates that 11.8k residential units have been handed over.

Nshama Property Developer announced that it had delivered 320 units of Zahra Townhouses in Dubai Town Square. The total project covers an area of 31 million sq ft and is located near to the Expo 2020 site and the Al Maktoum International Airport.

Wilton Terrace 1 becomes Ellington Properties’ fifth Dubai launch. Located in MBR City, work has already started on the first of two towers which will house 150 residential units and include a recreational area with a pool.

Dubai Municipality plans a new 763 hectares residential area in Umm Nahd-3.

After several false starts, Berwaz Dubai (Dubai Frame) will open next month featuring uninterrupted views of Old Dubai to its north and New Dubai to the south. Its two 150 mt towers are connected by a 93 mt bridge at the top. The attraction will be managed by Emaar.

France’s EDF has started their studies into the planned US$ 518 million Hatta Dam project – the first of its kind in the region. On completion, it will have a 250MW capacity, with the dam itself capable of holding 1,716 million gallons and a further 880 million gallons in an upper reservoir. The move to hydro power is just one piece of the energy jigsaw that will see 75% of the country’s needs emanating from clean energy.

MAF Cinemas, which expects its customer base to jump 50%, to 18 million this year, is set to invest US$ 327 million to grow its cinema portfolio by a mix of acquisitions and internal expansion. It has already sourced 23 new locations that will open over the next three years; in 2017, 16 VOX cinemas will open, with a total of 145 screens, in seven countries.

DP World is in discussions with the Malian government to develop a transportation and logistics strategy, with electronic customs processes, to improve the landlocked African country’s economy by tapping into its huge resource potential. The Dubai operator would bring its expertise to maximise the benefits of the 1.8k km of inland waterways, carrying agricultural products and gold to international markets.

Emirates and flydubai have announced an extensive code-sharing arrangement that involves a greater integration of services and initially covers 29 routes, most notably in Eastern Europe, the Gulf and India. Both carriers will continue to be managed independently and more code sharing is expected in the future. (This week it was also announced that Emirates will be the first to receive Boeing’s all-new 777X aircraft, when it gets rolled out in 2020).

Mashreq Bank on Sunday launched Mashreq Neo, a new full-service digital bank – a financial institution without any branches and where every transaction is via mobile devices. Although not the first of its kind in the region, it is the only one to provide access to international markets for investment opportunities.

With a 10-year maturity and a 4.85% coupon rate, Emirates NBD has obtained a US$ 156 million senior unsecured kangaroo bond; ANZ was the sole lead manager.

Channel VAS has seen Abu Dhabi investment firm Waha Capital invest US$ 55 million for a minority stake. The Dubai-based financial technology company operates in over 25 emerging markets and provides micro finance lending solutions to over 500 million mobile network subscribers.

Dubai’s Souqalmal.com has raised US$ 10 million, including from UK site GoCompare, UAE Exchange Group and Saudi’s RTF, to finance future expansion plans. This is the third foray by major international investors into the local online sector following Amazon’s US$ 580 million acquisition of Souq.com and China’s DiDi Chuxing’s investment in Careem.

Despite a monthly fall from 57.3 to 55.1 in the headline seasonally adjusted Emirates NBD UAE PMI, growth in the country’s non-oil sector remains strong, as recorded by the best quarterly return (at 56.1) in two years. The main drivers behind this remain above-average expansions in both output and new orders but on the downside new overseas business, output charges and input price inflation all softened.

According to the UAE Central Bank, total remittances in Q2 came to US$ 11.1 billion, following the Q1 figure of US$ 10.1 billion. In Q2, the top three nationalities were Indian (US$ 4.0 billion), Pakistani (US$ 1.1 billion) and Filipino (US$ 0.8 billion) which accounted for 52.6% of all remittances.

GEMS Education is reportedly streamlining its corporate structure as it plans a US$ 1 billion loan facility to refinance existing debt prior to an expected London IPO. The company, which operates 250 schools in 14 countries, could reach a market valuation of up to US$ 4.0 billion.

It is reported that Emaar Properties is preparing to float parts of its business with an IPO before the end of the year. Accordingly, it has transferred a number of key assets to a new investment vehicle, Emaar Development; these include 49 units in the Burj Khalifa and two Address hotels still under construction. It is expected that existing shareholders will receive dividends from the funds raised from the new IPO. More information will be made available but it is known that the new entity will be divided into five sections – completed units, empty plots, JVs, mixed use projects under construction and villa communities under construction. The parent company will retain 70% ownership, with the balance going to the public.

Gulf General Investment Company has finalised a US$ 572 million debt restructuring deal that will buy the company time to dispose its non-core assets in an organised way. Among GGICO’s portfolio is the development of a 50 million sq ft community in Dubai Sports City. In its latest Q2 return, the company saw losses almost double, from a year earlier, to US$ 11 million whilst revenue halved to US$ 30 million. Last month, its shares were trading at US$ 0.10 compared to US$ 0.14 in September 2016.

Drake & Scull has completed its restructuring program and will focus on the local market and its core sector strength in mechanical, electrical and plumbing (MEP). The company will benefit by Tabarak Investment’s input of US$ 136 million, with the DFM approving the capital increase activation. Its capital had been reduced to US$ 156 million from US$ 623 million prior to the Tabarak issue.

The DFM opened Sunday (01 October), at 3564 and recovered 27 points (0.8%) to close the week on Thursday, 05 October at 3591. Volumes improved this week, with trading of 245 million shares, valued at US$ 108 million, (cf 137 million shares for US$ 51 million, on Thursday, 28 September). Emaar Properties was up US$ 0.03 at US$ 2.34, with Arabtec also higher by US$ 0.02 to US$ 0.80.

By Thursday, Brent Crude was US$ 0.57 (1.0%) higher on the week, closing at US$ 57.00, with gold continuing its recent downward trend, dropping a further US$ 16 to US$ 1,273 by 05 October 2017.

It is reported that Russia and Saudi Arabia have agreed to establish a US$ 1 billion fund to invest in energy projects, technology and equipment. It will encompass not only the oil and gas sector but also electric power and renewable energy.

Ford is set to slash its costs by over US$ 14 billion over the next five years, as it moves its focus away from traditional vehicles to electric and hybrid cars. As it aims to achieve an 8% profit margin, it is considering partnerships with ride services company Lyft (for its future self-driving cars), Indian automaker Mahindra and Chinese electric vehicle maker Zotye.

VW took an unexpected US$ 3 billion Q3 provision relating to the on-going diesel emission scandal that could bring its total damages bill to over US$ 30 billion. The latest provision indicates that the tainted VW engines are proving “far more technically complex and time consuming” to fix and, that even after two years, there may be more financial worries for the biggest car-maker in the world.

Google has agreed a US$ 1.1 billion deal with HTC Corp to acquire a division that develops the US firm’s Pixel smartphones. As part of the agreement, Google will inherit 20% of the Taiwanese workforce (2k) and acquire a non-exclusive license for HTC’s intellectual property. Google will use this as a quick way to try and catch up with Apple’s i-Phones. (Over the past seven years, HTC has seen its global smartphone market share sink from 8.8% to 0.9%, as its share value has plummeted 94%, giving it a current value of US$ 1.9 billion).

Tesco posted a much improved H1 profits figure to US$ 750 million (compared to US$ 95 million in the same period in 2016), attributable to it not raising prices as high as its competitors; however, sales in Q2 dipped 2.1% and 2.3% a quarter earlier. The company has already retrenched 1.2k HO staff and 1k from its Cardiff call centre in a bid to slash costs by US$ 2.0 billion. Meanwhile a London court case sees three ex-Tesco executives on trial, accused of fraud and false accounting, whilst overstating the supermarket’s profit forecast by US$ 330 million in September 2014.

The former head of HSBC’s foreign exchange, Mark Johnson is on trial for fraud and conspiracy, in New York accused of a scheme  the made the Bank US$ 8 million profit; furthermore it is alleged that he, the bank’s former head of European  currency trader and none other traders made commission of US$ 3 million. The bank had been hired by Cairn Energy Plc to convert the proceeds of a US$ 3.5 billion to GBP. The deal was done when sterling was at its highest for the day with accusations that the price was ramped up with 75% of the trading occurring five minutes before the trade’s execution.

Last week, Ryanair was in the news – this week it is the turn of Monarch Airlines, which stopped trading on Monday, with 110k of its clients still overseas. The fifth biggest airline in the country employed 2.1k and had reported a US$ 395 million loss last year. Even though it has carried 14% more passengers than last year, its revenue was down US$ 135 million. It is easy to blame Brexit and the fall in the value of sterling for the airline’s demise but “depressed prices” in the short haul travel market, along with “problems” in places like Egypt and Tunisia, are the root causes of the failure.

Another UK company seemingly in trouble is the building and services firm Carillion which announced a profit warning, advising that year end results would be below expectations. This comes after a H1 loss of US$ 1.6 billion, including a US$ 182 million impairment charge on its UK and Canadian construction businesses. Further write-offs were US$ 270 million for support services contracts’ losses and a July charge of US$ 1.0 billion. Following the announcement of the forecast revenue lowering to around US$ 6.2 billion, its share value plummeted by 20%.

For the first time in nine years annual house prices in London have fallen – and, according to Nationwide, not since 2005 has the capital been the country’s “worst-performing” region, (being the only location to post a Q3 annual fall of 0.6%). The average growth, at 2.0%, was up 0.2% – month on month – with the average cost of a UK property coming in at US$ 285k. Although the north/south divide is seen to be slowing, the gap in cash terms remains “exceptionally high” at US$ 231k – a figure which has doubled over the past decade. Despite all this, compared to pre-GFC London’s prices were still 55% higher compared to the national 14% average.

With the Kingdom posting its second quarterly contraction, down 1.0% from a year earlier, Saudi Arabia is in recession. The main driver behind the demise is its oil GDP shrinking 1.8% in Q2. Not only do authorities have to manage falling prices but Saudi Arabia is at the forefront of OPEC’s initiative to cut output. Furthermore it is going through a time of great structural change and non-oil industries seem to be stagnating – only 0.4% growth this quarter compared to 0.9% in Q1. BMI expects the Saudi economy to remain in recession for the rest of the year but to recover next year with a “modest” growth of 1.3%.

Business confidence in Japan is at a decade-high on the back of improving global demand. The Abe government is hoping that the economic recovery will help push inflation towards its 2.0% target and to boost wages and consumer spending. Recent high H1 corporate profit returns and a weaker yen are signs that there is traction in the country’s economic recovery, with 2.5% annualised growth recorded in Q2.

The Indian drinks tycoon, Vijay Mallya, has been rearrested in London on new charges of money-laundering, involving the collapse of his airline Kingfisher. In March 2016, he reportedly defaulted on bank loan payments and left debts totalling US$ 1 billion. His monetary affairs are also being investigated by his country’s Central Bureau of Investigation.

India’s answer to Uber, Ola, has just received additional funding from a group of investors including SoftBank Group and Tencent, This cash influx will help the company with latest technology requirements and finance the need for extra vehicles and manpower. With Uber hoping to get the upper hand by driver incentives and increased promotions, it remains to be seen which of the two gets the lion’s share of the estimated US$ 10 billion market.

The Indian drinks tycoon, Vijay Mallya, has been rearrested in London on new charges of money-laundering, involving the collapse of his airline Kingfisher. In March 2016, he reportedly defaulted on bank loan payments and left debts totalling US$ 1 billion. His monetary affairs are also being investigated by his country’s Central Bureau of Investigation.

In Q2, the Indian economy grew at its slowest pace (at 5.3% compared to 9.1% a year earlier) in three years, as growth itself declined for the sixth straight quarter; indeed, without government spending, expansion would have been a lot lower at 4.3%, a particular worry since this represents 90% of the country’s economy. Ever since Prime Minister Narendra Modi took over the reins from Manomohan Singh, he has promised more jobs and a stronger economy. This is not reflected in the latest numbers that show industry as a whole up by only 1.6%.

There is also some concern about the state of India’s mainly government-owned public sector banks, with a reported 17 of 21 of them having a bad loans ratio of more than 10%, including the Indian Overseas Bank at 25%.

One of the main reasons that the world has seen politics turned on its head in recent times is political cronyism and links between governments and big business. The most recent example is the former German Chancellor Gerhard Schroeder, seemingly cashing in on his position,  being elected chairman of the Russian state-controlled oil giant Rosneft. As Chancellor for seven years to 2005, he was a strong supporter of Nord Stream’s building of a pipeline between Russia and Germany; once out of office, he became chairman of the Nord Stream shareholders’ committee.

A meagre 0.1% hike in August consumer spending and inflation falling to its lowest pace in two years did not spook Wall Street. By 30 September, both the Nasdaq (at 6,496) and the S&P 500 closing on 2,519 had reached record highs. The Dow Jones finished the month on 22,405. The fact that President Trump is considering the hawkish former Federal Reserve Governor Kevin Warsh as a replacement for Janet Yellen was the main driver for the late boost in market activity. By 05 October, all three bourses had headed north again to 6,567, 2,547 and 22,762 respectively, whilst the world waits for the inevitable bubble to burst.

There is no doubt that Donald Trump is annoying a lot of people, none moreso than the big multinationals who for years have been making “tax arrangements” whereby instead of paying US tax at a higher rate they have shifted their tax bases to countries with a lower tax regime. The three examples listed – Facebook, Apple and Amazon – seem to back up the US President who seems determined to do something about it when previous incumbents have apparently turned a blind eye.

A perusal of Facebook’s recent UK results is bound to raise concerns. Last year, it paid tax of US$ 1.4 million (equivalent to 8.8%) with a profit of US$ 77 million on revenue of US$ 1.1 billion; the previous year its tax bill of US$ 1.1 million (8.1%) was based on a profit of US$ 14 million on the back of US$ 279 million. In 2014, its tax bill was just US$ 6k. Since April 2016, the company, with a 1k payroll, has booked revenue from larger advertisers, such as supermarkets and multinationals, through the UK books whilst smaller companies are invoiced through its Ireland office.

The European Commission is planning to take Ireland to court because it has failed to collect an estimated US$ 15.2 billion of back taxes from Apple. It estimated that Apple paid less than 1% in tax – when the Irish rate is at 15% (the lowest in the EU) and the US rate is at 35%.

The EU has also ordered Amazon to repay US$ 293 million in back taxes indicating that it had been given an unfair tax deal in Luxembourg. The European Competition Commissioner Margrethe Vestager argued that the US tech giant had paid “substantially less tax than other businesses”, which it said was “illegal under EU state aid rules”, with 75% of its profits escaping any tax (equivalent to four times less than other companies).

The current EC President, Jean-Claude Juncker, was the prime minister of Luxembourg when this tax deal was made in 2003 – a case of the poacher turning gamekeeper – and an example of why many people remain suspicious of the inner workings of the EU. Brexit will not be the only problem facing the technocrats of Brussels  – Italian banks and the Greek economy have now been joined by Catalonia, Ireland and big business to reflect a crucial Sign Of The Times.

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Life Is A Highway

Jumeirah Beach witnessed two “smart” events this week. The first saw the Crown Prince, Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, attend the maiden concept flight of the world’s first self-flying taxi service. The two-seater AAT (autonomous air taxi), supplied by German company Volocopter, transports people – without a pilot – and can remain airborne for 30 minutes and reach speeds of 100 kph. The RTA is planning to use the services in the future and has enlisted US-based JDA Aviation Company to oversee preparations for AAT flights and manage safety.

Meanwhile the Costa ‘coffee-copter’ (a specially engineered drone) carried out a one day trial delivering from its Jumeirah Beach Road drive thru store to “beach” customers, within 15 minutes of ordering.

The DMCC unveiled plans of its rebranded Uptown Dubai (formerly known as Burj 2020), located at the south end of JLT. The project will comprise seven towers, with 10 million sq ft of built up space. With two ‘super-tall’ towers (each over 300 mt high) on either side of the plaza, the district will contain 3k residences, office space, a number of luxury hotels, a twin-level central entertainment plaza – bigger than New York’s Time Square – and 200 retail outlets. Phase 1 will be ready by 2020, with the final two phases slated for completion by 2024.

Work has started on another of Dubai’s iconic landmarks – the One Za’abeel – featuring two towers linked by what is to be the “world’s largest cantilever”. With Alec Engineering the main contractor, the twin towers (67 and 57 storeys), will have a 210 mt sky concourse – The Linx, at a height of 100 mt. Both towers will sit on seven basement levels and three levels of podium. The developer, Investment Corporation Development, expects completion by 2020.

Prescott Real Estate Development announced a US$ 45 million residential and commercial project, Prime Views. Located in Meydan Avenue, the 225k sq ft development will include 133 one-bedroom units and 18 two-bedroom units, with completion by Q4 2019. The area will also have a health club, retail and food outlets.

Arabtec’s subsidiary, Target Engineering, has won a US$ 53 million Emaar contract for phase 1 of the Forte Project in Downtown. The work involves the construction of five basements for two residential towers and should be completed by the end of Q3 next year. In July, the same company won four contracts totalling US$ 79 million.

Sales in Mohammed bin Rashid Al Maktoum City District 1 have gone well, with 520 villas already sold for a combined total of US$ 2.45 billion in its first two stages. The 267 villas in phase 1 are almost ready with the balance in the next phase completed by next year.

It is expected that Marriott will open six new regional properties in the coming months, with three destined for the Dubai market – Bulgari on  Jumeirah Bay Island, Renaissance in Downtown and a ‘W’ on Palm Jumeirah. To those who think the sector is saturated, the world’s largest hotel chain has 18 more properties in its Dubai pipeline.

Revenues and room rates continued their downward spiral into August, with latest STR figures showing declines in occupancy (down 5.9%) to 68.4%), average daily rates off 8.3% at US$ 115 and revenue per available room 134.7% lower at US$ 79. Despite YTD demand increasing by 4.8%, this was less than the 5.1% growth in new supply.

According to the latest MasterCard Global Destinations Cities Index, Dubai was ranked the fourth most popular in the world behind Bangkok, London and Paris. Last year, the emirate attracted 14.9 million visitors who spent a total of US$ 28.5 billion.

The Global Competitiveness Report ranks the UAE 17th in a listing of 137 countries in terms of competiveness – down one place from 2016. Despite this, the country is still the leading nation in the Arab world. The top three positions went to Switzerland (again), USA and Singapore.

A German study, carried out by auto parts retailer kfzteile24, has put Dubai as the second best city for driving out of more than 100 global locations! Just behind Dusseldorf, it came ahead of Zurich, Tokyo and Basel.

A Knight Frank report indicates that Dubai has the 18th most expensive global rent – at US$ 44 per sq ft – when it comes to high-rise buildings. Dubai’s rent, which has remained flat in H1 – is still some way off that of the top three – Hong Kong, New York and Tokyo at US$ 304, US$ 162 and US$ 140 respectively.

In yet another survey this week sees the country tenth in the HSBC Expat Explorer study of most preferred destinations for expats. UAE has moved up two places in the survey of 27.5k people around the world with Singapore, Norway and New Zealand in the top three places.

A report by Payfort expects the regional e-commerce market to double to US$ 69 billion by 2020, with the two main players, UAE (US$ 27 billion) and Saudi Arabia (US$ 22 billion) dominating the sector.  Some studies indicate that the UAE has the world’s highest social media penetration. (Coincidentally, the US$ 1 billion e-commerce site, noon.com, driven by the Emaar Chairman Mohammed Alabbar, goes live this Sunday).

There was no surprise to see that Dubai International recorded its busiest month ever in August with a 6.6% jump in passenger numbers to 8.23 million, compared to the same month in 2016. Despite a 1.7% decline in flight movements to 34.4k, the uptick was driven by a 7.2% hike in the number of passengers per flight to 246. In August, cargo handled reached 222k tonnes – a 10.1% month on month rise.

JAFZA posted a 2.2% increase in H1 profit to US$ 164 million despite a marginal 0.2% fall in revenue to US$ 266 million. During the period, capital expenditure was at US$ 198 million.

A Dubai Chamber of Commerce report estimated that the sale of bottled water in the country will top US$ 736 million by 2021, growing at a 9.3% compound annual growth rate. Of the current total, carbonated water accounts for just 1%, flavored water – 5% – and the balance distilled water.

Sunday will see the start of the new Excise Duty that will result in the current selling prices of both energy drinks and cigarettes doubling overnight whilst carbonated drinks will register a 50% retail price increase.

Meanwhile, October petrol prices will also change on the same day. Special 95 will see a 5.8% increase to US$ 0.555 per litre, with diesel prices up 5.0% to US$ 0.572.

DHL has announced a 4.9% hike in its regional annual general average price increase commencing 01 January 2018. The global express service provider indicated an additional rate increase for heavier (more than 300kg) and bulkier time definite international shipments.

Emaar’s chairman, Mohamed Alabbar, has been appointed a board member of Aramex; in July, several of his investment companies acquired a 16.45% in the logistics company.

By June, the federal government had a 6.7% budget surplus; YTD revenue came in at US$ 10.2 billion (equivalent to 78.4% of the 2017 total), as expenditure was lower at US$ 8.4 billion.

The country’s Q2 inflation – at 2.0% – was well down on the previous quarter’s level of 2.7%. There were increases in housing/utilities of 0.9% and food/beverages – 1.1% – whilst transport costs dipped 1.1%.

The country has launched a US$ 136 million Mars Science City project which aims to replicate a viable and realistic model of life on the Red Planet. The project, on 1.9 million sq ft of land, will include laboratories and agricultural testing facilities to be manned by a UAE team of scientists and engineers.

The UAE is using Japanese assistance in its plan to increase the region’s rainfall by cloud seeding. The researchers will follow the aircraft dispersing the seeds and measure their efficacy and a cloud’s micro-properties. The Japanese scientists, along with their local counterparts, will then further study the seeding effects in laboratory tests and information gleaned from aerial and ground-based measurements.

With its first of four planned nuclear reactors 96% complete, the UAE Energy Minister, HE Suhail Mohammed Al Mazrouei, announced it will open next year. Korea Electric Power Group is building the US$ 20 billion Barakah plant and when all four reactors are in operation, they will produce 5.6k MW of electricity every year. In its move away from fossil fuels, the country is aiming for 27% of ‘clean’ energy by 2021, rising to 50% by 2050.

The Islamic Development Bank has issued a US$ 1.25 billion sukuk on Nasdaq Dubai – its eighth on the exchange, bringing its total value to US$ 10.25 billion. The latest listing brings the bourse’s total value of sukuks to US$ 52.5 billion.

The DFM opened Sunday (24 September), at 3633 and fell 67 points (1.9%) to close the week on Thursday, 28 September at 3564. Volumes continued on the thin side, with trading of 137 million shares, valued at US$ 51 million, (cf 86 million shares for US$ 44 million, on Thursday, 21 September). Emaar Properties was down US$ 0.09 at US$ 2.31, with Arabtec down a further US$ 0.02 to US$ 0.78. For September, the bourse dipped 72 points, having started the month on 3638, whilst Emaar was only US$ 0.01 lower but Arabtec dropped US$ 0.11.

By Thursday, Brent Crude was US$ 0.73 (1.3%) higher on the week, closing at US$ 56.43, with gold continuing its recent downward trend, dropping a further US$ 6 to US$ 1,289 by 28 September 2017.

Scalia, owned by VW, has been fined US$ 1 billion by EU regulators for its role – with four other companies – in a 14 year cartel to fix truck prices. DAF, Daimler, Iveco and Volvo had already been fined a combined US$ 3.3 billion.

Fairfax Media is planning to divest itself of its Domain real estate business in a US$ 1.6 billion deal that will see shareholders receive one share in the new entity for every ten Fairfax shares owned. Australian analysts value each of Fairfax Media’s 2.3 billion shares at US$ 0.87, with one Domain share worth US$ 0.70.

Citing “continued investment in prices and infrastructure”, Aldi has reported a 17.0% slide in 2016 UK profit despite a 13.5% hike in revenue to US$ 11.9 billion. The German chain, with 726 stores in the country and plans for a further 70 this year, has a 6.9% market share and is regarded as having the lowest prices in the sector.

According to Moody’s, as it cut the UK’s rating one notch to Aa2, the country’s budget deficit will hover around 3% of GDP in the coming years and will not reach the government’s 2020 target of 1.0%. Even though the deficit has fallen dramatically since 2010, when it stood at 10%, the agency has indicated that the outlook had weakened somewhat after the fall of the Cameron regime which had pushed austerity measures a little too far. At this level, the UK will be one of the few developed countries whose public debt ratio is likely to rise – but probably no higher than 92% of GDP within the next two years.

There has been yet another Chinese acquisition of a UK tech company – this time in a US$ 750 million deal, Canyon Bridge has bought Imagination. The chip designer decided to go ahead with a sale after its largest customer, Apple, announced in June that it would stop buying its products.

To some, Ryanair have been flying close to the wind for some time and their day of reckoning has arrived. The CAA, Civil Aviation Authority, had threatened the Irish budget airline with legal action for “persistently misleading” passengers about their rights, following the early September announcement of 50 daily flights to be cancelled until the end of October and this week’s suspension of 34 routes during the winter season. In all, the total number of affected customers amounts to 800k.

This week the US authorities slapped a draconian 220% import tariff on the sale of Bombardier C-Series jets that could impact on thousands of jobs in Northern Ireland. Consequently, the UK government has reacted warning Boeing, the instigator of the complaint, that its status as a ‘long-term partner’ is at risk. The US company is also having legal battles with Airbus, as both sides accuse each other of taking advantage of government subsidies. No wonder then that The Economist called Boeing’s action “a flight of hypocrisy”.

One UK industry that will benefit from Brexit is sugar beet. For the first time in fifty years, it will be in a position to produce and sell as much sugar as it wants; on the other hand, European competitors from the likes of Germany and France can do the same. Incidents, like what happened in 2015, will not happen again; because of a bumper harvest, British Sugar produced 1.4 million tonnes but could only sell 1.06 million tonnes, having to store the balance (at great expense) for the following year. 60% of the UK’s 2 million tonne consumption emanates from UK sugar producers, with 15% from the EU and the balance from the rest of the world.

If anyone was questioning the efficacy of Chinese companies, they will just have to note that the country’s August industrial profits jumped 24.0%, year on year, to US$ 101 billion – its highest increase in four years and 16.5% higher than July’s return. The main driver is a government-backed construction boom that has seen building material prices ratchet higher.

Fitch Ratings has concerns about China’s high debt levels and warned of the distinct possibility of local government bond defaults and its contagion effect on the global economy. The bonds, issued by Chinese local government financing vehicles (LGFVs), have increasingly utilised the country’s shadow banking sector, especially after official lines of credit diminished, as the central government introduced stringent regulations. It is estimated that LGFV debt equates to 5.4% of China’s GDP and that a massive US$ 605 billion of such bonds have been issued since 2015.

The Asian Development Bank has amended its April 6.5% growth forecast for China to 6.7% (and its 2018 from 6.2% to 6.4%); this is in line with the IMF’s latest estimates. In H1, China’s growth was at 6.9%, driven by impressive service growth, improving exports and strong domestic consumption. However, there are concerns that rising debt levels and the move to a more market and services-driven economy may drag growth rates lower; it is noted that S&P’s worries saw the agency cut China’s sovereign credit rating to A+ from AA-.

In August, with apparent self-interest in mind, the Brazilian government agreed to open up a vast 46k sq km Amazonian reserve (as big as Denmark) to commercial mining. Following indigenous and global concerns about the environmental damage that would result, the President Michel Temer decree has been revised to prohibit mining in conservation or indigenous areas.

The Bank of England has forecast that if there were a sharp economic downturn, the banks could lose US$ 41 billion on their lending on credit card and personal loans. This could happen if interest were to suddenly rise and there was a spike in unemployment levels. As there are worries in the increase in consumer debt, it has requested UK banks to hold an extra US$ 13.7 billion to guard against the increased “pocket of risk”. As inflation levels are nearer 3% than the BoE’s 2% level, expect interest rates to probably double to 0.5% in the coming months.

The ECB President Mario Draghi is confident that recent positive economic data will continue and the euro area economies finally have broad-based traction, driven by improving employment levels and consumer confidence. Although the inflation level has still not reached the 2.0% target, the bank admits that “a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialise”. There is every possibility that the bank could consider the possibility of rate hikes and a tapering of its massive QE monthly purchases as early as next month.

As he had promised in his manifesto, Donald Trump is keen to overhaul the US tax system, including slashing corporation tax from 35% to 20% and doubling the amount individuals/families can deduct (before paying tax) to US$ 24k. There is no doubt that the tax system is cumbersome, complex and out-dated and any simplification would make the country more competitive. It will be interesting to see how some of the country’s big companies, that seem to hide profits in offshore locations, react!

One of the major decisions ever made in Saudi Arabia is that of allowing women to drive in the Kingdom. It is a sign to the rest of the world that it is committed to implementing ambitious economic and social reforms that can only benefit the long term future of the country and the region. To some of the women in the Kingdom, come June 2018, Life Is A Highway.

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I Get Knocked Down But I Get Up Again!

On Sunday, Sheikh Ahmed bin Saeed Al Maktoum launched the operation of 50 Tesla electric cars to be used by Dubai Taxi Corporation’s limousine fleet. This is the first batch of a 200-vehicle order which are fitted with several components for self-driving, in line with RTA’s target of making 25% of all taxi rides driverless by 2030.

The latest hotel in Emaar Hospitality Group’s portfolio will be the 202-key Address Harbour Point. The property is part of the developer’s 1.4 million sq ft twin tower project (of 65 and 53 storeys) in Dubai Creek Harbour that will also include Address Residences Harbour Point, along with a raft of retail and food outlets.

Bin Ghatti Developers already has 30 projects in Dubai which will add 6k residential units to the emirate’s portfolio. Currently, the company is planning a further US$ 817 million investment on 17 new projects in various locations, including Business Bay, Dubai Silicon Oasis and Dubailand.

Invest Group Overseas has forecast that its total investments will reach US$ 1.2 billion by 2020, including a US$ 245 million Dubai residential project due for launch later in the year.

Following the recent initiative by UK-based developer to accept Bitcoins for some units of their Aston Plaza and Residences in Dubai Science Park, fäm Properties has announced that it will accept the crypto currency for property rentals for a limited number of City Walk apartments.

Bloom Education expects that its contemporary institution, focusing on the Arabic language, arts and culture, will open in time for the 2018/2019 academic year. The centre, located in Barsha South, will see prominent Bahraini jeweler and artist, Rayyah Fathalla, as its first director. The 89k sq mt campus will also have two K-12 schools – one teaching the British curriculum and the other International Baccalaureate – and will have 4k students.

The 700 MW fourth phase of the world’s largest single-site concentrated solar power project has been won by a consortium of China’s Shanghai Electric and Saudi Arabia’s ACWA Power. The US$ 3.9 billion award equates to US$ 0.073 per kilowatt hour and the project will be commissioned in stages starting from Q4 2020. It is forecast that the Mohammed bin Rashid Al Maktoum Solar Park will generate 1k MW by 2020 expanding to 5k MW over the following decade.

A report by the Dubai Chamber of Commerce and Industry estimates that spending within the local tourism and travel sector, which accounts for 12.1% of the country’s GDP, will grow from 2016’s total of US$ 43.3 billion to US$ 56.0 billion by 2022. The main drivers behind this impressive growth are Expo 2020 and the numerous mega projects launched over the past year. One of the targets of Expo is to see the number of overseas visitors total 20 million which would be a 34.2% jump from last year’s figure of 14.9 million.

Abraaj Group and France’s Engie have agreed to develop a wind power platform in India, which could generate one gigawatt. This will go a little way to help the country reach its target of 175GW from renewables by 2022, 60GW of which would be from wind power (India already has wind power capacity of 32GW). The Dubai-based private equity firm, which manages over US$ 11 billion in assets, has two other Indian wind energy agreements – a 2015 deal with Aditya Birla Group and this year it became a majority shareholder in Jhimpir Power.

Dubai’s July annual inflation rate of just 1.0% is at its lowest level in over two years. During the month, there were declines in transport prices by 1.7%, whilst food and beverage remained flat but housing increased by 0.9%.

UAE’s new Excise Tax, which will commence on 01 October, will only be collected in e-dirham – the federal government’s e-payment platform, introduced in 2011; the prepaid cards are a means of payment for more than 5k government services. The government has introduced the “sin” tax – which will see a 100% levy on tobacco and energy drinks and  50% on sugary fizzy drinks – to discourage consumption of products that could be harmful to public health and the environment. In addition, it is expected to add an annual US$ 1.9 billion to government coffers.

Following a May directive from the Central Bank, advising financial institutions and advisors to resolve all mis-selling complaints within 90 days, it seems that the authorities are taking action. To date, over 100 complainants have had funds returned to them following the clampdown, with the Central Bank now having its own consumer protection division to deal directly with complaints.

The Central Bank has announced that medium and long term deposits, that make up 26.9% of the total deposits, have jumped 7.0% YTD to US$ 57.2 billion, compared to the same 7-month period in 2016. The main driver seems to be the Central Bank’s move to raise the deposit interest rate earlier in the year.

According to, HE Mubarak Rashid Al Mansouri, the country’s growth this year will be 3.1%, rising four notches to 3.5% in 2018. According to the Central Bank Governor, this has come about – despite low oil prices – from the economic diversification in the UAE.

It is expected that the expected 4.4% hike in the country’s trade next year, with both imports and exports on the increase, will prove a fillip for the logistics, warehousing and handling sectors. One location that looks to see further expansion is Jebel Ali Free Zone, already home to 328 logistics companies from 29 countries.

It is reported that Emaar Properties has obtained a US$ 1.5 billion corporate finance loan from First Abu Dhabi Bank. The company is also planning an IPO covering 30% of its UAE real estate development business in Q4.

As a 49% shareholder, DP World has announced that it would not be renewing its operating contract with PT Terminal Petikemas Surabaya which expires in 2019. The main reason for this withdrawal was that the Indonesian authorities had failed to meet the Dubai operator’s threshold for continued investment. The financial impact will be minimal as the port represents only 2.5 million TEUs (20’ containers) of DP World’s global figure of 85 million.

This week DP World also spent US$ 405 million when acquiring two local related shipping entities – Drydocks World (for US$ 225 million) and Maritime World, the owner of Dubai Maritime City. The former deal is subject to the successful completion of its debt restructuring process and both deals should be finalised by early next year.

Du is to pay a US$ 161 million interim dividend, with shareholders receiving US$ 0.035 per share.

DXB Entertainments has had a tough trading time exemplified by its Q2 results indicating that its losses had increased sevenfold from US$ 11 million to US$ 78 million on the back of a dip in quarterly revenue to US$ 33 million. This week, its major shareholder, Meraas, has given a US$ 67 million subordinated loan to repay certain debts and to fund ongoing operational expenses.

The DFM opened Sunday (17 September), at 3656 and fell 23 points (0.6%) to close the shortened week (because of the Islamic New Year) on Wednesday, 20 September at 3633. Volumes continued on the thin side, with trading of only 86 million shares, valued at US$ 44 million, (cf 108 million shares for US$ 56 million, on Thursday, 14 September). Emaar Properties was flat at US$ 2.40, with Arabtec down a further US$ 0.03 to US$ 0.80.

By Thursday, Brent Crude was US$ 1.94 (3.6%) higher on the week, closing at US$ 56.43, with gold continuing its recent downward trend, dropping a further US$ 38 to US$ 1,295 by 21 September 2017.

A memorandum of understanding was signed last week by Tata Steel and Thyssenkrupp to combine their European operations in a joint venture. The tie-up will see the formation of Europe’s second largest steelmaker with a combined turnover of US$ 18 billion but could result in over 4k retrenchments.

Following a 2005 US$ 7.5 billion leveraged buyout in which the company found itself  so much in debt going private, Toys ‘R’ Us has filed for bankruptcy – another indicator of the demise of  “brick and mortar” stores. The iconic toy retailer, founded in 1948 by Charles Lazarus, has secured a US$ 3 billion finance package as it tries to restructure by closing some stores and focusing more on expanding online business. Already this year, at least twelve major US retailers, including Gymboree, Payless and Perfumania, have filed for Chapter 11 bankruptcy.

Norway’s sovereign wealth fund hit a major milestone this week when it topped US$ 1 trillion on the back of soaring global stock markets and a weaker dollar. It is still some way off Japan’s Government Pension investment Fund’s total of US$ 1.3 trillion. Interestingly, the Chief Executive, Yngve Slyngstad, has indicated that the fund will be cutting the portfolio’s 23 different currencies down to three – US$, GBP and the Euro – and it would not be considering entering any new different asset class such as infrastructure.

In a bid to attract global companies to its state, Wisconsin has approved the country’s largest ever incentive package – a US$ 3 billion subsidy for Foxconn. In return, the Taiwanese manufacturing conglomerate has pledged a US$ 10 billion new LCD panel factory and to employ up to 13k high quality workers. Whether it works remains to be seen but a recent study indicated that even under optimistic projections break even could take 25 years.

Foxconn (in a group with Western Digital, Toshiba’s US-based chip factory partner) is also involved in a bidding war for Toshiba’s memory chip business. Apple and Dell have combined to also try and acquire this lucrative division of the cash-stripped Japanese industrial conglomerate. However, it seems a third consortium, headed by Bain Capital, has been selected by Toshiba as the leading candidate for a deal worth more than US$ 18 billion.

Following hot on the heels of Bell Pottinger and McKinsey, KPMG becomes the third firm to feel the heat from the fall-out of the Gupta family in South Africa. It seems that chairman, Ahmed Jeffery, chief executive, Trevor Hoole, and five senior partners have left the firm because work for the Guptas “fell short of our standards”. KPMG will also donate the US$ 3 million it earned in fees from the family-controlled businesses to charity and refund almost US$ 2 million fee income earned in compiling a controversial report for the country’s tax authority.

There was a major landmark for Portugal’s economy as, after five years, S&P raised its rating from junk status to BBB-, the lowest investment grade mark, with a stable outlook. The agency cited that the country had made “solid progress” since receiving a US$ 93 billion bailout package in 2011. After years of recession, the country is well and truly on the recovery route, with growth of 2.5% expected this year.

The US Q2 current account deficit came in at US$ 123.1 billion – its highest level since 2008 – with the main culprit being a US$ 5.2 billion decline in income receipts from foreigners, mainly government penalties, along with dipping exports and falling income from overseas investments. Despite all the hullabaloo, critics must remember that the current 2.6% deficit amount to GDP is much lower than the 6% levels recorded in 2005. Latest data also show August import prices and export prices both up 0.6%.

Because of a fall in July exports (by 1.1%) and a 0.7% hike in imports, the euro area trade surplus fell US$ 3.7 billion to US$ 22.3 billion. On an annual basis, exports showed a 6.1% rise but imports grew at the faster rate of 8.2%.

Despite all the negative vibes emanating from the doom and gloom merchants, all is not lost for the UK economy. For example, August retail sales were 1.0% higher, month on month, and 2.4% up from a year ago; for the past 52 months, sales have risen. Although inflation reached 2.9% last month whilst wage levels for the three months to July were 0.4% lower in real terms, than the same period in 2016, there has been no brake on consumer spending. Indeed although food sales have remained flat, retail prices in non-food stores (up 3.2% year on year) and non-store retailing (3.3%) are at their highest levels in over 25 years.

Europe’s “3M” leaders – May, Merkel and Macron – all face a rocky weekend ahead. On Friday, Theresa May is set to give her third major speech in Florence on Brexit with the EU27 demanding money, promises on key article 50 points and clarity on the UK’s future trading relationship. The next day sees the Germans go to the polls and although there is little doubt that Angela Merkel will still be Chancellor, for the fourth time, her party seems set to lose ground to the far right. On Sunday, some 75k elected officials will vote in the French Senate elections and it will be interesting to see how many of the 348 seats go to President Emmanuel Macron’s centrist party.

Whatever happens over the next three days, there will be a knock-on effect felt by the continent. For example, this will be felt in the currency market – if all goes well, the euro will move up, any shocks will see it go the other way; sterling has only one way to go. The bourses will show some movement and move in line with the euro. One thing is certain, come Monday, there will only be two of the leaders who can say I Get Knocked Down But I Get Up Again!

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The Last Thing On My Mind

According to the latest Phidar report, Dubai real estate prices and rents are set to fall on the back of six-year low sales of completed properties and increasing vacancy numbers – quoted “at 35%, in preferred communities sampled”. It also concluded that prices and rents have fallen over the past twelve months – villas being 10.2% down (with rents 4.9% off) and apartment prices flat but rents dropping 3.4%. The main drivers behind the dismal news were the oil price, job cuts and a booming supply of properties. (However some others report that new properties have only totalled 13.3k in H1 and 11.9k and 14.9k over the two previous years – hardly enough to swing the supply curve). More worryingly is the belief that Dubai residential market is overvalued “by around 15% to 20%”.

At the start of this week’s Cityscape Global, the Expo 2020 organisers unveiled their impressive legacy plan  – District 2020 will be a two million sq mt mixed use community including 65k sq mt for residential use and 135k sq mt earmarked for commercial use, with both Siemens and Accenture already signed up.  Following the former’s announcement, earlier in the year, that it would establish a global HQ for airports, cargo and ports logistics at the site, Dublin-based Accenture is the second major company set to open a digital hub in District 2020; the professional services company has already been appointed as Expo’s digital services premier partner and systems integrator.

Key features of Expo will be retained with emphasis on culture, education, entertainment, innovation and sustainability. The UAE Pavilion is set to be a museum, whilst the three thematic pavilions (Mobility, Opportunity and Sustainability), will become new cultural facilities and conference/exhibition centres. There is no doubt that the two pillars of their successful 2013 bid will become reality – an Expo that will amaze the world and building a lasting legacy that will offer a new alternative to urban living.

Cityscape Global is an exhibition that is a platform for Dubai developers and, despite Emaar’s absence, the event did not disappoint. There was a raft of new projects announced that will keep the construction sector busy and boost the local economy.

With a 2020 completion date for the 7k-apartment Royal Pearls project, developer Oriental Pearls has announced that 10% of phase 1 (1.6k apartments) has already been completed and is slated for a November 2019 handover. Located in the Meydan Master Development, the project will also include a community centre, surrounded by water, along with the usual accoutrements of retail, dining and leisure space.

MAG Property Development has announced a US$ 600 million community project based on wellness. Located next to Ras Al Khor Flamingo Wildlife Sanctuary, it will feature the world’s largest wellness centre at 120k sq ft. The gated community will also have 550 mt of Dubai Creek waterfront, along with a hotel. Newspaper reports indicate that MAG is also to launch a US$ 1.1 billion gated community in MBR City.

Nakheel has announced a 38-storey luxury beachfront residential project on Palm Jumeirah which will house 250 1-3 bedroom apartments. Details of their other developments were released. Discovery Gardens Pavilion will add a further 350k sq ft of retail space, along with a 350-key hotel, with construction to start in Q2 2018. A second – Jenan Heights – will see a 2.5k home gated community which will be linked to the upcoming 2020 Metro extension. Others include further expansion of the developer’s Jumeirah Park – 174 luxury 4-bedroom villas – and Jumeirah Park Leisure, with an Olympic-size pool and a16k sq ft gym.

Meanwhile Seven Tides will add 1k new apartments on Palm Jumeirah, as it develops SE7EN Residences. The 14-floor tower, located on Palm Jumeirah and adjacent to the developer’s Dukes Dubai Hotel and Apartments, will see studios selling for US$ 197k up to US$ 967k for 3-B/R apartments. The project should be completed within two years.

The first nine Business Bay “water homes” have been anchored in place, with the initial residents being chosen by lucky draw. The Finnish-built villas, on Dubai Canal, form part of Dubai Properties’ US$ 272 million Marasi Business Bay cluster, which will also incorporate an extensive retail and F&B promenade. The government-owned division of Dubai Holding has also launched the first of four “Marasi” towers.

Having already delivered 1.1k units in the first eight months of the year, Damac expects to add a further 1.7k by year-end that would bring its total lifetime delivery to 19.2k, with a further 42.3k in the pipeline. The Dubai-based developer has hinted that it may not launch any new local projects, as it considers that it may be as big as it can get in the UAE; in the region, it has projects in locations such as Amman, Beirut, Malta, Muscat and Riyadh. To expand its market base and revenue – and currently with only one non-regional project, Icon One residential and commercial tower in London – it is looking at other places including Croatia, Montenegro and Toronto.

Azizi Developments launched the second phase, valued at US$ 817 million, of its massive US$ 3.3 billion Azizi Riviera project. The total project, located in Meydan One, comprises 69 mid-rise towers, with 13k residential units and several hotels; phase 2 covers 17 buildings, housing 4k units. The high profile developer has announced that phase 1 had sold out on the first day of Cityscape Global whilst phase 2 was halfway there. It also intimated that it would launch an ‘iconic’ tower later in the year.

Kleindienst Group also released plans for “the world’s first underwater luxury vessel resort”, to be known as “The Floating Venice”. The US$ 681 million project, located off-shore on The World, will comprise 414 cabins over four decks (including one underwater), the world’s first underwater spa, 24 pools and 12 restaurants and will be able to host 3k guests every day. Gondolas will be in use to ferry guests through the canals to their cabins. The developer, who is also behind The Heart of Europe Islands, will also add 400k sq ft of coral for impressive viewing and expects completion by Q4 2020.

Sobha Group has launched phase 2 of its US$ 1.1 billion Hartland Gardenia Villas. Located on Dubai Water Canal in MBR City, the project covers four million sq ft, 60% of which will be green space.

Shuua Capital has unveiled plans for Dubawi – a mixed use hotel and residential tower, with 500 hotel rooms and 500 serviced apartments. The development, located on SZR, near to Business Bay, will be managed by Shuua’s own real estate asset management division.

Likewise, Deyaar Development announced its US$ 272 million South Bay project, located in Business Bay. The 63-storey structure will house 926 units of which 345 will be hotel rooms, 338 residential and 133 serviced apartments.

Danube Properties, with four projects totalling US$ 300 million to be delivered by year-end, will soon launch a new development, probably located in either Arjan or Furjan.

It seems the ongoing legal battles between developer, Five Holdings Ltd, and Viceroy Hotel Management are still some way from settlement. The US$ 1 billion Viceroy Palm Jumeirah Dubai opened in March but by June, the management contract was cancelled and the property’s name changed to FIVE Palm Jumeirah Dubai. Now there are claims and counterclaims involving how the hotel was run and managed with talk of  breach of trust, doctored invoices, fraudulent accounting, self-dealing, unapproved budget overruns etc. Currently, there are three court cases in Dubai and one in Los Angeles.

Union Properties is considering issuing sukuks as it looks at ways to finance its new property development strategy, totalling US$ 2.2 billion, which would require annual funding of US$ 545 million. The developer has signed an agreement with China State Construction Engineering Corp (who will help with finance) to build MotorCity that would include 18k units.

Q2 saw Union Properties post a net loss of US$ 627 million after provisions of US$ 763 million had been made. Now the company has confirmed that the developer’s long-term interests has been best served by the recent asset revaluation. UP is also to establish two new business units – Union Malls and Al Etihad Hotel Management – to further diversify and consolidate their revenue streams.

Saudi group, Alhokair, has opened MENA Plaza Albarsha Dubai. The MENA brand is expected to grow in the region, with the opening of the 90-room property.

In the 18 months to January 2017, there had been 71k property transactions, totalling US$ 41.1 billion, of which the Chinese ranked 8th with 2.2k deals totalling US$ 845 million. Now the DED is to take action to increase China’s participation in the Dubai sector and has appointed locally-based UC Forward with a Chinese partner to ameliorate this strategy.

According to BNC Network, there are currently 7.9k active building projects in the country with a value of US$ 227.8 billion Of this total, 35.7% of the buildings (valued at US$ 121.1 billion) are to be found in Dubai.

There was no surprise to read YouGov’s latest poll that sees the UAE retain its position as the region’s most desirable location for real estate investment – with Dubai being the most popular city for Middle East homeowners and investors.

Dubai Food Park and China’s Ningxia Forward Fund Management Company have signed a US$ 368 million agreement to build a UAE/Chinese Food Industrial cluster over two years. The 4.38 million sq ft project will cover six components, with an estimated 30 new food plants including two Chinese catering companies.

Emirates Healthcare Development Co has announced that it has obtained a US$ 101 million Islamic syndicated loan. The finance will be used by its Dubai-owned private Saudi German Hospital for operation and expansion purposes.

With artificial intelligence slowly inculcating everyday life, one of the first industries to feel the effects is the financial sector; all over the world, bricks and mortars are being replaced by clicks and sorters. Thus it is no surprise to see Mashreq announcing a 10% retrenchment, over the next twelve months, as the digital age takes hold. The chances of talking to a human voice are quickly diminishing and “your call is important to us” will become more prevalent and annoying in the future.

Last Saturday, Dubai Metro celebrated its first eight years in operation during which time, it has carried 1.028 billion passengers, of which 67% travelled the Red Line and the balance of 339 million travelled the Green Line. The system extends 75 km and is considered the world’s longest driverless metro line, as well as having the biggest underground metro station – Union Station, covering 25k sq mt. There will be a 15 km extension to the Red Line from Nakheel Harbour station to accommodate the upcoming Expo 2020 requirements.

It is reported that CVC Capital Partners could be interested its first ME investment, with UAE-based shisha maker Al Fakher Tobacco Trading, Emaar Properties PJSC’s entertainment division and certain education companies reportedly on their radar. The London-based buyout firm, with funds totalling US$ 85 billion, is one of a growing number looking at ME investments; last year, MENA reported a 26% hike, to US$ 28.5 billion, in the value of foreign buyers acquiring “local” assets.

The DFM opened Sunday (10 September), at 3644 and nudged 12 points (0.1%) higher to close on Thursday, 14 September, at 3656. Volumes continued on the thin side, with trading of only 108 million shares, valued at US$ 56 million, (cf 175 million shares for US$ 83 million, on Thursday, 07 September). Emaar Properties was US$ 0.03 higher at US$ 2.40, with Arabtec down a further US$ 0.04 to US$ 0.82.

By Thursday, Brent Crude was US$ 0.79 (1.4%) higher on the week, closing at US$ 54.49, with gold going against its recent upward trend, declining US$ 17 to US$ 1,333 by 14 September 2017.

Troubled Uber is facing three US legal probes, one of which involves an internal programme known as “Hell” that allowed the ride-hailing company to spy on rival Lyft’s drivers; this was reportedly used between 2014-2016 to entice drivers to work for Uber. Another programme – “Greyball” – was allegedly used to deceive regulators about certain of the company’s operations. The third investigation involves the possible payments to corrupt foreign officials. No doubt new CEO, Dara Khosrowshahi, already has his in tray full, with other problems including the appointment of a Global Head of Compliance, following the resignation of the incumbent, Joseph Spiegler, last week.

The Finnish mobile games maker, Ravi, expects to raise up to US$ 1 billion when it goes public on the Helsinki bourse next month. The company behind Angry Birds reported an annual profit of US$ 317 million, 79% of which originated from games and the balance from brand licensing.

John Lewis posted a 53.0% decline in H1 profits to US$ 36 million on the back of increases in higher costs (including pension and restructuring charges) and ‘dampened customer demand’. However, the Group, which includes Waitrose supermarkets, saw revenues 2.3% higher at US$ 6.4 billion, compared to the same period in 2016. Meanwhile Morrisons recorded a 3.0% Q2 hike in sales, whilst pre-tax profits climbed 40% to US$ 269 million.

It has been a good year for Qantas and its Irish chief executive. Having overseen 5k job cuts and the introduction of new routes, the airline has posted annual profits, as at June, of US$1.1 billion. Alan Joyce has seen his remuneration jump to just under US$ 20 million on the back of improved results and the airline’s shares rocketing.

The Head of the UK Financial Conduct Authority is in cuckoo land if he thinks that the 12k SMEs, who were unfairly treated by the RBS’s Global Restructuring Group during the period 2007-2012 would be happy hearing him decide that it would not be in the public interest to publish its full report. Although denied by the bank, it seems that it made matters worse for such customers so as assets could be seized for their benefit (and profits and bonuses). Evidently 92% of ‘viable’ firms, seen by the GRG met with “inappropriate” behaviour, including higher charges and increased interest rates.

In 2013, the Bank of England declared that it would consider raising interest rates once the unemployment level, then at 7.8%, came down to 7.0%. Since then the rate has fallen to a 42-year low of 4.3%. What has the Bank done? Nothing.

The experts were backing the Economics 101 theory that as employment levels rise, there is more competition for jobs which in turn push wage levels higher. One explanation is that the supply of EU cheap labour has kept wages down, backed by a BofE report indicating that a 10% increase in the ratio of migrant to native workers results in wages falling 1.88%. With annual inflation now at 2.9%, and wage growth lagging behind, the problem will not go away. However, as sterling hits a 15-month high of 1.355 to the greenback, there has to be a solid case for an earlier rate hike.

As widely expected, the ECB maintained all three interest rates unchanged – deposit at minus 0.4%, the main refi at zero and the marginal lending facility rate at 0.25%. This is expected to be the status quo at least until the tapering of the net asset purchases which will be kept at the monthly rate of US$ 72.2 billion (until at least December 2017), following the March change from US$ 96.3 billion.

Some will argue that Mario Draghi should ease off a lot quicker, bearing in mind that the ECB has already bought more than US$ 2.4 trillion worth of assets. It seems that Germany is leading the calls for QE to be curtailed especially now that most of the bloc’s countries are showing signs of solid growth. There is concern that ultra-cheap lending costs may see money going to finance marginal investment projects which could be a catalyst for another financial crisis. The ECB Chairman will be praying that this will be The Last Thing On My Mind.

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Welcome To Paradise

Cluttons has estimated that Q2 property prices dropped for the 12th consecutive quarter, with average prices falling 5.8% over the past twelve months and 14.0% over a three-year period. The real estate consultants also estimated that Q2 falls for apartments were at 1.0%, whilst villas fared worse with a 2.2 % decline. In line with others, it sees the market bottoming out and that the Expo 2020 factor will start having more of an impact on the sector in H1 2018 – a little later than most had earlier estimated. Strangely, it also indicated that villa rents could fall by up to 10% this year, with apartments remaining largely unchanged.

Knight Frank has forecast that prime office rents in Dubai are heading north as latest data shows that average rents to the 12 months to June had dipped 4.5%. However, it was noted that rents in the DIFC rose 1.3% in Q2.

Monday sees the opening of the three-day Cityscape Global and with it a raft of realty projects, including a US$ 409 million mixed-use tower on SZR. Further details will be announced at the event but it is known that Shuua Capital will be managing the development. The Dubai-based investment bank already has a US$ 817 million portfolio of real estate in the UAE and Saudi Arabia.

National Bonds Corporation is to launch phase 3 of Casa Flora, located in Motor City Green Community. Sales will occur at Cityscape Global and will comprise both villas and apartments.

Aston Property Ventures has announced  a world’s first, with its US$ 326 million development in Dubai Science Park; 20% of the project’s 750 apartments will be for sale by the use of the bitcoin; it is estimated  that the cost of a studio will be about 30 bitcoins (US$ 169k) and 85 (US$ 389k) for a two-bedroom apartment. The UK developers, the lingerie businesswoman, Michelle Mone, and her partner Doug Barrowman, expect completion by 2020.

Dubai South has launched its Park Lane residential project.

Dubai Municipality has published the first of its projects, as part of the US$ 350 million Hatta Comprehensive Development, encompassing three sectors – economic/services, education and tourism/sports. Part of the plan is to develop the Al Sherpa heritage area to include eight rest houses and pedestrian pathways.

Damac estimates that it has awarded 370 contracts, totalling US$ 954 million, in the first eight months of 2017. About half of this money has been invested in the developer’s massive 55 million sq ft Akoya Oxygen.

Kleindienst is expected to announce a US$ 681 million development next week. The company has developed The Heart of Europe islands, along with underwater Floating Seahorse housing, located on The World Islands, 4 km off Dubai’s mainland.

MAF’s newest hotel, Aloft City Centre Deira, is set to open in Q1 next year. The property, covering some 28.8k sq mt, will have 304 rooms, including 29 suites.

After the local success of its hotel brand, Emaar is set to manage The Address Madivaru Maldives Resort & Spa. Due to open in 2020, the hotel, located some 20 minutes by air from Male Airport, will have 80 beachside and over-water villas, some of which will be for sale.

The builder of Nakheel’s Deira Mall is set to raise finance of US$ 272 million. United Engineering Construction will use the proceeds for the building of this major shopping centre – a project that is estimated to cost US$ 1.7 billion.

UK’s biggest drug maker, GlaxoSmithKline, is planning to build a facility in the UAE next year, in a bid to boost regional sales. The maker of drugs, such as Augmentin and Panafon, will manufacture three, as yet undetermined, drugs in their factory which will probably cost in excess of US$ 100 million. (BMI expects the regional pharma sector to grow by 3.7% to US$ 33.4 billion this year).

The Banker magazine has ranked Dubai as tenth in the world for international financial centres, based on several factors including economic potential, business environment and financial market indicators. The 13-year old Dubai International Financial Centre is recognised as the leading financial hub in the MENA region; last year, the number of incorporated companies rose by 14.0% and by the end of June was home to 1.75k entities.

The RTA has signed an MoU with Siemens to extend its use of 3D printing technology that was first used last year by the rail agency for designing and manufacturing spare parts.

Following the recent decision by Qantas to move its Asian hub from Dubai to Singapore, comes the news that the emirate will become the regional centre for Cathay Pacific. The Hong Kong-based carrier confirmed that Dubai will become its hub for all passenger and cargo operations across the region.

Although ME airlines reported a 4.5% annual increase in passenger traffic in July, this figure is still well down on the five-year 11.2% average. IATA estimates that load factors rose 0.7% to 81.5% but noted that there was a slowdown in the expansion of non-stop services by the larger carriers. The industry has also been hit by regional conflicts, proposed US travel bans and rising costs.

July MENA hotel RevPar (revenue per available room) dropped to a five-year low, to US$ 85, as very weak demand saw hoteliers giving attractive discounts to attract business; occupancy was 1.0% higher at 60.4% but the average room rate dipped 12.7% to US$ 141. The profit per room was at its lowest level for some time at US$ 74 – a figure that was 51.8% down on the annual average.

The Department of Tourism has reported that the first seven months of the year saw tourist numbers 9.5% higher, at 9.2 million. The top three source markets – India (1.1 million), Saudi Arabia (904k) and the UK (712k) – accounted for 29.5% of the total.

The country’s third telecom operator came on line this week. Emirates Integrated Telecommunications Company (who also own du) has launched Virgin Mobile. The new entrant offers a fully digital service and increased choice for the country’s users who can select their own numbers and customise mobile packages.

August’s UAE Purchasing Managers’ Index grew at its fastest pace in over two and a half years, climbing by 1.3 to 57.3, month on month. According to the Emirates NBD’s monthly report, the main drivers behind this boost were impressive growth in new orders, inventories and output. With further investment relating to Expo 2020 due to be announced shortly, the recent economic improvement seems set to continue.

The UAE’s total non-oil trade for Q1 grew by 3.1% to US$ 109 billion – with direct foreign trade accounting for US$ 74 billion (67.8%) and trade from the free zones the balance of USS 35 billion. Both imports and reexports increased by 5.2% to US$ 67 billion and 7.4% to US$ 30 billion; exports totalled US$ 12 billion.  The three leading imports – gold (US$ 9.5 billion), mobile phones (US$ 6.6 billion) and motor vehicles (US$ 4.0 billion) – accounted for 30.0% of the total.

SOUQ.com, recently bought out by Amazon, has acquired the remaining shares in Wing.ae to take a 100% stake in the local online logistics supplier.

The DFM opened Monday (04 September), following the Eid Al Adha holiday, at 3638 and nudged 6 points higher to close on Thursday, 07 September at 3644. Volumes continued on the thin side, with trading of 175 million shares, valued at US$ 83 million, (cf 116 million shares for US$ 59 million, on Wednesday, 30 August). Emaar Properties was US$ 0.05 higher at US$ 2.37, with Arabtec down a further US$ 0.03 to US$ 0.86.

By Thursday, Brent Crude was US$ 1.63 (3.1%) higher on the week, closing at US$ 54.49, with gold continuing its recent upward trend, jumping a further US$ 27 to US$ 1,350 by 07 September 2017. According to Warren Buffet – “gold gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their heads”. Nevertheless, investing in such a “useless” metal has been profitable this year – it has risen 17.3% since its 01 January opening of US$ 1,151.

In the past week, VW has had to recall nearly 2.1 million vehicles because of a faulty fuel pump which can cause an engine to stall. 1.8 million vehicles in China were recalled, after an April 2016 investigation by authorities and 281k in the US for similar problems.

The merger between the UK engineering software firm Aveva and the software division of Schneider Electric will result in a new US$ 3.9 billion entity. The French company will be the majority shareholder.

Lego is planning to reduce its workforce by 7.7% to 16.8K on the back of a slowdown in business reflected in H1 falls in both revenue and profit – by 5.0% to US$ 2.3 billion and 3.0% to US$ 686 million. The toymaker indicated that the business had become too complex and needed a “reset”.

A US$ 30 billion deal sees a tie-up of UTC (who make Pratt & Whitney jet engines) and Rockwell Collins, who will combine their aerospace parts businesses, under a new entity, Collins Aerospace. The deal, which will need regulatory approval, is one of the biggest in aviation history and may prove a headache for plane makers, Boeing and Airbus, as they are continually striving to cut costs. Following this shakeup, the new entity will have size and greater negotiating power on its side.

This week, the World Trade Organisation reversed a previous decision to rule that Boeing had received state aid to build new aircraft. This “victory” for the US aircraft manufacturer may be short-lived as Airbus claim that other issues over alleged government support are on the table. This case concerned the state of Washington giving Boeing tax breaks, valued at US$ 9 billion, which effectively shut out imports. However, the 13-year old battle between these two aviation giants is far from over.

Bell Pottinger has been ejected from its trade body, the Public Relations and Communications Association, because of its work in South Africa, for a company owned by the Gupta family, had “incited racial hatred”. Its campaign for Oakbay Capital emphasised the power of white-owned businesses in the country. There are doubts that the firm can continue as more clients will abandon the “sinking ship” in the wake of its PRCA expulsion and negative press; by Thursday, the global firm had appointed BDO to look at options going forward, including a possible sale. (The Guptas have had close ties with President Jacob Zuma who has faced corruption allegations over his ties with them).

With a monthly fall of 0.6 in July to 53.2, the IHS Markit/CIPS PMI slowed to its lowest pace in a year on the back of rising costs for fuel, imports and payroll. It reports that lack of business confidence, mainly because of the uncertainty around Brexit, has led to delays in spending decisions.

Australian exports (up 2.7%) are performing better than expected, driven by higher volumes of LNG and iron ore. Analysts expect quarterly growth could be as high as 1.2% – a lot higher than the initial 0.7% forecast. The Australian dollar is still trading at just under the US$ 0.80 level and there may be concerns that the relatively high AUD may lead to slower economic growth.

The manufacturing sector also grew at a faster rate than expected with the August ISM PMI up by 2.5 to 58.8 – its highest level in over six years. The main driver seems to be in job growth where the index was 4.7 higher at 59.9 which pushed the employment index to 61.3. There is no doubt that business conditions in the US are on the march with backlog, employment, exports, new orders and production all heading north.

Although the 2017 hurricane season is far from over, the last two have caused untold damage and numerous fatalities. Hurricane Harvey has left 50 people dead and 43k homeless, with the Texas Governor Greg Abbott estimating that the reconstruction bill could top US$ 180 billion.

Fast on its heels came Irma that developed near Cape Verde Islands last week and by 05 September had intensified to a Category 5 hurricane. The storm wreaked catastrophic damage on many Caribbean islands – such as Anguilla, Barbuda, Saint Barthélemy, Saint Martin and Virgin Islands – before smashing Cuba and Florida. With 92 deaths already announced and a damage bill that could top that of the 2005 Hurricane Katrina, many regional economies will be in tatters and will take time (and money) to return to normality. Meanwhile many West Indians (and tourists) will be hoping for a speedy return and an early Welcome To Paradise.

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Give Peace A Chance

Reidin-GDP estimate that developers have handed over 13.3k units in H1 (compared to just 8.7 units a year earlier); the consultancy expects the final figure to be in the region of 27k by 31 December 2017 and 31.3k a year later. However, that would be a marked increase on the 2015 and 2016 deliveries of 11.9k and 14.9k. Whatever materialises, there is  no doubt that developers will continue to set the supply/demand curve as close to equilibrium as possible. In an earlier blog, it has been estimated that at current levels of population growth supply would need to be nearer 40k. It is interesting to note that Dubai Silicon Oasis (2.8k units) and Dubailand (2.5k) accounted for nearly 40% of the total YTD handovers and at the higher end of the market Downtown (1.4k) and Business Bay (869). The current occupancy rates for Dubai apartments is 88.4%.

Al Nabooda Construction Group has been appointed by Emaar Properties as the main contractor for its two Creekside18 37-storey towers. The project, located in Dubai Creek Harbour, will comprise housing and commercial units.

Emaar Properties also announced the launch of its Dubai Hills Mall which will serve the residents of MBR City and surrounding environs. To open in H2 2019, the development, covering two million sq ft of gross leasable area, will have 750 outlets including seven anchor stores, a hypermarket and a Cineplex. It will also have parking for 7k vehicles and will be directly linked with the Metro.

Having been awarded a Wasl Asset Management contract to build the first phase of wasl 1 development, Kele Contracting has already started work on the four towers. The work is scheduled for completion by H2 2019 and when all four towers are built, the development will comprise 746 residential units.

Orion Real Estate Development has awarded a US$ 48 million contract to troubled Dubai-based engineering and related services company Drake & Scull subsidiary, GTCC. This is related to MEP (mechanical, electrical and plumbing) work for the developer’s 34-storey West Bay residential tower in Business Bay.

With Cityscape Global 2017 just two weeks away, Nakheel has whetted investors’ appetites by announcing that it will launch five new projects at the three-day mega event. The developer has already intimated that it expects to jump its revenue nearly three and a half times to over US$ 2.0 billion by 2021, along with a portfolio of 36.5k residences, 5k hotel rooms and 17.6k sq ft of retail space.

As Indians accounted for 13.2% (US$ 3.3 billion) of Dubai’s real estate transactions last year, it is no surprise to see Azizi Development open a sales office there. The Dubai-based developer has recently launched its massive US$ 3.3 billion Azizi Riviera project. Located in MBR City Meydan One, it comprises 69 mid-rise towers, which will house 13k residential units, along with three hotels and an integrated retail space.

Damac Properties is considering investment opportunities in Toronto, with the developer’s chairman, Hussain Sajwani (who owns 70% of the company) meeting its mayor, John Tory. The city is one of the fastest growing in the Americas.

Gulf Sotheby’s International has acquired a 51% stake in rival property developer, SPF Realty, for an undisclosed sum. The new entity will result in a doubling in the number of brokers to 100 and the integration of both entities’ client bases.

Since its inception, Dubai Chamber of Commerce’s entrepreneurship development programme, Tejar Dubai, has received 260 business ideas and has launched 28 commercial projects to date. The majority of these entities are involved in smart business, retail and logistics services.

Dubai International continued to break records as July passenger numbers showed a 5.9% hike to 8.1 million – a new monthly high for the world’s largest international airport. Although the number of flights dropped 4.7%, there was a 10.1% boost in the number of passengers per aircraft to 243. It also handled more cargo – at 213k tonnes, 5.0% up on the same month last year.

The Minister of Economy, HE Sultan Al Mansouri, is hoping that the introduction of new legislation will help the country’s productivity that in turn will boost the contribution of the non-oil sector from the current level of 70% to 80% over the next four years. Some of the new laws will cover foreign direct investment, industry regulation, commercial transactions and arbitration, all of which will improve the investment climate, along with business confidence and competitiveness. The Minister expects 2017 non-oil growth at 3.1% rising to 3.7% next year and this follows the 2016 return of 2.7% (and 3.8% for oil growth).

There was a 4.6% annual increase in UAE banks’ assets to US$ 716.6 billion, as deposits rose by 7.1% to US$ 433.8 billion, by the end of last month; over the same period, loans/advances were 3.5% higher at US$ 434.3 billion.

Despite a 9.6% hike in H1 revenue to US$ 2.29 billion, DP World posted a marginal 0.3% fall in profit to US$ 606 million. In line with the continued growth in global trade, the world’s fourth largest terminal operator expects to meet full year market expectations. The company’s cash position has grown 10.5% to US$ 1 billion since 30 June 2016 and has budgeted capex of US$ 1.2 billion for this year; the main areas of expenditure are Jebel Ali, London’s Gateway, Canada’s Prince Rupert and Somaliland’s Berbera. It also reported an 8.2% jump in the number of TEUs (20’ ft equivalent units) to 33.9 million.

Emirates REIT posted a 21.5% increase in H1 rental income to US$ 24 million, with service and other fees 6.8% higher at US$ 3 million. However, the country’s first real estate investment trust recorded a 23.1% slump in profits to US$ 18 million on the back of a fall in revaluation gains compared to the same period a year earlier. Since it announced that it has seen a 6.9% rise in its aggregate portfolio to US$ 772 million, this week it bought the European Business Centre (its tenth commercial property) in DIP for US$ 35 million.

The DFM opened Sunday (20 August) at 3601 and nudged 23 points (0.6%) higher to close on 3624. Volumes declined, closing on Thursday – 24 August – on 177 million shares, valued at US$ 77 million, (cf 234 million shares for US$ 79 million, on Thursday, 17 August). Emaar Properties was US$ 0.02 higher at US$ 2.32, with Arabtec flat at US$ US$ 0.89.

By Thursday, Brent Crude was US$ 1.22 (1.1%) lower for the week, closing at US$ 52.13, with gold down US$ 3 to US$ 1,292 by 24 August 2017.

All is not well in the Uber boardroom, already torn by a legal battle between the former chief executive, Travis Kalanick (who has control of three board seats), and major investor, Benchmark. Still searching for a new CE, COO and CFO, and with Benchmark accusing the co-founder of fraud and intervening with these executive searches, some shareholders are worried that the company is being torn apart and “losing the plot”.

Amazon.com has made progress this week in its attempt to acquire Whole Foods Market for a reported US$ 13.7 billion. If successful, it would give the world’s largest online retailer an entree in the USS 700 billion US grocery market (as well as 465 physical outlets). Although the US chain has only nine UK outlets, the country’s supermarkets were under pressure after Amazon announced that it would cut prices of everyday groceries. No wonder shares in the Big 4 – Asda, Morrisons, Sainsbury’s and Tesco – dipped on the news of the acquisition by a predator that is not too concerned about short-term loss pains for long-term gains and market share.

WPP, the world’s largest advertising group, not only announced its second sales warning of 2017 but also issued a downbeat assessment of the industry. The company has halved its forecast for full year revenue to just 1.0%, as big companies cut their traditional market spends. The result is that advertising agencies have had to slash fees and even offer clients upfront discounts just to retain business. WPP’s Chief Executive, Sir Martin Sorrell, has blamed primarily digital disruption for the slowdown that has seen his company’s shares sink 23.9% to US$ 1,886 since 01 March 2017 (and by 10.9% in one day following Tuesday’s profit warning).

At the end of the week, the vice-chairman and heir to the global mobile phone behemoth, Samsung, was sentenced to five years in prison for corruption. Lee Jae-Yong was found guilty of bribery, perjury and embezzlement and that he had paid US$ 39 million to a close friend of the recently impeached president, Park Guen-Hye, in exchange for business support. The world’s most lucrative tech firm, with Q2 profits of US$ 9.9 billion, also saw two of its executives facing four years in jail for similar offences.

A recent Fidelity study has indicated a massive fall in the value of a typical UK “pension-pot”, compared to a decade earlier. It estimates that in the ten-year period to 2007 – when average annual earnings rose by 3.5% (with 2.5% average inflation rates) – retirees earned an annual income of US$ 15.7k. In 2017, using the average annual data for the previous decade, with 1.7% wage growth and 2.7% inflation, annual income has almost halved to US$ 8.5k.

One of the most improved global economies this year is Japan where most indicators continue their recent upward trend. Its all industry activity index climbed 0.4% in June – and 2.2% on an annual basis – whilst its July Manufacturing PMI reached 52.1. There were noticeable improvements in output, new orders, new export orders, employment, input prices and inventory levels. Q growth levels since 1980 have averaged 0.51% amid a range of minus 4.8% in Q1 2009 to 3.2% (Q2 1990); the latest quarter sees a 1.0% level that could result in the country posting a healthy 4.0% annual growth in 2017.

The Bundesbank now expects the German economy to grow by over 2.0% this year on the back of recently improved data that sees an upturn on the bank’s previous June 1.9% forecast. It also shows the country benefitting from the global economy growing at a stable underlying pace.

New home sales in the US took an unexpected plunge in July, down 9.4%, month on month, to 571k, driven by sharp monthly falls in the North East (down 23.8%) and the West falling 21.3%. However, median house sales, at US$ 314k, were up 0.7% for the month and 6.3% for the year. The same has not happened in the UK, as the August average price of a house dipped 0.9% but still 3.1% higher, year on year.

At this week’s meeting in Jackson Hole, Fed Chair, Janet Yellen, has reminded all and sundry not to rush in and cut the red tape and bank regulations introduced after the GFC. Opponents, including the President, are of the opinion that the system is stifling the economy but Ms Yellen has said that the new environment is “substantially safer” and that the tighter rules are not weighing on growth or lending. It seems likely that the Fed will have a new chairman next February and early indications point to the current Fed vice-chair of financial supervision, Randal Quarles.

There is no doubt that the leaders of both the US and North Korea are rattled. Earlier in the month, President Trump warned the rogue state that it best not to make any more threats to his country or “they will be met with fire and fury like the world has never seen.” Two days later, he tweeted on 11 August that “if anything, maybe that statement wasn’t tough enough” and a day later “Military solutions are now fully in place, locked and loaded, should North Korea act unwisely. Hopefully Kim Jong Un will find another path!” This week sees North Korea protesting at the annual joint US-South Korean military exercises. With bilateral relations sinking to new depths, and the UN yet again full of resolutions but seemingly powerless to act, the last thing the world economy needs is a major political conflict that will derail the recent upturn in global trade and growth. However, it could be too late to yet again Give Peace A Chance.

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