Look Away

Ithra 13 is to launch a major upgrade in Dubai’s historic gold and jewellery business location, the Deira Gold Souq. Situated between the existing Gold Souq and the Creek’ “District 13” will be a major project for Deira, part of Dubai that seems to have missed out on much of the emirate’s recent redevelopment investment. It will be interesting to see whether customers return to Dubai’s customary gold base and oldest cultural district, rather than buying in the many malls and hypermarkets.

Deyaar will launch its latest project at next week’s three-day Cityscape 2018, opening on 02 October. Located in Dubai Science Park, the 18-storey Bella Rose will house a range of studio, 1-2 B/R units and be completed by the end of next year. No cost details were available but studio apartments will start at US$ 123k.

Although Emaar will not be attending this year’s Cityscape, Dubai-based master developer Nakheel will be there. It will showcase several new projects including a beachfront development at its new Deira Islands waterfront city, Dragon Towers, a twin-building high-rise apartment complex at Dragon City, and a collection of Jumeirah Park townhouses – each with a private pool. The developer estimates that since its 2002 inception, it has sold 42k land plots or residential units, valued at US$ 31.9 billion and currently has more than US$ 15.8 billion worth of projects in progress.

There are reports that Nakheel is in the market for a US$ 1.1 billion loan to finance construction of a new mall in Deira, estimated to cost around US$ 1.7 billion. It is likely that the developer will issue sukuk, probably early next year. United Engineering Construction Company has won the tender to build the mall, slated to be the largest in the ME.

An agreement between Lulu Group and The Waterfront Market will see the retail giant opening a 55k sq ft hypermarket in Deira’s new retail area, overlooking the Deira Islands; the Waterfront Market is a wholly owned subsidiary of Ithra Dubai and is the region’s the largest facility for fresh food.

Ali Mousa & Sons Contracting has been awarded a US$ 150 million Nakheel construction contract for its 37-storey Dragon Towers; the project, housing 1-2 B/R units along with ground/first floor retail, is slated for completion by 2021 and is a focal point of the US$ 194 million development.

The Radisson Hotel Group will introduce its new brand to the region in mid-2019, with the opening of Radisson Red hotel in Silicon Oasis. Mainly known for its luxury properties, this will meet the growing trend for innovative mid-scale properties, catering for guests to connect in a flexible and fun environment. There are already branded hotels in Europe, South Africa and the Americas and the plan is for 200 hotels to be opened or in development by 2022.

Wyndham Hotels & Resorts, the New York-listed hospitality company, expects to grow its regional portfolio of hotel rooms by 30 per cent by 2022 from 10,500 rooms today, to capitalise on rising demand in the mid-scale sector.

Dubai’s latest golf course will probably open next month to the public.  The Dubai Hills Golf Club, a JV between Emaar Properties and Meraas, is a par 72 championship course, featuring a series of valleys and wadis along with a network of lakes.

A sign of the times sees El Chiringuito, at  Rixos the Palm, closing down “effective immediately”, less than two years since its opening. Operating company, The Crystal Group, has terminated its franchise agreement with the venue operator citing ‘unforeseen circumstances’ during the renovation of the hotel. However, it could be yet another casualty of an oversupply of such venues in the emirate, allied with a fall in consumer spending habits.

Beside Group has been bought by Saudi based investment group Taj Holding for an undisclosed fee. The Dubai-based fashion retailer has a number of international brands in its portfolio, including Diesel, Fred Perry Pinko and Scotch & Soda.

A MasterCard report ranks Dubai as the highest international overnight visitor spend destination last year, as well as being the fourth most-visited city in the world. Tourists to the emirate shelled out US$ 29.7 billion which equates to a daily US$ 537, well ahead of Paris (US$ 301) and Singapore (US$ 286). For the third year in a row, Dubai was the fourth most visited city with 15.8 million, behind Bangkok, London and Paris with numbers of 20.0 million, 19.8 million and 17.4 million respectively. In H1, the emirate has reported flat numbers of 8.1 million visitors but is still aiming for 20 million visitors in 2020.

With its latest opening of five solar-powered service stations, ENOC is well on the way to expand its 122-unit network by 40% over the next two years. The five stations, all located in newly established residential communities, have been built in compliance with Dubai Municipality’s ‘green build’ regulations.

Following the January liquidation of the UK’s Carillion, its shares in UAE-based facilities management company, Emrill, have been acquired by the other two stakeholders – Emaar Properties and Al Futtaim Real Estate Investment. It will remain as an independently operated joint venture company.

Dubai-based DP World’s Indian arm, Hindustan Infralog Pvt Ltd, has paid US$ 783 million to the Jawaharlal Nehru Port Trust-Special Economic Zone to lease a 44-acre plot for sixty years. This will no doubt boost the freezone’s industrialisation policy that will generate jobs and expand cargo revenue to the benefit of all stakeholders.

With DP World issuing four new debt listings – a US$ 1.0 billion sukuk and three conventional bonds, totalling US$ 2.3 billion – the Dubai-based port operator now becomes Nasdaq Dubai’s largest debt issuer, with a sum of US$ 6.75 billion. The local bourse is still the world’s largest centre for sukuk listings, with a value of US$ 58.9 billion.

The High Court of England and Wales  has again ruled in favour of DP World by ordering the continuation of an injunction over Djibouti port operator Port de Djibouti. This rules that the Dubai port operator can continue, without any interference, with the management of the joint venture company, Doraleh Container Terminal.

Despite press reports indicating a possible tie-up with Deyaar, Union Properties has reiterated that it is “not considering any merger”, and that any possible future plans would be revealed in accordance with laws and regulations.

By the end of the year, overseas visitors may be able to reclaim VAT paid on goods bought during their stay in the country. The FTA (Federal Tax Authority) is urging participating retailers and shops to register for the tax refund scheme; for them to qualify, there are certain conditions that have to be met.

Q2 expat remittances from the UAE totalled US$ 12.1 billion, with 55.2% sent to just three countries – India (US$ 4.8 billion), Pakistan and Philippines accounting for 39.6%, 8.5% and 7.1% of the total. The uptick, 8.8% higher compared to the same period in 2017, in these countries has been driven by their currencies falling on the back of a strengthening greenback. Not surprisingly, because of banks traditionally charging more, currency exchanges handle over 78% of total transactions.

YTD gross bank assets in the UAE grew by 3.9% to US$ 763.0 billion by the end of August, with gross credit 3.4% higher at US$ 445.0 billion. Over the same period, expansions were seen in domestic loans received by the private sector, up 3.4% to US$ 306.0 billion, and credit provided to individuals by 0.4% to US$ 924 million. These figures indicate a marked improvement in the solvency of the country’s financial institutions.

As widely expected, the US Federal Reserve hiked rates by 0.25%, to a range of 2%-2.25%, on Wednesday – its eighth rate rise since 2015 – with similar gradual rises on the horizon. In line with this news, the UAE Central Bank followed suit, lifting its repo rate by 0.25% as well as raising interest rates on the issuance of its certificates of deposit.

Target Engineering, a subsidiary of Arabtec Holding, has been awarded a US$ 872 million ADNOC contract with Spain’s Tecnicas Reunidas. The four and a half year contract is to construct gas processing trains, supporting utilities and off-site facilities for phase II of its Gas Development Expansion project.

Careem, itself rumoured to be an Uber acquisition target, has bought the three-year old Indian bus shuttle service app Commut, for an undisclosed amount. The Dubai-based ride-hailing firm plans to move into the mass transport sector, by introducing bus services across 100 cities. However it will leave local shuttle service provider Shuttl to manage and operate Commut’s customers and drivers whilst it will take over Commut’s talent and technology. Careem has also been recently expanding into other services, including food and package delivery.

It is reported that TPG is in discussions to combine the Abraaj Group’s US$ 1 billion healthcare assets with its Rise Fund. The US private equity fund is keen to consolidate resources so as to optimise their “shared commitment to accessible, affordable, quality health care” in sub-Saharan Africa and South Asia. It is also reported that the much-troubled firm has been asked to vacate its DIFC offices by the end of the month, as its lease has expired and there has been no tenancy renewal.

The DFM opened Sunday, 23 September, on 2764, and, after several weeks’ declines, gained a welcome 62 points (2.2%) to close on Thursday at 2826. Emaar Properties moved US$ 0.04 higher to US$ 1.35, with Arabtec flat at US$ 0.52. Thursday 27 September saw volumes dropping, with trades of 171 million shares, valued at US$ 94 million, compared to a week earlier (236 million shares at US$ 76 million).

By Thursday, 27 September, Brent continued its recent upward movement, trading US$ 3.02 (3.9%) higher to US$ 81.72; gold fell away, losing US$ 24 (2.0%) to US$ 1,187.

Michael Kors has acquired the 40-year old Versace fashion brand in a US$ 2.1 billion deal. The Italian fashion house, still 80% family-owned, had the sold the other 20% to US private equity group Blackstone in 2014. Last year, the US fashion group bought the luxury shoemaker for US$ 1.2 billion.

The latest in a very long list of struggling UK retailers to issue a profits warning is womenswear chain Bonmarché, reducing its full year profit forecast by 31.2% to US$ 7 million; its shares dropped more than 20% on the news. The Wakefield-based chain, established in 1982 and with 300 stores, has blamed weak consumer demand and the warm weather for its problems.  Last week, menswear chain, Moss Bros, issued a profits warning, also citing the summer’s hot weather as a factor for poor trading.

Last month, FW Evans Cycles reported trading problems on the back of rising costs and challenging trading conditions. Now the country’s biggest bike retailer, Halfords, is one of a number of parties considering a takeover that would secure the 97-year old company’s future. There is an urgent US$ 13 million cash requirement to see the embattled retailer, owned by private equity firm ECI Partners since 2015, through the next few trading months.

The name of the game in the insurance sector is consolidation, with the latest seeing the UK’s Jardine Lloyd Thompson taken over by Marsh & McLennan in a US$ 6.4 billion deal.

Rupert Murdoch’s Fox lost out to rival Comcast after the UK Takeover Panel had ordered the two companies to participate in a blind auction.  The US cable giant’s bid, at over US$ 39.0 billion, equating to US$ 22.65 a share, was about 10% higher than Fox’s. Both bids were higher than their July offers by Comcast (US$ 34.1 billion) and Fox’s. Until then, it seemed highly likely that Fox would take over the 61% of Sky it did not already own but by Wednesday, it agreed to sell its 39% stake in Sky plc, the owner of Sky News.

Deliveroo is seen to be a target for Uber Technologies who want to enhance food-delivery business in Europe. The London-based firm has business in two hundred cities, over four continents, but is little known in the US. With no acquisition price available, the bid will have to be in excess of US$ 2.0 billion which was the figure of the food-delivery company’s last valuation price; last year, it raised US$ 480 million from investors, including Fidelity Investments and T. Rowe Price Group Inc.

In a bid to stave-off an imminent economic collapse, the IMF has brought forward an increased three-year US$ 57.1 billion rescue package for Argentina. Most of the money will be made available over the next fifteen months, with most of it earmarked to support the budget deficit. The bail-out plan, one of the biggest in IMF’s history, is subject to the Argentine Congress approving the 2019 budget and the Macri government cutting back on spending and delivering a balanced budget next year.

S&P Global Ratings confirmed no change in China’s A+, with ‘stable’ outlook, as the government continues its efforts to rein in credit growth (and the shadow banking sector) and cut back on public investment. Despite the current spat with the US over sanctions, it seems highly likely that the country’s future growth will continue at levels of over 6.0%, at least for the next three years.

US house prices continue their upwards spiral and, although easing to a monthly 0.2% hike in July, climbed 6.4% on an annualised basis, compared to a 6.0% rise last year. Double-digit growth was seen in Las Vegas, Seattle and San Francisco, where prices rose by13.7%, 12.1% and 10.8% respectively.

Despite the ever-growing criticism of his antics, Donald Trump continues to defy his critics and delivers what he promised prior to becoming the 45th President – a booming economy, despite the ongoing trade dispute with China. This month, US consumer confidence has hit an 18-year high with the Conference Board’s index reaching 138.4, 3.7 higher, month on month. With the labour market tightening, as the 3.9% jobless rate indicates at or near full employment, and the resultant boost in household wealth, the short-term outlook for the economy is positive, with Q3 estimates above  3.0% mark; but the nagging doubt remains – what will happen when the impact of tariffs cuts in?

UK government spending in August surprisingly jumped to US$ 8.9 billion, (compared to US$ 5.7 billion a year earlier), driven by subdued tax receipts (only 1.6% up on last year) and a 5.4% increase in expenditure. Despite the increase, the US$ 23.3 billion YTD borrowing figure is 30.5% lower and gives the Chancellor room to spend more on the NHS and other public services in his late October budget. The current public sector net debt, excluding public sector banks, totals US$ 2.34 trillion, equating to 84.3% of GDP.

August UK retail sales were higher 0.3% higher, month on month, and 2.0%, quarter on quarter, as all segments – except food (down 0.6%), clothing (1.9% lower) and petrol – moved higher. The surprising rise in sales saw strong growth figures of 4.5% and 2.8% in household goods stores and other non-food outlets respectively. On-line spending continued to grow, as a proportion of total retail spending, and is now at a record high of 18.2%.

Eurozone private sector grew at the second-weakest pace in almost two years, as the September composite fell to 54.2. With export orders failing to expand for the first time since June 2013, this led to weaker growth in the manufacturing sector. However, the services PMI nudged 0.1 higher, month on month, to 54.7. These figures seem to point that the bloc’s momentum may have slowed, driven by factors such as Brexit worries, rising political uncertainty and waning global demand.

Italy’s banking structure is showing signs of strain. Two problems bubbling under the surface are the US$ 580 billion Italian bank debt, owed to the ECB, and the US$ 200 billion in NPLs (non-performing loans). Furthermore, financial markets will surely be rattled with the Italian populist parties coercing the government to provide more funds as per their election promises which include an additional US$ 12 billion for a so-called citizen’s income that will “cancel poverty.” This sets the budget deficit at 2.4% of output which goes against EU requirements that the country should improve its budget balance so as to reduce its debt mountain. This should have resulted in a much tougher budget, with a headline deficit more in line with 1.6%. As Brussels is more concerned with Brexit, the Italians will probably escape scot free with bending the rules again. Look Away.

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End Of May

In a move to tap into the ever-growing Chinese market, Falcon City of Wonders has launched a new villa development – Eastern Residence will be a gated community of 680 LEED Gold certified villas, with starting prices at US$ 845k. This development will be part of its Pyramids Park project that will comprise 4.7k serviced hotel apartments in three structures, which will include the largest ever-built pyramid.

Azizi Developments expect to deliver 2.3k units in Q4, as completion of seven projects draws closer. Encompassing 284k sq mt, the projects are Shaista, Samia, Star, Farishta, Plaza in Al Furjan, Azizi Mina on The Palm Jumeirah and Azizi Aliyah Residence.

Emaar has invited construction bids to start work on Beach Vista residences in Emaar Beachfront. The Sunrise Bay project comprises two towers of 33 and 26 storeys, with the size of apartments ranging from 75 to 253 sq mt.

Jumeirah Group has announced the launch of its 22nd property – the Jumeirah Nanjing in China, designed by the late Zaha Hadid. The hotel, located on floors 39 – 67 of the North Tower, is by the banks of the Yangtze River and includes 212 rooms and 49 suites.

Foundering Drake & Scull could have been thrown a lifeline in its bid to stop going out of business, with its largest shareholder, Tabarak Investment, increasing its investment to 13.73%. This comes ahead of a crucial general meeting next week to vote on whether to close down operations or not.

The US food retailer and convenience store chain, Circle K, is planning to triple the number of its UAE outlets, from the current level of 35, over the next twelve months. To complement this expansion, the company, owned regionally by Convenience Arabia, will open a dedicated regional distribution warehouse and central kitchen.

There are reports that Uber is in discussions to acquire Careem Networks FZ in a deal that could top US$ 2.5 billion. Earlier in the year, the Dubai-based ride-hailing firm held investor talks to raise US$ 500 million which would have valued it in the region of a much lower US$ 1.5 billion; at the time, an IPO was a possibility. Careem is the biggest player in the region, employing one million drivers in more than 100 cities.

The UAE government is to introduce a new class of visa to encourage retirees to remain in the country. Persons over 55 can apply for a five-year visa subject to one of the following three conditions being met – owning a real estate investment in excess of US$ 545k, local financial savings of over US$ 272k or proof of monthly income of at least US$ 5.5k.

This is just one of four decisions made by the government this week, in an attempt to boost consumer confidence, with the other three being reduced electricity costs for factories, (up to 29% for large and 20% for smaller utilities), the introduction of a ‘one-day court’ system for minor criminal offences and the adoption of unified national standards for public and private hospitals.

The UAE President HH Sheikh Khalifa has approved additional funding of US$ 536 million for the general federal budget and to the budgets of independent entities for the current year, to be financed from the general reserve. The many beneficiaries will include Ministry of Tolerance, the Emirates Diplomatic Academy, the UAE Space Agency and the General Authority for Sports.

Moody’s reckon that there was but a “modest” inflationary impact, following this year’s introduction of VAT in the UAE, as many high ticket items for households – including education, healthcare and rent – were at zero or exempt rates. Another “benefit” was that higher input costs for firms have generally not been passed through to output costs. The ratings agency also estimated that the tax could add US$ 6.5 billion, equating to 1.7%, to the country’s GDP and that 30% of receipts will be utilised by the federal government, with the balance being distributed among the seven emirates; the sharing formula is not yet known.

The Central Bank has trimmed its 2018 inflation-adjusted GDP growth forecast from an earlier June 2.7% to 2.3%, caused by a Q2 slowdown in the non-oil sector which contracted 0.2% to 3.6%, quarter on quarter. A major factor impacting the country’s economy is the lacklustre realty sector which has seen Dubai prices fall 5.8% over the past twelve months and 1.7%, quarter on quarter. Because of last year’s OPEC decision for some members to cut back on their quotas, Q2 oil production reduced by 1.7% compared to a year earlier, although prices have firmed; nevertheless, oil GDP will decline by 0.5% in 2018.

Dubai August inflation levels remained flat (0.2%), compared to the same month in 2017, at the same time, housing deflation decelerated 3.6%, year on year. However, the January introduction of VAT saw marked increases in transport and food/beverage prices of 18.5% and 3.3%.

H1 figures indicate that Dubai’s non-oil foreign trade rose 0.8% to US$ 175.7 billion. Re-exports showed a 13.4% hike to US$ 55.3 billion, with imports and exports totalling US$ 102.7 billion and US$ 17.7 billion respectively. The fifty+ free zones in the emirate posted a 20.1% rise in foreign trade to US$ 70.0 billion, as re-exports jumped by 31.0% to US$ 30.5 billion.

Another suiter joined the crowd to acquire the management rights for the ten ME funds of embattled private equity firm Abraaj. The Abu Dhabi Financial Group (ADFG) is one of more than a dozen international entities in the market to buy the majority of the Dubai’s equity firms. It is reported that their bid includes US$ 6 million for the audit and litigation financing, as well as a US$ 10 million credit facility to fund the operations of the regional funds and a further US$ 10 million earmarked for liabilities.

The DFM opened Sunday, 16 September, on 2810, and continued with its recent weekly declines by shedding 46 points (1.6%), to close on Thursday at 2764. Emaar Properties was down US$ 0.04 to US$ 1.31, with Arabtec also US$ 0.04 lower at US$ 0.52. Thursday 20 September saw volumes edging higher, with trades of 236 million shares, valued at US$ 76 million, compared to a week earlier (217 million shares at US$ 56 million).

By Thursday, 20 September, Brent traded US$ 0.61 (0.8%) higher at US$ 78.70; gold was US$ 3 up to US$ 1,211. Despite the August global oil output hitting a record 100 million bpd, the market may still tighten, leading to prices heading northwards, as exports from Iran and Venezuela decline.

Danske Bank is being investigated for its role in one of Europe’s biggest money laundering scandals that could see the Danish bank facing a US$ 630 million fine. The financial institution, which saw its disgraced chief executive officer, Thomas Borgen, resign, admitted that US$ 234 billion flowed through its tiny Estonian unit between 2007 and 2015, a “large” chunk of which needs to be treated as “suspicious”. Danish authorities are investigating “illegal acts” and there are suggestions that criminal investigations into the bank are on-going in Denmark and Estonia. The Danske scandal is the latest in a line of European financial institutions, including Deutsche and ING, that have been investigated for illegal money-laundering operations.

Apple has finally paid the Irish government US$ 16.5 billion that was demanded by the EC, owing to previous illegal tax breaks by the government which has always maintained that no special tax treatment had been given; this despite the below 1% effective tax rate the US tech firm paid in Ireland. Both parties – the Irish government and Apple – disagree with the EC findings and with an appeal in the offing, the money is being held in an escrow account.

Argentina’s woes continue unabated, with its economy contracting by 4.2% in Q2, mainly attributable to a drought that resulted in slower agricultural export activity (14% lower quarter on quarter) and the Macri government being forced to slash public spending; furthermore, the fact that interest rates stand at 60% does not bode well for the economy. The quarterly decline followed six straight quarters of growth, so the annual contraction is forecast at a lower 2.4% level.

Having already reduced 2020 Eurozone economic growth forecasts in June from 2.1% to 1.7%, the ECB is expected to downgrade these forecasts again. The main drivers seem to be the ongoing global trade difficulties and the introduction of tariffs, along with potential problems emanating from Brexit and Turkey’s current woes. The ECB is also expected to cut back on its monthly bond purchases by halving the stimulus package to US$ 17 billion and down to zero by year end. Inflation levels are expected to stabilise around 1.7%.

Meanwhile the bloc’s July industrial production dropped 0.8%, month on month, but 0.1% higher on an annual basis, whereas the larger EU28 declined by 0.7% but rose by 0.8%, year on year. On a country basis, the biggest falls were in Malta, Croatia and Sweden – 6.3%, 5.0% and 4.1% respectively – with 3.6%, 2.8% and 1.8% hikes reported in Denmark, Ireland and Latvia. Both the Eurozone and EU 28 saw falls in durable consumer goods (1.9% and 1.0%), non-durable consumer goods (1.3% and 1.3%) and intermediate goods (0.8% and 0.6%).

Another indicator that the US economy is in fine fettle is new residential construction showing a marked increase in August – up 9.2% to 1.28 million, from July’s annual rate of 1.17 million; analysts had estimated a 5.7% hike to 1.23 million for the month.

There is no way that Donald Trump will back down as he hits China with another round of tariffs – this time a further US$ 200 billion in imports, with the promise of even more (totalling US$ 267 billion) if the inevitable happens – China retaliates. White House officials have indicated that China had been given “chance after chance” to change the trade practices considered unfair to US businesses, but “have remained obdurate.” Even the most ardent Trump critic, of which there are many, can see the unfairness in a 2017 US$ 375 billion trade deficit between the world’s two largest economies. It cannot be long before the currently booming US economy feels the impact of rising input costs and declining exports.

August inflation figures in the UK rose unexpectedly to 2.7% in August, against market expectations of 2.4%, and the 2.5% rate a month earlier. The main drivers behind this were price hikes for recreational goods, transport and clothing, whereas there were lower charges for mobile phones, and furniture/household goods. The fact that wage growth, at 2.9%, is still higher than inflation may force the Bank of England to raise rates before next year’s 29 March Brexit.

With little more than six months to go before Brexit, the scaremongers are out in force again. The two main protagonists heading the Fear Factor are Mark Carney and Christine Lagarde – both preached prior to the 2016 referendum that the economy would sink if the Remainers lost the vote – and got it horribly wrong then.

This week, the Canadian Bank of England governor has reportedly told ministers that the UK property market would crash and mortgage rates spiral up in the event of a chaotic no-deal Brexit – as well as house prices tumbling 35% within three years. In addition, he indicated that a plunge in sterling would drive up inflation and interest rates. As was the case two years ago, his calculations may be right but his assumptions – on which the models were based – completely wrong. To his credit, the former Goldman Sachs banker later admitted he had miscalculated the impact of the Brexit vote and could find himself again a laughing stock in the City with his current dire warnings.

Jumping on the bandwagon again is the IMF’s French Managing Director warning that a no-deal” Brexit would entail “substantial costs” for the UK economy. Christine Lagarde also commented said that all likely Brexit scenarios would “entail costs”, but a disorderly departure could lead to “a significantly worse outcome”. If a broad agreement is made, the forecast growth for the next two years will be 1.5%.

Whatever you think of Theresa May, she was in an unenviable position at this week’s EU meeting in Salzburg, when she went to discuss Brexit progress with both the elected and unelected leaders of the 28-member bloc. However, it is highly unlikely that they will respond positively to her conclusion that she had “put forward serious and workable proposals” and that it was now up to the EU to “respond in kind” and “evolve its position.” EU and the UK look no closer to a deal and the planned October summit will be another exercise for the EU to mock the UK Prime Minister yet again. The bloc is in the driving seat and there is no way that they will negotiate to help the UK at the expense of any of their 27 members. There is no doubt that the Brussels lynch mob will go for the jugular and October could see the End Of May.

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Cruel Summer

A week after winning a Damac US$ 140 million contract to build tower 3 in its Aykon City development, China State Construction Engineering Corporation has snared another bigger deal, totalling US$ 351 million, awarded by Emaar. The project is to build the Downtown Views II towers – three high-rise residential buildings, with 1.5k serviced apartment units.

According to Dubai Land Department, 47 new real estate projects, encompassing 14k properties, of which 71.4% were apartments, were completed during the first eight months of the year. It is estimated that 1k properties, valued at US$ 3.3 billion, were handed over to investors.

The latest Knight Frank Wealth Report indicates that Dubai luxury property prices dipped 0.8% in H1, with other locations recording bigger declines – Vancouver, Istanbul and London by 6.2%, 2.4% and 1.8%. On the flip-side, both Singapore (11.5%) and Tokyo (9.4%) returned impressive growth.

Having well and truly cemented its position in both the malls and hospitality sectors, Majid Al Futtaim has plans to expand its real estate division, along similar lines in terms of revenue. The Dubai-based company has four major projects under way, the largest of which is the US$ 3.8 billion Tilal Al Ghaf mixed-use development in Dubai; the others are located in Beirut, Muscat and Sharjah. In its latest H1 accounts, the Group posted revenues of US$ 4.0 billion (up 15.0%) and US$ 627 million (1.0% higher) in its retail and hospitality sectors.

There were reports that Emaar was offering buyers in six of its recent launches – including those in Dubai Creek Harbour and Downtown Dubai – ten-year investor visas, for both buyer and immediate family. On Tuesday, these reports were refuted by Dubai’s leading developer. To boost sales, the developer is to offer a three-year payment plan, after hand-over, and to pay half of the 4% DLD registration fee.

Arabtec has been awarded a US$ 71 million Dubai Properties’ contract  for MEP (mechanical, electrical, and plumbing) on its Amaranta and La Quinta projects in the Villanova master development; this entails 1.4k villas, townhouses, and cluster houses.

Union Co-op has signed a US$ 26 million, 30-year investment contract with Dubai Silicon Oasis Authority to establish a commercial centre. The centre, covering 142k sq ft, will have a 61k sq ft Union Co-op hypermarket on the first floor and will include basement parking for 250 vehicles.

Having recorded 289 million passenger kilometres in 2017, Emirates is officially the fourth biggest airline in the world. Not surprisingly, the top three were all US-based – AA (324 million), Delta (316 million) and United (311 million). Emirates did better with cargo, at 12.7 billion freight tonne kilometres, as global second behind Federal Express.

Sunday saw the ninth anniversary of Dubai Metro and, at the same time, a report by the UK’s Henley Business School estimated that in its first seven years of operation to 2016, the project accumulated economic benefits, totalling US$ 18.0 billion, against costs of US$ 11.2 billion. By 2020 and 2030, the forecast accumulated benefits will top US$ 31.3 billion and US$ 63.8 billion, against total costs of US$ 12.3 billion and US$ 14.7 billion respectively. Apart from the obvious direct factors, the study took into account the impact of the likes of reducing mobility/ vehicle operation costs, curtailing the number of traffic accidents, curbing carbon emissions and cutting road maintenance costs.

DP World is to meet arranging banks to discuss a ten-year benchmark dollar sukuk offering. The Dubai logistics group, and the world’s fourth biggest port operator, is also considering issuing 30-year Regulation S/144A bonds, if market conditions so dictate.

Shuaa Capital is planning to buy a further 70.9% stake in Kuwait’s Amwal International Investment Company, which will bring its total shareholding to 87.2%. Prior to the GFC, the Dubai firm was one of the region’s top investment banks and, since returning to profitability last year, is now on the road for further expansion. Recent attempts to buy into Kuwaiti bank Global Investment House and Bahrain’s GFH did not materialise but this bid seems to be more positive and will be subject to regulatory approval.

The Securities and Commodities Authority is to recognise and regulate ICOs (initial coin offerings) as securities. Following a review of best international practices, the SCA will introduce a set of mechanisms as part of an integrated project to ensure that regulation for such a highly speculative and volatile commodity is closely monitored.

Much-troubled Drake & Scull is to hold a Special General Assembly Meeting, on 27 September, to decide whether the company should continue or be dissolved. With the accumulated losses exceeding 50% of its issued share capital, Article 302 of the 2015 UAE Companies Law No. (2) requires the company to call this meeting. By Wednesday, 12 September, its YTD share value had plummeted 81.9% from its 01 January opening of US$ 0.616 to US$ 0.112.

The DFM opened Sunday, 09 September, on 2827, and shed 0.6% to close the shortened week on Wednesday at 2810. Emaar Properties was down US$ 0.01 to US$ 1.35, with Arabtec up US$ 0.04 to US$ 0.56. Wednesday 12 September saw falling volumes, ahead of the Islamic New Year, with trades of 217 million shares, valued at US$ 56 million, higher than a week earlier (348 million shares at US$ 100 million).

By Thursday, 13 September, Brent traded US$ 1.59 (1.0%) higher at down US$ 78.09; gold was US$ 4 up at US$ 1,208. The main reasons behind the recent hike in prices, which are at their highest this year, are the concerns about Iranian supplies (with sanctions beginning to take effect) and a marked fall in US stockpiles.

VW Investors are in court claiming US$ 11 billion damages  over the car-maker’s fraudulent role in the diesel scandal. The case, initially involving 1.7k claimants, is suing for damage suffered by the investors, when the shares fell by over 40% and that VW should have admitted as early as June 2008 that its diesel vehicles emitted illegal levels of pollution – and not waited to September 2015 to disclose the problem and cause its shares to fall. The company has already paid out US$ 31.7 billion in penalties and fines and could be in line to pay out a lot more, especially if this test case is successful.

Tesla shares continue to fall not helped by the antics of its controversial chief executive Elon Musk, the latest of which was smoking marijuana live on the web during a podcast interview. This incident, along with the unexpected resignations of two senior executives, sent the shares spiralling 10% lower, to recover ending the day 6% down. Since his June announcement that he was planning to delist the company, which he later recanted, the share value has fallen over 20%.

James Dyson, the great British innovator, is to join the big boys in the electric car market, with plans to invest US$ 2.6 billion to build a “radically different” product than rival models. His vehicles will utilise solid-state batteries (being smaller and more efficient), whereas most of the competition will rely on lithium-ion battery technology. Even with Elon Musk’s Tesla losing some momentum, the major traditional car-makers – such as Aston Martin, BMW, Renault-Nissan and VW – will be expanding and investing great sums of money into the growing electric car market. It will be interesting to see whether the 71-year old Dyson can beat them at their own game.

Faced with increasing competition and regulatory scrutiny, Didi Chuxing posted a US$ 585 million H1 loss; since its inception six years ago, and still the world’s second most valuable start-up, the Chinese ride-hailing giant is facing so much competition, from the likes of Meituan Dianping, that it spent US$ 1.7 billion in subsidies and discounts to passengers and drivers. Because it returns most of its generated revenue via subsidies to riders and drivers, Didi has been working on wafer-thin 1.6% gross margins.

As expected, on Wednesday, Apple launched three new iPhone X handset models – XS Max, XS and XR – along with a new smartwatch with an added fall-detection function. The iPhone XS Max, with a bigger 16.5cm screen, will retail from a relatively high US$ 1.4k to US$ 1.9k, depending on its amount of storage. The XS will keep the same-sized screen as before – and will retail at between US$ 1.3k to US$ 1.8k -whilst the lower quality XR will sell for up to US$ 1.2k.

This week, Jack Ma, co-founder and chairman of Alibaba, announced that he will step down from both positions next September; he will be replaced by the current CEO, Daniel Zhang. The 54 year old ex-teacher will then focus on philanthropy and education.

Not many retailers can boast a 1.6% growth in H1 sales to almost US$ 7.2 billion and then see its net profit slump 99% to under just US$ 2 million. But the John Lewis Partnership, which also owns Waitrose, has done it as the department store chain has had to resort to  matching rivals’ discounting “extravaganza days”. The retailer, which employs 85.5k staff, also warned that full-year profits would be “substantially lower”.

After calling in advisers this week – and the possibility of a company voluntary agreement in the offing – Debenhams saw its share value plunge 17%. The troubled retailer has several other options available, apart from the CVA route which normally results in closure of stores; these include renegotiating leases, giving up space in some of its larger outlets and the possible divestment of its Danish Magasin du Nord. Whichever way one looks at this retailer, it is in trouble, having already this year, lost nearly 70% of its market cap, issued three profit warnings and laid off 320 store management staff in February. Debenhams’ shares took another beating today declining 7% in early trading on the back of Sports Direct issuing a statement to the market saying it had no intention of making an offer; Mike Ashley’s retail empire owns almost a 30% stake.

Yet another high street retailer has hit the buffers – this time Evans Cycles, with over sixty stores, is in talks with its lenders about an urgent capital injection following a slump in profits. Founded in 1921, and owned by private equity firm, ECI Partners, it requires over US$ 13 million in new funding to keep the wheels rolling.

In “a fight back against online and e-reading”, Waterstones has acquired Foyles for an undisclosed sum; it includes taking on six shops in London, Bristol, Birmingham and Chelmsford along with its on-line operation. It already owns Hatchards and Hodges Figgis – both booksellers more than 200 years old.

UK house prices continue their recent upward trend rising 3.7% in August, up from July’s 3.3% annual increase and recording the largest rise since last November. For the quarter ending August, prices were 1.9% higher, at an average of US$ 298k, than the previous three month period.

Surprising many of its critics, the UK economy bounced back in July, (thanks mainly to the effects of the World Cup and the tropical summer weather).  It expanded 0.3% in the month and 0.6% for the July quarter, compared to 0.4% in the June quarter. Both the services, 4.4% higher, and construction sectors – up 3.3% – moved forward, whilst industrial output contracted by 0.2% for the month and by 0.5% for the quarter.

UK workers’ pay growth in July saw its fastest pace of growth in three years, with the year on year level 3.1% higher. Annual average weekly earnings excluding bonuses came in at US$ 636. With inflation rates of 2.4%, and the higher growth in pay levels, households will have more disposable income available to spend which in turn should boost the economy. Another plus is that there are now 32.4 million employed as the number of unemployed fell to 1.36 million – its lowest level since the mid-1970s. Normally, more tax being paid will bolster the Exchequer’s

revenue stream because of the double whammy of less unemployment benefits being paid and more money available for consumer spending.

Positive economic data continues to flow out of the US. In August, the non-manufacturing index grew at a faster rate, up 0.8% to 58.5%, month on month. This is a bellwether indicator that Q3 economic growth figures will continue to be strong and resilient. All other indices headed north, including business activity (up 4.2% to 60.7%), new orders by 3.4% to 60.4% and sectorial employment at 56.7%.

Not only did the US economy add 201k new jobs in August but average hourly earnings rose 0.4% on the month and 2.9% for the year – the fastest pace in over nine years. The unemployment rate remained steady at 3.9%. Because of this unexpected boost in wages, it is becoming increasingly likely that the Fed will hike rates by 0.25% at its next meeting later in the month. The number of US job vacancies hit a new high in July, totalling 6.94 million. Job opening rates, at 4.4%, were well ahead of the quits 2.4% level. During July, the number of people hired at 5.70 million was 2.6% higher than the 5.53 million who left their employment.

Even though its annualised export growth dipped slightly in August to 9.8%, China’s trade balance with the US widened to a record US$ 31.1 billion, up US$ 3.0 billion for the month. President Trump will not be best pleased to see that, already this year, China’s trade surplus with the US has jumped by almost 15.0%; there is every chance that he will initiate even more tariffs than the US$ 200 billion already in operation. Meanwhile, Chinese US imports slowed in August to 2.7%, compared to an 11.1% growth the previous month. The US President is also, quite rightly, concerned with other problems concerning limits on US firms’ access to Chinese markets, intellectual property protection, technology transfers and investment.

The World Meteorological Organisation has indicated that there is a 70% chance of a recurrence of the El Niño weather over the next three months. The last time this happened was in 2015-2016 which resulted in changes in weather patterns that brought drought to Africa, resulting in marked declines in food production, and unseasonal floods to parts of South America. If this were to happen, the economies of many poorer countries, already facing massive problems, will have a negative impact at both regional and global levels. The week has seen the physical and economic damage caused by Typhoon Mangkhut and Hurricane Florence. For many, 2018 has already been a Cruel Summer!

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God Only Knows

China State Construction Engineering Corporation has been awarded a US$ 140 million Damac Properties contract to build tower C of Aykon City, part of the developer’s US$ 2.0 billion project overlooking the Dubai Canal. CSCEC also won the contact for Tower B, awarded earlier in the year. The latest 62-floor tower, known as The Residence, will have 48 residential floors, with a total built-up area of 1.8 million sq ft, and will comprise studio to 1-3 B/R apartments.

This week witnessed the opening of Hampton by Hilton Dubai Airport, a tie-up between wasl Asset Management Group and Hilton. Apart from being the brand’s first foray in the region, it is its largest hotel to date, with 420 rooms.

A touch of Mediterranean is to grace Dubai, with a 192-berth super-yacht marina (Port de La Mer) and La Côte, featuring around 400 1-4 B/R apartments and a two-storey penthouse, across five low-rise buildings; completion is expected by Q4 2020. These two projects are part of Meraas’ La Mer beachside destination which will also feature retail options and restaurants, as well as 4-5 star hotels and a private beach.

Emaar Properties has begun construction work on its private island, Beach Vista residences, on Emaar Beachfront; the development comprises 33 and 26-storey towers.

Reports indicate that Emaar India has plans to launch up to eight  projects in 2019 and to use some of its 4.5k acres of land to set up JVs with interested parties; the Dubai developer will only share revenue with the chosen partners, who will develop projects of their own brand. In 2005, Emaar Properties and India’s MGF Group formed a JV, Emaar MGF Land, with an initial US$ 1.2 billion investment.

Flydubai posted an H1 loss of US$ 86 million – more than double the US$ 39 million deficit recorded in the same period last year. The main driver was the rising cost of fuel, up an average 35% over the year, which had a US$ 48 million impact on the bottom line. Meanwhile, revenue was 10.4% to the good, at US$ 763 million, with revenue per passenger kilometre growing 6.5%. In the first half of the year, the budget airline launched or restarted ten routes and expects to increase its fleet size by 9.8% to 67 Boeing 737s by the end of the year.

Dubai-based Novus Aviation Capital is to manage a junior consortium including the Development Bank of Japan Inc, NORD/LB Norddeutsche Landesbank and Boeing. The venture, known as Cedar Aviation Fund, will comprise a new junior debt fund designed to provide airlines and lessors with higher loan-to-value financing for the acquisition of Boeing planes.

By separating Inchcape Shipping Services Holding Ltd into two standalone companies, the Investment Corporation of Dubai has launched a new entity, ISS Global Forwarding. Focussing on supply chain logistics, and located in DAFZA, it will be involved in global freight forwarding, contract logistics and oil/gas projects. Initially, it will have a presence in eighteen countries but will expand operations in China and Asia Pacific.

In February, the Djibouti government abruptly cancelled its agreement with DP World to operate Doraleh Container Terminal and seized all its facilities which the Dubai-listed company had designed, built and operated. Yet again, the London courts have ruled in favour of DP World and this week barred the African authorities from treating its JV shareholders’ agreement with the Dubai port operator as “terminated”.

Jebel Ali Free Zone posted a US$ 162 million profit on the back of a 2.0% hike in revenue to US$ 270 million. Over the six-month period, the DP World unit saw assets rise to US$ 3.6 billion and an additional 293 to its client base.

Two of Dubai’s leading entities saw their credit rating cut by S&P Global. DEWA was downgraded to BBB, with a negative outlook, whilst DIFC Investments was lowered to BBB – with a stable outlook. One of the main reasons given was the fact that credit conditions in the emirate had deteriorated which could impact on the government’s ability to provide extraordinary financial support, if so required. With a massive increase in population, up 43.1% over the past five years to 3.119 million, (2.179 million – 06 September 2013),  Dubai has seen its annual GDP per capita fall 17.8% to US$ 37k over the five-year period.

Figures from International Data Corporation indicate that GCC Q2 mobile phone shipments fell 9.9%, year on year, and 2.1% over the quarter to 5.8 million units; smartphones recorded their fifth straight quarter of declines and have posted a 14.3% fall over the past twelve months. The decline was felt more in the UAE where annual smartphone shipments were 10.9% lower, with the overall mobile market off by 8.8%. Three companies accounted for 75% of the smartphone market – Samsung (34.2%), Apple (24.3%) and Huawei (16.5%).

Latest figures from the Emirates NBD PMI indicate that the index dropped 0.8 to 55.0 in August, driven by a slowdown in employment and lower stocks of inventories. However, there was some good news, including growth in output and new orders to 63.1, as well as in new work to 57.1. Margins continue to be squeezed which has led to a more focused approach to cost control and job creation being impacted. Because of the fragility of the non-oil private sector, much of the country’s growth this year will be attributable to the rate of government spending and investment, plus net exports.

Emirates Investment Bank is exploring new revenue streams, looking at different sectors – including education, F&B and healthcare – in the GCC. Already this year, the bank has implemented two deals in the healthcare and food sectors and is closely monitoring developments within the regional education network. EIB posted a H1 5.6% profit hike, to just over US$ 7 million.

Having reportedly received offers from the likes of Abu Dhabi Financial Group, Kuwait’s Agility and the US Vistria Group, Actis has chipped in with a cheeky US$ 1 bid for Abraaj Group’s fund unit. The liquidators are also receiving bids for parts of the Dubai-based buyout firm’s business, including Colony Capital for its Latin American operations and Helios Capital Management, interested in some of its African business.

The DFM opened Sunday, 02 September, on 2840, and shed 0.5% to close the week on 2827. Emaar Properties was down US$ 0.01 to US$ 1.36, with Arabtec flat at US$ 0.52. Thursday 06 September saw rising volumes, with trades of 348 million shares, valued at US$ 100 million, higher than a week earlier (184 million shares at US$ 65 million).

By Thursday, 06 September, Brent, having climbed 12.4% the previous three weeks, lost a little ground, down 1.6%, US$ 1.27, to US$ 76.50; gold was US$ 1 lower at US$ 1,204. Over the month, Brent gained US$ 3.39 to US$ 77.64 from its 01 August opening of US$ 74.25, whilst gold headed the other direction down US$ 27 to US$ 1,207.

Opec’s 15-member bloc saw its August production levels hit their highest so far this year, pumping an average of 32.74 million bpd, 1.3% more than a month earlier. This comes after their June meeting, at which it was agreed to push up production levels by 1 million bpd to meet consumer demand and prevent a sharp rise in prices. Libya saw daily levels up 47.0% to 970k bpd, whilst the UAE and Iraq both increased production by 80k bpd, with Iran down 6.4% to 3.5 million bpd.

In a move to cut its debt levels, Norwegian Air is planning to dispose of a number of its planes to make room for the 210 units (from both Boeing and Airbus) that it has committed to acquire before 2020. Of the “new” arrivals, the sixty A320neos are already up for sale. The company expects a 10% increase its fleet size to 165 by the end of 2018 and to 200 over the next three years.

The latest international bank to face the wrath of the regulators is Société Generale which is expecting to be fined US$ 1.3 billion by US authorities over international sanctions violations. The French bank hopes that this will resolve criminal and civil charges in the United States and France for bribing Gaddafi-era Libyan officials and manipulating the Libor interest rate benchmark. This will not impact on future profit streams, as the balance had already been taken into account.

ING has agreed to pay a US$ 780 million fine, and other payments of US$ 117 million, after admitting errors in its policies to stop financial crime over a seven-year period to 2016, during which time some customers were laundering money through their accounts with the bank. The Dutch financial institution admitted that its operations did not “meet the highest standards” and are “taking a number of robust measures to strengthen our compliance risk management”.

As a direct result of the Chinese government clamping down on online gaming, the market value of Tencent sank over 20% last Friday; the 20-year old company accounts for 42% of all games sold in China. The reason behind the decision was the rising level of myopia (near-sightedness) mainly among the young population, attributable to spending too much of their time playing these games. The Education Ministry has directed the publishing regulator, inter alia, to limit the number of new online video games and restrict the time young people spend on such applications. Last month, China’s largest gaming and social media firm blamed the freeze on games for their first quarterly loss in thirteen years; there are concerns for the company that has lost more than US$ 160 billion in market value already this year. But with a third of its 1.4 billion population suffering from myopia, what else can the government do?

On Tuesday, Amazon joined Apple when it became the second US technology firm to be valued at US$ 1 trillion. The company posted a twelve-fold jump in quarterly profits to US$ 2.5 billion and has an ever-increasing employee headcount of 575k.

Switzerland’s Jacobs Holdings is likely to acquire Cognita, one of Britain’s biggest private school operators, in a US$ 2.6 billion deal. It had been on the market for some months and there was plenty of interest including from Nord Anglia Education and GEMS Education, who are both well known in the UAE. The initial plan was to hold an auction, as Cognita, with operations in eight countries, was keen to cash in on strong investor interest in the booming global education sector.

Canada’s Oxford Properties Group seems to have gazumped US private equity firm Blackstone Group, with a last minute (higher by US$ 65 million) US$ 2.4 billion offer for Australian office owner Investa Office Fund. The sale of its twenty-property national portfolio had seen widespread interest and indicates that demand for commercial space continues to be strong and that because of short supply, rents will inevitably go up. The Canadian landlord already owns 10% of Investa and its offer was 3.4% higher than the last traded share price.

Coca Cola has spent US$ 5.0 billion to acquire UK’s biggest coffee chain, Costa, from Whitbread. The leisure group had been mulling over whether to list Costa as a separate entity and there were several other parties, including Nestle SA, JAB Holding Co. and Starbucks Corp, that may have been interested in a deal. Whitbread bought Costa for only US$ 25 million in 1995, when it had only 30 outlets, and has built the brand over the past twenty-three years, now with 2.4k UK shops and already 1.4k in 32 countries, including China. It will use the windfall not only to return a “significant majority” to shareholders but also to prop up the pension fund and expand its Premier Inn chain in the UK and Germany. It will be interesting to see how the new set-up takes up the mantle to challenge the two market leaders – Nestle and Starbucks.

Yet another UK high street retailer is facing problems – this time it is Footasylum. Despite an 18.5% revenue hike over the past six months to US$ 127 million, it has issued a warning that its profits could be 50% lower than initially anticipated because of difficult trading in July and August; the retailer indicated that recent sales had been “more challenging” and there was “no sign of a recovery” on the high street. This week, its shares were trading at more than half of its value which fell to just US$ 54 million.

Meanwhile embattled DIY chain, Homebase, bought by Hilco Capital for just over US$ 1 in May, has gained creditors’ approval to close 42 of its 250+ stores that will now save it from having to cease business. The closures will take place over the next twelve months and lead to job losses of some 1.5k staff. The company, like Carpetright, House of Fraser, Mothercare and New Look in recent times, has used the controversial CVA (company voluntary arrangement) to control rising costs and keep in business, whilst its creditors are often left wearing most of the cost.

In line with other retailers, the smallish UK department store chain, Fenwick is to shed 400 jobs in a bid to restructure and further cut costs, after posting a 93% slump in profits to just under US$ 3 million, not helped by a 3.6% sales decline.

Accor has acquired Movenpick’s 84 hotels, and a further 18 under development, for US$ 559 million. The sale will strengthen Accor’s presence in the Mena region, with the addition of 51 properties formerly managed by the Swiss operator, along with the 18 under development. Europe’s largest hotel company currently has 222 hotels in the region and a further 90 in the pipeline. In recent times, Accor has purchased both the Raffles and Fairmont brands and future acquisitions cannot be ruled out.

July ME air passenger demand grew at an annualised 4.8%, well down on the corresponding figure of 11.2% the previous month – and this at a relatively peak time for the sector. Capacity was 6.5% higher than a year earlier, as the load factor slipped 1.3% to 80.3%. On a global scale, annualised average growth stood at 5.3%, with capacity up 5.5% and load factor 0.6% higher at a record high of 85.2%. The short-term future looks rosy but increasing energy prices may damage airlines’ bottom lines.

A look at three locations shows that their manufacturing sectors all slowed down in August. Some analysts point the finger of blame at the volatile state of the global economy and the introduction of tariffs. In the UK, the PMI dipped 1.0 to 52.8, with growth rate declining and new orders weakening. Most other indicators headed south, including new export business, overseas demand, factory output and pace of employment.

China’s manufacturing PMI was nearing the 50 mark – the crossover from expansion to contraction. At 50.6 (down 0.2 from July’s reading of 50.8), it posted its weakest level in over a year, with exports declining for the fifth straight month as new orders rose at their slowest pace since May 2017. There is no doubt that this sector has lost its momentum and is in a cycle of downward pressure.

Although extending growth for the 62nd straight month, the Eurozone PMI recorded its lowest expansion rate in over two years, registering 54.6, compared to a July figure of 55.1.  Worries about Brexit, trade wars and the impact of tariffs will not go away so the erosion of business optimism in the bloc will continue into the coming months. There is no doubt that consumer demand is cooling, whilst risk aversion is beginning to warm up.

The service sector in China moves up in August albeit at a slower pace, with a PMI reading of 51.5 – a ten-month low and 1.3 lower, month on month. The composite index came in 0.3 lower at 52.0, still above the 50.0 mark which differentiates between expansion and contraction. Meanwhile, Japan’s services sector edges higher and, at a faster rate, at 51.5. With business confidence remaining upbeat, both new business growth and recruitment rose at a faster rate.

Japanese capital spending increased at its fastest quarterly rate in over a decade, with Q2 spending 12.8% higher, year on year – and well up on the 3.4% return the previous quarter. This is a major indicator that points to an upward GDP revision due out next week.

In the UK, the August service sector PMI was 0.8 higher, month on month, to 54.3 and is comfortably placed well above the 50.0 line that marks the difference between contraction and expansion. These figures will come as some relief to the May government following recent poor manufacturing and construction data. It is expected that Q3 growth will be around 0.4%.

Disappointing news for the UK car industry in July when production fell 11.0%, year on year, to 121.1k vehicles, of which 19.4k were for the domestic market, down 35.0%; YTD figures were 4.4% lower at 955.5k. Monthly exports dropped by 4.2% to 101.7k units. The main drivers appear to be consumer uncertainty ahead of Brexit, the introduction of tougher emission standards and model changes.

July consumer borrowing growth was 0.3% lower, month on month, at 8.5% – it slowest pace in almost three years – as the net amount of new consumer borrowing came in at US$ 1.0 billion. This is well below the three year average of US$ 1.9 billion. Mortgage lending at US$ 4.1 billion was flat at 3.2%, whilst net bank lending to non-bank businesses increased to US$ 3.4 billion in July.

Fitch dropped Italy’s BBB rating from stable to negative on the back of a risk that a reversal of structural reforms would impact negatively on the country’s creditworthiness, not helped by political uncertainty. The government had been elected earlier in the year on the promise of massive tax cuts and some form of universal income for the poor; if implemented, the Italy’s debt level would inevitably head north. Its public debt level, at US$ 2.7 trillion, is the highest in the euro area and equates to a worryingly high 130.8% of GDP.

With unconfirmed reports that Goldman Sachs would shelve plans to set up a cryptocurrency trading desk, digital currencies have taken a hit this week. On Thursday, Bitcoin traded 4.5% lower at US$ 6,382 and is slipping to its year low of US$ 5,887. However, the loss was not as bad as other similar currencies that took a real pasting – Ethereum 12% lower, Litecoin – 11%, and Ripple – 7%.

It has also not been a good week for some more traditional currencies. Despite government efforts by President Hassan Rouhanim, the Iranian rial has dropped to record lows, with the dollar worth 138k Rials mid-week – down 8.0% in one day, Tuesday, and YTD 70% lower. This instability will inevitably go on for some time

The Turkish lire continues to plummet and is currently trading at 6.58 lire to the US$ – 42.4% lower than its opening price of 3.79, at the beginning of 2018. Despite its currency problems, Turkey’s economy is set to increase by 3.8% this year – 0.7% lower than expected in July. At the same time, Fitch lowered its forecast for next year from 2.4% to 1.2%, before recovering to 3.9% in 2020. The main drivers behind the slowdown include “policy missteps, heightened financial stress in the private sector, geopolitical tensions and potential capital flight.” The country is also facing increasing inflation levels, now at a 15-year high of 17.9%.

With persistent trade worries and increasing macro concerns, the Indian rupee slipped to new record lows trading at 71.58 to the greenback on Tuesday – and even lower on Thursday to 71.73.

On Wednesday, the rand lost 1.5% and was trading at 15.6 to the US$; since 01 January 2018, trading at 12.4, it has lost 25.8% of its value. South Africa has entered into recession, as its economy contracted by 0.8% in Q2 – its second straight quarterly fall. The main driver was the 29.2% slump in the agriculture sector which took 0.8% off the GDP, as the new Ramaphosa government has still not come to grips with reality and needs to reform and restructure much of the public service.

Many other emerging markets’ currencies can be added to the mix. Brazil’s real, trading at 4.13 to the greenback, has lost 24.8% in value, since starting the year at 3.31. Pakistan and Indonesia have also seen less dramatic YTD falls of 11.5% to 123.12 rupiah and 9.9% to 14,904 rupiah. (Even the Australian dollar, trading at 1.39, has managed to lose 8.6% in value so far this year).

With all the news focussing on the decline of sterling, it is interesting to note that the Euro has lost almost twice as much in value this year than the pound – 6.9% compared to 3.7%.

Even the Archbishop of Canterbury has offered his pennyworth of advice on the UK economy. Justin Welby has come out in support of higher taxes on technology giants and more public spending, citing that the present economy was “unjust”. For eleven years before leaving in 1989, the archbishop worked in the oil industry, with Elf Aquitaine and latterly for five years, as treasurer of Enterprise Oil plc. The energy sector seems to be one that makes high profits and low taxes – a possible case of poacher turning gamekeeper! Whether he is right, God Only Knows.

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Slippin’ and Slidin’

Anybody with US$ 22 million to spare can become the proud owner of Lebanon, a 420k sq ft island, located in Nakheel’s The World Islands. This comes complete with chalets, a swimming pool, two beaches and a restaurant. Currently owned by an Indian businessman, it has been on the market since the beginning of the year. Although other islands are up for sale, this would be one of the few which has been developed.

This week, Azizi announced the launch of Fawad Azizi Residence – the developer’s third project in Dubai Healthcare City. At a US$ 93 million cost, it will comprise 396 units (201 studios, 165 1 B/R and 30 2 B/R) following the other two projects Aliyah Residences and Farhad Azizi Residence, with 346 and 634 apartments respectively.

Meraas has signed an agreement with Caesars that will see the Las Vegas-based operator manage two properties on Bluewaters Island. The two – an upscale 178-key “Caesars Palace” property and another with 301 rooms – will open in Q4 and will be the first Caesars’ branded hotels in the Gulf. Caesars Entertainment – which operates 39k hotel rooms and 53 properties in five countries – organises over 10k live entertainment show, some of which will find their way to Dubai.

Having secured funding, and expanded its workforce by 28.6% to 9k, Emaar Properties’ Indian entity will complete all of its 10k delayed residential units by the end of 2019. Over the past two years, it has finished more than 5k properties.

The Museum of Illusions is set to open on 12 September in Al Seef, near the Dubai Creek. The first such museum opened in Zagreb in 2015 and the Dubai entree will be the sixth branch to open since then; it will house eighty visual and sensory exhibits, including a Vortex Tunnel, which tricks visitors to think that the ground is moving, and Ames Room, where guests shrink or grow, depending on their position.

Dubai Airport Freezone Authority posted an 8.0% hike in H1 profits, driven by revenue increases in both government services (31%) and licensing – 10%. Over that period, there was a 43% rise in leasable area, including 63% and 29% increases in warehouse and office space respectively; the number of registered companies was 15% higher. DAFZA’s first project outside of its airport location, its Industrial Park, has an 82% occupancy rate.

As part of its strategy to provide easily accessible, personalised services to all its customers, du is to open nine retail outlets in the country. The Dubai-based telecoms operator is to employ fifty staff to service the centres.

Local petrol prices are set to rise as from Saturday, 01 September. Special 95 will be US$ 0.0054 higher (0.07%) at US$ 0.706 per litre, with diesel marginally higher at US$ 0.719.

A significant milestone is in the offing for Dubai International, as sometime later this year it will welcome its number 1 billionth visitor. The airport recorded its second busiest-ever month in July with 8.2 million passengers – 1.8% higher than a year earlier; YTD traffic, at 51.9 million, is up 1.6%. Cargo volumes, totalling 223k tonnes, were 4.8% higher but YTD figures of 1.49 million tonnes came in 1.6% lower.

A new report by PayPal and Ipsos sees UAE online spending to top US$ 9.8 billion by the end of the year. It appears that cross-border shopping has grown by 14.7% to US$ 3.4 billion, over the past two years, and is set to expand even quicker,  as the number of users has increased from 33% to 61% over the past twelve months. The US, India and China accounted for 53% of most popular cross-border shopping destinations – accounting for 22%, 16% and 15% of the total.

With the main aim of facilitating the sharing of information on financial sector innovation, an agreement has been signed by Dubai Financial Services Authority and the Monetary Authority of Singapore. This will see the referral of innovative FinTech companies between both authorities. The DFSA and MAS also agreed to work on projects including on the application of blockchain and digital/mobile payments.

Majid Al Futtaim, who introduced Ski Dubai, an indoor resort with 22.5k sq mt of indoor ski area, to the world in 2005, is set to operate the Wintastar Shanghai indoor ski park. The project, which expects 3.2 million annual visitors when it opens in 2022, is a JV between Shanghai Lujiazui Development (Group) Company, Wintastar Holdings, a subsidiary of KOP, and Shanghai Harbour City Development (Group) Co. With a gross floor area of 227k sq mt, including a 90k sq mt alpine-themed ski and snow park, it will be the largest in the world and will have three slopes, including one to Olympic standards.

In December 2016, 7 Days shut down and this week it is Dubai-based weekly tabloid newspaper Xpress. The paper, published by Gulf News, will still continue as an on-line newspaper and there will be no staff layoffs. This is another indicator that print news media belongs to another era.

Fitch Ratings expect UAE’s fiscal surplus to grow at 3.2% this year on the back of rising energy prices, and by 3.8% in 2019. Because of government measures to boost the country’s economy, public spending will head in the same direction which will inevitably cut into the expanded oil revenue. The government will also be seeking to grow other non-oil revenue streams and has already introduced VAT; however, there is a fine balancing act to ensure that the economy retains its competitiveness on the global stage.

The UAE’s inflation rose to 3.78% in July, compared to 3.29% a month earlier. Since the beginning of the year (and the introduction of VAT), the index had fallen from 4.80% to 3.29% by the end of June, before creeping higher last month.

Six-year old Careem has confirmed that an IPO will not take place in the foreseeable future, as it still maintains focus on growing the platform, adding new cities and building new products. The Dubai-based ride-hailing app also denied rumours that it was in merger talks with Uber.

Investors in one of embattled Abraaj Group’s funds, the US$ 1.6 billion Private Equity Fund IV, are owed at least US$ 300 million, triple the amount first estimated. They have now requested the court-appointed liquidators, Deloitte and PwC, to remove the company as manager and stop Abraaj management fees forthwith. The investors’ council is unhappy with the “insufficient progress” made by the liquidators to stem losses in relation to “mismanagement and apparent fraudulent activity” by Abraaj and the general partner – and is threatening possible legal action. This week, the second bounced cheque case involving Ari Naqvi was settled out of court. The latest investor – following Kuwait’s Agility, York Capital and Abu Dhabi Financial Group – to show interest in acquiring most of its private equity funds’ business is Actis, a leading emerging market investor.

The DFM opened Sunday, 26 August, on 2816, and traded 0.8% higher to close the week on 2840. Emaar Properties was US$ 0.01 lower at US$ 1.37, with Arabtec also down US$ 0.01 at US$ 0.52. Over the month, both share values were lower – down from their August opening prices of US$ 1.44 and US$ 0.54. Volumes for the last week of August were weak at 184 million shares traded, valued at US$ 65 million.

By Thursday, 23 August, Brent, having climbed 4.2% the previous week, was up a further 4.1%, US$ 3.04, to US$ 77.77, with gold – jumping US$ 10 (3.3%) the previous week – US$ 11 higher to US$ 1,205.

China Petroleum & Chemical posted record high H1 profits of US$ 11.6 billion – 52.0% higher, year on year. Sinopec, the world’s largest refiner, benefitted from higher energy prices and better margins from selling higher-grade fuel products. Its shares have climbed 31.0% this year on the benchmark Hang Seng Index, which itself has fallen 7.5% over the same period.

Uber has decided to shift its focus to electric bikes and scooters (instead of cars) for short-distance inner city travel. The move will see the company, that posted a US$ 4.5 billion deficit last year, incur more short-term losses. In April, the ride-hailing firm invested US$ 200 million acquiring the bike-sharing company Jump.

In a bid to expand its presence in the self-driving car sector, Toyota is to invest US$ 500 million in a JV with Uber; this is a sector that the Japanese car-maker is trailing behind some of its rivals. The end product is to mass produce autonomous vehicles that would be deployed by Uber.

104-year old Aston Martin, is set to float on the London Stock Exchange which could value the iconic British sports carmaker at a mouth-watering US$ 6.4 billion. The IPO sees the company, which last year made its first profit since 2010, joining the likes of Ferrari which went public in 2015. It is thought that the company, whose main owners are Kuwaiti and Italian investors, will float at least a 25% stake to the public and that the flotation will go ahead later in the year.

In Australia, telecoms giants, Telstra and Optus, will now face increased competition following the US$ 10.8 billion merger of Vodafone Hutchison Australia and TPG Telecom. The former, owned by Hong Kong-based CK Hutchison and Vodafone Group, will have a 50.1% share and TPG, one the country’s largest internet service providers, the balance. Currently, Vodafone Hutchison Australia is the country’s third largest mobile operator, with a six million mobile customer base. On news of the merger, which has to be approved Competition and Consumer Commission, shares in Hutchinson rose by 44% and TPG by 18%.

July IATA figures indicate that ME air cargo growth continues to be the highest in the world at 5.4%, year on year, compared to the global average of just 2.1%; regional capacity was 6.3% higher and 3.8% on a worldwide basis. Global growth was at its lowest in over two years, with the tariff war being blamed for the slowdown.

Despite posting a record annual profit, up 14.3% to US$ 1.17 billion, driven by its non-international business, Qantas shares slumped 7.7% in early morning trading, before recovering somewhat by the end of the day. Investors were concerned that the forecast US$ 504 million increase in its fuel bill would impact on the airline’s bottom line, although CEO Alan Joyce seemed confident that the extra cost would be fully recovered in the domestic sector and mostly on its international routes. But in a competitive market, it is hard to see whether this will be possible and indicators are for flat earnings this year.

Air New Zealand’s results are also heading in the same direction, recording its second highest profit, but unlike its neighbour, it did warn that its future profit could be as much as 21% lower because of spiralling fuel costs.

How the mighty have fallen! Wonga, launched in 2007, is in the throes of going out of business – a sorry state of affairs for the payday lender which only recently was one of Britain’s fastest-growing consumer finance companies. Five years ago, the company, that became infamous for its sky-high interest rates on short-term loans, was looking at a US$ 1 billion New York IPO; only three weeks ago, the company received an emergency US$ 13 million cash injection, at which time its valuation was put at just US$ 30 million. It will be interesting to see who may be interested in acquiring the business and whether its fortunes can be reversed.

Although open for investment, Liverpool FC owners have confirmed that the club is not for sale. This comes after reports that Abu Dhabi-based Sheikh Khaled Bin Zayed Al Nayahan had made a US$ 2.6 billion bid earlier in the year. If the sale had gone ahead, it would have dwarfed the Glazer’s 2005 US$ 1.0 billion 2005 takeover of Manchester United which still remains the most expensive in football’s history. The 18-times English champions, now managed by Jürgen Norbert Klopp, was bought by the then known as New England Sports Ventures, for US$ 390 million in 2010; this year, KPMG valued the club at US$ 1.9 billion.

A major change will see Lloyd’s switch their auditors, PwC, who have been the bank’s auditors since 1865, to be replaced probably by Deloitte. The other two members of the Big 4 seem to have been ruled out; EY already audits RBS, Standard Chartered and several other major lenders, whilst KPMG is considered a “non-starter” because of its role as the auditor of HBOS, which Lloyds TSB bought during the 2008 banking crisis. Under recent EU rules, banks must rotate their auditors every five years.

On the subject of auditors, regulators are looking at how the big audit firms monopolise the market for the larger audits and there are reports that the nine larger entities may agree to place a cap on the number of FTSE 100 companies that any single accountancy firm can audit. To the outsider, the market looks a little skewed in favour of the big players.

Latest estimates points to the fact that Q2 growth in the Indian economy, driven by an improvement in manufacturing and exports, could be 7.6% -a tad down on the 7.7% growth noted in Q1 but still impressive. Union Minister, Arun Jaitley, is confident that the US$ 2.59 trillion economy, having overtaken France this year, could well become the world’s fifth largest if it surpasses the UK next year. This comes despite higher energy prices and a weakening rupee, trading on Thursday, 30 August, at a historic low of 71.42 to the US$ (and down 11.8% from its 01 January opening of 63.88).

Although Venezuela still dominates South American economic news, Argentina is back in the news. It is reported that President Mauricio Macri has requested the IMF to speed up a three-year stand-by US$ 50 billion loan package to support the country’s austerity programme and bolster the country’s weakening currency.  The government has agreed to slash its 2017 3.9% budget deficit to 2.7% this year and to 1.3% of GDP next year. Some hope! Not for the first time, the peso is under great strain, having lost over 50.5% to the greenback this year, whilst inflation is rampant. By Thursday, the peso was trading at 38.53, having lost 19.0% the previous two days, as the government ratcheted up interest rates by 15% to 60%! In June, the economy contracted 6.7% with an annual 0.6% negative growth rate.

The Trump administration appear confident that a trade agreement with Mexico is imminent, as their bilateral NAFTA differences are being resolved; this could be followed by Canada rejoining talks to get their differences fixed and their annual US$ 1.2 trillion trade running smoothly again. The Mexican Economy Minister, Ildefonso Guajardo, is on record that he will endorse nothing until Canada signs a new agreement.

The July US trade deficit in goods grew 6.3% to US$ 72.2 billion from US$ 67.9 billion a month earlier. Both wholesale inventories and retail stockpiles were both higher – by 0.7% and 0.4% respectively – as the consumer sentiment index climbed to 97.9. Meanwhile, the Conference Board’s confidence index rose by 5.5, month on month, to 133.4, despite analysts forecasting a dip to 126.8; this figure is the highest in over eighteen years. Such figures indicate that the US economy is in rude health and the forecast for the rest of the year is more solid growth. Q2 growth touched an annualised 4.2% – its fastest rate in four years – and an H1 expansion of 3.2%. The main driver continues to be the US$ 1.5 trillion tax cuts ushered in late last year along with the front-loading of soybean exports to China before the introduction of tariffs.

The honeymoon is over for Emmanuel Macron, with his government becoming increasingly unpopular and which now has to reform social spending. His pre-election promises included a boost for both jobs and growth which have not transpired; indeed, the growth forecast next year has already been cut from 1.9% to 1.7% and this in turn will bump up the public budget deficit from its current level of 2.3% of economic output to 2.6% this year and as much as 3.0% by the end of 2019. From being a man of the people, when elected last year, the French President’s aloof leadership (in line with many of his recent predecessors) and a scandal involving his personal Moroccan body guard, have seen his approval rating plummet to just 34% – a record low. (Even Donald Trump has a higher rating of 41%). For Argentina, Venezuela, Wonga, many emerging markets’ currencies and Emmanuel Macron, it appears that they are all Slippin’ and Slidin’.

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Respect

There is very little local financial news this week because of the Eid Al Adha celebrations. Most government offices have been closed all week, as banks and the Dubai Financial Market opened only on Sunday to then shut down for the rest of the week. The private sector, as is the norm, pulled the short straw and was given three days off.

Prior to an expected US$ 545 million start-up investment in the local property market, Fidu Properties is liaising with authorities on the use of telesales to prospective customers. RERA has recently informed the real estate industry that unsolicited telemarketing calls could result in fines of up to US$ 13.6k. The Chinese company, which opened its Dubai regional office in April, aims to target investments totalling US$ 1.4 billion and to create 3k regional jobs.

It is understood that Vimana Global has recently been conducting a prototype trial in the emirate of its autonomous aerial vehicle (AAV). The US flying taxi firm is in discussions with Dubai authorities to deploy a blockchain platform prior to its 2020 launch. The company confirmed that the AAV will have a dual role – for both passenger and cargo uses.

In July, Dubai’s CPI rose to 2.2%, compared to 1.3% a month earlier, driven by a 78.5% hike in tobacco products and marked increases in transport, restaurants/hotel and entertainment/cultural by 17.0%, 11.9% and 5.9% respectively.

After making recent investments in both the UAE and Saudi Arabia, Amanat Holdings has turned their attention to Bahrain, acquiring a 69.3% stake in that country’s Royal Maternity Hospital Holding for US$ 39 million. Prior to this deal, the company had utilised 72% of its US$ 681 million capital base on six assets, three of which had occurred in 2018; the company focuses on both the healthcare and education sectors.

It was the straw that broke the camel’s back when investors in the US$ 1 billion Abraaj healthcare fund questioned its unusual dealings and mismanagement of money. Now they have appointed Alix Partners to oversee the fund’s separation from the Abraaj Group and to ensure its long-term success in delivering accessible, affordable and quality healthcare in developing countries. Despite the recent appointment of provisional liquidators over Abraaj Holdings and Abraaj Investment Management Limited, day to day operations have not been impacted.

The DFM opened Sunday, 19 August on 2803, and, because of the Eid Al Adha celebrations, was only open for one day, to reopen on 26 August. Having lost 171 points (5.7%) over the past fortnight, it gained 13 points on the day with only 91 million shares traded, to close the week on 2816. Emaar Properties was US$ 0.01 higher at US$ 1.38, with Arabtec flat at US$ 0.53.

By Thursday, 23 August, Brent was trading US$ 3.30 (4.2%) higher at US$ 74.73, with gold also on the up – by US$ 10 (3.3%) to US$ 1,194.

Notwithstanding a 61.0% hike in Q2 revenue to US$ 11.0 billion, Alibaba Group Holding posted a 41.0% decline in net income to US$ 1.2 billion, attributable to one-off costs associated with compensation for Ant Financials’ recent fundraising. The world’s biggest online retailer recorded a near doubling of its cloud computing business to US$ 637 million and a 46.4% rise in its entertainments unit to US$ 813 million. It is expected that its future profit margins will continue to be squeezed by increased off-line retail and logistics investments.

To nobody’s surprise, the Saudi Aramco 5% IPO may still go ahead but will be delayed until late next year at the earliest. What was possibly to be the world’s largest initial public offering would have added around US$ 100 billion to the coffers of the Kingdom’s Public Investment Fund. The conglomerate, which produces 12.9% of the world’s oil, appears to be in no hurry at a time when energy prices are on the up and it is mulling over investing in a major share in the region’s largest chemicals company, Sabic.

Mulberry has issued a profit warning which resulted in a 30% slump in its share value on Monday to US$ 5.20. The luxury handbag maker operates 21 House of Fraser concessions and with that group’s recent problems, including debts of US$ 629 million to its creditors, Mulberry has intimated that it is owed US$ 3 million and that “sales in House of Fraser stores have been particularly affected”. The House of Fraser has recently been taken over by Mike Ashley, in a US$ 117 million deal, who has indicated that he will not pay suppliers money owed before his takeover.

So far this year, 2018 has been an “annus horribilis” for the UK’s high street shops and Laura Ashley is no exception. It has announced a 98.4% slump in profits to just US$ 130k, amid “challenging” trading conditions and a “changing retail landscape”; it was also hit by an accounting write-off on the sale of a Singapore property. Although like for like sales dipped 0.4%, including sales of furniture falling by 4.1%, on-line sales were 4.1% higher and clothing was 9.7% to the good. The retailer has 161 shops in the UK, having closed eight last year, with five more closures scheduled for the coming year.

Prior to this week, shares in Israel-based Sodastream – a maker of machine and refillable cylinders allowing users to make their own carbonated drinks – had climbed 78% last year and 85% YTD. This week, Pepsi acquired the company for US$ 3.2 billion (at an 11% premium on last Friday’s market price), at a time when global bottled water sales have risen 6.2% annually in the five years to 2017, while carbonated soft drinks sales have been flat.

Despite pleas by Kerala’s Chief Minister, Pinarayi Vijayan, the Modi government has rejected a UAE offer of US$ 97 million saying “in line with the existing policy, the government is committed to meeting the requirements for relief and rehabilitation through domestic efforts”. In trying to prove they can handle any emergency by themselves, the federal government perhaps could watch news reports to see the catastrophe that has unfolded and be grateful for any offers of help from whatever source. Meanwhile, Emirates SkyCargo will carry 175 tonnes of relief cargo to the flood-hit state, where more than 1.3 million people are still living in temporary camps.

By last Friday, 17 August, the Tesla share value of US$ 305 reflected that it had fallen 14.0% over the week and 8.9% on the day. There is something usually afoot when any company’s share value fluctuates wildly. On 31 July, Tesla shares were at US$ 298 but by 07 August were trading 27.5% higher at US$ 380, only to fall back 19.7% by 17 August. According to some experts, 25% of the company’s shares, worth US$ 11.2 billion, are held by investors betting that its share price will fall. The main reason behind their strategy is that they do not believe that the company can deliver on its promises and that its projected revenues and production capacity do not add up. It is estimated that these short sellers raked in over US$ 1 billion betting on a fall in Tesla’s share price since 07 August, when the Tesla founder tweeted he had “secured” funding to take the troubled company private.

Wednesday saw the S&P reach its longest ever running streak that has lasted 3,453 days – almost nine and a half years – driven in its earlier years by QE measures by the US government with the Federal Reserve, spending a massive US$ 3.5 trillion in asset purchases. Logic dictates that this bull run cannot go on forever and it must now be a matter of when – and not if – the share market plunge occurs. The main problem with that argument is the current strength of the US economy and whilst it continues, there is little chance of the markets pulling back. Furthermore, a Thomson Reuters report expects S&P 500 company earnings to rise 23.3% this year and another 10.1% in 2019. However, in the medium-term, it will only take trade tensions to deteriorate or global markets to take fright because of events in Turkey, or a specific geopolitical problem flaring up or a marked downturn in China to turn things on their head.

The current bull market is commonly thought to have started on 09 March 2009, when the S&P 500 closed at 676.53 as the United States grappled with the global financial crisis. Since then, the benchmark US stock index has more than quadrupled, closing Friday at 2850.13, and becomes the third most-rewarding such run in history, after ones between 1932-1937, (following the Great Depression), and between 1990-2000. However, this past nine years has seen much volatility including sixty occasions when the market has dropped more than 1% in a day and sixteen times the fall has been above 5%. It is interesting to know that over the past 72 years, there have been 12 bear markets and the average fall in share values was 32.7%. More worryingly for investors, the last two – the dot.com bubble and the GFC – witnessed slumps of 49.1% and 56.8%. Jump while you can!

The new Malaysian Mahathir Mohammad government has advised Chinese authorities that his debt-laden country has canned three China-backed projects, totalling US$ 22.0 billion, because they cannot afford to pay for them; the projects were two separate gas pipelines and a US$ 20 billion East Coast Rail Link to be built by China’s largest engineering firm, China Communications Construction Company, with much of the finance via the Export-Import Bank of China. The country is beset with a huge national debt of US$ 250 billion. Economic history is full of examples of major powers, including China, Russia and US, flaunting their financial largesse to poorer nations and then holding them to “ransom” when massive loans cannot be repaid. Recent examples include Sri Lanka and Djibouti.

If President Nicolas Maduro thinks he has fixed Venezuela’s economic problems, he is sadly mistake. By deleting five zeroes off the strong bolivar, and creating a new sovereign bolivar, the ex-bus driver has only increased economic instability; at least, he did better than the former leader, Hugo Chavez, who a decade ago, knocked  three zeroes off the currency note, to try to halt hyperinflation and failed miserably. He also announced other measures to tackle widespread poverty, including, for the fifth time this year, a rise in the minimum wage – a 3,670% hike – and also an increase in sales tax. For a country that has 20% of the world’s proven oil reserves, at almost 300 billion barrels, it will never recover so long as rampant corruption and tyranny continue unabated – and the crippling US sanctions do not help either! Yet again , the likes of the UN and other global bodies appear to stand by while the country becomes a basket case.

After eight years, and assisted by a US$ 348 billion rescue package, Greece has officially exited its final bailout programme. However, although it will now be free to borrow money on global financial markets, the Hellenic country will have to follow an austerity regime that will mean meeting unrealistic primary surpluses, adding to its tax receipts and putting up with lower pensions. Greece still faces many challenges especially with major reforms required in many areas including the public sector, the judiciary and the general business environment. Unemployment levels are still unacceptably high – at 19.5% and 39.7% for those under 25. The economy is 25% smaller than eight years ago and it will take decades to pay off its debt, equivalent to 180% of GDP.

It appears that the Eurozone trade balance fell 12.5% over the past twelve months to US$ 25.6 billion, whilst the EU28 (all 28 members of the EU) headed the other way – up 4.5% to US$ 7.9 billion. Eurozone imports and exports to the rest of the world both climbed over the year by 5.7% to US$ 226.0 billion and 8.6% to US$ 200.4 billion respectively; for the bigger bloc, the figures were higher by 8.2% to US$ 195.1 billion and 8.4% to US$ 187.3 billion.

There was good news for the embattled UK government this week, as public finances posted their biggest July surplus (US$ 2.6 billion), since the start of the century, driven by increases in tax receipts. The end result was that the public sector net debt of US$ 2.31 trillion is equivalent to 84.3% of GDP, compared to 86.0% last year. This improvement will give the Chancellor some leeway in his November budget  to allocate extra funds to the NHS and other public services.

Chancellor Philip Hammond has yet again shown his true colours, as he warns that a no-deal Brexit could result in the UK’s economy witnessing a 7.7% hit to GDP over the next fifteen years, as well as the estimated borrowing being US$ 105 billion a year higher. He indicated that certain sectors – including cars, chemical, clothing, food/drinks and retail – would be worst hit and that the North East and Northern Ireland would bear the brunt of the impact. The man, who was a staunch Remain supporter prior the 2016 referendum, now appears to be the leading figure in a dodgy project fear campaign.

Even when he was campaigning to be President, Donald Trump accused China of manipulating the yuan and now he continues his assault not only on the second most powerful economy but has also brought the EU into the equation. China’s currency has dipped by almost 10% since April when the trade dispute started to make an impact; this would have made their imports from 10% cheaper which would have also lessened the effect of any additional tariffs. China has also been involved in selling its own currency, which drives its value down and makes exports cheaper.

It seems likely that Australia will soon have its sixth Prime Minister in little over a decade as the current incumbent, Malcolm Turnbull, just survived a leadership spill on Thursday, 26 August, by 48-35 against Home Affairs Minister, Peter Dutton. The fact that the government is riddled by disunity and that the country has seen four leaders – Julia Gillard, Kevin Rudd, Tony Abbott and Malcolm Turnbull – in the past five years, is bound to have a negative impact on the economy. There is the danger that if the government becomes more concerned with its survival, rather than the country’s economy. Paul Keating’s 1986 comment may become reality – “we will end up a third rate country.   .   . a banana republic”. There is no doubt that Australian politicians are quickly losing the electorate’s Respect!

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Only a Pawn In Their Game

The Radisson Hotel Group has signed an agreement to manage the luxury hotel currently under construction in the DAMAC Hills Development. The 481-key luxury property, which includes 1-2 B/R suites, will be completed by the end of 2019. The international hotel group currently has 81 properties, encompassing 20k rooms, in operation and under development, across the MENA region. The hotel will be the first ever Radisson hotel to be located on a golf course.

There is a chance that The Taj hotel in Jumeirah Lake Towers will have its soft opening by the end of the year. The 5-star property, with 17 floors, will have 200 guest rooms and suites, as well as recreational facilities and dining venues. Its second Dubai venture – Taj Exotica Resort & Spa on Palm Jumeirah – is due for a Q4 2019 opening.

Grim news continues for Dubai’s hospitality sector, with STR’s preliminary July figures indicating a 14-year low for average daily rates, down nearly 10% to US$ 115, and revenue per available room 8.8% lower at US$ 76. Meanwhile, there were increases in both supply – 6.3% – and demand of 7.2% with a 0.9% rise in occupancy level to 66.0%.

Despite the doom and gloom surrounding the F&B sector, Bulldozer Group is set to open nine new dining concepts in the region. The six-year old Russian-owned company already has an enviable track record in Dubai with the likes of Venice’s legendary Cipriani, London’s celebrity hangout Novikov, Monte Carlo’s famous Sass Café (which closed in May 2018) and Sydney’s Toku. The Dubai-based hospitality firm is planning a September opening for Greek-Mediterranean restaurant GAIA in DIFC and China Tang later in the year, in the same area. It has a current portfolio of some ninety properties in eight locations.

However, good news for the local airlines in that there was an 11.0% growth in July revenue per passenger kilometre, compared to a year ago, which at that time was beset by problems with the four-month US ban on large portable electronic devices and travel restrictions for certain nationalities. Other increases noted were a 1.9% hike in load factor to 71.0%, with capacity 8.0% higher over the period. It is expected that this improvement will be carried forward into H2 but the best-laid plans could become unhitched by factors such as increases in both the value of the greenback and energy prices, not to mention trade tariffs.

With the cruise season almost upon us, a new report by the Dubai Chamber points to increased business for the 2018-2019 six-month period. Over the past four years, the number of passengers has almost doubled from 320k to 625k and this figure is expected to grow 16.0% to 725k by March 2019, particularly because more cruise ships are making Dubai an important global destination.

Despite the local rumour mill clunking into action, it seems that the premium international schools market continues to expand across the Middle East, showing no signs of slowing down, despite challenging economic conditions, according to new research. Over the past five years, the number of such schools has risen by 37.4% to 1.6k, with the UAE having the largest number, at 624, with 28 new schools added last year. The student number is around 1.5 million, with an average annual fee of US$ 7.7k. Thirteen new establishments are expected to open this school year in Dubai.

Local company, Danube Home is to open its first overseas store in Hyderabad next month, with an US$ 82 million investment. The company already operates 25 outlets in the MENA region and expects to open 25 in India over the next five years.

An Indian-based pharmaceutical and biotech firm is to open a factory in JAFZA. Wockhardt is planning a US$ 40 million investment in a 10k sq mt drug-making facility, specialising in antimicrobial drugs to fight the emerging threat of superbugs, for global distribution.

Dnata continues to add to its revenue  base by launching passenger handling operations at New York-JFK Airport, with Panama’s Copa Airlines as its first customer; the Dubai-based air service provider already has a major presence in the US, handling over fifty airlines in that country, where it has captured forty new contracts over the past twelve months.

According to the July Emirates NBD seasonally adjusted Dubai Economy Tracker Index, business conditions continue to head north, albeit at a slower pace. Softer growth was seen in the construction, travel/tourism and wholesale/retail sectors, as business activity increased. The uptick in higher output and new orders came at the expense of continued extensive price discounting, resulting in average selling prices falling at their sharpest rate in twenty months. Unsurprisingly, YTD employment growth is the softest on record.

The Emirates Nuclear Energy Corporation announced that it had completed hot functional testing on Unit 2 of the Barakah Nuclear Energy Plant and that construction was 93% complete. Last month, it was reported that the first of its four nuclear reactors had been delayed and would come on line in late 2019 or early 2020. When all four reactors, at the US$ 20 billion Barakah plant, come on line, there will be an annual saving of 21 million tons of carbon emissions, equivalent to removing 3.2 million cars from the roads.

Figures from the Central Bank show that month on month cash deposits were 11.4% higher in July at US$ 6.2 billion, with YTD figures of US$ 38.0 billion. Cash withdrawal figures for the month were at US$ 5.5 billion and YTD totlalled US$ 37.6 billion. Over the past seven months, money transfers by banks and clients totalled US$ 1.1 trillion and US$ 498.6 billion respectively – and for the month up 4.1% to US$ 168.9 billion and US$ 71.6 billion.

With the rupee sinking to a record low level of 70 to the US$, many Indian expatriates are cashing in although there is every chance that the fall in the currency will continue. The latest decline has been driven by the events in Turkey where the lire has fallen down the toilet – so far this year it has lost 35.6% in value, which includes a 15% slump since the beginning of the month.

Emirates NBD may be thankful for the Turkish currency crisis. In May, it agreed to buy the Turkey’s DenizBank from Russia’s Sberbank for 14.6 billion liras, worth US$ 3.2 billion. Now it could be in a position to renegotiate the deal, as the value of the lire has dropped from the time of the May acquisition, and could lead to at least a US$ 1 billion “saving” – even if this involves a 10% penalty for cancelling the original deal.

It was no surprise to read a Moody’s report which intimated that the country’s four largest banks – ADCB, Dubai Islamic, Emirates NBD and First Abu Dhabi – posted a combined 21% jump in Q2 profits to US$ 2.2 billion. The financial services firm also forecast much of the same for the next twelve months. The improvement was largely attributable to two factors – higher net interest income (up 10%) and lower provisions (down 27%). Banks continue to be the stand-out sector in the local economy – at the same time that many other entities continue to struggle often because of the lack of liquidity.

Arabtec has won a US$ 42 million Dubai Municipality sewerage and drainage contract in the Al Khawaneej area, due to be completed Q4 2019.

The verdict in the US$ 217 million bounced cheque criminal case against Abraaj founder, Arif Naqvi, is expected later in the month. Once the biggest regional private equity firm, with assets of US$ 14 billion under management, the company is undergoing a court-supervised restructuring in the Cayman Islands. The fall-out promises to be messy as there is a chance that the ex-chairman, who is currently out of the UAE, could face an international arrest warrant – whilst investors wait to see whether they will have their full investments returned.

Dubai Aerospace Enterprise posted H1 profit figures over five times greater than in the same period in 2017. Profit before tax came in at US$ 224 million (2017 – US$ 43 million), as revenue more than tripled from US$ 229 million to US$ 711 million. The main driver was the acquisition of AWAS which saw the fleet increase to 375 owned, managed and committed aircraft and total asset value jumping to US$ 15.5 billion.

This week saw the reporting season in full swing, with a mixed bag of results for companies listed on the Dubai bourse

Marka’s Q2 net loss was US$ 3 million, a major improvement on the US$ 34 million deficit in Q2 2017, as cost of sales was 40% lower at US$ 2.9 million, with expenses 75% down at US$ 3.0 million; interest on loans of US$ 37 million was US$ 2.2 million. Revenue declined by 22% to US$ 5.4 million. The company auditors noted that the group’s current liabilities exceeded its current assets by US$ 8.7 million and that certain loans were outstanding.

Although its shares have been suspended from trading until next month, when its restructuring plan will be discussed at a general meeting, the five-year old Marka reported its second consecutive quarterly gross profit of US$ 762k, compared to a US$ 13 million loss over the same period in 2017. The country’s first publicly traded retail operator may well have turned the corner under its CEO Benoit Lamonerie, appointed last year, who has finally pushed Marka into a profitable business.

Drake & Scull has attributed both the performance of its subsidiaries in secondary markets in Qatar, Oman and Jordan, as well as project debt defaults, for a Q2 loss of US$ 50 million. The company is continuing work on a restructuring plan  and also announced the appointment of a new CEO, Yousef Al Mulla, who will replace Dr Fadi Feghali, who had been in that position since March.

As its H1 revenue jumped 45.9% to US$ 3.1 billion, Emaar Properties posted an 18.0% increase in profit to US$ 911 million, driven by strong growth in its development and malls businesses; the profit figure did include a one-off US$ 99 million income item arising from the IPO of Emaar Development. The profits were also bolstered by property sales of US$ 1.7 billion by Emaar Developments.

With its revenue climbing 144.7% to US$ 1.01 billion, Emaar Developments posted a 73.4% hike in Q1 net profit to US$ 272 million; over the first six months of 2018, its revenue came in at US$ 1.9 billion, with a profit 68.0% higher at US$ 496 million. The developer reported that it had launched the sale of 3.6k units in H1 and that it has a US$ 10.5 billion development pipeline of sixty residential projects, comprising more than 28k units.

Damac posted its third consecutive quarterly fall in profit with Q2 results showing a  46.0% profit plunge to US$ 101 million on revenue of US$ 488 million; cost of sales jumped 62.0% to US$ 316 million. At the end of June, the developer carried over US$ 1.4 billion in debt and is planning to cut this down by US$ 500 million over the next three years. It confirmed that it was on track to deliver a record 4k units by the end of the year.

Nakheel posted a 3.8% decline in H1 net profit to US$ 684 million on revenue of US$ 1.9 billion. Strong growth was seen in its non-development businesses – asset management, hospitality, leasing and retail – which now accounts for 38.0% (US$ 708 million) of the company’s revenue. These revenue streams will continue to grow, moreso with The Night Market, Warsan Souk, The Palm Tower and Nakheel Mall being added over the next twelve months to the developer’s portfolio. Nakheel has also handed over 451 residential units in the first six months of 2018, during which time it has signed construction contracts totalling US$ 1.6 billion, the biggest of which was US$ 1.1 billion for Deira Mall.

DP World posted a 14.0% rise in H1 revenue (on a reported basis) – and 3% on a like for like basis – to US$ 2.62 billion, as profits grew 18.0% to US$ 643 million; during the period, gross volume was 4.8% higher to 35.6 million TEUs (20’ equivalent units), driven by its European and Australian  terminals. The Dubai-based ports operator has made investments of US$ 1.4 billion which will inevitably lead to future profit growth. DP World plans to extend its core business into port-related, maritime, transportation and logistics sectors. The only clouds on the horizon would appear to be the current trade tariffs and regional geo-political problems.

The world’s fourth largest port operator also announced that it had bought Danish logistics company Unifeeder for US$ 760 million as it continues to expand its footprint in Europe and expand its business segments to shipping.

Mainly because of an US$ 8 million final settlement of a long-standing legal case, Gulf Navigation posted a US$ 4 million H1 loss, compared to a US$ 5 million profit over the same period last year. The bottom line was also not helped by the fact that it had two petrochemical tankers in dry dock for major upgrades.

The DFM opened on Sunday, 12 August on 2920 and, having lost 1.8% (54 points) the previous week, continued its downward trend shedding 117 points (4.0%) to close on Thursday at 2803. Over the week, Emaar Properties declined by US$ 0.07 – to US$ 1.37 – with Arabtec flat at US$ 0.53.

By Thursday, 16 August, Brent was trading US$ 0.64 (0.9%) lower at US$ 71.43, as gold sank by US$ 40 (3.3%) to US$ 1,184.

A US$ 8 billion JV between two Saudi companies – Aramco and Acwa Power – with Air Products has been agreed that aims to attract foreign investment into the Kingdom. The US entity, with a minimum 55% stake, will purchase Aramco’s gasification assets, power block and associated facilities, with the oil giant supplying feedstock to the JV from its Jazan Economic City facility. After processing, the end result will be asphalt, benzene, LPG, paraxylene and sulphur. The JV, covering the next 25 years, will own and operate the assets for a fixed monthly fee.

Not everybody’s favourite company, Monsanto has been ordered to pay school groundkeeper, Dewayne Johnson, US$ 289 million, as a Californian court agree with his claim that the company’s glyphosate-based weed-killers, including Roundup, caused his cancer. This is expected to be the first of a possible 5k claims against the unit of Bayer AG.

Despite costs climbing 6.0% to US$ 17.5 billion, HSBC posted a 4.6% rise in H1 pre-tax profit to US$ 10.7 billion. There was a further US$ 765 million settlement for alleged mis-selling of US mortgage securities. The bank has introduced a strategy that will see a spend of up to US$ 17 billion, over the next three years, in areas such as technology and in China, with the aim of boosting market share and future profit streams.

IAG, owner of BA, Aer Lingus, Iberia, Level and Vueling, saw its share value 3.9% lower, even though it posted a 6.0% increase in Q2 profit to US$ 967 million. The result would have been better if it were not for a US$ 23 million hit at Vueling from disruption caused by French Air Traffic control strikes, as well as a strengthening greenback.

There may be life after Emirates for the A380, with news that Norwegian will use the super-jumbo on its LGW-JFK route, whilst some of its Boeing 787s are grounded to undergo maintenance and resolve glitches with Rolls-Royce engines. Even Thomas Cook has been using the A380 on routes from Oslo and Copenhagen to Mediterranean destinations.

Not all fans were happy with the news that Arsenal’s 67% stakeholder, Stan Kroenke, has agreed to buy a further 30% share from Alisher Usmanov for a reported US$ 600 million. (Strangely, the Russian metal magnate, recently linked with Everton, was unsuccessful in his attempts to take over the club in 2015 with a US$ 1 billion bid). The Arsenal Supporters’ Trust called the news “a dreadful day” which would “see the end of supporters owning shares in Arsenal and their role upholding custodianship values,” and that Kroenke would be able to take “detrimental actions” such as paying “management fees and dividends without any check or balance”.

The World Trade Organisation has forecast a slowdown in global trade for the rest of 2018 because of the risk of the numerous trade disputes growing out of control. Their global indicator, which utilises seven forward-looking components, including export orders and automobile production and sales, fell 1.5 to 100.3, month on month in June, and is well down on February’s return of 102.3.

Although lower than analysts’ expectations, positive data still emanates from China. Three major July indicators show that retail sales remained buoyant at an annualised 8.8% growth (compared to 9.1% market forecasts), fixed asset investment was 5.5% higher (6.0%) and industrial production up by 6.0% (6.3%).

With India’s retail inflation rate easing to 4.17% in July, it seems likely that there will be no more rate hikes this year, especially after the two recent ones, the last of which was 01 August, which pushed the rate to 6.5%. Even though the IMF is forecasting inflation to top 5.2% next year, Prime Minister, Narendra Modi is confident that inflationary pressure will be dampened by higher state spending on subsidised housing and infrastructure projects.  However, the sinking rupee, which has already lost over 8% this year, may be a cause for concern moreso because of the contagion effect of the Turkish crisis. Despite all this, the world’s sixth largest economy, at US$ 2.6 trillion, grew at a more than credible 7.7% annual rate in Q2.

In the UK, the headline inflation indicator moved up 0.1% in July to 2.5%. The main factors behind this uptick in the CPI (consumer price index) were, surprisingly, rising prices in computer games and higher transport fares. On the flip side, clothing/footwear recorded a 0.4% decline over the year.

Mainly because of declining exported vehicles and aircraft to non-EU countries, the UK overall trade balance jumped 83.0% to US$ 11.0 billion with the total trade gap, after stripping away inflation, growing at US$ 5.4 billion. On an annual basis, the trade deficit has contracted by US$ 8.0 billion, as the value of exported goods and services nudged higher. Following a 0.2% Q1 growth, the country’s GDP recorded a 0.4% expansion in Q2, with the market still defying attempts by the fear factor to talk down the economy. Over the quarter, both construction was 0.9% higher and the service sector 0.5%, with the wholesale/retail trade up 1.6%. Year on year, GDP was 1.3% higher.

The July US budget deficit was 79.3% higher on the year at US$ 76.9 billion, driven by lower revenues (because of the December tax cuts taking effect) and increased spending. The CPI (consumer price index) rose 0.2% in the month as consumer prices hit record ten-year highs, with the main contributor being the 0.3% hike in the cost of shelter, attributable to 60% of the gain; on an annual basis, the CPI rose 2.9%.

The US economy continues to sail on the crest of a wave with latest data indicating that the manufacturing sector is progressing well. The Empire State manufacturing index, gauging overall general business conditions, posted an August reading of 25.6 (well above analysts’ 20.0 expectations). Firms remain moderately optimistic about the short-term outlook, with the business optimism index for future conditions climbing 4 points to 34.8. On the retail front, annualised July sales expanded by 6.3%, and up 0.5%, month on month, at US$ 507.5 billion.

Donald Trump sent the Turkish lire into a tailspin when he doubled the steel and aluminium tariffs to 50% and 20% respectively last Friday. Both the economy and the currency were faltering for weeks prior to Trump’s announcement. By Thursday, 16 August, it had slumped to 5.85 lire to the US1 – down 35.6% from its 01 January opening of 3.77 and 15.3% since the beginning of August. The tipping point centred around the two-year detention of Pastor Andrew Burson in Turkey whilst the US has refused to extradite US-based Turkish cleric Fethullah Gulen.  Anybody who thinks that these two are the reason behind the current impasse is badly mistaken – they are individually, Only A Pawn In Their Game.

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