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The Impossible Dream
Even in these troubled, times there are still many Dubai properties being sold for over US$ 2.72 million (ten million dirhams). According to statistics from Data Finder, the leading locations were Downtown (34 deals), Palm Jumeriah (31), Business Bay (five) Jumeirah (four), JBR (four) and Dubai Creek Harbour (four) over the first ten months of the year. Two projects accounted for 31 of these deals – Il Primo in the Opera District of Downtown, with 18 transactions, and the Palm Royal Atlantis Resort & Residences making up 13 of the total. The most expensive apartment sale so far has been for US$ 20 million at The One at Palm Jumeirah.
Villa sales fared even better, with 157 deals in the top five locations – Dubai Hills Estate (47 deals), Palm Jumeirah (43), MBR City (32), Emirates Hills (22) and Jumeirah Golf Estates (13).The average price for villas sold in Emirates Hills was estimated at US$ 7 million.
October figures from STR indicate the Middle East hotel construction pipeline stands at 434 projects and 120k rooms; no surprise to see that the UAE accounts for 38.3% of the total, with 52.8k rooms, followed by Saudi Arabia’s 38.9k.
Capri Palace becomes the latest property to be added to the Jumeriah Group’s portfolio of managed hotels, due to reopen next April, after major renovation work. Founded by Tonino Cacace in the 1960s, it has 68 guest rooms and is home to three of the island’s Michelin stars, including the hotel’s signature restaurant L’Olivo. The Dubai government-owned company operates other properties in Europe including in London, Mallorca and Frankfurt, as well as in the Middle East, China and the Maldives.
Having just opened its third hypermarket, near Burjuman Metro Station, and its fifteenth branch in the emirate, Lulu is planning a further six more outlets for Dubai. The Abu Dhabi-based retail group now has 74 outlets in the country, having opened fourteen this year, compared to nine in 2018 – an indicator of its confidence in the local economy, as are its plans for twenty-two new projects in the near future.
Following its recent agreement with Careem/RTA, Canada-based PBSC Urban Solutions announced more details about its upcoming launch of an electric bike-share network, starting with its deployment of 3.5k E-FIT electric pedal-assist bikes and 350 smart stations throughout the emirate. This is the Canadian company’s first regional foray, following several successful launches including in Barcelona, Buenos Aires, Monaco and Santiago, involving 84k bikes and 6.8k stations.
Whilst placing Kuwait as the bottom of their table in the Expat City Ranking 2019 by InterNations, Dubai found itself, rather surprisingly, rated 34th of the 82 cities surveyed, behind other regional locations such as Abu Dhabi (15th), Manama (21st) and Muscat (28th). Taipei, Kuala Lumpur, Ho Chi Minh City and Singapore were the four leading destinations for expats to reside, whilst Rome, Milan and Lagos propped up the table with Kuwait. Dubai’s position was not helped by being placed 71st for its “work life”, with less than half polled said they were happy with their work-life balance (cf 60% globally), and 45% feeling insecure in their job (cf 59%).The only conclusion is that such surveys should be taken with a very large pinch of salt.
Another study ranks Dubai 7th when it comes to most visited global cities with 16.3 million visitors. As in the past the top positions were dominated by Asia, with Hong Kong, Bangkok, Macau and Singapore taking the top four positions.
Dubai-based AquaChemie Middle East is planning a US$ 40 million spend to build a chemical terminal facility at Jebel Ali Port to be used as a strategic petrochemical gateway hub. Mott MacDonald has been appointed for the design, engineering and project management work and the project is expected to take eighteen months. The company will be able to utilise the facilities at the port including multiple jetty pipelines, along with other crucial existing utility and building support infrastructure. It is expected that 100 new jobs will be created, with that number doubling by 2025.
DP World added to its ever-expanding portfolio by acquiring a 77% stake in Singapore-based Feedertech Group, via its subsidiary Unifeeder, for an undisclosed sum but less than 1% of the parent’s net value; the seller will retain the remaining 23% shareholding. The aim of the exercise is to build an end-to-end logistics capability, soon culminating with a dedicated and efficient India-Gulf region service. Feederetch, with annual revenues of over US$ 100 million and movement of 600k TEUs (20’ ft equivalent units), will help in this regard as it operates two business units – one that moves containers from smaller ports to larger container terminals and the other that operates short sea networks.
Just like DP World, dnata continues to expand its global reach – this time announcing that it had bought the remaining 50% share in its UK in-flight catering JV, Alpha LSG, from the LSG Group. The seven-year old company, employing 3.5k across fifteen airport catering units and two central production facilities, posted annual revenue of over US$ 375 million. This acquisition follows several others already this year, with dnata having opened new facilities in Boston, Houston, Los Angeles, San Francisco and Vancouver which have seen its expanding catering division now employing over 10k.
The Majid Al Futtaim Group is planning to invest over US$ 1.5 billion in Saudi Arabia and Egypt, (including a US$ 866 million mall in Cairo), over the next three years as it ramps up its expansion drive. Over the past four years, Dubai-owned MAF has spent over US$ 2.2 billion in Egypt whilst much of the Saudi investment will be in cinemas, as part of its five-year US$ 4.3 billion investment plan, where it already has one hundred cinema screens since the ban on commercial cinemas was lifted just two years ago. Later this month, the Group will open a Carrefour in Uganda and plans to open seven next year in Uzbekistan.
Over the past two months, it is reported that Emirates NBD has shed 500 jobs, about 4% of its 12k employment numbers, because of the need to cut costs in a slowing economic environment. Its retail and technology operations faced the brunt of these job losses. This comes despite Moody’s Investors Service indicating that the operating conditions for GCC banks remain favourable, being underpinned by solid economic growth, and by the banks’ solid liquidity and strong capital buffers; furthermore, the ratings agency expects the region’s average non-hydrocarbon GDP growth to push higher to 2.6% next year.
So far this year, total volumes, at 21.9 million and valued at over US$ 400 billion, on the Dubai Gold and Commodities Exchange (DGCX) are on track to easily beat last year’s figure of 22.3 million. For November, the best performing asset class was again the Indian rupee which showed a YTD 17.0% improvement, with the best performing being the exchange’s flagship Gold Futures product, with YTD volume growth 94%.
With collaboration between UAE and Chinese police, more than 28k fake luxury items, worth US$ 257 million and destined for sale in Dubai, have reportedly been seized. 75% of the goods were in Dubai where police raided ten locations and arrested twenty people. A further 37 were charged in China where police found 7k counterfeit luxury handbags in Guangdong Province. Along with the fake goods, it seems that certificates, invoices, receipts and gift wrapping were also being produced.
Sunday, 01 December, saw the UAE’s Federal Tax Authority include sweetened drinks, electronic smoking devices and tools, and the liquids used in these devices, added to the list of products now subject to excise tax. They now join products such as tobacco and tobacco products, energy drinks, and carbonated beverages which have had tax levied since October 2017. Khalid Ali Al Bustani, director general of the FTA, commented that “Implementing the new decision is in line with our wise leadership’s directives to further enhance the UAE’s competitiveness, build a healthy community by curbing consumption of harmful products, mitigate damages and costs incurred while combatting diseases that result from consuming these products, and supply the resources necessary to support the government’s expansion and upgrade of its services.”
The bourse opened on Wednesday 04 December, following the extended National Day holidays, and, having shed 22 points the previous fortnight, regained 16 points to 2695 by 05 December 2019. Emaar Properties lost the US$ 0.1 gained the previous week to close on US$ 1.12, whilst Arabtec, down US$ 0.23, over the past six weeks, was US$ 0.03 higher at US$ 0.34. Thursday 05 December saw continuing dismal trading of 134 million shares, worth US$ 37 million, (compared to 147 million shares, at a value of US$ 59 million, on 28 November).
By Thursday, 05 December, Brent, having, shed US$ 0.68 (1.1%) the previous week, closed US$ 0.58 (1.0%) lower at US$ 63.97. Gold, having declined US$ 12 (0.9%) the previous fortnight, gained US$ 22 (1.8%), closing on Thursday 05 December at US$ 1,483. Brent ended November on US$ 63.32 – up US$ 3.09 (5.1%) from its November start of US$ 60.23 and 17.7% higher YTD by from its 01 January opening of US$ 53.80. The yellow metal was down on the month by US$ 35 (2.3%) – from US$ 1,515 – but up US$ 199 (15.5%) YTD from its year opening of US$ 1,281.
It seems likely that OPEC will agree to an extension of its current round of production cuts, of 1.2 million bpd, maybe for the whole of 2020, at their two-day meeting starting in Vienna today. The cartel, to be joined by non-member countries such as Russia, Oman and Bahrain, may even increase that figure with Iraq supporting further cuts of 400k barrels. As usual, the main issue will not be the scale of cuts but members’ future compliance; recently, Saudi Arabia has helped with this problem by actually cutting more than it has been required to do, so that the total cut number was achieved. It is reported that the likes of Nigeria, Ecuador, Malaysia and Brunei have had problems meeting their quota. If disagreements do arise and no agreement reached, oil prices could drop by as much as US$ 20 in the short-term.
The Aramco 1.5% regional IPO, hoping to raise US$ 25.6 billion, was oversubscribed by 234%, pointing to the fact that shares will be valued at the top end of earlier expectations. Of the 3 billion shares on offer, two thirds were allotted for institutions (with six billion subscribed for) and the remaining one billion were for the retail sector which was 1.5 times over the number of shares offered. Although the issue was favourably met by the market, it was nowhere near the interest of that for Saudi Arabia’s National Commercial Bank in 2014, where the retail portion was 23 times oversubscribed. It is thought that the share value will be in the region of US$ 8.00 to US$ 8.50, which would value the energy titan at up to US$ 1.7 trillion. Any dip in the oil price could see this value decline 25% in the short-term – another reason why the government is willing to support a continuation of oil production cuts into 2020.
Daimler is the latest big-name car maker to announce global job cuts – at least 10k, coming days after Audi said it would lose 15.5% of its current 61k German workforce.; the main reason given was to raise more finance for the switch to electric cars, with the industry going through “the biggest transformation in its history”. Daimler expects to save over US$ 1.5 billion by introducing the personnel cuts and reducing the number of management positions worldwide by 10%.
In a move to boost profitability, Energy firm Npower, owned by E.On, is to cut up to 4.5k UK jobs, including three call centres, as it plans to merge computer systems to save money; this restructuring plan is set to cost Npower US$ 640 million and would result in small businesses and consumers being served by the same computer systems and customer service teams. The big six industry players have not been helped by the energy price cap and, at the other end of the scale, there have sixteen small energy companies going out of business since 2018. So that leaves those mid-sized companies picking up business because they tend to have newer computer systems and are better able to serve their customer base. Two years ago, they held 18% of the household energy market, rising to its current 30% level which could rise to 50% over the next four years.
London-listed Network International will focus on regional expansion rather than looking for new markets. The payments solutions company, with H1 revenue and profit both heading north, by 12.4% and 13.9%, reckons that the MENA region has huge untapped potential; it has recently renewed contracts with two of its largest customers, Emirates NBD and Emirates Islamic. Since its April IPO, NI has posted low double-digit growth from its two main business lines — merchant and issuer solutions – driven by selling additional services and expanding its customer base.
No country seems to be immune from what is happening in the global High Street and Australia is no exception. The latest retailer there to go into voluntary administration is popular women’s fashion brand, Bardot. The 23-year old women’s fashion brand has gone into voluntary administration, joining an ever-growing list of struggling Australian retailers.; it has 72 stores employing 800. Over the past year, the likes of Karen Miller, Napoleon Perdis Cosmetics, Shoes of Prey, Ed Harry and Roger David have entered into administration. The main factor behind its demise is that, despite double digit growth in online sales, it is operating in a highly competitive retail environment and having to compete in a “highly cluttered and increasingly discount-driven market”. Fashion rivals include Country Road, H&M, Sportsgirl, Top Shop and Zara.
Relying on solar energy can present its own problems as can be seen In Perth where over a third of all houses has a solar installation; now this solar capacity is far greater than that of an ageing 854-megawatt coal-fired power station and this is where the problem begins. There is a fine balance between the two energy sources and there is a tipping point that could result in regular black-outs for this part of Western Australia, which is probably the most advanced in the world when it comes to alternate energy supplies. Because Perth is considered the most isolated city in the world, it cannot rely on “neighbours” to help if there is a supply shortage. Solar works best when, on mild, sunny days in spring or autumn, consumers are not using air conditioners, leading to an excess of solar power piling into the system and thus reducing the power needed from the grid. In short, high levels of solar output tend to go hand in hand with low levels of demand, so there is surplus capacity when not really needed. If that happens the obvious solution is to scale back or switch off the coal- and gas-fired power stations. However, most power stations are not equipped to be turned on and off at a whim. Now experts are trying to work out on how best to integrate solar and storage and, if no progress is made, authorities warn of a “real risk” of a system-wide blackout, especially when soaring levels of renewable energy periodically overwhelm the system.
Those who thought that the Australian economy would start turning north again got a rude awakening, as the Q3 GDP growth dipped from 0.6% to 0.4%, quarter on quarter, with a marked shift in household consumption, with an increasing number of households apparently saving more of their tax return rather than spending it; indeed, discretionary spending was at its weakest growth of only 0.1% since the GFC, whilst the household saving rate rose to 4.8%. Most of the growth was attributable to government infrastructure spending and increased exports, contributing 0.2% to the GDP growth. Other indicators, that added more gloom, were dwelling investment being 1.7% lower, (its fourth consecutive decrease), and November new car sales 10.0% lower from a year earlier. The RBA’s latest 2.3% annual growth forecast for this year would mean that Q4 would have to have an 0.7% rise which seem highly unlikely.
There was no surprise to see India’s economy posting its weakest growth, at 4.5%, since 2013 and down from the 5.0% annualised growth recorded in the previous quarter; October saw core infrastructure industries’ output posting its biggest contraction since 2005, declining 5.8%. The three main drivers, behind Asia’s third largest economy recording worrying results, include export demand faltering, weaker consumer demand and business investment slowing. Many of the problems seem to be self-inflicted. with much of the blame laid at Prime Minister Narendra Modi’s door. He has aimed to steer the economy in a positive direction by slashing corporate tax rates, introducing more privatisation of public entitles and setting up a special real estate fund. India’s 14th prime minister, six months into his second five-year term, was overseeing quarterly growth rates of 9..4% as late as 2016 – now he has his work cut out to reverse the downward spiral, not helped by the fact that because of a boost in spending and lower tax revenue (because of the recent cuts), he will fail to hit his fiscal deficit target of 3.3% of GDP.
With sales of over US$ 7.4 billion, Black Friday saw the second biggest ever US online sales day, behind Cyber Monday, as an increasing number of shoppers are now using mobile devices rather than computers; Friday posted a record US$ 2.9 billion of sales via smartphone. The ongoing transition from the traditional computer, as a purchasing vehicle, encourages potential customers to shop three days earlier and not wait for the following Monday. It is estimated that 20% of the total holiday season spend will occur over the five days from Thanksgiving to Cyber Monday. with an increasing amount being diverted from in-store buying.
The Bank of England’s Canadian governor, Mark Carney, is leaving the post next month and has been appointed United Nations Special Envoy for Climate Action and Finance; he swaps his current annual US$ 1.3 million package for a nominal remuneration of US$ 1. The 55-year old was an apparent avid opponent of Brexit claiming, at the time of the 2016 referendum, that it was the most significant risk to the country’s financial stability, that had “pushed up uncertainty to levels not seen since the euro crisis”, only to apologise later for getting it wrong. Accused of scaremongering at the time, the former Goldman Sachs banker had to admit months later that “financial stability risks are greater on the Continent than they are in the UK”. In October, he had supported the new Brexit deal as “welcome” and a “net economic positive” – but this was rejected by the shambolic British parliament – the supposed home of democracy.
All is not well in the eurozone as manufacturing activity dipped for the tenth straight month, albeit the November figure of 46.9 was up on the previous month’s 45.9; any figure below 50 indicates contraction. One sign of optimism was a 3.4 jump in the future output index to 55.3, whilst new orders, employment, raw materials purchases and backlogs of work all declined – but at a reduced rate. Germany, the bloc’s biggest economy, saw its manufacturing sector also grow at a slower rate but should still post a miserly 0.2% growth in Q4, following a 0.1% improvement last quarter and an 0.2% contraction in Q2.
China’s factory activity in November surprised even the most optimistic of analysts, as it surged to a three-year high and comes on the back of upbeat government data released earlier in the week. The Caixin/Markit manufacturing rose 0.1, month on month, to 51.8, with the market expecting a lower 51.4 reading. Although lower, month on month, total new orders and factory production remained at buoyant levels in November; a month earlier, both readings had grown at their fastest rate in six years and almost three years respectively. Furthermore, a recovery in the labour market saw companies adding workers for the first time in eight months. These figures indicate that the country’s 2019 growth will come in marginally above 6.0% – and although acceptable on the global stage, it will be the country’s worst return in thirty years.
There are problems – other than the ongoing US trade war – that face the world’s second largest, but soon to be first, economy, including deflation, with input costs rising as output charges head in the other direction. With slowing export levels, declining profit margins and weakening business confidence, the country needs a major economic boost. Even though the past year has seen major tax cuts, and much higher infrastructure spending, the government has fallen well short of its target and, to date, has gained little traction. In a bid to attract more public works, it has brought forward US$ 142.0 billion of the 2020 local government special bond quota and has cut some of its key lending rates to reduce corporate financing costs. The problem for the government is if it were to be more aggressive with tax cuts and public spending, it may well heighten financial risks and add to a mountain of debt – a risk that it is evidently not willing to take. On top of that, there are the fallouts from the US tariffs and increasing tensions in Hong Kong.
Argentina and Brazil have been warned that President Trump is considering restoration of up to 25% tariffs, which were initially imposed, and then waived, on steel and aluminium imports arguing that their respective weaker currencies, following, “a massive devaluation”, have made it harder for US food exports to compete. Brazil is the world’s tenth biggest steel exporter and accounts for 3.7% of the country’s exports. The US president, with next year’s elections in mind, has to protect the farming interests in his home base where the sector witnessed a 24% increase in bankruptcies over the past year.
Monday saw the country celebrating its 48th National Day, with HH Sheikh Mohammed bin Rashid Al Maktoum stating that the national economy had made “great strides” thanks to the UAE’s resilient and flexible legislation. The Dubai Ruler highlighted the government’s strategy to take advantage of the dawn of the Fourth Industrial Revolution, as the UAE, with the aid of AI, positions itself as a “model for interactive cities”. He reiterated that “We will continue to deliver the future for our generations to come. The occasion we are celebrating today is teeming with a myriad of lessons that we have learned from our founding fathers, who instilled in us an ambition and will to cope with the changes in the world and to utilise our full potential.” Sheikh Mohammed also mentioned that the word “impossible” is now void, after the achievements of the country and its progress in recent years. The Impossible Dream.
Slow an’ Easy 28 November 2019
Signs that the property slump may have bottomed out, after four years, continue with the average monthly loss, in capital values, falling 0.8%, compared to the average 1.0% decline so far this year. The latest ValuStrat report shows that the declines were felt in all locations, except for International City, ranging from Palm Jumeirah’s 0.4% to Discovery Gardens’ 1.3%. It also noted that, with two months to go to the end of the year, overall sales volume has already surpassed the whole of 2018. Furthermore, the weighted average residential price per sq ft has slumped 32.2% since its 2014 peak, dropping below the important Dhs 1 million level – US$ 272k.
Last Sunday, 24 November, saw the DLD deal with a record 515 realty transactions, (valued at US$ 241 million) – the highest one day number since the giddy heights of 2008. According to Data Finder statistics, the most expensive transaction, at US$ 9 million, was a five-bedroom penthouse on the 45th floor of The One JBR. Three quarters of all transactions were for off plan properties, with 248 of the 387 total, for apartments. This is yet another indicator that the sector may be finally climbing off its bottom, after a long four-year bull market.
Citing a “supply-demand imbalance,” S&P reckons that the local real estate market may not see much of an improvement in the near future, after shedding a further 10% in value since February. It reports that the quarter ending December will remain weak, as new supply comes online but that Expo 2020 may ease the pressure somewhat, but it will not be the panacea many had hoped for. The current property glut is one of the main factors behind Dubai’s H1 GDP faltering to 1.9% (from 3.1% a year earlier) to US$ 56.7 billion.
Nakheel saw two openings this week with Nakheel Mall on Jumeriah Palm and a US$ 46 million, four-level retail complex and multi-storey car park (for 900 vehicles) at Dragon City. Encompassing 118k sq ft, it will house 150 shops and kiosks and this addition will surely see the annual number of annual visitors increase from its current number of 40 million. At its Dragon Mart, there are 1.7k Chinese workers operating in 5k outlets. One of its biggest tenants, Sun Tour, occupies the entire retail area, with a wide a range of products on offer including clothes, household goods, electronics, luggage etc. Reckoned to be the world’s biggest Chinese trading hub outside mainland China., Dragon City houses Dragon Mart 1 and 2, along with two hotels – ibis Styles and a Premier Inn – whilst Dragon Towers, the community’s first residential development, is under construction
The Landmark Group is to invest US$ 272 million in constructing a warehousing and distribution facility in Jebel Ali Free Zone which will be the biggest, at 700k sq ft, in the region. The Group, with revenues of US$ 5 billion, from its 48 brands and 2.2k regional stores, is also hoping to tap into the ever-growing e-commerce sector, as well as managing the warehousing needs of non-Landmark Group distributors/retailers. A new company, Omega Logistics, has been formed to operate the high-tech distribution facility.
Summer proved a boost for Dubai tourist numbers, as the total of international visitors, for the first nine months of the year, was 4.5% higher on the year to 12.1 million, despite a 5% decline in the emirate’s leading source of arrivals from India; UK numbers were 2% lower. There were welcome increases in visitors from Saudi Arabia, (2% higher), Oman (28%), and China (14%). The top five source markets were India, Saudi Arabia, UK, Oman and China with numbers of 1.39 million, 1.25 million, 851k, 778k and 729k respectively. With Expo fast approaching, and now less than year to opening, the pipeline of new hotel rooms is, as expected, beginning to fall, now at 5.7% year-on-year. By the end of Q3, Dubai had 716 hotels and a 119.8k room portfolio, with an average occupancy level of 73%. The most recent data from STR shows that revenue per available room in August had declined 12.6% to US$ 73 as “hotel rooms are being competitively priced in an effort to stimulate demand and keep up with accelerating room supply”.
It can only be Dubai when the latest addition to the police vehicle fleet is a Mercedes-AMG GT 63 S that can go from 0-100kmh in 3.2 seconds and has a top speed of 315 kph; it is powered by a 4.0-litre, twin-turbo V8, generating 639 horsepower This brings the number of luxury patrol cars to fifteen, all of which are used in tourist areas – such as Burj Khalifa, MBR Boulevard, JBR and La Mer – to help enhance the force’s security presence. The next supercar to be added to the fleet is set to be a Tesla Cybertruck.
Emirates has become the first international carrier to sign a code-sharing and interline agreement with India’s SpiceJet. This will enable passengers to take advantage of many more flight options on routes common to both airlines, as well as access to a more extensive route network. It will enable travellers to book just one ticket to any of Emirates’ nine points across India and connect onwards to 172 domestic routes that are part of SpiceJet’s network. Interestingly, SpiceJet is also in talks with potential investors in Ras Al Khaimah for equity partnership for its proposed airline venture, with it holding a 49% stake in the proposed airline venture, with the remaining 51% equity to be taken by one or multiple potential local investors in RAK.
Meanwhile, Emirates has ordered 30 Boeing 787-9 Dreamliners, a new addition to its fleet, as the airline continues to review its route network and make-up of its future fleet, as its A-380 jumbos slip out of service over the next decade. The new package comes with a list price of US$ 8.8 billion, with Emirates exercising its rights to replace some of its 777X orders with the 787; now that order has been reduced to 125 planes. With a US$ 16 billion order for fifty A-350-900 earlier in the week, it is evident the Emirates is moving to more flexible and smaller aircraft to lead its expansion into the next decade.
Flydubai has been successful in raising a five-year US$ 500 million term loan to refinance its expiring first sukuk issued in 2014 for “for general corporate purposes and refinancing”. Emirates NBD and Noor Bank acted as global coordinators on the deal. The budget carrier has been hit by the fact that its Boeing 737 Max fleet has been grounded for nine months, losing the airline “at least two or three periods of good revenue and profit,” according to its chairman, Sheikh Ahmed bin Saeed Al Maktoum. If there is no resolution going into Q1, then this would have a “significant” impact in the second half of its fiscal year, with Christmas, New Year and Easter holiday coming up. To add extra capacity over the holiday period, flydubai has leased four next generation Boeing 737-800 aircraft from the Czech airline Smartwings on a wet lease until the end of January; with its 737 Max fleet still grounded, the carrier is fully utilising the remaining the forty 737-800 jets
There is a possibility that the US will not have a pavilion at next year’s Expo, as there is a struggle to find construction funds, with federal government financing for capital expenditures or operational expenses, associated with US pavilions or exhibits at World Expos, being legally prohibited. Even Secretary of State Mike Pompeo is concerned, saying there is “too much at stake” for the country not to participate in the event. If funding from private sources is not forthcoming, the country’s international reputation would be damaged, and it would have no chance of hosting similar events in the future. There is some hope for a last-minute reprieve, as the House of Representatives has approved a bill, requesting that the government waive those regulations, and provide emergency funds. This now has to pass through the Senate and, if successful, then signed into law by President Trump.
There was no surprise to see DEWA name a consortium, led by ACWA Power and Gulf Investment Corporation, as the preferred bidder to build and operate the 900 MW fifth phase of the Mohammed bin Rashid Al Maktoum Solar Park. It proved to be a world record, at US$ 0.016953, as the lowest bid per kilowatt hour (kW/h). Starting from Q2 2021, the fifth phase will become operational in stages and, when completed, the solar park will be the largest global single site facility, with a production capacity of 2.863k MW.
According to the latest UBS and PwC Billionaires Insights report, there are still seven billionaires living in the country, whose total wealth diminished 18.3% to US$ 19.6 billion last year. On a global stage, billionaires’ wealth dipped 4.4% to US$ 8.5 trillion, driven by a strong greenback and volatile equity markets; the fall followed five years of annual growth during which time their wealth almost quadrupled. However, US tech tycoons bucked the trend with a slight increase over the year.
Indian billionaire, Rizwan Sajan, whose 26-year old empire includes Danube Building Materials, Danube Home, Danube Properties, Milano and Alucopanel Middle East, has no current plans to expand further, focussing on consolidation instead. He recently invested US$ 5 million, launching Danube Hospitality Solutions but commented “this is not the time for expansion, I’d rather consolidate. Definitely we will be launching one or two projects, but nothing major. I would much rather my bottom line remains intact and my top line I don’t have to worry about.”
The global digital banking and payments platform, Bankable, is opening a regional hub in the Dubai International Financial Centre that will service around fifty MENA markets. The nine-year old company has made Dubai its third international location, following London and Brussels. Backed by Visa, which has also made an undisclosed financial investment in the firm, the new entrant provides digital payment solutions, and software , that allows its clients, (such as banks, electronic money issuers and insurance companies), to streamline their payment processes. The fact that the UAE is one of the top global remittance countries, with a total of US$ 46.2 billion leaving to overseas destinations last year, should prove a fruitful business opportunity for Bankable. Other rival firms, such as TransferWise, have already established a local presence to capitalise on opportunities with financial institutions, global corporates and FinTechs all looking for more advanced methods to streamline, and reduce costs of, their payment processes. Indeed, the country is drawing more FinTech investment from both regional and global players, particularly in the payments space.
So far this year, ports operator, DP World, has listed two sukuk (one at US$ 1 billion and the other for US$ 500 million), and two conventional bonds, all valued at US$ 2.3 billion, on Nasdaq Dubai. With listings, now totalling over US$ 9.0 billion, it is the largest UAE debt issuer by value on the region’s international exchange. Majority-owned by the Dubai government, it will use the money raised for debt refinancing and to fund “growth opportunities”. By the end of 2018, it carried US$ 10.5 billion debt on its books.
Next month, Dubai Islamic Bank will seek shareholders’ approval to acquire Dubai-based Noor Bank, following regulatory approval from the Central Bank. The deal will see the UAE’s biggest Islamic Bank issuing 651 million shares, with each share worth the equivalent of 5.49 Noor shares,
Earlier in the month, Amanat Holdings posted credible results for the first nine months of the year, with all indicators heading north – profit 38.0% to the good at US$ 9 million and operating income quintupling to US$ 6 million on revenue of US$ 24 million. The company, that invests in the healthcare and education sectors, plans a further regional spend of US$ 245 million over the next few years, focussing on companies with strong growth potential; of that total, only US$ 109 million will have to be via bank loans, as it has cash reserves of US$ 136 million, having only utilised 80% of the US$ 681 million raised through its 2014 IPO. The company currently has seven assets in its portfolio, three of which are healthcare and four in education.
Union Co-op posted a 16.3% hike in Q3 profit to US$ 105 million, with revenue 2.0% higher at US$ 572 million. Over the next four years, the country’s largest consumer cooperative is planning to invest US$ 572 million in new retail projects.
The bourse opened on Sunday 24 November and, having shed 17 points the previous week, dipped 5 points to 2679 by 28 November 2019. Emaar Properties, having lost US$ 0.10 the previous four weeks, closed up US$ 0.01 to US$ 1.13, whilst Arabtec, down US$ 0.19, over the past five weeks, lost a further US$ 0.04 to end the week on US$ 0.31. Thursday 28 November saw continuing dismal trading of 147 million shares, worth US$ 59 million, (compared to 64 million shares, at a value of US$ 54 million, on 21 November). In the month of November both Emaar and Arabtec lost ground – down from their month openings of US$ 1.16 and US$ 0.48. – by US$ 0.03 and US$ 0.17 respectively; YTD, Emaar was flat (with exactly the same balance at the beginning of the year as at the end of November) with Arabtec losing US$ 0.03 over the past eleven months. For the month of November, the index fell from its 01 November opening of 2745 but YTD was 149 points (5.89%) higher from its year opening of 2530.
By Thursday, 28 November, Brent, having gained US$ 2.69 (4.4%) the previous week, shed US$ 0.68 (1.1%) to US$ 63.97. Gold, having declined US$ 10 (0.7%) the previous week, was down US$ 2 (0.1%), closing on Thursday 28 November at US$ 1,461.
This week, Saudi Crown Prince Mohammed bin Salman’s visited the UAE which saw four new policy initiatives, including the possibility of a joint tourist visa for residents of both nations and an agreement to enhance cyber security efforts to prevent attacks in both countries. The eyecatcher was a US$ 70 billion investment, spearheaded by Saudi Aramco and the Abu Dhabi National Oil Co, to construct a joint oil and petrochemicals refinery in India, with a 1.2 million bpd daily capacity. With Saudi Arabia being the host country for the November 2020 G7 meeting, Prince Mohammed took the opportunity to invite the UAE to attend.
2019 has been an “annus horribilis`’ for Boeing, with the fatal crashes of two of its 737 MAX aircraft earlier in the year, followed by the grounding of the whole fleet for more than eight months and no hope of returning to the skies until Q1. Now it has been reported that the fuselage of one of Boeing’s new 777X aircraft completely ruptured in pressure tests in September and this could lead to a further delay to its launch; there are reports that the body structure supporting the door also ruptured during the tests, as well as damage to one of its wings. Only last month, the plane maker indicated that the pressure test result would not impact on the plane’s flight test schedules, but further delays are inevitable, as there will have to be design changes and perhaps the need to reinforce sections of the aircraft body; it could now be late 2021 before the first delivery of the new plane. Emirates is the lead customer for the 777X and is not happy with the lack of progress being made and has already cancelled 20% of its original 150-plane order, replacing them with the 787 Dreamliner.
Tata Steel has announced that it will retrench 3k jobs, with 1k expected from its UK operations, with the Netherlands bearing the brunt losing 1.6k jobs. Two thirds of the job losses will be from management and office-based roles, with this restructuring coming just months after EU regulators blocked a JV with Germany’s Thyssenkrupp. To say that the steel industry is on its knees is an understatement, with the sector beset by surplus capacity and high costs, with big names such as ArcelorMittal, the world’s biggest steelmaker, idling several plants and British Steel going into liquidation in June; subsequently, there has been a provisional agreement with China’s Jingye to take over operations.
Despite the lorry windows shattering in front of him on stage, Elon Musk had a successful launch of his Cybertruck, with early reports of 146k orders; 42% of that number were for dual, 41% tri and 17% single motor models. Although no timetable was given, it is unlikely that the revolutionary designed vehicles, covered in stainless steel alloy, will be on the road before early 2022; another feature is that it will be able to go from 0 to 100 kmh in about three seconds.
In what is the largest luxury-goods deal ever, LVMH has agreed to buy Tiffany & Co. in a US$ 16.2 billion all cash deal, by paying US$ 135 a share, aimed at raising the French conglomerate’s jewellery profile and broadening its customer base access in the US and Asia; this acquisition valued Tiffany 37% above its 26 October market price. LVMH is a global leader in the fashion and cosmetics sectors, (with 75 brands including Christian Dior), and this deal will see it more than double its current jewellery market share, with an estimated 18% off the total.
In 2007, eBay acquired StubHub for US$ 310 million and, twelve years later, it is planning to divest it to the secondary ticketing firm Viagogo for a reported US$ 4.0 billion, in a move it claims will create more choice for customers. Viagogo has had a chequered past and only last September, the Competition and Markets Authority, the UK’s competition authority, suspended legal action against the firm after it made changes to the way it operates. In May 2018, the then Digital Minister, Margot James, said that if fans had to use a secondary site to buy tickets, “don’t choose Viagogo – they are the worst”. Coincidentally, Eric Baker, Viagogo’s supremo, cofounded StubHub but left the organisation prior to the eBay sale.
US private equity firm Silver Lake has acquired a 10% stake in City Football Group, the parent company of Manchester City, for US$ 500 million, valuing it at US$ 5 billion – a record in global sports valuations. Earlier in the year, Brooklyn Nets basketball team became the highest valued US sports team, at US$ 2.35 billion, after Alibaba’s co-founder, Joe Tsai, bought a controlling share.Apart from owning the Manchester club, the Abu Dhabi group has interests in seven other clubs in the US, Australia, Japan and China. The ways in which football clubs are run have changed somewhat over the past decade, with an increasing emphasis on converging entertainment, sports and technology rather than just focussing on the football side.
Victoria Beckham Limited has continued posting deficits, ever since its 2008 launch, with the latest 2018 loss of US$ 29 million, as revenue dipped 16% to US$ 45 million, with demand for the former Spice Girl’s high-end clothes, having “plateaued”. The company, which sells fashion and accessories, in more than 400 stores around the world., is to introduce several measures to firm up future sales, including launching its own cosmetics range, striking a partnership with Reebok and cutting prices. The business is controlled by Victoria and her husband David Beckham, via their company Beckham Brands Holdings, which itself made its first ever loss, at US$ 2 million, following a US$ 16 million profit the previous year.
Just days after Uber lost its new licence to operate in London, following repeated safety failures, Indian ride-sharing firm Ola is planning to launch its ride-hailing services in the UK capital; it has operations in other parts of the country but has already begun signing up drivers. Earlier in the year, Ola was granted a licence from Transport for London and has built a “robust mobility platform for London which is fully compliant with TfL’s high standards”.
The consequence of an October 25% hike in sales tax to 10% was that Japan’s retail sales slumped 7.1% on the year, to its lowest level since March 2015, as consumers cut spending in the month., indicating a marked weakening in domestic demand. The tax hike was prompted by the government to reduce Japan’s public debt, equivalent to more than twice the country’s GDP and the highest in the industrial world. Seasonally-adjusted retail sales fell 14.4% month-on-month in October. The economy is also being hit by declines in exports and production and the odds are that the trend will continue into 2020.
Australian stocks hit record highs on Wednesday, with the benchmark ASX climbing to 6,879 points on the back of the possibility (once again) of the US and China signing an interim trade deal before year-end. At the same time, the Aussie dollar slipped to US$ 0.6764, attributable to the strengthening greenback. Meanwhile, there was more disappointing economic data from the September quarter, despite rates being at historic lows, with little chance of them moving higher in the foreseeable future. With private sector investment falling again – now 1.5% lower on an annualised basis – along with tepid retail and construction results, Q3 GDP growth will inevitably be heading south, even though net exports have moved higher. It is apparent that the low interest rates have yet to make a meaningful impact on boosting spending and the question is if – and not when – they will do so?
The UK Office for National Statistics (ONS) reported that October borrowing reached US$ 14.4 billion, 25.8% higher than a year earlier, as the total for financial year (starting 01 April) was up 10% at US$ 59.4 billion. At the same time, national debt climbed 1.8% to US$ 2,308.1 billion, equating to 80.4% of GDP. It is inevitable that come year end, on 31 March 2019, last year’s US$ 6.4 billion current account surplus will disappear because of the rise in borrowing in recent months. So, whoever wins the December election will have difficulty in fulfilling all their promises, with public spending set to grow to its highest level since the 1970s.
The OECD has called for urgent action from governments, stating that extreme weather events may result in disruption of economic activity that could lead to long lasting damage on capital and land. The world body reiterated that the lack of government involvement to date has already had a negative impact on business investment and this can only deteriorate unless positive action is taken.
The OECD is yet another world body indicating that the world’s economic prospects have steadily deteriorated, forecasting global growth will be around the 3% mark. Their latest downbeat report blames, among other factors, lack of direction on climate policy for holding back business investment. In many countries, the weakening economic performance has arisen because of lack of investment and slowing trade. Another major threat is that China is rapidly turning into a more services-oriented economy, which will see a downturn in the country’s demand for imported goods for its industries to process.; the other Chinese factor, adding to the global malaise, is that the rate of annual growth has steadily headed south over recent years and the days of 8%+ figures could well be halved in the future. The best the rest of the world can hope for is that the slowdown is controlled and not too abrupt – and is Slow an’ Easy.
The World’s A Mess 21 November 2019
The latest Knight Frank report shows that for the second straight quarter, Dubai prime property prices registered an 0.2% rise, following an 0.3% jump in Q2 – an indicator the downturn may be coming off its four-year bottom. Despite this glimmer of hope, annual prices had fallen by 3.7% and Dubai was ranked 40th out of 45 global real estate markets surveyed. The average annual price rise was just 1.1%, with Moscow topping the table and Seoul at the other end.
With limited details available, Emaar has announced it will majority-own a build-to-sell property development, The Valley, in a US$ 6.8 billion JV, located on the Dubai – Al Ain Road. Earlier in the month, the developer reported a 17.1% decline in nine-month profit to US$ 564 million, but a 25% hike in property sales to US$ 3.4 billion. YTD, its nineteen new residential developments totalledUS$ 2.8 billion and it also has a US$ 9.8 billion sales backlog; it has also handed over 4.7k units so far this year.
With no new local launches expected for the foreseeable future, and still 37k units under development, troubled Damac is looking for expansion in new overseas markets, including resorts in the Maldives, Seychelles, Bali and Marrakech, rather than adding to the “large oversupply problem” in the UAE. The developer, having sold over 8k units over the past two years, with a further 4k expected in 2020, is only going to sell what they have launched to date and will not start anything new into the local market which they believe is over-supplied and have called for a freeze on future developments.
There will be a new addition to Dubai’s retail sector – with four-year old b8ta set to open its first international venture in the emirate. The retail-as-a-service company, with sixteen US locations, provides retailers with a space to showcase their products, with its aims to make physical retail accessible for product makers and exciting for consumers.
Nakheel Mall is set to open next Thursday, 28 November, in time for National Day celebrations. Located on Palm Jumeirah, the mega retail destination, costing US$ 327 million, will host over three hundred shops, restaurants, entertainment outlets and services, split over five levels. Along with a 14-screen Vox Cinemas complex, it will have car parking for 4k vehicles and will also serve as an access point for The View at The Palm, a public observatory on top of the 230 mt The Palm Tower.
The RTA and Careem signed a fifteen-year agreement for the Dubai-based ride-hailing firm to initially operate 1.75k bicycles across 175 docking stations and becoming the region’s first bicycle-pool phased program. The project will double that figure over the ensuing five years. Riders will be able to take advantage of the extensive network of cycling tracks that have sprung up over the past decade to 274 km and this will more than double to 632 km by 2023.
With the Sunday start of the Dubai Air Show, Boeing has spent time, with both of Dubai’s airlines. With the delivery delay (again) of the Boeing 777x, there is need for a schedule review of the 150 aircraft on order, especially as the plane-maker is still having its problems with the embattled 737Max. Furthermore, there is still the possibility of a 787 deal.
Boeing confirmed that it was working with flydubai to ensure that its grounded fleet of fourteen 737 Max aircraft is “preserved well”, ahead of its return to the skies. There will be an inevitable financial settlement for losses incurred by the Dubai airline, but no details have yet to be given; earlier in the year, chairman Sheikh Ahmed bin Saeed Al Maktoum indicated that the airline had a “right” to ask for compensation over the Max groundings. Boeing also confirmed that live pilot evaluation will soon take place which is a precursor for full certification so that the plane may be back in the skies by early Q1.
By the second day, Airbus had scored two major deals – an Emirates order for fifty A350-900s, with a list price of US$ 16 billion, and Air Arabia’s US$ 14 billion order for a mix of A320 Neos, the larger A321 Neos and the longer-range A32XLRs, to be delivered starting in 2024. The Emirates agreement replaces an earlier US$ 12 billion February outline deal that was for thirty A350s, which also included A330 Neos; negotiations are on-going between both parties relating to forty A330 Neos. Boeing did not fare as well but did reach an agreement from Turkey’s SunExpress for 10 additional 737 Max jets, exercising options on top of its existing order of 32 Max aircraft, as well as 787-9 Dreamliners to Biman Bangladesh Airlines in a deal worth a reported $585 million.
The third day started with orders worth US$ 6 billion for fifty 737 Max from two airlines. Air Astana, Kazakhstan’s national carrier, weighed in with a thirty-plane order, valued at US$ 3.6 billion list price, along with an unknown airline placing a US$ 2.3 billion order for ten Max 7 variant and 10 of the larger Max 10. Ghana’s newly launched airline, 10% owned by the government, made an order for three Boeing 787-9 wide-bodies, worth US$ 878 million. Senegal, signed a preliminary order with Airbus for eight A220s worth US$ 732 million. Other orders reported included EasyJet’s US$ 1.3 billion spend on twelve Airbus A320 neos, Turkish carrier SunExpress’s US$ 1.2 billion investment in ten Boeing 737 MAX. It wrapped up on Thursday with orders totalling US$ 54.5 billion, 71% of which emanated from sales orchestrated by Emirates and Air Arabia, and a record attendance of 84k, with 1.3k exhibitors; total sales from the last event in 2017 was more than double at US$ 113.8 billion
The five-day event has also seen plenty of activity from the defence sector particularly when one sees that seven of the top ten biggest spenders, (as a proportion of GDP), are located in the MENA region (Middle East and North Africa). All the leading global companies – including Lockheed Martin (the largest in the world), BAE and Dassault –are showing their wares. Top of the rankings is Oman, which spends 11.0% of its annual economy on defence, followed by Saudi Arabia’s 10.8%; this is three times more than the 3.1% US figure and five times more than the less than 2% spent by some NATO members.
The UAE’s Ministry of Defence invested US$ 1.9 billion on the first day, signing deals with ten different local and international companies, with the two biggest being for US$ 954 million, with UAE-based Global Aerospace Logistics, and US$ 463 million with French aerospace company Dassault Aviation for enhancements on its Mirage fighter jets. Halcon, a unit of the UAE’s new defence giant EDGE, signed a US$ 1 billion contract to deliver its Desert Sting-16 range of precision guided weapons to the UAE Armed Forces
ON.DXB is a new regional festival that aims to further stimulate Dubai’s growth as a global platform for companies and talent in film, gaming, video and music – sectors that are being driven by digital technology. There is no doubt that content is primarily driven by western media but there is increasing demand for more local original content from gaming to music to TV; this event is but one initiative to drive the strategy forward and put Dubai firmly on the global creative map. Major gaming industry leaders, including – Hiba Muhareb, co-founder of Shanab Games; John Lacey, MD and founder of Power League Gaming; influencer Ahmed Al Nasheet; MC Baraa Andullah; Mohammed Alturkistani, the MENA Director at Tentacle Gaming; and RobocomVR founder Karim Ibrahim – will be attending the event. In October, the emirate hosted Insomnia Dubai, the region’s largest gaming festival, and next month it will be the location for Girlgamer Esports Festival, the world’s leading esports event for women.
HH Sheikh Mohammed bin Rashid Al Maktoum has enacted a new DIFC Intellectual Property Law, encompassing a wide range of subjects including patents, utility certificates, industrial designs/drawings, copyright, trademarks, trade names and trade secrets. The new legislation sees the creation of the new office of the Commissioner of Intellectual Property which will have the responsibility for administering the law, resolving disputes and imposing fines. The law covers all related DIFC affairs and is in line with global standards befitting the world’s eighth ranked international financial centre.
Sheikh Mohammed also issued Law No. (10) of 2019, which partially amends Law No. (24) of 2009 on the establishment of the Dubai Financial Support Fund. Under the new regulations, the Director General of the Dubai Department of Finance is authorised to supervise all administrative, technical and financial affairs of the Fund. He will be also responsible for approving the Fund’s organisational structure and budget and submitting them to the Executive Council of Dubai for final approval.
DP World is nearing the completion of a major Egyptian expansion and, when Basin 2 is completed by the end of next June, it will nearly double the capacity at the port to 1.75 million TEUs per year. This particular US$ 520 million project has seen the Dubai company’s investment in the country top US$ 1.6 billion. The expansion of DP World’s Sokhna, the only port in the country capable of handling the largest container ships, cost US$ 520 million. As an aside, there was a bilateral agreement signed this week between the UAE and Egypt for a US$ 20 billion joint strategic platform to invest in a range of vital sectors and assets.
The latest legislation sees a new insolvency law that lifts the threat of criminal sanctions for clearing bad debts by decriminalising their financial obligations, whilst offering them an opportunity to work to resolve their financial dilemma. The new law will prove the ease of doing business in the country and will be beneficial for all stakeholders – the business community, the banking sector and the local economy. The law, to be introduced in January, will enable debtors resolve their liabilities, through court-appointed advisers, who will liaise with lenders on their behalf to reach a settlement, by rescheduling liabilities with an option to receive “new concessional loans”, probably with more relaxed repayment terms. However, it should be noted that bounced cheques will not be decriminalised under the new insolvency law.
A unit of Arabtec Holding has been awarded a US$ 100 million Emaar Misr contract to build a residential project at Greek Village in Egypt, comprising 42 town houses, 18 residential buildings and seven bungalows. This is the second contract this year for Arabtec Properties following an August US$ 111 award from the same developer to construct two projects in Cairo.
It was a disappointing Q3 for Arabtec reporting losses of US$ 109 million (compared to an US$ 18 million profit a year earlier), with revenue declining 31.0% to US$ 441 million; its Dubai-based fitout contractor Depa increased its YTD deficit to US$ 68 million following a quarterly loss of US$ 13 million. Over the nine months of the year, both revenue and profit declined – by 18.0% to US$ 1.6 billion and from a US$ 49 million profit to a US$ 103 million loss. The troubled developer attributed three factors for its problems – tight liquidity, a continued decline in the real estate sector and delays in handing over legacy projects. Employing 45k, it still remains the biggest publicly listed contractor in the country, with total assets of US$ 2.9 billion, net equity of US$ 324 million and a US$ 3.7 billion backlog.
Union Properties posted a Q3 29% slump in revenue to US$ 29 million, as its loss worsened 31.9% to US$ 22 million, driven by revaluations on financial assets declining from US$ 2 million to US$ 10 million. It now plans to focus on developing its land bank to create assets with recurring cash flows; finance costs rose 41.1% to US$ 13 million. Over the nine-month period to 30 September, revenue was 19.0% lower, at US$ 85 million, with a US$ 45 million loss, compared to a US$ 40 million profit a year earlier. The Motor City developer has incurred cumulative losses of US$ 567 million, following a 2017 write down in the value of its land by US$ 327 million and taking a further US$ 188 million hit, by reporting that about two million sq ft of its 14 million sq ft site to be undevelopable. Its September net assets came in 5.8% lower at US$ 798 million.
The bourse opened on Sunday 17 November and, having nudged up 2 points the previous week, dropped 17 points lower to 2684 by 21 November 2019. Emaar Properties, having lost US$ 0.09 the previous three weeks, closed US$ 0.01 lower at US$ 1.12, whilst Arabtec, dived US$ 0.13 and now has lost US$ 0.19, over the past four weeks, to end the week at US$ 0.35. Thursday 14 November saw continuing dismal trading of 64 million shares, worth US$ 54 million, (compared to 101 million shares, at a value of US$ 73 million, on 14 November).
By Thursday, 21 November, Brent, having shed US$ 1.01 (1.6%) the previous week, regained all those losses, and more, US$ 2.69 (4.4%) higher at US$ 63.97. Gold, having gained US$ 7 (0.4%) the previous week, was down US$ 10 (0.7%), closing on Thursday 21 November at US$ 1,463.
The preliminary valuation on Aramco has been set at between US$ 1.6 – US$ 1.7 trillion as the state oil company tries to sell 1.5% of its shares on the local bourse for US$ 25 billion – this is short of the initial US$ 2 trillion target and also lower than the 5% that was thought going on offer. At that time, it was expected that 2% would be issued on the kingdom’s Tadawul bourse, and a further 3% on an overseas exchange. Nevertheless, it will still potentially be the world’s biggest IPO and would value the world’s most profitable company north of US$ 25 trillion – slightly higher than the amount raised in 2014 by Chinese e-commerce giant Alibaba.
With future plans of focussing on mega projects, Exxon Mobil is planning to divest itself of some US$ 25 billion worth of assets, including oil and gas fields in Europe, Asia and Africa, as it attempts to free up cash to pay for these future projects. The oil giant has come late to the game as its main rivals, Shell and BP, have sold off major assets, totalling US$ 30 billion and US$ 65 billion respectively, since the 2014 energy market crash. The end result is that Exxon now has a negative US$ 9 billion cash flow, whilst Shell has already generated cash of over US$ 21 billion so far this year. The plan seems to be the Texas-based company to quit its upstream oil and gas business in eleven countries, so they would have cash to invest in new developments in Brazil, Guyana, Mozambique, Papua New Guinea and the US.
Two of Australia’s richest people, Mike Cannon-Brookes and Andrew Forrest, are investing in an ambitious project to export solar power from a giant 10-gigawatt plant in Australia to Singapore, via a 4.5k km transmission cable. The project has already raised tens of millions of Australian dollars that will allow developer Sun Cable to undertake development work. If successful, the project would meet almost 20% of the city-state’s energy needs.
Continental confirmed it would slash 5.5k jobs (2.3% of its current workforce of 240k) by 2028, as the demand for combustion engines slows and global vehicle sales continue to head south. According to its CEO, Elmar Degenhart, it urgently needs technological transition to strengthen its competitiveness and future viability. The move is expected to save US$ 600 million a year from 2023 and help finance new technology.
By Thursday, Bitcoin had had seven straight days of declines to fall below the US$ 8k mark for the first time in a month and also slipped below its 200-day moving average line; some analysts consider this to be a pointer to sell. The world’s largest cryptocurrency has witnessed fairly low trading volumes since August, as no new money entered the sector, and has seen stocks/bonds/gold all up in double-digits YTD. So far in November, it has shed 14% of its 31 October value.
Despite closing all but three of his twenty-five UK restaurants, and falling into administration, last May, celebrity chef Jamie Oliver is to open twenty-one new Jamie Oliver-branded overseas restaurants by the end of 2020; currently, there are 70 restaurants, all of which are run as franchises, in 27 global markets. The first two – Jamie Oliver Kitchen restaurants – will open this month in Bali and Bangkok. Although annual profits of the Jamie Oliver Group fell sharply, he paid himself a US$ 4 million dividend in 2018, although he had invested a lot of his own money to support his then failing restaurants.
In a bid to stem its US$ 1 billion H1 loss, WeWork is to slash almost 20% of its current 12.5k workforce, calling the cuts “necessary” in order to “create a more efficient organisation”, following the dramatic collapse of its September failed IPO. Earlier in the year, its major investor, Softbank, valued the company, which rents office space to freelancers and businesses, at US$ 47 billion – it has since pared this estimation to just US$ 8 billion.
Sheikh Mansour’s Manchester City posted a 6.9% hike in revenue last season to US$ 692 million, driven by a 20% jump in broadcast revenue, leading to a net US$ 13 million profit; since the Abu Dhabi 2008 takeover of the club, its revenue has risen more than six-fold. The 2017-18 season saw the club win an unprecedented quadruple of England’s domestic trophies – the Premier League, FA Cup, League Cup and Community Shield – whilst Liverpool lifted the big European trophy. Its revenue steam was still well behind Manchester United’s US$ 785 million but the “noisy neighbours” will probably surpass that, as it has signed a record ten-year kit deal with Puma, worth an annual US$ 85 million. However, it is being investigated by FIFA for allegedly flouting FFP regulations, by inflating the value of sponsorship deals – if found guilty, the club could face bans on transfers and from the lucrative Champions League.
The Australian Securities and Investments Commission is concerned that scandal-prone financial giant AMP appears to still be charging already dead customers, after the financial services royal commission had exposed over 3.1k deceased customers still paying their life insurance premiums. The authority’s chair, James Shipton, commenting on one recent case said “One thing I will say and unfortunately this is a vignette, an example of where their system is … their systems are obviously failing and there isn’t a magic, quick solution.” AMP was also found to be lying to regulators and charging hundreds of millions of dollars in so-called “fees for no service”. Since the royal commission, AMP has lost its chairman, chief executive and half of its board. What happened to the other half?
Another bank in trouble again is Westpac, with theAustralian Transaction Reports and Analysis Centre accusing it of an incredible 23 million breaches of anti-money laundering and counter-terrorism financing laws; not surprisingly, Australia’s second largest bank is “reviewing Austrac’s statement of claim” for what the financial crime watchdog deemed “serious and systemic non-compliance”. It is alleged that the bank failed to properly report more than 19.5 million international funds transfers, amounting to US$ 8 billion over a five-year period to 2018. Probably the most damaging revelation that came to light was that its LitePay service was used by paedophiles, without raising any red flags within the bank’s systems, to pay for child exploitation in the Philippines.
Westpac’s competitor Commonwealth Bank paid a US$ 500 million fine for similar breaches last year. The royal commission report, issued in September 2018, concluded that the abuse and misconduct within Australia’s banks and financial institutions were driven by a culture of greed.
Meanwhile, the NAB also finds itself in hot water and has agreed to pay US$ 35 million in compensation to tens of thousands of customers who were sold junk personal loan insurance and credit cards. The case was brought before the High Court by Slater, alleging the bank and its subsidiary MLC engaged in unconscionable conduct in selling consumer credit insurance (CCI) to customers, and was the first settlement of a class action taken as a result of the royal commission. The lawyers argued, successfully, that the policies were “next to worthless” to many of the customers they were sold to.
What seems to be a continuing monthly occurrence of disappointing jobs and wages data is worrying Australian economists. It is estimated that nearly 1.9 million Australians are either out of work or looking for extra work. There are very few analysts who consider that the current slackness in the labour market will suddenly tighten or that any meaningful wage growth will gain traction over the next two years. To solve the problem, the government has to take action whether it be two more rate cuts early in 2020 and/or the introduction of quantitative easing – bond buying maybe in the region of US$ 40 billion. (QE is indeed making a comeback for many global central banks. This can be seen that the global total for net central bank assets stood at US$ 77 billion, with the figure set to rise to over US$ 1 trillion by the end of 2020). The RBA will see it as another weapon to keep rates low, liquidity up and core inflation nudging higher.
It is now expected that India’s Q3 growth will be lower than 4.5%, following a 5.0% reading the previous quarter. Any reading less than 4.2% would be the lowest since authorities adopted a new base year for GDP data in 2012. It does appear that the economy is suffering from weak global demand and ongoing tight domestic credit conditions, with most economic indicators pointing down. This situation has arisen despite five rate cuts this year (with another one, perhaps as high as 0.5%, before the end of 2019) as well as US$ 20 billion reductions in company taxes. The problem facing Finance Minister Nirmala Sitharaman is whether the slowdown has bottomed out, or there is worse to come, despite the steps already taken by the government, along with whether new investments, from the private sector, have started to materialise.
The Institute of International Finance estimates that the total of global debt will touch a massive US$ 255 trillion by the end of the year, having risen 3.1% in H1 and nearly 40% over the past decade, with little sign of a slowdown on the horizon. The debt, for which the US and China account for over 60% of the increase, now equates to 320% of global GDP and has been spurred by looser financial conditions. Non-financial sector debt – borrowing by governments, households and other businesses – accounts for $190tn, (76%) of total debt, with government debt – driven mainly by the US – expected to reach US$ 70 trillion. Global bond markets have jumped nearly a third since 2009 to US% 115 trillion, with government bonds accounting for 47% of that total and rising. With high debt burdens, 60% of the world’s countries expected to see below-potential growth next year, a global manufacturing recession, trade wars, threats of deflation and record low rates (to try and boost borrowing), it is all but inevitable that some sort of recession is on the cards. The first thing that will happen is the bond market bubble bursting and the outcome will not be pretty. When it comes to debt, there is no doubt that The World’s A Mess.
Set Fire To The Rain 14 November 2019
The latest launch from Azizi Developments, designed towards the younger generation, is Miraj in Dubai Studio City. The 444-unit development will house 253 studios, 155 1 B/R and 36 2 B/R apartments. As with recent releases, the developer will be offering “affordable and flexible payment plan options.” Currently, Azizi has fifty-four on-going projects, scheduled for completion by 2023, and a further 130 projects in planning, that are projected to be delivered by 2025.
Fam Properties has closed out a US$ 173 million deal at Dubai Creek Harbour – one of the largest real estate deals recorded in Dubai in recent years. The forty-floor property, Creek Edge, located in Dubai Creek Harbour, will house 388 units and be completed in 2023.
BackLite Media has been awarded a ten-year, US$ 272 million advertising contract to transform signage in Dubai, with a mix of digital and traditional outdoor platforms across twenty-six locations along SZR. The out-of home advertising company advised that it would be utilising technology and visual solutions that are “far ahead of the systems used in global hubs across the world”. The company was responsible for introducing its distinctive unipole signs to Dubai, as far back as 1996.
Amway’s APAC Leadership Seminar 2019 will see 6.5k of its top management flying into Dubai, with Emirates, as the world’s largest direct selling business holds a meeting at DWC next month. The sixty-year US-based multi-level marketing company, with sales of US$ 8.8 billion in 2018, represents a major boost for the local MICE sector (meetings, incentives, conferencing and exhibitions) and is but one of 118 successful bids engineered by Dubai Business Events (DBE) —the emirate’s official convention bureau – that will bring in 75k overseas delegates over the course of the year. Furthermore, such events provide much needed revenue for the economy – especially in the travel, retail and hospitality sectors.
US$ 47.1 billion has been added to the assets of UAE-based conventional banks, bringing its total to US$ 670 billion, of which 19.7% is owned by the eight Shariah-compliant banks in the country, with the balance by the 59 conventional banks. The total assets of all fifty-nine banks totalled over US$ 817 billion, as deposits over the nine months grew by 3.9% to US$ 398.0 billion, although Islamic banks’ assets contracted 2.9% to US$ 154.1 billion. Retail loans totalled US$ 481.2 billion, of which 80.3% was provided by conventional banks.
Following the May launch of the government’s Golden Card scheme, 2.5k scientists and researchers, from varied academic backgrounds, have been granted permanent residency this week. HH Sheikh Mohammed bin Rashid Al Maktoum tweeted “we welcome them among us – the UAE will always be open to scientists, investors and entrepreneurs.” The Ruler’s son, Sheikh Hamdan bin Mohammed, attended the ceremony at which visas were handed out.
Dubai’s October Purchasing Managers’ Index (PMI) points to business growth in the emirate’s non-oil private sector, rising 2.0 to 54.6, driven by improving new order growth, (most notably travel and tourism firms), and higher demand. On the flip side, there was weaker growth reported in the construction and wholesale and retail sectors. Continuing price competitiveness resulted in an increase in sales activity, as selling charges reduced for the eighteenth straight month – declining at their quickest rate since February 2016. Furthermore, the rate of job growth was at its highest level in twenty-one months, with the amount of new work moving upwards.
The seventh annual State of the Global Islamic Economy survey estimates that there will be a 45% hike in Islam-inspired ethical consumption to US$ 3.2 trillion over the next four years. The UAE, along with Malaysia, Bahrain Saudi Arabia and Indonesia, continue to dominate the sector which comprises 73 countries. The survey reports on seven sectors including Islamic finance (the largest at US$ 2.5 trillion), halal food (US$ 1.4 trillion), modest fashion, pharmaceuticals, cosmetics, media/recreation and Muslim-friendly travel. Although Malaysia topped the Islamic finance and Muslim-friendly travel categories, UAE leads the field in the other five. There is no doubt that the creation of the 2014 Dubai Islamic Economy Development Centre has helped move the UAE inexorably closer to the top of the ladder.
So far this year, there has been a 2.3% decline in Q3 passenger numbers to 22.6 million, with a YTD 4.5% fall to 64.5 million, not helped by the 45-day runway closure earlier in the year and the continuing grounding of flydubai’s thirteen 737 Max jets. The top destination remains India, with 8.8 million passengers, followed by Saudi Arabia and the UK, with numbers of 4.8 million and 4.6 million. The world’s busiest hub for long-haul flights also posted a 5.9% Q3 fall in cargo to 637k tonnes and 4.1% to 1.9 million tonnes YTD.
The UAE aviation regulator will decide when the Boeing 737 Max can return to fly once the US Federal Aviation Administration decides it is fit to return to commercial service; this is expected to be in January, ten months after two fatal crashes grounded the aircraft. The GCAA will conduct its own safety checks, in conjunction with the FAA assessment but it is expected that Max deliveries will restart next month. Boeing’s second largest customer for the 737 Max is flydubai, with a 250 aircraft order.
Last year, UAE foreign direct investment rose 8.0% to US$ 140.3 billion, boosted by government efforts to implement reforms and attract foreign capital, despite a dismal worldwide economic environment which saw a 19.0% decline in global inflows; the biggest declines were seen in the EU, developed countries and ‘transition economies’ declining 73%, 40% and 8% respectively, whilst developing countries witnessed a 3% increase. Asian countries came first in new funds introduced into the country. By H1 this year, Dubai had attracted US$ 12.7 billion – an impressive 135% increase on the same period a year earlier.
DP World continues its global expansion plans, as it announces an agreement with Namibia’s Nara Namib Free Economic Industrial Zone to establish a free zone in the country. The Dubai port operator already has an African presence in several countries, including Algeria, Egypt, Mozambique, Rwanda, Senegal and Somaliland, and sees this Walvis industry and logistics free zone as an important regional hub. The first phase, covering just 50 hectares (expandable to up to 1.5k hectares), will create 3k jobs, with an initial investment of US$ 237 million.
Trukker, a three-year old digital freight platform, has secured US$ 23 million in a Series A funding which will be utilised to expand regionally and enhance its infrastructure; currently, it operates in the UAE and Saudi Arabia, with plans to open in Egypt, Jordan and other regional countries. The online service matches hauliers (with up to 15k trucks) and its 200+ client base, allowing them to bid for jobs, as real time supply matches current demand.
Following its recent merger with Abu Dhabi Financial Group, Shuaa Capital posted a Q3 profit of US$ 6 million, with ADFG contributing profits of US$ 8 million. The merger was the result of an all-share reverse takeover deal, with the larger entity being rebranded as ‘ADFG’. In H1, Abraaj posted losses of US$ 15 million, driven by its exposure to the disgraced, and now bankrupt, Abraaj along with certain merger-related one-off costs.
DXB Entertainments is still struggling as indicated by a Q3 loss of US$ 73 million – a marginal 2.5% improvement, compared to a year earlier; over the first nine months of the year, the loss reduced by 3.6% to US$ 195 million. Both Q3 and nine-month revenue declined by 24% to US$ 21 million and US$ 90 million, attributable to lower visitation from the resident market with visitor numbers declining by 8.2% to 1.8 million. The company behind Dubai Parks and Resorts has so far lost US$ 1.4 billion and has put strategies in place to increase the number of international visitors and reduce costs – a move that is easier said than done.
Once flying Damac Properties has had its wings trimmed and has been hit by a double whammy of declining revenue – down 42.0% to US$ 244 million – and rising costs, including a 126% hike in selling costs to US$ 73 million; the end result was that Q3 profit slumped some 78% to US$ 14 million. For the first nine months of 2019, net income was 87.8% lower at US$ 36 million, along with falls in cash/bank balances, down 20.6% to US$ 1.1 billion, and total assets sliding 2.8% to US$ 64.9 billion. Hussain Sajwani, chairman of the developer, is confident of reaching his 4k delivery target for this year.
Some analysts predict that with 21k residential units completed in H1, a further 38.4k could be finished in H2. In the unlikely event of this happening, the 2019 total would be about the same number as handed over in the past four years from 2015-2018. If there were a problem at the beginning year, that being the case, we are in for a turbulent 2020.
All of Emaar Properties’ financial indicators headed north during Q3, with a 14.0% hike in revenue to US$ 1.6 billion and profit 20.0% to the good at US$ 354 million. Over the nine-month period to 30 September, sales were 25.0% higher at US$ 3.4 billion, revenue by 1% to US$ 4.8 billion and net profit 2.0% at US$ 1.2 billion. The main drivers behind the stronger revenue stream were from foreign investors plus new, first-time home buyers entering the local property market.
Emaar Malls also recorded positive nine-month results, with 6.0% increases posted for both revenue at US$ 926 million and net profit to US$ 463 million. With a credible 92% occupancy level, it welcomed 99 million visitors to its assets – including The Dubai Mall, Dubai Marina Mall, Gold & Diamond Park, Souq Al Bahar and the Community Retail Centres. Along with Emaar Malls, its hospitality & leisure, entertainment and commercial leasing business posted a 30.0% increase in revenue to US$ 1.4 billion with its hotels’ occupancy rate at 78%. The international property development operations recorded a 22% increase in revenue to US$ 708 million, contributing 15% of the total group revenue.
Emaar Development posted an 11.0% hike in Q3 revenue to US$ 924 million, with profit 1.0% up at US$ 187 million, with selling, marketing, general and administrative expenses 63.0% higher at US$ 110 million. UAE’s largest listed property company has an impressive sales backlog of US$ 9.8 billion, which will boost revenue streams in the years ahead, driven by the launch of nineteen new residential developments, valued at US$ 2.7 billion, this year.
The bourse opened on Sunday 10 November and, having lost 85 points (3.1%) the previous two weeks, nudged 2 points higher to 2701 by 14 November 2019. Both Emaar Properties and Arabtec shed US$ 0.01. The former, having lost US$ 0.08 the previous fortnight, closed at US$ 1.13, whilst Arabtec, down US$ 0.05 the previous two weeks, traded at the end of the week on US$ 0.48. Thursday 14 November saw dismal trading of 101 million shares, worth US$ 73 million, (compared to 157 million shares, at a value of US$ 43 million, on 07 November).
By Thursday, 14 November, Brent, having gained US$ 4.42 (7.6%) the previous five weeks, shed some of those gains, down US$ 1.01 (1.6%) to US$ 61.28. Gold, having shed US$ 45 (3.7%) over the previous week, was up US$ 7 (0.4%), closing on Thursday 14 November at US$ 1,473.
On Sunday 17 November, Saudi Aramco will open its IPO to investors and, as yet, two days before the event, the size of the stake (probably 5%) and the pricing range (around US$ 1.7 billion) are yet to be revealed; it will offer as much as 0.5% of its shares to individual investors, along with a plan to incentivise its 73k staff via a share scheme. The 650-page prospectus confirms that the energy conglomerate will not be allowed to list further shares within six months and for the company’s owner, the Saudi government, that period is for one year after the start of trading. The final pricing will be revealed on 05 December. In a bid to boost interest ahead of the issue, Aramco has seen its taxes cut for the third time and has introduced measures to encourage investors not to sell their newly acquired shares.
Toyota Motor Corp plans a US$ 1.8 billion share buy-back, following news of a more-than-expected Q3 profit at US$ 6.1 billion (up 14.4%), driven by better global sales and a 5.6% improvement in its North American business; the profit figure beat market expectations. It saw quarterly vehicle sales 26.1% higher at 2.75 million. By the end of March, the carmaker is planning a 34 million share buy-back, costing US$ 1.8 billion, with rival Honda also in buy-back mode paying US$ 915 million. However, the company has had a tough time and has cut its annual profit forecast by 10.4% to US$ 6.3 billion, (and revenue by 3.8% to US$ 71.7 billion), as global vehicle demand remains moribund and specific supply issues continue. Quarterly profit came in on US$ 2.0 billion.
Nissan posted disappointing Q2 (ending 30 September) results, with declines in both revenue – down 7.0% to US$ 24 billion – and profit by 54.6% to US$ 541 million. The main drivers include falling global vehicle sales and the loss of confidence in the brand power, following the arrest of its former chairman Carlos Ghosn; he faces various allegations, including under-reporting promised compensation in documents and breaching trust in making dubious payments. The car maker has started to improve much-needed governance, corporate culture and ethical standards which, in turn, will result in additional costs at least in the short-term.
As part of its strategy to cut costs by up to US$ 1 billion by 2022, Mercedes-Benz is to shed 1k jobs. The German company is not the only carmaker facing costly challenges from new, tougher emissions targets. Not only do the new CO2 targets require high investment but costs fly north when it comes to investing in plug-in hybrids and all-electric cars.
After a two-year agreement, Nike has decided to invest in “distinctive” partnerships with other retailers and platforms, as it stops using Amazon as a vehicle for selling directly to customers. The trial seems to have convinced the sportswear giant that it should seek greater control of its brand and ensure that it deals more directly with its customer base, by investing in strong, distinctive partnerships with other retailers and platforms.
Following the lead of its tech competitors, including Amazon, Apple, Facebook and Uber, Google is set to announce a new financial product for users. The service, launched via Google Pay, will utilise the expertise of banks and credit unions in the US to offer “smart checking” accounts; users will be able to add Google’s analytic tools to traditional banking products. Google has teamed up with Marcus, (Goldman Sachs’ new consumer arm), as part of its Apple Pay and Wallet service. There is no doubt that US regulators will take a close look at Apple’s entrée into this new market segment, with all the tech giants already facing probes related to competition, data protection and privacy.
The co-founder of the Nusr-Et steakhouse, Nusret Gokce, and the other co-owners, Mithat Erdem and billionaire Ferit Sahenk, are considering selling a stake in the business, known as Salt-Bae. As a stand-alone entity, Nusr-Et could be worth up to US$ 1 billion and undoubtedly, if a part sale occurs, much interest would be generated. The three also operate steakhouses and burger joints in New York, Miami, Dubai and on the Greek island of Mykonos. Sahenk, a 51% shareholder, as well as a real estate developer, has struggled, in line with the fall in the Turkish lire and having a US$ 2.5 billion of debt to be repaid; he has been divesting stakes in hotels and restaurants and could be a likely part-seller.
Although Vodafone shipped US$ 2.7 billion in H1 losses, it was a major improvement on the US$ 10 billion+ deficit posted over the same period last year. The dismal reading was brought about mainly by “a loss at Vodafone Idea, following an adverse legal judgement against the industry by the (Indian) Supreme Court, partially offset by a profit on the disposal of Vodafone New Zealand.” If these items had been taken out of the equation, the UK telecom would have showed a positive operating profit. Last month, Vodafone was one of several beleaguered Indian telecoms companies ordered by the courts to pay a total of US$ 13 billion in unpaid bills.
There has been an offer from private equity group KKR to buy out Boots’ parent company, Walgreens Boots Alliance, which, if successful, would be the biggest ever of its kind. Whether the current time is best suited to such a deal remains to be seen. Only three years ago, the private equity group sold its final shares in Walgreens which, although it has an estimated market value of around US$ 56 billion, is US$ 17 billion in debt. Operating in twenty-five countries, it is currently trying to save US$ 2 billion a year and has indicated that it would close 200 UK outlets. Prior to the latest news, its share value had dipped over 20% YTD.
It is no surprise to see that a disgruntled shareholder has taken WeWork to court over the US$ 1.7 billion leaving package approved for ousted co-founder Adam Neumann. Although the company called the claims “meritless”, there would be many who would agree that this sum is “beyond comprehension” and is “improper”. It was only two months ago that the company, that had previously been valued around US$ 50 billion, saw a stock market floatation collapse in disarray, with latest valuations coming in at a lot less than US$ 10 billion.
A growing problem in Australia (and probably the same in many other countries including the UAE), is that of so-called payday loans. A local study estimates that 1.8 million households there have taken out 4.7 million such loans over the past three years. There is increased concern that those taking out payday loans were “those doing it toughest in society” and were easy pickings for the “predatory” practices of lenders. Evidently, 41% of female borrowers are single mothers, with women accounting for 23% of borrowers, the number having risen 62.1% to 287k over the past three years. In 2016, the federal government announced plans to tighten laws around small consumer loans and leases but, in true Ozzie style, no progress has been made in the ensuing three years, so that the financial vultures are still charging exorbitant rates, whilst making mainly the poorer even poorer.
The Australian Big 4 banks’ woes continue with both CBA and Westpac hauled before regulators, denying charges that they levy a so-called loyalty tax, forcing existing mortgage customers onto higher interest rates to fund lower rates for new customers. It seems that CBA dispute the concept of a loyalty tax, arguing different loan rates reflect supply and demand for mortgages over time and that the bank did not discriminate between “old” and “new” clients. Westpac indicated that competition would be destroyed if all loans were at the same price. Another area of concern was the fact that none of the banks have passed on the full benefit of recent rate cuts and are being accused of profiteering at the expense of millions of home loan customers.
There are further signs of continuing weakness in Australian workers’ wage growth, as average pay packets have only risen 2.2% on the year – below long-term expansion rates. The latest quarterly 0.5% rise, down from 0.6% the previous period, will probably see interest rates cut again. Public sector growth, at 2.5%, came in at a faster rate than the private sector’s 2.2%. but returns were expected to be higher as during the quarter, new enterprise bargaining agreements (EBAs) were introduced plus the Fair Work Commission’s annual wage review. The situation was not made any better with Australia’s October unemployment rate jumping back to 5.3%, with the number of unemployed at 726k.
China produces about 22% of global cotton supplies and the Xinjiang region (with 84% of that total) is the focus of Chinese cotton production; the region has been in the news with allegations of its Uighur minority being persecuted and recruited for forced labour. Now there is increasing pressure on the many global brands that directly or – more probably – indirectly source cotton products from there to boycott the region. It is reported that the likes of H&M, Esprit and Adidas, along with Japan’s Muji and Uniqlo, are at the end of supply chains from the Chinese region.
Monday 11 November saw Singles Day (11/11), an annual event, that is the world’s busiest online shopping day, adopted by Jack Ma’s Alibaba, and has now become a marketing tool not only in China but also in other Asian countries. In the first eighteen hours of the day, Alibaba had surpassed last year’s total, with a 25.2% increase, to reach US$ 38.3 billion, with rival JD.com posting sales of US$ 25.6 billion by mid-afternoon. Alibaba’s normal daily sales average US$ 2.3 billion and Ma had expected a bigger number this year, blaming the fact that it fell on a Monday and the weather was too hot. There is no doubt that China is one of the most “switched-on” counties in the world with 85% of the population using the internet for everyday use, including payments, driven by a lack of traditional retailing networks. Many of the country’s richest entrepreneurs owe their wealth to e-commerce including the likes of Jack Ma, Colin Huang (Pinduoduo), Zhang Jindong (Sunng) and Richard Liu (JD Com).
With Q3 growth of 0.3%, the UK economy managed to avoid recession, following an 0.2% contraction in the previous quarter. (The technical definition of a recession is two straight quarters of negative growth). The main driver behind the uptick was the services sector, with help from an improved construction contribution; production was flat and the manufacturing sector continued to fall in most industries except car production. On an annualised basis, the 1.0% reading is the weakest such quarter in nearly a decade and the outlook is more of the same.
As October UK inflation rates nudged lower by 0.2% to 1.5% – its slowest pace in three years – it seems that this could be a third factor to swing the BoE into cutting interest rates again; the other two, Brexit uncertainty and slowdown in the global economy, in themselves are strong indicators for further cuts. The good news is that there could be a boost in household spending, with wages rising at a faster rate (3.6%) than inflation. With lower energy prices -gas and electricity 8.7% and 2.2% lower month on month – there is every possibility that it could go as low as 1.2%, before climbing back to reach the BoE’s 2.0% target, and more, by the end of 2020.
Winter came with a vengeance after a long, hot and never-ending summer saw Dubai hit by heavy rains and storms on Sunday, leading to localised flooding, huge traffic jams, some property damage and minor disruptions at Dubai International. Notwithstanding the usual suspects, motorists heeded warnings to take extra care and avoid unnecessary trips outside. The week has seen Venice and parts of England reeling from floods, whilst the east coast of Australia and the US west coast of US have witnessed catastrophic fires. These events have been happening for ages and were seen as natural and expected occurrences; the problem is that the world has become more aware and that it appears that they are increasing in their severity. In 2019, this should not be happening. Set Fire To The Rain.
A Change Is Gonna Come 07 November 2019
There could be a welcome boost for the local real estate sector with reports that the Central Bank is considering new rules that will loosen the cap on bank lending; currently, it is 20% of customer deposits that can be lent to the property industry. Any amount above the 20% threshold will incur a capital charge but any loosening is bound to have a positive impact. If it were to go through, banks will have to be cautious, bearing in mind that latest Q3 figures show that UAE banks’ non-performing loans stood at 6.4%, compared to 5.7% a year earlier.
In a bid to accelerate construction at its four-phased residential mega project, Riviera in MBR City, Azizi Developments has added a total of 6k workers to its payroll, as its own Year of Construction, (dedicated to the swift construction of its ongoing projects), rolls to an end. This massive project encompasses 16k residences spread across 71 mid-rise buildings. The developer estimates that phases 1, 2 and 3 are 54%, 36% and 22% completed.
According to Knight Frank, average office rents have declined 8.2% over the past twelve months, with citywide office rents down 9.2% to US$ 30 per sq ft per year. The main driver continues to be lower demand in line with reduced business confidence, as the local economy reports 2019 growth of 1.9%, compared to 3.1% a year earlier.
A US$ 102 million infrastructure project, that involved construction work on 1.4 km of tunnels and 7 km of roads, leading to the Jewel of the Creek development, has been completed. The ground and basement access points of the Jewel of the Creek project have been linked with Baniyas Street to the north, and Al Ittihad Street to the east. An 80 mt footbridge over Baniyas Street, along with other work including lighting, will be completed by the end of Q1 2020. The mega 126k sq mt development encompasses 756 serviced apartments (in four towers), three hotels with 1.2k rooms, twenty restaurants, a man-made lake, and a waterfront promenade and marina for 65 berths; it will also have parking for 6k vehicles.
One tyre manufacturer is introducing a new concept to Dubai by introducing its Pirelli Tyre Hotel, located close to Dubai Autodrome. The temperature-controlled facility, allowing drivers to store their premium tyres to optimise performance, is fitted with custom-designed racks made to enhance the longevity of such tyres. The emirate becomes its fourth location in the world, following Munich, Monte Carlo and Los Angeles.
The Department of Tourism and Commerce Marketing (Dubai Tourism) has tied up with Tencent Games to develop The Map, featuring Dubai within the successful online game application. Lego Cube is free to download and allows players to experience many of Dubai’s landmarks; the aim of the exercise is to attract more Chinese tourists and is the first time that TenCent has partnered with an oversees entity.
With the start of the cruise season, Dubai is expecting to welcome up to one million visitors on over 200 ship calls – last season saw a 51% increase in numbers to 850k, arriving on 152 liners. The first ship arrived last month at Dubai’s Mina Rashid Cruise Terminal. – TUI Cruises’ Mein Schiff 5, carrying 6k passengers.
Monopoly has finally arrived in Dubai and was launched at a ceremony at the Burj Al Arab on Monday. The iconic hotel is one of the places on the board that includes iconic Dubai sights such as Burj Khalifa, The Dubai Mall, Atlantis The Palm, Dubai Frame, Dubai Opera and Global Village. Surprisingly, Nord Anglia International School was featured, whilst the likes of The Dubai Mall and Palm Jumeirah did not pass ‘Go’. The two top positions were taken by the Burj Al Arab and Bluewaters.
Kibsons has expanded its 130k sq ft head office and cold storage warehouse in Dubai Fruit and Vegetable Market and has plans to quadruple its daily home deliveries to 10k.; its work force will increase by a further 200. The family-owned 38-year old online fruit, vegetable, dairy and meat distributor will also triple its distribution capacity, both distribution capacity of fresh produce, which currently stands at more than 250k kg, and also its meat processing capabilities. The company plans to expand into other parts of the region before the end of 2021.
There have been calls from some operators in Dubai’s hospitality sector for a review of taxation on adult beverages, served in bars and restaurants, claiming that the current tax on adult beverages is having a negative impact on a struggling industry and perhaps hurting tourism numbers.
An NBK report on the UAE sees its growth prospects remain “relatively solid”, backed up by 3.5% 2019 hike increase in the oil sector this year, leading to a modest average 2.2% expansion over the three years to 2022. It estimates that this year’s growth in the non-oil sector will be 1.0%, almost doubling next year to 1.8%, boosted by “the impact of structural reforms, the fiscal stimulus package and the Expo 2020 begin to be realised”. Going forward, the economy is expected to weaken to 1.5%, as the impact of the Abu Dhabi stimulus and Expo 2020 eases. With property rentals still heading south, it is expected that there will be 1.9% deflation this year, but this is a short-term feature with inflation returning to “normal” levels of around 2.4% by 2022.
There was even more bullish news from the IMF espousing that the UAE’s non-oil growth would exceed 1% this year and rise to 3% in 2020 – at the fastest rate since 2016. The UAE GDP will reach 2.5% in 2020., helped by Expo 2020 and UAE government policies. The world body noted that the economy has been helped by the government taking “a number of important steps”, including allowing 100% foreign ownership in certain sectors, reducing fees/penalties, a new insolvency framework and the promotion of greater financial inclusion.
According to a Ministry of Finance official, the UAE has no plans to introduce income tax and the country will not see any VAT hikes for at least another three years. This is welcome news for many and comes on the back of increasing rumours that VAT would double to 10% and that income tax was just around the corner. There are some analysts who think that any future tax will be forced on the government by outside bodies such as the World Bank or IMF. Initial estimates made when VAT was introduced to the UAE in January 2017 were for revenues of US$ 3.3 billion; the first year of operations saw the actual figure more than double to US$ 7.4 billion.
Despite all the doom and gloom hanging around the economy, the Ministry of Human Resources and Emiratisation indicated that Dubai added 90.3k net new jobs in the year to June – up 21.9% on the previous year.
The GITEX Technology Week Economic Impact Assessment highlighted revenue across direct, (spending in ancillary sectors such as accommodation, F&B, retail, entertainment, travel), indirect and induced economic levers, (including higher employment and consequent disposal income growth); this equated to US$ 250 million being added to the emirate’s GDP.
Landmark Group has launched e-commerce apps for iPhone and Android and an e-commerce website for its Centrepoint brand in Kuwait, an e-commerce market expected to grow to US$ 1.1 billion by the end of 2020. The Dubai-based retail and hospitality conglomerate expects that with a population of 2.6 million internet users, of which over 92% already shop online, will be a lucrative market. Kuwait customers will have instant access to over 25k product lines from its range, including Babyshop, Splash, Lifestyle and Shoemart, and be able to shop for over 200 homegrown and international brands. Landmark has had over seven years in the e-commerce sector and has witnessed exponential compound annual growth of 140%.
It seems inevitable that 2019 will see new record highs for the Dubai Gold and Commodities Exchange, as after nine months of trading, it has posted 20.3 million contracts (valued at US$ 373 billion); its twelve-month total in 2018 was 22.3 million. Last month, its daily trading was at 72.9k and its monthly total of 1.68 million deals was 11.5% higher than a year earlier. Gold Futures showed a YTD 70% jump in trades as both INR Quanto Futures (116% higher on the year) and Brent Crude Oil Futures, up 38%, were notable performers.
DP World’s expansion plans seem never-ending, with the latest being a 34-year concession (with French container operator Terminal Link – PortSynergy Group) to run two berths in Le Havre; the world’s largest port operator already has operations in berth 5 in the French port. Once completed, this addition will add one million TEUs (20’ Equivalent Units) to its portfolio and will cover an area of 42 hectare, with a 700 mt quay.
As the much-troubled Drake & Scull continues to restructure its business, it is also still investigating the actions of its previous management; Shuaa Capital is assisting to “support our restructuring, to transform DSI and bring it back to profitability”. The current chairman, Shafiq Abdelhamid, commented “it is our duty to protect the rights of our shareholders who trusted us and invested in this company.” The contracting firm has already lodged fifteen complaints against former company board members and executive management, with further criminal complaints having been added. The company now claims that between 2009-2017, annual losses were hidden from shareholders. In 2015, DSI posted a US$ 256 million loss, rising to US$ 378 million two years later, by which time retained losses had risen to US$ 858 million. Its shares were suspended on the DFM in November 2018.
The region’s biggest aviation lessor, state-owned Dubai Aerospace Enterprise, posted a 10.3% decline in nine-month profit to US$ 260.5 million, driven by marked increases in depreciation, increasing by US$ 12 million, and finance costs grew. 12.0% to US$ 281 million. In September, the company received a mandate from an unnamed investor to acquire and manage aircraft worth about US$ 1.4 billion. As at 30 September, the lessor had a fleet of 358 aircraft (84% owned, with the balance managed planes) with 111 customers in 56 countries; the book value of its owned planes is US$ 11.9 billion. Emirates is the company’s largest customer, contributing 14.1% of lease revenue during the nine-month period – its other four top lessees accounted for a further 14.5% of the revenue stream.
Meanwhile, Emirates saw its H1 profits (to 30 September) 382% higher to US$ 235 million, despite a 3.0% decline in revenue at US$ 12.9 billion; the main drivers were a US$ 545 million fall in oil prices, offset by a US$ 320 million exchange loss and a 45-day closure of the southern runway earlier in the year. However, there are still a few canaries in the mine, including an uncertain and slowing global economic environment, socio-political problems in certain locations of the airline’s market and increasing competition, biting into margins Consequently, the airline has decreased capacity and rationalised routes, whilst expecting “flattened” growth going forward. During H1, there was a 2% fall in the number of passengers carried to 29.6 million, as capacity was reduced by 5% due to the runway closure; however, passenger yields and passenger seat factor both headed north – up 1% and by 2.3% to 81.1% respectively.
Dnata – its airport and travel services arm – saw revenue dip 2% to US$ 14.5 billion, with an 8.0% profit decline at US$ 327 million, partly due to its exposure to the UK’s bankrupt tour operator, Thomas Cook; to date, there has been a US$ 23 million impairment cost. Dnata posted a 64% decline in profits to US$ 85 million.
In line with global trends, freight volumes at the world’s largest international cargo airline fell 8.0% to 1.2 million tonnes and yields by 3.0%. (In September, IATA reported that global air freight had fallen 4.5% – the 11th consecutive month of decline in freight volumes and the longest period since the 2008 GFC). With ongoing trade tensions, and the US/Chinese tariff war, conditions are not expected to improve in the short-term.
This week the Emirates chairman, Sheikh Ahmed bin Saeed Al Maktoum, has been requested to temporarily oversee Dubai Holding and Meraas, replacing Abdulla Al Habbai, who had been in charge of both government entitles since March 2017; during that time, he launched several projects, most notably Downtown Jumeirah and Madinat Jumeirah Living. His Highness will assume further responsibility for some of Dubai’s most important entities with Dubai Holding, owning the likes of the Jumeriah Group, Tecom, Dubai Properties, Dubai Asset Management and Arab Media Group; it is estimated it has 20k employees and an asset value of US$ 35.4 billion. Meraas has recently agreed a US$ 1.4 billion retail JV with Canada’s Brookfield Asset Management and is responsible for some of the emirate’s major developments including Bluewaters Island, City Walk, La Mer and The Beach.
Furthermore, Sheikh Ahmed is also Second Deputy Chairman of The Executive Council of Dubai, president of Dubai Civil Aviation Authority, chairman of Dubai Airports and chairman of Dubai World.
Although its property income rose 4.0%, to US$ 54 million, for the nine months to 30 September, Equitativa’s posted an 81.0% decline in profit to US$ 6 million. The fund manager, that runs the Nasdaq Dubai-listed Emirates Reit, is now looking at reducing costs and focusing on operational improvements. Results were not helped by a US$ 1 million revaluation loss, “influenced by market conditions”, compared to a US$ 20 million gain posted in the same period last year. The company’s portfolio stands at US$ 1 billion and, although its net assets per share is at US$ 1.67, its latest market value of US$ 0.66 shows trading at a substantial discount.
Amanat halved its losses to US$ 463k in Q3, whilst operating revenue more than quintupled to over US$ 4 million, with finance income 24% higher at just under US$ 3 million. Over the nine-month period, profit was 38% up at US$ 9 million on revenue totalling US$ 24 million, with operating income almost five times higher at US$ 6 million. Two of its assets, Middlesex University Dubai and North London Collegiate Schools, performed well with revenue streams of US$ 5 million and US$ 6 million respectively.
Emaar Malls reported a 6.0% hike in profits for the nine months to 30 September to US$ 472 million on the back of a 5.6% revenue increase to US$ 929 million. On a quarterly basis, both profit and revenue headed north by 12.1% to US$ 164 million and 5.4% to US$ 323 million respectively. Its wholly owned on-line subsidiary also posted positive results, with nine-month revenue 14.0% up at US$ 188 million, with Q3 figures 19.7% higher at US$ 73 million. Its flagship, Dubai Mall, welcomed 61 million visitors out of the 99 million that shopped at all their malls over the nine months, whilst Q3 occupancy levels remained at a credible 92%.
The bourse opened on Sunday 03 November and, having lost 39 points (1.4%) the previous week, shed 46 points (1.7%) to 2699 by 07 November 2019. Emaar Properties, having lost US$ 0.06 the previous week shed a further US$ 0.02 to close at US$ 1.14, whilst Arabtec, down US$ 0.04 the previous week, was US$ 0.01 lower to US$ 0.49. Thursday 07 November saw dismal trading of 125 million shares, worth US$ 65 million, (compared to 157 million shares, at a value of US$ 43 million, on 31 October).
By Thursday, 07 November, Brent, having gained US$ 3.72 (6.4%) the previous four weeks, continued in positive territory, up US$ 0.70 (1.0%) to US$ 62.29. Gold, having gained US$ 20 (0.5%) over the previous fortnight, lost that and more, down US$ 45 (3.7%), closing on Thursday 07 November at US$ 1,466.
Ahead of a partial IPO, Saudi Aramco’s nine-month profit dipped 18.0% to US$ 68.2 billion, as revenue slipped 6.9% to US$ 217.0 billion on the back of lower energy prices – with average Brent crude declining by 11.0% over the same period. Despite the fall, these figures are still way ahead of the total 2018 profit of the most profitable global publicly traded company.
Meanwhile Sunday saw the start of the company’s IPO – with potential tax cuts and dividends to lure investors – that will probably value the energy giant at a lot less than the touted US$ 2 trillion only three months ago. Sixteen banks have offered valuation guidance, ranging from US$ 1.1 trillion to US$ 2.5 trillion – it looks as if the final decision may result from a toss of a coin.
An industry report intimated that there was a massive 22.9% Q3 jump in mobile consumer spend on the Apple App Store and the Google Play Store, to US$ 21.9 billion. Of the world’s two largest distribution channels, App stores earned more than 60% of that total (US$ 14.2 billion) with Google Play, supported by Android devices, lagging some US$ 6.5 billion behind in earnings; however, Google Play does have a larger number of apps in its library (2.47 million) compared to the 1.8 million held by its rival. Interestingly, whilst App Store posted a 5.3% growth in first-time app installations, with its main rival almost tripling their number in Q3. The total number of apps being downloaded is expected to grow by 26.8% to 260 billion over the next three years.
It seems highly likely that Jingye Group will buy British Steel out of insolvency, after initial frontrunner, Turkey’s Ataer pulled out late in October. The utility, currently being run by the UK government since May, employs 5k in its Scunthorpe plant, with a further 20k in the supply chain. The chairman of the Chinese steelmaker, Li Ganpo, visited British steel sites last week and held discussions with Scunthorpe MP Nic Dakin and Andrew Percy, representative for the Brigg and Goole constituency.
After 58 years of trading, and unable to find a buyer, Mothercare has announced plans to put its UK business into administration, with the loss of a possible 2.5k jobs. Its overseas business remains intact, with countries such as India, Indonesia and Russia not subject to administration. In line with many of its peers, the retailer has been struggling from increased competition, including the big UK supermarkets, fast fashion brands and the internet.
Under Armour is being investigated by US federal authorities for accounting irregularities, including shifting sales from quarter to quarter to appear healthier; the company, which has been struggling with staling growth, has been under investigation since 2017. When the news broke this week, along with Q3 results showing a 1.0% decline in sales to US$ 1.4 billion, its shares slumped 16%.
Yet again, both the S&P 500 and Dow Jones indices hit record highs after opening up about 0.3% each on Thursday, with the Nasdaq up 0.5%, following reports that both China and the US would rollback tariffs in phases. Whilst discussions are taking place, both parties have agreed to cancel further tariffs in different phases. However, it seems that a November meeting between President Donald Trump and Chinese President Xi Jinping could be delayed a month.
Judgement Day may have finally arrived for the Big 4 Australian banks – ANZ, CBA, NAB and Westapc – with all of them posting lower annual profits. The last one to post results was NAB whose profits have declined 13.6% to US$ 3.3 billion. A KPMG report shows that that these four banks saw their combined cash profits, for the year ending 30 June 20 19, 7.8% lower compared to a year earlier. What is sure is the banks have to change from their previous past poor, oft illegal and unethical behaviour and that they will have to introduce new processes which will take years to actually fully implement: this will impede further revenue (and profit) growth. In addition, it is inevitable that all will be in line for heavy penalties for their previous “misdeeds”. and higher costs as new processes are introduced. They also face the double whammy of shrinking margins in a low-interest-rate environment.
The Australian retail sector is going through tough times, with one analyst stating that the September figures were “the weakest retail spending in 28 years” and this despite the fact that 60% of tax refunds had been processed and in the hands of consumers. YTD retail volumes are 0.2% lower, as there have been three 0.1% quarterly declines over the past twelve months. The last time volumes fell on an annual basis was in the early 1990s – the last time Australia experienced a recession. There is no doubt that consumers are cutting back on spending, despite successive interest rate and tax cuts but low wage growth is another problem. However, what is most worrying for the macro economy is that consumer spending accounts for 67% of the country’s economic activity and this will not help the lucky country from slipping into recession.
October 2019 could be the month that the Dubai property market finally moved off its four-year bottom. It is reported that last month witnessed 4.8k sales of land, residential and commercial properties – its highest monthly number since January 2008. It is estimated that by July 2019, villa/apartment prices had declined by 12% over the previous two years and were 4% down on December 2018 prices. The sales jump has been driven by several factors, apart from the fact that all cycles have to change and go through ups and downs – and now may be the time to head north. With the help of banks being forced to remove the 3% early settlement fee, a change in maximum age requirements and lower prices, among other factors, the market dynamics are finally starting to shift. A Change Is Gonna Come.
Turning Japanese 31 October 2019
Danube Properties is to launch a US$ 409 million residential community— its biggest ever project— comprising over 2k homes, with unit prices starting US$ 79k to US$ 327k for a 3 B/R property. Its launch will take place before year-end and will be completed by 2023. This would be the biggest development this year by any private company, at a time when there are some in the industry, such Hussain Sajwani, who advocate a freeze on new developments for up two years; there are others who hold back sales until the project has gone past the 70% stage of build. Danube is selling at launch date and they seem to be announcing that for them at least, it is business as usual, with their sales plan backed with its innovative 1% monthly payments.
Following comments from Damac’s founder Hussain Sajwani that all new home constructions should be halted for eighteen months, and that the main culprit for the current property over-supply was Emaar, its chairman, Mohammed Alabbar, retorted “Maybe if your Q2 profits were down by nearly 90 percent, it’s difficult to focus. I know what I am focused on, which is delivering the results Emaar customers and shareholders expect.” Damac’s Q2 results showed that the developer had seen slumps in both its revenue and profit streams – by 46% to US$ 264 million and 87% to US$ 14 million; over the same quarter, Emaar posted sales of US$ 965 million.
Damac’s founder was also in the news as he finally acquired troubled Italian fashion house Roberto Cavalli, via his Dubai-based Vision Investment Company; this follows a Milan court approval of a debt restructuring agreement. Earlier in the year, when the company filed for bankruptcy in Italy and the US and closed all of its American stores, reports put its value at US$ 179 million. There were several high-profile companies in the bidding, including US-based Marquee Brands, Bluestar Alliance and Only the Brave. Two years ago, the two companies had signed a deal to build a number of “Just Cavalli” villas in Dubai and another one to provide the interior design for at least five luxury hotels.
The opening of the new Address Sky View Hotel in Downtown Dubai should open tomorrow, 01 November, but this has been delayed so as to complete the finishing touches to the twin tower structure, with 169 hotel rooms and 551 apartments. The property is distinguishable by its a floating sky bridge, connecting the two structures, and a 70 mt long infinity pool located 220 mt above ground level. For the adventurous, it also boasts a glass slide which takes guests down, outside, from the 53rd floor to the Sky Views observation deck, as well as an adventure walk (with a harness) on the outside of the structure.
MAF is to open seven Carrefour stores in Uzbekistan over the next two years, becoming the first international grocery retailer to enter that country’s market. The Dubai-based conglomerate, which holds the exclusive rights to operate Carrefour in 31 countries in Mena and Central Asia, currently operates 285 stores in fifteen countries; it hopes to double that number by 2023. H1 figures for MAF’s retail arm posted a 1% rise in profit to US$ 4.0 billion.
Majid Al Futtaim has refuted reports that it owes any money to Will.i.am’s tech company i.am+ and that it has yet to fill its financial obligations to the US firm with regards to a partnership to build a firm the size of Amazon in the UAE. In February, a deal between the two parties was signed to bring its Omega technology to MENA customers and to build a firm the size of Amazon in the UAE, and that the lack of funds has been the cause for the nine-month delay since then. The Dubai-based retail giant indicated that it had fulfilled all its financial commitments to date. US reports show that US federal government had filed a lien showing i.am+ owes US$ 1.8 million in delinquent taxes and interest.
Sheikh Ahmed bin Saeed Al Maktoum, chairman of both Emirates and flydubai, has commended the two-year partnership between the two airlines saying “the strategic partnership has been a success, generating benefits for travellers, for both airlines, and for Dubai.” During the two year, the partnership has carried 5.3 million passengers and having initially started with codeshare arrangements, now share more routes, schedules and airport operations. It is a win-win situation for both parties using Dubai as a hub, Emirates’ passengers can connect to 94 destinations on the flydubai network whilst flydubai passengers can access 143 Emirates locations.
There was good news for Emirates this week with a Mexican court ruling that the airline could commence flying to the country (via a ‘fifth freedom’ flight from Barcelona) starting in December. The case – brought by Aeromexico – is still on-going, with the judge agreeing that the local carrier can appeal the verdict. The bilateral air services agreement was signed by both countries in July.
Dubai ports operator DP World has put its UK expansion plans on hold due to uncertainties over Brexit, having already invested upwards of US$ 1.9 billion in the country; most of the investment has been made in the London Gateway port and logistics park.
For the third consecutive month, fuel prices will go down in November, as set by the Fuel Price Committee. Special 95 will be US$ 0.008 lower (1.4%) at US$ 0.569 per litre.
Work has started on phase 1 of Emirates Central Cooling Systems Corporation’s construction for its new US$ 52 million plant in Dubai Production City. Empower expect this phase to be completed within twelve months and when the final and when finished, it will add 47k Refrigeration Tonnes to its capacity. The company currently provides district cooling services to more than 1.1k buildings, comprising more than 100k customers.
A meeting of the Council of Ministers approved the country’s 2020 US$ 16.5 billion deficit-free budget. The budget covers three main sectors – social development, government affairs and infrastructure/economic resources/living benefits – all allocated roughly a third of the total.
Du saw its Q3 profit level (after royalty payments) decline by 13.5% to US$ 104 million, as revenue dipped 7.9% to US$ 817 million. Over the period, mobile subscriptions dropped 10.6% to 7.7 million, although fixed-line customers grew 1.5% to 771k. Over the nine-month period to 30 September, the telecom posted a 7.9% fall in like-for like profit after royalty to US$ 351 million, with revenue 6.2% shy at US$ 2.6 billion. Capex, at US$ 218 million, was 82.0% up on the corresponding period in 2018.
The bourse opened on Sunday 27 October and, having nudged 4 points higher the previous week, shed 39 points (1.4%) to 2745 by 31 October 2019. Emaar Properties, having gained US$ 0.01 the previous week lost US$ 0.06 to close at US$ 1.16, whilst Arabtec was US$ 0.04 lower to US$ 0.50. Thursday 31 October saw lower trading of 157 million shares, worth US$ 43 million, (compared to 219 million shares, at a value of US$ 50 million on 24 October). For the month of October, Emaar, having opened the month on US$ 1.26, closed US$ 0.10. lower on US$ 1.16, with Arabtec US$ 0.02 higher from its opening of US$ 0.48.
By Thursday, 31 October, Brent, having gained US$ 3.52 (6.1%) the previous three weeks, kept in positive territory, up US$ 0.20 (0.3%) to US$ 61.59. Gold, having gained US$ 7 (0.5%) over the previous week, was up US$ 13 (0.9%), closing on Thursday 31 October at US$ 1,511. For the month of October, both commodities were up – Brent from month openings of US$ 60.68 and the yellow metal from US$ 1473.
Thanks to an almost 25% lift in sales to China Jaguar Land Rover posted a quarterly profit of US$ 200 million, with revenues climbing 8.0% to US$ 7.6 billion. Sales of JLR’s new Range Rover Evoque were almost 50% higher and the improved returns helped to reduce its parent company’s losses with Tata Motors posting a Q3 79.3% reduction to US$ 31 million.
Australian regulators have taken to the courts, alleging that Google has been misleading consumers about the personal data it collects, uses and keeps. The ACCC, in a world first action against the tech giant, is seeking fines and compliance orders against Google, which has a US$ 880 billion market value, in a crackdown on digital platform disclosures.
To the surprise of some, Microsoft has been awarded a ten-year, US$ 10 billion Pentagon contract to replace its ageing computer networks with a single cloud system; Jedi (Joint Enterprise Defence Infrastructure) will bring the US defence department right up to date with its technology and give the military better and quicker access to data. Oracle and IBM were also involved in the process, along with Amazon who for some time were favourites to win the bid. However, in July, President Trump, who has had his run-ins with Amazon founder Jeff Bezos, questioned the integrity of the contract process indicating that other companies had told him that the contract “wasn’t competitively bid” and that his administration would “take a very long look” at the deal. Other parties seemed to side with the President claiming that the bidding process had been rigged to favour Amazon, the world’s biggest provider of cloud-computing services.
Although Alphabet’s Q3 revenue was 20% up on last year at US$ 40.5 billion, its profit slumped over 23% to US$ 7.1 billion, as the internet search leader continued to pump money into R&D for artificial intelligence (25% higher at US$ 6.6 billion), cloud infrastructure and new Pixels smartphones; sales and marketing expenses were also higher – up 20% at US$ 4.6 billion. The tech firm has seen its tax provision almost double its effective tax rate to US$ 1.6 billion, equating to 18%.
It seems that LVMH may bid up to US$ 14.5 billion for jeweller Tiffany & Co on a possible takeover; the offer price is 22% higher than its 25 October closing price. The French company, that owns the Bulgari jewel and watch brand, Sephora cosmetics stores, Hublot watches and Dom Perignon Champagne, is looking for extra penetration in the jewellery sector. If the sale were to go through, it would help LVMH compete against companies such as Swiss rival Richemont SA, the owner of Cartier and Van Cleef & Arpels. On the news, both companies’ shares were up – LVMH by 1% with Tiffany jumping by 22%.
HSBC’s Q3 pretax profit fell 12% to US$ 5.3 billion., missing market estimates; 90% of that total emanated from Asian operations. Global banking and markets reported a 30% decline to over US$ 1.2 billion, while retail banking and wealth management saw an 18% drop to US$ 1.7 billion. The bank estimates that it will spend US$ 17 billion updating its technology platforms and expanding its business in mainland China. The new management realised that some of its business units needed to change and that there was an urgent need to accelerate plans to remodel them and move capital into higher growth. The bank will try to sell its French retail bank and exit stock trading in some developed Western markets.
In the wake of its banking scandal, Australian regulators are looking at banning the big audit firms doing both auditing and consultancy works for clients. It was noted that auditors avoided scrutiny at the royal banking commission, despite being a significant part of the problem. There is no doubt that public confidence in the profession is at a low ebb and it is time for a wakeup call to confront concerns about independence and conflicts of interest. The country’s second auditing profession, Chartered Accountants Australia and New Zealand (CAANZ), wants to “clarify and strengthen” prohibitions on audit firms providing often-lucrative consulting services to companies they audit. Better late than never.
After two tumultuous weeks of unprecedented nationwide protests, that have crippled Lebanon, Saad Hariri announced he was submitting the resignation of his government. The prime minister’s decision “in response to the will of many Lebanese who took to the streets to demand change” was inevitable after tension mounted between protesters and security forces. There is no doubt that the populace has grown tired of incompetent and corrupt politicians who have brought the country to economic chaos, with networks of cronyism, patronage and nepotism depleting the treasury and gutting public services.
It is hoped that a change in government may placate protestors at a time when the economy was “days” from collapse. Such a move may restore business confidence and ensure that banks reopen (after being closed for the past two weeks) so as to ensure that expat remittances do not dry up. It is expected that the currency will struggle to continue to be pegged to the greenback and there are also fears that if the political situation does not improve there could be a run on the banks with dire consequences. The economy was in a mess, well before these protests started, with rising unemployment and one of the highest debt ratios in the world at US$ 86 billion, equating to a worryingly high 150% of GDP.
Due to a statistical error, it seems that the UK budget deficit was up to US$ 2.0 billion less than initially reported. The Office for National Statistics has indicated that there was “an error in the measurement of local government social benefits” and that last month’s shortfall was almost US$ 12.0 billion and that the YTD budget deficit, excluding public-sector banks, was US$ 53.0 billion.
Although weakening in Q3, the 1.9% growth was better than market expectations, with consumer spending, although slowing from the previous month’s 4.6%, the highlight at 2.9%. Some of this weakening is attributable to the waning impact of last year’s US$ 1.5 trillion tax cut and the ongoing spat with China. Although there were disappointing results, with a fall in business investment and lower public spending, the stronger than expected returns for housebuilding and consumer spending, that accounts for 67% of the country’s economic activity, points to the fact that any short-term recession is unlikely.
According to speakers at this week’s Success 2020 Arabian Business forum, the UAE is fast becoming a cashless society, driven by several government initiatives and on-going support. The country is helped by the fact that it has a young and dynamic population that embraces new technology – this is supported by traders and merchants keen to make the appropriate infrastructure available. The benefits of going cashless are manifold and could boost the economy by some US$ 2.2 billion, by saving time needed to handle cash.
Strangely, Japan still appears to rely on cash for many transactions, as witnessed at this year’s successful Rugby World Cup. What they do well is to manage big sports events almost to perfection and Dubai would do well to see how they manage to carry this out, with Expo just around the corner. The only minor hiccoughs (apart from the Final’s score that saw South Africa demolish England) were 20-minute toilet breaks for spectators and patchy Wi-Fi. The country is well prepared for the Olympics next year and once again the sports world will be Turning Japanese.