All Things Must Pass!

All Things Must Pass!                                                                  23 September 2022 

The 2,401 real estate and properties transactions totalled US$ 1.83 billion during the week ending 23 September 2022. The sum of transactions was 243 plots, sold for US$ 351 million, and 1,659 apartments and villas, selling for US$ 956 million. The top three transactions were for land in Burj Khalifa, sold for US$ 27 million, another for US$ 14 million in Al Barsha South Fourth and the third for US$ 13 million in Umm Suqeim.  Al Hebiah Fifth recorded the most transactions, with 102 sales transactions, worth US$ 67 million, followed by Jabal Ali First with 37 sales transactions, worth US$ 44 million, and Al Yufra 2, with 20 sales transactions, valued at US$ 7 million. The sum of the amount of mortgaged properties for the week was US$ 254 million, and 119 properties were granted between first-degree relatives, worth US$ 78 million.

Driven Properties claim that a five-bedroom, 4.6k sq ft townhouse, sold for almost US$ 10 million, was the most expensive to be sold in Dubai; the Villa Amalfi development is located on the Jumeirah Bay Island, with the townhouse community built around a private park and features a range of community facilities. In August, the single biggest residential land sale in Jumeirah Bay fetched US$ 49 million and, a month earlier, a garden villa was sold for US$ 18 million – making it the most expensive to be sold on Palm Jumeirah. Many analysts opine that the emirate’s ultra-prime luxury properties will post record 2022 price increases north of 15%.

Damac Properties’ hospitality arm announced plans not only to expand its local portfolio but also to seek overseas opportunities abroad.  Damac Hotels and Resorts expects “strong” occupancy rates at its properties this year and will open two hotels in Dubai in the coming months – the Navitas Rotana and another hotel at Damac’s Aykon City on SZR. Currently, the developer has 5k rooms over seven properties – Paramount Midtown, Damac Tower by Paramount Hotel Dubai, Radisson Hotel Dubai Damac Hills, Damac Maison Cour Jardin, Damac Maison Distinction, Damac Maison Mall Street and Damac Maison Canal Views.

Dubai posted 7.12 million visitors in H1, (compared to 2.52 million a year ago), as its tourism sector rebounded strongly from the impact of the coronavirus pandemic, driven by government initiatives, the successful hosting of Expo 2020 Dubai and other major international events this year. It is estimated that the whole country received twelve million hotel visitors, up 42.0%, that contributed US$ 5.17 billion to the country’s economy. HH Sheikh Mohmmed bin Rashid Al Maktoum noted that “our indicators today are stronger than our indicators before the pandemic, and our economic growth is faster than before the pandemic, and our tourism, commercial and development sectors are larger than before the pandemic.”

HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman of the Dubai Supreme Council of Energy, chaired its 72nd meeting held virtually, which discussed, inter alia, several topics, including the results achieved by the Dubai Carbon Abatement Strategy 2030, which aims to reduce 30% of carbon emissions by the end of 2030; this is in line with the country’s efforts to achieve net-zero carbon emissions by 2050. Last year, it was estimated that carbon emissions fell 21%, over the year, attributable to solar energy taking a bigger share and enhanced waste recycling in power and water production, industry, ground transport and waste treatment. The meeting also reviewed national initiatives and strategies to achieve net-zero carbon emissions and consolidate a low-carbon economy.

WETEX and Dubai Solar Show will open its 24th annual three-day exhibition on 27 September, and is expected to attract 1.75k companies from fifty-five countries. Saeed Mohammed Al Tayer, MD & CEO of DEWA noted that “organising WETEX and Dubai Solar Show is in line with the vision of the wise leadership to promote sustainable development in the UAE and consolidate Dubai’s position as a leading global hub for green economy and a preferred destination for organising and hosting major international events, conferences and exhibitions”. WETEX and DSS 2022 is held in conjunction with the 8th World Green Economy Summit, organised by the World Green Economy Organization, DEWA, and the Dubai Supreme Council of Energy, under the theme ‘Climate Action Leadership through Collaboration: The Roadmap to Net-zero.’

Salik Company’s IPO, which saw 24.9% of its share capital being sold by the remaining shareholder, the Government of Dubai, was a massive 49 times oversubscribed, with the gross demand for the AED 2 shares (US$ 0.545) garnering US$ 50.2 billion for all tranches. The qualified investor tranche attracted US$ 40.7 billion of demand from across the globe and was oversubscribed 52 times, whilst the retail offering was 119 times oversubscribed, attracting more than US$ 9.4 billion from local investors. It will see its first trade, on the DFM, next Thursday,  and will open with a market cap of US$ 4.1 billion, (AED 15 .0 billion).

The DFM opened on Monday, 19 September, 128 points (3.8%) higher on the previous week, shed 80 points (2.3%), on Friday 23 September, to 3,409. Emaar Properties, US$ 0.11 higher the previous week, lost US$ 0.07 to close the week on US$ 1.69. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.71 US$ 3.54, US$ 1.64, and US$ 0.47 and closed on US$ 0.68, US$ 3.43, US$ 1.65 and US$ 0.45. On 23 September, trading was at 99 million shares, with a value of US$ 60 million, compared to 158 million shares, with a value of US$ 144 million, on 16 September 2022.  

By Friday 23 September 2022, Brent, US$ 9.45 (9.4%) lower the previous three weeks, dropped a further US$ 5.20 (5.7%) to close on US$ 86.15.  Gold, US$ 43 (2.5%) lower the previous week, fell a further US$ 33 (2.0%), to close Friday 23 September, on US$ 1,652.  Gold, meanwhile, dropped to its lowest level since the early days of the Covid-19 pandemic, but as rising interest rates usually result in lower gold prices, gold will continue to head south for the rest of the year and US$ 1,500 is not out of the question by 31 December.

Today, oil prices tanked to an eight-month low, losing 4.76% on the day, driven by investor worries about an almost certain global recession, as somnolent central bankers have now realised that rising inflation was actually a real problem that would not just disappear in time. Now many are introducing belated monetary tightening measures, including aggressive rate hikes, to return inflation to their mainly 2% targets – a move that should have started more than twelve months ago. As it is inevitable that any global recession will impact on the oil sector, with demand falling, we could see Brent trading at US$ 70, or even lower, by the end of the year.

A Boeing executive has commented that Saudi Arabia has the potential to become a big player in the ME aviation industry and could join the region’s three front runners – Emirates, Etihad and Qatar. It comes at a time when the kingdom embarks on a plan to develop its air transport sector, as outlined in its Vision 2030. Backed by a US$ 100 billion investment, its aviation sector is aiming to triple annual passenger traffic to 330 million by 2030, boosting the number of destinations from its current 99 to 250 and establishing a new flag carrier RIA – with reports it has managed to poach Etihad’s CEO Tony Douglas. Over the next two decades, there is a forecast for almost 3k new planes, valued at US$ 765 billion, as the regional passenger traffic and commercial fleet is projected to more than double. Almost 70% of this total will be the result of growth, whilst the balance will replace older planes with more fuel-efficient models such as the Boeing 737 Max, 787 Dreamliner and 777X.

Whilst not admitting or denying the SEC’s findings, Boeing and its former chief executive, Dennis Muilenburg, agreed to pay US$ 200 million and US$ 1 million respectively to settle civil charges by the US Securities and Exchange Commission. The SEC had claimed that both had misled investors about its 737 MAX, which was grounded for twenty months after two fatal crashes that killed 346 people. It seems that the plane maker knewafter the first crash that a flight control system, (Manoeuvring Characteristics Augmentation System), posed a safety issue, but assured the public that the 737 MAX airplane was “as safe as any that has ever flown the skies.” After the second crash, in Ethiopia in March 2019, the SEC said, “Boeing and Muilenburg assured the public that there were no slips or gaps in the certification process with respect to MCAS, despite being aware of contrary information.” A fund will be established for the benefit of harmed investors. To date, these two crashes have cost Boeing more than US$ 20 billion. In a sign of global corporate dysfunction, that seems to put profits over people, Muilenburg departed Boeing with US$ 62 million in compensation and pension benefits but received no severance pay.

Germany has seen Volkswagen seeking to raise as much as US$ 9.2 billion from putting Porsche through an IPO, which would be Europe’s largest listing in more than a decade. The giant car manufacturer is valuing the company in the region of US$ 70 billion to US$ 85 billion, with the offer period having started last Tuesday and trading to commence on 29 September. At the mid-valuation point for the preference shares, the IPO would value Porsche at 10.2 times earnings before interest, tax, depreciation and amortisation; this is markedly lower than Ferrari’s 23.1 times. Its upper valuation almost equates to VW’s total market value – comprising Audi, Skoda, the VW brand as well as Seat – of US$ 87 billion. Porsche annual sales total over 300k.

With a consortium led by LA Dodgers’ co-owner Todd Boehly, taking over the ownership of Chelsea, there are now ten English Premier League teams at least part-owned by Americans. Furthermore, there are only five clubs with British owners – Brentford, Brighton, Crystal Palace, Tottenham and West Ham. Of the foreign owners involved in  the EPL it seems that the Glazer family is the most unpopular with the fan base almost as soon as they became involved in the club at the turn of the century. By the end of 2003, the Glazers had increased their stake to 15% and then they started to explore a takeover bid, and had acquired further shares so that by October 2004, they had almost reached a 28.3% stake – with 30% the amount needed to submit an official takeover bid. In May 2005, the Glazers bought J.P McManus and John Magnier’s 28.7% stake to take their overall investment to a controlling stake of 57%, and a month later had seen their stake at 97.6% – the threshold to force a compulsory buyout of all the remaining Man Utd shareholders. It is estimated that the Glazers used US$ 293 million of their own money to buy Manchester United for US$ 870 million. It appears that the US family purchased the club, via a leveraged buyout, which was funded by loans – many of which were secured against the club’s assets – and which pushed the club into debt for the first time in seventy years.

Since their arrival, it is estimated that the family has been paid around US$ 1.75 billion, summarised below:

  • Interest                         US$ 810 million
  • Debt repayments        US$ 160 million
  • Dividends                    US$ 180 million
  • Directors’ Fees            US$ 290 million
  • Management Fees      US$ 25 million
  • Sale of Shares             US$ 300 million

When the Glazers took over control of the club back in 2005, its gross debt was valued at US$ 645 million, which is about the same it is today. Old Trafford, once the best club ground in the country, has fallen into disarray, as has its Carrington training centre; both need money spent to catch up with other leading EPL teams. The club’s finances are in bad shape, with its market value having fallen by US$ 1.32 billion over the past nine months. Having used the club’s assets as collateral in the past – and, at the same time, taken out so much from it – an increasing number of fans are calling time on the family. This week,  Manchester United have announced a net loss of US$ 125 million for the 2021-22 season, even though revenues rose by 18% to US$ 625 million. The Glazers has taken so much from this investment and put little or nothing back and it is about time the club was returned to its rightful owners – the fans – but more likely to a benevolent investor who is willing to put money into this potential goldmine.

Last month, Sri Lanka’s annual inflation rate surged to more than 70%, with the island nation still struggling with its worst economic crisis since its 1948 independence from the UK. Because of its shortage of foreign currency – brought on by mismanagement and questionable mishandling of public money – Sri Lanka has been unable to buy key imports, including fuel, fertiliser and medicine, made worse by surging global inflation that has seen food prices 84.6% higher on the year. (Indeed, the country is among the ten countries around the world with the highest food inflation). Furthermore, in the latest quarter to 31 August, the economy has contracted by 8.4%., not helped by the fact that the tourism sector that had almost dried up during Covid has been slow to recover. At the beginning of the month, Sri Lanka reached a preliminary deal with the IMF for a US$ 2.9 billion loan, but all this hinges on the country receiving funds from private creditors. India, which had loaned the country US$ 4 billion in financial aid, is in discussions to restructure this, and has deferred US$ 1.2 billion of payment on Sri Lankan imports, whilst offering a credit line of US$ 55 million for fertiliser imports. The UN’s World Food Programme has commented that “the situation could deteriorate further in the coming months without urgent assistance”.

Last week’s damming economic data, including worryingly high inflation figures and disappointing consumer price reports, ensured that the Federal Reserve had no alternative but to hit the market, with yet another massive interest rate increase this week. Although energy prices have dipped, the increases seen in the likes of housing, food and medical costs have seen so-called core inflation accelerating. The initial factor behind rising prices was demand surging as the world’s largest economy emerged from the pandemic amid supply chain snarls. Since then, others came into play including extended Covid lockdowns in China and surging energy and food prices due to the Ukraine conflict. Added to this is the fear that if the expectation that rising prices become the norm, for consumers and businesses, then there is the danger of stagflation, and it is this possibility that is making the Fed push rates higher and quicker than ever seen before in history. Since June, there have been three straight 0.75% hikes and there are concerns that pushing rates higher and quicker could tip the US economy into recession. Then we will see the dollar falling back to what should be its ‘true’ value, whilst currencies such as sterling will recover.

For obvious reasons, all the news in the UK press concerns the plight of the pound and many seem to forget the sorry state of the Euro which slid to a new twenty-year low at US$ 0.969, driven by the usual factors plus the almost certain win by a right-wing party in Italy’s weekend polls rattling investor confidence. Following the collapse of the government of former EC bureaucrat, Mario Draghi, the Fratelli d’Italia party, led by Giorgia Meloni, will be in power by Sunday night; the right-wing party has campaigned on an anti-EU platform and its victory will see a major political shift in Italy. The currency has seen YTD falls of over 15%, with steeper falls in the coming weeks expected, whilst European bonds weakened with the 10-year bond yield gaining 7 basis points to 1.958% on Thursday. Inflation continued to move higher with August rates, in both the EU and the EC, increasing 0.3% to 10.1% and 0.2% to 9.1% respectively, whilst the S&P Global flash eurozone composite PMI fell 0.7 to 48.9. The ECB is playing catch-up, as it has been far too slow in fighting inflation and may rue their inaction; the economic warning signs have been evident – but not heeded – for the past nine months.  

Last month was almost Armageddon for the energy sector, as gas wholesale prices were more than fifteen times higher than a year earlier. In August, wholesale prices for gas were soaring to 15 times the steady level they were at before August 2021. At the time, there were independent forecasts that prices would shoot even higher next January to US$ 5.4k (GBP 5k). Towards the end of September, wholesale gas prices have fallen by more than half, but they are still six times higher than they were in mid-2021. The government has bankrolled UK households by agreeing to pay the difference between the actual cost and the ‘typical’ US$ 2.7k bill (GBP 2.5k). Obviously, the cost to the taxpayer will be dependent on the actual energy price and could be in the region of US$ 54.2 billion to US$ 162.9 billion, (GBP 50 billion to GBP 150 billion).

Today, pound sterling tanked, ditching 3.6% in value on the day closing below US$ 1.09 – and a new 37-year low. Over the past three months, the battered currency has seen more than 11% wiped off its value compared to the greenback, with Friday also seeing it trade against the Euro at its lowest level since January 2021. The Chancellor of the Exchequer, Kwasi Kwarteng, (yet another government product of Eton), scrapped the country’s top rate of tax of 45%, (so now that rate is 40%), and also abandoned a planned rise in corporate taxes, just two days after the government had introduced the hugely expensive plan to subsidise energy bills for households and businesses. The market reacted to this borrowing-funded mini budget, which is estimated will cost the UK taxpayers US$ 434 billion (GBP 400 billion) over the next five years, by slamming the currency and seeing government bonds suffering their worst day in decades, as well as sending international investors running for the door. Undoubtedly, the Chancellor’s plan to cut taxes spooked the global bourses, with investors losing confidence in the UK’s ability to control its finances and continuing to push payback time well into the future. Feeding on the growing momentum, the drive against sterling will continue into next week but will eventually ease as the market turns on the Euro instead. Eventually, the dollar’s strength will ease and sterling will recover but to perhaps lower levels than seen at the beginning of the year. All Things Must Pass!

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What A Shambles!

What A Shambles!                                                            16 September 2022

The 2,594 real estate and properties transactions totalled US$ 2.43 billion during the week ending 16 September 2022. The sum of transactions was 227 plots, sold for US$ 1.19 billion, and 1,560 apartments and villas, selling for US$ 937 million. The top two transactions were for land in Madinat Al Mataar, sold for US$ 269 million, and the other for US$ 71 million in Al Yufrah 1.  Al Hebiah Fifth recorded the most transactions, with 66 sales transactions, worth US$ 60 million, followed by Naad Al Shiba First with 39 sales transactions, worth US$ 50 million, and Jab Ali First First, with 33 sales transactions, valued at US$ 37 million. The sum of the amount of mortgaged properties for the week was US$ 254 million, and 145 properties were granted between first-degree relatives, worth US$ 56 million.

According to the latest Moody’s Investors Services, the credit quality of the UAE property companies will remain stable until at least the end of 2023, driven by high oil prices and a bounce-back in the services sector which has lifted consumer confidence. All their rated companies have enough liquidity to cover debt maturities for the next eighteen months. This year, ratings of local Moody’s-rated real estate companies have surged this year, with the upward momentum set to continue, despite rising inflation and interest rates moving higher at a pace. Moody’s expects off-plan sales to remain buoyant, with a ready market for new projects, especially the high-quality ones. Many of the buyers will be high net worth individuals who are less sensitive to rising rates. Although the pace of growth will inevitably slow, CBRE reported July year on year prices 10% higher – with villas and apartments recording growth levels of 19% and 9% respectively; in that month also, Property Finder posted that Dubai recorded the highest number of sales transactions in the past twelve years.

CBRE reported that last month, average villa and apartment pries were 15.8% and 7.7% higher on the year and 0.3% and 0.5% on the month, as transaction values decreased, despite the global economy slowing ahead of a recession. August saw total monthly volumes at nearly 9.3k – the fifth highest monthly return on record – and more of the same on the cards for this month. There seems a trend that, with rising rents, many tenants are considering buying their own property and taking advantage of fairly low fixed rates before they move inevitably higher.

Meanwhile, Valustrat noted that Dubai August property prices experienced their slowest monthly growth rate in eighteen months. Apartment prices, in typically popular areas such as Dubai Marina and Jumeirah Lakes Towers, fell, as they did in the villa segment in Jumeirah, Jumeirah Golf Estates and District One. However, on the apartment side, there were 4.8% increases seen in Remraam and Dubailand Residence Complex, whilst villas in Falcon City of Wonders also registered a similar price increase; the average villa price in Dubai came in at a slower – but still positive – 1.3% on the month. Prime apartment areas still continued to move higher, with Jumeirah and Palm Jumeirah registering monthly price increases of 3.4% and 2.0%. The news was no so positive for apartments in Dubai Marina and JLT – and for villas in Jumeirah, Jumeirah Golf Estates and District One. – where prices dipped. For apartments, Jumeirah registered the highest average sales rate at US$ 586 per sq ft while in the villas segment, and The Palm Jumeirah registered the highest average sales rate at US$ 978 per sq ft.

So as to provide 15.8k homes for Dubai nationals over the next four years, Sheikh Hamdan bin Mohammed has launched an integrated housing plan, following directives from his father, HH Sheikh Mohammed. Dubai’s Crown Prince commented that “our objective is not only to provide homes for nationals, but also to develop integrated residential communities, provide a high quality of life and create a social system that ensures family stability”. It is estimated that construction works that are underway on several housing projects are worth US$ 463 million.  Last September, the Dubai Ruler launched a historic budget of US$ 17.7 billion, as part of his twenty-year national housing programme; over the past twelve months, housing loans worth US$ 1.78 billion have been approved, along with the 4.8k approvals that have also been provided to date.

Cigna ranked the UAE as the top country in the region, and tenth in the world, when it came to expatriates relocating in a survey covering all 197 countries in the world. For the size of the exercise – and with 1k interviewees in the UAE – it seems a little shallow to survey only 11.9k people. UAE scored 68.2 on the overall well-being index, significantly above the global average of 62.9, followed by the US, UK, China, Spain and Australia. Interestingly, the average length of stay for foreign workers in the UAE is 4.4 years, compared with the global average of 3.2 years. The latest 360° Global Well-Being Survey indicated that 4% of expats around the world would like to live in the UAE because of its impressive economic rebound, progressive policy changes, talented labour pool and the introduction of a wide range of different visas.

A report by Henley & Partners paints a bright picture for Dubai’s future, with the emirate posting an 18% H1 hike in high net worth individuals (HNWI) to over 65k millionaire residents; it is now ranked as the 23rd most popular city in the world for HNWIs. Dubai is benefitting from a relatively strong economy, driven by the likes of financial services, oil and gas, real estate, travel and tourism, technology, and healthcare industries. Meanwhile another report by New World Wealth had slightly different figures noting 67.9k HNWIs at the end of June, placing Dubai as the richest city in the MEA and the 29th wealthiest in the world; it is also home to 202 centi-millionaires (those with net assets of US$ 100 million or more), and thirteen billionaires. Furthermore, it is reported that the UAE is expected to overtake countries, like US and UK for the world’s wealthy, by attracting the largest net inflows of millionaires globally this year.

Sheikh Hamdan bin Mohammed has launched the Dubai Research and Development Programme to create new economic opportunities and support strategic sectors in the emirate, noting that “R&D is key to achieving Dubai’s futuristic vision for a robust knowledge-based economy.” The programme pointed to four priority areas – health/well-being, environmental technology, smart built infrastructure/space and augmented human-machine intelligence. In July, a higher committee was established focussing on future technology and digital economy in a bid to further enhance Dubai as a global hub for the future economy. Its main target was to help shape the future of AI by investing in the metaverse and establishing partnerships to boost the emirate’s digital economy.

This week has seen another milestone in the history of the new Etihad Rail, with the connection of its main line with the UAE’s largest inland freight railway terminal in the Industrial City of Abu Dhabi (ICAD) in Musaffah. The plan will see this become the logistics hub for heavy industries, with twenty-two buildings, spanning more than 2.7 million sq ft on completion, and handling more than 20 million tonnes of cargo per year. This latest development is part of Stage Two of the UAE’s national railway network, extending from the borders of Saudi Arabia to Fujairah.

The UAE became one of the first countries in the world to introduce a digital value-added tax refund scheme for tourists, with the Federal Tax Authority saying it would cut down on paperwork and speed up reclaimed VAT for departing tourists. The process is integrated electronically between retail outlets and the tax refund scheme, with Planet Tax Free appointed the operator of the tax refund system for tourists in the UAE. Retailers will now be able to generate e-receipts, and the data for VAT refunds will be available even before the tourist arrives at the various airports and ports where they can access more than one hundred self-service kiosks available at departure points.

With news that Salik Company will issue 24.9% of its total issued share capital, in an initial public offering on the DFM, Dubai’s toll gate operator is valued in the region of US$ 4.0 billion (AED 15.0 billion). There will be 1.867 billion shares on offer, priced at US$ 0.545 (AED 2.00) per share, sold by the selling shareholder, the Dubai government, who will retain 75.1%. Dubai’s exclusive toll gate operator posted that there will be three tranches – Individual Subscribers, Professional Investors and Eligible Employees. The subscription period opened on 13 September 2022 and will close on 20 September for UAE Retail Investors and a day later for Qualified Investors. Two entities – Emirates Investment Authority and Pensions and Social Security Fund of Local Military Personnel – will each have 5% of the IPO reserved. Dividends are expected biannually and Salik expects to pay out 100% of the net profit, after deduction of statutory reserve.

The DFM opened on Monday, 12 September, 102 points (3.0%) lower on the previous fortnight, gained 128 points (3.8%), on Friday 16 September, to 3,489. Emaar Properties, US$ 0.03 lower the previous week, gained US$ 0.11 to close the week on US$ 1.76. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.70 US$ 3.50, US$ 1.58 and US$ 0.45 and closed on US$ 0.71, US$ 3.54, US$ 1.64 and US$ 0.47. On 16 September, trading was at 158 million shares, with a value of US$ 144 million, compared to 61 million shares, with a value of US$ 45 million, on 09 September 2022.  

By Friday 16 September 2022, Brent, US$ 7.96 (5.3%) lower the previous fortnight, dipped a further US$ 1.49 (1.6%) to close on US$ 91.35.  Gold, US$ 5 (0.3%) higher the previous week, was US$ 43 off (2.5%), to close Friday 16 September, on US$ 1,685.  Raising interest rates usually indicate lower gold prices.

The International Energy Agency has cut its forecast for global oil demand by almost 5% in September to two million bpd, attributable to renewed Chinese Covid lockdowns and the global economic slowdown. It appears that more oil is hitting the market, as it is estimated that in the six months to August an extra 180 million barrels were released from government stocks, with a further 52 million barrels anticipated over the next two months. IEA estimates that OECD industry stocks rose by 43.1 million barrels to 2.705 million barrels.

Qantas shares bucked the trend, (as the Australian share market ended last week higher, at 6,894 points, including NAB and ANZ after raising mortgage interest rates) by losing 0.2%. The carrier is still in a loss position, despite a 54% increase in revenue, with a reported US$ 591 million loss, compared to a US$ 1.16 billion deficit in the year ending 30 June 2021. Despite the negative return, chief executive Alan Joyce’s pay packet returned to its pre-pandemic base pay level, with many stakeholders calling for his head; the 56-year-old had worked at Aer Lingus for eight years before joining Ansett Australia in 1996 and joined Qantas four years later before being appointed as its CEO in 2008. There is no doubt that the airline is facing turbulent time on three fronts – delayed planes, cancelled flights and shaky service – and it would appear that the Irishman may be running out of luck.

Lufthansa announced that the German government has completely sold its stake in the national airline that it acquired in a US$ 9.0 billion state aid package at the onset of the pandemic, when global airlines were grounded. Earlier it had divested 13.8% of its shares and this week sold its remaining 6.2% stake for US$ 1.07 billion, making a tidy profit of US$ 761 million. Lufthansa’s CEO, Carsten Spohr noted that “the stabilisation of Lufthansa was successful and is also paying off financially for the German government and thus for the taxpayer.” In August, the carrier announced Q2 profits of US$ 259 million, following losses of US$ 6.71 billion and US$ 2.20 over the two preceding years.

Latest figures seem to indicate that prices in the second-hand luxury watch market may be on the mend with consultancy WatchCharts noting that Rolex resale prices, fell by 1.84% earlier in the month, from August, a slower place of decline following a summer slump of at least twice that rate. The index had shown price declines in June, July and August of 5.9%, 3.5% and 5.1%. The Subdia50 index was more bullish pointing to a 1.2% rise, over the past thirty days, in prices of the fifty most-traded luxury watches. It has been a rollercoaster ride for the market, which had peaked in March, when some prices were 35% higher on the year, before tanking, with signs, some months later, of the market having bottomed out. Some analysts blame the collapse in cryptocurrency prices, whilst others point to dealers trying to get rid of overstock. Those who thought that just buying a luxury watch was a safe bet have had their fingers burnt.

This week, the European General Court has largely upheld a US$ 4.1 billion record fine, levied in 2018, against Google for using the Android platform to cement its search engine’s dominance. The court decided that the tech giant had breached its laws by forcing Android phone-makers to carry its search and web browser apps in order to access the Google Play Store, (which Google had acquired for US$ 50 million in 2005 and that now powers roughly 70% of the world’s mobile phones). Since 2018, Google has changed its terms and conditions.

Latest data from research firm Kantar confirms that Aldi has taken over from Morrisons to become the fourth-largest UK supermarket, helped by the fact that consumers are turning to such discounters to manage their budgets, as food price increases edge well into double digit territory, reaching 12.4% last month; food inflation was climbing at its fastest pace in over forty years, with milk, butter and dog food prices rising especially quickly. It appears that shoppers are also cutting back on spending, by buying more own-brand products, with sales of the very cheapest value own-label products up by a third over the past twelve months.

Reports indicate that Goldman Sachs is expected to lay off hundreds of workers, with its chief financial officer, Denis Coleman, having noted earlier that “we have made the decision to slow hiring velocity,” as it cuts expenses in the face of worsening economic conditions. The investment bank had reported a Q2 48% profit slump, with revenue down 41% to US$ 2.1 billion, in an economic environment of surging inflation, rising interest rates, and the war in Ukraine.

This comes at a time of a broad sell-off in U.S. stocks on Tuesday driven by news that inflation had moved a lot higher than expected; this disappointed the market and ensured that the Federal Reserve may not be able to consider cutting back its policy tightening in the immediate future. All three major indices – S&P 500, Nasdaq Composite and Dow Jones – fell to two-year lows and closed the week at 3,873, 11,448 and 30,822, with interest-rate-sensitive tech and tech-adjacent market leaders, led by Apple Inc, Microsoft Corp and Amazon.com Inc among the biggest losers. It seems likely that this data will make the Fed move rates higher – and quicker – in the near future.

Rather belatedly, this week the World Bank came out with a report that most observers had already known – that the world’s three major economies, US, China and Eurozone, “have been slowing sharply” and that “the global economy was in its steepest slowdown since 1970”. It also warned that “under the circumstances, even a moderate hit to the global economy over the next year could tip it into recession.” The global body also called on central banks to coordinate their actions and “communicate policy decisions clearly” to “reduce the degree of tightening needed”. The report noted that inflation, at a forty-year peak, was driven by higher demand, (following the slowing of the pandemic, with restrictions being lifted), and the war in Ukraine pushing energy, fuel and food prices higher. Consequently, many central banks started raising rates to dampen demand from households and businesses, with big rate increases causing economies to slow, as consumers have to bear the cost of extra borrowing. In a fine balancing act, central banks may have to reconsider pushing rates too high and consider the possibility of more monetary easing.

The cost of a typical US mortgage in the US has hit its highest level since the 2008 GFC crisis, with the average rate of 6.02% more than double what it was a year ago – and the first time that it has crept above the 6.0% mark since 2008. With consumer prices 8.3% higher on the year, the Federal Reserve has taken drastic action by aggressively raising rates so as to try and cut inflation levels. It does seem that higher monthly rate hikes will continue for the rest of the year especially if inflation levels continue to head north at a faster rate than the Fed had anticipated. Although raising rates theoretically should lower consumer demand – and reduce the pressures pushing up prices. – the housing sector has seen a slowdown in property sales, but prices continue to climb, 10% higher on the year, to US$ 400k, in July.

Deflecting any blame from himself and the Reserve Bank of Australia, its Governor, Philip Lowe, blamed the country’s surging property prices on high land prices and not caused by low mortgage rates. He noted that the RBA was not to blame for the lack of affordable housing, but by land prices made higher by structural reasons, such as planning and zoning decisions, lack of investment in transport infrastructure, certain taxation policies, and peoples’ preferences to live in less dense neighbourhoods. He commented that when rates go up or down it affected property prices a lot in the short term, but that those structural factors were more important in the long run. He was concerned that if the weak global economy worsened “it’ll be difficult for us to navigate this narrow path of getting inflation down while having our economy continue to grow reasonably well.”

To the disdain of many, UK Chancellor of the Exchequer, Kwasi Kwarteng, is considering removing a cap on bankers’ bonuses .in order to make London a more attractive place for global banks to do business. EU-wide bonus rules cap bonuses at twice an employee’s salary which has meant that many banks have raised base pays higher to compensate; this in turn pushes up banks’ fixed costs, with bonuses forming part of variable costs and only paid out when profits are higher and makes the UK less attractive than the US or Asia. There are others who argue that uncapped bonuses lead to the kind of excessive risk taking that led to the 2008 GFC and that with the country heading towards a recession, this may not be the time for bankers “to raise their heads above the parapet”.

The EU inflation rate hit double digits in August at 10.1% – up 0.3% on the month – and almost treble that of July 2021’s return of 3.2%; the inflation rate in the euro area was marginally smaller at 9.1%, up from 8.9% a month earlier. The highest inflationary returns were found in Estonia (25.2%), Latvia (21.4%) and Lithuania (21.1%), with the other side of the spectrum showing France (6.6%), Malta (7.0%) and Finland (7.9%). It was reported that the highest contribution to the annual euro area inflation rate came from energy (3.95%), followed by food & tobacco (2.25%), services (1.62%) and non-energy industrial goods (1.33%).

The euro rose at its quickest rate since March, nudging 1.6% higher to US$ 1.0198 by mid-week and closing Friday at US$ 1.0016, driven by the previous week’s move to hike rates by 0.75% and US inflation figures coming in higher than expected. The ECB has lagged the Fed in tightening policy which contributed to the euro’s slide to a two-decade to below parity last month. Maybe the dollar has run its course in this particular economic cycle.

Following a marked 0.6% decline a month earlier, caused by the extra bank holiday, the UK economy nudged at a lower than expected 0.3% higher in July, attributable to an improvement seen in the services sector, helped by the UK hosting the Women’s Euro Championship. Both the production and construction sectors shrank in July, with production being hit by a fall in demand for energy such as electricity. It is widely expected that the bank holiday for Queen Elizabeth’s state funeral on 19 September, as well as the ten days of national mourning, will have a negative impact on economic growth and push the UK into recession sooner than expected. Evidence supports the theory that consumer spend is waning, under a four-decade inflation high of 10.11%. and that lower demand is in response to increased prices. With a technical recession being two quarters of recession, and the previous quarter down 0.1%, it is highly likely that this quarter will see the start of a year-long marginal recession – and the government’s utility price freeze is unlikely to change the situation.

Today, sterling fell to a thirty-seven year low, trading at US$ 1.135 to the greenback, as the cost of living worsened and August retail sales continued its slow decline, down 1.6% on the month, with households spending less in the face of rising prices. The currency has been on a slippery slope since the beginning of the year, falling from its 2022 high of 1.36, as the dollar strengthened, and at the same time inflation headed in the other direction. Latest data point to the fact the economy may already be in recession – a little earlier than many had thought.  There is no doubt that even if inflation levels have plateaued, the Bank of England will continue an aggressive policy when it comes to rate hikes to curb rising prices. Although most of the developed world will see their economies contracting, it appears that the UK recession will start earlier and last longer than those of other nations. What A Shambles!

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Don’t Dilly Dally On The Way!

Don’t Dilly Dally On The Way! 09 September 2022

The 2,594 real estate and properties transactions totalled US$ 2.56 billion during the week ending 09 September 2022. The sum of transactions was 209 plots, sold for US$ 258 million, and 871 apartments and villas, selling for US$ 1.06 billion. The top two transactions were for land in Island 2, sold for US$ 13 million, and the other for US$ 7 million in Al Barsha South Third. Al Hebiah Fifth recorded the most transactions, with 73 sales transactions, worth US$ 53 million, followed by Naad Al Shiba First with 25 sales transactions, worth US$ 40 million, and Jab Ali First First, with 24 sales transactions, valued at US$ 24 million. The top three transfers for apartments and villas were all apartments, one sold for US$ 181 million in Al Wasl, another for US$ 125 million in Marsa Dubai, and the third sold for US$ 114 million in Business Bay. The sum of the amount of mortgaged properties for the week was US$ 932 million, with the highest being for an apartment in Nadd Hessa, mortgaged for US$ 545 million.  100 properties were granted between first-degree relatives worth US$ 272 million.

According to Property Finder, the Dubai August real estate market posted 9,720 total sales worth US$ 6.62 billion – the highest performing month, in terms of sales transactions volume and value, in twelve years. Compared to August 2021, both volume of transactions and values came in 37.1% and 69.6% higher. On comparisons with the previous month, and August 2021, volumes were 27.4% and 67.5% higher, as values rose 6.7% and 57.4%. The off-plan market transacted 4,392 properties worth US$ 2.32 billion. With regard to the transactional volume, the off-plan market was higher for volume and value, up 51.1% and 72.1%, and 38.5% and 76.5%, – both presenting a significant increase In terms of value. When it comes to mortgages, volumes were 15.7% higher, compared to June 2021, and 21.2% higher on the year, as rentals recorded a 10.6% rise on the monthwhereby rental contracts dipped to 9.3% on the year due to the decrease of the renewal rate by 18.9%.

Valustrat has reported that Dubai August property figures showed the slowest monthly growth, rising 1.0% to 83.1 points – still well down on the 100 base points set in January 2014. Villa prices were up 1.3%, month on month, as apartments were 0.7% higher – a sign that the bull market may have almost run its course. The residential ValuStrat Price Index for villas and apartments were both higher – 28% to 101.9 and 8.0% to 71.4.

To be developed on a 68k sq ft of land in Arjan, Danube Properties has appointed Naresco Contracting, as the main contractor for the construction of Skyz Tower, with a development value of US$ 129 million. The Mediterranean-themed high-rise residential tower is the latest in the developer’s current development portfolio, comprising 8.3k residential units, with a combined development value exceeding US$ 1.54 billion. Completion date is slated for Q3 2024. It has so far delivered almost 4.6k units, with a combined sales value of US$ 969 million.

At the end of the month, there will be the two-day Dubai Metaverse Assembly at the Museum of the Future and Emirates Towers, organised by the Dubai Future Foundation. Launched by HH Sheikh Mohammed bin Rashid Al Maktoum, the convention will host over three hundred global experts and more than forty specialised organisations – such as World Economic Forum, Meta, Mastercard, Emirates Airlines, and Accenture – discussing, exploring and shaping the future of the metaverse. The two main aims of the assembly are to leverage metaverse technologies and improve global readiness for the metaverse across key sectors.

It is reported that a new urban technology district – Dubai Urban Tech District – has been unveiled that is expected to create 4k jobs in green urban technology, education and training. Located on the Creekside of Al Jaddaf district, it will cover 140k sq mt of built-up area. The mastermind behind this new concept is UBR, whose founder and chief executive, Baharash Bagherian, noted that “Dubai is best positioned to lead the urban tech transformation than any other city in the world,” and that it will become the world’s largest urban tech district, The project is estimated to commence by 2024 and will be completed over the ensuing six years in two phases. UBR is involved in several international projects including Xzero City in Kuwait, (a sustainable net zero city for 100k residents), Alnana Smart City in Riyadh – housing 44k people – and Nexgen Sustainable City in Egypt, with a population of 35k across 580 hectares.

Launched last February, the Dubai Can initiative has witnessed a reduction, equivalent to more than 3.5 million 500 ml single-use plastic water bottles. over the past six months, during which time, it has overseen the installation of forty-six fountains at public parks, beaches and tourist attractions. The sustainability movement has extended its reach,encouraging the population to purchase refillable bottles for use at the fountains and in their homes and hotels. The momentum for sustainability change is speeding up, with the latest being a ban on all single-use plastic bags, as from 01 June.

Emirates has decided to invest US$ 350 million in the new Thales’ AVANT Up system for its next-generation inflight entertainment solutions. Its introduction, to its new fleet of fifty Airbus A350s, with delivery starting in 2024, will maintain the airline’s position as probably offering the best in the sky. Ever since it became the first airline to put personal screens onto every single seat, thirty years ago, it has remained the best in class when it comes to in inflight entertainment content and experience; since 2008, it has always won best-in-the-sky awards and with this spend will continue to lead the field for many years to come.

On 17 September, the RTA has arranged an auction for some ninety premium car number plates, including two, three, four and five-digit plates, highlighted by Super Plates AA 13 and U 70. Registration of bidders starts next Monday, with each bidder requiring a Dubai traffic file, a US$ 6.8k security deposit cheque and a non-refundable auction fee of US$ 33.

UAE and Israel H1 trade surged 117%, on the year, with the Israeli Ambassador to the UAE, predicting that the UAE will be among Israel’s top ten trading partners within three years. Speaking on the second anniversary of the Abraham Accords, he noted that in the seven months to July, bilateral trade at US$ 1.2 billion had already surpassed the whole of 2021 returns to the tune of $1.4 billion. He also reported that the Comprehensive Economic Partnership Agreement, signed between the two countries on May 31, 2022, after six-month long negotiations, was the “fastest negotiations Israel did” for any similar free trade agreement with other countries. Estimates expect the UAE-Israel CEPA to advance bilateral trade beyond US$ 10 billion, within five years, and add $1.9 billion to the UAE’s GDP, with total UAE exports up 0.5% by 2030.

The DIFC reported that the number of new companies in H1 rose 11.0%, 537 businesses, on the year, to just over 4k. DIFC is currently home to seventeen of the top twenty global banks, twenty-five of the world’s top thirty global systemically important banks, five of the top ten insurance companies, five of the top ten asset managers and a number of leading global law and consulting firms. Dubai is now considered a leading global hub for financial institutions, Fintechs and innovation firms, which is in tandem with DIFC’s Strategy 2030; according to the latest Global Financial Centres Index ranking, DIFC is the largest financial centre in the MEA and the 19th biggest worldwide. Dubai’s Deputy Prime Minister, Sheikh Maktoum bin Mohammed commented, “DIFC has created a strong platform for financial companies across the spectrum including global majors, regional players and promising entrepreneurial ventures to innovate, scale their business and add value to the economy,”

August’s UAE PMI continued to trend higher, reaching a 38-month high of 56.7 – a sure indicator that the recent upturn in the non-oil sector, is more than a mirage to signal a vibrant upturn in business conditions in the non-oil sector. The main drivers behind the impressive monthly return were lower fuel prices and growing demand, despite global nervousness related to concerns about a looming global recession. Purchasing growth topped a seven-year high, as lower fuel prices helped reduce companies’ expenses, whilst stimulating price drops for other items. Sales growth picked up even further, supported by additional efforts to provide discounts to clients. Total new orders rose at the quickest pace in ten months, driven by improving client demand, higher exports, and a broad recovery in economic conditions since the pandemic. The canary in the coal mine was that confidence for 2023 was at its lowest level in seventeen months, with the growing concern of a global recession as early as the end  of Q4.

Latest figures from the Central Bank noted that last year, the UAE economy grew 3.8% and forecast growth at 5.4% and 4.2% over the subsequent years; the IMF and Emirates NBD project 2022 economic growth at 4.2% and 5.7%. Meanwhile the country’s hospitality sector is fast recovering from the impact of the pandemic, as occupancy rates are expected to top 75% in the coming months and to benefit greatly from a surge in numbers because of the FIFA World Cup Qatar 2022.

DEWA posted that it had received four proposals relating to a consultancy contract for the sixth phase of the Mohammed bin Rashid Al Maktoum Solar Park., with a production capacity of 900 MW ,which will bring the project’s total capacity to 5k MW by 2030. The largest single-site solar park in the world is part of the emirate’s strategy to use clean energy sources to meet all of its power requirements by 2050. It is estimated that clean energy accounts for 11.5% of Dubai’s clean energy production which will increase to 14.0% by the end of the year; its current capacity stands at over 1.6k MW.

With four months of the year remaining, Dubai Duty Free YTD sales more than doubled to US$ 1.06 billion, already surpassing last year’s full total; it has every chance of beating its full-year US$ 1.6 billion sales target. For the whole of 2021, total transactions and units sold topped nine million and twenty-six million – to date, the figures show ten million and 29.3 million. It is estimated that DDF’s business has risen to 80% of pre-pandemic levels, whilst staff numbers at 4.4k, boosted by the recall of 2k laid-off workers, are slowly reaching 2019 figures. The top five ‘value’ performers remained perfumes, liquors, gold, tobacco and electronics at US$ 186 million, US$ 168 million, US$ 106 million, US$ 98 million and US$ 81 million. Online sales at US$ 29 million accounted for 3.0% of total sales.

The RTA posted that there are over 1.3k car rental companies in Dubai at the end of H1 – up 23.7% from a year earlier, whilst the number of rental vehicles rose 11.8% to 78k over the same period. In the first six months of the year, the RTA introduced six new initiatives that included exempting new vehicles from testing, limiting the number to ten vehicles per car rental license, extending the lifetime of vehicles in use from two to four years, and abolishing the surcharge on car rental vehicles.

As expected, Salik Company, announced that one billion five hundred million shares ,each with a nominal value of AED0.01 will be made available in a DFM IPO, representing 20% of its total issued share capital. Dubai’s exclusive toll gate operator posted that there will be three tranches – Individual Subscribers, Professional Investors and Eligible Employees. The subscription period will be open from 13 September 2022 and is expected to close on 20 September for UAE Retail Investors and a day later for Qualified Investors. Two entities – Emirates Investment Authority and Pensions and Social Security Fund of Local Military Personnel – will each have 5% of the IPO reserved. The share capital of the Company has been set at AED75 million, divided into seven billion, five hundred million paid-in-full. Shares. Dividends are expected biannually and Salik expects to pay out 100% of the net profit, after deduction of statutory reserve.

The DFM opened on Monday, 05 September, 69 points (4.4%) lower on the previous week, shed 33 points (1.0%), on Friday 09 September, at 3,361. Emaar Properties, US$ 0.21 higher the previous four weeks, shed US$ 0.03 to close the week on US$ 1.65. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.70 US$ 3.53, US$ 1.58 and US$ 0.47 and closed on US$ 0.70, US$ 3.50, US$ 1.58 and US$ 0.45. On 09 September, trading was at 61 million shares, with a value of US$ 45 million, compared to 71 million shares, with a value of US$ 54 million, on 02 September 2022.  

By Friday 09 September 2022, Brent, US$ 7.36 (5.3%) lower the previous week, dipped US$ 0.60, to close on US$ 92.84 Gold, US$ 87 (3.2%) lower the previous fortnight, nudged  US$ 5 (0.3%) higher, to close Friday 09 September, on US$ 1,728.  

There were encouraging numbers emanating from Iata’s latest passenger data for July, showing that ME carriers recorded a 193.1% jump in revenue passenger kilometres, on the year, while globally the traffic growth was 58.8%, or at 74.6% of pre-Covid levels. ME passenger capacity and load capacity both came in higher on the year at 84.1% and 82.0%. Domestic traffic was 4.1% higher, compared to July 2021, and at 86.9% of the July 2019 level, as international travel was 150.6% higher, compared to a year earlier and at 67.9% of the July 2019 return. Meanwhile, global air cargo market demand neared pre-pandemic levels, at just under 3.5%, but was 9.7% lower on the year levels. ME carriers posted a 10.9% decrease on the year. Although the war in the Ukraine has impacted on cargo capacity, global goods trade continued to recover in Q2 and the additional easing of Covid-19 restrictions in China will further boost recovery in the coming months.

As UNCTAD readies itself for this week’s second Illicit Trade Forum, it has released some harrowing facts, as the world loses more than US$ 2 trillion annually due to illicit trade. This sees mainly the poorer countries losing the true value of their resources, which, in turn, impedes their future development. The UN body defines illicit trade as the transaction of any goods that fail to comply with legislative and regulatory frameworks, including in the ways in which they are produced, transported, certified or sold. Examples include trade in endangered species and falsified medicines, illicit financial flows related to drug trafficking, terrorist financing, trade misinvoicing and aggressive tax avoidance. Nations suffering from this growing trend are hit by a double whammy of cutting out legitimate economic activity and depriving governments of much-needed fiscal revenues. It is estimated that in Africa alone, the average value of customs seizures of counterfeit and stolen medicines grew by 5% in 2020; in 2021, more than twelve million illicit health products were seized. The worrying statistic is that up to 169k children may die from pneumonia every year, after receiving counterfeit drugs, and 116k may die from taking fake anti-malarial medication.

The cryptocurrency market has tanked recently, with the sector’s valuation, dipping US$ below 1.15 trillion (GBP 1.0 trillion). Bitcoin has shed more than 6% this week and was trading at US$ 18.8k, but by the end of today’s trading was at US$ 21.3k, driven by surging real interest rates – seen as the true cost of borrowing. In June, it was trading at its year low of US$ 17.6k.

Aston Martin has announced a US$ 660 million rights issue, backed by the likes of Saudi Arabia’s Public Investment Fund, Mercedes-Benz and the Yew Tree Consortium. It will issue 23.3 million new shares to PIF, at US$ 3.86 a share, giving it a 17% stake in the luxury car maker. The money raised will be used to “repay existing debt, strengthen financial resilience and improve its cash flow generation by reducing its interest costs”. YTD, its share price has tanked – down by around 65% – and it shed more than 6% on Monday.

The recent release of the 2021 Australian Census data revealed a shocking “one million homes were unoccupied”, at a time when Australia, and many other developed countries, have reported a marked housing shortage. On the surface, an extra one million homes to the country’s residential portfolio would make a big difference for the homeless, ease the rental affordability and help first-time buyers. There are the inevitable rumours that some of the major reasons behind this include overseas millionaires buying up housing, (and leaving it as an empty investment), Airbnb becoming more popular or cashed-up Gen-Xers double-consuming by living in one house while renovating another. Although they have an impact on why  there are 1.04k residences, it is relatively negligible, with latest statistics noting that at the previous census in 2016, almost 11% of private dwelling stock was classified as unoccupied, with the latest figure at under 10%. A major cause behind the conundrum is that the Australian Bureau of Statistics defines occupancy “is determined by the returned census form”; if a form was not returned, and the ABS had no further information, the dwelling is often deemed to be unoccupied. 647k dwellings were sold last year, and at one time, they would be empty awaiting transfer and the final sales process. Another reason is that latest estimates indicate that two million Australians own one or more properties, other than their own home. It is estimated over 346k of these properties may be listed on Airbnb; with the census taking place mid-winter – 10 August 2021 – many holiday homes would have been unoccupied. The Australian property sector illustrates Benjamin’s famous quote, ‘there are three types of lies – lies, damn lies and statistics.

Driven by higher food prices, Egypt reported a further rise in inflation, which climbed to 14.6% last month, bringing President Abdel Fattah El Sisi under the spotlight and criticism for his handling of the economy. Inflation in urban areas climbed 14.6% – the highest level in four years. Yesterday, the President warned against what he called a campaign by unnamed parties to cast doubt on the government’s handling of the economy and ordered Prime Minister Mustafa Madbouly to organise an economic conference by the end of the month to discuss the country’s economic problems. It was reported that food and beverage costs, which make up the largest single component of the inflation basket, jumped 23.1% on a monthly basis. Following the appointment of Hassan Abdalla, as governor of the Central Bank on 18 August, the Egyptian pound has been allowed to weaken against the greenback by less than EGP 0.01, (US$ 0.0005) on a daily basis. There is a feeling that the overvalued Egyptian currency will continue its slow but definite decline so as to secure a much-needed IMF loan after the country lost US$ 20 billion, following the Russian Invasion of Ukraine; at times of any crisis, the emerging markets are usually the first to suffer in times of economic uncertainty.

In 2014, it was ranked tenth, (accounting for 2.6% of global GDP), and over the past eight years, there has seen a structural seismic shift, as India now becomes the fifth largest economy, at 3.5%, overtaking the UK. By 2029, it could surpass both Germany and Japan to become the third biggest global economy. In Q1, the country posted a 13.5% growth and is destined to be the fastest growing economy – at an estimated 7.5% – in the world by the end of December. The Indian economy could also benefit by an apparent Chinese slowdown in terms of new investment intentions. For example, Apple has just moved part production of its flagship iPhone 14 model for worldwide shipping from India, and this could result in other conglomerates following suit.

Germany has announced a US$ 65 billion relief package – including one-off payments to the most vulnerable, caps on energy bills and tax breaks to some 9k energy-intensive businesses, (receiving some US$ 1.7 billion) – to ameliorate the surging energy prices arising from Russia continuing to reduce supplies to Europe.  This third relief package, the largest to date, brings the total spend on relief from the energy crisis to almost US$ 100 billion – about a third of the Covid total package. The Ukraine President, Volodymyr Zelensky spoke about Russia trying to destroy the normal life of every European citizen said that it was preparing a “decisive energy attack on all Europeans”, and only unity among European countries would offer protection. Meanwhile EU officials have warned of an upcoming crunch point when countries start to feel acute economic pain while also still being asked to help the Ukrainian military and humanitarian effort; small signs of disconnect have already been seen in several European capitals. German Chancellor, Olaf Scholz, confirmed that an energy company windfall tax will be used to boost flagging public revenue. Over the weekend, Sweden and Finland also announced multi-billion dollar packages to support energy companies.

Royal Mail workers have been on strike over the past two days, and have voted to walk out again on 30 September and 01 October in a dispute over pay and conditions. The Communication Workers Union noted that its 115k members did not support an “imposed” 2% pay rise, although the Royal Mail says the union rejected an offer worth up to 5.5%. The company, that claims that it is losing US$ 1.15 million (GBP 1 million) a day, posted a US$ 466 million in the year ending 31 March 2021. A range of workers, including Openreach engineers, BT call centre staff, railway workers and barristers, have walked out in recent weeks, as remunerations fall further behind the soaring inflation of about 10%.

After unveiling its US$ 50 billion plan to build up the local semiconductor industry, the Biden administration has advised US tech companies that if they receive federal funding, they will be barred from building “advanced technology” facilities in China for ten years. The US Commerce Secretary, Gina Raimondo, commented that “we’re going to be implementing the guardrails to ensure those who receive CHIPS funds cannot compromise national security… they’re not allowed to use this money to invest in China, they can’t develop leading-edge technologies in China…. for a period of ten years.” It is interesting to know that the US currently produces roughly 10% of the global supply of semiconductors, compared to 40% in 1990.

Monday early trading saw the Dutch month-ahead wholesale gas price, a benchmark for Europe, 30% higher, whilst UK prices jumped even more, by 35%, before settling at just under US$ 5.75 per therm. On the same day, Russia confirmed that it would not reopen the Nord Stream 1 pipeline, after it was shut for three days for maintenance, until sanctions are lifted.

Coincidentally, the Gazprom announcement came shortly after the G7 nations agreed to cap the price of Russian oil in support of Ukraine. There is no doubt that Russia is involved in an economic war, which it appears to be winning, but it seems to be tit for tat because of the EU sanctions.

With cost-of-living skyrocketing, and the pressure on household increasing by the day, many Europeans worry that high inflation, due to the current energy crisis, could fuel social unrest, protests, with strikes already causing concern. A YouGov poll in four countries – France, Germany, Poland and the United Kingdom – posted that 40% of those polled in France said they wanted to see a return of the Yellow Vests protest movement. 20% of the study commented that they were drawing down from their savings, with one in ten skipping meals. What stood out– as shown by the majority of those polled – was that it will not be a short crisis, with many seeing no end in sight.  Unsurprisingly, the survey also showed that Europeans in the four countries had low trust in their governments’ ability to handle the crisis.

Whilst signalling further rises, the ECB belatedly lifted its key interest rates, by an unprecedented 75 bp, as it fights against surging inflation, at a half-century high. Rates are now at their highest level since 2011 and even with further rises pencilled in for the next two months, the bloc is almost certain to see double digit inflation by the end of the year along with the onset of a continental recession. The ECB raised its deposit rate to 0.75% from zero and lifted its main refinancing rate to 1.25% but it has a long way to go to return inflation to its long-standing 2.0% medium-term target which it now forecasts to occur by 2025, with expectations of it falling to 5.5% next year and 2.3% a year later.  Worryingly, it has amended its growth forecast for this year and next to 3.1% and 0.9%. Many still have lost confidence in the ECB and balk at its bank’s inflation-targeting framework.

Assisted by London recording its strongest growth in six years, UK average house prices rose 0.4%, on the month, to US$ 338k; according to UK bank Halifax, there had been a 0.1% dip in July. The annual 11.5% rate of house price growth was slightly down on the previous month’s 11.8%, with London and Wales being the strongest regions for sales, as prices jumped 8.8% and 16.1%, Wales’ fastest rate in eighteen years, on the year.  Mortgage rates are now at their highest in six years, after six interest-rate increases since December, with another 0.50% rise on the cards next week. The market showed its resilience in the face of the triple whammy of the cost-of-living crisis, soaring inflation and rising mortgage rates, at a time when many analysts had forecast a marked slowdown in the sector. However, what is certain is that for the rest of the year and into 2023, the market will soften, demand will decrease, and prices will head south.

As expected, new Prime Minister Liz Truss has capped a typical annual household energy bill at US$ 2.8k, (£2,500) until 2024 – a move that could cost up to US$ 173 billion (£ 150 billion)

will limit energy bill rises for all households for two years, as the new prime minister tries to prevent widespread hardship. The cap had been expected to rise to US$ 4.1k next month – and even higher in January. Meanwhile, businesses, (including public sector groups like schools and charities), will see prices only capped for six months, whilst energy firms will be compensated for the difference between the wholesale price for gas and electricity they pay and the amount they can charge customers. Some will criticise the move for its “scattergun” approach and that the new measures are not targeted to the sections that require the assistance more urgently and will be in fuel poverty if they do not receive added help. Experts and charities have been warning for some time that lives would be at risk if financial help was not forthcoming without help, as people will still struggle to afford basic day-to-day living costs. In addition, the government will:

  • scrap green levies
  • continue with a previously announced US$ 463 (£400) energy bills discount for all households.
  • launch a new oil and gas licensing round to boost production in the North Sea
  • try to negotiate lower-priced long-term contracts with renewable and nuclear power companies
  • with the BoE, introduce a plan to provide emergency support to struggling UK energy firms
  • lift the ban on fracking

Downing Street estimates that these changes to the price cap would boost economic growth and curb inflation by as much as 5%, and that the inevitable recession will not be as steep as it would have been. However, if the UK demand is greater than the current supply pipeline this winter, then the Truss administration may have to follow France’s latest move by the introduction of rationing.

Both the EC President, Charles Michel, and Belgian Prime Minister, Alexander De Croo, have reproached the EU’s tardy response to the worsening energy crisis. This blog has often been critical on the apparent laissez-faire of the bloc’s administration, with regard to their marked unhurried approach to rate hikes and a dilatory reaction to soaring electricity bills. In short, if this approach continues, there will be widespread industrial paralysis and insolvency, as businesses and consumers buckle under the financial strain. For some time, the European Commission president by Ursula von der Leyen, has been promising to unveil a proposal to tackle the crisis, and although no policy has yet been finalised, it seems that it will include a price cap on the excess revenues obtained by non-gas producers (renewables, nuclear, coal) and a plan to gradually cut down electricity demand. The message to the EC is Don’t Dilly Dally On The Way!

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All Is Fair In Love And War!

All Is Fair In Love And War!                                                      02 September 2022

The 2,593 real estate and properties transactions totalled US$ 2.02 billion during the week ending 02 September 2022. The sum of transactions was 320 plots, sold for US$ 477 million, and 1,720 apartments and villas, selling for US$ 967 million. The top three transactions were for land in Saih Shuaib 3, sold for US$ 46 million, one for US$ 31 million in Island 2 and the third in Saih Shuaib 4 for US$ 21 million. Al Hebiah Fifth recorded the most transactions, with 107 sales transactions worth US$ 898 million, followed by Palm Jumeirah with 60 sales transactions worth US$ 53 million, and Nad Al Shiba First, with 41 sales transactions, worth US$ 56 million. The top three transfers for apartments and villas were all apartments, one sold for US$ 211 million in Marsa Dubai, another for US$ 100 million in Business Bay, and the third sold for US$ 83 million in Burj Khalifa. The sum of the amount of mortgaged properties for the week was US$ 338 million, with the highest being for an apartment in Business Bay mortgaged for US$ 54 million.  111 properties were granted between first-degree relatives worth US$ 257 million.

Latest figures from Property Finder report that the most popular areas for residences are Dubai Marina, Downtown Dubai and Business Bay, with the top searched areas being Palm Jumeirah, Jumeirah Village Circle, and Jumeirah Lake Towers. The first three locations noted above have also witnessed the biggest increase in rentals in Q2. Meanwhile, Asteco has indicated that the biggest rental increases among all the mid to high-end properties in Q2 were Dubai Marina, Downtown and Business Bay – 23%, 24% and 21%, respectively. The following is a list of rents in the three most popular areas for apartments

US$ kStudio1 B/R3 B/R
Dubai Marina10.9 – 16.312.3 – 27.228.6 – 62.3
Downtown12.9 -17.719.1 – 27.242.2 – 81.7
Business Bay11.6 – 15.013.6 – 21.827.2 – 46.3

In relation to villas/townhouses, Property Finder noted that Dubai Hills Estate, Palm Jumeirah, Arabian Ranches, Damac Hills (Akoya by Damac), Mohamed bin Rashid City and Dubai Land were the most popular areas. The three areas that recorded the highest increase in rents were Dubai Hills Estate, Palm Jumeirah and Arabian Ranches – up by 42%, 41% and 30% respectively, with further details below:

US$ k3 B/R5 B/R
Dubai Hills45.0 – 81.754.5 – 122.6
Palm Jumeirah81.7 – 136.3149.9 – 258.9
Arabian Ranches40.8 – 76.384.5 – 109.0

There is no doubt that the rental market continues to be robust, driven by the demand for residential leases which represented 73.0% of July total rental leases, equating to 42.7k, and 5.7% higher on the year; the ratio between new and renewed leases was 56:44.

One of India’s richest industrialists, with a reported family fortune of US$ 99.3 billion, is reported to have acquired a property on Jumeirah Palm. Media reports that Mukesh Ambani, whose family base is the twenty-seven-storeyed Antilla in south Mumbai, is the buyer of an US$ 80 million beachside villa. If reports are true, the property had been bought for Anant, Ambani’s youngest son, and one of three heirs to his fortune.

DMCC’s new flagship building, Uptown Dubai, has reported that all its Grade A office space, encompassing 495k sq ft, and twenty-two floors, has been fully pre-leased, ahead of the tower’s construction completion later this year. Anchor tenants include Hisense, HIKVision and the Gemological Institute of America (GIA) and will join DMCC which will move its headquarters from nearby Al Mas Tower. Following the completion of Uptown Tower, it is expected that work on the next two commercial towers will soon start to become part of Uptown Dubai District; this location will eventually boast almost six million sq ft of Grade A commercial and residential space, a substantial number of retail and F&B outlets, approximately 2k residences, a unique central entertainment plaza, and a number of luxury hotels.

It is reported that Emirates will announce a codeshare agreement with United on 14 September at a joint event in Washington. September will also see the launch of Emirates’ latest brand ambassador, Gerry the Goose, who will extol the virtues of the benefits and services of the world’s largest international airline to choose to ‘Fly Better’. On Monday, Emirates airline announced the suspension of flights to and from the Iraqi cities of Baghdad and Basra following heavy fighting in Baghdad, in which twenty people have died, after Shi’ite cleric Moqtada Al Sadr said he would quit politics. The airline also announced that, in summer, it had carried more than ten million passengers on nearly 35k flights to 130 destinations.

Kerala Pravasi Association has asked the Delhi High Court to hear a writ petition challenging the exorbitant prices of air tickets on flights operating between Gulf countries and India. The Delhi-based political group seeks urgent interim relief concerning tariffs established by the airline or the scrapping of Rule 135(1) of the Aircraft Rules, 1937. This states that “every air transport undertaking operating by sub-rules (I) and (2) of rule 134 shall establish a tariff, having regard to all relevant factors, including the cost of operation, characteristics of service, reasonable profit and the generally prevailing tariff.” The petition to the Court noted that airlines have been charging unreasonable, excessive, and prohibitive airfares for travel from the Gulf region countries to Kerala and the rest of India. There are signs that air ticket and hotel bookings could well double next month, to US$ 545, whereas in mid-September they would be selling at US$ 272.

DXB LIVE posted that it had seen its business rise by more than 10% on comparative pre-Covid returns in H1. Activities and services relating to events organised at the DWTC resulted in record high returns and an increase in international, regional and local visitors. Involving over 450 projects of which  there were 260 events and 43 exhibitions. They included, inter alia, Gulf Food, Arab Health, Med Lab, Dubai International Boat Show, Dubai Jewellery Show, and Intersec, plus six global conferences. Other events included thirty-six weddings, five graduation ceremonies and a gamut of festivals, sporting events, exhibitions and fashion shows.

After several months of rising prices last month, the UAE Fuel Price Committee reduced retail petrol prices across the board by over 13%+. Despite oil prices continuing to hover around the US$ 100 level, prices have again been lowered for September.

  • Super 98: US$ 0.929 – down by 12.3% on the month and up 28.7% YTD from US$ 0.722
  • Special 95: US$ 0.899 – down 15.8% on the month and up 30.5% YTD from US$ 0.689
  • Diesel: US$ 1.054– down 6.6% on the month and up 51.2% YTD from US$ 0.697
  • E-plus 91: US$ 0.877 – down by 16.2% on the month

Last year, Jebel Ali Free Zone generated over US$ 123.9 billion in trade, up 18.8%, year-on-year, along with an 18.6% growth in the number of new companies to over 9k. Of the new companies, sector-wise, the highest percentages were in retail/general trading – 25%, electronics/electric – 10%, and vehicle/transport – 9%. Trade-wise, there were marked improvements in electrical and machinery, followed by construction materials, consumer electronics, and auto parts and spares. 2021 also saw the launch of Yiwu Market – the first smart free-zone market in the ME, catering to retail and wholesale industries and revolutionising trade in the region by providing advanced end-to-end solutions.

For the June quarter, the Central Bank noted that the number of bank employees had increased by 2.51% to 34.3k; the split between international and national banks was 6.8k:27.5k. The number of licensed commercial banks reached sixty, comprising thirty-seven international, twenty-three national and two digital banks.  Of the 582 bank branches in the country, 508 were attached to national and the balance to international banks.

Using its environmentally friendly district cooling services, Empower has posted a 41.3% hike in the number of buildings, to 1.4k, , over the last five years to 2021, and 13.0% on the year. During the period, the world’s largest district cooling services provider increased its Dubai share to 80%, with new clients being the likes of Marsa Al Arab, One Za’abeel, The Residences Dorchester Collection, Uptown and Wasl1. Emirates Central Cooling Systems Corporation has come a long way from its modest 2004 beginning of only two buildings.  A further split of its services sees residential, commercial, hospitality, healthcare, and the balance with shares of 64%, 15%, 14%, 3% and 4%.

This week, the current shareholders of Taleem Holdings approved the sale of part of the school operator’s shares, in a DFM IPO; creditors and shareholders have thirty days to raise any objections. The actual percentage of shares on offer is not yet known and the Dubai-based company also advised that the book building process will be “in accordance with the allotment policy set out in the prospectus, which shall be published, and the application to list all of the company’s shares on the Dubai Financial Market”. Taaleem joins utility companies, including Empower and Salik, that have announced plans to list their shares on the DFM. In April 2021, Dubai-listed Amanat, which specialises in investments across health and education sectors, sold its entire stake in Taaleem for US$ 95 million. The company has over 1.7k teachers and 27k students, across its portfolio of twenty-six schools.

The DFM opened on Monday, 29 August, 146 points (4.4%) higher on the previous four weeks and shed 69 points (2.0%), on Friday 02 September, to 3,394. Emaar Properties, US$ 0.19 higher the previous three weeks, was up US$ 0.02 to close the week on US$ 1.68. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.71 US$ 3.74, US$ 1.62 and US$ 0.50 and closed on US$ 0.70, US$ 3.53, US$ 1.58 and US$ 0.47. On 02 September, trading was at 71 million shares, with a value of US$ 54 million, compared to 138 million shares, with a value of US$ 100 million, on 26 August 2022.  

For the month of August, the bourse had opened on 3,338 and, having closed the month on 3,443 was 105 points (3.1%) higher. Emaar traded US$ 0.21 higher from its 01 August 2022 opening figure of US$ 1.50, to close the month at US$ 1.71. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.69, US$ 3.76, US$ 1.60 and US$ 0.45 and closed on 31 August on US$ 0.70, US$ 3.64, US$ 1.60 and US$ 0.47 respectively. The bourse had opened the year on 3,196 and, having closed August on 3,338, was 142 points (4.4%) higher, YTD. Emaar traded US$ 0.38 higher from its 01 January 2022 opening figure of US$ 1.33, to close August at US$ 1.71. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the year on US$ 0.00, US$ 3.69, US$ 1.47 and US$ 0.72 and closed on 31 August on US$ 0.70, US$ 3.64, US$ 1.60 and US$ 0.47 respectively.

By Friday 02 September 2022, Brent, US$ 5.04 (5.3%) higher the previous week, shed that gain and more, losing US$ 7.36 (7.3%) to close on US$ 93.44. Gold, US$ 59 (3.2%) lower the previous week, shed a further US$ 28 (1.6%), to close Friday 02 September, on US$ 1,723.  

Brent started the year on US$ 77.68 and gained US$ 17.86 (23.0%), to close 31 August on US$ 95.54. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has shed US$ 115 (6.3%) during 2022, to close on US$ 1,716. For the month, Brent opened at US$ 110.01 and closed on 31 August, lower at US$ 95.54 (13.2%). Meanwhile, gold opened August on US$ 1,773 and shed US$ 57 (3.2%) to close at US$ 1,716 on 31 August.

It is reported that Credit Suisse is planning a 10% redundancy, as part of a cost cutting exercise, as it takes drastic steps to recover from a string of scandals, as well as a change in tack. Switzerland’s second-biggest bank is restructuring to curtail risk-taking in investment banking and bulking up wealth management. Last month, the Zurich-based financial institution appointed Ulrich Koerner, a restructuring expert, to succeed Thomas Gottstein, as chief executive. He has been given the task of paring back investment banking and cutting more than US$ 1 billion in costs, to help the bank recover from a string of setbacks and scandals; these included  a US$ 5.5 billion loss on the default of Archegos Capital Management, the closure of US$ 10 billion worth of supply chain finance funds linked to collapsed UK financier Greensill, the June Swiss conviction for failing to prevent money laundering by a Bulgarian cocaine trafficking gang, and a Q2 U$ 1.62 billion loss. The bank has dismissed speculation that it could be bought or broken up.

To help its permanent staff, known as partners, as well as its temporary and agency workers, John Lewis and Waitrose are offering staff free food from October to January. This will be a welcome move for the staff when latest reports show that soaring food costs have pushed UK inflation to 10.1% and rising at its quickest pace in over forty years. The ONS noted that food and non-alcoholic drinks were the largest contributor to rising prices in July, followed by the price of bread, cereals, milk, cheese and eggs rising the fastest, with the cost of vegetables, meat and chocolate also higher. The retailer is to recruit 10k for the upcoming festive season, as from this month, comprising 4k for both Waitrose and its supply chain and 2k for John Lewis.

Over 40k BT and Openreach staff staged fresh strike action and started a two-day strike on Tuesday, as part of an ongoing pay dispute; this comes at the same time that 115k CWU members walked out on Wednesday, following similar action a week earlier. The union confirmed that members were striking against the offered US$ 1,755 (£1,500) pay rise, offered by BT Group, equating to an average 5% pay hike and to 8% for the lower paid. There is no doubt that there will be more strikes in the coming weeks, with the worry that they will become more damaging, with Unite and Unison having submitted motions ahead of the Trade Union Congress next month which call for future walkouts to be synchronised.

More strikes on a more regular basis are occurring in the UK, with the latest being Aslef announcing that train drivers, at twelve rail companies, will strike again, as part of an ongoing dispute over pay. The walkout, the biggest strike so far, will start on 15 September, following similar action on 30 July and 13 August. The union is asking that pay rises are in tandem with inflation, with the Rail Delivery Group, which represents train operators, previously indicating that it wants to give its workers a pay rise but added “to fund it unions must recognise that as an industry that has lost 20% of its revenue, we can either adapt or decline”.

Today, after Lufthansa pilots went on strike, it had to cancel eight hundred flights, impacting 130k passengers. After wage talks collapsed, the pilots’ union, which was asking for a 5.5% hike in pay, called on its 5k pilots to stage a 24-hour walkout – the German carrier (along with other national airlines), has had to cancel thousands of flights during the summer because of strikes and staff shortages. Lufthansa noted that the union’s demand would raise staff costs by 40%, (US$ 900 million), having offered US$ 901 more in basic pay per month in two stages over an eighteen-month period, equating to an 18% higher pay for entry-level jobs and 5% more for senior positions.

Reliance Industries have announced that it plans to roll out a US$ 25.0 billion scheme to launch 5G mobile internet services in India by the end of October. Initially, it will target the major cities such as Delhi and Mumbai, but the high-speed network will be expanded throughout India by the end of 2023. Reliance chairman, multi-billionaire, Mukesh Ambani, noted that on completion, the network would be the largest in the world, and also confirmed that his company would be working with Google to develop a budget 5G smartphone; currently, the cheapest instrument retails at US$ 150. The service will be run by a subsidiary, Jio, the country’s largest mobile carrier, which last month won a US$ 19.0 billion government auction for airwaves, including 5G, despite strong opposition from the likes of Vodafone, Idea, Bharti Airtel and a fourth new entrant, Adani Data Networks. 5G is an important cog in the government’s strategy to turn India into a US$ 1 trillion economy and it is readily apparent that Mukesh Ambani wants to be the leading player in the sector. However, it has some way to go to catch China which has the highest global 5G penetration, at 84%.

This entrée into 5G also plays into Reliance’s bid to dominate the e-commerce space and this will greatly benefit from an alliance with technology giant Meta, (previously known as Facebook) which already has five hundred million users out of India’s 1.4 billion population. Reliance Retail is already the country’s fastest growing and most profitable retail business, with over 12k stores across the country, and it has the ability to go head-to-head with major online entitles such as Amazon and Walmart-owned Flipkart.

This week witnessed the death of Mikhail Gorbachev – the last Soviet leader – who became president in 1985, before the Soviet Union collapsed by 1991. During his six years in office, he introduced reforms, but was unable to prevent the slow collapse of the union – and many Russians have blamed him for the years of turmoil that ensued. At the time, the Soviet Union had been struggling to keep pace with its arch-rival, the US, and Gorbachev introduced his policy of perestroika that sought to introduce some market-like reforms to the state-run system. On the international stage, he negotiated with Ronald Reagan on arms control deals with the US, signing the Intermediate-Range Nuclear Forces Treaty in 1987. Furthermore, he refused to intervene when eastern European nations revolted against their Communist rulers and he also ended the decade-long bloody Soviet war in Afghanistan.  He also introduced glasnost, or openness, that allowed the common people to criticise the government in a way which had been previously unthinkable. Henry Kissinger eulogised Gorbachev, commenting that he would be “remembered in history as a man who started historic transformations that were to the benefit of mankind and to the Russian people”.

It seems that Sri Lanka has finally reached a preliminary agreement with the IMF for a four-year US$ 2.9 billion loan, noting that “the objectives of Sri Lanka’s new Fund-supported programme are to restore macroeconomic stability and debt sustainability.” The agreement is subject to the crisis-hit island following through with previously agreed measures. Sri Lanka has to restructure nearly US$ 30 billion of debt, US$ 19 billion of which is with international banks, as Japan has offered to lead talks with the other main creditors, including India and China.

Lebanon suffered their 25th consecutive month of triple-digit inflation, with the July inflation figure 168% higher than a year earlier, with the index rising 7.4% on the year. By the end of the year, it is estimated that inflation will top 178% – up from 155% a year earlier. Even after four months since parliamentary elections, and political deadlock, a new Cabinet has yet to be formed, whilst the country’s economy tanks. Inflation continues unabated, whilst the Lebanese pound rate fluctuates wildly on the parallel market. In July, the cost of utilities increased six time in the month, transport costs four and half times, health care quadrupled and food/beverage three times. Last year, its public debt of over US$ 100 billion, equated to 21.2% of GDP, which fell to US$ 21.8 billion, (in 2019, it stood at US$ 52.0 billion).

This week, the yen tanked to its lowest level since 1998, trading at 139.68 before nudging to 140.03, above the key psychological level of 140, by the end of the week. The government faces a conundrum – if they were to intervene to prop up the ailing currency, there is the high risk of failure which would send the yen into a spin. With low rates continuing, (its policy rate at minus 0.10% and ten-year government bond yield target at 0.00%), and no early signs of increases in the near time, the environment is ripe for the yen to keep tumbling.

On Monday, the Indian rupee dipped to an all-time low of 80.15, to the dollar, but recovered later in the day to trade at 79.96, after a reported sale intervention by the Reserve Bank of India and driven by the Fed confirming that it would continue tightening its monetary policy until taming inflation to the its target of 2%. Last time,it sank below the 80 mark was on 20 July, but there would beno surprise to see the currency fall to as low as 82 by the end of the year, not helped by surging inflation, a global slowdown and a strengthening dollar. The question facing the market is whether the RBI will be bothered to intervene if the rupee falls much further.

In response to the impact of Covid-19, Scott Morrison decided to extend his prime ministership by appointing himself to several other ministries, including health, resources, finance, treasury and home affairs. The only trouble, with this move, was that the former Australian prime minister forgot to tell other ministers and kept the unheard-of power grab a secret. It does seem that this unprecedented and bizarre action by ScoMo was done without the knowledge of the ministers involved. He has refused to step down, rebuffing calls from within his own party, admitting, “I understand the offence that some of my colleagues particularly have felt about this. I understand that and I have apologised to them”.

In August, 315k new jobs were created in the US, as the jobless rate dipped 0.2% to 3.5% on the month; the number was 185k fewer than a month earlier – another indicator that the US economy continues to head south. The Fed Chairman, Jerome Powell, has warned that rising rates are a necessity to prevent inflation, at forty-year highs, from becoming a permanent aspect of the US economy.  The knock-on effect is that higher borrowing costs impacts on spending and will invariably slow economic activity. In most of the rest of the world, a technical recession is when there are two successive quarters of contraction, but the US is an outlier in this regard and uses different measuring tools so that it is not yet in recession despite two periods of negative growth.

Last week ended badly for the global bourses, with the likes of the Dow Jones index falling 3% to 32,283, the S&P 500 down 3.4% to 4,058, the Nasdaq Composite dropping 3.9% to 12,142, Australia’s ASX shedding 4.6% and pan-European STOXX 600 index shedding 1.7%. The main drive for last Friday’s downturn was the Federal Reserve Chair Jerome Powell reiterating a hawkish tone to battling inflation and indicating that the Fed would raise rates as high as necessary to limit growth and tackle inflation. Since the Fed will inevitably tighten money supply, for at least the next twelve months, it was a sure deal that an index of global stock markets would fall, while short-term US Treasury yields headed in the other direction. The other winner from the Fed’s strategy saw the greenback strengthen, whilst gold prices, in response to rising rate hikes, declined. Economic 101 teaches that tight monetary policy results in slower growth, a weaker job market and reduced consumer confidence for households and businesses.

By the end of August, sterling had lost 5% in value to the US dollar in one month, driven by concerns over the state of the UK economy and the almost inevitable recession on the horizon. Sterling ended the week at US$ 1.15 and there is no reason why it should not fall further. The aftermath of the Brexit vote was in October 2016, and this was the last time the pound fell so much against the dollar – Monday will see the announcement of Liz Truss, as the new prime minister, and it will be interesting to see what happens to sterling. The pound’s weakness is also a result of a strong dollar and the feeling that it is a safer bet.

August was also not a kind month for the pound against the euro, as investors ditched UK government bonds which recorded their worst month for decades. Investors were concerned that it was becoming riskier to hold such investments. In the month, the yields, on some of those bonds have jumped the most since 1994. Last month, it was reported that its manufacturing sector shrank for the first time since May 2020. A Resolution Foundation report estimates that typical household disposable incomes are on course to fall by 10%, or US$ 3,470, over the next fifteen months, with the country expected to see “the deepest living standards squeeze in a century”.

The week the euro dipped below parity to the greenback, the Institute of International Finance consider that the currency could continue its decline, having recently dropped more than 12%, driven by historically soaring inflation, now at a record high 9.1%. Eurostat estimates that energy posted the highest annual inflation rate at 38.3%, with food, alcohol and tobacco up 10.6%. You would not think that the ECB consider a falling euro a major worry, otherwise it would have lifted interest rates more expeditiously – in July, it increased interest rates by 50 basis points, to zero, for the first time in eleven years! More of the same from the ECB is expected next week, but the central bank is well behind the inflation curve – and to catch up, it may leave the euro hanging out to dry, with every chance it dropping to US$ 0.90 over the coming months. Either way, the bloc is heading for a recession by year end, as economic indicators head lower.

There was a tenth consecutive double digit annual rise, as UK house prices rose by 10%, despite pressure on buyers’ budgets; on the month, it dipped 1% to 10%. Over the past two years, Nationwide posted that average prices have jumped by US$ 57.8k to US$ 316.6k. Despite the slowdown, the market still has greater demand from buyers than homes for sale, but there are signs that the “price” tide could be turning on the back of less consumer spend because of surging inflation and rising mortgage rates. One factor that keeps first-time buyers still interested in acquiring their first property is that rent increases are comparatively higher.

Iraqi-born Nadhim Zahawi, one of the richest politicians in the House Commons, with an estimated net worth touching US$ 120 million, was appointed Chancellor of Exchequer replacing Rishi Sunak, on 05 July. Two days later, he had withdrawn his support for Johnson and publicly called on him to resign. Last month, he was reportedly absent from office on annual leave and this week it has become known that he is in the US on a taxpayer-funded jolly, for talks on how to tackle the spiralling cost of living. This comes at a time when UK households are being battered from soaring inflation, rocketing energy bills and rising interest rates. With the UK prime ministerial announcement due on Monday, there are three certainties – Liz Truss will become the new leader, Nadhim Zahawi will no longer be Chancellor, and Rishi Sunak will be left out in the cold.

Led by Belgium, there is increasing pressure on the EU to introduce a cap on the price of gas and its decoupling from the price of electricity. Just like the UK, EU nations have been struggling with huge energy price hikes since key gas supplier Russia invaded Ukraine in February, triggering sanctions. Last Friday, the annual contracts for electricity topped US$ 991 and US$ 1,125 per MW, in Germany and France – ten times higher from one year earlier. Russia, which supplied the EU with 40% of its gas last year, has in turn restricted supplies. Austria’s Chancellor Karl summed up the bloc’s feelings saying, “we have to stop this madness that is happening right now on energy markets,” and all seem to agree that they cannot allow Vladimir Putin dictate the European electricity price every day.

Arguing that repairs were needed, Russia has completely halted gas supplies to Europe, via its Nord Stream 1 pipeline, for the next three days from Wednesday, coming when state-owned Gazprom has already markedly reduced gas exports via the pipeline that was operating at 20% capacity, equating to thirty-four million cu mt. Supplies, through the 1.2k km pipeline, were cut to 40% in June and then halved again to 20% a month later. Thirteen EU countries, which have either completely stopped receiving Russian gas or are partially cut off from the supply, await tomorrow to see whether returns production to 20%. There were concerns that Putin could extend the outage in an attempt to drive up gas prices even higher, especially after the G7 agree an “unpriced” price cap on Russian supplies. Coincidentally, on Friday the oil company announced that the pipeline will remain closed because of a “fault”. Someone should advise French Energy Transition Minister, Agnes Pannier-Runacher, who has accused Russia of “using gas as a weapon of war” that All Is Fair In Love And War!

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The Winter of Discontent

The Winter of Discontent!                                           26 August 2022

.No figures were available for property statistics for the week ending 26 August.

Recording 7.1k sales transactions, at a value of US$ 5.7 billion, Dubai’s property sector witnessed its best ever July returns, and up 63.5%, compared to a year earlier; sales transaction values were 88.4% higher, on an annual basis. Property Finder noted that sales volumes and values were also up 41.2% and 58.3%, respectively, in comparison with July 2013, when they peaked. The consultancy also noted that the July split between secondary/ready property and off-plan properties was 59:41, with the latter totalling 2.9k transactions, equating to an annual increase of 67% (volumes) and 81% (value).

Knight Frank has indicated that Palm Jumeirah villa prices have skyrocketed – up 51% in the past twelve months, and 68% since the onset of the pandemic. According to Luxhabitat Sotheby’s, the prices of the top ten residential sales in Q2 ranged from US$ 20 million to US$ 35 million. The top five sales were found in Dubai Hills Grove, Palm Jumeirah Frond G. MBR City District One, Umm Suqeim 3 Marsa Al Arab and Emirates Hills, Sector L  – at prices of US$ 35 million, US$ 34 million, US$ 30 million, US$ 29 million and US$ 28 million. Four of the top ten prices were located in Palm Jumeirah.

One of the highest-priced property sales saw US$ 44 million being spent on the largest penthouse at Atlantis The Royal Residences on The Palm Jumeirah. Encompassing 25k sq ft, the five-bedroom property includes a sky garden, two private pools and terraces, a private lift and floor-to-ceiling windows with 360-degree views of the city and the Arabian Gulf. The penthouse is located on floors 35, 36 and 37 of the residential towers, with an additional mezzanine level on 37. The only Dubai apartment and penthouse currently listed at a higher price is AVA at Palm Jumeirah by Omniyat, at US$ 68 million.

Some eighteen years since land was recovered to establish Deira Islands, Nakheel has unveiled a new upscale plan for what is now known as Dubai Islands, in line with the Dubai 2040 Urban Master Plan. It will comprise five, interconnected, (but with their own different features), islands with a total area of 17k sq mt, all of which have recreational sport beaches and beach clubs, with easy access to the city and airport. Combined, the islands will add a further 20 km of beachfront – and 2 sq km of parks and open spaces including golf courses – and will include over eighty resorts and hotels, including luxury and wellness resorts, The development will also boast a well-connected network of marina promenades and pathways for water and road transportation, walking and biking support.

Emirates announced that Emirates will restore its non-stop A380 services to and from Auckland and Kuala Lumpur, starting from 01 December; the routes are currently served by Boeing 777-300s, with the New Zealand flight having a stop at KL. Emirates’ direct flight EK448 from Dubai to Auckland will take almost seventeen hours and will be the longest pf EK’s routes, at 14.2k km.

Senior management of Damac Group are “on a fact-finding mission in Germany to research the market and possibly identify “mutually beneficial partners” and exploring data centre and technology-related investment opportunities worth US$ 1 billion. Last year, the Dubai-based developer had launched Edgnex, a global digital infrastructure provider that identifies and invests in the next digital hubs. Its chairman, Hussain Sajwani, noted that “the country has a lot of opportunities in sectors such as data centres”, and that he sees “a lot of opportunity and potential, especially in eastern Germany”.

Dubai Business Events has confirmed that the emirate continues to consolidate its position as a leading destination for international business events, reporting that, in H1, it had registered ninety-nine successful bids to host major conferences, congresses, incentive travel programmes and other meetings over the coming years. These events are set to attract more than 77k delegates and yield over 330k hotel room nights with the aims of boosting Dubai’s events, hospitality and related tourism sectors, in addition to advancing the broader economy by bringing in global expertise and knowledge. It is estimated that of the two hundred bids and proposals for international business events submitted in H1, there are several bids yet to be decided but some of those that have been won include the International Congress of the World Confederation for Physical Therapy (2023), IFOS ENT World Congress (2023), Congress of the Asia Pacific Orthopaedic Association (2024) and International Congress of Endocrinology (2024). On top of this, key corporate events and incentive travel programmes to be held in Dubai include Sun Pharmaceuticals Industries’ Annual Convention and Incentive (2022) and IBM Best in Tech (2023).

Majid Al Futtaim Holding posted an 18% hike in H1 earnings, driven by a marked improvement in retail and leisure sectors. MAF recorded EBITDA at US$ 518 billion, as revenue climbed 15% to U$ 4.90 billion, attributable to strong operational performance, diversification efforts and cost efficiencies. Revenue at the company’s properties business jumped 51% to US$ 654 million, while Ebitda increased 27% to US$ 381 million. In H1, there were increases across the board including:

  • shopping mall tenant sales by 21%, while footfall increased 20% to 100 million visitors
  • hotel portfolio’s revenue grew to US$ 91 million, with Revenue Per Available Room and average occupancy rates climbing 142% and 43%, respectively
  • retail business revenue increased 9% to US$ 3.92 billion and EBITDA was 9% higher at US$ 154 million, along with the opening of eighteen new stores
  • leisure, entertainment and cinemas arm’s revenue rose 56% to US$ 154 million, with cinema admissions increasing by 60% to 8.8 million
  • lifestyle arm reported a 42% revenue increase to US$ 98 million

The privately held conglomerate, and the region’s largest mall operator, noted that the retail industry that had been battered by the impact of Covid, along with enforced lockdowns, but had bounced back strongly in 2021, and maintained the growth momentum into this year. 2022 statistics point to this, with the country’s economy growing 8.2% in Q1, and is set to post its strongest annual expansion since 2011 on the back of higher oil prices and the fact that UAE consumer spending increased 22% in H1 –  and this despite the double whammy of soaring inflation and rising fuel costs.          

The RTA has announced that last year, it achieved a 13% decrease in total emissions, and a 10% decrease in energy costs, as it recorded an 18% reduction in the total energy consumption of its operations and projects, compared to the average consumption in the years from 2016 to 2019. Its chairman, Mattar Al Tayer, noted that the Authority had a roadmap, aiming to achieve zero-emission public transport in Dubai by 2050. Over the year, gasoline consumption decreased by 36%, over the four-year period, because of the expansion of the Dubai Taxi Corporation, in the use of hybrid taxis, as well as a 15% decrease in diesel consumption during the same period, despite the increase in the fleet of public transport buses. Because of the introduction of the 15 km route 2020 of the Dubai Metro, and its seven stations, electricity consumption was 11% higher.  With it implementing thirty-six energy and green economy initiatives, there was a financial saving of US$ 23 million, along with other savings of 68 million kW hours in electricity consumption, 55 million gallons of water, 21 million litres of gasoline, and 1.8 million litres of diesel. It is estimated that the initiatives also contributed to avoiding emissions of nearly 86 tonnes of carbon dioxide equivalent and diverting nearly 450k tonnes of waste from landfill.

HH Sheikh Mohammed bin Rashid al Maktoum has issued a law which affiliates Dubai Media Incorporated to Dubai Media Council. Furthermore. HH. Sheikh Hasher bin Maktoum Al Maktoum has been appointed as Chairman of DMI, while Mohammed Al Mulla serving as its CEO. Sheikh Ahmed bin Mohammed, Chairman of the Dubai Media Council, said the new law reflects the importance Mohammed bin Rashid accords to media and is in line with HH’s directives to develop media establishments to keep pace with the emirate’s growing global prominence in the sector.

It is reported that the total H1 premiums of twenty-eight insurance companies listed on the two local bourses increased by 7.64%, year-on-year, to US$ 4.27 billion, as their combined net profits totalled US$ 223 million. Of that total, the thirteen companies listed on the DFM accounted for 56.1% of the total premiums of insurance companies, valued at US$ 2.40 billion, while the remaining fifteen companies listed on the ADX accounted for 43.9% or US$ 1.88 billion. The Dubai-listed insurance companies accounted for 56.4% of the total assets, valued at US$ 17.65 billion, equating to US$ 9.95 billion, with the ADX firms accounting for the balance of US$ 7.70 billion; total assets increased by US$ 798 million, (4.7%), over the six-month period.

A report by Alvarez & Marsal indicated that the top ten banks in the country reported a 24% Q2 increase in aggregate net profit, to US$ 3.43 billion, driven by total net interest income 19.5% higher on the quarter. Four of the banks – Emirates NBD, DIB, Mashreq and CBD – are Dubai-based. With the UAE banking sector’s aggregate net interest margin improving to 2.3%, and by 26.1bp, it is still 2.6% lower of its pre-pandemic mark.  Over Q2, there were increases in both aggregate loans/advances and deposits by 1.8% and 4.5% respectively.

The professional services consultancy was also bullish on the future, noting that “the regional banking sector is expected to report continued strong profitability on the back of increasing interest rates, improving credit quality and robust economic growth.” Although global inflation is a potential threat to further growth, it will probably have a lesser effect for the UAE because of robust oil prices, hovering around the US$ 100 level, (with some analysts forecasting it to go 25% higher in the coming months), increased consumer confidence and strong economic activity. Another bonus for the lenders is that rising interest rates will fill their coffers even further – next month, it is a shoo-in that the Fed will increase rates by at least 0.50%, after the 0 75bp jump in July, with any US move mirrored by the Central Bank of UAE.

Dubai Investments, with over 19.8k shareholders and a capital base of US$ 1.09 billion, posted a H1 20.5% rise in net profits to US$ 99 million, compared to a year earlier, driven by the continued strong performance of the group’s manufacturing, contracting and services segment. With total equity 1.0% higher at US$ 3.30 billion, the group’s total assets remained stable at US$ 5.99 billion. It will wait until Q3 when it will recognise the resultant gain on disposal and fair valuation gain on retained interest amounting to US$ 267 million.

The DFM opened on Monday, 22 August, 103 points (3.1%) higher on the previous three weeks and closed, up 43 points (1.3%), on Friday 26 August, at 3,463. Emaar Properties, US$ 0.14 higher the previous fortnight, was up US$ 0.05 to close the week on US$ 1.66. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.70, US$ 3.72, US$ 1.61 and US$ 0.49 and closed on US$ 0.71, US$ 3.74, US$ 1.62 and US$ 0.50. On 26 August, trading was at 138 million shares, with a value of US$ 100 million, compared to 81 million shares, with a value of US$ 22 million, on 19 August 2022.  

By Friday 26 August 2022, Brent, US$ 2.21 (2.3%) lower the previous week, gained US$ 5.04 (5.3%) to close on US$ 100.80. Gold, US$ 59 (3.2%) lower the previous week, shed US$ 59 (0.5%), to close Friday 26 August, on US$ 1,751.

Brent, the global benchmark for 67% of the world’s oil, was trading at $100.80 a barrel at close of today’s trading. At the onset of the Russian invasion of Ukraine in March, prices went as high as US$ 140 because Russia is the second energy exporter in the world and was the leading supplier to European countries. There are three main reasons why prices have dipped, despite the continuance of hostilities in the Ukraine: they are the regulated output strategy managed by OPEC, spare capacity is below 2 million bpd, and oil inventories standing at a multiyear low. However, fundamentals also point in the other direction, based on the possibility of Iran returning to the global marke..

2022 has been a year that Bitcoin, and its peers, will want to forget after a battering brought on by rising US rates and soaring inflation – not the best scenario for so-called risky assets. The marquee cryptocurrency is down 50% YTD and has fallen for a fifth day in the past six trading sessions, closing the week at US$ 20,211

Blaming its recent poor financial performance, Twitter has warned its employees, by email, that they may only receive half of their annual bonuses because the bonus pool is only at 50% of what it could be if the company had met its financial targets. Its latest Q2 figures saw the micro-blogging website post a US$ 270 million loss, (compared to a US$ 66 million profit a year earlier), as revenue dipped a marginal 1.0% on the year to US$ 1.18 billion. A revenue split sees advertising, 2.0% higher, contributing 92% of the total, whilst revenue from subscriptions and other streams tanked 27% yearly to US$ 101 million. Twitter posted that the revenue fall reflected “advertising industry headwinds associated with the macro-environment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk”. It is also considering a reduction in its physical office space globally, including in San Francisco, New York and Sydney, as it focuses on remote work to cut operational costs. It is also reported that the company is looking at closing various offices once leases expire, including those in Seoul, Wellington, Osaka, Madrid, Hamburg, and Utrecht, as well as reducing office space in other sites including Tokyo, Mumbai, New Delhi, and Dublin.

Ford Motor Co announced that its was making 3k white collar jobs redundant in line with its strategy to cut costs, as it makes the transition from internal combustion to electric vehicles; the total would comprise 2k full-time salaried and 1k contract salaried workers, equivalent to about 6% of the 31k  full-time salaried work force in the US and Canada. Ford’s 56k union factory workers are not affected. Some workers will also lose jobs in India. The company has already restructured in Europe, Asia and India. This week, the carmaker announced that it would appeal a US$ 1.7 billion verdict against the automaker after a 2002 Ford F-250. pickup truck crash that claimed the lives of a Georgia couple, in 2014.

Toyota is taking a gamble that will see it restart its strategy that the Indian driver will start to accept hybrid vehicles as long as the price is right. Since entering the market in 2013, the Japanese conglomerate – in line with other international car manufacturers – has struggled to sell large numbers of its hybrid Camry sedan. With a price tag, equating to eight times the annual income of a middle-class family, it has failed to sell large numbers of its hybrid Camry sedan. Having learned an expensive lesson, it will bet that lower cost hybrids will be well received by Indian consumers by cutting costs across the board, including making many parts in India, (rather than importing them), where the car maker’s factories are running well below capacity, and to source key materials within the country. Unlike other countries where the trend is to go all electric, (in line with VW, GM and Tata in India), Toyota will focus on a mild hybrid alternative which have smaller batteries and are cheaper to produce. Its first entrée will be the Urban Cruiser Hyryder, a compact sports utility, priced at about US$ 25k — less than half the price of the Camry. A major drag factor affecting the Hyryder’s price is taxation, with levies of 43% on hybrids — on par with petrol or diesel SUVs – and far higher than the 5% tax on EVs.

The former F1 supremo, Bernie Eccleston, has been charges with fraud by false representation for failing to declare a trust in Singapore, with a bank account containing over US$ 600 million – a charge that the nonagenarian has denied. HM Revenue and Customs brought the charges after a “complex and worldwide” probe between July 2013 and October 2016.The court heard that he claimed that he disclosed “only a single trust” to tax authorities, one in favour of his daughters. Eccleston was granted unconditional bail ahead of his next appearance next month.

There was a shock that Malaysia’s former Prime Minister, 69-year-old Najib Razak lost his appeal, after he was convicted in July 2020 for his involvement in a corruption scandal involving state-owned wealth fund 1Malaysia Development Berhad (1MDB). After two years out on bail, he has been sentenced to twelve years in jail – and his request that the sentence be delayed was rejected by the country’s highest court. In the original trial, he was found guilty

on seven counts – centred on a total of over US$ 9 million which was transferred from SRC International – a former unit of 1MDB – into his private accounts.

Saying the airline is “working hard” to remove the traffic bottlenecks, and that “on behalf of the national carrier, I want to apologise and assure you that we’re working hard to get back to our best,” Qantas chief executive Alan Joyce has apologised to the airline’s customers. Since April, the carrier, which has recorded a 50% jump in sick leave, has hired 1.5k more people to “have more crew in reserve” to deal with this problem. Paying passengers have been increasingly concerned that cancelled flights, hour long queues and lost baggage; Qantas has even requested senior executives to help out with baggage handling for three months to support airport operations. There is no doubt that Australia’s ‘Flying Kangaroo’ has been badly hit hard by a labour shortage. Like many other national airlines, Qantas had to lay off many staff at the onset of the pandemic, with many of them moving to different jobs, with more flexible work options. Now the conundrum is that with international travel having more than tripled in June, on the year, it is being hampered by a shortage of staff in the various sectors of the industry which will continue to be a major disrupter.

Australian airports are not the only ones in the world that can be impacted by staff calling  in sick; this week, twenty-six  EasyJet flights in and out of Gatwick have been cancelled at short notice, with the airport blaming staff sickness, specifically in its air traffic control tower. Over the summer, thousands of UK travellers have been hit by flight cancellations and airport delays this summer, with the main driver being down to staff shortages. The Office for National Statistics recorded that around a  third of people have experienced disruption, while travelling abroad over the past eight weeks, and that out of those, four in five said their flights had been delayed or that they had faced longer waiting times on planes, while one in four reported flight cancellations.

It will be a turbulent year for cotton, with crops in several producing countries being badly impacted by the extreme weather conditions. India, the world’s leading producer, has been bedevilled by heavy rains and pests damaging crops so much that it has had to resort to importing supplies. In contrast, the world’s second largest producer, USA, will see its cotton production tanking to its lowest level in over a decade because of the worsening drought in the country. Both China and Brazil, the world’s two leading exporters accounting for 50% of global production, are facing heatwave conditions and droughts that could lead to yields slowing by 30%. Another factor to note is that unseasonal rains in regions, including Australia, Pakistan and even Brazil, have also diminished the quality of the stock. Furthermore, demand may be impacted by slowing economies and a decline in clothing purchases. Earlier in the year, cotton prices reached their highest level since 2011 and there is every chance that these March prices could be superseded as cotton supplies are cut.

To add to their economic woes, large parts of China are facing a severe drought amid a record-breaking heatwave, with authorities issuing its first national drought alert of the year in many locations such as Shanghai in the Yangtze Delta region and Sichuan in SW China experiencing weeks of extreme heat. Several international companies have been affected, including Volkswagen, Toyota and Foxconn, with the German carmaker noting that its factory in Chengdu remains shut, and that it expects “a slight delay” in deliveries that it could recover “in the near future”. The Japanese manufacturer commented that it was gradually resuming production in Sichuan “utilising in-house power generation”. Meanwhile, the Apple supplier, which also shut its plant in Sichuan, confirmed the impact on its production was currently “not significant”.

Although it appears that Russia may be losing the war in the Ukraine, it is doing better on the economic battlefields of Europe. At the beginning of the crisis, in late February, the EU introduced various sanctions, including:

  • a ban on transactions with the Russian Central Bank
  • a ban on the overflight of EU airspace by Russian carriers of all kinds
  • a ban on imports of iron and steel products currently under EU safeguard measures
  • a list of 680 individuals and 55 entities of sanctions persons and 53 entities
  • excluding key Russian banks from the SWIFT system
  • prohibiting investing in projects co-financed by the Russian Direct Investment Fund
  • prohibiting the provision of euro-denominated banknotes in Russia
  • prohibiting certain state-owned media
  • prohibiting the export of luxury goods

In the first two months of the war, it is estimated that Germany paid as much as US$ 9 billion for Russian energy supplies, as In April, Germany imported more than half of its natural gas, this side of 50% of its coal and a third of oil used in homes, from Russia.  On top of that, EU nations have spent about US$ 51 billion for Russian energy and have only given US$ 21 billion to Ukraine for its defence against the Russian invasion. In the first one hundred days of the war, the CREA estimated that Russia earned over US$ 100 billion, from fossil fuel exports, with the EU making up 61% of that balance. This windfall is paying for the war, with Russia ‘s daily spend evaluated at US$ 876 million.

Prior to the invasion, the rouble was trading at 0.13 to the greenback but had halved to 0.0072 by 07 March and was trading, a lot higher, at 0.017 on 22 August. On the same dates, the euro was at 1.13, 1.09 and 0.99. It is easy to see that the rouble has fared better than the euro over the period. In the twelve months to July, EU inflation more than quadrupled from 2.2% to 8.9%, whilst Russia saw comparative figures at 8.4% and 15.1% – less than double. Europe’s recession is a given, especially as the risks of disruptions for energy supplies remain elevated. There is no doubt that Russia has weathered the barrage of economic sanctions much better than expected, whilst Europe’s economy is in dire straits and a continental recession is edging in that direction, as it faces the prospect of a full-blown energy crisis this winter. At the onset of fighting, the experts felt that the war would be won by Russia within six months; once again they have been proved wrong.

Eurostat reports that the Q2 seasonally adjusted GDP in both the EU and the euro area rose by 0.6%, quarter on quarter; Q1 noted growth in the EU and the euro area by 0.6% and 0.5%. Over the same Q2 period last year, the seasonally adjusted GDP increased by 3.9% in the euro area and by 4.0% in the EU, following increases of 5.4% in the euro area and 5.5% in the EU. There was an increase in the number of employed persons, nudging 0.3% higher in both blocs, whilst employment had increased by 0.6% in the euro area and by 0.5% in the EU, compared to Q1. A year earlier in Q2 2021, employment increased by 2.4% and 2.3% in the euro area and in the EU, following rises of 2.9% and 2.8% in the previous quarter.

In a bid to ‘tame’ record high inflation rates, Chairman Jerome Powell confirmed that the Fed will have to continue with a tight monetary policy “for some time” to beat record-high inflation. He indicated that the policy will leave households and businesses feeling “some pain”, and that it would result in softening the labour market and the only way to beat inflation, and bring it down, is a soft labour market, “a sustained period of below-trend growth”, and higher interest rates which could top 3.5% by year-end. The Fed chairman has repeatedly said his aim is to achieve a soft landing by slowing the economy without bringing on a recession. Indicators are that the US economy is “clearly slowing” and the betting is that the US has a better chance of avoiding a recession than the EU – maybe that will see the greenback gaining even further than the euro in the coming months.

On Tuesday, the euro broke parity, trading at US$ 0.9910 – its lowest level in twenty years, driven by growing fears of an inevitable recession, and not helped by the increasing risk to the supply of natural gas from Russia to Europe. YTD, it has lost 12.8% in value, at a time of rising inflation, currently at 8.9% at the end of last month, (10% higher than it was in May and still heading north). An indicator that the bloc is in trouble came with news that the latest S&P flash composite PMI showed that the downturn in Germany’s private sector economy worsened in August, with the indicator falling 0.5 on the month to 47.6. The ECB has been reticent to move rates higher because of the slowing economic activity in the eurozone, whilst the hawkish Fed will continue to raise rates, having increased them by 0.75% over the past two months, with more of the same on the cards next month. There is no doubt that traders are having a field day who think they are betting on a certainty that the euro will continue with its downward trend.

Meanwhile, the leaderless UK economy is fast becoming a basket case, and the country a banana republic, with sterling, at US$ 1.18, down about 13% since the start of the year, and forecasts that inflation could top 18% by the beginning of 2023 – its highest rate in fifty years. With the UK’s energy sector being privatised – and despite not being in the eurozone – it is still impacted by soaring gas prices. It is the main driver why UK inflation will hover around the 15% level come October and another 7% hike in energy prices. Today, the UK public got the news they did not want, with Ofgem announcing that its price cap would jump by a massive80%, and a typical household gas and electricity bill will rise to US$ 4,164 (£3,549) a year from October. The energy price cap is the maximum amount that suppliers can charge households per unit of energy – it does not apply to businesses. Cornwall Insight has forecast that we have seen nothing yet, forecasting that the typical annual household bill will rise to US$ 6,336 (£5,400) in January before hitting more than US$ 7,744 (£6,600) in April. Unite has estimated that at least 30% of the Ofgem price cap increase is made up of profit for energy giants, equating to US$ 17.60 (£15 billion). The new energy price cap will drain the disposable income of several million households and will have a huge negative impact on consumer confidence, as the economy downturns into a recession. There is no doubt that the country is facing The Winter of Discontent.

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Time To Pay The Fiddler

Time To Pay The Fiddler                                                           19 August 2022

The 3,149 real estate and properties transactions totalled US$ 2.81 billion during the week ending 19 August 2022. The sum of transactions was 344 plots, sold for US$ 695 million, and 2,239 apartments and villas, selling for US$ 1.07 billion. The top three transactions were for land in Al Wasl, sold for US$ 109 million, one for US$ 56 million in Hadaeq Sheikh Mohammed Bin Rashid and the third in Palm Jumeirah for US$ 35 million. Al Hebiah Fifth recorded the most transactions, with 173 sales transactions worth US$ 130 million, followed by Jabal Ali First, with 70 sales transactions worth US$ 77 million, and Al Yufrah 2, with 28 sales transactions, worth US$ 10 million. The top three transfers for apartments and villas were all apartments, one sold for US$ 163 million in Business Bay, another for US$ 119 million in Palm Jumeirah, and the third sold for US$ 111 million in Burj Khalifa. The sum of the amount of mortgaged properties for the week was US$ 1.02 billion, with the highest being for land in Al Mamzer, mortgaged for US$ 272 million.  Eighty properties were granted between first-degree relatives worth US$ 30 million.

Knight Frank estimate that there will be at least a 15% growth in Dubai’s ultra-prime residential properties, (properties over US$ 10 million), driven by increased demand, allied with restricted supply, with the consultancy noting that just eight new homes are expected to be completed between 2023 and 2025 in ‘Prime Dubai’ area that includes the Palm Jumeirah, Emirates Hills and Jumeirah Bay Island. This shortage – and booming demand – has seen prices jump over 70% in the past twelve months, with prices in the region of US$ 790 per sq ft; at this level, Dubai prices are in fact four times cheaper than prime neighbourhoods in New York or London. Knight Frank indicated that last year, it posted a record ninety-three ultra-prime sales, equating to nearly 40% of all ultra-prime home sales ever recorded in Dubai; in H1, it has already negotiated eighty-three sales. It also noted that “those that are in search of yields are finding a market where rental growth has kept pace with capital value increases, meaning there has been no yield compression”.

Following unprecedented growth in 2021, Knight Frank says values are growing at a more sustainable rate, and expect prices to be up to 7% higher by the end of the year – and are currently 10.1% higher on the year, with average prices at US$ 300 per sq ft. Villa prices were 19.3% higher on the year at 30 June – slowing from previous levels of 20.0% and 21.0% as at the end of Q1 and as at 31 December 2021.

CBRE’s latest Dubai Residential Market Snapshot posted twelve-month average rents to 31 July jumped 23.7%, with average apartment and villa rents increasing by 23.5% and 24.8% respectively. Over the period, the highest average annual apartment and villa rents were in Palm Jumeirah and Al Barrari at US$ 59.9k and US$ 252.0k respectively. In the same period, off-plan sales increased by 59.0% and secondary market sales by 57.1%, as total transaction volumes neared 45.8k – the highest total recorded since 2009 – and 6.5k in July, (58% higher than a year earlier). With average prices rising 9.9%, split between villas up 17.8%, to US$ 364k and apartments by 8.7%, at US$ 303k – but still 25.1% and 7.6% lower than witnessed at the sector’s 2014 peak. Knight Frank estimated a 10.1% rise in average residential prices across at the end of Q2 and noted that “values are growing at a more sustainable rate”.

Luxhabitat Sotheby’s International Realty reported the single biggest residential land sale, since its 2009 launch in Jumeirah Bay Island at US$ 50 million; it encompasses 46.1k sq ft of prime beachfront. The consultancy expects that prices could rise to US$ 1.36k per sq ft over the next two years, driven by its luxury beach front location and scarcity of land in that sector. The island, located between the World Islands and Downtown, encompasses 6.3 million sq ft, with low-rise apartments, villas, a boutique resort, and a marina, also featuring the five-star Bvlgari Hotel.  Plot sizes on the island, at between 16k sq ft – 37k sq ft, are four times the size of similar plots on Palm Jumeirah – and there are only 128 plots available, of which forty-six plots face the inner bay and eighty-two plots further inland.

Binghatti Developers has announced early completion of three of its projects in Jumeirah Village Circle – Binghatti Rose, (170 apartments), Binghatti Mirage, (160 apartments) and Binghatti Gems (77 apartments)– with a total investment value of US$ 109 million. It has also launched in the same location – Binghatti Luna, Binghatti Gate, Binghatti Jasmine and Binghatti Heights – which will bring the total number of units launched in the JVC area to more than 1.5k apartments. The Dubai-based developer hopes to launch more projects in several regions this year which will enhance the value of its Dubai real estate portfolio.

This week, Damac Properties launched a range of penthouses and luxury units, in its Skylofts Collection, at three of its luxury developments – Safa One de Grisogono, Safa Two de Grisogono and Cavali Tower in Dubai Marina. The three projects will have their own special features. Safa One, located between the 40th and 60th floors, will have access to a tropical garden and a rainforest on the top floor, plus an artificial beach pool on the podium level. Safa Two, located between the 73rd and 84th floors, will provide access to a fog forest and have adventure experiences through the Edge Walk and Glass Slide amenities. It will also boast a floating pool on the 60th floor, as well as an artificial beach pool and gym on the 11th floor. Meanwhile, skylofts in Cavali Tower will be found between the 68th and 71st floors, with residents able to use an infinity set within a sky garden and the tower’s Malibu Bay beach. The developer confirmed that prices for the Cavali penthouses will start at US$ 17 million and Safa at US$ 12 million.

Dubai’s Northacre Properties announced that it had completed ‘The Broadway’, its London-based wellness centre. The development, comprising an area of 75k sq ft and located in Westminster, is on the former site of the Metropolitan Police headquarters and had been acquired for US$ 370 million by its owner, Shuua Capital, in 2016. The six-tower development, built by Multiplex, will be home to 258 luxury apartments and will have 355k sq ft of residential, including 16k sq ft of health and wellness amenities, as well 116k sq ft and 27k sq ft for office and retail.

A new codeshare agreement between Emirates and Aegean will give the Dubai carrier’s passengers increased connectivity to eight Greek cities, (including Kerkyra, Chania, Irakleion, Mikonos, Thira, Rhodes, Thessaloniki and Alexandropoulos), via Athens, with a single ticket. It will also see the network encompassing other European cities, serviced by Greece’s largest carrier, including Bucharest, Belgrade and Naples. More interestingly, the codeshare network will also expand westward on Emirates’ flights to New York Newark from Athens and New York JFK from Milan.

In order “to limit further losses” over “blocked funds”, Emirates has announced its decision to suspend all flights to and from Nigeria from next month and regretted the inconvenience caused to their customers, but stressed that the “circumstances were beyond their control”. The airline confirmed that it would help affected passengers to “make alternative travel arrangements wherever possible” or provide them with a full refund, and that “we remain keen to serve Nigeria, and our operations provide much needed connectivity for Nigerian travellers”.

Blocked remittances have bedevilled international airlines for years and it is reported that the balance owed by twenty countries totals US$ 1.6 billion, of which twelve African counties owe 67% of that total, with Nigeria the biggest offender, with related debts, including that of Emirates, of US$ 450 million. Making up the top five are Zimbabwe, Algeria, Eritrea and Ethiopia, with outstanding payments due of US$ 100 million, US$ 96 million, US$ 79 million and US$ 75 million respectively.

DP World posted a year-on-year 52% increase in H1 profits, as revenue climbed by over 60% to US$ 7.9 billion, with adjusted EBITDA 30.8% higher at US$ 628, driven by growth in high margin cargo, feed through services and acquisitions made by the group: capex was 7.9% higher at US$ 741 million. Guidance recorded up to US$ 1.4 billion for the full year with investments planned in UAE, Jeddah, London Gateway, Sokhna (Egypt), Senegal and Callao (Peru). However, the port operator noted that “the near-term outlook remains uncertain due to the more challenging macro and geopolitical environment. Consequently, we expect growth rates to moderate in the second half of 2022”. 

A new law, introduced by Sheikh Hamdan bin Mohammed, will give heads of government entities the power to decide whether to allow payments of outstanding public funds by instalments, only if applicants can prove their inability to pay the total outstanding amount in one payment. Other conditions include public funds must be due by the date on which the application for payment by instalment is submitted, and the amount of public funds to be paid by instalments must not be less than the minimum amount prescribed by the Department of Finance. Furthermore, the initial payment must be at least 25% of the outstanding balance. The instalment period must not exceed five years, or the period in which the public funds are due, whichever is shorter, and instalments must be paid by bank cheques or similar instruments.

It is expected that by the end of next year, Dubai International’ passenger traffic will near pre-pandemic levels, as traffic, at a monthly 7.8 million for the rest of the year, with global air travel surging. This year, annual numbers should come in at around 62.4 million and up by 24.7%, to 77.8 million, by the end of 2023, still somewhat short of the 2019 return of 86.4 million. Despite a forty-five-day closure of one runway, Q2 passenger numbers almost tripled to 14.2 million, compared to the same 2021 period – the   ninth consecutive quarter of continued growth, since the start of the pandemic; H1 traffic was at 27.9 million. The top source countries were India, Saudi Arabia and the UK with four million, two million and 1.9 million passengers, with the top three destination cities being London, Riyadh and Mumbai with numbers of 1.3 million, 910k and 726k. Dubai may not suffer as much as other cities from the triple whammy of higher oil prices, rising inflation rates and a global economic slowdown. Over the coming years, it is expected that DXB’s capacity will increase to 120 million passengers, as the new airport DWC will be utilised by foreign carriers that handle more point-to-point traffic.

Magnitt reported that the UAE is the leading country for venture capital financing in the Mena region, with its local companies raising US$ 699 million in H1; the remaining top  places went to Saudi Arabia, Egypt, Bahrain and Tunisia, with total deals valued at US$ 584 million, US$ 307 million, US$ 116 million and US$ 36 million respectively. The data platform also noted that the country was the leader in terms of deals, up by 10%, compared to a year earlier as well as hosting the region’s biggest deal — a $181m convertible note mega-round for Abu Dhabi-based Pure Harvest in June. In 2021, it attracted more than US$ 1.47 billion in venture capital. Early-stage funding remained the dominant trend in the UAE at 80%, which is at similar levels, compared to the previous four years. Series A rounds were next at 11%, followed by Series B with 8%.

Earlier in the week, there were reports that Emaar Properties’ board was considering the divestment of its Emaar Malls’ subsidiary Namshi, its e-commerce fashion business. The developer, which has the Dubai government as its principal shareholder, with a 24% stake, through its sovereign wealth fund, acquired a 51% share in Namshi in 2017 for US$ 151 million, from Rocket Internet’s Global Fashion Group and the 49% balance for US$ 129 million two years later. (In 2017, it made an 11th-hour bid to acquire rival platform Souq.com, which was eventually sold to Amazon for US$ 580 million in 2017). By the end of the week, it was revealed that the buyer, paying US$ 335 million in cash, would be e-commerce company Noon, a company that was launched in 2017 by Mohamed Alabbar, (who founded Emaar Properties and, was the chairman, back in 1997), as a US$ 1 billion e-commerce platform, with the help of Saudi Arabia’s sovereign wealth fund. It is estimated that UAE’s e-commerce retail market grew 53% in 2020 to US$ 3.9 billion, equating to 8% of the overall retail market, with Amazon the biggest player with 2021 net sales of US$ 500 million, followed by Namshi’s US$ 249 million and Noon with a US$ 169 million share. (E-commerce licences issued by the Department of Economic Development jumped 63%).

Having upgraded its latest products, Chinese auto brand Chery plans to soon enter the Dubai market, introducing Tiggo8 Pro Max, Tiggo7 Pro Max and several other new models, and are in discussions with several of the country’ s leading automotive groups. In 2021, it posted a global sales increase of 31.7% to 961.9k vehicles, including exports of 269.2k. Launches have already been carried out in Saudi Arabia, Kuwait and Qatar, with the UAE being introduced to the range of vehicles before the end of 2022.

UAE car dealers are facing up to six-month delays for delivery of new stock, attributable to semiconductors and supply chain issues. It seems that the problem is more pronounced when it comes to higher performance vehicles and that some base vehicles have quicker delivery schedules. The delay affecting luxury vehicles that come up with high specifications because they are equipped with more semiconductors, of which there is an ongoing global shortage that has been evident for the past two years. On top of that, because of recent lockdowns in major Chinese manufacturing centres, such as Shanghai, there have been major disruptions in supply, with factories having to close. Furthermore, there are European delays caused by delays due to the Russia-Ukraine crisis because of raw material being sourced from the two countries. Semiconductors and logistics issues will remain problems in the foreseeable future. It is estimated that overall UAE vehicle sales are recovering, up by 9% on the year, but still 5% lower than at pre-pandemic levels.

It is reported that the net investments of non-Arab foreigners in the local bourses reached US$ 511 million by the end of H1, with purchases of US$ 5.11 billion offset by sales of US$ 4.60 billion, driven by the country’s investment attractiveness and the strong performance of listed companies, supported by the strength and robustness of the country’s economic foundations. YTD to 08 August, non-Arab foreign investors’ net investmentof US$ 4.23 billion.

Driven by a one-off merger transaction with National Takaful Company and rising inflation, the federal Securities and Commodities Authority is to allow the twenty-one Dubai Gold and Commodities Exchange (DGCX) licensed brokerage firms to become DFM derivatives members and to provide their services in the market for the first time. DGCX’s brokerage companies can acquire a range of DFM derivatives membership licences, including trading brokerage, trading and clearing brokerage or trading and general clearing brokerage.

Dar Al Takaful posted a Q2 US$ 4 million loss, compared to a US$ 7 million profit a year earlier. The H1 loss was US$ 3 million after a US$ 4 million in H1 2021. H1 gross written contributions were 4.4% lower at US$ 109 million, whilst it posted total assets in excess of US$ 545 million.

The DFM opened on Monday, 15 August, 78 points (0.6%) higher on the previous fortnight and closed, up 25 points (0.7%) on Friday 19 August, at 3,420. Emaar Properties, US$ 0.06 higher the previous week, was up US$ 0.08 to close Wednesday on US$ 1.61, (trading was closed on Thursday because of the sale of Namshi to Noon). Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.71, US$ 3.79, US$ 1.62 and US$ 0.48 and closed on US$ 0.70, US$ 3.72, US$ 1.61 and US$ 0.49. On 19 August, trading was at 81 million shares, with a value of US$ 22 million, compared to 113 million shares, with a value of US$ 74 million, on 12 August 2022.  

By Friday 19 August 2022, Brent, US$ 3.51 (3.7%) higher the previous week, lost US$ 2.21 (2.3%) to close on US$ 95.76. Gold, US$ 112 (6.6%) higher the previous four weeks shed US$ 59 (3.2%), to close Friday 19 August, on US$ 1,760.

Saudi Aramco Q2 profits soared 89.8% on the year to a record US$ 48.4 billion – and 23.8% higher than in Q1 – driven by higher crude prices, volumes sold and higher refining margins; H1 net income increased 86% to US$ 87.9 billion on the year. The world’s largest oil-producing company has announced that the Q2 dividend of US$ 18.8 billion would be paid in the next quarter and is the same amount as paid in Q2.

Although Boeing said it was not aware of any plane that had been affected by a digital vulnerability in the computer systems used on some of its aircraft, that could have allowed malicious hackers to modify data and cause pilots to make dangerous miscalculations, it has confirmed that a software update to address it has been released. It appears that older versions of a digital tool, used to calculate landing and take-off speeds on some aircraft, could be tampered with by hackers with direct access to an “Electronic Flight Bag,” and could cause pilots to make dangerous miscalculations. It is noted that the likelihood of this impacting flight safety is incredibly low, and pilots are trained to handle unusual situations.

In a futuristic move, American Airlines has not only signed an agreement with Boom Supersonic, but also put down a non-refundable deposit, to purchase twenty supersonic jets, with the option of a further forty Overture aircraft. The Colorado-based plane maker commented that the planes will fly at twice the speed of the current fastest commercial aircraft and is forecast to start operations by 2029; it will run on 100% sustainable aviation fuel. Carrying up to eighty passengers, the Overture could travel from Miami to London in five hours at Mach 1.7 over water. It is almost twenty years since BA and Air France grounded their Concorde fleet, citing US political pressure, high operating costs and reduced ticket sales. Last year, United Airlines agreed to a similar deal purchasing fifteen Overture jets, once safety, sustainability and operating requirements were met, with the option to purchase an additional thirty-five supersonic jets. It is reported that Boom is in discussions with Rolls Royce and others, and have yet to decide an engine manufacturer.

Today, Joules issued a profits warning saying trading in the five weeks to 14 August had “softened materially” because of the extremely warm and dry weather, which hit sales of outerwear, rainwear, knitwear and wellies. The clothing and homeware retailer, which has its roots in country and equestrian shows, commented that it had been badly hit by “ongoing subdued consumer demand due to the well-documented cost-of living crisis”. Although it confirmed “positive discussions” were continuing with rival retailer Next about the latter taking a US$ 18 million stake in it, Joules said there could be “no certainty that these discussions will lead to any agreement”.

Struggling with US$ 5.0 billion worth of debt, and falling attendances, shares in Cineworld, the world’s second largest cinema chain, (with 28k employees in ten countries and 9.2k screens across 750 sites), tanked over 60%, with reports that it would be filing for bankruptcy. The company, which also owns the Picturehouse chain in the UK, has been badly impacted by the pandemic and posted that post-Covid attendance levels have been lower than expected, blaming “limited” film releases. The firm had hoped blockbusters, such as the latest Bond film, Top Gun: Maverick and Thor: Love And Thunder, would draw audiences back after Covid restrictions, but noted that “despite a gradual recovery of demand since reopening in April 2021, recent admission levels have been below expectations”, citing that Hollywood has released fewer major films than would have been typical in a pre-pandemic summer. Consequently, total box office takings this year are 32% lower, compared with the equivalent period in 2019. Another disrupting factor is competition from streaming services, with the likes of Netflix investing millions of dollars making films and releasing them straight into subscribers’ homes.

Calm was co-founded in the US in 2012 by UK tech entrepreneurs Michael Acton Smith and Alex Tew, and was one of many such tech companies to benefit from a demand surge at the onset of Covid-19 in Q1 2020 that saw its guided meditation and bedtime stories for all ages, being downloaded more than 100 million times globally and attracting over four million paying members by the end of that year, with the company valued at US$ 2 billion. This week, it was announced that meditation app Calm has axed over 22% of its workforce, becoming the latest US tech company to announce job cuts, in line with similar tech companies which are facing investor pressure to rein in expenses, with revenue streams drying up, as demand falls. It is reported that over five hundred US start-ups have laid off staff in 2022 after a massive recruitment campaign seen last year.

In a bid to enhance the socio-economic diversity of its workforce, one of the country’s largest graduate employers will now accept applicants with lower second-class degrees; to date, PwC would only accept new recruits with a first or 2:1 degree. It is estimated that about 17% of university graduates receive a second-class classification or below, with the firm now accepting that “talent and potential is determined by more than academic grades.” The firm posted that this change of tack is about “opening our roles to students from a broader range of backgrounds, including those from lower income households.” Traditionally, most of the big professional firms have required students to have a 2:1 or above, and this move may see other professional firms follow suit

In a bid to help with their food shop prices climbing higher, amid soaring inflation, Iceland will offer customers interest-free loans of up to US$ 122, after successfully trialling the scheme in Huddersfield and Rhyl.  The retailer will use loans, provided by charity-owned lender ‘Fair For You’, and would only be offered to those who can afford them, with repayments set at US$ 12 a week.  This comes in the week that inflation hit double-digits, at 10.1%, ensuring real pay dipped 3.0% in Q2.

The Republic of Türkiye’s central bank surprised the market (yet again) by a 1.0% reduction in its benchmark rate to 13.0% to try and combat the double trouble of surging inflation, now floating around the 80% level and a sinking lira at 0.055 to the greenback, which a year ago was trading at US$ 0.012. The central bank is looking at inflation nudging up to 85% by the end of Q3 before declining to 60% by the end of December. The economy’s foreign reserves have been helped by more than US$ 10 billion – a Russian payment for the construction of a nuclear power station, more so because of the authority’s belief that inflation will soon head lower. The central bank also commented on the importance of a stable and supportive financial environment to maintain “the growth momentum in industrial production and the positive trend in employment in a period of increasing uncertainties regarding global growth as well as escalating geopolitical risk.”

An indicator of the slowdown in the Chinese economy is that tech giant Tencent reported its first ever quarterly deficit, with revenue dipping 3.0% to US$ 19.8 billion, as profits tanked 56% to US$ 2.75 billion. With about 50% of its revenue emanating from online advertising, financial and business services, it has been badly impacted by the economic downturn, as other revenue streams from cloud and other offerings slowed sharply, with ad sales plunging 18%. The owner of WeChat has also been hit by a government clampdown on online gaming. Furthermore, it has cut 5k jobs and shut down parts of its business including online education, e-commerce and game live streaming. Other companies have also taken a hit, including e-commerce giant Alibaba, which like Tencent, posted no quarterly growth for the first time. Last year, the firm faced challenges since the Li Keqiang government tightened restrictions on children’s game playing and halted approvals of new games, and although those approvals have resumed, Tencent has yet to see one of its games given a green light, forcing it to rely on older titles.

Hit by the triple whammy of its continuing property crisis, slowing consumer spending and Beijing’s zero Covid policy, July marked a slowdown in the national economy, with industrial 0.1% lower on the month at 3.8%, resulting in China’s central bank surprising the market by cutting key lending rates for the second time this year to revive demand. Analysts had expected a 4.6% hike and they were also disappointed to see retail sales 0.4% lower on the month at 2.7%, well short of their 5.0% forecast. July property investment noted its fastest rate decline this year, sinking 12.3%, while there was a massive 28.9% fall in new sales. As fresh lockdowns were seen in many parts of the country, because of outbreaks of the more transmissible Omicron variant, the chances of missing its official 5.5% growth target this year appear more likely, with some experts looking at figures hovering around the 4.0% level.

Following China’s decision to reduce key lending rates on Monday, along with the prospect of gas rationing, of up to 20%, in Germany, eurozone government bonds slipped lower with the benchmark, Germany’s ten-year bond, falling 0.04% to 0.899%, whilst fears of a recession grew. The markets are pricing in at least a 0.50% rate increase by the ECB next month. When Mario Draghi’s government collapsed last month, the spread between the ten-year bonds of Italy and Germany widened to 260 bp but this has since narrowed to 209 bp. The two factors behind this move were the support of the Pandemic Emergency Purchase Programme reinvestments, the ECB’s first line of defence in these circumstances, and the fact that the Italian right-wing coalition leaders said they would stick to EU budget rules.

Whilst the UK and other countries are raising rates at historic increases, with the UK almost certain to introduce a 0.5% hike next month, Argentina’s central bank has raised its main rate of interest for the eighth time in 2022, by 9.5%, (and 8.0% just two weeks earlier), to 69.5%, as it tries to contain soaring inflation, now above the 70% level. It is expected that this could top 90% by year end. There is little hope that the country’s latest economy minister, Sergio Massa, its third economy minister in six weeks, will be able to control soaring prices, tackle high debt levels and rein in government spending but he has promised that he would not be requesting the central bank to print more money this year to fund government spending. Earlier in the year, the country avoided defaulting on a US$ 44 billion IMF loan, but still has to meet conditions of the deal which are highly unpopular with the Argentinians.

The OECD, comprising thirty-eight countries, saw its May inflation rate for the bloc climb to 9.6%, 0.4% higher on the month, driven by international events such as supply chain interruptions, the pandemic and the war in Ukraine.  This was the sharpest price increase since 1988. The following table sees individual countries posting different results when analysing their inflation, average housing and fuel prices.

InflationAvg HousingFuel per litre
Australia6.80%US$ 517kUS$ 1.46 
New Zealand7.30%US$ 627kUS$ 1.90
UK10.10%US4 354KUS$ 1.85
Germany7.90%US$ 301kUS$ 1.72
USA8.50%US$ 345kUS$ 1.06
Canada8.10%US$ 515kUS$ 1.29

Prices of food, gas, petrol and rent have skyrocketed, attributable to a twenty-one year high inflation rate. With the ABS posting a 2.4% hike in annual wage growth, real wages in Australia continue to head south, down 3.6% on the year. In New Zealand, the main factor behind the hike in inflation is driven by housing construction and rentals for housing. In Q2, prices for the construction of new dwellings increased 18% on the year, with the usual suspects being supply-chain issues, labour costs, and higher demand; the previous two quarters had registered rises of 18% and 16%. July food prices had increased 7.4%, on the year.

In the UK, the June CPI figure of 9.4%, (that had risen to double-digits by August) was the highest annual CPI inflation rate since 1997, with a leading driver being the soaring price of fuel, (42.3% higher on the year), and electricity. Food, (including milk, cheese and egg), and non-alcoholic beverage prices rose 9.8% on the year – the highest rate ever since March 2008. Since May, the German CPI, at 7.5%, has been steadily dropping month by month, but still relatively high for the country. However, this remains higher than normal, with the main reason for the high inflation still being price rises for energy products which would have been higher if it were not for fuel discounts and the introduction of a nine-euro monthly train travel pass.

In June, Canada’s CPI was at its highest level, at 8.1%, since 1983, with the main driver being the 54.6% increase in petrol, whilst on a monthly basis, demand for passenger vehicles rose 1.6% and used cars by 1.3%. Prices for service like rent also rose 5.2% in the same period.

In the quarter to 31 July, UK retail sales volumes fell by 1.2%, with consumer confidence hitting a record low in August due to the soaring cost-of-living and bleak economic prospects; however, overall retail sales were still above pre-Covid levels. The Office for National Statistics noted that people were continuing to cut back on non-essential spending, in particular clothing and household goods, and an indicator that there has been a trend that 20% of people are postponing major purchases such as electricals and furniture. The ONS noted that consumers were cutting back on spending because of “increased prices and affordability concerns”. There is a growing trend that sees 33% of the consumers buying their main food shop at a discounter, compared to 28% a year earlier.

In a scheme covering sixty-five developing countries, the UK government is to cut import taxes on hundreds of more products from some of the world’s poorest countries to boost trade links. This is in addition to the thousands of products which developing nations can already export to the UK without tariffs and will affect around 99% of goods imported from Africa. It is reported that products such as clothes, shoes and foods, (not widely produced in the UK), will benefit from lower or zero tariffs, and is part of a wider push by the UK to use trade to “drive prosperity and help eradicate poverty”, as well as to reduce dependency on aid. It also simplifies the rules for which items, such as some textiles, qualify for preferential treatment which, in turn, could save importers millions of pounds.

According to Rightmove, UK home prices have dipped for the first time this year, down US$ 5.8k because of a summer lull in activity, with the typical asking price declining 1.3% to US$ 441.1k. The 1.3% drop in August is in line with the average drop seen every August since 2013. The actual impact of the double whammy of the rising cost of living, allied with mortgage rates moving higher, is unknown but they are both considered drag factors in the market. The consultancy expects “price changes for the rest of the year to continue to follow the usual seasonal pattern, which means we’ll end year at around 7% annual growth, even with the wider economic uncertainty.” Moneytfacts.co.uk indicates that the average five-year fixed rate mortgage has now breached 4%, which will obviously climb higher when the BoE move rates further north.

The UK government has announced that regulated train fares, (which cover some 45% of all fares), in England will rise below the rate of inflation which will help a little to cushion the impact of the cost of living crisis The government uses the formula RPI plus 1%, with the June index being 11.8% – but it is not known what next year’s increase will be;  the increase  will also be delayed for two months and be introduced next March. The June rate of RPI figure was the highest rate in more than forty years. Passenger numbers have yet to return to pre-pandemic levels, with a recent survey indicating that many are still working from home for at least three days a week.

Official data indicates that UK workers’ pay lags behind inflation, with the Office for National Statistics noting regular pay, excluding bonuses, grew by 4.7% in Q2, and still lagging behind rising inflation rates, touching 9.4%. The ONS reported that this resulted in a 3% drop in regular pay for employees once inflation is taken into account, representing the biggest slump since records began in 2001. Official figures also showed that the number of UK workers on payrolls rose by 73k between June and July to 29.7 million, with the total number of hours worked each week appearing to have stabilised very slightly below pre-pandemic levels. The number of job vacancies, still at historically high levels, dipped for the first time in two years, but still sees a vacancy for every person unemployed. The way inflation is moving – now to a possible 15% within months – and actual pay increases heading in the other direction, it must be Time To Pay The Fiddler.

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Nero Played His Fiddle While Rome Burned!

Nero Played His Fiddle While Rome Burned!                       12 August 2022

The 2,433 real estate and properties transactions totalled US$ 2.64 billion during the week ending 12 August 2022. The sum of transactions was 326 plots, sold for US$ 447million, and 1,567 apartments and villas, selling for US$ 850 million. The top three transactions were for land in HadNadd Hessa, sold for US$ 96 million, one for US$ 25 million in Island 2 and the third in Al Hebiah Fourth for US$ 11 million. Al Hebiah Fifth recorded the most transactions, with 214 sales transactions worth US$ 162 million, followed by Jabal Ali First, with 39 sales transactions worth US$ 35 million, and Al Yufrah 2, with 26 sales transactions, worth US$ 9 million. Sixty-six properties were granted between first-degree relatives worth US$ 89 million.

According to Betterhomes, Dubai average rental prices for apartments and townhouses rose by 29% and 33% in H2 and for villas by 64%, as the property market continued its strong post-pandemic recovery.

There is no doubt that the local property market is booming and recovering strongly from the Covid slowdown, with recent data showing that it posted the highest number of sales in the month of July in the past twelve years, with 7.1k sales transactions, 63.5% higher on the year, valued at US$ 5.72 billion – up 88.4%. Property Finder also noted that sales volumes and values were also up 41.2% and 58.3%, respectively, in comparison with July 2013, when they had peaked. 59% of all July sales transactions were in the secondary/ready property, with the balance for off-plan units, (totalling 2.9k transactions 67% higher on the year). In the rental sector, 42.7k July contracts were 4.3% higher on the month. The report also saw tenants increasingly preferring to stay in their current location amid rising rents rather than to incur moving costs, but also many were considering buying as, in many cases, montage repayments are still less than rents.

In a recent Savills’ report, Dubai was ranked fourth in their bi-annual review of prime residential capital values across thirty major global cities. Three US cities – Miami, Los Angeles and San Francisco – were ahead of the emirate. In H1, Dubai prime property prices came in 4.7% to the good, and now the emirate is set to become the best-performing  in the world. Savills noted that “Dubai is set to perform the strongest for the remainder of 2022 and factors that work in its favour include the continuously positive changes to policies, the most recent being additional benefits for long-term visa holders, with the opportunity for residents to have a superior quality of life at their fingertips”. Dubai was seventh, with a 5.3% rise in prime rents in H1, with the three leading cities being New York, Singapore and London, with rises of 8.5%, 8.5% and 7.7%.

It is reported that Emaar has agreed a US$ 2.04 billion deal to fully acquire Dubai Creek Harbour from Dubai Holding, to be paid equally in cash and Emaar Properties’ shares; the cash portion includes a US$ 335 million payable in three equal instalments. The development, located along the emirate’s waterfront, features 78.5 million sq ft of residential space and is expected to house 200k people when complete; it currently has about 100 million sq ft of future development. Emaar noted that “the transaction will be beneficial to Emaar shareholders, as it will allow Emaar full control over the strategically located land assets of Dubai Creek Harbour, including entitlement to 100% of its generated profit.”

Savills’ H2 Dubai Office report indicates that the emirate’s office sector has remained resilient over the period, mainly attributable to ongoing demand for Grade A office space, with robust occupier demand because of the improvement in the local economy and the fact that it is estimated that an average of 80% of workers have returned to office work. The consultancy indicated that Dubai’s Q2 office utilisation levels were the highest among surveyed EMEA cities. Driven by new entrants into the local market – and some companies aiming to cut costs – there is a growing demand for serviced offices and co-working spaces; it is reported that the more prominent flexible space operators are recording high occupancy levels, and even some with 100% occupancy. Because of the increased demand, grade A developments have witnessed H2 average increases of around 10%, compared to a year earlier, and a 13% hike year-on-year.  The highest twelve-month rental gains were reported in Dubai Investment Park (35%), Barsha Heights (29%), Dubai Production City (27%) and Deira (25%). Most of the leasing activity in H1 took place in sub-markets such as DIFC, DWTC, DMCC, Dubai Media City and Dubai Internet City.

Starting from August, Emirates’ passengers can expect: to see “new” interiors and layouts in one hundred and twenty of the carrier’s planes, as it announced a US$ 2.0 billion spend to enhance its inflight customer experience. On top of that, passengers will also see improved inflight customer experience, upgraded menus, (that will be introduced next month), new vegan choices and a ‘cinema in the sky’ experience. The carrier has set up an award-winning team of chefs and a world-class catering team to deliver the best fine dining experience in the sky. The most significant investment is an extensive and record-breaking refurbishment of the aircraft fleet interiors, where cabins will be retrofitted with new or reupholstered seats, new panelling, flooring and other cabin features. Every cabin class will be refreshed, and new Premium Economy cabins installed.

Dubai hosted 282% more H1 visitors to 7.12 million, but still 14.2% lower than its equivalent pre-Covid figure of 8.36 million, as it pursues its target to become the world’s most visited destination. The main driver behind the improved figures was generated by Expo 2020 Dubai which ended 31 March but also by the fact that Dubai is seen on the global stage as a safe destination, and that events such as the Dubai Shopping Festival, the World Government Summit and the Arabian Travel Market also boosted visitor numbers. It is estimated that the emirate’s tourist sector contributes 11.6% to Dubai’s GDP. An analysis of the market sees both Western Europe and the GCC accounting for 22% of the overall tourist numbers followed by South Asia, MENA and Russia, the Commonwealth of Independent States and eastern Europe with 16%, 12% and 11% of the total. By country, India, Oman, Saudi Arabia, the UK and Russia were the top five source markets.

Understandably, the main beneficiary of the rise in incoming international tourists was the hotel sector which saw a 12% H1 rise to 74% in hotel occupancy – and this despite a 19% hike in capacity since the onset of Covid – and it was slightly lower than the 76% occupancy rate recorded during the same period in 2019. By the end of June 2022, Dubai was home to 773 establishments with 141k rooms, (June 2019 – 714 and 118k rooms). Revenue per available room came in 76% higher at US$ 114 on the year – and up 24% from the H1 2019 level of US$ 92. The average H1 daily rate of US$ 154 was 48.4% higher on the year and 27.7% compared to the same period in 2019. The GCC’s hospitality industry is set to grow by 74.8% to US$ 26.3 billion this year and will also return to pre-Covid levels by the end of the year.

July saw Dubai’s non-oil private sector economy continuing its recent improvement, rising 0.3 on the month to 56.4 – its fastest output growth since June 2019, (and rising for the twentieth consecutive month), driven by marked increases in new orders and promotional activity. Dubai has benefited from an fast improving travel and tourism sector and a booming property market, attributable to many factors including the ongoing Expo impact, residency visas for remote workers and retirees, and a marked expansion in the ten-year golden visa programme. The volume of new business dipped from its June three year high but sales were higher, backed by ongoing promotion and discounting.

According to the Central Bank, UAE inflation has been rising, in line with the global trend, with the Q1 CPI increasing by 3.4%, compared with 0.6% and 2.3 % in Q3 and Q4 2021; it estimates that inflation will reach 5.6% by year end. After June had registered the fastest rise in input prices since January 2018, July saw an easing of cost inflationary pressures for Dubai’s non-oil private sector but were still at their second highest over the past fifty-three months.

The federal government has introduced new reporting requirements aimed at certain real estate transactions conducted in the country. The UAE is one of the first countries in the world to implement a mechanism for real estate transactions involving virtual assets, which will greatly assist authorities in their global fight against money laundering and terrorist financing. In future, all real estate agents, brokers, and law firms will have to file reports to the UAE Financial Intelligence Unit in any of the following transactions:

  • single or multiple cash payment(s) equal to or above US$ 15k, (AED 55k)
  • payments that include the use of a virtual asset
  • payments where the fund(s) used in the transaction were derived from a virtual asset

They will also have to obtain and record the identification documents of the parties, (both individuals and companies), to the applicable transaction, among other relevant documents related to the transaction. The new law encompasses a wide range of sectors that are mostly exposed to the risks of money laundering and misuse of commercial transactions and the funds traded by them for the purposes of money laundering or other illegal practices.

The Ministry of Finance has announced that the country’s Q1 public spending rose 19.6% to US$ 23.8 billion on the year; of that total, employee compensation payments amounted to US$ 7.8 billion, a 16.5% increase compared to H1 2021. Other payments included goods and services usage worth US$ 8.4 billion, social benefits – US$ 3.8 billion, financial aid – US$ 1.1 billion, interest – US$ 463 million, US$ 436 million – fixed capital expenditure, grants – US$ 83 million and US$ 1.0 billion – other expenses. Over the period, revenue jumped 39.1% to US$ 33.7 billion, including US$ 15.4 billion in taxes, US$ 1.3 billion – social contributions and US$ 16.9 billion – other.

It is reported that the emirate’s biggest bank has given most of its employees a pay rise of between 5.0% – 8.0% to help cushion against rising costs of living, driven by inflation. The increases varied according to seniority and were part of a mid-cycle salary adjustment for inflation, with top executives receiving smaller or no increases, and lower-paid staff receiving the biggest increase. Last month, Emirates NBD posted a 42% jump in Q2 profit to US$ 953 million. According to Forbes’ list of Top 30 Banks 2022 in the region, the bank – along with First Abu Dhabi Bank – was ranked among the top five lenders in the ME.

As of June 28, 2022, the thirty banks in the ME had a total market value of US$ 586.6 billion and assets worth US$ 2.5 trillion. Gulf banks dominate this year’s ranking, with twenty-five out of the thirty based in the GCC. Saudi Arabia and the UAE are the most represented countries on the list, with ten and seven banks, respectively. Qatar followed with four banks, while Morocco had three. Kuwait – two, and Egypt, Bahrain, Jordan, and Oman with one each.

By the end of May, the UAE Central Bank reported that the assets of the twenty-two national banks had risen by 4.0% to US$ 823.7 billion, accounting for 87.8% of gross banking sector’s assets of US$ 937.9 billion. The 12.2% balance of US$ 114.2 billion was held by the thirty-seven foreign banks – up 0.94% YTD and 2.22% over the twelve months.

Mastercard has announced that it has partnered with Michelin as an official sponsor of the 120-year old MICHELIN Guide Dubai 2022. The emirate is the 38th, and latest, addition to the MICHELIN Guide, which is currently found in destinations across North America, South America, Asia Pacific and Europe. The Michelin rating criteria for restaurants takes into account five considerations: quality of ingredients, mastery of flavour and cooking techniques, the personality of the chef represented in the dining experience, harmony of flavours and consistency between inspectors’ visits.

It is reported that in H1, the overall UAE automotive market in the UAE has increased by 9.3% on the year, with the total units sold in June up 8.1% on a year-on-year basis. The dominant player in the market, Al-Futtaim Automotive, estimated that SUVs made up 50.5% of sales in the first six months of 2022. According to Market Research UAE, the UAE automotive market, which had dipped in Covid-hit 2020 and H1 2021, has shown signs of recovery with passenger cars to top US$ 5.8 billion this year. New car sales are expected to increase by up to 30% this year, as more new brands on offer and the supply chain improving.

Emaar Properties saw H!1 revenue 10.0% higher at US$ 3.70 billion, with EBITDA jumping 66% to US$ 1.66 billion, driven by a strong performance of its core property development business, and complemented by growing recurring revenue operations. Record sales were reported in H1, with a 4.9% rise to US$ 4.81 billion, as the company successfully launched projects both in its domestic and international markets. In Q2, revenue was 7.8% higher at US$ 1.75 billion, as EBITDA rose 52.5% to US$ 798 million. By 30 June, sales backlog was at US$ 13.06 billion which augurs well for its future profits. Its international operations recorded property sales, in Egypt and India, of US$ 661 million, contributing US$ 563 million to Emaar’s total revenue.

Emaar Malls, Emaar Properties’ wholly owned shopping malls and retail arm, posted a 30% hike in H1 revenue at US$ 725 million, surpassing 2019 pre-Covid tenant sales, led by record tenant sales at The Dubai Mall. EBITDA was 66% higher at US$ 448 million, as leasing occupancy stood at 94%. Its hospitality, leisure, entertainment and commercial leasing businesses recorded revenue of US$426 million, was up 93%, whilst Emaar’s UAE hotels, including JV and managed hotels, posted occupancy rates of a credible 71%. The combined revenue of malls, hospitality, leisure, entertainment and commercial leasing, posted a 48% rise to US$ 1.15 billion and EBITDA by 78% to US$ 805 million, equating to 31% and 48% of Emaar’s total revenue and EBITDA.

Emaar Development achieved a record 10.0% hike in H1 property sales at US$ 4.14 billion, as the company, majority-owned by Emaar Properties, launched fifteen projects in various master plans, including Dubai Hills Estate, Dubai Creek Harbour, Downtown Dubai, Emaar Beachfront, Arabian Ranches and Emaar South Over the period, revenue was at US$ 1.98 billion, as EBITDA came in 15.0% higher at US$ 698 million.  In H1, it delivered over 3.1k residential units and has now delivered more than 55.1k residential units, with over 26.1k residences currently under development in the UAE. As at 30 June, the build-to-sell property development business had a sales backlog of US$ 8.92 billion that will be recognised as future revenue for the business.

Dubai Investments has posted a 20.5% hike in H1 net profit to US$ 99 million, driven by a marked uptick in its manufacturing, contracting and services segment. Its total assets remained stable at US$ 6.00 billion, with total equity increasing by 1.0% to US$ 3.30 billion. Its recent sale of its 50% of Emirates District Cooling (Emicool) LLC, with a resultant gain of US$ 267 million, will be accounted for in Q3 results.

DEWA posted a 40% hike in Q2 net profit, to US$ 654 million, driven by improved revenue, up 14.0% to US$ 1.91 billion, because of increased power demand. In H1, both profit and revenue were higher – by 39.0% to US$ 856 million and 15% to US$ 3.29 billion.

Aramex posted a 31.9% annual decline in Q2 net income to US$ 12 million, as revenue declined 3.0% to US$ 409 million, driven by lower courier volumes, although the freight-forwarding and logistics business reported a sixfold growth. In H1, Aramex’s net profit dropped 18.0%, year-on-year, to US$ 25 million. ME’s biggest courier company has also suffered from a global downturn in e-commerce activity, as consumers returned to brick-and-mortar shopping, with Covid restrictions easing, and rising worldwide inflation rates impacting pressure on discretionary spending.

Shuaa Capital posted a Q2 net loss, attributable to the owners of the parent, of US$ 46 million, (compared to an US$ 8 million profit a year earlier), as expenses rose by 19.0% to US$ 26 million. The Dubai-based investment bank reported a Q2 net operating loss extending to US$ 9 million, compared to US$ 2 million in Q2 2021, as non-cash charges, including provisions and accelerated amortisation of intangible assets, impacted the company’s quarterly results.

The DFM opened on Monday, 08 August, 21 points (0.6%) lower on the previous three week and closed 78 points higher (2.3%) on Friday 12 August, at 3,395. Emaar Properties, US$ 0.03 lower the previous week, was up US$ 0.06 to close on US$ 1.53. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 3.69, US$ 1.58 and US$ 0.46 and closed on US$ 0.71, US$ 3.79, US$ 1.62 and US$ 0.48. On 12 August, trading was at 113 million shares, with a value of US$ 74 million, compared to 87 million shares, with a value of US$ 73 million, on 05 August 2022.  

By Friday 12 August 2022, Brent, US$ 16.55 (14.1%) lower the previous week, gained US$ 3.51 (3.7%) to close on US$ 97.97. Gold, US$ 85 (5.0%) higher the previous three weeks gained US$ 27 (1.5%), to close Friday 12 August, on US$ 1,819.

Oil prices continued with their volatility this week, with supply concerns as, on 04 August, Russia suspended oil exports to Europe through a major pipeline amid Moscow’s military offensive in Ukraine, according to the Russian pipeline operator Transneft. The southern leg of the pipeline passes through Ukraine and supplies oil to Hungary, Slovakia and the Czech Republic Despite the distinct possibility of a global recession looming, which would normally see demand – and prices – fall, oil prices will not go much lower if the oil supply outlook remains tight. On Wednesday, the Russian pipeline operator resumed supply through the southern Druzhba pipeline, Last week, the 23-member Opec+ super-group of oil producers agreed to boost output by 100k bpd, whilst the International Energy Agency trimmed its global oil demand forecast by 1.7 million bpd to 99.2 million bpd this year and by 2.1 million bpd to 101.3 million bpd in 2023.

India’s Tata Motors has agreed a US$ 92 million deal, (including land, machinery and all “eligible employees”), to buy a Ford manufacturing plant in the western state of Gujarat in a bid to boost its domestic car production. The US car maker has finally given up on India after a twenty-year presence and struggle to make any RoI in the country; it has lost a reported US$ 2 billion over the past decade. The acquisition will see Tata’s new capacity rise by 300k units which could further rise 40% to 420k. Last September, Ford announced that it would close its Indian car factories, as part of a move that would cost it around US$ 2.0 billion, and joined the likes of General Motors, Volkswagen-owned MAN Trucks and motorbike maker Harley Davidson who had earlier left the Indian market. With its car market stagnating, it is interesting to note that over the past five years. India’s annual passenger vehicle market has stayed at around 3 million units a year, compared to China seeing twenty million cars bought annually. This may be about to change as Mahindra posted that demand for its vehicles was outstripping production, as consumers rushed to buy its popular sport-utility vehicles.

In the wake of the Covid pandemic, which severely disrupted international travel, demand has returned but it seems that the infrastructure was not ready, with staff shortages at airlines and airports leading to delays and cancellations; another problem was the soaring cost of fuel which obviously has hit margins. This week, Ryanair’s supremo, Michael O’Leary, commented that the era of the €10 ticket is over, noting that the carrier’s average fare would increase by 25% to US$ 52 over the coming years. Despite the rising expenses facing airlines, and surging costs of living costs for potential travellers, he expects customers to seek out lower-cost options rather than cut back on flights, commenting that “we think people will continue to fly frequently. But I think people are going to become much more price sensitive and therefore my view of life is that people will trade down in their many millions. Because of advance planning – for example, deciding to start recruiting and training cabin crew and pilots last November – Ryanair has had to cancel only 0.3% of flights, compared to BA and EasyJet with 3.5% and 2.8% cancellations. The CEO said he had “very little sympathy” for the airports, saying they knew schedules months in advance and that security staff, which are the responsibility of the airports, required less training than pilots, and accused LHR of mismanagement.

Having faced several well-publicised production problems, Boeing managed to deliver its first 787 Dreamliner since May 2021, with American Airlines receiving its first new Boeing plane in sixteen months; it expects to receive a further eight jets by the end of the year, with a further thirty-three on order. Both parties benefitted from the news, with share values up 4.5% for AA and 3.3% for the plane maker. Boeing confirmed it resumed deliveries following “thorough engineering analysis, verification and rework activities to ensure all airplanes conform to Boeing’s exacting specifications and regulatory requirements.” Following two fatal 737 MAX crashes, in 2018 and 2019, the Federal Aviation Administration pledged to more closely scrutinise Boeing and delegate fewer responsibilities for aircraft certification. In September 2020, the FAA said it was investigating manufacturing flaws in some 787 jetliners and consequently has indicated that it “will inspect each aircraft before an airworthiness certificate is issued and cleared for delivery.”  The 787 has cost Boeing additional expenses and earlier in the year, it took a US$ 3.5 billion charge due to 787 delivery delays and customer concessions, and another US$ 1 billion in abnormal production costs stemming from production flaws and related repairs and inspections.

The Swedish, Danish and Norwegian pilot union members have voted in favour of adopting the July collective bargaining agreement, reached with airline SAS, and will thus not resume their strike. This comes after SAS grounded some 3.7k flights during a crippling fifteen-day strike that left 380k passengers stranded. On the second day of the strike, the struggling airline filed for U.S. bankruptcy protection, and estimated the industrial action cost it more than $145 million (during what should have been a profitable peak summer travel season). Part of the agreement included lower wages and longer hours, and the carrier rehiring pilots laid off during the pandemic.

The next sector to go out on strike for a better pay deal will be London bus drivers following in line behind Underground and railway workers; the two-day walk-out will be from 19-20 August. The union has rejected the company’s offer of a pay increase of 3.6% this year and 4.2% in 2023, claiming that it was a real terms pay cut due to the soaring rate of inflation.

In 2020, Johnson & Johnson ended sales of its talc-based baby powder in the US, after facing tens of thousands of lawsuits from women who alleged that it contained asbestos and caused them to develop ovarian cancer. This week, it was announced that it will stop making and selling its talc-based baby powder around the world, replacing it with an all corn-starch-based baby powder, despite claiming that the product is safe to use. The claims against J&J were based on the fact that talc is mined from the earth and is found in seams close to that of asbestos, which is a material known to cause cancer. Last October, J&J created a subsidiary, LTL Management, assigning its talc claims to it, and then placed it into bankruptcy, which paused the pending lawsuits. Prior to the bankruptcy filing, J&J was facing costs of US$ 3.5 billion in verdicts and settlements, including one in which 22 women were awarded a judgement of more than US$ 2.0 billion.

Another twist in the Twitter saga sees Elon Musk tweeting he would be prepared to go ahead with the US$ 44 billion acquisition so long as the tech giant could provide its method of sampling one hundred accounts and how it confirmed that the accounts are real.  However, he added that if it turns out that their SEC filings are materially false, then he would not. Twitter responded that his claims that he was hoodwinked into signing the deal to buy the social media company, were “implausible and contrary to fact”. It seems that Elon Musk would use the US$ 6.9 billion he acquired after selling shares in Tesla to finance a potential Twitter deal if he loses this October’s legal case. The enigmatic entrepreneur noted that “in the (hopefully unlikely) event that Twitter forces this deal to close, and some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock.” In April, he agreed to buy Twitter for at a high premium price of US$ 44 billion but tore up the agreement last month, after claiming certain irregularities including a number of spam accounts. Over the past year, he has sold Tesla shares, valued at US$ 32 billion, but still owns 155 million shares in the electric carmaker, equating to some 15% of the company; its share value has risen some 15% since declaring better than expected profits late last month.

In its first-ever bond offering, and following in the footsteps of Apple and Intel who both recently finalised bond deals for US$ 5.5 billion and US$ 6.0 billion, Meta Platforms Inc (META.O) has raised US$ 10 billion as it looks to fund share buybacks and investments to revamp its business. The Facebook parent company, the only big tech company with a debt free balance sheet, wants to build a more traditional balance sheet and fund some projects including its metaverse virtual reality. Last month, it posted its first ever quarterly loss and forecast a turbulent period ahead of a possible recession and pressure on its digital ads sales.

With latest figures showing that Walt Disney Co has 221.1 million streaming customers, it has surpassed Netflix’s 220.7 million. Following the news, Disney shares jumped 6.9% in Wednesday trading and it announced it will introduce a 38% increase in prices for customers who want to watch Disney+ or Hulu without commercials. Five years ago, Disney was struggling, as the viewing trend was moving away from traditional cable and broadcast television, and so it staked its future on building a streaming service to rival Netflix. There is no doubt that Disney has the momentum, as Netflix is struggling, and it has still more room to grow in international markets where it is rolling out its service fast and adding new customers. Having lost out on IPL cricket rights in India, Disney has lowered its forecast, projecting figures of between 215 million – 245 million, from 230 million – 260 million. The latest quarterly results shows that the streaming TV unit lost US$ 1.1 billion, whilst operating income more than doubled at the parks, experiences and products division to US 3.6 billion. Overall revenue rose 26% to US$ 21.5 billion.

Having been royally battered by a massive sell-off in global tech stocks, Japan’s SoftBank posted a record Q3 US$ 23.4 billion net loss, with its Vision Fund sector shipping US$ 2.82 billion, surpassing its highest ever quarterly Q2 loss of US$ 2.66 billion; it also took a US$ 993 million forex loss because of the weakening yen. SoftBank, the world’s largest tech fund holder, has billions of dollars invested in unlisted technology start-ups, as well as the likes of giants Amazon and Uber – and with the Nasdaq 100 shedding 22% in value during the quarter, (its worst ever return since the 2008 GFC), it is bound to hurt the Japanese mega investor. There appears to be worse to come as global economic growth continues to slow. It posted losses in Coupang (US$ 355.4 billion), SenseTime (US$ 285.8 billion), and DoorDash (US$ 267.4 billion). Furthermore, it has seen Bytedance and Klarna Bank valuations losing 25% and 85%.

After being twice imprisoned for bribing former South Korean president Park Geun-Hye, to the tune of US$ 6.6 million, to secure support for a merger opposed by shareholders that would shore up his control of his family’s empire, Samsung heir Lee Jae-yong has been granted a special presidential pardon. His crimes were directly tied up in the corruption scandal that led to the twenty-five year imprisonment of the former president Park Geun-Hye, who had been in office from 2013-2017. However, her replacement, Moon Jae-in, was elected on the mandate of cleaning up the mess but patently failed to do so and in his last days as president, pardoned his predecessor. Eight months ago, he was replaced by Yoon Suk-yeol who in turn has offered clemency to the Samsung chief and In his last days as president, he granted a pardon to his predecessor. There is no doubt that South Korean ‘wasta’ is alive and kicking and it seems that certain business leaders are above the law.

Even worse economic news from Türkiye, with the country’s July inflation rate climbing to a record inflation rate of 79.6%, with the lira was trading flat at 17.956 against the US$; It had touched a record low of 18.4 at the end of 2021 and last year and YTD had risen 44% and 27%. On the month, consumer prices rose 2.37% in July, as global energy and commodity costs pushed prices higher, with transportation and food and non-alcoholic drinks climbing by 119.1% and 94.7%. President Tayyip Erdogan estimates that inflation will come down to “appropriate” levels by February-March next year, while the central bank raised its end-2022 forecast to 60.4% from its most recent forecast of 42.8%.

In a bid to catch up lost ground to the Chinese, and to reduce the country’s reliance on Chinese tech products, President Joe Biden has signed a law committing US$ 280 billion to high tech manufacturing and scientific research, including for investments such as tax breaks for companies that build computer chip manufacturing plants in the US. Thirty years ago, the US produced 40% of the global semiconductors – now that has sank to just 10%. Furthermore, the global shortage of microchips, which has had a negative impact on many sectors, including motor vehicles and white goods, has increased the need for this new investment. The Chinese Embassy in Washington had opposed the semiconductor bill, calling it reminiscent of a “Cold War mentality.” The EU is also investing in tech, with a US$ 41.3 billion investment plan to boost production of computer chips.

Its seems that the Johnson government may have made a big mistake, in January 2021, by no longer offering tax-free purchases to international tourists, Under the VAT Retail Export Scheme, non-EU visitors to the bloc could recover the VAT on High Street purchases, but the scheme was withdrawn  in January 2021 after the UK left the EU. It seems that many high-spending international tourists have stopped coming to spend money in the UK and instead are going to the likes of Paris for their luxury shopping requirements. Even UK travellers to the continent can avail of duty-free shopping on the continent.

The calendar Q2 UK economy contracted by 0.1%, (compared to a 0.8% growth in the previous quarter) attributable to a decline in household spending; this was the first contraction since the pandemic, as predictions for a recession come in line with reality. Because of the Queen’s platinum jubilee celebrations, there was a 0.6% decline in June, following surprise growth in May due to the celebrations. The cost-of-living crisis and the global impact of the Ukraine war added to the economic problems in Q2, with health a leading factor for the contraction, because of the withdrawal of the NHS Test and Trace Covid-19 vaccination services, along with a dip in the retail sector. However, improvements were seen in hotels, bars, hairdressers and outdoor events.   The forecast for the next quarter is quite positive, as the effect of the holiday unwinds, but thereafter it is downhill all the way until the end of 2023, with every possibility of five quarterly declines in GDP. Rates are expected to rise again, by a probable 0.5%, next month, (with cash rates currently at 1.75%, compared to just 0.1% last December) – and that alone would inevitably slow growth.

As the country struggles with all its economic woes, it seems incongruous that the Johnson lame duck administration appears to be doing nothing to rectify the economic mess, as its 160k+ Conservative members, mostly white and above the age of fifty, take six weeks to register their vote. At the same time, the two candidates for the leadership, Liz Truss and Rishi Sunak, are tearing each other – and their party – apart, as the country awaits 02 September to find out the name of the UK’s fifth Prime Minister this century. Interestingly, both were senior cabinet ministers under Boris Johnson so one would expect that they should be ‘singing from the same hymn sheet’, which they are patently not. However, come the election result, all will return to some sort of normalcy, with former Johnson allies falling in line behind the new leader. Is this democracy at work?

One of the main issues to be addressed by the new leadership is the soaring energy prices that has brought the nation to its knees. The former Chancellor seems to be promising everyone everything to become the new PM – but one has to ask why he could not have introduced these new policies when he was the captain of the ship – and was still there when inflation topped 8%. He is now advocating more energy payments whilst his rival, Liz Truss, has defended earnings at energy companies amid soaring price rises, saying profits should not be considered “dirty and evil”, and that windfall taxes on profits were about “bashing business”, and that cutting taxes was the best way to help with living costs over winter. Meanwhile the main man himself is on summer holidays and so is his recently appointed Chancellor of the Exchequer, Nadhim Zahawi, who turned on the Prime Minister a day after being appointed to this position. This is at a time when the UK inflation rate continues to head towards double-digit territory, energy prices are exploding and the BoE has raised rates again.  Nero Played His Fiddle While Rome Burned!

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Storm Clouds On The Horizon!

Storm Clouds On The Horizon!                                               05 August 2022

The 2,247 real estate and properties transactions totalled US$ 1.44 billion during the week ending 05 August 2022. The sum of transactions was 255 plots, sold for US$ 338 million, and 1,510 apartments and villas selling for US$ 760 million. The top two transactions were for land in Hadaeq Sheikh bin Rashid, sold for US$ 29 million, and the other for US$ 25 million in Island 2. Al Hebiah Fifth recorded the most transactions, with 130 sales transactions worth US$ 85 million, followed by Jabal Ali First, with 40 sales transactions worth US$ 35 million, and Al Yufrah 2, with 26 sales transactions, worth US$ 8 million. The top three transfers for apartments and villas were all apartments – one sold for US$ 102 million in Marsa Dubai, another for US$ 94 million in Burj Khalifa, and a third for US$ 62 million in Business Bay. The sum of the amount of mortgaged properties for the week was US$ 311 million, with the highest being for land in Al Thanyah First, mortgaged for US$ 38 million. Sixty-eight properties were granted between first-degree relatives worth US$ 58 million.

In Q2, Dubai rental rates continued to head north, with quarterly and annual rises of 4% and 15% for apartments and 6% and 23% for villas. Asteco noted that demand for villas, with outdoor areas, and for high-quality apartments remained robust and there was a marked interest in villas, adjacent to the Expo site. It also indicated that “the positive benefits of Expo 2020, including infrastructure upgrades and the repurposing of the site, will no doubt be felt across a wide range of sectors for years to come (‘the Expo effect’).” Although it sees rental rates “remaining elevated” for the rest of 2022, growth is expected to slow, in line with an oversupply of units. CBRE reported slightly different rental increases than Asteco – with apartments up 21.2% and villas 24.7%. It noted that the highest average rentals for apartments and villas were in Palm Jumeirah (US$ 59.5k) and Al Barari (US$ 242.3k). JLL Mena, meanwhile, placed average rental rises at 19%.

Asteco posted that 6k new apartments were delivered in Q1 and a further 7k in Q2, with only 529 villas handed over in that period; most of the new deliveries were concentrated in ‘new’ developments, including Damac Hills, Dubai Hills Estate, Wasl Gate and Port De La Mer. JLL put the Q2 figure at 6.5k, with a further 35k to be added by the end of the year – this figure seems to be a little too ambitious. The uptick in consumer confidence in the Dubai property sector saw a series of new projects launched in H1, with further new releases expected in the coming months. It must be noted that Dubai is in the same world that is now being impacted by surging inflation, higher borrowing rates and a slowing global economy. It is not immune from these economic factors and there will be a property slowdown but hopefully not at the same level as in other developed economies.

When open in Q4 2025, Jumeirah Living Residences Business Bay will   be Jumeirah Group’s fourth branded residence in Dubai, following in the footsteps of Jumeirah Zabeel Sarai Royal Residences, Jumeirah Living World Trade Centre Residences and Jumeirah Living Marina Gate. The 35-storey residence will be one of six premium residential towers within the Peninsula development, on the edge of Dubai Canal, and will comprise eighty-two premium branded residences, including 2-5 B/R units, as well as a unique full-floor, five-bedroom penthouse located on the top floor. It will have concierge services, a residents’ lounge, a teenager lounge, with gaming amenities, and a co-studying area.

dnata has extended its six-year partnership with GOL Airlines to continue to provide a range of passenger, ramp and baggage services to Brazil’s leading low-cost airline that carries nineteen million passengers, on 133k flights, to twenty of the country’s airports. The Dubai company, one of the world’s largest air and travel services providers, is that country’s leading ground services provider, offering a range of passenger, ramp and baggage services to the airline. dnata has recently increased its investment in Brazil to become the sole shareholder of its local subsidiary, and currently serves more than fifteen airlines at twenty-nine airports.

The third auction of the UAE’s 1.5 billion dirham-denominated treasury bonds was oversubscribed 5.1 times. It is expected that there will be a further three auctions, all for US$ 409 million (AED 1.5 billion), before the end of the year which will see the government’s T-bonds issuance programme for 2022 reach US$ 2.45 billion (AED 9.0 billion). As with the two previous auctions, there were two tranches for US$ 204 million, (AED 750 million), each – one for two and the other for three-year notes. The prices were at a spread of a 16 basis points (bps) over US Treasuries for two years, and a spread of 15 bps over US Treasuries for three years.

Latest figures to 31 May see the value of gold reserves of the Central Bank of the UAE 1.63% higher at US$ 3.30 billion; at the end of 2019, the value was at US$ 1.09 billion, 31 December 2020 at US$ 2.44 billon and at US$ 3.25 billion on 31 December 2021.

Following recent rises in petrol prices, and despite continuing high energy prices, the UAE Fuel Price Committee has decided to allow them to drop in August; at the end of last month, prices were retailing at their highest level since they were liberalised in 2015. At theonset of Covid, prices were frozen by the Fuel Price Committee, but controls were removed in March 2021 to reflect the movement of the market.

August petrol prices all showed monthly decreases of 13%+:

  • Super 98: US$ 1.098 – down by 13.0% on the month and 52.1% YTD from US$ 0.722
  • Special 95: US$ 1.068 – down 13.5% on the month and 55.0% YTD from US$ 0.689
  • Diesel: US$ 1.128 – down 13.0% on the month and 61.8% YTD from US$ 0.697
  • E-plus 91: US$ 1.046 – down by 13.5% on the month

e& (formerly known as Etisalat Group) has posted a 2.5% rise in H1 consolidated net profits to US$ 1.34 billion, on the year, as revenue rose 3.8% to US$ 7.17 billion and EBITDA was flat at US$ 3.65 billion. The number of UAE subscribers topped 13.3 million in H1 2022 – an annual increase of 10%, with aggregate group subscribers up 2.5% to 160 million. The Board approved an interim dividend of US$ 0.109 per share.

Amlak Finance PJSC posted a H1 35.0% net profit hike to US$72 million, despite total income dipping 9.1%to US$ 87 million, as revenues from financing business decreased by 18.8% to US$ 69 million. The company recorded a gain of US$ 61 million on debt settlement arrangements and was able to reduce its debt burden by US$ 154 million, including Mudaraba instrument of US$ 33 million. Operating costs reduced by 4.7% to US$ 11 million, whilst amortisation costs fell 14.1% to US$ 20 million; it also recorded a US$ 27 million impairment reversal compared to a US$ 5 impairment reversal in H1 2021. Over the period, the profit distribution to financiers decreased by 15.2% to US$ 11 million.

Tecom posted a 15.8% rise in H1 revenue to US$ 269 million, driven by an increase in occupancy rates across its various properties, up 4% to 82%, and strong revenue growth from the business and value-added service segment, from its 7.8k customers. EBITDA came in 22.4% higher at US$ 197 million, attributable not only to revenue growth but also to improved operational efficiencies, as H1 profit was up 43.4% to US$ 117 million; Q2 net profit at US$ 65 million was 54.1% higher on the year and 24.7% on the quarter.

Although H1 revenue remained stable at US$ 27 million, Union Properties reported a marked decline in Q2 net profit at US$ 78k, compared to over US$ 7 million a year earlier. With the developer continuing to implement a revised turnaround strategy, to cut costs and boost profitability, following detection last October of forgery, abuse of authority and fraud, it has been weighed down by finance costs, relating to a US$ 16 million legacy debt, and having to revamp three of its existing business units — Edacom Owners Management Association, Uptown Mirdiff Mall and Al Etihad Cold Storage — into a single entity, Edacom Asset Management. Administrative and general expenses declined by 42% on the year to US$ 5 million in Q2, and by 32% on an annual basis to US$ 10 million in H1.

Dubai Aerospace Enterprise posted a credible 186% leap in H1 profit to US$ 140 million, as cash flows from operating activities were 36% higher at US$ 679 million. Noting that it has up to US$ 2.7 billion in available liquidity, DAE’s new capital commitments for aircraft purchases was US$ 750 million and that it had signed a new aircraft management mandate to acquire and manage up to US$ 1.75 billion of aircraft assets.

Amanat Holdings reported a 7.0% hike in adjusted H1 profits to US$ 18 million, a 6.8% increase on the year, and on an adjusted basis, excluding the prior year’s gain on sale and trading results from divested entities, it posted a 13.6% hike in revenue to total income of US$ 26 million. Its healthcare platform recorded a 70.6% jump in income to US$ 7 million, whilst Middlesex University Dubai saw income 13.2% higher to nearly US$ 10 million. Having bought out the remaining 49% stake in Khawarizmi International College, NEMA Holding (formerly Abu Dhabi University Holding Company) acquired 100% of Liwa College of Technology in H1 2022. Amanat’s Chairman Hamad Abdulla Alshamsi said that “with expansions underway across CMRC, MDX, NEMA, and Sukoon, we are excited for the phase ahead where we see Amanat capitalising on further growth opportunities in addition to deploying capital into assets that complement our existing platforms”.

The DFM opened on Monday, 01 August, 280 points (9.2%) higher on the previous three weeks and closed 21 points lower (0.6%) on Friday 05 August, on 3,317. Emaar Properties, up US$ 0.10 the previous three weeks, was down US$ 0.03 to close on US$ 1.47. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 3.76, US$ 1.60 and US$ 0.47 and closed on US$ 0.69, US$ 3.69, US$ 1.58 and US$ 0.46. On 05 August, trading was at 89 million shares, with a value of US$ 38 million, compared to 87 million shares, with a value of US$ 73 million, on 29 July 2022.  

By Friday 05 August 2022, Brent, US$ 9.07 (9.0%) higher the previous fortnight, lost US$ 16.55 (14.1%) to close on US$ 94.46. Gold, US$ 66 (3.9%) higher the previous fortnight, gained US$ 19 (1.1%), to close Friday 05 August, on US$ 1,792.

In a trade-off between slower economic growth, (which would normally see oil prices declining), and supply shortages (which normally have the opposite effect), energy prices steadied today after breaching their lowest level since the Russian invasion of Ukraine in late February. Brent, the global benchmark for two thirds of the world’s oil, was trading marginally higher at $94.46 a barrel. Last week has seen nothing but bleak news on the global economy with the likes of the UK forecast to enter five successive quarters of recession, and its GDP falling by as much as 2.1%, and the IMF once again lowering its global economic growth forecast, this time to 3.2%.

With less than four months to go to the FIFA World Cup, Airbus has revoked its entire outstanding order from Qatar Airways for A350 jets, severing all new jetliner business with the Gulf carrier. This is part of an ongoing dispute in which the Gulf carrier has argued that the scarred condition, over premature surface damage, of more than twenty new long-haul jets that the airline says could pose a risk to passengers and which the plane manufacturer insists are completely safe. The carrier, which was the A350 launch customer in 2015, has grounded almost half its fleet and is suing Airbus for at least $1.4 billion, and had refused to take delivery of more aircraft. By the end of June, there were nineteen outstanding orders from Qatar Airways, with a catalogue price of US$ 7 billion, and the latest complete cancellation comes six months after Airbus also revoked the whole contract for fifty smaller A321neo jets in retaliation for Qatar refusing to take A350 deliveries. The dispute is already set for the London law courts next June.

Looney by name and apparently looney by nature, BP chief executive Bernard Looney, having overseen a massive windfall Q2 profit of US$ 8.45 billion, told the world that he would donate US$ 487, from his own funds, to an unnamed charity, having said he was unaware that the UK government was offering direct financial assistance to help families pay their soaring energy bills this winter. His basic annual salary is only US$ 1.7 million. US$ 3.5 billion of the profit will be used to buy back the company’s shares and the dividend will rise by 10%. This is another classic example of the rich getting richer and the poor, poorer, with surging energy prices accounting for a large share of the current UK 9.1% inflation rate. Some analysts expect a typical UK household to pay over US$ 3.7k, until at least the end of next year which could result in extra millions living under the poverty line. BP plans to invest as much as US$ 22.0 billion, into the UK this decade, on fossil fuel extraction, renewable energy production and electric vehicle charging which will create thousands of jobs across the country.

Meanwhile, Shell has decided to give most of its 82k workers a one-off 8% bonus after the company reported record quarterly profits of US$ 11 billion, driven by high oil and gas prices. Shell has also said it would return billions of dollars to its shareholders. UN Secretary General Antonio Guterres has called for energy companies to face special taxes, saying it was immoral for firms to be profiting from the Ukraine war. He may be right for a change!

Because of revaluations in Aurora, Grab and Zomato, Uber reported a Q2 net loss of US$ 2.6 billion, (Q2 2021 – US$ 300 million), whilst revenue increased by 105% to US$ 8.1 billion. Its adjusted pre-tax income was US$ 364 million, compared to a US$ 509 million loss recorded in the same period last year, driven by a jump in gross bookings, up 334% to US$ 29.1 billion, as both mobility and delivery gross bookings rose by 55% to US$ 13.4 billion and 7.0% to US$ 13.9 billion. Having declined by more than 43% over the previous twelve months, its share value rebounded on the news climbing 15.3% to US$ 28.40 in premarket trading on Tuesday. Location-wise, revenue jumped 149% to US$ 4.9 billion, 99% to US$ 1.8 billion, 57% to US$ 481 million and 14% to US$ 810 million in US/Canada, MEA, Europe and Asia Pacific respectively.

​​​​​​​​​​​​​ In 2019, JD Sports paid US$ 110 million for Footasylum, and now three years later, it has sold the business, for only US$ 46 million, to private equity firm Aurelius, which owns Lloyds Pharmacy. Following a ruling by the UK’s Competition and Markets Authority, that the merger could lead to less choice and a “worse deal” for customers, it had no other alternative but to divest it. JD Sports has described the decision to block the takeover as “inexplicable” but admitted “inadvertently” breaking the rules over the sharing of commercially sensitive information, with both firms being fined almost US$ 6 million for the offence and failing to alert the regulator. JD has around 3.4k stores across twenty-nine countries, including 700 in the UK and Ireland, selling brands such as Nike, Adidas and Puma, whilst Footasylum has sixty-five stores across the UK, selling similar sportswear brands. The two companies have a shared history – JD Sports co-founder David Makin established Footasylum in 2005.

Some 1.9k workers at the UK’s biggest container port in Felixstowe are to strike for eight days in a dispute over pay, as from 21 August, with the Unite union indicating that the 7% pay offer was “significantly below” the rate of inflation. Unite noted that “both Felixstowe docks and its parent company CK Hutchison Holding Ltd are both massively profitable and incredibly wealthy. They are fully able to pay the workforce a fair day’s pay. The company has prioritised delivering multi-million pound dividends rather than paying its workers a decent wage.” Around half of containers brought into the UK are transported via the port which posted that it was “disappointed” and that it was “determined” to help workers tackle rising costs – whilst continuing to invest in the port.

The Reserve Bank of Australia has downgraded its economic growth forecast on the back of house prices falling, surging inflation, mortgage rate hikes and a dismal global outlook – and despite expecting unemployment to fall to a low of 3.25%, before rising back to 4.0% by the end of 2024. Despite this leading to a modest pick-up in wage rises to about 3.5% in 2023, the Reserve Bank still expects real wages to fall for at least the next year. After peaking at 7.75%, by the end of this year, inflation is still expected to be about 6.2% by the middle of next year, and 4.3% at the end of 2023, driven by further significant rises in retail electricity prices next year.

It has also scaled back its forecasts for household consumption, which accounts for about 60% of Australia’s economy, from 4.4% to 2.8%, as consumer sentiment approaches recessionary levels. It also notes that there are “downside risks” to its forecasts due to the economic slowdowns in China and Europe. The RBA has based its forecasts on an assumption that its cash rate would climb from its current level of 1.85% to hit 3.0% by 31 December –before nudging lower by the end of 2024. Its GDP forecast for the end of the calendar year has been cut by 25% to 3.0%, with the economy expected to grow just 1.75% for the next two years. Falling house prices, combined with the previous construction boom inspired by ultra-low interest rates, and the previous government’s HomeBuilder grant, will result in dwelling investment contracting 4.8% over 2024.

UK property prices have been defying the law of gravity by still moving northwards, despite the growing cost of living crisis; in June, Nationwide indicated that prices were only 0.1% higher on the month at US$ 330.1k, indicating a slowdown in growth, but 11.0% on the year. The main drivers behind these figures are the relatively strong labour market conditions and the limited stock of homes on the market. However, Thursday’s BoE announcement of a 50bp rate, pushing bank rates to 1.75%, will inevitably cool the market but by how much remains to be seen and it may take further cuts to see a major impact on the sector. The rate for a two-year 75% loan-to-value fixed-rate mortgage had already jumped YTD from 1.57% to 2.88% by June, (the fastest six-monthly increase since 1995), that could rise to about 3.1% by the end of the year. Another factor that will have a drag on the market would be a continuing surge in the cost-of-living squeeze, and, further down the track, the property market could take a battering if a recession occurs later this year.

The UK rate increase may prove to be good news for UAE investors wishing to buy UK property there, as economic conditions point to an inevitable slowdown, and more rate hikes. The overseas buyer will benefit from the double whammy of falling prices and a strong currency which will make UK prices more attractive. This week witnessed the BoE raise rates by 50 bp to 1.75% and issue a warning of a looming recession.

House prices slipped for the first time since June 2021 in monthly terms and the market is likely to weaken further as rates move higher. The annual rate of price growth slowed by 0.7% to 11.8%, having risen by 1.4% in June, and this comes after a two-year boom driven by the pandemic, the switch to working from home and historically low mortgage rates. Now when the major impact of Covid has largely become part of history, the working population is returning to office work and rates are moving higher, house prices will come under more pressure. Property website, Zoopla sees house price rises down to 5% from 8.3%, by the end of 2022.

The Bank of England has warned the UK will fall into recession as it raised interest rates by the most in 27 years, with the ominous forecast that the economy will contract in Q4 and keep shrinking until at least the end of 2023; at the same time, it expects inflation to top 13%, driven by soaring energy prices. After months of burying their heads in the sand, the BoE actually did something else – it warned that the country is facing a recession, maybe longer than the GFC of 2008, and maybe worse than economic slump of the 1990s. If this blog could see stagflation – the combination of a stagnating economy and high inflation – happening early last year, why did it not occur to the nine wise experts, on the Bank’s MPC, who dictate monetary policy? The UK population will take little solace from the Bank’s governor, Andrew Bailey, who he had “huge sympathy and huge understanding for those who are struggling most” with the cost of living. He also added that he knew the cost-of-living squeeze was difficult but if it didn’t raise interest rates it would get “even worse”; this could have been done in May 2021 and not have to wait for August 2022. The UK is going into recession sooner than many people think and there are Storm Clouds On The Horizon!

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Brother, Can You Spare A Dime?

Brother, Can You Spare A Dime?                                                       29 July 2022

The 2,285 real estate and properties transactions totalled US$ 1.85 billion during the week ending 29 July 2022. The sum of transactions was 254 plots, sold for US$ 368 million, and 1,516 apartments and villas selling for US$ 913 million. The top two transactions were both for land in Hadaeq Sheikh Bin Rashid, one sold for US$ 27 million, and the other for US$ 25 million. Al Hebiah Fifth recorded the most transactions, with 134 sales transactions worth US$ 84 million, followed by Jabal Ali First, with 28 sales transactions worth US$ 27 million, and Al Yufrah 2, with 21 sales transactions worth US$ 8 million. The top three transfers for apartments and villas were all apartments – one sold for US$ 137 million in Marsa Dubai, another for US$ 94 million in Burj Khalifa, and a third for US$ 62 million in Business Bay. The sum of the amount of mortgaged properties for the week was US$ 411 million, with the highest being a building in Business Bay, mortgaged for US$ 84 million. 79 properties were granted between first-degree relatives worth US$ 139 million.

Mo’asher reported that June sales transactions had risen 34.0%, month on month, to 8.9k, valued at US$ 6.20 billion, 24.8% higher on the month. Of that total 60.05% of all sales transactions recorded were for secondary properties, (3.6k units valued at US$ 1.92 billion) and the balance for off-plan properties, (5.3k at US$ 4.28 billion). Q2 volume sales transactions were the highest quarterly returns in a decade, at 22.5k, valued at US$ 16.12 billion. Compared to Q2 2021, transactions and value were 45.9% and 61.6% higher. Of that total 59.68% of all sales transactions recorded were for secondary properties, (6.0k units valued at US$ 5.06 billion) and the balance for off-plan properties, (13.4k at US$ 11.06 billion). 

Property Monitor reports that Dubai June property prices declined, month on month, by 0.45, to 142.25, for the first time this year but were more than 10% higher on an annual basis.  Average property prices stood at US$ 278 per sq ft and these prices were at their highest level since August 2013. The report noted that this dip should “not be an immediate cause for concern at this stage, rather a welcome sign of a healthy market that can move forward at a sustainable pace whilst continuing to grow.”  There was massive growth seen in transaction volumes in the month – the second strongest June on record – at 8.9k, up 34.2% and 38.8% on a monthly and an annual basis; the value of sales was 55% higher at US$ 6.19 billion, with the total, at 01 July, equating to 70.8% of all 2021 sales. Property Monitor said it expects prices to be stable in H2. However, it must be remembered that Dubai is facing many of the same economic problems, as the rest of the world, including rising mortgage rates, the strength of the greenback and soaring inflation, and there may be some sort of minor correction by the end of the year. Property consultancy CBRE reported month-on-month apartment prices nudging up 0.1%, while villa prices gained more than 1.0%.

According to Betterhomes’ H1 2022 Dubai Real Estate Market Report, all segments of Dubai’s real estate market recorded growth “despite headwinds in the form of rising interest rates and a strengthening dollar”. The top five leading property buyers emanated from India, UK, Italy, Russia and France. During H1, 37.8k unts were sold, 60% higher on the year, whilst there was an 85% increase in the total value of sold properties on the year. The report noted that the Dubai market “is uniquely placed to weather any short-term storm and, as we have shown throughout the pandemic, could well be a net beneficiary of global uncertainty”, driven by the likes of surging inflation, rising mortgage rates and political unpredictability. Furthermore, high energy prices may act as an economic benefit, improving the country’s fiscal position. The report estimated that investors accounted for 68% of all transactions, with the balance from end users, and some 31% of transactions involved mortgages. Over the period, average rental prices for apartments, townhouses and villas climbed by 29%, 33% and 64%, while occupancy rates in freehold and leasehold areas increased to 90% and 86%.

For the rest of 2022, the report’s bullish outlook records “rising taxes, inflation and geopolitical instability in the West, and continuing Covid restrictions in the East, are likely to continue to push more expats to relocate to the UAE. Dubai will continue to reform employment and visa regulations to attract talent”. There has been an easing in earlier supply constraints, as some sellers have decided to “take the money”, thus releasing more stock in the market whilst developers have started to increase launches to enhance the off-plan market sector. With rates moving slowly northwards, it sees both rents and sales prices edging higher in H2 but noted that “historically, rates and prices still remain low, while yields and capital growth are strong, so for those taking a long-term view, Dubai real estate remains one of the best investment opportunities available.”

HH Sheikh Mohammed bin Rashid has made 2k plots of land available in the Umm Nahad Fourth district, located between Al Qudra and Al Ain roads. Emirati families will be able to receive US$ 272k, (AED 1 million), in interest-free loans to construct their residences. The plots were made available last Wednesday 27 July, when Emiratis, who had got approvals from the Mohammed bin Rashid Housing Establishment, through the Maskani app, can apply for a plot. The Executive Office noted that “it is part of His Highness’s keenness to enhance family stability and provide the highest standards of living for citizens.” Other benefits include exemption from mortgage fees and exempting citizens building homes for the first time from electricity connection fees. The project is part of the broader Dubai 2040 Urban Plan, which seeks to significantly expand the city and “make Dubai the best city for living in the world”.

The Dubai Ruler has made several amendments to rules governing the granting of titles to allotted industrial and commercial land in Dubai, aimed at promoting Dubai’s status as a preferred global real estate investment destination. The new decree defines “allotted land” as land plots allocated for industrial or commercial use whose “usufruct right is awarded to UAE nationals, (beneficiaries), including land subject to an order of disposition and allotted land transferred to third parties by way of succession, assignment, donation or in return for consideration”. The amended decree permits granting the allotted land to the beneficiary at their request on a freehold basis and without any restriction on its “use, exploitation or disposition, provided the allotted land includes the real estate project – either completed or under construction – in accordance with the rules and regulations of the Dubai Land Department”.

Boston Consulting Group has estimated that the country’s wealth will grow at 6.7% CAGR for the next five years to top US$ 1 trillion by 2026, from its current balance of US$ 700 billion, of which 41% was derived from UHNWIs, with this share expected to grow to 43% in 2026. Last year, global financial wealth rose by 10.6% to US$ 530 trillion, recording the fastest growth in more than a decade, whilst the UAE recorded growth in the region of 20%, driven by the influx of 2k millionaires in the year; it now accounts for 30% of the total financial wealth in the GCC, which totalled US$ 7 trillion after a 9% growth in 2021. The report noted that, “the growth in UAE and GCC wealth was equally distributed between financial wealth, such as equities, bonds, cash and deposits, and real assets.”

Premier Inn’s new listing places Dubai as the most popular global city break destination, as it won over travellers from twenty-one countries, claiming the “top searched-for city break destination” tag. Trailing behind Dubai were Paris (16), Boston (12), Madrid (8), Singapore (7) and London (6). The list was based on Google’s search data for city breaks from over 130 countries.

Dubai has formed a higher committee for future technology and digital economy, to be chaired by Sheikh Hamdan bin Mohammed, with the main aims of shaping the future of artificial intelligence and establishing Dubai as a global hub for the digital economy. The Crown Prince noted that this will require investing in the metaverse and establishing partnerships to boost the digital sector, in line with the Dubai Metaverse Strategy. The committee will design policies and analyse trends for the digital economy and future technologies, including the metaverse, and will work to identify the future skills needed for the digital sectors and will also plan to attract international companies and conferences.

Huobi Group has received a minimum viable product provisional approval from the Dubai Virtual Assets Regulatory Group. This will give the international crypto exchange time to undertake the process of applying for a licence and allow it to offer services within the parameters set by the regulatory authority’s specialised “test-adapt-scale” model. It plans to set up a regional headquarters in the emirate, noting that it was “optimistic about the city’s potential and the future opportunities it offers”.

Another company, which is based in Singapore, has also obtained a provisional licence from Dubai’s VARA which will allow it to participate in Dubai’s “fast-growing digital assets ecosystem by operating crypto native services under full regulatory supervision.” Financial services firm, Fintonia, commented that “Dubai is making significant strides towards establishing itself as a virtual assets hub and creating a conducive environment for the industry’s growth,” and that “the virtual asset licence marks an important milestone in our aspiration to have a presence in every region where there are innovative Web3 and crypto companies”. It will serve as the single custodial entity mandated to licence and govern the cryptocurrency sector in Dubai, including all mainland and free zones but excluding the DIFC.

The UAE is ranked 19th globally in Global Food Security Q2 2022, part of a report compiled by Deep Knowledge Analytics – and the first in the Arab World –  in  a list of the most food-secure nations in the world. The only other Arab countries in the top quartile were Saudi Arabia, and Qatar. The US topped the list with a score of 7.9 out of ten, while Sub-Saharan and MENA region countries dominated the bottom quartile of the Food Security Index, with Somalia scoring the lowest at 2.97 points out of ten. It noted that certain countries had not demonstrated the capacity to build food security through national policies and had been affected either by conflicts (northern Nigeria, Yemen, Burkina Faso and Niger), or by weather conditions such as consecutive seasons of drought (Kenya, South Sudan and Somalia) and by economic shocks. There is no doubt that the Russian invasion of Ukraine has destabilised the global food system and added to food insecurity this year.

This week DP World signed US$ 55 million agreements with agricultural commodity processors Adroit Canada and Al Amir Foods to develop two new agri-storage and processing units at Jebel Ali agri-terminal to boost the country’s food security; these units will have a “singular ecosystem” for bulk silo storage and agri-processing. Built over a quayside plot, it will cover an area of 100k sq mt and contribute to Dubai’s strategic plan of boosting foreign trade in the coming years. The Dubai-based port operator will also invest in the technologically advanced grain and pulses automated material-handling and ferrying systems as part of the project. A spokesman confirmed that “we look forward to amplifying trade for the UAE and the Middle East by enabling agri-trade and through our new developments in the Jebel Ali Port,” and that “our vision is always set on achieving the country’s national goals by supporting initiatives such as the National Food Security Strategy 2051,” Initially it will account for an estimated annual trade of US$ 245 million.

With global trade slowly improving, DP World, posted an almost 3% annual rise in gross container shipping volumes in Q2, handling 20.2 million twenty-foot equivalent units (TEU) driven by its terminals in Asia Pacific, the Americas and Australia. Group chairman, Sultan bin Sulayem noted that the results are “another solid set of throughput figures”, which are “once again ahead of industry growth”. In H1, the Dubai-based port operator recorded a 2.0% hike in TEUs transported, at 39.5 million, with strong growth of 4.5% to 5.7 million TEUs noted in the Americas and Australia.  The Asia Pacific and Indian subcontinent regions saw a 3.0% growth to 17.6 million TEUs, whilst EMEA nudged 1.0% higher to 16.1 million TEUs. In H1, its flagship base Jebel Ali port handled almost 7 million TEUs including more than 3.5 million TEUs in Q2, an increase of 1.2% and 3.5% on a yearly basis, respectively. Research and Markets estimate that the global shipping container market is projected to grow by more than 6% this year to more than US$ 10 billion and is expecting a 7.5% CAGR over the next four years to top US$ 13.5 billion by 2026.

By 30 June, DP World, had a global network of 295 business units in 78 countries, and over the previous six months had seen an expansion in its portfolio, including in the past month:

  • its South African unit, Imperial Logistics, increasing its stake in Botswana firm PST Sales & Distribution, receiving approval to buy a 100% stake in Mozambique-based logistics company J&J Group and acquiring a controlling stake in Nigeria’s Africa FMCG Distribution
  • signing an agreement with the Saudi Ports Authority to build a “port-centric” logistics park at the Jeddah Islamic Port with a total investment of more than US$ 133 million
  • signing an agreement, (including Dubai’s Ports, Customs and Free Zone Corporation), with Romania to develop infrastructure in the port city of Constanta and help it become one of the Black Sea’s “most important” cargo and vehicle ports
  • Canadian fund Caisse de Depot et Placement du Quebec announcing that it will invest US$ 5 billion in three of DP World’s UAE assets — Jebel Ali Port, Jebel Ali Free Zone and National Industries Park

In H1, the Federal Tax Authority more than doubled their inspections to almost 10k, compared to a year earlier, in a bid to combat tax evasion and protect consumers from non-compliant products. During the period, 5.5 million pieces of tobacco products, not bearing digital tax stamps, as well as other goods that failed to meet tax specifications were seized; the total value came to US$ 36 million and over 1.2k fines were also issued and 404 notices of non-registration were handed to violating entities.

For the first four months of the year, the gross value of interbank fund transfers through UAE Fund Transfer System (UAEFTS) topped US$ 1.08 trillion – a 26.2% increase over the same period last year. March was its busiest month with dirham-denominated transfers standing at US$ 297.8 billion. Over the same four months, cheques worth US$ 106.1 billion were handled by the Image based Cheque Clearing System – a year on year growth of 12%. The number of cheques processed by the ICCS rose 2.7% to 7.24 million.

Deyaar Development posted a 24.2% increase in unaudited H1 revenue at US$ 101 million and a 196% hike in profit to US$ 18 million. The property developer reported that revenues from development activities had increased, as it started recognising revenues from the sales of its Regalia project, (with it progressing according to schedule), and its hospitality portfolio performance continued to grow in line with the strong recovery of the tourism sector in the emirate. This is an indicator on how resilient the Dubai market is and how the market is expanding, despite adverse global economic conditions. The company also noted that “last month, the company successfully executed its capital reduction to write off the accumulated losses, which will increase the company’s attractiveness to investors and will reflect positively on Deyaar’s share price in the Dubai Financial Market.”

Dubai’s largest bank, Emirates NBD, reported its highest H1 profit in three years by recording an 11% increase in net profit to US$ 1.44 billion, with total operating income 45.1% higher at US$ 2.12 billion. Total H1 income came in 23% higher at US$ 3.87 billion attributable to record half-year retail lending, allied with improving margins. Net interest income jumped more than 24% year on the year to US$ 1.20 billion, whilst provisions for loan losses fell 28%, year on year, to US$ 518 million. Q2 figures saw earnings 42% higher at US$ 954 million, as provisions for bad loans dropped and revenue increased on a rise in net interest income. In H1, all three indicators grew – customer loans by 1%, to US$ 115.8 billion, deposits 2%, to US$ 127.5 billion, and total assets 3% to US$ 193.7 billion.

The Dubai-based Shariah-compliant lender Emirates Islamic saw H1 net profit climb 23% to US$ 191 million, driven by higher funded and non-funded income, as well as a marked reduction in the cost of risk; its impairment allowances declined 12%, year on year, reflecting improved business sentiment. The bank’s total assets grew strongly by 14% to US$ 20.2 billion in H1, with customer financing up 11% to US$ 12.8 billion and customer deposits 15% higher at US$ 14.7 billion, with CASA balances at 76% of deposits.

Commercial Bank of Dubai posted a 28.1% surge in H1 net profit to US$ 236 million, compared to a year earlier, driven by rising market interest rates and solid loan growth. It commented that “while the global macro-economic environment is challenging, on balance, the outlook for the UAE economy remains positive.” The bank’s operating income increased 10.3%, to US$ 472 million, driven by net interest income, fees and commissions, with operating profit to US$ 343 million, up by 8.3% comparable to H1 2021. Net impairment allowances were US$ 107 million, down 19.3%. Capital ratios remained strong with the capital adequacy ratio at 15.43%, Tier 1 ratio at 14.28% and Common Equity Tier 1 ratio at 11.88%.

Dubai Islamic Bank posted a Q2 33% hike in net income, to US$ 365 million, as revenue rose 8.0% to US$ 886 million and impairment charges for loan losses declined 29.0% to US$ 144 million. H1 profit rose 44.0% to US$ 725 million, as revenue rose 9.0% to US$ 1.36 billion and impairment charges were 37% lower, with a notable 6.0% jump in financing and Sukuk investments to US$ 66 million. The bank’s total assets rose 1.0% higher to US$ 76.9 billion. The bank’s capitalisation ratios remained strong, with capital adequacy at 17.9% and equity tier 1 ratio at 13.2%. The country’s biggest Sharia-compliant lender’s chairman, Mohammed Al Shaibani, noted that despite only moderate global growth “the GCC region and the UAE remain strong, building on the economic foundations and reforms.”

The Dubai Financial Market posted a 63.4% hike in H1 profit to US$ 17 million, with Q2 profit 134.6% higher at US$ 10 million, as H1 revenue rose by 19.9% to US$ 45 million; revenue was split into operating income of US$ 33 million and US$ 12 million of investment income & others. Q2 revenue came in at US$ 23 million, up 34.8% on the year. There were marginal increases in operating expenses in both H1 and Q2 to US$ 27 million and US$ 13 million. Total H1 trading volume on the bourse rose by 75.2% to US$ 13.46 billion, whilst the total market cap of listed securities was 28.2% higher at US$ 143.6 billion.

The DFM opened on Monday, 25 July, 199 points (6.5%) higher on the previous fortnight and closed up 81 points (2.5%) on Friday 29 July, on 3,338. Emaar Properties, up US$ 0.06 the previous fortnight, was US$ 0.04 higher to close on US$ 1.50. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 3.49, US$ 1.58 and US$ 0.47 and closed on US$ 0.69, US$ 3.76, US$ 1.60 and US$ 0.47. On 29 July, trading was at 87 million shares, with a value of US$ 73 million, compared to 62 million shares, with a value of US$ 55 million, on 22 July 2022.  

For the month of July, the bourse had opened on 3,223 and, having closed the month on 3,338 was 115 points (3.6%) higher. Emaar traded US$ 0.08 higher from its 01 July 2022 opening figure of US$ 1.42, to close the month at US$ 1.50. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.69, US$ 3.60 US$ 1.57 and US$ 0.45 and closed on 29 July on US$ 0.69, US$ 3.76, US$ 1.60 and US$ 0.47 respectively. The bourse had opened the year on 3,196 and, having closed July on 3,338, was 142 points (4.4%) higher, YTD. Emaar traded US$ 0.17 higher from its 01 January 2022 opening figure of US$ 1.33, to close July at US$ 1.50. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the year on US$ 0.00, US$ 3.69, US$ 1.47 and US$ 0.72 and closed on 29 July on US$ 0.69, US$ 3.76, US$ 1.60 and US$ 0.47 respectively.

By Friday 29 July 2022, Brent, US$ 2.69 (2.7%) higher the previous week, gained US$ 6.38 (6.2%) to close on US$ 110.01. Gold, US$ 18 (1.1%) higher the previous week, gained US$ 48 (2.8%), to close Friday 29 July, on US$ 1,773.

Brent started the year on US$ 77.68 and gained US$ 32.33 (41.6%), to close 29 July on US$ 110.01. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has shed US$ 58 (3.2%) during 2022, to close on US$ 1,773. For the month, Brent opened at US$ 107.59 and closed on 29 July, US$ 110.01 (2.2%) higher. Meanwhile, gold opened July on US$ 1,793 and shed US$ 20 (1.1%) to close at US$ 1,773 on 29 July.

Russian state-owned energy company indicated that it was concerned about the potential impact of western sanctions “due to expiration of time before prescribed time for overhaul, Gazprom is shutting down one more gas turbine produced by Siemens at the Portovaya CS”. Last week, Vladimir Putin had warned that flows could drop to 20% if the turbine issues were not resolved. It has been estimated that if Nord Stream 1 flows remain at a minimum of 40% of capacity and imports through other routes remain at the levels reported since 17 June, before the maintenance began, Europe will be able to refill storage to more than 80% by November. If Putin decided to cut supplies to zero next month, Europe will be able to refill its storage to only 70% and this would see countries most dependent on Russian gas – the likes of Germany, Austria and Central and Eastern Europe – struggling.

Samsung Electronics posted a Q2 12.1% hike in profits to US$ 10.84 billion, with record revenue figures of US$ 59.24 billion, 21.5% higher on the year, driven by record high semiconductor sales as they jumped 25% to US$ 2.19 billion, and profit by 44% to US$ 7.67 billion. Samsung said that the important drivers behind the impressive figures “were disciplined sales strategy, to meet market demand, and the benefits of a strong dollar”. Q2 profit at Samsung’s mobile division – which includes its flagship Galaxy smartphones – slid 19%, year-on-year, to US$ 2.01 billion, attributable to overall market demand amid geopolitical issues and inflationary worries; the tech giant expects demand in the smartphone sector to “stay similar year-on-year or show single-digit growth” with prolonged geopolitical issues and economic uncertainties.

Amazon posted a Q2 net loss of US$ 2 billion because of forex losses and a pre-tax valuation loss of US$ 3.9 billion, included in non-operating expense from the company’s common stock investment in Rivian Automotives; this was their second consecutive quarterly loss in seven years after making a US$ 7.8 billion net profit a year earlier. Revenue was 7.0% higher at US$ 121.2 billion, beating market expectations. Its share value rose 12.2% to US$ 137.20 in after-hours trading on Thursday.

Although revenue was 14.7% lower, quarter on quarter, Apple posted an 1.8% rise in fiscal Q3 revenue to US$ 83.0 billion but net profit declined 10.6% to US$ 19.4 billion – 22.4% lower than the previous quarter’s profit of US$ 25 billion. In April, the tech company warned the market that parts shortages would hit its sales by between US$ 4 billion and US$ 8 billion in the quarter.

There are always two sides to an argument and in the case of LHR it is the owner blaming the operators, (and everybody else but themselves), and the airlines accusing the airport’s management. Its embattled CEO, John Holland-Kaye, confirming that its deep-seated problems could take another eighteen months to solve, and “this is not going to be a quick fix.” The man, who is at the helm in making Heathrow a national embarrassment, blamed passenger habits, operators’ failures. the government, inter alia, in a wide-ranging attack on deflecting responsibility away from the source. LHR noted that “all parts of the airport are now fully operational. We have hired 1.3k people in the past six months and will have a similar level of security resource by the end of July as pre-pandemic”. It confirmed that there was no prospect of lifting a cap on flights until airlines boost the number of ground personnel, saying carriers were too slow to combat staffing shortages that contributed to the travel chaos engulfing Europe this summer. The airport operator confirmed that the 100k cap on departing passengers, due to end on 12 September, “will remain in place until airlines increase their ground handler resource”. (In July 2019, Unite threatened strike action when the CEO was awarded a 103% pay rise to US$ 5.06 million, with staff being denied a 4.5% increase at the time). In line with his CEO, the chairman of LHR, Paul Deighton, continues to blame the travel chaos, including delays and caps on passenger numbers, squarely on the shoulders of the airlines for failing to recruit enough baggage handlers; he could be deluded.

At last, some good news for the UK travel sector, as hundreds of BA staff at LHR voted to call off strike action after the airline made a new improved pay offer which was accepted by members. This comes days after fuel workers also called off a three-day strike at the airport.

In yet another dispute over pay, the union Unite said 92% of its members at the Port of Felixstowe voted in favour of strike action and there was an 81% turnout; Unite had about 1.9k members at the port.  Although the employer had made a pay offer of 5% increase, the union has retorted that “this is an effective pay cut with the real rate of inflation currently standing at 11.9%.” Felixstowe is the UK’s biggest container port, handling 48% of the country’s container trade, and any strike action will have a damaging knock-on effect on the already troubled UK supply chain.

Following ground staff strike action on Wednesday, Deutsche Lufthansa had to cancel over 1k flights, further disrupting the peak summer travel season,  when they went on strike early Wednesday, prompting the cancellation of more than 1k flight. The union is asking for a 9.5% pay hike (US$ 355 a month) for its 20k members. The airline had offered a US$ 152 monthly pay rise for the rest of 2022, followed by an additional US$ 101 next year and a 2% increase from mid-2023 dependent on the company’s financial results.

With no new government formed, even after two months of parliamentary elections, and the resulting delay in the introduction of reforms, the IMF has delayed its expected US$ 3 billion rescue package to boost the country’s reserves. Securing IMF backing will also help in a further US$ 11 billion of assistance that was pledged at a Paris donor conference in 2018. Lebanon continues to be an economic basket-case, as June inflation topped 210% on the year – and its 24th consecutive triple-digit monthly increase – and 9.2% higher on the month. Water, electricity, gas and other fuels soared 594% in June, compared with the same month last year, followed by the health segment, which surged 492%, transport costs at 462% and food and non-alcoholic beverages rising 332%. Last year, Lebanon’s public debt ballooned to more than US$ 100 billion, equating to 212% of its GDP and it has the fourth-highest debt-to-GDP ratio in the world, surpassed only by Japan, Sudan and Greece. In the period, 2019 – 2021, the country’s economy contracted about 58%, with GDP falling from US$ 52.0 billion to US$ 21.8 billion in 2021 – the largest contraction on a list of 193 countries. Continuing failure by politicians to agree on the formation of a new government, and agreement on a new president by 31 October, when Michel Aoun’s six-year term expires, will further exacerbate the country’s economic crisis and delay the implementation of the IMF bailout programme.

According to NonFungible.com, the global NFT sector posted a Q2 25.2% drop in terms of buyers, volume of sales and volume of US dollars traded to US$ 8.0 billion. The report noted that “the market is experiencing a historical bearish period”, in line to what is occurring in the wider share and cryptocurrency markets and that for the first time ever, in the history of NFTs, trading-related activities are no longer profitable.” The average Q2 price of NFTs dropped 6.0%, quarter on quarter.

Surging costs, across the board, have seen McDonald’s push the UK price of a cheeseburger by 20.2% to US$ 1.45 (GBP 1.19) its first price increase since 2008. It will also increase prices for other items by between US$ 0.12 and US$ 0.24 (GBP 0.10 and GBP 0.20). A study by Meal Deal Experts has expensed all the ingredients required for a cheeseburger at a cost of US$ 0.83 (GBP 0.68). The chain’s UK & Ireland chief executive Alistair Macrow said the increases are needed to help the business cope “through incredibly challenging times”, as UK inflation continues to rise to over 9%. Reckitt and Unilever have seen their prices rise by 9.7% and 11.2% in Q2. Having raised prices by an average 3.1% late in Q4, Nestle has increased them again by 6.5% during H1, due to “unprecedented” increases in costs.

One of the by-products of inflation is that June interest payments on UK government debt hit a record high amount of US$ 23.4 billion, which pushed up government borrowing for the month to the second-highest June level since records began in 1993. The actual interest payment hike was down to the fact that interest paid on government bonds rises in line with the Retail Prices Index measure of inflation, which has soared to 11.8%. The month’s borrowing – the difference between spending and tax income – was US$ 27.7billion, up by almost US$ 5.0 billion from June 2021. The upcoming Truss government will have to choose between slashing inflation/cost of living or focus on cutting the rising budget deficit.

According to Eurostat’s latest preliminary flash estimate, there was Q2 growth of 0.7% and 0.6% in the GDPs of the EU and the euro area, following expansions of 0.5% and 0.6% in Q1. Compared with the same quarter of the previous year, seasonally adjusted Q2 GDP increased by 4.0% in both areas, after posting annual gains of 5.4% in the euro area and 5.5% in the EU in Q1.

With its economy contracting 0.9% for second consecutive quarter, having declined 1.6% in Q1, the US economy has shrunk into a “technical recession”, attributable to record-high inflation and aggressive interest rate hikes from the Federal Reserve, aimed to slow business and housing demand. However, the National Bureau of Economic Research is the official arbiter of recessions in the US and will decide whether the economy is in recession or not.

Although job growth averaged 457k per month in H1, which is generating strong wage gains, the risks of a downturn have increased, as homebuilding/house sales have weakened along with business/consumer sentiment softening in recent months. It is not in the political interests of the White House to see a recession ahead of the mid-term elections in November, which could result in the ruling Democratic Party losing control of the US Congress. At the same time, the report noted that consumer and business confidence were dipping because of soaring prices due to inflation, the Federal Reserve lifted interest rates by a further 75bp to mitigate the price increases.

There was no surprise to see the IMF lowering its global growth forecast for the second time this year, to 3.2% and 2.9% (in 2023), compared to a 6.1% growth last year. The announcement came with a caveat that if further risks materialise, and inflation continues to rise, expansion could slow to 2.6% and 2.0%. The main drivers behind this latest contraction forecast are the global spill over of Russia’s military offensive in Ukraine, which has exacerbated inflationary pressures, and the halving of growth forecasts for advanced economies and China. The world body noted that “the global economy … is facing an increasingly gloomy and uncertain outlook”.

A Q2 slowdown in China’s economy, growing at its slowest pace since pre-Covid, has added to global supply chain disruptions and has reduced global growth; last year, its economy expanded 8.1% and is expected to slow to 3.3% in 2022. Furthermore, four-decade high inflation figures have led to rising interest rates in most countries of the world. Advanced economies, which grew at 5.2% in 2021, are expected to expand 2.5% this year, compared with an earlier 3.3% estimate, with the US, seeing growth at 2.3%, down from the earlier estimate of 3.7% and last year’s 5.7%. Germany, the UK and France had seen 2021 expansion rates of 2.9%, 7.4% and 6.8% and are forecast to grow over this year and 2023 by 1.2%/0.8%, 3.2%/0.5% and 2.3%/1.0%. Japan, the world’s third largest economy, is expecting annual growth of 1.7% for 2022 and next year.

Emerging market and developing economies are now projected to grow 3.6% this year, down from 6.8% in 2021, whilst the ME and Central Asia, having expanded by 5.8% last year, will see growth of 4.8% in 2022, but Saudi growth this year is forecast to reach 7.6% after expanding by only 3.2% in 2021, helped by Brent prices jumping 67% last year and 37% YTD. IMF expect oil prices this year and next to average US$ 103.88 and US$ 91.07. As borrowing costs start to head north, central banks are beginning to tighten policies by literally printing money more than two years ago.

The IMF pointed to increasing risks for some countries, as borrowing costs rise amid rising inflation after governments and central banks across the world, which provided more than US$ 16 trillion of fiscal and US$ 9 trillionn of monetary support to help economies recover, tighten policy. It estimated that about 60% of low-income countries are in or at high risk of debt distress, compared with 20% a decade ago, and noted that a quadruple whammy of reduced available credit, a stronger greenback, higher borrowing costs and weaker global growth will cause even greater problems to the low-income countries. Brother, Can You Spare A Dime?

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Lost In France!

Lost In France!                                                                               22 July 2022

The real estate and properties transactions totalled US$ 1.50 billion during the week ending 22 July 2022. The sum of transactions was 186 plots, sold for US$ 162 million, and 1,004 apartments and villas selling for US$ 662 million. The top two transactions were for land in Ras Al Khor Industrial First, sold for US$ 9 million, and land sold for US$ 5 million in Al Merkadh. Al Hebiah Fifth recorded the most transactions, with 105 sales transactions worth US$ 72 million, followed by Jabal Ali First, with 35 sales transactions worth US$ 28 million, and Al Yufrah 2, with 12 sales transactions worth US$ 4 million. The top three transfers for apartments and villas were all apartments – one sold for US$ 86 million in Burj Khalifa, another for US$ 65 million in Al Wasl, and a third for US$ 52 million in Palm Jumeirah. The sum of the amount of mortgaged properties for the week was US$ 561 million, with the highest being a building in Burj Khalifa, mortgaged for US$ 150 million. Eighty properties were granted between first-degree relatives worth US$ 131 million.

In H1, Abu Dhabi’s real estate market recorded 7,474 property transactions amounting to over US$ 6.13 billion, with Sharjah posting Q1 21,615 real estate transactions worth $1.71 billion. By comparison, June was the highest month yet for Dubai sales, with a value of US$ 6.2 billion – 55% higher in overall value year on year, when compared with June 2021.

Growth was the word for Dubai Chamber’s members in H1, with exports and reexports 17.8% higher at US$ 35.26 billion and the number of certificates of origin issued up 8.9% year-on-year, to over 357k, all heading north. Hamad Buamim, President & CEO of Dubai Chambers noted the crucial role that the body plays in HH Sheikh Mohammed bin Rashid’s Dubai Foreign Trade Plan to boost the emirate’s foreign trade to US$ 560 billion, (AED2 trillion) by 2026. He added that this year is forecast to be a record for member companies’ trade performance, as the body continues to support Dubai’s business community and enhances its position as a leading global trade hub.

Over the next five years, DEWA is planning to invest US$ 11.20 billion, (AED 40 billion) in utility projects, including spend on boosting transmission and distribution networks, as well as expanding renewable and clean energy initiatives. Of the total capex budget, US$ 4.36 billion, (AED 16 billion) will be invested to strengthen and expand electricity and water transmission and distribution networks, and US$ 3.27 billion, (AED 12 billion), to complete the Independent Power Producer (IPP) projects in the Mohammed bin Rashid Al Maktoum Solar Park, the Hassyan Power Complex and the Independent Water Producer (IWP) projects at Hassyan. Empower, 70% owned by DEWA, will see an US$ 817 million investment on expanding district cooling capacity and network to meet growing demand.

Initial operations for the Dubai Waste Management Centre will start early next year, with two of the centre’s five treatment lines operating and generating 80 Mwh of renewable energy by processing 2k tons of solid waste in a day. The world’s largest waste-to-energy project, currently 75% complete, will be able to process 5.7k tons of solid waste per day via five lines, converting and producing 200 Mwh of clean energy into the local power grid.

There was a 25% hike in new business licenses in H1 to almost 45.7k – an indicator that the emirate’s strategy and policy changes, such as full company ownership to foreign investors, has paid off with a marked improvement in the rate of local and foreign investment, enabling economic growth and diversification. The split of new business licenses sees 55% being ‘professional’ and the balance ‘business’. In H1, there were 262k business registration and licensing transactions, up 33%, whilst renewal transactions, at 93k, were 22% higher. Interestingly, there were 14.7k Instant Licenses issued in H1; they can be issued within five minutes on invest.dubai.ae platform, with the option to issue an electronic MOA and a virtual site for the first year only.

HH Sheikh Mohammed bin Rashid Al Maktoum toured Dubai International Airport yesterday and instructed senior officials to “continue working as a team” and to provide an “exceptional experience” for international travellers; he also instructed them to further enhance the capabilities of both airports, (DXB and DWC), in all areas including services, security and logistics so as to improve service benchmarks and passenger experience. He tweeted that“we had started preparing early for the return of international passenger traffic after the Covid-19 pandemic. Today, DXB maintains the first place in the world in international passenger traffic. We will continue to monitor the level and quality of services offered,” and that the “remarkable growth”, achieved by Dubai’s travel and tourism sector, is an example of the emirate’s “relentless efforts to ensure outstanding quality levels in diverse sectors”. Last year,DXB maintained its position as the world’s busiest international airport with 29.1 million passengers and recorded a traffic of more than 13.6 million passengers in Q1; the current forecast is that passenger traffic will top 58 million passengers by the end of the year.

This week, HH Sheikh Mohammed bin Rashid issued Decree No. (22) of 2022, introducing incentives for property investment funds. The new legislation will encompass all real estate investment funds licensed and regulated by government authorities, as well as private development zones and free zones; one of its main aims is to support real estate investment funds – both local and global. The DLD will be responsible for establishing a ‘Register of Property Investment Funds’, with any funds over US$ 49 million allowed, with the proviso that they are registered by the appropriate government authorities and have not been barred from trading in Dubai’s financial markets at the time of application. The value of properties that funds invest in should be US$ 14 million or above. A ‘Committee for Property Investment Funds’ will oversee applications to ensure that such funds are allowed to invest either through full ownership or lease for a period not exceeding ninety-nine years. The DLD will appoint a valuation expert to determine the value of properties owned by property investment funds. Funds are allowed to relinquish ownership of properties only after approval from the Committee.

With a US$ 40 million investment, Emirates has opened Bustanica, the world’s largest vertical farm, at 330k sq ft, and located near to Al Maktoum International Airport at Dubai World Central. Part of Emirates Crop One, a JV between Emirates Flight Catering (EKFC) and Crop One, Bustanica is capable of producing more than one million kg of high-quality leafy greens annually, while requiring 95% less water than conventional agriculture, and grown without pesticides, herbicides, or chemicals. Bustanica will have zero impact on the world’s threatened soil resources, an incredibly reduced reliance on water and year-round harvests, unhampered by weather conditions.

A new law, to come into effect in January 2023, will see the UAE fall in line with international standards in rules on sourcing gold into the country; it will apply to companies working in the field of gold refining and the recycling of gold products. Its main target is to prevent the misuse of gold for money laundering, terrorism financing and other financial crimes, while importing gold from conflict zones or high-risk areas; companies found to be violating the law will receive large fines. Its introduction will further enhance the country’s position as one of the leading global gold hubs. The guidelines will follow the directives of the Organisation for Economic Cooperation and Development and its annex related to gold.

UAE Central Bank has estimated that the UAE’s Q1 economy grew by 8.2% and that it expects real GDP to grow by 5.4% this year and 4.2% in 2023. There is every likelihood that these figures could be surpassed, driven by higher oil production and by the government’s commitment to double the size of the manufacturing sector by 2031. With global travel recovering well, as restrictions are being eased, this has helped the non-energy sector, expanding 6.1% year-on-year in Q1 2022; for the year, estimated growth is at 4.3%.

In Q2, EITC posted a 14.1% hike in overall service revenue to US$ 616 million – the third consecutive quarter of improvements and growth. DU’s mobile service revenue came in 8.6% to the good at US$ 381 million, with a bigger increase for fixed service revenue, up nearly 25% to US$ 233 million; handset sales generated US$ 53 million in revenue.  Operating free cash flow rose 48% to US$ 193 million, driven by improving Ebitda and lower capex which moderated to US$ 152 million.

The DFM opened on Monday, 18 July, 51 points (1.6%) higher on the previous week and closed up 148 points (4.8%) on Friday 22 July, on 3,257. Emaar Properties, up US$ 0.01 the previous week, was US$ 0.05 higher to close on US$ 1.46. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 3.38, US$ 1.52 and US$ 0.44 and closed on US$ 0.69, US$ 3.49, US$ 1.58 and US$ 0.47. On 22 July, trading was at 62 million shares, with a value of US$ 55 million, compared to 77 million shares, with a value of US$ 37 million, on 15 July 2022.   

By Friday 22 July 2022, Brent, US$ 10.51 (9.1%) lower the previous four weeks, gained US$ 2.69 (2.7%) to close on US$ 103.63. Gold, US$ 164 (8.8%) lower the previous four weeks, gained US$ 18 (1.1%), to close Friday 22 July, on US$ 1,725. 

There are reports that Starbucks, the world’s biggest coffee chain, is considering a potential sale of its UK business because of tough competition and changing customer habits emanating from the impact of the pandemic and the resultant lockdown measures. According to ‘The Times’, the firm will continue to “evaluate strategic options” for its company-owned international operations. Starbucks is feeling the pinch not only from the post-Covid impact but also from increased competition from rivals, such as Costa, Pret A Manger and Tim Hortons, surging product prices and customers’ changing habits. The first UK Starbucks opened in 1998 and there are now 1k outlets of which 30% are company-owned and the majority being franchises. Last year, it closed five company-operated stores, and opened fourteen new ones, targeted at drive-through locations.

In the last four months, Netflix has lost a further one million subscribers – a lot less than many analysts had forecast, with the firm expecting a growth recovery by the end of the year. Following its first subscriber decline since 2011, in April, the streaming company cut hundreds of jobs to compensate for the revenue downfall. It seems that when you are at the top of the ladder – in an era when competition is exploding – it is “inevitable” that Netflix would start to falter but if it continues to launch dramas, such as ‘Stranger Things’, it will make it more difficult for its rivals to take over the number one spot.

With the tech giant warning that it was facing “incredibly challenging” conditions, noting that advertising revenue had been slashed because of supply chain disruptions, labour shortages and rising costs, Snapchat’s share value slumped more than 25% in after-hours trading in New York; its Q2 revenue of US$ 1.11 billion was below market expectations. The current economic conditions, also impacting other tech giants, have also seen the market value of Alphabet, (Google’s parent company), Meta (owner of Facebook), Twitter and Pinterest fall.

The Cyberspace Administration of China has fined Didi US$ 1.7 billion for breaking cyber security laws, having found “conclusive evidence” against the ride-hailing giant. The regulator announced that it had started an investigation into Didi just days after the firm’s US IPO last year;  Didi’s shares stopped trading in New York last month. CAC also imposed fines of US$ 148k (one million yuan) each on Didi Global’s chairman and chief executive Cheng Wei and president Liu Qing. Apart from pressing ahead with the IPO, and not awaiting a cybersecurity review of its data practices, the regulator also fined the firm for violating three major laws concerning cybersecurity, data security and personal information protection. Chinese authorities have been pursuing a wide-ranging crackdown on similar companies, such as Alibaba with a record US$ 2.8 billion fine and ordering technology giant Tencent to suspend the roll out of new apps.

The Canadian plane manufacturer, Embraer, estimates that, over the next two decades, the demand for new aircraft of up to 150 seats will be almost 11k, with a value of US$ 650 billion. Of that total, 57% will be replacing retiring aircraft, with the balance increasing global airline fleets; 3.8%, or 330 units, will be delivered to the ME. The world’s third biggest plane maker noted that “the trend to smaller aircraft reflects overall lower demand growth, traffic patterns favouring short-haul versus long-haul, an increasing need for flexibility, connectivity, efficiency, and fleet and network transition to a decarbonised industry through new technology.” It expects annual growth figures of 4.3% for Asia Pacific, (including China), Latin America (4.0%), Africa (3.8%), ME (3.2%), Europe (2.3%) and North America (2.0%).

With many of the UK leading airports currently operating under chaotic conditions, the blame game continues unabated, with Heathrow’s chairman Lord Paul Deighton laying the responsibility for the travel disruptions on airlines failing to recruit enough baggage handlers. He seems immune from criticism from major players such as IATA and Emirates, with the former’s head, Willie Walsh, saying the management of Heathrow was “a bunch of idiots” for failing to foresee the recovery post-pandemic and the opening up of global business and tourism. “All you had to do was count up the tickets.” Meanwhile the Dubai airline’s Tim Clark said it had enough ground crew in place and should not have to cancel flights due to Heathrow’s inability to cope, and that anyone who behaved in that unacceptable fashion “would feel its wrath”. On Tuesday, Lord Deighton maintained the fault lay with airlines’ failure to recruit and defended the airport’s chief executive John Holland-Kaye, who has come under fire for his handling of the situation. Like the proverbial ostrich, the good lord seems to have his head buried in the sand as he denied the problem was down to a lack of planning or investment by the airport.

Earlier in the week, it seemed likely that a total of fifty workers from Aviation Fuel Services (AFS) would stage a three-day walkout from 05:00 BST on Thursday which would have had a negative impact on international airlines such as Emirates, Virgin, United, KLM and Air France. (AFS is a joint venture operation, which includes firms BP, Total Energies, Q8 Aviation and Valero Energy). This would have been another major blow to Heathrow’s sinking reputation in the aviation sector, with the Unite union noting that this industrial action would “cause delays to hundreds of flights”, claiming AFS workers were responsible for refuelling half of the non-British Airways traffic at the airport. Unite said its members had not received a pay rise for three years, adding AFS had made an offer of a 10% increase which was “rejected by members as it did not meet their expectations”.

Latest figures for the quarter ending May saw regular pay declining at the fastest rate since 2001, when taking into account rising prices, with pay excluding bonuses down 2.8% from a year earlier when adjusted for inflation. There was a marked difference between the private sector, with total pay growth of 7.2%, and the public sector’s 1.5%, both taking account of inflation. Pay, including bonuses, was down 0.9% when adjusted for inflation. With household budgets being bludgeoned by soaring inflation, at a record forty year high of 9.1% in May, and consumer spending dropping, the government is soon to unveil this year’s pay deal for 2.5 million public sector workers. There is no surprise to see unions calling for wages to reflect the cost of living, but if that did occur it would only mean inflation moving even higher, so that would inevitably see any pay rises not aligning with price increases.

This week, the IMF warned that if Putin were to completely close off Russian gas supplies, European countries would face a power crunch which could result in a slump of 6% in the some members’ GDP – including Hungary, Slovakia and the Czech Republic – as  their normal consumption would be slashed by 40%. Such a move would have a ‘significant’ impact on Austria, Germany and Italy but its extent would be dependent on policy responses, the remaining bottlenecks at the time of the shutdown and the market’s ability to adjust. Other countries would not suffer as much, with a GDP contraction of up to 1.5 %, in case of a severe winter, and no preventive measures to save energy have been taken, and under 1% in a normal winter. Earlier in the week, Russian state-owned energy company Gazprom declared force majeure on energy supplies to at least one major customer in Europe, and there is the ongoing possibility of Russia closing its main 1.224k km Nord Stream 1 pipeline permanently following its annual ten-day maintenance closure ending yesterday.

The ECB finally woke up and raised interest rates by more than expected yesterday – 50bp cf the forecast 25bp, justified by an “updated assessment of inflation risks”- with the prospect of further rises on the cards; this was the first rate hike for eleven years. It seems likely that a similar rise will occur in early September. With inflation now running at 8.6% – driven by soaring energy prices – and the central bank’s target having been 2% for some time, it does seem incongruous that Christine Lagarde, the ECB chief, has left this move far too late. Economics 101 teaches that raising rates is seen as the standard panacea for excessive inflation. This week saw the ECB end an eight-year experiment in negative interest rates, noting that “the front-loading today of the exit from negative interest rates allows the Governing Council to make a transition to a meeting-by-meeting approach to interest rate decisions.” This blog has espoused for some time that the ECB has been perpetuating the problem for too long, with the economic outlook worsening by the day, and that this week’s rate hike is too low, too slow and too late. The fact that energy is priced in US dollars only adds to ECB’s inflation fighting problems so that the current higher oil price has exacerbated the value of the euro which has hovered around parity for some weeks, as well as touching parity.

At the beginning of H1, UK interest rates stood at 1.25%, having risen by only 0.1% in H1, but many analysts consider that rate rises have still some distance to go before they will have any control over inflation which currently stands at 9.1% – a forty-year high. This observer has espoused that the Bank of England has left it too late so if, and when, it takes more positive action, and pushes rates higher, it, like the ECB, will be a case of too little too late. Economics 101 teaches that when rates move higher, it becomes more expensive for consumers and businesses to borrow, so that businesses and consumers start spending less, which in turn slows demand for goods and services and then the pace of price rises slows. The problem this time is the cost of soaring energy prices – and any rise in rates will have little impact on prices, and must be gauged against the backdrop that the economy earlier this year was in excess demand. In fact, the real economy is slowing when inflation erodes real income and real spending,

June prices nudged 0.3% higher on the month to 9.4%, driven by higher petrol, up by US$0.22 to US$ 2.20 a litre, and food costs, with milk, cheese and eggs recording the biggest rises in the month; a year earlier, fuel prices were at US$ 1.55. Food prices increasing at the fastest rate since March 2009. Kantar has predicted supermarket bills will jump by an average of US$ 544 this year, with energy prices moving an average US$ 836 higher from last April and set to rise even further this October. Prices charged in restaurants and for accommodation also increased in June climbing by 8.6% on the year. The rest of the world is in the same boat as the UK, but their inflation figures are lower, such as France and Germany posting annual rises of 6.5% and 8.2%. All three countries have been impacted by surging energy prices but to a large extent the EU has been immune from worker shortages due to fewer workers coming to the UK from overseas and a greater share of people of working age deciding they no longer want to or needed to work. It seems that the labour force has shrunk, making it harder to recruit and pushing up wages, so that the inflationary pressures on the economy are no longer just global, they are domestic too.

This week, 115k members of the Communication Workers Union voted for strike action in a pay dispute, that saw 97.6% of voting members. The Royal Mail workers have yet to decide strike date details in what would be the biggest ever action taken by its members. The CWU is the latest of several unions, including railway and airport workers, to ballot for strikes in recent weeks as the cost of living soars, with threats that they “will not budge” until they receive a “dignified, proper pay rise”. Royal Mail said it had offered workers a “deal worth up to 5.5% for CWU grade colleagues, the biggest increase we have offered for many years, which the CWU rejected”. It is reported that following the breakdown in talks, the Royal Mail offered a non-conditional 2% pay increase, backdated to 01 April, and a further 3.5% is available if agreements are subsequently reached.

Today, Friday 22 July, the Port of Dover declared a “critical incident” due to six-hour queues leading to the ferry terminal, with the blame being laid at the door of the French border controls, who “didn’t turn up for work”.  This weekend, the start of the UK schools’ summer holidays, will see an estimated 18.8 million leisure trips over the next three days according to the RAC. It is reported only six of the twelve passport booths, run by the French authorities, at Dover are currently open. Dover Port officials have requested more cooperation from the French, but it does seem that their officials have been Lost In France.

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