It Ain’t Right!

Arabtec Holding has been awarded a US$ 116 million Damac contract to build 916 villas at the developer’s massive Akoya Oxygen project. Covering phase 6 of the development, work on the 148k sq mt site will be completed by the end of 2019. The once-troubled contractor has a US$ 4.7 billion project backlog and is well on its way back to stability and profitability.

UAE-based Binghatti Developers reported that it had sold 60% of the 230 units in its US$ 109 million Millennium Binghatti Residences tower, following its 03 March launch. Located directly on the waterfront, the 29-storey building will be completed by Q4 2019.

This week, Emaar Development launched the 62-storey The Grand, located in Dubai Creek Harbour. The super luxury development will have a mix of 1-3 B/R apartments, 4 B/R penthouses and podium-level townhouses.

Danube Properties has announced the launch of its tenth project, Jewelz, at a cost of US$ 82 million. The building – G+2 podium+13 floors – will house 463 units and is located adjacent to a park.

Nakheel announced the 85% completion of the US$ 327 million Nakheel Mall, located in the middle of Palm Jumeirah The developer reported that retail fit outs will start soon and work has  already commenced on the 60k sq ft, 15-theatre VOX Cinemas complex.

Last year, second tier properties, older and poorly maintained, in areas such as Deira and Garhoud, saw annual declines of 17% and 14% respectively. Cluttons reported that high end office property remained largely unchanged but Grade A buildings in Business Bay jumped by up to 17%. The consultancy expects difficult conditions to continue in 2018, as the leasing market remains tight, with a slight downturn in most rentals.

A JV between ACCIONA Agua and Belhasa Six Construct has been awarded a US$ 237 DEWA contract to build a desalination plant in Jebel Ali.  The 40 million imperial gallons per day (MIGD) reverse osmosis plant is slated for a 2020 completion.

The Italian export credit agency has seen its portfolio of new projects in the MENA region grow 273% in just over two years to US$ 14.7 billion – of which US$ 6.1 billion is located in the emirate. SACE, which supports Italian trade and investment worldwide, has been involved in significant investments across a gamut of sectors, including a US$ 1.2 billion credit facility to assist the development of Dubai South and a US$ 300 million loan related to supplies for the first phase of the upcoming Meydan One Mall.

BEYOUland, founded by Sheikha Mayha Hasher Al Maktoum, is using 17 abra type boats to launch the country’s first ever-floating boutique. Stretching 1.8 km, the venture will host local and international brands and artists in a unique selling environment whilst incorporating part of Dubai’s traditional culture and history.

The federal government is gearing up for phase 2 of the UAE federal railway network which will connect Mussafah to Khalifa Port and Jebel Ali Port, as well as to the Saudi and Omani borders. Phase 1 covered 264 km and has already started commercial operations, moving granulated sulphur from Shah and Habshan to the port of Ruwais. When completed, the network, which will also include passenger traffic, will cover 1.2k km and link all seven emirates and the rest of the GCC.

DP World and the Somaliland have signed an agreement in Dubai to develop a greenfield economic free zone in the country, in tandem with the growth of the Port of Berbera. Located adjacent to the port, the 12 sq km site will be a catalyst for the development of a regional trading hub which will prove a fillip for the Somaliland economy and job creation.

Dubai Airport Freezone Authority continues on its growth path during 2017, recording a 25% year-on-year increase in registered companies, as leasable space increased by 6%; licensing revenue was 16% higher and total assets were up 2% – but no figures were readily available. The total number of companies stands at 1.6k, with MNCs now accounting for 36% of that total. DAFZA is estimated to account for 7% of Dubai’s non-oil trade and 18% of the total Dubai free zone trade.

Emirates is reportedly in negotiations about a possible US$ 1 billion sukuk issue and is arranging a global investor roadshow to discuss with interested parties; Citi and Standard Chartered will act as joint lead managers. In 2015, the airline raised US$ 913 million through a sukuk backed by the UK Export Finance.

Established in 2001, Emirates loyalty programme now boasts 20 million members. 30.5% of Emirates Skywards’ customer base can be found in the UK (2.6 million), USA (1.8 million) and Australia (1.7 million). Last year alone, 35 billion miles were redeemed by members on flights and other rewards.

Of the 2.2k billionaires on the Forbes annual list, seven are to be found in the UAE, two more than last year. The Magnificent Seven are Abdulla bin Ahmad Al Ghurair and family (US$ 5.9 billion), Majid Al Futtaim and family (US$ 4.6 billion), Hussain Sajwani (US$ 4.1 billion), Abdulla Al Futtaim (US$ 3.3 billion), Saeed Bin Butti Al Qebaisi (US$ 2.7 billion), Saif Al Ghurair and family (US$ 1.9 billion) and Khalifa Bin Butti Al Muhairi (US$ 1.5 billion). It seems that those with interests in healthcare, money exchange and property had a good 2017 – with better than average returns – whilst declines were noted in sectors such as banking, automobiles and other industries. The number of Dubai ultra-wealthy individuals (with personal assets of US$ 30 million+) is 1.1k, whilst the number of multi-millionaires (assets of US$ 10 million+) is put at 2.4k, according to New World Wealth.

The latest monthly Emirates NBD’s seasonally adjusted PMI sees a weakening in the country’s non-oil private sector economy – at its slowest pace in 18 months – as business confidence splutters to a six-month low; the main drivers appear to be sluggish job creation and output growth, both at  nine-month lows. Overall the economy is still growing with strong domestic demand but on the flip side, business confidence is slowly heading south, with February optimism levels “well below” the historical average.

The Federal Tax Authority added some clarification on transitional rules involving goods and services being delivered fully or partially in 2018, but had been contracted in 2017 – before the 01 January implementation of VAT. In short, it stated that the only case where consumers are directly responsible for paying VAT on received services, that are delivered fully or partially in 2018, is where the contract states that the amount due is exclusive of tax. In all such “overlapping” cases, the supplier remains liable for accounting for the tax and paying it to the FTA, even if it cannot be recovered from the consumer.

There has been a major improvement in the state of Dubai’s credit default swaps, which in 2009 stood at 1k basis points and now has fallen below 100 bp.  At the height of the GFC, the emirate was on its economic knees, after splurging out on so many construction and acquisition projects and relying on Abu Dhabi for financial assistance.

The total sukuk value listed on Dubai’s two exchanges has now reached US$ 56.5 billion, making it the largest amount of any listing centre in the world, with this week’s two Indonesian government’s listings, totalling US$ 3.0 billion. These transactions make that government the largest sukuk issuer on Nasdaq Dubai, by both value (US$ 14.5 billion) and number of listings (10).

Etisalat is to spend up to US$ 2 billion to buy back up to 5% of its paid up capital (equivalent to 434.8 million shares). It has a current market value of US$ 41.1 billion.

Dubai National Insurance and Reinsurance posted a 9.0% hike in 2017 profits to US$ 14 million, as gross written premiums were 24.0% higher, at US$ 96 million, along with an 18.0% hike in net underwriting income to US$ 12 million.

Union Coop posted a record profit in 2017, with revenue 16.8% higher to US$ 796 million, resulting in a 16.8% increase in shareholders’ equity to US$ 684 million. Over the year, the number of families associated with the supermarket chain was 3k higher at 31k, whilst in October it launched its on-line shopping website.

DIFC reported that its 2017 net profit jumped 25.3% to US$ 99 million, as revenue remained flat at US$ 221 million. Last year, the financial hub, rated in the top ten global financial centres, saw a record 315 new companies to bring the total firms to 1.85k; occupancy was at 99%.

Dubai-listed Amanat Holdings continues with its expansion strategy by paying US$ 87 million for a 35% stake in Abu Dhabi University Holding Company. The health and education sectors speciality investment firm has bought into a leading private higher education provider which, with a 21.7% holding, is the largest investor in Taaleem Holdings.

The DFM opened on Sunday (04 March), at 3209, and having lost 486 points (9.1%) over the past eight weeks was again down – by 52 points (2.4%) – to close at 3157 by Thursday, 08 March. Emaar Properties traded US$ 0.06 lower at US$ 1.63, with Arabtec also down – by US$ 0.02 to close on US$ 0.65. Volumes improved to 382 million shares traded on Thursday, valued at US$ 139 million (compared to 99 million shares worth US$ 39 million the previous Thursday – 01 March). There is no doubt that the DFM is currently in the doldrums, having shed 6.3% already this year, and this despite attractive valuations of 8.1 times expected earnings, as against the 12.3 times found on the MSCI Emerging Markets Index.

By Thursday, Brent Crude had traded slightly lower over the week, shedding US$ 0.22 to US$ 63.61, with gold heading the other direction – up US$ 16 (1.2%) to US$ 1,321 by 08 March 2018.

Indian telco, Aircel is set to start bankruptcy as it is unable to pay outstanding debts of US$ 7.7 billion of which 30% is owed to secured financial creditors, with the balance being unsecured liabilities. The court has to rule whether the company, owned by billionaire, T Ananda Krishnan, should be placed in liquidation as early as today.

2017 proved a difficult year for Lego which posted its first fall in annual sales since 2004, 17.0% lower at US$ 1.7 billion, as revenue dipped 8.0% to US$ 5.8 billion. The main drivers behind the “challenging year” were a decline in its core markets, North America and Europe, and a major clear-out of excess stock. In September, the privately-owned Danish company announced the retrenchment of 8% of its global workforce so as to “reset the company”. (The company, with six stores and Legoland theme park in the emirate, is planning to open a Dubai office this year).

Following its dubious role in mis-selling financial products in the lead up to the GFC, RBS has agreed to pay a fine of US$ 500 million to settle with the US authorities. 80% of the settlement will be paid to those affected, whilst US$ 100k will be for the New York State. However, the bank, still majority-owned by the UK government, is facing a potential fine that could top US$ 5 billion, from the US Department of Justice, for selling risky mortgage-backed securities.

Because of order declines for both its A380 and A400M planes, there is a possibility that Airbus could slash 3.5k staff from its payroll. By 2020, the plane maker will only be producing six jumbos (only thanks to Emirates’ recent 36-plane order) and  eight military aircraft, (which has incurred losses of almost US$ 10 billion to date) a year. Other models are performing well.

Although no numbers were made public, Rolls Royce is another company set to introduce further job cuts following 600 managers leaving over the past two years. This comes despite 2017 profits of US$ 1.5 billion, 25% higher than the previous year when one off costs, including a costly corruption scandal settlement and sterling’s post Brexit collapse when the pound was trading 19% lower to the US$ at around the US$ 1.20 mark, saw the engine maker posting a U$ 6.3 billion loss.

With an adjusted 0.4% Q4 GDP growth – for the eighth consecutive quarter – Japan’s economy expanded 1.6% last year, well above initial 1.0% forecasts.

Turkey joined the likes of Brazil, Costa Rica and Croatia when Moody’s cut its credit rating by a notch to Ba2 – junk status. The main drivers behind the decision appear to be geopolitical tensions, an erosion in public institutions and lack of effective monetary policy by the Erdogan government.  The lira has remained steady so far this year at 3.81 to the greenback, compared to a 2.5% gain witnessed by the MSCI index of emerging market currencies, but ten year bond yields are at a relatively high 12.3%.

Alarming data from the UK’s Office for National Statistics reports that “total accrued-to-date gross pension liabilities of UK pension liabilities” amount to  a massive US$ 10.5 trillion – 20.8% higher than in 2010. Of this figure, US$ 7.3 trillion is owed by the UK government and the balance, US$ 3.2 trillion, relates to promised pension payments, mainly to those in the private sector. The worrying news is that US$ 5.5 trillion is in future “unfounded” state pension payments which are paid from taxes of current workers, as does a further US$ 1.3 trillion of pensions for those employed in the public sector.

The CBI estimates that UK business grew at its fastest pace in more than two years in the February quarter, measured at +20 last month compared to +9 in January. Despite the uncertainty surrounding Brexit, retail was the only sector that did not post figures higher than the long-run averages, with manufacturing and business/professional services stand-out performers. The economy, that many predicted would fall off the cliff after the referendum, continues to head north, driven by an uptick in the global commercial environment.

The first two months of trading has seen eurozone’s retail trade volume posting 0.1% declines in both January and February – when analysts expected a positive 0.3%. However, the figures should be more positive over the year as the impact of on-line sales takes effect. For the eurozone, the year on year retail trade volume growth is expected to be 2.3% (and 2.7% in the bigger EU bloc).

China expects a slight downturn in its economy, with this year’s forecast growth being 6.5% (compared to 6.9% in 2017). Over this year, its two main economic targets are to maintain inflation running at around 3% and trim its budget deficit by 0.4% to 2.6%. President Xi Jinping has been keen to crackdown on big-spending conglomerates and curtail the worryingly high shadow banking sector, as he tries to bring a level of normalcy to the economy. (It is estimated that Chinese shadow lenders account for 15.5% (US$ 7 trillion) of the total global riskier non-bank loans). It will also be interesting to see his response to President Trump’s moves to impose weighty tariffs on steel and aluminium to protect US producers from “unfair” competition.

The President’s mutterings on tariffs have raised the hackles on some of the world’s financial elite. The EU’s Margrethe Vestager called the Trump action “one-sided protectionist measures, which hurt, not just jobs, but the whole system of rules that makes our global economy work”. The IMF’s Gerry Rice has reiterated that such action will cause damage to both the United States (particularly in the manufacturing and construction sectors, both major users of aluminum and steel) and its trading partners.

President Trump wants to see a reduction in the US 800 billion trade deficit (not including the US$ 244 billion services surplus). This has expanded by 16.2% to US$ 56.6 billion, since he took office last year – not helped by cheap imports and in some cases dumping of steel and aluminum. Last month, the Commerce Department commented that the global glut of steel and aluminium threatened US national security. According to US data, it has a US$ 22.3 billion automotive vehicle and parts trade deficit with Germany and a US$ 7.0 billion deficit with the UK. Surely he has a right to be upset by the imbalance and, for instance, to take a pot shot at European carmakers when US-made cars into Europe face a 10% tariff but the other way it is only 2.5% on cars assembled in Europe and sold in the USA. In anyone’s language, It Ain’t Right!

Posted in Finance | Tagged , , , , , , , , , , , | Leave a comment

The Winner Takes It All

HH Sheikh Mohammed bin Rashid Al Maktoum announced this week that all federal government fees will not be increased for the next three years. According to his Twitter account, he commented that “we decided not to increase the federal fees during the next three years, to restore the economic and social stability of the state and to support our industrial and commercial sectors and attract more foreign investments.”

The Dubai Land Department reported that last year 90 projects were completed, whilst a further 150, worth US$ 22.3 billion, were registered. Director General, HE Sultan Butti bin Mejren, confirmed that recent reports about a change, that would have seen developers having to deposit 50% of a project value (rather than the current 20%), were untrue.

Azizi Developments expects to complete the building of the world’s fifth largest tower by 2021. Located adjacent to the Dubai Creek, the 122-floor building will house residential units and then a luxury hotel from the 100th floor up. The total project, including land, is expected to cost US$ 817 million, with work starting on the 570 mt structure, designed by Atkins, in Q2.

Azizi Developments is also set to launch 200 realty projects this year, costing US$ 10.9 billion, of which 190 will be located in the Meydan District. The developer expects to add 55k residential units, with some completion by the end of 2019.

Emaar Development released its latest development on Sunday – Saffron Community in Emaar South. The new townhouse community will comprise 3-4 B/R units and will also host an18-hole championship golf course.

Dubai-based Binghatti Developers has launched a US$ 109 million project on Dubai’s Water Canal in Business Bay. Millennium Binghatti Residences will comprise 230 apartments (studio and 1-2 B/R), with prices starting at US$ 170k.

China State Construction Engineering Corporation has been awarded a US$ 163 million contract to build one of Damac’s towers in Aykon City, a four million sq ft development around Safa Park. The tower will have 53 residential floors, along with seven podium levels and two basements.

ART Marine has been appointed by Dubai Properties Group to be the exclusive operator of Marasi Marina. The leisure marine company will be responsible for managing the entire premises including its water and onshore areas. The marina will hold 130 boats (up to 35 mt in length) and comprises eight interconnected piers.

With the logo “Fresher, Cheaper, Better shopping to its customers”, Landmark Group is set to revolutionise local retail in the way Aldi and Lidl have in the UK. It is to introduce VIVA, as the region’s first food discounter, which will offer a range of private label quality products up to 30% cheaper than other established outlets. With four stores opening soon (including one in Dubai), there could be fifteen in operation by the end of the year. The long-established UAE retail company also owns, Babyshop, Centrepoint, Home Centre and Splash.

Cityland Mall, the world’s first nature-inspired shopping destination, is set to open by year-end, with 60% of the US$ 300 million project already complete; over a half of the available retail space has been let. The landscaping contract for Central Park – the focal point of the mall – has been awarded to Miracle Garden Landscaping, which also runs Dubai Miracle Garden and Dubai Butterfly Garden.

Having seen its 2017 revenue grow 5.6% to US$ 1.9 billion, Dubai Duty Free expects a 3.5% hike this year to US$ 2.0 billion and by 57.9% to US$ 3.0 billion within four years. The bullish forecast is based on more traffic at Dubai International, as tourist traffic increases from the current level of 88.2 million to an expected 118 million by 2022. The duty free operator also expects an uptick in the number of high spending Chinese and Russian visitors, with the former accounting for 9% of sales. Another factor for the positive forecast is the weakness of the US$, resulting in a strengthening of both the euro and sterling, with Western Europe being DDF’s main source market.

DP World is looking at further opportunities to expand into Latin America, where it is currently working on land reclamation and road network works for Guayaquil Port in Ecuador. The world’s third-largest ports operator is set to invest US$ 1.2 billion on the project which when completed will give the country its first deep-water port and allow mega vessels to berth.

A new agreement was signed this week by SCZone and DP World that will see the start of an integrated industrial and residential zone in Sokhna, Egypt, the first phase of which covers 30 sq km. The JV, which sees the Suez Canal authority holding 51%, empowers the Dubai-based port operator to manage the zone which will not only see an expansion to Sokhna port but the development of a comprehensive industrial zone.

Having been awarded a government concession in 2006 – and posting annual profits ever since – DP World has evidently lost control of the Doraleh Container Terminal in Djibouti. The port operator has now accused the government of illegally seizing control of the facility in a move to force a renegotiation in the concession’s terms. Interestingly, the terminal is the country’s largest employer and biggest source of revenue.

Last year was a record year for public transport with 551.7 million users – a 1.5% increase on the previous year. 96% of this total used the three main transport modes – Dubai Metro (36%), taxis (32%) and public buses (28%). In addition, Dubai Tram saw an 11.1% uptick in users to over 6 million, whilst marine transport had 13 million passengers. Public transport accounts for 17% of all people movement in Dubai (up from 2006’s figure of 6%), with the RTA targeting 20% by 2020.

January passenger traffic at Dubai International was 1.0% lower than in 2017 at 8.0 million. The top growth areas were South America and CIS – up by 22.6% and 19.7%.

UAE petrol prices will be lower this month, starting today, 01 March– this time, Special 95 falls 1.3% to US$ 0.605 per litre, whilst diesel, at US$ 0.643, is 2.4% lower.

Despite posting a 44.4% hike in 2017 profits to US$ 354 million, the country’s listed insurers face a tough 2018, driven by the introduction of VAT and comparatively low energy prices. The 30-member bloc, which accounts for about 50% of total written premiums, benefitted last year by the introduction of both compulsory medical insurance and the Unified Motor Insurance Policy; over the period, their total revenue or gross written premiums jumped 15.8% to US$ 6.0 billion. Five insurers account for 59% of the market share, led by Orient Insurance and Oman Insurance.

The UAE’s Federal Tax Authority has decided not to issue penalties for businesses that have been late to register (the original cut-off date was 31 December) for VAT. Businesses now have until 30 April to become VAT-registered. It is estimated that 260k businesses have already registered but there could be a further 100k that have not.

At the end of January, the UAE Central Bank reported that foreign assets were 12.1% higher, year on year, at US$ 88.8 billion, whilst foreign deposits were 96.3% to the good at US$ 69.5 billion. At the end of January, government deposits and bank deposits stood at US$ 55.5 billion and US$ 117.1 billion.

The Central Bank Governor, Mubarak Rashed Al Mansoori, reported that the federal government’s 2017 expenses showed a 23% increase on the previous year. He also confirmed that the country’s 2017 non-oil GDP was 2.95% and is expected to reach 3.5% this year.

Etisalat is planning to invest US$ 1 billion in the modernisation of mobile and fibre-optic networks, infrastructure development and future technologies. The aim is to maintain its leading position in the region and play a major role in future technologies such as AI (artificial intelligence), IoT (internet of things) and robotics, as well as concentrating on its traditional business.

DEWA posted a 7.1% rise in 2017 net profit to US$ 1.8 billion, as revenue was 5.0% higher at US$ 5.9 billion. During the year, its assets grew 11.0% to US$ 35.7 billion, whilst the demand for electricity and water rose by 5.18% and 3.12%, respectively.

The Dubai Statistics Centre reported that January’s inflation rate rose 2.69% year-on-year, driven by the introduction of VAT and the increase in fuel prices. Major increases were seen in the prices of tobacco (9.06%), hospitality (7.69%), communication (5.91%) and recreation/culture (5.12%).

According to HSBC, its Expat Explorer Survey is the world’s largest study of expat life and it rates Dubai as one of the best global places for both job prospects and a great social life – even ahead of the likes of LA, New York, Paris and London. When it came to salary levels, Dubai’s average came in at US$ 138k, some way behind Mumbai’s US$ 217k.

It is reported that the New York-based Apollo, which oversees US$ 250 billion in global private equity, credit and real estate assets, is winding down its partnership with DIFC’s Frontier Management Group, after nearly three years. It had planned to use Frontier to gain a footing in the regional investment sector but had little success despite a 2015 bid for Saudi Arabian supermarket chain, Al-Raya Foodstuff Co.

Emirates Global Aluminium, jointly owned by Investment Corp of Dubai and Abu Dhabi’s sovereign fund Mubadala Investment Co, posted a hefty 57.1% jump in 2017 profits to US$ 899 million, on the back of a 20.0% increase in revenue at US$ 5.6 billion; a major contributing factor was aluminium gaining 34% in 2017. There is a possibility that there may be an IPO, that could raise up to US$ 3 billion, in the next twelve months – subject to favourable market conditions.

First Abu Dhabi Bank has denied any interest in merging its NBAD Securities, with Dubai’s SHUAA Capital.

Ithmaar Holding posted a disappointing Q4 loss of US$ 56 million (compared to a US$ 3 million deficit in the same period in 2016) and an annual loss of US$ 72 million, following a US$ 14 million profit a year earlier.

The founder of Abraaj Group, Arif Naqvi, is to relinquish control of Abraaj Investment Management in a major reshuffle that will see the appointment of joint chief executives, Omar Lodhi and Selcuk Yorgancioglu. The Dubai-based firm, that manages assets in excess of US$ 13.6 billion, has hired independent consultants to review its corporate governance and controls.

Depa Limited has withdrawn its application to be listed on the London Stock Exchange citing that the volume of global depositary receipts traded was negligible and thus not worth the expense for the  Dubai-based interior design company. It had earlier in the month appointed Shuaa Capital as its liquidity provider. The company posted  a 26.0% rise in 2017 profit to US$ 37 million, as revenue increased by 4.0% to US$ 490 million; its backlog declined 7.0% to US$ 488 million

Union Properties’ subsidiary, UPP Capital Investment, has increased its share in Egypt’s Palm Hill Developments by 0.74% to 10.18%, by acquiring 17 million shares for US$ 4 million. The Cairo-based company posted a 19.2% hike in 2017 profits to US$ 53 million.

The DFM opened on Sunday (25 February), at 3287, and having lost 330 points (9.1%) over the past six weeks was again down – by 78 points (2.4%) – to close at 3209 by Thursday, 01 March. Emaar Properties traded US$ 0.03 lower at US$ 1.69, with Arabtec marginally higher by US$ 0.01 to close on US$ 0.67. Volumes slid at to just 99 million shares traded on Thursday, valued at US$ 39 million (compared to 192 million shares worth US$ 98 million the previous Thursday – 22 February). For the month, Emaar was down US$ 0.11 at US$ 1.68 from February’s opening of US$ 1.79 as was Arabtec, US$ 0.05 lower for the month to US$ 0.66.

By Thursday, Brent Crude had traded lower over the week, shedding US$ 1.56 (2.4%) to US$ 63.83, with gold heading the same direction – down US$ 28 (2.1%) to US$ 1,305 by 01 March 2018.  For the month, Brent was down (6.0%) from US$ 68.89 to US$ 64.73, whilst the yellow metal also fell US$ 26 (3.0%) from US$ 1,343 to US$ 1,317.

OPEC chief Suhail al-Mazrouei considers that the oil market will be balanced this year following the crash of 2014.This has been made possible because of the late 2016 agreement between both OPEC and non-OPEC producers, agreeing to cut output by 1.8 million bpd. Furthermore, he estimates that up to US$ 10.5 trillion of investment will be needed, with demand set to rise by 15 million bpd by 2040.

Better known for its iconic hand dryers and vacuum cleaners, Dyson is keen to establish itself in the electric car sector. Having doubled the number of scientists working on its battery programmes in the past twelve months, it already has a 400-strong team in place and plans to hire a further 300 engineers, so as to be in a position to launch its first vehicle in 2020. Last year, it posted a 27% hike in earnings to US$ 1.1 billion.

The UK seems to be the favoured location for Toyota as it has invested US$ 3.5 billion in the country – far more than any other country in Europe. This week, the Japanese car-maker confirmed that it will build the next generation of the Auris hatchback at its Burnaston plant, with most of the engines being built at its Deeside factory in North Wales. This will ensure the security of 3k jobs across both plants. Despite Brexit scaremongering, the car industry is alive and well, with the likes of BMW (assembling its electric Mini in Oxford) and Nissan (its next generation of Qashqai and X-Trail sports utility vehicles) still showing their commitment to the UK.

As expected, an international consortium, including the likes of the Saudi and Singaporean sovereign wealth funds, acquired a 55% stake in AccorHotels for US$ 5.4 billion. This will enable the French firm to expand its portfolio from its current level of 891 properties and continue to manage its brands, including Mercure, Novotel, Pullman and Raffles.

Comcast has joined the race to acquire Sky with a US$ 31 billion offer – 16% higher than 21st Century Fox’s offer of US$ 25.9 billion to buy the 61% remaining share it did not already own. The biggest cable TV firm in the US plans to “use Sky as a platform for our growth in Europe”. It was no surprise then to see Sky shares 20% higher on the day at US$ 18.30, with Comcast shedding 7% in value.

The Swedish music streaming service, Spotify is aiming to raise US$ 1 billion in an IPO on the New York Stock Exchange. With 159 million monthly users, including 71 million paying subscribers, revenue was 38.0% higher at US$ 5.0 billion but its net loss stretched out to US$ 1.5 billion. Despite being unable to return stable returns, the twelve-year old company, co-founded by the then 23 year old Daniel Ek, is valued at US$ 23.4 billion.

Following its first loss in twenty five years in 2015, Standard Chartered posted a US$ 409 million profit in 2016. Last year, it went even better with a US$ 2.4 billion profit, of which US$ 642 million emanated from the Africa & Middle East region – a 49.0% year on year improvement. Operating income was 2.6% higher at US$ 14.4 billion, whilst there was an 11.6% growth to its loan book.

Two major UK retail entities – ToysRUs and Maplin – are facing the possibility of going under this week, with the loss of 5.9k jobs. The toy retailer has had various discussions with possible suiters over the past three months but to no avail. The electricals chain, which employs 2.5k, had been in last minute rescue talks with Edinburgh Woollen Mill but these broke down.  This could be the start of a bad year for the high street as the perfect storm (on-line shopping, rising costs and soft consumer spending) starts to brew.

Disneyland Paris, that employs 16k and accounts for 6% of the French tourism income, is set to invest US$ 2.5 billion to further develop its troubled theme park. Investors are concerned that since its 1992 opening, it has only produced seven years of profit. Walt Disney took full control of the park last year, when it bought the shares in Euro Disney that it did not already own. Development will only start in 2021 and include new areas devoted to hit films such as Frozen and Star Wars.

Despite opposing President Trump’s recent tax cuts, Warren Buffet has probably been the main beneficiary receiving some US$ 29 billion as a result of the reforms. In reporting Berkshire Hathaway’s quarterly Q4 and annual profits, the US billionaire indicated that of the US$ 65 billion profit, 44.6% was directly attributable to when “Congress rewrote the US Tax Code.” It is estimated that future earnings could continue to rise by 12% because of the tax change.

According to the latest ICAEW/Oxford Economics’ report, ME growth this year will reach 2.9% and 3.6% in 2019, following an eight year low of 1.1% last year; the major drivers behind the welcome improvements are higher energy prices and expansionary government budgets.

Chinese authorities have woken up to the fact that there has been an ongoing problem with some large enterprises picking up “trophy assets” around the world. Like certain western companies, including banks, they thought they were too big to touch, especially with their political clout, Things are beginning to change – this week, authorities took control of insurance and financial giant Anbang, known as a “grey rhino” (previously unheard of conglomerates with access to large amounts of money, splurging out and paying premium prices for assets – often unrelated to their core business – and then trampling over everything in their wake). If any of these grey rhinos were to fail, there will be a negative impact on both the Chinese economy and the government’s international standing.

With China’s economy posting only a 6.8% increase in Q4, India surpassed that with a credible 7.2% – its fastest rate in five quarters. Asia’s third largest economy, after China and Japan, is expecting 2018 growth in the region of  6.6%, after recovering from the introduction of sales tax last July, with its disruptive aftermath  for the country’s manufacturers  and service industries. Despite the encouraging outlook, it is unlikely that the Reserve Bank will lift interest rates in the short term, at least.

The recent Florida school massacre has resulted in several big name businesses cutting ties with the powerful National Rifle Association which may result in some much-needed changes in the country’s gun laws. Delta, Enterprise, Hertz and United have ended discounts for NRA members, whilst others including Allied Van Lines, Avis Budget Group, Chubb, First National Bank of Omaha and Symantec Corp have been distancing themselves from the lobby group. Activists continue to put pressure on companies that have a commercial relationship with the NRA and it will be interesting to see how FedEx and Amazon (which distributes NRA television programmes) react. This could be the start of some sense being introduced to the country’s archaic gun laws.

The US Labour Department posted a 3.1% decline in jobless claims to 222k for the past week – its second lowest figure since 2009 – as the monthly average also fell – by 1.0% to 226k; the unemployment rate stands at 4.1% – a 17-year low. It is estimated that the improvement will continue over the coming months as the impact of recent tax cuts take effect. January new home sales in the US slid 7.8% to an annual rate of 593k. Median sales prices stood at US$ 323k, with a total of 301k new houses – equating to a six month supply line at current rate of sales.

The US economy grew by 2.5% in Q4, down from the 3.2% the previous quarter; annual growth came in at 2.3%, compared to just 1.5% in 2016. Not a bad first year for President Trump who is looking at a 3.0% expansion this year. Incoming Federal Reserve chairman, Jerome Powell, is bullish on the economy stating that “some of the headwinds the US economy faced in previous years have turned into tail winds”. With faster growth, higher inflation (moving to the 2% target) and falling unemployment, care has to be taken to avoid the economy overcooking. It seems more than likely that he will chair over three rate hikes of 0.25% this year.

With an imminent introduction of new laws effecting credit card companies, UK’s Financial Conduct Authority estimates that borrowers could save up to US$ 1.8 billion in lower interest charges. It is primarily aimed at those in, or at risk of being in, persistent debt, with the FCA indicating that some four million accounts were currently paying, on average, around US$ 3.50 in interest and charges for every US$ 1.40 they repaid of their borrowing.  This practice is not only a UK problem but can be seen in most other countries.

Crown Prince Mohammed bin Salman is certainly making his presence known and has commented that his anti-corruption drive was the “shock treatment” the country needed. He has made a point of appointing “high energy” people who could modernise the kingdom and overhaul government bureaucracy. If his reforms are carried through, the economic boost to both the Kingdom and the region will be noticeable. No doubt, The Winner Takes It All!

Posted in Finance | Tagged , , , , , , , , , , , | Leave a comment

Keep The Customer Satisfied!

There were reports that there could be changes, relating to the sale of future off-plan projects which could be beneficial for the consumer. A possible proposal was that off-plan projects would need to achieve 50% completion, prior to any sales launch (as opposed to the current status quo of 20% (or 20% escrow account / bank guarantee). Most contractors appear to utilise bank guarantees with a cost ranging from 0.2% – 1.0%, depending on the applicant’s track record and balance sheet.  Another option was that the 20% rule would remain in place but it would cover “the total project value”, not just the “value of the construction”. With these extra costs in mind, there probably would be a slowdown in launches – especially from the smaller players – and there could be a marked reduction in project delays and potential default risks.

According to Phidar Advisory, Dubai property prices will take longer to rebound because of the continuing over supply in the luxury market sector. The consultancy estimates that there is a 5-10% oversupply situation which, under normal conditions would present no problem but the fact is that much of the new stock is in the higher value sector. The drop in real estate investment is due to various factors, including low oil prices, US$ exchange and GDP growth in key foreign buy markets such as India and UK.

S&P is also very downbeat and has forecast that the three-year Dubai property downturn is set to continue to 2020 with the “usual” key drivers – the introduction of VAT, low oil prices and a Gulf diplomatic crisis. The agency has been wrong before and it is hoped that it is wrong again. It has to be remembered that the Dubai economy is expected to grow by 3.9% this year, that energy prices are heading north again and that the population growth last year was 8%. At the beginning of every year, consultants seem to overestimate the potential number of new units for the coming year and seem to forget that for the past three years, just over 52k units have entered the market. Furthermore if the population grows at 8% this year, Dubai will be hosting 224k new residents who have to live somewhere – and the current number of 490k residential units will have to increase accordingly.

A recent Asteco report has outlined the five most expensive and five cheapest locations where to rent a one-bedroom apartment in Dubai; all ten locations saw rents from US$ 1.4k to US$ 5.4k lower than a year earlier. The five at the top end where Palm Jumeirah (US$ 30.0k – US$ 5.4k lower than in 2016), DIFC (US$ 27.2k – US$ 1.4k), Downtown (US$ 25.9k – US$ 5.4k), JBR (US$ 25.9k – US$ 2.7k) and SZR (US$ 24.5k – US$ 1.4k). At the other end of the scale, International City with a rent of US$ 10.9k down US$ 1.4k from 2016, Deira (US$ 13.6k – US$ 2.7k) and Jumeirah Village, Dubai Sports City and Discovery Gardens all at US$ 15.0k.

Omniyat announced that its One Palm development will be managed by the Dorchester Collection – a week after announcing that the same London luxury brand would also be involved in a 5-star hotel and luxury residences being built on the banks of Dubai Canal at Marasi. The penthouse at One Palm was sold for US$ 28 million last year, the most expensive ever in Dubai.

The biggest contract in recent times – at US$ 1.2 billion – was awarded by Nakheel for its mall project on Deira Islands; the main contractor will be United Engineering Construction. (This week, the contractor successfully completed a US$ 350 million finance package with local banks). Slated to be the largest in the region, the mall will host over 1k outlets and have 3.8 million sq ft of multi-storey parking. The project will be completed by 2021 and will be the focal point of Deira Central which will have fifty residential and hotel towers.

Jaleel Holdings is to build a cash and carry facility in Dubai Wholesale City, at a cost of US$ 27 million. The country’s largest fast moving consumer goods (FMCG) wholesaler is planning a fully integrated direct sale warehouse, flagship store, storage and staff accommodation on the 300k sq ft site.

A new Dubai Tourism study envisages a 10.2% compound annual growth rate in the next two years in occupied room nights, to bring the total to 35.5 million by 2019; over the same time period, room supply is expected to grow at an 11.1% CAGR to 132k. Occupancy is estimated to remain steady at between 76% – 78%. Last year, there was a 6.2% increase in the total of overnight visitors to 15.8 million, with the hotel inventory at 107.4k rooms.

The RTA unveiled the initial design of the Hyperloop project that is set to revolutionise intercity travel, by slashing travel time between Dubai and Abu Dhabi to just 12 minutes. Travelling at speeds of up to 1.2k kph, the aim is to move 10k passengers an hour using an electromagnetic propulsion system to move the passenger pods through a vacuum tube; the pods will have leather seating and an in-house entertainment system.

Emirates has agreed a new five year shirt sponsorship deal with Arsenal which will now see the Gunners in their familiar attire until at least 2024. The naming rights of The Emirates Stadium, which came into being in 2012 when the new ground was opened, will remain in place until 2028. No financial details were readily available.

The Australian Competition and Consumer Commission has rubber stamped the partnership agreement between Emirates and Qantas for another five years to 2022. This will result in an improved schedule choice for passengers and increased flyer benefits. Since its 2013 inception, over 8 million have used the network.

A good year for flydubai saw the low-cost carrier posting an 18.0% hike in 2017 profits to US$ 10 million on the back of a 9.2% increase in revenue to US$ 1.5 billion. Over the year, the airline, which saw passenger numbers 5.5% higher at 10.9 million, placed an order for 175 Boeing 737 MAX airplanes.

BMI’s latest report estimates that with the introduction of VAT – and higher oil prices – UAE inflation levels could reach 3.3% this year. The higher energy prices will see a marked increase in transportation costs that account for 10% of the “inflation basket”. It also envisages that there will be three UAE 0.25% rate hikes, in line with the Fed increases.

Emirates REIT posted 2017 rental income of US$ 54 million, as total property income rose 19.5% to US$ 61 million; net income increased 9.1% to US$ 52 million. The value of its property portfolio, 14.2% higher, topped US$ 860 million.

The Dubai-based MAF Group is planning to more than triple the number of Carrefour stores in Egypt to 137. The company had already announced a US$ 4.8 billion investment strategy in Africa’s third largest country and has on-going projects there, including the massive Mall of Egypt in Cairo and the development of City Centre Almaza.

Dubai-based Careem has acquired RoundMenu, which has a regional presence in 18 cities and nine countries. The ride hailing firm, which raised US$ 500 million finance last year from various investors, bought the website and app for an undisclosed amount. It will start trialing food delivery services this month in a sector that includes the likes of Deliveroo, Talabat, UberEats and Zomato.

The UAE-based banks’ total assets rose 19% to US$ 734 billion at the end of 2017 continuing to be the leading GC state for banks in terms of assets for the third year running. Both Saudi Arabia and Kuwait lagged behind with totals of US$ 615 billion and US$ 212 billion. The leading GCC bank, by a long chalk, was First Abu Dhabi Bank, with assets totalling US$ 182 billion; the bank also led the field when it came to profit (at US$ 3 .0 billion) and  market value of US$ 30.4 billon.

Despite some rumours to the contrary, the UAE Telecommunication Regulatory Authority will not add a third mobile network operator, at least  not for this year. The TRA noted that both etisalat and du have made major reductions in prices, whilst at the same time improving service quality.

The DIFC courts reported a 26% hike in the value of settlements at US$ 926 million, as the settlement rate of the 520 cases heard increased – in the Court of First Instance (dealing with disputes above US$ 27k) by 5% to 88% and in the Small Claims Tribunal 10% to 85%, where the value of total claims was 74.9% higher at US$ 10 million.

GEMS Education is to open four new schools in the country next academic year, two of which will be in Dubai. No further details were made available but the move is in line to meet increased local demands for high-quality education.

The good news continues for the 400k Filipinos living in Dubai, as the peso this week fell to its lowest level (14.19 to the dirham and 52.08 to the greenback) in over twelve years. At this rate, remitting money means more pesos being sent home and the downward trend is set to continue, at least in the short term.

The Investment Corp of Dubai (ICD) is reportedly planning a 5-year US$ 1 billion refinancing package, partly to repay a 5-year US$ 2.55 billion facility expiring this June.

Dubai Islamic made its sixth listing – a US$ 1 billion sukuk – on Nasdaq Dubai which makes the bank the bourse’s largest local debt issuer, with a total of US$ 5.25 billion. The current listing is a five-year sukuk with a 3.625% profit rate.

Nasdaq Dubai has set up future contracts – covering the country’s two main bourses in Abu Dhabi and Dubai – in a move that could add much needed liquidity to local equity markets.

Union Properties has advised the DFM that, despite rumours to the contrary, it has no intention of reducing its capital base. The Dubai-based developer posted a US$ 627 million loss last year.

Having posted a 3.0% increase in its UAE revenue to US$ 8.5 billion, and a 5.0% jump in net profits after royalty to US$ 2.2 billion, Etisalat Group has proposed a final dividend US$ 0.109, bringing the total pay-out for the year to US$ 0.218. The telco, which operates in sixteen markets across the Middle East, Africa and Asia, saw its UAE base grow 3% to 12.6 million, whilst the aggregate total was 1% higher at 142 million.

The DFM opened on Sunday (18 February), at 3330, and having lost 287 points over the past five weeks was again down – by 43 points – to close at 3287 by Thursday, 22 February. Emaar Properties regained some of its recent losses – and rallied from 14-month lows – up US$ 0.02 at US$ 1.72 but Arabtec continued its downward path losing US$ 0.04 to close on US$ 0.66. Volumes continued on the low side at 192 million shares traded on Thursday, valued at US$ 98 million (compared to 186 million shares worth US$ 81 million the previous Thursday – 15 February).

By Thursday, Brent Crude traded higher over the week, being US$ 1.06 higher at US$ 65.39, with gold heading the other direction – down US$ 22 (1.6%) to US$ 1,333 by 22 February 2018.

Although Walmart posted online figures 23% higher in Q4, they were less than half the growth recorded the previous quarter and lower than the same period in 2016. Furthermore, it lost money on its US$ 11.5 billion on-line sales recorded in 2017 and expects the same sort of losses this year. The end result was that the world’s largest retailer saw its share value fall by over 10% to US$ 94.11 – its largest percentage daily fall in over thirty years.

Europe’s largest hotel chain, AccorHotels, posted a credible 66.0% jump in 2017 profits to US$ 545 million, driven by a 17.7% rise in revenue to US$ 2.4 billion. The company, that includes Ibis, Mercure, Novotel and Sofitel in its portfolio, saw the number of its hotels 7.6% higher at 4.3k, with 616k rooms.

The banking sector is in the news for yet another week as the ECB has frozen payments by Latvia’s third largest bank, ABVL, as money laundering allegations gather momentum. Two days before Monday’s announcement, the country’s Corruption Prevention Bureau arrested the Latvian bank governor, Ilmars Rimsevics, who is also a member of the ECB governing council.

Following recent revelations of an ongoing US$ 1.8 billion scam, Punjab National Bank is laying the blame at the door of two junior officials who issued “letters of undertaking” to companies linked with diamond trader Nirav Modi and his uncle Mehul Choksi of the Gitanjali Group; over the past decade, they were then able to obtain credit from at least 32 other Indian lenders’ overseas branches. None of these documents were lodged on the bank’s internal software system. A further lapse was that many of the major listed partners in some of these companies were of “limited means”. Three firms belonging to Modi – Diamonds R Us, Solar Exports and Stellar Diamond – had a total capital of US$ 61.8 million whilst he had garnished loans totalling US$ 617 million; trade receivables were also much higher than actual sales booked. Their whereabouts are unknown.

In the year, the UK government finally divested itself of its remaining shares, following its US$ 28 billion 2008 bailout, Lloyds Banking Group posted record annual 2017 profits, up 24.0%, to US$ 7.4 billion on the back of a 6.0% hike in revenue to US$ 25.9 billion. However, the good news was tarnished by the fact that it set aside a further US$ 840 million provision to cover the cost of compensating victims of mis-sold PPI, which will eventually have cost the bank US$ 26.2 billion.

Meanwhile Barclays recorded a 9.5% improvement in profit to US$ 5.0 billion despite a US$ 1.3 billion charges – as a result of the recent changes to US corporate tax – and its investment bank reporting a 22.0% fall in earnings of US$ 2.9 billion. It too is also still paying for past misdeeds, setting aside US$ 1.7 billion for litigation and conduct, including US$ 980 million for PPI.

Driven by encouraging Asian results, HSBC reported an impressive 142% hike in 2017 profits to US$ 17.2 billion as many of the one off costs, that weighed down the 2016 figures, including the sale of its Brazilian unit, were absent. However the markets were disappointed and its share value dipped 4.5% on the day and ended trade on Thursday on US$ 10.16. Part of the problem was loan impairments of US$ 500 million, attributed to “two large corporate exposures in Europe”, thought to be the South African retail giant Steinhoff and Carillion.

This week at a joint select committee investigation, MPs were told of Carillion investors “fleeing for the hills” up to two years before its recent collapse, amid increasing concern about the company. There were complaints that the firm’s annual reports were “worthless as a guide to the true financial health of the company”.  After three profit warnings in H2 2017, the company, that employed 20k, finally sank with debts of US$ 1.8 billion and an estimated pension deficit of US$ 3.6 billion.

As widely expected, Hong Kong-based Noble Group has warned of a massive 2017 loss, brought on by challenging operating conditions, as it tries to finalise a US$ 3.4 billion debt for equity swap. This will result in creditors getting 70% of the company in return for halving their senior debt, with shareholders seeing their stake diluted to just 10%. The troubled commodities trader expects Q4 losses to be around US$ 1.9 billion and an annual deficit of US$ 5 billion, following a marginal US$ 9 million profit last year and a US$ 1.9 billion loss in 2015. Little wonder then that its market value has plummeted from US$ 4.6 billion three years ago to its current value of US$ 197 million.

Japan posted a US$ 9.4 billion trade deficit in January, following a US$ 3.5 billion shortfall the previous month. Month on month, exports grew by 2.9% to 12.2% whilst imports fell 7.0% to 7.9%.

Since the economic outlook for the US is positive, there is no doubt that this will lead to perhaps three interest rate hikes in 2018. This is particularly so on the back of recent data that has seen an uptick in wage levels which in turn would normally push up the inflation rate. One thing certain is that days of almost negative interest rates and other economic stimulus measures, introduced following the GFC, are over.

Further positive news on the state of the UK economy from the  Office for National Statistics indicated the strongest two quarters of productivity growth since the 2008 GFC – at 0.8% and 0.9%. On top of this wages grew by 2.5%, year on year, with output per hour rising by 0.8% in Q4 (following 0.9% in the previous quarter). A January surplus budget balance of US$ 14 billion – the second highest for a January month on record – is yet
another indicator that the UK economy is ticking over. For the ten months YTD, PSNB (public service net borrowing) excluding public sector banks has decreased 16.0% to US$ 52.8 billion – the lowest YTD borrowing in a decade. The total debt figure of US$ 2.4 trillion equates to 84.1% of GDP. There was a slight increase in the unemployment ratio (from 4.3% to 4.4%) in Q4, as the number of unemployed rose by 44k; however, the total number of people in work grew by 88k over the same period. It was also reported the economy grew by 0.4% in Q4 – weaker than expected because of a slowdown in both consumption and business investment.

Chicken jokes were out in force this week as KFC’s debacle became front page news. The fast food chain, with 900 outlets in the UK, had to close half of them because they had run out of chickens. Last week, it was decided to move its delivery contract from the South African-owned supplier Bidvent to DHL which subsequently blamed “operational problems” for the supply disruption. It is evident that both companies have forgotten the number one business mantra – Keep The Customer Satisfied!

Posted in Finance | Tagged , , , , , , , , , , , , | Leave a comment

Nkosi Sikeleli Africa!

This week saw the RTA trial the world’s first autonomous pods, in cooperation with Next Future Transportation. Weighing 1.5k kg and carrying up to ten passengers, each pod can travel at 20 kph and can operate for three hours before the need to recharge. Dubai is keen to be able to have 25% of all local journeys autonomous by 2030.

To the surprise of a few, all fifty luxury apartments (of the 1.3k being built) in Dubai Science Park, with a Bitcoin price tag, have been snapped up. The US$ 300 million Aston Plaza project, developed by UK nationals, Michelle Mone and Doug Barrowman, was thought to be the first in the world to utilise cryptocurrency. With development under way, completion is slated for 2020.

Damac awarded its first major contract of the year – after spending US$ 954 million in 2017 – to Emirates Electrical Engineering LLC for the third 132/11KV substation in its Akoya Oxygen development; it will provide energy to 2.9k villas and 855 apartments for phases 6, 7 and 9 of the project that covers 55 million sq ft.

Ghantoot Gulf Contracting has been awarded a US$ 22 million Nakheel contract to build the Palm’s St. Regis Beach Club which will be part of the 289-room St. Regis Dubai hotel. The property is located in the 52-storey Palm Tower, due to open next year.

Following the January announcement of its new brand, Jumeirah Group has wasted no time in setting up Zabeel House by Jumeirah hotels. It will soon manage two properties, with a combined total of 350 keys, in Al Seef, adjacent to the Al Fahidi historical district.

January’s STR report provided good news for the Dubai hospitality sector, with RevPAR up 1.0% to US$ 192 and occupancy rate nudging 1.5% higher to 86.4%. It was a welcome change to see that demand at 5.5% exceeded the supply increase of 3.6%. One of the main factors for this turnaround was the introduction of visas on entry for certain nationalities that resulted in a 121% increase in the number of Russians over the year, with more Chinese also visiting the emirate. Indeed Dubai recorded a 64% increase in events and international conferences it hosted to 212. It is estimated that US$ 195 million in revenue was generated attracted 95k participants.

Dubai will be rocking in May as the emirate hosts the largest gathering of internal auditors. The international body is hosting 3k professionals from 110 countries who will be able to listen to 100 global speakers. Events like this should be the icing on the cake for the hospitality sector and no doubt MICE will continue to be a growing contributor to the progress of the local economy. Last year, Dubai recorded a 64% increase in events and international conferences it hosted to 212. It is estimated that US$ 195 million in revenue was generated, attracting 95k participants.

On Sunday, Emirates signed a US$ 16 billion Airbus contract for 20 A380 jumbos (with a further option for 16), with delivery commencing in 2020.

January’s Emirates NBD Dubai Economy Tracker rose 1.3 to 56.0 month on month – an indicator that the emirate’s non-oil economy is returning to robust health. The main drivers were gains in construction (ahead of Expo 2020), as well as increased activity in the wholesale and retail sectors. The introduction of VAT in January placed pressure on both input and output prices but the recent uptick in oil prices brought more confidence into the market. The three best performing sectors were wholesale/retail, travel/tourism and construction – at 56.1, 55.7 and 55.2 respectively.

Having just acquired Union Properties PJSC’s 50% stake in Emicool for US$ 136 million, thus taking full control of the provider of cooling services, Dubai Investments is reportedly interested in divesting 30% of the company in an IPO later this year. It is estimated that the company could be valued at between US$ 354 million to US$ 408 million. Another potential IPO could see DIC’s real estate investment trust being listed on either of Dubai’s bourses. It is estimated that the company has up to US$ 2.5 billion of projects in its books of which US$ 1.4 billion are under construction, with the balance in either the tender or design stage.

Meanwhile the holding company reported an 18.0% decline in 2017 profits to US$ 272 million, caused mainly by some late year transactions being held over until this year.

The DMCC confirmed that it had granted a licence to Dubai gold trader Regal RA DMCC to trade cryptocurrencies – the first company in the region to do so officially.

Emaar Entertainments is set to open the region’s first visual reality park in Dubai Mall. The facility will feature attractions, allowing visitors to interact using immersive rides, educational journeys and games.

Al Ahli Holding Group announced that it had received an Islamic US$ 340 million financing package so as to extend its Dubai Outlet Mall.  The expansion, covering some 3 million sq ft, will be completed by Q4 2019 which will then make the facility, which already has a built-up area of 1.1 million sq ft, one of the largest in the world.

With the reporting deadline being today (15 February), there has been a raft of results from listed companies on the DFM – some good, some not so.

After two years of losses, including US$ 926 million in 2016, Arabtec Holding posted a US$ 34 million profit last year, as revenue increased by 12.0% to US$ 2.5 billion. The contractor also intimated that it had a backlog of US$ 4.7 billion at year end.

Dubai Holding’s Emirates International Telecommunications is reportedly in discussions to raise US$ 572 million to refinance loans due to mature in 2020. The company that has stakes in Axiom, Du and Telecom, agreed in December to sell its 35% share of Tunisie Telecom to Dubai-based Abraaj Group, Its net operating profit dipped 21.9% to US$ 343 million, as a result of a 2016 profit on the sale of a subsidiary. Q4 profits were 53.5% lower at US$ 47 million.

Damac Properties announced a 25.2% decline in 2017 profits to US$ 752 million, although revenue was 4.1% higher at US$ 2.0 billion. The Dubai-based developer pointed to higher cost of sales (20.9% up to over US$ 1.0 billion) and a 23.3% hike in general expenses to US$ 299 million, as root causes for the deficit.

Amlak Finance had a disappointing year as 2017 net income was down 52.0% to US$ 14 million (and operating profit 24.9% lower at US$ 48 million) with revenue also lower – by 44.4% to US$ 118 million. Reasons for the decline appear to be a softer property market and low oil prices for most of the year.

Etisalat posted a 12.1% decline in Q4 profits to US$ 537 million as 2017 surplus remained flat at US$ 2.3 billion. Annual revenue was down 1.3%, mainly because of the unfavourable impact of the Egyptian pound against the dirham.

Emaar Properties came in with a healthy 16.0% boost in 2017 profits to US$ 1.6 billion, with revenue 21.0% up at US$ 5.1 billion. Interestingly, non-UAE operations now account for 19.0% of the company’s turnover. In November, it hived off 20.0% in a listing of unit Emaar Development which raised US$ 1.3 billion. This unit, basically responsible for its hospitality & leisure, commercial leasing and entertainment business, posted an annual 29.9% hike in profit to US$ 741 million.

Emaar Malls returned impressive Q4 and annual 2017 results with both revenue up 35.0% to US$ 308 million (and US$ 989 million for the year) and profit 27.0% to US$ 156 million (and 11.0% to US$ 566 million).  Its Dubai Mall was again the world’s most popular mall with 80 million visitors and occupancy across its portfolio was at 94%. The company expects to continue its expansion of The Dubai Mall Fashion Avenue and open its New Springs Village this year.

Maybe Drake & Scull could have turned the corner after a torrid time. Q4 saw the company just about break even with a wafer thin profit, compared to a US$ 98 million loss in the same period in 2016; quarterly revenue was 18.4% up at US$ 118 million. However, over the whole year both revenue and profit headed south; turnover was 17.0% lower at US$ 736 million, whilst losses worsened 71.2% to US$ 380 million.

Gulf Navigation registered a 7.0% hike in gross profit to US$ 13 million, whilst its total asset value increased by 12.2% to US$ 293 million over the year.

DXB Entertainments posted disappointing figures with losses in both Q4 – US$ 69 million (US$ 79 million a year earlier) – and for the year posting a US$ 304 million deficit compared to a US$ 132 million loss in 2016. Its 2.3 million visitors last year were well short of its annual 6.7 million target number. The park operator is reportedly in discussions with lenders to restructure its 2014 US$ 1.15 billion loan facility, initially used to build the facility.

Aramex posted a 14.0% hike in Q4 revenue to US$ 360 million, as profit surged by 25.2% to US$ 45 million. For the year, the Dubai-based courier saw profit up 2.1% to US$ 118 million, with revenue 8.8% higher at US$ 1.286 billion.

Having to close various non-profitable stores, retailer Marka reported a worsening of its losses to US$ 59 million – 44.7% higher than in 2016 – as revenue sank by 67.9% to US$ 26 million. The company, which has never made a profit since its 2014 début on the local bourse, has been badly hit by falling disposable income and the rising cost of tourism. It introduced a major restructuring programme last year that has seen an improvement inasmuch that H2 losses of US$ 18 million accounted for just 30.5% of the annual deficit.

Amanat Holdings posted a 10.0% hike in 2017 profits to US$ 11 million, as revenue pushed 6.0% higher to US$ 24 million; income from its associate businesses, excluding a one-off charge, increased 65.0% to US$ 9 million. Specialising in healthcare and educational investments, the Dubai-listed company now holds a 21.7% stake in Taaleem Holdings, having bought an additional 5.3% share in October for US$ 14 million.

Although CBD posted an 11.8% hike in Q4 profits to US$ 92 million, its annual figure was flat at US$ 273 million – an indication that the bank was recovering from disappointing nine-month figures that had seen a 5.2% decline in profits to US$ 181 million. Operating expenses were 3.5% higher at US$ 181 million.

The DFM opened on Sunday (11 February), at 3326, and having shed 291 points the previous four weeks managed to just stop the haemorrhaging – up 4 points to close at 3330 by Thursday, 15 February. Emaar Properties was down US$ 0.07 at US$ 1.70, with Arabtec falling US$ 0.02 to US$ 0.70.  Volumes continued on the low side at 186 million shares traded on Thursday, valued at US$ 81 million (compared to 159 million shares worth US$ 107 million the previous Thursday – 08 February).

By Thursday, Brent Crude had a flat week trading only US$ 0.02 lower at US$ 64.33, with gold heading the other direction – up US$ 35 (2.6%) to US$ 1,355 by 15 February 2018.

Uber reported slightly better Q4 results, with revenue 11.8% higher at US$ 2.2 billion and its loss narrowing to US$ 1.1 billion. During the quarter, the car ride hailing company raised US$ 14.0 billion in new funding, as a consortium led by Japan’s SoftBank, became a leading stakeholder with 17.5% of the company.

Despite a US$ 1.6 billion charge (as well as US$ 2.7 billion in 2016) on its troubled A400M military aircraft, Airbus posted a near tripling of 2017 profit to US$ 3.6 billion, despite revenue being flat at US$ 86.0 billion. The main factors behind these impressive results included record deliveries of 718 (688 – 2016), a net capital gain of US$ 754 million from the divestment of its defence electronic business and favourable exchange rates (as the US$ weakens).

Lotte Group is now looking for a new chairman, as the current holder has been sentenced by South Korean courts to thirty month in prison for bribery. Shin Dong-bin was found guilty of offering millions of dollars in bribes to Choi Soon-sil, a friend and adviser to former president Park Geun-hye.

As far back as 2008, at the height of the GFC, Barclays made a US$ 3.0 billion loan to Qatar Holding which in turn used the funds to buy shares in the bank. Now a decade later, the UK’s Serious Fraud Squad is to charge the bank for unlawful financial assistance. Last June, the SFO took action against the bank’s holding company and four executives. This time, the banking unit is being charged – and if found guilty, there could be major repercussions for Barclays including severe sanctions.

Another bank in ongoing trouble is RBS. Not only will it soon post its tenth consecutive annual loss, it will also find out how much it will have to pay US authorities over the misspelling of residential mortgage-backed securities, that could be as high as US$ 5 billion; it has already set aside US$ 3.3 billion. Last year, a settlement with the US Federal Housing Finance Agency cost the bank US$ 5.5 billion. The bank, which is actually finally trading in the black, is still 71% owned by UK taxpayers and the Chancellor, Philip Hammond is reluctant to do anything until the US fine is confirmed. Whatever happens, the UK taxpayer, as appears to be the norm, will pick up the tab.

Yet another bank in trouble is Punjab National Bank, India’s second largest stake-run bank. It has been the subject of a US$ 1.8 billion scam, equivalent to 50 times its latest quarterly profit figure and a third of its market value. There are fears that the scam, which is linked to a single Mumbai branch and benefits only a handful of people, could affect other banks and hurt confidence in the country’s already tarnished banking system.

In Australia it is not one bank but all of them who are involved in a royal commission into their past wrongdoing. They have been accused of customer exploitation and corporate fraud among other scandals – and if true then one can understand why they are among the most profitable in the world. The enquiry is expected to examine misleading and deceptive behaviour in the industry and conduct which fell “below community standards and expectations”. The commission will also examine the pension, insurance and wealth management industries and will inevitably find that the general public has not only been let down but also ripped off by unscrupulous practitioners. Whether public trust can ever be restored is unlikely.

Bitcoin has had an impact on many individuals as its value has gone from a US$ 20k high down to US$ 6k and then back to its current level of just over US$ 10k – all over the past two months. Now its effect is being felt in several countries including Iceland, a country with a population of just 336k; electricity use at Bitcoin mining supply data centre computers  and cooling systems (at 840 gigawatt hours) is greater than the 700  gigawatt hours used by the country’s homes.

December US wholesale stock piles beat forecasts, increasing by a further 0.4%, having jumped 0.6% the previous month. For the year 2017, the figure came in at 3.4%.

China’s influence on the US economy continues to cause worries as reports indicate that it is holding US bonds, notes and bills, totalling US$ 1.28 trillion  – 12.0% higher than at the end of 2016; its global balance stands at US$ 3.16 trillion. This could be a trump card for the Chinese authorities as bilateral trade tensions between the two super powers appear to be worsening.

Both the EU and the eurozone saw their economies grow at the fastest pace – 2.5% – in a decade last year, whilst both blocs recorded 0.6% growth in Q4.

Driven by higher fuel import prices and net EU trade declining (with imports being greater than exports),the UK’s trade deficit grew by US$ 1.7 billion to US$ 15.0 billion and by US$ 10.0 billion for the quarter.

A Visa Index report indicated that UK consumer spend in January was 1.2% lower than the same month last year – the first time there has been a January fall since 2013; the main drivers seem to be lower spending in the high street and transport. This trend is expected to continue until wage growth exceeds the inflation rate – little chance in the short term since latest inflation remains at 3.0%, whilst wage growth is nearer 2%.

The global equity markets continue to trade under volatile conditions with the current environment continuing at least in the short-term. The three US bourses have all shown positive YTD results, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all higher at 25,200 (1.9% – 24,719 on 01 January), 2,731 (2.1% – 2,674) and 7,256 (5.1% – 6,903).

It seems likely that Cyril Ramaphosa will replace Jacob Zuma as the next president of South Africa. Following nine years of apparent misrule, which saw the country skip from one scandal to another and with nepotism running wild, there was an air of inevitability that he would be pushed. The biggest challenges facing the incumbent will be to tackle corruption at all levels and to restore confidence in the besmirched criminal prosecution system. Somehow the country has to quadruple its current miserable 1.4% growth rate, introduce measures to slash the 27% unemployment level and try and regain international confidence which has seen global agencies cut the country’s debt to junk status. Nkosi Sikeleli Africa!

Posted in Finance | Tagged , , , , , , , , , , , | Leave a comment


Another global brand is set to enter the emirate’s hotel sector as Omniyat announce the launch of a 5-star hotel and luxury residences managed by Dorchester Collection. This will be the first of several regional projects planned between the two parties. The original Dorchester opened its Mayfair doors in 1931 and is considered one of the best hotels in the world. The Dubai project will see the iconic brand follow in the footsteps of the original property and its other established hotels in locations such as Beverly Hills, Paris and Rome.

MAG Lifestyle Development will hand over the first phase of its MAG 5 Boulevard six-building project in Q2, six months earlier than expected. Comprising 528 units (ranging from studio to 3 B/R), and within a gated community that has a pool, jogging tracks and a community centre. Phase 2 of the US$ 218 million project (with seven buildings) will be completed by Q2 next year.

An increasing number of Dubai’s private schools is reducing or freezing student fees, including the likes of Horizon International (by up to 33%) and Repton (by around 10%). The two main drivers are that current expat salary packages are more likely not to include an education allowance and increasing competition among establishments in a market that could be becoming over-supplied.

Four-year old Broccoli is set to become not only one of the largest restaurant operators in the country but is also aiming high on the global stage. Currently, it boasts 48 franchised outlets in the UAE and a further 101 worldwide including in India, Saudi Arabia and the UK. The Dubai-based company reports that it has a further 54 properties under construction and that 200 franchises are in the planning or design phase.

DEWA has awarded a US$ 300 million contract to a consortium of Siemens and Egypt’s Elsewedy to build a power plant in Al Aweer. The project, involving 815 megawatts gas turbines, is expected to be finalised by Q2 2020.

Dubai Properties has appointed Raed Al Nuaimi to succeed as its group chief executive, taking over from Abdullah Lahej. The incumbent had been with North25, a new entity formed to lead Dubai Holding, among other projects. Another high profile change sees Dubai Holding appointing former CFO, Amit Kaushal, as its CEO to replace Edris Alrafi who has left the investment firm, after being appointed in April 2017. A third senior management change sees Malek Al Malek replacing Amina Al Rustamani as chief executive of Tecom Group, which operates, inter alia Dubai Media City, Dubai Internet City and the new D3 (Dubai Design District). Further changes include two CE appointments of Arif Mubarak at Dubai Asset Management and Nabil Ramadhan at Dubai Retail.

DP World posted a 2017 10.1% hike in gross cargo volume handled to 70.1 million twenty foot equivalent units, with a 9.7% increase on a like for like basis; Q4 showed even better results at 10.3% and 9.9%. The two main drivers behind these positive results were a rise in global trade and a growth in market share. The Q2 opening of Container Terminal 4 will see DP World’s handling capacity increase to 3.1 million intermodal containers in JAFZA.

The federal government has approved a US$ 1.9 billion plan to build 7.2k houses for UAE nationals. The cabinet, chaired by HH Sheikh Mohammed bin Rashid Al Maktoum, directed that the residential areas should be in line with global environmental standards. It is estimated that over 80% of the population own their homes – one of the highest levels of private ownership in the world.

It seems that Dubai and Dallas will be the testing grounds for the first air taxis in a JV between Bell Helicopter and Uber Technologies. Testing is expected to start by 2020 and flights could start as soon as 2025.

There was no surprise with Dubai announcing yet another record year, as tourist numbers climbed 6.2% to 15.8 million. The top three market sources – India (15% higher at 2.1 million), Saudi Arabia (down 7.0% to 1.5 million) and UK, 2% up at 1.3 million – accounted for 31.0% of the total number.

Even though 2017 passenger numbers grew at their slowest pace in nine years, Dubai International still remains the world’s busiest international airport. Traffic grew by 5.5% to 88.2 million and 2018 expects to see even slower growth of 2.4%, equating to 90.3 million passengers. Annual cargo volumes were 2.4% higher at 2.7 million tonnes.

Two new government charges have been recently introduced. The first is a US$ 2.72 “ten dirham innovation fee” which will be charged by all Dubai public agencies to support educational and cultural projects, via the Dubai Future Foundation. The other, to be introduced in May, will see a waste disposal charge, starting at US$ 21.80 per tonne.

Although falling 0.9 in January to 56.8, the seasonally adjusted Emirates NBD UAE PMI showed a marked improvement in business conditions, with increases in new orders and new export orders. The introduction of VAT impacted both prices and purchases in January. Input costs rose at their fastest rate in over six years and, although selling prices were higher, not all the VAT was borne by consumers, as some businesses held back and paid at least some of the new tax.

Dubai became one of the top ten maritime capitals last year, and fifth in terms of competitiveness and attractiveness, according to Norway-based Manon Business Group. With the upcoming Dubai Harbour project – including its 1.4k berth marina – and several other waterfront attractions, the emirate will not only see its yacht berthing capacity surging 50% to 4.5k but becoming  one of the world’s most important maritime destinations by 2022.

After a 2016 loss of US$ 36 million, its seems that Shuua Capital has turned the corner having posted a healthier US$ 20 million profit in 2017 – its highest ever annual profit since pre GFC in 2007; Q4 profits came in at US$ 4 million, compared to a loss of US$ 5 million in the same quarter a year earlier.

Abraaj Group has refuted US newspaper claims that it misused funds earmarked for healthcare projects in the developing world. The Dubai-based private equity firm, with some US$ 13.6 billion of assets under management, dismissed the allegations by some 24 investors as “inaccurate and misleading”.

One of Dubai’s smaller financial institutions, Commercial Bank International, posted a healthy 40.0% hike in 2017 profits to US$ 48 million; this comes on the back of an 8.0% fall in impairment charges, a fall in its non-performing loan ratio from 8.7% to 7.2% and a 10% hike in net interest income to US$ 151 million.

The DFM opened on Sunday (04 February), at 3412, and having shed 119 points the previous two weeks dropped a further 86 points (2.5%) to close at 3326 by Thursday, 08 February. Emaar Properties was down US$ 0.03 at US$ 1.77, with Arabtec moving US$ 0.02 down to US$ 0.72.  Volumes were again low at only 159 million shares, valued at US$ 107 million, traded on Thursday, (compared to 158 million shares worth US$ 78 million the previous Thursday – 01 February).

By Thursday, Brent Crude traded US$ 5.30 (7.6%) lower at US$ 64.35, with gold heading the same direction – down US$ 28 (2.1%) to US$ 1,320 by 08 February 2018.

Two energy giants have benefited by the uplift in commodity and oil prices. BP announced that 2017 profits more than doubled from US$ US$ 3.6 billion to US$ 6.2 billion (and Q4 from US$ 400 million to US$ 2.1 billion) as oil prices rose last year. During the year the company saw production 12.0% higher at 2.27 million bpd and opened seven new oil and gas fields.

Rio Tinto had a strong year with a 69.0% hike in profits to US$ 8.6 billion, as revenue climbed 18.3% to over US$ 40 billion, that resulted in shareholders being handed a 70% jump in dividends of US$ 5.2 billion, equating to US$ 2.90 per share; the mining giant also announced a US$ 1 billion share buy-back.

A major UK law firm is launching an equal pay claim on behalf of 200k store assistants (mostly female) that could result in individual pay-outs of up to US$ 28k. If the claims, lodged with the conciliation service Acas, are successful a supermarket like Tesco could be saddled with a bill for back pay, totalling US$ 5.6 billion.

Nokia exceeded analysts’ expectations by posting a 7% hike in Q4 profits to over US$ 1.2 billion, driven by a US$ 261 million one-off patent payment from China’s Huawei. Nokia – along with other major players, Huawei and Ericsson – expects another tough trading year as demand for 4G equipment declines and with 5G gaining traction only by next year.

Tesla is starting to test stakeholders’ patience as it continues to struggle with a number of issues. In Q4, only 1.55k vehicles were delivered, with delays being attributed to continuing battery problems. Two years ago, founder Elon Musk forecast production of 500k units in 2018; this year, he has stated that the figure would be one million by 2020. Although its share value rose by 10% last year, shareholders will not be happy with the fact that the company lost US$ 2 billion in 2017, including a US$ 675 million Q4 loss (compared to being US$ 121 million in the red this time last year). More worrying is the cash burn which reached US$ 3.4 billion last year with US $ 787 million in Q4.

Toyota lifted its annual forecast operating profit by 10.6% to US$ 20.2 billion, driven by a weaker yen and enhanced domestic sales. The world’s second biggest car-maker, after VW, posted its Q3 (to 31 December) profit of US$ 6.2 billion – 54% higher, year on year, and its highest quarterly surplus in two years – with global vehicle sales up 15.4% to 2.63 million. Although operating profit more than doubled in its home market, it continues to struggle in North America where it fell 53.1%.

In attempting to join VW and GM as one of the top three car makers in China (the single biggest global market), Nissan is planning a US$ 35 billion investment with its JV partner, Dongfeng. By focusing on electric cars and a no frills local brand (Venucia), the aim is to boost annual sales by over 73% to 2.6 million within five years. Whilst the likes of Ford, Honda and Toyota have sales of around one million, GM and VW post turnovers of over 4 million a year.

Another week sees yet another international bank facing fines for past corporate misdemeanours. This time, Rabobank has agreed to pay US authorities for money laundering between 2009-2012. The Dutch bank pleaded guilty to obstructing US legislators in their enquiries and “chose to look the other way”.

IATA had good news this week for regional airlines reporting that all indicators were pointing up – traffic by 6.6%, capacity 6.4% and load factor up 0.1% to 74.7%. However, these figures were down on a global comparison with international passenger numbers up by 7.9%, capacity 6.4% and load by 0.9% to 81.4%. Despite a sluggish start to 2017, including the US ban on certain electronic carry-on items, the ME industry recovered towards the end of the year and can confidently look at doubling their profits this year to US$ 600 million. (Watch out for much improved results from Emirates come April).

Sri Lanka’s President Maithripala Sirisena has ordered an investigation into the 39-year old flag carrier, Air Lanka, following its 2008 controversial parting with Emirates. The then leader, Mahinda Rajapakse, (who ruled for a decade until 2015), terminated the ten-year management agreement with the Dubai-based carrier and replaced the Emirates’ appointee with his brother-in-law, who had no prior industry knowledge. Since then, the once profitable airline has lost more than US$ 1 billion and has incurred debts totalling US$ 3.2 billion. A separate probe is looking into the purchase of Airbus planes at a cost of over US$ 2 billion.

With reservations about weak consumer spending, the Reserve Bank of Australia decided to hold interest rates at the record low 1.5% which has remained unchanged for the past 17 months. However, at this week’s meeting, the RBA commented that there had been improvements in both business conditions and investment.

The future of one of the world’s biggest coal mines (estimated to produce 60 million tonnes of thermal coal a year) is in doubt when the Australian government confirmed that it would not be financing a rail link to the US$ 12.6 billion Carmichael mine near the Great Barrier Reef. Adani, the Indian miner, was granted a lease in 2016 and is still trying to find US$ 790 million funding for phase 1 of the 189km rail link. Last year, the mining company advised mining services giant Downer, that it would not be proceeding with a US$ 1.6 billion contract, preferring to manage the mine on its own – and to save on costs.

Another Asian economy performing better than expected is Indonesia as its Q4 GDP grew by 5.2%, year on year, (and 5.1% for the year), driven by an 8.5% jump in exports. The major problem facing authorities is that consumer spending continues to lag and that more job creation is badly needed. Although government spending and investment both rose – by 3.8% and 7.3% – in Q4, December retail sales, at 2.6%, disappointed. President Joko Widodo needs to boost consumer confidence, to encourage more spending, as well as spend more government money on capital investment and social assistance.

In December, the US trade balance deficit was 5.4% higher, month on month, at US$ 53.1 billion; the value of monthly imports was 2.5% up at US$ 256.5 billion whilst exports grew at a slower (1.8%) level to US$ 203.4 billion. For the year 2017, the deficit came in at US$ 504.8 billion, with exports of US$ 2,329.3 billion lower than imports totalling US$ 2,895.3 billion.

The EU has upgraded its growth forecasts for the next two years to 2.3% (from 2.1%) and 2.0% in 2019, both lower than the 2017 actual of 2.5%.

The latest twist in the befuddled Brexit talks sees the May government ruling out any future customs union with the EU. If the UK were to join the customs union, then it would be prevented from striking any global independent deals. Currently, the government is considering two options – a new customs agreement with the bloc and a highly streamlined customs arrangement.

The Labor Department reported the biggest wage gain in over eight years, as employment expanded quicker than expected, at 200k, with the unemployment level unchanged at 4.1%. The expansion appeared to be across the board, a sure indicator that the whole economy is showing signs of robust growth. The average hourly wage for private sector workers posted a monthly 2.9% hike but overall wage growth is anaemic and could impact on consumer spending trends.

On Friday (02 February), the Dow Jones Industrial Average fell 666 points – its biggest daily point fall since December 2008. Investors are beginning to worry that not only that stocks may have been overvalued but inflation fears as the labour market tightens with the possibility of earlier than expected Fed action on rates. The S&P 500 and Dow, along with the Dow, saw their biggest weekly losses in two years.

However what is lost in the hullabaloo is that the markets have been on a roller coaster from late last year with most indicators heading north (probably too quickly). A correction has taken place since the middle of January and to put things into perspective all three bourses have been down over the past five days (in a range of between 5.30% and 5.46%), over the past month down between 4.28% and 5.0% but all up over the past three months in the range of 1.28% and 1.58%. When there is so much volatility in the market the best advice is to lay low!

There are local reports that the QE2, berthed in Dubai since its 2008 arrival, (and after being retired following its 1969 launch), is to become a permanent hotel and maritime museum. Located in Port Rashid, it had appeared to be left to the elements but has been the subject of a major overhaul in the past year. The new 300-key hotel could be open as soon as this year but its owners, Dubai’s Port, Customs and Free Zone Corporation, remain numb on the subject. The world famous cruise liner, which carried 2.5 million passengers over six million miles in its 29-year history, is finally laid to rest and no longer Sailing!

Posted in Finance | Tagged , , , , , , , , , , | Leave a comment

You’ve Got Your Troubles

According to recent data from Dubai Land Development the property market is on the rebound, as H1 transactions were 16.8% higher at US$ 36.0 billion compared to H1 2016.  With increased government spending and the upcoming Expo, the sector will continue heading north.

A JLL report indicates that 2018 will see much of the same as last year for the Dubai realty sector, with sale prices and rents continuing to fall because of the additional supply entering the market. One of the main factors behind the slowdown is that last year’s 1.7% growth was well below the 4.1% historic average. It is estimated that the total residential stock stands at 491k (with apartments accounting for over 80% of the total) and that the number of new launches is well below that recorded in the peak years of 2007. Despite this, the majority of current sales are for off-plan properties which totalled 25.6k last year. But what happens if the emirate’s economy grows 4% this year which is a distinct possibility? Will there be a marked upturn in the sector?

A Chesterton report indicates that last year, off plan property deals increased year on year by 60%, with a marked rise towards the end of the year. The top three locations (by value) were The Lagoons (US$ 218 million), Downtown (US$ 212 million) and Business Bay (US$ 207 million), with Dubailand, Business Bay and Al Furjan  being the most in demand. However it is to be noted that in Q4 ready property sales volumes, quarter on quarter, were 17% higher as off-plan headed the other way – down 8%; transaction values were up 15% whilst off plan declined by 16%.

The agency estimated prices for both villas and apartments dipped 3% in 2017 and expects much of the same this year as new units add to the emirate’s property portfolio; 45% of the new supply over the next five years will be priced below US$ 272 per sq ft.

Relative-newcomer, Danube Properties, announced that it had sold new homes to the value of US$ 223 million last year. Since its 2104 inception, the company has been involved in nine projects, comprising 3.2k units, valued at US$ 774 million.

Following approval by the Department of Tourism and Commerce Marketing, Sabah Rotana is to be built on SZR. The 54-storey tower, with 533 rooms and serviced apartments, is in collaboration between developer RSG Properties and hotel operator Rotana.   The 5-star hotel will be ready prior to the opening of Expo in October 2020.

BinGhatti Hospitality is planning to invest US$ 136 million in an expansion plan that will see more than 200 branches over the next three years. The Dubai-based company is involved in hospitality management services across the region.

DXB Entertainments reported that last year there were over 2.3 million visits to Dubai Parks and Resorts, with 34.6% (796k) of the total in Q4. The largest integrated theme park destination in the region is benefitting from a major restructuring program introduced in Q3 2017.

Dubai-based ASGC has been appointed the main contractor for AccorHotels’ 25hours One Central. The 434-room property will be the brand’s largest hotel in the world and will open in 2020.

Swedish & Sweid has appointed Core Savilles as their lead sales agent for the 32-storey Banyan Tree Residences – Hillside Dubai. The development will include a range of 1 – 4 B/R apartments, as well as three penthouses along with a resident-only clubhouse.

The RTA has awarded the first two road construction contracts – improving the Jebel Ali-Lehbab Road and the construction of bridges on Sheikh Mohammed bin Zayed Road – as part of the six-phase Expo Roads Improvement Project. Phase 1 is valued at US$ 371 million, with the project‘s aim to ensure that visitors to Expo have a hassle-free route in and out of the mega event.

Spain’s ACCIONA Producciones y Diseño has been awarded a contract to work on the technical development and museographic implementation for phases 2A, 2C and 2D of the Shindagha Museum project. Located in Dubai’s Historic District, work on these phases is expected to be completed by year end.

A Colliers International report noted that 6.8k rooms were added to the country’s hotel inventory, bringing the total number to 77.7k; this is set to rise by a massive 53.1% by 2020 to 119k. Russian visitor numbers almost doubled last year whilst there was double digit growth of Chinese nationals. The consultancy expects an improvement in occupancy rates but because of increased supply and more affordable hotels, there will be an inevitable dip in profitability indicators.

Having attracted 327k medical tourists in 2016, generating over US$ 272 million, the Dubai Health Authority is keen to reach 500k by 2020. The emirate is making “significant progress” and just needs to see an annual growth of 11% to reach this ambitious target.

Dubai Municipality is to build the world’s largest waste-to-energy project, at a cost of US$ 681 million. Located in Al Warsan, the plant will treat up to 1.82 million tonnes of waste annually with a capacity to produce 185Mw of power, equating to the electricity needs of 120k homes. With work starting by mid-year, the development will take two years to complete. Along with DEWA, other stakeholders will include Belgium’s Besix Group and the Swiss Hitachi Zosen Inova.

It appears that there will be further delay in the startup of the country’s first nuclear as the regulator, the Federal Authority for Nuclear Regulation, has announced that Nawah is not ready to receive its operating licence. The company – a JV between Emirates Nuclear Energy Company and Korea Electric Power Corporation – is to build four APR-1400 reactors, with the first one due to be operational this year.

Dubai Silicon Oasis is planning to spend US$ 136 million to set up a campus of Rochester Institute of Technology, with a capacity for 4k students. The first phase of the 129 sq mt project, costing US$ 54 million, will be completed within two years, with phase 2 on line by 2023.

UAE petrol prices rose again on 01 February – this time, Special 95 is up 6.1% to US$ 0.651 per litre, whilst diesel, at US$ 0.678 is 6.8% higher. Prices rises reflect the recent hike in oil costs which last year saw Brent up 16.4% and Special 95 by 16.9%.

Although 2017 revenue was 8.0% higher at US$ 8.7 billion, Majid Al Futtaim Group registered only a 1.9% hike in profit to US$ 1.1 billion, as some of its units registered slower growth last year. Of the three divisions – Properties, Retail and Ventures – revenue was higher by 3.0% to US$ 1.2 billion (EBITDA – US$ 790 million), 8.0% to US$ 7.1 billion (US$ 327 million) and 14.0% to US$ 572 million (US$ 70 million). respectively. The group’s bottom line was not helped by the currency devaluation out one of its largest overseas markets, Egypt.

Nakheel posted a massive 58% surge in Q4 profits to US$ 455 million, as annual profit was 14% higher at US$ 1.5 billion, driven by diversification and an uptick in the property market. The developer spent US$ 2.2 billion on construction contracts during the year.

Gulf Navigation Company is set to acquire a major shareholding in Singapore-based Atlantic Navigation Holdings which has assets totalling US$ 177 million. When finalsied, the Dubai-based operator will manage a total of thirty supply and maritime service ships.

Al Ghurair Group, via its subsidiary Canal Sugar Co, is set to invest up to US$ 1 billion in Egypt on two projects – US$ 550 million in which the company will lease and reclaim 181 acres of desert in Minya and the balance for a plant to produce 750k tonnes of high-quality sugar from beet.

Emirates NBD launched a US$ 1.2 billion Australian denominated bond as part of its so-called Kangaroo programme, with a 4.75% indicative annual coupon. Meanwhile Dubai Islamic issued a five-year, US$ 1 billion sukuk at a 3.625% profit rate; this was part of the bank’s US$ 5 billion sukuk programme.

Emirates NBD is also in preliminary discussions with Russian-based Sberbank to acquire 99.85% of Turkey’s Denizbank. Dubai’s biggest bank, with Q4 profits 17% higher at US$ 597 million, is keen to expand its overseas operations. In 2013, it had bought BNP Paribas’ Egyptian banking business.

Dubai Islamic is also to seek shareholders’ approval to raise US$ 450 million, through a share issue, which will see the option for stakeholders to purchase one share for every three held, with the possibility of a discount being offered. If it goes ahead, the bank’s capital base will increase by 33.2% to US$ 1.8 billion. At the same meeting this month, the shareholders will also be asked to approve a US$ 605 million 2017 dividend.

According to Central Bank figures, total bank deposits grew by 3.0% to US$ 443 billion during 2017. Total assets of the country’s operating banks fell 0.3% to US$ 734.3 billion, with banking credit also dipping- 0.9% to US$ 430.5 billion.

Mashreq posted a 6.5% hike in 2017 profits to US$ 572 million on the back of a 2% fall in operating expenses and a 14.2% drop in impairment provisions. Both the bank’s total assets and loans/advances were up – by 1.9% to US$ 34.1 billion and 2.9% to US$ 17.1 billion respectively.

Dubai Financial Market announced an 8.0% dip in annual 2017 profits to US$ 63 million, with revenues dipping 4.0% to US$ 125 million. Q4 saw disappointing returns for the bourse – with marked declines in both revenue (17.0% lower at US$ 29 million) and profit down 24% at US$ 16 million. A 5% cash dividend has been proposed by the board.

The DFM opened on Sunday (28 January), at 3469 and having shed 62 points a week earlier dropped a further 57 points (1.6%) to close at 3412 by Thursday, 01 February. Emaar Properties was down US$ 0.07 at US$ 1.80, with Arabtec edging US$ 0.02 higher to US$ 0.74.  Volumes were lower at 158 million shares traded on Thursday, valued at US$ 78 million (compared to 247 million shares worth US$ 89 million the previous Thursday – 25 January). For the month, Emaar was down US$ 0.10 at US$ 1.79 and Arabtec traded higher up US$ 0.06 at US$ 0.71 from their year openings of US$ 1.89 and US$ 0.65.

By Thursday, Brent Crude traded US$ 0.77 (1.1%) lower at US$ 69.65, with gold heading the same direction – down US$ 15 (1.1%) to US$ 1,348 by 01 February 2018. For the month, Brent  was up (3.4%) from US$ 66.62 to US$ 68.89 whilst the yellow metal fell US$ 2 (3.0%) to US$ 1,343.

It seems that troubled Toys R Us is looking for a buyer for its UK operations which employ 3.2k after a disappointing festive trading season. The UK’s biggest toy retailer looks certain to close doors if a buyer cannot be found. Suffering from mounting pressure from Amazon and other online competitors, Toys R Us has increasing problems in its home location where it plans to reduce its number of shops by 20% to just over 700.

Boeing reported an impressive 92% hike in Q4 profits to US$ 3.1 billion and a recorded sale of 763 aircraft in 2017. Earnings were boosted by a one-off gain from US tax cuts and increased demand for its workhorse 737.

However, it was not all good news as, to the surprise of many, Boeing has lost its landmark case against Bombardier which refuted the claim that both the UK and Canadian governments had given unfair subsidies to the Canadian aerospace firm. This comes after December’s ruling by the US Commerce Department that imposed 292% tariffs on imports of its C-Series planes. Apart from the 1k workers at Bombardier’s Belfast plant, it was also good news for Airbus who had taken a majority share in the C-Series when the Canadian firm was struggling and looking likely to lose the case.

The low-key German Reiman family, through their JAB Holding vehicle, has many lucrative investments including 38% of Coty (Max Factor and Rimmel), 8% stake in Reckitt Benckiser (Mr Sheen, Airwick, Dettol, Nurofen and Durex), 50% of Jacobs Douwe Egberts and doughnut chain Krispy Kreme. This week it was in the market and snapped up Dr Pepper Snapple, the world’s fifth-largest fizzy drinks company, for US$ 18.7 billion.

Following a major multi agency US probe, three banks – Deutschland Bank, HSBC and UBS – along with eight employees have settled the various cases for alleged manipulation in the country’s futures and commodities market. One of the cars involved the use of spoofing – involving placing bids to buy or sell contracts with the intent of cancelling them before execution.

Despite posting record 2017 sales (6% higher), Intel has lost its top global position as the biggest chip maker (by sales) to Samsung Electronics. The South Korean company posted annual chip sales totalling US$ 69.0 billion with profit of US$ 11.2 billion.

With reports that Apple is looking to half its Q1 production of its 10th anniversary smartphone to just 20 million, the tech giant saw US$ 60 billion wiped off its market value this week.

Fujifilm is planning to slash 10k from its payroll by 2020 as its subsidiary, Fuji Xerox – a 55-year old JV with Xerox – is struggling in an “increasingly severe” market. The Japanese company, a manufacturer of printers and copiers in a dwindling market, is to take a majority 50.1% stake by absorbing Xerox and forming “New Fuji Xerox”.

Instead of taking some of the blame for their role in the demise of Carillion (which had 450 government contracts), MPs are now looking at the big four auditors – Deloitte, EY, KPMG and PwC – to see what work they had carried out for the past decade. It does seem strange that one of these firms is now acting as a liquidation ‘special adviser’, after working with the government on Carillion’s pension scheme when it was still in business. Furthermore, the company’s only auditors for the past 18 years had approved audited accounts last March which included a US$ 2.2 billion goodwill valuation and had also signed off four months before a massive profits warning, following a US$ 1.2 billion write-down of the value of its contracts. Two banks were in the market for financing this week. When it went under, the company had a market cap of just US$ 85 million and liabilities of over US$ 7.0 billion, including a pension deficit of US$ 3.6 billion.

Capita seems to be going the same way as Carillion which last June announced a management shakeup and a loss of a major contract, followed by a profits warning and then a slump in its share value. Now the outsourcing firm which last month lost a lucrative Deal with Prudential, has announced major management changes, issued yet another profit warning and seen its market value plunge by more than 37%. Like Carillion it has several major government contracts including operating London congestion charges and collecting BBC licence fees.

After two months in 5-star incarceration at Riyadh’s Ritz Carlton, Prince Alwaleed bin Talal was freed earlier in the week. He – and up to 200 hundred others – had been detained as part of the country’s crackdown on corruption but the flamboyant businessman expects to be cleared of any wrong doing. He denied that he had been involved in money laundering, bribery and extorting officials, but whether he paid a US$ 6 billion “settlement” is still unknown. On the news of its chairman’s release, Kingdom Holding Co saw its share value up by over 10% – the maximum allowed on a day’s trading and the most since November 2014 – and by a further 7% the following day.

Officials have announced that there are no longer any detainees at the Ritz Carlton but it is unclear how many are still in detention, assuming no settlement had been reached. Last week, it was reported that 95 of the 185 held remained in custody. It was also announced that the purge has resulted in the repayment of US$ 106 billion to the government. When compared to say Apple’s current cash balance of US$ 163 billion (net of debt) it does not seem that much!

More positive economic data emanating from the US sees December’s personal income 0.4% higher, following a 0.3% hike the previous month, whilst personal spending and real spending increased by 0.4% and 0.3% respectively.

The fact that UK average pay increases at 2.1% are lower than inflation levels of 3.0%, resulting in a decline in real wages, is but one driver behind December mortgage approvals of 36.1k falling to their lowest level in nearly five years – and 19% down year on year. Another contributing factor was the mistimed November 0.25% hike in rates which has exacerbated an already serious problem. Not surprisingly, national house prices have flattened, led by falls in London.

Q4 EU growth slowed to 0.6% (0.7% in Q3) but showed a stronger 2.6% increase for the year. This return was slightly lower than the 2.7% posted in the eurozone and marginally higher than the 2.5% recorded for the UK. Meanwhile there was a decline in the eurozone’s inflation rate to 1.3% in January, compared to December’s 1.4% (and the bloc’s target of 2.0%). Meanwhile there was an improvement in the eurozone unemployment figures with the December figure of 8.7% (compared to 9.7% a year earlier). There are still major problems in both Greece and Spain where the unemployment levels are still at a worryingly high 20.7% and 16.4% respectively; the message to both governments, You’ve Got Your Troubles!

Posted in Finance | Tagged , , , , , , , , , , , | Leave a comment

American Dream

Following recent bleakish reports by several consultancies on the state of Dubai’s realty sector in 2018, it is refreshing to read that at least one, PropertyFinder, indicating that it is not all doom and gloom. Whilst conceding that 2017 prices had fallen across the board – villas by up to 9% and apartments in the low, single digit range – it foresees a turnabout ahead of Expo 2020.  There is every possibility that the sector will come off its bottom in Q1, driven by the facts, that according to Reidin, population growth is double that of new supply, oil prices are nearer to US$ 70 (and not US$ 40) and both the Dubai and global economies are to grow by up to 3.9% this year.

Tiger Group has started work on two of its Dubai projects. The UAE-based developer expects the 41-floor O2 Tower – with 600 apartments -in Jumeirah Village Circle to be completed within three years. With 85% of the Jumeirah Village Triangle Al Jawhara Tower already sold, the company expects that the 532 studios will be ready by Q2 next year.

Sales will start this Saturday for Damac’s latest luxury launch – Reva Residences – with prices from US$ 190k. Located on the south ridge of Business Bay, the development comprises 1-2 B/R apartments.

At Saturday’s launch of the first phase of its private gated island Beach Vista development, Emaar recorded sales of US$ 272 million, as all 375 residences were sold out. The units – in two towers (33 and 26 storeys) – comprise a range of 1-4 B/R units and are part of the Emaar Beachfront scheme located in the new Dubai Harbour project.

The Jumeirah Group has added a second brand (following Stay Different) to its portfolio with the launch of Zabeel House by Jumeirah. Five management agreements – including properties in the UAE, Saudi and UK – have already been signed, with the newcomer offering “brilliant basics and unexpected extras set in an upscale, casual environment”.

The latest STR report indicates regional declines in the Middle East’s hospitality sector, with occupancy down by 1.1% to 65% and RevPAR (revenue per available room) 4.5% lower.

Dragged down by the increased supply of inventory, Dubai hotels registered falls in November room rates by 1.4% to US$ 286 and RevPAR (revenue per available room) by 2.8% to US$ 252. The EY report indicated that November is normally a prime month for the sector with the weather improving and mega events such as Dubai Airshow and Motor Show.

Dubai itself continues to expand ahead of Expo 2020, with its hotel room portfolio expected to grow by a massive 32.4% to 108.6k over the next two years, following a 5.2% hike in 2017. Since much of the increased room supply is in the midscale sector, rather than at the high-end, this could have a negative impact on both occupancy levels (if demand is lower than the increased supply) and revenue indicators, with more rooms at lower prices. The good news is that cheaper hotels will attract more visitors – the bad news is that average spend per visitor may suffer.

Dubai Industrial Park is set to see US$ 37 million being used on infrastructure development and road expansion. This spend will boost the park’s ability to cope with an ever increasing number of companies becoming involved with the emirate’s growth in the industrial sector, which is a key part of the 2016 Dubai Industrial Strategy. In 2016, the sector grew by 3.4% and accounted for 9.5% of Dubai’s GDP;  with manufacturing surging 31.2%, equating to US$ 9.7 billion, and industrial exports 8.6% higher at US$ 39.0 billion, it will play a significant role, as the largest contributor to GDP after oil and gas, in Dubai’s future.

Following its latest debt restructuring programme and new credit facilities, Drake & Scull International (DSI) is to build a new camp to house 5k workers; this will cater for the Dubai-based company’s labour force increasing by 41.7% to 17k.

DP World has signed an agreement with the National Investment and Infrastructure Fund to invest up to US$ 3 billion in India’s transportation sector, with an emphasis not only on seaports but also economic zones, terminals, transportation and logistics.

Expo officials have confirmed that the collapse of Carillion would have no impact on the event, as ongoing work on the three themed districts   is already underway by Al Futtaim Carillion. At the same time, it was also announced that another UK company, Laing O’Rourke, had won two construction contracts, valued at US$ 183 million. They were for the construction of Expo’s ‘Hammerhead’ access road and the Leadership and Media pavilions.

The Federal Tax Authority has announced that over 260k companies have now registered for VAT following its 01 January implementation. It is mandatory for any company with an annual turnover of over US$ 100k to register.

Adnoc Distribution is to open three service stations in Dubai, for the first time, as it expands its operations away from Abu Dhabi (where it has 360 outlets). The fuel and retail arm of Abu Dhabi National Oil Company listed on the Abu Dhabi Securities Exchange last month, with a share price of US$ 0.68.

At a cost of US$ 18 million, the RTA has added a further 32 km of cycle track covering Mushrif, Mirdif and Al Khawaneej areas. This brings the total to about 250 km of cycle paths available in Dubai. The government hopes to double this to over 500 km by 2021, as part of its strategy to encourage people to practice sports exercises and cycling.

It is reported that Dubai’s Al Shafar General Contracting is still keen on an IPO but it will happen later – rather than earlier – because of current market conditions. After a slow two years, there is a feeling that the sector may be on the upturn, as witnessed by the recent local IPOs of Emaar Development and Adnoc Distribution, as well as several investment trusts in Saudi Arabia. It is estimated that money raised from regional IPOs in 2017 – US$ 3.2 billion – was more than four times greater than in the previous year.

SHUAA Capital, already an 8% shareholder, has offered to buy a major stake in Kuwait’s Amwal International Investment which has a capital base of US$ 60 million.

The country’s largest sharia-compliant bank, Dubai Islamic, is to issue a US$ 750 million sukuk a week after announcing a 26% hike in Q4 profits to US$ 1.23 billion. As part of a US$ 5 billion financing programme, the bank, with an ‘A’ rating from Fitch, issued a US$ 1 billion Islamic bond last February.

Dubai Investments finalised the US$ 136 million purchase of Union Properties’ 50% share in Emicool to take over the entire company. Under the company’s Memorandum of Association, the remaining partner had priority to buy any shares offered for sale. The money raised will be used by the developer to expand its operations and projects.

Having recently extended its capital to US$ 272 million, Gulf Navigation is to refinance both its “Gulf Mishref” and “Gulf Mirdif” petrochemical carriers, as demand for its shipping services increases.

The DFM opened on Sunday (21 January), at 3531 and shed 62 points to close 1.8% lower at 3469 by Thursday, 25 January. Emaar Properties was down US$ 0.13 at US$ 1.87 (having gone ex div on Monday), with Arabtec flat at US$ 0.72.  Volumes were lower at 247 million shares traded on Thursday, valued at US$ 89 million (compared to 331 million shares worth US$ 153 million the previous Thursday – 18 January).

By Thursday, Brent Crude traded US$ 0.91 (1.3%) higher at US$ 70.42, with gold heading the same direction – up US$ 36 (2.7%) to US$ 1,363 by 25 January 2018.

Despite making a US$ 1 billion provision for tax payments (following President Trump’s recent overhaul), Halliburton posted a profit of US$ 0.53 a share and recorded an 18.4% Q4 growth in revenue to US$ 5.9 billion on the back of the recent surge in shale production. Figures were particularly strong in its backyard, with US revenue 88.9% higher at US$ 3.4 billion. Shares in the oilfield services provider were up 6% on the day.

The UK’s Competition and Markets Authority has rejected Fox’s proposed takeover of Sky, on the grounds of being against the public interest, as it would give the Murdoch family too much control over UK’s news providers. However, the CMA ruled that it would not be against the public interest on the grounds of broadcasting standards. Fox currently owns a 39% stake in Fox and, with Disney awaiting approval from US regulators to acquire much of the Fox empire, it may all conclude with Disney taking over Sky.

With Ikea being reportedly investigated by EU tax officials for unfair tax advantages by the Netherlands government, its CEO, Jesper Brodin, has indicated that the flat pack furniture retailer pays its fair share of global tax – in the region of 25%. Whether the Swedish company, with a Dutch head office in Delft, has operated within EU rules remains to be seen.

Qualcomm Inc has been fined US$ 1.2 billion by the EU for paying Apple “billions of dollars” not to buy chips from competitors. The initial agreement was signed in 2011 and subsequently renewed in 2013. To add to its woes, the world’s largest chipmaker is fighting a US$105 billion hostile takeover bid by rival Broadcom Ltd and continues with several court cases against Apple over patent licensing.

General Electric Co had a woeful Q4 posting a 5.1% decline in revenue at US$ 31.4 billion and, more worryingly, a US$ 10.1 billion loss (compared to a US$ 3.5 billion profit) on the back of a US$ 11 billion charge for insurance losses (US$ 6.2 billion) and taxes.

Kimberly-Clark is set to close ten manufacturing plants, with a loss of up to 5k jobs, with Q4 sales only nudging up 1%, as keen competition from rivals and store brands increases. The company has also not been helped by falling birth rates in key markets such as South Korea and the US which has made inroads in sales of nappies and other baby-related staples. The Kleenex-maker hopes to cut costs by US$ 2 billion over the next four years, 25% of which would be saved by streamlining its supply chain.

The 155-year old Bacardi, which also owns major spirits brands such as Grey Goose vodka, Dewar’s whisky and Bombay Sapphire, is set to acquire tequila maker Patron for a reported US$ 5.1 billion, to add to existing Cazadores and Corzo tequila labels. The world’s biggest privately-owned spirits firm, and the second largest by value, Bacardi is trying to boost its segment share in the “high quality, cocktail combinations and sophisticated sipping products” sector.

After last week’s US$ 16 billion order by Emirates, which effectively saved the A-380 from demise, Airbus is looking for a smaller order from BA to further boost its order book. The airline, which is the leading operator of Boeing’s 747, already has 12 of the superjumbos in service. It had also been studying second-hand 380s, used by the likes of Singapore and Malaysian, but sees the refurbishment option as not being cost effective.

HSBC has agreed to settle US$ 101 million in penalties with US authorities, following the Justice Department investigating the manipulation of currency rates. As part of the deal, the bank has promised to help with the criminal case against former traders. It also entered into a deferred-prosecution agreement – just a month after it was released from a similar order for helping Mexican drug cartels launder money and breaching international sanctions by doing business with Iran. (In 2015, five international financial institutions were each fined between US$ 200 million and US$ 925 million for similar offences).

On the back of troubles at rival Monarch (closed down), Air Berlin and Alitalia (both in administration) and Ryanair (pilot rostering difficulties), Europe’s second largest budget operator, EasyJet posted a 14.4% hike in Q4 revenue to US$ 1.6 billion; passenger numbers were 8.1% higher, at 18.8 million, than in the same period of 2016. Following the announcement, its share value jumped 5.1%.

The UK car sector received another jolt following Vauxhall recently slashing some 650 jobs at its Ellesmere Port plant. This week, Jaguar Land Rover announced that it would be trimming production of some of its Range Rover brand – and this comes after a record global sales year in 2017. However – along with the perennial Brexit factor – the car maker cites a 2% fall in production and a 5.7% decline in UK new car sales as drivers behind the decision.

In December, the UK’s budget deficit declined, as public sector net borrowing fell 3.9%, year on year, to US$ 3.5 billion, mainly because of a US$ 1.7 billion credit payment from, of all sources, the EU; this was the lowest December net borrowing since the turn of the century. For the nine months to December, the PSNB has fallen 11.7% to US$ 69.5 billion and for the tax year ending 31 March the Office for Budget Responsibility forecasts that this December figure will be roughly the same. The UK’s public sector net debt is currently at US$ 2,445 billion, equating to 85.4% of GDP.

It seems that the UK economy is not in such a bad state as some commentators have led us to believe and this change in attitude may account for sterling topping the US$ 1.42 level on Tuesday – a welcome improvement from when it reached its lowest level in thirty years – at 1.20 – after the June 2016 Brexit vote. With inflation levels beginning to come off their recent 3.1% highs, sterling heading north (with imports heading the other way) and some positive economic indicators maybe the country’s prospects are becoming brighter, with “business returning to normal”.

Not surprisingly, the Bank of Japan has decided to make no immediate change to its monetary stimulus package which stands at an annual amount of US$ 730 billion. This will result in the Bank of Japan purchasing government bonds so that the yield remains at zero level; current account interest rates will stay at minus 0.1%. The world’s third largest economy is expected to see growth levels continue to head north, with inflation nudging higher towards the 2.0% mark.

China reported that Q4 figures indicated that the economy had continued at a steady growth pace, climbing 6.8%, year on year. Last week, the authorities reported an annual jump to 6.9% (up on 2016’s 6.7%) with three other indicators posting gains – annual industrial production 6.6% (2016 – 6.0%), retail sales 10.2% and fixed asset investment at 7.2%.

With its public debts equating to 180% of its GDP, Greece’s economy is still in dire straits. The two protagonists still have opposing views – the IMF supports major debt relief, saying that the debt burden is “unsustainable”, whilst Germany and other EU creditors maintain enough is enough (having already lowered interest rates and extended repayment periods) and that the Hellenic country should pay up all its outstanding liabilities. Some agreement between the two parties is necessary and the IMF has intimated that it will only join in the current (and third) bailout of US$ 8.3 billion if a further “haircut” takes place.

After safely navigating the three day closure of government services, Donal Trump has approved high duty on imports of solar panels (30% over four years) and large residential washing machines (50% over three years). This follows reports that the domestic industry was being unfairly targeted by heavily subsidised Chinese imports.

Once again the President has got his own way as Jerome Powell is confirmed to take over the reins of the Federal Reserve from Janet Yellen.  The former investment banker was Donald Trump’s choice and comes as a signal that he will continue with slow and deliberate rate increases and could well oversee more bank deregulation. Tomorrow he will address some of his biggest critics at the annual elite Davos forum.

As seems to be the norm, the IMF has yet again revised its global estimate just three months after their last forecast. It now sees global growth this year and 2019 to come in at 3.9%, following on last year’s 3.7%. The main factors behind this upward revision are the recent US tax policy changes (including tax cuts) and a faster than expected recovery in Europe and Asia. The growth is broad-based with a majority of global economies recording year on year expansions. Despite its bullish outlook, there is a warning about the equity asset bubble, potential problems for the UK economy (and Brexit again) and the rise of protectionism because of the America First policy – Donald Trump’s American Dream!

Posted in Finance | Tagged , , , , , , , , , , | Leave a comment