Do You Believe In Miracles?

Do You Believe In Miracles? 06 June 2019

Developers are doing much to allay fears that there are too many residential units flooding the Dubai market; for the first five months of the year, the latest Reidin-GCP data indicated that last year, 13.7k new off-plan units were released, compared to just 3.2k so far in 2019. When it comes to completed units and handovers, the figures show that the 8.9k number in 2018 was actually higher than the 7.0k figure for the first five months of 2019.  YTD, ready home sales at 5.7k units are comparable to 2018 figures. Once again, the doomsayers are getting ahead of themselves and 2019 will probably be the same as has been the case over the past five years. The much bandied around 50k+ figure, for this year’s handovers, will not happen, with half that figure more of a reality. If there is to be an over-supply problem, we will not see it this year, whilst developers play the market, waiting for demand to catch up with supply – only then will there be an increase in off-plan launches.

Research by Knight Frank indicates that Dubai luxury property prices have fallen 4.7% over the past twelve months – and 1.8% the last quarter. Its Q1 Prime Global Cities Index, which tracks the movement in luxury residential prices across 45 global cities, ranked Dubai 38th.  The global price hike of 1.3% in the year to Q1 is the lowest in a decade, attributable to factors such as political and economic headwinds, allied with rising finance costs and increased property market regulations. The fact that the IMF has predicted that 70% of the world’s economies would see a slowdown in growth this year further exacerbates the problem.

Spinneys is to open a further eight supermarkets in the country this year, including in Damac Hills, Dubai Creek Residences and Jumeirah Golf Estate. This week, it opened its 58th UAE store in Ajman, its second in that emirate.

Madame Tussauds is to bring their famous waxwork museum to Dubai which will be run by Merlin, the operator of the London Eye and Legoland. The project, first muted in 2008, will be located on Bluewaters Island, with the opening date still unknown.

Emaar has signed an MoU with Beijing New Aeropolis Holdings to develop an integrated project, encompassing retail, hospitality, entertainment and lifestyle functions in a one-stop location. The business and tourism complex is to be situated within the Aero-Economic Area of Beijing Daxing International Airport. Such projects can only enhance UAE/Chinese relations, with the Dubai developer actively looking for more developments as part of the Belt Road Initiative.

Al Najah Education’s subsidiary, Horizon Education Asia Limited, has acquired a significant stake in Malaysia-based Regent International Schools; no financial details were made available. The Dubai-based parent company, through HEAL, already has a portfolio of 31 pre-schools and training centres in Singapore and four schools in the UAE and Oman.

The luxury market is one bright light in the troubled local retail sector, as Deloittes report that the “sustained growth” in the Dubai luxury market is attributed to an increase in brand omnichannel strategies and the continued rise of the tourism industry. The consulting firm expects “the luxury market will continue to experience growth as the market matures and adjusts to global trends.” Many of the top one hundred companies, analysed by Deloittes, have a presence in the country; on a global scale, they generated a 10.8% increase in revenues, for the fiscal year ending June 2018, with sales reaching a combined total odUS$ 247 billion.

Cryo Holdings continues with its global expansion plans, having already established new distribution partners this year in Czech Republic, Germany, Hong Kong, Italy, Slovakia, Slovenia, South Korea, Taiwan and the UK. The Dubai-based company, a leading operator in the fledgling global cryotherapy sector, is planning to invest US$ 7 million in three locations in Saudi Arabia and four in India by the end of the year. Cryotherapy, sometimes known as cold therapy, is the local or general use of extremely low temperatures (as low as minus 110 Celsius) in medical therapy and is growing in popularity, especially in the field of sports medicine.

It is estimated the auto sector contributes US$ 16.3 billion to the local economy and now the Dubai Chamber of Commerce wants a piece of the action. It is to form a Car Dealers’ Business Group that will unite the various interested parties – including member companies and private parties – to ensure that the best interests of the sector are served, and global best practices implemented. The Group, whose first chairman will be industry veteran, Michel Ayat, CEO of AW Rostamani Automotive Group, will comment on areas of concern, including regulations.

The bourse was closed for trading all week and will open after the Eid Al Adha holiday on Sunday 09 June at 2620, having closed 45 points (1.7%) to the good over the previous fortnight’s trading to 31 May 2019, Thursday 31 May, at 2620. Emaar Properties closed on US$ 1.22, with Arabtec at US$ 0.42. Thursday 31 May had seen wafer thin trading again of 159 million shares, at a value of US$ 56 million.

By Thursday, 06 June, Brent, having traded down US$ 5.75 (7.9%) the previous fortnight was US$ 5.20 (7.8%) lower at US$ 61.67. Gold leapt in the other direction this week, gaining US$ 51 (3.9%) to US$ 1,343. For the month of May, prices for Brent plummeted US$ 9.61 (13.4%) to US$ 61.99, whilst gold showed some improvement up US$ 38 (3.0%) to US$ 1,310.

No doubt that oil has moved into bullish territory, driven by weak demand, increased trade tensions, rising US stock piles and the nagging worries of a marked slowdown in both US and Chinese economies. There is every possibility that OPEC members, along with other oil producers will beef up their current output cuts into H2.

Only a week after announcing a possible US$ 35.0 billion tie-up with Renault, Fiat Chrysler has pulled the plug. This has not stopped BMW and Jaguar Land Rover announcing that they would be joining forces to develop electric car technologies. With both firms haemorrhaging cash, attributable to falling sales, higher costs and dwindling margins, the need to invest in future technologies has become a necessity. The venture expects to save costs through shared research, shared production planning, and by jointly buying electric car components.

The latest quarterly figures from Uber sees the ride-hailing firm posting a US$ 1 billion loss, even though revenue was 20% higher at US$ 3.12 billion and monthly active users climbed to 93 million. No surprise then to see the firm’s share value has fallen almost 11% since it listed on Wall Street four weeks ago. The main drivers behind the disappointing figures were extra costs for signing up new drivers, establishing the Uber Eats delivery service and increased competition.

Aviva, with offices in sixteen countries, has announced that it will reduce its global workforce by 6.0% to 28.2k over the next three years. The UK insurer is planning to simplify its business – and making it more competitive – by splitting it in two, separating its life and general insurance businesses.

Casino mogul James Packer has sold 20% of his 46% stake in Crown Resorts to Macau’s Melco Resorts and Entertainment for almost US$ 1.8 billion.

What could be the first settlement of many sees JP Morgan paying US$ 5 million in a discrimination case involving parental leave for fathers. It was alleged that the bank had denied a male employee parental leave benefit available to all personnel who are “primary caregivers” of a new-born. A class action followed in the New York courts on behalf of male employees who claimed they were unlawfully denied access to paid parental leave on the same terms as mothers from 2011 to 2017; women were allowed 14 weeks, but fathers were only eligible for two weeks of paid parental leave unless they could show that their spouses or partners were incapacitated or had returned to work.

Following in yhe footsteps of other global bodies, the World Bank has cut its 2019 global economic forecast to 2.6% – 0.3% lower than its previous January prognosis; the downgrade was attributed to a decline in investment levels across the world and a weakening in trade growth. It expects growth to nudge slightly higher over the next two years to 2.7% and 2.8% respectively. The downside risks continue to worry economists including a worse than expected slowdown in most major economies, the worry of increasing tariffs and growing government debt. The forecasts for the two global leaders point lower, with the US slowing to 2.5% this year and 1.7% next, whilst China also slows to 6.1% and 6.0% over the next two years. Meanwhile, the eurozone’s amended forecasts are down at 1.2% and 1.4% respectively, whilst the MENA comes in at 1.3% this year, rising to 3.0% by 2020-21.

At their Seoul meeting this week, IATA slashed its previous 2019 global airline profit forecast by 21.1% to US$ 28.0 billion, on the back of an expanding trade war and higher oil prices; last year, profits touched US$ 30 billion. There are concerns that with the cargo business being badly dented by trade tensions, and international trade at a zero-growth level, this could spill into the passenger market with dire consequences.

There are many warning signs that the Australian economy could be heading for trouble, including falling house prices, slowing wage growth and a worrying depletion in consumer saving levels. Housing accounts for much of the debt and with property prices heading south – declining for the past four years in WA and nearly two years on the east coast – there is an increasing number of house owners treading water, now owing banks more than their houses are worth. It is estimated that 15% of mortgages in WA and the NT are in negative territory – and with unemployment nudging higher – the Reserve Bank had no option but to reduce rates and loosen lending restrictions. It cut its benchmark rate by 0.25% to a record low 1.25% this week – its first rate change in almost three years.

The signs are clear – and have been for some time – that the lucky country is in for a rocky ride. They include a declining world economy, a zero Q1 inflation rate, a sinking currency, worryingly weak credit growth, poor retail sales, plunging vehicle sales, declining building approvals, slowing Q1 GDP growth at 0.4% (its lowest level since 2009), sluggish business investment etc etc. Could it be time for QE to be introduced?

A bad week for one Sir Philip Green started with the chairman of the UK parliamentary Work and Pensions Committee, Frank Field, urging the head of the troubled Arcadia retail empire, to use his own money to support the Group’s pension fund. In a restructuring program to save the empire, that included shop closures and rent cuts, the company’s contribution to the pension fund would be halved from US$ 65 million a year. If this were not to happen, it would be inevitable that the fund would be well short and that the pensions regulator would be forced to step in if members of the pension fund were put at serious risk. On Saturday, the UK retail tycoon was also charged in the US with four counts of misdemeanour assault after a fitness instructor in Arizona alleged that he repeatedly touched her inappropriately. An interesting June lies ahead.

The new Modi government took office on Friday 31 June, with Nirmala Sitharaman as Finance Minister. Unfortunately, the day got worse for India’s first female in that position, as Q1 growth slipped to 5.8% with the fall occurring for the third straight quarter – and well down on the 6.6% return of the preceding three months to December 2018. It is almost certain the bad news will continue into the next quarter, as there is little sign of any improvement occurring in investment growth and consumer spending. Furthermore, labour figures were also released posting an unemployment rate of 6.3% – the worst it has been since 1973. With this sort of news, it is a wonder how Narendra Modi got re-elected! Do You Believe In Miracles?

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Down To Earth

Down To Earth                                                            30 May 2019.   

Jumeirah Golf Estates announced that its Alandalus towers A and B have been completed and that Tower C will be handed over in Q4 2019, with the remaining four towers (D – G) ready within twelve months. The whole project encompasses 715 1-4 B/R apartments and 95 townhouses, along with a mosque, hotel, and a community retail centre.

Arabtec’s subsidiary, Target Engineering, has been awarded a 24-month US$ 52 million contract from Ellington Properties for their 12-storey residential twin towers Wilton Park Residence project. Work will include construction, MEP, landscaping and irrigation works.

It has to be Dubai when a developer comes up with such an innovative marketing ploy to sell residential property. UAE developer Kleindienst Group’s Heart of Europe has offered buyers, who spend more than US$ 1.4 million on property in their development, automatic qualification for Moldovan citizenship. It is expected that handover of phase 1 will take place by the end of the year.

UAE-based Azizi Developments has announced plans to incentivise its contractors, with a bonus of up to US$ 2.7 million, to encourage the timely completion of its Dubai projects; this year alone, it hopes to complete nine projects. The company reckons that on-time delivery will cut costs, involved in snagging and hiring new contractors, if a project is delayed, as well as other expenses.

Knight Frank estimated that office rents have fallen 4.3% over the past twelve months – on the back of weakened demand and increased supply – and 2.1% over Q1. However, the falls in the prime sector, at 3.6%, and Grade A rents (at 3.3%), where average rents are at AED240 sq ft per year, seem to indicate that some firms are not willing to relocate to secondary locations in order to reduce costs. However, an increasing number of landlords have introduced rent free incentives and other favourable terms to attract and retain existing tenants.

Himalaya Drug Company is planning to increase its Dubai workforce by 100, as it expands its global research centre in Dubai Science Park. The Indian company produces high quality cosmetics, nutritional supplements, herbal medicines and pharmaceutical-grade Ayurvedic products and sees the expansion as a way to expand in the region.

Emirates National Oil Company is to spend upwards of US$ 600 million on expanding its retail portfolio in the UAE and Saudi Arabia. Enoc see its home base as a profitable market, particularly so because of the removal of government subsidies in 2015 and the fact that local fuel consumption is comparatively high; it estimates that each of its gas stations pumps 60k litres of fuel per day, compared to a daily average of 35k litres per station in other countries. The company, owned by the Dubai government, will grow the number of outlets in the UAE by 11.6% to 144 by the end of the year, with a further 47 stations to be added in 2020.

Arif Naqvi, former Abraaj Group founder, has finally been released from Wandsworth prison in London to effectively go into house arrest, after posting a UK record US$ 19.0 million bail. Part of his bail conditions include surrendering his travel documents, staying in his London home and wearing an electronic tag. He is currently fighting extradition attempts to the US where he is facing a New York trial in connection with inflating the value of Abraaj’s holdings and stealing hundreds of millions of dollars.

US-based Urban Outfitters, with over 240 global stores, is to set up shop in The Dubai Mall – its first foray in the GCC. It appears that the fashion chain will form a partnership with local retail giant Azadea Group which already has rights for many fast fashion brands such as Bershka, Mango, Misguided and Zara.

Dubai-based Careem, recently taken over by Uber, has acquired Cyacle, an Abu Dhabi bike rental services, for an undisclosed amount. The 24-hour a day app operation in the capital has docked bicycles for consumers to use by inputting a ride code to release the bicycles from the docking system.

As part of a joint venture agreement with Hassana Investment Company, Gems Education has acquired Ma’arif Education Group, Saudi Arabia’s largest private school operator, for an undisclosed sum that could be as high as US$ 600 million. The deal involves fourteen schools and will see the Dubai-based education provider’s portfolio rise significantly from its current level of a reported fifty schools in the Mena region, with 124k students.

For the fourth consecutive month, UAE fuel prices are set to increase in June. Special 95 will go up by 3.4% to US$ 0.659, whilst diesel moves 1.2% higher to US$ 0.698. This follows price hikes of 11%, 10% and 4% over the previous three months.

One thing certain is that the IMF is constantly – and usually – downgrading former forecasts and this is still the case that it now expects the UAE economic “growth could exceed” 2% this year after indicating only last month it would be 2.8%. The Central Bank is more bearish, downgrading its 3.4% March forecast to a current 2.0% expectation. It envisages that the non-oil economy will grow by 1.7%, with the oil economy 2.7% lower, from the initial 3.7% forecast, because of a deceleration in oil production from 3.3 million bpd to 3.1 million bpd.

In a bid to cut business costs and increase competitiveness, the federal government has agreed to waive or amend fees of over 1.5k government services in the UAE; there will be reduced consumer costs for services provided by numerous government agencies including the Ministry of Interior, Ministry of Economy and the Ministry of Human Resources and Emiratisation. Not only will it help companies to be more competitive with reduced costs, it will also balance the revenue system of the government, in parallel with the tax system.

From being ranked 15th in 2016, the UAE has climbed to first in the IMD World Competitiveness Rankings for business efficiency and fifth overall, with Singapore heading the table of 63 listed economies; the UAE rates highly and continues to climb the table, when it comes to productivity, digital transformation and entrepreneurship.

The Federal Customs Authority announced that last year, the country’s non-oil trade topped US$ 436.9 billion with direct trade and free zone activity accounting for US$ 272.5 billion and US$ 161.4 billion respectively, customs warehouses making up the total at US$ 3.0 billion. Imports for the year fell 4.2% to US$ 255.6 billion, whilst both exports and reexports headed in the other direction – both 1.8% higher. The value of the two leading export items were raw and half-finished gold at US$ 14.6 billion and raw aluminium reaching US$ 5.1 billion.

The Central Bank reported that the country’s banks’ personal loan book fell 1.2% (quarter on quarter) and an annual 0.9% to US$ 90.9 billion; this reflects soft consumer demand and lower confidence sentiment, because of continuing uncertainties over the labour market. Gross credit climbed 4.2% to US$ 456.4 billion, whilst bank deposits rose 5.3% to US$ 476.3 billion.

The total value of sukuks on Nasdaq Dubai increased by US$ 2 billion this week, as the Indonesian government issued two Shariah-compliant sustainable development bonds – one for US$ 750 million and the other at US$ 1.25 billion. This brings the total of bonds issued by Indonesia to 11, valued at US$ 15 billion. The Dubai bourse has sukuks worth US$ 61.5 billion, making it the largest such exchange in the world.

Dubai-listed Amanat Holdings still has US$ 136 million cash in its kitty to spend on a range of existing investments or on further acquisitions. The company, with a paid-up capital of US$ 680 million, has already spent 80% of that on healthcare and education related investments, with US$ 327 million spent on four additional assets in 2018. It is reportedly looking at Egypt to be its first expansion outside the Gulf region.

Much can be said of figures indicating that banks listed on the Dubai Financial Market accounted for 57% of the total market’s Q1 profits of US$ 2.6 billion (Q1 2018 – US$ 2.6 billion). Compared to Q1 in 2018, this quarter saw these banks’ profits climb 17.5% to US$ 1.5 billion. When the Dubai and Abu Dhabi bourses’ returns are combined, banks account for 57.2% of the total quarterly US$ 5.5 billion profit figure. These figures do not include Bank of Sharjah and Invest Bank who have yet to disclose their financial statements. Over the same period, realty and construction sectors posted total profits of US$ 861 million.

With the local real estate market still in the doldrums, there is little surprise that ENBD Reit saw its net asset value decline 10% to US$ 270 million for the year ending March 2019; however, revenue was US$ 5 million to the good over the twelve months. The Sharia-compliant real estate investment trust saw its total property portfolio value decline by only 2.8%, with average occupancy at a credible 86%.

The bourse opened for trading on Sunday 26 May at 2590 and, having closed 15 points higher a week earlier, closed 30 points (1.1%) to the good on Thursday 30 May at 2620. Emaar Properties, having gained US$ 0.04 the previous week, closed on US$ 1.22, with Arabtec, nudging US$ 0.01 higher to US$ 0.42. Thursday 30 May saw wafer thin trading again (typical of the Ramadan period) of 159 million shares, at a value of US$ 56 million – compared to 122 million shares trading at US$ 48 million the previous week.

Thursday was also the last day of trading in the month of Ramadan and the last day of the month, with the bourse closed all next week to celebrate Eid. Over the month of May, the bourse was 147 points (5.3%) lower at 2620, with both Emaar and Arabtec down US$ 0.14 at US$ 1.22 and by US$ 0.14 to US$ 0.42 respectively. However, YTD the bourse is trading 90 points (3.5%) higher at 2620, with Emaar up US$ 0.10 but Arabtec US$ 0.10 lower.

By Thursday, Brent, having traded down US$ 5.34 (7.4%) the previous week was US$ 0.41 (0.6%) lower at US$ 66.87. Gold headed in the other direction this week, gaining US$ 7 (0.5%) to US$ 1,292.

Following a 3.0% decline the previous month, IATA reported that ME passenger demand bounced back in April – up 2.9%, compared to the same month in 2018. That was the only good news, as most other indicators headed south, including load factor 3.5% lower at 80.5% and available seat kilometre off 1.6%.  ME airlines’ share of the global market at 9.2% is some way off those of Asia Pacific (34.4%) and Europe (26.7%). The ME fared badly when compared to global trends which saw revenue passenger kilometres (RPKs) rise by 4.3%, load factor 0.6% higher at 82.8% and capacity up 3.6%.

Regulators have still to set the date for the return to the skies of the 737 MAX, after global civil aviation regulators failed to decide on whether the plane was fit to return to service. Boeing has held off submitting a proposed software fix for review after the FAA raised additional questions; earlier, it had indicated that the anti-stall Manoeuvring Characteristics Augmentation System update was ready for certification but now, hopes of an early return to operations have been dampened and could be August before the Max flies again. The FAA’s reputation has taken a beating since the March crash, facing accusations of an overly cosy relationship with the aviation giant. Other aviation authorities now appear less likely to follow the US agency. Meanwhile, the US Securities and Exchange Commission has begun investigations whether the plane maker properly disclosed issues tied to the grounded 737 Max jetliner.

Former Jet Airways chairman, Naresh Goyal, was stopped by immigration authorities from leaving Mumbai airport on an Emirates flight bound for London. The 69-year old, who was in charge when the debt-ridden airline grounded its fleet, was not arrested and allowed to leave the airport – but not the country. All of its operations were halted last month when it failed to find a buyer for a 75% stake in what was once the country’s leading operator, along with a consortium of lenders refusing to pay emergency cash. Etihad still have a 24% stake in the airline. Employees have not been paid since January and 20k face a worrying future.

A bad start to the week for President Emanuel Macron who, on Sunday, saw his party beaten by Marie Le Pen in Sunday European elections and the following day learnt that GE was cutting over 1k jobs in the country, even though the French government had requested it not to do so. The move was driven by a fall in demand for gas which saw GE’s energy division’s profit slump 22% last year. When in 2015, the US giant acquired French energy firm Alstom, it promised it would create 1k new jobs. By February 2019, only 25 jobs had been found, at which time GE promised to pay the government US$ 57k for each job it had failed to provide in a US$ 57 million settlement.

Fiat Chrysler has invited Renault to form a 50/50 merger that would create the third biggest carmaker in the world with sales in excess of 8.7 million, still some way off the 10 million+ cars produced by both VW and Toyota. As part of the deal, Fiat will pay a special dividend of US$ 2.9 billion and sell its Comau robotics business. If the deal goes ahead, it will be an accountant’s nightmare as both the French government and Nissan have 15% shares in Renault, whilst Renault has a 43.4% stake in Nissan, as well as having an alliance with the Japanese company, in which research costs and parts are shared.

On top of that, Italy may want to try and match the French government in owning part of the new company. Sector consolidation seems inevitable as individual car makers need to share funds and expertise with the industry moving inextricably to electric models and new technology for autonomous vehicles, as well as having to deal with stricter emissions standards. It is estimated this merger would save US$ 5.6 billion by sharing development costs. Based on 2018 results, combined revenue and net profit comes to US$ 190.5 billion and US$ 9.0 billion.

Arla Foods has acquired Mondelez International’s Kraft cheese business for an undisclosed amount. The Danish company now has full ownership of the Mondelez cheese production site in Bahrain, which produces a range of Kraft products, as well as all Kraft-branded cheese products in the Middle East and Africa markets; it does not include the cream cheese brand Philadelphia and Jocca cottage cheese. It appears to be a win/win situation for both companies – Arla will strengthen its regional market presence and access new products, whilst Mondelez can focus more on faster growing snacks categories, including chocolate, biscuits and powdered beverages such as Tang.

A global mega drug manufacturer has gone on trial in Oklahoma in a multi-billion-dollar lawsuit, accused of deceptively marketing painkillers and downplaying addiction risks, fuelling a so-called “opioid epidemic”. This is the first of an expected 2k cases being brought against US drug companies. Johnson & Johnson are accused of “the worst man-made public health crisis in [the] state’s history,” and had persuaded doctors to prescribe more opioids in the 1990s by using misleading marketing. The state government has accused the company of creating a public nuisance which will cost between US$12.7 billion and US$ 17.5 billion to remedy over the next two decades.

In a bid to cut costs, Walgreens Boots Alliance is considering the future of 200 of its UK outlets, as it reviews “underperforming stores and opportunities for consolidation.” Boots currently has a 56k payroll who operate in nearly 2.5k shops across the UK. The iconic brand has been caught in the middle of a perfect storm, losing customers, who have decided to trade down with discounters (including Aldi, Lidl and Savers), and others trading up to higher end retailers for more expensive items. If the company fails to act and invest more, then it can only be a matter of time that it goes the way of many other famous UK brands. Management only have to look at the likes of Carpetright, Homebase, Mothercare and New Look that have witnessed the closure of hundreds of stores, as well as Maplin, Poundworld and ToysRUs who have disappeared from the UK retail landscape for good.

UK retail sales slowed last month in April and remained flat month on month; the results could have been worse, but the warm weather boosted sales of clothing; quarterly sales were 1.8% higher, with record online sales, up 9.4%, at the highest quarterly growth since records began. There were 0.5% and 2.9% falls for department store sales and household goods stores respectively.

With four English teams in the two major European finals this week, it is little wonder that the EPL is the richest football league in Europe, generating a record US$ 7.5 billion in revenue, as the clubs’ wages-to-revenue ratio rose to 59%.  The European football market is now worth over US$ 32 billion, according to Deloittes latest report, with the leading five leagues accounting for some US$ 18 billion of the total – 6.0% higher than last year.

Facebook has launched its new digital currency, “GlobalCoin”, due to start operation early next year, when it will set up a digital payments system, as a testing exercise, in about a dozen countries. The cryptocurrency could be used by Facebook’s two billion users to transfer money and make purchases through blockchain technology. Some weeks ago, it was reported that talks were being held to seek US$ 1 billion in funding from payment technology companies such as Visa and MasterCard, as well as financial institutions such as First Data Corporation.

So much for the talk about the demise of crypto currencies, as Bitcoin posted a 10% jump in prices on Monday to trade at US$ 8,847 – its highest level in a year that has also doubled since March and up 80% in May. Other similar increases saw prices on the up for other such currencies, including Litecoin and Ether, rising 9% and 6% on the day. Now with more companies introducing their own digital currencies (such as Facebook) and mainstream firms (including Fidelity Investments and AT&T) becoming involved, the future looks rosy for cryptocurrencies.

Another sign that the German economy is in slowdown was the fact that its May unemployment figures moved upwards to 5.0%, for the first time since November 2013 when it reached 6.9%; the figure was 0.1% higher than recorded in the two previous months, with a current 2.24 million unemployed. It comes at a time when its 2019 economic growth forecast has been halved to just 0.5%. It seems inevitable that the worse is yet to come and perhaps German Chancellor Merkel is getting out just at the right time.

In Australia, lawyers are taking a class action against wealth management firm AMP, claiming that 2.5 million of its superannuation accounts have been charged too much in administration fees, and costs could go into hundreds of millions of dollars. The scandal-riddled entity is also facing a shareholder class action, as well as ASIC (Australian Securities and Investments Commission) seeking penalties. This comes after the recent royal commission that claimed AMP routinely charged more in administration fees than they should have, including, for example, applying fees of 1.5%  – at triple the proper rate.

Australian bourses are thanking the “ScoMo surge” for major gains, following the surprise victory of the incumbent Coalition Party, led by Scott Morrison. Since the results were announced, shares have gained over US$ 23 billion, soaring to 12-year highs. The benchmark S&P/ASX 200 index was up 97points, or 1.52 %, on Friday to 6462 points, as the broader All Ordinaries climbed 93 points, (1.44 per cent), to 6553. The market had dropped before the election, with traders factoring in all the bad news that a Labour victory would have brought. The Big 4 banks – ANZ, CBA, NBA and Westpac – were over 9% higher and accounted for 80% of the total market gains. However, the poor performing Aussie dollar is causing concern, languishing around the US$ 0.69 level, which could result in an early rate cut by the RBA.

It has been a tough five months for the incoming far-right Brazilian Jair Bolsonaro, as he grapples with major economic problems. He openly admitted that he knew nothing about economics and appointed a businessman president, Paulo Guedes, as an economic “super-minister”. What has happened since he took office on 01 January is that the economy is still at the same level it was back in 2014 and there is no recovery in sight. After two years of recession (2015-2016), when the country contracted by almost 7%, the next two years have seen annual growth of 1.1% and even though there were expectations that 2019 growth would almost double, it is highly likely that it will just top 1.0%. Matters are not helped that the number of unemployed Brazilians has almost doubled to over 13 million since 2012, although official unemployment survey shows that over 28.3 million are “under-utilised”.

Even more worrying is the mushrooming fiscal debt which has jumped from 51.0% in the boom years to its current level of 77.1%, with fears of it reaching parity within four years if no action is taken. Furthermore, its currency continues to head south (trading at 0.25 real to US$ 1), the stock market, having reached an all-time high in March, has returned most of its gains following disappointing corporate results and since the beginning of Brazil’s recession four years ago, prices have gone up by 25%.

March data sees Japan’s economy slowing, with its leading indicator, measuring future economic activity, down month on month by 1.2 to 95.9 – its lowest reading in three years. The index measuring current conditions also fell – by 1.1 to 99.4, its lowest since September 2015. Meanwhile, April producer prices were 0.9% higher on the year but dipped 0.2% from March’s reading when it advanced 0.7.

Japan has also hosted US president Donald Trump this week where again he broached the trade inequality between the two countries in apparently cordial discussions with Shinzo Abe. At a press conference with the Japanese leader, he again berated China saying “I think they probably wish they made the deal that they had on the table before they tried to renegotiate it. They would like to make a deal. We’re not ready to make a deal.” He also warned that tariffs on Chinese goods “could go up very, very substantially, very easily”. Now the rhetoric has been ratcheted up again since the talks faltered and Trump blacklisted Huawei Technologies Co. and scores of its affiliates earlier this month in a bid to stymie its access to the US market.

In the ongoing trade war between the world’s two superpowers, there is an increasing likelihood that China may restrict the export of rare earth minerals to the United States. Rare earths are a group of seventeen elements used in production in a huge number of sectors, including renewable energy technology, oil refinery and electronics, with China accounting for about 70% of global output and that 80% of US imports emanate from China. Since 2014, there has been a doubling of China’s exports of rare earth oxides. Any retaliatory action cold spell major problems for US industries worth trillions of dollars that rely on rare earth minerals. Could the Chinese be trying to bring the US President Down To Earth?

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Cruel Summer

Cruel Summer                                                  21 May 2019

According to Property Finder, there are 136 Dubai projects, encompassing more than 43k residential units, with an expected completion date by the end of 2019: there is also a further 4.1k from 18 other projects, ready for completion by September 2020. Of this total, 33.4 k were apartments, 4.6k villas and 5.6k serviced apartments. This would equate to over 47k over the sixteen months, assuming that all construction has been handed over – historically the figure has been just over 50%. In the first four months of the year, it is estimated that almost 11k have been handed over; last year the number for the twelve months was 23k.

April’s Cavendish Maxwell’s Dubai House Price Index indicates an average 13.2% slump in Dubai property prices over the past twelve months; in certain locations, such as Emirates Living, Dubai Silicon Oasis, Jumeirah Lake Towers and IMPZ, the news was even more depressing with falls in excess of 14%. On a monthly and quarterly comparison, April prices, at US$ 681k, were 1.5% and 4.9% lower.

Arabtec has won another tender from Dubai Properties – this time a US$ 56 million contract to build 322 villas in Villanova, a residential community in Dubailand. This is their sixth project award from the real estate arm of the Ruler of Dubai’s investment vehicle. Completion date should be around early 2021.

Arabtec picked up another contract this week with a US$ 60 million, three-year Indian contract from Raheja Developers for construction in the Navin Minar development. The project will include a 42-storey residential tower and fifteen, fifteen-storey community housing towers, located twenty two km from Delhi airport.

German hotel company, Deutsche Hospitality, has announced its plans to introduce new properties in the UAE and that it will be completely relaunching its luxury brand, Steigenberger Hotels & Resorts; it will also introduce its new brand to Dubai with the 2022 opening of Jaz in the City hotel in Deira, a property with 253 guest rooms.

InterContinental Hotels Group is planning a 30% expansion in its ME room portfolio over the next four years, with 37 properties (and 5.2k rooms) in the pipeline; this will encompass IHG’s many brands including InterContinental Hotels and Resorts, Crowne Plaza, Holiday Inn, Holiday Inn Express, Staybridge Suites and voco. Dubai will see the introduction of yet another brand with opening of the first Hotel Indigo in the Middle East, later in the year. It will also to increase its midscale portfolio in the emirate by the addition of two Staybridge Suites properties.

Due to open between 2021 and 2022, Wyndham Hotels & Resorts will open the country’s first Days Inn and Super 8 branded hotels, as well as a new Wyndham in Dubai; all located on the Deira waterfront, the owner is Ithra, the investment arm of the Dubai government. The hotel group, with 9.2k properties under twenty different brands, has recently acquired the La Quinta label – which has 900 global properties, with a total of 900k keys. Currently, it operates 57 properties (and 11k rooms) in MEA, with a further 21 hotels under development, comprising 4k keys; 23 of these hotels are operated under the Ramada brand.

Landmark Group is set for a major regional expansion as its largest fashion retailer, Centrepoint, plans to open eighteen new outlets over the next twelve months, bringing the total of its shops to 162 in seven countries. The retailer carries four major concepts – Babyshop, Splash, Lifestyle and Shoemart. According to CEO Simon Smith, “our stores of the future will combine features of both online and in-store shopping to offer a seamless and convenient shopping experience.”

Another local casualty of the difficult trading conditions is the Gourmet café chain Pantry Café, closing its three stores in Wasl Square, Jumeirah and Bay Square Business Bay. The four-year old company will shut by the end of May, but no reasons were given. Despite all the problems facing a new entrant in the Dubai F&B sector, last year saw 641 restaurants and 468 cafés open their doors for the first time, bringing the total number to 11.8k in the emirate.

In a bid to protect the wages of its employees, Jebel Ali Free Zone will become the first free zone to return cash and bank guarantees to businesses, via its new Workforce Protection Programme initiative. Commencing in September, it will inject US$ 354 million back into Dubai’s economy that companies can invest in their operations. In the past, companies had to lodge cash or a bank guarantee to provide insurance to their employees in the event of non-payment of wages. Employees will be protected because companies will have to take out insurance to protect the workers in case of wage default.

In recognition of 2019 being designated the Year of Tolerance, JAFZA has decided to waive almost US$ 10 million in fines, owed by its businesses. The authority reckons that this initiative will also support the government’s goal of further enhancing its ease of doing business rating, whilst incentivising new companies and investors. The UAE is currently rated 11th in the World Bank’s Ease of Doing Business ranking.

As DP World continues its expansion of inland operations, it has acquired a 76% stake in the Indian rail logistics company Kribhco Infrastructure, via a JV with India’s sovereign wealth fund; Kribhco will retain the remaining 24% stake. The decade-old company operates container train operations across India, along with three major inland container depots and private freight terminals at Pali in Haryana, Modinagar in Uttar Pradesh and Hazira in Gujarat. DP World already has a large presence in the sub-continent, operating five ports – Mundra, Nhava Sheva, Cochin, Chennai and Visakha,

HH Sheikh Mohammed bin Rashid Al Maktoum has announced that an initial batch of 6.8k people have been granted their new permanent residency status and issued with a gold card. The Ruler indicated that the first tranche of investors and entrepreneurs would hold total investments of US$ 27.2 billion, equating to US$ 4 million per individual. The aim of the exercise is not only to generate foreign investment but also to attract top engineers, scientists, and star students. Sheikh Mohammed also added “Gold Card permanent residence will be awarded to exceptional and talented individuals and to whoever contributes positively to the UAE’s success story. We want those people to be permanent partners in our journey”.

To some, it will come as no surprise to see that Dubai is the most expensive city in the world for internet, at US$ 82 for a month of 8 Mbps internet, according to a recent Deutsche Bank study. Covering 55 cities, the annual survey of global prices and living standards ranks Dubai 14th in monthly salaries (at US$ 2,856) and 11th in disposable income, with San Francisco coming in at number one for both, mainly due to the “rapid growth of the US tech sector”. Interestingly, Dubai was not too expensive for five-star hotel rooms with a view, ranking 29th.

Union Properties has had disastrous Q1 results, reporting a 99% slump in profit to just about breaking even, attributable to mounting finance costs (up 80.4% to US$ 11 million) and losses on investments. The developer, currently in the midst of a restructuring exercise, posted a quarterly loss of US$ 6 million, compared to a US$ 23 million profit over the same period in 2018. So far this year, UP has seen its share price on the DFM down around 22%.

With revenue falling as visitor numbers dip, DXB Entertainments recorded a 3.0% increase in its Q1 deficit to US$ 59 million, as revenue declined 18.0% to US$ 39 million. The operator of the Dubai Parks and Resorts theme parks reported an 11.0% decline in visitor numbers to 760k, of which 45% were from overseas, slightly down on the 60% target; international visitors generally spend more money and bring in higher yields than local residents.

The bourse opened for trading on Sunday 19 May at 2575 and, having ditched 7.6% (212 points) the previous three weeks, closed 15 points higher on Thursday 23 May on 2590. Emaar Properties recovered US$ 0.04 over the week to close on US$ 1.20, with Arabtec, despite the two orders this week, heading in the other direction by US$ 0.03 to US$ 0.41. Thursday 23 May saw wafer thin trading again (typical of the Ramadan period) of 122 million shares, at a value of US$ 48 million, compared to 130 million shares trading at US$ 42 million the previous week.

By Thursday, Brent, having seen 17% swings in both directions over the past three weeks, traded down US$ 5.34 (7.4%) to US$ 67.28. Gold again muddled through the week, shedding only US$ 1 to US$ 1,285.

Huawei was dealt a huge blow earlier in the week when it was announced that their new smartphones will lose access to popular Google apps and that Google has cut it off from some updates to its Android operating system. Furthermore, the Chinese tech firm will also lose Google’s security updates and technical support, and that any of its new devices would no longer have apps such as YouTube and Maps. The previous week, the US President had banned the company from acquiring technology from US firms without government approval. The US is leading a raft of other western countries worried about national security if Huawei has a carte blanche in next-generation 5G mobile networks.

In April 2018, Tesla chief executive Elon Musk confirmed that he had asked his finance team to “comb through every expense worldwide” to find possible cuts. Two months later, 9% of the electric carmaker’s workforce were laid off. In January, a further 7% were shown the door and now he is going to increase scrutiny of expenses to further cut costs at the electric carmaker. Now it seems that after burning US$ 700 million in cash in Q1 – and also just raising a further US$ 2.7 billion via an offering of stock and convertible notes – the company has only to the end of this year to break even. Maybe someone will wake up and see that questions should be asked whether Tesla has the wherewithal to make, sell and deliver enough cars to make a sustainable profit.

Being the largest national operator of Boeing 737 Max aircraft, and the first country in the world to close down their operations, after the second fatal crash in Ethiopia, the Chinese seem to be the first in the queue to file claims against the US plane maker for pay-outs. All of its three airlines -China, China Southern and China Eastern – are claiming compensation for losses incurred by the grounded fleet, and on top of that for delayed deliveries of the 737 Max jets. Boeing has reported that it has completed development of a software update for its 737 Max plane and has subsequently completed over 200 successful flights. The upgrade certification will be handed over to the FAA this week.

The Brazilian cosmetics group Natura, which already owns The Body Shop and Aesop, is to acquire Avon for US$ 2.0 billion in an all-stock deal; the end result is that its shareholders will hold 76% of the new combined entity which will have an annual revenue stream in excess of US$ 10 billion. Now becoming the fourth-largest cosmetics company, it will have 3.2k outlets in over 100 countries. The UK-based direct-selling cosmetics business has been struggling in recent years, as its door to door sales model became outdated and less popular, with e-commerce eating into their market share.

Sir Philip Green‘s retail empire continues to crumble, with an announcement that twenty three Burton, Dorothy Perkins and Topshop stores will close and rents will be cut at another 194 UK stores at his Arcadia group. This is on top of the 200 stores shut over the past three years, as it struggles with a challenging market. Furthermore, the company also plans to shut all its 11 US Topshop and Topman stores. This could be the last throw of the dice for the highly unpopular tycoon as he banks on a US$ 65 million investment from his wife, Tina. Early next month, creditors will vote on whether to accept a series of Company Voluntary Arrangements (CVAs), that will see rents reduced in return for a 20% stake in the company.

Another blow for the UK high street came with news that the Jamie Oliver Restaurant Group – and its subsidiaries Jamie’s Italian, Jamie’s Italian Holdings, One New Change and Fifteen Restaurant – had gone into administration. The owner had already injected US$ 17 million into the failing business in 2017 and has struggled to pay down reported debts of US$ 92 million. Now only three of his twenty-five restaurants remain open, threatening the livelihoods of 1.2k staff. The usual suspects – a soft retail market, economic slowdown and Brexit uncertainty – have been blamed. However, his franchised pizza restaurant in JLT will remain open, as it is a franchise operation licensed by Dubai-based Apparel Group.

Jamie is not alone as the UK high street starts looking like a battlefield, with competitors such as  burger brand Byron, French cuisine chain Cafe Rouge and pizza outlet Prezzo all battling for survival.

Marks & Spencer continue to struggle, with annual pre-tax profits (at 31 March) down by almost 10% to US$ 680 million, as like for like sales dip 2.3% lower; however, figures were somewhat distorted because of Easter falling later than normal. The retailer is in the midst of a major turnaround programme that will see a big store closure program to bring its current number of 1,043 stores down to just above 0.9k within three years.

With its assets’ total at US$ 960 almost equal to that of its liabilities, Thomas Cook’s shares have plummeted 30% to be worth around US$ 0.26; this comes at the same time that the tour operator  issued its third profit warning in less than a year and reported a half-year loss of almost US$ 2.0 billion. Even its auditors, EY, have warned of “material uncertainties” over the group’s sale of its airline, on which a new US$ 400 million bank facility depends. In an attempt to keep the company flying, it is seeking bidders for its fleet of 105 jets, slashing costs and considering the future of its currency arm Thomas Cook Money.

Despite the UK news, it appears that it is business “as usual” in the UAE; the tour operator opened its first regional venture in November 2017 – the Ras Al Khaimah Beach Resort. Three months ago, Thomas Cook India Group invested US$ 41 million for a 51% shareholding in Dubai-based Digiphoto Entertainment Imaging. 

Two major election results this week – in Australia and India. Once again, the polls were proved wrong when Scott Morrison retained his position as the country’s leader. This was good news for the banking sector as shares jumped, with the big four – ANZ, CBA, NBA and Westpac – trading over 5% higher. There had been fears that a Labour victory would see banks suffer because of their pre-election warnings of limiting negative gearing, reducing the capital gains tax discount and tougher restrictions on mortgage brokers. Another sector, healthcare also benefitted with shares in Medibank and NIB up 10% and 9% because the defeated Labour would have limited premium increases to 2%.

By Thursday, it seems that Narendra Modi has won a landslide victory to secure another five years as PM of the world’s largest democracy, India, that saw over 600 million vote in a marathon six-week process. The victory came despite the fact that joblessness is at a record high, farm incomes have plummeted and industrial production has slumped. Furthermore, the economy continues to suffer from Modi’s introduction of a complicated sales tax and his disastrous 2017 demonetisation strategy which was designed to flush out undeclared wealth and black money. The market took the victory in its stride, with the benchmark Sensex index recording a record high of 40,000, with investors gambling that Modi would continue with his business-friendly policies.

The EU technocracy continue to hide their heads in the sand as a major European crisis is brewing that puts the Brexit issue into the second division. The EU growth forecast at 1.4% is just marginally above that of the UK and will be inevitably downgraded if problems persist in two of its powerhouses – Germany and Italy. The former is expected to see growth plummet from 1.8% to just 0.5%, as its manufacturing struggles with slower Chinese demand and disruption caused by the US-China trade war, as well as tougher emissions standards for its car industry.

Italy is the bigger problem as it grapples with recessionary fears, rising government debt and a banking industry in disarray. Its financial credibility lays in tatters as government spending and tax cuts ensure that it will run a deficit and also breach EU rules. Over the last three years, seven banks have been bailed out and estimates put the amount of bad debts on financial institutions’ books at over US$ 300 billion – a comparatively small figure next to the estimated US$ 2 trillion government debt. Then there is France and a summer of discontent in the offing! For many, including Theresa May, the UK Conservative party and some EU governments, 2019 could become a Cruel Summer!

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The Only Way Is Down

DSS 2019 Dates

From 21st June 2019 to 3rd August 2019

dubai Summer Surprises

The Only Way Is Down                                                      16 May 2019

Bayut reported strong interest in off-plan residential projects near Dubai’s Expo 2020 site, with particular focus on Dubai South, Meydan City, Mudon and Town Square. The real estate portal noted that ROIs are higher in such areas, with some Dubai South properties having rent yields of 11%; in that location, studio apartments can be bought for US$ 105k and a 3-bedroom villa for US$ 272k.

The locally-based realty portal reckoned that Q1 saw a total of 9.3k transactions, worth US$ 5.8 billion, were registered – 7.9% and 0.7% (in value) higher than the same period in 2018. There were 5.0k and 4.3k deals, accounting for US$ 3.7 billion and US$ 2.1 billion, involving secondary market and off-plan deals respectively.

After announcing a 78.5% surge in 2018 sales, five-year old Danube Properties will launch three new projects this year to add to their current portfolio of over 5k residential units across twelve developments valued at US$ 1 billion. The first project will probably occur after the holy month of Ramadan. The Dubai developer claims that it has more than doubled its market share of off plan sales to 10.5% of the total.

The One Palm is an exclusive address, with the second most expensive penthouse, covering 20k sq ft, ever sold in Dubai has been bought for US$ 20 million. The most expensive, encompassing 30k sq ft, three floors and a 25 mt lap pool, was at the same address when US$ 28 million changed hands in 2017. The developer, Omniyat, is hoping that the third and last one goes for a similar amount.

In the first four months of the year, there were 37 commercial property deals, each worth more than US$ 13 million; according to Property Finder, most involved schools, hospitals and land plots acquired by master developers, with Emaar involved in eight transactions – three Arabian Ranches land plots for a cumulative US$ 89 million and five relating to the five Address hotels sold to Abu Dhabi National Hotels for US$ 463 million.

It is reported that Jawad Azizi, the managing director of Meilenstein Developments, is being held by police in Dubai. The German-based real estate developer entered the Dubai market last October, with plans for eight projects worth US$ 327 million.

Dubai-owned P&O Ports has signed a 25-year agreement (with a further 25-year option) to manage the Serbian port of Novi Sad; this will serve as a link between DP World Constanza, Romania, and Jebel Ali Port. The development, situated on the Danube, is on a 24-hectare site, with a 500 mt quay; it has an estimated annual throughput of around 1 million tons. P&O Ports will retain exclusive rights to undertake all waterside operations, container handling and project cargo activities.

The Bulldozer Group’s latest entrée into the local restaurant scene is planning to open its second outlet in Monaco, only six months after starting operations in the emirate. GAIA, the Dubai-grown concept, will also expand into London, Miami and Moscow but will not be franchised, as all new restaurants will be run and managed by Bulldozer.

Dubai Festivals and Retail Establishment (DFRE) announced that the 22nd edition of DSS (Dubai Summer Surprises) will start on 21 June and run for six weeks to 03 August. An array of summer deals, across the emirate’s shopping outlets, will be on offer that will also include attractions, hotel staycations, live concerts and family entertainment.

In March, the Central Bank of the UAE pumped US$ 2.0 billion in cash to the financial system, as bank deposits fell 5.0% (US$ 1.9 billion) to US$ 379.3 billion over the month.

The UAE’s Securities and Commodities Authority is investigating a case that an unnamed listed company had inflated its value and has referred it to the public prosecution for possible legal action to be taken. The independent body, set up in 2000, noted that this action was taken “in light of the investigations conducted by the SCA with regards to acquisitions and transactions of one of the public listed companies, and given that these acquisitions are suspected to have included errors that led to inflated value.”

The Federal Authority for Government Human Resources reportedly discussed plans to set up retirement investment funds for expatriate workers. If implemented, it most probably result in the introduction of a private sector savings scheme to replace the current gratuity system. At the beginning of May, the Dubai International Financial Centre reported that it might change to the DIFC Employee Workplace Savings (DEWS) Trust savings scheme. It is not currently mandatory for companies in the UAE to set aside payment for end of service gratuity.

At the recent meeting of the Dubai Free Zones Council (DFZ Council), chaired by Sheikh Ahmed bin Saeed Al Maktoum, there was a preliminary agreement to facilitate companies to operate in multiple free zones. The One Free Zone Passport initiative will allow companies licensed at a single free zone to also operate in other Dubai free zones, utilizing only one licence. The meeting also agreed to implement the requirement of an insurance policy instead of a bank guarantee for free zone-based companies, which will boost liquidity for the companies and attract greater investment capital.

Talks are on-going that may result in the merger of Dubai Islamic Bank and its smaller rival Noor Bank which, if it goes ahead, will result in a lender with assets of US$ 76 billion; of that total, the former bank would hold 81.6% of the total. The state-owned holding company, Investment Corp of Dubai, is the largest shareholder in DIB, with a 28% stake, and is also one of the largest shareholders in the eleven-year old Noor Bank.

Shuaa Capital has confirmed that talks are progressing with Abu Dhabi Financial Group, (with assets of over US$ 20 billion), about a possible merger that would see both entities form a publicly listed company. ADFG, whose chairman Jassim Al Seddiqi is also the CEO of Shuaa, already own 48.4% of the Dubai-based company. In Q1, Shuaa posted a 66.9% hike in revenue but recorded a US$ 7 million loss compared to a US$ 3 million profit over the same period in 2018; the deficit was a result of “certain one-off provisions and a change in accounting standards”.

Dubai-listed Gulf Navigation Holding saw revenue jump 29.0% to US$ 12 million but still recorded a Q1 loss of US$ 3 million, compared to a US$ 1 profit in the corresponding period last year; the loss was attributable to its last petrochemical tanker being in dry dock for maintenance for a period of time. During the quarter, Goldilocks Fund became an 18.32% shareholder, with the shipping firm also enhancing its fleet, with the acquisition of livestock carriers. Its assets now include six petrochemical tankers and four livestock transport vessels.

Union Properties has again disappointed the market by producing poor Q1 results – just breaking even after a US$ 50 million profit a year earlier; revenue also fell – by 11.1% to US$ 25 million; accumulated losses stand at US$ 681 million. The company would have gone into the red if it were not for a US$ 20 million attributable to “other income”. Little wonder then that the stock continued to trade at one-year lows of US$ 0.082.

Emaar Developments saw revenue 3.0% higher at US$ 872 million whilst profit dipped 11.2% to US$ 281 million; total assets were at US$ 8.4 billion. It was also confirmed this week that the company had maintained its position being included in the MSCI emerging market index, contrary to market expectations.

Its parent company, Emaar Properties reported flat results, with Q1 profit at US$ 619 million, on the back of revenue at US$ 1.6 billion. By the end of March, its total assets stood at US$ 30.5 billion, along with a cash balance of US$ 2.2 billion.

The day it announced a 54.1% slump in Q1 profit to US$ 8 million, Arabtec’s chief executive officer, Hamish Tyrwhitt, stepped down from the post. (It will be interesting to see the Australian’s next move). Revenue also slid 16.0% to US$ 544 million, with the developer reporting a US$ 2 million loss from investments in an associate, Depa. Citing “lower revenue from a slowdown in awards in the construction sector, coupled with a number of legacy projects closing out in the coming months”, its profit margins dipped from 2.7% to 1.5%.

Another major developer, Damac, also posted major declines in both revenue and profit with falls of 52.8% to US$ 244 million and 93.6% to US$ 8 million respectively. However, one bright light is the fact that the developer has a strong sales pipeline (with Q1 sales of US$ 327 million) and had managed to scale down its debt level on a US$ 272 million sukuk. The company estimates that it has a relatively strong cash position with US$ 490 million in free cashflow and US$ 1.4 billion in escrow although gross debt was at US$ 1.4 billion.

Amanat Holdings posted a 43.0% improvement in Q1 profit to US$ 6 million, as revenue came in 30.0% higher at US$ 10 million, 85.3% of which was attributable to investments in associates and subsidiaries. The health care and education investment firm, a Sharia-compliant entity as it follows the Dubai bourse’s Sharia principles, expects to see its investment portfolio, along with its geographic footprint, expand during the rest of 2019.

In the midst of a major restructuring programme, struggling Marka, posted a US$ 81 million Q1 loss, 21.9% higher than the deficit in the previous quarter. Year on year revenue at US$ 26 million was 22.7% lower than the same period in 2018. The Dubai-based fashion, sports and food retailer, which has not made a profit since its 2014 stock market début, counts Reem Al Bawadi and Morelli’s Gelato among its brands. it continues to consider all available options for capital restructuring, including seeking a strategic capital investment partner; in March, it agreed a 95% planned share capital reduction of US$ 95 million that would decrease its capital base to US$ 14 million. However, with over 90% of shareholders attending a SGM this week, Marka decided to liquidate the business, after a last ditch attempt at turning the company’s finances around failed.

On Monday, the DFM posted its worst session of the year, falling 3.5%, as it saw both the “sabotage” attack of four oil vessels near Fujairah port and a serious hitch in US/Chinese trade talks, as China introduced its own tariffs of US$ 60 billion. Having already shed almost 7% this year, it did fall 3.66% to 2,522 with heavyweights such as Emaar down 6.11%, with Damac and Shuaa Capital hitting their lower limits.

The bourse opened for trading on Sunday 12 May, at 2673, and, having shipped 114 points (4.1%) the previous fortnight lost a further 98 points (3.7%) to close by Thursday, 16 May, on 2575. Emaar Properties dropped US$ 0.07 to close the week on US$ 1.16, whilst Arabtec, after a tumultuous week, was US$ 0.09 lower at US$ 0.44. Thursday 16 May saw marginally higher, but still wafer thin, trades, at 130 million shares, valued at US$ 42 million, (compared to a week earlier of 89 million shares at US$ 33 million).

By Thursday, 16 May, Brent, having dropped US$ 12.65 (17.0%) the previous fortnight, regained much of that loss, up US$ 10.92 (17.7%) to close on US$ 72.62; gold nudged US$ 1 higher to US$ 1,286.

Steel is in the news this week with reports that the long-proposed JV between Tata and Thyssenkrupp is close to collapse. The German steel-maker has indicated that it did not expect regulators to approve the agreement, whilst the Indian company is still looking for a solution to its European interests, after being badly hit by the 2016 commodity crisis. In that year, Tata sold most of its UK sites to British Steel, whilst keeping its Port Talbot plant. Now that the company is facing possible administration, it is seeking a further US$ 98 million from the government to help it address “Brexit-related issues”. This comes just two weeks after the steelmaker, which employs 4.5k at four sites, secured a US$ 130 million loan from the government to pay its EU carbon bill.

The EC have fined five international banks a total of US$ 1.3 billion for rigging the foreign exchange market between 2007 – 2013. Two of the banks, Barclays and RBS, were in cartels, known as “Banana Split” and “Essex Express”, with Citigroup and JP Morgan also involved in the former and MUFG in the latter. Although UBS was also in on the act, it was not fined, because of its role as whistle-blower to reveal both cartels’ existence to authorities. It seems that traders, using online chatrooms, exchanged trading plans and occasionally co-ordinated their market strategies.

Reliance Brands’ owner, Mukesh Ambani, has acquired the iconic British toy retailer Hamleys from China’s C Banner International for an undisclosed sum. India’s richest man will take control of 167 global toy stores, 88 of which are located in his home country. The company, founded in 1760 and the world’s oldest toy retailer, posted a US$ 12 million loss last year.

Pharmaceutical is one of the highest US profile lobby groups and they will be called into action now more than 40 US states have filed a lawsuit accusing some twenty pharmaceutical firms of conspiring to artificially inflate the cost of about one hundred common medicinal drugs; one firm indicted is the Israeli Teva Pharmaceuticals, the world’s largest producer of generic medicine. It appears that a five-year investigation has found drug companies being involved in a scheme to boost prices – in some cases by more than 1,000% – in a multi-billion dollar fraud.

By the end of last week, the Turkish lira had hit the rails, trading at seven-month lows of 6.246 to the greenback; this would have been even worse if the central bank had not injected US$ 4.5 billion to keep the currency afloat. The main driver behind the recent decline was last Monday’s decision to re-run Istanbul’s mayoral election that had been narrowly won by the main opposition party.

Q1 saw the UK manufacturing sector grow at its fastest pace since 1988 with increased stockpiling ahead of the 31 March Brexit deadline (which never materialised). At 0.5% (up from 0.2% in Q4), one of the main drivers behind the improvement was pharmaceuticals, expanding 9.4% in the three-month period. Because of the surge in imports, the trade deficit more than doubled to US$ 24.0 billion, with marked increases in gold and motor vehicles. The caveat behind the good news is that trade in goods widened by 11.8% to a record US$ 56.7 billion.

China’s economy was on the downslide well before Donald Trump announced the latest sleuth of tariffs starting earlier this month. Most economic indicators were moving southwards as April data indicates. Retail sales grew at their slowest pace since during the SARS outbreak in 2003 and although sales were 7.2% higher, it was somewhat lower than the previous month’s 8.7%. Industrial output was down from 8.5% to 5.4%, as housing-related consumption — including furniture, home appliances and construction & decoration material — slowed dramatically, as did sales of clothes, phones and cosmetics. May’s data will prove interesting and if authorities do not take urgent stimulatory measures, then there will be more headaches for the Chinese administration.

The UK economy is resilient if nothing else, as Q1 unemployment figures, at 3.8%, are at their lowest level since 1974; even more impressive was the fact that female unemployment of 3.7% is the lowest since records began in 1971.The downward trend started six years ago and probably will not be bettered. With average weekly earnings (excluding bonuses) for employees rising 3.3%, the rate is higher than the national inflation level which means that the man in the street will have more money to spend.

Uber shares had a disappointing start on their first day of trading on the New York Stock Exchange, with shares ending the Monday 7.6% from their listing price of US$ 45; by Thursday, their value had fallen further to US$ 41.50. The firm had sold 180 million shares (about 10% of their total) and was expecting to raise US$ 8.1 billion. Only last year, Uber, which has never made, and may never make, a profit, (and has racked up US$ 9.0 billion in losses, since its 2009 formation), was valued at US$ 120 billion. For Uber, it seems The Only Way Is Down.

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Wake Up Time

Uber New 2018 Logo First Look App Application Book Taxi Driver

Wake Up Time                                                          09 May 2019

Three separate reports this week seem to indicate that the turnaround in the Dubai economy may have started. Driven by new publicly-funded investments, and higher energy prices, the IMF pointed to a “turning point” which will also see an additional “Expo boost”; the world body is forecasting a 2.0%+ growth this year and 3.0% in 2020. The economy has recovered well from two years ago when the growth was at 1.7% – not helped by weaker external demand and intensified geopolitical tensions.

Another positive indicator came from the Department of Economic Development announcing it had issued more than 2.8k new licences in April – 60% up, year on year; the agency estimated that this added an additional 8.4k jobs to the Dubai employee numbers. Two sectors dominated, with professional and commercial sectors accounting for 49.0% and 48.1% of the total. April business registration and licensing transactions totalled 29.8k – a 13% growth.

The latest Emirates NBD Dubai Economy Tracker Index was also the bearer of positive economic improvements in Dubai, with business conditions advancing at their fastest pace in four years; the main drivers behind these figures were a boost in new business and an improvement in wholesale and retail sector activity. The composite index moved 0.3 higher to 57.9 and, for the fourth straight month, was above its long-run trend level of 55.2. However, discounting, that has continued, with prices falling for the twelfth straight month, masks the real problem that there has been no actual improvement in underlying demand. On the plus side, the level of incoming new business, at 66.6, increased at the fastest rate since January 2015, new sales growth at wholesalers and retailers hit a record high of 70.8, while construction firms registered 55.7 – its strongest level this year. However, employment in the non-oil sector remained flat at a disappointing 50.0 – the threshold between expansion and contraction.

JW Marriott Dubai in Deira will close its doors next week due to “circumstances” beyond the control of the hospitality group. The four-star hotel’s management has reported that events had “interfered with our ability to continue to operate the hotel.”

Q1 figures show that Dubai attracted 4.75 million visitors, 2.2% higher than the same period in 2018. The top four source countries continue to be India, Saudi Arabia, the UK and China (up 13%), with numbers of 565k, 412k, 327k and 292k respectively, accounting for 35.3% of the total; surprisingly, Oman came in fifth as numbers from the emirate’s neighbour climbed 27%.

By the end of March, the emirate’s hotel room portfolio was 8% higher at 118k encompassing 717 establishments; of that total, luxury five-star properties continue to dominate with 34%, four-star account for 26%, and one-three star 19%, with the remaining 21% taken by hotel apartments.  Occupancy continues to be high on a global scale at 84%.

There was a 2.2% decline in Q1 passenger traffic (22.2 million) at Dubai International, attributable to the late timing of Easter, compared to 2018, and a reduction in flights as flydubai’s Boeing 737 Max aircraft remain grounded. Cargo traffic was 4.1% higher at 641k tonnes.

April’s UAE’s purchasing managers’ index (PMI) recorded its highest reading (at 57.6) since December 2017, as business conditions improved, driven by higher output, increasing at its fastest rate in over four years, and new work. However, just as in Dubai, with discounting still driving sales (and reduced margins), hiring is still flat and there has been no apparent improvement in job expansion. Furthermore, with weak wage growth, household consumption remains in the doldrums. One ray of light saw business optimism reaching a series high in April, as the future output index climbed to 90.8.

There are reports that twelve-year old Dubai-based Arqaam Capital Ltd and Abu Dhabi’s The National Investor could merge, creating a business with an equity value of US$ 250 million. If the deal were to go through, it is expected that Arqaam investors would retain managerial responsibilities, along with a 40% share. Financial institutions are leading the way forward in the region with consolidations that, in theory at least, lead to reduced costs and increased market share.

Driven by its biggest ever fuel bill and a strong greenback, Emirates posted a 69% year-on-year decline in profit to US$ 230 million, although revenue was 6.0% higher at US$ 26.7 billion. Operating costs jumped 8.0%, with its fuel bill spiralling 25% higher at US$ 8.4 billion, equivalent to 32% of total costs (28% a year earlier); the strong dollar cost the airline a further US$ 147 million. Over the year, Emirates passenger numbers remained flat at 58.6 million but with seat capacity increasing by 4%, fare increases resulted in a 3% hike in passenger yields.

The group, which also includes Dnata, posted a 44% decline in profits to US$ 626 million, with revenue 7.0% higher at US$ 29.8 billion; its year end cash balance fell 13.0% to US$ 6.0 billion. Dnata itself saw revenue 10.0% higher at US$ 4.0 billion (of which 70% came from its ever-expanding international business), resulting in a profit of US$ 381 million, inflated by a one-time gain from its divestment in the travel management company Hogg Robinson Group; when this one-off transaction is taken out, profit would have declined by 15%. It is expected that the group’s parent company, the Investment Corporation of Dubai, will receive a US$ 136 million dividend.

Dubai Aerospace Enterprise, owned by the Investment Corporation of Dubai, posted a 3.1% increase in Q1 profit at US$ 99 million, as revenues rose 2.2% to US$ 360 million. The Middle East’s biggest aircraft lessor, having acquired Ireland’s Awas in August 2017, is now one of the top ten global jet lessors, with 301 owned aircraft and 52 managed jets.

Drake & Scull International confirmed that it was being investigated by a forensic audit committee formed by the UAE’s Securities and Commodities Authority for “floundering financial position and accumulated losses”. Some files, relating to questionable projects between 2009 and 2016, are currently being reviewed. Furthermore, the federal public prosecutor is still studying fifteen legal complaints, alleging offences by members of the company’s previous management. Last month, DSI, which has incurred losses of US$ 1.6 billion over the past two years, terminated both the CEO and CFO and this week saw the departure of its chairman, Obeid Bin Touq, and a director, Khamis Buamim.

Amlak’s fortunes have not improved in Q1, as it posted a 71.4% slump in profits to just US$ 1 million on the back of a 24% hike in revenue to US$ 33 million which included an unrealised fair value gain related to investment properties. The Sharia-complaint home financier, with Emaar its main shareholder, also booked a US$ 12 million impairment. It hopes that 2019 will see improved economic conditions, that would boost its revenue stream, and that it will be able to finalise restructuring its debt; it had previously reorganised its US$ 2.8 billion investment deposits and settled US$ 769k in cash with financiers in 2014, before revising the terms of the 12-year deal in 2016.

Impressive Q1 results were posted by Emaar Properties with a 7.2% hike in profit to US$ 463 million, on the back of a 123% jump in booked sales to international clients at US$ 708 million and quarterly revenue 53.0% higher at US$ 1.6 billion. By 31 March, its sales backlog was 3.5% higher at US$ 13.2 billion, which fares well for future dividend prospects.

Meanwhile, its development arm, Emaar Development, recorded a healthy 51.0% jump in revenue to US$ 910 million, with profit coming in at US$ 204 million. In Q1, the developer launched eight new projects with a value of US$ 1.2 billion, as its total sales backlog increased to US$ 10.3 billion. Interestingly, sales to non-UAE residents accounted for over 45% of total sales.

Although Dubai Investments saw a 44.2% slump in Q1 profits to US$ 55 million, it was not as bad as it looked compared to the same period in 2018 when the figure was inflated by a US$ 91 million overall gain on the acquisition of a stake in Emirates District Cooling. Its total assets nudged 2.9% higher at US$ 5.5 billion. Its share value dipped 2.14% lower to US$ 0.337.

The bourse opened for trading on Sunday 05 May, at 2758, and, having shed 29 points (1.0%) the previous week lost a further 85 points (3.1%) to close by Thursday, 09 May, on 2673. Emaar Properties dropped US$ 0.06 to close the week on US$ 1.23.  Arabtec, having shed US$ 0.03 the previous week, lost the same again and by Thursday closed on US$ 0.53. Thursday 09 May, saw similar trades to the previous week at 89 million shares, valued at US$ 33 million, compared to a week earlier of 90 million shares at US$ 42 million.

By Thursday, 09 May, Brent, having dropped US$ 3.60 (4.8%) the previous week, lost a massive US$ 9.05 (12.8%) to close on US$ 61.70; gold reversed its recent downward trend – up $ 15 to US$ 1,285.

The downward trend in ME air cargo activity continued into March, with a cargo increase of 1.3%, offset by a 3.8% jump in capacity, driven by weakening volumes both in and out of North America and Asia Pacific. Capacity growth has now outstripped demand growth for 11 out of the last 12 months. Although an improvement on February’s return of a 4.9% contraction, it is still 1.5% lower on an annualised basis.

Driven by a marked improvement in its Asian operations, along with lower costs (down 12.0%), HSBC posted a 30.5% hike in Q1 profit to US$ 6.2 billion – and this despite a dismal performance from its investment banking sector and the drag of its US business. Cost reduction was helped by one-off sales in its retail and commercial businesses and the non-recurrence of US regulatory fines for past misdeeds.

Siemens is set to slash its workforce by 10.4k in a major restructuring programme which will involve the spinning off its oil, gas and power generation business and cutting costs in the region of US$ 2.7 billion. The German industrial equipment maker has been under pressure due to a broader trend toward renewable energy such as sun and wind power in a sector that has seen its global rivals, General Electric and Mitsubishi, struggling as well. The company is expected to maintain a significant stake of less than 50% in the spun-off company and hold a majority stake in its renewable energies company.

Uber Technologies Inc priced its initial public offering at the low end of its targeted range, valuing it at US$ 82.4 billion, after seeing rival Lyft losing 23% in value following its March entrée into the market. The company hopes to raise US$ 8.1 billion tomorrow, 10 May, after offering 10% of its shares at US$ 45 each. Only last year, analysts were expecting a valuation north of US$ 120 billion. Whether the company can deliver this amount remains to be seen and tomorrow will see what happens on the New York bourse.

BMW posted a 78.0% decline in earnings before interest and tax to US$ 673 million, with the automotive division reporting its first loss in a decade, as legal provisions over alleged collusion on cleaner car emissions climbed to US$ 1.6 billion. To improve both revenue and profitability streams, BMW announced a US$ 16 billion savings strategy that would see culling models and cutting development time; in H2, it will also introduce a new 3-Series and a X7 SUV. With Donald Trump once again using the tariff threat on China, the German car maker expect earnings before tax to fall “well below”, year on year, while deliveries will rise slightly – this would see return on sales drop to between 4.5% – 6.5% from an already lowered target of 6% – 8%.

At last, Debenhams’ creditors have agreed a plan that will see the closure of fifty stores and rent reductions for others. Having rejected all takeover bids for the struggling firm, UK’s biggest department store chain, with 166 shops and 25k staff, is still owned by Celine, a consortium of the retailer’s lenders.

A six-year-old New York company has been bought by the owner of Wilkinson Sword for US$ 1.4 billion. Harry’s is an on-line retailer of men’s razors, as well as face washes, lotions and women’s products and revolutionised the sector by selling goods direct to consumers via subscription. In its short history, it has captured 2% of the global US$ 2.8 billion men’s shaving industry.

A decade later, Didier Lombard, the ex-boss of France Telecom (now Orange) and six other former executives have gone on trial in Paris, accused of moral harassment. At that time, in 2008, the French telecom was cutting 22k jobs, whilst retraining a further 10k. The tough measures then taken have been linked with 35 staff suicides at the time – some of whom left messages blaming the callous actions taken by management. M Lombard was quoted as saying “I’ll get them out one way or another, through the window or through the door”. The surprising factor in this story is that, if found guilty, the defendants can only face one-year imprisonment and a US$ 18k fine and Orange a fine of only US$ 90k.

To those who thought that Trump would not get past first base and that Brexit was only a pipedream comes the news that Bitcoin has passed the US$ 6k level – 90% higher than its December 2018 value but some way off its artificially high 2017 mark of US$ 19k. However, Binance, one of the largest cryptocurrency exchanges in the world, lost US$ 40 million this week when hackers withdrew 7k Bitcoins.

Having already returned US$ 57 million, (used to fund the blockbuster The Wolf of Wall Street), to Malaysian authorities, the US is to remit a further US$139 million in relation to illicit funds from the 1 Malaysia Development Berhad fund (MDB). The sovereign wealth fund was set up in 2009 to boost Malaysia’s economy, through strategic investments, but US$ billions worth of money was illegally used, including US$ 4.5 billion that ended up in the US. The country’s former prime minister, Najib Razak, and his wife, Rosmah Mansor, are facing charges of corruption. including pocketing US$ 681 million from 1MDB.

As it strives to reduce its budget deficit and debt levels, Bahrain will receive a further US$ 2.3 billion from a 2018 US$ 10 billion five-year support package provided by its Gulf Arab allies – Saudi Arabia, UAE and Kuwait. The package has helped the Kingdom slash borrowing costs and restore investor confidence, so much so that it is now planning to sell bonds later in the year.

Despite all the negative economic news surrounding Brexit, April UK house prices were up 5.0%, year on year – its highest level in two years and better than the 2.7% recorded last month; it was also 1.1% higher compared to March. The news from mortgage lender Halifax seems to be in contrast with other indicators and appears to reflect factors such as unusually weak April prices, increased sales of more expensive newly built homes and a bigger proportion of London sales, where house prices are above average. Recent Bank of England data indicates that mortgage lending was at its lowest level since December 2017 and that consumer borrowing had slowed sharply in the run-up to the original Brexit deadline of 29 March.

Even without the problems surrounding Brexit, the UK economy has once again confounded critics as the UK April services sector expanded by 0.5 to 50.4, after recording its lowest level in March in 32 months. With subdued domestic consumer and business spending, new business decreased for the fourth consecutive month, as exports continued to head south – as it has for the past eighteen months – with European demand flattening. However, the composite Index jumped 0.9 to 50.9, as the manufacturing sector improved with the IHS Markit/CIPS UK Construction Purchasing Managers’ Index, or PMI, rising to 50.5 from 49.7 in March.

In April, Chinese exports dipped 2.7% (after a mega 14.2% expansion the previous month), whilst imports headed in the other direction – up 4.0%, compared to a March contraction of 7.6%. This resulted in a US$ 13.8 billion trade surplus – with that with the US up US$ 0.5 billion to US$ 21.0 billion, as both exports and imports declined – by 13.0% and 26.0% respectively.

In a bid to support companies struggling, amid an economic slowdown, China has cut the reserve requirement ratios (RRRs) for 1k small and medium-sized banks to 8%; currently, the rate is between 10% – 11.5%. This should release more than US$ 41 billion in long-term funding that will boost the country’s SMEs. The cut comes at the same time as Donald Trump sharply escalated trade tensions between the world’s two largest economies, threatening to raise tariffs on US$ 200 billion of goods from 10% to 25%, starting as early as tomorrow – Friday 10 May.

Donald Trump is doing something right with the April US unemployment rate falling to its lowest level for more than 49 years, as the jobless rate fell 0.2% to 3.6%. Impressive figures showed that 490k joined the work force in April and that the average earnings grew at an annual rate of 3.2%. The number of people working part time, because their hours had been reduced or because they were unable to find full-time jobs, remained at 4.7 million. As good as the figures were, it is unlikely to prompt the Fed to consider hiking interest rates.

At the start of the week, the President’s mind was on China but by Wednesday he had moved his attention to Iran. His predecessor, Barrack Obama, had signed a deal with the country but on the anniversary of him pulling out of the “horrible” accord, the US deployed an aircraft carrier strike group and nuclear-capable bombers to the area, accusing Iran of “imminent” attacks. He also threatened to introduce further sanctions on the mining industry as Iran retaliated with threats – aimed at other five parties to the 2015 agreement, (China, France, Germany, Russia and the UK).

The RBA has finally faced reality – that Australia’s economy is to go through a rough patch and it will have to cut interest rates sooner rather than later. In February, it indicated that the country’s economy grew 2.75% last year only to downgrade that to 2.3% this week. Last November, it was hoping that 2019 growth would be 3.35%, only to reduce that to 1.7% for the year ending 30 June. Better late than never, for the lucky country that has never witnessed a recession for three decades, it’s Wake Up Time!

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Suspicious Minds

The "skybridge" that will connect old and new Dubai. Courtesy Dubai Media Office
The “skybridge” that will connect old and new Dubai. Courtesy Dubai Media Office

Suspicious Minds                                                               02 May 2019

HH Sheikh Mohammed bin Rashid Al Maktoum was in Beijing this week, attending the Belt and Road project, at which China’s President Xi Jinping tried to ease concerns, promising to ensure transparency and the “fiscal sustainability” of all projects. Some critics are concerned that China is trying to exert its geopolitical influence which has already seen some countries becoming indebted to the world’s second largest economy. The initiative is expected to have a final investment of over US$ 1 trillion and has already chalked up some mega infrastructure work in several countries. Sri Lanka has already had to hand over control of one of its ports to repay China some of its foreign loans.

Following HH Sheikh Mohammed Bin Rashid Al Maktoum’s visit to the country there are plans for China to invest in two Dubai-located trading facilities. A US$ 2.4 billion investment will see the building of a sixty million sq ft (5.6 million sq mt) facility, that will be used to store Chinese products for shipping around the world. DP World has also signed an agreement for a US$ 1 billion project to import, process, pack and export agricultural, marine and animal products. These two investments should benefit both parties – it will enhance China’s influence in the Gulf region and will boost regional and international trade.

The Dubai Ruler also unveiled a federal Ministry of Possibilities, a new branch of government, with the “unconventional” ministry functioning “without a minister” but with input from the whole cabinet. He stated that “the virtual ministry, administered by the cabinet, will address pressing national portfolios and build future government systems.” In its first phase, it will oversee the Department of Behavioural Rewards to develop an approach for incentivising positive behaviour through a point-based “rewards” system.

Following Sheikh Mohammed’s displeasure at the service level of some government services, the Ministry of Human Resources and Emiratisation has penalised nine Tasheel government service centres and revoked the license of another. The crackdown followed an investigation into slow service by the Dubai Ruler after he received an anonymous complaint, with a photo, of long queues at an Emirates Post branch. He tweeted that “I received this picture through an anonymous shopper with regards to the level of service at Emirates Post… This is not our level… or our service… and those who continue to provide this level of service will not remain within my team…”

HH Sheikh Mohammed also approved several infrastructure projects on Tuesday, including a 380 mt long, 60m high “sky garden” footbridge, soaring across Dubai Creek, featuring cycling and running lanes and shops. It will connect the redeveloped Al Seef area in Bur Dubai across to the Deira side of the Creek. Other developments include new bike-sharing schemes, beachfront areas and three new promenades.

The 2.5km Sheikh Zayed Road promenade, linking DWTC and the Financial Centre, will feature green spaces for walking and cycling. The second, “sunset promenade”, at Jumeirah Beach Walk, will include several floating islands, with a total 107k sq mt beach area. The “Umm Suqeim promenade”, linking the Mall of the Emirates and Madinat Jumeirah, will comprise a 110 mt pedestrian bridge above Jumeirah Street, including more cycling and running lanes.

The bike scheme, to be managed by the RTA and Careem, will include the provision of 3.5k bicycles at 350 separate locations around the emirate. Users will be able to rent bikes with their credit cards, metro cards or smartphone apps.

More details about these exciting initiatives will be announced in the coming months.

Damac awarded US$ 120 million worth of contracts in Q1, 41% of which were for their master development, AKOYA, 16% for work at Damac Hills and 12% for the completion of the four-tower Damac Towers by Paramount Hotels and Resorts.

Yet another mega development was announced this week which involved two of Dubai’s biggest players – Emaar and DP World (through its subsidiary P&O Marinas). The developer is to use land made available by the ports operator to regenerate an area around Mina Rashid. The Riviera-style coastal development will include residential and the likes of an elite waterfront retail, dining and leisure destination, a floating yacht club (with 430 berths), a sandy beach of over 12.6k sq mt and Dubai’s longest swimming pool. Mina Rashid will also have ‘signature’ hotels, a private beach club, interconnected parks, a 500 mt palm tree-fringed canal, art galleries, a theatre and a museum. Sirdhana, the first residential units for sale, will be launched shortly.

The latest Creek Harbour development was unveiled this week – Creek Edge. Comprising two towers – 40- and 20-storey structures – they will house 560 1-3 B/R apartments, with a very limited collection of waterfront duplex townhouses on the podium level. Located near the premium luxury Address Harbour Point Hotel, as well as the Ras Al Khor Wildlife Sanctuary, it will have a wide range of leisure and recreational facilities.

It is reported that the Dubai Land Department is studying a proposal that would see residential and commercial rents frozen for three years, once a lease agreement has been signed by both landlord and tenant. Nearby Sharjah has already implemented such a scheme.

The Andaz Dubai The Palm will open in Q4 this year following an agreement between the hotel operator and Wasl Asset Management Group; it will be Hyatt’s second branded property in the UAE, following in the steps of Andaz Capital Gate Abu Dhabi. The twin-tower, 15-storey beach-front building will house 217 guestrooms and 116 serviced apartments, along with four restaurants. Hyatt will also open another branded hotel a year later – Hyatt Centric La Mer Dubai.

The 25-year old Jumeriah Group boasts nineteen overseas properties and expects a further nine more before the end of 2020; these will include two in China – in Guangzhou and Hangzhou – one in Bali and others in Italy and France. Owned by the Ruler’s investment arm, Dubai Holding, the hotelier has not forgotten its local roots and is currently developing Marsa Al Arab, a four million sq ft leisure and hotel development on two man-made islands near the Burj Al Arab; completion is expected by 2022. Longer term, it is considering an ultra-luxury brand – The Burj Collection – which would be exclusive global properties built in the manner of its Dubai flagship, the Burj Al Arab.

Dubai becomes the fourth global location – after London, Berlin and Milan – for Warren Buffet’s Berkshire Hathaway Home Services real estate brokerage firm; only six years old, it boasts 1.45k offices in the USA and has 50k advisers. The firm will focus on property above US$ 870k and is confident of success in a market that has seen steady growth in the number of overseas buyers.

Details of some ticket prices for Expo 2020, were released this week, including a one-day pass for US$ 33 and a three day one for US$ 71; more ticket options will be made available later. The site will host pavilions from 192 countries and will have 22 performance venues, hosting 60 different events each day over the six-month period. International travellers will also be able to purchase tickets through hotel, airline or tour operator bundles, with details currently being finalised.

Emaar Malls recorded a 7.0% hike in Q1 net profit to US$ 159 million on the back of a 4.0% increase in revenue to US$ 300 million, helped by the input from its newly acquired e-commerce retailer, Namshi; there were also strong returns from its shopping malls portfolio, including Dubai Mall and Marina Mall. The unit of Dubai’s biggest listed developer Emaar Properties also posted strong occupancy levels touching 92%, with a 3% rise in visitors to 36 million, of which 22 million visited Dubai Mall.

At this week’s Arabian Travel Market, flydubai’s CEO reiterated that the airline remains confident in the Boeing 737 Max aircraft model and that it is still committed to its Boeing orders. However, Ghaith Al Ghaith, said the financial impact of that grounding may be “significant” if it lasts much longer, with 17% of the airline’s seats being affected by the groundings.

HH Sheikh Ahmed bin Saeed Al Maktoum, the carrier’s chairman indicated that flydubai, is in talks with both Boeing and Airbus. The former in relation to seeking compensation for its grounded 14 737 Maxs and the European manufacturer about its A320 Neo narrow-body model in the absence of a timeframe for the return of the troubled Maxs to the skies. Sheikh Ahmed said he hoped the aircraft would be in operation “soon” and “that it’s safe to fly” but commented that Boeing’s communications to its customers, about its software upgrades for the jet and pilot training, “could be better.”

Also, at the Arabian Travel Market, Emirates finally confirmed that it would be introducing a premium economy class for both the its new A380 planes and its new Boeing 777 jets. Sir Tim Clark, president of Emirates, also indicated that ticket prices would be “well below business class fares.” Not many details were made available, but it will have sleeperettes, rather than fully lie-flat beds, and will offer more legroom, along with enhanced food and beverage services.

According to Visa’s latest UAE Travel Snapshot, cardholders spent US$ 6.2 billion (up 4%) in 2018, when visiting the UAE, as the number of transactions climbed 22%. Despite a stronger greenback, which makes the dirham more expensive, the country still continues to be an attractive tourist attraction. Saudi visitors remained the biggest spenders, accounting for 21.5% of the total, at US$ 1.3 billion, followed by the USA, UK and China.

Last month saw the cost of Special 95 jump 9% and yesterday the May price rose a further 10.9% to US$ 0.707 per litre. Diesel prices fared a lot better with only a 1.6% increase to US$ 0.689.

Having earlier forecast 3.6% growth last October for the UAE, the IMF has downgraded its 2019 outlook to 2.8%, as well as cutting its 2018 figure from 2.9% to 1.7%; next year, growth is expected at 3.3% driven by a 4.0% expansion in the non-oil sector, assisted by Expo-2020 spending. The wider GCC bloc is expected to see 2.1% growth this year, slightly up on the 2.0% seen in 2018. Lower domestic liquidity growth has arisen because of pressures from tighter global financial conditions which has resulted in net regional capital outflows.

Notwithstanding negative currency fluctuations, Aramex turned in a 4.0% hike in Q1 profit to US$ 29 million, on the back of a similar revenue increase to US$ 327 million; the percentage revenue would have doubled to 8% if it were not for weaknesses in the Australian dollar, Libyan dinar and the rand, which cut the bottom line by US$ 3 million.

Dubai-based Deyaar Development posted a 54.6% decline in Q1 profits at US$ 5 million, although revenue was only 0.4% down at US$ 48 million. The developer, majority owned by the Dubai Islamic Bank, is hoping for a better 2019, as it will hand over several projects, including the Millennium Atria Business Bay hotel and units from Afnan and Dania districts of its Midtown mega development. It also plans to launch its second hospitality development – the Millennium Al Barsha.

The bourse opened for trading on Sunday 28 April, at 2787, and, shed 29 points (1.0%) to close by Thursday, 02 May, on 2758. Emaar Properties, having lost US$ 0.11 the previous three weeks, was flat at US$ 1.29.  Arabtec shed US$ 0.03 to close on US$ 0.56. The last Thursday before the start of the holy month of Ramadan, 02 May, saw reduced trades of 90 million shares, valued at US$ 42 million, compared to a week earlier of 233 million shares at US$ 56 million. Over the month of April, the bourse was 132 points (5.0%) higher at 2767, with both Emaar and Arabtec down US$ 0.02 at US$ 1.31 and US$ 0.56 respectively.

By Thursday, 02 May, Brent, having traded US$ 6.53 (8.0%) higher the previous month, shed some of that gain this week by closing US$ 3.60 lower (4.8%) at US$ 70.75; gold also headed south again, losing US$ 10 to US$ 1,270. In April, Brent gained US$ 3.50 (5.1%) to US$ 71.60 whilst gold went the other way, down US$ 10 (0.8%) at US$ 1,272.

Australia has witnessed some sort of retail history, as Ikea moves away from its traditional giant out of town warehouse model, opening its smallest store in the world. The first opened in Warringah’s Westfield Shopping Centre and, at only 100 sq mt, is a world away from the traditional Ikea floor space area of 37k sq mt. The Swedish furniture retailer is set to open a further twenty such Australian locations over the next twelve months.

Although widely expected, it was still as shock to see Samsung Electronics report a 56.9% fall in Q1 profits to US$ 4.3 billion (its lowest since Q3 2016), as the global chip market weakened, driven by slowing demand and increased competition. The world’s biggest smartphone and memory chip maker is rapidly losing market share, as the likes of Huawei can make and sell similar products at lower prices; the Chinese rival is now the second largest chip maker in the world surpassing Apple. Another South Korean company, SK Hynix, the world’s second-largest memory chip maker, saw profits nosedive 67%.

With Q1 revenue coming in 17% higher at US$ 36.3 billion, Alphabet’s profit slumped 29% to US$ 6.7 billion, with earnings taking a US$ 1.7 billion hit from an EC fine over alleged abuse of its dominance in internet search, advertising and its mobile system. The market reacted badly with Google shares falling 6.1% to US$ 1.208k, after revenue was not as high as expected. Over 80% of the revenue came from its lucrative advertising platform but the company had losses on its “other bets”, including the Waymo self-driving car project, Verily life sciences and services for internet for remote parts of the world and drone delivery; losses for this sector climbed to US$ 858 million.

Another tech giant going well is Spotify returning a quarterly profit of US$ 106 million on the back of a 33% hike in revenue to US$ 1.7 billion, as the music-streaming entity reached 100 million paid subscribers for the first time; shares climbed 5% on the news. Even now, its subscriber base is twice as much its nearest rival Apple, with the gap expected to grow even further as recent launches in the ME, North Africa and India start to make an impact; already, it has over one million unique users in India across its free and premium tiers, only one week after its release.

The latest tech unicorn planning to go public is the fast-growing office-sharing start-up WeWork, that could be valued at US$ 47 billion. The nine-year old company, a leader in the co-working space sector, has filed documents for a stock market listing to help fuel further expansion plans. It has hundreds of thousands of customers from individual entrepreneurs to major companies, requiring either temporary or permanent office space; among its investors is SoftBank which placed US$ 2 billion with the company earlier in the year.

There is no doubt that US sanctions, as well as its curtailing of the country’s oil exports to zero, are making lives miserable for many Iranians, as its economy sinks deeper into recession. Its inflation rate has almost quadrupled over the past two years from its 2017 level of a manageable 9.6% to its current 37.2%. The country’s economy contracted 3.9% last year, with an even worse scenario set for 2019, not helped by Washington’s decision not to renew waivers that were initially granted to eight nations importing Iranian oil when they expire today, 02 May. Last year, the rial hit record lows, losing 60% in value to the greenback, and the loss of oil revenue has cost the country in excess of US$ 10 billion in revenue.

It seems that the Australian economy, which has not seen a recession in well-nigh thirty years, is finally set to hit the buffers. Q1 saw the country’s inflation rate at zero – a sure sign that all is not well in the lucky country. Deflation will result in a reduction in spending as people wait for prices to fall further and this has a knock-on effect that will soon see unemployment levels head north. The RBA has been targeting an inflation level around the 2-3% level but has failed and now sees stymied growth. When there are other signs of economic weakness – such as falling house prices, weak wage growth and a much too high 8% underemployment rate – then is the time for some drastic action. One would be to cut interest rates which are already at record lows of 1.5%. The other is the bazooka approach and the government to bring in a much-needed stimulatory fiscal policy which would include tax cuts, increased public spending on infrastructure and the like, along with higher pensions/welfare payments.

The eurozone economy continues to disappoint as an EC report noted another fall in its economic sentiment index down 1.6 to 104 in March. All this week’s indicators headed south, including the industrial confidence index down to -4.1 from -1.6, (with expectations for a -1.7 reading), the consumer confidence index lower at -7.9 from -7.2 and the business climate indicator declining 0.12 to 0.42.

The latest Commerce Department indicated that the Q1 US economy fared better than expected, expanding by 3.2% (following 2.2% the previous quarter) – and much higher than the 2.1% forecast by analysts. The main drivers were exports, up 3.7%, and imports falling 3.7%. It will be interesting whether this growth spurt can be maintained but it will silence critics who have been forecasting a major slowdown for some months. Another positive indicator was manufactured durable goods which were 2.7% higher.

Yesterday, 01 May, the S&P 500 hit record highs, with 61% of the listed companies (305) having already posted Q1 results with 76% (232) of that number beating market expectations. One of the best performers of the day was Apple – jumping 6.4% after announcing that Chinese sales were steadying as well as a US$ 75 billion company share back. The current buoyant state of the US economy has also helped push the stock market higher.

Despite the President‘s protestations, the Fed kept rates on hold this week, with borrowing costs remaining at between 2.25% – 2.5%. Donald Trump was hoping for a reduction to just 1% which he said would see the US economy “go up like a rocket” and, if the Fed cut interest rates “with our wonderfully low inflation, we could be setting major records”. However, it is becoming increasingly likely that there will be no further cuts in 2019, with the Fed indicating that global economic risks had moderated; indeed, economic data – especially from China and Europe – has shown marked signs of improvement, with progress being made over the trade tariffs issue.

Meanwhile the Bank of England maintained its rate steady at 0.75%, with its governor, Mark Carney, stating that increases could be “more frequent”, if the economy performs as the Bank of England is expecting; so, if there is a Brexit resolution of sorts, as well as inflation and growth moving higher, rate hikes will result. Currently, the market expects but one rate increase over the next eighteen months.

A leaked report claimed that in a top-secret meeting, the UK government had had agreed to allow Huawei limited access to help build Britain’s new 5G network, amid warnings about possible risks to national security, with three of its main allies, US, Australia and New Zealand warning that the Chinese firm was a security risk. Now the Chinese ambassador to the UK, Liu Xiaoming, has come out saying that “countries of global influence, like the UK, make decisions independently and in accordance with their national interests”. Apart from the security aspect of allowing a Chinese state-like company to help build the new network, is the fact that one of the five ministers present must have leaked the information. On Wednesday, the finger pointed to the Defence Minister, Gavin Williamson. He has subsequently denied he was responsible for any leak, although he did acknowledge an 11-minute call to a Daily Telegraph reporter, minutes after the secret meeting. No wonder there are many around with Suspicious Minds.

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The First of May

The First of May 25 April 2019

HH Sheikh Mohammed bin Rashid Al Maktoum was in Beijing this week attending the Belt and Road project at which China’s President Xi Jinping tried to ease concerns, promising to ensure transparency and the “fiscal sustainability” of all projects. Some critics are concerned that China is trying to exert its geopolitical influence which has already seen some countries becoming indebted to the world’s second largest economy. The initiative is expected to have a final investment of over US$ 1 trillion and has already chalked up some mega infrastructure work in several countries. Sri Lanka has already had to hand over control of one of its ports to pay China back some of its foreign loans.

The Dubai Ruler also unveiled a federal Ministry of Possibilities, a new branch of government, with the “unconventional” ministry functioning “without a minister” but with input from the whole cabinet. He stated that “the virtual ministry, administered by the cabinet, will address pressing national portfolios and build future government systems.” In its first phase, it will oversee the Department of Behavioural Rewards to develop an approach for incentivising positive behaviour through a point-based “rewards” system.

A Damac official indicated that the Dubai property market “will balance out” before the end of next year, as the sector is already experiencing the bottom of the cycle. This year, the developer expects to deliver 8k units – the most in the company’s history and double the amount handed over in 2018. Last year’s profit was its lowest since going public in 2013 and is one of the reasons why the company’s share value has plummeted 56% over the past twelve months.

According to Cavendish Maxwell, Dubai house prices have fallen 12% over the past twelve months, with bigger declines seen in locations such as Arabian Ranches, Dubai Sports City, Dubai Silicon Oasis and Jumeirah Islands. In March, month on month prices dropped 1.7% and 5.1% over Q1, as average house prices fell to US$ 708k. Q1 saw a marked decline in apartment transfers (14% lower on the year), as March average prices stood at US$ 490k.

Khoory Hotels is to open two sharia-compliant hotels in Al Qouz – as it taps into an ever expanding hotel sector. The 3-star 92-key Urban By Al Khoory and the 4-star 158-key Al Khoory Courtyard will open before year end. A third property, the 258-key Al Khoory Sky Garden, located near Dubai International Airport, will start operations mid-2020 and bring the company’s portfolio to seven Dubai hotels and 1.2k rooms.

An agreement between Meraas and Singapore-based Chinese company Samanea Group will see yet another mall opening in the emirate in 2021. Costing US$ 272 million, the 570k sq ft outlet, located near Dubai International City, will focus on home appliances and furniture from small, medium and big Chinese companies. This will further enhance bilateral relations and boost China’s number one position as Dubai’s largest trading partner; annual trade currently stands at US$ 37.9 billion.

There was a marginal 90k improvement (1.3% to 3.14 million) in the number of international guests visiting Dubai during first two months of the year. The emirate’s three main markets continue to be Western Europe, GCC and SE Asia, contributing 57% of the total at 22%, 18% and 17% respectively. Country-wise, India is still top of the table, although numbers have dropped 9% to 386k, whilst visitor numbers from the UK, Germany and the US all headed north by 4%, 11% and 4%. However, most hotel indicators came in lower, with Occupancy falling 3% to 84%, Revenue per Available Room 13.8% to US$ 118 and Average Daily Room Rate 10.6% to US$ 140.

Dnata has opened its first of five new US operations for 2019 – a 4.7k sq mt catering facility at Houston’s George Bush Intercontinental Airport; it will have a capacity of 10k meals a day and employ up to 150. The ground handling division of Emirates Airline is expecting to open similar facilities at Boston, Los Angeles, Newark and San Francisco by year-end. Having acquired 121 Inflight Catering last year, it already has three operations in New York’s JFK, Nashville and Orlando airports.

It was a sluggish Q1 for DP World with gross container volumes falling 0.6% year-on-year in handling 17.5 million TEU (twenty-foot equivalent units). Gross-like-for-like volumes declined 0.1% due to higher year-on-year comparables and softer volumes in the UAE and Australia. Due to the loss of low-margin throughout, the UAE posted an 8.8% decline when handling 3.5 million TEUs which was offset by marked growth in Peru’s Callao, the Egyptian port of Sokhna and Mumbai.

Last year, Dubai became home to 2k HNWIs, (high net worth individuals – each with at least $1 million worth of net assets) – 2% up on the previous year. This could prove a welcome boost for the local economy.

A good week for Union Co-op as well as for its customers. The chain posted a 26.3% hike in profits to US$ 38 million and then announced that it had set aside US$ 30 million towards price reduction of more than 25k basic food, non-food, and consumer goods during the holy month of Ramadan, starting within a fortnight.

This week saw the 192nd country to announce their participation in Expo 2020 Dubai, with all indicators pointing to “a truly international event and platform for all of humanity”. It is expected that numbers attending the six-month extravaganza will top 25 million – less than the 73 million at Shanghai in 2010 but more than the 21 million at Expo 2015 in Milan. It is expected that the emirate’s GDP 2020 growth will jump to 3.8% and that foreign investments will be up to 20% higher at US$ 13.6 billion because of the Expo impact.

Having put its proposed Six Flags Dubai project on hold, DXB Entertainment has decided to use some of the funds raised in a 2106 rights issue to expand the offers at its existing Bollywood Parks and Motiongate.

Having divested itself of five of its flagship hotel assets to state-backed Abu Dhabi National Hotels (ADNH), Emaar Hospitality will continue to expand its hotel management portfolio while remaining asset-light. Over the next year, it will add a further five properties and 1.7k rooms to Dubai’s total portfolio. They will include two under its premium Address Hotels + Resorts collection, both in Downtown, and two under its upscale Vida Hotels and Resorts brand in the new Creek Harbour scheme. A fifth, a JV with Meraas, the Rove At The Park hotel, will be located at Dubai’s theme park destination Dubai Parks and Resorts, and feature 579 rooms.

Arabtec is planning to take advantage of “growing market opportunities” in the UAE, Saudi Arabia, Egypt, Bahrain and Kuwait, as it expands its footprint regionally. The Dubai-based contracting giant will also continue to diversify its backlog into infrastructure and industrial sectors, which accounts for 50% of current projects. It announced a US$ 0.014 2018 dividend, having seen its annual profit more than double to US$ 71 million.

Dubai Islamic Bank posted a 12.0% increase in Q1 profit to US$ 249 million, beating market expectations. The country’s biggest Shariah-compliant lender is currently considering the acquisition of Noor Bank and expects to submit a report to the local bourse by the end of the month. Its biggest shareholder is the Investment Corporation of Dubai, with a 28.37% stake, who also has a 22.85% share in Noor Bank – and if the deal were to go through, it would result in a lender with US$ 75 billion in assets.

Embattled Drake and Scull International posted further dismal results as 2018 losses more than tripled from US$ 381 million to US$ 1.4 billion, as revenue fell 69.3% to US$ 217 million. Consequently, its total asset base sank 72.5% to US$ 518 million over the year. The company’s shares have been suspended on the Dubai Financial Market since November 2018 as it continues with its restructuring efforts. The fall-out sees the departures of three of its executives – its chief executive officer, (who only started in January 2019), chief financial officer and chief legal officer.

Etisalat’s Q1 profit rose 5.0% to US$ 599 million on the back of consolidated revenue topping US$ 3.5 billion, driven by a 2.0% expansion in its subscriber base to 12.6 million, as its aggregate subscriber base reached 143 million. Its EBITDA (earnings before interest, tax, depreciation and amortisation) figure came in at US$ 1.8 billion.

Mashreq posted a 5.0% improvement in Q1 profits to US$ 171 million as there were increases in both total assets (up 1.2% to US$ 38.6 billion) and loans/advances 0.8% higher at US$ 19.0 billion; however. customer deposits dropped 3.1% to US$ 22.0 billion. Overall loan impairment allowance fell 13.6% to US$ 71 million, with the non-performing loans to gross loans ratio at 3.6%, as total provisions for loans/advances reached US$ 1.0 billion, equating to a 123.3% coverage for non-performing loans.

Following an eighteen-month drought, it is reported that three companies are preparing IPOs on the DFM; no names have been made available, but the companies are involved in the industry, oil and gas services and health care sectors. The last IPO was the US$ 1.3 billion issue by Emaar Development back in late 2017.The bourse has had a relatively good start this year jumping over 11%, following a dismal 2018 when the market sank 25%.

The bourse opened for trading on Sunday 21 April, at 2814, and having gained 240 points (9.3%) the previous month, shed 27points (1.0%) to close by Thursday, 04 April, on 2787. Emaar Properties, having lost US$ 0.05 the previous fortnight, was down a further US$ 0.06 to close at US$ 1.29.  Arabtec, having gained US$ 0.04 last week, surrendered most of that by falling to US$ 0.59. Thursday 25 April saw reduced trades of 233 million shares, valued at US$ 56 million, compared to a week earlier of 233 million shares at US$ 60 million.

By Thursday, 25 April, Brent, having traded US$ 3.80 (5.6%) higher the previous three weeks, continued its upward trend to close US$ 2.73 (3.8%) higher at US$ 74.35; after a recent downward trend, gold moved US$ 4 higher to US$ 1,280.

Amazon posted impressive Q1 results with a record profit of US$ 3.6 billion (almost double that of one year previously), on the back of a 17.0% jump in revenue to US$ 59.7 billion; this was driven by 40% gains in cloud computing, other revenue including online advertising 34% higher and a 10% hike in revenue from online sales. The market was not too impressed, dipping 0.6% on the news.

Microsoft’s book value briefly topped the US$ 1 trillion level when it announced a Q1 14.0% increase in revenue to US$ 30.6 billion, largely attributable to its cloud computing business. Facebook went even better with a 26.0% increase in its quarterly revenue to US$ 15.1 billion.

Generally, US companies posted better than expected Q1 results, 3M was a notable exception. Having cut its full-year outlook and noting that it will reduce its payroll by 2k, the industrial manufacturer saw its share value plummet 13% – its steepest drop since Black Monday in October 1987. The company is famous for ‘Post-it’ notes, along with a wide range of adhesive products.

Tesla again disappointed the market as it announced a US$ 702 million Q1 loss on the back of a 31% slump in revenue. However, CEO Elon Musk is as optimistic as ever forecasting future growth in both demand and profit margins as the company rolls out updated products and pricing for its three models and sells more battery storage units. Tesla has to start moving more of its three models – S, X and 3 – as it only delivered 63k in total over the quarter, only half the number ordered. After a US$ 920 million bond repayment, its cash reserves fell 31.8% to US$ 1.5 billion by the end of March. Whether the company can produce its expected 400k vehicles this year remains to be seen – and if not its retained losses of over US$ 6.0 billion since its 2004 inception will only get worse.

Having posted a further bail of US$ 4.5 million, the 64-year old Carlos Ghosn, has been released from a Tokyo jail. The former Nissan chairman was first incarcerated last November, charged with under-reporting his post-retirement compensation and breach of trust in allegedly diverting Nissan money for his personal investment losses. Prosecutors were reluctant to see his release, fearing he could tamper with evidence or influence witnesses.

As widely expected, the Sainsbury’s US$ 9.4 billion purchase of Walmart’s Asda has been rejected by UK regulators citing concerns the deal would have increased prices and reduced the quality and range of products available.

Having put its airline up for sale in February, Thomas Cook has received interest for both other parts of the business, as well as the Group in its entirety. To cut costs, it is planning to close 21 UK outlets (but will still have 566 operating stores), with the loss of 300 staff. An early entrant for the company’s tour operating business is Chinese investment firm Fosun International which already runs a JV with Thomas Cook in China. Since September, it has issued two profit warnings – the first indicating that profits would be hit after the summer heatwave, with many deciding to take holidays at home rather than overseas, and the second profit warning in November, stating winter bookings were also down.

Australian banks seem to be able to have their cake and eat it, even after the industry was savaged by a royal commission for its unethical and fraudulent behaviour over a long period of time. For the past decade, even though the bank rate has declined, credit card rates have remained static. Currently, the average Australian will pay a rate of 19.77% on credit cards, even though the official cash rate is only 1.5% – the gap of 18.27% is at its highest ever level. In 1995, when the cash rate was 7.5%, credit card interest stood at under 17% (a 9.5% gap). In those days both interest rates (cash and credit card) rose and fell in tandem but that practice has fallen away for the benefit of greedy bank coffers.

By Wednesday, the Australian dollar dipped below the US$ 0.70 mark for the first time since the 3 January ‘flash crash’ – and before that was in early 2016. The main reason for the slide was the release of the weakest core inflation figures on record. This will probably see the Reserve Bank cutting interest rates within the next two months, with another reduction later in the year.

The eurozone economy continues to cause concern, as the latest Composite Purchasing Managers’ Index declined 0.3 to 51.3, with April manufacturing contracting and the service sector growth slowing. Although still in negative territory, the manufacturing PMI rose 0.3, month on month, to 47.8, with the services PMI 0.8 lower at 52.5. Furthermore, new export orders fell yet again whilst new order growth remained stagnant, as employment growth remained at its lowest since 2016.

The euro area government debt to GDP declined 2.0% last year to 85.1%, with the lowest ratio recorded in Estonia, at 8.4%, and Luxembourg with 21.4%. The bloc’s government deficit halved to 0.5% on the back of increasing revenue, up 0.2% to 46.3% of GDP, and expenditure declining 0.2% to 46.3%. Luxembourg posted the highest budget surplus at 2.4% of GDP followed by Bulgaria and Malta, both at 2.0%, with Germany slightly behind at 1.7%.

The US Commerce Department recorded a 4.5% March annualised increase in new home sales at 692k, following a 5.9% increase the previous month – its highest level since the 712k figure of November 2017. Median sales prices – at US$ 303k – were off 4.0% on the month and 9.7% lower than in March 2018. The number of new houses for sale slowed to 344k, equating to a six-month supply at the current sales rate. After jumping to a revised rate of 5.48 million in February, existing home sales plunged by 4.9% to an annual rate of 5.21 million in March.

The Trump administration has decided not to renew waivers that let eight countries – China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey – buy Iranian oil without facing U.S. sanctions. This decision will upset many but should boost oil prices in the short-term at least, with other suppliers, including the UAE, offsetting the loss of Iranian crude on the market.

Emmerson Mnangagwa has fared little better than his predecessor, Robert Mugabe, in controlling Zimbabwe’s inflation crisis. After 37 years of economic mismanagement, it was hoped that the incoming president would revive the country’s economy but after the introduction of a new currency in February, prices of goods and services have skyrocketed at rates unseen in a decade – and topping 300% in some areas. However, it is still some way off the 500 billion % rate seen in the Mugabe days

Mouvement des gilets jaunes, which only started in November last year, is increasing its power base and worrying the Macron government. Driven by surging fuel prices, increased cost of living and their call for the reintroduction of a solidarity tax on wealth, they donned the yellow high visibility vests; this is in response to French law requiring all drivers to have them in their vehicles and to wear during emergencies and is seen to be “a unifying thread and call to arms”. Their protests over the past six months have involved demonstrations, blocking roads and fuel depots, that appear to have become more violent. Wednesday will see May Day and it is hoped that their protests – and the police reaction – do not get out of hand on The First of May.

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