Throwing It All Away

Throwing it All Away                                                          

Because of the slowing construction and realty sectors, Moody’s expects that bank loan losses will inevitably grow, based on the fact that lending to real estate entities has increased to 20% of their total lending book (compared to 16% in 2015) but economic conditions have deteriorated. Because of falling demand and increased supply, Reidin have come out with some frightening data that Dubai prices are 23% lower since 2018. With the influx of lower paid workers entering Dubai, and employers reluctant to boost staff numbers, there are fears that the bottom of the market has still not been reached. However, it did estimate that Q4 annualised sales were 8.4%, up from the 7.3% recorded in Q3 – this comes as S&P forecasts a 5%-10% decline this year, due to oversupply and tepid demand; this follows a 25%-33% decline in the Dubai property sector since 2014.

However, a lot could (and will) change when the 25%-30% home buyer deposit is relaxed, and energy prices hover around US$ 70. More tinkering, such as cutting the 4% transfer fee and facilitating visa requirements, will further help the cause.

Emaar, the world’s largest property company outside China, will become one of the first in the world to offer its customers (and partners) referral and loyalty tokens that will give them access to an existing US$ 10 billion operational ecosystem. The plans to leverage blockchain technology, based on the Ethereum blockchain and the ERC20 token framework, could possibly see billions of internet users gain access to the Emaar experience. Furthermore, an initial coin offering in Europe (ICO) could be on the cards within a year.

Flydubai has had to cancel fifteen daily flights following the grounding of its thirteen Boeing 737 Max aircraft, following the global decision to take the model out of operation, as a precautionary safety measure. This comes after 157 passengers and crew were killed on Sunday when an Ethiopian Airlines Boeing 737 Max 8 aircraft crashed on its way to Kenya. The Dubai carrier currently has 237 Boeing 737 MAX aircraft on order, with 46 Next-Generation Boeing 737-800 in operation. (Because of new evidence, Boeing later grounded its  entire 371-global fleet of 737 Max aircraft, following the US Federal Aviation Administration’s much delayed closure decision because new evidence, “made it clear to all parties that the track of the Ethiopian Airlines [flight] was very close and behaved very similarly to the Lion Air flight”).

Package A of the Etihad Rail second stage tender has been awarded to a JV between China State Construction Engineering Corporation and South Korea’s SK Engineering and Construction. The US$ 410 million contract includes all design and build, civil and track works for 139 km of the track. Stage two, when complete, will run for a total of 605 km from Ghuweifat to Fujairah; the total length of the network will be over 1.2k km, linking all the country’s import/export points.

Sheikh Hamdan bin Mohammed Al Maktoum has approved a new strategy to create economic and creative free zones in universities. The aim of the exercise is to support students with education and research so that they can graduate not as students, but successful entrepreneurial employers. This is part of the 50-Year Charter to ensure that Dubai will become the best city in the world.

The UAE is rightly not happy with the EU for adding the country to a ten-country tax haven blacklist set up in 2017 to battle tax evasion. It was included in the first listing but was later removed. According to UAE officials “this inclusion was made despite the UAE’s close cooperation with the EU on this issue and ongoing efforts to fulfill all the EU’s requirements.” As can be seen from their past actions, the EU does not always follow its own rules and is not the easiest body to deal with.

The emirate’s 2018 external non-oil trade neared US$ $353 billion, despite a global growth slowdown, as direct trade reached US$ 206.3 billion and trade through free zones grew 23.0% to US$ 145.0 billion. Of that total, re-exports were 12.0% higher at US$ 109.5 billion, with imports and exports totalling US$ 209.8 billion and US$ 34.6 billion respectively. China still remains Dubai’s leading trading partner, followed by India and the US – with total trade values of US$ 37.8 billion, US$ 31.5 billion and US$ 22.0 billion. (When it comes to FDI, the US is Dubai’s foremost foreign investor with 121 deals totalling US$ 3.9 billion).

Meanwhile Moody’s indicated a 2.8% country forecast for 2019 and estimates that growth was 2.6% in 2018. The ratings agency predicted that non-oil growth would be 0.5% higher at 2.9% but that headline growth would be “constrained” because of previously agreed OPEC cuts.

The February Emirates NBD Dubai Economy Tracker Index sent out mixed signals, with employment in Dubai’s non-oil private sector falling at the fastest rate since January 2010, whilst business conditions maintained a seven-month high at 55.8. Although there has been growth in the volume of output and new work, this has been at the expense of continued price discounting, resulting in on-going lower margins; this has seen a tenth successive month of firms cutting their selling prices, even though input costs have increased over the same period. One of the obvious casualties has been employment, with no increased hiring and job growth in the private sector.

Probably because of the slowing economy, Q4 expat remittances were 7.7% lower at US$ 10.9 billion; 76.2% of the transfers were through money exchanges and the balances through the banking system. The top five destinations, accounting for 62.2% of the total, were India (34.2%), Pakistan (9.4%), Philippines (7.2%), USA (5.9%) and Egypt (5.5%).

Announcing that it will close up to 50% of its branches in 2019, Mashreq Bank, controlled by the Al Ghurair family, will spend US$ 136 million over the next five years replacing physical infrastructure with digital ‘branches’. It seems a logical move particularly when 97% of the bank’s transactions are on-line. Its Chief Executive, Abdul Aziz Al Ghurair, an early pioneer of digitisation, has warned that “the industry is changing, and the banks will have to come out of their comfort zone”.

Network International processed almost 680 million transactions whilst handling US$36 billion in transaction volume. The payments solutions provider, 51% owned by Emirates NBD, is active in over fifty markets in both the Middle East and Africa. Currently, it sees Saudi Arabia – where previously the market was restricted to locals – as a great potential and is ramping up its operations there. The company may well have a 25% IPO on the London market by the end of the year.

DP World posted a 10.2% hike in 2018 profit to US$ 354 million on the back of annual revenue climbing 19.1% to US$ 1.53 billion, driven by acquisitions such as Drydocks World and consolidation of its portfolio. The Dubai company saw the number of TEUs (20’ equivalent units) increase by 1.9% to 71.4 million. The world’s fourth-largest port operator’s capex reached US$ 908 million, lower than the expected US$ 1.4 billion, in 2018, as spending was contained because of the uncertain global trade environment; however, it has spent US$ 2.5 billion on new acquisitions.

Dubai Refreshment Company posted a 26% decline in revenue to US$ 176 million and a 54.0% slump in 2018 profit to US$ 12 million, some of which is attributable to the introduction of 5% VAT which impacted on 60% of the company’s net local revenue and higher prices. The situation was exacerbated because the tax was only applied to carbonated drinks and not to other sugary non-carbonated drinks.

Following the sale of its 10% stake (valued at US$ 164 million) in Aramex by Australia Post, Aramex’s shares jumped 9.1% on the DFM; this was its biggest increase since December 2014, as it opened up the market for overseas buyers. The delivery company is only allowed to have foreign ownership of 49% and its stock was almost at this regulatory limit.

The bourse opened for trading on Sunday 10 March, on 2595, and having shed 41 points (1.6%) the previous week ended 21 points (0.8%) lower by Thursday, 14 March, on 2574. Emaar Properties, having shed US$ 0.23 the previous fortnight lost a further US$ 0.04 to US$ 1.25, with Arabtec flat at US$ 0.58. Thursday 14 March saw increased trades of 342 million shares, valued at US$ 133 million, compared to a week earlier of 103 million shares at US$ 15 million.

By Thursday, 14 March, Brent traded US$ 1.20 (1.8%) higher to close on 67.23; gold also clawed back some of the previous week’s US$ 29 fall (2.2%) to end US$ 9 (0.8%) up at US$ 1,295.

There is no doubt that OPEC’s market presence will be hit by a double whammy – falling production in two of its members (Iran and Venezuela) and increased shale activity in the USA. It is ironic that what was the cartel’s biggest customer is now the world’s biggest crude producer.  The situation will not improve if one believes that the US could be producing 25 million bpd by 2030.

Volkswagen is to go ahead with payroll cuts totalling at least 7k this year, with the aims of achieving a US$ 6.6 billion profit by 2023 and shifting to electric and self-driving cars. The VW brand, which accounts for about 50% of the group’s total deliveries, employs 185k and have been actively reining in excessive expenses which have resulted in the carmaker’s margins being much lower than those of its competitors; last year, its return on sales fell to 3.8% from 4.2%. Over the past three years, the company has made US$ 2.7 billion in savings and has seen a reduction of more than 6.3k positions.

LK Bennett, the womenswear chain, which trades from 200 outlets across the UK and in overseas markets, has called in administrators after a failed attempt to partially sell the business to fashion new investment. Five stores have already closed and a number of staff have been laid off. This comes just eighteen months since the founder, Linda Bennett, regained full control of the 29-year old business after selling out in 2008.

With mounting debts of over US$ 850 million, it seems highly likely that Interserve will soon go into liquidation. Its directors were planning a debt swap for new shares but with the major 27% shareholder, US hedge fund Coltrane, against any such deal, the plan quickly lost traction. The private provider of public services, which employs 45k, will most likely sell the entire company to the current lenders for a nominal amount. This seems to be Carillion all over again.

Despite an annual 4.0% growth, air cargo contracted in January, posting its worst performance in the past three years – the eleventh straight month when growth in capacity has outstripped demand. The main driver behind the disappointing results was the trade tension caused by tariffs and other protectionist measures. Only two of the six global regions bucked the trend with growth seen in both North America (with a 3.3% increase in demand) and Africa. ME freight volumes contracted 4.5% in January, whilst capacity was 4.1% higher.

With a 2.4% contraction in Q4, following a 1.6% decline the previous quarter, Turkey has gone into a technical recession, driven by a trade war with the US which has sent the lire nosediving (falling 30% last year). The trade impasse has resulted from Turkey’s plan to buy Russian missile defence systems and the US not happy with the way that Turkey is fighting the Islamic State Syria and how the Erdogan government has dealt with plotters of a failed 2016 coup which attempted to topple the President. Although the economy did grow 2.6% in 2018, this was a lot lower than the previous year’s 7.4%. Analysts see little chance of any major improvement in 2019.

Germany’s economy continues to struggle with January industrial production down 0.8% on the previous month and 3.3% over the year. The non-adjusted trade surplus, at US$ 16.4 billion, was lower than market expectations, whilst the US$ 20.7 billion current account surplus was 20.8% lower than the December return. Imports grew by 1.5%, after a 0.7% rise in December, whilst exports remained flat

President Trump’s latest budget points to a 3.2% hike in GDP this year, with 3% plus growth over the next five years. December figures show that business inventories climbed 0.6%, whilst the same for wholesale and retail inventories were 1.1% and 0.9% higher.  There were falls in the three main sales sector, retail, wholesale and manufacturing – down by 1.8%, 1.0% and 0.2% respectively. The visible trade deficit climbed 20.1% to US$ 17.1 billion, compared to a year earlier.

The state of the UK economy surprised many by expanding at a faster-than-expected rate in January, driven by upward movements in the manufacturing, services and construction sectors – up by 0.8%, 0.3% and 2.8%.  Month on month GDP growth was at 0.5% (following December’s disappointing 0.4% decline) and up 0.2% quarter on quarter.

However, there is no doubt that the economy would be in a much better shape if politicians had managed to arrange a Brexit arrangement – one way or the other. The shenanigans at Westminster are an embarrassment to both the country and democracy. In the absence of any political leadership and statesmanship, it seems that the country is in danger of Throwing It All Away.

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Don’t Play With Me

Despite all the doom and gloom around, a positive note was sounded by Bayut.com’s CEO Haider Ali Khan who noted that the start of the year has witnessed positive growth in a selection of key Dubai developments. Although agreeing that prices (for both rentals and sales) continue to head south, the rate of decline has slowed somewhat, with very few areas witnessing drastic decreases of over 10% – as had been the case in recent times. it was also noted that in some popular areas, including Downtown Dubai, Palm Jumeirah and Business Bay, there have even been marginal increases in some segments. has been appointed by Meraas to be the main contractor for the Address Harbour Point project in Dubai Creek Harbour. The project comprises two towers – 65 and 53 stories – and will feature 202 1-4 B/R luxury apartments.

In the wake of the property slowdown, it is reported that both Nakheel and MAF Properties cut staff numbers by 300 and 100 respectively. It seems that both developers are outsourcing more project management work – a cheaper option when the work load has been reduced. The questions are when will the market hit the bottom and will it start its inevitable upturn?

ASGC has been appointed by Meraas to be the main contractor for the Address Harbour Point project in Dubai Creek Harbour. The project comprises two towers – 65 and 53 stories – and will feature 202 1-4 B/R luxury apartments.

HH Sheikh Mohammed bin Rashid Al Maktoum announced the allocation of US$ 409 million to build the first tranche of a “new generation” of Emirati schools. He also approved a US$ 27 million fund to transform the Higher Colleges of Technology into economic zones in the hope that it would help support the career development of 65k students in the hospitality, retail, oil and gas and logistics sectors.

With the construction of the world’s largest single-site strategic solar park well under way, DEWA has requested tenders for developers to build and operate phase 5, with a 900 MW capacity, of the project. The Mohammed bin Rashid Al Maktoum Solar Park, at an estimated US$ 13.6 billion cost, will generate 5k MW by 2030 and will be a major contributor to the Dubai Clean Energy Strategy 2050 that aims to provide 75% of the emirate’s total power output from clean energy. Phase1, adding 13 MW, became operational in 2013, followed by phase 2, using photovoltaic solar panels and generating 200 MW, becoming active in 2017.The 800 MW photovoltaic third phase should come on line next year.

The week Kuwait raised the number of leave days of its private sector to 35 days, the UAE government announces that the country’s private sector will now have the same number of public holidays as the public sector.

According to Dubai Municipality, there was a 6% hike in Dubai’s urban construction sector last year, with 29k building permits approved and 6.0k buildings completed in 2018, encompassing 100 million sq ft. Surprisingly, there were 802 new contracting companies registered last year, bringing the total to 9.1k.

The February Emirates NBD UAE PMI figures indicate that the rate of employment in the country’s non-oil economy fell at its sharpest level in almost a decade to 47.5; any reading under 50 indicates contraction. Although still in growth territory, the overall index of 53.4 is the lowest since late 2016 and 2.9 lower than January’s return. There were major falls in both business confidence and seasonally-adjusted selling prices.

There was good news for many SMEs with the government’s announcement that it will expedite payments which should improve the current “awkward” liquidity problems facing many sectors within Dubai. It is expected that US$ 435 million of additional liquidity to companies will become available. As well as cutting current payment terms from 90 to 30 days, there will also be a reduction in insurance costs for SMEs which will not impact their eligibility for government tenders. The ripple effect of such a positive initiative will be felt throughout the local economy.

As it continues to expand its product offerings, the Dubai Gold & Commodities Exchange has launched two new products, aluminium and zinc futures; it already offers futures and options contracts, covering the precious metals, energy, equities and currency sectors, to more than 175 global members. Last month, the DGCX traded over 1.6 million contracts and in 2018 22.3 million contracts totalling US$ 475 billion.

Beehive has secured US$ 4 million in funding from Riyad Taqnia Fund (RTF) as part of a Series B funding round, with the money being used for expansion plans in the GCC and South East Asia. The five-year old peer to peer lending platform has facilitated funding of almost US$ 100 million to more than 450 businesses.

ITP Media Group has launched a new division – ITP Gaming – as it enters the ever-expanding US$ 138 billion global gaming market, with a myriad of games being played by 2.3 billion worldwide players. The leading sector is mobile gaming, growing at a phenomenal 25% annual rate and accounting for 51% of the total revenue. The new entrant will focus on managing large-scale gaming events, representing gaming publishers and creating new games.

It is reported that Uber Technologies Inc is in advanced discussions to acquire Careem in a possible US$ 3 billion cash and share deal. It was less than three years ago that the Dubai-based ride-hailing entity, with more than one million drivers and operations in more than 100 ME cities, was valued at a much lower US$ 1 billion in a 2016 funding round.

The UAE’s inflation rate decreased by 2.39% year-on-year and 0.12% month-on-month in January, according to a recent report by the Federal Competitiveness and Statistics Authority. The UAE Consumer Price Index (CPI) recorded 109.61 points in January, driven by price declines of 5.08% in the housing/utilities segment and food/beverage of 1.09%.

DIFC posted an impressive 11.0% hike in 2018 profit to US$ 88 million, as consolidated revenue moved 5.0% higher at US$ 199 million. At the end of the year, assets under management stood at US$ 99 billion. Over the year, the number of new companies, new arrivals and leased space all headed upwards – by 25.7% to 2.1k, 5.5% to 23.6k and 8.9% to 4.2 million sq ft. Earlier in the year, HH Sheikh Mohammed bin Rashid Al Maktoum approved a plan to triple the size of DIFC that will see 50k employees and US$ 250 billion under management by 2024.

Troubled Union Properties has received official approval to raise its foreign ownership ceiling to 49%; its share value dipped over 1% to US$ 0.104 on the news. In February, the developer posted a US$ 17 million 2018 profit – a major move forward compared to the US$ 740 million loss the previous year.

The bourse opened for trading on Sunday 03 Mar, on 2636, and having risen by 3.7% the previous fortnight ended the week 41 points (1.6%) lower by Thursday, 07 March, on 2595. Emaar Properties, having jumped $ 0.23 the previous fortnight, shed US$ 0.05 to US$ 1.29, with Arabtec down US$ 0.01 at US$ 0.58. Thursday 28 February saw trades of 103 million shares, valued at US$ 15 million, compared to a week earlier of 201 million shares at US$ 77 million.

By Thursday, 07 March, Brent, having jumped US$ 5.31 (8.6%) the previous fortnight had a lacklustre trading week, dipping US$ 0.27 (0.4%) to close on US$ 66.03; gold’s recent good run came to an abrupt halt slumping US$ 29 (2.2%) to end the week on US$ 1,286.

Mining giant Rio Tinto has posted full year underlying earnings of US$ 8.8 billion, (2017 – US$ 8.6 billion). The company also posted a final dividend of US$ 1.80 per share, plus a special dividend of US$ 2.43 per share.

To mark its 110th anniversary, Bugatti has launched a one-off celebration vehicle – La Voiture Noire. At over US$ 12 million, it will become the most expensive sports car ever made and is built along the lines of the Bugatti Type 57 SC Atlantic – with only four vehicles made between 1936 and 1938. It will also have a unique 1.5k horse power 16-cylinder engine.

After three months of incarceration, former Nissan boss, Carlos Ghosn has been released on US$ 9 million bail. Numerous charges against him include financial misconduct and aggravated breach of trust and if found guilty he could face up to ten years in prison. As a French citizen, it will be interesting to see how far the government of that country gets involved in the case.

Despite Elon Musk promising to deliver a US$ 35k Model 3, Tesla woes continue as it posts a Q1 loss that saw its shares sink 4.1% to US$ 307 on the news. He has now promised to go in the black in Q2 by “significantly reducing” its spending on sales and marketing, as it focuses on direct-to-consumer sales and reducing the number of outlets to 130; it is estimated that concentring on on-line sales could save 6% in costs. Furthermore, any car delivered before 01 July will be eligible for a US$ 3.75k government incentive. Although he promised, it is unlikely that car sales will top 500k this year.

Debenhams has issued a profits warning saying its turnaround plan is likely to prove “disruptive” as trading conditions remain tough. In H1, to 02 March, the retailer announced that its like-for-like sales in its core UK market were 6% lower but noted that the rate of decline had moderated. The news did little for the company’s market value which dipped below US$ 53 million, as it fell 8% in early morning trading. Watch out for the much-maligned Mike Ashley who already owns almost 30% of the battered retailer. Having acquired House of Fraser last year, he could be in the market for a bigger share and considering a merger of the two famous retail brands.

Following a surprise 9.1% January jump, Chinese exports will probably show a 4.8% decline, year on year, in February, whilst imports fell for the third straight month as the impact of US trade tariffs begin to take their toll. The need for an amicable settlement between the world’s two superpowers is imperative for world trade to get back on track. For that to happen, Beijing will have to agree to certain structural economic changes and see that its bilateral trade surplus continues to head south. In the week when its overall trade surplus fell by a third to US$ 26.4 billion, China announced that it expects the economy to grow at between 6.0%-6.5% – its slowest pace in almost thirty years.

Australia is not happy with China’s apparent decision to ban its coal exports to five ports due to additional environment checks. Some in Australia thinks this could be a retaliatory move for Australia ‘picking on’ their high-tech company Huawei. However, the IMF is happy with the ‘robust and resilient.’ Australian economy, whilst extolling the virtues of its infrastructure and labour market; the organisation did voice some concern about the downturn in the housing sector and stagnant wage growth.

Worrying news for secret bankers, with the Italian government demanding that Swiss lenders disclose the names of bankers working in Italy, along with details of how their clients’ assets are managed. The letter, sent in January, came three weeks before UBS was hit by a French court fine of US$ 5 billion for helping French clients to launder their assets. On the surface, it seems that the Italians want to ensure that Swiss banks pay Italian taxes, but it is not inconceivable that this information could be used in future prosecutions.

The UK government has agreed to pay US$ 43 million to Eurotunnel in an agreement to settle a lawsuit over extra ferry services, in the event of a no-deal Brexit. It is claimed that the May administration handed out three contracts in a “secretive” way and that one of the firms awarded a ferry contract, Seaborne Freight in a US$ 18 million deal, despite the company having never run a ferry service and having had its deal already cancelled. Eurotunnel wrote to the error-ridden Transport Secretary Chris Grayling pointing out this anomaly and that it should have been considered. The fact that he is still in a job speaks volumes of the way the government moves from one self-made crisis to another.

On an annualised basis, the Indian unemployment rate climbed 1.3% to 7.2% in February – its highest level in almost three years – whilst the number of employed persons dropped 6 million to 400 million. This was probably not what Prime Minister Narendra Modi wanted to hear two months before an early May general election that could easily lead to a change in government for the world’s largest democracy.

Another blow for the Indian Prime Minister came with news that Donald Trump will end India’s preferential trade treatment under a program that allows US$ 5.6 billion worth of Indian exports to enter the United States duty free. The US President is concerned that it “has not been assured the United States has been provided equitable and reasonable access to the markets of India,” Even his most ardent critic must agree that he has a point, as the goods and trade deficit with India stands at US$ 27.3 billion.

Following a massive 9.1% jump in November new home sales to 599k, December witnessed another climb – this time by 3.7% to 621k. This was even more impressive as the general consensus pointed to an 8.7% decline. A 15.3% slump in Midwest sales was more than offset by a 44.8% spike in the Northeast. Median sales were 5.0% higher, month on month, to US$ 318.6k but 7.3% lower than the December 2017 price of US$ 343.5k.

Meanwhile the ISM non-manufacturing index for February rebounded to 59.7 after falling to 56.7 a month earlier and this despite concerns about the uncertainty of tariffs, capacity constraints and employment resources. The main driver was the pace of new orders growth, climbing 7.5 to 65.2, month on month.

There will be one unhappy US President hearing the news that, last year, his country’s trade gap ballooned to US$ 621 billion – a decade long high. The deficit is bound to continue to head north if trade continues as is – last year’s export totals slumped 1.9% to US$ 205.1 billion, whilst imports headed in the other direction, up 2.1% to US$ 264.9 billion. Of that total, the situation worsened in locales such as China, up US$ 43.6 billion to US$ 419.2 billion, and the EU which saw a US$ 17.9 billion widening to US$ 169.3 billion (as EU exports rose to US$ 487.9 billion). Certain governments will soon be heeding Donald Trump’s warning – Don’t Play With Me.

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Back Home Again

sheikh-mohammadHH Sheikh Mohammed bin Rashid Al Maktoum has approved a US$ 8.7 billion nationwide project for the construction of 34k housing units for Emiratis over the next five years. He has also ordered that the value of the salary ceiling of beneficiaries obtaining support from the Sheikh Zayed Housing Programme be increased 50% to US$ 4.1k and the loan values be also raised by the same ratio to US$ 327 million. He again reiterated that “our first, second and third focus is on Emiratis, and we will not be sidetracked from ensuring a sound quality of life for all citizens.”

More of the same news on the property front – this time Cavendish Maxwell indicating that January Dubai real estate prices fell by 9.2%, year on year, 1.7%, month on month and 4.2% Q on Q; the decline sees average house prices in the emirate fall to US$ 733k. Compared to September 2015 prices, villas had lost 16.1% to US$ 1.3 million whilst apartments were at 14.3% down to US$ 490k.

Property Finders estimate that some 47.5k residential units could be handed over this year alone; in the unlikely event that this were to happen, it will equate to almost the same number handed over in the three preceding years combined. This in turn would do nothing to improve the current soft prices, as the supply already in the market and the three-year supply line going forward far outnumber demand. However, if some action were taken on say reducing the 30% deposit and pumping more liquidity into the system, things may change a lot quicker than many would anticipate.

Emaar announced a further extension of its Arabian Ranches neighbourhood. Featuring 3-4 B/R townhouses, and connected to the 86 km long Al Qudra Cycling Track, Arabian Ranches III will also feature a 7.5 acre central park area, community parks and a 4 km long boulevard.

Also with a central park theme, Meraas plans a residential neighbourhood of twelve mid-rise residential buildings, with 187 1-4 B/R units, overlooking a 40k sq mt park. Central Park at City Walk, covering in total 230k sq mt, will include a number of “lifestyle amenities” and be located just a two-minute stroll from the City Walk complex

Sobha is planning to build its new HQ – a 60-storey tower on SZR, ready for completion by 2023.The project, costing US$ 190 million, will also include 6.5k sq mt of office and 1.9k sq mt of retail space, as well as 140 luxury residential units.

Construction has started on the new campus of Rochester Institute of Technology – Dubai in Silicon Oasis. Phase 1 of the total US$ 136 million project, encompassing 30k sq mt, will be completed within a year, whilst phase 2, at a cost of US$ 82 million, will be handed over by 2023. The facility will house up to 4k students and five colleges – Electrical Engineering and Computing, Mechanical and Industrial Engineering, Business Administration, Sciences, and Humanities.  There is no doubt that, with the likes of RIT opening a campus in Dubai, this will enhance the emirate’s position as a tech hotbed as well as one of the world’s leading innovation incubators.

MAF is to spend US$ 100 million (and one year) to revamp its original mega mall, Deira City Centre, more than twenty years after its opening. The investment is targeted at attracting new tenants and customers by adding numerous features such as escalators to the second floor, optimising flow of shoppers and a new food hall. The actual size of the shopping centre will remain unchanged.

Although still heading north the rate of increase has declined with Dubai welcoming 15.9 million visitors last year – up 0.8% on 2017. India and Saudi Arabia remain the two largest markets, providing 22.6% of that total with 2.0 million and 1.6 million. Even with a 5.5% decline in numbers, the UK provided 1.2 million guests. Government initiatives to attract more Chinese and Russian visitors are bearing fruit, with numbers rising 12% and 28% to 857k and 678k. Other data shows that there was an 8.0% hike in the number of rooms and apartments added to the 716 tourist establishments during the year to 116k, with a 76% occupancy rate.

Indian hotel chain, OYO, estimates that it added more rooms than the three largest hotel chains combined in 2018, to bring its total portfolio to 458k. No wonder then, having quadrupled its room numbers last year, it will soon become the world’s largest hotel chain soon, with a value run-rate of US$1.8 billion. Year on year, its total of room nights more than quintupled from 13 million to 75 million. The hospitality chain manages 12.5k rooms in the UAE and has welcomed 120k guests since its April 2018 opening.

Last year’s shipments of mobile phones to the GCC continued to head south, with the figure of 23.6 million 30.4% down on the market’s 2015 peak and 9.4% lower than in 2017. There are many factors behind the fall in numbers including continuous price increases, lengthening refresh cycles and economic uncertainty. With Saudi Arabia accounting for 54% of the market, UAE comes in second although its 2.4% decline in Q4 sales is much lower than the GCC average. Although Huawei is catching up fast (increasing its share of the market by 8%), Samsung and Apple still account for 56.0% of the market – 32.3% and 23.7% respectively.

The Department of Economic Development (DED) in Dubai has recorded a 20.1% hike in January new license numbers to over 2k; commercial and professional dominated, with 64.5% and 33.7% of the total. During the month, 25.1k licences were renewed, with Indians, Pakistanis and Egyptians the top three source markets. In 2018, 248.8k business registration and licensing transactions (an increase of 4.6%) were recorded in the Business Map digital platform of DED.

It is perhaps fitting that in the Year of Tolerance, thirteen national banks have come together to waive debts totalling US$ 98 million for 3.3k Emirati citizens. Jaber Mohammed Ghanem Al Suwaidi, the chairman of the Supreme Committee of the Debt Settlement Fund, said the move was aimed at promoting tolerance as a sustainable institutional practice.

Fuel prices increased for the first time in three months, with March prices for Special 95 4.3% higher at US$ 0.523 per litre; diesel prices also headed north by 5.7% to US$ 0.657.

There are reports that there could be a 30% public offering in shares of Emicool, currently wholly owned by Dubai Investments.

Emaar Malls has invested US$ 130 million to acquire the remaining 49% stake it does not currently own in Namshi from Global Fashion Group (GFG). The deal is seen as a natural progression for the mall developer, as it tries to play a major role in the future of the nascent regional e-commerce sector. The on-line retailer has an ever-expanding customer base, currently at 1.2 million, and had 2018 sales of US$ 231 million, 16% higher year on year, with a selection of over 700 brands.

The bourse opened for trading on Sunday 24 February, on 2634, and having risen by 3.7% the previous week ended the week flat on 2636 by Thursday, 28 February. Emaar Properties, having bounced up US$ 0.15 the previous week climbed another US$ 0.08 to US$ 1.34, with Arabtec US$ 0.02 higher at US$ 0.59. Thursday 28 February saw trades of 223 million shares, valued at US$ 38 million, compared to a week earlier of 201 million shares at US$ 77 million. Although Emaar, which lost almost 40% in value last year, was 14% higher in February alone, it would be a brave punter to see the market going much higher in the medium term.

By Thursday, 28 February, Brent, having jumped US$ 5.31 (8.6%) the previous fortnight slipped back US$ 0.91 (1.3%) to close on 66.03; gold also traded lower by US$ 12 (1.3%) to end the week on US$ 1,315; its short-lived honeymoon may be over. There is a possibility that Saudi Arabia will extend OPEC cuts until the end of the year which should stabilise prices but may not be to the liking of President Trump who has vowed to keep energy prices low.

Rio Tinto posted a 2.1% hike in annual underlying earnings to US$ 6.2 billion – its highest level since 2014. Investors were kept happy with a bumper dividend of US$ 2.8 billion, after a string of divestments in the year including the Grasberg copper mine in Indonesia and other non-core aluminium and coal assets. No wonder that its shares have already jumped almost 15% already YTD.

Nike will no longer sponsor title chasing Manchester City after Puma secured a ten-year deal thought to be worth US$ 850 million. It will be the German company’s biggest ever deal which includes a fixed retainer, a bonus based on sporting achievements and a royalty element. Nike still sponsor Chelsea, whilst Adidas’ deal with Manchester United is thought to be in the region of US$ 100 million per annum.

Rolls Royce continues to have apparent insurmountable problems with fixing its Trent 1000 engines. Having posted a US$ 5.1 billion profit in 2017, it recorded a pre-tax loss of US$ 3.98 billion, whilst taking a US$ 240 million charge after Airbus stopping production of its A-380 jumbo. Last year, the company said that it would take “some years” to fix problems with its Trent engine, which were wearing out faster than expected; increased the charge it had taken on fixing problems by 42.6% to US$ 1.0 billion. The UK engineering giant also withdrew its bid to supply an engine for a new mid-sized Boeing plane. The Derby-based company has some way to go before returning to its golden days

No doubt some will blame Brexit for the fact that UK car sales to China dipped for the eighth straight month in January – down 72%! (The Chinese market only accounts for 7.5% of exports). Year on year production was 18.2% lower at 121k vehicles, whilst exports slumped 21.4% to 94k.

The US President is confident of striking a deal with China to end their trade war and extend his previous 01 March deadline. Although the current impasse has disrupted commerce and spooked global growth, the further escalation, that would have occurred tomorrow when tariffs on US$ 200 billion worth of Chinese imports were to be raised from 10% to 25%, would have been little short of disastrous. The master of brinkmanship also plans to invite Chinese President Xi Jinping to his private Florida Mar-A-Lago residence for further discussions in March. For Donald Trump, it will be good to be Back Home Again!

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Look Away

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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End Of May

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Cruel Summer

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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God Only Knows

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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