Things Can Only Get Worse!

Things Can Only Get Worse!                                              02 December 2022

The 1,600 real estate and properties transactions totalled US$ 1.31 billion, during the shortened three-day week, ending 30 November 2022, because of the National Day holidays. The sum of transactions was 176 plots, sold for US$ 272 million, and 1,052 apartments and villas, selling for US$ 632 million. Jabal Ali First recorded the most transactions, with 110 sales worth US$ 78 million, followed by Al Hebiah Fifth, with fifty sales transactions, worth US$ 39 million, and Al Yufrah 2, with six sales transactions, worth US$ 2 million. The top three transfers for apartments and villas were for an apartment, valued at US$ 10 million, in Jumeirah Second, followed by one in Palm Jumeirah for US$ 10 million and in Al Barsha First for US$ 9 million. The mortgaged properties for the week reached US$ 373 million and 38 properties were granted between first-degree relatives worth US$ 31 million.

The latest Knight Frank report has indicated that Dubai’s prime residential market is set for the world’s strongest growth in 2023 among its twenty-five-city ranking. The consultancy has forecast that global growth in this sector will be just 2.0%, as Dubai is expected to expand at almost seven times this average at 13.5%; six months ago, the global prediction was 2.7%. Dubai is well ahead of the likes of Miami (5%), Los Angeles (4%) and Paris (4%). The report noted that “Dubai’s prime residential market has and continues to be a global outlier, with record price growth in 2022, albeit this has been from a low base.” The emirate continues to be one of the most “affordable” luxury residential markets in the world, with prices trailing the 2014 peak levels by a staggering 21.4%. Knight Frank also expects that 2023 will see 13.5% price hikes in Palm Jumeirah, Emirates Hills and Jumeirah Bay Island because of “prime values are being fuelled by Dubai’s safe-haven status, an exceptionally diverse range of international ultra-high-net-worth individuals in search of luxury second homes, combined of course with the government’s world-leading response to the pandemic, which has spurred business confidence.” There is also a marked shortage in the supply of new high-end homes, with just eight villas in Dubai’s prime precincts expected to be delivered by 2025, whilst the main supply of apartments will be Bulgari Lighthouse on Jumeirah Bay Island, (thirty-one apartments), and Aloago’s Palm Flower on The Palm Jumeirah, (eleven apartments). It does not take a genius to see that there is a clear demand-supply imbalance.

Orla, Dorchester Collection, Omniyat’s new development on Dubai’s Palm Jumeirah, is expected to see the developer pull in over US$ 1.36 billion (AED 5 billion) in sales revenue. The luxury developer has posted that over 60% of its eighty-six units, designed by Foster + Partners, with prices starting at US$ 6.0 million, have either been booked or sold. The Orla project will also include three sky palaces and Omniyat’s first mansion, which will sit on a dedicated beach frontage of about 50 mt which will have the Dorchester Collection service as well. Construction will start imminently and is slated for completion by H1 2026.

Emirates Airline is confident of returning to 100% capacity, and network, by the end of 2023; currently they stand at 80% and 95%. Meanwhile, the carrier is carrying out a major retrofit of the aircraft, having announced last month a massive multi-billion-dollar two-year retrofit programme with work starting on the first of 120 aircraft earmarked for a full cabin interior upgrade and the installation of the airline’s latest Premium Economy seats. It is estimated that global airlines have added over 110k seats to on Dubai route in November to accommodate the increased flow of tourists and FIFA World Cup football fans.

The Ministry of Energy always adjusts fuel prices in the UAE by the first day of every month. According to the government, the UAE liberalised fuel prices help to rationalise consumption and encourage the use of public transport in the long run and incentivise the use of alternatives. The UAE Fuel Price Committee marginally decreased December retail petrol prices:

  • Super 98: US$ 0.899 – down by 0.067% on the month and up 24.51% YTD from US$ 0.722  
  • Special 95: US$ 0.866 – down by 0.069% on the month and up 25.69% YTD from US$ 0.689
  • Diesel: US$ 1.019– down 0.586% on the month and up 46.20% YTD from US$ 0.697
  • E-plus 91: US$ 0.847 – down by 0.700% on the month

The Investment Corporation of Dubai posted marked increases in both H1 revenue and net profit – 61.0% higher, at US$ 33.0 billion, and more than ten times higher at US$ 4.03 billion – driven by improvements in all sectors. ICD, the principal investment arm of the Government of Dubai, posted increases in both its assets and liabilities to US$ 309.5 billion, attributable to a much higher level of activity overall, and US$ 241.8 billion, as borrowings and lease liabilities slightly declined. Its share of equity increased by 4.8% to US$ 54.4 billion.

The DFM opened on Monday, 28 November, 102 points (3.0%) lower on the previous fortnight, gained 19 points (0.6%) to close the shortened week, (because of the National Day holidays), on 3,324 by Wednesday 30 November. Emaar Properties, US$ 0.13 shy the previous fortnight, gained US$ 0.05 to close the week on US$ 1.66. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.65, US$ 3.60, US$ 1.57, and US$ 0.42 and closed on US$ 0.64, US$ 3.61, US$ 1.55 and US$ 0.44. On 30 November, trading was at 393 million shares, with a value of US$ 213 million, compared to 170 million shares, with a value of US$ 70 million, on 30 November 2022.

For the month of November, the bourse had opened on 3,332 and, having closed the month on 3324 was 8 points (0.1%) lower. Emaar traded US$ 0.01 higher from its 01 October 2022 opening figure of US$ 1.65, to close the month at US$ 1.66. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.68, US$ 3.50, US$ 1.60 and US$ 0.47 and closed on 30 November on US$ 0.64, US$ 3.61, US$ 1.55 and US$ 0.44 respectively. The bourse had opened the year on 3,196 and, having closed November on 3324, was 128 points (4.0%) higher, YTD.  Emaar traded US$ 0.33 higher from its 01 January 2022 opening figure of US$ 1.33, to close at US$ 1.66. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the year on US$ 0.00, US$ 3.69, US$ 1.47 and US$ 0.72 and closed on 30 November on US$ 0.64, US$ 3.61, US$ 1.55 and US$ 0.44 respectively.

By Friday, 02 December 2022, Brent, US$ 14.77 (14.4%) lower the previous three weeks, was down a further US$ 1.75 (2.0%) to close on US$ 86.77.  Gold, US$ 3 (1.2%) higher the previous week, gained US$ 56 (3.2%), to close at 1,811, on Friday O2 December.

Brent started the year on US$ 77.68 and gained US$ 9.09 (11.7%), to close 30 November on US$ 86.77. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has shed US$ 38 (2.1%) during 2022, to close on US$ 1,793. For the month, Brent opened at US$ 94.83 and closed on 30 November, US$ 8.06 lower (8.5%) at US$ 86.77. Meanwhile, gold opened November on US$ 1,642 and gained US$ 151 (9.2%) to close at US$ 1,793 on 30 November.

SIngapore Airlines is in line to take a 25.1% stake in Air India, which will result in its Vistara full-service airline having a JV with Tata Sons, into India’s national carrier; SIA will invest US$ 250 million in the venture. Tata Group currently owns a 51% in Vistara, and the remaining 49 per cent shareholding is with SIA. After sixty-nine years as a government-owned enterprise, Air India and Air India Express were welcomed back into the Tata Group last January after a US$ 2.4 billion deal with the Modi government. The new set-up will see Air India becoming the country’s leading domestic and international carrier, with a combined fleet of 218 aircraft, making it India’s largest international carrier and second largest domestic carrier.

With delivering sixty-six planes last month, to bring its YTD total to 563, Airbus will probably not meet its 700-plane target, having delivered an estimated sixty-six jets in November, leaving itself a near-record challenge of 137 in December. However, it did manage to turn out a monthly record of 138 planes in pre-Covid December 2019, but this will probably not be replicated this year because of ongoing supply chain problems, which are said to continue for at least a further six months However, it was reported that eleven aircraft left the Toulouse factory on 01 December.

It is reported that Jaguar Land Rover will reduce output at the Solihull and Halewood factories, due to ongoing problems obtaining enough computer chips for new vehicles. This will impact its Jaguar F-Pace and Land Rover vehicles, whilst it will focus on more profitable models such as the Range Rover Discovery; it is estimated that there is a one-year waiting list for this US$ 120k vehicle.

In a US$ 41 million deal, Joules has been rescued from administration by retail giant Next, and founder Tom Joule, that will see about one hundred Joules stores remaining open and save 1.45k jobs; six years ago, the company was valued at US$ 162 million, when it was floated on the London Stock Exchange. The new set-up will see Next with 74% of the equity. There is no doubt that the retailer, founded in 1989, had lost its way in the sector and even when struggling spent US$ 24 million on a new head office, as well as acquiring an online furniture accessories business; Next bought the head office for US$ 9 million. However, the clothing chain has announced that nineteen stores will be closed, with immediate effect, with the loss of 133 posts. Next will continue to operate Joules’ website but will also sell Joules-branded clothing through its own e-commerce platform from 2024.

A report by the Economist Intelligence Unit, which compares the prices of more than 200 products and services in 172 global cities, ranks New York and Singapore as the world’s most expensive cities, overtaking last year’s top-placed Tel Aviv. The remaining top leading places are Hong Kong, Los Angeles, Zurich, Geneva, San Francisco, Paris, Copenhagen and Sydney.  The other end of the chart is taken by Damascus and Tripoli. A strong greenback ensured that US cities moved higher, whilst most European cities fell because of fall in the value of the euro and other local currencies. The average 8.1% price rise across the 172 cities is the strongest seen in the twenty years, driven by several factors including the war in Ukraine, supply chain problems, rising interest rates, exchange rate shifts, and the cost-of-living crisis.

The World Travel and Tourism Council has ranked Dubai, ahead of Doha and London, as the city with the highest spending by international visitors this year. The report, covering eighty-two cities, indicates that the emirate has raked in US$ 29.4 billion in international visitor spending so far this year, well ahead from its two main competitors with spends of US$ 16.8 billion and US$ 16.2 billion. It was also noted that the three cities to recover fastest from the pandemic were Doha, Orlando and Antalya, with spend increases of 21%, 19% and 15%. The study concluded that ten of the cities would have surpassed pre-pandemic levels, in term of direct travel and tourism GDP to their economies, before the end of the year. Paris, Beijing and Orlando are the three cities with the largest direct travel and tourism contribution to GDP of US$ 36 billion, Beijing (US$ 33 billion) and Orlando (US$ 31 billion)., Within a decade, it is estimated that the sector will directly generate up to 8% of all jobs, (126 million jobs), by 2032 in the cities analysed, compared to 6.6% in 2019 and 5.1% in 2020.

Last year it is reported that the EU spent on imports of cars:

  • non-plug in hybrid – US$ 12.4 billion (40.5% of extra-EU imports of hybrid/electric cars)
  • full electric – US$ 12.0 billion (39.2%)
  • plug-in hybrid – US$ 6.2 billion (20.3%)

and earned export sales revenue of:

  • non-plug-in hybrid – US$ 24.1 billion (54.5%)
  • full electric – US$ 13.0 billion (29.3%)
  • plug-in hybrid – US$ 7.2 billion (16.2%)

Between the years of 2017 to 2021, total extra-EU exports and imports both rose significantly by almost 800% to US$ 44.3 billion and by 400% to US$ 30.6 billion respectively

The World Bank estimates that the world’s poorest countries now owe US$ 62 billion, with a 35% year on year increase, in annual service charges to official bilateral creditors, as its president David Malpass warning that the rising cost is increasing the risk of default. Over 67% of the debt is owed to China. He is also concerned that the growing debt in advanced economies, such as the US, is drawing more capital away from developing countries, as well as the fact that when rates head north, debt service charges go up in tandem, with the knock-on impact that more money is required to service the debt and less to invest.

The International Labour Organisation is concerned that H1 global monthly wages fell 0.9% in real terms – the first time this century that negative growth has occurred. It noted that the purchasing power of middle-class families has been reduced, while low-income households have been badly impacted, placing “tens of millions of workers in a dire situation as they face increasing uncertainties”. It is obvious that if the purchasing power of the lowest paid is not maintained, any post-Covid recovery will be further delayed and the danger of social unrest increases. Their latest Global Wage Report estimated that H1 real wages declined 2.2% in the advanced G20 countries but grew by 0.8% in emerging G20 countries – down by 2.6% compared to pre-Covid. Furthermore, inflation rose at a higher rate in the developed countries compared to poorer nations, with the knock-on effect that real wages dipped. For example, in Canada and the United States, average real wage growth dropped to zero in last year, and then fell by 3.2% in H1 and by 1.4% and 1.7% in Latin America and the Caribbean. However, the comparative figures in Asia and Pacific see growth levels of 3.5% and 1.3%.

The World Bank has indicated that 2022 remittance flows to low and middle-income nations are set to rise by 5% to US$ 626 billion, including a record US$ 100 billion to India, on the year – and this despite the global macroeconomic malaise; this is less than half the 2021 growth figure of 10.2%, when such flows to poor and middle-income countries grew to US$ 589 billion.  Location-wise the remittances grew 9.5% in in Latin America and the Caribbean, 3.5% in South Asia, 2.5% in the MENA region, to US$ 63 billion, and 0.7% in East Asia and the Pacific.  The study noted that the five most common remittance destinations were India, China, Mexico, the Philippines and Egypt, and that “migrants help to ease tight labour markets in host countries, while supporting their families through remittances”. The global average cost of sending US$ 200 remained high at 6.0% in Q2 2022.

The International Labour Organisation is concerned that H1 global monthly wages fell 0.9% in real terms – the first time this century that negative growth has occurred. It noted that the purchasing power of middle-class families had been reduced, while low-income households have been badly impacted, placing “tens of millions of workers in a dire situation as they face increasing uncertainties”. It is obvious that if the purchasing power of the lowest paid is not maintained, any post-Covid recovery will be further delayed and the danger of social unrest increases. Their latest Global Wage Report estimated that H1 real wages declined 2.2% in the advanced G20 countries but grew by 0.8% in emerging G20 countries – down by 2.6% compared to pre-Covid. Furthermore, inflation rose at a higher rate in the developed countries compared to poorer nations, with the knock-on effect that real wages dipped. For example, in Canada and the United States, average real wage growth dropped to zero in last year, and then fell and by 3.2% in H1 and by 1.4% and 1.7% in Latin America and the Caribbean. However, the comparative figures in Asia and Pacific see growth levels of 3.5% and 1.3%.

Recording the biggest drop since June 2020, the average UK house price fell by 1.4% in November,  with the annual price growth slowing to  4.4%, compared to 7.2% a month earlier in October; the average UK house is now at US$ 320k.The sector is still recovering from the financial debacle of the Liz Truss mini-budget which spooked markets and which still sees new mortgages remaining elevated, with  the market having lost a significant degree of momentum. Four factors that, despite the imminent recession, may see the housing sector keeping its head above water are that borrowing costs have fallen back in recent weeks, lack of supply, unemployment levels are at a near-fifty year low and that household balance sheets remain in good shape, with significant protection from higher borrowing costs, as about 85% of mortgage balances are on fixed interest rates. Knight Frank expect average house prices to be 10% lower two years from now, but others argue that this figure could come in higher.

US October jobs growth remained strong, with a further 263k jobs added, while wages climbed sharply, as the average hourly pay rose 5.1% on the twelve months; the unemployment rate remained at 3.7%. These figures surprised the market, at a time when the Federal Reserve is making concerted efforts to slow the economy and stabilise prices by raising interest rates, which many had thought would weaken the country’s job creation growth. Wages are not rising as fast as price, with November Inflation hitting 7.7% and though the rate has eased since June’s 9.1%, it still remains near a forty-year high.

Earlier in the week, the President of the ECB warned that Eurozone inflation had yet to peak and that there was the possibility of it rising even higher than the record 10.6% recorded last month. Christine Lagarde also indicated that there could be possible interest rate hikes in the future, fuelling speculation that the bank would not take the gentler path to curb inflation. She commented that “we do not see the components or the direction that would lead me to believe that we’ve reached peak inflation and that it’s going to decline in short order.” There is no doubt that the main driver behind these figures is the war in Ukraine, causing the cost of energy to spike and that the bank will push rates higher at their next meeting later in the month; the only point of discussion whether this will be at 0.5% or 0.75%. The market is also expecting further rate hikes into the new year, whilst inflation rates, which reached double digits in October, will remain high in the short term driven by soaring energy/food prices, and supply shortages. The euro zone faces a grim winter as a recession bites, with the bloc’s economy shrinking now and which will continue to contract into the new year. Things Can Only Get Worse!

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Practice What You Preach!

Practice What You Preach!                                        25 November 2022

The 2,867 real estate and properties transactions totalled US$ 4.09 billion, during the week ending 25 November 2022. The sum of transactions was 313 plots, sold for US$ 428 million, and 1,936 apartments and villas, selling for US$ 1.22 billion. The top two land transactions were both for land in Hadaeq Sheikh Mohammed Bin Rashid – US$ 12 million and US$ 7 million. Al Hebiah Fifth recorded the most transactions, with 110 sales worth US$ 96 million, followed by Jabal Ali First, with seventy-three sales transactions, worth US$ 64 million, and Al Yufrah 2, with twenty-three sales transactions, worth US$ 8 million. The top three transfers for apartments and villas were for an apartment, valued at US$ 14 million, in Jumeirah Second, followed by two transactions in Palm Jumeirah for US$ 11 million and US$ 9 million. The mortgaged properties for the week reached US$ 2.30 billion, with the highest being for land in Al Warsan First, mortgaged for US$ 817 million. 145 properties were granted between first-degree relatives worth US$ 143 million.

The increasing number of doomsayers in the market who have been saying, for several months now, that Dubai property prices will go down, will be disappointed that, according to Property Monitor, sales prices rose 1.77% last month. The average property values in Dubai now stand at US$ 294 per sq ft – a level not seen since the time of the last market upswing in November 2013. The volume of sales transactions remains at par with last month, dipping 0.7% to 8.6k registrations, with residential transactions accounting for 92% (7.9k sales transactions) of the total, followed by hotel apartments (3.4%), office (1.9%), and land sales (1.7%). YTD, there have been 77.2k transactions registered (89.2% of which were residential) equal to 126% of the entire annual transaction volume of 2021. At this rate, total 2022 transactions could easily top 92k, which would be second best year in the annals of Dubai’s property history. YTD, new off-plan development project launches total almost 37k, as a further 3.4k being added in October, expected to raise US$ 28.34 billion in cumulative gross sales value. There is no doubt that, to date, the local market has remained aloof from many of the problems being experienced in other countries and has benefited by the dirham being pegged to the greenback and several progressive initiatives, introduced by the Dubai government. Investors should continue to be confident in a market that is set to move higher for at least the next six months, but there could be some realignment in prices towards the end of 2023, when the doomsayers will be shouting that they were right.

Arada, Sharjah’s largest property developer with projects valued at over US$ 9.0 billion, and with property sold valued at US$ 2.34 billion, has unveiled its first ever project in Dubai with the launch of Jouri Hills at Jumeirah Golf Estates; the announcement was made during Cityscape Dubai. The luxury villa project will include 294 high-end villas, ranging from three B/R townhouses to six-bedroom mansions. All detached villas come with swimming pools as standard, while the community’s most luxurious homes will encompass 14k sq ft of space, spread across four floors and encompassing underground parking, basements with a flexible entertainment or fitness floor plans and a landscaped ‘English courtyard’ for outdoor entertainment. The development will have its own community park and will see facilities, including cycling and running tracks, swimming pools and a fitness centre. Construction will start next year, with the first homes scheduled to be handed over by Q2 2025. It was also reported that the Sharjah-based developer had acquired the last remaining beachfront land plot on The Palm Jumeirah. The launch for the concept design – an ultra-luxury mixed-use project – is ongoing, with the sales launch slated for Q1 2023.

Inspire Home Contracting, currently developing villas in Dubai South and a tower on Dubai Islands, is planning a community on the Oman Island at Dubai’s The World Islands. It has already received preliminary approval from master developer Nakheel and is in the process of applying for a building permit. On completion, the US$ 20 million development will comprise 167 villas, (all with one B/R), with a massive swimming pool in the middle of the island, a clubhouse that will have a spa, five-star restaurant, cinema and ballroom. All the villas, some of which will be floating, will be manufactured in South Korea and will take two years to complete, during which time, infrastructure work will be carried out on the island. The villas will be guaranteed for fifty years, with prices starting at US$ 1.63 million.

The development on the World Islands has been ramping up, with Anantara expected to launch a hotel on the South American section before the end of the year and Kleindienst’s Heart of Europe project  is in its final phases to completion; indeed, the first of its Floating Seahorse villas  were handed over in 2020, with its chairman, Josef Kleindienst,  noting that there has already been an appreciation in the price of its floating villas..

Sobha Realty launched two new megaprojects – Sobha 1 and Hartland 2 – valued at US$ 6.53 billion and located adjacent to the Sobha Hartland master development in MBR City. The developer expects both projects, with 10k apartments covering a 220-acre site, to be finalised by 2030 at the latest, with full-scale construction starting next year; financing will be via a mix of debt and equity.

Meanwhile, Azizi Developments has bought a fifteen million sq ft plot of land from Dubai South, an aviation and logistics urban master developer, to build a mixed-use development, valued at US$ 3.27 billion, taking advantage of a booming Dubai property market to expand its portfolio of assets. Part of the development will be 24 million square feet of gross floor area, within the Dubai South development, a 145 sq km city that includes Al Maktoum International Airport.  Full details of the development have yet to be released but what is known is that Azizi, will also be in charge of constructing the project’s infrastructure and road network.

Savills latest Prime Office Costs analysis points to Dubai having one of the largest increases in net effective cost to occupiers of prime office space in Q3 as fit-out costs in key global office markets have climbed 10% over the past twelve months. In Q3, Dubai’s net effective cost to occupiers of prime office space was 3.0% higher on the quarter at US$ 108.. Demand for office space has been concentrated across prime properties, leading to limited availability and an increase in rents. The study also noted that the best returns were seen in Dublin, London City, Dubai and Berlin – up 7.0%, 5.0%, 3.0% and 3.0% respectively. Some analysts forecast the cost of leasing office space in the emirate rising by double-digit numbers on the year, as strong demand continues to outstrip supply significantly. By the end of September, Dubai’s office market had a portfolio of 9.1 million sq mt of gross leasable area, with supply nudging 53k sq mt in Q4.

The latest IMF report indicates that the UAE’s economy is set to grow by more than 6.0% this year which would be the highest rate since the 6.9% expansion of 2011; the Q1 economy was 8.4% higher, as “fiscal and external surpluses have increased further, benefitting from the higher oil prices, as well as the removal of the temporary Covid crisis-related fiscal support to businesses and households as the pandemic has gradually waned. 2023 growth is expected at 4.0%. H1 foreign trade exceeded US$ 272 billion (AED 1 trillion), compared with US$ 229 billion for the same period before the pandemic. The IMF noted that this major improvement was helped by a rebound in tourism, construction and activity related to the Expo 2020 Dubai. Tourism revenue, in H1, topped US$ 5.2 billion, with the number of hotel guests at over twelve million, climbing 42%, compared with the same period before the pandemic.

More than 60% of the exhibitors at this year’s Cityscape Dubai, which opened on Monday, were from outside the UAE, including from Tunisia, Germany, Georgia, Bali, Canada and the UK. These developers, along with most of the major local players such as Azizi, Sobha Realty, Damac and Arada, all hope to cash in on the booming local property sector. By the end of Q3, prices were 9% higher on the year, with average residential prices up to 25% higher on the year. Another factor pushing property prices higher was the 18% rise in high-net-worth individuals, moving to the emirate, in the first six months of this year; it is estimated that Dubai’s growing millionaire and billionaire population now amounts to almost 68k and thirteen respectively.

Last week, Dubai Harbour welcomed its first cruise ship, the AIDAcosma, officially starting the emirate’s 2022-23 cruise season. With 5.5k passengers on board its maiden voyage from Germany, this is the start of an expected influx of more than 300k to land at the Dubai Harbour, over the next seven months. Dubai Harbour will pave the way for green cruising by becoming the first to host a brand-new LNG powered cruise ship, with usage of LNG cutting emissions by 30%. Shamal Holding is the owning-company and curator of Dubai Harbour and is the driving force behind making it an exceptional seafront district. Dubai Harbour Cruise Terminal comprises two terminal buildings, designed to process over 3.3k passengers per hour, on a pier stretch of over 910 mt and can accommodate a complete passenger turnaround of two mega cruise ships simultaneously.

Despite a recent downward trend in the price of Brent, with a decline to around the US$ 90 a barrel level, caused by several factors, including a slowing global economy and a potential drop in demand from China, YTD prices are still 12.0% higher. Allied with this, business activity in the UAE’s non-oil private sector economy continued to improve last month, with the S&P Global PMI at a healthy 56.6, as new business and output climbed along with a rise in demand and employment. To date, the country has not seen the double-digit inflation rates, compared to many other countries, with the UAE Central Bank looking at a relatively low 5.6% figure for 2022, which are expected to soften into the new year. It is highly likely that if higher oil prices continue in 2023 – along with the healthy fiscal buffers – the country will remain a haven for investors and many expats.

The IMF also noted that the economy will also benefit from several other initiatives which will help to underpin growth and fiscal consolidation including:

  • expected introduction of corporate tax
  • gradual phasing out of business fee structures
  • reforms under the UAE 2050 Strategy, with a focus on diversification of the economy
  • ongoing structural reforms, such as those to support private sector employment and female labour force participation
  • increase in trade and foreign investment
  • harnessing the benefits of technology and education

Following the onset of Covid in early 2020, the Insurance Authority introduced a 50% discount on MV premiums, replacing the previous up to 30% discount, depending on the driver’s history; insurance companies were permitted to offer a 10% discount for drivers with no claims for a year, 20% on a two-year policy and 30% for three years and above in case of no claim history. Another move in 2020 saw the merger of the Insurance Authority with the Central Bank in order to boost the insurance industry’s role in the country’s economy. Now it seems that insurers are returning to the 30% norm, and most of them would have these “new” rates in place by the end of the month, which could see insurance premiums coming in 15%-20% higher, as the premium collection is 40% lower to maintain the loss ratios at a profitable position. It also seems that health insurance premiums will move up to 10% higher due to factors such as the ageing population and healthcare inflation.

The FTA has notified eligible taxpayers that the deadline, to apply for the re-determination of administrative penalties on taxes, is 31 December 2022. However, the authorities have confirmed that non-compliance to this deadline could be extended subject to three conditions:

  • the administrative penalty must be imposed under Cabinet Decision No. (40) of 2017 before 28 June 2021, and remain outstanding
  • the tax registrant needs to have settled all due Payable Tax by 31 December 2021
  • the tax registrant must have paid 30% of the total unsettled administrative penalties due until 28 June 2021 no later than 31 December 2022.

In line with all tax payments, the authority has cautioned that bank transfers can take up to three working days to process the payment.

Qashio has raised US$ 10 million in a seed round, which consisted of both equity and non-equity financing, and backed by various international and regional investors, including One Way Ventures, Mitaa, Cadorna Ventures, Sanabil 500 Mena, Nuwa Capital, Iliad Partners and Phoenix Investments. Money raised will be pointed at expanding into Saudi Arabia, the Arab world’s biggest economy. The UAE-based FinTech start-up, only founded last year by Armin Moradi and Jonathan Lau, issues charge cards to automate the management of a company’s expenses, by linking them to the FinTech’s software. Transactions made, using Qashio’s cards, are automatically captured by its software and interfaced to the company’s accounting system, cutting down the time companies spend on reconciling expenses and receipts. The latest MasterCard report estimates an almost tripling of the FinTech global market from last year’s US$ 112.5 billion to US$ 332.5 billion by 2028. Currently there are some 470 FinTech unicorns, (start-ups with a US$ 1 billion+ valuation), and it is expected that the MENA region will have forty such entities by 2030.

This week, Dubai Islamic Bank sold US$ 750 million of its debut five-year sustainable Islamic bond, sold at 155 bps over US Treasuries; this was tightened by 20 bps to 155 bps after demand topped US$ 1.6 billion. Because of the pandemic of economic volatility, and surging interest rates, international bond sales have plummeted this year. Late last week, there were two bank-related sales – Dubai’s Mashreq raising US$ 500 million in Tier 2 bonds, and a US$ 700 million bond sale by Banque Saudi Fransi.

Marked occupancy improvements in both its Al Thuraya Tower 1, (recently hitting a 50% rate following the completion of a major refurbishment in March 2022), and Burj Daman, topping an 80% occupancy rate, ENBD REIT announced its 30 September net asset value had risen to US$ 172 million ($0.69 per share), compared to US$ 166 million in Q2 and US$ 164 million, a year earlier. Its rental income nudged 0.7% higher to US$ 15 million, whilst the Weighted Average Unexpired Lease Term (WAULT) stands at 4.13 years for the portfolio, and the Loan-to-Value (LTV) ratio remains stable at 54%.  Operating expenses came in 2.2% higher, with fund expenses and finance costs being 3.7% and 5.5% higher respectively. The property value was 1.3% higher, on the quarter, to US$ 362 million, as its portfolio occupancy jumped 9% to 84%, on the year, mainly attributable to strong growth seen in the Dubai property market. The Board recommended a US$ 4.5 million dividend, equating to US$ 0.018 per share.

DEWA has announced that at its second general assembly meeting will be held physically and virtually on Monday, 12 December, at which time the meeting will most probably approve a special one-time cash dividend of US$ 552 million to its shareholders; if this goes through the dividend record date has been set for 22 December. In the past, its MD and CEO, Saeed Mohammed Al Tayer, had indicated that the utility intended to pay its shareholders a total dividend of US$ 2.24 billion in 2022. Last month, it paid US$ 844 million in dividends for H1, with the same amount being paid as an H2 dividend payment in April 2023.

On Monday, the DFM launched its new general index culminating the successful accomplishment of a comprehensive transformation of its indices’ methodology, with S&P Dow Jones Indices acting as the calculation agent of the indices. The eight new sectors include Communication Services, Consumer Staples, Materials, Real Estate, Utilities, Financials, Industrials, and Consumer Discretionary. The various key features of the new methodology of DFM indices include:

  • amending the current 20% cap of the threshold of a DFM index individual constituent to 10% percent of the index weightage
  • index calculation based on actual free float adjusted market capitalisation
  • amending the current semi-annual review to a quarterly rebalancing of the index
  • a DFM independent index committee overseeing current and future methodology changes
  • the alignment of DFM’s sectors with the Global Industry Classification Standard (GICS) that are tracked by institutional clients

The DFM opened on Monday, 21 November, 55 points (1.6%) lower on the previous week, lost a further 47 points (1.4%). to close on 3,305 by Friday 25 November. Emaar Properties, US$ 0.06 shy the previous week, shed US$ 0.07 to close the week on US$ 1.61. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.65, US$ 3.58, US$ 1.59, and US$ 0.43 and closed on US$ 0.65, US$ 3.60, US$ 1.57 and US$ 0.42. On 25 November, trading was at 170 million shares, with a value of US$ 70 million, compared to 185 million shares, with a value of US$ 61 million, on 18 November 2022.

By Friday, 25 November 2022, Brent, US$ 11.02 (2.7%) lower the previous fortnight, was down US$ 3.75 (11.2%) to close on US$ 87.62.  Gold, US$ 22 (1.2%) lower the previous week, gained US$ 3 (0.2%), to close on 1,755 by Friday 25 November.

Following the windfall extension on energy companies by the Sunak government, (from 25% to 35%), Shell is reviewing plans to invest US$ 29.7 billion in UK projects, over the next decade, indicating that it would now look at each of its projects on a “case-by-case basis”. It is forecast that the tax extension will fill the Exchequer’s coffers by an extra US$ 16.6 billion. It is estimated that this tax takes the total levy paid on oil and gas profits to 75%, among the highest in the world. Obviously, the more a company is taxed will see the amount available for investment being diminished, as Shell confirms that it does not expect to pay any extra tax this year because of its heavy investment in the North Sea. It is sometimes forgotten that many of the energy giants only make a small portion of their profits in the UK and that they can deduct most investments in new oil and gas projects from any tax levied. Its profits over Q2 and Q3 came in at US$ 11.4 billion and US$ 9.5 billion, resulting from the soaring energy prices which rose to as high as US$ 120 per barrel.

Guess, the US clothing brand has been advertising its latest collection, “with graffiti by Banksy” – an arrangement that had not been authorised by the UK street and graffiti artist, whose actual identity remains unknown. He noted that “they’ve helped themselves to my artwork without asking, how can it be wrong for you to do the same to their clothes?”, and posted a photo of the London Regent Street, and suggested shoplifters should visit the branch which was subsequently closed. It seems that the company’s defence is that its collection was created in collaboration with Brandalised, which licenses designs by graffiti artists and apparently had the rights to commercialise and use Banksy’s artwork on goods.

Penguin Random House has scrapped a US$ 2.2 billion planned takeover of rival Simon & Schuster, after a US court blocked the deal, saying it could “substantially” weaken competition in the industry. Penguin’s parent company Bertelsmann said Paramount Global, the owner of Simon & Schuster, decided not to appeal the ruling. The world’s largest book publisher commented that “we believe the judge’s ruling is wrong” but we have to accept Paramount’s decision not to move forward.” The judge in the case opined that the US Justice Department had shown the deal could substantially lessen competition “in the market for the US publishing rights to anticipated top-selling books”. If the deal had gone through, Penguin and Simon & Schuster combined would control nearly half the market for publishing rights of blockbuster books. Penguin Random House, (established in 2013 by the merger of two major publishers from the UK and the US), is obligated to pay a US$ 200 million termination fee to Paramount.

In what is thought to be first time that Amazon has had an international strike day, following Make Amazon Pay initiative calling for a global strike today, Black Friday, it appears that more than thirty countries, including France, Germany and the US, could be directly impacted on one of the online retailer’s biggest revenue days. It is reported that Germany’s Verdi union expect planned stoppages in at least ten fulfilment centres and is canvassing Amazon to recognise collective bargaining agreements for the retail and mail order trade sector.

By the end of last week, it was estimated that Twitter could have lost at least 33% of its payroll numbers of 7.5k, mainly driven by the sweeping changes introduced by Elon Musk, who had acquired the company for US$ 44 billion. The latest layoffs resulted in some core teams without any staff, at a time when the new owner is considering closing one of the company’s main data centres in the US, which would see the workforce down to about 2.5k. Things started badly for Elon Musk even before he took over the running of Twitter in late October. Throughout the months-long saga, that led to his purchase of the company, he did not put forward any clear strategy on how to run it, thus alienating many employees. The first of his staff emails sent to his new employees threatened dissenters and suggested he would fire anyone who was not a “hardcore” worker, whilst banning remote working. By early November, he had fired senior executives and began introducing rigid changes to the company’s operating structure, saying it needed to boost its revenue streams because it was losing US$ 4 million a day. Matters seem to have gone from bad to worse as his first month in charge, comes to a close.

There are reports that Mitsubishi Chemical UK may make a decision to close down its Teesside production plan that would see 238 made redundant. Three of the major drivers are “rapidly escalating” gas prices, a downturn in the European economy caused by inflation and weaker demand. It seems that the company has already started consulting with its workers and a decision could be made as early as January. Its production of methacrylates, which are used in acrylic products and require large quantities of gas, initially stopped in January as part of a planned overhaul and had remained halted since September because of negative economic factors.

Earlier in the week, it was reported that the bankrupt cryptocurrency exchange FTX owes its fifty largest creditors almost US$ 3.1bn (GBP 2.6 billion), including US$ 1.45 billion to its ten unnamed major creditors. It also seems that more than one million people and businesses could be owed money following its collapse; the betting is that any pay-out to creditors will be minimal. On Saturday, the firm indicated that it had launched a review of its global assets and was preparing for the sale or reorganisation of some businesses. The new chief executive, John Ray, who took over the reins from the Sam Bankman-Fried, commented that he had never “seen such a complete failure of corporate controls” and he criticised FTX’s founder for a “complete absence of trustworthy financial information”. The firm recently filed for US bankruptcy court protection, and has fired three senior executives, including co-founder Gary Wang, engineering director Nishad Singh and Caroline Ellison, who ran the firm’s trading arm Alameda Research.

It is reported that cryptocurrency custodian company BitGo has already managed to recover US$ 740 million from the FTX debacle but experts say it may be many years before customers have any chance of getting any of their money back, whilst others may never recover the funds.

YTD, cryptocurrencies have lost more than US$ 1.4 billion in value, with Bitcoin’s Tuesday trading at US$15.5k – its lowest level in two years. The world’s second-largest cryptocurrency Ethereum also shed more than 13% in the last week to reach US$ 1.1k on Tuesday, with  Coinbase’s shares closing more than 8% lower on Monday, its lowest point since it came into the market in April 2021.There are several factors impacting this sector, the latest being the collapse of FTX, the world’s third-largest crypto exchange, earlier in the month and the Terra Luna saga. The match that led to FTX imploding earlier in the month was lit by Binance’s Chang Peng Zhao (better known as CZ), saying it would sell its FTT tokens – the coin of FTX; earlier, the crypto exchange had signed a letter of intent to buy FTX but then reversed its decision, saying FTX’s issues were “beyond our control”. 

It is reported that cryptocurrency custodian company BitGo has already managed to recover US$ 740 million from the FTX debacle but experts say it may be many years before customers have any chance of getting any of their money back, whilst others may never recover the funds.

Credit Suisse expects Q4 losses of up to US$ 1.5 billion, on the back of further outflows of wealth management funds, as client confidence worsens, with continued withdrawals of customer assets, as market conditions continue to soften. The troubled lender also commented that net asset outflows were about 6.0% of the assets, equating to US$ 89.4 billion in outflows, under management at the end of Q3. It is changing its main focus towards private banking and less on its investment bank sector. On Wednesday, shareholders approved a US$ 4.26 billion capital raise and agreed to 9k staff cuts by 2025.

There was no surprise to see that the OECD has forecast that the UK economy will suffer a bigger blow from the global energy crisis than other leading nations, (with a 0.4% contraction next year, followed by a small 0.2% rise in 2024), whilst growth in the US and the eurozone will be weak, with Germany being the only other major economy expected to shrink – by 0.3%.  This figure contrasts with UK’s Office for Budget Responsibility’s prediction of the UK posting a 1.4% contraction in 2023 and a 1.3% growth a year later. The world body forecasts a “significant growth slowdown” globally next year but sees global growth at 2.2%, attributable to the strength of emerging economies, whilst the Ukraine war has resulted in European countries bearing the brunt of the impact on business, trade and the spike in energy prices. When that happens, the BoE can do little else but to move rates higher, which in turn will lead to higher costs of servicing debt. The OECD noted that UK inflation rate, which hit a 41-year high of 11.1% last month, should peak next month but will remain above 9% in early 2023, halving to 4.5% by the end of the year – still more than double the bank’s fantasy 2.0% target.

It expects UK interest rates to raise by 50% to 4.5%, from its current 3.0% level, by April, whilst unemployment is expected to rise to 5.0% by the end of 2024. The Office for National Statistics estimated that with the first tranche of a US$ 475 (GBP 400) subsidy, along with the lower US$ 2.97k, (GBP 2.5k) energy price cap, has cost the government an estimated US$ 4.0 billion; this extra spend pushed up the cost of government borrowing by 28.4% to US$ 16.04 billion, compared to a year earlier. In the seven months of the UK government fiscal year, public borrowing at – US$ 100.3 billion – is 20.5% lower than the same period in 2021.

As the first week of the World Cup comes to an end, there seems to be more news about everything except the accrual football. Scoring on own goal even before the first match started Gianni Infantino, born and bred in Switzerland, to Italian parents, told the world’s press in an hour-long ramble that he felt like a migrant worker. The FIFA supremo raked in US$ 3.2 million in 2019 – not bad for a migrant worker! Using words very similar to those used by disgraced New York Governor Andrew Cuomo in January 2017, he made an awkward attempt to compare his personal backstory to disenfranchised populations across the globe. He opened proceedings with the words “I am Qatari” and it is reported that he has a rented house in the country and two of his children go to school there; initially it seemed that FIFA continually denied that this was the case and confirmed that Infantino spends half of his working time in Doha and that the house in the Qatari capital allows him to spend a lot of time with his family. However, it is alleged that Infantino is rarely present in the FIFA’s Zurich headquarters.

Infantino said he was “dismayed” when he was implicated in the FIFA corruption scandal in documents released in the 2016 Panama Papers which showed that UEFA undertook deals with indicted figures where previously they had denied any relationship as well as confirming that he had never personally dealt with the parties involved. In the same year, he was suspected to have broken the FIFA code of ethics and was interviewed by the investigatory chamber of the body’s Ethics Commission, (FIFA being judge and jury).   The enquiry focussed on three matters which were  “several flights taken by Mr Infantino during the first months of his presidency, human resources matters related to hiring processes in the president’s office, and Mr Infantino’s refusal to sign the contract specifying his employment relationship with FIFA”. Despite a document being leaked indicating illegitimate spending of funds by FIFA, the matter concerning expenses and governance was not investigated, although they revealed that Infantino had billed FIFA for personal expenses such as US$ 10.6k for mattresses at his home, US$ 8.3k, for a stepper exercise machine, and US$ 1.3k for a tuxedo, as well as billing FIFA for an external driver for his family and advisors while he was away. He was also accused of   potential conflicts of interest receiving special treatment by the 2018 and 2022 World Cup hosts who had organised private jets for Infantino and his staff to visit the two countries.

Two years ago, he faced further allegations accused of having a secret meeting, (and at least two more), with the Swiss Attorney General Michael Lauber, at a time when the Swiss government was actively investigating FIFA for irregularities in the awarding of the World Cup to Qatar. The Attorney-General had opened official proceedings against four members of the organising committee for the 2006 World Cup in Germany, including disputed payments and vote-buying for that country to host the event. Among the more than twenty other football matters discussed involved TV rights deals signed by the then UEFA’s chief legal officer and current FIFA president. In June 2019, the Federal Criminal Court criticised Lauber’s conduct in the football proceedings, and especially his secret meetings with Infantino, which Lauber had not recorded and described as informal. It seems that when it became known that there had been a third meeting with Infantino, which Lauber had kept secret, Infantino himself and the Valais senior public prosecutor Rinaldo Arnold, who had arranged the meeting, also claimed that they had no memory of the meeting. In September 2019, Lauber was not reselected to his position by the United Federal Assembly, which noted that Lauber had grossly negligently violated his official duties by meeting FIFA President Infantino. So much for transparency, democracy and governance!

Let’s hope Infantino’s actions after the World Cup speak louder than the words, he uttered in his pre-opening welcome address and that the US$ 6 billion expected to be raised from this World Cup does not end up in FIFA’s treasury and that they do something to make good the crass words with which he addressed the footballing world. He had the gall to forget that he was a leading member of the footballing bureaucracy in the latter days of Sepp Blatter’s reign and for even suggesting that criticism of Qatar is “just hypocrisy”, and that western countries were in no position to criticise the host nation, which in itself could not be more hypocritical. A week earlier, this is the same person who had sent a circular to all concerned that they should just focus on football. At least the FIFA supremo should Practice What You Preach!

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Leaving London!

                                                                             

Leaving London! 18 November 2022

The 3,011 real estate and properties transactions totalled US$ 2.37 billion, during the week ending 18 November 2022. The sum of transactions was 230 plots, sold for US$ 463 million, and 2,233 apartments and villas, selling for US$ 1.37 billion. The top two land transactions were both for land in Palm Jumeirah – US$ 35 million and US$ 19 million. Al Hebiah Fifth recorded the most transactions, with 122 sales worth US$ 117 million, followed by Al Hebiah Fourth, with seventy-two sales transactions, worth US$ 48 million. The top three transfers for apartments and villas were all in Palm Jumeirah – a villa that was sold for US$ 40 million, followed by apartments sold for US$ 22 million and US$ 17 million. The mortgaged properties for the week reached US$ 379 million, with the highest being land in Al Hamriya, mortgaged for US$ 41 million. 87 properties were granted between first-degree relatives worth US$ 195 million.

latest report from CBRE shows that the Dubai property market continued its growth in October, with higher average price increases over the twelve months – 13.0% for villas and 8.5% for apartments – and by 0.7% and 1.4%, compared to September. Last month, the number of transactions was 72.5% higher, on the year, at 8.3k, with a 133.5% jump in off-plan market sales and by 29.4% in the secondary markets. In the ten months of the year to 31 October, total transaction volumes reached 71.4k – the highest total recorded since 2009. Average prices in Dubai reached US$ 313 per sq ft for apartments, and US$ 371 per sq ft for villas. However, these figures are still below the figures recorded in 2014, by 22.8% and 6.0%, for apartments and villas respectively. The most expensive areas for apartments and villas per sq ft were Jumeirah and Palm Jumeirah.

A partnership, incorporating Ellington Properties, Shuaa Capital and Sol Properties, has launched a new residential project on Palm Jumeirah, designed by the Bjarke Ingels Group. It will comprise nine floors, with 88 units, ranging from two to six bedrooms, as well as duplexes. Northacre, the real estate development arm of Shuaa Capital, is already involved in projects, totalling US$ 3.6 billion, including The Broadway, a US$ 1.5 billion residential and mixed-use development in central London. Meanwhile, Ellington has two developments on The Palm – the 123-unit Ellington Beach House and The Ellington Collection, comprising nine beachfront villas. A recent Knight Frank report indicated that prime residential values in The Palm Jumeirah have risen 89% over the course of the past twelve months.

Savills has ranked Dubai as the world leader for branded residences, with the property consultancy indicating that the global sector has expanded 150% over the past decade. There are currently 640 schemes, (expected to top 1.1k by 2027), with Dubai, with more than forty completed branded residences, (set to take that number beyond seventy), running  ahead of South Florida and New York City in terms of hotspots for completed and current pipeline. Last August, the Jumeirah Group unveiled its fourth branded residence in the emirate, as part of the area’s new Peninsula waterfront development. The Atlantis The Royal Residence is finally set to open next year, along with a 795-room hotel, and this month, the Mag of Life Mansions, each valued at US$ 48 million, at the Ritz-Carlton Residences, Creekside, was launched.

The national day holiday will start on Thursday, 01 December, with employees returning to work the following Monday, 05 December; the four-day weekend celebrates Commemoration Day and the UAE’s 51st National Day. Commemoration Day, formerly known as Martyr’s Day, that officially falls on 30 November, remembers those who have lost their lives in the line of service. National Day marks the day that six emirates bound together to form the UAE, with Ras Al Khaimah joining as the seventh and final emirate the following year.

HH Sheikh Mohammed bin Rashid met various local dignitaries, heads of Dubai government entities and businessmen at his Majlis at Zabeel Palace. Two of his sons, Sheikh Hamdan bin Mohammed, Dubai’s Crown Prince, and Sheikh Maktoum bin Mohammed were also in attendance. Discussions involved initiatives and efforts to further improve government services and enhance the business-friendly legislative framework, with the Dubai Ruler commenting that development is a continuous process, aimed at achieving the nation’s goals and aspirations. He also emphasised the importance of partnerships between the public and private sectors to help realise the vision of the UAE, as well as that of Dubai, and accelerate the country’s development. Sheikh Mohammed expressed his appreciation for the efforts undertaken by various stakeholders to accelerate the UAE’s development journey and meet the needs of the community.

Following a meeting with high-achieving learners this week, Sheikh Hamdan bin Mohammed, Dubai’s Crown Prince, pledged that the emirate would support the academic aspirations of the best and brightest high school pupils; he also commented that the Dubai government will provide financial awards and scholarships to prestigious universities for top performers, and that the Dubai Ruler’s “vision focuses on recognising and rewarding talent”. Many of the leading students are in line to receive ten-year golden visas, as it was announced by 151.7k have already been issued by Dubai’s General Directorate of Residency and Foreigners Affairs. Launched in 2019, it was awarded to exceptional workers and foreign investors to give them the opportunity to establish deeper roots in the country and allow the nation to benefit from their expertise.

This week, Sheikh Hasher bin Maktoum Al Maktoum, Director-General of Dubai Department of Information, opened the 11th edition of Paperworld Middle East and the co-located Gifts & Lifestyle Middle East. The three-day event closed yesterday, Thursday 17 November and had hosted 316 exhibitors from more than forty countries, a 68% increase on last year’s event; there were also nine country pavilions from Germany, Turkey, China, Hong Kong, Lithuania, Russia, South Africa, Zimbabwe, and the UK.

Emirates SkyCargo expects to add seven more Boeing 777F freighters over the next two years, to bring its fleet to eighteen, indicating the airline’s confidence in the market; it is also looking at the feasibility of expanding its facilities at Dubai World Central airport to accommodate an anticipated rise in exports and imports, as it has already reinstated its cargo hub at DWC for dedicated freighter aircraft operations. The facilities encompass 60k sq mt and has the capacity to handle one million tonnes a year. In H1, Emirates SkyCargo witnessed growth in demand, particularly for pharmaceuticals, medical supplies, foodstuffs and manufacturing-related goods, with more of the same expected in H2, ending 31 March 2023; the facility is still seeing growth in both revenue and yield at a double-digit increase over pre-pandemic levels, and expects to carry two million tonnes of cargo by the end of the financial year on 31 March. Based on current demand, Emirates SkyCargo expects cargo rates to “stabilise” and even “decline slightly” going forward, but despite this, they remain up to 60% higher than their pre-pandemic levels.

As from this Sunday, 20 November, until 19 December, Flydubai and Qatar Airways will operate up to 120 daily World Cup football shuttle flights in and out of Dubai World Centre. This influx of fans will see passenger demand at DWC “triple” over the coming weeks. The number of passengers through DWC is forecast to exceed 494k in Q4. Latest analysis indicates that bookings to Qatar, from the thirty-one competing countries, and from the UAE, where many fans are basing themselves during the tournament, are currently ten times the volume of pre-pandemic levels. With Dubai’s hospitality benefitting from the lack of available accommodation in the host nation, many fans are using the emirate as a base, and flying over just for match days. 85% of all “day trips” to Qatar, during this period, will emanate from the UAE, and it is estimated that Dubai will capture 65% of all fans travelling to other destinations, after their stay in Qatar.

In the first nine months of the year, Dubai hosted 10.12 million overnight visitors, equating to 85% of its comparative pre-pandemic level, when it welcomed 12.08 million. Last week, the UAE announced a national tourism strategy, targeted to forty million hotel guests, raising US$ 27.2 million in additional tourism investment and increasing the sector’s contribution to the country’s GDP to US$ 122.6 billion by 2031.

The Ministry of Human Resources and Emiratisation has referred an unnamed private company to the public prosecutor after claims that it wrongly deducted money from the salaries of Emirati staff intended to support their training under the government’s Nafis. This employment programme, set up to support the government’s push to ensure citizens make up 10% of the private sector by 2026, which included a monthly stipend of US$ 1.4k for up to five years for Emirati university graduates, as well as a one-year salary support of up to US$ 2.2k a month for skilled Emiratis undergoing training. Following a complaint by an Emirati female employee, investigations were carried out showing that the woman, and other workers, were instructed to pay monthly contributions to their employer, which were taken out of the additional payments they were due to receive for a period of twelve months. Even though the firm indicated that the deducted money was being used to support humanitarian initiatives, the Ministry argued that “such practices are considered a violation of the requirements explained to establishments before they are licensed by the Nafis programme to train Emiratis,” and noted that companies face US$ 27.2k fines for forging hiring documents to hit a new quota for Emiratis working in the private sector. Many firms will not realise that, by 01 January 2023, companies with more than fifty employees must ensure 2% of their staff are Emirati, with failure to adhere to the target must pay US$ 1.6k a month for every position short of the quota.

At the beginning of this year, the Ministry of Finance announced the introduction of Corporate Tax, set at a standard 9%, and to commence on or after 01 June 2023. One of the main aims of this new federal tax is to strengthen the UAE’s position as a world-leading hub for investments and businesses. Some of its main details of the tax include:

  • levied on income of over US$ 102k (AED 375k)
  • starting from the financial year 01 July 2023 so that most businesses with a financial year ending 31 December will start from the year ending 31 December 2024
  • a rate of 9% which will vary for big multinational companies that meet certain specific criteria
  • it will be the FTA’s responsibility to administer, collect, and enforce CT administration in the UAE
  • the MoF will remain the competent authority for international tax agreement purposes, and treaties

The FTA has announced that it will launch the EmaraTax online platform on 05 December, with the migration to the new system commencing on 30 November. The aims of the new platform include improving taxpayer’s access, payment of taxes and obtaining refunds, as well as increasing the authority’s ability to administer taxes; it will also enable better, faster decision-making and earlier engagement with taxpayers that need support. Its introduction will align the FTA, with the UAE Digital Government Strategy 2025, to leverage emerging technologies and build a solid digital infrastructure that serves the people and business community.

There has been a major amendment in VAT, effective from 01 January 2023 – director services undertaken by natural persons serving as members of boards at entities and institutions across the UAE will not be subject to VAT; however, VAT is still applicable to director services for legal persons serving as board members that delegate a natural person to act in the name of the legal persons as a member of the board of directors.

Dubai-based fintech firm baraka has raised US$ 20 million, on its latest funding round, led by New York-based Valar Ventures, backed by billionaire venture capitalist, Peter Thiel, with investment firm Knollwood also investing. Money raised will help baraka expand its presence in the GCC, Egypt and the wider MENA region, as well as enhancing customer acquisition. The firm allows users to have “commission-free” investing in US stocks and exchange-traded funds, with its founder, Feras Jalbout, noting that “in just one year since our launch, tens of thousands of users have signed up to baraka.” It will also work with local stock exchanges to allow local trading on its app, as they have seen the recent regional IPO boom.

Zomato has announced that, as from 24 November, its Zomato UAE app will cease to function, and that people will no longer be able to order food; it added that they have “renewed (their) focus on restaurant discovery and dining out”, especially with “new features like Vibe check and additional offers via Zomato Pay”. Customers will be able to continue to order using the Talabat app.

Emaar Properties posted a 46.0% hike in Q3 net profit to US$ 409 million, attributable to new project launches and strong demand, whilst revenue in the period fell 21.0% to US$ 1.45 billion. EBITDA was 12.0% higher at US$ 627 million, as its international real estate operations recorded property sales of US$ 1.0 billion, (that contributed US$ 872 million to revenue), in the first nine months of 2022, led by successful operations in Egypt and India, with its cumulative revenue 1.2% lower at US$ 5.15 billion. However, its net profit came in 47.0% higher to US$ 1.58 billion, with EBITDA up 47.0% at US$ 2.29 billion. The nine months saw Emaar recording the highest group property sales of US$ 7.33 billion, along with a property sales backlog topping US$ 14.14 billion that will be recognised as revenue in the coming years.

Emaar Development, the UAE build-to-sell property development business, majority-owned by Emaar Properties, reported revenue of US$ 2.53 billion in the nine-month period, with both Emaar Malls, and its hospitality, leisure, entertainment and commercial leasing businesses, 24% up at US$ 1.09 billion and 78% higher at US$ 654 million. Its UAE hotels achieved strong ADRs (average daily rates) with average 67% occupancy levels. 

Taaleem Holdings’ IPO raised US$ 204 million, (AED 750 million), equating to 25% of its paid-up capital, with 250 million shares available at US$ 0.817. The company, with twenty-six schools in its portfolio, is one of the largest K-12 premium education providers in the country. The issue was eighteen times oversubscribed, and as this offering is a primary offering, the net proceeds of the Offering will go to the company upon settlement, with the money raised being used to expand its K-12 premium education network. Based on the Final Offer Price, its market cap is expected to be in the region US$ 817 million, (AED3.0 billion).

On Tuesday, DFM’s latest entrant, Emirates Central Cooling Systems Corporation (Empower), started its first day of trading – the Dubai bourse’s fourth public offering and listing this year. One of those four, TECOM announced that shareholders have approved the proposed US$ 54 million (AED 200 million), in line with the Group’s previously announced dividend policy of distributing US$ 218 million, (AED 800 million) annually, to be distributed in semi-annual payments, to shareholders through to October 2025.  In the first nine months of the year, TECOM had posted a 51% increase in profit, to US$ 174 million, on the year, driven by double-digit growth in revenue because of high occupancy levels, with lower operational expenses and reduced financial costs.

In the first nine months of 2022, Amanat Holdings posted a 6.3% hike in net profit to US$ 17 million, with adjusted total income 17.1% higher at US$ 29 million and adjusted EBITDA up 19.3% to US$ 30 million. Over the period, the company acquired HDC – and entry into the special education needs and care market in Saudi Arabia – along with the acquisition of LIWA by NEMA Holding. Amanat’s healthcare platform income grew 39.1% to over US$ 12 million.

The DFM opened on Monday, 14 November, 78 points (4.1%) higher on the previous five weeks, lost 55 points (1.6%). to close on 3,352 by Friday 18 November. Emaar Properties, US$ 0.08 higher the previous week, shed US$ 0.06 to close the week on US$ 1.68. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.67, US$ 3.61, US$ 1.62, and US$ 0.43 and closed on US$ 0.65, US$ 3.58, US$ 1.59 and US$ 0.43. On 18 November, trading was at 185 million shares, with a value of US$ 61 million, compared to 132 million shares, with a value of US$ 98 million, on 11 November 2022.

By Friday, 18 November 2022, Brent, US$ 2.65 (2.7%) lower the previous week, was down US$ 8.37 (8.7%) to close on US$ 87.62.  Gold, US$ 126 (7.6%) higher the previous fortnight, shed US$ 22 (1.2%), to close on 1,752, Friday 18 November.

Owing to an economic slowdown in China, a strong greenback and Europe’s energy crisis, the International Energy Agency lowered its 2023 global oil demand growth estimate by 1.6 million bpd, 0.1 million bpd lower than its previous forecast. With Opec+ cutting production by two million bpd, and an EU ban on Russian energy supplies, the IEA estimates that this will reduce oil supply by one million bpd for the rest of 2022. Meanwhile, global demand for diesel and gas oil is estimated to fall to 400k bpd in 2022, from 1.5 million bpd last year. In September, global crude oil stocks fell by 14.2 million barrels, with OECD oil stocks dropping by 45.5 million barrels.

Six airlines have been fined a combined US$ 7.3 million – and have agreed to issue US$ 622 million in passenger refunds – by the US Transportation Department who seem to have tightened up their consumer enforcement procedures. Transportation Secretary, Pete Buttigieg, commented that “it shouldn’t take enforcement action from (USDOT) to get airlines to pay the funds that they’re required to pay,” with many of the refunds involving flights delayed or cancelled during the COVID-19 pandemic, as many travellers have had to wait months, or even years, for refunds. The six airlines involved were ultra-low-cost carrier Frontier Airlines ULCC.O, (who was required to pay US$ 222 million in refunds and will pay a $2.2 million penalty), Tata Group-owned Air India (US$ 121 million / US$ 1.4 million), Colombia’s Avianca (US$ 77 million / US$ 750k),  El Al Israel Airlines  (US$ 62 million / US$ 900k) and Mexico’s Aeromexico, (US$ 14 million / US$900k).

This week, and following a review, the UK government has finally advised Newport Wafer Fab that its Chinese owners must sell 86% of its stake “to mitigate the risk to national security”. In July 2021, the firm, the UK’s largest microchip plant, was acquired by Dutch-based technology company Nexperia, a subsidiary of Shanghai listed Wingtech. The ruling was based on two factors – Nexperia’s development of the Newport site, which could “undermine UK capabilities” in producing compound semiconductors, and its location as part of a semiconductor cluster on the Duffryn industrial estate, could “facilitate access to technological expertise and know-how”. The firm employs more than 1.5k workers in Newport and Manchester and would be a major player in the sector that could prove a boon for the UK economy.

Last week, Toucan Energy Holdings 1 entered into administration owing the Thurrock Council US$ 755 million; the Tory-run council helped the renewable energy company finance fifty-three of the company’s solar farms in the UK and had racked up debts totalling US$ 1.78 billion; it is reported that these solar parks, with a combined capacity of 513 MW, “continue to operate as normal”. The debt-ridden council has also entered administration, with its leader noting that it was  a “significant step to reducing our overall debt”, and that the appointment was a “positive move forward”. Earlier in the year, the then Johnson administration appointed Essex County Council to step in and act as a commissioner for Thurrock because of the “serious financial situation”.

It is reported that Frasers Group is in advanced discussions to acquire the 251-year old Savile Road tailor, Gieves & Hawkes, which has faced uncertainty ever since its Hong Kong-based owner collapsed into liquidation in 2021. Frasers, owned by Sports Direct, used to be run by retail billionaire, Mike Ashley, but he has recently stepped down from the Board, handing the role over to his son-in-law, Michael Murray. No further details were readily available. In recent times, the ex-Newcastle FC owner has taken over several troubled brands and retailers, including the collapsed fashion outlets of Missguided in June, as well as Game, Evans Cycles, Jack Wills and Sofa.com in similar deals.

A week after furniture retailer Made.com fell into administration, clothing group Joules has become the latest to become another victim of the tough times hitting the retail sector. It also runs the online-only Garden Trading Company. The Leicestershire-based company, which has 132 shops, had failed in negotiations with several potential investors, including Next, is looking at buying Made’s brand name, website and intellectual property. Its founder, Tom Joule, admitted that “we recognise our business has become too complex and our model today is not aligned to succeed in the current, tough trading environment.” It put disappointing quarterly results down to “the challenging UK economic environment which has negatively impacted consumer confidence and disposable income”. When the company listed its shares on London’s junior stock exchange market, Aim, in 2016, it was valued at US$ 165 million, but with its shares tanking 95% YTD sees its current value at just US$ 12 million.

Having come under serious pressure from regulators to treat its 15k riders as employees, and from a serious increase in competition, UK-based food delivery app Deliveroo has confirmed it is quitting Australia. The seven-year old entity is being placed into voluntary administration and has stopped accepting orders via its app. Just like its three main rivals ‘down under’, Uber Eats, Doordash and Menulog, it has been fighting against the new Albanese government which is on record saying that it would work to improve the rights of workers in the gig sector, calling such work a “cancer” on the economy, with accusations that it drives down the wages of a million workers. Business went gung-ho during the pandemic but has seen a slowdown, as consumer spending has been hit with surging inflation, along with regulations being tightened. The company has pledged “guaranteed enhanced severance payments for employees, as well as compensation for riders and for certain restaurant partners.” Last month, Deliveroo also announced that it has planned to quit the Netherlands market at the end of November; it exited the German market in 2019 and Spain earlier in 2022. Its London-listed share value has halved since the start of the year. There is no doubt that the country’s food delivery sector is heading towards a monopoly, and this could have a negative impact on its many stakeholders, including hospitality venues, gig economy workers, and consumers.

At the initial chapter 11 bankruptcy hearing  into the fall of the FTX crypto empire, John J Ray III told the court that “never in my (forty-year) career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here”, adding that most of the group’s accounts were unaudited and some subsidiaries did not have financial accounts at all; he also advised the court that a “substantial portion” of the estate’s property may be missing or stolen. FTX – established, in May 2019, by tech wunderkind Sam Bankman-Fried and his partners Zixiao “Gary” Wang and Nishad Singh – had claimed that, in 2021, the firm had “millions” of registered users and was responsible for around US$ 15 billion of assets on the platform, equating to 10% of global volume for crypto trading. Mr Ray commented that “these figures have not been verified by my team”.

The ECB President Christine Lagarde has reiterated that she believes singling out raising interest rates, over balance sheet reduction, is the best way forward to restrict economic activity to tame inflation. Over the past five months, the central bank has lifted rates by an unprecedented 200 basis points to tackle inflation and said that more policy tightening is coming via rate hikes, and the reduction of its US$ 5.2 trillion euro debt holding. She again reiterated that “we expect to raise rates further – and withdrawing accommodation may not be enough,” and that “interest rates are, and will remain, the main tool for adjusting our policy stance.” It seems likely that rates will head further north by 50bp next month and whether this is sufficient to see inflation, now running at 10.5%, fall to anything near to the bank’s 2.0% target, remains problematic. What is certain is that the bloc will be in recession as early as Q1 2023 and that it will have to start reducing its balance sheet by quantitative easing and letting some of its bonds expire. Otherwise, the bloc could enter a period of entrenched inflation and all the economic troubles that would entail.

It has been an eventful three weeks since Elon Musk moved into his Twitter office after his US$ 44 billion acquisition in March. This week, he was in a Delaware court, defending himself against claims that his US$ 56 billion pay package at Tesla was based on easy to achieve performance targets and that it was approved by a compliant board of directors. There are several Tesla investors not happy to see its founder apparently spending most of his time with his new acquisition, with Musk indicating that “there’s an initial burst of activity needed post-acquisition to reorganise the company, but then I expect to reduce my time at Twitter.” In the last fortnight, he has sent Twitter’s previous chief executive and other senior leaders packing, as well as laying off half of Twitter’s staff, and this week he said that he hoped to complete an organisational restructuring and also to find a new leader. On Wednesday, he sent an email to the remaining Twitter employees giving them twenty-four hours to decide whether they wanted to stay on at the company to work “long hours at high intensity” or take a severance package of three months’ pay.

Following this edict, hundreds of Twitter employees are estimated to be quitting the beleaguered social media company. It is clear that many more staff members are considering “jumping ship” from a company that the new owner seems overkeen to rid it of half of its payroll, as well as ruthlessly changing the culture to emphasise long hours and work at an intensive pace. Yesterday, Musk twittered that he was not worried about resignations as “the best people are staying,” even though the departures include many engineers responsible for fixing bugs and preventing service outages. Yesterday, 17 November, Twitter told employees that the company’s office buildings will be temporarily closed, with immediate effect, and would reopen next Monday. Despite all the shenanigans going on at Twitter, Elon Musk could still see the funny side of the drama that could soon turn into an economic tragedy – “How do you make a small fortune in social media?” – “Start out with a large one.”

Google will pay $392 million to settle allegations about how it collects data from users, after forty US states, claiming that it had tracked the location of users who opted out of location services on their devices, took the tech giant to various courts. Having settled the largest privacy-related multi-state settlement in US legal history, it has been told to be transparent about location tracking in the future and develop a web page telling people about the data it collects. Earlier in the year, Texas, Indiana, Washington and the District of Columbia had already taken legal action against Google in January, whilst in October, Google agreed to pay Arizona US$ 85 million over similar issues. It has been proven that Google had been misleading consumers about location tracking since at least 2014, and knowing that information, helps advertisers target products, with this seeing Google generating US$ 200 billion in annual advertising revenue. Nebraska Attorney General Doug Peterson was correct, noting that “for years Google has prioritised profit over its users’ privacy. It has been crafty and deceptive”.

As widely expected, Amazon has announced that it is cutting its payroll by almost 3%, equating to 10k jobs, and joins other tech giants shedding jobs across the sector, as revenue streams begin to dry up as the global economy slows. (Last week Meta – which owns Facebook, Instagram and WhatsApp – announced that it would cut 13% of its workforce, whilst the likes of Microsoft, payment processing platform Stripe and cloud-based business software firm Salesforce have also announced layoffs). Amazon had already introduced a hiring freeze, having recognised that it had over-hired during the pandemic, as well as cutting some of its warehouse expansions. Its founder, Jeff Bezos, has recently warned that the US economy was slowing and that it was time to “batten down the hatches”. YTD, Amazon’s share price has fallen by more than 40%, as it grapples with a slowdown in online sales.

This week, the Amazon founder awarded a US$ 100 million prize, the Bezos Courage & Civility Award, to country star and philanthropist, Dolly Parton. In giving the award, his partner, Lauren Sanchez, noted that the singer-songwriter was “a woman who gives with her heart and leads with love and compassion in every aspect of her work”. Her Dollywood Foundation has been a high-profile supporter of charities, including giving books to children around the world, and has supported Moderna with a US$ 1 million donation for coronavirus to the Vanderbilt Medical Center in Nashville.

Jeff Bezos has also confirmed that he plans to give away most of his US$ 124 billion fortune, during his lifetime, mainly to fighting climate change and reducing inequality. He follows the paths of Warren Buffett, Bill Gates and his ex-wife MacKenzie Scott who had already pledged to give their fortunes away. The Amazon founder, who previously pledged US$ 10 billion to the Bezos Earth Fund, which he launched in 2020 to help fight climate change, also owns the Washington Post and space tourism company Blue Origin.

There was a little good news for the EU this week with its Q3 seasonally adjusted GDP nudging 0.2% higher in both blocs – euro area and in the EU – compared with the previous quarter, according to a flash estimate published by Eurostat;; in Q2, GDP had grown by 0.8% in the euro area and by 0.7% in the EU. When it comes to employment data, there was a Q3 0.2% increase in the number of employed persons in both sectors, compared to a 0.4% growth in both the euro area and EU in Q2. On the year, the increases were at 1.7% and 1.5% respectively.

The latest EC economic forecast notes that the eurozone and most EU countries will be in an economic recession, (for at least two quarters), before the end of the year, as its economic situation has deteriorated markedly. It also revised upward trends in its inflation forecast, indicating it would peak by 31 December and average 9.3% in the EU and 8.5% in the eurozone for the year, whilst remaining high well into the new year. The forecasts for the next two years see inflation in the eurozone and the EU at 6.1% /7.0% and 2.6%/3.0% in 2024. The forecast included the caveats that geopolitical tensions, such as the war in Ukraine, would neither normalise nor escalate and that sanctions against Russia would remain in place. Average inflation was highest in the Baltics, where it was forecast to be 19.3% in Estonia, 18.9% in Lithuania, and 16.9% in Latvia. EU unemployment rates are expected to nudge higher from 2022’s level of 6.2% to 6.5% and then 6.4% in 2024, with current employment growth of 1.8%, sliding to zero next year. However, there is no doubt that, despite all the negative economic data around, the bloc’s labour market remains strong.

Like other members of G20, Japan has been badly impacted by the rising cost of living which has markedly reduced consumer spending growth. Consequently, Q3 GDP fell an annualised 1.3%, but it seems that the country may well bounce back in Q4. The world’s third biggest economy is expected to recover, driven by a rebound in tourism and a much-improved trade balance. However, because of the variances in interest rates between the Bank of Japan, (keeping its key rate below zero) and the Fed, (in contrast, aggressively raising rates), the value of the yen, to the greenback, hit new thirty-two-year lows last month – making exports cheaper but imports more expensive.

Although September UK wages rose at their fastest rate in more than two decades, at 5.7%, they are still 2.7% lower because of the soaring cost of living, rising at its fastest rate in almost forty years, largely due to the ongoing Ukraine war. Although nudging 0.1% higher to 3.6% in the September quarter, this is still near a fifty-year low; however, the BoE has issued a warning that because of the upcoming recession in the country, this could climb to 7.0% by 2025.

The UK overall inflation rate jumped 1.0% on the month to 11.1% in October, which was the highest rate in forty-one years, as food prices rose at their fastest rate in forty-five years, coming in at 16.2% last month – 1.7% up on the month. Energy and fuel costs rose in tandem, with the surging cost of living impacting household budgets, leaving many people facing hardship, especially in the poorer households, who tend to spend 50% of their income on food and energy, compared to about 33% for those on middle incomes. Although the Office for National Statistics noted a spike in food prices last month, with milk, pasta, margarine, eggs and cereals all going up, gas and electricity prices remained the main drivers of inflation after bills climbed again last month – with gas and electricity prices a staggering 130% and 66% up, compared to October 2021. Most households did benefit from the government’s Energy Price Guarantee scheme which limits the average household bill to around US$ 3k (GBP 2.5k) a year. There are signs that the inflation level could slowly start to move downwards from this month, but don’t bet your house on it.

Since records began in 2003, the London Stock Exchange had always been the most valued bourse in Europe but has now lost this position to the French stock market. It is now worth US$ 2.823 trillion – US$ 0.002 trillion more than its London rival; six years ago, the gap was around US$ 1.4 trillion in London’s favour. Three main factors in this change seem to be a weak pound, fears of recession in the UK and surging sales of French luxury goods makers. On top of that is that the UK’s medium sized companies have been doing particularly badly this year, as consumers cut back on their spending and businesses struggle with higher costs; the FTSE 250 share index has shed 17% in value over the past twelve months. Since the Brexit referendum, in June 2016, Paris’s CAC-40 index is up 47% and London’s FTSE 100 by just 16%, and it was only a matter of time before London lost its crown. If the economy continues to be run by inexperienced politicians and bloated bankers, human capital, investments and industries will also be joining the be bandwagon Leaving London!

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Down, Down, Down!

Down, Down, Down!                                                                     04 November 2022

The 3,474 real estate and properties transactions totalled US$ 2.62 billion, during the week ending 04 November 2022. The sum of transactions was 348 plots, sold for US$ 649 million, and 3,126 apartments and villas, selling for US$ 1.97 billion. The top three land transactions were all for land – two in World Islands, sold for US$ 95 million and US$ 26 million, and the third in Al. Safa 2 for US$ 20 million. Jabal Ali recorded the most transactions, with 122 sales worth US$ 117 million, followed by Al Hebiah Fifth, with seventy-two sales transactions, worth US$ 48 million, and Al Hebiah Fourth with twenty-four sales transactions, valued at US$ 59 million. The mortgaged properties for the week reached US$ 362 million, with the highest being  land in Al Hamriya, mortgaged for US$ 41 million. 79 properties were granted between first-degree relatives worth US$ 578 million.

The last day of October was a bumper one for Dubai real estate, with deals on Monday topping US$ 1.04 billion, including 625 sales transactions worth US$ 455 million, 101 mortgage deals totalling US$ 75 million and twenty-three gift deals amounting to US$ 529 million. That would bring October’s transactions to a total of US$ 9.11 billion, compared to US$ 6.65 billon in September. YTD figures to 31 October are near to US$ 60 billion.

At the peak of the pandemic, many renters of Dubai property made the move to bigger residential space and larger outdoor areas, as restrictions made many ‘house-bound’. But, as the economy reboots at a much quicker rate than many had expected, and residential rents have started climbing north, there is a marked reverse in movements to downsizing again. The end result is that there are steeper increases in rents, (up by 28% for villas and apartments by 26%), as compared to increases in sales prices. Despite these steep annual rises, both villa and apartment rents are below 2014 peaks by 5% and 24%.

There have been significant apartment rent rises seen in several locations, including Palm Jumeirah, Downtown Dubai, The Greens, The Views, Discovery Gardens, Dubailand and Dubai Sports city, with hikes of 38%, 37%, 37%, 37%, 27%, 25%, and 21%.  Core noted that she steepest increases, in year-on-year villa rents, were posted in Emirates Hills (42%), Palm Jumeirah (41%), Jumeirah Village Circle (28%,) the Springs (20%) and the Meadows (20%).

Alpago Properties is confident that another high-value penthouse on the Palm Jumeirah will attract bids of over US$ 68 million – as the demand for luxury properties continues to rise in Dubai. The same developer recently sold a new mansion, in the same location, for a record price of US$ 82 million, (AED 302 million). The penthouse is one of ten penthouses in its eleven-tower, ten-residence Palm Flower project; construction will start in Q1 2023, with completion slated for 2024.

The latest S&P Global PMI sees business activity in the UAE’s non-oil private sector continue to improve last month,  with new business and output along with a rise in demand and employment. The October seasonally adjusted PMI rose 0.5 to 56.6 – its highest since July 2019. The fact that there were marked expansions in business activity and new orders point to domestic firms benefitting from strong demand growth, and this has led to an increase in work backlogs as firms’ operating capacity is being stretched to the limit in many cases. New order inflows were the highest since last November, attributable to several factors, including growth in new clients, lower prices, improved services and this month’s FIFA World Cup in Qatar. Not surprisingly, this has led to a marked increase in payroll numbers – rising at its fastest rate since July 2016 – and purchasing activity at its fastest rate in three years.

In tandem with the latest S&P Global PMI, other data indicate that the economy is in robust health having made a strong rebound from the pandemic-induced slowdown The Central Bank expects UAE’s economy to expand by 5.4% this year, whilst Emirates NBD forecasts a more bullish 7.0%, attributable to higher energy prices and the “robust growth” of its non-oil sector, and ADCB sees a 6.2% growth this year. In H1, foreign trade rose 19.0% to US$ 272 billion, compared to the same period pre-Covid. Over the same comparative periods, the number of hotel guests was 42% higher, at twelve million, with the revenue generated surpassing US$ 5.2 billion. Q3 Dubai property prices reached a twelve year high, both in terms of volume and value, whilst average property prices, in the twelve months to 30 September, rose by 8.9%; average villa prices were more than 14% higher and average apartment prices by 8.0%.

On 01 November, Emirates and Air Canada announced the launch of their codeshare cooperation, confirming that the new partnership will allow customers of both airlines to enjoy seamless connectivity to forty-six markets, spanning three continents. Emirates also noted that “codeshare tickets will be available for sale to thirty-five markets for travel effective 01 December, with eleven additional markets to be added pending final regulatory approval, and the potential for more markets to be included beyond that.” The Dubai-based carrier’s customers will be able to book codeshare flights to and from Canadian points beyond Toronto, including Calgary, Edmonton, Halifax, Montreal, Ottawa and Vancouver.

At this week’s Abu Dhabi International Petroleum Exhibition and Conference, the UAE and the US signed a strategic partnership agreement to invest US$ 100 billion in clean energy projects, with a production capacity of 100 gigawatts, by 2035. ‘PACE’, (the UAE-US Partnership for Accelerating Clean Energy) will finance and offer other support in addition to deploying 100 new gigawatts (GW) of clean energy in the US, the UAE and emerging economies. Both countries reconfirmed their joint commitment to enhance climate ambition and climate action, in line with their net zero 2050 goals. Utilising private and public sector funding, PACE will focus on four main areas:

  • clean energy innovation
  • financing, deployment and supply chains
  • carbon and methane management advanced reactors, including Small Modular Reactors (SMRs)
  • industrial and transport decarbonisation

All du’s financial indicators headed north in Q3, including revenue, (10.5% to the good at US$ 864 million) and EBITDA, 18.5% higher at US$ 355 million, driven by sustained demand for broadband and mobile services. The increase in service revenues (and its inherent higher profitability) saw the gross margin up 3.0% to 65.2%, and the EBITDA margin expanded by 277bp to 41.0%. Revenue streams saw mobile service revenues 10.7% higher to US$ 393 million, with equipment sales accounting for US$ 48 million. Capex totalled US$ 197 million, with the company ending the period with a net cash position of US$ 248 million and US$ 1.04 billion of undrawn facilities. Its mobile customer base grew by 14.7% to 7.4 million subscribers.

The Ministry of Energy adjusts fuel prices in the UAE on the last day of every month. According to the government, the UAE liberalised fuel prices help to rationalise consumption and encourage the use of public transport in the long run and incentivise the use of alternatives. The UAE Fuel Price Committee increased November retail petrol prices by up to 9.8% – the first increase in three months.

  • Super 98: US$ 0.905 – up by 9.6% on the month and up 25.3% YTD from US$ 0.722  
  • Special 95: US$ 0.872 – up 9.6% on the month and up 26.6% YTD from US$ 0.689
  • Diesel: US$ 1.025– up 9.3% on the month and up 47.1% YTD from US$ 0.697
  • E-plus 91: US$ 0.853 – up by 9.8% on the month

The UAE Central Bank followed the US Federal Reserve by lifting its benchmark borrowing rates by 0.75%; the Base Rate applicable to the Overnight Deposit Facility (ODF) rose by 75 basis points to 3.90%. The rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities was maintained at 50 basis points above the Base Rate, which provides an effective interest rate floor for overnight money market rate.

In the first nine months of the year, Dubai Aerospace Enterprise posted profit, before exceptional items, 125% higher at US$ 204 million, with cash flow from Operating Activities up 20% to US$ 957 million. By September, DAE’s net to debt equity stood at 2.35, with available liquidity at US$ 2.8 billion, giving a liquidity coverage ratio of 743%. During the period, the company acquired and sold forty-five, (ten, owned and thirty-five managed) and thirty-five aircraft, (twelve, owned and twenty-three managed). Last month, it acquired Sky Fund I Irish, Limited, a company with a fleet of 36 modern aircraft.

Taaleem is joining a growing list of Dubai-based businesses planning IPOs on the DFM. The private school operator aims to raise US$ 204 million, with the process starting this Thursday, 10 November and will close on 16 November for UAE retail investors, eligible employees and eligible parents; subscriptions will close on the following for professional investors. Taaleem, owned by Investment Corporation of Dubai, “intends to use the net proceeds from the offering to expand its premium K-12 schools’ network.”

Union Properties on Tuesday reported a Q3 net profit of US$ 225k – following a net loss of US$ 8 million a year earlier – with a 3.0% hike in revenue to US$ 27 million, attributable to group’s subsidiaries delivering healthy performance improvements, driven by strong market dynamics in the local real estate sector. Over the period, admin expenses halved to under US$ 5 million and by 39.0%, to US$ 15 million over the first nine months of 2022. Two major events in Q3 saw the successful completion of the US$ 162 million debt restructuring plan and subsidiary ServeU being awarded fifty-eight new contracts, valued at US$ 74 million. As at 30 September, its book value had remained flat at US$ 518 million, equating to US$ 0.122 per share.

On Monday, Emirates Central Cooling Systems Corporation announced that the price range  for its upcoming IPO, which is expected to raise in the region of US$ 360 million, would value Empower around the US$ 3.6 billion mark. 10% of the total issued share capital of Empower (equivalent to a total of 1,000,000,000 shares) were being made available via the Offering, with the now usual caveat that the Selling Shareholders’ reserve the right to amend the size of the Offering. A day later, it was announced that, due to popular demand, it had raised the size of the IPO by 50% to 15% and by Friday, to 20%. The world’s largest district cooling provider has already indicated that the 2023 dividend will be within the 6.4% – 6.5% range equating to US$ 232 million. All the shares involved in the IPO already exist, with DEWA and Empower initially selling 7% and 3% of the total issued share capital, respectively.

The DFM opened on Monday, 31 October, 76 points (2.3%) higher on the previous three weeks, nudged 1 point higher to close on 3,350 by Friday 04 November. Emaar Properties, US$ 0.04 lower the previous week, remained static to close the week on US$ 1.66. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 3.56, US$ 1.66, and US$ 0.39 and closed on US$ 0.67, US$ 3.58, US$ 1.59 and US$ 0.41. On 04 November, trading was at 172 million shares, with a value of US$ 73 million, compared to 82 million shares, with a value of US$ 69 million, on 28 October 2022.

For the month of October, the bourse had opened on 3,339 and, having closed the month on 3,332 was 7 points (0.1%) lower. Emaar traded US$ 0.07 higher from its 01 October 2022 opening figure of US$ 1.58, to close the month at US$ 1.65. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.68, US$ 3.50, US$ 1.60 and US$ 0.47 and closed on 31 October on US$ 0.66, US$ 3.67, US$ 1.59 and US$ 0.38 respectively. The bourse had opened the year on 3,196 and, having closed October on 3,332, was 136 points (4.3%) higher, YTD, Emaar traded US$ 0.33 higher from its 01 January 2022 opening figure of US$ 1.33, to close October at US$ 1.66. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the year on US$ 0.00, US$ 3.69, US$ 1.47 and US$ 0.72 and closed on 31 October on US$ 0.66, US$ 3.67, US$ 1.59 and US$ 0.38 respectively.

By Friday 04 November 2022, Brent, US$ 4.14 (4.5%) higher the previous fortnight, was up US$ 2.87 (3.0%) to close on US$ 98.64.  Gold, US$ 15 (1.0%) lower the previous week, gained US$ 38 (2.3%), to close Friday 04 November.

Brent started the year on US$ 77.68 and gained US$ 17.15 (22.1%), to close 31 October on US$ 94.83. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has shed US$ 189 (10.3%) during 2022, to close on US$ 1,642. For the month, Brent opened at US$ 86.33 and closed on 31 October, US$ 9.21 higher (10.5%) at US$ 94.83. Meanwhile, gold opened October on US$ 1,716 and shed US$ 74 (4.3%) to close at US$ 1,642 on 31 October.

BP became the latest energy giant to make obscenely high profits, with many critics calling for the Sunak government to raise more money from the windfall tax on global profits. In Q3, BP more than doubled its quarterly profit, compared to a year earlier, at US$ 8.2 billion, driven by surging energy prices which is a major factor in fuelling a rise in the cost of living. Whilst Shell does not expect to pay any such tax this year, BP’s windfall tax will be in the region of US$ 800 million; the tax was introduced by the then Chancellor Sunak in May and estimated to boost the Exchequer by up to US$ 17 billion this year and next “to help fund cost of living support for eight million people” – many consider this figure too low and that energy companies should be paying more and there is every chance this will be taken up in the Autumn Statement on 17 November.

As the impact of a global shortage of semiconductors continues unabated, Toyota, the world’s biggest carmaker, has announced that it expects annual production of vehicles to come in below its initial target No estimate was given but since it has missed its first four months’ target to July, it seems likely that the figure will be 9.3 million for the twelve months to the end of March. Toyota confirmed that a revised target will be disclosed once the outlook for production becomes clearer. Like its peers, Toyota has also been impacted by a decline in consumer confidence, mainly attributable to soaring inflation, rising interest rates and growing risks of economic recession in major markets. Toyota will suspend eleven production lines at eight domestic factories next month, for between two to nine days, affecting the output of a wide variety of vehicles, including the Corolla, RAV4 and Yaris. It ended up producing about 8.6 million vehicles in the last financial year to 31 March.

According to a Washington Post’s report, Twitter, is planning to cut its workforce by 25%, (more than 1.7k of its current 7k payroll), as part of what is expected to be a first round of layoffs, Elon Musk has denied about laying off Twitter employees at a date earlier than 01 November to avoid stock grants due on the day.


Earlier in the week, it looked as if UK battery firm Britishvolt would fold in the wake of the UK government rejecting a US$ 34 million (GBP 30 million) advance to help in constructinga factory in Blyth in Northumberland which would build batteries for electric vehicles. However, it managed to secure funds from other sources after it was refused a request to draw down a third of a US$ 113 million government commitment. This cash injection will allow the firm, which has yet to make any revenue, to stay afloat in the short to medium term. In January, the then Johnson administration had pledged the US$ 113 million to help it build its battery plant, as well as to attract more private investment for the development, as part of its “levelling up” strategy. The government’s commitment helped the company raise a further US$ 1.93 billion from private investors, which included UK asset investment giant Abrdn and fund manager Tritax. However, Britishvolt, citing “difficult external economic headwinds including rampant inflation and rising interest rates”, has had to delay the start of production until the middle of 2025. It still seems that the US$ 4.32 billion (GBP 3.8 billion) project may not go ahead, with a spokesman adding that the company was “aware of market speculation” and was “actively working on several potential scenarios that offer the required stability”. The demand for batteries will increase significantly especially because that from 2030, sales of new petrol and diesel cars in the UK will be banned and manufacturers are switching to making electric vehicles. It is understood that Britishvolt had already struck MoUs to make batteries for UK car firms Aston Martin and Lotus.

To the surprise of many, incumbent Labour Prime Minister, Anthony Albanese and Treasurer Jim Chalmers have decided to stick with the Morrison government’s controversial stage 3 tax cuts. It seems that the financial benefits of the Albanese government’s major tax and welfare policies will be of greater use to the country’s rich, and, at the same time, widening income inequality, making the rich richer and the poor poorer, Calculations see that high income couples with children will get an extra US$ 6,261 a year, whereas the lowest income couples, with children, will only get US$ 124.  The professorial study has indicated that policies will see the top 20% of households getting an extra US$ 7.7 billion a year in disposable income in 2024-25, compared to the poorest 20% benefitting by US$ 26 million. The variances in total benefits are startling:

US$ milTop 20%Bottom 20%
Couple with children6,261124
Couple only2,7962
Lone person2,2440
Single parent4,3064

A flash estimate from Eurostat sees the Euro area annual inflation to come in 0.8% higher on the month at 10.7%. All the main components of euro area inflation are expected to move higher from September, including, energy up 1.2% higher to 41.9%, food, alcohol & tobacco (1.3%, to 11.8%), non-energy industrial goods, (0.5% to 6.0%) and services (0.1% to 4.3%).

In a move that seems to be deflecting blame away from the ECB bureaucracy, its supremo, Christine Lagarde, signals out Russian President Vladimir Putin’s for the soaring inflation levels and cost of living crisis that is dragging the bloc’s economy into an inevitable recession. She commented that the central bank has had to raise interest rates because of inflation caused by Russian President Vladimir Putin’s war in Ukraine, and warning “that’s what he [Putin] is trying to do, cause chaos and destroy as much of Europe as he can,” and “this energy crisis is causing massive inflation which we have to defeat.” Maybe she and her cohorts could have moved much earlier and much quicker and not wait until inflation nudged towards the double-digit mark – and quintuple the ECB’s 2.0% target. Not only has she laid the main cause at Putin’s door but also pointed to a speedier-than-expected economic rebound from the pandemic as a secondary cause.

Some would agree that Christine Lagarde has some nerve to tell the people of the nineteen-member euro zone that inflation has further to rise from the current October figure of 10.7% without specifying a level for the so-called terminal rate. This is the lady who became President of the ECB four years ago this week, when the bloc’s inflation rate in November 2018 stood at 1.9%. Two years later inflation was at minus 0.3% in late 2020, and eleven months later, in October 2021, inflation nudged over 2.0%. So, over the past year, the bloc’s inflation rate has more than quintupled, whilst to the outsider, the ECB has been remiss in doing so little to solve the problem.

From the end of 2021 onwards, inflationary pressures broadened and intensified, with core inflation rising above 2% as of October 2021 and more significantly as from February 2022. This was driven by a sequence of supply shocks, in particular disruptions in energy markets following Russia’s war with Ukraine, combined with a rebound in demand reflecting pandemic restrictions being lifted. A succession of supply-side shocks has the potential to destabilise inflation expectations, with the risk that the increase in inflation becomes self-sustained. In response, the ECB began normalising monetary policy in December 2021, with the decision to end net purchases under the pandemic emergency purchase programme at the end of March 2022. Lagarde indicated that borrowing costs had further to rise and that, “the destination is clear, and we haven’t reached it yet;” she also acknowledged that the likelihood of a recession had increased but warned of the dangers of not stepping in to tame inflation. A year ago, the ECB’s Governing Council, driven by the fact that inflation was beginning to get out of hand, noted that it would ensure inflation returns to the 2% target over the medium term.  The Bahasa term, “Jam Karat”, means that time in Indonesia moves at a different, slower pace and perhaps it could be used to describe the ECB’s timekeeping.

YTD, at the end of September, China’s current account surplus had risen by 56%, year on year, at a record US$ 310.4 billion. The country’s goods trade surplus rose by 37% to another record at US$ 521.6 billion, while the deficit under trade in services narrowed by 23%. Another positive economic indicator showed direct investment with a net inflow of US$ 46.9 billion.

The Fed on Wednesday lifted its policy rate by another 0.75% – for the fourth successive month in a row – with its short-term rate to between 3.75% and 4.0%, the highest level since 2008. The main aim of this strategy of raising rates is to bring inflation down towards its 2.0% target range – at a time when the US headline CPI had increased by 0.4% in September, up 8.2% from a year earlier. The core CPI, which excludes food and energy, increased 6.6% from a year ago, the highest level since 1982, according to Labour Department data. Despite the economy climbing out of its mid-year technical recession, it has returned to growth but many think this will be short-lived. In line with other major central banks, it could be argued that it has been far too slow to react to rising prices and now the country is suffering from their vacillation.

Meanwhile, the Bank of England had its first asset sales from the quantitative easing (QE) asset portfolio, offering US$ 863 million, (US$ 750 million), last Tuesday, but postponed the fourth auction to avoid a clash with the UK government’s fiscal statement; it has US$ 965.8 billion of government bonds in its Asset Purchase Facility after a more than a decade of buying to stimulate the economy. The BoE also confirmed that future auctions will take place on 07 November, 14 November, 24 November, 28 November, 05 December and 08 December.

The Bank of England has warned the UK is facing its longest recession since records began, as it raised interest rates by the most since 1989, that will see unemployment levels doubling to 6.5% by 2025, from its current fifty-year level low; rates were lifted by the expected 0.75% to 3.0%. With some irony, BoE Governor commented that there was a “tough road ahead” for UK households, but said it had to act forcefully now or things “will be worse later on”. If only he and his cohorts had moved quicker, the country would not be facing such a worrying future. It also got its recession forecast wrong having initially expected the UK to fall into recession at the end of this year, indicating it would last for all next year. Now it believes the economy has already entered a “challenging” downturn this summer, which will continue next year and into the first half of 2024. Only three months ago, the forecast had been about a sharp energy recession, with the current thinking being a shallower but a longer downturn.

Nationwide posted that October UK house prices fell 0.9% on the month – for the first time since June 2021 – noting that one of the main impact factors was the debacle of the Truss/Kwarteng mini budget that spooked global markets and pushed UK mortgage rates up to 2.0% higher (for a time). The lenders suspended hundreds of mortgage products, amid uncertainty over how to price these long-term loans. The October fall was the largest since June 2020, at the height of the Covid pandemic. Across the UK, the average house price in October was US$ 307.9k, (GBP 268.3k), whilst there was a marked slowdown in annual house price growth last month, to 7.2% from 9.5% in September, with the market deteriorating further in the coming months; according to the BoE, monthly mortgage approvals edged lower – 10.3% lower at 66.8k in the month in September. Tuesday’s rate hike ensured the market will slow even further in the coming months, as demand continues to wane.  Any expat thinking of buying property in the UK would do well to wait another fifteen months when prices could be at least 20% cheaper, in sterling terms, and perhaps even lower in dirhams, as sterling sinks.  The next eighteen months will be painful for everyone, as the UK economy drags behind those of the US and EU, unemployment rates will surge, household income will wane and consumer confidence will take a massive hit on the chin. There is only one way the market is going and that is  Down, Down, Down!

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Dawn of a New Day

Dawn of a New Day                                                                      28 October 2022

The 2,217 real estate and properties transactions totalled US$ 1.91 billion, during the week ending 28 October 2022. The sum of transactions was 234 plots, sold for US$ 616 million, and 1,983 apartments and villas, selling for US$ 1.09 billion. The top three land transactions were all for land – one in Palm Jumeirah, sold for US$ 82 million, another in Island 2 for US$ 36 million and in World Islands for US$ 23 million. Jabal Ali recorded the most transactions, with 105 sales worth US$ 96 million, followed by Mohammed bin Rashid Gardens, with twenty-nine sales transactions, worth US$ 173 million, and Al Mamzar with twenty-three sales transactions, valued at US$ 45 million. The top three transfers for apartments and villas included one sold for US$ 16 million in Palm Jumeirah, another purchased for US$ 183 million in Umm Suqeim Third for US$ 13 million, and a third sold for US$ 12 million in Me’aisem First. The mortgaged properties for the week reached US$ 608 million, while 170 properties were granted between first-degree relatives worth US$ 39 million.

Morgan’s International Realty released figures this week indicating that in the nine months to September, 31k new units have been added to Dubai’s property market – the highest number since 2018. The total value of transactions came in on US$ 17.68 billion, and 54.5% higher on the year, and almost double the number of transactions, compared to Q3 last year. The report also noted that townhouses/villas witnessed a 30% hike in price increases to US$ 349 per sq ft, with apartments 29% higher, year on year, to US$ 412 per sq ft, while hotel apartments (US$ 655 per sq ft) and commercial property (US$ 376 per sq ft) were up 10% and 8% respectively. The consultancy noted that mortgage activity remained buoyant in Q3, despite rising rates, with mortgage volumes 9% higher from Q2 and by 185% year on year, as there was a 2% decline in cash transactions on the quarter but up 85% compared to a year earlier. The secondary market was relatively flat, compared to Q2, and 52% higher than the previous year. Primary (off plan) transactions performed better – 31% and 74% higher on the quarter and year on year. With figures like these, it will be no surprise to see the number of new launches being ramped up in the coming months.

Knight Frank reports that prices of prime residential properties in The Palm Jumeirah, Emirates Hills and Jumeirah Bay have skyrocketed by up to 89% over the past twelve months. In other locations, values have risen by 29% in Q3, driven by a marked increase in the number of incoming UHNWI, (ultra-high net worth individuals), interested in buying into this sector of the emirate’s market. This boom will continue into the coming months and will probably peak next month when many visitors will use Dubai as a base for watching the FIFA World Cup matches in Qatar.

Q3 saw an interesting shift in the Dubai property market in that there has been a reversal from villa to apartment sales; Covid saw villas become more popular, as buyers were preferring villas as they sought more space and many workers shifted to home working, with another two factors being villa prices have been rising at twice the rate of apartments and there has been a villa supply shortage. Q3 results saw apartments accounting for 73% of all sales, compared to 67% over the same 2021 period, whilst transactions were 61% higher on the year, with apartments transactions 61% higher, as villa transactions dipped 5%.

On Tuesday, Global Village opened its doors for the start of its 27th season. The six-month long event, which is the region’s leading family destination for culture, shopping, and entertainment, will feature over 3.5k shopping outlets and 250 restaurants, housed in twenty-seven pavilions, with guests having the choice of 40k shows during the season. There will be over four hundred performers from forty different countries, with over two hundred performances every night – and if that is not enough, there will be more than 175 rides, games and attractions, including the new Global Village Big Balloon, a one-of-its-kind Helium Balloon Ride, providing spectacular 360-degree views across Global Village and its wider surroundings.

This week, the Ministry of Finance released preliminary federal government 2021 financials, showing that revenues were 26.1% higher at US$ 126.4 billion, with social contributions increasing by 4.7% to US$ 3.68 billion; the value of other revenues jumped 23.6% to US$ 68.6 billion. Although expenditures nudged 1.0% higher to US$ 109.6 billion, capex sank 57.0% to US$ 5.4 billion. Meanwhile, current expenses, including the likes of workers’ compensation, use of goods and services, consumption of fixed capital, interest paid, subsidies, grants, social benefits, and other transfers, rose by 8.3% to US$ 104.2 billion. The end result saw a US$ 8.6 billion 2020 deficit change to a US$ 16.7 billion surplus last year.

The fifth and final auction of the UAE government’s Treasury Bonds programme has concluded, being oversubscribed more than five times. The T-Bond 2022 programme was aimed at raising US$ 2.45 billion (AED 9.0 billion) in five tranches. As with past issues, this year, there were final allocations of US$ 204 million (AED 750 million) each for both the two-year and three-year tranches, with a spread of 17bps and 8 bps respectively. The Ministry of Finance was the issuer in collaboration with the Central Bank of the UAE as the issuing and paying agent.  The aims of the exercise were to build the dirham denominated yield curve, strengthen the local debt capital market, develop the investment environment, provide safe investment alternatives for investors, and support sustainable economic growth.

It appears that the Emerging Markets Property Group, (which has just raised US$ 200 million in its latest funding round, led by US-based growth equity fund Affinity Partners, with new funding from KCK, Acacia Partners and several other investors), is setting up for an IPO. The money raised will be spent on its technology platforms to strengthen its product offering, as well as expanding their payroll numbers. The Group, which owns classified portals Bayut, dubizzle and others, operates mainly in the Mena region and SE Asia, across fifty locations. In 2020, EMPG and Amsterdam-based OLX Group merged their businesses in the Mena region and in South Asia to create a company with assets worth US$ 1 billion.

It is reported that a consortium of Abu Dhabi state-backed entities, including wealth fund ADQ and real estate developer Aldar Properties PJSC, is interested in acquiring a stake in Dubai-based GEMS Education, said to be valued in the region of US$ 6.0 billion. Aldar, backed by the Abu Dhabi wealth fund Mubadala Investment Co, already has interests in the education sector, with Aldar Education. The Dubai-based company, owned by Sunny Varkey and buyout firm CVC Capital, is one of the world’s largest private school operators. GEMS operates more than sixty schools, teaching over 130k students across the Middle East and North Africa. It also has schools in Asia, Europe and North America.

Dubai Multi Commodities Centre has signed a Memorandum of Understanding with Logis, that will see the two entities combine to develop the largest agri-logistics free trade zone in Central and Latin America. The MoU will also see DMCC and Logis sharing market insights, analysis, and forecasts to support the development of commodities trading in both locations, with the aim of expanding trade between the members of their respective free zones.

According to the IMF, the UAE will be the fastest growing economy in the Arabian Gulf next year; the latest forecast by the world body sees the country’s economy growing 4.2%, ahead of Oman (4.1%), Saudi Arabia (3.7%), Bahrain (3.0%), Kuwait (2.6%), and Qatar (2.4%). This year, it is expected that Kuwait and Saudi Arabia, with growths of 8.7% and 7.6%, will be ahead of the UAE’s 5.1%. Globally, the IMF is predicting a slowdown in economic growth, with the world economy moving 3.2% higher this year, down from 6.0% in 2021, and then slowing further to 2.7% in 2023. The IMF said that risks to its economic outlook “remain unusually large and to the downside.”

Monday saw the start of Comprehensive Economic Partnership Agreement negotiations with Cambodia, part of the UAE government’s strategy to double the size of its economy and push its GDP beyond US$ 817 billion (AED 3 trillion) by 2030; it also hopes to see bilateral non-oil trade jump from its current estimated US$ 350 million this year to over US$ 1.0 billion by 2027. Dr Thani Al Zeyoudi, Minister of State for Foreign Trade, expects the deal, between the two countries, to be finalised in “three to six months’ time, maximum”. The main focus of negotiations will be on infrastructure/logistics, tourism/hospitality, food security, energy and, in particular, renewables. So far this year, the UAE has finalised similar Cepa deals with India, Indonesia and Israel, and is currently holding negotiations with Turkey, Georgia and Colombia.

Effective from 01 January 2023, the federal Ministry of Finance announced amendments to some provisions of the Federal Decree-Law No. 8 of 2017 on Value Added Tax. Decree-Law No 18 of 2022 contained changes including:

registered persons who make taxable supplies are allowed to apply for an exception from VAT registration if all of their supplies are zero-rated or if they no longer make any supplies other than zero-rated supplies
setting a 14-day period to issue a tax credit note to settle output tax, in line with the time frame set for issuing tax invoices
the FTA may forcibly deregister registered persons in specific cases if deemed necessary

As part of its ongoing strategy of strengthening both its Healthcare and Education platforms, by expanding their reach to cater to People of Determination, Amanat Holdings has announced it has bought a 60% stake in Human Development Company; the deal included an initial consideration of US$ 59 million and a contingent consideration of up to US$ 13 million, payable subject to future earnings growth. The Saudi company, a provider of special education and care (SEC) services in Saudi Arabia covering educational, medical, and rehabilitation services, caters to over 3k beneficiaries, with nine schools, twenty-two day-care centres and specialised rehabilitation medical clinics.

For the first nine months of the year, DP World posted a 2.0% rise in the number of TEUs to 59.6 million, with gross container volumes also increasing by 2.5% year-on-year on a like-for-like basis. In Q3, it handled 20.1 million TEUs on a reported basis, up 1.5% year-on-year, and 2.1% higher on a like-for-like basis. The main drivers behind this enhanced performance was an overall gross volume growth, mainly driven by Asia Pacific, MEA, Americas, and Australia as Jebel Ali, handling 3.5 million TEUs, up 2.0% year-on-year. On a consolidated basis, over the first nine months, DP World terminals handled 34.6 million TEUs, up 1.9% year-on-year and up 1.4% on a like-for-like-basis, whilst Q3 posted 11.7 million TEUs, increasing 2.7% on a reported basis and 1.5% year-on-year on a like-for-like basis. Although growth rates have slowed, they are still above global comparisons, and they are expected to continue to outperform the market in the coming months; industry growth has been slowed by the geopolitical environment, inflationary pressures and currency fluctuations.

TECOM Group has performed well this year, with marked improvements noted in Q3 and the nine months to September. Over those two periods, both revenue and profit moved markedly higher – revenue and profit by 12.5% to US$ 133 million and by 70.0% to US$ 58 million in Q3 and by 15.0% to US$ 403 million and 51.0% to US$ 174 million. The main driver was strong growth across all business segments. Quarterly EBITDA was 26.8% higher at US$ 99 million and by 24.0% to US$ 209 million YTD, attributable to top line growth and lower operational expenses. By the end of September, occupancy levels for commercial and industrial assets was at 83.5% – compared to 78.3% at the end of 2021 – driven by the very strong customer retention rates and an increase in new customers across the portfolio underpinned by Dubai’s continued economic growth.

Dubai Islamic Bank posted a 14.0% hike in Q3 profit to US$ 375 million, with revenue 4.0% higher at US$ 708 million; impairment charges, 26.0% down at US$ 137 million, along with higher operating revenue and income from financing and investing transactions, were the main drivers behind the improved figures. Net profit and revenue over the first nine months were both higher by 10.0% and 7.0% to US$ 2.08 billion and US$ 2.68 billion, as impairment charges fell 33% to US$ 395 million. The country’s biggest Sharia-compliant lender has also benefitted from the buoyant local economy, currently operating better than expected in a slowing global economy, driven by a recovery in travel and tourism, retail business spending and the implementation of new residency reforms. By 30 September, net financing and sukuk investments were 3.3% higher at US$ 64.3 billion, with customer deposits at US$ 50.9 billion – lenders’ deposits accounted for 42% of current account savings accounts.

Emirates NBD posted strong returns in Q3, as total operating income, before impairments, surged 62% to US$ 1.85 billion, and net profit was up 51% to US$ 1.03 billion; net interest income was up 37.0% to US$ 1.67 billion. Over the first nine months of the year, the bank’s net profit was 25.0% to the good, at US$ 2.48 billion, with net interest income climbing 23.0% to US$ 4.22 billion on the year. Provisions for loan losses over the period declined 12.0%, year on year, to US$ 899 million. It reported that international operations, contributed 40% of total income, while new lending increased substantially in both the retail and corporate segments.

Emirates Islamic posted strong returns for the nine months to September, with total income 22.0% higher, attributable to higher funded and non-funded income, a marked decline in the reduction in the cost of risk and vastly improved business sentiment. Net profit was 23% higher at US$ 287 million, even though expenses had jumped 22%, partly offset by a 23% decline in impairment allowances. Furthermore, the bank’s total assets rose to US$ 19.9 billion, with further increases noted for customer financing and customer deposits – up 12% to US$ 13.1 billion and 16% to US$ 15.0 billion respectively.

Deyaar posted a healthy 72.1% jump in Q3 revenue to US$ 57 million, as profit more than quadrupled to US$ 10 million, with the Dubai economy continuing its strong post-Covid economic recovery. Over the nine months to September, the company posted a 38.0% rise in revenue to US$ 157 million and a tripling of profit to US$ 28 million. By September, the company’s total assets grew 5.4% to US$ 1.66 billion in the nine months, with total liabilities up 17% to US$ 455 million during the same period. In 2019, a UAE court ordered Limitless to pay US$ 112 million to Deyaar in a dispute related to the purchase of land, as well as costs of US$ 17 million. This week, the directors recommended to approve a US$ 136 million cash settlement offer made by Dubai-based developer Limitless.

Emirates Central Cooling Systems Corporation (EMPOWER), 70% owned by DEWA and Emirates Power Investment, will retain 90% of the district cooling provider, as the remaining 10%, equating to one billion shares, will be listed on the DFM; the two companies reserve the right to amend the size of the offering, with subscriptions opening this Monday – Hallowe’en. The first tranche, reserved for individual investors, ends on 07 November and the second tranche, which is allocated for professional investors, a day later. Last November, Dubai’s Deputy Ruler, and the country’s Minister of Finance, Sheikh Maktoum bin Mohammed, announced that the emirate would list ten state-owned companies – to increase the size of its financial market to US$ 817 billion – and this would be number four. The first three raised US$ 7.59 billion – DEWA, (US$ 6.11 billion), Salik (US$ 1.02 billion) and Tecom (US$ 463 million). In August, the world’s largest district cooling services provider, with 84 plant rooms and a network that is more than 350 kilometres long, posted a 41.3% jump in in the number of buildings over the last five years.

Having received a US$ 553 million cash dividend from its 70% shareholding, in EMPOWER, DEWA “intends to seek all necessary approvals to make a one-time special dividend payment to its shareholders. This one-time special dividend is intended to be an additional payment to shareholders over DEWA’s stated annual dividend policy of paying AED6.2 billion (US$ 1.69 billion) in dividends.”

Dubai Financial Market posted its own results indicating that in the nine months to September, both revenue and net profit both moved higher – by 29.9% to US$ 64.8 million and by 134% to US$ 24 million. The revenue comprises US$ 47.2 million of operating income and US$ 17.6 million of investment returns and other income, with expenses nudging 2.6% higher to US$ 40.3 million. Total Market Capitalisation of listed securities increased 40.0% to US$ 156.8 billion, driven by both organic and non-organic growth in the form of IPOs and a marked improvement in listed securities’ performance. In the nine months, total trade value jumped 79.6% percent to US$ 18.9 billion, with foreign investors accounting for 47.3% of trading value at the end of September with net purchases of US$ 872 million. Foreign ownership reached to 19.1% of the total Market Capitalisation, with institutional investors accounting for the 46.7% of the total trade value, with a net purchase of US$ 354 million. Interestingly, the number of new investors who joined the market this month has increased 41 times to 155.1k investors, compared to 3.8k investors during the corresponding period in 2021.

The DFM opened on Monday, 24 October, 26 points higher on the previous fortnight, and 50 points (1.5%) points by Friday 28 October, to close on 3,349. Emaar Properties, US$ up 0.12 the previous three weeks, shed US$ 0.04 to close the week on US$ 1.66. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 3.56, US$ 1.66, and US$ 0.39 and closed on US$ 0.68, US$ 3.61, US$ 1.58 and US$ 0.39. On 28 October, trading was at 82 million shares, with a value of US$ 69 million, compared to 181 million shares, with a value of US$ 120 million, on 21 October 2022.

By Friday 28 October 2022, Brent, US$ 1.87 (2.0%) higher the previous week, was up US$ 2.27 (2.4%) to close on US$ 95.77.  Gold, up US$ 13 (1.1%) the previous week, shed US$ 15 (1.0%), to close Friday 28 October, on US$ 1,648. 

With air travel almost non-existent, and the company bleeding money, Qantas Airways came within eleven weeks of financial collapse at the height of the Covid-19 pandemic, according to its chief executive, Alan Joyce. With its rival Virgin Australia collapsing, Qantas started raising cash by selling land and slashing costs which helped lift its life expectancy to two years. This statement, by the Irishman, seems to be responding to his critics saying that he had cut costs too quickly and too aggressively, as 8k employees lost their jobs. Now that demand has begun to rebound, but not yet, to pre-Covid levels, Qantas continues to struggle to cope with many complaints of cancelled flights, delays and lost luggage. Overall global passenger traffic hit 75% of pre-pandemic levels in 2019, with domestic travel at 86.9% of the July 2019 level.

Not helped by a US$ 2.4 billion impairment cost, after a reclassification of its French operations ahead of its imminent sale, HSBC posted a 41.7% slump in Q3 profit to US$ 3.15 billion, as its reported revenue dipped 3.0% to US$ 11.6 billion, attributable to its upcoming “French sale” and an adverse foreign currency translation impact of US$ 1 billion. Europe’s largest lender posted that net interest income increased in all the lender’s businesses globally due to interest rate rises, with adjusted revenue rising 28% to US$ 14.3 billion. Customer lending balances fell US$ 61 billion, on a reported basis, and on an adjusted basis, by US$ 18 billion, reflecting a US$ 23 billion reclassification of loans relating to the planned disposal of assets held for sale in France.

After being involved in too many expensive scandals in recent years, (including Greensill Capital Archegos Investment fund, Mozambique’s tuna fishing industry and Bulgarian drug money laundering), and posting a US$ 4.0 billion loss last year, Credit Suisse is to cut over 9k jobs – to 43k – over the next three years as it tries to stem heavy losses. The banking giant’s move did little to assuage investor concerns as its market value tanked – down by more than 13% on the day. Other parts of the strategy jigsaw will see the bank divest its investment arm, relaunch the CS First Boston brand, and wind down some of its higher-risk businesses., aiming to reduce overall costs by 15% to US$ 2.5 billion. Credit Suisse is hoping to raise US$ 4.0 billion in new capital, of which US$ 1.5 billion has been promised by the Saudi National Bank. It will take more than time and money for Credit Suisse to regain its former glory and status

Online furniture retailer Made.com seems to be a another post-Covid casualty, as the firm’s sales, that surged as people were confined to their homes, shopping online, and buying more furniture and other home goods. Since more consumers have returned to physical shopping, allied with ongoing supply chain problems and the cost-of-living crisis, revenue has slumped. Customers did not want to wait for furniture because of supply problems and cut back on big-ticket items added to the retailer’s problems. Little wonder that the market value of the company, that employs seven hundred staff, tanked by more than 90%, in trading on Tuesday to US$ 0.58, made worse by news that the company had failed to find a buyer. The company, which has also stopped taking orders, has warned that if further funding could not be raised before its cash reserves ran out, it would take “appropriate steps to preserve value for creditors”. In 2020, sales were 30% higher at US$ 364 million and in the three months of 2021, prior to the real onset of Covid, sales grew by 61% to US$ 127 million. With such a bright outlook then, in June 2021, the firm was listed on the LSE at US$ 897 million. Sic transit gloria mundi.

The Royal Mail has announced that 1st and 2nd Class “everyday” stamps – the normal stamps that were available in books of six or twelvem,m – that feature the profile of the late Queen Elizabeth, but with no unique barcode, will no longer be valid from 31 January 2023. Non-barcoded Christmas and other special stamps, with pictures on, continue to be valid for postage and should not be submitted for swap out. Barcoded stamps were introduced in February 2022, with the long-time aim of using them to allow people to watch videos, find out information and send birthday messages to each other through the barcodes which can be scanned via the Royal Mail app.

Last week, this blog noted the troubles that Asos had experienced posting an annual loss, caused by shoppers returning to stores post-Covid. This week, it was announced that Frasers Group, owned by billionaire Mike Ashley, and also the owner of Sports Direct,                                                                                                                                                                                                                                                                                                                                                                       has been building up its stake in the online fashion retailer to become its fourth-largest shareholder, owning 5% of Asos. The group also announced it had raised its investment in Hugo Boss to 4.3% directly and an extra 28.5% through the sale of financial instruments known as put options. The retail giant said the move was the latest example of its “its drive to expand and acquire businesses and brands that can strengthen Frasers Group”. Along with House of Fraser and Sports Direct, the group also owns Flannels, Game, Jack Wills, Evans Cycles and Sofa.com, as well as a significant shareholding in the fashion brand, Mulberry.

Having fallen 4.0%, to a market value of US$ 27.7 billon, last month, Meta shares plunged by more than 20% yesterday, after disappointing Q3 results. Although still making healthy profits – US$ 4.4 billion in the quarter – and seeing users climb from 2.88 billion to 2.93 billion over the period, its revenue stream fell 4.0% to US$ 27.7 billion. There is investor concern that its founder Mark Zuckerberg may have got his strategy – of believing that virtual reality would be the next frontier to drive Facebook’s growth – wrong, but over the past twelve months has struggled from intense competition and clients cutting advertising budgets, in a time of an economic slowdown. He said the company was focused on becoming more efficient and hinted at job cuts, saying the firm may be a “smaller organisation” next year; since 2016, payroll numbers have more than quintupled from 16k to 87k last year, during which numbers jumped 28%.  Although problems will continue, he still stays committed to his pet project, Reality Labs, which works on virtual reality, and has seen revenues drop significantly. Investors are beginning to think differently.

Apple posted a flat 24 September quarter net profit, at US$ 20.7 billion, despite hitting record sales of US$ 90.1 billion; the profit was 0.8% higher on the year and 6.7% up on the preceding quarter, whilst revenue came in up 6.7% on the quarter. The company’s full financial year’s net profit increased 5.4% to US$ 99.8 billion, with twelve-month sales 7.7% higher at US$ 394.3 billion, year on year. Its shares, down 20.4% YTD were trading 0.7% higher to US$ 144.80 in after-market hours. iPhone sales account for about 47.3% of the company’s revenue, with other revenue drivers being smartphones, iPads, wearables, home & accessories and wearables and services accounting for US$ 42.6 billion, US$ 18.7 billion, US$ 9.6 billion and US$ 19.2 billion. Its main market continues to be the Americas, accounting for US$ 39.8 billion of sales, followed by Europe’s US$ 22.8 billion, Greater China – US$ 15.5 billion – and Asia Pacific, with US$ 12.0 billion.

Investors punished Amazon, after it released Q3 figures indicating that its net income had dipped 9.3% to US$ 2.9 billion, by selling shares so as to see their value fall 20.0%, on the news yesterday. However, this was a major improvement on the previous quarter’s loss of US$ 2.0 billion, but the current return includes a pre-tax valuation gain of US$ 1.1 billion, relating to non-operating income from its investment in Rivian Automotive. Operating income fell by US$ 2.4 billion to US$ 2.5 billion. Revenue, at US$ 127.0 billion, was 5% higher on the quarter and 15% on the year; this was split between North America, (20% higher on the year), international – 5.0% lower – and Amazon Web Services, up 28.0%, accounting for US$ 78.8 billion, US$ 27.7 billion and US$ 20.5 billion.

If Apple and Amazon were unhappy with their Q3 results, they should get some comfort from Intel which reported an 85% slump in net profit to US$ 1.0 billion, as revenue came in 20% lower at US$ 15.3 billion on an annual basis – and flat compared to Q2. The world’s largest chip maker also incurred US$ 664 million in restructuring charges, down to initial cost reduction actions. It has also downgraded its 2022 full fiscal year revenue guidance, citing “continued macroeconomic headwinds”. On Wednesday, it divested itself of its driver-assist subsidiary Mobileye, bought for US$ 15.3 billion which raised US$ 861 million.  Having already seen its share value more than halved YTD, yesterday it shed a further 3.7% on the news.

A US District Judge in Texas has indicated that families of passengers killed in the two fatal Boeing crashes, in Indonesia and Ethiopia, can be deemed as official crime victims, entitled to consultation before the US Justice Department cuts any deals with the plane maker. He will now decide what remedies the families should receive because federal prosecutors failed to consult with them before reaching a plea deal with Boeing in January 2021; in that deal, the company agreed to pay US$ 2.5 billion, including a $244 million penalty, but now the defendants, both Boeing and its executives, could face new criminal charges or penalties, that could result in criminal prosecution. The families have claimed that if the pilots had been properly trained, the crashes, which killed 189 in Indonesia and 157 in Ethiopia in 2019, could have been avoided.

Saudi Arabia’s national airline, Saudia, has signed an agreement to purchase one hundred aircraft, (capable of carrying between four to six passengers), from German electric plane maker Lilium. The planes would be used on domestic routes and would offer a “premium service”, with the planes expected to be certified by the regulators by 2025. This move is part of the country’s strategy to reach net zero by 2060. This week, it was also reported the country’s Public Investment Fund was in negotiations with both Airbus and Boeing for up to eighty passenger jets for its new national airline, RIA.

With its currency tanking, having lost 11% YTD, UAE remittances to India have jumped around 25%, as the rupee hit an all-time low of 83 versus the US dollar (22.61 versus the AED), last week and started this week at 82.74 and ended on 82.29. Many analysts consider that Indian remittances will continue in the same vein due to the weakness of the rupee, attributable to high oil prices and a growing trade deficit, depleting the country’s foreign exchange reserves. A July UN report noted that India was the top global remittance recipient, at US$ 87 billion last year, with the UAE one of the major sources of remittances to India, along with the US and Saudi Arabia.

On Sunday, and to nobody’s surprise, Xi Jinping was reappointed for a historic third five-year term in charge of the Chinese Communist Party, with Li Qiang, a close ally, being named as his new second-in-command, and likely to be named premier at the government’s annual legislative sessions early next year. He was also reappointed head of China’s Central Military Commission and is all but certain to be reappointed China’s president for a third term as well. What was of more interest happened after the week-long 20th Party Congress was the fact that the country released a set of economic figures which had been postponed from the previous week. Official figures showed that China’s economy grew 3.9% in Q3 on the year – a major improvement on the 0.4% posted a quarter earlier, when Shanghai was in lockdown, and the ongoing trade conflict with US. The latest growth figures are far below the rate of expansion China has seen for decades and still some way off the 5.5% 2022 target set in March. Regional markets did not appreciate the new data, with the Hang Seng index, 6% lower, as the Hong Kong-listed shares in Chinese technology giants Alibaba and Tencent plunged, and the Shanghai Composite also headed south, 2% lower. The sixty-nine-year-old promoted some of his close Communist Party allies at the week-long Congress, (‘closed shop’), of 2.3k hand-picked delegates which approved a sweeping reshuffle that saw former rivals step down. It seems that Xi Jinping may have taken a leaf out of Liz Truss’s book by appointing senior positions based on loyalty, rather than on expertise and experience.; the only difference is that they will last longer in their positions than what she did.

The latest initiative sees Prince Mohammed bin Salman allocating over US$ 10 billion in incentives for supply chain investors, with no further details available, except that the latest supply chain initiative includes establishing a number of special economic zones. Last year, the Crown Prince announced a US$ 45 billion package to enhance the country’s infrastructure, including airports and seaports, by the end of the decade, as it tries to become a leading international player as a transport and logistics hub. This is part of Prince Mohammed’s Vision 2030 to modernise Saudi Arabia and wean its economy off oil revenues, as well as boosting the country’s position on the global economic stage.

Despite the US economy expanding a credible 2.6% in Q3, after being in a technical recession because of contractions being posted in the previous two quarters, there is every chance that the economy will downturn into 2023. The latest improvement has been put down to continued spending in the High Street, despite the ongoing rising prices and higher borrowing costs, whilst exports have surged. However, trade will be impacted by a strong dollar and a weak global economy, with consumer spending slowing, rising just 1.4% in Q3, compared to 2.0% the previous quarter. Furthermore, the mid-term elections take place next month and these results could cost the incumbent president control of Congress., although Joe Biden has come out fighting declaring, that the figures show “further evidence that our economic recovery is continuing to power forward”. It is true that hiring is still in positive territory, and that the unemployment rates are nearing historic lows, but prices continue to head north at their fastest rate since the 1980s. On the flip side, housing construction fell 26% in Q3, not helped by rising mortgage rates.

As the weekend progressed, it became increasingly likely that Rishi Sunak would take the top position – and this was confirmed as early as Monday, when both contenders, Boris Johnson and Commons Leader, Penny Mordaunt, dropped out. The markets were impressed, as sterling headed north, 0.4% higher to US$ 1.134, as government borrowing costs dropped; by the end of the week, sterling went even higher to US$ 1.161. This was in direct contrast to the events after the now infamous mini-budget, orchestrated by the terrible twosome – Lis Truss and Kwasi Kwarteng.

It is inevitable that by the end of Tuesday, next week, UK interest rates will be 0.75% higher at 3.0% – being the eighth meeting in a row that the BoE has hiked rates. It is forecast that the central bank will become the first in the world to start monetary tapering , as it starts selling bonds from its stimulus stockpile.  A figure of US$ 45.5 billion (GBP 40 billion), of bonds bought since 2009, being sold over the next year, has been bandied about. Despite these efforts, the country will soon be in recession and there are many who consider that the BoE has been far too slow in its efforts to quell inflation and attempt to return it to its 2.0% target. The new Sunak administration has its work cut out to balance the books that could see scathing cuts in government spending, even after many of Liz Truss’s costly help for households and businesses have been abandoned.  Chancellor Jeremy Hunt is looking at a minimum US$ 56.8 billion, (GBP 50 billion) of tax increases and spending cuts, to make up the current deficit. He was due to announce his new economic plan this Monday but it has been delayed until 17 November after Sunak became the country’s new leader.

At last Friday’s EC summit, its President Ursula von der Leyen announced that the EU would have granted Ukraine nearly US$ 18 billion in financial assistance by the end of the year to cover the country’s basic budgetary needs. The other highlight was the bloc’s strong position on China. At the beginning of the month, Ukraine’s President Volodymyr Zelenskyy had commented that his country will need around US$ 55 billion to sustain next year’s budget deficit and repair damaged infrastructure. This is almost in line with the IMF’s estimate that the country will need up to US$ 4 billion a month, in foreign aid, to keep its public services running. Some 40% of that total will emanate from the EU which aims to contribute with €1.5 billion a month, equating to US$ 18 million. This money is being raised by the Commission on international markets and then covered with guarantees using the EU’s common budget and national contributions. Nothing is certain though, as the bloc had committed to deliver up to US$ 9 billion in exceptional loans but so far this has fallen short, with Zelensky noting that “thank you for the funds that have already been allocated, but a decision has not yet been made on the remaining Eur 6 billion from this package, which is critically needed this year.” 

There was a marked increase of 0.8% to 9.9%, on the month, in the euro area annual inflation rate in September; this figure is almost triple the 3.4% posted in September 2021. The EU annual inflation was also 0.8% higher to 10.9% last month, and more than tripling last September’s 3.6%. The highest rates were reported in Estonia, Lithuania and Latvia – at 24.1%, 22.5% and 22.0% – with the three lowest rates being in France, Malta and Finland, at 6.2%, 7.4% and 8.4%. On the month, annual inflation fell in six Member States, remained stable in one and rose in twenty, with the highest contribution to the annual euro area inflation rate originating from energy, 4.19%, followed by food, alcohol & tobacco, 2.47%, services -1.80% – and non-energy industrial goods, 1.47%.

The ECB raised interest rates again yesterday by another 0.75%, bringing the total hike to 2.0%, over its last three meetings; it has also started to unravel its US$ 8.5 trillion stimulus package that could see the end of debt purchases and ultra-cheap loans extended to banks. It beggars belief that ECB’s President, Christine Lagarde, continues to allow some US$ 2.1 trillion of ultra-cheap loans handed out to commercial banks, at zero or even in some cases negative rates, to continue and even worse these banks can then simply deposit this cash with the ECB for a positive, risk-free return, which rises with each deposit rate hike. It seems that the ECB has been negligent by not raising rates fast enough – as inflation soared well above its 2.0% target – and allowing commercial banks to mint money at taxpayers’ expense. Hopefully, the good lady has finally seen the light and the bank makes the most of the Dawn of a New Day.

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Rich Getting Richer, Poor Getting Poorer!

Rich Getting Richer, Poor Getting Poorer!                        21 October 2022

The 2,703 real estate and properties transactions totalled US$ 2.18 billion, during the week ending 21 October 2022.The sum of transactions was 147 plots, sold for US$ 305 million, and 2,023 apartments and villas, selling for US$ 1.31 billion. The top two land transactions were both for land in Al Thanayah, sold for US$ 23 million, and the other in Island 2 for US$ 17 million. Jabal Ali First recorded the most transactions, with forty-eight sales, worth US$ 41 million, followed by Hadaeq Sheikh Mohammed bin Rashid, with eighteen sales transactions, worth US$ 115 million, and Al Yufrah 2 with eleven sales transactions, valued at US$ 4 million. The top three transfers for apartments and villas included one sold for US$ 260 million in Palm Jumeirah, another purchased for US$ 183 million in Marsa Dubai, and a third sold for US$ 146 million in Business Bay. The mortgaged properties for the week reached US$ 401 million, with the highest being for land in Island 2, valued at US$ 74 million, while 107 properties were granted between first-degree relatives worth US$ 105 million.

In their Q3 report, Betterhomes indicated that Russians have emerged as top buyers in the Dubai property market, surpassing those from UK, India, Germany, France, the US, Pakistan, Lebanon, Canada and Romania. The main driver behind the Russian influx is down to the Ukraine crisis, with high-net-worth individuals, from both protagonist nations, moving to safer, more stable and faster-growing locations, including Dubai. It posted that H1 had seen Indians being the top of the list, followed by the UK, Italy, Russia and France. The property brokerage firm confirmed that Q3 witnessed a record number of transactions – at 22.9k – 61% higher on the year, but noted that prices were almost flat. It did signal out Palm Jumeirah, where it sees prices showing no signs of easing, that had already grown 10% YTD. Apartment prices in Damac Hills, Mohammed bin Rashid City, Dubai Studio City and Al Khail Heights increased 7.0%, 6.0%, 3.0% and 3.0% respectively. Betterhomes also noted decreases in Culture Village, JBR, DuBiotech, Jumeirah Village Triangle and Dubai Investment Park, posting 11%, 10%,  9%,  5% and 4% losses respectively in Q3.

There are many Dubai residents whose main topic of conversation seems to be the high rental rates of residential property in the emirate. Only last week, this blog noted that on the year, it was estimated that apartment and villa rents had jumped 26.6% and 25.5%. However, there are certain areas, in and around the emirate, that have affordable housing, including Dubai Production City, International City, Jumeirah Village Circle, Dubai South, Dubai Investment Park, Damac Hills 2, Dubai Land, Al Muhaisnah and Al Warsan.

What could well become one of the most expensive eateries in Dubai, Sublimotion will offer a theatrical dinner experience, a ten-course meal, live performances and 360-degree screens with surround imagery. The restaurant, located in the Mandarin Oriental, will only host twelve diners at a time, with each seat costing US$ 1.36k, (AED 5k), for a two-hour experience. Set in a roofless box, with a long table, with food descending from the ceiling, the new season will run from November 2022 to May 2023. The whole experience has a crew of twenty-five designers, engineers, stage directors, composers, illusionists, and actors, working to deliver the two-hour dining performance. Launched by chef Paco Roncero, in Ibiza in 2014, it moved to Dubai last year.

Flydubai has signed a wet lease agreement, with Smartwings, for four Next-Generation Boeing 737-800 aircraft between 17 November 2022 and 16 January 2023. The aircraft, crew, maintenance and insurance (ACMI) agreement, with the Czech Republic-based airline, will help the Dubai carrier add more capacity for its passengers and cater to demand for travel during the busy winter season. Flydubai currently operates a single-fleet type of Boeing 737 aircraft, that includes thirty-two next-generation Boeing 737-800s, thirty-three Boeing 737 MAX 8s and three Boeing 737 MAX 9s. The all-economy class aircraft will operate on select routes, on the flydubai network, including Chattogram, Colombo, Dhaka, Karachi, Multan, Muscat and Sialkot.

According to the OAG’s latest report, Dubai International has retained its position as the world’s busiest international airport. The consultancy, using seat capacity for its calculation, estimates that Dubai’s 4.12 million seats, 5.0% higher on the month, was well ahead of second place, London Heathrow’s 3.47 million. Amsterdam, Paris Charles de Gaulle and Frankfurt made up the top five spots. The last ten days of this month represent one of the busiest periods for Dubai International, as schools break for their half-term. It is expected as many as 2.1 million passengers will pass through the world’s busiest international airport, equating to an average daily traffic, touching 215k passengers. Sunday 30 October is expected to be the busiest day with an expected 259k passengers.

The 2022-2023 academic year sees good news for Dubai parents, because there will be no school fee hikes, as the country’s education regulator, the Knowledge and Human Development Authority, also determines allowable fee increases thorough its Education Cost Index. The Index, based on several factors, including salaries, rent, and utilities, was set at minus 1.01%, meaning that Dubai private schools were not allowed to implement any fee increases. Aside from the ECI, the schools are also subject to a fee framework, developed by the KHDA, which outlines eligibility requirements for raising tuition fees, with performance playing a huge part in this framework. The Dubai Schools Inspection Bureau (DSIB), a unit established by the KHDA, is in charge of rating schools – from “Very Weak” to “Outstanding.” The following is a list of the ten most expensive schools in the emirate.

DSIB RatingMin FeeMax Fee
US$US$
Jumeirah CollegeOutstanding19.9K24.9KYear 7Year 13
JESSOutstanding10.9k25.6kFS1Year 13
Repton SchoolOutstanding20.4k25.9kYear 7Year 13
Nord AngliaVery Good17.3k26.1kFS!Year 13
King’s SchoolOutstanding14.6k26.6kFS1Year 13
Dubai CollegeOutstanding23.6k26.7kYear 7Year 13
Swiss Intl ScientificGood14.4k27.0kPre-KYear 12
Dwight SchoolAcceptable15.9k27.1kPre-KYear 12
GEMS World AcademyVery Good10.9k31.1kNurseryYear 12
N London CollegiateGood18.1k35.4kGrade 1Year 12

The federal Ministry of Finance unveiled amendments to the Decree-Law No 7 of 2017 on Excise Tax, with immediate effect. These changes, thought to be beneficial for the business sector, include facilitating fulfilment of obligations for taxable persons, minimising tax avoidance, and addressing challenges, related to the application of the excise tax.  There are two major amendments, with the first seeing persons, importing excise goods for purposes other than conducting business, being excepted from tax registration, while remaining liable to pay the relevant excise tax on the import.  The other is interesting in that a person subject to tax shall pay the amounts he receives as tax to the FTA, even in cases where the tax was applied by mistake or evasion. There have been several additions to the legislation relating to tax audits, tax assessments and permissible timeframes to submit a voluntary disclosure.

In a bid to foster the region’s emerging position in the global coffee market, DXB LIVE is to organise the second edition of World of Coffee Exhibition 2023, to be held at the DWTC between 11-13 January. The target audience will include the likes of coffee producers, manufacturers, retailers, traders, and the broader industry from all parts of the world. The integrated event management and experiential agency of Dubai World Trade Centre has also signed an agreement to organise this exhibition in the region for a period of five years, with future exhibitions being hosted in different MENA countries to take advantage of the genuine potential that the region gives to this business. The exhibition will continue to solidify Dubai’s position as a world-class destination for hosting international events, as well as its growing position in the global coffee market.

Jebel Ali Power Generation and Water Production Complex – with a daily production capacity of 490 million imperial gallons of water per day, which is equivalent to 2,227,587 cubic metres per day – has been included in the Guinness Book of records for the second time; the accolade came because DEWA owns and manages the world’s largest single-site water desalination facility. Last year, Dubai’s power giant was awarded the largest single-site natural gas power generation facility in the world, with the complex having a power generation capacity of 9,547MW. DEWA utilises three pillars to sustain water production – clean solar energy to desalinate seawater, the use of reverse osmosis technology, which consumes less energy than MSF plants, and Aquifer Storage and Recovery. When completed by 2025, this project will allow 6k million imperial gallons of water to be stored and retrieved when needed, making it the largest emergency potable water storage in the world. This technology will provide a strategic reserve that will supply Dubai with more than fifty million imperial gallons of water per day for ninety days in emergencies, while ensuring the safety of the stored water.

In H1, DEWA invested US$ 463 million, (22% higher on the year), to commission a new 400kV transmission substation and ten new 132kV transmission substations. By the end of H1, Dubai had twenty-six 400kV transmission substations and 329 substations. It is forecast that the utility will spend US$ 2.72 billion on electricity transmission projects over the next two years, including US$ 544 million for 400kV transmission projects and US$ 2.18 billion for 132kV projects. One of the main aims of this investment is to ensure that all the emirate’s power production will be from clean energy sources by 2050, in line with the Dubai 2040 Urban Masterplan, the Dubai Clean Energy Strategy 2050, and the Dubai Net Zero Carbon Emissions Strategy 2050, to provide 100% of Dubai’s total power production capacity from clean energy sources by 2050.

After receiving DIFC approval and authorisation, M7 Real Estate has opened its first office in the DIFC – its first foray in the ME. The move, by the pan-European investor and asset manager, is aimed to capitalise on the continued strong demand for high-quality European real estate from regional investors. The company, owned by Oxford Properties, already manages almost US$ 1 billion of European property, on behalf of ME investors, equating to 20% of the company’s assets under management. It is also keen to tap into a new sector of investors, apart from its current portfolio of select Middle Eastern clients. Established in 2009, M7 manages a portfolio of 580 assets, comprising 47.3 million sq ft of area, with a capital value of US$ 5.7 billion, and invests across a variety of multi-tenanted asset classes in Europe. Its Dubai office sees the company now having a presence in fifteen countries, and since its acquisition by Oxford Properties, it is focussing on further global expansion.

Dubai-based Network International announced Q3 revenue rose 28% year-on-year, driven by UAE consumer spending and growth in regional tourism, and that revenue from merchant solutions came in 39% higher. The UAE and Jordan posted 19% growth, attributable to strong consumer confidence, whilst the value of international payments grew 84%, year on year. The LSE-listed payments processor also confirmed that its Saudi Arabian market entry was going to plan.

Effective 26 October, Emaar Properties will now allow 100% foreign ownership, having gained approval from the Securities and Commodities Authority and Dubai Economy and Tourism Department; formerly, the limit was set at 49%. Its latest financials showed that Q2 profits were 100% higher, at US$ 561 million, as revenue was up 8% at US$ 1.89 billion. At last month’s AGM, the shareholders also approved the acquisition of Dubai Creek Harbour from Dubai Holding, costing US$ 2.04 billion.

Troubled Union Properties has had a chequered recent past and this week has agreed with its creditors to restructure US$ 162 million of debt and will repay US$ 61 million to its lenders. In August 2020, the developer had reached an agreement with Emirates NBD, its biggest creditor at the time, to restructure US$ 258 million in bilateral debt. Last October, SCA, the country’s market regulator, filed a complaint against its senior executives, accusing them of abuse of authority, fraud and causing damage to the interests of the company. Earlier this year, UP initiated a much-revised turnaround strategy, with the triple aim of restoring shareholder value, enhancing profitability and cutting costs, and confirmed that it was in negotiations with two of its major creditor banks to restructure loan facilities. Although details of its latest “comprehensive restructuring plan” were sketchy, it will “effectively reduce financing costs” for the company, and, at the same time, help it significantly improve its profitability and cash flow generation.

Deyaar Development announced a US$ 10 million Q3 net profit, on the back of a revenue stream of US$ 57 million – with US$ 28 million and US$ 157 million posted for the nine months to 30 September. In Q3, the developer confirmed rapid progress in the construction work of its Mesk and Noor districts in Midtown, with their completion expected by the end of this year, and the beginning of 2023, respectively. During this week’s meeting, its Board recommended to approve the US$ 136 million cash settlement, offer provided by Limitless, comprising US$ 54 million – immediately upon signing the agreement – and completing the US$ 82 million balance within a period, not exceeding eighteen months from the signing of the agreement.

TECOM, the company that owns Dubai Internet City, Dubai Media City, Dubai Design District (D3), and Dubai Industrial City, has posted a 43.4% hike in H1 profits to US$ 117 million, attributable to “encouraging revenue growth, enhanced operational efficiencies and prudent financial measures.” The Board has proposed a US$ 54 million interim dividend, equating to US$ 0.0109 per share, (AED 0.04); TECOM had declared that it would be distributing US$ 218 million, (AED 800 million), annually until October 2025 in its previously announced dividend policy.

DFM-listed Aramex has made an all-cash investment of US$ 265 million to acquire Access USA Shipping (MyUS), a global technology-driven platform. The transaction was the biggest ever purchase for the leading global provider of logistics and transportation solutions. MyUS, which will retain its brand name, will be fully integrated into Aramex’s business, operating as a business unit within the company’s courier business segment. MyUS provides cost-effective package forwarding solutions. In 2021, the company posted US$ 100 million in revenue and delivered 1.1 million packages to its 180k customers who shop from retailers based in the US, UK and China.

The DFM opened on Monday, 17 October, 4 points higher on the previous week, and rose 22 points (0.6%) points by Friday 21 October, to close on 3,399. Emaar Properties, US$ up 0.08 the previous fortnight, gained US$ 0.04 to close the week on US$ 1.70. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 3.53, US$ 1.64, and US$ 0.39 and closed on US$ 0.68, US$ 3.56, US$ 1.66 and US$ 0.39. On 21 October, trading was at 172 million shares, with a value of US$ 76 million, compared to 181 million shares, with a value of US$ 120 million, on 14 October 2022.

By Friday 21 October 2022, Brent, US$ 1.59 (1.7%) lower the previous week, was up US$ 1.87 (2.0%) to close on US$ 93.50.  Gold, US$ 18 (1.1%) lower the previous week, gained US$ 13 (0.8%), to close Friday 21 October, on US$ 1,663. 

No doubt using money from its recent super profits, BP has invested US$ 4.1 billion to acquire US renewable gas producer Archaea, as part of its strategy to reach net zero carbon emissions by 2050; the deal will see the energy giant, whose cash balance has been greatly enhanced by recent surges in oil prices, pay US$ 3.3 billion in cash and US$ 800 million in debt. The company posted that the acquisition of Archaea, which currently produces renewable natural gas equivalent in amount to about 6k bpd, would create “a real leader in the biogas sector, and support our net zero ambition”. In June, BP announced that it was taking a 40.5% stake in an Australian energy project, being billed as one of the world’s largest renewable power stations. Maybe the new Chancellor will be looking at raising more revenue by imposing a windfall tax on super profits earned by energy companies. Shell’s outgoing CEO, Ben van Beurden, indicated that governments should “probably” tax energy firms more to help protect the poorest from rocketing energy bills, but another former employee. Liz Truss, has remained silent on the subject.

In the UK, consumer-rights champion Julie Hunter is leading a legal claim against Amazon, citing it had breached competition law and caused customers to pay higher prices by the Amazon app obscuring better-value deals. It is alleged that independent sellers have been excluded from the buy box, even when they offer the same product cheaper, or on better terms – thus breaching UK and EU competition law. The case will be heard in the Competition Appeal Tribunal and will reportedly seek damages from Amazon, estimated in the region of US$ 1.0 billion. It appears that anyone living in the UK, who has made purchases on Amazon.co.uk or the Amazon mobile app since October 2016, is an eligible member of the claimant class.

Better news for the tech giant saw the first ever ballot for strikes, at a UK Amazon warehouse, fail to reach the legal threshold for industrial action – by just three votes – and despite 99% of those who took part backing action. UK law states at least 50% of members entitled to vote must do so for strike ballots to be valid. The union is looking for a US$ 16.80 (GBP 15.00) an hour pay rate, whilst the US conglomerate said it had increased pay and offered a “comprehensive benefits package” to its employees in Coventry.

With the persistent global semiconductor shortage not going away, Toyota Motor Corp, like many other similar companies, has indicated that its annual vehicle production was likely to come in below its initial target of 9.7 million vehicles; it is expected that this month and next, production will come in at least 100k less, at almost 800k. The Japanese carmaker posted that the figures for the first five months of its fiscal year, to August, were down 6.7% on initial forecasts. Toyota is also concerned that demand for its vehicles will also be impacted by the global economic slowdown, surging inflation and rising interest rates. It has confirmed that it will suspend eleven of its production lines, at eight domestic factories, in November for between two to nine days. Last year, it ended up turning out 8.5 million vehicles, compared to its original forecast of 9.3 million.

On Wednesday, following the announcement that Tesla had missed Wall Street estimates for Q3 revenue, because of fewer deliveries of vehicles than expected, its shares fell 6.3% to US$ 208.16; over the past twelve months Tesla’s market value has tanked by almost 50%.  Earlier in the year, Elon Musk had said that his EV company would boost deliveries by 50% this year – a figure that some are now questioning, since Q3 had only seen a 35% hike in numbers. Tesla’s Q3 revenue was $21.45 billion, with gross margin down from 30.5% to 27.9% on the year.

French cement maker Lafarge has pleaded guilty in the US to supporting the Islamic State, and other terror groups, and has agreed to pay a US$ 778 million penalty, and “deeply regretted” the events and “accepted responsibility for the individual executives involved”. In 2010, the company had invested US$ 680 million for a plant in Jalabiya, near the Turkish border, and that Lafarge’s Syrian subsidiary had paid Islamic State and another terror group, al Nusra Front, the equivalent of US$ 6 million to protect staff at the plant, as the country’s civil war intensified. The firm agreed to the US$ 778 million penalty for payments it made to keep a factory running in Syria after war broke out in 2011. With fighting intensifying the company evacuated in September 2014 but not before these deals helped it with US$ 70 million in sales; in the following year, the business was sold to Switzerland’s Holcim.

For the year ended 31 August, online fashion retailer Asos has reported a US$ 36 million loss, (compared to a US$ 198 million profit a year earlier), with lower customer spend on fashion, due to the rising cost of living. It expects that conditions will worsen into their new fiscal year, as inflation and living costs continue at high levels. The owner of Topshop and Topman indicated it was facing “an incredibly challenging economic environment” and although a decline in the sector is almost certain, it remains confident in its ability to take market share against that backdrop. However, it expects to be in a loss position again at the end of H1 (February 2023), as it needs to clear surplus stock at reduced prices. Asos, and its rival Boohoo, benefitted from Covid but both have been losing business, as people return to traditional store shopping. Little wonder that its share value has tanked 80% YTD.

As it prepares to offer a new streaming option with advertising, Netflix Inc saw its share value jump 14% on the day this week, after starting Monday 60% lower on the year. The streaming giant has manged to reverse customer losses, that had hammered its stock this year, and is forecasting a pick-up of 4.5 million new customers, projecting more growth ahead, driven by its new option. Its Co-CEO, Reed Hastings, confirmed the need for the company to continue gathering momentum by focusing on content, marketing and a lower-priced plan with advertising. Having added 2.4 million new subscribers worldwide in Q3, more than double what Wall Street expected, it now has a total of 223.1 million global subscribers.

The Competition and Markets Authority has reissued a final order to Meta to sell animated images platform Giphy, warning that the takeover of the gif-creation website could harm social media users and advertising; this is thought to be the first time that the UK has blocked an acquisition by a tech giant, signalling a new determination to scrutinise digital deals. It had acquired Giphy – the largest supplier of animated gifs to social networks such as Snapchat, TikTok and Twitter – in 2020. In November, the UK’s competition watchdog had ordered the then known Facebook to dispose of Giphy and to pay a US$ 50 million fine for refusing to comply with the CMA during investigations.

Not only has it had its licences suspended, Australian gambling giant Star Entertainment Group has also been fined a record US$ 62 million (AUD 100 million) for failing to stop money laundering at its Sydney casino. All over the country, casino owners have been under great pressure to reform their gambling operations following reports of widespread criminal activity. As noted in a recent blog, the casino had permitted organised crime and money laundering in its Sydney operation and had, on some occasions, tried to cover their tracks, with the regulatory chief Philip Crawford noting that “the institutional arrogance of this company has been breath-taking.” After a similar inquiry in Queensland, The Star was earlier this month also found unsuitable to run its three casinos in that state.

Treasurer Jim Chalmers has warned fellow Australians that the country “will not be spared from the consequences of a global slowdown”, ahead of next week’s budget. Having just returned from Washington, where he attended an IMF meeting with G20 finance ministers, he cautioned that the global economy is treading an “increasingly perilous path”, and that “downside risks loom large”. He noted that “the budget will confirm the stark deterioration in the outlook for global growth, and in several major economies, with some at risk of falling into recession.” The finance minister stated that he will deliver a responsible budget – and that global peers have posted much lower growth forecasts than expected earlier in the year – because of a weaker global economy, with higher inflation and heightened risks.

Hong Kong shares have slumped to their lowest level since the 2008 GFC, with the Hang Seng falling by over 3.0%, following its chief executive, John Lee, announcing measures to boost security and plans to attract more overseas talent to the territory. However, the fall came about because he failed to elaborate on economic targets for the city, which has lost ground to rival financial centres like Singapore and Dubai. Hong Kong is in currently technical recession – after posting two successive quarters of contraction. There is market concern that the tax rebates are not enough to draw foreigners back to Hong Kong and about the “unprecedented silence on key economic indicators.” On top of that – and probably the main drivers behind declining consumer confidence – are the downside outlook for China’s economy and a rise of Covid cases in the middle of the party congress in Beijing.

Yesterday, EU leaders finally started to debate how to handle Europe’s rising energy prices and imposing a cap on gas prices. On one side of the fence is Germany, and on the other Italy, looking for a swift and ambitious cap on prices. The bloc’s twenty-seven member states have been squabbling for months over measures to lower energy bills and there seems little chance of a common approach becoming a realty, more so because the top two nations in the bloc, Germany and France, cannot agree on any approach. There are several avenues that the ministers can study as they try to satisfy these differing views with a series of proposals that it hopes will help Europeans pay for their heating as winter approaches. One such proposal is to allow joint purchases by the EU energy giants in order to command cheaper prices to replenish reserves. Other ideas put forward include giving the Commission the power to establish a pricing “corridor” on Europe’s main gas index, to intervene when prices get out of control. One major hassle is the link between gas and electricity prices, because under EU rules, a gas price index helps set the price of electric power across the continent, but the index has skyrocketed since the beginning of the Russia-Ukraine conflict, since it was Moscow that supplied 40% of the EU’s gas imports before the war. Spain and Portugal have already gained an exemption and now there are other nations looking for the same exclusion. However, Germany opposes this idea, arguing that cheaper gas will dissuade users from cutting back on their energy use.

Most analysts expect that the ECB will lift rates on its deposit and refinancing accounts by a further 0.75% next Thursday, (or a possible 1.0%), as it belatedly tries to contain inflation rates which, like the BoE, is running at five times more than the central bank’s target. By December, the deposit and refinancing rates are expected to reach 2.0% and 2.50% respectively compared to 1.25% and 2.00% predicted last month. The ECB’s first increase did not come until July, when it added 50 basis points to all its rates, taking the deposit rate to zero — its first time not in negative territory since 2014 — and followed that up with a 75 bp lift in September. Skyrocketing energy prices, allied with fractured supply chains, and the ongoing and deteriorating Ukraine crisis, are the main factors pushing such rates even higher. It is expected that it may show signs of improvement and end the year on a still high 9.6% – and could, but probably will not, drop to its original 2.0% target by the end of 2024. The central bank, which has also started unwinding its US$ 3.25 trillion of bond purchases, will have to carry out a balancing act so as not to force a recession because of higher rates.

President Biden’s administration has awarded US$ 2.8 billion in grants – to twenty companies across twelve states – to boost the production of electric vehicle batteries and the minerals used to make them. He also announced the American Battery Materials Initiative to commit the entire government to securing a reliable and sustainable supply of critical minerals used for electricity and EVs. The aims of this strategy are to make 50% of all new vehicles sold in the US electric or plug-in hybrid models, and provide 500k new EV charging stations, and to reduce the country’s reliance on China and other nations for its green energy revolution. In August, the Chips and Science Act provided US$ 52.7 billion for semiconductor research, development, manufacturing and workplace development.

As the White House announced the release of a further fifteen million barrels from its Strategic Petroleum Reserve, Joe Biden called for an increase in domestic oil production. The struggling President wants to see oil prices head further south before the 08 November midterm elections that will decide the make-up of the US Congress. It was also announced that the country’s strategic reserves, housed in vast salt caves in Texas and Louisiana, will be refilled when oil prices are at or below about US$ 67- US$ 72 per barrel. Earlier in the month, the Saudi Arabia-led Opec+ alliance agreed to a two million bpd cut, in a move that could be seen to be a snub to Biden to hinder his Democratic Party at the polls.  He has also urged refiners and retailers to pass their savings on to consumers, condemning their “record” profits amid a global inflation crisis “at the expense of the vast majority of Americans”.

A neutral observer would ask why opposition parties and other critics, in the UK, are solely blaming the government for the current high inflation rate when, say the US and EU, with almost identical figures, and other administrations get away using the Ukraine crisis, supply chain problems, high energy prices, slowing global economy etc for their justification? This week, the Federal Reserve came out with their latest “beige book”, confirming that economic prospects are becoming “more pessimistic” in the country on growing worries of weaker demand, citing heightened inflation and rising interest rates. The US central bank has to try hike rates to cool surging consumer prices, and simultaneously avoid tipping the world’s biggest economy into a recession by raising them too high and too quickly. This year, it has already pushed the benchmark lending rate five times to add a total of three percentage points.

The volume is being turned up as more industry leaders are pointing to the fact that a recession is on the horizon., with the latest being Elon Musk, who considers that a recession will last for eighteen months ending in Q2 2024. Earlier in the week, he had commented that “a recession of sorts” in China and Europe was weighing on demand for its electric cars.  This opinion is shared by Jeff Bezos, former supremo at Amazon, who wrote that “the probabilities in this economy tell you to batten down the hatches.” Their opinion is shared by many others including the IMF MD, Kristalina Georgieva, who has consistently warned of rising recession risks, and David Solomon, CEO of Goldman Sachs, who commented that “there’s a good chance we could have a recession in the United States”. Even stock markets are feeling the pressure, worried that if the Fed continues with hefty rate rises, the US economy could go into recession, as the benchmark ten-year T-Bond yield hit fifteen-year highs.

Moneyfacts estimates that some UK mortgage rates are at their highest level since August 2008 – as the average rate for a two-year fixed rate loan rose to 6.53% and the average interest rate on a five-year fixed rate mortgage rising to 6.36%. It does offer a glimmer of hope to homebuyers, as it expects markets to calm and pressure on mortgage rates to ease, with the recent many government U-turns. The number of mortgages available for homebuyers dropped sharply after the government’s disastrous mini-budget but has recovered somewhat – although there are still far fewer available compared with 2021. At the same time, there has been a marked slowdown in house sales, which was happening even before the tumultuous events of the last seven weeks. Housebuilder Bellway commented that there had been a fall in “elevated” demand from homebuyers, that had picked up in the coronavirus pandemic and that it expected sales to be flat in the coming year. The Royal Institute of Chartered Surveyors (RICS) warned that “storm clouds” in the housing market were visible, with the market “losing momentum”, as buyer enquires fell for the fifth month in a row in September.

Following a change of faces at No. 11, its new incumbent, Jeremy Hunt, has indicated that some taxes would go up, and government spending would rise by less than previously “planned” by the odd couple – Liz Truss and Kwasi Kwarteng. The incoming Chancellor has confirmed that “some taxes will not be cut as quickly as people want, and some taxes will go up. So it’s going to be difficult,” as he tries to restore UK’s economic policy credibility. This comes after the Prime Minister last Friday confirmed that the corporation tax rate would increase, abandoning her plan to keep it at current levels, and government spending would rise by less than previously planned. The new Chancellor did not hold back blasting his new (and now departed) boss on all fronts, agreeing with her fundamental approach of seeking to spark economic growth, but the way she and Kwarteng went about it had not worked. He also continued by saying “there were mistakes. It was a mistake when we’re going to be asking for difficult decisions across the board on tax and spending to cut the rate of tax paid by the very wealthiest,” and that “it was a mistake to fly blind and to do these forecasts without giving people the confidence of the Office of Budget Responsibility saying that the sums add up. The Prime Minister has recognised that, that’s why I’m here.” To some, this seems to have been her death warrant.

Three weeks after the disastrous mini-budget, masterminded by the incompetent Liz Truss and her thankfully departed Chancellor, Kwasi Kwarteng, the UK government continued to do U-turn after U-turn to try and put the country on better footings. (Chancellor, Jeremy Hunt – being one of eleven Tory MPs who announced they would seek the leadership of the Conservative Party, with three withdrawing before the race began – was the first to be eliminated). Now he has added a further change to the energy price support, which had been touted to last for two years will be cut in April; until then, the price will be capped at US$ 2.8k but could now top US$ 4.9k from April 2023; it was confirmed that the most vulnerable would continue to be protected from soaring energy prices. The Chancellor, in defending this change, said “it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices”, and that the Treasury will review the support given from April.

Thursday saw the demise of the UK’s 56th Prime Minister, Liz Truss who resigned after only forty-five days in the office, and on the news, the pound rose against the dollar, lifting 1.13 to the greenback, and government borrowing costs dipped. The market was evidently glad to see her back, and were “relieved” by the news, despite a lot of uncertainty remaining.

Latest figures from the Office for National Statistics indicate that retail sales fell by more than they did before the onset of Covid-19, and retail sales, down 1.4%, fell by more than expected last month. As a result, sterling dipped against the greenback today, trading at US$ 1.11, after rallying a day earlier as Prime Minister Liz Truss resigned. To further dampen the pound’s progress was news that government borrowing rose slightly to its second highest September on record. Apart from the impact of negative economic data, it seems that investors are also concerned with political and economic uncertainty that is spooking global markets and ensuring a volatile ride for sterling.

The UK rate of Consumer Price Index inflation in the UK rose to 10.1% in the twelve months through to September, 0.2% higher than a month earlier and returning to double digits first seen in July; this figure is quintupled the almost laughable 2.0% target of the BoE.  The Office for National Statistics figures showed that the CPI monthly rate was at 0.5%, compared to 0.3% a year earlier. The RPI jumped to 12.6% while CPI, including housing costs (CPIH), nudged 0.2% higher on the month to 8.8%. Although partially offset by lower fuel costs, rising food prices were the greatest addition to the cost-of-living squeeze on households. If no further action is taken, inflation will move higher in April if the government cuts funding for household energy bills. Food costs jumped 14.6% in the year to September – the biggest rise since 1980 – with bread, cereal, meat and dairy prices all climbing.

An ultra-high-net-worth-individual is defined as an individual who has more than US$ 100 million in tangible assets. A study by Henley & Partners estimates that there are 25.5k “centimillionaires” on the global stage, with the US home to 38.0% of the number, followed by China, India, UK and Germany, accounting for 7.9%, 4.4%, 3.8% and 3.8% respectively. Switzerland, Japan, Canada, Australia and Russia fill the top ten positions. A report, earlier in the year, by Knight Franks reckoned that there were 9.3%, (52k) more people globally added to the ultra-wealthy segment, defined as having net wealth of over US$ 30 million, with US numbers 12.2% higher. When it comes to the UAE, the Boston Consulting Group has estimated that 41% of the country’s wealth last year was derived from UHNWIs, estimated to nudge 2% higher up by 2026. Currently, in the global list of global of centimillionaires, Dubai, with 202 centimillionaires, ranks 18th,with New York at the top, followed by the San Francisco Bay Area, London and Los Angeles with 737, 623, 406 and 393 respectively. Latest figures show that 85% of the world live on less than US$ 30 per day, two-thirds live on less than $10 per day, and every tenth person lives under the poverty line of US$ 1.90 per day. These figures will become more worrying once the full impact of the current cost of living crisis hits home. There is no doubt that it is a case of Rich Getting Richer, Poor Getting Poorer!

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You Say Hello, I Say Goodbye!

You Say Hello, I Say Goodbye!                                                   14 October 2022                    

The 2,338 real estate and properties transactions totalled US$ 1.99 billion, during the week ending 14 October 2022. The sum of transactions was 106 plots, sold for US$ 480 million, and 1,791 apartments and villas, selling for US$ 1.04 billion. The top two land transactions were both for land in Palm Jumeirah, sold for US$ 163 million and US$ 59 million, followed by a third in Al Satwa fetching US$ 12 million. Hadaeq Sheikh Mohammed Bin Rashid recorded the most transactions, with twenty-two sales, worth US$ 122 million, followed by Jabal Ali First with nine sales transactions, worth US$ 7 million, and Al Hebiah Fifth, with nine sales transactions, valued at US$ 6 million. The mortgaged properties for the week reached US$ 401 million, with the highest being for land in Island 2, valued at US$ 74 million, while 157 properties were granted between first-degree relatives worth US$ 114 million.

September property deals jumped 33.4% to 7.3k transactions, year on year, and topped 62.4k in the twelve months to 30 September – its highest level since 2009. CBRE posted that off-plan market sales increased by 51.4%, while the secondary property market transactions rose by 17.3%, compared to the same period last year. September average prices for residential properties have risen by 8.9% in the past twelve months, with average apartment prices rising by 8.0% to US$ 309 per sq ft and villas by more than 14%, to US$ 368. As with other recent reports, the consultancy noted that prices are “still below the highs witnessed in late 2014”, with apartments remaining 23.8% and villas staying 21.6% below that peak. On the year, it was estimated that apartment and villa rents jumped 26.6% and 25.5%. Many expect a further spike in Q4, as the market will be boosted by the knock-on impact of the FIFA World Cup, starting next month in Qatar.

A UBS Global Wealth Management report indicates that Dubai’s real estate bubble risk is the second lowest after Warsaw. Its Global Real Estate Bubble Index noted that, despite recent hikes, the Dubai housing market is still only at its 2019 price level, and still 25% below its 2014 peak, and is now in fair-valued territory. It confirmed that among the world’s twenty-five major cities, the average nominal house price growth was 10.0%, in the twelve months to mid-2022, and that there were indicators the global housing boom was coming to an end. It noted that Dubai’s house price growth is likely to remain high in the coming quarters, but growth rates will gradually recede amid higher financing costs. The study also reported that “looking ahead, Dubai’s property market is likely to benefit from a new visa program – with looser residence requirements for skilled professionals – and new regulations increasing transparency of transactions. Dubai is already attracting more skilled and wealthy migrants from other regions, where the investment climate has become less favourable. This population inflow has impacted both the prime owner-occupied and the rental markets. Rents bottomed out last year and have climbed by 22% since mid-2021. As these new tenants settle in, they will eventually become potential buyers.”

Only last month, Alpago Properties was in the news for selling Dubai’s most expensive villa at US$ 82 million, located on Palm Jumeirah. Now it has tied up with Foster & Partners to develop the Palm Flower on the West Beach of Palm Jumeirah. The new ultra-luxury property project will only have ten residential units on eleven floors, with each occupying an entire floor and one mega penthouse taking up two floors. Each unit will have floor-to-ceiling windows, with unobstructed views of the Arabian Gulf, and will also house high-end amenities such as a private cinema, a private pool facing the sea, a garden terrace and a gymnasium. The lobby will link the basement with personalised parking pods, through private elevators, that open directly into each apartment. Prices and other details will be announced later.

Damac Properties unveiled its latest foray in the emirate’s property market – the 41-storey luxury Chic Tower, featuring interiors designed by Swiss jeweller de Grisogon. Located in Business Bay, it will initially include studio, 1B/R and 2 B/R units, with plans to add 3 B/R and 4 B/R apartments, with “hydroponic walls and sky pools” at a later stage. No other details, including costs and construction timetable, were made available, except that it will include many amenities including seven baths, a beauty bar and sky gyms.

There are reports that a US$ 5.0 billion Moon Resort could debut in Dubai, as the US developer, founded by Michael Henderson and Sandra Matthews, is considering several global sites for its introduction. It is estimated that the resort, with an overall height of 224 mt, could be built within forty-eight months. The developers are planning a global roadshow next year to select four locations but will limit each region to just one project. They estimate that The Moon resort could become the most profitable tourism project ever – but there again any developer would paint such a rosy picture.

The world’s largest group of independent hotel brands, Global Hotel Alliance, posted a 68% hike in room revenue in the first nine months of 2022, as well as reaching 84% of pre-pandemic levels. The firm, with its twenty-two million members of its GHA Discovery loyalty programme, saw total revenue at US$ 900 million, assisted by a 20% rise in average length of stay. It noted that the UAE, the Maldives and Thailand were the top three countries driving growth in the period, with the most-visited cities for GHA Discovery members being Dubai – with a 48% growth in stays – followed by Singapore and Bangkok. The highest-spending international travellers came from the US (US$ 76million), the UK (US$ 71 million) and Germany (US$ 60 million).

Monday saw the opening of the 42nd edition of the five-day GITEX GLOBAL by Sheikh Maktoum bin Mohammed bin Rashid. Taking place in its usual location of the Dubai World Trade Centre, it was the biggest in the event’s history., with 100k attendees, 5k leading technology companies from more than ninety countries across twenty-six sold-out halls. There were thirty-five Unicorns hoping to expand in one of the world’s fastest-growing markets. 250 government entities were also present to showcase their latest public-private partnerships and digital projects. The Deputy Ruler of Dubai commented that “the record global participation in the 42nd edition of the event reflects Dubai’s profile as a hub for innovation, knowledge sharing, enterprise and networking in the international technology industry”.

At the event, DAFZA entered the metaverse, offering an innovative experience for customers. METADAFZ will enable clients from across the globe to conduct meetings via a virtual platform, offering a different option to the “old” way of conducting business and bridging the gap between the physical and virtual world.

Affirming the emirate’s position as a major global hub, non-oil trade at Dubai Airport Free Zone rose 36.1% year-on-year in 2021, with figures exceeding US$ 41.4 billion. The chairman of the Dubai Integrated Economic Zones, HH Sheikh Ahmed bin Saeed Al Maktoum, noted that “we are proud of these exceptional results that highlight the strategic contribution of DAFZ under the umbrella of DIEZ. These results have been pivotal in promoting economic recovery in Dubai and the UAE”. The free zone contributed 10.7% to Dubai’s non-oil trade in 2021 and posted a US$ 2.53 billion trade surplus.  Of that total, imports hit record levels and jumped 48% on the year, whilst exports more than quadrupled to US$ 381 million. The two main drivers behind the improved growth were machinery/equipment/appliances and precious stones/metals/jewellery’ sectors, with growth levels 36% and 46% higher, as well as making up 94% of DAFZ’s overall trade. Location-wise, Asia accounted for 43% of total trade, valued at US$ 18.9 billion, followed by the Mena – 37%, at US$ 16.5 billion, and Europe’s 13%, with a value of US$ 5.9 billion.

By 2031, the UAE aims to make the country a global industrial centre, and with this in mind, it has launched a national programme to boost the pace of the technological transformation, as it plans to develop 1k tech projects over the next nine years. The strategy includes the establishment of national centres for industrial empowerment and plans to export US$ 4.1 billion worth of advanced Emirati technological products a year. Earlier in the year, ‘Operation 300 bn’ was launched highlighting the need to increase the industrial sector’s contribution to the country’s GDP to US$ 81.7 billion, (AED 300 billion), by 2031, from US$ 36.2 billion in 2021. The key components include innovation and the adoption of advanced technologies in the industrial sector, with the federal government updating and facilitating legislation, including the introduction of 100% foreign ownership of projects and making dedicated financing available. Focussing on eleven sectors – petrochemicals, plastics, metals, food, agriculture, water, health care, space, biotech, medi-tech, pharmaceuticals, clean and renewable energy, including hydrogen production, machinery and equipment, rubber and plastic and electronics and electrical gadgets – it aims to improve UAE’s global standing on the Competitive Industrial Performance Index, by ten rankings, to 25th place globally; over the period, there will be direct government support for at least 13.5k SMEs.

HH Sheikh Mohammed bin Rashid chaired a cabinet meeting on Monday to approve UAE’s US$ 68.7 billion federal budget for 2023 – 2026, with revenue estimated to come in at US$ 69.7 billion.   It is estimated that revenues will grow at a quicker rate than expenditure next year – 11.0% to 3.9%. A further analysis sees the main expenditure drivers being social development/benefits, equating to 39.3% of the total 2023 spend, followed by government affairs, (38.0%), infrastructure/economic resources (3.8%) and the financial assets and investments, (3.4%); other federal expenses account for the balance of 15.5%. The Dubai Ruler, and the country’s Prime Minister, commented that “the budget of the union is sustainable and balanced, and it is a major driver of the union government and its development ambitions for the people of the union.”

The owners of GEMS Education are considering offering an IPO, which could raise up to US$ 6.0 billion, as a potential option for sale, but to date there is still no confirmation from either of the two shareholders – CVC Capital or Sunny Varkey, the school operator’s founder. Prior to 2019, when CVC acquired a stake, it was solely owned by the Varkey family. One of the world’s largest operators of private schools, with a student body of over 130k, it started in Dubai over sixty years ago and now operates more than sixty schools across the Mena, along with educational institutes in Asia, Europe and North America.

At its first general assembly since it joined the DFM, shareholders of Dubai Electricity and Water Authority have approved the items at the Company’s first general assembly agenda, attended by 90.19% of the shareholders. Among the agenda items approved were the H1 cash dividend distribution of US$ 845 million, equating to US$ 0.0169 per share, and the Board recommendation to suspend any further allocation of profit towards legal reserve, considering the Company’s legal reserve is currently in excess of 50% of its paid-up share capital.

The DFM opened on Monday, 10 October, 34 points (1.0%) higher on the previous week, and nudged up 4 points  on Friday 14 October, to close on 3,377. Emaar Properties, US$ up 0.05 the previous week, gained US$ 0.03 to close the week on US$ 1.66. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 3.60, US$ 1.63, and US$ 0.39 and closed on US$ 0.69, US$ 3.53, US$ 1.64 and US$ 0.39. On 14 October, trading was at 181 million shares, with a value of US$ 120 million, compared to 105 million shares, with a value of US$ 66 million, on 07 October 2022.  

By Friday 14 October 2022, Brent, US$ 8.89 (9.2%) higher the previous week, shed US$ 1.59 (1.7%) to close on US$ 91.63.  Gold, US$ 50 (3.1%) higher the previous fortnight, lost US$ 18 (1.1%), to close Friday 14 October, on US$ 1,650.

Opec has lowered its global oil demand forecast for 2022, down 500k bpd to 2.6 million barrels, and by 400k bpd to 2.3 million barrels in 2023 and attributing this move to Covid-19 restrictions in China, economic challenges in Europe and continuing global inflationary pressures. OECD countries will see this year’s oil demand down 200k bpd to 1.4 million barrels. Demand for Opec crude will decline by 200k bpd to 28.7 million barrels, and by a further 300k bpd next year.

Late last week, Toyota issued an apology to 300kk customers after revealing that their email addresses, and customer management numbers, had been “mistakenly” leaked through a subcontractor. It had noted that customers, who had registered their email addresses on the Toyota Connect (T-Connect) app since July 2017, were affected, with the app connecting customers to their vehicles through smartphones. It stressed that other information, such as names, phone numbers and credit card details, was not affected. The world’s largest car maker joins a string of high-profile companies – including Cisco, Samsung, LinkedIn, Facebook and Twitter – that have had their data and customer information compromised.

On Monday, Air France and Airbus went on trial in Paris on charges of involuntary manslaughter relating to the 2009 AF447 Rio to Paris crash that killed all 228 on board. The plane plunged into the Atlantic Ocean, after it stalled entering a zone of strong turbulence, and it took nearly two years to locate the bulk of the fuselage and recover the “black box” flight recorders. The case evolves around alleged insufficient pilot training and a defective speed monitoring probe, with the initial enquiry concluding the crash resulted from mistakes made by pilots disorientated by so-called Pitot speed-monitoring tubes that had frozen over in thick cloud. Both plaintiffs denied any criminal negligence, with the case dropped in 2019, attributing the crash mainly to pilot error. Exasperated by the decision, victims’ families went to court and in 2021, a Paris appeals court ruled there was sufficient evidence to allow a trial to go ahead. Air France commented that it “will continue to demonstrate that it did not commit any criminal negligence that caused this accident, and will request an acquittal,” whist the French plane maker refused to comment. Testimony will also be heard from some of the victims’ family members, 476 of whom are civil plaintiffs in the case. However, the maximum fine is set at a paltry US$ 220k, and even if there is a conviction, who will face punishment – the plane maker, the carrier or individual senior management?

The Royal Mail has announced plans to cut 7.2% (10k) jobs, from its current workforce of 140k, by next August, blaming ongoing strike action and rising losses at the business – it expects this year’s losses to top US$ 390 million. It anticipates that 6k jobs will be from redundancies and the balance from natural attrition. Other drivers for the continued losses include the fallout from the recent eight-day strike and a marked reduction in the volume of parcels being posted. A fresh round of strikes, over pay and conditions, will encompass nineteen days of industrial action, including Black Friday. During H1, Royal Mail said that strike action cost the business US$ 78 million, leading to an operating loss of US$ 245 million, compared to a US$ 263 million profit a year earlier. International Distributions Services, the parent company of Royal Mail, saw its share price slump 11% to US$ 2.09 on Friday following the announcement.

Having announced previous plans to axe 110 main stores, as part of a major overhaul, Marks & Spencer has decided to speed up the process, with sixty-seven of its bigger – “and lower productivity, full line stores” – to shut within five years, whilst at the same time opening 104 new Simply Food stores. Its aim is to have 180 “full-line” shops selling food, clothing and homeware products by early 2028, down from its current 247. No details were given on which locations, or how many jobs, would be affected by the plans.

Morgan Stanley announced disappointing Q3 results with all indicators heading south – net income down 30.0% to US$ 2.6 billion, revenue sliding 12% lower to US$ 12.9 billion, and investment banking tanking 55% to US$ 1.28 billion, along with declines across the bank’s advisory, equity and fixed income segments. The market expressed its disappointment by knocking nearly 4% off its share value to US$ 76.21 in early Friday afternoon trading and has lost over 25% of its market cap over the preceding twelve months. It is almost certain that there will be job cuts announced over the next six months.

Almost 4% of Apple Inc’s 4k employees in Australia are due to go out on a one-hour strike on 18 October because of lack of progress on wage negotiations – it will be the company’s first such action in Australia and follows recent moves to increase unionisation in the US. The main impact will be felt in the tech company’s store operations but will also exacerbate the industrial relations problems it is facing elsewhere. The strikers are members of the Retail and Fast Food Workers Union and their action will restrict most customer services in at least three of the company’s twenty-two stores in the country. Two months ago, Apple had proposed a new set of locked-in wage rises and conditions, following which three unions, including RAFFWU, successfully appealed to the industrial arbiter for more time to negotiate with Apple. The three unions had wanted the tech giant to guarantee wage increases that reflect inflation and weekends of two consecutive days rather than being split, with Apple responding that its minimum pay rates are 17% above the industry minimum and that full-time workers get guaranteed weekends. The strike action is because the union has “come to the end of that today and we still aren’t anywhere near a satisfactory agreement, so last night members unanimously endorsed that path.” This can only be the beginning of unionisation in Australia becoming the norm for employees in tech giants such as Apple.

The AFP has arrested two Australian men, aged 67 and 71, and charged them with bribing Sri Lankan officials to secure two infrastructure contracts, worth over US$ 10 million, between 2009 – 2016. The charges follow a decade-long investigation into SMEC International Pty Ltd, an Australian-based engineering firm, which involved authorities from the US, Canada, India and other jurisdictions. It is alleged that bribes, worth US$ 200k, were paid to government officials. Founded in 1949, and known as the Snowy Mountains Engineering Corporation, four of the company’s subsidiaries in India, Bangladesh and Sri Lanka were temporarily barred, in 2017, by the World Bank, from bidding for any of its contracts.

In a bid to achieve its net-zero carbon goal by 2040, Amazon has announced investment plans of US$ 975 million in electric vans, trucks and low-emission package hubs across Europe. It also noted that the investment would help its electric van fleet in Europe more than triple from 3k vehicles to over 10k by 2025 and hoped that the investment would also spur innovation across the transportation industry and encourage more public charging infrastructure for electric vehicles. To date, its largest electric van order is for 100k vehicles from Rivian Automotive Inc and it will also invest in doubling its European network of “micro-mobility” hubs from more than its current twenty cities.

New rules introduced by the Biden administration will try to ensure that US firms do not sell certain chips used for supercomputing and artificial intelligence to Chinese companies. In the past, the US targeted specific companies, such as Huawei, barring sales of technology on national security grounds, but the latest measures are less circumspect. Many of the measures are aimed at preventing foreign firms from selling advanced semiconductors to China or providing China with the tools to make advanced chips. Some investors are concerned that the rules should be implemented in a more targeted way, warning that they may cost the industry millions of dollars in revenue; Nvidia noted that they could cut US$ 400 million from their revenue stream. The Semiconductor Industry Association has called for increased international collaboration to “help level the playing field”, at a time when the US industry pours billions of dollars into its domestic chip industry, so to boost US competitiveness. Shares in major Asian computer chipmakers slumped after the US announcement, with the likes of Taiwanese chipmaker TSMC, South Korea’s Samsung Electronics, Tokyo Electron and China’s SMIC falling by 7.7%, 2.3%, 5.5% and 1.7% respectively in Tuesday’s trading.

Mainly because of the global economic slowdown, Samsung has warned the market that it faces a 32% slump in profits to US$ 7.6 billion, as demand for electronic devices, and the memory chips that power them, shrinks due to the global economic slowdown; its quarterly revenue is expected to be US$ 1.0 billion short of latest forecasts. The South Korean company was not the only one, with the US chip maker Advanced Micro Devices also confirming  a fall in demand for computers, as potential buyers cut back on purchases, with the cost-of-living rising; its shares fell 4.5% on the news. With sales of electronics tanking for various reasons, including surging inflation, mounting interest rates and the “Ukraine impact”, it has resulted in those companies that buy memory chips, having to cut their purchases as they use up their existing inventory. It is almost certain that the industry will continue to deal with falling demand that will see them posting lower revenue, lower profits and lower margins in the coming months.

To meet demand over this year’s Christmas holiday season, Amazon is to hire 150k employees throughout the US, with vacancies ranging from packing and picking, to sorting and shipping. On average, it is expected that those selected can earn, on average, US$ 19 or more per hour based on their location and role. This announcement comes at a time when the country continues to have a tight labour market which is one of the main reasons for the higher cost of goods.

Meanwhile, US jobs growth slowed for a second month in September, adding 263k new jobs – the fewest since April 2021 – and maybe an indicator that the labour market is beginning to cool. Despite this, analysts are predicting the need for further rate hikes to slow the economy, still beset by raging inflation. Any economic downturn will inevitably lead to some job losses, as a trade-off for reducing demand on big ticket items that should bring prices downwards and possibly avoid a recession. Restaurants, bars and health care firms led the September job gains, as the month’s unemployment rate fell 0.2% to 3.5% from 3.7% in August – a fifty-year low. On the year, the average hourly wage was 5% higher than a year earlier. There are signs that job losses are on the increase, especially in sectors such as the housing and tech sectors, whilst Peloton has announced its fourth round of job cuts this year, shedding another 500 positions, equating to 12% of its workforce.

Latest figures show that September US consumer prices rose more than expected – a sure indicator that the Fed is not yet winning the inflation fight, as it dropped just 0.1%, on the month, to 8.2%. The rate is well above the central bank’s 2% target and means the Federal Reserve is likely to continue to keep raising interest rates in an attempt to cool rising prices. America’s central bank has been aggressively raising its interest rates, to cool inflation, which has made the dollar more attractive to investors, but at the same time pushing up the value of the greenback. Although inflation has dipped from its June zenith of 9.1%, attributable to a marked decline in petrol prices, clothing costs and used car prices, grocery prices – 13% higher on the year – housing and medical costs have risen sharply; excluding food and energy, inflation jumped 6.6% – the fastest rate since 1982. Despite raising rates five times since March, including the last three being all being at 0.75%, inflation still seems far away from  disappearing  from the economic landscape, with these increases having had the negative effects of disrupting the global markets, slowing sectors such as housing and pushing up costs across the board. With the mid-term elections next month, Joe Biden must be hoping that the Fed actions will not slow economic activity by much so as to push the world’s leading economy into recession.

With news that prices in the US consumer prices had risen faster than anticipated, the Japanese yen touched a 32-year low against the US dollar, falling to 147.66, with its Finance Minister Shunichi Suzuki confirming that the government will take “appropriate action” against the currency’s volatility. Only last month, the government surprised the market by injecting more than US$ 20.0 billion to prop up the ailing currency – the first time that Japanese authorities had intervened in the currency market since 1998. But such action will have little impact on the global stage as long as the government maintains rates much lower than those of the Fed.

Whilst it appears that Liz Truss is out of her depth, the ECB President Christine Lagarde seems to be in cuckoo land saying that the bloc is still growing and that “Europe is not in recession”, with the aside that “we never had such a positive employment situation.” Latest surveys seem to point that the euro zone will contract both in Q4 and Q1 2023. This week, the German government indicated that the country’s energy crisis will probably push the economy into a 0.4% recession early next year – only for the third time since the GFC. It seems likely that the central bank will add a further 0.75% to rates at their next meeting at the end of October.

The United Nations Development Programme has called for a speedy response, as it has warned that fifty-four developing nations are spiralling into a deepening debt abyss. Many of the countries face converging economic pressures and may find it impossible to access new financing with such countries “among the most climate-vulnerable in the world”, and that they “desperately needed investments in climate adaptation and mitigation will not happen”. Forty-six of these countries had a cumulative US$ 782 billion debt pile in 2020, with Argentina, Ukraine and Venezuela accounting for more than a third of that amount. It also noted that a third have debt labelled as being “substantial risk, extremely speculative or default”, and that Sri Lanka, Pakistan, Tunisia, Chad and Zambia, are the five countries at the most immediate risk. The situation has worsened because a freeze on debt repayment, during the pandemic to lighten their burden, has expired. There is no doubt that a major restructuring plan is long overdue and until then the situation will continue to deteriorate – in 2022, ten more countries have now been effectively shut out of the lending market, more than doubling to nineteen developing countries., with UNDP noting that “the risks of inaction are dire”.  

In the UK, the number of people neither working nor looking for work had continued to rise over the past few months, as the jobless rate touched 3.5% by the end of August, at the same time, that the number of job vacancies dipped again, although the level still remains high with many firms struggling to recruit. The decline in the number looking for work has sent the unemployment rate to its lowest for nearly 50 years but despite this, the pressure on pay remains, as most recent pay increases fall way behind the surging inflation rate. The economic inactivity rate – which measures the proportion of people aged between 16 and 64 not looking for work – increased to 21.7% in the June to August quarter.. There are a record high of almost 2.5 million people, considered inactive number because they are long-term sick, whilst the economic inactivity rate sees that 21.7% of the people aged between 16 and 64 are not looking for work. The number of those inactive because they are long-term sick hit a record high of nearly 2.5 million.

The Institute for Fiscal Studies has estimated that the Truss government may have to lay off 200k civil servants to avoid adding billions of pounds to the national debt. For example, the public debt will be increased by US$ 5.6 billion just to cover the budgeted 5% pay rises this year.  The former Chancellor Kwasi Kwarteng was tasked with the job of keeping public finances under control including finding ways of financing the US$ 52 billion tax cuts announced at the beginning of his reign last month. He was expected to make his plan public on 23 November, but many expect that this may be brought forward by his successor, Jeremy Hunt. The IFS said about 100k job cuts this year would ensure the overall wage bill was unchanged and avoid cuts elsewhere in departments. If pay increases with inflation in 2023, the government would need to cut another 100k jobs to keep the bill in check.

The Bank of England came up with two announcements this week – the first that it would increase the amount of bonds it can buy in the final week of the scheme, which ended today and that it would introduce new measures so as to ensure an “orderly end” to its emergency bond buying scheme; this was introduced, after last month’s mini-budget, that pledged US$ 52 billion of tax cuts, as part of a plan to boost economic growth, to stop a collapse of some pension funds. The BoE confirmed that the measures are “designed to reassure pension managers – and pension holders – that help will be provided”, and that it would tighten monetary policy as it fights inflation. As a consequence of the BoE’s statements, the pound hit a record low and investors demanded a much higher return for investing in government bonds, causing some to drop sharply in value. Last month, the Truss government had to thank the Bank of England for its timely intervention in buying gilts, after the market showed its disdain for the then Chancellor all out to spend money, with no plan on how the US$ 64 billion of tax cuts would be bankrolled. There was an immediate collapse in the price of gilts, after his mini budget resulted in a rush to sell bonds, forcing their price to tank, in some cases by 50%. If the BoE had not intervened the possibility was that those pension funds could have got to a position where they could not pay their debts.

Chaos ruled the markets all week, with the BoE commenting that the government’s unplanned and unthought out economic strategy was likely to put households under severe pressure next year. It estimated that the number having to spend 70% or more of their disposable income on mortgage rates and essentials would reach its highest level since pre GFC. The government seemed to forget that the BoE’s double bail out efforts, over the past two weeks, were a temporary and targeted effort aimed at maintaining some sort of financial stability. There was no doubt that the government had to go back, change tack and return quickly to the market, with an economically credible and politically viable debt plan, including a set of tax and spending budgets, with independent forecasts. What the dynamic duo have done to date would not even warrant a pass in an Economics 101 examination, with a former IMF deputy director noting that the UK economy was on “shaky ground”.

By the end of her first six weeks in power, “Dizzy Lizzy” had fired her Chancellor of the Exchequer – and close ally – Kwasi Kwarteng and scrapped some of her more radical and unpopular economic measures to placate her growing number of opponents in the Tory hierarchy and to ensure her political survival as Prime Minister, for the time being; she also cancelled the rise in corporation tax from 19% to 25% from next April. She accepted that her plans for unfunded tax cuts had gone “further and faster” than investors were expecting. Despite yet another U-turn, both sterling weakened, and gilt prices tumbled, as the analysts opined that her reversal of US$ 22 billion of tax cuts was insufficient to restore some sort of tranquillity in the volatile market. There are still unfunded tax cuts of US$ 27 billion to be accounted for. On Friday, Jeremy Hunt, (a supporter of Rishi Sunak), became the fourth Chancellor in four months following in the steps of Kwarteng, (who lasted 38 days), Nadhim Zahawi, (63 days) and Sunak. The lady leader must have got used to singing You Say Hello, I Say Goodbye!

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Mind Your Own Business!

Mind Your Own Business!                                                         30 September 2022

What a way to end the month with a mega week for the local retail estate market! In August, the DLD registered 9,720 real estate sales with a value of US$ 6.63 billion for the whole month. The 2,702 real estate and properties transactions totalled US$ 5.99 billion, (almost equal to the total value in August), during the week ending 30 September 2022. The sum of transactions was 123 plots, sold for US$ 259 million, and 2,068 apartments and villas, selling for US$ 1.21 billion. The top two transactions were for land in Palm Jumeirah, sold for US$ 39 million, and the other for US$ 23 million in Palm Jumeirah. Al Hebiah Fifth recorded the most transactions, with 32 sales transactions, worth US$ 21 million, followed by Jabal Ali First with 20 sales transactions, worth US$ 20 million, and Al Hebiah Fourth, with 18 sales transactions, valued at US$ 53 million. The top three transfers for apartments and villas were all apartments, selling at US$ 139 million in Palm Jumeirah, another for US$ 135 million in Business Bay, and the third for US$ 113 million in Al Wasl. The sum of the amount of mortgaged properties for the week was US$ 4.35 billion, with the highest being for land in Jabal Ali Industrial First for US$ 3.81 billion. 82 properties were granted between first-degree relatives, worth US$ 191 million.

Today, Nakheel launched residences at Palm Beach Towers 3, featuring over three hundred fully furnished 1-3, B/R units and located on Palm Jumeirah. Residences will have 360-degree views, with a variety of nearby dining, leisure and recreational facilities, as well as the usual features including a modern gymnasium, an outdoor yoga area, private beach access, sky lounge and infinity swimming pool. Both previous launches of Palm Beach Towers 1 and 2 have sold out. The master developer has also recently unveiled a master plan for Dubai Islands, formerly known as Deira Islands, and is also redeveloping Jebel Ali Village.

There is no doubt that the Qatar World Cup is a godsend for the UAE hospitality sector and will also have a positive impact on the Dubai property market, driven by a shortage of hotel rooms in the host nation and the fact that many international fans would prefer to stay in Dubai and fly in and out of Qatar for the matches. A sign of how Dubai will be affected, by the influx of football fans, is that flydubai and Air Arabia will be operating a combined total of forty-five daily shuttle flights from Dubai and Sharjah into Doha over the four-week football extravaganza, due to start on 20 November.  It is expected that even those with a ticket for only one match in Qatar will take the opportunity to stay in Dubai for a longer period. However, it is noted that this time of the year is the peak period for the local tourism sector and when hotels expect to be close to full capacity. Accordingly, there will be great demand for short-term lets in the emirate and even now it is reported that rentals are at a premium, to the point that a property on Palm Jumeirah is up for a US$ 272k rental.

Last week, ADCB revised its 2022 country growth forecast by 0.2% to 6.2%, only to be surpassed this week by Emirates NBD upping its forecast by 1.3% to 7.0%; if this were to happen it would be even higher than the 6.9% growth registered in 2011. Both the non-oil sector – up from 4.1% to 4.7% – and the hydrocarbons sector from 10.0% to 13.0%. Dubai’s biggest lender attributed this uptick to a higher estimate for the energy industry’s output and the “robust growth” of its non-oil sector, assisted by a surge in tourism numbers and a buoyant property sector. However, growth has moderated, as 2022 has progressed, after Q1 GDP expanded by an annual 8.4%, with the non-oil sectors growing by 8.8%, on the year. Although the country is not immune from the impact of high inflation and a slowing global economy, it is in a better position than almost any other nation in the world, helped by encouraging economic indicators such as:

  • the August S&P Global PMI for the UAE climbing on the month by 1.3 to 56.7 – the quickest rise in non-oil business activity since June 2019
  • YTD crude oil production 13.0% higher by the end of last month
  • average residential unit prices 10% higher on the year by June with villa prices up 19% and apartments by 9%
  • July posting the highest number of sales transactions in the past twelve years
  • UAE’s H1 foreign trade exceeded US$ 272 billion (Dhs 1 trillion), compared with US$ 229 billion for the same pre-pandemic period
  • total H1 hotel guests topped 12 million, with tourism contributing US$ 5.18 billion to the economy

With the aim of attracting more US companies to the emirate, DMCC has successfully concluded its Made For Trade live events in Miami and New York, which attracted some 120 business leaders; last year, US bilateral trade was worth US$ 23 billion, whilst Dubai was home to over 1.5K US companies – a third of which were to be found in the DMCC. The free zone continues to hammer home Dubai’s economic benefits, including the ease of doing business, and it being the fastest growing and most interconnected free zone in the world, whilst the emirate itself is positioned as a global hub for financial services, crypto and commodities trade. The DMCC team will be continuing the tour and travelling to South America to engage with the business communities in Brazil in October.

Following the 2018 visit of its late prime minster, Shinzo Abe, when the UAE and Japan announced a comprehensive partnership, the final agreement was launched this week in Tokyo, with the twin aims of strengthening bilateral ties, by encouraging more diplomatic, economic, political and commercial partnerships and by encouraging investment in both countries. The UAE is Japan’s tenth largest trading partner globally, and Japan’s largest strategic partner in the field of energy, importing more than 20% of its oil from the UAE; the volume of non-oil trade last year touched US$ 13.35 billion.

Providing a wide range of services to complement its physical offices in Abu Dhabi and Dubai, the federal Ministry of Economy has unveiled its new headquarters in the Metaverse, posting that its third office will offer an immersive experience for governments, global corporations and the public to connect and collaborate. It will be equipped with advanced technology for the Ministry to sign bilateral agreements with other nations in the Metaverse, described as an economic equaliser, transforming key industries from logistics to real estate. It is expected that the global metaverse market will reach US$ 1.6 trillion by 2030, with a total annual growth of 43.3%, and the country is targeting to become a digital export centre and a leading metaverse economy.

Last Wednesday and Thursday witnessed the launch of the Dubai Metaverse Assembly, a global platform for the global metaverse community to discuss opportunities and enhance the potential of the promising virtual world. The event covered twenty-five various sessions and workshops and took place across the Museum of the Future and AREA 2071 at Emirates Towers. It included a wide range of related topics from building robust and scalable metaverse infrastructure to creating robust, business-friendly regulations and providing government services in the digital world. The Dubai metaverse strategy was approved in July by Dubai’s Crown Prince, Sheikh Hamdan bin Mohammed bin Rashid, with the aim that by 2030, it would have created 40k virtual jobs and attracted a further 1k companies, specialising in blockchain and metaverse technologies to turn Dubai into one of the world’s top ten metaverse economies.

After September’s 13%+ price reduction across the board (except for diesel’s 6.5% cut), the UAE Fuel Price Committee reduced October retail petrol prices by over 11%+. Despite oil prices continuing to hover around the US$ 90 level, prices have again been lowered – a feat that not many other countries can replicate.

  • Super 98: US$ 0.826 – down by 11.1% on the month and up 14.4% YTD from US$ 0.722
  • Special 95: US$ 0.796 – down 12.5% on the month and up 15.5% YTD from US$ 0.689
  • Diesel: US$ 1.025– down 2.8% on the month and up 47.1% YTD from US$ 0.697
  • E-plus 91: US$ 0.777 – down by 12.4% on the month

Yesterday, Salik saw its share value jump by 21.0% in its first day of trading on the DFM from its issue price of US$ 0.545 (AED 2.00) to US$ 0.657 (AED 2.41). The IPO was more than 49 times oversubscribed, after the Dubai government released 24.9% of its shares that raised US$ 1.02 billion. This latest IPO is the third out of ten state-owned companies to go public that will help boost the size of the local bourse to about US$ 817 billion. To date, the two other entities to go public have been Dewa and Tecom that raised US$ 6.11 billion and US$ 463 million.

The DFM opened on Monday, 26 September, 80 points (2.3%) lower on the previous week, shed a further 70 points (2.1%), on Friday 30 September, to 3,339. Emaar Properties, US$ 0.07 down the previous week, lost US$ 0.11 to close the week on US$ 1.58. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.68 US$ 3.43, US$ 1.65, and US$ 0.45 and closed on US$ 0.68, US$ 3.50, US$ 1.63 and US$ 0.41. On 30 September, trading was at 105 million shares, with a value of US$ 66 million, compared to 99 million shares, with a value of US$ 60 million, on 23 September 2022.  

For the month of September, the bourse had opened on 3,443 and, having closed the month on 3,339 was 104 points (3.0%) lower. Emaar traded US$ 0.13 lower from its 01 September 2022 opening figure of US$ 1.71, to close the month at US$ 1.58. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.70, US$ 3.64, US$ 1.60 and US$ 0.47 and closed on 30 September on US$ 0.68, US$ 3.50, US$ 1.60 and US$ 0.47 respectively. The bourse had opened the year on 3,196 and, having closed September on 3,339, was 143 points (4.5%) higher, YTD. Emaar traded US$ 0.25 higher from its 01 January 2022 opening figure of US$ 1.33, to close September at US$ 1.58. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the year on US$ 0.00, US$ 3.69, US$ 1.47 and US$ 0.72 and closed on 30 September on US$ 0.70, US$ 3.64, US$ 1.60 and US$ 0.47 respectively.

By Friday 30 September 2022, Brent, US$ 19.85 (18.7%) lower the previous four weeks, dipped a further US$ 0.82 (1.0%) to close on US$ 85.33.  Gold, US$ 76 (4.4%) lower the previous fortnight, recovered a little, up US$ 16 (1.0%), to close Friday 30 September, on US$ 1,668.

Brent started the year on US$ 77.68 and gained US$ 7.65 (9.8%), to close 30 September on US$ 85.33. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has shed US$ 163 (8.9%) during 2022, to close on US$ 1,668. For the month, Brent opened at US$ 95.54 and closed on 30 September, lower at US$ 9.21 (10.5%). Meanwhile, gold opened September on US$ 1,716 and shed US$ 48 (2.8%) to close at US$ 1,668 on 30 September.

Despite the volatile state of global stock markets, Volkswagen seem to have got away with pitching the Porsche IPO price at the top of the range, priced at US$ 82.15 (Eur 84.00), which generated US$ 19.07 billion and valued the luxury car maker at US$ 72.40 billion. This figure almost tops the valuation of its parent Volkswagen, valued at US$ 82.15 billion. Its share value had dipped US$ 81.06 (Eur 82.88) by mid-morning whilst Volkswagen lost 4.9% in early Frankfurt trading. Money raised by the IPO will help fund the tens of billions needed for VW to shift towards electric mobility and software. The Porsche and Piech families, in turn, will solidify their control over the car maker with a 25% stake, plus one ordinary share – carrying voting rights –  in Porsche, effectively giving them a blocking minority.

As it tries to rid itself of a stockpile of products, Nike has been hit by the strong dollar – making exports, (which account for 50% of its business), more expensive – and having to introduce discounts, cutting profit margins, as stock rose more than 40% compared to a year earlier; the sports giant has forecast that its revenue will be hit by more than US$ 4 billion because of its stock issue – more than double that of its previous estimate. Its quarterly income to 31 August fell 22% to US$ 1.5 billion, on the year, whilst stock levels rose by 44% to US$ 9.7 billion over the same period, with the only good news being revenue rising to US$ 12.7 billion. Following the announcement, Nike shares fell by more than 9% in extended trading.  It is not the only such firm suffering from a fall in consumer confidence and spending, with rival sportswear maker Under Armour and major US retailers like Target having to offer heavy discounts as their inventories have risen in recent months.

Following a landmark cooperation agreement between the UAE and Oman, a US$ 3 billion contract will see the railway connecting the 303 km  distance between Sohar Port to the UAE National Rail Network, as passenger trains, travelling at top speeds of 200 kmph, will soon connect Abu Dhabi with Sohar, to the north of Muscat. There is no doubt that such a link will add economic benefits to both countries and will also facilitate cross-border trade by linking commercial ports to the railway network, boost market competitiveness and reduce the total cost of supply chains. Oman Rail and Etihad Rail will also establish a joint company – Oman-Etihad Rail – to introduce and operate the railway network which will reduce travel time from Sohar to Abu Dhabi to 1 hour 40 minutes, and from Sohar to Al Ain to 47 minutes.

Last week, Optus revealed about ten million customers – equating to 40% of the Australian population – had personal data stolen in what it called a cyber-attack, which could turn out to be the worst data breach in the country’s history. About 2.8 million customers had passport or licence numbers taken and are at a “quite significant” of risk of identity theft and fraud, according to the government. Australia’s second-largest telecoms provider initially confirmed it was investigating the breach and had notified the relevant authorities, indicating that it had originated overseas. Two days later, on Saturday, an internet user published data samples on an online forum and demanded a ransom of US$ 1 million in cryptocurrency, giving Optus a week to come up with the money or the other stolen data would be sold off in batches. In a worrying twist, it was claimed that the breach was not ‘sophisticated’ as Optus had claimed and that the purported hacker told a journalist that the data was pulled the data from a freely accessible software interface – “No authenticate needed… All open to internet for anyone to use.” By last Tuesday, the hacker released 10k customer records and reiterated the ransom deadline but within hours had deleted the previously posted data set, leading to some thinking that maybe a ransom had been paid.

Last week, the NSW Independent Casino Commission found the Star Entertainment Group unsuitable to operate its casino in Sydney, with the authority’s chief, Philip Crawford, noting that senior executives “didn’t have a clue” what was going on at the company. He remarked that the report was scathing on the workings of the casino and that it was found that the casino’s protections against money laundering were unsatisfactory and that it had links to organised crime and fraud. Subsequently, Geoff Hogg, its acting CEO, has resigned, with the report confirming that the operator was unfit to hold a licence and giving it fourteen days to convince New South Wales authorities that it should be allowed to keep its operating licence.

The EU has agreed to windfall taxes on certain energy companies, as well as mandatory cuts in electricity use. These emergency measures will see some energy firms having to pay tax on their record profits, driven by higher energy costs to the consumer. There will be a levy on fossil fuel firms’ surplus profits and a levy on excess revenues made from surging electricity costs, with the receipts expected to go to help household and businesses with their mounting expenses that have gone up sixfold in some circumstances. Fifteen member states, including France and Italy, have asked the EU to impose a price cap on gas bills to slow the soaring costs. However, member states seem to disagree on whether to introduce a cap on the wholesale gas price ahead of a difficult winter because of supply problems and the cost-of-living crisis. It is expected that the tax could reap a further US$ 140 billion for the bloc, after the fossil fuel extractors were told to give back 33% of their surplus profits for this year.

The euro slid to a fresh twenty-year low on Monday, falling below 96 cents against the US dollar – the steepest decline in two decades – after the election of a far-right party in Italy’s election rattled investor confidence. The currency has been struggling for some time and has been trading below or near parity since mid-August, with the euro dropping by more than 15% this year. There seems to be only one measure that the ECB can take under the present economic conditions – and that is to be more aggressive with the timing and rate hikes in the coming months – but even then, it may have acted too late to stop the surging inflation spiral. Italy could sink deeper into the economic mire since it will face higher debt costs, as interest rates head north, on its massive US$ 2.65 trillion sovereign debt – the third highest in the world after US and Japan.

By Monday, eurozone government bond yields jumped to new multi-year highs amid expectations that central banks will keep tightening their monetary policy and a fresh sell-off in UK gilts, with short-dated yields surging by almost 50 bps, following Kwasi Kwarteng mini budget aimed at boosting growth. There was no surprise that, following Giorgia Meloni‘s victory in the polls to become its first woman prime minister, the spread between Italian and German yields widened. Meanwhile, Germany’s ten-year yield hit its highest level in eleven years, at 2.132%, while the two-year yield rose 2.013%, its highest point since December 2008, whilst Italy’s 10-year bond yield, at 4.42%, hit its highest since October 2013.

The Bank of England acknowledged that the UK is now in a recession, expecting a Q3 0.1% slip in GDP, driven by slowing consumer spending and weaker economic activity.  Just like the ECB, it has to continue an aggressive policy, from its latest 2.25% fourteen-year high rate to tame inflation which now stands at 9.9%. The governor of the BoE should be held responsible for his past inaction, doing nothing when the rate started climbing higher than its own 2% target. It will be no surprise to see the BoE surprise the market one day this week by lifting rates a further 1.0% which would be an unprecedented move in its 328-year history.

Australian and US markets both rebounded after the BoE confirmed it would buy longer-term UK government bonds to stabilise financial markets after the pound plunged to record lows against the greenback earlier this week. The central bank pledged to buy US$ 75 billion of government bonds to stem the global market turmoil, which was sparked by the new UK government’s plans to cut taxes. Global markets reacted positively to the news with all three US bourses higher – the Dow Jones, 1.9% higher to 29,684, the S&P 500 2.0% to 3,719 and the Nasdaq Composite 2.1% to 11,052 – the FTSE 0.3% to 7,005, the DAX 0.4% to 12,183, the CAC 40 0.2% to 4,351 and the ASX 200 1.4% to 6,555.

The Bank of England stepped in to calm markets by pledging to buy US$ 72.2 billion of government bonds that has helped some types of pension funds avoid the risk of collapse. Some government bonds lost half their value, which resulted in pension funds divesting them in search for bonds with a higher return, which in turn resulted in the collapse in the price of these gilts. The Bank said its decision to buy government bonds at an “urgent pace” was driven by concern over “a material risk to UK financial stability.” If no action had been taken, there was every chance that some pension funds would have been unable to pay their debts. The cause of this crisis was the government’s mini budget, pledging US$ 50 billion in tax cuts, which led to a loss of market confidence, driven by the fear that the government would be struggling to cope with spiralling borrowing rates on public debt which already had been blown up by the energy crisis relief package which could cost upwards of US$ 100 billion.

It seemed that the whole world turned on the UK, driving sterling to record lows and sending global markets into a spin. Every man and his dog took a bite at the government’s antics and even the IMF came out and openly criticised the tax cuts, warning that the measures were likely to fuel the cost-of-living crisis and increase inequality. The IMF employs three main functions – surveillance, financial assistance, and technical assistance – to promote the stability of the international monetary and financial system. Perhaps it would be better all round if they kept their nose out of a sovereign nation’s economic affairs and put their own house in order first. It was also no surprise to see former BoE’s governor, Mark Carney, jumping on the bandwagon accusing the government of “undercutting” the UK’s key economic institutions, noting that the government’s tax-cutting measures were “working at some cross-purposes” with the Bank. Perhaps, the Canadian, appointed by George Osborne “of the old guard” to his position at the BoE, should stick to his day job with Brookfield. Mind Your Own Business!

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All Things Must Pass!

All Things Must Pass!                                                                  23 September 2022 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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