Let The Good Times Roll!

Let The Good Times Roll!                                                                  15 April 2021

As property prices start heading north in certain Dubai locations, a Colliers report indicates that investors are holding back the sale of their residential units to bargain for better prices. It has taken time for some observers to realise that the Dubai real estate sector is in recovery mode, (and probably has been since late last year), and that with the number of buyers now outnumbering the number of sellers, this is the start of a bull market after a seven-year hiatus. That being the case, it means that property prices will continue to increase but it must be noted that price rises will vary between villas and apartments, with location being an important contributor as to the level of price rises. Most of the economic indicators are positive, including the success of the vaccine programme, record low mortgage rates, attractive bank packages, Expo 2020 and the country’s golden jubilee celebrations at the end of the year. JLL said lower sales prices have yielded a 15% hike in Q1 sales volume for Dubai on the year and that there had been marginal 2% – 3% price increases on the quarter for some attractive villa and townhouse deals. It also noted that a further 10k units were handed over in Q1, with a further 46k expected before year end to add to the residential market stock of 607k units at the end of 2020.

According to the Dubai Statistics Centre, as at 31 December 2020, the number of apartments and villas in urban Dubai totalled 575.2k and 117.7k – an increase over the year of 37.8k apartments (7.0%) and 5.1k (4.5%) villas. With many of the big developers abandoning the release of new projects as long ago as two years, the number of new residential units will decline. This in turn will see the supply side drying up further, with the inevitable result of increased prices which will continue until either demand falls or the supply pipeline is turned on to pre 2019 levels,

Latest figures show that Dubai tourism performed noticeably better than any other country, except China, recording a 54.7% hotel occupancy rate last year, despite the impact of Covid-19 and the subsequent restrictions and lockdowns; the global rate dipped to 37% and ME hotels posted just 43% occupancy. Meanwhile, the slump in tourist activity was catastrophic, falling by 74% globally and 76% regionally. It is estimated that the UAE suffered the least globally in terms of tourist traffic with activity declining by just 45.2% – followed by Mexico, 52%, Italy (63%), Germany (69%), Turkey (73%), Saudi Arabia (76%), USA (77%), Spain (78%), the UK (82%), and Thailand (83%). In 2020, the UAE welcomed 14.8 million guests, who spent 54.2 million nights, in 1,089 different establishments that provided approximately 180k rooms; this resulted in an average 3.7-night stay per guest at US$ 87 per room. Domestic tourism added US$ 11.2 billion to the national economy.

According to Mastercard’s latest Recovery Insights report, the UAE witnessed a 2020 44% increase in the number of high-volume eCommerce trading partners. Before the start of 2020, e-commerce made up roughly US$ 1 out of every US$ 7 spent on retail, by the end of 2020; this was up to US$ 1 out of every US$ 5. Dubai Future Foundation has noted that the UAE’s digital economy, prior to Covid-19, contributed 4.3% to the UAE GDP,and that by the end of 2023 this is estimated to grow to US$ 62.8 billion. In 2021, it is forecast that the regional online shopping market will grow a massive 36.4% to US$ 30 billion. Three countries – Saudi Arabia, Egypt and the UAE – account for more than 80% of the overall e-commerce market. Interestingly, residents in Italy and Saudi Arabia are buying 33% more from online stores, followed by Russia, the UK and the UAE (21%).

It is reported that Cruise will launch its first international robotaxi service, outside the US, in Dubai in 2023. The tech company, backed by General Motors and Honda, has set 2030 as the year that “25% of the total transportation trips in Dubai to self-driving trips through various means of transportation.” Dubai’s Crown Prince, Sheikh Hamdan bin Mohammed Al Maktoum, discussed the future of mobility with Jeff Bleich, chief legal officer of General Motors-Cruise, and also attended a signing ceremony of the strategic partnership between Cruise and the RTA. The agreement sees the set-up of a new Dubai-based entity, responsible for the deployment, operation and maintenance of the fleet. To date, Cruise has spent US$ 2.2 billion refurbishing the former GM’s Detroit-Hamtramck plant, from its original combustion motor beginnings to its new use for making batteries and electric vehicles., which will start  production next year. Over the past three years, Cruise, valued at US$ 30 billion, and backed not only by GM and Honda but also the likes of SoftBank, T Rowe Price Group and Microsoft, has raised more than US$ 7.4 billion.

The Ministry of Energy and Infrastructure has outlined plans for developing the country’s energy, housing, infrastructure, and transportation sectors over the next fifty years. The Ministry aims to introduce energy efficient systems in industrial and mining facilities and enact legislation to produce clean energy.  Included in the report was a study on the need for housing across the country, based on the availability of land and supply of housing until 2040, with the aim of determining the demand and supply in each emirate, along with the financing requirements for housing projects. The plans will ensure that all housing needs are in line with government directives to provide citizens with decent living conditions. To further develop infrastructure, the Ministry is working to promote digital identity in infrastructure, demographic changes and urbanisation, interactive smart cities, and resilient infrastructure. The UAE is already one of the largest global logistics hubs and, to add to its impressive seaports and international airports, it is building an extensive 1k km rail network across the country to speed up transport of freight. In addition, it aims to design safe, integrated and sustainable transport networks that will use advanced technology.

The Telecommunications and Digital Government Regulatory Authority (TDRA) has rebranded, following a September 2020 decree, and board approval at the end of 2020. Its first director general, Hamad Obaid Al Mansoori, commented that “we are witnessing a full digital transformation … electronic government was started before 2000, mobile government was started in 2013 and today we are talking about a digital government supported by data and [the] Fourth Industrial Revolution.” The authority is remitted to regulate the UAE’s telecom sector and to provide frameworks to government entities in the field of smart transformation; it will also monitor the impact of its changes on users and collect feedback to improve services.

The Ministry of Human Resources and Emiratisation has introduced a new penalty for private sector companies that do not pay salaries through the government’s Wages Protection System and do not pay its employees on time. If companies do not follow these rules, they will be penalised by seeing the insurance policy of an employee more than doubling to US$ 68. When the government introduced a new insurance policy, ‘Taa-meen’, in 2018, employers had the option of submitting a US$ 817 bank guarantee for any new employee or use the new insurance policy, which costs US$ 33 for two years. The maximum insurance coverage was at US$ 54k to cover payroll items such as non-payment of wages, end of service benefits, unpaid wages, annual leave etc. The policy covers the financial entitlements of the employees of relevant companies for thirty months.

“Even as we continue reviewing details and consulting with Emirati officials”, President Biden is going ahead with more than US$ 23 billion in weapon sales to the UAE; they include fifty advanced F-35 Lighting II aircraft, eighteen armed drones and other equipment. These sales were approved by Donald Trump, days before leaving the White House, as part of the Abraham Accords, and it seems that the new incumbent passed the deals so that he could review them. A State Department spokesperson estimated that the delivery dates on the UAE sales, if implemented, were for after 2025 or later, and that it anticipated “a robust and sustained dialogue with the UAE” to ensure a stronger security partnership,

Boeing’s troubles just do not seem to be going away. This week, the platemaker has told 16 airlines to address a potential electrical issue in a specific group of 737 Max planes, prior to further operations. It advised airlines to check that “sufficient ground path exists for a component of the electrical power system” and to temporarily remove them from service to address a manufacturing issue. Flydubai has confirmed that none of its fourteen Max aircraft fleet is affected. The airline, one of Boeing’s biggest customers for the plane, only resumed flying the 737 Max on 07 April.

In Q1, DAE Capital acquired thirteen aircraft and signed 48 lease agreements and extensions, bringing its fleet size of owned, managed, committed and mandated to manage aircraft to 425, with a book value of more than US$ 16 billion.  During the quarter, it had sold seven aircraft, including the four it owned and three it managed. Last year, its revenue dipped 9.7% to US$ 1.3 billion, with profit 29.1% lower at US$ 250 million; it also reported new senior unsecured debt issuance of US$ 1.55 billion, with total bond repurchases and share repurchases of US$ 192 million and US$ 350 million.

Official data showed that, despite the negative impact of Covid-19, Dubai’s 2020 non-oil foreign trade performed remarkably well – at US$ 322.1 billion – only 13.7% lower on the year dominated by lockdowns and a marked global economic downturn.  The overall value of exports came in 8% higher at US$ 45.5 billion, with imports and reexports totalling US$ 186.9 billion and US$ 89.7 billion. The emirate hopes to hit its trade target of US$ 595 billion (AED 2 billion) by 2025. Dubai is planning to consolidate its position as a leading regional/global trade and investment hub, with a new international trade map showing an expansion in air and sea navigation routes, which will see its existing network expanding 50% to 600 cities. Air, sea and land trade accounted for US$ 152.3 billion, US$ 114.7 billion and US$ 55.3 billion in 2020. Direct trade touched US$ 193.7 billion, with free zones and warehouses at US$ 152.3 billion and US$ 1.9 billion respectively.

Dubai’s top five trading nations continue to be China, India, US, Saudi Arabia and Iraq with totals of US$ 39.0 billion, US$ 24.2 billion, US$ 16.6 billion, US$ 14.7 billion and US$ 11.2 billion. External trade figures improved in H2, with Q-on-Q growth in Q3 and Q4 being up 34% and 7% (US$ 8.9 billion), as well as H2 growth 6% higher than in the same period in 2019. The top five listed traded items were gold, telecoms, diamonds, petroleum oil and jewellery with respective values of US$ 58.0 billion, US$ 41.7 billion, US$ 17.4 billion, US$ 15.5 billion and US$ 12.8 billion. There will be at least five extra drivers to further boost Dubai’s trading figures this year – the delayed six-month Expo 2020 starting in October, golden anniversary celebrations for the country in `December, the launch of the Dubai 2040 Urban Master Plan, the expansion of trade with Israel and the resumption of trade with Qatar.

Continuing to build up its financial buffers, Dubai Islamic Bank has secured its second sukuk in five months, after a five-year US$ 1 billion additional tier-1 sukuk, with a 4.25% annual profit rate, last November. Now the biggest Sharia-compliant lender in the UAE has secured a US$ 500 million perpetual five and a half years non-call bond, with a 3.375% annual profit rate – the lowest-ever pricing achieved by a GCC bank on an additional Tier-1 sukuk instrument. The order book was 5.6 times oversubscribed, with the bond listed on both Euronext Dublin and Nasdaq Dubai.

It is reported that the administrators of NMC Health Administrators, Alvarez & Marsal, have so far received about US$ 6.4 billion of claims, (from 927 creditors), with a further 10% of that total being added by ten other “main financial creditors” that have yet to file before the 30 April deadline. They have outlined a Deed of Company Arrangement plan which would mean lenders agreeing to a reduction in their claims in return for exit instruments in a new holding company, with a view to achieving a “controlled” exit from the company within three years; this would lead to more than US$ 4 billion of its debts being wiped out, with the group debt reduced to a more manageable level. If agreement is reached by 15 June, it would see 35 out of the 36 businesses placed into administration being restored as going concerns.  If no agreement can be reached, and assuming that the group cannot be sold as one unit, then the companies would have to be sold off as separate entities which “is likely to yield a significantly lower recovery”.

Hotpack Global opened its 32nd GCC sales centre – its largest retail store for food packaging products, for both retail and wholesale customers, in the UAE – spanning 5.6k sq ft and located in Al Barsha. There is no doubt that the UAE food packaging industry is set for continual growth, with forecasts that it will expand 40% over the next five years to US$ 3.8 billion. It is also estimated that the regional market will grow at an annual faster rate of up to 7%, compared to the global forecast of up to 5%. The company, which manufactures and supplies over 3.5k disposable food packaging products, has a group turnover of US$ 259 million, with a footprint in 25 locations across the Middle East and UK, along with a network chain in other Gulf and African countries. The 25-year old company has also invested US$ 70 million in a state-of-the art manufacturing facility in Wrexham and has an ultra-modern PET extrusion plant in National Industries Park.

The latest Mergermarket report notes that Q1 M&A (Mergers and Acquisitions) activity, in the MEA region, was 52.1% higher, at US$ 32.7 billion, (and 41.7% for 85 deals). Inward foreign investment saw 52 transactions, totalling US$ 24.7 billion – the highest quarterly inbound value since Q4 2007 (US$ 26.2 billion). Tech deals still dominate the sector with their 31 transactions totalling US$ 14.7 billion, and the EMU (energy, mining and utility) sector accounting for 18 deals, valued at US$ 4.6 billion. There has been a noticeable increase in private equity deals, with 26 buyouts in Q1, totalling US$ 18.3 billion – the region’s highest quarterly buyout value and volume on record.

2020 foreign direct investment (FDI) into Dubai saw 455 projects valued at US$ 6.73 billion create an estimated 18.3k new jobs in the emirate. These figures, released by the Dubai Investment Development Agency, place the emirate among the top global FDI locations in 2020, ranking first in the MENA region and fourth globally in attracting greenfield FDI capital. Dubai also achieved a record global market share in greenfield FDI projects, attracting 2.1% of all such projects in 2020, exceeding the 2% mark for the first time.

Dubai SME, by utilising contracts from 61 local and federal government entities, was able to assist Dubai start-ups and SMEs to win government procurement contracts, worth US$ 244 million last year. The government agency, tasked to help such businesses to enhance their competitiveness and sustain growth, introduced the Government Procurement Programme that “reflects the continuity and firm commitment from the public and private sectors in the country to supporting SMEs”. Out of all contracts in 2020 won by Dubai SME members, 47% were from Dubai government entities, (with RTA the biggest provider), 22% came from semi-governmental entities, with Emirates providing US$ 21 million, 21% from the private sector, with the leading providers being Union Co-op worth US$ 37 million, Emaar and Etihad Airways, and 10% from federal government entities, led by the Ministry of Education.

Mohamed Alabbar, the founder, and former chairman, of Emaar Properties will head Zand, the UAE’s first digital bank, with a full UAE banking licence, that will cater to retail and corporate clients. It is hoped that it will prove successful in the UAE so that it can become a global player. It aims to service both retail and corporate customers by providing innovative, effective financial solutions that help simplify businesses and lives. Zand, a “digital economic accelerator”, to serve as a platform for wider digital services that focus on businesses and individuals, will launch imminently after final regulatory approval. Its chief executive will be Olivier Crespin, who most recently headed Eradah Capital in Dubai and previously worked for BNP Paribas, Citi, and DBS Bank. He noted that the bank was “backed by strong shareholders and working with the best bankers and technologists, we’ve built a bank that delivers on the promise of understanding and meeting customer needs”.  

On the back Zand’s entrée into the digital banking world, comes news that Al Maryah Community Bank has also secured a licence from the Central Bank of the UAE. The new bank indicated that it would focus on ‘supporting individuals and small businesses within the UAE economy”, offering smart banking services built on AI. Tarek Al Masoud has been appointed the chairman of the board of founders for the bank that will develop products to bridge gaps in personal and business banking. The Abu Dhabi government owned ADQ was reported last year to be interested in setting up a UAE digital bank using a legacy banking licence held by First Abu Dhabi Bank.

Emaar Properties PJSC approved a 10% dividend of the share capital at their recent AGM, at which a new board of nine directors was elected. Those elected were Mohamed Ali Rashid Alabbar, Jassim Mohammed AbdulRahim Al Ali, Ahmad Thani Rashed Al Matrooshi, Jamal Majed Khalfan Bin Theniyah, Buti Obaid Buti AlMulla, Eman Mahmood Ahmed Abdulrazzaq, Ahmed Jamal H Jawa, Helel Saeed Salem Saeed Almarri, and Sultan Saeed Mohammed Nasser AlMansoori. Eman Abdulrazzaq, chief human resource officer at Emirates NBD, becomes the first ever female board member. Last year, the developer posted property sales of US$ 3.0 billion, of which US$ 1.7 billion was made in the UAE and the balance overseas. Currently, it has 26k units under development in the UAE and 12k overseas.

Dubai Investments’ AGM approved all agenda resolutions, including its 2020 financial statements and approval of an 8% cash dividend to its shareholders. The 2020 profit came in at US$ 95 million, whilst its US$ 219 million growth in total assets brought the company’s total to US$ 5.93 billion.

Despite the negative niggles of the pandemic, Ducab Group posted a 36% profit across all three of its business units – Ducab Cable Business, Ducab Metals Business and Ducab High Voltage. No financial figures were readily available. Its largest business unit, DCB, posted a 13% hike in profit, driven by a sales volume of nearly 80k conductor tonnes. Its main revenue stream remains the local market, but it also exports to 25 other locations. DMB, comprising Ducab Aluminium Company and Ducab’s Copper Rod Factory, saw a 33% jump in 2020 profits, as it sold 190k tonnes of metal products to forty-five countries. The best performing unit, with margins 42% higher on the year, was DHV, as it sold nearly 6k tonnes of specialised high voltage cable to several regional utilities and global EPCs.

Amanat Holdings has decided to stay with the DFM and not transfer its share listing to Abu Dhabi’s stock market, almost a year after it received shareholders’ approval for the move. The Dubai-based healthcare and education company posted an 86% fall in 2020 net profit, although revenue nudged higher. In another announcement, it advised that Dr Shamsheer Vayalil will also step down as managing director, although he will continue to serve as the company’s vice chairman. Last May, Dr Mohamad Hamade was appointed as chief executive.  Last month, it was involved in one of the region’s biggest healthcare deals, when it invested US$ 232 million to acquire Cambridge Medical and Rehabilitation Centre from TVM Capital Healthcare, partly funded via a US$ 110 million bank loan; this was the company’s first local wholly owned healthcare investment., although it has healthcare investments in Saudi Arabia and Bahrain. Its education portfolio includes schools’ operator Taaleem, Abu Dhabi University Holding and Middlesex University Dubai, along with owning the property assets of the North London Collegiate School in Dubai.

Deyaar Development posted impressive Q1 results, with revenue coming in 51.0% higher at US$ 41 million, and profit almost six times higher at US$ 4 million on the year. The Dubai-listed developer, majority owned by DIB, “expects demand to grow even more with the economic recovery in the emirate and the effort that the government [is making] towards executing the Dubai Urban Master Plan 2040”. Earlier in the year, it announced the handover of its Bella Rose project, in Dubai Science Park, comprising 478 residential units and that construction had started on its residential project Midtown, adding eleven more buildings to the development.

Last week, it was all systems go for DFM’s first major IPO for over three years, with full page ads taken out in the local press amid much fanfare; it had announced plans to float 24% of its shares. Yesterday came the shock announcement that Dubai-based logistics company Tristar had dropped plans to float its company as “shareholders’ expectations were not met”, with the board having a last-minute change of mind believing that “that greater returns can be realised executing Tristar’s current growth strategy under the established shareholder structure.”

The bourse opened on Sunday 11 April and, having gained 25 points (1.0%) the previous week, was up a further 50 points (1.9%) to close on 2,633 by Thursday 15 April. Emaar Properties, US$ 0.03 higher the previous week, moved up another US$ 0.06 to close at US$ 1.06. Emirates NBD and Damac started the week on US$ 3.17 and US$ 0.33 and closed on US$ 3.26 and US$ 0.34. Thursday 08 April saw the market trading at 184 million shares, worth US$ 89 million, (compared to 172 million shares, at a value of US$ 45 million, on 08 April).

By Thursday, 15 April, Brent, US$ 6.21 (8.7%) lower the previous three weeks, dipped US$ 0.04 lower to close on US$ 63.38. Gold, up US$ 29 (1.6%) the previous fortnight, was US$ 5 higher, by Thursday 15 April, to close on US$ 1,761.

Opec revised oil demand growth upwards by 100k bpd for 2021, as the global economies begin to improve on the back of a stronger economic rebound, boosted by stimulus programmes, reduced lockdowns, and successful vaccine programmes in some countries in the world’s largest economies countries. It is forecast that global oil demand will increase by 6.6% this year to 96.5 million bpd. The producers will now bring back the 2 million bpd that was deferred three months ago due to uncertainty over any global economic recovery, and will start over the next two months – by 350k bpd and 450k bpd in May and June. Saudi Arabia, which had supported the group’s restrictions by volunteering to cut 1 million bpd until April, will phase out the curbs from May onwards.

Several commodities trading houses are currently investigating why their web domains have been imitated and registered to an email address of an employee of Liberty House – Sanjeev Gupta’s commodities trading and industrial group and part of his GFG Alliance conglomerate. Registrations include concordresources.net, (with the London-based trading house Concord Resources planning to send GFG a cease-and-desist letter), and szmhgroups.com (similar to the szmh-group.com site of the steel trading group, Salzgitter Mannesmann). An FT report notes that Greensill Capital’s administrators have been unable to verify some of the invoices used for Greensill to lend money to Gupta’s group. It seems that some of the companies listed on the documents denied that they have ever done business with GFG or is associated companies. Meanwhile, life sems to be getting more worrying for Greensill’s high profile special adviser, David Cameron, as his role and super connections with high government officials are the subject of more than one official government enquiry. The ex-prime minister was reportedly to receive 1% of Greensill’s value when it went public which could have been as high as US$ 800 million – now worth nothing.

The Japanese-owned ship that blocked the Suez Canal for almost a week last month is still stuck in the Suez Canal for different reasons. The Ever Green container ship is being held by officials pursuing a US$ 916 million compensation claim, including US$ 392 million, as a “salvage bonus”, and US$ 392 million for “loss of reputation”. The Suez Canal Authority’s chairman, Osama Rabie, commented that the Ever Given would not leave until the investigation was finished and compensation paid, adding that the canal had borne “great moral damage”, as well as shipping fee losses and salvage operation costs. Meanwhile, Maersk has warned customers that it does not expect a quick return to normal shipping in the Suez Canal and that global supply chains will be disrupted for weeks.

Toshiba’s chief executive, who had been masterminding a US$ 20 billion buyout bid from UK private equity firm, CVC Capital Partners, surprisingly resigned on Wednesday; a statement from Toshiba gave no reason for Nobuaki Kurumatani’s resignation. However, he had faced criticism from activist shareholders over the bid from CVC, his former employer, arguing that it was far below the company’s fair value. Toshiba’s chairman Osamu Nagayama said CVC’s bid was unsolicited and lacking in substance and requires cautious consideration. Its shares were up more than 6% in Asian morning trading on Wednesday, following media reports of potential rival bids for the company.

The fact that on its stock market debut, Cryptocurrency firm Coinbase, which runs a top exchange for Bitcoin and other digital currency trading, hit a market value of nearly US$ 100 billion is a sure indicator that cryptocurrencies are gaining wider acceptance among traditional investors. The firm has done well when compared to just three years ago when, following a private funding round, it was valued at just US$ 8 billion – now, as per its initial stock market valuation, it is worth more than BP and many key stock exchanges. Coinbase, whose main revenue stream derives from charging transaction fees, has more than 56 million users across more than 100 countries, holding some US$ 223 billion in users’ assets at the end of March. Its reported Q1 revenue of US$ 1.8 billion was more than its total for all of 2020 – driven by the boom in Bitcoin and other digital currencies.

The man who founded Bernard L Madoff Investment Securities in 1960 and went on to con thousands of investors, out of tens of billions of dollars, has died in prison, where he was sentenced in 2009, to 150 years, after admitting that he had defrauded investors through a Ponzi scheme; an estimated US$ 65 billion was tied up in the scam. Despite Bernie Madoff’s firm being investigated eight times by the US Securities and Exchange Commission because it made exceptional returns, it became one of the country’s largest market-makers and he also served as chairman of the Nasdaq stock exchange. The fraud exposed holes at the US Securities and Exchange Commission and was a wakeup call for the audit profession. The disgraced financier told the court he started the Ponzi scheme in the early 1990s, but many reckon he was scamming his clients much earlier than that. All he was doing was collecting money from investors (and there was no shortage of them) and used that to pay off existing investors. Investors were entranced by the steady, double-digit annual gains that Madoff seemed to generate, and which others found impossible to explain or duplicate. When the 2008 GFC happened, that was his final curtain, as investors tried to recoup US$ 7 billion, and the firm did not have any to pay out.

According to International Data Corporation, Q4 witnessed an 8.2% jump in the Gulf region’s mobile phone market to 5.38 million units, with smartphone shipments up 2.3% to 4.26 million users; feature phone shipments moved 38.3% higher to 1.12 million units. Value-wise, the smartphone market was up 39.5% to US$ 1.62 billion in Q4, growing faster than the feature phone market’s value with a 22.2% quarterly growth to US$ 19.2 billion. 5G shipments accounted for 16.5% of all smartphone shipments. The three best-selling brands were Samsung, Apple and Xiaomi, but all three suffered from supply shortages which will still cause problems in Q1, as sales will almost certainly decline by up to 1.0%.

Launched in 2012, Grab, the Malaysian ride-hailing and food delivery firm, is preparing to list US$ 4.0 billion worth of shares in the US which would value the company at around US$ 40.0 billion to become the largest US share offering to date by a South East Asian company. Shares will start trading in July, following a merger with US-listed Altimeter Growth Corp, set up, last year, as a Spac (special purpose acquisition vehicle), specifically for the purpose of finding a private firm to merge with and then take public on the stock market. (Known as “blank cheque companies”, they are seen as a faster route to taking a company public with less scrutiny). As is the case with many similar IPOs, Grab has yet to make a profit, with 2020 net revenue of US$ 1.6 billion.

Although Tesco has announced a 7.0% hike in sales to US$ 73.5 billion, it posted a 17.5% slump in full-year profits to US$ 1.17 billion, which included a US$ 1.24 billion abnormal spend to carry on trading through the Covid pandemic, including giving full pay to staff off work ill or shielding and US$ 736 million forgoing business rates relief. The sales growth was boosted by a 77% rise in online sales, whilst like-for-like sales rose by 6.3% for the group. The UK’s largest retailer expected that it would recover to a similar level in the previous financial year as well as a strong recovery in profitability as most of the costs incurred in the pandemic would not be repeated. Covid-19 hit Tesco Bank’s profits which moved into negative territory, with a loss of US$ 241 million, compared to a 2019 profit of US$ 266 million. The 2020 deficit was attributable to the pandemic resulting in less income from loans and credit cards and an increase in bad debts.

To tackle post-Brexit trading difficulties, retailer JD Sports has decided to solve part of the problem by opening a 65k sq ft warehouse in Dublin, after launchng a similar facility in Belgium; it is also considering a further warehouse in the EU from which it would process all the bloc’s online orders. Currently, the products it imports from East Asia attract tariffs when they are distributed onward to its stores across Europe. Its chairman, Peter Cowgill, noted that “there was no true free trade with the EU, because goods that JD Sports imports from East Asia incur tariffs when they go to its stores across Europe” and that “All the spin that was put on it about being free trade and free movement has not been the reality.”

It seems likely that that French lawmakers will ban short-haul flights of less than two and a half hours where rail alternatives exist. This is part of the Macron administration’s bid to reduce carbon emissions and will become law if passed by a further vote in the Senate. This could see the end of flights between the capital and cities such as Nantes, Lyon and Bordeaux. Noting that a plane will emit 77 times more CO2 per passenger than the train on these routes, the French consumer group UFC-Que Choisir called for all flights of less than four hours but this was cut following objections from some regions and the airline Air France-KLM. The vote to scrap certain flights came days after the French government more than doubled its stake in Air France, with the government previously offering US$ 8.3 billion in loans to help the airline battle the pandemic.

Microsoft Corp is set to spend almost US$ 20 billion to acquire Nuance Communications, a tech firm known for helping to develop Apple’s Siri speech recognition software. The tech giant’s second largest purchase, following its 2016 acquisition on LinkedIn, will reportedly bolster its software and AI expertise for healthcare companies at a time when so-called “telehealth” has boomed during the pandemic. Its chief executive, Satya Nadella, commented that “Nuance provides the AI layer at the healthcare point of delivery,” and “AI is technology’s most important priority, and healthcare is its most urgent application.” Nearly 80% of US hospitals are already Nuance customers and this purchase will dramatically expand Microsoft’s potential market in the health care industry.

It has not been a happy half year for Jack Ma that has seen the Chinese government suspend his Ant Group’s IPO last November, seemingly followed by a travel ban from leaving the country. Earlier, he had told a gathering of China’s leading regulators that they were stifling innovation. Now Alibaba has been fined by regulators a sum of US$ 2.78 billion, (4% of its 2019 revenue of US$ 69.5 billion) for “abusing its dominant position” for several years. Perhaps not surprisingly, the company said it accepted the ruling and would “ensure its compliance”. It was felt that Alibaba had restricted competition by stopping some sellers using other platforms. Other Chinese tech giants are being closely monitored by the regulators and last month, twelve of them, including Tencent, Baidu, Didi Chuxing and SoftBank, were fined.

Chinese authorities have begun to crackdown on the country’s fast-growing tech platforms, as regulators have ordered a sweeping restructure on the Ant Group, so the financial technology firm acts more like a bank. The People’s Bank of China will subject it to tougher regulatory oversight and minimum capital requirements.  This comes after Ant Group’s US$ 37 billion IPO was surprisingly canned days before its November launch and last week its affiliate company Alibaba was fined US$ 2.8 billion over monopoly concerns. Ant is China’s biggest payments provider, with more than 730 million monthly users on its digital payments service Alipay. The central bank has also introduced a “comprehensive and feasible restructuring plan,” for Ant that would cut the “improper” linkage between Alipay, and its credit card and consumer loan services.

Although March Chinese factory prices hit a more than two-year high, at 4.4%, compared to a year earlier, and pointing to a stronger economic recovery, there are concerns it could filter through to the global economy whose recovery is well behind that of China; the country was the only major economy to expand last year. Now with the worldwide vaccination making a positive impact in many countries, with restrictions and lockdowns being lifted, demand for Chinese goods is beginning to rise. Much of the increase in Chinese factory gate prices has been due to factors such as rising international commodity prices, including oil, iron ore and copper, along with a jump in local production. Because the country is the largest exporter of manufactured goods, any inflationary pressure in China will inevitably be passed to other economies, giving central banks another problem to deal with, in addition to trying to maintain ultra-loose monetary policies and low interest rates as inflation levels begin to move higher. Last week, the IMF raised its growth forecast for China to 8.4%.

In Q1,China’s economy grew a record 18.3% but this figure is skewed somewhat because last year’s figures came in the midst of the economy contracting because of Covid-19; in Q1 2020, the economy had contracted by 6.8%. Other comparative data will be similarly impacted because of the pandemic. Industrial output for March rose 14.1% over a year ago, while retail sales grew 34.2%. Many analysts consider that the economy’s rebound is largely down to exports, as factories work to fill overseas orders as the global economy starts to improve.

Wall Street stocks have climbed to fresh record highs fuelled by strong earnings and US economic data, with the Dow Jones up 0.9% on Thursday to a new record high of 34,036. Not to be outdone, the S&P 500 moved higher on the day by 1.1% to close at its record high of 4,170, driven by tech stocks such as Apple, Facebook and Microsoft. The Nasdaq Composite rose 1.3% to 14,039. The markets were helped by solid results from the likes of Bank of America, (with Q1 profits double that of a year earlier), as Citigroup and Blackrock posting double digit profit growth. There was also favourable economic data, including US retail sales up 9.8% in March, weekly first-time claims for unemployment benefits falling 193k to 576k, the lowest level since March last year, and March manufacturing production increasing by 2.7% in the month. 

Still trying to form a government and in the midst of its worst economic crisis, Lebanese inflation in February topped an annual 155.4%, 4.5% higher on the month and the eighth consecutive triple-digit CPI increase. Restaurant prices surged 618% in February and clothing/ footwear by 609%. The country will be the recipient of billions of dollars of aid from the IMF and donors, once a national government is in place. The jump in inflation is partly down to the inability of authorities to monitor and contain prices and also to the slump in the Lebanese pound which has been in free fall and lost as much as 90% of its value against the greenback on the black market. Before the onset of the latest crisis the pound was pegged at 1,507 to the US$, whilst on the black-market last month it was trading at 15,000 to the US$ before retreating to its current 12,000 level. In 2019, the economy contracted 6.7% and by 25.0% last year, with more of the same this year, more so if a government cannot be formed. By the end of January, the public debt had almost reached US$ 96 billion, equating to 194% of GDP.

Following January’s 42% slump in exports, between UK and EU trade, February saw a recovery, with growth figures of 46.6%; likewise, imports improved over the month, but at a weaker rate of 37.0%. Despite the much-improved figures, along with the UK economy growing 0.4% in the month, the fact is that the economy is still 7.8% smaller than a year ago; however, lockdowns and restrictions were still in place for the first two months of 2021. Although exports recovered well in February, imports have still not bounced back, as bureaucratic issues continue to hamper much progress. There is no doubt that consumer confidence is on the up and, notwithstanding a further lockdown, the UK economy will benefit from pent-up demand, which will result in increased spending in restaurants and pubs, with more people booking holidays.

March average UK house price hit a new record high of US$ 349k, as the market bounced back after Rishi Sunak extended the stamp duty holiday to 30 June which had been scheduled to expire on 30 March. Prices were 6.5% higher on the year, 0.3% on the quarter and 1.12% up, month on month. Apart from the stamp duty “present”, the sector has benefitted from the new mortgage guarantee scheme, (which encourages lenders to provide mortgages on deposits as low as 5%), continuing historically low mortgage rates and pent-up demand following the first lockdown. Prices have risen across the country, as demand continues to outstrip supply, with many buyers looking for larger properties and more outdoor areas. However, the canary in the coal mine remains that the UK economy has just gone through its worst year for centuries, with the economy contracting a record 9.9%, so when the stamp duty holiday is closed, taxes increase, rates edge higher and government rescue packages are tapered, it is inevitable that the longer-term UK housing outlook is not as rosy.

Following the end of its third lockdown, since the March 2020 onset of Covid-19, England’s hospitality sector received a US$ 430 million boost in the first week, after the reopening of the country’s restaurants, cafes and pubs. Following three months of closure, they finally opened their doors on Monday. With the vaccine campaign going so well in the country, consumer confidence continues to head north, up 3.0 to 106.4 in March. In 2019, hospitality was the country’s third biggest employer (3.2 million workers), generating US$ 180 billion in economic activity and contributing US$ 55 billion in tax. Pre-pandemic, it was estimated that individual households spent US$ 800 a week on dining which dropped to almost zero. After the first two lockdowns, diner numbers jumped 33% and 56% respectively, so it is no wonder that this week the numbers were even greater. To get the economic recovery moving faster, the short-term message to the country is to get out and spend money. Let The Good Times Roll!

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Another Day In Paradise?

Another Day In Paradise?                                                                 08 April 2021

How could all the property experts get it so wrong predicting further doom and gloom for the Dubai property sector in 2021?  March saw a marked uptick in sales transactions which totalled 4,643, valued at US$ 3.0 billion, and undoubtedly the 22% month on month growth in transactions, and 47% in value, will continue the same trend into Q2 and for the rest of 2021. 101 Economics teaches that prices will head north when there is lack of supply and high demand – this is exactly what is happening in areas like The Meadows and other established locations in the emirate for villas, and in Palm Jumeirah for prime apartments. Interestingly, last month had the highest number of secondary/ready properties transacted in a single month since June 2015.

The DLD weekly real estate report ending 01 April noted that the value of real estate and properties transactions was US$ 1.93 billion, including 1,116 apartments/villas selling for a total of US$ 559 million, along with 103 plots for US$ 197 million. The total amount of mortgaged properties came to US$ 1.09 billion, half of which was for land mortgaged in Marsa Dubai; there were 83 properties granted between first-degree relatives, valued at US$ 53 million. Three apartments were the top-priced for the week – US$ 55 million in Palm Jumeirah, US$ 52 million in Marsa Dubai, and U Madinat Dubai Almelaheyah, US$ 51 million, in Burj Khalifa. The highest land value sold this week was for US$ 58 million in Hadaeq Sheikh Mohammed Bin Rashid. Most transactions were carried out at Hadaeq Sheikh Mohammed bin Rashid, (28 sales valued at US$ 61 million), followed by Nad Al Shiba Third, with 22 sales transactions worth US$ 15 million, and Al Hebiah Third, with 8 sales transactions worth US$ 7 million.

Colliers’ latest report indicates that Dubai’s property market is running low on inventory, as buyers currently outnumber sellers in popular areas of the emirate, resulting in Dubai property fast becoming a sellers’ market. Since the advent of Covid, the trend is for many stakeholders moving to bigger spaces or better communities, or both. Covid was a catalyst for some property owners having to sell their property, (either through losing their job or having their pay cut). Now many sellers are in a position to wait and see, waiting for the right price to be offered.

Since the September 2019 launch of the Dubai Supreme Committee for Real Estate Planning, new project launches have slowed down substantially, so that, according to Asteco, only 34k residential units were handed over last year. Most of this number were already work-in progress, in September 2019, but with time the pipeline will become more manageable as actual new launches slow. There is no doubt that equilibrium is returning to the market and as supply slows, property prices will inevitably move higher, also driven by historically low mortgage rates, enticing buyers to pay more as the lack of good property available becomes apparent; maybe gazumping is returning to the local market.

Binghatti Developers launched a US$ 55 million project in JVC, comprising 160 apartments, covering 300k sq ft. The Binghatti Mirage – its third development in that location – is scheduled for completion within twelve months. One 722 sq ft B/R apartment will be priced at US$ 132k, after a 30% discount in advance, while a 2 B/R apartment, with an area of ​​856 sq ft, will cost US$ 188k. According to Cavendish Maxwell, JVC saw 2020 rental declines for both apartments (down 16.1%) and villas by 3.1%.

Dubai Economy has joined forces with Amazon in a new initiative to assist  local start-ups and SMEs, who are DED Trader licence holders and interested in expanding their online footprint. The Amazon Sale University will provide new e-learning courses and also host a dedicated store front on Amazon.ae to showcase products offered by local traders. One of DED’s main aims is to accelerate the “growth of e-commerce initiatives and promote technology integration” within the local business community.

Having met all safety requirements issued by the General Civil Aviation Authority (GCAA), flydubai will resume 737 Max passenger service with the first flight today to Pakistan’s Sialkot. The Dubai carrier has fourteen Max aircraft currently grounded, of which  four  Max 8s and one Max 9 have got the go-ahead to fly, following a comprehensive twenty-month review. The remaining nine Max aircraft are expected to return to passenger service over the next two months, following extensive work to reactivate planes that have been grounded for two years. The carrier noted that the Max aircraft “will operate to a number of flydubai’s destinations over the coming weeks” and that passengers will be notified in advance of travel if their itinerary now includes a flight that is scheduled to be operated by a Max plane. Twelve countries, within the carrier’s network, have yet to clear the narrow-body jet’s return, including Russia and India. The Dubai-based airline has over 750 pilots, of which over 30% have completed the required additional training on the 737 Max, with the remaining 520 expected to complete the additional training by the end of the year.

Dubai’s largest fuel retailer, Emirates National Oil Company, is planning to invest US$ 68 million of its capex budget on digital technology to optimise operations and identify synergies within its businesses. Enoc has more than 11k employees in sixty markets and it expects to grow the number of its service stations by 41.9% to 193 this year. In 2019, it had launched Enoc Link, an on-demand fuel service initially only for commercial customers, and now expects to add new revenue streams from the launch of on-demand fuel retail. In February, it introduced its first sustainable service station at the Expo 2020 site – and the first in the region equipped with a wind turbine for generating power. Enoc has launched its Masar project, as part of its digital transformation plans, with the aim of integrating all of its divisions and providing a more focused service to customers.

Earlier in the week, HH Sheikh Mohammed bin Rashid Al Maktoum launched the Dubai Creative Economy Strategy, with the aim of doubling the emirate’s creative industries’ contribution to GDP to 5.0%, company numbers to 15k and the number of creators to 140k by 2025. The Ruler noted that design, content, culture and arts will be major drivers for Dubai’s future, but the concept also covers a wide range including the likes of publishing, writing, cinema, video, cultural heritage and artistic industries. To speed up the process, the legal and investment environment will be upgraded to spur growth of creative industries in Dubai and to enhance its attractiveness to international creators, investors and entrepreneurs.

The Dubai Ruler also approved the Emirates Development Bank (EDB) Strategy to provide a sizeable US$ 8.2 billion financial support to businesses and start-ups in a major step to drive the national economy, as a support mechanism for the recently launched US$ 82 billion “Operation 300bn”. This was introduced last month as a ten-year comprehensive strategy to more than double the industrial sector’s contribution to the country’s GDP, and to finance more than 13.5k SMEs and to create 25k jobs. The Dubai Ruler also noted that “we must adopt a distinctive vision that meets global trends and sustains development to maximise the industrial sector’s revenue and boost the broader economy”, as well as “The Emirates Development Bank Strategy presents a giant leap that will leverage the bank’s role as a key driver of the national economy. Providing effective financial solutions will support the role of SMEs as main players in shaping our national economy.”

This week saw the appointment of Khaled Mohamed Balama Al Tameemi as governor of the Central Bank of the UAE who takes over the role from Abdulhamid Saeed Alahmadi. At the same time, the central bank also decided to extend the Targeted Economic Support Scheme (Tess), the US$ 13.61 billion zero-cost funding programme, set up a year ago to help lenders maintain funding flows through the economy, following the onset of Covid-19, until year end.

Moving up four places, the UAE is now ranked 15th in the world (and the leader in the Arab region) in Kearney’s 2021 Foreign Direct Investment (FDI) Confidence Index. Not surprisingly, the report indicated a marked decline in overall optimism about the global economy over the year but noted that the UAE business environment demonstrated continued strengths, including government incentives for investors. It also pointed to the fact that investors are more cautious regarding FDI as they gear up for a long-haul economic recovery Only 57% of investors were optimistic about the three-year global economic outlook – compared to 72% in last year’s survey. China, the UAE and Brazil are the only three emerging markets on this year’s Index, with China remaining the highest-ranked emerging market, as has been the case all this century.

The International Monetary Fund revised upward the UAE economic growth forecast for 2021, thanks to massive vaccination efforts which will strengthen recovery in H2. The UAE is now the second most vaccinated country in the world after Israel. The world body more than doubled its previous forecast of 1.3% to 3.1%, with growth softening to 2.6% in 2022. (However, the IMF often seem to get their forecast so wrong and no doubt the UAE economy will grow at an even faster rate next year). For the MENA region, the Fund revised its 2021 growth outlook from 3.2% to 4.0%.

The Ministry of Economy announced a price reduction on 30k food items during Ramadan. Discounts on items such as rice, flour, sugar, meat, fish and juices will range from 25% – 75%, across 900 national outlets. The ministry will also clamp down on unfair price increases during the holy month and will carry out 420 inspections to ensure grocery stores and businesses follow the rule. Government officials have met with representatives of fruit and vegetable markets in Abu Dhabi and Dubai to ensure enough food will be available during the Holy Month. It is estimated that on a daily basis, Dubai imports around 17k tonnes of fruit and vegetables, whilst the Abu Dhabi total is nearly 5k tonnes.

Dubai Internet City will be the regional headquarters for a company rated as the most valuable start-up in the US. Stripe, the online payments company, will help all its internet-based customers accept payments, make pay-outs and manage the money-side of the business. The UAE digital payment transactions have doubled over the past two years to US$ 18.5 billion, with a further 54% increase to US$ 28.5 billion expected by the end of 2022.

Two DFM entities were in the news this week. With Meraas now owning over 90% of the shares in the theme park operator, DXB Entertainments, the company will buy out the remaining equity holders by paying them US$ 0.022 per share, so that the government-owned entity can assume 100% ownership. Meanwhile, Deyaar has decided not to pursue a capital reduction to cancel US$ 417 million of accumulated losses; no reason has been given for this change. The DFM also announced a plan to launch new equity futures contracts on individual stocks of three leading listed companies – Aramex, Air Arabia and Emirates Integrated Telecommunications Company (DU) – in line with its strategy to diversify investment opportunities. It is like the inaugural equity futures contracts launched last October on stocks of five listed companies – Emaar Properties, Dubai Islamic Bank, Emirates NBD, Emaar Development and Emaar Malls.

Later in the month, the DFM will see its first IPO for some time, as Tristar will be offering shares at between US$ 0.60 to US$ 0.74 which would value the Dubai-based fuel distributor at up to US$ 880 million. It is expected that 20% of the shares will be offered to the public, through the sale of new shares, while the current shareholders could divest a further 4% onto the market, through a secondary offering. The business currently has three shareholders – Kuwait-based logistics group Agility, (65%), Gulf Investment Corporation (20%) and an investment vehicle owned by chief executive, Eugene Mayne (15%). Last year, Trisatr, with a fleet of more than 2k lorries and 35 maritime vehicles, posted a US$ 103 million EBITDA on revenue of US$ 453 million.

The bourse opened on Sunday 04 April and, having gained 62 points (2.5%) the previous week, was up 25 points (1.0%) to close on 2,583 by Thursday 08 April. Emaar Properties, US$ 0.03 higher the previous week, moved up another US$ 0.03 to close at US$ 1.00. Emirates NBD and Damac started the week on US$ 3.12 and US$ 0.32 and closed on US$ 3.17 and US$ 0.33. Thursday 08 April saw the market trading at 172 million shares, worth US$ 45 million, (compared to 69 million shares, at a value of US$ 36 million, on 01 April).

By Thursday, 08 April, Brent, US$ 6.83 (8.6%) lower the previous fortnight, lost a little more ground, shedding US$ 1.23 (1.9%) in this week’s trading, to close on US$ 63.42. Gold, up US$ 3 (0.1%) the previous week, was US$ 26 (1.5%) higher, by Thursday 08 April, to close on US$ 1,756.

IATA estimates that ME passenger demand has fallen back to levels last seen in 1998, noting that last year was the worst in the industry’s history. The global body indicated that, in 2020, passenger demand slumped by 72%, allied with a 63% fall in capacity, with cargo only declining 10%. It once again warned that some carriers may face bankruptcy and that to date losses registered total more than US$ 7 billion and that there must be more collaboration between the industry and various governments to best facilitate global economic recovery.

Despite a shortage of chips, Tesla delivered a record 184.8k electric vehicles in Q1, beating analysts’ expectations of 168k; this is well on its way to meet Elon Musk’s target of 750k for the year. Tesla announced that it would be progressing to full capacity at its Chinese plant. Despite this positive news, Tesla’s shares, which have skyrocketed by more than  540% over the past twelve months, were 1% lower on the day. Q1 sales were dominated by its cheaper models ‘3’ (from US$ 33.7k) and ‘Y’ (from US$ 45.7k), with its two more expensive models, ‘S’ and ‘Y’, (from US$ 75k), accounting for just 1% of Q1 turnover. The company confirmed it was still in the “early stages” of ramping up production of updated versions of both the more expensive models. Tesla was the biggest electric car manufacturer in 2020, accounting for 15.6% of the global production of 3.2 million. However, Monday was another day and, after digesting the news of record quarterly production, investors pushed Tesla shares 8% higher in pre-market trading on Monday.

LG Electronics is to close its loss-making smartphone business following six years of continual losses, totalling US$ 4.5 billion. Only eight years ago, it was the world’s third largest smartphone maker but has trailed the leading two players, Samsung and Apple, not helped by its own hardware and software issues; last year it shipped 28 million phones, compared with Samsung’s 256 million; it is estimated that it has a 2% global market share. Noting that the mobile phone market had become “incredibly competitive”, the South Korean conglomerate has said that its “strategic decision to exit the incredibly competitive mobile phone sector will enable the company to focus resources in growth areas such as electric vehicle components”. The smartphone business is the smallest of LG’s five divisions, accounting for just 7.4% of revenue.

The UK High Street cannot wait for next Monday – the day when lockdown restrictions are finally lifted and, driven by pent up demand, analysts are expecting that there will be a massive 48% hike in “bricks and mortar” sales. A study by Springboard noted that between the first and last weeks of March, the decline in shopping centre footfall moved up from -69% to -62.5%, compared with March 2020, whilst a -29.8% annual drop in footfall at retail parks shrank to -14.8% just before the Easter weekend. Over that four-day holiday period, footfall in. the country’s major cities was three times greater than for the same period a year earlier, and for UK retail destinations, footfall has increased from week to week for ten of the past eleven weeks, despite all but non-essential stores being closed. A more telling statistic from the latest data from the PwC’s Consumer Sentiment Index is that consumer confidence is now at its highest level since the tracking of the data began in 2008, with figures showing there are consumers with more disposable income and “a pent up demand to spend after a year of lockdown restrictions”.

It is estimated that Penguin Random House has claimed US$ 1.4 million under the UK government’s furlough scheme and now it has commented that it will not be repaying any of this back to the government despite strong sales in lockdown; revenues rose by 4.6% to US$ 5.3 million last year but UK’s biggest publisher, owned by German firm Bertelsmann, does not publish its UK profits separately, but they are thought to have soared. A spokesperson said: “We have used the government’s furlough scheme for its intended purpose: to protect jobs during this extraordinary time.” To date, the furlough scheme has cost the UK taxpayer US$ 78 billion.

The collapsed fashion chain Peacocks, previously owned by Edinburgh Woollen Mills, has been bought out of administration, by an international consortium, led by Peacocks’ former chief operating officer, Steve Simpson. It is being supported by EWM, a private investment group controlled by the Day family, which is owed money by Peacocks. If they receive the support of stakeholders, including partners, suppliers and landlords, the Peacocks’ management team is hoping to reopen 200 of its 400 shops, and retain all 1.85k store staff, along with more than 150 in head office and support. Last year, a similar deal was agreed with EWM and Bonmarche brands; as well as EWM also selling its Jaeger brand to M&S which will be run as an online-only business.

CVC Capital Partners, a UK private equity fund, has placed a buyout offer for troubled embattled Japanese conglomerate Toshiba, in a deal that could be as high as US$ 20 billion. Shares jumped almost 20% on Toshiba’s US-listed shares. The company has been involved in several scandals in recent years, including false accounting, (by overstating its profits for six years to 2015), and huge losses linked to its US nuclear unit, which resulted in an enforced sale of its profit-making chip sector to cover the deficit. Last year, it sold its final stake in the personal computer maker Dynabook, but if the deal goes through – it still needs the green light from regulators, including the Japanese government – it will allow the company to focus on renewable energy and other core businesses.

It took Credit Suisse little time to dismiss two key executives, chief risk officer, Lara Warner and its investment banking chief, Brian Chin, and to decide to cut bonuses in the fallout from two major business relationships. The first involved Greensill Capital, which filed for insolvency last week, and was a key financial backer of Liberty Steel owner, GFG Alliance. The other casualty was hedge fund Archegos which also imploded with major losses. Credit Suisse said it expects to make a Q1 US$ 960 million loss.  The Swiss bank also warned of a US$ 4.7 billion Archegos’ loss but noted that it had yet to calculate the cost of its involvement with Greensill Capital, but that could easily run into billions as well. It had acted as one of several lenders as prime broker for Archegos which collapsed after “bets” made on stocks unravelled including entertainment giant Viacom. The bank was one of the last to exit when these shares crashed from US$ 100, (earlier in March), to just over US$ 40. Credit Suisse confirmed it had launched investigations into both matters, with chief executive, Thomas Gottstein noting that “serious lessons will be learned.”

The recent rally in digital assets appears to have no ending and is no longer the domain of just Bitcoin. Ethereum, the world’s second largest cryptocurrency and rising 6.2% last Friday is now worth US$ 2.144k, having already tripled in the first three months of 2021. Ethereum was trading at US$ 150 in April 2020. The market has been boosted by major institutional investment, as well as increased adoption by retailers and payment platforms, including Visa which recently started using its network to settle cryptocurrency transactions.

The Australian Securities and Investments Commission is suing Westpac over its sale of consumer credit insurance in 2015 to almost 400 customers. ASIC alleges that the bank mis-sold CCI with credit cards and other credit lines to almost 400 customers “who had not agreed to buy the policies” for several months back in 2015. This insurance is usually optional and provides cover for consumers if they are unable to meet their minimum loan repayments due to unemployment, sickness or injury. A 2019 report by ASIC, covering eleven banks, found CCI was giving consumers “extremely poor value for money” and that they were only receiving 11 cents for every dollar they spent on CCI premiums linked with their credit cards – and only 19 cents for every dollar on all CCI products.

The Consumer Action Law Centre noted that the practice of selling people insurance, that they did not need, had been “widespread” and targeted consumers at the vulnerable “pressure dynamic” point of sale. It concluded that “the salesperson effectively adds on junk,” and “the problems with junk insurance were industry wide. It was a rort and everyone was in on it”. To date, ASIC has “recovered” US$ 191 million for 580k consumers from eleven banks, equating to an average of US$ 185 for each consumer. If any company had been found stealing so much money, there would be executives serving time but it seems that the law does not apply to the Australian banking sector.

One positive sign for the Australian economy is that job vacancies are rising, indicating there is a growing demand for labour and positions are not being filled. February job vacancies surgied, with 289k vacancies – 13% higher than three months earlier and 90% of the total in the private sector. With such figures, some analysts are looking at a 5% unemployment rate by July, particularly since the government is scaling back on JobSeeker unemployment payments so that it may encourage those at the lower end pf the payment schedule to seek full-time paid work, as opposed to living on a relatively comfortable JobSeeker pay-out.  There is no doubt that there are clear labour shortages in some industries, and with job vacancies rising, there is an obvious growing demand for labour for positions that are not being filled. The construction sector is an obvious example – in February 2020, there were 16.6k job vacancies but that number halved to 8.3k in May 2020 when the lockdowns were put in place. One obstacle to the favourable employment prospects is vaccine and the disappointing figures – at the beginning of the year, Prime Minister Scott Morrison hoped to have four million doses of the vaccine administered by the end of March; his woeful forecast was well out, with only 670k doses administered by the end of last month. Other potential drag factors include ongoing trade tensions with China, further possible disruptions to global trade and the booming Australian property market that could see regulators stepping in to curb bank lending.

With the biggest gains seen since August, March witnessed a surge in US hiring, with 900k jobs being added in the month, as the vaccination program gained traction and restrictions easing led to the mass opening of restaurants, bars, construction sites and schools. Accordingly, although the unemployment rate eased 0.2% to 6.0%, it is only a year ago that the country lost more than twenty million jobs, at the onset of the pandemic; full employment will return within eighteen months The current estimate sees a 6.0% growth rate, driven by a strong rebound later this year, as families emerge from lockdowns with pent-up demand and in many cases, savings put away during the pandemic. Despite the number of Americans claiming unemployment benefits unexpectedly rising by 16k to a seasonally adjusted 744k for the week ending 03 April, there is no doubt that labour market conditions are rapidly improving, as the country’s economy reopens, vaccination programs increase, and the various stimulus packages take effect.  However, there is still some way to go as the US employment figures are still 8.4 million shy of the February 2020 peak.

As restrictions eased, Chancellor Rishi Sunak has announced a government-backed loan scheme to help companies, as the economy reopens. The loans, ranging from US$ 35k to US$ 13.9 million, (GBP 10 million), will be 80% guaranteed by the government and will aim to help companies restart trading. Administered by the British Business Bank, it will run until the end of the year and interest rates will be capped at what seems to a rather high 14.99%. To date, it is estimated that its emergency loans had supported about US$ 105 billion of financing.

US Treasury Secretary Janet Yellen confirmed that the US is working with G20 countries to agree on a global corporate minimum tax rate to end a “30-year race to the bottom on corporate tax rates”. In the absence of a global minimum, the US will always be struggling against other economies with lower rates so that is probably why the Biden administration is leading the negotiations to level ‘the tax playing field.’ It appears that the US would use its own tax legislation to prevent companies from shifting profits or residency to tax-haven countries and would encourage other major economies to do the same. Ms Yellen’s take on the problem is not shared by the World Bank supremo, David Malpass who was against such a high tax rate of 21% for companies and indicated that such high rates would hinder poor countries’ ability to attract investment. Whilst the EC supported the idea, it did not comment on the rate, whilst some countries, including Ireland, expressed reservations about the US proposal. Recently, the OECD held discussions that focused on a minimum corporate tax rate of 12.5%, whilst the average corporate tax rate globally is about 24%, with Europe having the lowest regional rate at around 20%.

Every three months, the IMF seems always to amend previous quarters and this month is no exception. This time it is forecasting a stronger economic recovery this year and next and has marginally upped the UK’s growth to 5.3% and 5.1% in 2022, after a 9.9% contraction last year. Despite this, the UK remains ahead of just one of the G7 countries, Italy, and will only return to pre-pandemic levels only by the end of 2022. On a global scale, two year forecasts are at 6.0% (up from October’s 5.2%) and 4.4%, with the caveat that recoveries are diverging dangerously within and between countries. The global body notes that countries likely to perform less than the global average are those with slower vaccine rollouts, more limited support from economic policy, and those more reliant on tourism. Many emerging and developing economies are forecast not to return to pre 2020 economic levels, although China has already returned to pre-pandemic levels of economic activity. Over the period 2020 – 2022, cumulative losses in income per person are forecast at 11% for the developed world and 20% for other countries. The report notes that people counted as extremely poor are likely to have increased by 95 million in 2020, with a rise of 80 million in the number who are undernourished. Another Day In Paradise?

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Another Day In Paradise

Another Day In Paradise?                                                                 08 April 2021

How could all the property experts get it so wrong predicting further doom and gloom for the Dubai property sector in 2021?  March saw a marked uptick in sales transactions which totalled 4,643, valued at US$ 3.0 billion, and undoubtedly the 22% month on month growth in transactions, and 47% in value, will continue the same trend into Q2 and for the rest of 2021. 101 Economics teaches that prices will head north when there is lack of supply and high demand – this is exactly what is happening in areas like The Meadows and other established locations in the emirate for villas, and in Palm Jumeirah for prime apartments. Interestingly, last month had the highest number of secondary/ready properties transacted in a single month since June 2015.

The DLD weekly real estate report ending 01 April noted that the value of real estate and properties transactions was US$ 1.93 billion, including 1,116 apartments/villas selling for a total of US$ 559 million, along with 103 plots for US$ 197 million. The total amount of mortgaged properties came to US$ 1.09 billion, half of which was for land mortgaged in Marsa Dubai; there were 83 properties granted between first-degree relatives, valued at US$ 53 million. Three apartments were the top-priced for the week – US$ 55 million in Palm Jumeirah, US$ 52 million in Marsa Dubai, and U Madinat Dubai Almelaheyah, US$ 51 million, in Burj Khalifa. The highest land value sold this week was for US$ 58 million in Hadaeq Sheikh Mohammed Bin Rashid. Most transactions were carried out at Hadaeq Sheikh Mohammed bin Rashid, (28 sales valued at US$ 61 million), followed by Nad Al Shiba Third, with 22 sales transactions worth US$ 15 million, and Al Hebiah Third, with 8 sales transactions worth US$ 7 million.

Colliers’ latest report indicates that Dubai’s property market is running low on inventory, as buyers currently outnumber sellers in popular areas of the emirate, resulting in Dubai property fast becoming a sellers’ market. Since the advent of Covid, the trend is for many stakeholders moving to bigger spaces or better communities, or both. Covid was a catalyst for some property owners having to sell their property, (either through losing their job or having their pay cut). Now many sellers are in a position to wait and see, waiting for the right price to be offered.

Since the September 2019 launch of the Dubai Supreme Committee for Real Estate Planning, new project launches have slowed down substantially, so that, according to Asteco, only 34k residential units were handed over last year. Most of this number were already work-in progress, in September 2019, but with time the pipeline will become more manageable as actual new launches slow. There is no doubt that equilibrium is returning to the market and as supply slows, property prices will inevitably move higher, also driven by historically low mortgage rates, enticing buyers to pay more as the lack of good property available becomes apparent; maybe gazumping is returning to the local market.

Binghatti Developers launched a US$ 55 million project in JVC, comprising 160 apartments, covering 300k sq ft. The Binghatti Mirage – its third development in that location – is scheduled for completion within twelve months. One 722 sq ft B/R apartment will be priced at US$ 132k, after a 30% discount in advance, while a 2 B/R apartment, with an area of ​​856 sq ft, will cost US$ 188k. According to Cavendish Maxwell, JVC saw 2020 rental declines for both apartments (down 16.1%) and villas by 3.1%.

Dubai Economy has joined forces with Amazon in a new initiative to assist  local start-ups and SMEs, who are DED Trader licence holders and interested in expanding their online footprint. The Amazon Sale University will provide new e-learning courses and also host a dedicated store front on Amazon.ae to showcase products offered by local traders. One of DED’s main aims is to accelerate the “growth of e-commerce initiatives and promote technology integration” within the local business community.

Having met all safety requirements issued by the General Civil Aviation Authority (GCAA), flydubai will resume 737 Max passenger service with the first flight today to Pakistan’s Sialkot. The Dubai carrier has fourteen Max aircraft currently grounded, of which  four  Max 8s and one Max 9 have got the go-ahead to fly, following a comprehensive twenty-month review. The remaining nine Max aircraft are expected to return to passenger service over the next two months, following extensive work to reactivate planes that have been grounded for two years. The carrier noted that the Max aircraft “will operate to a number of flydubai’s destinations over the coming weeks” and that passengers will be notified in advance of travel if their itinerary now includes a flight that is scheduled to be operated by a Max plane. Twelve countries, within the carrier’s network, have yet to clear the narrow-body jet’s return, including Russia and India. The Dubai-based airline has over 750 pilots, of which over 30% have completed the required additional training on the 737 Max, with the remaining 520 expected to complete the additional training by the end of the year.

Dubai’s largest fuel retailer, Emirates National Oil Company, is planning to invest US$ 68 million of its capex budget on digital technology to optimise operations and identify synergies within its businesses. Enoc has more than 11k employees in sixty markets and it expects to grow the number of its service stations by 41.9% to 193 this year. In 2019, it had launched Enoc Link, an on-demand fuel service initially only for commercial customers, and now expects to add new revenue streams from the launch of on-demand fuel retail. In February, it introduced its first sustainable service station at the Expo 2020 site – and the first in the region equipped with a wind turbine for generating power. Enoc has launched its Masar project, as part of its digital transformation plans, with the aim of integrating all of its divisions and providing a more focused service to customers.

Earlier in the week, HH Sheikh Mohammed bin Rashid Al Maktoum launched the Dubai Creative Economy Strategy, with the aim of doubling the emirate’s creative industries’ contribution to GDP to 5.0%, company numbers to 15k and the number of creators to 140k by 2025. The Ruler noted that design, content, culture and arts will be major drivers for Dubai’s future, but the concept also covers a wide range including the likes of publishing, writing, cinema, video, cultural heritage and artistic industries. To speed up the process, the legal and investment environment will be upgraded to spur growth of creative industries in Dubai and to enhance its attractiveness to international creators, investors and entrepreneurs.

The Dubai Ruler also approved the Emirates Development Bank (EDB) Strategy to provide a sizeable US$ 8.2 billion financial support to businesses and start-ups in a major step to drive the national economy, as a support mechanism for the recently launched US$ 82 billion “Operation 300bn”. This was introduced last month as a ten-year comprehensive strategy to more than double the industrial sector’s contribution to the country’s GDP, and to finance more than 13.5k SMEs and to create 25k jobs. The Dubai Ruler also noted that “we must adopt a distinctive vision that meets global trends and sustains development to maximise the industrial sector’s revenue and boost the broader economy”, as well as “The Emirates Development Bank Strategy presents a giant leap that will leverage the bank’s role as a key driver of the national economy. Providing effective financial solutions will support the role of SMEs as main players in shaping our national economy.”

This week saw the appointment of Khaled Mohamed Balama Al Tameemi as governor of the Central Bank of the UAE who takes over the role from Abdulhamid Saeed Alahmadi. At the same time, the central bank also decided to extend the Targeted Economic Support Scheme (Tess), the US$ 13.61 billion zero-cost funding programme, set up a year ago to help lenders maintain funding flows through the economy, following the onset of Covid-19, until year end.

Moving up four places, the UAE is now ranked 15th in the world (and the leader in the Arab region) in Kearney’s 2021 Foreign Direct Investment (FDI) Confidence Index. Not surprisingly, the report indicated a marked decline in overall optimism about the global economy over the year but noted that the UAE business environment demonstrated continued strengths, including government incentives for investors. It also pointed to the fact that investors are more cautious regarding FDI as they gear up for a long-haul economic recovery Only 57% of investors were optimistic about the three-year global economic outlook – compared to 72% in last year’s survey. China, the UAE and Brazil are the only three emerging markets on this year’s Index, with China remaining the highest-ranked emerging market, as has been the case all this century.

The International Monetary Fund revised upward the UAE economic growth forecast for 2021, thanks to massive vaccination efforts which will strengthen recovery in H2. The UAE is now the second most vaccinated country in the world after Israel. The world body more than doubled its previous forecast of 1.3% to 3.1%, with growth softening to 2.6% in 2022. (However, the IMF often seem to get their forecast so wrong and no doubt the UAE economy will grow at an even faster rate next year). For the MENA region, the Fund revised its 2021 growth outlook from 3.2% to 4.0%.

The Ministry of Economy announced a price reduction on 30k food items during Ramadan. Discounts on items such as rice, flour, sugar, meat, fish and juices will range from 25% – 75%, across 900 national outlets. The ministry will also clamp down on unfair price increases during the holy month and will carry out 420 inspections to ensure grocery stores and businesses follow the rule. Government officials have met with representatives of fruit and vegetable markets in Abu Dhabi and Dubai to ensure enough food will be available during the Holy Month. It is estimated that on a daily basis, Dubai imports around 17k tonnes of fruit and vegetables, whilst the Abu Dhabi total is nearly 5k tonnes.

Dubai Internet City will be the regional headquarters for a company rated as the most valuable start-up in the US. Stripe, the online payments company, will help all its internet-based customers accept payments, make pay-outs and manage the money-side of the business. The UAE digital payment transactions have doubled over the past two years to US$ 18.5 billion, with a further 54% increase to US$ 28.5 billion expected by the end of 2022.

Two DFM entities were in the news this week. With Meraas now owning over 90% of the shares in the theme park operator, DXB Entertainments, the company will buy out the remaining equity holders by paying them US$ 0.022 per share, so that the government-owned entity can assume 100% ownership. Meanwhile, Deyaar has decided not to pursue a capital reduction to cancel US$ 417 million of accumulated losses; no reason has been given for this change. The DFM also announced a plan to launch new equity futures contracts on individual stocks of three leading listed companies – Aramex, Air Arabia and Emirates Integrated Telecommunications Company (DU) – in line with its strategy to diversify investment opportunities. It is like the inaugural equity futures contracts launched last October on stocks of five listed companies – Emaar Properties, Dubai Islamic Bank, Emirates NBD, Emaar Development and Emaar Malls.

Later in the month, the DFM will see its first IPO for some time, as Tristar will be offering shares at between US$ 0.60 to US$ 0.74 which would value the Dubai-based fuel distributor at up to US$ 880 million. It is expected that 20% of the shares will be offered to the public, through the sale of new shares, while the current shareholders could divest a further 4% onto the market, through a secondary offering. The business currently has three shareholders – Kuwait-based logistics group Agility, (65%), Gulf Investment Corporation (20%) and an investment vehicle owned by chief executive, Eugene Mayne (15%). Last year, Trisatr, with a fleet of more than 2k lorries and 35 maritime vehicles, posted a US$ 103 million EBITDA on revenue of US$ 453 million.

The bourse opened on Sunday 04 April and, having gained 62 points (2.5%) the previous week, was up 25 points (1.0%) to close on 2,583 by Thursday 08 April. Emaar Properties, US$ 0.03 higher the previous week, moved up another US$ 0.03 to close at US$ 1.00. Emirates NBD and Damac started the week on US$ 3.12 and US$ 0.32 and closed on US$ 3.17 and US$ 0.33. Thursday 08 April saw the market trading at 172 million shares, worth US$ 45 million, (compared to 69 million shares, at a value of US$ 36 million, on 01 April).

By Thursday, 08 April, Brent, US$ 6.83 (8.6%) lower the previous fortnight, lost a little more ground, shedding US$ 1.23 (1.9%) in this week’s trading, to close on US$ 63.42. Gold, up US$ 3 (0.1%) the previous week, was US$ 26 (1.5%) higher, by Thursday 08 April, to close on US$ 1,756.

IATA estimates that ME passenger demand has fallen back to levels last seen in 1998, noting that last year was the worst in the industry’s history. The global body indicated that, in 2020, passenger demand slumped by 72%, allied with a 63% fall in capacity, with cargo only declining 10%. It once again warned that some carriers may face bankruptcy and that to date losses registered total more than US$ 7 billion and that there must be more collaboration between the industry and various governments to best facilitate global economic recovery.

Despite a shortage of chips, Tesla delivered a record 184.8k electric vehicles in Q1, beating analysts’ expectations of 168k; this is well on its way to meet Elon Musk’s target of 750k for the year. Tesla announced that it would be progressing to full capacity at its Chinese plant. Despite this positive news, Tesla’s shares, which have skyrocketed by more than  540% over the past twelve months, were 1% lower on the day. Q1 sales were dominated by its cheaper models ‘3’ (from US$ 33.7k) and ‘Y’ (from US$ 45.7k), with its two more expensive models, ‘S’ and ‘Y’, (from US$ 75k), accounting for just 1% of Q1 turnover. The company confirmed it was still in the “early stages” of ramping up production of updated versions of both the more expensive models. Tesla was the biggest electric car manufacturer in 2020, accounting for 15.6% of the global production of 3.2 million. However, Monday was another day and, after digesting the news of record quarterly production, investors pushed Tesla shares 8% higher in pre-market trading on Monday.

LG Electronics is to close its loss-making smartphone business following six years of continual losses, totalling US$ 4.5 billion. Only eight years ago, it was the world’s third largest smartphone maker but has trailed the leading two players, Samsung and Apple, not helped by its own hardware and software issues; last year it shipped 28 million phones, compared with Samsung’s 256 million; it is estimated that it has a 2% global market share. Noting that the mobile phone market had become “incredibly competitive”, the South Korean conglomerate has said that its “strategic decision to exit the incredibly competitive mobile phone sector will enable the company to focus resources in growth areas such as electric vehicle components”. The smartphone business is the smallest of LG’s five divisions, accounting for just 7.4% of revenue.

The UK High Street cannot wait for next Monday – the day when lockdown restrictions are finally lifted and, driven by pent up demand, analysts are expecting that there will be a massive 48% hike in “bricks and mortar” sales. A study by Springboard noted that between the first and last weeks of March, the decline in shopping centre footfall moved up from -69% to -62.5%, compared with March 2020, whilst a -29.8% annual drop in footfall at retail parks shrank to -14.8% just before the Easter weekend. Over that four-day holiday period, footfall in. the country’s major cities was three times greater than for the same period a year earlier, and for UK retail destinations, footfall has increased from week to week for ten of the past eleven weeks, despite all but non-essential stores being closed. A more telling statistic from the latest data from the PwC’s Consumer Sentiment Index is that consumer confidence is now at its highest level since the tracking of the data began in 2008, with figures showing there are consumers with more disposable income and “a pent up demand to spend after a year of lockdown restrictions”.

It is estimated that Penguin Random House has claimed US$ 1.4 million under the UK government’s furlough scheme and now it has commented that it will not be repaying any of this back to the government despite strong sales in lockdown; revenues rose by 4.6% to US$ 5.3 million last year but UK’s biggest publisher, owned by German firm Bertelsmann, does not publish its UK profits separately, but they are thought to have soared. A spokesperson said: “We have used the government’s furlough scheme for its intended purpose: to protect jobs during this extraordinary time.” To date, the furlough scheme has cost the UK taxpayer US$ 78 billion.

The collapsed fashion chain Peacocks, previously owned by Edinburgh Woollen Mills, has been bought out of administration, by an international consortium, led by Peacocks’ former chief operating officer, Steve Simpson. It is being supported by EWM, a private investment group controlled by the Day family, which is owed money by Peacocks. If they receive the support of stakeholders, including partners, suppliers and landlords, the Peacocks’ management team is hoping to reopen 200 of its 400 shops, and retain all 1.85k store staff, along with more than 150 in head office and support. Last year, a similar deal was agreed with EWM and Bonmarche brands; as well as EWM also selling its Jaeger brand to M&S which will be run as an online-only business.

CVC Capital Partners, a UK private equity fund, has placed a buyout offer for troubled embattled Japanese conglomerate Toshiba, in a deal that could be as high as US$ 20 billion. Shares jumped almost 20% on Toshiba’s US-listed shares. The company has been involved in several scandals in recent years, including false accounting, (by overstating its profits for six years to 2015), and huge losses linked to its US nuclear unit, which resulted in an enforced sale of its profit-making chip sector to cover the deficit. Last year, it sold its final stake in the personal computer maker Dynabook, but if the deal goes through – it still needs the green light from regulators, including the Japanese government – it will allow the company to focus on renewable energy and other core businesses.

It took Credit Suisse little time to dismiss two key executives, chief risk officer, Lara Warner and its investment banking chief, Brian Chin, and to decide to cut bonuses in the fallout from two major business relationships. The first involved Greensill Capital, which filed for insolvency last week, and was a key financial backer of Liberty Steel owner, GFG Alliance. The other casualty was hedge fund Archegos which also imploded with major losses. Credit Suisse said it expects to make a Q1 US$ 960 million loss.  The Swiss bank also warned of a US$ 4.7 billion Archegos’ loss but noted that it had yet to calculate the cost of its involvement with Greensill Capital, but that could easily run into billions as well. It had acted as one of several lenders as prime broker for Archegos which collapsed after “bets” made on stocks unravelled including entertainment giant Viacom. The bank was one of the last to exit when these shares crashed from US$ 100, (earlier in March), to just over US$ 40. Credit Suisse confirmed it had launched investigations into both matters, with chief executive, Thomas Gottstein noting that “serious lessons will be learned.”

The recent rally in digital assets appears to have no ending and is no longer the domain of just Bitcoin. Ethereum, the world’s second largest cryptocurrency and rising 6.2% last Friday is now worth US$ 2.144k, having already tripled in the first three months of 2021. Ethereum was trading at US$ 150 in April 2020. The market has been boosted by major institutional investment, as well as increased adoption by retailers and payment platforms, including Visa which recently started using its network to settle cryptocurrency transactions.

The Australian Securities and Investments Commission is suing Westpac over its sale of consumer credit insurance in 2015 to almost 400 customers. ASIC alleges that the bank mis-sold CCI with credit cards and other credit lines to almost 400 customers “who had not agreed to buy the policies” for several months back in 2015. This insurance is usually optional and provides cover for consumers if they are unable to meet their minimum loan repayments due to unemployment, sickness or injury. A 2019 report by ASIC, covering eleven banks, found CCI was giving consumers “extremely poor value for money” and that they were only receiving 11 cents for every dollar they spent on CCI premiums linked with their credit cards – and only 19 cents for every dollar on all CCI products.

The Consumer Action Law Centre noted that the practice of selling people insurance, that they did not need, had been “widespread” and targeted consumers at the vulnerable “pressure dynamic” point of sale. It concluded that “the salesperson effectively adds on junk,” and “the problems with junk insurance were industry wide. It was a rort and everyone was in on it”. To date, ASIC has “recovered” US$ 191 million for 580k consumers from eleven banks, equating to an average of US$ 185 for each consumer. If any company had been found stealing so much money, there would be executives serving time but it seems that the law does not apply to the Australian banking sector.

One positive sign for the Australian economy is that job vacancies are rising, indicating there is a growing demand for labour and positions are not being filled. February job vacancies surgied, with 289k vacancies – 13% higher than three months earlier and 90% of the total in the private sector. With such figures, some analysts are looking at a 5% unemployment rate by July, particularly since the government is scaling back on JobSeeker unemployment payments so that it may encourage those at the lower end pf the payment schedule to seek full-time paid work, as opposed to living on a relatively comfortable JobSeeker pay-out.  There is no doubt that there are clear labour shortages in some industries, and with job vacancies rising, there is an obvious growing demand for labour for positions that are not being filled. The construction sector is an obvious example – in February 2020, there were 16.6k job vacancies but that number halved to 8.3k in May 2020 when the lockdowns were put in place. One obstacle to the favourable employment prospects is vaccine and the disappointing figures – at the beginning of the year, Prime Minister Scott Morrison hoped to have four million doses of the vaccine administered by the end of March; his woeful forecast was well out, with only 670k doses administered by the end of last month. Other potential drag factors include ongoing trade tensions with China, further possible disruptions to global trade and the booming Australian property market that could see regulators stepping in to curb bank lending.

With the biggest gains seen since August, March witnessed a surge in US hiring, with 900k jobs being added in the month, as the vaccination program gained traction and restrictions easing led to the mass opening of restaurants, bars, construction sites and schools. Accordingly, although the unemployment rate eased 0.2% to 6.0%, it is only a year ago that the country lost more than twenty million jobs, at the onset of the pandemic; full employment will return within eighteen months The current estimate sees a 6.0% growth rate, driven by a strong rebound later this year, as families emerge from lockdowns with pent-up demand and in many cases, savings put away during the pandemic. Despite the number of Americans claiming unemployment benefits unexpectedly rising by 16k to a seasonally adjusted 744k for the week ending 03 April, there is no doubt that labour market conditions are rapidly improving, as the country’s economy reopens, vaccination programs increase, and the various stimulus packages take effect.  However, there is still some way to go as the US employment figures are still 8.4 million shy of the February 2020 peak.

As restrictions eased, Chancellor Rishi Sunak has announced a government-backed loan scheme to help companies, as the economy reopens. The loans, ranging from US$ 35k to US$ 13.9 million, (GBP 10 million), will be 80% guaranteed by the government and will aim to help companies restart trading. Administered by the British Business Bank, it will run until the end of the year and interest rates will be capped at what seems to a rather high 14.99%. To date, it is estimated that its emergency loans had supported about US$ 105 billion of financing.

US Treasury Secretary Janet Yellen confirmed that the US is working with G20 countries to agree on a global corporate minimum tax rate to end a “30-year race to the bottom on corporate tax rates”. In the absence of a global minimum, the US will always be struggling against other economies with lower rates so that is probably why the Biden administration is leading the negotiations to level ‘the tax playing field.’ It appears that the US would use its own tax legislation to prevent companies from shifting profits or residency to tax-haven countries and would encourage other major economies to do the same. Ms Yellen’s take on the problem is not shared by the World Bank supremo, David Malpass who was against such a high tax rate of 21% for companies and indicated that such high rates would hinder poor countries’ ability to attract investment. Whilst the EC supported the idea, it did not comment on the rate, whilst some countries, including Ireland, expressed reservations about the US proposal. Recently, the OECD held discussions that focused on a minimum corporate tax rate of 12.5%, whilst the average corporate tax rate globally is about 24%, with Europe having the lowest regional rate at around 20%.

Every three months, the IMF seems always to amend previous quarters and this month is no exception. This time it is forecasting a stronger economic recovery this year and next and has marginally upped the UK’s growth to 5.3% and 5.1% in 2022, after a 9.9% contraction last year. Despite this, the UK remains ahead of just one of the G7 countries, Italy, and will only return to pre-pandemic levels only by the end of 2022. On a global scale, two year forecasts are at 6.0% (up from October’s 5.2%) and 4.4%, with the caveat that recoveries are diverging dangerously within and between countries. The global body notes that countries likely to perform less than the global average are those with slower vaccine rollouts, more limited support from economic policy, and those more reliant on tourism. Many emerging and developing economies are forecast not to return to pre 2020 economic levels, although China has already returned to pre-pandemic levels of economic activity. Over the period 2020 – 2022, cumulative losses in income per person are forecast at 11% for the developed world and 20% for other countries. The report notes that people counted as extremely poor are likely to have increased by 95 million in 2020, with a rise of 80 million in the number who are undernourished. Another Day In Paradise?

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So You Think You’ve Got Troubles

So You Think You’ve Got Troubles                                                              01 April 2021

Azizi Developments recently celebrated the handover of Mina, its luxurious development on the eastern crescent of Palm Jumeirah and is on its way to complete its ambitious target of handing over 10k residential units in 2021. Future handovers include Al Furjan, (Plaza and Star in April and Berton in May), phase 1 of MBR City’s Riviera’s phase one in June, and Dubai Healthcare City. Prices for the Mina development start at US$ 708k for a 1 B/R apartment to US$ 7.3 million for a penthouse, with a private pool; to date, 96% of the 120 1 B/R and 54 2 B/R residences, as well as four spacious penthouses, have been sold. The development, encompassing 38.5k sq mt of built-up area project, will include retail units and other amenities.

Another world record for the emirate came with the announcement that Dubai’s Address Beach Resort has the world’s highest infinity pool in a building. The pool, located in JBR and 294 mt up, on the building’s 77th floor, is only accessible to hotel guests. It is divided into a 75m-long swimmable zone, a wet sunbed area and a sunken pod water feature.

According to the Consumer Confidence Index, released by Dubai Economy, Q1 consumer confidence rose to 145 – its highest level in almost six years – mainly driven by improvements in personal finance conditions of consumers. There is growing optimism on personal finance conditions improving in 2021, with 84% of consumers expecting a boos this year, compared to 73% in Q1 2020. The Index also noted that 84% of consumers are optimistic about the overall economy during the next 12 months. Furthermore, 87% of consumers see chances of getting a job improving over the next twelve months, pointing to a brighter job market.

As part of the emirate’s clean energy strategy, which aims to produce 25% of its energy from clean sources by 2030, and 75% by 2050, Dubai Holding is leading a consortium of local and international companies developing a 200-megawatt, US$ 1.1 billion energy-from-waste project. The consortium, which also includes Itochu Corporation, Hitachi Zosen Inova, Besix Group and Tech Group, will operate the PPP (public-private partnership) project under a 35-year concession period, agreed with Dubai Municipality. The project, one of the biggest of its kind in the world, will be partly financed by a loan of US$ 900 million from several banks. It is estimated that the plant, located in Warsan, will treat 5.7k tonnes of municipal solid waste per day, converting a total of 1.9 million tonnes of waste per year into renewable energy. The facility will have the capacity to process up to 45% of Dubai’s current municipal waste generation.

DEWA is planning to invest US$ 408 million to acquire the Ras Al Khaimah-based Utico’s Hassyan seawater reverse osmosis plant in a thirty-five year agreement. The plant, owned by a private utility company, will have a daily capacity of 120 million imperial gallons and will be built under the independent water producer (IWP) model. It is an increase in daily desalinated water capacity to 750 million imperial gallons – 60% higher than the current level – with the utility aiming to produce 100% of desalinated water, using a mix of clean energy and waste heat, by 2030; the authority also plans to reduce water consumption by 30% by 2030. This is another PPP project with DEWA partnering with sovereign entities from Saudi Arabia, Bahrain, Oman and Brunei.

The bourse opened on Sunday 28 March and, having lost 108 points (4.1%) the previous week, regained 62 points (2.5%) to close on 2,558 by Thursday 01 April. Emaar Properties, US$ 0.05 lower the previous week, moved US$ 0.03 higher to close at US$ 0.97. Emirates NBD and Damac started the week on US$ 2.97 and US$ 0.30 and closed on US$ 3.12 and US$ 0.32. Thursday 01 April saw the market trading at 115 million shares, worth US$ 31 million, (compared to 69 million shares, at a value of US$ 36 million, on 25 March).

For the month of March, the bourse had opened on 2,552 and, having closed the month on 2,550, down just 2 points. Emaar traded lower from its 01 March 2021 opening figure of US$ 0.98 – down US$ 0.02 – to close February on US$ 0.96. Two other bellwether stocks, Emirates NBD and Damac, started March on US$ 3.04 and US$ 0.32 and closed on 31 March on US$ 3.13 and US$ 0.33 respectively.

By Thursday, 01 April, Brent, US$ 6.83 (8.6%) lower the previous fortnight, lost a little more ground, shedding US$ 2.06 (1.5%) in this week’s trading, to close on US$ 64.65. Gold, US$ 2 (2.4%) lower the previous week, nudged US$ 3 (0.1%) higher, by Thursday 01 April, to close on US$ 1,730. There are reports that both Saudi Arabia and Russia are in agreement that the current Opec+ cuts will be eased, with oil curbs being reduced by 350k bpd per month  from May until July, with demand not yet being strong enough to prevent prices declining. Last year, the group agreed to cut 9.7 million bpd, equating to 10% of global output, but then eased back to 7.7 million bpd, as demand recovered. Saudi has also a further 1 million bpd quota cut in place that will probably stay in place until at least July.

Brent started the month on US$ 64.42 and shed US$ 0.88 (1.4%) during March to close on US$ 64.42 Meanwhile, the yellow metal lost US$ 60 (3.4%) in March having started the month on US$ 1,773 to close on 31 March on US$ 1,713.

What a mess the financial world is in when it is reported that some Goldman Sachs have been complaining of having to work a 95-hour week under “inhumane” conditions. Now it is reported that team leaders have been paying, from their own pockets, for food hampers to all their team members. It seems that senior management have ignored the problem to take responsibility and further action to rectify the embarrassing work situation that some of their lower-ranking employees face.

If there are no more UK lockdowns this year, JD Wetherspoon, with a current portfolio of 871 pubs, plans to invest US$ 200 million in opening eighteen new pubs, and 2k new jobs. The pub chain also confirmed that it. would not only “significantly extend” 57 existing pubs as part of the project but would also invest a further US$ 1 billion to open 15 new pubs, and enlarge fifty existing pubs, each year for the next decade.

Financially it has been another good year for Denise Coates CBE, the boss of the gambling firm Bet365, and said to be the founder and majority shareholder in Bet365 Group, has been awarded one of the biggest pay packets in UK corporate history. In the year ended 29 March, she earned a salary of US$ 579 million and picked up dividends of US$ 66 million, making a total of US$ 645 million; her annual salary was 50% higher compared to the previous year. Although revenue fell 8% to US$ 3.85 billion, and profits slumped 74% to US$ 268 million, the company noted that the arrangements were “appropriate and fair” – a view probably not shared by many outsiders. According to the High Pay Centre, she earned more than the bosses of every FTSE 100 company combined. She has taken over the mantle as the highest paid UK executive from hedge fund tycoon, Sir Chris Hohn, who last month was paid US$ 479 million in dividends from his The Children’s Investment fund, after doubling annual profits; interestingly, he was once chancellor Rishi Sunak’s boss at TCI.

Jessops, the High Street photographic equipment chain, with 120 staff and 17 outlets, has filed a notice to appoint administrators and advisors FRP to help it restructure the business. It still plans to continue to trade, when lockdown restrictions lift in April, as it considers a rescue deal in the form of a Company Voluntary Arrangement. This is not the first time that the retailer has had financial problems; in 2013, the current owner bought Jessops out of administration, after it had collapsed with US$ 112 million of debt and in October 2019, it issued a similar CVA notice. (A CVA ensures that landlords will not receive their fixed rent but a percentage of a shop’s revenue instead).

Microsoft Corp confirmed that it would sell augmented reality headsets, based on its HoloLens product and backed by Azure cloud computing services, to the US army; the ten-year contract could be worth up to US$ 22 billion Since 2019, both parties have been working on the prototyping phase of what is called the Integrated Visual Augmentation System, or IVAS, and this has now moved into the production phase of the project.

With the aim of increasing its capacity, the world’s largest contract chipmaker is to invest US$ 100 billion over the next three years. Taiwan Semiconductor Manufacturing Co has already announced that it would spend up to US$ 28 billion this year to develop and produce advanced micro chips. A global chip shortage has hit the car industry, with Volkswagen, Honda, Toyota and General Motors all having to reduce production because when the carmakers cut production levels last year, the chip-makers switched to selling their products to other industries with greater demand. Now with the car industry slowly recovering, chip-makers are finding it difficult to satisfy their current demand. Furthermore, demand from other sectors, including consumer electronics, has also increased and there has been a marked growth in demand for semiconductor technology, with the Covid-19 pandemic further accelerating digitalisation. Shortages across the board are expected to continue for the rest of the year.

With revenue nudging 3.2% higher, despite the impact of the pandemic, and tightening US pressure, Huawei posted a record 2020 profit of US$ 9.9 billion, at 3.2 higher on the year; the Chinese telecom giant returned revenue figures of US$ 136.6 billion. Prior to Trump-led pressure to curtail its activities in the US, the world’s leading supplier of telecom networking gear and a top smartphone brand, regularly posted 30%+ annual revenue growth figures, but since 2018 it has begun to slow, so that by 2019 sales still expanded, but at a lower 19% level. The Trump administration cut Huawei off from key components and banned it from using Google’s Android operating systems in its handsets.

With major UK investors concerned with its gig economy-related personnel problems – and possible negative client reaction – and not participating, Deliveroo’s IPO saw shares sinking 27.2% on its first day of trading to fall to US$ 3.91 from its start of US$ 5.37. The company had initially hoped for a share price of up to US$ 6.33. It was the UK’s biggest stock market launch for a decade and such a disappointing first day may convince other major tech players not to list in the UK.  However, Deliveroo had its own problems and if some of the UK’s biggest investment fund managers, (including Aberdeen Standard, Aviva Investors, BMO Global, charity fund manager CCLA, Legal and General Investment Management and M&G), boycott an IPO, it is bound to have a negative impact. It is also an embarrassment for the UK Chancellor who had earlier claimed that the Amazon-backed company was a “true British tech success story” that could clear the way for more initial public offerings by fast-growing technology firms.

There was no surprise to see that the Registrar of Consultant Lobbyists cleared David Cameron of any wrongdoing for contacting senior Treasury officials at least nine times on behalf of the disgraced and now bankrupt financial firm Greensill Capital. It quickly concluded that his activities had not fallen within the criteria that required registration, as he had been an in-house employee for Greensill, a key backer of UK giant Liberty Steel. The ex-prime minister will undoubtedly face other enquiries into his role with Greensill that may not be as accommodating.

Concerns over the future of Liberty Steel have grown ever since the Johnson government’s refusal to Sanjeev Gupta’s request for a US$ 242 million financial support package on the back of the fallout from the Greensill debacle. The company, that employs 5k at various plants in the UK, needs funds to pay day-to-day operating expenses and absorb recent losses. It seems that government has concerns about the “opaque” nature of Mr Gupta’s empire, which employs a further 30k worldwide so if any public funds were forthcoming, there would have to be assurances that the money was being used only in the UK. There is no doubt that the only hope for the firm is restructuring, so that any funds ensure value for money and appropriate protections for the taxpayer.

How can a mega 200k tonne container ship be blown “hard fast aground”, and, for six days, block one of the world’s biggest waterways which accounts for 12% of total global shipments? Maybe the captain of Ever Given could explain why his stranded vessel is holding up an estimated US$ 9.6 billion of goods each day, equating to US$ 400 million an hour; interestingly, the Suez Canal’s westbound traffic generates a daily US$ 5.1 billion, more than the US$ 4.5 billion from eastbound traffic. Some experts were wrongly estimating that it could take weeks to free the vessel, and on their advice, some shippers had already started moving their vessels to sail around the Cape of Good Hope, which adds 3.5k miles and twelve days to the journey. The “blockage” only took six days to clear.

After the UK government indicated that it wanted to “make sure tech firms pay their fair share of tax”, the US has threatened to retaliate with tariffs of up to 25% on items such as ceramics, make-up, overcoats, games consoles and furniture. In a possible tit for tat tax, it is estimated that it will add US$ 325 million to both countries’ exchequers. The Biden administration has argued that the 2% digital services tax – based on tech companies’ revenue – has “unreasonable, discriminatory, and burdensome attributes”. The tax, introduced last April, is aimed at search engines, social media services and online marketplaces which derive value from UK users.

On Monday, two leading global investment banks issued profit warnings, with Credit Suisse indicating it could have a “highly significant” impact on its next quarterly results and Japan’s Nomura said it could make a US$ 2 billion loss from problems at Archegos. The US hedge fund seems to have made huge investments in certain companies that have turned bad and when it came clear that it was in financial trouble, its lenders made a call on the money owed and, unable to raise further finance, the last resort was to sell their shares at a loss. On the news, the Swiss bank’s share value shed 14% and Nomura 16%.  Perhaps these two financial giants could have carried out a more detailed due diligence on Archegos – in 2012, it settled insider trading charges in the US and two years later was banned from trading in Hong Kong. At times like these, it is inevitable that others will be in the same boat and very quickly the situation could become a financial crisis.

Having flagged a possible US$ 2 billion loss at a US subsidiary, Japan’s biggest brokerage and investment bank has decided to shelve a hefty bond issuance and cancel its planned issuance of US$ 3.25 billion in senior notes. Last month, it posted a 23% jump in nine-months profit to December, to US$ 2.82 billion, driven by its US business, which includes investment banking and equity and bond trading. Last Friday, there were a series of block trades in the US, linked to sales of holdings by Archegos Capital Management, that investors said caused falls in the stock prices of numerous companies.

This surprise default of a US hedge fund will send reminders to traders of the demise, in the late 1990s, of hedge fund, Long Term Capital Management. It is hoped that the Nomura problem is not as big and complicated, as it appears that it has been managing the money only of its founder and traders, rather than for external investors. But since then, there is no doubt that the financial world has become more widely interconnected, making it difficult to gauge exactly what risks and trading positions individual hedge funds have built up. The market will be watching developments closely.

March figures from ADP Research indicated that US employers added the most jobs in six months – a sure sign that the increase in Covid vaccinations and easing of restrictions, with many businesses reopening, has had a positive impact on the country’s economy. Company payrolls were 517k higher, driven by a marked uptick in in the leisure and hospitality sectors. SMEs showed better employment growth than larger companies but overall, the labour market has bounced back after an earlier sluggish improvement late last year.

Research from CoreLogic indicates that Australian house prices are rising at the fastest pace since October 1988, as the sector has recovered quicker than expected from the short-lived COVID downturn; home values in Sydney, Melbourne, Hobart, Canberra and Brisbane are at record highs. The study noted that Sydney recorded the most rapid price rise in March at 3.7% (Q1 – 6.7%), followed by Hobart’s 3.3%, Canberra – 2.8% and 2.4% monthly rises in Melbourne and Brisbane. For the first time in twelve months, capital city property prices were higher than regional markets. One of the main reasons attributable to these impressive growth figures is record low interest rates which have increased people’s borrowing capacity and encouraged first home buyers to enter the market. The current mix of lack of supply and high demand has resulted in listing numbers remaining low and the current advertising housing stock is 25% lower than the five-year average; it is estimated that for every new listing added, 1.1 homes are being sold. However, such property price increases, and bank lending becoming looser and riskier, cannot last forever and it is inevitable that measures will be taken to slow the lending boom and to “cool” the market. It is unlikely that the central bank will come to the party and tinker with interest rates in the short -term, so other measure will have to be implemented. They may include placing limits on interest only loans, high loan-to-valuation-ratio lending and high debt-to-income-ratio lending. If prices continue to grow at this rate, and lending conditions deteriorates, there is only one conclusion – and it will be messy.

Although dipping in February, because of expectations that the property tax break would expire on 31 March, UK mortgages approvals remained at their highest level since March 2016. The 87.7k figure was down 10k on the month and 16k lower than November’s record return of 103.7k. Total February borrowings were at US$ 8.5 billion, as effective interest rates nudged 0.06% to 1.91%. The UK property market has witnessed a mini boom since the Chancellor, Rishi Sunak, introduced the Stamp Duty land Tax holiday last July, by which the first US$ 690k (GBP 500k) of the purchase price of a main residence was exempt from SDLT, resulting in 2020 house prices rising a record 8.5% to US$ 350k; this “holiday” has now been extended to September.

For the seventh straight month, February consumer borrowing dropped 9.9% on the year, the biggest increase on record; with consumers repaying US$ 1.65 billion of personal debt in the month, this indicated that consumers’ repayment of existing debts outweighed the value of their new borrowing. Most of the reimbursements went on credit card repayments. When the economy opens up next week, there will inevitably be a marked increase in economic activity, with consumers’ pent-up demand released onto the market, as non-essential retail and hospitality venues start to open; Q2 and Q3 consumption growth levels could come in as high as 3.5%, dependent on no further lockdowns.

Joe Biden has managed to push his second funding package, after the US$ 1.9 trillion Covid pandemic aid deal, through Congress. This one will see US$ 2.3 trillion being spent largely in two sectors – upgrading the country’s crumbling infrastructure and tackling climate change – in a bid to boost economic growth and keep it competitive on the global stage; some of this funding will be met by increasing corporate tax by a third from 21% to 28% and raising the minimum rate charged for overseas profits. Almost 26% of the package will be invested in infrastructure, including modernising roads, replacing rail cars and buses and repairing crumbling bridges, and billions more on projects such as improving veterans’ hospitals, upgrading affordable housing, expanding high-speed broadband, and providing incentives for manufacturing and technology research. The proposal contains hundreds of millions of dollars in green energy spending, expanded care for the elderly and disabled and job training as well as billions to initiatives, such as charging stations for electric vehicles and eliminating lead water pipes.

 It is unclear what difficulties this plan will face in Congress, but early signs point to a tough – and maybe acrimonious – fight ahead. If the President gets this passed in Congress, he has more unpopular and controversial issues to face – immigration, voting rights, gun control, healthcare and race relations to name just five. So You Think You’ve Got Troubles.

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Waiting For The End

Waiting For The End                                                                                25 March 2021

This week came the sad news of the death of Sheikh Hamdan bin Rashid Al Maktoum, the country’s Minister of Finance since the UAE’s 1971 formation. He was the second son of HH Sheikh Rashid and the elder brother of Dubai’s current Ruler, HH Sheikh Mohammed bin Rashid. From the start of public life, he followed Sheikh Rashid’s vision of developing Dubai as a diverse economy that would become a world city and his father put him in charge of Dubai Aluminium (now EGA), Dubai Natural Gas (Dugas), Dubai Cable and the Dubai World Trade Centre. Later his portfolio expanded to include Dubai Municipality and to become president of  Dubai Ports Authority. He also became the country’s chief representative to the International Monetary Fund and the Opec Fund for International Development. He also created the Hamdan bin Rashid Al Maktoum Award for Distinguished Academic Performance, to improve the quality of education and teaching, as well as the Sheikh Hamdan bin Rashid Al Maktoum Award for Medical Sciences, rewarding medical research that serves all humanity. Sheikh Hamdan will also be remembered for his contribution to education, science and philanthropy, giving generously throughout his life.

For the past fifty years, Sheikh Hamdan devoted his life to the duties of government, as a minister, and from 1995, Deputy Ruler of Dubai. His second love was racing and forty years ago he founded Shadwell Racing, a distinguished breeding and racing operation, encompassing eight stud farms – with hundreds of Arabian and thoroughbred horses – in the UK, Ireland and the US. Between 1990 – 2005, he was the British Flat Racing Champion Owner five times, with victories in the English and Irish derbies, the 2,000 Guineas, the Ascot Gold Cup and the Dubai World Cup in 1999 and 2007.

Figures for the week ending yesterday, Wednesday 24 March, show that 1,131 real estate and property transactions valued at US$ 817 million were registered, including 115 plots, worth US$ 149 million, and 721 apartments valued at US$ 340 million. The top three values all involved land transactions in Palm Jumeriah with the highest valued at US$ 15 million. The top three transfers for villas/apartments were in Marsa Dubai – a US$ 37 million apartment – US$ 28 million for a villa in Hadaeq Sheikh Mohammed Bin Rashid and a US$ 25 million apartment in Palm Jumeirah. The three top areas for actual transactions were Al Hebiah Fourth, with 25 sales transactions worth US$ 24 million, followed by Nad Al Shiba Third with 22 sales transactions, valued at US$ 15 million, and Hadaeq Sheikh Mohammed Bin Rashid with 16 sales transactions worth US$ 37 million. Over the week, there were 44 properties granted first-degree relatives worth US$ 42 million. Mortgaged properties this week, valued at US$ 272 million, with the highest one in Al Barsha First at US$ 52 million.

A report by Mortgage Finder estimates that 83% of people taking out a mortgage last year planned to live in the property and that 97% of mortgage transactions in 2020 were taken out by UAE residents. However, when global lockdowns and travel bans begin to get lifted, it is inevitable that an increasing number of non-residents will re-enter the Dubai property market. The 2020 mortgage transactions saw a 51:49 split between villas and apartments, with a 40% increase in H2, as restrictions and lockdowns eased. The report also found that the average mortgage amount was US$ 436k, with a 21-year term, with completed properties seeing an average mortgage of US$ 468k and for off-plan properties (finance upon handover), it was US$ 378k. The leading locations registering mortgages were Dubai Marina, Arabian Ranches, Palm Jumeirah, Dubai Hills Estate, Jumeirah Golf Estate and Jumeirah Village Circle. Two other points indicated the growing trend in the popularity of villas/townhouses, which will continue into 2021, and that 65% of overall mortgages were for completed properties, with the mortgage percentage for off-plan declining.

According to Nakheel, its Palm Tower project is in the advanced stages of fit out, with all exterior cladding completed. The 52-storey, 240 mt high building, located on Palm Jumeirah, is 95% complete and is expected to open in October. The development, has 432 luxury, fully furnished 1-3 B/R apartments, (which will be on levels 19 to 47), and a 290-room St. Regis hotel, that will occupy the first eighteen floors.

Progress relating to the UAE’s vaccination campaigns is expected to boost demand in H2, and attract consumers and tourists back to traditional stores. Expo 2020 Dubai, scheduled to kick off  this October, is expected to be a major catalyst for the recovery of the retail sector, in addition to the support and incentives provided by governments to business sectors at the federal and local levels. The UAE currently leads the Middle East and North Africa region in terms of household spending on e-commerce at $2,554 per household, which is twice the value of the global average of $1,156, and four times the value of the average in the MENA region ($629). JLL’s latest data sees Dubai‘s retail gross leasable area increasing by 761k sq mt, (18.1%), to almost five million sq mt by year end, having risen by 110k sq mt, (2.7%), to 4.2 million sq mt last year. Traditional retail may see a glimmer of hope with lower rents and more available options.

After HH Sheikh Mohammed bin Rashid Al Maktoum launched the first ever World Logistics Passport at last year’s Davos meeting, it has now been rolled out to include eleven nations. This global network of trade mega hubs aims to increase opportunities for trade, with the likes of India, Indonesia, Thailand, Brazil, Colombia and South Africa, among the nations that have signed on to the Dubai-led WLP in the past 12 months. The Dubai Ruler noted that “in just one year, we have taken the WLP from vision to reality, bringing together a number of leading nations, logistics partners and multinational corporations in a close-knit alliance focused on trade growth.” In addition, many MNCs have signed up to be members, including UPS, Pfizer, LG, Sony and Johnson & Johnson, and are already registered WLP members which offers them over a hundred operational and financial benefits. This initiative is yet another example of Dubai’s willingness to work in tandem with other countries for the benefit of all parties involved, as by its nature WLP expands growth opportunities. It also enables companies to remain competitive, with its twin aims of reducing costs and increasing the efficiency of the logistics value chain.

The UAE Cabinet has approved a multiple entry tourist visa for all nationalities, with HH Sheikh Mohammed bin Rashid Al Maktoum, saying the new scheme aims to “strengthen the UAE’s status as a global economic capital”. At the same meeting last Sunday, he also announced a remote work visa that lets overseas remote working professionals reside in the UAE, as they connect to work abroad virtually. Both visa schemes aim to boost the economy by assisting investors, entrepreneurs, qualified individuals and families.

The Ruler of Dubai announced on Monday that the government had launched a national industrial strategy, known as Titled Operation 300bn aimed at raising the manufacturing sector’s contribution by 225% from US$ 36.2 billion to US$ 81.7 billion (AED 300 billion) over the next decade. The main aim of the exercise, to be managed by the federal Ministry of Industry and Advanced Technology, is to support the establishment of 13.5k industrial companies in the next ten years. It will also be a catalyst to create new jobs, stimulate R&D, boost competitiveness and ultimately build resilience by producing more domestically and reducing the country’s reliance on imports. At the same time, the ‘Make It In The Emirates’ campaign was also launched to highlight the country’s identity to support domestic products and promote the sector globally. To support both strategies, that aims to bring together the private and public sectors to re-imagine the future of industries, R&D expenditure will jump 171% to US$ 15.5 billion. Both the Operation Dh300bn and Make it in the Emirates initiatives are part of a shake-up of the industrial ecosystem which will result in a major change by reducing red tape and updating legislation.

It is reported that the UAE plans to invest US$ 10 billion in the Indonesia Investment Authority – the country’s sovereign wealth fund which aims to implement strategic projects to support national progress, which will include a new capital in Kalimantan, to replace the overcrowded Jakarta. Any investments, that will assist the country’s economic and social progress, will be considered including infrastructure, roads, ports, tourism and agriculture. There are strong bilateral economic, political and cultural ties between the two countries, which have grown since the start of diplomatic relations in 1976. Over that period, the volume of trade exchange has grown to US$ 3.7 billion.

A new study by the Dubai Chamber of Commerce and Industry estimates a 13% hike in 2021 UAE retail sales, driven by the triple whammies of the country’s impressive vaccination programme, the release of consumer pent up demand in H2 and the impact of Expo 2020/UAE golden anniversary. Euromonitor estimates that by 2025 retail sales will top US$ 70.5 billion by maintaining 6.6% annual growth in the medium term. The growth gap between bricks/mortar and click/collect widens with the former only expanding at a CAGR of 5.7%, and the latter by 14.8%. Currently, the average UAE household will spend nearly US$ 2.6k on e-commerce – twice more than the global US$ 1.2k average and four times the MENA total of US$ 629.

Following an agreement between the Dubai Multi Commodities Centre and the UAE’s Securities and Commodities Authority, crypto-based businesses will be permitted to operate from the free zone. The free zone’s Crypto Centre will offer bespoke licences and a range of incentives to prospective businesses, with the aim of making it easier for crypto and blockchain businesses to set up and operate in the emirate. Although the UAE Central Bank has yet to accept or acknowledge crypto or digital assets as a legal tender, companies “offering, issuing, listing and trading crypto-assets” can set up their business within the DMCC. Approval will have to vetted by the regulatory authority, who will also oversee crypto activities, in line with rules issued last year.

For the first nine months of last year, Dubai Airport Free Zone Authority posted a 64% hike in companies registered and generated US$ 23.8 billion of trade, equating to 10% of Dubai’s total.   Although no actual numbers were available, sales were 7.6% higher and DAFZA now boasts 1.8k companies, including Airbus, Boeing, Panasonic, Richemont and Toyota. 75.8% of its exports and re-exports comprised machinery, televisions and electronic equipment, with pearls, semi/precious stones and metals making up a further 17.1%. The free zone’s three main trading partners, accounting for 43% of the total, were China, Iraq and India with shares of 25%, 10% and 9%. Its chairman, Sheikh Ahmed bin Saeed Al Maktoum, noted that Dubai “maintained its role and position as a global economic and trade hub”.

Having been shortlisted to four bids, the RTA has awarded the contract to a French Japanese consortium. Keolis Group, Mitsubishi Heavy Industries Engineering and Mitsubishi Corporation, will operate and maintain Dubai’s Metro system. The contract, equivalent to US$ 148 million per annum, will come into force on 08 September, (exactly twelve years since the Metro’s inauguration), and also cover Dubai Tram operations; Serco, the current operator, will be involved in a smooth handover to the new consortium until then. Part of the deal sees “calls for providing senior, technical and administrative posts for Emiratis and training them on the rail systems”.

Covid has resulted in Q4 outward remittances dipping US$ 463 million (4.1%) to US$ 10.65 billion – the third straight quarter when remittances from the UAE have declined. Despite being biggest loser, with a 15.9% decline, India still maintained its number one position, accounting for 31.1% of the total, followed by Pakistan and the Philippines having 12.2% and 7.1%.

 On Sunday, embattled construction company Arabtec finally filed a bankruptcy application, more than six months after shareholders had approved such a move last September. It is reported that a panel of seven experts would be responsible for producing a report on the holding company and its subsidiaries including Arabtec Construction, Austrian Arabian Readymix Concrete Company, Arabtec Precast, Emirates Falcon Electromechanical Company, Target Engineering and Arabtec Engineering Services. There was a chance that the last two named subsidiaries could have been sold to protect the value of its assets amid liquidation, but this has not yet occurred. It will also decide the way forward for the company that may include the possibility of restructuring.

The bourse opened on Sunday 21 March and, having gained 67 points (2.6%) the previous three weeks, lost 108 points (4.1%) to close on 2,496 by Thursday 25 March. Emaar Properties, US$ 0.01 higher the previous week, fell US$ 0.05 to close at US$ 0.94. Emirates NBD and Damac started the week on US$ 3.22 and US$ 0.30 and closed on US$ 2.97 and US$ 0.30. Thursday 25 March saw the market trading at only 69 million shares, worth US$ 36 million, (compared to 118 million shares, at a value of US$ 73 million, on 18 March).

By Thursday, 25 March, Brent, US$ 5.95 (8.6%) lower the previous week, lost a little more ground, shedding US$ 0.98 (1.5%) in this week’s trading, to close on US$ 62.59. Gold, US$ 41 (2.4%) higher the previous three weeks, was US$ 2 (0.1%) lower, by Thursday 25 March, to close on US$ 1,727.

Although Saudi Aramco announced that its 2020 profits fell by nearly 45%, it still made a US$ 49 billion profit and declared shareholders’ dividends at a mouth-watering US$ 75 billion. The main reason behind “one of the most challenging years in recent history” was that the pandemic global lockdowns curbed demand for oil, and over the year energy prices slumped 20%. Saudi Aramco, with the government its main shareholder, was not alone among the energy giants to post disappointing profits and joined the likes of Royal Dutch Shell, BP and Exxon Mobil which posted its first ever loss. However, it has a further unique problem at a time when oil prices are steadily moving north and that is, recent drone attacks on its assets, reportedly carried out by the Houthis because of the country’s involvement in the war in Yemen.

John Lewis has announced that it would close a further eight shops, that had been marked as being “financially challenged prior to the pandemic”, putting 1.5k jobs at risk.

The retail giant said some locations could not sustain a large store and that four department stores, in Aberdeen, Peterborough, Sheffield and York, would be axed along with four “At Home” shops. Eight stores were closed in 2020. The company said it planned to create more places to shop for John Lewis products country-wide and that it expected that between 60% to 70% of its future sales would be click-and-collect. Since 2007, it had seen its outlets almost double from 26 to 49; of the 23 “new” stores, only twelve will be in operation after the lockdown. The retailer is also reining in on its smaller “John Lewis at home” stores, with only four of the original twelve still open for business. It made its first ever annual loss for the year ending 31 January, (of US$ 710 million compared to a US$ 200 million profit a year earlier), mostly attributable to a write down in the value of its stores because of the shift to online shopping, as well as restructuring and redundancy costs.

Following the loss of 166 shops, (affecting 900 employees), Tui is set to close a further 48 in the UK, with the loss of 273 jobs – a move brought on by an increasing number of people making online holiday bookings. Subsequently, the travel firm will still have 314 outlets in the country and is hoping to offer to redeploy employees to other stores or to work from home. Figures speak louder than words to explain what has happened to Tui and other travel agencies – Q4 income fell 87.8% on the year from US$ 5.30 billion to just US$ 642 million.

Tesla has announced that it will accept Bitcoin as payment for its electric vehicles in the US – this will be extended globally later in the year. CEO Elon Musk confirmed that any Bitcoin paid will not be converted to US$ or other currencies. Last month, he surprised the market by investing US$ 1.5 billion in the cryptocurrency which sent Bitcoin value to record highs.

There is no doubt that Australia’s AMP got savaged at the country’s 2018 banking royal commission in which it was found that the company had lied to regulators and engaged in serious misconduct (in particular, the “fee for no service” scandal). Since then, the embattled wealth manager has never regained its reputation and credibility, and this has been reflected in its share price which has lost 67% in value. Today, 24 March 2021, when Nine’s newspapers reported that Francesco De Ferrari, the chief executive appointed following the commission’s findings, would “resign from the company today”, the share value sank 3.6% to US$ 1.02. AMP issued a statement mid-afternoon that its shares would be “temporarily paused pending a further announcement” and later in the evening that “Francesco De Ferrari remains as chief executive officer of the group.”

Troubled Australian casino operator, Crown Resorts, has confirmed that it had received a US$ 8 billion unsolicited takeover bid from Blackstone, comprising a non-binding offer of US$ 9.17 a share; the US private equity giant already owns nearly 10% of shares, (acquired in April from Melco Resorts at US$ 6.31 a share), with James Packer the largest shareholder owning 37% of the equity. The current bid represents a 19% premium on the share price noted in its latest financial report. Blackstone already owns the Bellagio casino in Las Vegas, which it recently acquired for US$ 4.25 billion and The Cosmopolitan in Las Vegas, as well as Spanish gaming hall operator Cirsa. It also owns the MGM Grand and the Mandalay Bay, with MGM managing the casino operations and paying rent. However, this is not a done deal as Crown still has its own regulatory problems to overcome after the damming conclusions of the recent Royal Commission, whilst Blackstone will have to prove to the Australian regulators that it is a suitable person to own and operate the three Australian Crown casinos. On the day, Crown shares jumped 17.6% to US$ 8.97.

What is happening from the fall-out in the Greensell debacle (and possible scam) is the oft-unseemly relationship between industry, finance and government, represented in this example, by Sanjeev Gupta, Lex Greensell and David Cameron. Gupta got a name for himself for almost single-handedly saving the UK heavy industry entitles which were in financial trouble by buying up steel plants in twelve different UK locations. His money sources were unknown because most of the acquisitions were financed by the Gupta Family Group (GFG), so the companies were interconnected but, importantly, not consolidated – hence no real financial details and no detailed public accounts, despite employing 35k and sales of US$ 21 billion, were readily available.

Following reports in the Financial Times that former Prime Minister David Cameron had met Treasury officials to lobby for Greensill Capital and tried to increase the specialist bank’s access to government-backed Covid-19 emergency loan schemes, there are calls for an official enquiry. There are rightful concerns about how did Greensill representatives obtain ten virtual meetings between March and June 2020 with the two most senior officials at the Treasury, as they sought access to a Bank of England Covid loan scheme. Not surprisingly, the Treasury confirmed that it had had a meeting but decided not to take things further. Not another surprise was to see that when campaigning in 2010, the former PM criticised the role of lobbyists., noting that “secret corporate lobbying” was undermining public confidence in the political system; he has obviously not practiced what he preached since becoming an adviser to Greensill in 2018.

What went wrong with what seemed to be a fail-safe scheme? The plan involved the bank’s main customer, Sanjeev Gupta, who was responsible for 50% of Greensill’s turnover, to invoice his clients (with say payment terms of up to 180 days) and then forward them to Greensill for payment of these invoices at a discount. Greensell would then sell “bundles” of these invoices to investors, taking a fee for arranging the deal, and would then use the proceeds to buy more businesses which generated even more invoices to bundle and sell. The more Greensill could sell on to investors the more valuable the company became. But then the perfect tie-up started unravelling when both investors and insurers realised that the business relied heavily on one client and once funding (and insurance) was cut off, the end came quickly for Greensill Capital, (that late last year was valued at US$ 7 billion), and became uncomfortable for Sanjeev Gupta, as his finances from various sources dried up.

Last year, Scott Morrison led the critics who lambasted former Australia Post chief executive Christine Holgate for rewarding four senior employees with Cartier watches, worth a total of US$ 15.2k; she left her highly paid government post (earning over US$ 1.1 million) shortly after the incident. Now questions are being asked about why his government has let US$ 59 million be paid as bonuses to senior staff of NBN, an entity, owned by the government, in only five months in H2 2020; last year, bonuses paid for the twelve months were only US$ 26 million.

Euromonitor International estimates that, over the next five years, e-commerce will account for at least 50% of the total growth for the global retail sector – an expansion that equates to US$ 1.4 trillion. If it were not Covid-19, the growth would have been much slower. Over the past five years to 2020, the value of goods bought online doubled from 8% to 16% of the total. The report forecast that the US, China and Mexico will record the highest e-commerce value growth during the period, at US$ 386 billion, US$ 361 billion and US$ 77 billion, respectively. The three regions, forecast to have the highest e-commerce growth to 2025, were Latin America (21%), Eastern Europe (12%) and MEA (11%).

In a post-Brexit deal, Abu Dhabi is reportedly planning to invest up to US$ 7.8 billion in various UK sectors, including health, tech, green energy and infrastructure. Mubadala is to pay US$ 1.1 billion into life sciences over five years, along with a UK government investment of almost US$ 275 million. UK’s investment minister Lord Gerry Grimstone has indicated that he hoped for investments in clean energy would be spread across the country. This investment is part of Abu Dhabi’s strategy to diversify its economy away from oil and gas.

Earlier in the year, video games retailer GameStop was in the news when it was the centre of a trading war between asset managers and amateur investors. The Texas-based video games retailer’s share value started the year at less than US$ 20 to trade at US$ 350 by the end of January and even by the beginning of this week was at just less than US$ 150. However, its financials paint a different picture with revenue falling in the quarter to January by 3% to US$ 2.1 billion – its ninth straight quarterly revenue decline – driven by significant store closures, although there was a 175% leap in e-commerce. Its quarterly profits did move north, whilst annual losses narrowed US$ 255 million to US$ 215 million. It is obvious that the continued investors’ interest in the stock is not attributable to financial fundamentals but more to small time traders taking on Wall Street by buying shares and putting their value higher; theoretically, this would force the firms that had bet against the shares going higher to buy more at a higher price, resulting in a buying frenzy or “short squeeze” – and an opportunity for the small-time traders to sell and cash in their profits.

Having brought the lira back from its historic lows, (by raising interest rates to fight an inflation rate running above 15%), in his four-month tenure, Turkey’s central bank governor, Nadi Agbal, was surprisingly shown the door and removed by President Recep Tayyip Erdogan. The market, which had been praising his efforts to rein in inflation, reacted to this shock by selling the currency which dived as much as 14% on the day; earlier in the year the lira was the best performing emerging market currency, having gained almost 20% against the US dollar. Only last week, the departing governor had increased rates by 2% – double the figure that the market had forecast – to 19%. His successor, Sahap Kavcioglu, a professor of banking, is known to be against high interest rates as a way to fight inflation, but some analysts consider that the President could soon be looking for his fifth governor in three years.

The UK government borrowed a record US$ 26.5 billion last month, bringing the fiscal eleven-month YTD figure to US$ 386.7 billion. There is no doubt that huge public funds were needed to support the faltering economy as well as to protect lives and livelihoods. The Chancellor has estimated that government financial support has topped US$ 488 billion, with government finances badly impacted by the cost of schemes such as furlough payments, (last month, the government spent US$ 5.4 billion on job support measures alone), and the fall in taxable receipts including from income tax, lower VAT, business rates and fuel duty.  Interestingly, tax payments from the self-employed sector rose by US$ 1.25 billion in 2020. Total public sector debt has risen to US$ 2.95 trillion, equating to debt having reached 97.5% of annual economic output.

Despite entering its third lockdown – and earlier dire forecasts – UK’s unemployment rate fell 0.1% to 5.0% in the three months to January. During that three-month period, about 1.7 million people were unemployed – 26.9% higher than the corresponding figure twelve months earlier. This decline is not only an indicator of the success of the government’s furlough scheme in protecting jobs but also helped by the fact that the number of people, counted as economically inactive and outside the workforce, who have lost their job, have now given up searching for a new position; a total of 4.8 million employees were furloughed at the end of January ensuring that the unemployment rate did not skyrocket. Other data indicate that the number of redundancies dipped to 11 per 1k people in January – down from November’s 14 per 1k, average wage growth rose 4.8% (its highest in thirteen years) and the number of employees on payrolls rose 68k in February, the third monthly increase in a row; job vacancies from December to February increased 8% to a total of 601k. The worst impacted sectors appear to be the under 25s, services and hospitality. There were 700k fewer people working in February compared to twelve months ago, with 67% of that total comprising young workers. Since the start of the pandemic in March 2020, 368k payroll jobs have been lost in the hospitality sector and 123k in retail; it is thought that the furlough scheme is now providing support for 600k retail workers, a 50% rise since December.

To the surprise of many analysts, UK’s February inflation unexpectedly declined from 0.7% to 0.4%, month on month, driven by marked falls in the cost of clothes and second-hand cars; the general consensus was that inflation would rise to 0.8%. The fall in clothing prices has been put down to the third lockdown in January which left retailers with excess stock, as prices posted their biggest annual decline – at 5.7% – since 2007. Prices were cheaper for children’s toys, computer games and second-hand cars. With prices edging 2.9% higher, the cost of factories’ raw materials was up 2.6% on last year. If there are no further lockdowns and restrictions, there is every chance that the inflation rate will reach the BoE’s 2% target by the end of Q3. However, the good news for mortgage holders is that the inflation will not rise much higher until the start of 2023 so that any hike in interest rates is unlikely over the next two years.

Meanwhile, the flash IHS Markit/CIPS UK Composite Purchasing Managers’ Index jumped 7.0 to a seven-month 56.6 high in March, driven by a rush of new orders in anticipation of the easing of Covid-19 lockdown restrictions early next month. This surprise pickup in business activity will see the knock-on effect of only a slight decline in Q1 GDP – not the 4% widely tipped at the beginning of the year. The UK’s January House Price Index sees prices falling 0.6% on the month, but the average price of a house is now US$ 365k – 7.5% higher than January 2020.

To keep any economy going, there has to be spending and because of the pandemic, consumer spending has fallen drastically, since so many jobs have been lost – and people have not got the spending power they once had – and those that have been lucky enough to remain in employment have not been able to spend on the likes of holidays and eating out because of the various lockdowns. Without the additional government spending the economic contraction would, without a shadow of a doubt, be worse. In short, if consumer spending contracts, the shortfall has to be picked up by public spending.

Official statistics showed that total household savings have increased, and total household debt remains mostly unchanged, largely due to a fall in spending on non-essential items over the various lockdown. Q2 2020 household savings ratio (household savings as a proportion of household disposable income) increased from 9.6% in Q1 2020 to 29.1% in Q2 of 2020, with deposits in bank accounts increasing by US$ 61.9 billion in Q2 2020. Unsecured debt fell in each month between March and November in total, as many households reduced their spending (and so were less likely to borrow).

Mr Micawber was half right with his observation, ‘Annual income 20 pounds, annual expenditure 19 [pounds] 19 [shillings] and six [pence], result happiness. Annual income 20 pounds, annual expenditure 20 [pounds] nought and six, result misery’. What was said is right when it comes to households and businesses, they have to be able to ‘balance the books’. Fortunately, the same does not apply to governments because, unlike the private sector, they cannot go bankrupt because they issue their own sovereign currency, and because they literally print the money. Furthermore, most of the borrowed money, utilising gilts, is from another public sector body, the BoE. If the Johnson administration had not spent so much money on the various stimulus packages to counter the negative impact of the pandemic, it is certain that the economic contraction would have been doubly worse and the recovery time a lot longer.

Time will tell whether the Biden confrontational approach to Russia, compared to his predecessor’s less adversarial style, will pay dividends. However, his first meeting with Vladimir Putin got off to a rocky start, as bilateral relations have sunk to historic lows. The Kremlin recalled its ambassador, Anatoly Antonov, after the new US incumbent had referred to the Russian president as a “killer”, with Putin’s spokesman noting that Biden “does not want to normalise relations with our country. This is what we will be guided by from now on”. Meanwhile, the US is said to be in the throes of imposing further sanctions, in response to the detention of Russian dissident, Alexi Navalny, 2020 US election interference and the recent cyber espionage attacks on US governments and businesses.

The US also seems to be at loggerheads with China as both parties traded insults at the start of a meeting in Akasaka last Friday – a sure indicator that relations are strained. The US started proceedings, with Secretary of State, Antony Blinken, hitting out at China’s stance of undermining global stability with its approaches to Hong Kong, Xinjiang and Taiwan. His Chinese counterpart retaliated, claiming that the US had a “cold war mentality” and that the country had used its military and financial clout to “suppress” other countries and to “incite some countries to attack China”. A spokesman for China commented that “when Chinese delegates came to Anchorage, not only did they feel the cold weather of Alaska but also the (cold) way the US treated their guests”.

A report from the Centre for Economics and Business Research estimates that Covid-19 has cost the UK economy US$ 344 billion, which equates to twice the annual output of Scotland. This is based on the reduction in the UK’s gross value added (GVA), a figure that measures the value of goods and services produced by the economy minus the costs of inputs and raw materials needed to deliver them. On the anniversary of the first lockdown, parts of the UK have now faced two more, resulting in high unemployment rates, businesses closing down and consumer confidence (and demand) plummeting. Furthermore, the economy has contracted by 10%, with last month’s GDP 9% lower on the year, as the government pumped in US$ 482 billion to keep the economy afloat. Cebr estimates that the three with the highest losses were London, the SE and the East of England with totals of US$, 70 billion, US$ 48 billion and US$ 36 billion. It still expects the economy to return to pre-pandemic levels by Q1 2022. After more than a year living with the pandemic, there are many Waiting For The End.

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Only Time Will Tell

Only Time Will Tell                                                                                        19 March 2021

For the week ending 18 March, there were almost 1.5k real estate and property transactions, valued at US$ 1.55 billion, with 104 plots selling at US$ 150 million and 900 apartments/villas for US$ 589 million. The top three transfers for apartments/villas were all apartments, with one in Marsa Dubai selling for US$ 123 million, followed by sales of US$ 71 million and US$ 67 million for units in Palm Jumeirah, and in Al Thanyah Fifth. The three top transactions of the week all involved land selling at Wadi Al Safa 3, (US$ 11 million and US$ 10 million) and Al Thanayah Fourth for US$ 11 million. The three most popular locations for sales were found in Al Hebiah Fourth, (22 sales transactions worth US$ 21 million), followed by Nad Al Shiba Third, with 20 sales transactions at US$ 14 million, and Nad Al Shiba First with 15 sales transactions, worth US$ 9 million. The highest mortgaged property was land in Burj Khalifa for US$ 272 million, with the total amount of mortgages being US$ 817 million. Sixty-nine properties were granted between first-degree relatives worth US$ 88 million.

HH Sheikh Mohammed bin Rashid Al Maktoum has released ambitious plans to increase the emirate’s tourism and hotel capacity by a massive 134%, along with a 400% increase in beach capacity, over the next twenty years; by 2040, 60% of Dubai will be classed as nature reserves. This is part of the strategy to prepare the emirate’s readiness for life after the post-oil era and to maintain its regional superiority. Tourism is only part of the Dubai-2040 Urban Master Plan, which also includes adding 168 sq km of lands, allocated to logistics and other businesses, as Dubai realises that neighbouring countries will be piling on the pressure to take a bigger slice of the regional economic cake. (For example, from 2024, the Saudi government will stop giving state contracts to companies and commercial institutions that base their Middle East hubs in any other regional country). The plan also aims to provide Dubai the highest standards of urban infrastructure and facilities, with the Dubai Ruler also noting, “we have adopted the new urban plan for Dubai until the year 2040. Our goal is to make Dubai the best city to live in the world.” Over that time period, Dubai’s population is expected to grow from its current 3.3 million level to 5.8 million by 2040.

The Urban Master Plan will see development focused on five key centres, including Deira/Bur Dubai (representing Dubai’s history, tradition and heritage), Downtown/Business Bay, (business and finance), and Dubai Marina/JBR (leisure/hospitality). The remaining two centres are Expo 2020, which is fast becoming an economic and growth hotspot, and a focal point for the exhibitions, tourism and logistics sectors, as well as Silicon Oasis (tech development and start-ups).

The plan is keen to see equitable access to facilities across the whole of the emirate, with the plan outlining a hierarchy of communities, with the five main ‘towns’ built around each of the five main urban centres (indicated above), each with a population of 1 to 1.5 million. Under this “umbrella” will be the multi sector (with a population of between 300k-400k) and then sectors with between 70k-125k people, then districts of between 20k-30k and finally a community of some 6k-12k, with up to 2k residences. Based on these levels, infrastructure and transit systems, energy and government services, along with public facilities such as hospitals, schools and leisure centres will be established. In making Dubai the world’s best city to live and work in, prioritisation will be given to improving the efficiency of resource utilisation, developing vibrant, healthy and inclusive communities along with doubling green and leisure areas. Other targets include providing sustainable and flexible means of mobility, enhancing environmental sustainability, safeguarding the emirate’s cultural and urban heritage and developing a comprehensive legislation and planning governance model, which in turn will foster greater economic activity and attract increased foreign investments.

The latest upbeat forecast from the Central Bank of the UAE sees the country’s real GDP fully recovering in 2022, following growth levels of overall real GDP 2.5% and 3.5%, along with non-oil GDP up 3.6% and 3.9%, in 2021 and 2022 respectively. There are several drivers in. place including consumer confidence moving higher, increased fiscal spending, real estate slowly improving and a pick-up` in credit. This year, the two major events, that should boost the economy, are the six-month Dubai 2020 Expo and the country’s fifty-year anniversary.

Twelve years after its inception, the long-winded Special Tribunal for the Settlement of Cheque Disputes Relating to Real Estate Transactions has been dissolved, following a decree by the Dubai Ruler. In future, all complaints, claims, lawsuits and appeals, being reviewed by the Special Tribunal that have not received a final judgement, will now be referred to the judicial entity (to date, not yet named) concerned. The ‘old’ tribunal comprised a judge each from the Court of Appeal and the Court of `First Appeal, as well as a representative from the Dubai Land Department. It had an exclusive jurisdiction to settle complaints related to dishonoured cheques. Even the police were directed to refer all cheque-related complaints to this tribunal. The new body will have jurisdiction over all property disputes in the emirate relating to unfinished or cancelled projects, meaning cases over stalled projects cannot be filed at the Dubai International Financial Centre Courts. There are many who feel that this latest ruling is a welcome change for the industry.

In another related real estate story, the Dubai Ruler has issued a decree to form a special tribunal to resolve disputes over inherited property and to “protect the rights and interests of all concerned parties, especially the elderly, minors, femmes sole, divorced women, widows and people of determination”. Part of the decree stipulated that all Dubai courts, including the DIFC Courts, will no longer review petitions or appeals related to the sale of inherited property. The special tribunal will also adjudicate and issue rulings on appeals against decisions and procedures issued by the Dubai Land Department or the Mohammed bin Rashid Housing Establishment. The tribunal will comprise a president, to be announced by the chairman of Dubai’s Judicial Council, with other members drawn from the legal, financial and real estate sectors.

This week, Dubai Refreshments had a rare “win” at the expense of the Federal Tax Authority, who have to recompensate the F&B company on administrative penalties wrongly charged. This is the result of a judgement passed by the UAE Federal Supreme Court which overturned an appeal by the FTA that “had wrongly imposed administrative penalties because the FTA imposed them on the incorrect premise that the company had collected funds as tax and had not reported or voluntarily declared such tax”.

DP World is committed to investing up to US$ 442 million to expand the Moroccan port of Berbera and, once completed, it will increase its annual capacity by 500k TEUs. As part of its expansion and development strategy, it introduced three new ship-to-shore (STS) gantry cranes – each at 51 mt high, a capacity of 65 tonnes, with an outer reach of 24 rows of containers; in January, the port installed eight new rubber-tyred gantry (RTG) cranes. This will enable some of the world’s largest container vessels to utilise the port, allowing importers and exporters to make the most of the resulting economies of scale for DP World Berbera, a multi-use port regional maritime hub in the Horn of Africa.

In troubled times, there always seems to be a rise in the number of scams, with the aim of defrauding innocent – and often gullible – people from their money. This week, an Abu Dhabi court has sentenced four expats to five years in prison, along with fining each US$ 2.72 million for money laundering and fraud. Having set up a jewellery company, owned by one of the four, they managed to dupe up to 4k people by enticing them to buy dubious gold investments; the company was fined US$ 13.6 million and 7.4kg of gold and US$ 375k in cash were seized. The scam included a mock pyramid scheme, where an investor, introducing another ‘victim’, was paid US$ 272 and new clients were ‘offered’ a US$ 545 subscription to buy into the scheme.

The Securities and Commodities Authority has announced that UAE listed companies need to have at least one female director on their boards. The move is the latest in a series of measures being taken to boost female representation at the highest levels of UAE business. The regulator commented that the country’s markets be elevated “to meet the highest global standards”. Aurora50, a social enterprise co-founded by Sheikha Shamma bint Sultan bin Khalifa, noted that women currently sit on the boards of 28 of the 110 listed companies in the UAE, equating to 26% of the total but when it comes to member numbers, they only account for 29 of the 823 board members. The World Bank has estimated that, with 57.5% of its women in the workforce, the UAE has the highest level of working women the MENA region.

It is reported that because of the fact that an unvaccinated workforce could create operational issues, Emirates has told its employees to take a free coronavirus vaccine or pay for tests to prove they are not infected; the airline reportedly advised cabin crew, who have not been vaccinated, that they must pay for a test valid for seven days to the start of flight or standby duty. The airline noted that “certain countries may in the future differentiate entry criteria between those who have taken the vaccine and those who did not. Keeping this in mind, having a vaccinated workforce has become essential not just from a health and safety angle but from an operational one too.” Those exempted from this new rule include those due for their second vaccine dose, have registered to take their initial dose, have a valid medical reason, or have been recently infected or are infected are exempt. The airline has offered free vaccines to all staff since the beginning of the year.

Earlier in the week, it was reported that Saudi Arabia’s Almarai had acquired Bakemart’s business, in the UAE and Bahrain, for US$ 26 million that will expand the Saudi company’s regional presence. The biggest dairy company in the ME has financed the deal internally from its operating cash flow. The agreement remains subject to regulatory approvals, including from Saudi Arabia’s General Authority for Competition. Bakemart, which employs 800, produces bakery items and frozen foods for the retail and hospitality industry in the ME, as well as running a number of its own food retail and cake stores.

The bourse opened on Sunday 14 March and, having gained 36 points (1.4%) the previous fortnight, was 31 points (1.2%) higher to close on 2,604 by Thursday 18 March. Emaar Properties, US$ 0.03 lower the previous week, nudged US$ 0.01 higher to close at US$ 0.99. Emirates NBD and Damac started the week on US$ 3.17 and US$ 0.31 and closed on US$ 3.22 and US$ 0.30. Thursday 18 March saw the market trading at 118 million shares, worth US$ 73 million, (compared to 192 million shares, at a value of US$ 50 million, on 11 March).

By Thursday, 18 March, Brent, US$ 12.46 (21.6%) higher the previous five weeks, lost ground this week shedding US$ 5.95 (8.6%) in this week’s trading to close on US$ 63.51. Gold, US$ 33 (2.0%) higher the previous week, was up a further US$ 8 (0.4%), by Thursday 18 March, to close on US$ 1,729. For the first time in three years, the Central Bank of the UAE sold gold bullion, worth UAE 463 million, in January, bringing its gold reserve down to US$ 3.4 billion, as it capitalised on the near record prices at that time.

With news that a supplier had changed its production processes, and reports that they may not be up to standard, Boeing has decided to test flight deck windows on a select number of its 787 Dreamliners. This potential problem will no doubt delay the scheduled end of March restart of deliveries of the aircraft. This is not the first of glitches that the manufacturer has faced – last month, the US Federal Aviation Administration published an airworthiness directive, requiring the examination of 222 Dreamliners, after dimples were found in 787s’ inner lining. Both Emirates and Etihad are 787 customers, with the Dubai carrier having signed a US$ 8.8 billion order for thirty 787-9 aircraft at the 2019 Dubai Air Show.

If you want to talk about looking after yourself, you only have to refer to bankers – and Deutsche Bank is a good example. It is facing investor backlash because, although it has frozen dividends for the second year in a row, it has decided to hand a 46% increase in bonuses – equating to US$ 1.05 billion and almost eight times the bank’s net profit – to its investment bankers; its chief executive, Christian Sewing, was not to be left out, seeing his remuneration also increasing by 46% last year, as did the executive board’s pay to US$ 70 million. 47% of the total bonus pool of the US$ 2.3 billion has been awarded to its 16.2k investment bankers, representing 20% of the workforce; the groupwide bonus pool rose 29% last year. It is also interesting to note that the ECB would not allow the bank to raise the bonus pool above the Eur 2.0 billion level. Although its share price has doubled over the past twelve months, it is still 6% lower than its April 2018 level.

Before becoming the Bank of England governor, Andrew Bailey, was head of the Financial Conduct Authority and in that position, he was criticised by Dame Elizabeth Gloster, a former appeal court judge for his – and the FCA’s – role in regulating London Capital & Finance; the company collapsed in 2019, with 11k having lost their life savings. The judge criticised him for failing to supervise and regulate LCF and her report named Mr Bailey as responsible for that failure and said he had made legal representations to prevent responsibility for the FCA’s failings being attributed to him by name. Last month, the BoE governor told a Treasury committee of MPs that he was “angry” and “disturbed” by her criticisms, adding it was “not correct” to say he did not want his name mentioned. Unusually, the retired judge wrote to the committee releasing extracts of representations from Mr Bailey’s legal team, revealing that they had asked for him not to be named on a number of different grounds. In another issue, he has come under further criticism for his role in the RBS scandal, with the bank accused of benefitting at the expense of thousands of its customers, who were left in financial ruin. It is reported that Mr Bailey did not reveal his role in the scandal and, to the surprise of no-one, the Bank of England said there was no interest to declare.

NatWest, formerly known as the Royal Bank of Scotland, is being taken to court by the Financial Conduct Authority for allegedly failing to comply with money laundering rules by not adequately monitoring and scrutinising this activity between 2011 and 2016. The UK’s watchdog claimed “increasingly large cash deposits” were made into a UK account, totalling US$ 520 million, including US$ 370 million in cash. The bank, still 62% owned by the government after the 2008 GFC bailout, saw their share value dip 1% in early Tuesday trading.

The supply chain finance firm, Greensill Capital, has claimed another scalp, with Credit Suisse axing its asset management head Eric Varvel and suspending bonuses for senior executives; a number of lower-ranking managers have been dismissed. His successor, ex-UBS Group asset management head Ulrich Koerner, will take over next month when the division will be run separately from international wealth. It will take the bank some time to recover from the debacle, as it was forced to suspend funds it ran that invested in Greensill’s notes when it became apparent that it could no longer value them. There is no doubt that some notes, underlying the funds, are worthless, whilst the value of what’s left is highly uncertain. The bank confirmed that it had already paid out US$ 3.1 billion and had a further US$ 1.3 billion in liquid funds. (Coincidentally, Lex Greensill and his family sold about US$ 200 million worth of shares in the company in 2019, during a fund-raising round led by SoftBank Vision Fund, which valued the business then, at US$ 3.5 billion).

Now there are reports that David Cameron, who became an adviser to Greensill in 2018, lobbied for the company access to UK Covid loan schemes. It is alleged that he pushed ex-colleagues to see whether the company could play a bigger part in programmes designed to keep credit flowing to cash-stricken businesses. It seems from public records that Greensill representatives had at least ten virtual meetings between March and June 2020, with the two most senior Treasury officials, in their attempt to seek access to a BoE loan scheme. The FT notes that the ex-Prime Minister also intervened personally when it appeared that Treasury officials were reluctant to include the Australian company in the BoE CCFF (Covid Corporate Financing Facility). One wonders what the premium is to obtain a person with such contacts, compared to the “normal” adviser – and whether there are any possible conflicts of interest.

Last Thursday, Born Kim became a multi-billionaire when the company he founded, Coupang, listed its shares on the New York Stock Exchange. At the start of the day’s trading, the South Korean’s stake in the company was worth US$ 8.6 billion but things got even better, with the share price surging a further 41% during the day. This was the biggest Asian listing in seven years, since Alibaba’s debut in 2014, and the biggest US IPO for two years, the year Uber went public. The e-commerce giant, backed by SoftBank, has indicated that its warehouse staff, and 15k full-time delivery workers, would be beneficiaries of as much as US$ 90 million worth of its shares. In line with a lot of mega tech companies, it is still posting losses, although revenue more than doubled in 2020, driven by the impact of Covid-19 and the subsequent surge in online shopping.

Having cut thousands of jobs since 2015, Nokia is planning another cull of between 5k to 10K of its current 91k payroll, as part of its US$ 720 million cost-saving strategy. The Finnish telecoms giant is playing catch-up on 5G, following major missteps by the previous management, and also plans to invest in cloud computing and digital infrastructure research. The new chief executive, Pekka Lundmark, appointed in 2020, has made changes to get closer to their rivals, such as Sweden’s Ericsson and China’s Huawei. The Finnish telecom was formerly the leading global handset manufacturer but was superseded by Apple’s iPhone and Samsung’s Galaxy, as it failed to anticipate the popularity of internet-enabled touchscreen phones.

One company that has faith in a strong post-Covid recovery is Greggs, planning to open 100 new shops this year and coming after the UK bakery chain’s first ever annual loss, (of US$ 17 million), in thirty-six years; it currently has 2.1k outlets in the country. As High Street sales fell by 36% in the year, Greggs compensated by ramping up deliveries, wholesale, and click-and-collect.

On Monday, UK retailer Thorntons announced that it is to close all its sixty-one stores, but it appears that its 100+ franchisees will remain active. The chocolate-maker noted that “we proactively communicated with all our franchise partners this morning to reassure them that we remain committed to supporting them and continuing to supply their business with our Thorntons range.” Up to 2004, the only outlets that sold the chocolates were Thorntons own shops and its franchisees, but since then it has been open season, with its products being sold in supermarkets and elsewhere. There is an example of a franchisee who claims he paid an annual US$ 10k to Thorntons and was told at what price he could sell the chocolate, as well as adhering to strict protocols for items such as specific lighting requirements. Since then, potential customers could get the same product at much cheaper prices, at petrol stations and discount retailers. In one case, it is alleged a franchisee could buy Easter eggs for US$ 4.20 from Wilko that cost him US$ 7.00 to buy direct from Thorntons.

With its latest fundraising, yielding US$ 600 million, Stripe has become the most valuable private company in Silicon Valley, with an estimated market value of US$ 95 billion. The eleven-year-old company – founded by Irish brothers, Rick and John Collison – has seen its value almost triple over the past twelve months. Last year, the firm handled 5k transactions a second. Two high profile names in the finance world – former BoE governor, Mark Carney, and Christa Davies, CFO at Aon – joined Stripe’s board in 2020, with the likes of PayPal founders, Elon Musk and Peter Thiel, being among early investors.

After fifteen years as head of the 37-nation Organisation for Economic Cooperation and Development, Mexico’s Angel Gurria is to stand down in May, to be replaced by Australia’s former finance minister, Mathias Cormann. The 51-year-old politician, who quit parliament last year to challenge for the job, was chosen “by a slim majority”, beating Sweden’s Cecilia Malmstrom, a former EU trade commissioner. He becomes the first person from the Asia-Pacific region to lead the OECD, despite his contrarian stance on climate change.

BA’s Chief Executive, Sean Doyle, is asking the Johnson government to allow vaccinated people to travel, without restrictions, while those yet to receive the jab should be allowed to travel with a negative Covid-19 test. It is reported that the airline has negotiated a deal with a testing kit provider to give its passengers tests, costing US$ 59, to take abroad. The latest government advice is that citizens will not be allowed to take holidays until 17 May at the earliest; however, on 12 April, it will announce how and when non-essential travel, into and out of the country, could resume. BA has called on the government to work with other countries to allow vaccines and health apps to open up travel, noting that France, Greece, Portugal, Cyprus and Spain had all sounded positive about welcoming British holidaymakers this summer.

One of the main sectors impacted by the pandemic is the aviation sector and even though global airlines have received a cumulative total of US$ 225 billion from the various governments, via direct aid, wage subsidies, tax relief and loans, IATA has warned that much more is needed. It now considers that borders may not fully re-open until October, rather than June, and has urged governments to consider stimulus measures. The world body commented that airlines could not cope with more debt and that one new measure could be to subsidise tickets to help the sector and also supported the EU’s proposal on a bloc-wide “green digital certificate” to allow travel.

Colin Huang, China’s seventh richest person, and worth more than US$ 50 billion, has stepped down unexpectedly as chairman of the company he founded. His high-flying e-commerce group Pinduoduo, with 788 million active buyers on its platform, is now bigger than local rivals, JD.com and Alibaba. Shares in the company dipped 8% on the news, cutting US$ 4 billion from Huang’s personal wealth. The company is known for introducing novel ideas to the market including team buying, where customers combine to purchase more units at a lower price, and allowing users to play games on the site, sometimes rewarding them with gifts. On the flip side, the tech company continues to make losses and has raised US$ 9 billion from investors since its New York market launch in 2018; it has also been criticised for its intense work culture and its “996” schedule – working daily from 9am-9pm, six days a week.

There is no doubt that Chinese regulators are becoming increasingly concerned on the relative freedom afforded to its tech giants and are stepping up their scrutiny on their operations and content platforms. It is reported that the Chinese cyber space administrator – along with the public security ministry – have met with eleven tech companies, including Alibaba, Tencent and ByteDance, for talks on their use of “deepfake” technologies.  (Deepfakes use AI to simulate hyper-realistic but fake videos or audios where a person appears to say or do something they did not). Over the past six months, there is no doubt that the Chinese authorities are paying closer attention to the working of the tech giants, worried about their power, size, monopolistic behaviour and potential infringement of consumer rights.

Impressive figures from China for the first two months of 2021 saw its industrial output grow 35.1%, compared to the same months last year – an indicator that the recovery has been stronger than expected. However, there is a caveat because over this period in 2019, the country and many of its factories were in pandemic lockdown. Export growth was driven by a rebound in foreign demand, whilst retail sales climbed by a third in the period, with the major growth products being jewellery (up 99%) and cars (78%), whilst spending on travel, restaurants and leisure activities were subdued because of government imposed travel restrictions before the Chinese New Year holidays, early in February. One disappointing figure was the jobless rate climbing 0.3% to 5.5% from December to February.

The US Fed Reserve noted that interest rates will remain near to zero until at least 2023, despite some analysts predicting problems with higher inflation. Another positive take from this announcement is the uptick in its 2021 economic growth forecast – up to 6.5% from its previous 4.2% December prediction. Meanwhile, inflation will be nearer 2.4%, rather than the previous 1.8% forecast. The markets approved this announcement but there are some who think it wiser for the Fed to start reining in the current low-rate policies. Unemployment is expected to dip even faster, with the current 6.2% level dropping to 4.5% by the end of this year – and to 3.9% by the end of 2022.

Applications for US jobless claims sank to their lowest level since early November, driven by an uptick in vaccinations and the easing of lockdown restrictions. The latest weekly report showed that initial claims fell by 42k to 712k – and on an adjusted basis by 47k to 709k. Continuing claims declined by 193k to 4.14 million as at the last week in February – this is an approximate figure of the number of Americans filing for unemployment benefits.

The number of Australians with jobs is almost back to pre-pandemic levels, as the country’s unemployment rate dipped 0.5% to 5.8% last month, with interestingly women securing 75% of the new jobs in February. The fall was larger than expected but an indicator that the labour market and the economy are definitely on the mend. For the first time in eleven months, there were more than thirteen million Australians in employment, with February numbers of 89k finding jobs. The next examination on the state of the labour market will come when the JobKeeper programme expires at the end of this month. However, the underemployment rate – which measures the number of employed people, who already have jobs, but want to work more hours – rose 0.4% to 8.5%.

It seems that thirty-four listed companies, that had received hundreds of millions of dollars in JobKeeper subsidies, posted higher profits in H2 2020 than in the same period in 2019. It is estimated that these government ‘hand-outs’ account for about 20% of their underlying earnings on average. Last year, 25% of the companies listed on the ASX 300 received JobKeeper payments. An analysis showed that ninety-five of the listed entities had reported receiving 2020 government subsidies, worth a combined US$ 2.96 billion, with JobKeeper payments received by seventy-five of those companies accounting for US$ 1.94 billion (more than 60%) of the total. 63% of all JobKeeper payments were received by only six companies – Qantas (US$ 565 million), Crown Resorts (US$ 198 million), Flight Centre (US$ 152 million), Star Entertainment Group (US$ 118 million), Eagers Automotive (US$ 100 million) and G8 Education (US$ 79 million).

One drawback for the government in applying JobKeeper was that when introduced, it was based on the temporary turndown in profit over the period March to June and the scheme would offset any fall by up to US$ 15k per employee in subsidies until September 2020. There was no requirement to return the JobKeeper subsidy if sales or profits increased after the recipient had qualified. To date, it seems that only twenty listed companies have announced that they would return some of this subsidy paid. The total amount of US$ 112 million would be net of tax and only accounts for about 4% of all disclosed JobKeeper receipts by ASX 300 entities – to date only US$ 15 million has been received. To add to the ATO’s woes, it appears that companies, that have been caught rorting the system, still owe hundreds of millions of dollars.

At the weekend, Merkel’s Christian Democrats slumped to their worst ever results in what had been one of their traditional strongholds. The elections were a litmus test for the upcoming national elections in September, when the Chancellor relinquishes power after sixteen years. Her party’s image was badly damaged by one of their leading MPs, Nikolas Lobel, having to resign because of his involvement in a US$ 300k commission payment on a deal to procure face masks. Her party also suffered voters’ wrath, with her government’s handling of the pandemic; her programme is seen to have gone too slowly and that promises to introduce rapid testing have yet to materialise.

The Covid crisis has seen cracks appearing in the EU, as well as seeing Angela Merkel’s party slump in the latest regional elections in Germany. Six countries – Austria, Bulgaria, Croatia, the Czech Republic, Latvia and Slovenia – have complained to both the presidents of the European Council and the European Commission of “huge disparities” in the allocation of vaccines between member states. The commission has commented that the allocation of doses had followed a “transparent process”. Earlier in the year, the EU had been expecting at least 100 million and 180 million doses in Q1 and Q2, from AstraZeneca – now the numbers will be 30 million and 70 million. These delivery shortfalls highlight the systems, by which vaccines are shared out between member states under the control of bloc’s vaccine procurement strategy.

Last week, it was the European Council president, Charles Michel, seemingly defaming the UK government, claiming that the UK had imposed an “outright ban” on the export of vaccines and their components. Now, apparently driven by post Brexit disagreements, the European Commission president has taken a pot shot at the UK warning that, if Covid vaccine supplies in Europe do not improve, the EU “will reflect whether exports to countries who have higher vaccination rates than us are still proportionate”. Because of poor management, the EU has always been behind when it comes to vaccines and evidently made their order three months after the UK placed theirs. It is claimed that the number one export destination for vaccines manufactured in the EU is the UK, with 41 million vaccines being produced over the past six weeks, of which 10 million went to the UK; Canada and Mexico have received 3.9 million and 3.1 million doses from the EU. There is no doubt that the EU has handled – and continues to handle – its vaccine protocol badly and the bureaucracy will not take responsibility for their failings. Until someone takes control of the shambles, the bloc will continue to fall behind the rest of the developed world.

With the UK economy contracting a further 2.9% in January, it is now 9.0% smaller than it was prior to the onset of the pandemic in 2020. In the first month of the year, EU imports and exports were both lower – imports 28.8% (US$ 12.4 billion) down and exports by 40.7% (US$ 7.4 billion). The Office for National Statistics indicated that these monthly figures, the first since the introduction of new post-Brexit trading rules, were “likely the result of temporary factors”, whilst saying that January’s fall was a “notable hit”, albeit smaller than some had expected. There is no doubt that the UK economy will recover quicker than most analysts anticipate – when it will return to pre-pandemic levels, Only Time Will Tell.

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Suspicious Minds

Suspicious Minds                                                                              11 March 2021

February was another good month for the Dubai property sector. Month on month, there was a 15.6% hike in the number of property transactions to 3.8k, along with a 10.6% rise in the value of deals to US$ 2.0 billion. According to Data Finder, the two-month total now stands at 7.1k transactions, valued at US$ 3.86 billion – an indicator that the long-awaited recovery has started. Of the total February transactions, 68% (2.65k, worth US$ 1.59 billion) were for secondary or ready units and the 32% balance, (of 1.15k, worth US$ 438 million), for off-plan properties. On the month, the number of off-plan transactions was 35.8% higher, with the secondary or ready property transactions 8.2% higher.

The five most popular sales locations for villas and townhouses were Nad Al Sheba, (accounting for 10.3% of all sales in February), followed by Dubai Hills Estate, Green Community, Arabian Ranches and Dubailand. Business Bay was the top location, in relation to apartments, with 14.9% of the total, followed by Dubai Marina, Jumeirah Village Circle, Downtown Dubai and Palm Jumeirah. One interesting feature that has come to the fore is that there is a rise in tenants exchanging apartment-living for a move to villas, with gardens and pools, as families seek more space due to home-schooling and working from home continues.

Last year, the most expensive villa sold in Dubai was for just over US$ 20 million, with this figure already superseded in 2021. It is reported that a Swiss family from Monaco has paid a touch over US$ 30 million for a Palm Jumeirah villa, which will be used as a rental investment property. A video of the new custom modern contemporary villa – One100Palm – has already received over one million views. Spanning three floors, with a built-up area of 14k sq ft and five spacious VIP bedroom suites, it also boasts three indoor/outdoor cinema lounges, including a rooftop outdoor cinema, along with an infinity glass Jacuzzi, with a pop-up TV. It had been on the market for sale since June 2020.

HH Sheikh Mohammed bin Rashid Al Maktoum has issued a ruling that will see all CEOs of Dubai’s public sector entities being appraised, under a new performance management system, and assessed by a ‘competencies and performance committee’. The actual performance appraisal will be carried out either by the director-general, line manager, chairman of the board of directors or board of trustees. The system will match the performance of the individual, including their vision, leadership and achievements, and attainment of specified KPIs, with the individual entity’s goals and objectives. If the CEO has two successive below expectations’ appraisals, the assessor will notify the Dubai Government Human Resources department to take the necessary action.

It appears that the proposed visit of the Israeli Prime Minister, Benjamin Netanyahu, has been put on hold due to his wife’s illness. However, following a discussion with HH Sheikh Mohammed bin Zayed, the UAE has announced the establishment of a US$ 10 billion fund, aimed at bolstering economic ties in strategic sectors, including energy, manufacturing, water, space, healthcare and agri-tech. This comes six months after the historic Abraham Accord was signed by both countries in Washington.

With an expected US$ 1.2 billion investment to build a port and industrial logistics park in East Java, DP World, and Canada’s Caisse de dépôt et placement du Québec have signed a long-term agreement, with Indonesian conglomerate Maspion Group, to build a port and industrial logistics park in East Java. Work will start in Q3 this year and commercial operations are expected to begin two years later in 2023, to be managed by DP World Maspion East Java; the international container port will have a capacity of up to three million twenty-foot equivalent units and will become a key trade gateway for Indonesia, SE Asia’s largest economy. This will not be the first partnership between DP World and CDPQ – since its 2016 launch, the US$ 8.2 billion platform has invested in ten port terminals globally.

In the past four years, since signing a twenty-five-year agreement with the Republic of Cyprus, DP World Limassol has served more than 250 cruise ships and processed the arrival of over 400k passengers and a total of over 3.5k commercial vessels, shipping three million tonnes of cargo. The Dubai-based company has recorded impressive results, leading to a considerable increase in government revenue from the Limassol port’s operations. The Company’s CEO, Nawaf Abdulla, commented that, “despite the difficulties of the past 12 months”, “we remain dedicated to our goal of making the Limassol port a leading port of choice for trade and cruises in the Eastern Mediterranean”.

According to Brand Financing ranking, DP World is the fastest growing brand in the UAE. The London-based consultancy estimated that the global ports operator’s brand value had jumped 17% to US$ 1.1 billion, driven by strong performances in some of its global markets, specifically India, the UK, Netherlands, Belgium and Egypt. The Dubai-based company had expected a “relatively stable” financial performance last year, but the 2021 outlook remains uncertain due to the continuance of the Covid-19 pandemic. The study placed Aramco as the region’s most valuable brand, with Abu Dhabi National Oil Company (Adnoc) claiming the title of the UAE’s number one brand, as Etisalat replaced Emirates as Dubai’s strongest brand.

The DIFC welcomed a record 915 new financial entities in 2020, as their fintech firms’ numbers doubled to 303; the number of employees rose by 4% to 26.8k by year end. There was a net 20% increase in new companies, bringing the total number of operating firms at the Dubai International Financial Centre to over 2.9k. Tata Asset Management, Samba Financial Group, Caixabank and AfricaRe. Ebury, Ripple, Adyen opened their regional offices in the period. During the year, total banking assets booked in DIFC increased 6% to US$ 189 billion, with an additional US$ 64 billion of lending being arranged by DIFC firms. According to Sheikh Maktoum bin Mohammed, deputy ruler of Dubai and president of DIFC, the performance in 2020 “reflects the UAE’s and Dubai’s ability to partner with its business communities to facilitate continued growth despite the most challenging conditions we have seen in the international economy.” The centre’s three-year target is to triple in size and reach assets under management to US$ 250 billion.

The emirate’s February non-oil private sector economy nudged 0.3 higher to 50.9, as the early introduction of vaccinations improved operating conditions for the third consecutive month, that saw employment and output moving northwards. 50.0 is the threshold between expansion, being any figure above 50.0, and contraction any figure below. Key sectors such as construction, wholesale and retail, came in higher, whilst travel and tourism continued to be a drag on business activity. However, with Dubai still having relatively high cases – and the fact that international travel continues to be battered – Dubai’s tourism sector is bound to feel the heat; in days gone by, tourist chiefs would have been swinging from the lampposts on news that oil prices were over US$ 70 and the dollar was trading a lot weaker against international currencies such as sterling and the euro. Notwithstanding weaker sales, an air of optimism was evident that the current slowdown is temporary and that there could be a sharp rebound in output later in the year, with expectations that Dubai’s economy will pick up by 4%.

In the eleven months of Emirates’ fiscal year to 28 February, dnata has handled over 5k cargo-in-cabin flights, safely moving 50k tons of shipments at DIA. Although passenger traffic numbers slumped, because of international lockdowns and restrictions, there was a strong demand for air cargo which saw Emirates/flydubai making use of passenger planes  just to carry cargo. To adapt to this change, dnata had to update services, enhance processes and train more than 500 employees to efficiently handle passenger planes carrying cargo only. dnata has been working closely with government authorities, customers and suppliers to maintain global trade and the flow of essential goods, including PPE, vaccines and other pharma goods.

Last Thursday was the last time Coinbase shares were sold on the Nasdaq Private Market before the company goes public in late March. Based on their last week of trading, the company could be worth between US$ 90 billion to US$ 100 billion on share values of US$ 350 to US$ 375. The Nasdaq private market is a division of Nasdaq and used by companies to trade their shares before they go public and are often a good guideline to how the shares will trade following an IPO. This will be the first time that Nasdaq Dubai has been involved in a major direct listing, an alternative to a traditional IPO. Founded nine years ago, Coinbase posted a US$ 322 million profit last year, on a doubling in revenue to US$ 1.14 billion

A resolution to regulate Dubai’s collection and management of public revenue has been issued by the Crown Prince, Sheikh Hamden bin Mohammed .bin Rashid Al Maktoum. Resolution No. (5) of 2021 on the Executive Regulation of Law No. (1) of 2016 specifies procedures for government payments and expenditures, whilst also streamlining payment procedures for suppliers and contractors, and specifying that all payments to the suppliers need to be made within a maximum of 90 working days from the date of the final handover or as per the timeframe specified in the contract. Only last year, the Dubai government pledged to cut average payment times to SMEs to just thirty days.

Another of Sheikh Hamdan’s Resolutions this week specified that the use of systems, applications and smart financial solutions can be selected by individual government departments but have to be approved by the Department of Finance. All such financial operations are considered legally enforceable, provided they are compliant with regulations, pre-approved by the Department of Finance and Smart Dubai. The resolution also regulates the collection and management of public revenue.

Sheikh Hamdan bin Mohammed also announced that the freeze on Dubai government fees has been extended until early 2023. He also added that no new fees would be imposed, except in the case of the introduction of “new vital services”. The aim of this latest announcement is to assist the emirate’s businesses and ease any financial challenges brought on by the pandemic. The extension of the freeze will help boost Dubai’s competitiveness and improve the confidence of businesses, as well as to strengthen Dubai’s ability to adapt to changing market realities, accelerate the pace of recovery and boost sustainable development.

There are hefty fines for a section of the professional community if they do not register with the Financial Intelligence Unit (goAML) and the Committee for Commodities Subject to Import and Export Control system before the end of the month. Estate agents, gold dealers, auditors and corporate service providers have been urged to register with the relevant anti-money laundering system to avoid revocation of licences, company closure and imposition of fines. Penalties for non-adherence to AML regulations could range from US$ 13.6k to US$ 272k (Dhs 1 million). The registration of these four target groups, in the government’s networks, will help in their battle to combat money laundering and financing of terrorism in the UAE. Last month, the Executive Office of Anti-Money Laundering and Counter Terrorism Financing was established to carry out surveillance and monitor possible cases of money laundering or of financing terrorists. Three months earlier, the MoE set up an AML department to ensure all non-financial businesses and professionals comply with local laws. Furthermore, the banking regulator has adopted a tough stance on non-compliance and has been quick to penalise banks for non-compliance.

Tuesday’s General Assembly approved that Meraas Leisure and Entertainments LLC acquire 100% ownership in embattled in theme park operator, DXBE, which comprises Motiongate Dubai, Legoland Dubai and Bollywood Parks. One resolution approved the conversion of the senior bank debt of the company acquired from Emirates NBD and DIB as at 28 February 2021; the balance totalled US$ 1.16 billion and will be converted into 53.391 billion new ordinary shares with a par value of US$ 0.272, at a conversion price of US$ 0.0218 per share. It also authorised the company to increase the shareholding of the company by US$ 14.450 billion to US$ 17.117 billion, with the issuance of 53.391 billion new ordinary shares with a par value of US$ 0.272.

Network International posted a 90% slump in 2020 profit to just US$ 5.6 million, as revenue was 15% lower at US$ 285 million; 71.2% of the revenue emanated from ME operations and the balance from Africa. The Dubai-based and leading ME payment processing firm noted that trading and revenue were naturally subdued during 2020 and that there was “a progressive recovery of volumes and transactions and a pickup in the pace of new business”, by year end. In 2019, Network International listed on the London market, and raised US$ 1.4 billion, with Mastercard taking a 10% stake, and subsequently pledged to invest a further US$ 35 million in the business over the next five years. It is also on track to acquire African payments firm DPO Group, the largest online commerce payments platform on the continent, in Q2, which will inevitably boost future revenue; its imminent entrée into Saudi Arabia will also help enhance the firm’s future stream.   

By the end of last year, the number of UAE telecom subscriptions had touched 21.9 million in a country with a 9.9 million population; these figures include users of mobile phones, landline and internet services. Mobile phone users accounted for 76.2% of the total, of which 13.2 million were pre-paid mobile phone subscriptions, with post-paid accounting for 3.6 million of the users. Landline subscriptions increased to 2.1 million, while the total number of internet subscriptions stood at 3.0 million.

A study by Alvarez & Marsal shows that the aggregate net profit of the top ten local banks in the country sank by 38.3% in 2020, driven mainly by increased impairment provisions and reduced operating income. This year, the firm expects less volatility, but banks’ assets may deteriorate further, following the completion of the UAE Central Bank’s deferral programme in June 2021. In 2020, overall net interest income was 2.0% lower, with many banks slashing interest rates in the wake of Covid-19; operating income also declined – by 4.0% – attributable to the introduction of lower interest rates, with fee income down 9.0%, with lockdown impacting on card income and business volumes. The aggregate net interest margin tightened over the year by 28bps to 2.30%. One worrying – but not surprising – feature was the 79% increase in loan provisions to US$ 7.7 billion, whilst the cost of insurance jumped 69bps to 1.71%. Profitability ratios also headed south, with the return on equity and return on assets down 5.6% to 7.7%, and 0.7% to 0.9% respectively.

The bourse opened on Sunday 07 March and having gained 32 points (1.3%) the previous week, nudged 4 points higher to close on 2,573 by Thursday 11 March. Emaar Properties, US$ 0.06 higher the previous week, shed US$ 0.03 to close at US$ 0.98. Emirates NBD and Damac started the week on US$ 3.02 and US$ 0.33 and closed on US$ 3.17 and US$ 0.31. Thursday 11 March saw the market trading at 192 million shares, worth US$ 50 million, (compared to 153 million shares, at a value of US$ 64 million, on 04 March).

By Thursday, 11 March, Brent, US$ 9.86 (17.3%) higher the previous four weeks, gained a further US$ 2.60 (3.9%) in this week’s trading to close on US$ 69.46. Sunday’s drone and missile attacks on Saudi Arabia’s main export terminal at Ras Tanura saw oil prices hitting US$ 70.82 on the day, its highest level since May 2019. Gold, US$ 105 (11.1%) lower the previous six weeks, reversed its recent downward trend, moving US$ 33 (2.0%), by Thursday 11 March, to close on US$ 1,721.

There are some analysts, including the Bank of America, who are forecasting that Saudi Aramco, is “well placed” to raise its dividend guidance beyond US$ 75 billion, as prices are in line to tip over the US$ 70 bpd level. At its IPO in 2019, the world’s biggest oil-exporting company pledged that it would pay investors a minimum of that figure which would be  the largest ever dividend pay-out in the world,  This would come about even after its Q3 profit slid 44.6% , because of lower output and lower prices,  but since then, mainly because of the action of the  Saudi-led (with Russia) Opec+, it has managed to cut industry production and push prices higher; last week, the oil cartel decided to roll over its current level of cuts of 7.2 million bpd for a further two months until the end of April, whilst Saudi has also slashed a further one million bpd from its own production.

Aer Cap has finalised a US$ 30 billion deal to acquire GE’s leasing arm GECAS, with the combination of the world’s two largest aircraft leasing companies controlling more than 2k jets. The deal comprised US$ 24 billion in cash, US$ 1 billion paid in AerCap notes or cash, including 111 million new shares.  The new entity, which will be easily the largest buyer of jetliners built by Airbus and Boeing, will now wield greater bargaining power when out buying stock. Citi and Goldman Sachs have provided AerCap with US$ 24 billion of committed financing for the transaction. This deal could be a forerunner for further consolidation in the global air finance industry, but initial market reaction was negative, with both companies’ share values dropping more than 6% following the news on Wednesday. It is noted that the new entity will have three times more assets than its nearest competitor, Dubai-based Avolon, and this in itself could be a red flag that it may have to offload some planes to meet anti-trust requirements.

The agreement marks a real transformation of GE, which will own 46% in the new entity, into a more focused, simpler and stronger industrial company and will result in a marked reduction in debt levels, as well as enabling it to focus on its core strengths in the power, renewable energy, aviation and healthcare sectors. GE said it planned to reduce debt by about US$ 30 billion, using transaction proceeds and existing cash, but announced a US$ 3 billion write-down in connection with the deal.

After making a US$ 813 million profit the previous year, Rolls-Royce posted a US$ 5.58 billion loss in 2020 after Covid-19 played havoc with air travel which dropped significantly over the year; the engine-maker makes most of its money servicing engines and if there is little or no flying, this will lead to little or no income. To overcome some of the problems, that have arisen because of the pandemic, the Derby-based company has already cut jobs, raised cash from investors to bolster its finances, raised more cash through asset sales (although the planned US$ 210 million divestment of Rolls’ Norwegian unit, Bergen Engines, was scrapped on security grounds), and started to restructure the business going forward, which includes cutting 9k jobs worldwide. In 2021, it expects a cash burn of up to US$ 2.8 billion but is anticipating a better year, as the vaccine rollout should see a pick-up in air travel in H2, dependent on the vaccine programme working and there is a global agreement on checking passengers’ health. Even if there is no aviation rebound, Rolls Royce has enough cash to see it through until Q1 2023.

Having declared a record H1 loss of US$ 1.27 billion, there was no surprise to see Cathay Pacific post a US$ 1.52 billion H2 loss to bring the 2020 deficit to US$ 2.79 billion; 2019 profit was at US$ 220 million, which had been disappointing because of the political turmoil in Hong Kong. Apart from the impact of Covid-19, the negative 2020 results were also driven by major restructuring costs. The figures would have been worse if not for the performance of cargo, even though it witnessed a downturn as a cutback in passenger flights, which also carry cargo, caused a reduction in capacity. Another reason for the group’s downturn was the fact that Cathay is one of the few international airlines, which does not have a domestic travel market to fall back on; last October, it announced it would close its subsidiary Cathay Dragon, a regional carrier flying mainly to mainland China and other Asian destinations, with Cathay Pacific and its budget carrier Hong Kong Express taking over Cathay Dragon’s routes. The extent of the impact of Covid and international lockdowns can be seen by this January’s figures that show the Hong Kong carrier’s passenger number at 30.4k, a massive 99% lower compared to January 2020. To make matters worse, IATA has forecast that air travel will not return to pre-pandemic levels until 2024.

After posting its fastest growth in five years in 2020, up 13% to US$ 7.0 billion, as profit rose 19.0% to over US$ 2.0 billion, Lego plans to recruit hundreds of computer experts in the UK and Denmark to expand its digital games and online sales operation. The lockdown has seen the Danish toy giant sell bigger Lego sets, (as families had more time at home to make models together), and during the year it launched a new Super Mario set, which blends physical bricks with online games. This success has encouraged the firm to speed up its digital plans, with its latest Lego VIDIYO release, in partnership with Universal Music, allowing children to make their own music videos, with special effects and filters. The firm has confirmed that over the past two years, it has invested heavily in accelerating digital transformation within the operation.

Following a profit of US$ 40 million a year earlier, John Lewis posted a 2020 loss of US$ 141 million and also warned of further “painful” store closures, noting that “it does not expect” all of its department stores to reopen once lockdown restrictions ease; it had already announced last year that at least eight stores would not reopen post lockdown. The big drivers behind the loss were write downs in the value of its stores, because of the shift to online shopping, as well as restructuring and redundancy costs.  It is not yet known how many of its 42 outlets will be closed but it was said to be a “small number”, as talks with landlords continue. Before the pandemic, the retail giant estimated that 60% spent on its websites was driven by its shops – now the figure has halved to 30%. On the surface, the fact that revenue figures were flat could be interpreted as good news, but the real reason was the surge in online sales made up for the fall in bricks and mortar retail operations. By 2025, the retailer expects 70% of its revenue will be driven by on-line shoppers. The partnership, which also runs Waitrose supermarkets, is now targeting annual savings of US$ 420 million by 2022; the supermarket’s annual revenue stream is now in excess of US$ 1.4 billion – a lot of which is online business as it takes 240k orders weekly.

Over the past twelve months, Tesla has managed to lose a third of its value three times. The latest sees the electric car company’s share value fall from its 26 January high of US$ 850 billion to US$ 550 billion; on Tuesday it lost a further 4%, having shed 35% of its value over the previous six weeks. With such volatility, it is difficult, dangerous and potentially costly for the rational investor to trade in such equity.

According to Elon Musk, there are only two profitable carmakers in the US – Tesla and Ford – as the others have become bankrupt. In Q4, the electric car company posted revenue of US$ 10.7 billion, achieving free cash flow of US$ 2.8 billion, after spending more than $3 billion on building new factories and other expenditures. Over 2020, Tesla produced and delivered more than 500k vehicles, as well as starting production of its Model Y in Shanghai. Earlier this year, it registered its Indian subsidiary with the Registrar of Companies in Bengaluru. Meanwhile, Ford announced last month plans to double its investment in electric and autonomous vehicles to US$ 29 billion, having previously committed to spending US$ 11.5 billion on electrifying its vehicle line-up through 2022. Ford’s immediate strategy is to catch up with the EV market leader Tesla and keep pace with other automakers, such as GM and Volkswagen.

At last, there was some good news for the UK car industry, with Aston Martin pledging to manufacture all of its electric cars in the country from 2025, according to its Canadian billionaire owner, Lawrence Stroll. All of its battery sports cars will be made at its plant in Gaydon, Warwickshire, whilst its electric SUV models will be made at St Athan in Glamorgan. The luxury car-maker will start making hybrid versions of its cars over the next four years, followed by battery-only models. This follows the UK government announcing plans that it will ban the sale of new petrol and diesel cars from 2030. Mercedes also has a 20% stake in Aston Martin, with both companies in a technical partnership.

Most investors will get concerned when they see the chairman divesting shares in his and their company and this is what has happened with Virgin Galactic Holding. Its share value slumped 9.9% on the news late last week, when the US Securities and Exchange Commission was notified, that its billionaire chairman Chamath Palihapitiya, had offloaded 6.2 million shares worth about $213 million, in the space-tourism company he had  also rid himself of about US$ 100 million worth of shares last December. He still owns 15.8 million shares with his partner Ian Osborne through investment company Social Capital Hedosophia, but the share value has dropped more than 50% since their mid-February peak.

The latest high-profile IPO sees Roblox floating on the New York Stock Exchange, valued at US$ 30 billion, but floated almost 60% higher by US$ 17 billion to US$ 47 billion in its first day of trading, making the founder US$ 4.6 billion. The video-game platform, founded by David Baszucki, is already the world’s largest user-generated games site, mainly used by under-12s. It is free to play, relying on purchases paid for in currency known as robux which can be converted back into cash. Last year, it was estimated that at least 300 developers earned more than US$ 100k and 1.25k at least US$ 10k. The founder hopes to expand the platform, not just for gaming but also for work and learning.

ECB regulators have started investigating lenders about their exposure with stricken Greensill Capital and its main client, Sanjeev Gupta’s GFG, which operates steel mills all over the world, employing 30k and turning over US$ 23.8 billion, and was heavily reliant on Greensill funding facilities. There are concerns that there is a risk of a further fall-out from the crisis when all details become known. After Credit Suisse abandoned a US$ 11.9 billion supply chain funding facility last week, and Germany’s watchdog BaFin froze its Bremen bank account, along with filing a criminal complaint alleging balance sheet manipulation, alarm bells stared ringing. There are also worries on the insurance front with Greensill’s exposure and that it was reported that it was trying to restore up to US$ 4.6 billion of credit insurance, without which there would be an inevitable wave of insolvencies.

On Tuesday, administrators were formally appointed to Greensill Group, with Grant Thornton chosen to two of its major entities in the UK and its Australian parent company also in voluntary administration with local counterparts. The UK liquidator noted that “Greensill Capital is the parent company for the Greensill Group and provides administration and head office support to the group but operates only in a limited capacity.” The joint administrators also indicated that they were “in continued discussion with an interested party in relation to the purchase of certain Greensill Capital assets” but would not comment any further. Last year, the company, named after its founder Australian billionaire Lex Greensill, engaged in US$ 110 billion of financing for ten million customers in 175 countries. The company’s modus operandi was that it provided debt coverage to companies, who were awaiting payment from their customers, and then sold off this debt in bundles to other investors. These packages were insured but problems started to arise when some insurers began to get nervous about their potential exposure to risk. Earlier in the month, Greensill went to court but failed to get IAG to renew its policies.

The other major problem is that Greensill is the principal financial backer of one of the UK’s largest industrial groups, Sanjeev Gupta’s sprawling empire, which includes Liberty Steel. There are obvious worries that this crisis may soon envelop his firms and earlier in the week, it was reported that UK Business Secretary Kwasi Kwarteng had held an emergency meeting with the chief executive of Liberty Steel UK, John Ferriman; the main topic on the agenda was the consequences of Liberty Steel failing. One of the main problems was the fact that last week, Credit Suisse froze any withdrawals of up to US$ 14 billion because of Greensill’s heavy exposure to Mr Gupta’s business which constitutes about 50% of Greensill’s lending volumes. It has been estimated that Gupta’s daily funding requirements are just under US$ 100 million. It was reported that some of his metal sites had missed payments to UK tax authorities, covering outstanding VAT and PAYE.

The Restaurant Group is planning to ask shareholders for a further US$ 245 million to tide it over the coming months of potential future lockdowns and to pay off outstanding debts.  The owner of Wagamama, and other restaurant chains, including Frankie & Benny’s, Chiquito and Food & Fuel, saw 2020 revenue drop 57% to US$ 640 million, resulting in a pre-tax annual loss of US$ 175 million. Chief executive Andy Hornby added that its short-term outlook remains “uncertain”, while lockdown restrictions remain in place. With the current lockdown set to ease early next month, TRG has a trimmed down portfolio of four hundred restaurants, pubs and concessions.

With an IPO imminent, Deliveroo is set to reward both its customers and drivers., with the latter sharing a fund of up to US$ 23 million; those who have delivered the most for the firm are in line for a pay-out as high as US$ 14k, whilst customers will be able to buy up to US$ 1.4k worth of shares in the IPO. 2020 results are still unavailable but in 2019, the company saw revenue 62% higher, at US$ 950 million, with losses coming in 30.6% higher at US$ 440 million.

As part of its push into digital tokens, PayPal is acquiring the three-year-old Israeli cryptocurrency security firm Curv; although no financial details were made available, it is thought the amount paid would be south of US$ 200 million. Last October, the fintech giant, with 375 million users in over 200 hundred markets, introduced a new service to allow customers to trade in cryptocurrency, and also created a dedicated business unit to focus solely on blockchain and crypto. In two 2020 funding rounds, Curv raised US$ 23 million in July and US$ 7 million in October.

According to a regulatory filing, Eric Yuan transferred 18 million shares, valued at US$ .5.5 billion, in Zoom, the company he founded; this equates to 40% of his total number of Zoom shares.  The shares were shown as gifts to unspecified beneficiaries, in line with Mr Yuan’s estate planning practices. In the past year, the company’s shares have nearly tripled, with a current value of around the US$ 100 billion mark, whilst Eric Yuan’s personal wealth is estimated at US$ 13.7 billion.

Every cloud has a silver lining, and it seems that the increase in Covid-related excess deaths will see a boost of some US$ 2.0 billion to the Exchequer, as the state pension burden reduces, with less pensioners to pay out. It is expected that pension spending will be US$ 840 million and US$ 1.26 billion over the next two years. Most of the 144k Covid-19 deaths recorded in the UK comprised mainly of people over the age of 65.  

For the second month in a row, UK house prices dipped 0.1% in February to US$ 348k – an indicator that the mini housing boom continues to soften – but still 5.2% higher over the twelve months, 1% down from January, the second monthly dip in a row, and 0.5% over the previous three months. Annual prices greatly benefitted when the Chancellor first unveiled the tax break in July last year, with the first US$ 700k of the purchase price of a main residence in the UK exempt from stamp duty.

In Australia, the Reserve Bank has warned about the dangers of the latest house price boom, and the possibility regulators may step in to deflate it, with its governor, Philip Lowe, admitting low interest rates were helping to drive up house prices; however, he did add that the central bank will not adjust its policy purely based on the housing market, noting there were “various other tools” to keep house prices in check. One interesting fact to note is that the prospect of lower population growth in the coming years could possibly outweigh some of the other factors driving property prices higher, as the country records its lowest population growth in a hundred years.

In a novel, but obviously welcome, move for the hospitality sector, the federal government will halve the price of nearly 800k airline tickets, as part of a US$ 920 million package, aimed at  getting more Australians to spend big on domestic holidays in 2021; thirteen locations – including the Gold Coast, Cairns, the Whitsundays region, the Sunshine Coast, the Lasseter region which includes Uluru, Alice Springs, Launceston, Devonport, Burnie, Broome, Avalon, Merimbula and Kangaroo Island – have been selected by the government. Tickets will be available for discounts for four months from April, with all destination’s chosen being those normally relying heavily on international visitors. It is estimated that an average of 46k half-price fares will be offered each week, mostly with Qantas, Virgin and Jetstar.

At the opening of this year’sNational People’s Congress, China’s Premier Li Keqiang announced that the country is aiming for a 6%+ economic growth target; this comes after a 2020 growth of just 2.3%, (including a Q120 6.8% Covid-driven contraction) – its weakest annual growth in decades. The economy recovered strongly in H1 and the aim is to continue this robust rebound into 2021. The Premier commented that “a target of over 6% will enable all of us to devote full energy to promoting reform, innovation, and high-quality development,” “In setting this target, we have taken into account the recovery of economic activity.” To some analysts, the growth forecast may be very conservative, as it is coming off a relatively low base, with the IMF predicting a 8.1% expansion; others argue that the country may now be focusing on quality – not quantity and speed – with more room for structural reform and a transition to a more mature economy. The Premier is also predicting a two million increase in new employment numbers to eleven million and has set a budget deficit goal of around 3.2% of GDP. However, that may present a conundrum, bearing in mind the country’s “grey” debt problem.

Nothing has changed in Lebanon over the past twelve months, with demonstrators still out on the streets and burning tyres to block main roads all over the country, angry at the continued political paralysis and seemingly endless economic crises. The latest protests were the result of the country’s 2019 financial mess which brought hundreds of thousands onto the streets to bring down the government. Since then, the situation has gone from bad to worse, with tens of thousands of jobs being lost in the crisis, bank accounts frozen and many Lebanese have started to go hungry. After the massive August 2020 explosion, the government resigned and the new prime minister-designate, Saad al-Hariri, has been at loggerheads with President Michel Aoun and has been unable to form a new government to carry out the reforms that would unlock billions of dollars of international aid. The Lebanese pound tumbled to a new low last Tuesday, at 1,523 to the US$.

London Stock Exchange Group posted a 5% increase in 2020 profit to US$ 1.5 billion, with revenue nudging slightly higher to US$ 2.6 billion; it also increased its full-year dividend by 7% to US$ 1.03. The announcement came after the Chancellor, Rishi Sunak, unveiled details of an independent review, recommending updating rules around free float requirements, dual-class structures and special purpose acquisition companies (Spacs) to strengthen the UK’s position as a world-leading financial centre. There is no doubt that the Johnson administration is keen to make the UK stock market home to more tech businesses.

With US virus cases dropping, as the vaccination programme begins to make an impact, hiring rose last month. Even though employers added 379k jobs – a lot stronger than many analysts had predicted – it made little impact on the jobless rate which only dipped 0.1% to 6.2%. Most of the job gains in the private sector were found in the leisure and transport sector, with construction firms and local governments shedding positions, as other sectors remained little changed. Almost ten million are still unemployed but it must be remembered that this number excludes millions more that have stopped looking for work or identified as employed but are not working because of the pandemic.

There are reports that Pfizer-BioNTech, AstraZeneca, and Moderna are being sold on the darknet at inflated prices of between US$ 250 – US$ 1.2k and being paid for in Bitcoin. Most of the sales appear to emanate from France, Germany, the UK and the US.

Last week, this blog posted on a PPE scandal in Italy – this week it is the turn of Germany and (once again) the UK. This week, “maskgate” is hitting the headlines in the German press, just ahead of this weekend’s elections. It has been reported that two MPs from Angela Merkel’s centre-right bloc earned substantial commissions on PPE deals to procure urgently needed masks during the first wave last March. Nikolas Lobel of the CDU (Christian Democratic Union) quit the Bundestag with immediate effect, whilst CSU (Christian Social Union) member, Georg Nusslein, will leave later in the year. This is another episode that will put a major dint in Angela Merkel’s popularity, also not helped by her inept handling of Germany’s pandemic crisis and vaccine roll-out programme.

Instead of trying to put their own house in order, EU leaders seem to be waging some sort of war on the UK and US over the distribution of vaccines. The EU has still not got over the fact that the UK has actually left the bloc and now the EC president Charles Michel has wrongly accused the UK of banning shipments of jabs and their components. The Belgian, a son of a former European Commissioner, has also taken the fight to the US, accusing them also of banning vaccine exports and raw materials. Perhaps he should be knocking on the door of Cypriot European Commissioner, Stella Kyriakides, who has been roundly attacked in the international media, as her vaccine procurement programme was seen to be slow and inefficient, especially when compared to the UK and the US. Even the CEO of AstraZeneca, Pascal Soriot, blamed the EU for being three months slower than the U.K. in finalising its purchase agreements for the vaccine. How many lives have been lost on continental Europe over the past three months by the woeful efforts of the bureaucracy to implement a proper vaccination programme?

Despite the Prime Minister stating that all PPE contracts are “on the record for everyone to see”, it is reported, by the Good Law Project, that Boris Johnson’s assurance was “not true”, with government lawyers indicating that one hundred contracts, signed before 07 October, were yet to be revealed. They also admitted that 482 out of the 513 contracts award notices had been published outside the thirty days required by law. The Department for Health and Social Care signed deals worth hundreds of millions of dollars during the coronavirus pandemic which has to include a “contract award notice” within thirty days of the awarding any contracts for public goods or services worth more than US$ 170k. Some contracts have attracted scrutiny because many were awarded directly, without being opened to competition, because of the urgency of the pandemic. Last month, High Court judge, Mr Justice Chamberlain ruled that Health Secretary Matt Hancock had acted unlawfully when his department failed to publish award notices for contracts it had agreed during the Covid pandemic within thirty days of them being signed and that the public were entitled to see who the money was going to. Unfortunately, some of these contracts were handed to relatives, friends or business acquaintances and this to some may smell of cronyism. Maybe Gemma Abbott, the Good Law Project’s legal director, was right saying, “we have a government contemptuous of transparency and apparently allergic to accountability.”

The UK parliamentary watchdog has produced a scathing and damming report on Boris Johnson’s US$ 51 billion test and trace programme which failed its main target of averting more lockdowns. The Commons public accounts committee noted that the programme had an initial US$ 31 billion budget, with a further US$ 21 billion “thrown in” for spend over the next two years. One of its main concerns, other than its failings, was its dependence on expensive contractors and temporary staff. Even today, estimates are that 2.5k consultants are still being being employed with daily rates of between US$ 1.5k to US$ 9.2k! It seems that someone at the Department of Health and Social Care considers these to be “very competitive rates”. There is every possibility that some of these sub-contractors know people in the right places and just like in the early days of Covid, when proper checks were not being made on PPE equipment, some politicians have kept “their snouts in the trough”. No wonder more of the electorate of global democracies are becoming more cynical in their attitude and more wary of their elected representatives – they have begun to have Suspicious Minds.

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Mother’s Little Helper

Mother’s Little Helper                                                                                           04 March 2021

According to the latest S&P Global Ratings report, Dubai’s Covid-battered economy will not return to 2019 levels until 2023, whilst key sectors – including hospitality, real estate, retail and tourism – will remain under pressure for the next 12-24 months. It notes the stunning progress that the country has made with its globally acclaimed vaccine drive and considers that Dubai’s GDP will soon start recovering from the sharp recession of 2020, that had been triggered by the pandemic and low oil prices. It added that Dubai’s residential real estate recovery would be led by a cutback of new supply and low mortgage interest rates. Last year, Dubai saw the sharpest population decline in the GCC – 8.4% against the region’s average of 4.0%; any fall in the population level will inevitably have an impact on the real estate sector. The agency expects that, with low prices, transaction volumes will remain robust and that villa prices, in the secondary market, will remain more resilient.

However, the rather bearish report did note that the normalisation of relations with Israel, as well as the restoration of ties between Qatar and the other four GCC states, previously boycotting the country, should support tourism and real estate investments. Official government figures indicate that in the year to 01 March 2021, Dubai’s population has actually grown 1.15% to 3.417 million. There is no doubt that the main factors in play to boost Dubai’s realty sector include the weakening greenback, historically low interest rates, increased energy prices (with Brent hovering around the US$ 65 level) and the upcoming six-month Expo 2020, starting in October. In certain locations, there is no doubt that property prices have been moving higher, specifically villas in well-established areas and prime apartments.

It is interesting to note that according to the latest Knight Frank report, Dubai comes second to London, with the highest number of prime properties, among all the major global cities. The consultancy defines prime property in different ways, according to location, with London’s threshold being US$ 2.8 million (GBP 2 million), Dubai – US$ 1 million, Sydney – US$ 2.3 million (AUD 3 million) and Hong Kong – US$ 645k (HK$ 5 million). The survey shows that London, Dubai, Sydney, Hong Kong and Singapore have 68.2k, 42.4k, 27.4k, 21.3k and 104.0k prime properties respectively. It also noted that Dubai’s 2020 property decline of 5.9% was the sixth highest ranked after Buenos Aires, Cape Town, Bangkok, Hong Kong, and Doha. Rather surprisingly, Knight Frank forecasts that only two locations in the survey – Dubai (minus 2%) and Buenos Aires (minus 8%) – will report declines in 2021. However, the study also stated that Dubai has certain hotspots, including villas and apartments, where prices actually rose – in Palm Jumeirah, with increases of 9.4% (villas) and 5.1% (apartments), and in District One (3.5%), recorded in H2.

Binghatti Developers has launched sales at its Binghatti Gate development in Jumeirah Village Circle, being built for US$ 41 million. The project, comprising 132 units, 84 of which will be 1 B/R apartments, is 50% completed. Its CEO, Muhammad Binghatti, estimates that sales prices will nearly be on par with secondary market prices and commented that his company has committed almost US$ 1 billion covering up to forty projects in Dubai including in locations such as Al Jaddaf, Business Bay, Dubai Marina and Dubai Silicon Oasis.

Earlier in the week, it was announced that Dubai will be extending its current coronavirus countermeasures, which were introduced in early February, until the beginning of the holy month of Ramadan, probably 12 April. Some of these measures include the maximum capacity allowed in venues with indoor seating – such as cinemas, entertainment and sports venues – to remain at 50%, shopping malls, hotels, swimming pools and private beaches in hotels permitted to only operate at 70% capacity, and restaurants and cafes, across the city, must close by 1 a.m. In addition, monitoring and inspection campaigns will be intensified across Dubai to ensure that all establishments follow safety protocols. Last month, daily new cases averaged over 3k, despite the government intensifying its inoculation campaign. By the end of March, the government is planning that 50% of the country’s 9.9 million population will have been vaccinated. (Recent UK studies have indicated that a single dose of the Pfizer Covid-19 vaccine could significantly reduce the risk of transmission).

2020 was a bad year for IPOs in the MENA region, registering an annual fall of some 40%, to US$ 1.86 billion, but, according to the latest EY report, 2021 will be the year of the rebound, driven by sweeping reforms, as well as changes to foreign ownership law and listing requirements. The most radical change saw the 51% UAE ownership requirement for most entities scrapped, with companies now being 100% foreign owned.  Other changes include founders of private joint-stock companies may now sell up to 70% (rather than the previous 30%), of their capital, by way of a public offering,

Despite the pandemic, 2020 saw a 3.5% growth, to 3.2k, in the number of Gulf and other foreign companies operating in the UAE, according to the UAE’s National Economic Register. The split between Gulf and foreign was 23.8% to 76.2%.

A recent report by consultant management firm BCG, and recruitment alliance, The Network, saw Dubai ranked third in the world of top cities for foreign workers to relocate. London and Amsterdam were placed ahead of the emirate followed by Berlin and Abu Dhabi. The survey, involving 209k people in 180 countries, aimed to ascertain if, and under what circumstances, people would move to a foreign country for work. The top three placings saw a surprise with Canada taking over the number one spot from the USA, with Australia in third. Despite being rated the top country, Canada did not have any city in the top ten, with Toronto coming in at fourteenth.

Mini history was made in the UAE, with monthly fuel prices rising for the first time in a year. The UAE Fuel Price Follow-up Committee announced that petrol prices for March have risen, with Special 95 at US$ 0.057 (11.7%) higher to US$ 0.548. However, the diesel price – that had dipped 2.4% to US$ 0.548 in February – will retail US$ 0.038 (6.9%) higher at US$ 0.586 per litre. The new prices became effective on Monday, 01 March.

On Monday, the Multipurpose Terminal (MPT) at the Port of Luanda was handed over to DP World, following the twenty-year concession agreement, signed in January. The new CEO for the project will be Panamanian, Francisco Pinzón, who joined DP World in 2016 as COO for DP World Djibouti. DP World Luanda is investing US$ 190 million to improve the terminal to help Angola to make it a major trade hub, along the western coast of Southern Africa. This project is the eighth port facility, currently managed and operated by DP World in its Africa and Middle East region.

Jebel Ali power and desalination complex has been recognised by the Guinness World Records, as the world’s largest single-site natural gas power generation facility. The complex, valued at US$ 12.3 billion, has a total capacity of 9,547 MW and is part of Dewa’s long-term power generation plans to meet the needs of over “one million customers”.

In yesterday’s budget, Rishi Sunak unveiled the Thames Freeport in East London’s Thames Estuary as one of eight winning bids to turbocharge post-Brexit Britain; this gives the digitally linked special economic zone, which comprises the Dubai-backed DP World London Gateway port, along with Tilbury port and a Ford factory in Dagenham, advantageous tax and customs duty relief. London Gateway site has almost ten million sq ft, with planning permission and the capacity to expand. Freeports are areas that allow companies to import and export from the UK under simplified customs, tax and planning rules.

Mastercard has introduced Click to Pay in the country which will see the end of clients having to complete time-consuming details, when they purchase goods and services online; the service was first launched in the US in October 2019, followed by the Asia-Pacific region last July. Apart from doing away with all the paperwork, and hassles associated with the old process, users are no longer required to store their sensitive financial details with different merchants and can instantly checkout after making a purchase. The payments technology company is confident that the new solution will not only speed up the process but will also reduce fraud risk. The UAE is the first country in the region to have Click to Pay, whilst Visa has had a similar service in local operation since last July.

Following a slight tightening of lockdown restrictions, it was no surprise to see a dip in the country’s February non-oil PMI data with the headline index dipping 0.6 to 50.6, month on month. However, with the figure over the 50.0 threshold, it shows that there is still a slight expansion. This was down to the output subcomponent which continued to hover above the 50.0 level but new business failed to rise for the first time since October and output has softened in the first two months of 2021, whilst the employment level remained unchanged.

Both Emaar Properties and Emaar Malls have decided to merge both companies in a bid to create a larger entity to better face the negative impact of the pandemic.  The developer noted that “as part of the transaction, the existing business of Emaar Malls will be reconstituted in a wholly owned subsidiary of Emaar Properties.” It will be business as usual for Emaar Malls that will continue to develop a portfolio of retail assets. The proposed merger still has to be approved by shareholders of both entities, and, if agreed, a share swap would see Emaar Malls’ shareholders (excluding Emaar Properties) receiving 0.51 Emaar Properties’ shares for every one of Emaar Malls’ shares held.

Latest data shows that thirty-eight companies, listed on the country’s bourses, will pay out a total of US$ 7.9 billion in cash dividends, despite the impact of the pandemic and “flat” business conditions. To date – and not all possible dividends by listed companies are known – banks and telecoms are the biggest dividend payers; eight Emirati banks will distribute US$ 4.1 billion and US$ 2.1 billion respectively.

The bourse opened on Sunday 28 February and having shed 263 points (10.4%) the previous five weeks, gained 32 points (1.3%) to close on 2,569 by Thursday 04 March. Emaar Properties, US$ 0.08 lower the previous fortnight, regained US$ 0.06 to close at US$ 1.01. Emirates NBD and Damac started the week on US$ 3.05 and US$ 0.32 and closed on US$ 3.02 and US$ 0.33. Thursday 04 March saw the market trading at 153 million shares, worth US$ 64 million, (compared to 338 million shares, at a value of US$ 43 million, on 25 February).

For the month of February, the bourse had opened on 2,654 and, having closed the month on 2,552 was down 102 points (3.8%) in the month. Emaar traded lower from its 01 February 2021 opening figure of US$ 1.02 – down US$ 0.04 – to close February on US$ 0.98. Two other bellwether stocks, Emirates NBD and Damac, started February on US$ 3.16 and US$ 0.37 and closed on 28 February on US$ 3.04 and US$ 0.32 respectively.

By Thursday, 04 March, Brent, US$ 9.68 (17.0%) higher the previous three weeks, gained US$ 0.18 (1.7%) in this week’s trading to close on US$ 66.86. Gold, US$ 105 (5.6%) lower the previous five weeks, continued its downward trend, tumbling a further US$ 83 (0.3%), by Thursday 04 March, to close on US$ 1,688. At today’s Opec+ extraordinary ministerial meeting, seen as a bellwether of the recovery in oil markets, the alliance, led by Saudi Arabia and Russia, acknowledged that it has managed to rein in production and has seen prices 25% higher since the onset of Covid last March. Then it had started the process of cutting production by a record 9.7 million bpd from the markets between May and July. Today, it agreed to rollover its current pact as it keeps a tight lid on output, with Saudi Arabia also extending its outsized voluntary cut of 1 million bpd until end of April.

Brent started the month on US$ 55.43 and gained US$ 8.99 (16.2%) during February to close on US$ 64.42 Meanwhile, the yellow metal lost US$ 90 (4.8%) in February, having started the month on US$ 1,863 to close on 28 February on US$ 1,773.

Last year, Rio Tinto was held accountable for the destruction of two 46k year old ancient Aboriginal rock shelters. The mining company was praised for eventually overseeing the resignations of the then-chief executive, Jean-Sebastien Jacques, and two deputies, after a public and investor backlash. However, they lost a lot of public goodwill when the mining company decided to hand out large pay-outs to all three executives. Now Simon Thompson will step down as chairman after next year’s AGMs, while non-executive director Michael L’Estrange will retire from the board, after this year’s meetings. Having been accused by regional elders that he had broken a personal promise, he has admitted that “I am ultimately accountable for the failings that led to this tragic event.”

Despite the judge finding Barclays guilty of “serious deceit” over an investment deal with Qatar, at the height of the GFC, UK financier Amanda Staveley has lost her US$ 23 billion legal battle against the international bank. She had claimed thatsenior bank managers had lied to her during a 2008 fund-raising operation to secure the ailing bank’s future out of UK government control. Unfortunately, the ruling found that her company, PCP Capital Partners, would have been unable to raise enough money to be part of the rescue plan and decided she was not entitled to damages. The case was about Barclaysbeing desperate to stave off government control during the crisis and being accused of giving preferential rates to Qatari investors to ensure their involvement in a fund-raising operation to secure the bank’s future. Ms Staveley is considering the merits of an appeal.

On Monday, Spanish police raided Camp Nou, the home of FC Barcelona and reportedly arrested three people associated with the club – its former president, Josep Maria Bartomeu, the club’s CEO, Iscar Grau, and legal counsel, Roman Gomez Ponti. In what has become known as Barcagate, the three have allegedly been involved in the club hiring outside groups to defame Bartomeu’s adversaries on social media. 2020 was not a good year for the club both on and off the field. Bartomeu fell out with his star player, Lionel Messi, results started to disappoint and Covid was the main reason why Barcelona lost US$ 121 million – another one was the news that the uncommitted and unhappy Messi was on a US$ 555 million four-year contract. Furthermore, the club has to urgently address its US$ 1.2 billion debt problem. Presidential elections to replace Bartomeu, who resigned last October, are due to take place on Sunday, as 140k members decide.

Walt Disney Co has decided to focus more on e-commerce and to close at least sixty Disney retail stores in North America, (about 20% of its global total), in 2021, as it revamps its digital shopping platforms to focus on e-commerce; it is mulling over the future of many of its European outlets, but Japan and China will not be affected. Job losses are currently unknown. The pandemic has seen an accelerated shift to digital shopping with many other major retailers, including Walmart and Macy’s, closing more of their physical outlets. However, Disney will continue to sell its merchandise inside other retailers, such as Target in the United States and Alshaya in the ME, as well as in their own theme parks. The entertainments company will also invest in overhauling its shopDisney apps and websites, with the aim of creating “a more flexible, interconnected e-commerce experience that gives consumers easy access to unique, high-quality products across all our franchises.”

Zoom’s latest forecast, that it expects a 2021 sales increase of more than 40% to US$ 3.7 billion, from 2020’s US$ 2.6 billion, sent its shares trading 6% higher in Monday’s New York trading; 2020 profit was US$ 672 million, compared to just US$ 21.7 million a year earlier. There were concerns that, as more people get vaccinated and social distancing rules are relaxed, growth would slow but, according to its boss, Eric Yuan, Zoom is here to stay with business remaining strong; however, Q4 370% growth figures to US$ 883 million are unlikely to be replicated.

There is no doubt that the pandemic has been kind to companies like Deliveroo, as restaurants were forced to close during lockdowns so that the demand for food home delivery soared. The company, founded in London by Will Shu in 2013, has stated that the UK is its “long-term home”. The platform operates in twelve markets and is planning a London IPO that could value the company in the region of US$ 7 billion. The decision comes about after the government proposed new stock market rules, (similar to those in the US), that would benefit start-up technology firms, such as creating two different classes of shares with differential voting rights, giving founders more say in key decisions.,

The UK economy will benefit from two pieces of drink-related, non-related budget news. One is that Budweiser is planning to invest US$ 175 million at its two UK breweries – its Welsh site in Magor and the other In Samlesbury in Lancashire. The US brewer, which employs more than 1k at its two sites, will spend US$ 100 million to create 32 new jobs at Magor, with the balance invested at its English brewery, creating 23 new jobs. On completion, both capacity and efficiency. will improve, as a total of 3.6 million hectolitres, equating to 630 million pints a year, will be produced. In Q3 and Q4, Budweiser posted that it had hit its highest-ever sales levels in the off-trade, with growth levels of 19.6% and 23.4%.

The Biden administration has agreed to a four-month suspension of tariffs on UK goods including single malt whiskies that were imposed in retaliation over subsidies to the aircraft maker Airbus. (Other UK goods, including pork, cheese, cashmere and machinery, will also benefit from this decision). On 01 January, the UK dropped its own tariffs on some US goods put in place over a related dispute about US subsidies to Boeing – the US/EU decades-old tariff war continues but with Brexit, the Johnson administration has been able to lobby on its own behalf, as opposed to being one of twenty-seven states. Th scotch tariff has been in place for sixteen months during which time, US exports have slumped by 35%, costing the industry at least US$ 700 million, as well as losing its place, as the US’s number one whisky supplier.

The year started badly for the UK motor trade, with January car production 27% lower at 86k, compared to a year earlier. This was the worst January performance since 2009 and the seventeenth straight month of decline. The industry is petitioning for Covid-secure car showrooms to open before the current date of 12 April and hopes that the government unveils measures to extend Covid-19 support schemes, including the furlough programme, reform business rates to encourage manufacturing investment and to increase support for skills and training.  It is estimated that the pandemic has cost the industry US$ 15.8 billion, driven by dwindling production. Other drivers, behind the sector’s demise, include global supply chain issues, hassles with post-Brexit trade with the EU and the fact that it is difficult to arrange test drives.

Aston Martin had a disastrous year, as losses almost quadrupled to US$ 585 million, from US$ 165 million in 2019, with revenues 37.6% lower at US$ 860 million, driven by the pandemic and a policy of destocking dealerships.  The company’s new management wrote off US$ 140 million from previous engine and technology development and also expanded a deal with Mercedes Benz to take parts and some technology.  It plans to make 500 jobs redundant and introduce cost cutting measures, saving US$ 35 million. Last year, Canadian billionaire Lawrence Stroll led a bailout with new management changing strategy based on F1 and restoring the brand’s luxury credentials. The company expects to sell 6k units this year, 50% of which will be their SUV model.

Meanwhile European car marker Stellantis confirmed that negotiations with the UK government, over the future of Vauxhall’s Ellesmere Port plant, were “productive but not conclusive”. There is no doubt that this is another nail in the coffin of car-making in the UK, but the government could do worse than investing a lot more in the production of batteries for vehicles to make the country a world leader in this field. Last year, production of battery electric, plug-in hybrid and hybrid vehicles rose 18.9% to 21.8k units. The government has to have a serious look to actively attract battery gigafactory investment and transform the supply chain.

February saw Australian house prices posting their sharpest monthly increase since August 2003, as the market is now entrenched in one of its strongest growth phases on record. In the month, capital city prices were 2.0% higher (with the best performing being Sydney and Hobart both recording 2.5% increases) and regional prices marginally better at 2.2%. February turned out to be a good month for Queensland real estate, as it marked the sharpest monthly increase in Brisbane house prices since 2007, driven by low mortgage rates and a shortage of housing stock, as well as net interstate migration to Queensland being at its highest level this century. Monthly and annual increases noted in Brisbane, Gold Coast and Sunshine Coast were 1.5% and 5.0%, 2.6% and 10.5% and 2.5% and 11.2% respectively.

Chinese investment in Australia plummeted 61% to US$ 790 million in 2020, the lowest figure in six years, attributable to a growing diplomatic rift between the two countries; a year earlier, there had been a 47% decline to US$ 1.57 billion.  In recent years, the Chinese had invested across all sectors in Australia but last year, they only dealt in three sectors – real estate, mining and manufacturing with deals of US$ 350 million, US$ 320 million and US$ 120 million. According to the UN, 2020 foreign direct investment fell 42% but Australia suffered more because, at the onset of Covid in March 2020, the government announced temporary measures that would subject every proposed investment to scrutiny by Australia’s Foreign Investment Review Board; this extended the review period from one month to six months. However, a more important cause is political, with Australia calling out China on a number of issues including a request for a rigorous investigation into the origins of the Covid-19 pandemic in April, the treatment and persecution of Chinese Uyghurs and the country’s handling of the Hong Kong crisis. In response the Chinese quickly fired back, imposing tariffs or trading restrictions on Australian goods such as coal, timber, barley, wine, beef and lobster. This has caused alarm in Australia, as China is its biggest trading partner, accounting for close to 40% of exports, but despite all that, Australia’s trade balance with China hit a six-month high in December, driven by China’s insatiable appetite for Australian iron ore.

Finally, the House of Representatives have approved President Joe Biden’s US$ 1.9 trillion Corona relief package, though two Democrats sided with the Republicans, considering the plan as too expensive. Now the bill goes to the Senate – where Democrats and Republicans each have fifty members – and it may prove a big ask for this to pass the final stage; only recently, the Senate turned down the US minimum wage to be US$ 15 an hour. With US unemployment almost at 10%, and ten million jobs already lost dueto Covid, if it passes this stage, the money would be used for emergency financial aid to households, small businesses and state governments. It does seem that the President is receiving some of his own medicine, having appealed for bipartisan unity when he took office last month, he has seen little of that since then – a case of quid pro quo.

It is reported that the African Union will be paying US$ 9.75 per dose for 300mm of Russia’s Sputnik V jab, which equates to almost triple the price of the Oxford/Astra Zeneca and Novavax vaccines. The government-run Russian Direct Investment Fund, which oversees Sputnik V’s foreign sales, has claimed that not only is its international price the same globally but also that the jab’s cost is “two times lower than that of other vaccines with similar efficacy rates”. This flies in the face of the fact that the AU has signed a deal for US$ 3 a jab from Astra Zeneca and Novavax vaccines made by the Serum Institute of India, US$ 6.75 a dose for the BioNTech/Pfizer vaccine and US$ 10.00 for a Johnson & Johnson’s single dose.

Cases of official corruption, along with seemingly unethical and illegal behaviour, seem to be rampant throughout the world with the latest high-profile one being the former French president Nicolas Sarkozy, found guilty of trying to bribe a judge and of influence-peddling. He had been accused of trying to illegally obtain information from a senior magistrate in 2014, about an ongoing investigation into his campaign finances. It was alleged that Sarkozy had offered to secure a plum job in Monaco for judge Gilbert Azibert, in return for confidential information about an inquiry into allegations that he had accepted illegal payments from L’Oreal heiress Liliane Bettencourt for his 2007 presidential campaign. Unluckily for him, investigators had originally been wiretapping conversations between Sarkozy and his lawyer Thierry Herzog, after Sarkozy left office, in relation to another investigation into alleged Libyan financing of the same campaign.  

Another ex-leader in the news this week was the UK’s ex-prime minister, David Cameron, who was hired by Greensill Capital as an adviser in 2018, and regularly promoted the controversial lender which operated in the world of supply chain finance. This week, the German financial watch dog filed a complaint against Greensill bank’s management, citing balance sheet manipulation. At the same time, its parent company, Greensill Capital is applying for insolvency protection in the UK but is trying to transfer viable parts of the business to Apollo Global Management, Such a deal would invariably wipe out the funds of all the shareholders including the US$ 1.5 billion poured in by Soft Bank’s Vision Fund. The German regulator, BaFin, has all but frozen the bank’s operations, indicating “there is an imminent risk that the bank will become over-indebted”. It is estimated that 85% of the bank’s deposits of US$ 4.2 billion are covered by Germany’s public deposit insurance scheme, but that would still leave Institutional depositors picking ap a US$ 600 million tab.

The Council of Europe’s anti-graft report has noted that Austria’s government has repeatedly failed to tackle corruption among its lawmakers and the judiciary. The CoE’s group of 49 European states and the US, (known as Greco), castigated the country for “globally unsatisfactory” progress into tackling corruption. The latest case involves its finance minister, Gernot Blumel, in a widespread corruption probe into the connections between some of the country’s ministers and Novomatic, one of the largest casinos in the world, that could see the end of Sebastian Kurz’s time as Chancellor. The report places Austria behind Turkey, but just ahead of the Czech Republic and Serbia, in terms of its implementation of the council’s anti-corruption standards. 

One of Donald Trump’s staunchest political adversaries, Governor Andrew Cuomo, is now facing his day of reckoning, which is fast approaching, as he encounters the wrath of the state of New York. After becoming a national hero for his statesman-like leadership at the height of the virus late last year, it is now discovered that his administration made the decision to order elderly patients being treated for Covid, back into the nursing homes; he was desperate to free up hospital beds for other patients. Now the state attorney-general is accusing him of undercounting nursing home deaths by 50% and then stonewalling state legislators requesting further information.  On top of that, he is facing accusations, by two former female aides, of sexual harassment. Six months ago, Cuomo was a shoo-in for a fourth term in office – now he is in real trouble.

Both Germany and France seem to be struggling when it comes to Covid vaccines. Initially it was because the EU were months behind say the UK in ordering the vaccines and now when, they have got supplies, having trouble with distribution. At the beginning of the week, it was estimated that Germany had only distributed 364k doses out of a possible 1.45 million (about 25%), whilst France fared even worse with only 21% of its 1.1 million doses distributed so far. All vaccines should be cleared for use in the bloc by the European Medicines Agency, but some countries, including Hungary and the Czech Republic, have side-tracked this rule and have started using the Russian Sputnik jab, yet to be approved by the EMA. Despite French president Macron saying in January that the Astra-Zeneca jab was “quasi-ineffective”, (but now indicating he would take it), the EU leaders have started to talk up the brand, as stocks are piling up, amid widespread doubts about its efficacy among Europeans. By the end of the week, it was reported that Italy had halted a delivery of 250k doses of AstraZeneca to Australia because the Draghi administration considered it a ‘non-vulnerable’ country and ‘the high number of vaccine doses covered by the request. . .. compared to the quantity of doses supplied so far to Italy and, more generally, to EU countries’.

Prior to his Wednesday budget, Rishi Sunak announced a US$ 175 million boost for traineeships in England, which will include a new “flexi-job” apprenticeship that will enable apprentices to work with a number of different employers in one sector. In announcing the package, the Chancellor noted that it was “vital” that support continued to get people back into work. He has also introduced paying up to double the current cash incentive to firms who take on an apprentice, regardless of age. The scheme is expected to see 40k new apprenticeships. Currently, firms are given US$ 2.8k for every new apprentice they take on under the age of 25, and US$ 2.1k for those over 25, in addition to a US$ 1.4k grant they are already getting under another project.

Earlier in the week, it was announced that grants, to as high as US$ 25k per firm, will be made available to help shops and hospitality firms reopen once the current lockdown is eased; the scheme is expected to cost the Exchequer up to US$ 7 billion, with even more support later. The Chancellor also noted that this latest package was part of a range of support measures that would continue and that “we went big, we went early – and there’s more to come.” It is estimated that up to 700k businesses will be eligible for the so-called “restart gains”, which will replace the current monthly grant system. To date, US$ 35 billion has been spent on direct grants to businesses, since the onset of Covid-19. In 2020, there has been 180k jobs lost in the country’s High Street, attributable mainly to lockdown measures and the huge swing towards online shopping.

Other announcements made ahead of Wednesday’s annual economic speech included: a new government-backed mortgage guarantee scheme for home buyers with small deposits;; an “elite” visa to encourage high-skilled workers including researchers, engineers and scientists to come to the UK, (obviously very similar to Dubai’s earlier initiative); US$ 2.3 billion towards ensuring that every UK adult is offered a vaccine dose before the end of July; raising the  limit on a single payment using contactless card technology to US$ 140 later this year; and a “world-first” green savings bond for retail investors to help boost the UK’s transition to net zero emissions.

Although many more have suffered financially from the impact of Covid-19, it is reported that up to six million people in the UK have become “accidental savers” because they managed to keep their jobs, whilst financial outgoings, including lower travel costs and fewer holidays or meals out, were being reduced. Most people are under the false impression that pent up demand is good forthe economy – for example, car sales spiked the month after the first lockdown was lifted and Dubai’s real estate sector did likewise. Now there is a fear – not without foundation – that when the next lockdown, now happening in many countries, is lifted, there would have been more than a year of constrained supply meeting what could be a once-in-a-lifetime demand surge, that would inevitably result in higher prices and stoke up the embers of inflation.

By Thursday, having already fallen 10% from February’s record high, the tech-heavy Nasdaq index had wiped out its 2021 gains, to close on 12,464, with the Dow dipping 1.1% to 30,924 and the S&P 1.3% lower at 3,768. These falls were attributable to the Fed chairman, Jerome Powell, taking no steps to assuage market volatility which has been pushing up  bond yields to 1.533%. He commented that the increase was “notable and caught my attention”, but that “our current policy stance is appropriate.” It appears the fact that investors had pushed up borrowing costs in this way has not concerned the Fed, with him reiterating his promise to keep US interest rates near zero and monthly US$ 120 billion bond-buying intact. It seems that the Fed continues to hang fire and will only change policy, if conditions change materially but there has to be concern about inflation becoming a problem in the not too distant future.

Because of the unique feature of the current economic environment, nobody really knows what will happen when the lockdown curtain is lifted, but it is highly likely that there will be a much sharper increase in the inflation curve. What is known is that central banks worldwide have been printing money and, to put it lightly, monetary policy has been “loose”. It is nearly time for those very same regulators to change tack and act more assertively and tighten policy now, otherwise the inflation problem will only get worse and more difficult to overcome. It is estimated that people in the US and the eurozone have US$ 1.5 trillion and US$ 500 billion in savings because of not being able to spend as much during the lockdowns. The worry is that if a big percentage of that was splurged over a short period of time, inflation could easily run riot, with disastrous economic results, including higher interest rates, and much higher prices, as supply, which had suffered greatly during the pandemic, will be unable to meet the increased demand. It is a strange world that twelve months ago, it was a lack of inflation that was the major economic worry in the developed world and several rate cuts, by most global central banks, failed to move inflation higher. Now the opposite is going to happen. There are some outliers who think that future inflation levels will be set by the financial markets – and not the central banks.

What has to be remembered, is that government assistance has cost the UK taxpayer a lot of money that needs to be repaid. To date, the Johnson administration has borrowed US$ 380 billion this financial year, pushing the national debt to US$ 3 trillion. The Chancellor has faced calls to raise taxes from some parts of the Tory party, while Labour and other Conservative MPs have opposed increases. On Wednesday, Rishi Sunak did not disappoint and the payback for all his Covid-related borrowing is a massive US$ 22.5 billion hike in Corporation Tax and US$ 11.2 billion changes to thresholds for the last two years of this parliament. More than one million people are set to be paying income tax for the first in the next five years, with the Chancellor indicating that the thresholds, at which the tax starts being paid, will be frozen until 2025 after a rise next month, with the tax allowance being US$ 17.5k. Corporation Tax will jump 6% to 25% in April 2023, but the 19% rate will remain in place for about 1.5 million SMEs, with profits of less than US$ 70k.

Ann Hebert, Nike’s general manager for North America, has resigned, after twenty-five years with the company following revelations that her son’s booming sneaker resale business became public. Her nineteen-year-old son, Joe, is connected with the West Coast Streetwear firm and it is reported that he used a credit card, in his mother’s name, to purchase shoes for his business, which he resold for a profit. In one case he allegedly bought US$ 132k worth of shoes, from which he made a profit of US$ 20k. Nike defended their manager, indicating that they had been aware of her son’s business since 2018 and saying, “there was no violation of company policy, privileged information or conflicts of interest, nor is there any commercial affiliation between WCS LLC and Nike, including the direct buying or selling of Nike products.”  It appears that bots were used to swarm online sale sites which negated systems meant to restrict purchases, to buy up popular, limited edition sneakers. Her son has done well but now Ann Herbert can no longer rely on her Mother’s Little Helper.

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You’ll Be The One Who’ll Lose!

You’ll Be The One Who’ll Lose                                                         26 February 2021

Sobha, which is building the US$ 4 billion Sobha Hartland project, near to MBR City, confirmed that the company’s partnership with state-owned Dubai developer Meydan ended “in an amicable way” after the completion of the first phase of the project. It hopes that 2021 sales will reach US$ 680 million, 1.3k units, this year; last month, sales of US$ 70 million were made, with February business “progressing well”. The developer noted that that “there has been some active interest from markets that were not active before such as Europe and Canada”, some of which could be attributable to “an increased interest in Dubai, considering the way the Covid situation has been handled and the kind of infrastructure that is provided here.” The market was seeing signs of recovery, as supply started to slow prior to the arrival of Covid, which delayed any recovery, but now there are positive indicators of a move upwards, driven by several factors, the latest of which is a weaker US dollar. The outlook for villa sales in the secondary market and upscale apartments appears promising, with price increases already being noted in certain locations. Latest official January figures recorded a doubling of ready unit sales to US$ 1.2 billion, while mortgage transactions jumped seven-fold to US$ 2.6 billion.

The latest developer, to come up with a special offer to attract buyers, is Reportage Properties, who have introduced a system of no down payments for its 380-unit Alexis Towers development, in Downtown Jebel Ali SZR.  Those who wish to acquire a studio apartment for US$ 109k, will only have to commit paying US$ 2.2k per month. Earlier, the developer had come up with an offer to waive all services charges for the first ten years of occupancy.

Last year, the RTA was successful in attracting several foreign investors to assist with infrastructure and services developments projects, through PPP (public-public partnerships) models to Build, Operate, Finance and Transfer (BOFT). Investments with firms, from the USA and Europe, exceeded US$ 272 million for projects including the air-conditioned bus shelters and Union 71 Project. The authority is keen to entice international partners and foreign investments in the transport sector and has started to develop smart and innovative solutions for new partnerships in investment and funding transport projects.

The first meeting between the UAE and Qatar, following the Trump-driven Al-Ula Declaration, took place in Kuwait on Monday. The main discussions were around ways to implement the Declaration, whilst stressing the importance of preserving Gulf unity, and developing a joint GCC action plan, in the common interest of all six member states. Both sides thanked  t heEmir of Kuwait, Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah, for his country’s efforts to heal the rift.

One sector that benefitted from the pandemic in 2020 was online sales within the country’s food and beverage market, which grew 225% to top US$ 412 million. The Dubai Chamber of Commerce and Industry’s latest report also forecast that this would have an 8.5% compound annual growth rate over the next five years to reach US$ 619 million by 2025. According to Hassan Al Hashemi, Vice President of International Relations at Dubai Chamber, the impressive growth figures were also down to Dubai’s advanced technology infrastructure, world-class logistics facilities, high-Internet penetration rate and high disposable income among consumers.

This week, the five-day Gulfood 2021, with 2.5k companies from 85 countries, became the world’s first in-person F&B event for twelve months. Known as the world’s most competitive sourcing hub, it has been run under strict and proven health and safety protocols. At a presentation at the event, the 26th edition of the world’s largest annual food festival, some interesting facts were revealed by Dubai Chamber’s Nizami Imamverdiyev,. The six biggest food importing countries, accounting for 53% of imports, were India (19%), New Zealand (13%), Pakistan (9%) and 4% from the USA, Egypt and Canada. Legumes, powdered milk, rice, sugar, onions and potatoes were the six leading imported food products, accounting for 17%, 14%, 13%, 9%, 7% and 5% of the total. When it came to reexports, sugar, legumes and dates were the top products. It was also reported that the UAE recorded a 6% growth in 2020 sales of fresh food products, up 6.0% to 2020, reaching US$ 7.9 billion, whilst sales of canned food products grew 4.0%.

Majid Al Futtaim posted a 7.0% decline in 2020 revenue to US$ 8.9 billion, with EBITDA down 19.0% at US$ 1.0 billion. Revenue from the conglomerate’s properties declined 14% to US$ 954 million, as EBITDA dropped 21% to US$ 627 million. The company’s Carrefour returns saw a marginal 1.0% dip in revenue at US$ 7.6 billion but EBITDA headed 14% higher to US$ 436 million. The company noted that it had enough cash, and available committed facilities, to cover all its financing needs for the next three years.

The latest in the Finablr saga sees the possibility of the consortium of Switzerland’s Prism and Abu Dhabi’s Royal Strategic Partners combining the former BR Shetty, and heavily indebted foreign exchange company, with Bahrain’s BFC Group Holdings. Initially, trading in gold bullion, Bahrain Financing Company, formed in 2017, moved into the remittance markets in the 1970s and was later acquired by Islamic lender Bank Alkhair, with its operations expanding into the UK, Kuwait and India. If the discussions prove successful, it would create “a market-leading, pan-global financial services company in the region”, servicing 24 million customers in 30 countries.

At the onset of Covid-19 last March, the Securities and Commodities Authority ordered the UAE bourses to limit cap per day to 5% of the last closing price. However, this has been amended to 10%, starting on Sunday 28 February

The bourse opened on Sunday 21 February and having shed 157 points (5.6%) the previous four weeks, lost a further 106 points (4.0%) to close on 2,527 by Thursday 25 February. Emaar Properties, US$ 0.02 lower the previous week, lost a further US$ 0.06 to close at US$ 0.95. Emirates NBD and Damac started the week on US$ 3.12 and US$ 0.33 and closed on US$ 3.05 and US$ 0.32. Thursday 25 February saw the market trading at 338 million shares, worth US$ 43 million, (compared to 116 million shares, at a value of US$ 49 million, on 18 February).

By Thursday, 25 February, Brent, US$ 8.43 (10.2%) higher the previous fortnight, gained US$ 1.15 (1.7%) in this week’s trading to close on US$ 66.68. Although the crude stockpile jumped surprisingly by 1 million bpd, over the week, oil prices have edged higher, mainly due to continued outages in the United States and a weaker dollar.  Gold, US$ 100 (5.3%) lower the previous four weeks, lost a further US$ 5 (0.3%), by Thursday 25 February, to close on US$ 1,771.

It seems that Boeing problems will not go away, with the US plane manufacturer recommending that all its 777-models, using Pratt & Whitney 4000-112 engines, should be grounded. This follows an incident last Saturday in which a United 777 had an engine failure which shed debris over Denver in Colorado.  Fortunately, the suspension only affects 128 planes, of which 69 are currently in service for United, Korean Air and two Japanese carriers. The Federal Aviation Administration has ordered extra inspections of Boeing 777 jets fitted with the Pratt & Whitney 4000 engine, following the incident. The initial finding of the National Transportation Safety Board is that damage was mostly confined to the right engine, with two fan blades fractured and the others impacted. Since the UAE General Civil Aviation Authority has been closely monitoring the grounding of 777 jets this has had no impact on the local airline because of the simple fact there are no registered aircraft operating with PW4000 engines in the country’s airspace and at the airport.

There was no surprise to see Qantas turning in a US$ 855 million loss, (pre-tax – US$ 1.3 billion), on the back of a US$ 5.5 billion slump in 2020 revenue; it is reported that the carrier has US$ 3.3 billion in available cash to ride out the “storm”, until Australia’s international border reopens, and domestic travel ramps up to more like pre-pandemic levels. The airline is running at just 8% of international capacity through trans-Tasman and repatriation flights. Qantas expects international travel to resume by the end of October, once Australia’s vaccine rollout is complete, and hopes that it will achieve 80% of pre-pandemic domestic capacity by the end of June. The carrier is expecting to have 40% of its international traffic back by the end of 2022 and not at 100% until 2024.

In a bid to boost its flagging cash reserves, BA plans to delay US$ 630 million in pension payments and will also draw down a five-year US$ 2.8 billion UK Export Finance-backed loan agreement with a syndicate of banks by the end of this month. The airline, owned by IAG, posted a US$ 1.5 billion Q4 loss and shares are trading 55% lower over the past twelve months. This follows the worst year in aviation history that has seen global passenger traffic slump by almost 70% in 2020 with the worst falls coming in April, at the beginning of the pandemic, and towards the end of the year – and into 2021, when further lockdown measures were introduced.

Since his departure from the Bank of England, Mark Carney has been busy becoming United Nations special envoy for climate action and now appointed to the board of Stripe. He is expected to help the financial technology business in preparing a new funding round to finance emerging carbon removal technologies. Founded in 2010, by Irish brothers John and Patrick Collinson, (and now each worth an estimated US$ 4.3 billion), Stripe sells software, allowing businesses to accept online payments. The company, valued at last April’s funding round, at US$ 36 billion, claims Amazon and Zoom Video Communications among its customers. It recently branched out to offer bank accounts to businesses through e-commerce providers.

The link between governments, banks and big business goes on throughout the financial world but sometimes it can become a little too cosy The UK has seen many cases where departing ministers will take on directorships or consultancies, with major commercial enterprises – banks being the usual favourites. Now the ongoing government enquiry into the shenanigans at Wirecard, once touted as a rare German technology success, has discovered that Werner Steinmuller, a Deutsche Bank executive board member, brokered meetings and conference calls between leading Wirecard executives and potential Asian clients for eighteen months until his retirement in July 2020. A parliamentary enquiry spent months looking into the implosion of Wirecard before it filed for bankruptcy in June 2020, after disclosing that US$ 2.2 billion of its cash, listed in its accounts, did not exist. Steinmuller had organised high-level meetings for the payment company’s CFO, Burkhard Ley, and a senior adviser, and former Wirecard deputy chairman, Alfons Henseler, in Hong Kong.

With the smell of some UK officials, either directly or indirectly making money from the sale of personal protection equipment, still whiffing around, comes news that Italian prosecutors are investigating a US$ 1.5 billion government purchase of PPE from China. It is alleged that a group of shady businessmen were paid tens of millions of dollars in illegal commissions to secure the contracts. The deals involving four Italian companies – Guernica, Microproducts It, Partecipazioni and Sunsky – “illicitly served as concealed intermediaries” between the government and a Chinese consortium, receiving illegal payments from the Wenzhou-based groups. Facing a shortage of masks last March, the government placed an order for 800 million of them from three Chinese companies – Wenzhou Moon-Ray, Wenzhou Light and Luokai Trade – with the tender being awarded because of the mediation of the Italian companies’ owners, who allegedly received the “backhanders”. One of the Chinese companies, Luokai Trade was only incorporated five days before the order was formalised. Three of the Italian “alleged benefactors” were Sunsky, who were paid US$ 69 million by the Chinese for delivering  the PPE to Italy, Ecuadorian Jorge Solis, a friend of Daniele Guidi, a business partner of Sunsky’s chief executive, Andrea Tommasi  – US$ 7 million and US$ 14 million to the founder of Microproducts It, Mario Bennoti, (a long-time acquaintance of Domenico Arcuri, Italy’s emergency commissioner for the pandemic response), for introducing Solis and Tommasi to the commissioner’s office.

The latest high-level Austrian corruption probe seems to be slowly entangling chancellor Sebastian Kurz. Late last week, fraud police raided the house of finance minister, Gernot Blumel, who is regarded as a key suspect into a graft inquiry between the country’s lawmakers, senior officials and the Austrian gambling company Novomatic. In the arresting warrant, Kurz’s name was mentioned 42 times and his minister, a close confidant, only 23 times.  The chancellor is no stranger to scandals, as a political corruption scandal brought down his first government in 2019. This enquiry centres on Blumel’s 2017 role to lobby the Italian government for a US$ 46 million tax rebate in return for political support.

With twelve banks joining its financing deal, Tencent raised US$ 8.3 billion, with its biggest ever loan to be used for general corporate purposes. Last month, it received a US$ 1.6 billion loan to help it acquire more shares in Universal Music Group International. The creator of the messaging platform, WeChat, has seen its market value jump over US$ 200 billion to almost US$ 1 trillion. What started life as a social media platform has, over the past decade,  expanded into other areas such as grocery delivery and has invested billions of dollars in a wide range of promising start-ups.

Amazon had a rare win in India this week, with the Supreme Court putting an end – albeit temporarily – to Future Group’s US$ 3.4 billion sale of retail assets to Reliance Industries; the US tech giant challenged the deal amid fierce competition for domination of the country’s US$ 1 trillion retail sector. The court petition contested that Reliance Industries’ transaction violated Amazon’s contract with Future Group and it overturned the contrary decision by a lower court as well as not permitting the companies tribunal from approving the deal until further notice. Future Group is an old-fashioned bricks and mortar retailer, badly hit by the pandemic and associated lockdowns, that could go bankrupt if the deal with Reliance is permanently shelved. Amazon sees a big future in a fast-expanding Indian market of 1.3 billion people and is spending billions to obtain a bigger slice of the e-commerce cake.

Just when you thought that it was safe to go back into the water, GameStop’s share price, more than doubled in the final trading hour on Wednesday to US$ 91.71, There is no logical reason in the world why US investors have piled back into what is a struggling bricks and mortar video game retailer. Last month, to say the stock was volatile would be an understatement, as it surged 2,400%, reaching US$ 483. The stock was the subject of an epic “short squeeze”, as amateur traders on Reddit forums helped send its share value to unprecedented highs in a manner to punish hedge funds, such as Melvin Capital, that had taken outsized bets against the company; complicating matters further on Wednesday, not only did the system crash but also Reddit’s website was down shortly after 8:00am AEDT, leaving thousands of users unable to get onto its platform.

Uber received a major blow when the UK Supreme Court ruled that their drivers are not part of the gig economy but are “workers” and are entitles to labour rights such as a minimum wage, holiday pay and rest breaks. This is a financial problem not only for the US tech giant but also against the gig economy which relies on not having to pay their “employees” normal industry rates and rights. There are many who consider that the rights of such workers, who are only paid on a sort of piece rate, have been abused.

Nobody really knows who won the big fight down under, with both sides claiming some sort of victory. A week earlier, and after what seemed to be acrimonious negotiations, Facebook decided to cut off news content in Australia, followed by a Mexican standoff for several days. Then Facebook accepted a number of technical concessions from the Australian government and agreed to restore news content. Whilst Facebook were happy with these amendments, opposition lawmakers warned that smaller media players may be overlooked, Australian Competition and Consumer Commission Chair Rod Sims said the bargaining power imbalance had been righted. It does appear that Australia has become the first country in the world to stand up to the bullying tactics of the tech giants, who in future will have to pay rates, as set by the government arbitrator if negotiations with media companies fail. (The fight against the tech giants may now have been taken to India, with calls from that country’s largest newspaper, with a 71 million circulation, for Google to pay publishers 85% of ad revenues).

It is reported that Asda is planning a major restructuring of its business which could put about 5k jobs at risk, including 3k non-store jobs, such as cash management, where work has diminished because of increased on-line shopping. There could be cuts and closures at two online-only stores, in Dartford and Heston, that are used to pick online orders; this could result in 800 lost jobs, as orders will be taken by using regular stores. It also plans to change about 1.1k store management roles. The changes have come about from the rise in online shopping, accelerated by Covid-19, a trend that seems certain to continue even if and when Covid-19 abates. The company said it planned to create 4.5k jobs, mainly as order pickers and delivery drivers.

It seems that Hermes has recovered well from the initial Covid-19 blow, returning strong sales in the latter half of 2020. The French Birkin bagmaker posted a 16.0% hike in Q4 global revenue, helped by sales increasing 47% in Asia, driven by marked improvements in China, South Korea and Australia, as well as much improved online activity. Profitability came in better than expected, with the gross margin reaching a record 37% in H2. Noting that “the absence of tourists was offset by the loyalty of our local customers and a strong increase in online sales”, executive chairman Axel Dumas advised that 2020 revenues, at constant exchange rates, declined by just 6.0% to US$ 7.7 billion.

In line with other carmakers, Renault has had a miserable year, posting a record annual loss of US$ 9.7 billion, with much of the deficit coming in H1 when almost universal lockdowns crippled vital shipments. About US$ 5 billion of the loss, mostly incurred in H1, was attributable to Nissan. H2 saw marked improvements when it generated an operating margin of 3.5%, which resulted in a positive automotive operational free cash flow. The French company warned that 2021 will not be much better and that a global shortage in auto chips could cut its car production by 100k vehicles and that the industry will be faced with lingering coronavirus restrictions and supply chain challenges. Chief executive, Luca de Meo, commented that in 2021, “the priority is profitability and cash generation.”  

The Hong Guang Mini EV, selling in China for US$ 4.5k, is currently outselling Tesla’s more upmarket cars. The budget electric car is made by China’s leading automaker, the state-owned SAIC Motor, in a JV with General Motors. In January, sales of the compact car, at 25.8k, were almost double that of Tesla, (which has  recently been questioned over safety issues). The EV was the second most popular car, behind Tesla, with sales of 112k vehicles. The company also markets an upgraded model, with A/C, for just over US$ 5k, and although their technology is not as good as Tesla’s, when it comes to battery, range and performance, it does have a top speed of 100kph and can cosily hold four people.

This week, the US Central Bank saw the system, that it uses to process transactions  every day of more than US$ 3 trillion, fail. The Fed, which handled over 184 million transactions last year, confirmed that the disruption was caused by an “operational error”, with some services restored within three hours. However, others continued to take longer to fix, including its Fedwire Funds system. The crash added to the pressure the bank is facing to keep up with tech disruptors. Earlier in the week, Fed Chair, Jerome Powell, was asked what plans the bank had for digital currencies and replied that extensive research into the idea of a digital dollar would be carried out in 2021 and added it was a “high priority project”.

Last Friday, Bitcoin hit a record market capitalisation of $1 trillion, once again silencing its many critics warning that it is an “economic side show” and a poor hedge against a fall in share prices; when it reached US$ 56.4k, crypto currency had gained an impressive 14% in one week’s trading – and 70% in the first nineteen days of February. Time is proving an ally for Bitcoin, which accounts for about 59% of all digital coins, as an increasing number of mainstream companies, including Mastercard, BNY Mellon and Tesla are beginning to use the cryptocurrency. There are some who consider that there is still a lot of upside for Bitcoin, noting that the market cap for gold is estimated at this side of US$ 10 billion, so if it only reached half of that level, it could easily top US$ 250k. Others are concerned that because of its volatility, and lack of regulation, it will not really work in the everyday commercial environment

Applications for US state unemployment benefits fell 110k to 730k – their lowest level since November – a sure indicator that employment is recovering, as vaccinations begin to make an impact and cases are declining.

Having spent the first few days of his presidency undoing many of the changes that Donald Trump had introduced, President Joe Biden, has frozen sales of some arms and ended the US support for Saudi’s six-year war in Yemen. But with the Houthi rebels attacking a civilian plane in Saudi last week, the US came out saying it would “not stand by” while the Houthis launched such attacks and was committed to “bolster” Saudi defences against incursions. It also appears that future formal discussions will be held with King Salman, rather than his son Crown Prince Mohammed. This represents a marked difference to the approach taken by Donald Trump, who sometimes spoke directly with the Crown Prince and even invited him to the Oval Office. It also seems a matter of time before the Biden administration re-enters the Iran nuclear accord, from which the former President extricated the US in 2018.

By the end of Thursday trading, the US markets had posted losses on the day, with the Dow Jones 1.75% lower at 31,402, the tech heavy Nasdaq down 3.52% to 13,119 and the S&P 500 2.45% weaker on 3,829. European bourses also posted declines, but on a smaller scale, with the FTSE 100, the DAX and CAC 40 closing 0.11% down at 6,652, 0,69% lower at 13,879 and 024% weaker at 5,784 respectively. Tech shares led the US declines which coincided with a selloff in global bonds, as the benchmark treasury yield hit a one year high. After Jerome Powell’s reassurance that current policy will continue, yields will keep heading north.

The latest lockdown restrictions resulted in January UK retail sales falling 8.2%, month on month, as many stores closed, with department and clothing store sales facing the brunt of the decline. As has happened throughout the eleven months of Covid-19, online sales continued their upward trend, accounting for 35.2% of total spending. January was the second worst performing month in the Covid era. Figures could have been worse, but it seems that retailers sold more food and alcohol because of the enforced closure of pubs and restaurants.

At next Wednesday’s budget, UK Chancellor, Rishi Sunak. Is expected to extend the stamp duty holiday a further three months, until the end of June. There were concerns that the property market would collapse if it all ended on 31 March, with the conveyancing system struggling, with a recent surge in transactions. The “holiday”, introduced last July, by which the first US$ 707k (GBP 500k) of the purchase price of a main residence in England and Northern Ireland was exempted from stamp duty; this could save potential house buyers – both UK residents and overseas parties – up to US$ 21k (GBP 15k) on the closing price. UK house prices jumped 8.5% last year, to US$ 356k because of this tax break and pandemic-induced demand for more space.

Latest data confirms that the furlough scheme in the UK, until the end of January, had cost the taxpayer US$ 76.2 billion to date, (and probably over US$ 100 billion when it is stopped), with the jobs covered by the scheme topping 4.7 million; furlough protection is due to end at the end of April. To pay for this – and other costs associated with tackling the impact of Covid-19 on the economy, including borrowing costs of the US$ 570 billion already incurred this financial year – the Chancellor has to start looking at ways to raise government revenue which will inevitably see taxes moving higher. One obvious candidate, in next week’s budget, is an inevitable rise in Corporation Tax.

Last month, UK government borrowing hit a record January high of US$ 12.4 billion and it was the first time in a decade that more has been borrowed in January than collected through tax and other income. There was extra spending of US$ 11.3 billion for PPE and vaccines and US$ 7.1 billion on wage support, including furlough. Some positives in the month were a US$ 3.0 billion reduction in interest payments and the saving of US$ 3.1 billion for no longer contributing to the EU budget. In the ten months of the fiscal year, government had spent US$ 381.8 billion, compared to just US$ 68.6 billion a year earlier; by the end of the year in March, the figure could top US$ 555 trillion. With the national debt now at just under US$ 3 trillion, the country’s overall debt equates to 97.6% of GDP a level not seen in nearly sixty years. Gone have the day when January was a time when the Treasury coffers filled and more paid into the kitty than spent.

The UK has agreed to a month’s extension, to the end of April, to let the EU ratify their post-Brexit trade deal, bringing more uncertainty to the fragile start to their new relationship. Although the agreement, covering trade, security and fisheries, was signed on Christmas Eve, the EC applied the deal provisionally to give members of the European Parliament time to study its contents further before ratifying the deal. Although this should be a formality, there are more than a few Europeans, including Maros Sefcovic, the EU commissioner in charge of overseeing the Brexit deal, who may disagree. He is on record saying “we have already seen some of the changes brought about by this and I think it is clear to everyone now that our partnership with the UK does not replicate or resemble its former membership of the EU.”

According to financial consultancy Bovill, 1.5k EU finance firms, including money managers, payment firms and insurers, are considering opening offices in the UK for the first time. If these forecasts bear fruition, it will be good news for the various UK professional firms, including accountants, lawyers, consultants etc, as well for the services sector in general. That total included 400 insurance firms and 100 banks, with three countries providing 39% of the firms – Ireland (230), France (186) and Germany (168); the next three were Cyprus, Netherlands and Luxembourg with 151, 106 and 101 firms interested in a move to post Brexit Britain. As mentioned in previous blogs, it is important that both the UK and the EU reach an agreement on financial services equivalence. Eight weeks after Brexit, it seems that the UK is currently in a stronger economic position than the EU and there is a feeling that those Brexiteers were right to warn their European partners that You’ll Be The One Who’ll Lose!

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Good Day Sunshine!

Good Day Sunshine!                                                                          19 February 2021

Positive news on the Dubai property front saw January secondary/ready properties transactions jump to its highest level since March 2014, with a total of total of 3.3k sales transactions, worth US$ 1.84 billion. Compared to January 2020, the figures were 37.0% higher in monetary terms and 15.5% in transactions, with many analysts seeing this upward trend continuing into the year. Q4 had seen 11.1k sales transactions, totalling US$ 6.01 billion. There are various factors driving this forward, including the proactive measures and incentive packages launched by the government to address the effects and consequences of the outbreak of Covid-19, rock bottom property prices coming off six-year lows and historically inexpensive mortgage rates. In January, the swing back to secondary sales, rather than off plan, continued with the ratio increasing to 72:28 of all transactions; there were 2.4k property sales in the secondary market, valued at US$ 1.48 billion. Of total sales transactions, 70% were still for apartments and 30% for villas. The four most popular areas, accounting for 40.0% of total villa sales, were Nad Al Sheba (11.5%), Dubailand (11.4%), Meydan (7.5%) and Dubai Hills Estate (6.0%). For apartments the top four were Business Bay (12.4%), Marina (9.7%), Jumeirah Village Circle (9.3%) and Downtown (5.6%).

By Thursday, there was a weekly total of almost 1.3k property transactions, valued at US$ 1.34 billion, including eighty plots for US$ 114 million and 776 apartments/villas for US$ 335 million. The top two locations for number of sales were to be found at Nad Al Shiba Third (24 transactions, valued at US$ 159 million) and Al Hebiah Fourth (8 transactions – US$ 8 million).  The top three transactions of the week were all land deals – two at Jebel Ali Industrial Second, (one for US$ 21 million) and Island 2 for  US$ 10 million.

With the aim of expanding regional operations, real estate software tech start-up Xplor has raised US$ 3 million in a funding round, led by Ayana Holding. The five-year old entity provides a master-planning software that covers all aspects of the business, including marketing, sales, leasing and facilities management. It does not only assist developers reduce capital expenditure but also helps investors choose by use of 3D models and online viewings.

As expected, Dubai International posted a 70% slump in 2020 passenger numbers to 25.9 million, having handled 17.8 million in pre-Covid Q1. The UAE officials issued directives to suspend most commercial flights in April, with Dubai reopening to international visitors in July. The airport handled 184k flights last year, down 51.4% year-on-year, while the average number of travellers per flight decreased 20.3% to 188. Annual air freight volume fell 23.2% to 1.932 million tonnes in 2020. Even with these disappointing figures, Dubai International exceeded London Heathrow passenger numbers which were 73% down, at just 22.1 million. By passenger numbers, India continued to be the top destination, with traffic for 2020 reaching 4.3 million, followed by the UK with 1.89 million and Pakistan with 1.86 million.

With approval granted by the UAE’s General Civil Aviation Authority, Flydubai will now “start the process of preparing the aircraft for passenger service”. The airline has the second biggest order with Boeing for the Max 737 – after Southwest Airline – and already had a fleet of eleven Boeing 737 Max 8 and three 737 Max 9 aircraft which have been grounded since March 2019. The chief executive of Flydubai, Ghaith Al Ghaith, noted that “safety is the founding principle of our business. We said that we would only return the aircraft to service when it was safe to do so and that time is now.” Flydubai said it is “too early” to say when the 737 Max returns to service but will announce routes serviced by the aircraft at a later date. The regulator has insisted that every flydubai Boeing 737 Max will have to undergo software enhancements and additional protections to the Manoeuvring Characteristics Augmentation System.

The RTA services about 947k daily users on its various public transport facilities which equates to an annual 2020 total of nearly 346 million riders. During the year, 113.6 million used the Metro (74.5 million on the Red Line and 39.2 million on the Green), 109.9 million in taxis and 95.4 million on public buses. Those three modes of transport accounted for 319 million or 92.2% of the total users. Shared transport means, such as e-hail and smart rental vehicles lifted 15.3 million riders, marine transport ferried 8.05 million people and Dubai Tram 3.65 million passengers; this accounted for 27 million or 7.8% of the 2020 total users.

With imports, exports and reexports at US$ 4.4 billion, US$ 1.0 billion, and US$ 435 million, the value of 2020 Dubai’s external trade was US$ 5.9 billion. The figures were released at a recent meeting between representatives of Dubai Customs and British Customs, where the main items of discussion included the implementation of Brexit and the following consequences on trade, travel and security. One interesting fact from the meeting was Ahmed Mahboob Musabih remarking that “the UK and Dubai have seized 198 million cigarettes and 122 tonnes of illegitimate tobacco products that were to be transported to the UK.” Dubai will host the fifth World Customs Organisation’s Global AEO Conference, in coordination with the World Customs Organisation and the Federal Customs Authority this May; the event is expected to see the participation of around 1.5k experts.

Despite the Covid-19 impact, DMCC announced a record-breaking performance in 2020, as over 2k new companies joined the free zone – the highest number of registrations in five years, with retention rate remaining at an all-time high. The latter was primarily due to the Business Support Package that saw more than 8k member companies utilising over 13k  offers and incentives throughout 2020. DMCC, with over 18k registered companies, was awarded Global Free Zone of the Year by the Financial Times’ fDi Magazine for a record sixth consecutive year.

Over the past decade, DMCC’s commodity trading has come on by leaps and bounds. With gold and diamonds accounting for over 15% of the country’s exports, a total of almost US$ 25 billion worth of diamonds were traded through the DMCC’s Dubai Diamond Exchange (DDE), the world’s largest diamond tender facility. The free zone has helped develop the new UAE Gold Delivery Standard and continues to be a leading hub in the global gold and precious metal trading landscape. The DMCC Coffee Centre processed and handled seven million kg of coffee, as well as facilitating US$ 68 million worth of coffee shipments from 25 countries. The DMCC Tea Centre transacted 40k metric tonnes of tea during 2020.

DMCC’s subsidiary, Dubai Gold and Commodities Exchange, now in its sixteenth year, traded 12.73 million contracts valued at US$ 320.7 billion. For the third year in a row, the DGCX received the prestigious “Exchange of the Year” award at the Futures and Options World Global Investor MENA 2020 event. The DMCC Trade Flow platform registered US$ 202 billion worth of transactions – an increase of 121% on the year, as the transaction value of Islamic products jumped 128%. In August, the Agriota e-Marketplace, a technology-driven agri-commodity trading and sourcing platform that uses blockchain to help bridge the gap between millions of rural farmers in India and the UAE’s food industry, was launched.  More than 92k farmers have registered on the platform to date.

More than fifty storeys of DMCC’s flagship Uptown Tower have been completed and, when finished, it will encompass 81 floors and be 340 mt high. Designed by world-renowned architects, AS+GG, it will house a 188-key five star hotel – SO/Uptown Dubai – 229 signature SO/ branded residences and 46k sq mt of Grade A office space.

Dutch global payment technology provider firm Adyen, with a market capitalisation of US$ 80 billion and having processed over US$ 367 billion worth of transactions in 2020, has set up its regional base in the DIFC, adding to their other hubs in New York, London, Hong Kong, Singapore and Tokyo. The move will allow the Dutch firm to launch regional operations seamlessly, whilst providing local merchants with frictionless access to the Adyen platform.

Following Indian courts’ decision, as well as from the DIFC, to freeze the disposal of any assets belonging to disgraced billionaire BR Shetty, a court in London has done likewise. with the court decision also including assets of other shareholders and former top executives, including Prasanth Manghat. The founder stepped down as chief executive in February last year,  The latest decision covers any assets held anywhere in the world but to the outsider, a lot of assets may have already gone elsewhere. The London case was instigated by ADCB after it appears that billions of dollars in bank loans/credit were diverted from the accounts of NMC Healthcare over a number of years. A report in the Financial Times indicates that ADCB, which is the main creditor with exposure of over US$ 1 billion, specifically named the NMC founder as being the “chief protagonist” in the whole billion-dollar saga. This case has Bollywood – or even Hollywood – written all over it.

Tabreed reported a 16.5% jump in 2020 net income, to US$ 150 million, (and EBITDA by 27% to US$ 264 million), as revenue grew 14.5% to US$ 474 million, attributable to organic and inorganic capacity additions to its business. The board has recommended a 10% increase in dividends, with shareholders receiving a cash dividend of US$ 0.0157 and a bonus share issue of 1 for every 45 held – this equates to an overall dividend payment of US$ 0.0313 per share. The National Central Cooling Company has 86 district cooling plants, including in developments such as the Burj Khalifa and Dubai Metro. In 2020, the company acquired an 80% majority stake in Emaar Properties’ Downtown Dubai district cooling business for US$ 676 million, with Emaar retaining the balance under a long-term partnership deal.

Deyaar recorded a US$ 59 million loss in 2020, (compared to a US$ 19 million 2019 profit), driven by higher impairments and fair value adjustments forced on the Dubai-listed developer by the impact of Covid-19. Revenue was down by 32% to US$ 112 million, with net operating profit falling 4.7% to US$ 7 million. Last year, its shareholders approved a plan to write off accumulated losses by reducing its capital by US$ 335 million to US$ 1.24 billion. Deyaar’s construction timetable continued during the crisis, with its Bella Rose project in Dubai Science Park completed ahead of schedule. The nineteen-year old company – with DIB holding a majority shareholding – has developed many projects in Dubai, including in Business Bay, Dubai Marina, Al Barsha and Jumeirah Lakes Tower. 

Union Properties posted a 2020 US$ 55 million profit, compared to a US$ 61 million loss a year earlier, driven by its turnaround strategy and a decline in operating costs; revenue fell 11.0% to US$ 102 million. By the end of the year, assets had climbed 2.2% to US$ 1.63 billion, with shareholder equity 6.6% higher year-on-year to US$ 787 million. The turnaround strategy being implemented by the company’s board has allowed it to reduce accumulated losses and increase shareholder equity and also involved diversifying operations and developing recurring revenue lines. Last August, it reached an agreement with Emirates NBD to restructure an outstanding debt of US$ 258 million and it also agreed to sell a 40% stake in its Dubai Autodrome subsidiary for US$ 109 million. The company also has plans to list three of its subsidiary companies – facilities management firm ServeU, interiors contractor The FitOut and Dubai Autodrome – on the DFM at a yet to be announced date.

Damac has had better years, as it posts a 2020 loss of US$ 282 million, (compared to a US$ 10 million deficit in 2019), with revenue up 7.0% to US$ 1.3 billion but property sales slumping 26% to US$ 627 million. The developer’s total assets dipped 11% to US$ 5.7 billion, while its gross debt stood at US$ 872 million, by the end of 2020. Its chairman, Hussain Sajwani, noted that the lockdowns had had a dire effect on tourism “which has been a critical force that drives Dubai’s economy and boosts its property market”. He has forecast that it will take at least 12 to 24 months to see a substantial recovery.

Yet another casualty of the pandemic, Emaar Properties posted a 20.0% decline in revenue to US$ 5.4 billion, as net profit sank 58% to US$ 711 million; in 2020, Dubai’s largest listed developer by market capitalisation, managed to sell almost U$ 3.0 billion worth of property during the year as it recorded “sustained interest from investors, both domestic and foreign”. At year end, it had a US$ 10.0 billion backlog and is currently developing a further 38k properties, having already delivered 72k residential units since 2012. It has more than 1.14 million sq mt of revenue-generating assets and now earns over 50% of revenue from its malls, hotels and international business units. Emaar Development posted a 23% fall in 2020 revenue to US$ 2.66 billion, resulting in a 39% decline in net profit to US$ 450 million.  Emaar’s international property development arm posted a 10% rise in 2020 revenue to US$ 1.31 billion.

Etisalat posted a 3.8% hike in 2020 profit to US$ 2.5 billion, although revenue dipped 0.9% to US$ 14.1 billion, driven by what is now considered the normal driver for many corporates – the Covid-19 pandemic that resulted in temporary lockdowns, restricted mobility and travel bans, leading to reduced activities in most of the UAE’s biggest telecom operator’s markets. The company’s earnings per share nudged 4.0% higher in the year to US$ 0.283, as it now reaches 149 million subscribers in sixteen countries across the Middle East, Asia and Africa. The telco, which is 60% owned by Emirates Investment Authority, recently increased its foreign ownership cap to 49%, from 20%, to attract more external investors.

Meanwhile du, the company that became the country’s second telecom in 2007, breaking Etisalat’s previous long-term monopolistic hold on the local market, posted a 16.7% decline in 2020 profit to US$ 283 million, with revenue 11% lower at US$ 2.83 billion.

Dubai Islamic Bank posted a 34.0% decline in 2020 net profit of US$ 895 million, driven by impairment charges, (more than doubling to US$ 1.23 billion), and operating expenses, 16.0% up at US$ 736 million, brought on by the impact of the coronavirus pandemic. Customer deposits and total bank assets both grew 25.0% on the year, to US$ 56.1 billion and US$ 78.9 billion respectively, with net financing and sukuk investments jumping 26.0% to US$ 63.2 billion. Last year, DIB completed its takeover of rival Noor Bank to create one of the largest Islamic banks in the world, with almost US$ 75.0 billion in assets.

Shuaa Capital had a good year, with the investment bank reporting a 166% rise in its 2020 net income, driven by higher recurring revenue, as it launched several new investment vehicles.  Its gross profit was US$ 34 million and EBITDA 87% higher at US$ 95 million, including US$ 20 million in “valuation adjustments” of its non-core assets unit, as a measure to accelerate its wind down, US$ 28 million net “mark-to-market gains” on portfolio assets, including associates, and US$ 31 million in other valuation adjustments on investment portfolios.

The bourse opened on Sunday 14 February and having shed 100 points (3.7%) the previous three weeks, lost a further 57 points (2.2%) to close on 2,633 by Thursday 18 February. Emaar Properties, US$ 0.02 lower the previous week, lost another US$ 0.02 to close at US$ 1.01. Emirates NBD and Damac started the week on US$ 3.17 and US$ 0.33 and closed on US$ 3.12 and US$ 0.33. Thursday 18 February saw the market trading at 116 million shares, worth US$ 49 million, (compared to 187 million shares, at a value of US$ 45 million, on 11 February).

By Thursday, 18 February, Brent, US$ 5.60 (10.2%) higher the previous week, gained US$ 2.83 (4.7%) in this week’s trading to close on US$ 63.53. Gold, US$ 54 (3.9%) lower the previous three weeks, lost a further US$ 46 (2.5%), by Thursday 18 February, to close on US$ 1,775.

Only the battle-hardened aficionados of quizzes would have any inkling on the identity of Laszlo Hanyecz. In 2010, his order for two pizzas was the first known commercial transaction of cryptocurrency, expending 10k Bitcoins, that would now be worth US$ 446 million! On the previous Thursday, the crypto currency was trading at US$ 47,200 after Tesla bought US$ 1.5 billion in Bitcoin and announced that it would accept the digital currency for the purchase of cars; by Thursday 18 February, it was trading at US$ 51,463, with a market cap of US$ 959 billion. There are some analysts who see this maybe tripling over the coming months, but any investors will face a volatile time, with many ups and downs. In 2020. Bitcoin fell 80% at the beginning of the year before it quadrupled by the end. Interestingly, merchant-related transactions accounted for 0.3% of cryptocurrency spending last year with 99.7% dominated by an explosion of trading.

Barclays posted a 29% fall in 2020 pre-tax profits, to US$ 4.2 billion, with the main driver being the US$ 6.7 billion to cover loans unlikely to be paid back amid the economic fallout of Covid. During the pandemic, the bank has given over US$ 37 billion of emergency loans during the coronavirus crisis, as well as providing more than 680k payment holidays globally for customers with mortgages, credit cards and loans. Despite the disappointing returns, the bank has resumed dividend payments of US$ 0.014 per share, (GBB 0.01), and announced that its staff bonus pool would be 6% higher than the US$ 2.0 billion paid out in 2019. Pity must go out to CEO, Jes Staley, who saw his pay drop from US$ 8.2 million to just US$ 5.6 million.

One who will struggle to make a bonus this year is Michael Corbat, the chief executive of Citigroup. This week, rather surprisingly, the bank lost a legal battle in the US courts to recover US$ 504 million from Revlon Inc lenders, paid to them by mistake. US District Judge Jesse Furman ruled in favour of the ten asset managers for the lenders who do not have to return US$ 504 million that Citibank had mistakenly transferred last August, while trying to make an interest payment. The judge ruled that they should not have been expected to know that the transfer, totalling more than US$ 900 million, before some lenders returned their share, was an error.

In order to meet its ambitious 2030 target to create a 100% recyclable, plastic-free bottle -capable of preventing gas escaping from carbonated drinks – and as part of its strategy to produce zero waste by 2030, Coca Cola is to test a paper bottle. Denmark’s Paboco is to make the prototype from an extra-strong paper shell that has to withstand drinks that have been bottled under pressure, as well as the requirements to be mouldable, to create distinct bottle shapes and sizes for different brands and take ink for printing their labels. Only last year, charity group ‘Break Free From Plastic’ placed the drinks giant as the global number one plastic polluter, followed closely by Pepsi and Nestlé. (Carlsberg and Absolut are also building prototypes of a paper bottles). Whether this is the future of such drinks or just a fad, remains to be seen as most plastic drinks bottles are already recycled.

Despite thousands of jobs being lost over the past two years, Jaguar Land Rover has announced plans to cut a further 2k global jobs over this year, but this will not include production staff. JLR, with its HQ in Coventry and plants in Castle Bromwich, Solihull, and Halewood, has seen a decline in sales and has started a full review as it prepares to become a “more agile organisation”. The company also confirmed that all cars will be electric after 2025 and no manufacturing jobs will be lost at its UK operations.

There are rumours that the Indian operations of TikTok may be sold by Bytednace to rival unicorn Glance, a subsidiary of mobile advertising technology firm InMobi, which also owns short-video app Roposo. Since TikTok was banned by the Indian government last July, Japan’s SoftBank Group Corp, a backer of InMobi Pte, as well as TikTok’s Chinese parent, ByteDance, has reduced staff numbers in its 2k India team and made noises that it is unsure of resuming local operations. The Indian government has retained its ban on TikTok and 58 other Chinese apps, on issues such as compliance and privacy, but if any sale is made, it will be certain to insist that user data and technology of TikTok stay within its borders.

There is no need to tell Neil Woodford about the meaning of “gall”, as it appears that he thinks an apology will suffice for what he did wrong when Woodford Equity Income Fund went belly up in 2019, resulting in many investors incurring big losses. The then star fund manager had spent 26 years building up his reputation at the City firm Invesco, before he set up his own business. He has recently admitted that “I’m very sorry for what I did wrong. What I was responsible for was two years of underperformance – I was the fund manager, the investment strategy was mine, I owned it and it delivered a period of underperformance.” Consequently, his flagship fund was first suspended, then shut down, with Mr Woodford removed as investment manager in October 2019. Whether he can regain his former “investment magic” and whether he can entice new investors to believe that he can, remain to be seen. Someone has to ask the questions – what are the regulators doing and why are they allowing such a move?

As noted in previous blogs, the Australian casino group Crown Resorts is in deep trouble after an enquiry has found the company not fit to hold a gaming licence in New South Wales, following a scandal over money laundering allegations within its casinos; this means that it will be unable to open a new casino in the State – and probably anywhere else in the country. Following the findings, the chief executive, Ken Barton, departed the company, with the spotlight now being shone on the casino’s majority holder, James Packer. His Australian properties in Perth and Melbourne have been dogged by allegations of illegal activity for years, including Chinese high rollers linked to organised crime groups. Other causalities may include the gaming regulators in Victoria and Western Australia for their failure to pick up Crown’s misconduct. This Monday saw the first to fall – WA’s chief casino regulator had resigned after it was revealed he was friends with senior members of Crown’s legal team.

With its Q4 economy slowing from 5.3% the previous quarter, but still expanding by 3.0%, Japan posted a 4.8% decline for the whole year in 2020; the country last had a contraction in 2009, post GFC. Going forward, annualised growth – which assumes that Q4 figures will be replicated throughout 2021 – is forecast at 12.7%. Per se, it indicates a strong rebound this year but some fear that this will not occur because the country is well behind western economies in vaccine distribution and could have to reintroduce stricter lockdown measures. This fact alone will see the country post negative Q1 figures.

However, Japan’s Nikkei index briefly hit 30,000 for the first time since 1990, gaining ground at last after what seems to have been years of stagnation. The recovery has been driven by an anticipated global rebound from the Covid-19 pandemic, with the bourse’s abundance of cyclical shares, such as electronic parts makers, attracting global investors to push the numbers north. Whether it will top its 1988 high of 38,957 remains to be seen but is unlikely.

Following a 12.4% Q3 growth, the eurozone economy returned to earth, recording a 0.6% contraction in Q4 returning the economy to weaken 5.0% over the whole of 2020. Although the employment rate over the last two quarters of 2020 showed 1.0% and 0.3% rises, the year-end figure was still 2.0% down on 2019. Meanwhile, employment grew 0.3% on the quarter in the last three months of 2020, after a 1.0% quarterly rise in Q3, but the reading was still 2.0% lower than in the same period a year earlier. Government action, with various job protection schemes, such as furloughing, prevented the unemployment figures from probably touching 20%, but by the end of December, the unemployment rate came in at 8.3%. Latest EC figures sees the bloc cutting their 2021 economic growth forecast from 4.2% to 3.8% but a lot will depend on whether the bureaucracy eventually gets to grip with its vaccination protocol.

Last September, the then President Trump barred the US population from downloading TikTok and WeChat, following which both Chinese enterprises approached the courts to suspend the orders. In a softly softly approach, Joe Biden has petitioned the two different courts to defer these suspensions so that an “evaluation of the underlying record justifying these prohibitions” could take place. ByteDance-owned TikTok has about 12.5% of its eight million global users residing in the US, whereas WeChat, with one billion users worldwide, has only 2% of its revenue stream flowing from the US. It is unlikely that the new administration will go hard on these two tech giants and that it will not worry about the growing impact that Chinese tech apps will have on US lives.

The Organisation for Economic Co-operation and Development announced a 4.9% contraction in output last year – its largest decline since 1962 and the Cuban Missile Crisis. Q3 and Q4 growths were at 9.0% and 0.7%. The organisation’s seven major countries   saw the overall economy slow 0.8% in Q4, ranging from a 3.0% expansion in Japan, followed by Canada, UK, US and Germany with growth figures of 1.9%, 1.0%, 1.0%  and 0.1%; there were economic contractions in France (minus 1.3%) and Italy (minus 2.0%). All countries in the bloc recorded 2020 falls in output, ranging from the US (3.5%) to the UK’s 9.9%, with France and Italy also falling by 9.3% and 8.9% respectively.

The UK posted its worst ever annual economic results since 1707, as the country’s economy slumped 9.9%, driven by Covid-19. However, Q4 economy did post positive data, with the economy 1.0% higher and this will negate any possibility of a recession – technically when a country sees two consecutive quarters of contraction – because of the inevitability of the third lockdown resulting in Q1 moving back to negative territory. The BoE have forecast a Q1 fall of 4.0% but most analysts see a mega rebound if and when restrictions are eased, and some sort of normalcy returns. Public sector borrowing reached US$ 47.0 billion in December, bringing the nine-month YTD figure to a record to US$ 373.7 billion. The Institute of Financial Studies estimates that Chancellor Rishi Sunak will have to implement tax rises of at least US$ 83 billion to balance the books, following the Covid-19 crisis.

Sterling hit a near three year high on Monday at US$ 1.391, with positive news on the UK’s vaccine protocol, with fifteen million vaccines having already been administered. By Thursday, 18 February, sterling was moving higher on all currencies, with marked increases of 0.56% and 0.40% rises against the greenback and the euro respectively; the dollar was at 1.3934 and the euro at 1.1550. Obviously, the success of the UK’s vaccine roll-out programme is a leading driver for this improvement but there are other factors in play. The fact that the Brexit process, admittedly with a few problems along the way, has gone better than expected is another reason for the rise in sterling (and a timely reminder to those Remainers who were preaching doom and gloom, and the demise of the pound, not so long ago). With Brexit ceasing to be a concern for markets, the currency appears to be attracting bids, as markets continue on the rise. Investors remain in a bullish mood and although sterling is not normally considered a safe haven, they appear to be confident that it will continue its upward momentum at least in the short to medium term. Two other drivers were the Q4 GDP results being better than market expectations and the BoE all but ruling out the chances of negative interest rates this year. There is every chance that sterling could be soon visiting its 2018 peak of US$ 1.438.  Good Day Sunshine!

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