Easy Money

Easy Money                                                                   10 October 2019

The Sheikh Zayed Housing Programme has approved 522 housing assistance applications for Emirati citizens, totalling US$ 111 million; the initiative is in conjunction with housing institutions around the UAE. Encompassing three residential districts, the project includes 341 residences in Dubai’s Tolerance Village, as well as two others in Ajman and Ras Al Khaimah.

Last year, Gulf Sotheby’s UAE operations acquired SPF Realty; this month, an exit agreement sees the firm back in the hands of Ranjeet Chavan. He has been joined by three other founding members and plans to revive the brand and has targeted a sales volume of US$ 204 million in the first year of relaunch, focusing on inward investments, preferably at the premium end. Whilst acknowledging that real estate prices may continue heading south, Chavan is certain that the market will see a turnaround and a return to new peaks at some point.

Indeed, employment figures released by the Central Bank reiterates the importance of the real estate – and associated – sectors to the country’s economy. It is estimated that the realty and construction sectors account for 45.7% of the country’s workforce and that in Q2, these two sectors grew by 5.0% and 8.2% respectively, well up on the 4.4% and 4.9% growth returns seen in Q1.

Dubai Municipality has launched a PPP (private-public partnership), with French company Veiola, to build a high-tech biogas power generation plant. The Warsan Sewage Treatment Plant will use biogas to produce clean energy and aims to reduce CO2 emissions by 31k tonnes annually, equivalent to 7k homes that will convert 58k cu mt per day of biogas into electricity. Work on the 25-year project, which will reduce the annual operating costs of the sewage treatment plant by using the biogas, will commence in 2021.

Dubai residents will soon be able to hire a driver for their vehicles at an hourly cost of US$ 11; the requisite DTC app should be running by the end of the month. Another new service will allow users to request an electric Tesla vehicle, a family limo, a vehicle for people of determination, a dedicated limo for ladies or a standard limo; costs will be lower than local rivals, Uber and Careem.

This November’s Dubai Air Show expects to host 87k aerospace trade professionals and an 8.3% increase in exhibitors to 1.3k, with some major announcements expected. However, already troubled Rolls Royce has indicated that there is little likelihood of a US$ 21 billion engine order for seventy new A350 and A330s, (as well as restructured engine orders for the remaining A380s on order), being announced at the show in  November; the UK engine-maker cites the main reason being concerns involving the price and the performance of the planes. This comes after Emirates indicated that it would no longer accept jets that did not meet specifications given by Airbus, Boeing and their engine providers. It also has forty Boeing 787s on order and the airline is concerned about the engines’ reliability and that ongoing issues had not been resolved.

It is estimated that the air transport sector contributes 13.3% to the UAE GDP, equating to US$ 47.4 billion, and adding 800k jobs. IATA estimate that if the government continues with its current positive agenda for the sector, the market could generate an extra US$ 80 billion to the GDP and add a further 620k new jobs by 2037.

The Federal Tax Authority will introduce an excise tax on smoking devices and sweetened beverages as from 01 December 2019; it has requested that producers and importers register early to avoid late registration fines. In October 2017, the FTA introduced a tax on harmful goods, (encompassing 1.7k items), such as soft and energy drinks and tobacco – with duties of 60%, 14% and 26% respectively.

H1 saw Dubai post a 5.0% hike in non-oil foreign trade to US$ 184.2 billion (and 87% higher over the past decade). Despite a tough global trading environment, Dubai has managed to increase both exports (17.0% higher at US$ 20.7 billion) and reexports, up 3.0%, at US$ 57.2 billion. Imports rose 4.0% to US$ 106.3 billion. Trade volumes climbed 31.0% in H1 to 56 million tonnes, with exports, reexports and imports higher by 46%, 39% and 26% at 10 million, 9 million and 38 million tonnes.

It is reported that the UAE, along with Switzerland and the Marshall Islands, will soon be removed from an EU blacklist of countries deemed to be tax havens. It was only last March that the country was returned to the list, first drawn up in 2017, much to the dismay of the government. According to local officials at the time “this inclusion was made despite the UAE’s close cooperation with the EU on this issue and ongoing efforts to fulfil all the EU’s requirements”.

A US$ 436 million Etihad Railway contract has been awarded to Hitachi Rail, relating to systems and integrations work for the UAE’s national railway’s second phase. It involves design and build of the power distribution network and electronics subsystems, that runs for 800 km. This the latest major contract seen this year following March awards totalling US$ 409 million to extend the network by a further 605 km and deals of US$ 1.2 billion in July for lines stretching 216km and 94 km, connecting the network to Khalifa Port and Khalifa Industrial City, as well as to Jebel Ali Port.

To celebrate, and in keeping with, the UAE’s Year of Tolerance, the Ministry of Human Resources and Emiratisation has cancelled fines, prior to 01 August, involving 27k companies and 12k workers. Furthermore, Jebel Ali Free Zone came to the party, by waiving US$ 10 million in fines owed by businesses within the free zone.

Troubled Arabtec Holding has secured a US$ 76 million contract through its wholly owned subsidiary, Target Engineering. The Saudi Aramco deal involves the expansion and upgrade of a water disposal facility at its Qatif’s gas oil separation plant.

The bourse opened on Sunday 06 October and, having shed 93 points (2.5%) the previous three weeks, gained 49 points (1.8%) to 2810 by 10 October 2019. Emaar Properties, having declined US$ 0.12 the previous fortnight, nudged up US$ 0.01 to US$ 1.24, with Arabtec, gaining US$.0.03 the previous week, losing that gain and down US$ 0.03 to US$ 0.43. Thursday 10 October saw improved trading of 175 million shares, worth US$ 43 million, (compared to 80 million shares, at a value of US$ 24 million on 03 October).

By Thursday, 10 October, Brent, having shed US$ 6.63 (10.7%) the previous fortnight, regained some of that loss, up US$ 1.23 (2.1%) to US$ 59.10. Gold, having shed US$ 9 (0.9%) the previous week, was US$ 5 (0.4%) lower, closing on Thursday 10 October at US$ 1,501. 

US sanctions are beginning to hurt the Iranian economy, as China National Petroleum Corp pulls out of a US$ 5 billion deal to develop a portion of Iran’s massive South Pars offshore natural gas field; the 2015 agreement came after the global nuclear deal  and initially involved Total SA, CNPC and Iran’s PetroPars, with shares of 51.1%, 30.0% and 19.9% respectively. Total had earlier withdrawn from the agreement over US sanctions so now there are no international parties to support this venture. This latest episode is bad news for the sector that needs international partnership to utilise the fact that it has the world’s second-largest known reserves of natural gas and fourth-largest oil reserves.

Samsung Electronics has announced an expected 56.2% slump in Q3 profits to US$ 6.4 billion, (on the back of a 5.3% fall in revenue), driven by a dismal performance in the global chip market. With the decline in semiconductor prices, and weakened demand for its mobile devices, this will be the fourth straight quarter of profits heading south. It still has a 23% share of the global smartphone market and is ahead of Huawei, Oppo and Apple in fourth. Although the company gained some market share, because of the US trade ban on Huawei with its mid-to-low Galaxy A handsets, and increased demand for its OLED display panels, it has suffered from a trade war between Japan and South Korea, stemming from World War II disputes.

A 40-year old independent family travel agency has agreed to acquire the 555 UK outlets of the fallen Thomas Cook Group; Hays has already recruited 421 of its former staff members, with many more expected to join their ranks. This comes the same week that the government completed the country”s biggest peacetime repatriation, returning 140k stranded Thomas Cook customers from overseas locations.

The week that many parties were set to sign an agreement to formally join Facebook’s controversial Libra Association, PayPal pulled out “to continue to focus on advancing our existing mission and business priorities”. This is a severe blow to Facebook Inc’s efforts to develop a digital currency which has already faced severe government pressure and criticism. Despite the withdrawal, the payments company remains committed “to remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future”. In other words, glad to get out when it can.

Having culled 4k posts in August, 2% of its labour force, (as well as seeing a political resignation of its chief executive, John Flint), there are reports that HSBC may be laying off a further 10k; much of this will see the loss of high-paid roles.  Like other banks, it is struggling with almost negative interest rates, the tariff war and even Brexit. Interim boss Noel Quinn thinks this is an opportune moment to reduce its cost base, a large proportion of which is payroll driven. All this is despite H1 profit jumping 18.6% to US$ 8.5 billion – what would have happened if profit levels had dipped? There has been recent downsizing by the likes of Commerzbank, Deutsche Bank and Société Générale with job cuts of 4.3k (10% of the payroll), 18k and 1.6k respectively.

India has cut interest rates for the fifth time (by a total of 135 bp) this year in a continuing bid to boost its slowing economy and to ensure that inflation levels remain within the 4% target; the 25bp reduction sees the benchmark repurchase rate at 5.15%. The central bank also reduced its 2019 growth forecast to a seven year low of 6.1%, down from a previous estimate of 6.9%. The markets were not impressed, as the benchmark stock index and the rupee fell, along with ten-year bonds rising to 6.65%. There is no doubt that further cuts are needed and will be seen in Q4.

One area of many concerns for the Indian economy is the lack of liquidity to fund construction of apartment complexes, not helped by last year’s default of one of the country’s shadow banking sector’s leading lenders, Infrastructure Leasing & Financial Services. Now the loans from the bloated shadow-banking sector, that were fuelling the property boom, have all but dried up, leaving a total of US$ 63 billion of stalled residential projects across the country. The end result sees an offload of properties at discounted prices, developers unable to fund construction and stalling on repayments as well as shadow banks failing, all because cash flow has dried up.

In September, figures showed that the US unemployment rate had fallen to a 50-year low – down to 3.5% from 3.7% – with a revised168k and 136k jobs created in August and September. It is argued that 100k new jobs are needed each month to keep up with growth in the working-age population. Although there was weak data, with manufacturing activity hitting a decade low, along with a sharp slowdown in services industry growth (at a three-year low), the employment figures were a counterbalance easing immediate recession worries. The US economy has been in continuous expansion for the past eleven years and to keep this trend going, it seems that a further interest rate cut is inevitable this year, with a possibility of a second one in December.

Several former colleagues have gone to war with Mario Draghi, criticising his latest monetary-stimulus initiative and the ECB’s stance to its inflation goal. They believe (quite rightly) that “interest rates have lost their steering function and financial stability risks have increased. The longer the ultra-European Central Bank President’s low or negative interest rate policy and liquidity flooding of markets continue, the greater the potential for a setback.” They do not agree with a myriad of issues, including the financing of governments, through asset purchases, which restarted last month, arguing that with low rates, it keeps weak banks and companies afloat. Other concerns include Draghi’s mistaken diagnosis and approach to complying with the price-stability mandate and the adverse effect of negative interest rates on the entire financial sector.

One has to agree with Oswald Gruebel, once a major figure in the Swiss bank fraternity, who has criticised negative interest rates. He reasons that negative interest rates point to the fact that “money is not worth anything anymore,” and that the financial industry will continue to shrink as long as such rates continue. The world’s economy is undoubtedly suffering – and will continue to do so –  from too much Easy Money!

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Counting Airplanes

Counting Airplanes                                                        04 October 2019

HH Sheikh Mohammed bin Rashid Al Maktoum has vowed to create 20k new jobs for Emiratis, over the next three years, in a wide range of sectors including aviation, banking, insurance, real estate and telecommunications. He also approved a US$ 82 million budget to train 18k citizens. In future, UAE nationals will be given priority for any position in 160 professions in all government, semi-government and private sector companies. The Dubai Ruler also added that the government will pay up to 40% of payroll costs of 800 new graduates and warned that those entities that do not achieve the required Emiratisation level will have to contribute financially to the government’s efforts. Sheikh Mohammed indicated that the government is set to introduce a national economic development plan to stimulate the economy, concluding that “My message to everyone is: ‘We will not stop as, in the UAE, we don’t like to do so’”.

Another initiative this week saw Sheikh Mohammed introduce a long-term ‘cultural visa’ for innovators, artists and authors. In a bid to position Dubai as a “global art destination”, and as part of a “new cultural vision”, it will utilise 6k arts and culture companies, five creative clusters, twenty museums, and more than 550 annual cultural events. The Dubai Culture & Arts Authority, chaired by the Ruler’s daughter, Sheikha Latifa, will play an important role. It was also reported that Dubai will launch a new “international literature season” with a book fair and events, expected to attract over two million visitors.

Two of Sheikh Mohammed’s sons were involved in separate launches this week. Sheikh Hamdan, Dubai’s Crown Prince, initiated an e-commerce strategy that involved slashing direct costs – such as storage, customs duties and VAT on transportation – by 20%. The primary target is to increase the sector’s contribution to the emirate’s GDP which will see it grow to US$ 3.3 billion by 2023 and also to increase the regional and global share of e-commerce companies operating in Dubai to US$ 6.5 billion. The plan is also to establish e-logistics distribution centres and encourage international companies to have a presence in Dubai that will in turn consolidate its position as a leading global e-commerce platform location.

Meanwhile his brother, Sheikh Maktoum, Deputy Ruler of Dubai, launched the region’s first ‘Virtual Company Licence’, which is part of a bigger strategy to build a ‘Virtual Commercial City’ in the emirate. This will enable most international investors to carry on business here without the need of a resident’s visa. Only verified non-resident individuals, tax resident in countries that have implemented the Convention on Mutual Administrative Assistance in Tax Matters, will be allowed to apply.  It will permit licence holders to work digitally and may be another unique selling point for the emirate in its bid to open new horizons for business competitiveness and growth in Dubai This is yet another innovative stride in the race to make Dubai one of, if not the best, business hubs in the world. To date, the emirate has always been one of the more tech-savvy international environments, with advanced and sophisticated infrastructures.

Every cloud has a silver lining and it would appear that the troubles in Hong Kong could have a positive knock-on effect here in Dubai. It is reported that there is an increasing demand for new residential passports, as protests continue to cast a cloud over the territory’s future. Consequently, according to various immigration agencies, there has been a marked increase in interest from Hong Kong residents in investor visa schemes. Costs of such visas vary wildly ranging from US$ 100k, in Antigua & Barbuda, to US$ 2.2 million in real estate investment for Cyprus. It is inevitable that Dubai would benefit from some of these residents deciding to move here.

By the end of 2019, Savills estimates that Dubai will become the world’s biggest market for “branded residences”, taking the number one position from New York which slips to second, followed by Miami.  On a global scale, there are at least 430 branded schemes comprising 65k units; 2019 has seen 9k (and 60 projects) been added to the portfolio, with a further 70 schemes expected to go live next year. Hotel branded schemes, led by Marriot International, whose brands include Ritz Carlton, St Regis and W, account for 86% of the completed projects and 96% of the pipeline supply. Globally, Accor now has the same size pipeline as Marriott and on a regional scale, Emaar Hospitality Group is growing fast under its Address and Vida umbrella.

UBS has indicated that, although Dubai property prices have yet to hit their bottom, it was a good time to buy at a “fair value”, adding that “affordability has improved even though incomes have declined amid slower economic growth”. Stating what everybody seems to know that the market is over-supplied, (with property prices down 35% from their mid-2014 levels), it pointed to the fact that Dubai had the highest population growth of all the locations in their ‘Global Real Estate Bubble Index’ and that “easier visa requirements and next year’s Expo should support the market.”

Despite all the problems, most of which are out of the airline’s control, Flydubai reported that H1 loss had decreased 38% year on year to US$ 54 million, driven by a shrinking fuel bill (17.3% lower) and the recent introduction of cost efficiencies. However, external problems including the grounding of the Boeing 737 Max (which meant the use of older, less efficient 737-800s), and regional geo-political problems, continue to dog the carrier. One other problem is that because of the new jets still grounded, and lease contracts on other planes expiring, the fleet will decline to 2014 levels; in H1, five jets were returned to lessors and a probable four more in H2. Because of these problems, capacity fell by 14.9% and passenger numbers dipped 5.0% to five million.

It is hard to disagree with the CEO of Majid Al Futtaim Holding when he said  “consumer confidence has been impacted negatively in the past three to four years and I think currently the regional instability, the volatility globally, the trade wars and so on are taking a toll on consumer sentiment.” Alain Bejjani is hoping that, over the next twelve months, negative consumer confidence will improve, aided by the fact that 50% of the regional population is under 25 with a comparatively high internet penetration rate. Not surprisingly, he estimates that domestic demand plays a more important role than tourist trade, by around 85:15, for MAF operations in fifteen countries.

Dubai Aerospace Enterprise has signed a US$ 300 million, seven-year unsecured loan – arranged by Abu Dhabi Commercial Bank, with a group of six banks – to repay secured debt and support the future financing needs of the company.  This brings the total liquidity it has raised since early 2018 to US$ 3.5 billion and will help the Dubai-based aircraft leasing company with its aggressive growth agenda.

One of Sheikh Saeed bin Ahmed Al Maktoum’s companies, SEED Group, has partnered with a leading Asian blockchain provider to bring its Aergo platform to the region. Blocko, a Samsung-backed company, has already established a presence in South Korea, the UK and Hong Kong and built 38 full-scale enterprise blockchain solutions for companies like Samsung, Cisco and Hyundai Motors. It is now hoping to replicate this success in the Gulf and particularly in the UAE where the government’s Emirates Blockchain Strategy 2021 aims to transform 50% of government transactions into the blockchain platform by 2021; if this happens, estimated savings will be in the region of US$ 3.0 billion.

The UAE’s Financial and Economic Committee – chaired by Sheikh Hamdan bin Rashid Al Maktoum – approved a 2.0% hike in the 2020 federal budget to US$ 16.4 billion, and the highest on record. The three biggest beneficiaries will be social development, education and the health sectors, receiving 42.3%, 17.0% and 7.3% of the total.

There has been a US$ 0.010 fall in the October price for Special 95 to US$ 0.578, whilst diesel nudged US$ 0.008 higher to US$ 0.657 per litre.

An RTA public auction of 100 car number plates raised US$ 7 million this week, with ‘T 50’ being sold for US$ 664k and ‘L 21’ for US$ 637k. Twenty of the plates auctioned, with codes starting from ‘H’ to ‘Z’, displayed the Expo logo for the first time.

As part of Emaar’s $2 billion bond issuance programme, Nasdaq Dubai listed the developer’s US$ 500 10-year million, 3.875% sukuk on Monday, with the money being used for both regional and international expansion plans. This is the third time that Emaar has tapped this market following a US$ 750 million 2014 listing by Emaar Malls and the same amount by Emaar Properties in 2016.

The bourse opened on Sunday 29 September and, having shed 93 points (2.5%) the previous three weeks, lost a further 37 points (1.3%) to 2761 by 03 October 2019. Emaar Properties, having shed US$ 0.12 the previous fortnight, dipped US$ 0.01 to US$ 1.23, with Arabtec, gaining US$.0.03 the previous week, coming in US$ 0.01 lower at US$ 0.46. Thursday 03 October witnessed trading at still dire levels of only 80 million shares, worth US$ 24 million, (compared to 78 million shares, at a value of US$ 45 million on 26 September). For the month of September, Emaar, having opened the month on US$ 1.35, closed US$ 0.09 lower on US$ 1.26, with Arabtec US$ 0.04 higher from its opening of US$ 0.44 to US$ 0.48.

By Thursday, 03 October, Brent, having shed US$ 1.76 (2.6%) the previous week, took a major hit, slumping US$ 4.87 (7.8%) to US$ 57.87. Gold, having gained US$ 8 (0.8%) the previous week, moved in the other direction losing US$ 9 (0.9%), closing on Thursday 03 October at US$ 1,506. 

The perilous sate of the global construction sector can be seen from this week’s announcement by the region’s largest, and the 17th biggest globally, international contracting group. Athens-based Consolidated Contractors Company, with 70% of its work concentrated in the Gulf, is planning to send 2.5k of its core staff on extended leave until the market for new projects picks up; such staff total 13k that form part of the 145k employed by the Group. The family-owned company considered, that with next year’s revenue falling 40.5% to US$ 2.5 billion, a downsizing of staff was the only option available.

Just when it seemed that it had gotten over its 737 Max problems, Boeing has now been ordered by US aviation regulators to carry out inspections of Boeing 737 NG aircraft, after cracks were found on some planes. No numbers were readily available, but the manufacturer confirmed that the affected 737 NG operators have been contacted and that a recommended inspection plan for certain airplanes will soon be implemented.

As intimated in an August blog, Forever 21 has finally opted for bankruptcy protection, through a Chapter 11 filing in Delaware; its consolidated total liabilities could be as high as US$ 10 billion. The US fashion merchant, which plans to close most of its Asian and European locations, had already received funding of US$ 350 million, almost 80% of which was from JP Morgan and the balance from TPG Sixth Street Partners.

Over the Pond, another UK retailer in trouble is Ted Baker, whose share value slumped 35% on news that it had posted a H1 US$ 28 million loss, compared to a US$ 35 million profit over the same period in 2018; the main drivers, for falls in both retail and online revenue, were fierce competition, distressed discounting and unseasonable weather. Much of the same is expected for H2.

The European Court of Justice has ruled in favour of 500k indebted Polish homeowners, many of whom have gone bankrupt because they took out Swiss franc mortgages – at a much lower interest rate – some years ago, only to see the currency more than double. Now the court has ruled that they can ask Poland’s courts to let them convert their loans into the Polish zloty. With an estimated one in five Polish mortgages held in Swiss francs, this is a major victory for those homeowners (known as “Frankowitzes”), but a stunning blow for Polish banks, who will now face losses running into tens of billions of zloty. Other nationals, including Austrians, Croats and Hungarians, fell into the same trap.

When the plan was to make the country a “top 10” weapons exporter, it is strange to see that Australia has become the second largest global arms importer, behind Saudi Arabia. The Stockholm International Peace Research Institute also noted that the country’s position as a military exporter has dropped seven places to just 25th in the world. (In contrast, the UAE ranks eighth (for imports) and seventeenth as an exporter. Despite last year’s introduction of a new loan scheme for exporting defence companies, it is unlikely that Australia will reach the top ten in the exporters’ league in the near future.

There was no surprise to see the RBA cut rates to below 1.0% – its third one in four months on the back of the Australian unemployment rate rising from 4.9%, at the beginning of the year, to its current level of 5.3%, along with low wage growth. The RBA also took notice that if the currency stayed at a relatively high level, exports may have become more uncompetitive on a global scale. Not all the rate cut will be passed on to customers, with the banks, having held back on about 20% of the 50 basis points from the June and July rate cuts, expected to hold back an even bigger percentage this time.

It seems that the four major Australian banks – ANZ, CBA, NAB and Westpac – continue to defy Treasurer Josh Frydenberg by not passing on this week’s full 0.25% rate cut on their home mortgages, with all of them holding back between 40%-50% of the 25 bp reduction; the “robbing” banks claim that they have to balance their own business performance with the country’s needs to stimulate the economy. It is estimated that because of the cut, the mortgagee, (depending on which of the four banks is used), has gained between US$ 258-US$ 298, whilst the bank has “gained” (and customer has “lost”) between US$ 197-US$ 216.

At the same time, NAB has more than doubled the cost (to US$ 1.4 billion) of compensating customers for a decade of misconduct, mainly for fees paid to self-employed wealth advisors between 2008-2019. More may be added to this figure because “until all customer payments have been completed, the final cost of such remediation matters remains uncertain”.

Meanwhile, CommInsure, CBA’s insurance arm, is facing 87 charges for “hawking”, by trying to sell insurance products through unsolicited phone calls, via its Simple Life brand. This is but the first major financial institution to be charged for insurance-related offences, since the banking royal commission.

S&P Global Ratings has slashed India’s 2020 growth projection by 0.8% to 6.3%, slightly lower than the Asian Development Bank’s amended forecast of 6.5%. This comes after Q2 growth was a miserly 5.0%, brought about by a slump in private consumption to just 3.0% which over recent years had been the engine of growth. Evidently, the recent tax breaks will have minimal impact on growth, having cost 0.7% of the GDP, unless it boosts business confidence.

There could be fireworks in India next week as Donald Trump visits after he has tweeted on several occasions that India’s tariffs are “unacceptable,” and has described the country as the “king” of tariffs. Indeed his concerns are mirrored by the WTO who stated that India’s tariff rates on other members of the organisation remain “the highest of any major economy.” It has estimated that India’s average tariff rate was a high 17.1% in 2018, compared to the rates of between 3.4% – 5.2%  found in the US, Japan and the EU; only one country was higher – Egypt at 19.1%. These figures are expected to move higher, as tariffs in 2019 have become more prevalent as a lever of global trade policy.

A ruling by the World Trade Organisation seems to have given the US carte blanche to impose tariffs of US$ 7.5 billion on EU imports; the US had claimed US$ 11.0 billion for EU illegal aid to Airbus. Goods affected will include a wide range from aircraft parts, Scotch whiskey and even shellfish and is the result of a fifteen-year tussle, involving supposedly illegal subsidies for the world’s two biggest plane makers, Airbus and Boeing. This battle has been won by Boeing but there is more to come when the WTO rule next year on whether the American plane maker has received illegal subsidies from US federal and state governments. Then we will see if both the US and EU are subsidising and Counting Airplanes.

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A Spaceman Came Travelling (Hazza Al Mansouri)

A Spaceman Came Travelling (Hazza Al Mansouri )          26 September 2019

More than one hundred developers, consultants and architects showcased at this year’s three-day Cityscape Global exhibition, which will close tomorrow – 27 September. Developers are hoping to incentivise potential buyers at this year’s meet by offering discounts, fee waivers and other deals as the market for property purchases remains soft. Developers participating in the event include Aldar Properties, Arada, Nakheel, Azizi Developments and Sobha Group, among others. Business may be boosted by the fact that a 500-strong delegation of North American agents and brokers, with combined 2018 sales of US$ 2.2 billion, are in attendance, as part of the show’s strategic partnership with the Dubai Land Department and Dubai-based Century 21.

It is reported that since the 02 September inception of a higher committee to oversee the realty sector, there has been 134% hike in Dubai’s real estate transactions. A new law, applicable to all major projects and jointly owned properties in Dubai, has been enacted to oversee the upkeep of “jointly owned properties” in Dubai, including the way facilities management companies bill clients. Such firms will have to submit six-monthly reports to Rera on the management of the property and common areas and will also have to obtain insurance coverage for each project. The agency can also appoint another FM company, in case there has not been proper maintenance of the common areas.

A US$ 1.4 billion JV between Meraas and Brookfield Asset Management will see both parties managing and expanding a portfolio of local retail assets, including La Mer, City Walk and The Beach in Dubai. One of the main aims of the exercise is to “leverage Meraas’s regional brand recognition and experience in curating lifestyle-focused mixed-use developments” with the Canadian company’s worldwide reach utilising US$ 385 billion of global assets, including US$ 194 billion of real estate.

Construction has begun on phase one of the UAE’s new 370-hectare Riviera project in Ghantoot, with Abu Dhabi-based developer Imkan joining forces with Nael & Bin Harmal Hydroexport Co.  Al Jurf, a second-home destination, with 3.4km of azure beachfront, will comprise three distinct districts – Al Jurf Gardens, Jiwar Al Qasr and Marsa Al Jurf. Al Jurf Gardens, with 293 residential villas and land plots, along with a wellness clinic resort, a private beach, a marina and a community centre, is scheduled for a 2021 completion.

Dubai was the ME launch location for Delta Hotels by Marriott, with the opening of Delta Hotels by Marriott Jumeirah Beach. The property, with 360 keys, has a range of rooms, suites and serviced apartments, along with three multi-function rooms and a business centre spread over 145 sq mt of event space.

It is forecast that the US$ 680 million Dubai’s Deep Tunnel Project will be ready one month before the October Expo 2020 opening. Currently 65% complete, and 10 km long covering 490 km, it will drain rainwater in the Airport City and Expo 2020 areas. The three final foundation stages will use about 55k cement pieces in the tunnel, each weighing 2 tons, along with the installation of 4.4k huge metal rings. To date, four million man-hours have been utilised in what is one of the biggest such projects in the world.

Farnek has won a five-year contract from Dubai Airports to carry out the cleaning of Terminals 1 and 2, Concourse D, and Cargo & Logistics at DXB, as well as Dubai World Central. The contract covers the cleaning services management of landside and airside facilities, and also managing the passenger baggage trolley services. The facilities management company expects to utilise 800 of its 5k employees on this contract.

DAE has finalised a US$ 1.4 billion multi-year deal, with an unnamed hedge fund, to source and manage aircraft. Dubai Aerospace Enterprise’s Investor Services platform will be responsible for acquiring narrow-body and wide-body aircraft, 25% of which have already been sourced. This deal brings the value of its managed assets to US$ 2.7 billion, with a target of US$ 5 billion over coming years.

As the country’s working population reached 5.1 million by the end of June 2019, 51.6% of that total were employed in Dubai and 26.9% in the capital. The 0.5% hike in Q2 was driven by the real estate sector, which has seen a 5.0% growth in numbers over the past year.

Although overseas remittances topped US$ 11.6 billion in Q2, they were still 4.2% lower than the same quarter last year; this was attributable to a slowdown in employment. In 2018, US$ 46.1 billion (up 3.0% over 2017), was sent overseas, with India accounting for 37.2% of the total, despite only accounting for 27.5% of the country’s 9.6 million population. Pakistan, Philippines, Egypt and the UK took the other four top spots, with totals of 10.5%, 7.2%, 6.3% and 3.8% respectively.

The UAE’s waste management sector witnessed further consolidation this week with the Averda acquisition of rival Zenath Recycling & Waste Management; no financial details were readily available. The sale involved Zenath’s 1k customer base, 150-srong labour force and assets including eleven compactors, eleven chain loaders and nine hook loaders. It will allow Averda to enhance its long-term value and market position in a fast-growing waste management industry. In August, there were reports that the Dubai-based company was in preliminary discussions about a possible London Stock Exchange IPO that could value it at US$ 870 million.

It seems that Emirates will have to delay the introduction of a fourth class – premium economy – because of a possible delay in the delivery of the new Boeing 777x jetliner, due to problems with its General Electric-made turbines. Because the first delivery, of the 150 planes that the airline has ordered, could be pushed back from its original June 2020 date, the new class could start with the Airbus SE’s A380 in December 2020.

Emirates also expects that H1 profits to September will be better than those reported over the same period in 2018 – and this despite the 45-day closure of the southern runway at Dubai International earlier in the year. In 2018, the H1 figures had shown a massive 86% fall in profits, driven then by higher oil prices and a stronger greenback. Since then, the end of the Airbus A380 programme, and a sluggish global economy, have seen the airline introduce a major strategic review, including staff cuts.

As part of the UAE-India food corridor project, it is estimated that UAE companies will pump in over US$ 7 billon, US$ 5 billion of which will be in various mega food parks, (in locations such as Pawarkheda) and a logistics and warehouse hub in Itarsi, with the balance for contract farming. The project, coordinated by the Emaar group and employing up to 200k, will involve food security for the UAE. This investment will help reduce the estimated 30% wastage that is caused by the lack of appropriate infrastructure for storage, processing and transportation in India – a country that grows enough to feed its 1.3 billion burgeoning population. It looks as if this is a win/win for both parties – the UAE can buy this food at a cheaper price, while Indian farmers get a comparatively better price for their crops because of the reduction in wastage levels.

Following August’s UAE launch of its RuPay card, National Payments Corporation of India is planning to introduce its Unified Payments Interface digital payment system to the UAE. UPI, introduced in India three year ago, is a mobile platform that instantly transfers funds between bank accounts, makes purchases and remits money. The developer is confident of its success in the region more so because of the large number of expat Indians in the country with it being the number one trade partner for the UAE and the UAE the third-largest trade partner for India.

Still not fully recovered from the 2010 property crash, Dubai banks are facing a double whammy of falling home prices, (down 27% by some estimates over the past five years) and a growing non-performing loans book which stood at 4.99% of gross loans at the end of last year, compared to 4.01% in 2017. This compares to 1.5% in Saudi Arabia and 1.9% in Qatar at the end of 2018. The price downturn is attributable to a raft of factors, some of which are outside the government’s control, including lower oil prices, geopolitical tensions and a strong greenback (dirham); other issues in play are an oversupply (which is now being addressed) and weaker consumer confidence. It is estimated by Fitch that 20% of Q1 loans were incurred by real estate and construction – and this figure may be higher if retail mortgage lending, and some lending to investment companies that finance developers, are added.

Fitch also consider that a “significant portion” of government loans of US$ 23 billion, set to mature in 2021, may have to be restructured. Hopefully, we are some way off the 2009 GFC position, when state-owned Dubai World restructured US$ 23.5 billion of debt and property developer Nakheel PJSC had $10.5 billion of unpaid bills on its books.

A recent Dubai Chamber report studied the banking challenges faced by new and emerging businesses and found that nearly 65% of the country’s entrepreneurs surveyed believed that banking was the first challenge they faced, with opening a bank account taking up to three months in some cases. Interestingly, this week two major Dubai banks have introduced some sort of digital banking for SMEs.

Emirates NBD launched the E20, the country’s first digital business bank for entrepreneurs and SME businesses, as well as for sole proprietors, freelancers, gig economy workers, fintechs and insurtechs. It will help customers access banking services seamlessly and conveniently, and reduce time spent on banking to a minimum.

Mashreq’s offering of NeoBiz, with the motto ‘Built for Business’, will see the implementation of key services, including digital onboarding, transparent and simplified products, digital assistant and full transaction capability online, targeted at start-ups and young businesses.

There was good news from the UAE central bank which revised up its 2019 growth forecast from the last one in May of 2.0% to 2.4%, of which the non-oil growth would be 1.4% and the oil sector at 5.0%; the Q2 growth was 2.2%, with the non-oil sector posting a 1.5% hike (a major improvement on Q1’s 0.3%). This improvement should manifest itself in rising public and private spending, along with higher investment prior to Expo 2020. In Q2, the PMI pointed to an improvement in economic sentiment – at 58.2, its highest level since 2014, with Q2 employment also on the rise, up to an annualised 1.0% (compared to just 0.1% in the previous quarter). The doom and gloom expat merchants should compare this growth with the likes of say UK, South Africa, Germany and Italy with lot lower levels at 1.2%, 0.6%, 0.4% and minus 0.1%; there is no barbed wire around Dubai International to stop such people leaving!

The Q2 Dubai Economy survey indicates that the Composite Business Confidence Index (BCI) was 2.2 points higher at 114.9, boosted by Expo 2020, with new export markets and projects being launched. The survey also indicated that 83% of Dubai businesses rated their situation as ‘good’ or ‘stable’, as there was a marginal improvement, at 46%, in the number of companies expecting an uptick in their business situation. One worrying factor was to see hiring intentions continuing to soften.

The bourse opened on Sunday 22 September and, having shed 71 points (2.5%) the previous fortnight, lost a further 22 points (0.8%) to 2798 by 26 September 2019. Emaar Properties, having dipped US$ 0.04 the previous week, took a US$ 0.08 dive to US$ 1.24, with Arabtec, regaining the US$.0.03 lost the previous week, up at US$ 0.47. Thursday 26 September witnessed trading returning to dire levels of only 78 million shares, worth US$ 45 million, (compared to 310 million shares, at a value of US$ 142 million on 19 September).

By Thursday, 26 September, Brent, having gained US$ 4.02 (6.7%) the previous week, due to the attacks on two Saudi oilfields, shed US$ 1.76 (2.6%) to US$ 62.74. Gold, having lost US$ 30 (2.0%) the previous fortnight, moved US$ 8 (0.8%) higher, ending on Thursday 26 September at US$ 1,515. 

Brazilian police are expected to bring charges against mining giant Vale and German safety firm Tüv relating to January’s dam collapse that left 248 dead. Both companies have been accused of falsifying documents, claiming that the dam had been safe and stable that resulted in the country’s worst ever industrial accident. The mining company has already been ordered to pay compensation for all damages.

Yet another case of unauthorised trades by an employee has left the financial world pondering on what went wrong. This time, Japanese trading house Mitsubishi Corp has lost US$ 320 million from its Singapore-based subsidiary. It seems that the person involved was hired “to handle its crude oil trade with China”, but “was discovered to have been repeatedly engaging in unauthorised derivatives transactions and disguising them to look like hedge transactions since January of this year”. Fortunately for the Japanese trading house, and following investigations of other group companies and in-house departments, it seems that this was a lone wolf operation. This was not the first such fraud, (only last year two top officials at Chinese firm Unipec lost $656 million), and will not be the last.

Under strong boardroom pressure, WeWork co-founder Adam Neumann, has been ousted as chief executive but will stay on as chairman. The nine-year old company’s investors were set for an apparent golden nest egg, with an expected US$ 50 billion September IPO, only to see its value fall to US$ 10 billion for a myriad of reasons; these included Neumann’s loose and unconventional approach to corporate governance, various examples of conflicts of interest and rumours detailing drug/alcohol use within the organisation. The fact that the company had not made a profit may have also influenced decision-makers.

Ericsson is to make a US$ 1.2 billion provision to cover the costs of resolving a US corruption investigation. The Swedish telecoms equipment maker has been in discussions with US authorities over the past six years to resolve several breaches of its code of business ethics covering operations in six countries – China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam. The company will take the “hit” in its Q3 results, set to be announced next month, and concurred that there had been “a failure to react to red flags and inadequate internal controls which enabled a limited number of employees to actively circumvent internal controls for illegitimate purposes.”

Early Monday morning, the inevitable happened as the 178-year old Thomas Cook went into liquidation, leaving 22k jobs at risk worldwide, of which 9k are in the UK. The Civil Aviation Authority (CAA) is coordinating what will be the country’s largest peacetime repatriation, codenamed Operation Matterhorn, as the UK government is left to fly around 155k customers from 18 countries back home. The company was left burdened with a debt of US$ 2.1 billion. Meanwhile, Condor, the German arm of Thomas Cook, was rescued with a last minute US$ 300 million government bailout, with their staff cheering the news and applauding Condor’s chief executive, Ralf Teckentrup.

No such celebrations for the former UK bosses of the stricken travel firm, as news filtered through of them receiving pay-outs, worth more than US$ 44 million over the past 12 years. Who can forget Manny Fontenla-Novoa, who received US$ 22 million over his four-year tenure, ending in 2011, that saw the company rake up debts of over US$ 1.2 billion (and almost collapse) and 2.8k losing their jobs following the merger with MyTravel? Then Harriet Green was paid nearly US$ 6 million (plus a share bonus of US$ 7 million) for less than three years at the helm.

Meanwhile, Australia has also seen a travel company hit the buffers this week, with Tempo Holidays and Bentours being placed into voluntary administration. Only a few days earlier, its head company, India-based travel giant Cox & Kings, announced that it had shut down its Australian and New Zealand operations. One poor traveller, who had spent over US$ 30k on a worldwide tour, was dismayed to find that although he had taken out insurance, page 60 of the PDF document, explaining his coverage, stated there was no cover for insolvencies! God bless insurance companies!

A study by the Australian National University suggests directors are illegally using insider trading to make personal profits on ASX trading. It is almost inevitable that this practice is not only restricted to Australia, with directors using information that is not available to the general public. The university looked at 50k directors’ trades, covering a decade to 2015, and concluded that insider trading is “rife” and “that there is significant buying pressure by directors following bad news, and a lot of selling pressure following good news.”

The UK offshore wind power is proving to be a major success story, with new upcoming projects capable of powering more than seven million homes. Apart from being environmentally friendlier than electricity (which powers just 15% of household energy, some way behind petrol, diesel and gas), it is more economical. For example, the cheapest operator will provide power for as low as US$ 48 per megawatt hour, less than half of the US$ 115 expected from Hinkley Point C, when it opens in 2025. It is estimated that over the past two years, the cost of offshore wind has plummeted some 30%.

There is no doubt that there is heavy state involvement (and high public sector debt) by GCC governments in boosting their individual country’s economies. Fitch has raised concerns that there is a significant and growing contingent liability facing some GCC government-related entities, with non-bank GRE debt ranging from 12% of GDP in Kuwait to 32% of GDP in Oman. Debt of government-related banks – wholesale or interbank funding, excluding customer deposits – ranged from Bahrain’s 9% of GDP to Qatar’s 39% last year. More worryingly is the potential scope of contingent liabilities from the banking sector with assets ranging from 74% of GDP in Saudi Arabia to 209% in Bahrain.

Indian Finance Minister Nirmala Sitharaman surprised the market by slashing corporate tax rates from 30% to 22% in a move to try and boost investment and growth in the country’s faltering economy, currently standing at a six-year low. The 8% reduction will apply to companies that do not seek exemptions, whereas those that do so will see the tax rate drop from 35% to 25%; new companies will have to pay 15%, down from the existing 25% rate. Already, the Central Bank has introduced four rate cuts, with little success, and has seen domestic spending slow markedly, despite the falling rates which are at a decade low.

Latest figures confirm that South Africa is entering its 70th straight month of a weakening cycle in September. All the indicators continue to head south, including economic growth and business confidence (at a three-decade low). The country’s economy has been in a quagmire, as growth has never been above 2.0% since 2013, with 2019 probably recording levels of less than 0.6%. The many cries for government action, to lift business confidence and boost growth, appear to have fallen on deaf ears. Meanwhile, Africa’s most industrialised country will continue to stutter on the back of rising debt, concern about the impact of Eskom Holdings SOC Ltd on the nation’s finances and a 29% unemployment rate.

Just like the UK, US retailers are facing difficult times as can be seen from latest data showing that, in H1, 7k stores have already closed their doors – a major increase on the 6k posted for the whole of 2018. There are so many reasons, apart from the usual suspects of trade tariffs and increased online competition, including tax reforms, poor weather and the historic government shutdown earlier in the year. The majority of shop shutdowns were seen in apparel specialty stores, footwear and general merchandise stores; clothing stores accounted for 36% of H1 closures (compared to 18% the previous year), followed by footwear – 26% compared to 8% in 2018 – and general merchandise (14% cf 2% in 2018). It is estimated that the higher tariffs will cost the average US household US$ 831 a year, money that would have previously been spent on retail sales.

As the Fed continues to cut rates, the impact is being felt in the US realty sector, with August home sales rising to a seventeen-month high, as mortgage repayments become cheaper. The 30-year fixed mortgage rate has dropped to around 3.5%, from a more than seven-year peak of over 4.9% late last year. Monthly sales increased 1.3%, equivalent to an annual rate of 5.5 million units. Buying activity has also been boosted by an economy with low unemployment, rising wages and slower house price inflation. By August, there were 1.86 million homes on the market, (down 2.6% on the year), with the median price of a house 2.6% higher at US$ 278k.

25 September will go down as a milestone date in the country’s history, with 35-year old Hazza Al Mansouri becoming the first Emirati astronaut – and the first Arab – on the orbiting laboratory. The astronaut joined Russia’s Oleg Skripochka and NASA astronaut Jessica Meir onboard a Soyuz rocket from Baikonur in Kazakhstan for an eight-day working space odyssey. The country rightly revels in this mega achievement as A Spaceman Came Travelling.

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Suspicious Minds

Suspicious Minds                                                      19 September 2019

A new law has seen the Real Estate Regulatory Agency take over responsibility for regulating and overseeing all Dubai developers’ escrow accounts, with management being carried out by accredited financial institutions. Rera will also govern the development, brokerage and management of real estate, with the aim of the exercise to provide “a secure environment to protect the rights of developers and investors”. More importantly, it will also have exclusive rights for policies designed to balance supply and demand. At the same time, the Dubai Land Department will carry out work, formerly done by Rera, for registering real estate rental contracts. These regulatory changes can only be for the good in such a soft market as the rights of both developer and investor become better defined.

Property Finder estimates that 21.0k residential units were completed in H1, with a further 38.4k more than 85% completed and expected to be ready for delivery before the end of the year. That being the case, it would mean a total of 59.4k units being handed over in 2019 –  a far cry from the average 23k per annum seen over the past four years.

For the five months to May 2019, US$ 28.9 billion worth of real estate transactions were recorded in Dubai, compared to 53k real estate deals, valued at US$ 60.8 billion, for the whole of 2018. Encouragingly, 66% of buyers (and 57% of transactions) involved were new investors. Business Bay was the busiest location in 2018 accounting for 4k transactions amounting to US$ 3.0 billion. The data indicates that new launch activity is actually declining – a trend that, if continued, would help balance the supply/demand conundrum. From 2013-2016, as new lease contracts decreased steadily, there was an increase in renewed lease contracts; over the next two years, both registered increases, with new lease contracts rising at a higher rate. This may point to an increasing number of new properties finding tenants.

In 2018, Dubai’s GDP jumped 1.9% to reach US$ 108.4 billion, with the real estate sector accounting for 13.6% of the total (6.9% in 2017) and construction contributing 6.4% to the total (6.2%, a year earlier).

Dubai Maritime City announced that construction has started on phase one of a US$ 30 million commercial precinct project that will include retail, residential, office towers and a promenade. Located in the Mina Rashid area, it is expected to be completed within eighteen months.

Brothers Ehab and Hani Sulaiman Elyoussef unveiled their iconic “Dubai Brand Logo” real estate project, designed to mirror the Dubai Brand Logo. The US$ 136 million residential and commercial project, stretching over 1.5 million sq ft, will result in the world’s largest logo and was inspired from the vision and directives of HH Sheikh Mohammed bin Rashid Al Maktoum.

So much for talk of an economic slowdown in the emirate when Symmetry Gym announces a 28-day intensive fitness package costing US$ 10k. Dubai’s most expensive gym, established eight years ago, boasts about 100 members, with monthly rates ranging from US$ 1.2k to US$ 2.4k for the Extreme Fitness Recharge plan. Amir Siddiqui, the centre’s founder, seems to have the right approach and has only targeted the top end of the market which at that level he considers to be almost recession-proof.

HH Sheikh Mohammed bin Rashid Al Maktoum has completed the comprehensive evaluation report of services in 600 government centres; this will become an annual transparent exercise. He has delivered on his promise of last month and has named the top five and shamed the bottom five government centres. Management at the worse performing offices were summarily dismissed, whilst at the other end of the ladder, bonuses, equivalent to two months’ salaries, were handed out to the team members. He directed immediate management replacement, in the worst centres, with highly capable leaders, and warned that he would visit again within a month to see if improvements had been made. The Dubai Ruler added “we have the courage to evaluate ourselves and our teams because the cost of hiding mistakes is much higher”.

Maybe Dubai entrepreneurs could take a leaf out of several small tourism towns in Western Australia that have gone into aquaculture that has provided a working option to traditional seasonal work. The WA government, which has laid the foundations for the industry’s growth, estimates that it will create an additional 30k jobs over the next four years. The abalone industry is now the biggest single employer in SW coastal towns such as Augusta and Bremer Bay. 95% of the abalone from Augusta is exported to Asian markets. The influx of permanent employment – rather than seasonal work – has provided an economic lifeline to coastal communities.

There is no doubt that the emirate has a sustainable, high quality infrastructure and for further enhancements, Dubai’s Department of Finance is to establish a dedicated unit to focus on public-private partnerships. Over the coming years, it is expected that the government and private sector will combine on a number of projects, valued in the billions of US$, so Dubai can achieve its ambitious targets set out by the Dubai Plan 2021 and the Dubai Industrial Strategy 2030.

More disappointing news for Dubai hoteliers in August as STR preliminary figures show declines in occupancy levels, average daily rate and revenue per available room down 0.2% to 68.5%, 12.5% to US$ 106 and 12.6% to US$ 73 respectively. However, both supply and demand were higher in the month rising 7.6% and 7.4%.

Two-year old Noon hopes to attract 25 million unique shoppers as part of its next ‘Yellow Friday’ sales push, which will this year run from 24 to 30 November. The portal, backed by Mohamed Alabbar and Saudi Arabia’s sovereign wealth fund Public Investment Fund, will be offering deals with up to 80% discounts. Last year, it saw an eightfold increase in revenue and the number of items purchased per basket 50% higher. There are reports that the US$ 1 billion e-commerce player could go public within five years.

Khaldoun Tabari, the former chief executive officer of Drake & Scull International, has claimed that accusations of financial violations against him are an attempt to find a “scapegoat” for rising losses; last year, fifteen separate complaints against their former CEO were filed with the public prosecutor by the firm. Since then, he has had his local bank accounts frozen and a travel ban issued while he was overseas. The case is still under review, as the authorities await a report from an expert committee, with Bloomberg indicating that the sum involved is over US$ 272 million (one billion dirhams).

Emaar Properties has signed the final terms relating to the issuance of a US$ 500 million sukuk – a ten-year Islamic bond with a 3.875% return; the developer is looking at issuing a further US$ 1.5 billion in the coming years.

The bourse opened on Sunday 15 September and, having dipped 3 points (0.1%) the previous week, lost 68 points (2.4%) to 2820 by 19 September 2019. Emaar Properties fell US$ 0.04 to US$ 1.32, with Arabtec US$.0.03 lower at US$ 0.44. Thursday 19 September witnessed improved trading conditions of 310 million shares, worth US$ 142 million, (compared to 98 million shares, at a value of US$ 51 million on 12 September).

By Thursday, 19 September, Brent, having gained US$ 0.06 (0.1%) the previous week, jumped US$ 4.02 (6.7%) higher to US$ 64.40. Gold, having shed US$ 30 (2.0%) the previous week, ended on Thursday 19 September flat at US$ 1,507. 

Two Saudi oilfields have been targeted, leading to half of Saudi’s oil production (and 5% of global production, equivalent to 5.7 million bpd) being affected. It is still early days since the weekend attack but there is every likelihood that it could lead to a delay in the massive Aramco planned IPO to debut in November on a local stock market before being listed internationally next year. JP Morgan had already been appointed to lead the initial listing, with the whole company being valued at US$ 1 trillion. Amazingly, 50% of the “lost” capacity was restored by Tuesday.

Airbus forecasts that air traffic will grow by 4.3% every year until 2039 which will lead to the number of planes doubling over that period to 48k; this will comprise 39.2k new jets, with the balance from the current fleet. Additionally, this will result in the need for 550k new pilots and 640k additional technicians.

Now that Cobham shareholders have agreed to a US$ 4.8 billion takeover bid by US private equity firm, Advent International, the UK government has “issued an intervention notice on the grounds of national security”. The Competition and Markets Authority will have to report by the end of next month; since 2002, the government body has investigated nine takeovers, on the grounds of national security concerns, and none have been blocked to date. The Dorset-based company, that employs 10k, pioneered technology enabling the mid-air refuelling of planes and is also involved in electronic warfare systems and communications for military vehicles. The fact that it is a world leader in mid-air refuelling may not be enough to stop the deal, although strings will be attached.

Thomas Cook is hoping that 75% of its bondholders back the takeover by Chinese firm Fosun Tourism, despite some lenders likely to vote against the terms of the agreement. The troubled travel firm posted a US$ 1.8 billion H1 loss and issued three profit warnings over the previous twelve months, as it struggles to reduce its debt pile. It has been hit by a double whammy of on-line travel agents and low-cost airlines, as well as last summer’s heatwave, potential customers undecided about travel plans due to Brexit worries and geo-political unrest in several places including Turkey.

It seems that the eleven-year old Airbnb is considering an IPO as early as next year. Having disrupted the hotel and travel industry, the “unicorn” would hope that its share value would not fall like the ride-hailing services Uber and Lyft did straight after their companies went public. No concrete details were readily available.

Another disrupter, Aldi is planning a US$ 1.2 billion investment splurge in the UK over the next two years, as plans unfold to raise the number of stores from 840 to 1.2k before 2024. The German discount supermarket group, which saw profits drop 26% last year, is in expansion mode and is not afraid to sacrifice short-term gains for sales growth, store openings and new customers; in 2018, its customer base increased by 800k to 16.6 million and sales by 8.1% to US$ 11.6 billion, whilst its share of the UK market jumped to 8.1%, becoming the country’s fifth biggest supermarket – still behind but fast catching Tesco, Sainsbury’s, Asda and Morrisons.

Faced with over 2.6k lawsuits, accusing it of fuelling the US opioid crisis, US drug-maker Purdue Pharma has filed for bankruptcy protection, with the board approving the Chapter 11 filing on Sunday. The company, owned by the billionaire Sackler family, had already reached a deal with 24 US states but still faced opposition from the remaining states who were against the proposed settlement. The family has agreed that the money raised by the dissolution (thought to be in the region of US$ 12 billion), plus a further US$ 4.5 billion from their personal wealth, will go towards settling the lawsuits.

In a bid to boost the flagging Indian economy, by helping exporters and easing overseas borrowing norms for some housing projects, finance minister Nirmala Sitharaman has introduced a raft of measures, totalling US$ 7.0 billion. The reimbursement of taxes and levies on export promotion will result in the “loss” of US$ 7.0 billion in revenue. Exports continue to head south, and returns would be even worse if it were not for the weak rupee. Whether these measures will help to improve the unemployment rate, (currently at its highest level in 45 years), car sales at its worst on record, and to boost economic growth, which at 5.0% in Q2 was at its slowest pace in over six years, remains to be seen.

Because carmakers continue to refuse to share technical information with independent mechanics, as is the norm in the US and Europe, Australian car owners are paying an extra US$ 1 billion every year. Figures from the AAA point to the fact that a standard service could cost 30% more at a dealership than at an independent outlet. This is despite the fact that car-makers made a voluntary data-sharing agreement in 2014 and that the federal government agreed in May 2018 that reform of the sector was a priority.

Australia’s economy is indeed slowing, as indicated by latest unemployment figures again nudging higher, hitting 5.3% last month, compared to 4.9% in February; the number of unemployed stands at 717k. NSW posted the lowest return at 4.3%, whereas South Australia recorded the highest at 7.3%. In August,15.5k full-time jobs were lost as 50.2k part-time jobs were added. Indicators are that any employment growth is being driven more by part-time roles, with a growing divergence between employment growth and growth in hours worked. Partly because of the employment figures, the Aussie dollar fell below the US$ 0.68 level and it is certain that the RBA will cut rates again to 0.75%, a record low, as early as 01 October.

As expected, the Fed cut interest rates for the second time in three months, with the 0.25% reduction leaving them at between 1.75% – 2.0%. Chairman, Jay Powell said that the move was to shore up the US economy, amid “uncertainties” about future growth, with President Trump commenting “Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!”.

Also this week, the Fed continued to pump in up to US$ 75 billion a day to preserve the Federal Reserve’s control over short-term interest rates. The repurchase agreement operation injects more liquidity to the system, as banks have been struggling to find the cash needed to meet reserve requirements; this, in turn, has seen a hike in short-term borrowing rates.

YTD, UK house prices rose at their slowest rate in July since September 2012, indicating that there had been general slowdown in UK property price growth. Although the market slowed in London and the SE, the biggest falls were recorded in the NE, with annualised declines of 2.9%, with Wales at the other end of the spectrum with an increase of 4.2%. The average price of a UK house has risen to US$ 285k.

UK inflation growth dropped to its slowest rate in almost three years as it dipped to 1.7% in August from 2.1% a month earlier; the two main drivers cited were falling costs of computer games (down 5%) and clothing prices rising “less than last year after the end of the summer sales” – 1.8% compared to 3.1% in 2018. These figures will widen the gap between inflation and wage growth (at 3.8% in July) and will lead to increased household spending which in turn will boost GDP figures. Even the BoE has at last intimated that the country will not go into recession this year – a great stride forward from their previous prediction that the economy would fall off a cliff following the Brexit referendum. They did however think that a no-deal Brexit would lead to weaker growth, higher inflation and a further drop in the value of sterling.

However, by the end of the week, there seemed to be movement on the Brexit front with Jean Claude Junker announcing that there still could be a deal with the UK. This is not the first time that the EU has changed its mind, on an important issue, at the last minute and this softening of its position points to the fact that a no deal exit would also harm member countries. Indeed, it would be hard to find any other organisation that is so adept at 11th-hour trade and political agreements. All that has gone on before represents basic 101 negotiation skills positioning in order to obtain the best deal for them, even at the other party’s cost.

It is almost a shoo-in that an agreement will be reached over the controversial Irish backstop and that Boris Johnson will deliver an acceptable alternative. Then, with further tweaks to other aspects of the agreement, it will be long forgotten that in summer the EU had stated categorically the withdrawal agreement was not up for renegotiation. Finally, the UK can sing we can’t go on together with Suspicious Minds.

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Hope Springs Eternal

Hope Springs Eternal                                                12 September 2019

Despite all the gloom around the realty sector, there have been recent glimpses that the worse may be over. Property Finder reported that over the summer quarter, (June – August), residential sales at 8.8k were the highest in four years and 33.5% up on the 6.6k figure in 2018. The secondary market recorded a 20.4% rise to 8.8k, with total sales at US$ 3.9 billion, up 14.9% year on year. However, the off-plan market still leads the way, with the quarter’s 5.0k, 43.5% higher than the corresponding figure last year; sales came in at US$ 2.0 billion – up 49.6%.

For the first eight months of the year, the fact that only 179 residential units, worth over US$ 1.4 million (Dhs five million), compared to 12.4k under that value, sold in off-plan sales, points to a significant switch in consumer behaviour; in the secondary market, the numbers were 527 and 8.8k. In 2018, off plan sales showed 241 units being sold over US$ 1.4 million and 17.2k below that amount, with the secondary market seeing sales of 1k and 14.6k respectively. These figures indicate a marked shift in a move from what was considered luxury to more affordable units.

MAG Property Development is planning to invest US$ 2.2 billion into the local realty sector, with three major projects – Mag City in Meydan, Al Furjan Villas and MPL Tower in JLT. To further encourage potential buyers into the market, the developer is to introduce a US$ 33 per day payment option to own a property – and this without any additional terms or fees, including registration, service and any other administrative costs.  MAG believes that a move to more affordable housing is the direction the market is taking and that developers should take note or lose out.

September sees Damac launch a month of offers, covering projects in Business Bay, Damac Hills and Akoya. Among the offers are a 50% discount off select homes in Celestia in Dubai South and 10% discounts on luxury villas, along with a three-year flexible payment plan. The payment plan is also open to buyers in Damac Hills (as well as a 15% discounts) and 20% on golf course-facing apartments in Kiara. Buyers for its recently opened Paramount Tower Hotel & Residences will receive guaranteed three-year rental revenue of up to 30%, with the same offer available for Radisson Dubai Damac Hills. Damac is going back in time by also offering a new Mercedes Benz to customers buying homes at three of the four Damac Towers by Paramount, Royal Golf Boutique Villas and those buying 2-3 B/R apartments at Golf Town in Damac Hills.

Businessman, Abdul Razeq Abdul Ahad has signed an agreement with Ellington Properties to build a new residential tower in a central location in the emirate. The US$ 41 million deal will go some way towards the builder’s target to build 1k residential units every year; to date, its developments have included Belgravia, Belgravia Heights, Belgravia Square, Wilton Terraces and Wilton Park Residences in MBR City.

Monday saw the tenth anniversary of Dubai Metro over which time it has carried 1.5 billion people, riding on the world’s longest driverless metro project. In its first year of operations, it had 39 million users, but this has more than quintupled to 204 million recorded last year. It is hard to believe that HH Sheikh Mohmmed bin Rashid Al Maktoum faced some opposition to his plan from some members of the Dubai Executive Council, worried of its non-acceptance by the population.

Emirates reported that its UK market has been growing at a healthy 6% per annum and accounts for 56% of its total European profit, along with 26% of capacity. Data firm OAG estimates that the Dubai-London route is valued at US$ 800 million, with the Heathrow-Dubai leg, (utilising six A380s a day), being the fourth busiest in the world, carrying 3.4 million passengers. The airline uses eight UK destinations, with its president, Tim Clark, believing that there would not be a “collapse in UK demand” if and when the country leaves the EU.

The Minister of Health has ordered that the price of some 410 drugs should be reduced, by between 2% – 77%, as from 15 September; 183 of these are produced locally. HE Abdul Rahman bin Mohammed Al Owais is implementing the government’s directive that medicine should be provided at competitive prices and in line with the lowest prices to be found in the Gulf.

It seems that some UK employees in various sectors would be better off financially by moving to this country. A study by 1st Move International estimates that pilots, doctors and lawyers would earn, on average, more by 126% to US$ 168k, 86% at US$ 108k and 70% to US$ 138k respectively. The UAE was also ranked the tenth best paying country, with an average overall salary of US$ 55k.

Shuaa Capital is to sell its local Shuaa Securities brokerage and market-making businesses to IHC RSC Ltd, an Abu Dhabi investing holding company. This is part of the strategy of the new entity, following Shuaa’s recent merger with Abu Dhabi Financial Group, that sees the divestment of non-core business units.

On Tuesday, Arabtec shares finished 11.3% higher at US$ 0.482 (but still at almost record lows), as the builder confirmed it was in merger talks with Trojan Holding. In the first two quarters of 2019, the troubled company posted year on year profit falls of 50.0% and 62.0% respectively.

The bourse opened on Sunday 08 September and, having gained 122 points (4.4%) the previous week, dipped 3 points lower (0.1%) to 2888 by 12 September 2019. Emaar Properties, having lost US$ 0.07 the previous four weeks, was flat at US$ 1.36, with Arabtec US$.0.03 higher to US$ 0.47. Thursday 12 September witnessed even lower trading conditions again of 98 million shares, worth US$ 51 million, (compared to 143 million shares, at a value of US$ 95 million on 05 September).

By Thursday, 12 September Brent, having shed US$ 0.76 (1.1%) the previous week, nudged US$ 0.06 (0.1%) higher at US$ 60.38. Gold, having gained US$ 19 the previous fortnight, ended on Thursday 12 September US$ 30 (2.0%) lower at US$ 1,507. 

Following problems with so-called “final load” tests, Boeing has suspended testing on its new long-haul 777X aircraft, of which Emirates is the biggest launch customer. There are reports that a door of the plane blew out during the test – a very rare occurrence at this stage of testing.  The new model was supposed to have its first flight this summer – now it seems it will be a toss-up between the 777X and 737 which will fly first. At the same time, the US manufacturer is in the process of completing changes required by regulators to lift a flight ban on the 737 MAX.

Google has agreed to pay French tax authorities US$ 1.0 billion to settle a tax dispute. The US company expects that this will put to bed the many fiscal differences that it had with France for numerous years. However, there seems to be little common ground on how to control the taxation of digital giants, even though this was discussed at the recent G7 meeting.

Earlier in the year, Goldman Sachs was lauding the fact that WeWork could be valued at US$ 65 billion, despite the fact that the office-sharing company was losing billions of dollars and had never posted a profit in its nine-year history. In H1, WeWork lost a further US$ 609 million bringing its total losses over the past three years to US$ 3.0 billion. Now there are questions whether the company will ever go public and if it did, pundits are valuing it as low as US$ 20 billion. There is every chance that it may go to its number one investor, SoftBank, for more financing.

A late flurry in the number of complainants, claiming for the mis-selling of Payment Protection Insurance (PPI), has left Lloyds and Barclays facing billions of dollars in new costs. The former will provide between US$ 1.5 billion–US$ 2.2 billion, whilst Barclays will put aside slightly less. Popular with “financial advisers” in the 1980s, and wholly unsuitable for its supposed purpose, PPI policies were sold alongside a personal loan or mortgage to cover repayments if borrowers fell ill or lost jobs.

It seems highly likely that the London Stock Exchange will reject a surprise US$ 39.4 billion takeover offer from Hong Kong Exchanges and Clearing which would have combined “the largest and most significant financial centres in Asia and Europe”. However, having called the bid “unsolicited, preliminary and highly conditional”, the board said it would “consider” the proposal and “make a further announcement in due course”.

The IMF seem to be advising Saudi Arabia to double its VAT rate to 10%, as one way to reduce its far too high budget deficit (at US$ 320 billion) which is expected to widen by a further 0.6% this year to 6.5% of GDP on the back of OPEC production cuts. In its first year of operation, 2018, VAT generated returns of US$ 12.5 billion, equating to 1.6% of the country’s GDP. Although some progress has been made to reduce the deficit, the government still needs to look at other reforms, such as raising energy prices and fees levied on expatriates.

Australia – with a mere 25 million population – holds the world’s third-largest pool of pension assets, worth a massive $1.9 trillion, almost double that of the world’s tenth largest bourse – the Sydney-based national stock market ASX. This nearly 2:1 ratio is the highest among major developed economies where the ratios for UK, Canada and US are around 1.4, 1.2 and 1.0 respectively.

Fund managers are increasingly looking for overseas returns on some of that total which could be in the region of US$ 250 billion. Because of this cash imbalance, many of the Australian funds have been forced to look offshore to find suitable infrastructure, property, private equity and listed companies that could grow to US$ 1.0 trillion. Reports indicate that 41% of the biggest funds’ assets are currently invested overseas, with 75% of those funds expected to grow these offshore investments over the next two years.

The ECB has announced the return of quantitative easing (initially purchasing US$ 18 billion a month), and further cutting the deposit facility rate by 0.1% to minus 0.5%; the main interest rate remained unchanged at zero. Despite these measures, aimed at pushing the inflation rate to its 2.0% target, the economy remains sluggish at best and the hope is that by making more money available, it will encourage financial institutions to lend more to businesses and individuals.

With all the negative news emanating from the UK media, it is perhaps a surprise to some that the economy is faring comparatively well, when compared to some of its European neighbours. Wages continue to head north with July quarter growth readings of 4.0%, on an annualised basis, and at the same time the unemployment rate dipping to 3.8%; the estimated employment rate remained at a record 76.1% (32.8 million), its highest level in forty-five years. These figures point to a high probability that the economy should avoid a technical recession in Q3. On top of that, sterling started its climb back on Monday standing at 1.2357 to the greenback after falling below the 1.20 threshold the previous week.

Mainly as a result of the bi-lateral trade war with the US, China posted disappointing August exports – down 1.0%, compared to the same month in 2018. Exports to its nemesis fell 16.0%, year on year, whilst the flip side saw US imports slump 22.4%. The country is almost certain to introduce new measures to avoid the obvious danger of a further economic deterioration. This has already included the central bank cutting banks’ reserve requirements for a seventh time in twenty months to free up more funds for lending; there is the possibility of a rate cut which would be the first in four years. The on-off talks are back on with both countries agreeing to renew trade talks next month.

Good news and bad news on the trade tariff war. This week, China has decided to exempt sixteen US imports from their tariff quota. The bad news is that there are still 5k products still subject to levies of between 5% and 25%. In July, the US had exempted 110 Chinese-made products from their tariff list and some observers consider the Chinese move a very small gesture of goodwill ahead of talks in Washington next month. Currently the tariff table stands at US imposing US$ 360 billion worth of “charges”, with China retaliating with US$ 110 billion. By the end of the week, a presidential tweet saw Donald Trump delaying the planned tariff hike on US$ 250 billions of Chinese goods as a “gesture of goodwill”. Hope Speaks Eternal.

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Make The Money

Make The Money                                                      05 September 2019

In an on-line letter, HH Sheikh Mohammed bin Rashid Al Maktoum addressed his “brothers and sisters” in a six-point document. One of his most interesting points was directed at government officials who he said belong “in the field” and “we want to see them there and hear from them among the people rather than in conferences that have increased and consumed resources and the energy of those in charge…we are a government of achievements and not a government of conferences.” He was also critical of social media users and urged them not to tarnish the efforts and accomplishment of the UAE, whilst reminding them that “we have a Ministry of Foreign Affairs and International Co-operation, responsible for managing our external affairs, speaking on our behalf and expressing our position on foreign policies.”

He also pointed out that Emiratisation is a “priority of the new season”, more so because Emiratis account for only 0.5% of the private sector (and 60% of the public sector). He also reemphasised that “providing jobs for Emiratis was and remains a priority”. He also indicated that the country is to become more competitive on the global stage, adding that “we are not a country that moves according to the average economic rates. We are a country that seeks to make economic leaps.” Who needs Tony Robbins when it comes to motivation?

In a busy week, he was among a crowd of over “10k aspiring leaders and positive change makers at the biggest motivational event in the region.” He was attending lifestyle guru, Tony Robbins’ ‘Achieve the Unimaginable’ event and also tweeted “gathering a crowd of 10k is just the beginning to lead societies towards a better future. We have more to come.”

HH Sheikh Mohammed Bin Rashid Al Maktoum also issued directives to form a Higher Real Estate Planning Committee to try and equate the supply/demand conundrum seen in the emirate’s realty sector. He is keen to bring about a right balance between supply and demand, avoid launching similar real estate projects and ensure projects add real value to the national economy. Part of its strategy would be “to ensure that semi-government real estate companies do not compete with private investors”, as well as “to develop a comprehensive strategic plan and vision for all major real estate projects”. It also aims to ensure that real estate projects are not duplicated and to avoid competition between big developers and small private investors.

So far this year, Sobha has racked up sales in excess of US$ 272 million and expects to double that number by the end of the year, if the strong investor interest, in its flagship project Sobha Hartland, continues; compared to the same period in 2018, sales are up 165%. Interestingly, Chinese sales account for 36.5% of the total. The property developer is planning a 2022 IPO of its local business unit, dependent perhaps on it meeting its ambitious revenue and profit forecasts of US$ 680 million and US$ 110 million.

There has been a 2.1% hike in the number of hotel rooms in the final phase of the development pipeline in the ME with, as usual, the UAE, streets ahead of its neighbouring countries. A STR study indicates that the pipeline comprises 427 projects, accounting for 124k rooms of which the UAE has over 54k (31.8%) of the total.

Its seventh premium luxury Address Hotels + Resorts property was unveiled by developer Emaar Properties. Located in Downtown Dubai, the three tower, 193-key Address Fountain Views will open next month; a link bridge will connect it with Dubai Mall.

Emaar has confirmed that it has appointed banks, including Standard Chartered and Emirates NBD, to assist with the potential issuance of US$ Islamic bonds, (probably a ten-year sukuk), an integral part of its US$ 2 billion debt raising programme.

This week it has also launched Ease by Emaar, a property management service that allows investors to seamlessly rent their Emaar property short-term as a holiday home. The company will charge a. 20% management fee, whilst the owner will have to pick up all other expenses, including government and booking fees.

It already has properties in its portfolio, as the new initiative may well boost the realty sector. Strangely, a day after this announcement, Emaar announced a rather abrupt end (as from 19 September) to all holiday-home visits in Downtown Dubai, citing that this was the result of “several requests and resident complaints on disturbances and related inconveniences due to holiday home operations.”

According to Mastercard’s Global Destination Cities Index 2019, Dubai maintained its position as the fourth most visited global city, with almost sixteen million international overnight visitors. Once again, Dubai visitors spent more (US$ 553) on a daily average, with a total spend for the year at US$ 30.8 billion, than any other of the two hundred cities surveyed. The next three – Makkah, Bangkok and Singapore – were way behind, with totals of US$ 20.1 billion, US$ 20.0 billion and US$ 16.6 billion.

The emirate welcomed more than 1.4 million passengers over the last two weeks of August, of which 260k (18.6%) utilised the 75 smart gates.

It is reported that Dubai Airports “is currently reviewing its (Dubai World Central) long term master plan to ensure infrastructure development takes full advantage of emerging technologies”. It seems that plans for what would have been the world’s biggest airport are being pushed back. There were hopes that following phase one, DWC would be able to handle 130 million passengers. Currently, even though it can handle 27 million, total passengers last year came in at 900k.

In the light of the imminent demise of its workhorse, the Airbus A-380, and a slowdown in the global economy (which is inevitably a cyclical event), Emirates is reviewing its future fleet requirement. The airline, basing its fleet around the Airbus super jumbo and the Boeing 777, has become the world’s largest international carrier. Now it has to consider that the market may be changing and that some locations may be better served by smaller planes. Emirates has reportedly still to sign off on a US$ 21 billion order, for thirty A350-900s and forty A330-900neos, made earlier in the year. It is also to restrict the number of A-380s to 123 after RR could not guarantee their engines’ price and fuel efficiency. It will be interesting to see what order the local carrier makes at this November’s Dubai Air Show.

Emirates has revamped some of its top hierarchy this week, with Adnan Kazim appointed as CCO, replacing Thierry Antinori, who abruptly departed some four months ago. Other appointments saw Adel Al Radha, as the new chief operating officer, leading all operational departments in the airline, and Shaikh Majid Al Mualla as divisional senior vice president for international affairs.

Emirates Cuisine Solutions is a new entity following a JV agreement between Emirates Flight Catering and Washington DC-based Cuisine Solutions. This will see Dubai host the world’s largest halal sous vide manufacturing facility. (Sous-vide is a cooking method in which food is placed in a plastic pouch or a glass jar and cooked in a water bath for longer than usual cooking times at an accurately regulated temperature). Distribution of these specialised food items will start this month, whilst the manufacturing facility will be ready by 2022.

There was a big fall in August’s IHS Markit’s PMI which saw the index decline to an eight-year low down, month on month, by 4.9 to 51.6. Despite this dip in business conditions, driven by increasing market competition, it is still above the 50 mark that is the threshold between expansion and contraction. It was also noted that activity in the non-oil economy increased “at a notably softer rate”, with weaker demand biting into any expansion and prices continuing to be discounted. Companies maintained their vigilance when hiring, with employment numbers, in the non-oil sector, remaining in the doldrums.

One sector that seems to defy the local economic conditions is banking, with the Central Bank releasing figures showing that the sixty UAE-based institutions received a total of US$ 5.8 billion in commissions last year; national banks accounted for 82.8% of the total. In 2018, the profits of UAE banks rose by 12.0%, year on year, to US$ 11.6 billion. With total banking assets topping US$ 780 billion, the UAE maintained its banking sector’s position as the largest in the Arab world. The Central Bank also revealed that eligible liquid assets totalled US$ 112.8 billion.

S&P expects Dubai economy to expand by 2.4% this year (2.0% – 2018), driven by a slight rise in economic activity, with stronger growth expected next year on the back of Expo 2020 and the completion of related infrastructure projects, along with increased tourist numbers. The ratings agency expects average 2.5% growth until 2022 but the downside could arise from the real estate sector expected to post a further price 10% decrease this year. Meanwhile, the country will see growth at 2.6% next year (up from 1.7% in 2018), with Dubai’s non-hydrocarbon sector contributing about 70% of its real GDP.

August saw the DGCX post average daily volumes totalling 146.5k – 55% higher than the same month in 2018 – and actually had its highest ever daily volume of 220k on 05 August. As usual, the best performing asset class during the month was the Indian Rupee, specifically Rupee futures which links the Indian currency to the US$. It seems highly likely that continuing geo-political tensions will benefit the Dubai exchange – as investors search for new hedging tools – so much so that by the end of the year it should have overtaken its previous annual volume of 22.3 million contracts.

On Monday, Emirates NBD, 55.8% owned by the Dubai government,  raised the cap on foreign ownership, from 5% to 20%, and saw its shares, quoted on the DFM, jump 15% limit up to its highest level since 2007; it is considering doubling this to 40% in the near future, as well as raising its capital base to US$ 2.0 billion from a new share issue. Money raised will help to pay some of the US$ 2.6 billion spent on its recent Turkish acquisition, Denizbank AS. The bank also confirmed that it raked in US$ 376 million, with its April sale of a 10.5% stake in Network International which floated on the London Stock Exchange; it still retains an 11.9% shareholding. There is every chance that, by early next year, Dubai’s largest bank could be included in the emerging market benchmarks compiled by MSCI and FTSE Russell. Since the beginning of September, its share value has shot up 19.5% to US$ 3.76.

The bourse opened on Sunday 01 September and regained most of the 141 points (4.8%) shed the previous four weeks, jumping 122 points (4.4%) to 2891 by 05 September 2019. Emaar Properties, having lost US$ 0.08 the previous three weeks, nudged US$ 0.01 higher to close on US$ 1.36, with Arabtec flat at US$ 0.44. Thursday 05 September witnessed low trading conditions again of 143 million shares, worth US$ 95 million, (compared to 159 million shares, at a value of US$ 45 million on 29 August).

By Thursday, 05 September Brent, having gained US$ 3.70 (6.4%) the previous three weeks, was US$ 0.76 (1.1%) lower at US$ 60.32. Gold, having gained US$ 29 the previous week, ended on Thursday 05 September US$ 10 (0.7%) lower at US$ 1,537.  Silver ended the week at US$ 18.82 – up 17.5% from its 01 January opening of US$ 16.02.

For the month of August, Brent lost ground, shedding US$ 5.17 (9.0%) to close the month at US$ 59.25 but was well up YTD having gained US$ 5.45 (10.1%) from its year opening balance of US$ 53.80 to close at US$ 59.25. Meanwhile, gold astounded the market, with monthly gains of US$ 104 (7.3%) and YTD US$ 235 (18.3%) to close August on US$ 1,520.

American Airlines has followed the example of others, including United, South West and Air Canada, to remove the troubled Boeing 737 Max from its schedule until at least December. The aircraft manufacturer is confident that the US Federal Aviation Administration will conduct its Max certification flight next month, more than seven months after the model was grounded worldwide on 13 March, following two crashes within five months that killed 346 people. However, some global civil aviation authorities have complained that Boeing has yet to provide technical details about modifications to the Max’s flight control computers and this could delay its return into the new year.

In the UK, the Restaurant Group, that acquired Wagamama last year, has indicated concerns that some of its restaurants are considered to be in unfavourable locations. Having identified 76 Frankie & Benny’s restaurants in March, they have now highlighted that a further 42 (mainly Chiquitos) are in line for possible closure for the same reason. The future of each outlet would be reviewed when their lease expired. Although total H1 sales were 58.2% higher at US$ 620 million, the company posted a US$ 106 million loss, driven by a US$ 139 million write down in the value of restaurant sites seen as being “structurally unattractive”. Its share value dipped 14% on Tuesday when the details were published.

Last Friday, shares in Shoe Zone sank by over 30% after a double announcement that it expected profits to be less than initially forecast and its chief executive, Nick Davis, would leave immediately to “pursue other business interests”. The retailer, with 4k employees and 550 stores, is but the latest High Street name to hit the buffers, as reports indicate that the number of empty shops in the UK reached its highest rate in four years and shopper footfall declined by 1.9%.The retailer also revealed that its 17 freehold properties were worth US$ 4 million less than expected. Its future strategy will see it focus more on online and larger out-of-town stores.

The Australian supermarket sector is in for a major shake-up, involving the entry of a largely unknown German powerhouse Kaufland, backed by the fourth biggest retailer in the world, Schwarz Gruppe. It first announced that it would open three stores earlier in the year and now has twenty ready to open in Victoria and South Australia, prior to moving to NSW. It is expected that the expansion will result in 2.4k jobs and that Victoria itself will benefit by a US$ 350 million investment made in outlets, HQ and a distribution centre. Not only other big players – including Coles, Woolworths and even its compatriot Aldi – will feel the pinch but also the likes of Big W, as well as Wesfarmers’ Kmart and Target, because the German interloper also houses a full line of discount department store goods. Kaufland operates big – its stores are usually fifteen times bigger than an Aldi, five times bigger than a big Coles or Woolworths, and stocks 40k different stock items (compared to Aldi’s 1.3k average).

It is no surprise to see yet another of Australia’s larger banks in court. This time, Westpac is facing a class action by potentially thousands of their superannuation members, claiming that they have been short-changed out of retirement savings for more than a decade. The case involves two of the bank’s subsidiaries – Westpac Life and BT. The latter, (even though funds were meant to be invested directly into a low-risk “cash-only” fund), is accused of shifting its superannuation members’ funds to the former which then transferred them to an external fund, thus ramping up fees. It is then thought that Westpac Life “pocketed” half the returns.  It seems that Westpac Life had earned “reasonable returns” (of 2.5%) but decided to only pass on 1.3% to members. The compensation claim could cost the bank tens of millions of dollars – and because it is an “open class action”, any investor is automatically included as plaintiffs.

Australia posted its first quarterly current account surplus (of US$ 4.0 billion) since June 1975 (when January’s ‘Never Give Up’ was number one in the charts) on the back of big trade surpluses driven by booming iron ore prices and a lower Australian dollar. The current account deficit used to average about 4% of the country’s GDP but this figure had risen to US$ 16.1 billion by 2015. Subsequently, it has been slowly whittled down to finally attain positive status. Meanwhile, the RBA has kept the cash rate at a historic low 1.0% following consecutive 0.25% cuts the previous two months but expect a further reduction probably in November. The dollar (US$ 0.682) is hovering around decade-long lows.

It is a hard fact of economic life that Australia’s good news derives a lot from Brazil’s Vale iron ore mine disaster in January that saw 300 people killed and the facility closed. Consequently, Australian miners, including Rio and BHP, cashed in as iron ore prices rose from US$ 72 a tonne to US$ 122, before dipping to US$ 90.72 by Thursday; even at this level, it is still 65% higher than the US$ 55 a tonne forecast by Treasury for the current financial year. The fact that for every US$ 10 over the US$ 55 forecast price generates US$ 3.7 billion for the federal budget may well be masking that the Australian economy is not performing as well as it first appears.

This week, Argentina introduced currency controls, limiting bank withdrawals to a maximum of US$ 10k without formal approval. This move comes with the country facing a deepening financial crisis, resulting in the value of the peso slumping. The Macri government, which is likely to fall from power in next month’s elections, has also approached the IMF to defer debt repayments. Argentina, where in 2018 alone, three million more fell into poverty, has posted a H1 inflation rate of 22%, as its economy contracted 5.8% in Q1, following a 2.5% decline last year. Whether this compares with the other four debt defaults, that the country has faced in the past thirty years, remains to be seen.

August’s IHS Markit/CIPS PMI saw UK manufacturing activity slumping to its lowest level in seven years, as the index dipped, month on month, 0.6 to 47.4. With new orders dropping at their fastest rate in seven years, and business confidence at a historic low, the blame has been apportioned to the usual two main suspects – the global economic downturn and uncertainty around Brexit.

In what many considered to be an election budget, there is no doubt that new Chancellor Sajid Javid splurged out, declaring that the Johnson governmenthad “turned the page on austerity”. With what was a budget, with the fastest increase in spending for fifteen years, the government will spend US$ 16.5 billion across the board including the NHS, education and the police (with an additional 20k new police being recruited).The budget was overshadowed within hours when Prime Minister Boris Johnson lost his majority in the House of Commons with Phillip Lee’s defection to the Liberal Democrats. More bad news followed when rebel Tories and Labour MPs passed a bill to stop the UK leaving the EU on 31 October without a deal and the PM failed in a bid to hold a snap general election on 14 October. Sterling had fallen to US$ 1.206 but recovered to close on Thursday at US$ 1.225 – another missed opportunity for those with dirhams or dollars to exchange.

Despite the ever-increasing noise about an imminent recession, driven by the year-long trade war between the United States and China, August US private payroll figures continue to move northwards, with an increase of 195k monthly jobs, up from July’s figure of 142k. However, despite the obvious strength in the labour market, and the fact that the US economy is in its 11th straight year of expansion, there are genuine concerns that global trade issues will eventually have a negative economic impact. On those grounds, there will almost certainly be a further interest rate cut later in the month, two months after the last one.

As options contracts expired at the end of the month and low liquidity pervaded the market, the euro sank below US$ 1.10 for the first time in over two years last Friday and weekend worries about tariffs and possible Hong Kong unrest. Even Donald Trump was tweeting about the fact that the strong dollar was costing his country exports revenue to the bloc. There are expectations that the ECB could well cut rates to below zero as well as introduce a new stimulus package. If you can get a near-zero loan, it could be time to fill your boots – otherwise, yet again, it is time for the banks to Make The Money.

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True Colours

True Colours                                           29 August 2019

Finally, some good news for the Dubai realty sector, with a Knight Frank report that luxury property prices showed a 0.3% increase in Q2 (but still down 6.0% over the previous twelve months). However, the emirate is only ranked 42nd out of out of 46 cities, covered in the latest Knight Frank Prime Global Cities Index, which listed Berlin at the top of the ladder (showing a 12.7% annual growth, with Vancouver at the other end, declining 13.0%). Hong Kong still remains the most expensive global prime residential city market, with an average price of US$ 4,251 per sq ft; Dubai is a lot more affordable, with average per sq ft prices of US$ 625. It is inevitable that Dubai real estate will benefit from the on-going trouble in the once-held British colony.

Oyo Rooms and Gallery Suites Vacation Rentals have signed a US$ 5 billion deal to furnish and manage 10k Dubai holiday homes, to meet the growing demand for short-term and holiday lets. Located in areas such as Dubai Marina and Palm Jumeirah, the venture is confident of becoming the service provider of choice for the exclusive end of this burgeoning market. Gallery Suites Vacation Rentals is a subsidiary of the UAE-based IBC Group, whilst Oyo is the third largest hospitality company in the world. It may well benefit from its choice of Berkshire Hathaway Home Services Gulf Properties to play an advisory brokerage role in identifying, acquiring and financing the right properties.

Five Jumeriah Village is set to open its doors in JVC next month. The new hotel, located in Jumeirah Village Circle, comprises 247 rooms and suites, along with 254 1-4 B/R hotel apartments; the chic hotel also boasts 269 pools and jacuzzis. Nearby, Nakheel has released one hundred 4-5 B/R villas, with prices starting at US$ 871k –  part of its new gated community, containing1.6k Mediterranean and Moroccan style villas.

Just when you thought that Dubai was teeming with too many schools, the Knowledge and Human Development Authority announce that five new ones will open this school year and at least three more next; it also added that 13k new seats would be made available to give parents an even wider choice for their children’s education. Over the last three years, 41 new schools have opened in Dubai which has seen the number more than triple over the past decade to the current 119.

Since its 2016 start-up, India’s Cure.fit has managed to raise over US$ 400 million in four rounds of funding. Now it is to spend US$ 10 million to test the UAE market, with the aim of opening fifty gyms (35 in Dubai) and get up to 20% of the local US$ 545 million market, set to rise by 50% to US$ 817 million over the next three years. Although there are some major players in Dubai, such as Fitness First and Gold’s Gym, the market is fragmented with over 91% of fitness outlets being independently owned.

Dubai Economy reported a 23% hike in the number of H1 trademark infringement cases, with its Intellectual Property Protection section resolving 186 cases (cf 151 in H1 last year).  The top three countries lodging cases were US, France and Switzerland with numbers of 37, 33 and 21 respectively. Furthermore, there were 38 and 22 cases involving cosmetics and personal care products. Over the period, there was a 63% increase in trademark files registered on the DED’s ‘IP Gateway’ portal, as global trademark owners registered over 4.7k brands; more than 50% were lodged by three countries – US, UAE and Germany, with 1,482, 742 and 325 files.

A major scam, involving 6k tonnes of missing rice, is being investigated by Dubai Police. The fraud was reportedly carried out by six men and two companies, as well as staff at a money exchange house. The suspects, purporting to represent a Dubai trading company, duped millions of dollars when as many as 23 TTs were cancelled after their cheques bounced. When the real traders travelled to Dubai to check on the situation they found that the Al Qouz warehouse, which should have had 250 containers full of rice, was empty; furthermore, the Dubai trading company’s office in JLT was also left vacant.

Dubai Police has also warned residents to be aware of other scam artists, using counterfeit foreign money, being offered at above normal rates. Last year, the authorities seized over US$ 272 million (one billion dirhams) and arrested 471 suspects, with 500 cases of counterfeit bills being detected. (This scam is somewhat bigger than the Italian suit man who has been around for at least twenty years).

Although the country’s population has only grown 5.2% to 9.543 million over the past four years, the number of road traffic deaths in the UAE has fallen by 34.2% to 468 in 2018. With the number of vehicles on the road increasing significantly over that period, the number of serious accidents dropped 24.1% to 3.7k. The government is on track to meet its 2021 target of reducing its road mortality rate to three per 100k.

The fuel price committee has set September pump prices in a monthly process, that started in August 2014, of adjusting prices according to market conditions. Special 95 and diesel have both fallen by 4.4% to US$ 0.589 and 1.7% to US$ 0.648.

Mars has become one of the first global companies to take advantage of the country’s new foreign direct investment (FDI) laws that allow them 100% ownership for the first time ever; in the past, 51% local ownership was mandatory. The privately-owned food company has invested US$ 150 million since setting up in Jebel Ali Free Zone in 1993. Its range of brands include Dolmio and Uncle Ben’s, as well as pet food brands Whiskas, Royal Canin and Pedigree. Following its US$ 23 billion 2017 acquisition of chewing gum maker Wrigley, it boasts five of the top ten confectionery brands in the country – Galaxy, Snickers, Bounty, M&M’s and Extra.

A Dubai-based start-up could save delivery drivers almost US$ 7k a year, with the September launch of UAE-designed electric scooters, costing from US$ 4.0k to US$ 4.5k. The savings would come from reduced maintenance, no fuel charges and no registration charges – and taking polluting motorcycles off the road will lead to cleaner air. One Moto hopes that it could sell up to 50k units over the next three years as it looks to regional expansion.

The recently launched Dubai-based Galaxy Racer Esports is to host the world finals of the third annual Girlgamer e-sports festival in December. The event, at Meydan Grandstand, will see nine five-player teams battling it out to see who will win in the games of League of Legends and CounterStrike Go. The company hopes to encourage and develop local talent in the ever-growing e-sports sector and although it attracts a global audience of 454 million, and revenue in excess of US$ 1.1 billion, there is a lack of infrastructure, funding and opportunities in the region. Galaxy Racer eSports hopes to change all that.

The UAE is the first Gulf country to introduce Indian Rupay, that country’s answer to Mastercard and Visa, which was launched by Prime Minister Narendra Modi in Abu Dhabi last Saturday. Within weeks, the Rupay card will be accepted by 175k merchant locations of 21 businesses and 5k ATMs in the UAE.

Following initial reports in May, GEMS Education confirmed that it had completed the acquisition of Saudi Arabia’s Ma’arif Education, through a joint venture with Hassana Investment; no financial details were made available. Working with the Kingdom’s largest private school group, having 22k students, the Dubai-based schools operator plans to invest up to US$ 800 million, over the next decade, to acquire and develop more than fifty schools; these would educate more than 100k students across the country.

Emaar Misr has rejected an “utterly false” claim by Egyptian businessman, Wahid Raafat, involving more than 400 acres of land where it is building the up-market Marissa residential and leisure development. The Egyptian subsidiary of Emaar Properties has a portfolio, valued at US$ 3.2 billion, in the country and has claimed that it bought this parcel of land by way of a public government auction.

A unit of Arabtec Holding has been awarded a US$ 112 million by Emaar Misr to build two urban projects, comprising 449 residential units, in Cairo. The same company was awarded a US$ 26 million contract in February for 42 units. Emaar Misr has already completed 6.5k units in the huge project and expect to deliver a further 800 prior to year end.

Emirates Reit posted a 96% year on year slump in H1 profit to just US$ 1 million, largely attributable to a US$ 5 million revaluation impairment on a portfolio of around US$ 1 billion; revenue was 7% higher at US$ 36 million. It is to invest US$ 52 million over the next six months on buying properties in what continues to be a buyers’ market, as prices still remain stubbornly low. It is focusing its acquisition efforts on education and office buildings in Dubai and is reportedly near to completing deals.

MAF Group has posted 1.0% increases in both H1 revenue, at US$ 4.8 billion, and profit of US$ 571 million in what the company said was because of “challenging market conditions and more cost-conscious consumer behaviour across the region”.

Although there were more than 100 million visitors and occupancy was at a credible 93%, MAF – Properties recorded revenue of US$ 572 million, 3% down on the same period in 2018. Meanwhile, its hotel operations saw occupancy 2% higher at 78% but RevPAR (revenue per available room) fell in line with the market. However, MAF – Ventures fared better posting 16% increases in both revenue and profit to US$ 354 million and US$ 37 million respectively. With weak consumer confidence abounding, it was no surprise that, despite the opening of new stores in Egypt, revenue was flat at US$ 3.9 billion, with profit dipping 1% to US$ 164 million.

DP World and the Zhejiang China Commodity City Group Company signed a 70:30 agreement to develop a “smart” wholesale and retail traders’ marketplace in Jebel Ali Free Zone. Construction of the first phase, covering 220k sq mt and with an estimated US$ 150 million investment, will start in Q4, to be completed by the end of 2021.  The whole development, which will have an area of over 800 km sq mt, will take a little longer. This is yet another example of the increasing trading relations with China which is expected to double over the next two years to US$ 70.0 billion.

The bourse opened on Sunday 25 August and, having shed 131 points (4.7%) the previous three weeks, lost a further 10 points (0.4%) to 2769 by 29 August 2019. Emaar Properties, having lost US$ 0.07 the previous fortnight, was a further US$ 0.01 lower to close on US$ 1.35, with Arabtec also down US$ 0.01 at US$ 0.44. For the month of August, Both Emaar and Arabtec lost ground – by US$ 0.16 and US$ 0.04 respectively but YTD, Arabtec jumped US$ 0.22 whilst Arabtec lost US$ 0.08 from their 01 January openings of US$ 1.13 and US$ 0.52. Thursday 29 August witnessed low trading conditions of 159 million shares, worth US$ 45 million, (compared to 70 million shares, at a value of US$ 29 million on 22 August).

By Thursday, 29 August, Brent, having gained US$ 2.61 (1.5%) the previous fortnight, was US$ 1.09 (1.8%) higher at US$ 61.08. Gold lost US$ 23 (1.5%) the previous week, but regained all that and more, closing US$ 29 (1.9%) higher on Thursday at US$ 1,537. 

Naspers, South Africa’s largest company by market value, has created Prosus, a new entity, containing assets including a stake in China’s Tencent, as well as international interests in industries such as online food delivery and classified advertising. When it lists on the Amsterdam stock market, with a stock value in the region of US$ 100 billion, it will become the third largest traded behind Royal Dutch Shell and Unilever. The parent company is valued in excess of US$ 34 billion, and owns 31% of the Chinese tech giant, will retain a 73% stake in the new entity.

Not helped by falling sales in the UAE, Ace Hardware International Holdings, Ltd, which manages operations outside the USA, posted a US$ 10 million decrease in Q2 revenue, although the Group reported a 6.3% hike in total revenue to US$ 1.7 billion. The world’s largest retailer-owned hardware cooperative, which has 17 distribution partners worldwide and 5.2k outlets globally, saw profit dip 1.8% to US$ 54 million.

US toymaker, Hasbro, has agreed to pay US$ 4.0 billion for Entertainment One, the studio that makes the Peppa Pig and PJ Masks children’s shows. The world’s largest toy maker, in terms of stock market value, has paid a 26% premium for a company that has respected scripted and unscripted TV production and development capabilities, which include animated and live action shows. Now Hasbro will be in a position to make larger films, previously having had to license its characters to studios. Weak sterling made the deal more favourable for Hasbro, (as did the sale of UK pub operator Greene King to Hong Kong’s Li family for US$ 3.3 billion).

US fashion retailer Forever 21 is considering a possible Chapter 11 bankruptcy filing, as it has failed to negotiate a refinancing package with possible lenders. Founded by Do Won Chang in 1984, the Group has over 800 outlets mainly in the US but also globally; it is one of the biggest mall tenants in the country and if it were to go under, it would join a raft of other household names which have recently dropped out from the US High Street.

Johnson & Johnson have been fined US$ 572 million by an Oklahoma court for its role in fuelling the opioid addiction crisis in that state; the case was the first of many thousands that will be filed against opioid makers and distributors. It is estimated that over 6k have died in Oklahoma (out of a country total of 400k) from opioid overdoses. Earlier in the year, OxyContin maker Purdue Pharma and Teva Pharmaceutical settled out of court for US$ 270 million and US$ 85 million. All monies collected will be used for the care and treatment of opioid addicts. The same week, Purdue Pharma, facing over 2k lawsuits linked to its painkiller OxyContin, is reported to be offering between US$ 10 billion and US$ 12 billion to settle out of court.

China’s Fosun Tourism, a major shareholder, looks likely to step in and save the 179 year-old Thomas Cook, after agreeing a rescue deal also involving banks and a majority of its bondholders. This would see the Chinese group investing US$ 545 million for at least 75% of the tour business and 25% of the group’s airline; banks and bondholders would put in the same amount, in return for at least 75% of the tour business and 25% of the group’s airline. This would be at the at the expense of other shareholders. (Fosun owns Wolverhampton Wanderers FC and the Club Med holiday business).

Eleven years after Altria, the biggest investor (35%) in e-cigarette market leader Juul Labs, spun off the Philip Morris business, the two tobacco giants are discussing a merger that would create a mega company, valued at US$ 208 billion with Marlboro-maker Altria worth US$ 88 billion and the other party US$ 120 billion. The fact that the industry itself is declining, with global tobacco sales falling 4.5% last year, is the main driver behind the potential merger. Both companies have been investing in other areas – PMI its own e-cigarette division and Altria in wine, beer and cannabis companies, as well as Juul.

There are always winners and losers when shares, commodities and currencies rise and fall. For example, Emirates NBD acquired Turkey’s Denizbank earlier in the year and saved US$ 400 million on the deal because of the devaluation of the lire – paying 15.5 billion lire. On the other side of the coin is billionaire Ferit Sahenk, the owner of Dogus Holdings, which has in its portfolio the Nusr-Et steakhouse, popularly known by its founder chef’s meme Salt Bae, as well as interests in other restaurants, entertainment outlets, marinas and car-distribution businesses. Now with the fall in the lire, he is struggling to repay his euro loans and has recently been selling assets, valued at US$ 694 million. The Turk wants to cut his euro debt to US$ 1.7 billion by the end of next year.

Germany’s economy is heading for further contraction and an inevitable recession come 30 September. Final analysis confirmed that GDP shrank 0.1% in Q2 and 0.4%, year on year. Because of various external factors, such as the US-China trade war, slowing global trade and Brexit, there was no surprise to see exports falling 1.3% on the quarter and at a faster rate than imports dipping 0.3%.

In its latest report, Bundesbank hinted that there is every chance that Germany will witness another contraction of its GDP that would put the country into a technical recession following Q2’s negative 0.1% decline. It must be inevitable that the Merkel administration will introduce a significant fiscal package to try and boost an economy that has seen the business climate falling as pessimism among companies fell to its lowest since the 2009 GFC.

On the side-lines of last week’s G7 meeting, the US and Japan agreed in principle to a bilateral trade deal which could be signed next month at the UN’s General Assembly in New York by Donald Trump and Prime Minister Shinzo Abe. The agreement covers agriculture, industrial tariffs and digital trade which would see Japan buy excess US corn, the sale of which has been badly hit by the trade war with China. Currently, the US exports US$ 14 billion worth of agricultural products – this deal would add a further US$ 7 billion.

In the latest tit-for-tat trade war, Donald Trump has levied a further 5% duty on some US$ 550 billion in targeted Chinese goods, bringing the tariff on imports worth US$ 300 billion to 15% and US$ 250 billion to 30%. This follows China unveiling retaliatory tariffs of US$ 75 billion of US goods. Following the news, both the Nasdaq Composite and S&P 500 fell – by 3.0% and 2.6% – as did US Treasury yields and crude oil. On Monday, the ASX, Australia’s stock market, lost US$ 16.5 billion, on opening, whilst the Aussie dollar sank below US$ 0.67.

On the news that Her Majesty, The Queen, had acceded to Boris Johnson’s request to suspend parliament from 09 September to 14 October, sterling plummeted below US$ 1.22. This move would reduce greatly the opposition parties to prevent the country falling out of the EU on 31 October, without a divorce agreement. There are critics of a no-deal Brexit that argue that such a clean break from the bloc would devastate the UK economy and send it falling into recession. Among them, the man with many hats – ex-Chancellor of the Exchequer, Phillip Hammond, who had backed Remain in the Referendum, but then confirmed he would support the withdrawal of the UK from the EU, saying “No ifs, no buts, no second referendums” in 2017. Now he appears to be on the other side of the fence again, showing his True Colours.

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