Not All That Glitters Is Gold!

Not All That Glitters Is Gold!                                                20 October 2021

Last month, Dubai recorded the highest value of real estate sales in one month since December 2013, with a nine-month total of sales transactions of 5,762, valued at over US$ 4.4 billion, bringing the YTD total to 43,299 sales transactions, worth US$ 28.4 billion. In only nine months, the YTD total sales transactions are already the highest yearly sales figure since 2017 – and 45.2% higher than at this time in 2020. Q3 2021 had seen Dubai’s best quarter volume and value returns since 2009, after posting 15,927 sales transactions, worth US$ 11.54 billion. Compared to the same periods last year and in 2019, Q3 figures for volume and sales were 85.4% and 135.4% higher than 2020 and up 64.5% and 138.8%, compared to 2019.

Using January 2012 as a 1.000 base line, the Mo’asher September overall monthly index was at 1.115, and an index price of US$ 290k, and for the quarter at 1.128 and US$ 287k. The monthly indices for apartments and villas/townhouses stood at 1.140 and 1.098, with prices at US$ 260k and US$ 529k respectively; on a quarterly basis, the figures were 1.134/US$ 258k and 1.124/US$ 533k.

In the month, 56% of all sales transactions were for secondary/ready properties and the balance for off-plan properties, with the former posting 3,232 sales transactions worth US$ 3.02 billion, and the latter transacting 2,530 properties, valued at a total of US$ 1.39 billion – the highest value of off-plan sales transactions the Dubai Real estate market has seen in over eight years. In Q3 2021, 56.6% of all sales transactions were for secondary/ready properties and 43.38% were for off-plan properties. As for the volume of transactions, the off-plan market transacted 6,909 properties, worth a total of US$ 3.68 billion, and the secondary market transacted 9,017 properties valued at US$ 7.86 billion.

Property Monitor noted that residential property prices rose for the eleventh month in a row, but with the pace slowing; last month, there was a 1.2% increase in prices to an average of US$ 264 per sq ft. The consultancy estimated that prices were still 19% short of the 2014 peak, but the market is expected to continue its recovery process, driven by Expo 2020 and resurgent consumer, (and investor), confidence. It did warn that, with inventory slowing amid strong demand for villas, a widening buyer-seller expectation gap regarding pricing is appearing, leading to overpriced properties staying in the market, as buyers explore other options rather than paying higher prices. (Whether that is actually now the case is debateable, but it will become a drag factor sometime in this current cycle). There is every likelihood that a new market high will occur during this current cycle, assuming there is no resurgence with Covid, oil remains above the US$ 80 mark and interest rates remain flat.

Latest September figures from STR point to a major improvement in Dubai’s hospitality sector, ahead of the opening of Expo 2020, as the average occupancy rate jumped to 67.2% – 51% up on the same return last year- and higher than the 58.0% and 53.9% posted the previous two months. The improvement, which is expected to continue over the next six months, is attributed to several factors including improving local weather, Expo 2020 and travel restrictions being markedly eased across the world. Another indicator sees revenue per available room (RevPAR) 117% higher on the year at US$ 74. For the first seven months of the year, visitor numbers reached 2.85 million and the emirate will benefit from the fact that it was one of the first cities globally to re-open its markets and businesses in July 2020 and that it continues to stay open. Another positive sign saw the removal of the UAE from the UK’s red list in August, followed by the recognition of UAE-administered vaccines from October that allows travel between the two countries, with no need for home isolation. In addition, the loosening of restrictions with India and Saudi Arabia is bound to boost visitor numbers. There is hope that Expo 2020 will drive figures higher – in the first seventeen days of October, visitor numbers were at over 771k – 12% higher on the week ending 17 October. Whether its ambitious target of 25 million visitors will be reached come 31 March 2022 remains to be seen but being Dubai, it will give it a good shot.

Last Sunday, Dubai’s Crown Prince, Sheikh Hamdan bin Mohammed, officially opened the 41st edition of GITEX GLOBAL x Ai Everything, reaffirming the emirate’s commitment in supporting the global technology community, accelerating innovation, boosting resilience and driving its transformation agenda post-Covid. The world’s most influential technology sourcing and networking event of the year, exhibiting GITEX GLOBAL, Ai Everything, GITEX Future Stars, the Future Blockchain Summit, Fintech Surge and Marketing Mania, attracted more than 3.5k exhibitors from over 140 countries. On Wednesday, HH Sheikh Mohammed bin Rashid visited the global event and said Gitex represented the UAE’s “aspirations for its future economy”, whilst praising the high-profile trade show for bringing the world together to develop the technology of the future.

As the Dubai government continues to take firm steps to accelerate efforts to boost its digital economy, Dubai could add a further 600 new entities, bringing its total cryptocurrency businesses to 1k by the end of next year. Speaking at a Gitex conference, Dr Marwan Al Zahrouni, Dubai Blockchain Centre’s chief executive, commented that “five years ago you wouldn’t see people coming to Dubai to do the cryptocurrency business … we’re open-minded, and we’re willing to change regulations with reason.”  According to a recent Nickel Digital Asset Management survey, it was noted that many local institutional investors and wealth managers plan to increase their cryptocurrency exposure over the next two years. Although several cryptocurrency exchanges have been given permission to operate in free zones, they are not licensed by the UAE Central Bank. Launched only this May, the DMCC Crypto Centre already boasts 100 members, with a further 900 having applied for licences. Ralf Glabischnig, founder and board member of Swiss crypto hub CV Labs, said that the market in Dubai will “grow faster compared to anywhere else”.

Another indicator that some form of normalcy is returning to post-Covid Dubai is that, according to Dubai Municipality, over 1.5k new food establishments have opened in Dubai YTD, bringing the total portfolio to 20.4k; this equates to an impressive 5.5 new outlets every day. With Expo having started earlier in the month – and continuing until the end of March – there is every chance, with increased business, (and investor), confidence, that this number will top 2k by year end.

Dubai Internet City, currently home to 15k workers and 1.6k companies, expects staff numbers to jump to 40k by 2025. Ammar Al Malik, managing director of the free zone, noted that “there are a few industries that are going very fast such as e-commerce, logistics, digitalization, payment solution, fintech and agricultural technologies. The next unicorns are likely to come from these fields because they have very strong interests”, following earlier successes such as Careem, being acquired for US$ 3.1 billion by Uber, and the US$ 1.1billion merger of Bayut and Dubizzle. The MD also reckons that company digitalisation, that used to span up to four years, now has a probable six-month time period and that there could be at least three unicorns coming up in the country, within the next three years.

HSBC’s 14th annual Expat Explorer study, involving 20k expatriates, has ranked UAE fourth in the world for the best country to live and work in – ten places higher than last year. According to the survey, the top three reasons cited by expats for choosing to move to the UAE were to improve their earnings (56%), to progress their career (49%) and to improve their quality of life (43%). There is no surprise to see that 86% said their overall quality of life is better than their home country. Among the findings for the UAE were that 82% felt optimistic that life will be more stable and normal again in the next twelve months despite the global pandemic – compared to the global 75% average – with 53% expecting an increase in their income and 57% forecasting a better work/life balance. UAE was placed behind Switzerland, Australia and New Zealand but ahead of Guernsey, Jersey, Isle of Man, Bahrain, Singapore and Qatar – a strange eclectic of nations indeed.

For the seventh consecutive year, the Dubai Multi Commodities Centre has received the Global Free Zone of the Year 2021 award by the Financial Times’ fDi Magazine. It also won Global Free Zone of the Year and Middle East Free Zone of the Year- Large Tenants. During the year, DMCC opened international representative offices in Tel Aviv and Shenzhen, and launched both the DMCC Crypto Centre and DMCC Cacao Centre. In 2020, it welcomed over 2k new companies and looks set to bring its total number of entities to 20k by the end of this year.

With a US$ 272 million investment, Dubai Investments signed an agreement with Ras Al Khaimah-based master developer Marjan to acquire land to develop a mixed-use waterfront destination on Al Marjan Island. It will comprise a beachfront resort, serviced apartments and 170 villas, plus residential buildings, retail, food and beverage outlets. The latest foray is a continuation of the Dubai’s company strategy to add more high-end hospitality projects to its growing portfolio. RAK is fast becoming a global hub for both wellness and adventure holidays and the Dubai company, 11.54% owned by Dubai’s sovereign wealth fund, the Investment Corporation of Dubai, wants a piece of the action.

This week, GeoPost acquired 20.15% of Dubai-listed Aramex, purchasing 295 million shares for US$ 381 million. News of the sale to the French parcel group sent Aramex’s share 14.9% higher to US$ 1.34 – its biggest intraday gain since January 2009 and recovering all its 2021 losses, closing 0.2% higher YTD. GeoPost, a unit of the French government’s postal arm, delivers about 1.9 billion parcels a year through the brands DPD, Chronopost, SEUR and BRT, with its 2020 revenue at US$ 12.8 billion. It has had a fifteen-year relationship with Aramex in Europe and employs more than 15.5k in more than six hundred locations, across more than sixty-five countries.

Emirates NBD posted a 61% hike in Q3 revenue to US$ 681 million and a 29% increase in the nine months to US$ 1.99 million, driven by the continuing local (and global) economic recovery, record retail financing and impairment charges declining 42%; net profit, at US$ 653 million, beat market expectations. Although total income was 7.0% higher on the quarter, helped by a higher contribution from DenizBank and a more efficient funding base, year on year total income was 5.0% lower from record low interest rates. Customer deposits stood at US$ 106.1 billion at the end of Q3 – 3.0% higher than at the beginning of the year – with total assets remaining stable at US$ 1.90 billion.

Despite a 6.9% hike in revenue to US$ 786 million, du posted a 65.6% slide in Q3 net profit, to US$ 77 million, as operating expenses rose 6.9% to US$ 616 million, along with higher depreciation and amortisation charges. The company’s mobile customer base touched 6.5 million in Q3, with the company gaining 1.3 million post-paid customers, whilst the number of prepaid customers fell to 5.2 million subscribers.

The DFM opened on Sunday, 17 October, 17 points higher the previous week, gained a further 68 points (2.4%) to close the shortened week on Wednesday at 2,857. Emaar Properties, US$ 0.02 lower the previous week, regained the US$ 0.02 to close at US$ 1.09. Emirates NBD and Damac started the previous week on US$ 3.73 and US$ 0.34 and closed on US$ 3.76 and US$ 0.34. On Wednesday, 20 October, in much-improved trading, brought about by Aramex, 458 million shares changed hands, with a value of US$ 468 million, compared to 112 million shares, with a value of US$ 43 million, on 14 October.

By Thursday, 21 October, Brent, US$ 11.30 (15.4%) higher the previous three weeks, shed US$ 0.49 (0.6%), to close on US$ 84.00. Gold, US$ 37 (2.1%) higher the previous week, lost US$ 9 (0.5%) to close Thursday 21 October on US$ 1,787.  

The first US bitcoin futures-based exchange-traded fund (EFT) began trading on Tuesday, coinciding with Bitcoin increasing in value to a six-month high of US$ 63.3k and then on Wednesday reaching its all-time high of US$ 66,974, overtaking its previous record of US$ 64.9k set last April. Ten years earlier, in April 2011, it was valued at just US$ 1 and at the beginning of 2015 at US$ 315.

Investment bank Credit Suisse has been fined US$ 203 million by the UK’s Financial Conduct Authority and will write off a further US$ 200 million owed by the Mozambique government over a corruption scandal involving the country’s tuna fishing industry. The fine is part of a US$ 475 million settlement with UK, Swiss and US regulators. The Swiss bank’s staff allegedly took and paid bribes, as they arranged US$ 1.3 billion of industry loans and were accused by the FCA that it had “failed to properly manage the risk of financial crime”. It was also reported that a Mozambique government contractor secretly paid “significant kickbacks, estimated at over US$ 50 million, to members of Credit Suisse’s deal team”, including two managing directors, between 2012 and 2016 in order to secure loans at more favourable rates. Meanwhile, it seems that Mozambican officials fared slightly better receiving US$ 137 million in bribes. The bank also agreed to settle with the SEC in the US, paying a US$ 100 million fine, with the regulator indicting former Credit Suisse investment bankers and their intermediaries, whilst back in the African country, nineteen individuals – including the son of former President Armando Guebuza – have gone on trial charged with bribery, embezzlement and money laundering. It will be interesting to see who goes to jail, (and who does not), for their participation in this fraud.

To add further woes to Boeing’s catalogue of problems, it has confirmed that some titanium parts on its 787 Dreamliner were improperly manufactured over the past three years. The manufacturer noted that there were no issues to the safety of current flights but that all planes carrying passengers will undergo a review. The parts, provided by fellow aerospace company Leonardo, who purchased the items from an Italian-based company, Manufacturing Processes Specification, include fittings that help secure the floor beam in one fuselage section, as well as other fittings, spacers, brackets, and clips within other assemblies. Earlier problems started in September 2020 when the FAA said it was investigating manufacturing flaws; at the time, airlines using that model removed eight jets from service and Boeing was unable to resume deliveries of the 787 Dreamliner until five months later. Two months later in May 2021, the FAA raised concerns about its proposed inspection method and in July, the safety watchdog reported that some 787 Dreamliners had a manufacturing quality issue near the nose of the plane that must be fixed before Boeing can deliver to customers.

With its business booming in the UK, Amazon is in the throes of hiring 20k new positions and, as it is operating in a very tight employment sector, it is offering one-off payments of up to US$ 4k in order to attract staff in UK regions where there is high demand for labour. In August, the online retailer started offering a US$ 1.4k signing-on bonus to recruit permanent staff in some regions, including US$ 4k for locations such as its Exeter warehouse and US$ 2k for new temporary and permanent workers in Peterborough. The wage inflation instigated by Amazon will have a knock-on effect as the cost of higher pay rates and bonus payments will inevitably be borne by the end user. Last month, the tech giant announced that its sales had risen by 50% to US$ 28.3 billion, whilst its direct tax bill came in at a paltry US$ 676 million.

In a bid to construct the so-called metaverse – a nascent online world where people exist and communicate in shared virtual spaces – Facebook Inc is planning to hire 10k in the EU. Last month, the tech giant, founded by Mark Zuckerberg, committed US$ 50 million towards building the metaverse, as it tries to catch up with earlier entrants such as Roblox Corp (RBLX.N) and “Fortnite” maker Epic Games. Recently, it launched a test of a new virtual-reality remote work app, where users of the company’s Oculus Quest 2 headsets can hold meetings as avatar versions of themselves.

Today, 21 October, Evergrande shares tanked 14% in Hong Kong, as trading resumed after a seventeen-day hiatus because of an expected announcement that real estate firm Hopson Development was set to buy a 51% stake in its property services unit. Yesterday, the huge development company posted that the US$ 2.6 billion deal had fallen through which increased investors’ concerns about Evergrande’s US$ 300 billion debt mountain, with liabilities equal to about 2% of China’s GDP. Evergrande’s chairman and founder Hui Ka Yan says its plan is to try to secure extensions for its debts and “other alternative arrangements” with its creditors, but added, “there is no guarantee that the group will be able to meet its financial obligations”. If the crisis turned into an economic collapse of Evergrande, then the shockwaves will be felt around the world’s markets. Already battling the energy crisis and soaring raw material costs, the last thing Chinese authorities want to see is a meltdown from its property developers which are believed to be in debt of over US$ 5 trillion. The indebted property giant has reportedly missed two interest payments to overseas investors and has asked for several extensions for interest payments, but it is only a matter of time before it defaults. Before then, the company may receive a call from Beijing to fire sell some of their assets which would be sobering news for shareholders who have already lost 80% of their investment this year.

With the UK government confirming financial support to accelerate automotive electrification, Ford will invest up to US$ 316 million to produce components for electric cars at its existing plant in Merseyside. The plant is gradually phasing out the manufacture of combustion-engine transmissions and repurposing the Halewood plant to build electric power units within three years. It will become the first such factory in Europe to make electric vehicle parts for Ford, protecting 500 jobs at the site. Ford will produce about 250k electric power units at the plant, adding to a growing trend among car makers to manufacture electric car components themselves.

To add further woes to the already troubled UK supply network comes the news that Domino’s Pizza is intending to hire more than 8k drivers in the UK and Ireland in the run-up to Christmas; it had already taken thousands of extra staff, including 5k cooks and drivers in June, to meet increased demand and it also confirmed that most of these new positions will be permanent. The pizza chain reported that more than 90% of store managers had started in the kitchen or as delivery drivers. There is no doubt that this is a big ask considering that there is a massive nationwide shortage of heavy goods vehicle (HGV) drivers, backed up by a job site analysis that concluded that the share of searches being made for seasonal roles by jobseekers was 27% lower than in the same period in 2019 and down 33% on its 2018 level. The pizza chains latest quarterly revenue figures to 26 September were 8.8% higher at US$ 516 million, with orders up 40.3% to be at 82% of pre-pandemic levels.

With strong north winds blowing and temperatures falling by as much as sixteen degrees Celsius, China’s energy crisis deepened, as power plants clambered to stock up on coal, which in turn saw prices hitting record highs. Power shortages are expected to continue into Q1 2022, with analysts and traders forecasting a 12% decline in industrial power consumption in Q4, as coal supplies fall short and local governments give priority to residential users. The most-active January Zhengzhou thermal coal futures hit a record high US$ 259.42 per tonne last Friday, with the contract having already risen more than 200% YTD. Despite attempts by China to be “carbon neutral” by 2060, and it trying to reduce its reliance on polluting coal power in favour of cleaner wind, solar and hydro, it is inevitable that coal will provide the bulk of its electricity requirements for some time. The crisis has highlighted the difficulty in cutting the global economy’s dependency on fossil fuels, as world leaders seek to revive efforts to tackle climate change at COP26 UN climate conference starting next month in Glasgow.

Canada’s inflation rate hit the roof in September, reaching 4.4% – its highest level since February 2003 – driven by marked increases in the costs of transport, housing and food brought on by the global supply chain issues, surging pent up consumer demand, product shortages and rising energy prices. It is estimated that petrol pump prices are 32.8% higher on the year, with other prices including food, meat and housing up by 3.9%, 9.5% and 4.8% respectively. Last year, the Bank of Canada cut its baseline interest rate to 0.25%, so as to support the economy, by cutting the cost of borrowing for consumers and businesses. Inflation can be controlled by raising rates but any movement before the end of the year is highly unlikely because the central bank is of the opinion that the “inflationary surge is transitory.”

The UK has cut a free trade deal with New Zealand which, according to Prime Minister, Boris Johnson, will reduce costs for exporters and open up New Zealand’s job market to UK professionals, as well as benefitting consumers and businesses. Tariffs will be removed on UK goods including clothing, ships and bulldozers, and on New Zealand goods including wine, honey and kiwi fruits. Although the free trade agreement is unlikely to boost UK growth, it, (along with the recent similar agreement with Australia), will enhance its chances of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The eleven countries currently in the bloc – Australia, Brunei, Canada, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam – account for an estimated 13.4% of global GDP, equating to US$ 13.5 trillion.

There are more than mumblings from Threadneedle Street that the Bank of England is finally moving towards a move to bump up interest rates, from its current record low of 0.1%. The central bank has already intimated that UK inflation is set to top 4% – double that of its long-standing 2% target – with energy prices leading the drive. At the end of last month, figures showed prices rose by an average of 3.2% over the previous twelve months. The next Bank’s rate-setting Monetary Policy Committee (MPC) is due to meet on 4 November.

Unilever, with a 2020 US$ 5.93 billion turnover, and 400 household brands, including the likes of Axe, Dove, Omo, Wall’s ice cream, Magnum, Oxo, Magnum, Knorr, Lipton and Sunsilk, has increased prices on its products by 4.1% in Q3 – the biggest rise in almost a decade.  It also warned that it expects consumer inflation to accelerate next year. Mattel has also raised its prices driven by soaring shipping and raw materials costs. The Barbie toymaker announced an 8.0% hike in Q3 revenue, to US$ 1.8 billion, and interestingly posted that price hikes had not affected sales.

Last November, Boris Johnson launched an ambitious ten-point plan to prioritise green technology and climate goals in UK’s economic recovery from the pandemic, and to date it has raised a credible US$ 8.0 billion.  The event, with two hundred attendees, including ministers, industry leaders and British royals, was designed to drum up financing for projects to help the UK meet its climate goals and regenerate struggling post-industrial areas of the country left behind by a decades-long economic focus on the services sector. There is no doubt that the UK is aiming to be a front runner in the global race to capitalise on the demand for better green technology and the highly-skilled, highly-paid jobs that are expected to come with it.  Its target is US$ 57.5 billion of private investment by 2030 in energy, buildings, transport, innovation and the natural environment, alongside the creation of 250k ‘green jobs’.

Before Tuesday’s Global Investment Summit, at London’s Science Museum, the UK had already secured eighteen new trade and investment deals, totalling US$ 13.4 billion, that will support green growth and create over 20k jobs. The biggest, at over US$ 8 billion, was for a Spanish-backed offshore wind farm, with electric utility company Iberdrola planning to invest with Scottish Power in the East Anglia Hub offshore wind farms, creating 7k jobs, subject to securing planning consent and a contract for difference. Meanwhile, global logistics company Prologis will invest US$ 2.1 billion over the next three years to develop net-zero carbon warehouses across London, the SE and Midlands, supporting about 14k new jobs. The UK’s goal to be net zero by 2050 will be helped by this package of deals in various sectors, including wind and hydrogen energy and sustainable homes, as well as carbon capture and storage. Also at the summit, trade minister Anne-Marie Trevelyan, praised the recent expansion of the Strategic Investment Partnership with the UAE as an example of the “strategic and high-value deals” the UK is now forming with the world’s “largest and fastest growing economies”. In September, Abu Dhabi’s Mubadala Investment Company committed US$ 12.4 billion to Britain’s technology, infrastructure and energy transition.

This week, Goto Energy became the sixteenth provider to exit the UK energy market already this year; it provided energy supplies to some 22k households. The top six companies to fail so far in 2021 have been Avro Energy, People’s Energy, Green Supplier, Pure Planet, Utility Point and Igloo which supplied 580k, 350k, 255k, 235k, 220k and 179k homes respectively, accounting for 1.810 million of the over 2 million homes affected by bankrupt energy companies folding.  A 250% surge in energy prices already this year is the main cause behind these failures, as many have been caught between rising costs and the UK’s energy price cap, which limits what companies can charge consumers.

Scottish brewer Brewdog is in trouble with the authorities yet again because of a promotion saying that customers could win “solid gold” beer cans, which the advertising watchdog has found to be misleading. The company offered shoppers the chance to find a gold can hidden in cases sold from its online store but in fact they were gold-plated. The ruling comes amid heavy criticism of Brewdog in recent months, with ex-workers stating former staff had “suffered mental illness” as a result of working for the craft beer brewer and that it had fostered a culture where staff were afraid to speak out about concerns. As well as complaints over the prize’s authenticity, some winners questioned that the can was not worth the US$ 21k that Brewdog had claimed; it was estimated that a can made of 330 ml of pure gold would have cost around US$ 500k. Embattled chief executive, James Watt, will quickly recover from this latest setback whilst many of his customers will realise that Not All That Glitters Is Gold!

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Carry Me Home Down To Gasoline Alley!

Carry Me Home Down To Gasoline Alley!                                           15 October 2021

Q3 was the third best quarter, since 2009, in Dubai’s real estate transactions history when 15.9k transactions reaped US$ 11.54 billion. Property Finder estimated that 56.5% of the total was for secondary or ready properties, with 9.0k deals, worth US$ 7.86 billon, with off plan accounting for the 6.9k balance, valued at US$ 3.68 billion. The consultancy also noted that off-plan sales had the highest value of sales transactions since December 2013; the trend started to show a marked uptick earlier in the year, with the number of sales transactions between secondary and off-plan split almost evenly. Residential transaction volumes were 76.8% higher in the first eight months of the year, while secondary market transactions jumped 120.7% and off-plan transactions rose 39.0%. Quarter on quarter, the volume of off-plan transactions increased 14.7%, while the number of secondary market deals declined 6.0%. Over the period, the value of off-plan sales transactions jumped 47.1%, with the value of secondary sales deals marginally higher by 4.2%. The top areas for villa/townhouse secondary sales transactions were Damac Hills 2, Dubai Hills Estate, Arabian Ranches, Nad Al Sheba and The Springs. For off-plan sales transactions the leading locations were Arabian Ranches 3, Dubai Land, Tilal Al Ghaf, Dubai South and The Valley. The most popular areas for ready apartments were JLT, Dubai Marina, Meydan, JVC and Downtown Dubai.

Core’s latest Dubai Market Update estimates that a decade-record 37k residential units will be added to the emirate’s property portfolio in 2021; 24k, of which 86%, or 20.6k, comprised apartments – were delivered in the first nine months of the year, with the 13k balance expected in Q4. With investor confidence rocketing, the consultancy expects villa prices, which are already 16% higher YTD, to continue to rise due to limited stock available and end-users clamouring for villas, after the change in lifestyle and work requirements due to Covid-19. Major villa handovers were seen in Akoya Oxygen and Villanova, both in Dubailand, and Club Villas at Dubai Hills Estate, whilst Dubailand, JVC, MBR City and Business Bay are witnessing increasing delivery numbers. Apartment prices have only nudged 2% higher YTD, despite an increase in supply over the period. Major apartment projects handed over include Tiara United Towers in Business Bay, Artesia in Damac Hills, Bloom Heights in JVC and 52-42 in Dubai Marina. Core expects the recovery to be aided by fewer new launches, noting that YTD volumes are 47% lower than last year and 79% down on 2019’s returns. However, Q3 did witness transaction volumes up 108% on the year and 18% in 2019.

The UBS Global Real Estate Bubble Index 2021 notes that Dubai’s property sector is the only global market surveyed with the lowest price bubble risk among 25 leading cities and that the emirate’s real estate sector is an undervalued market. The study also commented that “improved affordability, easier mortgage regulations, higher oil prices, and an economic rebound now seem to have finally kick-started a recovery”. However, there was something of a caveat that “although construction has slowed, essentially limitless supply poses a risk for long-term appreciation prospects”. On a worldwide scale, the study indicated that, on average, the bubble risk had increased and there is a possibility of a severe price correction, with Frankfurt, Toronto, and Hong Kong exhibiting the most elevated risk levels on housing markets; it also elevated the bubble risk in Munich and Zurich, with Vancouver and Stockholm re-entering the bubble risk zone, joining Paris and Amsterdam already in the “zone”. It did conclude that a housing market recovery is likely to gain pace after the average house price jumped 6.0% over the past twelve months – its highest increase since 2014.

Azizi has launched three new fourteen-story properties to its master-planned Riviera community, located in MBR City. These will see a further 439 units (252 studios, 84 1 B/R, 84 2. B/R and nineteen retail units) added to the community’s portfolio. Each building will feature a swimming pool, vast landscaped areas, a fully equipped gym, a barbeque area, a children’s playground and a yoga space. The development will also have access to a 2.7km crystal lagoon, encompassing an area of over 130k sq mt, with the community boasting several basketball and tennis courts, an extensive jogging and cycling track, and other common facilities.

This week, Prescott announced the launch of Prime Residency III, their US$ 38 million contemporary residential development in Al Furjan. The G+2P+7 residential project will be a mixed-use development, with spacious studios and one B/R apartments, along with a swimming pool, kids’ pool, gym, residents’ lounge and a rooftop garden; prices start at US$ 100k. The developer has also introduced a payment plan, with a 10% down payment, 10% after three months, followed by four quarterly 5% instalments, 10% on handover, and 50% post-handover over 3 years.

As an indicator that the emirate’s property market continues to head north, wasl properties managed to lease 130 units of its residential portfolio in only forty-five minutes, as part of its promotional drive which coincides with the inauguration of Expo 2020. The developer’s campaign, which runs throughout the month, includes 2k units from its residential portfolio across Dubai, three hundred of which were leased on the first day. The current offer for a one-year lease includes a US$ 1.4k discount, with twelve monthly instalments, 0% commission fees and security deposits, as well as a one-month grace period.

Dubai’s largest foreign exchange company, Al Ansari Exchange, noted a surge in transactions made by non-residents during the first ten days of October 2021, which coincided with the start of Expo. It posted that all transactions at their branches were 69% higher than the first ten days of the previous month. Interestingly, the number of foreign currency purchase transactions by non-residents was 9% higher compared with the same period in 2019. Expo is the main driver behind this mini surge, but other factors such as the resumption of flights, especially from India and Saudi Arabia, return of in-person conferences and events and growing economic activities in the country also played their parts. By 10 October, more than 411k visitors had visited the exhibition, a third of whom were from overseas.

UAE’s H1 non-oil foreign trade jumped 27.0% to US$ 245.2 billion, with exports, 44% higher on the year at US$ 46.3 billion and imports up 24% to US$ 131.3 million. During the period, gold exports rose 48% to US$ 19.1 billion; it was estimated that 87% of the country’s non-oil exports were locally made, with the balance coming from free zones and customs warehouses.

September’s IHS Markit Dubai Purchasing Managers’ Index showed a 1.8 seasonal adjusted decline to 51.5, but was still in positive territory, as it continued its growth for the tenth consecutive month. Although new business declined in the month, output continued to expand, and with the start of Expo 2020, and the economic rebound from Covid restrictions, it is expected that sales will continue to rise in the services sector over the next six months. The marginal fall in new business was attributed to weaker demand and discounts at competing firms, with the construction sector leading the decline, as new work fell for the first time since June. Meanwhile, travel and tourism companies saw a sustained upturn in sales, as confidence in the sector reached a five-month high. Although business confidence continued to improve, hiring was dragged back by a decline in new orders but still managed to record its second strongest expansion in over a year.

According to the findings of the Dubai Chamber’s Q3 Business Leaders’ Outlook Survey, business confidence in Dubai reached its third highest level in a decade, with the main driver being the start of Expo 2020; the confidence level saw 76% of respondents looking forward to an improvement, compared to 66% and 48% in the previous two quarters. Two drag factors noted were global supply chain restrictions and a rise in global commodity prices. Meanwhile, the Chamber’s President and CEO, Hamad Buamin, commented that the growing optimism was down to increased government support for the private sector, success in overcoming Covid-related challenges, new business incentives, easing travel restrictions and higher oil prices. He also noted that trade, tourism, hospitality and logistics are the sectors that are expected to see the most business activity during Expo 2020 Dubai, with a knock-on effect felt in other market segments.

A record US$ 5.2 million tender for a 118.6 carat rough diamond was sold at the Dubai Diamond Exchange this week, hosted by Trans Atlantic Gems Sales, a world leading rough diamond tender and auction house. Last December, Stargems’ tender resulted in US$ 87 million worth of rough diamonds in one diamond tender event. Ahmed bin Sulayem, Executive Chairman and Chief Executive Officer, DMCC, commented that “this tender is yet another achievement that adds on another successful tender at the Dubai Diamond Exchange”. He also noted that “with the trade gap between Antwerp and Dubai now less than a billion dollars, our position as a transparent and highly-regulated market has made us the go-to for legitimate traders who are seeking a fair price for their diamonds, particularly those based in Africa.” Following the recent MoU with the Israel Diamond Exchange, the DDE is set to further boost regional trade and support the growth of the global diamond industry.

According to Dubai Economy’s latest report, over 6.9k new business licences, (of which 56% were professional and 43% commercial), were issued in September – 68% higher than a year earlier. 67.2% and 32.7% of the licences were issued for companies in Burj Dubai and Deira. By legal categories, sole establishments, LLCs and civil companies accounted for 36.0%, 25.5% and 22.0% of the trade licences issued.

As Dubai’s high-net-worth population surged 3.8% to 54k in the first half of 2021, and in a bid to encourage family businesses to establish Single and Multiple Family Office (SFO & MFO) licences, the Dubai World Centre Authority Trade has announced updated regulations for the free zone. It is hoped that these would address the needs of family-run entities and introduce a new platform for wealthy families to set up offshore holding companies to manage their private family global wealth, assets and investments from Dubai. It is felt that there is a need for a specialised legal and regulatory framework that offers distinct flexibility and fundamental benefits for setting up single and multiple family offices. Offshore entities, founded directly by members of a single-family, to own and manage their collective wealth, assets, businesses and investments through incorporating a new Free Zone Establishment (FZE) or Free Zone Company (FZCO), will be subsequently licensed to operate from the free zone.

At the Tuesday Cabinet meeting, held in the UAE pavilion at Expo 2020, HH Sheikh Mohammed bin Rashid adopted a five-year, US$ 79 billion federal budget. In a bid to unify federal and local housing efforts, co-ordinate on road and infrastructure projects, and build an urban and housing road map for the UAE, the Cabinet approved the establishment of the Emirates Infrastructure and Housing Council, headed by Suhail Al Mazrouei, Minister of Energy and Infrastructure. The meeting also discussed how to enable a faster-working government and the adoption of cyber security standards for government agencies and those proposed by the Emirates Cyber Security Council. HH Sheikh Mohammed noted that “our work will not be based on individual ministries, but on strategic sectors, and plans and agendas will not be the standard, but field projects and initiatives.”

HH Sheikh Mohammed bin Rashid Al Maktoum has reiterated that the UAE will remain “everyone’s country and everyone’s home”, after an Arab Youth Survey indicated that 46% of the sample said the UAE was the preferred country to live in for Arab youths, well ahead of the USA (19%) and Canada (15%). In his tweet, the Dubai Ruler also added that “our experience will remain available to everyone. .  .  .  . and our relations will remain positive with everyone.”

DP World has announced a partnership with UK’s CDC Group to create a long-term investment platform. The local ports operator will contribute its stakes in three existing ports initially and expects to invest a further US$ 1 billion over the next several years, whilst the development finance institution and impact investor is committing an initial US$ 320 million and a further US$ 400 million over the next several years. The transaction is subject to certain final regulatory approvals. The platform will be African focussed, investing in origin and destination ports, inland container depots and economic zones.

At the First Dubai International PPP Conference, held at the Expo’s regional tourism and business hub, almost US$ 7 billion worth of projects were announced. They included seven development projects, valued at US$ 6.158 billion, fourteen involving road/transport, worth US$ 654 million, and eight in the health/safety sector, totalling US$ 143 million.

At a court hearing, and following a case brought against it by creditors, Marka was declared bankrupt, and all of its assets brought into liquidation and the board members were required to pay up to US$ 122 million to outstanding creditors; the decision also applies to all the Marka subsidiaries. The ruling also confirmed that the company’s managers and directors were stripped of all rights to manage the company or its subsidiaries. Furthermore, they cannot manage or dispose of the company’s funds, pay out any claims or borrow any sums under its name. In addition, they will have to hand over to the court-appointed bankruptcy trustee all funds and documents of the company within five days of the date of the ruling. Formed in 2014, the US$ 75 million float offering was 360 times oversubscribed, and on its first trading day, its share value closed 59% higher. Marka was to be a holding enterprise for a range of global fashion and accessory brands, as well as F&B concepts, and, starting from scratch, it went on a buying spree. However, some of its investments failed to live up to their initial promise it and was hit by the sudden and steep drop in oil prices from mid-2014, racking up debts of over US$ 182 million and never having made a quarterly profit in its short history. The DFM suspended its trading in May 2018.

This week, Emaar Properties’ shareholders approved the developer’s mergerwith its retail and shopping mall unit – Emaar Malls – of which it already owned an 84.6% stake. The merger has already been approved by the industry watchdog – the Securities & Commodities Authority. At the meeting, it also won approval to boost its share capital to US$ $2.2 billion. Under the arrangement, shareholders will receive 0.51 Emaar Properties’ shares for each share held – equating to a 3.5% premium on the 01 September Emaar Malls’ share price. The existing Emaar Malls’ business will be reconstituted, within its wholly owned subsidiary, and will continue to develop and hold a portfolio of premium shopping malls and retail assets,

The DFM opened on Sunday, 10 October, 78 points lower the previous fortnight, gained 17 points (0.6%) to close the week on 2,789. Emaar Properties, US$ 0.02 higher the previous week, lost US$ 0.02 to close at US$ 1.07. Emirates NBD and Damac started the previous week on US$ 3.50 and US$ 0.34 and closed on US$ 3.73 and US$ 0.34. On Thursday, 14 October, 112 million shares changed hands, with a value of US$ 43 million, compared to 130 million shares, with a value of US$ 39 million, on 07 October.

By Thursday, 14 October, Brent, US$ 9.24 (6.7%) higher the previous fortnight, gained US$ 2.06 (2.5%), to close on US$ 84.49. Gold, US$ 19 (1.1%) lower the previous week, gained US$ 37 (2.1%) to close Thursday 14 October on US$ 1,796.

After years of negotiations, Air India has a new owner, with Tata Sons winning a US$ 2.4 billion bid, including equity and debt, finally privatising the troubled national carrier. Tata – which already manages Vistara, India’s only other full-service carrier, in a venture with Singapore Airlines as well as budget airline AirAsia India, a venture with Malaysia’s AirAsia Group – will take on US$ 2 billion of Air India’s US$ 8.2 billion total debt, resulting in an equity value of only about US$ 400 million which it will pay to the government. It is estimated that over the past decade, the loss-making airline has cost the Indian government the equivalent of US$ 3 million every day. It could be the forerunner of many state-owned entities to be sold to private companies that would push India into becoming a fully market-driven economy.

The English Premier League has finally approved the US$ 415 million takeover of Newcastle FC by a Saudi Arabian consortium, led by Public Investment Fund, (who will provide 80% of the funding), after receiving “legally binding assurances” that the Saudi state would not control the club. PCP Capital chief executive Amanda Staveley, a 10% owner, will take a seat on Newcastle’s board, while Yasir Al-Rumayyan, the governor of PIF, will be the non-executive chairman. To the relief of many of its legion of fans, it sees the end of the fourteen-year reign of Mike Ashley. With PIF’S assets totalling US$ 340 billion, it makes Newcastle a rich club and one with cash to boost its playing resources. A deal was initially agreed in April 2020 but was held up by several outstanding issues, but this seems to have been resolved after Saudi Arabia settled an alleged piracy dispute with Qatar-based broadcaster BeIN Sports, which own rights to show Premier League matches in the Middle East.

A McKinsey report noted that, in 2020, the global payments industry posted its first contraction in eleven years, declining 5.0% to US$ 1.9 trillion. However, the consultancy is confident that the industry will bounce back this year, to almost record levels seen in 2019 and could top US$ 2.5 trillion by 2025, driven by the digitisation of consumer and commercial transactions. Covid saw the sector undertake many changes, as consumers increasingly adopted digital platforms to shop, study and work online. Although the sector will also benefit from an improvement in the global economy, interest margins are likely to remain muted.

Reports indicate that Apple may slash Q4 production of its iPhone 13 by at least ten million, from an initial ninety million forecast, due to the ongoing global computer chip shortage; the news saw its share value fall 1.2% on Tuesday. Like other sectors, such as the car and video game console makers, Apple, one of the biggest chip purchasers in the world, has been badly impacted. It was only last month that the tech giant introduced four new iPhone 13 models – iPhone 13, iPhone 13 mini, iPhone 13 Pro and iPhone 13 Pro Max – and started shipping on 24 September. If consumer demand for the new iPhone continues, it is estimated that Apple will be running a shortage of more than five million iPhone 13 units for the festive season.

To those who think the current disruption to global supply chains is a short-term problem, Ikea has issued a wakeup call. The Swedish furniture giant says, that despite some improvement having been noted, it expects the disruption to global supply chains to continue until at least the end of Q3 2022. Last month, Ikea said it was struggling to supply 10% of its stock, or around 1k product lines, to its twenty-two stores in the UK and Ireland, amid the continuing shortage of HGV drivers. The problem was partially solved by Ikea embracing its need to meet customer needs and take on “the new competition”, by ramping up online sales, resulting in a two-year strategy taking just two months to implement. Poundland has also predicted that pressure from supply chain problems will last into 2022, and noted that shipping costs had soared, and that “there are sometimes where we have had to pay ten times our normal rates”.

After four years of negotiation, agroup of 136 countries, accounting for over 90% of the global economy, has agreed to set a minimum global tax rate of 15%, (well below the average 23.5% rate levied in industrialised countries), for big companies. The aim of the exercise is to make it harder for them to avoid taxation which seems to finally end a four-decade-long “race to the bottom”. Since the eighties, several countries have stood out by introducing a lighter tax regime, with the aim of attracting international investment. The OECD estimated that an annual US$ 150 billion in new revenues could be collected, whilst taxing rights on more than US$ 125 billion of profit would be shifted to countries where big multinationals earn their income. The global minimum tax rate would initially apply to overseas profits of multinational firms with more than US$ 867 million in global sales. Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could “top up” their taxes to the 15% minimum, eliminating the advantage of shifting profits. The agreement calls for countries to bring it into law next year, so that it can take effect by 2023, with those countries that have already created national digital services taxes having to repeal them by then.

The World Bank has estimated that the pandemic has cost the sixteen countries in the Mena region US$ 200 billion, based on measuring the estimated GDP of each country, compared to what actually happened because of Covid; the forecast growth was 2.8% in 2021 but the actual was a 3.8% contraction. By the end of 2021, the region’s GDP per capita will still be below the 2019 level by 4.3%. The 2021 GDP growth rate across the region will be highly uneven ranging from Lebanon’s minus 9.8% to Morocco’s growth figure of 4.0%. It is also a sad reality check that Mena’s health systems, which were considered relatively developed, buckled and were unable to fully cope with the ramifications of the crisis; any recovery is dependent on the capabilities of each country’s health system and their exposure to rising commodity prices.

According to a World Bank report, the debt burden of the world’s low-income countries jumped to US$ 633.5 billion – 12.0% higher on the year – because of the impact of Covid. Global governments brought in fiscal, monetary and financial stimulus measures to soften the burden on their respective economies, but this obviously came with a price and for all countries, that price was a much-increased debt burden. Unfortunately, it was the world’s poorest countries which suffered the most and now the World Bank is calling for “a comprehensive approach to the debt problem, including debt reduction, swifter restructuring and improved transparency.” This stance is also in line with the UN Conference on Trade and Development statement that “sustainable debt levels are vital for economic recovery and poverty reduction.” In short, such economies are being hit by the double whammy of slowing economic growth and public and external debt at elevated levels. The World Bank estimated that low and middle-income countries’ external debt-to-GNI ratio, excluding China, rose 5% on the year to 42% in 2020. This problem is not going away.

Australia’s second largest bank saw its share value dip 1.3% on Monday on news that it would be taking a US$ 960 million hit, mainly attributable to a US$ 710 million write-down after it quit energy trading and lowered its outlook due to “subdued” financial markets. Westpac also noted that there were one-off charges, including provisions to pay out customers seeking remediation for wrongly charged fees and costs associated with the sale of its life insurance unit; furthermore, there were also legal costs, customer refunds and litigation provisions, totalling US$ 127 million, bearing in mind that the bank is currently being pursued by ASIC over consumer credit insurance.

Two years after its main adversary, Crown Resorts, was hit by allegations, that it enabled illegal activity at its casinos for years, Star Entertainment is now facing similar claims brought by three news outlets implicating the firm in suspected money laundering, organised crime and fraud. Star has since commented that “we will take the appropriate steps to address all allegations with relevant state and federal regulators and authorities.” According to the report by the Sydney Morning Herald, the Age and 60 Minutes, Star had been warned that its anti-money-laundering controls were inadequate, but that in the seven years to 2021, it had wooed high-rolling gamblers, who were allegedly linked to criminal or foreign-influence activities. The worry for the markets is that Star may go the same way as Crown which had to face a series of public investigations into the firm that has left its future in doubt; earlier in the year, the NSW state gaming authority said Crown was unfit to operate its casino in Sydney after an official inquiry found it had facilitated money laundering. It was a well-known fact that until recently the only way to make money from a casino was to buy its shares – with Star shares tanking 23% on Monday, playing the roulette wheel may be a better option.

An ABC report estimates that over US$ 600 million in political payments disclosed over twenty-two years is linked to entities with a stake in gambling. Since political donations are mired in murky territory, this estimate is at least double the amounts identified by previous analyses, and yet almost surely an underestimate. The true figure is impossible to calculate because loopholes in the laws governing political donations mean that more than a third of the money poured into the political system is “dark money”, whose source remains unknown.

Talking about gambling, Bonza, a new domestic budget airline, backed by the US investment firm 777 Partners, will be launched in Australia early next year. In a country that has seen strict Covid restrictions until recently, and that already has four national carriers – Qantas, Jetstar, Virgin and Rex – this seems to be a risky venture. It will launch with a fleet of new Boeing 737-8 aircraft and will possibly fly into some forty-five Australian airports, that are potentially capable of handling the new planes; it will not target the lucrative “Golden Triangle” of Sydney-Melbourne-Brisbane. Bonza is currently awaiting necessary regulatory approvals before it can take to Australia’s skies.

Although the Australian Treasury confirmed that it paid US$ 19.8 billion in its JobKeeper programme to businesses whose turnover either increased, or did not decline as much as required, it has dismissed calls to introduce a clawback mechanism; its argument centred on the fact that a different design of the scheme would have cost jobs and delayed economic recovery and that its introduction saved up to 700k positions. Without the government’s significant fiscal support, including JobKeeper, Treasury had estimated that the unemployment rate would have peaked at least 5% higher, and remained above 12% for two years. To qualify for government support, businesses with a turnover of less than US$ 730 million, (AUD1 billion) needed to forecast a 30% decline in revenue in any single month or quarter of the first six-month period; those with a higher threshold had to forecast a 50% decline. In the first three months of the scheme, internal analysis by the Treasury indicated that US$ 8.4 billion, (AUD 11.4 billion), went to entities that did not suffer their forecast 30% or 50% drop in turnover; the following three months saw a figure of US$ 11.4 billion, (AUD 15.6 billion) being paid out in September to businesses that did not suffer their forecast 30% or 50% drop in turnover. Of the total of US$ 27 billion, US$ 9.6 billion went to businesses whose fall in turnover was less than forecast in the first six months, whilst the balance of US$ 10.2 went to businesses that enjoyed higher than forecast turnover. 

Whilst apparently absolving itself from any blame or mismanagement, Treasury noted that its “report demonstrates that JobKeeper was more than just a wage subsidy. It was designed to ensure the strongest possible economic recovery and avoid the scarring impacts on the labour market, which were characteristic of previous recessions. JobKeeper was specifically designed, not as a furlough scheme, but as one that enabled businesses to adapt and stay open. It was this feature, combined with the six-month guaranteed support and the absence of a clawback mechanism, that allowed JobKeeper to not only save jobs, but to create them.” (There must have been some top Aussie Rules players helping with the report). Several federal politicians are calling for transparency register, (such as the one in New Zealand), which shows how much firms with more than US$ 730 million turnover received under the scheme.

JobMaker was a key announcement in the October 2020 federal budget, delivered by Treasurer Josh Frydenberg, and intended to boost the Covid recession recovery; at the time, he estimated that “this will support around 450k jobs for young people.” Reality was different and in the nine months to 06 July 2021, there were only 4.1k companies — described as ‘entities’ with an Australian Business Number (ABN) — that had a processed claim through the scheme. The hiring credit paid employers up to US$ 272 a week for creating new jobs for people aged 16 to 29 years who were on JobSeeker, Youth Allowance, or the Parenting Payment, and US$ 136 a week for 30- to 35-year-olds. At the time there were concerns that employers could sack older, more experienced employees, and replace them with young workers earning a third of the salary and get the taxpayer funded JobMaker credit to make it cost no more, as well as possible problems that the US$ 3.0 billion scheme could be illegal under laws that aimed to prevent age discrimination.

It does appear that hundreds of thousands of Australians may have given up on searching for a job. There were  reports that a further 138k  jobs were lost in September, as Australia’s two most populous states, NSW and Victoria, struggled through extended lockdowns, nudging the unemployment level 0.1% higher to 4.6%; this figure would have been higher if it were not for a marked weakening in the participation rate which hit a fifteen-month low of 64.5% of people aged 15 and over currently working or actively looking for work. There are now 111k fewer people employed than before the first lockdowns in March 2020. Over Q3, participation in the labour force declined by 333k, as employment dropped by 281k people. With statistics like these, it is all but inevitable that the labour market will not fully recover until Q3 next year.

Last Friday, the US Senate voted 50-48 to temporarily raise the nation’s debt limit, by US$ 480 billion, avoiding a historic default and keeping the country open until early December. Only the intervention of Republican senate leader, Mitch McConnell, saved the country being two weeks away from being unable to borrow money or pay off loans for the first time ever. The bill will now go to the House of Representatives for approval, before being signed into law by President Joe Biden. Senate Republicans have previously argued that raising the debt limit was the “sole responsibility” of Democrats because they hold power in the White House and both chambers of Congress; they are also frustrated by new spending proposals the Democrats are trying to push through without Republican support. Any future default could have major economic repercussions, including a cut in the country’s credit rating (and thus higher interest payments) and throwing the global economy into financial turmoil.

Although its September unemployment rate dipped 0.4% to 4.8%, (equating to 7.7 million) on the month, the US only managed to add a disappointing 194k jobs last month, to the national payroll, as the Delta variant of coronavirus continued to drag on the economy. The market was expecting a figure nearer to 500k, but it is noted that readings were taken on 13 September, when daily Covid rates still hovered around the 150k level but have since fallen by a third. Although positions in education dipped, there were marked gains seen in hospitality, retail and transportation. A largely unchanged 61.6% labour participation rate seems to indicate that people, who left the workforce during the crisis, have yet to return to employment. Recently Fed Chair, Jerome Powell, noted that “it would take a reasonably good” September employment report to meet the central bank’s threshold for reducing its massive bond buying programme; with these figures, and the fact that Q3 GDP growth, at 1.3% was well down on the previous quarter’s 6.7%, it seems that the Fed will delay any tapering move until consumer confidence notches higher and the leisure, hospitality, and retail sectors return to some form of normalcy.

The Pensions and Lifetime Savings Association has estimated that a single person in the UK requires a post-tax annual income of US$ 15k for a minimum standard of living in retirement, and a couple US$ 23k; for the first time,Netflix subscriptions and items such as haircuts were included on the assessment. These figures for a minimum standard have risen by around US$ 1k since 2019 and would normally comprise the US$ 13k state pension plus some workplace pension savings. The calculations for retirement living standards are pitched at three different levels – minimum, moderate and comfortable.  A moderate living standard, including a two-week holiday in Europe and more frequent eating out, requires US$ 28.5k for a single person and US$ 41.8k for a couple. For a comfortable retirement living standard, the annual budget rises to US$ 45.9k and US$ 67.9k; this includes items such as regular beauty treatments, theatre trips, and annual maintenance and servicing of a burglar alarm. Currently, housing costs are not included on the assumption that most pensioners have paid off mortgages and it is estimated that only one in six is projected to have an income between moderate and comfortable.

There is no doubt that food inflation is having a major impact on UK household spending, with prices for all major basic food commodities heading north. Much of these rises have been put down to various causes, including poor harvests in Brazil, (which is one of the world’s biggest agricultural exporters), drought in Russia, reduced planting in the US and stockpiling in China, allied with more expensive fertiliser, energy and shipping costs to push prices up. In the UK, there are the added problems of lack of HGV drivers, a shortage of labour in certain areas of the economy and a major energy crisis. The end result is that all food producers are facing the same tide of price hikes, most of which will have to be borne by the end consumer. According to the UN Food and Agriculture Organisation, the cost of ingredients, such as cereals and oils, has pushed global food prices to a 10-year high. With inflation “across the board”, people will just have to get used to increased food prices, as producers will inevitably pass a higher proportion of increased costs onto the end user.

There are several factors that have played an important role in pushing up UK and global energy prices this year; it is estimated that in the UK, Europe and Asia, YTD prices have jumped 250%, including 70% since August. There are various reasons, both nationally and globally, put forward for the price hikes including a global squeeze on gas and energy supplies, as countries emerged from lockdown and industry re-opened, a European cold winter put pressure on supplies, as did a colder than normal Asian winter and a shortage of UK gas storage facilities ensured that its “in-house” supplies soon emptied, and they were exposed to the increasing wholesale prices. Then there is the possibility that Russia, a major energy provider, may be playing politics and restricting output.

Much has been written about its impact on households and industry hit by soaring energy costs. Domestic energy consumers had a certain amount of protection from rising prices due to a price cap, which sets the maximum price suppliers could charge customers on a standard – or default – tariff. However, the cap was increased on 01 October, leaving some fifteen million households facing a 12% rise in energy bills.

Industry has no such cap, meaning they are open to the risk of an unlimited rise in prices. Certain sectors, including ceramics, paper and steel manufacturing, have petitioned the government for a price cap, otherwise many would have to close down.  For example, a large UK container glass plants has estimated that its “normal” annual energy cost would likely jump from US$ 54.50 million (GBP 40.0 million) to US$ 136.3 million, (GBP 100.0 million); the UK cost is more than a majority of its overseas competitors. Already manufacturers and services are warning they will have to pass on their rising costs to consumers, and as energy costs are a big driver of inflation, few consumers and households will escape the consequences of the current crisis.

As more people dined out, went on holiday and attended music festivals, the UK economy grew by 0.4% in August and is now only 0.8% smaller than it was pre-pandemic; July returns were amended from an earlier 0.1% growth to minus 0.1%. The services sector was the biggest contributor to the monthly improvement, as arts, entertainment and recreation grew 9%, boosted by sports clubs, amusement parks and festivals. Demand for hotels and campsites recorded a 22.9% growth, with activity in accommodation and food services rising 10.3% in August. Although air and rail travel benefitted because of the further easing of Covid restrictions, both sectors were trading far below pre-pandemic levels. Construction output dipped 0.2% and is still 1.5% lower than pre Covid but the manufacturing sector fared better being 0.5% higher, driven by an increase in vehicle production. With business confidence fading and supply chain disruptions continuing, it is highly unlikely that the UK will return to pre-pandemic levels until the end of Q1 next year. Rising inflation, driven by significant increases in energy prices, and the recent cut in Universal Credit, will continue to impact on consumer spending and will have a negative effect on UK’s GDP growth for the rest of 2021.

In September, the UK recorded a monthly rise of 207k new jobs to bring the total employment figure to a record 29.2 million, as the unemployment level came in at 4.5%, (compared to 5.2% at the end of 2020), but still down on the 4.0% pre-pandemic level. However, the country is facing a strange anomaly – even with another record high of job vacancies, at 1.2 million. The economy has a chronic labour shortage in certain sectors – and labour shortages invariably impact negatively on economic growth. They include retail and motor vehicle repair, reporting the largest increases, along with accommodation, food services, professional activities and manufacturing. A desperate shortage of HGV drivers has led to supply chain chaos and concerns of a spiral in wages and prices, with underlying wage growth at between 4.1% and 5.6% in the quarter to August, well above the 3% seen before the pandemic. Two weeks ago, the Treasury invested a further US$ 681 million in fresh job support funding aimed at getting people into new or better jobs. The Bank of England is notorious because it seems that it can never get its inflation forecast correct; for a long time, 2.0% was its target, (and if it went above that it would raise rates) but when it went higher to 3.0%, no action was taken and now it seems to be 4.0% that will force a tightening in monetary policy and an inevitable rate hike that could be as high as 0.5%.

As an aside, fuel shortage was one of the main drivers in September retail spending falling to its lowest level since January. It was only 0.6% higher on the year and much weaker than the 3.0% level recorded a month earlier. There is little doubt that consumer confidence will be hit further, as the fuel and product shortages, combined with colder weather, will leave its footprint in Q4. Carry Me Home Down To Gasoline Alley!

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Streets Paved With Gold!

Streets Paved With Gold                                                      07 October 2021

For the past week, ending 07 October, Dubai Land Department recorded a total of 1,959 real estate and properties transactions, with a gross value of US$ 1.93 billion. It confirmed that 1,307 villas/apartments were sold for US$ 839 million, and 158 plots for US$ 160 million over the week. The top three transfers for apartments and villas were for a US$ 148 million apartment in Marsa Dubai, US$ 93 million for a Burj Khalifa apartment and US$ 72 million for a villa in Wadi Al Safa 5. The top two land transactions were in Hadaeq Sheikh Mohammed Bin Rashid for US$ 9 million, and in Madinat Dubai Almelaheyah for US$ 8 million. The most popular locations were in Al Hebiah Third, with 52 sales transactions, worth US$ 34 million, Al Yufrah 2, with 21 sales at US$ 9 million, and Al Yufrah 3 with 13 sales transactions, valued at US$ 4 million. Mortgaged properties for the week totalled US$ 817 million, including a plot for US$ 272 million in Marsa Dubai. 125 properties were granted between first-degree relatives worth US$ 93 million.

According to the latest CBRE report, Dubai residential property prices climbed 4.4% during the first eight months of the year – its highest annual growth rate since February 2015 – with average villa prices 17.9% to the good and apartments at 2.5%. Overall average rents were 2.7% lower, with villas 15.5% higher but apartments heading 5.2% lower. The study noted that “while there are still headwinds which are tapering performance, we do expect price performance to begin to improve in the not-too-distant future.” Over the period, residential transactions volume came in an impressive 76.8% higher, split between the secondary market (up 120.7%) and off-plan transactions (39.5%); YTD figures are already higher than all but two total annual returns over the past decade. It is also estimated that in the first eight months, 24.6k units were added to Dubai’s property portfolio, with a further 24.7k expected before year-end.

According to Property Finder, last month, Dubai recorded 5,762 transactions worth US$ 4.4 billion – the best September monthly return in eight years, and also the highest value of real estate sold in a single month since December 2013. YTD returns showed 43.3k transactions, valued at US$ 28.4 billion – 45% higher than the whole twelve months of 2020. The report also noted that there has been a growing trend for end-users to renovate, upgrade or extend their current properties instead of entering a booming market of increased prices – with a welcome knock-on effect for local contractors. 56% of all September transactions were for secondary and ready properties, totalling US$ 3.0 billion – the balance, (US$ 1.4 billion), for off-plan properties. Other analysts see Expo 2020 giving the market a further boost, as potential short-term visitors for the event could potentially turn into residents in the long-run, with a potential 20% surge to the emirate’s real estate transactions. The median price for secondary apartments has increased by 41%, year on year – 20% for secondary villa and townhouses. For off-plan apartments and villas/townhouses by 15% and 10% respectively.

Dubai’s office market saw Q3 occupancy rates 1.7% higher at 78.8%, driven by an increasing number of new IT firms, FinTechs and Chinese companies, (that may include coders). On the retail side, Dubai was slightly higher at 0.3%, than its pre-pandemic level, but rents remain under pressure, down 16.4% YTD. Its hotel occupancy rates were 11.4% higher YTD, with rises in both daily rates and average RevPar (Revenue per Available Room) of 2.3% and 11.4%.

According to the first Finom ‘Innovation in Business Index’, Dubai is ranked at 30th, with 63.1 points out of one hundred, and for attracting venture capital was at 32nd, (with 54.1 points), in relation to the funding of start-ups. The initial list of one hundred was derived from a shortlist of two hundred global cites and uses various categories, including IT, AI, software, machine learning and FinTech innovation. Other metrics included the ability to drive innovation forward in the business world, their research capabilities and strong industrial presence. San Francisco topped the overall index, owing to its strength in company R&D spending and green technologies, while London dominated in FinTech and start-ups. Beijing was ranked the top city in the fields of AI/machine learning, and education/mobility. The emirate boasts some two hundred VC funds, which boosts Dubai’s economic activity, with UAE start-ups accounting for 61% of the US$ 1.2 billion raised in the region in H1; Telegram and Careem are the most well-known of the Dubai start-ups.

Emirates Airline and Qantas have announced they will extend their alliance for another five years so that both airlines’ passengers will continue to have access to an expansive joint network, and their loyalty programmes. The carriers have existing approvals from regulators to operate a joint business until March 2023 but hope to get clearance to operate the agreement until 2028.

It was reported that HH Sheikh Mohammed bin Rashid Al Maktoum issued Decree No. (40) of 2021, forming the new board of directors for the Dubai Multi Commodities Centre Authority. It will be chaired by Hamad Mubarak Buamim and Abdulwahid Abdulrahim Al Ulama as the vice-chairman. Other board members include Abdullah Saif Al Shamsi, Charles George Webb, Roger Alfred Pierreinstein and Thierry Jean Luis Gemount, in addition to the CEO of DMCC. The decree is effective from its date of issuance and will be published in the Official Gazette. 

YTD, DMCC recorded its best ever nine-month performance since its 2002 formation, with 1.8k new companies joining the free zone., including a record September number of 214 new entities. The increase in numbers was boosted by expanding the DMCC Tea and Coffee Centres, along with launching both the DMCC Cacao Centre and the DMCC Crypto Centre; the latter could well be home to one hundred crypto and blockchain companies by 31 December.

During September, the Dubai Gold and Commodities Exchange recorded a spike in trading activity, with increased interest in currencies as an alternative asset class. DGCX’s G6 Currencies Portfolio traded a combined total of 1,434 lots, valued at US$ 80 million, with the recently launched Pakistani Rupee (PKR) Futures Contract continuing to expand, with a combined value of US$ 108 million. DGCX also posted gains in its Hydrocarbons asset class, as its West Texas Intermediary (WTI) Futures Contract came in 37% higher, on the year. Its precious metals’ portfolio also moved higher, with its Sharia Compliant Spot Gold Contract trading a total of 20 lots. Over 2021, the DGCX has signed MoUs with Sudan’s Financial Markets Regulatory Authority and with Victoria Falls Stock Exchange (VFEX) – a subsidiary of the Zimbabwe Stock Exchange (ZSE) – to provide both technical support, knowledge, and skills.

Dubai Airport Freezone Authority reported that it contributes 11% (US$ 21.0 billion) to Dubai’s H1 non-oil foreign trade – 34% higher on the year – whilst posting a US$ 1.69 billion trade surplus.  Imports,  exports and reexports grew by 44.5%, 24.0% and 20.5% in H1. Imports, (at US$ 9.63 billion), account for 8.5% of the emirate’s total imports, whilst reexports, at US$ 11.11 billion, represents 20.5% of Dubai’s total non-oil foreign trade.

H1 saw Jebel Ali Free Zone saw a 40% increase, year on year, in new customer numbers including machinery/equipment, vehicle/transport and retail/general trading which witnessed increases of 188%, 100% and 78%. Jafza, home to over 8.7k multinational companies, generated US$ 104.2 billion of trade last year, equating to 32% of Dubai’s total trade value in 2020, and accounting for 23.9% of total foreign investment.

Oxford Economics noted that, driven by higher energy prices, GDP growth in the GCC will more than double from 2.2% to 5.1% in 2022, with the UAE leading the bloc’s uneven economic recovery, attributable to its proactive approach to attracting global talent. However, there was a warning that, although the bloc has benefitted from domestic and global reopening, it will continue to lag other emerging market regions in regaining pre-pandemic activity levels, which will not be reached until Q1 next year. The report also noted that oil prices have almost doubled in the previous twelve months to 01 October, with Brent rising from US$ 39.27 to US$ 78.20; it also upgraded its regional oil growth forecast from 3.8%, (three months ago), to 6.7%. What with higher prices and higher demand, it is time for local producers to utilise the extra revenue to close budget gaps and build up financial resources. However, if the local central banks continue to follow the US Fed, it might see the regional nations lifting rates, when local circumstances dictate otherwise, and this could stunt credit growth recovery.

For the first time in its fifty-year history, the UAE is planning to raise up to US$ 3.5 billion in a debut bond sale, comprising three tranches of senior unsecured bonds with maturities of ten, twenty and 40 years, subject to market conditions. After drawing more than US$ 20 billion in orders, the federal government tightened the price guidance for its debut bonds – by around 80bps over US Treasuries (UST) for a 10-year portion, about 110 bps over UST for a 20-year tranche and around 3.3 per cent for 40-year Formosa bonds. Earlier in the year, the cabinet approved a public debt strategy, aimed at developing the domestic market for local currency bonds, in a bid to “revitalise the financial and banking sector in the country.” Moody’s commented that the higher debt burden will be offset by a further accumulation of liquid assets and is unlikely to significantly affect the fiscal strength of the federal government.

YTD, Dubai Aerospace Enterprise reported it had acquired twenty-three new aircraft, (ten owned and thirteen managed), and signed 147 lease deals, whilst divesting the same number of planes; this brings the total fleet to 425 aircraft serving 114 customers from 54 countries. The Middle East’s biggest plane lessor also added three new managed customers during the period. DAE, owned by the Investment Corporation of Dubai, with 114 customers from 54 countries, has placed an order for twelve Boeing 737 Max 8 planes with a customer in the Americas. During the period, it raised US$ 2.55 billion through a 4.5-year, 2.31% unsecured debt deal, and it will pay a debt of US$ 2.19 billion, with a 5.0% interest rate.

The DFM opened on Sunday, 03 October, 5 points higher the previous week, shed 73 points (2.6%) to close the week on 2,772. Emaar Properties, US$ 0.02 higher the previous week, lost US$ 0.02 to close at US$ 1.09. Emirates NBD and Damac started the previous week on US$ 3.87 and US$ 0.34 and closed on US$ 3.50 and US$ 0.34. On Thursday, 07 October, 130 million shares changed hands, with a value of US$ 39 million, compared to 81 million shares, with a value of US$ 50 million, on 30 September.

By Thursday, 07 October, Brent, US$ 4.98 (6.7%) higher the previous week, gained US$ 4.26 (5.4%), to close on US$ 82.43. Gold, US$ 66 (4.3%) lower the previous three weeks, gained US$ 19 (1.1%) to close Thursday 07 October on US$ 1,759.

In the nine months to September, Tesla delivered 627k cars, (including  another quarterly record of 241k in Q3), compared to  499k in the whole of the year 2020.The California-based company is seen by many to be a gauge on how well the EV market is progressing, with consumer demand moving higher, urged on by  governments, including the US and China, mandating that a certain percentage of up to 50%, of new car sales be EVs in the next decade. In Q3, Model 3 sedan and Model Y SUV crossover accounted for 96% of deliveries, while the Model S and Model X made up the production balance of 237.8k units. It currently produces its vehicles in California and Shanghai, while new factories in Berlin and Texas, are nearing completion. The company is also currently accepting orders for its Cybertruck, with production slated to begin in 2022. Its Q3 financial results will be published later in the month.

This week, Tesla is in the news for another reason, and this pertains to its founder, Elon Musk being in court for his role over the company’s US$ 2.6 billion acquisition of SolarCity. Investors, who are claiming that he received 2.4 million Tesla shares in exchange for his holdings in SolarCity, (an amount that subsequently rose to twelve million because of stock splits), calculate that the damages could be between US$ 1.4 billion to US$ 2.4 billion, to account for what they contend is SolarCity’s lower value. The judge has to ascertain whether the solar power provider’s chairman, Elon Musk, and largest shareholder at the time of the buyout, stood on both sides of the fence in the deal and wrongfully used his influence with the Tesla board to get the transaction done. His lawyers argue that the purchase was a “product of fair dealing” that was approved by 85% of Tesla’s shareholders. He is the last Tesla director left in the case, after his colleagues agreed to a US$ 60 million settlement of investors’ claims last year.

What a difference a day makes – following its largest monthly decline since May – on 01 October, Bitcoin jumped to its biggest daily gain since July, with a gain of around 10% to US$ 47.9k, dragging “lesser” digital currencies – Ethereum, Litecoin and EOS – with it. Two driving factors behind the surprise surge were comments by Federal Reserve chair Jerome Powell, that he had “no intention” on banning cryptocurrencies, and that crypto seems to be in its own bull cycle. There are reports that the US is considering enforcing bank-like regulations on cryptocurrency companies issuing so-called stablecoins, that are tied to another asset such as gold, and are less subject to valuation swings, a move mooted by the Fed. President Joe Biden’s administration is also looking at legislation to register such entities as banks. There is no doubt that the traditional banks are very concerned about cryptocurrencies and if – or rather when – they were to become an alternative to domestic bank deposits or even loans.

According to its President, the ECB is closely watching rising inflation expectations and wage developments, noting that “we should not overreact to supply shortages or rising energy prices, as our monetary policy cannot directly affect those phenomena.” Christine Lagarde also reiterated that predicting the length of disruptions, that has curbed the economy’s post-pandemic reopening, is difficult, but she still expected the “frictions” to be transitory. She still expected “that inflation expectations are anchored at 2%” and the current spike will abate in 2022.

The 2008 GFC proved to some that the IMF was incapable in preventing or even forecasting the worst financial crisis since the 1930s.  Currently, the world body, which has overseen national and international economic affairs for nearly eighty years, seems to be running scared when it comes to cryptocurrencies, with it calling for “robust and globally consistent” standards to govern the sector. Over the past year, the crypto market cap has more than doubled to over US$ 2 trillion. The IMF seems to be worried that the banking sector can also come under pressure if the crypto ecosystem becomes an alternative to domestic bank deposits or even loans. There is no surprise to see that global central banks have been reluctant to endorse cryptocurrencies because of their speculative nature and regulatory oversight. The fund also noted that users need to disclose only limited amounts of information and high levels of anonymity enable money laundering and terror financing.

Maybe the IMF should be spending more of its resources in cleaning up itself as well as the traditional global banking system, which has been more than tarnished by illegal activities especially since the GFC. In March 2017, CNBC reported that a Boston Consulting Group study had estimated that global banks had raked in nearly US$ 1 trillion in profits since the GFC but had paid a staggering US$ 321 billion in fines. It seems that 2020 was a comparatively quiet year but a report by Finbold.com indicating that banks paid US$ 12.8 billion in fines, with US financial institutions being fined a total of US$ 15.1 billion, with the US banks paying out 73.4% (US$ 11.1 billion) of the total. Central banks around the world have been reluctant to endorse cryptocurrencies because of their speculative nature and regulatory oversight.

According to a report in Switzerland’s ‘Le Temps’, the IMF deleted fourteen pages, (containing vital information), from a 1917 report on the state of Lebanon’s financial system, at the behest of the country’s central bank which wanted to omit data that highlighted risks to the country’s financial stability. Less than three years later, the economy collapse resulting in the currency tanking – losing 90% in value – and 50% of the population living below the poverty line. Whether this would have happened if the “full” report was made available is debateable but the new Prime Minister, Najib Mikati, confirmed he would reassess the scale of the country’s losses with Lazard and pursue a deal with the IMF. Financial services company, Lazard, estimate Lebanon’s loss at over US$ 80 billion, with the World Bank describing it as one of the most severe country financial services’ collapse since the 1850s.

With the World Bank reviewing Kristina Georgieva’s role into allegations that she pressured bank staff to adjust data that determined the ranking of certain countries in an index while she worked there, the executive board of the IMF met her to discuss the matter further. The Bulgarian economist is now head of the IMF, taking over the role formerly held by Christine Lagarde, but from 1993 to 2010, she served in a number of positions in the World Bank Group, eventually rising to become its vice president and corporate secretary in March 2008. In January 2017, the World Bank announced her new position as the first CEO of the International Bank for Reconstruction and Development. After data irregularities were reported in the 2018 and 2020 surveys, World Bank management discontinued the next Doing Business report and initiated a series of reviews and audits of the report and its methodology. Last year, an independent legal enquiry concluded that the World Bank’s Doing Business reports had been altered, on Ms Georgieva’s instructions, to inflate the rankings for countries such as Azerbaijan, China and Saudi Arabia. It is reported that the US, IMF’s largest shareholder, is debating whether to ask Ms Georgieva to resign as a result of the ethics scandal and there is every chance that her days are numbered.

Under new UK anti-money laundering legislation. NatWest has admitted three counts of failing to properly monitor US$ 496 million deposited into a customer’s account; the customer was a Bradford gold merchant, who is alleged to have received nearly US$ 3 million a day in bags of cash, as well as allegedly laundering US$ 495 million through its NatWest Bank accounts, over a five-year period from 2011 to 2016. The FCA said that the bank, facing a fine of up to US$ 360 million, had failed to adhere to the requirements of anti-money laundering legislation in relation to Fowler Oldfield Ltd’s account; when first opened, the figure the firm forecast for its annual turnover was US$ 20 million – but over five years, it was US$ 500 million – and it was agreed that the bank would not handle cash.

Almost twelve million documents have been leaked by a group of news organisations showing the confidential financial details, and revealing assets held offshore, by politicians and public officials worldwide. The news reports have been published by the International Consortium of Investigative Journalists (ICIJ) and its media partners in the Pandora investigation, including The Washington Post, the BBC, The Guardian, Radio France and the Indian Express. Initial reports noted that leaders of certain countries

Initial reports noted that leaders of certain countries, in Africa, Asia and Europe, had carried out suspicious financial transactions to better themselves or their families/associates. One African country’s president and family were allegedly linked to thirteen offshore companies, one of which had stocks and bonds to the value of US$ 30 billion.  Another allegation was that an Asian president and family had secretly been involved in seventeen UK property deals, valued at US$ 542 million, which included a US$ 45 million office block for his young son.  Indeed, the Crown Estate, after carrying out the checks required in law, bought another office block from the family for US$ 89 million in 2018. In another Asian country, it was alleged that its cabinet ministers have secretly owned companies and trusts, holding millions of dollars of hidden wealth, with the report also showing the personal wealth of its military leaders. The Pandora news reports said a European prime minister moved US$ 22 million, through offshore companies, to buy an estate on the French Riviera in 2009, while keeping his ownership secret. Other documents signalled out a US state that is now rivalling opaque jurisdictions in Europe and the Caribbean for financial secrecy, revealing almost US$ 360 billion in customer assets sitting in trusts in the state, some of it tied to offshore-based people and companies, accused of human rights abuses and other wrongdoing.

The Pandora papers also reported that several major Australian mining companies, including Rio Tinto and BHP Billiton, (now owned by Sanjeev Gupta), have continued to trade with a Chinese steel billionaire Du Shuanghua, even after he confessed to paying bribes to a Rio Tinto executive. more than a decade ago. The files also noted that since 2010, Rio had traded more than US$ 200 million with his steel companies — via a Singaporean intermediary. The Papers clearly show that Mr Du is the beneficiary of a company called Bright Ruby Resources, through six layers of trusts and holding structures, including four based in the BVI and another based in the Cayman Islands. The restructuring started in 2009, the year Mr Du was being investigated by Chinese authorities for the Rio Tinto case and since then he has stashed his massive amount of wealth — accumulated via political connections and briberies — in offshore tax havens and jurisdictions such as Singapore. In 2010, four Rio Tinto employees were charged for accepting millions of dollars from Chinese steel companies and stealing state (commercial) secrets. At the trial, he testified as a witness and admitted giving US$ 9 million in bribes to one of the Rio Tinto executives, Wang Yong — a claim Wang denied – and said “without Wang Yong’s help, my company could not grow to this size.” The four accused were given fourteen years’ jail whilst the elusive Du escaped prosecution.

Clayton, Dubilier & Rice, whose senior adviser, Terry Leahy, is the former chief executive of Tesco, has won an auction for the British supermarket Morrisons, with a US$ 9.5 billion bid. The US private equity group had offered US$ 3.89 per share, beating the Fortress offer by GBP 0.01. In July, the Bradford-born grocery had been proved right to reject CD&R’s initial offer of US$ 7.45 billion. The offer has to be approved by the shareholders at a 19 October meeting, following which CD&R will take over Morrisons next month.

Following an investigation into Leicester City and retailer JD Sports over the sale of merchandise, the Competition and Markets Authority confirmed it had “reasonable grounds to suspect one or more breaches of competition law.”  Furthermore, it indicated that the investigation relates to suspected infringements regarding anti-competitive agreements over the sale of club branded products in the UK. This comes less than a year after the watchdog launched an investigation into price fixing of replica Rangers football kits sold by JD Sports and other retailers.

UK September new car registrations slowed to their lowest level since the end of the last century, sinking to 214k, down 35% compared to the same month in 2020. One of the main drivers seems to be the global shortage of computer chips (semiconductors), when lockdowns forced car production lines to halt, resulting in microchip manufacturers diverting the chips, that would normally go into new cars, to the consumer electronics market, and supply is yet to fully recover. One bright light was that 32k electric vehicles were registered in the month – almost the same amount registered in the whole of 2019. Last year, new car registrations had fallen 29% on the year to 1.63 million. The main beneficiary of this decline is sales of second hand cars which have more than doubled in recent months due to a shortage of new models, with the Q2 market more than doubling on the year to 2.2 million vehicles.

At this week’s Conservative party conference, Chancellor Rishi Sunak has reiterated that there is no “magic wand” to solve the disruption to fuel and food supplies disappear overnight, noting that supply problems were global, as a result of lockdowns and the rapid re-opening of economies. He did note that “pragmatic controlled immigration” could be part of the short-term solution. The Chancellor is facing a myriad of other problems, that are eating into the populace’s spending, such as rising food and energy prices, cuts to universal credit benefits and tax rises to fund the NHS and social care.

France continues to show its displeasure with its neighbour – this time its irk is centred over post-Brexit fishing rights which is putting increased pressure on already strained bilateral relations. This time, the problem relates to the fact that the UK granted 12 licences out of 47 bids for smaller vessels to fish in its territorial waters, with prime minister, Jean Castex, accusing the Johnson administration of not respecting its Brexit deal commitments on fishing.

and warning that all bilateral agreements with the UK could be at risk if the EC did not take a tougher stance on the UK government. The UK has indicated that it would consider further evidence to support remaining bids for fishing rights, as this week the Macron government repeated its threat to cut the UK off from energy supplies, (it is estimated that 47% of the country’s electricity imports emanate from France).

New Zealand became one of the first (but definitely not the last) developed economies to reverse rate cuts put in place during the pandemic by doubling its cash rate to 0.5% this week – the first rate hike in seven years. Two of the main reasons for this early intervention were to rein in property prices and inflation, with the central bank advising that it plans to remove more stimulus measures, “contingent on the medium-term outlook for inflation and employment,” as the economy continues to recover. In August, South Korea became the first major Asian economy to raise interest rates since the coronavirus pandemic began, with Norway and the Czech Republic following suit last month.

On Monday, trading in Evergrande shares was suspended after the indebted property developer, with debts of over US$ 300 billion, allegedly missed interest payments to its bondholders; shares in its related property services businesses were also suspended on the Hong Kong Exchange. It is reported that a rival real estate firm Hopson Development, is reportedly set to buy a 51% stake in an Evergrande real estate unit for US$ 5.0 billion. Evergrande shares have fallen by almost 80% YTD.

The end of October will see the opening of the 2021 United Nations Climate Change Conference in Glasgow. Delegates, from over two hundred countries, heading to the COP26 UN climate summit agreed they must deliver on the US$ 100 billion (AED 367 billion) per year pledge to help vulnerable nations tackle climate change. Under the presidency of Alok Sharma, the pre-COP26 climate event in Milan last week agreed to the consensus to do more to keep the 1.5 degrees Celsius target within reach, adding more needed to be done collectively in terms of national climate plans.

Joe Biden has managed to keep the government going for a further two months, having signed a temporary measure to keep it funded and to avoid yet another federal shutdown, which would have resulted in the closure of federal agencies and hundreds of thousands of government employees having to take unpaid leave. The bill also includes money for hurricane relief and Afghan refugees. However, a further funding of US$ 1 trillion to finance infrastructure was postponed; the bill would have provided US$ 550 billion for roads, bridges, internet and other domestic priorities. There has been opposition from those who would like the legislation to encompass climate change and social welfare. One other problem facing Congress this month is that the US government is set to hit its borrowing limit, (the limit on how much the US government can borrow), within weeks. If this is not solved quickly, the ramifications will be felt globally, with a major economic downturn.

France is still reeling from the so-called Aukus security partnership which saw Canberra cancelling a US$ 27.5 billion deal with France to build a fleet of conventional submarines, to be replaced by at least eight nuclear-powered submarines, utilising US and UK technology. Now the EU has postponed a 12 October meeting with Australia for a month, with EC president, Ursula von der Leyen, questioning whether the EU would be able to strike a trade deal with Australia, in solidarity with France. The EU is Australia’s third-biggest trading partner, with trade in goods and services totalling over US$ 52 billion last year.

According to a Zoopla report, the number of UK streets where the average home is valued at more than US$ 1.36 million (£ 1 million) has risen by 18.0% over the past twelve months to 11.7k. Nearly 65% of the increase was seen in the South East, (with 942 “extra” streets)  and London’s 262, bringing their totals to 4.4k and 4.5k. Covid has seen people looking for bigger properties and the stamp duty holiday has helped house prices rocket. London remains home to the ten most expensive streets with Kensington Palace Gardens being the country’s most expensive street, with homes there priced at nearly US$ 41 million on average, followed by Courtenay Avenue in Highgate (US$ 26 million) and Grosvenor Crescent at US$ 23 million. The most expensive street outside London was Titlarks Hill in Ascot, with the average home price at US$ 11 million. Five suburbs – Guildford, Reading, Sevenoaks, Harpenden and Altrincham – had million-pound streets, with 176, 137, 133, 115 and 105 streets respectively. It would be interesting to find out how many such streets could be found in the emirate, but it will be a lot higher than Wales which has only nine £ 1 million streets. It is indeed true that Dubai beats Wales when it comes to Streets Paved With Gold!

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Looks Like A Cold, Cold Winter!

Looks Like A Cold, Cold Winter!                                                         30 September 2021

For the past week, ending 30 September, Dubai Land Department recorded a total of 1,592 real estate and properties transactions, with a gross value of US$ 1.63 billion. It confirmed that 1,080 villas/apartments were sold for US$ 747 million, and 73 plots for US$ 95 million over the week. The top three transfers for apartments and villas were for a US$ 102 million apartment in Marsa Dubai, US$ 72 million for a Palm Jumeirah villa and US$ 70 million for a villa in Wadi Al Safa 5. The top two land transactions were in Al Thanyah Fourth for US$ 16 million, and in Al Qusais First for US$ 9 million. The most popular locations were in Al Yufrah 3, with 17 sales transactions, worth US$ 4 million, Nad Al Shiba Third, with 10 sales at US$ 48 million, and Al Hebiah Third with 9 sales transactions, valued at US$ 5 million. Mortgaged properties for the week totalled US$ 545 million, including a plot for US$ 56 million in Me’Aisem First. 71 properties were granted between first-degree relatives worth US$ 272 million.

Knight Frank has confirmed what everyone knew – that Dubai property prices have jumped 16.5% over the twelve months to July. The global property consultancy also noted that Q3 villa prices are provisionally 5.0% higher, on the quarter, and 17.0% on the year, driven by the UAE’s lauded handling of the pandemic and the “buzz” around the much-anticipated World Expo. By the end of Q3, the number of US$ 10 million plus properties sold in the emirate YTD totalled 54 – well over the record twelve-month total of 31, established in 2015. Over 75% of these sales have occurred in two locations – Emirates Hills and Palm Jumeriah.

Last week a bullish Crown Prince, Sheikh Hamdan bin Mohammed expected Dubai’s economy to grow by 3.1%, this year, nudging 0.3% higher to 3.4% in 2022. He also noted, that “Dubai has successfully overcome the pandemic’s global shockwaves,” and that the emirate’s position, as a major economic capital, had been supported by clear goals, flexibility and speed in responding to changes. Now that Expo 2020 finally opened this evening, analysts are considering the economic benefits that will accrue from the six-month event, as business confidence heads north at an increased pace. Sheikh Hamdan’s realistic growth projections are in line with the revised forecast made by the International Monetary Fund which has upgraded the UAE’s growth forecast to 3.1% for 2021 in its latest World Economic Outlook, as compared to 1.3% predicted in October 2020.

According to the latest Global Financial Centres Index, Dubai moved up one place to 18th, with 694 points, among the top twenty vibrant financial centres, to become the only city in the Middle East, South Asia and Africa region to do so. New York and London maintained their top two positions, despite the latter exiting the EU at the start of 2020, and that the two cities’ financial services sectors managed to sustain their performance despite radical changes in working practices resulting from the pandemic. Playing a pivotal role in Dubai’s transition, over the past two decades, as a sought-after hub for financial companies and fintechs are world class financial zones, including Dubai International Financial Centre. Financial industry sources said the enhanced ranking further boosts Dubai’s position on the ladder and underscores the emirate’s economic potential and its position as the destination of choice for international organisations, including FinTech leaders. Dubai’s position as a major global centre has also benefitted from the government taking innovative initiatives and introducing a series of progressive regulatory reforms.

Indicating its position as one of the fastest growing global business hubs, Dubai’s H1 non-oil external trade surged 31.2% to reach US$ 196.8 billion, compared to a year earlier. Exports, imports and reexports were all higher – by 44.9% to US$ 29.9 billion, 29.3% to US$ 112.8 million, and 28.3% to US$ 54.1 billion; volume wise, the tonnage rises were up 10.0%, 30.8% and 4.3% to 48.0 million, 10.1 million and 7.0 million. The Crown Prince, Sheikh Hamdan, noted that “we will continue to build on our growth momentum to achieve our ambitious sustainable development projects and plans.”

China maintained its position as the emirate’s leading trading partner, 30.8% higher on the year at US$ 23.6 billion in H1, followed by India (up 74.5% to US$ 18.3 billion), the USA (US$ 8.7 billion, up 0.9%), Saudi Arabia, (US$ 8.3 billion, up 26.5%) and Switzerland, 2.5% higher at US$ 6.8 billion. The total share of the five biggest trade partners in H1 was 30.3% higher at US$ 65.7 billion. Gold topped the list of commodities in Dubai’s H1 external trade at US$ 37.8 billion (19.2% of Dubai trade), followed by telecoms, diamonds, jewellery and vehicle trade at US$ 25.6 billion, US$ 15.6 billion, US$ 9.3 billion and US$ 7.6 billion. Direct trade totalled US$ 121.4 billion, up 39.5%, while trade through free zones reached US$ 74.1 billion, up 19.8%.

After six months of rising prices, pump prices fell in September, but tomorrow, 01 October, prices will move higher again, as global energy prices touch three-year highs. The country’s fuel price committee announced that Super 98 would be US$ 0.0136 higher to US$ 0.7084 per litre, Special 95, up US$ 0.0136 to US$ 0.6648 and diesel US$ 0.0354 to US$ 0.6839.

It is reported that Package A of the country’s Etihad Rail project has been completed two months ahead of schedule. This part extends 139 km and is connected through Al Ghuwaifat, on the border of Saudi Arabia, with Stage One, which extends 264 km from Habshan to Al Ruwais.  When completed, Stage Two will extend 605 km from Ghuweifat on the border with Saudi Arabia to Fujairah on the UAE’s east coast, to be followed by future route additions.  It will eventually connect vital areas in the seven emirates, via a track extending over 1.2k km to enhance the country’s social and economic development, as well as its global positioning in line with the UAE Centennial 2071.

Prior to June 2022, Shuaa Capital, via its 100% subsidiary, Northacre, estimates that it will have built and delivered US$ 2.8 billion worth of property projects in London. In October, it will unveil its first show apartment in The Broadway and will bring 116k sq ft of commercial space to the market and by the end of H1 2022, it hopes to complete its two key projects – No 1 Palace Street, (bought in 2013 for US$ 417 million), and The Broadway, (acquired for US$ 498 million in 2014). Walid El-Hindi, chief executive of real estate at Shuaa, commented that “we look forward to exploring further opportunities in line with our strategy and investing in the UK.” Northacre has been involved in ten luxury London projects, encompassing one million sq ft, as well as managing US$ 2.7 billion worth of property projects in the UK.

The DFM opened on Sunday 26 September, 72 points (0.3%) lower the previous three weeks, nudged 5 points higher to close the week on 2,845. Emaar Properties, US$ 0.02 higher the previous week, remained flat at US$ 1.11. Emirates NBD and Damac started the previous week on US$ 3.81 and US$ 0.34 and closed on US$ 3.87 and US$ 0.34. On Thursday, 30 September, in another low trading environment, 81 million shares changed hands, with a value of US$ 50 million, compared to 55 million shares, with a value of US$ 30 million, on 23 September.

For the month of September, the bourse had opened on 2,903 and, having closed the month on 2,845, was 83 points (2.0%) lower. Emaar traded from its 01 September 2021 opening figure of US$ 1.14 – down US$ 0.03 – to close September on US$ 1.11. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.57 and US$ 0.35 and closed on 30 September on US$ 3.87 and US$ 0.34 respectively. YTD, the bourse had opened the year on 2,492 and gained 353 points (14.2%) to close the nine months on 2,845. NBD and Damac started the year on US$ 3.33 and US$ 0.35 and closed 30 September at US$ 3.87 and US$ 0.34.

By Thursday, 30 September, Brent, US$ 2.43 (3.2%) lower the previous week, gained US$ 4.98 (6.7%), to close on US$ 78.17. Gold, US$ 54 (2.3%) lower the previous fortnight, lost US$ 12 (3.0%) to close Thursday 30 September on US$ 1,740.  Brent started September on US$ 71.82 and gained US$ 6.35 (8.8%) during the month, to close on US$ 78.17. YTD, it started the year trading at US$ 51.80 and has gained US$ 26.37 (50.9%) to close on US$ 78.17 during the first nine months of the year. Meanwhile, the yellow metal opened September trading at US$ 1,815 and shed US$ 58 (3.2%), during the month, to close on US$ 1,757. Over the year it has lost US$ 138 (7.3%) from its opening year balance of US$ 1,895.

Further good news for the local economy is that oil prices climbed above US$ 80 a barrel on Tuesday, with Brent hitting its highest level at US$ 80.69 since October 2018. There is no doubt that the current prime driver is the energy crisis in Europe and in an environment of surging demand and tight supplies, there is every chance of a further 10% hike occurring by the end of October. The last two months have seen major hurricanes, Ida and Nicholas, hit the US east coast and, in damaging oil infrastructure, led to a major fall in production which in turn helped push prices higher. Furthermore, a dramatic 400% surge in natural gas prices has increased the demand in oil, seen to be a relatively cheaper alternative for power generation. It now seems to be highly likely that global demand will increase by a further 500k bpd by year end – another driver to push prices higher.

Ford has announced a US$ 11.4 billion plan to build zero-emission cars and pickups “at scale” for American customers, with its biggest ever factory in Tennessee, and two battery parks in Kentucky; the expansion will add 11k jobs to its payroll. In line with its peers, such as GM and Stellantis, the car maker plans to have 50% of its vehicles to be zero emission by 2030; currently, the US only accounts for just 2% of new EV sales globally in 2020. It will also introduce a new agreement with South Korean batter maker, SK Innovation.

Next has announced that it foresees staff problems in the run up to Christmas which can only be solved by a government relaxation in immigration rules for overseas workers. The UK retailer noted that some of its operations were “beginning to come under pressure”, including warehouse and logistics staffing, and that the lorry driver crisis was “foreseen, and widely predicted”. The UK company commented that the retail bounce-back from the coronavirus pandemic was “far stronger than we anticipated”, and that “sales in retail stores have done better than planned, while online sales have fallen back less than we expected. It appears that the wider economy has not suffered the long-term damage many feared, for the moment at least. And, in particular, employment has held up well.”

Aldi UK’s chief executive Giles Hurley is confident the supermarket chain can weather any storms in the supply chain and does not see any customer disruption during the festive season. As with its competitors, the UK’s fifth largest supermarket has had to increase payments for its delivery drivers and is ramping up their supplies to reduce any chance of running out during Christmas trading. Aldi posted a 10.0% growth in revenue to US$ 18.2 billion, with a 2.5% dip in pre-tax profits to US$ 357 million, and announced that it would invest US$ 1.75 billion in expansion plans that will see one hundred new stores and 2k extra jobs. There was no doubt that 2020 was a challenging year for Aldi, along with Lidl and other discounters. Aldi lost market share during the year, as huge numbers of shoppers moved to online grocery shopping but it has since quickly made up for the lost ground, especially since the easing and subsequent lifting of lockdown restrictions.

All supermarkets will be impacted by the double whammy of many shoppers tightening their purse strings this year, (and less disposable income), whilst inflation and rising costs will see many prices heading higher; Tesco is warning about food prices being 5.0% higher by year-end. To add to these problems is the fact that this year, actual stock items will be reduced, leading to limited choice of products for the shopper.

The problem that many UK businesses are facing, and that is impacting on supply chain problems, is a chronic shortage of lorry drivers., estimated by some to be in the region of 100k. The recent announcement that the government will hand out 5k temporary visas to fuel tanker drivers, (valid until Christmas Eve and with pay starting at US$ 40k) and 5.5k poultry workers. However, the problem, initially attributable to the pandemic, may be a lot bigger than it first appears and includes other factors including tax changes, Brexit, and an ageing workforce.

Not many football fans would have heard of Forest Green Rovers but today the club is top of the Sky Bet League Two (the fourth tier of English Football), four points ahead of their nearest rival. Furthermore, it is not only the world’s first carbon neutral football club, (and it plays on organic turf), it has also been acknowledged by FIFA as the greenest team in the world. In 2010, the 120-year old football club was in danger of folding when green energy entrepreneur, Dale Vince, became interested, although he had never seen the team play. Since then, he has driven the club’s transformation and brought his environmental principles to the field in the hope of creating a new kind of football club. He started making environmentally focused changes from the start of his tenure, with the club putting solar panels on their roof, banning single-use plastics, like cups and water bottles, and installing charging points for electric cars; they also have their own electric vehicles in the fleet. All the food sold in the ground is vegan, despite initial opposition and scepticism. Even the club shirts are made from sustainable fabric – three years ago, bamboo was used – this year, they are made from coffee grounds, a better alternative because it uses recycled materials. Over the past decade, the club has transitioned from near collapse to a commercially successful entity, with the chairman reiterating that “the more prestigious the club is, the greater their ‘green influence’ will be”. 

The UK furlough scheme closes today, 30 September, with uncertainty ahead for the onemillion who have not yet fully returned to work. According to a report by the Resolution Foundation, about half that number, at the end of July, had been able to work some of the time. The jury is out whether the US$ 92 billion was money well spent with the Chancellor, Rishi Sunak saying he was “immensely proud” of the scheme but now was the right time to close it. In the past eighteen months, since the onset of Covid, it has helped pay the wages of over 11.6 million workers; under the scheme, it paid 80% of their usual wage, but in August and September it paid 60%, with employers paying the balance. Some consider that there will be a small rise in unemployment as furlough ends and that there will be an increase in under-employment where employees return to work but possibly not on a full-time basis. Inevitably, there will be a big mismatch of skills and experience between those leaving the furlough scheme and the jobs on offer which will see job vacancies still around the one million level, at the same time unemployment remaining higher than it theoretically should be.

In Australia, there are reports that the local coffee industry is being hit by global price hikes that have risen YTD by 21.6% to US$ 2.63 per kg, with speciality beans from Brazil 40% higher. The “world price of coffee” comprise the average of monthly prices of arabica and robusta green, or raw, coffee beans, with such high prices last seen in 2014. The two main drivers behind the price rises are climate change and global supply chain issues. Drought and severe frost are estimated to have destroyed about 25% of Brazil’s, and some Central American countries’, coffee plants, with drought also affecting producers in North Africa. Brazil is the world’s largest coffee producer and accounts for about 50% of global supply and is Australia’s second biggest import source for coffee after Sweden.  In short, there will be less Brazilian coffee available to Australian drinkers and because of the law of supply/demand, prices will inevitably move higher. It seems that Australian coffee roasters are paying up to US$ 0.75 per kg extra and are being impacted by higher delivery prices. Some of these extra expenses need to be passed on to their clients, the coffee shops, already reeling from continuous lockdowns imposed by the various governments in the country over the past eighteen months.

China’s administration has continued to display its displeasure at cryptocurrency, by issuing a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins. The central bank, along with nine other government agencies, as well as banking, securities and foreign exchange regulators, will root out “illegal” cryptocurrency activity.  The reason for this stance, not to support cryptocurrency market development, is that it goes against its policies of tightening up control over capital flow and big tech.

The People’s Bank of China has banned overseas exchanges from providing services to mainland investors via the internet, cutting off the likes of Coinbase and Binance from the world’s second-largest economy; it also barred financial institutions, payment companies and internet firms from facilitating cryptocurrency trading nationally. Claiming  it was “imperative” to cut out crypto mining because it contributed little to China’s economic growth, consumed a huge amount of energy and hampered carbon neutrality goals, the National Development and Reform Commission confirmed it would work closely with other government agencies to make sure financial support and electricity supply will be cut off for mining use.  On the news, Bitcoin dipped 6% to US$ 42.2k, whilst smaller coins, such as Ether and XRP fell 10%.

Last week, China’s central bank injected US$ 71 billion of short-term cash into the banking system, as it sought to avoid contagion stemming from the China Evergrande Group spreading to domestic markets. The cost of borrowing overnight fell 0.60% on the week to 1.68%, the lowest level since late July. This move helped calm China’s financial markets after deepening concern, over Evergrande, sparked a global selloff on Monday and is in direct contrast to the central government’s apparent standoff approach to the fate of the embattled developer. Furthermore, seven banks assured investors that they had collateral cover on the risks emanating from Evergrande. Regulators continue to encourage the company to take all measures possible to avoid a near-term default on dollar bonds while focusing on completing unfinished properties and repaying individual investors.

The EU has another problem to face caused by surging use. energy prices as its leaders have been pushing their expansive climate plan – “Fit for 55” – to cut carbon emissions by 55% by 2030. Even without the current energy minefield, the EU plans would have resulted in higher prices and that even proponents of the greener economy strategy were warning of increased costs. Spain becomes the first member nation to call for the energy crisis to be discussed at the next leaders’ summit and with its past history of last-minute compromise and policy changes, it is inevitable there will be a dilution of “Fit for 55” to accommodate financial requirements. As the current crisis intensifies, the greater the backlash may be over the EU’s climate plans, having highlighted the difficulty for Europeans in funding the move to renewable energy. For many, it Looks Like A Cold, Cold Winter!

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We Are Never Ever Getting Back Together!

We Are Never Ever Getting Back Together!                                         23 September 2021

For the past week, ending 23 September, Dubai Land Department recorded a total of 1,835 real estate and properties transactions, with a gross value of US$ 1.85 billion. It confirmed that 1,249 villas/apartments were sold for US$ 708 million, and 157 plots for US$ 327 million over the week. The top three transfers for apartments and villas were all for apartments –  US$ 86 million in Burj Khalifa, US$ 73 million in Marsa Dubai, and US$ 52 million in Palm Jumeirah. The top two land transactions were in Al Hebiah Fifth for US$ 52 million, and in Um Suqaim First for US$ 14 million. The most popular locations were in Al Yufrah 2, with 36 sales transactions, worth US$ 8 million, Al Hebiah Third, with 31 sales at US$ 21 million, and Hadaeq Sheikh Mohammed bin Rashid, with 19 sales transactions valued at US$ 90 million. Mortgaged properties for the week totalled US$ 817 million, including a plot for US$ 187 million in Wadi Al Safa 5. 76 properties were granted between first-degree relatives worth US$ 56 million.

Yesterday, 22 September, was a hectic day for the Dubai Land Department, with 266 sales transactions, worth US$ 232 million, and mortgage deals of US$ 91 million; there were also 21 gift transactions, amounting to US$ 7 million. The daily total of realty transactions was US$ 327 million, covering 227 villas/apartments, and 39 land plots, while the mortgages included 51 villas/apartments and 17 land plots. Chesterton’s latest UAE Q2 2021 Market Report, showed that, on the quarter, total Dubai residential transaction value increased by 49.4% to US$ 8.5 billion.

An indicator that the property market is returning to some form of normalcy, and that investors, including a marked increase in those from overseas, are back in force can be gleaned from the fact that off-plan sales are now almost the same as secondary sales, compared to a 30:70 ratio seen in recent times. Another interesting feature is that the average August transaction, at US$ 339k, was 52.9% higher on the year, with villa/town house up 12.1% to US$ 495k, and the median price for off-plan apartments 47.6% higher at US$ 300k. The overall average August sales transaction value increased 1.57% higher to US$ 705 million, with secondary average transaction value 5.91% higher at US$ 858 million and off-plan average transaction value down 1.3% to US$ 519 million. According to Property Finder, the five leading locations for villas/townhouses last month were Dubai Hills Estate, Arabian Ranches, Palm Jumeirah, Damac Hills 2 and Mohammed bin Rashid City. For apartments, the top five were Dubai Marina, Downtown Dubai, Palm Jumeirah, Business Bay and Jumeirah Village Circle. YTD, it is estimated that about 32k units have been completed of which 26k (81%) were apartments, well short of earlier estimates by so-called experts.

The latest report by Zoom Property Insights expects the Dubai villa segment to be 50% higher in Q4, based on trends from the previous three quarters, with one of the main drivers being investors and end-users looking for best options in areas near to the Expo 2020 site. The Dubai-based real estate portal listed Arabian Ranches, Dubailand, Dubai South, Palm Jumeirah, MBR City, Dubai Hills Estate and Damac Hills 2 as prime areas for increased sales in Q4. Sales in the ultra-luxury sector has seen the likes of Palm Jumeirah and MBR City posting price hikes of 18.5% and 10.5%, over the past six months; growth levels in Arabian  Ranches and Jumeriah Park were higher at 21.2% and 19.3%. Zoom expects the market, especially for villas, to continue its recent strong performance, noting the low inventory may result in price increases. The report concluded that Q4 villa prices could be as high as 10%, and, with the economy opening up next year, a sharper up-trend in 2022.

Dubai Holding Real Estate announced plans to sell about 6k units over the next fifteen months, (1.5k this year and 4.5k in 2022) to capitalise on the continued recovery of the UAE property market; it will also start new phases of master developments. The developer is an amalgam of the consolidation of Dubai Properties and Meraas as well as two other entities – North25 and Ejadah – last year. It has several master developments under construction, including Port de la Mer, City Walk Central Park, Mudon, Villanova and Madinat Jumeirah Living. In the first eight months of 2021, Dubai saw sales transactions totalling 37.5k, (35.4k in the whole of 2020), worth US$ 24.0 billion, up 22.6%, compared to last year’s twelve-month total.

HH Sheikh Mohammed bin Rashid Al Maktoum has created the Dubai Integrated Economic Zones Authority, an independent legal entity, with financial and administrative autonomy, which will take over the supervision of Dubai Airport Free Zone, Dubai Silicon Oasis and Dubai Commerce City. Effective from 10 January 2022, the law will take effect with HH Sheikh Ahmed bin Saeed Al Maktoum as Chairman and Dr Mohammed Ahmed Al Zarouni as CEO. The aim of the exercise is to introduce new frameworks for further improving services provided to businesses and investors, which in turn will help accelerate economic growth, with objectives of making Dubai the destination of choice for global investors and a major focal point for global commerce. Under the new DIEZA, with a company base in excess of 5k employing 30k, those with licences will be exempt from all taxes, including income tax, for fifty years, and will not be subject to the regulations of Dubai Municipality or Dubai Economy, with minor exceptions.

The Dubai Ruler also issued Law No. (18) of 2021, regulating the services related to the mediation of disputes applicable to anyone involved in the business of settling civil and commercial disputes through mediation. The new law seeks to encourage the adoption of alternative dispute resolution methods and enhance the speed and efficiency of mediation procedures. The law also outlines the procedures followed by the ‘Centre for Amicable Settlement of Disputes’, with the centre hearing and adjudicating disputes referred to it by a decision issued by the President of Dubai Courts. The court will delegate one or more judges to supervise mediation procedures and hearings and approve settlement and agreements.

The Dubai Chamber of Commerce and Industry estimates that the retail e-commerce market will reach US$ 8.0 billion, by 2025, from its current balance of US$ 3.9 billion, a year on year 53% rise; in 2020, the sector accounted for 8.0% of the country’s GDP, driven by a change in consumer shopping habits, arising from the impact of Covid and subsequent restrictions. The forecast growth will be aided by numerous other factors, including high incomes, government support, a more enhanced digital payment protocol, higher internet penetration and a young IT-knowledgeable generation.

The Department of Economic Development expects Dubai’s economy to grow by 3.1%, this year, nudging 0.3% higher to 3.4% in 2022. HH Sheikh Hamdan, Dubai’s Crown Prince, noted that “Dubai has successfully overcome the pandemic’s global shockwaves,” and that Dubai’s position as a major economic capital has been supported by clear goals, flexibility and speed in responding to changes.

In line with the recently announced federal government’s NAFIS programme, Majid Al Futtaim is planning to employ up to 3k Emiratis across its group companies in the ME, Africa and Asia. The programme is that private companies will have to employ more Emiratis in their workforce so that within five years, ‘locals’ will make up 10% of every private company’s payroll, employing 2% a year until the figure is reached. The government initiative is expected to see up to 75k Emiratis joining the private sector.

Following an agreement between Empower and Mitsubishi Heavy Industries Thermal Systems, the Dubai district cooling company will double the number of its centrifugal chillers, equivalent to a cooling capacity of 200k RT, over the next two years. The new units will be located in plants being built in Zabeel, Business Bay, Madinat Jumeirah and Dubailand.

There is no doubt that the UAE is positioning itself to become a global leader in blue hydrogen, with Adnoc already producing 300k tonnes of hydrogen a year, as it looks to achieve self-sufficiency in natural gas and tap the growing market for low-carbon fuel. Dr. Sultan Ahmed Al Jaber, the federal Minister of Industry and Advanced Technology as well as the MD and Group CEO of Adnoc, noted that “by leveraging our existing gas infrastructure and commercial-scale CCUS [carbon capture utilisation and storage] capabilities, the UAE can and will become a major player in the emerging blue hydrogen market”. In 2020, eighty trillion cu ft of shallow gas reserves were discovered in an area between Abu Dhabi and Dubai – the biggest discovery in fifteen years. With a global Covid recovery gaining traction, LNG and broader gas markets are tightening and prices moving north at an alarming rate – 36% higher on the month and 96% YTD. Almost 25% of the global energy supply is down to gas and this will continue to grow in the future.

To boost sustainability and achieve its water security goals, the country is developing three new water desalination projects in Dubai, Abu Dhabi and Umm Al Quwain; they will have a combined daily capacity of 420 million imperial gallons of water per day. All three will be commissioned within two years and will increase the country’s daily water desalination capacity to 1.69 million imperial gallons, in line with the UAE Water Security Strategy 2036. Three main aims of the strategy are to reduce total demand for water resources by 21%, increase national water storage capacity by up to two days and increase the reuse of treated water to 95%.

In a bid to speed up its expansion plans, the Gargash Group has acquired Deem Finance for an undisclosed amount. Its MD, Shehab M Gargash, commented that “this is a transformational transaction that will allow us to reimagine financial services in a way that the success of our brands is aligned with the financial success of our customers.” The Abu Dhabi-based digital financial services supplier provides a range of financing solutions, including personal loans, credit cards as well as wholesale deposit products to UAE corporate clients. The acquisition will complement Gargash subsidiary, Daman Investments, which also provides investment management and advisory services, including asset management, securities brokerage and wealth management.

As part of its strategy to support the SME sector in the UAE, the Emirates Development Bank is joining with UAE-based fintech, YAP, and has indicated that it will extend US$ 8.2 billion (AED 30 billion) in financial support to SMEs over the next five years. The EDB Business Banking app, launched earlier in the year, offers SMEs access to 24×7 secure, convenient, on-the-go digital banking services. The account, with no minimum balance criteria, is free to all, without paying additional fees.

Amazon announced that it would be adding 1.5k new jobs in the UAE, where it currently has two fulfilment centres, eight delivery stations, three sorting centres and a network of delivery service partners. The US tech giant did not disclose the value of the investment but did note that its latest expansion plan includes creating a “pipeline of new openings” and “closure of older buildings and upgrades, designed to deliver a better experience for customers”.

In June, Dubai developer, Hussain Sajwani announced plans for his investment company, Maple Invest, to take over Damac Properties, the listed company that he launched in 2002 and was the principal shareholder. At the time, it was stated that the offer would remain at US$ 0.354 (Dhs 1.30) per share, and that Maple Invest “plans to own a minimum of 90% and up to 100% of Damac”. This week, it confirmed that was relaunching a bid to take Damac private and at close of Thursday trading one share was worth US$ 0.338 (Dhs 1.24). The company has a market value in excess of US$ 2.0 billion and that in H1, it had delivered 2.7k units and had booked sales of US$ 708 million; revenue was 35.5% lower at   US$ 200 million.

In a US$ 114 million deal, Union Properties has signed an MoU with an unnamed real estate developer to take over the ownership of a shopping centre under construction in Motor City in Dubai.

The DFM opened on Sunday 19 September, 11 points (0.3%) lower the previous fortnight, shed a further 61 points (2.1%) to close the week on 2,840. Emaar Properties, US$ 0.06 lower the previous fortnight, gained US$ 0.02 to close on US$ 1.11. Emirates NBD and Damac started the previous week on US$ 3.88 and US$ 0.34 and closed on US$ 3.81 and US$ 0.34. On Thursday, 23 September, in a very low trading environment, 55 million shares changed hands, with a value of US$ 30 million, compared to 192 million shares, with a value of US$ 127 million, on 16 September.

By Thursday, 23 September, Brent, US$ 5.18 (7.3%) higher the previous fortnight, gave back US$ 2.43 (3.2%), to close on US$ 73.25. Gold, US$ 42 (2.3%) lower the previous week, lost US$ 12 (0.7%) to close Thursday 23 September on US$ 1,740.  

Partly funded by the German government, BMW has developed a hydrogen prototype car based on its X5 SUV and will build a test fleet of up to one hundred vehicles by next year. Furthermore, Audi has assembled a team of more than one hundred mechanics and engineers to research hydrogen fuel cells on behalf of the whole Volkswagen group and has already built a few prototype cars. There is no doubt that hydrogen is currently far too costly and is so far behind battery-powered vehicles, but it must be remembered that not so long ago, diesel was the future until the 2015 Dieselgate emissions scandal put it on the back burner and into virtual extinction. Battery power may be the current frontrunner to become the car technology of the future, but do not rule out the underdog hydrogen.

The latest report from the OECD forecast that prices in the G20 bloc of developed nations will rise quicker than pre-pandemic levels for at least two years, driven by higher commodity prices and shipping costs, constraints on the supply of goods and stronger consumer demand. It is expected that the UK will have the fastest rate of the advanced economies – at 3% – whilst there will be declines expected in the US, France, and Germany.

Following its latest US$ 1.5 billion funding round, including Abu Dhabi’s Mubadala Investment Company, Goldman Sachs-backed CityFibre, will use the funds to support and accelerate the rollout of full fibre to a third of the UK market by 2025. (Full fibre networks run fibre optic connections directly from an exchange to the home, allowing much faster transmission speeds). CityFibre, now the UK’s third largest national digital infrastructure platform, behind BT and Virgin Media, provides broadband to 650k UK homes and is aiming to hit a million by the end of 2021.

A JV between Next, (51%) and struggling Gap (49%), sees the US fashion giant’s UK website being managed by the UK retailer. Last July, Gap announced that it would close all its UK outlets but now Next will manage some of their concessions in several stores, keeping some sort of physical presence in the country. Next will expand its ‘Total’ platform where it will run

 other fashion brands’ e-commerce operations, including customer service, payment systems and logistics. Victoria’s Secret and Childsplay are two brands already on board.

During the first lockdown, Pret A Manger Pret had to make 33% of its 9k staff redundant and now eighteen months later, with the economy almost at pre-pandemic levels, the coffee and sandwich chain has announced that it will open two hundred outlets, with many located in train stations, bus stations and motorway services, over the next two years and recruit 3k by the end of 2022. Furthermore, it is planning to expand into five overseas markets over the next two years. Last year, it posted a 57.8% fall in revenue to US$ 407 million. To finance this latest growth strategy, Pret has received a US$ 137 million funding from JAB and Pret founder Sinclair Beecham. Earlier in the month, it announced that café workers would receive at least a 5% pay rise, which will raise their hourly rate from the legal minimum of US$ 12.14 to US$ 12.91, and that all team members, including managers, will get a raise.

August was the fourth consecutive month that UK retail sales fell, this time at the slower rate of 0.9%, compared to a much higher 2.8% in July. One of the main reasons proffered for the 1.2% decline in food store sales was that with the lifting of restrictions, people spent more time eating and drinking in bars and restaurants, but other drivers were ongoing labour shortages, (mainly lorry drivers and fruit pickers), and supply chain problems which will be a sector disruptor for some time. Pre-pandemic online sales in February 2020 were at 19.7% and since then, have risen to 27.7% last month, (27.1% in July). Department and clothing stores were the two more badly hit by the disruption, down 18.2% and 11.1% respectively.

Last week’s blog indicated that the ‘Just in Time model’ was struggling to remain a viable management tool for many companies, amid disrupted supply chains that leave the end user with little or no stock. A similar problem is rattling the UK energy sector with the classic law of supply and demand – a theory that explains the interaction between the sellers of a resource and the buyers for that resource. There has been a surge in UK gas prices, exacerbated by the fact that the UK has scant storage facilities amid surging demand. How dramatic the shortfall in supply can be seen when comparing UK’s gas storage of 8.9 terawatt/hours with Spain, Germany and Italy storing 166.2 TWh, 147.1 TWh and 113.7 TWh respectively. The UK imports more than 50% of its pipeline gas and LNG, with the four main providers being Norway, Qatar, US and Russia, with totals of 266k Gigawatt hours, 97k GWh, 53k GWh and 25k GWh.

The demand surge for gas is not unique to the UK and is seen all over Europe, where demand is also rising. Last winter was one of the coldest on record which resulted in increased demand which in turn depleted supplies; these have not been replenished because suppliers had to carry out major maintenance that had been curbed because of earlier lockdowns. The situation was worsened because calmer weather reduced the amount of electricity generated by wind power and the deteriorating situation just became worse. Consequently, wholesale gas prices have more than quadrupled over the last year and with the UK being one of Europe’s biggest users of natural gas, with 85% of homes using gas central heating, the country has been badly impacted. It is expected that there will be no let up until Q2 next year because prices will not fall until storage facilities fill up again. Any effect from Brexit – and the UK leaving the bloc’s Internal Energy market – has been minimal. It so happens that the country will be hit by more than a double whammy, with gas prices skyrocketing, labour shortages in certain key sectors, higher food prices, empty supermarket shelves and inflation topping 4.0%, this could turn into a winter of discontent.

With real estate accounting for 10% of its GDP, Chinese administrators and global economists are closely monitoring the fallout from Evergrande, failing to repay US$ 84 million in interest payments, exacerbating the possibility of a default. If this were to occur, its impact would have global implications affecting foreign direct investment. However, it seems that analysts have been premature to announce the demise of China’s second-biggest property developer by sales, and despite all its financial woes, and being on the brink of default with a huge US$ 300 billion debt, it is unlikely to spread globally. S&P considers this to be a domestic Chinese problem and is more than likely to be settled locally. Property has always been a problem in China, with lax regulations, loan sharks, dodgy building standards and a host of other illegal activities associated with a massive property bubble.

Even before the announcement, earlier in the month, that warned that it may default on debt repayments if its efforts to refinance and sell assets fall short, the company was already talking with creditors and stakeholders trying unsuccessfully to sell their debt by up to 70%. The fear is that in a fire sale, Evergrande may have to sell its vast portfolio of apartments, at heavy discounts, which in turn could really damage the industry by undermining prices and putting smaller competitors out of business.

Last year, Beijing introduced what it called the Three Red Lines Policy for property developers, so as to reduce debt within the industry, curb runaway property prices and lift standards. This was a belated government attempt to take more control over a sector that was running wild as the government were more concerned with economic growth at all costs and turning a blind eye to the excesses seen in relation to the building industry.  It is apparent that the housing boom in China is in the throes of an implosion and the hope is that the property bubble is deflated slowly and methodically so as not to leave its debris scarring the rest of the economy. Considering Evergrande owns more than 1.3k projects in 280 or more cities in China, serving about 12 million homeowners, with its property services arm, which listed on Hong Kong Exchanges and Clearing in December 2020, having about 2.8k projects in more than 310 Chinese cities, this will not be an easy exercise.

It appears that most banks have limited exposure to the troubled developer except for the affiliated Shengjing Bank and national Minsheng Bank, which may go under without government support. Other stakeholders impacted include home buyers, investors, bondholders, suppliers and contractors. There is a belief that if a contagion effect were to occur, the government would get involved if that were to cause a systemic risk to the economy; it would also look at reducing the risk to home buyers and minimising economic losses. However, the high-net-worth individuals, and institutional investors, may see a bigger percentage of their investment disappearing.

According to its Chair, Jerome Powell, the Federal Reserve could start tapering its asset purchasing programme as early as November, with complete closure by mid-2022, whilst emphasising that this was not meant to be a direct signal on the timing of the beginning of interest rate hikes. At this week’s meeting, their updated quarterly projections were released indicating that officials are now evenly split on whether or not it will be appropriate to begin raising the federal funds rate as soon as next year; their previous forecast in June had indicated no rate increases until 2023; their projected median rates rose by 0.4% to 1.0% for 2023 and to 1.8% the following year. It also unanimously voted to maintain the target range for its benchmark policy rate at zero to 0.25% and continue purchases of Treasuries and mortgage-backed securities at a pace of US$ 120 billion per month.

From early next month, the UK government will scrap its controversial traffic lights system, seeing the end of the green and amber lights, whilst retaining the red-light list, in England. People who have had double jabs will not need to take a pre-departure test before leaving any country not on the red list and will also be able to replace the day two PCR test with a cheaper, rapid lateral flow test. The change in policy has been a “shot in the arm” for the sector and mostly welcome in the travel industry, with Airlines UK noting that it “moves us much closer to the reopening of UK aviation”. The acid test for Dubai is to see how many UK travellers visit for the next school half-term in October now travel restrictions have largely been lifted by the Johnson administration.

The day after the announcement of the so-called Aukus pact, between Australia, UK and US, that rattled the Chinese administration, the country has applied to join CPTPP, a key Asia-Pacific trade pact, as it attempts to strengthen its position in the region. The focus of the tri-nation pact is for Australia to build nuclear-powered submarines for the first time, using technology provided by its two partners, with China describing it as “extremely irresponsible” and “narrow-minded”. The Chinese foreign ministry commented that the alliance risked “severely damaging regional peace… and intensifying the arms race”.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership was signed in 2018 by eleven countries, including Australia, Canada, Chile, Japan and New Zealand; since then, both the UK and Thailand have expressed their desires to join, with China now indicating its wish to be added. It started life as the Trans-Pacific Partnership, promoted by the then US president, Barrack Obama, in a move by the US to challenge/counteract China’s growing economic influence in the region. If the Chinese application is accepted by the current members, it will be a significant boost for China’s position on the world stage and comes less a year after it joined the Regional Comprehensive Economic Partnership – the world’s largest free trade agreement, with fourteen regional nations, including seven members of the CPTPP, Australia, Brunei, Japan, Malaysia, NZ, Singapore and Vietnam.

In 2016, Naval Group, a global and major French contractor, and an industrial group that specialises in naval-based defence, was awarded a contract by the Australian government for the design of twelve future submarines for the Royal Australian Navy; the contract was cancelled last week, and the decision was not well received by the Macron government who were set to lose a US$ 90 billion deal.  The French company issued a statement “taking note of the decision of the Australian authorities to acquire a fleet of nuclear submarines in collaboration with the United States and the United Kingdom”. Meanwhile, French Armed Forces’, Florence Parly, indicated that the government would look to ensure any financial hit to Naval Group from a cancelled Australia submarine deal is limited.

To the outside observer, it does make sense that a nuclear submarine is more preferable to diesel and Australia has made the right decision, even though the decision is bad news for some Australian companies who were lining up for contracts worth over US$ 1 billion from Naval Group – and employing 500 – in Q4. Even though the design phase of the project had not yet started, some work was already being contracted and hundreds of people employed in Adelaide. There is a warning of a ‘valley of death’ relating to these companies and how they will survive until work starts in 2024. Questions are being asked why the French contractor was not asked to switch to the existing nuclear version of the Barracuda design, especially because there were lots of companies that already had Naval Group’s contracts. Furthermore, France will not be in the mood to be offering any contracts to the UK and this may have repercussions for the UK defence sector.

It is reported that the EU is contemplating the postponement of a major cooperation summit with the US on trade next month. The reason behind this comes on the back of the US entering a new alliance involving the UK that would deliver Australia at least eight nuclear-powered submarines which led to Canberra cancelling an existing contract with France for twelve diesel-powered submarines. The EU-US Trade and Technology Council (TTC) was announced in June and was meant to signify a new era of cooperation between the two sides. So much for the EC then stating that the TTC “will serve as a forum for the United States and European Union to coordinate approaches to key global trade, economic, and technology issues and to deepen transatlantic trade and economic relations based on shared democratic values.” It seems to the outsider that the other 26 members are bowing to the whims of a furious, upset and bitter French administration. An irate Emmanuel Macron seems to be of the opinion that We Are Never  Ever Getting Back Together!

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It’s Just Only Begun!

It’s Only Just Begun!                                                          16 September 2021

For the past week, ending 16 September, Dubai Land Department recorded a total of 1,610 real estate and properties transactions, with a gross value of US$ 1.75 billion. It confirmed that 1,081 villas/apartments were sold for US$ 583 million, and 119 plots for US$ 379 million over the week. The top three land transactions were in Palm Jumeirah for US$ 138 million, and two in Saih Shuaib 2 for US$ 19 million and US$ 14 million. The most popular locations were in Al Hebiah Third, with 20 sales transactions, worth US$ 17 million, Al Yufrah 2, with 15 sales at US$ 5 million, and Hadaeq Sheikh Mohammed bin Rashid, with 14 sales transactions worth US$ 69 million. Mortgaged properties for the week totalled US$ 545 million, including a plot for US$ 87 million in Al Safouh Second. 93 properties were granted between first-degree relatives worth US$ 76 million.

The International Schools Market in the Mena Region’s latest report notes that enrolments at the 2.3k international schools (1.83 million pupils) in the Mena have seen a 20.1% increase over the past five years. It also confirmed that the UAE – with 725 international schools of which 333 are in Dubai – has the highest number of students in the world at 697k. Some way behind are China and India with 419k and 316k pupils. Within the region, there is Saudi Arabia, with 292 schools (320k pupils), Egypt, with 279 (120k), and Qatar, with 207 (182k). Over the six-year period to 2021, the number of teaching staff has risen 21.4% to 153k, average tuition fees have increased 10.0% to US$ 7.7k, and total fee income by 36.8% to US$ 13.48 billion.

With travel restrictions being eased, and Emirates returning to some form of normalcy, it is reported that the Dubai carrier is planning to recruit a further 3k cabin crew and 0.5k airport staff over the next six months. For the past three months, the airline has been recalling pilots, cabin crew and other operational employees who were stood down during the early stages of Covid in Q2 2020. The current schedule sees Emirates flying to 90% of its pre-pandemic destinations and hopes to be flying at 70% capacity by year end.

Within the next six months, the country is preparing to be the leading global destination for travellers during Expo 2020 Dubai. Last month, the total number of passengers travelling to the UAE was 207% higher, on the year, at 2.5 million, while it is reported that local hotel sector has regained its pre-pandemic reservation rates, with hotel reservations in the UAE showing a marked growth prior to the opening of Expo 2020 Dubai. “Wego” registered over 500k searches for flights and hotel reservations for Dubai during the event period. The country, although surprisingly still on the UK ‘amber list’, is seen as a safe haven by many travellers, more so when 79.3% of its population has been fully vaccinated and 90.1% having had their first dose. Another driver has been the government’s decision to allow fully vaccinated individuals to apply for an entry visa, and this could be a real game changer.

H.H. Sheikh Mansour bin Mohammed bin Rashid Al Maktoum opened the four-day 42nd edition of ‘The Big 5’ exhibition The region’s largest event for the construction industry has attracted 1.2k exhibitors from fifty countries and is the only live in-person event to connect the global construction industry in 2021. Sheikh Mansour noted that the strong momentum witnessed in Dubai’s events sector was the result of the emirate’s long experience in hosting and organising international events, as well as its prudent handling of the global pandemic.

Following this week’s two-day Dubai Digital Economy Retreat, a new plan has been established, with the help of the one hundred industrial experts who were attendees, to develop Dubai’s digital economy strategy. The scheme revolves around three pillars – enhancing the digital business environment, supporting digital firms and attracting leading digital companies to Dubai. Some of the topics aired included:

  • the need to attract more international digital companies and specialised talent to Dubai
  • high costs for companies operating in this sector
  • encouraging more digital start-ups
  • enhancing investments in growing these businesses
  • widening acceptance of e-commerce payments
  • removing barriers of entry
  • enhancing the quality of services operating in this space

Currently, the digital economy contributes about 4.3% to the country’s GDP, equating to  t  the US$ 27.2  billion action plan that lays the groundwork for developing Dubai’s digital economy strategy and ecosystem, which will lead to many new jobs and growth opportunities. It is estimated that the UAE is home to 1.4k start-ups, (estimated to be valued at US$ 24.5 billion), ninety investment funds in the digital sector and twelve business incubators.

Following last month’s start-up of Unit 2 of the Barakah Nuclear Energy Plant, the Emirates Nuclear Energy Corporation confirmed that its operations and maintenance subsidiary, Nawah Energy Company, had safely and successfully connected the unit to the UAE grid. This will add a further 1.4k MW of clean electricity capacity to the UAE grid and takes the facility halfway to its target of supplying up to 25% of the country’s electricity needs; it will also drive reductions in UAE’s carbon emissions. The project, started in 2012 and which is more than 96% finished, will boast four APR-1400s, with Units 3 and 4 in the final stages of commissioning at 95% and 91% completed respectively. It is expected that the plant will produce 5.6 gigawatts of free carbon electricity for the next sixty years.

On Sunday, the government released thirteen policies, being the second batch from the UAE’s 50 Projects for the Future, first announced earlier in the month. One of its more striking requirements, in a thirteen-policy package, was that UAE private sector employers must ensure 10% of their workforce is Emirati over the next five years, with hiring having to show a 2% rise each year; this would boost the number of Emiratis in the private sector by 75k. The government confirmed that “unskilled labourers will not be counted, only the skilled labour will be within in our target”. Other projects include paid training programmes, subsidies for Emiratis working in the private sector and support for local entrepreneurs looking to leave the public sector and start up their own companies. A further US$ 341 million will be made available to train Emiratis and prepare them for specialised private sector roles, as well as a monthly US$ 2k payment for university fees to support the cost of training citizens in the private sector for up to a year. Furthermore, pensions for those in lower paid jobs will also be supplemented by government funds for the next five years.

In a bid to encourage Emiratis to set up their own businesses, rather than working in the public sector, newly introduced incentives include:

  • a monthly US$ 1.4k top-up, for five years, for Emirati university graduates who take a role in a privately-owned company
  • six-month state support for Emiratis who lose their job in the private sector
  • a fixed five-year US$ 1.4k monthly bonus for nationals working in specialised fields in the private sector, such as programmers, nurses, accountants, and others
  • federal government employees can take a six or twelve-month sabbatical on 50% pay so as to start their own business, and employees aged over fifty can take early retirement to do the same

In the eight months to August 2021, Dubai Chamber reported a 21.8% jump, to US$ 40.1 billion, in the value of exports and re-exports year-on-year, driven by a rebound in trade activity in Dubai; on the year, the growth was 43.9% higher. Last month, the Chamber issued 58.2k certificates of origin – 20.8% higher compared to July 2021. The GCC region accounted for 53% of the total exports and re-exports of members in August – 37% higher on the month, at US$ 3.1 billion, and up 16.4%, year on year, to US$ 22.7 billion. The Chamber is to support the five-year plan, announced by HH Sheikh Mohammed bin Rashid Al Maktoum, to boost Dubai’s foreign trade by 42.9% to US$ 545 billion.

Latest figures indicate that the value of the UAE’s 2020 non-oil foreign trade jumped to US$ 382.3 billion, including a 10.1% hike in year-on-year non-oil exports at US$ 69.4 billion; imports, accounting for 56% of total trade, were at US$ 213.9 billion and re-exports at US$ 99.0 billion. The top five trading partners – China, Saudi Arabia, India, US and Iraq – with bilateral trade amounting to US$ 47.4 billion, US$ 28.3 billion, US$ 27.9 billion, US$ 21.9 billion and US$ 14.4 billion respectively. These five accounted for 36.6% of total trade, compared to 44.1% a year earlier. In relation to exports. the top five nations were Switzerland, Saudi Arabia, India, Turkey and Italy with totals of US$ 8.0 billion, US$ 7.0 billion, US$ 5.4 billion, US$ 5.0 billion and US$ 4.9 billion. For imports, the leading five were China, US, India, Japan and Germany, (accounting for 41.6% of all imports), with figures of US$ 39.3 billion, US$ 16.5 billion, US$ 16.5 billion, US$ 9.5 billion and US$ 7.3 billion. Re-exports saw Saudi Arabia the leading nation, with US$ 14.9 billion, followed by Iraq, (US$ 11.1 billion), Oman, (US$ 6.6 billion), India, (US$ 6.1 billion), and China (US$ 5.3 billion).

At a meeting at 10 Downing Street today, an agreement was signed that expanded the UAE-UK Sovereign Investment Partnership. This framework for investment was signed in March that saw Mubadala Investment Company tie up with the UK Office for Investment, with the former committing US$ 1.10 billion (GBP 800 million) and OfI US$ 275 million (GBP 200 million) to be invested in UK life sciences. Following today’s meeting, the UAE-UK SIP will receive a major boost by a further five-year investment of US$ 13.8 billion (GBP 10 billion) by the Abu Dhabi partner not only in life sciences but also in three more sectors – technology, infrastructure, and energy transition. It was also decided that the UAE-UK SIP will become the central investment platform under the new Partnership for the Future bilateral framework, attracting many UAE and UK entities to invest under the UAE-UK SIP umbrella.

The UAE’s Central Bank has issued  new guidlines on transaction monitoring and sanctions screening for its licensed financial institutions that requires them to demonstrate compliance with CBUAE’s requirements by 12 October. Among LFI’s obligations include to:

  • develop internal policies, controls, and procedures that are commensurate with the nature and size of their business
  • manage their identified money laundering and financing of terrorism risks
  • put in place indicators to identify suspicious transactions and activities
  • file suspicious transaction and activity reports or other report types to the UAE’s Financial Intelligence Unit
  • regularly screen their databases and transactions against names on lists issued by the UN or by the UAE Cabinet 

The Federal Tax Authority has reminded impacted registrants to benefit from the June Cabinet Decision No. 49 of 2021 which includes reductions on administrative penalties. The aim of this latest Decision, which sees reductions in sixteen types of administrative penalties, seems to enhance the legislation to encourage self-compliance. To benefit, certain conditions have to be met, including the:

  • administrative penalty must have been imposed under Cabinet Decision No. 40 of 2017 before 28 June 2021
  • administrative penalty due was not settled in full until 27 June 27, 2021
  • the registrant should settle all due payable tax by 31 December 2021
  • the registrant should settle 30% of the total unsettled administrative penalties imposed before 28 June 2021, no later than 31 December 2021

If these conditions are met, the administrative penalties will be redetermined to equal 30% of the total unpaid penalties that will appear on the FTA’s electronic system after 31 December 2021.

Amanat Holdings has invested over US$ 12 million to acquire the real estate assets of Cambridge Medical and Rehabilitation Centre in Abu Dhabi – the Dubai-listed company’s first foray into healthcare sector real estate investment. Earlier in the year, the company acquired Cambridge Medical for US$ 232 million, in one of the region’s biggest healthcare sector deals, from TVM Capital Healthcare, a private equity company. The company, that specialises in healthcare and education sector investments, plans to further invest in developing its portfolio of companies by either owning the underlying real estate assets or investing in technology.

Although still in the “early stages”, discussions have started that could result in Dubai-listed courier Aramex acquiring Turkish transportation company MNG Kargo. Its final decision is dependent “to satisfactory findings of the due diligence process” and “the company’s senior management and board of directors’ approval.” Although “the total value of this transaction has not yet been determined or agreed upon at this early stage,” the deal may top US$ 500 million.

This Sunday, 19 September, the DFM will introduce three new equity futures contracts, bringing the total on the bourse to 33 on individual stocks of eleven listed companies, with tenures of up to three months. First launched in October 2020, the total value of trading on contracts has topped US$ 32 million. The public is able to trade DFM equity futures through eight local brokerage firms.

The DFM opened on Sunday 12 September, 4 points (0.1%) lower the previous week, shed a further 7 points (0.2%) to close the week on 2,901. Emaar Properties, US$ 0.01 lower the previous week, lost a further US$ 0.05 to close on US$ 1.09. Emirates NBD and Damac started the previous week on US$ 3.81 and US$ 0.34 and closed on US$ 3.88 and US$ 0.34. On Thursday, 16 September, 192 million shares changed hands, with a value of US$ 127 million, compared to 148 million shares, with a value of US$ 55 million, on 09 September.

By Thursday, 16 September, Brent, US$ 0.90 (1.2%) higher the previous week, gained a further US$ 4.28 (5.9%), to close on US$ 75.68. Gold, US$ 16 (0.9%) higher the previous week, lost US$ 42 (2.3%) to close Thursday 16 September on US$ 1,752.   

Late last week, the US Energy Information Administration revised downwards its Brent 2021-2022 price outlook by US$ 0.10 to US$ 66.04 this year but maintained its 2022 forecast at US$ 66.04.  This year, it expects a 5.0 million bpd increase in supply, and 3.6 million bpd in 2022, resulting in a daily 101 million bpd and this despite lower-than-expected demand. It expects “growth in production from Opec+. US tight oil, and other non-Opec countries will outpace slowing growth in global oil consumption and contribute to” oil price declines in 2022. Next year, the agency sees Opec adding 1.4 million bpd, to reach a daily total of 28.34 million bpd, but that Brent prices will remain around the US$ 71 level in Q4.

The International Energy Agency confirmed that the recent Hurricane Ida shut out an estimated 1.7 million bpd, along the US Gulf coast, (equating to 44% of the area’s oil supply), with total losses in the region of thirty million bpd; this is expected to erase the additional supply that is being added to the market, following Opec+’s latest initiative. Last month, global supply dipped by 540k bpd to reach 96.1 million bpd, with this figure to remain basically the same this month and nudging higher in October, as the oil cartel continues unwinding cuts, resolving outages and increasing production. At their planned 01 October meeting, Opec+, will probably sanction a further 400k bpd, rising to two million bpd by year-end. The energy agency expects oil demand to grow by 5.2 million bpd in 2021 and 3.2 million bpd in 2022.

A money.co.uk study studied a plethora of fine dining restaurants, high-end designer shops and elegant 5-star hotels, to rank the world’s most luxurious cities. The top five cities in the study were Paris, London, Tokyo, New York and Seoul, with five Asian destinations – Hong Kong, Shanghai, Singapore, Bangkok and Beijing – making the top ten. Dubai was ranked 16th in front of the likes of LA and Madrid. Dubai scored well in several sector including having the most five-star hotels, (112), compared to say the Paris number of 95. However, the French capital with 108 luxury stores, (with more Cartier stores than any other city in the world) outscored Dubai’s 76. Rather surprisingly, the emirate does not have any Michelin-star restaurants whereas Paris has 427 of them, followed by London’s 156.

First applied by Toyota in the early 1970s, Just in Time is a Japanese inventory management philosophy which was first developed as a way of meeting consumer demand, with minimum delays. The main thrust of the system is to ensure that goods are received from suppliers only as they areneeded, with the main objectivesbeing to reduce inventory holding costs and increasing inventory turnover. The system, which requires careful planning over the whole supply chain, increases efficiency and increases profitability, and among its benefits are reducing inventory wastage and decreasing warehouse holding costs. Other advantages are that, as essential and stocks are required, less working capital is required, and the manufacturer has complete control over the manufacturing process which works on the demand-pull basis. It also gives manufacturers 100% control over the manufacturing process which allows them to quicken production for an in-demand product and, at the other end, reduce production for slower-moving items.

Supposedly the panacea for all manufacturing inventory problems, many companies failed to read the small print.  Its two main drawbacks are that in case of disruptions, there is no excess of stock to fall back on and the other is the environmental impact of the model requiring a lot of transporting between supplier, manufacturer and customer, with the resultant over-use of fossil fuel and packaging. Covid has probably rung the death bell for JIT, with the problem further exacerbated in the UK by Brexit, which has seen 100k HGV drivers returning to their respective European countries. The UK’s farm-to-fork supply chain is currently missing around half a million of the four million people who usually work in the sector – again mainly attributable to the ‘Brexit exit’. The end result is that many companies, including the likes of MacDonald’s, KFC Heineken, Hardy’s wine, Iceland, Nissan and Boots, have experienced supply chain difficulties that have seen empty shelves and restaurants having to cut back on their menu items. What is apparent is that the labour shortage has probably put the final nail in the coffin of JIT, as the system is no longer working and highly likely not to recover.

On Tuesday, Apple released its latest updated iPhone 13 and its success will ensure the tech giant will become the world’s first three-trillion-dollar company sometime in 2022; currently, its market value hovers just under US$ 2.5 trillion, having climbed 12% YTD, having only reached the US$ 2 trillion mark in August 2020. Apple did take a hit last week when a US court ruled that it must not block app developers from guiding users towards making payments outside the Apple app system – a blow to one of its most profitable services. Apple’s service division, which includes the app store, accounted for 20% of the company’s US$ 275 billion turnover, with the iPhone driving 50% of its revenue stream. The new iPhone does not differ that much from its predecessor, although its camera lenses and battery capacity are much improved. Two drivers will push sales in an already saturated marketplace – the global rollout of super-fast 5G networks, and the fact that about 300 million iPhone owners have not upgraded their phone in three and a half years. How long Apple can rely on its iPhone – of which over one billion have been sold – as its principal revenue driver remains to be seen.

In an antitrust case, a Californian district judge has ruled against Epic Games confirming that the Apple 30% App store commission for subscriptions and downloads does not violate state or federal law. The judge summarised that “the court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws”. The long-standing argument saw Apple claiming the App Store’s fee system was an essential operating charge, with Epic calling it a monopolistic tax. The spat came to a head in August 2020, with Epic introducing a replacement payment system in its popular game Fortnite to go round the App Store’s transaction fees, following which Apple retaliated by deleting it from its app gallery. The court found this action to be a breach of contract and ordered Epic to reimburse Apple 30% of all revenue it collected through direct payments, thought to be over US$ 3 million. The judge also noted that “while the court finds that Apple enjoys considerable market share of over 55% and extraordinarily high profit margins, these factors alone do not show antitrust conduct. Success is not illegal.” In her summing up, the judge said that “the court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice.”

The Commonwealth Bank of Australia will plead guilty to charges that it sold junk insurance to 165 customers, as the Australian Securities and Investments Commission brought charges relating to the sale of CreditCard Plus and Loan Protection insurance as add-on products from 2011 to 2015. The allegations surround claims that the bank misled customers in branches, online and on the phone into believing the policies had uses or benefits when they did not.  The bank has apologised for their “unacceptable conduct” and will get the proverbial slap on the wrist, with no individuals facing prosecution; the bank will pay the penalty and its current customer base will pay the tab. It is also reported that the watchdog is chasing Westpac for selling junk consumer credit insurance, and ME Bank for making dodgy representations to its customers.  Old leopards never change their spots!

Having just raised a further US$ 200 million in a fresh round of private equity investment, Canva is now valued at US$ 40.0 billion, becoming one of the world’s biggest privately-owned companies and the fifth most valuable global start-up behind ByteDance, which owns TikTok, payment platform Stripe, SpaceX and Swedish financial technology firm Klarna. Having doubled in value over the past five months, the Australian graphic design business, founded in 2013 by Melanie Perkins and Cliff Obrecht, who now own a 36% stake in the company, have announced that “the vast majority” of their stake would be used “to do good in the world” through a foundation.  The Sydney-based allows customers to design everything from T-shirts to business cards and is becoming more popular with large companies to use as a tool to run collaborative design projects. Around 130k non-profit organisations are said to get the premium version of Canva for free.

In the UK, the Johnson government has set out plans to invest US$ 900 billion in public and private infrastructure over the next decade. Launched on Monday, it is expected that the investment would support an extra 425k jobs over the next four years, creating new opportunities for thousands of apprentices, technicians, graduates and skilled workers. It is estimated that US$ 123 billion would be spent on social infrastructure to help communities, including US$ 3.5 billion on 165 major rebuilding education projects, as well as US$ 41.5 billion of planned procurements over the next twelve months in social and economic infrastructure. The PM also noted that the furlough scheme had so far cost US$ 94.8 billion and had helped 11.6 million people, including protecting 910k jobs in Scotland, 470k jobs in Wales, and nearly 290k jobs in Northern Ireland.

One of the anomalies in the UK labour figures is that although its unemployment figures dipped 0.1% to 4.6%, in the quarter to July, and August payrolls rose by 241k to 29.1 million, job vacancies hit a record high at over one million. The Office for National Statistics confirmed that numbers were back at pre-Covid levels in August, but despite this, there remains high demand for more staff. There were labour shortages in certain sectors, which will inevitably dampen growth, as well as the impact on firms’ ability to fulfil orders and meet customer demand. Figures may be skewed because it is estimated that one million people are still on furlough which comes to an end on 30 September. The number of vacancies in the six sectors with the highest numbers were social work, hospitality, technical professions, retail, manufacturing and administration services with 167k, 134k, 98k, 83k, 75k and 75k. 

Driven by higher prices in its various eateries, August UK inflation has risen to 3.2% – its highest level in more than nine years – with prices moving higher, following last summer’s discounts under the government’s ‘Eat Out to Help Out’ scheme that lasted throughout August 2020. With a record monthly 1.2% hike, from July’s 2.0% rate, the inflation figures were skewed by the US$ 14 discount offered by the government to help out the hospitality sector.  There were also price rises in computer games and fuel, (now at US$ 1.86 per litre), but restaurant prices represented more than half of the 1.2% rise in headline inflation. The higher than expected inflation rate hike may see the BoE considering phasing out the stimulus package, first introduced at the onset of Covid in March 2020, and/or even nudging interest rates marginally higher.  Some analysts will let you believe that this inflationary surge is just a temporary blip, but with the global supply chain in disarray, Brexit bureaucracy, higher energy prices and higher food costs all combine that point to inflation rates continuing to head north to reach at least 4.0% by year end.

According to the UN Conference on Trade and Development, the global economy is expected to expand, this year, at a quicker rate – 5.3% – than initially expected, followed by 3.6% in 2022; this follows the worldwide 3.5% contraction reported last year. (Globally, international trade is forecast to grow by 9.5% in 2021, after dropping by 5.6% in 2020). The usual caveat applies – that the overall global economic recovery will be uneven across geographies, income levels and sectors. The report highlighted that “these widening gaps, both domestic and international, are a reminder that underlying conditions, if left in place, will make resilience and growth luxuries enjoyed by fewer and fewer privileged people.” Many developing economies are being held back by very limited access to vaccines and constraints on fiscal measures, with the resultant economic damage being more felt in Africa and South Asia. It is estimated that, within four years, developing countries will be US$ 12 trillion poorer owing to the pandemic.

The Institute of International Finance estimates that, in Q2, US$ 4.8 trillion was added to global debt increasing the total balance to a massive – and unacceptable – level of US$ 296 trillion. Having moved lower in Q1, the latest balance came in US$ 36 trillion higher, compared to its pre-pandemic level. To the observer, it seems that governments, corporates and households continue to borrow almost unabated, as the pandemic keeps reappearing under different guises. 

Emma Radacanu was not the only tennis player in New York to have a big win this week when she won the US Open, without losing a set in her seven matches, to become the first ever qualifier to win a major. The other winner was not on the tennis court but Roger Federer-backed running shoe company, On Holding, jumping 46% on their New York debut yesterday, 15 September; by the end of trading, the Swiss firm, founded in 2010, had a market value of US$ 11.0 billion, after selling 31.1 million shares in its IPO raising US$ 746 million. The company, which teamed up with Federer to develop the Roger Pro tennis shoe, (which retails at US$ 200 a pair), also makes a 100% recyclable brand of running shoes, called Cyclon, made from castor beans.

For the twelve months to August, the Swiss tennis ace made only US$ 1 million from his sport but netted US$ 91 million, ensuring his position as the highest-earning tennis player in the world, with most of his income from endorsements. The trend continues when the top ten tennis earners are assessed with a collective total of US$ 320 million, 6.0% lower on the year, of which US$ 281 million, (87.8% of the total) originates from endorsements.  It can only be a matter of time before big hitter Emma Radacanu joins the big earners, having just won US$ 2.5 million for her victory in the last major of the season. With the top nine global female sportswomen all being tennis players, there is no doubt that the Canadian-born teenager has all the right credentials to become the highest ever paid female athlete – with the usual caveat that she has to keep winning.  Her current business manager is IMG’s Max Eisenbud, who formerly managed world number one, Maria Sharapova, who was the world’s highest-paid female athlete for 11 years running. Radacanu already has a shoe and clothing sponsorship contract with Nike, a racquet sponsorship with Wilson and is on the front cover of October’s Vogue. There will be major brands falling over each other to try and get her signed up with lucrative deals – for Emma Radacanu, It’s Only Just Begun!

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Make Hay While The Sun Shines!

Make Hay While The Sun Shines!                                                    09 September 2021

For the past week, ending 09 September, Dubai Land Department recorded a total of 1,944 real estate and properties transactions, with a gross value of US$ 1.96 billion. It confirmed that 1,371 villas/apartments were sold for US$ 744 million, and 111 plots for US$ 152 million over the week. The top two land transactions were both in Island 2 for US$ 16 million and US$ 14 million. The top three transfers for apartments and villas were all apartments in Business Bay, Marsa Dubai and Burj Khalifa selling for US$ 108 million, US$ 54 million and US$ 50 million respectively. The most popular locations were in Al Hebiah Third, with 28 sales transactions worth US$ 19 million, Al Yufrah 3, with 22 sales at US$ 6 million, and Saih Shuaib 1, with 8 sales transactions worth US$ 2 million. Mortgaged properties for the week totalled US$ 817 million, including a plot for US$ 114 million in Al Raffa. 73 properties were granted between first-degree relatives worth US$ 225 million.

It would be no surprise to anyone to read ValuStrat’s comment that the Dubai property sector had staged a strong recovery this year. The consultancy also added, “excluding any unexpected economic or global shock, we expect the current positive trends in the Dubai property market to continue in the short to medium term and to broaden out into some areas currently not seeing an uplift in values”. Many believe that current prices still represent good value and that there is a mid-term undersupply in some in-demand districts and segments, such as villas and prime apartments. Valustrat concluded that, “it can be expected that some of the highest year-on-year percentage gains recently seen will moderate, as buyer price ceilings are neared, and more moderate house price inflation is seen”. Some will be more bullish, more so if the Covid virus were to dissipate.

For only the second time in six years, all 13 villa locations and 21 apartment areas monitored by ValuStrat’s value price index (VPI) have seen their capital values either stabilised or improved in August, compared to a month earlier. There was a mixed annual capital value performance of Dubai’s apartments, which represent 87% of the residential market, split roughly equally with a third growing, a third flat and a third contracting. Latest figures see the top annual performers for VPI apartments being Palm Jumeirah, JBR, Al Furjan and Al Quoz Fourth-Al Khail Heights, with annual capital gains of 6.8%, 6.1%, 4.6% and 4.1%. For villas, the highest annual capital gains were found in Arabian Ranches 22.0%, Jumeirah Islands 20.8%, Dubai Hills Estate 18.5% and The Lakes 18.3%.

The report also noted that the following four developers accounted for 42.3% of sales – Emaar (21.5%), Nakheel (8.6%), Damac (6.1%), and Dubai Properties (6.1%). In relation to off-plan, the top locations in August were in Dubai Harbour (11.8%), Business Bay (9.2%), Jumeirah Village (9.0%) and Sobha Hartland (7.8%). The most transacted ready homes were located in Jumeirah Village, Business Bay, Al Furjan, Dubai Marina, Downtown Dubai and Dubai Hills Estate, with returns of 8.4%, 7.5%, 7.2%, 6.9%, 5.0% and 4.5%.

Property Finder reported that Dubai property sales transactions rose again in August, with 5,780 sales deals valued at US$ 4.08 billion – its highest ever August level since 2009.  Of the total transactions, 55% (3,181 units), valued at US$ 2.73 billion, were in the secondary market, with 2,599 deals, valued at US$ 1.35 billion, for off-plan sales. The overall average monthly sales transaction value increased, month on month, 1.57% to US$ 703k. The five most popular locations for villas/townhouses for transactions were Arabian Ranches 3, Dubai Land, Dubai South, Tilal al Ghaf and Damac Hills 2 and for apartments – Business Bay, Jumeirah Village Circle, Dubai Harbour, Mohammed bin Rashid City and Downtown Dubai. In the eight months of 2021, there were 37,537 transactions, worth US$ 24.0 billion – 22.61% higher than the total figure for the whole of 2020. With rising consumer and investor confidence, along with the imminent opening of Expo 2020, the current bullish property run is expected to continue. Covid has been a driver behind property prices being on the rise, as many have upgraded to larger homes, with outdoor amenities, amid a remote working and learning trend.

EFG Hermes has indicated that Emaar’s 2021 property sales could top US$ 5.85 billion this year, driven by a boom in the UAE’s real estate market and a marked economic recovery. It noted that “ED’s business model has proven resilient amidst the challenges posed since the 2009 real estate crash in the emirate.” The local market has seen a revival in its fortunes, with many end users looking to upgrade to bigger properties, initially driven from the need to work and learn from home remotely. EFG Hermes forecast that that property sales in 2022, 2023, and in the next five and twenty-three years would be US$ 5.85 billion, US$ 4.8 billion, US$ 25.9 billion and US$ 115.8 billion respectively. It would appear that sales in Dubai Creek will contribute the most to the total development portfolio, although over the coming five years are more evenly scattered between projects in the company’s portfolio.

In his bid to achieve top levels of service and dedication among public servants, and also to enhance the competitiveness of the UAE at the global level, HH Sheikh Mohammed bin Rashid Al Maktoum directed an evaluation of the government’s digital services earlier in the year. At the time, he confirmed that more than 1.3k services, provided by ministries and federal government agencies, would be evaluated. True to his word, the Dubai Ruler announced that the UAE’s five best and five worst government digital services would be published. Following assessments testing how easy it was for the public to pay fees, the accuracy of procedures and the speed of service, as well as polling 55k citizens for their opinion, HH Sheikh Mohammed announced the findings. The best performing agency was the Ministry of Interior, followed by the Federal Authority for Identity and Citizenship, the Ministry of Foreign Affairs & International Co-operation, the UAE Ministry of Climate Change and Environment, and the Ministry of Community Development. The five agencies at the other end of the scale, in no particular order, were the Ministry of Education, the Federal Tax Authority, the Securities and Commodities Authority, the General Pension and Social Security Authority, and the Ministry of Energy & Infrastructure. The Dubai Ruler indicated that they all need to improve and gave them ninety days to do so.

This week, the country’s leaders announced ‘The Principles of the 50’, as part of the ‘Projects of the 50’ campaign, to chart the strategic roadmap for the UAE’s new era of economic, political and social growth, over the next fifty years. The ten principles will act as guidelines for all UAE’s institutions and, according to HH The Ruler Sheikh Khalifa bin Zayed Al Nahyan, with the target “to provide the best possible life for citizens and residents of the UAE”. Meanwhile, HH Sheikh Mohammed bin Rashid Al Maktoum noted, “The UAE is one destination, one economy, one flag, one leader, and over the next 50 years, everyone will work as one team to achieve our goals.”

The First Principle states the key national focus shall remain the strengthening of the union, its institutions, legislature, capabilities and finances. The development of the urban and rural economies throughout the nation is the fastest and most effective way to consolidate the union of the Emirates. Other Principles include developing the educational system, ensuring that the economy provides a better life for the people of the Union, and working on stable and positive political, economic and social relations with its neighbours. Others cover consolidating the UAE’s global reputation as well as its position as a global hub for talent, companies and investments Another principle, based on openness and tolerance, sees the need to promote peace, openness and humanity, and sees the country’s foreign humanitarian aid available to any country in cases of disasters, emergencies and crises. The Tenth Principle “calls for peace, harmony, negotiations and dialogue to resolve all disputes is the basis of the Emirates’ foreign policy. Striving with regional partners and global friends to establish regional and global peace and stability is a fundamental driver of our foreign policy”.

New legislation sees children, aged between 15 and 18, now able to take up part-time work in the UAE, when the government announced this the first of fifty new projects that will mark the country’s Year of the 50th celebrations. The Ministry of Human Resources and Emiratisation clarified that the employer has to apply for the ‘juvenile work permits’, with the application costing US$ 27 (AED 100); an additional US$ 136 (AED 500) would be paid once approval is given and the visa will be valid for twelve months.

The two leading regional economies both continued to improve in August; having steadily improved over the past twelve months, Saudi Arabia’s IHS Markitt PMI grew at a slower pace, dipping 1.7 to 54., as did that of the UAE which slipped 0.2 to 53.8. The UAE’s figures were the second-fastest improvement in the country’s non-oil private sector for more than two years, with output growth driving the fastest rise in employment since January 2018. Although August’s data for new orders was slightly lower, it did show that business activity grew at the quickest rate since July 2019, driven by an improvement in demand. There is hope that the recent pickup in the economy – allied with the Expo boost – will continue until year end. Despite the global supply chain problems, the data indicates that supply-side conditions are improving, with overall delivery times shortened for the first time since January.

Dubai’s seasonally adjusted August’s IHS Markit PMI nudged 0.1 higher, on the month, to 53.3, as Dubai’s non-oil private sector grew at its quickest rate in almost two years, driven by output growth among travel, tourism and construction. Consequently, Dubai companies, that needed to accommodate greater sales volumes and backlogs of work, have increased their payroll levels at the fastest rate since November 2019, as they need to rebuild staff capacity to pre-pandemic levels, in response to greater sales volumes and backlogs of work. With the economy beginning to move into top gear, both tourist numbers and consumer demand have headed higher. Furthermore, there is every hope that Expo 2020, opening in another three weeks, will be another fillip for Dubai economy which will also benefit from easing Covid-19 restrictions and the ongoing vaccination programme.

Emirates is slowly returning to some form of normalcy reporting nearly 1.2 million passengers, in July and August, compared to 402k in the corresponding two months last year. YTD, it has slowly restored former routes and currently travels to 120 destinations, from almost nil last year; by the end of October, it will have added a further twenty to its schedule.  In 2020, it was the world’s largest international carrier, carrying over 15.8 million passengers.

For the fourth consecutive year, Dubai finds itself fifth globally in the International Shipping Centre Development Index, behind Singapore, London, Shanghai and Hong Kong for global freight. According to the ISCD index report for 2021 it ranks above the likes of Rotterdam, Hamburg, Athens / Piraeus, New York / New Jersey and Ningbo / Zhoushan. The index evaluates three primary indicators (port infrastructure, shipping services and general environment) and 16 secondary indicators, along with the competitiveness of attracting maritime businesses and the extent of development in maritime centres around the world, as well as their impact in advancing the growth of the global shipping sector. It also considers government transparency, within each country on the list, while also taking into account the ease of doing business, the performance of logistics services and capabilities of the departments and e-governments of the countries.

DEWA has confirmed that its Seawater Reverse Osmosis (SWRO) desalination plant is 92.4% complete and when completed by year end, it will have a daily production capacity of 40 million imperial gallons of water. Its current SWRO production capacity is at 13% but targeted to reach 42%, totalling 303 MIGD, by 2030. The power utility is hopeful that, by this date, desalinated water will be 100% produced by a clean energy mix that uses both renewable energy and waste heat by 2030.  DEWA also announced that its Hatta hydroelectric power station is 29% complete; it will have a production capacity of 250 MW, a storage capacity of 1.5k megawatt-hours, and a life span of up to eighty years.

H1 witnessed a 59% increase (492 companies) in new company registrations to 3.3k at Dubai International Financial Centre. With these figures, DIFC has reached its 2014 target of tripling its size within a decade, three years ahead of schedule. According to Global Financial Centres Index, the DIFC is the biggest financial centre in the MEA and the 19th biggest worldwide. It has also teamed up with the Mena FinTech Association to develop an innovation forum and other initiatives to advance the financial technology sector in the region.

Amazon Web Services has announced that it will launch its cloud infrastructure in the UAE in H1 2022 – a move that will benefit the Dubai corporate sector, by boosting trade and investment, as well as attracting global talent into the country. With Covid boosting the advent of digital transformation, allied with government support and investment, there is no doubt that the country has become a major hub for cloud infrastructure players, such as AWS, Oracle, Microsoft, Alibaba, SAP and Google.  According to Cloudwards, the cloud computing market is estimated to expand 224% to US$ 830 billion by 2025 and that 48% of global businesses currently use cloud storage for storing classified and important data – a figure that will surely move higher. Meanwhile, the public cloud services market in the MENA region has more than doubled to US$ 1.9 billion, over the past five years, whilst the GCC public cloud market is expected to grow 246% to top US$ 2.35 billion by 2024.

Attending the 108th meeting of the Arab League’s Economic and Social Council, the federal Minister of Economy, Abdulla bin Touq Al Marri, reiterated the UAE’s keenness, to achieve the development goals of Arab countries, in line with the Council’s recommendations. Last year, trade between Arab countries and the rest of the world amounted to around US$1.27 trillion, with the UAE accounting for 25% of the total. In H1, the non-oil trade between the UAE and Arab countries grew 29% to US$ 52.0 billion. The Minister also detailed UAE’s bid to host the 28th session of the Conference of the Parties (COP 28) to the United Nations Framework Convention on Climate Change (UNFCCC) in Abu Dhabi in 2023.

The Minister also expects the UAE economy to grow 4.0% this year, 1.5% higher than the estimate put forward by the Central Bank last December, and higher than the IMF’s 2.9% forecast last April. Furthermore, the Minister indicated that the UAE will be seeking US$ 124 billion of inward foreign investment by 2030, (from the likes of Russia, Australia, China and the UK), as well as aiming to be among the ten biggest global investment destinations by then. He also confirmed that the country will be strengthening economic partnerships with South Korea, Indonesia, Kenya, Ethiopia, India, Israel and Turkey.

Last week, this blog noted a study by New World Wealth that ranked Dubai as the 29th most popular global city for ultra-wealthy residents. In H1, it is reported that the number of Dubai’s HNWIs increased by 3.8%, (2k), to top 54k. It also splits the group of HNWIs into billionaires, (those with reserves of more than US$ 1 billion) centimillionaires, (those with a net worth of US$ 100 million), multimillionaires, (with a personal fortune of US$ 10 million or more) and millionaires, (with at least US$ 1 million in property, cash, equities and business interest). It estimated that the number of billionaires increased by two to 12, centimillionaires by thirteen to 165 and multimillionaires by fifty to 2,480. The combined private wealth held by all Dubai residents, with at least US$ 1 million in property, cash, equities and business interests, increased by US$ 13 billion, (2.5%), to US$ 530 billion.

Expo 2020 Dubai will host the two-day 7th World Green Economy Summit next month, organised by DEWA and the World Green Economy Organisation (WGEO), in collaboration with the Dubai Supreme Council of Energy and the UN Development Programme. The theme for this year’s gathering is ‘Galvanising Action for a Sustainable Recovery. The summit’s targets are to advance the green economy and to review the latest digital platforms and international best practices in the green economy and sustainable development. It will also address four main pillars -Youth, Innovation & Smart Technologies, Green Policies and Green Finance.

The Central Bank of the UAE confirmed that the gross assets of banks in the country nudged 0.8% higher to US$ 874.4 billion, on the month, to 31 July. Over the month, total bank deposits increased by 0.3%, increasing from US$ 521.8 billion, driven by rises of 0.1% and 2.3%, in resident deposits, (attributable to a 3.5% increase in government deposits), and in non-resident deposits respectively. Money supply aggregates, M1 and M2 both decreased, on the month, by 0.8% to US$ 178.2 billion and 0.7% to US$ 402.7 billion, whilst M3 increased by 0.1% to US$ 483.7 billion. After 1.4% declines in the previous two quarters, gross credit extended by banks in the UAE rose 0.9% in Q2, at US$ 48.2 billion.

ServeU has won a US$ 5 million contract to provide human resources and staffing services at fourteen of the 190 country pavilions and themed exhibitions during Expo 2020 Dubai. The subsidiary of Dubai developer Union Properties has also secured a deal to provide the UK pavilion with manpower at the Expo 2020 site. ServeU is one of three subsidiaries that UP is planning to list on the Dubai Financial Market, as the parent company attempts to boost its revenue and wipe out accumulated losses. As part of the group’s strategy to cut accumulated losses, it had, last year, agreed with Emirates NBD to restructure an outstanding debt of US$ 258 million, as well as agreeing to divest a 40% stake in its Dubai Autodrome subsidiary for US$ 109 million. To an extent, it has succeeded, with a 2020 profit reducing accumulated losses and increasing shareholders’ equity; in Q2, it posted a US$ 7 million profit, with revenue 19% higher at US$ 27 million.

With no financial details available, Trukker has acquired Pakistan’s TruckSher in a push to expand its operations in that country and boost growth. Only last year, Trukker raised US$ 10 million venture debt from Silicon Valley’s Partners for Growth and it could well be a candidate for an IPO on Saudi Arabia’s Tadawul stock exchange in a bid to tap into the region’s growth potential.  This is the first acquisition by the Dubai start-up to expand within the land freight sector. Trukker, established in 2016, operates a fleet of more than 35k trucks here in the UAE, Saudi Arabia and Egypt. The Pakistani purchase, only set up earlier in the year, has a presence in Lahore and Karachi.

The Securities & Commodities Authority has approved the merger move initiated last March between Emaar Properties and Emaar Malls. This arrangement reinforces Emaar Properties’ position as Mena’s largest integrated and diversified real estate company and will boost its financial and operational performance through full consolidation of Emaar Malls’ earnings and cash flow generation. Emaar Malls shareholders will receive 0.51 Emaar Properties shares for one Emaar Malls share at a premium of 7.1% to the closing price of Emaar Malls on 01 March 2021, the last trading day prior to the merger announcement and 3.5%on its 01 September price.

The DFM opened on Sunday 05 September, 208 points (7.4%) higher the previous seven weeks, shed 4 points (0.1%) to close the week on 2,908. Emaar Properties, up US$ 0.05 the previous three weeks, lost US$ 0.01 to close on US$ 1.14. Emirates NBD and Damac started the previous week on US$ 3.79 and US$ 0.34 and closed on US$ 3.81 and US$ 0.34. On Thursday, 09 September, 148 million shares changed hands, with a value of US$ 55 million, compared to 149 million shares, with a value of US$ 44 million, on 02 September.

By Thursday, 09 September, Brent, US$ 0.82 (1.2%) lower the previous week, regained US$ 0.90 (1.3%), to close on US$ 71.43. Gold, US$ 61 (2.9%) higher the previous three weeks, shed US$ 16 (0.9%) to close Thursday 09 September on US$ 1,794.   

With Iraq in the midst of a severe energy crisis, there was some good news this week with TotalEnergies signing a US$ 27 billion contract to invest in the country’s oil, gas and solar production. No immediate details were available as to the value and duration of this mega agreement, but it seems that the initial investment will be US$ 10 billion, to be spent on infrastructure. The contract covers four projects which aim to:

  • pipe seawater from the Gulf to southern Iraqi oilfields, (with the water used to extract oil from subterranean deposits)
  • increase production from the Artawi oilfield from 85k bpd to 210k bpd
  • construct a complex to exploit production from the sector’s gas fields so that any excess can be utilised for use in electricity generation
  • Install a solar farm in Artawi that should produce 1k megawatts of electricity

Because of lack of investment, OPEC’s second biggest oil producer is currently facing an acute energy crisis and chronic blackouts, with the country’s economy tanking as oil revenue accounts for 90% of state revenue.  It is reported that 33% of its gas and electricity requirements are being supplied by its neighbour, Iran, to which it owes at least US$ 6 billion for past supplies.

With the financing needs of Gulf sovereign wealth funds being boosted by rising energy prices, and a brighter economic environment, the consequence of which is that sukuk issuances this year will be marginally down, around 5%, on the 2020 return of US$ 205 billion. Driven by continued economic recovery, improved liquidity in debt markets and strong investor demand, H2 issuances may be just shy of the US$ 100 billion mark. It expects that issuances in Malaysia and Indonesia, still reeling from the Covid impact, will be higher, because the need for funding remains high. Moody’s Investors Service noted that H1 sukuk issuance in the GCC fell 19.0% to US$ 35.3 billion, with Saudi Arabia remaining the bloc’s largest issuer accounting for around 62% (or US$ 22 billion) of the total volume – down from US$ 24.5 billion in H1 2020.

A US judge has ruled that Boeing’s board of directors must face a lawsuit from shareholders over two fatal crashes involving its 737 Max plane, indicating that the first crash in December 2018 in Indonesia was a “red flag” about a key safety system on the aircraft “that the board should have heeded but instead ignored”. It also noted that the real victims were the 346 who died, and their families, but investors had also “lost billions of dollars”. The 737 Max was then grounded in March 2019 following the second crash in Ethiopia, with investigations later finding a flaw in an automated flight control system, known as MCAS.

In another blow to Prime Minister Narendra Modi’s hope to bring in foreign manufacturers, Ford has joined General Motors to pull the plug in India and will stop production at plants in Gujarat and Tamil Nadu in Q2 2022. The car giant, which has accumulated losses of US$ 2 million, over the past decade, will continue to make car engines for export. Ford makes five different models in India but is ranked ninth on the list of the country’s biggest car makers, with a paltry 2% of the market.

After acquiring William Hills for US$ 4.0 billion in April, Caesars Entertainment, the owner of Caesars Palace, decided that it only needed the seller’s US operations and that it would auction the non-US side of William Hill’s business, which includes online operations across the UK and Europe. Five months later, 888 Holdings announced that it will take over the business, which includes 1.4k UK betting shops, in a US$ 3.0 billion deal.  The new combined group, which will be one of the world’s largest online betting and gaming groups, will have 12k employees and the merger will result in annual savings of US$ 140 million.

In a bid to strengthen its presence in Asia, particularly in Japan, the world’s third biggest e-commerce market, PayPal, is planning to invest US$ 2.7 billion to acquire payments platform and provider of buy now, pay later solutions Paidy. A PayPal spokesman noted that “Paidy pioneered buy now, pay later solutions tailored to the Japanese market and quickly grew to become the leading service provider in Japan”. The Tokyo-based platform has more than six million registered users and enables Japanese shoppers to make online purchases and then pay for them each month in a consolidated bill. Only last month, it was reported that Paidy was planning an IPO, but its immediate remit is to continue to operate existing business, maintain its brand and support a wide variety of consumer wallets and marketplaces. (Although Q2 revenue was 19% higher on an annual basis to US$ 6.24 billion, and a further 11.4 million new active accounts, its net profit dipped 22.4% to US$ 1.2 billion).

Following the demise of some of its U.S. investment funds in 2020, Germany’s biggest financial company is being investigated by Germany’s financial regulator, BaFin. Allianz, which is already facing a slew of investor lawsuits by the US Department of Justice and Securities and Exchange Commission, over its Structured Alpha Funds, has a massive US$ 2.9 trillion in assets under management. These funds, catering to US pension funds for workers such as teachers and subway employees, were also marketed to European investors, and were under the management through bond giant Pimco and Allianz Global Investors. The insurer closed two funds in March 2020, valued at US$ 2.3 billion at December 2019, after the losses from bad bets on options became so extreme, as the onset of Covid sent global markets tanking and funds losing up to 80% in value. The end result is that Allianz is facing twenty-five lawsuits, claiming US$ 6 billion in damages. The investigation is looking at the extent to which Allianz executives, outside the fund division, had knowledge of, or were involved in, events leading up to the funds, racking up billions of dollars of losses.

PAL Holdings, the holding company of Philippine Airlines, has had financial problems for some time and had reported losses for every quarter since 2017; the carrier posted a US$ 1.4 billion loss last year, compared to a US$ 200 million shortfall in 2019. Having cut its work force by 35% earlier in the year, and with a proposed restructuring plan, which needs court approval, Philippine Airlines has filed for Chapter 11 bankruptcy in New York. The eighty-year-old embattled airline aims to slash US$ 2 billion in borrowings – and with a further US$ 505 million in equity and debt financing from its majority shareholder, as well as US$ 150 million of debt financing from new investors, it already has support agreements from 90% of its lenders. Philippine Airlines is the latest international carrier to reorganise in the US, under the US bankruptcy code, following the likes of Chile’s Latam Airlines, Aeromexico and Colombia’s Avianca Holdings, all being badly impacted by Covid.

Having invested US$ 9.4 billion to acquire Asda last year, the Blackburn billionaire brothers, Mohsin and Zuber Issa, announced plans to open nearly 230 convenience stores at UK petrol stations, owned by EG Group, the brothers’ business. After a trial at five petrol stations, 28 ‘Asda on the Move’ shops will open this year, with a further two hundred at petrol forecourts, to launch in 2022, in a belated attempt to catch up with Tesco and Sainsbury’s, which have long operated smaller format shops. Asda indicated that shops would be up to 3k sq ft and stock up to 2.5k products; it would supply goods to EG Group on a wholesale basis.

The UK has a new cheapest supermarket, with Lidl taking over the mantle from fellow German interloper, Aldi. Last month, a basket of 23 essential items bought from Aldi came in US$ 0.60 and US$ 12.50 cheaper than Lidl and Waitrose. Lidl, the world’s fifth largest retailer, has 11.2k global stores of which 762 are in the UK.

The seriousness of the ongoing semi-conductor chip shortage can be seen with news that General Motors has had to halt output at most of its North American plants – four in the US, three in Mexico and one in Canada; it is expected that the closures could be for up to two weeks. The vehicle maker reported that the closures will affect some of its most profitable vehicles, including sport-utility vehicles and midsize pickup trucks. Earlier, both Toyota, (slashing global production by 40% this month), and Ford announced output cuts for this month, as chipmakers struggle to meet the high demand from various industrial sectors. The current problem is down to Covid, as car makers slashed orders at the start of the pandemic, fearing a long downturn in sales. At the time, chipmakers saw a demand surge from tech companies and the consumer electronics sector to take the semiconductors that normally would have gone to the car manufacturers. Now with business conditions improving, carmakers, that had previously cancelled orders last year, find themselves at the bottom of the queue.

There has been another monthly improvement in the OECD’s unemployment rate, declining a further 0.2% in July to 6.2%, which is still 0.9% higher than reported in pre-pandemic February 2020’s returns. The bloc, encompassing eurozone countries as well as the US, Australia, Japan and the UK, saw the number of unemployed workers declining 1.6 million in July to 41.1 million. In the eurozone, the unemployment rate fell 0.2% to 7.6%, with Spain knocking 0.7% off its rate, but it is still at a worryingly high 14.3%. Other major economies – Canada, US, Australia and Korea – all saw 0.3% monthly declines to 7.5%, 5.4%, 4.6% and 3.3%, whilst Mexico and Japan were flat on the month as unemployment levels remained at 4.2% and 2.8%.

Despite the US August unemployment rate dipping 0.2%, on the month, to 5.2%, the US economy only added a disappointing 235k new jobs, compared to the 1.05 million created in July. The number of people unemployed edged down to 8.4 million, remaining well above the pre-pandemic level of 5.7 million seen in February 2020. This could be an indicator that the economic recovery may be running out of steam, but it may only be a blip caused from rising Delta variant infections that have impacted spending on travel, tourism and hospitality. This month’s figures will probably be worse considering the devastating effect of last week’s Storm Ida on the east coast and the Californian wildfires.

August saw the lowest figure for proposed job cuts, at only 12.7k, for seven years, despite the imminent end of the UK’s government’s furlough scheme – a year ago, firms were looking at figures of 150k; it now appears that the predicted surge in unemployment this autumn may be smaller than expected. The furlough scheme ends this month so that by then employers will have to make the decision whether to keep staff and pay all their wages, for the first time since April 2020 or let them go. At the end of June, the number on furlough had dropped to 1.9 million. The latest unemployment rate at 4.8% is 0.9% higher than before the pandemic, but 0.2% lower than the previous quarter. It is expected that the rate will keep heading south because of the high labour demand and fewer people in the labour market due to the crisis and Brexit; there is every chance that staff shortages in certain sectors will continue until the end of 2023.

First it was MacDonald’s milk shakes, KFC chickens, beer, Hardy’s Australian wine, Iceland products and flu vaccines in short supply, and now joined by Ikea, as a combination of a shortage of HGV drivers, (some estimate that the figure could be as high as 100k), Brexit issues and a global supply problem, combine to dry up the supply chain. The Swedish furniture giant is struggling to supply about 1k product lines and reported that all 22 of its UK and Ireland stores were having supply problems, with 10% of its stock. To make matters worse, Ikea cannot serve the higher customer demand – and so are losing revenue – as more people are spending more time at home.  For what it is worth, the government noted that it was “working closely with industry to address sector challenges”.

Many Brits put their shortages down to Brexit and do not seem to realise that it is a global problem not getting any better. In Australia, the global supply chain crunch is badly effecting wholesalers and retailers either unable to receive goods on time and, if they can, costs are rising higher. Most of the imports originate in Asia, and specifically China, where one coronavirus case was enough to shut down a critical part of the world’s third-busiest container port, at Ningbo in China, for a fortnight.  Currently, outbreaks of the virus have also closed down factories and ports in Vietnam, which is now known as a major global apparel supplier.  Another cost problem is that freight rates see Australia also competing against more lucrative markets for products, like the US, where consumer spending is soaring and driving up shipping rates. Australians sometimes forget that the country accounts for only around 0.3% of the global population and so has little or no clout compared to the bigger and more populous nations. Before the pandemic, about 80% of air freight to Australia was carried on passenger flights but because of Covid, this has been drastically cut as there is an almost total travel ban that ensures that citizens can only leave Australia for essential reasons, (that does not include holidays). Other problem areas are port congestion and landside inefficiencies which tie up huge amounts of capacity.

With its property market still firing on all cylinders, Australian lenders have slashed variable mortgage and short-term fixed interest rates to attract new customers, even though the RBA kept rates on hold at 0.1%. Latest data from RateCity notes that over the past two months, the number of variable rates on its database under 2% had risen from 28 to 46; the cheapest rate on offer was at 1.77%, with the average at 2.72%.  However, on the flip side, longer term fixed rates are heading in the other direction – at the start of 2021, there were 32 four-year fixed loans, with a less than 2% interest rate, now there are none. The Reserve Bank also extended its monthly US$ 3.0 billion bond buying stimulus program, until at least mid-February, to counteract the negative economic impact from the latest lockdowns in the ACT, New South Wales and Victoria.

As Chinese companies come under increased pressure in the western world, as well as in China itself, it may be more than coincidence that President Xi Jinping has announced that the country will have a third stock exchange in Beijing to serve the country’s SMEs; its two other bourses are located in Shanghai and the southern city of Shenzhen. The China Securities Regulatory Commission confirmed that it would be similar to Shanghai’s STAR market, which is seen as China’s equivalent to the technology-heavy Nasdaq. Already this year, the Chinese regulators have introduced a myriad of tough measures to curb some activities of companies, including tech giants, tutoring firms, TV companies and streaming platforms, both at home and overseas. To make matters worse, the SEC will now require more detailed information on Chinese companies selling shares in the country, whilst back home the government signalled that this crackdown would continue, as it unveiled a five-year plan outlining tighter regulation of much of its economy.

The financial problems of Hong Kong-listed China Evergrande may have a negative impact on Australia’s future economic wellbeing. Although it is China’s biggest property group and the world’s 122nd largest company by sales, it now has the unenviable title of being the most indebted company in the world, owing creditors and other stakeholders a mouth-watering US$ 300 billion. Its fall from grace has been rapid, having been the world’s most valuable real estate group just three years ago. Two years ago, its chief executive, Jiayin Xu, was China’s third-richest person, with an estimated wealth of US$ 30 billion.  Even before this week’s announcement, that warned that it may default on debt repayments if its efforts to refinance and sell assets fall short, the company was already talking with creditors and stakeholders trying unsuccessfully to sell their debt by up to 70%. The fear is that in a fire sale, Evergrande may have to sell its vast portfolio of apartments at heavy discounts which in turn could really damage the industry by undermining prices and putting smaller competitors out of business.

In the past, it was felt that the Chinese administration often turned a blind eye to the industry’s excesses, with its principal target being to stimulate economic growth and introduce an unprecedented free market system away from the previous agrarian-based market, at the expense of tougher regulations. Dodgy building standards, sales and loan sharks and a host of other illegal activities have been prevalent in the industry. This laissez faire approach has seen China transform into an urbanised industrial powerhouse, over the past forty years, on a scale and speed never before witnessed in history. The end result has seen millions of farm workers flock to newly built cities, the rise of property moguls, sky high rents, unaffordable housing and younger generations locked out of the market. Last year, Beijing introduced what it called the Three Red Lines Policy for property developers, so as to reduce debt within the industry, curb runaway property prices and lift standards. It is apparent that the housing boom in China is in the throes of an implosion and the knock-on impact in Australia could be grave, bearing in mind that property developers account for 50% of all China’s iron ore demand; Australia supplies 60% of China’s requirements, with the country buying about 70% of the iron ore Australia exports which makes up about 60% of Australia exports. With iron ore prices declining some 40% since May, and the distinct possibility of China cutting its demand forthe metal, the conclusion is that Australian exports and its GDP will take a big hit and could push the lucky country into its second recession in twelve months.

It is interesting to see how much tax the tech giants actually pay and how they can shift profits to low-tax locations. Amazon posted a Covid-driven 50.3% hike in 2020 revenue to US$ 28.4 billion but only managed to pay US$ 678 million in direct taxation; last year the two figures were US$ 18.9 billion and US$ 404 million. The company’s 2020 indirect tax bill came in 24.1% higher, to US$ 1.46 billion, driven by VAT on increased sales and employee taxes, as it took on more people and increased wages. When both direct and indirect taxation were taken into account, its total “tax contribution” was 34.8% higher at US$ 2.13 billion. Amazon reiterated that it was “proud” of its contribution to the UK economy and that it had invested US$ 44.1 billion in UK infrastructure since 2010 and had added 22k to its UK workforce to bring its total payroll to 55k. Amazon – along with its tech giant peers such as Facebook, Google and Apple – pay tax on profits not sales, whilst last April, the UK government launched a 2% tax on digital sales amid concerns that big tech firms were re-routing their profits through low tax jurisdictions. Their reporting is in line with legal requirements, but it does lack crucial information, such as intra-group transactions, so it is impossible to ascertain their actual economic profit. One thing certain is that Amazon’s tax bill is lower than its competitors such as supermarket chains.

Uber Australia’s latest accounts confirm that it has continued its longstanding practice of sending revenue to its head company in the Netherlands, described as a Dutch “cash pooling arrangement”. Some analysts consider this arrangement as a model to minimise tax, but the ridesharing and food delivery says it pays all taxes it owes in each jurisdiction in which it operates. In 2015, the platform acknowledged that 25% of each transaction in Australia was routed to its Dutch parent company in the Netherlands, Uber International Holding BV, which then paid Uber Australia a fee for providing service support in Australia.  The 2020 accounts notes that “the Group has a cash pooling arrangement with Uber BV and all cash at bank is transferred to Uber BV at the end of every day,” with US$ 4 million of interest expenses for having this money in the Dutch “cash pool”. The Australian company posted revenue of over US$ 750 million and a US$ 5 million profit as well as noting US$ 474 million of “service fee paid to related companies”, which could be Uber BV or another related offshore entity; it paid US$ 5 million in Corporate Tax.  Furthermore, Uber Australia notes a US$ 4.4 billion “collection on behalf by a related company” largely offset by a US$ 3.9 billion “payment on behalf by related companies”. This entity — Uber’s Netherlands-based wholly owned subsidiary called Uber International Holding BV — then paid Uber Australia a fee for providing service support in Australia.

This week, Australia became the world’s biggest gold producer taking the mantle, for the first time, from China which had been the global leader since 2007. Surbiton Associates noted that in H1, Australian producers mined 157 tonnes, four more than China. Over the two previous years, Australia had produced 321 and 328 tonnes, its best ever two years’ results. It does seem, however, that China may soon regain its title once it has sorted out some safety problems in mines, that have resulted in fatalities, which have been closed for further investigations. IBISWorld estimates that the US$ 19.1 billion sector will see an 11.6% revenue hike “due to continued uncertainty about the effects of the Covid-19 pandemic on the global economy”, as well as an anticipated surge in industry output and higher gold prices, currently hovering around the US$ 1.8k level, 25% higher over the past two years.

101 Economics teach that the price of gold, considered a safe haven asset, increases when there is political and economic instability. This is exactly what has happened with the pandemic and global unrest, most notably with the Taliban in Afghanistan, but currently the two biggest factors affecting the gold price is the US Federal Reserve and a weaker US dollar. Although the RBA, (and the ECB), have started cutting back on their QE strategies, the US Fed has yet to move with its tapering of bond buying, which would normally result in less global support for the greenback – and that could see the yellow metal moving higher at least in the short-term which would benefit both gold investors and the Australian economy. The warning to those with investments in gold, (and also cryptocurrencies and global tech shares) is simple – Make Hay While The Sun Shines!

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Take Me Home Country Roads!

Take Me Home Country Roads!                                                              02 September 2021

For the past week, ending 02 September, Dubai Land Department recorded a total of 1,667 real estate and properties transactions, with a gross value of US$ 2.56 billion. It confirmed that 1,080 villas/apartments were sold for US$ 613 million, and 146 plots for US$ 613 million over the week. The top two land transactions were for a plot in Marsa Dubai, selling for US$ 179 million, and another in Al Murqabat for US$ 89 million. The top three transfers for apartments and villas were all apartments in Marsa Dubai, Burj Khalifa and Business Bay selling for US$ 63 million, US$ 54 million and US$ 45 million respectively. The most popular locations were in Jabal Ali First, with 40 sales transactions worth US$ 24 million, Ras Al Khor, with 30 sales at US$ 188 million, and Wadi Al Safa 5, with 14 sales transactions worth US$ 19 million. Mortgaged properties for the week totalled US$ 1.09 billion, including a plot for US$ 545 million in Al Kheeran area. 61 properties were granted between first-degree relatives worth US$ 128 million.

Asteco has carried out a summary of the leading Dubai property locations, and their price movements, on a quarterly and annual bases and some of the results were quite surprising. Of the twelve “villa locations”, four showed double digit rises over both periods – Arabian Ranches – 19% on the quarter and 24% for the year, along with Dubai Sports City (14%:11%), Dubai Hills (13%:20%) and The Meadows (10%:15%), with Mirdiff recording annual growth at 15%, and on the quarter 9%.  On an annual basis, Palm Jumeirah and Dubai Silicon Oasis both saw prices up 10% but posted single digit quarterly growth of 6% and 8%. Of the remaining five – Jumeirah Parks, Jumeirah Village, Umm Suqeim, The Springs and The Lakes – posted annual figures of 9%, 8%, 8%, 2% and 2%, with quarterly returns of 8%, 9%, 8%, 4% and 2%.

In contrast, the fourteen “apartment locations” showed mostly subdued growth and, in six cases, annual losses The top six annual growth locations were The Greens, Dubai Marina, Business Bay, JLT, JBR and Palm Jumeirah with prices up 6%, 4%, 4%, 3%, 2% and 1%. Both Downtown and Jumeirah Village were flat but the six remaining areas – International City, Discovery Gardens, Dubai Sports City, Deira, SZR and DIFC – saw yearly values move southwards by -12%, -11%, -5%, -3%, -2% and -1%, although but one, International City, recorded growth levels of between 1% – 7%.

According to the latest New World Wealth report, Dubai’s total wealth climbed 7.8% to US$ 529 billion by the end of June, compared to the same period in 2020; it also maintained its position as the 29th wealthiest city globally. There are reports that a large number of ultra-high net worth individuals have been showing interest in the emirate’s high-end properties and that many millionaires have moved to Dubai, seeing it a safe and secure location in which to live.  In H1, Palm Jumeirah saw the highest selling price for a villa, at over US$ 30 million, and the highest rental for a villa, at over US$ 1 million. The three most popular places for the emirate’s twelve billionaires, (nine last year), and 54k high net worth individuals, (49.4k last year), were Emirates Hills, Jumeirah Golf Estate and Palm Jumeirah.

In its latest quarterly report, global consultancy Colliers estimated that Dubai will open about 40% of 2021 forthcoming supply to coincide with the 01 October opening of Expo 2020 Dubai. By 30 June, it reckoned that the country’s branded hospitality market, with Dubai the main contributor, topped 108k keys. Over the next two years, it expects that supply will increase by an 8.0% compound annual growth rate. Some estimate that the number of hotel rooms in Dubai could reach 160k by the time of the Expo opening and, even with the Covid cloud hanging over the event, the target is still an optimistic 25 million visitors. Occupancy rates continue to cause concern, as the current level is 23% higher than the same month last year, but it is still 16% lower than in July 2019. On the same lines, revenue per available room has increased 23% on the year but is still 16% lower, compared to 2019 figures.

Dubai Media Office claims that the emirate’s sports sector contributes US$ 1.1 billion to the local economy every year and its contribution to the national and local economy will continue to grow, as the emirate attracts investment and creates more jobs. Some of the contribution derives from a number of national and international events which attracts global visitors. In addition, there are more than 20k people employed in Dubai’s sports sector, along with five factories manufacturing sports equipment and sportswear in the emirate, and more than 2.5k outlets that sell training equipment and merchandise. In addition, there are more than 350 registered companies that organise various sports events and training camps.

Between now and November, Emirates will receive its last three A380s, bringing its fleet size to 118, (almost half of the 248 total ever built); six of this number will be a four-class configuration, with the introduction of Premium Economy seats, which can be found on its London Heathrow and Paris Charles De Gaulle routes. The Dubai carrier expects to be the largest operator of the A380 for the next two decades. As travel restrictions ease, the jumbo will be reinstated on twelve more routes – including Cairo, Frankfurt, Guangzhou, Los Angeles, Manchester, New York JFK and Zurich – by next month.

The latest public auction of Dubai’s special car plate numbers, organised by the RTA, raised almost US$ 10 million, with the five most expensive numbers – E55, W29, X35, V88888 and BV9999 going under the hammer for US$ 994k, US$ 681k, US$ 676k, US$ 270k and US$ 234k. One hundred various numbers were on offer.

The UAE fuel price committee has announced petrol and diesel prices for the month of September 2021, with the three petrol grades all US$ 0.008 higher, on the month, with Super 98, (US$ 0.703), Special 95 (US$ 0.673) and US$ 0.651). Diesel prices will head in the opposite direction – down US$ 0.019 to US$ 0.649 per litre.

Established in 2002, DMCC recorded 204 new member companies – its highest ever August figure, two months after posting its best H1 returns, of 1,230, since 2013.  The free zone is on track to top 20k members by the end of the year. It has recently launched DMCC Crypto Centre – a comprehensive ecosystem for businesses operating in the cryptographic and blockchain sectors.

A new law sees the UAE enhancing transparency in government by holding ministers and senior officials accountable for wrongdoing, allowing the Public Prosecutor to investigate complaints against any senior official. If found guilty, any minister, or an official under investigation, can be banned from travelling and have their money frozen which will also apply to funds of their wives and minors, if necessary. The potential penalties for violators include censuring, forced retirement, job termination, or relief of duties, along with deprivation of pension or bonus at a maximum of 25% of the total. In announcing the decree, HH Sheikh Mohammed bin Rashid Al Maktoum commented, “we are a law-abiding country. The integrity and transparency of our federal government is a top priority.”

The July IHS Markit PMI sees an improvement in the country’s non-oil private sector and confirms that the country’s economy continues to improve, with the index hitting a two year high of 54.0. Three contributing factors pushing the economy are the easing of restrictions, (and the increasing of capacity), at local restaurants, cinemas and malls, cases trending downwards to their lowest since October 2020 and the resumption of tourist visas; rising oil production and higher oil prices have also helped boost the recovery. Output and new business rose at the quickest rates since July 2019, with firms reporting their sharpest rise in new orders for two years, amid soaring domestic sales and strengthening market confidence. One possible drag would be the fact that local banks continue to struggle with rising bad loans, resulting in credit to the private sector being stuck in negative territory.

A Dubai farm, with more than 1.2k date trees, has teamed up with Terraplus Solutions to implement an underground watering system that is claimed could save the UAE an annual one trillion litres of water, equivalent to the amount of water used by half the emirate’s population. Since 2019, experiments have been carried out at the Al Awir farm which sees a 30% reduction in water usage by implementing an underground watering system that saves up to 50k litres of water per tree every year. The new subsurface technology, which has pipes inserted into the ground, allowing water to directly find the trees’ roots, results in the farm now losing 86 million litres, compared to the prior total of 170 million litres. Apart from the water saving, it appears that the amount of crop each tree produces increases by up to 10%. It is thought that there are twenty million date trees in the UAE and that the global agricultural sector uses 70% of all the world’s potable water every year. With such facts, if the technology were installed in the UAE, there is no doubt that it would not only transform the sector but would also allow the UAE, (and the world), to use the money saved on many projects that are currently unaffordable.

Mainly because of the global economic uptick and increased demand, Emirates Global Aluminium, posted a record H1 net profit of US$ 474 million, compared to a loss of US$ 57 million a year earlier, and is 166% higher than the US$ 178 million figure of H2 2020. EBITDA for the half year was 111% higher on the year at US$ 951 million, with revenue climbing 20.0% to US$ 2.94 billion. With the global demand for aluminium high, the future is positive for the country’s biggest industrial company, outside the oil and gas sector, jointly owned by Abu Dhabi’s Mubadala Investment Company, and the Investment Corporation of Dubai. Aluminium was trading at US$ 2,245 in H1, 41.0% higher than a year earlier, as October aluminium futures currently trading at US$ 2.6k.

Kamco Invest’s latest GCC Banking Report noted that gross loans of GCC’s listed banks jumped 4.6% by the end of Q2, compared to the previous quarter, and up 7.1% on the year, driven by broad-based growth seen in all its markets. Total bank revenue for GCC banks increased 3.5% on the quarter, driven by higher net interest income, partially offset by a decline in non-interest income. The two GCC countries, with the lion’s share of the regional balance sheet, were the UAE (with total assets of US$ 840 billion – 29.9% of the total) and Saudi Arabia, with 26.7% of the aggregate. Gross credit came in 0.9% higher at US$ 482 billion, marginally higher than the pre-pandemic gross credit of US$ 480 billion. UAE banks registered their biggest increase in profits in Q2, at 11.8%, after nine out of the sixteen listed banks reported rising net profits.

As widely expected, more than 95% of NMC Health creditors have approved its proposed deeds of company arrangement, (DOCA) restructuring process, resulting in the 34 companies of the UAE’s biggest healthcare provider to exit administration; it is expected that NMC Healthcare will remain in administration in order to pursue potential litigation claims on behalf of itself and the other DOCA companies. The creditors, owed more than US$ 6.4 billion by NMC Health, will see US$ 4 billion of their debts being wiped out in return for equity instruments. In H1, gross revenue for its UAE and Oman businesses beat company expectations by 10% to reach US$ 611 million.

As from 03 October, the DFM will extend its trading time by one hour and will remain open from 10.00 hrs to 1500 hrs. International interest in the local market continues to increase, with latest figures showing that international investors account for 48.2% of its trading activities and own 18.5% of the market capitalisation by the end of June 2021. Interestingly, foreign investors accounted for 69% of new investors on the DFM. Furthermore, in a bid to further promote investors’ participation in the market, the bourse has announced that the minimum trading commission will be waived, with immediate effect. The result was swift, with Wednesday’s trade witnessing a 161% increase, along with the highest level of daily trade count since the beginning of this year, which jumped 146%, YTD, compared to its 2,740 average.

The DFM opened on Sunday 29 August, 196 points (6.8%) higher the previous six weeks, rose 12 points (0.4%) to close the week on 2,912. Emaar Properties, up US$ 0.03 the previous fortnight, gained a further US$ 0.02 to close on US$ 1.15. Emirates NBD and Damac started the previous week on US$ 3.79 and US$ 0.34 and closed flat at US$ 3.79 and US$ 0.34. On Thursday, 02 September, 149 million shares changed hands, with a value of US$ 44 million, compared to 233 million shares, with a value of US$ 44 million, on 26 August.

For the month of August, the bourse had opened on 2,820 and, having closed the month on 2,903, was 83 points (1.6%) higher. Emaar traded from its 01 August 2021 opening figure of US$ 1.11 – up US$ 0.03 – to close August on US$ 1.14. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.37 and US$ 0.35 and closed on 31 August on US$ 3.57 and US$ 0.35 respectively. YTD, the bourse had opened the year on 2,492 and gained 411 points (16.5%) to close the eight months on 2,903, as Emaar traded US$ 0.18 higher at US$ 1.14   NBD and Damac started the year on US$ 3.33 and US$ 0.35 and closed 31 August at US$ 3.77 and US$ 0.35.

At their meeting this week, Opec+ confirmed that it had started to taper a historic production restriction pact, planning to bring two million bpd back to the markets by the end of the year. The bloc, headed by Saudi Arabia and Russia, will begin by increasing output by 400k bpd during the month of September. The fact that the oil supply pipeline is being ramped up saw oil prices fall, whilst the oil market is expected to remain in deficit for at least the next four months, with a six million bpd oil demand growth forecast.

By Thursday, 02 September, Brent, US$ 3.77 (10.9%) higher the previous week, shed US$ 0.82 (1.2%), to close on US$ 70.53. Gold, US$ 50 (2.9%) higher the previous fortnight, gained a further US$ 11 (0.6%) to close Thursday 02 September on US$ 1,810.   Brent started August on US$ 75.19 and lost US$ 3.37 (2.6%) during the month, to close on US$ 71.82. YTD, it started the year trading at US$ 51.80 and gained US$ 20.02 (38.6%) to close on US$ 71.82 during the first eight months of the year. Meanwhile, the yellow metal opened August trading at US$ 1,817 and shed US$ 2 (0.1%), during the month, to close on US$ 1,815. Over the year it has lost US$ 80 from its opening year balance of US$ 1,895.

It is estimated that 835k new UK companies were registered in the twelve months to January 2021 – 42% higher than a year earlier, and despite the period covering the devastated economy caused by the onset of Covid; in the US, the figure was 4.4 million, 24% higher. In this day and age, not only do they all need a distinctive name but also a domain name, more so for the many e-commerce entities set up in tandem with the expansion of people shopping online. A stand-out name and domain name will often be the unique selling point that ensures that it will often become the “first to go to company” as similar entities vie for the same business; in days gone by, this would not necessarily have been the case. There is no doubt that demand for business names has soared and that a host of websites has sprung up that can help them both to pick one and register a connected domain.

Amazon is planning to extend its current 275k global payroll, by a further 55k, for corporate jobs and roles in robotics, research and engineering. 72.7% of the total will be in the US, with a further 2.5k being added in the UK, where it has recruited 10k already this year. A big percentage will be required in the company’s new satellite launch programme – Project Kuiper – to widen broadband access. In the past, the new chief executive, Andy Jassy, had commented that the company needs more staff to keep pace with expansion of its retail, cloud computing and advertising arms.

Covid has claimed another victim, with Marks & Spencer announcing that the retailer will no longer sell men’s suits at more than 57% of its 254 bigger stores, as men’s preference has shifted to “smart separates”, such as chinos and shirts, with an increased demand for casual wear. M&S reckons that they only sold 7.5k suits in the first two months of the pandemic – 80% lower than in the same period a year earlier. Market research consultancy, Kantar Group, has estimated that suit sales last year were 54% lower, at two million, compared to the 4.3 million sold in 2017. The study also noted that the average spend on men’s suits was 62.1% lower, at US$ 219 million, to the twelve months to July 2021, compared to five years earlier.

Zoom Video Communication posted a 70.6% rise in Q2 net profit to US$ 317 million, driven by a 54%, year on year, revenue hike to US$ 1.02 billion. It has updated its full-year revenue forecast to over US$ 4.0 billion, which would be 55% higher than their 2020 return. It put the revenue increase to “acquiring new customers and expanding across existing customers”. The tech company is confident that, even if the pandemic threat were to go away, the demand for video conferencing will not decline, as companies continue to adopt hybrid work models. During the period, it invested US$ 82 million in R&D, as well as acquiring, cloud call centre software provider Five9 for US$ 14.7 billion, as part of its strategy to adapt to the post-pandemic world; this was the fourth purchase by Zoom since the start of the Covid-19 pandemic. With total cash and marketable securities of US$ 5.1 billion, Zoom has enough finance to acquire new start-ups and competitors in the same space of video conferencing.

In July, coffee prices had surged to seven-year highs, after reports that frost had damaged crops in the world’s biggest producer Brazil, with the price for arabica coffee rising above the US$ 2 level, or 60% higher, YTD. Lower-quality robusta coffee prices performed likewise – up 40% YTD – to its highest level since October 2017. Late August saw reports that the world’s second largest coffee producer, Vietnam, was having to deal with similar problems faced by all global producers, including a dire shortage of containers, soaring freight rates and various climatic issues, including frost and rain. In addition, the country has had to deal with a fresh outbreak of the delta variant which has led to stringent travel curbs in the country, badly impacting some key producing areas of the Central Highlands.

Exactly ten years ago, when Tim Cook took over the reins of Apple from its co-founder, Steve Jobs, he struck a deal that has already made him a billionaire. A company filing with the US SEC confirms that he has sold most of the five million shares, he has received as part ofthe deal, for more than US$ 750 million.  Part of the agreement was contingent on the value of Apple’s shares, over the past three years, surpassing at least two-thirds of companies in the S&P 500. Cook silenced all those critics, who thought him to be too technocratic to match Jobs’ success, by the fact that Apple shares have returned more than 1,100%, its revenue has doubled, and its market value has topped US$ 2.5 trillion.

Even though most member countries posted Q2 expansion, averaging 1.6%, compared to 0.6% in Q1, the OECD economies still remain an average 0.7% below pre-Covid levels. The bloc includes a group of major world economies from the Eurozone, the US, Japan and the UK. Q2 growth levels varied, with the UK top of the list, growing 4.8%, (following a 1.6% contraction in Q1), ahead of Italy with a 2.7% growth, compared to just 0.2% the previous quarter. Five other countries that make up the “Major Seven” – US, Germany, France, Canada and Japan – recorded the following growth levels of 1.6%, 1.6%, 0.9%, 0.6% and 0.3% in Q2. Four months ago, the OECD upgraded its 2021 growth forecast from 4.2% to US$ 5.8%, whilst noting that many member states will only return to pre-pandemic levels by the end of 2022. (After declining 0.3% and 0.1% in Q1, the euro area and the EU posted GDP growth of 2.0% and 1.9% respectively).

As its central bank raises its base rate from a record low of 0.50% – set three years ago – to 0.75%, South Korea has become the first major Asian economy, and the first G20 nation, to lift rates since the pandemic began. The country’s household debt and home prices have recently soared, and it is hoped that this move may improve the situation and curb the risks that high inflation and surging public debt may bring to the economy. It will not be too long before other nations follow suit by raising their own bank rates and curtail their massive stimulus packages, introduced to save their economies in the first eighteen months of Covid.

Despite mining stock returning impressive returns, the Australian market traded relatively flat on Monday, with the ASX 200 trading at 7,490 points; the standout performer was Fortescue Metal, up 6.3%, at US$ 15.51, with the world’s fourth largest iron ore miner posting a 117% jump in annual profit to US$ 10.3 billion, after shipping a record amount of iron ore to take advantage of soaring prices. Those prices topped a record US$ 233 in May, attributable to Brazilian supply problems and high Chinese demand, but they have since dipped 32.2% to US$ 158 a tonne; the current price is expected to nudge slightly higher for the rest of the year. With a final dividend of US$ 1.54 expected, the total annual payout will come in at US$ 2.61 per share, equating to a total of US$ 8.0 billion, of which its major shareholder, Andrew Forrest, will take home US$ 681 million.

The latest CoreLogic report notes that, in August, Australian property prices moved 1.5% higher to US$ 491k, with Darwin, Canberra and Hobart posting annual rises of at least 22.0%, with Melbourne reporting the slowest price rise at 13.1%. Regional property rises of 22% were higher than those seen in capital cities, with an 18% increase.  On a monthly basis, the plaudits go to Hobart, Canberra and Brisbane, with increases of 2.3%, 2.2% and 2.0%. Although housing values are still heading north, they are moving at a slower rate than of late. Sydney and Melbourne median values rose to US$ 766k and US$ 567k by the end of August, with the number of properties advertised for sale 5.8% lower than the five-year average, pushing prices higher. Australia’s median property price has risen by over US$ 76k in the past year, equating to US$ 1.46k per week. Another interesting statistic sees house prices rising almost eleven times faster than wages growth over the past year.

An ABC report discovered that 20k companies, (of all sizes), tripled their turnover yet accrued US$ 275 million in JobKeeper during the first three months of the pandemic, with a further 15k entities doubling their turnover, earning US$ 236 million, whilst receiving government support through JobKeeper. It is obvious that thousands of profitable companies qualified for the subsidy based on projected turnover falls that never eventuated. It also estimated that US$ 4.4 billion was received by companies that increased turnover during the first six months of the pandemic. An earlier ABC report previously noted that over 16% of JobKeeper businesses did not suffer a downturn during the three months of the pandemic, racking up nearly US$ 3 billion in subsidies. When first introduced, most businesses with US$ 740 million, AUD 1 billion), revenue were required to show or predict at least a turnover fall of 30% to qualify JobKeeper, with a 50% turnover threshold for big companies and 15% for charities. Once accepted into this government scheme, companies continued receiving payments until around the end of September, when turnover tests changed. At no stage did the legislation, which has cost more than US$ 66 billion, address what would happen if companies were not impacted or actually “benefitted” from Covid so there was no mechanism to recoup money from such firms. By the end of the week, there were reports that because tax commissioner, Chris Jordan, had failed, with a Senate request, to forward details of large private companies, with a turnover greater than US$ 7.4 million, (AUD 10 million), that received JobKeeper payments, he could be fined or sent to jail under the Parliamentary Privileges Act.

Finally, there is good news that its economy has bounced back from the COVID recession, as national growth rose 9.6% over the year to June, and 0.7% to the June quarter. However, economists note that the data is “inherently backward-looking” and expect that the real impact of the recent lockdowns may only be felt this month, where some analysts are looking at a 3.0% quarterly contraction. The country’s terms of trade rose 7% in the quarter to its highest level in history and that strong export prices for mining commodities were the main driver, contributing to a 3.2% increase in nominal GDP. Domestic demand was also a key factor in the GDP figures, with household spending 1.1% higher, but still 0.3% down on the figure in December 2019. Public spending came in 7.4% to the good.

Reports from China indicate that the government has unilaterally banned children, (i.e., anyone under the age of 18), from playing online games for more than three hours a week, citing their concern about youngsters getting addicted to gaming. Online gaming companies will be barred from providing gaming services to younger users, in any form, outside those hours, and authorities will increase the frequency and intensity of their inspections. Prior to this edict, the hours were restricted to an hour and a half per day and three hours on public holidays. In a notice published by the National Press and Publication Administration, juvenile playing time will be restricted to between 8pm – 9pm on Fridays, weekends and on public holidays, starting today, 02 September. With this latest news, and the ongoing crackdown, by the regulators, on the tech giants, there is little wonder why their stocks are falling on the world’s bourses. 

The Federal Reserve’s chairman, Jerome Powell, has been reading from the same script for some time and confirmed again that the bank was in no rush to raise interest rates, despite a recent spike in inflation, and that any increase would be based upon the economy returning to maximum employment and inflation returning to the bank’s 2% target. lf the US economy continues to improve for the rest of the year, it seems highly likely that the Federal Reserve will begin the tapering of the Fed’s bond purchases, that has reached US$ 120 billion monthly since the onset of the pandemic in March 2020. In his annual speech, at the Jackson Hole Economic Policy Symposium, earlier in the week, Powell noted that, “we have said that we would continue our asset purchases at the current pace until we see substantial further progress toward our maximum employment and price stability goals.  .   .    My view is that the ‘substantial further progress’ test has been met for inflation. There has also been clear progress toward maximum employment.”

Latest figures see the country’s GDP – at 6.6% – growing at a faster rate than expected and that last week’s jobless claims had risen to 353k, with its July unemployment rating slipping to 5.4%, with 943k jobs created. One fly in the ointment could be the current rise in the Delta variant that may put these plans on hold.

Last month, British house prices rose 2.1% on the month, to an average US$ 343k, driven by robust demand and a shortage of homes for sales, despite the tapering of the stamp duty holiday on purchases; the price increase is the second largest in fifteen years, with the biggest increase – at 2.3% – seen in April 2021. On an annual basis, the pace of growth accelerated by 0.5% to 11.0%; current values are now 13% higher than before the pandemic. Although the consensus was that the tapering of the stamp duty tax break would see reduced demand, this was not to be, as the key driver turned out to be limited supply.

There is no doubt that Covid has fundamentally changed the way cities are viewed and there has been a marked interest, on a global scale, in emigrating from cities to the country. In the light of the pandemic, many city dwellers are re-evaluating the importance of larger (and generally cheaper) homes, green spaces and a less hectic lifestyle. For example, an August 2020 survey by London Assembly, polled 450 Londoners and the response was that 4.5% of them would definitely move out of the city within the next 12 months; this equates to 416k people. Take Me Home Country Roads!

Posted in Australian economy, Commodities, Covid-19, Dubai economy, Dubai property, Finance, Global Economy, UK economy, US economy | Leave a comment

Take Me Home Country Roads!

Take Me Home Country Roads!                                                              02 September 2021

For the past week, ending 02 September, Dubai Land Department recorded a total of 1,667 real estate and properties transactions, with a gross value of US$ 2.56 billion. It confirmed that 1,080 villas/apartments were sold for US$ 613 million, and 146 plots for US$ 613 million over the week. The top two land transactions were for a plot in Marsa Dubai, selling for US$ 179 million, and another in Al Murqabat for US$ 89 million. The top three transfers for apartments and villas were all apartments in Marsa Dubai, Burj Khalifa and Business Bay selling for US$ 63 million, US$ 54 million and US$ 45 million respectively. The most popular locations were in Jabal Ali First, with 40 sales transactions worth US$ 24 million, Ras Al Khor, with 30 sales at US$ 188 million, and Wadi Al Safa 5, with 14 sales transactions worth US$ 19 million. Mortgaged properties for the week totalled US$ 1.09 billion, including a plot for US$ 545 million in Al Kheeran area. 61 properties were granted between first-degree relatives worth US$ 128 million.

Asteco has carried out a summary of the leading Dubai property locations, and their price movements, on a quarterly and annual bases and some of the results were quite surprising. Of the twelve “villa locations”, four showed double digit rises over both periods – Arabian Ranches – 19% on the quarter and 24% for the year, along with Dubai Sports City (14%:11%), Dubai Hills (13%:20%) and The Meadows (10%:15%), with Mirdiff recording annual growth at 15%, and on the quarter 9%.  On an annual basis, Palm Jumeirah and Dubai Silicon Oasis both saw prices up 10% but posted single digit quarterly growth of 6% and 8%. Of the remaining five – Jumeirah Parks, Jumeirah Village, Umm Suqeim, The Springs and The Lakes – posted annual figures of 9%, 8%, 8%, 2% and 2%, with quarterly returns of 8%, 9%, 8%, 4% and 2%.

In contrast, the fourteen “apartment locations” showed mostly subdued growth and, in six cases, annual losses The top six annual growth locations were The Greens, Dubai Marina, Business Bay, JLT, JBR and Palm Jumeirah with prices up 6%, 4%, 4%, 3%, 2% and 1%. Both Downtown and Jumeirah Village were flat but the six remaining areas – International City, Discovery Gardens, Dubai Sports City, Deira, SZR and DIFC – saw yearly values move southwards by -12%, -11%, -5%, -3%, -2% and -1%, although but one, International City, recorded growth levels of between 1% – 7%.

According to the latest New World Wealth report, Dubai’s total wealth climbed 7.8% to US$ 529 billion by the end of June, compared to the same period in 2020; it also maintained its position as the 29th wealthiest city globally. There are reports that a large number of ultra-high net worth individuals have been showing interest in the emirate’s high-end properties and that many millionaires have moved to Dubai, seeing it a safe and secure location in which to live.  In H1, Palm Jumeirah saw the highest selling price for a villa, at over US$ 30 million, and the highest rental for a villa, at over US$ 1 million. The three most popular places for the emirate’s twelve billionaires, (nine last year), and 54k high net worth individuals, (49.4k last year), were Emirates Hills, Jumeirah Golf Estate and Palm Jumeirah.

In its latest quarterly report, global consultancy Colliers estimated that Dubai will open about 40% of 2021 forthcoming supply to coincide with the 01 October opening of Expo 2020 Dubai. By 30 June, it reckoned that the country’s branded hospitality market, with Dubai the main contributor, topped 108k keys. Over the next two years, it expects that supply will increase by an 8.0% compound annual growth rate. Some estimate that the number of hotel rooms in Dubai could reach 160k by the time of the Expo opening and, even with the Covid cloud hanging over the event, the target is still an optimistic 25 million visitors. Occupancy rates continue to cause concern, as the current level is 23% higher than the same month last year, but it is still 16% lower than in July 2019. On the same lines, revenue per available room has increased 23% on the year but is still 16% lower, compared to 2019 figures.

Dubai Media Office claims that the emirate’s sports sector contributes US$ 1.1 billion to the local economy every year and its contribution to the national and local economy will continue to grow, as the emirate attracts investment and creates more jobs. Some of the contribution derives from a number of national and international events which attracts global visitors. In addition, there are more than 20k people employed in Dubai’s sports sector, along with five factories manufacturing sports equipment and sportswear in the emirate, and more than 2.5k outlets that sell training equipment and merchandise. In addition, there are more than 350 registered companies that organise various sports events and training camps.

Between now and November, Emirates will receive its last three A380s, bringing its fleet size to 118, (almost half of the 248 total ever built); six of this number will be a four-class configuration, with the introduction of Premium Economy seats, which can be found on its London Heathrow and Paris Charles De Gaulle routes. The Dubai carrier expects to be the largest operator of the A380 for the next two decades. As travel restrictions ease, the jumbo will be reinstated on twelve more routes – including Cairo, Frankfurt, Guangzhou, Los Angeles, Manchester, New York JFK and Zurich – by next month.

The latest public auction of Dubai’s special car plate numbers, organised by the RTA, raised almost US$ 10 million, with the five most expensive numbers – E55, W29, X35, V88888 and BV9999 going under the hammer for US$ 994k, US$ 681k, US$ 676k, US$ 270k and US$ 234k. One hundred various numbers were on offer.

The UAE fuel price committee has announced petrol and diesel prices for the month of September 2021, with the three petrol grades all US$ 0.008 higher, on the month, with Super 98, (US$ 0.703), Special 95 (US$ 0.673) and US$ 0.651). Diesel prices will head in the opposite direction – down US$ 0.019 to US$ 0.649 per litre.

Established in 2002, DMCC recorded 204 new member companies – its highest ever August figure, two months after posting its best H1 returns, of 1,230, since 2013.  The free zone is on track to top 20k members by the end of the year. It has recently launched DMCC Crypto Centre – a comprehensive ecosystem for businesses operating in the cryptographic and blockchain sectors.

A new law sees the UAE enhancing transparency in government by holding ministers and senior officials accountable for wrongdoing, allowing the Public Prosecutor to investigate complaints against any senior official. If found guilty, any minister, or an official under investigation, can be banned from travelling and have their money frozen which will also apply to funds of their wives and minors, if necessary. The potential penalties for violators include censuring, forced retirement, job termination, or relief of duties, along with deprivation of pension or bonus at a maximum of 25% of the total. In announcing the decree, HH Sheikh Mohammed bin Rashid Al Maktoum commented, “we are a law-abiding country. The integrity and transparency of our federal government is a top priority.”

The July IHS Markit PMI sees an improvement in the country’s non-oil private sector and confirms that the country’s economy continues to improve, with the index hitting a two year high of 54.0. Three contributing factors pushing the economy are the easing of restrictions, (and the increasing of capacity), at local restaurants, cinemas and malls, cases trending downwards to their lowest since October 2020 and the resumption of tourist visas; rising oil production and higher oil prices have also helped boost the recovery. Output and new business rose at the quickest rates since July 2019, with firms reporting their sharpest rise in new orders for two years, amid soaring domestic sales and strengthening market confidence. One possible drag would be the fact that local banks continue to struggle with rising bad loans, resulting in credit to the private sector being stuck in negative territory.

A Dubai farm, with more than 1.2k date trees, has teamed up with Terraplus Solutions to implement an underground watering system that is claimed could save the UAE an annual one trillion litres of water, equivalent to the amount of water used by half the emirate’s population. Since 2019, experiments have been carried out at the Al Awir farm which sees a 30% reduction in water usage by implementing an underground watering system that saves up to 50k litres of water per tree every year. The new subsurface technology, which has pipes inserted into the ground, allowing water to directly find the trees’ roots, results in the farm now losing 86 million litres, compared to the prior total of 170 million litres. Apart from the water saving, it appears that the amount of crop each tree produces increases by up to 10%. It is thought that there are twenty million date trees in the UAE and that the global agricultural sector uses 70% of all the world’s potable water every year. With such facts, if the technology were installed in the UAE, there is no doubt that it would not only transform the sector but would also allow the UAE, (and the world), to use the money saved on many projects that are currently unaffordable.

Mainly because of the global economic uptick and increased demand, Emirates Global Aluminium, posted a record H1 net profit of US$ 474 million, compared to a loss of US$ 57 million a year earlier, and is 166% higher than the US$ 178 million figure of H2 2020. EBITDA for the half year was 111% higher on the year at US$ 951 million, with revenue climbing 20.0% to US$ 2.94 billion. With the global demand for aluminium high, the future is positive for the country’s biggest industrial company, outside the oil and gas sector, jointly owned by Abu Dhabi’s Mubadala Investment Company, and the Investment Corporation of Dubai. Aluminium was trading at US$ 2,245 in H1, 41.0% higher than a year earlier, as October aluminium futures currently trading at US$ 2.6k.

Kamco Invest’s latest GCC Banking Report noted that gross loans of GCC’s listed banks jumped 4.6% by the end of Q2, compared to the previous quarter, and up 7.1% on the year, driven by broad-based growth seen in all its markets. Total bank revenue for GCC banks increased 3.5% on the quarter, driven by higher net interest income, partially offset by a decline in non-interest income. The two GCC countries, with the lion’s share of the regional balance sheet, were the UAE (with total assets of US$ 840 billion – 29.9% of the total) and Saudi Arabia, with 26.7% of the aggregate. Gross credit came in 0.9% higher at US$ 482 billion, marginally higher than the pre-pandemic gross credit of US$ 480 billion. UAE banks registered their biggest increase in profits in Q2, at 11.8%, after nine out of the sixteen listed banks reported rising net profits.

As widely expected, more than 95% of NMC Health creditors have approved its proposed deeds of company arrangement, (DOCA) restructuring process, resulting in the 34 companies of the UAE’s biggest healthcare provider to exit administration; it is expected that NMC Healthcare will remain in administration in order to pursue potential litigation claims on behalf of itself and the other DOCA companies. The creditors, owed more than US$ 6.4 billion by NMC Health, will see US$ 4 billion of their debts being wiped out in return for equity instruments. In H1, gross revenue for its UAE and Oman businesses beat company expectations by 10% to reach US$ 611 million.

As from 03 October, the DFM will extend its trading time by one hour and will remain open from 10.00 hrs to 1500 hrs. International interest in the local market continues to increase, with latest figures showing that international investors account for 48.2% of its trading activities and own 18.5% of the market capitalisation by the end of June 2021. Interestingly, foreign investors accounted for 69% of new investors on the DFM. Furthermore, in a bid to further promote investors’ participation in the market, the bourse has announced that the minimum trading commission will be waived, with immediate effect. The result was swift, with Wednesday’s trade witnessing a 161% increase, along with the highest level of daily trade count since the beginning of this year, which jumped 146%, YTD, compared to its 2,740 average.

The DFM opened on Sunday 29 August, 196 points (6.8%) higher the previous six weeks, rose 12 points (0.4%) to close the week on 2,912. Emaar Properties, up US$ 0.03 the previous fortnight, gained a further US$ 0.02 to close on US$ 1.15. Emirates NBD and Damac started the previous week on US$ 3.79 and US$ 0.34 and closed flat at US$ 3.79 and US$ 0.34. On Thursday, 02 September, 149 million shares changed hands, with a value of US$ 44 million, compared to 233 million shares, with a value of US$ 44 million, on 26 August.

For the month of August, the bourse had opened on 2,820 and, having closed the month on 2,903, was 83 points (1.6%) higher. Emaar traded from its 01 August 2021 opening figure of US$ 1.11 – up US$ 0.03 – to close August on US$ 1.14. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.37 and US$ 0.35 and closed on 31 August on US$ 3.57 and US$ 0.35 respectively. YTD, the bourse had opened the year on 2,492 and gained 411 points (16.5%) to close the eight months on 2,903, as Emaar traded US$ 0.18 higher at US$ 1.14   NBD and Damac started the year on US$ 3.33 and US$ 0.35 and closed 31 August at US$ 3.77 and US$ 0.35.

At their meeting this week, Opec+ confirmed that it had started to taper a historic production restriction pact, planning to bring two million bpd back to the markets by the end of the year. The bloc, headed by Saudi Arabia and Russia, will begin by increasing output by 400k bpd during the month of September. The fact that the oil supply pipeline is being ramped up saw oil prices fall, whilst the oil market is expected to remain in deficit for at least the next four months, with a six million bpd oil demand growth forecast.

By Thursday, 02 September, Brent, US$ 3.77 (10.9%) higher the previous week, shed US$ 0.82 (1.2%), to close on US$ 70.53. Gold, US$ 50 (2.9%) higher the previous fortnight, gained a further US$ 11 (0.6%) to close Thursday 02 September on US$ 1,810.   Brent started August on US$ 75.19 and lost US$ 3.37 (2.6%) during the month, to close on US$ 71.82. YTD, it started the year trading at US$ 51.80 and gained US$ 20.02 (38.6%) to close on US$ 71.82 during the first eight months of the year. Meanwhile, the yellow metal opened August trading at US$ 1,817 and shed US$ 2 (0.1%), during the month, to close on US$ 1,815. Over the year it has lost US$ 80 from its opening year balance of US$ 1,895.

It is estimated that 835k new UK companies were registered in the twelve months to January 2021 – 42% higher than a year earlier, and despite the period covering the devastated economy caused by the onset of Covid; in the US, the figure was 4.4 million, 24% higher. In this day and age, not only do they all need a distinctive name but also a domain name, more so for the many e-commerce entities set up in tandem with the expansion of people shopping online. A stand-out name and domain name will often be the unique selling point that ensures that it will often become the “first to go to company” as similar entities vie for the same business; in days gone by, this would not necessarily have been the case. There is no doubt that demand for business names has soared and that a host of websites has sprung up that can help them both to pick one and register a connected domain.

Amazon is planning to extend its current 275k global payroll, by a further 55k, for corporate jobs and roles in robotics, research and engineering. 72.7% of the total will be in the US, with a further 2.5k being added in the UK, where it has recruited 10k already this year. A big percentage will be required in the company’s new satellite launch programme – Project Kuiper – to widen broadband access. In the past, the new chief executive, Andy Jassy, had commented that the company needs more staff to keep pace with expansion of its retail, cloud computing and advertising arms.

Covid has claimed another victim, with Marks & Spencer announcing that the retailer will no longer sell men’s suits at more than 57% of its 254 bigger stores, as men’s preference has shifted to “smart separates”, such as chinos and shirts, with an increased demand for casual wear. M&S reckons that they only sold 7.5k suits in the first two months of the pandemic – 80% lower than in the same period a year earlier. Market research consultancy, Kantar Group, has estimated that suit sales last year were 54% lower, at two million, compared to the 4.3 million sold in 2017. The study also noted that the average spend on men’s suits was 62.1% lower, at US$ 219 million, to the twelve months to July 2021, compared to five years earlier.

Zoom Video Communication posted a 70.6% rise in Q2 net profit to US$ 317 million, driven by a 54%, year on year, revenue hike to US$ 1.02 billion. It has updated its full-year revenue forecast to over US$ 4.0 billion, which would be 55% higher than their 2020 return. It put the revenue increase to “acquiring new customers and expanding across existing customers”. The tech company is confident that, even if the pandemic threat were to go away, the demand for video conferencing will not decline, as companies continue to adopt hybrid work models. During the period, it invested US$ 82 million in R&D, as well as acquiring, cloud call centre software provider Five9 for US$ 14.7 billion, as part of its strategy to adapt to the post-pandemic world; this was the fourth purchase by Zoom since the start of the Covid-19 pandemic. With total cash and marketable securities of US$ 5.1 billion, Zoom has enough finance to acquire new start-ups and competitors in the same space of video conferencing.

In July, coffee prices had surged to seven-year highs, after reports that frost had damaged crops in the world’s biggest producer Brazil, with the price for arabica coffee rising above the US$ 2 level, or 60% higher, YTD. Lower-quality robusta coffee prices performed likewise – up 40% YTD – to its highest level since October 2017. Late August saw reports that the world’s second largest coffee producer, Vietnam, was having to deal with similar problems faced by all global producers, including a dire shortage of containers, soaring freight rates and various climatic issues, including frost and rain. In addition, the country has had to deal with a fresh outbreak of the delta variant which has led to stringent travel curbs in the country, badly impacting some key producing areas of the Central Highlands.

Exactly ten years ago, when Tim Cook took over the reins of Apple from its co-founder, Steve Jobs, he struck a deal that has already made him a billionaire. A company filing with the US SEC confirms that he has sold most of the five million shares, he has received as part ofthe deal, for more than US$ 750 million.  Part of the agreement was contingent on the value of Apple’s shares, over the past three years, surpassing at least two-thirds of companies in the S&P 500. Cook silenced all those critics, who thought him to be too technocratic to match Jobs’ success, by the fact that Apple shares have returned more than 1,100%, its revenue has doubled, and its market value has topped US$ 2.5 trillion.

Even though most member countries posted Q2 expansion, averaging 1.6%, compared to 0.6% in Q1, the OECD economies still remain an average 0.7% below pre-Covid levels. The bloc includes a group of major world economies from the Eurozone, the US, Japan and the UK. Q2 growth levels varied, with the UK top of the list, growing 4.8%, (following a 1.6% contraction in Q1), ahead of Italy with a 2.7% growth, compared to just 0.2% the previous quarter. Five other countries that make up the “Major Seven” – US, Germany, France, Canada and Japan – recorded the following growth levels of 1.6%, 1.6%, 0.9%, 0.6% and 0.3% in Q2. Four months ago, the OECD upgraded its 2021 growth forecast from 4.2% to US$ 5.8%, whilst noting that many member states will only return to pre-pandemic levels by the end of 2022. (After declining 0.3% and 0.1% in Q1, the euro area and the EU posted GDP growth of 2.0% and 1.9% respectively).

As its central bank raises its base rate from a record low of 0.50% – set three years ago – to 0.75%, South Korea has become the first major Asian economy, and the first G20 nation, to lift rates since the pandemic began. The country’s household debt and home prices have recently soared, and it is hoped that this move may improve the situation and curb the risks that high inflation and surging public debt may bring to the economy. It will not be too long before other nations follow suit by raising their own bank rates and curtail their massive stimulus packages, introduced to save their economies in the first eighteen months of Covid.

Despite mining stock returning impressive returns, the Australian market traded relatively flat on Monday, with the ASX 200 trading at 7,490 points; the standout performer was Fortescue Metal, up 6.3%, at US$ 15.51, with the world’s fourth largest iron ore miner posting a 117% jump in annual profit to US$ 10.3 billion, after shipping a record amount of iron ore to take advantage of soaring prices. Those prices topped a record US$ 233 in May, attributable to Brazilian supply problems and high Chinese demand, but they have since dipped 32.2% to US$ 158 a tonne; the current price is expected to nudge slightly higher for the rest of the year. With a final dividend of US$ 1.54 expected, the total annual payout will come in at US$ 2.61 per share, equating to a total of US$ 8.0 billion, of which its major shareholder, Andrew Forrest, will take home US$ 681 million.

The latest CoreLogic report notes that, in August, Australian property prices moved 1.5% higher to US$ 491k, with Darwin, Canberra and Hobart posting annual rises of at least 22.0%, with Melbourne reporting the slowest price rise at 13.1%. Regional property rises of 22% were higher than those seen in capital cities, with an 18% increase.  On a monthly basis, the plaudits go to Hobart, Canberra and Brisbane, with increases of 2.3%, 2.2% and 2.0%. Although housing values are still heading north, they are moving at a slower rate than of late. Sydney and Melbourne median values rose to US$ 766k and US$ 567k by the end of August, with the number of properties advertised for sale 5.8% lower than the five-year average, pushing prices higher. Australia’s median property price has risen by over US$ 76k in the past year, equating to US$ 1.46k per week. Another interesting statistic sees house prices rising almost eleven times faster than wages growth over the past year.

An ABC report discovered that 20k companies, (of all sizes), tripled their turnover yet accrued US$ 275 million in JobKeeper during the first three months of the pandemic, with a further 15k entities doubling their turnover, earning US$ 236 million, whilst receiving government support through JobKeeper. It is obvious that thousands of profitable companies qualified for the subsidy based on projected turnover falls that never eventuated. It also estimated that US$ 4.4 billion was received by companies that increased turnover during the first six months of the pandemic. An earlier ABC report previously noted that over 16% of JobKeeper businesses did not suffer a downturn during the three months of the pandemic, racking up nearly US$ 3 billion in subsidies. When first introduced, most businesses with US$ 740 million, AUD 1 billion), revenue were required to show or predict at least a turnover fall of 30% to qualify JobKeeper, with a 50% turnover threshold for big companies and 15% for charities. Once accepted into this government scheme, companies continued receiving payments until around the end of September, when turnover tests changed. At no stage did the legislation, which has cost more than US$ 66 billion, address what would happen if companies were not impacted or actually “benefitted” from Covid so there was no mechanism to recoup money from such firms. By the end of the week, there were reports that because tax commissioner, Chris Jordan, had failed, with a Senate request, to forward details of large private companies, with a turnover greater than US$ 7.4 million, (AUD 10 million), that received JobKeeper payments, he could be fined or sent to jail under the Parliamentary Privileges Act.

Finally, there is good news that its economy has bounced back from the COVID recession, as national growth rose 9.6% over the year to June, and 0.7% to the June quarter. However, economists note that the data is “inherently backward-looking” and expect that the real impact of the recent lockdowns may only be felt this month, where some analysts are looking at a 3.0% quarterly contraction. The country’s terms of trade rose 7% in the quarter to its highest level in history and that strong export prices for mining commodities were the main driver, contributing to a 3.2% increase in nominal GDP. Domestic demand was also a key factor in the GDP figures, with household spending 1.1% higher, but still 0.3% down on the figure in December 2019. Public spending came in 7.4% to the good.

Reports from China indicate that the government has unilaterally banned children, (i.e., anyone under the age of 18), from playing online games for more than three hours a week, citing their concern about youngsters getting addicted to gaming. Online gaming companies will be barred from providing gaming services to younger users, in any form, outside those hours, and authorities will increase the frequency and intensity of their inspections. Prior to this edict, the hours were restricted to an hour and a half per day and three hours on public holidays. In a notice published by the National Press and Publication Administration, juvenile playing time will be restricted to between 8pm – 9pm on Fridays, weekends and on public holidays, starting today, 02 September. With this latest news, and the ongoing crackdown, by the regulators, on the tech giants, there is little wonder why their stocks are falling on the world’s bourses. 

The Federal Reserve’s chairman, Jerome Powell, has been reading from the same script for some time and confirmed again that the bank was in no rush to raise interest rates, despite a recent spike in inflation, and that any increase would be based upon the economy returning to maximum employment and inflation returning to the bank’s 2% target. lf the US economy continues to improve for the rest of the year, it seems highly likely that the Federal Reserve will begin the tapering of the Fed’s bond purchases, that has reached US$ 120 billion monthly since the onset of the pandemic in March 2020. In his annual speech, at the Jackson Hole Economic Policy Symposium, earlier in the week, Powell noted that, “we have said that we would continue our asset purchases at the current pace until we see substantial further progress toward our maximum employment and price stability goals.  .   .    My view is that the ‘substantial further progress’ test has been met for inflation. There has also been clear progress toward maximum employment.”

Latest figures see the country’s GDP – at 6.6% – growing at a faster rate than expected and that last week’s jobless claims had risen to 353k, with its July unemployment rating slipping to 5.4%, with 943k jobs created. One fly in the ointment could be the current rise in the Delta variant that may put these plans on hold.

Last month, British house prices rose 2.1% on the month, to an average US$ 343k, driven by robust demand and a shortage of homes for sales, despite the tapering of the stamp duty holiday on purchases; the price increase is the second largest in fifteen years, with the biggest increase – at 2.3% – seen in April 2021. On an annual basis, the pace of growth accelerated by 0.5% to 11.0%; current values are now 13% higher than before the pandemic. Although the consensus was that the tapering of the stamp duty tax break would see reduced demand, this was not to be, as the key driver turned out to be limited supply.

There is no doubt that Covid has fundamentally changed the way cities are viewed and there has been a marked interest, on a global scale, in emigrating from cities to the country. In the light of the pandemic, many city dwellers are re-evaluating the importance of larger (and generally cheaper) homes, green spaces and a less hectic lifestyle. For example, an August 2020 survey by London Assembly, polled 450 Londoners and the response was that 4.5% of them would definitely move out of the city within the next 12 months; this equates to 416k people. Take Me Home Country Roads!

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The Boys Are Back In Town

The Boys Are Back In Town                                                                     26 August 2021

For the past week, ending 26 August, Dubai Land Department recorded a total of 1,345 real estate and properties transactions, with a gross value of US$ 1.69 billion, and is heading for a bumper month. It confirmed that 1,163 villas/apartments were sold for US$ 668 million, and 215 plots for US$ 327 million over the week. The top two land transactions were both for plots in Hadaeq Sheikh Mohammed bin Rashid, selling for US$ 9 million and US$ 8 million. The most popular locations were in Jabal Ali First, with 75 sales transactions worth US$ 86 million, Hadaeq Sheikh Mohammed bin Rashid, with 35 sales at US$ 20 million, and Palm Jumeirah, with 11 sales transactions worth US$ 13 million. Mortgaged properties for the week totalled US$ 510 million, including a plot for US$ 109 million in Al Khairan area. 99 properties were granted between first-degree relatives worth US$ 207 million.

As Dubai’s economy bounces back to life, along with the emirate’s residential property sector, a Reuter’s poll of eleven housing experts sees the market on a steady course, with prices expected to rise modestly over the next couple of years. Three months ago, their estimate was that house prices would rise 3.0% and 2.5% in 2021 and 2022; this has been upgraded to 1.1% and 2.8%. To an observer, these figures seem to be on the light side and will come in a lot higher, especially when other global locations, such as Australia, New Zealand and Canada have had property hitting record high levels, but Dubai prices are still around 36% lower than in the bull market of 2014.

Another week and another report by an international agency. This time, CBRE Research noted that total transactions in H1 surged 69.2% and 46.4%, compared to the same periods in 2020 and 2019, as demand for bigger homes increased; it estimated that average home prices only increased by an annual 2.8%, led by the demand for villas and larger homes, with the apartment segment lagging somewhat behind and even recording price reductions. Secondary market transaction volumes jumped 148.4%, while off-plan transaction volumes were at a much-reduced figure of 13.4% in H1. When it comes to the supply issue, CBRE indicated that 18.6k units were handed over in H1, with a further 37.5k expected to be added to Dubai’s property portfolio by year end. On that basis, 56.1k will be handed over in 2021, well down on an earlier estimate pf 83.0k – but expect the figure to be on the south side of 50k. (In the past, it was common to see some consultancies overestimate new property forecasts, sometimes by 50%, which may have encouraged potential buyers to delay their purchases). One of the reasons for the current boom is that new supply coming to the market also remains lower than expected. The consultancy also noted that for the rest of 2021, “prime prices will be in positive territory but not at the same growth levels that we’ve seen to date”.

Union Properties announced the launch of Motor City Views, featuring 880 residences, comprising 313 studios, 427 one-bedroom, 133 two-bedroom and seven three-bedroom apartments. The apartments will be divided into three buildings, each with seven floors, and are serviced by recreational areas designated for residents such as air-conditioned sports halls, a covered children’s playground and swimming pools. The development, which will cover an area of 857k sq ft, will also have a retail area, including a shopping mall, with diverse shops, restaurants, and various recreational activities.

This week saw the sale of a Dubai luxury villa for over US$ 27 million – the third time this year that a property sale has exceeded the AED 100 million mark – and a sure sign that the market is on a strong recovery curve. The luxury villa, sold by Luxhabitat Sotheby in less than a month, became the highest value property ever sold in Dubai Hills Estate, and was bought by an anonymous buyer.

As would be expected, the chairman of Danube Properties, Rizwan Sajan, expects demand for Dubai property to pick up, as foreign investors continue to snap up unsold units, amidst a steady recovery in prices. He noted that “a good number of high-net-worth foreign investors from India, Russia and other countries are flocking to Dubai to buy real estate assets at a very attractive price.”  To take advantage of the bullish market, Danube is planning to launch its first project, in Arjan, since the outbreak of the Covid-19 pandemic, before the end of October. The Danube chairman also noted that “in the last 28 years, I have seen three ups and downs. But whenever there is a crisis, Dubai has emerged stronger because its fundamentals are very strong.”

Dubai Electricity and Water Authority has announced the completion of its Water Pumping Station project at the Mohammed bin Rashid Al Maktoum Solar Park. The project, which has a daily capacity of 7.5 million imperial gallons of water, cost US$ 6 million. DEWA confirmed that all electricity and water infrastructure expansion plans are developed based on demand forecast in Dubai until 2030. The station uses clean energy from the solar park and can be operated remotely.

Dubai-based Emirates Central Cooling Systems Corporation will invest US$ 234 million, in a deal with Nakheel, to acquire the developer’s district cooling assets which they will also manage and operate. Empower’s new portfolio serves more than 18k customers in 17 major urban projects through 19 plants across Dubai, in locations such as The Gardens, Nakheel Mall, Dragon Mart, Jumeirah Islands, Souk Al Marfa on the Deira Islands, The Circle Mall, Al Khail Avenue Mall and others. (District cooling companies deliver chilled water through insulated pipes to properties). Similar deals have occurred over the past nine months, including December’s purchase of two Saadiyat Island district cooling units by Tabreed from Aldar Properties in a US$ 262 million deal and the more recent April agreement that saw Emaar sell its Downtown Dubai district cooling business, for US$ 676 million, to Dubai’s Tabreed.

The Emirates Tourism Council notes a 13.1% H1 rise in hotel revenue to US$ 3.08 billion, as occupancy rose from 53.6% to 62.0%, driven by the country’s rapid Covid-19 vaccination campaign. Some 8.3 million guests, a 15% hike in year-on-year numbers, stayed in the UAE in H1, with the number of “local” hotel guests 77% higher, at 2.3 million. The UAE has seen 80% of its near ten million population inoculated. Another major improvement is expected in H2, during the six-month Expo 2020 Dubai starting on 01 October – which is only five weeks away. The economy of Dubai has shown positive indicators of a quicker than expected rebound and tourism is one of the drivers for the July improvement in the emirate’s IHS Markit PMI.

Dubai’s Crown Prince, Sheikh Hamdan bin Mohammed, has noted that the recovery of the tourism sector is “gathering pace”, despite the challenges currently faced by international markets. With the twin aims of increasing the inflow of international tourists, as well as targeting new source markets, the Emirates Tourism Council has approved a joint action plan of the Ministry of Economy and local tourism departments. Furthermore, the plan includes initiatives such as large-scale campaigns promoting several “promising destinations”, introducing long-term and multiple-entry tourist visas, (including the possibility of a five-year tourist visa), and marketing the country’s major tourism spots.

According to the RTA, marine public transport, (ferry, abra, water taxi and water bus), transported 5.7 million riders in H1 – 20.5% higher than the comparative 2020 figure.

A strategic alliance sees Outlet Mall join with the Lulu Group to form the region’s first and largest regional megamarket concept; targeting both B2B and B2C customers, and encompassing an area of some 200k sq ft, it will introduce the region to the cash-and-carry concept. This alliance will focus on bulk buying prices and will offer UAE residents exclusive bargains, as well as a broad range of low-cost, high-value products at competitive prices. Furthermore, with the expansion, Dubai Outlet Mall, which first opened in 2007, will spread over 3.5 million sq ft, to become the largest outlet mall on the planet, with a catchment area of 1.2 million customers.

Dubai’s Sharaf Group is to build an ultra-modern ‘Used Lead Acid Battery’ recycling facility, built on a 250k sq ft area, in Dubai Industrial City. The project is in line with the emirate’s vision of “Clean Environment” and “Zero Waste” by 2050 and the fully automated facility will process 21k tonnes or 85% of the ULABs generated in Dubai every year. The facility is being built by Italian battery recycle plant manufacturer, Engitec Technologies, and will commence operations in Q1 2023.

In the seventeen months to April 2021, it is reported that local Emirati authorities, assisted by HP staff members, conducted three major raids on several large-scale counterfeiting storage facilities in Dubai and Ajman, resulting in 207k illicit items being confiscated. Over that period, multiple major counterfeiting schemes, designed to assemble and distribute illegal HP printer cartridges in the UAE market, have been permanently closed down – a win win win situation for the government, HP and consumers.

The top ten UAE banks, including four from Dubai – Emirates NBD, Dubai Islamic Bank, Commercial Bank of Dubai and Mashreq – posted a healthy Q2 Return on Equity of 10.9%, its highest level since Q4 2019 when it reached 13.3%. The main drivers behind this improvement were a 2.8% quarter on quarter increase and lower impairment charges. The Central Bank notes a strong, ongoing domestic credit demand across all sectors of the economy, but the US Fed’s commitment to maintaining the current low level of interest rates is expected to keep domestic banks’ income streams under pressure. Q2 also witnessed deposit growth outpacing loans at most banks, as consumers and businesses cut spending, which in turn saw a boost to liquidity; the asset quality of these banks has also  stabilised overall, after deteriorating in 2020.

Embattled Drake & Scull International announced an H1 net profit of US$ 21 million, with revenues of US$ 22 million, with a stable order book of US$ 96 million; it has ongoing operations in the UAE, Algeria, Tunisia, Palestine, India, Kuwait, Iraq, and Germany. The Dubai-based construction firm expects its 600 creditors’ approval of its restructuring plan by the end of Q3 and noted that its financial restructuring was progressing positively. As part of the restructuring plan, the company’s capital will be raised, and priority in subscribing to new shares will be given to existing shareholders.

Majid Al Futtaim posted increases in both EBITDA, (US$ 436 million) and net profit (US$ 18 million), despite a 10% decline in H1 revenue to US$ 4.25 billion. The privately held company, which owns and operates 28 shopping malls, 13 hotels and four mixed-use communities, noted that the 2.0% increase in earnings was primarily down to stabilisation of the retail market and steady asset valuations. The company’s retail business registered 12% declines in both revenue and EBITDA at US$ 3.6 billion and US$ 170 million respectively. Its property arm posted 6.0% rises in both revenue to US$ 436 million, and EBITDA to US$ 300 million. Revenue from the company’s hotels unit remained flat, year on year, at US$ 40 million, whilst there was a 25% jump from the company’s leisure, entertainment and cinemas businesses to US$ 137 million, albeit from a low base last year. The ME’s largest mall operator noted that there had been “encouraging signs of recovery” across its markets, as consumers gain assurance in resuming their pre-pandemic activities, and appeared confident in returning to pre-pandemic levels over the next two years.

ENBD Reit announced that its net asset value declined 3.3% on the quarter to US$ 174 million, mainly attributable to sustained valuation pressures and softening real estate market conditions. The Shariah-compliant real estate investment trust, which posted gross rental income 11.4% lower at US$ 7.5 million, managed to reduce operating expenses by 16.9% and saw occupancy dip 1% to 75%. The weighted average unexpired lease term increased 0.77 years to 3.97 years as 30th June 2021, compared to the previous year. Shareholders will be paid the equivalent of an 8.6% annualised dividend return of ENBD Reit’s share price.

Islamic Arab Insurance Company reported a net H1 income of US$ 11 million, driven by a solid performance in improving core business profitability and investment income, up 87.5% to US$ 9 million. The company, listed as Salama on the DFM, posted a 1.2% rise in net underwriting income to US$ 23 million, attributable to measures to revamp and restructure operations and processes and related IT infrastructure, as well as to tighten underwriting controls. Its subsidiaries, in Egypt and Algeria, also posted positive results, but their combined profit dipped 20.3% to US$ 4 million. In Q2, the insurance company’s focus on the local market saw Gross Written Contributions at US$ 179 million and an 11.7% increase in invested assets to US$ 348 million. The Board will meet next week to discuss the distribution of semi-annual dividends to shareholders.

The DFM opened on Sunday 22 August, 134 points (5.0%) higher the previous five weeks, rose 62 points (2.8%) to close the week on 2,900. Emaar Properties, up US$ 0.01 the previous week, gained a further US$ 0.02 to close on US$ 1.13. Emirates NBD and Damac started the previous week on US$ 3.68 and US$ 0.34 and closed at US$ 3.79 and US$ 0.34. On Thursday, 26 August, 233 million shares changed hands, with a value of US$ 44 million, compared to 99 million shares, with a value of US$ 50 million, on 19 August.

By Thursday, 26 August, Brent, US$ 8.16 (10.9%) lower the previous three weeks, regained US$ 3.77 (5.6%), to close on US$ 70.53. Gold, US$ 38 (2.2%) higher the previous week, gained a further US$ 12 (0.7%) to close Thursday 26 August on US$ 1,799.   

On Monday, Bitcoin topped the US$ 50k level for the first time in three months, trading at US$ 50,267. It had fallen to US$ 27.7k in January, and to under US$ 32k mid-July, following a crackdown in China and a decision by Elon Musk’s Tesla not to accept it as payment. However, with more mainstream financial companies beginning to utilise the digital currency, and an announcement by PayPal saying it would allow UK customers to buy, sell and hold a range of cryptocurrencies, Bitcoin reacted with prices heading north again. It also continues to be helped by the Fed holding interest rates at record lows and making riskier assets more attractive to investors, with its ongoing support of the post-pandemic US economy. Any newcomer to the cryptocurrency market is advised to wait until Bitcoin declines to US$ 30k again before taking the plunge.

The amount raised by start-ups in the MEA region has topped US$ 2.1 billion, YTD, and is more than double the figure of the annual funding raised over the past three years, driven by the growth of the region’s fast growing digital economy; the two leading sectors, with the strongest investor backing, were fintech and food services. Management consultancy, RedSeer also expects the size of the region’s consumer digital economy to more than double by 2023, led by the online retail and travel sectors. Meanwhile, Bain & Company expects that MEA online sales will top US$ 28.5 billion by the end of 2022 – more than triple the 2017 total of US$ 8.3 billion.

There is no surprise to see that q-commerce is gaining traction in the region, with the fairly new business model being defined by very fast delivery from local shops, restaurants, and dark stores, and usually characterised by an under 2-hour delivery. Latest Redseer research indicates that q commerce – with the most common example being online food deliveries – has already taken up 20% of the Mena region’s digital economy and will contribute US$ 20 billion in gross merchandise value over the next three years.

A Spac (special purpose acquisition company) announced that it has entered into a Merger Agreement, under which Virgin Orbit will become a publicly traded company, utilising its parent company, Vieco US Inc, and NextGen Acquisition Corp.  On completion, this transaction will provide finance of US$ 483 million, comprising US$383 million of cash, held in the trust account of NextGen (assuming no redemptions), and a US$100 million fully committed PIPE, (Private Investment in Public Equity). This will value Virgin Orbit at approximately US$ 3.2 billion and the process is expected to close by year end. The ownership will probably comprise Virgin Orbit’s existing shareholders base, including Virgin Group, Mubadala Investment Company, management and employees, holding an 85% stake, NextGen – 10 %, PIPE investors – 3% and SPAC sponsor – 2%.

Only recently, Morrisons’ directors had recommended investors accept a US$ 9.2 billion offer from a consortium led by US-based investment group, Fortress. Now it has changed its mind and accepted a better US$ 9.7 billion offer from another US private equity group Clayton, Dubilier & Rice, who, in June, had put a much lower US$ 7.6 billion bid which was turned down then.Fortress said it was “considering its options”, amid signs shareholders think the battle is not over. The latest offer represents a 60% premium to Morrisons’ share price before takeover interest emerged in mid-June. However, Morrisons’ shares, which jumped 4.4% on Friday, after the latest news, are trading above the new and improved offer price – a sure sign that there is more to run in this saga. (It seems that UK companies are the flavour of the month for overseas investors, as indicated by the fact that they have spent more buying UK listed companies in the last eight months than they had in the past five years; maybe sterling should be trading at a higher level).

Marks & Spencer announced that, over the previous nineteen weeks to 14 August, revenue from its food business was 10.8% and 9.6% higher compared to 2020 and 2019. It posted that clothing and home business had seen a “good recovery”, with revenue up 92.2% from last year and down just 2.6% on 2019. On this rare piece of good news for the retailer, as well as it issuing a profits upgrade, there are signs that its latest turnaround plan – “Never The Same Again” – is working; on the news, its share value traded 11.0% higher.

Staggering figures from the UK see that the country has lost 83% of its main department stores in the five years, since the collapse of the BHS chain, and that 67% of these remain unoccupied, with 237 big stores still empty. A study by CoStar noted that in 2016, the country was home to 467 stores, with the current figure now dropping to 79. Of the 388 stores that closed, 237 are still sitting empty, with a further 52 having plans in place for a change in usage.

According to CelebrityNetWorth, Charlie Watts, who died this week, was worth in excess of US$ 250 million, most of which came from ownership of shares in corporate entities of The Rolling Stones, which include royalties, album sales and tours, as well as other business ventures. The Rolling Stones’ member, since 1963, was considered to be one of the best drummers in the rock era and was the sixth richest drummer behind Ringo Starr (The Beatles – US$ 360 million), Lars Ulrich (Metallica – US$ 350 million), Dave Grohl (Foo Fighters – US$% 320 million), Larry Mullen Jr (US$ 300 million – U2) and Phil Collins (US$ 300 million – Genesis).

To see how bad the situation was in the seventeen-year Sepp Blatter FIFA era, one has just to see that the US Department of Justices has criminally charged fifty defendants and returned US$ 200 million to the global football body, five years after it started its corruption probe. Of that total, twenty-seven people and four corporate entities have pleaded guilty, with two people convicted at trial, with the money “raised” from the bank accounts of former officials, who were prosecuted for corruption, being used by the FIFA Foundation, an independent foundation, to help finance football-related projects. Blatter’s successor, Gianni Infantino, who earlier had been Secretary General of UEFA from October 2009 under the disgraced Michel Platini, commented that “I am delighted to see that money which was illegally siphoned out of football is now coming back to be used for its proper purposes, as it should have been in the first place.” It may be a bit rich of him to further claim, “we have been able to fundamentally change FIFA from a toxic organisation at the time, to a highly esteemed and trusted global sports governing body.” There is still some concern of Infantino’s involvement in the European Super League talks he has since distanced himself from. Corruption will probably never escape from football, with the latest scandal being Swiss prosecutors continuing a corruption investigation into two individuals, who worked for UEFA in the run-up to EURO 2020.

One of the biggest casualties of the pandemic was the global travel and tourism sector, battered by lockdowns, travel restrictions and border closures. It is estimated that its contribution to the global GDP almost halved from 11.4% to 5.5%, and more than US$ 4.5 trillion was “lost” last year because of the impact of Covid; over that time, 62 million jobs were lost in sector.

With Sydney under another lockdown, latest figures see payroll jobs continuing to head lower. It is estimated that payroll jobs have fallen 8.9% in Greater Sydney and 3.8% in NSW since lockdowns first began and that the negative momentum is accelerating; the main sector impacted is construction, with a fall of 22% across the state. Payroll job losses in the accommodation and food services, retail trade and construction industries accounted for 44.3% of job losses across Australia in the second half of July, and 45.4% in NSW. This is in direct contrast with the national unemployment rate falling to a thirteen-year low of 4.6% because of thousands of workers leaving the labour pool altogether, resulting in the labour force becoming smaller on a national scale.

It seems incongruous that Australia does not have to follow the leads of US and UK governments and reveal how many multiples of the median worker’s wage that is paid to the company supremos. The “CEO pay ratio”– that compares the average employee’s wage to how much the boss gets paid –  is not mandatory but many are now calling for its implementation to clarify who gets what in major Australian entities. It is reported that in the US, Brian Niccol, the chief executive of US fast food chain Chipotle, has this ratio at a staggering 1,129:1. It has been estimated , utilising  publicly available figures from before the coronavirus pandemic in 2019, those CEOs who out-earned workers by more than one hundred times included Alan Joyce, the Qantas chief, (126:1), Woolworth’s Brad Banducci, (143:1) and Goodman Group’s Gregory Goodman, (169:1). It is suggested that one of the top fat cats was CSL’s Paul Perreault, with a CEO pay ratio of 380:1. Critics want it a legal requirement so that observers can consider whether there is a “fair” split between the workforce and the management team and to emphasise, in some cases, the soaring gaps between executives and workers. Since being mandated in the US and UK, it has exposed the well-paid leaders of listed companies, boosted the income of minimum wage workers and increased macro remuneration transparency. After a decade-long slide, last year wage growth nudged a record 1.4% higher but what the Australian CEOs actually received is another story.

With the surprise election last week of Hakainde Hichilema as President of Zambia, Africa’s second biggest copper producer, there is increased hope that US$ 2.0 billion of expansion plans can start, once an agreement in the long running dispute over royalties is settled. The copper industry and the outgoing president, Edgar Lungu, had a fractious relationship that saw the industry stagnate, despite recent high copper prices. The slowdown can be seen from comparing production in Zambia and the Democratic Republic of the Congo. In 2010, Zambia produced nearly twice as much of the metal than the DRC – now its northern neighbour produces twice as much as Zambia. In the later stages of Lungu’s six-year presidency, some of the larger players, such as First Quantum Minerals, which accounts for more than 50% of the country’s copper output, and EMR Capital have the finance to fund their projects, while others have to spend “hundreds of millions of dollars” that have been held back since 2019 because of tax changes that deterred investment. The new incumbent may have to allow miners to deduct mineral royalties from the tax they pay on profits, as well as sliding-scale taxes that are levied on a pay-as-you-earn basis.

In the twelve months to May, copper prices jumped 123% from US$ 4.8k to US$ 10.7k but has since declined to US$ 9.4k by 26 August. It is estimated that Zambia is the seventh largest global copper producer, mining 882k tonnes of the total output of 18 million metric tonnes. Its importance to the country’s economy can be seen that it contributes over 26% to its GDP and accounts for over 70% of Zambia’s exports. Last year, it became the first country to default on an external debt and is still awaiting IMF’s approval of a US$ 13 billion bailout, which is probably dependent on reforming the mining industry. There is no doubt that mining is the key to the country reducing its 14.4% budget deficit to GDP and creditors restructuring its US$ 12.5 billion external debt.

Any cuts to Australia’s iron exports have a significant impact on the economy and government budgets. Two interesting facts about the commodity are that it accounts for 20% of the country’s exports and 5% of Australia’s GDP; China also buys about 70% of the iron ore Australia exports which makes up about 60% of ore Australia exports, which in turn makes up about 60% of all the iron ore China imports. For the fiscal year, ended 30 June 2021, the total company tax paid by miners was around US$ 24 billion. Needless to say, any cuts to Australia’s exports – or major price falls – will have a significant impact not only on miners’ profits but also on the economy and government budgets.

With the country in almost total lockdown, and its international tourism non-existent, the Australian economy needs increased exports to keep moving forward and that iron ore has played an important role in ensuring Australia’s economy remains buoyant. Prior to the onset of the pandemic, iron ore prices hovered around the US$ 100 a tonne, but when May 2020 arrived all bets were off and, in the twelve months since then, its price has more than doubled to top US$ 220 by the end of May 2021, before falling 27.4% to US$ 160 by 26 August.

There are reasons behind this boom/bust saga. When the pandemic first hit in China, its response was fast and positive – once the lockdown was eased, the Chinese started building apartments and infrastructure which requires steel, (pig iron, one of the main raw materials to make steel, is made from iron ore). The second factor was Covid in Brazil which led to many of its mines being closed down, with the subsequent cut in production from that country, that led to higher prices. Now twelve months later, the Brazilian mines have all reopened and it is estimated that, so far this year, it has shipped about 12% more iron ore than at the same point last year. In the meantime, this returning supply is coming into a market of falling demand, as the Chinese economy – specifically property and infrastructure – has slowed markedly, with the negative knock-on impact on prices, as the infrastructure and property sectors account for up to 25% and 30% of China’s steel demand respectively. Another point is that China does not want to increase steel output this year, as it has already produced too much in H1. Furthermore, China will almost certainly cut back on iron ore, as next February Beijing will host the Winter Games and the administration will not want two weeks of smog dominating the global media, so will cut back on construction work, weeks before the event.

There is no doubt that Australia has ridden the crest of a wave over the past year, but with the double whammy of reduced demand and falling prices, iron ore will no longer be able to carry the economy as it did last year; the government budget is looking at iron ore price falling back to US$ 55 by the end of Q1 2022. It is estimated that for every US$ 10 per tonne decrease in the iron ore price, relative to the budget forecast this financial year, Australia’s nominal GDP and federal government tax receipts are expected to fall US$ 4.6 billion and US$ 931 million respectively.

For the year ending 30 June, Qantas turned in a US$ 1.83 billion loss, slightly down on the previous year’s deficit of US$ 1.96 billion, and this despite revenue tanking 58.4% to US$ US$ 5.93 billion. The Australian carrier estimates that Covid has cost it over US$ 16 billion in lost revenue – because of a full year of closed international borders and more than 330 days of domestic travel restrictions – and the reduction in this year’s loss is mainly down to an aggressive cost-cutting campaign, (already at US$ 650 million), and staff stand-downs, mainly in the worst hit states of NSW and Victoria. The airline is hopeful that some international routes could open by year end and is planning to bring five A380 aircraft back into service next year. Over the financial year, Qantas paid down around US$ 500 million of debt and is currently discussing a potential land sale in Mascot, near Sydney airport, to raise even more finance; at year end, the Aussie carrier had US$ 3.8 billion in cash and available debt facilities.

With all this economic turmoil, there is no surprise to see the Aussie dollar tanking, trading at US$ 0.7244 on 26 August, 8.5% lower from its US$ 0.7913 mark six months ago in February. Normally a low dollar would be manna from heaven for the tourism sector, but with no international travellers allowed in the country, no benefit has accrued. One other major sector – international education – cannot gain from a lower dollar when there are only a limited number of overseas students in the country. To complete the trifecta, a lower dollar will inevitably increase prices of imports, resulting in what is known as cost push inflation.  This, in turn, will reduce consumer confidence and consumer spending and what the Australian economy needs for full recovery is the complete opposite.

Although July UK retail sales dipped 2.5%, partly due to weaker food sales, following the end of Euro 2020, they are still 5.8% higher on pre-pandemic levels; food sales were 1.5% down on the month, after climbing 3.9% in June. Non-food stores reported a 4.4% drop in volumes, driven by declines at second-hand goods stores and computer/telecoms equipment stores. There was also a drag on fuel sales, caused by rainy weather earlier in the month, with declines also noted at clothing stores and household stores. Department stores were the only sector to show a rise but that was only 0.2%.

The UK’s Competition and Markets Authority is becoming increasingly concerned that the US$ 40 billion proposed takeover of chip designer Arm, owned by Japan’s Softbank, by US firm Nvidia, would stifle innovation in several areas, such as gaming and self-driving cars. Consequently, it is requesting a more comprehensive investigation into whether the takeover is warranted. Not surprisingly, the US suitor, the world’s largest graphic and AI chip maker, has reacted by indicating that the deal would benefit Arm, licensees and competition in the UK, but the watchdog is not too impressed. The takeover will now likely be subject to a deeper “phase 2” investigation, which increases the likelihood that it could be stopped altogether.

As UK July car production declines 37.6%, on the year, to its lowest July monthly, total of 53.4k units, since 1956, second hand car sales are soaring of the main drivers to these disappointing numbers include shutdowns, the global microchip shortage and staff being affected by the so-called “pingdemic”. YTD, car production is 20% higher than in the corresponding period last year – but down 28.7% on 2019 returns. Exports dipped 37.4% on the month to 45k, whilst more than 25% of the vehicles made were either battery electric or hybrid electric. It is estimated that the UK industry, with a US$ 109 billion turnover, employs 180k in manufacturing and 864k in supply chain; there are thirty manufacturers in the UK building seventy different models. For the remainder of 2021, the man drag on production will continue to be the shortage of microchips (semiconductors), with Goldman Sachs’ analysts estimating that this will cut the global carmakers’ profit by US$ 20 billion.

Although the stamp duty holiday must have played a part in the latest UK property boom, there are some who consider that more important contributors were low interest rates and moves to bigger housing units. According to the Resolution Foundation, the stamp duty holiday was unnecessary and has cost the government US$ 6.1 billion in lost revenue, indicating that prices will continue to move north because of the other factors in play. Not surprisingly, the Treasury has rebuffed these claims, saying the policy saved jobs by stimulating the housing market and that the cut introduced for first-time buyers estimated that between 50-70% of the value fed through into higher house prices. The think tank also noted that similar house price rises occurred in the US, France, Germany, Canada and Australia, even without the tax holiday. For the twelve months to June, UK house property prices jumped 13.2% – its fastest rise in seventeen years – equating to an average price increase of US$ 43k. The four locations, showing the fastest rises, were the NW, Wales, Yorkshire & the Humber and the NE at 18.6%, 16.7%, 15.8% and 15.3%, as London came in at the bottom of the listing at 6.3%.

With the easing of most Covid restrictions, and the subsequent boost to the UK economy, government borrowing came in 3.0% higher, year on year, at US$ 14.4 billion – the second highest July return since records began. Because of the economic impact of Covid, government debt – the difference between government spending and tax receipts – has expanded to over US$ 2.2 trillion, equivalent to 98.8% of GDP. Last fiscal year, to 31 March 2021, it is estimated that the government borrowed a total of US$ 411 billion or 14.2% of GDP. The Office for National Statistics also calculated that because of the need to support individuals and businesses, day-to-day spending by the government more than quadrupled to US$ 1.3 trillion and that interest payments on central government debt were US$ 4.7 billion in July, compared to US$ 1.5 billion a year earlier.

August’s IHS Markit/CIPS Composite PMI fell to a six-month low, dipping 3.9 on the month to 55.3, mainly attributable to staff and supply shortages and indicating the bounce-back from the pandemic is losing momentum. This comes despite measures easing to the lowest since the pandemic began, being offset by rising virus case numbers, whilst the number of companies reporting that output had fallen due to staff or materials shortages has risen far above anything ever seen by the study. As from last week, the rules changed yet again absolving people with double vaccinations from self-isolation requirements for contacts of people with Covid.  If this trend were to continue, it is inevitable that forecasts of the economy returning to pre-pandemic levels in October will be wide of the mark. Other surveys pointing to a slowdown in the economy include manufacturing output growth easing in the three months to August, and stock levels weakening to a new low for the third consecutive month.

As the UK economy continued to reopen, the July Consumer Price Index slipped 0.5% to 2.0%, which has been the BoE’s target for some time. The dip was driven by price falls in clothing/footwear, as well games, toys and hobbies; package holidays also fell slightly. On the other side, transport prices headed in the other direction, with average petrol prices 19.0% higher, year on year, at US$ 1.83 per litre – its highest price in eight years. It is widely expected that the annual inflation will continue to hover around the lower side of the 2.0% mark, but will drift higher later in the year, driven by the removal of the temporary VAT cut for the hospitality sector and bigger energy bill hikes.

Commission President Ursula von der Leyen confirmed that the EU has yet to recognise the Taliban and is not holding political talks with the militants, a week after they seized control of Afghanistan – not to their surprise but to that of the rest of the world – by walking into Kabul, without firing a shot. She added that “we may well hear the Taliban’s words, but we will measure them above all by their deeds and actions.” The EU is considering a US$ 67 million increase in humanitarian aid, which the Commission had allocated this year, for Afghanistan, and confirmed that it was ready to provide funding to EU countries which help resettle refugees. There must be questions asked on how this debacle could have taken place in the first place and why the world’s best security, defence and armed forces were apparently caught napping. To their embarrassment and shame, after twenty years, The Boys Are Back In Town.

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