Cruel Summer

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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God Only Knows

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Slippin’ and Slidin’

Anybody with US$ 22 million to spare can become the proud owner of Lebanon, a 420k sq ft island, located in Nakheel’s The World Islands. This comes complete with chalets, a swimming pool, two beaches and a restaurant. Currently owned by an Indian businessman, it has been on the market since the beginning of the year. Although other islands are up for sale, this would be one of the few which has been developed.

This week, Azizi announced the launch of Fawad Azizi Residence – the developer’s third project in Dubai Healthcare City. At a US$ 93 million cost, it will comprise 396 units (201 studios, 165 1 B/R and 30 2 B/R) following the other two projects Aliyah Residences and Farhad Azizi Residence, with 346 and 634 apartments respectively.

Meraas has signed an agreement with Caesars that will see the Las Vegas-based operator manage two properties on Bluewaters Island. The two – an upscale 178-key “Caesars Palace” property and another with 301 rooms – will open in Q4 and will be the first Caesars’ branded hotels in the Gulf. Caesars Entertainment – which operates 39k hotel rooms and 53 properties in five countries – organises over 10k live entertainment show, some of which will find their way to Dubai.

Having secured funding, and expanded its workforce by 28.6% to 9k, Emaar Properties’ Indian entity will complete all of its 10k delayed residential units by the end of 2019. Over the past two years, it has finished more than 5k properties.

The Museum of Illusions is set to open on 12 September in Al Seef, near the Dubai Creek. The first such museum opened in Zagreb in 2015 and the Dubai entree will be the sixth branch to open since then; it will house eighty visual and sensory exhibits, including a Vortex Tunnel, which tricks visitors to think that the ground is moving, and Ames Room, where guests shrink or grow, depending on their position.

Dubai Airport Freezone Authority posted an 8.0% hike in H1 profits, driven by revenue increases in both government services (31%) and licensing – 10%. Over that period, there was a 43% rise in leasable area, including 63% and 29% increases in warehouse and office space respectively; the number of registered companies was 15% higher. DAFZA’s first project outside of its airport location, its Industrial Park, has an 82% occupancy rate.

As part of its strategy to provide easily accessible, personalised services to all its customers, du is to open nine retail outlets in the country. The Dubai-based telecoms operator is to employ fifty staff to service the centres.

Local petrol prices are set to rise as from Saturday, 01 September. Special 95 will be US$ 0.0054 higher (0.07%) at US$ 0.706 per litre, with diesel marginally higher at US$ 0.719.

A significant milestone is in the offing for Dubai International, as sometime later this year it will welcome its number 1 billionth visitor. The airport recorded its second busiest-ever month in July with 8.2 million passengers – 1.8% higher than a year earlier; YTD traffic, at 51.9 million, is up 1.6%. Cargo volumes, totalling 223k tonnes, were 4.8% higher but YTD figures of 1.49 million tonnes came in 1.6% lower.

A new report by PayPal and Ipsos sees UAE online spending to top US$ 9.8 billion by the end of the year. It appears that cross-border shopping has grown by 14.7% to US$ 3.4 billion, over the past two years, and is set to expand even quicker,  as the number of users has increased from 33% to 61% over the past twelve months. The US, India and China accounted for 53% of most popular cross-border shopping destinations – accounting for 22%, 16% and 15% of the total.

With the main aim of facilitating the sharing of information on financial sector innovation, an agreement has been signed by Dubai Financial Services Authority and the Monetary Authority of Singapore. This will see the referral of innovative FinTech companies between both authorities. The DFSA and MAS also agreed to work on projects including on the application of blockchain and digital/mobile payments.

Majid Al Futtaim, who introduced Ski Dubai, an indoor resort with 22.5k sq mt of indoor ski area, to the world in 2005, is set to operate the Wintastar Shanghai indoor ski park. The project, which expects 3.2 million annual visitors when it opens in 2022, is a JV between Shanghai Lujiazui Development (Group) Company, Wintastar Holdings, a subsidiary of KOP, and Shanghai Harbour City Development (Group) Co. With a gross floor area of 227k sq mt, including a 90k sq mt alpine-themed ski and snow park, it will be the largest in the world and will have three slopes, including one to Olympic standards.

In December 2016, 7 Days shut down and this week it is Dubai-based weekly tabloid newspaper Xpress. The paper, published by Gulf News, will still continue as an on-line newspaper and there will be no staff layoffs. This is another indicator that print news media belongs to another era.

Fitch Ratings expect UAE’s fiscal surplus to grow at 3.2% this year on the back of rising energy prices, and by 3.8% in 2019. Because of government measures to boost the country’s economy, public spending will head in the same direction which will inevitably cut into the expanded oil revenue. The government will also be seeking to grow other non-oil revenue streams and has already introduced VAT; however, there is a fine balancing act to ensure that the economy retains its competitiveness on the global stage.

The UAE’s inflation rose to 3.78% in July, compared to 3.29% a month earlier. Since the beginning of the year (and the introduction of VAT), the index had fallen from 4.80% to 3.29% by the end of June, before creeping higher last month.

Six-year old Careem has confirmed that an IPO will not take place in the foreseeable future, as it still maintains focus on growing the platform, adding new cities and building new products. The Dubai-based ride-hailing app also denied rumours that it was in merger talks with Uber.

Investors in one of embattled Abraaj Group’s funds, the US$ 1.6 billion Private Equity Fund IV, are owed at least US$ 300 million, triple the amount first estimated. They have now requested the court-appointed liquidators, Deloitte and PwC, to remove the company as manager and stop Abraaj management fees forthwith. The investors’ council is unhappy with the “insufficient progress” made by the liquidators to stem losses in relation to “mismanagement and apparent fraudulent activity” by Abraaj and the general partner – and is threatening possible legal action. This week, the second bounced cheque case involving Ari Naqvi was settled out of court. The latest investor – following Kuwait’s Agility, York Capital and Abu Dhabi Financial Group – to show interest in acquiring most of its private equity funds’ business is Actis, a leading emerging market investor.

The DFM opened Sunday, 26 August, on 2816, and traded 0.8% higher to close the week on 2840. Emaar Properties was US$ 0.01 lower at US$ 1.37, with Arabtec also down US$ 0.01 at US$ 0.52. Over the month, both share values were lower – down from their August opening prices of US$ 1.44 and US$ 0.54. Volumes for the last week of August were weak at 184 million shares traded, valued at US$ 65 million.

By Thursday, 23 August, Brent, having climbed 4.2% the previous week, was up a further 4.1%, US$ 3.04, to US$ 77.77, with gold – jumping US$ 10 (3.3%) the previous week – US$ 11 higher to US$ 1,205.

China Petroleum & Chemical posted record high H1 profits of US$ 11.6 billion – 52.0% higher, year on year. Sinopec, the world’s largest refiner, benefitted from higher energy prices and better margins from selling higher-grade fuel products. Its shares have climbed 31.0% this year on the benchmark Hang Seng Index, which itself has fallen 7.5% over the same period.

Uber has decided to shift its focus to electric bikes and scooters (instead of cars) for short-distance inner city travel. The move will see the company, that posted a US$ 4.5 billion deficit last year, incur more short-term losses. In April, the ride-hailing firm invested US$ 200 million acquiring the bike-sharing company Jump.

In a bid to expand its presence in the self-driving car sector, Toyota is to invest US$ 500 million in a JV with Uber; this is a sector that the Japanese car-maker is trailing behind some of its rivals. The end product is to mass produce autonomous vehicles that would be deployed by Uber.

104-year old Aston Martin, is set to float on the London Stock Exchange which could value the iconic British sports carmaker at a mouth-watering US$ 6.4 billion. The IPO sees the company, which last year made its first profit since 2010, joining the likes of Ferrari which went public in 2015. It is thought that the company, whose main owners are Kuwaiti and Italian investors, will float at least a 25% stake to the public and that the flotation will go ahead later in the year.

In Australia, telecoms giants, Telstra and Optus, will now face increased competition following the US$ 10.8 billion merger of Vodafone Hutchison Australia and TPG Telecom. The former, owned by Hong Kong-based CK Hutchison and Vodafone Group, will have a 50.1% share and TPG, one the country’s largest internet service providers, the balance. Currently, Vodafone Hutchison Australia is the country’s third largest mobile operator, with a six million mobile customer base. On news of the merger, which has to be approved Competition and Consumer Commission, shares in Hutchinson rose by 44% and TPG by 18%.

July IATA figures indicate that ME air cargo growth continues to be the highest in the world at 5.4%, year on year, compared to the global average of just 2.1%; regional capacity was 6.3% higher and 3.8% on a worldwide basis. Global growth was at its lowest in over two years, with the tariff war being blamed for the slowdown.

Despite posting a record annual profit, up 14.3% to US$ 1.17 billion, driven by its non-international business, Qantas shares slumped 7.7% in early morning trading, before recovering somewhat by the end of the day. Investors were concerned that the forecast US$ 504 million increase in its fuel bill would impact on the airline’s bottom line, although CEO Alan Joyce seemed confident that the extra cost would be fully recovered in the domestic sector and mostly on its international routes. But in a competitive market, it is hard to see whether this will be possible and indicators are for flat earnings this year.

Air New Zealand’s results are also heading in the same direction, recording its second highest profit, but unlike its neighbour, it did warn that its future profit could be as much as 21% lower because of spiralling fuel costs.

How the mighty have fallen! Wonga, launched in 2007, is in the throes of going out of business – a sorry state of affairs for the payday lender which only recently was one of Britain’s fastest-growing consumer finance companies. Five years ago, the company, that became infamous for its sky-high interest rates on short-term loans, was looking at a US$ 1 billion New York IPO; only three weeks ago, the company received an emergency US$ 13 million cash injection, at which time its valuation was put at just US$ 30 million. It will be interesting to see who may be interested in acquiring the business and whether its fortunes can be reversed.

Although open for investment, Liverpool FC owners have confirmed that the club is not for sale. This comes after reports that Abu Dhabi-based Sheikh Khaled Bin Zayed Al Nayahan had made a US$ 2.6 billion bid earlier in the year. If the sale had gone ahead, it would have dwarfed the Glazer’s 2005 US$ 1.0 billion 2005 takeover of Manchester United which still remains the most expensive in football’s history. The 18-times English champions, now managed by Jürgen Norbert Klopp, was bought by the then known as New England Sports Ventures, for US$ 390 million in 2010; this year, KPMG valued the club at US$ 1.9 billion.

A major change will see Lloyd’s switch their auditors, PwC, who have been the bank’s auditors since 1865, to be replaced probably by Deloitte. The other two members of the Big 4 seem to have been ruled out; EY already audits RBS, Standard Chartered and several other major lenders, whilst KPMG is considered a “non-starter” because of its role as the auditor of HBOS, which Lloyds TSB bought during the 2008 banking crisis. Under recent EU rules, banks must rotate their auditors every five years.

On the subject of auditors, regulators are looking at how the big audit firms monopolise the market for the larger audits and there are reports that the nine larger entities may agree to place a cap on the number of FTSE 100 companies that any single accountancy firm can audit. To the outsider, the market looks a little skewed in favour of the big players.

Latest estimates points to the fact that Q2 growth in the Indian economy, driven by an improvement in manufacturing and exports, could be 7.6% -a tad down on the 7.7% growth noted in Q1 but still impressive. Union Minister, Arun Jaitley, is confident that the US$ 2.59 trillion economy, having overtaken France this year, could well become the world’s fifth largest if it surpasses the UK next year. This comes despite higher energy prices and a weakening rupee, trading on Thursday, 30 August, at a historic low of 71.42 to the US$ (and down 11.8% from its 01 January opening of 63.88).

Although Venezuela still dominates South American economic news, Argentina is back in the news. It is reported that President Mauricio Macri has requested the IMF to speed up a three-year stand-by US$ 50 billion loan package to support the country’s austerity programme and bolster the country’s weakening currency.  The government has agreed to slash its 2017 3.9% budget deficit to 2.7% this year and to 1.3% of GDP next year. Some hope! Not for the first time, the peso is under great strain, having lost over 50.5% to the greenback this year, whilst inflation is rampant. By Thursday, the peso was trading at 38.53, having lost 19.0% the previous two days, as the government ratcheted up interest rates by 15% to 60%! In June, the economy contracted 6.7% with an annual 0.6% negative growth rate.

The Trump administration appear confident that a trade agreement with Mexico is imminent, as their bilateral NAFTA differences are being resolved; this could be followed by Canada rejoining talks to get their differences fixed and their annual US$ 1.2 trillion trade running smoothly again. The Mexican Economy Minister, Ildefonso Guajardo, is on record that he will endorse nothing until Canada signs a new agreement.

The July US trade deficit in goods grew 6.3% to US$ 72.2 billion from US$ 67.9 billion a month earlier. Both wholesale inventories and retail stockpiles were both higher – by 0.7% and 0.4% respectively – as the consumer sentiment index climbed to 97.9. Meanwhile, the Conference Board’s confidence index rose by 5.5, month on month, to 133.4, despite analysts forecasting a dip to 126.8; this figure is the highest in over eighteen years. Such figures indicate that the US economy is in rude health and the forecast for the rest of the year is more solid growth. Q2 growth touched an annualised 4.2% – its fastest rate in four years – and an H1 expansion of 3.2%. The main driver continues to be the US$ 1.5 trillion tax cuts ushered in late last year along with the front-loading of soybean exports to China before the introduction of tariffs.

The honeymoon is over for Emmanuel Macron, with his government becoming increasingly unpopular and which now has to reform social spending. His pre-election promises included a boost for both jobs and growth which have not transpired; indeed, the growth forecast next year has already been cut from 1.9% to 1.7% and this in turn will bump up the public budget deficit from its current level of 2.3% of economic output to 2.6% this year and as much as 3.0% by the end of 2019. From being a man of the people, when elected last year, the French President’s aloof leadership (in line with many of his recent predecessors) and a scandal involving his personal Moroccan body guard, have seen his approval rating plummet to just 34% – a record low. (Even Donald Trump has a higher rating of 41%). For Argentina, Venezuela, Wonga, many emerging markets’ currencies and Emmanuel Macron, it appears that they are all Slippin’ and Slidin’.

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Respect

There is very little local financial news this week because of the Eid Al Adha celebrations. Most government offices have been closed all week, as banks and the Dubai Financial Market opened only on Sunday to then shut down for the rest of the week. The private sector, as is the norm, pulled the short straw and was given three days off.

Prior to an expected US$ 545 million start-up investment in the local property market, Fidu Properties is liaising with authorities on the use of telesales to prospective customers. RERA has recently informed the real estate industry that unsolicited telemarketing calls could result in fines of up to US$ 13.6k. The Chinese company, which opened its Dubai regional office in April, aims to target investments totalling US$ 1.4 billion and to create 3k regional jobs.

It is understood that Vimana Global has recently been conducting a prototype trial in the emirate of its autonomous aerial vehicle (AAV). The US flying taxi firm is in discussions with Dubai authorities to deploy a blockchain platform prior to its 2020 launch. The company confirmed that the AAV will have a dual role – for both passenger and cargo uses.

In July, Dubai’s CPI rose to 2.2%, compared to 1.3% a month earlier, driven by a 78.5% hike in tobacco products and marked increases in transport, restaurants/hotel and entertainment/cultural by 17.0%, 11.9% and 5.9% respectively.

After making recent investments in both the UAE and Saudi Arabia, Amanat Holdings has turned their attention to Bahrain, acquiring a 69.3% stake in that country’s Royal Maternity Hospital Holding for US$ 39 million. Prior to this deal, the company had utilised 72% of its US$ 681 million capital base on six assets, three of which had occurred in 2018; the company focuses on both the healthcare and education sectors.

It was the straw that broke the camel’s back when investors in the US$ 1 billion Abraaj healthcare fund questioned its unusual dealings and mismanagement of money. Now they have appointed Alix Partners to oversee the fund’s separation from the Abraaj Group and to ensure its long-term success in delivering accessible, affordable and quality healthcare in developing countries. Despite the recent appointment of provisional liquidators over Abraaj Holdings and Abraaj Investment Management Limited, day to day operations have not been impacted.

The DFM opened Sunday, 19 August on 2803, and, because of the Eid Al Adha celebrations, was only open for one day, to reopen on 26 August. Having lost 171 points (5.7%) over the past fortnight, it gained 13 points on the day with only 91 million shares traded, to close the week on 2816. Emaar Properties was US$ 0.01 higher at US$ 1.38, with Arabtec flat at US$ 0.53.

By Thursday, 23 August, Brent was trading US$ 3.30 (4.2%) higher at US$ 74.73, with gold also on the up – by US$ 10 (3.3%) to US$ 1,194.

Notwithstanding a 61.0% hike in Q2 revenue to US$ 11.0 billion, Alibaba Group Holding posted a 41.0% decline in net income to US$ 1.2 billion, attributable to one-off costs associated with compensation for Ant Financials’ recent fundraising. The world’s biggest online retailer recorded a near doubling of its cloud computing business to US$ 637 million and a 46.4% rise in its entertainments unit to US$ 813 million. It is expected that its future profit margins will continue to be squeezed by increased off-line retail and logistics investments.

To nobody’s surprise, the Saudi Aramco 5% IPO may still go ahead but will be delayed until late next year at the earliest. What was possibly to be the world’s largest initial public offering would have added around US$ 100 billion to the coffers of the Kingdom’s Public Investment Fund. The conglomerate, which produces 12.9% of the world’s oil, appears to be in no hurry at a time when energy prices are on the up and it is mulling over investing in a major share in the region’s largest chemicals company, Sabic.

Mulberry has issued a profit warning which resulted in a 30% slump in its share value on Monday to US$ 5.20. The luxury handbag maker operates 21 House of Fraser concessions and with that group’s recent problems, including debts of US$ 629 million to its creditors, Mulberry has intimated that it is owed US$ 3 million and that “sales in House of Fraser stores have been particularly affected”. The House of Fraser has recently been taken over by Mike Ashley, in a US$ 117 million deal, who has indicated that he will not pay suppliers money owed before his takeover.

So far this year, 2018 has been an “annus horribilis” for the UK’s high street shops and Laura Ashley is no exception. It has announced a 98.4% slump in profits to just US$ 130k, amid “challenging” trading conditions and a “changing retail landscape”; it was also hit by an accounting write-off on the sale of a Singapore property. Although like for like sales dipped 0.4%, including sales of furniture falling by 4.1%, on-line sales were 4.1% higher and clothing was 9.7% to the good. The retailer has 161 shops in the UK, having closed eight last year, with five more closures scheduled for the coming year.

Prior to this week, shares in Israel-based Sodastream – a maker of machine and refillable cylinders allowing users to make their own carbonated drinks – had climbed 78% last year and 85% YTD. This week, Pepsi acquired the company for US$ 3.2 billion (at an 11% premium on last Friday’s market price), at a time when global bottled water sales have risen 6.2% annually in the five years to 2017, while carbonated soft drinks sales have been flat.

Despite pleas by Kerala’s Chief Minister, Pinarayi Vijayan, the Modi government has rejected a UAE offer of US$ 97 million saying “in line with the existing policy, the government is committed to meeting the requirements for relief and rehabilitation through domestic efforts”. In trying to prove they can handle any emergency by themselves, the federal government perhaps could watch news reports to see the catastrophe that has unfolded and be grateful for any offers of help from whatever source. Meanwhile, Emirates SkyCargo will carry 175 tonnes of relief cargo to the flood-hit state, where more than 1.3 million people are still living in temporary camps.

By last Friday, 17 August, the Tesla share value of US$ 305 reflected that it had fallen 14.0% over the week and 8.9% on the day. There is something usually afoot when any company’s share value fluctuates wildly. On 31 July, Tesla shares were at US$ 298 but by 07 August were trading 27.5% higher at US$ 380, only to fall back 19.7% by 17 August. According to some experts, 25% of the company’s shares, worth US$ 11.2 billion, are held by investors betting that its share price will fall. The main reason behind their strategy is that they do not believe that the company can deliver on its promises and that its projected revenues and production capacity do not add up. It is estimated that these short sellers raked in over US$ 1 billion betting on a fall in Tesla’s share price since 07 August, when the Tesla founder tweeted he had “secured” funding to take the troubled company private.

Wednesday saw the S&P reach its longest ever running streak that has lasted 3,453 days – almost nine and a half years – driven in its earlier years by QE measures by the US government with the Federal Reserve, spending a massive US$ 3.5 trillion in asset purchases. Logic dictates that this bull run cannot go on forever and it must now be a matter of when – and not if – the share market plunge occurs. The main problem with that argument is the current strength of the US economy and whilst it continues, there is little chance of the markets pulling back. Furthermore, a Thomson Reuters report expects S&P 500 company earnings to rise 23.3% this year and another 10.1% in 2019. However, in the medium-term, it will only take trade tensions to deteriorate or global markets to take fright because of events in Turkey, or a specific geopolitical problem flaring up or a marked downturn in China to turn things on their head.

The current bull market is commonly thought to have started on 09 March 2009, when the S&P 500 closed at 676.53 as the United States grappled with the global financial crisis. Since then, the benchmark US stock index has more than quadrupled, closing Friday at 2850.13, and becomes the third most-rewarding such run in history, after ones between 1932-1937, (following the Great Depression), and between 1990-2000. However, this past nine years has seen much volatility including sixty occasions when the market has dropped more than 1% in a day and sixteen times the fall has been above 5%. It is interesting to know that over the past 72 years, there have been 12 bear markets and the average fall in share values was 32.7%. More worryingly for investors, the last two – the dot.com bubble and the GFC – witnessed slumps of 49.1% and 56.8%. Jump while you can!

The new Malaysian Mahathir Mohammad government has advised Chinese authorities that his debt-laden country has canned three China-backed projects, totalling US$ 22.0 billion, because they cannot afford to pay for them; the projects were two separate gas pipelines and a US$ 20 billion East Coast Rail Link to be built by China’s largest engineering firm, China Communications Construction Company, with much of the finance via the Export-Import Bank of China. The country is beset with a huge national debt of US$ 250 billion. Economic history is full of examples of major powers, including China, Russia and US, flaunting their financial largesse to poorer nations and then holding them to “ransom” when massive loans cannot be repaid. Recent examples include Sri Lanka and Djibouti.

If President Nicolas Maduro thinks he has fixed Venezuela’s economic problems, he is sadly mistake. By deleting five zeroes off the strong bolivar, and creating a new sovereign bolivar, the ex-bus driver has only increased economic instability; at least, he did better than the former leader, Hugo Chavez, who a decade ago, knocked  three zeroes off the currency note, to try to halt hyperinflation and failed miserably. He also announced other measures to tackle widespread poverty, including, for the fifth time this year, a rise in the minimum wage – a 3,670% hike – and also an increase in sales tax. For a country that has 20% of the world’s proven oil reserves, at almost 300 billion barrels, it will never recover so long as rampant corruption and tyranny continue unabated – and the crippling US sanctions do not help either! Yet again , the likes of the UN and other global bodies appear to stand by while the country becomes a basket case.

After eight years, and assisted by a US$ 348 billion rescue package, Greece has officially exited its final bailout programme. However, although it will now be free to borrow money on global financial markets, the Hellenic country will have to follow an austerity regime that will mean meeting unrealistic primary surpluses, adding to its tax receipts and putting up with lower pensions. Greece still faces many challenges especially with major reforms required in many areas including the public sector, the judiciary and the general business environment. Unemployment levels are still unacceptably high – at 19.5% and 39.7% for those under 25. The economy is 25% smaller than eight years ago and it will take decades to pay off its debt, equivalent to 180% of GDP.

It appears that the Eurozone trade balance fell 12.5% over the past twelve months to US$ 25.6 billion, whilst the EU28 (all 28 members of the EU) headed the other way – up 4.5% to US$ 7.9 billion. Eurozone imports and exports to the rest of the world both climbed over the year by 5.7% to US$ 226.0 billion and 8.6% to US$ 200.4 billion respectively; for the bigger bloc, the figures were higher by 8.2% to US$ 195.1 billion and 8.4% to US$ 187.3 billion.

There was good news for the embattled UK government this week, as public finances posted their biggest July surplus (US$ 2.6 billion), since the start of the century, driven by increases in tax receipts. The end result was that the public sector net debt of US$ 2.31 trillion is equivalent to 84.3% of GDP, compared to 86.0% last year. This improvement will give the Chancellor some leeway in his November budget  to allocate extra funds to the NHS and other public services.

Chancellor Philip Hammond has yet again shown his true colours, as he warns that a no-deal Brexit could result in the UK’s economy witnessing a 7.7% hit to GDP over the next fifteen years, as well as the estimated borrowing being US$ 105 billion a year higher. He indicated that certain sectors – including cars, chemical, clothing, food/drinks and retail – would be worst hit and that the North East and Northern Ireland would bear the brunt of the impact. The man, who was a staunch Remain supporter prior the 2016 referendum, now appears to be the leading figure in a dodgy project fear campaign.

Even when he was campaigning to be President, Donald Trump accused China of manipulating the yuan and now he continues his assault not only on the second most powerful economy but has also brought the EU into the equation. China’s currency has dipped by almost 10% since April when the trade dispute started to make an impact; this would have made their imports from 10% cheaper which would have also lessened the effect of any additional tariffs. China has also been involved in selling its own currency, which drives its value down and makes exports cheaper.

It seems likely that Australia will soon have its sixth Prime Minister in little over a decade as the current incumbent, Malcolm Turnbull, just survived a leadership spill on Thursday, 26 August, by 48-35 against Home Affairs Minister, Peter Dutton. The fact that the government is riddled by disunity and that the country has seen four leaders – Julia Gillard, Kevin Rudd, Tony Abbott and Malcolm Turnbull – in the past five years, is bound to have a negative impact on the economy. There is the danger that if the government becomes more concerned with its survival, rather than the country’s economy. Paul Keating’s 1986 comment may become reality – “we will end up a third rate country.   .   . a banana republic”. There is no doubt that Australian politicians are quickly losing the electorate’s Respect!

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Only a Pawn In Their Game

The Radisson Hotel Group has signed an agreement to manage the luxury hotel currently under construction in the DAMAC Hills Development. The 481-key luxury property, which includes 1-2 B/R suites, will be completed by the end of 2019. The international hotel group currently has 81 properties, encompassing 20k rooms, in operation and under development, across the MENA region. The hotel will be the first ever Radisson hotel to be located on a golf course.

There is a chance that The Taj hotel in Jumeirah Lake Towers will have its soft opening by the end of the year. The 5-star property, with 17 floors, will have 200 guest rooms and suites, as well as recreational facilities and dining venues. Its second Dubai venture – Taj Exotica Resort & Spa on Palm Jumeirah – is due for a Q4 2019 opening.

Grim news continues for Dubai’s hospitality sector, with STR’s preliminary July figures indicating a 14-year low for average daily rates, down nearly 10% to US$ 115, and revenue per available room 8.8% lower at US$ 76. Meanwhile, there were increases in both supply – 6.3% – and demand of 7.2% with a 0.9% rise in occupancy level to 66.0%.

Despite the doom and gloom surrounding the F&B sector, Bulldozer Group is set to open nine new dining concepts in the region. The six-year old Russian-owned company already has an enviable track record in Dubai with the likes of Venice’s legendary Cipriani, London’s celebrity hangout Novikov, Monte Carlo’s famous Sass Café (which closed in May 2018) and Sydney’s Toku. The Dubai-based hospitality firm is planning a September opening for Greek-Mediterranean restaurant GAIA in DIFC and China Tang later in the year, in the same area. It has a current portfolio of some ninety properties in eight locations.

However, good news for the local airlines in that there was an 11.0% growth in July revenue per passenger kilometre, compared to a year ago, which at that time was beset by problems with the four-month US ban on large portable electronic devices and travel restrictions for certain nationalities. Other increases noted were a 1.9% hike in load factor to 71.0%, with capacity 8.0% higher over the period. It is expected that this improvement will be carried forward into H2 but the best-laid plans could become unhitched by factors such as increases in both the value of the greenback and energy prices, not to mention trade tariffs.

With the cruise season almost upon us, a new report by the Dubai Chamber points to increased business for the 2018-2019 six-month period. Over the past four years, the number of passengers has almost doubled from 320k to 625k and this figure is expected to grow 16.0% to 725k by March 2019, particularly because more cruise ships are making Dubai an important global destination.

Despite the local rumour mill clunking into action, it seems that the premium international schools market continues to expand across the Middle East, showing no signs of slowing down, despite challenging economic conditions, according to new research. Over the past five years, the number of such schools has risen by 37.4% to 1.6k, with the UAE having the largest number, at 624, with 28 new schools added last year. The student number is around 1.5 million, with an average annual fee of US$ 7.7k. Thirteen new establishments are expected to open this school year in Dubai.

Local company, Danube Home is to open its first overseas store in Hyderabad next month, with an US$ 82 million investment. The company already operates 25 outlets in the MENA region and expects to open 25 in India over the next five years.

An Indian-based pharmaceutical and biotech firm is to open a factory in JAFZA. Wockhardt is planning a US$ 40 million investment in a 10k sq mt drug-making facility, specialising in antimicrobial drugs to fight the emerging threat of superbugs, for global distribution.

Dnata continues to add to its revenue  base by launching passenger handling operations at New York-JFK Airport, with Panama’s Copa Airlines as its first customer; the Dubai-based air service provider already has a major presence in the US, handling over fifty airlines in that country, where it has captured forty new contracts over the past twelve months.

According to the July Emirates NBD seasonally adjusted Dubai Economy Tracker Index, business conditions continue to head north, albeit at a slower pace. Softer growth was seen in the construction, travel/tourism and wholesale/retail sectors, as business activity increased. The uptick in higher output and new orders came at the expense of continued extensive price discounting, resulting in average selling prices falling at their sharpest rate in twenty months. Unsurprisingly, YTD employment growth is the softest on record.

The Emirates Nuclear Energy Corporation announced that it had completed hot functional testing on Unit 2 of the Barakah Nuclear Energy Plant and that construction was 93% complete. Last month, it was reported that the first of its four nuclear reactors had been delayed and would come on line in late 2019 or early 2020. When all four reactors, at the US$ 20 billion Barakah plant, come on line, there will be an annual saving of 21 million tons of carbon emissions, equivalent to removing 3.2 million cars from the roads.

Figures from the Central Bank show that month on month cash deposits were 11.4% higher in July at US$ 6.2 billion, with YTD figures of US$ 38.0 billion. Cash withdrawal figures for the month were at US$ 5.5 billion and YTD totlalled US$ 37.6 billion. Over the past seven months, money transfers by banks and clients totalled US$ 1.1 trillion and US$ 498.6 billion respectively – and for the month up 4.1% to US$ 168.9 billion and US$ 71.6 billion.

With the rupee sinking to a record low level of 70 to the US$, many Indian expatriates are cashing in although there is every chance that the fall in the currency will continue. The latest decline has been driven by the events in Turkey where the lire has fallen down the toilet – so far this year it has lost 35.6% in value, which includes a 15% slump since the beginning of the month.

Emirates NBD may be thankful for the Turkish currency crisis. In May, it agreed to buy the Turkey’s DenizBank from Russia’s Sberbank for 14.6 billion liras, worth US$ 3.2 billion. Now it could be in a position to renegotiate the deal, as the value of the lire has dropped from the time of the May acquisition, and could lead to at least a US$ 1 billion “saving” – even if this involves a 10% penalty for cancelling the original deal.

It was no surprise to read a Moody’s report which intimated that the country’s four largest banks – ADCB, Dubai Islamic, Emirates NBD and First Abu Dhabi – posted a combined 21% jump in Q2 profits to US$ 2.2 billion. The financial services firm also forecast much of the same for the next twelve months. The improvement was largely attributable to two factors – higher net interest income (up 10%) and lower provisions (down 27%). Banks continue to be the stand-out sector in the local economy – at the same time that many other entities continue to struggle often because of the lack of liquidity.

Arabtec has won a US$ 42 million Dubai Municipality sewerage and drainage contract in the Al Khawaneej area, due to be completed Q4 2019.

The verdict in the US$ 217 million bounced cheque criminal case against Abraaj founder, Arif Naqvi, is expected later in the month. Once the biggest regional private equity firm, with assets of US$ 14 billion under management, the company is undergoing a court-supervised restructuring in the Cayman Islands. The fall-out promises to be messy as there is a chance that the ex-chairman, who is currently out of the UAE, could face an international arrest warrant – whilst investors wait to see whether they will have their full investments returned.

Dubai Aerospace Enterprise posted H1 profit figures over five times greater than in the same period in 2017. Profit before tax came in at US$ 224 million (2017 – US$ 43 million), as revenue more than tripled from US$ 229 million to US$ 711 million. The main driver was the acquisition of AWAS which saw the fleet increase to 375 owned, managed and committed aircraft and total asset value jumping to US$ 15.5 billion.

This week saw the reporting season in full swing, with a mixed bag of results for companies listed on the Dubai bourse

Marka’s Q2 net loss was US$ 3 million, a major improvement on the US$ 34 million deficit in Q2 2017, as cost of sales was 40% lower at US$ 2.9 million, with expenses 75% down at US$ 3.0 million; interest on loans of US$ 37 million was US$ 2.2 million. Revenue declined by 22% to US$ 5.4 million. The company auditors noted that the group’s current liabilities exceeded its current assets by US$ 8.7 million and that certain loans were outstanding.

Although its shares have been suspended from trading until next month, when its restructuring plan will be discussed at a general meeting, the five-year old Marka reported its second consecutive quarterly gross profit of US$ 762k, compared to a US$ 13 million loss over the same period in 2017. The country’s first publicly traded retail operator may well have turned the corner under its CEO Benoit Lamonerie, appointed last year, who has finally pushed Marka into a profitable business.

Drake & Scull has attributed both the performance of its subsidiaries in secondary markets in Qatar, Oman and Jordan, as well as project debt defaults, for a Q2 loss of US$ 50 million. The company is continuing work on a restructuring plan  and also announced the appointment of a new CEO, Yousef Al Mulla, who will replace Dr Fadi Feghali, who had been in that position since March.

As its H1 revenue jumped 45.9% to US$ 3.1 billion, Emaar Properties posted an 18.0% increase in profit to US$ 911 million, driven by strong growth in its development and malls businesses; the profit figure did include a one-off US$ 99 million income item arising from the IPO of Emaar Development. The profits were also bolstered by property sales of US$ 1.7 billion by Emaar Developments.

With its revenue climbing 144.7% to US$ 1.01 billion, Emaar Developments posted a 73.4% hike in Q1 net profit to US$ 272 million; over the first six months of 2018, its revenue came in at US$ 1.9 billion, with a profit 68.0% higher at US$ 496 million. The developer reported that it had launched the sale of 3.6k units in H1 and that it has a US$ 10.5 billion development pipeline of sixty residential projects, comprising more than 28k units.

Damac posted its third consecutive quarterly fall in profit with Q2 results showing a  46.0% profit plunge to US$ 101 million on revenue of US$ 488 million; cost of sales jumped 62.0% to US$ 316 million. At the end of June, the developer carried over US$ 1.4 billion in debt and is planning to cut this down by US$ 500 million over the next three years. It confirmed that it was on track to deliver a record 4k units by the end of the year.

Nakheel posted a 3.8% decline in H1 net profit to US$ 684 million on revenue of US$ 1.9 billion. Strong growth was seen in its non-development businesses – asset management, hospitality, leasing and retail – which now accounts for 38.0% (US$ 708 million) of the company’s revenue. These revenue streams will continue to grow, moreso with The Night Market, Warsan Souk, The Palm Tower and Nakheel Mall being added over the next twelve months to the developer’s portfolio. Nakheel has also handed over 451 residential units in the first six months of 2018, during which time it has signed construction contracts totalling US$ 1.6 billion, the biggest of which was US$ 1.1 billion for Deira Mall.

DP World posted a 14.0% rise in H1 revenue (on a reported basis) – and 3% on a like for like basis – to US$ 2.62 billion, as profits grew 18.0% to US$ 643 million; during the period, gross volume was 4.8% higher to 35.6 million TEUs (20’ equivalent units), driven by its European and Australian  terminals. The Dubai-based ports operator has made investments of US$ 1.4 billion which will inevitably lead to future profit growth. DP World plans to extend its core business into port-related, maritime, transportation and logistics sectors. The only clouds on the horizon would appear to be the current trade tariffs and regional geo-political problems.

The world’s fourth largest port operator also announced that it had bought Danish logistics company Unifeeder for US$ 760 million as it continues to expand its footprint in Europe and expand its business segments to shipping.

Mainly because of an US$ 8 million final settlement of a long-standing legal case, Gulf Navigation posted a US$ 4 million H1 loss, compared to a US$ 5 million profit over the same period last year. The bottom line was also not helped by the fact that it had two petrochemical tankers in dry dock for major upgrades.

The DFM opened on Sunday, 12 August on 2920 and, having lost 1.8% (54 points) the previous week, continued its downward trend shedding 117 points (4.0%) to close on Thursday at 2803. Over the week, Emaar Properties declined by US$ 0.07 – to US$ 1.37 – with Arabtec flat at US$ 0.53.

By Thursday, 16 August, Brent was trading US$ 0.64 (0.9%) lower at US$ 71.43, as gold sank by US$ 40 (3.3%) to US$ 1,184.

A US$ 8 billion JV between two Saudi companies – Aramco and Acwa Power – with Air Products has been agreed that aims to attract foreign investment into the Kingdom. The US entity, with a minimum 55% stake, will purchase Aramco’s gasification assets, power block and associated facilities, with the oil giant supplying feedstock to the JV from its Jazan Economic City facility. After processing, the end result will be asphalt, benzene, LPG, paraxylene and sulphur. The JV, covering the next 25 years, will own and operate the assets for a fixed monthly fee.

Not everybody’s favourite company, Monsanto has been ordered to pay school groundkeeper, Dewayne Johnson, US$ 289 million, as a Californian court agree with his claim that the company’s glyphosate-based weed-killers, including Roundup, caused his cancer. This is expected to be the first of a possible 5k claims against the unit of Bayer AG.

Despite costs climbing 6.0% to US$ 17.5 billion, HSBC posted a 4.6% rise in H1 pre-tax profit to US$ 10.7 billion. There was a further US$ 765 million settlement for alleged mis-selling of US mortgage securities. The bank has introduced a strategy that will see a spend of up to US$ 17 billion, over the next three years, in areas such as technology and in China, with the aim of boosting market share and future profit streams.

IAG, owner of BA, Aer Lingus, Iberia, Level and Vueling, saw its share value 3.9% lower, even though it posted a 6.0% increase in Q2 profit to US$ 967 million. The result would have been better if it were not for a US$ 23 million hit at Vueling from disruption caused by French Air Traffic control strikes, as well as a strengthening greenback.

There may be life after Emirates for the A380, with news that Norwegian will use the super-jumbo on its LGW-JFK route, whilst some of its Boeing 787s are grounded to undergo maintenance and resolve glitches with Rolls-Royce engines. Even Thomas Cook has been using the A380 on routes from Oslo and Copenhagen to Mediterranean destinations.

Not all fans were happy with the news that Arsenal’s 67% stakeholder, Stan Kroenke, has agreed to buy a further 30% share from Alisher Usmanov for a reported US$ 600 million. (Strangely, the Russian metal magnate, recently linked with Everton, was unsuccessful in his attempts to take over the club in 2015 with a US$ 1 billion bid). The Arsenal Supporters’ Trust called the news “a dreadful day” which would “see the end of supporters owning shares in Arsenal and their role upholding custodianship values,” and that Kroenke would be able to take “detrimental actions” such as paying “management fees and dividends without any check or balance”.

The World Trade Organisation has forecast a slowdown in global trade for the rest of 2018 because of the risk of the numerous trade disputes growing out of control. Their global indicator, which utilises seven forward-looking components, including export orders and automobile production and sales, fell 1.5 to 100.3, month on month in June, and is well down on February’s return of 102.3.

Although lower than analysts’ expectations, positive data still emanates from China. Three major July indicators show that retail sales remained buoyant at an annualised 8.8% growth (compared to 9.1% market forecasts), fixed asset investment was 5.5% higher (6.0%) and industrial production up by 6.0% (6.3%).

With India’s retail inflation rate easing to 4.17% in July, it seems likely that there will be no more rate hikes this year, especially after the two recent ones, the last of which was 01 August, which pushed the rate to 6.5%. Even though the IMF is forecasting inflation to top 5.2% next year, Prime Minister, Narendra Modi is confident that inflationary pressure will be dampened by higher state spending on subsidised housing and infrastructure projects.  However, the sinking rupee, which has already lost over 8% this year, may be a cause for concern moreso because of the contagion effect of the Turkish crisis. Despite all this, the world’s sixth largest economy, at US$ 2.6 trillion, grew at a more than credible 7.7% annual rate in Q2.

In the UK, the headline inflation indicator moved up 0.1% in July to 2.5%. The main factors behind this uptick in the CPI (consumer price index) were, surprisingly, rising prices in computer games and higher transport fares. On the flip side, clothing/footwear recorded a 0.4% decline over the year.

Mainly because of declining exported vehicles and aircraft to non-EU countries, the UK overall trade balance jumped 83.0% to US$ 11.0 billion with the total trade gap, after stripping away inflation, growing at US$ 5.4 billion. On an annual basis, the trade deficit has contracted by US$ 8.0 billion, as the value of exported goods and services nudged higher. Following a 0.2% Q1 growth, the country’s GDP recorded a 0.4% expansion in Q2, with the market still defying attempts by the fear factor to talk down the economy. Over the quarter, both construction was 0.9% higher and the service sector 0.5%, with the wholesale/retail trade up 1.6%. Year on year, GDP was 1.3% higher.

The July US budget deficit was 79.3% higher on the year at US$ 76.9 billion, driven by lower revenues (because of the December tax cuts taking effect) and increased spending. The CPI (consumer price index) rose 0.2% in the month as consumer prices hit record ten-year highs, with the main contributor being the 0.3% hike in the cost of shelter, attributable to 60% of the gain; on an annual basis, the CPI rose 2.9%.

The US economy continues to sail on the crest of a wave with latest data indicating that the manufacturing sector is progressing well. The Empire State manufacturing index, gauging overall general business conditions, posted an August reading of 25.6 (well above analysts’ 20.0 expectations). Firms remain moderately optimistic about the short-term outlook, with the business optimism index for future conditions climbing 4 points to 34.8. On the retail front, annualised July sales expanded by 6.3%, and up 0.5%, month on month, at US$ 507.5 billion.

Donald Trump sent the Turkish lire into a tailspin when he doubled the steel and aluminium tariffs to 50% and 20% respectively last Friday. Both the economy and the currency were faltering for weeks prior to Trump’s announcement. By Thursday, 16 August, it had slumped to 5.85 lire to the US1 – down 35.6% from its 01 January opening of 3.77 and 15.3% since the beginning of August. The tipping point centred around the two-year detention of Pastor Andrew Burson in Turkey whilst the US has refused to extradite US-based Turkish cleric Fethullah Gulen.  Anybody who thinks that these two are the reason behind the current impasse is badly mistaken – they are individually, Only A Pawn In Their Game.

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The Land Down Under

Last year, Schon Properties reportedly started work on its US$ 870 million iSuites project in Dubai Investments Park which would comprise 2.6k hotel apartment suites, 52 restaurants, outdoor cafes and a 125k sq ft mall; to cap it all off, it would have been surrounded by a man-made beach and a lagoon spread over five acres. This week, the Dubai Land Department seized properties, land plots and funds deposited in the developer’s escrow account which it will hold until the Dubai Public Prosecution “complete legal procedures to secure the rights of all investors and other parties”.

In 2007, hundreds of investors made partial payments into the developer’s Dubai Lagoon project due for completion by 2008. Last February – more than a decade later – the company announced that it would be transferring parts of the project to another developer, Xanadu Real Estate. Then a year ago came the plan for the US$ 870 million iSuites, due for completion by 2020. Once bitten, twice shy!

Maybe there are other developers in a similar position to Schon – if so, there is no doubt that their day of reckoning nears, with the Dubai Land Department bearing its teeth. More seizures and stricter enforcement will become more prevalent which will be a major boost for the Dubai realty sector which has been struggling for some time.

One developer that seems to firing on all cylinders is Danube Properties which announced that its latest development – the US$ 150 million Lawnz – has sold out within five weeks. Located in International City, the two-year project will see a further 1k units added to bring its total portfolio to 4.7k, with a US$ 1.0 billion development value; prices start at US$ 79k.

Aurora Real Estate has sold all but seven of its twenty townhouses and 122 apartments in its US$ 46 million Hyati Residence development, recently handed over in Jumeirah Village Circle. Later in the year, the private developer will deliver another project in International City. This week it launched its latest – Hyati Avenue, comprising103 apartments and 19 townhouses – due for completion by December 2019. Prices will start at US$ 109k for a studio, US$ 191k for a 1 B/R unit and US$ 754k for a townhouse.

It was reported that the JV between Dubai Holding and Emaar, developing the six km Dubai Creek Harbour, will inaugurate Creek Island Dubai in December. A new development was unveiled this week – Creek Marina will be a city-harbour getaway, located in the centre of Creek Island, the six sq km residential and leisure district. The first Dubai Creek Harbour residents will move in early next year. Creek Marina will also have a 286-key Vida Harbour Point hotel, a pearl-shaped marina with 81 single and double berths, an interactive fountain along with high-end retail and food outlets.

Kleindienst Group have invested US$ 1.4 billion in The Heart of Europe – a six million sq ft development on the man-made World Islands, four km off Dubai’s coast. The project includes the ‘countries’ of Germany (with 32 villas) and Sweden (with ten beach palaces) with a further 131 Floating Seahorse vessels that will be berthed for vacation stays in Russia and Italy. All ten palaces, with a price range of US$ 8.2 million through US$ 20.6 million, have been sold and will be handed over by the end of the year. Most of the villas, with prices of between US$ 3.1 million and US$ 7.1 million, have been sold and hand-overs will start in December. The Floating Seahorses, which are moored at their location, will see delivery start this month.

Propertyfinder Trends reckon that there have been rental falls in both Dubai apartment rents and selling prices of 18.2% and 14.0% over the past two years. There could be some good news on the horizon for certain locations, as villa rentals in Jumeirah Village Circle and Mudon were 5.4% and 2.4% higher over the same period.

The report said some areas in Dubai are showing signs of life, with villas for rent up 5.4% and 2.4% in Jumeirah Village Circle and Mudon, respectively. Arabian Ranches stayed flat over the same period. Since January, Palm Jumeirah has seen villa sale prices move up 5.2%, whilst apartment sales were 2.7% to the good in Dubai Investment Park – the only place to record any improvement. With regard to apartment rentals, Al Furjan was the only location to move higher – 2.7%. Maybe there is light at the end of a very long tunnel in time for Expo 2020.

According to ISS Worldwide, shipping volumes for expats returning home have “come down drastically” by up to 15% in terms of both bookings and enquiries. The conclusion is that the expat exodus may well have slowed down this year, with the shipping company indicating that inbound shipments are on the up and that “more people seem to be coming in compared to 2017”. Time will tell!

A Knight Frank’s Prime Global Cities Index ranks Dubai 35 out of 42 when it comes to real estate performance. According to the consultants, prime property has fallen by under 0.8% over the past year, although the pace of decline quickened since January, falling 0.6% in Q2.

It seems that the UK press have a love-hate relationship with Dubai and often fabricate news stories to give a biased slant on events. Some usually involve “unlucky” tourists, whilst others are related to the economy. This blog was interested to see a recent article in The Sunday Times which advised its readers that it should think twice about investing in local real estate because of an oversupply coming into the market. That may be so, but their estimates of an additional 550k by 2020 seems a little far-fetched, especially if one considers that the present portfolio hovers around 500k and that under 4k were handed over in Q1.

Despite a ruling by a London court in favour of DP World against Djibouti seizing the Doraleh Container Terminal, the African government has refused to recognise the tribunal’s decision. Meanwhile, the Dubai port operator is adamant that the contract to run the port in Djibouti remains in “full force and effect”. In February, the 30-year agreement was cancelled by the African government who seized the facilities designed, built and operated by DP World.

DP World saw its long-term issuer rating upgraded one notch by Moody’s to Baa1, with a stable outlook because of its strong track record, solid profitability and liquidity profile.

There is very little sympathy for the European tourist who managed to rack up fines totaling US$ 46k in the space of three and a half hours on the very early morning Dubai roads. The rent a car company, that leased the US$ 354k Lamborghini Huracan, is taking legal action on the errant motorist to reclaim the money it has had to pay the police for the car’s return.

The Department of Economic Development has estimated that incoming foreign direct investment over the past three years has been over US$ 21.7 billion; this has resulted in the 860 projects creating an extra 54k jobs in the tech sector. This investment, 66% of which emanates from the EU and the US, has boosted Dubai’s drive to become a major knowledge-based economy.

One of the first casualties of the Abraaj Capital downfall is Stanford Marine Group that has failed to meet its debt obligations.  The company, which operates offshore supply vessels, has also been hit by a sharp decline in chartering rates, is in discussions with three potential buyers. Abu Dhabi’s Waha Capital owns a 49% stake in SMG.

Amanat Holdings has spent US$ 300 million this year on three investments, the last of which was US$ 100 million to complete the 100% acquisition of Middlesex University Dubai. This brings the GCC’s largest healthcare and education investment company’s portfolio to three education assets in the UAE, two healthcare assets in Saudi Arabia and another real estate investment.

Shuaa Capital posted a 21.0% hike in Q2 net profit to US$ 4 million and is expected to distribute its first dividend in over a decade. However, the investment bank posted a 28.5% fall in H1 profit to US$ 7 million, with revenue 2.9% to the good at US$ 17 million. Its total asset base has risen by a third to US$ 436 million over the past twelve months.

Although DXB Entertainments posted a narrowing of its Q2 net loss, by 11.0% to US$ 69 million, the result was higher than market expectations. There was a 3.0% decline in revenue to US$ 32 million, although both visitor numbers rose 48.0% to 613k and operating expenses fell 11.0% to US$ 77 million. The company will “evaluate future development plans and capital deployment” and expects “to deliver year-on-year growth compared to the year ended December 31, 2017.”

Arabtec posted a 98.2% jump in H1 profit to US$ 31 million on the back of a 13.0% rise in revenue to US$ 1.3 billion. It had a US$ 9.4 billion backlog of tenders submitted or under preparation. The fact that the company managed to improve debtor days by 17 days and decreased trade and other receivables by US$ 61 million resulted in a US$ 56 million positive cash flow. The company has seen dark times in the past and its share value, at US$ 0.53, is still 43.7% lower than this time last year.

Depa posted disappointing H1 results, with net profit 68.4% lower at US$ 10 million, although revenue nudged 2.0% higher to US$ 232 million; however, last year’s figures benefitted by the fit-out firm recovering two long-standing debts. Expenses were 13.6% higher at US$ 218 million, with an order backlog 5.0% higher at US$ 515 million.

The DFM opened on Sunday, 05 August on 2974 and ended on Thursday 54 points lower, 1.8%, at 2920. Over the week, both Emaar Properties and Arabtec dipped by US$ 0.01 – to US$ 1.44 and US$ 0.53. Volumes improved slightly to 127 million shares, valued at US$ 43 million (compared to the previous Thursday, 02 August, when 68 million shares at US$ 26 million were traded).

By Thursday, 09 August, Brent was trading US$ 1.38 (1.9%) lower at US$ 72.07, whilst gold nudged US$ 4 higher to US$ 1,224.

Driven by higher production and prices, Rosneft posted a significant tripling of Q2 profits to US$ 3.6 billion, with revenue climbing 49.0% to US$ 32.7 billion; H1 profits came in at US$ 4.9 billion. Shares in Russia’s largest oil producer, which pumps 4.6 million bpd, hit record highs on this latest news.

Rolls Royce posted a H1 US$ 1.3 billion loss (after a US$ 1.5 billion profit in the same period last year) as it suffered again from exceptional charges of US$ 720 million to its Trent 1000 power plant. Repairs to the engines, used by the A380 and the Boeing 787, have come about because some have been wearing quicker than expected. With the US$ 650 million sale of its loss making commercial marine business to Norway’s Kongsberg, the Derby based company can now focus on its three core businesses – civil aerospace, defence and power systems.

There is a chance that the US$ 9.1 billion merger between Smiths Group, the FTSE-100 industrial conglomerate, and Nasdaq-listed ICU Medical will not go ahead. It seems that another US player, Baxter International is also interested in acquiring the UK company. Both suiters are major healthcare companies whereas Smiths Medical, which accounts for 30% of the Group’s revenue is but one of five divisions which includes security detection, and John Crane, a provider of engineering solutions for energy and other process industries.

In a bid to diversify and grow its revenue streams, Samsung has announced a US$ 22 billion, three-year investment plan in areas such as artificial intelligence, 5G mobile technology, electronic components for autos and the biopharmaceutical business. This is in response to a slowdown in its two core business sectors – semiconductor and smartphone. Over 72% of the new investment will be spent in South Korea and is expected to add 40k new jobs. The Group’s 62 affiliates have assets totalling in excess of US$ 351 billion.

Toyota shocked the market by posting a 7.2% hike in Q2 profits to US$ 5.9 billion and selling 0.9% more vehicles at 2.2 million. The carmaker reported strong sales in Asia, especially in Thailand, and indicated that it had introduced several cost reductions that boosted its bottom line. In May, Toyota posted that it had made a US$ 23.0 billion profit (36.2% higher than in the previous year) and sold almost 9.0 million units. Whether the introduction of tariffs will have a negative impact on Toyota, and the car industry in general, remains to be seen.

Tesla posted a Q2 record loss of US$ 717 million as it continues to burn cash – this quarter US$ 740 million, 32.7% lower quarter on quarter. The electric car-maker is ramping up production of its Model 3 and expects to raise levels by around 75% to 55k in Q3. However, Elon Musk reckons that this quarter would be the last posting losses and that profits would start forthwith; he also indicated that within a year there would be 10k Model 3s coming off the assembly line every week and that Tesla would be producing 750k vehicles in 2020.

Later in the week, the South African entrepreneur tweeted that he may take the electric car firm private so that he would no longer feel pressured into making short-term decisions to keep shareholders happy; if it were to go ahead, the share could have a 16% premium on today’s prices. If that were so, the company would be valued at US$ 80 billion. Meanwhile, the Financial Times reported that the Saudi sovereign wealth fund had taken a 3%-5% stake in Tesla.

Higher programming costs and a fall in its ESPN sports channel subscribers resulted in Walt Disney not meeting its quarterly profit forecast; the markets were not too happy and its shares fell more than 2% on the news. However, its revenue stream was 7.0% higher at US$ 15.2 billion whilst profit was 22.9% to the good at US$ 2.9 billion.

This week, 21st Century Fox, which already owns 39.1% of the company, posted its offer for Sky plc, owner of Sky News – its price remained unchanged and values the whole company at almost US$ 32 billion. The other interested party, the US cable operator Comcast, will be happy to take just a 50% stake, plus one extra share, of Europe’s largest pay-TV broadcaster.

To add to his investments in Lyft, Twitter and JD.com. and other tech companies, Prince Alwaleed Bin Talal has now paid US$ 250 million for a 2.3% stake in Snap. The social media company seems to be struggling recently with a 1.6% decline in daily active users to 188 million and increased competition for digital ads from the likes of Facebook. The latest quarterly figures show a 44% hike in revenue to US$ 262 million, with losses reducing to US$ 353 million – 20% lower than the same period in 2017.

Every now and then, this blog bemoans the fact that Amazon – and similar mega companies – continue to take the p… out of the UK taxpayers. It managed to cut its latest tax bill by 37.8% to US$ 6 million and only paid 37% of that total, deferring the balance. Having revenue of almost US$ 2.6 billion in the UK, it saw its net profit climb 73.9% to US$ 102 million, which in itself does not seem a particularly high net margin. There is no doubt that Amazon’s approach is both perfectly legal and blatantly unfair. Like Sergio Ramos, Amazon get away with it when the rest of the world looks on bemused.

It would be safe to say that Venezuela is in a bit of an economic mess, with inflation running at 1,000,000%. Hyperinflation sees an egg costing 200k times more than a litre of 91-octane petrol and US$ 1 can be changed for 3.5 million bolivars. The country now produces 1.5 million bpd – less than half the figure of ten years ago. Fuel subsidies cost the impoverished Latin American country US$ 10 billion and now it imports 34k barrels of gasoline and 36k barrels of diesel every day from the US.  In Venezuela’s inflation-hit economy, a single US dollar can buy 3.5 million litres of gasoline!

Public anger in Malaysia led to the defeat of Najib Razak’s long-ruling coalition in May’s vote, ushering in the first change of power since the country gained independence from Britain in 1957. Whilst he was in power, investigations into the running of the state investment fund,1 Malaysia Development Berhad (1MDB), were stifled and only recently reopened when the new government came to power. International investigations claim that billions of dollars were creamed off by the ex-PM’s associates, including his stepson who reportedly used funds to help finance ‘The Wolf of Wall Street’ film. He is now finally facing the court on numerous charges including money laundering and fraud.

At long last, it seems that Japanese consumer spending and inflation are showing signs of pushing upwards. Its workers’ inflation-adjusted real wages showed a 2.8% annual hike in June – when it rose at its fastest pace since 1997 – with increased summer bonuses being the main driver. Most other related indicators headed north over the year – nominal cash earnings by 3.6%, overtime by 3.5% and monthly household income by 9.1% to US$ 7.3k. This data will be good news for the Bank of Japan, as core inflation hovers around 1%, still some way off its 2.0% target, despite five years of massive stimulus. After contracting in Q1, the economy bounced back this quarter and grew at a much faster rate than expected of 1.9%, driven by a jump in private consumption.

In June, Germany’s exports remained flat at US$ 134.0 billion whilst imports rose 1.2% to US$ 109 billion – its highest level since records began in 1950. Consequently, its trade surplus slipped 5.4% to US$ 22.4 billion. The largest economy in Europe saw imports, at 10.2%, grow at a faster rate than the 7.8% for its exports. The question to be asked is whether Germany is doing enough to counteract their surplus which is in direct contrast to the US’s trade deficit – and most EU members.

Following a significant decline in eurozone demand, the country’s manufacturing orders declined in June, with a 4% month on month fall in total factory orders; of that, total foreign orders were 4.7%, with domestic orders 2.8% shy. There is a feeling that current international trade tensions have impacted on business confidence and introduced uncertainty.

The IMF has estimated that India’s economy will grow a credible 7.3% this financial year and 7.5% a year later, driven by resilient investment and solid private consumption. There has been a recent lull following the November 2016 cash ban and the 2017 sales tax introduction but now its economy accounts for a massive 15% of global economic growth. However, it continues to face risks that could derail Prime Minister Modi’s best laid plans including its weakening currency (down 7% to the greenback), higher energy prices, declining tax revenues and the sluggish pace of much needed structural reforms.

To the surprise of some, the Bank of England did unanimously decide to raise its key interest rate to 0.75% from 0.50% – following a similar rise last November. The decision to tighten monetary policy was in line with their bid to curb inflation and return it to “the 2% target at a conventional horizon”. This could be the last tweak with rates for some time. Growth is expected in the region of between 1.4% – 1.8% for the next thirty months.

Although UK housing activity remained soft, July house prices were 1.4% higher, month on month, and 1.3% for the quarter ending July. For the year, prices were 3.3% higher with the average house price now selling at a record high of US$ 299k. For the past three months to June, mortgage approvals rose 1.4% to 65.6k with house sales falling 3.0% in June to 96.3k.

UK Foreign Secretary, Liam Fox, reckons that it is now 60:40 that the UK will fail to agree to a Brexit deal with the EU by next March and is blaming intransigence by the EU for the increased possibility of no deal. He also claimed that Michel Barnier, the EU’s chief negotiator, had already dismissed the proposals, which “makes the chance of no deal greater”. The Brussels mafia has countered by blaming the UK government for failing to make realistic proposals. Even the BoE governor, Mark Carney, has warned that there was a “uncomfortably high” possibility of a no deal Brexit.

Following the US announcing new sanctions on Russia because of their alleged role in the nerve agent attack in the UK in March on Sergei Skripal and his daughter Yulia, the Russian rouble sank to its lowest since November 2016. It fell over 5.3% on Tuesday to 66.7, whilst share values of major Russian companies – including Aeroflot, Rusal and Sberbank – also drifted lower.

President Trump followed up on his re-imposition of Iranian sanctions with a warning to “anyone doing business with Iran will NOT be doing business with the United States”. Earlier in the year, he pulled out of the Iran nuclear deal, described by him the “worst I’ve ever seen” and considers that sanctions will force Iran to agree a new deal.

Not surprisingly, AMP has seen its H1 net profits slump 74.2% to US$ 84 million on the back of its massive compensation and legal costs related to its fee-for-no-service scandal. Australia’s largest financial adviser network may now face criminal charges after it emerged that it had misled the corporate regulator on multiple occasions about a widespread practice of charging many customers fees for services they were not, and could not be, receiving. The country’s financial sector is coming under close scrutiny by a Royal Commission that started its work in March. It has already uncovered many unsavoury and illegal acts carried out by the country’s banks, insurance companies, financial advisers etc, over many years, with a lot more to be revealed. Life is about to become uncomfortable for some of them in The Land Down Under!

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Everybody’s Talkin’

Chestertons latest report indicates that in Q2, there were quarter on quarter declines in both overall rental rates for apartments and villas by 4% and 2% respectively, with sale prices down by 1% and flat. The main driver behind the uptake was in the mid-market sector where buyers took advantage of good deals and attractive packages on offer.

The report also highlighted the improvement in certain areas such as Business Bay where units, having recorded a 9% decline in Q1, bounced back 4% to US$ 334 per sq ft and Jumeriah Village Circle up 6% to US$ 237 per sq ft (from an 8% fall the previous quarter). On the flip side, International City posted a 7% quarterly fall to US$ 160 per sq ft, whilst The Greens was 2% lower at US$ 293. When it comes to villas, only Palm Jumeirah was higher by 4% to US$ 626 per sq ft. The Meadows and The Springs remained flat and there were declines of 1%, 2% and 3% in The Lakes, Arabian Ranches and Jumeirah Park respectively.

Luxhabitat also confirmed that some sort of stability had returned to the secondary residential market in Q2 with 1.4k villas and 6.7k apartments sold for US$ 3.3 billion, compared to US$ 3.9 billion in Q1, traditionally a busier sales period. It also estimated that the five best locations for gross rental yield were Jumeirah Village Circle (8.0%), Jumeirah Lake Towers, Emirates Living, DIFC and Dubai Marina – all around 6.0%.

Central Hotels has had a soft opening of Royal Hotel – a 207-key property on Palm Jumeirah. The five-star hotel, overlooking the Arabian Gulf, will have a variety of recreational facilities and numerous dining options.

With a current portfolio of fifty aircraft, valued at over US$ 4 billion, Dubai-based aircraft lessor, Novus Aviation Capital, is one of the world’s fastest growing aircraft leasing financing platforms. This week it signed a US$ 1.4 billion deal with Boeing for 777-300ERs at the Farnborough International Airshow.

Dubai Parks and Resorts reported a 46% hike in H1 visitor numbers to 1.4 million, with over 300k in April alone. During the period, hotel occupancy at the Lapita Hotel jumped from 24% to 55%.

There are reports that Emaar Properties is in the throes of selling up to US$ 1.4 billion of its non-core assets, half of which will be from the sale of all but two of its hotel portfolio and the balance from the sale of schools and clinics in its residential communities.

Troubled Abraaj Holdings posted a Q1 US$ 188 million loss after having dipped into investors’ money to run its operations, following its delayed sale of K-Electric in Pakistan. Once one of the region’s largest private equity firms, with assets of over US$ 14 billion and now under liquidation, it has total assets of US$ 1 billion – with US$ 148 million net realisations from assets available for the liquidation process. With discussions on the sale of the firm’s asset management business ongoing, it is reported that both Cerberus Capital Management and Colony Capital have made increased offers to acquire some of the Dubai-based firm’s assets. Currently, 89 firms have announced exposure to Abraaj including Air Arabia’s US$ 327 million, Commercial Bank of Dubai (US$ 18 million), Mashreq (US$ 125 million) and Al Qudra Investments.

It seems that Abraaj Holdings used an “unusual” business model as it tried to plug the liquidity gap between the investment management fees and operating expenses. It is reported that the liquidators have had trouble finding key annual financial statements/management accounts and that there had been problems funding its cost base from ongoing revenues. The liquidator has indicated that since 2014, “management fee income and carried interest was insufficient to meet the Abraaj Group’s significant operating costs, with the result that any liquidity shortfall was largely funded through new borrowings.”

To coincide with the visit of President Xi Jinping, Emaar announced its landmark six-square kilometre mega-development which will include the region’s largest Chinatown. The company is to open three offices in Beijing, Shanghai and Guangzhou to promote tourism, education, trading and investment between UAE and China. Emaar also plans to expand its premium luxury hotel and serviced residences brand, Address Hotels + Resorts, to China.

The emirate is trying to boost bilateral relations with China in other aspects. In 2016, it was decided that Chinese visitors could enter the country without a visa – the end result sees visitor numbers topping 400k in the first five months of this year, with that total having doubled over the past three years; overnight Chinese visitors have grown 119% since 2014 and last year saw an annual 42.4% hike in arrivals. There are 200k Chinese living in the country. The Dubai College of Tourism has undertaken Mandarin tour guide training for more than 200 guides and an MoU has been signed with Fliggy, Alibaba’s online travel platform to position Dubai as the preferred destination for Chinese travellers. Another agreement sees Huawei, one of China’s leading smartphone manufacturers, offering useful Dubai content on its travel apps.

After a five-month trial, it seems that Dubai-based ride-hailing app Careem is to launch its own food delivery service, CareemFood. Earlier in the year, it acquired regional online restaurant listing platform RoundMenu and is now in discussions with investors to raise up to US$ 150 million funding. The firm, with 24 million registered users, is expected to start in Pakistan by the end of Q3, followed by the UAE.

Du posted an 18.8% hike in H1 profits to US$ 263 million, as revenue jumped 4.0% to US$ 1.8 billion. As a result, an interim US$ 0.0354 dividend (totalling US$ 160 million) has been recommended, subject to shareholders’ approval.

Mashreq recorded a 5.2% hike in H1 profits to US$ 327 million backed by a 3.7% improvement in operating income to US$ 845 million. There were increases in total assets (up 1.4% to US$ 34.6 billion), loans/advances (7.9% to US$ 18.4 billion) and customer deposits (2.3% to US$ 18.4 billion).

The DFM opened on Sunday (15 July) on 2880, having shed 262 points (8.6%) the previous two weeks, regained some ground, up 59 points (2.1%), closing the fortnight, on 26 July 2018, at 2880. Along with the bourse up 69 points (92.4%) to 2974, both Emaar Properties and Arabtec were trading higher on Thursday 26 July by US$ 0.05 to US$ 1.39 and US$ 0.04 to US$ 0.56 respectively. Volumes were lower, trading 226 million shares, valued at US$ 64 million, (compared to 226 million shares, worth US$ 64 million, Thursday – 12 July).

By Thursday 26 July, Brent Crude, having shed US$ 5.60 (1.9%) the previous two weeks, lost further ground down US$ 3.14 (4.1%) lower to close on US$ 74.25, with gold losing US$ 12 (1.0%) to US$ 1,247.

Google was fined US$ 5.0 billion by the EU’s commission, having concluded that the US tech firm had forced device-makers to pre-install its apps and services. This is the largest-ever fine imposed and Google have been given ninety days to end the “illegal conduct”. Last year, Google was fined US$ 2.8 billion for forcing users away from rival offerings and towards its own comparison-shopping site.

In what was its worst day in its short history, Facebook shares plummeted by over 20% slashing over US$ 120 billion off its market cap and making its founder, Mark Zuckerberg nearly US$ 16 billion poorer but still worth US$ 67 billion! The fall came after the social networking giant warned that profits would be lower, as it would be spending an increased amount on site security, following the Cambridge Analytical fiasco. European users have fallen 1.0% to 279 million, with a slowdown in advertising revenue because of tough new European data protection laws, introduced in May.

The same fate awaited Twitter the following day with their share value plummeting 19% on the back of concerns that it was putting “more effort into producing a “healthy” service and numbers had fallen in the wake of weeding out fake accounts.

Amazon share value went the other way – up 3% after posting a record US$ 2.5 billion Q2 profit, compared to US$ 197 million a year ago. The growth in its top line was not as spectacular – jumping 39.0% to US$ 52.9 billion.

With imports growing faster than exports, by 0.9% to 0.2%, the eurozone trade surplus fell 6.1% (US$ 1.8 billion) to US$ 19.3 billion in May.

There was a marginal 0.1% decline in China’s Q2 economic growth to 6.7% at a time when US trade relations deteriorated. There was impressive year on year growth figures including retail sales (up 9.0%), fixed asset investment (6.0% higher) and industrial production at 6.0%. The urban unemployment rate remained flat at 4.8% in June.

A recent Begbies Traynor report has highlighted the stress facing the UK’s High Street. It estimates that over 30.6k store chains are in trouble and “facing significant financial distress” and the problem is not going away. Over the past five years, 61k shops have closed and 50k retail jobs axed. The situation has been exacerbated by the presence of online retailers, with the major players such as Amazon not facing the high costs associated with a brick and mortar retailer. Instead of seemingly bending over backwards to help these international interlopers, the government should be looking at reforming business rates, cutting exorbitant parking rates and charging the internet sector a fairer tax rate.

To try and level the playing field with Aldi and Lidl, Tesco is to open a new chain of discount stores, called Jack’s. It will be operated separately from its parent company and up to 60 stores could be opened over the next twelve months. Over the past decade, the two German retailers have seen its combined market share more than triple from 2.9% to 9.4% – and still heading north.

Further problems for President Trump came with news that China’s trade surplus of US$ 24.6 billion with the US in June was at a ten-year high and YTD topped US$ 133.8 billion. For June, exports were 11.3% higher and YTD both exports and imports were higher – by 13.6% and 11.8%. It seems that some Chinese companies were trying to move goods before tariffs took effect. There is no doubt that Washington will not be too happy with these figures and will “encourage” China to cut back its trade surplus.

June retail sales were 0.5% higher, following a stellar 1.3% jump in May, driven by a 0.9% rise in vehicle sales and a 2.2% hike in sales by health and personal care stores; on an annual basis, the growth came in at 6.6%. Consumer spending is expected to expand further in the coming months, as job growth strengthens, wage growth begins to pick up and tax cuts start to increase disposable income streams.

There is no doubt that the President’s tax cuts late last year have been the main driver in the economy growing at its fastest quarterly rate in over four years. At an annualised 4.1% rate, even his critics must admit that the economy is booming. However, it will be some time before we know whether it has been all worthwhile – that will happen when the extra growth exceeds the US$ 1.5 trillion cost of the cuts.

July has turned out to be a good month for Russian president, Vladimir Putin. He had a successful meeting in Helsinki’s Hall of Mirrors with Donald Trump at which he managed to be one hour late. Nobody really knows what happened since the main meeting took place behind closed doors with just the two protagonists and their interpreters.

The economy is holding up well in Q2 after impressive Q1 returns on the back of higher energy prices and an uptick in exports, with unemployment remaining at a multi-year low. Retails sales are heading north even before the football circus came to town, Putin also defied his many critics by seeing his country hosting what many observers claim to have been the best-ever staged FIFA World Cup. The event was a showcase for the Russians and they passed with flying colours – both on and – more importantly – off the field. There is no doubt that Everybody’s Talkin’

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