Money, Money, Money

AbbaEvery month this year, consumer spending has shown marked increases – with June the largest on record as personal expenditure reached US$ 1.0 billion, with the H1 total at US$ 4.2 billion. Amazingly, this sum equates to all the spending recorded in the prior thirty months and brings the local banks’ personal lending to US$ 75.3 billion. No doubt, this boost in consumer spending is good news for the banks and local economy but not so for some residents who are living beyond their means which may prove costly in the future, as rates of inflation and interest rates inevitably rise.

By any measure, Dubai hotels had a spectacular Eid Al Fitr holiday, with occupancy rates at 89%. 73k of the 82k hotel rooms available were taken by guests coming from all over the globe, including the GCC (42k), Europe (14k) and Asia (12k). However, recent reports show that the number of Indian cancellations are beginning to rise as the falling rupee starts to hit the pockets of potential tourists from there; it will be interesting to see whether last year’s figure of 764k is surpassed in 2013. (Yet again, the currency skidded to another record low touching 70 to the US$ – with no end to its strife in sight).

It is difficult not to imagine another property bubble here when latest reports indicate that Dubai residential prices have risen over 30% in H1 alone. Amazingly, villa price hikes in Q2 (at 21%) were actually down on the same period last year which had a 24.4% increase. The Land Department estimates property sales in excess of US$ 6.2 billion for the first seven months of the year – a staggering 67.4% up on last year. Mortgages have risen in tandem showing a 66.4% surge to US$ 11.5 billion.

Helping to satisfy the increasing appetite for real estate, Nakheel is on track to deliver upwards of 3k units this year and has announced that it has just completed construction of over 800 homes in its Al Furjan development.

Dubai Aerospace Enterprise is in discussions with BBA Aviation in a reported part merger of certain divisions of their business. The UK aircraft services company is in negotiations with US-based StandardAero which DAE bought in 2007.

To keep pace with ever-growing demand, it is estimated that Emirates Airline will need to spend at least US$ 26.7 billion over the next five years as it prepares to expand its existing fleet from 201 to 320 aircraft. It is now planning to raise US$4.5 billion to finance its next tranche of aircraft – 10 Airbus 380s, 9 Boeing 777-300ERs and 2 Boeing 777 freighters. Will there come a time when economies of scale begin to go the other way?

Also expanding is the number of passengers using Dubai International Airport which saw a 6.1% July rise to 5.31 million – this equates to a YTD jump of 15.3% to almost 38 million. The world’s second busiest international airport is well on its way to narrowing the gap on London Heathrow and could well  take over the top spot within two years.

Although minute, Qantas has returned to the black posting a US$ 5.4 million profit in 2013, compared to a loss of  US$ 220 million a year ago – although US$ 112 million came as a result of a settlement with Boeing in relation to its cancelled orders for the troubled 787 Dreamliner. Its alliance with Emirates has helped the carrier improve passenger numbers on its international routes.

Despite a 1.3% drop in H1 revenue to US$ 1.51 billion, DP World still managed a 6.3% improvement in operating  profit to US$ 278 million. This year, the company, 80% effectively owned by the government,  has seen capital expenditure of US$ 544 million and has a further US$ 3.7 billion planned over the next thirty months. It currently has 65 terminals operating on all continents.

Dubai-based interior contracting company, Depa Limited returned to profit in H1. With revenue up 22.4% to US$ 275 million, it posted a surplus of US$ 9.0 million compared to a US$ 30.0 million loss a year earlier. With new contracts of US$ 354 million signed in H1, its project backlog has risen by 11% to US$ 817 million.

Orbit Showtime Network, the MENA region’s largest pay TV company, has purchased Pehla Media & Entertainment which brings in forty new channels and access to a a huge Asian audience. Dubai-based OSN has decided that acquisition – rather than organic expansion – is their fastest growth strategy.

The latest Forbes list of 1,226 billionaires includes four from Dubai. The CEO of Mashreq bank, Abdul Aziz Ghurair, has an estimated wealth of US$ 2.9 billion, followed by his relative Saif (US$ 2.0 billion), Abdullah Al Futtaim (US$ 1.6 billion) and his cousin Majid (US$ 1.1 billion).

In the UK, Citizens Advice is becoming increasingly concerned with financial services companies and their “cold calling” techniques, especially after the 30 million unwanted calls following the recent mis-selling PPI. The organisation is asking for a total ban on such calls and perhaps the same could be introduced in Dubai, where many financial services and real estate staff ply their trade with similar nuisance and unasked for calls.

The World Bank has released 2011 figures showing that the 15 million expatriates, then living in the six-country GCC, remitted a total of US$ 74.5 billion. 39.9% of this total (US$ 29.7 billion) was by Indians beating the combined total of the next four countries – Egypt (US$ 6.9 billion), Pakistan (US$ 6.0 billion), Philippines (US$ 5.0 billion) and Bangladesh (US$ 3.1 billion). Saudi Arabia was the main provider accounting for 38.4% of the total (US$ 28.6 billion) with UAE coming in next at US$ 18.2 billion.

Last week, it was thought that the Dubai bourse may lose some steam – but nobody could have predicted that it would come off the rails! Monday saw the market attain its highest level in five years, closing at 2742; Tuesday, the market had its biggest daily fall in six years, losing 7.01% of its value to close on 2549.  By the end of the week some sort of normality had returned to the market where it closed on 2523 – 8.0% down on the week from its Sunday opening of 2700 points. Despite the tumultuous week, and the accompanying drop, it must be remembered that the market is still currently up 62.66% this year and 70.51% higher than it was this time in 2012. No doubt, the Syrian crisis was the tipping point for the massive sell-off but other factors are in play, including the anticipated US tapering of QE2 and the fact that profit-takers were in the market.

The big winner from the global mini stock market crash is gold which is fast recovering lost ground, topping US$ 1,429 per oz during the week, before falling back to just below US$ 1,400 – a gain of over 21% since its late June close of US$ 1,181. As usual, silver tracked gold and nearly reached US$ 25 per oz before sliding to under US$ 24 on Thursday.

It seems that embattled US bank, JP Morgan, is set to be fined US$ 80 million by federal regulators for inappropriate dealings with its retail customers some years ago. However, this is small change to reports that the bank could be fined US$ 6 billion for mis-selling securities to the value of US$ 33 billion to Fannie Mae and Freddie Mac, then the country’s biggest mortgage lenders. To further add to their woes, it could receive a similar hefty fine for its role in the ‘London Whale’ trading debacle that has already cost the firm US$ 6 billion.

The patchy US growth scenario was reflected in disappointing trade figures with July durable goods orders falling 7.3%, after three months of gains, and non-defence capital goods dropping 3.3%. This follows close on news of a marked slowdown in residential construction and new home sales.

As the Brazilian real continues in free fall to its lowest level in almost five years (at 2.45 to the US$) and inflation rates soar to 6.3%, the country’s central bank has confirmed its fourth rate hike this year to 9%. Whether this works remains to be seen but the odds are stacked against any early improvement, as the country gears up for the FIFA World Cup next year.

Meanwhile the gaffe-prone FIFA executive committee will soon vote to move the Qatar summer 2022 World Cup bid. This probably means either moving to a winter date, at the same location, or moving to another country. One has to ask two questions – why did the football authorities go against tradition and vote for the Gulf country in 2010, four years earlier than had ever been done before? Secondly, are they now blaming global warming for deciding it is too hot, less than a year after their selection (when evidently it was not too hot)? Money, Money, Money (must be funny in a rich man’s world).

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