Little Arrows

japan-bullet-trainAfter a relatively quiet month by their standards, Emaar Properties are once again in the news – this time launching the Rosa collection of 144 villas in Arabian Ranches. No doubt there will be much activity on Saturday – in Dubai, Abu Dhabi and Mumbai – as the villas go on sale.

Commercial property had been the weak link in Dubai’s realty sector, dragged down by an over-supply of inventory. But latest indicators point to the fact that, in Q3, UAE and Japan were the best performing global markets, with more of the same expected, as there has been a noticeable drop in the sale of distressed assets. However, the market is still some way off its 2008 price position but is recovering well from its later trough which saw values some 60% down from their peak. The Knight Frank Prime Global Cities Index estimated that Q3 prices were easing but still up 3.4% compared to the 6.1% in Q2 and 22.0% over the past twelve months.

Also slowing down is the hospitality sector with October occupancy rates at 78.6%, down 0.7% mainly because  the 7% demand growth was more than offset by a 7.4% supply expansion. However, both the average daily rate (ADR) and revenue per available room were up by 7.4% to US$ 299 and 6.6% to US$ 245 respectively. Hotel visitors for the first nine months of the year were up 9.9% at 7.9 million with total revenue of almost US$ 4.2 billion. Some hotels may have to consider not killing the golden goose by reducing their comparatively high room rates

As the Q3 reporting season draws to an end, Dubai Islamic Bank – the main sharia-compliant financial institution in the emirate – came out with impressive numbers. A 52.0% hike in net profit to US$ 126 million helped the YTD return rise by 33.5% to US$ 327 million. All other indicators headed north including deposits up 19.3% to US$ 21.7 billion, loans and advances by 1.4% to US$ 16.3 billion and total assets up 9.0% to US$ 29.3 billion.

Sensational figures were announced by Arabtec Holdings which saw its Q3 profit surge 212% to US$ 44 million on the back of a 39% rise in revenue at US$ 518 million. The company’s YTD revenue is up 27% to US$ 1.39 billion and profits by 153% to US$ 100 million. Largely as a result of these figures, the Board has decided not to go ahead with phase 2 of a US$ 653 million rights issue.

Less spectacular were the results from Shuaa Capital which turned a Q3 2012 loss of US$ 3.8 million into a US$ 1 million profit this period on a 57.0% increase in revenue to US$ 14.9 million. Its total assets stood at US$ 409 million.

Dubai’s jewel in the crown, Emirates Group saw H1 revenue up 12.8% to US$ 11.5 billion resulting in a 4% hike in profit to US$ 599 million. The main cost drivers were the fuel charges, accounting for 39% of operating expenses, and exchange variances because of the relatively high US$. It still has cash reserves of almost US$ 5 billion and the airline has seen the number of employees jump 11.7% to its current level of 75,800. Having already brought ten aircraft into service in H1 and a further fifteen expected in H2, it will be interesting to see what acquisitions the airline makes at next week’s Dubai Air Show. There is no doubt that there are benefits from economies of scale but there may be a time when it starts working against the airline – in other words, can any airline get too big?

A joint venture, between Danzas AEI Emirates, the Al Tayer Group and DHL Global Forwarding, has started work on two new airfreight and chemical logistics facilities. Located at the DWC Logistics District, the US$ 40 million facility, covering 37k sq mt, will be ready by the end of 2014.

Despite reports earlier in the year, it now seems that Majid Al Futtaim Holding (MAF) is only interested in the two Spinneys branches in Jordan – and not now in buying all the Spinneys outlets outside of the UAE, i.e. in Egypt, Lebanon and Qatar.

Christmas has come early for two Australians, Matthew Joyce and Marcus Lee. The Court of Appeal has quashed their convictions and acquitted them in a corruption case in which the former had been sentenced to ten years and a US$ 25 million fine.

Although there were some slight falls in September, the UAE Central Bank latest statistics indicate that YTD money supply has risen. Monetary aggregate M2 (currency, current accounts call accounts and deposits) rose by 10.7%, with bank loans and advances increasing by 7.2% and total bank deposits by 8.8%.

The Dubai Financial Market General Index lost 73 points this week to close 2.5% down at 2825.

Dubai’s annual inflation rate continues to rise – at 3.2%, its highest level in four years. According to the Dubai Statistics Centre, 44% of consumer costs is taken up by housing and utility expenses which have increased by 3.2% year on year. But with recent spiralling rent rises and school fees, the CPI may see a bigger jump next year.

Indian inflation in October hit 10.1% with some food prices going through the roof. On the other hand, inflation in the UK fell to 2.2% and is expected to drop to the 2% level in 2014 despite the recent double digit energy price hikes.

The UK economy has recovered we’ll and appears to have some traction, with 2013 GDP growth expected to be 1.6% and rising to 2.8% next year. Unemployment has dropped again with 7.6% of the workforce looking for a job.

This is in direct contrast to the eurozone which managed to register growth of just 0.1% in Q3. Nine countries in the 17 nation bloc have unemployment levels of over 10%, including Spain and Greece with 1 in 4 of their population unemployed. Even the three largest economies are feeling the pinch with Germany recording a falling 0.4% growth and France and Italy each with a marginal 0.1%.

In Japan, the situation is not much better with Q3 growth falling to 0.5%, despite the best efforts of PM, Shinzo Abe. His brand of economics, known as Abenomics, relies on the so-called “three arrows” – being monetary policy to end twenty years of deflation, reform to boost outside investment and to bolster government spending on infrastructure. To overcome his economic woes and get the country back on track, the Japanese leader will need a bigger armoury than his Little Arrows.

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