Won’t Get Fooled Again

Mike_AshleyThis week, HH Sheikh Mohammed bin Rashid al Maktoum approved a US$ 136 million plan to build a 1.4 km bridge from JBR to the upcoming Bluewaters Island, with further access by footbridge and monorail.  The US$ 1.6 billion project, encompassing a five star hotel, residential units and retail and dining outlets, is to have the world’s largest Ferris wheel, surpassing that of Singapore’s 165 metres.

In yet another survey, this time by Knight Frank, Dubai is rated as having the best performing real estate in the world. Overall, 2013 prices were up 34.8%, compared to the global average of 8.4%. Their report also figures that prices are still 25% below the 2008 zenith but this has to be considered a little on the high side.

Good news for Emaar shareholders came with its Board proposing a 15% dividend as well as a 10% bonus share issue, to be discussed at April’s AGM. The company is also considering a dual listing of 25% of its retail division on Nasdaq Dubai and in London, at a price in the region of US$ 2.3 billion. It is also expected to carry out a similar exercise for its Egyptian operation. The market reacted favourably on Sunday with its shares on the DFM up 5.1% to US$ 2.48 on the day.The developer also launched the sale of its recently announced BLVD Crescent, including two towers – one 39 floors and the other 21 levels. It also awarded a US$ 354 million contract to Dutco Balfour Beatty to build the new Fashion Avenue extension in Dubai Mall.

There was plenty of other activity on the construction front. Nakheel awarded two contracts, totalling US$ 143.3 million, for construction of 401 residential units in its Al Furjan community, to be completed by the end of 2015. Deyaar managed to sell all 219 residential units in its 30-floor Atria project in one day, raising over US$ 136 million in receipts on its Business Bay development, to be completed by 2017.  A week after winning a US$ 208 million contract from Meraas for The Avenue Phase 2 City Walk, Al Futtaim Carillion has another order, for US$ 102 million from the Dubai World Trade Centre, for a 588-room hotel along with an eight-storey office building, slated for completion by mid-2015. Green Valley International Real Estate is planning to invest US$ 409 million in the country including an apartment building in Dubai Sports City. DIFC is set to launch a 128-room boutique hotel, costing US$ 68 million, near its Gate Village.

Arabtec’s Q4 profits rose a staggering 381% to US$ 33 million on revenue of US$ 627 million. So far this year, the company has increased its order book by US$ 49.0 billion! Based on a 2013 profit of US$ 103 million, the developer is expected to declare a dividend of US$ 0.002 per share plus bonus shares equivalent to 30% of its capital.

Dubai Industrial City announced a 67.1% jump in 2013 profits to US$ 56 million on a 33% hike in revenue. A further 158 new companies opened during the year – a sure sign that the industrial sector is becoming an increasingly important driver for Dubai’s burgeoning economy.

Dubai Silicon Oasis Authority increased 2013 profits by 23.5% to US$ 55.7 million. To help with making the DSO a truly global smart city, the government has earmarked US$ 654 million for further investment over the next three years.

Majid Al Futtaim will be spending US$ 204 million on its VOX Cinemas, including four new international locations – Bahrain, Egypt, Oman and Qatar. In Dubai, Shindagha and Burjuman will be new locations and there is to be a new 24-screen facility in MoE.

It appears that Thuraya Telecommunications wants to expand its operations into the US so as to increase its revenue stream. Last year, the Dubai-based company posted sales of US$ 122 million and is looking at double-digit growth over the next five years.

DP World recorded disappointing 2013 results even though there was a 10.8% rise in profits to US$ 604 million which included a US$ 158 million profit on sale of assets. But overall their profit, after including separately disclosed items, actually fell 13.3% to US$ 640 million on revenue of US$ 3.07 billion.

After two weeks of losses, the bourse returned to some sort of Dubai normality by jumping 8.2% from its Sunday opening of 3981 points to close on Thursday at 4306. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.36 and US$ 1.31 respectively – 17% and 12% up on the week.

Another new local listing this week on Nasdaq Dubai; the US$ 300 million Dubai Investments Park’s sukuk brought the number of new listings to the bourse to US$ 12.5 billion over the past fifteen months.

The Department of Economic Development is seriously looking at setting up an Islamic export/import bank to boost foreign investment and trade. The proposed financial institution would be the world’s first Shariah-compliant Exim bank.

As widely expected, the Central Bank has agreed to refinance Dubai’s US$ 20 billion debt facility for a further five years at 1% over EIBOR. Half of the debt was maturing this month with the balance due for repayment in November.

Official figures indicate that in February, Dubai inflation, at 2.6%, was at its highest level in over four years. With housing and utility costs accounting for 44% of expenses, many would have thought that this figure would be higher than the 4.5% recorded.

Property prices are also shooting up in Australia which has some of most expensive realty in the world. With it being estimated that the Chinese are pouring in US$ 4.5 billion every year, the Abbott government is considering ways to curtail overseas purchasers pushing up prices even further. Is there any chance of Dubai doing likewise?

It is no surprise that the Federal Reserve saw its 2013 net assets jump by  US$ 1.1 trillion, inflating its total assets to over US$ 4 trillion. Courtesy of QE, every month last year, the US government made asset purchases of US$ 85 billion. Consequently, the US Treasury’s coffers increased by US$ 79.6 billion – the Fed’s net profit for the year. On Wednesday, the QE program was further tapered by a further US$ 10 billion to US$ 55 billion.

This phasing out of quantitative easing is having a negative impact on emerging markets, including the “fragile five” – Brazil, India, Indonesia, South Africa and Turkey. The turning off of the tap of easy money will expose such economies to capital outflows and will add to their already inflated current accounts and external debt. As currencies weaken, servicing debts, in say dollars or euros, becomes more expensive and local interest rates move higher to attract investment. The problem is further exacerbated every time the Fed decides to reduce QE and when confidence goes, a liquidity crisis will be unfortunately followed by a fully blown financial crisis.

Is there any doubt that the rich are getting richer with the gap between rich and poor becoming larger by the year? It is inequitable to see that, in the UK, the five richest families – Grosvenors (US$ 13.1 billion), the Reuben brothers (US$ 11.5 billion), the Hinduja brothers (US$ 10.0 billion), the Cadogan family (US$ 6.6 billion) and Mike Ashley (US$ 5.5 billion) have more money than 12.6 million – or about 20% – of the country’s population.

Ominous signs are looming for the eurozone as it heads towards deflation with February inflation figures of 0.7% – well down on the ECB’s 2.0% target and its December 2011 return of over 3.0%. Despite the bank’s president, Mario Draghi, insisting otherwise, this is a problem that will not go away and will inevitably cause economic problems for the 18-nation bloc. Surely he Won’t Get Fooled Again!

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