I Heard It Through The Grapevine

mall-of-the-world-dubaiHH Sheikh Mohammed bin Rashid Al Maktoum stunned everybody with his latest announcement – the world’s largest (covering 48 million sq ft) and first temperature-controlled city – Mall of the World. There will be many components to the new US$ 6.8 billion project including the world’s largest shopping mall, at 8 million sq ft, the world’s largest indoor theme park, with a dome that can be opened in the winter months, 100 hotels and serviced apartments (comprising 20k rooms), a cultural area and a Wellness District.

The proposed location on SZR will not do much for traffic flow, the timing may be a problem, especially with all the work that Expo 2020 will entail, and funding such a massive project will tax the minds of financing gurus. Apart from these potential problems, this can only be a tremendous boost, in the long run, for the Dubai brand.

Another property update – this time by Asteco – confirms that Q2 prices were flat (by Dubai standards), with 6% growth for apartments and half that for villas. Current hotspots include Dubai Marina, Downtown and Jumeirah Village that have posted annuals gains of 62%, 52% and 46% respectively.

The owners of Lamcy Plaza, Lals, and Regal Group, a textiles company, have formed Signature Developers in a surprise move to enter the burgeoning residential and hospitality sector. Their initial foray will be a 220 metre tower block, located near Dubai Mall, and priced at the luxury end of the market whilst the second will be a mixed-use 44-storey building in JLT, including a 170-room 5-star hotel.

Construction has already started on two residential developments in Al Furjan which are expected to be completed by the end of next year. The 11-storey buildings were initially planned prior to the GFC but have now been unveiled again by Azizi Developments.

The 4th MasterCard Global Destinations Cities Index sees Dubai move into the top five as it sees a 7.5% rise in overnight visitors to 12 million. Only London, Bangkok, Paris and Singapore will have more visitors. Last year data from the Department of Tourism and Commerce Marketing showed a 10.6% rise in visitor numbers to 11 million.

According to the Sunday Times, there is a consortium, headed by Dubai’s Khalaf Al Habtoor, planning to spend US$ 1.7 billion buying iconic hotels in the UK capital. Although no specifics have been revealed, it is known that the Al Habtoor Group is keen to expand their hotel ownerships in Europe, especially London and Paris.

Having recently cancelled a US$ 16 billion order for 70 Airbus 350s, Emirates has finalised a US$ 56 billion order for 150 Boeing 777s, with purchase rights of a further fifty. With this order, the 777 fleet will have 208 planes making the Dubai-based airline its largest operator in the world.

As part of their 2012-2016 plan, the RTA have completed work, valued at US$ 109 million, on 193 km of internal roads in Al Quoz, Barsha, Khawaneej and Hatta. Further work on roads in Al Warqaa and Muhaisnah should be completed by the end of the year. Despite all this, the highways are as busy as ever – testament to the booming economy and influx of people.

This is borne out by official H1 figures from the General Directorate of Residency and Foreigners Affairs in Dubai which issued 571k new residency visas – up 30.6%. With 515k residency visas renewed and 382k cancelled in this period, it indicates that there is a big increase in people living in the city.

In H1, Dubai Auto Zone – part of the government’s Economic Zones World – recorded a 64.0% increase in trade to US$ 1.48 billion. DAZ currently houses 420 companies, with its key trading partners being found in Russia and Africa.

The Dubai Multi Commodities Centre has reported a 30% annual hike in the number of companies to 8.9k, of which just over 1k have established over the past six months. The free zone is the largest in the region and currently comprises some 65 tower blocks and this does not include the Burj 2020 which will become the world’s tallest commercial tower; work is expected to start next year.

Nakheel reported a 54.2% jump in H1 profits to US$ 504 million. The company announced that it would repay an outstanding US$ 1.5 billion debt four years earlier than scheduled – a sure sign that the government-owned developer considers that the good times are back.

DP World, which operates some 65 ports all over the world, is involved in a spat with Djibouti authorities who have failed in court attempts to stop the port operator operating Doraleh Container Terminal in that country. The dispute is all about how the initial 2000 contract was awarded and how payments were made.

Troubled Gulf Navigation, Dubai’s only listed crude oil shipper, has cut its capital base from US$ 452 million to US$ 150 million in a move to solve its debt difficulties. By a reverse stock split (three former shares now equal one share), the company has managed to write off US$ 300 million in losses. The sale of two vessels and the issue of a US$ 130 million convertible bond will help cash flow.

With an additional capital inflow, Emaar Economic City – a consortium of Emaar Properties and Saudi investors – now holds 50% (or US$ 693 million) of Port Development Company, with Huta Marine Company holding the balance. The cash injection will be used to internally finance the second phase of work on the King Abdullah Economic City port, located on the Red Sea. The facility has a capacity of 1.3 million teus (twenty-foot equivalent units), set to rise to 4 million by 2016.

Limitless has confirmed that its Vietnamese JV partner, Sovico Holdings, had received an investment certificate from the Quang Ninh state which now allows the Dubai developer to move a step closer to start infrastructure work. The Halong Star project, in the country’s north-east , includes housing, retail and a hotel.

Dubai-based Metito Holdings has signed a partnership agreement with three Japanese companies – Mitsubishi Corporation, Mitsubishi Heavy Industries and Japan Bank for International Corporation. The Japanese triumvirate will invest heavily in the water management solutions company as the bank will provide funds of US$ 92 million and the two other companies have purchased 38.4% of the shares for an undisclosed amount.

Not surprisingly after the recent stock market mini-crash, the authorities are planning to tighten up procedures and supervision to avoid “another” Arabtec. The Securities and Commodities Authority will set up a technical committee to look into share trading integrity and preventive stock manipulation measures.

The DFM, opening on Sunday at 4400 points, had another eventful week to close Thursday up 4.0%, or 175 points, at 4575. Emaar and Arabtec, ended the week on US$ 2.62 and US$ 1.14 respectively.

Two recent studies – from the IMF and Bank of America – indicate that Dubai’s economy has gained traction and is heading to growth levels in the region of 5%. The usual drivers – tourism, high oil prices, a turnaround in the realty sector and trade – play a big part in this positive and solid outlook. Although there has been some welcome restructuring in the GRE debt, this still needs close monitoring, as does property speculation – if it starts to get out of hand again.

Meanwhile, the IMF has again lowered its French growth forecast to 0.7%, only three months after its previous revised estimate of 1.0%. There is no doubt that Europe’s second largest economy needs major structural reforms, as unemployment hits a new high of 3.39 million and the Hollande government struggles to cut the country’s public deficit to 4.0% – as opposed to 3.0% as laid down by eurozone rules. Whether the government will be able to slash public spending by US$ 68 billion, within the next three years, remains to be seen – if not, any future growth plans and reduced unemployment go out of the window.

Even the once mighty German economy is under the cosh as its industrial output dropped for a third consecutive month. This comes after the latest ECB’s warning that a prolonged period of low inflation in the bloc will hamper any meaningful recovery. The odds are increasing that the central bank will loosen its monetary policy sooner rather than later in a bid to reverse the worrying downward inflation spiral and the low patchy growth.

With inflation nudging upwards and its QE program tapering downwards (now at US$ 35 billion per month from its January total of US$ 85 billion), there is no surprise to see pressure on the US dollar. Because Q1 saw the GDP contract by 2.9%, it seems highly unlikely that the Fed’s 2014 target will be met unless the US economy can show 5% quarterly growth over the next three quarters. The Fed has a difficult balancing act – if they were to end QE, there is every chance the economy would fall into recession and if they continue with QE, at current levels, inflation would inevitably rise.

The UK largest drug conglomerate – GlaxoSmithKline – is having a bad time in China. There is a possibility that the company could be thrown out of the country if the massive bribery case, now going on, goes against GSK. Former country head Mark Reilly, and Peter Humphrey, GSK’s own internal investigator, are in detention.

The SCA (Securities and Commodities Authority) has advised investors to ignore rumours about Arabtec Holding. This warning could be of use in many cases as Dubai sometimes seems to thrive on rumours spread mainly though the social media. Obviously, interested stakeholders will look after their own interests and may spread rumours that a certain market is going up or down, a certain company (or individual) is in trouble etc. Even General Sheikh Mohamed bin Zayed Al Nayahan has come out about the President’s health rumours and urged all citizens to validate the transfer of information.  Hopefully there will come a time in Dubai when we can rely on fact and not I Heard It Through The Grapevine.

This entry was posted in Finance and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s