Danger Zone

marina-101The last week of July saw the Q2 reporting season in full swing with Arabtec, Emirates NBD, Emirates Islamic and Du announcing their latest results. Arabtec – which has dominated the financial press recently for all the wrong reasons – came in with a 51.0% hike in Q2 revenue to US$ 657 million to generate a quarterly profit of US$ 28 million (H1 revenue and profit were US$ 1.24 billion and US$ 65 million).

Emirates NBD saw its Q2 profit up 34.8% with H1 profit at US$ 640 million on total income of US$ 1.92 billion. At the end of June, its total assets were US$ 94.9 billion, with customer loans and deposits both marginally up at US$ 65.9 billion and US$ 68.9 billion respectively. Its related bank, Emirates Islamic, reported impressive H1 increases in both income (28.0% to US$ 250 million) and profit (101.8% to US$ 62 million).

Du’s revenue was 13.7% higher at US$ 823 million with jumps in both EBITDA (17.9% to US$ 351 million) and net profit by 22.0% to US$ 259 million. The Dubai-based telecom company is proposing an interim dividend of US$ 0.033 on the back of these figures.

Despite its recent partial 80-day closure for maintenance and refurbishment – and reduced June passenger numbers of 5.1 million (cf 5.6 million in June 2013) – Dubai International was still able to record an impressive H1 growth of 6.2% to 34.7 million.  It is highly likely that the world’s busiest international airport will top a record 70 million passengers by the end of the year.

DP World handled 29.4 million TEUs in H1 – 10.7% up on like to like traffic over the same period last year with 25.2% originating at its home base – a rise of 14.1%. This figure is set to grow even further as an extra 66.7% capacity will be added by the end of the year so that Jebel Ali will be able to handle in excess of 10 million TEUs.

The long-awaited Marina 101 – slated to be Dubai’s second tallest tower at 425 metres – is due to open early next year. It was expected that Hampshire Hotels, in association with the Wyndham Group, would operate the 300-room Dubai Dream hotel – the focal point of the development – but it now seems that the search is on for new management of the hotel.

Dubai has always put a lot of emphasis on 5-star tourism with an estimated 62% of all properties falling into that category. Premier Inn is one company that is planning to redress the balance with plans to open a further four budget hotels adding 1,090 rooms – Ibn Batuta (370 rooms), Jadaf (300), Healthcare City (220) and Al Maktoum International Airport (200). The UK-based hotel brand, established in 1987, entered a JV agreement with Emirates Group in 2006 to launch in the Gulf and has already opened three properties in Dubai.

Having reported a 12% fall in H1 revenue to US$ 17.6 billion, JP Morgan Chase & Co is cutting staff numbers by 2%, including a number in its Dubai operation.

A recent report by Knights Frank shows a massive 25% increase in Dubai industrial rents with Class 2 buildings in Dubai Investment Park, Jebel Ali and Ras Al Khor posting gains of over 40%. With an increasing dearth of quality buildings available, there is growing demand for second-rate units.

The Dubai World Hospitality Championship is to establish a sector to develop best training methods to global standards in the hospitality segment. This comes in the form of a directive from the Crown Prince, Sheikh Hamdan bin Mohammed Al Maktoum, as Dubai ratchets up its efforts to ready the emirate for Expo 2020 and the influx of 20 million visitors.

The Dubai Financial Market General Index opened on Sunday at 4652 – and closed the shortened week up 3.9% at 4833. Because of the Eid Al Fitr holidays, there were only two days’ trading – Monday and Thursday – with thin volumes; Thursday saw only 335 million shares, equivalent to US$ 240 million, being transacted. The market has recovered 22.6% in July from its monthly opening of 3943.

A US lawsuit has now named Deutsche Bank, HSBC and Bank of Nova Scotia of trying to fix the price of silver and abusing their position in the market. Every day, in an apparent veil of secrecy, these three banks, appointed by the London Bullion Market Association, fix the price of silver in a practice that has been going on since 1897.

Thursday saw Argentina default on its foreign currency debt as last-minute talks failed to end the impasse.  A US federal court has urged its government to resolve this debt crisis through negotiations as it blocked the Latin American country from making interest payments to creditors, who exchanged their bonds in 2005 and 2010 for securities of a lesser amount. The court ordered that it should settle the US$ 1.5 billion owed to US hedge funds, led by NML Capital, that bought up the cheap defaulted debt but did not agree to a “haircut”. Until this dispute is settled, the country’s precarious economy could be further damaged which will then have a negative impact on the world’s financial markets.

It was only last year that the IMF was advising the UK government that their economic policies were not working. Not for the first time has the august world body got it wrong as the British economy goes from strength to strength. This week, it reported a 0.8% rise in GDP, with latest data forecasting that annual growth is set to be around the 3.2% level – the highest of any developed country. In contrast, the German economy is slowing dramatically, not helped by geo-political developments in the Ukraine, with even the moist optimistic growth estimate being south of 2.0%. Meanwhile France’s economy is stagnating as the Hollande government fails to get to grips with archaic labour laws and too much red tape.

The July eurozone inflation rate dipped yet again to 0.40% – its lowest level since the financial crisis. Over the past ten months, annualised prices have risen at less than 1.0% and the monthly trend continues to head south. This figure is well below the European Central Bank’s target of 2.0% and the risk of a deflation spiral will become reality unless the ECB Governor Mario Draghi takes a more proactive approach to the problem. There is no doubt that the bloc is in the Danger Zone.

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