A Change Is Gonna Come!

delta-emiratesThe big retail battle between Apple and Samsung is on in Dubai. This week, Samsung completed a major overhaul and expansion of its 9.2k sq ft flagship store in Dubai Mall ensuring that it was the electronics company’s largest global store outside of Seoul. Meanwhile on Thursday Apple launched its first ME store in the Mall of the Emirates.

Latest data shows that the world’s largest smartphone maker is losing market share, at the quarterly rate of 11.5%, whilst its American rival is expanding sales of its iPhone units by 35% a year. Q3 results indicated a 30% jump in profit to US$ 11.1 billion, on the back of the sale of 48 million iPhones; with the recent introduction of the 6S and 6S+, Q4 sales may see a record 75 million units being sold. (As an aside, Sharp is expecting to report a US$ 970 million six-month loss at the end of September, as demand for its smartphone screens dries up).

Recent estimates indicate that there are over 29k serviced apartments in Dubai, with a further 18% increase to 34.2k expected before 2020. Colliers also estimate 36% of that total is managed by international brands, the same ratio unbranded and the remaining 28% managed by local brands. 2014 occupancy rates fell by 3.3% but still registered a creditable 79.0%.

Accor Hotels and the Manazil Group are planning three new Dubai properties, and 1.1k rooms, for completion by 2019. The three hotels will be built in Jumeirah Village Triangle, being a Majlis Grand Mercure hotel, a Mercure hotel and an Adagio aparthotel.

Damac announced that it expects to open its 1k-key Damac Towers by Paramount in Q4 2016. Three of the four towers will be serviced apartments, whilst the other will be known as the Paramount Hotel & Resorts; all four structures will share a common central podium / reception area.

The 3-day Gulfood Manufacturing 2015 opened on Tuesday, attracting an estimated 1.5k exhibitors (a 35% increase on last year) and over 30k visitors, most of whom will be from overseas. As usual, the hospitality, retail and travel sectors will benefit from this influx which shows the benefit of a strong and vibrant MICE sector for the economy.

The UAE ranks 5th in the Global Built Asset Wealth Index. The Arcadis index measures the value of built assets for every citizen with the UAE, recording a figure of US$ 141k, behind Qatar’s US$ 198k, Singapore, Hong Kong and Japan.

Emirates reached a major milestone this week when it celebrated its 30th anniversary. Although Dubai is now the world’s largest international airport, HH Sheikh Mohammed bin Rashid Al Maktoum’s vision so long ago was not this target but to build “the aviation capital of the world”. Furthermore his strategy for the airline is one of continued innovation so that aviation can be reinvented with “new products, technologies and services”.

September passenger numbers at Dubai International increased 8.2% to 6.4 million, with YTD traffic up 12.0% at 58.7 million. Even though much of the freight traffic has been transferred to Al Maktoum International, the “old” airport still saw freight traffic up 0.3% to 207k tonnes.

It is reported that flydubai will record a 35.2% jump in the number of passengers this year to 9.8 million, despite seeing flight disruptions because of regional conflicts. Last month, the airline received the last of its 50 737s, ordered seven years ago and has a current backlog of 111 outstanding from an order made at the 2013 Dubai air show.

DP World announced a 3.2% rise in gross container volumes to 46.5 million TEUs (twenty-foot equivalent units) for the nine months to 30 September. Growth areas were the UAE (up by 4%) and Europe.

Empower has won a US$ 34 million contract to supply the US$ 1.6 billion Bluewaters project with 25k refrigeration tonnes for the island’s residential and commercial units.

Majid Al Futtaim has launched a 10-year, US$ 500 million sukuk at 255 basis points over midswaps. The wakala Islamic bond was more than three times oversubscribed.

According to a Deloitte & Touche report, the UAE design sector – including fashion (the largest contributor at 74%), architecture and furniture design – is valued at US$ 27.6 billion, ahead of Saudi (US$ 21.9 billion) and Qatar (US$11.9 billion). Over the next four years, it is expected to grow a further 30.4% to US$ 36 billion. In an attempt to rival the likes of London, Paris and New York, Dubai has already completed phase 1 of d3 (Dubai Design District) – comprising 11 buildings, 500 companies and 10k professionals. Phase 2 will be completed by 2017.

Since the beginning of August, when the petrol subsidy was abolished, fuel prices have been amended every month in line with global trends. In the first month, prices jumped 24.4% to US$ 0.58 per litre but since then, they have been pared back so that November prices will be lower than they were when the subsidy was in place. September and October saw prices fall 8.4% to US$ 0.53 and to US$ 0.49 respectively whilst November prices for Special 95 have been cut by a further 5.0% to US$ 0.46.

UAE’s oil production in September rose 0.8% to 2.9 million bpd as a US federal review indicates that the country could expand production by a further 30%. Currently, the country is the third largest producer within the OPEC cartel.

On Sunday, the federal cabinet approved the 2016 US$ 13.2 billion federal budget, with a zero deficit. Despite the low oil price, the government is still keen to go ahead with major projects in key sectors such as education, social development, public services and healthcare; these four areas accounted for 55.6% of the 2016 spend, being allocated US$ 2.8 billion, US$ 2.0 billion, US$ 1.5 billion and US$ 1.0 billion respectively.

The UAE and UK are looking at doubling bilateral trade, to US$ 25 billion, over the next five years – an ambitious programme considering that five years ago this figure was only US$ 7.5 billion; more business, such as the recent US$ 9.2 billion order for Rolls Royce engines for 50 A380s, will help achieve this target.

Union Properties is arranging a 50:50 JV with the Saudi company, Naif Al Rajhi Investment Company. Based in Riyadh, the new entity will make use of the Saudi’s company huge land bank, with the first project likely to be mixed-use, including 210 town houses and 16 apartments.

Emirates NBD reported a 7.1% rise in Q3 profits to US$ 455 million, with a 27.6% increase, to US$ 1.36 billion, for the first nine months of the year. Dubai’s largest lender, 55.6% owned by the Investment Corporation of Dubai, saw increases in loans and advances plus deposits – of 5.6% to US$ 71.3 billion and 8.0% to US$ 73.3 billion respectively. Its related bank, Emirates Islamic, announced a 109% jump in net profit to US$ 145 million.

Emaar Malls, 85% owned by its parent Emaar Properties, recorded a 17.1% hike in Q3 profits to US$ 102 million. The remaining 15% shareholding was hived off in a US$ 1.6 billion IPO last September.

This week, there were also disappointing Q3 results. Deyaar Development reported a 37.7% slump in Q3 profits to US$ 13 million, which brings its nine months’ earnings figure to US$ 52 million. Meanwhile Dubai Financial Market saw quarterly profits sink 70.4% to US$ 12 million, on the back of a serious slowdown in trading activity.

The DFM opened Sunday at 3588 and fell 2.3% to 3503 by the end of the week (29 October) and for the month, the index fell 90 points. Of the bellwether stocks, Emaar Properties was down US$ 0.05 to US$ 1.75, whilst Arabtec fell US$ 0.02 to US$ 0.44. Yet again, trading volumes on Thursday were dismally low, at only 174 million shares, valued at US$ 73 million changing hands, (cf 148 million shares for US$ 80 million, the previous Thursday).

Oil and gold had mixed weeks so that by Thursday (29 October), Brent crude had closed 0.9% up on the week at US$ 48.80, whilst gold continued heading south, falling US$ 19 to US$ 1,147. By the end of October, oil and gold were trading at US$ 46.39 and US$1,141 respectively – down US$ 2.31 and up US$ 27 on the month.

BP reported woeful Q3 profit figures as it announced a slump of 48.1% to US$ 1.23 billion and that it was cutting a further US$ 1 billion off its already reduced 2015 capital spending to US$ 19 billion. It also has to take a further US$ 426 million hit, in relation to the 2010 Deepwater Horizon accident, which brings its total cost to a staggering US$ 55 billion. Meanwhile, Shell joined BP with Q3 figures that both would like to forget – a US$ 6 billion loss following a US$ 5.3 billion profit over the same period in 2014. The company took a US$ 8 billion impairment charges after failing to find oil in the Alaskan Chukchi Sea.

To add to VW’s troubles, it has lost its top spot to Toyota in global vehicle sales for the first 9 months of the year. The Japanese carmaker recorded 7.5 million sales to the German’s 7.43 million (with GM coming in 3rd with 7.2 million sales). The gap will be greater by the end of the year as the full impact of the emissions scandal comes into play.

With a marked slowdown in global trade, the world’s largest container carrier has trimmed its 2015 profit forecast by 15% to US$ 3.4 billion. The Danish shipping line, Maersk blames low capacity utilisation and competitive pricing which has resulted in loss-making rates on some routes.

IBM is reportedly facing investigation by regulators in three countries – US, UK and Ireland. The probe is apparently related to the way the tech company accounts for certain of its revenue transactions.

It is reported that five major banks – Barclays, BNP Paribas, Goldman Sachs, HSBC and RBS – will be fined a total of US$ 1.2 billion by US regulators. The penalty is in relation to their involvement in the foreign exchange rigging trading scandal and is the latest in a string of claims by affected stakeholders.

Despite there being no change for some time in Australian benchmark rates, most of the banks, including ANZ, CBA, NAB and Westpac, have decided to raise mortgage rates. This will cost consumers US$ 400 pa, as the average rate rises to 5.6%. Next Tuesday, the country is on holiday for the Melbourne Cup and this is always a good time for the RBA to tinker with rates – this time downwards.

Growth in the UK fell in Q3 from 0.7% to 0.5%, with the service sector, accounting for almost 80% of the economy, up 0.7% over Q2. However, construction has decreased 2.2% whilst manufacturing is in recession, having fallen in the previous two quarters. Despite the global slowdown gaining traction, the UK is still in comparatively good shape and will see a 2.3% expansion this year whilst next year may prove a little more difficult.

Any country that has cut its benchmark interest rate six times already this year is in a financial quagmire. At the beginning of the week, China shaved a further 25 points off the index to 4.35%, as well as cutting the amount of local currency banks have to maintain. The government is treading a fine line between stimulating consumer confidence and creating another higher level of debt which could easily turn into a major financial headache. In China, the latest Westpac MNI indicator – measuring consumer sentiment – fell by 7.25% to its lowest level in 8 years.

However, this week China did sign a US$ 17 billion deal with Airbus for 100 A-320s and 30 A-330s – a sure indicator that at least the travel sector in the country is booming. A recent Boeing report indicated that, over the next 20 years, Chinese airlines will need to spend US$ 950 billion buying 6.3k new planes.

Although the global slowdown has hit some of the country’s exports, including carmaker Hyundai, South Korea’s economy is now growing at an annual rate of 2.5% – its highest level in over five years. Although hamstrung earlier in the year because of the negative impact of the Mers virus on tourism and weak consumer confidence, latest figures beat analysts’ estimates.

In February, the second largest US carrier will stop flying between Atlanta and Dubai because of “unfair” competition from “heavily subsidised” Gulf carriers, particularly Emirates. Delta will use the extra capacity to fly where it “where it can compete on a level playing field that’s not distorted by subsidised state-owned airlines”. Delta is one of three major carriers lobbying the US government to take draconian action against the local airlines, claiming they have been the beneficiaries of US$ 42 billion in government subsidies. As this route has a reported 85% average seat load, it would appear that Delta’s chief executive, Richard Anderson, has no economic argument to cut this link – only political reasons to keep Emirates’ presence in the US to a bare minimum. No doubt A Change Is Gonna Come!

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