The Taxman’s Taken All My Dough

jw-marquis-dubaiDubai’s first major affordable lifestyle community, Town Square, will welcome its first residents in 2017. Nshama, the developer, has already sold over 2k units and started work on 1.05k townhouses and 1.1k apartments. Prices for the former will start at US$ 272k, whilst 1-bedroom units will sell for US$ 167k. The development is planned to have a 2.5 million sq ft retail district, with over 600 stores as well as many other leisure facilities.

Radiant Star has indicated that its Riah Towers project, located in Dubai Culture Village, will be completed by Q4 2016. The 17-storey US$ 90 million building will house 156 apartments and four retail units.

Despite a slowdown in the 5-star hotel sector, Dubai’s largest property, JW Marquis, managed to buck the trend. The 1.6-key hotel recorded a 13.0% jump in room revenues and had occupancy rates in excess of 73%; it also saw 2015 demand jump 12%, despite overall Dubai supply, at 6.7%, outstripping the 4.3% growth in demand.

It is expected that Dubai’s retail sector will generate more than US$ 52 billion by 2020, as annual growth rate nears 8.0%. Of the 2015 sales figure, totalling US$ 35.4 billion, store based shopping accounted for 93.8%, split between non-grocery (US$ 22.3 billion) and grocery (US$ 10.9 billion).

Savills Global Retail Destination Index 2016 sees Dubai Mall ranked higher than some of its global retail competition, including the likes of Champs-Elysees, London’s Regent Street and New York’s Fifth Avenue. Furthermore, the report expects Dubai to register the strongest future global growth in retail sales over the next five years and could then be in a position to challenge London’s West End’s current leading global position.

According to a New World Wealth’s report, Dubai’s millionaire population rose by 5% last year to 42k, with many coming from North Africa. Whilst Australian cities, Sydney and Melbourne, saw increases of 4k and 3k, on the flip side Paris saw a 7k exodus of millionaires.

Last month, DEWA announced a 3-year plan to build 64 substations, at a cost of US$ 1.8 billion. This week, it announced a spend of US$ 178 million to enhance Dubai’s expanding water supply, by laying down 373km of transmission network.

The emirate has launched its own high-end tea brand – Shay Dubai – with three flavours (Arabic Breakfast, Dubai Spirit and Khaliji Blend). The DMCC, which manages its own Tea Centre handling 41 million tons, is keen to tap into the ever expanding global tea market, estimated at 5.2 million tons.

Following a 4-year low in January, the Dubai non-oil business environment has edged forward, with the latest reading from the Emirates NBD PMI survey showing a 54.5 reading (up from February’s 53.1). Although exports fell, there was slight growth recorded in sectors such as employment, new work and input stocks.

Nasdaq Dubai, the world’s largest Islamic bond centre, valued at US$ 39.6 billion, has seen the issue of two Indonesian government sukuks totalling US$ 2.5 billion. The emirate also has ambitions to become the Islamic Economy’s global capital.

The bourse had a flat week opening Sunday at 3356 to close 30 points up at 3386 by Thursday (07 April 2016). Bellwether stocks, Emaar Properties and Arabtec, had a flat week with the former unchanged at US$ 1.64, and the latter up US$ 0.02 to US$ 0.47. Trading volumes on Thursday were well up at 910 million shares, valued at US$ 215 million, changing hands, (cf 394 million shares for US$ 198 million, the previous Wednesday).

Brent crude traded lower – down 1.5% (US$ 0.59) to US$ 37.52 – whilst gold moved up US$ 7 to US$ 1,242 by Thursday (07 April) close.

With this week’s acquisition of Richard Branson’s Virgin America, Alaska Airlines will become the 5th largest carrier in the US (with a 280-plane fleet). The deal is valued at US$ 4 billion, with a cash payment of US$ 2.6 billion (equivalent to US$ 57 per share) and the US$ 1.4 billion balance taking over the debt of the 9-year old airline.

The fight for Starwood Hotels & Resorts Worldwide rumbles on with Marriott International lodging a US$ 14.4 billion bid as its rival, China’s Anbang Insurance Group, finally pulls out. The deal has still to be approved by regulatory authorities in the EU and China. Marriott will then become the largest hotel chain in the world (with 5.5k properties and 1.1 million rooms), after adding the Sheraton, St Regis and Westin brands to its portfolio.

What is left of the UK steel industry is now in tatters as the Tata Group plans to exit, only 8 years after buying plants from Corus. Despite on-going problems of over-manning and underinvestment, the main problems were the flood of cheap Chinese steel into the market, which has seen prices plummet to US$ 320 per metric tonne, allied with a global economic slowdown. (Coincidentally, there are reports that the Indian steel conglomerate may have made up to US$ 1 billion windfall profits by selling carbon emissions permits it was given for free through the EU emissions trading scheme).

There is no doubt that cheap consumer finance has been a major fillip for the UK car industry, as it enjoyed its second best ever sales month in March. With sales growing by 5.3%, 519k vehicles were registered – only bettered by August 1997’s 526k units.

A sure sign that UK exports are becoming more of a problem came with its February trade deficit – in goods and services – of US$ 6.8 billion, whilst the trade gap with the EU widened to a record level of US$ 12.2 billion. Other data point to more economic problems – industrial output and manufacturing output fell 0.5% and 1.8% respectively, year on year. Indeed industrial output is now 10.7% below its 2008 peak – just before the GFC – whilst there were monthly decreases in 11 of the 13 manufacturing sub-sections. This would indicate that Q1 growth will be no more than 0.3%, compared to 0.6% recorded in the preceding quarter.

Japan’s latest strategy to kick start its faltering economy – negative interest rates – has backfired. Instead of weakening its currency to make exports cheaper and more competitive, the yen has surged to an 18-month high at 112. There is no doubt that markets are beginning to doubt the efficacy of Prime Minister’s “Abenomics”, after 3 years of monetary easing, and it will be interesting to see what happens next.

Q1 %     Unit 31 Mar 16 31 Dec 15 30 Sep 15 30 Jun 15 31 Dec 14 31 Dec 13
17.17% Gold US$ oz 1,242 1,060 1,114 1,174 1,186 1,236
17.02% Iron Ore US$ lb 55 47 57 62 73 135
3.08% Oil – Brent US$ Bar 37.52 36.40 48.70 63.05 57.33 102.50
3.23% Coffee US$ lb 128 124 121 131 161 260
-9.38% Cotton US$ lb 58 64 60 68 62 86
11.79% Silver US$ oz 15.45 13.82 14.57 15.68 15.77 20.15
1.87% Copper US$ lb 2.18 2.14 2.38 2.62 2.88 3.37
5.48% AUD US$   0.77 0.73 0.71 0.77 0.81 0.89
-2.70% GBP US$   1.44 1.48 1.52 1.57 1.53 1.64
4.59% Euro US$   1.14 1.09 1.11 1.11 1.21 1.38
0.00% Rouble US$   0.01 0.01 0.02 0.02 0.017 0.03
-1.07% FTSE 100     6,175 6,242 6,061 6,521 6,548 6,730
-13.86% CS1300     3,214 3,731 3,195 4,409 3,532 2,291
0.78% S&P 500     2,060 2,044 1,887 2,063 2,091 1,831
6.51% DFMI     3,356 3,151 3,593 4,087 3,774 3,370
-4.90% ASX All Ord     5,083 5,345 5,021 5,451 5,415 5,352

Despite all the global gloom, an upbeat Q1 saw rises for six of the seven commodities tracked by this blog, with double digit growth for gold (17.17%), iron ore (17.02%) and silver (11.79%). In relation to the currencies, both the AUD and the Euro headed north whilst sterling weakened again, ahead the prospect of a June Brexit. The local DFM was the big winner this quarter rising by 6.51%, as many of the other global bourses struggled.

The big news of the week was the release of 11.5 million confidential documents allegedly emanating from the Panama-based law firm Mossack Fonseca. The “Panama Papers” seem to indicate how the firm aided some of its clients to dodge sanctions, evade tax and launder money. There were 214k offshore companies listed, many with details of shareholders and directors. The five main countries of incorporation were BVI (113k) and Panama (49k), followed by Bahamas, Seychelles and Nieu.

It has been estimated that over US$ 245 billion of UK property is held overseas and that about 10% of the tax haven companies set up for this role have been linked with this Panamanian legal company. What used to be seen as a private matter has now become public domain much to the embarrassment and chagrin of many including world leaders, politicians along with other powerful and rich members of society. Sunny Afternoon – The Taxman Has Taken All My Dough.

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