Living In The Gangsta’s Paradise

pokemon-go-banWith developers continuing to scale back on completion of launched and often pre-sold projects, the number of new homes handed over in Q2 totalled only 2.8k; industry expectations were that up to 40k residences would be handed over this year – in fact that number will struggle to reach 15k, with only 5k units delivered so far in 2016. Indeed, according to a Cavendish Maxwell report, 71% of units, that were expected to be handed over, have been delayed and a further 12% placed on hold. This tightening of the supply pipeline should negate any further price falls, as demand continues its upward trend.

Figures from the Dubai Land Department indicate that in H1, US$ 13.1 billion, from 21.8k transactions, were invested in the Dubai realty sector. Of that figure, five nationalities accounted for 57.4% of the total – UAE – US$ 3.3 billion, India – US$ 1.6 billion, Saudi Arabia – US$ 995k, UK – US$ 902k and Pakistan – US$ 728k.

Cavendish Maxwell have reported marginal Q2 declines in both Dubai apartment and villa prices, whilst over the past 12 months falls have been at 6% and 4% respectively. Meanwhile rents are showing marginal declines. The sector is still suffering from tight liquidity, consumer confidence and high deposit requirements from the financial institutions.

Core’s latest report sees a general softening in Dubai office rents, as stock levels continue to rise with a further 7.3 million sq ft, being built, adding to the current 90 million sq ft portfolio. In Q2, the property broker estimated that there were price falls of 10% in JLT, 6% along SZR and 3% in Business Bay, although Tecom and DIFC bucked the downward trend with rentals up 10% and 6% respectively.

Yet another Damac launch this week – this time phase 1 of The Beach at Navitas Hotel & Residences, comprising 3-bedroom apartments, with prices starting at US$ 341k. The 5-tower residential and hotel development will be located within the massive 55 million sq ft Akoya Oxygen project and will have all resort type facilities, including artificial beaches.

Al Shafar General Contracting will be the main contractor for the Vivanta by Taj hotel, to be built in JLT. Piling work has already started and completion date is set for Q4 2018.

The 304-key Aloft Dubai City Centre Deira, due to open in Q1 2018, will have an outdoor rooftop VOX Cinema. The property will also utilise Starwood’s keyless entry, allowing clients to use their smartphone for room access. The hotel will be Majid Al Futtaim’s 11th in the country, whilst it will become Starwood’s 26th, with a further 17 in the pipeline.

If Kleindienst, the firm behind Dubai’s The Heart of Europe development, have their way, the company will soon have the region’s first honeymoon destination. It is developing St Petersburg Island, a heart-shaped island, as a 5-star resort especially for newly-weds.

According to the Dubai Statistic Centre, Dubai’s permanent 2015 population was 2.4 million, with this figure boosted by the daily influx of 1.1 million souls, who live in other emirates but work in Dubai.

An agreement between the World Economic Forum, the UAE government and the Dubai Future Foundation will see the 2-day Shaping the Future annual meeting taking place in the emirate in November. The gathering will build on the work of the Global Future Councils.

The Al Naboodah Construction Group is expecting revenue to climb 75% this year, to US$ 954 million, as new management aims to better utilise related company links with its offshoots, including Arcon ready-mix concrete business, National Plant and Equipment and Trans Gulf (MEP).

Four-year old Careem, the local online taxi booking service, plans to spend US$ 100 million on R&D over the next five years. The company, with three million registered users, has already added 50 engineers in Pakistan and will open further centres in Egypt and Germany.

The 2016 Skytrax World Airline Awards saw Emirates voted the best airline in the world, as well as scooping the world’s best inflight entertainment and best regional airline.

Dnata continues on its acquisition trail – this time it has bought a majority shareholding in the UK’s Air Dispatch, with no monetary details available. This subsidiary of Chapman Freeborn Group provides loading services to airports in Prague and Warsaw and has Cathay Pacific, Qantas and Qatar Airways among its client base.

Although ME carriers posted an 11.8% jump in May air passenger numbers, compared to 4.5% the previous year, capacity increased by more – 15.6% (compared to the global average of 5.5%). IATA estimate that 2016 profits for the region’s airlines will rise by 14.2% to US$ 1.6 billion whilst the global increase will be lower at 8.5% to US$ 39.4 billion. (Some airlines must be making losses if Emirates, US$ 2.27 billion, and Qatar Airways Group – US$ 824 million – made such recent impressive profits).

According to Al Ansari Exchange, UAE expats remitted US$ 1.4 billion to their home countries over the last week of the holy month of Ramadan – 20% higher than last year, and three times the daily average. In 2015, the UAE Central Bank estimated that a sum of US$ 23.9 billion was remitted.

Although the June Emirates NBD Economy Tracker Index is marginally up to 54.6, it is still below the 3-year trend. However there were welcome signs of improvement in two main sectors – retail at 58.2 and tourism at 54.1; even the maligned construction segment had a positive reading of 51.5. Despite these rays of sunshine, there was no improvement in employment numbers, in contrast to the past four-year upward trend.

The June Emirates NBD UAE Purchasing Managers’ Index posted a monthly fall from 54.0 to 53.3 that is lower than the 3-year 56.3 average. One contributing factor to the sluggish figures could be attributable to the start of the holy month of Ramadan. However, non-oil private trade continued to improve, as higher output and new orders shored up a marginal improvement in the sector.

UAE’s Q1 direct non-oil trade, at US$ 73.4 billion, was slightly down on the same period in 2015; 40.2% (or US$ 29.5 billion) of the total emanated from Asia, Australia and the Pacific, whilst Saudi Arabia was the leading regional partner. Imports – at US$ 45.3 billion – comprised 61.6% of total trade, with reexports, at US$ 15.4 billion, and exports of US$ 12.7 billion making up the balance. Whilst the country’s trade momentum has been somewhat subdued, the slowdown in global trade is reflected in these figures. (Credit Suisse has predicted a 2.9% growth this year for the country’s non-oil economy, followed by 3.7% in 2017).

With its US$ 500 million Tier 1 Sukuk, Noor Bank’s listing became Nasdaq Dubai’s 11th of the year and brought the total value of Shariah bonds on the exchange to US$ 44.6 billion.

The DFM opened on Sunday at 3371 and regained all the previous week’s losses and more, rising 3.0% to close the week on 3472 by Thursday (14 July 2016). Volumes, on the last day of the trading, were at 530 million shares, valued at US$ 187 million, changing hands, (cf 289 million shares for US$ 116 million, the previous Tuesday). Bellwether stock, Emaar Properties, surged US$ 0.11 to US$ 1.83, whilst Arabtec also moved north by US$ 0.02 to US$ 0.41.

Brent crude recovered somewhat and closed the week US$ 0.97 up at US$ 47.37 – whilst gold headed the other direction – down US$ 30 to US$ 1,332 by the Thursday (14 July 2016) close. (Iran’s oil exports at 2.6 million bpd have almost reached pre-sanction levels).

It came as no surprise to see Which? reporting that several UK banks have been charging customers several times the fees, compared to payday lenders. It seems that for borrowing US$ 130 for 28 days, customers of HSBC, Lloyds, RBS and TSB could be charged between US$ 104 and US$ 117 – four times higher than the maximum charged by a payday loan institution.

It seems that the seven bidders to acquire Tata Steel’s UK operations will now face serious international competition, as the Indian conglomerate has decided to “look at alternative and more sustainable portfolio solutions for the European business”. At least three major players – China’s Hebei Iron & Steel, India’s JSW Steel and ThyssenKrupp AG – could be interested in JV agreements with Tata Steel. There could be several sticking points in relation to the inclusion of its UK business, employing 15k, including resolution of the US$ 950 million British Steel pension fund liability and government assistance with any bailout.

Boeing could lose out on a potential US$ 25 billion order, with the House of Representatives passing a motion to block US aircraft sales to Iran. Any ban would have to be approved by the Senate. In January, Airbus won an Iranair order for 118 units, with Boeing later reaching a similar preliminary agreement.

Mitsubishi Aircraft Corp’s attempt to break the Embraer and Bombardier duopoly in the regional jet sector received another boost with a 20-aircraft order for its 92-seat MRJ90 from leasing company Rockton; this comes after a similar order earlier in the year from Aerolease Aviation LLC.

Meanwhile, Airbus has announced that it will cut the delivery of its A380s form its current annual level of 27 to 12 per annum as from 2018 – a sign of disappointing sales and a shorter than expected life span?

Pokemon’s first foray into mobile gaming hit the jackpot as GO’s runaway triumph saw the company’s shares jump 86%, to gain US$ 17.0 billion in just two days of trading, following its 06 July launch. Since the app, that has been released only in the US Australia and New Zealand to date, is free, Pokemon investors are unlikely to reap the dividends that the game’s success should warrant.

After last week’s Amazon announcement that it was creating 1k jobs, the UK received another fillip on Monday with news of a further 2k new jobs, as a result of a government agreement with Boeing. The deal involves expanding the US planemaker’s UK research operations and the purchase of 9 Boeing P8 maritime patrol aircraft.

Saudi Arabia’s Kingdom Holding has lost US$ 40 million because of the recent fall in sterling. The company agreed to trade its US$ 3.2 billion stake in FRHI Holdings – owner of the Raffles and Fairmont brands – for a 5.8% share in the French hotel group, Accor, US$ 339 million cash and other assets, including a stake in California’s Claremont Hotel and increasing its stake in London’s Savoy to 58.8%.

Three major elections were settled this week. Following his success, Prime Minister Shinzo Abe, Japan has slashed two major forecasts – growth from its January estimate of 1.7% to 0.9% and inflation from 1.2 to 0.4%. With the three arrows of Abenomics – monetary, fiscal and structural – continuing to miss their target, it is inevitable that a further stimulus package (up to US$ 200 billion) will soon be implemented.

The markets initially reacted favourably to news that the incumbent Australian Prime Minister, Malcolm Turnbull, scraped home, a week after the actual election. However, the Conservative leader will face many problems including the distinct possibility of a credit rating cut of the country’s coveted AAA status, declining consumer confidence and a ballooning trade deficit.

Theresa May became the UK’s Second ever Prime Minister and the 13th in the Queen’s 64-year reign. Her first job appeared to be the axing of the Chancellor George Osborne to be replaced by Philip Hammond. The markets seemed to take the ministerial changes in their stride, with Thursday’s closing of sterling at 1.32 to the US$, FTSE 100 at 6662 and FTSE 250 at 16775.

Following May’s blip, when only 11k new jobs were created, normality returned to the US economy with June figures coming in at a healthy 287k. The jobless rate – measured by the number of unemployed actually looking for work – rose 2 notches to 4.9%, whilst the monthly wage growth was a disappointing 0.1% (2.6% year on year). If there is further encouraging economic data in the coming weeks, a Fed rate hike could be on the cards for September.

Now that a revision has been made to the level of its capital assets, brought about by the number of aircraft imported by leasing companies and other reclassifications, Ireland has amended last year’s impressive 7.8% growth to a spectacular 26.3%. The country’s economy has been bolstered by the fact that it is the home of many overseas companies, redomiciling there for favourable tax reasons.

The IMF has revised forecasts for the Italian economy in the wake of the Brexit vote – to under 1% this year (from 1.1%) and 1% in 2017 – down from 1.25%. Other analysts indicate even lower growth for the Eurozone’s third biggest economy. In the unlikely event that the country fully implemented all recent reforms, it would probably only reach its 2008 peak after a further decade; this compares to other eurozone countries that would be 25% higher by 2025. Italy’s cause will not be helped by high unemployment level, bank debts totalling US$ 398 billion and a rising public debt, currently at 132.9% of GDP – with only Greece in a worse state.

The EU has been beset with internal problems largely of their own making – structural weaknesses, high unemployment and soaring debt levels. Nevertheless the EU has been looking for some excuse to explain its miserable economic performance over the past few months and has been handed one on a plate – the UK Brexit.

Now this is one of the main factors behind the IMF’s decision to cut its 2017 growth forecast for the bloc from 1.7% to 1.4%, with 2016 marginally down to 1.6%. Others include political and economic uncertainty, market volatility and falling investor confidence. (The IMF has a past record of consistently changing forecasts downwards on a regular basis).

A bigger worry to the EU has to be the state of its banking system; for example, Italy may need external assistance as its financial institutions are awash with bad loans. However, the IMF’s main concern is Deutsche Bank which it considers the biggest single risk to the global financial system of the world’s top 29 banks. If that were to suffer, then expect carnage in the markets.

A US Congressional report seems to confirm what many already know – big banks have too much sway with governments. It seems that although HSBC was accused, in 2012, of money laundering for drug cartels – and subsequently paid US$ 1.9 billion in settlement – it never faced criminal charges nor saw any of its top officials prosecuted. The report alleges that the UK government “influenced” the outcome and “hampered” the probe with Chancellor George Osborne “intervened in the HSBC matter by sending a letter to Federal Reserve Chairman Ben Bernanke… to express the UK’s concerns regarding US enforcement actions against British banks”.

Although not the only entity, Goldman Sachs has a history of apparent collaboration with global governments and institutions. In 2009, it is reported that the bank received US$ 20 billion in bailouts, payments and backstops under the Obama administration – that year it paid out US$ 16.2 billion in bonuses. Interestingly, the likes of Robert Rubin (Treasury Secretary in the Clinton administration), Henry Paulson (Treasury Secretary – Obama) and Mark Patterson (Chief of Staff Treasury) were three of many who had previously held important positions In Goldman Sachs – as Co Chairman, CEO and lobbyist respectively.

Governor of the Bank of England, Mark Carney, spent 13 years with the bank in various countries. President of the ECB, Mario Draghi, is not only a member of the lobbyist Group of Thirty but also worked for Goldman Sachs from 2002 – 2005. Even Prime Minister, Malcolm Turnbull, was MD Australia and partner in the bank for four years to 2001.

The latest episode sees the former head of the EC, Portugal’s Jose Manuel Barroso, taking up a job advising the US bank on the consequences of Brexit – this comes 20 months after he stepped down from his presidency. There is something called conflict of interest or is it that some of out politicians, bureaucrats, fat cats and financiers are benefitting, at our expense, Living In The Gangsta’s Paradise?

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: Logo

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

Facebook photo

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

Connecting to %s