Where Have All The Flowers Gone – When Will They Ever Learn?

dubai-safari-parkIt is reported that what would have been the world’s largest hospitality and leisure development in 2007 could be revived. The US$ 27.2 billion Bawadi, a JV between Dubai Holding and Emaar Properties, was shelved as a result of the GFC. At the time, the project would have encompassed 70 million sq ft and included 51 luxury hotels, 6 million sq ft of commercial and retail space, 1.5k restaurants and 18k residential units.

Emaar’s latest launch consists of 147 1-3 bedroom exclusive apartments in Dubai Hills Estate, Mohammed bin Rashid City (MBR). Prices in this Acacia development start at US$ 272 million and the mid-rise tower will be completed by Q4 2018. The estate covers an area of 2.2 million sq mt, equating to about 20% of the landmass of MBR – being built by a Emaar/Meraas Holding JV. On completion, the new city will house 22k apartments and 4.4k villas, along with a boutique mall, two hotels, schools and leisure activities, including a golf course.

Plans are afoot to build the flower-shaped, eco-friendly Desert Rose City to accommodate up to 160k. The US$ 8.2 billion city will encompass 14k hectares, with 50% of the 20k plots allocated for affordable housing units. Dubai Municipality indicated that the city would be largely self-reliant utilising its own resources for communications, energy and transport.

Already with a US$ 817 million property portfolio under development, MAG 5 Property has appointed Fujairah National Construction Company as the main contractor for its US$ 52 million MAG 5 Boulevard project in Dubai South. The project will accommodate 1.2k units, with prices starting at US$ 104k; phase 1 is due for completion by Q4 2018.

Having recently handed over 328 residential units in phase 1 of its Living Legends Community in Dubailand, Tanmiyat Global has released 188 offices at its Exchange Tower in Business Bay.

Dubai Land Department posted that, although the number of H1 real estate transactions rose 22.8% to 28.3k, the total value dropped 12.4% to US$ 30.8 billion; the average transaction fell from US$ 1.53 million to US$ 1.09 million, as the impact of tightening liquidity and tougher mortgage requirements kicked in. Property sales (20k transactions) accounted for US$ 13.3 billion of the total transaction value, with mortgages (6.4k deals) accounting for US$ 13.2 billion.

The latest Luxhabitat report indicated a massive 13% drop in Q2 residential transactions as there was a marginal 0.3% increase in the prime residential sector (including DIFC, Downtown, JBR, Meadows and The Palm).

A triumvirate of Dubai authorities – Land Department, Economic Department and Municipality – is looking closely at the potential of, and the need for, affordable housing in the emirate. The group will analyse factors such as financing (from both sides – the developer and the end user), sector development and stimulation, as well as location.

Dubai South has awarded contracts in excess of US$ 272 million to a raft of companies, specifically for its Residential District adjacent to the Expo site. Eventually this area will house 10k villas / apartments, with a local population of 35k.

The Kuwait-based Action Group is to spend US$ 56 million to build a 220-key, 4-star hotel in Dubai Healthcare City. The property, to be managed by the Accor Hotels’ Novotel brand, is on a 26.3k sq ft plot of land that cost US$ 16 million.

A landfill site at Al Warqa’a has been transformed into a 199-hectare animal safari park, built to replace the outdated Dubai Zoo on Al Wasl Rd. The US$ 272 million facility, housing more than 5k animals, will be open to the public in Q4.

Empower won a US$ 490 million Nakheel contract to provide district cooling to JVC and JVT; the six new cooling plants will eventually provide 260k refrigeration tons for 400 buildings in the two locations.

Less than four weeks after Brexit, a recent local report found that it has had an adverse effect on Dubai’s retail and hotel sector, as average daily room rates fall 13%, year on year. Just like everything else that is heading south in the world, a good time to blame Brexit!

Troubled Arabtec is to receive a US$ 109 million debt facility from Aabar, a major shareholder. The money will be used to ensure expeditious delivery of its current project portfolio, at a time when the payment pipeline in the industry is getting longer, with margins falling.

Embattled Drake & Scull announced that it had been awarded a US$ 62 million contract for engineering, procurement and construction work at Iraq’s Zubair oil field.

In a further bid to diversify the country’s economy away from its dependency on oil, the UAE is planning to expand its manufacturing sector from its current 14% of GDP to 20% over the next five years.

The IMF has adjusted (again) its 2016 MENA growth forecast from 3.1% to 3.4%, as oil prices creep higher, but downgraded next year’s figure from 3.5% to 3.3%. The authority has also recommended that the UAE government should prioritise upgrading the quality of education, facilitating SMEs’ financing access and introducing a modern bankruptcy law.

The Department of Economic Development reported a 34.9% hike in Q2 transactions to 119.6k. Figures, such as increases in new licences (5.6% to 6.4k) and licence renewals (53.2% to 45.3k), indicate that the Dubai economy is weathering the global economic storm.

H1 inflation in Dubai rose to 1.75%, with the usual suspects – education (4.09%), housing (3.91%) and F&B (2.04%) – being the main drivers, whilst transport costs slid by 4.39%.

Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum has launched the Dubai Future Accelerators, focusing on the identification and deployment of futuristic prototypes and products. The ultimate aim of the new initiative is to transform the UAE into a global capital “to explore and create the future”.

June saw the Money Supply aggregate M1 falling 1.6% to US$ 131.0 billion, with decreases in both M2 and M3 by 0.5% to US$ 321.6 billion and US$ 371.8 billion respectively. The UAE Central Bank also reported a 0.5% increase in gross bank assets to US$ 682.9 billion, with gross credit also up 0.8% to US$ 420.5 billion.

Deyaar Development reported a 19.2% fall in H1 profit to US$ 30 million, with Q2 profit falling 30.1% to US$ 16 million, compared to the same period in 2015.

Sister banks posted Q2 figures that were better than market expectations. Emirates NBD reported a 15.8% surge in profits to US$ 520 million (and a 12.0% hike in H1 profits to US$ 1.0 billion), as provisions for bad debts dropped by 30% to US$ 171 million; its non-performing loans ratio has fallen to 6.6%, from a 2012 high of 14.3%. Emirates Islamic Bank more than doubled its quarterly profit to US$ 25 million, as total income rose 11.0% to US$ 335 million.

Mashreq’s H1 net profit decreased 15.4% to US$ 334 million, with a Q2 profit of US$ 147 million, as operating income rose 6.7% to US$ 872 million. The bank’s total assets fell 0.4% to US$ 31.3 billion, whilst loans and advances increased by 2.6% to US$ 16.8 billion; non-performing loans stood at US$ 708 million.

Following two successful US$ 500 million bond issues in 2013 and 2014, Global Securities, a division of MAF Holding, has listed a third for US$ 300 million on Nasdaq Dubai.

The DFM opened on Sunday at 3472 and continued its recent good run, rising 2.1% to close the week on 3544 by Thursday (21 July 2016). Volumes, on the last day of the trading, were at 461 million shares, valued at US$ 156 million, changing hands, (cf 530 million shares for US$ 187 million, the previous Thursday). Bellwether stock, Emaar Properties, was up US$ 0.08 to US$ 1.91, whilst Arabtec remained flat at US$ 0.41.

Brent crude dipped, closing the week US$ 1.17 down at US$ 46.20 – whilst gold was marginally down US$ 1 to US$ 1,331 by the Thursday (21 July 2016) close.

Six years after the Deepwater Horizon drilling disaster in the Gulf of Mexico, it seems that BP’s final bill will come to US$ 61.6 billion in legal fees, compensation pay-outs and government penalties. To help finance some of this total, of which US$ 20 billion went to the US government, the oil company has had to shed US$ 30 billion of its assets.

Houston-based Halliburton posted a US$ 3.2 billion Q2 loss, as revenue came in at US$ 3.8 billion.

EU’s coffers will be US$ 2.9 billion better off, as it has fined four truck manufacturers for price collusion and passing on costs of emissions-reducing technology. DAF, Daimler, Iveco and Volvo/Renault had carried on this illegal practice for 14 years, with the fraud only coming to light when their competitor (and fellow colluder), VW-owned MAN, turned whistle blower – and escaped any punishment.

Despite posting a 4.8% hike in Q2 revenue to US$ 1.3 billion, (with a 50% jump in mobile revenue to US$ 378 million), Yahoo recorded a loss of US$ 440 million for the period. However, it is still trying to divest its core internet business, with interest being shown by Verizon, that recently acquired AOL, and T&T; any deal is expected to raise up to US$ 6 billion. The actual company has a current market value of US$ 35.8 billion.

Another major tech company, IBM, saw Q2 profits sink 27.5% to US$ 2.5 billion, as revenue fell 3.5% to US$ 20.1 billion. Once the leader in the PC market, “Big Blue” has been bypassed by other players and has seen sales slump. A revamp of the business model will see IBM move away from hardware to software, including security, business analytics and security.

Three major US banks reported falling Q2 profits, as the earnings season started in earnest. Bank of America’s earnings fell 19.4% to US$ 3.9 billion, as revenue dipped 7.1% to US$ 20.4 billion. Although its bond business and trading operations revenue rose by 14% to US$ 3.5 billion and 10% to US$ 4.7 billion, Citigroup’s net income fell 14% to US$ 4.0 billion. Meanwhile, Wells Fargo posted a 3.5% fall in quarterly earnings to US$ 5.2 billion.

Last Friday, the market valuation of ARM Holdings was US$ 22.4 billion. On Monday, 18 July, the UK technology firm’s board accepted a bid by Japan’s Softbank, valued at US$ 32 billion – a premium of 43%! Apple and Samsung use the microchips, designed by the Cambridge-based firm that employs 3k, for their smartphones. However, the sale is a major blow to the UK’s technology sector that has seen other major players – including Cambridge Silicon Radio (acquired by Qualcomm) and Autonomy (to HP) – being sold off to overseas interests. Full marks to the Japanese company, that also saved itself 10% because of the fall in sterling, but the new government should be more careful when looking after the country’s crown jewels.

The ECB President, Mario Draghi, seems to be fighting a losing battle as he continues with scant apparent support from the bloc’s governments to spend more. He is fighting fires on several fronts with little success – inflation levels hovering around zero, record low interest rates, double-digit unemployment levels, sluggish growth, an underperforming economy and increasing resentment to the “European Project”. The ECB’s monthly US$ 88 billion QE policy and almost negative interest rates have failed to move static inflation, boost investment, encourage consumer spending or increase the rate of public expenditure. It must be remembered that these problems cannot all be pinned on the current scapegoat – Brexit!

Another company apparently using Brexit as an excuse for its failing is Lowcost Travelgroup. As of last Friday, when the holiday booking company went into administration, it had 110k bookings and 27k customers actually taking their holidays. Other reasons for their failure included the turbulent financial environment, increased terror threats and intense competition. 80% of the total payroll of 570 was based in Poland, with the balance operating from the UK.

Fears of a slowdown in the Chinese economy seem to have been negated with Q2 figures indicating a 6.7% expansion, in line with Q1. The good news was that, with the benefit of government stimulus measures, industrial output and retail sales moved north, although private investment dipped to a record low. Interest rates have been at all-time lows since last October and there has been a surge in public infrastructure projects. But what the economy really needs is a major structural overhaul.

The Department of Economic Development has closed down Exential Group, a DMC company reportedly running a dubious forex trading scheme. Gullible investors were attracted by annual returns of 120% and yet again a duopoly of investors’ greed and ignorance has seen some residents’ fortunes disappear. Where Have All The Flowers Gone – When Will They Ever Learn?

Advertisements
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 )

Twitter picture

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

Facebook photo

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

Google+ photo

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

Connecting to %s