Mysterious Ways!

shkmohammed-dubai-creekOn Monday, HH Sheikh Mohammed bin Rashid Al Maktoum launched construction work on The Tower at Dubai Creek. The 928 mt observation tower will be located at the heart of Dubai Creek Harbour and is expected to be ready in time for Expo 2020.

According to a Cavendish Maxwell report, Dubai Q3 apartment prices fell 1.3% – equivalent to 3.0% on an annual basis and 12.0% over the past two years. It is probably the first recent study that has not pointed to Brexit as being a drag factor – citing government regulations, the strong greenback, the weakening rouble, oil prices, increased supply and regional uncertainty as factors for the price slump.

The majority of the 5.6k units (81% of which were apartments) completed in Q3 were to be found in Dubailand, Silicon Oasis and JVT. Although there are 26.5 units scheduled for completion this quarter, it is obvious that many will be held over to keep a hold on the supply pipeline. This is slightly different to a JLL report that estimated that 5.4k units (of which 63% were apartments) were completed – its highest level since Q4 2012. Furthermore the consultancy reckoned that 11k units were expected to enter the market in Q4. (It will be interesting to see what other figures consultancies come up with in the coming weeks).

On the office side, JLL estimated that the total stock in Dubai has now reached 8.6 million sq mt, as 51k sq mt came on stream in Q3; a further 152k sq mt is expected to be added in Q4. Overall, the general trend is a move towards smaller offices.

Dubai Properties will soon be releasing its “cluster homes” project, Villanova, in Dubailand. The Mediterranean–inspired development is yet another targeting the burgeoning affordable housing segment.

Azizi Developments launched its latest offering in Al Furjan – the US$ 117 million Azizi Plaza. Encompassing 60k sq ft, it will house 434 apartments and have a total retail area of 9.4k sq ft; completion will be within two years.

Work will start on Dubai’s first all studio-residential tower before year-end, with an expected completion by Q4 2018. Developed by Tiger Properties, Al Jawhara Residences will house 532 units and be located in JVT.

Damac became the first developer to release a property project in Dubai South – as it handed over Damac Maison de Ville Tenora hotel apartments. The last units go on sale this week, with prices at US$ 160k. Its sister development – Damac Maison de Ville Celestia – will be completed in 2018.

The company has also released units (studio and 1-2 bedroom apartments) in its Maison Privé 1k hotel apartments development, located in the Burj Khalifa area. Starting prices will be US$ 257k.

Dubai Municipality, following which there will be a detailed plan and design for Aladdin City, has approved a one-year study by Meinhardt Group. Initial plans for the project, to be located on Dubai Creek, indicated three commercial and hotel towers with A/C bridges, in the form of dragons and snakes, connecting the towers. Whether the development will go ahead will become clearer late next year. The municipality also confirmed that plans for its massive US$ 8.2 billion smart city project, Desert Rose, are at a detailed stage, with phase 1 on track for completion by 2020.

It was no surprise to see Hamptons International, a wholly owned subsidiary of Emaar Properties, being appointed the exclusive sales and marketing agent of The Address Residences Jumeirah Resort & Spa. The twin tower development, each with 74 storeys, will house residential apartments for sale, as well as 182 rooms and suites, fully serviced by Emaar’s flagship hospitality brand, The Address.

Wednesday saw the official opening of Nakheel’s US$ 25 million International City Pavilion, complete with 24 retail outlets. This is the third of the developer’s neighbourhood centres following two at Jumeirah Park and Discovery Gardens, with four more in the pipeline.

Building work on phase 2 of the US$ 272 million Dubai Design District (d3) has started and will include showrooms, studios and workshops, as well as places for events. Designed by Foster & Partners, the 93k sq mt development should be completed by 2019.

Airbnb.com is yet a further distraction for the local hospitality sector, which has seen profitability levels falling because of the strong currency, a global slowdown and regional troubles. Research indicates that there are 4.2k active short-term lets using the site in Dubai which is bound to impact on hotels’ future revenue streams.

Dubai Holding is planning to develop a SmartCity project in South Korea – its third overseas project, following the launches of SmartCity Malta and SmartCity Kerala. Based on the success of the original 1999 Dubai Internet City, Dubai will provide consulting and guidance for the urban development that will cover an area of 51 million sq ft.

5-year old Theluxurycloset.com has received its second round of funding, totalling US$ 8 million, from venture capitalist firm, Wamda Capital. The Dubai-based e-commerce firm is a leader in trading second hand luxury goods at discounted prices and will use the injected finance to expand regional operations; it already has 300k members.

Dubai’s H1 non-oil trade totalled US$ 176.3 billion (H1 2015 – US$ 177.6 billion and year 2015 – US$ 349.6 billion). Of that total, imports accounted for US$ 109.3 billion, re-exports – US$ 46.9 billion – and exports, US$ 20.1 billion. The three most valuable traded items – phones (US$ 22.9 billion), gold (US$ 20.4 billion) and diamonds (US$ 13.9 billion) – accounted for 32.4% of all trade. The three leading trading partners were China, India and USA with values of US$ 21.5 billion, US$ 13.1 billion and US$ 11.7 billion respectively.

The latest study from AT Kearney serves to confirm the increased tightness in the retail sector, as a result of lower consumer spend because of depressed oil prices, along with a marked fall in tourist numbers, especially from Russia and China. The UAE is ranked 7th in the consultancy’sGlobal Retail Development Index 2016, as year on year growth fell from 8% to 6%, with a per capita spend of US$ 7.2k.

As mobile banking and digitisation start to become an every day reality, Emirates NBD is leading local banks in implementing blockchain technology for a raft of banking and payment services, including international remittances and open account trade finance. It has recently tied up with India’s ICICI Bank Limited in a successful trial run.

Emirates NBD’s PMI fell six points to 55.1 in September but Q3 growth was positive, driven by expansion in tourism and travel bookings. Although margins continue to tighten and rate of employment remains flat, sales figures were up, as consumer confidence nudged higher.

Further to this February’s agreement by all six GCC members to introduce 5% VAT, there has still been no announcement of official procedures and there is a chance that the UAE may initially go it alone. There are estimates that the tax revenue generated could be as high as US$ 3.3 billion in the first year which is due to end 31 December 2018. (How much it will cost to implement is another matter).

In the first nine months of the year, the Department of Economic Development has confiscated 223k fake mobile phones, along with over 12.5 million accessories, said to be worth US$ 89 million.

This week, the Hong Kong branch of China Construction Bank – with a US$ 600 million listing – became the 4th Chinese bank to issue a bond on Nasdaq Dubai since 2014. Conventional bonds on the local bourse now total US$ 11.4 billion.

Dubai’s Department of Economic Development is actively pursuing the establishment of a Shariah-compliant institution focussing on international trade and commodity financing. There are on-going discussions with the Central Bank relating to their approval for an Islamic wholesale banking licence for Emirates Trade Bank which will support Dubai’s aim to become a major centre for Islamic finance and to double the country’s trade flows to US$ 381.5 billion within four years.

EIB’s board has approved plans for a US$ 409 million rights issue to boost the bank’s capital by 38.5% to US$ 1.5 billion. As the bank has grown, it has seen its reserve cushion soften and although its Tier 1 capital equivalent of just under 12% is well within the Central Bank’s 8% guidance level, it is under the sector’s 16.8% average. Indeed it is a necessary step if EIB continues to expand at the same rate it did in 2015, when its balance sheet grew 24%.

Having shed 3.5% in value a week earlier, the DFM opened Sunday at 3354 and lost a further 0.6% (19 points) to close on 3335 by Thursday (13 October 2016). Volumes, on the last day of trading, were down to the ridiculously low level of 106 million shares, valued at US$ 44 million, (cf 200 million shares for US$ 88 million, the previous Thursday). Bellwether stocks, Emaar Properties lost US$ 0.05 to US$ 1.83, with Arabtec flat at US$ 0.38.

Having surged US$ 6.19 over the past two week, Brent crude headed south, down US$ 2.07 to US$ 50.44; gold steadied, having shed $ 75 the previous week – up US$ 7 to US$ 1,258 at Thursday’s (13 October 2016) close.

According to its Chief Executive, Amin Nasser, Saudi Aramco is planning to spend US$ 300 billion in oil and gas projects over the next decade. The petroleum giant is still on track to have the largest ever public listing in 2018 as it expects an improvement in oil prices and market conditions by then.

Having been successful in a tender process, BP plans to spend over US$ 1 billion, on drilling two exploration wells in the Australian Bight, have been shelved. The South Australian government is not pleased with the decision with BP now indicating that they are only interested in pursuing “opportunities if they are competitive and aligned to our strategic goals”.

Toyota, which makes 10.0 million cars a year, and Suzuki – 2.8 million units – are in discussions on the possibility of a technological partnership to keep up with overseas competitors. The eight Japanese carmakers are lagging behind in R&D for advanced and future technologies in the sector and so are in an era of consolidation.

Inevitably, Samsung has finally pulled its Galaxy Note 7 Smartphone from the market, with buyers entitled to a full refund. Accordingly, the South Korean conglomerate has cut its Q3 revenue and profit guidance by 4.1% to US$ 42.1 billion and 33.3% to US$ 4.7 billion respectively. This whole fiasco could cost US$ 17 billion (equivalent to 19 million units) in lost sales. On Thursday, its share price stood at US$ 678 – down 11.1% in the week.

It was no surprise that shares in the world’s biggest maker of mobile network equipment Ericsson, slumped 16.7% on Tuesday morning after the Swedish company warned that Q3 profits would be down by 94% to US$ 35 million, as turnover dipped 14.0% to US$ 5.3 billion. The main driver was that competition was having a negative impact on demand.

William Hill, the FTSE 250 betting company is in merger negotiations with Amaya, owners of poker websites, Full Tilt and PokerStars, in an all equity deal, worth US$ 5.6 billion. Two months ago, 888 Holdings and Rank called off discussions with the UK company in a proposed US$ 3.8 billion arrangement.

In a major blow to Airbus, Qatar Airways has placed a massive US$ 11.7 billion order with rival aircraft maker, Boeing. This sale is for 30 787-9 Dreamliners and 10 777-300ERs, with an option to purchase 60 737 MAX 8s for US$ 6.9 billion. It has not been a good week for Airbus as Poland has scrapped a US$ 3.5 billion helicopter sale with chief executive Tom Enders moaning that his company has “been misled for months” by the government and “will of course seek remedies”.

No need to spare a thought for the disgraced chief executive of Wells Fargo, John Stumpf, who resigned this week, having taken home US$ 19.3 million last year as his remuneration. However the shenanigans that saw the bank open 2 million accounts without customers’ permission, and now accused of “widespread illegal practice”, have seen 5.2k staff retrenched in response to the scandal.

An S&P report highlights the debt problem faced by Chinese banks, as the nation’s debt is now at 250% of its GDP. It estimates that the financial institutions will have to find US$ 1.7 trillion to cover a hike in bad loans and the situation is unlikely to improve in the short term.

A worrying trend saw September global food prices rise by a staggering 2.9% month on month (and 10.0% year on year) driven by a surge in sugar prices – 6.7% for the month. The Food and Agriculture Organisation’s food index stood at 170.9 – its highest level in 18 months.

September saw the US economy create a disappointing 156k jobs, well down on the 2016 monthly average of 180k and 2015’s number of 229k, with the unemployment level nudging one notch higher to 5.0%. However, the 08 November presidential election rather than this data, will decide whether the Fed push the rate button.

Having only paid US$ 5k UK tax in 2014, Facebook managed to up their game and forked out US$ 5.2 million to HMRC last year, with a profit of US$ 25 million on a turnover of US$ 263 million; further bad news is that the firm has a tax credit of US$ 14 million to offset against future tax payments. In March, the company, that made global profits of US$ 3.7 billion on revenue of US$ 18 billion, announced that it would no longer route advertising sales through Ireland. Post Brexit UK could do with the extra Facebook tax revenue this change will inevitably bring next year.

In just two minutes early last Friday morning, sterling fell nearly 10% from US$ 1.26 to US$ 1.14, in what is known as a “flash crash”, to recover somewhat to US$ 1.24 within 30 minutes. What actually happened will probably never be known – but three likely suspects would be an “algo” trader, a fat finger or Francois Hollande. The first is when a computer carries out trade automatically, the second is when a human inputs the wrong data and the third is when a French politician talks up a “hard” Brexit. As of Thursday the currency was trading at 1.225 to the US$.

It is reported that David Cameron has agreed to speak at a private event for Bain Capital, an equity firm that bought a NHS unit when he was the UK Prime Minister. It is unclear if this is a one-off arrangement or not and what, if any, remuneration he will receive. He follows in the tracks of his two predecessors, Gordon Brown and Tony Blair, who have apparently made more money than the US$ 176k the prime ministerial role pays. However, it does beg the question of conflicts of interest and cronyism.

With the banks’ past history in rigging rates, in a sector that turns over a massive US$ 5.3 trillion daily, some sort of collusion cannot be ruled out. Banks have already forked out more than US$ 7.4 billion in fines imposed by the US Department of Justice and Commodity Futures Trading Commission, whilst the UK’s Financial Conduct Authority also collected US$ 1.7 billion in penalties. Financial institutions have worked, still work and will continue to work in shady and Mysterious Ways!

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