Turn, Turn, Turn!

dubai-canal-waterfallOn Wednesday, HH Sheikh Mohammed bin Rashid Al Maktoum opened a satellite manufacturing facility at Dubai’s MBR Space Centre. He also approved the final designs for the country’s Mars Hope probe, slated for launch in 2020, as well as installing the first part of KhalifaSat, ready for liftoff in 2018.

Where else in the world would this happen? Only three years after its unveiling in October 2013, the US$ 545 million Dubai Water Canal is set to open this month. The 3.2 km and 6 mt deep waterway, stretching from the Business Bay Canal to the Arabian Gulf, will now feature a waterfall on the SZR bridge. Utilising 80 pumps, the feature will automatically switch off when boats approach.

The US$ 128 million Azizi Aliyah development in Healthcare City should be completed in 2018. Encompassing an area of 482k sq ft, the fully serviced residences will include at total of 346 units, ranging from studio to 2-bedroom.

In line with the economic slowdown, Dubai Land Department forecasts an 8.6% fall (to US$ 66.5 billion) in realty transactions this year. However, Director General, Sultan Bin Mejren, expects an upturn in 2017, as the impact of new projects start to take effect.

Construction of a new AccorHotels development will commence in Q1 2017. The 266-key Novotel Downtown Dubai, in association with Acropole Holdings Limited, will be ready in time for Expo 2020.

Seven Tides will open their first international property – Dukes Collection on Dubai’s Palm Jumeirah – by the end of the year. The development will incorporate a 279-key hotel and 227 furnished hotel apartments.

Lulu Group is planning to spend US$ 545 million to build three malls in the country, one of which will be located in Silicon Oasis. Avenues Mall, covering an area of 82.5k sq mt, is scheduled for completion in Q1 2018. This week Majid Al Futtaim also announced plans for ten new UAE stores – all to open next year.

Following the award of infrastructure works at its Akoya Oxygen project earlier in the year, China State Construction Engineering Corporation has won another Damac project – the US$ 151 million Paramount Residences at the Paramount Tower Hotel and Residences in Dubai. The state-owned company will be the main work contractor for 27 floors that include the project’s luxury residences.

The JV between Emaar Properties and Dubai World Trade Centre, has appointed UK’s Laing O’Rourke, as their preferred bidder for a major Dubai South project. The development, part of Expo 2020, will comprise two hotels and a 21.6ha shopping mall.

In order to finance its two international airports, the Dubai government is looking at an initial US$ 3 billion funding programme. Three state entities – Department of Finance, Dubai Aviation City Corporation and Investment Corporation of Dubai – will be used as investment vehicles to raise money from various sources. It has been announced that Emirates will move its operations to Al Maktoum International by 2025.

After a slight drop in fuel prices for October, the Ministry of Energy has announced an increase in all grades for this month, with Special Unleaded 95 up 5.3% to US$ 0.488 per litre.

The federal cabinet approved the country’s US$ 13.3 billion 2017 annual and 5-year US$ 67.5 billion budgets this week. The government affairs sector, covering a myriad of activities, accounted for US$ 5.6 billion of the budget. Other big-ticket items included general and higher education (US$ 2.8 billion), health care (US$ 1.1 billion) and pensions (US$ 1.1 billion).

The federal budget represents about 14% of the total UAE public spend, with the balance emanating from the seven individual emirates’ budgets. The IMF estimates that the country’s consolidated fiscal deficit this year will be 3.86% of GDP.

Dubai Investments, of which the Investment Corp of Dubai has an 11.5% stake, posted a 39.5% hike in Q3 profits to US$ 91 million, driven by a surge in rental income – up 21.0% to US$ 178 million; its assets have grown by 5.2% to US$ 4.4 billion.

The Dubai Gold and Commodities Exchange (DGCX) will soon list Shanghai Gold Futures, thus making Dubai the first ever overseas location for the yuan-denominated gold future product. This is another example of the increasing economic cooperation between the two nations.

The Abraaj Group has agreed to sell its 66.4% share in K-Electric to Shanghai Electric Power Co for a reported US$ 1.77 billion. The Dubai-based company acquired its stake in Pakistan’s largest electric company in 2009.

Emirates Reit has become the largest global real estate investment trust, as its portfolio value surged 13% to top US$ 742 million at 30 September, whilst its rental income jumped 19.7% to US$ 11.4 million. The upturn in rental income is a result of the opening of the new Jebel Ali School and leasing of the Index Tower offices. However, YTD profit has fallen 24.0% to US$ 35 million.

Aramex posted a 3.2% decline in Q3 profit to US$ 20 million but 16.0% higher, at US$ 80 million, for the nine months ending 30 September. Quarterly and YTD revenue figures were both on the upside at US$ 286 million and US$ 755 million respectively. Recently, a company headed by Emaar chairman, Mohammed Alabbar, acquired a 16.45% stake in the 34-year old entity which is now actively looking to expand its e-commerce business.

Du posted its 8th straight quarterly fall – this time a 6.7% drop to US$ 125 million – on a 3.0% hike in revenue to US$ 831 million. Its Q3 royalty expense has risen by 11.6% to US$ 147 million; the royalty is based on 15% of its regulated revenue (which does not for example include the sale of handsets) and 30% of its regulated profit.

The DFM opened Sunday at 3318 and shed 20 points to close on 3298 by Thursday (03 November 2016). Volumes, on the last day of trading, were marginally higher at 259 million shares, valued at US$ 85 million, (cf 210 million shares for US$ 76 million, the previous Thursday). The bourse was down 4.1% for the month of October, closing 142 points lower at 3332 but still up YTD by 5.7%, from its year opening balance of 3151.

Over the week ending 03 November, bellwether stocks, Emaar Properties lost US$ 0.03 to US$ 1.84, whilst Arabtec gained US$ 0.01 to US$ 0.36. Both stocks were down on the month but still higher than their 01 January opening price. The property developer opened the year at US$ 1.51 and closed ten months later, 25.4% higher, at US$ 1.90; October saw the stock weaken 1.8% from its month opening of US$ 1.93. Meanwhile Arabtec opened the year on US$ 0.34 and YTD is 6.4% higher at US$ 0.36; however, it lost 9.5% in October as it opened the month on US$ 0.40.

Brent crude tanked, losing 8.2% (US$ 4.12) to close on US$ 46.35; meanwhile gold headed in the other direction, up 2.6%, or US$ 33, to close on US$ 1,303 at Thursday’s (03 November 2016) close. The yellow metal is up 20.1% (or US$ 213) YTD, closing October at US$ 1,273 but 3.5% lower on the month from its October opening of US$ 1,319. Brent is more than a third higher YTD and marginally up for the month – 33.7% (US$ 12.21) higher for the ten months and US$ 0.60 as it closes October on US$ 48.61.

OPEC is having problems with attempts to cut output by 1 million bpd to 32.5 million. Several members – Iran, Iraq, Libya and Nigeria – continue to make overtures for exemptions so as to increase their production quotas.

Two oil giants posted mixed Q3 results. BP announced a 48.2% fall in Q3 profit to US$ 933 million, whereas rival Royal Dutch Shell reported an 18.9% jump in profits to US$ 2.8 billion. Low oil prices and a “weaker price and margin environment” were the drag factors attributable to BP’s disappointing returns.

Rio Tinto has divested its 47% stake in Guinea’s Simandou iron ore project to its current partner, Chinalco, for a reported US$ 1.2 billion. The Chinese miner, already with a 41% shareholding, will now be responsible for developing the world’s biggest untapped deposit of iron ore.

Although passenger numbers were up 2.5% to 13.2 million, Qantas reported a US$ 3.0% fall in quarterly revenue to US$ 3.0 billion because of an increase in international competition and a decrease in domestic demand.

Although rental yields are at record lows, major Australian markets saw an average 0.5% hike in house prices in October – and 7.5% higher than the same month in 2015. The Sydney and Melbourne bubbles continue – up over the past 12 months by 10.6% and 9.1% respectively. Darwin and Perth home values headed southwards – by 3.8% and 3.7%.

Amazon.com posted favourable Q3 results, as both revenue, up 29.0% to US$ 32.7 billion, and profit – by 31.9% to US$ 252 million – recorded impressive improvements. (Coincidentally, there are reports that the world’s biggest e-commerce retailer may be interested in acquiring 30% in Dubai-based Souq.com that could cost them at least US$ 360 million).

Despite mega Q3 results that saw revenue up 55.6% to US$ 7.0 billion, and profit by 166% to US$ 2.4 billion, shares in Facebook sank 8% on Wednesday to US$ 117. The social network, with 1.8 billion monthly users, has warned that revenue growth next year would be slower and that there will be more money spent on new engineering staff and data centres.

Two of Japan’s largest electronic companies have cut their annual profit forecasts. Because of the sale of its battery business to Murata Manufacturing, Sony has slashed 10% of this figure to US$ 2.6 billion (with an expected impairment charge of US$ 367 million).

Citing the same macro problems – a strong yen and weaker earnings – that face Sony, Panasonic has also lowered its profit forecast for the year ending 31 March 2017, by 17.2% to US$ 1.2 billion, as well cutting its sales estimate by 5.3%. (Tesla Motors confirmed its obligation of a US$ 1.7 billion payment to Panasonic for electric car batteries made in their Nevada factory. In 2014, the Japanese electronics firm agreed to a partnership that saw it invest in equipment and machinery).

According to a KPMG study, EU banks still have a worrying US$ 1.2 trillion in non-performing loans on their books, as the total value of European toxic loans has increased from 1.5%, in 2008, to around 5% of total lending.

A BBC investigation seems to implicate Rolls Royce in a corruption scandal covering secret payments of US$ 12 million to an unregistered Indian agent. The probe relates to a US$ 490 million deal for Hawk aircraft with RR engines.

Having made provisions of US$ 517 million for litigation costs, RBS posted a US$ 570 million Q3 loss. The bank, still 73% government-owned, following its 2008 US$ 30 billion bailout, had made a US$ 1.1 billion surplus over the same period last year.

With its new orders book growing for the first time since January, because of a boost in global demand, Japan’s October manufacturing PMI score of 51.4 surprised the market – up from the previous month’s 50.4.

In the same vein, China came in with a similar improvement, with their index up from 50.1 to 51.2, as new orders accelerated; employment also declined at its slowest rate in 17 months.

After seven years of negotiation and last minute hassles with the Belgian region of Wallonia, the landmark EU trade treaty with Canada was signed this week. Ceta (Comprehensive Economic and Trade Agreement) is set to remove 99% of all tariffs and see trade between the two parties expand by US$ 12 billion.

The Egyptian pound started the week at 18.25 to the US$ on the black market, whilst the official rate was under 9 to the greenback; by Wednesday it had fallen to 13. On Thursday, the Central Bank caved in to demands by the IMF and officially devalued the currency pegging the pound to a rate of 13 to the US$. The country now awaits the IMF’S loan for US$ 12 billion.

Apart from a 4-month hiatus, between December 2013 and March 2014, Australia’s monthly trade balance has been in deficit for the past five years. Although still in negative territory, September has seen an improvement from US$ 1.5 billion to US$ 1.3 billion, as commodity prices have moved higher and the country’s exports grew at their fastest rate in over three years.

US Q3 data saw the world’s largest economy expand 2.9% on an annualised rate, compared to 1.4% the previous quarter. The figures surprised the market and could act as a signal for a rate hike after the presidential election. Although consumer spending at 2.1% was well down on the Q2 annual rate of 4.3%, restocking of inventories by companies moved in the other direction, as did inflation.

Mark Carney and the Prime Minister have come to sort of uneasy compromise, as the Bank of England Governor has agreed to stay on an extra year, relinquishing the role in June 2019. This hopefully will see the Canadian helping Theresa May steer the country through an “orderly” Brexit process, although a High Court decision has ruled she needs MPs’ approval before starting negotiations to leave the EU.

The Bank of England has yet again changed its forecasts, including 2017 inflation almost trebling to 2.7%, from 1.0%, and economic growth (out by 75%) at 1.4% – up from their earlier 0.8% estimate. The same institution warned of major problems if the country voted for Brexit and now it has to eat humble pie, as growth forecasts head northwards. Undoubtedly, the central bank forecasting has been found wanting and not for the first time, it has been forced to Turn, Turn, Turn!

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