Down The Wrong Way!

boardwalk-on-palm-jumeirahA case of déjà vu from the good old days before the GFC – with prices starting at US$ 76k, it was no wonder to witness buyers queuing in Dubai South overnight to acquire units in The Pulse cluster’s second release; the initial launch in October saw 300 units snapped up within minutes of release.

According to a recent Cluttons report, the Dubai realty sector slipped a further 2.6% in Q3 and 7.4% year on year; since its peak in Q4 2008, the market has slumped by 26.7%. The firm expects a further slowdown in the rate of decline, before stabilisation sets in within a year.

In contrast, a JLL / Dubizzle study reported that both average sales and rental prices, across a dozen popular communities, were stable in Q3 but had dropped 4%, year on year. The study concludes that the market has probably reached the bottom of its cycle and expects a recovery to start in 2017, on the provisos of an economic improvement and that a lid is kept on the supply pipeline.

Driven by activity in the affordable housing market sector, JLL estimates that 2017 residential price rises in 2017 could jump up by 5%. The consultancy indicated that Q3 prices were off by 2.6% (and 15% lower than at its 2014 peak) and that a further 1% decline in Q4 will happen before the market turnaround next year.

This week, Dubai Properties launched its Rahaba Residences in Dubailand – its first foray into the affordable housing market segment, targeting junior to mid-level employees of large entities. The concept is an entirely new approach to traditional staff housing.

The affordable house section received a further boost with Nshama announcing another phase of its Town Square project – Noor Townhouses. With prices starting at US$ 324k, the development – including 3/4-bedroom units – will be built in three separate communities.

There is no stopping Azizi Developments who have just launched their ninth development since June 2016! Located in Al Furjan, Azizi Farishta will contain 284 studio / 1-2 bedroom units and should be completed by 2018.

Nakheel have officially opened its impressive Boardwalk – an 11 km, 6 mt wide, walkway located on Palm Jumeirah’s protective breakwater. Access is via 14 separate points and attractions will include a wide range of food trucks.

It seems that Emirates are having last minute technical problems with the new RR engines for its upcoming delivery of A380 jets, five of which are scheduled to be here in December. Its current portfolio of 85 planes is powered by Engine Alliance, a joint venture of General Electric and Pratt & Whitney. RR won a US$ 9.2 billion deal to provide engines for the airline’s next fifty Airbus jumbos.

The new 62km Abu Dhabi-Dubai highway, which has cost US$ 572 million, is expected to open later this month. The 8-lane highway is a godsend for the inter-city commuters and should see improved travel time and reduced accidents.

Work has started on the US$ 8.1 billion Dubai Wholesale City project, with Saeed Transport & Building Contracting Company carrying out excavation work on the 135 million sq ft site. Due to become the largest global wholesale hub, the development will tap into the US$ 4.3 trillion sector, with the aim of increasing the country’s share in this burgeoning market.

In October, UAE gross bank assets increased by 5.1%, year on year, to US$ 693.2 billion. Other key indicators headed in the same direction with total deposits, at US$ 409.5 billion, up 4.7%, and loans and advances higher by 5.9% to US$ 428.8 billion.

Alibaba Cloud has announced that it plans to open four new global data centres, one of which will be in Dubai and the other three in Australia, Europe and Japan. The Chinese offshoot of the Alibaba Group becomes the first such provider of cloud services in the region.

Reportedly hoping to make its first ever profit, by 2018, Careem, the Dubai-based on-line car booking service, is in negotiations to raise a further US$ 300 million for expansion purposes; this follows a US$ 60 million funding last year. The company is facing increased competition from the likes of Uber and Indian start-up, Ola.

The Bank of Singapore has become the latest overseas financial institution to acquire a licence to open in the DIFC; until now, it has had a representative office in the emirate for the past 20 years.

The DFM opened Sunday at 3310 and nudged 14 points higher to close on 3324 by Thursday (24 November 2016). Volumes, on the last day of trading, were marginally down at 926 million shares, valued at US$ 324 million, (cf 1 billion shares for US$ 354 million, the previous Thursday). Over the week, bellwether stocks, Emaar Properties lost US$ 0.01 to US$ 1.81, whilst Arabtec was up US$ 0.02 at US$ 0.36.

After a turbulent three weeks, in which Brent shed over 10% of its value, this week it has moved back into positive territory, up 7.0% to US$ 48.61. Gold headed in the same direction, up 4.6%, or US$ 56, to close on US$ 1,273 at Thursday’s (24 November 2016) close.

Embattled Volkswagen has announced global job losses totalling 30k (or 4.9%) of which 23k (equivalent to 19.2% of its local base workforce) will be in Germany. The carmaker has indicated that there will be no enforced retrenchments and that a further 9k “new future proof” jobs would be created; the cuts are expected to save VW US$ 3.9 billion a year by 2020.

Australian building materials supplier, Boral, is set to pay US$ 2.6 billion in a cash deal to acquire Headwaters Incorporated. With the Utah-based company generating revenue US$ 1.1 billion (with profits at US$ 218 million), Boral is expecting to see a doubling of its present US business.

The extent the luxury goods sector is suffering from the global slowdown can be gauged from the disappointing Q3 results of two of the leading US chains. Abercrombie & Fitch’s shares plunged 13.9% on news of a 6% fall in revenue to US$ 822 million, with profits sinking 80.0% to a mere US$ 8 million. Gap saw revenue down 2.0% to US$ 3.8 billion, as profit slumped 17.7% to US$ 204 million; its shares dropped 13.1% on the day.

JP Morgan has been fined US$ 264 million by the Department of Justice for hiring the offspring of highly placed Chinese officials to gain business in that country. In many cases, the 100 children, so selected as interns, were unqualified but, because of their parents’ connections, managed to generate extra revenue for the bank of US$ 100 million.

Chinese video streaming service PPTV has agreed a 3-year, US$ 700 million deal with the EPL to broadcast English matches. Suning, the parent company of the Chinese video streaming service, already has a controlling interest in Inter Milan. China’s President Xi Jinping is keen for the country to become a major footballing nation within the next decade.

The Saudi government has released US$ 10.7 billion in outstanding payments owed to private companies; this represents 22.9% of the estimated total outstanding of US$ 46.7 billion and a further payment of US$ 26.7 billion is expected in the coming weeks. Any payment will free up companies’ cash flows, to an extent, and see payroll backlogs cleared. One company that may not benefit from the government’s initiative is the indebted Mohammad Al Mojil Group – a construction company that overextended itself and has not traded on the Saudi bourse since July 2012.

In October, Japan reported disappointing trade figures with a trade surplus of US$ 4.5 billion – lower than market expectations of US$ 5.5 billion. Both exports and imports headed downwards on an annual basis – by 10.3% and 16.5% respectively.

With the biggest gain since 1982, US October home construction shot up by 25.5% to a seasonally adjusted 1.3 million, whilst new construction is at its highest level in over nine years. The main drivers behind this boost are a 75% hike in apartment construction and a 10.7% increase in single-family homes.

It was no surprise to see President-elect Donald Trump quitting the Trans-Pacific Partnership trade deal – signed by 12 countries and encompassing 40% of the global economy. Many critics of the TPP – with aims of boosting growth and expanding economic ties – were not happy with the secret deal’s apparent bias towards big business. Maybe China will see an opportunity and step in to fill the gap?

China’s largest online travel firm, Ctrip, has acquired its Scottish equivalent, Skyscanner, in a US$ 1.75 billion deal. The travel search company allows travellers to compare different sites for their vacation requirements. Ironically, the news comes one day after the Chancellor’s promise of US$ 500 million to help local digital start-ups avoid being acquired by overseas predators.

On Monday, Wall Street closed on record highs with the Dow reaching 18,956, S&P at 2,198 and the tech-focused Nasdaq at 5,369. By Thursday, all three indices had moved upwards again to 19,083, 2,205 and 5,381 respectively.

It seems that corruption is rife everywhere. Swedish media has reported that Ericsson officials shelled out millions of US$ in bribes at the turn of the century. It is estimated that US$ 150 million and US$ 89 million payments were sent to Malaysian and Polish bank accounts, via Jersey. Details of these two and other kickbacks – to politicians and senior civil servants – have been forwarded to the US Securities and Exchange Commission by a former executive, turned whistleblower.

Early indications point to Australia’s GDP shrinking for a fourth straight quarter. If this trend were to continue, then undoubtedly the lucky country will have its first recession in nearly 30 years. Major concerns are that house prices have surged 40% over the past three years whilst commodity prices, although nudging higher, will not result in increased mining investment. There is every chance that whilst interest rates creep up elsewhere, Australia will buck the trend and see further cuts.

The EU meritocracy is beginning to run out of excuses for their dismal financial management of the bloc’s economies. Not happy with blaming Brexit, impending trade wars, possible interest rate hikes, increased inflation risks and a strong dollar, their latest effort is political uncertainty. Brussels need not look any further to understand why the populace is turning against them – if they cannot see now wait another nine months after the people in France, Germany, Italy, Spain have voted! Unfortunately, the time for much-needed fiscal and structural reforms has long passed.

Tomorrow sees Black Friday – a day when UK shoppers are expected to spend US$ 2.5 billion – followed by Cyber Monday, with on-line sales expected to reach US$ 4.8 billion. However, this year, several big names – Asda, Ikea and Next – will be noticeably absent. The fall in sterling will have a detrimental effect on this year’s returns.

With its latest sale, the UK government now holds less than 8% of Lloyds Banking Group Plc’s share – a bank that it bailed out, after the GFC, with a US$ 20.3 billion cash injection. Notwithstanding interest and inflation, the government is in front, having already received US$ 21 billion.

It comes as no surprise to see ex-Chancellor, George Osborne picking up over US$ 400k for delivering speeches in the US, including US$ 175k for JP Morgan two speeches and US$ 100k from Palmex Derivatives last month. To some, it may seem that the boys are looking after themselves yet again.

In the government’s first budget statement since Brexit, former Remain campaigner and now Chancellor, Philip Hammond, painted a gloomy picture of the UK economy. With such a weak economy, there were no major highlights, with little funds available for the public spending purse or tax cuts. Indeed, as the government will need to borrow more, (“only” US$ 151 billion) it is expected that the national debt will rise from March’s 81.3% to 90.2% by March 2018 whilst growth for the next two years is forecast to be 1.4% and 1.7%. There is every chance that Mr Hammond, who preached that the economy would take an immediate massive hit, if Brexit went through, and is presumably still utilising the same advisers, is again heading Down The Wrong Way!

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