Congratulations!

7sheikhs-uaeEven though it already houses nine UN Humanitarian Agencies, and over fifty other related international entities, HH Sheikh Mohammed bin Rashid Al Maktoum has ordered further expansion to Dubai’s International Humanitarian City. In these days of socio-political regional tensions, Dubai’s ruler wants to enhance operations and improve the management of relief projects.

A study by Propertyfinder Group has concluded that apartment investors will be getting better returns – as high as 9.0% – from Dubai’s newer and more affordable freehold areas such as Discovery Gardens, Silicon Oasis and Sports City. This is higher on average than the 7.5% levels to be found in The Greens and JLT and the lesser 6% expected returns from Dubai Marina and Palm Jumeirah. Traditionally, villa returns are lower and can vary with the likes of Arabian Ranches and The Springs returning up to 6.4%, more than double that of Dubai Marina and Palm Jumeirah.

Already titleholder of the largest indoor theme park in the world, IMG Worlds of Adventure is to add a new centre – at 2 million sq ft, 33% larger than its existing facility. IMG World of Legends, with eight new attractions, will be built adjacent to the current park and be connected by a state-of-the-art sky bridge.

This month will see the launch of Al Futtaim’s immersive show, combining the three elements – water, fire and light. The entertainment forms part of a US$ 409 million redevelopment project, within Dubai Festival City, and will use 30 fountains, surround sound and giant aqua screens to spectacular effect.

Kleindienst, the developer of The Heart of Europe on Dubai’s The World, has awarded a US$ 1.3 billion contract to three companies – JK Bauen Building Contracting, Sino Great Wall International Engineering Co Ltd and Wuchang Ship Building Industry Group Co Ltd. The development encompasses a cluster of six islands.

This week, the second Rove hotel, a 270-key property, opened its doors in Deira City Centre. The hospitality brand – a JV between Emaar Properties and Meraas Holding – expects to add ten hotels, with 3.7k rooms, before Expo 2020.

There has been no letup for Dubai’s hospitality sector with another month of declining returns. October has witnessed falls across the board with occupancy down 2.0% to 78.0%, average daily rates (ADR) by 9.8% to US$ 208 and revenue per available room (RevPAR) by 11.6% to US$ 162. Over the first ten months of the year, the supply growth of 5.8% has trekked marginally above the 5.6% demand curve.

Dubai Investments is expanding its local realty portfolio, with two projects – the US$ 817 million Mirdif Hills project and phase 3 of Green Community West. It also has plans for a US$ 109 million business centre in Fujairah, an investment park in Saudi Arabia and mixed-use industrial and business parks in Africa.

Following a recent agreement, DP World will hold a 55% stake, with the balance being with Canadian pension fund manager, Caisse de dépôt et placement du Québec, in a US$ 3.7 billion investment vehicle. The fund will invest in ports and terminals worldwide, with 75% allocated for existing assets and the balance for greenfield sites. The Dubai firm has also opened Peru’s first smart logistics centre in DP World’s Callao Port that handles 1.4 million TEUs.

It was a busy week for Emaar Properties The developer has overseas operations in several locations, including Egypt and Saudi Arabia. Its current portfolio in the former is over US$ 2.9 billion and the company will be actively looking at expanding operations there. Meanwhile, Emaar Middle East has launched its third project in its Jeddah Gate – a community that will house 2k residential units and 230k sq mt of office space. It also plans several hotels under its homegrown Vida Hotels and Residences brand.

Emirates National Oil Co is planning to add a further 54 service stations prior to 2020, as part of its growth strategy. ENOC will also expand its Jebel Ali refinery that will see capacity up 50% to 210k bpd, along with a 19km jet fuel pipeline connecting it with Al Maktoum Airport.

It is reported that Emaar Properties has agreed a US$ 327 million settlement with Orient Insurance following the New Year’s Eve fire at its Address Downtown Hotel. The fire was caused by an electrical short circuit on a spotlight.

Dubai-based Gulf Navigation, along with two Chinese shipping companies, is looking at its expanding shipbuilding and repair operations in Khorfakkan and Fujairah. These eastern coast ports are the world’s second leader for ship refueling and bunkering.

There was a minor improvement in November’s Emirates NBD UAE Purchasing Managers’ Index with a 0.9 month on month hike to 54.2. Output growth in UAE’s non-oil private sector dipped 0.8 to 59.8, as output prices fell for the 13th straight month, whilst growth in new orders jumped from 53.2 to 56.4.

According to the Minister of Economy, HE Sultan bin Saeed Al Mansouri, the country’s economy is expected to grow by 3.4% next year, compared to the 3.0% forecast for 2016. Over the past decade, UAE’s GDP has grown threefold from just US$ 139 billion to US$ 490 billion by year end. Inflation is expected to nudge slightly higher from 2.3% to 2.5%. Meanwhile the IMF sees the country’s current account surplus improving from 2015’s US$ 19 billion (equivalent to 5.4% of GDP) to US$ 29 billion (7.3%) this year.

Following October’s shareholders’ agreement to raise its capital by US$ 409 million, Emirates Islamic Bank has now listed and traded the rights issue at US$ 0.10 per share.

The DFM opened Sunday at 3361 and was 198 points higher to close the week at an impressive 3559 level by Thursday (08 December 2016). Volumes, on the last day of trading, were higher at 1.104 billion shares, valued at US$ 401 million, (cf 916 million shares for US$ 330 million, the previous Wednesday). Over the week, bellwether stocks, Emaar Properties traded higher by US$ 0.16 to US$ 2.02, whilst Arabtec was also US$ 0.02 higher at US$ 0.37.

After a 10.2% hike the previous seven days, this week saw Brent Crude holding on to recent gains nudging US$ 0.31 higher to US$ 53.89. Having shed 7.7% the previous week, gold continued its downward trend, just US$ 3 lower, to close on US$ 1,172 at Thursday’s (08 December 2016) close.

The Kremlin has agreed to a US$ 11.3 billion offer by Qatar and commodities trader Glencore to purchase 19.5% of oil giant Rosneft. Maybe the Trump presidential election has seen a lesser risk of such deals going sour, as commercial relations improve between Russia and the western world.

There was mixed October news for the regional airlines – with IATA reporting increased cargo traffic but a slowing down in the rate of passenger demand. ME air fright demand was up 9.2% (globally 8.2%) as capacity rose by less than half at 4.2%. On the flip side, ME carriers saw a 7.0% hike in passenger demand – its slowest pave in 18 months – as capacity grew at the higher level of 10.0%. Consequently, load factors dropped 2.0% to 70.1% – its lowest October level in a decade.

The Competition and Markets Authority has fined two pharmaceutical firms – Pfizer (US$ 106 million) and distributor Flynn Pharma (US$ 7 million) – for overcharging the NHS by a whopping 2,385%. The CMA indicated that an overnight price hike in September 2012 saw a100 mg pack of a drug known as Epanitin jump from US$ 3.56 to US$ 85.05, before dropping to US$ 68.04 in May 2014. Having spent US$ 2.5 million on the drug in 2012, the NHS forked out US$ 63 million a year later.

Reports indicate that the scandal-ridden Malaysian state investment fund, 1MDB, is planning to repay the US$ 6.5 billion owed to Abu Dhabi’s International Petroleum Investment Company (IPIC). It appears that the fund is to swap assets (perhaps land in Penang?) for financing by a Chinese source.

An increasing number of South Korean conglomerates are being pulled into the massive corruption scandal surrounding the President Park Geun-hye. Hyundai Motors, Samsung and six other entities have faced lawmakers who are investigating that millions of US$ have been “donated” to funds operated by Choi Soon-sil, a close presidential confidante, in exchange for favours.

With a 28% premium on Friday’s share price, Hong Kong-based Cheung Kong Infrastructure has made an unsolicited US$ 5.4 billion offer to acquire Australian energy firm Duet Group. CKI, owned by billionaire, Li Ka-shing, would have to obtain formal approval from Australia’s Foreign Investment Board Review. Earlier in the year, it had a joint US$ 7.4 billion bid, with China’s State Grid Corp, for Ausgrid rejected by the FIRB, citing security concerns.

Over the past four years, Sony has sold more than 50 million PlayStation 4 consoles, reaching a sales peak during the Black Friday week ending 27 November 2016. However, this figure is small fry when compared to past sales of PlayStation (157 million units), Nintendo (154 million) and Gameboy (118 million). However, the recently released PlayStation 4 Pro has already reached 370 million game sales.

The Canadian conglomerate, Brookfield, is reportedly buying a share in Greenergy – a fuel supplier that delivers 18 billion litres of fuel, equivalent to 25% of UK’s road usage. The company, 34% owned by Tesco’s pension fund‎ and 16% by co-founder, Andrew Owens, is believed to be worth about US$ 625 million.

Having being accused by some EU officials of avoiding almost US$ 1.1 billion in tax through the use of a Luxembourg loophole, McDonald’s is set to move its non-US tax base to the UK. The food giant dismisses such claims and has indicated that it has paid US$ 2.5 billion in EU tax over the past five years. The new international holding company will see the creation of 5k new jobs and its profits will be liable to UK corporation tax which is said to be cut by 3% to 17%.

The Royal Bank of Scotland, still 73% owned by the taxpayer, has settled with three of the five creditor groups suing it for compensation. The claims refer to the bank’s dubious actions in 2008, when it misled investors to buy into a US$ 15 billion fund raising scheme to shore up the bank after its US$ 61 billion acquisition attempt for ABN Amro failed.

Once again the worrying state of the European banking system has been highlighted because of high levels of non-performing loans, reduced profitabilities and continuing legal claims for past scandalous behaviour. The good news is that the average NPL (non-performing loan) ratio for assessed banks has improved from 6.5% to 5.4% by mid-2016. However, the results from some countries are of major concern with NPL ratios of Greece (47%), Portugal (20%), Italy (16.4%) and Spain (6%). The questions are how the Eurocrats have allowed this situation to arise in the first place and what can they do when the inevitable happens – banks go under?

There are indications that the Italian government may request US$ 16 billion from the European Stability Mechanism (ESM) to help prop up its rotting banking system. Furthermore, the faltering government may also pump in US$ 2.2 billion to take a major stake in Monte dei Paschi, one of many of the country’s struggling financial institutions.

Following news that the Italian Prime Minister, Matteo Renzi, was to resign after he had lost a constitutional referendum, the euro fell on Monday to its lowest level – 1.05 to the US$ – since March 2015. It later clawed its way back to 1.08 before closing on Thursday a tad over 1.06.

In a desperate move to prop up the ailing euro, ECB president Mario Draghi has extended his monthly QE programme a further six months beyond March 2017, but has reduced the stimulus package by US$ 21 billion to US$ 63.4 billion. To date, the ECB has pumped in a massive U$ 1.84 trillion and this, along with ultra low interest rates, has not worked – with the 19-country bloc still in the economic doldrums. There is no doubt that the next year is pivotal for the future of the euro currency (in its present state) and of the eurozone.

The latest Japanese PMI data shows that the Japanese service sector continues to improve in November with a 51.8 reading, compared to 50.5 a month earlier. Furthermore price inflation expanded to a two-year high as output at service firms grew at its fastest rate since January.

As new domestic orders are on the rise, along with a surge in exports (following sterling’s “devaluation”), the recent slump in UK manufacturing may have turned a corner – in the short-term at least. A hike in oil prices should see increased activity from that sector but if inflation levels begin to rise next year then this will have a negative impact on the economy.

The impact the financial service sector has on the UK finances can be gleaned from a City of London report that estimates that it contributes 11.5% of the country’s tax receipts, equivalent to US$ 89 billion. Furthermore it employs 3.4% of the UK workforce – 1.1 million – with an average remuneration of US$ 40k. Any move away from the City, post-Brexit, will have far-reaching consequences.

Ministers still have to sign off a second review of Greece’s bailout programme, before further funds can be released, but have gained some interim relief in the form of longer repayment periods and lower rates. There is some dispute between the eurozone and the IMF, with the latter preferring a “haircut” – an actual reduction in the balance owing – a move opposed by the likes of Germany.

Although there was a chance of the Reserve Bank of Australia cutting rates, it held back so as not to unsettle the patchy labour and housing markets. The September quarter’s inflation data – growing at an annual 1.7% rate – was better than expected but still down on the RBA’s target of 2 – 3% but would normally have been the catalyst for a rate cut. The September quarter saw a 0.5% contraction in the country’s GDP – its weakest reading since the GFC and ending five years of continuous growth. The main drag factors are a marked slowdown in business spending and government cutbacks.

Softbank, which this year has already acquired UK’s ARM Holdings for US$ 32 billion and Vodafone’s Japanese operations for US$ 20 billion, is to invest US$ 50 billion in US businesses. In a meeting with President-elect Trump, the Japanese tech firm’s chief executive, Masayoshi Son, added that this would result in 50k jobs in the USA. In October, the Japanese company announced the establishment of a new US$ 100 billion fund, SoftBank Vision Fund, 45% of which would be financed by Saudi Arabia’s Public Investment Fund. This is one major step for Japan – a country that once ruled the tech world but has been left far behind.

Improving economic data in November sees many US indicators heading north. The ISM’s non-manufacturing index rebounded, gaining 2.4 to 57.2, whilst its manufacturing PMI was 1.3 higher at 53.2. Latest US figures indicate that unemployment has dropped to a 9-year low with jobless rates falling 0.3% to 4.6%, with 178k new jobs being created in November. However, earnings have grown at less than expected, with the annual increase of 2.5% down 0.3% from the October return. With recent indicators pointing to a 3.2% 2016 growth, a rate hike next week is all but inevitable.

Friday’s 45th National Day celebrations saw the UAE rulers gather for the opening of Dubai’s US$ 136 million museum on the Union House site of the original signing of the UAE charter in 1971. The other five rulers, Their Highnesses Sheikh Sultan bin Mohammed Al Qasimi (Sharjah), Sheikh Saud bin Saqr Al Qasimi (Ras Al Khaimah), Sheikh Humaid bin Rashid Al Nuami (Ajman), Sheikh Hamad bin Mohammed Al Sharqi (Fujairah) and Sheikh Saud bin Rashid Al Mualla (Umm Al Quwain) joined Abu Dhabi Crown Prince Sheikh Mohamed bin Zayed Al Nahyan and Dubai ruler, Sheikh Mohammed bin Rashid Al Maktoum, in the celebrations. Congratulations!

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