Days Are Numbered!

HH Sheikh Mohammad Bin Rashid Al Maktoum has approved Dubai’s US$ 12.9 billion 2017 budget which, as expected, sees a marked 27% expansion in infrastructure expenditure, in line with the 2021 Strategic Plan. Consequently, the budget allocation is US$ 272 million higher than in 2016 and forecasts a US$ 681 million deficit, equating to 0.6% of the emirate’s GDP.

The Dubai Ruler also inaugurated the US$ 3.5 billion Dubai Parks and Resorts, the region’s largest theme park destination. Located on an area of 30.6 million sq ft, it hosts three parks – Bollywood, Legoland Dubai and Motiongate (a collaboration of three Hollywood studios, Columbia Pictures, DreamWorks and Lionsgate.

The latest Core Savills 2016 report estimates that Dubai apartment rentals will have fallen between 2% – 4%, except for JLT and JV, which have nudged 1% higher, as well as in prime and central residential locations. There was even worse news for villa renters, but not for tenants, with forecast falls of 3% – 5% in most areas as new supply takes hold. However, the consultancy predicts gradual property prices throughout 2017, with a forecast 20k units being delivered,of which 19% will comprise prime residential.

The Russian Forum Group has advised that its Palm Island XXII Carat will be completed by late 2017. 30% of the luxury development of 22 7-bedroom beachside villas, ranging from 8k – 13k sq ft, has already been sold.

This week, Nakheel opened its fourth community retail centre – Al Furjan Pavilion – which is part of its massive US$ 4.4 billion retail expansion. YTD, the developer has added 1.5 million sq ft of retail space, with a value of US$ 409 million. (Its chairman, Ali Rashid Lootah, expects to exceed last year’s profit of US$ 1.2 billion when 2016 results are published early in Q1.

Union Properties have announced plans for a US$ 163 million mixed use project in Motor City, including yet another theme park. The location was initially slated for a US$ 545 million F1-X Dubai park that has since been shelved. Now half of that land would be used for the theme park and the remaining 50% for residential/retail units. Although Dubai Municipality has given the project an initial approval, the developer is still awaiting clearance from Dubailand to conduct a detailed study.

To support the growing population, Dubai Health Authority is set to build seven hospitals, bringing the emirate’s total to 33, and expand three existing facilities. Furthermore, it already has a staggering 2.8k health facilities serving its 2.7 million inhabitants plus the 1 million daily commuters from other emirates.

Damac announced the launch of MOD – a range of 1-bedroom townhouses – with prices starting at US$ 162k and located in its Akoya Oxygen golf community.

Even with all the doom and gloom surrounding the realty sector, Azizi Developments have announced that it will launch 50 new developments next year in the emirate. The developer is already working on 20 projects (15 of which are in Al Furjan), with a reported portfolio value of US$ 2.0 billion, including the US$ 204 million, 178-unit Azizi Mina Hotel Apartments on the crescent of Palm Jumeirah.

Meraas Holding is expected to open a new operation that will see the introduction of gourmet dining destinations, with the first outlet, Qasr Al Sultan, opening next month; the facility will offer a “Life of a Sultan” experience and comprise a souk, a food bazaar and traditional entertainment. Future outlets will be located in Meraas developments or standalone venues.

According to the Minister of State for Financial Affairs, HE Obaid Humaid Al Tayer, the new VAT tax régime will generate US$ 13.6 billion in its first three years of operation. Although the law has yet to be enacted, it is still expected to commence on 01 January 2018, with revenue being split between federal and the seven local governments. It appears that the tax will not apply to education and health care, whilst some staple food items will be exempted.

A report by PayPal and Ipsos indicates that UAE on-line spending will continue to expand and reach US$ 9 billion by 2018. It estimates that 68% of the country’s on-line adults have used e-commerce shopping over the past year (up from 62% a year earlier).

Unilever has opened its US$ 272 million, 100k sq mt production plant in Dubai Industrial Park. The factory will produce an annual100k tonnes of liquid personal care, 80% of which will be exported.

Unsubstantiated reports indicate that Emirates is cutting back on staff numbers, currently totalling 103k, as a challenging economy, the strong greenback, regional conflicts, and overcapacity continue to wreak havoc on its bottom line.  It seems that the airline has been offering redundancy packages to selected HO staff, as it slashes costs, following a 75% decline in H1 profit to US$ 214 million. Indeed IATA’s dismal forecast for ME carriers sees only a US$ 300 million profit, compared to an expected US$ 900 million this year.

Of the 293 mid-to-large private jets delivered to ME customers over the past decade, UAE (with 63 planes) was the second largest recipient, after Turkey’s orders for 77 units. 80% of financing for the jets (with a price range of between US$ 25 million to US$ 75 million) has been via external sources.

HH Sheikh Ahmed bin Saeed Al Maktoum inaugurated the world’s largest VIP Terminal – covering 5.6 sq mt – at Dubai South, just minutes away from Al Maktoum International. The facility has so far seen 1k flight movements, since its April soft opening, and is looking at quadrupling that number in 2017.

Bloomberg has reported that the cost of the new DWC airport and the surrounding Dubai South logistics hub will cost the government up to US$ 35.7 billion over the next 12 years. Financing is expected to be largely debt-related, using the three main state entities (Department of Finance, Dubai Aviation City Corporation and Investment Corporation of Dubai), with initial expansion costs slated to be in the region of US$ 3 billion.

The emirate’s latest metropolis, Dubai South, will have the region’s first electric E-bus on its roads early next year following an agreement with Australian-based Transit Australia Group. The zero-carbon vehicle, with maintenance costs 80% lower than traditional buses, will carry 50 passengers and have a range of 300 km, as a result of advanced battery technology.

The WTO estimates that the UAE accounts for 31.5% of the ME exports – up from 24.0% the previous year. On a global scale, the country is ranked 20th, accounting for 1.6% of the worldwide total.

The Ministry of Economy has indicated that the country’s overseas investments total US$ 87.4 billion, making it the top Arab investor.

Government-owned Saudi Telecom Co becomes the latest company to show faith in Dubai-based Careem, acquiring a 10% shareholding for US$ 100 million, with Japan’s Rakuten, the world’s largest retailer outside of China and the US, being confirmed as its co-leader. The regional equivalent of Uber is in the throes of raising up to US$ 500 million for expansion purposes.

Nick Peel, Chief Executive of Marka for the past two years, has resigned from the loss-making listed retail company. Q3 figures showed that it made losses of US$ 3 million, as revenue dipped 15.6% to US$ 18 million, compared to the same period a year earlier. Vice chairman, Khaled Al Mheiri, will take over his duties until a replacement is appointed. Dubai’s retail sector is going through a sticky period being hit by a strong currency, weak consumer confidence and the rise of e-commerce. After the announcement, Marka shares jumped 7.1% to close on US$ 0.41.

Emaar Properties has agreed to develop a 2 million sq area in Ras Al Khaimah’s Al Marjan Island, that emirate’s first man-made island development, which has cost US$ 1.8 billion. The Dubai developer will build a 5-star hotel, retail precinct and serviced residences in its phase 1. This will be followed by several more hospitality and retail projects on the island that stretches 4.5km into the sea.

Du (Emirates Integrated Telecommunications Co) has proposed a 0.84% reduction (38.52 million shares) which will see its capital base being reduced by US$ 38 million to US$ 1.235 billion.

Emirates REIT will pay a 2016 interim dividend of US$ 0.409 in January, costing the company US$ 44 million. Shareholders as on 16 January 2017 will be entitled to the pay-out.

With Clarity Fund’s divesting its 9% share in Drake and Scull International, its founder member, Khaldoun Tabari, now becomes its biggest shareholder, with an 8.3% stake. Its shares were trading at US$ on Thursday at US$ 0.13

The DFM opened Sunday at 3554 and after a lack lustre week closed 38 points lower to close on Thursday (22 December 2016) at 3517. There was a marked fall again in volumes, with the last day of trading 210 million shares, valued at US$ 89 million, (cf 691 million shares for US$ 232 million, the previous Thursday). Emaar Properties and Arabtec were both down for the week by US$ 0.04, to US$ 1.98 and US$ 0.37 respectively.

This week saw Brent Crude continue its recent upward trend – US$ 1.03 higher to US$ 55.05. Having shed over 9% the previous three weeks, gold had a welcome flat week, just US$ 2 higher to close on US$ 1,131 by Thursday (22 December 2016).

BP has paid an estimated US$ 2.2 billion, by issuing about 2% of its issued share capital to be held on behalf of the Abu Dhabi government, for a 10% stake in Abu Dhabi’s ADCO onshore oil concession for 40 years. Of the 40% allocated to overseas interests, other stakeholders include Total (10%), Japan’s INPEX (5%) and South Korea’s GS Energy (3%). ADNOC is still looking for further partners to take up the remaining 12% balance.

Two corrupt Brazilian companies have been hit by huge penalties levied by the US Department of Justice. Construction giant, Odebrecht has been fined US$ 2.6 billion and petrochemical firm, Braskem, US$ 960 million, for bribing government officials to secure public contracts.

Lloyds Banking Group beat off the likes of HSBC and Santander, to acquire MBNA for US$ 2.4 billion The company, with 5 million users, is one of the UK’s biggest credit card issuers, holding assets in excess of US$ 8.7 billion and a loan book equivalent to 11% of the UK credit card market.

Bitcoin  has had a phenomenal year  and on Thursday reached its highest ever level on the Europe-based Bit-stamp exchange at US$ 875. It is estimated that the value of all Bitcoins in circulation is US$ 14 billion, with the cryptocurrency more than doubling from its 01 January opening of US$ 435.

SoftBank founder Masayoshi Son has started to deliver on his promise to President-elect Trump of creating 50k jobs and investing US$ 50 billion in US start-ups. This week he agreed to invest US$ 1 billion in the US company, OneWeb Ltd.

Despite the three main rating agencies maintaining Australia’s AAA rating, the outlook for the country is far from promising. The government is still forecasting that the budget deficit will turn to surplus by 2020/21 but that is dependent on factors such as a 3% annual wages growth rate, current high iron ore prices to continue, a marked cut-back in spending, no major falls in the property market and the global economic growth moving north. Even the government has already reduced its growth forecasts – this year from 2.5% to 2.0% and next year 2.75% from 3.0%.

Despite still awaiting the next US$ 656 million tranche of its bailout deal, Greece has angered its creditors by a one-off US$ 900 payment to its pensioners and scrapping a VAT increase for residents of Aegean islands. The Tsipras government claim that this will come out of a US$ 1.1 billion tax surplus but this has not gone down well with Greece’s paymasters which may now delay any further payments to the troubled country.

The Fed Chair painted a rosy picture of the US labour market, with job openings and wages moving higher. Janet Yellen also considered that younger workers are now entering the strongest job market in over a decade, following years of sluggish growth.

Despite hitting another record high, the Dow Jones failed by just 13 points to hit the magical 20,000 level on Tuesday. Since the Trump election the bourse has gained nearly 1,000 points and might have hit the jackpot were it not for the Berlin Christmas market attack and the assassination of the Russian ambassador to Turkey.

To prop up the country’s ailing banking system, new Italian Prime Minister, Paolo Gentiloni, is to seek parliament’s approval to issue bonds totalling US$ 20.8 billion. The scale of the problem can be gleaned from the fact that eight of Italy’s largest banks carry bad loans of US$ 375 billion. It is little wonder that the country is the second most indebted country in EU with a US$ 2.34 trillion burden equating to 136% of its GDP.

For the first time in over three years, Germany’s producer prices edged higher by 0.1% year on year, following a 0.4% decline in October. Although energy prices have fallen 1.7% over the year, non-durable goods, durable goods and capital goods experienced increases of 1.5%, 1.0% and 0.6% respectively.

The post Brexit UK budget deficit narrowed in November by US$ 0.75 billion, with the current public sector net borrowing, excluding intervention, now standing at US$ 15.8 billion; YTD, this has fallen by US$ 11.6 billion to US$ 74.4 billion. However, the public sector net debt has increased over the past twelve months by US$ 73.3 billion to US$ 2.06 trillion, equivalent to 84.5% of the country’s GDP.

Over two years ago, this blog indicated that the IMF chief will be facing criminal charges (Foxy Lady – 01 September 2015). Now the case involving a US$ 430 million award, which Christine Lagarde, then France’s Minister of Finance, signed off in favour of an ally, Bernard Tapie, in a dispute with the then state owned Credit Lyonniase, has been settled. Interestingly, the lady was found guilty as charged but escaped both a prison sentence and a fine. Surely she must go the way of her predecessor, the disgraced Dominique Strauss-Kahn, and now her IMF Days Are Numbered!

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