Sittin’ On The Dock Of The Bay

dubai-harbourThis week, the Dubai ruler launched the UAE Food Bank project as part of the UAE’s Year of Giving initiative. His wife, Sheikha Hind bint Maktoum bin Juma Al Maktoum, has been appointed chairperson of the board of trustees.

Al Futtaim Carillion has won a US$ 198 million contract to construct phase 1A6 of One Central for DWTC. The 183k sq mt project will include two (12 and 8 storey) Grade A office buildings which will be handed over by late 2018. Having just delivered Phase1A5, the construction company now has been awarded contracts totalling US$ 490 million in connection with One Central development.

MAF has announced that it will use Dubai as a distribution centre for its ever-growing Carrefour hypermarket chain. The 800k sq ft facility will be located at the National Industries Park (NIP), owned by DP World.

The RTA has had a busy holiday period reaching its peak on New Year’s Eve, when an incredible 1.8 million journeys were made by its passengers including 770k on the metro, 543k by taxi and 394k on public buses.

Considering the strong dollar and a sluggish retail environment, Dubai Duty Free did comparatively well to report only a 3.2% decline in 2016 revenue to US$ 1.82 billion, following on from a 1.5% 2015 fall – the first in DDF’s history. Perfume (16.5%), alcohol (15.9%) and tobacco (8.7%) accounted for 41.1% of total sales.

GEMS Education reported a US$ 132 million profit, on a US$ 790 million revenue, for the year ending 31 August 2016 – a major improvement on the US$ 64 million profit, on a turnover of US$ 879 million, posted for the 17 months to August 2015. Student numbers at the education provider’s 88 schools increased by 6.1% to 104.2k, as its workforce rose by 7.4% to 13.5k.

With the acquisition of a further 23.94% stake in Pusan Newport Company Limited, DP World now holds a 66.03% share in the largest terminal in Pusan. The port – which accounts for 75% of South Korea’s total container volumes, handling nearly 20 million TEUs – is the 6th largest in the world. It is reported that it is also considering plans to build a dry port near Cairo, along with other new ports and free zones in Egypt.

For the first 11 months of the year, both passenger and cargo traffic have surged at Dubai International, the world’s biggest international airport. November saw passenger numbers up 9.4% (compared to a year earlier) to 6.6 million bringing a 7.0% YTD increase to 76.0 million. Cargo was 7.5% higher in November, with 235k tonnes, and 3.3% up YTD to 2.36 million tonnes.

Over the past two years Dubai’s population has grown by 15.86% to stand on New Year’s Day at 2.696 million. Of that total, an estimated 69.3% are male and about 10% – 12% will be nationals. Last year 30.5k babies were born in the emirate, of which 25.3% were Emiratis, with the balance being expatriate births.

Six months after the Department of Economic Development closed its office in Media City, the owner of Exential Group has reportedly been arrested. It is alleged that he ran a US$ 14 million forex Ponzi scheme that promised investors a 100% return on their US$ 25k deposits.

The UAE Central Bank reported that its gold reserves climbed 11.9% to US$ 287 million in the first 11 months of 2016 but decreased 6.8%, month on month. It is expected that this upward movement will continue into 2017.

In a possible April US$ 1.5 billion London IPO, Brazilian food exporter BRF SA is to hive off a 20% stake in its Dubai-based One Foods Holdings (now renamed Sadia Halal). The local company controls 45% of all poultry sales in the GCC. BRF, the world’s leading poultry exporter, aims to tap into the global halal market which is expected to top US$ 60 billion by 2020.

Rasmala has acquired a 68% stake, from PSM Partners, in a UK corporate serviced apartments company, Orchard Apartments, for an undisclosed sum. The Dubai-based investment firm is in the throes of expanding assets under management and diversifying its realty portfolio.

Amlak Finance – 45% owned by Emaar Properties – has renegotiated part of its 2014 creditors’ debt restructuring package, having received approval from a “super majority” of stakeholders. The agreement sees Amlak being able to expand its mortgage book and add new business, following a lifting of several restrictions.

Damac Properties has advised the DFM that it will distribute 2016 dividends of not less than 25% of its equity, totalling at least US$ 409 million. The developer is expected to cash in on its relationship with the US president-elect and this week announced the launch of new villas, adjacent to the first of its Trump golf courses – the Kensington Boutique Villas at Akoya Oxygen and Beverly Hills Boutique Villas at Akoya by Damac.

Dubai Islamic Bank has sold its 20.8% share (held through a 40% stake in MESC Investments) in Jordan Dubai Islamic Bank to Bank Al Etihad. No other details are available.

The impact of foreign investment on the local bourse can be gleaned from the fact that 2016 purchases topped US$ 16.6 billion, as sales were 0.5% lower at US$ 16.5 billion. Meanwhile, institutional investors bought US$ 10.9 billion worth of shares (selling US$ 10.3 billion), as UAE investors topped the lot, with acquisitions of US$ 19.9 billion and sales of US$ 20.0 billion.

The DFM opened Monday at 3531 and had a credible opening week for 2017, climbing 97 points (2.7%) to close Thursday (05 January 2017) on 3628. Volumes were still on the low side, but up for the week, at 504 million shares, valued at US$ 171 million, (cf 398 million shares for US$ 89 million, the previous Thursday). Emaar Properties and Arabtec were both higher this week by US$ 0.07, to US$ 2.01 and US$ 0.01 to US$ 0.37 respectively.

This week saw Brent Crude consolidate recent gains, trading flat – US$ 0.04 higher at US$ 56.89. Gold continued last week’s US$ 27 uptick, closing US$ 23 higher at US$ 1,181 by Thursday (05 January 2017).

According to a MEED report, 83% of the estimated US$ 208 billion to be awarded this year in the MENA region will emanate from the power, oil and transport sectors. Saudi Arabia will account for 20.7% of this total, with this spend 71.3% higher than its 2016 total of US$ 25.1 billion.

Insurance companies had their worst year since 2012 for natural disaster claims which came in at US$ 175 billion, with two disasters – two earthquakes in Kyushu (US$ 31 billion) and mid-summer floods in China (US$ 20 billion) accounting for 29.1% of the total. Worryingly, and probably a sign of the times, floods accounted for 34% of total losses – well above the 10-year average of 21%. It is estimated that 98% of all losses in China were uninsured – and 70% on a global scale.

It seems that President-elect Trump has spooked Ford into cancelling a US$ 1.6 billion plant in Mexico and using some of these funds to expand its Michigan facility in Flat Rock. The tweeting Trump had earlier criticised both Ford and GM for not producing in the USA. It does appear that one of the first casualties following his inauguration on 20 January could well be the NAFTA.

The world’s 5th largest carmaker, Hyundai/Kia, with 35 plants in 10 countries, expects a marginal 1.5% increase in car sales to 8.25 million this year. South Korea’s largest auto manufacturer has seen 11 consecutive quarters of profit downturn, with the latest Q3 return 7.2% down, quarter on quarter, to US$ 953 million.

Although the EU already has a free trade agreement with South Korea, it does not have one with China. The benefits of such agreements have been brought home by Australia that starts 2017 with tariff cuts (of up to 50%) to 7k products because of free trade deals with these two massive economies.

Following the disastrous discontinuance of its Galaxy Note 7 (and a probable US$ 2.1 billion hit to profits), the tide may have turned for South Korea’s Samsung after estimates that December quarter profits would top US$ 7 billion; memory chip sales with its semiconductor business are likely to reach US$ 3.7 billion in Q4 and US$ 10.9 billion for 2016. Little wonder their shares have jumped 43% during the year.

Toshiba shares fell over 5% on Wednesday, as news filtered out that the company, yet again, has been misrepresenting profits – this time of US$ 340 million over the past three years. This came just two weeks after the Japanese conglomerate announced that it may face a multibillion US$ write down on its US nuclear business which saw its shares then crash over 20%.

Apple becomes the latest big name to invest in Japan’s SoftBank Group Corp. The company confirmed a US$ I billion payment into the tech fund which is reportedly tapping Saudi Arabia’s Public Investment Fund in a possible US$ 45 billion deal, with further investments likely from inter alia Foxconn, Oracle and Qualcomm.

There is further evidence that an Australian property bubble is about to burst, with news that capital city properties surged 10.9% last year with Sydney (15.5%), Melbourne (13.7%), Hobart (11.2%) and Canberra (9.3%) at dangerous levels, whilst Perth is cooling off (after the mining boom) with a 4.3% slump.

There was finally some good news for Spain which has reported a credible 10.1% hike in visitor numbers to 71.6 million, for the first eleven months of 2016. The UK was the biggest source market accounting for 23.7% of the total, followed by France (10.8 million) and Germany (10.7 million). For the whole of 2015, numbers totalled 68.1 million whilst November saw a 9.2% hike in numbers to 4.1 million.

In December, the eurozone factory PMI climbed to 54.9 – its highest level since April 2011 – and up from November’s 53.7. Individual countries – such as Germany (55.6) and France (53.5) – performed well but could be facing a difficult year as national elections loom on the horizon.

Caixin’s December survey, at a 53.4 reading, showed the country’s service sector was continuing its recent upward trend. The composite index at 53.5 was at its highest level in almost four years. In contrast, China’s manufacturing PMI headed south dropping 3 notches to 51.4 – as did December’s non-manufacturing PMI to 54.5. Although there have been positive signs such as an improvement in domestic demand, and a fillip in the property sector, there are concerns that private sector debt is climbing to dangerous levels.

As it plans to develop its energy sector, China’s National Energy Administration announced that it would spend US$ 360 billion in renewable power generation over the next five years.

China has opened a 12k km train link from Yiwu, in the eastern province of Zhjiang, to London. The freight train service will take 18 days to complete each way and is expected to make the UK the European gateway for Chinese products as well as to boost investment into the country, following Brexit

The UK’s construction PMI was up to 54.2 from November’s reading of 52.8, as new orders rose at their fastest rate since January. The December manufacturing Purchasing Managers’ Index, with a 56.1 reading, surprised the market by expanding at its fastest rate in 30 months. New orders for the month, along with rates of growth for production and the pace of jobs growth, indicate that apparently there is life after Brexit. The UK economy will probably have grown more than 2% this year, despite a lackluster start to 2016 and the uncertainty before and after the referendum.

In similar fashion, the US manufacturing PMI steamed higher in December to 54.7 – its highest reading for the year – driven by impressive hikes in new order growth to 60.2 and production to 60.3. Furthermore, construction spending climbed to US$ 1.18 trillion, its highest level in over 11 years, driven by a boost in private construction to a rate of US$ 893 billion.

Even Japan jumped on the bandwagon, with a manufacturing PMI reading of 52.4, up from November’s 51.3. Both production and new orders grew at their fastest rate in 2016. Its services sector also headed north with a December PMI score of 52.3 with new orders increasing at their quickest rate in 18 months with input prices maintaining their two-year highs. Caixin’s December survey, at a 53.4 reading, showed the country’s service sector was continuing its recent upward trend. The composite index at 53.5 was at its highest level in almost four years.

HH Sheikh Mohammed bin Rashid Al Maktoum launched the emirate’s latest mega project this week – Dubai Harbour. Encompassing DIMC, Logo Island and Skydive Dubai, and located adjacent to JBR, the 20 million sq ft Meraas project will incorporate a 3.5 million sq ft shopping mall, a cruise ship port, hotels, residential units and offices. It will also feature Dubai Lighthouse and will have a 1.45k berth marina and no doubt a place for Sittin’ On The Dock Of The Bay!

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