Big Yellow Taxi

Work has started on an Al Futtaim 78.5k sq mt “smart mall”, part of phase 1 of the upcoming Wasl Gate development, located near the Ibn Battuta Mall.  With a 55k sq mt leasable space, it will have 100 outlets, with the anchor stores being the country’s 4th Ikea, covering 30k sq mt, and Ace (4k sq mt). The mall, with parking for 2k vehicles, will be completed within two years but the whole development, which will eventually have 25k residents and a 23 hectare central park, will be a15-year project.

Al Futtaim Carillion will be the main contractor for a US$ 600 million project to develop three Expo site districts, housing 136 pavilions. This is the first major contract awarded for the event, with a further US$ 2.4 billion of construction work still to be let.

It seems that work may have already started on the Hyperloop which will eventually cut the travelling time between Dubai and Abu Dhabi to just 12 minutes. The futuristic transport system uses magnets to levitate pods inside an almost 100% vacuum tube, so that speeds of over 1k kph can be reached. The US-based company estimates that it would save inter alia US$ 800 million in lost working hours but that seems to be a very conservative estimate.

Dubai’s first ever stone villas are to be built, with units ranging from 1 to 4 bedrooms, with starting prices at US$ 293k. Hajar Villas is a concept by developers, MAC Properties.

An agreement between Dubai Holding and Dubai Municipality will see the establishment of the region’s largest public park at 1.43 million sq mt. Increasing the emirate’s public space by 17%, the park will have a myriad of attractions, including 45 sports grounds, five major event arenas, 30 km of walkways, 20 km of jogging tracks, 14 km for cyclists and 7 km of nature trails. Work on the 318k sq mt phase 1 will commence this year.

DAFZA, which accounts for 9% of Dubai’s non-oil trade (US$30.0 billion), reported a 32% hike in multinational companies using the free zone in 2016. Almost half of that number emanates from three sectors – IT/telecoms account for 27% of the total, followed by consumer products (10%) and engineering/aviation contributing 9%.

It is estimated that the UAE maritime industry is worth US$ 16.3 billion, with Dubai the busiest Gulf port, as has been the case for over a century. With a 2 million sq ft freezone soon to open in Maritime City, and further expansion plans at Jebel Ali, this sector will continue to act as a lifeline for Dubai’s well-being. Currently, the sector adds 4.6% to the emirate’s GDP (equating to US$ 3.9 billion) – a figure that is set to show robust growth.

A big win this week for DP World with the announcement that The Alliance – comprising Hapag-Lloyd, K-Line, MOL, NYK Line and Yang Ming – has chosen to use their Southampton and London Gateway facilities on its transatlantic and Asia-Europe lines. This 5-group consortium accounts for 18% of the global container shipping fleet.

As economic indicators continue to head north, the Minister of Economy, HE Sultan bin Saeed Al Mansouri, has indicated that the UAE economy could grow by up to 4% this year. As prices continue to nudge higher, the country will benefit with 30% of the economy being reliant on the oil sector. In tandem, the non-oil sector will move higher as the economy stabilises and reaps the benefits of major Expo capital investment and improving indicators.

Etisalat reported that it would be spending more than US$ 817 million to develop the country’s infrastructure and expand mobile and fibre optic networks. The UAE boasts the highest fibre to the home (FTTH) penetration, at 93.7%, of any other country, whilst its 3G network coverage and 4G LTE are in excess of 99% and 95%.

To the surprise of some, the February Emirates NBD Purchasing Managers’ Index jumped 7 notches to 56 – its highest level in 18 months; the main drivers appear to be a marked expansion of output to 63 and inflows of new work at 59.9. With the economy picking up in Dubai’s non-oil private sector, companies have apparently been hiring and purchasing more. With oil prices creeping higher and the prospect of major Expo contracts in the offing, business confidence is looking up.

To ensure that UAE financial institutions have an adequate capital base, the Central Bank has issued new rules in line with the Basel Committee on Banking Supervision in Basel III. The regulations are complicated but banks have to ensure that their common equity Tier 1 is a minimum of 7.0% of their risk weighted assets and Tier 1 capital at least 8.5% of RWA. Even ratings agency, Fitch, said that the UAE banks were able to comfortably meet these new capital adequacy rates.

Emaar Properties’ shares plummeted 3.3% to US$ 2.02 on news that the developer was maintaining a 15% cash dividend, unchanged from 2015. The company is also to propose a share capital increase and a plan to introduce an employee sharing scheme at their upcoming AGM.

In contrast, Mashreq shareholders will be happy with a 40% (US$ 10.90) cash dividend, with the bank paying out a total of US$ 193 million, despite a 19.6% fall in 2016 profits to US$ 526 million.

The DFM opened Sunday at 3584 and sank even lower, 1.8% down on Thursday (09 March 2017) at 3520. Volumes still remain at low levels, closing the day at 221 million shares, valued at US$ 139 million, (cf 360 million shares for US$ 175 million, the previous Thursday). Emaar Properties traded US$ 0.08 lower, to US$ 2.00, with Arabtec, remaining flat at US$ 0.25.

By Thursday, Brent Crude was US$ 3.71 lower (6.4%) to close on US$ 52.19, with gold also heading down (US$ 30) to US$ 1,203 by 09 March 2017.

Wednesday had seen its price fall 5% – its largest one day drop in a year and this despite top oil ministers at a Houston meeting trying to reassure the world that their November output deal was working. Furthermore, a large build up in US crude inventories of 8.2 million barrels, along with reports of rebounding shale output, spooked the market. For the first time since 1979, Iran’s oil exports topped three million bpd, as its daily output heads towards four million bpd, with a five million target by 2021.

Analysts estimate that next year’s IPO could value Saudi Aramco as high as US$ 1.5 trillion, whilst Deputy Crown Prince Mohammed bin Salman is more bullish at US$ 2 trillion. Either way, it will be the world’s largest IPO, as the government sells 5% of the asset. The Saudi conglomerate has also agreed to pay Royal Dutch Shell US$ 2.2 billion, as it takes over full ownership of the Motiva Enterprises’ name and legal entity.

As January capacity showed a 3.3% seasonally adjusted increase, IATA reported that ME carriers’ cargo volumes were 8.4% higher. Although lower than the double digit growth, prevalent for the past decade, the figures were still higher than the 6.9% global average.

It has been reported that Uber has been using “dirty tricks” to fool authorities around the world to stop them closing the ride-hailing app in certain jurisdictions. The company used a program named Greyball that was able to help in discovering officials who were trying to clamp down on its activities so that ride-hailing service could take preventive measures. Days after defending the system earlier, Uber has now decided to ban the secret software.

GM announced details of the proposed sale of its loss-making Vauxhall/Opel operations to PSA, the French company, which owns Peugeot/Citroen. This could be bad news for the UK economy with 4.5k jobs in the balance at plants in Luton and Ellesmere Port. If the US$ 2.3 billion deal goes ahead, then PSA will overtake Renault to become Europe’s second largest car-maker behind the world leader, Volkswagen.

In Australia, the chief executives of the four major banks – ANZ, CBA, NAB and Westpac – have been hauled in front of a House of Representatives standing committee to explain why the banks had not passed on an August 2016 central bank interest rate cut. Much ducking and weaving is bound to ensue.

Troubled Deutsche Bank is making several strategic changes in an attempt to recover from its recent losses, including US$ 1.5 billion in 2016. These measures incorporate an US$ 8.5 billion rights issue (pricing the shares at US$ 12.31, a 39% discount on last Friday’s close), an IPO of a minority stake in its asset management business, possibly worth US$ 8.5 billion, and remerging its corporate finance business and trading activities.

Latest retail figures from the UK indicate that Aldi and Lidl recorded  12.0% and 9.1% year on year increases in February sales, compared to the overall market average of just 2.2%. The two German retailers now account for 12.3% of the country’s market share, with this set to grow again this year to the dismay of the traditional Big Four – Tesco, Asda, Sainsbury’s and Morrisons. The latter, the country’s fourth largest supermarket, and currently outperforming its three main rivals, has returned to sales growth for the first time in five years, with 2016 profits up 50% to US$ 395 million.

In 2012, Schlecker, the German retail pharmacy giant, with 50k employees, went bankrupt. Now its head, Anton Schlecker, has gone on trial, accused of syphoning off US$ 21 million for personal use, despite knowing that the company was going under.

In a proposed US$ 4.6 billion merger, Standard Life Plc is in discussions with Aberdeen Asset Management Plc that would see the new entity overseeing funds of over US$ 811 billion. If the deal were to go ahead, Standard Life investors would own 66.7% of the combined group, valued at US$ 13.4 billion.

Having acquired the UK tech firm, ARM Holdings, last year, for US$ 29.2 billion, it appears that Japan’s Softbank is to offload a 25% stake to a Saudi-backed investment group.

The third biggest cereal maker in the US, Post Holdings, whose brands include Golden Crisp and Cocoa Pebbles, is ready to pay US$ 1.8 billion to acquire Weetabix, the UK’s second biggest cereal maker after Kellogg’s. The only other company interested in the sale is its majority shareholder, China’s Bright Food.

The OECD is the latest global organisation that sees an improvement in the worldwide economy, indicating a “modest” recovery to 3.3% and 3.6% over the next two years. However, it warns that significant risks – including exchange rate volatility and external shocks – could pose problems in middle income and developing countries. Interestingly, its biggest adjustment was for the UK which should see growth up 0.4% to 1.6% this year; this is not as optimistic as Philip Hammond. In his Wednesday budget, the Chancellor reiterated that the economy had “continued to confound the commentators” and expected this year’s growth to reach 2.0%.

With the Australian mining boom a distant memory, it seems that agriculture is once again front stage. In Q4, there was an 8.3% growth in agriculture, forestry and fishing production, compared to 3.4% recorded by mining. It is estimated that the sector’s annual production will reach a record high of US$ 48.4 billion – nearly 18% higher than the five year average to 2016. Exports are expected to top US$ 37.0 billion.

Figures from Eurostat showed the eurozone economy finally stabilising in Q4, with 0.4% growth, the same as Q3 – and 1.7% on an annual basis. Both exports and imports recorded increases of 1.5% and 2.0% respectively. The 28-country EU economy also reported a 0.5% Q4 growth and 1.9% for the 12 months.

Germany is going through a rocky patch, with January factory orders recording their biggest fall in over eight years decreasing on the month by 7.4%; local orders plummeted by 10.5%, with foreign orders faring better but still down 4.9%. There is an obvious lag between the recent upbeat economic indicators and what is actually happening on the shop floor.

Dragged down by a poor performance from Airbus, France posted its biggest ever trade deficit in January. Following a 6.6% hike last year to US$ 50.8 billion, January saw a massive US$ 8.3 billion gap as the country’s exports fell 7.7%, whilst imports went in the other direction by 2.9%.

Brazil continues in the doldrums posting a worrying 3.6% GDP contraction last year, resulting in an economy that has slipped 8.0% over the past two years. Unemployment levels have soared by 76% since 2014, with the current rate at 12.6%, equating to 12.9 million. Investor confidence is at rock bottom, mainly because of rampant corruption, political scandals and lower commodity prices, allied with the global economic slowdown.

With the US weekly 25 February jobless application rate falling 19k to 223k, this was the country’s lowest number since 1973. – an indicator that the employment market is in rude health. Economists are happy with a figure of 300k – a level that is seen to be in line with a healthy labour sector. Initial reports are that in February, the economy generated 175k new jobs, compared to 225k a month earlier, and the unemployment rate edged lower to 4.7%.

However, January’s trade deficit widened by the most in nearly five years – by 9.5% to US$ 48.5 billion. Imports were 2.3% higher at US$ 65.6 billion, as exports rose at the lower rate of 0.6% to US$ 192.1 billion. It is expected that over the next quarter, exports will expand at a stronger rate.

Japan’s Q4 grew by 0.3% and only 1.2% on an annual basis but the economy has expanded for four straight quarters for the first time in over three years. The country’s current account surplus sank 88.9% to US$ 574 million, well down on the US$ 2.4 billion forecast. Annual exports and imports both rose – by 2.9% to US$ 48.4 billion and 10.0% to US$ 55.8 billion respectively – to give a trade deficit of US$ 7.4 billion. Overall bank lending was up 2.8%, compared to a year earlier, at US$ 4.48 trillion.

At Sunday’s National People’s Congress, Chinese Premier Li Keqiang introduced a raft of measures to attract increased overseas funding into the local economy. In future, more service industries, manufacturing and mining will be able to enter the Chinese market and be treated the same as domestic firms, when it comes to licence applications, government procuring etc. After a lull in foreign direct investment, which has seen India attracting more funds, inflows have improved, rising 4.1% last year to US$ 118 billion. This year’s growth is expected to come in at 6.5% down from 6.7% in 2016 which was the lowest return in over 25 years. The country is also having trouble maintaining the yuan at below 7 to the US$ and so far has expended over US$ 1 trillion in keeping the currency around that level. In February, it posted its first trade deficit – at US$ 9.2 billion – in three years, as imports jumped 38.1%, with exports falling by 1.3%.

A Singaporean study has concluded that a yellow taxi is safer to drive  than a blue one, with six fewer accidents per 1k taxis each month than their blue counterparts. The three-year study concluded that colour visibility plays an important role in traffic safety. On average, the country’s 12.5k blue taxis had 71.7 monthly accidents per 1k taxis per month, compared to 65.6 for their yellow equivalent vehicles. How long before the RTA change their vehicle colours from beige to yellow and we have a city of Big Yellow Taxis?

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