All The Right Friends

HH Sheikh Mohammed bin Rashid Al Maktoum has laid the foundation stone for the Meydan One mega project, expected to be finished by 2020. The focal points of the project will be the world’s largest dancing water fountain, at 400m high and 100 mt wide, and the 30k sq mt mall, with a retractable roof. Meydan Mall One will have 529 outlets, including a 11.2k sq mt hypermarket and two major department stores, along with a variety of sports venues and a 1km ski slope – the longest indoor one in the world.

His son, Sheikh Hamdan Bin Mohammad Bin Rashid Al Maktoum, Dubai’s Crown Prince, has introduced a low-income housing policy. Its two main programmes will incorporate increased cooperation with developers to construct such units and a renovation of some of the emirate’s older areas to house this sector of the market.

This week, Sheikh Hamdan also visited the new SAP MENA HQ at which the software maker announced a US$ 200 million, five-year investment plan for the country. It also confirmed the establishment of its first SAP Cloud Data Centre and launched its first COIL (Co-Innovation Lab) in the UAE – its 15th such facility globally.

State-owned China Railway Engineering Corporation has opened a regional office in Dubai and, along with China State Construction Engineering Corporation, the emirate can boast that it hosts the world’s two biggest contractors – a sure testament that these players see a bright future in Dubai and the region.

Emaar has launched the sale of its Vida Residences Dubai Marina properties, comprising 360 1-4 bedroom units, located on floors 14-56 of the new tower. Residents will have access to the Vida Dubai Marina Hotel and Yacht Club.

The third phase of MAG 5 Boulevard community has been released this week, with prices starting at US$ 84k for studios to US$ 139k for 2-bedroom units. This is G5 Property Development’s first project in Dubai South and it expects phases 1 and 2 to be handed over by the end of 2018 and phase 3 in Q2 2019.

Deyaar is currently carrying out an estimated US$ 736 million amount of work at its four Dubai sites; these are the US$ 267 million Atria in Business Bay, the US$ 120 million triple tower Mont Rose in Barsha South, a US$ 114 million Barsha hotel and US$ 233 million on two Midtown projects. The developer also has about 5.7 million sq ft of potential new projects, comprising 3 million sq ft in various stages of design and 2.7 million sq ft at Dubai South.

STR’s February 2017 Pipeline Report indicates that Dubai has a total of 19.6k rooms and 64 projects in its hotel construction pipeline, whilst the total in the whole of the Middle East is 153.5k rooms and 540 properties.

No longer will the country’s bank notes originate from either the UK or France, as HH Sheikh Mohammed bin Rashid Al Maktoum opened the country’s first banknote printing plant, with the Dubal ruler handed the first note, bearing the number 1. Oumolat Security Printing hope that the company will win contracts to print notes for all the region’s central banks.

A Dutch transport company, 2getthere, has joined forces with Abu Dhabi’s United Technical Services to provide 25 vehicles to move passengers from Bluewaters Island to the Metro. These driverless vehicles will carry 24 passengers and run on a specially built 2.4km track, with an hourly capacity of 2.5k passengers. No financial information was available but the network will be operational by the end of 2018.

In association with both ConsenSys and IBM, Smart Dubai expects to go live early next year with several projects based on Blockchain technology. This is the focal point of last October’s Dubai Blockchain Strategy which aimed to ensure that all government entities would be using this technology by 2020. When fully implemented, it is expected to save an impressive 25 million annual productivity hours.

According to Mercer’s Quality of Living Survey, Dubai came in at a surprisingly low 74th, when it comes to global quality of living; however, it maintained its position as the leading country in the region. Vienna, Zurich and Auckland topped the survey of 231 cities, with Sana’a, Bangui and Baghdad bringing up the rear.

Dubai Investments has sold a group of ten warehousing facilities (with a built-up area of 1.2 million sq ft) to Arcapita for about US$ 150 million, bringing the Bahraini company’s total UAE portfolio to US$ 250 million.

Dubai Silicon Oasis Authority posted a 9.4% hike in 2016 recurring revenue to US$ 141 million as profit jumped 27.7% to US$ 64 million.  During the year, the number of operating companies rose 10.4% to 2.12k, of which 78.0% were in the IT sector.

On Wednesday, Panalpina, the leading global supply chain solutions provider, opened a 40k sq mt facility in Dubai South. This centre is the Swiss company’s largest logistics and manufacturing facility.

Dubai Aerospace Enterprise has purchased more  ATR 72-600 aircraft from GE Capital Aviation Services, bringing its total of owned and committed of this model to 57, and its total fleet portfolio to 126; these include 26 Boeing 737s, 14 777s, 3 A350s and 26 smaller Airbus aircraft. Its impressive client list includes the likes of Emirates, Oman Air, SAS and 29 other airlines.

Latest UAE figures, for the first nine months of 2016, show national non-oil commodity exports 5.7% higher at US$ 35.1 billion, with the figure for total foreign trade 2.8% up at US$ 221.7 billion. Of that total, imports, at US$ 141.9 billion, were 3.4% higher with reexported commodities 1.2% down, at US$ 44.7 billion. There was a slight 0.5% drop in Dubai’s 2016 non-oil foreign trade to US$ 347.7 billion, with the “usual suspects” – telecommunications, gold and diamonds – being the three most traded commodities.

Dubai-listed Shuaa Capital is to purchase two financial services firms – Integrated Capital and Integrated Securities – from its 48.3% major shareholder, Abu Dhabi Financial Group. No financial details have been released and the sale is subject to regulatory approval. Even though the firm is recovering from losses over the past two years of US$ 36 million and US$ 52 million, the market reacted favourably with its shares up 14.7% on the day to US$ 0.51. It is also reported that the Dubai company is in talks about a possible merger with Bahrain’s Global Finance House that would form an investment bank with US$ 3.7 billion of assets. (ADFG is the biggest shareholder of both companies).

Following the Fed’s much anticipated 0.25% rate hike, the UAE Central Bank followed suit by raising the Repo Rate, applicable to borrowing short-term liquidity from CBUAE against Certificates of Deposits, by 25 basis points to 1.25%.

With a US$ 100 million sukuk maturing next week, as well as another US$ 650 equivalent due in 2019, Damac is looking to banks for a US$-denominated sale; no figures were available. Also in the funding market, Majid Al Futtaim has obtained a US$ 1 billion syndicated loan – a five-year revolving credit facility. Some of the loan could be utilised to finance existing debt.

Al Mal Capital acquired a further tranche of Amanat Holding shares, equivalent to 1.56% of total capital, bringing its total portfolio to 214 million shares, or 8.55% equity share. Amanat reported a 24.1% fall in 2016 profits to US$ 10 million, with Q4 down 96.2%.

The DFM opened Sunday at 3520 and ended the week flat, down only 1 point, by Thursday (16 March 2017) at 3521. Volumes strengthened over the week, closing on Thursday at 592 million shares, valued at US$ 181 million, (cf 221 million shares for US$ 139 million, the previous Thursday). Emaar Properties regained half of its previous week’s loss, US$ 0.04 higher, to US$ 2.04, with Arabtec’s problems going from bad to worse, down US$ 0.01 at US$ 0.24; so far in 2017, it has lost 33.82% of its share value.

By Thursday, Brent Crude was US$ 0.45 lower (0.9%) to close on US$ 51.74, with gold heading in the opposite direction, up 2.0% (US$ 24) to US$ 1,227 by 16 March 2017.

The cost of moving away from fossil fuels to renewable energy does not come cheap as E.On has discovered. Over the past two years, the German energy giant has reported losses of US$ 6.7 billion and, more recently, in 2016, US$ 17.0 billion of which there was a US$ 13.8 billion impairment on the value of its power business Uniper and US$ 2.3 billion towards phasing out its nuclear energy programme.

The Scottish Wood Group has acquired Amec Foster Wheeler, a consultancy, engineering and project management services company, with 40K employees, for US$ 2.7 billion. The company, a big player in the energy sector accounting for more than 50% of its business, has been badly hit by falling oil prices.

One of UK’s biggest warehouse owners, Logicor, is considering a London stock market listing that would value the company at US$ 13.4 billion. The 5-year old firm, that is controlled by the private equity group, Blackstone, owns 600 warehouses and has Amazon as a major client.

As part of its US$ 2.4 billion investment plan, Vodaphone is expected to create 2.1k UK customer service jobs over the next two years.

China Investment Corporation has subscribed to about 10% of a US$ 1.3 billion Airbnb funding round – a probable precursor to a fully-fledged IPO by the end of the year; the nine-year old company could be valued on the other side of US$ 40 billion which compares favourably to the likes of Twitter at US$ 14.5 billion and Snapchat’s US$ 31 billion.

Toshiba has still not released their 2016 results, largely because of finalising its possible US$ 6.3 billion write-down in relation to its majority shareholding in the much-troubled US nuclear unit Westinghouse. This sector accounts for about a third of the Japanese conglomerate’s revenue but has not made a profit since 2013 and is experiencing huge cost over-runs. Now with some of its assets being worth a lot less than initially estimated, it is thought that the company, whose share value has halved since December, may want to exit.

A BBC investigation has found that some Eastern European lorry drivers, working for haulage companies that carry out contract work for major retailers,  live inside their cabs for months and earn as little as US$ 4 per hour (or US$ 512 per month). One of the retailers, Ikea, has expressed that it was “saddened by the testimonies” of the drivers. It is noted that Danish drivers would be earning at least four times this figure. So much for the EU ruling that a driver, posted temporarily away from home, should be ”guaranteed” the host nation’s ”minimum rates of pay” and conditions.

In a novel way – and a sign on how the financial world is changing – Elon Musk has promised the South Australian government that he could fix its power problems within 100 days; the Tesla boss has intimated that he could build and install a 100MWh battery farm which would see an end to the state’s recent blackouts.

Australian February employment figures were down on analysts’ expectations, with the jobless rate up two notches to 5.9%, including a 33.5k fall in the number of part-time workers. This resulted in the underemployment rate – people looking for more work – jumping to 8.7%, a record high equating to 1.1 million workers.

Charlotte Hogg made the simple mistake of not disclosing that her brother was a Barclays employee and this has cost her the job as the Bank of England’s deputy governor for markets and banking. For the past four years, she had been the central bank’s chief operating officer and it was felt by a Treasury Committee that because of this omission, she had fallen “short of the very high standards” required.

Latest figures from the UK indicate that house prices expanded at their fastest rate in twelve months in February.  The 0.6% hike (compared to 0.3% in January) took the average UK house price to US$ 361k, whilst the average house price growth came in at 2.4% – its lowest level since 2013.

There was mixed news on UK’s employment figures with the three months to January witnessing an unemployment level of 4.7% (1.58 million) – its lowest level since 1975; on the flip side, wage growth at 2.2% was down 0.4%, quarter on quarter, but this is still higher than the current 1.8% inflation level. This slightly disappointing figure was the catalyst for the Bank of England keeping rates unchanged at 0.25% at Thursday’s Monetary Policy Committee meeting but surprisingly the decision was not unanimous, with one member voting the other way. This was enough to push both sterling higher to US$ 1.236 and the FTSE 100 to a new record high of 7443.

With the US Department of Labour announcing that 235k new jobs (of which 58k were in the construction sector) were created last month, it put to bed any lingering doubts that the Fed would not hike rates this month. (This was duly done on Wednesday, with a 0.25% push to 0.75%). Furthermore, the unemployment rate slipped lower to 4.7% and over the past twelve months, 2 million jobs have been added to the country’s payroll.

Zhou Xiaochuan, governor of the Central Bank, has reiterated that Chinese corporate debt levels are too high. The government is aiming to introduce painful reforms and measures to curb debt and housing risks, following years of easy money. Whether this is done remains to be seen.

There were some favourable numbers coming out of China this week. For the first two months of the year, most indicators headed north including fixed asset investment at 8.9%, factory output (6.3%) and retail sales – 9.5%. After several years of tepid growth, 2016 private investment increased from 3.2% to 6.7%, year on year – an indicator that there could be a turnaround as private investment accounts for 60% of overall domestic investment. 2017 growth is expected to come in at 6.5%, down from last year’s 6.7% which was China’s slowest pace of expansion in 25 years.

The country’s administration is also keen to clamp down on the outflow of money – and what is known as “irrational investments” – which has been draining its forex reserves and this has been further exacerbated by a slowing and transforming economy. The government is advising companies to be more selective in the choice of overseas investments and the prices that are being paid; a classic example is the US$ 43 billion bid by ChemChina for Switzerland’s Syngenta.

Earlier in the week, the Saudi Deputy Crown Prince Mohammed bin Salman met with President Trump which was his first meeting with a senior diplomat from a Muslim majority country. Following the meeting, Prince Mohammed indicated his satisfaction “with the positive attitude and clarifications he heard from President Trump about his stance on Islam”. Furthermore, he considered him a true friend of Muslims, who will serve the Muslim World. Likewise, if and when the US President placates the likes of Vladimir Putin and Li Keqiang, the world will be in a better place as he reaches out to make All The Right Friends.

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