Dark Side Of The Moon

In the spirit of giving during the holy month of Ramadan, Damac Properties will give buyers of their latest launch – Aurum Villas – 1 kg of gold, valued in the region of US$ 41k. Located within an international golf community, villa prices will start at US$ 436k.

Sofitel’s largest ME hotel – the Sofitel Dubai Wafi – is to be built in collaboration with MKM Commercial Holdings LLC. The property, housing 511 keys, along with 97 (studio – 3 bedroom) serviced residences, will open in 2019.

Dubai Investments is planning to spend US$ 272 million on a 70-storey tower, overlooking Dubai Water Canal on SZR. Tenders will be released shortly and the project will be finalised by 2020.

It is reported that Nakheel will introduce three yet unnamed hotel brands into the local market within weeks. The developer has 4.3k hotel units, under operation and construction, and expects to double its investment portfolio to the same level as both its residential and retail leasing divisions.

In order to house its hospitality staff in one location, wasl Asset Management Group is building 3.9k residential units (ranging from shared rooms to 1-bedroom units). Encompassing 26 separate buildings, the development will be located in Warsan, within easy reach of many of its new hotels, due to open in the Expo 2020 area. Earlier in the year, the company launched its first three hotel projects – Hyatt Centric, Mandarin Oriental and MGM.

ACWA Power submitted the lowest of the four DEWA bids for the phase 4 tender of the Mohammed bin Rashid Al Maktoum Solar Park was US$ 0.945 per kW/h. The winning bidder for the 200 MW plant will complete the project by 2021.

Al Futtaim Automall is to open a 12k sq mt sales facility next month in DFC, with a 400-car capacity. The 17-year old company is the largest used car dealer in the country, with seven showrooms nationwide, including three in Dubai.

MAF is reportedly the front runner to acquire Geant in what could be a deal worth US$ 500 million. The supermarket, a franchise of French grocery retailer Casino Guichard-Perrachon SA, and operated by Dubai-based BMA International Group, has had a presence in the country since 2001 and operates throughout the GCC. It appears that Saudi Arabia’s Bindawood Holding is also showing interest.

A major Fortune 100 global health insurance and service company has opened its MENA regional centre in the DIFC. Cigna Corporation is expecting to grow its market in providing personal and local health service solutions.

DP World has opened a new terminal in its home base of Jebel Ali that will reduce the time needed to transfer containers and improve traffic flow within the port environs. Latest figures indicate that the port recorded a 5.7% volume hike in Q1 to 16.4 million containers.

The port operator has acquired Spain’s Reyser for an undisclosed amount (but probably under US$ 500 million). The maritime service company, with 151 vessels and agreements with 10 Spanish ports, is involved in harbour towage, mooring and bunkering. The Dubai company also has a major share in the Somaliland’s Berbera Port along with the local government who are reported considering giving 19% of its share to Ethiopia.

Growth in the UAE’s non-oil private sector activity slowed – to 54.1 from 56.1 in April – for the first time in six months, according to the headline Emirates NBD PMI. Although there was expansion of sorts in new orders, employment and output, input and selling prices dipped. Meanwhile, the Markit/CIPS services PMI also slipped from 55.8 to 53.8 in May.

On Wednesday the Chairman of China Construction Bank, Guo You, rang the opening Nasdaq Dubai bell, as the bank listed its second bond on the local bourse; the US$ 1.2 billion issue (following the first one last October for US$ 600 million) is part of CCB’s US$ 6 billion Medium Term Note Programme.

Arqaam Capital is to join forces with New York-based Marco Polo Securities Inc to help the broker market its products in Egypt. The 17-year old US dealer, with an extensive global network of securities firms, is involved in the trading of exchange listed securities along with private placements.

Because no agreement could be reached between GFH and the Dubai-based investment bank Shuaa Capital, the Bahraini firm has temporarily pulled out of further acquisition negotiations. On the news, shares in both firms fell – with Shuaa down 5.3% to US$ 0.39 and GFH by 4.7% to US$ 0.61.

In a surprise announcement, Emaar is planning to list, on the DFM, up to 30% of its real estate development business and to distribute the proceeds to shareholders. No date has been announced but it is likely that the IPO will occur before the end of the year and could be bigger than the Emaar Malls’ 15% placement in 2014.The developer’s value of properties sold but revenues not recognised stands at US$ 10.9 billion.

The DFM opened Sunday at 3352 and traded 1.4% higher this eventful week – closing on Thursday – 08 June – at 3400. Volumes were lower, closing on Thursday at 565 million shares, valued at US$ 132 million, (cf 615 million shares for US$ 243 million, the previous Thursday). Emaar Properties, following its midweek announcement about another IPO, jumped US$ 0.11 to US$ 2.07, whilst Arabtec remained flat at US$ 0.21.

By Thursday, Brent Crude, having shed 2.0% the previous week, traded down again US$ 2.77 (5.5%) to US$ 47.86, with gold again heading the other way, gaining US$ 10 to US$ 1,280 by 08 June 2017.

IATA reported a 3.1% increase in ME cargo for the year ended 31 March 2016. However, the world body has sobering news for the region, with a forecast that local airlines will post a 63.7% fall in 2017 profits to US$ 400 million – and this despite passenger demand rising 7.0% on the back of a 6.9% rise in capacity. On a global scale, the industry is expected to show a US$ 31.4 billion profit, with revenues climbing to US$ 743 billion.

Despite environmental opposition, the Queensland government has given final approval for the Indian company Adani to start work on the state’s mega US$ 12.3 billion Carmichael coal mine. The project, located in the Galilee Basin, will include six open-cut and three underground mines, covering an area of 250 sq km.

It is reported that the Big 4 accounting firm, KPMG, has written to some 500 UK retired and existing partners, with a warning that they could be liable for huge tax bills; the problem comes about with a 2010 disagreement between the firm and HM Revenue & Customs on the treatment (and eligible tax deductions) of an investment in one of its Middle East operations.

For the first time in eight years, the UK housing market has witnessed a fall in prices (of 0.2%, 0.3% and 0.4%) for three consecutive months, with the annual rate dropping to 2.1% – its lowest level in four years. The Nationwide figures also show that the average UK house price stands at US$ 269k. As inflation takes hold and consumer spending weakens, it is inevitable that house prices will continue to slow and a real fall in prices will only be averted by the fact that there is a shortage of properties on the market.

It seems that alcohol drinking is on a global decline, according to an International Wine and Spirits report which estimated that there was a 1.3% annual drop in all drinks – with worldwide consumption of beer, cider and wine 1.8%, 1.5% and 0.1% lower in 2016. UK wine drinkers have also been hit hard by Brexit, as the average price of a bottle in the 12 weeks to 25 March increased by 3.0% to reach US$ 7 – its highest price ever. The fall in sterling, rising inflation, allied with reduced consumer spending, and increasing costs are the drivers that will see the price of the 1.8 billion bottles consumed annually continue their upward trend.

With The Body Shop’s profits falling – estimated to drop from 2013’s equivalent figure of US$ 127 million and last year’s US$ 90 million to a forecast US$ 73 million – it would appear that the upcoming L’Oreal auction will struggle to reach its initial estimate of US$ 900 million; a figure of say US$ 600 million would be a more realistic target.

Australia’s junior telco, Vocus Group has seen its share value drop 70% since August and last month issued its second profit warning in six months. Now Kohlberg Kravis Robert has tabled a conditional US$ 2.5 billion takeover offer that would include debt of US$ 840 million; at this level, it represents a premium of 22%.

The RBS Shareholder Action Group seems to have lost its nerve by accepting a settlement with the bank of US$ 1.39 a share – considering that they had been duped in paying up to US$ 3.00 per share in 2008. The bank raised US$ 15.5 billion by these devious means and also received US$ 58.0 billion from the UK government in bailout funds; nine years later, the government still owns 70% of RBS.

Spanish banking giant Santander has paid US$ 1 in a deal that is expected to cost US$ 7.9 billion to save Banco Popular – a bank deemed to “fail or likely to fail” by the ECB. The bank had struggled after several property investments, totalling US$ 40 billion, turned bad, as the country’s economy imploded. Last year, the bank posted a US$ 3.9 billion loss.

Last Thursday, the Pakistani bourse, Asia’s best performing market in 2016, was upgraded to Emerging Markets Index from Frontier Markets status. To the surprise of many, and after a record high in late May, the exchange shed 8%, as US$ 500 million worth of shares were sold off but only US$ 450 million of foreign funds entered the market. Other factors involved were the inevitable profit-taking opportunity and uncertainty about the government’s upcoming budget that could include higher taxes on dividend payments.

China’s service sector continues its expansion push, with the latest Caixin PMI data posting a 1.3% month on month increase to a May reading of 52.8. At the same time, the composite index was three notches higher at 51.5.

Japan’s service sector also continues its recent improvement from April’s 52.2, with a May reading of 53.0 – its highest level in four years. The main driver appears to be a major boost in new work, resulting in an increase in job numbers. The composite index also jumped 8 notches to 53.4.

Australia has now gone 26 years without a recession, recording an 0.3% Q1 growth and 1.4% for the twelve months – its slowest rate since 2009. The expansion came despite falls in exports and housing investment, whilst the manufacturing sector decreased for the tenth quarter out of the past eleven. However, there was a dramatic April fall in the country’s trade balance surplus which fell month on month from US$ 2.4 billion to just US$ 0.4 billion, driven by an 8% drop (US$ 2.1 billion) in exports. The country may be struggling later in the year, if growth continues to slow and energy prices remain sluggish.

On the flip side – and not surprisingly the way the country appears to be run – South Africa has gone into recession, after two contractions of 0.3% in Q4 and 0.7% this quarter. The markets had expected Q1 growth of 0.9% but, with falls in both trade and manufacturing sectors, this was never going to happen. The economy will not be helped as it now has to borrow money at a higher rate following S&P and Fitch downgrading the country’s creditworthiness to junk status.

Although the US economy is still on track  to full employment – with the May unemployment rate again moving lower to 4.3%, its lowest level since 2001 – payroll numbers only increased by a disappointing 138k. Average hourly earnings of US$ 26.22 are 2.5% higher, year on year. Although this is but one indicator on the health of the US economy, there have been other data that indicate a weakening but officials are confident that this is a temporary blip.  For example, new orders tumbled resulting in a slowdown in the US services sector whilst the ISM’s non-manufacturing activity index lost 0.6 but was still at a high of 56.9. The pointers indicate a Fed rate hike of 0.25% next week.

The UAE was one of several countries, including Saudi Arabia and Bahrain, to cut ties with neighbor Qatar, accusing it of supporting terrorism. At the same time, postal links were severed and transport corridors in and out of the country were closed so that the country’s four airlines – Emirates, flydubai, Etihad and Air Arabia – have cancelled all flights with almost immediate effect. Furthermore, Qatari nationals have been given 15 days to leave the country with the same for UAE nationals in Qatar. It is probably too early to ascertain the economic impact of these moves but in the short-term, Qatar will have problems importing food and other essentials. As the rial fell 1% on Wednesday – its lowest level in 11 years – S&P downgraded the country’s credit rating to AA- from AA.

On the back of an improving global economic environment, UK manufacturing remains buoyant with exports still getting the benefit of a weak pound, as companies report improving output and new orders. Another positive driver is the fact that since exports become more expensive, domestic consumers may focus more on locally produced merchandise. However, there are challenges ahead for the UK economy with sluggish real wages growth having a possible negative impact on household income and spend and any fall-out from a hard Brexit.

A revised OECD report has indicted that this year’s global economic growth will be 3.5% with 3.8% expected in 2018. The UK’s forecast is a markedly lower 1.6% and an even lower 1.0% next year. The agency’s rationale is based on the uncertainty in relation to Brexit and sluggish consumer spending resulting from higher prices and lower real wages.

This data was available prior to the general election, with a hung parliament all but certain by late Thursday. Sterling will wobble but the volatility seen last year after the Brexit referendum is unlikely to be repeated. There are very few winners in this debacle but the big loser has to be the Prime Minister, Theresa May, who called an unnecessary election and seemed a disinterested observer over the past month. Almost certain to lose her job, she is now looking at The Dark Side Of The Moon.

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