Bend Me, Shape Me (Anyway You Want Me)

Dubai has come up with another global first – this time a collective-endowment park, established by the Mohammed Bin Rashid Global Centre for Endowment Consultancy and Dubai Municipality. Located in Mushrif Park, it will include a not-for-profit date-packing factory that will produce up to 150 tonnes of dates grown from trees donated by the UAE community; net proceeds will be given to charity for the needier sector, in line with a 125-year old Hatta tradition of endowing palms.

With the onerous buying conditions (including up to 30% cash deposit and other fees) still in place for completed properties, many potential expat buyers are turning to off-plan developers. In the current economic climate, they are being offered attractive conditions, including low upfront fees and a greater selection of properties. The two major players – Emaar and Damac – reported Q1 sales increases of 44% to US$ 1.6 billion and 11% to US$ 600 million respectively.

Last month, Ellington Properties completed its first ever Dubai development – Belgravia – in JVC and has now launched Eaton Place in the same location; this project will comprise 1 and 2 bedroom units, along with a pool courtyard.

Progress Constructions has been appointed by Jumeirah Golf Estates as contractor to build 95 2/3 bedroom units and a retail centre for its mid-range Alandalus development, with completion slated within 15 months. The community will also include 715 apartments, a hotel and its second golf club house.

A week after its chairman, Kabir Mulchandani, announced FIVE Holdings as the region’s first hospitality-focused real estate investment trust, (which included its existing Viceroy Palm Jumeirah, Viceroy Jumeirah Village, due to open next year, and two projects at the development stage), the company has taken over the running of the Palm property. Its CEO, Aloki Batra, indicated that most of the commercial benefits are taken by the operators, at the expense of the developer. The company also announced the establishment of a new hotel brand – FIVE Hotels & Resorts – which will run all four properties, valued at a total of US$ 2 billion.

In less than three years, Danube Properties has already released eight developments with more on the horizon. The property development company, an offshoot of the successful building materials group founded by Rizwan Sajan is now considering an entree into the hospitality sector. The founder has ruled out his company going public in the foreseeable future.

Damac Properties has been appointed by the Omani government to develop Port Sultan Qaboos in Muscat. This will be the Dubai developer’s first foray in that country but it has had prior experience in Lebanon, Qatar and Saudi Arabia. The US$ 1 billion, 10-year, development will be in four phases, with the initial one completed by 2020. Damac has already handed over 18.5k residential units, over the past decade, and has a further 44k under development.

The RTA confirmed that autonomous air taxis will be trialled in Q4, later than the original Q3 plan because of the need to obtain all the required safety approvals. The German-made Volocopter can fly for up to 30 minutes, at a speed of 100 kph, and is equipped with nine independent battery systems (and an emergency parachute).

The government-controlled Dubai Aerospace Enterprise, which recently acquired Ireland’s aircraft lessor, AWAS, is planning to issue bonds, totalling US$ 2 billion, to part finance the deal. With this take-over, the Dubai aircraft leasing and maintenance company will have a fleet of almost 400 planes, with a book value in excess of US$ 14 billion.

The country’s first 3D printing facility has been launched. Immensa Technologies Labs uses eight 3D printing systems, offering 30 materials for production for use in a gamut of industries.

GEMS Education, which operates over 250 schools in 14 countries, is reportedly considering a London IPO that could value the private school operator at some US$ 4 billion. Among its backers are Bahrain’s Mumtalakat Holding Co, Blackstone and Fajr Capital Ltd.

DP World and the Kazakhstan government have signed two agreements with the aim of improving the ease of doing business there, including the introduction of paperless systems to speed up processes. The country is at a prime location when it comes to China’s One Belt, One Road initiative.

Dubai’s CPI was 2.26% higher in May than a year earlier but 0.22% lower than April’s return. Although there was an 11.7% hike in the goods/services sector, there were minor falls in transport (0.30%) and 0.26% in the hospitality sector.

Inflation is one of the main reasons why Dubai is becoming more expensive, as it moves up one place to 20th in the latest Mercer’s Cost of Living Survey; Abu Dhabi is ranked 23rd of 200 global cities surveyed. The five most expensive locations were Luanda, Hong Kong, Tokyo, Zurich and Singapore.

The UAE is number one in the world, as ranked in the Efficiency of Customs Procedures Index by the Swiss Global Competitiveness Center of the International Institute for Administrative Development. The ranking is based on some 346 indices that gauge the efficiency of customs resource management in 63 countries.

During the first five months of the year, the UAE Clearing Cheque System handled 12.9 million cheques, with a total value in excess of US$ 175 billion. Of that total, US$ 7.9 billion, equating to 4.5%, were bounced – well down on the 7.3% reported a year earlier. It is still a criminal matter in this country if cheques are bounced and those perpetrators could easily find themselves incarcerated.

Troubled Drake & Scull is still planning to reduce its capital base by 75% in Q3. This will be partly offset by a US$ 136 million cash injection by its principal stakeholder, Tabarak Investment, which after acquiring the shares of former chief executive Khaldoun Tabari, now owns almost 20% of the Dubai-based contractor. The company also hopes to improve cash flow by chasing up US$ 272 million of debts, here and in Saudi Arabia, restructuring payments with creditors and even probably tapping into the bond market.

The DFM opened Sunday at 3459 and traded 1.6% lower at 3402 by the end of the week. Volumes were markedly down, closing on Thursday, 22 June, at 350 million shares, valued at US$ 128 million, (cf 565 million shares for US$ 132 million, the previous Thursday). Emaar Properties fell US$ 0.03 (having gained US$ 0.22 the previous two weeks) to US$ 2.15, with Arabtec also down by US$ 0.01 to US$ 0.20.The bourse will be closed all next week because of the Eid Al Fitr holiday and will reopen on 02 July.

By Thursday, Brent Crude, having shed almost 10% over the previous three weeks, was yet again in negative territory down US$ 0.98 (3.5%) to US$ 45.22, with gold nudging lower by US$ 6 to US$ 1,249 by 22 June 2017. Growing US output appears to be taking up the slack from the recent OPEC production quota cuts and this is weighing heavily on downward prices. Last week, there was a 2.5 million barrel decrease in US crude oil supplies, compared to a week earlier.

Following recent problems around the company and an investigation headed by former US Attorney General, Eric Holder, it was no surprise that Uber’s CEO and co-founder, Travis Kalanick, has resigned; his position was not helped by the fact that five of the company’s major investors called for his head. Being the major shareholder, he still retains his position on the Board.

Ford may have just upset Donald Trump with their decision to move its Focus model production to China in 2019 after, earlier in the year, scrapping plans to produce in Mexico. The auto-maker has seen flat sales of the model in the US, as local demand still prefers larger vehicles, and has indicated that  the move will save US$ 500 million and that there would be no US lay-offs emanating from this decision.

UK’s Competition and Markets Authority has given the green light to the US$ 14 billion merger between Standard Life and Aberdeen Asset Management. It is expected that there will be an 8.2% decrease in payroll numbers to 9k but the new entity – Standard Life Aberdeen – will cut costs by US$ 254 million; it will also become Europe’s second biggest fund manager, with assets of US$ 850 billion.

The former chief executive of Barclays has resigned as an independent director of mining giant, Rio Tinto. John Varley headed the bank that has been investigated by the Serious Fraud Squad and is also one of the four executives charged by the agency for their roles in acquiring funds to keep the bank afloat at the time of the GFC.

After six problematic years, Egypt’s economy seems to be on the mend, with news that Q3 growth was at 4.3%, year on year, driven by marked expansions in sectors such as communications, manufacturing and tourism (with numbers up 106% to 14.2 million and revenue by 128% to US$ 1.3 billion), and also helped by a recent US$ 12 billion IMF loan. For the first nine months of the fiscal year, the country posted an US$ 11 billion balance of payments surplus and its budget deficit fell 1.0% to 8.4%. Although high inflation remains a problem, the country’s exports have become more competitive since the Egypt floated its currency last November, resulting in its halving in value.

Yet again, Chinese authorities are voicing concerns about the country’s major financial institutions acquiring overseas trophy assets and are trying to stem the flow of money overseas.  The fact is that 2016 overseas investments topped US$ 225 billion which in turn depleted the country’s forex reserves and increased pressure on the renminbi. Regulators are analysing deals by the country’s five major players – Anbang Insurance, Dalian Wanda, Fosun International, HNA and Zhejiang Luosen. This week, shares in Fosun (that owns Wolverhampton Wanderers) and HNA (that owns Swissport, Gate Gourmet and 25% of Hilton) fell by 6% on Thursday, as news of government concerns on loan exposures gained traction.

It has not been a good time for Japan’s Prime Minister, Shinzo Abe, as he faces mounting criticism involving approval of a veterinary school, run by a friend, to be in a special state run economic zone. As his ratings took a tumble to 36%, he has vowed to take steps to regain public confidence which will see a cabinet reshuffle in the coming weeks. The economy dipped in May as the merchandise trade deficit of US$ 1.82 billion, was well off market expectations of a US$ 389 million surplus; exports climbed 14.9% (against a 16.0% forecast), year on year, but imports came in higher at 17.8% – compared to a forecast 14.5%.

Because of exports falling faster (at 2.1%) than its imports (0.8%), the euro area trade surplus disappointed the market by falling 11.7%, month on month, to US$ 24.8 billion. Headline inflation fell in May from 1.9% (a month earlier) to 1.4%, mainly driven by lower energy prices, and is still some way off the 2.0% ECB target.

Driven by higher a 4.3% hike in VAT receipts, the UK’s May budget deficit, at US$ 8.5 billion, reached its lowest borrowing level in a decade. The first two months of the fiscal year seem to indicate that the public sector finances are keeping on track with an improvement recorded in the year ending 31 March 2017; the deficit for the year was US$ 59.5 billion, the lowest return since March 2008. Whether this is set to continue remains to be seen as the public  sector debt of US$ 2.22 trillion still equates to worrying 86.5% of GDP; in his dreams, the Chancellor still aims to balance the budget within the next decade but he will not be in power then, so being a true politician, he can promise whatever.

It is not all bad news coming out of the UK as the CBI has reported that “made in Britain” firms have order books not seen since the halcyon days of the 1980s. Buoyed by a fall in sterling, exports have become cheaper for foreign consumers with the manufacturing sector now having export order books the best since 1995 as total orders, including domestic business, at their highest level since 1988, driven by four sectors – chemicals, drink, food and tobacco. However, there are problems ahead as domestic consumer spending weakens with inflation rising and the cost of importing materials heading further north.

It seems that Mark Carney is again acting as a doom and gloom merchant indicating that Brexit is to make people poorer and that there is a direct link between leaving the EU and “weaker real income growth”. Also speaking at a recent Mansion House meeting was the Chancellor, another firmly in the “Remain” camp twelve months ago: Philip Hammond has said that no one voted for Brexit to become poorer as the country suffers from a drop in real incomes with inflation running at a higher level than wage growth, driven by a fall in sterling. Both got it horribly wrong one year ago and have since eaten their share of humble pie. Both seem to be taking easy options and changing their opinions as circumstances dictate with an end game of a “Brexit without a Brexit”. Talk about Bend Me Shape Me (Anyway You Want Me)!

This entry was posted in Finance and tagged , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s