Fool If You Think It’s Over!

A Reidin-GCP report indicated that freehold land prices in the emirate had appreciated by 13% in H1, with this figure to rise even more with Expo 2020 on the horizon. Furthermore, 2016 construction permits are 38% higher than the same period a year earlier; however, there has been a reported 23% slump in Q2 residential transactions. The study also estimated that since 2003, land transactional returns had outperformed Dubai residential units by almost 50%.

Dubai Properties has launched the latest phase of its Remraam community, with prices starting at US$ 122k; located in Dubailand, the 1/2 bedroom apartments will be ready by H2 2019. The master development, launched in 2014, comprises 34 clusters, 64 buildings and 4k apartments with the usual add-ons – community centre, retail, dining and leisure activities.

Jumeirah Golf Estates is set to release land encompassing 700 hectares adjacent to the developer’s current 16 mini residential communities and two championship golf courses – Earth and Fire. The land, which is favourably located within 15 minutes of Expo 2020 site and Dubai World Central, will be made available to all interested developers.

Although there have been adjustments to the design, The Royal Atlantis Resort & Residences is still set to open in 2019. Kerzner International Resorts appointed Six Construct (in a JV with Ssangyong Engineering & Construction) to construct the US$ 1.4 billion, 46-storey hotel that will house 800 guest rooms and 239 serviced apartments.

Reef Mall in Deira will be the location for Dubai’s third “outlet” mall. Brands4u, operated by Concept Brands Group and covering an area of 20k sq mt; it will be a stand-alone, multi-brand outlet and will start with an initial investment of only US$ 4 million for purchasing merchandise.

In a joint statement, Emirates and flydubai confirmed an expansive codeshare agreement that will see both airlines working closer, including “integrated network collaboration with coordinated scheduling”. For both airlines, which will still be separately managed, it is a win-win situation, as the international carrier gets access to a strong regional network, whilst flydubai will have “seamless connectivity to Emirates’ worldwide destinations”. Currently, the combined fleet totals 317 aircraft with 259 wide-body units and 58 new-generation Boeing 737s, serving 216 destinations. There are signs that Emirates could be in the market to add the Boeing 787 Dreamliner (or less likely the Airbus A350) to its fleet and could add up to 100 planes to its current portfolio.

DP World’s subsidiary, P&O Ports, has been awarded a three-year contract to manage the Port de Sete container terminal in south of France, as from October. The agreement, which can be converted to a long-term concession, involves a container yard with a draft up to 14.5mt, a 457 mt quay and an adjacent two hectares of land. Initially, it will act as a feeder service for the eastern Mediterranean but later will see more international activity. The Dubai ports operator has also signed an agreement to advise the Indonesian government on the development of a new port in North Sumatra.

DEWA has awarded a US$ 13 million contract to Dutco Balfour Beatty for the first phase of its new Al Jadaf HQ, known as Al Sheraa. To be ready by the end of 2019, the building is slated to become the tallest, largest, and smartest government net Zero Energy Building in the world; generating 5.8k MWh every year, it will have 16.5k sq mt of photovoltaic solar panels on the roof, producing over 3.5k kW.

The first ever Dubai International Hospitality Week in September will see six events occurring at the same time; they are GulfHost, The Hotel Show, The Leisure Show, The Speciality Food Festival, SEAFEX Middle East, and yummex ME which in the past would have been stand-alone exhibitions. It is expected that the event will see 2k of the top global brands on show, with more than 50k visitors expected.

Beauty products continue to big business in Dubai with the emirate’s trade (imports, exports and reexports) totalling US$ 5.6 billion in 2016; in Q1, reexports have already reached US$ 1.4 billion. The country ranked seventh in the world, with a figure of US$ 239 in per capita spend.

A director of Dubai-based UHY Saxena and Matrix Holdings, Shivani Saxena, has been arrested by Indian authorities in relation to the US$ 560 million AgustaWestland VVIP chopper scam. Following allegations of kickbacks, the Indian government cancelled the contract three years ago and registered a case under PLMA (Prevention of Laundering Money Act), naming former Indian Air Force chief S.P. Tyagi and twenty others.

UK authorities have thanked Dubai Police for their efforts in tracking down tax fugitive Geoffrey Johnson in the emirate; he had been caught travelling on a false passport from Kenya in September 2014, he had been sentenced in absentia to 24 years in jail for his involvement in a complex tax theft involving US$ 285 million and laundering money valued at over US$ 2 billion.

The BRL sector at Dubai Economy reported that in H1, it issued a record number of licences, including 71.8k renewals and 10.5 new applications, of which 73.0% were trade related and 23.4% professional permits.

The IMF’s latest country report has forecast a 1.3% growth this year, on the back of subdued economic performance, slowing global trade and lower oil prices, but a marked improvement to 3.4% in 2018. Inflation eased to 1.8% last year from the previous year’s 4.1%, driven by weaker rents and falling domestic demand. UAE’s overall deficit climbed 0.9% to 4.3% in 2016 whilst the current account surplus was down to 2.4% of GDP (4.7% in 2015).

The Dubai Statistics Centre reported that the emirate’s June inflation level rose 0.86%, month on month, and 2.4%, year on year. The main driver behind last month’s increase was a 7.14% hike in transportation prices whilst food/beverages were only 1.5% higher. On an annual basis, the main factors were increases in miscellaneous goods (11.2%), transportation (5.5%) and education (5.2%).

The country’s bank deposits in June fell 1.7% to US$ 433 billion, month on month, as total assets reduced by 1.2% to US$ 723 billion.

With VAT on the horizon next year, the Ministry of Finance is considering the imposition of corporate taxation; the good news for many is that discussions are still in the very early stages. If implemented, the tax will probably add far more than the US$ 3 billion VAT receipts expected in its first year of operation 2018.

Jumeirah Group, owned by Dubai Holding, will manage its first ever property in Saudi Arabia, the five-star Jabal Omar Jumeirah Makkah Hotel. With views of Masjid al Haram (the Grand Mosque), the four-tower structure will have over 1k rooms and almost 100 villas.

Deyaar Development posted a massive 135% hike in H1 revenue to US$ 86 million, compared to the same period last year, as profit dipped 39.8% to US$ 18 million. However H2 may offer some solace when both the company’s The Atria and Mont Rose developments nearing finalisation.

Government-owned Investment Corporation of Dubai, that includes the likes of Emirates, Emirates Global Aluminium, Emirates NBD, flydubai and Jumeirah in its asset portfolio, posted an unsurprising 13.9% decline in 2016 profits to US$ 4.9 billion, with revenue 0.5% lower at US$ 48.0 billion. The fall was largely attributable to “increased competitive pressure on yields”, especially in the transportation sector which accounts for 55% of ICD’s total turnover but only 18.2% of the group’s US$ 210 billion asset portfolio.

The emirate’s largest lender, Emirates NBD, reported a 5.8% rise in Q2 profit to US$ 550 million. Provisions dipped 0.8% to US$ 169 million as overheads declined 7.3% to US$ 311 million, with impairment charges little changed at US$ 169 million. H1 profit came in 4.9% lower at US$ 101 million.

Its sister bank, Emirates Islamic posted a 282% jump in H1 profits to US$ 105 million although total income dipped 3.0% to US$ 324 million. Dubai Islamic Bank filed a 14.9% jump in H1 revenue to US$ 1.32 billion, as profit rose 7.0% to US$ 583 million, with operating expenses flat at US$ 316 million.

Driven by a 22.3% fall in impairment provisions to US$ 172 million, Mashreq reported a 3.0% increase in H1 profit to US$ 300 million; Q2 profits rose at the slower rate of 2.1% to US$ 152 million. Hampered by a 14.7% fall in commission to US$ 208 million and non-interest income by 9.9%, total operating income fell 5.5% to US$ 817 million.

The DFM opened Sunday at 3537 and, having risen 4.0% the previous week, continued its upward trajectory, moving 37 points (1.0%) to close the week on 3574. Volumes improved, closing on Thursday, trading 341 million shares, valued at US$ 124 million, (cf 279 million shares for US$ 69 million, the previous Thursday). Emaar Properties was US$ 0.05 higher to US$ 2.21, with Arabtec gaining a further US$ 0.01 to US$ 0.97.

By Thursday, Brent Crude was US$ 0.36 lower at US$ 48.06, with gold pushing up US$ 28 to US$ 1,245 by 20 July 2017.

The International Energy Agency expects that oil demand will be higher than expected this year, at 98 million bpd, with increased consumption from Germany, India and the USA; next year, the IEA expects demand to increase by 1.7% to 99.4 million bpd. For oil prices to stabilise or even to move higher, this demand increase will have to be met by strict adherence to quota cuts, so that a reduction in supply will help rebalance the market.

The Footsie is facing a quandary as it hopes to become the lead overseas bourse for the upcoming partial 5% flotation of Saudi  Aramco; overseas exchanges such as New York, Tokyo and Singapore all would like a piece of action that could value the Saudi petroleum giant in excess of US$ 1 trillion! However, to qualify for a London FTSE-100 listing, a company needs a “premium listing” which entails that 25% of shares should be publically tradable in the open market. This week, the UK’s Financial Conduct Authority has launched a consultation to discuss bending the rules to accommodate this lucrative IPO.

Despite a mega influx of funds into its low cost index-tracking iShares, with Q2 turnover 462% higher at US$ 74 billion, BlackRock Inc’s quarterly 6% hike in revenue to US$ 3 billion still disappointed analysts. Although the world’s biggest asset manager, with assets of US$ 5.7 trillion, the US company has faced a barrage of reduced performance fees and other price cuts so as to keep pace with its rivals, as investors move to less expensive products.

Reckitt Benckiser has sold its food business, French’s Food, to McCormick & Company for US$ 4.2 billion; proceeds will be used to  part finance RB’s US$ 16.6 billion recent acquisition of baby formula firm Mead Johnson.

Netflix saw its shares jump 10% on news that it had posted a Q2 profit increase of 60.0% to US$ 66 million, on a 32% hike in revenue to US$ 2.8 billion; it also reported a 5.3% jump in subscribers to 104 million.

The Chinese attraction to acquire overseas trophy assets continues with a consortium, led by Nesta Investment Holdings, offering US$ 11.6 billion for Global Logistic Properties Ltd; the Singaporean company provides warehouse space for the likes of Amazon, DHL, FedEx and Walmart. Following last month’s US$ 13.8 billion buyout of Blackstone Group LP’s European logistics business by China Investment Corporation, this will be the second biggest logistics deal YTD. GLP is also one of the world’s largest real estate fund managers (overseeing assets in excess of US$ 27 billion) and is well positioned to take advantage of the increase in on-line trading.

The price of an average Chinese home has risen 10.2% year on year and 0.7% in the month of June, as the property bubble grows bigger, despite official attempts to deflate the soaring market. If June has anything to go by, this has been a futile attempt as sales more than doubled to 21.4%, month on month, with H1 new construction starts up by 10.6%. Household loans – mostly mortgages – rose 21.0% to US$ 109 billion, month on month.

China surprised the market as it posted a 6.9% annual growth rate in Q2 and this despite the government tightening up on real estate transactions and trying to reduce worryingly high debt levels which would normally have the effect of slowing growth. Other data gives the impression that the economy is on the rebound after growing at its weakest pace since 1990 last year. There were marked improvements in both industrial output (up 7.6% in June) and retail spending – up 11% -along with imports/exports posting higher than expected growth figures of 17.2% and 11.3% respectively.

The Australian dollar has hit two-year highs, as the Central Bank noted that it was upbeat about the local economy and happy with recent improvements in the labour market. On Tuesday, it maintained its cash rate of 1.5% – a level that has remained unchanged since August 2016. However, as the global economy slowly improves, there may be moves for a rate increase by the end of the year.

The impetus of the new French President Emmanuel Macron seems to have had a positive impact on the French economy, as the IMF upgrades its 2017 growth forecast to 1.5%. The world body has been impressed by his “ambitious” reform program which includes a tax overhaul and US$ 5.1 billion of public spending cuts; this should result in a reduction in the country’s debt and budget deficit.

Partly because of an improvement in sterling (and a fall in oil prices), UK’s June inflation rate fell 0.3%, month on month, to 2.6% – its first decline since October 2016. As the rate had escalated since Brexit – and topped the Bank of England’s target of 2.0% – it seemed inevitable the end result would be an increase in interest rates. Although inflation is still outrunning wage growth, the chance of any early rise has been extinguished; however, in the longer term, a marked increase in energy prices and a dip in sterling could see circumstances change.

In August 2015, when its shares were at their lowest point in a year, the government sold a 5.4% stake in RBS which raised US$ 2.7 billion for the taxpayer; nearly two years later, the National Audit Office reported a US$ 2.5 billion loss (as opposed to an expected US$ 1.3 billion deficit at the time). Despite share values falling 8% in the three days before the sale and the fact that details had been leaked prior to the official announcement, the public spending watchdog has the nerve to announce that taxpayers received “value for money” from the sale. The government, which still owns over 70% of a bank that has lost over US$ 75 billion since its 2009 bail-out, now has shares valued at US$ 3.30, which it bought at US$ 6.53! Not many enterprises, perhaps with the exception of the banking sector, would get away with such nonsensical business – and, with more of the same to come, Fool If You Think It’s Over!

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