Ridin’ The Storm Out

Sheikh Hamdan Bin Mohammad Bin Rashid Al Maktoum launched the 5-day Gitex Technology Week on Sunday. Now in its 37th edition, the event hosted 4.1k exhibitors and 100k visitors from 70 countries; this is another example of how the emirate’s MICE sector proves a welcome fillip for the local hospitality and retail industries.

JLL’s latest report points to the possibility of a 16.4% rise in the number of residential units to 567k by 2019. That would indicate 40k handovers for the next two years 2018 to 2019 – despite the fact that Dubai property portfolio has only risen by 40k over the past thirty months to June 2017, equating to just 16k a year. The consultancy did state that actual deliveries may be less than the headline number quoted but even if this were not the case, the emirate’s population growth will probably require that number. Since 01 January 2016, Dubai’s population has risen by 14.2% to 2.86 million over the past 21 months – this equates to an annual growth of 8.1%. If that growth rate were to continue to September 2019, the population would have increased by 480k. How many extra residential units will be needed? Furthermore with a swathe of lower priced realty entering the market there will be more buyers available, compared to earlier in the cycle when most of the property available was beyond the range of most residents.

The luxury end of the villa realty sector ticked over in Q3 with the two biggest deals being in Emirates Hills, selling for US$ 26 million and US$ 16 million, whilst The Palm saw two deals worth US$ 7.5 million and US$ 6.1 million. According to Luxhabitat, the overall villa market recorded Q3 deals totalling US$ 187 million, with 71% of the sales occurring in the Emirates Living areas.

Skyview Levels at Golf Vita – with views of the Trump International Golf Club – is the latest Damac Properties’ launch. Located on the 42 million sq ft community site, the project includes 1 – 2 B/R apartments, with prices starting at US$ 157k.

With a focus on revitalising the sector, Al Ghurair Properties is to spend US$ 1.4 billion on 58 buildings, including 3k residences and 350k sq ft of retail space. Spread across the whole of Dubai, including Barsha, Bur Dubai and Deira, work will be completed by 2020.

Al Qabdah Building Contracting has been awarded a US$ 109 million contract by Jumeirah Golf Estates for its Alandalus development comprising 715 1-4 B/R apartments in six apartment buildings (two more are already under construction), 95 villas and a retail centre. The first two towers will be handed over in Q2 next year with phased handovers of the other six buildings from Q3 2019.

Nakheel has awarded a US$ 45 million contract to APCC Piling for the construction of six marinas at Deira Island that will accommodate 614 craft. The developer has already invested US$ 2.0 billion on the project which, when completed, will have a 250k population and will add 40 km to Dubai’s coastline.

Ishraqah has announced that its US$ 350 million The Onyx is completed and handed over. The development – located on SZR – comprises a 4-star hotel, two towers (one commercial and the other residential) and three podium levels for retail.

Dubai-based Hospitality Management Holding (HMH) has added to its property portfolio by acquiring the 5-star, 337-key Coral Dubai Al Barsha Hotel from Faisal Holding; it was formerly known as Auris Plaza Hotel.

Kingston Holdings International Limited has signed up InterContinental Hotels Group to develop and manage Holiday Inn & Suites in Dubai Business Bay. The development, set to open in 2021, will comprise 350 keys, 400 residences and a small boutique shopping arcade. The hotel chain already has three properties in the area – Hotel Indigo, Crowne Plaza and an InterContinental Residences.

September was another disappointing month for the hospitality sector, with STR’s preliminary data indicating a 14.8% decline in RevPar (revenue per available room) to US$ 104 as the ADR (average daily rate) fell 10.6% to US$ 136. Although demand nudged up 0.6%, this fell well short of the 5.6% increase in supply.

The latest addition to the ENBD Reit Ltd’s portfolio is The Edge in Dubai Internet City, bought for US$ 60 million from developer Sweid & Sweid. It is expected that the 7-storey office building, with tenants including McGraw Hill, Oracle and Snapchat, will deliver a gross yield of 7.4%.

The world’s first government entity to adopt blockchain technology is Dubai Land Department which has been developed in co-operation with Smart Dubai. The system, with a secure database, keeps a record of all realty contracts and related documents / details and is linked with other entities such as DEWA, du and etisalat. With the tenant database recording Emirates Identity Card, bank records, visa details etc, online payments can be made from anywhere in the world.

On Tuesday, Uber introduced the Tesla, to its Dubai customers, at a base rate of US$ 2.72 and US$ 0.52 per km – the same rate as UberBlack.  Both Model S and Model X of the electric vehicles are available for hire.

Having signed a three year contract in July, P&O Ports (part of DP World) plans to start operations in the French Port de Sete in Q1 next year. The contract sees the Dubai operator managing a container yard, with a draft up to 14.5m and 457 metres of quay. Strategically located, the deep draft port forms part of the network of feeder routes to Italy, Spain and France, with ready access to major Mediterranean hubs. The port is also the location for a new superyacht marina to be run by another DP World subsidiary, P&O Marinas, in association with IGY Marinas.

According to September’s Emirates NBD Dubai Economy Tracker Index, expansions in both new business and output indicated a welcome improvement in the emirate’s business environment. Although the index declined by 1.1 to 55.2, month on month, the indicators point to on-going improvement in the economy, driven by construction and retail/ wholesale. Firms in the non-oil sector continue to reduce their prices, so as to remain competitive and to boost demand in a demanding market.

Good news for the local economy came with IMF’s latest forecast that sees UAE’s growth double to 3.4% come next year and the bigger region of Menap (Middle East, North Africa, Afghanistan and Pakistan) up to 3.5% from 2.6%. This latest global forecast indicates 2018 growth at 3.5% (well up on this year’s 2.6%) but the advanced economies are set for a paltry 2.0%.

Whilst maintaining a stable outlook for the country’s banking sector, Moody’s Investors Service has indicated that because of sluggish 2017 growth, NPLs (non-performing loans) will rise from its June 2017 5.3% level to up to 6.0%. Meanwhile the topsy-turvy credit growth has seen levels of 8.0% in 2015, 5.8% last year, an expected 2.0% this year and a forecast 5.0% next year, as faster economic growth returns to the market.

The Federal Tax Authority (FTA) has announced that online registration is now open and has encouraged companies, that have taxable supplies and imports surpassing the mandatory registration threshold of c US$ 100k, to register early. Businesses with taxable supplies and imports from abroad that are below the mandatory registration threshold and exceed the voluntary registration limit of c US$ 50k can optionally register for VAT. All businesses, however, must be registered by 01 January 2018 and should submit their registration applications before 04 December 2017.

Etisalat is to spend US$ 817 million to modernise its infrastructure, expand its fibre optic networks and implement new technologies. The telecom is targeting 2020 to complete its 5G network so that it becomes “one of the fastest, smartest and most advanced networks in the world”, by the time Expo opens in October of that year.

Dubai Islamic Bank reported impressive Q3 numbers, with increases in both Islamic financing and investing transactions – up 21.0% to US$ 545 million – and net profit by 25.6% to US$ 300 million. The main drivers were an increase in customer deposits and growth in financing assets, although impairments doubled. The emirate’s largest Sharia-compliant lender has posted a 10.0% jump in YTD profit to US$ 899 million, with financing assets14.0% higher at US$ 35.8 billion and deposits up 17.0% to US$ 39.1 billion.

Marka’s shareholders have approved plans to continue business but will restructure the business, and introduce a strict cost control programme, whilst existing underperforming fashion and sports sections will be closed. Since its September 2014 listing, the retailer has accumulated losses of US$ 98 million of which US$ 34 million arose in Q2.

As it broadens its range of capital investments, Dubai-listed Amanat Holdings announced that it plans to invest US$ 272 million in the Saudi healthcare and education sectors which would bring its total external investments to US$ 472 million; this equates to about 70% of the company’s equity. 80% of the spend to date has been in the UAE and Saudi Arabia but the company will invest in other GCC countries when circumstances so direct.

The DFM opened Sunday (08 October), at 3564 and by the end of the week had risen by 96 points (2.7%) to close on Thursday, 12 October, at 3660. Volumes also improved this week, with trading of 467 million shares, valued at US$ 144 million, (cf 245 million shares for US$ 108 million, on Thursday, 05 October). Emaar Properties was up US$ 0.04 at US$ 2.38, with Arabtec also higher by US$ 0.02 to US$ 0.82.

By Thursday, Brent Crude was US$ 0.75 (1.3%) lower on the week, closing at US$ 56.25, with gold reversing its recent downward trend, adding US$ 24 to US$ 1,297 by 12 October 2017.

This week, 9.2% of the 9k employed in the two Lancashire sites (Warton and Samlesbury) of BAE Systems have been retrenched, along with a further 1.2k jobs in other locations. Workers at the defence contractor’s two sites are involved in the production of the Eurofighter Typhoon jet, which has seen a marked slowdown in orders, not helped by increased competition from the likes of the new F-35, the US F-16 and France’s Rafale.

It is reported that its chief executive Tom Enders has written to all 130k Airbus employees warning them of “turbulent and confusing times” in the wake of fraud and corruption investigations by both UK and French authorities. Senior management had reported anomalies in the 2003 US$ 2 billion sale of Eurofighter combat jets to Austria to UK investigators, with the possibility of illicit payments being made in other deals, now being investigated.

Not satisfied with slapping a 220% tariff on Bombardier last month, the US Department of Commerce has now ruled again in favour of Boeing and added a further 80% levy for alleged below-cost selling. The so-called subsidies are in relation to the Canadian plane maker’s C-Series, the wings of which are built in a US$ 690 million factory in Belfast, where a work force of 1k could be impacted by an adverse decision.

The Organization for Economic Co-operation has reported that Q2 growth was up from 0.5% to 0.7%, Q on Q, driven by improved investment (0.3%) and private consumption (0.5%), with net exports dipping 0.1%. The major economies of USA, Japan, Germany and the UK registered movements of 0.8%, 0.6%, 0.6% and 0.3% respectively, with German growth softening, UK flat and Japan’s real growth doubling.

September saw some weak economic data coming out of China with the Caixin/Markit services PMI falling to 50.6 (52.7 in August) – its lowest level since December 2015 – and one of the weakest since the survey began in 2005. Recent expansion in both manufacturing and services softened last month with new business (at 52.0) moving at a slower rate. Indicators are that there will be continuing downward pressure on growth in Q4 as China moves its economy from the traditional heavy industry and investment to more emphasis on high value-added services in finance and technology. Meanwhile the central bank, in a bid to add extra finance to SMEs and boost the softening private sector, has cut the reserves that some financial institutions hold, in a bid to ease liquidity.

The Organization for Economic Co-operation has reported that Q2 growth was up from 0.5% to 0.7%, Q on Q, driven by improved investment (0.3%) and private consumption (0.5%), with net exports dipping 0.1%. The major economies of USA, Japan, Germany and the UK registered movements of 0.8%, 0.6%, 0.6% and 0.3% respectively, with German growth softening, UK flat and Japan’s real growth doubling.

The latest US company to seemingly flout the UK tax laws is Airbnb which, despite a revenue of US$ 870 million, managed to pay corporation tax of only US$ 250k last year! The nine-year old Californian accommodation website uses an Irish platform to book commissions (3% from landlords for each booking and fees to users) earned in the UK; last year, it had 5.9 million travellers and 168k listings in the country. Airbnb, valued at over US$ 24 billion, estimated that it boosted the UK economy by US$ 4.6 billion over the year.

It has not been a good year for Japanese business when it comes to product defects. Takata started the eventful year by misleading car makers about the safety of its exploding air bags, followed by Toyo Tire & Rubber admitting that it had falsified data on rubber for earthquake-proofing building. In June, Shinko Wire, a Kobe Steel affiliate, admitted that it had misstated data on the tensile strength of stainless steel wires for springs. Only last week, one million Nissan vehicles were recalled because of unauthorised inspectors approving vehicle quality. The latest revolves around Japan’s third biggest steel-maker, Kobe Steel, falsifying data related to the strength and durability of some of its aluminium and copper parts products.

Despite all these troubles, Tokyo’s Topix index hit a ten-year high at 1,695 on Tuesday with the Nikkei 225 recording its sixth successive daily gain to close on 20,824; it closed on Thursday on 20,954, with Softbank reaching a 17-year high. Investors were heartened by a cooling in the North Korean crisis and improving economic data from home and the US.

August  growth in German industrial production expanded at its highest in six years as it jumped 2.6% month on month, having declined 0.1% in July; Q3 figures should prove interesting reading. The growth would have been even better at 3.2% if energy and construction had been stripped from the data. On an annual basis, the growth figure came in at 4.2% and is in line with last week’s factory orders growing by 3.6%, driven by strong foreign interest.

UK’s retail sector continues to improve with September retail like for like sales 1.9% higher, as August figures were adjusted up to 1.6%; food sales were 2.5% higher whilst non-food lagged somewhat behind at 0.5%. It appears that the main driver is focused on essential purchases rather than the big-ticket items. Another sector going well is tourism with a record 40 million visitors (spending US$ 34 billion) expected this year; this is estimated to be worth US$ 168 billion to the country’s economy.

On the flip side, August saw UK’s trade deficit hit an all-time high at US$ 18.9 billion – 10.9% higher than a month earlier. Imports rose by 4.2% but exports, despite the fall in sterling, increased at the much lower 0.7% rate. Despite this, there is every chance of a rate hike next month so as to keep rising inflation in check.

With the 2017 hurricane season nearing a welcome end, Morgan Stanley expects overall insured losses this year to be around US$ 100 billion. Insurance companies have had to bear the brunt of the cost. For example, AIG estimate that the three major storms – Harvey, Irma and Maria – has cost US$ 2.7 billion with Morgan Stanley estimating losses of above US$ 2.6 billion and Chubb US$ 1.3 billion. Unlike PM Theresa May, these entities will have no problems Ridin’ The Storm Out!

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One Response to Ridin’ The Storm Out

  1. Peter Cooper says:

    Hi Tim, Back next Wednesday, is the Thai ambassador still on for NBA Thursday? Look forward to catching up. Still 26C here in Budapest at the end of October… global warming is for real, best regards Peter

    On Thu, Oct 19, 2017 at 9:56 AM, howesdubai.com wrote:

    > howesdubai posted: “Sheikh Hamdan Bin Mohammad Bin Rashid Al Maktoum > launched the 5-day Gitex Technology Week on Sunday. Now in its 37th > edition, the event hosted 4.1k exhibitors and 100k visitors from 70 > countries; this is another example of how the emirate’s MICE sector pr” >

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