Against All Odds!

HH Sheikh Mohammed bin Rashid Al Maktoum has launched the One Million Arab Coders initiative which he hopes (and expects) to equip young Arabs with fluency in coding and programming. The forward thinking Ruler sees coding as the language of the modern era which will provide them with improved employment prospects and empower them with the attributes required to contribute to the development of the fast-growing e-economy not only in the UAE but further afield. The two-year initiative will comprise three stages, culminating in the leading 1k coders competing for a top prize of US$1 million.

According to the Dubai Land Department, there were 52.2k property transactions, valued at US$ 55.6 billion, in the first nine months of the year. Location-wise, Burj Khalifa, Business Bay and Dubai Marina were the best performing, with deals valued at US$ 1.7 billion, US$ 1.5 billion and US$ 1.4 billion respectively. Of the total transactions, 36k (US$ 13.2 billion) involved residential, land 11.2k (US$ 39.0 billion) and building sales 5.0k (US$ 3.4 billion).

Following a raft of quarterly reports last week, the latest is ValuStrat’s Q3 realty review which concludes that market recovery is being stymied by increased off-plan activity, especially in the affordable section. It noted that more than 50% of the monitored locations – including Downtown Dubai and Emirates Hills – were showing signs of recovery. It estimates that 73% of all Q3 residential sales transactions were off-plan and that by the end of 2017, Dubai’s residential portfolio would see an addition of 25k units. Interestingly, it suggests a further 55k could be added next year.

Asteco has joined the ranks of other consultants reporting that realty prices fell in Q3 – with rentals 4% lower for apartments and 3% for villas. Further fall are expected in Q4.

Azizi Developments has announced that its ninth Al Furjan project should be completed in Q1 2018. Azizi Montrell, with 168 studios and 54 one B/R apartments, will bring the developer’s total delivery to over 1k. The company expects to complete a further three projects in the same location by 2020.

Although construction will not be completed until 2020, wasl Asset Management Group is to sell 200 residential units in wasl1 Park Gate Residences project. Located on a man-made island, access to the development will be via four bridges.

The scarcity of good office space has seen prime office lease rates remain stable in Q3. The latest CBRE report also indicates that this could change, with the influx of new office buildings, as 85k sq mt was added to the Dubai portfolio in the last quarter. Since Q1 2016, rentals have been stable in both sectors – with prime locations at US$ 522 per sq mt and secondary office rents at US$ 276. Meanwhile the major shopping centres continue to perform well – with high occupancy and stable lease rates – but the smaller malls are still struggling with vacancy levels nudging upwards. It is expected that a further 1 million sq mt of gross leasable area will be added before the end of 2019. JLL also came with similar results reporting that there has been up to a 5% decline in headline rents, with smaller neighbourhood and community malls faring slightly worse.

Tunneling work has started on the Metro’s Route 2020 Project which will have 3.2 km of the new 15 km Red Line extension to the Expo site going underground from Discovery Gardens to The Green Community. The transport system is to receive fifty new carriages which will see Gold Class seats transversal and Silver Class longitudinal, along with other enhancements.

H1 investment in the industrial sector has risen by 2.0% to US$ 35.4 billion, year on year. The Ministry of Energy has plans to lift this sector’s contribution to national GDP from its current level of 16% to 20% by 2021.

With the introduction of Apple Pay this week, the UAE became the 20th country in the world to use the latest digital wallet. This payment method can be used by anyone with credit card facilities, with one of six participating UAE banks, and an i-Phone. Apple Pay will now offer competition to earlier start-up e-payment systems, Samsung Pay (introduced six months ago) and BEAM that has been available for the past five years.

With the cruising season starting on Wednesday, DP World announced that it is expecting a record 115 luxury cruise ships to berth at Mina Rashid’s Dubai Cruise Terminal in the coming months. Current expansion plans will see enhancements to present berthing facilities, as well as new ones being added.

DEWA has raised US$ 6.5 billion for its investment arm, Green Fund, that could eventually reach US$ 272 billion, according to Saeed Al Tayer, its Managing Director and CEO. The fund, established last year, has two aims – to invest directly into green businesses and to offer loans to companies in the clean energy sector.

DP World posted a 13.5% hike in Q3 gross volume handled, as its YTD total rose 10.0% to 52.3 million TEUs (twenty-foot equivalent units), across its global portfolio. During the period, 1.5 million TEUs of new capacity were introduced – 1 million from Jebel Ali Terminal 3 and 0.5 million (the port of Prince Rupert in British Columbia).

Because of steady growth across its various business sectors – including hospitality, residential and retail – Nakheel posted a 2.5% hike in nine-month profit to US$ 1.1 billion; for the first six months of 2017, it had reported a 10.5% decline in net profit. So far this year, the government developer has issued US$ 1.9 billion of contracts, including the US$ 1.1 billion Deira Mall project, and now has over US$ 13.6 billion worth under construction.

Emaar Properties’ shareholders approved an IPO for up to a 30% stake in Emaar Development as well as transforming the new entity into a public joint stock company, with the shares being listed DFM. Part of the proceeds from the issue – which could generate as much as US$ 7.6 billion – will be made available to shareholders, in the form of a cash dividend, probably as early as January.

Etisalat reported a 29.0% surge in Q3 profit to US$ 654 million on revenue of US$ 3.5 billion. The UAE, which has 12.5 million of the telco’s 140 million subscribers, saw increases in both revenue, up 3.0% to US$ 2.1 billion and profit 4.0% higher at US$ 545 million.

Gulf Navigation posted declines in both nine-month and Q3 profits – by 89.4% to US$ 32 million and 76.1% to US$ 9 million respectively. The Dubai listed company has also announced a tie-up with Ali & Sons Marine Engineering Factory to form a new company specialising in oil drills reparation and renovation. The navigation company has also put aside US$ 150 million for future acquisitions which will further expansion plans and profit levels and will issue a US$ 250 million sukuk in the near future.

Dubai-listed Shuaa Capital is considering a stake in Global Investment House subject, inter alia, to DFM approval. It is part of the company’s expansion strategy within the GCC.

The DFM opened Sunday (22 October), at 3673 and by the end of the week had lost 22 points to close on Thursday, 19 October, at 3651. Volumes were down this week, with trading of 452 million shares, valued at US$ 118  million, (cf 709 million shares for US$ 250 million, on Thursday, 19 October). Emaar Properties, on the back of the IPO announcement, dropped US$ 0.07 to US$ 2.31, with Arabtec edging US$ 0.01 lower to US$ 0.80.

By Thursday, Brent Crude was US$ 1.92 (3.4%) higher on the week, closing at US$ 59.15, with gold again moving lower by US$ 22  to US$ 1,268 by 26 October 2017.

Singapore Airlines has signed a US$ 13.8 billion order for 20 777-9 and 19 787-10 models from Boeing, although in reality the value of the order could be discounted by at least 50%. Delivery will start by next year. In 2016, the airline was one of several that decided not to continue using the Airbus A380.

Singapore-based Noble Group could post a US$ 1.25 billion Q3 loss (following a US$ 1.75 billion Q2 deficit) on the back of a proposed sale of its American oil-liquids business to Vitol Group. The embattled commodities trader, badly impacted by the falling energy prices, is selling some of its assets in an attempt to pay off its mounting debts. By the beginning of the week, its shares had plummeted 78% YTD.

Global Infrastructure Partners (GIP) is set to acquire Equis Energy for US$ 5.0 billion, including US$ 1.3bn of liabilities. The Singaporean developer of renewable-power projects is involved in several solar, wind and hydroelectric power operations in Asia and Australia, where it is developing one of that country’s largest solar plants.

Volvo surprised the market with Q3 profit 44.7% higher at US$ 861 million, driven by strong demand for heavy trucks and commercial vehicles. The Swedish company, that hived off its car-making to Ford nearly two decades ago, is also benefitting from its introduction of a US$ 1.2 billion cost-cutting drive. Consequently, its shares shot up by 7% and YTD up 56%.

EU officials have raided the BMW headquarters as it investigates an alleged cartel along with four other German carmakers – Audi, Daimler, Porsche and VW. It is reported that Daimler has already filed an application for leniency but has no current plans to set aside funds for possible fines, whilst VW defended itself against similar claims last July. Regulators are looking at allegations that there has been collaboration for decades on many aspects of development and production, to the disadvantage of stakeholders, including customers and suppliers.

Toshiba has halved its annual loss forecast for selling its memory chip division to a Bain-led consortium for US$ 1.0 billion. This week, its shareholders agreed to the US$ 17.6 billion sale that will help the Japanese conglomerate claw back some of the losses incurred by a multibillion-dollar deficit in its US Westinghouse nuclear operations.

Lloyds posted an impressive Q3 146.6% profit surge to US$ 2.6 billion only four months after it returned to 100% private ownership, having been bailed out in 2008 by the government post GFC. It was helped by the fact that there was no increase in impairment provisions for which the bank has already paid out in excess of US$ 23.7 billion for its role in the payment protection insurance (PPI) scandal.

Having already paid US$ 2.5 billion in fines in 2015 for dubious dealings over rate fixing, Deutsche Bank has agreed a US$ 220 million payment to settle a US investigation into its rigging of the benchmark Libor rate. The bank had been accused of defrauding government entities and charities by making false or misleading submissions to set benchmark rates so as to benefit their own internal trading positions.

On the subject of rate rigging, three of Australia’s major banks have gone down the same road. ANZ settled with the Australian Securities and Investments Commission in 2016 and it now looks as if National Australia Bank may do likewise. That being the case, it would leave only Westpac to face trial over bank bill swap rates, a key benchmark used to price billions of dollars of loans, bills, bonds and derivatives.

Latest quarterly figures from Qantas indicate that the airline is going well, with revenue up 5.1% to  US$ 3.2 billion and a six month underlying profit forecast of up to US$ 730 million, 11.5% higher when compared to the same 2016 period.

In her first significant move as New Zealand’s youngest-ever Prime Minister, Jacinda Ardern, is to ban foreign buyers from purchasing existing homes in the country. This is because soaring prices have resulted in an affordability crisis, with many New Zealanders unable to climb on to the property ladder. Other factors impinging on the problem were increased immigration, low interest rates and a shortage of residential stock. An estimated 10.4% annual jump in house prices has seen Auckland’s median price up at US$ 583k, whilst the capital Wellington witnessed a massive 18.1% surge for the year to June 2017.

Shinzo Abe comfortably won Japan’s general election, the market responded favourably with the Tokyo bourse hitting 21-year highs and the yen declining to its lowest level in three months. Although slightly down on the previous month, Japan’s manufacturing sector, at 52.5, is still in expansion mode, driven by an increased rate of employment, backlogs and output prices, whilst new orders, new export orders, output and purchases increased at a slower pace.

In a bid to diversify its economy away from hydrocarbons, Saudi Arabia announced that it plans to establish an investment zone, comprising nine specialised sectors, named as Neom, in the north west of the country. The project, which will be backed by up to US$ 500 billion, will be spearheaded and supported by the PIF (Saudi’s Public Investment Fund) with backing from PPPs (public private partnerships) and international investors, including Japan’s Softbank. The development, covering some 10k sq miles and bordering the Red Sea, will stretch into Egypt (which will be linked by a bridge) and Jordan.

Unsurprisingly, it seems that Greece is still some way off to placate the requirements of the IMF and the EU involving some 95 outstanding reforms that need to be implemented. Prime Minister Alexis Tsipras is keen to get some agreement by the end of the year so that the country can see an early end to eight years of rescue funding programs. Whether it can reduce state control of public utilities and cut back on government spending to satisfy its two main creditors remains to be seen.

There was good news from the smaller 19-country Eurozone bloc as October’s IHS Markit’s Flash Composite PMI reported that companies were hiring at the fastest pace in over a decade – although it did show a month on month decline from 56.7 to 55.9. However, the manufacturing PMI headed north – up 0.5 to 58.6. Both indices indicate that the eurozone economy is progressing well.

Q2 euro area government debt to GDP fell 1.7%, year on year and 0.1%, Q on Q, to 89.1%. Estonia, Luxembourg and Bulgaria had the lowest ratios of debt in the 29-country bloc with Greece (at 175%), Italy and Portugal were found at the other end of the spectrum. Debt securities accounted for 80.3% of the liability,as loans comprised 16.6% of the total.

The UK can expect its first interest rate hike in over a decade next week on the back of better than expected Q3 growth of 0.4% following 0.3% in each of the previous two quarters. The current record low rate is at 0.25% and could be doubled by this time next week.

A benchmark indicator points to the rude health of the US economy as September new home sales surged 18.9% to 667k, driven by a 33.3% jump in sales in the Northeast and 25.8% in the South to 405k. At the current level, the 279k estimate of new houses for sale equates to a five month supply at current sales rates.

Just as the Trump administration plans to introduce tax cuts of US$ 1.5 trillion, it was reported that the country’s budget deficit rose by US$ 666 billion for the 2017 fiscal year, 13.7% higher than a year earlier; the deficit represents 3.5% of the GDP, compared to 3.2% in 2016. With the Senate narrowly passing the 2018 federal budget, it is hoped that these cuts will result in expanded growth which in turn will increase tax revenues.  There is no doubt that Donald Trump will be ultimately judged on how the US economy performs and, after nine month in office, he continues to defy many of his critics Against All Odds.

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