Wouldn’t It Be Nice?

This week, a US$ 736 million JV was announced between Dubai Airport Free Zone Authority and wasl Asset Management Group to set up Dubai CommerCity. Located on a 2.1 million sq ft plot in Umm Ramool, MENA’s first dedicated e-commerce free zone will have three clusters – Business (with 13 office buildings), Logistics (84 units) and Social (including art galleries and a range of luxury restaurants and cafés). There is no doubt that it will enhance Dubai’s standing as a major e-commerce hub and will act as a catalyst for dedicated foreign investment opportunities and further growth in a regional market that is set to expand to US$ 20 billion by 2020.

Azizi Developments confirmed that its US$ 212 million Mina by Azizi on Palm Jumeirah will be ready by Q4 2018. Based on the traditional Arabic dhow, the project will comprise a range of 1-4 BR fully-furnished and serviced residences. This year alone, the Dubai-based developer has registered 68 separate projects, valued at US$ 5.7 billion.

The twin tower The Waves in Jumeirah Village Circle will be ready for handover by Q4 2018, according to Lootah Real Estate Development. The project comprises 135 studios / 1 BR units and will incorporate a pool and gymnasium.

The world’s fifth Bulgari Hotels and Resorts property will open in Dubai in December 2018. Located on Jumeirah Bay Island, and shaped like a seahorse, the Marriott International operated property will have 101 rooms and 20 beachfront villas, with its own private beach.

Union Properties has set up an investment arm, UPP Capital Investment, that will focus on its direct and indirect real estate business. This will be the developer’s third new division, following Union Malls and Al Etihad Hotel Management, since the May appointment of Nasser Butti Omair Bin Yousef as its Chairman.

Gulfood Manufacturing 2017 opened on Tuesday and, with 1.6k exhibitors, expects over 10k trade visitors over the three days.

There are two news items that should help silence the many doom and gloom merchants in town. BNC report that Saudi Arabia and the UAE account for 74% of the GCC’s hospitality and leisure projects currently underway and valued at a US$ 200 billion total. The other is the price of oil that has seen Brent at over US$ 60 for the first time in over two years. A rising oil price and a strong construction sector, allied with Expo 2020, will have a positive impact on the local economy that will see Dubai grow almost 4.0% in 2018 and even more in the ensuing two years.

To support the recently announced Saudi Vision 2030 by the Crown Prince, Prince Mohammed bin Salman bin Abdul Aziz, DP World will help in the development of Jeddah port. Along with the new US$ 500 billion mega project called Neom, Jeddah could become a major hub owing to its geographical proximity to this new development, other major markets and trade routes.

Locally-based fit-out company, Depa reported a 343% surge in nine-month profit to US$ 35 million, as revenue rose 33% to US$ 334 million. Its recently introduced business/restructuring plan is seemingly taking effect.

For the first nine months of the year, Dubai International has posted a 5.8% hike in passenger numbers to 66.6 million, with September registering only a 1.7% rise to 7.2 million because of the splitting of seasonal travel rushes during Eid; 27.9% of the traffic emanated from three countries – India (931k), UK (549k) and Saudi Arabia (536k) – and the three most popular destinations were London (346k), Kuwait (214k) and Mumbai (183k). Although there was a 1.9% monthly decline in flight movements to 308k, the average number of passengers per flight was 6.8% higher at 224.

Petrol prices will be lower in November as the Ministry of Energy announces that Special 95 will fall 4.5% to US$ 0.523, although diesel will nudge up 0.5% to US$ 0.575.

Because of the oil price crash, when prices dipped below US$ 30 in January 2016, the GCC countries took steps to boost non-oil revenue streams, slash public spending and introduce economic reforms. The inevitable slowdown in some countries – and slumps in others – resulted in budget deficits, and this week the IMF predicted GCC economic growth of just 0.5% this year – the worst return since 2009’s 0.3%. Consequently, the organisation is encouraging quicker diversification away from oil and greater input from the private sector.

Dubai Investment recorded a 4.8% rise in Q3 profit to US$ 95 million, with a nine-month profit figure of US$ 226 million. The company had a US$ 553 million turnover and a total asset base of US$ 4.6 billion.

Emirates REIT posted a very healthy 42.2% growth in nine-month profit, at US$ 14 million, with its portfolio value topping US$ 845 million – a 13.9% hike compared to September 2016. The world’s largest Sharia-compliant REIT spent US$ 35 million when purchasing European Business Centre in Dubai Investment Park. The company is planning a debut US$ 300 million Islamic bond by this December.

Emirates NBD reported a 36.7% hike in Q3 profit to US$ 619 million, well up on market expectations, as net interest income was 10.0% higher at US$ 763 million, with non-interest income 9.0% higher at US$ 316 million. Operating income at the emirate’s biggest bank by assets was 9.7% higher at US$ 1.1 billion, with a marked reduction in net impairment provisions, down 40.8% to US$ 117 million. Customer loans, deposits and total assets all headed north – by 5.0% to US$ 82.9 billion, 4.0% to US$ 87.7 billion and 3.0% to US$ 125.6 billion respectively.

Emirates Islamic has posted increases in both Q3 and 9-month profit figures – up, year on year, to US$ 30 million (following a US$ 8 million loss in 2016) and by 470% to US$ 136 million respectively.  However, nine-month total income dipped 6.0% to US$ 490 million, driven by lower one-off gains from the sale of investment properties, whilst impairment provisions were 41% lower and operating costs down  by 13%. The bank saw its total assets up 1.0% to US$ 16.3 billion.

Emirates Investment Bank posted a 74.0% hike in nine-month profit to US$ 12 million, with Q3 coming in 48.4% higher at US$ 5 million.

Emirates Integrated Telecommunications Company PJSC reported a 4.2% Q3 year-on-year increase in net profit to US$ 130 million, as revenue remained flat at US$ 853 million. Du’s nine month profit was down 6.9%, to US$ 351 million, after royalty for the quarter came in at US$ 140 million and YTD at US$ 417 million.

Emaar confirmed that it would be offering 800 million shares (20% of the issued shares) in the IPO of its subsidiary Emaar Development; 7.2 million shares will be available to institutional investors with the remaining 10% allocated to retail buyers. An additional 40 million shares, worth US$ 1.6 billion, will be assigned to the Emirates Investment Authority. The IPO was full subscribed within hours of its Thursday opening and the share issue price will be in the region of US$ 1.70.

The DFM posted a 21.8% decline in Q3 profits to US$ 8 million, as revenue fell 8.8% to US$ 20 million, on the back of a sluggish summer that saw trading values down 23.0% to US$ 4.6 billion; this in turn resulted in lower fee income.

The DFM opened Sunday (29 October), at 3651 and by the end of the week had lost 29 points to close on Thursday, 02 November, at 3622. Volumes were well down this week, with trading of only 126 million shares, valued at US$ 58 million, (cf 453 million shares for US$ 118 million, on Thursday, 26 October). Emaar Properties dropped US$ 0.05 to US$ 2.26, with Arabtec flat at US$ 0.80. For the month, the bourse gained 2.0% from 3564 to 3635, with Emaar US$ 0.04 lower from its October opening of US$ 2.31 to its close at US$ 2.27, whilst Arabtec was US$ 0.02 higher at 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 02 November 2017. Brent had a good October jumping 5.6% from US$ 57.54 to US$ 60.79 as gold was US$ 8 lower to close the month on US$ 1,276.

IATA has announced that ME September, year on year, cargo growth reached 8.9% with capacity growing at the much lower rate of 2.6%. On a global scale, air freight demand came in at 9.2%. ME carriers reported a 3.7% hike in September passenger traffic – its slowest rate of increase in more than eight years. Capacity rose 4.3% with load factors slowing 0.4% to 74.5%.

The problems facing the disgraced Kobe Steel continue to mount as it withdrew its US$ 308 million net income forecast for March 2018 (and cancelled an interim dividend payout) because the company does not know the potential liabilities from the scandal, involving its falsification of product data. Clients will inevitably seek reimbursement if their 525 affected customers request replacement products or compensation and there is every chance of litigation taking place. (VW have already paid out over US$ 50 billion, arising from claims and fines, for falsifying diesel emission).

JC Penney is beginning to feel the pinch and, with sales flat in 2017, it has downgraded its adjusted earnings per share from US$ 0.40 – 0.65 to US$ 0.02 – 0.08. The US retailer, along with other traditional department stores, is fast losing grounds to the likes of Amazon and other on-line sites as well as to discount retailers.

Yet another Australian dairy processor is joining the ranks of those who have been acquired by overseas interests. This time, Murray Goulburn is being bought out in a US$ 1 billion deal, by Canada’s Saputo, since it can no longer afford to pay its suppliers enough to keep them happy and in business. The Victorian company has seen its milk supply half over the past two years whilst its debt levels and operating costs have remained at the same levels.

Swiss drug-maker, Novartis, has acquired French-based Advanced Accelerator Applications for US$ 3.9 billion which will boost its growing oncology business. The cash amount showed a 47% premium on AAA’s closing price when news first broke in late September.

The UK’s Competition and Markets Authority is investigating how hotel booking websites operate and whether they have customers’ best interests at heart. There are concerns that they could be misleading in the way they present information on their sites, including the likes of result rankings, “pressure selling”, hidden charges, and discount claims.

There were some stellar Q3 results from a myriad of major international players, Sony was perhaps the most impressive, posting a US$ 1.8 billion profit figure, 27 times higher than a year earlier; it also expects to post a record annual profit in March – the traditional Japanese business year end.

BP saw Q3 profits 9.0% higher at US$ 1.8 billion helped by the recent hike in global energy prices. The oil giant has recovered from the devastating 2010 Gulf of Mexico oil spill disaster, which cost over US$ 50 billion. It has also been bolstered by marked improvements in its downstream division (including distribution, marketing and refining).

HSBC more than quintupled its Q3 profits from US$ 843 million to US$ 4.6 billion, driven by improving business in Asia and reaping the benefits of a recent major corporate overhaul.

Meanwhile BNP Paribas reported an 8.3% hike in quarterly net profit to US$ 2.4 billion, assisted by a US$ 380 million capital gain from the Indian IPO of SBI Life: however, its revenue dipped 1.8% to US$ 12.1 billion, driven by “an unfavourable foreign exchange effect.”

Despite reporting its third straight quarterly profit (of US$ 517 million, compared to a US$ 619 million loss 12 months ago), the government-backed RBS is still looking at its tenth straight annual loss. The bank, still 70% owned by UK taxpayers after its US$ 59.4 billion 2008 bailout, is facing a multi-billion dollar US Department of Justice penalty for its sale of toxic mortgage-backed securities.

Ryanair has confounded the markets by posting an 11% hike in half year profits (at 30 September) to US$ 1.5 billion, with passenger traffic up by 11% to 72.1 million; this number is expected to fall to 4% over the next half year (to 56.9 million) because of the roster problem that has grounded 25 aircraft for lack of available crew and a “forced” pay rise costing an extra US$ 52 million. It will also incur an expected expense of US$ 29 million to cover the cost of 700k affected passengers.

China’s industrial profit continues to boom with September’s 27.7% year on year growth not only eclipsing August’s impressive 24.0% figure but also being the fastest growth rate since 2011. Over the nine-month period, earnings at state-owned firms surged 47.6% which were more than triple those of private enterprise at 14.5%.

Even as it trimmed its inflation forecast, the Bank of Japan decided to maintain its mega monetary stimulus program unchanged. It now expects to hit its 2.0% target by April 2019 and sees that the economy is on track to continue its longest expansion since 2001 with both stocks at their highest level and the labour market at its tightest this century.

According to figures released by the EC, economic confidence in the Eurozone is at its highest level since January 2001, as the Index of Industry and Consumer Sentiment rose 0.9 to 114 points in October, month on month. Furthermore, the bloc’s economy expanded for the 18th straight quarter in Q3, whilst unemployment levels have fallen to 9.0%. Q3 eurozone growth continued to head north – driven by strong domestic demand – climbing 0.6% quarter on quarter, (slightly down on the 0.7% in Q2), as the unemployment rate was at its lowest in over eight years. However, inflation slowed surprisingly and is still some way off the bloc’s 2% target. Eurozone’s annual 2.5% GDP growth is similar to that of the EU28.

Chancellor, Philip Hammond, could be looking at a US$ 26 billion black hole only weeks before his autumn budget, later in the month. As productivity growth diminishes, the IFS estimate that the public deficit could reach over US$ 47 billion – a lot higher than the Office for Budget Responsibility’s US$ 22 billion forecast earlier in the year. It will be interesting which route the Chancellor takes to balance the books or whether he abandons this target altogether.

In the UK, the Institute for Fiscal Studies has warned that the manufacturing sector PMI recorded yet another monthly growth in October (its 15th in a row), rising 0.3, month on month, to 56.3. The most active drivers behind the uptick were increased production, new export business and a rise in new orders. However, the service sector did not fare as well, and, with the perennial problem of inflation outpacing wage growth, discretionary spending is still muted.

There was also a slowdown in the US manufacturing sector as the Institute for Supply Management’s PMI dipped 2.1 to 58.7 in October. This result is not as bad as it first appears coming on the back of September’s 13-year high return. The main drivers were slowdowns, recorded in new orders and production growth but both still have 60+ readings. This is still very good news for Trump administration and will allow the Fed to continue with its “gradual” pace of policy tightening.” The agency has already indicated that there will be a rate hike before the end of the year.

The US economy continues to confound analysts as Q3 posted a 3.0% growth despite global uncertainty, including North Korea, as well as the problems emanating from Hurricanes Harvey, Irma, and Maria. These figures follow positive Q2 data indicating a solid 3.1% economic expansion, with the last six months seeing the country’s strongest economic activity in over three years. There is no doubt that the US economy is heading in the right direction and if only some credit could go to the incumbent president, Wouldn’t It Be Nice?

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