Sailing!

Another global brand is set to enter the emirate’s hotel sector as Omniyat announce the launch of a 5-star hotel and luxury residences managed by Dorchester Collection. This will be the first of several regional projects planned between the two parties. The original Dorchester opened its Mayfair doors in 1931 and is considered one of the best hotels in the world. The Dubai project will see the iconic brand follow in the footsteps of the original property and its other established hotels in locations such as Beverly Hills, Paris and Rome.

MAG Lifestyle Development will hand over the first phase of its MAG 5 Boulevard six-building project in Q2, six months earlier than expected. Comprising 528 units (ranging from studio to 3 B/R), and within a gated community that has a pool, jogging tracks and a community centre. Phase 2 of the US$ 218 million project (with seven buildings) will be completed by Q2 next year.

An increasing number of Dubai’s private schools is reducing or freezing student fees, including the likes of Horizon International (by up to 33%) and Repton (by around 10%). The two main drivers are that current expat salary packages are more likely not to include an education allowance and increasing competition among establishments in a market that could be becoming over-supplied.

Four-year old Broccoli is set to become not only one of the largest restaurant operators in the country but is also aiming high on the global stage. Currently, it boasts 48 franchised outlets in the UAE and a further 101 worldwide including in India, Saudi Arabia and the UK. The Dubai-based company reports that it has a further 54 properties under construction and that 200 franchises are in the planning or design phase.

DEWA has awarded a US$ 300 million contract to a consortium of Siemens and Egypt’s Elsewedy to build a power plant in Al Aweer. The project, involving 815 megawatts gas turbines, is expected to be finalised by Q2 2020.

Dubai Properties has appointed Raed Al Nuaimi to succeed as its group chief executive, taking over from Abdullah Lahej. The incumbent had been with North25, a new entity formed to lead Dubai Holding, among other projects. Another high profile change sees Dubai Holding appointing former CFO, Amit Kaushal, as its CEO to replace Edris Alrafi who has left the investment firm, after being appointed in April 2017. A third senior management change sees Malek Al Malek replacing Amina Al Rustamani as chief executive of Tecom Group, which operates, inter alia Dubai Media City, Dubai Internet City and the new D3 (Dubai Design District). Further changes include two CE appointments of Arif Mubarak at Dubai Asset Management and Nabil Ramadhan at Dubai Retail.

DP World posted a 2017 10.1% hike in gross cargo volume handled to 70.1 million twenty foot equivalent units, with a 9.7% increase on a like for like basis; Q4 showed even better results at 10.3% and 9.9%. The two main drivers behind these positive results were a rise in global trade and a growth in market share. The Q2 opening of Container Terminal 4 will see DP World’s handling capacity increase to 3.1 million intermodal containers in JAFZA.

The federal government has approved a US$ 1.9 billion plan to build 7.2k houses for UAE nationals. The cabinet, chaired by HH Sheikh Mohammed bin Rashid Al Maktoum, directed that the residential areas should be in line with global environmental standards. It is estimated that over 80% of the population own their homes – one of the highest levels of private ownership in the world.

It seems that Dubai and Dallas will be the testing grounds for the first air taxis in a JV between Bell Helicopter and Uber Technologies. Testing is expected to start by 2020 and flights could start as soon as 2025.

There was no surprise with Dubai announcing yet another record year, as tourist numbers climbed 6.2% to 15.8 million. The top three market sources – India (15% higher at 2.1 million), Saudi Arabia (down 7.0% to 1.5 million) and UK, 2% up at 1.3 million – accounted for 31.0% of the total number.

Even though 2017 passenger numbers grew at their slowest pace in nine years, Dubai International still remains the world’s busiest international airport. Traffic grew by 5.5% to 88.2 million and 2018 expects to see even slower growth of 2.4%, equating to 90.3 million passengers. Annual cargo volumes were 2.4% higher at 2.7 million tonnes.

Two new government charges have been recently introduced. The first is a US$ 2.72 “ten dirham innovation fee” which will be charged by all Dubai public agencies to support educational and cultural projects, via the Dubai Future Foundation. The other, to be introduced in May, will see a waste disposal charge, starting at US$ 21.80 per tonne.

Although falling 0.9 in January to 56.8, the seasonally adjusted Emirates NBD UAE PMI showed a marked improvement in business conditions, with increases in new orders and new export orders. The introduction of VAT impacted both prices and purchases in January. Input costs rose at their fastest rate in over six years and, although selling prices were higher, not all the VAT was borne by consumers, as some businesses held back and paid at least some of the new tax.

Dubai became one of the top ten maritime capitals last year, and fifth in terms of competitiveness and attractiveness, according to Norway-based Manon Business Group. With the upcoming Dubai Harbour project – including its 1.4k berth marina – and several other waterfront attractions, the emirate will not only see its yacht berthing capacity surging 50% to 4.5k but becoming  one of the world’s most important maritime destinations by 2022.

After a 2016 loss of US$ 36 million, its seems that Shuua Capital has turned the corner having posted a healthier US$ 20 million profit in 2017 – its highest ever annual profit since pre GFC in 2007; Q4 profits came in at US$ 4 million, compared to a loss of US$ 5 million in the same quarter a year earlier.

Abraaj Group has refuted US newspaper claims that it misused funds earmarked for healthcare projects in the developing world. The Dubai-based private equity firm, with some US$ 13.6 billion of assets under management, dismissed the allegations by some 24 investors as “inaccurate and misleading”.

One of Dubai’s smaller financial institutions, Commercial Bank International, posted a healthy 40.0% hike in 2017 profits to US$ 48 million; this comes on the back of an 8.0% fall in impairment charges, a fall in its non-performing loan ratio from 8.7% to 7.2% and a 10% hike in net interest income to US$ 151 million.

The DFM opened on Sunday (04 February), at 3412, and having shed 119 points the previous two weeks dropped a further 86 points (2.5%) to close at 3326 by Thursday, 08 February. Emaar Properties was down US$ 0.03 at US$ 1.77, with Arabtec moving US$ 0.02 down to US$ 0.72.  Volumes were again low at only 159 million shares, valued at US$ 107 million, traded on Thursday, (compared to 158 million shares worth US$ 78 million the previous Thursday – 01 February).

By Thursday, Brent Crude traded US$ 5.30 (7.6%) lower at US$ 64.35, with gold heading the same direction – down US$ 28 (2.1%) to US$ 1,320 by 08 February 2018.

Two energy giants have benefited by the uplift in commodity and oil prices. BP announced that 2017 profits more than doubled from US$ US$ 3.6 billion to US$ 6.2 billion (and Q4 from US$ 400 million to US$ 2.1 billion) as oil prices rose last year. During the year the company saw production 12.0% higher at 2.27 million bpd and opened seven new oil and gas fields.

Rio Tinto had a strong year with a 69.0% hike in profits to US$ 8.6 billion, as revenue climbed 18.3% to over US$ 40 billion, that resulted in shareholders being handed a 70% jump in dividends of US$ 5.2 billion, equating to US$ 2.90 per share; the mining giant also announced a US$ 1 billion share buy-back.

A major UK law firm is launching an equal pay claim on behalf of 200k store assistants (mostly female) that could result in individual pay-outs of up to US$ 28k. If the claims, lodged with the conciliation service Acas, are successful a supermarket like Tesco could be saddled with a bill for back pay, totalling US$ 5.6 billion.

Nokia exceeded analysts’ expectations by posting a 7% hike in Q4 profits to over US$ 1.2 billion, driven by a US$ 261 million one-off patent payment from China’s Huawei. Nokia – along with other major players, Huawei and Ericsson – expects another tough trading year as demand for 4G equipment declines and with 5G gaining traction only by next year.

Tesla is starting to test stakeholders’ patience as it continues to struggle with a number of issues. In Q4, only 1.55k vehicles were delivered, with delays being attributed to continuing battery problems. Two years ago, founder Elon Musk forecast production of 500k units in 2018; this year, he has stated that the figure would be one million by 2020. Although its share value rose by 10% last year, shareholders will not be happy with the fact that the company lost US$ 2 billion in 2017, including a US$ 675 million Q4 loss (compared to being US$ 121 million in the red this time last year). More worrying is the cash burn which reached US$ 3.4 billion last year with US $ 787 million in Q4.

Toyota lifted its annual forecast operating profit by 10.6% to US$ 20.2 billion, driven by a weaker yen and enhanced domestic sales. The world’s second biggest car-maker, after VW, posted its Q3 (to 31 December) profit of US$ 6.2 billion – 54% higher, year on year, and its highest quarterly surplus in two years – with global vehicle sales up 15.4% to 2.63 million. Although operating profit more than doubled in its home market, it continues to struggle in North America where it fell 53.1%.

In attempting to join VW and GM as one of the top three car makers in China (the single biggest global market), Nissan is planning a US$ 35 billion investment with its JV partner, Dongfeng. By focusing on electric cars and a no frills local brand (Venucia), the aim is to boost annual sales by over 73% to 2.6 million within five years. Whilst the likes of Ford, Honda and Toyota have sales of around one million, GM and VW post turnovers of over 4 million a year.

Another week sees yet another international bank facing fines for past corporate misdemeanours. This time, Rabobank has agreed to pay US authorities for money laundering between 2009-2012. The Dutch bank pleaded guilty to obstructing US legislators in their enquiries and “chose to look the other way”.

IATA had good news this week for regional airlines reporting that all indicators were pointing up – traffic by 6.6%, capacity 6.4% and load factor up 0.1% to 74.7%. However, these figures were down on a global comparison with international passenger numbers up by 7.9%, capacity 6.4% and load by 0.9% to 81.4%. Despite a sluggish start to 2017, including the US ban on certain electronic carry-on items, the ME industry recovered towards the end of the year and can confidently look at doubling their profits this year to US$ 600 million. (Watch out for much improved results from Emirates come April).

Sri Lanka’s President Maithripala Sirisena has ordered an investigation into the 39-year old flag carrier, Air Lanka, following its 2008 controversial parting with Emirates. The then leader, Mahinda Rajapakse, (who ruled for a decade until 2015), terminated the ten-year management agreement with the Dubai-based carrier and replaced the Emirates’ appointee with his brother-in-law, who had no prior industry knowledge. Since then, the once profitable airline has lost more than US$ 1 billion and has incurred debts totalling US$ 3.2 billion. A separate probe is looking into the purchase of Airbus planes at a cost of over US$ 2 billion.

With reservations about weak consumer spending, the Reserve Bank of Australia decided to hold interest rates at the record low 1.5% which has remained unchanged for the past 17 months. However, at this week’s meeting, the RBA commented that there had been improvements in both business conditions and investment.

The future of one of the world’s biggest coal mines (estimated to produce 60 million tonnes of thermal coal a year) is in doubt when the Australian government confirmed that it would not be financing a rail link to the US$ 12.6 billion Carmichael mine near the Great Barrier Reef. Adani, the Indian miner, was granted a lease in 2016 and is still trying to find US$ 790 million funding for phase 1 of the 189km rail link. Last year, the mining company advised mining services giant Downer, that it would not be proceeding with a US$ 1.6 billion contract, preferring to manage the mine on its own – and to save on costs.

Another Asian economy performing better than expected is Indonesia as its Q4 GDP grew by 5.2%, year on year, (and 5.1% for the year), driven by an 8.5% jump in exports. The major problem facing authorities is that consumer spending continues to lag and that more job creation is badly needed. Although government spending and investment both rose – by 3.8% and 7.3% – in Q4, December retail sales, at 2.6%, disappointed. President Joko Widodo needs to boost consumer confidence, to encourage more spending, as well as spend more government money on capital investment and social assistance.

In December, the US trade balance deficit was 5.4% higher, month on month, at US$ 53.1 billion; the value of monthly imports was 2.5% up at US$ 256.5 billion whilst exports grew at a slower (1.8%) level to US$ 203.4 billion. For the year 2017, the deficit came in at US$ 504.8 billion, with exports of US$ 2,329.3 billion lower than imports totalling US$ 2,895.3 billion.

The EU has upgraded its growth forecasts for the next two years to 2.3% (from 2.1%) and 2.0% in 2019, both lower than the 2017 actual of 2.5%.

The latest twist in the befuddled Brexit talks sees the May government ruling out any future customs union with the EU. If the UK were to join the customs union, then it would be prevented from striking any global independent deals. Currently, the government is considering two options – a new customs agreement with the bloc and a highly streamlined customs arrangement.

The Labor Department reported the biggest wage gain in over eight years, as employment expanded quicker than expected, at 200k, with the unemployment level unchanged at 4.1%. The expansion appeared to be across the board, a sure indicator that the whole economy is showing signs of robust growth. The average hourly wage for private sector workers posted a monthly 2.9% hike but overall wage growth is anaemic and could impact on consumer spending trends.

On Friday (02 February), the Dow Jones Industrial Average fell 666 points – its biggest daily point fall since December 2008. Investors are beginning to worry that not only that stocks may have been overvalued but inflation fears as the labour market tightens with the possibility of earlier than expected Fed action on rates. The S&P 500 and Dow, along with the Dow, saw their biggest weekly losses in two years.

However what is lost in the hullabaloo is that the markets have been on a roller coaster from late last year with most indicators heading north (probably too quickly). A correction has taken place since the middle of January and to put things into perspective all three bourses have been down over the past five days (in a range of between 5.30% and 5.46%), over the past month down between 4.28% and 5.0% but all up over the past three months in the range of 1.28% and 1.58%. When there is so much volatility in the market the best advice is to lay low!

There are local reports that the QE2, berthed in Dubai since its 2008 arrival, (and after being retired following its 1969 launch), is to become a permanent hotel and maritime museum. Located in Port Rashid, it had appeared to be left to the elements but has been the subject of a major overhaul in the past year. The new 300-key hotel could be open as soon as this year but its owners, Dubai’s Port, Customs and Free Zone Corporation, remain numb on the subject. The world famous cruise liner, which carried 2.5 million passengers over six million miles in its 29-year history, is finally laid to rest and no longer Sailing!

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