The Winner Takes It All

HH Sheikh Mohammed bin Rashid Al Maktoum announced this week that all federal government fees will not be increased for the next three years. According to his Twitter account, he commented that “we decided not to increase the federal fees during the next three years, to restore the economic and social stability of the state and to support our industrial and commercial sectors and attract more foreign investments.”

The Dubai Land Department reported that last year 90 projects were completed, whilst a further 150, worth US$ 22.3 billion, were registered. Director General, HE Sultan Butti bin Mejren, confirmed that recent reports about a change, that would have seen developers having to deposit 50% of a project value (rather than the current 20%), were untrue.

Azizi Developments expects to complete the building of the world’s fifth largest tower by 2021. Located adjacent to the Dubai Creek, the 122-floor building will house residential units and then a luxury hotel from the 100th floor up. The total project, including land, is expected to cost US$ 817 million, with work starting on the 570 mt structure, designed by Atkins, in Q2.

Azizi Developments is also set to launch 200 realty projects this year, costing US$ 10.9 billion, of which 190 will be located in the Meydan District. The developer expects to add 55k residential units, with some completion by the end of 2019.

Emaar Development released its latest development on Sunday – Saffron Community in Emaar South. The new townhouse community will comprise 3-4 B/R units and will also host an18-hole championship golf course.

Dubai-based Binghatti Developers has launched a US$ 109 million project on Dubai’s Water Canal in Business Bay. Millennium Binghatti Residences will comprise 230 apartments (studio and 1-2 B/R), with prices starting at US$ 170k.

China State Construction Engineering Corporation has been awarded a US$ 163 million contract to build one of Damac’s towers in Aykon City, a four million sq ft development around Safa Park. The tower will have 53 residential floors, along with seven podium levels and two basements.

ART Marine has been appointed by Dubai Properties Group to be the exclusive operator of Marasi Marina. The leisure marine company will be responsible for managing the entire premises including its water and onshore areas. The marina will hold 130 boats (up to 35 mt in length) and comprises eight interconnected piers.

With the logo “Fresher, Cheaper, Better shopping to its customers”, Landmark Group is set to revolutionise local retail in the way Aldi and Lidl have in the UK. It is to introduce VIVA, as the region’s first food discounter, which will offer a range of private label quality products up to 30% cheaper than other established outlets. With four stores opening soon (including one in Dubai), there could be fifteen in operation by the end of the year. The long-established UAE retail company also owns, Babyshop, Centrepoint, Home Centre and Splash.

Cityland Mall, the world’s first nature-inspired shopping destination, is set to open by year-end, with 60% of the US$ 300 million project already complete; over a half of the available retail space has been let. The landscaping contract for Central Park – the focal point of the mall – has been awarded to Miracle Garden Landscaping, which also runs Dubai Miracle Garden and Dubai Butterfly Garden.

Having seen its 2017 revenue grow 5.6% to US$ 1.9 billion, Dubai Duty Free expects a 3.5% hike this year to US$ 2.0 billion and by 57.9% to US$ 3.0 billion within four years. The bullish forecast is based on more traffic at Dubai International, as tourist traffic increases from the current level of 88.2 million to an expected 118 million by 2022. The duty free operator also expects an uptick in the number of high spending Chinese and Russian visitors, with the former accounting for 9% of sales. Another factor for the positive forecast is the weakness of the US$, resulting in a strengthening of both the euro and sterling, with Western Europe being DDF’s main source market.

DP World is looking at further opportunities to expand into Latin America, where it is currently working on land reclamation and road network works for Guayaquil Port in Ecuador. The world’s third-largest ports operator is set to invest US$ 1.2 billion on the project which when completed will give the country its first deep-water port and allow mega vessels to berth.

A new agreement was signed this week by SCZone and DP World that will see the start of an integrated industrial and residential zone in Sokhna, Egypt, the first phase of which covers 30 sq km. The JV, which sees the Suez Canal authority holding 51%, empowers the Dubai-based port operator to manage the zone which will not only see an expansion to Sokhna port but the development of a comprehensive industrial zone.

Having been awarded a government concession in 2006 – and posting annual profits ever since – DP World has evidently lost control of the Doraleh Container Terminal in Djibouti. The port operator has now accused the government of illegally seizing control of the facility in a move to force a renegotiation in the concession’s terms. Interestingly, the terminal is the country’s largest employer and biggest source of revenue.

Last year was a record year for public transport with 551.7 million users – a 1.5% increase on the previous year. 96% of this total used the three main transport modes – Dubai Metro (36%), taxis (32%) and public buses (28%). In addition, Dubai Tram saw an 11.1% uptick in users to over 6 million, whilst marine transport had 13 million passengers. Public transport accounts for 17% of all people movement in Dubai (up from 2006’s figure of 6%), with the RTA targeting 20% by 2020.

January passenger traffic at Dubai International was 1.0% lower than in 2017 at 8.0 million. The top growth areas were South America and CIS – up by 22.6% and 19.7%.

UAE petrol prices will be lower this month, starting today, 01 March– this time, Special 95 falls 1.3% to US$ 0.605 per litre, whilst diesel, at US$ 0.643, is 2.4% lower.

Despite posting a 44.4% hike in 2017 profits to US$ 354 million, the country’s listed insurers face a tough 2018, driven by the introduction of VAT and comparatively low energy prices. The 30-member bloc, which accounts for about 50% of total written premiums, benefitted last year by the introduction of both compulsory medical insurance and the Unified Motor Insurance Policy; over the period, their total revenue or gross written premiums jumped 15.8% to US$ 6.0 billion. Five insurers account for 59% of the market share, led by Orient Insurance and Oman Insurance.

The UAE’s Federal Tax Authority has decided not to issue penalties for businesses that have been late to register (the original cut-off date was 31 December) for VAT. Businesses now have until 30 April to become VAT-registered. It is estimated that 260k businesses have already registered but there could be a further 100k that have not.

At the end of January, the UAE Central Bank reported that foreign assets were 12.1% higher, year on year, at US$ 88.8 billion, whilst foreign deposits were 96.3% to the good at US$ 69.5 billion. At the end of January, government deposits and bank deposits stood at US$ 55.5 billion and US$ 117.1 billion.

The Central Bank Governor, Mubarak Rashed Al Mansoori, reported that the federal government’s 2017 expenses showed a 23% increase on the previous year. He also confirmed that the country’s 2017 non-oil GDP was 2.95% and is expected to reach 3.5% this year.

Etisalat is planning to invest US$ 1 billion in the modernisation of mobile and fibre-optic networks, infrastructure development and future technologies. The aim is to maintain its leading position in the region and play a major role in future technologies such as AI (artificial intelligence), IoT (internet of things) and robotics, as well as concentrating on its traditional business.

DEWA posted a 7.1% rise in 2017 net profit to US$ 1.8 billion, as revenue was 5.0% higher at US$ 5.9 billion. During the year, its assets grew 11.0% to US$ 35.7 billion, whilst the demand for electricity and water rose by 5.18% and 3.12%, respectively.

The Dubai Statistics Centre reported that January’s inflation rate rose 2.69% year-on-year, driven by the introduction of VAT and the increase in fuel prices. Major increases were seen in the prices of tobacco (9.06%), hospitality (7.69%), communication (5.91%) and recreation/culture (5.12%).

According to HSBC, its Expat Explorer Survey is the world’s largest study of expat life and it rates Dubai as one of the best global places for both job prospects and a great social life – even ahead of the likes of LA, New York, Paris and London. When it came to salary levels, Dubai’s average came in at US$ 138k, some way behind Mumbai’s US$ 217k.

It is reported that the New York-based Apollo, which oversees US$ 250 billion in global private equity, credit and real estate assets, is winding down its partnership with DIFC’s Frontier Management Group, after nearly three years. It had planned to use Frontier to gain a footing in the regional investment sector but had little success despite a 2015 bid for Saudi Arabian supermarket chain, Al-Raya Foodstuff Co.

Emirates Global Aluminium, jointly owned by Investment Corp of Dubai and Abu Dhabi’s sovereign fund Mubadala Investment Co, posted a hefty 57.1% jump in 2017 profits to US$ 899 million, on the back of a 20.0% increase in revenue at US$ 5.6 billion; a major contributing factor was aluminium gaining 34% in 2017. There is a possibility that there may be an IPO, that could raise up to US$ 3 billion, in the next twelve months – subject to favourable market conditions.

First Abu Dhabi Bank has denied any interest in merging its NBAD Securities, with Dubai’s SHUAA Capital.

Ithmaar Holding posted a disappointing Q4 loss of US$ 56 million (compared to a US$ 3 million deficit in the same period in 2016) and an annual loss of US$ 72 million, following a US$ 14 million profit a year earlier.

The founder of Abraaj Group, Arif Naqvi, is to relinquish control of Abraaj Investment Management in a major reshuffle that will see the appointment of joint chief executives, Omar Lodhi and Selcuk Yorgancioglu. The Dubai-based firm, that manages assets in excess of US$ 13.6 billion, has hired independent consultants to review its corporate governance and controls.

Depa Limited has withdrawn its application to be listed on the London Stock Exchange citing that the volume of global depositary receipts traded was negligible and thus not worth the expense for the  Dubai-based interior design company. It had earlier in the month appointed Shuaa Capital as its liquidity provider. The company posted  a 26.0% rise in 2017 profit to US$ 37 million, as revenue increased by 4.0% to US$ 490 million; its backlog declined 7.0% to US$ 488 million

Union Properties’ subsidiary, UPP Capital Investment, has increased its share in Egypt’s Palm Hill Developments by 0.74% to 10.18%, by acquiring 17 million shares for US$ 4 million. The Cairo-based company posted a 19.2% hike in 2017 profits to US$ 53 million.

The DFM opened on Sunday (25 February), at 3287, and having lost 330 points (9.1%) over the past six weeks was again down – by 78 points (2.4%) – to close at 3209 by Thursday, 01 March. Emaar Properties traded US$ 0.03 lower at US$ 1.69, with Arabtec marginally higher by US$ 0.01 to close on US$ 0.67. Volumes slid at to just 99 million shares traded on Thursday, valued at US$ 39 million (compared to 192 million shares worth US$ 98 million the previous Thursday – 22 February). For the month, Emaar was down US$ 0.11 at US$ 1.68 from February’s opening of US$ 1.79 as was Arabtec, US$ 0.05 lower for the month to US$ 0.66.

By Thursday, Brent Crude had traded lower over the week, shedding US$ 1.56 (2.4%) to US$ 63.83, with gold heading the same direction – down US$ 28 (2.1%) to US$ 1,305 by 01 March 2018.  For the month, Brent was down (6.0%) from US$ 68.89 to US$ 64.73, whilst the yellow metal also fell US$ 26 (3.0%) from US$ 1,343 to US$ 1,317.

OPEC chief Suhail al-Mazrouei considers that the oil market will be balanced this year following the crash of 2014.This has been made possible because of the late 2016 agreement between both OPEC and non-OPEC producers, agreeing to cut output by 1.8 million bpd. Furthermore, he estimates that up to US$ 10.5 trillion of investment will be needed, with demand set to rise by 15 million bpd by 2040.

Better known for its iconic hand dryers and vacuum cleaners, Dyson is keen to establish itself in the electric car sector. Having doubled the number of scientists working on its battery programmes in the past twelve months, it already has a 400-strong team in place and plans to hire a further 300 engineers, so as to be in a position to launch its first vehicle in 2020. Last year, it posted a 27% hike in earnings to US$ 1.1 billion.

The UK seems to be the favoured location for Toyota as it has invested US$ 3.5 billion in the country – far more than any other country in Europe. This week, the Japanese car-maker confirmed that it will build the next generation of the Auris hatchback at its Burnaston plant, with most of the engines being built at its Deeside factory in North Wales. This will ensure the security of 3k jobs across both plants. Despite Brexit scaremongering, the car industry is alive and well, with the likes of BMW (assembling its electric Mini in Oxford) and Nissan (its next generation of Qashqai and X-Trail sports utility vehicles) still showing their commitment to the UK.

As expected, an international consortium, including the likes of the Saudi and Singaporean sovereign wealth funds, acquired a 55% stake in AccorHotels for US$ 5.4 billion. This will enable the French firm to expand its portfolio from its current level of 891 properties and continue to manage its brands, including Mercure, Novotel, Pullman and Raffles.

Comcast has joined the race to acquire Sky with a US$ 31 billion offer – 16% higher than 21st Century Fox’s offer of US$ 25.9 billion to buy the 61% remaining share it did not already own. The biggest cable TV firm in the US plans to “use Sky as a platform for our growth in Europe”. It was no surprise then to see Sky shares 20% higher on the day at US$ 18.30, with Comcast shedding 7% in value.

The Swedish music streaming service, Spotify is aiming to raise US$ 1 billion in an IPO on the New York Stock Exchange. With 159 million monthly users, including 71 million paying subscribers, revenue was 38.0% higher at US$ 5.0 billion but its net loss stretched out to US$ 1.5 billion. Despite being unable to return stable returns, the twelve-year old company, co-founded by the then 23 year old Daniel Ek, is valued at US$ 23.4 billion.

Following its first loss in twenty five years in 2015, Standard Chartered posted a US$ 409 million profit in 2016. Last year, it went even better with a US$ 2.4 billion profit, of which US$ 642 million emanated from the Africa & Middle East region – a 49.0% year on year improvement. Operating income was 2.6% higher at US$ 14.4 billion, whilst there was an 11.6% growth to its loan book.

Two major UK retail entities – ToysRUs and Maplin – are facing the possibility of going under this week, with the loss of 5.9k jobs. The toy retailer has had various discussions with possible suiters over the past three months but to no avail. The electricals chain, which employs 2.5k, had been in last minute rescue talks with Edinburgh Woollen Mill but these broke down.  This could be the start of a bad year for the high street as the perfect storm (on-line shopping, rising costs and soft consumer spending) starts to brew.

Disneyland Paris, that employs 16k and accounts for 6% of the French tourism income, is set to invest US$ 2.5 billion to further develop its troubled theme park. Investors are concerned that since its 1992 opening, it has only produced seven years of profit. Walt Disney took full control of the park last year, when it bought the shares in Euro Disney that it did not already own. Development will only start in 2021 and include new areas devoted to hit films such as Frozen and Star Wars.

Despite opposing President Trump’s recent tax cuts, Warren Buffet has probably been the main beneficiary receiving some US$ 29 billion as a result of the reforms. In reporting Berkshire Hathaway’s quarterly Q4 and annual profits, the US billionaire indicated that of the US$ 65 billion profit, 44.6% was directly attributable to when “Congress rewrote the US Tax Code.” It is estimated that future earnings could continue to rise by 12% because of the tax change.

According to the latest ICAEW/Oxford Economics’ report, ME growth this year will reach 2.9% and 3.6% in 2019, following an eight year low of 1.1% last year; the major drivers behind the welcome improvements are higher energy prices and expansionary government budgets.

Chinese authorities have woken up to the fact that there has been an ongoing problem with some large enterprises picking up “trophy assets” around the world. Like certain western companies, including banks, they thought they were too big to touch, especially with their political clout, Things are beginning to change – this week, authorities took control of insurance and financial giant Anbang, known as a “grey rhino” (previously unheard of conglomerates with access to large amounts of money, splurging out and paying premium prices for assets – often unrelated to their core business – and then trampling over everything in their wake). If any of these grey rhinos were to fail, there will be a negative impact on both the Chinese economy and the government’s international standing.

With China’s economy posting only a 6.8% increase in Q4, India surpassed that with a credible 7.2% – its fastest rate in five quarters. Asia’s third largest economy, after China and Japan, is expecting 2018 growth in the region of  6.6%, after recovering from the introduction of sales tax last July, with its disruptive aftermath  for the country’s manufacturers  and service industries. Despite the encouraging outlook, it is unlikely that the Reserve Bank will lift interest rates in the short term, at least.

The recent Florida school massacre has resulted in several big name businesses cutting ties with the powerful National Rifle Association which may result in some much-needed changes in the country’s gun laws. Delta, Enterprise, Hertz and United have ended discounts for NRA members, whilst others including Allied Van Lines, Avis Budget Group, Chubb, First National Bank of Omaha and Symantec Corp have been distancing themselves from the lobby group. Activists continue to put pressure on companies that have a commercial relationship with the NRA and it will be interesting to see how FedEx and Amazon (which distributes NRA television programmes) react. This could be the start of some sense being introduced to the country’s archaic gun laws.

The US Labour Department posted a 3.1% decline in jobless claims to 222k for the past week – its second lowest figure since 2009 – as the monthly average also fell – by 1.0% to 226k; the unemployment rate stands at 4.1% – a 17-year low. It is estimated that the improvement will continue over the coming months as the impact of recent tax cuts take effect. January new home sales in the US slid 7.8% to an annual rate of 593k. Median sales prices stood at US$ 323k, with a total of 301k new houses – equating to a six month supply line at current rate of sales.

The US economy grew by 2.5% in Q4, down from the 3.2% the previous quarter; annual growth came in at 2.3%, compared to just 1.5% in 2016. Not a bad first year for President Trump who is looking at a 3.0% expansion this year. Incoming Federal Reserve chairman, Jerome Powell, is bullish on the economy stating that “some of the headwinds the US economy faced in previous years have turned into tail winds”. With faster growth, higher inflation (moving to the 2% target) and falling unemployment, care has to be taken to avoid the economy overcooking. It seems more than likely that he will chair over three rate hikes of 0.25% this year.

With an imminent introduction of new laws effecting credit card companies, UK’s Financial Conduct Authority estimates that borrowers could save up to US$ 1.8 billion in lower interest charges. It is primarily aimed at those in, or at risk of being in, persistent debt, with the FCA indicating that some four million accounts were currently paying, on average, around US$ 3.50 in interest and charges for every US$ 1.40 they repaid of their borrowing.  This practice is not only a UK problem but can be seen in most other countries.

Crown Prince Mohammed bin Salman is certainly making his presence known and has commented that his anti-corruption drive was the “shock treatment” the country needed. He has made a point of appointing “high energy” people who could modernise the kingdom and overhaul government bureaucracy. If his reforms are carried through, the economic boost to both the Kingdom and the region will be noticeable. No doubt, The Winner Takes It All!

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