It Ain’t Right!

Arabtec Holding has been awarded a US$ 116 million Damac contract to build 916 villas at the developer’s massive Akoya Oxygen project. Covering phase 6 of the development, work on the 148k sq mt site will be completed by the end of 2019. The once-troubled contractor has a US$ 4.7 billion project backlog and is well on its way back to stability and profitability.

UAE-based Binghatti Developers reported that it had sold 60% of the 230 units in its US$ 109 million Millennium Binghatti Residences tower, following its 03 March launch. Located directly on the waterfront, the 29-storey building will be completed by Q4 2019.

This week, Emaar Development launched the 62-storey The Grand, located in Dubai Creek Harbour. The super luxury development will have a mix of 1-3 B/R apartments, 4 B/R penthouses and podium-level townhouses.

Danube Properties has announced the launch of its tenth project, Jewelz, at a cost of US$ 82 million. The building – G+2 podium+13 floors – will house 463 units and is located adjacent to a park.

Nakheel announced the 85% completion of the US$ 327 million Nakheel Mall, located in the middle of Palm Jumeirah The developer reported that retail fit outs will start soon and work has  already commenced on the 60k sq ft, 15-theatre VOX Cinemas complex.

Last year, second tier properties, older and poorly maintained, in areas such as Deira and Garhoud, saw annual declines of 17% and 14% respectively. Cluttons reported that high end office property remained largely unchanged but Grade A buildings in Business Bay jumped by up to 17%. The consultancy expects difficult conditions to continue in 2018, as the leasing market remains tight, with a slight downturn in most rentals.

A JV between ACCIONA Agua and Belhasa Six Construct has been awarded a US$ 237 DEWA contract to build a desalination plant in Jebel Ali.  The 40 million imperial gallons per day (MIGD) reverse osmosis plant is slated for a 2020 completion.

The Italian export credit agency has seen its portfolio of new projects in the MENA region grow 273% in just over two years to US$ 14.7 billion – of which US$ 6.1 billion is located in the emirate. SACE, which supports Italian trade and investment worldwide, has been involved in significant investments across a gamut of sectors, including a US$ 1.2 billion credit facility to assist the development of Dubai South and a US$ 300 million loan related to supplies for the first phase of the upcoming Meydan One Mall.

BEYOUland, founded by Sheikha Mayha Hasher Al Maktoum, is using 17 abra type boats to launch the country’s first ever-floating boutique. Stretching 1.8 km, the venture will host local and international brands and artists in a unique selling environment whilst incorporating part of Dubai’s traditional culture and history.

The federal government is gearing up for phase 2 of the UAE federal railway network which will connect Mussafah to Khalifa Port and Jebel Ali Port, as well as to the Saudi and Omani borders. Phase 1 covered 264 km and has already started commercial operations, moving granulated sulphur from Shah and Habshan to the port of Ruwais. When completed, the network, which will also include passenger traffic, will cover 1.2k km and link all seven emirates and the rest of the GCC.

DP World and the Somaliland have signed an agreement in Dubai to develop a greenfield economic free zone in the country, in tandem with the growth of the Port of Berbera. Located adjacent to the port, the 12 sq km site will be a catalyst for the development of a regional trading hub which will prove a fillip for the Somaliland economy and job creation.

Dubai Airport Freezone Authority continues on its growth path during 2017, recording a 25% year-on-year increase in registered companies, as leasable space increased by 6%; licensing revenue was 16% higher and total assets were up 2% – but no figures were readily available. The total number of companies stands at 1.6k, with MNCs now accounting for 36% of that total. DAFZA is estimated to account for 7% of Dubai’s non-oil trade and 18% of the total Dubai free zone trade.

Emirates is reportedly in negotiations about a possible US$ 1 billion sukuk issue and is arranging a global investor roadshow to discuss with interested parties; Citi and Standard Chartered will act as joint lead managers. In 2015, the airline raised US$ 913 million through a sukuk backed by the UK Export Finance.

Established in 2001, Emirates loyalty programme now boasts 20 million members. 30.5% of Emirates Skywards’ customer base can be found in the UK (2.6 million), USA (1.8 million) and Australia (1.7 million). Last year alone, 35 billion miles were redeemed by members on flights and other rewards.

Of the 2.2k billionaires on the Forbes annual list, seven are to be found in the UAE, two more than last year. The Magnificent Seven are Abdulla bin Ahmad Al Ghurair and family (US$ 5.9 billion), Majid Al Futtaim and family (US$ 4.6 billion), Hussain Sajwani (US$ 4.1 billion), Abdulla Al Futtaim (US$ 3.3 billion), Saeed Bin Butti Al Qebaisi (US$ 2.7 billion), Saif Al Ghurair and family (US$ 1.9 billion) and Khalifa Bin Butti Al Muhairi (US$ 1.5 billion). It seems that those with interests in healthcare, money exchange and property had a good 2017 – with better than average returns – whilst declines were noted in sectors such as banking, automobiles and other industries. The number of Dubai ultra-wealthy individuals (with personal assets of US$ 30 million+) is 1.1k, whilst the number of multi-millionaires (assets of US$ 10 million+) is put at 2.4k, according to New World Wealth.

The latest monthly Emirates NBD’s seasonally adjusted PMI sees a weakening in the country’s non-oil private sector economy – at its slowest pace in 18 months – as business confidence splutters to a six-month low; the main drivers appear to be sluggish job creation and output growth, both at  nine-month lows. Overall the economy is still growing with strong domestic demand but on the flip side, business confidence is slowly heading south, with February optimism levels “well below” the historical average.

The Federal Tax Authority added some clarification on transitional rules involving goods and services being delivered fully or partially in 2018, but had been contracted in 2017 – before the 01 January implementation of VAT. In short, it stated that the only case where consumers are directly responsible for paying VAT on received services, that are delivered fully or partially in 2018, is where the contract states that the amount due is exclusive of tax. In all such “overlapping” cases, the supplier remains liable for accounting for the tax and paying it to the FTA, even if it cannot be recovered from the consumer.

There has been a major improvement in the state of Dubai’s credit default swaps, which in 2009 stood at 1k basis points and now has fallen below 100 bp.  At the height of the GFC, the emirate was on its economic knees, after splurging out on so many construction and acquisition projects and relying on Abu Dhabi for financial assistance.

The total sukuk value listed on Dubai’s two exchanges has now reached US$ 56.5 billion, making it the largest amount of any listing centre in the world, with this week’s two Indonesian government’s listings, totalling US$ 3.0 billion. These transactions make that government the largest sukuk issuer on Nasdaq Dubai, by both value (US$ 14.5 billion) and number of listings (10).

Etisalat is to spend up to US$ 2 billion to buy back up to 5% of its paid up capital (equivalent to 434.8 million shares). It has a current market value of US$ 41.1 billion.

Dubai National Insurance and Reinsurance posted a 9.0% hike in 2017 profits to US$ 14 million, as gross written premiums were 24.0% higher, at US$ 96 million, along with an 18.0% hike in net underwriting income to US$ 12 million.

Union Coop posted a record profit in 2017, with revenue 16.8% higher to US$ 796 million, resulting in a 16.8% increase in shareholders’ equity to US$ 684 million. Over the year, the number of families associated with the supermarket chain was 3k higher at 31k, whilst in October it launched its on-line shopping website.

DIFC reported that its 2017 net profit jumped 25.3% to US$ 99 million, as revenue remained flat at US$ 221 million. Last year, the financial hub, rated in the top ten global financial centres, saw a record 315 new companies to bring the total firms to 1.85k; occupancy was at 99%.

Dubai-listed Amanat Holdings continues with its expansion strategy by paying US$ 87 million for a 35% stake in Abu Dhabi University Holding Company. The health and education sectors speciality investment firm has bought into a leading private higher education provider which, with a 21.7% holding, is the largest investor in Taaleem Holdings.

The DFM opened on Sunday (04 March), at 3209, and having lost 486 points (9.1%) over the past eight weeks was again down – by 52 points (2.4%) – to close at 3157 by Thursday, 08 March. Emaar Properties traded US$ 0.06 lower at US$ 1.63, with Arabtec also down – by US$ 0.02 to close on US$ 0.65. Volumes improved to 382 million shares traded on Thursday, valued at US$ 139 million (compared to 99 million shares worth US$ 39 million the previous Thursday – 01 March). There is no doubt that the DFM is currently in the doldrums, having shed 6.3% already this year, and this despite attractive valuations of 8.1 times expected earnings, as against the 12.3 times found on the MSCI Emerging Markets Index.

By Thursday, Brent Crude had traded slightly lower over the week, shedding US$ 0.22 to US$ 63.61, with gold heading the other direction – up US$ 16 (1.2%) to US$ 1,321 by 08 March 2018.

Indian telco, Aircel is set to start bankruptcy as it is unable to pay outstanding debts of US$ 7.7 billion of which 30% is owed to secured financial creditors, with the balance being unsecured liabilities. The court has to rule whether the company, owned by billionaire, T Ananda Krishnan, should be placed in liquidation as early as today.

2017 proved a difficult year for Lego which posted its first fall in annual sales since 2004, 17.0% lower at US$ 1.7 billion, as revenue dipped 8.0% to US$ 5.8 billion. The main drivers behind the “challenging year” were a decline in its core markets, North America and Europe, and a major clear-out of excess stock. In September, the privately-owned Danish company announced the retrenchment of 8% of its global workforce so as to “reset the company”. (The company, with six stores and Legoland theme park in the emirate, is planning to open a Dubai office this year).

Following its dubious role in mis-selling financial products in the lead up to the GFC, RBS has agreed to pay a fine of US$ 500 million to settle with the US authorities. 80% of the settlement will be paid to those affected, whilst US$ 100k will be for the New York State. However, the bank, still majority-owned by the UK government, is facing a potential fine that could top US$ 5 billion, from the US Department of Justice, for selling risky mortgage-backed securities.

Because of order declines for both its A380 and A400M planes, there is a possibility that Airbus could slash 3.5k staff from its payroll. By 2020, the plane maker will only be producing six jumbos (only thanks to Emirates’ recent 36-plane order) and  eight military aircraft, (which has incurred losses of almost US$ 10 billion to date) a year. Other models are performing well.

Although no numbers were made public, Rolls Royce is another company set to introduce further job cuts following 600 managers leaving over the past two years. This comes despite 2017 profits of US$ 1.5 billion, 25% higher than the previous year when one off costs, including a costly corruption scandal settlement and sterling’s post Brexit collapse when the pound was trading 19% lower to the US$ at around the US$ 1.20 mark, saw the engine maker posting a U$ 6.3 billion loss.

With an adjusted 0.4% Q4 GDP growth – for the eighth consecutive quarter – Japan’s economy expanded 1.6% last year, well above initial 1.0% forecasts.

Turkey joined the likes of Brazil, Costa Rica and Croatia when Moody’s cut its credit rating by a notch to Ba2 – junk status. The main drivers behind the decision appear to be geopolitical tensions, an erosion in public institutions and lack of effective monetary policy by the Erdogan government.  The lira has remained steady so far this year at 3.81 to the greenback, compared to a 2.5% gain witnessed by the MSCI index of emerging market currencies, but ten year bond yields are at a relatively high 12.3%.

Alarming data from the UK’s Office for National Statistics reports that “total accrued-to-date gross pension liabilities of UK pension liabilities” amount to  a massive US$ 10.5 trillion – 20.8% higher than in 2010. Of this figure, US$ 7.3 trillion is owed by the UK government and the balance, US$ 3.2 trillion, relates to promised pension payments, mainly to those in the private sector. The worrying news is that US$ 5.5 trillion is in future “unfounded” state pension payments which are paid from taxes of current workers, as does a further US$ 1.3 trillion of pensions for those employed in the public sector.

The CBI estimates that UK business grew at its fastest pace in more than two years in the February quarter, measured at +20 last month compared to +9 in January. Despite the uncertainty surrounding Brexit, retail was the only sector that did not post figures higher than the long-run averages, with manufacturing and business/professional services stand-out performers. The economy, that many predicted would fall off the cliff after the referendum, continues to head north, driven by an uptick in the global commercial environment.

The first two months of trading has seen eurozone’s retail trade volume posting 0.1% declines in both January and February – when analysts expected a positive 0.3%. However, the figures should be more positive over the year as the impact of on-line sales takes effect. For the eurozone, the year on year retail trade volume growth is expected to be 2.3% (and 2.7% in the bigger EU bloc).

China expects a slight downturn in its economy, with this year’s forecast growth being 6.5% (compared to 6.9% in 2017). Over this year, its two main economic targets are to maintain inflation running at around 3% and trim its budget deficit by 0.4% to 2.6%. President Xi Jinping has been keen to crackdown on big-spending conglomerates and curtail the worryingly high shadow banking sector, as he tries to bring a level of normalcy to the economy. (It is estimated that Chinese shadow lenders account for 15.5% (US$ 7 trillion) of the total global riskier non-bank loans). It will also be interesting to see his response to President Trump’s moves to impose weighty tariffs on steel and aluminium to protect US producers from “unfair” competition.

The President’s mutterings on tariffs have raised the hackles on some of the world’s financial elite. The EU’s Margrethe Vestager called the Trump action “one-sided protectionist measures, which hurt, not just jobs, but the whole system of rules that makes our global economy work”. The IMF’s Gerry Rice has reiterated that such action will cause damage to both the United States (particularly in the manufacturing and construction sectors, both major users of aluminum and steel) and its trading partners.

President Trump wants to see a reduction in the US 800 billion trade deficit (not including the US$ 244 billion services surplus). This has expanded by 16.2% to US$ 56.6 billion, since he took office last year – not helped by cheap imports and in some cases dumping of steel and aluminum. Last month, the Commerce Department commented that the global glut of steel and aluminium threatened US national security. According to US data, it has a US$ 22.3 billion automotive vehicle and parts trade deficit with Germany and a US$ 7.0 billion deficit with the UK. Surely he has a right to be upset by the imbalance and, for instance, to take a pot shot at European carmakers when US-made cars into Europe face a 10% tariff but the other way it is only 2.5% on cars assembled in Europe and sold in the USA. In anyone’s language, It Ain’t Right!

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