Summertime Blues

The week started with HH Sheikh Mohammed bin Rashid Al Maktoum meeting senior government officials. The Ruler later announced that he had instructed the “relevant entities to facilitate business procedures, reduce the cost of doing business and dedicate all possible resources to ease investment activities”. Consequently, expect a waiving of some DED penalties and fines, 20% of tenders given to SMEs and the introduction of instalment payments for some government services. Although Dubai’s GDP is expected to be 3.5% higher this year, the emirate still intends to boost growth to compensate for a regional trade slowdown.

Las Vegas Caesars Entertainment Group has joined with Meraas to build a 178-key Caesars Palace Bluewaters Dubai (only the second in the world) and a 301-room Caesars Bluewater Dubai. Both facilities, sharing a 450 mt private beach and housing a variety of live entertainment and gourmet celebrity restaurants, will help boost the emirate’s burgeoning tourism sector.

Q1 saw Dubai Land Department record 13.8k real estate transactions, valued at US$ 15.7 billion, including 9.1k sales deals (worth US$ 5.2 billion) and 3.7k mortgage transactions worth US$ 7.7 billion. The three main contributing countries were the UAE, India and Saudi Arabia; Business Bay and Dubai Marina were the two leading locations, with 973 and 720 transactions respectively.

What will become the world’s largest cantilever, when it connects the two towers of The Lynx, is to house a One&Only Urban Resorts on opening in 2020. Located in the mixed-use development, One Za’abeel, it will have luxury residences, offices and a retail podium, The Gallery. Ithra Dubai, a fully-owned subsidiary of the Investment Corporation of Dubai, will be the main developer.

wasl Asset Management Group hopes to complete the construction of its Mandarin Oriental Hotel, Jumeirah Beach by year-end. The property, with 246 rooms and six F&B outlets, will have its own private yacht-docking facilities and will be the Hong Kong operator’s first branded hotel in the emirate.

Amlak Finance is to develop a mixed-use project in Nad Al Hamer, covering 700k sq ft. The US$ 79 million, 14-floor tower is slated for a 2020 handover. Last year, the company, which posted a 51.4% decline in annual profits to US$ 14 million, is hopeful that the project will have a positive impact on its future profitability.

MAF has announced a nine-year project, Talal Al Ghaf – a three million sq ft development that will include 6.5k residences and a 70k sq mt swimmable lagoon. No financial details were readily available but the lifestyle destination will also feature commercial, retail and leisure outlets. This will be the Dubai developer’s fourth regional community project following Al Zahia in Sharjah, Al Mouj Muscat and Waterfront City in Beirut.

Dubai Investments, 11.54% owned by the Investment Corporation of Dubai, is planning a US$ 68 million “Crazy Garden”, a domed leisure park featuring gardens, cafes and sporting facilities. Covering 33k sq mt, and located in the Meydan area, almost half the area will be entirely covered by a 14 mt high glass dome so as to ensure 365 days a year usage for visitors.

Having already a 95% share of the auction markets in both this country and Bahrain, Emirates Auctions is to open operations in Saudi Arabia and Kuwait. Initially, the company will focus on vehicle, real estate and unique number plates which has already seen over 1.3 million on-line bidders.

With this week’s launch of Tourism 2.0, the Department of Tourism and Commerce Marketing has introduced a blockchain-enabled marketplace to directly and transparently link potential buyers to the emirate’s tour operators and hotels. This is another step to ensure that Dubai will become the prime destination for global travel, business and events by 2021.

In a bid to establish Dubai as a leading player in the video-gaming sector, an alliance between Tecom and Dubai Media Office is to open Dubai X-Stadium. Globally, the industry is worth US$ 100 billion and this government-backed initiative will place the emirate as a key player for hosting future international e-sports events.

Dubai-based Landmark Group is expanding its Oasis Mall brand across the region, with four slated for this year to bring its total to eleven. The company is one of the largest retail and hospitality companies in the region.

Dubai Duty Free posted a credible 11.0% hike in Q1 turnover to US$ 1.9 billion, with liquor, perfumes and tobacco again being the biggest sales contributors.

Shanghai Electric and Saudi’s ACWA Power have signed a US$ 1.1 billion EPC (engineering, procurement and construction) contract, encompassing phase 4 (700 MW) in the final piece of the jigsaw that is the Mohammed bin Rashid Al Maktoum Solar Park. The whole development, costing US$ 3.9 billion, will deliver the world’s lowest levelised cost of electricity (LCOE) for solar power at US$ 0.073 per kilowatt hour.

The emirate posted a 1.99% increase in its Q1 Consumer Price Index, driven by an 8.2% hike in restaurant/hotel prices and a 5.9% rise in transportation costs (both impacted by the recent 5% VAT introduction). On an annual basis, inflation was 2.27% higher on the back of restaurant/hotel, transport and F&B – rising 12.2%, 8.9% and 5.5% respectively.

The federal Ministry of Economy expects the country’s per capita GDP to increase by 4.0% to US$ 41.7k this year. It also forecasts that foreign direct investment will be 2.4% higher at US$ 10.5 billion.

Of the 7.2 million cheques (valued at US$ 95.7 billion) handled in Q1 by the UAE Clearing Cheque System, US$ 4.3 billion (4.3%) of them bounced. Up to last year, anyone signing a dishonoured cheque faced almost immediate incarceration but a new law allowed for any value under US$ 54k to be dealt via fines.

Dubai-based Al Kasir Group launched three crypto-assets, backed by IGS certified real diamonds – Al Mas, Al Haqeek and Al Falal. Public trading will start in August, with investors able to purchase a variety of packages ranging from US$ 250 to US$ 250k.

Abraaj has offered to resign from its management of a US$ 1 billion healthcare fund that has caused the private equity firm so much recent angst. It has been alleged that it had misused investors’ money, some of whom have raised concerns that the investment was not being used for its stated purpose. The Dubai-based management firm conducted an internal review that concluded nothing amiss had occurred and that the money had been properly accounted for.

Emaar’s chairman, Mohamed Alabbar, has indicated that he expects that the property division should double over the next five years, with the developer focussing on the UAE, Saudi and Egyptian markets. In relation to further IPOs, following Emaar Malls and Emaar Development, there is every possibility that the Indian business and hospitality divisions could be listed before 2021.

Nasdaq Dubai saw its total value of listed sukuk increase 1.5% this week to US$ 59.2 billion, with two new listings – Sharjah Islamic Bank (US$ 500 million) and Damac Properties – US$ 400 million; the Dubai property developer now has three listings on the bourse totalling US$ 1.5 billion.

Whilst still making losses, probably in the region of US$ 80 million, DXB Entertainment has reported a 45% increase in Q1 visitor numbers to 851k. The park operator, 52.3% owned by Meraas, has posted losses of US$ 302 million and US$ 132 million over the past two years.

Deyaar recorded a welcome 25.0% hike in Q1 profits to US$ 11 million, as revenue headed up at same rate to US$ 48 million. The developer, majority owned by the Dubai Islamic Bank, also announced that it expects to deliver The Atria – a 4-star hotel and residential tower in Business Bay – this quarter.

Dubai Islamic posted a 16.4% improvement in Q1 profits to US$ 330 million, with revenue up 9.4% to US$ 537 million, as operational expenses remained flat at US$ 161 million. In 2017, its annual profit was 25.3% higher at US$ 1.2 billion.

Emirates Islamic recorded a more modest 2.0% hike in Q1 profits to US$ 57 million, as its total income dipped 1.0% to US$ 161 million. The bank’s total assets were 7.0% lower at US$ 15.7 billion.

Emirates NBD reported a 27.3% jump in Q1 profits (compared to 10.0% in Q4) to US$ 654 million on the back of a 13.0% rise in net income to US$ 1.6 billion, driven by an increase in loans and the impact of the recent rate hike. At the same time, total assets grew 1.0% to US$ 129.6 billion, whilst its impaired loan ratio was 0.2% lower at 6.0%.

The DFM opened on Sunday (15 April), at 3094, and was 0.4% lower at 3082 by Thursday, 19 April. Emaar Properties was off US$ 0.05 at US$ 1.54, whilst Arabtec lost US$ 0.01 to close on US$ 0.58. Volumes traded were wafer thin at only 78 million shares on Thursday, valued at US$ 45 million, (compared to 176 million shares worth US$ 77 million the previous Thursday – 12 April).

By Thursday, Brent Crude, having risen 5.4% the previous week, gained a further US$ 5.42 (7.9%) to close on US$ 73.75, with gold also on the up by US$ 3 to US$ 1,345 by 19 April 2018.

It is reported that Unilever is to consider abandoning its 89-year old Anglo Dutch structure and base itself in the Netherlands, moving from London to Rotterdam. With a vote to be taken in September, 75% of UK and 50% of Dutch shareholders have to approve the move. The main reason appears to be related to Kraft Heinz’s unsuccessful US$ 143 billion take-over last year and the need for the European conglomerate to simplify its corporate structure.

Morgan Stanley posted stellar Q1 results as revenue climbed 14.1% to US$ 14.1 billion and earnings per share came in at US$ 1.45 (against an expected US$ 1.25).

Netflix is to spend over US$ 1 billion on original productions this year in attacking the European market. This comes at the same time that the company announced that international revenues have exceeded US turnover for the first time. Its rapid expansion will inevitable result in a raft of media mergers in both continents as other providers try to lure back former customers.

According to the IMF, global growth is expected to reach an annual 3.9% over the next two years (0.2% higher than the previous October 2017 forecast); advanced economies are expected to grow at the lesser rates of 2.5% and 2.2% over the two years – both higher than the earlier returns of 2.0% and 1.8%. India and China will witness 7.4% and 6.6% expansions this year, followed by 7.8% and 6.4% in 2019. Growth in the world’s powerhouse has been amended higher to 2.9% and 2.7%.

Driven by President Trump’s recent tax cuts, the Institute of International Finance expects the 2018 global economy to grow at the faster rate of 3.5%, as the US GDP increases by 2.9% (compared to 2.3% last year and an earlier 2.4% forecast for this). This is slightly lower than the IMF forecasts. The world body has expressed concern about the level of global debt – at US$ 164 trillion, it is higher than it was at the height of the GFC; it is also urging the US to reverse tax reductions which continue to keep public borrowing at high levels.

Meanwhile the World Bank has forecast that MENA growth this year will more than double to 3.1% on the back of higher energy prices, government reforms and global economic growth. Another important factor, that will have a positive impact on the global stage, is the US boosting of its domestic consumption and investment.

US retail sales in March climbed 0.6% with a strong rebound noted in the auto sector, up by 2.0%, having contracted by 1.3% a month earlier. The upbeat economic news seems to indicate that the slowdown earlier in the year was a mere blip and that business confidence, backed by strong indicators such as high employment and rising wage levels, is on the rise again.

China’s economy grew at 1.5% in Q1 – slightly down on the 1.6% recorded the previous quarter but was up at 6.8% on an annual basis. Other major indicators – industrial production, retail sales and fixed asset investment – headed north by 6.0%, 10.5% and 7.5% respectively. However, with its March exports falling 2.7% as imports grew 14.4%, China posted a rare monthly trade deficit of US$ 5.0 billion in Q1.

UK inflation dipped again in March falling to 2.3% as it inexorably moves to the Bank of England’s 2.0% target, having recently topped a worrying 3.0% level. On the other side, eurozone’s month on month inflation nudged slight higher to 1.3%, still some way off the 2.0% ECB target but is heading in the right direction. Inflation across the bloc ranged from minus 0.4% in Cyprus to 4.3% in Estonia.

The average price of a UK home has risen 0.4% month on month to a record US$ 427k in April. Latest UK unemployment levels fell to 4.2%- its lowest since 1975 – down from 4.7% a year earlier; the number of jobless fell to 1.42 million. At the same time, weekly earnings came in 0.2% higher.

Recent data still confound the many “experts” who predicted that the economy would fall off a cliff, following the Brexit referendum nearly two years ago. With inflation moving lower, wage levels higher, sterling still hovering around the US$ 1.40 level and a booming stock market, there are a lot of positives. There is no doubt that there will be difficulties in the coming months for the UK but there will be bigger problems facing some of its European neighbours, including France, with its labour troubles, Italy – with its failing banks – and Greece’s on-going high unemployment levels. Summertime Blues!

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One Response to Summertime Blues

  1. leo fewtrell says:

    sorry. Aint no time for the Summertime Blues!

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