When Will They Ever Learn?

The big news of the week was that the UAE cabinet approved plans to allow foreign investors 100% ownership in some businesses and grant ten-year residency to selected expatriates, with the ultimate aims to attract international investors and high-skilled professional workers. It will also allow dependent students to extend their visa time after completing their tertiary education. It is expected that the law could be in place by the end of Q3. HH Sheikh Mohammed bin Rashid Al Maktoum has reiterated that “the UAE will remain a global incubator for exceptional talents and a permanent destination for international investors.”

According to the IMD World Competitiveness Center, the country, having moved up from 27th only seven years ago, is the seventh most competitive in the world and ranked number one in twenty-three indicators including “Government Decisions” and “International Talent”.  As the Dubai Ruler said “we have the determination, we have the talent, and we have the resources. Being Number One suits our nation”.

In another busy week, the Dubai Ruler launched the UAE Platform for Scientific Laboratories with the main aim of driving scientific research and development in the country. As well as trying to attract highly qualified scientists to use the country as a base for further studies and projects, its aims are to provide an advanced research environment and outstanding infrastructure. He also launched the construction of the US$ 107 million Shindagha Bridge Project, part of the 13 km US$ 1.4 billion Shindagha Corridor Project; the bridge will feature an iconic design based on the concept of the mathematical infinity sign.

Asteco’s latest report indicates that JBR posted the emirate’s largest annual apartment rental declines (at 15%), closely followed by 14% falls in Deira, Downtown Dubai and Dubai Marina plus 13% declines in Sports City and The Greens. In relation to villas, the three biggest decreases were to be found in Jumeirah Village (15%), Jumeirah Park (13%) and 11% in Arabian Ranches. In Q1, sales prices for both villas and apartments dropped by 1% but over the twelve months the declines were 6% and 9% respectively. The report also estimated that there would be 30k residential units delivered by the end of the year, with 3.7k already handed over in Q1, leaving a further 26.3 k over the next nine months. (This compares to Core Saville’s recent forecast of handovers “may exceed 21.5k)).

Union Properties’ shareholders have approved two motions –  allowing an increase in the foreign shareholding ceiling from 25% to 49% and the launch of sukuk (within the next twelve months), at a maximum value of US$ 272 million, with no more than 9% yield, which is not convertible to shares and will neither be offered publicly nor be listed.

Abu Dhabi-based Manazel Real Estate, in association with Tasameem Real Estate, is to invest over US$ 136 million in three projects, two of which are in Dubai – Dubai Silicon Oasis and Jumeirah Village Triangle. The company is also in discussions with other investors for other similar projects locally and in the wider region.

Seven City JLT is the latest project off the drawing board of property developer, Seven Tides. The US$ 350 million 27-floor development, covering an entire cluster, will include a 2.6k residential building and retail space of 150k sq ft; already 15% completed, handover is expected by Q3 2021.

Colliers International reports that Q1 year on year construction costs and material costs were between 1.8%-2.3% and 3.1 higher respectively, driven by an increase in the price of local and foreign manufactured materials as well as higher Chinese prices as the government there continues to close down illegal factories. The consultancy also predicts that overall construction costs this year will be no higher than 1.8%, based on World Bank predictive prices – copper and crude oil remaining flat and 6.3% and 3.4% declines in iron ore and aluminium. With YTD copper at US$ 3.096 (6.2% lower), Brent’s US$ 78.79, 18.3% up, iron ore at US$ 65.74 – 7.8% off – and aluminium flat at US$ 2,252, the World Bank forecasts could be a little shaky.

A US$ 300 million JV will see Gems Education and EFG Hermes invest in the Egyptian education sector over the next five years. The country has a student population of 21 million, 10% of which are enrolled in private schools.

Amazingly, it is estimated that ride-hailing app Careem creates 80k new job every month, with 800k self-employed drivers (captains), currently using the platform to make a living. Careem, which provides training and other benefits to their drivers, is now available in 100 cities in 14 countries with potential markets such as Sudan, Oman and Algeria in the pipeline.

April data shows that Dubai’s inflation level dropped 0.32%, month on month, to 1.79%, driven mainly by 1.91% decreases in housing, utility and gas/fuel costs, as well as a marked 11.25% slump in entertainment and culture.

The Ministry of Finance has reported that 2017 federal government spending reached US$ 13.2 billion, with two sectors, ‘general public services’ (US$ 4.4 billion) and public order and safety (US$ 2.9 billion), accounting for 54.8% of the total spend.

It seems that worrying times are ahead for Abraaj, the biggest buy-out firm in the ME, with assets under management totalling almost US$ 14 billion, as two separate examinations are reportedly under way into the running of some of its funds. Since the beginning of the yea, and possible problems arising from its running of a US$ 1 billion global healthcare fund, the firm has witnessed its founder Arif Naqvi ceding control of the asset management unit, job cuts including three senior managers, liquidity concerns and asset sales. Reports indicate that it is close to disposing both of its Pakistani utility and a controlling stake in its fund management unit.

In a major deal, Emirates NBD has paid Russia’s Sberbank a reported US$ 3.2 billion to acquire Turkey’s fifth largest bank, Denizbank, which will allow Dubai’s biggest lender to expand its regional reach. With assets of US$ 37 billion, as well as 708 branches in its home country and 43 in five others, it has an 11.8 million customer base. Moody’s maintained a stable outlook the Dubai bank’s long-term deposit rating and confirmed its long-term and short-term foreign currency deposit ratings.

To ramp up its capital base, Dubai Islamic Bank has offered 1.64 billion shares at US$ 0.85 per share (on Thursday its share price on the DFM was US$ 1.30); subscriptions will remain open until Saturday, 26 May.

The country’s largest real estate investment trust, Emirates Reit posted a 23.0% hike in property operating income to US$ 13 million, with EBITDA, (earnings before interest, taxes, depreciation and amortisation), 21% higher at US$ 9 million. The company did not provide figures for net income but its total 2017 dividend payout was US$ 0.022, half of which has already been distributed.

Union Properties’ shareholders have approved two motions –  allowing an increase in the foreign shareholding ceiling from 25% to 49% and the launch of sukuk (within the next twelve months), at a maximum value of US$ 272 million, with no more than 9% yield, which is not convertible to shares and will neither be offered publicly nor be listed.

The DFM opened on Sunday (20 May), at 2913, and having gained gaining 31 points (1.1%), the previous week was 41 points (1.4%) higher, closing on 2954 by Thursday, 24 May. Emaar Properties was up US$ 0.01 at US$ 1.41 whilst Arabtec was flat at US$ 0.53. Volumes were higher, trading 321 million shares on Thursday, valued at US$ 68 million, (compared to 115 million shares worth US$ 55 million the previous Thursday – 17 May).

By Thursday, Brent Crude, having risen 7.6% the previous two weeks dipped by US$ 0.51 (0.6%) to close on US$ 78.79, with gold going in the opposite direction, driven by the cancellation of the North Korean / US nuclear summit, to move US$ 15 (1.2%) higher at US$ 1,304 by 24 May 2018

Although still posting adjusted net losses of US$ 577 million (18.2% lower than the deficit a year earlier), Uber posted fairly decent Q1 figures, with net revenue 67.0% higher at US$ 2.5 billion on a 55.0% jump in revenue to US$ 11.3 billion. The loss figure did not include the US$ 3.0 billion gain from its sale of its SE Asian sale of Grab and the merging of its Russian business with Yandex. Significantly the company’s market value seems to have risen 29.2% in little over a year to US$ 62.0 billion – the difference between its own valuation last year when it sold a stake to Softbank (US$ 48.0 billion) and its current US$ 62.0 billion, based on a US$ 500 million sale to two current investors.

Despite reports this week of a possible tie-up between Barclays and Tata Steel has acquired a majority shareholding for US$ 5.4 billion in bankrupt Bhushan Steel – the first time that any Indian company has “beaten” the country’s new insolvency and bankruptcy laws, introduced to tackle the seemingly insurmountable US$ 150 billion bad debt problem.

Standard Chartered, it is highly unlikely to take place The British institution, centered on the US/European markets, has a market capitalisation of US$ 49 billion whilst the Asian-centric bank valued at US$ 34 billion. Both banks have their own unique problems – the former with an underperforming investment arm and the other a lack of capital generation to further major expansion activities – which a merger would not help either party.

An Epicor Software’s report indicates that global manufacturing grew 3.7% last year to register 103.7 points on its Global Growth Index, which reports on activity in 14 territories. This comes about despite a challenging economic environment and was driven by investment in new technology. Many of the manufacturers involved in the study reported increases in sales and turnovers (5%) and profit (3%).

Eurozone May manufacturing growth slowed 1.7 month on month to 54.5 – its lowest level of growth in eighteen months and fourth consecutive month of declining growth – with services growth off at 53.9, a sixteen-month low. The final IHS Makit Eurozone PMI (purchasing managers’ index) was 1.0 lower at 54.1. The outlook for business activity levels for both sectors showed was at an 18-month low.

To avoid a possible Trump trade war, China has offered a US$ 200 billion olive branch to reduce its spiralling trade surplus with the US. This will largely be carried out by increasing imports, after the government announced that it would discontinue its anti-dumping and anti-subsidy investigation into imports of US sorghum, citing matters of public interest for their change of heart.

China’s State Information Center expects an annualised 6.7% growth in Q2, as other economic indicators point to a slight loss in momentum following the government’s recent crackdown on the country’s shadow banking industry. Although industrial output headed north, and retail sales and fixed asset investment increased at less than expected rates, property sales dipped for the first time in six months.

There was a marked month on month fall in Japanese consumer prices in April – down almost half to 0.6%.

The UK’s inflation rate continues to fall steadily to its 2.0% BoE target, with April’s return of 2.3% its lowest level in over a year and down from its October peak of 2.8%. The main factor behind the fall was airfares “influenced by the timing of Easter.”

Bitcoin continues to defy its many critics who have predicted it downfall for some time and now they have some ammunition with the cryptocurrency down 23.1% at US$ 7,561 from US$ 9,837 on 05 May 2017. Even more fuel to the doubters is that it is 60.9% lower than its 11 December 2017 peak of US$ 19,357. However, if a longer-term view is taken it is 371.5% higher than it was just twelve months ago when its value was US$ 2,035 and 1,595% higher than its US$ 474 level exactly two years ago. Even then, the doomsayers were on its back and probably will be next year and the year after but to no avail. When We They Ever Learn?

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