Football’s Coming Home!

There has been a 20.1% H1 decline, to 9.4k units, in the number of Dubai off-plan sales transactions (with values 28.0% lower at US$ 3.3 billion), despite a June boost when 2k units were sold. The two top performing locations were Meydan and Jumeirah Village Circle that recorded 1.1k and 0.9k sales respectively. There was more encouraging news on sales for ready property, only dipping 11.8% to US$ 2.8 billion. The market may worsen as mortgage rates start moving north – up 75 bp already this year.

With a US$ 156 million contract awarded to Majed Hilal Contracting, Azizi is expected to start work on phase 4 of Azizi Riviera. Located in Meydan 1, the contract, to build eleven canal-side buildings, comprises over half of phase 4 of the development that will add 4.8k residential units to its flagship project.

Although the offices and commercial side of the iconic Opus building, designed by the late Zaha Hadid, has received their first tenants, it is reported that the opening of the Me by Melia hotel has been delayed twelve months and set to open in Q4 2019. The property – which encompasses 19 floors, including 98 serviced apartments and 19 rooms – would have been the brand’s eighth global location. Melia also announced that it had taken over the running of the Desert Palm Dubai Hotel, formerly managed by the Per Aquum brand by Minor Hotels.

With the market becoming increasingly competitive, as well as hotel revenues and occupancy rates heading south, Rotana is taking active steps to remain viable. The hotel group, with 65 regional properties, has introduced a strategy of cost-cutting and rejigging expansion plans in a bid to stop a decline in revenue levels.

HH Sheikh Mohammed bin Rashid Al Maktoum approved a new human resources law that will see increased annual leave for government employees, by a further three days, with grade 8 employees and above having 25 days’ leave a year; employees will also be entitled to overtime compensation in some cases, have the option to work remotely and receive ticket allowances for all offspring under the age of 21.

In a move to boost customer numbers, Dubai Parks and Resorts have teamed up with Emirates to offer a special two-day access to all four of its theme parks for only 42% of the price. The offer is open to anyone with an Emirates booking.

As part of a new phase of last July’s code-sharing agreement, Emirates and flydubai will utilise the same customer loyalty program, Skywards, from next month. To date, the airlines have a joint network of ninety shared destinations in 48 countries, with a 220 target by 2022.

By acquiring a further 40% stake in Airport Handling, dnata becomes a majority 70% shareholder in the Milan-based ground handler. It manages the passenger, ramp and baggage services to sixty airlines at the city’s two airports, Malpensa and Linate.  The Dubai-based airport operator, with 300 airline customers in 130 airports, made its first investment in the four-year old company in 2016.

Because of the holy month of Ramadan starting in mid-May, monthly traffic at Dubai International was 3.8% lower, at 6.6 million, than in the same month last year; YTD figures of 36.9 million passengers are 0.1% lower than in 2017, whilst figures for the past twelve months are 2.6% higher at 88.2 million. Monthly cargo traffic of 221.4k tonnes was 4.9% down, with YTD returns 3.1% off. Although flight movements have fallen by 5.6% to 32.6k, efficiency has improved, with each flight taking 2.0% more passengers – 209 per flight in May; YTD, a fall of 3.5% resulted in 169k flight movements over the past five months.

It is reported that local ride-hailing service Careem is in talks with Uber about possible collaboration that could take many forms. Uber could try for an outright 100% bid or be satisfied with a majority shareholding or Careem could manage the local business. Uber has been cutting back on business interests outside its core markets in anticipation of a 2019 IPO. It has sold operations mainly in China, Russia and SE Asia but has also retained a share with Russia’s Yandex NV and holds a 27.5% stake in Singapore’s Grab Holdings. Meanwhile, the Dubai firm is a market leader in almost all the ten countries in which it operates and has a regional presence in seventy locations.

Yet again, Dubai scores well in another global poll. According to a recent study by the Boston Consulting Group, Dubai came in sixth in the world that people would move to for work. Cities ahead of the emirate included first place London, New York, Berlin, Barcelona and Amsterdam.

A BMI Research study expects the ME e-commerce sector to expand 80.7% from this year’s total of US$ 26.9 billion to US$ 48.6 billion by 2022. The region’s top two markets are the UAE and Saudi Arabia, where the 20-39 year-old sector account for 50% and 36% of the total population respectively.

Having just extended its title sponsorship of the Irish Open for four more years, Dubai Duty Free has become an Official Partner to the European Tour. It joins a list of well-known global brands – including BMW, Hilton, Rolex and Titleist – that see major golf events as a beneficial marketing tool.

To facilitate logistics to landlocked African countries, DP World will set up a facility in Ethiopia. Goods will be shipped in and out of that country and then transported from there to inland areas. This development will open a whole new trading link that will be a win-win situation for all stakeholders.

The Central Bank reported that for the first five months of the year, 12.1 million shares were handled by the Clearing Cheque System, valued at US$ 161.3 billion; of that total, 4.27% in numbers (515k) and US$ 7.1 billion (4.43%) ‘bounced’. Over the same period in 2017, 12.9 million cheques, valued at US$ 175.4 billion, were cleared and there were 546k cheques not honoured, totalling US$ 7.9 billion (4.48%).

In April, the Central Bank injected US$ 3.8 million into the banking system, reducing its certificates of deposits to US$ 32.2 billion; a month later, in May, it withdrew US$ 1.9 billion excess liquidity from the local market to restore its CD balance to US$ 34.1 billion.

A Truth Economic Consultancy report shows that the country’s s real estate and construction sector added US$ 94.3 billion to the GDP – up 5.9%, compared to a year earlier; it also accounts for almost 31% of UAE’s GDP. Total bank loans to the commercial and industrial sectors rose by 3.4% in the first five months of 2018 to US$ 211.0 billion, equating to 48% of total bank lending.

The Dubai Financial Services Authority has questioned senior executives, including founder Arif Naqvi as well as co-chief executives Omar Lodhi and Selcuk Yorgancioglu, about the alleged misuse of investor funds at Abraaj. In June, the Dubai-based private equity firm stopped fund raising activities and filed for provisional liquidation in the Cayman Islands. Since then, it has been trying to sell the firm’s assets in an orderly manner including its investment management arm to Colony Capital. However, more pressure on the embattled Abraaj came with news that Colony Capital’s deal to take control of four of the buy-out firm’s funds is facing investor resistance.

This week, the DIFC Courts have ruled against the former deputy chief executive of GFH Capital, David Haigh, who was ordered to repay US$ 6 million plus costs; having led GFH Capital’s purchase of Leeds United in 2012, he was convicted of fraud and embezzlement in 2015. He served two years in prison from 2014 and was subsequently deported from the UAE after being convicted for faking some one hundred invoices, with monies being paid into at least four banks here and in the UK. Sir Jeremy Cooke said in his summing up “the court… is satisfied on the evidence that the defendant is a fraudster who caused to be paid into his own bank accounts and that of his close friend, monies belonging to the claimant.   .   .” GFH will now go to the UK courts to try and enforce the judgement.

The number of H1 traded contracts at the Dubai Gold and Commodities Exchange hit a record level of over 11.3 million, valued at US$ 250 billion. DGCX, a derivatives exchange, is a subsidiary of the DMCC.

ServeU will launch its IPO, and be registered on the Dubai Financial Market, in September. There were no further details relating to the size and value of the listing. The Union Properties’ subsidiary, one of the country’s leading five facilities management companies, is also expecting to double the size of its workforce to 10k over the next two years, as its client base expands along with possible local acquisitions.

It seems that troubled retailer, Marka, which has suspended trading on the DFM since late April, will not resume until at least 04 September at which time a restructuring plan will be discussed at a shareholders’ meeting. Since its 2014 establishment, the company, which has exclusive Gulf rights to Real Madrid products, has yet to show any profit returns.

The DFM opened on Sunday (01 July) on 2821, having shed 262 points (8.6%) the previous two weeks, regained some ground, up 59 points (2.1%), closing the week, on 05 July 2018, at 2880. Both Emaar Properties and Arabtec were trading higher on Thursday 05 July by US$ 0.05 to US$ 1.39 and US$ 0.04 to US$ 0.56 respectively. Volumes were lower, trading 226 million shares, valued at US$ 64 million, (compared to 306 million shares, worth US$ 123 million, the previous Thursday – 28 June).

By Thursday 05 July, Brent Crude, having gained US$ 4.80 (6.6%) the previous week, lost some ground down US$ 1.46 (1.9%) to close on US$ 77.39, with gold climbing back, after shedding US$ 52 (4.0%) the previous fortnight, up US$ 8 to US$ 1,259.

Mining giant Glencore is being investigated by US authorities in a money laundering probe relating to business deals over the past decade in Nigeria, Democratic Republic of Congo and Venezuela. The company, which expects to make an annual profit of up to US$ 3.2. billion, saw its share value slump 12% to nearly US$ 4.00, after it was ordered to hand over specific documents.  A day later, the mining giant announced that it would buy back up to US$ 1 billion of its shares – a move that may go some way to placate shareholders who had seen US$ 5 billion written off its market value; shares jumped 4.7% on the news.

After winning a US$ 200 million tank contract with the US Marine Corps last week, BAE Systems has hit the jackpot. It has been awarded a US$ 26.5 billion Australian government contract to build a new generation of warships. Part of the deal is that the frigates will be built down under.

In a two-prong strategy move, Boeing is forming a US$ 4.8 billion 80:20 venture with Brazil’s Embraer SA, that will result in an expansion into the smaller jetliner market, as well as giving it an overseas manufacturing base. It will also help the US company expand into the ever-growing market for 100-seater planes and levels the playing field somewhat with Airbus who, on 01 July, took over control of Bombardier C series jets.

Because of Pratt & Whitney failing to meet an engine delivery deadline, Airbus will supply up to forty less A320neo planes this year and now expects to hand over 170 planes by the end of the year; well-publicised problems have seen a three-month delay that could result in customers claiming penalties. For example, Indigo, the plane maker’s largest customer, with a 430-jet order, has incurred extra costs by having to lease aircraft on short-term contracts. In turn, the Toulouse-based company has had to park planes, without engines, in places such as China, Germany and the US, adding to their costs.

This week has seen the proposed merger between the Indian-owned Tata Steel and Germany’s ThyssenKrupp move a step closer, with the new entity to be known as Thyssenkrupp Tata Steel. The merger will create Europe’s second biggest steelmaker (after Arcelor Mittal) and will lead to a reduction in the combined 48k workforce, in both administration and production; cost savings of up to US$ 580 million are expected. In the UK, Tata employs 4k at its Port Talbot operation and 3k at Deeside. The steel industry will be facing pressure on three fronts – Donald Trump’s introduction of 25% tariffs, dumping by China and the possible fall-out from Brexit.

Although still wearing Nike shoes, Roger Federer has moved his allegiance to Fast Retailing Co.’s Uniqlo, 24 years after signing his first sponsorship deal with the Oregon-based athletic-wear conglomerate. The agreement will see the 36-year old Swiss tennis star earn US$ 300 million over the next decade.

After discovering financial irregularities late last year, Steinhoff International has written off US$ 14.5 billion, emanating from inflated asset deals and other trades “not at arm’s length”. The owner of Conforama in France, Mattress Firm in the US and Kika/Leiner has restated its 2017 figures which saw asset values fall US$ 14.5 billion to US$ 26.1 billion – and the calculation process is still on-going. Little wonder that its shares have fallen 97% since the scandal was discovered and the company is trying to negotiate a US$ 11.0 billion restructuring programme with its creditors. Former chief executive Markus Jooste is being investigated by a South African anti-corruption police unit.

DB, a US subsidiary of troubled Deutsche Bank, was found to have “widespread and critical deficiencies”, as it failed the second part of the US Federal Reserve’s annual stress tests. This news comes after S&P had cut its rating and questioned its plans to return to positive trading. Last month, it did pass a stringent phase 1 test measuring its capital levels against a severe recession. The end result is that the bank, with US$ 133 billion in assets, may cut back on its US operations and that it will need the Fed’s approval to make any distributions to its German parent. Deutsche Bank, has seen its share value fall by over 43% so far in 2018.

June’s IHS Makit Eurozone Manufacturing PMI registered 54.9 – its lowest level in eighteen months – driven by a continued softening in both production and new order intakes. Output and new orders both registered their weakest pace of growth since November 2016 and August 2016, respectively. Consequently, business optimism has slumped to its lowest level in thirty months, whilst the rate of expansion in outstanding business is at a 22-month low. The threat of a trade war will exacerbate the problem of ongoing, weak economic data. Unemployment levels in both the EU28 and the eurozone remain flat at 7.0% and 8.4%, with Czech Republic and Germany posting the lowest levels of 2.3% and 3.4%, with Greece (20.1%) and Spain (15.8%) at the other end of the spectrum.

Strong economic data keeps coming from the US, with the Institute for Supply Management’s June PMI climbing 1.5 to 60.2, partly due to a quickening in production growth from 61.5 to 62.3, whilst the new orders index dipped 0.2 to 63.5. Just as in Europe, there is concern what impact a trade war would have on the economy.

How the mighty have fallen! Worth more than US$ 35 billion only six years ago, Brazilian magnate, Eike Batista, has seen his empire built on oil and mining collapse. He has been found guilty of handing the former Rio governor, Sergio Cabral, US$ 16 million in bribes to secure lucrative projects. It is apparent that his fortune was down to corruption and bribing top officials for their favours.

To ready themselves for an upcoming battle with Amazon, supermarket giants, Tesco and Carrefour, have formed a buying alliance which could result in an annual saving of well over US$ 500 million. The US “invader” spent US$ 14.2 billion last year for niche retailer Whole Foods Market, which already had seven supermarkets within the M25, as well as becoming involved in on-line sales with Morrisons.

The Financial Reporting Council is looking into KPMG’s audit of ex-Bargain Booze owner Conviviality, which went into administration in April. Only last month, the financial watchdog criticised the firm for an “unacceptable deterioration” in the quality of its audits and took the unusual step saying it would inspect 25% more of its audits in the 2018-19 financial year. Earlier in the year, it was also censured over its audit of collapsed construction firm Carillion and, last month, fined over US$ 4 million relating to the audit of insurance firm Quindell.

Turkey’s June inflation level rose by 15.39%, its highest level since January 2004, driven by a slumping currency and hikes in transportation (up by 24.26%) and food products such as non-alcoholic beverages rising 18.89%. The Central Bank has lifted its 2018 forecast to 8.4% but expects a dip next year to 6.5%. Consequently, it is all but inevitable that there will be a rate hike, that could be as high as 100 bp (1%) later this month.

Theresa May will have all her cabinet locked up for the day tomorrow as she tries to agree a united blueprint for the UK’s relationship with the EU post Brexit. This week, several major players have gone out of their way to warn of the catastrophic impact that leaving the EU will have on the UK economy. This is almost a rerun of the many establishment disaster-day comments made before the referendum including Mark Carney’s warning that the risks of leaving “could possibly include a technical recession”; the then Chancellor, George Osborne said that leaving the EU would tip the UK into a year-long recession, with up to 820k jobs lost within two years.

Now, we have the ADS chief executive, the Jaguar boss and the Airbus chief executive all scare-mongering with dire warnings once again. Paul Everitt has said that a no-deal Brexit would be a “worst case scenario”, that could ground aircraft made with UK-made parts. Ralf Speth, of the country’s biggest carmaker, has also warned that a “bad” Brexit deal would threaten US$ 106 billion worth of investment plans for the UK and may force it to close factories. Paul Enders has indicated that the plane-maker could leave if the UK were to leave the single market and customs union without a transition deal.

This is just what the government wants to hear to “soften up” the electorate that has been bamboozled by both sides of the argument. On 27 June 2017, almost one year after the referendum, this blog wrote about Mrs May that:

This his time last year, she was steadfastly in the “Remain” camp but soon moved her position to appear pro-Brexit. The same can be said of her cohort, Chancellor Phillip Hammond as both canvassed for a “Hard” exit after the referendum. Now it looks as if the debate will go full circle and both turncoats will opt for a very soft Brexit resulting in the UK retaining more than one foot in the EU – so much for the PM’s battle cry of “no deal is better than a bad deal”

Since then nothing seems to have changed and the government is no further down the road with its Brexit plans. Instead of worrying about their political careers, it is about time some politicians considered their electorate and the UK population.

Contrary to popular belief, the UK service sector continues to gain momentum with the latest HIS Markit CIPS PMI increasing 1.1 to a healthy 55.1 – the 23rd consecutive month it has stayed above the 50 level which marks the difference between growth and contraction. Positive influencers were the general upturn in demand, a rapid increase in new business inflows and improved economic conditions. Even the Bank of England governor has more confidence in the economy, indicating that weak Q1 figures were down to the weather, and that household spending and sentiment had “bounced back strongly”. With the favourable weather conditions and England’s progress in the World Cup, the feel-good factor will feed into July results, moreso if the team goes all the way – Football’s Coming Home!

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