Everybody’s Talkin’

Chestertons latest report indicates that in Q2, there were quarter on quarter declines in both overall rental rates for apartments and villas by 4% and 2% respectively, with sale prices down by 1% and flat. The main driver behind the uptake was in the mid-market sector where buyers took advantage of good deals and attractive packages on offer.

The report also highlighted the improvement in certain areas such as Business Bay where units, having recorded a 9% decline in Q1, bounced back 4% to US$ 334 per sq ft and Jumeriah Village Circle up 6% to US$ 237 per sq ft (from an 8% fall the previous quarter). On the flip side, International City posted a 7% quarterly fall to US$ 160 per sq ft, whilst The Greens was 2% lower at US$ 293. When it comes to villas, only Palm Jumeirah was higher by 4% to US$ 626 per sq ft. The Meadows and The Springs remained flat and there were declines of 1%, 2% and 3% in The Lakes, Arabian Ranches and Jumeirah Park respectively.

Luxhabitat also confirmed that some sort of stability had returned to the secondary residential market in Q2 with 1.4k villas and 6.7k apartments sold for US$ 3.3 billion, compared to US$ 3.9 billion in Q1, traditionally a busier sales period. It also estimated that the five best locations for gross rental yield were Jumeirah Village Circle (8.0%), Jumeirah Lake Towers, Emirates Living, DIFC and Dubai Marina – all around 6.0%.

Central Hotels has had a soft opening of Royal Hotel – a 207-key property on Palm Jumeirah. The five-star hotel, overlooking the Arabian Gulf, will have a variety of recreational facilities and numerous dining options.

With a current portfolio of fifty aircraft, valued at over US$ 4 billion, Dubai-based aircraft lessor, Novus Aviation Capital, is one of the world’s fastest growing aircraft leasing financing platforms. This week it signed a US$ 1.4 billion deal with Boeing for 777-300ERs at the Farnborough International Airshow.

Dubai Parks and Resorts reported a 46% hike in H1 visitor numbers to 1.4 million, with over 300k in April alone. During the period, hotel occupancy at the Lapita Hotel jumped from 24% to 55%.

There are reports that Emaar Properties is in the throes of selling up to US$ 1.4 billion of its non-core assets, half of which will be from the sale of all but two of its hotel portfolio and the balance from the sale of schools and clinics in its residential communities.

Troubled Abraaj Holdings posted a Q1 US$ 188 million loss after having dipped into investors’ money to run its operations, following its delayed sale of K-Electric in Pakistan. Once one of the region’s largest private equity firms, with assets of over US$ 14 billion and now under liquidation, it has total assets of US$ 1 billion – with US$ 148 million net realisations from assets available for the liquidation process. With discussions on the sale of the firm’s asset management business ongoing, it is reported that both Cerberus Capital Management and Colony Capital have made increased offers to acquire some of the Dubai-based firm’s assets. Currently, 89 firms have announced exposure to Abraaj including Air Arabia’s US$ 327 million, Commercial Bank of Dubai (US$ 18 million), Mashreq (US$ 125 million) and Al Qudra Investments.

It seems that Abraaj Holdings used an “unusual” business model as it tried to plug the liquidity gap between the investment management fees and operating expenses. It is reported that the liquidators have had trouble finding key annual financial statements/management accounts and that there had been problems funding its cost base from ongoing revenues. The liquidator has indicated that since 2014, “management fee income and carried interest was insufficient to meet the Abraaj Group’s significant operating costs, with the result that any liquidity shortfall was largely funded through new borrowings.”

To coincide with the visit of President Xi Jinping, Emaar announced its landmark six-square kilometre mega-development which will include the region’s largest Chinatown. The company is to open three offices in Beijing, Shanghai and Guangzhou to promote tourism, education, trading and investment between UAE and China. Emaar also plans to expand its premium luxury hotel and serviced residences brand, Address Hotels + Resorts, to China.

The emirate is trying to boost bilateral relations with China in other aspects. In 2016, it was decided that Chinese visitors could enter the country without a visa – the end result sees visitor numbers topping 400k in the first five months of this year, with that total having doubled over the past three years; overnight Chinese visitors have grown 119% since 2014 and last year saw an annual 42.4% hike in arrivals. There are 200k Chinese living in the country. The Dubai College of Tourism has undertaken Mandarin tour guide training for more than 200 guides and an MoU has been signed with Fliggy, Alibaba’s online travel platform to position Dubai as the preferred destination for Chinese travellers. Another agreement sees Huawei, one of China’s leading smartphone manufacturers, offering useful Dubai content on its travel apps.

After a five-month trial, it seems that Dubai-based ride-hailing app Careem is to launch its own food delivery service, CareemFood. Earlier in the year, it acquired regional online restaurant listing platform RoundMenu and is now in discussions with investors to raise up to US$ 150 million funding. The firm, with 24 million registered users, is expected to start in Pakistan by the end of Q3, followed by the UAE.

Du posted an 18.8% hike in H1 profits to US$ 263 million, as revenue jumped 4.0% to US$ 1.8 billion. As a result, an interim US$ 0.0354 dividend (totalling US$ 160 million) has been recommended, subject to shareholders’ approval.

Mashreq recorded a 5.2% hike in H1 profits to US$ 327 million backed by a 3.7% improvement in operating income to US$ 845 million. There were increases in total assets (up 1.4% to US$ 34.6 billion), loans/advances (7.9% to US$ 18.4 billion) and customer deposits (2.3% to US$ 18.4 billion).

The DFM opened on Sunday (15 July) on 2880, having shed 262 points (8.6%) the previous two weeks, regained some ground, up 59 points (2.1%), closing the fortnight, on 26 July 2018, at 2880. Along with the bourse up 69 points (92.4%) to 2974, both Emaar Properties and Arabtec were trading higher on Thursday 26 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 226 million shares, worth US$ 64 million, Thursday – 12 July).

By Thursday 26 July, Brent Crude, having shed US$ 5.60 (1.9%) the previous two weeks, lost further ground down US$ 3.14 (4.1%) lower to close on US$ 74.25, with gold losing US$ 12 (1.0%) to US$ 1,247.

Google was fined US$ 5.0 billion by the EU’s commission, having concluded that the US tech firm had forced device-makers to pre-install its apps and services. This is the largest-ever fine imposed and Google have been given ninety days to end the “illegal conduct”. Last year, Google was fined US$ 2.8 billion for forcing users away from rival offerings and towards its own comparison-shopping site.

In what was its worst day in its short history, Facebook shares plummeted by over 20% slashing over US$ 120 billion off its market cap and making its founder, Mark Zuckerberg nearly US$ 16 billion poorer but still worth US$ 67 billion! The fall came after the social networking giant warned that profits would be lower, as it would be spending an increased amount on site security, following the Cambridge Analytical fiasco. European users have fallen 1.0% to 279 million, with a slowdown in advertising revenue because of tough new European data protection laws, introduced in May.

The same fate awaited Twitter the following day with their share value plummeting 19% on the back of concerns that it was putting “more effort into producing a “healthy” service and numbers had fallen in the wake of weeding out fake accounts.

Amazon share value went the other way – up 3% after posting a record US$ 2.5 billion Q2 profit, compared to US$ 197 million a year ago. The growth in its top line was not as spectacular – jumping 39.0% to US$ 52.9 billion.

With imports growing faster than exports, by 0.9% to 0.2%, the eurozone trade surplus fell 6.1% (US$ 1.8 billion) to US$ 19.3 billion in May.

There was a marginal 0.1% decline in China’s Q2 economic growth to 6.7% at a time when US trade relations deteriorated. There was impressive year on year growth figures including retail sales (up 9.0%), fixed asset investment (6.0% higher) and industrial production at 6.0%. The urban unemployment rate remained flat at 4.8% in June.

A recent Begbies Traynor report has highlighted the stress facing the UK’s High Street. It estimates that over 30.6k store chains are in trouble and “facing significant financial distress” and the problem is not going away. Over the past five years, 61k shops have closed and 50k retail jobs axed. The situation has been exacerbated by the presence of online retailers, with the major players such as Amazon not facing the high costs associated with a brick and mortar retailer. Instead of seemingly bending over backwards to help these international interlopers, the government should be looking at reforming business rates, cutting exorbitant parking rates and charging the internet sector a fairer tax rate.

To try and level the playing field with Aldi and Lidl, Tesco is to open a new chain of discount stores, called Jack’s. It will be operated separately from its parent company and up to 60 stores could be opened over the next twelve months. Over the past decade, the two German retailers have seen its combined market share more than triple from 2.9% to 9.4% – and still heading north.

Further problems for President Trump came with news that China’s trade surplus of US$ 24.6 billion with the US in June was at a ten-year high and YTD topped US$ 133.8 billion. For June, exports were 11.3% higher and YTD both exports and imports were higher – by 13.6% and 11.8%. It seems that some Chinese companies were trying to move goods before tariffs took effect. There is no doubt that Washington will not be too happy with these figures and will “encourage” China to cut back its trade surplus.

June retail sales were 0.5% higher, following a stellar 1.3% jump in May, driven by a 0.9% rise in vehicle sales and a 2.2% hike in sales by health and personal care stores; on an annual basis, the growth came in at 6.6%. Consumer spending is expected to expand further in the coming months, as job growth strengthens, wage growth begins to pick up and tax cuts start to increase disposable income streams.

There is no doubt that the President’s tax cuts late last year have been the main driver in the economy growing at its fastest quarterly rate in over four years. At an annualised 4.1% rate, even his critics must admit that the economy is booming. However, it will be some time before we know whether it has been all worthwhile – that will happen when the extra growth exceeds the US$ 1.5 trillion cost of the cuts.

July has turned out to be a good month for Russian president, Vladimir Putin. He had a successful meeting in Helsinki’s Hall of Mirrors with Donald Trump at which he managed to be one hour late. Nobody really knows what happened since the main meeting took place behind closed doors with just the two protagonists and their interpreters.

The economy is holding up well in Q2 after impressive Q1 returns on the back of higher energy prices and an uptick in exports, with unemployment remaining at a multi-year low. Retails sales are heading north even before the football circus came to town, Putin also defied his many critics by seeing his country hosting what many observers claim to have been the best-ever staged FIFA World Cup. The event was a showcase for the Russians and they passed with flying colours – both on and – more importantly – off the field. There is no doubt that Everybody’s Talkin’

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