End Of May

In a move to tap into the ever-growing Chinese market, Falcon City of Wonders has launched a new villa development – Eastern Residence will be a gated community of 680 LEED Gold certified villas, with starting prices at US$ 845k. This development will be part of its Pyramids Park project that will comprise 4.7k serviced hotel apartments in three structures, which will include the largest ever-built pyramid.

Azizi Developments expect to deliver 2.3k units in Q4, as completion of seven projects draws closer. Encompassing 284k sq mt, the projects are Shaista, Samia, Star, Farishta, Plaza in Al Furjan, Azizi Mina on The Palm Jumeirah and Azizi Aliyah Residence.

Emaar has invited construction bids to start work on Beach Vista residences in Emaar Beachfront. The Sunrise Bay project comprises two towers of 33 and 26 storeys, with the size of apartments ranging from 75 to 253 sq mt.

Jumeirah Group has announced the launch of its 22nd property – the Jumeirah Nanjing in China, designed by the late Zaha Hadid. The hotel, located on floors 39 – 67 of the North Tower, is by the banks of the Yangtze River and includes 212 rooms and 49 suites.

Foundering Drake & Scull could have been thrown a lifeline in its bid to stop going out of business, with its largest shareholder, Tabarak Investment, increasing its investment to 13.73%. This comes ahead of a crucial general meeting next week to vote on whether to close down operations or not.

The US food retailer and convenience store chain, Circle K, is planning to triple the number of its UAE outlets, from the current level of 35, over the next twelve months. To complement this expansion, the company, owned regionally by Convenience Arabia, will open a dedicated regional distribution warehouse and central kitchen.

There are reports that Uber is in discussions to acquire Careem Networks FZ in a deal that could top US$ 2.5 billion. Earlier in the year, the Dubai-based ride-hailing firm held investor talks to raise US$ 500 million which would have valued it in the region of a much lower US$ 1.5 billion; at the time, an IPO was a possibility. Careem is the biggest player in the region, employing one million drivers in more than 100 cities.

The UAE government is to introduce a new class of visa to encourage retirees to remain in the country. Persons over 55 can apply for a five-year visa subject to one of the following three conditions being met – owning a real estate investment in excess of US$ 545k, local financial savings of over US$ 272k or proof of monthly income of at least US$ 5.5k.

This is just one of four decisions made by the government this week, in an attempt to boost consumer confidence, with the other three being reduced electricity costs for factories, (up to 29% for large and 20% for smaller utilities), the introduction of a ‘one-day court’ system for minor criminal offences and the adoption of unified national standards for public and private hospitals.

The UAE President HH Sheikh Khalifa has approved additional funding of US$ 536 million for the general federal budget and to the budgets of independent entities for the current year, to be financed from the general reserve. The many beneficiaries will include Ministry of Tolerance, the Emirates Diplomatic Academy, the UAE Space Agency and the General Authority for Sports.

Moody’s reckon that there was but a “modest” inflationary impact, following this year’s introduction of VAT in the UAE, as many high ticket items for households – including education, healthcare and rent – were at zero or exempt rates. Another “benefit” was that higher input costs for firms have generally not been passed through to output costs. The ratings agency also estimated that the tax could add US$ 6.5 billion, equating to 1.7%, to the country’s GDP and that 30% of receipts will be utilised by the federal government, with the balance being distributed among the seven emirates; the sharing formula is not yet known.

The Central Bank has trimmed its 2018 inflation-adjusted GDP growth forecast from an earlier June 2.7% to 2.3%, caused by a Q2 slowdown in the non-oil sector which contracted 0.2% to 3.6%, quarter on quarter. A major factor impacting the country’s economy is the lacklustre realty sector which has seen Dubai prices fall 5.8% over the past twelve months and 1.7%, quarter on quarter. Because of last year’s OPEC decision for some members to cut back on their quotas, Q2 oil production reduced by 1.7% compared to a year earlier, although prices have firmed; nevertheless, oil GDP will decline by 0.5% in 2018.

Dubai August inflation levels remained flat (0.2%), compared to the same month in 2017, at the same time, housing deflation decelerated 3.6%, year on year. However, the January introduction of VAT saw marked increases in transport and food/beverage prices of 18.5% and 3.3%.

H1 figures indicate that Dubai’s non-oil foreign trade rose 0.8% to US$ 175.7 billion. Re-exports showed a 13.4% hike to US$ 55.3 billion, with imports and exports totalling US$ 102.7 billion and US$ 17.7 billion respectively. The fifty+ free zones in the emirate posted a 20.1% rise in foreign trade to US$ 70.0 billion, as re-exports jumped by 31.0% to US$ 30.5 billion.

Another suiter joined the crowd to acquire the management rights for the ten ME funds of embattled private equity firm Abraaj. The Abu Dhabi Financial Group (ADFG) is one of more than a dozen international entities in the market to buy the majority of the Dubai’s equity firms. It is reported that their bid includes US$ 6 million for the audit and litigation financing, as well as a US$ 10 million credit facility to fund the operations of the regional funds and a further US$ 10 million earmarked for liabilities.

The DFM opened Sunday, 16 September, on 2810, and continued with its recent weekly declines by shedding 46 points (1.6%), to close on Thursday at 2764. Emaar Properties was down US$ 0.04 to US$ 1.31, with Arabtec also US$ 0.04 lower at US$ 0.52. Thursday 20 September saw volumes edging higher, with trades of 236 million shares, valued at US$ 76 million, compared to a week earlier (217 million shares at US$ 56 million).

By Thursday, 20 September, Brent traded US$ 0.61 (0.8%) higher at US$ 78.70; gold was US$ 3 up to US$ 1,211. Despite the August global oil output hitting a record 100 million bpd, the market may still tighten, leading to prices heading northwards, as exports from Iran and Venezuela decline.

Danske Bank is being investigated for its role in one of Europe’s biggest money laundering scandals that could see the Danish bank facing a US$ 630 million fine. The financial institution, which saw its disgraced chief executive officer, Thomas Borgen, resign, admitted that US$ 234 billion flowed through its tiny Estonian unit between 2007 and 2015, a “large” chunk of which needs to be treated as “suspicious”. Danish authorities are investigating “illegal acts” and there are suggestions that criminal investigations into the bank are on-going in Denmark and Estonia. The Danske scandal is the latest in a line of European financial institutions, including Deutsche and ING, that have been investigated for illegal money-laundering operations.

Apple has finally paid the Irish government US$ 16.5 billion that was demanded by the EC, owing to previous illegal tax breaks by the government which has always maintained that no special tax treatment had been given; this despite the below 1% effective tax rate the US tech firm paid in Ireland. Both parties – the Irish government and Apple – disagree with the EC findings and with an appeal in the offing, the money is being held in an escrow account.

Argentina’s woes continue unabated, with its economy contracting by 4.2% in Q2, mainly attributable to a drought that resulted in slower agricultural export activity (14% lower quarter on quarter) and the Macri government being forced to slash public spending; furthermore, the fact that interest rates stand at 60% does not bode well for the economy. The quarterly decline followed six straight quarters of growth, so the annual contraction is forecast at a lower 2.4% level.

Having already reduced 2020 Eurozone economic growth forecasts in June from 2.1% to 1.7%, the ECB is expected to downgrade these forecasts again. The main drivers seem to be the ongoing global trade difficulties and the introduction of tariffs, along with potential problems emanating from Brexit and Turkey’s current woes. The ECB is also expected to cut back on its monthly bond purchases by halving the stimulus package to US$ 17 billion and down to zero by year end. Inflation levels are expected to stabilise around 1.7%.

Meanwhile the bloc’s July industrial production dropped 0.8%, month on month, but 0.1% higher on an annual basis, whereas the larger EU28 declined by 0.7% but rose by 0.8%, year on year. On a country basis, the biggest falls were in Malta, Croatia and Sweden – 6.3%, 5.0% and 4.1% respectively – with 3.6%, 2.8% and 1.8% hikes reported in Denmark, Ireland and Latvia. Both the Eurozone and EU 28 saw falls in durable consumer goods (1.9% and 1.0%), non-durable consumer goods (1.3% and 1.3%) and intermediate goods (0.8% and 0.6%).

Another indicator that the US economy is in fine fettle is new residential construction showing a marked increase in August – up 9.2% to 1.28 million, from July’s annual rate of 1.17 million; analysts had estimated a 5.7% hike to 1.23 million for the month.

There is no way that Donald Trump will back down as he hits China with another round of tariffs – this time a further US$ 200 billion in imports, with the promise of even more (totalling US$ 267 billion) if the inevitable happens – China retaliates. White House officials have indicated that China had been given “chance after chance” to change the trade practices considered unfair to US businesses, but “have remained obdurate.” Even the most ardent Trump critic, of which there are many, can see the unfairness in a 2017 US$ 375 billion trade deficit between the world’s two largest economies. It cannot be long before the currently booming US economy feels the impact of rising input costs and declining exports.

August inflation figures in the UK rose unexpectedly to 2.7% in August, against market expectations of 2.4%, and the 2.5% rate a month earlier. The main drivers behind this were price hikes for recreational goods, transport and clothing, whereas there were lower charges for mobile phones, and furniture/household goods. The fact that wage growth, at 2.9%, is still higher than inflation may force the Bank of England to raise rates before next year’s 29 March Brexit.

With little more than six months to go before Brexit, the scaremongers are out in force again. The two main protagonists heading the Fear Factor are Mark Carney and Christine Lagarde – both preached prior to the 2016 referendum that the economy would sink if the Remainers lost the vote – and got it horribly wrong then.

This week, the Canadian Bank of England governor has reportedly told ministers that the UK property market would crash and mortgage rates spiral up in the event of a chaotic no-deal Brexit – as well as house prices tumbling 35% within three years. In addition, he indicated that a plunge in sterling would drive up inflation and interest rates. As was the case two years ago, his calculations may be right but his assumptions – on which the models were based – completely wrong. To his credit, the former Goldman Sachs banker later admitted he had miscalculated the impact of the Brexit vote and could find himself again a laughing stock in the City with his current dire warnings.

Jumping on the bandwagon again is the IMF’s French Managing Director warning that a no-deal” Brexit would entail “substantial costs” for the UK economy. Christine Lagarde also commented said that all likely Brexit scenarios would “entail costs”, but a disorderly departure could lead to “a significantly worse outcome”. If a broad agreement is made, the forecast growth for the next two years will be 1.5%.

Whatever you think of Theresa May, she was in an unenviable position at this week’s EU meeting in Salzburg, when she went to discuss Brexit progress with both the elected and unelected leaders of the 28-member bloc. However, it is highly unlikely that they will respond positively to her conclusion that she had “put forward serious and workable proposals” and that it was now up to the EU to “respond in kind” and “evolve its position.” EU and the UK look no closer to a deal and the planned October summit will be another exercise for the EU to mock the UK Prime Minister yet again. The bloc is in the driving seat and there is no way that they will negotiate to help the UK at the expense of any of their 27 members. There is no doubt that the Brussels lynch mob will go for the jugular and October could see the End Of May.

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