The Only Way Is Down

DSS 2019 Dates

From 21st June 2019 to 3rd August 2019

dubai Summer Surprises

The Only Way Is Down                                                      16 May 2019

Bayut reported strong interest in off-plan residential projects near Dubai’s Expo 2020 site, with particular focus on Dubai South, Meydan City, Mudon and Town Square. The real estate portal noted that ROIs are higher in such areas, with some Dubai South properties having rent yields of 11%; in that location, studio apartments can be bought for US$ 105k and a 3-bedroom villa for US$ 272k.

The locally-based realty portal reckoned that Q1 saw a total of 9.3k transactions, worth US$ 5.8 billion, were registered – 7.9% and 0.7% (in value) higher than the same period in 2018. There were 5.0k and 4.3k deals, accounting for US$ 3.7 billion and US$ 2.1 billion, involving secondary market and off-plan deals respectively.

After announcing a 78.5% surge in 2018 sales, five-year old Danube Properties will launch three new projects this year to add to their current portfolio of over 5k residential units across twelve developments valued at US$ 1 billion. The first project will probably occur after the holy month of Ramadan. The Dubai developer claims that it has more than doubled its market share of off plan sales to 10.5% of the total.

The One Palm is an exclusive address, with the second most expensive penthouse, covering 20k sq ft, ever sold in Dubai has been bought for US$ 20 million. The most expensive, encompassing 30k sq ft, three floors and a 25 mt lap pool, was at the same address when US$ 28 million changed hands in 2017. The developer, Omniyat, is hoping that the third and last one goes for a similar amount.

In the first four months of the year, there were 37 commercial property deals, each worth more than US$ 13 million; according to Property Finder, most involved schools, hospitals and land plots acquired by master developers, with Emaar involved in eight transactions – three Arabian Ranches land plots for a cumulative US$ 89 million and five relating to the five Address hotels sold to Abu Dhabi National Hotels for US$ 463 million.

It is reported that Jawad Azizi, the managing director of Meilenstein Developments, is being held by police in Dubai. The German-based real estate developer entered the Dubai market last October, with plans for eight projects worth US$ 327 million.

Dubai-owned P&O Ports has signed a 25-year agreement (with a further 25-year option) to manage the Serbian port of Novi Sad; this will serve as a link between DP World Constanza, Romania, and Jebel Ali Port. The development, situated on the Danube, is on a 24-hectare site, with a 500 mt quay; it has an estimated annual throughput of around 1 million tons. P&O Ports will retain exclusive rights to undertake all waterside operations, container handling and project cargo activities.

The Bulldozer Group’s latest entrée into the local restaurant scene is planning to open its second outlet in Monaco, only six months after starting operations in the emirate. GAIA, the Dubai-grown concept, will also expand into London, Miami and Moscow but will not be franchised, as all new restaurants will be run and managed by Bulldozer.

Dubai Festivals and Retail Establishment (DFRE) announced that the 22nd edition of DSS (Dubai Summer Surprises) will start on 21 June and run for six weeks to 03 August. An array of summer deals, across the emirate’s shopping outlets, will be on offer that will also include attractions, hotel staycations, live concerts and family entertainment.

In March, the Central Bank of the UAE pumped US$ 2.0 billion in cash to the financial system, as bank deposits fell 5.0% (US$ 1.9 billion) to US$ 379.3 billion over the month.

The UAE’s Securities and Commodities Authority is investigating a case that an unnamed listed company had inflated its value and has referred it to the public prosecution for possible legal action to be taken. The independent body, set up in 2000, noted that this action was taken “in light of the investigations conducted by the SCA with regards to acquisitions and transactions of one of the public listed companies, and given that these acquisitions are suspected to have included errors that led to inflated value.”

The Federal Authority for Government Human Resources reportedly discussed plans to set up retirement investment funds for expatriate workers. If implemented, it most probably result in the introduction of a private sector savings scheme to replace the current gratuity system. At the beginning of May, the Dubai International Financial Centre reported that it might change to the DIFC Employee Workplace Savings (DEWS) Trust savings scheme. It is not currently mandatory for companies in the UAE to set aside payment for end of service gratuity.

At the recent meeting of the Dubai Free Zones Council (DFZ Council), chaired by Sheikh Ahmed bin Saeed Al Maktoum, there was a preliminary agreement to facilitate companies to operate in multiple free zones. The One Free Zone Passport initiative will allow companies licensed at a single free zone to also operate in other Dubai free zones, utilizing only one licence. The meeting also agreed to implement the requirement of an insurance policy instead of a bank guarantee for free zone-based companies, which will boost liquidity for the companies and attract greater investment capital.

Talks are on-going that may result in the merger of Dubai Islamic Bank and its smaller rival Noor Bank which, if it goes ahead, will result in a lender with assets of US$ 76 billion; of that total, the former bank would hold 81.6% of the total. The state-owned holding company, Investment Corp of Dubai, is the largest shareholder in DIB, with a 28% stake, and is also one of the largest shareholders in the eleven-year old Noor Bank.

Shuaa Capital has confirmed that talks are progressing with Abu Dhabi Financial Group, (with assets of over US$ 20 billion), about a possible merger that would see both entities form a publicly listed company. ADFG, whose chairman Jassim Al Seddiqi is also the CEO of Shuaa, already own 48.4% of the Dubai-based company. In Q1, Shuaa posted a 66.9% hike in revenue but recorded a US$ 7 million loss compared to a US$ 3 million profit over the same period in 2018; the deficit was a result of “certain one-off provisions and a change in accounting standards”.

Dubai-listed Gulf Navigation Holding saw revenue jump 29.0% to US$ 12 million but still recorded a Q1 loss of US$ 3 million, compared to a US$ 1 profit in the corresponding period last year; the loss was attributable to its last petrochemical tanker being in dry dock for maintenance for a period of time. During the quarter, Goldilocks Fund became an 18.32% shareholder, with the shipping firm also enhancing its fleet, with the acquisition of livestock carriers. Its assets now include six petrochemical tankers and four livestock transport vessels.

Union Properties has again disappointed the market by producing poor Q1 results – just breaking even after a US$ 50 million profit a year earlier; revenue also fell – by 11.1% to US$ 25 million; accumulated losses stand at US$ 681 million. The company would have gone into the red if it were not for a US$ 20 million attributable to “other income”. Little wonder then that the stock continued to trade at one-year lows of US$ 0.082.

Emaar Developments saw revenue 3.0% higher at US$ 872 million whilst profit dipped 11.2% to US$ 281 million; total assets were at US$ 8.4 billion. It was also confirmed this week that the company had maintained its position being included in the MSCI emerging market index, contrary to market expectations.

Its parent company, Emaar Properties reported flat results, with Q1 profit at US$ 619 million, on the back of revenue at US$ 1.6 billion. By the end of March, its total assets stood at US$ 30.5 billion, along with a cash balance of US$ 2.2 billion.

The day it announced a 54.1% slump in Q1 profit to US$ 8 million, Arabtec’s chief executive officer, Hamish Tyrwhitt, stepped down from the post. (It will be interesting to see the Australian’s next move). Revenue also slid 16.0% to US$ 544 million, with the developer reporting a US$ 2 million loss from investments in an associate, Depa. Citing “lower revenue from a slowdown in awards in the construction sector, coupled with a number of legacy projects closing out in the coming months”, its profit margins dipped from 2.7% to 1.5%.

Another major developer, Damac, also posted major declines in both revenue and profit with falls of 52.8% to US$ 244 million and 93.6% to US$ 8 million respectively. However, one bright light is the fact that the developer has a strong sales pipeline (with Q1 sales of US$ 327 million) and had managed to scale down its debt level on a US$ 272 million sukuk. The company estimates that it has a relatively strong cash position with US$ 490 million in free cashflow and US$ 1.4 billion in escrow although gross debt was at US$ 1.4 billion.

Amanat Holdings posted a 43.0% improvement in Q1 profit to US$ 6 million, as revenue came in 30.0% higher at US$ 10 million, 85.3% of which was attributable to investments in associates and subsidiaries. The health care and education investment firm, a Sharia-compliant entity as it follows the Dubai bourse’s Sharia principles, expects to see its investment portfolio, along with its geographic footprint, expand during the rest of 2019.

In the midst of a major restructuring programme, struggling Marka, posted a US$ 81 million Q1 loss, 21.9% higher than the deficit in the previous quarter. Year on year revenue at US$ 26 million was 22.7% lower than the same period in 2018. The Dubai-based fashion, sports and food retailer, which has not made a profit since its 2014 stock market début, counts Reem Al Bawadi and Morelli’s Gelato among its brands. it continues to consider all available options for capital restructuring, including seeking a strategic capital investment partner; in March, it agreed a 95% planned share capital reduction of US$ 95 million that would decrease its capital base to US$ 14 million. However, with over 90% of shareholders attending a SGM this week, Marka decided to liquidate the business, after a last ditch attempt at turning the company’s finances around failed.

On Monday, the DFM posted its worst session of the year, falling 3.5%, as it saw both the “sabotage” attack of four oil vessels near Fujairah port and a serious hitch in US/Chinese trade talks, as China introduced its own tariffs of US$ 60 billion. Having already shed almost 7% this year, it did fall 3.66% to 2,522 with heavyweights such as Emaar down 6.11%, with Damac and Shuaa Capital hitting their lower limits.

The bourse opened for trading on Sunday 12 May, at 2673, and, having shipped 114 points (4.1%) the previous fortnight lost a further 98 points (3.7%) to close by Thursday, 16 May, on 2575. Emaar Properties dropped US$ 0.07 to close the week on US$ 1.16, whilst Arabtec, after a tumultuous week, was US$ 0.09 lower at US$ 0.44. Thursday 16 May saw marginally higher, but still wafer thin, trades, at 130 million shares, valued at US$ 42 million, (compared to a week earlier of 89 million shares at US$ 33 million).

By Thursday, 16 May, Brent, having dropped US$ 12.65 (17.0%) the previous fortnight, regained much of that loss, up US$ 10.92 (17.7%) to close on US$ 72.62; gold nudged US$ 1 higher to US$ 1,286.

Steel is in the news this week with reports that the long-proposed JV between Tata and Thyssenkrupp is close to collapse. The German steel-maker has indicated that it did not expect regulators to approve the agreement, whilst the Indian company is still looking for a solution to its European interests, after being badly hit by the 2016 commodity crisis. In that year, Tata sold most of its UK sites to British Steel, whilst keeping its Port Talbot plant. Now that the company is facing possible administration, it is seeking a further US$ 98 million from the government to help it address “Brexit-related issues”. This comes just two weeks after the steelmaker, which employs 4.5k at four sites, secured a US$ 130 million loan from the government to pay its EU carbon bill.

The EC have fined five international banks a total of US$ 1.3 billion for rigging the foreign exchange market between 2007 – 2013. Two of the banks, Barclays and RBS, were in cartels, known as “Banana Split” and “Essex Express”, with Citigroup and JP Morgan also involved in the former and MUFG in the latter. Although UBS was also in on the act, it was not fined, because of its role as whistle-blower to reveal both cartels’ existence to authorities. It seems that traders, using online chatrooms, exchanged trading plans and occasionally co-ordinated their market strategies.

Reliance Brands’ owner, Mukesh Ambani, has acquired the iconic British toy retailer Hamleys from China’s C Banner International for an undisclosed sum. India’s richest man will take control of 167 global toy stores, 88 of which are located in his home country. The company, founded in 1760 and the world’s oldest toy retailer, posted a US$ 12 million loss last year.

Pharmaceutical is one of the highest US profile lobby groups and they will be called into action now more than 40 US states have filed a lawsuit accusing some twenty pharmaceutical firms of conspiring to artificially inflate the cost of about one hundred common medicinal drugs; one firm indicted is the Israeli Teva Pharmaceuticals, the world’s largest producer of generic medicine. It appears that a five-year investigation has found drug companies being involved in a scheme to boost prices – in some cases by more than 1,000% – in a multi-billion dollar fraud.

By the end of last week, the Turkish lira had hit the rails, trading at seven-month lows of 6.246 to the greenback; this would have been even worse if the central bank had not injected US$ 4.5 billion to keep the currency afloat. The main driver behind the recent decline was last Monday’s decision to re-run Istanbul’s mayoral election that had been narrowly won by the main opposition party.

Q1 saw the UK manufacturing sector grow at its fastest pace since 1988 with increased stockpiling ahead of the 31 March Brexit deadline (which never materialised). At 0.5% (up from 0.2% in Q4), one of the main drivers behind the improvement was pharmaceuticals, expanding 9.4% in the three-month period. Because of the surge in imports, the trade deficit more than doubled to US$ 24.0 billion, with marked increases in gold and motor vehicles. The caveat behind the good news is that trade in goods widened by 11.8% to a record US$ 56.7 billion.

China’s economy was on the downslide well before Donald Trump announced the latest sleuth of tariffs starting earlier this month. Most economic indicators were moving southwards as April data indicates. Retail sales grew at their slowest pace since during the SARS outbreak in 2003 and although sales were 7.2% higher, it was somewhat lower than the previous month’s 8.7%. Industrial output was down from 8.5% to 5.4%, as housing-related consumption — including furniture, home appliances and construction & decoration material — slowed dramatically, as did sales of clothes, phones and cosmetics. May’s data will prove interesting and if authorities do not take urgent stimulatory measures, then there will be more headaches for the Chinese administration.

The UK economy is resilient if nothing else, as Q1 unemployment figures, at 3.8%, are at their lowest level since 1974; even more impressive was the fact that female unemployment of 3.7% is the lowest since records began in 1971.The downward trend started six years ago and probably will not be bettered. With average weekly earnings (excluding bonuses) for employees rising 3.3%, the rate is higher than the national inflation level which means that the man in the street will have more money to spend.

Uber shares had a disappointing start on their first day of trading on the New York Stock Exchange, with shares ending the Monday 7.6% from their listing price of US$ 45; by Thursday, their value had fallen further to US$ 41.50. The firm had sold 180 million shares (about 10% of their total) and was expecting to raise US$ 8.1 billion. Only last year, Uber, which has never made, and may never make, a profit, (and has racked up US$ 9.0 billion in losses, since its 2009 formation), was valued at US$ 120 billion. For Uber, it seems The Only Way Is Down.

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