Do You Believe In Miracles? 06 June 2019

Developers are doing much to allay fears that there are too many residential units flooding the Dubai market; for the first five months of the year, the latest Reidin-GCP data indicated that last year, 13.7k new off-plan units were released, compared to just 3.2k so far in 2019. When it comes to completed units and handovers, the figures show that the 8.9k number in 2018 was actually higher than the 7.0k figure for the first five months of 2019.  YTD, ready home sales at 5.7k units are comparable to 2018 figures. Once again, the doomsayers are getting ahead of themselves and 2019 will probably be the same as has been the case over the past five years. The much bandied around 50k+ figure, for this year’s handovers, will not happen, with half that figure more of a reality. If there is to be an over-supply problem, we will not see it this year, whilst developers play the market, waiting for demand to catch up with supply – only then will there be an increase in off-plan launches.

Research by Knight Frank indicates that Dubai luxury property prices have fallen 4.7% over the past twelve months – and 1.8% the last quarter. Its Q1 Prime Global Cities Index, which tracks the movement in luxury residential prices across 45 global cities, ranked Dubai 38^th.  The global price hike of 1.3% in the year to Q1 is the lowest in a decade, attributable to factors such as political and economic headwinds, allied with rising finance costs and increased property market regulations. The fact that the IMF has predicted that 70% of the world’s economies would see a slowdown in growth this year further exacerbates the problem.

Spinneys is to open a further eight supermarkets in the country this year, including in Damac Hills, Dubai Creek Residences and Jumeirah Golf Estate. This week, it opened its 58^th UAE store in Ajman, its second in that emirate.

Madame Tussauds is to bring their famous waxwork museum to Dubai which will be run by Merlin, the operator of the London Eye and Legoland. The project, first muted in 2008, will be located on Bluewaters Island, with the opening date still unknown.

Emaar has signed an MoU with Beijing New Aeropolis Holdings to develop an integrated project, encompassing retail, hospitality, entertainment and lifestyle functions in a one-stop location. The business and tourism complex is to be situated within the Aero-Economic Area of Beijing Daxing International Airport. Such projects can only enhance UAE/Chinese relations, with the Dubai developer actively looking for more developments as part of the Belt Road Initiative.

Al Najah Education’s subsidiary, Horizon Education Asia Limited, has acquired a significant stake in Malaysia-based Regent International Schools; no financial details were made available. The Dubai-based parent company, through HEAL, already has a portfolio of 31 pre-schools and training centres in Singapore and four schools in the UAE and Oman.

The luxury market is one bright light in the troubled local retail sector, as Deloittes report that the “sustained growth” in the Dubai luxury market is attributed to an increase in brand omnichannel strategies and the continued rise of the tourism industry. The consulting firm expects “the luxury market will continue to experience growth as the market matures and adjusts to global trends.” Many of the top one hundred companies, analysed by Deloittes, have a presence in the country; on a global scale, they generated a 10.8% increase in revenues, for the fiscal year ending June 2018, with sales reaching a combined total odUS$ 247 billion.

Cryo Holdings continues with its global expansion plans, having already established new distribution partners this year in Czech Republic, Germany, Hong Kong, Italy, Slovakia, Slovenia, South Korea, Taiwan and the UK. The Dubai-based company, a leading operator in the fledgling global cryotherapy sector, is planning to invest US$ 7 million in three locations in Saudi Arabia and four in India by the end of the year. Cryotherapy, sometimes known as cold therapy, is the local or general use of extremely low temperatures (as low as minus 110 Celsius) in medical therapy and is growing in popularity, especially in the field of sports medicine.

It is estimated the auto sector contributes US$ 16.3 billion to the local economy and now the Dubai Chamber of Commerce wants a piece of the action. It is to form a Car Dealers’ Business Group that will unite the various interested parties – including member companies and private parties – to ensure that the best interests of the sector are served, and global best practices implemented. The Group, whose first chairman will be industry veteran, Michel Ayat, CEO of AW Rostamani Automotive Group, will comment on areas of concern, including regulations.

The bourse was closed for trading all week and will open after the Eid Al Adha holiday on Sunday 09 June at 2620, having closed 45 points (1.7%) to the good over the previous fortnight’s trading to 31 May 2019, Thursday 31 May, at 2620. Emaar Properties closed on US$ 1.22, with Arabtec at US$ 0.42. Thursday 31 May had seen wafer thin trading again of 159 million shares, at a value of US$ 56 million.

By Thursday, 06 June, Brent, having traded down US$ 5.75 (7.9%) the previous fortnight was US$ 5.20 (7.8%) lower at US$ 61.67. Gold leapt in the other direction this week, gaining US$ 51 (3.9%) to US$ 1,343. For the month of May, prices for Brent plummeted US$ 9.61 (13.4%) to US$ 61.99, whilst gold showed some improvement up US$ 38 (3.0%) to US$ 1,310.

No doubt that oil has moved into bullish territory, driven by weak demand, increased trade tensions, rising US stock piles and the nagging worries of a marked slowdown in both US and Chinese economies. There is every possibility that OPEC members, along with other oil producers will beef up their current output cuts into H2.

Only a week after announcing a possible US$ 35.0 billion tie-up with Renault, Fiat Chrysler has pulled the plug. This has not stopped BMW and Jaguar Land Rover announcing that they would be joining forces to develop electric car technologies. With both firms haemorrhaging cash, attributable to falling sales, higher costs and dwindling margins, the need to invest in future technologies has become a necessity. The venture expects to save costs through shared research, shared production planning, and by jointly buying electric car components.

The latest quarterly figures from Uber sees the ride-hailing firm posting a US$ 1 billion loss, even though revenue was 20% higher at US$ 3.12 billion and monthly active users climbed to 93 million. No surprise then to see the firm’s share value has fallen almost 11% since it listed on Wall Street four weeks ago. The main drivers behind the disappointing figures were extra costs for signing up new drivers, establishing the Uber Eats delivery service and increased competition.

Aviva, with offices in sixteen countries, has announced that it will reduce its global workforce by 6.0% to 28.2k over the next three years. The UK insurer is planning to simplify its business – and making it more competitive – by splitting it in two, separating its life and general insurance businesses.

Casino mogul James Packer has sold 20% of his 46% stake in Crown Resorts to Macau’s Melco Resorts and Entertainment for almost US$ 1.8 billion.

What could be the first settlement of many sees JP Morgan paying US$ 5 million in a discrimination case involving parental leave for fathers. It was alleged that the bank had denied a male employee parental leave benefit available to all personnel who are “primary caregivers” of a new-born. A class action followed in the New York courts on behalf of male employees who claimed they were unlawfully denied access to paid parental leave on the same terms as mothers from 2011 to 2017; women were allowed 14 weeks, but fathers were only eligible for two weeks of paid parental leave unless they could show that their spouses or partners were incapacitated or had returned to work.

Following in yhe footsteps of other global bodies, the World Bank has cut its 2019 global economic forecast to 2.6% – 0.3% lower than its previous January prognosis; the downgrade was attributed to a decline in investment levels across the world and a weakening in trade growth. It expects growth to nudge slightly higher over the next two years to 2.7% and 2.8% respectively. The downside risks continue to worry economists including a worse than expected slowdown in most major economies, the worry of increasing tariffs and growing government debt. The forecasts for the two global leaders point lower, with the US slowing to 2.5% this year and 1.7% next, whilst China also slows to 6.1% and 6.0% over the next two years. Meanwhile, the eurozone’s amended forecasts are down at 1.2% and 1.4% respectively, whilst the MENA comes in at 1.3% this year, rising to 3.0% by 2020-21.

At their Seoul meeting this week, IATA slashed its previous 2019 global airline profit forecast by 21.1% to US$ 28.0 billion, on the back of an expanding trade war and higher oil prices; last year, profits touched US$ 30 billion. There are concerns that with the cargo business being badly dented by trade tensions, and international trade at a zero-growth level, this could spill into the passenger market with dire consequences.

There are many warning signs that the Australian economy could be heading for trouble, including falling house prices, slowing wage growth and a worrying depletion in consumer saving levels. Housing accounts for much of the debt and with property prices heading south – declining for the past four years in WA and nearly two years on the east coast – there is an increasing number of house owners treading water, now owing banks more than their houses are worth. It is estimated that 15% of mortgages in WA and the NT are in negative territory – and with unemployment nudging higher – the Reserve Bank had no option but to reduce rates and loosen lending restrictions. It cut its benchmark rate by 0.25% to a record low 1.25% this week – its first rate change in almost three years.

The signs are clear – and have been for some time – that the lucky country is in for a rocky ride. They include a declining world economy, a zero Q1 inflation rate, a sinking currency, worryingly weak credit growth, poor retail sales, plunging vehicle sales, declining building approvals, slowing Q1 GDP growth at 0.4% (its lowest level since 2009), sluggish business investment etc etc. Could it be time for QE to be introduced?

A bad week for one Sir Philip Green started with the chairman of the UK parliamentary Work and Pensions Committee, Frank Field, urging the head of the troubled Arcadia retail empire, to use his own money to support the Group’s pension fund. In a restructuring program to save the empire, that included shop closures and rent cuts, the company’s contribution to the pension fund would be halved from US$ 65 million a year. If this were not to happen, it would be inevitable that the fund would be well short and that the pensions regulator would be forced to step in if members of the pension fund were put at serious risk. On Saturday, the UK retail tycoon was also charged in the US with four counts of misdemeanour assault after a fitness instructor in Arizona alleged that he repeatedly touched her inappropriately. An interesting June lies ahead.

The new Modi government took office on Friday 31 June, with Nirmala Sitharaman as Finance Minister. Unfortunately, the day got worse for India’s first female in that position, as Q1 growth slipped to 5.8% with the fall occurring for the third straight quarter – and well down on the 6.6% return of the preceding three months to December 2018. It is almost certain the bad news will continue into the next quarter, as there is little sign of any improvement occurring in investment growth and consumer spending. Furthermore, labour figures were also released posting an unemployment rate of 6.3% – the worst it has been since 1973. With this sort of news, it is a wonder how Narendra Modi got re-elected! Do You Believe In Miracles?