Lost in France

Lost in France                                                                    11 July 2019

Emaar launched its Seashore (Sirdhana by Emaar) development of 1-3 B/R apartments, located in Mina Rashid. The project will also comprise signature hotels, a private beach club, a community park, splash park and a community podium, with a gym and kids’ play area. Interestingly, it will be located in a free zone area that will also include 430 wet berths that can accommodate larger yachts.

Union Properties is to spend US$ 7 million to expand Dubai Autodrome Business Park project in Dubai MotorCity, by building a purpose-built facility for racing teams and other motorsport-related businesses. Spanning 33.9k sq mt, phase 2 will be completed by February 2020 and has already sold out. MotorCity encompasses six projects, each with its distinct environment, including Avenue District, Dubai Autodrome, OIA Residence, Uptown MotorCity, Green Community MotorCity, and Business Park MotorCity.

In December, Al Futtaim will open the country’s biggest Ikea store (covering 30k sq mt), in its new Festival Plaza. Located in Jebel Ali, the new facility will also host ACE, M&S and Lulu Hypermarket, along with a further 120 stores within the 64.8k sq mt retail precinct. It will also have over forty food outlets, as well as parking for 2.3k vehicles.

Dubai will get another tourist attraction, with Nakheel’s announcement that it will add a 240 mt high public observation deck. The View at The Palm will be on the top level (52nd) of The Palm Tower which will have a St Regis hotel and luxury residences; it will be accessible from Nakheel Mall which will house an interactive museum and gallery dedicated to the creation of Palm Jumeirah. The three-minute elevator ride the top of The Palm Tower will be a floor-to-ceiling digital sea, sand and sky experience. Hand-over is expected by Q2 2023.

Dubai Business Events has already secured 118 events for the emirate to take place over the coming years. It is estimated that the mix of conferences and meetings will attract over 75k delegates from around the world and provide a welcome boost for the local economy – especially in the hospitality and retail sectors. This number represents a17% increase on the number of those attending events hosted in Dubai in H1 2018. Majpor events include the Amway China Leadership Seminar 2020, World Hospital Congress, Geospatial Week and the AIPPI World Intellectual Property Congress, among others.

It has been several years since we last heard of a company planning to float an iceberg from Antarctica to these shores. Now, 40-year old Emirati, Abdulla Alshehi, is to spend up to US$ 80 million on a test to float a smaller iceberg  to either Perth or Cape Town on a trial run before deciding the feasibility of moving a larger one to Fujairah; this project would have an estimated cost in the region of US$ 150 million. It is thought that the cost of harvesting fresh water this way would be a lot cheaper than utilising desalination.

It is reported that Barclays may be ditching 20% of its Dubai workforce in its 100-man wealth management business, with potentially more redundancies in the future; some have been offered jobs in other locations such as Geneva or London. The bank did confirm “that it had completed a review of its operational model in the UAE to ensure a sustainable and efficient business platform.” Three years ago, it was reported that Barclays had cut some 150 corporate and investment banking jobs in the emirate. It currently employs about 200 staff in DIFC.

The Federal Tax Authority will launch electronic tracking on the sale of shisha tobacco and e-cigarettes from November. Digital tax stamps will be introduced in a bid to crack down on the sale of contraband products and tax fraud. From March next year, if imported designated excise goods do not bear these stamps, they will not be allowed into the country and by June 2020, it will be illegal to supply, transfer, store, or possess unmarked designated excise goods. Legislation is already in place,covering the sale of all types of imported and locally produced and distributed cigarettes which should have the Digital Tax Stamps.

The country’s May inflation rate has declined to 1.09% over the past twelve months with a CPI reading of 109.87. The main drivers for the fall were price declines in both housing/utilities (5.48%) and ready-made clothing/footwear (3.39%). Prices in telecommunication, transport, and education all nudged higher by 0.62%, 0.85%, and 1.23%, respectively.

The Central Bank is confident that the country’s banking system has sufficient capitalisation and liquidity reserves to meet current requirements. The country’s economic outlook has improved because of various factors including higher energy prices, recently introduced structural reform and an increasingly proactive fiscal strategy. The country’s banks’ performance in Q1, with higher 15% profits, reflected higher operating efficiency in the sector. Although bank lending growth pricked up last year, driven by corporate sector lending, retail sector lending remained in the doldrums.

According to June’s Emirates NBD’s monthly economy tracker, Dubai’s non-oil private sector grew in all sectors, with the stand-out performer being travel and tourism. There was a marked increase in new business activity with a rise in business expectations for the next year. The figures indicate that growth this year will be stronger than it has been over the previous two years. The two canaries in the coal mine are again continued price discount and employment levels in the non-oil economy remaining unchanged not only over the month but for some time now; staffing levels in both tourism/recreation and construction fell.

Efforts to take over Newcastle FC continue with prospective Dubai-based owner, Sheikh Khaled Bin Zayed Al Nahyan, still “working diligently” on a deal with current owner, Mike Ashley. There were reports in May that his Bin Zayed Group had agreed terms in the region of US$ 440 million; it had been bought by Ashley in 2007 for US$ 169 million. However, the club has been on the market on three separate occasions, with each one failing. This latest bid is definitely work in progress.

Depa has been awarded a US$ 27 million fit-out contract for the new headquarters of an unnamed airline in Dubai.

Damac has joined with the Oman Tourism Development Company to develop Port Sultan Qaboos and transform the Mina Sultan Qaboos Waterfront area into a global tourism destination. The development will have two main zones – the tourist port regeneration areas and other sites such as Shotayfi Village and Hay Al Mina. Phase 1, covering 150k sq mt, will comprise 430, residential units, retail space and a 4-star hotel. EFG Hermes painted a worrying future for the Dubai-based developer cutting the target price for its shares to US$ 25.89 from its previous US$ 43.60 guidance and this despite the investment bank’s forecast that Dubai’s property sector will remain stable this year helped by governments initiatives in the pipeline.

After recently acquiring Topaz Energy & Marine, from Oman’s Renaissance Services and Standard Chartered’s private equity unit, it is reported that DP World is to raise US$ 1 billion in an Islamic-bond issue to finance the deal. Over the past eighteen months, the world’s largest port operator has been rapidly expanding its portfolio, acquiring P&O Ferries and P&O Ferrymasters in Europe, Puertos y Logistica in Chile, along with an additional stake in DP World Australia and new JVs in Canada and India.

A CVC Capital Partners’ consortium is set to acquire about 30% of Dubai-based GEMS Education from existing shareholders – no financial information was readily available. It seems that Khazanah Nasional Berhad, a sovereign wealth fund of Malaysia, will retain its 3% stake, whilst a consortium led by Fair Capital Limited including Tactical Opportunities funds managed by Blackstone and Bahrain’s SWF, Mumtalakat Holding Company, will exit. The Varkey Family will remain with the largest shareholding. At the same time, the world’s largest education provider of private K-12 education by revenue is in the midst of a major refinancing programme.

Dubai-listed healthcare and education investment company, Amanat Holdings, has a 13.2% stake in International Medical Centre which has agreed to buy three Jeddah medical facilities for an undisclosed amount; IMC already operates a 300-bed hospital in the city.

The bourse opened on Sunday 07 July at 2661 and gained 25 points (0.9%) to 2686 by 11 July 2019. Emaar Properties closed US$ 0.07 higher at US$ 1.29, with Arabtec up US$ 0.02 to US$ 0.45. Thursday 11 July again witnessed very low trading conditions again of only 88 million shares worth US$ 61 million, (compared to 124 million shares, at a value of US$ 41 million on 11 July).

By Thursday, 11 July, Brent was trading US$ 3.22 (5.1%) higher at US$ 66.52. Gold closed US$ 14 (1.0%) lower at US$ 1,407, still driven by continuing tensions in the Gulf and trade worries prior to this Friday’s G20 meeting in Osaka.

Brazilian mining giant Vale has been ordered to pay US$ 2.9 billion in compensation for all damages caused by the January Brumadinho dam collapse which killed at least 270 people; monies initially will go to affected families and businesses. The judge, Elton Pupo Nogueira, has been unable to put a specific number to the amount Vale will have to pay, indicating that technical and scientific criteria were not enough to quantify the effects of the collapse. However, he did warn that “the value [of the compensation] is not limited to the deaths resulting from the event, it also affects the environment on a local and regional level as well as the economic activity in the affected region.” In other words, Vale will face a huge bill for damages and compensation and could face possible liquidation.

Flyadeal became the first airline to actually cancel an order with Boeing for their troubled 737 Max jets. The Saudi budget carrier has decided to scrap its order for fifty planes and to buy the same number of A320s from Airbus and thus maintaining an entirely Airbus SE fleet. Other airlines have already amended orders in the wake of the global 737 Max grounding in March; they include Garuda, VietJet and Virgin Australia. European regulators have now indicated a previously unknown problem about the jet’s autopilot function which will further slow the return of the 737 to global skies. Interestingly, the European plane maker reported that H1 deliveries were 28% higher (389 planes) than the same period last year, whilst Boeing posted a 37% slump.

Deutsche Bank has launched a US$ 8.4 billion “reinvention” plan, under the auspices of its chief executive Christian Sewing, which is targeting an 8% return on tangible equity (RoTE) by 2022. The markets were none too happy as reflected in a 10% tumble in its share value over just two days, after hitting a record low last month. Among the changes are a slashing of 18k jobs, scrapping the bank’s global equities division and creating a “bad bank” to house billions of euros of costly trading positions and relieve pressure on Deutsche Bank’s stretched balance sheet. Whether these sweeping changes will have a positive impact remains to be seen particularly because of intense competition in the sector and low interest rates.  The bank has not seen revenue streams expand recently and previous attempts to overhaul its sprawling business have ended badly.

Despite the fracas surrounding the current trade dispute with the US, China is confident that its 2019 growth will be between 6.0% – 6.5%. Finance Minister Liu Kun has indicated that although protectionism is having a negative impact on the global economy, China would continue to promote the roles of multilateral organizations such of the WTO, G20 and other multilateral organisations. Meanwhile the country’s inflation level of 2.7% is at a 15-month high because of higher food prices (up 8.3%), caused by bad weather – with fruit prices soaring 42.7% – and African swine fever causing pork prices to jump 21.1%.

A July Sentix report echoed what many already knew – that euro area investor confidence continues to head south – weakening to its lowest level since November 2014, with a reading of -5.8 (compared to -3.3 a month earlier). Furthermore, investor confidence in Germany sank to a 10-year low, a sure sign that recession will shortly hit the biggest euro area economy, with ramifications felt all over Europe.

Following a 0.4% decline the previous month, UK’s May’s GDP was 0.3% higher driven by 1.4% growth in both industrial production and manufacturing; however, the three-month rolling trendslowed to 0.3% in May. Construction as 0.6% higher after posting declines of 0.5% and 1.5% the previous two months. During the month, the total trade deficit declined 37.5% to US$ 2.9 billion, as the UK visible trade deficit narrowed 9.7% to US$ 14.5 billion, month on month. However, there is no doubt that the economy is stalling, and that consumers and businesses await any sort of closure over Brexit; until then sterling will continue its downward trend (having lost 5% in recent weeks) and the economy will continue to nudge higher at a much-reduced rate.

This week, Fed chair, Jerome Powell, gave a downbeat outlook for the US economy which saw the greenback lower but the US markets higher with the S&P briefly hitting a record high of 3,000 points whilst the Dow Jones index lifted to 26,820 and the Nasdaq rose 0.75%. The US central bank chief noted that disappointing data continued to show a “broad” global slowdown, and said that “manufacturing, trade and investment are weak all around the world”; all of this will impact on the US economy, despite strong June jobs growth. The local economy is not being helped by “muted” inflation and only modest wage growth and that “we don’t have any evidence for calling this a hot labour market.”

Another matter worrying President Trump is the fact that France is planning to introduce a digital services tax which he considers is aimed at penalising US tech giants such as Facebook and Google. It is estimated that the tax – a 3% levy on revenue made by any digital company with revenue of more than US$ 840 million of which at least US$ 28 million is generated in France – will raise US$ 450 million and involve some thirty international companies. Retaliatory measures are almost inevitable if US authorities find that the tax is clearly protectionist and unfairly targets American companies in a way that will cost US jobs and harm American workers. It seems that Macron may have wrongly thought he could take the US for a ride but now it seems the tax will be Lost in France.

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