The Impossible Dream

Even in these troubled, times there are still many Dubai properties being sold for over US$ 2.72 million (ten million dirhams). According to statistics from Data Finder, the leading locations were Downtown (34 deals), Palm Jumeriah (31), Business Bay (five) Jumeirah (four), JBR (four) and Dubai Creek Harbour (four) over the first ten months of the year. Two projects accounted for 31 of these deals – Il Primo in the Opera District of Downtown, with 18 transactions, and the Palm Royal Atlantis Resort & Residences making up 13 of the total. The most expensive apartment sale so far has been for US$ 20 million at The One at Palm Jumeirah.

Villa sales fared even better, with 157 deals in the top five locations – Dubai Hills Estate (47 deals), Palm Jumeirah (43), MBR City (32), Emirates Hills (22) and Jumeirah Golf Estates (13).The average price for villas sold in Emirates Hills was estimated at US$ 7 million.

October figures from STR indicate the Middle East hotel construction pipeline stands at 434 projects and 120k rooms; no surprise to see that the UAE accounts for 38.3% of the total, with 52.8k rooms, followed by Saudi Arabia’s 38.9k.

Capri Palace becomes the latest property to be added to the Jumeriah Group’s portfolio of managed hotels, due to reopen next April, after major renovation work. Founded by Tonino Cacace in the 1960s, it has 68 guest rooms and is home to three of the island’s Michelin stars, including the hotel’s signature restaurant L’Olivo. The Dubai government-owned company operates other properties in Europe including in London, Mallorca and Frankfurt, as well as in the Middle East, China and the Maldives.

Having just opened its third hypermarket, near Burjuman Metro Station, and its fifteenth branch in the emirate, Lulu is planning a further six more outlets for Dubai. The Abu Dhabi-based retail group now has 74 outlets in the country, having opened fourteen this year, compared to nine in 2018 – an indicator of its confidence in the local economy, as are its plans for twenty-two new projects in the near future.

Following its recent agreement with Careem/RTA, Canada-based PBSC Urban Solutions announced more details about its upcoming launch of an electric bike-share network, starting with its deployment of 3.5k E-FIT electric pedal-assist bikes and 350 smart stations throughout the emirate. This is the Canadian company’s first regional foray, following several successful launches including in Barcelona, Buenos Aires, Monaco and Santiago, involving 84k bikes and 6.8k stations.

Whilst placing Kuwait as the bottom of their table in the Expat City Ranking 2019 by InterNations, Dubai found itself, rather surprisingly, rated 34^th of the 82 cities surveyed, behind other regional locations such as Abu Dhabi (15^th), Manama (21^st) and Muscat (28^th). Taipei, Kuala Lumpur, Ho Chi Minh City and Singapore were the four leading destinations for expats to reside, whilst Rome, Milan and Lagos propped up the table with Kuwait. Dubai’s position was not helped by being placed 71^st for its “work life”, with less than half polled said they were happy with their work-life balance (cf 60% globally), and 45% feeling insecure in their job (cf 59%).The only conclusion is that such surveys should be taken with a very large pinch of salt.

Another study ranks Dubai 7^th when it comes to most visited global cities with 16.3 million visitors. As in the past the top positions were dominated by Asia, with Hong Kong, Bangkok, Macau and Singapore taking the top four positions.

Dubai-based AquaChemie Middle East is planning a US$ 40 million spend to build a chemical terminal facility at Jebel Ali Port to be used as a strategic petrochemical gateway hub. Mott MacDonald has been appointed for the design, engineering and project management work and the project is expected to take eighteen months. The company will be able to utilise the facilities at the port including multiple jetty pipelines, along with other crucial existing utility and building support infrastructure. It is expected that 100 new jobs will be created, with that number doubling by 2025.

DP World added to its ever-expanding portfolio by acquiring a 77% stake in Singapore-based Feedertech Group, via its subsidiary Unifeeder, for an undisclosed sum but less than 1% of the parent’s net value; the seller will retain the remaining 23% shareholding. The aim of the exercise is to build an end-to-end logistics capability, soon culminating with a dedicated and efficient India-Gulf region service. Feederetch, with annual revenues of over US$ 100 million and movement of 600k TEUs (20’ ft equivalent units), will help in this regard as it operates two business units – one that moves containers from smaller ports to larger container terminals and the other that operates short sea networks.

Just like DP World, dnata continues to expand its global reach – this time announcing that it had bought the remaining 50% share in its UK in-flight catering JV, Alpha LSG, from the LSG Group. The seven-year old company, employing 3.5k across fifteen airport catering units and two central production facilities, posted annual revenue of over US$ 375 million. This acquisition follows several others already this year, with dnata having opened new facilities in Boston, Houston, Los Angeles, San Francisco and Vancouver which have seen its expanding catering division now employing over 10k.

The Majid Al Futtaim Group is planning to invest over US$ 1.5 billion in Saudi Arabia and Egypt, (including a US$ 866 million mall in Cairo), over the next three years as it ramps up its expansion drive. Over the past four years, Dubai-owned MAF has spent over US$ 2.2 billion in Egypt whilst much of the Saudi investment will be in cinemas, as part of its five-year US$ 4.3 billion investment plan, where it already has one hundred cinema screens since the ban on commercial cinemas was lifted just two years ago. Later this month, the Group will open a Carrefour in Uganda and plans to open seven next year in Uzbekistan.

Over the past two months, it is reported that Emirates NBD has shed 500 jobs, about 4% of its 12k employment numbers, because of the need to cut costs in a slowing economic environment. Its retail and technology operations faced the brunt of these job losses. This comes despite Moody’s Investors Service indicating that the operating conditions for GCC banks remain favourable, being underpinned by solid economic growth, and by the banks’ solid liquidity and strong capital buffers; furthermore, the ratings agency expects the region’s average non-hydrocarbon GDP growth to push higher to 2.6% next year.

So far this year, total volumes, at 21.9 million and valued at over US$ 400 billion, on the Dubai Gold and Commodities Exchange (DGCX) are on track to easily beat last year’s figure of 22.3 million. For November, the best performing asset class was again the Indian rupee which showed a YTD 17.0% improvement, with the best performing being the exchange’s flagship Gold Futures product, with YTD volume growth 94%.

With collaboration between UAE and Chinese police, more than 28k fake luxury items, worth US$ 257 million and destined for sale in Dubai, have reportedly been seized. 75% of the goods were in Dubai where police raided ten locations and arrested twenty people. A further 37 were charged in China where police found 7k counterfeit luxury handbags in Guangdong Province. Along with the fake goods, it seems that certificates, invoices, receipts and gift wrapping were also being produced.

Sunday, 01 December, saw the UAE’s Federal Tax Authority include sweetened drinks, electronic smoking devices and tools, and the liquids used in these devices, added to the list of products now subject to excise tax. They now join products such as tobacco and tobacco products, energy drinks, and carbonated beverages which have had tax levied since October 2017. Khalid Ali Al Bustani, director general of the FTA, commented that “Implementing the new decision is in line with our wise leadership’s directives to further enhance the UAE’s competitiveness, build a healthy community by curbing consumption of harmful products, mitigate damages and costs incurred while combatting diseases that result from consuming these products, and supply the resources necessary to support the government’s expansion and upgrade of its services.”

The bourse opened on Wednesday 04 December, following the extended National Day holidays, and, having shed 22 points the previous fortnight, regained 16 points to 2695 by 05 December 2019. Emaar Properties lost the US$ 0.1 gained the previous week to close on  US$ 1.12, whilst Arabtec, down US$ 0.23, over the past six weeks, was US$ 0.03 higher at US$ 0.34. Thursday 05 December saw continuing dismal trading of 134 million shares, worth US$ 37 million, (compared to 147 million shares, at a value of US$ 59 million, on 28 November).

By Thursday, 05 December, Brent, having, shed US$ 0.68 (1.1%) the previous week, closed US$ 0.58 (1.0%) lower at US$ 63.97. Gold, having declined US$ 12 (0.9%) the previous fortnight, gained US$ 22 (1.8%), closing on Thursday 05 December at US$ 1,483. Brent ended November on US$ 63.32 – up US$ 3.09 (5.1%) from its November start of US$ 60.23 and 17.7% higher YTD by from its 01 January opening of US$ 53.80. The yellow metal was down on the month by US$ 35 (2.3%) – from US$ 1,515 – but up US$ 199 (15.5%) YTD from its year opening of US$ 1,281.

It seems likely that OPEC will agree to an extension of its current round of production cuts, of 1.2 million bpd, maybe for the whole of 2020, at their two-day meeting starting in Vienna today. The cartel, to be joined by non-member countries such as Russia, Oman and Bahrain, may even increase that figure with Iraq supporting further cuts of 400k barrels. As usual, the main issue will not be the scale of cuts but members’ future compliance; recently, Saudi Arabia has helped with this problem by actually cutting more than it has been required to do, so that the total cut number was achieved. It is reported that the likes of Nigeria, Ecuador, Malaysia and Brunei have had problems meeting their quota. If disagreements do arise and no agreement reached, oil prices could drop by as much as US$ 20 in the short-term.

The Aramco 1.5% regional IPO, hoping to raise US$ 25.6 billion, was oversubscribed by 234%, pointing to the fact that shares will be valued at the top end of earlier expectations. Of the 3 billion shares on offer, two thirds were allotted for institutions (with six billion subscribed for) and the remaining one billion were for the retail sector which was 1.5 times over the number of shares offered. Although the issue was favourably met by the market, it was nowhere near the interest of that for Saudi Arabia’s National Commercial Bank in 2014, where the retail portion was 23 times oversubscribed. It is thought that the share value will be in the region of US$ 8.00 to US$ 8.50, which would value the energy titan at up to US$ 1.7 trillion. Any dip in the oil price could see this value decline 25% in the short-term – another reason why the government is willing to support a continuation of oil production cuts into 2020.

Daimler is the latest big-name car maker to announce global job cuts  – at least 10k, coming days after Audi said it would lose 15.5% of its current 61k German workforce.; the main reason given was to raise more finance for the switch to electric cars, with the industry going through “the biggest transformation in its history”. Daimler expects to save over US$ 1.5 billion by introducing the personnel cuts and reducing the number of management positions worldwide by 10%.

In a move to boost profitability, Energy firm Npower, owned by E.On,  is to cut up to 4.5k UK jobs,  including three call centres, as it plans to merge computer systems to save money; this restructuring plan is set to cost Npower US$ 640 million and would result in small businesses and consumers being served by the same computer systems and customer service teams. The big six industry players have not been helped by the energy price cap and, at the other end of the scale, there have sixteen small energy companies going out of business since 2018. So that leaves those mid-sized companies picking up business because they tend to have newer computer systems and are better able to serve their customer base. Two years ago, they held 18% of the household energy market, rising to its current 30% level which could rise to 50% over the next four years.

London-listed Network International will focus on regional expansion rather than looking for new markets. The payments solutions company, with H1 revenue and profit both heading north, by 12.4% and 13.9%, reckons that the MENA region has huge untapped potential; it has recently renewed contracts with two of its largest customers, Emirates NBD and Emirates Islamic. Since its April IPO, NI has posted low double-digit growth from its two main business lines — merchant and issuer solutions – driven by selling additional services and expanding its customer base.

No country seems to be immune from what is happening in the global High Street and Australia is no exception. The latest retailer there to go into voluntary administration is popular women’s fashion brand, Bardot. The 23-year old women’s fashion brand has gone into voluntary administration, joining an ever-growing list of struggling Australian retailers.; it has 72 stores employing 800. Over the past year, the likes of Karen Miller, Napoleon Perdis Cosmetics, Shoes of Prey, Ed Harry and Roger David have entered into administration. The main factor behind its demise is that, despite double digit growth in online sales, it is operating in a highly competitive retail environment and having to compete in a “highly cluttered and increasingly discount-driven market”.  Fashion rivals include Country Road, H&M, Sportsgirl, Top Shop and Zara.

Relying on solar energy can present its own problems as can be seen In Perth where over a third of all houses has a solar installation; now this solar capacity is far greater than that of an ageing 854-megawatt coal-fired power station and this is where the problem begins. There is a fine balance between the two energy sources and there is a tipping point that could result in regular black-outs for this part of Western Australia, which is probably the most advanced in the world when it comes to alternate energy supplies. Because Perth is considered the most isolated city in the world, it cannot rely on “neighbours” to help if there is a supply shortage. Solar works best when, on mild, sunny days in spring or autumn, consumers are not using air conditioners, leading to an excess of solar power piling into the system and thus reducing the power needed from the grid. In short, high levels of solar output tend to go hand in hand with low levels of demand, so there is surplus capacity when not really needed. If that happens the obvious solution is to scale back or switch off the coal- and gas-fired power stations. However, most power stations are not equipped to be turned on and off at a whim. Now experts are trying to work out on how best to integrate solar and storage and, if no progress is made, authorities warn of a “real risk” of a system-wide blackout, especially when soaring levels of renewable energy periodically overwhelm the system.

Those who thought that the Australian economy would start turning north again got a rude awakening, as the Q3 GDP growth dipped from 0.6% to 0.4%, quarter on quarter, with a marked shift in household consumption, with an increasing number of households apparently saving more of their tax return rather than spending it; indeed, discretionary spending was at its weakest growth of only 0.1% since the GFC, whilst the household saving rate rose to 4.8%.  Most of the growth was attributable to government infrastructure spending and increased exports, contributing 0.2% to the GDP growth. Other indicators, that added more gloom, were dwelling investment being 1.7% lower, (its fourth consecutive decrease), and November new car sales 10.0% lower from a year earlier. The RBA’s latest 2.3% annual growth forecast for this year would mean that Q4 would have to have an 0.7% rise which seem highly unlikely.

There was no surprise to see India’s economy posting its weakest growth, at 4.5%, since 2013 and down from the 5.0% annualised growth recorded in the previous quarter; October saw core infrastructure industries’ output posting its biggest contraction since 2005, declining 5.8%. The three main drivers, behind Asia’s third largest economy recording worrying results, include export demand faltering, weaker consumer demand and business investment slowing. Many of the problems seem to be self-inflicted. with much of the blame laid at Prime Minister Narendra Modi’s door. He has aimed to steer the economy in a positive direction by slashing corporate tax rates, introducing more privatisation of public entitles and setting up a special real estate fund. India’s 14^th prime minister, six months into his second five-year term, was overseeing quarterly growth rates of 9..4% as late as 2016 – now he has his work cut out to reverse the downward spiral, not helped by the fact that because of a boost in spending and lower tax revenue (because of the recent cuts), he will fail to hit his fiscal deficit target of 3.3% of GDP.

With sales of over US$ 7.4 billion, Black Friday saw the second biggest ever US online sales day, behind Cyber Monday, as an increasing number of shoppers are now using mobile devices rather than computers; Friday posted a record US$ 2.9 billion of sales via smartphone. The ongoing transition from the traditional computer, as a purchasing vehicle, encourages potential customers to shop three days earlier and not wait for the following Monday. It is estimated that 20% of the total holiday season spend will occur over the five days from Thanksgiving to Cyber Monday. with an increasing amount being diverted from in-store buying.

The Bank of England’s Canadian governor, Mark Carney, is leaving the post next month and has been appointed United Nations Special Envoy for Climate Action and Finance; he swaps his current annual US$ 1.3 million package for a nominal remuneration of US$ 1. The 55-year old was an apparent avid opponent of Brexit claiming, at the time of the 2016 referendum, that it was the most significant risk to the country’s financial stability, that had “pushed up uncertainty to levels not seen since the euro crisis”, only to apologise later for getting it wrong. Accused of scaremongering at the time, the former Goldman Sachs banker had to admit months later that “financial stability risks are greater on the Continent than they are in the UK”. In October, he had supported the new Brexit deal as “welcome” and a “net economic positive” – but this was rejected by the shambolic British parliament – the supposed home of democracy.

All is not well in the eurozone as manufacturing activity dipped for the tenth straight month, albeit the November figure of 46.9 was up on the previous month’s 45.9; any figure below 50 indicates contraction. One sign of optimism was a 3.4 jump in the future output index to 55.3, whilst new orders, employment, raw materials purchases and backlogs of work all declined – but at a reduced rate. Germany, the bloc’s biggest economy, saw its manufacturing sector also grow at a slower rate but should still post a miserly 0.2% growth in Q4, following a 0.1% improvement last quarter and an 0.2% contraction in Q2.

China’s factory activity in November surprised even the most optimistic of analysts, as it surged to a three-year high and comes on the back of upbeat government data released earlier in the week. The Caixin/Markit manufacturing rose 0.1, month on month, to 51.8, with the market expecting a lower 51.4 reading. Although lower, month on month, total new orders and factory production remained at buoyant levels in November; a month earlier, both readings had grown at their fastest rate in six years and almost three years respectively.  Furthermore, a recovery in the labour market saw companies adding workers for the first time in eight months. These figures indicate that the country’s 2019 growth will come in marginally above 6.0% – and although acceptable on the global stage, it will be the country’s worst return in thirty years.

There are problems – other than the ongoing US trade war – that face the world’s second largest, but soon to be first, economy, including deflation, with input costs rising as output charges head in the other direction. With slowing export levels, declining profit margins and weakening business confidence, the country needs a major economic boost. Even though the past year has seen major tax cuts, and much higher infrastructure spending, the government has fallen well short of its target and, to date, has gained little traction. In a bid to attract more public works, it has brought forward US$ 142.0 billion of the 2020 local government special bond quota and has cut some of its key lending rates to reduce corporate financing costs. The problem for the government is if it were to be more aggressive with tax cuts and public spending, it may well heighten financial risks and add to a mountain of debt – a risk that it is evidently not willing to take. On top of that, there are the fallouts from the US tariffs and increasing tensions in Hong Kong.

Argentina and Brazil have been warned that President Trump is considering restoration of up to 25% tariffs, which were initially imposed, and then waived, on steel and aluminium imports arguing that their respective weaker currencies, following, “a massive devaluation”, have made it harder for US food exports to compete. Brazil is the world’s tenth biggest steel exporter and accounts for 3.7% of the country’s exports. The US president, with next year’s elections in mind, has to protect the farming interests in his home base where the sector witnessed a 24% increase in bankruptcies over the past year.

Monday saw the country celebrating its 48^th National Day, with HH Sheikh Mohammed bin Rashid Al Maktoum stating that the national economy had made “great strides” thanks to the UAE’s resilient and flexible legislation. The Dubai Ruler highlighted the government’s strategy to take advantage of the dawn of the Fourth Industrial Revolution, as the UAE, with the aid of AI, positions itself as a “model for interactive cities”. He reiterated that “We will continue to deliver the future for our generations to come. The occasion we are celebrating today is teeming with a myriad of lessons that we have learned from our founding fathers, who instilled in us an ambition and will to cope with the changes in the world and to utilise our full potential.” Sheikh Mohammed also mentioned that the word “impossible” is now void, after the achievements of the country and its progress in recent years. The Impossible Dream.