Should I Stay Or Should I Go?                                                              19 December 2019

This week, HH Sheikh Mohammed bin Rashid Al Maktoum issued the “50-Year Charter for Dubai”, which includes nine articles from his future vision for the emirate, envisioning the life he wishes for everyone living in Dubai. He said “we shall develop our plans and projects and reinvent new ideas. 50 years ago, the founding fathers shaped our life today, and next year, we will shape the coming five decades for the future generation”. At the same time, two new Cabinet committees were established, one to lay out a comprehensive development plan for the next 50 years, including health, education, housing, transport and food security across the country, and the other, focussing on the organisation of the major celebrations to be held in honour of the 50th anniversary of the UAE in 2021.

Figures from Property Finder Group’s Data Finder show that 38.2k residential units were completed up to the nine months ended 30 September, with a possible 6.5k expected over Q4, bringing the total for the year to  a possible 45k; this would be the highest annual figure for several years and 31.9% higher than a year earlier. Over the past year to September, the emirate’s population has grown over 5.4% to 3.34 million. The consultancy expects 2020 will bring less new projects, as developers focus on completing existing projects and selling their inventory of completed units in response to reduce the levels of future supply. Of the 13.2k units slated for completion over the six months to March 2020, 87% are apartments.

Meanwhile, Knight Frank indicates that Dubai prime property prices, that are expected to be 3.7% lower this year, will decline at the slower rate of 2.0% in 2020, despite the fact that this sector posted slight increases – of 0.2% and 0.3% – over the past two quarters. It is felt that sales and demand will nudge higher, whilst supply will witness a significant jump. Everybody is hoping that Expo 2020 will act as a catalyst to boost demand in this sector. Those who left Dubai a decade ago and bought in Vancouver have done well – with prime residential prices 80% higher compared to Dubai’s 8% decline.

The DCCI estimates that the construction sector added 6.4% to the emirate’s GDP, driven by Expo 2020 and government-led infrastructure projects, with the impact to continue well into 2022. Furthermore, there are 4.8k ongoing projects in Dubai, equating to 42% of the country’s total number; on a national basis, the construction sector contributed US$ 33.2 billion to the UAE GDP and has US$ 48.4 billion of works in the pipeline. Other key factors include Dubai’s drive towards economic diversification, a steady population increase (7.3% higher in 2018 and 4.8% so far this year to 3.345 million) and continuous infrastructure projects.

In February, Meliá is set to open its first regional ME hotel in Dubai, located in the Opus.. Designed both inside and out by the late Zaha Hadid, the property will have 74 rooms and 19 suites along with 96 serviced apartments; it will also have fifteen restaurants, three of which will be run by the hotel, along with a spacious pool and a 7k sq mt gymnasium.

The Gevora on SZR has another three years as the world’s tallest hotel but will lose this distinction to the Ciel, the First Group’s Dubai Marina project, currently under development in Dubai Marina, and due to open in 2023. Designed by architectural firm, Norr, Ciel will reach a height of 360.4 mt – four metres higher – and will house 1.2k luxury suites and serviced residences. It will also feature a glass observation deck, providing 360-degree vistas across Dubai Marina, as well as a rooftop leisure deck with a swimming pool, fitness centre and steam rooms.

Following the 251-room Ibis Styles, Nakheel has just opened its second hotel in Dragon City, the Premier Inn at Dragon City, located in closed proximity to Dragon Mart. The eight-storey property, featuring a 320-seat restaurant and a Costa coffee shop, is Nakheel’s fourth hotel – the other two being located at Ibn Battuta Mall. Its first residential component – a twin-tower apartment complex with over 1.1k units – is under construction.

Dubai added two more ‘supertall’ buildings (over 300 mt) to its portfolio this year with The Address Residence – Fountain Views III in Dubai (332 mt) and Noora Tower at 307 mt; this year has seen 26 such structures being completed in the world bringing the total to 170, compared to 76 in 2013. The number of buildings above 200 mt totalled 126, as the UAE, with eleven completions, trailed China and the US with 57 and 14: however, these three countries accounted for 65% of total builds.

MAF and Dreamscape Immersive will open their first international venture in Dubai next week, located in the Mall of the Emirates; with two successful launches in both Los Angeles and New York, Dubai will be their first international entrée. The location-based VR entertainment company, backed by some of Hollywood’s heaviest hitters, will initially feature three immersive adventures which will transport viewers to fantastic new worlds.

The RTA is asking private companies to submit proposals for constructing about 1.5k bus shelters in a move to ramp up the use of public transport and improve the infrastructure needed. The Dubai government is keen on promoting PPPs (public-private partnerships) and, in this case, the contract on offer would be for up to three years, with the winning bidder operating and maintaining the shelters for ten years, renewable to a similar period.

With an annual spend of US$ 27.9 billion, Dubai has become the third biggest city in the world when it comes to international tourism spending that contributes 11.5% to the emirate’s GDP. The report, by the World Travel & Tourism Council, also noted that this spend in the MENA added US$ 92 billion to the global tourism GDP. Dubai can thank the arrival of international visitors as they account for 89% of the spend.

A US$ 1.25 billion Etihad Rail contract has been awarded to a Chinese JV, (involving China Railway Construction Corp and National Projects) for construction civil works and construction for stage two of the country’s rail project. The work involves a 145 km rail track, connecting the Fujairah and Khorfakkan ports to the network at the Dubai-Sharjah border. Financing of Stage 2, linking the UAE and Saudi Arabia from Fujairah Port to Ghuweifat via  Mussafah, Khalifa Port and Jebel Ali Port, will be through the UAE Ministry of Finance and the Abu Dhabi Department of Finance. When the 1.2k km rail network is complete, there will be connectivity between the country’s ports, airports and manufacturing hubs which will in turn boost freight volumes, enhance its logistics sector and facilitate trade; it will also improve UAE’s global position as one of the world’s leadinglogistics and transportation hubs.

Mohammed Alabbar has a few words to say to Amazon and that is “go back to Seattle”, as the Noon chairman is worried that the region’s e-commerce sector will be taken over by foreign players, if no local action is taken. Noon’s founder Mohamed Alabbar believes it is his duty not to let the region’s fast-growing e-commerce sector be dominated by foreign players and that Amazon and its billionaire founder Jeff Bezos should “go back to Seattle”. In an interview with WIRED magazine he is quoted as saying “We want Noon to do well because we don’t want just one guy to sell baby milk to our kids. I will not allow that. No way will that ever happen. I don’t want one company to control the life of my people.” Noon was established in 2017 as a US$ 1 billion JV between Mohamed Alabbar and Saudi Arabia’s state-owned Public Investment Fund. He considers this stand to be his duty to the Arab people, warning that if no action is taken now “the Middle East will either be left behind or will be occupied by foreign powers. These foreign powers are digital banks, digital companies, digital media—there’s no need for military.”

Following allegations by US short-selling firm Muddy Waters, which raised “serious doubts” about its financial statements, London-listed NMC’s shares slumped by 32% on Tuesday, equating to some US$ 2 billion being wiped off its market value. The country’s largest healthcare provider refuted the claims made which questioned the group’s asset values, cash balance, reported profits and debt levels. Prior to Tuesday, NMC’s shares had gained more than twelve-fold since its 2012 listing and issued a statement stating that “NMC will review the assertions, insinuations and accusations made in the report, which appear principally unfounded, baseless and misleading, containing many errors of fact, and will respond in detail in due course.”

With shareholders finally agreeing to Dubai Islamic Bank acquiring Noor Bank, the new banking entity will have assets of nearly US$ 75 billion making it one of the largest Islamic financial institutions in the world, as well as enhancing Dubai’s position as the leader of the Islamic economy. Investment Corp. of Dubai, the emirate’s main state-owned holding company, is the largest shareholder in DIB with a 28%, as well as being a major investor in Noor Bank.

The bourse opened on Sunday 15 December and, having risen 43 points (1.6%) the previous fortnight, was 47 points (1.7%) higher at 2769 by 19 December 2019. Emaar Properties, having shed US$ 0.04 the previous fortnight, gained  US$ 0.02 to close on US$ 1.11, whilst Arabtec, up US$ 0.05, the previous two weeks, gained a further US$ 0.01 to close at US$ 0.37. Thursday 19 December saw continuing dismal trading of 131 million shares, worth US$ 38 million, (compared to 105 million shares, at a value of US$ 44 million, on 12 December).

By Thursday, 19 December, Brent, US$ 0.69 higher the previous week, gained a further US$ 1.88 (2.9%) to US$ 66.54. Gold, having declined US$ 23 (1.5%) the previous three weeks, was US$ 12 (0.8%) higher, closing on Thursday 19 December on US$ 1,484.

IATA expects air cargo to recover somewhat next year, by 2.2%, following an expected 3.3% contraction in 2019, with revenue 8.0% lower – the weakest year for air cargo volumes since the 2008 GFC. This improvement is subject to a resolution to the US-Sino trade war and average oil prices around the US$ 63 level (as oil accounts for 25% of airlines’ costs). However, an expected uptick in global growth next year will have an obvious positive knock-on effect on air cargo markets and, even if this were to happen, there will be increased pressure on yields.

In January, Boeing will temporarily halt production of its troubled 737 Max airliner, which has now been grounded for nine months, with a further delay expected, dampening the plane maker’s expectations of returning to the air this year. Only last week, lawmakers were advised that US aviation regulators were aware, following the first crash in October 2018, that there was a risk of further accidents suggesting that there could be more than a dozen more crashes over the lifetime of the aircraft unless changes were made to its design.

As expected, Fiat Chrysler and PSA Group have joined forces in a US$ 50 billion deal, to become the world’s fourth largest carmaker. The merger is expected to result in annual cost savings of US$ 4 billion, with the current PSA boss Carlos Tavares becoming its chief executive. Earlier in the year, Fiat Chrysler pulled out of a US$ 29 billion merger with Renault, following pressure from the French government which had a 15% stake in the latter. Last month, Fiat Chrysler found itself in court, being sued by General Motors, claiming it bribed union officials over many years to gain advantages that cost General Motors millions of dollars.

The co-founder and chief executive of Bet365 is still the highest paid in the UK, raking in a US$ 360 million salary plus dividends of US$ 60 million as a 50% shareholder. Denise Coates, who saw a 25% hike in her salary, as the popularity of online gambling continues to grow, used her first-class degree in econometrics when she identified the potential of online gambling in 2000 and invested in the domain name Bet365. Whilst the company made a 19.7% increase in annual profits to over US$ 1 billion, her other investment, as owner of Stoke City, saw her lose US$ 10 million last year.

Oscar Wylee is in trouble with Australian authorities for blatant misrepresentation, following on a week after Coles faced the wrath of the Australian Competition and Consumer Commission. Coles had advertised that it would pass on AUD 0.10 per litre drought levy it advertised as supporting local dairy farmers but only forwarded AUD 0.035. Although the consumer watch dog reckoned it had a strong case to allege misleading conduct by the retailer, it did accept their offer to pay AUD 5 million+ to the Norco Dairy co-operative, as settlement. Meanwhile, the glasses chain, with 52 outlets and an active on-line selling platform, had advertised that it would give away a second pair  for every unit sale – it is alleged that only 3k had been donated, even though 300k had been sold over a five-year period to the end of last year. Oscar Wylee has strongly refuted the claim, saying that it had donated more than 350k pairs of glasses to charity organisations, along with monetary donations totalling AUD 131k.

The fall-out from the 2018 Royal Commission on Banking continues with APRA launching an investigation into the handling of alleged money laundering breaches, involving Westpac’s directors and senior managers. The regulators will look at their “fundamental deficiencies” and whether they had breached the Banking Executive Accountability Regime (BEAR). To make matters worse, the bank has also been taken to court by financial crime agency AUSTRAC over more than 23 million alleged money laundering breaches.

Meanwhile, regulators have taken the NAB to court for allegedly breaching company laws on more than 12k occasions. And that the bank is in serious danger of having to pay out billions of dollars if ASIC wins its case; the case is based on claims that the big-four bank collected almost US 500 million in fees but did not provide any financial advice and then making false or misleading statements in fee disclosure statements from December 2013 to February 2019.

Ongoing political problems have had a negative impact on passenger numbers at Hong Kong International Airport, posting its biggest annual decline since June 2009; the annualised 16.2% decline in November saw passengers down to just over five million. Over the previous three months, there were 12%+ falls, driven by on-going violent protests that started in June.

There seems to be no end to the economic (and political) crisis in Lebanon, as caretaker prime minister Saad Hariri requests both the World Bank and the IMF, as well as foreign donors, for “technical and financial support”. The country has a public debt of US$ 86 billion plus one of the highest debt-to-GDP ratios in the world at 150% of GDP. The Lebanese pound, which is pegged to the greenback, is trading on the local black market 33% lower. Even if external finance were to occur, there could be severe macroeconomic instability with the possibility of debt restructuring leading to a currency devaluation, resulting in major currency losses for private investors. Last week, the major banks were instructed to halve interest rates on foreign and local currency deposits.

For the first time since 2016, the Japanese government has resorted to issuing deficit-financing bonds to make up for a tax revenue shortfall, as Prime Minister Shinzo Abe continues to struggle to balance the budget. The additional issue of US$ 20.3 billion is an indicator that, despite the leader’s best efforts, “Abenomics” has failed and that the government will continue to have difficulties trimming debt issuances and raising revenue. The government has cut its current fiscal year tax income by 5.2% to US$ 575 billion, not helped by the on-going trade tariff war and a slump in exports.

The Bank of Russia has lowered its base rate by a further 0.25% to 6.25% – its sixth cut in 2019 and bringing the rate down 150 basis points from its year-opening figure of 7.75%. The bank indicated that there may be further rate reductions early in 2020, as “disinflationary risks still exceed pro-inflationary risks over the short-term horizon.” With both inflation falling below the government’s 4.0% target, and economic growth lagging behind expected goals, the government has had to introduce more robust economic measures.

In the past, German lawmakers have usually opted for a balanced budget approach, without the need for issuing new debt, and some still argue that its ‘black zero’ balanced budget policy is a useful approach to achieve sound finances. However, Chancellor Angela Merkel is being challenged by her Social Democrat (SPD) coalition partners for some sort of stimulus package to bolster the country’s flagging economy. In line with its EU neighbours, Germany is struggling because of the trade war, a slumping car industry and worries about the outcome of the UK leaving the bloc. Everybody knows that over the past seven years, the ECB has failed to reach its 2.0% target and a more aggressive approach in economic management is badly needed.

With the imminent departure of the Canadian Governor of the Bank of England, Mark Carney, it seems that one of the front runners to take over is Egyptian-born Dame Minouche Shafik, who would become the first female incumbent in the bank’s 325-year history. She worked for fifteen years at the World Bank, where she was its youngest vice-president at the age of 36, following which she moved to the UK, becoming the most senior official responsible for the UK government’s aid programme. She then took a position with the BoE as deputy governor to Mark Carney but left to become director of the London School of Economics. There will be several interested parties vying to help running the finances for the fifth biggest global economy including another female, Shriti Vadera, who is chairwoman of Santander UK, and Andrew Bailey, another former governor of the central bank.

The UK’s Competition and Markets Authority is concerned that the four global tech giants could be having a negative impact on digital advertising in the country and that the likes of Google and Facebook may have become entrenched in the UK market “with negative consequences for the people and businesses who use these services every day”. It is estimated that Google accounts for 90% of the US$ 7.8 billion search advertising revenue in the UK and that Facebook takes about 50% of the total UK US$ 5.2 billion display advertising revenue. There is no doubt that traditional newspaper and magazine platforms are losing their market share, resulting in their ability to continue to produce valuable content for their readers. The regulator is worried that a lack of “real competition” could mean higher advertising costs, being passed on to consumers, and that people may be missing out on “the next great new idea from a potential rival”.

UK unemployment rates continue to fall and quarterly October figures of 1.281 million were the lowest level since January 1975; the employment rate rose to an all-time high of 76.2%, equating to 32.8 million. Vacancies have fallen for the tenth month in a row and are now below 800k for the first time in two years. However, annual wage growth rate slowed 0.1% to 3.5%, quarter on quarter, but with inflation hovering around 2.0%, pay is still increasing in real terms.

As expected, the Trump administration agreed to suspend some tariffs, of around US$ 160 billion, on Chinese goods and to cut others by 50% in some cases, with Beijing promising to increase US farm products purchases by importing US$ 50 billion in US agricultural goods in 2020 – this is more than double the amount purchased pre-the tariff days in 2017. Negotiations are taking place in troubled political times, with the US supporting the Hong King protests and criticising China’s camps for ethnic Uighurs. The on-going trade war is probably the biggest cause for the slowdown in the global trade and economic environment. Donald Trump ended the week becoming the third of forty-five US presidents to face impeachment charges; this comes some eleven months before next November’s presidential elections. There is no doubt that he is one man who will not be asking himself Should I Stay Or Should I Go?