SO you Win Again

So You Win Again                                                                                          09 January 2020

Showing confidence in the Dubai property market, Emaar has introduced Burj Crown as its first launch of the year. The 44-storey, 400-unit luxury residential tower, designed by Hong-Kong based architecture firm LWK Partners, will be located in the heart of Downtown Dubai; it comes at a time when many believe that the almost five-year property bear run may have run its course, with latest figures showing that the number of 2019 transactions climbed over 20%, year on year, to 42k – its highest rate of sales since 2008.

WeWork’s second regional operation, following on from one opened in Abu Dhabi last year, will be located in One Central, near to the World Trade Centre. The co-working space provider is already accepting requests from start-ups and others; initially it will handle hot desk applications, but later dedicated desks and private offices will be made available for rent. The New York-headquartered company has yet to disclose price details for its Dubai base but monthly rates in the capital are set at US$ 300, with private office and dedicated desks for two people costing US$ 1,362 and US$ 708 respectively.

This week, on the occasion of his 14th accession anniversary, HH Sheikh Mohammed Bin Rashid Al Maktoum set up The Dubai Council that will oversee six areas of growth for the emirate including: economy, citizens’ services, government development, infrastructure, security / justice, and health/knowledge. The Dubai Ruler introduced the initiative to “drive change in Dubai, oversee social and economic governance in the emirate, improve competitiveness, economic leadership and attractiveness of the emirate, to become the best city to live in”. He further added that “performance benchmarks shall be set and signed with all general directors in Dubai — and are to be approved by the Dubai Majlis”. The benchmark, which will include the goals and projects for each department, will be revised every two years. He also warned that “whoever fails to bring about a real change within the two-year period will be released from their duties.”

The following consultative heads were appointed as Commissioner Generals: Shaikh Ahmed Bin Saeed Al Maktoum – Dubai Economic Track,  Mattar Mohammed Al Tayer -Infrastructure, Urban Planning and Well-Being, Major General Talal Belhoul – Security and Justice, Abdullah Mohammed Al Basti – Government Development, Saeed Mohammed Al Tayer –  Health and Knowledge and  Major General Abdullah Khalifa Al Merri  – Citizens.

At. their first ever meeting, the newly appointed Dubai Council outlined a new drive for efficiency for the next five years, having been set fifty goals that must be met to boost growth, or face removal from their posts. Chaired by HH Sheikh Mohammed bin Rashid al Maktoum, he stressed that there would be a new economic plan for the emirate and a new “urban plan” to improve living standards – and that the plans “will be implemented by the team… or we will replace the team”. He also confirmed that all publicly owned newspapers, radio and television stations and the government press office, Dubai Media Office, would come under one ‘Dubai Media Council’ and that personally, ”I have not stopped improving and changing over the past 50 years and I will not cease to do so.”

Dubai Taxi Corporation celebrated its silver anniversary this week and during the past twenty-five years, it is estimated that it has carried more than one billion passengers over 682 million trips. The RTA subsidiary has seen the number of taxis grow from just 81 in 1995 to its current level of 5.2k with the number of drivers increasing from 886 to 11.5k.

Uber has finalised its US$ 3.2 billion acquisition of Careem’s ME business, but the Dubai ride-hailing company will retain operational and brand independence, even though it is a wholly owned subsidiary of the San Francisco-based tech giant. With Careem’s co-founder Mudassir Sheikha remaining chief executive, the new board will comprise three Uber members and two representatives from Careem. Regulators in UAE, Saudi Arabia, Egypt and Jordan have approved the deal whilst approval is still pending in Pakistan, Qatar and Morocco.

To encourage repeat visitors, the UAE has introduced the country’s first multi-entry five-year tourist visa to encourage travellers to visit more than once and spend more while they are in the country The Dubai Rulers want to establish the country as a ‘major global tourism centre” Further details, including costs, will be revealed later.

As expected, Dubai Gold and Commodities Exchange broke annual records for traded volumes in 2019, with investors capitalising on volatility in gold and currency markets, as there were 23.1 million contracts – 3.6% higher on the year – valued at US$ 866 billion. The three busiest months of the year were August, July and May with trades of 3.2 million, 2.3 million and 2.2 million respectively. Once again, the exchange’s best performing product was its rupee-based INR Quanto.

The bourse opened on Sunday 05 January and, 4 points up the previous week, was 21 points (0.8%) lower at 2749 by 09 January 2020. Emaar Properties, having lost US$ 0.03 the previous three weeks, was up US$ 0.01 at US$ 1.11, whilst Arabtec, US$ 0.02 lower the previous fortnight shed a further US$ 0.02 to US$ 0.33. Thursday 09 January saw the market trading only 164 million shares, worth US$ 61 million, (compared to 30 million shares, at a value of US$ 11 million, on 02 January).

By Thursday, 09 January, Brent, US$ 7.45 (12.2%) higher the previous four weeks, had hit the US$ 70 level during the week but eventually lost US$ 3.15 (2.6%) to US$ 65.14. Gold, up US$ 69 (4.7%) the previous three weeks, rose a further US$ 11 (0.7%), closing on Thursday 09 January at US$ 1,552. The first full week of the new year proved to be a tumultuous one with so much market volatility, not seen for some time, caused by the death of Iran’s Qasem Soleimani in a US-backed Baghdad security raid. Later in the week, a Boeing 737, operated by Ukraine International Airline, was shot down in Iran just after take-off from Tehran airport, under suspicious circumstances – again rattling the global markets.

Airbus has announced that it will increase the monthly number of its A320-series planes, assembled at its Alabama operation from five to seven, which will minimise  US tariffs imposed on European built aircraft; it will also assemble more A220s at its Mobile plant, bringing its US output to more than 130 aircraft a year. Last October, the WTO agreed that the US could impose duties on US$ 7.5 billion of European exports, in response to the illegal funding for Airbus jets; this included planes made in Europe but not to aircraft components shipped for assembly to Alabama. Currently, the European plane maker has seven other assembly lines for A320s – four in Hamburg, two in Toulouse and one in Tianjin in China.

BP has agreed to sell off US$ 625 million of its North Sea assets to Premier Oil, including the Andrew platform, and its controlling stake in five surrounding fields, along with its 27.5% stake in the Shell-operated Shearwater field.

There were two contrasting reports this week, involving two of the UK’s iconic carmakers. Aston Martin issued a profit warning on the back of a “very disappointing” 2019. After announcing that annual earnings could be almost half of those of the previous year, at US$ 175 million, its shares sank by 16.0%, whilst it posted that “challenging trading conditions highlighted in November continued through the peak delivery period of December resulting in lower sales, higher selling costs and lower margins”. Fifteen months after going public, its share value has slumped by over 76% to US$ 1.23; although core retail sales were 12.0% higher, its wholesale volumes – the number of cars the dealers have actually ordered – were down by 7.0% at 5.8k vehicles. Meanwhile, Rolls-Royce posted “very stable, robust” orders, selling a record 5.1k vehicles last year, driven by higher sales following the launch of the Cullinan SUV. It seems that Aston Martin will have to learn from its mistakes to get back on track – otherwise it will find itself on a slippery road to further bad news.

For the fourth year in a row, Mercedes-Benz came in as the world’s best-selling luxury-car brand, ahead of the likes of BMW AG and Volkswagen AG’s Audi. It posted a 1.3% increase in car sales to 2.34 million, with BMW posting a 2.0% increase in sales to a record 2.17 million cars last year.

In common with most countries, registration of new cars continues to decline in the UK which posted a fall for the third consecutive year – down 2.4% to 2.31 million, the lowest level since 2013; more of the same is expected this year. Not only is the industry facing serious challenges adapting to new emissions legislation, the slump is attributed to other factors such as weak consumer confidence, Brexit (inevitably) and confusion over clean-air legislation. What will be needed is a huge investment in electric and hybrid cars to steadily replace diesel vehicles which once accounted for 50% of all sales, and now only 22%, and heading south all the time.

Several UK banks, including Barclays, HSBC and Sainsbury’s, were impacted when foreign currency seller Travelex took its site offline to deal with a cyber-attack so as to contain “the virus and protect data”. The attack took place on New Year’s Eve and consequently firms, dependent on the Travelex platform, were unable to sell currency online during a major holiday period. Normally, Travelex delivers the foreign currency to stores for customers to collect, as well as operating the software that is used to buy the travel money and had to resort to manual operations in its branches.

Ahead of what could well be a turbulent 2020 for Italian banks, its government is in talks with the EU over a rescue plan for cooperative bank Popolare di Bari, the largest financial institution in the south of Italy. Over the past four year, the country has seen numerous banking crises that to date have cost the government, and other Italian banks, US$ 25.5 billion – with more in the offing. The bank was placed under special administration by the Bank of Italy last month and the Italian banks are committed to an immediate cash injection of US$ 345 million, as well covering up to half of a potential capital increase of US$ 1.6 billion for the bank. The bank has so far resisted changes, introduced in 2016, aimed at forcing large cooperative banks to turn into regular joint-stock companies to improve governance and management accountability; now it has no option, if it wants to receive the required fresh capital injection.

In the US, Ikea has agreed to pay US$ 46 million to the parents of a two-year old who died from suffocation after a 32 kg Malm chest of drawers fell on him in 2017. The unstable-designed product had been recalled a year earlier (the largest ever in the Swedish company’s history), following safety concerns after three other children had been crushed to death; in a combined settlement then, Ikea paid out US$ 40 million.

Having been forced to resign for his role in the money laundering scandal that engulfed Westpac, its chief executive, Brian Hartzer walked away with US$ 2 million, despite his bank being responsible for a staggering 23 million breaches of AUSTRAC legislation. This is just another example of the fat cat brigade looking after themselves because it is certain that those working in the lower branches of the institution would not have been treated as royally and possibly ended up in court.

Likewise, in the UK where it is estimated that within the first three days of 2020, FTSE 100 chief executives  would have earned US$ 38.5k – equivalent to the average annual pay of the typical employee; by the end of the year, their average pay would be US$ 4.5 million or US$ 1,176 per hour. This year, publicly listed companies, with more than 250 UK employees, will have to disclose the ratio between the CE’s pay and that of their average worker – and to explain the reasons for their executive pay ratios.

The year started well for one of the UK’s bigger presences on the embattled High Street as Next reported better than expected Christmas sales and increased its profit forecast to US$ 950 million; full price sales for the quarter to 28 December rose 5.2%. The retailer now expects 2020 profit to come in 3.9% higher, year on year, and while in-store sales dipped 3.9%, (not helped by cold and wet weather), its investment in on-line resulted in an impressive 15.3% revenue increase.

It seems highly unlikely that India will attain its fiscal deficit target of 3.3% of GDP this year, if the November deficit of US$ 1.2 billion is anything to go by, not helped by its revenue stream coming in at 50% of expectations. The country’s finance minister, Nirmala Sitharaman, noted that the recent corporate tax cuts would knock off US$ 315 million from government revenues. In the eight-month YTD, the fiscal deficit has already crossed over 14.8% of the budget estimate – a record high that could see the deficit touch 4.0% by the end of March; if the energy prices continue their upward trend, this would be an added burden for an economy that is dependent on oil imports. More worrying statistics see the public sector’s borrowing requirement rising to 8.5% of GDP and its economic growth at a six-year low in Q3 – compared to 7.0% a year earlier. Fitch Ratings has cut its growth forecast to 4.6% from a previous 5.6% estimate for the current financial year. Under present conditions, it seems a distant hope for prime minister Narendra Modi that India will become a US$ 5 trillion economy over the next five years.

The US labour market ended 2019 on a flat note with both non-farm payrolls only rising 145k in December (compared to 256k a month earlier) and wages by 2.9% – the first sub-3% reading in eighteen months. Unemployment held at a half-century low of 3.5%. The year-end figures are a reflection of an economy gradually slowing in a global environment of trade-policy uncertainty and sluggish growth. However, if the incumbent goes for a second term as president, there is no doubt that he will be re-elected if the economy continues in its record-long expansion mode. That means a lessening of tension in the tariff war and a continuing strength in the labour market. Both economic factors are in the hands of Donald Trump – what is not is any political fall-out outside of his immediate control.  In cold reality, if US personnel were killed overseas in theatres of war – or by terrorist attacks – then we would be looking at a different picture and a new 46th US President. Otherwise it will be a shoo-in victory for Donald Trump come November. So You Win Again.

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