Good Day Sunshine!                                                                          19 February 2021

Positive news on the Dubai property front saw January secondary/ready properties transactions jump to its highest level since March 2014, with a total of total of 3.3k sales transactions, worth US$ 1.84 billion. Compared to January 2020, the figures were 37.0% higher in monetary terms and 15.5% in transactions, with many analysts seeing this upward trend continuing into the year. Q4 had seen 11.1k sales transactions, totalling US$ 6.01 billion. There are various factors driving this forward, including the proactive measures and incentive packages launched by the government to address the effects and consequences of the outbreak of Covid-19, rock bottom property prices coming off six-year lows and historically inexpensive mortgage rates. In January, the swing back to secondary sales, rather than off plan, continued with the ratio increasing to 72:28 of all transactions; there were 2.4k property sales in the secondary market, valued at US$ 1.48 billion. Of total sales transactions, 70% were still for apartments and 30% for villas. The four most popular areas, accounting for 40.0% of total villa sales, were Nad Al Sheba (11.5%), Dubailand (11.4%), Meydan (7.5%) and Dubai Hills Estate (6.0%). For apartments the top four were Business Bay (12.4%), Marina (9.7%), Jumeirah Village Circle (9.3%) and Downtown (5.6%).

By Thursday, there was a weekly total of almost 1.3k property transactions, valued at US$ 1.34 billion, including eighty plots for US$ 114 million and 776 apartments/villas for US$ 335 million. The top two locations for number of sales were to be found at Nad Al Shiba Third (24 transactions, valued at US$ 159 million) and Al Hebiah Fourth (8 transactions – US$ 8 million).  The top three transactions of the week were all land deals – two at Jebel Ali Industrial Second, (one for US$ 21 million) and Island 2 for  US$ 10 million.

With the aim of expanding regional operations, real estate software tech start-up Xplor has raised US$ 3 million in a funding round, led by Ayana Holding. The five-year old entity provides a master-planning software that covers all aspects of the business, including marketing, sales, leasing and facilities management. It does not only assist developers reduce capital expenditure but also helps investors choose by use of 3D models and online viewings.

As expected, Dubai International posted a 70% slump in 2020 passenger numbers to 25.9 million, having handled 17.8 million in pre-Covid Q1. The UAE officials issued directives to suspend most commercial flights in April, with Dubai reopening to international visitors in July. The airport handled 184k flights last year, down 51.4% year-on-year, while the average number of travellers per flight decreased 20.3% to 188. Annual air freight volume fell 23.2% to 1.932 million tonnes in 2020. Even with these disappointing figures, Dubai International exceeded London Heathrow passenger numbers which were 73% down, at just 22.1 million. By passenger numbers, India continued to be the top destination, with traffic for 2020 reaching 4.3 million, followed by the UK with 1.89 million and Pakistan with 1.86 million.

With approval granted by the UAE’s General Civil Aviation Authority, Flydubai will now “start the process of preparing the aircraft for passenger service”. The airline has the second biggest order with Boeing for the Max 737 – after Southwest Airline – and already had a fleet of eleven Boeing 737 Max 8 and three 737 Max 9 aircraft which have been grounded since March 2019. The chief executive of Flydubai, Ghaith Al Ghaith, noted that “safety is the founding principle of our business. We said that we would only return the aircraft to service when it was safe to do so and that time is now.” Flydubai said it is “too early” to say when the 737 Max returns to service but will announce routes serviced by the aircraft at a later date. The regulator has insisted that every flydubai Boeing 737 Max will have to undergo software enhancements and additional protections to the Manoeuvring Characteristics Augmentation System.

The RTA services about 947k daily users on its various public transport facilities which equates to an annual 2020 total of nearly 346 million riders. During the year, 113.6 million used the Metro (74.5 million on the Red Line and 39.2 million on the Green), 109.9 million in taxis and 95.4 million on public buses. Those three modes of transport accounted for 319 million or 92.2% of the total users. Shared transport means, such as e-hail and smart rental vehicles lifted 15.3 million riders, marine transport ferried 8.05 million people and Dubai Tram 3.65 million passengers; this accounted for 27 million or 7.8% of the 2020 total users.

With imports, exports and reexports at US$ 4.4 billion, US$ 1.0 billion, and US$ 435 million, the value of 2020 Dubai’s external trade was US$ 5.9 billion. The figures were released at a recent meeting between representatives of Dubai Customs and British Customs, where the main items of discussion included the implementation of Brexit and the following consequences on trade, travel and security. One interesting fact from the meeting was Ahmed Mahboob Musabih remarking that “the UK and Dubai have seized 198 million cigarettes and 122 tonnes of illegitimate tobacco products that were to be transported to the UK.” Dubai will host the fifth World Customs Organisation’s Global AEO Conference, in coordination with the World Customs Organisation and the Federal Customs Authority this May; the event is expected to see the participation of around 1.5k experts.

Despite the Covid-19 impact, DMCC announced a record-breaking performance in 2020, as over 2k new companies joined the free zone – the highest number of registrations in five years, with retention rate remaining at an all-time high. The latter was primarily due to the Business Support Package that saw more than 8k member companies utilising over 13k  offers and incentives throughout 2020. DMCC, with over 18k registered companies, was awarded Global Free Zone of the Year by the Financial Times’ fDi Magazine for a record sixth consecutive year.

Over the past decade, DMCC’s commodity trading has come on by leaps and bounds. With gold and diamonds accounting for over 15% of the country’s exports, a total of almost US$ 25 billion worth of diamonds were traded through the DMCC’s Dubai Diamond Exchange (DDE), the world’s largest diamond tender facility. The free zone has helped develop the new UAE Gold Delivery Standard and continues to be a leading hub in the global gold and precious metal trading landscape. The DMCC Coffee Centre processed and handled seven million kg of coffee, as well as facilitating US$ 68 million worth of coffee shipments from 25 countries. The DMCC Tea Centre transacted 40k metric tonnes of tea during 2020.

DMCC’s subsidiary, Dubai Gold and Commodities Exchange, now in its sixteenth year, traded 12.73 million contracts valued at US$ 320.7 billion. For the third year in a row, the DGCX received the prestigious “Exchange of the Year” award at the Futures and Options World Global Investor MENA 2020 event. The DMCC Trade Flow platform registered US$ 202 billion worth of transactions – an increase of 121% on the year, as the transaction value of Islamic products jumped 128%. In August, the Agriota e-Marketplace, a technology-driven agri-commodity trading and sourcing platform that uses blockchain to help bridge the gap between millions of rural farmers in India and the UAE’s food industry, was launched.  More than 92k farmers have registered on the platform to date.

More than fifty storeys of DMCC’s flagship Uptown Tower have been completed and, when finished, it will encompass 81 floors and be 340 mt high. Designed by world-renowned architects, AS+GG, it will house a 188-key five star hotel – SO/Uptown Dubai – 229 signature SO/ branded residences and 46k sq mt of Grade A office space.

Dutch global payment technology provider firm Adyen, with a market capitalisation of US$ 80 billion and having processed over US$ 367 billion worth of transactions in 2020, has set up its regional base in the DIFC, adding to their other hubs in New York, London, Hong Kong, Singapore and Tokyo. The move will allow the Dutch firm to launch regional operations seamlessly, whilst providing local merchants with frictionless access to the Adyen platform.

Following Indian courts’ decision, as well as from the DIFC, to freeze the disposal of any assets belonging to disgraced billionaire BR Shetty, a court in London has done likewise. with the court decision also including assets of other shareholders and former top executives, including Prasanth Manghat. The founder stepped down as chief executive in February last year,  The latest decision covers any assets held anywhere in the world but to the outsider, a lot of assets may have already gone elsewhere. The London case was instigated by ADCB after it appears that billions of dollars in bank loans/credit were diverted from the accounts of NMC Healthcare over a number of years. A report in the Financial Times indicates that ADCB, which is the main creditor with exposure of over US$ 1 billion, specifically named the NMC founder as being the “chief protagonist” in the whole billion-dollar saga. This case has Bollywood – or even Hollywood – written all over it.

Tabreed reported a 16.5% jump in 2020 net income, to US$ 150 million, (and EBITDA by 27% to US$ 264 million), as revenue grew 14.5% to US$ 474 million, attributable to organic and inorganic capacity additions to its business. The board has recommended a 10% increase in dividends, with shareholders receiving a cash dividend of US$ 0.0157 and a bonus share issue of 1 for every 45 held – this equates to an overall dividend payment of US$ 0.0313 per share. The National Central Cooling Company has 86 district cooling plants, including in developments such as the Burj Khalifa and Dubai Metro. In 2020, the company acquired an 80% majority stake in Emaar Properties’ Downtown Dubai district cooling business for US$ 676 million, with Emaar retaining the balance under a long-term partnership deal.

Deyaar recorded a US$ 59 million loss in 2020, (compared to a US$ 19 million 2019 profit), driven by higher impairments and fair value adjustments forced on the Dubai-listed developer by the impact of Covid-19. Revenue was down by 32% to US$ 112 million, with net operating profit falling 4.7% to US$ 7 million. Last year, its shareholders approved a plan to write off accumulated losses by reducing its capital by US$ 335 million to US$ 1.24 billion. Deyaar’s construction timetable continued during the crisis, with its Bella Rose project in Dubai Science Park completed ahead of schedule. The nineteen-year old company – with DIB holding a majority shareholding – has developed many projects in Dubai, including in Business Bay, Dubai Marina, Al Barsha and Jumeirah Lakes Tower. 

Union Properties posted a 2020 US$ 55 million profit, compared to a US$ 61 million loss a year earlier, driven by its turnaround strategy and a decline in operating costs; revenue fell 11.0% to US$ 102 million. By the end of the year, assets had climbed 2.2% to US$ 1.63 billion, with shareholder equity 6.6% higher year-on-year to US$ 787 million. The turnaround strategy being implemented by the company’s board has allowed it to reduce accumulated losses and increase shareholder equity and also involved diversifying operations and developing recurring revenue lines. Last August, it reached an agreement with Emirates NBD to restructure an outstanding debt of US$ 258 million and it also agreed to sell a 40% stake in its Dubai Autodrome subsidiary for US$ 109 million. The company also has plans to list three of its subsidiary companies – facilities management firm ServeU, interiors contractor The FitOut and Dubai Autodrome – on the DFM at a yet to be announced date.

Damac has had better years, as it posts a 2020 loss of US$ 282 million, (compared to a US$ 10 million deficit in 2019), with revenue up 7.0% to US$ 1.3 billion but property sales slumping 26% to US$ 627 million. The developer’s total assets dipped 11% to US$ 5.7 billion, while its gross debt stood at US$ 872 million, by the end of 2020. Its chairman, Hussain Sajwani, noted that the lockdowns had had a dire effect on tourism “which has been a critical force that drives Dubai’s economy and boosts its property market”. He has forecast that it will take at least 12 to 24 months to see a substantial recovery.

Yet another casualty of the pandemic, Emaar Properties posted a 20.0% decline in revenue to US$ 5.4 billion, as net profit sank 58% to US$ 711 million; in 2020, Dubai’s largest listed developer by market capitalisation, managed to sell almost U$ 3.0 billion worth of property during the year as it recorded “sustained interest from investors, both domestic and foreign”. At year end, it had a US$ 10.0 billion backlog and is currently developing a further 38k properties, having already delivered 72k residential units since 2012. It has more than 1.14 million sq mt of revenue-generating assets and now earns over 50% of revenue from its malls, hotels and international business units. Emaar Development posted a 23% fall in 2020 revenue to US$ 2.66 billion, resulting in a 39% decline in net profit to US$ 450 million.  Emaar’s international property development arm posted a 10% rise in 2020 revenue to US$ 1.31 billion.

Etisalat posted a 3.8% hike in 2020 profit to US$ 2.5 billion, although revenue dipped 0.9% to US$ 14.1 billion, driven by what is now considered the normal driver for many corporates – the Covid-19 pandemic that resulted in temporary lockdowns, restricted mobility and travel bans, leading to reduced activities in most of the UAE’s biggest telecom operator’s markets. The company’s earnings per share nudged 4.0% higher in the year to US$ 0.283, as it now reaches 149 million subscribers in sixteen countries across the Middle East, Asia and Africa. The telco, which is 60% owned by Emirates Investment Authority, recently increased its foreign ownership cap to 49%, from 20%, to attract more external investors.

Meanwhile du, the company that became the country’s second telecom in 2007, breaking Etisalat’s previous long-term monopolistic hold on the local market, posted a 16.7% decline in 2020 profit to US$ 283 million, with revenue 11% lower at US$ 2.83 billion.

Dubai Islamic Bank posted a 34.0% decline in 2020 net profit of US$ 895 million, driven by impairment charges, (more than doubling to US$ 1.23 billion), and operating expenses, 16.0% up at US$ 736 million, brought on by the impact of the coronavirus pandemic. Customer deposits and total bank assets both grew 25.0% on the year, to US$ 56.1 billion and US$ 78.9 billion respectively, with net financing and sukuk investments jumping 26.0% to US$ 63.2 billion. Last year, DIB completed its takeover of rival Noor Bank to create one of the largest Islamic banks in the world, with almost US$ 75.0 billion in assets.

Shuaa Capital had a good year, with the investment bank reporting a 166% rise in its 2020 net income, driven by higher recurring revenue, as it launched several new investment vehicles.  Its gross profit was US$ 34 million and EBITDA 87% higher at US$ 95 million, including US$ 20 million in “valuation adjustments” of its non-core assets unit, as a measure to accelerate its wind down, US$ 28 million net “mark-to-market gains” on portfolio assets, including associates, and US$ 31 million in other valuation adjustments on investment portfolios.

The bourse opened on Sunday 14 February and having shed 100 points (3.7%) the previous three weeks, lost a further 57 points (2.2%) to close on 2,633 by Thursday 18 February. Emaar Properties, US$ 0.02 lower the previous week, lost another US$ 0.02 to close at US$ 1.01. Emirates NBD and Damac started the week on US$ 3.17 and US$ 0.33 and closed on US$ 3.12 and US$ 0.33. Thursday 18 February saw the market trading at 116 million shares, worth US$ 49 million, (compared to 187 million shares, at a value of US$ 45 million, on 11 February).

By Thursday, 18 February, Brent, US$ 5.60 (10.2%) higher the previous week, gained US$ 2.83 (4.7%) in this week’s trading to close on US$ 63.53. Gold, US$ 54 (3.9%) lower the previous three weeks, lost a further US$ 46 (2.5%), by Thursday 18 February, to close on US$ 1,775.

Only the battle-hardened aficionados of quizzes would have any inkling on the identity of Laszlo Hanyecz. In 2010, his order for two pizzas was the first known commercial transaction of cryptocurrency, expending 10k Bitcoins, that would now be worth US$ 446 million! On the previous Thursday, the crypto currency was trading at US$ 47,200 after Tesla bought US$ 1.5 billion in Bitcoin and announced that it would accept the digital currency for the purchase of cars; by Thursday 18 February, it was trading at US$ 51,463, with a market cap of US$ 959 billion. There are some analysts who see this maybe tripling over the coming months, but any investors will face a volatile time, with many ups and downs. In 2020. Bitcoin fell 80% at the beginning of the year before it quadrupled by the end. Interestingly, merchant-related transactions accounted for 0.3% of cryptocurrency spending last year with 99.7% dominated by an explosion of trading.

Barclays posted a 29% fall in 2020 pre-tax profits, to US$ 4.2 billion, with the main driver being the US$ 6.7 billion to cover loans unlikely to be paid back amid the economic fallout of Covid. During the pandemic, the bank has given over US$ 37 billion of emergency loans during the coronavirus crisis, as well as providing more than 680k payment holidays globally for customers with mortgages, credit cards and loans. Despite the disappointing returns, the bank has resumed dividend payments of US$ 0.014 per share, (GBB 0.01), and announced that its staff bonus pool would be 6% higher than the US$ 2.0 billion paid out in 2019. Pity must go out to CEO, Jes Staley, who saw his pay drop from US$ 8.2 million to just US$ 5.6 million.

One who will struggle to make a bonus this year is Michael Corbat, the chief executive of Citigroup. This week, rather surprisingly, the bank lost a legal battle in the US courts to recover US$ 504 million from Revlon Inc lenders, paid to them by mistake. US District Judge Jesse Furman ruled in favour of the ten asset managers for the lenders who do not have to return US$ 504 million that Citibank had mistakenly transferred last August, while trying to make an interest payment. The judge ruled that they should not have been expected to know that the transfer, totalling more than US$ 900 million, before some lenders returned their share, was an error.

In order to meet its ambitious 2030 target to create a 100% recyclable, plastic-free bottle -capable of preventing gas escaping from carbonated drinks – and as part of its strategy to produce zero waste by 2030, Coca Cola is to test a paper bottle. Denmark’s Paboco is to make the prototype from an extra-strong paper shell that has to withstand drinks that have been bottled under pressure, as well as the requirements to be mouldable, to create distinct bottle shapes and sizes for different brands and take ink for printing their labels. Only last year, charity group ‘Break Free From Plastic’ placed the drinks giant as the global number one plastic polluter, followed closely by Pepsi and Nestlé. (Carlsberg and Absolut are also building prototypes of a paper bottles). Whether this is the future of such drinks or just a fad, remains to be seen as most plastic drinks bottles are already recycled.

Despite thousands of jobs being lost over the past two years, Jaguar Land Rover has announced plans to cut a further 2k global jobs over this year, but this will not include production staff. JLR, with its HQ in Coventry and plants in Castle Bromwich, Solihull, and Halewood, has seen a decline in sales and has started a full review as it prepares to become a “more agile organisation”. The company also confirmed that all cars will be electric after 2025 and no manufacturing jobs will be lost at its UK operations.

There are rumours that the Indian operations of TikTok may be sold by Bytednace to rival unicorn Glance, a subsidiary of mobile advertising technology firm InMobi, which also owns short-video app Roposo. Since TikTok was banned by the Indian government last July, Japan’s SoftBank Group Corp, a backer of InMobi Pte, as well as TikTok’s Chinese parent, ByteDance, has reduced staff numbers in its 2k India team and made noises that it is unsure of resuming local operations. The Indian government has retained its ban on TikTok and 58 other Chinese apps, on issues such as compliance and privacy, but if any sale is made, it will be certain to insist that user data and technology of TikTok stay within its borders.

There is no need to tell Neil Woodford about the meaning of “gall”, as it appears that he thinks an apology will suffice for what he did wrong when Woodford Equity Income Fund went belly up in 2019, resulting in many investors incurring big losses. The then star fund manager had spent 26 years building up his reputation at the City firm Invesco, before he set up his own business. He has recently admitted that “I’m very sorry for what I did wrong. What I was responsible for was two years of underperformance – I was the fund manager, the investment strategy was mine, I owned it and it delivered a period of underperformance.” Consequently, his flagship fund was first suspended, then shut down, with Mr Woodford removed as investment manager in October 2019. Whether he can regain his former “investment magic” and whether he can entice new investors to believe that he can, remain to be seen. Someone has to ask the questions – what are the regulators doing and why are they allowing such a move?

As noted in previous blogs, the Australian casino group Crown Resorts is in deep trouble after an enquiry has found the company not fit to hold a gaming licence in New South Wales, following a scandal over money laundering allegations within its casinos; this means that it will be unable to open a new casino in the State – and probably anywhere else in the country. Following the findings, the chief executive, Ken Barton, departed the company, with the spotlight now being shone on the casino’s majority holder, James Packer. His Australian properties in Perth and Melbourne have been dogged by allegations of illegal activity for years, including Chinese high rollers linked to organised crime groups. Other causalities may include the gaming regulators in Victoria and Western Australia for their failure to pick up Crown’s misconduct. This Monday saw the first to fall – WA’s chief casino regulator had resigned after it was revealed he was friends with senior members of Crown’s legal team.

With its Q4 economy slowing from 5.3% the previous quarter, but still expanding by 3.0%, Japan posted a 4.8% decline for the whole year in 2020; the country last had a contraction in 2009, post GFC. Going forward, annualised growth – which assumes that Q4 figures will be replicated throughout 2021 – is forecast at 12.7%. Per se, it indicates a strong rebound this year but some fear that this will not occur because the country is well behind western economies in vaccine distribution and could have to reintroduce stricter lockdown measures. This fact alone will see the country post negative Q1 figures.

However, Japan’s Nikkei index briefly hit 30,000 for the first time since 1990, gaining ground at last after what seems to have been years of stagnation. The recovery has been driven by an anticipated global rebound from the Covid-19 pandemic, with the bourse’s abundance of cyclical shares, such as electronic parts makers, attracting global investors to push the numbers north. Whether it will top its 1988 high of 38,957 remains to be seen but is unlikely.

Following a 12.4% Q3 growth, the eurozone economy returned to earth, recording a 0.6% contraction in Q4 returning the economy to weaken 5.0% over the whole of 2020. Although the employment rate over the last two quarters of 2020 showed 1.0% and 0.3% rises, the year-end figure was still 2.0% down on 2019. Meanwhile, employment grew 0.3% on the quarter in the last three months of 2020, after a 1.0% quarterly rise in Q3, but the reading was still 2.0% lower than in the same period a year earlier. Government action, with various job protection schemes, such as furloughing, prevented the unemployment figures from probably touching 20%, but by the end of December, the unemployment rate came in at 8.3%. Latest EC figures sees the bloc cutting their 2021 economic growth forecast from 4.2% to 3.8% but a lot will depend on whether the bureaucracy eventually gets to grip with its vaccination protocol.

Last September, the then President Trump barred the US population from downloading TikTok and WeChat, following which both Chinese enterprises approached the courts to suspend the orders. In a softly softly approach, Joe Biden has petitioned the two different courts to defer these suspensions so that an “evaluation of the underlying record justifying these prohibitions” could take place. ByteDance-owned TikTok has about 12.5% of its eight million global users residing in the US, whereas WeChat, with one billion users worldwide, has only 2% of its revenue stream flowing from the US. It is unlikely that the new administration will go hard on these two tech giants and that it will not worry about the growing impact that Chinese tech apps will have on US lives.

The Organisation for Economic Co-operation and Development announced a 4.9% contraction in output last year – its largest decline since 1962 and the Cuban Missile Crisis. Q3 and Q4 growths were at 9.0% and 0.7%. The organisation’s seven major countries   saw the overall economy slow 0.8% in Q4, ranging from a 3.0% expansion in Japan, followed by Canada, UK, US and Germany with growth figures of 1.9%, 1.0%, 1.0%  and 0.1%; there were economic contractions in France (minus 1.3%) and Italy (minus 2.0%). All countries in the bloc recorded 2020 falls in output, ranging from the US (3.5%) to the UK’s 9.9%, with France and Italy also falling by 9.3% and 8.9% respectively.

The UK posted its worst ever annual economic results since 1707, as the country’s economy slumped 9.9%, driven by Covid-19. However, Q4 economy did post positive data, with the economy 1.0% higher and this will negate any possibility of a recession – technically when a country sees two consecutive quarters of contraction – because of the inevitability of the third lockdown resulting in Q1 moving back to negative territory. The BoE have forecast a Q1 fall of 4.0% but most analysts see a mega rebound if and when restrictions are eased, and some sort of normalcy returns. Public sector borrowing reached US$ 47.0 billion in December, bringing the nine-month YTD figure to a record to US$ 373.7 billion. The Institute of Financial Studies estimates that Chancellor Rishi Sunak will have to implement tax rises of at least US$ 83 billion to balance the books, following the Covid-19 crisis.

Sterling hit a near three year high on Monday at US$ 1.391, with positive news on the UK’s vaccine protocol, with fifteen million vaccines having already been administered. By Thursday, 18 February, sterling was moving higher on all currencies, with marked increases of 0.56% and 0.40% rises against the greenback and the euro respectively; the dollar was at 1.3934 and the euro at 1.1550. Obviously, the success of the UK’s vaccine roll-out programme is a leading driver for this improvement but there are other factors in play. The fact that the Brexit process, admittedly with a few problems along the way, has gone better than expected is another reason for the rise in sterling (and a timely reminder to those Remainers who were preaching doom and gloom, and the demise of the pound, not so long ago). With Brexit ceasing to be a concern for markets, the currency appears to be attracting bids, as markets continue on the rise. Investors remain in a bullish mood and although sterling is not normally considered a safe haven, they appear to be confident that it will continue its upward momentum at least in the short to medium term. Two other drivers were the Q4 GDP results being better than market expectations and the BoE all but ruling out the chances of negative interest rates this year. There is every chance that sterling could be soon visiting its 2018 peak of US$ 1.438.  Good Day Sunshine!