When The Going Gets Tough, The Tough Get Going!                                06 May 2021

Being the last full week of the holy month of Ramadan, it was no surprise to see numbers drop for the Dubai real estate market, with a total of 1,557 real estate and properties registered transactions, valued at US$ 926 million, during the week ending Thursday, 06 May. The Dubai Land Department confirmed that 1,027 villas/apartments were sold for US$ 510 million and 111 plots for US$ 133 million. The three most expensive residential units sold were a Marsa Dubai villa for US$ 92 million, a Palm Jumeirah apartment for US$ 59 million and another Palm Jumeirah apartment for US$ 35 million. The most popular locations were in Al Hebiah Third, with 30 sales transactions worth US$ 18 million, Hadaeq Sheikh Mohammed Bin Rashid with 15 sales, at US$ 33 million, and Nad Al Shiba First with 15 sales for US$ 10 million. The top two land transactions were in Al Thanayah Fourth, selling for US$ 10 million, and a US$ 10 million sale in Palm Jumeirah. Mortgaged properties for the week totalled US$ 272 million, including a plot for US$ 25 million in Al Thanyah First. 63 properties were granted between first-degree relatives, worth US$ 30 million.

Property Finder posted that the value of Dubai’s April transactions hit a four year high of US$ 3.0 billion, bringing the YTD total of US$ 9.8 billion, involving 16.6k sales. In the off-plan market, 1.9k properties, worth US$ 842 million, with 2.9k properties, valued at US$ 2.15 billion, being sold in the secondary market. The consultancy also noted that there was a tripling in the number of ready villas and townhouses being sold in Q1, as residents upgraded to bigger homes amid the coronavirus pandemic. Interestingly, three of the first four months of the year recorded the highest number of monthly transactions since March 2010.

Last month, 70% of the total transactions were for less than US$ 545k (AED 2 million), 23% between US$ 545k to US$ 1.36 million, (AED 2 to 5 million), 4% between US$ 1.36 million to US$ 2.72 million (AED 5 to 10 million), and 3% between over US$ 2.72 million (over AED 10 million). For the month, 60% of all real estate transactions were for secondary/ready properties and the balance for off-plan properties. The most transactions in a single community were Mohammed bin Rashid City, followed by JVC, which accounted for 5.8% of all transactions, and Dubai Marina with 5.6%. The five leading communities, recording townhouse/villa transactions, were Mohammed bin Rashid City, Dubailand, Dubai Hills Estate, Rukan and Town Square accounting for 18.5%, 10.3%, 9.4%, 5.0% and 4.9% respectively. The five leading communities, recording apartment transactions, were Dubai Marina, JVC, JLT, Downtown Dubai and Business Bay, accounting for 8.5%, 8.4%, 7.6%, 7.3% and 5.4% respectively.

wasl properties has announced the release of ‘masaken wasl,’ a new leasing project in Al Qusais, offering 777 modern and spacious apartments, (from studio – 3 B/R apartments), with rentals from US$ 8k to US$ 20k. Located in Al Qusais, and close to the Metro and Al Mulla Plaza, the project comprises several modern facilities, including a gymnasium, a swimming pool, a kids’ play area, and parking lots for tenants.

A report by Juniper Research estimates that digital commerce spending is expected to jump 11.5% to US$ 16.1 trillion which includes money transfers and payments related to digital, as well as physical goods purchases, digital ticketing, banking, bills and NFC mobile retail. By the end of the year, mobile commerce will account for 73% of all digital trade transactions, increasing to 79% by 2025. Although much of the recent boom has been put down to the impact of Covid-19, it is expected that consumer behaviour will become increasingly digital, rather than reverting to pre-pandemic norms. January saw Mastercard recording a 30% increase in digital e-commerce spending and it seems likely that this will become a permanent feature, as the online share of retail spending in the Middle East and Africa region grows.

The annual ‘Dubai Summer Season’ opened last Saturday, 01 May. The Dubai Shopping Malls Group’s campaign, in association with Dubai Festivals and Retail Establishment, will last over four months to close on 04 September. During that period, it will run four mega promotions, including EID in Dubai, Dubai Summer Surprises (DSS), Back to School and Eid Al Adha. The first campaign will see forty lucky shoppers standing a chance to take home a total of US$ 54k, with draws being held on the 3 days of EID. EID in Dubai will run for six weeks until 14 August, with six prizes of brand-new Infiniti Q50s being won in the weekly draws. With every spend of US$ 54, at any of the participating malls, shoppers will also be eligible to enter the digital raffle draw and win major prizes.

The Federal Competitiveness and Statistics Centre confirmed that the UAE’s economy declined by 6.1% last year, attributable mainly to the negative effect of Covid-19 which saw foreign trade and investment slump, along with tourism, transportation and logistics. The non-oil sector was off 6.2%, with major falls of 23.6%, 13.1% and 10.4% seen in accommodation/food services, wholesale/retail trade and construction respectively.

The UAE retained its Moody’s Aa2 long-term issuer rating, with a stable outlook, mainly because of its exemplary record in its vaccine protocol and general control over the pandemic. The government’s policies have resulted in a “relatively muted impact of the pandemic on the federal government’s fiscal strength”. The ratings agency also noted that the country’s progress in vaccinating its population could allow for an easing of inbound international travel, supporting a “faster-than-expected recovery in the tourism sector, and providing a boost to the hospitality and retail sectors”. To date, the federal government has injected US$ 106 billion in economic support packages and has recently extended its Targeted Economic Support Scheme, a zero-cost loan initiative aimed at boosting liquidity in the banking system, until June 2022.

Dubai Aerospace Enterprise posted a 13% decline in Q1 revenue to US$ 308 million, with profit slumping to US$ 8 million from US$ 77 million in the same period in 2020, driven by falls in net lease revenue and maintenance revenue. However, it is confident that, with global vaccinations picking up and lockdown restrictions easing in many countries, air travel will expand. Over the period, DAE offered relief packages, valued at US$ 196 million, and in the form of either lease deferrals or amendments, to 38 airline customers. By 31 March, it had a total owned, managed and committed fleet of 377 aircraft, with an aggregate book value of its owned fleet, including finance lease and loan receivables, of US$ 11.6 billion and an estimated value of its managed fleet at US$ 1.4 billion. During Q1, its total available liquidity was US$ 3.3 billion, with cash and cash equivalents growing to US$ 717.4 million.

Flydubai posted a US$ 194 million 2020 loss, (for the year ended 31 March 2021), with revenue down by more than a half to US$ 763 million, as passenger numbers plummeted because of the various international lockdowns, attributable to the impact of Covid-19; a year earlier its profit was US$ 54 million. The main damage was seen in H1 when the deficit was at US$ 149 million. The budget carrier was also impacted by the almost two-year grounding of the Boeing 737-MAX.

April was a great month for DMCC, with 216 new businesses joining the free zone, following on Q1 numbers, recording their best quarterly returns since 2014. There are over 18k businesses operating in the free zone. This year, the Centre has introduced innovative bundled price packages, as well as new initiatives such as DMCC Cacao Centre and the upcoming DMCC Crypto Centre which have helped keep the company numbers high. Over the first four months of the year, it has seen strong interest from China, France, India, Israel and the UK.

Despite Covid-19 problems but assisted by providing several stimulus packages last year to support companies, Dubai Airport Free Zone reported that 2020 non-oil trade reached US$ 32.4 billion. DAFZ accounts for 10% of Dubai’s non-oil foreign trade, and 25% of the total commercial activity last year through Dubai’s free zones. Following the initial negative impact on business, because at the onset of Covid-19, both Q3 and Q4 witnessed “exceptional growth”, climbing 36.4% and 23.0%, year-on-year. H2 saw trade increasing by 7.1%, with imports, exports and reexports improving by 10.7%, 7.0% and 4.5% respectively, with H2 trade surplus coming in US$ 7.3 billion higher. Country-wise, China (with 27% of total trade) was the free zone’s biggest partner, accounting for 62.6% of all imports, followed by India and the US with 15.5% and 5.0%. Iraq was DAFZA’s largest export market with 17.5% of the total, followed by Switzerland (7.5%) and Saudi Arabia (6.2%).

During last Saturday’s “Most Noble Numbers” auction, Dubai car plate number AA9 went for over US$ 10 million, whilst mobile number 056 9999 999 went under the hammer for US$ 817k. Total money raised in this special Dubai car number and exclusive mobile numbers auction was US$ 13.2 million, with all proceeds going to UAE’s ‘100 Million Meals’ Ramadan campaign, recently launched by HH Sheikh Mohamed bin Rashid Al Maktoum. This week, the campaign provided 20.5 million meals for Palestinian refugee camps in Jordan and Bangladesh.

Now that the economy is picking up, many residents are receiving an increasing number of cold calls, with the three biggest culprits being financial advisers, real estate agents and banks. The authorities are enhancing their efforts to put an end to this malpractice. Now anyone receiving an unsolicited call can notify the Dubai Economic Department’s Commercial Compliance & Consumer Price Protection division – 600545555 – to lodge a complaint, follow a few steps and that caller will not be phoning again.

Following a Q4 loss of US$ 443 million, Mashreq returned to a profit of US$ 12 million in Q1 – but this was well down on the same period profit in 2020 of US$ 95 million; total operating income was down 7.9% at US$ 351 million but 12.0% higher than posted in Q4. Fees and commissions were up 29.0% to US$ 122 million, whilst customer deposits grew 2.2% to US$ 24.6 billion. The bank’s financial ratios remained stable, with a liquid asset ratio of 28.8%, capital adequacy ratio of 14.4% and Tier 1 ratio at 13.3%.

Meanwhile, CBD posted a Q1 net profit increase of 3.1% to US$ 89 million, compared to the same period in 2020, attributable to decreased credit losses and reduced operating expenses; operating income slipped 3.4% to US$ 199 million, driven by reduced market interest rates and a 6.4% decrease in other operating income because of lower fees and commissions. Operating expenses were 2.7% lower. Total assets, net loans/advances and customer deposits all headed north by 5.2% to US$ 27.9 billion, 6.6% to US$ 19.0 billion and 1.75% to US$ 19.0 billion. Its non-performing loan ratio dipped 0.15% to 6.62%, with quarterly impairment charges of US$ 57 million.

It is reported that the cumulative Q1 profit for the eleven UAE national banks grew 9.6% to US$ 2.11 billion, compared to the same quarter in 2020. The five listed Dubai banks posted a cumulative profit of US$ 1.02 billion, comprising US$ 632 million, US$ 231 million, US$ 89 million, US$ 57 million and US$ 12 million – Emirates NBD, DIB, CBD, EIB and Mashreq.

The bourse opened on Sunday 02 May and, having shed 28 points (0.3%) the previous fortnight, gained 39 points (1.5%), to close on 2,664 by Thursday 06 May. Emaar Properties, US$ 0.04 lower the previous fortnight, regained the US$ 0.04 to close at US$ 1.06. Emirates NBD and Damac started the week on US$ 3.39 and US$ 0.33 and closed on US$ 3.39 and US$ 0.34. Thursday 06 May saw typical Ramadan market trading at 76 million shares, worth US$ 28 million, (compared to 134 million shares, at a value of US$ 40 million, on 29 April). The market will only be open for two days next week and be closed from Tuesday to Thursday for Eid Al Fitr.

By Thursday, 06 May Brent, US$ 7.41 (12.1%) higher the previous fortnight, slipped by US$ 0.29 (0.4%) to close on US$ 68.27. Gold, down US$ 59 (3.2%) the previous five weeks, regained US$ 44 (2.5%) by Thursday 06 May to close on US$ 1,814. Brent started the month on US$ 64.42 and gained US$ 2.83 (4.4%) during April to close on US$ 7.25. Meanwhile, the yellow metal shed US$ 4 (0.2%) in April, having started the month on US$ 1,773 to close on 30 April at US$ 1,769.

The UN Conference on Trade and Development estimated online sales rose from 16% to 19% of all retail transactions in 2020, with the process “fast-tracked” somewhat by the advent of Covid-19. Countries reporting large growths included South Korea, China, UK and US, with increases of 5.1% to 25.9%, 4.2% to 24.9%, 7.5% to 23.3% and 3.0% to 14.0%. The top five countries, when it came to actual e-commerce sales, were the US, Japan, China, South Korea and the UK, with totals of US$ 9,580 billion, US$ 3,416 billion, US$ 2,604 billion, US$ 1,302 billion and US$ 885 billion. Ten of the top thirteen e-commerce businesses reside either in China or the US, with all of them experiencing sharp declines in gross merchandise volume and booking values. Chinese e-commerce company Alibaba retained the top position with a gross merchandise value of US$ 1.14 trillion last year, followed by Amazon at US$ 575 billion and Chinese site JD.com at US$ 379 billion.

As Barclays announced a doubling of Q1 profits to US$ 3.3 billion, its boss Jes Staley reckoned that the UK will see an economic boom and grow at its fastest rate since 1948. His reasoning is on the back of the success of the country’s vaccine roll-out and that his bank’s estimate there is an extra US$ 275 billion in customer and company bank accounts. He put the bank’s impressive profit figure down to growing customer confidence and that the bank’s impairment provision has fallen from more than US$ 2.75 billion to just US$ 75 million in a year. (Interestingly, Barclays – unlike other big banks in the UK and US – have decided not to adjust previous estimates of bad loan provisions but hinted that they will do so in future).

Bitcoin has been left in the blocks by the progress of ether which this week topped US$ 3.1k and is 325% higher YTD, compared to Bitcoin trading just 95% higher in 2021. Ether has benefitted by improvements to the ethereum blockchain and a marked move to decentralised finance, (DeFi), referring to transactions outside traditional banking for which the ethereum blockchain is a crucial platform. There are some analysts of the opinion that ether will be of even greater use in a decentralised future financial system, and it is reported that the European Investment Bank is planning to issue a digital bond over the Ethereum blockchain.

In another buying frenzy, Robinhood’s trading app crashed on Tuesday as crypto investors were in the market for so called altcoins, resulting in Dogecoin 50% higher as well as Dash and Ethereum Classic moving 14% and 30% to the good. The latest rally saw the value of all digital tokens surge past US$ 2.25 trillion and Dogecoin has already gained 14,180% YTD and was changing hands yesterday 05 May at US$ 0.67 – a year ago it was worth US$ 0.002. It is very difficult to see the logic behind such a surge for a “currency” that was created as a joke in 2013 and is now in the top ten of the most highly valued digital assets this year.  Even Jerome Powell Federal Reserve chairman, answered “some of the asset prices are high” when asked if things like GameStop’s and Dogecoin’s supercharged rallies created threats to financial stability.

PayPal reported a record Q1 net profit climbing more than 12 times to US$ 1.1 billion, (compared to US$ 84 million a year earlier), with revenue 31% higher at US$ 6.0 billion, driven by strong payment volumes, boosted by the shift to online shopping and digital transactions during the pandemic. As at 31 March, the company’s cash, cash equivalents and investments totalled US$ 19.1 billion. The tech giant has 392 million active accounts, (with an additional 14.5 million new accounts in Q1), with payment volumes 50% higher at a quarterly record of US$ 285 billion.  It expects Q2 revenue to top US$ 6.3 billion and has revised upwards its annual forecast to US$ 25.8 billion.  In 2021, 26 million merchants had access to PayPal’s new service enabling them to buy, hold and sell cryptocurrency. Over the past twelve months, its share value has risen 90%. 

Not surprisingly, Amazon posted a tripling in Q1 profit from US$ 2.5 billion to US$ 8.1 billion, with revenue moving 44.7% higher to US$ 108.5 billion – it expects more of the same in the coming months. Just as with Apple, Facebook, Microsoft and Google’s parent firm Alphabet, in many ways Covid-19 has been a godsend for Amazon. Almost every aspect of the Covid-19 pandemic has served to boost its revenues, including video streaming, cloud-based web-services and grocery delivery, with the tech giant also branching out into automated grocery stores and online healthcare services. The ten-year old Prime Vision has over 175 million Prime members, with streaming hours up 70% during the year, as AWS has current annual revenues of US$ 54 billion. Recent innovations have seen the arrival of Amazon Pharmacy, which allows Amazon Prime members to save money on prescriptions, Prime Wardrobe which offers personal shopping services and Discover Rooms, which the company described as “an immersive shopping experience that helps customers browse and shop from thousands of home room designs”.

With the future of the App Store at stake, (and the amount it charges developers), Tim Cook and his Apple team started their court battle on Monday against Epic Games who have been claiming for years that Apple charges are exorbitant. It is estimated that Apple have already made hundreds of millions from charges it has made on their premier game, Fortnite. Last August, it implemented its own in-app payment – bypassing Apple’s 30% charges – following which Apple ejected Epic Games off its App Store. The response was immediate with a 65-page lawsuit claiming that Apple’s control over the App Store is anti-competitive, arguing that developers should be able to make apps for smartphones, without having to pay large sums to Apple; it concluded that if you want to make games for smartphones you have to be on either the App Store or Google Play. In a separate but related incident, the EU has announced that it was charging Apple for its behaviour on the App Store, whilst last month, the US Senate was unusually united in their attacks on Apple. In addition, Spotify, Match and Tile are just a few of the many companies that have also claimed Apple’s charges are unfair. It is going to be a long hot summer.

After failing to revive their dimming fortunes, Verizon has sold its media interests, including both Yahoo and AOL, to Apollo Global Management for just US$ 5.0 billion, with Verizon retaining a 10% stake in the division. It had previously invested US$ 9.0 billion when acquiring Yahoo in 2017 and AOL in 2015. Unfortunately, these two brands, that were once trailblazers, offering a wide range of free and informative web services to consumers, soon lost ground and could not keep up with the newcomers such as Google and Facebook. In the early part of this century, Yahoo and AOL predominated the online advertising market but lost out with the market becoming saturated, with new entrants including Google, Bing, Facebook, Twitter, ESPN, Fandango and Weather.com.

McDonald’s has posted a 40% hike in Q1 profits to US$ 1.54 billion, with quarterly sales returning to pre-pandemic levels, despite Covid restrictions remaining in place in many countries. The sales boost comes after Q4’s global net income slumped 12% to US$ 990 million and 2020 profits 22% down at US$ 4.73 billion. The main driver behind these impressive results is the return of US customers, aided by growth in the UK, Australia and Canada. The food chain noted that it would “double down” on marketing its staple items, such as Big Macs and Chicken McNuggets, and continue expanding drive-throughs, delivery and online offerings, which it sees as major growth areas. Last October, food delivery company Just Eat Takeaway said orders had expanded 40% on the back of adding 800 McDonald’s restaurants, (and 300 Greggs outlets), to its network.

In Q1, the Eurozone slipped into a double dip recession, with a 0.6% contraction following a 0.7% fall in Q4 2020, as pandemic lockdown measures were reintroduced. This is in direct contrast to the likes of the US and China, with Q1 growth levels of 1.6% and 0.6%. In the bloc, Germany returned a 1.7% Q1 decline and Spain down 0.5%, both driven by falling household consumption. Portugal fell 3.3%, whilst Italy dipped 0.4% attributable to lower services sector activity. The main exception turned out to be France, actually expanding by 0.4%, driven by a marked rise in household consumption and a construction rebound.

The ongoing spat between Australia and China sees the Beijing administration indefinitely suspending all activities under the China-Australia Strategic Economic Dialogue – as a direct response to the Morrison government tearing up two Belt and Road agreements. Some will argue that Australia should have known that its outspoken stand on requesting an inquiry into the origins of the Covid-19 pandemic, or its criticism of the government’s handling of the Uyghur Muslims and their dealing with the troubles in Hong Kong, would inevitably face a backlash – and that is what has happened! The National Development and Reform Commission has accused Australia of unfairly targeting China and accusing the country of disrupting “the normal exchanges and cooperation between China and Australia out of Cold War mindset and ideological discrimination.”

Despite ongoing trade tensions with the US and other countries, China’s April exports, at US$ 264 billion, were almost US$ 43 billion greater than its imports, a more than threefold increase. China’s exports in dollar terms surged by more than 32% from a year earlier to almost US$ 264 billion. In contrast, Australian exports for March declined 2.0%, on the month, to US$ 29.8 billion. A belated cursory warning for the Australian administration – When The Going Gets Tough, The Tough Get Going!