Just One More Chance!

Just One MoreChance!                                                                        17 June 2021

For the past week ending 17 June, Dubai Land Department recorded a total of 1,921 real estate and properties transactions, with a gross value of US$ 1.36 billion. It confirmed that 1,298 villas/apartments were sold for US$ 692 million and 135 plots for US$ 195 million over the week. The top three transfers for apartments and villas were all for apartments – in Marsa Dubai for US$ 94 million, Burj Khalifs (US$ 76 million) and US$ 53 million in Palm Jumeirah. The most popular locations were in Al Hebiah Third, with 35 sales transactions worth US$ 21 million, Hadaeq Sheikh Mohammed Bin Rashid with 23 sales, at US$ 34 million, and Al Hebiah Fourth with 20 sales for US$ 25 million. The top two land transactions were a plot in Island 2 sold for US$ 24 million, followed by land that was sold for US$ 17 million in Al Hebiah First. Mortgaged properties for the week totalled US$ 545 million, including a plot for US$ 75 million in Al Qusais First. 84 properties were granted between first-degree relatives, worth US$ 55 million.

For the month of May, the DLD recorded 5,359 investments totalling US$ 3.0 million. There was a massive 197% year on year growth to 6,021, valued at US$ 5.94 billion, with brokerage value reaching US$ 225 million in the first five months of 2021. YTD has seen 254k Ejari contracts, of which 53% were new to the sector. The more popular locations for villas were, Hadaeq Sheikh Mohammed Bin Rashid, followed by Wadi Al Safa 5, Wadi Al Safa 7, Al Thanyah Fourth, and Palm Jumeirah and for apartments, Dubai Marina, Burj Khalifa, Palm Jumeirah, Business Bay, and Al Thanyah Fifth.

It was interesting to read Kalpesh Kinariwala’s comments on why he expects affordable homes to increase in price. Whilst noting that Dubai property prices had declined up to 15% over the past three years, cement and steel prices have headed in the other direction by 20% and 35% since the end of Q3 2020; other building materials have also witnessed price hikes. It is inevitable that developers will have to start passing on such price increases to the buyer, as their margins have been cut to the bone. Not only have the factory gate prices of imported products jumped, but freight costs have also skyrocketed due to the lack of available containers.

After a downturn last year because of the negative impact of Covid-19, Dubai’s commercial sector has seen an uptick in 2021. Led by increased traction in locations such as Business Bay and JLT, which accounted for 39.0% and 36.6% of Coldwell Baker’s total transactions for the first five months of the year. Meanwhile, Property Finder points to four locations with the highest sales transactions – the two listed above along with Dubai Silicon Oasis and Dubai Sports City. It is reported that median sales prices of secondary office space have increased 7.0% at US$ 191 per sq ft. compared to June 2020; overall rentals were 9.0% higher over the same period.

Next week sees another major event in Dubai’s MICE calendar – Arab Health 2021, from 22-24 June – with an expected 24.5k ‘live’ attendees, from 170 countries, and 2k exhibiting companies. Over 300 speakers are expected for the Arab Health Congress to improve medical practice and ultimately improve patient outcomes, with a total of twelve medical conferences taking place. The medical device market includes any product used in healthcare for the diagnosis, prevention, monitoring or treatment of illness or handicap, other than drugs such as consumables, diagnostic imaging, dental products, orthopaedic/prosthetic products, and patient aids. It is estimated that the country’s medical device market will top US$ 1.52 billion by 2025, with an annual compound growth rate of 4.4%, driven by a growing economy leading to population growth, changing epidemiology, a growing medical tourism industry, healthcare infrastructure developments, expanding health insurance, digital transformation and new technologies.

According to leading local retailer, Majid Al Futtaim, the region’s retail economy is “inching towards pre-pandemic levels”, as customer confidence returned. MAF noted that spending on fashion items had already reached pre-Covid-19 levels by March, whilst consumer spending by residents surged 17% month-on-month, with footfall almost back to 2019 levels. The retail economy has recovered well in a year, compared to April 2020, when the retail economy had slumped 40% at the height of movement restrictions. Euromonitor International reckoned that UAE consumer spending is forecast to grow 3% this year to US$ 146 billion, followed by a compound annual average rate of 4.3% over the next five years to US$ 175 billion. With e-commerce penetration rates having doubled since 2019, February was 30% higher on the year and it is estimated that 25% of all electrical items are now purchased online, as well as 8% of grocery and 7% to 9% of fashion items. Although March spending in the leisure and entertainment sector was 17% higher, month on month, it was still 52% lower than in March 2019.

Last month, UAE regulators issued new guidelines on anti-money laundering (AML) and combating the financing of terrorism (CFT), in line with international standards. It appears that all companies from every sector must implement strict compliance processes in their internal policy to abide by the rules related to AML, CTF and KYC (know your customer). Every business entity is required to ensure its own third parties are not linked to any fraudulent actions because they will also be responsible by association. The fines range from US$ 13.6k to US$ 136k, (AED 50k to AED 500k), with other penalties including closure of the business.

Last year, there was a 3.9% increase, in the number of parks and economic zones registered by DP World, UAE Region, to 9.6k. Its MD, Abdulla bin Damithan points to the fact that the improvement was down to the emirate’s investment-friendly environment and the ease of doing business in Dubai. He also noted there had been an increase in demand for its logistics and warehousing facilities.

After posting a US$ 288 million profit in the year ending 31 March 2020, this year, the world’s biggest international carrier recorded a massive US$ 5.5 billion loss after the aviation industry was ravaged by the impact of Covid-19. Emirates’ revenue tanked 66% to US$ 8.4 billion attributable to global traffic restrictions so that airline capacity was sank to 24.8 billion, with aircraft fleet size reduced by eleven aircraft. The Group turned in an annual US$ 6.0 billion loss, with Dnata reporting  a US$ 496 million loss, compared to a US$ 168 million profit a year earlier. The airline received a government capital injection of US$ 3.1 billion. For the first time in its thirty-year history, the carrier had to implement redundancies and reduced their workforce by 31%. Chairman HH Sheikh Ahmed bin Saeed Al Maktoum, commented that “our top priorities throughout the year were: the health and wellbeing of our people and customers, preserving cash and controlling costs, and restoring our operations safely and sustainably”.

Malabar Investments has shifted its base to Dubai International Financial Centre and also registered its international operation’s shares with Nasdaq Dubai’s Central Securities Depository. This latest move, by the international investment arm of Malabar Gold & Diamonds, enables its 300+ shareholders to trade shares with the approval of the Board of Directors through nominated brokerage companies; trading will take place off-exchange as the company remains privately held. Malabar Gold and Diamonds currently generates an annual turnover of US$ 4.51 billion, through an extensive network of over 260 outlets, 14 wholesale units and 14 jewellery manufacturing centres across ten countries.

By the end of the year, DEWA will have added 300MW from solar photovoltaic panels and another 300MW from concentrated solar power to the grid in 2021, equivalent to a 12% increase in clean power capacity. The Dubai-based utility announced that its total power capacity from clean energy will have increased to 1,613MW compared to a present level of 1,013MW, reflecting an increase of 12% by year-end. The clean energy coming online this year is mainly based on PSP and CSP. Next month, DEWA will commission the 300MW first stage of the fifth phase of the Mohammed bin Rashid Al Maktoum Solar Park and then in September the tallest CSP tower, with a capacity of 100MW; this will be followed by the end of the year with a further 200MW from the parabolic trough, as part of the fourth phase of the solar park. The main aim of the Dubai Clean Energy Strategy 2050 is for clean energy to 75% of the emirate’s total power capacity by then.

According to the UAE’s Central Bank, outward personal remittances in 2020 dipped 5.0%, US$ 2.26 billion, year-on-year, with transfers through exchange houses declining 13.8%,  (US$ 4.93 billion), but increasing via banks by 28.8%, (US$ 2.67 billion). On a global scale, remittance flows to low- and middle-income countries fell 1.6% to US$ 540 billion but are expected to move higher this year, as the global economy recovers; the 2020 fall was not as severe as that of 2009, following the GFC, which witnessed a 4.8% fall. The World Bank is forecasting a 1.5% rebound in 2021, but that could be higher in the UAE for various reasons such as the recent federal changes in company ownership, amendments in certain visa categories, the delayed six-month Expo 2020 starting in October and a notable increase in foreign direct investment. All will see an increasing number of employees being recruited from overseas, remitting money back to their home countries, as well as companies repatriating parts of their profits to their home base. The country’s economy is expected to grow 2.4% in 2021, and non-oil economy by 4.0%, according to the Central Bank, with growth of 3.8% next year.

Pursuant to the US Federal Reserve Board’s decision to lift its Interest on Excess Reserves (IOER) by 5 basis points, the Central Bank of the UAE has raised its Base Rate applicable to the Overnight Deposit Facility (ODF) also by 5bp, with the new rate being 15bp. The CBUAE’s rate applicable to borrowing short-term liquidity from the CBUAE, through all standing credit facilities, was maintained at 50bp above the Base Rate.

Driven by its highly successful vaccination protocol, and the input of various government stimulus measures, Dubai’s Q1 non-oil external trade surged 9.7% to US$ 96.5 billion and 5.0% higher compared to Q1 2019. Exports, imports and reexports all headed north by 25.0% to US$ 13.7 billion, 9.0% to US$ 55.8 billion and 5.5% to US$ 27.0 billion respectively. Dubai’s Crown Price, Sheikh Hamdan bin Mohammed, commented that “this remarkable growth will get us closer to the ambitious target of Dubai’s five-year strategy to raise the value of external trade to AED 2 trillion” (US$ 545 billion). The Dubai government’s forecast is that the emirate’s economy will grow by 4.0%, assisted by a boost from the upcoming Dubai Expo in October.

A further breakdown of the figures sees Q1 direct trade up 15% to US$ 59.1 billion, free zone 2.0% higher at US$ 36.8 billion and customs warehouse trade grew 23.0% to US$ 627 million. Of that total, airborne, sea and land trades came in 15% higher at US$ 48.8 billion, 3% to US$ 32.7 billion, and 7% to US$ 15.1 billion. China continued to be the emirate’s leading trade partner, followed by India and US, with totals of US$ 12.0 billion, US$ 9.5 billion and US$ 4.2 billion respectively. The top five traded commodities in Q1 continued to be gold, telecoms, diamonds, jewellery and diamonds with figures of US$ 17.2 billion, (27% higher), up 32% to US$ 13.6 billion, 61% higher at US$ 7.9 billion, US$ 4.6 billion and US$ 3.8 billion respectively.

This week, Nasdaq Dubai announced that the Indonesian government had listed further sukuk tranches, totalling US$ 3 billion, making its total values of sukuks listed on the local bourse to US$ 19.75 billion. The issues were for a five year US$ 1.25 billion sukuk at 1.5% yield, a 2.55%, ten year US$ 1 billion sukuk and a US$ 750 million green sukuk at 3.55% yield and 30 years’ maturity. The Asian country is the largest sovereign sukuk issuer on Nasdaq Dubai which has become one of the largest global centres for listing sukuks, with a total of US$ 76.6 billion; the bourse also welcomed the listing of a US$ 600 million sukuk by Ahli United Bank, one of Kuwait’s leading financial institutions.

Dubai-based Drake & Scull International posted a US$ 31 million Q1 profit on the back of 16.5% hike in revenue to US$ 12 million, as the company wrote back US$ 45 million of liabilities that no longer need repaying; over the same period a year earlier, the contractor recorded a US$ 8 million deficit. Total assets at 31 March were 6.0% lower at US$ 149 million, with total liabilities declining 3% to US$ 1.18 billion. With its accumulated losses now at US$ 1.30 billion, DSI is to circulate its debt restructuring proposals among its 600-plus creditors for approval, having reached a similar agreement with a group of its biggest lenders in Q1. If approval is reached from over two thirds of the creditors, the contractor can then approach the courts to obtain their approval which will then bind all creditors.

The bourse opened on Sunday 13 June, 217 points up (8.3%) the previous six weeks, gained a further 21 points (0.7%), to close on 2,863 by Thursday 17 June. Emaar Properties, US$ 0.04 lower the previous week, gained US$ 0.06 to close at US$ 1.12. Emirates NBD and Damac started the previous week on US$ 3.73 and US$ 0.35 and closed at US$ 3.81 and US$ 0.35. On Thursday, 123 million shares changed hands, with a value of US$ 71 million, compared to 171 million shares, with a value of US$ 67 million, on 10 June.

By Thursday, 17 June, Brent, US$ 6.65 (10.2%) higher the previous three weeks gained US$ 0.98 (1.4%) to close on US$ 72.95. Gold, up US$ 144 (8.2%) the previous five weeks, shed US$ 112 (5.9%), by Thursday 17 June, to close on US$ 1,784. With the US Energy Information Administration forecasting an H2 decline in global oil inventories, (despite oil production moving higher towards the 100 million bpd level), allied with an easing of global pandemic restrictions, and a continued recovery in global oil consumption demand, there is every chance that oil prices will continue in the bull market and may even test the US$ 80 mark.

Joe Biden and the EU agreed a long-term truce, (for at least five years), in the seventeen-year Airbus-Boeing feud after marathon talks by EU and US officials and formalised at a meeting between the US leader and Europe’s Charles Michel and Ursula von der Leyen. The President commented that Washington and Brussels will “work together to challenge and counter China’s non-market practices in this sector that give China’s companies an unfair advantage,” Both manufacturers welcomed the deal.

Last November, the UK government directed that all Huawei 5G equipment had to be removed from their networks by 2027. This week, in a major coup for Samsung in their bid to extend their UK coverage, Vodafone UK has chosen the South Korean telecom as a supplier for its 5G infrastructure. In a surprise move, considering that the UK had joined other countries in banning Huawei products, Ericsson and Nokia, seen as a “shoo-in” duopoly, had been the two favourites to obtain the business.Phase 1 will seeSamsung kit installed in 2.5k rural sites in SW England and most of Wales. Samsung is one of a number of companies contracted by Vodafone to build what it calls, “the “first commercial deployment of Open Radio Access Network (Open RAN) in Europe. The equipment from different suppliers is interoperable so that various companies’ components can be interchanged to build the network as opposed to just one supplier carrying out all the work. Open TRAN will have additional benefits of allowing Vodafone to release new features simultaneously across multiple sites, add capacity more quickly and resolve outages “instantly”.

Electronic Arts has confirmed that some source code and other software tools have been stolen by hackers who have reportedly advertised the stolen software for sale in various dark web fora. It appears that some of the stolen codes were being used for games including FIFA 21 and the Frostbite engine. The maker of popular titles such as Battlefield has noted that the attack was unlikely to have an impact on gamers or business operations. This attack comes a week before E3, this year a virtual Electronic Entertainment Expo, brings the global players together.

Peter Cowgill has received a huge US$ 6 million bonus this year. This comes as the chairman of JD Sports heads a company that received millions in Covid support from the UK government and has rejected suggestions the firm should repay US$ 86 million of furlough money and US$ 53 million in business rates relief. He has argued that this bonusresulted from a long-term incentive share plan (Ltip), and that he had received only one payout from the scheme in the past eight years; during that time, JD Sports saw annual profits surge more than fivefold from US$ 115 million to US$ 592 million.

An unidentified buyer has approached the Canadian Weston family, the owners of 113-year old Selfridges, which has the giant London department store, as well as outlets in Manchester and Birmingham. Reports indicate that the department store could be worth more than US$ 5.6 billion, driven higher by the fact that it owns valuable real estate, including the large area in Oxford Street. Whilst many retailers have struggled even before the onset of Covid-19, Selfridges has withstood the High Street downturn in recent years with its blend of cutting-edge fashion and a broad range of goods for sale. Any sale will not include its overseas retail chains, including Arnotts and Brown Thomas in Ireland, Holt Renfrew in Canada and de Bijenkorf in the Netherlands.

In years past, this blog had been very critical of Sepp Blatter’s modus operandi as head of the then scandal-ridden FIFA. Apart from his largesse habit of giving expensive watches to many FIFA delegates and outright bribes to buy votes for his causes, he was the person that introduced major sponsorship deals with the likes of Coca Cola, Heineken and McDonalds to support a sport that was diametrically opposite to what these companies espoused. Fast food, beers and fizzy drinks hardly point to a healthy lifestyle. This week, it has taken Cristiano Ronaldo to move two coke bottles out of sight of cameras at a press conference, to drive the message home to FIFA that they should focus on other sponsors. His action saw Coke’s market value lose US$ 2.6 billion on the day and might make FIFA realise that it has to be morally wrong to be eschewing the benefits of unhealthy foodstuffs.

Since the last rate adjustment in March 2020, the Fed has kept the target range for its benchmark policy rate unchanged at zero to 0.25% and it remained following the last Federal Open Market Committee meeting. It also confirmed that it would continue asset purchases at the current US$ 120 billion monthly pace until “substantial further progress” had been made on employment and inflation, whilst also signifying that there would be two rate hikes towards the end of 2023., brought forward in line with the quicker than expected economic recovery. One of the drawbacks, with the speed of the recovery, is that demand has outstripped capacity; this in turn has led to bottlenecks in the supply chain, longer lead times and higher prices. The consumer price rises in both April (0.8%) and May (0.6%) have been the two biggest monthly increases since 2009. On the news, the greenback moved higher, stocks lower and yields on 10-year Treasuries headed north.

This week, the EU has started to seek external funds to finance its massive deficit, resulting from the public spending splurge that has occurred since the onset of the pandemic, as it tests investors’ appetite to fund nearly US$ 1.0 trillion. The ECB President, Christine Lagarde, introduced ten-year bonds as part of its NextGenerationEU (NGEU) programme, with an initial offering ofover US$10 billion and with slightly better terms for investors; money raised will finance grants and loans to member states. There will probably be a further two syndicated NGEU bond sales before the August summer break. In September, the NGEU green bond framework will be introduced and will account for about US$ 300 billion of the total proposed funding.

One of the major announcements from the weekend’s G7 meeting in Cornwall related to its attempt to counter the impact of China’s multi-trillion-dollar Belt and Road project on developing nations, by offering them a similar type of infrastructure plan. The so-called Build Back Better World scheme aims to provide a transparent infrastructure partnership to participating nations. It is hoped that B3W will help narrow the US$ 40 trillion needed by developing nations come 2035, and also to minimise the threat of China’s surging economic and military rise over the past forty years. The Group and its allies will mobilise private-sector capital in areas such as climate, health and health security, digital technology, and gender equity/equality to enhance the initiative.

There was a record rise of 197k in the number of UK workers on payrolls in May, month on month, as the jobs market continued to recover; however, this figure was almost 500k down on pre-pandemic levels. The Office for National Statistics also noted that the month’s unemployment rate dipped 0.1% to 4.7% for the quarter ending 30 April. Hotspots for unemployment were among the under 25 age and those working in London.

In April, UK’s economy came in 2.3% higher, as lockdown restrictions eased across the country. With this April’s economic output 27.6% higher than a year earlier, Chancellor Rishi Sunak commented that the figures showed a “promising sign that our economy is beginning to recover” and that “with more than a million people coming off furlough across March and April, and the number of employees in work rising, it is clear that our Plan for Jobs is working.” The April bounce back was helped by strong growth in the services sector, up 3.4%, attributable to rises in retail spending, increased car and caravan purchases, schools being open for the full month and the beginning of the reopening of hospitality. However, the latest figures are still 3.7% lower than they were in pre-pandemic February 2020, but the outlook is bright, based on the strength of the country’s vaccination drive, signs of pent-up demand and lower-than-expected unemployment rates. The Bank of England’s latest forecast points to a 2021 growth level of 7.25%.

In simple terms, inflation means that the dirham in your pocket does not go as far as it did. For example, if the weekly food bill was US$ 300 and now it is US$ 320 for the same “basket”, a person is financially worse off. The supermarket may have had to raise prices because of an increase in their cost of goods, brought on by any number of factors such as higher transport costs and their suppliers pushing prices higher. The result is that for the status quo to return, the person needs to see an increase in their salary to compensate for this inflationary price rise. In short, inflation is the rate at which the prices for goods and services increase and, in short, if the inflation rate is at 5%, the consumer has lost 5% of his prior spending power. In most cases, the only way to counteract this is for a similar increase in salary and wages. If that is not forthcoming there is an inevitable loss in consumer confidence and a fall in the standard of living.

May US inflation surged as consumer prices jumped 5.0% on an annual basis – up from April’s 4.2% – and its biggest year-on-year increase since August 2008. The main drivers behind last month’s figures were a 7.3% hike in the price of second-hand cars and lorries, accounting for about one-third of the overall increase, and a rise in energy prices. There are those who put this down to temporary factors such as supply bottlenecks driven by increases in freight rates, factories restocking and pent-up demand spending, as many prices dipped at the 2020 onset of the pandemic. Other analysts see that with the Federal Reserve’s target of 2.0% being breached, there are real concerns that rising prices could push up interest rates at a quicker pace to cool the economy down. The Fed is hoping that the recent figures are just temporary, as the economy realigns after the impact of Covid. If it persists then that will be a major problem and no wonder the global central banks are watching what happens in the US with great interest.

There is little surprise to anyone to discover that over 62% of Europeans believe corruption is a problem in their country and that Covid-19 pandemic had made matters worse. The survey by Transparency International, involving 40k Europeans in the 27-nation EU bloc, concluded that government corruption was a big problem in their country, with 33% believing that corruption had got worse post the onset of the pandemic in early 2020. Healthcare was seen as an area of concern, with itsGlobal Corruption Barometer finding that 6% of people across the EU had paid a bribe for health care, with a worryingly high 29% having used personal connections to receive medical attention; just as what seems to have happened in the UK, most people also did not consider that their government had handled the pandemic in a transparent manner. As Delia Ferreira Rubio, chair of Transparency International, noted: “During a health crisis, using personal connections to access public services can be as damaging as paying bribes. Lives can be lost when connected people get a Covi-19 vaccine or medical treatment before those with more urgent need”.

Unsurprisingly, the survey found that  the likes of Slovenia (70%), Bulgaria and Cyprus (both 68%) and the Czech Republic (67%) thought that their government was controlled by private interests, with the Nordic countries at the other end of the scale; the average saw 53% concerned about such ties and, no doubt, the UK would be at the higher end of the scale Recent examples include David Cameron’s excessive lobbying role with the now bankrupt Australian Greensill Bank, Dominic Cummings’ and Michael Govescronies benefitting from PPE contracts, (with no tenders) and the recent knighthoods to Tony Gallagher, who had donated almost US$ 6 million  to the Conservative Party over the past decade, and William Adderley who donated over US$ 700k to “the cause”, during the 2019  general election.

MPs are rated as the most corrupt, followed by business executives, bankers and national government officials including personnel in the president’s and prime minister’s office. More than 50% of those surveyed believed big companies avoid paying taxes and that connections are commonly used by businesses to secure contracts. Probably another truism is that only 21% of Europeans think that corrupt officials face appropriate repercussions, if caught with “their snouts in the trough”. The NGO concluded that three immediate steps could be taken to help improve the situation – increase lobbying transparency at the EU and national levels tackle tax avoidance/money laundering more strictly and introduce robust measurers to protect whistle-blowers. It would be a safe bet that the EU technocrats will continue operating in an opaque environment and will not introduce any measures to substantially change their current modus operandi even by being given Just One More Chance!

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