Blue Sky Mine

Blue Sky Mine                                                                                                01 July 2021

For the past week ending 01 July, Dubai Land Department recorded a total of 2,020 real estate and properties transactions, with a gross value of US$ 1.23 billion. It confirmed that 1,321 villas/apartments were sold for US$ 610 million and 119 plots for US$ 230 million over the week. The top two transactions were for a plot of land in Marsa Dubai, sold for US$ 34 million, followed by a plot that was sold for US$ 16 million in Al Thanayah Fourth. The most popular locations were in Al Hebia Third, with 20 sales transactions worth US$ 17 million, Hadaeq Sheikh Mohammed Bin Rashid, with 14 sales at US$ 38 million, and Jumeirah First, with 14 sales transactions worth US$ 29 million. The top three transfers for apartments and villas were all apartments – US$ 81 million in Marsa Dubai, US$ 72 million in Al Merkadh and for US$ 63 million in Palm Jumeirah. Mortgaged properties for the week totalled US$ 272 million, including a plot for US$ 139 million in Al Goze Fourth. 124 properties were granted between first-degree relatives, worth US$ 63 million.

Following April’s announcement that the Dubai government was considering an imposition of freezing residential rents for three years, there has been a noticeable move by landlords in certain residential communities to try to lock in higher rents before it becomes law. At the time, the DLD commented that the legislation would bring stability to the market for both landlords and tenants and reduce rental disputes. However, it is still not known when the start date will be and whether the law will apply to either new rental contracts or just renewals and whether it encompasses all three property sectors – residential, commercial and industrial.

Consultancy Knight Frank has recorded record luxury home sales in Dubai, as the emirate seemingly recovers from the impact of the pandemic. It noted that in the first five months of the year, 22 homes, each worth more than US$ 10 million were sold, the most since 2015 and up from 19 homes in 2020. Their research head, Faisal Durrani, commented that “in Dubai, we appear to be in the midst of a spectacular post-Covid rebound in luxury home sales.” Most of the activity, at this price scale, was seen on The Palm Jumeirah, where the total value of property sold at the US$ 10 million level came in at US$ 770 million; the most expensive home sold this year was a US$ 30 million villa on the group of islands developed by Nakheel. The consultancy reports that only London has more US$ 1 million homes for sale than Dubai which has 42.4k properties in that sector.

Emaar Properties plans to issue a new benchmark sukuk of probably a ten-year US$ 500 million value under their US$ 2 billion Trust Certificate Issuance Programme. The UAE’s biggest listed property developer, by market capitalisation, has maintained its BB+ ratings from S&P Global which has lifted its outlook from negative to stable. This change has been brought about by the agency considering “that the residential real estate market in Dubai has bottomed out and now offers attractive opportunities for developers, especially for premium properties”. The agency also noted that Emaar accounts for more than 50% of new home sales in Dubai, focussing on the premium end of the market, and is set to generate more cash flow from operations as it hands over 6k units this year and 10k in 2022; last year, it delivered 4.8k.

Confirming its position as the leading regional entrepôt, the UAE warehouse and distribution 2020 trade totalled US$ 129.8 billion, of which the re-export market accounted for 46.5% of the total re-exports and exports of commodities and services, valued at US$ 273.3 billion. According to the Federal Competitiveness and Statistics Authority, since 2018, although the value has dipped, the percentage has risen from 44.2% (US$ 142.2 billion) to 44.8% (US$ 140.7 billion) to 46.5% (US$ 129.8 billion) last year.

Dubai Clear has announced it has been admitted as a Primary Member of the 38-member Global Association of Central Counterparties (CCP12) who operate more than 60 individual CCPs globally. This subsidiary of Dubai Financial Market, launched in April 2020 as the first regional local equities CCP, has guaranteed trade settlements and reduced counterparty risk to Clearing Members for securities and derivatives worth US$ 5.1 billion through its enhanced risk management and secured settlement framework.

Dubai has ranked second in a recent Nestpick study, behind Melbourne, in a Work-from-Anywhere Index report on 75 global cities. It came ahead of Sydney, Tallinn, London, Tokyo, Singapore; Glasgow, Montreal and Berlin, by scoring well on its game-changing one-year residency permit for remote workers. Other factors considered included costs and infrastructure, taxes, freedoms, safety and liveability. Last October, the government launched an initiative that that allowed overseas telecommuting professionals to live in the city while continuing to serve their employers in their home country. This gave remote workers – and their families – the opportunity to live in one of the safest locations in the world, backed by a high-quality lifestyle and a solid digital infrastructure.

This week, HH Sheikh Mohammed bin Rashid Al Maktoum, approved the new Board of Directors of Dubai Chambers, which had recently been restructured into three entities – Dubai Chamber of Commerce, Dubai Chamber of Digital Economy and Dubai Chamber of International Trade.  They will be headed by Abdulaziz Al Ghurair, Omar Al Olama and Sultan bin Sulayem respectively, with Juma Al Majid as the Honorary Chairman of the Dubai Chamber of Commerce and Industry. The main drivers behind this move were to enhance the Chamber’s contributions to the emirate’s economy, raise the level of support provided to emerging business sectors and accelerate Dubai’s innovation journey. Sheikh Mohammed commented that, “in the light of the changes sweeping across the globe, we need to adopt new business models that enable us to raise our sustainability and attain continued success. Deploying innovative operational frameworks and developing flexible legislations will help us foster further growth and achievement in Dubai’s economy.”

The Dubai Ruler has also launched several economic initiatives to further enhance the emirate’s economic advance, including an accelerator for family-owned businesses, that supports them in accessing new markets, UAE Growth Lab – an economic research institute established in collaboration with leading universities – and a global investment conference (Investopia) to be held in March 2022 that “will discuss strategies to leverage the opportunities created by the new economy”, brought on by the evolving regional and global environment. He also noted that “we have also launched an entrepreneurial academy (Skill-Up Academy) and a new platform to support the growth of start-ups (Scale-Up Platform), in addition to a web portal (Grow in UAE) to provide comprehensive information about policies and investment opportunities in the UAE”. In yet another bid to boost the post Covid economy, HH Sheikh Mohammed has announced that the UAE cabinet has decided to “adopt the National Agenda for Non-oil Export Development, a vital step aimed at accessing 25 new markets”, that will help expand the country’s exports and foreign trade.

China Export and Credit Insurance Corporation, a state-funded and policy-oriented insurance company, has opened its first regional office in the DIFC. By the end of last year, SINOSURE had supported more than US$ 5.3 trillion of domestic and foreign trade and investment, provided credit insurance-related services for over 210k enterprises and facilitated nearly 300 banks, offering more than US$ 600 billion of financing for exporters. One of the main aims of the venture is to further support China’s national Belt and Road initiative.

To support future regional expansion, and further into Asia, Kitopi has managed to raise US$ 415 million in a new funding round, led by SoftBank’s Vision Fund 2.  Kitopi operates sixty cloud kitchens across the GCC and employs 2.5k, whilst partnering with several restaurants and food and beverage brands to serve customers. The Dubai based cloud kitchen company, co-founded in 2018, by Mohamad Ballout and three others, is keen to take advantage of the sector’s huge potential; in 2019, the size of the global cloud kitchen market stood at about US$ 43.1 billion and, with an expected 12.0% annual growth will reach US$ 71.4 billion by 2027.

London-based venture capital firm AP Ventures and global FinTech Afterpay have invested US$ 10 million into two-year old Dubai-based buy-now-pay-later company Postpay which will allow the firm to best serve retail groups and brands across the GCC and the MENA region. This buy now pay later business model, has boomed globally since the onset of Covid by allowing consumers to make online purchases instantly and spread their payments out over interest-free instalments. For example, Australia’s Zip, a similar global platform, acquired Dubai-based Sopitii for US$ 16 million last month. Postpay works with global brands, including H&M, Footlocker, Dermalogica, and regional names such as Alshaya Group, The Entertainer and Kcal. On a global scale, this industry is expected to see growth of fifteen times by 2025.

The bourse opened on Sunday 27 June, 6 points lower (0.2%) the previous week, shed 40 points (1.4%) to close on 2,817 by Thursday 01 July. Emaar Properties, US$ 0.09 higher the previous fortnight, lost US$ 0.02 to close at US$ 1.13. Emirates NBD and Damac started the previous week on US$ 3.76 and US$ 0.35 and closed at US$ 3.65and US$ 0.35. On Thursday, 01 July, 76 million shares changed hands, with a value of just US$ 32 million, compared to 97 million shares, with a value of US$ 55 million, on 24 June. For the month of June, the bourse had opened on 2,798 and, having closed the month on 2811, was 13 points (0.1%) to the good. Emaar traded higher from its 01 June 2021 opening figure of US$ 1.08 – up US$ 0.06 – to close June on US$ 1.14. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.76 and US$ 0.37 and both closed lower on 30 June on US$ 3.65 and US$ 0.35 respectively.

By Thursday, 01 July, Brent, US$ 10.18 (15.6%) higher the previous six weeks shed US$ 0.57(0.8%) to close on US$ 75.50. Gold, US$ 119 (6.3%) lower the previous fortnight, was flat by Thursday 01 July, to close on US$ 1,777. Brent started the month on US$ 69.39 and gained US$ 3.92 (5.6%) during June to close on US$ 73.31. Meanwhile, the yellow metal had a disappointing month, shedding US$ 133 (6.8%) in June, having started on US$ 1,905 to close on 30 June at US$ 1,776.

Perella Weinberg Partners has announced an initial public offering, fifteen years after being founded by Joe Perella and Peter Weinberg, and will merge with a special purpose acquisition company, (SPAC), sponsored by finance entrepreneur Betsy Cohen. The investment bank is the latest firm to go public in an industry that has already seen US$ 1.8 trillion of M&As this year and is on course for a record year. The firm has advised on deals this year including AT&T’s sale of media assets to Discovery – the largest announced combination in 2021 – and the purchase of Cloudera by a group of buyout firms.

After Facebook won the dismissal of two antitrust cases filed by the federal government and a coalition of states, it finally reached a landmark US$ 1 trillion market valuation last Monday when shares jumped 4.4% on the day; YTD the social media company market cap has risen by 29%. It now follows four other companies with a thirteen-digit valuation – Apple, Microsoft (which topped the US$ 2 trillion level this week), Amazon and Google parent Alphabet.

The UK’s Financial Conduct Authority has banned Binance, the world’s biggest crypto-currency exchange, ruling that the firm cannot conduct any “regulated activity” in the country. At the same time, the financial regulatorissued a consumer warning about Binance.com, advising people to be wary of adverts promising high returns on cryptoasset investments. The Group, originally based in Malta, and now in the Cayman Islands, is an online centralised exchange that offers users a range of financial products and services, including purchasing and trading a wide range of digital currencies; its affiliate firm, Binance Markets Limited, is based in London, with multiple global entities. The FCA confirmed that no entity in the Binance Group holds any form of authorisation, registration or licence to conduct regulated activity in the UK. The Group has experienced similar problems in other countries. In the US, Binance Holdings has been the subject of a probe by SEC, specifically by its officials dealing with money laundering and tax offences; earlier in the week, Binance announced it was pulling out of Ontario, Canada, after the Ontario Securities Commission (OSC) accused it and several other crypto trading platforms of failing to comply with province regulations; Japan’s Financial Services Agency has recently warned Binance for the second time in three years that it is operating in the country without permission.

Investor power has again come to the fore – this time with Toshiba shareholders ousting chairman of the board Osamu Nagayony director, who is also a director for Sony; for the past decade, the Japanese conglomerate has rarely been out of the news for all the wrong reasons, being besmirched by on-going scandals and shoddy management. Since 2011, it has paid a record fine in an accounting scandal and then lost billions on a bungled foray into nuclear power. The latest crisis came about because investigators had uncovered alleged collusion with senior Japanese government officials to influence last year’s board selection; since the beginning of the year, its principal shareholder, Effissimo Capital Management, had been crying foul and managed to oversee a rare victory, especially in Japan, with Nagayony’s head,, for shareholder rights.

By the end of the year, there will no longer be any Gap physical stores in the UK, as the retailer has decided to go on-line and close all its remaining eighty-one shops in the UK and Ireland, Although, it will continue trading online, the US retailer plans to close all its outlets in France and Italy, following a strategic review of its European business. The chain, which began business in San Francisco, selling only Levi’s and LP records, first entered the UK market in 1987.  Although business in its early years was impressive, it failed to change with fashion trends and fell behind the likes of Primark when it came to price and variety of selection; it was also one of latest big names to catch on with online sales and paid the consequences when retailers like Next, which had spent millions in creating a strong internet presence, took a large slice of Gap’s market at the same time. Another criticism of the retailer was that it carried out too many discount offers which tempted many customers to wait for sales to buy their products and also created a perceived lack of value. It could also be argued that Gap did not keep up with changing trends across its core customer group and became a “run of the mill” retailer.

Welcome economic news for the Northeast this week on two fronts – Newcastle-based Greggs and Sunderland’s Nissan plant. The Japanese car manufacturer has announced plans to expand its battery production and may also launch a brand-new electric model in addition to its Leaf electric car production at the factory there. The Johnson government is contributing to the overall cost of the project, which is expected to cost hundreds of millions, which will result in creating thousands of new jobs both directly and in the supply chain. It is expected the new plant will be producing batteries in time for 2024, the year when the level of UK-made components in UK-made cars is required to start increasing in line with the terms of the UK’s trade deal with the EU which is the main market for the Sunderland-made vehicles. In 2018, it was estimated that theUK made about half of the electric cars built in Europe and it is feared that unless the Government pours more money into the sector, this figure could fall to as low as 4%. This is borne out by the fact that Nissan has already sourced funds for 474GWh of production across seventeen European sites, and that the Sunderland plant accounts for just 6.5GWh.

Meanwhile Greggs confirms that sales have been stronger than anticipated in the weeks since lockdown measures were eased, with a “strong recovery” in May, which saw sales remain 1% – 3% ahead of pre-pandemic levels. Earlier in the year, it posted its first ever loss in thirty-six years after sales sank by 33% during the 2020 coronavirus restrictions.

Car dealership Lookers has also reported “exceptionally strong” trading for 2021, with consumer demand “robust” and annual profits expected to behigher than previously forecast. However, it did issue a caveat that there was “some uncertainty” going into H2 due to the pandemic and “notable” supply restrictions in both new and used vehicles.

This week, the UK’s accountancy watchdog has launched an investigation into the auditor of Greensill Capital, Saffery Champness, and also into PwC, which audited financial statements made by Wyelands Bank. Greensill was the now bankrupt Australian Bank, better known for having David Cameron as a Special Adviser. The supply chain finance company went bust in March, raising concerns over the future of GFG Alliance, the sprawling empire controlled by Sanjeev Gupta and his family which owns the UK’s Liberty Steel.

In what would be a European first, the UK and Singapore have started negotiations on a new digital-trade agreement. The Johnson administration has bold plans to capitalise on investment opportunities abroad, (and try to help a post-Covid recovery), to ensure the country’s aim to become a “global tech powerhouse”. It has also commented that any agreement with Singapore could remove barriers to digital trade and enable British exporters to expand into high-tech markets and become global leaders in digitally delivered trade and industries like FinTech and cyber security.

   %age30 Jun       
 UnitRise20212020201920182017201620152014
GoldUS$oz-6.28%1,7761,8951,5171,2851,3051,1511,0601,186
Iron OreUS$Lb37.80%214.55155.791.5371.371.28754773
Oil -BrentUS$bl45.75%75.551.866.6753.866.6256.8236.457.33
CoffeeUS$Lb21.95%156.4128.25129.2101.9126.2133124161
CottonUS$Lb9.92%85.8778.1268.9572.278.5696462
SilverUS$oz-0.45%26.2926.4117.8615.5616.991613.8215.77
CopperUS$Lb20.74%4.253.522.82.643.32.482.142.88
AUDUS$-3.12%0.7460.770.7020.70.780.720.730.81
GBPUS$1.55%1.381.3591.3261.271.351.241.481.53
EuroUS$-3.12%1.181.2181.121.141.21.051.091.21
RoubleUS$0.00%0.0140.0140.0160.0140.0170.0160.0140.017
FTSE 1008.59%7,0386,4817,5426,7217,6887,1426,2426,548
CSI30022.26%6,3725,2124,0973,1424,0313,3103,7313,532
S&P 50014.43%4,2983,7563,2312,5072,6742,2382,0442,091
DFMI12.80%2,8112,4922,7652,5303,3703,5313,1513,774
ASX 20010.73%7,2946,5876,8025,6526,1715,6655,3455,415
BitcoinUS$ 20.56%35,01529,0437,2013,69413,081998427302

From the above, the standout performers in H1 were commodities and the stock markets, with Brent, iron ore, coffee and copper all showing healthy upticks of 45.75%, 37.80%, 21.95% and 20.74% respectively. Stock markets proved fertile ground for those who were risk averse, with four of the five surveyed recording double digit gains. Interestingly, the FTSE 100 did not perform as well as its peers, but this could be a sign that there is more profit to be made on London stocks going into H2.  Gold and silver have disappointed in H1, both losing traction and direction. Sterling performed well against the greenback, whilst both the euro and Aussie dollar dipped by over 3%. Bitcoin had a rollercoaster half year and even went above the US$ 60k mark for a time; perhaps the brave investor could take a punt in H2 but remembers to get out when it rises above the US$ 50k mark.

Since 1959, when the Australian Bureau of Statistics started publishing trade figures, the country has witnessed 221 quarterly deficits and just 26 surpluses, of which eight have been over the past two years, equating to the longest consecutive run of current account surpluses on record. The latest data shows that May’s trade surplus was US$ 7.3 billion, just off the record high of US$ 7.4 billion set in January, with the last national accounts data showing that the current account surplus had reached 3.1% of GDP. The main reason for the on-going surpluses is simply iron ore (along with other mined metals). Eighteen months ago, the Department of Industry expected iron ore exports to reach a value of US$ 49.7 billion – its latest update puts the figure at more than double that at US$ 112.2 billion. Maybe former Australian politician and lead singer of Midnight Oil, Peter Garrett, got it spot on when he sang “nothing’s as precious as a hole in the ground” – Blue Sky Mine.

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