The Writing’s On The Wall!

The Writing’s On The Wall!                                                              16 July 2021

For the past week ending 15 July, Dubai Land Department recorded a total of 1,826 real estate and properties transactions, with a gross value of US$ 1.5 billion. It confirmed that 1,218 villas/apartments were sold for US$ 760 million and 128 plots for US$ 233 million over the week. The top three transactions were for a plot of land in Hadaeq Sheikh Mohammed Bin Rashid, sold for US$ 24 million, a plot that was sold for US$ 18 million in Um Suqaim Third and a plot for US$ 11 million in Airport City. The most popular locations were in Hadaeq Sheikh Mohammed Bin Rashid, with 24 sales transactions worth US$ 61 million, Nad Al Shiba First, with 22 sales at US$ 17 million, and Al Hebiah Third, with 11 sales transactions worth US$ 9 million. Mortgaged properties for the week totalled US$ 417 million, including a plot for US$ 84 million in Marsa Dubai. 72 properties were granted between first-degree relatives, worth US$ 47 million.

A Property Monitor study notes that European buyers have been driving a significant rebound in Dubai’s property sector. It reported that June property prices had risen 10.0% on the year, at an eight-year high, and 2.1% on the month, with European buyers emerging as “a key demographic recently, driving sales with most being end users.” There appears to be a trend that not only the breadwinner is relocating to Dubai for employment reasons but all the family as well. There is also a movement that sees Dubai residents moving from rentals to buying property, for a myriad of reasons, and those already owning property upgrading to larger residences.

HH Sheikh Mohammed bin Rashid Al Maktoum, who celebrated his 72nd birthday this week, has announced that his plans for Dubai include creating 1k digital companies over the next five years and to train and attract 100k programmers. He has also indicated that the investment directed to start-ups will be boosted by a further US$ 680 million to US$ 1.1 billion. The Dubai Ruler noted that “The National Programme for Programmers is a new step to build our digital economy” and that the initiative has been launched in cooperation with Google, Microsoft, Amazon, Cisco, IBM, HPE, LinkedIn, Nvidia and Facebook. In June, the Dubai Digital Authority was established to speed up the transformation of government entities into smart service providers to individuals and businesses, as well as to double the size of the digital economy to US$ 545 billion by the end of 2023. Sheikh Mohammed also warned that survival will be for “the most prepared” and those who are quickest to “keep pace with the new changes in our world”.

Dubai’s latest tourist attraction – Deep Dive Dubai – has been opened to the public by the Crown Prince, HH Sheikh Hamdan bin Rashid. At sixty metres, it is by far the world’s deepest diving pool and being Dubai, it has to be something special. It holds fourteen million litres of water – which is filtered and circulated every six hours – and the 1.5k sq mt facility is shaped like an oyster, a recognition of the emirate’s historic link with pearl fishing. It also features an advanced hyperbaric chamber, a sunken city and two underwater habitats, as well as hosting an underwater film studio, with a media editing room and fifty-six cameras.

The newly created Dubai Collection, launched under the patronage of HH Sheikh Mohammed bin Rashid Al Maktoum, sees eighty-seven artworks, connected with the emirate, being acquired for public showing. It will be opened later in the year at the Etihad Museum for Artworks in the Collection and will also be accessible to the public through a dedicated digital museum. It will also be boosted by the personal collections of the Dubai Ruler and Sheikha Latifa bint Mohammed bin Rashid Al Maktoum, Chairperson of Dubai Culture and Dubai Collection’s Steering Committee. This latest initiative is set to see Dubai become one of the world’s leading cultural and creative hubs.

According to latest statistics from Dubai Customs, the value of the emirate’s Q1 external pharmaceutical and medical supplies trade expanded 30.8%, year on year, to US$ 1.85 billion. Further analysis sees imports and exports reaching US$ 1.44 billion and US$ 161 million. In terms of volume, Dubai’s trade in pharma and medical supplies jumped 47.3% to 48.6k tonnes.

An indicator that Dubai has become one of the leading cruise destinations in the world is that MSC Cruises will hold a naming ceremony for its newest flagship, MSC Virtuosa, in November at Mina Rashid. The event is in partnership with Dubai’s Department of Tourism and Commerce Marketing (Dubai Tourism), DP World and Emirates Airline. The event reflects the growing importance of Dubai as a must-visit destination for global travellers and the cruising’s key contribution to the city’s tourism industry. The occasion will also be a part of the celebrations surrounding the Golden Jubilee of the UAE and will be staged as Dubai welcomes the world to the delayed Expo 2020.

After a fleet review, and taking account of the impact of Covid, flydubai has cut its original 272 Boeing 737 Max order by 27.5% to 172 jets. The carrier took delivery of two 737 Max 8 jets in June and a further 11 aircraft will join the fleet by the end of the year. The state-owned carrier currently has 52 Boeing 737 jets – thirteen Max 8s, three Max 9s and thirty-six 737-800s. Boeing is trying to restore confidence in its best-selling model that earlier in the year resumed flights after a two-year global ban, prompted by two fatal crashes. The pandemic hit the global aviation industry hard, forcing airlines to preserve cash by grounding aircraft, deferring or cancelling plane deliveries and laying off or furloughing employees.

There has been a 347% surge in H1 private jet movements, to 8.1k, flying out of Mohammed bin Rashid Aerospace Hub, based in Dubai South; the comparative figures for 2020 and 2019 were 1.8k and 3.1k. The most popular destinations were Russia, India, the Maldives and Turkey. These figures demonstrate the proactive nature of the Dubai government, which followed all health protocols but also encouraged safe two-way travel whenever possible. It also showed Dubai to be one of the most resilient cities in the world.

Sokovo has signed an agreement with Dubai Industrial City, to set up a vertical indoor, 25k sq ft farm that will produce thousands of tonnes of leafy greens, fruits and vegetables. This is a major step forward for the country’s innovation-driven food security strategy. Sokovo will grow fresh kale, spinach, lettuce, tomatoes, strawberries and melons, supplying hundreds of hypermarkets, hotels and top chefs across the country. The industry is attracting and nurturing talents that are bolstering the UAE’s innovation-driven food security strategy as vertical farming booms nationwide. Located on a 100k sq Sft plot, the facility, with a retractable sunroof to maximise natural light, will utilise rotating seven-metre-tall towers that will also be used to make sure that all the crops get equal exposure to natural sunlight. Covering more than 550 million sq. ft. DIC divides the massive business district into strategic sector-focused zones, with the food and beverage site encompassing a total land area of 23.5 million.  It is home to more than sixty food and beverage manufacturers including Barakat, Patchi, Almarai Group, Barakah Dates Factory and Lifco, with a further eleven factories under construction.

As part of its strategy to become one of the ten leading global central banks, the Central Bank of the UAE is planning to issue its own digital currency, in line with the country’s goals for the next fifty years under UAE’s Centennial 2071 agenda; no dates for implementation were given. The overarching strategy encompasses seven objectives including driving the digital transformation in the UAE’s financial services sector by using the latest artificial intelligence and big data solutions. Earlier in the year, the CBUAE and the Saudi Central Bank completed a proof-of-concept project on a wholesale central bank digital currency “to settle domestic and cross-border transactions, using central bank money on a distributed ledger technology”.

Noor Capital has led a ‘Series A’ US$ 34 million funding round for iWire, as it plans to expand its geographic presence across twelve countries, by building the digital communication infrastructure to power the internet of things. Launched three years ago, iWire, which had already raised US$ 47 million, builds country-wide communication networks to power massive IoT solutions. The French sovereign wealth fund, Bpifrance has tied up with Noor by granting a long-term equipment purchase option to iWire through a buyer credit agreement.

Shuaa Capital is planning to invest US$ 600 million in three Spacs, as it becomes the latest investment bank to take more than a passing interest into the expanding market for blank-cheque companies. Special purpose acquisition companies are formed from invested cash, raised via an IPO, and to be spent on an existing commercial company. This method is normally quicker and does not have the more stringent checks of a “normal” IPO. The Dubai-based firm is currently in the early stages of research and negotiations with investment banks on the new initiative. According to Allen & Overy, H1 has seen 389 global Spacs, raising a total of US$ 110.1 billion, of which 310 listings, valued at US$ 95.5 billion, took place in Q1; last year, the total value of Spacs, which have only been a finance item since the end of 2019, was only US$ 83 billion.

The Dubai Financial Services Authority has fined Ashish Dave, former CFO of the disgraced Abraaj Group, US$ 1.7 million for his role in the downfall of the private equity company; he was also prohibited from “performing any function” in financial services within or from the DIFC. The regulator concluded that he was “knowingly involved” in deceiving investors over the use of money in Abraaj funds, and “in particular, Mr Dave was aware that approximately US$ 200 million was taken from the Abraaj Growth Markets Healthcare Fund and used for the Abraaj Group’s working capital or other investment commitments.” In 2019, the DFSA had fined Abraaj Group US$ 315 million and this week confirmed that that actions against other former senior members of Abraaj Group’s staff were ongoing and “in the final stages of the disciplinary process”.

Dubai Investments acquired a further 15.19% stake in National General Insurance Company, taking its total shareholding to 45.18%.  The Dubai-listed investment holding company, paid over US$ 19 million for 22.78 million shares at US$ 0.85 per share, as it continues to enhance its position in the country’s insurance sector. NGI, in which the government’s Investment Corporation of Dubai has an 11.54% stake, provides insurance to both individuals and corporates in all areas. Q1 saw the insurer post a US$ 34 million profit, compared to a US$ 2 million loss in Q1 2020, with total income 37.0% higher at US$ 174 million.

Emaar Properties’ US$ 500 million ten-year Sukuk on Nasdaq Dubai was celebrated by its chairman, Jamal bin Theniyah, ringing the market-opening bell on Monday. The Sukuk is part of the developer’s US$ 2 billion Trust Certificates Issuance Programme, solely listed on Nasdaq Dubai. Priced at 3.7% yield, it was nearly seven times oversubscribed, demonstrating that international investors find Dubai an attractive location for their funds. Currently, the bourse is home to US$ 78.0 billion of Sukuk listings, making it one of the largest Sukuk listing venues worldwide.

In February 2018, the Djibouti government illegally seized control of the Doraleh Container Terminal from DP World. Until then, the terminal was run under a JV between DP World and Port de Djibouti, (PDSA) – which is 23.5% owned by China Merchants Port Holdings Company Ltd of Hong Kong and 76.5% held by the Government of Djibouti. In July of that year, PDSA unilaterally declared that its agreement with DP World was terminated in a bid to seize control. This week, an arbitral tribunal of the London Court of International Arbitration confirmed the unlawfulness of PDSA’s efforts to terminate its JV and transfer its shares to the State.

Alvarez & Marsal confirmed that they had begun legal proceedings against “certain former directors of the company”, and EY, its former auditor, in a bid to recover part of the US$ 4 billion that disappeared from the UAE healthcare group, NMC Health. Filing will occur once the group’s restructuring, through a Deeds of Company Arrangement, (an agreement between the company and its creditors), is complete. The healthcare company was placed into administration in April 2020, after an investigation found that there was a US$ 4.4 billion under-reporting of debt. Since then, US$ 6.4 billion worth of claims were lodged from hundreds of creditors. The proposed restructuring is expected to reduce the company’s debt to a manageable level of US$ 2.25 billion, with creditors receiving equity for the US$ 4 billion that will be written off. The company’s biggest lender, Abu Dhabi Commercial Bank, has already taken action in UK and UAE courts to freeze the assets of former directors and of the group’s founder, BR Shetty. Although 99% of creditors have firmly committed to the restructuring plan, it seems that Dubai Islamic Bank, owed an estimated US$ 425 million, is already taking legal action in both the Dubai and Sharjah courts.

The bourse opened on Sunday 10 July, 83 points (2.9%) lower the previous three weeks, shed a further 66 points (2.4%) to close on 2,714 by Thursday 15 July. Emaar Properties, US$ 0.05 lower the previous fortnight, lost US$ 0.03 to close at US$ 1.07. Emirates NBD and Damac started the previous week on US$ 3.65 and US$ 0.34 and closed at US$ 3.61 and US$ 0.34. On Thursday, 15 July, 120 million shares changed hands, with a value of US$ 59 million, compared to 122 million shares, with a value of US$ 38 million, on 08 July. With the long Eid Al Adha break occurring next week, the bourse will only be open for one day – Sunday 17 July., and not much action is expected.

By Thursday, 15 July, Brent, US$ 1.97 (2.6%) lower the previous fortnight, shed a further US$ 0.67 (0.9%) to close on US$ 74.08. Gold, up US$ 27 (1.5%) the previous week, gained a further US$ 51 (2.9%), by Thursday 15 July, to close on US$ 1,828.

Following Richard Branson’s Sunday’s flight to the edge of space, it is reported that Virgin Galactic is planning to sell US$ 500 million of shares to develop its spaceship fleet and infrastructure. Early Monday, its shares had rocketed 8% in the US but had tanked 17% by the end of the day on the news; before Sunday’s flight, its market value had more than doubled YTD. Branson and his Virgin Group currently hold a 24% stake in the company.

Didi Global has had twenty-five of its mobile apps removed on the orders of China’s cyberspace administration, just days after the tech giant’s US$ 4.4 billion listing on the New York Stock Exchange. The apps had used data illegally collected by Didi and included those for its delivery service, camera device and finance services, with the regulator also ordering app stores to remove Didi’s main ride-hailing app. It was also ordered to stop registering new users, as it launched a probe into the company, citing national security and the public interest. With uncertainty on how much the government will rein in Didi’s activities, its market value was US$ 21.5 billion lower in last week’s trading.

PayPal Pay in 4 launched this week in Australia in a bid to take on market leader Afterpay, with the unique selling point of charging no fees.  Furthermore, the US digital payments giant will charge no interest, no late payment fees and no sign-up fees if customers use its four instalments option for purchases between US$ 22 and US$ 1.1k. The buy now, pay later industry has increased in popularity over the past two years and PayPal start with the added advantage of already having nine million accounts in the country. The market will get more crowded because Apple is also ready to enter the BNPL sector and Commonwealth Bank will launch its StepPay service soon.  Little wonder that shares in Afterpay, Zip, Sezzle and Hum all fell on the news of the new entrants, by 9.6%, 11.4%, 10.3% and 4.0%.

India’s central bank has barred MasterCard indefinitely from issuing new debit or credit cards to domestic customers. The Reserve Bank of India. has stated that the company had been violating data storage laws, as well as not complying with regulations requiring foreign card networks to store data on Indian payments exclusively in India, as required by a 2018 order; this would have given regulators “unfettered supervisory access” to payment details. Last year, Mastercard accounted for 33% of all card payments in India, and, in 2019, had announced an investment of a billion dollars over the next five years, as part of its expansion plans in the country. Earlier this year, American Express and Diners Club were blocked from issuing new cards due to similar violations.

Not helped by surging commodity prices, supply shortages, pollution control and new Covid-19 outbreaks, Q2 saw China’s economy grow at the slower rate of 7.9%, on the year, and was below the 8.1% market expectation and significantly lower than the annual 18.3% expansion recorded in Q1; on a quarterly basis, the GDP was 1.3% higher. It is readily apparent that the world’s second biggest economy is losing momentum, and this may see the government firming up stimulus measures to support the post-pandemic recovery, as the coronavirus continues to flare-up around the world, and this despite Premier Li Keqiang reiterating that the country would not resort to flood-like stimulus. However, the People’s Bank of China did announce that it would cut the amount of cash that banks must hold as reserves and there is every chance that the government will cut the bank reserve requirement ratio (RRR) sometime this year to bolster the country’s flagging GDP figures. Notwithstanding, China’s industrial output grew 8.3%, (down from an 8.8% rise in May), retail sales 12.1% higher on the year, (12.4% in May), and fixed asst investment 12.6%, down from 15.4% a year earlier.

Joe Biden seems determined to crack down on big tech firms and has signed an executive order that includes seventy-two actions and recommendations involving ten agencies. Noting that “capitalism without competition isn’t capitalism. It’s exploitation,” the US President is rightly concerned that the large tech firms collect too much personal information, buying up potential competitors and competing unfairly with small businesses. Three main aims of the legislation would see greater scrutiny of mergers, new rules on data collection and putting an end to unfair methods of competition on internet marketplaces. When it comes to the question of mergers, he wants to stop tech firms making “killer acquisitions”, essentially buying up the competition. Biden is also interested in seeing fairer competition in other sectors, including healthcare, travel and agriculture.

According to the Labor Department, for the week ending 10 July, US jobless claims touched a sixteen-month low, falling by 26 k to 360k, with 9.5 million people officially unemployed. Despite strong demand for goods and services, some companies are being hampered because of supply chain bottlenecks and labour shortages, and this has impacted on employment numbers. For example, manufacturing production declined in June, as the carmakers saw production levels dive, driven by a shortage of semi-conductors. However, Federal Reserve Chair, Jerome Powell, is confident that current shortages will abate, and that the comparatively high inflation levels will also dip.

June consumer prices surged 0.9%, (and 5.4% higher on the year) – the most since 2008, exceeding all forecasts and presenting the Federal Reserve more worries about when to start unwinding their ultra-easy monetary support. Excluding the volatile food and energy components, the so-called core CPI rose 4.5% from June 2020, the largest advance since November 1991. The main driver was used vehicles, (accounting for over a third of the total), along with hotel stays, car rentals, apparel and airfares. The Fed’s opinion is that it expects this a blip and that increases will normalise in the coming months, as most of the rises were down to outsize increases in prices in a few categories. It will also be closely watched by the White House, as Joe Biden may now have problems pushing through his recent additional fiscal spending of trillions of dollars.

This week, leading Senate Democrats agreed on a US$ 3.5 trillion new infrastructure investment plan they aim to include in a budget resolution to be debated soon; it is reported that some progress had been made between Democratic and Republican negotiators on the bipartisan measure. This agreement, which has to be endorsed by the fifty-member Senate Democratic caucus, would include a significant expansion of the Medicare healthcare programme for the elderly. It is highly likely that the Senate’s fifty Republicans will not back the broader infrastructure effort, which will probably lead the Democrats to pursue passage on their own under a budget “reconciliation” process that sidesteps a rule requiring at least sixty votes to advance legislation in the one hundred-member chamber. One sticking point will be Joe Biden’s move to increase taxes on corporations and the wealthy to help fund the initiatives, whereas the Republicans oppose any rolling back of tax cuts, which were achieved in their signature 2017 tax reform law.

With 29k new jobs created in June, Australia’s unemployment rate fell 0.2% to 4.9%, its lowest rate in a decade; it has now declined for eight consecutive months. Full-time employment increased by 52k, to 9.02 million people., with part-time employment decreasing by 23k, to 4.14 million people. However, the underemployment rate jumped 0.5% higher at 7.9%, attributable to a 1.8% decline in hours worked, equating to a total of 33 million hours across the whole economy. Although the economy is showing marked signs of improvement, this could all be derailed by major lockdowns in capital cities, as case numbers increase from almost zero; the damage to the economy will be seen in the July and August figures and it may not prove pretty; there are some forecasting a 200k fall in employment numbers and unemployment levels up by as much as 50k.

UK Q2 retail sales hit new record highs, helped by a gradual lifting of restrictions and pent-up demand, with sales up 28.4% on the year and 10.4% higher than the same period in 2019. The British Retail Consortium warned that, despite these encouraging figures, the High Street still faced “strong headwinds”, as the UK economy recovers from the pandemic. It noted that in June, fashion and footwear did well, during the brief burst of sunshine, while the start of the Euro 2020 football championship provided a boost for TVs, snack food and beer; on-line sales continue a lot higher than pre-pandemic levels which seems to indicate that e-commerce has changed the High Street for ever.

As coronavirus restrictions eased to allow pubs and restaurants to serve indoors, the UK’s economy expanded by 0.8% in May – a slower rate than the expected 1.5%, following a rebound in the hospitality sector which was offset by disruptions to car production. This follows the 2.0% uptick in April, and it is the fourth consecutive month of growth; however, the economy is still 3.1% below pre-pandemic levels. The overall services sector was 0.9% higher, as accommodation and food services jumped 37.1% in the month. On the flip side, carmakers continued to struggle with the microchip shortage, as there was a 16.5% decline in the manufacture of transport equipment; construction also suffered from a wet May, but it is still 0.3% above pre-pandemic levels. For the quarter to 31 May, the economy grew 3.6%, driven by strong retail sales, with pubs, restaurants and schools reopening from March.

Since their last G20 financial policymakers’ meeting in April, the global economic outlook has improved driven by worldwide mass inoculation programmes, as well as fiscal and monetary support packages. However, the global economic recovery is fragile as downside risks remain, with the virus continuing to evolve, with variants such as Delta spreading, and the marked different paces of vaccination especially between the rich and poor countries. At their two-day Venice meeting, the ministers confirmed “resolve to use all available policy tools for as long as required” to address the adverse consequences of the pandemic. However, the UN Secretary General Antonio Guterres did note that the one billion doses, already pledged by the IMF, in partnership with the World Bank, falls well short of the eleven million required to vaccinate 70% of the world’s population. Meanwhile, the IMF MD, Kristalina Georgieva, commented that further support from the G20 would lead to trillions of dollars of gains from a quicker economic recovery. It is estimated that, to date, more than US$ 16 trillion of fiscal and US$ 9 trillion of monetary support by global governments and central banks has been spent on trying to alleviate the negative impact of the pandemic.

The global economy is recovering broadly in line with the fund’s April projections of 6% growth in 2021, after plunging into its worst recession since the 1930s. The economic outlook is much better than at the beginning of the year, with more than US$ 16 trillion of fiscal and US$ 9 trillion of monetary support by governments and central banks across the world helping the recovery. However, the latest data confirms a deepening divergence in economic fortunes, with a large number of countries falling further behind.

At the same meeting, on Saturday, the finance ministers also backed a move to stop multinational companies from shifting profits to low-tax havens, with indications that some legislation could be introduced at their next G20 meeting in October; this would indeed swell the exchequers with billions of dollars in “extra” tax. The meeting confirmed that “we endorse the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax.” The big tech companies will not be best pleased if this were to come into being.

With 90% of the world’s central banks looking at creating digital versions of their currencies, the Bank for International Settlements, the IMF and the World Bank have made a joint call for global co-operation between all interested parties. According to Jon Cunliffe of the Bank of England, “CBDCs (central bank digital currencies) offer the opportunity to start with a clean slate. It is crucially important that central banks take the cross-border dimension into account,” There is no doubt that even if some banks intend CBDCs to stay “in country”, they are bound to extend beyond borders. The report recommended the setting up of international payment infrastructures and basic compatibility with common standards.

Following its latest investment round, that raised US$ 800 million, from SoftBank and Tiger Global Management, London-based Revolut is now valued at US$ 33.1 billion – six times higher than its value twelve months ago. The digital banking and payments start-up, now the UK’s most valuable private tech company, was started six years ago by former Lehman Brothers trader Nik Storonsky.  The money raised will be used to expand its customer base from thirty-five countries as it plans to move into operations in the US and India. The tech firm, cum bank, which provides currency exchange, current account and crypto-currency services for customers is still in the process of attaining a UK banking licence. Last year it posted a doubling of losses, to US$ 278 million, attributable to the need of employing more staff.

The Australian government is concerned that new EU carbon tariffs could trigger reciprocated action from Australia’s major trading partners that would damage the nation’s coal, iron, cement iron ore, steel and aluminium industries. The EU’s Carbon Border Adjustment Mechanism, still to be passed into law, will charge EU-based businesses that import carbon-intensive products in a move to help the EU reach its goal of cutting emissions by 55% by 2030. Australia’s Trade Minister is rightly concerned that the measures may contravene WTO rules and that CBAM could be seen as “a new form of protectionism that will undermine global free trade and impact Australian exporters and jobs.” There could be greater worries in store as it is reported that maybe Canada and Japan are looking at potentially similar initiatives which would have a greater impact on industries that export aluminium or iron or steel. For many of Australia’s mining communities, the golden goose may have been cooked – The Writing’s On The Wall.

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