Looks Like A Cold, Cold Winter!                                                         30 September 2021

For the past week, ending 30 September, Dubai Land Department recorded a total of 1,592 real estate and properties transactions, with a gross value of US$ 1.63 billion. It confirmed that 1,080 villas/apartments were sold for US$ 747 million, and 73 plots for US$ 95 million over the week. The top three transfers for apartments and villas were for a US$ 102 million apartment in Marsa Dubai, US$ 72 million for a Palm Jumeirah villa and US$ 70 million for a villa in Wadi Al Safa 5. The top two land transactions were in Al Thanyah Fourth for US$ 16 million, and in Al Qusais First for US$ 9 million. The most popular locations were in Al Yufrah 3, with 17 sales transactions, worth US$ 4 million, Nad Al Shiba Third, with 10 sales at US$ 48 million, and Al Hebiah Third with 9 sales transactions, valued at US$ 5 million. Mortgaged properties for the week totalled US$ 545 million, including a plot for US$ 56 million in Me’Aisem First. 71 properties were granted between first-degree relatives worth US$ 272 million.

Knight Frank has confirmed what everyone knew – that Dubai property prices have jumped 16.5% over the twelve months to July. The global property consultancy also noted that Q3 villa prices are provisionally 5.0% higher, on the quarter, and 17.0% on the year, driven by the UAE’s lauded handling of the pandemic and the “buzz” around the much-anticipated World Expo. By the end of Q3, the number of US$ 10 million plus properties sold in the emirate YTD totalled 54 – well over the record twelve-month total of 31, established in 2015. Over 75% of these sales have occurred in two locations – Emirates Hills and Palm Jumeriah.

Last week a bullish Crown Prince, Sheikh Hamdan bin Mohammed expected Dubai’s economy to grow by 3.1%, this year, nudging 0.3% higher to 3.4% in 2022. He also noted, that “Dubai has successfully overcome the pandemic’s global shockwaves,” and that the emirate’s position, as a major economic capital, had been supported by clear goals, flexibility and speed in responding to changes. Now that Expo 2020 finally opened this evening, analysts are considering the economic benefits that will accrue from the six-month event, as business confidence heads north at an increased pace. Sheikh Hamdan’s realistic growth projections are in line with the revised forecast made by the International Monetary Fund which has upgraded the UAE’s growth forecast to 3.1% for 2021 in its latest World Economic Outlook, as compared to 1.3% predicted in October 2020.

According to the latest Global Financial Centres Index, Dubai moved up one place to 18^th, with 694 points, among the top twenty vibrant financial centres, to become the only city in the Middle East, South Asia and Africa region to do so. New York and London maintained their top two positions, despite the latter exiting the EU at the start of 2020, and that the two cities’ financial services sectors managed to sustain their performance despite radical changes in working practices resulting from the pandemic. Playing a pivotal role in Dubai’s transition, over the past two decades, as a sought-after hub for financial companies and fintechs are world class financial zones, including Dubai International Financial Centre. Financial industry sources said the enhanced ranking further boosts Dubai’s position on the ladder and underscores the emirate’s economic potential and its position as the destination of choice for international organisations, including FinTech leaders. Dubai’s position as a major global centre has also benefitted from the government taking innovative initiatives and introducing a series of progressive regulatory reforms.

Indicating its position as one of the fastest growing global business hubs, Dubai’s H1 non-oil external trade surged 31.2% to reach US$ 196.8 billion, compared to a year earlier. Exports, imports and reexports were all higher – by 44.9% to US$ 29.9 billion, 29.3% to US$ 112.8 million, and 28.3% to US$ 54.1 billion; volume wise, the tonnage rises were up 10.0%, 30.8% and 4.3% to 48.0 million, 10.1 million and 7.0 million. The Crown Prince, Sheikh Hamdan, noted that “we will continue to build on our growth momentum to achieve our ambitious sustainable development projects and plans.”

China maintained its position as the emirate’s leading trading partner, 30.8% higher on the year at US$ 23.6 billion in H1, followed by India (up 74.5% to US$ 18.3 billion), the USA (US$ 8.7 billion, up 0.9%), Saudi Arabia, (US$ 8.3 billion, up 26.5%) and Switzerland, 2.5% higher at US$ 6.8 billion. The total share of the five biggest trade partners in H1 was 30.3% higher at US$ 65.7 billion. Gold topped the list of commodities in Dubai’s H1 external trade at US$ 37.8 billion (19.2% of Dubai trade), followed by telecoms, diamonds, jewellery and vehicle trade at US$ 25.6 billion, US$ 15.6 billion, US$ 9.3 billion and US$ 7.6 billion. Direct trade totalled US$ 121.4 billion, up 39.5%, while trade through free zones reached US$ 74.1 billion, up 19.8%.

After six months of rising prices, pump prices fell in September, but tomorrow, 01 October, prices will move higher again, as global energy prices touch three-year highs. The country’s fuel price committee announced that Super 98 would be US$ 0.0136 higher to US$ 0.7084 per litre, Special 95, up US$ 0.0136 to US$ 0.6648 and diesel US$ 0.0354 to US$ 0.6839.

It is reported that Package A of the country’s Etihad Rail project has been completed two months ahead of schedule. This part extends 139 km and is connected through Al Ghuwaifat, on the border of Saudi Arabia, with Stage One, which extends 264 km from Habshan to Al Ruwais.  When completed, Stage Two will extend 605 km from Ghuweifat on the border with Saudi Arabia to Fujairah on the UAE’s east coast, to be followed by future route additions.  It will eventually connect vital areas in the seven emirates, via a track extending over 1.2k km to enhance the country’s social and economic development, as well as its global positioning in line with the UAE Centennial 2071.

Prior to June 2022, Shuaa Capital, via its 100% subsidiary, Northacre, estimates that it will have built and delivered US$ 2.8 billion worth of property projects in London. In October, it will unveil its first show apartment in The Broadway and will bring 116k sq ft of commercial space to the market and by the end of H1 2022, it hopes to complete its two key projects – No 1 Palace Street, (bought in 2013 for US$ 417 million), and The Broadway, (acquired for US$ 498 million in 2014). Walid El-Hindi, chief executive of real estate at Shuaa, commented that “we look forward to exploring further opportunities in line with our strategy and investing in the UK.” Northacre has been involved in ten luxury London projects, encompassing one million sq ft, as well as managing US$ 2.7 billion worth of property projects in the UK.

The DFM opened on Sunday 26 September, 72 points (0.3%) lower the previous three weeks, nudged 5 points higher to close the week on 2,845. Emaar Properties, US$ 0.02 higher the previous week, remained flat at US$ 1.11. Emirates NBD and Damac started the previous week on US$ 3.81 and US$ 0.34 and closed on US$ 3.87 and US$ 0.34. On Thursday, 30 September, in another low trading environment, 81 million shares changed hands, with a value of US$ 50 million, compared to 55 million shares, with a value of US$ 30 million, on 23 September.

For the month of September, the bourse had opened on 2,903 and, having closed the month on 2,845, was 83 points (2.0%) lower. Emaar traded from its 01 September 2021 opening figure of US$ 1.14 – down US$ 0.03 – to close September on US$ 1.11. Two other bellwether stocks, Emirates NBD and Damac, started the month on US$ 3.57 and US$ 0.35 and closed on 30 September on US$ 3.87 and US$ 0.34 respectively. YTD, the bourse had opened the year on 2,492 and gained 353 points (14.2%) to close the nine months on 2,845. NBD and Damac started the year on US$ 3.33 and US$ 0.35 and closed 30 September at US$ 3.87 and US$ 0.34.

By Thursday, 30 September, Brent, US$ 2.43 (3.2%) lower the previous week, gained US$ 4.98 (6.7%), to close on US$ 78.17. Gold, US$ 54 (2.3%) lower the previous fortnight, lost US$ 12 (3.0%) to close Thursday 30 September on US$ 1,740.  Brent started September on US$ 71.82 and gained US$ 6.35 (8.8%) during the month, to close on US$ 78.17. YTD, it started the year trading at US$ 51.80 and has gained US$ 26.37 (50.9%) to close on US$ 78.17 during the first nine months of the year. Meanwhile, the yellow metal opened September trading at US$ 1,815 and shed US$ 58 (3.2%), during the month, to close on US$ 1,757. Over the year it has lost US$ 138 (7.3%) from its opening year balance of US$ 1,895.

Further good news for the local economy is that oil prices climbed above US$ 80 a barrel on Tuesday, with Brent hitting its highest level at US$ 80.69 since October 2018. There is no doubt that the current prime driver is the energy crisis in Europe and in an environment of surging demand and tight supplies, there is every chance of a further 10% hike occurring by the end of October. The last two months have seen major hurricanes, Ida and Nicholas, hit the US east coast and, in damaging oil infrastructure, led to a major fall in production which in turn helped push prices higher. Furthermore, a dramatic 400% surge in natural gas prices has increased the demand in oil, seen to be a relatively cheaper alternative for power generation. It now seems to be highly likely that global demand will increase by a further 500k bpd by year end – another driver to push prices higher.

Ford has announced a US$ 11.4 billion plan to build zero-emission cars and pickups “at scale” for American customers, with its biggest ever factory in Tennessee, and two battery parks in Kentucky; the expansion will add 11k jobs to its payroll. In line with its peers, such as GM and Stellantis, the car maker plans to have 50% of its vehicles to be zero emission by 2030; currently, the US only accounts for just 2% of new EV sales globally in 2020. It will also introduce a new agreement with South Korean batter maker, SK Innovation.

Next has announced that it foresees staff problems in the run up to Christmas which can only be solved by a government relaxation in immigration rules for overseas workers. The UK retailer noted that some of its operations were “beginning to come under pressure”, including warehouse and logistics staffing, and that the lorry driver crisis was “foreseen, and widely predicted”. The UK company commented that the retail bounce-back from the coronavirus pandemic was “far stronger than we anticipated”, and that “sales in retail stores have done better than planned, while online sales have fallen back less than we expected. It appears that the wider economy has not suffered the long-term damage many feared, for the moment at least. And, in particular, employment has held up well.”

Aldi UK’s chief executive Giles Hurley is confident the supermarket chain can weather any storms in the supply chain and does not see any customer disruption during the festive season. As with its competitors, the UK’s fifth largest supermarket has had to increase payments for its delivery drivers and is ramping up their supplies to reduce any chance of running out during Christmas trading. Aldi posted a 10.0% growth in revenue to US$ 18.2 billion, with a 2.5% dip in pre-tax profits to US$ 357 million, and announced that it would invest US$ 1.75 billion in expansion plans that will see one hundred new stores and 2k extra jobs. There was no doubt that 2020 was a challenging year for Aldi, along with Lidl and other discounters. Aldi lost market share during the year, as huge numbers of shoppers moved to online grocery shopping but it has since quickly made up for the lost ground, especially since the easing and subsequent lifting of lockdown restrictions.

All supermarkets will be impacted by the double whammy of many shoppers tightening their purse strings this year, (and less disposable income), whilst inflation and rising costs will see many prices heading higher; Tesco is warning about food prices being 5.0% higher by year-end. To add to these problems is the fact that this year, actual stock items will be reduced, leading to limited choice of products for the shopper.

The problem that many UK businesses are facing, and that is impacting on supply chain problems, is a chronic shortage of lorry drivers., estimated by some to be in the region of 100k. The recent announcement that the government will hand out 5k temporary visas to fuel tanker drivers, (valid until Christmas Eve and with pay starting at US$ 40k) and 5.5k poultry workers. However, the problem, initially attributable to the pandemic, may be a lot bigger than it first appears and includes other factors including tax changes, Brexit, and an ageing workforce.

Not many football fans would have heard of Forest Green Rovers but today the club is top of the Sky Bet League Two (the fourth tier of English Football), four points ahead of their nearest rival. Furthermore, it is not only the world’s first carbon neutral football club, (and it plays on organic turf), it has also been acknowledged by FIFA as the greenest team in the world. In 2010, the 120-year old football club was in danger of folding when green energy entrepreneur, Dale Vince, became interested, although he had never seen the team play. Since then, he has driven the club’s transformation and brought his environmental principles to the field in the hope of creating a new kind of football club. He started making environmentally focused changes from the start of his tenure, with the club putting solar panels on their roof, banning single-use plastics, like cups and water bottles, and installing charging points for electric cars; they also have their own electric vehicles in the fleet. All the food sold in the ground is vegan, despite initial opposition and scepticism. Even the club shirts are made from sustainable fabric – three years ago, bamboo was used – this year, they are made from coffee grounds, a better alternative because it uses recycled materials. Over the past decade, the club has transitioned from near collapse to a commercially successful entity, with the chairman reiterating that “the more prestigious the club is, the greater their ‘green influence’ will be”. 

The UK furlough scheme closes today, 30 September, with uncertainty ahead for the onemillion who have not yet fully returned to work. According to a report by the Resolution Foundation, about half that number, at the end of July, had been able to work some of the time. The jury is out whether the US$ 92 billion was money well spent with the Chancellor, Rishi Sunak saying he was “immensely proud” of the scheme but now was the right time to close it. In the past eighteen months, since the onset of Covid, it has helped pay the wages of over 11.6 million workers; under the scheme, it paid 80% of their usual wage, but in August and September it paid 60%, with employers paying the balance. Some consider that there will be a small rise in unemployment as furlough ends and that there will be an increase in under-employment where employees return to work but possibly not on a full-time basis. Inevitably, there will be a big mismatch of skills and experience between those leaving the furlough scheme and the jobs on offer which will see job vacancies still around the one million level, at the same time unemployment remaining higher than it theoretically should be.

In Australia, there are reports that the local coffee industry is being hit by global price hikes that have risen YTD by 21.6% to US$ 2.63 per kg, with speciality beans from Brazil 40% higher. The “world price of coffee” comprise the average of monthly prices of arabica and robusta green, or raw, coffee beans, with such high prices last seen in 2014. The two main drivers behind the price rises are climate change and global supply chain issues. Drought and severe frost are estimated to have destroyed about 25% of Brazil’s, and some Central American countries’, coffee plants, with drought also affecting producers in North Africa. Brazil is the world’s largest coffee producer and accounts for about 50% of global supply and is Australia’s second biggest import source for coffee after Sweden.  In short, there will be less Brazilian coffee available to Australian drinkers and because of the law of supply/demand, prices will inevitably move higher. It seems that Australian coffee roasters are paying up to US$ 0.75 per kg extra and are being impacted by higher delivery prices. Some of these extra expenses need to be passed on to their clients, the coffee shops, already reeling from continuous lockdowns imposed by the various governments in the country over the past eighteen months.

China’s administration has continued to display its displeasure at cryptocurrency, by issuing a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins. The central bank, along with nine other government agencies, as well as banking, securities and foreign exchange regulators, will root out “illegal” cryptocurrency activity.  The reason for this stance, not to support cryptocurrency market development, is that it goes against its policies of tightening up control over capital flow and big tech.

The People’s Bank of China has banned overseas exchanges from providing services to mainland investors via the internet, cutting off the likes of Coinbase and Binance from the world’s second-largest economy; it also barred financial institutions, payment companies and internet firms from facilitating cryptocurrency trading nationally. Claiming  it was “imperative” to cut out crypto mining because it contributed little to China’s economic growth, consumed a huge amount of energy and hampered carbon neutrality goals, the National Development and Reform Commission confirmed it would work closely with other government agencies to make sure financial support and electricity supply will be cut off for mining use.  On the news, Bitcoin dipped 6% to US$ 42.2k, whilst smaller coins, such as Ether and XRP fell 10%.

Last week, China’s central bank injected US$ 71 billion of short-term cash into the banking system, as it sought to avoid contagion stemming from the China Evergrande Group spreading to domestic markets. The cost of borrowing overnight fell 0.60% on the week to 1.68%, the lowest level since late July. This move helped calm China’s financial markets after deepening concern, over Evergrande, sparked a global selloff on Monday and is in direct contrast to the central government’s apparent standoff approach to the fate of the embattled developer. Furthermore, seven banks assured investors that they had collateral cover on the risks emanating from Evergrande. Regulators continue to encourage the company to take all measures possible to avoid a near-term default on dollar bonds while focusing on completing unfinished properties and repaying individual investors.

The EU has another problem to face caused by surging use. energy prices as its leaders have been pushing their expansive climate plan – “Fit for 55” – to cut carbon emissions by 55% by 2030. Even without the current energy minefield, the EU plans would have resulted in higher prices and that even proponents of the greener economy strategy were warning of increased costs. Spain becomes the first member nation to call for the energy crisis to be discussed at the next leaders’ summit and with its past history of last-minute compromise and policy changes, it is inevitable there will be a dilution of “Fit for 55” to accommodate financial requirements. As the current crisis intensifies, the greater the backlash may be over the EU’s climate plans, having highlighted the difficulty for Europeans in funding the move to renewable energy. For many, it Looks Like A Cold, Cold Winter!