It’s All Over Now! 28 October 2021

For the past week, ending 28 October, Dubai Land Department recorded a total of 1,254 real estate and properties transactions, with a gross value of US$ 1.34 billion. It confirmed that 1,080 villas/apartments were sold for US$ 590 million, and 174 plots for US$ 251 million over the week. The top three transfers for apartments and villas were all apartments – one sold for US$ 19 million in Nad Hessa, followed by two transactions in Burj Khalifa worth US$ 14 million and US$ 12 million. The top three land transactions were for a plot of land in Business Bay, worth US$ 19 million, followed by two for US$ 13 million each in Mohammad Bin Rashid Gardens. The most popular location in terms of volume and value was Business Bay, with 155 transactions totalling US$ 46 million. Mortgaged properties for the week totalled US$ 447 million and 79 properties were granted between first-degree relatives worth US$ 49 million.

As with other recent realty reports, Zoom Properties considers that Dubai rental market is likely to sustain an upward price trend over the near-term future, as Expo 2020 has generated property demand. It estimates that the emirate’s rental market has seen a 14% Q3 rise in affordable housing, and up to 30% in the luxury housing sector. Zoom also predicts growth both in terms of rental prices and demand in areas close to the Expo site. This comes after property market reports of increased activity for apartments located in the affordable sector, including JVC, Al Nahda, Bur Dubai, Dubai Silicon Oasis and Deira; and in Dubai Marina, Downtown Dubai, JBR, Palm Jumeirah and City Walk leading the field in the luxury apartment sector. Jumeirah, Al Barsha, Umm Suqeim, Arabian Ranches and Dubai Hills Estate continued to be the more popular locations for luxury villas and Mirdif, Damac Hills 2, JVC, Reem and Dubai South for affordable rental villas. Zoom also noted that the increase in demand and property prices was down to several factors such as Expo, the demand shift towards large homes, return of foreign investors to Dubai, and expatriate-friendly policies.

At a meeting with Hatta entrepreneurs earlier in the week, HH Sheikh Hamdan bin Mohammed, issued directives to establish the ‘Hatta Traders Council’ to support the implementation of the Hatta Master Development Plan, which forms an integral part of the Dubai 2040 Urban Master Plan. He commented that “the Hatta Master Development Plan seeks to enhance the sustainable development of the area and transform Hatta into an attractive local and international destination for business, investment and tourism. It also aims to generate investment opportunities for its people and encourage youth to set up new businesses in various fields,” which will help accelerate economic growth and support local tourism in the area.

Coinciding with Expo 2020 and the UAE’s Golden Jubilee celebrations, Dubai Shopping Festival will return for its 27th 46-day edition from 15 December 2021 to 29 January 2022. The organisers, Dubai Festivals and Retail Establishment, said that the event will feature the usual mega raffles, fun fairs, community markets, promotions and offers across a range of homegrown and global brands, backed by concerts, drone shows, fireworks displays and global brand collaborations. It is thought to be the longest running and most successful shopping festival of its kind.

In this year’s Kearney’s Global Cities Index, Dubai has climbed four places to 23rd out of 156 urban centres, when it comes to global engagement levels. It measures the global engagement levels of cities across five dimensions – business activity, human capital, information exchange, cultural experience, (where it is ranked fourth in the world), and political engagement. It holds the top spot in the region in a survey which is led by New York, London, Paris, Tokyo, LA, Beijing and Hong Kong. Regionally, Abu Dhabi Qatar, (which jumped fifteen places this year), and Cairo are ranked behind Dubai.

Another indicator that some form of normalcy is returning to the economy – and the aviation sector in particular – was the declaration that Emirates Airline is planning to recruit 6k staff over the next six months amid  ongoing plans to ramp up operations across its global network. The airline has already restored 90%of its network and is on track to reaching 70% of its pre-pandemic capacity by the end of the year. Its chairman, HH Sheikh Ahmed bin Saeed Al Maktoum commented that “our requirement for 6k additional operational staff signifies the quick recovery Dubai’s economy is witnessing and will lead to opportunities and other positive developments across various other businesses, including those in the consumer, travel and tourism sectors.”

October is traditionally the opening of Dubai’s seven-month cruise season which will see 126 liners and over 500k visitors stopping in the emirate. Prior to the onset of the pandemic, which led to all trips being cancelled from March 2020, Dubai welcomed over 800k people to its shores during the 2018-2019 season; it will take another year before Dubai returns to such traffic levels. There are two terminals at Mina Rashid which have the capacity to serve seven mega-cruise ships simultaneously, whilst the new 120k sq mt Hamdan bin Mohammed Cruise Terminal, located close to the newly opened Ain Dubai observation wheel, and equipped to handle 3k passengers every hour, will soon start receiving visitors, after its 2020 proposed launch was delayed by the pandemic.

Driven by a marked spending recovery in the UK, Dubai-based Network International Holdings posted a 19% hike in Q3 revenue on the year. The firm is targeting “to deliver our medium-term target of 20% plus revenue growth”, driven by “our enhanced sales strategies, faster merchant onboarding and new capability launches; as well as improving underlying market dynamics.” The company also noted that consumer spending is improving, driven by the ongoing return of tourism and growing domestic consumer confidence. NI expects to launch in Saudi Arabia early next year.

For the nine months to 30 September, DP World Limited posted an 11.9%, year on year, hike on a like for like basis in volume, handling 58.4 million TEU (twenty-foot equivalent units), with Q3 seeing an 8.1% increase to 19.8 million TEUs. The main positive drivers were Asia Pacific, India, MEA and Australia with Qingdao (China), Mumbai and Sokhna (Egypt) showing marked improvement in Q3. Jebel Ali (UAE) handled 3.4 million TEU during this period, up 0.6% year-on-year. Ahmed Bin Sulayem, Group Chairman and Chief Executive Officer, commented, “the near-term outlook remains positive, but we do expect growth rates to moderate in the final quarter. Overall, we are pleased with the year-to-date performance and remain focused on growing profitability, while managing growth capex”.

The Islamic Development Bank celebrated the listing of a US$ 1.7 billion Sukuk on Nasdaq Dubai, making IsDB’s position as the largest supranational Sukuk issuer on the local bourse, with a total value of US$ 18.8 billion, via thirteen issuances listed on the exchange over the past five years; earlier in the year, it had listed its second Sustainability Sukuk issuance of US$ 2.5 billion. With a total value of US$ 80.1 billion, Nasdaq Dubai is one of the world’s largest Sukuk listing venues and with its latest IPO, it has also increased the total value of its fixed income listings to U$$ 108.8 billion.

Dubai Islamic Bank posted a 20% hike in Q3 net profit to US$ 329 million, driven by a strong local economic recovery, with a 325% surge in income from its investment property portfolio and an 83% increase in income from property held for development and sale. The country’s biggest Sharia-compliant lender also noted that, although impairment charges rose by 27% to US$ 184 million, its operating expenses were 5.4% down at US$ 171 million. Over the nine-month period to 30 September, its net profit dipped 2.0% to US$ 831 million, as impairment charges declined 18.0% to US$ 572 million. Customer deposits rose 4% to US$ 58.3 billion.

Union Properties’ shares tanked 9.67%, to US$ 0.0654, on Sunday after it was reported that the Securities and Commodities Authority was investigating claims of financial irregularities by executives; it closed the week on US$ 0.0717. The corporate watchdog filed a complaint against the developer’s chairman Khalifa Al Hammadi and six of the developer’s executives, with accusations of selling one of the company’s property assets at a price below its real value and attempting to conceal the name of the beneficiary, via forged documents. They have also been accused of abuse of authority, fraud and damage to the interests of the company and its shareholders as a result of investments entered into outside and inside the UAE, without proper studies being done, leading to financial losses for the company. The country’s UAE Attorney General Hamad Al Shamsi said prosecutors had begun to carry out investigations under his direct supervision and he had ordered the seizure of the property of some of the accused and barred them from leaving the country. It was also reported that he had issued orders “to deal firmly with anyone whoever attempts to defraud or tamper with the national economy”.

As expected, Damac’s board has finally approved that its minority shareholders accept its founder’s offer to buy them out and take the company private. The Dubai-based developer will be bought out by Maple, the BVI investment arm of Hussain Sajwani, and will pay US$ 0.381 for each Damac share. Initially, the 72% shareholder of the company, had offered US$ 0.354 per share that would have cost US$ 595 million. Damac, which has a market capitalisation of more than US$ 2 billion, reported booked sales of US$ 708 million for the first six months of the year and had delivered 2.7k units in Dubai over the period.

With a total revenue of US$ 50 million in the first nine months of the year, (US$ 74 million in 2020), Dubai Financial Market Company posted a net profit of US$ 10 million, compared to US$ 33 million in the same period last year. Its revenue stream was split between operating income, at US$ 32 million, and US$ 18 million from investment returns and other income. DFM’s expenses decreased 4.0% to US$ 39 million. The bourse’s market cap rose by 15% to US$ 106.9 billion, with the General Index up 14.2%, despite a 23.7% decline in trading value, to US$ 10.5 billion, year on year. Moreover, foreign investors maintained their strong presence, with a 47.5% market share of trading value.

The DFM opened on Sunday, 24 October, 85 points (3.1%) higher the previous fortnight, gained a further 4 points (0.1%) to close the week at 2,861. Emaar Properties, US$ 0.02 higher the previous week, closed flat at US$ 1.09. Emirates NBD and Damac started the previous week on US$ 3.76 and US$ 0.34 and closed on US$ 3.80 and US$ 0.34. On Thursday, 28 October, 135 million shares changed hands, with a value of US$ 49 million, compared to 458 million shares, with a value of US$ 468 million, on 20 October.

By Thursday, 28 October, Brent, US$ 0.49 (0.6%) lower the previous week, gained US$ 0.19 (0.2%), to close on US$ 84.19. Gold, US$ 9 (0.5%) lower the previous week, gained US$ 912 (0.7%) to close Thursday 28 October on US$ 1,799.  

Once again, UK unleaded petrol prices, at US$ 1.97 a litre, have reached their highest level since April 2012, (partly due to a doubling of global oil prices over the past twelve months), and retail unleaded fuel US$ 0.39 higher over the same period; another 10% price hike to over US$ 90 a barrel, before the end of the year, may be on the cards. It is estimated that, since April, retailers have increased their profit margins by US$ 0.025 to over US$ 0.10 per litre. Duty on fuel currently stands at US$ 0.798 a litre, with the cost of the combined bio and petrol components at US$ 0.701. On top of that, VAT comes in at US$ 0.326, and supply/delivery at US$ 0.024, leaving a US$ 0.118 profit margin for the retailer. (Unleaded 95 fuel in the UAE retails at US$ 0.675 per barrel).

Just as news that Hertz had ordered 100k Tesla vehicles, and that its model 3 became the first electric vehicle to top monthly sales of new cars in Europe, its share value jumped 4.5% on Monday to US$ 950.53;, by the end of the week,  the world’s most valuable carmaker joined an elite club that includes Apple, Amazon.com, Microsoft Corp and Alphabet, that are valued in excess of US$ 1 trillion, with its share value at US$ 1,087.27, by the end of Thursday trading – 3.8% higher on the day. Tesla vehicles will start being available at Hertz rental facilities, which already have about 450k vehicles in its portfolio, next month – this would see Tesla making up about 20% of the company’s fleet. This purchase comes a year after Hertz had filed for bankruptcy protection, as travel demand sank during the height of the pandemic and talks with creditors failed to provide relief; it was later rescued by a group of investors.

This week, Tesla increased the prices of its four main models, with US$ 5k increases in models X and S to US$ 105k and US$ 95k and US$ 2k rises in its Y and 3 types to US$ 57k and US$ 44k. This comes after the electric car maker posted an impressive 56.9% Q3 hike in revenue to US$ 13.76 billion generating net profit of US$ 1.6 billion; over the period, it sold 241.4k vehicles, despite ongoing supply chain issues, “rolling blackouts” and a global microchip shortage. Most of Tesla’s revenue derives from sales of its lower priced models 3 and Y cars, which rose 87% to 232.1k. Tesla expects to see a 50% hike in sales next year, as it expands its “manufacturing capacity as quickly as possible”.

The damaging impact on the car manufacture sector, due to the shortage of semiconductors, can be seen from Renault’s announcement that it would be slashing output by 500k units this year – more than double its 220k forecast of last month; however, it maintained its profit outlook, helped by higher car prices and cost cuts. The carmaker estimates that the knock-on effect will continue well into 2022, although the chip shortage should show some improvement towards the end of this year, as Malaysia, a major global chip supplier, eases its Covid restrictions. Like its peers in the industry, Renault will also be facing inflationary price increases for many of its parts and has tried to boost its falling margins by focussing on its more profitable models. Renault said Q3 revenue had fallen by 13.4%, to US$ 10.4 billion, with higher car prices helping offset some of the 22.3% drop in global sales. In Q3, fully electric, plug-in hybrid and hybrid models made up more than 31% of sales. Renault confirmed a fifteen-year high order book, equating to 2.8 months’ worth of sales, and that its inventory level had fallen, over the twelve months, by 130k to 340k at the end of September.

Microsoft posted impressive figures for its fiscal Q1, ending 30 September, with revenue surging 22.0% to US$ 45.3 billion, beating market expectations, as net profit was 48.0% higher at US$ 20.5 billion, driven by strong growth in its cloud business, up 31% to US$ 17 billion. This was the seventeenth straight quarter of double-digit growth for the tech giant. Its share value rose 1.5% on the news and has seen a 45% expansion over the past twelve months. Microsoft 365 Consumer subscribers increased to 54.1 million, whilst it also returned US$ 10.9 billion to shareholders, in the form of share repurchases and dividends over the three-month period.

Despite recent negative media reports over leaked internal documents, Facebook has posted better-than-expected Q3 profits of US$ 9.0 billion – 15.4% higher, year on year. Over the year, its monthly user-base grew 6% to 2.91 billion, whilst its revenue stream was marginally down on analysts’ expectations. On the news, its share value rose 1.3% which pushed its YTD increase to over 20%. The tech giant plans to invest US$ 10 billion on its metaverse division this year – known as Facebook Reality Labs – with the aim of creating augmented and virtual reality hardware, software and content. Late in the week, Facebook rebranded itself, and will be known as Meta forthwith, indicating that it would better “encompass” what it does, as it broadens its reach beyond social media into areas like virtual reality.

It was not the best quarter for Amazon, as it posted a Q3 net income sinking from its 2020 figure of US$ 8.69 billion to US$ 3.2 billion, although net sales were 15% higher at US$ 110.8 billion. This week, the tech giant has confirmed that it will invest several billion dollars in additional costs to manage labour shortages and supply chain issues in the run up to Christmas and would do “whatever it takes to minimise the impact” on customers and sellers.

HSBC posted a 76% jump in Q3 pre-tax profits to US$ 5.4 billion, driven by releasing US$ 700 million in impairment provisions, compared to providing an additional US$ 800 million a year earlier to cover possible Covid-related losses. HSBC UK reported a 50% hike in profit before tax of US$ 1.5 billion, with its Asian sector contributing US$ 3.3 billion. Revenue nudged 1% higher to US$ 12 billion, as fee income grew across the bank’s businesses and net interest income remaining stable, but expected to rise in the future as lending picks up and interest rates finally head north again. The bank expects to soon start its share buyback of US$ 2 billion.

In a move to counter China’s increasing presence and influence in the region, the Australian government, who will contribute US$ 1.43 billion, with Telstra has finalised a US$ 1.58 billion deal to buy and operate Digicel Pacific. China Mobile, the country’s largest telecommunications company, had shown interest in buying the Pacific arm of the telecommunications giant, which has operations in Papua New Guinea, Fiji, Samoa, Vanuatu and Tahiti. Overall, Telstra will provide US$ 270 million and own 100% of the ordinary share capital. According to the Department of Foreign Affairs and Trade, this deal is “consistent with Australia’s longstanding commitment to growing quality investment in regional infrastructure.” 

Q3 saw the US economy slow sharply at 2.0%, compared to the 6.7% figure recorded in Q2, driven by the fast-spreading Delta variant impacting on consumer spending, as well as supply chain issues, rising inflation and new Covid restrictions in some places. On a non-annualised basis, the growth figure was 0.5%. Worrying economic indicators see the sales of big-ticket manufactured goods dropping 26%, and a marked decline in the sales of new cars, as prices shoot up amid a shortage of semiconductors; growth in the US services sector decelerated to 7.9%, as consumers spent less on eating out and staying in hotels. Earlier figures had seen only 194k jobs added to the country’s September payroll, (with market expectations of around 500k), and the inflation rate hitting 5.4%. The Fed Reserve is still of the opinion that current high prices are transitory and will not raise rates in the short-term, (but circumstances may dictate otherwise), but will probably begin paring back its pandemic-era stimulus for the economy by year end.

First it was the BoE governor saying the bank” will have to act” on inflation, now it is Huw Pill, the Bank of England’s new chief economist commenting that UK inflation is likely to hit or surpass 5% by early next year; the current historic low rate of 0.1% was set in March 2020, at the onset of Covid, and was measured at 3.1% on the year to September. At last, the central bank has realised that inflation is more than transitory, and that short-term action should be taken because of rising energy costs, higher wages to fill record job vacancies and supply chain disruption which will still be present into 2022. The BoE has been holding off any rate hikes in the hope that inflation rate should drop to its long-maintained 2.0% target – this is not going to happen by it doing nothing.

Retail sales dipped 0.2% last month – and 0.6% a month in August – and fell for the fifth month in a row, with consumer spend less in shops, despite the recent easing of restrictions.  Although fuel sales were 2.9% higher, non-food sales posted another monthly decline as shoppers bought fewer household goods and furniture, with sales almost 10% lower. Retailers are also being badly hit by labour shortages across supply chains, warehouses, and factories, along with inflation-linked higher prices in fuel and products. However, there were increases noted in the month by the proportion of online shopping, up 0.2% to 28.1%, and department stores 4.3% higher. The trend is expected to continue as shortages will not go away and Covid cases are moving higher so that retail sales growth will continue to be dull. The trend is obvious when it comes to Covid, people are wrong to think that It’s All Over Now!

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1 Response to It’s All Over Now! 28 October 2021

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