Glory Days!

Glory Days!                                                                                         16 December 2021

Latest data from the Dubai Land Department confirms that property sales transactions surged 88.4% annually in the first eleven months of the year, as the UAE’s economy has seen a strong post-pandemic recovery. The 55.6k transactions, valued at US$ 36.9 billion, have made this the best year since 2014, with the main drivers supporting the recovery including Expo 2020 Dubai, new measures by the government, including the expansion of the golden visa scheme and visas for retirees, and the roll out of mass inoculations. On a month-on-month base, Mo’asher, Dubai’s official monthly house price index rose 2.12%, and the general consensus is that prices will continue higher into the new year, albeit at a slower pace.Qantas Toyota

According to Valustrat, the UAE property market prices will continue their upward trend into next year, attributable to many factors, including supportive economic reforms and an accelerated vaccination programme. Furthermore, there will be an expected surge of international investors, looking to buy in the emirate, whilst developers will still be offering attractive packages, and mortgage rates, will continue at record lows, even though they may nudge marginally higher off their record lows in 2022. However, it did note that the price increase “is sustainable but it will only be toned down by the fact we have a lot of supply coming in, particularly in the apartment submarket”, citing that developers are expected to deliver up to 60k units in 2022. A Knight Frank study last month reported that Dubai residential property prices were 21.0% higher at US$ 336 per sq ft in the first ten months of the year.

Although Dubai’s November IHS market PMI remained flat, month on month, at 54.5, its non-oil economy continued its upward trend, with the joint-strongest improvement in operating conditions since October 2019. The positive data was attributable to a pick-up in new business, (on the back of higher tourism numbers and easing of restrictions), and a rebound in international travel, linked to Expo 2020 Dubai; by 05 December, more than 5.6 million visitors had visited the Expo site, (28% of the total emanating from overseas). All three monitored sectors – travel/tourism, wholesale and retail – showed improvements, whilst output expanded, as companies reduced their charges to attract more customers. Driven by higher demand, businesses also increased their input purchases.

For the first ten months of the year, Dubai welcomed 4.88 million visitors, including over one million in October; during that period, the hospitality sector sold 9.4 million room nights, compared to seven million room nights in the same period in 2019, also driven by a robust domestic tourism market and the knock-on effects of Expo 2020 Dubai. The latest tourism figures were released at the second bi-annual City Briefing of 2021, held by the Department of Economy and Tourism, attended by over 1.1k representatives from the sector, to provide stakeholders with key updates on the tourism sector’s growth and insights into current and future strategies and global marketing campaigns. In an October YTD study, occupancy was at almost 64%, while the length of stay showed a 12.2% increase from 4.1 nights to 4.6 nights. During this period, there were 24.74 million occupied rooms nights across the emirate at an average daily rate of US$ 105, with room inventory 6% higher than in 2019.

Today, Emirates received their 153th and the final and the 251st Airbus A380 ever to be built. Although several other carriers have already stopped using the Jumbo, which started commercial flights in 2007, the Dubai airline looks set to continue using it for many years to come. It is still the world’s largest passenger jet, with a standard configuration for 545 passengers; it has an 80 mt wingspan and a maximum take-off weight of 560 tonnes.

Based on financials, reputation, company’s age, value of projects completed and projects under construction, Forbes Middle East has unveiled its “Top 50 Real Estate Developers In MENA 2021” list. To nobody’s surprise, Emaar Properties, with total assets valued at US$ 34 billion, led the field, followed by Abu Dhabi-based Aldar Properties, with US$ 11.3 billion total assets as of September 2021. Seventeen of the fifty developers (and four in the top five) were based in the UAE, with Saudi Arabia, Egypt, Kuwait and Qatar – with numbers of eleven, seven, six and three making the top five.

The UAE nudged one place higher to 23rd in the IMD World Competitiveness Centre’s World Talent Report 2021; it maintained its top position in the Arab world and second in the Mena, behind Israel’s 22nd position. The survey focuses on three factors – investment and development, appeal and readiness. The country was ranked first in readiness of skilled labour, competent senior managers and student mobility inbound and appeal for zero personal income tax sub-indexes.

The latest Kearney’s Global Retail Development Index of thirty-five emerging markets has listed the UAE’s retail sector fourteenth. It bases its findings on a set of twenty-six factors and four key variables to determine markets that are growing, attractive, and relatively risk free. It noted that this was due to many factors, including its resilience during the pandemic, a raft of progressive government reforms and rapid digitalisation. With cash payments rapidly becoming a thing of the past, retailers have embraced technology adopting digital payment technologies such as mobile wallets and mobile payment apps. The consultancy also observed that the retail sector had benefitted from the general ease of doing business in the country, as well strong government support for start-ups and SMEs, which in turn encourage FDI. Another factor driving the sector forward is that the UAE is the regional leader when it comes to on-line spending at US$ 2.6k, compared to the global average of US$ 1.2k and the Mena average of US$ 629.

The Dubai Supreme Council of Energy confirms that the emirate has reduced its carbon emissions by 33% last year, more than double the 16% target of the Dubai Carbon Abatement Strategy 2021. These latest figures indicate that Dubai is well on its own way to becoming a carbon-neutral economy by 2050. This is part of the strategy of HH Sheikh Mohammed bin Rashid Al Maktoum to make Dubai a global hub for the green economy and sustainable development. Under the auspices of DSCE, there are other entities all working together to achieve the Ruler’s 2050 target. They include the Dubai Clean Energy Strategy 2050, the Dubai Net Zero Emissions Strategy 2050, (to provide 100% of energy from clean energy sources by 2050), and the Dubai Demand Side Management Strategy, which aims to reduce electricity and water demand by 30% by 2030.

Latest National Emergency Crisis and Disaster Management Authority guidelines confirm that a Hosn Green Pass and a negative PCR test, with 96-hour validity, will be mandatory for all those attending events this holiday season; it also has introduced an 80% capacity limit for all Christmas and New Year parties in the country, as well as 1.5 mt physical distancing guidelines being in place, except for members of one family  who are allowed to be be seated without adhering to social distancing protocols. 

DP World is again in the news, this time signing an agreement with the Government of the Democratic Republic of the Congo for the development of the country’s first deep-sea port at Banana. Earlier in the year, there was a signing of a term sheet, summarising the agreed amendments to the initial contract signed in 2018. The world’s leading provider of smart logistics plans to begin the port’s construction within twelve months, initially developing a 600 mt quay, with an 18 mt draft, capable of handling the largest vessels in operation. It will have a container handling capacity of about 450k TEUs (20-foot equivalent units) per year, and a 30-hectare yard to store containers.  Its development will be a boon for the local economy, attracting direct calls from larger vessels from Asia and Europe.

At the Central Bank’s fifth board meeting of the year, it was decided that local banks will be closely monitored in relation to internal policies regarding loans and management of real estate risk exposure. The aim of the exercise is to “improve identification, benchmarking and oversight of real estate exposure.” The meeting also discussed a proposal for conducting a study on a job nationalisation programme and Emiratisation of leading professions by qualified UAE citizens in the banking and insurance sectors. It also approved the Retail Payment System, the Large-Value Payment Systems (LVPS) and Card Schemes Regulation and approved amendments to the licensing and monitoring of exchange business. The meeting approved updates and amendments to the Targeted Economic Support Scheme (TESS) to contain the repercussion of COVID-19 and decided to extend capital buffer and stable funding relief for a further six months to 30 June 2022.

An unnamed bank has been fined over US$ 5 million by the Central Bank of the UAE for failing to comply with the anti-money laundering and combatting the financing of terrorism and illegal organisations (AML/CFT) regulations; the watchdog also took administrative measures against the bank for not adhering to the country’s banking norms. This follows on from the Central Bank tightening up regulations and imposing financial sanctions on six exchange houses operating and also fined them for violating AML and CFT laws.

Pursuant to Article 14 of the Federal Decree Law No. (20) of 2018 on Anti Money Laundering and Combatting the Financing of Terrorism and Financing of Illegal Organisations, the Central Bank imposed financial sanctions totalling almost US$ 100k on six Hawala providers operating in the country. The six companies were each fined almost US$ 14k each for failing to provide timely registrations on the GoAML reporting system.

Emirates Central Cooling Systems Corporation, the world’s largest District Cooling Services provider, becomes the fourth government and state-owned company that will be listed on the DFM. This is part of the strategy of Dubai’s Securities and Exchange Higher Committee to increase the size of the Dubai stock market in the emirate to US$ 817 billion. The company, established in 2003, is an enabler to the realtor sector and currently has a 79% market share in Dubai’s District Cooling market. Serving 140k corporate and individual consumers, it has 84 plant rooms and a network extending over 350 kilometres, with a cooling capacity of more than 1.64 million refrigeration tons.

The DFM opened on Sunday, 12 December, 287 points (8.5%) lower the previous fortnight, gained 153 points (5.9%) to close the week, on Thursday 09 December at 3,226. Emaar Properties, US$ 0.11 lower the previous fortnight, closed, up US$ 0.05, at US$ 1.33. Emirates NBD and Damac started the previous week on US$ 3.60 and US$ 0.38 and closed on US$ 3.79 and US$ 0.38. On Thursday, 16 December, 208 million shares changed hands, with a value of US$ 130 million, compared to 297 million shares, with a value of US$ 115 million, on 09 December.

By Thursday, 16 December, Brent, US$ 4.49 (1.8%) higher the previous week, shed US$ 0.94 (1.2%), to close on US$ 74.35. Gold, US$ 97 (5.2%) lower the previous fortnight gained US$ 18 (1.0%), to close Thursday 16 December on US$ 1,803. 

Over the next eight years, Toyota is planning to invest US$ 70 billion to electrify its automobiles by 2030, half of it to develop a battery electric vehicle (BEV) line-up. The carmaker estimates that BEV cars will only account for about a third of production, (equating to 3.5 million vehicles), come 2030. This is a lot lower than most other competitors such as VW which has predicted that 50% of its global vehicle sales will be battery-powered cars by that date. However, Toyota is still looking at a multi-pronged, carbon-reduction strategy that also includes hybrid cars and hydrogen-powered vehicles. Last month, the Japanese company did not sign a pledge, signed by six major carmakers, to phase out fossil fuel cars by 2040, arguing that some countries would not be ready to transition to green cars by that date.

In a major blow to Boeing, Qantas has announced that it will switch its domestic fleet of planes to Airbus from Boeing and had agreed to buy forty Airbus jets, with the option to purchase a further ninety-four aircraft. Deliveries of the new planes, which will lower carbon emissions, are due to start in mid-2023 and continue over the next decade to replace the airline’s ageing fleet of Boeing jets. This is yet another hit for Boeing, after yesterday’s announcement that Singapore Airlines had signed a provisional deal to buy seven A350 freighters. However, Boeing can glean some comfort from the demise of the Airbus A380 which has struggled since its 2007 launch to gain traction in the big jet market. Over the past fifteen years, Boeing was working on its long-range versions of its economical twin-engine 777 – and developing the 787 Dreamliner. In the end, it has become the most technically advanced commercial jet in history of aircraft and was much more efficient than previous models, using less fuel and cheaper to run.

The Australian carrier indicated that it would make a fiscal H1 (to 31 December) loss of US$ 790 million, having been savaged more than most airlines by months of coronavirus lockdowns”. Noting that this period had been the worst half year of the entire pandemic, Qantas had been operating at only 30% capacity, with most Australian states in lockdown. The airline has significantly reduced costs and added to its miscellaneous income figure by selling land near Sydney Airport for US$ 411 million.

Companies pay a lot of money to have their products appearing in films or on popular TV shows. One such company is Peloton Interactive, Inc, an American exercise equipment and media company, with one of its main products being internet-connected stationary bicycles and treadmills. It appears that the company had approved an appearance on a ‘Sex and the City’ reboot by a Peloton instructor Jess King, who plays Allegra, the trainer for Mr Big, one of the show’s favourite characters., The company was unaware of the plot before the show aired, with the main theme being Mr Big having a heart attack and dying (on screen) after working out on a Peloton exercise bike. The share price in Peloton nose-dived after the show was aired in the US. There is every possibility that because Peloton was unaware of the script beforehand, and because its stock prices took a substantial dive, there could be grounds for legal action against HBO.

The football world has been slow to enter the virtual world, with only twenty-four different clubs, in the five major European leagues, having launched or are considering fan tokens. A BBC study estimates that more than US$ 350 million has been spent on the virtual currencies and buying controversial crypto “fan tokens”. The eight EPL clubs mainly offer tokens similar to a club-specific crypto-currency – virtual coins can be bought and sold and their values rise and fall, depending on supply and demand. Some clubs, including Manchester City among others, also sell digital collectibles known as NFTs (non-fungible tokens). It seems that tech company Socios is involved with some of the clubs and is responsible for organising the initial sale, and subsequent trading, of the virtual coins. Buyers must first convert their money into the company’s own crypto-currency, Chiliz. and those hoping to cash in on the “cryptoboom” may be disappointed, as the value of many fan tokens has decreased since they were initially sold by the clubs. It is interesting to note although Manchester City and Lazio generated the most sales, they are the two that have fallen most in value – by 50% and 70% respectively, whilst the tokens of Inter Milan and Turkish outfit Trabzonspor have increased in value more than Bitcoin over the past twelve months. This market is not only volatile and unregulated, but also distorted as clubs hold on to most tokens, on average controlling 80% of the supply; the value of tokens held by the top thirteen clubs together exceeds US$ 1.36 billion – but individual buyers currently hold only US$ 270 million worth.

With coffee prices touching ten-year highs, some Brazilian coffee experts are looking at annual production levels of around 66 million bags which would see a three million bag surplus in global inventory levels; if this were the case, then prices may dip below the US$ 2 mark. There are others who are less optimistic and estimating arabica production in the region of 36 million bags and the total crop, (including the Robusta variety) to come in at 55 million bags. Brazil has had a bad year after a drought and later frosts ruined as much as 20% of the country’s coffee trees. Fortunately, following the bad weather, rains followed which produced flowering which indicates future cherries for picking; although the flowering was widespread, the conversion to fruit was below normal. Nobody really knows how many trees have been damaged and it will be the end of January before a realistic crop figure is known.

Claiming that Steve Easterbrook had hid and lied about sexual relationships with three staff members, McDonald’s has settled a lawsuit with its former CEO, who has returned equity awards and cash worth over US$ 105 million, which he had received in a severance package in 2019. (That is a lot of burgers). He had been terminated that year failing to uphold the firm’s values and fulfil his responsibilities, having admitted to having had a consensual relationship with one employee. At the time, McDonald’s said Mr Easterbrook had “violated company policy” and shown “poor judgement”. Investigators also found messages showing that he approved a grant of company shares worth hundreds of thousands of dollars to one of the employees “shortly after their first sexual encounter”.

In a belated bid to curb the power of big tech companies, such as Google and Facebook, the EU is taking steps to prevent them from abusing their market power by ensuring a higher degree of competition in the sector. One way to do this is to allow new players to enter the market more easily but MEPs also want to end anti-competitive practices within the sector. There is the feeling that the current law has been somewhat of a failure because it was “always running behind companies like Apple, Google or Facebook”, but the new law will change the burden of proof; it will stop companies from prohibiting or favouring a particular service, while also preventing interoperability between different rival platforms. Penalties of up to 10% of turnover could be levied for defaults or, in the case of systematic rule violations, could be enforced divesting part of the company’s assets. The providers argue that the new regulations would curb innovation.

On Tuesday, the Turkish lira slumped by nearly 7% to a new record low of just under 15 lira to the greenback amid fears that there will be further imminent rate cuts by the central bank. President Recep Tayyip Erdogan has pushed the central bank to keep cutting rates, despite surging inflation, and today’s 1.0% cut to 14% is the fourth 1.0% reduction since September. Although many economists disagree with his policy, the president continues to argue that lower interest rates will boost Turkish exports, investment and jobs. However, Turkey is now paying the price for this apparent misguided approach as the country’s November inflation rate topped 21.7%.

One of the few ‘benefits’ of the 20%+ inflation figures, and the record low lira rates, is the 59% November hike, to 178.8k, in Turkish house sales to foreigners to a record level, bringing in US$ 8.5 billion in foreign exchange, as a lira slump – down at under 15 lira to the greenback, made purchases significantly cheaper for those buying with hard currency. Many Turks see housing as a means of defence against inflation. 7.4k homes were sold to foreigners last month – the highest monthly level since the data series began in 2013; the highest number of foreign buyers were Iranian citizens, followed by Iraqis and Russians.

Official Japanese statistics have been called into doubt, with news that the government overstated construction orders data received from builders for years. The admission by Prime Minister Fumio Kishida, which will undoubtedly dent the credibility of official data widely used by investors and economists, came after the Japanese leader commented after it had been reported that the Ministry of Land, Infrastructure, Transport and Tourism had been “rewriting” data received from about 12k select companies since 2013 at a pace of about 10k entries per year. Kishida said “improvements” had been made to the figures since January 2020 and that there was no direct impact on GDP data for the fiscal years 2020 and 2021.

Lawmakers in Zhejiang are facing a new Covid 19 outbreak which has seen over twenty listed companies suspending operations in one of China’s biggest manufacturing hubs, halting production of goods from batteries to textile dyes and plastics. The Chinese province accounts for around US$ 1.02 trillion, (6%) of China’s GDP and is a manufacturing hub for exports. Tens of thousands of Zhejiang residents are in quarantine, with the outbreak in three cities – Ningbo, Shaoxing and Hangzhou – developing at a “relatively rapid” speed.

Data from the Australian Tax Office reports that 782 companies paid zero tax in the fiscal year ending 30 June 2020, with the agency noting evidence of profit shifting and continuing to battle large companies over unpaid taxes; the proportion of all entities with nil tax payable decreased from 36% in 2013-14 to 33%. For that tax year, the ATO issued US$ 2.25 billion in tax bills against large companies, of which US$1.79 billion is under dispute. It noted a significant increase in Australian public companies that paid nil tax, with service industries, transport and financial asset investing sectors badly impacted by pandemic lockdowns. There was increased concern about some companies who were seen to be mis-pricing loans and shifting income into low-tax jurisdictions such as Singapore, with funds being shifted offshore and not subject to Australian tax.

The ATO examined 2.4k tax-paying companies of which 1.4k were foreign-owned with an income of over US$ 72 million, 513 were Australian public entities with an income of US$ 72 million or more, and 479 Australian-owned resident private companies with an income of US$ 144 million or more. It found that 1.6k paid tax, 0.4k incurred an accounting loss, 0.2k used prior year losses and 0.8k did not pay any tax. Of the US$ 1.79 billion in disputed tax bills for 2021 have already been paid to the ATO under a 50:50 arrangement. Despite the progress being made, there are still disputes from previous years – 2020, US$ 1.07 billion from twenty-three different taxpayers, and 2019 US$ 720 million from thirteen.

For much of H2, the Australian dollar had been ‘range bound’ and has hovered around the US$ 0.72 and US$ 0.74 levels; over the past five weeks, the dollar has declined from US$ 0.75 to its current level of hovering around US$ 0.70; earlier in the year, it was trading at nearly US$ 0.80. The currency has always punched above its weight and although it is minute by global standards, it is one of the most traded in the international market. It is estimated that if the Australian currency declines 10%, then all things being equal, imported prices rise 10%, and they are about 20% of the CPI, so spread over a year, it would add 2% to prices; the lower the value of the dollar, the higher the price of imports and the higher the level of inflation. The question is not if the RBA is going to raise rates but more of when?

US November inflation figures hit a forty-year high, with latest figures showing prices up 6.8% on the year; on the month, they rose at the slower rate of 0.8%. compared to October’s 0.9%. Rising prices, including petrol, rent and the cost of second-hand cars, have impacted more on the lower income bracket. It is apparent that one of the main drivers behind the high inflation figure is President Biden’s previous spending programmes, designed to offer support amid the Covid pandemic. With many analysts arguing that further spending could make inflation worse, the US leader will have problems passing his new US$ 1.4 trillion social spending bill through both chambers. Another driver would be the lingering aftereffects of Covid and the fact that it has yet to be brought under full control, effecting the supply chain and the labour market. The US administration has pledged to tackle rising inflation and one factor that could greatly help is if the Federal Reserve moved a little quicker to reduce the monthly bond-buying support, allied with an interest rate hike.

At this week’s policy meeting, the US Federal Reserve surprised the market by declaring that it will quicken the pace at which it is pulling back its support for the post-pandemic US economy. The Fed will shrink its monthly bond purchases at twice the pace it previously announced, citing the original reasons for such purchases are no longer valid at a time when inflation is touching forty-year highs and unemployment declining. In other words, interest rates are set to move higher early next year, with two more rises before the end of 2022. Obviously, this will have an impact on rates here in Dubai.

Latest UK figures show there was a fall in unemployment among 16–24-year-olds, another group hit hard by the pandemic; the unemployment rate among that sector had now recovered to pre-pandemic levels at 11.3% – down from a high of 14.8% in the 2020 September quarter. After a marked slump during the pandemic, the number of people in part-time work jumped to 8.07 million, in the three months to October, (compared to 7.7 million in the May quarter). Data shows that the total of employees on payroll continued to grow strongly into November. Meanwhile job vacancies again moved higher– at 1.22 million, 54.9% higher than before the pandemic. – but the rate of growth slowing. However, the data was collected before the onset of the Omicron variant which some fear may lead to restrictions in some sectors. In November, UK employers added 257k staff to their payrolls, whilst unemployment nudged 0.3% higher to 4.3%.

In what is considered to be the first post-Brexit deal negotiated from scratch and not “rolled over” from trade terms that the country enjoyed while in the EU, the UK has signed a free trade deal with Australia which it says will benefit consumers and businesses. Not only will it unlock US$ 13.8 billion of additional trade. while ending tariffs on all UK exports, but a bigger boost will be the fact that it provides a gateway into the fast-growing Indo-Pacific region and would boost the UK’s bid to join the Trans-Pacific Partnership, one of the largest free trade areas in the world. The deal is due to come into force in 2022.

In a deal that sees his master recordings and publishing rights for his life’s work being sold to Sony, 20-time Grammy winner, Bruce Springsteen, has received US$ 500 million. Sony will have ownership of his twenty studio albums, including classics like ‘Born To Run’, The River and Born In The USA. Last year, it is estimated that his music generated about US$ 15 million in revenue. Last May, Sony reported that it had spent US$ 1.4 billion in acquisitions over the previous six months, including a multi-million-dollar deal to obtain the rights to Paul Simon’s back catalogue but it would appear that Springsteen’s deal would be the most expensive so far. For the 72-year old genuine rock star, famous for his four-hour live shows, there is no doubt that the future holds plenty more Glory Days!

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