Ain’t Got No!

Ain’t Got No!                                                                                     23 December 2021

For the past week, ending 23 December, Dubai Land Department recorded a total of 1,685 real estate and properties transactions, with a gross value of US$ 2.02 billion. It confirmed that 1,137 villas/apartments were sold for US$ 763 million, and 177 plots for US$ 586 million over the week. The top three land transactions were for two plots of land in Al Hebiah Fifth, worth US$ 207 million and US$ 72 million, followed by one for US$ 40 million in Palm Jumeirah. The most popular locations in terms of volume and value were Jebel Ali First, with 40 transactions, totalling US$ 31 million, followed by Wadi Al Safa 5, with 37 sales transactions, worth US$ 49 million, and Hadaeq Sheikh Mohammed Bin Rashid, with 19 sales transactions worth US$ 90 million. Mortgaged properties for the week totalled US$ 447 million and 79 properties were granted between first-degree relatives worth US$ 49 million.

On Monday, 20 December, there had been 246 sales transactions, worth US$ 166 million, and mortgage deals of US 41 million, in addition to ten gift transactions amounting to US$ 5 million. Data released by Dubai Land Department also confirmed that the sales covered 223 villas and apartments, worth US$ 137 million, and 23 land plots at US$ 29 million. The mortgages included 38 villas and apartments, worth US$ 30 million, and 18 land plots valued at US$ 11 million, bringing Monday’s total realty transactions to US$ 212 million.

Dubai is expected to record property sales transactions worth over US$ 40.9 billion this year, more than double of the US$ 19.75 billion in 2020; by mid-December, the Dubai Land Department estimates there had been more than 57.5k transactions, worth US$ 38.8 billion. Transaction volumes are expected to remain high in H1 before stabilising for the rest of 2022. Some would say that 2020 was a year of decline and reflection, followed by a year of recovery and sustained growth, with 2022 a year of consolidation and mature expansion. There is no doubt that Dubai is probably considered one of – if not – the safest city in the world and this unique selling point is an important driver that will keep the emirate’s realty bubbling, as an increasing number of international buyers see the emirate as an investment haven.

According to FAM Properties, Dubai rents will continue to rise next year, with strong demand especially in the high-end and beachfront properties, included newly handed over projects in Bvlgari Resort & Residence and the Palm. Asteco estimated that, in Q3, apartment and villa rental rates continued their upward trend rising by 3% and 6% respectively, with annual increases of 19% and 3%. Coldwell Banker UAE “anticipate a moderate rise in the overall market in 2022, especially in prime apartment builds providing high-quality units, modern amenities and services”. Although the consultancy notes a steady rental rise in rents for villas and gated communities it considers that apartment buildings, not in communities, particularly the older properties situated in old Dubai may not do as well and may see rents drop in 2022.

Last Friday, Dubai Harbour welcomed the 252 mt AIDAbella and the 323 mt Costa Firenze – arriving on its maiden voyage to Dubai – inspired by the Italian Florentine Renaissance, with an interior intended to evoke classic Italian streets and town squares. The two cruise ships, with 2.5k passengers and 1.9k crew, berthed at Dubai Harbour’s twin cruise terminals. Capable of processing over 3.2k passengers an hour, it is also the largest standalone dedicated twin cruise terminal centre in the eastern hemisphere.The terminals are located on a pier stretch of over 910 mt and can accommodate a complete passenger turnaround of two cruise ships simultaneously.Al Shamal Holding, a one-person company with limited liability formed five years ago, is the owner and manager of Dubai Harbour, with plans to make it an exceptional seafront district. Dubai’s 2021-2022 season, which commenced in October, is expected to welcome 126 ship and over 500k cruise visitors – a huge bonus for the Dubai’s tourism sector.

The Dubai World Trade Centre has become the latest government asset to be remodelled as a new economic sector to be a comprehensive zone and regulator for virtual assets and crypto, including digital assets, products, operators and exchanges. It will hook up with private sector companies, and other Dubai stakeholders, to create a global hub, whilst enforcing rigorous standards for investor protection, Anti Money Laundering (AML), Combating the Financing of Terrorism (CFT) compliance and cross border deal flow tracing. The WTC will not only provide and oversee a new world-class regulatory framework of Virtual Asset legislative and enforcement policies, but also deliver and oversee an excellent regulatory framework of Virtual Asset legislative and enforcement policies. The Authority has also signed a cooperation agreement with Binance, the world’s leading blockchain and cryptocurrency infrastructure provider, to establish a new international Virtual Asset ecosystem.

This week, the RTA’s  108th Open Auction for Distinctive Vehicle Number Plates raised US$ 10 million. The top five numbers of the one hundred fancy plates on offer – Q22, Z31, V10000, W500 and O66666 – raised US$ 1.36 million, US$ 768k, US$ 251k, US$ 229k and US$ 229k respectively.

As a positive indicator that the airport’s and tourism industry’s numbers are rising quicker than expected is the fact that they will exceed pre-pandemic levels in the remaining few weeks of 2021. DXB’s Terminal 3 is expected to handle more than 1.6 million passengers in the final two weeks of the year, after exceeding one million in October and one million a week in November. Following the reopening of the final phase of Concourse A at Terminal 3 in DXB, the world’s busiest airport, by international traffic, is now operating at its full capacity. Meanwhile, Emirates, the main user of DXB, has restored 90% of its network and is on track to reach 70% of its pre-pandemic capacity by the end of the year. It is expected that 2021 annual passenger traffic will reach 28.7 million by 31 December and this figure will almost double to 57 million in 2022.

The DHL Global Connectedness Index ranked the UAE fourth most globalised country, (out of 169 nations) and the number one ME country, ahead of Qatar 31st Bahrain 39th, Saudi Arabia 42nd, Lebanon 54th, Kuwait 56th and Jordan 61st. The Netherlands, Singapore and Belgium were ranked the top three.  Along with Mexico, the Netherlands, Sierra Leone and Vietnam, the UAE was one of the five countries that have stood out for their strong or rising global connectedness over the past two decades.  The index measures globalisation, based on four main pillars – the flows of international trade, capital, information and people – as well as tracking both the size of countries’ international flows relative to their domestic activity and their geographic reach around the world. The country performed well in trade, (scoring 83 out of 100) and 73 out of 100 on both information flows and people flows. Overall, the report did note that the pandemic had caused a “modest” decline in global connectedness in 2020, followed by clear signs of recovery in 2021. International movement of people was hit the hardest, and they are on track to recover the slowest, whilst international travel remained more than 80% down in the first half of 2021.

To ensure the adoption of best practices in real estate financing and risk management, the UAE Central Bank has drawn up tighter regulations. The new enhancements require banks to review and improve their internal policies to enhance sound underwriting, valuation and general risk management; the main aim is to supervise local banks’ exposure in this field. Banks will be given a year to enhance their policies and procedures to be in line with the new amendments.

Dubai Islamic Bank has launched a “fun” digital offering, named Rabbit, targeting more technology-savvy millennials and helping the unbanked in the UAE, and other heavily populated markets, in which the UAE’s biggest Sharia-compliant lender operates, to get access to the formal financial system. Such countries include Indonesia, Pakistan and Kenya where DIB will work with regulators to introduce their new app, which is available in Apple and Android stores. It was initially launched with a current account, globally accepted debit card, and payments and money transfer transfers, with credit card being introduced later.

The DFM opened on Sunday, 19 December, up 153 points (5.9%) on the previous week, shed 81 points (2.7%) to close the week, on Thursday 23 December, at 3,145. Emaar Properties, US$ 0.05 higher the previous week, closed, US$ 0.14 lower, at US$ 1.19. Emirates NBD and Damac started the previous week on US$ 3.79 and US$ 0.38 and closed on US$ 3.69 and US$ 0.38. On Thursday, 23 December, 58 million shares changed hands, with a value of US$ 41 million, compared to 208 million shares, with a value of US$ 130 million, on 16 December.

By Thursday, 23 December, Brent, US$ 0.94 (1.2%) lower the previous week, gained US$ 1.75 (2.3%), to close on US$ 76.10. Gold, up US$ 18 (5.2%) the previous week gained US$ 7 (0.4%), to close Thursday 23 December on US$ 1,810. 

Boeing and Airbus have joined forces and have called on the US government to delay the rollout of new 5G phone services, warning that the technology could have “an enormous negative impact on the aviation industry.” With deployment of 5G services scheduled to start, within two weeks, there are concerns that C-Band spectrum 5G wireless could interfere with aircraft electronics and that “5G interference could adversely affect the ability of aircraft to safely operate.” Industry research found that if the Federal Aviation Administration’s 5G rules had been in effect in 2019, about 345k passenger flights and 5.4k cargo flights would have faced delays, diversions or cancellations. This month, the FAA issued airworthiness directives warning 5G interference could result in flight diversions; there are calls for a further delay in its implementation but, according to the US wireless communications industry pushing back deployment one year would reduce economic growth by US$ 50 billion.

With his company valued at US$ 1 billion plus, and himself being the world’s richest person, Elon Musk has declared that he “will pay more taxes than any American in history this year”; he confirmed earlier in the week that he would be paying more than US$ 11 billion in taxes this year. Days earlier, Democratic US Senator Elizabeth Warren said that the Tesla founder, and major shareholder, should pay taxes and stop “freeloading off everyone else” after Time magazine named him its “person of the year”. Since the beginning of November, Musk has sold nearly US$ 14 billion worth of Tesla shares.

According to PitchBook Data, it is estimated that venture capital funds have poured about US$ 30 billion into crypto, or more than in all previous years combined for the little more than a decade-old technology. Over the past three years, this has grown from US$ 8 billion, over which time period, Bitcoin has climbed by more than 1.3k%. The US$ 30 billion tally includes fundraising rounds raised by the likes of Robinhood Markets and Revolut, and US venture capital transactions investment, with some US$ 7.2 billion in deals, four times the previous record set in 2018.

It seems that investors are funding anything and everything, including former niche sectors such as NFTs (non-fungible tokens). Dapper Labs, the NFT platform behind CryptoKitties, raised US$ 350 million in March from investors that included basketball legend Michael Jordan, pushing its valuation to US$ 2.5 billion. Crypto derivatives exchange FTX closed a  US$ 1 billion Series B funding round in July that pushed its valuation to US$ 18 billion. Last month, crypto payments infrastructure provider MoonPay, closed a US$ 555 million round, increasing its valuation to US$ 3.4 billion, whilst Sky Mavis, the developer of Axie Infinity, raised more than US$ 150 million, at a US$ 3 billion valuation, in October for the crypto-based online game.

Staggering figures from the US Secret Service indicate that a minimum of US$ 100 billion has been stolen from relief programs, (estimated to be in the region of US$ 3.4 trillion), established to assist businesses and people who lost their jobs due to the pandemic. The agency reckons that it has more than nine hundred active criminal investigations into pandemic fraud and that the figure does not include those already prosecuted by the Justice Department. In addition, the US Labor Department reported about US$ 87 billion in unemployment benefits could have been paid improperly, with a significant portion attributable to fraud. The Secret Service said it has seized more than US$ 1.2 billion while investigating unemployment insurance and loan fraud and has returned more than US$ 2.3 billion of fraudulently obtained funds by working with financial partners and states to reverse transactions. In the initial stages, the Secret Service confirmed that its focus was on fraud related to personal protective equipment, (maybe they could have helped the UK government, with reports that some were “filling their boots”, at the expense of the taxpayer).

UK’s Financial Conduct Authority has fined HSBC US$ 85 million for failings in its anti-money laundering processes over an eight-year period up to 31 March 2018. The watchdog reported that the bank had made a string of failings, including inadequate monitoring of money laundering and terrorist financing scenarios until 2014, and poor risk assessment of “new scenarios” after 2016. HSBC was also found to have had inappropriate testing and did not check the accuracy and completeness of data in monitoring systems. Like it seems in similar cases, many banks get a “discount” if they do not dispute the findings; in this case, it resulted in its penalty being deducted from US$ 120 million.

Covering about half of fares – including season tickets on most commuter routes – regulated rail fares in England will rise by 3.8% from March. This will be the biggest annual increase in nine years, with fare rises normally based on the preceding July’s Retail Prices Index measure of inflation plus 1%, but this time the Department of Transport has capped the increase to 3.8%. This would see Brighton to London and Liverpool to Manchester fares rise by US$ 257 to US$ 7,025 and by US$ 139 to U$ 3,795 respectively. During the pandemic, government support to keep rail services running topped US$ 18.65 billion.

Like Evergrande, which has around US$ 300 billion of debt, another of China’s bigger property developers has unveiled plans to restructure its debts, after defaulting on billions of dollars of bonds, with an added problem that it may have been duped out of US$ 313 million by Wingskengo, a BVI investment management. China Fortune Land Development had appointed Wingskengo, to earn annual returns of between 7% to 10%, and in turn they advised the Chinese developer to transfer the money to China Create Capital. Now it has advised the Shanghai Stock Exchange, (on which its shares are traded), and the police, that it has “lost contact” with the wealth manager that has US$ 313 million of its money. To add further misery to its long-suffering shareholders, its share value has lost more than 70% of their value this year, having defaulted on billions of dollars of bond debt in 2021 alone. However, it is reported that earlier in the month it had agreed a debt restructuring scheme with a group of creditors. Like other debt-laden developers, they were badly impacted when Chinese authorities launched a sweeping crackdown on excessive borrowing in the sector last year. Another developer, Kaisa, with a US$ 12 billion offshore debt, missed a US$ 400 million repayment last week.

Having been kicked off the New York Stock Exchange, like a growing number of other US-listed Chinese firms, China Mobile aims to raise up to US$ 8.8 billion when it lists its shares on the Shanghai bourse. The world’s largest mobile phone company joins its smaller rivals – China Telecom and China Unicom – which have already made the move back to their home country; all three were delisted from the New York Stock Exchange after a Trump-era decision to restrict investment in Chinese technology companies. A week after its New York listing was pulled, when Americans were banned from investing in the firm, Chinese artificial intelligence start-up SenseTime relaunched its US$ 767 million Hong Kong share sale. Although denied by the company, US regulators have accused it of developing facial recognition software to determine people’s ethnicity, with a focus on identifying ethnic Uyghurs. Following the announcement after the US market watchdog had unveiled tough new rules for Chinese firms that list in America, Chinese ride hailing giant Didi Global said it planned to take its shares off the New York Stock Exchange and move its listing to Hong Kong.

According to Cloudflare, an IT security company, TikTok is the world’s most popular online destination taking over from Google. One of the main drivers behind the change was the Covid pandemic, as lockdowns meant people were stuck at home and looking for entertainment. By July this year, the Chinese app had been downloaded more than three billion times and has now more than one billion active users. Owned by Bytedance, the social network is called Douyin in its home country, and runs on a different network, to comply with China’s censorship regulations. As one of the only globally successful Chinese apps, many countries’ politicians and regulators have raised concerns about security and privacy, and last year TikTok was forced to deny it was controlled by the Chinese government.

The UK Supreme Court has overturned a Court of Appeal verdict that prevents Venezuelan President Nicolás Maduro from accessing US$ 1.95 billion  of gold stored with the Bank of England. The ruling means that only opposition leader Juan Guaidó, who the UK considers as the legitimate leader, can decide what happens to the gold. In a highly controversial 2018 poll, boycotted by the Opposition, Maduro was re-elected to a further six-year term. He has been blamed for mismanaging the country’s economy, highlighted by soaring unemployment, a much devalued bolívar, a failed public service and rising poverty. The country has been sanctioned by a group of nations, including the US, UK, EU, Canada, Switzerland, Panama and Mexico since 2014 over corruption, human rights violations and the suppression of democracy.

With output tanking by 28.7% to 75.8k units in November, UK car production hit its lowest level since 1984, as the effects of the pandemic continue to savage the industry. Calling the figures “worrying”, the Society of Motor Manufacturers and Traders blamed a continuing shortage of semiconductors, which will “likely to affect the sector throughout next year”, and also noted that the start of full Brexit customs, on 01 January, controls could also hit firms,

marking the fifth consecutive month of decline. Electric, plug-in hybrid and hybrid cars accounted for 32.7% of all cars made last month, with battery electric vehicle output expanding 52.9% to 10.4k units, hitting a new high of 13.7% of all production.

The Q3 UK economy grew at a slower pace than first estimated, with updated data showing a 0.2% to 1.1%, blaming weaker consumer spending, and the impact of energy companies going out of business. Latest figures still show the economy is 1.5% down on the pre-pandemic levels and some commentators note that things may become worse as this data precedes the onset of the Omicron variant. Furthermore, business investment also fell by 2.5% in Q3 and was nearly 12% below its pre-pandemic level. UK’s recovery to its pre-pandemic economy remained behind most G20 nations, including France, Germany and the US, in inflation-adjusted terms.

Rishi Sunak’s latest US$ 1.33 billion assistance package is aimed at those businesses impacted by the rise in Covid case. They include the leisure and hospitality sector, which has witnessed a slump in bookings and a marked reduction in footfall, to the tune of up to US$ 8k per premise which will cost the government an estimated US$ 909 million; theatres and museums get a miserly US$ 40 million. The Chancellor has also set money aside to assist firms, with less than 250 employees, with the cost of sick pay for Covid-related absences by reintroducing the Statutory Sick Pay Rebate Scheme. Businesses, other than hospitality and, can apply for some of the funding under the Additional Restrictions Grant, which has been topped up with US$ 136 million. Although he opined that the new measures announced were comparable to the grants that were on offer when businesses were fully closed earlier this year, many analysts consider that the assistance falls well short of actual requirements.

Banque du Liban Governor Riad Salameh has indicated that Lebanon will need to receive between US$ 12 billion – US$ 15 billion from its partners to kickstart its economic recovery and shore up fast-diminishing foreign currency reserves.  The World Bank describes the current unprecedented economic crisis in the country as one of the worst in modern times, as more than 80% of the population live in poverty and the Lebanese pound has lost more than 90% of its black-market value. Since 1997, the pound has been officially pegged at 1.5k to the greenback; at the beginning of the month, it traded for nearly 30k to the dollar on the black market earlier this month in a record low. The Governor said “our quota in the IMF is US$ 4 billion” and “if countries add to it, we could reach US$ 12 billion to US$ 15 billion, an amount that could help start Lebanon’s recovery and restore confidence.” Before the onset of the current crisis in 2019, the country’s mandatory reserves stood at US$ 32 billion; now it is at US$ 12.5 billion. Discussions with the IMF, that started last year, have been relaunched in recent weeks.

Despite mounting inflationary pressure, now at over 21%, and a currency that is going down the toilet, trading at below 15 lira to the greenback, Turkey – or seemingly Recep Tayyip Erdogan – has cut interest rates again for the fourth straight month. With the currency sinking a further 5.7% on the news, the President announced a 50% hike in the country’s minimum wage to US$ 275 to alleviate some of the economic pain that his policies are causing to a majority of Turks. Wishing for a high growth, low interest-rate environment, the President, in contrast to a raft of economic experts, believes that lower rates will stimulate the economy, create jobs and fuel investment in the country because it keeps borrowing costs low. The only problem is that the exact opposite is occurring, despite high economic growth in an emerging market. The measures are intended to mitigate retail investors’ demand for dollars and bring to an end three months of turmoil for the nation’s currency. The lira has lost more than half of its value against the US dollar since September, with declines gaining pace after Mr Erdogan last month unveiled an economic model that relies on lower borrowing costs and a cheaper currency.

This week, the president pulled the proverbial rabbit out of his hat, announcing that his government will make up for losses incurred by holders of lira deposits should the lira’s declines, against hard currencies, exceed interest rates promised by banks; he also introduced a new programme that will protect lira balances from future adverse exchange fluctuations, noting that “from now on, none of our citizens will need to switch their deposits from the Turkish lira to foreign currencies because of their concerns that the exchange rate fluctuations might wipe out gains from interest payments”. He also commented that “Turkey has neither the intention nor the need to take the slightest step back from the free-market economy and the foreign-exchange regime”. Some of the other steps include:

  • the authorities will offer non-deliverable forwards to help exporters mitigate foreign-exchange risks emanating from the elevated levels of volatility
  • withholding tax for investments in lira notes issued by the government will be reduced to 0% from 10%
  • the government will match 30% of all contributions made by private-sector workers to the optional pension system, up from the current level of 25%

Faced by two contrasting problems – the highest inflation rate in decade, at 5.1%, and the threat of the rapid spread of the new Omicron variant – the Bank of England raised base rates from 0.1% to 0.25%; this will inevitably lead to a slowing of consumer spending. The BoE, which for so long had reckoned that the higher inflation figures were “temporary” and would revert to its 2.0% target, have yet again got their forecasting horribly wrong and finally had to raise rates to tackle strong inflationary pressures building up in the economy; it now expects that inflation will top 6.0% early in 2022, with a rise in gas prices playing an important role in driving the figure higher. There are some analysts who consider that the bank’s move will do little to reducing inflation, as many of the rising costs are attributed to global factors, outside its control, with it noting that “consumer price inflation in advanced economies has risen by more than expected.”

In a bid to assist low-income countries still suffering from the impact of the pandemic, the IMF has approved the extension of US$ 115 million in debt relief to 25 eligible nations from 11 January to 13 April 2022. This was the fifth – and final – tranche of a two-year debt service relief from the Catastrophe Containment and Relief Trust and brings the total to US$ 964 million. It is estimated that the pandemic fall-out has caused more economic damage than that of the 2008 GFC, particularly in Africa and South Asia. There is no doubt that the subsequent ongoing global economic recovery has been highly uneven, with the emerging markets/low income countries suffering the worst and this will continue with the world economy forecast to  sustain as much as US$ 5.3 trillion in losses over the next five years. In 2020, global debt surged to US$ 226 trillion, 28% higher on the year, to 256% of GDP; it was the largest one-year debt surge since WWII. Both emerging markets and low-income countries are also facing elevated debt ratios driven by the large fall in nominal GDP in 2020. Not only do they have to face record-high public and private debt levels, low-income countries have limited resources to deal with new virus mutations, restricted access to funding, higher borrowing costs and rising inflation. The end result is that the poverty levels are rising at an alarming rate and as we approach 2021, a growing number of the world’s population Ain’t Got No!

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