Don’t Play With Me, ‘Cause You’re Playing With Fire
2021 will go down as a stellar year for the Dubai real estate market, as the sector posted a mega jump in both the number of transactions, up 65% to 84.8k, and their value, 71% to the good at US$ 81.74 billion. 49.8k real estate units were registered in 2021 of which 41.0k units were sold, valued at US$ 18.66 billion, while 8.0 villas, worth over US$ 4.96 billion, were sold. The Dubai Land Department report noted that a total of 52.4k investors concluded 72.2k new investments, valued at US$ 40.32 billion, representing a 73.7% growth in the number of investments, a 65.6% rise in the number of investors, and a 100% increase in the value of investments compared to 2020. Of the 52.4k investors, 17.7k were women, with that number 72% higher than in 2020.; they totalled US$ 10.46 million of the US$ 40.32 annual investment. In the total, there were 6.1k Arab investors, 6.9k from the GCC and 38.3k foreign investors, with values of US$ 3.38 billion, US$ 4.60 billion and US$ 26.98 billion.
There is no doubt that the real estate sector represents a major catalyst for the growth of various other sectors and that the 2021 realty figures are an indicator that Dubai is fast becoming the preferred destination for many international investors and a leading candidate of being the world’s best city in which to live and work.
The top ten locations for transaction numbers were Dubai Marina (8.0k transactions), Business Bay (5.7k), Al Thanyah Fifth (5.1k), Al Barsha South Fourth (4.8k), Hadaeq Sheikh Mohammed bin Rashid (4.4k), Burj Khalifa (4.3k), Wadi Al Safa 5 (3.5k), Al Hebiah Fourth (3.3k), Al Merkadh (3.2k), and Palm Jumeirah (2.8k). When it comes to locations with the highest value during 2021, Dubai Marina again headed the field with sales totalling US$ 7.79 billion, followed by Palm Jumeirah (US$ 7.25 billion), Hadaeq Sheikh Mohammed bin Rashid (US$ 4.31 billion), Burj Khalifa (US$ 3.87 billion), Business Bay (US$ 3.59 billion), Al Thanyah Fifth (US$ 2.23 billion). Wadi Al Safa 5 (US$ 2.18 billion), Al Yufrah 1 (US$ 1.99 billion), Al Thanyah Fourth (US$ 1.96 billion), and Al Hebiah Fourth (US$ 1.96 billion).
Dubai Marina was also the location with the highest number of real estate mortgages, (with 1,440), followed by Hadaeq Sheikh Mohammed bin Rashid (1,046), Al Thanyah Fifth (1,015), Burj Khalifa (922), Al Barsha South Fourth (875), Nad Al Sheba 3 (864), Al Yelayiss 2 (717), Al Thanyah Fourth (675), Me’aisem First (655), and Palm Jumeirah (618).
For such a relatively small market, there was a surprise to note that 3.2k new brokers had entered the sector in 2021, bringing the total number of registered real estate brokers to 8k, (33.9% of whom were women), operating from over 1.4k brokerage offices. Over the year, real estate brokers’ commissions in Dubai’s real estate market exceeded US$ 817 million through 12.1k transactions.
Data from the Dubai Land Department showed that the emirate’s first ever working Friday included 173 sales transactions worth US$ 648 million— twelve of which were land plots, worth US$ 123 million, and 161 were apartments and villas for US$ 525 million. The top three areas that recorded the highest value of land sales transactions on Friday were Marsa Dubai, with land sales worth US$ 101 million; Al Thanya Fifth, where a plot of land was sold for US$ 8 million; and The Palm Jumeirah, where a plot of land went for US$ 5 million. Dubai’s Jebel Ali First area recorded the highest number of transactions, with three sales worth US$ 2 million. It was followed by Palm Jumeirah, with a US$ 5 million sales transaction, and Warsan First, with a US$ 1 million sale.
The three highest-valued sales transactions, featuring transfers of apartments and villas, included a US$ 136 million sales transaction in The Palm Jumeirah, followed by a US$ 135 million sales transaction in Marsa Dubai and a US$ 109 million sales deal, also in Marsa Dubai. Jebel Ali First recorded the most villa and apartment sales transactions on Friday, with 23 sales transactions worth US$ 5 million. Business Bay and Al Barsha South Fourth recorded 21 sales transactions (US$ 7 million) and 13 sales transactions (over US$ 4 million), respectively. The total value of mortgage transactions concluded on Friday was US$ 34 million, The biggest mortgage transaction was registered in Al Thanyah Fourth, featuring a value of US$ 10 million, followed by Nad Al Sheba Third (US$ 3 million). Five properties worth over US$ 5 million were granted to immediate family members. Among these, the highest value of Dh12m was registered in Al Merkadh.
According to the latest report by Knight Frank, Burj Khalifa apartment prices rose by a healthy 23% last year, to US$ 572 per sq ft, noting that the rest of Dubai saw an average 8% increase but that “2021 has been the exponential rebounding of Dubai’s luxury residential market.” All the usual drivers including:
- the movement to larger homes with outdoor amenities
- economic support measures
- government initiatives (introduction of flexible residency visas – ten-year golden visas, retired and remote workers)
- one of the best vaccine protocols in the world
- historically low mortgage rates
- attractive and flexible selling packages from developers
- Expo 2020
- a fast-growing non-oil economy
- ease of doing business
- year-round sunshine (except for this week)
- a cosmopolitan lifestyle
continue to enhance Dubai as one of the best places in the world in which to live and work.
HH Sheikh Mohammed bin Rashid Al Maktoum has approved the three-year 2022-2024 Dubai government general budget, with a US$ 50.7 billion spend, and also Law No. (28) for the General Budget for the fiscal Year 2022, with US$ 16.8 billion expenditure. Projected government revenues for 2022 are 10% higher, compared to 2021, at US$ 15.8 billion, as a result of the rapid economic recovery of Dubai and the effective measures taken to curb the pandemic, including not only cutting many government fees but also putting a freeze on fee increases until 2023. Non-tax revenues, tax revenues and government investment revenues, which come from fees, account for 57%, 31% and 6% of the total expected income – and do not include the 6% expected from oil revenue.
This year’s budget sees the emirate continuing to place a high emphasis on developing social services, and its healthcare, education and cultural sectors. It also includes US$ 272 million set aside for citizens’ housing sector, as well as allocating more than 4k plots and houses, with a total value of US$ 1.46 billion. As part of the government’s strategy to consolidate Dubai’s position as one of the best global cities in which to live and work, the budget also focuses on developing the Social Benefits Fund, by supporting families and people of determination. The budget reflects Dubai’s determination to accelerate post-pandemic economic recovery and achieve the Ruler’s wider aims to stimulate entrepreneurship, enhance society’s happiness and consolidate the emirate’s enviable position as a land of opportunities and innovation.
The two big ticket projected government expenditure items are salary and wages (34%), along with grant and social support (21%) to meet the requirements of human and community development and provide public services to the residents of the emirate. Other items include 9% of total spend on investments in infrastructure, 6% on public debt accounts, to follow a disciplined fiscal policy that ensures the budget fulfils all obligations, and 2% allocated to the private reserve to support emergency preparedness programmes. The budget allocates US$ 1.42 billion for post Expo construction projects. Sector wise sees 30% being spent on the social development sector, in areas of health, education, housing and women and children’s care and a further 23% on security, justice and safety. A massive 42% of the spend will be invested in infrastructure and transportation and the remaining 5% on supporting the sectors of government excellence, creativity, innovation and scientific research.
Because of the double whammy of an exceptional year in the equity markets, helped by some shrewd financial advice, and a welcome recovery in the price of oil, the UAE sovereign wealth fund’s assets grew by over 18% to US$ 1.624 trillion; a barrel of oil more than quintupled from its April 2020 level of US$ 15.06 to US$ 82.00 in October 2021. Abu Dhabi manages around US$ 1.3 trillion through different SWFs, becoming the third-largest concentration of such funds after Beijing and Oslo. The UAE created this SWF to invest petrodollars in diverse sectors such as equities, bonds, commodities, real estate, automobiles, technology, pharmaceuticals and others to support local budgets. The largest SWF in the country is Abu Dhabi Investment Authority, with US$ 829 billion assets under management. Dubai-based entities include the Investment Corporation of Dubai (US$ 302 billion), Dubai Holding (US$ 35 billion) and Dubai World (US$ 15 billion).
Sheikh Ahmed bin Saeed Al Maktoum has appointed a new leadership team to manage the Dubai Integrated Economic Zones Authority free zones which include Dubai Airport Free Zone, Dubai Silicon Oasis, and Dubai CommerCity. Amna Lootah has been appointed director general of DAFZ and to head that free zone’s executive management team; Dr. Juma Al Matrooshi was appointed as director-general of Dubai Silicon Oasis. Muammar Al Kathiri was appointed as chief engineering & smart city officer in the authority to lead and direct engineering planning and make strategic planning, design, and construction decisions. At all central divisional functions. William Chapel will serve as Chief Financial Officer in DIEZ, where he will be responsible for financial management. Other appointments at DIEZ include Youssef Behzad as chief people & organizational development officer, Bader Buhannad as chief corporate support officer, (including managing and directing digital and IT activities), Saeed Al-Suwaidi as the new chief legal & regulatory affairs office and Abdul Rahman Basaeed, chief internal audit & enterprise risk management officer. The authority’s main aims are to boost economic growth, contribute to shaping the future economic map of Dubai, and create more diverse investment opportunities.
Worldometer estimates that over 5.4 million have died from Coronavirus since its onset, with the number of recorded cases exceeding 295 million. There is no doubt that the new Omicron variant, which has seen a massive increase in infections in many parts of the world, could put a dampener on expected demand growth in Q1 and slow the pace of the global economic recovery. Over recent days, UAE daily virus cases have moved from double digit numbers in early December to more than 2k. However, because of the high vaccination rates, and being the leading country in the world, (with the 91.3% of its people fully vaccinated and 7.7% partially vaccinated), with a relatively young population, there is every chance that it will escape the need for any further serious lockdowns.
According to a report issued by the Jet Airline Crash Data Evaluation Center, Emirates has retained its leading position as the world’s safest airline, ahead of KLM, JetBliue, Delta and easyJet. Due to its size, Etihad did not make the global list but topped the regional survey, whilst KLM, Finnair, Air Europa, Transavia and Norwegian were rated the safest airlines in Europe. IATA has projected that the global airline industry losses, due to the pandemic, will touch US$ 201 billion in the three years to 2022.
December’s adjusted PMI shedding 0.3 to 55.6, on the month, still showed a continued improvement in UAE business activity, driven by a sharp rise in new business and output, and a boost from Expo 2020 Dubai. The UAE’s non-oil private sector is a gauge designed to give a snapshot of operating conditions in the economy, with any figure above 50 indicating expansion. The improvement, especially noticeable in Q4, was also helped by an easing of restrictions in the country. Although the rate of growth dipped to a three-month low, new orders continued to rise, as new work volumes moved higher, as business activity grew at its quickest rate since H2 2019. Despite the arrival of the Omicron variant, businesses are optimistic that the strong economic growth trend will continue into Q1, with sales growth driven by a substantial jump in travel due to Expo 2020 and strong demand from clients. The survey also noted that demand remained strong, as businesses reported a much sharper increase in input prices, driven by a rise in fuel and energy costs and higher raw material prices. There was a marginal increase in the workforce, indicating a slow recovery is taking place, but businesses still struggled to keep up with demand, leading to a sixth successive monthly increase in backlogs. With global inflation still moving higher, purchase costs rose at their fastest pace since March, resulting in businesses limiting their purchasing activity.
For what it is worth, the UAE’s oil GDP 2022 forecast growth is expected to come in at 5.0%, following a 2.0% contraction a year earlier, whilst in the non-oil sector, growth will remain flat at 4.2%, supported by rising oil prices. However, the UAE Central Bank added the caveat that, “economic projections are susceptible to uncertainties amidst Covid-19 repercussions”. Both the IMF and Emirates NBD are less bullish, with the former expecting the UAE economy to grow at just more than 3.0% this year and hover around the same levels into 2026 at least; Dubai’s biggest lender puts this year’s growth at 4.0 %, following 3.5% in 2021. Gulf countries, including the UAE, were dealt with a double whammy in 2020 as the spread of the coronavirus pandemic was accompanied by a drop in crude prices, the main source of income for the region. Last year, sentiment was better as travel restrictions eased and Dubai’s Expo 2020 was launched, attracting millions of visitors.
In 2021, Dubai Duty Free posted a 40% increase, on the year, to US$ 976 million in sales, as annual passenger traffic, totalling 28.7 million, began to rebound from the coronavirus pandemic. It was estimated that there were over nine million sales transactions in 2021, equating to 25k a day, selling 26 million different items. DDF will also benefit from increased footfall going through DXB, as early estimates see an almost doubling of traffic to 57 million in 2022; Dubai World Central, the emirate’s second hub, will also reopen its passenger terminal in May.
The top five products sold in 2021 were perfumes, liquor, cigarettes/tobacco, gold, and electronics, worth US$ 190 million, US$ 168 million, US$ 95 million, US$ 79 million and US$ 76 million; they accounted for US$ 608 million worth of the sales, equating to 62.3% of the total revenue. Online sales, at US$ 48 million, represented 5% of the total, with sales in Departures and Arrivals making up 84%, (US$ 790 million), and 10% (US$ 102 million) of the annual sales. In November, Dubai Duty Free said it will rehire seven hundred staff who were laid off during the pandemic, as passenger numbers pick up.
On Tuesday, DP World and the Senegal government laid the first stone to mark the start of construction of the new Port of Ndayane, its biggest port investment in Africa; it will also boost Senegal’s position as a major trade hub and gateway to West Africa. The US$ 1 billion investment to develop the port will be carried out in two phases and follows a December 2020 concession agreement to build and operate a new port at Ndayane, about fifty kilometres from the existing Port of Dakar. The first phase of the port development will include a container terminal with 840 mt of quay and a new 5 km marine channel designed to handle two 336 mt vessels simultaneously, and capable of handling the largest container vessels in the world. Annual container capacity will increase by 1.2 million Twenty Foot Equivalent Units. The second phase will be the development of an additional 410 mt container quay, as well as an economic and industrial zone, adjacent to the port and near the Blaise Diagne International Airport, creating an integrated multi-modal transportation, logistics and industrial hub.
Dubai Internet City and Khazna Data Centres have teamed up to establish two data storage centres in Dubai. With the government strategy of turning the country into a smart nation, the demand for data storage across all industries, with a secure cloud infrastructure, is of major importance, bearing in mind the huge volume of digital data generated in the region. DIC is a leading supporter of widespread digital transformation which is required to increase Dubai’s future economic competitiveness on the global stage. An Arizton Advisory and Intelligence report estimates that the data centre market in the Mena region will have an 8% CAGR (compound annual growth rate) to reach US$ 5 billion by the end of 2026.
This is not the only party in town. Last October, Etisalat and G42 agreed to merge their twelve data centre services to create the UAE’s largest data centre provider and operated under Khazna. Both Etisalat and du have data centres in Dubai, as have two global technology companies; Microsoft opened one in Dubai two years ago, whilst the world’s largest cloud storage service provider, Amazon Web Services, is set to open three centres in the country in H1. As Ammar Al Malik, DIC MD, commented, “building data centres and enhancing the overall technological infrastructure plays a key role in providing an investment-friendly environment;” and they will further support the UAE’s digital ecosystem.
Following an agreement signed between the governments of Dubai and Jammu and Kashmir, Emaar will develop a shopping mall in Srinagar. The 500k sq ft ‘Emaar Mall of Srinagar’ will be the first significant FDI investment in that northernmost region of northern India, since the Modi government revoked its special status given under Article 370 and brought the Union Territory under central administration. Emaar’s founder, Mohamed Alabbar commented that, “we wish to bring a world class mall experience to the residents of Jammu and Kashmir and the tourist inflows which are likely to increase exponentially” and that the Dubai developer “is also considering other investments into real estate, hospitality and mixed-use commercial and residential projects in the region”. It is expected that Dubai will deliver more than a billion-dollar worth of projects in Kashmir, including industrial parks, a medical college, a specialty hospital, logistic centres, IT towers and multi-purpose towers.
Dubai Aerospace Enterprise announced that at the end of 2021, it had a fleet of owned, managed, committed and mandated-to-manage aircraft of 425. During the year, it had divested thirty aircraft and acquired forty-one planes, as well as signing four new servicing agreements covering sevenaircraft. Its aircraft leasing division signed two hundred lease agreements, extensions and amendments in 2021. The average age of the fleet is 6.7 years and the ME’s biggest plane lessor served 112 customers in fifty-four countries. During the year, it issued US$ 2.5 billion in new unsecured notes and redeemed about US$ 2.2 billion in total unsecured notes.
The DFM opened on Monday, 03 January, up 51 points (1.6%) on the previous week, gained 24 points (0.7%) to close the week, on Friday 07 January, at 3,220. Emaar Properties, US$ 0.14 higher the previous week, gained US$ 0.02, at US$ 1.35. Emirates NBD, DIB and DFM started the previous week on US$ 3.69, US$ 1.47 and US$ 0.72 and closed on US$ 3.65, US$ 1.50 and US$ 0.72. On 07 January, 165 million shares changed hands, with a value of US$ 61 million, compared to 79 million shares, with a value of US$ 41 million, on 30 December.
By Friday 07 January 2022, Brent, US$ 3.43 (4.6%) higher the previous fortnight, gained US$ 4.15 (5.3%), to close on US$ 81.93. Gold, up US$ 53 (3.0%) the previous three weeks lost US$ 34 (1.9%), to close Friday 07 January on US$ 1,831.
At an online meeting on Tuesday, the Opec+ group of oil producers agreed to bring an extra 400k bpd to the market, as from next month, despite demand concerns due to the increase in the Omicron variant. It is apparent that the oil bloc is confident that the market can take further increases in supply. Although the news was widely expected, Brent jumped 1.62% to US$ 80.26 on the day, as demand for oil has continued to improve with the variant having only had a mild impact. It is expected that demand will average 99.13m bpd this quarter, up 1.11 million bpd from its November forecast, with global oil demand growth kept unchanged at an extra 4.2 million bpd for 2022 and total global consumption at 100.6 million bpd.
Bitcoin has slumped to its lowest level since its December flash crash, as growing expectations of rising borrowing rates weigh on some of the best performing assets over the past few years. The largest cryptocurrency by market value closed Friday trading at US$ 41.8k; its decline was followed by others such as Ether and Binance Coin along with. tokens of popular DeFi applications, including Uniswap and Aave. Bitcoin has surged by about 500% over the past two years, after stimulus measures were put in place during the Covid-19 pandemic. These recent declines run in tandem with what has been happening in the financial markets, at a time when inflation is running on its own speed and when global central banks have finally woken up to consider tightening monetary policy and lifting interest rates. There is no doubt that Bitcoin will bounce back but the market may have to wait until late Q2 to see that happen.
Following the latest US$ 300 million investment, it is estimated that the online marketplace OpenSea could be worth US$ 13.3 billion. The tech firm reports that trades’ in NFTs – unique pieces of digital code that can be associated with a digital asset such as a work of digital art.- on the platform have risen 600-fold in 2021. There are an increasing number of businesses, sports clubs and celebrities producing or purchasing NFTs including the rapper Eminem spending about US$ 450k on an image of a “Bored Ape” resembling him. According to the FT, the market in digital art and collectables is now approaching that of the global art trade and latest figures show that the total value of 2021 trade for NFTs was estimated to be worth US$ 40.9 billion.
This week, Blackberry advised that, as from Wednesday, 04 January, it will not operate correctly, stating that, “as of this date, devices running these legacy services and software through either carrier or Wi-Fi connections will no longer reliably function, including for data, phone calls, SMS and 9-1-1 (emergency) functionality.” This will see the end of BlackBerry 7.1 OS and earlier, BlackBerry 10 software, BlackBerry PlayBook OS 2.1 and earlier versions, whilst devices, using Google’s Android operating system, including the BlackBerry KEY2 released in 2018 would not be affected by the changes. Apple’s 2009 launch of its iPhone – and the introduction of smartphones – saw the beginning of the end for the once iconic Canadian tech company.
A lot has happened to the semiconductor industry after it had its worst ever recession in 2019, posting a 12% annual fall, followed by the onset of Covid-19 in the early part of 2020. Although global sales jumped 26% in 2021, to a record US$ 553 billion, the industry was beset by supply chain problems, but this year revenue is expected to be 9% higher, pushing industry revenue figures above the US$ 600 billion level. Covid saw a marked reduction in vehicle sales which would have been a major blow for the semiconductor sector but all the “lost” sales from the car industry were more than taken up by unusually strong demand for consumer electronics; personal computers, smartphones, and audio/video equipment accounted for 80% of semiconductor sales and were the three main factors driving the industry’s growth. 2021 saw prices on the up, as demand continued to outstrip supply. This unexpected demand growth led to a shortage in the industry, as has the US-China trade dispute which has seen both sides stopping their domestic tech companies from doing business with each other. The industry has a long lead time from drawing board to end user as the making of chips is a complex process that can take months.
The auto industry was one of the main users of semiconductors but when Covid first arrived, car production ground to a halt and all car makers cancelled forward orders for semiconductors. Even then, demand was greater than the supply, leading to long waiting times and increased prices and now Gartner expects that half of the major ten carmakers will be designing and producing their own chips by 2025 in order to reduce their reliance on traditional chip makers. Furthermore, the industry is modernising at break-neck speed to introduce electric and autonomous vehicles and need to have more control on what goes into their products. Because of shortages, manufacturers, such as Volkswagen, Ford, Fiat Chrysler, Toyota and Nissan, have had to delay production of some models in order to keep other factories running. Tesla got round the problem by using their own new chip designs and rewriting the software it uses on its vehicles.
In Monday’s premarket trading, Tesla shares jumped 7.0% to US$ 1,126 on the back of posting stronger-than-expected Q4 deliveries, easing any fears of supply chain problems that had beset the industry for most of last year. For the quarter, Models 3 and Y production rose 79%, whilst Models S and X fell 19%, largely due to a slowdown in production as new equipment was being installed. Analysts expect the world’s most valuable carmaker to report quarterly revenue of over US$ 2.3 billion, having seen the number of vehicles delivered being 17.3% higher than the market had expected – at 309k units. With new factories opening in Texas and Germany this year – and the fact that Tesla has managed to overcome much of the problems caused by the scarcity of semiconductors by reprogramming software to use less scarce chips – production is bound to be ramped up in 2022.
Ever since 1931, General Motors has held the mantle as America’s top car seller but it has lost that title as its domestic sales were down 13%, (impacted by the widespread shortage of semiconductors), with Toyota climbing to the number one position, with a 10% jump in sales to 2.3 million vehicles. It is estimated that car sales were 2% higher on the year in 2021 but remain depressed compared to pre-pandemic figures. Like all new car buyers around the world, US purchasers have had to make do with a reduced choice, because of the semiconductor shortage, supply chain problems and higher costs for new vehicles. GM’s profit would have been worse if it were not for the improved performance of its profitable pick-up trucks and SUVs. Toyota’s Camry has been the top-selling passenger car in the US fortwo decades, while its Rav4 has ranked as the best-selling SUV for five years.
One of the greatest hoaxers in history has been found guilty in a New York court of duping some very savvy investors into believing that her company had developed a revolutionary medical device that could detect a multitude of diseases and conditions from a few drops of blood. After a week of deliberation, the court found that 37-year old Elizabeth Holmes was guilty, on two counts of wire fraud and two counts of conspiracy to commit fraud, and now faces a maximum of twenty years in jail for each of the four offences; she was acquitted on four other counts involving patient fraud. Holmes had started Theranos in 2003 and went from an unknown to a Silicon Valley sensation, and an apparent visionary trailblazer, who amassed a US$ 4.5 billion on a tissue of lies. Her simple idea was to create a less painful, more convenient and cheaper way to scan for hundreds of diseases and other health problems by taking just a few drops of blood with a finger prick instead of inserting a needle in a vein. Her disruptive tactics were to upend an industry dominated by giant testing companies such as Quest Diagnostics and Labcorp and introduce “mini-labs” in Walgreens and Safeway stores across the US that would use a small device, called the Edison, to run faster, less intrusive blood tests. The likes of Rupert Murdoch, Larry Ellison as well as the Walton and DeVos families, were investors that helped her raise US$ 900 million in the early stages
Most people were unaware at the time that the Theranos’ blood-testing technology kept producing misleading results, and that blood tests were secretly being undertaken using conventional machines in a traditional laboratory setting and not by the simple Edison protocol. This façade could not go on forever and it was inevitable that she would be caught out even though she never stopped believing that Theranos was on the verge of refining its technology. It all ended in 2015 when the ruse was uncovered in a series of Wall Street Journal articles and a regulatory audit of the firm uncovered potentially dangerous flaws in its technology.
Asda has managed to anger UK farmers by backing out of its October commitment to stock exclusively British beef because of the rise in local beef prices. However, Asda has committed, (at least for the time being), that all fresh beef in its premium Extra Special tier will remain 100% British and all of their fresh beef will be sourced from farms in the UK and Republic of Ireland. Other UK supermarkets, including Lidl, Aldi, Morrisons and the Co-operative, also have commitments to source 100% British beef. The National Beef Association noted that farmers are struggling with feed, fertilizer and energy costs escalating at rates “never seen before”, whilst Republic of Ireland beef is currently around 20% less expensive than British.
Major UK retailers, Next and Greggs, have both indicated that they intend to raise prices this year to offset higher wage, supply and manufacturing costs at a time when inflation in the country could top 6% by the end of Q1. The fashion store intends to raise prices for its spring and summer clothing and homeware ranges by 3.7% and a 6% increase for autumn and winter goods. Shoppers at Greggs’ 2k stores will have to pay between US$ 0.07 to US$ 0.13 extra on items across its range of sausage rolls and cakes. There will be a lot more of the same from other major High Street stores as they get to grips with soaring inflation, higher costs and the Omicron variant.
It seems incongruous that bookmaker Ladbrokes could claim US$ 138 million from the furlough scheme, including US$ 60 million in 2021, despite rapid growth in online betting making up for all losses from the closure of stores. Its parent company, Entain, which actually saw revenues rise since the onset of the pandemic, said the matter is “under review” but that the money had protected 14k jobs. Although Entain was legally entitled to claim the money, others either returned the furlough money such William Hill, repaying US$ 33 million to the government, or did not claim it in the first place., such as Flutter, the owner of the Paddy Power betting shops. It is estimated that Ladbrokes was one of the twenty biggest furlough claims last year.
The latest Halifax House Price Index shows that the December average house price had risen 1.1%, on the month, 3.5% in Q4 and 9.8% for the year to US$ 374k – its largest annual gain since 2003. Despite the UK being under lockdown for some six months during 2021, the average house price reached record highs on eight occasions. Two main drivers behind these improved figures were the ongoing stamp duty holiday and a surge in demand for out of city locations, with gardens and more space. Wales registered the strongest growth of any part of the UK last year, at 14.5%, with London at the other end of the scale with tepid growth of just 2.1%. There is every chance that growth rates will slow, driven by factors such as rising inflation, higher cost of living, burgeoning interest rates, increased taxation and surging energy bills. With the end of the stamp duty holiday, the number of mortgage approvals continued to decline, with November numbers of mortgage approvals, at 67k, at their lowest level since June 2020. November also witnessed a decline in new listings, although new buyer enquiries rose by 13%.
With the cost of transport, food and other staples skyrocketing, Turkey’s annual inflation rate has soared to a 19-year high, at over 36% last month. In 2021, the currency tanked 44%, which made the country’s exports cheaper, and they became even cheaper this week when the lira lost a further 5% in value; since September, the central bank has cut rates from 19% to 14%, (instead of the other way round). However, the flipside of the coin sees imports become increasingly more expensive – bad news not only for the general population but also for manufacturers who have to pay more for energy, raw materials and other costs which in turn increase the cost of their exports. If there is no change in the economic attitude and change of monetary policy of Tayyip Erdogan, inflation could top 50% by April, with the lira in the monetary gutter; recently, the price of electricity and gas bills have jumped 50% and 25%.
Despite many other countries thinking to the contrary, China claims that “not a single country has fallen into [a] so-called ‘debt trap’ as a result of borrowing from China.” The criticism is that the country lends to poorer countries which often leaves then struggling to repay debts and therefore vulnerable to pressure from Beijing. (This practice is reminiscent of similar US aid in the 1970s to countries mainly in South America and SE Asia which often left them beholden on the goodwill of Uncle Sam). China is one of the world’s largest single creditor nations, with its loans to lower and middle-income nations tripling since 2010 to top US$ 170 billion by the end of 2020. The main beneficiaries of their “largesse” are nations in SE Asia and Africa. However, some analysts believe that this represents only about half of China’s commitment, as the other half of China’s lending to developing countries is not reported in official debt statistics, as funds originate from state-owned companies and banks, joint ventures or private institutions, rather than directly from government to government.
According to AidData, there are now more than forty low and middle-income countries, whose debt exposure to Chinese lenders is more than 10% of the size of their GDP, as a result of this “hidden debt”, with Djibouti, Laos, Zambia and Kyrgyzstan having Chinese-related debts equivalent to at least 20% of their annual GDP. Much of the debt owed to China relates to large infrastructure projects like roads, railways and ports, and also to the mining and energy industry, under President Xi Jinping’s Belt & Road Initiative. The current classic example is that of the massive Sri Lankan port project in Hambantota, a one billon dollar project financed by Chinese money. But it did not live up to its promise and soon became unviable leaving the country mired in debt; the only way out was to hand the state-owned China Merchants a controlling 70% stake in the port on a 99-year lease in return for further Chinese investment.
According to the World Bank statistics, China is the leading global lender, at over US$ 350 billion, followed by the World Bank (US$ 300 million), the Paris Club governments (US$ 200 billion) and the IMF some way back at UDS$ 80 billion. At the turn of the century China had no public debt commitments. There are major differences in the terms and conditions of a typical Chinese loan compared to others. They include a higher interest rate of around 4%, compared to say 1% on a loan from the World Bank or an individual country such as France or Germany, a shorter loan term of around ten years, (compared to around 28 years) and the requirement of borrowers maintaining a minimum cash balance as some form of collateral, often not needed for loans from other institutions.
After a nine-month suspension from trading on the Hong Kong Stock Exchange, shares in scandal-hit China Huarong Asset Management resumed trading on Wednesday only to see its value tank 50% on the day. This followed a state-backed bailout of almost US$ 6.6 billion after the distressed debt manager posted a record US$ 16 billion loss in 2020. However, H1 figures for Huarong, whose main shareholder is China’s finance ministry, had shown improvement with a US$ 25 million profit. This follows the execution of its former chairman Lai Xiaomin, after being found guilty of corruption; he had been arrested in 2018 on charges of taking US$ 280 million in bribes over a ten-year period. The company, established in 1999 to take bad debts off the country’s largest state-owned banks, expanded beyond its original remit.
Evergrande, with debts of over US$ 300 billion, has suspended trade in its shares in Hong Kong at a time when the Chinese real estate giant is scrambling to raise cash by selling assets and shares to repay suppliers and creditors, as part of its restructuring plan. Over the weekend, it was reported that the troubled company was ordered to demolish its thirty-nine residential buildings on the island of Hainan, within ten days, as they were built illegally. Last week, it did not make any interest payments on any of its US$ 19 billion worth of international bonds, after missing a payment deadline earlier in December. It also indicated that each investor in its wealth management product could only expect to receive US$ 1.3k each month, as principal payment for three months, irrespective of when the investment matures; a month earlier, Evergrande had agreed to repay 10% of the investment by the end of the month when the product matures. The developer advised investors that the situation was not “ideal” and that it would “actively raise funds” and update the repayment plan in late March.
To make matters worse, it seems that the company will not receive any assistance from the Chinese government because it was the Communist Party that changed its rules to limit how much money the country’s property developers could borrow, knowing that the likes of Evergrande, and other heavily indebted real estate firms, would face mega cash problems. A government bailout is out of the question as it has succeeded in sending a message that it was unhappy with the reckless spending behaviour of the sector and that it had to stop. Although the signs are that the government will not let it fail, but will allow it time to restructure, this appears to be a final warning from President Xi – Don’t Play With Me, ‘Cause You’re Playing With Fire.