Who Pays The Price? 29 April 2022
For the past week, ending 29 April 2022, Dubai Land Department recorded a total of 2,259 real estate and properties transactions, with a gross value of US$ 1.80 billion. A total of 197plots were sold for US$ 313 million, with 1,628 apartments and villas selling for US$ 959 million. The two top transaction sales were for plots of land – one in Business Bay for US$ 20 million, and another sold for US$ 19 million in Al Thanayah Fourth. The three leading locations for sales transactions were Al Hebiah Fifth, with 76 sales worth US$ 47 million, followed by Jabal Ali First, with 24 sales transactions worth US$ 33 million, and Al Yufrah 2, with 15 sales transactions, worth US$ 6 million. The top three apartment sales were one sold for US$ 157 million in Marsa Dubai, another for US$ 84 million in Burj Khalifa, and third at US$ 66 million in Business Bay. The sum of of mortgaged properties for the week was US$ 471 billion, with the highest being for a plot of land in Al Yelayiss 2, mortgaged for US$ 81 million. 75 properties were granted between first-degree relatives worth US$ 73 million.
The Mo’asher/Property Finder’s official sales price index noted that in Q1, Dubai registered 26.0k property transactions – the highest number of quarterly deals since 2010. During the quarter, 20.5k sales transactions, worth US$ 15.11 billion, were recorded. In March, there were 8.4k sales transactions, 83% higher, and 109% higher on an annualised basis, to US$ 6.15 billion. Property Finder reckoned that Dubai Marina, Downtown Dubai, Palm Jumeirah, Business Bay and Jumeirah Village Circle, were the top areas searched for apartment sales, whilst for villa sales. Dubai Hills Estate, Palm Jumeirah, Arabian Ranches, Damac Hills and The Springs, came out on top. With 60.3% new contracts, and the balance renewals, 44.8k rental contracts were signed in Dubai last month; 61.5% of the total emanated from five locations – Jabal Ali First, Al Warsan First, Business Bay, Naif and Al Karama.
HH Sheikh Mohammed bin Rashid Al Maktoum has approved a new housing package worth US$ 1.72 billion for UAE citizens in Dubai, including housing and land allotments for 4,610 Emiratis in the city, on the occasion of Eid al-Fitr, and as part of the Housing Programme for Dubai Citizens. A new housing complex in Al Khawaneej area 2, will include 1.1k residential villas and a plan for 3.5k plots in Umm Nahad 4 and Al Aweer. The Dubai Ruler emphasised that the housing programmes and social services projects were government priorities, aimed at meeting the needs of Emiratis and their families. Last year, he had approved the allocation of US$ 17.71 billion to an Emirati housing programme in Dubai, to be allocated over the next two decades to provide quality housing for Emiratis, and he also issued directives to quadruple the number of citizens benefiting from the housing programme effective from next year.
Last October, Samana Developers launched its Park View development which saw 80% of the project sold within four days. This week, the developer broke ground on its US$ 35 million G+6 storey Park Views, comprising 176 apartments, scheduled for hand over within eighteen months. Encompassing over 183k sq ft, it will house studio, 1 B/R and 2 B/R apartments, with private pools. Located close to a community park, Dubai Miracle and Butterfly Gardens, prices for a studio start at US$ 125k, with a flexible payment plan – 10% down payment, 1% every month for seventy months, 10% in the sixth month, 5% in the twelfth month, and 5% in the eighteenth month. The unit sizes range from 361 sq ft for studios, 937 for 1B/R, and 1,301 for 2 B/R apartments.
According to The Best Cities for Retirement Index, Dubai has been ranked fourteenth in terms of living standards for retirees but first for financial security and legacy management. A variety of factors such as quality of healthcare services, financial security, wealth management benefits available to retirees, mobility, connectivity, safety and availability of housing are used to draw up the list of cities. When all factors had been analysed, the top six cities turned out to be Tokyo, Wellington, Singapore, Paris, Vienna and Zurich. Other regional locations did not fare as well as Dubai, with Abu Dhabi in at 51st, Doha -70th and Riyadh 84th. Attracting retirees has become big business and many governments have introduced incentives to entice senior citizens to their shores. Dubai has its retirees’ visa, allowing residents and citizens from around the world to live in the emirate if they fulfil one of three requirements: earn a monthly income of US$ 5.45k, have US$ 272k in cash savings or own a property in Dubai worth at least US$ 545k. A retired expatriate and their spouse can apply for the five-year visa with the possibility of automatic renewal online, provided they continue to meet the criteria. Eligible applicants must be older than 55 and have valid UAE health insurance.
Savills has rated fifteen global cities to ascertain which is the best for digital nomads and it was no surprise to see Dubai third behind Lisbon and Miami. The real estate consultancy’s Executive Nomad Index is based on internet speed, quality of life, climate, air connectivity and prime rents. The Algarve, Barbados, Barcelona Dubrovnik, Saint Lucia, Malta and Antigua & Barbuda make up the top ten cities for long-term remote workers. As Covid accelerated the remote working trend, new technology also helped to encourage more workers to move from their traditional home bases; the government took advantage of the situation and quickly enacted appropriate legislation, such as a one-year residency permit, to entice such a labour sector to ‘set up shop’ in the emirate.
The Emirates Tourism Council confirmed that the country’s hotels welcomed 29% more visitors on the year to nineteen million tourists in 2021, generating a 70% surge in revenue to US$ 7.63 billion. Of the total number of tourists, 58% were domestic. There is no doubt that factors such as a successful vaccination protocol, stringent safety measures and a successful and quick economic recovery programme have benefitted the hospitality sector. During 2021, booked hotel nights jumped 42% to seventy-five million, with occupancy rates of 67% among the highest in the world. There was a 5.0% hike in the number of UAE hotels to 1.14k, whilst room numbers rose to 194k, of which 144k can be found in Dubai. The emirate also posted occupancy rates of 77% in the first two months of 2022.
Dubai’s administration has approved a three-year plan for the Dubai International Financial Centre Courts to establish a new digital economy court, dedicated departments for intellectual property rights, online courts with electronic capabilities, a new will deposit centre, digital will management system and multilingual consultancy services. This strategy is planned to enhance Dubai’s position as a global business and finance centre. Dubai’s Deputy Ruler, Sheikh Maktoum bin Rashid, noted “we approved the new strategic work plan that serves to further instil confidence that the DIFC Courts will forge ahead to shape the new dynamics of global dispute resolution.” The digital economy contributes about 4.3% to the UAE’s GDP which is equal to US$ 27.2 billion, a figure that will inevitably rise significantly in coming years.
Sheikh Hamdan bin Mohammed has launched a new fund targeted at enhancing the emirate as a global FinTech hub. The Crown Prince announced that the US$ 100 million ‘Venture Capital Fund for Start Ups’ will finance SME projects, supporting their development in Dubai and gradual expansion to global markets. The DIFC, a 15% contributor, will manage the fund that will create an integrated funding system with a number of suitable options that can cater to the needs of enterprises. It is expected that during the eight-year implementation period, the Fund will bolster the emirate’s GDP by US$ 817 million, will provide more than 8k jobs for emerging talents, and strengthen Dubai’s position as a regional centre for entrepreneurship and FinTech.
To meet the increased demand for air travel, Emirates is hoping to recruit 6k new cabin crew to boost numbers to an appropriate level. Last August, it announced that it required 3k cabin crew, as well as 500 airport services employees, and received 300k applications so it is certain that its HR division will be working overtime over the coming months. It seems that applicants need to have “a personality that shines, the ability to adapt to any situation and make people feel at ease”. Applicants need to have more than a year’s experience in hospitality and customer service, be a high-school graduate”, and be fluent in in written and spoken English. Entry level starting salary is US$ 2.66k plus housing and other benefits, with height requirements starting at 160 cm and the ability to reach 212 cm, while standing on tiptoes.
There are reports that Emirates is expecting to return to pre-pandemic levels by next year, as demand for global travel and tourism recovers. Currently, the carrier is operating at 70% of its pre-pandemic capacity and it is hoped that this will increase to 80% before the end of the summer, and 85% by the start of the winter season. For the year ending 31 March 2021, the world’s largest long-haul airline posted a loss of US$ 5.5 billion, not helped by the ongoing pandemic and despite a US$ 3.1 billion cash injection by its owner, the Dubai government, with Dnata, its airport services provider, received US$ 218 million in relief from authorities during that fiscal year. The latest 2021-22 accounts will be released shortly, and the airline is expecting a “good set of results” for its fiscal year ended March 31, narrowing losses for the last 12 months; it expects to return to profit in the next fiscal year, 2022-23.
The UAE fuel price committee announced petrol and diesel prices for the month of May 2022 with minor price reductions for both Super 98, down 2.1% US$ 0.022 to US$ 0.997, and E Plus 91 petrol by US$ 0.019 (2.0%) to US$ 0.948. Diesel prices headed in the other direction, with a US$ 0.163 rise to US$ 1.112.
In Q1, more than 10k companies joined Dubai Chamber of Commerce – a 64% hike in numbers compared to the comparative 2021 figure – bringing its total to almost 300k. It is estimated that member exports and re-exports saw 11.3% growth over the year, while their value reached US$ 16.6 billion. The number of certificates of origin issued by the Chamber was 7.1% higher to 179k. The Expo 2020 impact was one of the main drivers behind the much-improved figures that reflect Dubai’s strengthening position as a preferred business hub.
With the six-month extravaganza closing its doors last month, figures show that more than 25% of all Expo 2020 Dubai contracts, in terms of , were won by SMEs; in 2016, the organising committee had made a commitment that at least 20% of all contracts would go to SMEs. More than 3.2k contracts were awarded, of which 66% were SMEs, and of that total 1.39k were local and the balance 760 were from overseas. 52% of the overseas total came from five countries – UK (24%), USA (16%), France (4%), India (4%) and Australia (4%) – and that overall, suppliers from outside the UAE were sourced from ninety-four countries.
Dubai has become the latest emirate to approve a nine-day Eid Al Fitr break for federal government staff which will start on Sunday, 30 April, to 08 May, with work resuming on Monday, 09 May. Recently, the Sharjah public sector saw the same nine-day break, broken down to 30 April to 05 May and the fact that Sharjah has a three-day weekend, Friday 06 May to 08 May. Eid Al Fitr is marked on the first day of Shawwal – the month that comes after Ramadan in the Hijri calendar – and is expected to fall on Monday 01 May, as per astronomical calculations. The Ministry of Human Resources and Emiratisation had earlier announced that private sector staff would have four-day break from Ramadan 29 until Shawwal 3 – Sunday 30 April to Wednesday 03 May.
Last Saturday, in the 74th weekly live Mahooz Grand Draw, forty-five lucky participants shared the US$ 272k, (AED1 million), second prize in the 74th weekly live Mahzooz Grand Draw. They had picked four of the five lucky numbers, with a further 1.7k claiming US$ 95 (AED 350) for matching three of the five numbers. The total prize money, which also included three lucky raffle prize winners, was US$ 514k.The top prize of US$ 2.72 million (AED 10 million) is still waiting to be won and perhaps tomorrow Saturday 30 April, could be someone’s lucky day; even if not won, someone will drive off in a 2022 Nissan Patrol Platinum V8, 5.6L Engine in an Eid-special Mega Raffle Draw. To enter the draw, entrants will have to register via http://www.mahzooz.ae and by purchasing a bottle of water, for almost US$ 10 (AED 35).
The Emirates Development Bank has agreed with Food Tech Valley, launched last May, to provide financing for SMEs and start-ups operating within Dubai’s food tech hub. Both parties will support tech-based companies operating, or seeking to operate, in the hub with financing, roadshows, seminars, mentorships and knowledge transfer. Al Wasl is developing the project in partnership with the Ministry of Food and Water Security, with the aim of attracting local and foreign direct investments within the field to achieve the government’s mission of transforming the UAE into a global hub for tech-based food and agricultural solutions. It also targets tripling the country’s food production and make the UAE more self-sufficient.
With no financial details of the deal disclosed, Swyl has acquired the four-year old Turkish company Volt Lines which provides mass transit solutions to corporate clients working in more than 110 companies, in major cities such as Istanbul and Ankara The Dubai-based shared mobility services provider’s strategy seems to be expansion of its operations in Europe, and it currently offers intercity, intracity, business-to-business and business-to-government transport across more than one hundred cities in more than twenty countries. It was also the second Arab technology company to be listed on Nasdaq. Over the past six months, it acquired Argentina’s Viapool and European tech-enabled mass transit solutions, provider door2door.
Husain Sajwani’s Damac Group, recently delisted from the Dubai Financial Market, is planning to invest US$ 100 million to build digital cities, using their own companies, property developer Damac Properties, data centre firm Edgenex, luxury jeweller de-Grisogono and fashion house Roberto Cavalli. As one of the first local entrants into the world of metaverse, it will be in a good position to cater to the needs of the entire Group when it comes to digital assets, including virtual homes, digital property, digital wearables, digital jewellery and a digital treat of Damac’s Mandarin Oriental Resort Bolidhuffaru in the Maldives. The Damac Group has ambitions to move into digital assets and non-fungible tokens and has the ultimate goal to become a leading global digital brand.
With its latest listing – a US$ 1.6 billion Sukuk for the Islamic Development Bank (IsDB) – Nasdaq Dubai’s portfolio of Sukuks increased to US$ 77.5 billion, making the Dubai bourse one of the world’s largest Sukuk listing centres. The five-year Trust Certificates were priced at par, with a profit rate of 3.213%, payable on a semi-annual basis. IsDB has currently thirteen issuances, totalling US$ 18.05 billion, with the latest issuance being used to finance projects under the development mandate of the Bank.
Emirates Integrated Telecommunications Company PJSC – du – posted an 8.5% hike in Q1 revenue of US$ 852 million, with EBITDA and net profit both higher – by 13.3% to US$ 346 million and 21.0% to US$ 85 million respectively. A breakdown of revenue sees mobile services up 6.9% at US$ 382 million, fixed services 22.8% higher at US$ 222 million and handset sales coming in on US$ 60 million. Capex was at US$ 83 million and is expected to rise over the rest of the year. There was a 10.4% growth in mobile customers to 7.5 million, with post-paid customers at 1.4 million and prepaid at 6.1 million.
In Q1, the Commercial Bank of Dubai posted a 32.6% hike in net profit of US$ 117 million, as the bank’s operating income rose 17.5% to US$ 234 million, driven by net interest income, fees and commissions, operating expenses dropping 2.1% to US$ 64 million from Q4 2021. Operating profit was US$ 170 million, up 16.4% year on year, while net impairment allowances atUS$ 52 million, were down 8.6%. CBD also posted a record US$ 32.42 billion billion in assets attributable to a 3.4% growth in loans over the quarter. The bank also received a major award during Q1, being ranked by Forbes as the Number One Bank in the UAE in the World’s Best Banks 2022 report.
Via a special resolution, Deyaar’s shareholders approved a directors’ proposal to write off its accumulated losses through the company’s legal reserve, (US$ 82 million) and cancellation of shares, (by US$ 381 million to US$ 1.19 billion), equal to the remaining losses of US$ 463 million at 31 December 2021. The company, majority owned by Dubai Islamic Bank, posted a US$ 14 million profit – following a US$ 59 million loss a year earlier – as revenue grew 22% to US$ 138 million. The company noted that the restructuring will increase “the company’s attractiveness to investors and the possibility of obtaining funds for its future projects, which will reflect positively on the share price in the Dubai Financial Market”.
Dubai Islamic Bank reported a Q1 58% year-on-year surge in net profit to US$ 354 million, as revenue climbed 11% to US$ 672 million, driven by lower impairments and stronger top-line growth. The largest Islamic bank in the UAE, and the second-largest Islamic bank in the world, noted that total income was 6% higher at US$ 822 million, with net operating profit up 10% to US$ 440 million. DIB’s net financing and sukuk investments grew 3.0% to US$ 64.1 billion, with gross new financing of nearly US$ 4.4 billion being driven by strong growth of wholesale bookings on the back of an improved economic outlook. During the quarter, the balance sheet grew 3.0% to US$ 78.3 billion, as customer deposits remained steady at US$ 55.7 billion. Impairment provisions were reduced 44% to US$ 114 million.
The DFM opened on Monday, 25 April, 333 points (7.5%) up on the previous six weeks, moved 36 points (1.0%) higher to close on Thursday 28 April, at 3,719. (The bourse will be closed for the next four trading days and will reopen on Thursday 05 May, after the Eid Al Fitr holiday). Emaar Properties, US$ 0.37 higher the previous eight weeks, nudged US$ 0.02 up to US$ 1.74. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.78, US$ 4.14, US$ 1.71 and US$ 0.73 and closed on US$ 0.77, US$ 4.16, US$ 1.76 and US$ 0.73. On 28 April, trading was at 129 million shares, with a value of US$ 89 million, compared to 115 million shares, with a value of US$ 83 million, on 22 April 2022.
For the month of April, the bourse had opened on 3,527 and, having closed the month on 3,719 was 192 points (5.4%) higher. Emaar traded US$ 0.11 higher from its 01 April 2022 opening figure of US$ 1.63, to close the month at US$ 1.74. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.00, (it only started trading in mid-April), US$ 4.09, US$ 1.68 and US$ 0.66 and closed on 30 April on US$ 0.77, US$ 4.16, US$ 1.76 and US$ 0.73 respectively. The bourse had opened the year on 3,196 and, having closed April on 3,719, was 523 points (16.4%) higher, YTD. Emaar traded US$ 0.41 higher from its 01 January 2022 opening figure of US$ 1.33, to close April at US$ 1.74. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the year on US$ 0.00, US$ 3.69, US$ 1.47 and US$ 0.72 and closed on 29 April on US$ 0.77, US$ 4.16, US$ 1.,76 and US$ 0.79 respectively.
By Friday 29 April 2022, Brent, US$ 9.95 (8.9%) lower the previous week, gained US$ 5.84 (5.7%), to close on US$ 107.59. Gold, US$ 42 (2.5%) lower the previous week, shed US$ 36 (1.9%), to close Friday 29 April on US$ 1,897.
Brent started the year on US$ 77.68 and gained US$ 29.91 (38.5%), to close 29 April on US$ 100.05. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has gained US$ 66 (3.6%) during 2022, to close on US$ 1,897. For the month, Brent opened at US$ 100.05 and closed on 29 April, US$ 7.54 (7.5%) higher, on US$ 107.59. Meanwhile, gold opened April on US$ 1,943 and shed US$ 46 (2.4%) to close at US$ 1,897 on 29 April.
Driven by a dip in Q1 sales and charges arising from the Ukraine war, Boeing has posted a US$ 1.2 billion net loss, compared to a US$ 519 million deficit a year earlier. Q1 revenue slowed 8.0% to US$ 14.0 billion, driven by “lower defence volume and charges on fixed-price defence development programmes”, partially offset by commercial services volume”. Commercial aircraft sales dipped 3.0% to US$ 4.2 billion, with a delivery of ninety-five aircraft, as well as a 4.2k plane backlog, valued at US$ 291 billion. A 20.6% decline in operating margin reflects “abnormal costs and period expenses, including charges for impacts of the war in Ukraine and higher research and development expense”. Revenue from defence, space and security decreased 24% to nearly US$ 5.5 billion, whilst R&D spend jumped 26% to US$ 633 million. Its global services unit’s first-quarter revenue increased 15% to US$ 4.3 billion, as the unit secured a fuel-saving digital solutions contract for Etihad Airways’ 787 fleet and was awarded a contract for KC-135 horizontal stabilisers from the US Air Force.
Beset by mostly self-made problems over the past decade, and maybe longer, Boeing’s 777X programme could face a new delay that could push deliveries, a year later than earlier expected, to early 2025. The report claims that the certification target will take place in late 2024, with deliveries following nine to twelve months later. Last month, the Federal Aviation Administration warned Boeing that existing certification schedules for the 737 MAX 10 and 777X were “outdated and no longer reflect the programme activities”. It has to be remembered that the 777X has been in development since 2013 and at one point was expected to be operational by June 2020. The plane maker is also hoping to gain approval for the 737 Max 10 by the end of the year and has been requested by regulators to provide a “mature certification schedule”. To complete the trifecta, Boeing is also working to resume 787 Dreamliner deliveries after halting them nearly a year ago over structural flaws.
Californian-based Lease Corporation expects to lose US$ 802 million because of it writing off the value of the remaining twenty-seven aircraft it has in Russia; twenty-one of the planes are company-owned and the remaining six in its managed fleet. The loss will be reflected in accounts due to be published next month.
Last week, Netflix warned its revenue growth had slowed considerably after it lost subscribers due to stiff competition from rivals and the rising cost of living. This week, there was good news and bad news for Facebook, reporting that it has stopped losing users in Q1, growing its customer base to 1.96 billion, but posted its slowest revenue growth in a decade – 7% higher at US$ 27.9 billion; overall, Meta’s Q1 profits were US$ 7.46 billion. Last year, the social network noted a decline in users for the first time, and since the news was released in February 2022, its market value has lost billions from the firm’s market value. Since executives disclosed the fall in February, the firm’s share price has nearly halved, but on Wednesday when Meta’s Q1 details were published, shares jumped 19% in after-hours trade. Facebook is facing more competition against the likes of TikTok and Amazon.
Q1 brings some disappointing news for Amazon, as it reported its first loss, (at US$ 3.8 billion), since 2015, as online sales slipped 3%, with the pandemic-induced boom to its business starting to fade; overall sales headed 7% higher to US$ 116.4 billion, driven by a 37% hike in Amazon Web Services and advertising revenue 23% higher. However, growth in other sectors continued but the loss was further exacerbated by its investment in electric carmaker Rivian. Amazon, like many other global conglomerates, is also facing the impact of rising costs brought on by surging inflation, supply chain pressures and the Ukraine war. Its share value sank more than 10% in after-hours trade, with concerns spreading to other online retailers, sending shivers through US markets, which had already started moving south in recent weeks.
Even though iPhone maker Apple posted increases in Q1 sales and profit by 9% to US$ 97.3 billion and 10% to US$ 25.0 billion, it warned of a “challenging macroeconomic environment”, noting that “we are not immune to these challenges”. iPads tablets, which contribute US$ 7.6 billion to total sales was down 2%, and was the only segment that experienced a dip in Q1 sales. It also indicated that the company was more worried about Covid-related shutdowns in China and chip shortages, (that are impacting the firm’s ability to meet demand for its products), than that buyers will cut spending. It was noted that the supply chain frictions would dent Apple’s sales in the current Q2 by up to US$ 8 billion, and that it will be “substantially larger” than its impact in the last quarter. Apple also announced a 5% increase in cash dividend to US$ 0.23 per share.
On Monday, the irrepressible Elon Musk paid US$ 44 billion in cash to acquire Twitter, a social media platform populated by millions of users and global leaders. Twitter said Musk secured US$ 25.5 billion of debt and margin loan financing and is providing a US$ 21 billion equity commitment. The world’s richest person, worth US$ 268 billion, has long been a critic of Twitter on several fronts including its algorithm for prioritising tweets should be public and giving too much power on the service to corporations that advertise. Twitter shares rose 5.7% on Monday to close at US$ 51.70, well below the US$ 70 range where Twitter was trading last year; however, the offer price shows a near 40% premium to the closing price, the day before Musk disclosed he had bought a more than 9% stake, two weeks ago.
Days after Elon Musk acquired the microblogging site, Twitter had posted a seven-fold plus Q1 net income of US$ 513 million, compared to US$ 68 million a year earlier; revenue was 16% higher at US$ 1.2 billion. 92% of the revenue was from advertising sales which expanded by 23% to US$ 1.1 billion but revenue from subscriptions and other streams dropped 31% yearly to US$ 94 million. However, the net income figure included a pre-tax gain of US$ 970 million from the sale of MoPub — a platform for promoting and monetising apps — to AppLovin for US$ 1.05 billion and income taxes related to the gain of US$ 331 million. Daily active users rose 16% in the quarter to 229 million, split between international users (up 18.1% to 189 million) and US ones (6.4% higher at 40 million).
This week, Elon Musk divested US$ 4 billion of his shares in Tesla but indicated that he had no plans to sell anymore, after earlier in the week shares the had fallen, (on Tuesday wiping US$ 125 billion off its market value), on news that he was to sell part of his stake in the firm to help pay for his takeover of Twitter. This was his first sale of Tesla shares since offloading US$ 16.4 billion worth of stock late last year. Earlier in April, Tesla shares had fallen almost 20% when he earlier announced that he had bought a 9.2% stake in Twitter.
A Californian court has ruled against Zoom Communications and handed out an US$ 85 million penalty, including US$ 21 million in legal fees. The payment is in relation to settle a case stemming from privacy concerns and a number of hacking and video-crashing incidents, with claims that the owner of the popular video conferencing application misled its users about the security of its encryption technology. Further allegations include that Zoom shared their data through third-party software from companies like Facebook, Google and LinkedIn without consumer consent. The global video conferencing market is expected to grow by almost 250% over the next five years to US$ 22.5 billion, at a compound annual rate of almost 20%.
According to research firm Kantar, over the 12 weeks to 17 April, Lidl and rival discounter Aldi were the fastest growing UK grocers. UK’s sixth biggest supermarket, Lidl has 920 sites and wants to grow that number by 19.6% to 1.1k by 2025. This week, Lidl has introduced a finder’s fee, (either 1.5% of a freehold price or 10% of the first year’s rent), to anyone who can find a suitable site for a new store. As it expands its operations, there is no doubt that it is taking market share from the big four supermarket chains, so much so that Asda and Morrisons announced they were cutting prices on hundreds of products as they try to compete.
The biggest shareholder and chairman of retail-to-energy group Reliance Industries is reportedly interested in a potential bid, with US buyout firm Apollo Global Management, for UK high street chain Boots. Billionaire Mukesh Ambani has yet to confirm what the share split will be for the retailer, which has more than 2.2k pharmacies, health and beauty stores in the UK, and that could be valued at US$ 7.5 billion. If successful, the deal would see Boots expand into India, Southeast Asia and the Middle East as well as growing the business in the UK.
Having initiated an investigation last May into suspected fraud and money laundering by parent firm GFG Alliance, the Serious Fraud Office has visited the offices of Sanjeev Gupta’s Liberty Steel. The parent company owns a myriad of businesses, focussing on energy, steel and trading, with a global workforce of some 35k, many of whom are in the UK. Mr Gupta and Liberty Steel came under the spotlight because its main lender, Greensill Capital, collapsed after its insurer refused to renew cover for the loans it was making. It was the main lender to GFG’s Liberty Steel, which employs 3k people. The parent company, GFG, utilised Greensill’s supply chain finance services, which effectively allowed it to send any of its invoices to its lender and receive almost immediate payment. The problem arises when dummy or fraudulent invoices are used, including related party transactions, as may have been the case; in addition, concerns have been raised as to GFG’s unusual funding and company structures.
UK car production continues to disappoint as it headed south, with Q1 figures of 207k – 32.8% lower on the year. The main drivers behind the fall were the ongoing global supply chain problems, a worldwide shortage of computer chips and rising energy costs for manufacturers. Furthermore, the closure of Honda’s Swindon plant in 2021 did not help matters, having contributed to much reduced UK car exports to the US; US and EU car exports declined by 63.8% and 25.5% respectively. Q2 figures will also be impacted by the Ukraine crisis, as the two combatant countries supply integral parts such as wiring systems.
The UK government has introduced new food laws that Kellogg’s has taken umbrage with and has threatened to take the Johnson administration to court. The issue revolves around some cereals being prominently displayed in stores because of their high sugar content, with data showing that cereals are eaten with milk or yoghurt, in 92% of cases. Including added milk would change the calculation by reducing the proportion of sugar and salt content relative to the weight of the overall serving but the government has remained steadfast as some of their products are high in fat, sugar or salt in their dry form. The new law will come in force in October and would see products covered by the restrictions not being allowed to be displayed in prominent places within a store – and also their online equivalents. The aim of the new law is to halve childhood obesity by 2030.
The latest Putin edict sees countries that refuse to pay for their Russian energy in roubles having their gas flows cut off, starting with Bulgaria and Poland where gas supplies were severed from last Wednesday. Energy may well prove a major economic weapon in the on-going conflict in the Ukraine. On the details being released, European gas prices surged as much as 17%, with traders calculating the risk of other European countries being hit next. As the situation currently stands, European nations will soon have to decide whether to accept Putin’s terms or lose crucial supplies – and face the prospect of energy rationing. It will be interesting to see what the German and Italian governments do, with both countries heavily dependent on Russian supplies.
Following Vladimir Putin’s March decree earlier that “unfriendly countries” would have to start paying for its oil and gas in roubles to prop up its currency after Western allies froze billions of dollars it held in foreign currencies overseas, one major German energy company, Uniper, has acquiesced to the request and announced that it will pay in euros which will be converted into roubles, meeting a Kremlin demand for all transactions to be made in the Russian currency. To the neutral observer, this seems to be a flagrant disregard of the sanctions, and, with its usual bending of the rules, the EC said that if buyers of Russian gas could complete payments in euros and get confirmation of this before any conversion into roubles took place, that would not breach sanctions. Meanwhile, this week an EU official confirmed that any attempt to convert cash into roubles in Russia would be a “clear circumvention of sanctions” as the transaction would involve Russia’s central bank. Even the EC boss, Ursula von der Leyen, noted that firms could still be breaking the rules. Poland has reiterated that the EU should penalise countries that used roubles to pay for Russian gas and was particularly critical of Germany, Hungary and Austria for resisting the gas embargo.
European leaders branded Russia’s announcement it is cutting off gas supplies to Poland and Bulgaria after they refused to pay for the deliveries in roubles — a measure Moscow imposed on so-called “unfriendly” foreign buyers in response to sanctions over its invasion of Ukraine. Poland imports about 50% of its gas requirements, and Bulgaria, 75%, European Council President Charles Michel, commented that the move was “another aggressive unilateral; move by Russia with EC chief, Ursula von der Leyen, declaring Gazprom’s decision “yet another attempt by Russia to use gas as an instrument of blackmail” and that it was “unjustified and unacceptable”; the Belgian-born German leader should realise that ‘all’s fair in love and war’. It is hard to justify why European countries are still remitting up to US$ 850 million a day for Russian oil and gas and shows that certain countries are not adhering to the spirit of imposing sanctions.
Even before the onset of the Ukraine crisis, the world had begun to see inflation spiralling and food and energy prices heading north at a quick pace. History teaches that the uptick in energy prices, over the past twenty-four months, have been the highest since the 1973 oil crisis and that for food commodities and fertilisers the largest since 2008; Russia and Ukraine are large producers of both. The World Bank has forecast the average 2022 price of Brent will hover around the US$ 100 mark, down to an average US$ 92 next year, driven by disruptions in both war-related trade and production. The IMF expects 2022 inflation to hit 5.7%, in advanced economies, and 8.7%, in emerging market and developing economies, and next year 2.5% and 6.5% respectively. (Somebody should advise the world body that official inflation rates in the US and UK currently stand at 6.6% and 7.0%).
Q1 saw the US economy contracting – at an annualised rate of 1.4% – driven somewhat by trade disruption from the Ukraine war, and further exacerbated by the double whammy of a surge in imports, as businesses accelerated purchases, and a fall in exports, as overseas demand weakened. This quarter last year posted a 6.9% annualised growth rate. Despite inflation running at a forty-year high, households are still spending but will have to pull pack as economic conditions deteriorate further and growing inflation further erodes purchasing power. Wells Fargo has indicated that it considers that there is a 30% possibility of a US recession next year.
Yesterday, Joe Biden asked Congress for US$ 33 billion in military, economic and humanitarian assistance to support Ukraine so that it could defend itself better in the war with Russia. Most of the money will be used for the military, (US$ 20 billion), economic aid (US$ 8.5 billion), and humanitarian assistance (US$ 3.0 billion). The 78-year old US leader noted that the US had already supplied ten anti-tank weapons for every tank that Russia has deployed to Ukraine but clarified that the US was not attacking Russia. “We are helping Ukraine defend itself against Russian aggression.” Some of the US partners should be asking themselves whether they are shouldering their fair share of the burden in fighting the Russians.
With Australian cost of living 5.1% higher on the year – the most since June 2001 when the 10% GST was introduced – it is highly likely that there will be a chance of a pre-election interest rate hike next week. However, it must be noted that a federal election on 21 May and the timing of the release of quarterly wage figures may delay any rate announcement until June. Any rate increase could be at 0.5%, rather than the traditional 0.25%. Latest data indicates that consumer prices jumped 2.1% in Q3, of the fiscal year ending in June. Underlying inflation – that takes out the most extreme price moves – came in at 3.7%, (and 1.4% on the quarter), and well above the RBA’s 2%–3% target, and the highest figure seen in twelve years.
Average April UK house prices hit a record high of US$ 458k, (GBP 360k), the third month in a row a new benchmark has been set, with prices rising over a record US$ 24k for the period. Rightmove estimated that 53% of properties are selling at, or over, their final advertised asking price, amid high demand for a limited stock of properties, and that they are achieving 98.9% of the final advertised asking price on average. Two interesting facts were that three years ago, the average time to sell a property was sixty-seven days, but that now stands to thirty-three days, and the recent three-month price rise momentum has been even greater than during the stamp duty holiday-fuelled market of last year. There are some who think that this property balloon is soon set to deflate, (with a probable softer landing than some may expect), and prices will decline (not tank) beginning in June, with the process being sped up by the triple whammy of continuing upward inflationary momentum, declining consumer spend and rising mortgage rates.
Government borrowing – the difference between spending and tax income – in the fiscal year ending last month was 52.2% lower, on the year, at US$ 191.1 billion, as the UK has had to borrow less, with expensive schemes such as furlough having ended and tax receipts moving 17.9% higher to US$ 780.5 billion. Last month, the Office for Budget Responsibility said it expected borrowing in 2021-22 to be US$ 160.9 billion, which came in 18.8% higher than expected. Although the US$ 22.8 billion borrowed last month was the second-highest amount for the month since records began in 1993, borrowing in March remained well above pre-pandemic levels but was US$ 11.1 billion less than the amount borrowed in March 2021.The total amount the government borrowed equated to about 6.4% of GDP. Despite the fall in government borrowing, it is still the third-highest level for a financial year since records began in 1947. The recent surge in inflation has seen the government debt interest payments to reach a record high for a financial year at US$ 88.0 billion. There are no prizes guessing Who Pays The Price?
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