What You Waiting For? 13 May 2022
President His Highness Sheikh Khalifa bin Zayed Al Nahyan passed away today, 13 May. In a statement issued today, “The Ministry of Presidential Affairs mourns the death of the nation’s President His Highness Sheikh Khalifa bin Zayed Al Nahyan”. He was the second President of the UAE, (and sixteenth ruler of the emirate of Abu Dhabi), succeeding his late father, who died on 02 November 2004.
The Ministry has also declared an official mourning period for the late His Highness Sheikh Khalifa bin Zayed Al Nahyan, with the flag flown at half-mast for forty days starting from today. Work in ministries, departments, federal and local institutions and the private sector will be suspended for three days starting from Saturday, 14 May, and work will resume on Tuesday, 17 May.
As required by law, the rulers of the seven emirates have to meet within thirty days and will probably convene tomorrow Saturday 14 May. Until then, the constitution appears to appoint HH Sheikh Mohammed bin Rashid Al Maktoum as interim president.
With today’s sad news of the passing of the UAE President Sheikh Khalifa bin Zayed Al Nahyan, the public sector entered a three day mourning period, so there is no Dubai Land Department weekly property report yet available for the week, ending 13 May 2022.
According to Knight Frank, some locations in Dubai’s prime residential market, including Palm Jumeirah, Emirates Hills and Jumeirah Bay Island, have seen prices skyrocket 60% over the past twelve months. The consultancy reported that Palm Jumeirah and Emirates Hills have posted annual rises of 38% and 20%, and 11% and 6.5% in Q1. Last year, the agency sold ninety-three ultra-private homes, (valued over US$ 10 million) and a further thirty-two in Q1.
As the Dubai economy improved quicker from the pandemic, than most expected, and with 26k property transactions recorded in Q1 – the highest number of quarterly deals since 2010 – overall, local house prices in Dubai were 10.6% higher on the year, with the market up 2.6% in Q1. However, the study also estimated that average prices are still almost 25% lower on their 2014 peak, with villas 12.9% lower than in 2014. It also noted that there had been a slowdown in the rate of growth in certain market segments, as the average Q1 villa price rose 3.2% – 0.2% lower than the 3.4% growth registered in Q4 – the slowest quarterly increase in more than two years. The results came with a caveat that Dubai’s most expensive locations have been witnessing surging prices, driven by the influx of overseas UHNWIs (ultra-high net worth individuals) looking for suitable accommodation. Knight Frank forecasts another 100k units, (75k apartments and 25k villas), will enter the market by the end of 2025, including 50k due to be completed by the end of the year. These figures seem to be a little skewed.
In a deal to promote Emirati start-ups, in the healthcare and allied sectors, Dubai Healthcare City is offering a five-year 20% rental discount to Emirati entrepreneurs when they establish their business at the free zone. Other SME-related incentives include the health authority dedicating 10% of its procurement budget for purchases from national companies listed with Dubai SME, as well as assigning locations within the free zone to host food truck projects free of charge and give access to marketing and customer service support.
Emirates has announced that tickets for its much-vauntedfull Premium Economy offering will start from next month and that, as from 01 August, it will be introduced on A380 flights to London, Paris and Sydney, with Christchurch on board from December. The new cabin class will offer passengers luxurious seats, more legroom, and a service to rival many airlines’ business class offering; Emirates is the only regional airline to offer a Premium Economy cabin. In November, it will begin its retrofit programme to install Premium Economy on 67 A380s and 53 Boeing 777s. Last year, the airline introduced Premium Economy seats in January 2021.
Emirates Airline anticipates there will be no changes to the costs of flying on Emirates this summer, as they have already built in the increased fuel cost into ticket prices to absorb further costs within the company. As indicated earlier in the month, the carrier is operating on 90% of pre-COVID routes and at 70% capacity, as the recovery gains momentum; it hopes to top 85% of pre-COVID capacity by year end and 100% in 2023. The airline’s chairman, Sheikh Ahmed bin Saeed Al Maktoum, also confirmed that Emirates is planning to repay the US$ 4.1 billion it received from the government as a rescue package at the onset of Covid-19. Speaking at this week’s ATM, he intimated that it will be in the form of dividend starting this financial year. At the event, Emirates also picked up four Business Traveller Middle East industry awards – ‘Best Airline Worldwide’, for the ninth consecutive time, ‘Best Premium Economy Class’, ‘Best Economy Class’ and ‘Best Frequent Flyer Programme’.
With its fiscal year ending 31 March, Emirates Airline posted a 91% surge in annual revenue to US$ 16.13 billion, with the carrier expanding global capacity as Covid restriction were eased. Over the year, with its network growing to over 140 destinations by 31 March, and an extra five A-380s added to its fleet, the airline managed to reduce its annual loss from US$ 5.53 billion to US$ 1.06 billion. Group revenue, helped by dnata’s “significant revenue growth”, was 86.0% higher at US$ 18.04 billion, with a closing cash balance of US$ 7.03 billion – 30.0% higher on the year.
Dubai International has posted its busiest quarter since 2020 with 13.6 million passengers, 15.7% higher than recorded in the previous quarter, and 238% higher than Q1 2021 – a sure indicator that business is slowly returning to pre-pandemic levels. It is looking at an annual total of 58.3 million by year end. The facility handled 520k tonnes of cargo, 15.5% lower than the previous quarter. Flight movements were 5.8% higher on the previous quarter at 82.0k. Four countries accounted for 34.0% of the total traffic, equating to 4.63 million passengers – India (1.6 million), Saudi Arabia (1.1 million), Pakistan (997k) and UK (934k). The four leading city destinations were London, Riyadh, Jeddah and Istanbul with totals of 617k, 517k, 337k and 324k.
Dubai’s hospitality sector continues to recover strongly from the pandemic recording a massive 214% improvement in Q1 to 3.97 million international overnight visitors, with hotel occupancy rates at global highs of 82%, compared to the likes of London (56.0%), New York (55.3%) and Paris (51.2%), according to data from hotel management analytics firm STR. March proved a stellar month with 1.78 million international visitors, 11.0% higher on pre-pandemic figures. 73% of visitors came from three markets – Mena/GCC (35%), Western Europe (24%) and South Asia (14%). All key hospitality metrics in Q1 were markedly higher on pre-pandemic returns – Average Daily Rate of US$ 177 (30.3%), Guests’ Length of Stay at 4.3 nights, (22.9%) and Occupied Room Nights of 10.22 million (18.4%).. There has been an 8.0% increase in the number of hotel establishments to 769 and a 19.4% hike in the number of rooms to 140.2k. From these figures, there is no doubt that Dubai is well on its way to becoming the world’s most visited destination.
Another factor that will benefit the emirate’s hospitality sector is that TripAdvisor Travellers’ Choice Awards 2022 selected Dubai as the world’s most popular destination, the No.1 destination for ‘City Lovers’ and the fourth destination for ‘Food Lovers’. This will be enhanced by announcements that Michelin Guide Dubai will open in June, followed by the arrival of the renowned fine dining food critique brand Gault&Millau. Dubai is also home to over 12k restaurants and cafes. The emirate, with more than 97% of the population vaccinated, is one of the safest cities in the world and is ranked third globally in Bloomberg’s Covid Resilience Ranking.
On Monday, Sheikh Ahmed bin Saeed Al Maktoum officially inaugurated Arabian Travel Market (ATM) 2022 – the 29th edition of the Middle East’s largest travel and tourism exhibition. At the opening, he noted that Dubai continues to strengthen its position at the forefront of global travel and tourism recovery by hosting such global events, and lauded Dubai’s ability to provide a safe environment for both tourism and prominent global events post-Covid. The four-day event, 85% larger than last year, with an expected 20k attendance, attracted 1.5k exhibitors from 158 global destinations. This year sees the introduction of the ATM Draper-Aladdin Start-up Competition, which has fifteen travel, tourism, and hospitality innovators pitching for up to US$ 500k of funding – as well as the possibility of a further US$ 500k of investment as part of the hit TV show, Meet the Drapers.
At the ATM, the Dubai Health Authority revealed that, last year, Dubai received 630k international health tourists who spent an estimated US$ 2.0 billion in the emirate. A breakdown of these figures indicates that:
- a total of 38% from Asia, 24% from Europe and 22% from Arab and GCC nations
- 55% were male and 45% were female
- a total of 70% received treatment at multidisciplinary clinics, 16% at hospitals, and 14% at one-day surgery centres
- a total of 43% were from Asia, 24% from Europe and 22% from Arab/GCC nations
- the three medical specialties that attracted the most health tourists were dermatology (43%), dentistry (18%), and gynaecology (16%)
Blockchain consultancy, ColossalBit, announced that The Alves Trophy Collection NFTs will be launched next month at Dubai’s MetaTerrace. The Brazilian international footballer, who also played for Barcelona, PSG and Juventus, will be launching a line of luxury watch non-fungible tokens, created in collaboration with UK watchmaker Backes & Strauss. The collection, with forty three virtual timepieces , will commemorate each trophy Dani Alves won in his illustrious career. The launch will only enhance Dubai’s growing reputation in the world of NFTs, (which are unique digital properties in the form of art or media bought using blockchain technology). It is estimated that in 2021, NFT collectors sent a global US$ 40 billion worth of digital assets to NFT marketplaces, with the this year’s figure already topping US$ 37 billion.
Based on data from the Financial Times Ltd. ‘fDi Markets’, Sheikh Hamdan bin Mohammed, revealed that last year, Dubai was ranked first in the world in attracting foreign direct investment, with a record number of 418 greenfield FDI projects. The Crown Prince noted that, “Dubai has created a stable, sustainable economic environment and a vibrant business ecosystem for companies and entrepreneurs to launch new ventures, tap new opportunities and expand their business both in the country and beyond its borders”. The annual ‘Dubai FDI Results and Rankings Highlights Report 2021’ confirmed that the emirate had surpassed London and Singapore for the first time, registering more than fifty FDI projects than its two main rivals. The share of global greenfield FDI projects attracted into Dubai came in 0.7% higher on the year to 2.8%. Dubai continued to perform well across a broad range of metrics
- first in the Mena and third globally in FDI capital inflows
- first in the Mena and third globally in First In Reinvestment FDI projects
- first in the Mena and fifth globally, for FDI job creation
- first in the Mena and tenth globally in Global Venture Capital FDI Projects
There was significant annual growth in all key FDI indicators where the estimated value of 2021 FDI capital flows into Dubai was 5.5% higher at US$ 7.1 billion from a total of 618 announced FDI projects. FDI job creation, at 2.9k, was 35.7% higher on the year. Only Singapore surpassed Dubai, as the emirate attracted forty-three Headquarters FDI projects in the year, whilst it also ranked third globally in terms of HQ FDI capital flows, which amounted to US$ 763 million. It was also reported that eighty-four Dubai-based start-ups successfully attracted Venture Capital Backed FDI, worth US$ 638 billion during the year.
In a bid to further enhance the participation of Emirati talents in the private sector, the UAE Cabinet has introduced a package of incentives to increase the competitiveness of the Emirati workforce. They include an 80% reduction in the service fees of the Ministry of Human Resources and Emiratisation for private sector establishments, which accomplish major achievements in terms of recruitment and training of Emirati citizens, and an increase to an annual 2% of the Emiratisation, (and to reach the target of 10% by 2026), from high-skilled jobs in establishments that employ fifty workers or more. It is expected that this will attract over 12k job opportunities annually for citizens in all economic sectors. This is in line with the federal Nafis programme (meaning to compete in Arabic), that aims to increase the competitiveness of the Emirati workforce and to facilitate the private sector employment of UAE citizens. The programme also offers benefits such as the Emirati Salary Support Scheme, where UAE citizens will be offered a monthly US$ 2.2k (AED 8k) one-year salary support during training and a monthly support of up to US$ 1.4k (AED 5k) will be paid for up to five years for university graduates. The program also has other incentives including subsidised five-year government-paid contribution on the company’s behalf against the cost of pension plans for Emirati staff and full support for the Emirati’s contribution across the first five years of their employment. Its Private Sector Child Allowance Scheme is a monthly US$ 218 (AED 400) grant made to Emirati staff working in the private sector. Since its launch last September, 5.6k new Emiratis have joined the private sector, involving 1.8k companies. Non-compliance will result in monthly fines of US$ 1.6k, (AED 6k), for every citizen who has not been employed.
April figures confirm that Dubai’s business activity climbed at its second-fastest improvement in almost three years, although the headline S&P Global Dubai PMI dipped 0.8 to 54.7 on the month; it was the seventeenth consecutive month that the figure remained over the neutral 50 threshold which differentiates between expansion and contraction. One of the main drivers is the fact that overall new business grew, including in the travel and tourism industry, remaining strong in post-Covid April. During the month, output growth, markedly in wholesale and retail segment, was supported by a sharp rise in customer sales as the emirate’s economy continued to recover from the easing of pandemic-related restrictions. Monthly dips were seen in construction and travel and tourism sectors from post-pandemic highs in March, whilst volumes of new orders headed higher but at a slower pace. The country’s non-oil economy had expanded an annual 7.8% in Q4, driven by the easing of Covid-related restrictions and travel curbs.
Last month, the first federal auction government announced that it would be launching the country’s first auction of the dirham denominated federal Treasury Bonds. Reflecting investor confidence in the buoyant UAE economy, the first T-Bond issue of AED 1.5 billion, (US$ 409 million), was 6.3 times oversubscribed. The strong demand was equally spread across both the two year, (with a spread of 28bps), and three year tranches (29bps). This initial trade is part of the AED 9 billion (US$ 2.45 billion), T-Bonds issuance programme for 2022. This auction will be followed by a series of subsequent periodic auctions, with the T-Bonds being issued initially in two, three, and five year tenures, followed by a ten-year bond at a later date. Sheikh Maktoum bin Mohammed commented that “this successful first issuance is a milestone towards building a dirham denominated yield curve and providing safe investment alternatives for investors which contributes to strengthening the local financial market and developing the investment environment”; UAE’s Deputy Ruler also invited international investors to participate in the T-bonds issuance programme. There is no doubt that this successful issue will enhance the UAE’s position as an attractive hub for investment, its strong creditworthiness and economic and competitive capabilities at the global level.
Under Law No 8 of 2022, HH Sheikh Mohammed bin Rashid has announced the establishment of a Debt Management Office, to be regulated and managed by the emirate’s Department of Finance which has been invested with several responsibilities. They include meeting the government’s financing requirements, managing the sovereign debt portfolio, setting strategic objectives and policies, pursuing risks to ensure government financial sustainability, as well as maintaining high levels of transparency to enhance investor confidence and develop robust relationships with stakeholders. Rashid Ali bin Obood Al-Falasi has been appointed the Chief Executive Officer of the DMO.
Shuaa Capital posted a 76%, year on year, slump in Q1 net profit to just US$ 1.6 million but this included an US$ 8.4 million write down in intangible assets. The region’s leading asset management and investment banking platform noted EBITDA (earnings before interest, taxes, depreciation, and amortisation) was 10.6% higher, on the year, at almost US$ 23 million, and a major improvement on the Q4 negative return of US$ 5 million. In Q1, “it acquired another vessels company within the Thalassa fund, launched Shuaa Venture Partners and successfully raised a US$ 100 million SPAC during the quarter, demonstrating our ability to effectually execute in a challenging environment.”
Emaar Properties posted more than a threefold increase in Q1 net profit to US$ 610 million, on revenue 12.0% higher at US$ 1.80 billion, driven by a property market rebounding from the pandemic; property sales were up 17.0% to US$ 2.26 billion. Dubai’s leading developer also posted a 22.0% hike in international real estate operations to US$ 400 million, with revenue of US$ 269 million from its business operations in Egypt and India, also contributing to 15% of the company’s total revenue. It has a sales backlog at a high US$ 12.32 billion.
It noted that its “hospitality and shopping malls have recorded a solid performance in the first quarter of this year,” and will “continue to capitalise on the very attractive supply and demand dynamics” in the sector. Although revenue declined 7.0% to US$ 954 million in Q1, Emaar Development reported a 34% hike in profit at US$ 286 million as property sales grew 16 per cent to US$ 1.85 billion. Earlier in the year, the developer said it planned to increase its stake in Emaar Developments “by up to 3%.” Its shopping malls and retail arm also reported higher net profit, up 136%, during the first quarter. as revenue grew 336.0% to US$ 327 million. Its hospitality, leisure, entertainment and commercial leasing businesses saw revenue 120% higher at US$ 230 million, with average occupancy in its managed hotels standing at 80%.
Dubai Investments PJSC has posted a 63.6% surge in Q1 consolidated net profit to US$ 55million, as revenue, at US$ 207 million, was 19.4% higher on the year, attributable to strong results in the property and the manufacturing, contracting and services segments. By the end of March, both Total Assets and Total Equity remained relatively flat at US$ 6.0 billion and US$ 3.4 billion. Last month, DI divested a 50% stake in Emirates District Cooling, with the deal being finalised by the end of Q2, with ‘profit on the sale of an asset’ bring included in that quarter’s results.
Deyaar posted a massive 67% increase in Q1 net profit to US$ 7 million on the back of a 9.0% hike in revenue to US$ 44 million. The Dubai property developer advised that the results did not include any revenue from the company’s Regalia project but noted that it was expecting “an increase in revenues in the coming months attributable to … our Regalia project, which was successfully sold out with a total value of nearly AED1 billion (US$ 272 million)”. Deyaar has also managed to expand its revenue portfolio by “diversifying into areas such as strengthening its projects portfolio, property and facilities management services, and in the hospitality sector.”
Union Properties posted its Q1 financials indicating a 7.6% hike in revenue to US$ 29 million, attributable to the continued rebound in Dubai’s real estate sector, and its subsidiaries showing marked performance results. Despite the one-off gains of almost US$ 2 million due to the sale of assets in 2021 and additional legal costs of US$ 0.6 million related to claims from a prior period in Q1 2022, EBIT remained flat at US$ 1.4 million; administration expenses fell 21.2%. Helped by the launch of Motorsport Business Park 2 warehouse complex, Dubai Autodrome recorded a 38.0% hike in revenue, with profit 61.2% higher, whilst the merging of property management and cold store management operations with EDACOM saw a notable decline in costs, allied with improved operational efficiencies.
Amanat Holdings posted an 11.7% rise in Q1 revenue to US$13 million. Its healthcare platform revenue more than quintupled to US$ 4 million, driven by a full quarter contribution of Cambridge Medical and Rehabilitation Centre, (which only contributed to March’s result in Q1 last year on a compariave basis), a narrowing of losses at the Royal Hospital for Women and Children in Bahrain – with Q1 revenues doubling on the year – and a marked improvement in the performance of Sukoon, driven by a successful turnaround. With Middlesex University Dubai showing a 13.0% rise in Q1 revenue, the firm’s education platform saw a 3.0% rise in income to US$ 9 million.
Dubai Electricity and Water Authority posted a 15% jump in Q1 revenue to US$ 1.38 billion, with profit at US$ 188 million, driven by an increase in consumption across all sectors and the transition to a normalised tariff structure at the beginning of this year. Sector-wise, all three segments rose – electricity by 17.5%, water – 20.2%, and district cooling 17.6%. The utility’s consolidated gross fixed assets grew 1.3% to US$ 55.64 billion over the period.
The DFM opened on Monday, (after the Eid Al Fitr holiday), 09 May, 24 points (0.6%) down on the week, and shed 277 points (7.5%), in a torrid week of trading, to close on Friday 13 May, on 3,695. Emaar Properties, US$ 0.02 lower the previous week, lost US$ 0.18 to close on US$ 1.54. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.77, US$ 4.11, US$ 1.76 and US$ 0.72 and closed on US$ 0.73, US$ 3.72, US$ 1.63 and US$ 0.63. On 13 May, trading was at 96 million shares, with a value of US$ 126 million, compared to 171 million shares, with a value of US$ 66 million, on 06 May 2022.
By Friday 13 May 2022, Brent, US$ 11.40 (11.2%) higher the previous fortnight, dipped US$ 2.99 (2.6%), to close on US$ 110.16. Gold, US$ 92 (4.6%) lower the previous three weeks, lost US$ 73 (3.9%), to close Friday 13 May on US$ 1,810.
Blaming rising interest rates and political instability, Japan’s SoftBank Group became the latest mega tech group to post a loss, reporting a record quarterly US$ 26.2 billion loss; last year, it posted a then record profit. No doubt questions are being asked of chief executive, Masayoshi Son’s penchant for apparently relying on riskier, high-growth stocks. Three of his investments – South Korean e-commerce company Coupang, and ride-hailing companies, Didi Global and Grab, have seen dramatic falls, with the former 70% off its March 2001 IPO price. Vision Fund has 475 companies in its portfolio and made forty-three investments during the quarter but is slowing the pace of investment. It has a loan to value ratio of 20.4% but with pledges not to push that over 25% in 2022, it is inevitable that its investments will be at least 50% lower in the coming twelve months.
Supermarket group Morrisons, beating EG Group’s offer, has won a battle to rescue McColl’s, the convenience store and newsagent chain. The deal included Morrisons paying off McColl’s US$ 10 million debt, retaining all 1.16k shops and its pension scheme with 2k members. and taken on all 16k staff members. PwC put the retailer into administration which was immediately sold to Morrisons. Last week, it seemed that when Morrisons’ initial bid was rejected by the administrator, the Issa brothers’ (owners of Asda), were the frontrunners but then a better deal was offered over the weekend, which pushed the deal over the line.
Despite all its economic woes, US labour figures still remain firm with employers adding 428k jobs to the payroll last month, as the unemployment rate remained flat at 3.6%. The gains, which were better than expected, represent the sixteenth straight month of expansion. Furthermore, certain sectors have found it difficult to find workers and with supply not able to meet demand, wages have risen at their fastest rate in years – up 5.5% on the year. Normally such increases would be welcome but the fact that inflation is running at 8.5% means that real wages are lower. April figures also showed that the number of people in the labour force – working or looking for work – fell by more than 360k, the first decline in months. Obviously with less people in the labour market, supply issues will only get worse.
Trouble is brewing for Australians with mortgages – and maybe for the big four banks, ANZ, CBA, NAB and Westpac, holding a worryingly high whopping US$ 1.3 trillion in home loans. Little wonder to see these four banking behemoths posting after tax profits of over US$ 10 billion in fiscal H1 ending December. Despite all the warning signs, Australians keep on taking bigger mortgages — including 300k of them with loans worth more than six times their income, with about 25% of home loans of fiscal Q2 loans, representing this segment. There is no doubt that borrowers in this category are at higher risk of mortgage default, when the economy slows.
All pointers see rates rising with the CBA expecting the cash rate to lift to 1.60% within nine months, Westpac, 2.25% by May 2023, NAB 2.60% by August 2024, and ANZ 2.25% by May 2023. It seems that, in a competitive segment, bank margins have been dipping – by 14bp to 1.75% in fiscal H1 – as fixed rate loans have enticed people to move lenders. However, as rates head higher so will the banks’ margins. A study by RateCity estimates that if and when the cash rate reaches 2.60%, a US$ 350k (AUD 500k) mortgage will see monthly repayments rise by US$ 470 (AUD 675) and by US$ 840 (AUD 1.35k) for a US$ 700k (AUD 1 million) loan. The consultancy sees that with the rate increases, Australian house prices could easily decline by 15% over the next two years.
A widely held belief in Australia is that when their dollar is trading at under $0.75 to the greenback, it is good news for exporters, as international trade becomes cheaper and more competitive. It seems that the rest of nation has to deal with the impact of a falling dollar, with shoppers and businesses having to learn to survive with less purchasing power. Other segments feeling the pinch include business owners, when the cost of purchasing supplies and equipment sourced from overseas rises, and travellers when they go to exchange their dollars for greenbacks and receive 10% less than would have been the case just weeks ago. The ANZ-Roy Morgan consumer confidence index fell by 0.2 last week to a twenty-month low of 90.5. Consumer views on whether it is a good ‘time to buy a major household item’ dropped 2.2% in the past week to a 2-year low of -15.9 points, with the Westpac-Melbourne Institute Index of Consumer Sentiment sliding 6.0 to 90.4 in May – its lowest level since August 2020. Rather belatedly, the RBA has finally realised that surging inflation, that started some eighteen months ago, is no longer transitory and would just fade away over time when post-Covid trading conditions improved. This has not been the case and now the central bank has been forced to launch an aggressive monetary policy tightening program (raising interest rates). The end result is that the cost of borrowing for consumers (and everyone else) will rise and mean a further reduction in consumer spending and that the country’s exports become more expensive (and less competitive) on the global stage; this in turn will slow economic growth and could lead to a marked deceleration in GDP.
This week, the National Institute of Economic and Social Research think tank warned that the squeeze on household incomes may cause the UK to fall into recession in H2, as consumer spending continues to slow, with latest data showing that March shop sales were “well below expectations”, along with a downturn in “big ticket, non-essential items”. The services sector was the main contributor to the economy contracting in March, with the worst performer being the motor industry as the month’s new car registrations were the lowest since 1998, as supply chain problems continued to hamper carmakers. The GDP did grow 0.8% in fiscal Q4, performing better than most comparable economies, but when split into individual months, it can be seen that there has been a marked deterioration – all the growth happened in January, with a flat February and a small contraction in March. The bad news will arrive when the impact of April taxes, rising interest rates, and ongoing surging inflation all lead to a slowdown or even a recession before the end of 2022. The UK is flirting with the distinct possibility of a recession, and there is no doubt that higher prices are beginning to drag the economy lower and if the 10% inflation forecasts by year end ring true, allied with ever-increasing fuel, food and energy costs, it is certain to happen.
Monday saw Bitcoin decline to its lowest level of US$ 33.3k since January, when it traded at US$ 33.0k, driven by slumping equity markets. It seems that cryptocurrency trading is considered more of a risky asset and as the tech stocks start to plummet, with Nasdaq already 22.0% lower on the year, so do the likes of Bitcoin. Furthermore, the fact that interest rates continue to move north, and the global economy slowing amid inflation almost reaching double digit levels, the short-term progress for cryptocurrency is limited. On Tuesday, the world’s largest digital token, Bitcoin extended its losses as it fell 3.1% below US$ 30k for the first time since July 2021, putting its decline, at more than 55%, from a November record high amid a global flight from riskier investments.
This week has seen a blood bath in the cryptocurrency market, as exemplified by the Terra Luna token which was trading at US$ 118 last month only to tank this week to be valued at US$ 0.09 yesterday. The market was well and truly spooked and two so-called “stablecoins” soon followed suit – TerraUSD sliding to US$ 0.40 and Tether falling off its US$ peg and sinking to an all-time low of US$ 0.95. (Stablecoins try to remain in parity by being linked to an asset such as the US$, with a token equating to say US$ 1). Even the ‘big boys’ did not escape, with Bitcoin at US$27k, having traded at US$ 70k late in 2021and at its lowest level since December 2020, with Ethereum, the second largest coin by value, shedding 20% in just twenty-four hours. The damage to crypto confidence cannot be exaggerated, with the current value of all cryptocurrencies having sank by over 66% since November, with more than 35% of that deficit occurring this week. This blog suggested some months ago, when Bitcoin was edging US$ 60k, to wait until it fell to under US$ 30k before entering the market and then exit when it climbs back to US$ 50k. It ended the week on US$ 29.3k. What You Waiting For?