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The Keepers and the Poachers                                             01 July 2022

For the past week, ending 01 July 2022, Dubai Land Department recorded a total of 2,369 real estate and properties transactions, with a gross value of US$ 2.70 billion. A total of 379 plots were sold for US$ 444 million, with 1,990 apartments/villas selling for US$ 1.16 billion. The top two transaction sales were for plots of land – one in Palm Jumeirah for US$ 20 million and another sold for US$ 16 million in Seih Shuaib. The sum of mortgaged properties for the week was US$ 744 million. 144 properties were granted between first-degree relatives worth US$ 368 million.

Many analysts consider that the emirate’s luxury property market will continue to rise in H2, driven by limited stock of prime and ultra-prime residential units being not enough to meet the demand from high-net-worth individuals. This growing sector of the population has resulted in growing demand from both end-users and foreign buyers outstripping ready supply. A recent report noted that over 4k HNWIs are expected to relocate to the UAE this year for a variety of reasons, including the country’s ability in managing the Covid-19 pandemic, its successful hosting Expo 2020 Dubai, excellent connectivity, 100% foreign ownership of companies and its recent visa reforms. Real estate consultancy, Core commented that there had been a “marked increase in demand for prime residential properties since fourth quarter of 2020. In fact, 2021 saw the highest secondary market transactions above AED 10 million in the last decade, with Palm Jumeirah accounting for nearly 35% of these transactions.” In Q1, the number of deals involving property over US$ 2.72 million (AED 10 million) was 140.2% higher in the year at 483 – 305 villas and 178 apartments, (Q1 2021 – 150 villas and 51 apartments). This equates to only 3.3% of all the secondary market transactions and 1.4% of all the off-plan market transactions This year, the sector is expected to double its share due to an influx of investors showing interest in the segment.

The second phase of Imkan’s 370-hecatre, US$ 4.1 billion AlJurf masterplan project on the coast between Abu Dhabi and Dubai has been launched. Following the first phase, comprising 293 small ranch-like villas, due for completion within twelve months, this phase comprises 98 villas, with a choice of two styles, Joud and Budoor.  The overall aim of the project, stretching along 1.6 km of coastline, is to create a coastal “retreat” for UAE city dwellers, whilst conserving the existing resources – 100k trees, sea turtles and other wildlife at the Ghantoot reserve. AlJurf Gardens will include a private marina, a private beach and a large central park, as well as a private school, retail shops, restaurants, boutique hotels, parks, heritage sites and a canal adding 8 km of prime waterfront real estate.

On Monday, Al-Futtaim Group Real Estate launched a new residential development in Dubai Festival City. Al Badia Terraces comprises a complex of residential mid-rise towers that will house 132 1 B/R units, 193 2 B/R units and 26 3 B/R units, with floor sizes of at 749 sq ft, 1,183 sq ft and 1,942 sq ft. Completion is slated by mid-2024. Another developer has launched a US$ 136 million development to be completed next June. Binghatti Canal, comprising of 84 studios, 124 1 B/R and 85 2 B/R, is located in Business Bay, with views of the Dubai Water Canal. It will be the developer’s fiftieth project and will be unique in terms of creativity and luxury.

Pivot has been awarded a US$ 168 million, 976-townhouse contract by Damac Properties for construction works on its Costa Brava housing cluster at Damac Lagoons, which comprises seven other clusters named Venice, Morocco, Santorini, Nice, Malta, Andalucia and Portofino.  Earlier in the year, Shapoorji Pallonji was awarded a US$ 136 million contract for the main works at the Santorini cluster, with the last two clusters – Venice and Malta – only announced in May. The overall Lagoons development, only launched late last year, is expected to open in 2024.

Damac has completed its first ever European project, Damac Towers Nine Elm London building, with handover of units having already started. The 450-unit, fifty-storey project, in a tie up with Italian firm Versace, comprises studio, 1 B/R, 2 B/R and 3 B/R apartments. The developer has also collaborated with various other global brands such as Cavalli, de Grisogono, Paramount, Rotana, Radisson and The Trump Organisation. April saw average UK house prices jump 12.4% to US$ 345k, whilst Damac’s prices range from US$ 1.1 million to over US$ 17.0 million. The development has 8.0k sq ft of communal gardens, as well as four levels of office space in its South Tower.

Latest figures show that Dubai is ranked tenth among global cities with the most Airbnb residences, with 15.9k properties on offer, fast catching up on the top five locations – London (34.1 active properties), Paris (24.9k), New York (22.6k), Istanbul (21.6k) and Shanghai (20.7k).  It is estimated that Airbnb’s portfolio numbers over seven million rentals, but since 2019 – and the onset of the pandemic, and the resulting travel bans – the number of active rentals has fallen for the top ten destinations by 30.0% to 209.7k.

Mercer’s latest ‘Cost of Living’ survey sees Dubai move nine places higher to become the 31st most expensive city for expatriates, with Abu Dhabi dropping five places to 61st. Hong Kong again topped the list, followed by four Swiss cites – Zurich, Geneva, Basel and Bern. Tel Aviv was judged to be the sixth most expensive global city, followed by New York and three Asian locations – Singapore, Tokyo and Beijing. The survey is based around the price of two hundred goods and products, including housing, transport, utilities, food, domestic supplies and entertainment, in over four hundred cities. The cheapest places for expatriates to live include Ankara, Bishkek in Kyrgyzstan and Dushanbe in Tajikistan, with Karachi and Islamabad also ranking among the cheapest cities.

Another initiative to strengthen Dubai’s growing global presence has been launched by Sheikh Hamdan bin Mohammed. ‘Dubai Global’ will see fifty integrated representative offices being open in leading locations. Its twin aims are to increase public awareness of Dubai’s position as one of the best commercial hubs on the planet and to assist Dubai-based companies with ‘local’ logistical support in more than thirty promising markets. The Crown Prince added that, “our goal is to globalise our national companies, attract global investments, and add new markets to our global business lines”, and “we will double our economy over the next few years, establish the best business environment in the world, and be No. 1 in quality of life.” The fifty commercial representative offices will operate as part of Dubai Chambers and in partnership with several government and semi-government entities in Dubai.

A decision by Sheikh Hamdan bin Mohammed has seen the fee, imposed pursuant to regulations issued on March 12, 1985, and Resolution No. (4) of 1998, being cancelled. It applies to Dubai-based airline agents, offices and branches.

It has been announced that the Arafat Day and Eid Al Adha holidays will start next Friday, 08 July, for four days ending on Monday, 11 July 2022, with official working hours resuming on Tuesday.

 July petrol prices have once again shown double-digit monthly increases:

• Super 98: US$ 1.261 – up by 11.5% on the month and 74.7% YTD from US$ 0.722
• Special 95: US$ 1.232 – up by 12.1% on the month and 78.8% YTD from US$ 0.689
• Diesel: US$ 1.297 – up by 9.0% on the month and 78.8% YTD from US$ 0.697
• E-plus 91: US$ 1.210 -up by 12.1% on the month

Dual-tranche US$ 3 billion sovereign bonds, issued by the UAE, were five times oversubscribed, with the Ministry of Finance doubling its initial target of US$ 1.5 billion.  The bonds – a ten-year tranche and thirty-year Formosa bonds – will be listed on both the LSE and Nasdaq Dubai. The former tranche of US$ 1.75 billion was priced at a spread of 100 bps over US Treasuries, with a final coupon rate of 4.05%, whilst the latter tranche of US$ 1.25 billion was priced at a spread of 175 bps over US Treasuries, with a final coupon rate of 4.951 – this tranche will also be listed on the Taipei Exchange.

Wednesday saw the opening of the 200k sq mt Yiwu Market, thefirst smart free zone market in the Middle East, and the first phase of the Dubai Traders Market in Jebel Ali Free Zone. It is expected that this new concept, comprising 1.4k mainland showrooms and 324 warehouses, will revolutionise the trading experience for sellers and consumers. The showrooms will be split into various sectors including electronics/appliances, furniture/lighting, beauty/ accessories, tools/hardware (including auto spare parts), kitchen/bath, bedding, curtains, and clothing. The new marketplace will enable goods to be stored, sold, imported, and exported all in one place, without additional charges, and with the greatest possible ease.  Another benefit of the new facility is its close proximity to both Jebel Ali Port and Al Maktoum International Airport, allowing customers to easily transport goods to and from their warehouses. In tandem with ‘Yiwu Market’, ‘Yiwu Connect’, (a dedicated area that allows cross-border networking and information exchange between traders in Dubai and factories in China), has been launched.

Dubai International Financial Centre has launched the region’s first Open Finance Lab, a six-month programme that commenced on Wednesday. Four banks – CBD, FAB, Mashreq and National Bank of Ras Al Khaimah – along with FinTech company Zand will participate in the scheme that will use current cases that will conclude the participants giving a detailed summary of the impact achieved to government officials and bank executives. It is hoped that initiatives like this one will help unlock strategic opportunities for the UAE and reinforce DIFC’s leading position as a global financial services hub. Over the trial period, the lab will run regulatory forums on important issues, as it collaborates with banks, FinTech, regulators and the industry.

Following on the success of the DEWA IPO in April, the government’s latest foray into the DFM saw its TECOM Group raise US$ 463 million; the IPO was 21 times oversubscribed, with the UAE Retail Offer almost 40 times oversubscribed. The final offer price of US$ 0.728 per share valued the business at US$ 3.65 billion. The IPO comprised 12.5% of TECOM Group’s issued share capital, equating to 625 million ordinary shares; Dubai Holding Asset Management (DHAM) will continue to own a majority 86.5% stake.

The Union Coop today announced its intention to list on the DFM on 18 July 2022 and becomes the first national retail cooperative to do so. It suspended trading of its shares as of today, 01 July, and will now exercise a share split that will see Union Coop member receive ten shares against each currently owned share. The share price will be determined on the first day of trading on the DFM. Union Coop posted a 2.6% rise in profit., compared to a year earlier, and last year recorded a US$ 113 million profit.

The DFM opened on Monday, 27 June, 300 points (8.6%) lower on the previous three weeks, closed flat on Friday 01 July, on 3,202. Emaar Properties, US$ 0.18 lower the previous three weeks, gained US$ 0.02 to close on US$ 1.42. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 3.54, US$ 1.60 and US$ 0.50 and closed on US$ 0.69, US$ 3.49, US$ 1.54 and US$ 0.45. On 01 July, trading was at 38 million shares, with a value of US$ 41 million, compared to 35 million shares, with a value of US$ 26 million, on 24 June 2022.

For the month of June, the bourse had opened on 3,347 and, having closed the month on 3,223 was 124 points (3.7%) lower. Emaar traded US$ 0.14 lower from its 01 June 2022 opening figure of US$ 1.56, to close the month at US$ 1.42. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.69, US$ 3.58, US$ 1.62 and US$ 0.59 and closed on 30 June on US$ 0.69, US$ 3.60, US$ 1.57 and US$ 0.45 respectively. The bourse had opened the year on 3,196 and, having closed June on 3,223, was 27 points (0.1%) higher, YTD. Emaar traded US$ 0.09 higher from its 01 January 2022 opening figure of US$ 1.33, to close June at US$ 1.42. 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 30 June on US$ 0.69, US$ 3.60, US$ 1.,57 and US$ 0.45 respectively.

By Friday 24 June 2022, Brent, US$ 11.55 (10.5%) lower the previous week, lost US$ 1.17 (1.0%) to close on US$ 111.45. Gold, US$ 33 (1.8%) lower the previous week, shed US$ 15 (0.8%), to close Friday 24 June, on US$ 1,813.  

Brent started the year on US$ 77.68 and gained US$ 32.94 (42.4%), to close 30 June on US$ 110.62. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has shed US$ 38 (2.1%) during 2022, to close on US$ 1,793. For the month, Brent opened at US$ 107.59 and closed on 30 June, US$ 110.62 (2.8%) higher. Meanwhile, gold opened June on US$ 1,837 and shed US$ 44 (2.4%) to close at US$ 1,793 on 30 June.

The Minister of Energy and Infrastructure, Suhail bin Mohammed Al Mazrouei, confirmed that the UAE was close to OPEC+’s production baseline of 3.168 million bpd, which the country is committed to until the end of the agreement. Following the statement on Tuesday, made “in light of recent media reports,” oil prices jumped about 1% in early trading. It was reported that French President Emmanuel Macron told U.S. President Joe Biden, at the G7 summit, that President His Highness Sheikh Mohammed bin Zayed al-Nahyan had “told me two things. I’m at a maximum, maximum (production capacity). This is what he claims,” and that “the Saudis can increase by 150k bpd – maybe a little bit more, but they don’t have huge capacities before six months’ time.” Saudi Arabia and the UAE are the only two OPEC countries with spare capacity available to make up for lost Russian supply and weak output from other member nations.

The slight rise in gold earlier in the week was the result of it being looked on as a safe haven in a time of renewed fears of a recession and countered pressure from a firmer dollar, while investors waited for the Fed to introduce much awaited firmer monetary policy changes. This comes when rising interest rates, non-stop surging inflation, (9.1% in the UK last month), and stock markets declining.

Do Kwon, co-founder of Terraform Labs, acknowledged that he has lost almost all his net worth after the US$ 40 billion cryptocurrency ecosystem collapsed in May; prior to then, the Luna token that Terraform Labs backed was hovering around the US$ 100 mark – now it is almost worthless. Not only did it wipe out Do Kwon’s wealth, it also cleaned out the savings of thousands of investors; as well signalling the start of the collapse in cryptocurrencies and this is why investigators in both South Korea and the US are now delving further into the modus operandi of its stablecoin, TerraUSD. In May, the South Korean ex-billionaire introduced a new Luna coin, Lina 2.0, made available free to existing holders of the original token. It did reach a high of US$ 18.87 before slumping to recent values of around US$ 2.00.

This week, German Ruja Ignatova, also known as “Cryptoqueen,” has been added to the FBI’s list of its ten most-wanted fugitives long after being charged in 2019 with eight counts including wire fraud and securities fraud for running the Bulgaria-based OneCoin Ltd as a pyramid scheme. It is thought that she could have defrauded investors out of US$ 4 billion by offering commissions for members to entice others to buy a worthless cryptocurrency. She disappeared in late 2017 after bugging an apartment belonging to her American boyfriend and learning he was cooperating with an FBI probe into OneCoin, following which she boarded a flight from Bulgaria to Greece and has not been seen since. The FBI is offering a US$ 100k reward for information leading to Ignatova’s capture.

As it prepares to receive one of the largest aircraft orders in commercial aviation history, Air India, now taken over by Tata Sons from the government, is considering hiring retired pilots. The airline has to increase its manpower following reports that it would be ordering three hundred new jets – either Airbus SE A320neo and/or Boeing’s 737 Max models. Tata Sons has ordered a complete revamp of the former state-run airline, bringing in the former head of Singapore Airline’s budget unit, Campbell Wilson, and assigning a US$ 1.9 billion budget to the project. It will include the airline’s fleet, ground handling, network planning, IT systems, maintenance and training.

After introducing a temporary ban on parties in August 2020, in response to the pandemic, Airbnb has permanently banned them and events at homes on its platform, noting that the rule has become “much more than a public health measure.” Since the temporary ban, the number of complaints about parties had dropped by 44%. The San Francisco-based company has also removed a sixteen-person limit on how many people can stay at homes. It started putting restrictions on parties in 2019, when it banned “open-invite” parties and so-called “chronic party houses” that were a nuisance to neighbours.

Shareholder pressure is mounting on Sainsbury’s to ensure all its workers, including sub-contractors, are paid the real living wage. The supermarket chain already pays its direct staff over the rate set by the Living Wage Foundation, of US$ 12.14, (GBP 9.90,) which is higher than the government-set minimum wage of US$ 11.65 an hour (GBP 9.50) for workers over the age of 23. Management argues that the “vast majority” of its subcontracted staff were already being paid at the real living wage level, but the difficulty came with making a longer-term commitment to pay the rates set by the foundation. Investors pushing for a wage hike include Legal & General Investment Management, the National Employment Savings Trust (Nest), the Coal Pensions Board and wealth management firm Coutts and Co. Other large shareholders in the company have said they will support the firm and vote against the resolution at this week’s AGM on 07 July.

Gaffe-ridden Transport Secretary Grant Shapps continues to display his ministerial ineptitude, as he tries to keep out of trouble and continues in shifting any responsibility to other parties. He indicated that last week’s rail strikes dispute could “easily be settled because there are so many modernisations from antiquated work practices, for example noting that “two vans often have to be sent to a maintenance job when only one van is required.” Earlier it was pointed out that sending several vans “is both a safety and engineering standards issue”, and that “it would be pointless sending staff to a location without their gear, equipment and tools which is why the vehicles and associated equipment are sent to site” in more than one van. Although Minister Shapps has said that rail strikes could be “easily settled” by modernising “antiquated” working practices, he is adamant that “he didn’t, and shouldn’t, interfere with the detail of negotiations between the RMT and the industry”, noting employers were “the only people who could settle this strike”. He has acknowledged that he and the Treasury had set an overall mandate, which dictated how much money was available, and that he had final sign-off on what was agreed. Is this the same man who got so involved in the P&O dispute earlier in the year?

Yesterday saw another day of “total chaos” and “zero customer service” at London Heathrow with passengers again complaining of long queues; this came after the airport asked airlines to remove thirty flights from Thursday’s schedule, for safety reasons, as it was expecting more passenger numbers than it could cope with. Belatedly, and not unexpectedly, embattled Grant Shapps commented that “it’s now on airports and airlines to commit to running the flights they’ve promised or cancel them with plenty of time to spare so we can avoid the kind of scenes we saw at Easter and half term.” Yesterday, the government introduced twenty-two

measures to give airlines a short window to hand back plane parking slots for the rest of the summer season, with the aim to help manage capacity at the busiest airports. There has been disruption and flight cancellations all year at UK international airports caused by several factors, but staff shortages have left the aviation industry struggling to cope with resurgent demand.

The next sector lining up for industrial action appears to be Communications, with 40k BT workers voting to go on strike in a dispute over pay; this would be BT’s first national strike since it was privatised in the 1980s. Over 90% of workers called for strike action, with BT commenting that it was disappointed and would “work to keep our customers and the country connected.” It is all but certain that the UK –and other countries – will witness a summer of discontent, with widespread strikes, industrial action and civil unrest.

The G7 leaders have relaunched a US$ 600 billion Partnership for Global Infrastructure and Investment as a counter to China’s multi-trillion-dollar infrastructure initiative Belt and Road plan which has been criticised for hitting nations with too much debt. The G7 plan calls on leaders to raise the funds over the next five years to finance the launch of infrastructure projects in middle and low-income countries, with the focus on tackling climate change, improving global health, achieving gender equity and building digital infrastructure. Some of the highlighted initiatives include a solar-powered project in Angola, a vaccine manufacturing facility in Senegal, and a 1.6k km submarine telecommunications cable connecting Singapore to France via Egypt and the Horn of Africa. The EC President Ursula von der Leyen said that PGII’s target was to present a “positive powerful investment impulse to the world to show our partners in the developing world that they have a choice”.

(The Chinese have learnt well from the US escapades, in both South America and Indonesia, in the 1970s, and now countries such as Djibouti, Kyrgyzstan, Laos and Zambia have debts to China equivalent to at least 20% of their annual GDP. Then there are the loans from the Exim Bank of China to build the Hambantota International Port and the Mattala Rajapaksa International Airport that have left Sri Lanka bankrupt).

In another effort to hit the Russian economy, the G7 has announced a ban on imports of Russian gold as their summit in the Bavarian Alps. It is hoped that such a move will further tighten the sanctions squeeze on Moscow and the many Russian oligarchs. Boris Johnson commented that “we need to starve the Putin regime of its funding. The UK and our allies are doing just that.” (Whether that is the case for all members is debatable). It is estimated that their 2021 gold exports were worth US$ 15.45 billion last year and since the onset of the crisis, wealthy Russians have been buying bullion to reduce the financial impact of Western sanctions.

Although it has the money to and is willing to pay, Russia saw its first debt default since 1998 when it missed the deadline to repay a US$ 100 million debt interest. Because of sanctions, it was not in a position to get the payments to international creditors. It seems that the US$ 100 million interest payment was due on 27 May, and was sent to Euroclear, but that payment has been stuck there. Russia’s access to the global banking networks which would process payments from Russia to investors around the world, has all been cut. About US$ 40 billion of Russia’s debts are denominated in dollars or euros, with around half held outside the country.

With concerns about its economy growing by the day, US stocks have had their worst half year returns since 1970, with the benchmark S&P 500 tanking 20.6% as the others also showed marked declines; the Nasdaq Composite shed almost 30% and the Dow Joes a somewhat lower 15% in the first six months of the year. The same has happened on an almost global scale and despite unwarranted optimism from some central banks, it is almost inevitable that many economies will go into recession, some as early as by the end of this year, as interest rates move higher.  The FTSE 250 has dropped by more than 20%, while Europe’s Stoxx 600 index has lost almost 17% and the MSCI index of Asia-Pacific markets has moved 18% lower over the period. There is no doubt that volatility in the markets will continue, driven by the triple whammy of investor confidence, continuing soaring inflation and the ongoing war in Ukraine. The problem facing most central banks is the temptation to move too far with rates because the last thing anybody would like to see is a ‘hard landing’ that would lead to an even bigger downturn in economic activity. It is time for people to realise that the days of low inflation and low rates are fast disappearing and will not be seen again until the next economic cycle comes around.

According to the IMF, the US economy is likely to slow in 2022 and 2023 but will “narrowly avoid a recession” but warned that “the policy priority now must be to expeditiously slow wage and price growth without precipitating a recession.” Jerome Powell, the Fed Chairman seems to be pointing to a rate up to say 4% in a matter of months, including a probable 0.75% hike this month, which in theory should tighten financial conditions just enough to bring inflation down to its 2% target. To this observer, this seems a foreloin hope, bearing in mind a number of factors, including global supply constraints, domestic labour shortages and the ongoing war in Ukraine among many potential pitfalls. Like other central banks, including the BoE and the ECB, their moves may have come too late, after printing too much money, with a lackadaisical approach, for too long a period. Even Jerome Powell, facing the Senate Banking Committee, said when asked if a recession was possible “it’s not our intended outcome, but it’s certainly a possibility.” His best hope in his belated quest to quench soaring inflation is to achieve a “soft landing” — a reduction in inflation and a slowdown in growth without triggering a recession and high unemployment. Concerns are growing that the Fed will end up tightening credit so much as to cause a recession. This week, Goldman Sachs estimated the likelihood of a recession at 30% over the next year and at 48% over the next two years.

Unfortunately, many a UK government eventually falls to sleaze, described as ‘immoral, sordid and corrupt behaviour or activities’. In recent decades, it has seen the end of John Major, Tony Blair, David Cameron and very soon Boris Johnson. It happens in all walks of life with institutions like the NHS, the Vatican, other Church bodies, the judiciary, FIFA, the gun lobby, the mining industry and innumerable others have all been tarnished by sleazy behaviour by people who should have known better. The professions are not immune from their fair share of sleaze and in the US, the land of the lawsuits, the auditing profession are up there among the best. At the turn of the century, Enron managed to lose US$ 74 billion in a controversial accounting scandal, with its share value tanking from US$ 94 to less than US$ 1 within a year; WorldCom had US$ 3.8 billion in fake invoicing, resulting in a loss of 30k jobs and US$ 180 billion in investor losses. Since then, the cases have kept mounting, with the likes of Lehman Brothers, Freddie Mac. AIG and Bernie Madoff ensuring billions of dollars of losses for duped investors.

Now the Big Four are in the news again and this time for claims that employees have cheated on their ethics exams and have subsequently misled investigators. This week the SEC has fined EY a record US$ 100 million for exam cheating and illegal tip-offs. It is alleged that between 2017-2019, forty-nine EY staff shared answers to the ethics portion of their CPA exam, with hundreds more cheating on tests required to maintain their certification. In 2019, KPMG were fined US$ 50 million for similar offences but at the time EY, even though they knew to the contrary, denied any issues with its employees’ illegal behaviour. It is a worry that such firms are entrusted with auditing many of the US government and major US listed companies. If the gatekeepers are responsible for such important audits, who is watching the gatekeepers? It is becoming more difficult to separate The Keepers and the Poachers.