There’s No Way Out Of Here!

There’s No Way Out Of Here!                                            15 July 2022

The real estate and properties transactions totalled US$ 1.50 billion during the week ending 15 July 2022. The sum of transactions was 186 plots, sold for US$ 162 million, and 1,004 apartments and villas selling for US$ 662 million. The top two transactions were for land in Ras Al Khor Industrial First, sold for US$ 9 million, and land sold for US$ 5 million in Al Merkadh. Al Hebiah Fifth recorded the most transactions, with 105 sales transactions worth US$ 72 million, followed by Jabal Ali First, with 35 sales transactions worth US$ 28 million, and Al Yufrah 2, with 12 sales transactions worth US$ 4 million. The top three transfers for apartments and villas were all apartments – one sold for US$ 86 million in Burj Khalifa, another for US$ 65 million in Al Wasl, and the third for US$ 52 million in Palm Jumeirah. The sum of the amount of mortgaged properties for the week was US$ 561 million, with the highest being a building in Burj Khalifa, mortgaged for US$ 150 million. Eighty properties were granted between first-degree relatives worth US$ 131 million.

June was the highest month yet for Dubai sales, with a value of US$ 6.2 billion – 55% higher in overall value year on year, when compared with June 2021, and by the end of H1, 71% of the total sales volume of 2021 had been reached. For June, month on month growth for volume and value were 33% and 24% higher, and up 9.5% and 7.0% quarter on quarter.

The latest CBRE report notes that June Dubai average residential property prices for the year rose 10.0%, with villas and apartments 19% and 9% higher – and 1.0% and 0.1% on the month. For the six-month period to June, total transactions, at 38.9k, hit historical highs, whilst mortgage transactions were steady despite rates edging higher. The report noted that the average transactional sq ft price continues to move higher, with the average transactional price per sq ft steadily  increasing with Palm Jumeirah, Emirates Hills, District One and Dubai Hills all posting month on month 4%+ rises – and the third consecutive month that Palm Jumeirah prices have risen by more than 5%, where per sq ft prices touched US$ 917. In the apartment segment, Jebel Ali and Dubai Silicon Oasis posted June rises of 4.0% and 3.6%.

According to the 2022 Xinhua-Baltic International Shipping Centre Development Index, Dubai ranks the fifth best maritime city in the world behind Singapore, London, Shanghai and Hong Kong, with Rotterdam, Hamburg, New York/New Jersey, Athens and Ningo-Zhoushan making the top ten. The report notes that Dubai has an advantage of offering a number of different locations in which to do business, including free zones, industrial areas and commercial buildings, as well as having some free zones that allow 100% foreign ownership of businesses; in addition, Dubai onshore business regulations allow full foreign ownership in 122 economic activities across, thirteen sectors, and offer 100% profit repatriation.

Continuing its recent upward trend, Dubai’s business activity in its non-oil private sector economy improved at the quickest pace in three years, at 56.1, as new orders rose sharply despite inflationary pressures. The latest figures show that new business and activity continued to head north, (attributable to improving demand and increased promotional efforts), with a marked uptick in travel demand – the key driver of growth in the emirate -and a renewed increase in new work in the construction sector. Despite easing slightly from May, the output growth rate was still one of the fastest recorded since June 2019. Preliminary data indicates that Dubai’s economy grew 6.2% last year and by 5.9% in Q1. In Q1, the hospitality, and transport and storage had grown 47% and 40%, respectively.

HH Sheikh Mohammed bin Rashid has appointed Sheikh Ahmed bin Saeed – who is also chairman and chief executive of Emirates Group, Dubai Airports and Dubai Integrated Economic Zones Authority – as chairman of Expo City Dubai Authority (ECDA). At the same time, the Minister of State for International Co-operation, Reem Al Hashimy, was appointed director-general to oversee its development. The Expo 2020 site is being transformed and will soon welcome thousands of new residents and businesses, as well hosting international events including the upcoming Cop28 climate conference.

DP World has acquired a controlling share in Africa FMCG Distribution, another step in its quest to expand its growing presence in the continent; the deal, with no financial details given, involved DP World’s 100% owned Imperial which it acquired earlier in the year. AFMCG, part of the Nigeria’s Chanrai Group of Companies, represents multinational fast-moving consumer goods companies all over the continent. This acquisition also aligns with Dubai’s five-year foreign trade strategy to boost trade ties with promising global markets, and to enhance its status as an international business hub, focusing on high-growth markets in Africa, Latin America and Asia.

Faisal Belhoul’s latest foray sees his Dubai Digital Investment aiming to raise US$ 272 million in a Dubai listing by the end of the year. The vice chairman of Dubai Chamber of Commerce commented that “we’ve been granted permission by the local authorities to launch a greenfield investment company that focuses on the technology sector”. This latest venture will invest in regional and global technology opportunities alongside VC firms and founders, with the added benefit of enhancing Dubai’s ambitions to become a major technology hub. He also managed Dubai last similar IPO, involving Amanat Holdings which debuted on the DFM in 2014, as did the now defunct retail and dining company, Marka.

The DFM opened on Tuesday, 13 July, 393 points (12.2%) lower on the previous five weeks, and closed up 51 points (1.6%) on Friday 15 July, on 3,109. Emaar Properties, US$ 0.02 lower the previous week, nudged US$ 0.01 higher to close on US$ 1.41. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.69, US$ 3.23, US$ 1.48 and US$ 0.42 and closed on US$ 0.69, US$ 3.38, US$ 1.52 and US$ 0.44. On 05 July, trading was at 62 million shares, with a value of US$ 37 million, compared to 104 million shares, with a value of US$ 81 million, on 07 July 2022.

By Friday 15 July 2022, Brent, US$ 6.14 (5.7%) lower the previous three weeks, lost a further US$ 4.37 (4.0%) to close on US$ 100.94. Gold, US$ 130 (4.9%) lower the previous three weeks, shed US$ 34 (1.4%), to close Friday 15 July, on US$ 1,707. 

On Wednesday, US President Joe Biden started a four-day Middle East tour, that will end tomorrow, that includes stops in Israel, the occupied West Bank and Saudi Arabia. where he will hold meetings with regional leaders. It will be his first presidential visit to Saudi Arabia, where he will attend a GCC+3 summit, which includes Egypt, Iraq and Jordan. The US leader has stressed that the meeting revolves around relations with Israel and its greater integration in the broader region, and that the trip was not about mounting pressure on Saudi Arabia to boost oil production. However, Mr Biden and his European allies have repeatedly urged Opec+ oil producers to increase output in a bid to rein in high oil prices that are feeding into rising inflation, even though Gulf oil producers have precious little in spare capacity.

IATA reported that May global passenger traffic was 83.1% higher than a year earlier, attributable to a strong recovery in international traffic. However, it is still only at 68.7% of pre-crisis levels. International traffic rose 325.8% from May 2021, as the easing of travel restrictions in most parts of Asia accelerated the recovery of international travel; May 2022 international RPKs reached 64.1% of May 2019 levels. ME airlines’ traffic rose 317.2% compared to May 2021, with capacity 115.7% higher on the year. This was less than traffic recorded in Asia -Pacific and Europe where increases came in at 453.3% and 412.3%. but a lot higher than North America, Latin America and Africa with returns of 203.4%, 180.5% and 134.9% respectively.

At the behest of the UK government, Heathrow said it would cap the daily number of departing passengers at 100k this summer, (from 12 July to 11 September), to try to limit traveller disruptions as it struggles to cope with a rebound in demand. Airport authorities have noted that daily departing seats over the summer would average 104k, 4k above its cap, and have requested airlines partners to stop selling summer tickets to limit the impact on passengers.

John Holland-Kaye is facing the heat on two fronts, one as the temperature in London starts to rise even higher and is set to reach a record 42 degrees next Tuesday. The other sees the CEO of London’s Heathrow Airport, who earlier in the week received a strongly worded statement from Emirates, being issued an ultimatum to provide a “credible and resilient capacity recovery plan for the next six months”. Emirates had blamed Heathrow for choosing “not to act, not to plan, not to invest”, and that it is “now faced with an ‘airmageddon’ situation due to their incompetence and non-action, they are pushing the entire burden – of costs and the scramble to sort the mess – to airlines and travellers.”. The local airline rejected LHR’s demands to cut capacity and was upset that it had only been given “thirty-six hours to comply with the capacity cuts”, with it dictating the specific flights on which they should “throw out paying passengers” and the fact that it had “threatened legal action for non-compliance”. Interestingly, Emirates’ sister company dnata is “fully ready and capable of handling their flights”. The airline confirmed that they “plan to operate as scheduled to and from Heathrow” but has agreed not to sell additional tickets until mid-August.

After being sued by its shareholders, four former bosses of the failed Fukushima nuclear power plant have been ordered to pay US$ 95 billion (13 trillion yen) for not preventing a nuclear meltdown disaster. The bosses from the Tokyo Electric Power Company (Tepco) were sued by shareholders over the 2011 nuclear meltdown – caused by a tsunami., resulting from an earlier earthquake – with the judgment that it was preventable if they had exercised due care. This was considered to be the largest amount of compensation ever awarded in a civil lawsuit in Japan, but the four plaintiffs will only be able to pay as much as their assets allow.

As expected, Twitter started legal proceedings against Elon Musk for violating his US$ 44 billion deal to buy the social media platform at the agreed US$ 54.20 per Twitter share. Shares of the social media platform closed at $34.06 on Tuesday. The complaint noted that “Musk apparently believes that he is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.” Musk had argued that he was terminating the deal because Twitter violated the agreement by failing to respond to requests for information regarding fake or spam accounts on the platform. Twitter also accused Musk of “secretly” accumulating shares in the company between January and March without properly disclosing his substantial purchases to regulators. Twitter called his decision to walk away had more to do with a decline in the stock market, particularly for tech stocks, and that Tesla’s stock had lost around 30% of its value since the deal was announced, closing on Tuesday at US$ 699.21.

The latest casualty in the US$ 2 trillion cryptocurrency crash that has already wiped out some big names, such as broker Voyager Digital, Terra and crypto hedge fund Three Arrows Capital, is Celsius Network. These liquidations have left thousands of individual investors facing life-changing losses. Celsius, with more than 100k creditors, took the drastic action to stabilise its business and work out a restructuring for all stakeholders. At its peak, the lender had over US$ 20 trillion in assets, but that balance has dropped considerably. Like many of its peers, Celsius has been savaged by recent hikes in interest rates, with investors fleeing for cover, many concerned with the sky-high yields on offer.

Vijay Mallya has had a colourful past that has seen him make his fortune from Kingfisher beer, before branching out into aviation and F1 racing. Now evidently ensconced in London, India’s top court has sentenced him to four months in jail for disobeying an earlier court judgement linked to the collapse of Kingfisher Airlines which had been India’s second largest domestic carrier before it collapsed a decade ago. The tycoon, known as the “king of good times” for his lavish lifestyle, was found guilty in 2017 of the same offence and the following year a UK court agreed to his extradition back to his home country. Although he lost his final appeal on that verdict in 2020, he is still believed to be living in London.

Blaming the rising cost of shipping, fashion firm Boohoo has become the latest retailer to charge shoppers who return items, by deducting US$ 2.37 (GBP 1.99) from their refund amount; the likes of Uniqlo, Next and Zara already charge for online returns, with other peers set to join the trend. It is known that online customers are more likely to return items than those bought in store, raising costs for retailers. Boohoo’s brands include BoohooMan, Karen Millen, Nasty Gal, PrettyLittleThing, Coast, Misspap, Oasis, Warehouse, Burton, Wallis, Dorothy Perkins and Debenhams. Its latest accounts showed a slump in annual profits blaming soaring returns, with customers returning products at a higher rate than they did pre-Covid.

Q1 saw EV global shipments 79% higher at 1.95 million, with Tesla still dominating the fledgling market and China taking 1.14 million of the vehicles, up 126% on the quarter.  Tesla claimed 16.7% of the Q1 market share, followed by China’s Wuling Hongguan, with 8.9%, and if you add the Chinese company to BMW and Volkswagen, their sales would equate to that of Tesla. The sector has managed to withstand the double whammy of the pandemic and the semiconductor shortage which has had such a negative impact on global supply chains. The global EV market continues to grow as more countries aim to phase out petrol-powered vehicles to adhere to environmental standards and achieve net-zero goals. 2021 sales doubled last year to 6.6 million units and are expected to top ten million this year and reach fifty-eight million by 2030.

Newspaper reports, based on some 124k leaked documents, have claimed that from 2013 – 2017, Uber Technologies attempted to lobby European politicians. The so-called “Uber Files” indicate that laws were flouted and that the tech giant received assistance in its efforts from politicians including French President Emmanuel Macron. At the time, its co-founder, Travis Kalanick, was still chief executive and it seemed that the company was keen to expand into European cities as fast as possible and apparently ’taking no prisoners’.  Uber’s aggressive tactics included using a remote system to prevent police from obtaining internal data during raids, and the company has since not denied any of the allegations in the ‘Uber Files’ but noted that many changes have been made since 2017 when Dara Khosrowshahi took over the reins from Kalanick; since then, the company has been transformed, making safety a top priority.

‘Le Monde’ reported on text messages between Mr Kalanick and Mr Macron while he was finance minister. There was a total of four meetings between the two and a secret “deal” was put in place between Uber executives and French politicians, led by the then finance minister Macron, who sought “to facilitate by untying certain administrative or regulatory locks.” Then Uber withdrew its person-to-person UberPop service in France in 2015 and a few months later, a law making it difficult to become a licensed Uber driver was modified in favour of the ride-hailing company, infuriating taxi drivers. During the following anti-Uber protests, the company sought to use the violent attacks against its drivers to win public sympathy, as its co-founder dismissed internal concerns about potential violence against Uber drivers.

On 03 June, an earlier blog noted: “Following the debacle at last week’s UEFA Champions League final last week It did not take long for UEFA to suggest that thousands of Liverpool fans had been caught out and tried using ‘fake tickets’ that did not work at the turnstiles, and within hours had called for an official enquiry to be held by UEFA and French authorities. It took the footballing body longer – over six days – to admit their error and to issue a statement apologising “to all spectators who had to experience or witness frightening and distressing events”. It seems that nothing has been heard from the French minister, Darmanin. Now the governing body has eventually called for an inquiry from French officials into the use of teargas on fans at the Stade de France”.

This week, a French inquiry has found it was caused by a litany of administrative errors and failings rather than Liverpool fans and that dysfunctional mistakes were made at every level,

The French government initially blamed supporters and fake tickets for the crowd chaos that led to fans being tear-gassed and robbed in Paris. Two Senate committees have issued their report ‘Champions League Final: An Unavoidable Fiasco’, which investigated what went wrong on the night Paris police, UEFA and the French government were all taken to task by the inquiry: UEFA for failing to plan for potential ticketing fraud and the government for shifting the blame on to supporters. Interior Minister Gérald Darmanin still maintained that Liverpool fans were largely to blame but did admit things could have been better organised and apologised for the “disproportionate” use of tear gas. But the minister was rightly condemned in the report which stated, “It is unfair to have sought to blame supporters of the Liverpool team for the disturbances, as the interior minister has done, to deflect attention from the state’s inability to properly manage the crowd and suppress the action of several hundred violent and organised delinquents.” Darmanin, already the third most important member of the government, has since been given an extra ministerial portfolio and it seems there will be no apology forthcoming. Despite UEFA clarifying there had actually been 2.7k fake tickets on the night, this is the same person who had earlier complained that 30k – 40k Liverpool fans had arrived at the stadium either with no tickets at all or with forgeries. Hopefully, the French authorities will be better prepared for their next two events – the 2023 Rugby World Cup and the 2024 Olympic Games.

There has been a definite move for UK consumers to cut back on white good purchases, such as dishwashers and fridges, with many opting for cheaper brands, with June sales in shops and online declining for the third consecutive month. According to the British Retail Consortium, retail sales are falling at a rate “not seen since the depths of the pandemic”. At the same time, prices are currently rising at their fastest rate for forty years, as the May inflation reached 9.1%, with every chance of topping 10% by the end of Q3, as food inflation may well touch 15%. Total sales decreased by 1% in the five weeks ending 02 July 2022, to 9.0%, against an increase of 10.4% in June 2021, following declines in April and May.

Further bad news for UK consumers this week was that domestic energy bills will rise faster this winter than previously forecast by the energy regulator Ofgem; in May, it had forecast a

US$ 946 (GBP 800) increase from October – now it seems that this figure could rise by 50% to US$ 1,419 (GBP 1.2k). The typical bill stands at US$ 2,366 (GBP 2k) which had already risen by US$ 828 (GBP 700) in April. From October, the typical consumer will have to spend US$ 3,838 (GBP 3,244) rising in January to US$ 3,979. (GBP 3,363). The original figure was used by ministers when deciding how much to pay in direct assistance this winter, and so this may have to be amended upwards.

Beating economists’ expectations, (which is quite often), UK’s May economy rebounded in May, growing by 0.5%, after shrinking in the previous two months, with expansion seen in all sectors of the economy. However, consumer spending has been hit by a double whammy of shop prices rising, driven by higher running costs, and disposable income dipping because of higher energy costs among other factors. This time last year, UK inflation had just risen to 2.0%, the BoE’s target, and although the Ukraine crisis is probably the main inflationary driver, higher prices were beginning to ferment even before February with a 6.2% rate  then. It seems to this observer that the central bank was slow and a little negligent for not taking the problem as seriously as it would later become. Now its governor, Andrew Bailey, has belatedly vowed to bring inflation down to its target of 2%, “no ifs or buts”.

After last month’s major disruption on the country’s railways, both  eight train companies (employing Aslef members, the train drivers’ union), and hundreds of Transport Salaried Staffs Association (TSSA) members have voted “overwhelmingly” to go on strike in a dispute over pay. The June walkout involved members of the RMT union at thirteen train companies and Network Rail – a separate strike action by 40k rail workers, and the biggest such strike action seen in over thirty years. Aslef have claimed that many union members “have not had a pay rise since 2019”, and that “we want an increase in line with the cost of living – we want to be able to buy, in 2022, what we could buy in 2021”. The offer depended on workers accepting “modernising reforms”, but this was rejected, described by Network Rail as ‘paltry”. Probably, Transport Secretary Grant Shapps, is too busy launching his bid, (which did not last too long), to be the next Conservative party leader and prime minister, to worry about settling another dispute in his remit. Later in the week, Network Rail has made workers a fresh pay offer in an attempt to break the deadlock, saying the offer was worth more than 5%, but depended on workers accepting “modernising reforms”, whilst the RMT union said the offer was, in real terms, a pay cut and would mean cutting a third of front-line maintenance roles. In addition, there would be no compulsory redundancies for two years, which unions had been calling for, and employees and their immediate families would get 75% off rail travel. The rise in the cost of living has led to unions calling for pay rises to help workers cope. With several other industries having seen workers strike over pay, there is always concern that if employers hand out big salary increases, this could result in a 1970s-style “inflationary spiral”, where firms hike wages and then pass the cost on to customers via higher prices.

There is no doubt that the UK faces many problems over the next few months, Recently the IMF and the OECD have both warned that all is not well with its economy. The former predicted that the UK will be the slowest growing economy among the world’s largest economies next year, whilst the OECD indicated that the economy will grow more slowly than expected this year and will stagnate next year, as consumers rein in their spending and commodity prices remain high. However, with inflation set to continue to rise, ongoing political uncertainty following the Boris demise, longer term business confidence beginning to fall, ongoing Covid lockdowns in China and supply chain hassles, the economy is heading for a rocky few months.

At the beginning of the week, the euro had slid to a twenty-year low, edging closer to parity to the greenback as the prospect of European recession becomes increasingly likely. The ECB has been slovenly in trying to control surging inflation whilst theUS currency was boosted by expectations that the Fed will raise rates faster than the Europeans. Meanwhile, whilst the euro tumbled 1.3% in early Monday trading to US$ 1.0056, the dollar gained 1.0% against a basket of six major currencies, reaching 108.14, the strongest since October 2002. Another driver attempting to sink the euro is the fact that Nord Stream 1, the biggest single pipeline carrying Russian gas to Germany, stopped flowing for ten days on Monday for annual maintenance, and now the main concern is whether the shutdown might be extended because of the war in Ukraine. If this were to happen a recession is an almost given and There’s No Way Out Of Here!

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