Mind Your Own Business!                                                         30 September 2022

What a way to end the month with a mega week for the local retail estate market! In August, the DLD registered 9,720 real estate sales with a value of US$ 6.63 billion for the whole month. The 2,702 real estate and properties transactions totalled US$ 5.99 billion, (almost equal to the total value in August), during the week ending 30 September 2022. The sum of transactions was 123 plots, sold for US$ 259 million, and 2,068 apartments and villas, selling for US$ 1.21 billion. The top two transactions were for land in Palm Jumeirah, sold for US$ 39 million, and the other for US$ 23 million in Palm Jumeirah. Al Hebiah Fifth recorded the most transactions, with 32 sales transactions, worth US$ 21 million, followed by Jabal Ali First with 20 sales transactions, worth US$ 20 million, and Al Hebiah Fourth, with 18 sales transactions, valued at US$ 53 million. The top three transfers for apartments and villas were all apartments, selling at US$ 139 million in Palm Jumeirah, another for US$ 135 million in Business Bay, and the third for US$ 113 million in Al Wasl. The sum of the amount of mortgaged properties for the week was US$ 4.35 billion, with the highest being for land in Jabal Ali Industrial First for US$ 3.81 billion. 82 properties were granted between first-degree relatives, worth US$ 191 million.

Today, Nakheel launched residences at Palm Beach Towers 3, featuring over three hundred fully furnished 1-3, B/R units and located on Palm Jumeirah. Residences will have 360-degree views, with a variety of nearby dining, leisure and recreational facilities, as well as the usual features including a modern gymnasium, an outdoor yoga area, private beach access, sky lounge and infinity swimming pool. Both previous launches of Palm Beach Towers 1 and 2 have sold out. The master developer has also recently unveiled a master plan for Dubai Islands, formerly known as Deira Islands, and is also redeveloping Jebel Ali Village.

There is no doubt that the Qatar World Cup is a godsend for the UAE hospitality sector and will also have a positive impact on the Dubai property market, driven by a shortage of hotel rooms in the host nation and the fact that many international fans would prefer to stay in Dubai and fly in and out of Qatar for the matches. A sign of how Dubai will be affected, by the influx of football fans, is that flydubai and Air Arabia will be operating a combined total of forty-five daily shuttle flights from Dubai and Sharjah into Doha over the four-week football extravaganza, due to start on 20 November.  It is expected that even those with a ticket for only one match in Qatar will take the opportunity to stay in Dubai for a longer period. However, it is noted that this time of the year is the peak period for the local tourism sector and when hotels expect to be close to full capacity. Accordingly, there will be great demand for short-term lets in the emirate and even now it is reported that rentals are at a premium, to the point that a property on Palm Jumeirah is up for a US$ 272k rental.

Last week, ADCB revised its 2022 country growth forecast by 0.2% to 6.2%, only to be surpassed this week by Emirates NBD upping its forecast by 1.3% to 7.0%; if this were to happen it would be even higher than the 6.9% growth registered in 2011. Both the non-oil sector – up from 4.1% to 4.7% – and the hydrocarbons sector from 10.0% to 13.0%. Dubai’s biggest lender attributed this uptick to a higher estimate for the energy industry’s output and the “robust growth” of its non-oil sector, assisted by a surge in tourism numbers and a buoyant property sector. However, growth has moderated, as 2022 has progressed, after Q1 GDP expanded by an annual 8.4%, with the non-oil sectors growing by 8.8%, on the year. Although the country is not immune from the impact of high inflation and a slowing global economy, it is in a better position than almost any other nation in the world, helped by encouraging economic indicators such as:

• the August S&P Global PMI for the UAE climbing on the month by 1.3 to 56.7 – the quickest rise in non-oil business activity since June 2019
• YTD crude oil production 13.0% higher by the end of last month
• average residential unit prices 10% higher on the year by June with villa prices up 19% and apartments by 9%
• July posting the highest number of sales transactions in the past twelve years
• UAE’s H1 foreign trade exceeded US$ 272 billion (Dhs 1 trillion), compared with US$ 229 billion for the same pre-pandemic period
• total H1 hotel guests topped 12 million, with tourism contributing US$ 5.18 billion to the economy

With the aim of attracting more US companies to the emirate, DMCC has successfully concluded its Made For Trade live events in Miami and New York, which attracted some 120 business leaders; last year, US bilateral trade was worth US$ 23 billion, whilst Dubai was home to over 1.5K US companies – a third of which were to be found in the DMCC. The free zone continues to hammer home Dubai’s economic benefits, including the ease of doing business, and it being the fastest growing and most interconnected free zone in the world, whilst the emirate itself is positioned as a global hub for financial services, crypto and commodities trade. The DMCC team will be continuing the tour and travelling to South America to engage with the business communities in Brazil in October.

Following the 2018 visit of its late prime minster, Shinzo Abe, when the UAE and Japan announced a comprehensive partnership, the final agreement was launched this week in Tokyo, with the twin aims of strengthening bilateral ties, by encouraging more diplomatic, economic, political and commercial partnerships and by encouraging investment in both countries. The UAE is Japan’s tenth largest trading partner globally, and Japan’s largest strategic partner in the field of energy, importing more than 20% of its oil from the UAE; the volume of non-oil trade last year touched US$ 13.35 billion.

Providing a wide range of services to complement its physical offices in Abu Dhabi and Dubai, the federal Ministry of Economy has unveiled its new headquarters in the Metaverse, posting that its third office will offer an immersive experience for governments, global corporations and the public to connect and collaborate. It will be equipped with advanced technology for the Ministry to sign bilateral agreements with other nations in the Metaverse, described as an economic equaliser, transforming key industries from logistics to real estate. It is expected that the global metaverse market will reach US$ 1.6 trillion by 2030, with a total annual growth of 43.3%, and the country is targeting to become a digital export centre and a leading metaverse economy.

Last Wednesday and Thursday witnessed the launch of the Dubai Metaverse Assembly, a global platform for the global metaverse community to discuss opportunities and enhance the potential of the promising virtual world. The event covered twenty-five various sessions and workshops and took place across the Museum of the Future and AREA 2071 at Emirates Towers. It included a wide range of related topics from building robust and scalable metaverse infrastructure to creating robust, business-friendly regulations and providing government services in the digital world. The Dubai metaverse strategy was approved in July by Dubai’s Crown Prince, Sheikh Hamdan bin Mohammed bin Rashid, with the aim that by 2030, it would have created 40k virtual jobs and attracted a further 1k companies, specialising in blockchain and metaverse technologies to turn Dubai into one of the world’s top ten metaverse economies.

After September’s 13%+ price reduction across the board (except for diesel’s 6.5% cut), the UAE Fuel Price Committee reduced October retail petrol prices by over 11%+. Despite oil prices continuing to hover around the US$ 90 level, prices have again been lowered – a feat that not many other countries can replicate.

• Super 98: US$ 0.826 – down by 11.1% on the month and up 14.4% YTD from US$ 0.722
• Special 95: US$ 0.796 – down 12.5% on the month and up 15.5% YTD from US$ 0.689
• Diesel: US$ 1.025– down 2.8% on the month and up 47.1% YTD from US$ 0.697
• E-plus 91: US$ 0.777 – down by 12.4% on the month

Yesterday, Salik saw its share value jump by 21.0% in its first day of trading on the DFM from its issue price of US$ 0.545 (AED 2.00) to US$ 0.657 (AED 2.41). The IPO was more than 49 times oversubscribed, after the Dubai government released 24.9% of its shares that raised US$ 1.02 billion. This latest IPO is the third out of ten state-owned companies to go public that will help boost the size of the local bourse to about US$ 817 billion. To date, the two other entities to go public have been Dewa and Tecom that raised US$ 6.11 billion and US$ 463 million.

The DFM opened on Monday, 26 September, 80 points (2.3%) lower on the previous week, shed a further 70 points (2.1%), on Friday 30 September, to 3,339. Emaar Properties, US$ 0.07 down the previous week, lost US$ 0.11 to close the week on US$ 1.58. Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.68 US$ 3.43, US$ 1.65, and US$ 0.45 and closed on US$ 0.68, US$ 3.50, US$ 1.63 and US$ 0.41. On 30 September, trading was at 105 million shares, with a value of US$ 66 million, compared to 99 million shares, with a value of US$ 60 million, on 23 September 2022.  

For the month of September, the bourse had opened on 3,443 and, having closed the month on 3,339 was 104 points (3.0%) lower. Emaar traded US$ 0.13 lower from its 01 September 2022 opening figure of US$ 1.71, to close the month at US$ 1.58. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.70, US$ 3.64, US$ 1.60 and US$ 0.47 and closed on 30 September on US$ 0.68, US$ 3.50, US$ 1.60 and US$ 0.47 respectively. The bourse had opened the year on 3,196 and, having closed September on 3,339, was 143 points (4.5%) higher, YTD. Emaar traded US$ 0.25 higher from its 01 January 2022 opening figure of US$ 1.33, to close September at US$ 1.58. 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 September on US$ 0.70, US$ 3.64, US$ 1.60 and US$ 0.47 respectively.

By Friday 30 September 2022, Brent, US$ 19.85 (18.7%) lower the previous four weeks, dipped a further US$ 0.82 (1.0%) to close on US$ 85.33.  Gold, US$ 76 (4.4%) lower the previous fortnight, recovered a little, up US$ 16 (1.0%), to close Friday 30 September, on US$ 1,668.

Brent started the year on US$ 77.68 and gained US$ 7.65 (9.8%), to close 30 September on US$ 85.33. Meanwhile, the yellow metal opened January trading at US$ 1,831 and has shed US$ 163 (8.9%) during 2022, to close on US$ 1,668. For the month, Brent opened at US$ 95.54 and closed on 30 September, lower at US$ 9.21 (10.5%). Meanwhile, gold opened September on US$ 1,716 and shed US$ 48 (2.8%) to close at US$ 1,668 on 30 September.

Despite the volatile state of global stock markets, Volkswagen seem to have got away with pitching the Porsche IPO price at the top of the range, priced at US$ 82.15 (Eur 84.00), which generated US$ 19.07 billion and valued the luxury car maker at US$ 72.40 billion. This figure almost tops the valuation of its parent Volkswagen, valued at US$ 82.15 billion. Its share value had dipped US$ 81.06 (Eur 82.88) by mid-morning whilst Volkswagen lost 4.9% in early Frankfurt trading. Money raised by the IPO will help fund the tens of billions needed for VW to shift towards electric mobility and software. The Porsche and Piech families, in turn, will solidify their control over the car maker with a 25% stake, plus one ordinary share – carrying voting rights –  in Porsche, effectively giving them a blocking minority.

As it tries to rid itself of a stockpile of products, Nike has been hit by the strong dollar – making exports, (which account for 50% of its business), more expensive – and having to introduce discounts, cutting profit margins, as stock rose more than 40% compared to a year earlier; the sports giant has forecast that its revenue will be hit by more than US$ 4 billion because of its stock issue – more than double that of its previous estimate. Its quarterly income to 31 August fell 22% to US$ 1.5 billion, on the year, whilst stock levels rose by 44% to US$ 9.7 billion over the same period, with the only good news being revenue rising to US$ 12.7 billion. Following the announcement, Nike shares fell by more than 9% in extended trading.  It is not the only such firm suffering from a fall in consumer confidence and spending, with rival sportswear maker Under Armour and major US retailers like Target having to offer heavy discounts as their inventories have risen in recent months.

Following a landmark cooperation agreement between the UAE and Oman, a US$ 3 billion contract will see the railway connecting the 303 km  distance between Sohar Port to the UAE National Rail Network, as passenger trains, travelling at top speeds of 200 kmph, will soon connect Abu Dhabi with Sohar, to the north of Muscat. There is no doubt that such a link will add economic benefits to both countries and will also facilitate cross-border trade by linking commercial ports to the railway network, boost market competitiveness and reduce the total cost of supply chains. Oman Rail and Etihad Rail will also establish a joint company – Oman-Etihad Rail – to introduce and operate the railway network which will reduce travel time from Sohar to Abu Dhabi to 1 hour 40 minutes, and from Sohar to Al Ain to 47 minutes.

Last week, Optus revealed about ten million customers – equating to 40% of the Australian population – had personal data stolen in what it called a cyber-attack, which could turn out to be the worst data breach in the country’s history. About 2.8 million customers had passport or licence numbers taken and are at a “quite significant” of risk of identity theft and fraud, according to the government. Australia’s second-largest telecoms provider initially confirmed it was investigating the breach and had notified the relevant authorities, indicating that it had originated overseas. Two days later, on Saturday, an internet user published data samples on an online forum and demanded a ransom of US$ 1 million in cryptocurrency, giving Optus a week to come up with the money or the other stolen data would be sold off in batches. In a worrying twist, it was claimed that the breach was not ‘sophisticated’ as Optus had claimed and that the purported hacker told a journalist that the data was pulled the data from a freely accessible software interface – “No authenticate needed… All open to internet for anyone to use.” By last Tuesday, the hacker released 10k customer records and reiterated the ransom deadline but within hours had deleted the previously posted data set, leading to some thinking that maybe a ransom had been paid.

Last week, the NSW Independent Casino Commission found the Star Entertainment Group unsuitable to operate its casino in Sydney, with the authority’s chief, Philip Crawford, noting that senior executives “didn’t have a clue” what was going on at the company. He remarked that the report was scathing on the workings of the casino and that it was found that the casino’s protections against money laundering were unsatisfactory and that it had links to organised crime and fraud. Subsequently, Geoff Hogg, its acting CEO, has resigned, with the report confirming that the operator was unfit to hold a licence and giving it fourteen days to convince New South Wales authorities that it should be allowed to keep its operating licence.

The EU has agreed to windfall taxes on certain energy companies, as well as mandatory cuts in electricity use. These emergency measures will see some energy firms having to pay tax on their record profits, driven by higher energy costs to the consumer. There will be a levy on fossil fuel firms’ surplus profits and a levy on excess revenues made from surging electricity costs, with the receipts expected to go to help household and businesses with their mounting expenses that have gone up sixfold in some circumstances. Fifteen member states, including France and Italy, have asked the EU to impose a price cap on gas bills to slow the soaring costs. However, member states seem to disagree on whether to introduce a cap on the wholesale gas price ahead of a difficult winter because of supply problems and the cost-of-living crisis. It is expected that the tax could reap a further US$ 140 billion for the bloc, after the fossil fuel extractors were told to give back 33% of their surplus profits for this year.

The euro slid to a fresh twenty-year low on Monday, falling below 96 cents against the US dollar – the steepest decline in two decades – after the election of a far-right party in Italy’s election rattled investor confidence. The currency has been struggling for some time and has been trading below or near parity since mid-August, with the euro dropping by more than 15% this year. There seems to be only one measure that the ECB can take under the present economic conditions – and that is to be more aggressive with the timing and rate hikes in the coming months – but even then, it may have acted too late to stop the surging inflation spiral. Italy could sink deeper into the economic mire since it will face higher debt costs, as interest rates head north, on its massive US$ 2.65 trillion sovereign debt – the third highest in the world after US and Japan.

By Monday, eurozone government bond yields jumped to new multi-year highs amid expectations that central banks will keep tightening their monetary policy and a fresh sell-off in UK gilts, with short-dated yields surging by almost 50 bps, following Kwasi Kwarteng mini budget aimed at boosting growth. There was no surprise that, following Giorgia Meloni‘s victory in the polls to become its first woman prime minister, the spread between Italian and German yields widened. Meanwhile, Germany’s ten-year yield hit its highest level in eleven years, at 2.132%, while the two-year yield rose 2.013%, its highest point since December 2008, whilst Italy’s 10-year bond yield, at 4.42%, hit its highest since October 2013.

The Bank of England acknowledged that the UK is now in a recession, expecting a Q3 0.1% slip in GDP, driven by slowing consumer spending and weaker economic activity.  Just like the ECB, it has to continue an aggressive policy, from its latest 2.25% fourteen-year high rate to tame inflation which now stands at 9.9%. The governor of the BoE should be held responsible for his past inaction, doing nothing when the rate started climbing higher than its own 2% target. It will be no surprise to see the BoE surprise the market one day this week by lifting rates a further 1.0% which would be an unprecedented move in its 328-year history.

Australian and US markets both rebounded after the BoE confirmed it would buy longer-term UK government bonds to stabilise financial markets after the pound plunged to record lows against the greenback earlier this week. The central bank pledged to buy US$ 75 billion of government bonds to stem the global market turmoil, which was sparked by the new UK government’s plans to cut taxes. Global markets reacted positively to the news with all three US bourses higher – the Dow Jones, 1.9% higher to 29,684, the S&P 500 2.0% to 3,719 and the Nasdaq Composite 2.1% to 11,052 – the FTSE 0.3% to 7,005, the DAX 0.4% to 12,183, the CAC 40 0.2% to 4,351 and the ASX 200 1.4% to 6,555.

The Bank of England stepped in to calm markets by pledging to buy US$ 72.2 billion of government bonds that has helped some types of pension funds avoid the risk of collapse. Some government bonds lost half their value, which resulted in pension funds divesting them in search for bonds with a higher return, which in turn resulted in the collapse in the price of these gilts. The Bank said its decision to buy government bonds at an “urgent pace” was driven by concern over “a material risk to UK financial stability.” If no action had been taken, there was every chance that some pension funds would have been unable to pay their debts. The cause of this crisis was the government’s mini budget, pledging US$ 50 billion in tax cuts, which led to a loss of market confidence, driven by the fear that the government would be struggling to cope with spiralling borrowing rates on public debt which already had been blown up by the energy crisis relief package which could cost upwards of US$ 100 billion.

It seemed that the whole world turned on the UK, driving sterling to record lows and sending global markets into a spin. Every man and his dog took a bite at the government’s antics and even the IMF came out and openly criticised the tax cuts, warning that the measures were likely to fuel the cost-of-living crisis and increase inequality. The IMF employs three main functions – surveillance, financial assistance, and technical assistance – to promote the stability of the international monetary and financial system. Perhaps it would be better all round if they kept their nose out of a sovereign nation’s economic affairs and put their own house in order first. It was also no surprise to see former BoE’s governor, Mark Carney, jumping on the bandwagon accusing the government of “undercutting” the UK’s key economic institutions, noting that the government’s tax-cutting measures were “working at some cross-purposes” with the Bank. Perhaps, the Canadian, appointed by George Osborne “of the old guard” to his position at the BoE, should stick to his day job with Brookfield. Mind Your Own Business!