Dawn of a New Day

Dawn of a New Day                                                                      28 October 2022

The 2,217 real estate and properties transactions totalled US$ 1.91 billion, during the week ending 28 October 2022. The sum of transactions was 234 plots, sold for US$ 616 million, and 1,983 apartments and villas, selling for US$ 1.09 billion. The top three land transactions were all for land – one in Palm Jumeirah, sold for US$ 82 million, another in Island 2 for US$ 36 million and in World Islands for US$ 23 million. Jabal Ali recorded the most transactions, with 105 sales worth US$ 96 million, followed by Mohammed bin Rashid Gardens, with twenty-nine sales transactions, worth US$ 173 million, and Al Mamzar with twenty-three sales transactions, valued at US$ 45 million. The top three transfers for apartments and villas included one sold for US$ 16 million in Palm Jumeirah, another purchased for US$ 183 million in Umm Suqeim Third for US$ 13 million, and a third sold for US$ 12 million in Me’aisem First. The mortgaged properties for the week reached US$ 608 million, while 170 properties were granted between first-degree relatives worth US$ 39 million.

Morgan’s International Realty released figures this week indicating that in the nine months to September, 31k new units have been added to Dubai’s property market – the highest number since 2018. The total value of transactions came in on US$ 17.68 billion, and 54.5% higher on the year, and almost double the number of transactions, compared to Q3 last year. The report also noted that townhouses/villas witnessed a 30% hike in price increases to US$ 349 per sq ft, with apartments 29% higher, year on year, to US$ 412 per sq ft, while hotel apartments (US$ 655 per sq ft) and commercial property (US$ 376 per sq ft) were up 10% and 8% respectively. The consultancy noted that mortgage activity remained buoyant in Q3, despite rising rates, with mortgage volumes 9% higher from Q2 and by 185% year on year, as there was a 2% decline in cash transactions on the quarter but up 85% compared to a year earlier. The secondary market was relatively flat, compared to Q2, and 52% higher than the previous year. Primary (off plan) transactions performed better – 31% and 74% higher on the quarter and year on year. With figures like these, it will be no surprise to see the number of new launches being ramped up in the coming months.

Knight Frank reports that prices of prime residential properties in The Palm Jumeirah, Emirates Hills and Jumeirah Bay have skyrocketed by up to 89% over the past twelve months. In other locations, values have risen by 29% in Q3, driven by a marked increase in the number of incoming UHNWI, (ultra-high net worth individuals), interested in buying into this sector of the emirate’s market. This boom will continue into the coming months and will probably peak next month when many visitors will use Dubai as a base for watching the FIFA World Cup matches in Qatar.

Q3 saw an interesting shift in the Dubai property market in that there has been a reversal from villa to apartment sales; Covid saw villas become more popular, as buyers were preferring villas as they sought more space and many workers shifted to home working, with another two factors being villa prices have been rising at twice the rate of apartments and there has been a villa supply shortage. Q3 results saw apartments accounting for 73% of all sales, compared to 67% over the same 2021 period, whilst transactions were 61% higher on the year, with apartments transactions 61% higher, as villa transactions dipped 5%.

On Tuesday, Global Village opened its doors for the start of its 27th season. The six-month long event, which is the region’s leading family destination for culture, shopping, and entertainment, will feature over 3.5k shopping outlets and 250 restaurants, housed in twenty-seven pavilions, with guests having the choice of 40k shows during the season. There will be over four hundred performers from forty different countries, with over two hundred performances every night – and if that is not enough, there will be more than 175 rides, games and attractions, including the new Global Village Big Balloon, a one-of-its-kind Helium Balloon Ride, providing spectacular 360-degree views across Global Village and its wider surroundings.

This week, the Ministry of Finance released preliminary federal government 2021 financials, showing that revenues were 26.1% higher at US$ 126.4 billion, with social contributions increasing by 4.7% to US$ 3.68 billion; the value of other revenues jumped 23.6% to US$ 68.6 billion. Although expenditures nudged 1.0% higher to US$ 109.6 billion, capex sank 57.0% to US$ 5.4 billion. Meanwhile, current expenses, including the likes of workers’ compensation, use of goods and services, consumption of fixed capital, interest paid, subsidies, grants, social benefits, and other transfers, rose by 8.3% to US$ 104.2 billion. The end result saw a US$ 8.6 billion 2020 deficit change to a US$ 16.7 billion surplus last year.

The fifth and final auction of the UAE government’s Treasury Bonds programme has concluded, being oversubscribed more than five times. The T-Bond 2022 programme was aimed at raising US$ 2.45 billion (AED 9.0 billion) in five tranches. As with past issues, this year, there were final allocations of US$ 204 million (AED 750 million) each for both the two-year and three-year tranches, with a spread of 17bps and 8 bps respectively. The Ministry of Finance was the issuer in collaboration with the Central Bank of the UAE as the issuing and paying agent.  The aims of the exercise were to build the dirham denominated yield curve, strengthen the local debt capital market, develop the investment environment, provide safe investment alternatives for investors, and support sustainable economic growth.

It appears that the Emerging Markets Property Group, (which has just raised US$ 200 million in its latest funding round, led by US-based growth equity fund Affinity Partners, with new funding from KCK, Acacia Partners and several other investors), is setting up for an IPO. The money raised will be spent on its technology platforms to strengthen its product offering, as well as expanding their payroll numbers. The Group, which owns classified portals Bayut, dubizzle and others, operates mainly in the Mena region and SE Asia, across fifty locations. In 2020, EMPG and Amsterdam-based OLX Group merged their businesses in the Mena region and in South Asia to create a company with assets worth US$ 1 billion.

It is reported that a consortium of Abu Dhabi state-backed entities, including wealth fund ADQ and real estate developer Aldar Properties PJSC, is interested in acquiring a stake in Dubai-based GEMS Education, said to be valued in the region of US$ 6.0 billion. Aldar, backed by the Abu Dhabi wealth fund Mubadala Investment Co, already has interests in the education sector, with Aldar Education. The Dubai-based company, owned by Sunny Varkey and buyout firm CVC Capital, is one of the world’s largest private school operators. GEMS operates more than sixty schools, teaching over 130k students across the Middle East and North Africa. It also has schools in Asia, Europe and North America.

Dubai Multi Commodities Centre has signed a Memorandum of Understanding with Logis, that will see the two entities combine to develop the largest agri-logistics free trade zone in Central and Latin America. The MoU will also see DMCC and Logis sharing market insights, analysis, and forecasts to support the development of commodities trading in both locations, with the aim of expanding trade between the members of their respective free zones.

According to the IMF, the UAE will be the fastest growing economy in the Arabian Gulf next year; the latest forecast by the world body sees the country’s economy growing 4.2%, ahead of Oman (4.1%), Saudi Arabia (3.7%), Bahrain (3.0%), Kuwait (2.6%), and Qatar (2.4%). This year, it is expected that Kuwait and Saudi Arabia, with growths of 8.7% and 7.6%, will be ahead of the UAE’s 5.1%. Globally, the IMF is predicting a slowdown in economic growth, with the world economy moving 3.2% higher this year, down from 6.0% in 2021, and then slowing further to 2.7% in 2023. The IMF said that risks to its economic outlook “remain unusually large and to the downside.”

Monday saw the start of Comprehensive Economic Partnership Agreement negotiations with Cambodia, part of the UAE government’s strategy to double the size of its economy and push its GDP beyond US$ 817 billion (AED 3 trillion) by 2030; it also hopes to see bilateral non-oil trade jump from its current estimated US$ 350 million this year to over US$ 1.0 billion by 2027. Dr Thani Al Zeyoudi, Minister of State for Foreign Trade, expects the deal, between the two countries, to be finalised in “three to six months’ time, maximum”. The main focus of negotiations will be on infrastructure/logistics, tourism/hospitality, food security, energy and, in particular, renewables. So far this year, the UAE has finalised similar Cepa deals with India, Indonesia and Israel, and is currently holding negotiations with Turkey, Georgia and Colombia.

Effective from 01 January 2023, the federal Ministry of Finance announced amendments to some provisions of the Federal Decree-Law No. 8 of 2017 on Value Added Tax. Decree-Law No 18 of 2022 contained changes including:

registered persons who make taxable supplies are allowed to apply for an exception from VAT registration if all of their supplies are zero-rated or if they no longer make any supplies other than zero-rated supplies
setting a 14-day period to issue a tax credit note to settle output tax, in line with the time frame set for issuing tax invoices
the FTA may forcibly deregister registered persons in specific cases if deemed necessary

As part of its ongoing strategy of strengthening both its Healthcare and Education platforms, by expanding their reach to cater to People of Determination, Amanat Holdings has announced it has bought a 60% stake in Human Development Company; the deal included an initial consideration of US$ 59 million and a contingent consideration of up to US$ 13 million, payable subject to future earnings growth. The Saudi company, a provider of special education and care (SEC) services in Saudi Arabia covering educational, medical, and rehabilitation services, caters to over 3k beneficiaries, with nine schools, twenty-two day-care centres and specialised rehabilitation medical clinics.

For the first nine months of the year, DP World posted a 2.0% rise in the number of TEUs to 59.6 million, with gross container volumes also increasing by 2.5% year-on-year on a like-for-like basis. In Q3, it handled 20.1 million TEUs on a reported basis, up 1.5% year-on-year, and 2.1% higher on a like-for-like basis. The main drivers behind this enhanced performance was an overall gross volume growth, mainly driven by Asia Pacific, MEA, Americas, and Australia as Jebel Ali, handling 3.5 million TEUs, up 2.0% year-on-year. On a consolidated basis, over the first nine months, DP World terminals handled 34.6 million TEUs, up 1.9% year-on-year and up 1.4% on a like-for-like-basis, whilst Q3 posted 11.7 million TEUs, increasing 2.7% on a reported basis and 1.5% year-on-year on a like-for-like basis. Although growth rates have slowed, they are still above global comparisons, and they are expected to continue to outperform the market in the coming months; industry growth has been slowed by the geopolitical environment, inflationary pressures and currency fluctuations.

TECOM Group has performed well this year, with marked improvements noted in Q3 and the nine months to September. Over those two periods, both revenue and profit moved markedly higher – revenue and profit by 12.5% to US$ 133 million and by 70.0% to US$ 58 million in Q3 and by 15.0% to US$ 403 million and 51.0% to US$ 174 million. The main driver was strong growth across all business segments. Quarterly EBITDA was 26.8% higher at US$ 99 million and by 24.0% to US$ 209 million YTD, attributable to top line growth and lower operational expenses. By the end of September, occupancy levels for commercial and industrial assets was at 83.5% – compared to 78.3% at the end of 2021 – driven by the very strong customer retention rates and an increase in new customers across the portfolio underpinned by Dubai’s continued economic growth.

Dubai Islamic Bank posted a 14.0% hike in Q3 profit to US$ 375 million, with revenue 4.0% higher at US$ 708 million; impairment charges, 26.0% down at US$ 137 million, along with higher operating revenue and income from financing and investing transactions, were the main drivers behind the improved figures. Net profit and revenue over the first nine months were both higher by 10.0% and 7.0% to US$ 2.08 billion and US$ 2.68 billion, as impairment charges fell 33% to US$ 395 million. The country’s biggest Sharia-compliant lender has also benefitted from the buoyant local economy, currently operating better than expected in a slowing global economy, driven by a recovery in travel and tourism, retail business spending and the implementation of new residency reforms. By 30 September, net financing and sukuk investments were 3.3% higher at US$ 64.3 billion, with customer deposits at US$ 50.9 billion – lenders’ deposits accounted for 42% of current account savings accounts.

Emirates NBD posted strong returns in Q3, as total operating income, before impairments, surged 62% to US$ 1.85 billion, and net profit was up 51% to US$ 1.03 billion; net interest income was up 37.0% to US$ 1.67 billion. Over the first nine months of the year, the bank’s net profit was 25.0% to the good, at US$ 2.48 billion, with net interest income climbing 23.0% to US$ 4.22 billion on the year. Provisions for loan losses over the period declined 12.0%, year on year, to US$ 899 million. It reported that international operations, contributed 40% of total income, while new lending increased substantially in both the retail and corporate segments.

Emirates Islamic posted strong returns for the nine months to September, with total income 22.0% higher, attributable to higher funded and non-funded income, a marked decline in the reduction in the cost of risk and vastly improved business sentiment. Net profit was 23% higher at US$ 287 million, even though expenses had jumped 22%, partly offset by a 23% decline in impairment allowances. Furthermore, the bank’s total assets rose to US$ 19.9 billion, with further increases noted for customer financing and customer deposits – up 12% to US$ 13.1 billion and 16% to US$ 15.0 billion respectively.

Deyaar posted a healthy 72.1% jump in Q3 revenue to US$ 57 million, as profit more than quadrupled to US$ 10 million, with the Dubai economy continuing its strong post-Covid economic recovery. Over the nine months to September, the company posted a 38.0% rise in revenue to US$ 157 million and a tripling of profit to US$ 28 million. By September, the company’s total assets grew 5.4% to US$ 1.66 billion in the nine months, with total liabilities up 17% to US$ 455 million during the same period. In 2019, a UAE court ordered Limitless to pay US$ 112 million to Deyaar in a dispute related to the purchase of land, as well as costs of US$ 17 million. This week, the directors recommended to approve a US$ 136 million cash settlement offer made by Dubai-based developer Limitless.

Emirates Central Cooling Systems Corporation (EMPOWER), 70% owned by DEWA and Emirates Power Investment, will retain 90% of the district cooling provider, as the remaining 10%, equating to one billion shares, will be listed on the DFM; the two companies reserve the right to amend the size of the offering, with subscriptions opening this Monday – Hallowe’en. The first tranche, reserved for individual investors, ends on 07 November and the second tranche, which is allocated for professional investors, a day later. Last November, Dubai’s Deputy Ruler, and the country’s Minister of Finance, Sheikh Maktoum bin Mohammed, announced that the emirate would list ten state-owned companies – to increase the size of its financial market to US$ 817 billion – and this would be number four. The first three raised US$ 7.59 billion – DEWA, (US$ 6.11 billion), Salik (US$ 1.02 billion) and Tecom (US$ 463 million). In August, the world’s largest district cooling services provider, with 84 plant rooms and a network that is more than 350 kilometres long, posted a 41.3% jump in in the number of buildings over the last five years.

Having received a US$ 553 million cash dividend from its 70% shareholding, in EMPOWER, DEWA “intends to seek all necessary approvals to make a one-time special dividend payment to its shareholders. This one-time special dividend is intended to be an additional payment to shareholders over DEWA’s stated annual dividend policy of paying AED6.2 billion (US$ 1.69 billion) in dividends.”

Dubai Financial Market posted its own results indicating that in the nine months to September, both revenue and net profit both moved higher – by 29.9% to US$ 64.8 million and by 134% to US$ 24 million. The revenue comprises US$ 47.2 million of operating income and US$ 17.6 million of investment returns and other income, with expenses nudging 2.6% higher to US$ 40.3 million. Total Market Capitalisation of listed securities increased 40.0% to US$ 156.8 billion, driven by both organic and non-organic growth in the form of IPOs and a marked improvement in listed securities’ performance. In the nine months, total trade value jumped 79.6% percent to US$ 18.9 billion, with foreign investors accounting for 47.3% of trading value at the end of September with net purchases of US$ 872 million. Foreign ownership reached to 19.1% of the total Market Capitalisation, with institutional investors accounting for the 46.7% of the total trade value, with a net purchase of US$ 354 million. Interestingly, the number of new investors who joined the market this month has increased 41 times to 155.1k investors, compared to 3.8k investors during the corresponding period in 2021.

The DFM opened on Monday, 24 October, 26 points higher on the previous fortnight, and 50 points (1.5%) points by Friday 28 October, to close on 3,349. Emaar Properties, US$ up 0.12 the previous three weeks, shed US$ 0.04 to close the week on US$ 1.66. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 3.56, US$ 1.66, and US$ 0.39 and closed on US$ 0.68, US$ 3.61, US$ 1.58 and US$ 0.39. On 28 October, trading was at 82 million shares, with a value of US$ 69 million, compared to 181 million shares, with a value of US$ 120 million, on 21 October 2022.

By Friday 28 October 2022, Brent, US$ 1.87 (2.0%) higher the previous week, was up US$ 2.27 (2.4%) to close on US$ 95.77.  Gold, up US$ 13 (1.1%) the previous week, shed US$ 15 (1.0%), to close Friday 28 October, on US$ 1,648. 

With air travel almost non-existent, and the company bleeding money, Qantas Airways came within eleven weeks of financial collapse at the height of the Covid-19 pandemic, according to its chief executive, Alan Joyce. With its rival Virgin Australia collapsing, Qantas started raising cash by selling land and slashing costs which helped lift its life expectancy to two years. This statement, by the Irishman, seems to be responding to his critics saying that he had cut costs too quickly and too aggressively, as 8k employees lost their jobs. Now that demand has begun to rebound, but not yet, to pre-Covid levels, Qantas continues to struggle to cope with many complaints of cancelled flights, delays and lost luggage. Overall global passenger traffic hit 75% of pre-pandemic levels in 2019, with domestic travel at 86.9% of the July 2019 level.

Not helped by a US$ 2.4 billion impairment cost, after a reclassification of its French operations ahead of its imminent sale, HSBC posted a 41.7% slump in Q3 profit to US$ 3.15 billion, as its reported revenue dipped 3.0% to US$ 11.6 billion, attributable to its upcoming “French sale” and an adverse foreign currency translation impact of US$ 1 billion. Europe’s largest lender posted that net interest income increased in all the lender’s businesses globally due to interest rate rises, with adjusted revenue rising 28% to US$ 14.3 billion. Customer lending balances fell US$ 61 billion, on a reported basis, and on an adjusted basis, by US$ 18 billion, reflecting a US$ 23 billion reclassification of loans relating to the planned disposal of assets held for sale in France.

After being involved in too many expensive scandals in recent years, (including Greensill Capital Archegos Investment fund, Mozambique’s tuna fishing industry and Bulgarian drug money laundering), and posting a US$ 4.0 billion loss last year, Credit Suisse is to cut over 9k jobs – to 43k – over the next three years as it tries to stem heavy losses. The banking giant’s move did little to assuage investor concerns as its market value tanked – down by more than 13% on the day. Other parts of the strategy jigsaw will see the bank divest its investment arm, relaunch the CS First Boston brand, and wind down some of its higher-risk businesses., aiming to reduce overall costs by 15% to US$ 2.5 billion. Credit Suisse is hoping to raise US$ 4.0 billion in new capital, of which US$ 1.5 billion has been promised by the Saudi National Bank. It will take more than time and money for Credit Suisse to regain its former glory and status

Online furniture retailer Made.com seems to be a another post-Covid casualty, as the firm’s sales, that surged as people were confined to their homes, shopping online, and buying more furniture and other home goods. Since more consumers have returned to physical shopping, allied with ongoing supply chain problems and the cost-of-living crisis, revenue has slumped. Customers did not want to wait for furniture because of supply problems and cut back on big-ticket items added to the retailer’s problems. Little wonder that the market value of the company, that employs seven hundred staff, tanked by more than 90%, in trading on Tuesday to US$ 0.58, made worse by news that the company had failed to find a buyer. The company, which has also stopped taking orders, has warned that if further funding could not be raised before its cash reserves ran out, it would take “appropriate steps to preserve value for creditors”. In 2020, sales were 30% higher at US$ 364 million and in the three months of 2021, prior to the real onset of Covid, sales grew by 61% to US$ 127 million. With such a bright outlook then, in June 2021, the firm was listed on the LSE at US$ 897 million. Sic transit gloria mundi.

The Royal Mail has announced that 1st and 2nd Class “everyday” stamps – the normal stamps that were available in books of six or twelvem,m – that feature the profile of the late Queen Elizabeth, but with no unique barcode, will no longer be valid from 31 January 2023. Non-barcoded Christmas and other special stamps, with pictures on, continue to be valid for postage and should not be submitted for swap out. Barcoded stamps were introduced in February 2022, with the long-time aim of using them to allow people to watch videos, find out information and send birthday messages to each other through the barcodes which can be scanned via the Royal Mail app.

Last week, this blog noted the troubles that Asos had experienced posting an annual loss, caused by shoppers returning to stores post-Covid. This week, it was announced that Frasers Group, owned by billionaire Mike Ashley, and also the owner of Sports Direct,                                                                                                                                                                                                                                                                                                                                                                       has been building up its stake in the online fashion retailer to become its fourth-largest shareholder, owning 5% of Asos. The group also announced it had raised its investment in Hugo Boss to 4.3% directly and an extra 28.5% through the sale of financial instruments known as put options. The retail giant said the move was the latest example of its “its drive to expand and acquire businesses and brands that can strengthen Frasers Group”. Along with House of Fraser and Sports Direct, the group also owns Flannels, Game, Jack Wills, Evans Cycles and Sofa.com, as well as a significant shareholding in the fashion brand, Mulberry.

Having fallen 4.0%, to a market value of US$ 27.7 billon, last month, Meta shares plunged by more than 20% yesterday, after disappointing Q3 results. Although still making healthy profits – US$ 4.4 billion in the quarter – and seeing users climb from 2.88 billion to 2.93 billion over the period, its revenue stream fell 4.0% to US$ 27.7 billion. There is investor concern that its founder Mark Zuckerberg may have got his strategy – of believing that virtual reality would be the next frontier to drive Facebook’s growth – wrong, but over the past twelve months has struggled from intense competition and clients cutting advertising budgets, in a time of an economic slowdown. He said the company was focused on becoming more efficient and hinted at job cuts, saying the firm may be a “smaller organisation” next year; since 2016, payroll numbers have more than quintupled from 16k to 87k last year, during which numbers jumped 28%.  Although problems will continue, he still stays committed to his pet project, Reality Labs, which works on virtual reality, and has seen revenues drop significantly. Investors are beginning to think differently.

Apple posted a flat 24 September quarter net profit, at US$ 20.7 billion, despite hitting record sales of US$ 90.1 billion; the profit was 0.8% higher on the year and 6.7% up on the preceding quarter, whilst revenue came in up 6.7% on the quarter. The company’s full financial year’s net profit increased 5.4% to US$ 99.8 billion, with twelve-month sales 7.7% higher at US$ 394.3 billion, year on year. Its shares, down 20.4% YTD were trading 0.7% higher to US$ 144.80 in after-market hours. iPhone sales account for about 47.3% of the company’s revenue, with other revenue drivers being smartphones, iPads, wearables, home & accessories and wearables and services accounting for US$ 42.6 billion, US$ 18.7 billion, US$ 9.6 billion and US$ 19.2 billion. Its main market continues to be the Americas, accounting for US$ 39.8 billion of sales, followed by Europe’s US$ 22.8 billion, Greater China – US$ 15.5 billion – and Asia Pacific, with US$ 12.0 billion.

Investors punished Amazon, after it released Q3 figures indicating that its net income had dipped 9.3% to US$ 2.9 billion, by selling shares so as to see their value fall 20.0%, on the news yesterday. However, this was a major improvement on the previous quarter’s loss of US$ 2.0 billion, but the current return includes a pre-tax valuation gain of US$ 1.1 billion, relating to non-operating income from its investment in Rivian Automotive. Operating income fell by US$ 2.4 billion to US$ 2.5 billion. Revenue, at US$ 127.0 billion, was 5% higher on the quarter and 15% on the year; this was split between North America, (20% higher on the year), international – 5.0% lower – and Amazon Web Services, up 28.0%, accounting for US$ 78.8 billion, US$ 27.7 billion and US$ 20.5 billion.

If Apple and Amazon were unhappy with their Q3 results, they should get some comfort from Intel which reported an 85% slump in net profit to US$ 1.0 billion, as revenue came in 20% lower at US$ 15.3 billion on an annual basis – and flat compared to Q2. The world’s largest chip maker also incurred US$ 664 million in restructuring charges, down to initial cost reduction actions. It has also downgraded its 2022 full fiscal year revenue guidance, citing “continued macroeconomic headwinds”. On Wednesday, it divested itself of its driver-assist subsidiary Mobileye, bought for US$ 15.3 billion which raised US$ 861 million.  Having already seen its share value more than halved YTD, yesterday it shed a further 3.7% on the news.

A US District Judge in Texas has indicated that families of passengers killed in the two fatal Boeing crashes, in Indonesia and Ethiopia, can be deemed as official crime victims, entitled to consultation before the US Justice Department cuts any deals with the plane maker. He will now decide what remedies the families should receive because federal prosecutors failed to consult with them before reaching a plea deal with Boeing in January 2021; in that deal, the company agreed to pay US$ 2.5 billion, including a $244 million penalty, but now the defendants, both Boeing and its executives, could face new criminal charges or penalties, that could result in criminal prosecution. The families have claimed that if the pilots had been properly trained, the crashes, which killed 189 in Indonesia and 157 in Ethiopia in 2019, could have been avoided.

Saudi Arabia’s national airline, Saudia, has signed an agreement to purchase one hundred aircraft, (capable of carrying between four to six passengers), from German electric plane maker Lilium. The planes would be used on domestic routes and would offer a “premium service”, with the planes expected to be certified by the regulators by 2025. This move is part of the country’s strategy to reach net zero by 2060. This week, it was also reported the country’s Public Investment Fund was in negotiations with both Airbus and Boeing for up to eighty passenger jets for its new national airline, RIA.

With its currency tanking, having lost 11% YTD, UAE remittances to India have jumped around 25%, as the rupee hit an all-time low of 83 versus the US dollar (22.61 versus the AED), last week and started this week at 82.74 and ended on 82.29. Many analysts consider that Indian remittances will continue in the same vein due to the weakness of the rupee, attributable to high oil prices and a growing trade deficit, depleting the country’s foreign exchange reserves. A July UN report noted that India was the top global remittance recipient, at US$ 87 billion last year, with the UAE one of the major sources of remittances to India, along with the US and Saudi Arabia.

On Sunday, and to nobody’s surprise, Xi Jinping was reappointed for a historic third five-year term in charge of the Chinese Communist Party, with Li Qiang, a close ally, being named as his new second-in-command, and likely to be named premier at the government’s annual legislative sessions early next year. He was also reappointed head of China’s Central Military Commission and is all but certain to be reappointed China’s president for a third term as well. What was of more interest happened after the week-long 20th Party Congress was the fact that the country released a set of economic figures which had been postponed from the previous week. Official figures showed that China’s economy grew 3.9% in Q3 on the year – a major improvement on the 0.4% posted a quarter earlier, when Shanghai was in lockdown, and the ongoing trade conflict with US. The latest growth figures are far below the rate of expansion China has seen for decades and still some way off the 5.5% 2022 target set in March. Regional markets did not appreciate the new data, with the Hang Seng index, 6% lower, as the Hong Kong-listed shares in Chinese technology giants Alibaba and Tencent plunged, and the Shanghai Composite also headed south, 2% lower. The sixty-nine-year-old promoted some of his close Communist Party allies at the week-long Congress, (‘closed shop’), of 2.3k hand-picked delegates which approved a sweeping reshuffle that saw former rivals step down. It seems that Xi Jinping may have taken a leaf out of Liz Truss’s book by appointing senior positions based on loyalty, rather than on expertise and experience.; the only difference is that they will last longer in their positions than what she did.

The latest initiative sees Prince Mohammed bin Salman allocating over US$ 10 billion in incentives for supply chain investors, with no further details available, except that the latest supply chain initiative includes establishing a number of special economic zones. Last year, the Crown Prince announced a US$ 45 billion package to enhance the country’s infrastructure, including airports and seaports, by the end of the decade, as it tries to become a leading international player as a transport and logistics hub. This is part of Prince Mohammed’s Vision 2030 to modernise Saudi Arabia and wean its economy off oil revenues, as well as boosting the country’s position on the global economic stage.

Despite the US economy expanding a credible 2.6% in Q3, after being in a technical recession because of contractions being posted in the previous two quarters, there is every chance that the economy will downturn into 2023. The latest improvement has been put down to continued spending in the High Street, despite the ongoing rising prices and higher borrowing costs, whilst exports have surged. However, trade will be impacted by a strong dollar and a weak global economy, with consumer spending slowing, rising just 1.4% in Q3, compared to 2.0% the previous quarter. Furthermore, the mid-term elections take place next month and these results could cost the incumbent president control of Congress., although Joe Biden has come out fighting declaring, that the figures show “further evidence that our economic recovery is continuing to power forward”. It is true that hiring is still in positive territory, and that the unemployment rates are nearing historic lows, but prices continue to head north at their fastest rate since the 1980s. On the flip side, housing construction fell 26% in Q3, not helped by rising mortgage rates.

As the weekend progressed, it became increasingly likely that Rishi Sunak would take the top position – and this was confirmed as early as Monday, when both contenders, Boris Johnson and Commons Leader, Penny Mordaunt, dropped out. The markets were impressed, as sterling headed north, 0.4% higher to US$ 1.134, as government borrowing costs dropped; by the end of the week, sterling went even higher to US$ 1.161. This was in direct contrast to the events after the now infamous mini-budget, orchestrated by the terrible twosome – Lis Truss and Kwasi Kwarteng.

It is inevitable that by the end of Tuesday, next week, UK interest rates will be 0.75% higher at 3.0% – being the eighth meeting in a row that the BoE has hiked rates. It is forecast that the central bank will become the first in the world to start monetary tapering , as it starts selling bonds from its stimulus stockpile.  A figure of US$ 45.5 billion (GBP 40 billion), of bonds bought since 2009, being sold over the next year, has been bandied about. Despite these efforts, the country will soon be in recession and there are many who consider that the BoE has been far too slow in its efforts to quell inflation and attempt to return it to its 2.0% target. The new Sunak administration has its work cut out to balance the books that could see scathing cuts in government spending, even after many of Liz Truss’s costly help for households and businesses have been abandoned.  Chancellor Jeremy Hunt is looking at a minimum US$ 56.8 billion, (GBP 50 billion) of tax increases and spending cuts, to make up the current deficit. He was due to announce his new economic plan this Monday but it has been delayed until 17 November after Sunak became the country’s new leader.

At last Friday’s EC summit, its President Ursula von der Leyen announced that the EU would have granted Ukraine nearly US$ 18 billion in financial assistance by the end of the year to cover the country’s basic budgetary needs. The other highlight was the bloc’s strong position on China. At the beginning of the month, Ukraine’s President Volodymyr Zelenskyy had commented that his country will need around US$ 55 billion to sustain next year’s budget deficit and repair damaged infrastructure. This is almost in line with the IMF’s estimate that the country will need up to US$ 4 billion a month, in foreign aid, to keep its public services running. Some 40% of that total will emanate from the EU which aims to contribute with €1.5 billion a month, equating to US$ 18 million. This money is being raised by the Commission on international markets and then covered with guarantees using the EU’s common budget and national contributions. Nothing is certain though, as the bloc had committed to deliver up to US$ 9 billion in exceptional loans but so far this has fallen short, with Zelensky noting that “thank you for the funds that have already been allocated, but a decision has not yet been made on the remaining Eur 6 billion from this package, which is critically needed this year.” 

There was a marked increase of 0.8% to 9.9%, on the month, in the euro area annual inflation rate in September; this figure is almost triple the 3.4% posted in September 2021. The EU annual inflation was also 0.8% higher to 10.9% last month, and more than tripling last September’s 3.6%. The highest rates were reported in Estonia, Lithuania and Latvia – at 24.1%, 22.5% and 22.0% – with the three lowest rates being in France, Malta and Finland, at 6.2%, 7.4% and 8.4%. On the month, annual inflation fell in six Member States, remained stable in one and rose in twenty, with the highest contribution to the annual euro area inflation rate originating from energy, 4.19%, followed by food, alcohol & tobacco, 2.47%, services -1.80% – and non-energy industrial goods, 1.47%.

The ECB raised interest rates again yesterday by another 0.75%, bringing the total hike to 2.0%, over its last three meetings; it has also started to unravel its US$ 8.5 trillion stimulus package that could see the end of debt purchases and ultra-cheap loans extended to banks. It beggars belief that ECB’s President, Christine Lagarde, continues to allow some US$ 2.1 trillion of ultra-cheap loans handed out to commercial banks, at zero or even in some cases negative rates, to continue and even worse these banks can then simply deposit this cash with the ECB for a positive, risk-free return, which rises with each deposit rate hike. It seems that the ECB has been negligent by not raising rates fast enough – as inflation soared well above its 2.0% target – and allowing commercial banks to mint money at taxpayers’ expense. Hopefully, the good lady has finally seen the light and the bank makes the most of the Dawn of a New Day.

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