Lost Christmas!                                                                             23 December 2022

The 2,926 real estate and properties transactions totalled US$ 2.48 billion, during the week, ending 23 December 2022. The sum of transactions was 159 plots, sold for US$ 239 million, and 2,233 apartments and villas, selling for US$ 1.48 billion. The top two transactions were for land in Business Bay, sold for US$ 27 million, followed by land that was sold for US$ 26 million in Al Safouh First. Al Hebiah Fifth recorded the most transactions, with sixty-six sales worth US$ 48 million, followed by Al Yufrah 2, with twenty-one sales transactions, worth US$ 8 million, and Jabal Ali First, with twelve sales transactions, worth US$ 10 million. The top three transfers for apartments and villas were all for apartments, the first in  Jumeirah First at US$ 86 million,  the next in Business Bay for US$ 50 million and the third on Palm Jumeirah for  US$ 23 million. The mortgaged properties for the week reached US$ 722 million, with the highest being for land on Palm Jumeirah, mortgaged for US$ 216 million, whilst seventy-nine properties were granted between first-degree relatives worth US$ 47 million.

In a move to boost sales, Deyaar is planning to launch three new projects, valued at US$ 82 million, located in Al Furjan, by offering “flexible payment plans of up to five years, and a full exemption from real estate registration fees”. The projects will encompass some four hundred residential units and hotel apartments. No further details were made available but what is known is the first project will be Amalia Residences, and the other two will be announced next year. The developer, majority owned by Dubai Islamic Bank, is taking advantage of Dubai’s prime residential market’s current position of being set for the world’s strongest growth in 2023. In November, the emirate’s property sector recorded a 58.5% monthly hike of over 10.9k transactions, (the highest since November 2011), and a 70.8% surge in value to US$ 8.31 billion.

To alleviate any future occupancy problems and satisfy tenants, Tecom is to build an office project at Dubai Internet City amid higher demand for commercial property in Dubai. The operator of business districts, that are home to more than 7.8k companies, has broken ground on Innovation Hub 2, an investment valued at US$ 120 million. The project, slated for completion by 2024, will have two high-end office buildings, four boutique offices, retail spaces and more than eight hundred parking spaces, encompassing 355k sq ft of gross leasable area. The second phase is being constructed following the success of the first phase of the project, which is nearing total capacity and is home to global technology companies such as Google, Hewlett-Packard, Gartner and China Telecom.

According to its CEO, Ghaith al Ghaith, flydubai expects double digit growth next year on the back of international travel demand returning to pre-pandemic levels, as Dubai’s budget airline is now 80% up on pre 2020 levels. in relation to the number of aircraft, (71 Boeing 737 Max aircraft), destinations, (114) and employees (4.65k). There are several drivers behind these impressive returns including the UAE government’s management of the pandemic, the impact of hosting Expo 2020 Dubai, the regional spill over from the FIFA World Cup in Qatar, and new visa schemes introduced by the government. The carrier expects to post a 2022 profit, following a US$ 229 million profit a year earlier and a US$ 194 million loss in 2020. This year, it added a further twenty new Boeing 737 Max jets and hired  1.3k new staff, whilst in 2023, it is looking at taking delivery of seventeen new 737 Max aircraft and adding eight new routes to its network – Cagliari, Corfu, Gan (Maldives), Krabi, Pattaya, Milan, Bergamo (Italy) and St Petersburg. The airline supremo commented that pent-up demand for travel will weather higher inflation rates that are biting into consumer spending, and that “I can guarantee that until the summer for sure demand will be very strong, and I think the rest of the year will be very strong.”

Flydubai picked another winner when it became the regional partner for the Argentine Football Association and carried the world champions from Abu Dhabi to Doha after they concluded their training on 18 November. The 737, carrying the team, was decked out with a special livery but the carrier has gone one better following their win against France to pick up the World Cup. The two Boeing 737 MAX 8s show the “Campeón” decal and the three-starred AFA logo and added to it the celebratory liveries, the World Cup trophy and the Argentina national flag over the winning team including Lionel Messi and other players. Since the tournament started, flydubai has carried more than 170k passengers to and from Qatar.

Consultancy OAG confirmed Dubai International as the busiest international airport in the world, based on seat capacity and international flight frequency, with a December total of 4.6 million seats – 8% higher on the month. It was over one million more than second-placed Heathrow, followed by Paris Charles de Gaulle, Istanbul and Singapore Changi. When it comes to being the busiest airport in the world, which takes in domestic travel as well, Dubai is ranked second behind Atlanta’s Hartfield-Jackson, with 4.7 million seats, and ahead of Tokyo Haneda, LHR and Dallas Fort Worth. In Q3, DIA handled 18.5 million passengers – more than double the figure of a year earlier – and the first time that the quarterly figure was higher than pre-pandemic levels.

DP World and one of the world’s largest pension funds, Hassana Investment Company, have agreed to a US$ 2.4 billion investment in three of DP World’s flagship UAE assets. This sale of a 10.2% stake in Jebel Ali Port, Jebel Ali Free Zone and National Industries Park, to the investment manager for the General Organisation for Social Insurance, values the three assets in the region of US$ 23.0 billion. Last year, these assets generated revenue of US$ 1.9 billion, comprising over 9k companies and serving more than 3.5 billion people globally. This latest deal will not impact day-to-day operations, customers, service providers and employees, with the assets remaining fully consolidated businesses within the DP World Group.

With its main target being to reduce the US$ 1.7 trillion global trade finance gap, DP World Trade Finance, first launched in July 2021, offers businesses a simple way to secure the capital they need to trade in global markets. The DP World subsidiary has posted that it had already received US$ 600 million in credit limit submissions by facilitating a streamlined connection between SMEs and financial institutions on its trade finance platform. To date, it has registered over 56k global clients from more than fifty countries to provide them with affordable access to trade finance.

The country’s second largest private steel manufacturer posted that it would build a US$ 41 million colour-coated steel plant which will be able to produce an annual 100k metric tonnes of galvanised steel coils, strips and sheets. Located in Jafza South, it is the only private steel manufacturer, with four distinct product verticals, and exports products to twenty-six countries, with assets estimated to be valued at US$ 681 million. This latest expansion will increase revenues by up to 15%, with the company aiming to ramp up its manufacturing capacity to up to three million tonnes by 2030.

A bullish Central Bank of the United Arab Emirates has upped their 2022 country growth forecast from its earlier review of 6.5% to 7.6%, driven by strong performances in some of the non-oil sectors, including tourism, hospitality, real estate and manufacturing; the non-oil economy is expected to post a 6.1% rise, with the oil GDP expectedly to grow by a healthy 11.0% this year. Other factors in play were the removal of most COVID-19-related restrictions, a marked recovery in the global travel and tourism sector along with a major boost in the real estate and construction sectors. Next year, the global slowdown will see the real GDP growth at 3.9%, with the non-oil GDP slightly higher at 4.2%.

Pursuant to the merger of Sukoon International Holding Company CJSC with Cambridge Medical & Rehabilitation Centre, the largest pan-GCC post-acute care platform has been created. In a non-cash share swap, Sukoon shareholders will receive 15% of Amanat’s shares in CMRC, in return for Amanat receiving additional shares in Sukoon.  Amanat has confirmed that the new entity will operate four hundred beds in the UAE and KSA, across four cities (Abu Dhabi, Al-Ain, Dhahran, and Jeddah) with a three hundred-bed expansion underway.

As from the close of business today, the DFM has approved foreign ownership of shares in the National Central Cooling Company being raised from 49% to 100% and, interestingly, the increase of the Individual Ownership Limit has been lifted from 20% to 100%. Following the details of the new ownership arrangement, shares in Tabreed traded 10.4% higher at US$ 0.858, (AED 3.15). Earlier in the year, it posted H1 figures showing that profit was 3.0% higher at US$ 65 million.

The DFM opened on Monday, 19 December, 24 points (0.6%) higher on the previous three weeks, shed 13 points (0.44%) to close on 3,316 by Friday 23 December. Emaar Properties, US$ 0.07 lower the previous week, gained US$ 0.02 to close the week on US$ 1.61. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.65, US$ 3.65, US$ 1.53, and US$ 0.42 and closed on US$ 0.63, US$ 3.60, US$ 1.55 and US$ 0.41. On 23 December, trading was at 88 million shares, with a value of US$ 38 million, compared to 380 million shares, with a value of US$ 328 million, on 16 December 2022.

By Friday, 23 December 2022, Brent, US$ 2.64 (3.3%) higher the previous week, gained a further US$ 4.73 (6.0%) to close on US$ 83.97.  Gold, US$ 8 (0.5%) lower the previous fortnight, nudged US$ 3 (0.2%) higher, to close at 1,806, on Friday 23 December.

Every day this week, oil prices have edged higher, driven by stockpiles declining more than expected, with Opec+ remaining committed to keep supplies tight. It closed the week on US$ 83.53, during which US crude stocks fell by 5.9 million barrels – three times more than the market had expected – with a fall usually indicating stronger demand. This is backed up by the fact that crude oil in the Strategic Petroleum Reserve dipped 3.7 million barrels from the week before to 378.6 million barrels – its lowest level in thirty-nine years. Furthermore, jet fuel demand is at its highest since 2017, as air travel returns to almost pre-pandemic levels. Last week, the International Energy Agency lifted its global oil demand growth estimate for this year and the next on rising crude consumption in India, China and the Middle East, and expects demand to grow by 1.7 million bpd. The outlook is bullish with one caveat – that China’s reopening remains on course.

Having been accused by US regulators of violating child privacy laws and tricking users into making purchases, Fortnite has agreed to pay US$ 520 million to resolve claims. The award was split between a record US$ 275 million, paid to resolve the claims it collected child and teen data without parental consent, and another record of US$ 245 million to be used for refunds to customers, to settle a separate complaint about deceptive billing practices. The Federal Trade Commission claimed that the maker of popular video game had duped players with “deceptive interfaces” that could trigger purchases while the game is still loaded; it also accused it of using “privacy-invasive” default settings. The battle royale game was launched in 2017 and was an instant success, with more than 400 million global players.

There are reports that Elon Musk is reaching out to raise new funding from investors by offering Twitter shares for US$ 54.20 – the same price that he had paid for the company to go private in October. The struggling social media platform is seeing advertisers departing, worried by the antics of the new owner, including his approach to policing tweets, along with the slowing global economy. With revenues tanking, there is concern on its ability to pay interest on the US$ 13 billion debt that was taken to buy the social media company. (Musk has already increased his cash balance by selling Tesla shares for nearly US$ 40 billion already this year, whilst last week it posted its worst weekly loss since March 2020. Later in the week, he vowed that he would not sell any more Tesla shares for at least two years). In a Twitter poll, 57.5% of voters, which numbered 17.5 million, wanted Elon Musk to step down as chief executive of the social media platform, in a backlash against the billionaire less than two months after he took over. To his credit, Elon Musk has said he will resign as Twitter’s chief executive officer when he finds someone “foolish enough to take the job”.

With bitcoin prices declining to under US$ 17k, and surging energy prices pushing up mining costs, allied to a US$ 7 million unpaid debt from US crypto lender Celsius Network, one of its biggest customers, Core Scientific Inc has filed for Chapter 11 bankruptcy protection. The company – one of the biggest publicly traded cryptocurrency mining companies in the country and owning several bitcoin mining rigs – posted a US$ 435 million loss in Q3, and had a meagre US$ 4 million in cash reserves. The company has confirmed that it will not liquidate and is banking on a creditors’ restructure which, if it goes through, will see them owning 97% of the crypto miner. The company went public last year and was valued then at US$ 4.3 billion but this year the company’s shares have lost a mega 98% in value and now has a market value of US$ 78 million. It is not the only player in the industry to suffer such huge losses, with the likes of Riot Blockchain, Marathon Digital and Hut 8 Mining Corp, all shedding more than 80% this year.

It appears that two top FTX associates have pleaded guilty to criminal charges “in connection with their roles in the frauds that contributed to FTX’s collapse”; both are cooperating with the New York court. Meanwhile, FTX’s founder, Sam Bankman-Fried, who was arrested in the Bahamas last week, consented to being extradited back to the US to face several criminal charges, and appeared in the federal court in Manhattan yesterday. A US judge said the thirty-year-old former billionaire could be released to his parents on a US$ 250 million bond, as he awaits a trial on charges that he defrauded customers and investors of the collapsed cryptocurrency exchange. Describing the case as “one of the biggest financial frauds in US history”, federal prosecutors in New York have accused Mr Bankman-Fried of unlawfully using customer deposits made at FTX to fund his other crypto firm, Alameda Research, to buy property and to make millions of dollars in political donations, including US$ 40 million to US Democratic leaders, and US$ 5 million to the White House!

The US watchdog, the Securities and Exchange Commission, has also announced separate lawsuits against the two, Caroline Ellison and Gary Wang, alleging they participated in a scheme lasting several years to defraud FTX investors, and that between 2019 and 2022, Ms Ellison — at the direction of Mr Bankman-Fried — manipulated the price of FTX’s native token FTT by purchasing large quantities in the open market. It was also alleged that both knew, or should have known, Mr Bankman-Fried was falsely touting FTX as a safe cryptocurrency trading platform, while at the same time improperly transferring customer funds from FTX to Alameda. She was also accused of directing Alameda to use billions of dollars of FTX funds, including customer funds, for trades on other cryptocurrency exchanges and to pay for high-risk investments. Wang was accused that he “created features in the code underlying the FTX trading platform that allowed Alameda to maintain an essentially unlimited line of credit on FTX”.

Subject to the approval of a federal judge in San Francisco, it appears that Facebook owner Meta has settled a long running legal action over a data breach linked to UK political consultancy Cambridge Analytica, with a US$ 725 million payment. The case involved Facebook allowing third parties, including the UK firm, to access Facebook users’ personal data. and was brought by a class size “in the range of 250-280 million”, representing all US Facebook users during the “class period” running from May 2007 to December 2022. Although not admitting to any wrongdoing, the tech giant said settling was “in the best interest of our community and shareholders”. This case only involves US users and there could be further action taken by the UK Competition Appeal Authority early next year; Facebook estimates that the data of up to 87 million users was improperly shared with the now closed consultancy that had worked for Donald Trump’s successful presidential campaign in 2016.

TSB has been fined US$ 59 million by the Financial Conduct Authority for a 2018 IT meltdown that wreaked havoc and left its customers unable to access online accounts for several weeks. The regulator did note that the bank had already paid US$ 40 million in compensation to its customers, and that the failings were “widespread and serious” and led to “significant disruption”. The bank was trying to move data, totalling 1.3 billion customer records, from an old system run by its former parent bank, Lloyds, to a new computer system and anything that could go wrong did go wrong, with all areas of the bank’s services being affected, including branch, telephone and online banking; it took eight months to fully resolve all the problems and “a significant proportion of its 5.2 million customers were affected by the initial issues”. In February 2019, TSB said that the disastrous IT upgrade had cost it US$ 400 million, and about 80k customers had switched their account away from the bank.

Justin Bieber has joined a growing band of singers, including Rihanna, (against Topshop), and Ariana Grande, (against Forever 21), to take action against companies using their images to promote their products. The Canadian entertainer has branded a collection of T-shirts, jumpers, tote bags and phone accessories as “trash”, saying that he had not been approved by it. Subsequently, the retail chain has removed all items but indicated that it had followed all proper procedures, “but out of respect for the collaboration and Justin Bieber, we have removed the garments from our stores and online.” Earlier, Bieber had commented that “the H&M Merch they made out of me is trash and I didn’t approve it. Don’t buy it.”

1.2k Rolls Royce workers at its Sussex plant, received an early Christmas present having been awarded a 17.6% pay award, comprising a 10.0% pay increase and a  one-off bonus of US$ 2.4k. With this award, the luxury carmaker averted the real possibility of industrial action, after the Unite union claimed that Rolls workers, at the Goodwood factory, had been “repeatedly denied… a proper pay rise”. Rolls-Royce, which is owned by Germany’s BMW, said it was “pleased” Unite had recommended the agreement to its members.

The car industry is one of many sectors, both public and private, that is facing strikes to keep up with the surging cost of living, as November prices increased by 10.7% – the fastest rate in forty years. Latest figures also indicate that the gap between wage growth in the public and private sectors remains close to a record high; in the quarter ending October, the private sector witnessed an average pay rise of 6.9%, whilst it was only at 2.7% for public sector employees.

David Jones, an iconic 184-year-old Australian retail chain, has been sold to Anchorage Capital Partners for US$ 67 million (AUD 100 million), eight years after the South African company Woolworths Holdings Limited bought it for US$ 1.41 billion, (AUD 2.1 billion). This could be a portend for other department stores losing value as they will face more problems as interest rates move further north, retail spending is set to drop off next year and shopping habits change. In 2014, the acquisition was meant to be a major part of the company’s target to turn WHL into a leading force in the southern hemisphere. Within four years, Woolworth was writing off US$ 670 million in the value of the Australian entity in 2018. WHL has sold off assets in recent years to prop up DJs, including three of its four CBD properties. However, this deal does not include Melbourne’s Bourke Street building, which is estimated to be worth around US$ 134 million; this will be leased back by the new owners. David Jones, with forty-three stores in Australia and New Zealand, employing 7.5k, has not ruled out store closures or job losses. Woolworths Holdings will retain ownership of Country Road Group, which also includes brands Witchery, Trenery, Mimco and Politix. 

In Australia, the National Retail Association has reported an almost 4% jump in, year on year, retail spending across the country, whilst there has been a 15% hike in the number of families needing support this Christmas. It also found that shoppers’ purchases have been smaller, and more often, compared to last year. This rise comes despite the skyrocketing cost of living pressures, and the NRA is forecasting that more than US$ 14.4 billion (AUD 21.5 billion) will be spent nationwide in the ten days leading up to Christmas.

The IMF has approved a forty-six-month US$ 3 billion support package for Egypt, as it, likes many other countries, struggles with a faltering economy, attributable to the fallout from the Ukraine war and the pandemic. This approval will also speed up a further US$ 14 billion loan from the same world body. The IMF has ensured that any further financing will see the country introduce a flexible exchange rate and an enhanced social safety regime, and it also includes a programme of structural reforms that will “reduce the state footprint and level the playing field between the public and private sector”. The main driver behind Egypt’s current economic woes has been the war in Ukraine, which had seen investors pull US$ 20 billion out of the country’s debt market, resulting in its currency being devalued twice since March and losing 36% in value; on the black market, the greenback is trading at 33 pounds, in comparison to the official 24.7 rate. Last month, inflation was floating at almost 19% – its highest rate in five years. In the short-term, the currency may drop even lower, impacting on a further rise in domestic prices.

The Central Bank of Egypt surprised the market with a 300 bp rate hike that saw the overnight deposit rate, overnight lending rate, the rate of the main operation and the discount rate rising to 16.25%, 17.25%, and 16.75% and 16.75% respectively. This is the fourth hike rate since the start of the war in February, which was the trigger that saw Egyptian inflation soaring to 21.5% in November – up from 19.5% a month earlier.

Mainly attributable to stronger consumer spending and non-residential fixed investment than earlier estimated, the US economy posted a 3.2% expansion in Q3, after two quarters of contraction that had worsened recession fears. However, growth was partly offset by declines in residential fixed investment and private inventory investment, whilst consumer spending saw a hike in services in contrast to a fall in goods such as cars/auto parts and food/beverage. Personal consumption expenditure, at 2.3%, was higher than the initial 1.7% estimate, but it is obvious that this upward trend cannot continue indefinitely as there is evidence that many households are dipping into their savings to support their spending habits. That being the case, along with almost certain rate hikes into 2023, to dampen inflation, this will ensure that next year will see much slower growth.

With many companies passing on their rising expenses to consumers, prices in Japan have risen to their highest level in forty-one years. Surging energy costs have resulted in items such as processed food, smartphones, electricity and air conditioners climbing; official figures see core November consumer prices, which strips out volatile items like fresh food, increase 3.7% on the year. Unlike many other developed nations, Japan is the only major central bank to have negative interest rates but with inflation soaring, the Bank of Japan is under increasing pressure to start lifting interest rates out of ultra-low negative territory, more so because the global economic outlook for H1 is for worse to come. On Tuesday, the BoJ allowed long term interest rates to rise (by widening the allowable band for long-term yields to 50 bp either side of that, from 25 previously); this could be an indicator that the central bank may be considering tightening monetary policy.

With this year being the busiest Christmas for UK airports since 2019, what happens? 1k Border Force workers, many of whom check people’s passports as they arrive in the country, will strike from today to 26 December, and 28 to 31 December. The end result is that havoc will reign supreme, as hundreds of thousands of travellers will face disruption. LHR, the country’s biggest airport expects 579 inward flights today, with 10k arriving by 7.00am; it seems that 1.3k flights have landed at the six affected airports today, that could carry more than 250k passengers, with an estimated 8.9k flights arriving over the “strike days”, impacting nearly 1.8 million people. More havoc will face passengers who have fought their way through the airport melee, with national rail strikes recommencing on Christmas Eve. (The PCS union head, Mark Serwotka, said that the strikes could go on for months, unless the Sunak government enters talks over pay – and had a “mandate” for walkouts until May).

Zoopla has forecast that UK house prices and transactions are expected to fall next year and that there has been an easing in the trend of moving to rural and coastal areas, being replaced by moves to more affordable towns. One of the main drivers behind this seems to be higher mortgage rates, reducing the demand for larger, more remote homes which in turn will reduce house prices; the likes of Halifax and Nationwide are looking at 2023 reductions of 8% and 5% respectively. Zoopla indicated that price falls will be less pronounced in more “affordable” urban areas, and among flats. It is obvious that the days of government support through stamp duty holidays, and the historically low mortgage rates, seen in recent times, have long gone. The industry is hoping that 2023 will experience a soft landing, with stability and modest price decreases rather than volatility and bigger price reductions.

According to a survey by the Charities Aid Foundation, charities are facing “lacklustre” festive donations, with fewer people being able to contribute to causes than was the case pre-Covid. There is no doubt that the current state of the global economy – with surging inflation and the rising cost of living – has badly impacted the coffers of the thousands of UK charities. They are being hit by the double whammy of much reduced contributions, allied with rising operating costs. CAF noted that people had fewer opportunities to donate during the pandemic and the number of people donating had failed to pick up this year, and that was likely to be the result of the pressure of the rising cost of living. It added that a third of charities had seen demand for their services increase significantly compared to last year.

The Office for National Statistics confirmed that the UK economy shrank by 0.3% – more than the 0.2% initial Q3 forecast, as business investment deteriorated faster than expected; at the same time, the ONS adjusted Q2 and Q1 figures from 0.2% to 0.1% and 0.7% to 0.6%. Its latest prediction for 2023 sees a 1.4% contraction before some sort of growth returns in the following year. With a further contraction expected in Q4, the country is expected to fall into a recession driven by surging inflation, at its highest level in forty years, impacting growth by year end. A look at some sectors explains why the outlook is so dismal – declining household incomes in real terms, household spending falling for the first time since Q2 2021, following the final Covid lockdown, and a slowing economy, (with sectors such as electricity generation and manufacturing performing a lot worse than expected). The ONS noted that the GDP is 0.8% below where it was before the pandemic struck. The fall-out from this recession will leave the government with less money, to spend on public services, as tax receipts will head south, with companies making less money, (and profit), rising unemployment, (from 3.7% to 4.9%), tanking house prices, (not helped by rising mortgage rates), soaring interest rates, currently at their highest level in fourteen years, falling consumer spending, and businesses spending less on investment and capital expenditure. Not a pretty picture and for many this year it could be a Lost Christmas!