Shake It Off!                                                                                   30 December 2022

The 2,790 real estate and properties transactions totalled US$ 2.62 billion, during the week, ending 30 December 2022 and the year. The sum of transactions was 179 plots, sold for US$ 379 million, and 2,071 apartments and villas, selling for US$ 1.54 billion. The top three transactions were all for land, the highest in Marsa Dubai, sold for US$ 63 million, followed by sales for US$ 48 million, in Jabal Ali Industrial Area 1, and Palm Jumeirah for US$ 26 million. Al Hebiah Fifth recorded the most transactions, with ninety-five sales worth US$ 65 million, followed by Jabal Ali First, with twenty-four sales transactions, worth US$ 22 million, and Al Yufrah 2, with ten sales transactions, worth US$ 3 million. The top three transfers for apartments and villas were all for apartments, the first in Trade Centre at US$ 92 million, the next two both in Island 2 for US$ 36 million and US$ 35 million. The mortgaged properties for the week reached US$ 545 million, with the highest being for land in Jumeirah First, mortgaged for US$ 139 million, whilst ninety-four properties were granted between first-degree relatives worth US$ 147 million.

According to Knight Frank, Dubai’s prime property sector will end the year, with prices 50% higher, attributable to the fact that there is not enough supply in the market to meet current demand – with more of the same expected next year. There is every chance that Dubai’s real estate market will reach over a record 98k transactions by tomorrow – and this despite the global economic turbulence, including higher mortgage rates and lower consumer spending, impacting most other countries. By the end of November, Property Finder noted that YTD, there had been 88k sales transactions – up 50% compared to the same period last year and 38% higher than the market peak of 2013. Knight Frank also indicated that the high influx of high-net-worth individuals has pushed the luxury residences’ value higher, and that the emirate is forecast to have the best prime price growth in the world in 2023, ahead of the likes of Miami and Paris. Interestingly, it “believes that the luxury supply chain in 2023 is going to be limited to approximately 300 to 400 units” and that “the demand for this price point will remain quite strong.”

Meanwhile, Betterhomes posted that “supply in the secondary market will remain under stress, with handovers lagging population growth. The supply and demand equilibrium is likely to rebalance in 2024, as the most recent wave of new launches comes to fruition.” This being the case, there is no doubt that the local property market will continue to see price increases for at least H1, but there will be a time this year when Dubai prices will flatten and may even dip as the global economy contracts; No Man Is An Island. However, long-term, there is only one way for the sector to go, bearing in mind that, over the next decade, the population could easily rise by 50% to 5.3 million, along with an increasing number of foreign investors pushing demand higher. Asteco posted there were high rent increases recorded in Q3, with the likes of Downtown apartment rents, along with villas in Arabian Ranches and The Springs, up 24%, 27% and 24% respectively.

Danube Properties confirmed that its latest US$ 150 million project Elitz has been sold out at the launch. The project, located in Jumeirah Village Circle, is to be built on a 37k sq ft site, with a built-up area of 695k sq ft. Slated for completion in 2025, the twin-tower building will house 203 1 B/R, sixty-five 2 B/R, thirteen 3 B/R and four duplexes. To date, the Dubai-based private developer has delivered 4.6k units, with a combined sale value of US$ 1.0 billion, almost more than half of its 8.8k portfolio.

The Ministry of Energy usually adjusts fuel prices in the UAE by the first day of every month, but has made an exception this month. According to the government, the UAE liberalised fuel prices help to rationalise consumption and encourage the use of public transport in the long run and incentivise the use of alternatives. The UAE Fuel Price Committee marginally decreased December retail petrol prices:

• Super 98: US$ 0.757 – down by 15.76% on the month and up 4.85% YTD from US$ 0.722  
• Special 95: US$ 0.727 -– down by 16.04% on the month and up 5.51% YTD from US$ 0.689
• Diesel: US$ 0.896– down 12.00% on the month and up 28.55% YTD from US$ 0.697
• E-plus 91: US$ 0.706 – down by 16.80.% on the month

DubaiNow smart application has surpassed the 1-million users’ milestone, facilitating over twenty million transactions across thirty different government and private entities. Over that time, more than twenty million transactions, worth over US$ 2.72 billion, (AED 10 billion), have been completed, including four million transactions worth US$ 545 million this year. Dubai’s Crown Prince His Highness Sheikh Hamdan bin Mohammed noted that “it confirms the success of the Dubai government in providing smart, easy and fast services to all segments of society”.

Dubai Aerospace Enterprise has reportedly signed two new deals for unsecured term financing, worth US$ 800 million, with a weighted average maturity of 5.5 years. The company, one of the biggest global plane lessors, noted that “the signing of these financing facilities underscores DAE’s commitment to maintaining exceptional liquidity and a strong balance sheet”. It had posted a nine-month deficit of US$ 577 million attributable to “loss of control” over planes it previously leased to airlines based in Russia, as it incurred a loss of US$ 335 million, compared with a profit attributable to equity holders of US$ 91 million a year earlier; however, it had earned US$ 203 million before net exceptional items, with available liquidity almost flat at US$ 2.8 billion.

Following a general assembly meeting earlier in the week, Emaar Properties has increased its share capital by 8% to US$ 2.4 billion, (AED 8.83 billion), and also approved the issuance of a mandatory bond convertible into 659 million new shares in the company. The DFM confirmed that last Friday was the start date of trading for Dubai’s largest listed developer’s new shares. Latest figures show that Emaar’s Q3 profit 46% higher at US$ 420 million, driven by new project launches and strong demand.

Figures indicate that the net investments of non-Arab investors in the DFM and the Abu Dhabi Securities Exchange amounted to almost US$ 8.0 billion in 2022. During the year, non-Arab investors’ purchases of local shares amounted to US$ 37.4 billion, while the sales hit around US$ 29.4 billion which equals to net investments worth around US$ 8.0 billion.

The DFM opened on Monday, 26 December, 13 points (0.4%) lower on the previous week, gained 20 points (0.06%) to close on 3,336 by Friday 30 December. Emaar Properties, US$ 0.02 higher the previous week, shed US$ 0.02 to close the week on US$ 1.60. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.63, US$ 3.60, US$ 1.55, and US$ 0.41 and closed on US$ 0.59, US$ 3.54, US$ 1.55 and US$ 0.41. On 30 December, trading was at 66 million shares, with a value of US$ 18 million, compared to 88 million shares, with a value of US$ 38 million, on 23 December 2022.

For the month of December, the bourse had opened on 3,332 and, having closed the month on 3336 was 4 points (0.1%) higher. Emaar traded US$ 0.06 lower from its 01 November 2022 opening figure of US$ 1.66, to close the month at US$ 1.60. Four other bellwether stocks, Dewa, Emirates NBD, DIB and DFM started the month on US$ 0.68, US$ 3.50, US$ 1.60 and US$ 0.47 and closed on 30 December on US$ 0.59, US$ 3.54, US$ 1.55 and US$ 0.41 respectively. The bourse had opened the year on 3,196 and, having closed December on 3336, was 128 points (4.3%) higher.  Emaar traded US$ 0.27 higher from its 01 January 2022 opening figure of US$ 1.33, to close at US$ 1.60. 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 November on US$ 0.59, US$ 3.54, US$ 1.55 and US$ 0.41 respectively.

By Friday, 30 December 2022, Brent, US$ 7.37 (9.6%) higher the previous fortnight, gained a further US$ 1.94 (2.3%) to close on US$ 85.91.  Gold, US$ 3 (0.2%) higher the previous week, rose US$ 24 (1.4%) to close at 1,830, on Friday 30 December.

Brent started the year on US$ 77.68 and gained US$ 8.23 (5.9%), to close 30 December on US$ 85.91. Meanwhile, the yellow metal opened January trading at US$ 1,831 and shed just US$ 1 during 2022, to close on US$ 1,830. For the month, Brent opened at US$ 86.77 and closed on 30 December, US$ 1.14 lower (1.0%) at US$ 85.91. Meanwhile, gold opened December on US$ 1,793 and gained US$ 37 (2.1%) to close at US$ 1,830 on 30 December.

With announcements that China would end its quarantine requirements for inbound travellers starting on 08 January, amid concerns that US winter storms may impact on energy production, oil prices continued to head north over the last week of 2022. Concerns over a possible 7% production cut by Russia also contributed to oil price gains.

With the aim of enticing the EU to scrap its new windfall tax on energy companies, Exxon Mobil is planning to sue, arguing that it has exceeded its legal authority by imposing the levy. The US oil giant is claiming that the windfall profits tax is “counterproductive”, discourages investments and undermines investor confidence. The company also warned that it would factor in the tax as it considers future multibillion-euro investments in Europe’s energy supply and transition, which could see future investment markedly lower; over the past decade, it has invested over US$ 3 billion in the continent. It also claimed that these taxes could cost the sector at least US$ 2.0 billion by the end of next year. Chevron is yet another company weighing up future investment in the EU.

After passing through the Senate a day earlier, last Friday, the US House of Representatives approved a US$ 1.7 trillion spending bill which will fund the US government through the next fiscal year up to 30 September – and averted a partial government shutdown. The biggest beneficiaries will see US$ 772 billion for domestic programmes, US$ 858 billion, for defence, and about US$ 38 billion for regions recovering from natural disasters.

Sad news for global bankers are reports that end of year bonuses may be up to 50% lower, than those paid out in 2021, and that there will be more lay-offs in the coming months; last year saw them being awarded their biggest awards since 2006, as the economy recovered from the pandemic.  This comes on the back of a year that has seen a global slowdown in the economy, a marked reduction in the pace of mergers and acquisitions, (down 37% to US$ 3.6 trillion), continuing stock market volatility, (with a US$ 517 billion, 66%, slump in global equity underwriting), and debt financing markets collapsing.

Both Apple, (at its lowest since June 2021) and Tesla, (down 73% from its November 2021 high) have seen their stock values sink, driven by concerned delays at their Chinese production lines. After months of struggling with production because of draconian Covid restrictions and ongoing lockdowns, they now face a labour shortage, as a new Covid wave hits the country. It also seems that the labour problem will not go away, and it will be at least the end of February before production is ramped up, as most migrant workers will go back to their home villages for the Lunar New Year at the end of January. To add to their financial woes, like other companies, they will face problems arising from additional interest rate hikes, a global economic slowdown, and the ongoing war in Ukraine.

 On Wednesday, Elon Musk sent an email to Tesla staff telling them that  he believes that long term, Tesla will be the most valuable company on earth and urged all employees to “please go all out for the next few days and volunteer to help deliver if at all possible. It will make a real difference!” This announcement came after the automaker offered discounts on its vehicles in the United States and China, as worries mount that demand will decline because of the global economic slowdown and worrying Chinese Covid figures. Latest data expect that Tesla Q4 deliveries will top 442k. Morgan Stanley analysts cut their price target on the stock to US$ 250 from US$ 330, saying the last two years of demand exceeding supply will be “substantially inverted to supply exceeding demand” in 2023. Time will tell whether Elon Musk or Morgan Stanley, is right.

Having been convicted in May of masterminding a stock scam that wiped US$ 8.7 billion off Singapore’s exchange, John Son Chee Wen and his girlfriend, Quah Su-Ling, have been sentenced to jail for thirty-six years and twenty years respectively. It seems that the Malaysian and his Singaporean accomplice had used their knowledge of financial markets to inflate share prices, by setting up more than one hundred and eighty trading accounts to inflate the share prices of three companies – Blumont Group, Asiasons Capital and LionGold Corp – and borrowed large sums to manipulate stock prices. High Court judge, Hoo Sheau Peng, called it a “scheme of substantial scale, complexity and sophistication”, and that “immense harm” was caused by the stock market crash in 2013. Shares were used as collateral, with several banks, including Goldman Sachs, to extend US$ 126 million of credit lines to finance their ruse which was to create demand for penny stocks, reportedly managing to push up some prices by around 800% in 2013.

Christmas came late for Spaniards, as the government, on Tuesday, announced a US$ 10.7 billion package of measures to ease the pain of inflation – its third such measure this year, bringing total aid to US$ 47 billion. This includes a one off US$ 213 bonus to 4.2 million households, with annual incomes up to US$ 28.7k, and an extension of tax cuts for energy bills into H1 2023. The Sanchez government has also reached an agreement with the EU to place a limit on gas prices for electricity production, which has been the major driver behind Spain having the lowest inflation rate – at 6.7% – in the 27-country bloc. The country will also cut VAT on essential foods such as bread, cheese, milk, fruit and vegetables and cereals to 0% from 4%, and there have been twelve-month extensions on subsidies for train travel for commuters and limits on rental increases, whilst last month saw electricity prices 22.4% lower than a year earlier. Meanwhile, food prices have climbed 15% over the past twelve months. To put the icing on the Spanish ‘pastel’, growth forecast for 2022 is expected to come in at over 5%.

Moody’s Investors Service downgraded Russia’s ratings from B3 to Ca, deeper into “junk”, or non-investment grade territory, with a negative outlook, it expects that its GDP will contract by 7% this year due to mounting pressure on its finances. The move was triggered by the Central Bank of Russia’s capital control measures put in place following international sanctions. The ratings agency indicated that “the downgrade to Ca is hence driven by severe concerns around Russia’s willingness and ability to pay its debt obligations,” with its control measures restricting cross border payments including debt service on government bonds. Key interest rates have more than doubled to 20% to try to shield the US$ 1.5 trillion economy and a currency that has tanked 61% to 121 roubles to the greenback fell to a record low. In a similar vein, S&P Global Ratings has downgraded the country eight notches to CCC –  a week after it had already cut the rate to BB+. According to Moody’s, the world’s second largest energy exporter faces the likelihood of “sustained economic disruption and increased susceptibility to shocks” next year. There is no doubt that there is worse to come and that continuing high inflation, allied with a depreciating rouble, will see much lower living standards and possible social unrest.

			%age	31 Dec	31 Dec	31 Dec	31 Dec	31 Dec	31 Dec	31 Dec	31 Dec	31 Dec
		Unit	Rise	2022	2021	2020	2019	2018	2017	2016	2015	2014
Gold	US$	oz	-0.05%	1,830	1,831	1,895	1,517	1,285	1,305	1,151	1,060	1,186
Iron Ore	US$	lb	13.68%	121.3	106.7	155.7	91.53	71.3	71.28	75	47	73
Oil -Brent	US$	Bl	10.45%	85.91	77.78	51.8	66.67	53.8	66.62	56.82	36.4	57.33
Coffee	US$	Lb	-23.26%	174.00	226.75	128.25	129.2	101.9	126.2	133	124	161
Cotton	US$	Lb	-25.97%	83.40	112.65	78.12	68.95	72.2	78.5	69	64	62
Silver	US$	Oz	3.51%	24.18	23.36	26.41	17.86	15.56	16.99	16	13.82	15.77
Copper	US$	Lb	-14.35%	3.82	4.46	3.52	2.8	2.64	3.3	2.48	2.14	2.88
AUD	US$		-6.20%	0.681	0.726	0.77	0.702	0.7	0.78	0.72	0.73	0.81
GBP	US$		-10.57%	1.21.0	1.353	1.359	1.326	1.27	1.35	1.24	1.48	1.53
Euro	US$		-5.63%	1.073	1.137	1.218	1.12	1.14	1.2	1.05	1.09	1.21
Rouble	US$		4.62%	0.014	0.013	0.014	0.016	0.014	0.017	0.016	0.014	0.017
FTSE 100			0.66%	7,452	7,403	6,481	7,542	6,721	7,688	7,142	6,242	6,548
CSI300			-21.62%	3,872	4,940	5,212	4,097	3,142	4,031	3,310	3,731	3,532
S&P 500			-19.43%	3,840	4,766	3,756	3,231	2,507	2,674	2,238	2,044	2,091
DFMI			4.38%	3,336	3,196	2,492	2,765	2,530	3,370	3,531	3,151	3,774
ASX 200			-10.26%	7,039	7,844	6,587	6,802	5,652	6,171	5,665	5,345	5,415
Bitcoin	US$		-64.89%	16856	48011	29,043	7,201	3,694	13,081	998	427	302

The above table covers certain economic indicators, with two sectors standing out. Compared to all the other currencies covered in the table, the US$ dollar reigned supreme in 2022, as it did a year earlier, During the year, Sterling, the euro and the Ozzie dollar all traded lower closing 2022 down 6.20%, 10.57% and 5.63% respectively. Two others – gold and silver – did little to encourage investors, with the former nudging US$ 1 higher and the other up 3.51% on the year; it is unlikely that they will fare much better going into 2023. Notwithstanding iron ore, that has had three prior stellar years, being 13.68% higher on the year, other commodities performed badly with copper, cotton, and coffee all trading lower in 2022, down by 14.35%, 25.97% and 23.26%; this after all three had mega 2021 results, then up by 26.70%, 44.20%, and 76.80%. If the impact of Covid continues to dissipate in 2023, some sort of peace agreement is arranged between Russia and the Ukraine and the central banks finally get a grip on inflation, then most commodities are in for a good recovery year. If nothing changes on those three fronts, then batten down the hatches.

It is estimated that global stocks and bonds shed more than US$ 30 trillion in a year, that many had predicted to be positive, was beset by many problems including raising interest rates, soaring inflation and, to top it all, the war in Ukraine. 2022 proved to be a disappointing year for most of the global stock markets, with all three US bourses having their worst year since 2008, and all posting annual falls – the Dow, the S&P and the Tech-heavy Nasdaq down by 8.8%, 19.4% and 33.1%. As occurred in 2021, when it rose by 28.35%, one of the best performing markets in 2022 was our own DFM – up 4.38%.  Last year, Australia’s ASX gained more than 19%, but hit the buffers in 2022, losing 10.26%. It was a brutal year for Asian markets either showed less impressive gains, or losses in the case of Japan’s Nikkei 9.37% shy, Hong Kong’s Hang Seng index, down 15.46%, as well as the Shanghai Composite losing 14.24% and New Zealand’s NZX, 1.2% lower.

No question about the 2022 currency of choice, as the US dollar proved that it was still the global leader in times of economic volatility, surpassing the likes of the yen, sterling, Ozzie dollar and the Loonie (CAD), with the greenback 14%, 12%, 7%, 4% and 4% higher during the year. Whether the US currency remains paramount in 2023 is unlikely and there is little chance that the market will see the Federal Reserve push up rates by another 4% next year – at the beginning of 2022, the interest rate was at 0.25%, at the end 4.25% and probably will peak at around 5.0% during 2023.

A triple whammy of the Ukraine war, soaring, energy prices soar and slowing growth will result in a tough 2023 for the euro which at one stage was trading at 0.97 to the US dollar, after starting the year on 1.37. Although it had recovered somewhat to US$ 1.06 by the end of 2022, there is every sign that it could struggle to keep above parity by the end of next year, especially if the ECB remains bearish and not lift rates as quickly as it should. However, Economics 101 teaches that it will recover but 2023 may not be its year.

When it comes to cryptocurrency, anything can happen and volatility will remain the name of the game. Bitcoin has indeed lost its shine in 2022, as its price nosedived 64.89% to US$ 16.9k, with investors seemingly more concerned about the identity of the next crypto exchange to self-implode. Bitcoin has crashed since hitting its US$ 68,991 peak in November 2021, plunging the sector into chaos and ongoing crisis. The general view is that there is still room for further declines but there will come a price – some time in 2023 – which will encourage investors to return to the sector. There would be no surprise to see the price climb to above US$ 15k when this happens.

The economic forecast for the UK is more than gloomy, with the distinct possibility of a short – but damaging – recession, with some analysts forecasting that it will take a further three years just to return to pre-pandemic levels. Many will recall that George Osborne was appointed Chancellor of the Exchequer in 2010, following in the steps of Labour’s Alistair Downing who left a huge public debt, attributable to the 2008 GFC. He introduced an era of austerity policies aimed at reducing the budget deficit and launched the Northern Powerhouse initiative, (which has not been a startling success). “Dodgy Dave’s” crony was dismissed by Theresa May following the 2016 Brexit referendum. In 2010, the national debt equated to 74.6% of GDP, 86.8% in 2016 and 101.9% in June 2022, so it is evident that the Conservative austerity programme has been an out and out failure and the country is a lot worse off now than it was in 2010. The UK economy cannot afford another ‘lost decade’ of growth.

With inflation set to remain high and business investment largely on hold, the UK economy is forecast to contract by at least 1.0% in 2023. There is no doubt that the country has been badly impacted by the surge in natural gas prices, (as have the rest of Europe), slowing global economic growth, a patchy labour market recovery and continuing low productivity and weak investment – a sure indicator that the UK is in  a period of stagflation. Unemployment is expected to jump to 5.0%, by Q1 2024, from its 3.6% level, whilst inflation hit a forty-one year high of 11.1% in October. Its reduction will be slow, with some expecting it still to be at over 6.0% by the end of 2023, before halving to 2.8% in 2024 – still above the BoE 2.0% target. The most damaging forecast is that from the CBI that business investment at the end of 2024 will be 9% below its pre-pandemic level, and output per worker 2% lower. Unfortunately, the UK is on the way to be Europe’s weakest performing economy, bar Russia next year, and become the poor man of the G20 – a position that could take years to Shake It Off!