Wind of Change

Wind of Change                                                                            13 January 2023

The 2,574 real estate and properties transactions totalled US$ 2.21 billion, during the week, ending 13 January 2023. The sum of transactions was 221 plots, sold for US$ 322 million, and 1,889 apartments and villas, selling for US$ 1.34 billion. The top three transactions were all for land, the highest in Jabal Ali First, sold for US$ 13 million, and the other for plots in Wadi Al Safa 4 for US$ 12 million and Al Thanya Fourth for US$ 11 million. Al Hebiah Fifth recorded the most transactions, with 112 sales worth US$ 118 million, followed by Al Jadaf, with twenty-five sales transactions, worth US$ 16 million, and Jabal Ali First, with twenty-one sales transactions, worth US$ 31 million. The top three transfers for apartments and villas were all for apartments – the first in Al Raffa, at US$ 34 million, the next in Al Jadaf for US$ 33 million and In Island 2 for US$ 32 million. The mortgaged properties for the week reached US$ 411 million, whilst ninety-two properties were granted between first-degree relatives worth US$ 136 million.

The latest CBRE report confirmed that Dubai’s property market had a record year in 2022 with total transactions of 90.9k, easily surpassing the previous 2008 record of 81.2k. Over the year, average property prices increased by 9.5%, with apartments up 9.0% and villas 12.8% higher, as sales prices ended the year at US$ 318 per sq ft and US$ 377 per sq ft. The most expensive area in the apartment segment is Jumeriah, at US$ 633 per sq ft, and for villas, Palm Jumeirah at US$ 1,068 per sq ft. It has to be noted that 2022 prices are still below those set in 2014 – apartments trailing by 21.5% and villas still 4.2% lower. Property rents went through the roof last year – with increases of 27.1% for apartments and 24.9% for villas. CBRE also indicated that villa rents now stand at US$ 76.9k – 45.3% up on 2019 rates – and apartments 17.2% higher at US$ 25.9k. (Whether such rises can continue at these levels into this year remains unlikely but there will be some growth in both sectors). According to Zoom Properties, the top areas to buy apartments were Business Bay, (10.3k transactions, valued at US$ 4.8 billion), Dubai Marina, (7.4k transactions), JVC, Downtown Dubai, Dubai Creek Harbour and Palm Jumeirah.

In a bid to cash in on the current boom in the luxury Dubai residential market, MAG has released a further four ultra-luxurious mansions, in addition to the eight already released, at its Ritz-Carlton Residences project. The Sky Mansions, part of the Keturah Resort, are each priced at US$ 54 million, with each having four floors,  eight bedrooms, a majlis, media room, lounges, spa, gym and cinema, with the added bonus of a private mooring for up to 120 ft yachts. The overall Keturah Resort, which also contains a Ritz-Carlton hotel, offers homeowners access to the beach and will have a private members-only club, a women’s club, a kids club, Michelin-star restaurants and a retail promenade.

A massive US$ 5.45 billion project, located in Dubai South, has been announced by Azizi Developments, which will boast a two km long glass-covered, air-conditioned boulevard, which will comprise shopping areas, commercial space, restaurants, and other amenities. The mixed-use development will also feature luxury villas, residences, hospitals, schools and commercial/recreational space, as well having its own large swimmable crystal lagoon, with three km of beach-like shores and water features, along with vast parks. The developer, which has recently bought the fifteen million sq ft plot of land, with twenty-four million sq ft of GFA, will be the master developer in charge of constructing the buildings, roads and all infrastructure, and has signed an agreement with KEO International Consultants for the masterplan consultancy.

Dubai’s hospitality sector continues to improve and ended the year on a high, with most indicators heading north in December; revenue per available room and average daily rate jumped to US$ 186 and US$ 243, 31.1% and 33.8% higher compared to pre-Covid December 2019. STR noted that “overall, tourism demand has been returning to Dubai throughout 2022 and December was no exception with 397,910 more rooms sold, representing a 13% increase over 2019.” However, hotel occupancy rates dipped 2.0% to 76.6%, compared to 2019 levels. During December, 397.9k rooms were sold and on New Year’s Eve occupancy, ADR and RevPAR came in at 91%, US$ 481 and US$ 437. This week, Euromonitor International ranked Dubai as the second most attractive  global city destination, behind Paris but ahead of Amsterdam, Madrid and Rome.

New guidelines relating to Emirates’ Skywards Miles loyalty programme will see passengers having to pay more for upgrades to Business and First-Class travel, but at the same time offering increased bonus miles for all of its Platinum, Gold, and Silver members. The transition will be completed by the end of this month. Under the change, it appears that Skywards Platinum members will earn a further 100% of the Economy Flex+ Miles – increasing from 75%, whilst Gold and Silver members will earn 75% and 30% – up from the previous 50% and 25% respectively. The programme boasts thirty million members, many of whom may well be disappointed with the news that makes it harder to trade up on future flights.

Latest OAG data sees Dubai International Airport featuring in five of the top ten global busiest routes in terms of seats, noting that with the post-pandemic recovery, coming in better than expected, resulted in a robust growth in passenger traffic; the survey covers the twelve months starting in October 2021. The UAE’s Federal Authority for Identity and Citizenship data showed that Dubai received 21.8 million passengers in 2022, through Dubai’s two airports, and that DIA was the world’s busiest international airport, last month with total seats of 4.556 million. Cairo-Jeddah was the busiest global route – 3.234 million seats – followed by Dubai-Riyadh, with forty flights per day and 3.191 million seats. The four other routes involving DIA were Dubai-LHR, Dubai-Jeddah, Mumbai-Dubai and Delhi-Dubai coming in fourth, sixth, eighth and tenth with 2.697 million, 2.425 million, 1.977 million and 1.898 million seats respectively.

OAG also ranked Emirates as twentieth in a global airline list of on-time performance (OTP) of 81.13%, one place behind its neighbour Etihad, scoring 81.14%. On-time performance is gauged on flights that arrive or depart within fifteen minutes of their scheduled times. The two local airlines also had one of the lowest flight cancellations rates of 0.55% – Emirates – and 0.02% for Etihad in 2022 and were the only two Gulf carriers that made it to the top twenty list of 2022. Globally, Garuda Indonesia, South Africa’s Safair, German low-cost carrier Eurowings, Thai AirAsia and South Korea’s Jeju Airlines were the top five most punctual airlines last year. According to OAG, the top ten airports by punctuality in the Middle East and Africa were Durban King Shaka International, Cape Town, Amman Queen Alia International, Bahrain, Muscat, Addis Ababa, Beirut, Abu Dhabi International, Doha and Jazan.

The total foreign assets held by the Central Bank of the UAE (CBUAE) increased on a monthly basis by 0.41% to US$ 118.8 billion at the end of last October, mainly attributable to the monthly increase in bank balances and deposits with banks abroad by 2.2%, to reach US$ 67.1 billion. Foreign securities, within the foreign assets of the Central Bank, nudged 1.44% higher to US$ 33.1 billion. Meanwhile, other foreign assets decreased 8.3% to US$ 15.8 billion but increased on an annual basis by 22.7%.

The DMCC confirmed that, by the end of 2022, it attracted over 3k new member company registrations – a year on year increase of 22.7%. The record growth was attributable to several factors including the growing demand from commodities, global trade and blockchain/web3 businesses and rising international interest. To back up its claims to be the biggest and best free zone in the world, DMCC was named Global Free Zone of the Year by the Financial Times’ fDi Magazine for the eighth consecutive year.

The Arab Monetary Fund posted that, by the end of last year, the market cap of Arab stock exchanges exceeded US$ 4 trillion, with the values of the DFM at US$ 158.4 billion. The local bourse’s value was lower than the likes of the Saudi Stock Exchange, the Abu Dhabi Securities Exchange and the Qatar Stock Exchange with values of US$ 2.63 trillion, US$ 714.6 billion and US$ 167.09 billion; however, it was ahead of the market caps of the Boursa Kuwait’s US$ 152.7 billion, Muscat Stock Exchange’s US$ 61.6 billion and Bahrain’s bourse’s US$ 30.2 billion.

Taaleem Holdings posted a 14.3% hike in its Q4, (ending 30 November), profits to US$ 14 million, driven by higher enrolments, leading to higher revenue. The Dubai school operator, the first education company to be listed on the DFM, saw quarterly revenue rise 32.4%, to US$ 63 million, as total expenses rose 38.0% to US$ 50 million, including finance costs more than doubling to nearly US$ 2 million. Earnings before interest, taxes, depreciation and amortisation rose 22.1 to US$ 21 million, an EBITDA margin of 33.8%. Taaleem, formerly known as Beacon Education, was founded in Dubai in 2004, and operates twenty-six schools in the UAE, with 28.2k pupils enrolled.

The DFM opened on Monday, 09 January 2023, 34 points (1.0%) lower on the previous week, gained 22 points (0.7%) to close on 3,324 by Friday 13 January. Emaar Properties, US$ 0.09 lower the previous fortnight gained US$ 0.02 to close the week on US$ 1.59. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.62, US$ 3.57, US$ 1.53, and US$ 0.40 and closed on US$ 0.63, US$ 3.50, US$ 1.53 and US$ 0.40. On 13 January, trading was at 74 million shares, with a value of US$ 49 million, compared to 58 million shares, with a value of US$ 28 million, on 09 January 2023.

By Friday, 13 January 2023 Brent, US$ 7.36 (8.6%) lower the previous week, gained US$ 6.68 (8.6%) to close on US$ 85.28.  Gold, US$ 68 (3.8%) higher the previous three weeks, rose a further US$ 52 (2.8%) to close, at 1,923, on Friday 13 January.

The start of the week saw oil prices rising on the back of news that China was reopening its borders, with Brent trading 3.33% higher at US$ 81.11; only last week, Brent registered its biggest weekly loss – at 8.6% – since 2016. This came about after nearly three years of strict strict entry requirements, and as China is the world’s biggest crude oil importer, it was inevitable that there would be a boost in oil prices, with the lockdown slowing growth. As the Lunar New Year approaches, the holiday season could be a welcome boon for both international and national travel.

Northumberland battery firm Britishvolt, which is planning a US$ 4.62 billion “Gigafactory”, for electric cars, “is in discussions with a consortium of investors concerning the potential majority sale of the company”, indicating a deal would allow it to “pursue” plans to build a “strong and viable” battery manufacturing business in the UK. It has already had to delay production until Q3 2025, and the sale is expected to provide funding to continue its plans to build the site, which if completed would employ 3k people. The government had earlier promised US$ 122 million to the company but had refused to allow any funding to be drawn down early but this sale appears to allow it to develop the factory, until it can begin actually making a profit from the sale of batteries.

Admitting that he had made “some costly mistakes”, James Watt has had to pay out US$ 609k. Brewdog’s supremo admitted that he thought that some cans of his iconic beer were actually made out of solid gold but were actually gold-plated in a 2021 beer can promotion. Some winners complained to the Advertising Standards Authority, who agreed that the advertising was misleading and found in favour of the consumers. The chief executive of the Scottish brewer confirmed that he had contacted all fifty winners to offer the “full cash amount” as an alternative to the prize if they were unhappy” and indicated that he now owns forty of those “gold” cans.

According to reports, Subway could be up for sale and, that being the case, it could be valued at over US$ 10 billion. The sandwich maker, a privately held company, owned by its two founding families for more than five decades, has a presence in over one hundred countries, with 37k outlets, making it one of the largest global quick-service restaurant brands. If the sale were to go through, it seems likely that the buyer will either be a corporate buyer or a private-equity firm.

This week, Goldman Sachs Group started cutting the first of a reported 3.2k positions, from its 49.1k workforce, (6.5%), across the firm, as in line with its peers, it is set for a tough 2023 economic environment, after adding significant numbers of new staff during the pandemic. It would appear that its investment banking division will be impacted most, as the sector has suffered a major slowdown in corporate dealmaking activity because of volatile global financial markets; on a global scale, the investment banking sector lost 41.8%, on the year ,to US$ 77.0 billion and the value of mergers and acquisitions globally slumped 38.0% to US$ 3.66 trillion. It is also expected that numbers will be reduced in its loss-making consumer business after it scaled back plans for its direct-to-consumer unit Marcus. These cuts were confirmed to staff by its chief executive, David Solomon, via a year-end voice memo to staff warning of a headcount reduction in the first half of January and comes at a time when the financial institution is set to announce annual bonus payments, expected to be 40% lower on the year.

Redundancies were also announced at Twitter, as Elon Musk continued his staff cost cutting strategy focusing on the trust and safety team handling global content moderation and, in the unit, related to hate speech and harassment; these included personnel located in both the Singapore and Dublin offices. Even senior managers such as Nur Azhar Bin Ayob, the head of site integrity for the Asia-Pacific region, and Analuisa Dominguez, Twitter’s senior director of revenue policy were shown the door. Workers on teams handling policy on misinformation, global appeals and state media on the platform were also eliminated. This follows the initial November cull of 3.7k employees which saw hundreds of others resigning as well.

Elon Musk has not only alienated some Twitter employees (and users) but has also earned the ire of some two hundred Chinese Tesla car buyers, who have complained that they had overpaid for electric cars they had bought earlier. The protest was against the US. carmaker’s decision to slash prices for the second time in three months the previous Friday, making the cars between 13% – 24% cheaper than they were in September 2022. Many expect that these reductions will boost sales, (which tumbled in December, at a time of faltering demand in the world’s largest market for battery-powered cars), and support production at its Shanghai factory, which employs 20k. The protesters were left frustrated and disappointed with the abruptness of the latest price cut and Tesla’s lack of an explanation to recent buyers.

European customers will reap the benefit of Tesla reducing the price of some of its most popular electric cars by between 10% to 13%, and as high as 20% on some US models, as demand for its vehicles slow because of a difficult global economic outlook and increased competition from other carmakers. It is estimated that UK purchasers will save about US$ 6.7k on an entry-level Model 3 and US$ 8.5k on the cheapest Model Y. It was misfortune for the 16k customers who bought Tesla cars before the price cuts were announced. However, mainly because of disgruntled Tesla buyers, who were left paying the ‘old’ prices, the US EV maker has posted those customers who had ordered, but not yet received, their vehicle would be charged the new lower price. However, it seems that, within eighteen months, supply will be greater than demand as Tesla faces a turbulent time because of slowing global growth and higher interest rates, increasing competition from more established carmakers and from Chinese brands. It appears that the latest events have already seen second-hand Teslas lose up to 20% in value.

Of the 12k redundancies indicated by Amazon last week, 1.2k will be in the UK, as it plans to shut three warehouses in Hemel Hempstead, Doncaster and Gourock, in the west of Scotland. However, the online retail giant is planning to open two new “state of the art” robotic units, over the next three years, in Peddimore, West Midlands, and Stockton-on-Tees, creating 2.5 new positions. It also plans to close seven delivery stations in England, which employ dozens of workers, but will open two new ones in Havant and Aylesford.

In November 2020, Chinese authorities cancelled Ant Group’s US$ 37 billion IPO, (at the time the world’s biggest), at the last minute. Over two years later, its founder, Jack Ma, has announced that he will surrender control of his company to draw a line following the government’s crackdown and could result in an effort to resurrect a new IPO. However, this could take more time as China’s domestic A-share market requires companies to wait three years after a change in control to list, two years for Shanghai’s Nasdaq-style STAR market and one year in Hong Kong. Ma only owns a 100% stake in Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd 9988.HK but has exercised control over the company through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020. It now seems likely that Ant will be fined US$ 1.0 billion, as part of Beijing’s sweeping and unprecedented crackdown on the country’s technology titans over the past two years.  However, it does seem that Chinese authorities, recognising that the US$ 17 trillion economy has not yet fully recovered from the pandemic, may well be softening their robust approach to the sector which has lost billions of dollars in both revenue and profits.

The Chinese News Agency, Xinhua, reported that the country’s foreign exchange reserves rose to US$ 3.127 trillion at the end of December 2022 – 0.33% higher on the month. The increase was attributable to the double whammy of currency translation and asset price changes, with declines in both the U.S. dollar index fell and prices of global financial assets. It is expected that forex reserves will remain stable in the coming months because of strong fundamentals, with the Chinese economy enjoying “strong resilience, tremendous potential, and great vitality”. The central bank’s targets including work, to maintain liquidity at a reasonably ample level, maintain effective growth in total credit volume, and ensure that increases in money supply and aggregate financing are generally in step with nominal economic growth.

Having already defaulted on its debts, Sri Lanka’s central bank has urged China and India, (with loans of US$ 7 billion and US$ 1 billion), to agree a write-down of their loans, as a US$ 2.9 billion IMF bail-out payment is dependent on these two countries, but this will only be released when both countries first agree to reduce Sri Lanka’s debt. Although nudging lower, inflation is still high with food prices up 65% on the year, with the World Food Programme estimating  that eight million, of the 22.2 million population, are food insecure. The World Bank estimates that Sri Lanka’s economy shrank by 9.2% in 2022 and that it will contract by a further 4.2% this year.

The fact that Australian inflation rose again in November, would point to the RBA agreeing to a further rise next month. The latest figures from the Australian Bureau of Statistics showed that inflation rose 7.3% on the year, and 0.4% higher on the month; there were marked rises seen in housing, (up 9.6%), food/non-alcoholic beverages, (by 9.4%), groceries, travel, dining out and takeaway food. Latest data point to the fact that there are still ongoing inflationary pressures in the economy. Along with other G20 nations, Australia is reeling from rising energy prices, mainly attributable to the war in Ukraine, along with soaring petrol and diesel costs. It is estimated that, in November, operating costs, including wages, electricity, and weather affected reductions in food supplies drove prices up by 16.6% from October’s 11.8% rate. Furthermore, holiday and travel costs increased by a surprisingly high 12.8% – the second highest for this sector in almost five years. With latest inflation data still rising, allied with ongoing robust retail sales data, rates will rise following the 07 February RBA meeting; estimates are between 0.25% and 0.50% and that further increases could see the rate reach 4.2% by May.

It is more than likely that global rate hikes will continue into 2023, and further tightening will continue until at least the end of H1; this comes after last year witnessing borrowing costs rising by the most in four decades. It is interesting that the people who caused the problem in the first place, by not lifting rates earlier, continued to get all their forecasts wrong last year. A study by Bloomberg of twenty-one jurisdiction indicated that ten would be increasing rates, nine doing the opposite and two remaining on hold. Based on the findings, the consultancy has forecast inflation will peak at 6.0% in Q3 before ending on 5.8% by year end. It also considered central banks’ rates and forecast that the US Fed, ECB, BoE and Bank of Japan would end 2023 at 5.0%, 2.25%, 4.25% and -0.1%, having started the year at 4.5%, 2.0%, 3.5% and -0.1%.

The World Bank has nearly halved its 2023 global economic forecast to 1.7% from 3.0% posted last July, and that by the end of 2024, the economic output of emerging and developing economies will grow by just 1.2% and will be about 6% below levels pre-Covid levels while inflation is expected to moderate, but remain high. The usual suspects for this latest downgrade include the impact from the war in Ukraine, central banks tightening money supply, continuing high inflation levels, deteriorating financial conditions and slowing growth in the US, (0.5%), China, (4.3%) and the euro area (zero); the 2023 growth in advanced economies is expected to slump from 2022’s 2.5% to just 0.5% this year. Things could get even worse if any of the factors listed above come more into play The World Bank also noted that “the deterioration is broad-based: in virtually all regions of the world, per-capita income growth will be slower than it was during the decade before Covid-19”, and that Inflation, currency depreciation and underinvestment in people and the private sector are eroding average income levels “significantly”.

To the surprise of many, the UK economy unexpectedly grew 0.1% in November, following a 0.5% rise a month earlier. The two main drivers were a boost from the FIFA World Cup in Qatar, (with increased sales in pubs and restaurants, as fans went out to watch the games), and a marked increase in demand for services in the tech sector. However, the economy is still in dire straits, as consumer confidence and spend diminishes at a time when food and energy bills go up and people cut back, along with the many strikes not helping the situation.

Another indicator that US price pressures may have already peaked, was that annual inflation fell to its lowest level in more than a year last month, assisted by the Fed’s tightening of monetary policy; CPI dipped, (by 0.1% on the month), for the sixth straight month to post an annual 6.5% increase – its lowest level in fifteen months – and well down on the June 2022 high of 9.1%.

US Treasury Secretary, Janet Yellen, has warned Congress that the country is projected to reach its statutory debt limit, (which stands at US$ 31.4 trillion), by 19 January, and advised that she would take “certain extraordinary measures” to prevent the US from defaulting once the debt limit is reached, which could be as early as next week; the debt level represents the total funds the US is able to borrow to meet its legal obligations. The situation will result in the first major battle in the Republican-controlled House of Representatives over a potential default, which if it occurs will be the first ever.

There is no doubt that the ECB will continue to ratchet up rates, well into 2023, in its belated efforts to return inflation to its long-standing target of 2%. There is a school of thought that maintaining rates at tight levels will result in declining consumer confidence and consumption which, in turn, will drag inflation levels down. Since July 2022, rates have risen 2.5% in four successive hikes and perhaps a 0.50% rise will be seen next month.

Corruption seems to be an ongoing global problem and the EU is not immune from its impact, having seen far too many financial scandals in its history. It is almost a month since four individuals rocked the EU bureaucracy, when it was alleged that Greek MEP Eva Kaili and her partner, Francesco Giorgi, et alia were involved in the illicit lobbying allegedly conducted by Qatar. Now the horse has bolted yet again, the European Parliament has decided to review undeclared trips from lawmakers and pieces of legislation that might have been unduly influenced as a result of the alleged cash-for-favours scheme. It seems that investigators are now closely looking at a committee vote in early December that approved visa liberalisation for Qatar and Kuwait, as well as an array of paid-for visits of multiple European lawmakers to the Gulf region.  Since then, the net has widened and it is reported that two additional MEPs from the socialist group – Marc Tarabella and Andrea Cozzolino – as well as intelligence and diplomatic officials from Morocco, are being investigated. There is no doubt that corruption is alive and kicking, not only in Europe, but all over the world – and once again, and not only in the EU, many scandals will be just swept under the carpet, as politicians ensure that in any investigations, they often become both judge and jury.

Munich Re confirmed that 2022 was one of the costliest years on record for natural disasters, noting that climate change was making storms more intense and frequent. The world’s largest reinsurer estimated that losses, covered by insurance, from natural catastrophes totalled US$ 83.7 billion – almost the same level as recorded in 2021; the average insured losses, over the last five years, equate to US$ 67.7 billion, with Munich Re’s Ernst Rauch, chief climate scientist, commenting that “we can’t directly attribute any single severe weather event to climate change. But climate change has made weather extremes more likely.” Total losses, whether insured or not, from natural catastrophes were US$ 188.3 billion in 2022, compared to US$ 223.2 billion a year earlier, but near the five-year average. Three of the worst events last year were Hurricane Ian, which hit Florida, causing US$ 41.8 billion of insured damages and US$ 69.7 billion in total losses, as well as US$ 3.3 billion and US$ 5.6 billion from floods in Australia. Record monsoon rains and floods in Pakistan, that killed at least 1.7k people, caused US$ 10.5 billion in damages, most of which was not covered by insurance. No surprise to see insurance rates moving higher as it seems that the weather will not be improving with the likelihood of more climatic disasters. It is about time that governments’ promises now become reality and they need to take immediate action; what is now needed is a lot more than just a Wind Of Change!

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