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Knocking on Heaven’s Door                                                  31 March 2023

The 3,035 real estate and properties transactions totalled US$ 2.92 billion, during the week, ending 31 March 2023. The sum of transactions was 158 plots, sold for US$ 346 million, and 2,261 apartments and villas, selling for US$ 1.39 billion. The top three transactions were for plots of land, the first in Al Khairan First sold for US$ 428 million, followed by a plot in Island 2 for US$ 18 million, along with land in The World Islands selling for US$ 16 million. Al Hebiah Fifth recorded the most transactions, with fifty-two sales worth US$ 45 million, followed by twenty-one sales in Madinat Hind 4 for US$ 7 million and fourteen sales in Jabal Ali First, valued at US$ 16 million. The top three transfers for apartments and villas all took place in Palm Jumeirah – the first two for apartments at US$ 22 million and US$ 16 million, followed by a villa for US$ 15 million. The mortgaged properties for the week reached US$ 1.04 billion, whilst 123 properties were granted between first-degree relatives worth US$ 163 million.

Last year, Dubai property sales came in over 80% higher on the year, at US$ 56.6 billion, (and 86k sales transactions), with every indicator pointing to more of the same in 2023. Undoubtedly, Dubai is seen as a very attractive destination for many, with the country striving to enhance its position as a leading global financial hub. Because of progressive government initiatives, including the easing of visa requirements and increased public capex, Dubai has witnessed the easing of “doing business” in a safe and secure environment. Furthermore, the Ukraine crisis has resulted in many Russian companies moving to the region, followed by an influx of Russian entrepreneurs. All play a part in enhancing the emirate’s appeal and pushing up the domestic real estate prices – both for sales and rentals. It does seem that with a slowdown in the launch of new projects, since the onset of Covid, demand may now be stronger than supply. Since it will take at least two years for the recent increase in launches to have an impact on supply, there will be upward pressure on prices which may see some being priced out of the market or moving to smaller-size units.

In late May, Dubai will host the three-day The Hotel Show which will be attended by some 13k industry-related professionals from investors and owners, F&B specialists, procurement decision-makers, designers and specifiers. Attendance will be boosted from its co-location with The Leisure Show, the dynamic fitness exhibition. This comes at the same time that the local hospitality sector is booming, with billions of dollars being invested in new developments which are expected to see a 25% expansion by 2030 that will add 48k rooms to the sector’s portfolio.

United Airlines launched its first non-stop service between New York-Newark and Dubai since 2016 and is confident that it will have load factors in the “upper 80s”, during the busy summer travel season; its first flight last Sunday was “100% full”. Emirates has also benefitted because some passengers used the carrier for onward travel to locations such as Seychelles, Kenya and India. Last year, the two carriers signed a codeshare agreement. Dubai Economy and Tourism has also noted that YTD, US visitation to Dubai is already 5% above pre-Covid 2019 levels.

At a recent meeting of the Council of the International Civil Aviation Organisation in Montreal, the UAE unanimously won the right to host the third edition of the ICAO Conference on Aviation and Alternative Fuels in 2023; this conference only takes place every seven years.

This week, Mohamed Al Khaja, the UAE’s ambassador to Israel, said “to further strengthen people-to-people ties between Israel and the UAE, we now have increased the number of daily flights to better connect our people and economies.”  The number of flights between the two locations is now at forty-nine, with the addition of an additional daily EK flight. There is no doubt that these additional flights will strengthen the ties between the two countries which witnessed bi-lateral trade jumping 76.5%, to almost US$ 540 million, during the first two months of 2023.

As part of its strategy to have emission-free public transport by 2050, the Dubai Taxi Corporation has started the trial of Skywell electric vehicles in its limo service; testing will use various models and several companies on Dubai roads, over the three-month trial period. Eco-friendly vehicles already make up 70% of the DTC fleet and plans to add seventy eco-friendly vehicles to its fleet each year.

A recent EY report has estimated that Expo 2020 Dubai and its legacy are expected to contribute US$ 42.2 billion of gross value added (GVA) to the UAE’s economy from 2013 to 2042. The three sectors with the most contribution to this figure are organisation and business services (US$ 20.6 billion), construction (US$ 8.7 billion), and restaurants and hotels (US$ 6.3 billion). Over the thirty year period, the pre-event phase, 2013-2021 contributed around 25% of GVA, the event itself – 13%, with  62% post Dubai Expo to 2043. Over the six-month event, the event welcomed 24.1 million visitors. Dimitri S. Kerkentzes, Secretary-General of the Bureau International des Expositions noted that “the 182-day surpassed all expectations as an extraordinary experience for visitors and participants, and its legacy is set to continue creating new opportunities for growth in the years to come.” Expo City Dubai has repurposed more than 80% of the infrastructure built for the six-month event.

The Ministry of Energy, as usual, adjusted fuel prices in the UAE on the first day of every 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 decreased April retail petrol prices:

• Super 98: US$ 0.820 – down by 2.59% on the month and up US$ 0.63 (8.32%) YTD from US$ 0.757  
• Special 95: US$ 0.790 – down by 2.35% on the month and up 8.67% YTD from US$ 0.727
• Diesel: US$ 0.921 – down 3.50% on the month and up 2.79% YTD from US$ 0.896
• E-plus 91: US$ 0.768 – down by 2.76.% on the month and up 8.78% YTD from US$ 0.706

According to Boston Consulting Group’s latest report, over the next three years, the UAE will witness more than US$ 20 billion in digital technology spending in areas such as emerging tech (AI, IoT, blockchain and robotics), as well as the more “traditional” IT and telecoms. It alludes to the fact that over the past ten years, digital technology has accounted for over 67% of productivity growth and going forward will account for up to 30% of global GDP over the next decade. BCG noted that the UAE could well witness a doubling of its digital economy to GDP to 19.4%. Meanwhile, the Dubai Chamber of Digital Economy estimates that the country’s digital economy cloud grow to more than US$ 140 billion by 2031, from its current level of US$ 38 billion. The government recently launched its Dubai Economic Agenda (D33) plan, which is a step in the right direction on the path to make the emirate the global capital of the digital economy.

The latest foreign direct investment data points to the fact that DP World, having invested over US$ 10.0 billion in the past decade, is a global fifth, by total value of direct investments allocated to the overseas logistics services. US giant Amazon and Denmark’s AP Moller Maersk are the two leading firms, whilst DPW is the only company located out of US and Europe. DP World’s investments over the past year totalled $320 million despite demand for logistics services stalling as the global economy slowed. 2023 forecasts expect single-digit demand growth in the industry.

Al Ansari Financial Services confirmed that it had received nearly US$ 3.5 billion in bids for its IPO that ended on 27 March 2023; the offering, raising US$ 211 million, was 22 times oversubscribed, with the UAE retail offer, which was increased from 5.0% to 7.5% of the total offering size, oversubscribed by roughly 44 times. The exchange sold 750 million shares and set the final share price at US$ 0.281, the higher end of its offer range implying a market capitalisation of US$ 2.11 billion at listing. National Bonds Corporation – owned by the Investment Corporation of Dubai – committed to a cornerstone investment in the IPO and Emirates Investment Authority is entitled to subscribe to up to 5.0% of the offering.  The company expects to declare a minimum US$ 163 million dividend for the 2023 fiscal year, equating to an 8.0% pay-out at the listing price.

The Dubai Financial Market has launched the Omnibus Accounts structure for holding securities as a gateway to accessing investment opportunities for eligible investors for the benefit of more than one beneficiary owner. It has been sanctioned by the Securities and Commodities Authority. New Omnibus Account rules have been released and a registration process for interested eligible investors has already been introduced. This addition will benefit and boost the local bourse, giving easier access to international investors and the likes of asset management companies, as it enables them to achieve operational and cost efficiencies.

Empower shareholders are in line to receive a US$ 116 million H2 cash dividend, equating to US$ 0.012 per share and representing an equivalent to 42.5% of the company’s paid-up capital. Emirates Central Cooling Systems Corporation, established in 2003 to provide energy through its plants to Dubai’s property and the largest provider of eco-friendly district cooling services, started trading on the DFM last November. Last month, it posted a 13.4% hike in revenue to US$ 762 million, with profit up 6.9% to US$ 272 million. The utility’s main shareholders are DEWA and Emirates Power Investment, with 56% and 24% holdings.

The DFM opened on Monday, 27 March 2023, flat on the previous week, gained 58 points (1.7%) to close on 3,407 by Friday 31 March. Emaar Properties, US$ 0.04 higher the previous week, gained US$ 5 to close the week on US$ 1.53. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 3.51, US$ 1.43, and US$ 0.34 and closed on US$ 0.68, US$ 3.58, US$ 1.42 and US$ 0.35. On 31 March, trading was at 92 million shares, with a value of US$ 640 million, compared to 95 million shares with a value of US$ 54 million.

The bourse had opened the year on 3,438 and, having closed the quarter on 3,407 was 31 points (1.0%) lower. Emaar started the year with a 01 January 2023 opening figure of US$ 1.60, to close the quarter at US$ 1.53. Four other bellwether stocks, DEWA, Emirates NBD, DIB and DFM started the year on US$ 0.59, US$ 3.54, US$ 1.55 and US$ 0.41 and closed the quarter at US$ 0.68, US$ 3.58, US$ 1.42 and US$ 0.35.   On 31 March, trading was at 92 million shares, with a value of US$ 640 million, compared to 66 million shares, with a value of US$ 18 million, on 31 December 2022.

By Friday, 31 March 2023, Brent, US$ 1.13 higher (1.5%) the previous week, gained a further US$ 4.96 (6.6%) to close on US$ 79.94 on 31 March.  Gold, US$ 1 higher the previous week, closed on 31 March, US$ 6 (0.3%) higher at US$ 1,987. There is every chance that the yellow metal will break through the US$ 2k level in April.

Brent started the year on US$ 85.91 and shed US$ 5.97 (7.0%), to close 31 March on US$ 79.94. Meanwhile, the yellow metal opened 2023 trading at US$ 1,830 and gained US$ 157 (8.6%) during the quarter, to close on US$ 1,987.

This week, Next posted that it would hike up prices at a slower pace than initially expected – at 7.0% in the spring and summer season, and 3.0% in the autumn and winter – slightly less than the 8.0% and 6.0% increases it warned of in January – citing that shipping costs were falling, and suppliers were charging better rates. The retailer, with about five hundred stores and trades online, declared a 5.7% increase in profit to US$ 1.1 billion for the twelve months to 31 January. However, it did warn that “2023 will be bumpy, with sales and profits falling, as energy and wage costs remained high”.

Next has paid just over US$ 10 million for floral fashion brand Cath Kidston from administrators, with the retailer just acquiring the name and intellectual profit – and not its four shops. There is no doubt that Next is in the market to grab struggling retailers, having bought Made.com and fashion chain Joules last year.

There are reports that US regulators are planning to ban Binance, the world’s largest crypto trading platform, in a lawsuit from the Commodity Futures Trading Commission. It is alleged that the firm has been operating in the country illegally and has failed to lodge proper documents; it has also been accused of breaking numerous US financial laws, including rules intended to thwart money laundering. Since its formation in 2017 – and led by Chinese-born Canadian billionaire, Changpeng Zhao – Binance has more than one hundred million users.

Alibaba Group announced that it plans to restructure its six commercial groups with the possibility of five of them going public in the future. One of the main reasons behind this latest strategy is to make the Chinese conglomerate “nimble” to boost future operations. The six business groups will be: Cloud Intelligence, Taobao Tmall Commerce, Local Services, Cainiao Smart Logistics, Global Digital Commerce and Digital Media and Entertainment. The company posted that “the transformation will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes”. Each of the six business groups will be managed by its own chief executive and board of directors. Daniel Zhang will continue to serve as chairman and chief executive of Alibaba and will also serve as the chief executive of the Cloud Intelligence Group, which will house all cloud, artificial intelligence activities and businesses like DingTalk. Latest annual figures for 2022 saw revenue 2.0% higher, to almost US$ 36 billion, whilst net profit came in a staggering 138% higher at US$ 6.6 billion. Its US-listed shares have fallen by almost 70% since 2020, on concerns over Beijing’s crackdown on the tech sector, but gained 14% in New York trading last Tuesday.

US officials have charged Sam Bankman-Fried, founder of failed crypto firm FTX,  for authorising a bribe of “at least US$ 40 million” to try to gain access to trading accounts frozen by Chinese authorities. This is yet one more charge that the entrepreneur will face, in addition to those listed in the fraud case filed late last year. The latest charge accuses him of authorising the bribe, after Chinese authorities froze accounts holding roughly US$ 1.0 billion worth of cryptocurrency that belonged to his trading firm, Alameda Research; needless to add that the funds were subsequently released. Three of his closest colleagues have pleaded guilty and are cooperating with investigators, whilst he faces more than one hundred years in prison, if convicted.

Four bankers – three Russian and one Swiss – working for Russia’s Gazprombank in Zurich have been handed fines totalling US$ 812k for assisting cellist Sergei Roldugin, pay into his account around US$ 30 million between 2014 and 2016; the musician gave no credible explanation of where the money had come from. The bankers were found guilty of lacking due diligence, to allow the person, known as “Putin’s wallet “, to continually make deposits into his account. The Zurich court could not prove the four had doubts when the client, who is also godfather to President Putin’s eldest daughter Maria, turned up with millions of dollars. But the verdict says they should have and failed to act. Under Swiss law, banks are required to reject or close accounts if they have doubts about the account holder or the source of the money.  Not a good week for the Swiss bank industry with this indictment, allied with the apparent end of the UBS debacle.

Unable to source new investment funding, Virgin Orbit is to cut staff numbers by 85%, (675), and will stop operations for the foreseeable future. The UK rocket company, founded by Richard Branson, started the year badly when one of its rockets failed to complete the first ever satellite launch from UK soil. It is reported that Branson’s Virgin Investments has injected US$ 11 million into Virgin Orbit “to fund severance and other costs related to the workforce reduction”. Shares dropped 44% on the news in after-hours trading in New York on Thursday.

The firm, (which was founded in 2017, and has never made a profit), was meant to have developed rockets to carry small satellites.

In an open letter issued and citing potential risks to society, over one thousand tech experts and leaders, including the likes of Elon Musk and Steve Wozniak, have urged developers to pause the development of powerful new AI systems more potent than GPT-4. Their concern is that the safety protocols should be developed by independent overseers to guide the future of AI systems and that further development should only proceed once their positive effects are certain and risks are manageable. The letter from the Future of Life Institute shows concerns that new AI tools are becoming too powerful and cannot be reliably controlled and worries that in future they could outperform workers and make jobs obsolete.

It appears that Turkish President Tayyip Erdogan has contacted Russia’s Vladimir Putin to thank him for his “positive attitude”, in extending the Black Sea grain deal and commented that he understood “the Russian side’s principled position to achieve the full implementation of the second part of the agreement, removing barriers for Russia’s agricultural products.” The deal, allowing the safe Black Sea export of Ukrainian grain, was renewed on 18 March for at least sixty days – but reliant on the removal of Western sanctions.

February was a terror month for Lebanon, as its inflation rate continued its inevitable rise to 200%, touching 192% last month. Consequently, the IMF has called on Lebanon’s political elite, yet again, to close ranks and take some positive action, (including to form a new government and appoint a president), to release billions of dollars of funding from the world body. Again, driven by soaring energy, food, communication, (rising fivefold), health, (four times higher), restaurant and hotel prices, inflation topped 190% last month – the 32^nd consecutive month of hyperinflation which continues to cripple the national economy; on an annual basis, the CPI was 26% higher. In the two years to 2021, its GDP contracted from US$ 52.0 billion to US$ 21.8 billion, with its tax revenue almost halving and the currency continuing to lose value on the parallel market, and on the official exchange rate, since a 90% devaluation at the start of February. The IMF noted that the mis-valuation of customs, excises and VAT at the border caused a loss of revenue, worth 4.8% of Lebanon’s GDP last year. The World Bank has described the country’s crisis as one of the worst in modern history, ranking it among the world’s worst financial crises since the mid-19th century.

A new World Bank report sees the average potential global economic growth slumping to a three-decade low of 2.2% per annum over the next seven years, attributable to the rate of “the global economy’s “speed limit”. This will see the GDP rate at the same level it was at the beginning of the century. The report stressed “the urgency to boost productivity and the labour supply, ramp up investment and trade, and harness the potential of the services sector.” It does conclude that potential GDP growth can be boosted by as much as 0.7% – if countries adopt sustainable, growth-oriented policies This in itself would change an expected slowdown, and a lost decade, into an acceleration of global potential GDP growth.

Last month, UK mortgage rates fell to its lowest level since 2016, excluding the pandemic, whilst the number of mortgages approved by lenders rose slightly – an indicator that the slowdown may be stabilising. According to the BoE, homeowners borrowed 65% less on the month at US$ 861 million – its lowest level since April 2016, apart from the Covid crisis. One of the main drivers behind this slump is higher borrowing costs that has made buying property less affordable. However, mortgage approvals were 9.8% higher on the month at 43.5k – a sign that the housing market may have already hit its recent nadir, as mortgage rates have stabilised from the Liz Truss September mini-budget when they did spike.

In March, UK house prices, house prices fell at their fastest annual pace, at 3.1%, for fourteen years. Nationwide noted that since that UK mini budget, when the housing market reached a “turning point”, “activity has remained subdued.” Two leading drivers in the dip in house prices have been a continuing weakness in consumer confidence and the cost-of-living crisis that has left household spending still under pressure. Nationwide also indicated that prices have been dropping for the previous seven months and that prices are 4.6% shy of their 2022 high. Earlier in the month, the Office of Budget Responsibility predicted that house prices will drop by 10% between their 2022 peak and the middle of next year.

Despite all the hoo-ha surrounding the UK joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, it is estimated that this UK-Asia trade deal will boost the UK economy by just a paltry 0.08%. The UK becomes the twelfth member of the trade bloc, which includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, with a combined population of over five hundred million. The UK already has free trade deals with all of the members, except Brunei and Malaysia. Perhaps Rishi Sunak tried hard to keep a straight face when he said the UK’s “biggest trade deal since Brexit”, demonstrated the “real economic benefits of our post-Brexit freedoms”. As part of the CPTPP, the UK is now in a prime position in the global economy to seize opportunities for new jobs, growth and innovation.”

Governor Andrew Bailey warned MPs on the Treasury Committee that the BoE is on “heightened” alert for further turmoil in the banking sector, and that it would “go on being vigilant”. He also commented that “we were in a period of very heightened, frankly, tension and alertness”, but that the recent problems facing lenders had not caused stress in the UK banking system. He told MPs he did not think the UK was in a position similar to the 2008 GFC when banks stopped lending to each other, plunging the world into a deep recession.

TheUS Inflation Reduction Act, causing concern for the UK government, sees the US potentially cornering markets for once-in-a-generation investments which will transform the geography of manufacturing across the world.  The Biden administration will basically be offering billions of dollars in subsidies and tax credits to US businesses producing greener technologies, including electric vehicles, renewable electricity and sustainable aviation fuel. It seems the EU is following suit, with the probable introduction of its Net Zero Industry Act. The UK Chancellor, Jeremy Hunt, has reiterated that the UK would not engage in a trade war on green subsidies, even though to make any progress, the UK has to play the same game; he said that the UK’s approach to attract investment would be “better” – some hope! It is all but inevitable that car firms would leave the UK without a huge subsidy package, similar to the billions in support the US is providing – and probably the same from the EU. There is no doubt that time is running out for the government to boost the sector and jobs in the move to electric vehicles, by investing public money in line with competitors across the Atlantic and the Channel.

In January, the number of cars made in the UK sank to its lowest level since 1956. It is evident that that the government should be investing more money into the sector as the global industry is seeing a massive transformation from the traditional petrol/diesel combustion vehicles   to the era of electric ones. The Sunak government has indicated sales of new petrol and diesel cars will be banned by 2030 but are well short in investing in the new technology. The Society of Motor Manufacturers and Traders noted the country had a “firm foundation” for expanding the production of electric vehicles but warned “we must not squander these advantages”. The UK’s car sector could disappear unless the government follows the US and EU in helping, by huge subsidy packages, with the switch to electric – if not, it will soon be Knocking on Heaven’s Door.