Only A Pawn In Their Game!                                               13 October 2023

The 1,659 real estate and properties transactions totalled US$ 2.59 billion, during the week ending 13 October 2023. The sum of transactions was 297 plots, sold for US$ 1.38 billion, and 1,362 apartments and villas, selling for US$ 1.25 billion. The top three transactions were all for plots of land, one in Palm Jumeirah sold for US$ 163 million, the second in Palm Deira for US$ 163 million and the third in Al Thanyah Fifth for US$ 33 million. Madinat Hind 4 recorded the most transactions, with fifty-five sales, worth US$ 25 million, followed by forty-nine sales in Palm Jabal Ali for US$ 316 million, and thirty-eight sales in Al Hebiah Fifth, valued at US$ 31 million. The top three transfers for apartments and villas were for a villa in Al Safouh Second, another in Palm Jumeirah for US$ 10 million, with an apartment in Palm Jumeirah selling for US$ 7 million. The mortgaged properties for the week reached US$ 646 million and 117 properties were granted between first-degree relatives worth US$ 245 million.

Mashriq Elite Developments has launched a new project Floareá Residence, located in Arjan, and comprising two hundred and six studio, 1 B/R – 2 B/R apartments, with prices ranging from US$ 140k – US$ 375k. Construction, which has already started, is expected to be completed by Q1 2025. The project will feature a five-metre high and thirty-metre-wide waterfall falling from the first floor to the ground floor. Among its amenities will include a state-of-the-art clubhouse, yoga studio, barbecue courtyard, gymnasium, children’s indoor and outdoor play areas, steam and sauna facilities, surrounded by lush landscapes.

Its latest report sees Betterhomes noting that the outlook for Dubai’s off-plan market is promising, having witnessed a notable surge in interest from investors and end-users. The property market plan estimated that the off-plan market is booming by a 40% – 60% increase in the number of foreign and local property buyers, indicating a favourable environment for real estate investment in the emirate. Most consultancies also issue caveats – and this was no exception – commenting that “that various factors can influence the real estate market, and trends may shift over time.” The off-plan property market has experienced a remarkable 35% surge in demand over Q3 on the year, with off-plan transactions accounting for a marked 61% share of Dubai’s overall real estate market. Betterhomes’ report said with Dubai’s ongoing development and the steady rise in population, off-plan properties hold significant potential for appreciation in value by the time they are completed.

Latest CBRE September data shows that there was an 8.3% softening for Dubai’s realty sector to 7.5k, with off-plan transactions falling 41.5% as secondary increased by 30.5%; however, YTD sales topped 87.1k – a record number and 35.4% higher on the year. There is every chance that annual sales by the end of 2023 will top 100k. One of the causes for the monthly fall was because of limited supply of new inventory which is in the throes of ramping up.

This week, Expo City Dubai unveiled its latest launch, the Yasmina Villas at the Expo Valley, A limited number of properties will feature spacious and private 4 B/R – 5 B/R semi-detached homes, across three levels, with an average plot area of around 4k sq ft. Prices will start at US$ 1.66 million. Each bedroom will be en suite, and each house will have a maid’s room. Expo Valley is a gated community within Expo City, combining lush greenery, a lake and a 1 km wadi, running between the residential units of the neighbourhood with sceneries and terrain, including a water body and rugged topography, where people can hike within the neighbourhood which will also feature car-free lanes and dedicated tracks for cycles and e-scooters, with the entire road network being underground.

According to the MoE, the country hosted more than sixteen million guests – a 15.0% increase – in the first seven months of 2023. This equated to fifty-six million, while the occupancy rate increased by an annual 5.0% to 75.0% over the period. The Minister of Economy, Abdulla bin Touq, who is also head of the Emirates Tourism Council,  noted that the UAE had over 1.2k hotels and that YTD July, revenue was 24.0% higher, on the year, at US$ 7.1 billion. With the We The UAE 2031 vision, he is confident that the tourism sector’s contribution to GDP to top US$ 122.6 billion over the next decade; this year, the contribution of US$ 49.2 billion equates to almost 10% of UAE’s GDP, 1.8% lower than the 2019 pre-pandemic level of US$ 50.0 billion. For the first time, Dubai H1 visitors – at 8.55 million – exceeded pre-pandemic numbers of 8.36 million.

With Global Village reopening, for its twenty-eighth season, on 18 October, the RTA is set to restart the operation of four bus routes, with a fare for a single trip at US$ 2.72. It also confirmed that it “will also recommence the operation of tourist trips on electric Abras at the Global Village for the 2023-2024 season by deploying two electric Abras to cater to Global Village visitors during this season.”

This week, Dubai’s newly launched private carrier, Beond showcased its first aircraft, an Airbus A319, seating forty-four passengers in a luxurious all lay-flat configuration. Flights will depart the Al Maktoum International airport at Dubai World Central. The all-business class carrier has announced flights to Riyadh, Munich, and Zurich between 09 – 17 October, with Milan added to the schedule in March 2024 The plan sees Beond having thirty-two planes flying to sixty destinations, including to Maldives from Europe, the ME, and Asia-Pacific, by the end of 2028. One-way fares will start at US$ 1.63k.

Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum has reiterated the emirate’s strategy to reinforce its stature as a global hub for technology innovation. At the two-day Dubai Assembly for Generative AI, which closed yesterday, the Crown Prince noted the emirate’s growing prominence on the global technology landscape. The assembly, hosted by Dubai Future Foundation, brought together 2.2k attendees, in addition to global tech powerhouses and consultancies including Microsoft, Meta, IBM, PwC, Deloitte, SAP, Nokia and McKinsey. During the assembly, DFF launched the Dubai Generative AI Alliance, a new alliance of global tech companies to help Dubai accelerate the adoption of emerging technologies and build one of the world’s most advanced and effective tech-enabled governments.

On Monday, the UAE Cabinet, chaired by HH Sheikh Mohammed bin Rashid, approved the 2024 federal budget allocating total estimated expenses amounting to US$ 17.40 billion, with an expected total revenue of US$ 17.91 billion, together with the country’s US$ 52.32 billion three-year federal budget for 2024 to 2026. Dubai’s Ruler commented that “this reflects the UAE’s steadfast commitment towards sustainable development and investing in the welfare of its people,” and that “we are working to implement plans and projects that put the people of the union at the top of their priorities, because the UAE is a country of leadership, and its people deserve the best.” The revenue estimates for 2024 are 3.3% higher, while estimated expenses are up 1.6% on last year. The main sectorial beneficiaries, accounting for 81.3% of the budgeted expenditure, will be social development/social benefits and government affairs receiving US$ 7.28 billion and US$ 6.87 billion. Within the former segment, public/university education programmes, health care/community protection, pensions, social affairs, and public services will receive US$ 2.78 billion, US$ 1.42 billion, US$ 1.66 billion US$ 981 million, and US$ 409 million. Within the government affairs sector, US$ 6.87 billion will be utilised by the government and US$ 708 million on federal investment projects. US$ 1.96 billion will be expended for other federal expenses. The country aims to double the size of its economy to US$ 817 billion by 2031, with a focus on boosting non-oil exports and the tourism sector.

This week, HH Sheikh Mohammed, in his role as Dubai Ruler, issued Decision No. (18) of 2023 pertaining to the new Board of Directors of the Economic Security Center of Dubai. The new board will be chaired by Talal Humaid Belhoul Al Falasi, with Awad Hader Al Muhairi serving as Vice Chairman. Other board members include Tamim Mohammed Al Muhairi, Dr Riyadh Mohammed Belhoul, Saif Obaid Al Mansouri Faisal Mohammed Al Awadhi, and in addition the Executive Director of the ESCD to be appointed. The body was set up in 2016 to augment the legislations of economic security, and to counter corruption and economic crimes and has the authority to engage external expert services as deemed necessary.

Dr Thani Al Zeyoudi, the Minister of State for Foreign Trade, commented that the latest comprehensive economic partnership agreement with Georgia was “going to be opening huge market access to our exports; the minimum is at least US$ 1.3 billion for our exports to Georgia in five years,” and is “expected to add at least US$ 4 billion to the Gulf country’s GDP by 2031”. This latest Cepa will come into force in Q1 2024. The minister also noted that 2022 bi-lateral non-oil trade topped US$ 481 million, 115% higher on the year, and US$ 225 million in H1 – up 28.0%. As with other Cepas, the trade agreement will result in the elimination, or a significantly reduction, of tariffs, removal of non-tariff barriers and increasing trade promotion in goods, services and investment. The UAE now accounts for more than 63% of the total volume of Georgia’s trade with Arab countries and is responsible for about 5% of its total FDI.

As another indicator of Dubai’s standing in the global MICE market, Monday saw the start of the five-day Campden Global Owners and Family Office Congress, the world’s biggest and most significant family business conference. The event will bring together more than three hundred representatives from multi-generational wealth-owning families from around the world and will feature immersive networking opportunities and closed-door sessions to exchange knowledge and experiences. The event has attracted global participants from family businesses and offices from the ME, who were expected to account for around 18% of participants, with 26% travelling from Europe, 22% from North America, 16% from India, and 15% from the Asia Pacific region. The leading sector was real estate followed by venture capital, financial services, and energy, and others included technology, fintech, blockchain, construction, infrastructure, healthcare, food/beverages, and mining/minerals.

Last month, the latest seasonally adjusted S&P Global PMI rose 1.1 to 56.1, on the month, driven by sales growth reaching its highest in more than four years amid improving demand. The monthly survey, covering three sectors – construction, travel/tourism and wholesale/retail, and travel/tourism – all witnessed “faster upturns”, with the latter showing a “particularly rapid acceleration of growth”. Furthermore, business confidence moved northwards to its highest level since the start of the 2020 pandemic – an indicator that companies’ near-term growth expectations has improved, with the emirate’s economy surging on the back of strong trade and tourism, by 2.8%, in Q1; its accommodation and food services sector grew 5.6% over the same period. Although the rate of job creation was mild, and the weakest in seven months, employment numbers were higher, whilst the September pace of inventory accumulation also slowed and was “only modest”, with these two slowdowns not helped by “a solid and faster rise in average input costs in September.” Price increases were noted as the pace of inflation was the strongest in just over a year, driven by higher raw material costs, which increased despite another sharp improvement in supplier delivery times.

DP World has announced that its latest ten-year Islamic bond, with a 5.5% yield, which raised US$ 1.5 billion, was 2.3 times amid “strong demand” from global investors; the green sukuk will be listed on the Nasdaq Dubai and London Stock Exchange. It was priced at a spread of 119.8bp above US treasuries. Proceeds from the issuance will be utilised on eligible green projects that include electrification, renewable energy, clean transportation and energy efficiency. In 2021, DP World pledged to become a carbon neutral enterprise by 2040 and achieve net zero carbon by 2050, with a short-term aim of a 28% reduction in its carbon footprint by 2030. The port operator also confirmed that it was to invest up to US$ 500 million to cut carbon emissions from its operations over the next five years.

The Dubai Financial Services Authority has fined a former finance executive in Dubai, US$ 33k, for his involvement in account breaches and making misleading statements for a publicly listed company. Remi Ishak had worked for Equitativa and Emirates REIT, a public fund and Nasdaq Dubai-listed entity whose portfolio of properties was composed of commercial, retail, and educational assets. Two years ago, the firm was penalised for making misleading statements in relation to the Emirates REIT, not preparing financial statements in accordance with International Financial Reporting Standards and failing to take reasonable steps to ensure that relevant information was reported to its auditors.

Sheikh Mansoor bin Mohammed bin Rashid, Chairman of the Dubai Border Security Council, has launched a new digital platform, part of the Economic Security Centre of Dubai, for the public to report economic crimes. This latest initiative will further enhance Dubai’s aim to reduce the number of economic crimes, including money laundering, terror funding, bribery, forgery and embezzlement that could potentially impact its economy or its resources. Sheikh Mansoor stressed the importance of increased community involvement in protecting the national economy and also Dubai’s commitment to remove all potential disruptions to growth and development.

The UAE and India have entered an agreement that will see the development of the Emirates’ domestic card programme, based on India’s existing RuPay card, of which there are more than 750 million in circulation, equating to 60% of all cards issued in the country. It is hoped to be operational by the end of Q2 2024, according to Piyush Goyal, India’s Minister of Commerce and Industry. RuPay is a global card payment network, with wide acceptance at shops, ATMs and online platforms, with debit, credit and prepaid options. The UAE’s national domestic card programme will be developed by the UAE Central Bank’s Al Etihad Payments company, along with the National Payments Corporation of India’s subsidiary NPCI International Payments.  Both countries have also agreed to allow the usage of the card in India and the RuPay card in the UAE.

The UAE Central Bank and the Reserve Bank of India have also agreed to work together to use the India Stack, a set of digital infrastructure components that allows governments, businesses and individuals to conduct transactions electronically. The UAE is India’s second largest source of India’s annual US$ 90.0 billion annual inward remittances’ flow. This new initiative would bring down the exchange costs of transactions between the two countries which has been recently enhanced by the rupee-dirham bridge which will also bring down the exchange costs of transactions between the two countries. Since the two countries signed a comprehensive economic partnership agreement in May 2022, economic ties have been boosted, that saw bilateral trade 5.8% higher in the first twelve months to US$ 50.5 billion. Last Thursday, the two countries also signed a preliminary agreement to co-operate more closely in sustainable industrial development, in line with Cepa. The deal will focus on seven key areas – supply chain resilience, renewable energy and energy efficiency, health and life sciences, space systems, artificial intelligence, Industry 4.0 and advanced technology, as well as standardisation and metrology.

According to Financial Times “fDi Markets” data, in H1, Dubai continued to be the top global destination for attracting Greenfield Foreign Direct Investment (FDI) projects, attracting five hundred and eleven Greenfield projects; Dubai attracted 6.58%, (up from 3.83%), of the global market, well ahead of second place Singapore’s three hundred and twenty-five. This is in line with the city’s ten-year Dubai Economic Agenda D33, which aims to double the size of the emirate’s economy over the next decade. Dubai’s Crown Prince, Sheikh Hamdan bin Mohammed, commented that “the emirate has intensified its drive to accelerate economic diversification and innovation”, and “we continue to work to create an investment environment that not only wins the trust of investors from all over the world but also encourages them to contribute to Dubai’s transformation.”

Over the same period, the report also showed Dubai rose from ninth to fourth place globally in employment creation from FDI projects because of a 43.3% surge in job creation on the year. The top six sectors contributing to estimated job creation by FDI were Business Services at 5.2k jobs (21.5% share), Software and IT – 3.5k jobs (14.5%), Food & Beverages at 3.1k jobs (12.7%), Financial Services at 1.8k jobs (7.5%), Consumer Products at 2.1k jobs (8.3%) and Real Estate at 0.9k jobs (3.8%). Meanwhile, Dubai, climbing from eighth to sixth also saw a year-on-year rise in global Greenfield FDI capital attraction, reaching US$ 5.69 billion. It also ranked first globally in the attraction of HQ FDI projects, by attracting thirty-three HQ projects, ahead of London and Singapore.

The Dubai FDI Monitor showed that five sectors accounted for 82% of total FDI capital inflow and 705 of total FDI projects. Leading sectors by FDI projects include Business Services (22.4%), Software & IT (17.8%), F&B (12.2%), Financial Services (9.0%) and Consumer Products (8.3%). It also stated the emirate continued to attract medium-to-high-technology and low-technology FDI projects in H1 2023, with rates of 63% and 37% respectively, unchanged from last year.

The DFM opened on Monday, 09 October 2023, 1 point higher the previous week lost 200 points (4.8%) to close the trading week on 3,965, by Friday 13 October 2023. Emaar Properties, US$ 0.07 lower the previous week, shed US$ 0.14 to close on US$ 1.98 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.70, US$ 4.92, US$ 1.58, and US$ 0.45 and closed on US$ 0.68, US$ 4.82, US$ 1.50 and US$ 0.41. On 13 October, trading was at 372 million shares, with a value of US$ 204 million, compared to 108 million shares, with a value of US$ 79 million, on 06 October 2023.

In line with other regional bourses, the DFM has been impacted by the outrageous escalation in the conflict between Palestine militants and Israel and, to a lesser extent, the dovish shift in tone from the US Federal Reserve, pointing to no more rate hikes on the horizon.

By Friday, 13 October 2023, Brent, US$ 10.98 lower (11.5%) the previous week, gained US$ 6.49 (7.7%) to close on US$ 90.94. Gold, US$ 156 (7.8%) lower the previous four weeks, gained US$ 114 (6.2%) to US$ 1,946 by 13 October 2023.  Both commodities were reacting to increased uncertainty circling the global economy and threats to world peace.

After a 5% knee-jerk reaction to the crisis on Monday, oil prices rose today to record a weekly gain as supply risks from the Israel-Gaza war offset a large build-up in US crude stocks. Six days after the crisis began, there has been no impact to current global oil production which is expected to continue into the near future. However, the caveats would be that production could be cut by Saudi Arabia and the US could tighten Iranian sanctions; both would see supply tauten in the short-term and the subsequent increase in prices. Yesterday, the International Energy Agency slashed its 2024 oil demand growth forecast, by 100k bpd to 900k bpd. citing a “deteriorating economic climate” but raised its 2023 demand forecast by 100k bpd to 2.3 million bpd, citing “buoyant” demand growth in China, India and Brazil. However, Opec sees 2023 and 2024 demand rising by 2.44 million bpd and 2.25 million bpd.

There are two major EV start-ups in the US – Lucid Group and Rivian – with varying results. Lucid, which hopes to have manufactured 10k vehicles in 2023, has seen its stock valuation down 25% YTD. Some see further depletion in its market value as it struggles to actually reach its latest 10k unit forecast. Astonishingly, there are reports that the company burns US$ 338k for every vehicle it produces. Analysts’ average 2023 sales estimate for the firm has sunk nearly 50% over the past six months. Meanwhile, Rivian, its truck-making peer, with its share value almost flat this year, is estimated to be losing US$ 110k per vehicle, and its 52k units forecast figure has risen by some 5% on earlier expectations. With such disastrous figures for both entities, the only reason that they are both still in business are that their backers are Saudi Arabia’s Public Investment Fund for Lucid and Amazon for Rivian. Both entered the market in 2021, a good time for such companies with the nascent EV sector being flavour of the month for investors. The honeymoon period was not to last long and, within twelve months, such companies were seen as far too risky for many investors. The end result is that Lucid is down 91% from its peak, while Rivian has lost 89%. Where they go from here remains to be seen but the outlook is not promising.

In the UK,the Serious Fraud Office (SFO) said it was investigating a suspected fraud at the funeral plan provider Safe Hands, and its parent, SHP Capital Holdings Ltd. This follows the collapse of the company, after more than 46k people had paid into a fund towards future funeral costs. Its collapse meant prepaid funerals may not be honoured and some people had paid in instalments up to US$ 5k. Prior to last July, providers did not require approval to operate from the Financial Conduct Authority, but Safe Hands withdrew its application for FCA, then subsequently collapsed and went into administration in March last year; administrators were then  indicating that the company faced a “combination of factors, some of which are understood to be linked to the Covid pandemic”. They have since confirmed that creditors are owed US$ 87 million and although they are selling off the company’s assets, it has warned that there will be a shortfall – meaning that there will not be enough to meet the company’s funeral obligations.

Embattled Metro Bank has managed to raise nearly US$ 400 millionin new funding, as well as refinancing US$ 735 million of debt. Metro Bank also said it was still in discussions about raising cash by selling up to US$ 3.65 billion of its residential mortgages. Its chief executive, Daniel Frumkin, said the deal marked “a new chapter” for the troubled bank after its shares had tanked last week but rebounded on Monday following news of the deal. This will see Colombian billionaire, Jaime Gilinski Bacal, becoming its biggest shareholder with a 53% stake, with his company, Spaldy Investments, investing US$ 125 million into the bank. Metro Bank’s shares rose by about 10% on Monday, taking its share price to about US$ 0.61 – close to the level it had been last week before reports on the bank’s financial situation emerged. Its share price is still down nearly 60% YTD and well below the peak of over US$ 49.0 it reached in 2018. Whether this new investment will keep Metro a viable concern in the future is open to question but with a very high-cost base – and its penchant of focusing on physical High Street branches – it will continue to struggle. The best it can hope for is some sort of merger with a larger financial institution.

In Q3, PepsiCo posted a 7.0% hike in revenue figures to US$ 23.4 billion, and this despite a 2.5% decline in sales volume and a further hike in prices, of 11%, attributable to the higher cost of ingredients like cooking oil; the price increase was the seventh consecutive double-digit rise. Pepsi’s net income rose 14% to US$ 3.1 billion, or $2.24 per share. Some of the improvement was the introduction of new items such as Doritos Spicy Pineapple Jalapeno chips, and advertising, which is lifting brands like Gatorade. Although sales volume was flat in Europe, it dipped 6% and 5% in North America and Latin America.

Following the Internal Revenue Service’s audit of Microsoft 2004 – 2013 accounts, and how the firm allocated profits among countries and jurisdictions, the tech firm has a request to pay an additional US$28.9 billion in back taxes. Microsoft has indicated that it will contest the tax authority’s request and commented that “the issues raised by the IRS are relevant to the past but not to our current practices”. Although there has concerns that such mega tech companies do not pay enough tax in developed countries, the company said it had “always followed the IRS’s rules and paid the taxes we owe in the US and around the world”. Microsoft seem to think that any taxes owed after the audit would be reduced by up to US$ 10 billion based on tax laws passed by former President Donald Trump. The tech giant has also been chased by other US authorities, including the Federal Trade Commission – in June, it agreed to pay the authority US$ 20 million after it had been found to have illegally collected data on children who had started Xbox accounts.

Having initially blocked Microsoft’s US$ 69.0 billion deal to acquire Activision Blizzard, the UK’s Competition and Markets Authority has now reversed its earlier decision. This has been one of the largest ever tech takeovers, which the UK watchdog had qualms about Microsoft gaining too much control of the surging cloud gaming sector. However, fears were allayed when, In August, the US tech giant agreed to transfer the rights to stream Activision games from the cloud to French gaming company Ubisoft Entertainment for fifteen years outside the European Economic Area. Activision Blizzard is the company behind Call of Duty, Overwatch, and World of Warcraft. It is estimated that by 2027, the video gaming industry will earn revenues of US$ 334 billion in 2023, and by then, there will be 3.1 billion gamers worldwide.

Airbus is spinning off its commercial aircraft unit into a stand-alone entity, with its chief executive Christian Scherer, formerly the chief of sales for Airbus, to oversee a team of eight executives. Establishing a separate commercial aircraft business will allow Airbus chief executive Guillaume Faury to focus on the company’s broader strategy, its other units and its sustainability agenda after four years of doubling up as the boss of the core plane making unit. He will lead a team including the chief of Airbus Helicopters, the head of Special Industrial Projects, the chief sustainability officer and communications, the chief technology officer, as well as M Scherer as head of commercial aircraft. H1 net profit fell 20% year on year to US$ 1.57 billion, despite revenue coming in 11% higher at US$ 29.1 billion, from delivering three hundred and sixteen commercial aircraft.

There are reports that Boeing and Spirit AeroSystems have extended the range of their inspections to address a manufacturing flaw that affects 737 Max 8 jets. Reports indicate that they have expanded the scope of their reviews of the “aft pressure bulkhead structure on the 737 Max 8” and are examining hand-drilled fasteners. With this latest development, including newly expanded X-ray inspections and rework, there are concerns that both the recovery progress and the pace of overall production will slow, causing more delivery delays. In August, Boeing said a production glitch, found recently in some of its 737 Max jets, was not a safety risk. Boeing is still recovering from a long history of problems for the 737 Max, which was grounded for twenty months after fatal crashes in Indonesia and Ethiopia in 2018 and 2019.

The fall-out from the Qantas debacle continues with news that Richard Goyder is planning to step down before the airline’s next AGM later in 2024; this comes after he had reiterated that he had the board’s, and shareholders’, confidence despite being under increasing pressure to resign, following the premature departure of controversial former chief executive Alan Joyce last month. Perhaps he, and several board members, should have walked at the same time as Mr Joyce. The embattled board, saying it was time for board renewal, indicated that “in recognition of the reputational issues facing the group,” and “as a board, we acknowledge the significant reputation and customer service issues facing the group and recognise that accountability is required to restore trust.” Since the Joyce departure, the High Court found that Qantas had acted illegally when it sacked 1.7k ground crew staff members during the pandemic in 2020 and that the competition watchdog is also suing the carrier for allegedly selling tickets to thousands of flights that had already been cancelled in 2022. If no other board resignations are forthcoming, and no positive changes occur, it seems that Qantas is just carrying out an exercise to rearrange the deckchairs.

Unity has seen the immediate resignation of its chief executive, John Riccitiello; last month, he introduced a controversial pricing charge which angered gamers and developers alike. The firm wanted to charge studios every time a person installed a game using Unity’s code which powers thousands of modern video games, including Pokémon Go, Genshin Impact and Beat Saber, even though big developers already pay a licensing fee to use Unity in their games. The firm has since rolled back most of its plans and apologised. Riccitiello had taken Unity public in September 2020, valuing the company at US$ 13.6 billion; its share price peaked at nearly US$ 200 in 2021 but has since fallen to be trading now at just under US$ 30.0. However, despite its latest quarterly revenue rising to US$ 553 million, it is still returning losses, with the latest at US$ 189 million.

German sandal maker Birkenstock has been valued at US$ 8.0 billion, (with a US$ 46 share value), as indicated by its IPO value on the New York Stock Exchange; this figure sees the German sandal-maker at doubling its market value over the past three years. Last year, it sold over thirty million pairs of footwear, as its popularity moves inexorably higher; its appearance in this year’s Barbie movie, in which the main character’s journey of liberation was winkingly summed up by her adoption of a pink pair of the company’s classic two-strap sandals, sent demand surging threefold. Time will tell whether the company can maintain that momentum – and what impact opening the firm up to the pressure of public markets, for the first time in its two-hundred-and-fifty-year history, will have on business. There are mixed results on similar companies going public – sneaker brand Allbirds and boot company Dr Martens, which both went public in 2021 have seen their fortunes tumble, whilst the likes of Crocs, which listed in 2006, sells more than one hundred million pairs of shoes a year, and is worth about US$ 5.2 billion, more than six times what it was at the start.

Having missed not paying on two-dollar bonds last month, it seems highly likely that Chinese developer, Country Garden Holdings, is lining up for its first ever debt default and a long-needed restructuring. With grace periods for payment interest payment expiring later this month, it has US$ 11 billion of offshore bonds outstanding. On Tuesday, in a filing to the Hong Kong bourse, the company said that it “expects that it will not be able to meet all of its offshore payment obligations when due or within the relevant grace periods, including but not limited to those under the US dollar notes issued by the company”, and that “such non-payment may lead to relevant creditors of the group demanding acceleration of payment of the relevant indebtedness owed to them or pursuing enforcement action.” Country Garden, once the biggest developer in the country, has Yang Huiyan as its chairman and the majority shareholder, commented that it had not made a due payment of US$ 60 million “under certain of its indebtedness”. The developer has 3k projects in smaller cities and about 70k employees but the most worrying of factors is that it has four times the number of projects than the Evergrande Group which brought the sector to its economic knees back in 2021. Apart from having liabilities, totalling US$ 187 billion, Country Garden posted that September contracted sales plunged 81% from a year earlier; with such figures, the developer will have trouble trying to trade out of its financial problems.

The RBA, noting that China’s property market is facing a “sharp deterioration”, which could lead to financial stress domestically, has warned that it could ultimately affect its trade with Australia. That is one of the key risks, identified by the Reserve Bank of Australia in its latest financial stability review, in a chapter specifically about the “vulnerabilities in China’s financial system”. The RBA warned that problems stemming from the “sharp deterioration” in China’s property sector — which accounts for about 30% of that nation’s economic growth — could lead to a global slowdown, weaker commodity prices and “reduced Chinese imports of Australian goods and services”. There is no doubt that big questions are being asked whether the Chinese economy can weather the current economic storm, but if matters worsen, the RBA noted that the “direct links between mainland China’s financial system and advanced economy banking systems are limited”, but Australia would not be immune from the fallout. It also noted that “widespread financial stress in China would therefore affect advanced economy financial systems mostly via its impact on Chinese trade and a general increase in risk aversion in global financial markets.” However, as Chinese economic woes will not disappear overnight, the main problems facing Australia will be from slowing global economic activity, lower global commodity prices and reduced Chinese imports of Australian goods and services; last year, it exported US$ 118.4 billion worth of goods and services to China, with iron ore accounting for 56% of that total, followed by natural gas and crude minerals with 10% and 6%. Furthermore, China’s property downturn may also have unintended consequences for Australia’s housing market and housing affordability, with an increase of both Chinese migration and property investors pushing already high prices even more unaffordable.

The latest RBA report noted that Australian homes and businesses are vulnerable to financial stability risks as rising inflation and interest rates continue to pressure the global economy, but that the country’s financial system is well-placed to deal with global economic shocks. Despite rising rates, the vast majority of households are servicing their debts, although the share of households falling behind on their mortgage payments has picked up a little. Its Financial Stability Review points to the share of owner-occupiers, with variable-rate mortgages, whose essential expenses and mortgage costs exceeded their income in July 2023, is estimated to be around 5%, up from around 1% in April 2022. In a hypothetical situation where interest rates were to rise 0.5% to 4.6%%, the share of owner-occupiers with variable-rate mortgages whose essential expenses and mortgage costs exceeded their income would rise from 5% to 7%. It notes these households are likely to have little capacity to cut back on spending, and 30% of them are at risk of depleting their cash buffers within six months – and so are at higher risk of falling into arrears on their housing loan. Currently, the banks are comfortable with the state of affairs, as only a “very small share of borrowers” are in negative equity (where the value of a loan exceeds the value of a property), and that the vast majority of households continue to service their debts. There was some concern that if inflation and interest rates remain high for an extended period, it could lead to a significant deterioration in credit quality that “could lead to lenders cutting back on the provision of credit”, and that “disorderly declines in asset prices” could disrupt the functioning of the financial system.

The review also looked overseas and pointed to China as a major global risk particularly because of the perilous state of its property sector, with major developers carrying massive deficits and stock – either unfinished or unsellable. The major area of concern is the distinct possibility of contagion spreading to other sectors of China’s economy that could then spread onto the global stage. Banking systems in the US and Switzerland were listed as potential flashpoints where global financial risks remain “elevated”, despite intervention by governments to provide support. Other risks to upset the natural order include malicious cyber-attacks on banking systems, increases in bad debts resulting from rising unemployment, rising geopolitical tensions not only in Ukraine, but elsewhere, and the effects of climate change on the global economy.

Spain, the world’s largest producer of olives and olive oil, is facing a raft of organised crime, with gangs taking advantage of rising prices, attributable to a reduction in production because of severe droughts earlier in the year. Last week, Spanish police seized seventy-four tonnes of stolen olives in the southern province of Seville, with twelve people being arrested in the town of Pilas for their suspected involvement in the theft and trading of the olives. Some 6k litres of extra virgin olive oil were stolen in late September from olive oil producer Terraverne, which operates in Teba, a small village in Malaga province; the olive oil had already been bottled for dispatch to customers.

Better later than never, Sri Lanka has finally confirmed that it has managed to reach a deal to restructure US$ 4.2 billion of debt. The deal with China will enable the island state to unlock the next tranche of a bailout which will allow it to keep accessing funds from a US$ 3 billion bailout programme with the IMF. Having reached a deal with its creditors, the country will be able to access the next tranche of US$ 330 million, which had been on hold since last month, after Sri Lanka and the IMF failed to agree on the terms for its disbursement. Sri Lanka, which defaulted on its foreign debt in May 2022, has a total foreign debt of US$ 46.9 billion, 52% of which is owed to China. However, there is concern that China managed to negotiate special terms with regards to the loans, which would have a negative impact on other creditors who would have to bear the burden.

Ireland’s latest budget sees plans to have its sovereign wealth fund with assets of more than US$ 100 billion over the next decade; the basis of the fund will besome of the corporation tax windfall that Ireland has previously received from major global companies, with some of the monies being used in tax cuts and an increase in public spending. The Republic of Ireland raised US$ 24.0 billion in corporation tax in 2022. They include extrasupport with childcare costs, a reduction in college fees and credits to help with energy bills. The SWF, to be known as the Future of Ireland Fund, will be used to “protect living standards and public services”, and will include a US$ 14.9 billion sum to protect infrastructure spending during economic downturns and invest in climate change measures. The “main” fund will start with a US$ 4.0 billion injection from the existing budget reserve, and thereafter by an annual “top-up” equivalent to 0.8% of GDP until 2035 – the 2024 ‘‘contribution” is expected to be in the region of US$ 4.6 billion. Many US and other overseas companies have parked their money in Dublin and paid their tax on their global profits, (at a much lower rate), in the Republic. This has seen corporation tax receipts in Ireland balloon from just over US$ 4.2 billion to more than US$ 23.4 billion over the past decade since 2014.

The International Monetary Fund has revised down the UAE’s 2023 growth forecast – by 0.2% to 3.4% – but upgraded it 0.1% to 4.0% for the next year. Last week, the World Bank revised up the country’s 2023 and 2024 GDP growth forecast, by 0.6% to 3.4% and 0.3% to 3.7%, on the back of strong growth in oil and non-oil sectors.  By 2028, the UAE will be the fastest GCC economy with a figure of 4.5%, compared to Saudi Arabia (3.1%), Oman (3.1%), Bahrain (2.7%) and Kuwait (2.4%). The world body also noted that the global economy continued to recover slowly from the blows of the pandemic, the conflict in Ukraine, and the cost-of-living crisis. It also commented that “growth remains slow and uneven, with growing global divergences”. Its two-year forecasts were changed by 0.5% to 3.0% and 0.1% to 2.9%. Latest data sems to point to a ‘soft landing’ scenario for the global economy, bringing inflation down without a major downturn in activity. For advanced economies, the expected 2022-2024 slowdown is from 2.6% in 2022 to 1.5% to 1.4% amid stronger-than-expected US momentum but weaker-than-expected growth in the euro area. It sees the US economy growing at 2.1% this year and 1.5% in 2024. Meanwhile, emerging markets and developing economies are projected to have growth declining each year by 0.1% to 4.0% and 3.9% in 2024. India is expected to show impressive growth levels of 6.3% over the next two years.

US September inflation remained flat on the month at 3.7%, mainly attributable to higher housing and energy costs. Although it has fallen markedly from its 9.0% level late last year, it is still almost double of the Federal Reserve’s long-standing 2.0% target. The central bank, which has already raised borrowing costs sharply and its key interest rate now stands at more than 5.25% – up from near-zero in March 2022 – still has to decide whether to move rates higher to stabilise price growth. Increases in housing and petrol prices were offset by declines in used cars, clothing and grocery items. However, there is one fact to bear in mind – rates will remain relatively high for some time, partly because job growth and spending has held up far better than expected. Earlier forecasts were looking at rates dropping at a much quicker rate.

In the likely event that the Labour Party win the UK election in 2024, then UK expats in Dubai will not be too happy as Kier Starmer and his entourage are planning to increase the surcharge on property purchases for foreign buyers in an effort to fund increased building of homes; the Labour Party will raise the stamp duty surcharge on overseas buyers to get Britain building. An extra surcharge of 2% for foreign buyers was introduced in April 2021 and is applied regardless of the type of non-resident buyer, be they individual or business, and this is on top of the existing 3% stamp duty surcharge on purchases of second homes or buy-to-let properties and the existing stamp duty rates for UK home buyers, which is an increasing scale that begins after US$ 305k. It also seems that a new Labour administration could amend the non-dom tax status actually cancelling it which would then put an end to a tax benefit from which some enjoy foreign earnings free of tax for up to fifteen years; some estimate that this move could reap US$ 3.9 billion for the exchequer.

One just has to watch what happened earlier in the week to see that the world is becoming a less safe place. Thousands have been killed in Israel and Gaza after an unprecedented attack by Palestinian militant group Hamas and the inevitable retaliation by Israel. There is no doubt that the global economy is still reeling from the impact of Russia’s invasion of Ukraine which dragged the global economy into a downward spin resulting in energy/food prices, global trade, soaring inflation and higher interest rates. However, this latest episode in the ME may have far more damaging consequences that will not only affect the global economy but will stretch geopolitical relationships to the limit. What has happened to a world that does nothing but sit back and watch the two protagonists fighting it out, using innocent civilians as battle fodder?  This problem has festered for far too long and will continue indefinitely until positive action is taken – by who remains to be seen. Prime Ministers, Presidents and other world leaders have tried and failed – as have global bodies such as the toothless United Nations. Lobby groups, the world’s media and politicians, with their own self-centred motives, continue to play their parts in adding more fuel to the fire. Peace will only come when the people realise – and take positive action – that they are no longer Only A Pawn In Their Game!