Who Wants To Be A Billionaire? 09 February 2024
The real estate and properties transactions, totalling 3,543, were valued at US$ 2.67 billion for the week ending 09 February 2024. The sum of transactions was 197 plots, sold for US$ 439 million, and 2,572 apartments and villas, selling for US$ 1.55 billion. The top three transactions were all for plots of land, the first in Warsan Fourth for US$ 33 million, the second in Al Barshaa South for US$ 21 million and in Wadi Al Safa 3 for US$ 15 million. Madinat Hind 4 recorded the most transactions, with seventy-seven sales, worth US$ 54 million, followed by thirty sales, in Al Hebiah Fifth, for US$ 21 million, and eleven sales, in Jabal Ali First, valued at US$ 14 million. The top three transfers for apartments and villas were a villa in Island 2 for US$ 38 million, another in Jumeirah First, for US$ 32 million, and an apartment in Al Safouh Second for US$ 22 million. The mortgaged properties for the week reached US$ 490 million; one hundred and thirty-five properties were granted between first-degree relatives, worth US$ 198 million.
Despite a slower growth of 5.6%, in 2023, Dubai outpaced Mumbai, Bangkok, Tokyo, Sydney, Shanghai, Madrid, Barcelona, Geneva, Singapore and other cities in terms of capital value appreciation. Savills projects this year’s growth to be as high as 5.9%, which places the emirate a global second to Sydney’s 9.9%. It is estimated that around 9.5k millionaires made Dubai their home in the past two years. The consultancy noted that the Dubai prime market is still relatively competitively priced by global standards, at US$ 850 per sq ft, whilst offering a comparatively low cost of living, a relatively easy visa process, and a warmer climate – all magnets attracting international and domestic buyers. On the global stage, Dubai is a high-yielding city, with returns of 4.8%, as prime yields nudged up 40 bps, during 2023, in which capital values rose by 17.4% and rents by 8.9%. Another plus for the emirate is that the cost of buying, owning and selling a US$ 2 million property in Dubai is more economical than in Singapore, Hong Kong, London, New York, Tokyo, Paris, Mumbai and other cities. In terms of prime residential rental value growth, Dubai was ranked first ahead of Lisbon, Berlin and Singapore. Dubai rents are cheaper than other cities including New York, Hong Kong, Los Angeles, Singapore, Paris, Geneva and Amsterdam but are more expensive than in Bangkok, Mumbai, Sydney, Madrid, Kuala Lumpur, Beijing and Barcelona.
A Cushman & Wakefield study notes that there is a two-tiered rental market operating in Dubai, with a widening gap between new contracts and lease renewals. Over the past two years, data shows that residential rates rose by 19% – and 27% a year earlier – with apartment and villa sales prices having climbed 68% and 32% since the pandemic, and by 19% and 16% last year. Since their 2014 peak, villa and apartment sales prices are now more than 16% and 6% lower respectively. When it comes to rents, there were 16% and 17% increases noted last year. Betterhomes indicated that apartment and villa rents rose by between 20%-30% and between 10%-20% last year; Cushman & Wakefield reckoned that affordable apartment districts, including Discovery Gardens, Dubailand, Dubai Sports City and Jumeirah Village Circle, saw the sharpest rental increases in the past twelve months due to relatively lower bases, whilst the highest villa increases were in Discovery Gardens, Dubailand, Dubai Sports City and Jumeirah Village Circle. It also noted that 39.4k units, (83:17 – apartments:villas), were handed over last year. That being the case, the number of units at the end of 2023 would be 823k units (official figures for 2022 – 783.6k plus unofficial 2023 figures – 39.4k). With the actual 3.655 million population, at 31 December 2023, this would result in the average occupancy being 4.44 per unit.
The 30 December 2023 blog, ‘Nothing New’ noted:
‘Over the past four years, the average number of new units added to Dubai’s property portfolio every year has been around 42k. At the beginning of every year, the “experts” come out and predict that up to 70k units will be added in the new year. One fact to remember is that by the end of 2024, Dubai’s population will have grown by some 150k and basing that the average unit will house 4.3 persons, that will account for almost 35k new units required. So even if 50k new units hit the market in 2024, there will still be a problem with demand outstripping supply. It will only be in 2025 before any sort of equilibrium returns to the market when most of the 2022 launches become reality. During the pandemic there were very few, if any, launches and most will take up to three years from planning to handover’.
January saw the Dubai’s realty sector off to a flying start, with record-breaking sales totalling US$ 9.65 billion, and a great start for another positive year on the back of sustained momentum from 2023. There was a growing demand for off-plan properties, with the upward trend continuing with a marked 27% increase in the month; Property Finder’s data indicates a 17% annual increase in recorded sales transactions with over 11k transactions. Compared to January 2023, last month’s figures showed that there were more then 6k recorded transactions and a a 21% rise in values, to US$ 4.09 billion.
In a recent survey, Property Finder’s data posted that some 58% of interested property buyers were searching for an apartment – the balance 42%, for villas/townhouses. In contrast, 80% of tenants in the rental market were found to be looking for apartments, while 20% were searching for villas/townhouses. Of the total looking for apartments, 62.2% wanted them furnished – with the balance obviously wanting unfurnished. When it came to villas, more people, (57%), were looking for unfurnished units. Those looking for apartments, the preference for studios, 1 B/R and 2 B/R was spread 22%, 36% and 31%. Those who wanted to rent a villa/townhouse, 43% tenants were looking for three-bedroom units and 34% for four bedroom or larger options. When ownership is involved, the spread was 14%, 33% and 36% for those looking for apartments and 40% and 44% for villas/townhouses.
The most popular apartment locations for buyers were Dubai Marina, Downtown Dubai, Jumeirah Village Circle, Business Bay, and Palm Jumeirah and for villa/townhouse buyers Dubai Hills Estate, Arabian Ranches, Palm Jumeirah, Al Furjan and Damac Hills. Leading areas for rentals were Dubai Marina, Jumeirah Village Circle, Downtown Dubai, Business Bay and Deira. Dubai Hills Estate, Al Barsha, Damac Hills 2, Jumeirah and Umm Suqeim were popular when it came to searches to rent villas/townhouses.
Many analysts forecast that 2024 will see a further reduction in rents but still in double-digit territory. The rental increases, for both apartments and villas, in the so-called new districts of Dubai, will be more moderate than rises in the more established, and more central, Dubai locations. As rents are controlled by the Real Estate Regulatory Agency’s rental calculator, many tenants are opting to stay put because rental increases during renewals are much lower compared to signing new leases.
Citi Developers has announced that its first foray in the Dubai property, Aveline Residences, is already 70% booked. The US$ 82 million, twenty-one storey project, located in Jumeirah Village Circle, is slated for a Q2 2026 completion. It comprises two hundred and sixty-three apartments, with a payment plan – 10% for the booking fee, 40% during construction and 50% upon handover. Starting prices are from US$ 161k, US$ 270k, US$ 368k and US$ 479k for studio, one-bedroom, two-bedroom and three-bedroom apartments.
A new entrant to the Dubai residential sector is Portgual’s Swank Development who plan a US$ 82 million investment for ultra-luxury villas in Mohammed bin Rashid City in Meydan. Further details will be released soon but the project is slated for a Q1 2026 completion. The developer chose Dubai to launch operations due to its thriving economy, advanced infrastructure, and safety and security, distinguishing it from other regional cities. The company added that “it is the government’s ease of regulations and taxation and lifestyle that is attracting developers from Europe. Dubai has always shone because of lifestyle, safety and security infrastructure.” The Portuguese company is also in talks with master developers to develop more projects in the city. Swank follows in the footsteps of India’s Skyline Builders, Switzerland-based DHG Properties, and European developer Revolution, who have already taken their first steps into the local mature property market.
The Dubai Land Department achieved 1.6 million transactions from various real estate activities, 16.9% higher on the year. The value of real estate exceeded US$ 172.75 billion – 20% higher on the year. It noted that Gulf investors accounted for 10.4k investments, valued at US$ 8.38 billion, Arab investors – 13.2k investments, valued at US$ 7.96 billion and foreign investors, 90.8k buying into 122.9k investments, valued at US$ 75.28 billion. During 2023, real estate investments were 55% higher at US$ 112.26 billion, along with 157.8k investments, including 71.0k new investors – 20% higher; the percentage of non-resident investors rose to constitute 42%of the total new investors. Last year, more women were involved in the real estate sector, with the number reaching 38.1k, valued at US$ 24.66 billion, across 46.7k investments – growths of 53.9%, 42.5% and 39.8% respectively.
Mohamed Alabbar has seemingly confirmed that the cable-tied tower, designed by the Spanish-Swiss architect Santago Calatrava, that was due to be one hundred metres taller than Burj Khalifa, was being redesigned. Emaar Properties’ founder said the tower being built at Dubai Creek Harbour will be a smaller, more elegant structure than previously planned; he also added that the new design had been approved and construction had started on the tower, which will not be as tall as Burj Khalifa. He described the new tower, the centrepiece of the six square kilometre project, as an elegant version of the famous building.
As expected, Dubai posted its best-ever year, in 2023, as international tourist number jumped by 19.4% to 17.15 million, amid the continued expansion of its economy; it surpassed 2019’s then record number of 16.73 million. Sheikh Hamdan bin Mohammed, Dubai’s Crown Prince, stated that “with several indicators outperforming pre-pandemic levels, this year’s results mark Dubai out as a vibrant focal point of growth in the global tourism landscape.”
65% of the incoming tourists came from three regions – GCC/Mena, western Europe and South Asia, with totals of 28%, 19% and 18%. Average hotel occupancy rose 1.5% to 77.4% last year, and also exceeded the pre-pandemic level of 75.3% reported in 2019. Supply of hotel rooms in 2023 was 18% higher than in 2019, with occupied room nights climbing 11% to a record high of 41.70 million – and a marked 30% rise from the pre-pandemic figures. The average daily rates (ADR), at US$ 146, was similar to the previous year, while RevPar (revenue per available room), climbed 6% to US$ 113. The length of stay was 3.8 nights, a 10% increase from 2019 levels. Dubai’s hotel inventory topped reached 150.3k rooms with 821 establishments, compared to 146.5k rooms during the previous year across 804 establishments.
January saw Dubai’s economy continue in growth albeit at a slower pace with the S&P Global PMI dipping 1.1 to 56.6 on the month, with demand remaining strong and rising new orders and purchasing helping maintain its momentum. With the index still higher than the long-run average, it pointed to a continuing improvement in operating conditions in the emirate. However, the survey showed that there were signs of increasing competition leading to more discounting which inevitably results in tighter margins. It seems that the Red Sea crisis is becoming a growing risk to Dubai, as companies are beginning to witness shipment delays which will result into longer wait times, higher costs and capacity constraints.
According to a recent study by global HR platform Deel, the UAE is ranked as the most popular country in the world for ‘international talent seeking employment visas’. Using data from 300k work contracts, across one hundred and sixty countries, it concluded that the UAE topped the rankings, ahead of the Netherlands, France, the UK and Singapore. It noted that France, India, Turkey and the UK were the leading source markets and that the most sought-after roles were for management consultants, content managers, software engineers, influencer marketing managers and strategy directors. The leading industries hiring international workers to the UAE included financial services, information technology/services, computer software, management consulting, and marketing/advertising. It noted that “the UAE’s diverse and multicultural workforce is its greatest asset. By attracting and retaining international talent, the country is positioning itself for continued economic growth and success in the global marketplace.” The Deel report noted that ‘UAE talent’ is highly sought-after by companies in the US, UK, Australia and Canada, particularly in sectors such as computer software, IT services, financial services, marketing/advertising, and software development. Based on the number of international workers hired, the top five cities for global workers were London, Toronto, San Francisco, Buenos Aires and Madrid.
In its 2024 ‘Salary Guide’ report, Robert Half indicated that the country is moving towards being an employers’ market because of the lifestyle and economic problems in other countries. It also noted the influx of talent and greater competition for roles mean candidates are willing to accept lower remuneration to gain a foothold in the ME, which brings down the overall market rate and restricts salary growth. A survey by LinkedIn found that 82% of professionals, in the UAE and Saudi Arabia, preferred working in the GCC region rather than moving to Europe or the US. The three main drivers behind this conclusion were the region’s standard of living made it a preferred destination, (46%), attractive lifestyle (35%) and opportunities for professional growth (31%). The five most sought-after positions in the UAE were as management consultant, content manager, software engineer, influencer marketing manager and strategy director. On a global scale, Europe, the MEA region and Asia-Pacific were ranked the fastest-growing hiring locations. Also on a worldwide basis, teaching, sales, software engineering and content management saw the biggest pay rises and, at the other end of the scale, the biggest declines in wages were in customer support, recruiting, accountancy and marketing,
Standard & Poors posted that, (driven by lower provisioning requirements, improved liquidity levels – as deposit growth outpaced new loan growth – and higher interest margins), UAE banks reported exceptional profits for the full year 2023. The report also noted that the outlook for the banks in the UAE is stable, estimating that increased oil production and support from non-oil sectors, (specifically from the hospitality, real estate, and financial services sectors), will drive economic growth this year. The hike in net profit was also supported by growth in non-interest income, reflecting increased business activity and commercial activity. The agency believes that interest rates will remain higher for longer, which will support banks’ net interest margins. Along with largely stable cost of risk, UAE banks’ profitability is likely to remain robust. The agency also expects retail lending to remain strong as banks continue to expand in this profitable segment. The agency said that UAE banks maintain high liquidity, with the average cash and money market instruments of the ten largest banks reaching 21.8% at the end of last year. Strong core customer deposit bases – which grew by about 12% last year – and limited reliance on external funding contribute to the funding structures of UAE banks. S&P noted that local banks remain in a strong position in terms of net foreign assets, which rose to 27.9% of system-wide domestic loans as of 30 November 2023, from 9.65% at the end of 2021.
Emirates’ supremo, Tim Clark, is the latest senior airline executive to criticise Boeing noting that is in the “last chance saloon”, adding he had seen a “progressive decline” in its performance. He noted that “they have got to instil this safety culture which is second to none. They’ve got to get their manufacturing processes under review so there are no corners cut etc.” The Dubai carrier is one of the plane maker’s major customers and is now set to send its engineers to monitor Boeing’s production lines of the 777 and its supplier Spirit AeroSystems. Last November, it placed an order for ninety-five wide-body Boeing 777 and 787 jets, used for long-haul flights, valued at US$ 52.0 billion, at list prices.
Emirates has been appointed as the official Global Airline Partner of the NBA, (National Basketball Association), in a multiyear global marketing partnership. The agreement sees the Dubai carrier become the inaugural title partner of the NBA Cup, previously named the NBA In-Season Tournament, as well as the first-ever referee jersey patch partner of the NBA. Group chairman, Sheikh Ahmed bin Saeed, commented that ““the NBA is a valuable addition to our sponsorship portfolio, as it allows us to connect with a vast global fanbase, including in the US, where the game is an integral part of the country’s sports culture.”
Driven by a 6.1% hike in housing/water/electricity/gas group. Dubai’s December CPI index stood at 3.3%, and according to Kamco Invest’s GCC Inflation Update, among the six GCC countries, only Dubai reported an increase in its average annual inflation rate. Overall, only three out of Dubai’s thirteen CPI subgroups recorded year-on-year decreases during the month, with food/beverages group, (the third largest weighted group), recording a 4.2%, compared to a decline of 4.5% during December 2022. On the other hand, the transport subgroup (second largest weighted group) posted a 5.8% decline, compared to 2.9% decrease in 2022. According to the IMF, the primary factors that allowed the GCC regional countries to control their inflation so well are among other things, the combination of subsidies in energy sector, the prevalence of administered prices on basic food items and food security strategies, and the wider continuing economic diversification efforts.
By the end of 2023, the number of EVs in Dubai grew 71.7%, on the year, to 25.9k, with Dewa, advancing the emirate’s green mobility plans, commenting that “we will continue to foster the use of EVs through continuous development of the green charging stations using technologies of the Fourth Industrial Revolution,” and that “Dewa has launched several features to facilitate the charging of EVs on its public charging network, reduce charging time, enhance the infrastructure and provide better access to charging facilities across Dubai.” Dewa has invested in a network of three hundred and eighty-two public charging stations and confirmed that their use rose 59%, compared to 2022 returns.
HH Sheikh Mohammed bin Rashid announced that Dubai’s non-oil foreign trade had already reached its AED 2 trillion ($545 billion) five-year target – a year ahead of schedule. The Dubai Ruler commented that “in 2020, before the Covid crisis, we announced from the Dubai Council a target for Dubai’s non-oil foreign trade to reach AED 2 trillion by 2025. Then the Covid crisis came, and the team informed me of the impossibility of achieving the goal as a result of this crisis that struck the global trade movement. Life experiences taught me that crises are the best time to develop and think outside the ordinary.” In the first nine months of 2023, Dubai’s economy rose 3.3%, with two main drivers being growth in the tourism and transportation sectors. S&P Global Ratings reckons that UAE’s real GDP last year hit 3.4%, and could hit 5.3% in 2024.
A report by Henley & Partners ranks Dubai as the third wealthiest city among the newly expanded Brics bloc which analyses private wealth and global investment migration trends. The total investable wealth, currently held in the Brics bloc, amounts to US$ 45 trillion and the number of millionaires is currently at 1.6 million and expected to increase by 85% over the next ten years; the figure also includes 4,716 centi-millionaires and five hundred and forty-nine billionaires.
The top ten cities, with the number of millionaires are:
- Beijing 125.6k
- Shanghai 123.4k
- Dubai 72.5k
- Mumbai 58.8k
- Shenzhen 50.3k
- Hangzhou 31.6k
- New Delhi 31.0k
- Moscow 30.3k
- Guangzhou: 34.5k
- Abu Dhabi 22.7k
Among Dubai’s rich are two hundred and twelve centi-millionaires, (people with a net worth of US$ 100 million plus) and fifteen billionaires. It is expected that UAE numbers will have grown by 4.8k last year, which would only be surpassed by Australia’s 5.2k new millionaires. It is estimated that the country’s millionaire population has grown 77% over the last ten years to 116.5k. Although it has only 4.1k high-net-worth individuals, Sharjah’s rich are growing at a faster rate than Dubai, with the number forecast to grow 129% to 9.0k within the next ten years.
Smart and Secure Insurance Agent a company operating in the country, has seen its licence and registration revoked by the UAE Central Bank. The regulator indicated that this action was taken because of Smart and Secure’s weak compliance framework and failure to meet regulatory obligations. The CBUAE, through its supervisory and regulatory mandates, works to ensure that all companies and professionals abide by the UAE laws, regulations and standards to safeguard the transparency and integrity of the insurance industry and the UAE’s financial system.
Dubai Aerospace Enterprise posted a 16% hike in 2023 to US$ 1.35 billion, with net profit coming in at US$ 351 million. Over the year, DAE acquired twenty and sold thirty aircraft, whilst of the acquired units, ten were owned and ten managed with those sold being twenty-two managed and eight managed. Having booked over 1.5-million-man hours and performed three hundred and sixteen checks, DAE signed some one hundred and fifty lease agreements, extensions and amendments, of which one hundred and fourteen owned and thirty-six non-managed. The company announced a partnership with Boeing to become the first facility in the ME to be authorised to complete Boeing 737-800BCF conversions.
DEWA’s Q4 revenue rose 5.5% to US$ 1.93 billion, but for the full-year 2023, there was a 7.0% hike to US$ 795 billion; there was a 1.4% decline in net profit to US$ 2.15 billion, with Q4 showing a 14.6% rise to US$ 490 million, driven by higher demand for electricity, water and cooling services amid continued growth momentum in the emirate. In Q4, total power generation topped 13.4 terawatt-hours – 8% higher compared to Q4 in 2022; for the year, the figure of 56.5 terawatt-hours, up 6.3%. A sign of the population growing was that the utility added 11.2k new customers in Q4, bringing its total customer base to 1.2 million. Clean power accounted for 11 per cent of the total electricity generated in 2023.
Emaar Properties posted a 70% surge in annual net profit to US$ 3.2 billion on the back of increased sales, as the UAE property market continues to move higher even after three years of growth. Dubai’s largest property developer saw revenue 7.0% higher to US$ 7.27 billion, as property sales jumped 15% to US$ 10.98 billion, with a US$ 19.56 billion backlog.
Its majority-owned subsidiary, Emaar Development, specialising in the build-to-sell property development business, registered a 21% annual hike property sales of US$ 10.19 billion. revenue was at US$ 3.24 billion, with ebitda climbing 89% to US$ 2.18 billion. The Dubai property market surged (again) in 2023, by 20% to US$ 17.28 billion and 36%, to 166.4k – by value and the number of transactions respectively.
Emaar achieved 63 per cent annual growth in earnings before interest, taxes, depreciation and amortisation (ebitda) that stood at Dh16 billion during 2023.
With robust growth in tenant sales, Emaar’s shopping mall/retail/commercial leasing operations, posted a 21% rise in 2023 revenue to US$ 1.58 billion. Its mall assets achieved an average occupancy of 97%. 12% of Emaar’s revenue comes from its international real estate operations, which posted property sales of US$ 790 million with revenue totalling US$ 845 million, mainly attributable to operations in Egypt and India, with the latter posting aa four-fold increase in property sales driven by new launches. Emaar’s hospitality/leisure/entertainment divisions generated 20% more revenue to US$ 926 million, driven by the improvement in the emirate’s tourism sector and robust domestic spending. Emaar’s recurring revenue from malls, hospitality, leisure, entertainment, and commercial leasing rose more than 26%, on the year, to US$ 2.51 billion. Revenue from this portfolio contributed over 34% of the company’s total revenue.
The DFM opened the week, on Monday 05 February, 162 points (4.2%) higher the previous fortnight, shed 45 points (1.1%) to close the trading week on 4,229 by Friday 09 February 2024. Emaar Properties, US$ 0.08 lower the previous three weeks, gained US$ 0.6, closing on US$ 2.10 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 4.92, US$ 1.74, and US$ 0.36 and closed on US$ 0.66, US$ 4.71, US$ 1.74 and US$ 0.36. On 09 February, trading was at 87 million shares, with a value of US$ 71 million, compared to 63 million shares, with a value of US$ 47 million, on 02 February 2024.
By Friday, 09 February 2024, Brent, US$ 5.29 lower (6.4%) the previous week, gained US$ 4.99 (6.5%) to close on US$ 77.20. Gold, US$ 39 (1.9%) higher the previous week, shed US$ 16 (0.8%) to trade at US$ 2,039 on 09 February.
Data from Chainalysis reported that payments from crypto-related ransom attacks nearly doubled to a record US$ 1 billion in 2023. Scammers targeting institutions such as hospitals, schools and government offices for ransom pocketed US$ 1.1 billion last year, compared with US$ 567 million in 2022. The blockchain analytics firm noted that “an increasing number of new players were attracted by the potential for high profits and lower barriers to entry,” with “big game hunting” has become the dominant strategy over the last few years, with a dominant share of all ransom revenue volume made up of payments of US$ 1 million or more. Hundreds of organisations, including government departments, UK’s telecom regulator and energy giant Shell, have reported cybersecurity breaches involving the MOVEit software tool, which is typically used to transfer large amounts of often sensitive data, including pension information and social security numbers. The only good news seems to be losses stemming from other crypto-related crimes, such as scamming and hacking, fell in 2023.
In the twelve months to 31 January 2024, China’s vehicle sales surged 47.9%, year on year, to nearly 2.44 million units, and that the country’s vehicle output last month increased by 51.2% year on year to 2.41 million units. Passenger car output and sales returned rude returns – up 49.1% to 2.08 million and 44.0% to 2.12 million vehicles, whilst commercial vehicle output and sales posted even better numbers – by 66.2%, on the year, to 327k units, and soaring 79.6% to 324k units. January also saw even higher increases last month posted by the new energy vehicle industry, with production and sales – up 85.3% to 787k and 78.8% to 729k. In relation to all electric vehicle production and sales growth levels were 63.9% to 489k and by 55.1% to 445k. Exports also moved higher with January exports 47.4% to the good rising to 443k, with NEV exports by 21.7% to 101k units.
There are reports that Snap is planning to cut 10% of its 5k staff, following the release of its Q4 financials revealing a US$ 368 million loss for the quarter 31 October; there is no definitive news on the future of its UK workforce of 0.5k. Estimates are that the move could cost it between US$ 55 million – US$ 75 million in severance payments “and other charges”. In August 2022, the social media company released 20% of its staff. Snapchat said the move would “reduce hierarchy and promote in-person collaboration”. In contrast, its rival, Meta recently posted a tripling of quarterly profits. It is estimated that, in 2023, the tech sector industry saw a loss of 232k staff, including Meta and Google, all trying to optimise costs to remain profitable.
Even though BP’s 2023 profit almost halved on the year, (US$ 13.8 billion v US$ 27.7 billion), it was still the energy giant’s second highest annual profit in a decade. (Last week Shell also posted lower 2023 profit, at US$ 28.2 billion from US$ 39.9 billion). In Q4, profits were at US$ 3.0 billion, resulting in its share value scooting 5% higher on Tuesday. In H1, BP is planning to return, to shareholders, US$ 1.75 billion of share buybacks, as well as committing US$ 3.5 billion of buybacks.
Tesco has copied its rival Sainsbury’s by leaving the banking sector, with Barclays agreeing to buy the supermarket’s retail banking operations in a deal worth US$ 758 million to the supermarket giant; last month, Sainsbury’s said it was planning a “phased withdrawal” from its banking division in order to focus on its core food business. Barclays is taking over Tesco Bank’s credit cards, loans and savings accounts and has also agreed to market Tesco-branded banking services. It is likely that Tesco’s 2.8k payroll will transfer to Barclays. However, the supermarket has retained some of Tesco Bank’s services, including insurance, ATMs, travel money and gift cards.
Following a December 2023 announcement that Woodside and Santos were in discussions about a possible merger, this week Woodside posted that merger talks with the South Australian energy giant were over. One possible explanation was that the WA’s energy giant is seen as a risk averse entity and was reluctant to proceed any further in what would have seen the creation of an US$ 52.23 billion, (AUD 80 billion) company. Woodside chief executive officer, Meg O’Neill, said the company “continuously assesses a range of organic and inorganic growth opportunities” and it “will only pursue a transaction that is value accretive for its shareholders,” and “we continue to be disciplined in our approach to mergers and acquisitions and capital management to create and deliver value for shareholders,” A combined business would reportedly have had an LNG capacity of sixteen million tonnes a year.
Perceived to be a supporter of Israel is the main driver behind McDonald’s missing a key sales target – its first such quarterly sales miss in four years. The fast-food retailer is one of several Western companies, including Starbucks and Coca Cola, that have seen boycotts and protests against them by anti-Israeli campaigners. McDonald’s confirmed that the Israel-Gaza conflict had “meaningfully impacted” Q4 performance in some overseas markets, specifically in the ME, Malaysia, Indonesia and France. The fast-food retailer drew criticism after its Israel-based franchise said it had given away thousands of free meals to members of the Israeli military, sparking calls to boycott the brand by those angered by Israel’s military response in Gaza. Most of McDonald’s forty thousand plus stores are run by franchisees, of which about 5% are in the ME. Franchise owners in Muslim-majority countries such as Kuwait, Malaysia and Pakistan have even put out statements distancing themselves from the firm. Its Q4 global sales grew by just under 4% – down from 8.8% in Q3, and below its annual average.
After only eight months in the position, Hafize Gaye Erkan has tendered her resignation as the governor of the Turkish Central Bank; Turkish President Erdogen quickly appointed Fathi Karahan, her deputy governor, as the new supremo, signalling a welcome continuation of the transition to more friendly orthodox economic policies. Erkan commented that she was facing an apparent smear campaign against her and that she was resigning to protect her family, including an infant child. There had been allegations, which she denied, that her father was intimately involved in the central bank’s affairs, despite having no official role at the bank. The lira dipped, 0.5% to 30.489, to the greenback, when the news broke last Friday, with the currency having slumped by about 23% since the governor was appointed last June. During her brief tenure, she had led the about-face in Turkey’s economic policies, which included raising interest rates aggressively, (from 8.5% in June to its current 45.0%) and letting the currency trade more freely in an effort to attract foreign investment. It is expected that the current monetary tightening policy will continue.
The Central Bank of Egypt has raised its overnight deposit rate, overnight lending rate, the discount rate and the rate of the main operation by 200 bp.
Despite being the chief executive of Singapore’s biggest bank DBS, which posted a 27% hike in 2023 profit to US$ 7.67 billion, Piyuah Gupta has seen his bonus cut by 30% after several damaging disruptions to its digital services. The bank noted that his 2022 pay was US$ 11.5 million and that the cut to Piyush Gupta’s variable pay, (including a cash bonus and deferred shares), amounts to US$ 3.1 million, and that his full 2023 salary will be disclosed next month. The bank said other members of its management team will have their variable pay cut by 21%, while more junior employees will get a one-off bonus to help them with higher living costs.
The Albanese government has announced another round of sanctions designed to strangle the flow of money to Myanmar’s junta, three years after the military seized power in an illegal coup. The new round of sanctions will target banks that support state-owned enterprises, but there is pressure from several groups, including activists, who allege a dozen Australian and Australian-linked mining companies still operate in Myanmar. Anti-junta groups are concerned that Australian companies are propping-up the regime. and the government is being pressed by civil society groups to pull them out. But whilst the Foreign Minister Penny Wong announced that the government would impose targeted sanctions on Myanmar Foreign Trade Bank and Myanmar Investment and Commercial Bank, and would also sanction Asia Sun Group, Asia Sun Trading Co Ltd, and Cargo Link Petroleum, she fell short of further action on the miners. It seems that Australia is still lagging well behind the US and European nations which have imposed deeper and wider-ranging sanctions, with it some way off simply to catch up with the sanctions already imposed by its allies and should urgently sanction junta-controlled mining entities, given the continued Australian involvement in that sector. The CEO of Transparency International Australia, Clancy Moore, commented that “Australia’s lack of sanctions on the state-owned enterprises Mining Enterprise 1 and Mining Enterprise 2 that oversee mining sector and collect revenue for the junta means the door is wide open for the ten Australian-linked mining companies to continue to do business with the corrupt and murderous military regime,” and that “we would expect the Australian Government to follow the lead of the US, EU and Canada in sanctioning these important state-owned enterprises lining the pockets of the corrupt and murderous Myanmar generals.”
In 2023, Australian wine exports were hit by a global trend in people drinking less alcohol and cutting costs, with a fall in both the value and volume of exported wine in the middle of a global oversupply. The immediate hope is that the Chinese drop their tariffs which has had a major impact on the industry. In calendar year 2023, wine exports declined by 2% to US$ 1.24 billion and 3% in volume to 607 million litres. On top of that, only 39.3%, equating to forty-four of the one hundred and twelve destinations that received Australian wine during the year imported more value than they did in 2022. It seems that the market is being impacted on both health and financial reasons – people reducing their discretionary spending and also consumers becoming more conscious of their health. Although markets in Hong Kong and Singapore moved higher, those in Europe and US headed south, whilst the Chinese market continues in the doldrums because of the continuing heavy tariffs.
With inflation falling quicker than expected, (starting 2023 at 7.8% and ending on 4.1%), the Reserve Bank of Australia, at their first meeting of the year, left rates unchanged at 4.35%, in line with market expectations. Despite this, the RBA noted that inflation had clearly eased but it was still high at 4.1%, and above the central bank’s target of 2% – 3%, whilst services inflation was only moderating gradually. It forecast that inflation would return to its target range in 2025, and to the midpoint of that range in 2026. However, the global economy is beset with many potential trigger points, including the slowing Chinese economy, conflicts in the Ukraine and Gaza, as well as shipping being disrupted in the Red Sea – all of which have possible impacts on the Australian economy. Add in a local housing shortage, pessimistic consumer confidence, (the Westpac Melbourne Institute Consumer Sentiment Index declining 1.3% to 81 last month), jobless rates at an eighteen-month high and soaring cost of living expenses. The conundrum is that the market seems to be pricing in two rate cuts in 2024, but the RBA may have a different agenda, saying it cannot rule out another rate rise, depending on economic data.
As UK mortgage rates continued to head south, Halifax posted that January saw house prices at their highest for twelve months, driven by a slowdown in inflation and a buoyant jobs market. In January, the typical home cost US$ 368k – 2.5% over the past twelve months. Halifax noted that first-time buyers faced average deposits of US$ 68k and warned that while house prices had risen, interest rates still remained high, compared with the historic lows seen in recent years. An interesting fact is that around 65% of new buyers are in joint names. Halifax data is based solely on its own mortgage lending, which excludes cash buyers who account for about a third of all transactions. A typical two-year fixed mortgage rate last July was at 6.86% and has fallen to 5.57`% by the beginning of February, with further rate cuts later in the year.
With housebuilders struggling since the start of 2022, with higher interest rates denting demand, and construction costs rising, Barratt announced it would buy Redrow, in an all-stock deal, valued at US$ 3.16 billion, that would see the new entity known as “Barratt Redrow”. David Thomas, chief executive of Barratt, said despite the “challenging” economic environment, demand for the company’s homes was “strong”, and he expects the new company would build more than 22k homes a year in the medium term. He also added that “since the start of January, we have seen early signs of improvement in both reservation rates and buyer sentiment, helped by expectations of lower interest rates and the introduction of more competitive mortgage rates.”
A year ago, Chinese billionaire banker Bao Fao, went missing and his whereabouts are still unknown despite his firm, China Renaissance Holdings, recently announcing that he had stepped down “for health reasons and to spend more time on his family affairs,” adding that he “has no disagreement with the Board and there is no other matter relating to his resignation that needs to be brought to the attention of the shareholders”. Days after his February 2022 disappearance, the bank said he was cooperating with authorities who were conducting an investigation. Ben Fao is not the first Chinese billionaire to go missing – and he surely will not be the last! In China, Who Wants To Be A Billionaire?
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