Duck Before You Drown!                                                 16 February 2024

Real estate transactions for the week ending 16 February are currently unavailable.

Noting that all realty firms should always adhere to the terms and conditions stipulated for real estate advertisements, (including to provide accurate and correct information to customers by obtaining advertising licenses), the Real Estate Regulatory Agency has fined thirty firms, each US$ 13.6k, (AED 50k), for breaking the rules. The industry watchdog had previously issued circulars and warnings to emphasise the provisions and conditions of real estate advertising and ensure compliance. The general public have been advised not to deal with any real estate advertisement that does not have a permit and QR code.

On Wednesday, the Dubai Land Department gave real estate agents a three-day deadline to remove the property advertisements that are no longer up for sale or rental, advising them that they “must update the digital real estate platform portals within three working days, which should result in removing all unavailable properties for rental or sales.”

Speaking at the World Governments Summit in Dubai earlier in the week, Bill Winters, chief executive of Standard Chartered, seems to have disagreed with a recent IMF forecast that downgraded projected Mena economies by 0.5% to 2.9%.  He noted that, “Whenever I hear these IMF-type figures, it doesn’t resonate with what I see on the ground because there’s just tremendous growth [in the GCC], with obviously huge increases in population and economic activity,” and that “This is an extremely bullish environment despite the fact that there’s a war in the neighbourhood. The Gulf is a sanctuary for global capital and people – and that was clear during [and after] Covid, given the influx of business and the people coming with it.” At the conference, IMF’s MD, Kristalina Georgieva noted that the global economy, meanwhile, is set for a “soft landing” and interest rates in the world’s major economies are likely to ease by the middle of 2024 but warned that a prolonged war in Gaza could have spill over effects on the wider global economies.

In an agreement with Dubai’s Roads and Transport Authority, (and all-electric aircraft company Joby Aviation), UK-based Skyports Infrastructure aims to have air taxis operational in the emirate by 2025. The deal sees the RTA overseeing the air mobility services, with Joby given the exclusive right to operate air taxis in Dubai for six years. Skyports was granted exclusive rights to design, construct and operate an initial network of four vertiports in Dubai International Airport, the Palm Jumeirah, Downtown Dubai and Dubai Marina. It seems highly likely that Dubai will become the first location in the world with a commercial, citywide electric air taxi services The Joby Aviation S4, with a top speed of 321 kph, can accommodate a pilot and four passengers, with a maximum distance of 161 km; it is estimated that a flight from DXB to the Palm Jumeirah will take ten minutes.

A MoU between the UAE and India will see the partnership developing digital infrastructure and AI which will explore and evaluate the technical and investment potential of developing data centre projects in India. Initial capacity will be two 2 gigawatts, (supporting the deployment of a supercomputer cluster) and AI compute capacity of 8 exaflops for varied sectoral use. The MoU also seeks to promote investments in digital public infrastructure, AI, R&D, and innovation, while fostering public-private collaboration and knowledge exchange to support India’s digital growth and innovation. It is estimated that India’s data centre network could be valued as high as US$ 1 trillion by 2030. 

Sheikh Maktoum bin Mohammed bin Rashid has announced the launch of the Buna Payments Platform, an innovative platform that delivers advanced payment solutions that meet the highest global standards of compliance; it will also facilitate the clearing and settling of Arab payments. He noted that “the platform underscores the critical role of payment systems in bolstering the Arab economy’s infrastructure and is pivotal in promoting financial inclusion.”

According to the World Bank, in 2023, remittances to poor and middle-income countries grew an estimated 3.8% to reach US$ 669 billion. India was the top remittance recipient country, receiving funds worth US$ 125 billion, followed by Mexico, China, the Philippines, and Egypt, with remittances of US$ 67 billion, US$ 50 billion, US$ 40 billion and US$ 24 billion. The US continued to be the largest source of remittances.

Following approval by the Central Bank of the UAE, it seems that money exchanges houses will gradually increase charges in certain remittance corridors probably starting in Q2; this is the first time since 2019 that charges, via an introduction of an optional fee adjustment, have been increased. The chairman of the Foreign Exchange and Remittance Group, Mohammad Al Ansari noted that “it will be implemented after studying each corridor and could happen in the second quarter of this year. On Monday, the Ferg said exchange houses could opt for a minimum fee increase of 15%, which would typically equate to US$ 0.68 (AED 2.50), with the decision to increase fees dependent on individual exchange companies and their operational costs. The fee increase is expected to be applicable for remittance services through physical branches, while remittances offered through mobile apps of exchange houses will most likely remain unchanged or even reduced to maintain competitiveness. Despite the increase, it is anticipated the average remittance cost of sending US$ 200 will remain at less than 3.5% in the UAE – well down on the global 6.2% average.

Although Al Ansari Financial Services posted a 16.8% decline in 2023 net profit to US$ 135 million and a marginal 1.9% dip in operating income, the firm had a relatively good year. A statement noted that “headwinds in major remittance markets (such as India, Egypt, Pakistan) caused an 8.0% drop in remittance operating income. However, strong diversification drove an overall 9.0% increase in non-remittance operating income, largely mitigating the decline. Notably, transactions across all services grew,” The news in the paragraph above will undoubtedly help offset these costs and strengthen financial performance in the future. A US$ 163 million (AED 600 million) dividend, equating to US$ 0.0218 (AED 8 dirhams), was announced, half of which had already been paid out; this results in a dividend yield of 7.74%.. Al Ansari Exchange’s has two hundred and fifty-six physical branches and is currently in negotiations to integrate with Oman Exchange in Kuwait, with synergies to be realised Q2.

 Dubai International Financial Centre posted a 23% hike in 2023 revenue to US$ 352 million, with net profit surging 45% to US$ 203 million. Last year, there was a 26% hike in active companies, to 5.5k, employing more than 41.5k people, with the total number of new company registrations surging 34% to reach 1. 45k.The number of financial companies grew 22% to reach nearly 1.7k, while non-financial companies rose 28% to over 3.8k. Last year, the number of FinTech companies almost trebled to nine hundred and two, with the DIFC the base for three hundred and fifty wealth and asset management firms. DIFC also posted that it is ahead of schedule to achieve its target of doubling its gross domestic product contribution by 2030, aiming “to achieve the objectives outlined in Dubai’s Economic Agenda (D33), positioning Dubai among the top four global financial centres.” 

Amanat Holdings released impressive 2023 figures this week. The region’s leading healthcare and education investment company posted a 38.9% surge in net profit to US$ 42 million and a 40.0% hike in revenue to US$ 196 million; earnings per share rose 25% to US$ 0.0136. The revenue increases was down to “by almost two-fold growth at the education platform and the growth at the healthcare platform through the consolidation of Sukoon as well as the continued expansion of our long-term care offering in Saudi Arabia.” Total assets were 7.4% higher at US$ 1.14 billion.

Emirates Integrated Telecommunications Company posted a 33% hike in its 2023 net profit, to US$ 449 million, on the back of record revenue, up 7.0% to US$ 3.72 billion amid the introduction of generative AI in its operations, along with “sustained demand for mobile services, and strong growth in post-paid and fixed services”. Revenue from Du’s mobile services segment rose by 6.2% annually to US$ 1.66 billion, while fixed services revenue grew by 8.6% to US$ 1.03 billion, with other revenue increasing by 6.4% to US$ 1.03 billion. Ebitda rose 12.8% to US$ 1.58 billion, reflecting “top-line growth combined with margin expansion and disciplined cost management”. Q4 revenue and net profit both headed north by 7.3% to US$ US$ 970 million and by 38.5% to US$ 108 million. Before its earnings release on Tuesday, Du’s shares were trading at US$ 1.58.

The DFM opened the week on Monday 12 February, 45 points (1.1%) lower the previous week, gained 30 points (0.7%) to close the trading week on 4,259 by Friday 16 February 2024. Emaar Properties, US$ 0.06 higher the previous week, gained US$ 0.13, closing on US$ 2.23 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.66, US$ 4.71, US$ 1.74, and US$ 0.36 and closed on US$ 0.68, US$ 4.96, US$ 1.78 and US$ 0.37. On 16 February, trading was at 214 million shares, with a value of US$ 90 million, compared to 87 million shares, with a value of US$ 71 million, on 09 February 2024.

By Friday, 16 February 2024, Brent, US$ 4.99 higher (6.4%) the previous week, gained US$ 6.27 (8.1%) to close on US$ 83.47. Gold, US$ 16 (0.8%) lower the previous week, shed US$ 13 (0.6%) to trade at US$ 2,039 on 16 February.

A survey by Hays ME reckons that, with the job market growing, 39% of professionals working in the GCC are planning to change companies this year, with the main reason being a lack of career development opportunities. What seems to be on the high side is that 78% of employers in the Gulf region expect an increase in salaries in their organisation. Interestingly, 41% of employers said there were more candidates applying for jobs than in the past – a possible indicator of a shortage of skilled professionals. The GCC Salary Guide, which covered 2.3k employers and working professionals – and eleven professions in nearly four hundred roles – also posted that 67% of employers were wanting to grow their organisation’s headcount this year.

It seems that the El Niño weather phenomenon is the main driver behind global cocoa prices hitting fresh record highs, as dry weather hurts crops in West Africa, (which produces the bulk of global supply), especially the world’s two biggest producers of cocoa, Ghana and Côte d’Ivoire. Late last week, cocoa prices topped US$ 5.87k a ton, which has roughly doubled since the start of 2022. The soaring cocoa prices have already impacted on major chocolate makers’ margins and higher prices for consumers. Hershey has warned: “historic cocoa prices are expected to limit earnings growth this year.”, with the major player not ruling out putting up prices for customers. Recently, Which? noted that the price of some festive chocolate box sets had risen by at least 50% in a year. Although the overall inflation for UK supermarket food and drink eased in November to 8.3%, the rise in the chocolate prices was significantly higher at 15.3%.

This week, the global leading crypto currency headed above the US$ 50k level, driven by renewed interest in high-risk assets, as the US Fed starts to prepare to lower interest rates, and enhanced consumer confidence following the US Securities and Exchange Commission’s approval for Bitcoin ETFs. Crypto trading platform Bitget noted that on 01 January, when Bitcoin was approved, Bitcoin trading volumes were at US$ 16 billion and by 10 January, they had grown to US$ 50 billion. Bitcoin rose by about 12% in the second week of February 2024. The total crypto market capitalisation has risen to US$ 1.87 trillion with Bitcoin crossing US$ 50k for the first time in two years, but still some way off its 2021 high of US$ 67.5k.

Airbus posted a 13.2% decline in its Q4 net profit to US$ 1.56 billion, as revenue came in 11.0% higher on US$ 24.52 billion; full year net profit fell 11.0% to US$ 4.09 billion, not helped by charges related to its space business. The world’s biggest plane-maker expects to deliver eight hundred, jets, as it steps up production of its top-selling A320 family of narrow-body aircraft – an 8.8% increase on 2023 figures, subject to no further disruptions in the global economy, air traffic, the supply chain, the company’s internal operations and its ability to deliver products. Airbus confirmed that it was “on track” to be producing seventy-five A320s Neos a month by 2025. If it meets its 2024 target, that would mean that it would be pulling ahead of Boeing which has been barred by the US Federal Aviation Administration from increasing the existing 737 Max production rate, pending improvements in quality control. This gives the French company an added advantage in a market that pits the A320s against Boeing’s 737 Max. However, Airbus has its own problems including supply chain bottlenecks, fewer skilled workers and an ongoing problem with its Pratt and Whitney engines that has led to hundreds of A320 Neo jets being grounded for inspection. Having hired an extra 13k people last year, the plane-maker is planning to add “roughly half” that number this year.

Following Sainsbury’s recently warning about the availability of black tea, Tetley Tea has confirmed it is monitoring tea supplies on a daily basis as imports reach a “critical period”. The country’s second biggest tea brand said supplies were “much tighter” than it would like, amid disruption in the Red Sea, and noting that its current production levels were not changing, the amount it was able to hold in stock as a buffer would drop “but we’re pretty confident we can maintain supply levels”.

2k jobs are at risk with news that The Body Shop’s UK business had entered administration, but its two hundred retail outlets, and several franchises, will remain open as usual, while efforts are made to try to save the UK firm. Restructuring firm FRP said it would now consider all options to find a way forward for the business and noted that creating “a more nimble and financially stable UK business” was an important step in it becoming a modern beauty brand “relevant to customers and able to compete for the long term”. Part of the process will inevitably see costs, including on property and rents, being slashed and job cuts. Aurelius, the European private equity firm, became Body Shop’s third buyer since 2006; its funder Anita Roddick died in 2007. It bought the brand for US$ 261 million last November and took the drastic decision to place it into administration after poor sales during the key Christmas trading period. Rather like the demise of Wilko last year, three of the reasons for its current problems were that it failed to keep up with competitors on pricing, the boom in online trading and the cost-of-living crisis which saw customers’ spending squeezed.

Since announcing its annual financial results on 07 February, by Tuesday (13 February) this week, UK chip designer Arm Holdings, (whose chips power almost every smartphone in the world), had posted a 98% surge in its share value, over a period of five working days; it noted then that a demand in its AI-related technology had boosted its sales. Arm’s technology is not directly used for AI work, but chip makers like Nvidia are choosing it for central processing units that complement their AI-specific chips. The Cambridge-based firm, founded in 1990, and taken private by Japan’s SoftBank in 2016 in a US$ 32 billion deal, only returned to the stock market last September. Before then, plans to sell the firm to Nvidia, which started in 2020 were shelved in April 2022, after global regulators objected to the deal. Indeed, Nvidia, which has seen its share value more than triple in value over the last year on soaring demand for its AI chips, has seen its market cap currently valued at US$ 1.8 trillion. Even though it has been badly impacted by the declining valuations of some of its investments, including struggling office space firm WeWork, Softbank, which still holds a roughly 90% stake in Arm, has seen its own shares gain almost 30% in the past week.

Claiming the main reason being regulator Ofgem allowing it to recover losses of US$ 629 million it racked up in the aftermath of Russia’s invasion of Ukraine, British Gas, which has 7.5 million customers, posted a tenfold increase in 2023 profits to US$ 944 million, compared to just US$ 91 million a year earlier. However, with firms making record profits when energy prices spiked, suppliers that took on the customers of bust retailers made hefty losses. Centrica, British Gas’s parent company, said its profits fell by 17% to US$ 3.52 billion. This comes at a time when millions of UK households have been hit by higher electricity and gas bills, with energy being the main driver in the rising cost of living in the UK. This came about because Ofgem allowed energy providers to take a bigger slice of profits in H1 2023, to make up from losses arising from customers not being able to pay their energy accounts and honouring existing contracts when dozens of small energy providers went bust in 2021.

It is reported that Nike will reduce its payroll by 2%, (1.6k jobs) starting today and until the end of next month. It seems that those employed in stores and distribution centres, as well as those in its innovation team will not be impacted. Last December, the company slashed its annual revenue forecast and laid out a US$ 2 billion cost-saving plan, blaming cautious consumer spending. Nike is to use its resources to increase investment in categories like running, women’s apparel and the Jordan brand. The sportswear giant has yet to make any comment. These retrenchments will cost the company about US$ 400 million to US$ 450 million in employee severance costs this quarter.

Late last month, Jeff Bezos announced plans that he would be selling up to fifty million shares and, true to his word, on Tuesday, he confirmed that he would divest twenty-four million Amazon shares, worth more than twenty-four million dollars. This is the first time that he has sold any of his stock since 2021. One reason why he has done this, is that last November, he posted that he was moving to Miami, from the Seattle region, adopting a so-called 10b5-1 plan, after Washington state instituted a 7.0% capital gains tax in 2022 – which is not applicable in Florida. It is estimated that this move could have saved the billionaire US$ 288 million so far.

Another high-tech mover is Eon Musk’s decision to shift his rocket company SpaceX from the US state of Delaware to Texas, in line with a similar move two weeks ago for Tesla. This follows a January court ruling in the state of Delaware that annulled his US$ 55.8 billion Tesla pay package from electric car maker Tesla following which the billionaire entrepreneur advised “if your company is still incorporated in Delaware, I recommend moving to another state as soon as possible”.; this despite many big companies, including Amazon, being registered in the state, known for having light taxation.

With Q4 results showing its GDP had dipped by a worse than expected 0.4%, (with analysts actually expecting a positive 1.0%), Japan entered into a technical recession after it had posted a 3.3% contraction in Q3. (A technical recession is called after two consecutive quarterly GDP deficits). Another highlight of Q4 returns is that it seems that Japan may have lost its position as the world’s third-largest economy to Germany. The IMF will only declare a change in its rankings, once both countries have published the final versions of their economic growth figures, but latest figures indicate that Germany’s economy at US$ 4.4 trillion is now US$ 0.2. trillion higher than that of Japan, mainly driven by the yen’s weakness to the greenback, having fallen by about 9.0% last year.

With only 500 jobs created in the month, Australia’s January unemployment rate rose by 22k to 4.1% – the first time in two years that the unemployment rate had been above the 4.0% level; furthermore, hours worked fell by 2.5%, with the underemployment rate ticking up 0.1% to 6.6%. This would seem to indicate that the country’s labour market is cooling down partly as a result of the RBA’s rapid rate rises over the past two years, along with higher inflation, and economic uncertainty. The January figures could have also been skewed by the fact that many Australians were still on holidays when the survey was conducted, as well as other seasonal factors. Treasury secretary Steven Kennedy has said the economy remains on track to beat inflation without a large spike in unemployment, noting that consumer spending is at a fifteen-year low driven by the double whammy of high inflation and high interest rates. He also noted that although households are saving less and consuming less than at any time since the GFC, the level of unemployment remains low by historical standards, which he expects to peak at 4.5% next year. In contrast, the situation around ten years ago was that unemployment settled between 5% – 6 % because of the overzealous use of interest rates maintaining too-low inflation, and it can only be hoped that the RBA does not repeat that mistake again.

Although US price increases softened again last month by 0.3% to 3.1%, it was less than expected, as higher housing and food costs offset a decline in petrol prices. On the news earlier in the week, financial markets opened lower as it appeared that authorities have not got inflation fully under control and thus reducing the chances of any Fed rate cuts in the short term. In June 2022, US inflation peaked at 9.1% and even though progress has been made, it is still over the Federal Reserve’s target of 2.0%. February core inflation remained unchanged over the past two months at 3.9%, as some costs were higher on the year, including housing (6.0%), car insurance (20.5%) and personal care (5.3%).

There was some surprise when UK January inflation figures were relayed, indicating that it had remained flat at 4.0%, 0.2% lower than market expectations, but still double the BoE’s 2.0% target. However, although food prices fell for the first time since September 2021, they are still 7.0% higher than a year ago, with gas/electricity prices climbing at a faster rate than in January 2023; food prices were 0.4% lower attributable to price falls in bread cereals, cream crackers and chocolate biscuits.

The Office for National Statistics posted that by the end of Q4 2023, UK wage growth slowed again, (by 0.4% to 6.2%), but is still outpacing price rises. The number of vacancies fell for the nineteenth consecutive time, down 26k to 932k, in the quarter to January, as the unemployment rate dipped 0.1% to 3.8%. However, there were some signs that the downward trend in job vacancies could be slowing, but the statistics watchdog has said it could not guarantee the reliability of jobs market data, and that it is currently updating how it gathers information about employment, but this will not be fully in place until September. BoE’s Andrew Bailey has said that the ONS figures are the Bank’s only way to gauge unemployment, so their current unreliability is “posing challenges” as policymakers weigh up what to do about interest rates in the coming months. The Bank’s Monetary Policy Committee, which sets interest rates, always closely watch wage growth data and will only cut rates further when they can see more evidence of a tougher jobs market in order to avoid making cuts it may need to backtrack on later.

Just like Japan, the UK went into technical recession at the back end of 2023, after the economy contracted 0.3% in Q4 2023, following Q3’s minus 0.1%. The Office for National Statistics voiced that “all the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery,” Excluding the Covid year of 2020, last year’s meagre 0.1% growth was the worst quarterly performance since 2009, when the economy was still reeling from the GFC, and follows a positive 4.3% expansion in 2022. Three drivers behind the disappointing Q4 results were the doctors’ strikes, a fall in school attendance and shoppers spending less in the December run up to Christmas. These figures will not be much help for Chancellor, who will have to cut public spending even more sharply if he wants to deliver promised tax reductions in his 06 March budget, more so because in recent weeks as interest costs on UK government borrowing have increased. Questions are being raised whether Rishi Sunak can meet his pledge made last January to grow the economy. Lord Rose, chairman of Asda, commented that “it looks like a duck, it quacks like a duck, it walks like a duck, it is a duck – it is a recession.” Maybe the message to both the embattled Prime Minister and the befuddled Chancellor of the Exchequer is Duck Before You Drown!