Say No More!                                                    08 March 2024

Despite fears from some analysts, (who probably should have known better), Dubai real estate transactions surged by 27.0% in February to 11.9k deals, compared to a year earlier, whilst value wise, there was a 35.0% jump to US$ 9.97 billion. A month earlier, January sales came in 26.9% higher, on the year, to US$ 9.65 billion. In February, the consultancy noted that there was a 23.0% increase in existing property transactions, to over 5.5k, with the value of these transactions having surged by 46.9%, year-on-year, to US$ 6.41 billion. Off-plan posted a 31.0% rise in transactions, with their value 18.5% higher to US$ 3.56 billion. Property Finder found out that two B/R and 1 B/R apartments were the most sought-after rental option, accounting for 35% and 33% of all searches, as well as 59% of homebuyers were searching for apartments, (and the 41% balance for villas/townhouses). Top areas searched to own apartments included Dubai Marina, Downtown Dubai, Jumeirah Village Circle, Business Bay, and Palm Jumeirah. Dubai Hills Estate, Al Furjan, Arabian Ranches, Palm Jumeirah and Mohammed bin Rashid City were the most desired areas to own villas/townhouses. Leading areas for rentals were Dubai Marina, Jumeirah Village Circle, Downtown Dubai, Business Bay and Deira. Dubai Hills Estate, Damac Hills 2, Jumeirah, Al Barsha and Umm Suqeim were popular when it came to searches to rent villas/townhouses.

Based on Q4 data, Palm Jebel Ali stands out as the top-performing location for long-term investors. Some industry executives indicate that there are investors who are selling up, already at a 10% premium, but others see the new Palm Island as the next big destination after the on-going success of the smaller Palm Jumeriah Island. Since the relaunch – after a twenty-year plus hibernation period – Nakheel Properties began launching villas last September, with more launched by the master developer in December; there was very strong demand from local and foreign investors. Seemingly, some people are considering it as a future residence, but for others, it is about potential capital appreciation. Research from Emirates NBD Research estimated that in Q4, Palm Jebel Ali generated US$ 3.87 billion in sales, followed by Dubai Marina, with US$ 2.26 billion, and Business Bay’s US$ 1.39 billion. In the prime villa sales segment, Jumeirah Islands and The Palm were the outstanding 2023 performers, with price increases of 33% and 36%, year-on-year. It is expected that when finalised, that could be as early as 2028, Palm Jebel Ali will have 110 km of beachfront, eighty hotels and resorts, and more than 35k households.

According to property consultancy Global Branded Residences, there are fifty-one branded residences currently in Dubai, most of which are well-known hotel brands, with a further seventy planned over the next five years; more than 75% of the new residences will be non-hotel brands, from the automotive, fashion and design industries. Dubai is seen as a magnet for global capital looking to invest in branded residences, driven by factors such as its position as a global hub, favourable government initiatives, a growing economy and robust investor demand, all of which encourage long-term residency. The majority of such future projects will be in Downtown Dubai, Business Bay, Dubai Marina and JBR. Despite having to pay a premium, of up to an estimated 15%, developers tend to prefer branded residences, as they can pass on this premium to buyers, who are happy to pay the extra amount because of the brand and the services/amenities that come with such properties.

Ahead of its launch, Shamal Holding unveiled details of its Dubai Harbour Residences – “a low-rise, boutique residential development, with three hundred and fifty apartment units, ranging from studio to four-bedroom apartments. Located within the district of Dubai Harbour, at the intersection of the Palm Jumeirah and Bluewaters Island, the developer “expects to have the combination of hotels, restaurants, and retail facilities. Additionally, we are adding more berths to the marina, so we’ll be over seven hundred berths. This is also because of the demand that we have, which is at about 90% occupancy, so you can tell that we’re ideally positioned to take the destination forward”. The RTA will undertake the construction of a two-lane bridge in each direction, spanning 1.5k mt and accommodating 6k vehicles per hour, which will extend from Sheikh Zayed Road to Dubai Harbour.

A new entrant to the Dubai property scene is Confident Group, a leading real estate brand of India, which has announced the completion of its first project, completed in just eleven months. It noted that 70% of its Lancaster units, (1 B/R and 2 B/R), have already been booked by customers. Residents of Confident Lancaster will enjoy a host of amenities, “including round-the-clock security, private parking, swimming pools, gyms, spa centres, a cinema, party room, barbecue area, and indoor games,” Confident, which has launched over two hundred and three projects, spanning nearly 100 million sq ft of development in Kerala and Karnataka, is expected to launch another five projects in Dubai, which will be developed individually or in partnerships.

NABNI Developments and Hilton have released plans for Waldorf Astoria Residences Dubai Downtown, set for completion in 2028; this will be the first-ever standalone Waldorf Astoria residential address outside of the US. Located on a 65k sq ft plot in Downtown, the design will be carried out by Carlos Ott Architects, (who have already collaborated with NABNI on several Dubai projects including Lamborghini Building), and interiors by award-winning hospitality design firm Hirsch Bedner Associates.

The latest CBRE study includes details that the total value of real estate projects, currently planned or under construction in the UAE, stands at US$ 409 billion, and accounts for 24.4% of the total projects in the GCC. The consultancy expects a slight drop in transactions but that “price growth in the apartment and villas segments of the market will continue. However, we expect this rate to moderate somewhat over the course of the year.” In its 2024 Market Outlook for Middle East real estate, residential properties are expected to provide a yield of 7.0% to 7.5%, with prime residential real estate in the UAE expected to provide a yield of 6.25% to 7.0%.

Last year, the Dubai retail sector saw average rents 17.6% higher and that levels of demand will continue to be robust even though the level of quality stock in Dubai remains a cause for concern; this may impact new rental registrations moving lower although demand will remain net positive. Rental rates are expected to continue to increase, but at a more moderate level. In the office space category, CBRE forecast that Prime and Grade A assets will continue to outperform the market, given the scarcity in supply and rising demand for high-quality assets. Rental rates will also move higher, albeit at a slower rate, partly attributable to the limited number of developments in the Dubai pipeline.

On 01 March, the Real Estate Regulatory Authority Index was updated and is likely to impact tenants who have been living in properties for over two years. The CEO of Betterhomes, Richard Waind, noted that this will bring future renewals more in line with rents found today on the open market. The calculator tells landlords and tenants how much rent on renewal can increase, based on a benchmark rent for each community. He noted that “the recent increase in the calculator is likely to impact those tenants who have been in situ for over two years and are now likely to see a larger rent increase on renewal than they would have prior to the revision. I expect this will mean some tenants may look to move, or downsize, while for other tenants this may mean they decide to take the plunge and buy a property.” Some analysts see the possibility of rents moving up to 20% in the short-term that could result in present tenants, especially in villas, deciding to downsize or make the move to buy rather than continuing to rent.

Last year, Sobha Realty – which finalised a multi-year principal partnership with Arsenal FC and a venture with IIFA 2023 to expand its global presence – posted a record 51% jump in revenue to US$ 42 million; this year, it expects a 29.0% increase to US$ 5.45 billion. In 2023, it handed over 1.8k units and now claims a 10% market share in Dubai. Its latest launches include Sobha Hartland-2 and Sobha Seahaven Sky Edition, and last year raised US$ 300 million with a Sukuk issuance.

Dubai Mall continues to be the most visited place in the world, and last year there was a 19.3% increase in visitor numbers to 105 million; 2024 promises to be even busier, as twenty million have already visited the attraction in the first two months of the year.

Following a slowdown in the previous month, the latest S&P Global PMI indicates that, in February, the UAE non-oil sector rose at its fastest pace since pre-Covid 2019, driven by a rise in output and business confidence. Despite supply constraints, caused by disruptions in the Red Sea, the Index rose 0.5 to 57.1, while the output sub-index jumped 2.6 to 64.6, attributable to new business, stronger client activity and marketing activities.  Global shipping has indeed been impacted by this ongoing disruption, with some companies reporting delays to input deliveries, resulting in a sharp accumulation of outstanding work. New orders rose at their softest rate for six months, suggesting output growth could also begin to slow. However, employment levels rose at their quickest pace since May 2023, with hiring higher to support workloads and offset backlog growth. February also witnessed client orders improving, but increased competition for business resulted in more price cuts – the strongest since mid-2020. An interesting fact confirmed by the Minister of Economy, Abdullah bin Touq Al Marri, was that the country achieved “a historic first” in 2023, as its non-oil sector accounted for 73% of the UAE’s GDP – a sure sign that the country’s diversification move is paying dividends.

With the holy month of Ramadan due to start this Sunday, 10 March, the Ministry of Human Resources and Emiratisation announced a two-hour reduction in work hours for private sector employees during the holy month. The working hours apply to both fasting and non-fasting employees. Companies have the option to implement flexible or remote work schedules within the limits of daily working hours. Any additional hours worked beyond the reduced schedule may be considered overtime, for which workers will be entitled to extra compensation. All ministries and federal agencies will operate from 9am to 2.30pm from Monday to Thursday, and 9am to 12 noon on Friday.

Under the name, ‘Project Landmark’, Emirates General Petroleum Corporation has launched a first-of-its-kind project in the UAE, and globally, where companies and brands can secure naming rights for their service stations. At the ceremony, held at Dubai’s Museum of the Future, a new model for strategic partnerships, between Emarat and other businesses, (both local and international brands), was launched; each service station will provide a business platform for companies to reach customers and deliver services.

In the latest IPU’s ‘Women in Parliament 2023′ report, UAE is positioned fifth in the world behind Rwanda, Cuba and Nicaragua where women account for 61.3%, 55.7% and 53.9% of total parliamentary seats. The UAE women have parity with the men, as do Andorra and Mexico. The global proportion of MPs who are women nudged 0.4% higher to 26.9%, based on elections and appointments that took place in 2023. In the Americas, women accounted for 42.5% of all MPs elected or appointed in chambers that were renewed in 2023, the highest regional percentage. The region thus maintains its long-held position as the region with the highest representation of women in the world, at 35.1%.

By the end of the week, HH Sheikh Mohammed bin Rashid Al Maktoum, had  issued a law regarding a 20% tax on all foreign banks operating in Dubai; these will include special development zones and free zones, except those licensed to operate in the Dubai International Financial Centre. It will be imposed on the taxable income of a foreign bank, and the corporate tax rate will be deducted from this percentage.

The Dubai Integrated Economic Zones Authority, which encompasses the Dubai Airport Free Zone, Dubai Silicon Oasis, and Dubai CommerCity posted a 15.3% jump in 2023 net profit, with its contribution to the emirate’s GDP moving slightly higher to 5.1%. With its revenue climbing by 8.1%, and its market value of its net assets at US$ 5.67 billion, its EBITDA rose to 49.2%. DIEZ economic zones have witnessed marked growth in the six key sectors which collectively represent 95% of total companies. Wholesale/retail, professional/scientific solutions/services, information/IT, financial/insurance, administration/support and transportation/storage posted growth levels of 24.4%, 89.6%, 18.1%, 106.9%, 93.0% and 48.3% respectively. The total number of personnel working in DIEZ economic zones saw a marked rise of 30.5% to top 70k. During the year, DIEZ achieved record sustainability results by reducing carbon emissions; it increased solar energy generation by 30%, initiated adaptive air conditioning control systems to reduce electricity consumption by 30% and transitioned to LED lighting, resulting in more than 50% savings in total consumption. These measures resulted in a 12% reduction in carbon emissions. During the year, DIEZ finalised its new strategic approach to strengthen the emirate’s position as a premier regional and global investment destination, by targeting the Authority’s contribution to empower businesses and drive economic growth. During the year, it launched a US$ 136 million venture capital fund to support entrepreneurs, investors and emerging companies.

The shareholders of TECOM Group have approved the Board’s recommendation to distribute a cash dividend of US$ 109 million (US$ 0.0218 per ordinary share) for H2 2023. The approved cash dividend payment is in line with the dividend policy set out in the IPO prospectus, in which the company committed to paying a total annual dividend amount of US$ 218 million until next September.

The DMCC, the world’s flagship free zone and Government of Dubai Authority on commodities trade and enterprise, has hosted three events in Hong Kong and China in its quest to attract Chinese businesses to Dubai. The strategy seems to be working as the number of Chinese companies now operating in the free zone rose 25% last year to 852– and also 25% a year earlier in 2022. DMCC is home to over 14% of the estimated 6k Chinese businesses based in the UAE.

Emirates Global Aluminium posted declines in both revenue and net profit driven by a fall in global prices from the decade-highs reached in 2022, (average LME prices in 2023, at US$ 2,264, were 16.6% lower than 2022’s US$ 2,715). Revenue fell 15.0% to US$ 8.04 billion and profit by 54.1% to US$ 926 million, with EBITDA down 38.0% to US$ 2.10 million. However, there were marginal increases in production, to 2.48 million tonnes, and sales volume. Its total debt at the end of the year was 15.7% lower on the year at US$ 4.52 billion. The dividends were set at US$ 1.00 billion – the same as seen in 2022. However, it is expected that global aluminium demand is expected to grow significantly over the coming decade, particularly for low carbon and recycled metal. The company is one of the world’s largest aluminium producers, with smelters in Abu Dhabi and Dubai, a refinery in Abu Dhabi and a bauxite mine in Guinea.

For the first time in its history, the Board of Deyaar Developments announced the approval of a dividend distribution of US$ 48 million – US$ 0.019 per share – equating to 4% of share capital. In 2019, a UAE court ordered Dubai-based developer Limitless to pay Deyaar US$ 112 million in a land dispute and US$ 17 million in fees and compensation.^[4][5] In October 2022, the Board approved a US$ 136 million cash settlement, following which Deyaar reset its business model and since then the results have been impressive.

Driven by soaring revenue from its toll gates, Salik posted a 3.0% hike in Q4 net profit to US$ 80 million, as revenue climbed 12.2% to US$ 153 million, with net finance costs up 21.0%. The toll-gate operator said Q4 revenue-generating trips rose 11.1%, year-on-year, to 123.2 million. The revenue from toll usage fees, primarily generated through trips, constitutes the bulk of Salik’s overall revenue, but this will change this year as it plans to pursue additional revenue sources beyond its core tolling business, including providing technology solutions for parking. It does expect its core business – toll gate revenue – will increase by up to 6% in 2024 and EBITDA margin in the region of a credible 65%. For the whole year, 2023 revenue and net profit were 11.4% higher at US$ 575 million but 17.3% lower at US$ 300 million; revenue-generating trips for the year were 11.7% higher at 461.4 million.

An old stalwart of the DFM returns after trading in its shares were suspended in November 2018, after it reported heavy financial losses. Dubai-based contractor Drake & Scull International plans to return to the bourse, after it had increased its capital by US$ 82 million and received court approval of its restructuring plan that writes off 90% of its debt. This came about when it gained approval from creditors who accounted for 67% of the company’s total debt value. A 27 March EGM will vote on whether the shareholders approve of the move and if so, it could return to trading again on the DFM. The contractor was impacted by the three-year oil price slump that began in 2014, with an almost disastrous effect on the property sector and heavily affected the local property and construction sector. Last year, the company posted a higher net loss compared to its 2022 return – US$ 96 million to US$ 61 million – with 2023 revenue 16% higher at US$ 26 million; it had US$ 97 million worth of assets at year-end.

The DFM opened the week on Monday 04 March 113 points (3.1%) higher the previous week, lost 104 points (2.4%) to close the trading week on 4,253 by Friday 08 March 2024. Emaar Properties, US$ 0.07 higher the previous week, shed US$ 0.03, closing on US$ 2.23 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.67, US$ 4.70, US$ 1.77, and US$ 0.37 and closed on US$ 0.66, US$ 4.67, US$ 1.57and US$ 0.36. On 08 March, trading was at 136 million shares, with a value of US$ 70 million, compared to 213 million shares, with a value of US$ 112 million, on 01 March 2024.

By Friday, 08 March 2024, Brent, US$ 2.19 higher (2.7%) the previous week, shed US$ 1.93 (2.3%) to close on US$ 81.93. Gold, US$ 44 (2.1%) higher the previous fortnight, gained US$ 94 (4.5%) to trade at US$ 2,083 on 08 March.

In coordination with other members, the UAE has confirmed it would extend an additional voluntary cut of 163k bpd, for Q2, in coordination with some OPEC+ countries; production will remain at its current level of 2.912 million bpd; this is in addition to the April 2023 announcement that it would cut 144k bpd extending until the end of December 2024. The latest cut volumes will be reversed gradually subject to market conditions.

As annual air traffic is set to increase 4.6% in the ME, Airbus’ latest Global Services Forecast sees the region’s commercial aircraft services market will more than double in value – from US$ 12.0 billion to US$ 28.0 billion – by 2042, equating to a 4.4% CAGR. Airbus expects the market for ‘Maintenance’ to grow from US$10 billion to US$23 billion. Meanwhile, the market for enhancements and modernisation will show the biggest growth in the period, expanding at 5.5% to US$ 3.6 billion, driven specifically by cabin and system upgrades. The market for training and operations is expected to double in 2042, reaching US$1.6 billion. For the ME region, Airbus anticipates the need for a further 208k highly skilled professionals – comprising 56k new pilots, 52k and 100k new cabin crew members.

There are reports that Bridgepoint, the biggest shareholder, at 40%, in Moto GP’s parent company, Dorna Sports, is in advanced discussions to sell the business for more than US$ 3.80 billion.Over the past eighteen years, Bridgepoint has driven Moto GP to expand internationally, resulting in soaring revenue and a sharp increase in profitability. The Canada Pension Plan Investment Board owns slightly less than 40%, with the balance held by Dorna’s management. Uniting Moto GP and F1 under common ownership would provide Liberty Media with the opportunity to derive financial and commercial synergies, but any potential competition probe could scupper the deal – Bridgepoint acquired Moto GP’s parent in 2006 from CVC Capital Partners after the latter bought into F1, drawing scrutiny from EU watchdogs.

Pursuant to “challenging trading conditions” over the past six months, there are reports that the Alshaya Group, (the licensed franchise partner for Starbucks in Mena for more than twenty-five years, operating more than 1.3k coffee shops and employing 11k workers), plan to lay off some 2k workers. The reason for this move comes on the back of a downturn in business arising from consumer boycotts linked to the Gaza war. Laxman Narasimhan, chief executive of Starbucks, noted that “first, we saw a negative impact to our business in the Middle East. Second, events in the Middle East also had an impact in the US, driven by misperceptions about our position”, and “it’s important to note that Starbucks is not the only brand targeted by activists during this war. The situation remains complex and sensitive, affecting businesses and individuals alike.”

OpenAI was founded in December 2015 by several individuals including Elon Musk and Sam Altman. Now the Tesla founder is suing the company he helped start, accusing it of prioritising profit over developing AI for the public good. In a court filing, he is suing the firm, and its chief executive Sam Altman, for a breach of contract by reneging on its pledge to develop AI carefully and make the tech widely available; the AI giant was originally founded as a not-for-profit company but has grown to have commercial interests, with Elon Musk claiming that “under its new board, it is not just developing but is actually refining an AGI [artificial general intelligence] to maximise profits for Microsoft, rather than for the benefit of humanity”. The filing also noted that the company has “been transformed into a closed-source de facto subsidiary of the largest technology company, Microsoft”, which had provided a US$ 1 million investment in 2019 and another for US$ 10 million two years later.; a significant share of this was in the form of computational resources on Microsoft’s Azure cloud service.

A report by Counterpoint shows that Chinese sales of Apple’s iPhones fell 24% in the first six weeks of this year, having been hammered by the local favourite Huawei which saw sales, over the same period, coming in 64% higher. The US tech giant, which was also being attacked by aggressive pricing from the likes of Oppo, Vivo and Xiaomi,” saw its overall smartphone sales shrink by 7% in the same period. Having struggled for years, following US sanctions, sales suddenly surged last August following the release of its Mate 60 series of 5G smartphones which came as a surprise to the market as Huawei had been cut off from key chips and technology required for 5G mobile internet. In the first six weeks, Honor, which is the smartphone brand spun off from Huawei in 2020, was the only other top-five brand to see sales increase in China with sales of Vivo, Xiaomi and Oppo also declining. Vivo remained China’s top-selling smartphone maker last year, followed by Huawei claiming 16.5% market share, with Apple, (having a 15.7% share down from 19.0% in 2022) coming in fourth place. In Q4, Apple’s sales dipped 12.9% to US$ 20.82 billion – a sure indicator, that despite introducing discounts on its official sites in China, Apple returns are disappointing investors.

In what it considered was breaking the bloc’s competition laws, the EU has fined Apple over US$ 3.0 billion by unfairly favouring its own music streaming service; the investigation followed a complaint from music streaming giant Spotify. In challenging the decision, Apple retorted by saying the decision failed to “to uncover any credible evidence of consumer harm” and “ignores the realities” of the market, which is dominated by Spotify. The EC noted that Apple banned app developers from “fully informing iOS users about alternative and cheaper music subscription services outside of the app”, with the EU’s competition commissioner adding that “this is illegal, and it has impacted millions of European consumers.” Apple should have no problem paying this fine when its Q4 profit came in at US$ 33.92 billion. An appeal will take years to go through the courts but meanwhile, Apple will have to pay the fine and comply with the EU order. The commission also has opened a separate antitrust investigation into Apple’s mobile payments service, and the company has promised to open up its tap-and-go mobile payment system to rivals in order to resolve it.

After HelloFresh posted an earnings warning, down to US$ 438 million from US$ 622 million, its shares slumped by over 40%; at the same time, the German meal-kit maker also cancelled its revenue and profit targets for next year, pointing to higher costs in the development of its “ready to eat” business; the same problems are faced by its peers such as the Mindful Chef and Gousto. Covid was a boom time for such companies when many were ensconced at home, but since then customer numbers have fallen – in 2022, global numbers for HelloFresh were 8.5 million, now 7.1 million; the decline in business has had an impact on its share value that has fallen from US$ 109, at the height of Covid, to less than US$ 8 at the beginning of this week.

In December, Mike Ashley’s Frasers Group acquired the loss-making designer brands platform Matches for US$ 67 million, with the aim of turning it around to a profitable enterprise. Three months later, Matches, which sells items from established designers such as Balenciaga, Gucci and Prada, is put into administration with Frasers adding that its acquisition was making unsustainable losses.; most of its sales are online, selling merchandise to one hundred and seventy-six countries.

Following the sudden departure of Bernard Looney last September, BP appointed Murray Auchincloss, formerly BP’s CFO, as its new chief executive. He has not done so badly as it is announced that his pay packet last year was over US$ 10 million – including his salary, a bonus and share based rewards of US$ 1.3 million, US$ 2.3 million and US$ 5.9 million, as well as other benefits. Late last year, BP announced that is predecessor would forfeit up to US$ 42 million after his departure, including US$ 32 million in long-term share awards. Global Witness accused BP of giving its chief executive” a multi-million, fat cat pat on the back” after becoming “one of the biggest winners of Russia’s war in Ukraine while most people were “living pay check to pay check”.

On Tuesday, Bitcoin broke through to hit a new all-time high of more than US$ 69k surpassing the previous high posted in November 2021 – a year later, the cryptocurrency had sunk to around US$ 16.5k; it ended the week at US$ 68.6k. The latest surge is down to major US finance giants pouring billions into buying bitcoins; these entities are the same that vehemently voiced their opposition to cryptocurrencies from their very existence start in 2009, supposedly invented by the now infamous Satoshi Nakamoto. Finally realising that they were ‘walking on quicksand’, in January, US regulators reluctantly approved  several spot Bitcoin Exchange-Traded Funds (ETFs) and billions of dollars started pouring in for Bitcoin. That allowed giant investment firms, like Blackrock, Fidelity and Grayscale, to sell products based on the price of Bitcoin. Between them, they have been buying hundreds of thousands of bitcoins, rapidly driving up their value. Retail investors have probably left it too late in this cycle to cash in but one thing is certain about this volatile currency – it will go down as quickly as its value has risen. When it sinks to US$ 30k, then is the time to buy and hold until it tops US$ 65k and then leave the market. Such a scenario could easily occur over the next twelve months.

When most of the population thought that things could not become worse, they did overnight, with Egyptians waking up on Wednesday to a further 6.0% rate hike and the Egyptian pound being devalued, for the fourth time since 2022, and losing 60% in value by midday. This is after the Central Bank of Egypt decided to allow market forces to determine the value of the currency. The Monetary Policy Committee aims to unify the exchange rates and eliminate foreign exchange backlogs following the closure of the spread between the official and the parallel exchange rate markets. It also hopes that this strategy will bring underlying inflation under some sort of control, with headline inflation slowly dipping south.

Premier Li Qiang announced that China had set a 2024 growth project of around 5.0% and would introduce a series of measures, aimed at boosting its flagging economy, after admitting that the country’s economic performance had faced “difficulties”, adding that many of these had “yet to be resolved”. Measures included the development of new initiatives to tackle problems in the country’s crisis-hit property sector, aims to add twelve million jobs in urban areas, increased regulation of financial markets, with research being stepped up in new technologies, including AI and life sciences. Premier Li Qiang almost admitted that “risks and potential dangers in real estate, local government debt, and small and medium financial institutions were acute in some areas,” and that “under these circumstances, we faced considerably more dilemmas in making policy decisions and doing our work.” There are still many economists who still think that for years, the Chinese economies have been fabricated and even last year’s official 5.2% could really have struggled to top 2.0%. The economy will also suffer by the double whammy of low birth rates and an increasing ageing population, as youth employment becomes an increasing challenge to the government. As most global economies have had to deal with soaring inflation rates over the past thirty months, China seems to have missed its brunt and avoided soaring inflation rates.

Now the shoe is on the other foot, as the country is starting to come to terms with the problem of deflation, with consumer prices in China falling in January at the fastest pace in almost fifteen years, marking the fourth consecutive month of declines – the sharpest decline since post GFC 2009. In a deflationary cycle, consumers (and businesses) will keep putting off buying big ticket items on the expectation that they will be cheaper in the future. Another feature is probably more damaging – with prices and incomes may decline, debts do not, resulting in debt repayments becoming more onerous, as companies have to deal with revenues heading south and households having to manage with a declining income. It also has an impact on people and businesses with debts. Prices and incomes may fall, but debts do not. For a company with falling revenue, or a household with a declining income, debt payments become more of a burden.

Following the well-publicised demise of Silicon Valley Bank last year, the IMF is warning that US lenders’ continued exposure to risk could spark a new financial crisis, as high interest rates, economic uncertainty and declining commercial real estate prices still put US banks at risk of failure. The report specifically mentioned a “weak tail of banks” that are vulnerable because of high interest rates. The world body noted that the episode showed how a group of weak banks can force regulators to enact emergency measures, even if that group of banks is “not individually systemic” and that regulators were partly to blame for not flagging the problems faced by SVB sooner.

Despite more jobs being created in February, (270k), the US unemployment rate nudged up, by 0.2%, to 3.9% on the month, to its highest rate in two years. The jump in the unemployment rate was due to an estimated 334k more people reporting being out of work. Overall, analysts said there was little in the report to fuel major worries or raise fears that the economy would be harmed by higher interest rates, although Harvard professor Josh Furman added that the latest figures tilted the “balance of worry ever so slightly away from inflation and towards recession”. The job gains were attributable to increased. hiring by health care firms, the government and bars/restaurants.

With the Nationwide Building Society edging in on a US$ 3.72 billion deal to acquire Virgin Money, with both entities continuing to be run as separate units, it will become the UK’s second largest mortgage and savings group by market share and be worth some US$ 469.0 billion, with total lending and advances of about US$ 363.0 billion. It is expected that there will be no material change in the size of the 7.2k Virgin Money payroll – at least in the short term – and that the Virgin Money brand will be retained for around six years. The all-cash offer of US$ 2.82 per Virgin Money share equates to a 38% premium on Virgin Money’s share price last Wednesday; a further US$ 0.0256 a share dividend pay-out would come on top of that payment. The bank was formerly the Clydesdale and Yorkshire bank group and rebranded after a US$ 2.05 billion takeover of Sir Richard Branson’s banking group in 2018.

The Australian Transaction Reports and Analysis Centre has ordered an external audit of UK’s Bet 365 over its compliance with anti-money laundering and counter-terrorism financing laws. With the online betting sector coming under increased  scrutiny, Austrac’s CEO, Brendan Thomas noted that “businesses without adequate processes in place to manage those risks leave themselves vulnerable to exploitation by criminals,” The watchdog, which investigates banks, casinos and betting companies to make sure they have robust compliance systems to prevent them from profiting from the proceeds of crime,  have been probing Ladbrokes owner Entain since 2022, while another rival Sportsbet is facing an external audit. In the country, all customers have to be assessed by such firms and all transactions monitored in order to identify, mitigate and manage the risk that they might be engaging in money laundering or financing terrorism. Laws have recently been strengthened that have seen the use of credit cards banned for online gambling, whilst stricter rules have been introduced relating to advertising.

As an aside, Bet365 made a US$ 78 million loss, in the year ending 31 March 2023, despite revenue growing to US$ 4.32 billion; the previous year it turned in a US$ 42 million profit. Last year, its chief executive Denise Coates was paid around US$ 282 million as well as a further US$ 64 million in dividends. Ms Coates, who has a degree in econometrics, founded the Bet365 website in 2001 and the company is now the biggest private sector employer in the UK.

For the first time, it is reported that chicken meat has surpassed lamb. The Australian Bureau of Statistics posted that, in Q4, poultry slaughter increased by 0.02% to US$ 662 million, while lamb and sheep meat slumped by 7.6% to US$ 586 million, as the volatile nature of the lamb supply chain between the farm gate and the supermarket led to a reduction in the value of sheep meat. Another reason for the decline is that farmers have been selling off sheep and lambs, at a lower weight, which caused a drop in price and overall drop in value. Last Spring, lamb prices almost halved compared to a year earlier, whilst some reports indicated that sheep were being sold for just US$ 0.66; however, it took some time for supermarkets to adjust prices lower.

As with other major retailers trying to retain staff, and keeping ahead of the minimum wage threshold, both John Lewis/Waitrose and the Co-op are raising their minimum pay levels. The former will raise pay for store workers to US$ 14.72 and to US$ 16.43 for those in London, whilst the Coop will raise pay by 10.1% to US$ 15.30 and US$ 16.77 in London; the National Living Wage currently stands at US$ 14.59. Tesco, Sainsbury’s, Aldi and Lidl have already raised pay rates, with M&S and Asda starting next month.

There are reports that UK Finance, the country’s banking association, has warned its members that some eight hundred ‘rogue’ filings, related to one hundred and ninety companies, have been lodged at Companies House, the UK’s central corporate register. The banking body also confirmed that it had warned both Companies House and the Department for Business and Trade that the forms related to the discharging of financial liabilities were submitted in late February. It also stated that a number of members and law firms had “flagged an issue regarding the apparently erroneous satisfaction of security (registered charges) on Companies House relating to a number of live business clients”.

Following the Chancellor’s Wednesday Budget, the Institute for Fiscal Studies said households would be worse off at the election, expected this year, than they were at the start of this parliament, even though the Chancellor cut US$ 0.0255 off National Insurance, equating to UD$ 12.73 billion; the think tank also noted that this will be a record tax-raising exercise. Raising a slight laugh among Opposition MPs, Jeremy Hunt pointed to upgrades to short-term forecasts saying the UK would soon be “turning a corner” on growth as it has on inflation. He tried to get away with the fact that the cut would benefit millions of workers, on average earnings, who would be some US$ 1.27k better off, but failed to mention that he was only giving back “a portion” of the money taken away through other tax changes; previous freezing of tax thresholds has resulted in many having to pay more tax – overall, for every US$ 1.27 given back to workers (including the self-employed) by the NICs cuts, US$ 1.66 will have been taken away due to threshold changes between 2021 and 2024, with this rising to US$ 2.42 in 2027. The IFS estimates that by 2027, the average earner would be only US$ 178 better off, and only people, earning between US$ 40.8k and US$ 70.1k a year, would be better off from the combined tax changes. The Resolution Foundation said that, after taking account of rising prices, the average wage will not regain its 2008 level until 2026. Say No More!