Don’t Believe Everything You Hear!                                                   07 June 2024

Records were broken last month, with Dubai’s real estate sector posted the highest ever volume and value of transactions at 17.7k, (53.3% higher compared to May 2023) and  up 38.0% on the year to US$ 12.67 billion. According to Property Finder, the previous peaks for volumes were in March 2024, and for value in December 2023, with May 2024 returns 10.0% and 30% higher. Further analysis indicated that in the:

Rental Market

• 78% were seeking apartments; 58% of those seeking apartments preferred furnished; 19%, 35% and 33% were looking for studios, 1 B/R and 2 B/R respectively; top search areas were Dubai Marina, Jumeirah Village Circle, Downtown Dubai, Business Bay and Jumeirah Lake Towers
• 22% were seeking villas/townhouses; 57% of those in the villa/townhouse market were looking for furnished units; 38% and 43% were searching for 3 B/R and 4 B/R, (or larger); top search areas were Dubai Hills Estate, Dubai South (Dubai World Central), Al Furjan, Arabian Ranches, and Palm Jumeirah

Buying Market

• 59% were seeking apartments; 14%, 32% and 36% were looking for studios, 1 B/R and 2 B/R respectively; top search areas were Dubai Marina, Downtown Dubai, Jumeirah Village Circle, Business Bay and Palm Jumeirah
• 41% were seeking villas/townhouses; 57% of those in the villa/townhouse market were looking for furnished units; 40% and 46% were searching for 3 B/R and 4 B/R, (or larger); top search areas were Dubai Hills Estate, Dubai South (Dubai World Central), Al Furjan, Arabian Ranches, and Palm Jumeirah

May also witnessed the highest ever monthly volume and value of off plan transactions, with the former posting over 11.1k transactions, (surpassing the previous peak of 9.8k registered as far back as April 2009), valued at US$ 6.19 billion.

The existing market continued to support Dubai’s real estate market with an annual increase of approximately 8.8% in volume and 6.6k transactions recorded. The value of these transactions experienced a notable annual increase of 21%, touching approximately US$ 6.49 billion.

There are claims that a Jumeirah Bay home, being rented out for US$ 1.0 million a year, is not only one of the ‘most valuable’ rental deals in Dubai’s property history but also the highest ever for a townhouse. The five-bedroom Villa Amalfi home, encompassing 5.2k sq ft, came fully furnished, including Christofle cutlery, Hermès furnishings and a selection of contemporary art. It also boasts a private gym, sauna, and a rooftop terrace with skyline and sea views.

Since its rebranding in November 2023, Tabeer Developments, has rapidly drawn up expansion plans, allocating US$ 272 million in inventory to be launched this year. The nine-year old developer has a real estate portfolio that spans across community areas like International City, (Dragon Views and Tabeer 1), Dubai Sports City, (V2), Arjan, (48 Parkside), and JVC, (99 Park Place); the last two mentioned projects will be handed over this year. Last week, the developer launched its new residential project, Parkside Boulevard, with six retail spaces and one hundred and sixty-five apartments, including studios (441 sq ft and prices starting from US$ 174k), one-bedroom (starting from 779 sq ft and US$ 286k), and two-bedroom apartments (starting from 1,267 sq ft and US$ 409k). Some of its many facilities include glass elevators, concierge services, wellbeing havens, kids’ areas and recreational zones.

This week, Dubai South Properties unveiled South Living, a luxury apartment project, comprising two hundred and nine spacious units, with options of studio to three-bedroom apartments; there will also be special-terraced units, offering a mix of indoor and outdoor living experiences. Located in Dubai South’s Residential District, it will also have the usual accoutrements such as a swimming pool/deck area, gymnasium, sauna, a multi-purpose room, a kids’ library, a yoga deck, BBQ area, gazebo seating area, and artistically landscaped elevated gardens. The Residential District is home to over 25k residents, and has amenities such as public parks, sports courts, retail shops, a 50k sq ft hypermarket, a mosque and a petrol station; currently, a premium British curriculum school is being built in the location. The community is also serviced by the RTA public bus network, with easy connectivity to the Expo Metro station.

Another property unveiling this week was Swank Development’s US$ 87 million Lua Residences project, located in the Mohammed bin Rashid City in Meydan. The gated community will be home to a limited collection of forty-two four- to six-bedroom villas, each with their own private pool, interior elevator, landscaped gardens, and innovative solutions such as smart home technology. It will have a raft of external amenities such as vast open spaces, a crystal lagoon, sports facilities, a mosque, retail shops, supermarkets, schools, and medical clinics.

The Dubai Land Department has announced that three unnamed developers have each been fined US$ 136k for promoting and marketing real estate projects, without completing the mandatory registration procedures for off-plan projects. It was said that they had violated a law on real estate development escrow accounts. Ali Abdullah Al Ali, director of the Real Estate Control Department, urged investors to verify that off-plan projects are licensed and registered with an escrow account. He also advised that investors must not “make any payments outside the project’s escrow account”.

At the IATA annual meeting, Emirates’ president, Tim Clark, announced that the historic storm, that hit the country on 16 April, cost the airline US$ 110 million, adding that “it was a very, very difficult situation to manage.” He also noted that “it got so bad that access to the airport was underwater, so nobody could get to the airport,” and that Emirates’ protocols were “under huge stress and challenges” and were overwhelmed by the situation. Now the airline is undertaking a major review of its procedures.

Emaar has revealed a US$ 409 million expansion plan for Dubai Mall, which will result in the addition of two hundred and forty retail and dining options, with preliminary work having already started. Last year, with a 19% hike in numbers to a record one hundred and five million visitors, it became the most visited place on Earth. Emaar’s chairman commented that “this expansion reflects Dubai’s ambitious vision to remain at the forefront of global innovation and culture, further solidifying our city’s position as a top global destination”.

A busy week for the Emaar chairman, as he also announced the launch of a multimedia fountain plaza, ‘Water, Colour and Fire Plaza’ in Dubai Square in Dubai Creek Harbour, which will feature a mesmerising display of fire, vibrant colours, and synchronised music. The design ensures the area remains functional and accessible even when the music feature is deactivated, so it becomes a lively public space inviting visitors to walk and engage with their surroundings. The developer is in discussions with a Chinese technology company, known for its expertise in creating iconic music and fire features. The plaza will surround the upcoming Dubai Creek Tower, part of Dubai Creek Harbour, which encompasses 7.4 million sq mt of residential space and 500k sq mt of gardens and open areas.

Following a directive from HH Sheikh Mohammed bin Rashid Al Maktoum, Dubai’s government has been tasked to develop two public beaches – Al Mamzar Beach and Jumeirah (1). The renovations, lasting some eighteen months, will see the two public beaches reach world-class standards, with the provision of health and public service facilities including restrooms, shower areas, and changing rooms. Contracts totalling US$ 97 million for the two beaches’ development have already been awarded spanning a total of 5.7 km (4.3 km at Al Mamzar and 1.4km at Jumeirah 1). Scheduled for completion in 18 months, these projects signify a significant advancement in beach design. According to the social media account of the Dubai Urban Master Plan 2040, there will be numerous upgrades and additions for recreational activities, as well as the two beaches using advanced technology—with advance safety deposit boxes, Wi-Fi internet services, electronic screens, and beach rescue services that uses AI technology. The two beaches will remain partially open during the upgrades, but beachgoers can always use the likes of Kite Beach, Sunset Beach, Jebel Ali Public Beach, and the Beach at JBR.

Emirates Islamic’s maiden US$ 750 million Sustainability Sukuk, (part of the US$ 2.5 billion Certificate Issuance Programme) was launched on Nasdaq Dubai, bringing the total value of EI’s Sukuk listings on the bourse to US$ 2.02 billion, through four listings. The issuance was oversubscribed 2.8 times with investors across different regions, 44% of which came from outside of MENA region. The robust demand and strong order book allowed the bank to tighten the expected profit rate to 5.431% at a spread of 100 basis points over five-year US Treasuries. Now known as a leading global centre for Sukuk listings, Dubai manages US$ 93 billion in Sukuk issuances, of which 44% by value are from UAE issuers. Nasdaq Dubai continues to consolidate its status as the premier platform regionally and globally for both fixed income, (with a total value of US$ 129 billion) and ESG-related listings, (at US$ 29 billion).

Parkin, the largest provider of paid public parking facilities and services across Dubai, has posted that it has signed an exclusive four-year agreement, with a private developer, to manage parking services at six locations in Dubai. The locations, at Al Sufouh Gardens, Arjan, Dubailand Residence Complex, Jaddaf Waterfront, Liwan 1&2, and Majan, will add 7.5k spaces to Parkin’s current 10.0k portfolio. Operations will be from 8.00am to 10.00pm, for all days except for Sunday, with the listed company responsible for issuing fines for non-compliance, with parking laws and regulations.

Tecom Group on Wednesday announced a record US$ 599 million in 2023 revenue, representing a 10%, on the year, increase and a 49% hike in annual net profit to US$ 300 million, driven by elevated occupancy rates, (up 3% to 89%), on the back of high customer retention rates and an almost 15% increase in the number of new customers. Ebitda rose 23% to US$ 463 million, as the margin climbed 8% to 76%, attributable to enhanced revenue quality, which is down to improving macro conditions. Funds from operations came in 21% higher on the year at US$ 381 million. Growth was underpinned by Dubai’s resilient economic performance, pro-growth and diversification government initiatives, and bullish consumer and business confidence. The Board recommended a US$ 109 million H2 2023 dividend payout.

The DFM opened the week on Monday 03 June, 183 points (4.4%) lower the previous three weeks gained 4 points (0.1%) to close the trading week on 3,982 by Friday 07 June 2024. Emaar Properties, US$ 0.04 lower the previous week, shed US$ 0.07, closing on US$ 2.02 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.62, US$ 4.24, US$ 1.50, and US$ 0.35 and closed on US$ 0.62, US$ 4.39, US$ 1.51 and US$ 0.36. On 07 June, trading was at two hundred and thirteen million shares, with a value of US$ 91 million, compared to two hundred and thirty-four million shares, with a value of US$ 175 million, on 31 May 2024.  

By Friday, 07 June 2024, Brent, US$ 0.27 lower (0.1%) the previous week, shed US$ 2.02  (2.5%) to close on US$ 79.57. Gold, US$ 12 (0.5%) higher the previous week, shed US$ 41 (1.7%) to end the week’s trading at US$ 2,305 on 07 June 2024.

Despite Sunday’s, Opec+ agreement, to extend output cuts of 3.66 million bpd another year until the end of 2025, oil prices dipped on Monday to US$ 80.77. At the same time, the eight Opec+ member states agreed to extend their 2.2 million bpd voluntary production cuts for a further three months until the end of Q3, as well as posting plans of unwinding the voluntary curbs on a monthly basis from October 2024 until September 2025. These combined cuts of some 5.86 million bpd equate to about 5.7% of global crude demand. Opec expects strong economic growth, of some 2.25 million bpd, from emerging economies, particularly China and India, to drive crude demand this year, in contrast to the US Energy Information Administration and the International Energy Agency forecasting a lower growth rate of 1.1 million bpd.

Last Sunday, Aramco started a secondary share sale in a deal that could raise US$ 13.1 billion, with the main beneficiary being the Public Investment Fund, the kingdom’s SWF. The banks involved in the deal took institutional orders until yesterday and today announced the share price of US$ 7.27; trading will start this Sunday, 09 June. There were 1.545 billion shares on offer, at a range between US$ 7.12 and US$ 7.73, with the banks able to increase the offering by a further US$ 1.0 billion. About 10% of the new offering was reserved for retail investors, subject to demand. This deal will see the Saudi government, with its 82.0% stake in the oil giant cut by 0.7%; the other shareholders are PIF (16%) and the remainder held by public investors. Currently, Saudi Arabia is producing about nine million bpd of crude – equating to some 75% of its maximum capacity.

A day after its chairman, Akio Toyoda, apologised for being guilty of providing incorrect or manipulated data for safety certification tests, Japan’s transport ministry raided Toyota’s headquarters. It was another bleak day for the country’s car industry as Toyota is not the only guilty party, with its peers, Honda, Mazda and Suzuki, all guilty of similar offences. Toyota, which sold over eleven million vehicles last year, noted the findings did not impact the safety of vehicles already on the road and has suspended production of its Corolla Fielder, Corolla Axio and Yaris Cross models.

The eightieth IATA AGM and World Air Transport Summit was held in Dubai, (for the first time), from 02 June – 04 June and hosted by Emirates Airline. Over 1.5k industry leaders and government officials were in attendance. One of the topics discussed was that of airline funds being blocked from repatriation by governments, with a call for governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities in accordance with international agreements and treaty obligations. The meeting did note that there had been a 28% decrease in the amount of airline funds blocked from repatriation by governments – reduced by US$ 708 million over the year to US$ 1.80 billion. Eight countries accounted for 87% of the total blocked funds, amounting to US$ 1.6 billion, including Pakistan and Bangladesh unable to repatriate revenues earned, totalling US$ 411 million and US$ 320 million. For the past few years, Nigeria had headed the list, and at June 2023 it had held back some US$ 850 million, most of which has now been cleared, whilst Egypt was one of the main culprits, it too has cleared a significant accumulation of blocked funds. However, in both cases, airlines were adversely affected by the devaluation of the Egyptian Pound and the Nigerian Naira.

At the meeting, it was announced that global airlines are expected to see an 11.3% increase in profits to US$ 30.5 billion, (well up on their last estimate of US$ 27.5 billion, made in December), whilst carrying over a record five billion passengers; revenue will rise 9.7% to US$ 996 billion with a 9.4% hike in expenses to US$ 936 billion.  Cargo revenue is expected to fall 13.0% to US$ 120 billion in 2024, as cargo yields are expected to fall by 17.5%, remaining slightly above 2019 levels. IATA expects ME carriers to show a 22.6% rise in profits to US$ 3.8 billion, equating to a US$ 15.20 return per passenger, compared to the global US$ 6.00. The 2024 average passenger load factor is expected to be 82.5%, compared to the 82.6% level in pre-pandemic 2019.

It noted that the UAE continues to benefit from its appeal to both leisure and business travellers, with the world body’s chief economist, Marie Owens Thomsen saying “to make more profit, you need efficient operations, high load factors and a population keen to travel and that’s not too price sensitive, if all those conditions are fulfilled than those airlines will make more money,” However, geopolitical risks are the main threat, especially to the Levant carriers, whilst “the Gulf carriers are relatively less impacted unless tensions between Iran and Israel escalate”.

By the end of last week, Bitcoin had entered uncharted territory, surging above US$ 72.1k, after the UK’s Financial Conduct Authority announced that it would welcome applications for crypto asset-backed exchange-traded notes to trade on the London Stock Exchange. The FCA added that it would not object to requests from recognised investment exchanges to create a UK-listed market segment for cETNs, including Bitcoin and Ethereum, and that “these products would be available for professional investors, such as investment firms and credit institutions authorised or regulated to operate in financial markets only.” However, the FCA said that the cETNs would not be available to retail investors as crypto assets are “high risk and largely unregulated”, and that it “continues to believe cETNs and crypto derivatives are ill-suited for retail consumers due to the harm they pose.”  This comes four months after the US Securities and Exchange Commission approved spot Bitcoin exchange-traded funds. At the time, the SEC approved eleven spot Bitcoin ETFs offered by major asset management companies including BlackRock, VanEck, Fidelity, Franklin Templeton and Cathie Wood’s ARC. Many believe that Bitcoin, 55% higher YTD, could soon push the US$ 80k boundary, at which time all bets are off, and it could top US$ 120k by year end.

On Wednesday, shares in Nvidia scaled new heights, helped by a 5.2% hike on the day topping the US$ 3.0 trillion mark, and overtaking Apple, to become the world’s second most valuable company. It is also fast approaching the current valuation of the most expensive company, Microsoft with a current market cap of US$ 3.15 billion. By the end of trading on Wednesday, the stock had risen a phenomenal 140% since the beginning of 2024; the main driver behind this is demand for its top-of-the-line processors far outstripping supply as Microsoft, Meta Platforms and Alphabet race to build their AI computing capabilities and dominate the emerging technology

In the UK, the Competition Appeal Tribunal Google has confirmed that Google (Alphabet) must face a US$ 17.40 billion lawsuit alleging it has too much power over the online advertising market. Ad Tech Collective Action LLP brought the case, (involving adtech, which decides which online adverts people see, as well as how much they cost to publishers), alleging that Google behaved in an anti-competitive manner which caused online publishers in the UK to lose money. Some estimates indicate that the digital advertising spend turned over US$ 490 billion in 2021 and proves to be a lucrative revenue stream for all stake holders, including many websites and especially Google which dominates web search; the basis of this massive claim is that Google is abusing that dominance, reducing the income websites get. Ad Tech Collective claims it is missing out on income in two ways – one is “very high” fees and the other is that Google utilises “self-preferencing”, where it pushes its own products and services more prominently than that of its rivals where publishers end up getting less money for the ads they host. The case is what is known as opt-out, meaning all relevant UK publishers are included unless they indicate otherwise. UK is not the only jurisdiction taking Google to task, with the tech giant facing probes into its adtech business in the EU and the US.

The founder of software company Autonomy, Mike Lynch, has finally found justice in a US court some thirteen years after selling the company to Hewlett-Packard for US$ 10.62 billion. He had long been accused by HP of deliberately overstating the value of Autonomy, with the US tech giant writing down US$ 7.04 billion from Autonomy’s value within a year of completion, claiming revenue streams had been inflated. The acquisition was initially investigated by the UK’s Serious Fraud Office but it dropped the probe in 2015, while US prosecutors continued their own inquiry. He was extradited to the US to face trial just over a year ago, and this week  was acquitted of all charges by a US jury, alongside a former finance executive Stephen Chamberlain who had faced the same charges. He had taken to the witness stand at the trial to argue that the US firm rushed the deal, did not understand what it was buying and had not completed its due diligence sufficiently. Fortunately, the jury agreed.

Probably the UK’s largest fancy dress manufacturer is in financial distress and, having failed to find a buyer, is on the brink of insolvency, having filed a notice of intention to appoint administrators late last week. The company posted that “following four extremely challenging years, as a result of the pandemic, the subsequent supply chain crisis, and the ongoing inflationary burden on both businesses and consumers, Smiffys was required to take the difficult decision yesterday to file a notice of intention to appoint administrators.” Family-owned Smiffys, founded in 1894, reportedly ships more than twenty-six million items of fancy dress annually and distributes 7.5k products to thousands of stockists around the world, and some reports indicate that it has been beset by overstocking problems in recent months.

This week, Live Nation confirmed “unauthorised activity” on its database, after a group of hackers said they had stolen the personal details of five hundred and sixty million customers; this after ShinyHunters posted that it was responsible for theft of  data including names, addresses, phone numbers and partial credit card details from Ticketmaster users worldwide, with the hacking group demanding a US$ 500k ransom payment to prevent the data from being sold to other parties. Live Nation notified shareholders on 31 May that on 27 May “a criminal threat actor offered what it alleged to be company user data for sale via the dark web”, and that it was investigating, even though the breach was first revealed by hackers who posted an advert for the data on 29 May.

There is every chance that this breach is part of a larger ongoing hack involving a cloud service provider called Snowflake which is used by many large firms to store data in the cloud. Last Friday, Santander confirmed it had data from an estimated thirty million customers stolen which was being sold by the same hacking group as the Ticketmaster hackers. Ticketmaster has form – in 2020, it admitted it hacked into one of its competitors and agreed to pay a US$ 10 million fine, and last November, it was allegedly hit by a cyber-attack which led to problems selling tickets for Taylor Swift’s Era’s tour. It will be no surprise to see other companies posting in the coming weeks that they have been hacked.

Shein is considering to IPO on the London Stock Exchange, which could value the Chinese fast fashion giant at an impressive US$ 66 billion. It relies on thousands of third-party suppliers, as well as contract manufacturers, near its headquarters in Guangzhou, China. Although it has fast become one of the biggest global fashion retailers, it has courted controversy over its environmental practices, as well as allegations around the use of forced labour in its supply chain. There are claims that Uyghur forced labour is used to make some of the clothes it sells, and a report last month indicated that some of its suppliers are still working seventy-five hours a week. The UK seems to be a better option for Shein, as it faces mounting pressure, and increased scrutiny, from US lawmakers at a time when there are rising tensions between the Biden and Xi Jinping administrations. If their UK bid is successful, it would be a huge boost for the LSE that has seen too many clients exiting to overseas bourses.

In April, Zambian authorities broke a sophisticated crime ring that was involved in specialised  cyber-related crime in a “sophisticated internet fraud syndicate”, with seventy-seven arrests including twenty-two Chinese nationals. This followed an alarming rise in internet fraud cases in the country, targeting people in countries around the world, along with increasing cases of Zambians losing money from their mobile and bank accounts through money-laundering schemes which extend to other foreign countries. Dozens of young Zambians were also arrested after allegedly being recruited to be call-centre agents in the fraudulent activities, including internet fraud and online scams. All the Chinese accused, along with one Cameroonian national, were charged with manipulating people’s identities online with intent to scam them and all pleaded guilty of computer-related misrepresentation, identity-related crimes, and illegally operating a network or service. The Zambian nationals were charged in April and released on bail so they could help the authorities with their investigations. Among equipment seized were devices allowing callers to disguise their location, 13k Sim cards, and eleven Sim boxes which are devices that can route calls across genuine phone networks.

Only last month, the ‘Tears Of A Clown’ blog highlighted that Live Nation was being sued by the DoJ:

“Live Nation, the owner of Ticketmaster, is being sued by the US Justice Department over claims it is running an illegal live event “monopoly” which is driving prices up for fans and pushing out smaller competition. It claims that they are squeezing out smaller promoters by using tactics such as threats and retaliation The accused countered that it will defend itself against “baseless allegations” and claims the lawsuit would not solve ticket price or availability issues. Filed yesterday in a Manhattan federal court, the sweeping antitrust lawsuit was brought with thirty state and district attorneys-general. The US Attorney-General Merrick Garland commented that “it’s time for fans and artists to stop paying the price for Live Nation’s monopoly,” and “it is time to restore competition and innovation in the entertainment industry. It is time to break up Live Nation-Ticketmaster. The American people are ready for it.” Ticketmaster, which merged with Live Nation in 2010, is the world’s largest ticket seller across live music, sports, theatre and more. The company said it distributed more than six hundred and twenty million tickets in 2023”.

This week, Live Nation confirmed “unauthorised activity” on its database, after a group of hackers said they had stolen the personal details of five hundred and sixty million customers; this after ShinyHunters posted that it was responsible for theft of  data including names, addresses, phone numbers and partial credit card details from Ticketmaster users worldwide, with the hacking group demanding a US$ 500k ransom payment to prevent the data from being sold to other parties. Live Nation notified shareholders on 31 May that on 27 May “a criminal threat actor offered what it alleged to be company user data for sale via the dark web”, and that it was investigating, even though the breach was first revealed by hackers who posted an advert for the data on 29 May.

‘Tears Of A Clown’ blog of 24 May also outlined the problems with the various water companies in the UK including:

“A study of ten water and sewage firms in England and Wales bythe University of Greenwich has concluded that shareholders in some of the UK’s largest water companies, including Thames Water, United Utilities and Severn Trent, have taken out US$ 108.3 billion in dividends but failed to invest. It said that between privatisation in 1989 and 2023, money invested by shareholders in the largest firms shrunk by US$ 7.0 billion, when adjusted for inflation. Over the same period, the amount of “retained earnings” – profits left over once things like dividends have been paid out, that can be used to invest in a business – had dropped by US$ 8.52 billion in real terms. Ofwat, the industry regulator, said it “strongly refuted” the figures.  “While we agree wholeheartedly with demands for companies to change, the facts are there has been huge investment in the sector of over US$ 254.0 billion.” Water UK, which represents the industry, said investment in the sector was “double the annual levels seen before privatisation”. Water and sewage firms want to spend around US$ 127.10 billion over the next five years”.

This week, the embattled Thames Water, UK’s biggest water company has been told by Ofwat it faces a fine of more than US$ 51 million over the payment of a US$ 47 million shareholder dividend late last year, in spite of its poor performance. This is another nail in the utility’s coffin, as it moves towards a potential temporary nationalisation under a debt mountain of more than US$ 19.1 billion.

According to Zoopla, UK rents for new lets stand at US$ 1,569 having increased by 6.6%, US$ 102, over the year to April – its slowest annual rise since October 2021. Even with demand slowing, the property portal noted that there were still fifteen people on average chasing every home for rent – pre pandemic, this figure was six. There are various reasons for sharp rises in new let rentals including demand rising from students, but primarily because supply has not matched demand. It forecasts that the slowdown will continue for the rest of the year, with increases hovering around the 5% level.

Thanks to the secret intervention by the then Cameron/Osborne government in 2012, Standard Chartered, one of the UK’s largest banks, avoided prosecution by the US Department of Justice but now new documents filed to a New York court claim the bank processed thousands of transactions, worth more than US$ 100 billion, from 2008 to 2013, in breach of sanctions against Iran. It appears that an independent expert has identified US$ 9.6 billion of foreign exchange transactions, with individuals and companies designated by the US government as funding “terror groups”, including Hezbollah, Hamas, al-Qaeda and the Taliban. The bank has twice, (in 2012 and 2019), admitted breaching sanctions against Iran and other countries, paying fines totalling more than US$ 1.7 billion but not for conducting transactions for “terrorist” organisations.

Latest data for May, from the Society of Motor Manufacturers and Traders, indicates a 2.0% decline on the year in UK sales of new EVs – and this despite “very attractive offers” to lure buyers. The decline in sales has been put down to various factors including the cost-of-living pressures on household budgets, as well as a lack of affordable vehicles and charging infrastructure. The body’s supremo, Mike Hawes, warned that manufacturers could not sustain the level of discounting indefinitely and argued that a fairer transition was needed with “carrots, not just sticks” required from ministers to help improve future uptake. The SMMT were also disappointed with the recent Sunak Government’s U-turn on the sale of new cars powered by petrol and diesel – it had been policy that this would happen from 2030 but in March it was changed to 2035, and this has had a negative knock-on impact on EV sales, and investment in the sector. Another factor in play is affordability as indicated by the fact that the share of new models for sale below US$ 25.6k, (GBP 20k), in the past five years has dropped from 17% to just 4%; this may change with many new low-cost options expected on the market this year which may tempt consumers to make the transition to electric.

Following Canada’s decision, a day earlier to cut rates, the ECB followed suit yesterday, 06 June, knocking 0.25% off its main interest rate from an all-time high of 4% to 3.75%, whilst noting that the EU had made progress in tackling inflation, even though the monthly rate nudged 0.2% higher to 2.6% in May. Having posted that the outlook for inflation had improved “markedly”, Christine Lagarde, president of the ECB, warned that inflation was likely to remain above the bank’s 2% target “well into next year”, averaging 2.5% in 2024 and 2.2% in 2025 and that the bank would keep interest rate policy “sufficiently restrictive for as long as necessary” to bring inflation down to the Bank’s 2% target. This marginal cut in rates should be enough to start the ‘economic activity ball’ rolling by making it cheaper for consumers and businesses to borrow. The world waits for similar moves from the Fed and the BoE

Consulting firm Capgemini estimates that the number of ‘high net worth individuals’, (people with liquid assets of at least US$ 1 million), rose by 5.1% last year to 22.8 million. Much of the increase was the result of soaring global stock markets which has helped their cumulative wealth  rise by 4.7% to US$ 86.8 trillion. In 2022, the number of HNWIs and their wealth had each fallen by more than 3.0%, attributable to macroeconomic uncertainty and geopolitical tensions – the steepest fall recorded in a decade. With the gap between the rich and poor widening by the year, the inequality debate continues on whether the rich should pay their fair share of taxes, with countries like France and Belgium pressing developed countries  to set a global minimum tax on the world’s wealthiest people.

There is no doubt that both Prime Minister Narendra Modi and the benchmark NSE Nifty 509 share index received a shock this week, when his Bharatiya Janata Party failed to secure a majority in the five hundred and forty-three-member lower house of parliament. Indian stocks fell sharply, with the benchmark NSE Nifty 50 share index closing down nearly 6%, its steepest fall since India’s first Covid lockdowns in March 2020. The rupee slid 0.5% against the US dollar, its biggest fall in sixteen months. According to one commentator, there is every possibility that the new Indian coalition government may have to shift its focus to put more emphasis on welfare rather than concentrating on reforms during next month’s budget.

Two lessons could be learnt from this episode of Indian politics. One is that it seems that after two terms of government, whether it be for eight years or ten, something happens. Two examples from both the UK and France and one from Australia will illustrate the point. Margaret Thatcher was in power from 1979 – 1990 and Tony Blair from 1997 – 2007 and both were disposed of when in office; both parties lost the next general election.  Whether it was egotism, familiarity, sleaze, loss of ideas, over confidence, corruption, cronyism, low approval ratings, internal wranglings, not doing their homework, relying on partial advice and so on, both had stayed in office for too long and paid the price. Likewise, French presidents, Francois Mitterrand (1981 – 1995) and Jacques Chirac (1995 – 2007) and Australian prime minister, John Howard (1995 – 2007) all leaving office with their reputations tarnished. It seems that the US and France (since 2002) may have the right idea by restricting the position to two terms only. (Ironically, the current president of France, Emmanual Macron is highly critical of this and would like the opportunity of a third term in office – I wonder why?) Maybe the same for Modi and his government?

Markets had soared on Monday after exit polls over the weekend had suggested Mr Modi and the BJP would gain a significant victory. The second lesson to be learnt (again) is that in recent times as polls become more sophisticated it does seem to many observers that, on too many occasions, they are hopelessly wrong. Two 2016 cases in point are the Trump/Clinton 2016 US presidential election and the Brexit referendum in the UK. The pollsters had long concluded that Hilary Clinton would become the country’s first woman leader, even calling it on the morning after the election, whilst if you followed the pollsters, Brexit was a near certainty. Both results went the other way. In the recent Indian election, the “experts’ were still calling for a majority vote for the current incumbent on the day after the polls closed – and were wrong again. The lesson to be learnt is Don’t Believe Everything You Hear!