Are We There Yet?                                                                             14 June 2024

Majid Al Futtaim has unveiled plans for a massive new residential project, including 1 B/R, 2 B/R and 3 B/R apartments, as well as duplex penthouses, spread across five to six floors. Ghaf Woods will encompass 738k sq mt, and is located in Dubai’s Tilal Al Ghaf, adjacent to Global Village. The project, covering more than 7k premium units, will be released in eight phases between now and 2031, and will be set within a forest of 35k trees, suitable for the local climate, including the Ghaf. Residents will benefit by living in a community, engineered to maintain outdoor temperatures up to 5°C cooler than surrounding areas. The trees not only help to reduce soil erosion and conserve water, while providing shade, but also to improve the air quality.

It took only four hours for the final phase of South Bay to sell out. Dubai South Properties posted that the new launch followed the sell-out of all previously launched units across different phases, in South Bay, its development in the heart of Dubai South’s Residential District. Construction has already started on the new phase incorporated one hundred and sixty units comprising of three-, and four-bedroom townhouses, as well as four-, and five-bedroom semi-detached villas. Once completed South Bay will feature over eight hundred spacious villas and townhouses, more than two hundred waterfront mansions, a one km long lagoon, over three km of a waterfront promenade with cafes, multiple beaches, a clubhouse, state-of-the-art fitness centres, lush parks, a shopping mall, a renowned spa, kids’ clubs, waterparks, swimming pools, a lake park, and private beaches.

Private developer Peak Summit Development has launched the second phase of its The Orchard Place – Tower C. Following the completion of units in Tower A and B, the third tower, with twenty storeys, will house one hundred and ninety-three units, including studios, one, two, and three-bedroom apartments, two-storey penthouses and townhouses, with spacious terraces and private swimming pools. Other amenities include a twenty-five mt sports swimming pool, a wellness area complete with yoga, sauna, and steam rooms, an outdoor cinema and European appliances. Fully furnished apartments are offered with a two-year post-handover payment plan and 1% monthly payment options. Prices will start at US$ 187k, with the project slated for completion by Q4 2026.

Located in Al Faqa, (a village on the border of Dubai and the Eastern Region) along the road connecting Dubai and Al Ain, Arabian Hills Real Estate Development Company has introduced its highly anticipated flagship project, Arabian Hills Estate, comprising fourteen phases. At a cost of US$ 6.0 billion (AED 22.0 billion), it will cover an area of 244 million sq ft.

Citi Developers has announced the start of construction of its new project in Jumeirah Village Circle. Its seventeen-storey Aveline Residence project is slated for completion by 2026. The developer, a leading Dubai-based real estate company, has a ten-year history with operations in UK and Pakistan and this will be its first in Dubai. It will comprise features such as “beach pool, mini cinema, games area, glass bottom suspended pool, gym, padel court, kids pool games area, yoga area, lap pool, mini golf jogging track and the kids play area.”

According to a review by ValuStrat Price Index (VPI) on residential capital values, the impact of flooding caused by April’s record rainfall on May Dubai home valuations was largely offset by robust demand. Villa capital values continued to expand at similar monthly rates, while apartment valuations experienced accelerated growth compared to April, with the VPI posting an annual 27.2% increase, (monthly 2.1%); compared to its 100-points baseline set in January 2021, villas reached 221.2 points, while apartments stood at 144 points.

May 2024’s ValuStrat Price Index report noted:

• Palm Jumeirah became the first apartment area to exceed their previous capital value peak
• monthly apartment prices rose by 1.8%, (1.6% in April), marking a record annual growth of 22.4%
• the highest apartment capital gains on the year are Discovery Gardens, The Greens, Palm Jumeirah, Al Quoz Fourth and The Views, with annual gains of 34.0%, 32.6%, 30.9%, 29.1% and 28.1%
• most established villa communities in Dubai have now exceeded their previous capital value peaks
• monthly villa prices rose by 2.4%, marking a record annual growth of 32.5%
• the highest villa capital gains on the year are Palm Jumeirah, Jumeirah Islands, Dubai Hills Estate, Emirates Hills, and The Lakes with annual gains of 41.7%, 41.1%, 37.5%, 32.5% and 32.1%
• contract registrations for off-plan homes increased, on the year, by 76.3% – and 41.6% monthly – reaching a record monthly high of over 10k transactions equating to 69.4% of all residential sales
• the volume of ready home transactions grew 8.1% since last year, and 45.9% on the month
• there were sixteen transactions for ready properties priced over US$ 8.17 milllion (AED 30 million), situated in Palm Jumeirah, Dubai Marina, Jumeirah Bay Island, Emirates Hills, and District One
• the top five developers were Emaar, Azizi, Sobha, Damac and Nakheel, accounting for 16.6%, 8.5%, 8.2%, 7.9% and 3.6% of May sales
• Discovery Gardens and Dubai Hills Estate broke their individua records with the highest number of off-plan homes traded in one month
• Jumeirah Village Circle, Ras Al Khor, Meydan One and Dubai Hills Estate accounted for 10.0%, 9.5%, 9.4% and 7.7% of total of off-plan locations transacted
• Jumeirah Village Circle, Business Bay, Dubai Marina, Downtown Dubai and Jumeirah Lake Towers accounted for 8.3%, 6.6%, 5.9%, 5.3% and 3.9% of ready homes sold

Launched in 2021, the Dubai-based digital real estate investment platform Stake has over 500k users, (50% from outside the UAE), engaged in fractional ownership with an entry point as low as US$ 136k (AED 500). To date, it has sold over two hundred properties, worth over US$ 97 million, via its app. This week, it announced that it had secured US$ 14 million in funding led by Middle East Venture Partners as well as Aramco’s Wa’ed Ventures, Mubadala Investment Company, and US-based private investing platform Republic. The funds will be utilised to further scale the platform in the UAE and to bring new investment opportunities on the platform as well as expanding into Saudi Arabia.

In the two weeks to 25 June, Dubai International is expecting to welcome over 3.7 million visitors, equating to an average daily traffic of 264k during this peak season; the busiest date is said to be Saturday 22 June, with an expected 287k passengers.

Emirates has reached a settlement with the US Department of Transportation  after receiving a fine for operating one hundred and twenty-two flights carrying American low-cost airline JetBlue Airways’ designator code, between December 2021 and August 2022 in prohibited Iraqi airspace. The carrier noted that “(we have) reached a settlement with the US DOT, relating to the alleged breach of Special Federal Aviation Regulations (SFAR) that restricted airlines carrying a US air-carrier code from operating below 32k feet while over Iraqi airspace.” It is reported that Emirates was fined US$ 1.5 million for operating flights carrying JetBlue Airways’ designator code in prohibited airspace. Emirates clarified it had intended to operate the flights in question, at or above 32,000 feet, but the pilots had to descend into the prohibited area due to orders from Air Traffic Control. EK confirmed that it no longer operates flights with US carrier codes over Iraqi airspace, and it had ended its code share arrangement with JetBlue in 2022.

Ursula von der Leyen, president of the European Commission, met with Ruler, HM Sheikh Mohamed bin Zayed, president of the UAE, in Abu Dhabi last September. A EU delegation visited last week, wanting two bites of the cherry – whilst delegates visiting the UAE are  intensifying efforts to attract investment from the country, it wants to keep the UAE on its “grey list”, a marker of heightened scrutiny and potential obstacles for investors. It wants to promote the bloc’s Capital Markets Union plan, with its twenty-seven member states joining a single market, which should reduce regulatory complexity for foreign investors. The UAE is the EU’s top investment destination in the MENA, with European entities having invested US$ 175 billion ($175 billion) in the country, with the UAE’s investment in the EU at around US$ 140 billion. However, in April, members of the European parliament objected to the removal of the UAE from its list of high-risk third countries, whereas the global watchdog, the Financial Action Task Force, removed the UAE from its grey list in February, praising its efforts in combating illicit financial flows. The EU should realise that it takes two to tango.

The UAE Central Bank upgraded the country’s 2023 GDP growth by 0.5% to 3.6%, with non-oil gross domestic product expanding by 6.2%; on the flip side, it downgraded an earlier growth figure of 4.2% for 2024 to 3.9%, with the non-oil sector expanding by 5.4%. It was more bullish on 2025, projecting a much improved 6.2% growth, driven by a significant forecast increase in oil production to 8.4%, following the Opec+ decisions this month and continued expansion of the non-oil sector.

The Central Bank of the UAE announced that, by 31 March 2024, the money supply aggregate M1 increased by 3.7%, on the month, to US$ 239.26 billion. This was due to a US$ 1.63 billion rise in currency in circulation outside banks, combined with US$ 6.84 billion increase in monetary deposits. Money supply aggregate M2 increased by 1.4%, to US$ 581.69 billion. M2 increased mainly due to an elevated M1, overriding the US$ 272 million reduction in Quasi-Monetary Deposits. The money supply aggregate M3 increased by 1.9% to US$ 704.00 billion. M3 increased mainly because of an amplified M2, combined with an increase of US$ 5.07 billion in government deposits. The monetary base expanded by 2.1% to US$ 191.74 billion, with the rise in the monetary base was driven by the growth in key sub-categories: currency issued increased by 5.4%, reserve account by 21.0%, and monetary bills and Islamic certificates of deposit by 2.8%, overshadowing the decline recorded in banks and OFCs’ current accounts and overnight deposits of banks at CBUAE by 34.8%. Gross banks’ assets, including bankers’ acceptances, increased by 1.3%, on the month, to US$ 1,159.26 billion at the end of March 2024. Gross credit grew by 1.7% to US$ 557.77 billion, with gross credit growth being driven by the increase in domestic credit by 1.1% and in foreign credit by 5.3%. Domestic credit expansion was due to an increase in credit to the public sector (government-related entities), the non-banking financial institutions, and the private sector by 2.8%, 1.7%, and 1.4%, respectively. Total bank deposits climbed by 1.9%, increasing to US$ 724.00 billion, with the increase in total bank deposits due to the growth in resident deposits by 1.5% and in non-resident deposits by 6.4%. Resident deposits expanded as a result of the growth in non-banking financial institutions’ deposits by 17.8%, government sector deposits by 3.3%, and private sector deposits by 2.0%.

The Ministry of Economy and the Telecommunications and Digital Government Regulatory Authority have announced a new resolution regulating marketing through phone calls, and another resolution detailing violations and administrative penalties related to telemarketing practices. It will impact all licensed companies in the UAE, including those in the free zones, engaging in marketing products and services through marketing phone calls initiated by the company or its employees to the consumer for marketing, advertising, or promoting products or services they offer or on behalf of their clients, using a landline or mobile phone number; this includes marketing text messages and marketing messages through social media applications. Furthermore, all companies will require prior approval from the competent authority, (either the federal or local government) to legally practice telemarketing. Natural persons (individuals) are prohibited from initiating marketing phone calls for products or services they offer in their name or on behalf of their clients. The resolutions require companies, in their marketing of products and services through phone calls, to exercise due care and diligence to avoid disturbing the consumer and to adhere to the highest standards of transparency, credibility, and integrity. Interestingly, some of the provisions include the likes of:

• refraining from using any marketing means that place pressure on the consumer to persuade them of the offered product or service
• avoiding deception and misleading when marketing the product or service
• initiating marketing phone calls only from 9:00 to 18:00
• not calling the consumer again if they refuse the product or service in the first call
• not calling the consumer more than once a day and no more than twice a week if they do not answer the call or end it

The resolutions stipulate a gradation of administrative penalties as follows:

• warning
• administrative fine
• suspension of activity in whole or in part for a period not less than seven days and not exceeding ninety days
• cancellation of the licence
• removal from the commercial register with disconnection of telecommunications services and removal of the phone number

Some of the eighteen resolutions specify the various types of violations and administrative penalties including:

• not obtaining prior approval to engage in phone marketing from the competent authority, with administrative fines ranging from US$ 20.4k, (the first instance), to US$ 27.2k (the second), and US$ 40.9k, (the third)
• a fine of up to US$ 40.9k for marketing services or products to consumers whose numbers are listed in the DNCR
• a fine of up to US$ 40.9k for marketing products and services via phone calls using numbers not registered under the licensed company’s commercial licence in the country fines ranging from US$ 2.7k to US$ 40.9k for any violation of these resolutions’ provisions

NMC Healthcare is considering several options, including an IPO and the sale of the entity, as it explores strategic options for its shareholders. In 2022, a restructuring of the UAE-based hospital operator saw the exit of thirty-four operating companies from administration to become subsidiaries of a new group. Founded in 1975, by the disgraced BR Shetty, NMC grew from a single clinic to become the UAE’s biggest privately owned healthcare operator, employing thousands of people. In 2012, it listed on the LSE and by 2018, it had a US$ 10.9 billion market cap, before crashing to earth the next year, after a report from short seller Muddy Waters alleging that the company had inflated the value of its assets and understated its debt. In April 2020, it was placed into administration, after an independent investigation found more than US$ 4.4 billion of previously unreported debt. In July 2023, NMC filed a US$ 4 billion lawsuit against Shetty and its former CEO, Prasanth Manghat, related to allegations of fraud, which led to its fall in 2020. In November 2023, the UK’s financial watchdog found that the hospital operator had committed market abuse by understating its debts by as much as US$ 4 billion. Earlier this year, NMC and Dubai Islamic Bank signed an out-of-court settlement to resolve all legal disputes between them and any associated third parties. Currently, NMC Healthcare comprises eighty-five hospitals, specialty clinics and medical facilities under several brands serving more than 5.5 million patients annually, with 12k employees.

Having commenced the process of settling with other creditors, after completing the requirements of its restructuring programme, Drake & Scull International has written off US$ 1.14 billion in financial and commercial debts. Consequently, the Dubai-based contractor, absent from the DFM for some five years before returning last month, will now be able to resume its activities by entering into tenders and obtaining new projects. Part of the procedure sees DSI issuing five-year sukuks to its creditors owed more than US$ 272k, (AED 1 million) convertible to shares on maturity. Those creditors, with debts under US$ 272k, will be offered cash settlements, with a total amount of US$ 3.71 million to be paid, according to the final list of creditors published on 30 January. The court’s approval of the restructuring plan and its introduction “has halted all judgments and lawsuits filed by financial and commercial creditors against the company, which are subject to the restructuring process”. Now it seems that DSI can finally return to business as usual.

In the ‘We Will Rock You’ blog – 31 May, it was noted that the DSI had recommenced trading on the DFM, having seen its trading suspended in November 2018.

‘Drake & Scull fell on hard times during the three-year oil price slump from 2014, which heavily affected the property and construction sector in the region, resulting in its shares being suspended in November 2018 after the company reported heavy financial losses. In 2022, it finally completed its restructuring plan, after the company achieved the required voting percentage from its six hundred-plus creditors for a consensual agreement. It posted losses of US$ 61 million and US$ 96 million in 2022 and 2023; at the end of 2023, it posted a 16.0% rise in revenue to US$ 26 million and had assets totalling US$ 97 million. In a filing this week, the company said accumulated losses stood at US$ 1.50 billion, as of 31 March. It expects the benefits of restructuring to materialise in Q2, leading to an overall equity improvement of about US$ 1.25 billion, and posted a capital gain of US$ 926 million by writing off 90% of creditor claims. Accrued interest expenses and provisions for legal cases, totalling about US$ 113 million, were reversed, and mandatory convertible securities amounting to US$ 100 million were issued’.

With Eid Al Adha commencing tomorrow, Saturday 15 June, and the holiday period extending until Tuesday 18 June, the DFM, in line with other government agencies, will open next week on Wednesday 19 June. Tomorrow is Arafah Day, the holiest day in Islam, on Dhul Hijjah 9, as per the Hijri calendar. The blog wishes all its Muslim readers Eid Mubarak!

The DFM opened the week on Monday 10 June, 4 points (0.1%) higher the previous week gained 2 points (0.1%) to close the trading week on 3,984 by Friday 14 June 2024. Emaar Properties, US$ 0.11 lower the previous fortnight, gained US$ 0.09, closing on US$ 2.11 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.62, US$ 4.39, US$ 1.51, and US$ 0.36 and closed on US$ 0.62, US$ 4.43, US$ 1.52 and US$ 0.35. On 14 June, trading was at ninety-seven million shares, with a value of US$ 47 million, compared to two hundred and thirteen million shares, with a value of US$ 91 million, on 07 June 2024.  

By Friday, 14 June 2024, Brent, US$ 2.29 lower (2.8%) the previous fortnight, gained US$ 3.09 (3.9%) to close on US$ 82.66. Gold, US$ 41 (1.7%) lower the previous week, gained US$ 44 (1.9%) to end the week’s trading at US$ 2,349 on 14 June 2024.

The first seasonal forecast of the Food and Agriculture Organisation anticipates world cereal production to be flat at 2.846 billion tonnes – virtually on par with the record output realised in 2023/24. Whilst global maize and wheat outputs are forecast to decline, those of barley, rice and sorghum are predicted to increase. There is a caveat that the recent bad weather around the Black Sea could have a negative impact and possibly lead to a downgrade in world wheat production, a possibility not yet reflected in the forecast. World cereal total utilisation in 2024/25 is expected to increase by 0.5% to a new record high of 2.851 billion tonnes, led by increased food consumption, especially of rice. World cereal stocks are expected to rise by 1.5% to a record level of 897 million tonnes. Inventories of maize, barley, sorghum and rice are all expected to increase, while those of wheat could decline.

Only three months ago, many analysts were forecasting that the US would see three rate cuts in 2024 – three months later it seems that, despite May inflation, at 3.3%, and nudging towards the 2.0% target, the Federal Reserve will cut its key interest rate just once this year. On Wednesday, the Fed left rates alone, to remain at its twenty-three year high, at 5.25% – 5.50%. Jerome Powell, chair of the Fed, commented that only “modest” progress had been made on hitting the target and the central bank would need to see “good inflation readings” before interest rates can be cut.

Earlier in the week, the financial markets were moved by two major events – one, the US Labor Office figures, with the strong – and much higher than expected – employment numbers, at 272k, putting an end to talks for any early Fed rate cuts along, (and the greenback nudging higher); the other being the results of the EU parliamentary elections. The Fed’s concern is that strong employment and wage growth will push up US inflation, whilst global investors. The results of Sunday elections, which saw the FTSE 100, and other European bourses moving markedly lower in early Monday trading, spooked investors who were looking out for cheaper borrowing costs which is not going to happen in the short term. Emmanuel Macron was trounced in the EU vote by Marine Le Pen’s far-right group, with big gains for far-right parties in Germany, Austria and the Netherlands.

The English Professional Footballers’ Association has launched legal action over new FIFA plans for a Club World Cup, due to concerns over player burnout; their decision “was taken without negotiation or engagement with player unions”. The PFA claims that the thirty-two team competition, (to be held in June/July next year), would be “a tipping point for the football calendar and the ability of players to take meaningful breaks between seasons”. Other European players’ unions, along with global players’ union FIFPRO and the World Leagues Association are also warning the FIFA president, Gianni Infantino, not to go ahead, saying FIFA was being “inherently abusive” in adding games. If the Club World Cup were to go ahead, the event will take place every four years and replace the current annual “Micky Mouse” event that Manchester City won in December. Furthermore, UEFA has already added matches to the Champions League programme next season. It seems that the football bodies are more concerned about adding more money to their already bloated coffers and are not worried about some players having to play eight-five matches, at a time when the unions are canvassing for a complete twenty-eight-day gap between seasons

Following the seventeen-year reign of its corrupt supremo, Sepp Blatter, the jury is still out on his successor, Gianni Infantino, who took over in 2015; (in 2020, he was also appointed to be a member of the official International Olympic Committee – another global sporting body beset by corruption claims – of which the disgraced Blatter had been a member for sixteen years until 2015).  Prior to his election, he had been the UEFA General Secretary under the presidency of the disgraced Michel Platini. Many observers, who had hoped for a clean break from the Blatter/Platini cronyism era, were disappointed that no real change was made at FIFA.

Wizz Air is trying to keep up with Manchester City’s four consecutive EPL titles, by being named the worst airline for UK flight delays for the third year in a row – with an average of 31 minutes and 36 seconds behind schedule. They were followed by Turkish Airlines Tui, Air India and Pegasus Airlines, with delay times of 28 minutes and 36 seconds 28.24, 28.12 and 25.06 respectively; cancelled flights were excluded in this analysis of Civil Aviation Authority data. It covered scheduled and chartered departures from UK airports, by airlines operating more than 2.5k flights. Irish carrier Emerald Airlines was the most punctual airline with an average delay of just 13 minutes and six seconds, while Virgin Atlantic came second at 13 minutes and 42 seconds. Passenger numbers at the Hungarian carrier – which operates in Europe, north Africa, the Middle East and other parts of Asia – jumped over 20% to a record sixty-two million in the twelve months to March, up by more than 20% on the previous year, as revenue from ticket sales jumped 11.2%.

One shareholder who will not be ratifying Elon Musk’s proposed US$ 56.0 billion pay packet this week is Norway’s sovereign wealth fund and comes after a Delaware judge invalidated it earlier this year, saying the amount was unfair to shareholders, calling it an “unfathomable sum”. The Norges Bank Investment Management, which is the world’s largest SWF at US$ 1.62 trillion, is Tesla’s eighth-biggest shareholder, holding a 0.98% stake, valued at US$ 7.7 billion, and has acknowledged “the significant value generated under Mr Musk’s leadership since the grant date in 2018”. However, it did add “we remain concerned about the total size of the award, the structure given performance triggers, dilution, and lack of mitigation of key person risk”. NBIM also said it would vote for a shareholder proposal calling on Tesla to adopt a freedom of association and collective bargaining policy, a win for labour unions seeking to assert their influence over the US carmaker. In 2022, it had backed a proposal to call on Tesla to adopt a policy of respecting labour rights such as freedom of association and collective bargaining. The EV maker has been involved in an industrial dispute in Sweden, since last October, and continues to face industrial action in that country.

Earlier in the week, the EC advised Chinese EV car makers that it would apply additional duties of up to 38.1% on imports from 04 July; it confirmed that it would apply rates of 21.0% for companies, (including Tesla and BMW), deemed to have cooperated with the investigation and of 38.1% for those it said had not. There was no surprise that China’s commerce ministry said it would closely monitor the development and resolutely take all necessary measures to safeguard the legitimate rights of Chinese companies – inevitably a tête-à-tête retaliation on European exports. The new tariffs will come on top of the existing EU tariff of 10%. Western producers such as Tesla and BMW, that export cars from China to Europe, were considered cooperating companies.   

Two former directors of BHS, Lennart Henningson and Dominic Chandler, have been ordered to pay at least US$ 27 million to creditors for wrongful trading, misfeasance trading and misfeasance over their role in the collapse of the retailer in 2016; it was claimed that they had breached their corporate duties by continuing to trade, despite knowing there was no reasonable chance that BHS could avoid insolvency. BHS fell into administration with trading liabilities of GBP 1.0 billion. It came after retail tycoon Sir Philip Green sold the ailing business to Dominic Chappell, a former racing driver with no retail experience, for just US$ 1.27, (GBP 1.00), in March 2015. Within a year, BHS went down, resulting in 11k job losses and a £571m pensions shortfall. Having been highly criticised , Green later agreed a US$ 460 million cash settlement with the Pensions Regulator to plug the gap in the pension scheme. Both directors could face additional fines of up to US$ 169 millio for misfeasance trading. According to a 2016, Parliamentary Select Committee hearing, the collapse of BHS “created many losers”, (including around 20k current and future pensioners faced “substantial cuts to their entitlements”), but also “winners”, including” many of those closest to the decisions that led to the collapse of BHS, walking away greatly enriched despite the company’s failure”.

Tesco reported that sales grew across the group, including Ireland, by 3.4% to US$ 19.45 billion in the quarter to 25 May, on the year; the UK market posted a bigger rise – at 4.6% – to US$ 14.50 billion. Food sales came in 5.0% higher, driven by high demand for fresh produce, as sales of Tesco Finest products also grew “strongly”, amid demand by shoppers for premium products. Market researcher Kantar posted that the grocery giant’s market share rose by more than fifty bp to 27.6%. Tesco seemed to benefit from its strategy of matching some of its prices, on key items, with those of Aldi, as well as its Clubcard loyalty scheme, which provides lower prices for members. Tesco anticipates that it will deliver an operating profit of at least US$ 3.56 billion for the current financial year.

Not before time, the National Crime Agency is finally investigating suspected criminal offences in the procurements of PPE contracts by Medpro, with reports that a 46-year-old man has been arrested, as part of its investigation into the consortium; he was arrested on suspicion of conspiracy to commit fraud and of attempting to pervert the course of justice. In the early days of the pandemic, certain ministers may have taken the opportunity to “fill their boots”, as the rules relating to government purchases were “relaxed” because of the urgency to bring in critical medical equipment. The government has rejected accusations that it had operated a “chumocracy” – or a “VIP lane” – in its award of contracts during the pandemic but did confirm that was “a separate mailbox” set up to assess the influx of offers to possible credible leads. However, the National Audit Office said because the government grappled with the urgent need to provide frontline workers with PPE, it set up a high-priority lane to assess and process potential leads from “government officials, ministers’ offices, MPs, members of the House of Lords, senior NHS staff and other health professionals”.

One such company was PPE Medpro which, in June 2020, was awarded a US$ 103 million contract to supply two hundred and ten million face masks, followed two weeks later by a US$ 155 million contract to supply twenty-five million surgical gowns. Both contracts were awarded directly by the government, without competitive tenders, and, at the time, it remained unclear how its offer to supply PPE came to be processed through a channel created for companies referred by politicians and senior officials. It appears that two of its three directors were also directors of Knox House Trust, part of the Knox Group in the Isle of Man, a tax advisory and wealth management firm run by the businessman Douglas Barrowman; his wife happens to be Michelle Mone, the former owner of Ultimo lingerie and a Conservative peer. One of those two directors was also listed as the sole owner of PPE Medpro. The fact that the National Audit Office found that those companies using the “VIP lane” were ten times more successful in securing PPE contracts led to raised eyebrows and questions about whether some firms profited from political connections. Furthermore, PPE Medpro was only incorporated on 12 May 2020, but the contract had been under discussion “for a considerable time” before then.

Zuber Issa has sold his 22.5% stake in Asda to TDR Capital, the supermarket’s private equity backer, so that he can focus towards managing his EG UK forecourt sites and charitable endeavours. He will also step down as co-chief executive of EG Group, after reaching an agreement to buy its remaining UK forecourt business and some food service sites for US$ 290 million. EG Group said it will use the cash to repay debt and shore up its balance sheet. Zuber will keep his shareholding in EG and continue as a non-executive director, while his brother will become sole CEO. The purchase will increase TDR’s stake to 67.5%, whilst his brother, Mohsin, will still retain a 22.5% share, (with Asda holding the remaining 10%).  The Blackburn brothers had bought Asda, from Walmart, for US$ 8.64 billion in 2020, backed by TDR.

A US South Florida court has ordered multinational fruit company Chiquita Brands International liable to pay over US$ 38 million to eight families, whose relatives had been killed by the United Self-Defence Forces of Colombia. Also known as the AUC, the Colombian paramilitary group, had been designated by the US as a terrorist organisation, and had engaged in widespread human rights abuses in Colombia, including murdering people it suspected of links with left-wing rebels; the victims ranged from trade unionists to banana workers. The initial case was brought by the families after Chiquita pleaded guilty in 2007 to making payments to the AUC, in the six years to 2004. The banana trader argued that they had no choice but to pay the AUC or face the distinct possibility of retaliation which could be that staff and property belonging to Chiquita’s subsidiary in Colombia could be harmed. Although the AUC claimed to have been created to defend landowners from attacks and extortion attempts by left-wing rebels, it more often acted as a death squad for drug traffickers; at its peak, it had an estimated 30k members who engaged in intimidation, drug trafficking, extortion, forced displacement and killings.

As widely expected, Pakistan’s central bank cut its key interest rate by 150 bp, to 20.5%, on Monday in its effort to boost growth amid a sharp decline in retail inflation, declining to a thirty-month low of 11.8% – this was the first rate reduction in nearly four years. However, with headline inflation decelerating by 550 bps, a higher cut of up to 300 bp was on the cards; expectations are that there will be a fall in the region of 4.0% this year. Currently the country is in negotiations with the IMF for a loan of up to US$ 8.0 billion in a bid to avert a payment default for an economy that is growing at the slowest pace in the region. In 2023, it went into contraction but has recovered this year to a growth of 2.0%, with a favourable 3.6% expected in 2025. If the loan is approved by the world body, there will be possible further rate cuts later in the year.

Over 230k Pakistanis moved to the UAE last year to add to the 1.7 million already in the country, making it the second largest community in the country to India, which at last count was 3.5 million or round 30% of the population. The GCC has an estimated 863k Pakistanis, of which almost half – 427k – live in Saudi Arabia. It is estimated that more than 13.53 million Pakistanis have gone abroad through official procedures to work in more than fifty countries. This diaspora contributes to the development of the South Asian nation’s economy by sending remittances, the primary source of foreign exchange after exports. Pakistanis in the UAE remitted US$ 3.7 billion during the March 2024 fiscal year, behind Saudi’s US$ 5.1 billion but ahead of the UK (US$ 3.2 billion), the US (US$ 2.5 billion), other GCC countries (US$ 2.3 billion), EU (US$ 2.6 billion), Australia (US$ 0.5 billion) and other countries (US$ 1.3 billion).

Riots are not new events in Argentina, so there is little surprise to see riots break out outside Argentina’s Congress over controversial economic reforms tabled by President Javier Milei. Politicians approved the President’s contested economic reforms, which he says are needed to undo a major financial crisis; they include executive powers for the president and radical measures to overhaul the nation’s economy, currently grappling with nearly 276% inflation – down from 292% in April, with inflation having hit ttreble digit numbers for the past twelve months. The Argentine peso dipped to 1,220 against the US dollar on the black market, narrowing the gap between the official and informal exchange rates.

Milei rose to power on promises he would resolve what is Argentina’s worst economic crisis in two decades. The electorate – 50% of whom now live under the poverty line – is against any plans for reduced government spending, with the new president having slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket and spreading economic misery.  His austerity bill passed in parliament by one vote but still has to pass through the upper house, and allows him the power to manage energy, pensions, security and other areas and includes several measures seen as controversial. Four of those are a plan to privatise  some state-owned utilities, a generous incentive scheme for foreign investors, tax amnesties for those with undeclared assets, and plans to privatise some of Argentina’s state-owned firms are among the most disputed. It is expected that China will be a key player in helping ease fiscal pressures and free up treasury reserves, along with the IMF expected to reschedule billions in Argentina’s debt repayments to start from next year.

No surprise for Australian readers to see their country’s capitals rank among the world’s most unaffordable markets for middle-income buyers, in a ninety-four-city survey, covering eight countries, by the Chapman University Frontier Centre; the countries are Australia, Canada, Hong Kong, Ireland, New Zealand, Singapore, UK and the US. The study focuses on the ability of “median income” households to purchase median-priced homes. To compare different markets, within a country and across the world, it uses a metric called the “median multiple”, a ratio of median incomes to median house prices. Using that criteria, Hong Kong, Sydney and Vancouver are the most unaffordable markets for those buyers, with Pittsburgh, Rochester and St Louis the most affordable. However, five Australian capital cities – Sydney, Melbourne, Adelaide, Brisbane and Perth – all fell in the lowest quartile for affordability. It concluded that the key driver of more affordable housing will be progressive policies that free up land for development whilst noting that, in high-income nations, housing costs now far outpace income growth, and that “the crisis stems principally from land use policies that artificially restrict housing supply, driving up land prices and making home ownership unattainable for many.” It is estimated that median-income owners would need to spend around 60% of their gross income to purchase a median-priced property. The study’s highest category of “impossibly affordable” conveys the extreme difficulty faced by middle-income households in affording housing at a median multiple of 9.0. There is obviously the impact of urban planning procedures, with “the net effect is that land values and house prices have become skewed against the middle class, whose existence depends upon the very competitive land market destroyed by the planning orthodoxy”. It is interesting to see that in addition to the longer-running causes of housing unaffordability, in the United States, nearly two-thirds of the recent house price “shock” could be attributed to the sudden and significant shift to remote work during the pandemic. The same may have happened in Australia.

Late last week, the Reserve Bank of Australia’s deputy governor, Andrew Hauser, said that the country remains on its “narrow path” which “has worked” to get inflation down without the same scale of job losses as some other countries, such as Canada. Unlike other central banks, the RBA not only has to control inflation, in the 2% – 3% target range, but also maintain full employment, currently viewed at just under 4.5%. The European Central Bank cut interest rates for the first time in five years after its inflation outlook improved but warned that it’s not “pre-committing to a particular rate path” for future decisions. There is no doubt that Australia followed its own path during the pandemic – and did likewise when it came to managing the inflation crisis. It is noted that the RBA raised interest rates later and by less than many other developed economy central banks – and this approach has worked better than most other G20 nations. The deputy governor also commented that “the strategy has worked. It’s a narrow path, but it has worked”. It has to date, but the RBA is fully aware that it is easier to fall off a narrow path than slip on a wider road.

Last December, the Biden administration hit Russia with an economic double whammy, initiating a programme to target foreign banks, deemed to be aiding Russia’s war effort in Ukraine, as well as placing sanctions on the Moscow stock exchange, leading to it halting trading in dollars and euros. It also moved to try to restrict Russia’s use of technology, including chips and software. The December executive order imposed sanctions on banks, dealing with about 1.2k individuals and companies, deemed to be helping Russia’s war machine; this week, the sanctions will now impact 4.5k, with details of how it will also target gold-laundering. The US will target shell firms in Hong Kong selling chips to Russia, and in addition, software and IT services will also be restricted, although the US said its actions “are not intended to disrupt civil society and civil telecommunications”. Ironically, despite all this pollical and economic pressure, the IMF has forecast 2024 growth in Russia at 3.2%.

Joint analysis by the Yorkshire Building and data consultancy CACI estimates that more than a staggering US$ 466.0 billion, (GBP 366.0 billion), is to be found in UK current and savings accounts earning returns of 1% interest or less; it also noted that there are still nearly thirteen million current accounts held in the UK, with balances above US$ 6.4k (GBP 5k). More surprisingly, 17% of people admit to having never checked what rate of interest they are earning on their savings, and 36% admit they keep their savings in their current account.

EU Q1 figures indicate that there was an 0.3% rise, on the quarter, and 0.5% and 0.4% on the year, in seasonally adjusted GDP, for both the EU and the euro area. The best performing member states were Malta, Cyprus and Croatia, with quarterly improvements of 1.3%, 1.2% and 1.0%, whilst declines of 1.8%, 0.5% and 0.1% were noted in Denmark, Estonia and the Netherlands. Romania (2.4%), Malta (1.4%) and Portugal (1.1%) recorded the highest growths of employment, whilst declines were noted in Poland (0.6%), Slovakia (0.3%) and Sweden (0.1%). Over the past two quarters, (Q1 2024 and Q4 2023), the number of employed persons increased by 0.3% and 0.3%, and 0.2% and 0.3% in the EU and euro area, as employment increased by 0.9% and 1.0% and 1.0% and 1.2% in the EU and euro area.

Preliminary figures, from the Italian National Institute of Statistics, indicate that the country’s 2023 inflation rate, excluding the prices of imported energy, was 0.1% lower on the year at 6.9%. The agency forecasts that the rate for this year and 2025 will be 1.9% and 2.0%.

US inflation rates have fallen since its 2022 peak but, at the moment, it seems to have hit a sticky period, with the current rate at 3.4%, still some way off the Fed’s 2.0% target. Over the past twelve months, wages are up 4.1%, with the Labor Department posting an 0.4% rise in May. The Labor Department said average hourly pay increased 0.4% from April to May, as the pace picked up again after several months of slowing. The Fed faces a conundrum – if they keep rates high for too long, it could result in a marked slowdown in economic slowdown and if they go in the opposite direction, it could push the inflation rate to head north again. It seems inevitable that there will be no rate changes until at least Q4, with the Fed remaining focused on the upside risks to inflation rather than the downside risks to the real economy.

US labour figures once again surprised the market, that this time was looking at it slowing down. However, in May, employers added 272k jobs, well above the 185k expectations. There is no doubt that May job figures are in contrast to suggested signs of softening and could well result in brakes being applied to any Fed move to start reeling in rates. There is little chance that they will jump on the ECB/Bank of Canada’s bandwagon, (with both cutting rates by 0.25% last week) to also lower rates because it needs to see that the high rates (and high borrowing costs) are actually working to slow the economy and help ease pressures pushing up prices.

Official data from the Office for National Statistics pointed to an unexpected unemployment increase, to 4.4%, in the quarter ending 30 April 2024 – its highest level since September 2021. This surprise downturn comes despite wage growth remaining robust, (at an annual 6.0% hike), with earnings continuing to rise faster than prices. More surprisingly – and worryingly – the inactivity rate rose to its highest level since 2015, with 22.3% of working-age people, (equating to more than nine million people), deemed not to be actively looking for work. Pursuant to the pandemic, almost 800k people have fallen out of employment into “economic inactivity”. Since 2022, long-term sickness has become the number one reason why working age people are economically inactive. The ONS noted “this month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong.” The number of job vacancies also fell – 9k lower to 904k. With these figures, it is highly unlikely that the BoE will move on interest rates next week – and any rate cut will occur in August at the earliest. Rishi Sunak and his cronies will be hoping for a different outcome.

Three weeks before the UK general election, on 04 July, and according to the Trade Union Council, England has seen the biggest rise in YTD unemployment of any of the thirty-eight OECD countries, with the levels increasing, on the quarter, by 178k; the biggest rises were seen in the NW, W Midlands and London, with 47k, 38k, and 37k. The TUC noted this was in tune with a slump in job vacancies and real wages being still worth less than in 2008. It also found that “over four million people are trapped in insecure work and real wages are still worth less than in 2008,” and unsurprisingly called for a change of government.

After Q1 posted the fastest growth in two years, and following the mini recession in H2 2023, UK’s April economy failed to grow after higher than usual wet weather put off shoppers and slowed down construction. If you were Rishi Sunak, the economy has “turned a corner”, but this last throw of the dice seems to be his departure is all but sealed, with the other side noting that it was “underwhelming. For the fourth consecutive month, spending on services, which includes everything from hairdressers to hospitality, grew, although shop trade fell. Output in services for consumers, many of whom are still struggling to cope with the steep rises in the cost of living, fell by 0.7%. There were declines in production and in the construction industry. The country’s GDP moved 0.4% higher in March, with the quarter ending 30 April seeing a much-improved economy up 0.7%. Other positive indicators show May’s PMI reading for manufacturing was the best since July 2022, and there was a month-on-month increase in retail sales, helped by solid trading over the first Bank Holiday weekend of the month.

Mainly because of the BoE’s reticence to take positive action, i.e. to reduce rates from their historic highs of 5.25%, May demand in the housing market dropped off as prices dipped.  Fixed rates started heading south at the beginning of the year, ahead of a then imminent rate cut. The delays to rate cut expectations – a familiar theme for markets during 2024 – hit sentiment among buyers, with the Royal Institute of Chartered Surveyors saying many potential buyers are concerned about affordability and are awaiting rate cuts before entering the property market. All year, the market has been asking the same question to the central bank which continues to reply ‘not right now’ to the question, Are We There Yet?