Dress Rehearsal Rag!                                                        09 August 2024

This blog estimates that the apartment to villa ratio is 82:18; the latest official figures, in 2022, showed that there were 639.0k apartments and 144.6k villas in Dubai – and assuming a 50k unit increase in 2023, that would give a 2023 year-end total of 680k apartments and 153.6k villas, a total of 833.6k units. Further surmising that the average villa and apartment has 4.85 and 4.25 occupants, and the 2024 population grows 165k (4.51%) from 3.655 million to 3.820 million, and if the number of new 2024 units comes in at 40k, then the property portfolio would rise to 873.6k units; with the 82:18 ratio, that would result in 716.4k apartments and 157.2k villas. 4.25 occupants in 716.4k apartments would house 3.045 million and 4.85 occupants in 157.2k villas a further 762k; this gives a “housing population” of 3.807million, almost in tandem to the forecast 3.820 million by the end of 2024. All well so far with the new supply in line with the demand from the rising population. But add to the equation the number of Airbnb’s, the number of existing residents moving from renting to buying, the number of second homes empty for most of the year and investment properties waiting to sell for capital appreciation, then it can be seen that this cycle has some way to go before running out of steam.

By the end of 2022, according to official data, Dubai’s property portfolio was 736k units, and if you add say an additional 50k added in 2023, this year started with some 786k units. Residential properties in Dubai witnessed growth with the completion of about 6.6k new units in H1, bringing the total number of units to 792.6k. Let us say that a further 27.4k are handed over in H2, the total property numbers, at the end of 2024, will be 820k, and assuming this blog’s formula of 18:82, that would assume 147.6k villa/townhouses and 672.4k apartments. In the first seven months, Dubai’s population has grown 100k to 3.755 million and assume it expands by another 75k, it will end the year with 3.830 million. Using this blog’s formula of villa/townhouse – 18% and 4.85 occupants per unit – and apartments 82% and 4.25 occupants, the “housing population” will be 0.716 million in villas/townhouses and 2.858 million in apartments – a total of 3.574 million, and some 254k lower than the 3.830 million detailed above. But add to the equation the number of Airbnb’s, the number of existing residents moving from renting to buying, the number of second homes empty for most of the year, the number of unoccupied units could be as high as 12% of total units, and investment properties waiting to sell for capital appreciation.  Then it can be observed that demand is not being currently met by supply.

Property Finder notes impressive July property returns, with 17.7k real estate transactions worth US$ 15.10 billion – 59% and 57% higher compared to July 2023; ten locations, including Al Barsha South Fourth, Business Bay, Marsa Dubai, Jebel Ali First, Wadi Al Safa and Al Thanyah Fifth, accounted for 51% of all July transactions. The split saw the off-plan market with 9.3k transactions, (77% higher on the month), valued at US$ 5.29 million, (up 23%); the secondary market witnessed 8.4k transactions, (27.2% higher), valued at US$ 9.81 billion.

Further segregation sees that 59% of property seekers with an interest in ownership were looking for an apartment, while 41% were searching for villas/townhouses. For the apartment sector, 13.7%, 33.6% and 35.2% were looking for studios, 1 B/R and 2 B/R units. In the villa/townhouse sector, 39.8% and 44.9% were searching for 3 B/R and 4 B/R units. Popular areas for apartment ownership were Dubai Marina, Jumeirah Village Circle, Downtown Dubai, Business Bay, and for villas/townhouses Palm Jumeirah. Dubai Hills Estate, Al Furjan, Palm Jumeirah, Akoya by Damac.

When it comes to rentals, 80% of tenants were seeking an apartment, with the remaining 20% villas/townhouses. 61% were looking for furnished apartments, with the balance for unfurnished and for villas/townhouses the split was 57:43. Top rental locations for apartments included Dubai Marina, Jumeirah Village Circle, Downtown Dubai, Business Bay and Deira, and for villa/townhouses Jumeirah, Al Barsha, Dubai Hills Estate, Akoya Damac Hills, and Umm Suqeim.

As the demand for Dubai property continues unabated, driven by many factors, such as the country’s ongoing economic and financial stability, there have been at least a dozen residential projects launched in H1, including from the likes of Emaar, Deyaar, and Dubai Investments. Furthermore, there have been several other commercial complexes and towers, as well as office/warehouse spaces to keep up with the increase in the rising number of companies and projects. There seems to be no immediate end to the current positive market trend which has seen the bull market surging for the past thirty months.

Samana Developers has launched the “Samana Avenue” project in Dubailand, where the buyers will have the option of getting tailored investment advice on how to acquire the ten-year residency visa. The project, with a built-up area of 254.7k sq ft, features sixteen floors with one hundred and sixty-five studios, 1 B/R and 2 B/R units, with most of the apartments coming with private swimming pools; prices start at US$ 178k. The developer has introduced a flexible payment plan – eight and a half years of 1% monthly payments and 0.5% post-handover. Completion is slated for December 2027. The developer expects to launch a further seventeen new projects this year.

It is reported that the construction of The Pulse Beachfront, a luxury master-planned community in Dubai South’s Residential District, is 90% complete. Dubai South Properties indicated that phase 1, which comprises two hundred and fifty-one units, is expected to be finished this year.

With an annual 8.0% increase, Dubai International welcomed a record 44.9 million guests in H1, as the emirate attracted 9.31 million international visitors over the same period; DXB is on track to end the year with a record 91.8 million. Its four biggest destination nations, accounting for 33.4% of traffic were India, Saudi Arabia, UK and Pakistan, with numbers of 6.1 million, 3.7 million, 2.9 million and 2.3 million; they were followed by US and Russia, with 1.7 million and 1.3 million guests. China’s numbers exceeded 1.0 million – an 80% annual growth and a 90% recovery compared to pre-pandemic 2019 levels. The top three city destinations were London with 1.8 million guests, Riyadh (1.6 million), and Mumbai (1.2 million). The airport is connected to two hundred and sixty-nine destinations, across one hundred and six countries, served by one hundred and one international airlines; totlal flight number were 7.2% higher at 216k.

The Dubai government has introduced a plan that may revolutionise the emirate’s future working hours. Over the next seven weeks, employees at fifteen government entities will work a four-day a week, with a seven-hour shift, ie a twenty-eight-hour week. This is in line with Dubai’s strategy to improve people’s living conditions and follows Sharjah’s successful implementation of a four-day working week in 2022. The reasoning espousing a four-day week is that it can improve employees’ mental health, increase job satisfaction, boost productivity and help organisations to retain talent. Obviously, there are many sectors – including aviation, hospitality and medical – where it cannot happen for obvious reasons. This innovative pilot scheme will provide valuable evidence so that a reasoned decision can be made. Abdullah Al Falasi, director general of the Dubai Government Human Resources Department said, “we aim to improve the quality of life of employees and enhance the sustainability of government resources,” adding that “ultimately contributes to consolidating Dubai’s global position as a preferred city for living and working by providing a new model experience that integrates the elements of quality of life”.

Other countries are either studying the possibility of moving to such a working week or have already introduced it. A 2023 six-month study of forty-one Portuguese companies revealed that a shortened working week led to work exhaustion falling by 19% and challenges to maintaining a work-life balance dropping from 46% to 8%. A year earlier, nearly 3k employees across sixty-one UK companies, that trialled a shorter working week, reported lower stress and better health.

The UAE Cabinet has come up with a new fee structure for EV charging facilities at public places – express charging service will now be a minimum of US$ 0.327 (AED 1.20) + VAT per kWh, while slow charging service will be a minimum of US$ 0.191 (AED 0.70) + VAT per kWh. Presently, the rates at charging stations vary widely, with some being offered for free, such as Tesla’s free supercharging services. This new regulation will become effective as from 06 September. Since 01 June 2023, the cost of charging electric vehicles at public charging stations has been US$ 0.104, AED (0.38) per kWh + fuel Surcharge per kWh + VAT for commercial and non-commercial EV Green Charger registered users.

The UAE Central Bank posted that it dealt with 9.33 million cheques, in the first five months of the year, valued at US$ 148.34 billion. The value of cash deposits at the Central Bank over the period topped US$ 20.46 billion, while cash withdrawals stood at US$ 24.02 billion. Transactions included US$ 1.354 trillion for interbank transfers and US$ 798.36 billion for transfers between bank customers.

Following inspections by the Ministry of Economy, thirty-two local gold refineries have been suspended for three months for failing to follow anti-money laundering laws; each company was charged with eight violations. Focussing on the trade and manufacture of precious metals and gemstones, the investigations were to ensure compliance with all the pertinent regulations, relating to the gold sector. The alleged violations include failing to take proper measures to identify money laundering risks, not making required notifications of suspicious transactions to the Financial Information Unit and not examining customer and transaction databases against names on terrorism watch lists. The three month suspensions started on 24 July. None of the thirty-two companies, which account for about 5% of UAE’s gold sector, were identified. Dubai has become one of the largest gold trading hubs in the world, where the country is presently the fourth biggest country in the world for gold imports. The value of fines, imposed by regulatory authorities in the field of AML/CFT, between January and October last year, was more than triple the 2022 comparative figure. It is estimated that the 2023 number of suspicious activity reports, relating to the gold sector, increased to 6,432 from 223 in 2021.  No doubt this episode serves as a warning for all UAE businesses to strengthen their AML and CFT practices, as the government continues to enhance measures to enforce the highest international standards, following its sterling efforts to be taken off the FATF grey list earlier in the year.

UAE telecom operators e& (Etisalat)and Emirates Integrated Telecommunications Company PJSC (du) have paid a H1 royalty to the federal government of US$ 965 million – 5.1% lower than that paid in the corresponding period in 2023. Of that figure, e& paid US$ 749 million and du US$ 216 million, under the Ministry of Finance’s Royalty Guidelines.  In the eleven years to 2023, the two telecom operators’ royalty payments has been US$ 24.60 billion (US$ 19.24 billion by e& and US$ 5.37 billion by du). Last November, both firms announced that they had received the Royalty Guidelines for the local telecom sector issued by the Ministry of Finance for January 2024 through December 2026. The 2024 royalty payment formula does not extend to what is generated from its international operations. The excluded items include:

• Profits generated from international controlled entities
• Profits of international noncontrolled entities (associates and JVs)
• Dividends or other profit distributions received from international investments already subject to local corporate or other similar tax in the respective jurisdiction at 9% or above
• Profit attributable to non-controlling interest holders of the UAE controlled entities

The federal royalty rate of 38% will be applied to the sum of regulated and non-regulated UAE net profit for both e& and du, as well as the royalty and corporate tax rate of 9% on profit. For e&, the aggregate annual amount of royalty and corporate tax shall not be lower than US$ 1.55 billion. On the other hand, the aggregate amount of royalty and corporate tax payable by du shall not be lower than US$ 499 million per year.

Sidara, (also known as Dar Al Handasah), has confirmed that it will not be making an offer for the UK oilfield services and engineering firm John Wood Group, “in light of rising geopolitical risks and financial market uncertainty at this time”. In May, it had increased its offer to US$ 2.93 – 52% higher than Wood’s pre-bid share price. Last year, private investment firm Apollo Global Management ended its own pursuit of Wood, having made five proposals to take over the company, including an offer of up US$ 3.06 per share. On Monday, Wood shares were trading 36% lower.

The Central Bank of the United Arab Emirates confirmed that in the first five months of 2024, credit facilities provided by the UAE national banks to the business and industrial sectors amounted to US$ 70.03 billion. Figures also indicated that the two sectors saw a 3.5% rise in cumulative credit balance to US$ 209.05 billion, expanding by US$ 1.85 billion or 0.9%, on the month, and US$ 5.91 billion (2.9%) over the past twelve months. National banks provide the most credit to the two sectors, totalling US$ 232.12 billion, or 90.1%, of the combined credit balance of the two sectors, with foreign banks having the balance equating to US$ 23.08 billion. The credit balance for the sectors from banks in Abu Dhabi was around US$ 104.85 billion, in Dubai US$ 98.69 billion, and in other emirates lent US$ 28.58 billion to these sectors. Conventional banks accounted for approximately US$ 191.20 billion, or 82.4%, of the credit financing provided to the trade and industry sectors by the end of last May, while the share of Islamic banks reached approximately US$ 40.93 billion, equivalent to 17.6%.

The market cap of Arab stock exchanges exceeded US$ 174 trillion at the end of H1, according to the Arab Monetary Fund. The AMF’s monthly bulletin data said that the market value of the Abu Dhabi Securities Exchange reached US$ 761.54 billion, that of the Dubai Financial Market was US$ 184.8 billion, and that of the Saudi Exchange ‘Tadawul’ was US$ 2.68 trillion. The market value of the Qatar Stock Exchange was US$ 157.9 billion, the Boursa Kuwait was US$ 134.06 billion, and the Muscat Stock Exchange was US$ 63 billion.

Aramex posted a 15.0% hike in H1 net profit to US$ 13 million, driven by a 20% growth in EBIT and an improved EBIT margin, whilst revenue was 8.0% higher on the year, attributable to new customer wins and an increased focus on sales specialism. The company posted an annual 5.0% increase in gross profit to US$ 202 million, with a 24% GP margin. The global provider of comprehensive logistics and transportation solutions also noted a 32% growth in International Express and 5% in Domestic Express, along with strong growth in freight volumes in H1. Its cash position at 30 June stood at US$ 125 million, with a Net Debt-to-EBITDA ratio of 0.9x.

Emirates Central Cooling Systems Corporation PJSC posted a 10.3% rise in H1 revenue to US$ 368 million, with EBITDA growing 6.0%, on the year, to US$ 189 million, and profit before tax 6.3% higher at US$ 117 million; net profit after tax amounted to US$ 106 million. The two main drivers behind the increased demand are real estate developers and building owners who have been increasingly adopting environmentally friendly practices, and the increasing occupancy rates in real estate projects of various uses, led by the residential segment, and the continuous addition of new projects to the company’s portfolio. In H1, there was a significant increase in Empower’s business, with fifty-six new contracts signed to provide more than 58.3k refrigeration tonnes to reach a total contracted capacity of more than 1.72 million RT. Some of the contracts include 19k RT in Jumeirah Village, 7.2k RT on Sheikh Zayed Road, 6.9k RT in Meydan and 6.3k RT in Jumeirah Lakes Towers. Empower is the world’s largest district cooling services provider.

Amlak Finance reported an H1 net profit of US$ 8 million on the back of a 10.0% hike in revenue, from financing and investing activities, to US$ 18 million; the firm’s total revenue, excluding a one-off gain of US$ 42 million, increased by 14.3% to US$ 39 million, compared to US$ 34 million in H1 2023.The company’s operating costs increased by 4.3%, to US$ 13 million, mainly attributable to ongoing restructuring efforts to streamline operations and enhance efficiency. In H1, it repaid more than US$ 12 million to financiers and since 2014, has managed to settle 84% of its Islamic deposit liabilities, including Mudaraba instruments.

Q2 results from Union Properties PJSC see a US$ 5.0 million profit, as revenue moved 7.6% higher to US$ 35 million, attributable to high property sales and Dubai’s real estate market uptrend. In H1, profit almost doubled to US$ 9 million, as revenue rose 15%.
The group’s subsidiaries also contributed significantly, achieving an accumulated gross profit of US$ 14 million, which reflects a 15% increase in H1, compared to US$ 12 million during the same period in 2023. In a bid to solidify its position in the UAE’s real estate sector, UP expects to launch projects worth US$ 1.36 billion in the short to medium term.

Dubai Electricity and Water Authority registered record H1 results with revenue, (mainly driven by an increase in demand for electricity, water and cooling services), and operating profit both moving higher on the year by 7.3% to US$ 3.73 billion and by 6.3% to US$ 899 million; EBITDA came in at US$ 1.80 billion – up 8.9%. Consolidated first half net profit was down 6.7% to US$ 708 million mainly due to higher depreciation and the first time application of corporate tax in 2024. DEWA has approved a significant dividend payout of US$ 845 million to shareholders, set for October 2024.The demand for power and water in 2024 grew by 6.7% and 4.3% respectively. By 2030, installed capacity for power will reach 20 GW and 735 MIGD for water, with 5.3 GW being from renewable sources, representing 27%. DEWA’s Q2 consolidated revenue increased by 7.8% to US$ 2.15 billion, EBITDA by 8.8% to US$ 1.09 billion, and profit before tax was up by 5.9% to US$ 572 million.

H1 gross power generation was up 6.7%, on the year, to 25.5 TWh (terawatt hours), with green energy of 3.3 TWh, representing 12.9% of total generation. Electricity and water customer accounts were 4.2% higher, on the year, at 1.237 million. Meanwhile, total desalinated water production in H1 rose 4.3% to 71.3 billion Imperial Gallons.

Emaar Properties has posted its H1 results, noting that there were marked increases in both annual revenue and net profit before tax by 17% to US$ 3.92 billion and 33% to US$ 2.12 billion; EBITDA was 24% higher at US$ 2.18 billion. The improved figures were driven by sustained investors’ confidence and robust demand in Dubai’s real estate market, strong project execution capability, as well as continued growth in tourism and retail sales. Property sales grew 56% to a record US$ 8.58 billion whilst its revenue backlog stood at US$ 24.55 billion – up 43% on the year and 15% on the quarter – which represents future revenue from property sales that will be recognised over the next five years, indicating sustained profitability.

Emaar Development, a majority-owned subsidiary, successfully launched twenty-five projects, in H1, and saw record property sales 56% higher at US$ 8.09 billion, on the year. The consolidated revenue of Emaar Properties, from its UAE property development business, reached US$ 2.45 billion, including Dubai Creek Harbour. With an ongoing uptick in real estate sales, Emaar’s backlog from property sales in the UAE has reached US$ 22.43 billion, 33% higher than December 2023, which will be recognised as revenue in the coming years.

Its Malls and Commercial Leasing operations posted H1 revenue of US$ 763 million, with an EBITDA of US$ 627 million. Tenants’ retail sales performance of tenants was over 7% on the year, with its prime assets boasting occupancy of almost 99%. Recently, Emaar Malls announced a US$ 405 million investment to expand Dubai Mall, introducing two hundred and forty new shops. It has tied up with Salik to introduce a paid parking system designed to enhance the guest experience.

During H1 2024, Emaar’s International Real Estate operations reported property sales 50% higher at US$ 490 million, and US$ 218 million in revenue, equating to 6.0% of Emaar’s total revenue, attributable to operations in Egypt and India. In H1, its hospitality, leisure and entertainment divisions generated US$ 490 million in revenue – a 9% increase on the year -driven by the steady growth in the tourism industry and strong domestic spending. Emaar’s UAE hotels, including those under management, added four other properties to its portfolio, and reported an average occupancy of 78%. Emaar’s recurring revenue-generating portfolio, including malls, hospitality, leisure, entertainment and commercial leasing, collectively generated revenue US$ 1.25 billion – equating to 32% of Emaar’s total revenue.

Spinneys posted an annual 9.9% jump in H1 revenue, to US$ 436 million, along with a 12.3% rise in gross profit to US$ 180 million and a US$ 40 million net profit; both gross and net margins improved by 90 bp to 41.3% and by 50 bp to 9.2%. Adjusted EBITDA was 9.4% higher at US$ 83 million, with a margin of 19%, despite the impact of one-off IPO-related costs and pre-store opening expenses in Saudi Arabia. Spinneys confirmed its IPO interim dividend of US$ 28.0 million, equivalent to US$ 0.777 per share and 70% of distributable profits.

The DFM opened the week on Monday 05 August 43 points (1.0%) lower the previous  week, and shed 42 points (1.0%) to close the trading week on 4,195 by Friday 09 August 2024. Emaar Properties, US$ 0.09 lower the previous seven weeks, shed US$ 0.07, closing on US$ 2.22 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.65, US$ 5.19, US$ 1.61 and US$ 0.35 and closed on US$ 0.65, US$ 5.27, US$ 1.59 and US$ 0.34. On 09 August, trading was one hundred and nine million shares, with a value of US$ 66 million, compared to two hundred and forty million shares, with a value of US$ 108 million, on 02 August.  

By Friday, 09 August 2024, Brent, US$ 0.49 lower (11.3%) the previous four weeks, gained US$ 2.40 (3.1%) to close on US$ 79.50 Gold, US$ 90 (3.8%) higher the previous week, shed US$ 45 (1.8%) to end the week’s trading at US$ 2,431 on 09 August 2024.

In 2020, Google was sued by the US Department of Justice over its control of about 90% of the online search market, and this week a US judge has ruled that the tech giant acted illegally to crush its competition and maintain a monopoly on online search and related advertising.  Any penalties or fines have yet to be levied by the regulator, but the government has asked for “structural relief” – which could, in theory at least, mean the break-up of the company. The US District Judge Amit Mehta noted that Google had paid billions to ensure it is the default search engine on smartphones and browsers, and that “Google is a monopolist, and it has acted as one to maintain its monopoly”. Meanwhile, US Attorney General, Merrick Garland, commented that “no company – no matter how large or influential – is above the law,” and that “The Justice Department will continue to vigorously enforce our antitrust laws.” Prosecutors accused Google of spending more than US$ 10.0 billion annually to Apple, Samsung, Mozilla and others to be pre-installed as the default search engine across platforms.

Recession fears also hit the crypto market with Bitcoin and ether plunging to multi-month lows of under US$ 50k and US$ 2.46k which led to a panic in the global stock markets; at the end of July, Bitcoin was trading at over US$ 68k. Bitcoin had started the year at  US$ 45.0k and received a major boost when the US Securities and Exchange Commission approved exchange-traded funds to track the spot prices of bitcoin and ether.

Intel’s finances are struggling mainly because of two factors – a noticeable decline in consumer spending on traditional data centre semi-conductors and the fact that it lags behind its rivals in the burgeoning AI sector. Consequently, it has cut back on its initial Q3 revenue figures, slashed 15% of its payroll numbers, (17.5k employees) and suspended dividend payments as from Q4.

Although not admitting to their findings, Glencore has paid US$ 152 million as a fine and compensation claim, after the Office of the Attorney General of Switzerland found it liable for failing to prevent the bribery of a Congolese public official by a business partner in 2011. The mining giant was fined US$ 2.4 million, with the regulator imposing a compensation claim of about US$ 150 million. The OAG noted that it did not identify that any Glencore employees had any knowledge of the bribery by the business partner, nor did Glencore benefit financially from the conduct of the business partner.

Having almost doubled it H1 profits to US$ 1.1 billion, Rolls Royce has decided to reward their 42k employees with each of them to receive a bonus of one hundred and fifty shares worth US$ 896; UK workers, (totalling 21k), will not be able to sell the shares for three years, after which they will be taxable, unless they are held for five years. This is expected to cost US$ 38.4 million. The pandemic did no favours for the UK company as it was impacted by global air travel being almost closed down, which triggered a sharp decline in business, heavily impacting the firm’s commercial aerospace sector which sells and services jet engines.

Partly because of the success of its mega film release, Deadpool & Wolverine, made in the UK, Disney plans to invest US$ 1 billion per annum on making films and TV shows, (for its firm’s streaming platform Disney+ and National Geographic network), in the EMA region; however, it is expected that most of the expenditure will be in the UK and mainland Europe. Disney reportedly already has four films either in production or scheduled to be made at UK’s Pinewood studios, including Snow White, The Fantastic Four: First Steps, The Roses, and The Amateur. Disney has reportedly spent US$ 4.45 billion in the UK since 2020, making twenty-nine films and twenty-three TV series whilst supporting 32k jobs.

Last month, flooring retailer Carpetright went into administration, with the loss of two hundred and seventy-three stores and 1.5k staff. Within weeks, its rival, Tapi, had acquired Carpetright’s brand, intellectual property, fifty-four of its stores and two warehouses. This week, furniture chain Bensons for Beds bought 19 Carpetright stores, indicating that it would try to create job opportunities for former Carpetright staff when the shops reopen under the Bensons brand. Despite highlighting “challenging” conditions for the sale of more expensive furniture items, its chief executive, Nick Collard, said one of his priorities was to increase from its current number of one hundred and sixty-two outlets to more than two hundred over the next few years. However, having gained market share, the firm returned to profitability in 2023.

Arguing that its 19 July global outage had minimal potential liability, CrowdStrike rejected Delta’s claim that it should be blamed; the carrier thinks otherwise and is planning to take legal action for compensation, that could be as high as US$ 500 million, from the cybersecurity firm. Over a six-day period, the carrier had to cancel six thousand flights. The tech company noted that it was “highly disappointed by Delta’s suggestion that CrowdStrike acted inappropriately and strongly rejects any allegation that it was grossly negligent or committed misconduct.” The carrier is also facing a US Transportation Department investigation into why it took so much longer for it to recover from the outage than other airlines. Delta has since been hit by a class-action lawsuit filed on behalf of affected passengers.

In line with other western airlines, BA has been banned from flying over Russia since 2022 and this has meant that it has had to fly longer routes to certain destinations, resulting in longer flight times and higher costs, including for fuel and crew. Consequently, it has now decided to suspend its flights to Beijing from this October, until November 2025, as it feels the economic impact of being banned from Russian airspace after resuming flights last year; it had paused during the pandemic, commenting then it was “one of our most important routes”. BA is also dropping one of its two daily flights to Hong Kong but will continue flying to Shanghai. Chinese airlines are still able to fly over Russia, giving them a commercial advantage, and not surprisingly taking a large market share. Last month, Virgin Atlantic also announced plans to cancel its only flights to China, (to Shanghai), from October, saying flight times were approximately one hour longer to Shanghai, and two hours longer on the way back to London.

Finally, the Qantas board has realised that all was not well with the management of the airline in the final years of Alan Joyce’s reign, with the supremo departing suddenly in September 2023, noting that “events of the past” made it clear this is “the best thing” he could do. The board has slashed his terminal pay by more than 43% to around US$ 8.0 million; it also cut short-term incentives for current and former senior executives by more than a third. To an observer, it seems that senior management were more interested in making profits, (which in turn will result in bigger bonuses), than running the airline in the interest of all stakeholders, especially staff and passengers. Following a series of scandals and costly legal cases, growing public anger over high fares, mass delays and cancellations, as well as its problematic treatment of workers, the carrier’s reputation hit rock bottom. Last year, Qantas lost a High Court case over the sacking of staff during the pandemic, and, in May, it also agreed to pay US$ 79 million to settle a lawsuit over the sale of thousands of tickets for flights that had already been cancelled. The report also added that “the events that damaged Qantas and its reputation and caused considerable harm to relationships with customers, employees and other stakeholders were due to a number of factors,” and “while there were no findings of deliberate wrongdoing, the review found that mistakes were made by the board and management”.

A forty-seven year old Australian man has been arrested for the alleged theft of more than 63k unreleased, limited-edition AUD 1 coins from a warehouse worth US$ 390k, (AUD 600k), linked to the popular children’s television show “Bluey”. The commemorative issues, produced by the Australian Mint, look like AUD 1 coins and sell for AUD 20 each on its official website. Police say the man worked at the warehouse and allegedly stole the coins from the back of a truck, before selling them online within hours. One eBay seller was charging almost US$ 390, (AUD 600) for a pack of three. The Australian animated show was one of last year’s most streamed television shows in the US and was the fourteenth highest rated show of all time.

HM Revenue & Customs has noted that its tax schemes, designed to encourage research and development in business, has lost US$ 5.25 billion since its 2020 introduction. Some companies have been claiming the tax breaks even if they are not doing any R&D, with the authorities saying that the levels of error and fraud were “unacceptable”. Two schemes – the Corporation Tax Research and Development tax relief scheme, for SMEs and the Research and Development Expenditure Credit, for larger businesses – were designed to reward companies investing in innovation and new ideas – such as tech or drug businesses; they have subsequently been merged into one, allowing companies to offset the money they spent on R&D against what they owed in corporation tax so that they could lower their overall tax bill. An “enhanced” scheme, which allows businesses to pay even less tax, was introduced in April 2023 specifically for small businesses making a loss. In 2020-21 and 2021-22, HMRC says over a sixth of the money spent on the schemes was lost to error and fraud but has since fallen as the number of compliance officers more than doubled to eight hundred.

The UK’s competition regulator has launched an inquiry into Amazon’s investment of over US$ 3.80 billion into an AI startup as regulators ramp up their scrutiny of mergers involving the fast-growing technology sector. The March 2024 deal included a US$ 4 billion investment into Anthropic and its commitment to use Amazon Web Services as its “primary cloud provider” for essential functions. The CMA noted that it is “considering whether it is or may be the case that Amazon’s partnership with Anthropic has resulted in the creation of a relevant merger situation” and, if so, whether that has “resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.” The CMA is also looking at Google’s partnership with Anthropic, as well as investigating Microsoft’s involvement in Inflection, the AI lab, and Open AI.

Deliveroo posted its first ever profit in H1 at US$ 1 million, following a US$ 97 million loss in the same 2023 period. Total orders grew by 2% to US$ 172 million, and after registering a US$ 3.5 million cash flow, it announced a US$ 175 million share buyback programme. Its Gross Transaction Value per order – the average cost of a customer’s basket including delivery fees – was 3.3% higher at US$ 29.22, mainly due to restaurants and shops raising their prices. (Rival delivery firm Just Eat last week posted results showing a 9% rise in sales by GTV). The company is expanding into adding grocery and retail deliveries to its portfolio, noting that it was “early days” for its retail delivery side, there had been “strong growth” in grocery deliveries. The company was embroiled in union problems last year when The Supreme Court ruled that Deliveroo riders could not legally be considered employees, partly because they did not have specified hours and could also work for rival firms. Recently, it confirmed that it had struck a deal with the GMB union which had “increased the guaranteed minimum pay for the estimated period riders are on an order to GBP 12, (US$ 14.03), an hour, plus vehicle costs for all vehicle types”. On Thursday, Deliveroo shares rose by more than 10%.

The latest Numbeo Cost of Living Index rates Geneva as the most expensive city to live in, (with a rating of 101.7), followed by Zurich (100.4) and New York (100.0); six other US cities – San Francisco (90.5), Boston (85.8), Washington (82.5), Seattle (81.5), Los Angeles (80.9) and Chicago (80.2) made up the top ten, with Reykjavik (83.9) in sixth place. Dubai (60.0 – 78th), Abu Dhabi (54.1 – 87th), Doha (52.2 – 94th) and Riyadh (49.8 98th) were the top placed ME cities. The database company looked at factors such as the cost of groceries, eating in restaurants, rental costs and how far local currency goes to formulate its results.

Kenya’s President William Ruto has been hit by a double whammy. Only after his plans to raise taxes for his cash-strapped, debt-burdened government were thwarted by widespread protests did he withdraw his finance bill for the coming year. Then he discovered that three judges unanimously ruled the 2023 legislation that had raised taxes on salaries, fuel and mobile money transactions was “fundamentally flawed” and “unconstitutional”, as it had not followed laid down procedures. This means that the Kenyan exchequer has “lost” up to US$ 3.8 billion in revenue. It seems unlikely that he will find ways to fund the national budget and service its US$ 78 billion public debt and there is every likelihood that the current situation might lead to a paralysis of some government services. To pay for public services, the government has two options – either raise taxes or borrow more. Both have their problems – the former will probably lead to further civil disorder and the latter may be difficult following the country’s debt levels and the recent downgrading of its rating by international credit rating agencies Moody’s and Fitch.

Last week, the number of Americans filing new applications for unemployment benefits fell 17k to a seasonally adjusted 233k – its largest drop in about eleven months and was a welcome change from last week when the figures then spooked the global bourse and brought pandemonium to the market.

Whilst most global central banks seem to be dithering whether to twist or stick when it comes to interest rates, kudos to the Reserve Bank of Australia and its Governor, Michele Bullock. At Tuesday’s monthly meeting, rates were put on hold again, at 4.35%, with the governor seemingly ruling out a rate cut in the next six months; she also added that the board seriously considered an August rate hike, and “the judgement of the board was that keeping the interest rate where it is and making sure that people understand that a rate cut is not on the agenda in the near term, given what we know that continued pressure will help to keep demand coming back into line with supply”. The RBA is seeing that inflation will not hit its target range of between 2-3% until late 2025, and it seems to some observers that it is inflation running the economy – not the Albanese government.

By the end of Monday, the Australian share market had tumbled 3.7% in what was the index’s worst two-day performance since 2022. The sell-off followed weak jobs data in the US, which sparked fears a recession could be around the corner. By the end of trading on Monday, the markets had been stunned with all sectors in red including:

• ASX 200                     -3.7%             to 7,650 points
• Nikkei                          -12.9%           to 31,287 points
• Hang Seng                  -2.2%              to 16,577 points
• Shanghai                     -0.6%             to 3,363 points
• S&P 500                     -3.0%             to 5,186 points
• Nasdaq                        -3.4%             to 16,200 points
• Dow Jones Industrial  -2.6%             to 38,703 points
• FTSE 100                     -2.0%             to 8,008 points
• Spot gold                     -1.4%             to US$ 2,408
• Brent crude                 -0.4%              to US$ 77.25
• Bitcoin                         -8.0%              to US$ 54,043

There are many factors in play that led to what some say left conditions ready for a perfect storm. There was no doubt that stock markets have been pushing their luck and a correction of some sorts should not have been such a surprise. With other factors, such as the equity market index concentration, which was the highest in ninety years, AI profit taking and a blow up in the Japanese yen, (making funding more expensive), that seem to be pointing to a recession of sorts, as other economic indicators were pointing to a downturn not only in the US economy but the rest of the world.

Last Friday, the world’s five hundred richest people managed to lose a combined US$ 134 billion, following the stock market meltdown, driven by concerns of a possible US recession, on the back of worrying jobs data and weak global manufacturing activity around the world. Leading the pack was Jeff Bezos ending the day losing US$ 15.0 billion, with Amazon leaking 8.8%. In comparison, Larry Ellison got off lightly shedding US$ 5.0 billion, as Oracle ended the day 3.0% lower. The world’s wealthiest person lost US$ 6.6 billion as Tesla tanked 4.2%, costing Elon Musk US$ 6.6 billion. Alphabet’s co-founders saw its market cap 2.4% light and the individual wealth of both Sergey Brin and Larry Page down US$ 3.0 billion. Meta Platforms boss Mark Zuckerberg lost around US$ 3 billion, as the Facebook owner’s stock slid nearly 2.0%. Dell Technologies founder Michael Dell also lost around $3 billion as his company plunged 5.7%. LVMH chief executive Bernard Arnault, former Microsoft chief executives Bill Gates and Steve Ballmer, and Berkshire Hathaway chairman Warren Buffet, who make up the rest of the world’s ten wealthiest, collectively lost more than US$ 7 billion.

The long-awaited sell-off was attributable to a number of factors with the final straw beinginvestor concerns over weak jobs data and manufacturing activity, not helped by the failing health of manufacturing activity across Asia, Europe, the US and, in particular, China. The US Labor Department started the ball rolling, posting that last month, only 114k jobs were added to the economy, following a weak June return of 179k; to compound the problem, the unemployment rate unexpectedly rose 4.3%, its highest level since October 2021 – and above the 3.5% mark last year. This triggered something known as the “Sahm rule”, which states if the average unemployment rate over three months is 0.5% higher than the lowest level over the past twelve months, then the country is at the beginning of a recession.

On top of that, a report has shown that US manufacturing had dropped to an eight-month low – an indicator to some that the Fed may have missed the boat by not lowering rates earlier. Jitters returned to the financial markets, as investor sentiment and the global bourses start their inevitable slump. Last Friday saw both the Nasdaq Composite and S&P 500 down from their 10 July record close – by 10.0% and 6.0% – and by 2.4% and 1.8% on the day. The Dow Jones Industrial Average fell more than 1.5%. As the BoJ lifted rates to their highest level in fifteen years on Wednesday, two days later, the Nikkei 225 had tanked 5.8%, the Hang Seng Index 2.1%, and later European banks followed suit – the DAX, CAC 40 and FTSE 100 down 2.3%, 1.6% and 1.3%.

On 31 July, financial markets in the US and Asia fell sharply, as investors sold off tech shares, with AI stocks taking the brunt of the hit. On Wednesday, two major New York bourses – the S&P 500 and the tech-heavy Nasdaq – shed 2.3% and 3.6%, in their biggest one-day falls since 2022; the Dow Jones Industrial Average dropped by 1.2%. The major losses were seen in major firms including Nvidia, (down 6.8%, and 15.0% over the fortnight), Alphabet, (minus 5.0%), Microsoft, Apple and Tesla (12.0%). It seems that investors have finally woken up to the fact that there has been little revenue (and profits) to date, in relation to the huge amounts of expenditure, and were now looking for some sort of operating return. They are also concerned about two other factors – the presidential election and the timing of any US rate cuts.

Bloomberg estimates that US$ 6.4 trillion was wiped from stocks during the recent financial markets panic, with the trinity of key assumptions pushing markets upwards unfolding almost simultaneously. The first being that AI would quickly and fundamentally change the business world, the US market would continue its upward trend and Japan would never hike interest rates. As the 26 July blog – Somethin’ Stupid – indicated:

Mid-week, financial markets in the US and Asia fell sharply, as investors sold off tech shares, with AI stocks taking the brunt of the hit. On Wednesday, two major New York bourses – the S&P 500 and the tech-heavy Nasdaq – shed 2.3% and 3.6%, in their biggest one-day falls since 2022; the Dow Jones Industrial Average dropped by 1.2%. The major losses were seen in major firms including Nvidia, (down 6.8%, and 15.0% over the fortnight), Alphabet, (minus 5.0%), Microsoft, Apple and Tesla (12.0%). It seems that investors have finally woken up to the fact that there has been little revenue (and profits) to date, in relation to the huge amounts of expenditure, and are now looking for some sort of operating return. They are also concerned about two other factors – the presidential election and the timing of any US rate cuts.

Mid-week, financial markets in the US and Asia fell sharply, as investors sold off tech shares, with AI stocks taking the brunt of the hit. On Wednesday, two major New York bourses – the S&P 500 and the tech-heavy Nasdaq – shed 2.3% and 3.6%, in their biggest one-day falls since 2022; the Dow Jones Industrial Average dropped by 1.2%. The major losses were seen in major firms including Nvidia, (down 6.8%, and 15.0% over the fortnight), Alphabet, (minus 5.0%), Microsoft, Apple and Tesla (12.0%). It seems that investors have finally woken up to the fact that there has been little revenue (and profits) to date, in relation to the huge amounts of expenditure, and are now looking for some sort of operating return. They are also concerned about two other factors – the presidential election and the timing of any US rate cuts.

Mid-week, financial markets in the US and Asia fell sharply, as investors sold off tech shares, with AI stocks taking the brunt of the hit. On Wednesday, two major New York bourses – the S&P 500 and the tech-heavy Nasdaq – shed 2.3% and 3.6%, in their biggest one-day falls since 2022; the Dow Jones Industrial Average dropped by 1.2%. The major losses were seen in major firms including Nvidia, (down 6.8%, and 15.0% over the fortnight), Alphabet, (minus 5.0%), Microsoft, Apple and Tesla (12.0%). It seems that investors have finally woken up to the fact that there has been little revenue (and profits) to date, in relation to the huge amounts of expenditure, and are now looking for some sort of operating return. They are also concerned about two other factors – the presidential election and the timing of any US rate cuts.

It was only a matter of time before the tech market showed its concern following warning signs such as laying off staff, insane valuations, falling margins and ongoing shortage of chips. The second was as a result of US economic data at the end of last week which seemed to point to the fact that there was a distinct possibility of the US going into recession. But it was the unravelling of the “Japan will never hike interest rates” idea that really spooked markets, which it did just that last week, from 0.1% to 0.25% – its largest rate hike since 2007. In the carry trade, many investors were making money taking on the Japanese yen – at very low and, for many years, static rates – and then investing that money in high growth tech stock. Alarm bells had been ringing louder over recent weeks, as the carry trade grew to an estimated US$ 4 trillion and on 31 July the “impossible” happened – the BoJ moved on rates.

It is clear share markets have settled down for now, as US stocks had their best ever day on Thursday since November 2022, with the benchmark S&P 500 index ending the day 2.3% higher, The Dow Jones Industrial Average 1.8%, and the Nasdaq jumped 2.9%. This came in tandem with the release of the latest weekly labour figures, showing much lower unemployment claims easing concerns about a waning economy. However, it is inevitable that the turbulence in the market will not go away and add civil unrest in Europe, rising ME tensions, a weakening Chinese economy and a global slowdown to the equation, there will be a major stock market collapse before the end of October. Last Friday was only a Dress Rehearsal Rag!