Out Of Touch! 15 September 2023
The 2,329 real estate and properties transactions totalled US$ 3.46 billion, during the week, ending 15 September 2023. The sum of transactions was 549 plots, sold for US$ 1.16 billion, and 1,780 apartments and villas, selling for US$ 1.07 billion. The top three transactions were all for plots of land, one in Marsa Dubai sold for US$ 170 million, the second in Business Bay for US$ 49 million and in Marsa Dubai for US$ 41 million. Al Hebiah Fifth recorded the most transactions, with 123 sales, worth US$ 144 million, followed by 113 sales in Madinat Al Mataar for US$ 148 million, and 111 sales in Madinat Hind 4, valued at US$ 44 million. The top three transfers for apartments and villas were all for apartments, the first in Al Barsha First , valued at US$ 24 million, followed by one in Palm Jumeirah for US$ 20 million, and the other in Al Thanayah Fourth selling for US$ 18 million. The mortgaged properties for the week reached US$ 1.06 billion, with; 165 properties being granted between first-degree relatives worth US$ 183 million.
This week, Danube launched its latest project – Oceanz, valued at US$ 681 million, is located at Dubai Maritime City, adjacent to the historic Shindagha heritage village. The building will comprise fifty-one floors, including car parking and community facilities with forty-four floors, with 1.25k residential units including studio apartments, 1-bedroom, 2-bedroom and 3-bedroom apartments along with retail stores; prices will start at US$ 300k. It will also come with more than forty community, health and lifestyle amenities including, inter alia, health club, infinity swimming pools, sports arena, tennis court, barbecue area, jogging track, doctor on call, and nanny on board. This latest development for the Dubai-based developer, to be completed by Q1 2027, is its twenty-fifth since it was founded in 2014, and tenth in the past nineteen months – an indicator of the current booming Dubai’s realty sector. Having sold out its Elitz 3 project last month, Danube expects to deliver three projects by the end of the year – Wavez, Jewelz and Olivz., with most of the projects launched in 2022 and 2023 ahead of construction and delivery schedules.
Following the success of its Kenturah concept, MAG has launched its new US$ 575 million project, Keturah Business Bay. The luxury tower development follows the positive market response to the previous two developments under the Keturah brand – Keturah Reserve and Keturah Resort. It will encompass studios, one-, and two-bedroom apartments ranging from 600 sq ft to 2.2k sq ft. Amenities at the project include an outdoor pool, a gym, restaurants, and retail spaces. Completion is slated for Q3 2027, with unit prices and payment plans being announced by the end of 2023.
ValuStrat Price Index (VPI) for August 2023 grew 1.9% on the month, and 13.8% over twelve months, to reach 94.6 points, with apartments and villas at 78.5 points and 120.4 points, compared to 100 points set in January 2014. The VPI, which measures periodic changes in both capital values and rental values, (of typical residential and commercial properties), witnessed increased sales of apartments within affordable and mid-market communities. It noted that the emirate’s apartments had a 10.0% capital gain on the year – the highest in a decade – and 1.5% on the month. The top five locations were Palm Jumeirah, The Greens, Discovery Gardens, Motor City and Jumeirah Beach Residence – with gains of 19.3%, 14.7%, 14.1%, 13.0% and 11.3% respectively.
Although villa prices performed better, with marked increases of a monthly 2.4% and an annual 18.2%, this is far below the 33.9% villa annual capital gains seen during February 2022. The top four locations were Jumeirah Island, Palm Jumeirah, Dubai Hills Estate and Emirates Hills – with gains of 24.2%, 22.1%, 22.0% and 20.6% respectively. Jumeirah Park, Arabian Ranches, and Jumeirah Islands surpassed their 2014 price peaks by up to 3.2% . Last month, apartment sales dominated, accounting for 95% of all deals – 99% in off plan registrations and 88% in ready home title deeds. Home sales grew 1.1% monthly and 5.8% annually, with off-plan Oqood (contract) registrations up 13% monthly and 40.8% annually, representing a three-year record share of 63.5% of overall monthly sales; ready homes transactions fell 14.6% monthly and 26.2% on the year.
In the first eight months of the year, the average size of a ready home sold was 1.624k square feet, priced at US$ 366 per sq ft, with the following five developers accounting for 40.7% of all August sales – Emaar (10.9%), Damac (10.5%), Sobha (8.7%), Danube (5.6%), and Nakheel (5.0%). Five locations dominated August transaction accounting for 56.0% of the total – Business Bay (15.1%), Jumeirah Village (15.0%), Arjan (10.4%), Sobha Hartland (9.0%) and Dubai Harbour (6.5%). The majority of ready homes sold were in Jumeirah Village (9.2%), Dubai Marina (8.3%), Business Bay (6.5%), International City (4.9%), and Downtown Dubai (4.8%).
Knight Frank reports that, once again, Dubai has registered the highest global number of residential sales at more than US$ 10 million. In Q2, it sold ninety-five such homes, (compared to fifty-three in Q2 2022) – well ahead of the likes of New York, London, Paris, Hong Kong, Sydney and Singapore. In the twelve locations surveyed by the consultancy, only three posted total sales of over US$ 1.0 billion – with New York and Singapore behind Dubai’s total of US$ 1.5 billion – as the cumulative total came in at US$ 7.3 billion. It was noted that sales fell to 483 in the period, as higher interest rates began to impact on sales, but in the twelve months to June 2023, 1,638 residences were sold – compared to 1,009 in the pre-pandemic year of 2019. Last year, the emirate recorded the sale of 219 homes priced above US$ 10 million, with the total value of the transactions reaching US$ 3.8 billion.
Proptech firm Realiste indicated that, by using its proprietary AI platform, the three most profitable locations in terms of average annual price growth, were Sobha Hartland, Dubai Harbour Part 1 and Bukadra Part 2. Realiste AI is an advanced algorithm that uses self-learning capabilities to evaluate the investment attractiveness of real estate properties worldwide. It considers local preferences, simulating the decision-making process of potential buyers in specific locations, “to determine the score, our algorithm analyses over 200 metrics sourced from various reliable sources. These metrics have different impacts on the evaluation. All factors can be categorised into four groups with very high, high medium and low levels of impact.” Alex Galt, founder of Realiste said, “Dubai will remain attractive to foreign buyers who are seeking to shield their assets. It will strengthen its position as the geopolitical instability and energy crisis grow. As a result, there will be a further boost in demand for local property and the market in 2023.”
It found that Sobha Harland, handily located close to both DXB and the Burj Khalifa, witnessed an average annual price growth 17.6%. It is located within a fifteen-minute drive to Burj Khalifa and the International Airport. The project has over 30% of greenery, three functioning parks, pools and gyms, and is located close to the lagoon and two top Dubai international schools. Dubai Harbour Part 1 saw prices 16.5% to the good over the year and is within a five-minute drive to the Promenade, with a wide array of retail and dining destinations, Marina & Yacht Club, and SZR. It also has a private beach with stunning views of Palm Jumeirah, Ain Dubai, Cruise Terminal, Dubai Marina and Dubai Harbour Boulevard. There was a 14.5% rise in Bukadra Part 2’s average annual price growth, which is located close to two iconic areas of Dubai: Downtown and Creek. The area features a golf course and a private beach.
November will see the opening of Banyan Tree Dubai on Bluewaters Island, as it replaces the existing Caesars Palace in a deal signed by Dubai Holding with Accor Group’s Ennismore and Banyan Tree Group to introduce a unique luxury lifestyle experience in the emirate. The hotel will introduce a phased stage of brand related upscaling improvements, including to its 179 rooms, which include thirty suites and a brand-new four-bedroom villa, along, with the signature Banyan Tree Spa; this will include its own reception, relaxation area, gym, indoor and outdoor yoga spaces, dedicated F&B space, private mini rainforests, hydrotherapy pools and treatment rooms. Banyan Tree Dubai will also include ninety-six private residences comprising one, two, three and four-bedroom units, with a dedicated lobby, outdoor swimming pool and access to the hotel’s facilities.
The General Directorate of Residency and Foreigners Affairs has confirmed that it is working on a project, at DIA, whereby a single biometric will be used for check-in, immigration and boarding the aircraft to further facilitate passenger clearance, and that it would fully deploy biometric technology to identify individuals based on their unique physical or behavioural characteristics. It confirmed that this new technology will be rolled out “very soon”, and that “our target is to achieve 80% of people using smart gates and other technologies. We hope to achieve this target in a couple of years”. In H1, more than forty-two million passengers, including transit, used airports and immigration borders, with 37% of them were using the airport’s one hundred and twenty smart gates.
Although at a slower pace, down 0.7 to 55.0 compared to a month earlier, August saw Dubai’s non-oil private sector continue at a “robust” pace, partly due to an increase in new orders, and the pace of job creation at its highest in nearly eight years. Two other contributory factors included strong new order inflows and robust economic conditions. Business confidence improved on the month in all four sectors, covered by the survey – construction, wholesale/retail, travel and tourism – being the second strongest in nearly two years. On top of this, the data showed that, for a welcome change, the rate of selling price discounting eased to its slowest level since last November, with several businesses pushing prices higher. Two other factors saw an increase in the headcounts -its joint-fastest rise in employment since November 2015 and the sharpest accumulation of stock levels for five months.
Reaching its highest ever level, investments of banks operating in the UAE reached US$ 158.0 billion at the end of July – a 18.8% hike on the year; on a monthly basis, investments of banks increased by 0.91%. Bonds held until maturity accounted for 46.0% of the total, reaching US$ 72.7 billion, a 1.3% increase from the previous month. Debt securities, which represent debts owed to others, made up 43.1% of the total investments, reaching US$ 68.1 billion – 0.6% higher on the month. Other investments by banks amounted to US$ 12.2 billion, or 7.7% of the total – a 12.5% increase on the year. Bank investments in stocks were at US$ 3.4 billion, (2.1%), an increase of 3.3% from the previous month,
Earlier in the week saw the launch of the ‘Dubai MIT DesignX Dubai’ accelerator programme, as the Dubai Integrated Economic Zones Authority signed a partnership agreement with MIT. Its main aim is to boost the construction of innovative projects to enable entrepreneurs in the region to create effective solutions and innovative designs to address the world’s most pressing challenges in urban environment, such as water, climate, food security, and energy. It will also contribute to strengthening Dubai’s position as a pivotal global centre for sustainable entrepreneurship, development and design, and provide a competitive model environment that supports innovation and project launches within a comprehensive vision for leadership and shaping the future.
Opec estimates that the UAE’s Q1 economy grew by 3.8% and expects the country’s economic expansion to continue, noting that key sectors of the economy have seen significant growth; these include transportation/storage (10.9%), construction (9.2%), and accommodation/food services (7.8%). The Opec report also noted that UAE’s travel/tourism sector continued to play an important role in driving economic growth, with the number of passengers at Dubai International Airport and international visitors to the emirate exceeded pre-pandemic levels; by the end of the year, it expects passenger numbers to be 40% higher on the year and that this would be 17% higher than the pre-pandemic 2019 level.
Last year, 26% of the UAE’s financial wealth originated from ultra-high-net-worth individuals, defined as being worth more than US$100 million; in 2022, those, with a net worth of between US$ 1 million and US$ 20 million, represented 32% of the UAE’s wealth, which is expected to grow to 34% over the next four years. The Boston Consulting Group posted that the UAE’s 2022 financial wealth – at US$ 1.2 trillion – was ahead of Saudi Arabia and Qatar returns of US$ 1.1 trillion and US$ 302 billion, assisted by positive macroeconomic tailwinds, especially government-sponsored projects, high and steady oil and gas prices and the influx of millionaires. Equities and investment funds account for 58% of total personal wealth. Real assets in the UAE grew by 7.5% annually to US$ 1.9 trillion over the five years to 2022 and are projected to increase by 6.9% per annum to US$ 2.6 trillion by 2027.
The worldwide consulting group expects that there will be a 5.3% annual compound rate to bring the global financial wealth to top US$ 329 trillion by 2027. The main drivers will be macroeconomic growth, the creation of new millionaires in different countries and the continued growth of “generational money” where inherited wealth will be passed down. It also expects that financial wealth in emerging markets will continue to outperform developed markets until 2027.
Although S&P Global Rating expects GCC banks’ credit growth will be reduced, it expects performance of banks in the UAE and Saudi Arabia will be more resilient. Overall, it expects “a slight deterioration in asset quality indicators and an increase in the cost of risk, we expect GCC banks will report stronger profitability in 2023”, because of higher net interest margins and generally lower-cost business models. It also noted that, in H1, the country’s banks’ performance improved, on the back of lower credit losses and higher interest rates, and the fact that the recovery of the non-oil sector has led to higher lending growth this year. However, it noted that the global economic slowdown and higher interest rates could lead to a slight deterioration in asset quality and could face a rise in problem loans in the construction and trade sectors and in the SME segment.
Standard & Poor’s Global Ratings also expects that UAE banks will achieve strong performance in 2023, benefitting from strong non-oil GDP growth, which will mitigate the impact of rising interest rates on credit growth. It expects bank growth to be 2% higher on the year at 7%. It notes that, in H1, the performance of UAE banks improved due to the rise in interest rates, with high-interest rates expected to continue to support banks’ profitability. Importantly, it believed that the non-oil economy in the UAE is still providing sufficient support to help reduce the increase in loans that are classified as “non-productive,” and that banks’ reserve allocations over the past two years will help them withstand challenges.
The DFM opened on Monday, 11 September 2023, 32 points (0.8%) lower the previous fortnight, shed 24 points (0.6%) to close the week on 4,043, by 15 September 2023. Emaar Properties, US$ 0.02 lower the previous week, gained US$ 0.01 to close on US$ 1.92 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.71, US$ 4.69, US$ 1.57, and US$ 0.44 and closed on US$ 0.69, US$ 4.73, US$ 1.55 and US$ 0.43. On 15 September, trading was at 219 million shares, with a value of US$ 518 million, compared to 75 million shares, with a value of US$ 57 million, on 08 September 2023.
By Friday, 15 September 2023, Brent, US$ 9.90 higher (12.3%) the previous fortnight, gained US$ 3.85 (4.3%) to close on US$ 94.28. Gold, US$ 23 (1.2%) lower the previous week, shed US$ 20 (1.0%) to US$ 1,946 by 15 September 2023.
The International Energy Agency expects global oil demand to grow by 2.2 million bpd, to 101.8 million bpd, driven by a recovery in fuel demand in China; it also expects a “substantial” crude market deficit in Q4 due to Opec+ output cuts; this month, the loss of Opec+ production, led by Saudi Arabia and Russia (which extended supply cuts of a combined 1.3 million bpd to the end of the year), will result in a significant supply shortfall. It noted that “oil stocks will be at uncomfortably low levels, increasing the risk of another surge in volatility that would be in the interest of neither producers nor consumers.” The IEA expects H2 global oil demand to rise by 1.5 million bpd, compared to H1, exceeding supply by 1.24 million bpd during that period; China’s expected to account for 75% of this demand growth. However, it expects 2024 demand to fall by one million bpd, as the post-pandemic recovery loses steam and electric vehicle adoption grows. YTD, Opec+ supply has fallen by two million bpd with most of the slack taken up by non-Opec+ supply which had risen by 1.9 million bpd to a record 50.5 million bpd by the end of last month, including “sharply higher” crude flows from Iran.
This week, Binance.US has made several major restructuring changes. The US affiliate of cryptocurrency giant Binance has revealed significant organisational changes, including the departure of its CEO, Brian Shroder, (with Norman Reed, the company’s General Counsel stepping in), and a 33% cut in its current 300 workforce. In June, the US Securities and Exchange Commission filed a civil case against its founder, Changpeng Zhao, and the company, citing that Binance.US was part of a “web of deception”, designed to evade US securities laws. Both Binance and Binance.US have consistently maintained that they operate as separate entities. Prior to this latest move, there had been several executive departures including this month’s resignation of Mayur Kamat, its Global Head of Product, and the departure of its Chief Strategy Officer, Patrick Hillmann, in July.
With its shares priced at US$ 51 each, UK-based chip designer Arm Holdings has secured a US$ 54.5 billion valuation, as it made its highly anticipated return to the stock market. Arm shares started their first day of trading on New York’s Nasdaq yesterday and jumped 10% right as trading began and over 20% within the first thirty minutes; it closed trading at US$ 63.59 – 24.7% higher on the day, ending it with a market cap of over US$ 67.9 billion. This IPO raised US$ 4.87 billion for its Japanese owner SoftBank Group which bought the company for US$ 32 billion seven years ago. Many had expected that Arm would also trade in London but, in a blow to Rishi Sunak, Arm decided to list the company solely in the US because it was “the best path forward”. Arm estimates that 70% of the world’s population uses products that rely on its chips, including nearly all of the world’s smartphones.
The EU has levied a US$ 370 million fine on TikTok for breaching privacy laws regarding the processing of children’s personal data. Ireland’s Data Protection Commissioner, the lead regulator in the EU, noted that the Chinese-owned short-video platform had breached a number of EU privacy laws between 31 July 2020 and 31 December 2020. No surprise to see TikTok disagreeing with the verdict and the size of the fine, arguing that most of the criticisms were no longer relevant, as a result of measures it introduced before the DPC’s probe began last September. The DPC gave TikTok three months to bring all its processing into compliance where infringements were found. At the end of 2022, the DPC had twenty-two inquiries open into multinationals based in Ireland at the end of 2022.
As from next month, it appears that Robolox, which has a reported sixty million players a day, will be available on Sony’s PlayStation consoles; currently, it can only be played on computers and mobile devices, and on Microsoft’s Xbox One console.There are concerns about poor moderation of its content, and only last year the NSPCC and Childline tld the BBC, that since the pandemic, the number of children calling their helpline, with concerns about Roblox, had increased five-fold. In 2020, the company reckoned that 67% of all US children, between the ages of nine and twelve, played the game compared to just 23% who said they played Minecraft, which is the best-selling video game of all time. The game’s popularity stems from its emphasis on creation – that is, rather than being a traditional game, it allows players to make their own games within it.
Lidl has announced a full-year pre-tax loss of US$ 94 million, compared to a 2022 US$ 51 million profit, indicating that the two main drivers were its expansion plans, including opening fifty shops, and costs rising “across the board”, as it had “held firm on its promise” of lower prices for shoppers. Sales were 18.8% higher at US$ 11.5 billion. Earlier in the month, the privately-owned German retailer opened its largest-ever US$ 372 million global warehouse, creating 1.5k jobs. Ryan McDonnell, CEO at Lidl GB, said there was “no ceiling” to the company’s ambitions, adding he saw potential for hundreds more Lidl supermarkets across the country.
Today, about 13k US workers, working for three Detroit carmakers – GM, Ford and `Stellantis – went on strike because contract talks had failed, with both parties unable to agree on terms and conditions. It was the first time in the United Auto Workers union’s eight-year history that its members had walked out on all three companies simultaneously, as four-year contracts with the companies expired at 11.59pm local time on Thursday. If the strikes last a long time, they could cause dealers to run short of vehicles and prices could rise. The walkout could even be a factor in next year’s presidential election by testing Joe Biden’s proud claim to be the most union-friendly president in American history. The UAW focused on a handful of factories to prod company negotiators to raise their offers, which were far lower than union demands of 36% wage increases over four years, compared to the employers’ 17.5% – 20.0% range.
JM Smucker, famous for its fruit preserves and Jif peanut butter, has acquired Hostess Brands for a reported US$ 5.6 billion, as it expands its operations by adding an iconic sweet snacking platform with iconic US brands such as Twinkies, Donettes and Ho Hos. Smucker beat other potential buyers, including PepsiCo, Oreo maker Mondelez International and Cheerios maker General Mills. In 2013, Hostess was saved from bankruptcy by investment firms Apollo Global Management and Metropoulos & Co. Ohio-headquartered Smucker, has a stock market valuation of around US$ 14 billion. The US food manufacturing sector has seen several consolidation deals recently. Hostess Brands shares ended the New York trading day up by more than 19%, with Smucker shares closing 7% lower.
Monday saw Tesla shares jump 6% on news that Morgan Stanley posted that its Dojo supercomputer could power a near US$ 600 billion surge in its market value by helping speed up its entry into robotaxis and software services; the investment bank raised its revenue estimate for Tesla’s network services business to $335 billion in 2040. In July, the EV manufacturer commenced production of its supercomputer to train AI models for self-driving cars and plans to spend more than US$ 1 billion on Dojo over the next fifteen months. The Wall Street broker upgraded Tesla’s stock to “overweight” from “equal-weight” and replaced Ferrari’s US-listed shares with it as “top pick”. It also raised its twelve-eighteen-month target on Tesla’s shares by 60% to $400 – giving it a market cap of about US$ 1.39 trillion – 78% higher than its closing value of US$ 789 billion on 08 September.
BMW has announced plans to invest over US$ 750 million to ready its Mini factory near Oxford to build a new generation of electric cars, with production of two new electric Mini models due to begin in 2026. BMW has two facilities in the UK – with the other in Swindon -which employ 4k; it also plans to build additional logistics facilities at Cowley and at the Swindon factory which makes body panels for new vehicles. The UK government is expected to invest a further US$ 94 million, in a move that the UK industry body, the Society of Motor Manufacturers and Traders, called a “vote of confidence” in the country’s automotive manufacturing industry, and that “not only does it secure the long-term future of the home of one of the world’s most iconic brands, it also demonstrates once again our capabilities in electric vehicle production.”
Other carmakers continue to invest in the UK. In July, Jaguar Land Rover’s owner, the Indian group Tata, said it would build a giant “gigafactory” to produce batteries in Somerset, a project expected to benefit from hundreds of millions of pounds in taxpayer support. Stellantis has just begun production of electric vans at its Ellesmere Port factory in Cheshire; Nissan is expanding output of EVs at its Sunderland factory, while its partner Envision AESC is building a gigafactory close by. Meanwhile, Ford is investing heavily in its Halewood plant, preparing it to build electric motors.
Another problem hatched by its former CEO is that the High Court of Australia has rejected a bid by Qantas to overturn a ruling that it illegally outsourced 1.7k jobs during the pandemic, with the court deciding that carrier had unlawfully laid off staff at ten airports in November 2020; it found the embattled carrier had breached Australia’s Fair Work Act, which protects employee rights.
It is estimated that Alan Joyce has made an eye-watering US$ 80 million during a twenty-three-year association with Qantas – the last fifteen as CEO. There is no doubt that he did well for the airline in some aspects, but left it two months earlier than expected, as the carrier tries to restore some of its former glory. He was set to retire in November after fifteen years at the helm, to be replaced by the current CFO, Vanessa Hilton; however, he has “decided” to retire this week instead. He has had some success in delivering his last annual profit of a record US$ 1.6 billion, (maybe by taking advantage, and at the expense of passengers and employees) but will leave behind a legacy of a much-tarnished brand plus a battered reputation, a class action, a lawsuit by the ACCC, his role in “Qatargate” and bowing to public pressure by scrapping the expiry dates on more than US$ 323 million worth of flight credits. Unfortunately, no happy ending for Mr Joyce, except that he could leave with a “golden handshake” retirement package of more than US$ 15 million. The two questions are whether he should receive this bounty of a substantial amount of money in the bank and Qantas shares in his portfolio after leaving the carrier in such a state of disarray and whether some of the board should step down for allowing all this to happen.
As CEO, he was entitled to receive a base salary of about US$ 1.4 million a year, on top of annual bonuses issued as Qantas shares, depending on his (and the airline’s) performance; this year he was in line for a short-term cash bonus of US$ 2.8 million as at 30 June; he is also owed about 3.1 million shares, including 1.4 million from previous bonuses – deferred during the pandemic at Joyce’s request – which were cashed earlier this month with a value of US$ 6.4 million. The 1.7 million outstanding shares, valued at around US$ 3.65 million, have yet to be issued. In June, the Qantas supremo reportedly sold most of his US$ 11 million worth of his shares.
Alan Joyce is not the only chief executive having an eventful week and has been joined by BP chief executive Bernard Looney, who, on Tuesday, resigned immediately accepting that he was not “fully transparent” in his disclosures about past relationships with colleagues. He joined the petro giant in 1991 and replaced Bob Dudley in 2020 to take over the top spot In May 2022, the company had received information and allegations about his conduct in respect of personal relationships with company colleagues. During that review, Mr Looney disclosed a small number of historical relationships with colleagues prior to becoming CEO but found no breach of the company’s code of conduct. At the time, “the board sought and was given assurances by Mr Looney regarding disclosure of past personal relationships, as well as his future behaviour”. Subsequently, further allegations were made recently, and internal investigations started and with the process ongoing with him informing the company “that he now accepts that he was not fully transparent in his previous disclosures”, and “he did not provide details of all relationships and accepts he was obligated to make more complete disclosure”. It also noted that “no decisions have yet been made in respect of any remuneration payments to be made to Mr Looney”.
The company has been kind to him, noting that he had sold BP shares worth almost US$ 10 million in February and April 2019. His 2022 pay packet more than doubled to around US$ 15 million on the back of bumper profits amid spiralling energy prices, while BP’s emissions were broadly unchanged. Looney’s base salary of US$ 1.6 million was supplemented by retirement benefits and performance-related elements including an annual bonus and shares to US$ 12 million, more than double what he was awarded in 2021. To be fair to the departing Irishman, he is not the only one with an embarrassingly high pay packet – Shell’s CEO took home over US$ 12 million last financial year.
One country where the corporate life of an executive is not all roses is China, where it seems that, maybe too often, high-profile bosses go missing and are only seen again in court – in absentia or in person – or never. The latest is the former chairman of China Life Insurance, Wang Bin, who has just been sentenced to death, with a two-year reprieve, and after two years, with the sentence being commuted to life in prison without parole. The crackdown by President Xi Jinping’s administration has been ongoing for almost three years, and in April, a warning was given that this repression was far from over. Mr Wang was found guilty of taking US$ 45 million in kickbacks, and he was also found guilty of hiding over US$ 7 million in overseas deposits. Other bosses, mainly in the country’s US$ 60 trillion financial sector, have been ensnared. In 2021, Lai Xiaomin, the former chairman of Huarong – one of the biggest state-controlled asset management companies – was executed after being found guilty of corruption and bigamy. That year, China Development Bank chairman Hu Huaibang was sentenced to life in prison in a US$ 12 million bribery case.
2023 has already witnessed seen several such “incidents”. Bao Fan, one of the country’s most high-profile billionaire bankers and the chief executive of China Renaissance Holdings, has been “co-operating in an investigation being carried out by certain authorities” since his disappearance in February this year. An investigation into Bank of China’s party chief Liu Liange, suspected of “serious violations of discipline and law,” was launched in March. A month later, authorities said they were investigating Li Xiaopeng, the former chairman of state-owned asset management firm China Everbright Group. In June, Fan Yifei, a deputy governor of the country’s central bank, was arrested for suspected bribery and is facing a criminal investigation. He has also been expelled from the Communist Party.
The billionaire owner of HMV, Doug Putman, had hoped to keep up to three hundred Wilko shops open, but his bid failed, as rising costs complicated the deal. It looks inevitable that the Wilko name will disappear from the country’s High Street, with all of its four hundred stores across the UK closing by early October, along with 12.5k staff losing their jobs. It seems no bidders are interested in running shops under the Wilko name, although some parties are interested in rebranding their stores. For example, there are reports that B&M has said it will take on up to fifty-one of Wilko’s shops, in a deal worth US$ 16 million, with Poundland understood to be interested in buying up to seventy stores as a way of boosting its own portfolio. The Wilko brand is also still up for grabs, with retailers including The Range proposing bids for the name specifically. The company has struggled with strong competition from rival chains like B&M, Poundland, The Range and Home Bargains, as the high cost of living has pushed shoppers to seek out bargains. Closures have already started this week.
In a recent study, the Arab Monetary Fund noted that 2022 credit card losses, incurred by financial institutions and individuals, were 13.8% higher than the 2021 total of US$ 32.3 billion. These losses have speeded up financial institutions and decision-makers to explore innovative approaches leveraging modern technologies, to detect and analyse fraudulent transactions. There is no doubt that AI is playing an increasingly important role in tightening credit card fraud detection, with machine learning algorithms significantly contributing to achieving a predictive accuracy surpassing 94%. Furthermore, the report recommends the widespread adoption of AI and ML for scrutinising credit card fraud operations within Arab countries, as well as calling for intensified innovation and collaboration with leading financial technology firms to develop new, machine learning-based fraud detection systems. The report urges financial institutions to foster cooperation by sharing data and pooling resources in their fraud detection efforts.
Last month, most global food prices headed south, amid weakening global import demand and abundant offers from major exporters, as the UN’s Food and Agriculture Organisation’s Food Price Index dipped 2.1% to 121.4 points – 24.0% lower from its recent March 2022 peak. Decreases were noted as sunflower seeds, vegetable oil, meat, wheat, coarse grain and cereal prices declined 8.0%, 3.1%, 3.0%, 3.8%, 3.4% and 0.7%. Maize prices fell for the seventh straight month to hit their lowest value since September 2020, while sorghum prices declined as well, with the dairy price index down 4.0% – its eighth monthly decline in a row, and up to 22.4% on the year. One major exception was rice, with the index soaring 9.8%, to a fifteen-year high, due to “trade disruptions in the aftermath of a ban on white rice exports by India, the world’s largest rice exporter”. In April, a World Bank report noted that double-digit food inflation in the Mena region would impact poorer households and intensify long-term food insecurity for about 20% of those living in developing countries in the Mena region, while almost eight million children under the age of five will be hungry.
Speaking at the end of the two-day G20 summit in New Delhi, the Russian Foreign Minister Sergei Lavrov said that his country will return to the Black Sea grain deal ‘the same day’ as Moscow’s conditions for export of its own grain and fertilisers to the global markets are met. In July 2022, a deal was brokered by the UN and Turkey, the ‘Black Sea initiative'”, which allowed ships to safely export grain, other foodstuffs and fertilisers, including ammonia, from Ukraine via a maritime humanitarian corridor. At the summit, a declaration called for ‘full, timely and effective implementation to ensure the immediate and unimpeded deliveries of grain, foodstuffs, and fertilisers/inputs’ from Russia and Ukraine to meet demand in developing countries.
After a 0.1% dip in July, China’s Consumer Price Index turned positive last month, rising by 0.1% on the year, mainly attributable to a 3.0%b hike in pork prices, with air tickets, tourism products and hotels, all posting double-digit price growth. Meanwhile core CPI, which excludes food and energy prices, rose by 0.8% year-on-year. Analysts see a higher increase during the rest of 2023 – an indicator that domestic demand is steadily rising and that the deflationary concerns are mainly unfounded. In line with July, the August Producer Price Index, mainly monitoring factory prices, fell by 3.0% over twelve months, compared to 1.4% a month earlier. Overall, the economic prognosis points to an economy that is on the recovery track and that the deflationary concerns are overblown.
This week, French authorities has ordered Apple to stop selling the iPhone 12 on the grounds of it emitting too much electromagnetic radiation and ordered the tech giant to fix existing phones; if this cannot be done, then the ANFR has ordered that every iPhone 12 ever sold in the country should be recalled. This could be seen to be in contrast with the WHO which has advised that there is no evidence to conclude that exposure to low level electromagnetic fields is harmful to humans. No surprise to see that Apple will be appealing this typically French decision and had already provided the regulator with lab results from the tech giant itself and third parties which show the device is compliant with all the relevant rules. It does seem that this model has been recognised as being compliant with regulations on radiation levels worldwide. Evidently, there are two tests to see whether they are within set guidelines. The ‘membre’ (limb) check for when a phone is in close contact with a person’s body, such as when it is held or placed in a trouser pocket. The SAR, (Specific Absorption Rate), limit for this is four watts per kilogram, with the Apple phone recording 5.74 per kg. The other check showed that the iPhone 12’s SAR measure came in under this threshold.
Provisional 2022 data by Eurostat indicated that the EU exported services, valued at US$ 1,395 billion, to countries outside of the bloc – a 21.8% hike compared to a year earlier, with imports up 19.2% to US$ 1,208 billion. Consequently, the EU trade surplus for services hit US$ 188 billion last year, the highest value in the past ten years, and well up on the under US$ 10 billion surplus recorded in 2020.
Signalling that this could have been the last rate hike for the time being, the ECB raised its key rate for the tenth time in a row, by 0.25% to 4.0% citing that inflation was “expected to remain too high for too long”. The latest increase came after forecasts predicted inflation would be at an average 5.6% in 2023. It added that it expected inflation in the twenty-nation bloc to fall to around 2.9% next year and 2.2% in 2025. There is no doubt that the eurozone has been badly impacted by soaring food and energy prices that have squeezed household budgets. (UK interest rates are currently higher than in the eurozone at 5.25%, but UK inflation is also higher at 6.8%, and the Bank of England is expected to raise rates again next week). Many analysts are bearish on the EU economic prospects and have lowered their economic growth projections for the bloc “significantly” due to the impact of higher rates. Revised data from Germany – Europe’s largest economy – shows that the country is in recession.
August US consumer prices rose 0.5% to 3.7%, on the month – more than expected, driven by higher costs for rent and fuel. Although inflation has declined significantly from last year’s highs, it is still almost double that of the Fed’s longstanding 2.0% target – and any move upwards will inevitably cause concerns with the authorities and global markets because the overriding problem has not yet been fully resolved. Stripping out food and fuel, where price swings are common, prices still rose by 0.3% – more than expected. The central bank is due to meet on 20 September to consider whether further increases will be necessary; it has already raised its benchmark interest rate to its highest level, of between 5.25% and 5.50%, since 2021. It is unlikely that the Fed will make a move this month, with one of the main reasons being that rises have had little influence over fuel prices, which were the biggest contributor to the rise of inflation in August. However, it is likely that rates will rise again before year end. Only last month, Fed Chair Jerome noted “we are prepared to raise rates further, if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective”.
The UK state pension is likely to rise by 8.5% next April after data crucial to the so-called triple lock was published which sees the increase in the state pension based on the highest of average earnings, (total pay including bonuses), inflation or 2.5%. This will mean a US$ 16.60 weekly rise, equating to an annual increase of US$ 863, and the new annual basic state pension of US$ 11k. The triple lock is designed to ensure pensioners, especially if they rely solely on the state pension, will be able to afford rising prices, or to keep pace with the increases in the working population’s wages – it is thought that 20% of single pensioners and 13% of all pensioners rely solely on the state pension and benefits.
The Australian Securities and Investments Commission is to sue AustralianSuper, for failing to address multiple superannuation accounts, alleging that it did not address complaints from multiple superannuation account holders. It seems that ASIC is taking this action against the country’s largest superannuation fund because it failed to consolidate the superannuation accounts of 90k members, over a decade, costing its customers US$ 44 million in fees. Even though it self-reported the issue in 2021, AustralianSuper first detected the problem three years earlier. ASIC deputy chair Sarah Court says the superannuation fund clearly did not act in the best interest of its members, and it will have a long-term impact on their superannuation balances.
Philip Lowe has conceded he made some mistakes, in his seven-year tenure, and warned of the changing nature of inflation in his final speech as the RBA governor. He spoke about the three main economic challenges during his time as governor – the drawn-out period of inflation being below target, in his first few years, the global pandemic and the highest inflation rate in more than thirty years, in the aftermath of the pandemic. He claimed that one of his successes was, that despite everything, inflation still averaged 2.7% over this term as governor, which is within the bank’s 2% to 3% target range; some would argue that would be bending the truth somewhat bearing in mind that inflation hit 7.8% in December 2022 – its highest level in thirty years. He has argued that we could fight inflation better if we rethought our existing policy architecture, floating the idea of giving an independent institution limited powers over new fiscal instruments so it could help to manage inflation alongside the RBA. Another “success” was that the unemployment rate, at around 3.5%, is the lowest it has been in nearly fifty years.
However, he was involved in some controversial issues and confirmed he did post that, “including a promise that interest rates would not go up until 2024; everybody needs to get a flatmate; people need to work more hours to make ends meet; and young adults should stay at home because of the rental crisis;” he also said interest rates would not rise from 0.1% “until 2024 at the earliest” – a sure sign that, like a lot of high-level bureaucrats, he was out of touch with the “real world”. He did also finally realise that the central bank provided too much support for the economy during the initial lockdowns and post-pandemic. In line with many other G20 Central bank governors, he was also slow off the mark to raise interest rates when signs of inflation first emerged. Surely, someone Out Of Touch!
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