Breakin’ Up Is Hard To Do

The latest Knight Frank’s report indicates that average Dubai office rents have softened 4.3% over the past twelve months, despite a marked upturn in demand, especially in relation to firms’ consolidating their operations. Falls were more prevalent in ‘A’ grade buildings, where rents declined by 7.4% to US$ 41 per sq ft, whilst prime office space was only 1.4% down to US$ 68. As rents continue to come under pressure, some landlords have resorted to offering incentives including rent free periods, delayed price escalations and free parking. Rents are expected to remain under pressure for the rest of 2018, with vacancy levels remaining around 15%.

Developer Seven Tides has announced sales of US$ 82 million for all 661 apartments in phase 1 of its recently launched mixed-use SE7EN CITY JLT development. US$ 62 million of the revenue emanated from the sale of 572 studio apartments. The total US$ 354 million development, to be completed by Q2 2021, will feature 2.6k units, along with the usual add-ons of retail and F&B outlets.

An infrastructure tender for the US$ 1.2 billion MAG Eye Meydan District 7 development has been issued. Slated for completion by Q3 2020, the project encompasses 4.1k studio / 1 BR units and 536 3-4 BR apartments, with starting prices of US$ 133k.

Deyaar Development has announced that 35% of its Midtown development is now complete and will be ready for a Q4 2019 handover. The project encompasses 27 buildings and almost five million sq ft, with 659 apartments in the Arfan district and 579 in the Arnia district.

Despite the papers being full of stories of falling rents in the Dubai housing market, a recent Deutche Bank report ranks the emirate as the fourteenth highest among fifty global major cities. It estimates that the average annual rent for a 2 B/R apartment in the emirate is US$ 21.4k, still some way off the most expensive three of Hong Kong, San Francisco and New York at US$ 44.8k, US$ 44.0k and US$ 34.2k; at the other end of the scale come New Delhi and Bangalore at US$ 4.2k and US$ 3.5k. An interesting fact from the study estimates that US$ 82 billion is spent every year in the UAE on accommodation.

This week, HH Sheikh Mohammed bin Rashid Al Maktoum issued a decree cancelling any fines (covering over sixty different commercial violations) imposed by the Department of Economic Development until the end of the year. It is another step taken to further stimulate business in the emirate and enhance Dubai’s global competitiveness.

Dubai’s Crown Prince, Sheikh Hamdan bin Mohammed, has approved 26 Dubai 10X initiatives (from government departments) that aim to place the emirate ten years ahead of other cities. Two of these originated from the Dubai Airport Free Zone Authority – Dubai Blink, which would be the first global B2B smart commerce platform, and FZExchange. The latter will ameliorate capital investment opportunities for foreign investors, without the need to return to their home base, in a simplified and cost effective regulatory environment.

Meanwhile Dubai Land Department’s contribution to the Dubai 10X initiative is REST (Real Estate Self Transaction), a multiple-user platform for conducting real estate trading and transactions. The new smart system will eliminate paper documentation and simplify brokerage procedures, allowing Dubai properties to be traded at anytime and anywhere around the world.

In April, Dubai International witnessed 7.6 million passengers – almost the same figure as a year earlier – as total YTD numbers of 30.3 million are 0.8% higher than the same period in 2017. 27.4% of traffic emanated from three destinations – India (1.0 million), Saudi Arabia (557k) and the UK (530k). As in previous months, the number of flight movements slowed – YTD by 3.0% to 136k – but the average number of passengers per flight increased by five to 230. Cargo traffic declined – in April by 0.7% to 216k tonnes and YTD 2.6% lower at 832k tonnes. (YTD, Abu Dhabi recorded 193k tonnes and 4.0 million passengers).

Emirates will introduce its long awaited premium economy class on the newly-ordered 380s from 2020.

Dubai Aerospace Enterprise Ltd is to sell sixteen aircraft, valued at US$ 900 million that are currently on lease to eleven different airlines; proceeds will be used to pay down debt, following recent large-scale investments, as well as future expansions.

The world’s fourth biggest ports operator, DP World, is again in acquisition mode spending US$ 316 million to buy Cosmos Agencia Marittima in Peru, a country where it already has container terminals in Callao and Lurin.

It is reported that Dubai-based Landmark Group is considering a US$ 13 million investment in the 19-year old UK Italian restaurant chain, Carluccio’s. Under a CVA (Company Voluntary Arrangement), the company could close thirty of its 103 outlets (in four countries including UAE) as it attempts to slash costs, close non-profit making operations and invest in upgrading the remaining outlets. Landmark took full control of the 19-year old Carluccio’s in 2010, at which time its value was an estimated US$ 122 million.

The Labour Force Survey 2017 estimated that of the emirate’s total labour force of 2.78 million, 2.08 million lived in Dubai and the remaining 25.2% lived outside the emirate; the official Dubai population at 31 December 2017 was 2.98 million. The official unemployment level was given at 0.5%, with the labour market showing a 110k annual addition of workers over the past three years. The official percentage of employed rate, based on the total working age population, was 1% higher at 83.1%, with female workers 4.3% higher at 53.6%. Over 50% of the total were involved in three sectors – construction (27.6%), wholesale/retail (17.9%) and manufacturing (8.0%). 27.8% of all Emiratis worked as technicians/associate professors, with over a third of Emirati females being involved in jobs that required higher education and levels of skill and competency.

According to an International Data Corporation report, there was a significant 9.9% quarter on quarter decline in Q1 imports of mobile phones to the Gulf region to 5.9 million. Smartphone figures were 4.7% lower, (4.6% in the UAE) – the fourth straight quarter of declines, driven by falling consumer spending and the introduction of VAT in January (plus in Saudi Arabia by the new expat dependent tax). Samsung, with a 35% market share, continued to be the leader in the smartphone sector, followed by Apple and Huawei.

Petrol prices are set to rise tomorrow (01 June) with a monthly US$ 0.0381 (5.6%) increase in Super 98 to US$ 0.717; since January 2017, the price has risen 46.3%, from US$ 0.490, driven by the hike in energy prices (01 Jan 2017 – Brent at US$ 56.82, 31 May 2018 – US$ 77.56) and the 5% VAT as from 01 January 2018. Diesel will be 5.9% higher at US$ 0.738.

Having undergone a “comprehensive operational readiness review”, there will be a delay – to at least the end of next year – in the opening of Baraka nuclear energy plant in Al Dhafra. The facility will be the first nuclear power plant in the Arab world.

It seems that the Central Bank is coming to the party to help ameliorate the apparent liquidity problem in the market, by injecting US$ 3.8 billion in cash last month. It is expected that if this continues, it will go some way to boost economic activity and business momentum. The UAE Central Bank of the UAE raised its economic growth forecast for 2018 two notches to 2.7%, and 3.2% a year later, on the back of an expected expansion in the non-oil sector. “Due to improved international economic conditions,” non-oil GDP growth is expected to reach 3.9% – up from 3.4% recorded in 2017 – and 4.3% next year. However, because of a lower oil output forecast for this year, (mainly due to the OPEC quota cuts), there will be a 0.3% contraction in the oil GDP, with a marginal 0.1% expansion in 2019. Inflation levels this year are expected to hit 3.5% before falling to 2.5% in 2019.

52.5% of all Q1 remittances, totalling US$ 11.9 billion, by UAE expats emanated from three nationalities – Indian (36.8%), Pakistani (8.8%) and Filipinos (6.9%). There was a 10% increase in the number of trades carried out at money exchanges which now account for over 70% of the total transactions – a sign perhaps that banks are charging more for services. As these transfers account for 27% of the country’s current account, efforts should be made to reduce this by introducing attractive ways for expats to invest in the country. Naturally more money spent in Dubai will boost the local economy at a time when it is needed.

According to reports, it seems that two recent appointees to the Abraaj Group’s senior management team, COO Matthew Maguire and CFO, Bisher Barazi, have resigned. Apparently, there have been discrepancies found in a number of the firm’s investment vehicles, following irregularities discovered earlier in the year in a US$ 1 billion healthcare fund which had several high-profile investors including the Bill & Melinda Gates Foundation. The company is currently busy reorganising its structure which involves selling off some assets to raise liquidity levels; they include a stake in its fund management unit, its Pakistani utility unit and its shareholding in Dubai’s Middlesex University. There are late reports that Colony NorthStar has ended talks to acquire a major stake in the Dubai firm. (Coincidentally, Deutsche Bank, which is undergoing a massive cost-cutting exercise, is reportedly planning to sell its 8.8% stake in the Dubai firm).

The DFM opened on Sunday (27 May), at 2954, and, having gained gaining 72 points the previous two weeks, edged 10 points higher, closing on 2964 by Thursday, 31 May. Emaar Properties was up US$ 0.01 at US$ 1.42, whilst Arabtec was flat at US$ 0.53. Volumes were markedly higher, trading 555 million shares on Thursday, valued at US$ 246 million, (compared to 321 million shares worth US$ 68 million the previous Thursday – 24 May).

By Thursday 31 May, Brent Crude, having dipped US$ 0.51 (0.6%) the previous week shed US$ 1.23 (1.6%) to close on US$ 77.56, with gold US$ 1 higher at US$ 1,305. For the month of May, Brent traded 2.2% up from US$ 75.92 (and 16.4% YTD from US$ 66.02), with the yellow metal unmoved from its 01 January opening price of US$ 1,305 but US$ 8 lower for the month.

For one day this week, Netflix was the world’s most valuable media company when its market value went north of US$ 153 billion, trading above rivals Disney (US$ 152 billion) and Comcast’s US$ 143 million. So far this year, its share value has risen by more than 80%. The company, founded in 1997 as a DVD rental service, has 125 million streaming memberships in over 190 countries, with daily viewing hours topping 140 million.

Smiths Group, a UK engineering conglomerate with a market capitalisation of US$ 9.2 billion, is reportedly in discussions with US companies, including ICU Medical, about a transatlantic merger of its healthcare business‎. The medical side of the UK business accounts for only 30% of its revenue and, even at these early stages, it is thought that any future business relationship will be a JV rather than a merger. However, Smiths will not be immune from the possibility of some activist group pushing for a break up of its assets.

Pret A Manger is ready to be sold to Luxembourg-based JAB Holdings for a sum likely to be in the region of US$ 2.0 billion. It would net the current owners of the 32-year old UK sandwich and coffee chain, Bridgepoint, a tidy profit, as they paid US$ 472 million for it in 2008. The chain has 530 global outlets which generated US$ 1.2 billion in revenue last year. The new owners already have the world’s second-largest coffee business, controlling both the Peet’s and Espresso House chains, as well as the Kenco and Douwe Egberts brands.

Another UK retailer is facing tough times, with Dixons Carphone warning of a sharp fall in profits to US$ 515 million this year and US$ 405 million in 2019. The company is expected to close 13% of its 700+ stores this year, as it takes drastic cost cutting action to become a much leaner organisation.

It seems likely that the UK government will start selling part of its remaining 70.5% stake in RBS – a 10% divestment would net the coffers US$ 4.0 billion. The government, that has been a majority shareholder in the bank since 2008, will lose money on any sale when the share value in 2008 was at an average US$ 6.78 and at the beginning of this week stood at US$ 3.91- a 42.3% diminution. Earlier in the month, RBS was fined US$ 4.9 billion by the US Department of Justice for the mis-selling of mortgage bonds before the financial crisis.

In the UK, the Financial Reporting Council is to take disciplinary action against the former finance chiefs of Autonomy and Deloitte for their 2011 roles in the sale of the firm to Hewlett Packard for over US$ 10 billion. Within a year, HP was crying foul, amid accusations of a dishonest inflation in the selling price, so much so that it wrote off 75% of the value in 2012. The auditor is accused of failing to adequately challenge Autonomy’s accounting and disclosure of its purchases and sales of computer hardware.

A US court has awarded Apple damages of US$ 539 million against Samsung for copying certain features of the original i-Phone in a case that stretches back seven years. The US tech giant had asked for US$ 2.5 billion, with the South Korean conglomerate arguing that it should only have to pay US$ 28 million for profits directly related to the components or features covered by the patents.

President Trump has now allowed Chinese chipmaker ZTE Corp to remain in business after it had agreed to pay US$ 1.3 billion in fines, changed its senior management/board and provided “high-level security guarantees.” Last week, he intimated that he was doing Chinese President Xi Jinping a favour by lifting the ban that had cost the telecommunications-equipment maker US$ 3.1 billion.

As expected, US authorities have given the green light to Bayer’s controversial US$ 66 billion deal for Monsanto on condition that it sold off parts of its seeds and crop chemicals business; a US$ 8.8 billion sale has been agreed with chemicals producer, BASF. This deal goes some way to allay fears that the merger between the world’s two biggest agricultural companies would stifle competition. The new entity will result in cost savings of at least US$ 1.5 billion.

According to IATA’s April report, ME air freight volumes were 7.3% higher, year on year. On a global scale, April’s demand was up 4.1%, measured in freight tonne kilometres, but the pace in growth demand is still somewhat short of what was happening in 2017. However, it is expected that 2018 growth will be in the 4% region.

The bad loan situation at India’s five major state banks continues to deteriorate as it was reported that bad loans were more than US$ 6.8 billion higher than first estimated. The end result is that 31 March financials were littered with massive losses, as banks had to increase their loan impairment costs substantially. Half of the country’s 22 state banks currently operate under the RBI’s Prompt Corrective Action program that restricts lending and expansion, which then reduces banks’ lending powers which in turn have a negative impact on the Indian economy. Unfortunately, there is worse to come!

With the Indian rupee weakening over 6% YTD to 68 to the greenback -its lowest rate in eighteen months – there are concerns of the negative impact it will have on the economy. A strengthening US$ and a marked improvement in energy prices have a double whammy in that prices inevitably head north because imports, including oil, become more expensive. Furthermore, Q1 witnessed 4.4 billion rupees being taken out of rupee-denominated government and corporate bonds, the highest amount on record. The situation has not reached the crisis level seen five years ago and is unlikely to do so since foreign reserves in 2018 are close to record highs and the current account deficit is significantly smaller than in 2013.

All is not well with Asia’s third biggest economy. In a bid to boost sluggish lending and economic growth, Indonesia raised its benchmark interest rate for the second time in a fortnight, as fears rose of a continuing fragile rupiah (which has been trading at lows last seen in October 2015) and increasing capital outflows, not helped by the improving greenback. The authorities expect that lending growth will improve this year, increasing from the current 8.9% rate to 12% by year end, inflation will stay at the 3.5% mark and that growth will top 5.2%, slightly down from an earlier figure of 5.4%.

Although monthly Japanese producer prices in April nudged 0.1% higher, for the year, there was a 0.9% rise, driven by prices for transportation, advertising, communications and insurance heading north.

Last month, Chinese industrial firms’ profits rose at their fastest pace in six months, reaching US$ 90.1 billion – a massive 21.9% higher year on year and 15.0% YTD. Driven by higher prices and strong demand, the increase is even more impressive, when considering “negative’ factors such as cut-backs by regional governments, recent stringent regulations relating to industrial pollution (leading to many factory closures) and its rocky trade relations with the US. However, companies are seeing their profit margins being squeezed as debt growth slowed to its lowest level since the GFC.

Australia’s scandal-plagued financial sector received another blow this week when the Australian Competition and Consumer Commission confirmed that it would be prosecuting ANZ, Citibank and Deutsche Bank (and several individuals) on criminal cartel charges. The case involves arrangements for the August 2015 sale of 80.8 million ANZ shares worth US$ 1.9 billion.

Australia’s Wesfarmers’ foray into the UK market has ended ignominiously following its sale of Homebase to restructuring specialist Hilco for just over US$ 1 (one pound). It only acquired the DIY chain, with 250 stores and 11.5k employees, two years ago for US$ 460 million and had already converted part of the chain to the Bunnings brand; it has also racked up losses and other costs of some US$ 890 million. This sorry episode will inevitably find its place in future university studies under How Not To Manage a Foreign Takeover 101.

In an indicator that the Australian economy may be facing some headwinds, April housing activity slowed, with dwelling approvals 5% off as non-residential permits also weakened. Although on a twelve-month basis they were 2% higher, they are still well down on the double-digit growth seen the previous year. It is obvious that the four-year housing boom has run its course, with home prices in the major cities slowing because of banks introducing tighter lending procedures. Any further softening in this sector will have a negative impact on the country’s US$ 1.4 trillion economy, as consumer spending will inevitable tumble. The annualised growth forecast has declined from the 2.8% trend rate to 2.4% and there is now every chance that rates will be held at the 1.5% mark until early next year.

President Donald Trump has gone ahead with his pre-election pledge of imposing steep import duties on steel (25%) and aluminium imports (10%) from the EU, Mexico and Canada. Undoubtedly, there will be repercussions with tariffs being applied from the ”injured” parties on the likes of agricultural goods, clothes, Levis, JD and Harley Davidsons. The reasoning behind the President’s move is to address an oversupply (and dumping) of the two metals and to protect American jobs.

US Q1 growth was downgraded at 2.2%, 0.7% lower than the previous quarter. Meanwhile, the current dollar GDP was US$ 203 billion higher at US$ 19.96 trillion that was attributable to improvements in many sectors, including exports as well as spending by government and consumers.

Italian government bonds rose to their highest level in over three years to over 3.0%, as political uncertainty continues. Its people will not forget the 2008 GFC which left the economy 6% smaller and added three million to live in poverty. With its national debt equivalent to 132% of national output – second only to Greece – it can ill afford the US$ 20 billion needed to drag many families over the poverty line by raising the basic monthly income to US$ 919.

With the proposed appointment of 81-year-old Paolo Savona as Finance Minister, Italy would have moved one step nearer to leaving the euro. He has been highly critical of the single currency – a “flawed project” –  in general and Germany in particular – which “has replaced the will of military power with economic power”. The markets were indeed worried, with US$ 4.4 billion withdrawn last week from the European equity and bond funds, the country’s MIB recording its third straight week of losses (down 8%) and government bonds at 2.46%, a level not seen for more than a year. Sergio Mattarella, the president of the world’s third-most indebted nation, did not waste any time and blocked his appointment feeling that this appointment could hasten the country’s exit from the euro.

Consequently, a frustrated Prime Minister-designate Giuseppe Conte gave up in his attempts to form a government. Both the far-right League and the 5-Star Movement argued that the president’s actions were unconstitutional and demanded an immediate new vote. By Monday, technocrat and former IMF official Carlo Cottarelli was called in to head a government of unelected technocrats.

Then there is the Spanish fiasco, with the distinct possibility of a no confidence vote, ousting the current Prime Minister Mariano Rajoy to be replaced by the unelected Pedro Sánchez, whose party has only 84 seats in the country’s 350-seat parliament. So much for the democratic process in Europe’s third and fifth biggest economies! Pressure will be mounting in the Brussels corridors of power – Breakin’ Up Is Hard To Do!

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When Will They Ever Learn?

The big news of the week was that the UAE cabinet approved plans to allow foreign investors 100% ownership in some businesses and grant ten-year residency to selected expatriates, with the ultimate aims to attract international investors and high-skilled professional workers. It will also allow dependent students to extend their visa time after completing their tertiary education. It is expected that the law could be in place by the end of Q3. HH Sheikh Mohammed bin Rashid Al Maktoum has reiterated that “the UAE will remain a global incubator for exceptional talents and a permanent destination for international investors.”

According to the IMD World Competitiveness Center, the country, having moved up from 27th only seven years ago, is the seventh most competitive in the world and ranked number one in twenty-three indicators including “Government Decisions” and “International Talent”.  As the Dubai Ruler said “we have the determination, we have the talent, and we have the resources. Being Number One suits our nation”.

In another busy week, the Dubai Ruler launched the UAE Platform for Scientific Laboratories with the main aim of driving scientific research and development in the country. As well as trying to attract highly qualified scientists to use the country as a base for further studies and projects, its aims are to provide an advanced research environment and outstanding infrastructure. He also launched the construction of the US$ 107 million Shindagha Bridge Project, part of the 13 km US$ 1.4 billion Shindagha Corridor Project; the bridge will feature an iconic design based on the concept of the mathematical infinity sign.

Asteco’s latest report indicates that JBR posted the emirate’s largest annual apartment rental declines (at 15%), closely followed by 14% falls in Deira, Downtown Dubai and Dubai Marina plus 13% declines in Sports City and The Greens. In relation to villas, the three biggest decreases were to be found in Jumeirah Village (15%), Jumeirah Park (13%) and 11% in Arabian Ranches. In Q1, sales prices for both villas and apartments dropped by 1% but over the twelve months the declines were 6% and 9% respectively. The report also estimated that there would be 30k residential units delivered by the end of the year, with 3.7k already handed over in Q1, leaving a further 26.3 k over the next nine months. (This compares to Core Saville’s recent forecast of handovers “may exceed 21.5k)).

Union Properties’ shareholders have approved two motions –  allowing an increase in the foreign shareholding ceiling from 25% to 49% and the launch of sukuk (within the next twelve months), at a maximum value of US$ 272 million, with no more than 9% yield, which is not convertible to shares and will neither be offered publicly nor be listed.

Abu Dhabi-based Manazel Real Estate, in association with Tasameem Real Estate, is to invest over US$ 136 million in three projects, two of which are in Dubai – Dubai Silicon Oasis and Jumeirah Village Triangle. The company is also in discussions with other investors for other similar projects locally and in the wider region.

Seven City JLT is the latest project off the drawing board of property developer, Seven Tides. The US$ 350 million 27-floor development, covering an entire cluster, will include a 2.6k residential building and retail space of 150k sq ft; already 15% completed, handover is expected by Q3 2021.

Colliers International reports that Q1 year on year construction costs and material costs were between 1.8%-2.3% and 3.1 higher respectively, driven by an increase in the price of local and foreign manufactured materials as well as higher Chinese prices as the government there continues to close down illegal factories. The consultancy also predicts that overall construction costs this year will be no higher than 1.8%, based on World Bank predictive prices – copper and crude oil remaining flat and 6.3% and 3.4% declines in iron ore and aluminium. With YTD copper at US$ 3.096 (6.2% lower), Brent’s US$ 78.79, 18.3% up, iron ore at US$ 65.74 – 7.8% off – and aluminium flat at US$ 2,252, the World Bank forecasts could be a little shaky.

A US$ 300 million JV will see Gems Education and EFG Hermes invest in the Egyptian education sector over the next five years. The country has a student population of 21 million, 10% of which are enrolled in private schools.

Amazingly, it is estimated that ride-hailing app Careem creates 80k new job every month, with 800k self-employed drivers (captains), currently using the platform to make a living. Careem, which provides training and other benefits to their drivers, is now available in 100 cities in 14 countries with potential markets such as Sudan, Oman and Algeria in the pipeline.

April data shows that Dubai’s inflation level dropped 0.32%, month on month, to 1.79%, driven mainly by 1.91% decreases in housing, utility and gas/fuel costs, as well as a marked 11.25% slump in entertainment and culture.

The Ministry of Finance has reported that 2017 federal government spending reached US$ 13.2 billion, with two sectors, ‘general public services’ (US$ 4.4 billion) and public order and safety (US$ 2.9 billion), accounting for 54.8% of the total spend.

It seems that worrying times are ahead for Abraaj, the biggest buy-out firm in the ME, with assets under management totalling almost US$ 14 billion, as two separate examinations are reportedly under way into the running of some of its funds. Since the beginning of the yea, and possible problems arising from its running of a US$ 1 billion global healthcare fund, the firm has witnessed its founder Arif Naqvi ceding control of the asset management unit, job cuts including three senior managers, liquidity concerns and asset sales. Reports indicate that it is close to disposing both of its Pakistani utility and a controlling stake in its fund management unit.

In a major deal, Emirates NBD has paid Russia’s Sberbank a reported US$ 3.2 billion to acquire Turkey’s fifth largest bank, Denizbank, which will allow Dubai’s biggest lender to expand its regional reach. With assets of US$ 37 billion, as well as 708 branches in its home country and 43 in five others, it has an 11.8 million customer base. Moody’s maintained a stable outlook the Dubai bank’s long-term deposit rating and confirmed its long-term and short-term foreign currency deposit ratings.

To ramp up its capital base, Dubai Islamic Bank has offered 1.64 billion shares at US$ 0.85 per share (on Thursday its share price on the DFM was US$ 1.30); subscriptions will remain open until Saturday, 26 May.

The country’s largest real estate investment trust, Emirates Reit posted a 23.0% hike in property operating income to US$ 13 million, with EBITDA, (earnings before interest, taxes, depreciation and amortisation), 21% higher at US$ 9 million. The company did not provide figures for net income but its total 2017 dividend payout was US$ 0.022, half of which has already been distributed.

Union Properties’ shareholders have approved two motions –  allowing an increase in the foreign shareholding ceiling from 25% to 49% and the launch of sukuk (within the next twelve months), at a maximum value of US$ 272 million, with no more than 9% yield, which is not convertible to shares and will neither be offered publicly nor be listed.

The DFM opened on Sunday (20 May), at 2913, and having gained gaining 31 points (1.1%), the previous week was 41 points (1.4%) higher, closing on 2954 by Thursday, 24 May. Emaar Properties was up US$ 0.01 at US$ 1.41 whilst Arabtec was flat at US$ 0.53. Volumes were higher, trading 321 million shares on Thursday, valued at US$ 68 million, (compared to 115 million shares worth US$ 55 million the previous Thursday – 17 May).

By Thursday, Brent Crude, having risen 7.6% the previous two weeks dipped by US$ 0.51 (0.6%) to close on US$ 78.79, with gold going in the opposite direction, driven by the cancellation of the North Korean / US nuclear summit, to move US$ 15 (1.2%) higher at US$ 1,304 by 24 May 2018

Although still posting adjusted net losses of US$ 577 million (18.2% lower than the deficit a year earlier), Uber posted fairly decent Q1 figures, with net revenue 67.0% higher at US$ 2.5 billion on a 55.0% jump in revenue to US$ 11.3 billion. The loss figure did not include the US$ 3.0 billion gain from its sale of its SE Asian sale of Grab and the merging of its Russian business with Yandex. Significantly the company’s market value seems to have risen 29.2% in little over a year to US$ 62.0 billion – the difference between its own valuation last year when it sold a stake to Softbank (US$ 48.0 billion) and its current US$ 62.0 billion, based on a US$ 500 million sale to two current investors.

Despite reports this week of a possible tie-up between Barclays and Tata Steel has acquired a majority shareholding for US$ 5.4 billion in bankrupt Bhushan Steel – the first time that any Indian company has “beaten” the country’s new insolvency and bankruptcy laws, introduced to tackle the seemingly insurmountable US$ 150 billion bad debt problem.

Standard Chartered, it is highly unlikely to take place The British institution, centered on the US/European markets, has a market capitalisation of US$ 49 billion whilst the Asian-centric bank valued at US$ 34 billion. Both banks have their own unique problems – the former with an underperforming investment arm and the other a lack of capital generation to further major expansion activities – which a merger would not help either party.

An Epicor Software’s report indicates that global manufacturing grew 3.7% last year to register 103.7 points on its Global Growth Index, which reports on activity in 14 territories. This comes about despite a challenging economic environment and was driven by investment in new technology. Many of the manufacturers involved in the study reported increases in sales and turnovers (5%) and profit (3%).

Eurozone May manufacturing growth slowed 1.7 month on month to 54.5 – its lowest level of growth in eighteen months and fourth consecutive month of declining growth – with services growth off at 53.9, a sixteen-month low. The final IHS Makit Eurozone PMI (purchasing managers’ index) was 1.0 lower at 54.1. The outlook for business activity levels for both sectors showed was at an 18-month low.

To avoid a possible Trump trade war, China has offered a US$ 200 billion olive branch to reduce its spiralling trade surplus with the US. This will largely be carried out by increasing imports, after the government announced that it would discontinue its anti-dumping and anti-subsidy investigation into imports of US sorghum, citing matters of public interest for their change of heart.

China’s State Information Center expects an annualised 6.7% growth in Q2, as other economic indicators point to a slight loss in momentum following the government’s recent crackdown on the country’s shadow banking industry. Although industrial output headed north, and retail sales and fixed asset investment increased at less than expected rates, property sales dipped for the first time in six months.

There was a marked month on month fall in Japanese consumer prices in April – down almost half to 0.6%.

The UK’s inflation rate continues to fall steadily to its 2.0% BoE target, with April’s return of 2.3% its lowest level in over a year and down from its October peak of 2.8%. The main factor behind the fall was airfares “influenced by the timing of Easter.”

Bitcoin continues to defy its many critics who have predicted it downfall for some time and now they have some ammunition with the cryptocurrency down 23.1% at US$ 7,561 from US$ 9,837 on 05 May 2017. Even more fuel to the doubters is that it is 60.9% lower than its 11 December 2017 peak of US$ 19,357. However, if a longer-term view is taken it is 371.5% higher than it was just twelve months ago when its value was US$ 2,035 and 1,595% higher than its US$ 474 level exactly two years ago. Even then, the doomsayers were on its back and probably will be next year and the year after but to no avail. When We They Ever Learn?

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Lose Your Money

This week, HH Sheikh Mohammed bin Rashid Al Maktoum opened Area 2071, located at Emirates Towers, an interactive platform that will “act as an umbrella” to bring together SMEs, entrepreneurs, start-ups and government programmes. At the launch, the Dubai Ruler said that “Area 2071 reflects the UAE’s ambition to be a key player in building the future. It is an open laboratory to learn, develop ideas and experiences, and design the future, as well drafting a better future for humanity.”

The latest Core Savills report shows that Dubai rents and sale prices continue to soften and that it is more evident in central areas such as Downtown and the Marina, with falls of 7.0%. Declines in rentals have been more noticeable in The Meadows and The Springs, down 5% and 9%, with current rents up to 20% lower than in 2015. It expects that 21.5k units will be delivered this year and that the impact of new stock is affecting secondary sales prices, as there are more recent builds in less “preferred” locations, at lower (and more attractive) rates.

According to the Dubai Chamber of Commerce and Industry’s CEO, Hamad Buamin, the emirate will allow 100% foreign ownership of “strategically important” retail brands – as is apparently already the case with Apple and Tesla. Only last year, the Ministry of Economy indicated that a new law exempting foreign firms from the 51% local ownership rule would be in place in 2018.

Emaar has launched its new Downtown property, Grande residential tower located at Opera District. The 78-storey building will comprise 1-4 B/R units and will have views of Burj Khalifa and The Dubai Fountain.

This week, Nakheel has called for tenders for piling and enabling works on PALM 360 which, at 260 mt, will be the tallest building on the man-made island. The twin tower project – housing the 125-key Raffles The Palm and 331-units Raffles Residences PALM360 – will have the world’s largest sky pool connecting the buildings.

Azizi has appointed Evershine Contracting in a US$ 152 million agreement to build half of phase 4 of Azizi Riviera, located in Meydan One. The contract, encompassing ten of the 69 mid-rise buildings for the whole 16k-unit project, will start in Q3.

So as to further ease the burden of doing business for organisers of exhibitions and conferences, the UAE Cabinet has agreed to a VAT refund for entities involved in the sector. It is hoped that the decision will give a boost to an industry that contributed US$ 651 million to the national economy last year and is expected to more than double in value by 2020.

To further boost Chinese tourist numbers, Dubai’s Department of Tourism and Commerce Marketing (Dubai Tourism) has signed an agreement with Fliggy, one of China’s major online travel platforms and part of the Alibaba Group.

According to a How Global is the Business of Retail? Report, Dubai, having introduced 59 new retail brands to the emirate last year, has overtaken London as the world’s leading retail destination; 69% of global retailers now have a presence here. The report also indicated that Dubai’s existing retail inventory could grow by 50% (equivalent to 1.5 million sq ft) by the end of 2020.

The impasse between the Gulf airlines and the three major US carriers seems to have been broken as the UAE has agreed to increase financial transparency and to issue annual public financial reports under internationally recognised accounting standards. The UAE has also pledged that it will not add any further fifth freedom flights (that start in in the home country and touch down in a different nation before continuing on to the US). Three years ago, the US triumvirate – American Airlines Group, Delta Air Lines and United Continental – claimed that Gulf airlines were receiving government subsidies, giving them an unfair advantage. Having stopped flying into Dubai in 2016, Delta Air Lines will soon reopen the route, with its CEO, Ed Bastian saying “we’re going to have the opportunity to once again go back into parts of the world that we’ve been run out of”.

Emirates has agreed to renew its Formula 1 sponsorship deal until 2022.

State-controlled Dubai Aerospace Enterprise could be considering orders totaling some US$ 40 billion to acquire 400 single-aisle aircraft including A320s and 737 Maxs. DAE already has a fleet worth US$ 14 billion and last year raised US$ 2.3 billion in senior bonds to acquire Ireland’s Awas.

According to the IMF, the UAE is to return to a fiscal surplus of 0.5% of GDP this year (and 1.0% in 2019) on the back of higher energy prices; this is a major improvement from its previous forecast of a 2.2% deficit but the organisation is often seen not to be the world’s best prognosticator. It has also projected this year’s economic growth at 2.0% and 3.6% in 2019, with non-oil growth set at 3.0% and 4.0% and oil growth of 0% and 3.0% respectively. However, there are potential risks to consider – geopolitical tensions, rising interest rates and a currently weak property sector. Inflation is forecast to be at 3.5% this year, falling to 2.5% in 2019.

In 2017, JAFZA confirmed its position as the region’s top trade and logistics hub, with a traded volume of 29.4 million metric tonnes, valued at US$ 83.1 billion; this figure equates to 23% of the total Dubai trade value and 77.0% of all the emirate’s free zones. Volume wise, it is at its highest since 2013 and accounts for 32% of all Dubai’s trade and 97% of all the free zones. Its five main trading partners are China, Saudi Arabia, US, Vietnam and India.

Chinese interests make up almost 25% of total assets booked in the Dubai International Financial Centre; this figure of US$ 33.4 billion is set to grow, as last year a 30.5% jump of US$ 7.8 billion was recorded. China’s four leading banks – Bank of China, Agricultural Bank of China, ICBC and China Construction Bank Corporation – have made the DIFC their regional bases.

Celebrating its first birthday, the country’s first lifestyle digital bank, Liv has reported that it is attracting over 10k new customers (of which five in six are millennials) every month. The Emirates NBD offshoot is regarded as the fastest growing bank in the UAE.

In a bid to alleviate any possible liquidity issue, Abraaj Group is reportedly considering the partial sale of its fund-management unit (a majority stake to Colony NorthStar) and its 66.7% shareholding in Pakistani utility, K-Electric possibly to Shanghai Electric Power Co, worth US$ 1.8 billion. The Dubai-based firm, which is trying to convince stakeholders that it had not misused clients’ funds, has already introduced new internal controls, changed senior management and reduced payroll numbers by 15%.

Dubai-listed Gulf Navigation recorded a 5.0% Q1 profit growth to US$ 3 million, as revenue surged 28.2% to US$ 10 million. During the same time period, operating expenses were 39.6% higher at US$ 7 million.

Emirates Investment Bank saw its Q1 net profit decline 9.5% to US$ 4 million, as its operating income fell 12.5% to nearly US$ 5 million. However, EIB’s managed assets were 2.7% higher at US$ 2.9 billion.

Following a US$ 228 million loss a year earlier, Drake & Scull managed to post a US$ 2 million profit in Q1, although revenue fell 12.9% to US$ 189 million. In Q1, the company secured orders worth US$ 83 million in its home market and has a current project backlog amounting to US$ 1.5 billion.

Damac Properties posted disappointing Q1 results, with profit falling 45.0% to US$ 132 million, as cost of sales headed the other way – up 27.5% to US$ 308 million on revenue of US$ 515 million.  Even so early in the year, it is unlikely that the developer will reach its annual sales target of US$ 1.9 billion and could also see a fall in annual profit which last year touched US$ 752 million, which itself was 25% lower than the 2016 return.

Amanat Holdings posted a 10.7% increase in Q1 profits to US$ 4 million, fuelled by a 12.0% hike in total income to US$ 8 million. During the quarter, the health-care and education-based company acquired a 35% stake in Abu Dhabi University Holding Company for US$ 87 million. The company, whose portfolio is almost evenly spread between education and medical assets – and between locations (UAE and Saudi Arabia), – is planning to spread its geographical footprint to other countries in the region.

The DFM opened on Sunday (13 May), at 2882, and finally stopped its recent downward spiral, gaining 31 points (1.1%), to close at 2913 by Thursday, 17 May. Emaar Properties reversed just a little of its 28.1% YTD diminution in share value, jumping US$ 0.04 to US$ 1.40, whilst Arabtec gained US$ 0.06 to close on US$ 0.53. Volumes on the first day of Ramadan were predictably low, trading 115 million shares on Thursday, valued at US$ 55 million, (compared to 244 million shares worth US$ 102 million the previous Thursday – 10 May).

By Thursday, Brent Crude, having risen 5.2% the previous week, moved a further 2.4% higher to close on US$ 79.30, with gold going in the opposite direction, US$ 33 (2.5%) lower at US$ 1,289 by 17 May 2018. With oil inventories in the OECD industrialised countries falling to nine million barrels above the five-year average (compared to 340 million barrels at the beginning of the 2017), it seems that the oil glut of the past two years – allied with low prices – is all but over.

Xerox will not now be bought by Japan’s Fujifilm in what would have been a US$ 6.1 billion deal. Instead it has reached a deal with activist investors, Carl Icahn and Darwin Deason, already 15% shareholders of the US printer and photocopier maker, who have claimed that the sale price was undervalued. It is thought the company is still up for sale but the price would have to be somewhat higher.

TPG, the US owners of Poundworld has apparently instructed Deloittes to find a buyer for its UK operations. Two weeks ago, the discount chain was planning to close 100 of its 355 shops, that employ 5.7k, but any rescue plan (a Company Voluntary Arrangement) has now been ditched. The American owner had already pumped in US$ 28 million in an attempt to keep the operations afloat. Its recent annual accounts showed a US$ 23 million pre-tax loss, as impairment provisions rose. This is the latest UK chain to hit the ropes following Carpetright, New Look and Toys R Us UK.

The UK’s House of Fraser posted a US$ 60 million loss (compared to a US$ 2 million profit in 2016), as revenue fell 6.3% to US$ 1.1 billion. The usual suspect – Brexit – was given as one of the contributors to the disappointing results, along with the growth in e-commerce and terror attacks. China’s C.Banner has agreed to take over 51% of the retailer which has 59 outlets in the UK.

Another iconic brand that is struggling is Mothercare, which is set to close 49 (35.8%) of its UK stores over the next two years, as part of its strategy to keep the baby care retailer in business. This is part of the conditions of its company voluntary arrangement – a plan that needs to be ratified by creditors over the next 21 days. Just a decade ago, the chain had over 400 shops in operation.

The Financial Conduct Authority in the UK has come down strongly on Barclays boss Jes Staley after his befuddled attempt to unmask a whistleblower (a shareholder) who had been critical of a new employee, whose appointment was instigated by the Chief Executive. In a historic verdict, the FCA fined him US$ 880k (and the bank cut US$ 685k from his 2016 bonus) – small change when his 2016 and 2017 remunerations came in at US$ 5.7 million and US$ 5.3 million. No wonder, some people outside the Establishment think that Mr Staley has got off fairly lightly!

In a deal that would value the Saudi Arabia’s Alawwal Bank at US$ 5 billion, HSBC has offered a 29% premium to acquire RBS’s local venture stake. If the deal goes through it would result in the new entity, with the international bank having a 40% stake, becoming the Kingdom’s third largest bank with assets of US$ 73 billion.

There is a slight chance that the days of the “Big Four” could be over as MPs on both the Business and Work and Pensions select committees report on the Carillion collapse. They have recommended that the ”audit market” be referred to the Competition and Markets Authority to look at breaking up the quadropoly into more audit firms and detaching audit from other services these firms provide. It seems incongruous that they carry out all audits for 97% of the UK’s top 350 companies and that there could be grounds for potential conflicts of interest when 80% of their total revenue comes from non-audit sources. With the close relationship between governments, big business and the major audit firms, change will inevitably be slow and put on the back burner.

This week, the 274-year-old Sotheby’s posted its highest ever auction price – at US$ 157 million – for a work by Modigliani, Nu couche (sur le cote gauche). The previous owner, John Magnier, returned a tidy profit, after buying the work of art for only US$ 27 million in 2003. Many had expected a sale in excess of US$ 200 million but at its sales price, it was the fourth highest price for a work of art ever sold but still some way off the US$ 450 million paid by Abu Dhabi’s Department of Culture and Tourism for Da Vinci’s Salvator Mundi.

Japan’s economy continues its rocky road – after eight straight quarterly expansions – with Q1 GDP figures 0.2% lower, quarter on quarter, and on a seasonally adjusted annualised basis, 0.6% shy. The figures were not helped by business spending at 0.1% lower and flat private consumption.

In a bid to sweeten relations with China following months of difficulty, Australia’s Trade Minister, Steven Ciobo, arrives in Shanghai today. Having signed a free trade pact in 2016, troubles started with Australia banning foreign political donations which resulted in a formal protest and Australian government ministers having Chinese visas withheld. Australian industries have a lot to lose if conditions deteriorate further, considering that China imported US$ 69.5 billion of goods and services last year and is an important customer for mining giants, Rio Tinto and BHP Billiton.
Another factor is that the “lucky country” has to balance its links (especially security) with the US so as not to upset either of the superpowers.

There was positive news on the Chinese economy in April, with credible annual increases of 7.0%, 7.0% and 9.4% in industrial output, fixed asset investment and retail sales. At the same time, fiscal revenues were 11.0% month on month higher at US$ 292 billion and 12.9% up year on year, whilst government spending grew 10.3% YTD and 8.2% annually to US$ 232 billion.

In a surprise move, President Trump has indicated that he is keen to assist ZTE Corp to “back into business” and is working with Chinese President Xi to save many jobs in that country that are at risk. Only last month, the company, which relies on US parts for 30% of its production, was blocked by the Commerce Department from importing US components for its products for seven years; five years ago it was found to be illegally shipping hardware and software from the US to Iran and North Korea.

Following the Trump administration’s withdrawal from the 2015 Iranian nuclear accord and the reimposition of sanctions, Total becomes the latest European company to signal that it might quit the multi-billion-dollar South Pars gas project and exit Iran. European leaders are meeting in Sofia to try and keep the deal alive (which would almost be impossible without US involvement) as well as protect trade links. Large conglomerates, including Allianz and Maersk, have already started winding down operations in the country. It has also given EC supremo Jean-Claude Juncker something else to do apart from his Brexit dealings.

US retail sales in April were 0.3% month on month higher at US$ 497.6 billion, equating to a credible 4.7% annual hike. Meanwhile, April’s new residential construction was 1.3% down on the month but 7.7% higher on the year with a seasonally adjusted annual rate of approximately 1.3 million units. Over the past twelve months, there were double digit increases for both privately-owned housing starts (10.5%) and privately-owned housing completions (14.8%). Industrial production was 0.7% higher in April driven by output increases of 1.9%, 1.1% and 0.5% in utilities, mining and manufacturing respectively. However, the fact that manufacturing output is still 5% lower than it was in pre-GCC 2007 indicates that the US President will still use unfair foreign competition as a cause for his policies.

Latest data emanating from the eurozone points to Q1 GDP growth of 0.4%, following 0.7% the previous quarter with the larger EU bloc (E28) recording figures of 0.4% and 0.6%. Annual growth was 2.5% and 2.4% (E28) whilst the biggest growth levels were found in Poland (4.9%), Hungary (4.7%) and Czech Republic (4.5%).

Posting its fastest rate of growth in three years, UK wages expanded 2.9% in March – 0.1% higher than a month earlier. At that level it is now higher than the 2.5% inflation rate. Last year, wage growth only crept 0.4% higher and amazingly, real wages are US$ 32 less than pre GFC and not expected to return to its 2008 level for another seven years.

The Bank of England has indicated that its 2.0% inflation target should be reached within two years. Blaming among other factors the bad weather conditions, the Bank of England estimates that Q1 growth will only be 0.1% (compared to its February 0.4% forecast). Its annual 2018 forecast has been reined in from 1.8% to 1.4%, with the next two years being 1.7% and 1.8%. The slowdown in growth would point to interest rate hikes being put on hold for the foreseeable future – many will still continue to Lose Your Money.

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Wake Up And Smell The Coffee

Chestertons paint a gloomy picture of the Dubai real estate landscape and forecast further pressure on property sales prices and rental rates, as the addition of new stock and tough economic conditions take hold. It estimated that the emirate recorded its highest quarterly fall since 2014 in apartment sales prices at 5% in Q1, with the same figure for villas. Rentals also fell in both categories at 2%. The report also noted that there was a 10% rise in recorded transactions for completed residential units, whilst the off-plan sector was 19% lower. Locations that witnessed the biggest falls in apartment sales prices were Business Bay and Silicon Oasis (both 9% lower), with 8% falls recorded in Dubai Sports City, Jumeirah Village Circle and The Greens; in the villa market, the big losers were Palm Jumeirah, the Meadows and Springs all shedding 8% in value.

Azizi Developments continue to award construction contracts – this week for three low rise buildings to Tasmeem Building Contracting. The US$ 28 million deal covers 242 1-2 B/R apartments in its Meydan Avenue development – Azizi Gardens, Azizi Park Avenue, and Azizi Greenfield. The Dubai-based company is currently working on more than 200 projects this year.

Hilton has no qualms about the state of the hospitality sector as it announced plans to triple the number of its ME properties to 122, from its current number of 41 by 2023. Over 50 of the new properties will be found in the UAE (including four opening in the country this year) or Saudi Arabia.

By adding further properties – especially in City Walk, Downtown and Dubai Marina – fäm Properties will more than treble its portfolio value of Dubai holiday homes to US$ 272 million by year-end. The Department of Tourism and Commerce Marketing has recently launched a plan to develop a timeshare market in Dubai to help broaden the tourism sector.

A fairly rare event took place in Q1 – UAE hotel demand (at 5.2%) outpaced the supply line of 4.0% which resulted in improved occupancy figures for the sector, 1.1% higher at 83.4%. However, other indicators declined – average daily rates, by 3.4% to US$ 182 and revenue per available room, 2.3% to US$ 152. Overall ME occupancy was up 0.9% to 70.6%, with falls for both ADRs (4.5% to US$ 164) and RevPAR (3.7% to US$ 116).

HH Sheikh Mohammed bin Rashid Al Maktoum has issued Law No. (8) of 2018 in relation to Dubai Health Authority (DHA) that will enhance the emirate’s position as a global healthcare hub. His aims include “to offer the best healthcare facilities and services and attract top healthcare establishments, the best medical personnel and the most advanced technologies.”

Dubai fitness levels will continue their upward trend, as the RTA announce plans to extend the emirate’s cycle lanes to 316 km this year and to 850 km over the next decade. Apart from making Dubai one of the best global cities for cyclists, it will also introduce plans to support other “non-mechanical mobility means.” Any improvement in national fitness levels will be a boost for the Dubai economy – with a more productive and efficient workforce and a reduction in medical expenses and “sickies”.

Nakheel is teaming up with Al Nasr Sports Club to build a US$ 81 million mall in Al Khawaneej district. The JV will result in a three-floor retail, dining and entertainment centre, with a total built up area of 775k sq ft and parking for 700 vehicles.

UK’s export agency is to provide US$ 136 million finance for phase 4 of Dubai World Trade Centre, including an on-site hotel. UK Export Finance has already assisted in the first three phases and the latest will see over 50% of supplies emanating from the May government coffers.

To celebrate the 100th birthday of his father Sheikh Zayed, his son and succeeding UAE President, Sheikh Khalifa bin Zayed Al Nahyan has ordered that all government employees receive a bonus of one month’s salary – estimated to cost US$ 436 million. The bonus applies to both current and retired employees.

DP World’s new cruise passenger terminal in the Cypriot port of Limassol opened this week that will allow for the first time the biggest cruise ships in the world to berth at the island. A three-party consortium led by DP World is hoping manage an inland container depot in Egypt’s 6th of October City. If successful, DP will become the operator to create a central distribution centre and further develop the infrastructure to improve connections to the African continent. Last year, the Dubai-based port operator signed an agreement with SCZone to develop an integrated special economic zone in Ain Sokhna.

Following apparent delays in getting the flying taxi project off the ground in Dubai, Uber Technologies has reopened a contest to select the first “testing” city outside of the US, with Dallas and LA already selected. The company hopes to start demonstrator flights by 2020 and have intra-city operations by 2023.

It is reported that Mediclinic is set to acquire two clinics – City Centre and Me’aisem – from Majid Al Futtaim. The private health-care group is likely to partner with MAF in future locations, including gaining traction in some of the seller’s malls and entertainment complexes, as it further expands its operations.

A statement to the DFM confirmed that Bahrain-based GFH Financial Group had invested up to US$ 150 million for what was a possible 85% stake in the Dubai incentives and lifestyle app The Entertainer, founded by Australian entrepreneur, Donna Benton in 2001. The company had a US$ 35 million+ turnover last year and is operational in fifteen countries.

ENOC sold 249 million barrels in 2017 and is confident that the US$ 1 billion expansion to its Jebel Ali refinery will result in both a 50% increase in the supply of oil-related products and enhanced production that will meet taxing Euro 5 requirements. In January, work started on a 16.2km pipeline extension that will be able to carry 2k cub mt of jet fuel per hour to the new airport.

There is an interesting hearing in the DIFC, involving a complex matrimonial dispute (involving Russian oil tycoon Farkhad Akhmedov and his ex-wife Tatiana) and a US$ 540 million superyacht impounded in Dubai. The London Court has ruled that the 115 metre ‘Luna’ be given as part of the divorce settlement and its validity is being questioned in the local jurisdiction of the DIFC.

Shuaa Capital registered a 52.9% fall in Q1 profits to just over US$ 3 million, although revenue moved 4.0% higher to US$ 9.0 million. Over the period, the Dubai group’s total asset base stood at US$ 354 million and net assets at US$ 237 million.

Dubai Holding is to set up a next generation digital bank and will spend up to US$ 272 million over the next five years; it already has plans to expand into areas of the MENA region. With the aim to provide an on-demand, fully customisable and engaging experience to both businesses and individuals, it expects to start rolling out services next year. It will also introduce bespoke banking services including a state-of-the-art loan and deposit offerings platform to benefit SMEs.

Q1 passenger traffic at Dubai World Central was only 0.2% higher, touching 334k, driven by a 217% jump in Russian and CIS numbers to 191k. Cargo, over the same period, was 8.9% higher at 230k tonnes. The new airport is currently used by fifteen passenger carriers and twenty scheduled cargo operators, with the number growing.

Emirates posted a 67.0% hike in annual profits (ending 31 March) to US$ 1.1 billion, as revenue rose 8.0% to US$ 27.9 billion. Over the period, its cash balance was 33.0% higher at US$ 6.9 billion. Staff will receive a five-week bonus. Following the release of the figures, Emirates Chairman HH Sheikh Ahmed bin Saeed Al Maktoum confirmed that the airline has never had merger discussions “in any way, shape or form” with Etihad but that they could share facilities and services in the future.

At the same time, dnata, part of the Emirates Group, posted its highest ever revenue figures of US$ 359 million, 7.0% up on the previous year and, more impressively, 68% of the total emanating from its ever-growing overseas assets. The 59-year old air services provider is to invest US$ 163 million in new facilities and possible acquisitions out of its year-end cash balance of over US$ 1.3 billion.

Arabtec posted its highest quarterly profit since Q3 2014 at US$ 17 million (271% higher than in the same period in 2017), with revenue of US$ 654 million. The Dubai builder seems to be operating in much improved circumstances, as its backlog is at US$ 4.4 billion, with almost the same amount in the value of submitted tenders.

Aramex posted a 12.6% jump in Q1 profits to US$ 28 million on the back of a 7.6% rise in revenue to US$ 324 million. The local logistics giant expects to benefit from the huge growth in e-commerce activities and is focusing on boosting its operational efficiencies and enhancing its B2B and freight-forwarding capabilities.

Dubai Investments saw a 25.3% hike in Q1 profits to US$ 99 million, driven by the acquisition of a further 50% of Emirates District Cooling (Emicool); revenue rose 33.0% to US$ 253 million. Over the period, total assets were 12.9% higher at US$ 5.2 billion.

Ithmaar posted a US$ 72 million annual loss last year compared to a US$ 14 million profit a year earlier, driven mainly by unrealised foreign exchange losses; its revenue was 5.0% lower at US$ 392 million.

As a result of falling volumes – and therefore less commission – Dubai Financial Market posted a 52.2% fall in Q1 profit to US$ 13 million, as quarterly trading value slumped 57.3% to US$ 5.6 billion. With the holy month of Ramadan on the horizon, and the onset of summer holidays, it is unlikely that there will be much of an improvement in Q2.

The DFM opened on Sunday (06 May), at 2948, and continued its downward trend, losing another 66 points (2.2%), to close at 2882 by Thursday, 10 May. Emaar Properties was down US$ 0.11 at US$ 1.36 (Dhs 4.99), having shed 28.1% (US$ 0.53) YTD, whilst Arabtec lost US$ 0.04 to close on US$ 0.47. Volumes traded higher, more than doubling to 244 million shares on Thursday, valued at US$ 102 million, (compared to 102 million shares worth US$ 51 million the previous Thursday – 03 May).

By Thursday, Brent Crude, surged during the week – US$ 3.85 (5.2%) higher to close on US$ 77.47, with gold US$ 9 up to US$ 1,322 by 10 May 2018.

BT is to shed 13k jobs over the next three years, with middle management and back office staff being the main targets. The UK’s biggest telecoms operator is to hire 6k front line engineers, as it moves to ultrafast broadband and the next generation of mobile networks. The troubled company has been bedeviled by last year’s Italian accounting scandal and has seen its share value almost halve over the past two years. Although it paid US$ 17.0 billion in 2016 for mobile phone operator EE, the company is seen by analysts to be too slow to the ever rapidly changing environment and needs to become a much leaner organisation to survive.

Another leading UK operator, Vodafone is to buy Liberty Global’s operations – in Czech Republic, Germany, Hungary and Romania – for US$ 22.0 billion. This will help in its target to become a leading “next generation network” in Europe, with 54 million cable and fibre homes on its customer base. The acquisition will see the company’s revenue becoming more European oriented (up to an expected 75% of its total turnover), as well as earning more of a ratio from its fixed line and TV services

Having finally come to an agreement with US regulators and agreed to a US$ 4.9 billion settlement for its nefarious role its packaging and sale of mortgage-backed securities before the 2008 financial crisis, RBS is expected to take a US$ 1.4 billion hit in the next quarter’s accounts. This then should pave the way for the UK government to start ridding itself of its 71% stake, costing US$ 45.5 billion, needed then to bail out the troubled bank. (Only last month, Barclays paid a US$ 2.0 billion fine to the Department of Justice to settle similar claims).

Walmart is to pay US$ 16.0 billion for a 77% share in one of India’s leading web-based retailers, Flipkart, as it continues its on-going battle with Amazon (which holds an estimated 27% of the country’s e-commerce market) and others for market domination. It already operates 21 wholesale cash-and-carry stores across the country.  At the same time, the US retail giant is planning to sell Asda (which it bought for US$ 10.8 billion in 1999) to Sainsbury’s in the UK.

New York’s iconic 110-year old Plaza Hotel is about to change hands, with Dubai-based Indian Shahal Khan and US partner agreeing to pay US$ 600 million for the Central Park property. It is reported that UK billionaire brothers, David and Simon Reuben, will finance 69% of the deal. This could be scuppered if the owners of the remaining 25% stake (Kingdom Holdings and Ashkenazy) decide to take up the right of first refusal and buy at the same valuation. The hotel, formerly owned by the current US president who sold it for US$ 325 million was featured in. numerous films including Home Alone in which Donald Trump had a cameo role.

According to IATA, ME passenger traffic (measured in revenue passenger kilometre) continues its upward trajectory, rising 9.5% in March compared to a year earlier, as capacity (measured in available seats kilometre) grew at the slower rate of 6.4%; load factor was 2.3% higher at 82.4%. On a global comparison, all three indicators were higher – passenger demand (10.6%), capacity (6.6%) and load factor, 2.9% up to 81.5%. Higher fuel prices in Q2 will present problems to airlines if prices rise to cover the extra costs incurred.

In China, the April Caixin composite output index rose 1.5 to 52.3, month on month, with increases noted in both the service (which was 0.6 higher to 52.9) and manufacturing sectors. Driven mainly by service providers, new business rose at a slightly faster rate. With the dollar regaining some lost ground in April, China’s foreign reserves took somewhat of a hit by falling US$ 18.0 billion to US$ 3.1 trillion, caused by falling asset prices. It seems that despite positive economic vibes, some are backing that the yuan – which shed 0.9% against the greenback in April – will weaken further, after registering its highest quarter-on-quarter gains in a decade in Q1.

With weaknesses seen in both consumer spending patterns and private sector activity growth, there was only a marginal increase in April eurozone retail sales. When the latest composite PMI – down 0.1 to 55.1 – is factored in, then there is bound to be a slowing in the bloc’s GDP, growth following a sluggish Q1. Despite the disappointing figures, the economy should still hit its 2018 target growth of 2.3%. However, the lack of inflation growth in the eurozone continues to worry the authorities as the level fell to 1.2% in April – still some way off the bank’s 2.0% target.

April UK retail sales fell at their quickest year on year monthly rate – 3.1% (and 4.2% on like for like basis) – since 1995. Although there is a marked weakening in the sector, the biggest driver was the fact that Easter started in March (compared to April last year). However, with the recent demises of stores such as Maplin, New Look and ToysRUs there is no doubt that the downward spiral will continue until there is more of an equilibrium between inflation and wage growth

Once again, a prediction by the Bank of England Governor, Mark Carney did not materialise. Over the past five years, he has signaled likely rate hikes only to find that economic data headed in the opposite direction. With sterling sagging and some weak economic indicators, it seems that any rate hike, that looked a certainty only a few weeks earlier, is off the cards for some time. The Canadian banker has just over a year before he leaves his position and there is every chance that he may have already seen his last rate hike.

Not satisfied with two leading brands, Nescafé and Nespresso, Nestle (the world’s largest food and drinks company) is to pay Starbucks US$ 7.1 billion to sell its coffee in retail outlets outside the café’s chain. The Swiss-based company, with its huge distribution network, hopes that this deal will see a significant boost in the sector’s revenue from its current level of US$ 2.0 billion. Nestle also expects to strengthen its fairly weak position in the US market (where it has only 3% share and Starbucks – 15%) and probably move away from its “boring instant coffee tag” and focus more on the “roast and ground” side. It is estimated that a US$ 8 jar of Nescafé instant coffee makes 158 cups, (US$ 0.051 per cup), whereas a US$ 8 bag of Starbucks coffee beans yields 34 cups – US$ 0.235 per cup. Nescafé has finally realised that the sleeping giant has had to Wake Up And Smell The Coffee.

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Say What You Want

Azizi Developments has awarded Zahrat Al Safa Contracting two contracts (each valued at US$ 60 million) to construct Fawad Azizi and Mirwais Azizi in Dubai Healthcare City. The former will have 396 studio, 1-2 B/R apartments and the latter will house 383 units.

In a bid to reach its target of 500k medical tourists by 2020, Emirates Holidays and the Dubai Health Authority’s Health Tourism Council are to offer tailor-made health and wellness holiday packages for overseas visitors. The package will include return flights and stays in hotels with tailor-made premium health and wellness programmes; initially, two properties will be used for the trial – DNA Health at Madinat Jumeirah and Rayya Wellness Retreat by Sofitel.

The Ministry of Energy and Industry has announced new petrol prices for the month of May. Special 95 will be 6.8% higher at US$ 0.646, with diesel 5.3% up at US$ 0.698.

In 2015, Al Ahli Group signed a global licensing deal with Twentieth Century Fox, allowing it to build four Fox parks anywhere outside the US. The first one, a four million sq ft area located adjacent to the Outlet Mall, scheduled to open in 2020 has now been shelved because of “a serious supply of theme parks in Dubai.” The company is planning to double the size of the famous discount mall to three million sq ft by the end of next year but has also expressed concern about the rising number of shopping centres in the area.

DP World and Richard Branson’s Virgin Hyperloop One are planning a global entity – DP World Cargospeed – to build high-speed cargo delivery systems. Despite the very high entry costs to create this revolutionary tube-based technology to deliver goods and link existing road, rail and air transport infrastructure, there are already interested parties in India, Saudi Arabia and the UAE. There are firm plans for a 142 km link between Pune and Mumbai and the company is confident of having three projects in progress by 2020; the first full super-fast rail network is expected to be in commercial use five years later.

Four-year old UK tech company, Quiqup is to launch its first international base in Dubai. Based in Al Qouz Logistics Park, the start-up, offering last-mile logistics services to retailers of all sizes and sectors, is currently working on a trail run with 125 local entities. Last year, Quiqup received US$ 28 million Series B funding to finance overseas expansion and expects to roll out across the GCC in the future.

Spinneys has opened its 52nd regional store (2.6k sq ft) at Terminal 1, Dubai International Airport. It is reported to be the first such airport outlet in the region and is part of the supermarket’s ambitious plan to grow by 40% in less than three years.

The Egyptian division of Emaar Properties is planning to invest over US$ 454 million to operate hotels in Marassi, which they are currently developing, including Al Alamein Hotel and Marassi Golf Resort and Spa. Emaar Misr expects the former to open this summer and the latter by 2020.

More locally, Emaar Hospitality has signed a Management Agreement with Shurooq (Sharjah Investment and Development Authority) to open the 100-room Vida Al Qasba Sharjah. Emaar Properties with its JV partner, Meraas Holding, have signed an agreement with RAK developer, Al Hamra, to manage a 250-key Rove Hotel, Manar Mall due to open in 2020 in that emirate. Rove Hotels already operate five properties in Dubai. No further details were readily available.

The UAE Cabinet has effectively cancelled VAT for investors in gold, diamond and precious metals in a move that is bound to stabilise the sector that was badly hit by its January introduction. Last year, the World Gold Council indicated that gold demand in the country was at its lowest level this century, with local estimates that Dubai wholesale gold jewellery sales fell over 50% in Q1, compared to the same period in 2017.

MaisonPrive expects to double the number of clients who use their services to rent residential units out to corporate and leisure guests on short-term stays. The company estimates that using their services can add over 30% to a user’s revenue and that, without the hassle of managing guests. This is one part of the hospitality sector that is booming, following a 2016 change in the law governing the leasing of holiday homes in the emirate.

MAF is to invest US$ 82 million in a Carrefour Regional Distribution Centre. Located in JAFZA’s National Industries Park, it will be four times larger than any other of the supermarket chain’s distribution centres and is a key factor in ensuring the brand’s regional growth plans become reality. It will also ensure that customers in their 90 UAE stores will have the freshest produce possible with its seven temperature zones within the facility.

It is reported that Mitsubishi Corporation has taken a minority stake in the locally-based halal frozen food company, Islami Foods, Dubai Cooperative Society. The company, which has the second largest market share in the frozen meat products in the country, hopes to tap into the Japanese conglomerate’s extensive regional distribution network. With this investment, the company is looking to double digit annual growth, whilst expanding its share of the global halal food sector that is expected to top US$ 1.7 trillion by 2020.

Itqan Investments – owned by Sheikh Hamad Al Sulaiman, Tamar VPower Energy Fund and CITIC Pacific – have bought the remaining shares in the Byrne Group, a leading regional supplier of rental equipment in a US$ 272 million deal. Over the past five years, Byrne has experienced 20% annual growth and the new owners could be looking at an IPO but probably no earlier than 2021.

Shuaa Capital has finally acquired Integrated Securities (IS) and Integrated Capital (IC), following regulatory approval that will see the firm with an additional 3k retail and institutional clients. The deal will see its assets under management grow to over US$ 1.2 billion and will give the Dubai-based firm an entrée into the burgeoning Egyptian market.

Shareholders of Drake & Scull International will consider increasing the company’s capital by US$ 136 million, via a new share issue, with a par value of US$ 0.341. A further option to issue convertible bonds (up to a value of US$ 272 million) is under consideration.

Transguard Group, with over 90% of the country’s ATM network business, posted a US$ 44 million annual profit to 31 March, on the back of a 22.0% hike in revenue to US$ 629 million. The business services provider saw its payroll increase by 16.9% to 64.8k. Last year, it launched its US$ 1 billion Centre of Excellence in Dubai Investment Park which is scheduled to train 100k Transguard staff by 2020.

Marka recorded its first ever quarterly profit since listing on the DFM in September 2014. Despite posting a 39.4% fall in revenue to US$ 5.4 million, it managed to slash operating costs by 91.8% to just US$ 0.7 million, compared to a year earlier. It posted a gross profit of US$ 3 million and slashed its operating loss from US$ 8 million to under US$ 1 million.

Nakheel reported a 5.0% hike in Q1 profit to US$ 422 million, during which time it handed over 200 properties and sold the remaining villas in its Warsan Village community of 934 homes. The developer also signed construction contracts totalling US$ 1.4 billion in the first three months of the year.

Etisalat announced a Q1 net profit of US$ 572 million, after payment of the federal royalty, on the back of a 5.0% increase in revenue to US$ 3.6 billion. Its global subscriber base was 3.0% higher at 144 million, including 12.9 million in its domestic market where revenue was higher at US$ 2.1 billion.

Emaar Malls announced a 1.7% increase in Q1 profit to US$ 149 million, as revenue rose 24.2% to US$ 283 attributable to the consolidation of Namshi revenue in 2018. The company’s malls recorded 95% occupancy levels in Q1 whilst its flagship, Dubai Malls, attracted 21 million visitors over the period.

Mega results from Commercial Bank of Dubai saw the lender’s Q1 profits surge 74.7% to US$ 76 million driven by falls of 32.2% in impairment provisions and 5.1% in operating expenses to US$ 58 million, as well as a 4.8% increase in operating income. With net interest income 6.5% higher at US$ 125 million and non-interest income 1.0% up to US$ 54 million, the bank’s operating income rose 4.8% to US$ 179 million. However, its non-performing loans ratio was 1.5% up – to 7.5%. Total assets, loans/advances and customer deposits were all higher year on year – by 5.1% to US$ 19.1 billion, 5.0% to US$ 12.8 billion and by 5.0% to US$ 13.1 billion respectively; however, all were marginally lower compared to the December year-end figures.

The DFM opened on Sunday (29 April), at 3043, and continued its downward trend, losing 95 points (3.1%), to close at 2948 by Thursday, 03 May. Emaar Properties was down US$ 0.05 at US$ 1.47, whilst Arabtec lost US$ 0.06 to close on US$ 0.51. Volumes traded moved lower to only 102 million shares on Thursday, valued at US$ 51 million, (compared to 143 million shares, worth US$ 52 million the previous Thursday – 26 April).

By Thursday, Brent Crude, had had a flat week – down US$ 0.03 to close on US$ 73.62, with gold also lower by US$ 5 to US$ 1,313 by 03 May 2018. During the month of April, Brent traded US$ 5.58 (8.0%) higher to US$ 74.92, whilst gold headed in the opposite direction losing US$ 17 (1.3%) to US$ 1313.

Movenpick Hotels and Resorts, found in 1973, and 33% owned by Kingdom Holdings, has been acquired by AccorHotels in a deal valued at US$ 567 million. The Swiss-based hotel group currently has 84 properties in 27 countries, with plans for a further 42 by 2021. The French buyer, which already has brands such as Mercure, Novotel, Pullman and Raffles in its portfolio, recently sold a 55% interest in the subsidiary that owns its hotels to a group of international investors including the sovereign wealth funds of Saudi Arabia and Singapore for US$ 5.4 billion.

Public sector net borrowing (excluding public sector banks) in the UK recorded its lowest ever March level since 2004. The country’s budget deficit fell by US$ 1.1 billion to US$ 1.8 billion as public sector net debt stood at US$ 2.5 trillion, equivalent to 86.3% of GDP. The annual figure fell 7.6% to US$ 59.2 billion – the lowest annual net borrowing since the 2007 financial year.

Disappointing February returns showed that Japan’s all industry activity bounced back at a slower than expected rate, up by just 0.4%, month on month, after a 0.1% contraction in January. Although the construction activity index lost 0.3%, year on year, all industry activity growth fell to 1.1%, industrial production expanded 2.0 % over the month.

Germany recorded impressive construction figures for the first two months of the year, with new orders 9.0% higher than a year earlier.

Although still comparatively high, eurozone March unemployment rates have fallen from 9.4% to 8.5% over the past twelve months; this equates to its lowest level since December 2008. Eurozone unemployment stabilised at 8.5% (13.8 million) in March compared to February, recording the lowest figure since December 2008. The total number of unemployed in the larger 28-member EU bloc was 17.5 million. There was a wide variance between states with the Czech Republic, Malta and Germany returning the lowest number of unemployed at 2.2%, 3.3% and 3.4% respectively, whilst at the other end of the spectrum came Greece and Spain with 20.6% and 16.1%.

Meanwhile, Q1 GDP in the eurozone and the 28-member European Union (EU28) increased by 0.4%, equating to  seasonally adjusted GDP growths of 2.5% and 2.4% respectively, having grown 2.8% and 2.7% the previous quarter.

The US manufacturing sector had a strong April with a PMI reading 0.9 month on month rise to 56.5 – its highest increase since September 2014. The main drivers were an increased inflow of new orders and acceleration in goods production. Furthermore, both input prices and output charge inflation rose at their quickest rate since mid-2011.The level of outstanding business moved higher as a result of new order growth outstripping output expansion.

Inflation levels are edging ever closer to the Fed’s target, as US consumer spending rose 0.3% month on month to 2.0%. The three main factors behind the splurge in consumer spending continue to be the ever-tightening labour market, a jump in home prices and higher energy costs. The end result is an imminent rate hike probably of 0.25%, although key rates were kept on hold at 1.50% to 1.75% following this week’s Fed meeting.

President Trump has given a 30-day reprieve to the EU, Canada and Mexico on introducing controversial tariffs on steel (25%) and aluminium (10%); temporary exemptions that had been granted to these three parties in March were due to expire on Tuesday. Thus the dangers of a trade war have been averted until at least June. Meanwhile, a trade deal has been finalised with South Korea and Washington has “agreements in principle” with Argentina, Australia and Brazil. Despite his many critics, Donald Trump has tried to deliver what he promised to do before he became president – e.g. North Korean demilitarisation, Iran nuclear treaty, The Wall, Tax cuts, financial deregistration, TPP, climate change etc. He was voted in by the American voters and, unlike former incumbents, he has kept to many of his pre-election pledges – Say What You Want!

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For A Better Day

HH Sheikh Mohammed bin Rashid Al Maktoum’s vision to make Dubai the “Silicon Valley for the region” is slowly becoming reality, as Dubai Internet City continues to expand. The emirate’s free zone for technology and media companies is targeting 10% annual growth in numbers over the coming years, as it starts a 167k sq mt expansion later in the year. The 18-year-old entity is home to over 1.6k operating companies, of which 60% are in the SME category, in such classifications as AI, e-commerce, computer gaming and cyber security. It is expected that this ratio will continue to increase in the coming years making the free zone a hotbed for innovation hubs and tech entrepreneurs.

The Dubai Ruler also met with senior officials at the weekend and later announced a number of measures, with the aim of boosting three essential economic sectors – housing, SMEs and retail. He wants to ensure that the country has “the ability to absorb rapid changes in an unstable global economy in order to achieve sustainable economic growth and enhance its competitiveness at all levels”.

To attract more investment in the property sector, the introduction of time-sharing ownership of property in the emirate is under consideration which could involve overseas residents being able to own a fractional share of an apartment or villa for personal use for a set period each year; the Department of Tourism and Commerce Marketing is looking at up to 1k such units coming to the market. SMEs continue to be another target with Dubai’s Department of Finance expected to allocate 20% of tenders to this sector’s entities as well as additional incentives to attract more tech entrepreneurs to the emirate.

Dubai’s Moosa Enterprises is set to open three new properties – Hilton The Palm (608 keys), TAJ Exotica Resort & Spa (325 rooms) and Marriott The Palm (608 rooms) – by Q1 2019. This will increase the company’s Dubai room portfolio by 48.2% to over 4.7k.

Citymax Hotels, a division of the Landmark Group, is planning to double the size of its properties to eight this year, with room numbers 68.6% higher at 2.3k. Two of the properties will be located in Dubai, with the other two in the burgeoning emirate of Ras al Khaimah which is growing its hospitality sector at a rate of knots.

Four-year old Roda Hotels and Resorts added a new property, Roda Links Al Nasr, to its Dubai portfolio bringing its total to seven, with 1.5k rooms. The hotel group has several other properties under development and expects that the Roda brand will have 4.5k rooms under management by 2020.

Damac Hotels & Resorts estimates that its portfolio of rooms will top 15k by 2021 – currently 13k are in development.

Nakheel and U City PCL have signed an agreement in Bangkok to build the First Vienna House in the ME – the 600-room Vienna House Deira Beach. Located in Deira Islands, and part of the Dubai developer’s new 15.3 sq km master planned waterfront city, it will be Nakheel’s third hotel there following previous JVs with Spain’s RIU Hotels and Resorts and Thailand’s Centara Hotels and Resorts.

Nakheel has also awarded a US$ 162 million contract to Metac General Contracting Company for the construction of its 1.4 million sq ft Nad Al Sheba Mall. Due for completion by 2021, the mall will be the centerpiece of Dubai’s Nad Al Sheba district that will have more than 11k villas, 1.6k of which are being built by Nakheel themselves.

FIM Partners, a Dubai-based emerging and frontier markets investment management specialist, have appointed Strategic Housing Group (SHG), to manage the building of The Myriad Dubai in International Academic City (DIAC). The urban-styled student housing community will have 1.8k fully furnished en-suite rooms, with common lounges on each floor and retail outlets, as well as the requisite add-ons of multi-sporting facilities.

Arabtec has announced that its engineering service offshoot has been awarded a US$ 118 million, 30-month Dubai Municipality contract for infrastructure work for the authority’s DS188 Jebel Ali Industrial Sewerage and Drainage System.

MAF becomes only the second company to attain a license for a movie theatre in Saudi Arabia and will soon open a four-screen multiplex cinema in Riyadh. The Dubai-based group is planning to invest US$ 553 million and to open 600 theatres there over the next five years.

Careem confirmed that the company was a victim of a cyber-attack in January, resulting in the theft of the personal data of some 14 million people in the region. Over three months later, the ride-sharing platform indicated that it has “no evidence of fraud or misuse related to the incident” and “it is our responsibility to be open and honest with you. . . “.

To enhance its position as one of the world’s leading cruise destinations, Dubai is to add more capacity at DP World’s two million sq mt Mina Rashid Cruise Terminal that would make it the biggest in the world. Currently, the facility, which welcomed 625k passengers last year (compared to 320k just three years earlier) and 156 cruise ship calls, is able to handle 25k passengers and seven cruise liners at the same time.

Dubai International recorded a 4.5% increase in March traffic, as passenger numbers reached 7.85 million, with Q1 numbers 1.1% higher at 22.7 million, compared to the same period in 2017. Despite monthly flight numbers falling 1.5% to 34.1k, passengers per flight increased by 2.7% to 230. As in the past, London, Mumbai and Bangkok were the top city destinations with numbers totalling 348k, 217k and 209k respectively, with India (1.0 million), UK (572k) and Saudi Arabia (566k) the three leading countries. In March, freight handled dipped 5.7% to 236k tonnes.

Dubai tourist numbers in March rose 2.0% to 4.7 million, boosted by a growing number of Russian and Chinese visitors being 106% higher at 259k and 12.0% up to 258k respectively. The three main markets continued to be India (up 8.0% to 617k), Saudi and the UK which saw an 8.0% fall in numbers.

With the use of AI for the first time, Dubai Police caught a 10-man Asian gang involved in a Bitcoin-scam armed robbery, involving US$ 2 million. Two brothers had been lured into a trading office on the promise of a Bitcoin deal when they were assaulted and robbed.

As the impact of lower housing rentals and fuel prices take effect, Dubai’s inflation rate declined 1.8% month-on-month in March on the back of falls in prices of housing, water, electricity, gas, and other fuels However, there were increases in transportation (6.6%) and telecommunications (5.4%).

Official data showed that Dubai’s 2017 economic growth slowed marginally to 2.6% (2.8% – 2016), as its GDP rose to US$ 106 billion. However, the economy’s two largest segments showed increases – wholesale/retail (accounting for 26.6% of GDP) was 0.9% higher and transportation/storage (11.8%) grew by 4.5%. Meanwhile the third largest contributor to the economy, financial/insurance services remained flat at 10.4%. Manufacturing, generating US$ 10.0 billion, contributed 9.4% of GDP, whilst real estate, accounting for 7.1% of the emirate’s GDP (US$ 7.5 billion), recorded a 7.3% growth. The construction sector grew by 3.5% and accounted for 6.3% of Dubai’s GDP, equating to US$ 6.7 billion.

There was also trade growth, with a 2.2% rise in total imports and re-exports.  This year, it is expected that Dubai’s economy will expand by 3.5% and 3.8% in 2019. Last year, the UAE labour market saw over five million people in employment, including 1.4 million in the private sector.

April’s Emirates NBD’s UAE PMI data saw the country’s economy grow 0.3 to 55.1, as business growth confidence was at its highest in nearly three years; the main drivers were a recovery in export orders and strong output/new order growth, with increased government spending, spurred by Expo 2020. Expansion is also being helped by oil prices topping US$ 70.

The UAE Central Bank reported a 10.3% hike in Q1 foreign asserts to US$ 92 billion, attributable to a 51.6% quarter on quarter increase in the current account balances and deposits with banks abroad to US$ 74 billion.

Dubai Investment Company is to launch a US$ 817 million real estate investment trust to be listed on the DFM. DIC will fund 45% of the capital base, with the balance from investors via an IPO (initial public offering). Money raised will be used to finance a number of local properties and assets.

Noor Dubai listed its second US$ 500 million sukuk on Nasdaq Dubai this week following its initial listing in 2016. The five-year instrument was 2.1 times over-subscribed and brings the total of sukuk paper on the local bourse to US$ 59.7 billion.

Aramex, the region’s largest courier firm, posted a 15% rise in Q1 profits to US$ 28 million, as revenue jumped 8.0% to US$ 32 million. The Dubai-listed company expects to benefit from the boom in the GCC e-commerce market, forecast to grow to US$ 24 billion by 2020, and the fact that the global market could increase by 112% to US$ 4.9 trillion over the next five years.

Depa posted a 69.4% decline in Q1 profits to just US$ 2 million, resulting from a resolution of a long-standing receivable; revenue climbed 11.0% to US$ 111 million. The Dubai interior contractor is confident in future business, with a backlog of projects improving 6.0% to US$ 515 million.

Mashreq posted a 9.5% rise in Q1 profits to US$ 163 million despite a 5.2% fall in commissions’ income to US$97 million and a 4.0% increase in operating expenses to US$ 161 million. Total operating income was 4.1% higher at US$ 414 million.

Nakheel posted a 5.0% hike in Q1 profits to US$ 422 million as its retail, hospitality and leasing divisions performed well. No other financial details were made readily available. In Q1, the developer signed about US$ 1.4 billion worth of contracts, the largest of which was for the Deira Mall at over US$ 1.1 billion.

The country’s biggest listed developer, Emaar Properties, recorded a 20.0% increase in Q1 profits to US$ 452 million (or US$ 409 million if the impact of the Developments IPO was excluded). The revenue surge was driven by “significant progress achieved on projects under construction”, with revenue 37.3% up at US$ 1.5 billion.

Meanwhile, Emaar Developments posted an even more impressive 61.9% jump in Q1 profits to US$ 223 million, as revenue almost doubled to US$ 891 million. The real estate arm of Emaar Properties, which floated its shares on the DFM in Q4 2017, has a sales backlog of US$ 11.2 billion, equating to 27.2k residential units, due to be delivered over the next five years.

The DFM opened on Sunday (22 April), at 3082, and was 1.3% lower (39 points) as it inexorably falls towards the dangerous 3,000 level to 3043 by Thursday, 26 April. Emaar Properties was off US$ 0.02 at US$ 1.52, whilst Arabtec lost US$ 0.01 to close on US$ 0.57. Volumes traded moved marginally higher at only 143 million shares on Thursday, valued at US$ 52 million, (compared to 78 million shares worth US$ 45 million the previous Thursday – 19 April).

By Thursday, Brent Crude, having risen 7.9% the previous week, shed US$ 0.10 (0.1%) to close on US$ 73.65, with gold losing some of its luster, falling 2.0% (US$ 27) to US$ 1,318 by 26 April 2018.

Apple will start to pay the Irish government US$ 15.4 billion relating to a tax bill issued by the EU in 2016. The commission ruled that tax the tech giant paid in that country was so low that it was tantamount to illegal state aid. As there is an on-going appeal, that could take up to five years, the money will be paid into an escrow account. For obvious reasons, the Irish have been reluctant to receive any payment but have agreed to comply with its legal obligations.

It cost GKN a fruitless US$ 150 million in its unsuccessful attempt to fend off the recent Melrose takeover. Now the UK government has ruled that it will not intervene on national security grounds, after receiving several commitments from the US company, allaying any concerns raised, including not divesting the GKN’s core aerospace business for at least five years.

One argument in favour of Bitcoin (and other cryptocurrencies) results from news that the cost of global remittances rose 7% last year, to a staggering UD$ 613 billion. The World Bank estimates that in Q1 2018, the cost of sending US$ 200 was 7.1% – more than double the 3% set as a sustainable development target. The top five destinations were India, China, Philippines, Mexico and Nigeria with totals of US$ billions 696, 646, 336, 31 and 22 respectively. In some of the poorer countries remittances can account for up to 35% of a country’s GDP, whilst costs can easily touch 10% or more of the actual remittance amount. What a difference Bitcoin can make with minimal transfer costs and immediate transfer of funds. No wonder the banks are moaning but the global economy could easily double if the disrupters took over.

Nearly forty years after BA forced Freddy Laker to bankruptcy, it seems ironic that IAG, that includes the British flag carrier in its portfolio, is considering an offer for troubled budget carrier, Norwegian. The Scandinavian carrier seems to have taken over the Laker mantle for being a disrupter in the aviation sector and introducing cheap fares for international travel. Founded in 1993, it started with three planes and concentrated on short-haul flights but in 2013 decided to fly further afield and ordered 222 new jets. Within four years, it was flying 145 aircraft on 512 routes but had seen its 2016 profit line of US$ 136 million turn to a US$ 36 million loss last year, with a net debt 14 times its gross operating profit (compared to just 0.7 and 0.4 for EasyJet and Ryanair). Now the vultures are circling and, like events in 1979, are out to destroy a major rival.

From an economic viewpoint, Poland, led by Jaroslaw Kaczynski, is one of the leading states within the EU. However, it seems to be leaning away from the democratic principles that the bloc espouses, as other former East European countries test the boundaries. For example, in Hungary, the newly re-elected president Viktor Orban seems to be silencing any criticism by taking what some would consider inappropriate action against courts and media, as well as allegedly using public funds to nurture oligarchs. Romanian politicians also hope they will not be found out by continually weakening anti-graft legislation.

Now Polish democracy is being sorely tested with the ruling Law and Justice Party filling both the courts and the bureaucracy with its own supporters, as well as introducing judicial reforms that are in contravention of EU regulations. With at least three countries not playing to “the rules”, action has to be taken before the union falls apart. Three would-be autocrats are three too many.

To the outsider it seems that Tesla has a lot of catching up to do. Latest reports from the company, that posted a Q1 US$ 710 million loss (as vehicle revenue was 1.0% higher at US$ 2.7 billion), indicate that net reservations for its Model 3 stand at 450k, whilst the latest weekly production level is only 2.3k! As at the end of April gross margins on that model are still in negative territory. No doubt Elon Musk, his team, investors and customers are all hoping For A Better Day!

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Summertime Blues

The week started with HH Sheikh Mohammed bin Rashid Al Maktoum meeting senior government officials. The Ruler later announced that he had instructed the “relevant entities to facilitate business procedures, reduce the cost of doing business and dedicate all possible resources to ease investment activities”. Consequently, expect a waiving of some DED penalties and fines, 20% of tenders given to SMEs and the introduction of instalment payments for some government services. Although Dubai’s GDP is expected to be 3.5% higher this year, the emirate still intends to boost growth to compensate for a regional trade slowdown.

Las Vegas Caesars Entertainment Group has joined with Meraas to build a 178-key Caesars Palace Bluewaters Dubai (only the second in the world) and a 301-room Caesars Bluewater Dubai. Both facilities, sharing a 450 mt private beach and housing a variety of live entertainment and gourmet celebrity restaurants, will help boost the emirate’s burgeoning tourism sector.

Q1 saw Dubai Land Department record 13.8k real estate transactions, valued at US$ 15.7 billion, including 9.1k sales deals (worth US$ 5.2 billion) and 3.7k mortgage transactions worth US$ 7.7 billion. The three main contributing countries were the UAE, India and Saudi Arabia; Business Bay and Dubai Marina were the two leading locations, with 973 and 720 transactions respectively.

What will become the world’s largest cantilever, when it connects the two towers of The Lynx, is to house a One&Only Urban Resorts on opening in 2020. Located in the mixed-use development, One Za’abeel, it will have luxury residences, offices and a retail podium, The Gallery. Ithra Dubai, a fully-owned subsidiary of the Investment Corporation of Dubai, will be the main developer.

wasl Asset Management Group hopes to complete the construction of its Mandarin Oriental Hotel, Jumeirah Beach by year-end. The property, with 246 rooms and six F&B outlets, will have its own private yacht-docking facilities and will be the Hong Kong operator’s first branded hotel in the emirate.

Amlak Finance is to develop a mixed-use project in Nad Al Hamer, covering 700k sq ft. The US$ 79 million, 14-floor tower is slated for a 2020 handover. Last year, the company, which posted a 51.4% decline in annual profits to US$ 14 million, is hopeful that the project will have a positive impact on its future profitability.

MAF has announced a nine-year project, Talal Al Ghaf – a three million sq ft development that will include 6.5k residences and a 70k sq mt swimmable lagoon. No financial details were readily available but the lifestyle destination will also feature commercial, retail and leisure outlets. This will be the Dubai developer’s fourth regional community project following Al Zahia in Sharjah, Al Mouj Muscat and Waterfront City in Beirut.

Dubai Investments, 11.54% owned by the Investment Corporation of Dubai, is planning a US$ 68 million “Crazy Garden”, a domed leisure park featuring gardens, cafes and sporting facilities. Covering 33k sq mt, and located in the Meydan area, almost half the area will be entirely covered by a 14 mt high glass dome so as to ensure 365 days a year usage for visitors.

Having already a 95% share of the auction markets in both this country and Bahrain, Emirates Auctions is to open operations in Saudi Arabia and Kuwait. Initially, the company will focus on vehicle, real estate and unique number plates which has already seen over 1.3 million on-line bidders.

With this week’s launch of Tourism 2.0, the Department of Tourism and Commerce Marketing has introduced a blockchain-enabled marketplace to directly and transparently link potential buyers to the emirate’s tour operators and hotels. This is another step to ensure that Dubai will become the prime destination for global travel, business and events by 2021.

In a bid to establish Dubai as a leading player in the video-gaming sector, an alliance between Tecom and Dubai Media Office is to open Dubai X-Stadium. Globally, the industry is worth US$ 100 billion and this government-backed initiative will place the emirate as a key player for hosting future international e-sports events.

Dubai-based Landmark Group is expanding its Oasis Mall brand across the region, with four slated for this year to bring its total to eleven. The company is one of the largest retail and hospitality companies in the region.

Dubai Duty Free posted a credible 11.0% hike in Q1 turnover to US$ 1.9 billion, with liquor, perfumes and tobacco again being the biggest sales contributors.

Shanghai Electric and Saudi’s ACWA Power have signed a US$ 1.1 billion EPC (engineering, procurement and construction) contract, encompassing phase 4 (700 MW) in the final piece of the jigsaw that is the Mohammed bin Rashid Al Maktoum Solar Park. The whole development, costing US$ 3.9 billion, will deliver the world’s lowest levelised cost of electricity (LCOE) for solar power at US$ 0.073 per kilowatt hour.

The emirate posted a 1.99% increase in its Q1 Consumer Price Index, driven by an 8.2% hike in restaurant/hotel prices and a 5.9% rise in transportation costs (both impacted by the recent 5% VAT introduction). On an annual basis, inflation was 2.27% higher on the back of restaurant/hotel, transport and F&B – rising 12.2%, 8.9% and 5.5% respectively.

The federal Ministry of Economy expects the country’s per capita GDP to increase by 4.0% to US$ 41.7k this year. It also forecasts that foreign direct investment will be 2.4% higher at US$ 10.5 billion.

Of the 7.2 million cheques (valued at US$ 95.7 billion) handled in Q1 by the UAE Clearing Cheque System, US$ 4.3 billion (4.3%) of them bounced. Up to last year, anyone signing a dishonoured cheque faced almost immediate incarceration but a new law allowed for any value under US$ 54k to be dealt via fines.

Dubai-based Al Kasir Group launched three crypto-assets, backed by IGS certified real diamonds – Al Mas, Al Haqeek and Al Falal. Public trading will start in August, with investors able to purchase a variety of packages ranging from US$ 250 to US$ 250k.

Abraaj has offered to resign from its management of a US$ 1 billion healthcare fund that has caused the private equity firm so much recent angst. It has been alleged that it had misused investors’ money, some of whom have raised concerns that the investment was not being used for its stated purpose. The Dubai-based management firm conducted an internal review that concluded nothing amiss had occurred and that the money had been properly accounted for.

Emaar’s chairman, Mohamed Alabbar, has indicated that he expects that the property division should double over the next five years, with the developer focussing on the UAE, Saudi and Egyptian markets. In relation to further IPOs, following Emaar Malls and Emaar Development, there is every possibility that the Indian business and hospitality divisions could be listed before 2021.

Nasdaq Dubai saw its total value of listed sukuk increase 1.5% this week to US$ 59.2 billion, with two new listings – Sharjah Islamic Bank (US$ 500 million) and Damac Properties – US$ 400 million; the Dubai property developer now has three listings on the bourse totalling US$ 1.5 billion.

Whilst still making losses, probably in the region of US$ 80 million, DXB Entertainment has reported a 45% increase in Q1 visitor numbers to 851k. The park operator, 52.3% owned by Meraas, has posted losses of US$ 302 million and US$ 132 million over the past two years.

Deyaar recorded a welcome 25.0% hike in Q1 profits to US$ 11 million, as revenue headed up at same rate to US$ 48 million. The developer, majority owned by the Dubai Islamic Bank, also announced that it expects to deliver The Atria – a 4-star hotel and residential tower in Business Bay – this quarter.

Dubai Islamic posted a 16.4% improvement in Q1 profits to US$ 330 million, with revenue up 9.4% to US$ 537 million, as operational expenses remained flat at US$ 161 million. In 2017, its annual profit was 25.3% higher at US$ 1.2 billion.

Emirates Islamic recorded a more modest 2.0% hike in Q1 profits to US$ 57 million, as its total income dipped 1.0% to US$ 161 million. The bank’s total assets were 7.0% lower at US$ 15.7 billion.

Emirates NBD reported a 27.3% jump in Q1 profits (compared to 10.0% in Q4) to US$ 654 million on the back of a 13.0% rise in net income to US$ 1.6 billion, driven by an increase in loans and the impact of the recent rate hike. At the same time, total assets grew 1.0% to US$ 129.6 billion, whilst its impaired loan ratio was 0.2% lower at 6.0%.

The DFM opened on Sunday (15 April), at 3094, and was 0.4% lower at 3082 by Thursday, 19 April. Emaar Properties was off US$ 0.05 at US$ 1.54, whilst Arabtec lost US$ 0.01 to close on US$ 0.58. Volumes traded were wafer thin at only 78 million shares on Thursday, valued at US$ 45 million, (compared to 176 million shares worth US$ 77 million the previous Thursday – 12 April).

By Thursday, Brent Crude, having risen 5.4% the previous week, gained a further US$ 5.42 (7.9%) to close on US$ 73.75, with gold also on the up by US$ 3 to US$ 1,345 by 19 April 2018.

It is reported that Unilever is to consider abandoning its 89-year old Anglo Dutch structure and base itself in the Netherlands, moving from London to Rotterdam. With a vote to be taken in September, 75% of UK and 50% of Dutch shareholders have to approve the move. The main reason appears to be related to Kraft Heinz’s unsuccessful US$ 143 billion take-over last year and the need for the European conglomerate to simplify its corporate structure.

Morgan Stanley posted stellar Q1 results as revenue climbed 14.1% to US$ 14.1 billion and earnings per share came in at US$ 1.45 (against an expected US$ 1.25).

Netflix is to spend over US$ 1 billion on original productions this year in attacking the European market. This comes at the same time that the company announced that international revenues have exceeded US turnover for the first time. Its rapid expansion will inevitable result in a raft of media mergers in both continents as other providers try to lure back former customers.

According to the IMF, global growth is expected to reach an annual 3.9% over the next two years (0.2% higher than the previous October 2017 forecast); advanced economies are expected to grow at the lesser rates of 2.5% and 2.2% over the two years – both higher than the earlier returns of 2.0% and 1.8%. India and China will witness 7.4% and 6.6% expansions this year, followed by 7.8% and 6.4% in 2019. Growth in the world’s powerhouse has been amended higher to 2.9% and 2.7%.

Driven by President Trump’s recent tax cuts, the Institute of International Finance expects the 2018 global economy to grow at the faster rate of 3.5%, as the US GDP increases by 2.9% (compared to 2.3% last year and an earlier 2.4% forecast for this). This is slightly lower than the IMF forecasts. The world body has expressed concern about the level of global debt – at US$ 164 trillion, it is higher than it was at the height of the GFC; it is also urging the US to reverse tax reductions which continue to keep public borrowing at high levels.

Meanwhile the World Bank has forecast that MENA growth this year will more than double to 3.1% on the back of higher energy prices, government reforms and global economic growth. Another important factor, that will have a positive impact on the global stage, is the US boosting of its domestic consumption and investment.

US retail sales in March climbed 0.6% with a strong rebound noted in the auto sector, up by 2.0%, having contracted by 1.3% a month earlier. The upbeat economic news seems to indicate that the slowdown earlier in the year was a mere blip and that business confidence, backed by strong indicators such as high employment and rising wage levels, is on the rise again.

China’s economy grew at 1.5% in Q1 – slightly down on the 1.6% recorded the previous quarter but was up at 6.8% on an annual basis. Other major indicators – industrial production, retail sales and fixed asset investment – headed north by 6.0%, 10.5% and 7.5% respectively. However, with its March exports falling 2.7% as imports grew 14.4%, China posted a rare monthly trade deficit of US$ 5.0 billion in Q1.

UK inflation dipped again in March falling to 2.3% as it inexorably moves to the Bank of England’s 2.0% target, having recently topped a worrying 3.0% level. On the other side, eurozone’s month on month inflation nudged slight higher to 1.3%, still some way off the 2.0% ECB target but is heading in the right direction. Inflation across the bloc ranged from minus 0.4% in Cyprus to 4.3% in Estonia.

The average price of a UK home has risen 0.4% month on month to a record US$ 427k in April. Latest UK unemployment levels fell to 4.2%- its lowest since 1975 – down from 4.7% a year earlier; the number of jobless fell to 1.42 million. At the same time, weekly earnings came in 0.2% higher.

Recent data still confound the many “experts” who predicted that the economy would fall off a cliff, following the Brexit referendum nearly two years ago. With inflation moving lower, wage levels higher, sterling still hovering around the US$ 1.40 level and a booming stock market, there are a lot of positives. There is no doubt that there will be difficulties in the coming months for the UK but there will be bigger problems facing some of its European neighbours, including France, with its labour troubles, Italy – with its failing banks – and Greece’s on-going high unemployment levels. Summertime Blues!

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