SO you Win Again

So You Win Again                                                                                          09 January 2020

Showing confidence in the Dubai property market, Emaar has introduced Burj Crown as its first launch of the year. The 44-storey, 400-unit luxury residential tower, designed by Hong-Kong based architecture firm LWK Partners, will be located in the heart of Downtown Dubai; it comes at a time when many believe that the almost five-year property bear run may have run its course, with latest figures showing that the number of 2019 transactions climbed over 20%, year on year, to 42k – its highest rate of sales since 2008.

WeWork’s second regional operation, following on from one opened in Abu Dhabi last year, will be located in One Central, near to the World Trade Centre. The co-working space provider is already accepting requests from start-ups and others; initially it will handle hot desk applications, but later dedicated desks and private offices will be made available for rent. The New York-headquartered company has yet to disclose price details for its Dubai base but monthly rates in the capital are set at US$ 300, with private office and dedicated desks for two people costing US$ 1,362 and US$ 708 respectively.

This week, on the occasion of his 14th accession anniversary, HH Sheikh Mohammed Bin Rashid Al Maktoum set up The Dubai Council that will oversee six areas of growth for the emirate including: economy, citizens’ services, government development, infrastructure, security / justice, and health/knowledge. The Dubai Ruler introduced the initiative to “drive change in Dubai, oversee social and economic governance in the emirate, improve competitiveness, economic leadership and attractiveness of the emirate, to become the best city to live in”. He further added that “performance benchmarks shall be set and signed with all general directors in Dubai — and are to be approved by the Dubai Majlis”. The benchmark, which will include the goals and projects for each department, will be revised every two years. He also warned that “whoever fails to bring about a real change within the two-year period will be released from their duties.”

The following consultative heads were appointed as Commissioner Generals: Shaikh Ahmed Bin Saeed Al Maktoum – Dubai Economic Track,  Mattar Mohammed Al Tayer -Infrastructure, Urban Planning and Well-Being, Major General Talal Belhoul – Security and Justice, Abdullah Mohammed Al Basti – Government Development, Saeed Mohammed Al Tayer –  Health and Knowledge and  Major General Abdullah Khalifa Al Merri  – Citizens.

At. their first ever meeting, the newly appointed Dubai Council outlined a new drive for efficiency for the next five years, having been set fifty goals that must be met to boost growth, or face removal from their posts. Chaired by HH Sheikh Mohammed bin Rashid al Maktoum, he stressed that there would be a new economic plan for the emirate and a new “urban plan” to improve living standards – and that the plans “will be implemented by the team… or we will replace the team”. He also confirmed that all publicly owned newspapers, radio and television stations and the government press office, Dubai Media Office, would come under one ‘Dubai Media Council’ and that personally, ”I have not stopped improving and changing over the past 50 years and I will not cease to do so.”

Dubai Taxi Corporation celebrated its silver anniversary this week and during the past twenty-five years, it is estimated that it has carried more than one billion passengers over 682 million trips. The RTA subsidiary has seen the number of taxis grow from just 81 in 1995 to its current level of 5.2k with the number of drivers increasing from 886 to 11.5k.

Uber has finalised its US$ 3.2 billion acquisition of Careem’s ME business, but the Dubai ride-hailing company will retain operational and brand independence, even though it is a wholly owned subsidiary of the San Francisco-based tech giant. With Careem’s co-founder Mudassir Sheikha remaining chief executive, the new board will comprise three Uber members and two representatives from Careem. Regulators in UAE, Saudi Arabia, Egypt and Jordan have approved the deal whilst approval is still pending in Pakistan, Qatar and Morocco.

To encourage repeat visitors, the UAE has introduced the country’s first multi-entry five-year tourist visa to encourage travellers to visit more than once and spend more while they are in the country The Dubai Rulers want to establish the country as a ‘major global tourism centre” Further details, including costs, will be revealed later.

As expected, Dubai Gold and Commodities Exchange broke annual records for traded volumes in 2019, with investors capitalising on volatility in gold and currency markets, as there were 23.1 million contracts – 3.6% higher on the year – valued at US$ 866 billion. The three busiest months of the year were August, July and May with trades of 3.2 million, 2.3 million and 2.2 million respectively. Once again, the exchange’s best performing product was its rupee-based INR Quanto.

The bourse opened on Sunday 05 January and, 4 points up the previous week, was 21 points (0.8%) lower at 2749 by 09 January 2020. Emaar Properties, having lost US$ 0.03 the previous three weeks, was up US$ 0.01 at US$ 1.11, whilst Arabtec, US$ 0.02 lower the previous fortnight shed a further US$ 0.02 to US$ 0.33. Thursday 09 January saw the market trading only 164 million shares, worth US$ 61 million, (compared to 30 million shares, at a value of US$ 11 million, on 02 January).

By Thursday, 09 January, Brent, US$ 7.45 (12.2%) higher the previous four weeks, had hit the US$ 70 level during the week but eventually lost US$ 3.15 (2.6%) to US$ 65.14. Gold, up US$ 69 (4.7%) the previous three weeks, rose a further US$ 11 (0.7%), closing on Thursday 09 January at US$ 1,552. The first full week of the new year proved to be a tumultuous one with so much market volatility, not seen for some time, caused by the death of Iran’s Qasem Soleimani in a US-backed Baghdad security raid. Later in the week, a Boeing 737, operated by Ukraine International Airline, was shot down in Iran just after take-off from Tehran airport, under suspicious circumstances – again rattling the global markets.

Airbus has announced that it will increase the monthly number of its A320-series planes, assembled at its Alabama operation from five to seven, which will minimise  US tariffs imposed on European built aircraft; it will also assemble more A220s at its Mobile plant, bringing its US output to more than 130 aircraft a year. Last October, the WTO agreed that the US could impose duties on US$ 7.5 billion of European exports, in response to the illegal funding for Airbus jets; this included planes made in Europe but not to aircraft components shipped for assembly to Alabama. Currently, the European plane maker has seven other assembly lines for A320s – four in Hamburg, two in Toulouse and one in Tianjin in China.

BP has agreed to sell off US$ 625 million of its North Sea assets to Premier Oil, including the Andrew platform, and its controlling stake in five surrounding fields, along with its 27.5% stake in the Shell-operated Shearwater field.

There were two contrasting reports this week, involving two of the UK’s iconic carmakers. Aston Martin issued a profit warning on the back of a “very disappointing” 2019. After announcing that annual earnings could be almost half of those of the previous year, at US$ 175 million, its shares sank by 16.0%, whilst it posted that “challenging trading conditions highlighted in November continued through the peak delivery period of December resulting in lower sales, higher selling costs and lower margins”. Fifteen months after going public, its share value has slumped by over 76% to US$ 1.23; although core retail sales were 12.0% higher, its wholesale volumes – the number of cars the dealers have actually ordered – were down by 7.0% at 5.8k vehicles. Meanwhile, Rolls-Royce posted “very stable, robust” orders, selling a record 5.1k vehicles last year, driven by higher sales following the launch of the Cullinan SUV. It seems that Aston Martin will have to learn from its mistakes to get back on track – otherwise it will find itself on a slippery road to further bad news.

For the fourth year in a row, Mercedes-Benz came in as the world’s best-selling luxury-car brand, ahead of the likes of BMW AG and Volkswagen AG’s Audi. It posted a 1.3% increase in car sales to 2.34 million, with BMW posting a 2.0% increase in sales to a record 2.17 million cars last year.

In common with most countries, registration of new cars continues to decline in the UK which posted a fall for the third consecutive year – down 2.4% to 2.31 million, the lowest level since 2013; more of the same is expected this year. Not only is the industry facing serious challenges adapting to new emissions legislation, the slump is attributed to other factors such as weak consumer confidence, Brexit (inevitably) and confusion over clean-air legislation. What will be needed is a huge investment in electric and hybrid cars to steadily replace diesel vehicles which once accounted for 50% of all sales, and now only 22%, and heading south all the time.

Several UK banks, including Barclays, HSBC and Sainsbury’s, were impacted when foreign currency seller Travelex took its site offline to deal with a cyber-attack so as to contain “the virus and protect data”. The attack took place on New Year’s Eve and consequently firms, dependent on the Travelex platform, were unable to sell currency online during a major holiday period. Normally, Travelex delivers the foreign currency to stores for customers to collect, as well as operating the software that is used to buy the travel money and had to resort to manual operations in its branches.

Ahead of what could well be a turbulent 2020 for Italian banks, its government is in talks with the EU over a rescue plan for cooperative bank Popolare di Bari, the largest financial institution in the south of Italy. Over the past four year, the country has seen numerous banking crises that to date have cost the government, and other Italian banks, US$ 25.5 billion – with more in the offing. The bank was placed under special administration by the Bank of Italy last month and the Italian banks are committed to an immediate cash injection of US$ 345 million, as well covering up to half of a potential capital increase of US$ 1.6 billion for the bank. The bank has so far resisted changes, introduced in 2016, aimed at forcing large cooperative banks to turn into regular joint-stock companies to improve governance and management accountability; now it has no option, if it wants to receive the required fresh capital injection.

In the US, Ikea has agreed to pay US$ 46 million to the parents of a two-year old who died from suffocation after a 32 kg Malm chest of drawers fell on him in 2017. The unstable-designed product had been recalled a year earlier (the largest ever in the Swedish company’s history), following safety concerns after three other children had been crushed to death; in a combined settlement then, Ikea paid out US$ 40 million.

Having been forced to resign for his role in the money laundering scandal that engulfed Westpac, its chief executive, Brian Hartzer walked away with US$ 2 million, despite his bank being responsible for a staggering 23 million breaches of AUSTRAC legislation. This is just another example of the fat cat brigade looking after themselves because it is certain that those working in the lower branches of the institution would not have been treated as royally and possibly ended up in court.

Likewise, in the UK where it is estimated that within the first three days of 2020, FTSE 100 chief executives  would have earned US$ 38.5k – equivalent to the average annual pay of the typical employee; by the end of the year, their average pay would be US$ 4.5 million or US$ 1,176 per hour. This year, publicly listed companies, with more than 250 UK employees, will have to disclose the ratio between the CE’s pay and that of their average worker – and to explain the reasons for their executive pay ratios.

The year started well for one of the UK’s bigger presences on the embattled High Street as Next reported better than expected Christmas sales and increased its profit forecast to US$ 950 million; full price sales for the quarter to 28 December rose 5.2%. The retailer now expects 2020 profit to come in 3.9% higher, year on year, and while in-store sales dipped 3.9%, (not helped by cold and wet weather), its investment in on-line resulted in an impressive 15.3% revenue increase.

It seems highly unlikely that India will attain its fiscal deficit target of 3.3% of GDP this year, if the November deficit of US$ 1.2 billion is anything to go by, not helped by its revenue stream coming in at 50% of expectations. The country’s finance minister, Nirmala Sitharaman, noted that the recent corporate tax cuts would knock off US$ 315 million from government revenues. In the eight-month YTD, the fiscal deficit has already crossed over 14.8% of the budget estimate – a record high that could see the deficit touch 4.0% by the end of March; if the energy prices continue their upward trend, this would be an added burden for an economy that is dependent on oil imports. More worrying statistics see the public sector’s borrowing requirement rising to 8.5% of GDP and its economic growth at a six-year low in Q3 – compared to 7.0% a year earlier. Fitch Ratings has cut its growth forecast to 4.6% from a previous 5.6% estimate for the current financial year. Under present conditions, it seems a distant hope for prime minister Narendra Modi that India will become a US$ 5 trillion economy over the next five years.

The US labour market ended 2019 on a flat note with both non-farm payrolls only rising 145k in December (compared to 256k a month earlier) and wages by 2.9% – the first sub-3% reading in eighteen months. Unemployment held at a half-century low of 3.5%. The year-end figures are a reflection of an economy gradually slowing in a global environment of trade-policy uncertainty and sluggish growth. However, if the incumbent goes for a second term as president, there is no doubt that he will be re-elected if the economy continues in its record-long expansion mode. That means a lessening of tension in the tariff war and a continuing strength in the labour market. Both economic factors are in the hands of Donald Trump – what is not is any political fall-out outside of his immediate control.  In cold reality, if US personnel were killed overseas in theatres of war – or by terrorist attacks – then we would be looking at a different picture and a new 46th US President. Otherwise it will be a shoo-in victory for Donald Trump come November. So You Win Again.

Posted in Uncategorized | Leave a comment

Don't Stop Me Now!

Don’t Stop Me Now!                                                                                       O2 January 2020

According to Valustrat, the falling rate of Dubai monthly property prices slowed in 2019, from 1.0% to 0.8%, year on year. The consulting firm indicated that its November Residential Capital Values stood at 75.9 points, dipping 0.9%, month on month, and 10.8% lower on an annual basis. The report confirmed that all locations saw prices heading south, within a range between 0.6% (International City) and Jumeirah Village Circle -1.1%. It also estimated that, since 2014, the weighted average residential price has slumped 32.8% to US$ 263 per sq ft. A positive indicator was a stronger, month on month, buying activity, with the overall eleven-month sales volume, both off-plan and ready homes, 25% higher than last year, with still one month to go. Not surprisingly, the top five traded properties were from Emaar, Damac, Nakheel, Azizi and Meraas.

The DLD and Property Finder have joined forces to introduce a new monthly price index to the Dubai market. Mo’asher (the Dubai House Price Index) showed that there was a 1.4% hike in house prices in November, rising from 1.121 to 1.134, month on month, with average house prices 0.8% higher at US$ 319k. A month earlier, there was a 23% rise in the volume of transactions and a 33% jump in the value of investments. The index will help consumers with up to date Dubai property prices on a monthly basis and Property Finder also hopes to release data on specific locations in the coming months.

Following successful launches last year in New York and Miami, David Yeo is to open In DIFC in Q1; Hutong, one of the first Chinese restaurants to be awarded a Michelin star, can also be found at London’s iconic Shard. Hutong in Dubai will feature an indoor restaurant, a lounge bar, a private terrace and two private dining rooms, as well as displaying Chinese-inspired interior design, inspired by ‘The Four Arts’ of the Qing Dynasty.

Dubai authorities are pulling out all stops to not only make the emirate the region’s leading destination but also one of the tops for global cruise visitors. On Sunday, the Mina Rashid cruise terminal dealt with 60k cruise visitors, as six vessels berthed, including TUI Cruises’ Mein Schiff 5, Pullmantur Cruises’ Horizon, MSC Cruises’ MSC Lirica, Jalesh Cruises’ Karnika, Costa Cruises’ Costa Diadema and Royal Caribbean’s Jewel of the Seas. The latter two were on their maiden voyages to Dubai.

Dubai Culture and Arts Authority has teamed up with the Roads and Transport Authority to create a series of public land-based artworks. The agreement was signed by Sheikha Latifa bint Mohammed bin Rashid Al Maktoum, chairperson of the Dubai Culture, and RTA’s supremo, Mattar Al Tayer.  Under the Destination Land Art project, artists of different nationalities will work together to establish Dubai as a global centre for art and culture. The project also covers the rehabilitation of Zabeel High School, an iconic historical building, as well as supporting the development of the road network surrounding Al Fahidi Fort, a historical district founded in 1787.

It is estimated that the number of pupils, enrolling at some private schools for next term, has risen by almost 25%, with most consisting of children from families arriving in the country for the first time. For example, Taleem, which runs ten schools here and in Abu Dhabi, estimates that it “is currently looking at a 20% year-on-year increase in new enrolments for January.” Many reports last year pointed to the fact that an increasingly competitive private sector led schools to offer substantial discounts on fees to maintain their market share of pupils. According to the Knowledge and Human Development Authority, the eight new schools, due to open in Dubai before this September, will add a further 13k places for students in what could already be an over-populated market.

There were certain outlets that made their usual killings, on News Year Eve, because of their location close to the Burj Khalifa. Nando’s apparently charged US$ 681k each for at least 70% of their seats, whilst fast food chain Five Guys charged up to US$ 409. Charging a little less for ring-side fireworks seats were the likes of Starbucks and International House of Pancakes at US$ 327 and US$ 313, including food and beverages.

It was a busy New Year’s Eve for the RTA with over 2.1 million using public transport over the twenty-four hours – 3.6% higher, year on year. Of the total, 907k used Dubai Metro, 689k – taxis, 441k public buses, 52k marine transport and 37k Dubai Tram. Not many cities in the world could boast of having firework displays in ten different locations in such a relatively small area., with the Burj Khalifa putting on an impressive record-breaking 8 minute and 43-second-long show, featuring 1.4k kg of fireworks, watched by over one million in Downtown Dubai.

Driven by a late December surge from its 36th three-day anniversary, that netted US$ 30 million, Dubai Duty Free posted over US$ 2.0 billion in 2019 sales – 1.5% higher than a year earlier. In 2019, there were 24.3 million sales transactions, with 64.6 million units of merchandise sold. The sale of perfumes (which rose 2.0% on the year) was the best-selling item accounting for 15% of overall sales, equating to US$ 305 million, followed by liquor, cosmetics, tobacco and electronics.

One of the main reasons there was a 1.7% decline in Emirates passenger numbers to 58 million last year, compared to 2018, was an enforced reduction in operations because of a forty five-day closure of one of the airport’s two runways earlier in the year; accordingly, the number of Emirates flights in 2019 fell 3.1% to 186k. Over the past “year of recalibration”, Emirates has had to amend its fleet and network plans in the light of the fast changing political and socio-economic environment. Last year, the airline extended the number of its code-share partners to twenty-six with the addition of India’s SpiceJet. China Southern Airlines, Africa World Airlines, LATAM Airlines, and Interjet. Emirates also signed US$ 24.9 billion worth of agreements at November’s Dubai Air Show, including for fifty of Airbus’ A350s and thirty Boeing’s 787 Dreamliners.

Meanwhile Emirates has temporarily closed its US$ 88 million 1.6k hectare One&Only Wolgan Valley resort, as a result of the Australian bush fires which have ripped through the south-east of the country.

There are surveys and surveys and Which? UK has asked holidaymakers to rate recent trips to cities around the world. The study used certain parameters such as quality of the cultural attractions, accommodation, shopping, food, value for money and how crowded it was. There was good news and bad news for the emirate as its 62 points rated higher than Las Vegas, Los Angeles and Miami but the bad news is that it came fourth from the bottom of the survey, having been deemed “poor value for money”.  At the other end of the table, the top five were New Orleans (90 points), Singapore, Sydney, Chicago and Jaipur. In contrast, a survey by Post Office Travel Money, pointed to Dubai being one of the best long-haul destinations for British holidaymakers, more so because of the weakening dollar, down 4.5% last year; it estimates the cost of a one-week holiday package in early January, to be US$ 1.4k. On the downside, Dubai meals and drinks were the most expensive, at US$ 512, of the destinations surveyed.

For the first time, since petrol prices were regulated on a monthly basis, in August 2015, the previous month’s prices have been carried forward without any amendment. January prices will remain at US$ 0.578 per litre for Special 95 and diesel at US$ 0.648, as announced by the Fuel Price Committee. Then Special 95 was fixed at US$ 0.583 (up 23.6% from July 2015) and diesel at US$ 0.559 (down 29.0% on the month).

2020 will witness Dubai’s highest ever spending budget of US$ 18.1 billion, as announced by HH Mohammed bin Rashid Al Maktoum, as part of the emirate’s three-year fiscal plan (totalling US$ 53.4 billion). This figure is 16.9% higher than in 2019 and comes ahead of Expo 2020 and the Dubai Plan 2021. Over 30% of the spend is accounted for by salaries and wages and 24% taken by the health, education and social services. A further 12% will be utilised on construction projects, which includes sums for the continued development of Expo 2020 infrastructure, whilst 3% will be set aside to hedge and prepare for the big event. There is no doubt that the government is keen to take positive steps to move the economy forward in 2020. Estimates for public revenue this year are in the region of US$ 17.4 billion – year on year a 25% increase.

For the first nine months of 2019, Dubai’s non-oil foreign trade surged 6.0%, year-on-year, to US$ 277.6 billion, boosted by the contributions from the emirate’s fifty plus free zones. Of that total, exports showed a 23% increase to US$ 32.2 billion, whilst re-exports and imports both headed north, by 4% to US$ 85.0 billion and 3% at US$ 160.4 billion respectively. Volumes for the period were 22% higher as exports, re-exports and imports were all up by 47% to 14 million tonnes, 48% to 13 million tonnes and 13% to 56 million tonnes.   China remained the emirate’s number one partner, accounting for 27% of China’s exports to the Arab World and 29% of exports. The emirate’s top five trading partners were China, India, US, Switzerland and Saudi Arabia contributing US$ 29.7 billion, US$ 27.2 billion, US$ 15.5 billion, US$ 12.8 billion and US$ 11.4 billion. The top traded commodities continue to be gold (US$ 35.1 billion), mobile phones (US$ 32.4 billion) and diamonds (US$ 11.4 billion).

There are reports that the Arab world’s first commercial nuclear plant could start operations in Q1, with the first of four planned reactors, Barakah Unit 1, going live in Abu Dhabi. It will take several months before the plant starts full commercial operation, after it has loaded nuclear fuel. Emirates Nuclear Energy Corp and Korea Electric Power Corp will manage, operate and maintain the Barakah complex, which will eventually produce a combined 5.6k megawatts of power.

Dubai Aerospace Enterprises has bought back US$ 450 million of its own shares, with the early partial repayment of a note receivable from certain shareholders, as it strengthens its balance sheet ahead of the 31 December year end. The Middle East’s biggest plane lessor remains “committed to running our business with low levels of leverage and optimal amounts of capital.” The company operates from seven global locations, from which it serves the needs of 125 airlines, with its portfolio of 410 Airbus, ATR and Boeing aircraft, valued at more than US$ 15.5 billion. Its latest nine-months’ figures to September 2019 saw profit dip 10.3% to US$ 261 million, as costs rose, including depreciation and finance, by US$ 12 million and US$ 35 million, although revenue nudged up 1.2% to US$ 1.7 billion.

In the Dubai Financial Market, the value of foreign investors’ trade last year totalled US$ 28.7 billion, including buying and selling worth US$ 13.8 billion, with a year-end net investment of US$ 813 million.

The bourse opened on Sunday 29 December and, having shed 4 points the previous week, was 4 points higher at 2770 by 02 January 2020. Emaar Properties, having lost US$ 0.03 the previous fortnight, was flat at US$ 1.10, whilst Arabtec, US$ 0.02 lower the previous week, also did not move the scoreboard, remaining at US$ 0.35. Thursday 02 January saw the market with a New Year hangover, with almost non-existent trading of only 30 million shares, worth US$ 11 million, (compared to 169 million shares, at a value of US$ 37 million, on 26 December). Over the year, the bourse traded 235 points (9.3%) higher, ending on 31 December at 2765, whilst Emaar lost US$ 0.03 to close the year on US$ 1.10 and Arabtec shed US$ 0.17 to US$ 0.35.

By Thursday, 02 January, Brent, US$ 3.95 (6.3%) higher the previous three weeks, gained a further US$ 1.75 (2.6%) to US$ 68.29. Gold, up US$ 43 (2.9%) the previous fortnight, jumped a further US$ 26 (1.7%), closing on Thursday 02 January at US$ 1,541.

After a 1.4% decline in the global smartphone market, the International Data Corporation expects that, after three years of declines, the industry will bounce back in 2020 on the back of new affordable fifth-generation handsets and the rising popularity of foldable phones. A 1.5% increase will see shipment volumes top 1.4 billion units. A decade after the introduction of 4G units, which then accounted for 1.3% of total shipments, this year will see 5G handsets take up to 14% of the market. After eight years of development, Samsung finally released its Galaxy Fold, (which initially had screen problems), and Huawei’s Matt X – both with prices around the US$ 1.8k mark; when the initial euphoria dies, and prices come down, the market will see a marked rise in numbers.

New data from International Data Corporation sees consumer spending on technology in the Middle East and Africa climbing 4.1% to US$ 130.8 billion this year and that a five-year 3.5% compound annual growth rate (CAGR) is expected, with the figure to top US$ 149.4 billion by 2023. This year, 86.3% of sales will emanate from traditional technologies such as mobile phones, personal computing devices, and mobile telecom services, dominated by mobile telecom services (voice and data) and mobile phones taking 68.7% and 26.6% of the total spend. It is expected that growth in emerging technologies, (including AR/VR headsets, drones, on-demand services, robotic systems, smart home devices, and wearables), will register a 10.2% five-year CAGR and will account for 17.1% of consumer spending on technology by 2023 – up from its current 13.7%.

Reliance Industries has joined a conglomerate to set up a grocery delivery service that it hopes will rival Amazon, Flipkart and Walmart, and other existing local online retail titans, such as Big Basket and Grofers, in India. The new entity, JioMart, including Reliance Retail and Reliance Jio, is hoping that its massive mobile phone customer base will be a major boost to the start-up, as will its offer “free and express delivery” for a list of grocery goods, which currently numbers some 50k items. A unique selling point is that JioMart will connect local stores to customers via an app, rather than providing and delivering the goods itself. The sector is still in its infancy, with just a meagre 0.15% of the population using such services, and there are forecasts that over the next three years it will grow from its current US$ 870 million to US$ 14.5 billion – a huge jump by any measure.

There is no doubt that the past decade has been a disaster for the UK High Street, with many famous brands going into administration. Some managed a rescue deal with their creditors but there are many that have subsequently gone out of business forever. In April 2018, Toys R Us shut down all of its US and UK stores mainly because they did not keep up with the times and suffered from having massive unnecessary warehouses and not refreshing design and infrastructure. Earlier in the decade saw the demise of the Borders bookshop chain, probably killed off by Amazon and other  fierce competition. June 2016 was when the department chain British Home Stores, with debts of US$ 1.7 billion and a pension deficit of US$ 750 million, went out of business for good. The 88-year old retailer, with 163 stores, finally fell over because it failed to innovate and keep up with competition. Two years earlier, stationery store chain Staples disappeared from the High Street, after the UK arm of its business was sold to restructuring firm Hilco. Earlier a planned US$ 6.3 billion merger with fellow US office supply giant Office Depot was abandoned on competition grounds.  It failed to embrace e-commerce and lost business to cheaper alternatives.

In 2013, Blockbuster, a highly popular video rental chain, with more than 9k stores around the world, saw the end of its UK and US stores. It failed to get into the DVD mail-order rental delivery service that Netflix started off with. 2018 was the year that Maplin, with 200 outlets and 2.3k staff, closed its doors. One of the biggest electronic retailers was not helped by weak consumer confidence and a slump in sterling following the Brexit vote – problems faced by most retailers at the time – but fell because it failed to utilise e-commerce to its advantage. Tie Rack was yet another that failed to focus on its core business and paid the price as it collapsed in 2013. At its peak, it boasted 450 global stores but as ties gradually fell out of fashion, the company was also hit by global recession and online shopping. Poundworld was another retail icon that struggled from the Brexit referendum that saw the pound drop in value, making imports more expensive.  The discount goods retailer, with 5.1k employees and 335 stores, also suffered from intense competition from the likes of Poundland and Poundstretcher.

Barratts Shoes, once boasting 400 stores, sold only its own brand of shoes but was badly hit by cheaper imports and by 2013 had finally closed 61 of its 75 remaining outlets. By that time, its shoes were comparatively more expensive than its competition and it had no brands to back them up. One of the biggest failures was Phones4U in 2014. The independent mobile phones retailer, with 5.6k employees and 700 outlets, collapsed when it lost vital deals, with EE and Vodafone pulling out of negotiations to agree fresh contracts; it focused too much on big contract clients and not on their various customer bases.

In a shock move – and an embarrassment to Japanese authorities – 65-year old Carlos Ghosn skipped the country and flew to Lebanon, just a year after he was arrested in Tokyo for financial crimes. The disgraced automotive supremo, and former head of both Nissan and Renault, said he “will no longer be held hostage by a rigged Japanese justice system where guilt is presumed, discrimination is rampant, and basic human rights are denied”. Although he denies all charges, claiming to be a victim of a conspiracy, his critics accuse him of a pervasive pattern of financial misconduct and raiding of corporate resources for personal gain. Both US and Japaneseauthorities consider that Ghosn and Nissan violated the law by being compensated US$ 140 million more than the company reported to shareholders. It is also claimed that he transferred personal investment losses to Nissan and also moved money from an Omani dealership to a company he controlled in Lebanon.

Nissan was also in the news because in a bid to deal with declining sales, reduced margins and slumping profits, senior management have been told to slash non-essential spending on the likes of unnecessary travel, sales incentives and promotional events. The cost-cutting drive will continue well past the carmaker’s 31 March financial year. The company is still reeling from the Ghosn scandal, as well as the departures of some senior executives and increasingly strained relations with its partner, Renault. Despite a wide-ranging turnaround plan last April to revive sales and boost profits, Nissan posted a 70% Q2 fall in profit and in November cut its full-year forecast to an 11-year low.

There appears to be strong interest to take over the Thai and Malaysian operations of Tesco, with several parties showing interest in an acquisition that could raise over US$ 7 billion for UK’s largest supermarket chain. Among those include Thai billionaire Dhanin Chearavanont’s Charoen Pokphand (CP) Group and Central Group, controlled by Chirathivat family. Tesco is keen to divest itself of its SE Asian operations, that include 2k hypermarkets and convenience stores in Thailand and seventy shops in Malaysia, to raise funds to restructure its core UK business.

The IMF has expressed concern about the state of the Turkish economy, highlighting the need for a comprehensive reform package to ensure more resilient growth, as its recovery remains “fragile” amid persistent fiscal vulnerabilities. It wants the government to adopt “prudent” policies to enhance stressed bank and corporate balance sheets and strengthen low reserve buffers; despite the recent introduction of fiscal stimulus, there has been a marked increase in the underlying deficit, expected to touch US$ 13 billion this year – and be 72.3% higher next year at more than US$ 23 billion. Its current bank interest rate stands at 7.75%, but the central bank has introduced measures that have raised reserve requirement ratios for foreign currency deposits and participation funds by 200 basis points; this is expected to result in US$ 2.9 billion of forex liquidity being withdrawn from the market and boosting official reserves. Inflation is expected to end 2019 at over 11%.

For a decade, Ireland has seemingly milked the likes of Google and others by offering an effective tax rate in the single digits on non-US profits – in some cases saving companies up to 75% in their tax bill if paid under other regimes. This would seem to be a win-win for both the Irish government and the tech giant, with another country losing out on its “rightful” tax. Now Google has decided to “play fair” and heeded President Trump’s warnings and 2017 tax law changes, by bringing its intellectual property ownership and licensing structures back to the US. There is no doubt that Ireland has benefitted greatly from this arrangement that has helped the country post yet another annual fiscal surplus this year, with critics arguing that it had become a dumping ground for multinationals’ tax avoidance policies. A US study estimated that in 2015, foreign multinationals moved US$ 106 billion of corporate profits to Ireland – a great fillip for the country’s coffers, as some of its EU allies missed out on their legitimate tax revenue.

2019 saw China launch a series of pro-growth measures including increased infrastructure spending, rate/tax cuts and reductions in the amount of cash banks must keep on reserve to boost credit. Furthermore, as from yesterday, financial institutions were prohibited from signing floating-rate loan contracts based on the previous benchmark bank lending rate, which will be priced in line with the Loan Prime Rate and linked to the medium-term lending facility (MLF), a key policy rate of the PBOC. The one-year LPR, currently standing at 4.15%, acts to make interest rates more market-driven and helps lower financing costs which in turn should push the economy forward. 2019 growth is expected to come in at around 6.0% – such a low figure has not happened in thirty years; more of the same is expected for 2020.

At year end, it is normal to look how the global economy has performed and look forward to what may happen in 2020.  

    2020Unit    2019201920182017201620152014
102.00Iron OreUS$lb28.37%91.5371.3071.2875.0047.0073.00
69.45Oil -Brent23.92%66.6753.866.6256.8236.457.33
7,777FTSE 10012.22%7,5426,7217,6887,1426,2426,548
3,400S&P 50028.88%3,2312,5072,6742,2382,0442,091

The table shows that all indicators moved upwards in 2019 except for cotton and, not surprisingly, the euro – down 4.50% and 1.93% for the year respectively. The blog expects that these two will continue their downward trend this year and that they will be joined by the Australian dollar, whilst the other fourteen markers continue to head north in 2020.

It will be no surprise to see the lucky country struggle this year but will probably not enter recession, which would be for the first time in nearly thirty years. Figures indicate that the Australian economy grew slower in the twelve months to June 2019 than it had any time since 2001. Its labour market will remain weak, as wage growth continues to disappoint, and inflation remains below the RBA’s 2.0%+ inflation target; there will be one final rate cut earlier in the year. Bubbling under the surface is the fact that the country has the world’s second-largest household debt, hovering around 120% of GDP. Then there will be the longer-term impact of the on-going deadly bushfires to worry the economy in. 2020.

With the upcoming US presidential election in November, the re-election of Donald Trump is almost certain so long as the economy continues to fire on all cylinders. This will mean that there will have to be some sort of resolution with regard to the Chinese trade tariff war and that the US dollar will be kept on the lower side to boost domestic exports. A weaker dollar will result in other leading currencies strengthening against the base greenback.

The global bourses will continue to move higher but at a much slower rate than was seen in 2019. It is interesting to note that the Dubaiindex stood at 3774 at the back end of 2014; five years later it has shed 1009 points (26.8%) to 2765 and is probably one of the few bourses not to have moved ahead over the period. 2020 will see a major boost, with the DFM being one of the best performing stock markets in the world.

2019 global growth – at 2.6% – was the slowest since the 2009 GFC and this year will see an improvement – by how much depends on some factors, including the potential end of the tariff war, as well as peace in the Yemen and other war-torn areas. On a global scale, it could touch 3.4% but the likes of the lacklustre EU will be lucky to top 1.0%, whilst most rich companies will hover under the 2.0% mark. China and India are expected to return around 6.0% growth again in 2020, with Indonesia posting over 5%. On a global scale, the two fastest growing economies will be Guyana (35%) and Rwanda (9%) and, at the other end, Venezuela (-21%) and Zimbabwe (-13%).

There is no doubt that 2020 will be a watershed for the local property market sector for numerous reasons including higher energy prices, the Expo halo, newly introduced government policies and the fact that since it has been under the cosh for more than five years, it could be time for the cycle to change. Expect to see some positive moves from the recently formed higher committee for real estate planning, headed by Sheikh Maktoum bin Mohammed, Dubai’s Deputy Ruler.  Another cut in bank rates could be a possibility and this will encourage more buyers into the sector. Finally, if the central bank were to ease the rules regarding the cap on lending to the real estate sector, that would indeed be a game changer for the sector.

Although official figures for 2019 have yet to be posted, it is estimated that there could currently be 522k apartments and 110k villas in Dubai.  By the end of the year, this will climb by 8.4% to 565k apartments and 120k villas, at which time the emirate’s population would have grown from 3.35 million to 3.6 million – a 7.5% annual increase. Inflation is expected to decrease from 1.5% to 1.0% over 2019, whilst growth figures will improve to above the global average. Then there is Expo on the horizon. The economy has bottomed out and it is about time that confidence returned to the emirate. After a Year of Happiness and a Year of Tolerance, now should be the Year of Confidence to get the economy moving. Don’t Stop Me Now!

Posted in Uncategorized | Leave a comment

It's A Man's Man's Man's World

It’s A Man’s Man’s Man’s World.                                                        26 December 2019

The past twelve months to 30 November witnessed a record 44.6k real estate transactions and, despite all the gloom and doom in the market, this number represents the highest number of transactions in the history of Dubai real estate. For the first eleven months of 2019, a total of 36.8k residential properties have been sold in the emirate – a sure sign of improving market momentum after four years in the doldrums; sales for the period came in at US$ 20.9 billion.  If the trend continues into December, this year could be the best in a decade; this looks a distinct possibility particularly because November sales of 4.8k were 5.5% higher month on month, with total deals worth over US$ 2.5 billion. There are several factors pushing the market forward including favourable property prices, an-over supply, low interest rates, enhanced payment plans offered by developers, trying to improve cash flow (rather than profit margins) to get rid of surplus inventory, and recent government reforms to reduce on-costs.

The week, MAG Development broke ground on its upcoming US$ 544 million, 5.1k unit, MAG City project, it revealed that it is planning to list on the Dubai bourse. According to its CEO, Sar Haffar, ‘since it is in a preparation phase, I cannot commit to the date. It is going to take a bit more than a year’. The actual development, with 8k sq mt of retail space and 84k sq mt of public parks, is slated for a 2022 completion; China National Chemical Engineering Group Company has been awarded the contract for the construction of phase one.

A relative newcomer to the sector sees the opening of the 114-key The Lemon Tree Dubai Hotel on Al Wasl Road in Jumeirah, which also includes a wellness centre. The US$ 27 million property enters Dubai’s growing three-star mid-range sector and it is the sixteen-year old Group’s first regional foray. Lemon Tree Hotels (LTH) is India’s largest chain in the mid-priced hotels sector and operates 78 hotels in 46 destinations, with 7.9k rooms and over 8k employees.

This week finally saw the opening of the Address Sky View Hotel, a twin tower property, connected by a floating sky bridge, with 169 hotel rooms and 551 apartments. One of its stand-out features is a 70 mt long infinity pool, some 220 mt from ground level; it also boasts a glass slide which takes guests down, outside, from the 53rd floor to the Sky Views observation deck, and an adventure walk around the rim of the building (secured by a harness).

The same developer is in the UK news, with reports that Atkins, the British firm involved in the design and construction of The Address Downtown hotel, is being sued for negligence following the 2015 New Year’s Eve fire. At the time, the cause of the fire was down to an electrical short circuit on a spotlight, for which the developer submitted a US$ 339 million insurance claim, “revolving alleged negligence in the specification, testing and installation of the building cladding which is claimed to have exacerbated the fire, thereby increasing the damage to the building”.

Despite strong rumours to the contrary, Emaar Properties denied reports it was in the market to sell the observation deck of Burj Khalifa – At The Top. However, the developer “is currently considering a structured transaction wherein financing is being raised against the cashflows of At The Top business”. It is estimated that the facility generates around US$ 170 million a year and could be valued as high as US$ 1 billion.

November saw Dubai’s Department of Economic Development issue over 3.8k new licences of which 70.4% and 27.7% were for professional and commercial purposes respectively, with the balance taken for tourism and industrial. It is estimated that combined, they added over 10.8k to the emirate’s workforce. During the month, the agency dealt with more than 28.9k business registration and licensing transactions.

It is hard to believe that Dubai Duty Free celebrated its 36th anniversary last week and, for the occasion, held a three-day sale, with a 25% discount on a wide range of merchandise. Total revenue generated came to over US$ 57 million, with US$ 30.6 million being sold on the last of the three days, 20 December; there were 359k transactions. The three most popular sales items were cosmetics, perfumes and watches, with sales figures of US$ 15 million, US$ 10 million and US$ 9 million.

DP World is to invest US$ 500 million, as it has been awarded a 30-year build-operate-transfer, BOT, concession by the Saudi Ports Authority, Mawani. It is for the management and development of the Jeddah South Container Terminal, the country’s largest port with current volumes in excess of six million TEUs, as well as handling 60% of Saudi Arabia’s sea imports. The money will be spent on infrastructure to improve Jeddah Islamic Port’s ability to serve ultra-large container carriers, ULCC’s.

A recent RTA auction, of ninety number plates, managed to raise US$ 5.4 million, with the three biggest sellers being S70 – US$ 519k, AA99 US$ 496k and H333 US$ 264k.

As part of its 2017-2021 plan, the UAE Ministry of Infrastructure Development is to spend over US$ 2.7 billion on thirty-six projects, including security, education, health and services, along with federal roads and maintenance projects. A big portion will be spent on implementing and maintaining government buildings which will include six new health care centres, five government buildings, four schools and four road implementation projects.

Dubai’s Department of Economic Development’s Q3 survey shows that the consumer confidence index dipped 2 to 137, quarter on quarter, and by 3 YTD. The main drivers for the marginal decline appear to be a soft labour market – leading to insufficient work opportunities and no salary increases – and a global economic slowdown with the knock-on local effect of falling energy revenue. Consequently, consumer spending has been reduced, with respondents watching their dirhams, cutting back on recreational activities, taking cheaper holidays and delaying technology upgrades.

The UAE Central Bank has warned consumers about the rise in the number of scams that use its name to elicit private information about personal and bank account information. The Central Bank urges “the public to avoid responding to such calls, messages, and opening any hyperlink that may be attached, which may provide exposure to a malicious website and inform authorities immediately.” It reiterated that it ‘never conducts phone calls (unless a consumer complaint has been logged through the right channels with a reference number) or uses social media to contact individuals or businesses.”

It is reported that Limitless – a sister company of Nakheel and involved in planning large scale, mixed-use communities and waterfront developments – has lost a court case to Deyaar Development. The dispute, relating to the purchase of land, sees Limitless ordered to pay US$ 112 million and also the cancellation of a sales and purchase agreement. Furthermore, it was also forced to pay fees as well as compensation of US$ 17 million.

The bourse opened on Sunday 22 December and, having risen 90 points (1.6%) the previous three weeks was 4 points off at 2765 by 26 December 2019. Emaar Properties, up US$ 0.02 last week, shed US$ 0.01 to close on US$ 1.10, whilst Arabtec, up US$ 0.06, the previous three weeks, lost US$ 0.02 to close at US$ 0.35. Thursday 19 December saw continuing dismal trading of 169 million shares, worth US$ 37 million, (compared to 131 million shares, at a value of US$ 38 million, on 19 December).

By Thursday, 26 December, Brent, US$ 2.57 (4.0%) higher the previous two weeks, gained a further US$ 1.38 (2.1%) to US$ 66.54. Gold, up US$ 12 (0.8%) the previous week, was US$ 31 (2.1%) higher, closing on Thursday 26 December on US$ 1,515.

Having divested himself of most of the stock he held in the company he founded, it seems that Uber’s co-founder, 43-year old Travis Kalanick, is finally to step down from the nine-member board. Since September, he has liquidated over US$ 2.5 billion, equating to over 90% of his earlier stake in the company and will now spend more time with his latest creation, City Storage Systems – a start-up, establishing kitchens for use by delivery-only restaurants. Many Uber investors will be glad to see the back of the co-founder who had been involved in a series of damaging controversies.

Boeing has finally faced reality and realised that its embattled chief executive, Dennis Muilenburg, had become such a liability that he had to be removed from office.  He has been the unsuccessful voice of the plane-maker, following two fatal crashes that has forced the grounding of its top-selling 737 MAX since March. He has been replaced by board chairman David Calhoun, as chief executive and president, with the company finally admitting the need to “restore confidence” and “repair relationships with regulators, customers and all other stakeholders”. Only last week, Boeing temporarily shut down MAX production and was not sure when the plane would return to the skies. Whether Boeing’s new leadership will keep their promise that it will “operate with a renewed commitment to full transparency, including effective and proactive communication with the [Federal Aviation Administration], other global regulators, and its customers,” remains to be seen.

According to Tencent, the MENA (Middle East and Northern Africa) games market will jump 25% by 2021 to US$ 6.0 billion from its estimated US$ 4.8 billion for 2019. The local sector is in in nascent stage, accounting for only 3.2% of the US$ 148.8 billion global market this year. In a market overview, The Future of the Games Industry & Ecosystem whitepaper indicated that the way people consume media is changing and that technological enhancements are boosting the evolution of how people now use entertainment. It also looks at the future prospects for the video games sector, including the rise of mobile gaming and cross platform gaming, the growth of eSports in the region, and the potential of games to bring positive benefits for economic and social development.

There is no doubt that the likes of Black Friday, Cyber Monday and e-commerce in general have seen a marked reduction in the traditional Boxing Day sales shopping. In the UK, it is expected that 2019 could see the biggest annual decline in a decade, which has been hit further by bad weather. Forecasts indicate that sales will be 5.1% lower than last year, with total spend of US$ 4.8 billion – and that four in ten of UK adults will still spend US$ 241.

Boxing Day is set to differ in Australia, with a record spend at retail outlets following what could well have been the worst Christmas shopping season since the GFC, driven by the mix of drought and bush fires, along with the creeping menace of e-commerce which now accounts for over 7% of total sales.. Boxing Day spend is expected to top US$ 1.8 billion as the Aussie tradition is being kept alive. From Boxing Day to 15 January, Australians are expected to spend more than US$ 13.3 billion.

There has been little surprise that a white male has been appointed as the 121st governor of the Bank of England, a decision made by the UK government; the role has been given to Andrew Bailey, currently heading up the Financial Conduct Authority. This comes when the likes of Christine Madeleine Lagarde and Kristalina Georgieva are now in control of the European Central Bank and the IMF respectively. Dame Minouche Shafik – a former deputy governor of the Bank and a director of the London School of Economics – was a frontrunner for the governor’s job. Does the Bank of England have a woman problem?  Maybe there is – with only one woman serving on the nine-strong  (with eight white males) Monetary Policy Committee which sets and announces policy eight times a year; less than a third of senior positions are filled by females.

With the Bank of England set to start monitoring Lloyd’s of London, their lack of diversity (as noted above) may worry a few in the insurance set-up. It seems that as the Lloyd’s whistleblowing hotline was out of service for sixteen months, about 1k staff members had no way to anonymously report issues such as sexual harassment or bullying. Ever since Bloomberg Businessweek published a critical article reporting that female workers had faced inappropriate comments as well as physical attacks from male colleagues, the 330-year old market has been trying to clean up its act. A later internal report indicated that 8% of employees had witnessed sexual harassment over the past twelve months. In the upper echelons of the UK financial sector, It’s A Man’s Man’s Man’s World.

Posted in Uncategorized | Leave a comment

Should I Stay Or Should I Go?

Should I Stay Or Should I Go?                                                              19 December 2019

This week, HH Sheikh Mohammed bin Rashid Al Maktoum issued the “50-Year Charter for Dubai”, which includes nine articles from his future vision for the emirate, envisioning the life he wishes for everyone living in Dubai. He said “we shall develop our plans and projects and reinvent new ideas. 50 years ago, the founding fathers shaped our life today, and next year, we will shape the coming five decades for the future generation”. At the same time, two new Cabinet committees were established, one to lay out a comprehensive development plan for the next 50 years, including health, education, housing, transport and food security across the country, and the other, focussing on the organisation of the major celebrations to be held in honour of the 50th anniversary of the UAE in 2021.

Figures from Property Finder Group’s Data Finder show that 38.2k residential units were completed up to the nine months ended 30 September, with a possible 6.5k expected over Q4, bringing the total for the year to  a possible 45k; this would be the highest annual figure for several years and 31.9% higher than a year earlier. Over the past year to September, the emirate’s population has grown over 5.4% to 3.34 million. The consultancy expects 2020 will bring less new projects, as developers focus on completing existing projects and selling their inventory of completed units in response to reduce the levels of future supply. Of the 13.2k units slated for completion over the six months to March 2020, 87% are apartments.

Meanwhile, Knight Frank indicates that Dubai prime property prices, that are expected to be 3.7% lower this year, will decline at the slower rate of 2.0% in 2020, despite the fact that this sector posted slight increases – of 0.2% and 0.3% – over the past two quarters. It is felt that sales and demand will nudge higher, whilst supply will witness a significant jump. Everybody is hoping that Expo 2020 will act as a catalyst to boost demand in this sector. Those who left Dubai a decade ago and bought in Vancouver have done well – with prime residential prices 80% higher compared to Dubai’s 8% decline.

The DCCI estimates that the construction sector added 6.4% to the emirate’s GDP, driven by Expo 2020 and government-led infrastructure projects, with the impact to continue well into 2022. Furthermore, there are 4.8k ongoing projects in Dubai, equating to 42% of the country’s total number; on a national basis, the construction sector contributed US$ 33.2 billion to the UAE GDP and has US$ 48.4 billion of works in the pipeline. Other key factors include Dubai’s drive towards economic diversification, a steady population increase (7.3% higher in 2018 and 4.8% so far this year to 3.345 million) and continuous infrastructure projects.

In February, Meliá is set to open its first regional ME hotel in Dubai, located in the Opus.. Designed both inside and out by the late Zaha Hadid, the property will have 74 rooms and 19 suites along with 96 serviced apartments; it will also have fifteen restaurants, three of which will be run by the hotel, along with a spacious pool and a 7k sq mt gymnasium.

The Gevora on SZR has another three years as the world’s tallest hotel but will lose this distinction to the Ciel, the First Group’s Dubai Marina project, currently under development in Dubai Marina, and due to open in 2023. Designed by architectural firm, Norr, Ciel will reach a height of 360.4 mt – four metres higher – and will house 1.2k luxury suites and serviced residences. It will also feature a glass observation deck, providing 360-degree vistas across Dubai Marina, as well as a rooftop leisure deck with a swimming pool, fitness centre and steam rooms.

Following the 251-room Ibis Styles, Nakheel has just opened its second hotel in Dragon City, the Premier Inn at Dragon City, located in closed proximity to Dragon Mart. The eight-storey property, featuring a 320-seat restaurant and a Costa coffee shop, is Nakheel’s fourth hotel – the other two being located at Ibn Battuta Mall. Its first residential component – a twin-tower apartment complex with over 1.1k units – is under construction.

Dubai added two more ‘supertall’ buildings (over 300 mt) to its portfolio this year with The Address Residence – Fountain Views III in Dubai (332 mt) and Noora Tower at 307 mt; this year has seen 26 such structures being completed in the world bringing the total to 170, compared to 76 in 2013. The number of buildings above 200 mt totalled 126, as the UAE, with eleven completions, trailed China and the US with 57 and 14: however, these three countries accounted for 65% of total builds.

MAF and Dreamscape Immersive will open their first international venture in Dubai next week, located in the Mall of the Emirates; with two successful launches in both Los Angeles and New York, Dubai will be their first international entrée. The location-based VR entertainment company, backed by some of Hollywood’s heaviest hitters, will initially feature three immersive adventures which will transport viewers to fantastic new worlds.

The RTA is asking private companies to submit proposals for constructing about 1.5k bus shelters in a move to ramp up the use of public transport and improve the infrastructure needed. The Dubai government is keen on promoting PPPs (public-private partnerships) and, in this case, the contract on offer would be for up to three years, with the winning bidder operating and maintaining the shelters for ten years, renewable to a similar period.

With an annual spend of US$ 27.9 billion, Dubai has become the third biggest city in the world when it comes to international tourism spending that contributes 11.5% to the emirate’s GDP. The report, by the World Travel & Tourism Council, also noted that this spend in the MENA added US$ 92 billion to the global tourism GDP. Dubai can thank the arrival of international visitors as they account for 89% of the spend.

A US$ 1.25 billion Etihad Rail contract has been awarded to a Chinese JV, (involving China Railway Construction Corp and National Projects) for construction civil works and construction for stage two of the country’s rail project. The work involves a 145 km rail track, connecting the Fujairah and Khorfakkan ports to the network at the Dubai-Sharjah border. Financing of Stage 2, linking the UAE and Saudi Arabia from Fujairah Port to Ghuweifat via  Mussafah, Khalifa Port and Jebel Ali Port, will be through the UAE Ministry of Finance and the Abu Dhabi Department of Finance. When the 1.2k km rail network is complete, there will be connectivity between the country’s ports, airports and manufacturing hubs which will in turn boost freight volumes, enhance its logistics sector and facilitate trade; it will also improve UAE’s global position as one of the world’s leadinglogistics and transportation hubs.

Mohammed Alabbar has a few words to say to Amazon and that is “go back to Seattle”, as the Noon chairman is worried that the region’s e-commerce sector will be taken over by foreign players, if no local action is taken. Noon’s founder Mohamed Alabbar believes it is his duty not to let the region’s fast-growing e-commerce sector be dominated by foreign players and that Amazon and its billionaire founder Jeff Bezos should “go back to Seattle”. In an interview with WIRED magazine he is quoted as saying “We want Noon to do well because we don’t want just one guy to sell baby milk to our kids. I will not allow that. No way will that ever happen. I don’t want one company to control the life of my people.” Noon was established in 2017 as a US$ 1 billion JV between Mohamed Alabbar and Saudi Arabia’s state-owned Public Investment Fund. He considers this stand to be his duty to the Arab people, warning that if no action is taken now “the Middle East will either be left behind or will be occupied by foreign powers. These foreign powers are digital banks, digital companies, digital media—there’s no need for military.”

Following allegations by US short-selling firm Muddy Waters, which raised “serious doubts” about its financial statements, London-listed NMC’s shares slumped by 32% on Tuesday, equating to some US$ 2 billion being wiped off its market value. The country’s largest healthcare provider refuted the claims made which questioned the group’s asset values, cash balance, reported profits and debt levels. Prior to Tuesday, NMC’s shares had gained more than twelve-fold since its 2012 listing and issued a statement stating that “NMC will review the assertions, insinuations and accusations made in the report, which appear principally unfounded, baseless and misleading, containing many errors of fact, and will respond in detail in due course.”

With shareholders finally agreeing to Dubai Islamic Bank acquiring Noor Bank, the new banking entity will have assets of nearly US$ 75 billion making it one of the largest Islamic financial institutions in the world, as well as enhancing Dubai’s position as the leader of the Islamic economy. Investment Corp. of Dubai, the emirate’s main state-owned holding company, is the largest shareholder in DIB with a 28%, as well as being a major investor in Noor Bank.

The bourse opened on Sunday 15 December and, having risen 43 points (1.6%) the previous fortnight, was 47 points (1.7%) higher at 2769 by 19 December 2019. Emaar Properties, having shed US$ 0.04 the previous fortnight, gained  US$ 0.02 to close on US$ 1.11, whilst Arabtec, up US$ 0.05, the previous two weeks, gained a further US$ 0.01 to close at US$ 0.37. Thursday 19 December saw continuing dismal trading of 131 million shares, worth US$ 38 million, (compared to 105 million shares, at a value of US$ 44 million, on 12 December).

By Thursday, 19 December, Brent, US$ 0.69 higher the previous week, gained a further US$ 1.88 (2.9%) to US$ 66.54. Gold, having declined US$ 23 (1.5%) the previous three weeks, was US$ 12 (0.8%) higher, closing on Thursday 19 December on US$ 1,484.

IATA expects air cargo to recover somewhat next year, by 2.2%, following an expected 3.3% contraction in 2019, with revenue 8.0% lower – the weakest year for air cargo volumes since the 2008 GFC. This improvement is subject to a resolution to the US-Sino trade war and average oil prices around the US$ 63 level (as oil accounts for 25% of airlines’ costs). However, an expected uptick in global growth next year will have an obvious positive knock-on effect on air cargo markets and, even if this were to happen, there will be increased pressure on yields.

In January, Boeing will temporarily halt production of its troubled 737 Max airliner, which has now been grounded for nine months, with a further delay expected, dampening the plane maker’s expectations of returning to the air this year. Only last week, lawmakers were advised that US aviation regulators were aware, following the first crash in October 2018, that there was a risk of further accidents suggesting that there could be more than a dozen more crashes over the lifetime of the aircraft unless changes were made to its design.

As expected, Fiat Chrysler and PSA Group have joined forces in a US$ 50 billion deal, to become the world’s fourth largest carmaker. The merger is expected to result in annual cost savings of US$ 4 billion, with the current PSA boss Carlos Tavares becoming its chief executive. Earlier in the year, Fiat Chrysler pulled out of a US$ 29 billion merger with Renault, following pressure from the French government which had a 15% stake in the latter. Last month, Fiat Chrysler found itself in court, being sued by General Motors, claiming it bribed union officials over many years to gain advantages that cost General Motors millions of dollars.

The co-founder and chief executive of Bet365 is still the highest paid in the UK, raking in a US$ 360 million salary plus dividends of US$ 60 million as a 50% shareholder. Denise Coates, who saw a 25% hike in her salary, as the popularity of online gambling continues to grow, used her first-class degree in econometrics when she identified the potential of online gambling in 2000 and invested in the domain name Bet365. Whilst the company made a 19.7% increase in annual profits to over US$ 1 billion, her other investment, as owner of Stoke City, saw her lose US$ 10 million last year.

Oscar Wylee is in trouble with Australian authorities for blatant misrepresentation, following on a week after Coles faced the wrath of the Australian Competition and Consumer Commission. Coles had advertised that it would pass on AUD 0.10 per litre drought levy it advertised as supporting local dairy farmers but only forwarded AUD 0.035. Although the consumer watch dog reckoned it had a strong case to allege misleading conduct by the retailer, it did accept their offer to pay AUD 5 million+ to the Norco Dairy co-operative, as settlement. Meanwhile, the glasses chain, with 52 outlets and an active on-line selling platform, had advertised that it would give away a second pair  for every unit sale – it is alleged that only 3k had been donated, even though 300k had been sold over a five-year period to the end of last year. Oscar Wylee has strongly refuted the claim, saying that it had donated more than 350k pairs of glasses to charity organisations, along with monetary donations totalling AUD 131k.

The fall-out from the 2018 Royal Commission on Banking continues with APRA launching an investigation into the handling of alleged money laundering breaches, involving Westpac’s directors and senior managers. The regulators will look at their “fundamental deficiencies” and whether they had breached the Banking Executive Accountability Regime (BEAR). To make matters worse, the bank has also been taken to court by financial crime agency AUSTRAC over more than 23 million alleged money laundering breaches.

Meanwhile, regulators have taken the NAB to court for allegedly breaching company laws on more than 12k occasions. And that the bank is in serious danger of having to pay out billions of dollars if ASIC wins its case; the case is based on claims that the big-four bank collected almost US 500 million in fees but did not provide any financial advice and then making false or misleading statements in fee disclosure statements from December 2013 to February 2019.

Ongoing political problems have had a negative impact on passenger numbers at Hong Kong International Airport, posting its biggest annual decline since June 2009; the annualised 16.2% decline in November saw passengers down to just over five million. Over the previous three months, there were 12%+ falls, driven by on-going violent protests that started in June.

There seems to be no end to the economic (and political) crisis in Lebanon, as caretaker prime minister Saad Hariri requests both the World Bank and the IMF, as well as foreign donors, for “technical and financial support”. The country has a public debt of US$ 86 billion plus one of the highest debt-to-GDP ratios in the world at 150% of GDP. The Lebanese pound, which is pegged to the greenback, is trading on the local black market 33% lower. Even if external finance were to occur, there could be severe macroeconomic instability with the possibility of debt restructuring leading to a currency devaluation, resulting in major currency losses for private investors. Last week, the major banks were instructed to halve interest rates on foreign and local currency deposits.

For the first time since 2016, the Japanese government has resorted to issuing deficit-financing bonds to make up for a tax revenue shortfall, as Prime Minister Shinzo Abe continues to struggle to balance the budget. The additional issue of US$ 20.3 billion is an indicator that, despite the leader’s best efforts, “Abenomics” has failed and that the government will continue to have difficulties trimming debt issuances and raising revenue. The government has cut its current fiscal year tax income by 5.2% to US$ 575 billion, not helped by the on-going trade tariff war and a slump in exports.

The Bank of Russia has lowered its base rate by a further 0.25% to 6.25% – its sixth cut in 2019 and bringing the rate down 150 basis points from its year-opening figure of 7.75%. The bank indicated that there may be further rate reductions early in 2020, as “disinflationary risks still exceed pro-inflationary risks over the short-term horizon.” With both inflation falling below the government’s 4.0% target, and economic growth lagging behind expected goals, the government has had to introduce more robust economic measures.

In the past, German lawmakers have usually opted for a balanced budget approach, without the need for issuing new debt, and some still argue that its ‘black zero’ balanced budget policy is a useful approach to achieve sound finances. However, Chancellor Angela Merkel is being challenged by her Social Democrat (SPD) coalition partners for some sort of stimulus package to bolster the country’s flagging economy. In line with its EU neighbours, Germany is struggling because of the trade war, a slumping car industry and worries about the outcome of the UK leaving the bloc. Everybody knows that over the past seven years, the ECB has failed to reach its 2.0% target and a more aggressive approach in economic management is badly needed.

With the imminent departure of the Canadian Governor of the Bank of England, Mark Carney, it seems that one of the front runners to take over is Egyptian-born Dame Minouche Shafik, who would become the first female incumbent in the bank’s 325-year history. She worked for fifteen years at the World Bank, where she was its youngest vice-president at the age of 36, following which she moved to the UK, becoming the most senior official responsible for the UK government’s aid programme. She then took a position with the BoE as deputy governor to Mark Carney but left to become director of the London School of Economics. There will be several interested parties vying to help running the finances for the fifth biggest global economy including another female, Shriti Vadera, who is chairwoman of Santander UK, and Andrew Bailey, another former governor of the central bank.

The UK’s Competition and Markets Authority is concerned that the four global tech giants could be having a negative impact on digital advertising in the country and that the likes of Google and Facebook may have become entrenched in the UK market “with negative consequences for the people and businesses who use these services every day”. It is estimated that Google accounts for 90% of the US$ 7.8 billion search advertising revenue in the UK and that Facebook takes about 50% of the total UK US$ 5.2 billion display advertising revenue. There is no doubt that traditional newspaper and magazine platforms are losing their market share, resulting in their ability to continue to produce valuable content for their readers. The regulator is worried that a lack of “real competition” could mean higher advertising costs, being passed on to consumers, and that people may be missing out on “the next great new idea from a potential rival”.

UK unemployment rates continue to fall and quarterly October figures of 1.281 million were the lowest level since January 1975; the employment rate rose to an all-time high of 76.2%, equating to 32.8 million. Vacancies have fallen for the tenth month in a row and are now below 800k for the first time in two years. However, annual wage growth rate slowed 0.1% to 3.5%, quarter on quarter, but with inflation hovering around 2.0%, pay is still increasing in real terms.

As expected, the Trump administration agreed to suspend some tariffs, of around US$ 160 billion, on Chinese goods and to cut others by 50% in some cases, with Beijing promising to increase US farm products purchases by importing US$ 50 billion in US agricultural goods in 2020 – this is more than double the amount purchased pre-the tariff days in 2017. Negotiations are taking place in troubled political times, with the US supporting the Hong King protests and criticising China’s camps for ethnic Uighurs. The on-going trade war is probably the biggest cause for the slowdown in the global trade and economic environment. Donald Trump ended the week becoming the third of forty-five US presidents to face impeachment charges; this comes some eleven months before next November’s presidential elections. There is no doubt that he is one man who will not be asking himself Should I Stay Or Should I Go?

Posted in Uncategorized | Leave a comment

Take It Or Leave IT

Take It Or Leave It                                                                                                                                        12 December 2019

An eleven-year monthly high saw November property sales deals reach over 5k – 5.8% up on September and 4.7% higher than in October. According to Property Finder, much of the recent improvement in transactions stems from the recent formation of the emirate’s Higher Real Estate Planning Committee, with 13.8k property transactions taking place since kts formation on 02 September. A further indicator was the US$ 31 million sale for Burma Islands on Nakheel’s The World Islands, developed before the 2008 GFC. The main aim of the new committee is to achieve a better balance between supply and demand in thesector; this intervention is much needed in a market where it is estimated that 33k units are scheduled for completion in Q4, followed by a further 65k due for delivery in 2020. That would indicate that in the fifteen months to December 2020, the number of residential units in Dubai would jump 18.1% to 640k.

Following a positive response to phase 1 of its Dubai Production City Midtown master development, Deyaar will launch a US$ 218 million extension next month; January will also see the handover of the first of thirteen buildings. The developer has already sold 1.2k apartments in zones two and three and is now opening zones four and five, comprising eleven buildings and 750 apartments. The total development, costing US$ 708 million and catering to the affordable housing segment, consists of 25 buildings offering studio, 1 and 2 B/R apartments, featuring a 1km running track, tennis courts, a basketball court, swimming pool and children’s play areas. The developer has also expanded its hospitality sector, with three hotels – Millennium Atria Business Bay (including serviced apartments), Millennium Al Barsha hotel and Mont Rose, a three-tower complex at Dubai Science Park, offering a mix of residential and serviced apartments. It expects that the 952 keys, in its current hospitality portfolio, will each generate an average US$ 272k (Dhs 1 million) over the next twelve months.

To entice foreigners to buy into the local real estate sector, Azizi Developments has introduced a lucrative, customised five-star package to showcase its property portfolio (as well as Dubai landmarks). It seems that all a prospective international buyer needs to do is to advise the developer of a suitable time, and Azizi will do the rest. It is pleasing to see a company spending its own money to showcase the emirate (as well as trying to sell its wares). The developer has fifty-four on-going projects that will be delivered over the next four years.

In a tough realty environment – and a lack of market liquidity – ENBD Reit has decided to delist from the Nasdaq Dubai and restructure its fund. These trading conditions saw its share price regularly trading below the value of its net assets, so, as to maximise long-term value for shareholders, it has been decided “to proceed with a formal restructuring of the REIT, transitioning to a privately held investment vehicle”. Its portfolio has only Dubai-based assets, with its eleven main ones being a mix of commercial and residential units including The Edge in Dubai Media City, Binghatti Terraces apartment complex at Dubai Silicon Oasis and South View School in Dubailand. In late November, the REIT’s share value hovered around US$ 0.14 whilst its net asset value was more than double its share value at US$ 0.28.

According to its CEO, Jose Silva, Dubai’s Burj al Arab is “as profitable as any grand luxury hotel in the world, if not to say more profitable.” Dubbed the world’s first seven-star hotel on its opening twenty years ago this month, the iconic 321 mt high property has 201 suites, ranging in size from 170 square metres to 780 sq mt; it is run by the Jumeirah Group which is part of the government-owned Dubai Holding Commercial Operations Group. The CEO also commented that it has received “a number of requests” to build replicas of its iconic Dubai hotel and that “it will be done” as the company is in “ongoing discussions” with investors about potential projects; China looks a possibility to be the first to build.

With the official opening of its new Dubai World Central facility, DHL is set to invest over US$ 5 million over the next five years to support the rapid growth of e-commerce in the UAE and the region. The new 4.9k sq mt centre, capable of handling 58k shipments a day, will give the logistics giant improved commercial import and export capability at Al Maktoum International Airport, considered by some to be the emirate’s new strategic hub.

Dubai’s number one business centre, the Capital Club, is going through a rough passage and is looking for an additional US$ 8 million finance package, as part of plans that include bringing in a new management team, restructuring debt and refurbishing. Just like most business entities, the strategy seems to be to “increase revenue and reduce costs.” With annual membership fees of US$ 5.5k, it has seen numbers decline 33% to 1k, driven by some major financial institutions cutting their staff numbers in Dubai. It seems that Signature Clubs International Ltd has handed over management to a new board of directors, chaired by Hussain Sultan Al Junaidy, who has committed 20% of the new capital required.

The total number of international tourists arriving to Dubai and Abu Dhabi rose 4.1% to 15.88 million in the first nine months of the year, up from 15.26 million during the same period in 2018. Of that total, it is estimated that 6.8 million – 56.3% of total Dubai visitors – stayed in hotels, an 8.7% hike in numbers, year on year. Visitor numbers from the Philippines, Oman and China showed marked increases – up by 28.5%, 28.4% and 13.7% respectively.

A long-term agreement with DP World gives Swiss cruise line MSC Cruises preferential berthing rights at the emirate’s Mina Rashid Port. The 317 mt MSC Bellissima, with room for up to 5.6k people, is scheduled to make seventeen calls and spend 35 days in Dubai during the winter season, ending in March. It will bring 180k cruise passengers to Dubai, whilst operating a range of seven-night itineraries in the Gulf over this period. Another ship, the MSC Lirica will also be deployed in the Gulf for eleven-night and fourteen-night cruises.

A Dubai government report has projected growth in the emirate’s economy will reach 2.1% this year followed by 3.2% and 3.0% over the next two years; the main drivers include Expo 2020, government initiatives, as well as continuing economic diversification and sustainable growth. Dubai’s Crown Prince, Sheikh Hamdan Bin Mohammad bin Rashid, commented that the emirate is an “attractive environment for investment and enabled the city to make major economic and developmental strides.”

Another Dubai Economy report indicates the importance of SMEs to the emirate’s economy, contributing almost 50% of the local GDP and 52% of the work force, along with being responsible for 99.2% of the total number of establishments, at 152k. A further breakdown of SMEs has micro firms accounting for 62% of the total business entities, followed by small and medium firms’ 36%. Segment-wise, the breakdown is threefold – services, trading and manufacturing accounting for 48%, 47% and 5% respectively.

Last year, the then recently introduced VAT Tax revenue, at US$ 6.8 billion, accounted for 5.5% of the UAE’s total 2018 public revenue of US$ 124.3 billion; bigger contributors were oil revenue (36.1%) and joint stock companies (32.9%). Following three years of deficits, 2018 witnessed a budget surplus of 2.2% because  a 13.3% growth in general revenue was greater than the 4.2% hike in public spending.

With increased speculation that the Qatar crisis is close to an early settlement, the UAE Minister of State for Foreign Affairs Anwar Gargash has said that it still “continues” but that ”every crisis has an end, and sincere and sustainable solutions are in the interest of the region.” He also commented that the absence of Sheikh Tamim bin Hamad from the Riyadh summit was “due to poor judgment”, with Qatar’s prime minister attending in his place. However, an early settlement would be highly beneficial for all regional stakeholders.

The bourse opened on Sunday 08 December and, having regained 16 points the previous week, was 27 points (1.0%) higher at 2722 by 12 December 2019. Emaar Properties, having shed US$ 0.01 the previous week lost US$ 0.03 to close on US$ 1.09, whilst Arabtec, up US$ 0.03, the previous week, gained a further US$ 0.02 to close at US$ 0.36. Thursday 05 December saw continuing dismal trading of 105 million shares, worth US$ 44 million, (compared to 147 million shares, at a value of US$ 59 million, on 05 December).

By Thursday, 05 December, Brent closed US$ 0.69 (1.1%) higher at US$ 64.66. Gold, having declined US$ 12 (0.9%) the previous fortnight, shed US$ 11 (0.7%), closing on Thursday 12 December on US$ 1,472.

On the first day of its IPO, Saudi Aramco traded 10% limit higher at US$ 9.39 which valued the energy titan at over US$ 1.88 trillion – and at the same time making the Saudi Tadawul stock exchange the ninth largest in the world in value, which previously traded stock with a total value of US$ 500 billion. The company is by far the most valuable listed global company, well ahead of Microsoft Corp. and Apple Inc, both of which have been worth US$ 1.00 trillion; Thursday saw shares 8% up, pushing its market value above US$ 2.0 trillion. Saudi officials, for various reasons, are keen to push the stock higher after many international investors boycotted the IPO on grounds such as its initial perceived high valuation and concerns including governance issues and possible security threats; furthermore, the company has promised an annual dividend of no less than US$ 75 billion a year until 2024.

The London court case, which started in March, between Hewlett Packard and Autonomy founder Mike Lynch, is coming to final arguments, with a verdict expected early next year. The US tech company accuses the defendant of orchestrating a massive US$ 5 billion fraud at the British software firm ahead of its US$ 11 billion Autonomy acquisition. Mr Lynch takes the opposite view, saying that the whole claim is manufactured to explain away HP’s disastrous management of its acquisition. Judge Robert Hildyard has to decide whether Autonomy bent the rules to beat stock market expectations or whether HP sufficiently scrutinised Autonomy’s books before the deal, in a period when the computing giant sought to transform itself into a software-focused company only to change course months later. Mr Lynch is also fighting a US extradition battle, where he faces criminal charges of wire and securities fraud.

Being unable to sell assets fast enough to meet investors’ demands for money, UK’s M&G froze withdrawals from its property portfolio – as a result, the biggest day of outflows, of US$ 185 million, from other UK property funds of the year followed. The asset manager, with investments in ninety-one commercial properties in the UK, put the blame on “Brexit-related political uncertainty” and difficulties among retailers, for this temporary liquidity crisis. However, it is not the only company with such problems as so far this year that, with the exception of May, there have been net monthly cash outflows in the sector.

The proposed US$ 11 billion takeover by Asahi for Carlton & United Breweries may still go flat if the regulators consider it may dry up competition and raise prices; the deal would see the Japanese brewer offer the giant Anheuser-Busch InBev for all CUB’s brands. If the deal is successful it would see the combination of the two largest suppliers of cider in a highly concentrated market, with brands including Somersby, Strongbow, Mercury and Bulmers. Asahi has a relatively small share of the beer sales – with only a 3.5% market share. However, it has become the country’s second largest supplier of premium international beers and carries brands such as Asahi Super Dry, Peroni, Mountain Goat and Cricketers Arms. This acquisition of CUB would expand Asahi’s drinks portfolio, with the addition of Victoria Bitter, Carlton Draught and Foster’s at the mass end of the market, as well as one-time craft beers like Matilda Bay, Fat Yak and Four Pines, along with international brands such as Corona, Stella Artois and Beck’s.

Fifty years after taking on car giant Chevrolet for its Corvair’s dangerous suspension design, Ralph Nader has found another cause to take on a mega US company. This time, the consumer advocate is taking on Boeing and calling for the aircraft to be permanently grounded, following two fatal crashes earlier in the year. The 85-year old reckons that it is not the software responsible for the plane maker’s problems but is more of a structural design defect involving the engines being too much for the traditional fuselage, that has been in existence since the 1960s. He argues that the new larger engines, mounted higher on the wings than previously, have altered how the plane flies in certain circumstances and that Boeing should have started a new design from scratch. Nader does have an axe to grind, with his grandniece being one of the victims, but many would have to agree about the culpability of Boeing and that heads should roll at the top level of Boeing, a company that may be considered too big to fail. The frightening thing is that after the first crash, US safety regulators did predict a high chance of future accidents if the company did not make changes. It took the Ethiopian aircraft to fall out the African skies, five months later, before the Max was grounded by the US Federal Aviation Administration.

IATA expects worse 2019 results for its ME member airlines, driven by slowing economies and trade tensions. On a global scale, airline profits have been slashed by 7.5% to U$ 25.9 billion and are 5.1% lower, year on year. The weaker-than-expected global economic growth of 2.5% has resulted in softer passenger and cargo demand. However, there is better news on the horizon in 2020, with profits rising to US$ 29.3 billion on the back of an upturn in global trade to 3.3% and economic growth 2.7% to the good; these figures depend on a “truce” in the US/Sino trade war. It is expected that ME carriers will continue in their loss-making mode with a US$ 1.4 billion deficit this  year, improving to a US$ 1.0 billion loss in 2020.

Following a 1.8% September hike in ME airline traffic, there was a sharp and welcome 3.9% increase in October, with both capacity 0.3% higher and load factor up 3.9% to 73.5%. Globally, demand improved 3.4% – a modest slowdown on the previous month’s 3.9% driven by softer traffic performance in domestic markets. Capacity increased by 2.2% as load factor nudged 0.9% to 82%.

Held responsible for some of the recent Californian wildfires, Pacific Gas and Electric has agreed a US$ 13.5 billion settlement with victims. Its equipment has been linked with the state’s deadliest-ever fire – the 2018 Camp Fire which killed 85 people – and the 2017 North California wildfires, held responsible for 30 lives. The utility giant filed for bankruptcy earlier in the year and is now expected to emerge from it following this latest agreement, having already settled with insurers and local authorities.

There are reports that Tesco is considering a sale of its operations in Thailand and Malaysia, with over 2k stores operating under the Tesco Lotus brand, employing some 60k. With a combined revenue of US$ 5.5 billion, some analysts value this popular “trophy asset” at over US$ 9.2 billion. It does seem strange that UK’s biggest retailer was looking at further Thai expansion, with a further 750 stores planned to open. It has already withdrawn from the US, Japan and Turkey (as well as South Korea in 2015 for US$ 6.1 billion, and Turkey a year later), and any exit would leave its only overseas stores in Eire and central Europe, including Poland and Hungary.

This week, the US-Mexico-Canada Agreement (USMCA) was signed, replacing the twenty five-year-old North American Free Trade Agreement; it still needs approval by legislatures in the three countries. Not surprisingly, Donald Trump, who had promised in his 2016 presidential campaign that he would change NAFTA, is claiming his fair share of credit saying that it would be “the best and most important trade deal ever made by the USA. Good for everybody – Farmers, Manufacturers, Energy, Unions – tremendous support.”

The “on-off” trade war continues, with the latest being President Trump’s latest tweet that “we are getting VERY close to a BIG DEAL’ They want it and so do we!” This comes after the US offered to slash US$ 375 billion worth of Chinese goods by as much as 50% but more importantly to suspend new tariffs, scheduled for Sunday, on US$ 160 billion worth of Chinese imports. It is a welcome fillip for the president, who is under political pressure, with his ongoing impeachment debate in the US Congress. Australia, along with the rest of the world, will benefit from an improving global economic outlook. On the news from Washington, the Australian dollar jumped above the US$ 0.69 level, for the first time in months, but with the local economy under the cosh, the dollar will continue to struggle in the near future and is overvalued.

China’s export sector continues to head south, with November returns 1.1% lower, year on year, and a massive 23% slump in trade with the US, driven by the ongoing tariff war – the twelfth month in a row. With a further round of tariffs, of some US$ 156 billion, due to come online next Sunday, the news is not going to get any better. Even if some peace came to the “war”, Chinese trade may not pick up straightaway, as some suppliers may have already been sourced from other countries. The seventeen-month long trade war has certainly had a negative impact on China’s economy, as indicated by latest growth figures of around 6% being the lowest in over thirty years. To add salt to their wounds, imports moved in the other direction – to 0.3%, year on year – as the country’s trade surplus with the rest of the world fell.

Eighteen months after the event, the UK Office for National Statistics advised that debts, including credit card debt and personal loans, rose 11% to US$ 153 billion in the two years to March 2018; student loans (totalling US$ 41.6 billion) and hire purchase debt were the main drivers behind the increase. The average household debt came in 9% higher to nearly US$ 13k.

The latest quarter to October saw the UK economy report its worst three months since 2009, as output failed to grow once again in October, as well as flatlining, following two months of declines. Although there was a 0.2% uptick in the service sector, there were 0.7% and 2.3% falls in manufacturing and construction, with “a notable drop in housebuilding and infrastructure in October”.  Although unemployment dropped again, by 23k to 1.31 million, wage growth slowed on the month by 0.2% to 3.6%, year on year. There is no doubt that the economy has lost momentum ahead of today’s general election but a positive result in the polls could see a welcome end to all the current political and economic uncertainties mainly as a result of Brexit; whatever happens, a further rate cut is on the horizon.

It seems that the UK electorate has finally put the Brexit debate to bed, (along with the Remainers), as the incumbent prime minister wins the biggest Conservative majority in over thirty years. As expected, sterling received a boost, surging against the greenback, now that uncertainty around leaving Europe has been finally removed. Whether he can keep to his promise of leaving before 31 January 2020 remains to be seen. In a resounding message to the Remain camp, who will probably continue to question what democracy actually means, the UK has finally decided on whether to Take It Or Leave It.

Posted in Uncategorized | Leave a comment

The Impossible Dream

Posted in Uncategorized | Leave a comment

The Impossible Dream

The Impossible Dream

Even in these troubled, times there are still many Dubai properties being sold for over US$ 2.72 million (ten million dirhams). According to statistics from Data Finder, the leading locations were Downtown (34 deals), Palm Jumeriah (31), Business Bay (five) Jumeirah (four), JBR (four) and Dubai Creek Harbour (four) over the first ten months of the year. Two projects accounted for 31 of these deals – Il Primo in the Opera District of Downtown, with 18 transactions, and the Palm Royal Atlantis Resort & Residences making up 13 of the total. The most expensive apartment sale so far has been for US$ 20 million at The One at Palm Jumeirah.

Villa sales fared even better, with 157 deals in the top five locations – Dubai Hills Estate (47 deals), Palm Jumeirah (43), MBR City (32), Emirates Hills (22) and Jumeirah Golf Estates (13).The average price for villas sold in Emirates Hills was estimated at US$ 7 million.

October figures from STR indicate the Middle East hotel construction pipeline stands at 434 projects and 120k rooms; no surprise to see that the UAE accounts for 38.3% of the total, with 52.8k rooms, followed by Saudi Arabia’s 38.9k.

Capri Palace becomes the latest property to be added to the Jumeriah Group’s portfolio of managed hotels, due to reopen next April, after major renovation work. Founded by Tonino Cacace in the 1960s, it has 68 guest rooms and is home to three of the island’s Michelin stars, including the hotel’s signature restaurant L’Olivo. The Dubai government-owned company operates other properties in Europe including in London, Mallorca and Frankfurt, as well as in the Middle East, China and the Maldives.

Having just opened its third hypermarket, near Burjuman Metro Station, and its fifteenth branch in the emirate, Lulu is planning a further six more outlets for Dubai. The Abu Dhabi-based retail group now has 74 outlets in the country, having opened fourteen this year, compared to nine in 2018 – an indicator of its confidence in the local economy, as are its plans for twenty-two new projects in the near future.

Following its recent agreement with Careem/RTA, Canada-based PBSC Urban Solutions announced more details about its upcoming launch of an electric bike-share network, starting with its deployment of 3.5k E-FIT electric pedal-assist bikes and 350 smart stations throughout the emirate. This is the Canadian company’s first regional foray, following several successful launches including in Barcelona, Buenos Aires, Monaco and Santiago, involving 84k bikes and 6.8k stations.

Whilst placing Kuwait as the bottom of their table in the Expat City Ranking 2019 by InterNations, Dubai found itself, rather surprisingly, rated 34th of the 82 cities surveyed, behind other regional locations such as Abu Dhabi (15th), Manama (21st) and Muscat (28th). Taipei, Kuala Lumpur, Ho Chi Minh City and Singapore were the four leading destinations for expats to reside, whilst Rome, Milan and Lagos propped up the table with Kuwait. Dubai’s position was not helped by being placed 71st for its “work life”, with less than half polled said they were happy with their work-life balance (cf 60% globally), and 45% feeling insecure in their job (cf 59%).The only conclusion is that such surveys should be taken with a very large pinch of salt.

Another study ranks Dubai 7th when it comes to most visited global cities with 16.3 million visitors. As in the past the top positions were dominated by Asia, with Hong Kong, Bangkok, Macau and Singapore taking the top four positions.

Dubai-based AquaChemie Middle East is planning a US$ 40 million spend to build a chemical terminal facility at Jebel Ali Port to be used as a strategic petrochemical gateway hub. Mott MacDonald has been appointed for the design, engineering and project management work and the project is expected to take eighteen months. The company will be able to utilise the facilities at the port including multiple jetty pipelines, along with other crucial existing utility and building support infrastructure. It is expected that 100 new jobs will be created, with that number doubling by 2025.

DP World added to its ever-expanding portfolio by acquiring a 77% stake in Singapore-based Feedertech Group, via its subsidiary Unifeeder, for an undisclosed sum but less than 1% of the parent’s net value; the seller will retain the remaining 23% shareholding. The aim of the exercise is to build an end-to-end logistics capability, soon culminating with a dedicated and efficient India-Gulf region service. Feederetch, with annual revenues of over US$ 100 million and movement of 600k TEUs (20’ ft equivalent units), will help in this regard as it operates two business units – one that moves containers from smaller ports to larger container terminals and the other that operates short sea networks.

Just like DP World, dnata continues to expand its global reach – this time announcing that it had bought the remaining 50% share in its UK in-flight catering JV, Alpha LSG, from the LSG Group. The seven-year old company, employing 3.5k across fifteen airport catering units and two central production facilities, posted annual revenue of over US$ 375 million. This acquisition follows several others already this year, with dnata having opened new facilities in Boston, Houston, Los Angeles, San Francisco and Vancouver which have seen its expanding catering division now employing over 10k.

The Majid Al Futtaim Group is planning to invest over US$ 1.5 billion in Saudi Arabia and Egypt, (including a US$ 866 million mall in Cairo), over the next three years as it ramps up its expansion drive. Over the past four years, Dubai-owned MAF has spent over US$ 2.2 billion in Egypt whilst much of the Saudi investment will be in cinemas, as part of its five-year US$ 4.3 billion investment plan, where it already has one hundred cinema screens since the ban on commercial cinemas was lifted just two years ago. Later this month, the Group will open a Carrefour in Uganda and plans to open seven next year in Uzbekistan.

Over the past two months, it is reported that Emirates NBD has shed 500 jobs, about 4% of its 12k employment numbers, because of the need to cut costs in a slowing economic environment. Its retail and technology operations faced the brunt of these job losses. This comes despite Moody’s Investors Service indicating that the operating conditions for GCC banks remain favourable, being underpinned by solid economic growth, and by the banks’ solid liquidity and strong capital buffers; furthermore, the ratings agency expects the region’s average non-hydrocarbon GDP growth to push higher to 2.6% next year.

So far this year, total volumes, at 21.9 million and valued at over US$ 400 billion, on the Dubai Gold and Commodities Exchange (DGCX) are on track to easily beat last year’s figure of 22.3 million. For November, the best performing asset class was again the Indian rupee which showed a YTD 17.0% improvement, with the best performing being the exchange’s flagship Gold Futures product, with YTD volume growth 94%.

With collaboration between UAE and Chinese police, more than 28k fake luxury items, worth US$ 257 million and destined for sale in Dubai, have reportedly been seized. 75% of the goods were in Dubai where police raided ten locations and arrested twenty people. A further 37 were charged in China where police found 7k counterfeit luxury handbags in Guangdong Province. Along with the fake goods, it seems that certificates, invoices, receipts and gift wrapping were also being produced.

Sunday, 01 December, saw the UAE’s Federal Tax Authority include sweetened drinks, electronic smoking devices and tools, and the liquids used in these devices, added to the list of products now subject to excise tax. They now join products such as tobacco and tobacco products, energy drinks, and carbonated beverages which have had tax levied since October 2017. Khalid Ali Al Bustani, director general of the FTA, commented that “Implementing the new decision is in line with our wise leadership’s directives to further enhance the UAE’s competitiveness, build a healthy community by curbing consumption of harmful products, mitigate damages and costs incurred while combatting diseases that result from consuming these products, and supply the resources necessary to support the government’s expansion and upgrade of its services.”

The bourse opened on Wednesday 04 December, following the extended National Day holidays, and, having shed 22 points the previous fortnight, regained 16 points to 2695 by 05 December 2019. Emaar Properties lost the US$ 0.1 gained the previous week to close on  US$ 1.12, whilst Arabtec, down US$ 0.23, over the past six weeks, was US$ 0.03 higher at US$ 0.34. Thursday 05 December saw continuing dismal trading of 134 million shares, worth US$ 37 million, (compared to 147 million shares, at a value of US$ 59 million, on 28 November).

By Thursday, 05 December, Brent, having, shed US$ 0.68 (1.1%) the previous week, closed US$ 0.58 (1.0%) lower at US$ 63.97. Gold, having declined US$ 12 (0.9%) the previous fortnight, gained US$ 22 (1.8%), closing on Thursday 05 December at US$ 1,483. Brent ended November on US$ 63.32 – up US$ 3.09 (5.1%) from its November start of US$ 60.23 and 17.7% higher YTD by from its 01 January opening of US$ 53.80. The yellow metal was down on the month by US$ 35 (2.3%) – from US$ 1,515 – but up US$ 199 (15.5%) YTD from its year opening of US$ 1,281.

It seems likely that OPEC will agree to an extension of its current round of production cuts, of 1.2 million bpd, maybe for the whole of 2020, at their two-day meeting starting in Vienna today. The cartel, to be joined by non-member countries such as Russia, Oman and Bahrain, may even increase that figure with Iraq supporting further cuts of 400k barrels. As usual, the main issue will not be the scale of cuts but members’ future compliance; recently, Saudi Arabia has helped with this problem by actually cutting more than it has been required to do, so that the total cut number was achieved. It is reported that the likes of Nigeria, Ecuador, Malaysia and Brunei have had problems meeting their quota. If disagreements do arise and no agreement reached, oil prices could drop by as much as US$ 20 in the short-term.

The Aramco 1.5% regional IPO, hoping to raise US$ 25.6 billion, was oversubscribed by 234%, pointing to the fact that shares will be valued at the top end of earlier expectations. Of the 3 billion shares on offer, two thirds were allotted for institutions (with six billion subscribed for) and the remaining one billion were for the retail sector which was 1.5 times over the number of shares offered. Although the issue was favourably met by the market, it was nowhere near the interest of that for Saudi Arabia’s National Commercial Bank in 2014, where the retail portion was 23 times oversubscribed. It is thought that the share value will be in the region of US$ 8.00 to US$ 8.50, which would value the energy titan at up to US$ 1.7 trillion. Any dip in the oil price could see this value decline 25% in the short-term – another reason why the government is willing to support a continuation of oil production cuts into 2020.

Daimler is the latest big-name car maker to announce global job cuts  – at least 10k, coming days after Audi said it would lose 15.5% of its current 61k German workforce.; the main reason given was to raise more finance for the switch to electric cars, with the industry going through “the biggest transformation in its history”. Daimler expects to save over US$ 1.5 billion by introducing the personnel cuts and reducing the number of management positions worldwide by 10%.

In a move to boost profitability, Energy firm Npower, owned by E.On,  is to cut up to 4.5k UK jobs,  including three call centres, as it plans to merge computer systems to save money; this restructuring plan is set to cost Npower US$ 640 million and would result in small businesses and consumers being served by the same computer systems and customer service teams. The big six industry players have not been helped by the energy price cap and, at the other end of the scale, there have sixteen small energy companies going out of business since 2018. So that leaves those mid-sized companies picking up business because they tend to have newer computer systems and are better able to serve their customer base. Two years ago, they held 18% of the household energy market, rising to its current 30% level which could rise to 50% over the next four years.

London-listed Network International will focus on regional expansion rather than looking for new markets. The payments solutions company, with H1 revenue and profit both heading north, by 12.4% and 13.9%, reckons that the MENA region has huge untapped potential; it has recently renewed contracts with two of its largest customers, Emirates NBD and Emirates Islamic. Since its April IPO, NI has posted low double-digit growth from its two main business lines — merchant and issuer solutions – driven by selling additional services and expanding its customer base.

No country seems to be immune from what is happening in the global High Street and Australia is no exception. The latest retailer there to go into voluntary administration is popular women’s fashion brand, Bardot. The 23-year old women’s fashion brand has gone into voluntary administration, joining an ever-growing list of struggling Australian retailers.; it has 72 stores employing 800. Over the past year, the likes of Karen Miller, Napoleon Perdis Cosmetics, Shoes of Prey, Ed Harry and Roger David have entered into administration. The main factor behind its demise is that, despite double digit growth in online sales, it is operating in a highly competitive retail environment and having to compete in a “highly cluttered and increasingly discount-driven market”.  Fashion rivals include Country Road, H&M, Sportsgirl, Top Shop and Zara.

Relying on solar energy can present its own problems as can be seen In Perth where over a third of all houses has a solar installation; now this solar capacity is far greater than that of an ageing 854-megawatt coal-fired power station and this is where the problem begins. There is a fine balance between the two energy sources and there is a tipping point that could result in regular black-outs for this part of Western Australia, which is probably the most advanced in the world when it comes to alternate energy supplies. Because Perth is considered the most isolated city in the world, it cannot rely on “neighbours” to help if there is a supply shortage. Solar works best when, on mild, sunny days in spring or autumn, consumers are not using air conditioners, leading to an excess of solar power piling into the system and thus reducing the power needed from the grid. In short, high levels of solar output tend to go hand in hand with low levels of demand, so there is surplus capacity when not really needed. If that happens the obvious solution is to scale back or switch off the coal- and gas-fired power stations. However, most power stations are not equipped to be turned on and off at a whim. Now experts are trying to work out on how best to integrate solar and storage and, if no progress is made, authorities warn of a “real risk” of a system-wide blackout, especially when soaring levels of renewable energy periodically overwhelm the system.

Those who thought that the Australian economy would start turning north again got a rude awakening, as the Q3 GDP growth dipped from 0.6% to 0.4%, quarter on quarter, with a marked shift in household consumption, with an increasing number of households apparently saving more of their tax return rather than spending it; indeed, discretionary spending was at its weakest growth of only 0.1% since the GFC, whilst the household saving rate rose to 4.8%.  Most of the growth was attributable to government infrastructure spending and increased exports, contributing 0.2% to the GDP growth. Other indicators, that added more gloom, were dwelling investment being 1.7% lower, (its fourth consecutive decrease), and November new car sales 10.0% lower from a year earlier. The RBA’s latest 2.3% annual growth forecast for this year would mean that Q4 would have to have an 0.7% rise which seem highly unlikely.

There was no surprise to see India’s economy posting its weakest growth, at 4.5%, since 2013 and down from the 5.0% annualised growth recorded in the previous quarter; October saw core infrastructure industries’ output posting its biggest contraction since 2005, declining 5.8%. The three main drivers, behind Asia’s third largest economy recording worrying results, include export demand faltering, weaker consumer demand and business investment slowing. Many of the problems seem to be self-inflicted. with much of the blame laid at Prime Minister Narendra Modi’s door. He has aimed to steer the economy in a positive direction by slashing corporate tax rates, introducing more privatisation of public entitles and setting up a special real estate fund. India’s 14th prime minister, six months into his second five-year term, was overseeing quarterly growth rates of 9..4% as late as 2016 – now he has his work cut out to reverse the downward spiral, not helped by the fact that because of a boost in spending and lower tax revenue (because of the recent cuts), he will fail to hit his fiscal deficit target of 3.3% of GDP.

With sales of over US$ 7.4 billion, Black Friday saw the second biggest ever US online sales day, behind Cyber Monday, as an increasing number of shoppers are now using mobile devices rather than computers; Friday posted a record US$ 2.9 billion of sales via smartphone. The ongoing transition from the traditional computer, as a purchasing vehicle, encourages potential customers to shop three days earlier and not wait for the following Monday. It is estimated that 20% of the total holiday season spend will occur over the five days from Thanksgiving to Cyber Monday. with an increasing amount being diverted from in-store buying.

The Bank of England’s Canadian governor, Mark Carney, is leaving the post next month and has been appointed United Nations Special Envoy for Climate Action and Finance; he swaps his current annual US$ 1.3 million package for a nominal remuneration of US$ 1. The 55-year old was an apparent avid opponent of Brexit claiming, at the time of the 2016 referendum, that it was the most significant risk to the country’s financial stability, that had “pushed up uncertainty to levels not seen since the euro crisis”, only to apologise later for getting it wrong. Accused of scaremongering at the time, the former Goldman Sachs banker had to admit months later that “financial stability risks are greater on the Continent than they are in the UK”. In October, he had supported the new Brexit deal as “welcome” and a “net economic positive” – but this was rejected by the shambolic British parliament – the supposed home of democracy.

All is not well in the eurozone as manufacturing activity dipped for the tenth straight month, albeit the November figure of 46.9 was up on the previous month’s 45.9; any figure below 50 indicates contraction. One sign of optimism was a 3.4 jump in the future output index to 55.3, whilst new orders, employment, raw materials purchases and backlogs of work all declined – but at a reduced rate. Germany, the bloc’s biggest economy, saw its manufacturing sector also grow at a slower rate but should still post a miserly 0.2% growth in Q4, following a 0.1% improvement last quarter and an 0.2% contraction in Q2.

China’s factory activity in November surprised even the most optimistic of analysts, as it surged to a three-year high and comes on the back of upbeat government data released earlier in the week. The Caixin/Markit manufacturing rose 0.1, month on month, to 51.8, with the market expecting a lower 51.4 reading. Although lower, month on month, total new orders and factory production remained at buoyant levels in November; a month earlier, both readings had grown at their fastest rate in six years and almost three years respectively.  Furthermore, a recovery in the labour market saw companies adding workers for the first time in eight months. These figures indicate that the country’s 2019 growth will come in marginally above 6.0% – and although acceptable on the global stage, it will be the country’s worst return in thirty years.

There are problems – other than the ongoing US trade war – that face the world’s second largest, but soon to be first, economy, including deflation, with input costs rising as output charges head in the other direction. With slowing export levels, declining profit margins and weakening business confidence, the country needs a major economic boost. Even though the past year has seen major tax cuts, and much higher infrastructure spending, the government has fallen well short of its target and, to date, has gained little traction. In a bid to attract more public works, it has brought forward US$ 142.0 billion of the 2020 local government special bond quota and has cut some of its key lending rates to reduce corporate financing costs. The problem for the government is if it were to be more aggressive with tax cuts and public spending, it may well heighten financial risks and add to a mountain of debt – a risk that it is evidently not willing to take. On top of that, there are the fallouts from the US tariffs and increasing tensions in Hong Kong.

Argentina and Brazil have been warned that President Trump is considering restoration of up to 25% tariffs, which were initially imposed, and then waived, on steel and aluminium imports arguing that their respective weaker currencies, following, “a massive devaluation”, have made it harder for US food exports to compete. Brazil is the world’s tenth biggest steel exporter and accounts for 3.7% of the country’s exports. The US president, with next year’s elections in mind, has to protect the farming interests in his home base where the sector witnessed a 24% increase in bankruptcies over the past year.

Monday saw the country celebrating its 48th National Day, with HH Sheikh Mohammed bin Rashid Al Maktoum stating that the national economy had made “great strides” thanks to the UAE’s resilient and flexible legislation. The Dubai Ruler highlighted the government’s strategy to take advantage of the dawn of the Fourth Industrial Revolution, as the UAE, with the aid of AI, positions itself as a “model for interactive cities”. He reiterated that “We will continue to deliver the future for our generations to come. The occasion we are celebrating today is teeming with a myriad of lessons that we have learned from our founding fathers, who instilled in us an ambition and will to cope with the changes in the world and to utilise our full potential.” Sheikh Mohammed also mentioned that the word “impossible” is now void, after the achievements of the country and its progress in recent years. The Impossible Dream.

Posted in Uncategorized | Leave a comment