Walk On The Wild Side!

There will be another distinct building along the Dubai Canal, with the announcement by RKM Durar Properties of its new twin-tower development – J One. The curved towers (one 19-storey and the other 18), in a ‘U’ shape will house 347 apartments (ranging from studio – 4 B/R), six villas and nine retail outlets. Studio prices start at US$ 225k, with 2 B/R units selling at US$ 600k.

Nakheel has announced that it is mulling over five proposals for the construction of its US$ 245 million Dragon Tower. Located in Dragon City, the twin-tower project encompasses 1.5k residential units and is slated for completion by 2020.

Emaar is planning to build its eleventh tower – 17 Aykon  B Tower – that will house ten luxury residential units. Work will start next year with completion by H2 2020.

Piling work has started on Bloom Properties Jumeirah Village Circle development with completion expected byQ4 2020. The three-building project, Bloom Towers, is set to house 944 residential units, including 689 studio/1 B/R apartments.

Seven Tides, that already owns four hotels in Dubai and one in London, is set to add a fifth to its local portfolio. The property developer is to construct a three tower project in JLT that will include a 4-star hotel, along with two residential buildings. It is also developing one of its ten islands in The World archipelago – a 60-villa luxury resort.

In H1, the emirate’s real estate brokers collected US$ 223 million in commission, according to figures released by the Dubai Land Department. At this rate, the sector is expected to surpass its annual 2016 total of US$ 409 million.

Emirates has renewed its deal with the European Tour until 2021 to be the official airline and to become an official partner of The 2018 Ryder Cup. Under the agreement, the airline will continue to sponsor nine European Tour events, including the DP World Tour Championship,

It is reported that Al Futtaim is in discussions with Marks & Spencer for the purchase and franchising of the retail giant’s business in Macau and Hong Kong. The UK company has had a presence in the former British colony since 1988 and has 27 outlets there.

Flydubai posted a 9.9% increase in H1 revenue to US$ 681 million but saw losses climb 58.5% to US$ 39 million, compared to the same period in 2016. As is the case with most regional airlines, yields are under pressure and margins tightening. The airline has not been helped by on-going regional conflicts and having to cut fares on the back of higher regional capacity. Although fuel costs rose from 23.5% of total costs to 24.8%, it would seem that the airline could return to profitability come the H2 results in February next year.

Norwegian Air is set to start flights from Dubai to Stockholm in October, using the new Boeing 737-Max, with fares as little as US$ 270. The airline, the fastest growing in the world, is looking at other regional routes as it continues its ambitious international expansion. In Europe, it offers one way trips to New York from only US$ 65!

Overseas-AST has been awarded Enoc’s third and final contract for its US$ 1 billion Jebel Ali refinery expansion programme that will result in a 50% capacity increase to 210k bpd. The contract covers the construction of various interconnecting pipelines between the refinery’s processing units, the storage tanks and the berth facilities. The two other contracts were awarded earlier – to Technip Italy for the design and construction of the refinery’s new ancillary units and to Rotary Engineering Fujairah to construct twelve new storage tanks.

Emirates Glass has recently won a number of orders, totalling US$ 27 million, for projects not only locally but also in various countries including Kuwait, Saudi Arabia and other Asian countries. In May, the Dubai Investments’ subsidiary indicated that it would be setting up a new factory in the GCC.

Petrol prices are set to rise again in September with Special 95 retailing 6.7% higher at US$ 0.547, with diesel climbing 5.4% to US$ 0.545 per litre.

The new unified motor policy, with the resulting rate increases in vehicle insurance, and the compulsory introduction of medical insurance are the main drivers behind the H1 growth in the country’s insurance sector impressive H1 results. The total net profit for all 30 listed insurance companies jumped 26.8% to US$ 209 million, whilst gross premiums increased 16.2% to US$ 3.3 billion, compared to H1 2016.

July’s Emirates NBD UAE Purchasing Managers’ Index indicated that the country’s non-oil private sector is holding up well with marked improvements in both output and new work. Despite new export orders falling at a record rate, the index nudged 0.2 higher to 56.0 as inventories rose markedly on the back of future market demand strengthening.

With the Eid Al Hada holiday starting today, 31 August, the local hotels are bracing themselves for an influx of visitors and a four-day bonanza. With occupancy levels set to jump by up to 10%, most hotels will be full to capacity.

On Sunday, the long-awaited VAT legislation was enacted by The President, HH Sheikh Khalifa bin Zayed Al Nayahan. Federal Law No 8 of 2017 will see the introduction of the 5% tax as from 01 January 2018, to be imposed on the buying and selling of most supplies of goods and services at each stage of production and distribution. There will be exceptions that will see certain entities exempted from VAT and others being charged at zero rate.

The DFM opened Sunday (27 August) at 3624 and nudged 14 points (0.4%) higher to close on Wednesday, 30 August, at 3638. Volumes declined closing the shortened week (because of the Eid Al Adha holiday) on 116 million shares, valued at US$ 59 million, (cf 177 million shares for US$ 77 million, on Thursday, 24 August). Emaar Properties was flat at US$ 2.32, with Arabtec down US$ 0.02 to US$ 0.89. For the month of August, Emaar was 3.1% higher at US$ 2.32 (from US$ 2.25), whilst the revamped Arabtec was trading at US$ 0.89 (from US$ 0.94).

By Thursday, Brent Crude was US$ 0.73 (1.4%) higher on the week, closing at US$ 52.86, with gold up US$ 31 to US$ 1,323 by 31 August 2017. Brent started August trading at US$ 52.52 and gained a further US$ 0.34, (0.6%) to close the month at US$ 52.86. Meanwhile, gold raced ahead, gaining 4.3% in August to close at US$ 1,323.

Hurricane Harvey has had a devastating effect on Texas and the Gulf of Mexico with damage estimates to date topping US$ 100 billion, not to mention the human cost, including the loss of some 60 lives. The hurricane also hit the heart of the country’s energy sector resulting in 20% of US oil production cut, refineries closed and major pipelines shut down. The overall impact on the economy could see a 0.5% fall in Q3 GDP growth but this could be offset later when infrastructure repair spending takes hold. In the short-term it would seem that any chance of a rate hike will be put on hold.

Following its June fine of US$ 2.8 billion by the EU courts, Google has submitted proposals of plans to stop favouring its shopping service and to end its anti-competitive behaviour. The US tech conglomerate had been found guilty of abusing its dominance in the EU by giving undue prominence in searches of its own comparison shopping site at the expense of others.

Last year, Wells Fargo admitted that it had created 2.1 million “fake” accounts that had been opened without their customers’ knowledge. Following the revelation, the bank agreed to pay out over US$ 150 million, retrenched 5k lower-level staff and saw the early resignation of the chief executive, John Stumpf. This week it revealed that a further 1.4 million accounts had been created, again without permission, and to add to their woes, the bank is experiencing troubles with its online payment system.

The chief executive of Expedia, Dara Khosrowshahi, has been appointed the new CEO of Uber and has the unenviable task of mending the tarnished image of the car-riding service that has not made a profit over the past seven years. He also has to face disgruntled shareholders, who have witnessed the ongoing boardroom squabbles, and reengage staff whose morale has been sapped by several unsavoury incidents.

There has been a distinct fall in the number and value of mergers and acquisitions in the MENA region, according to a recent EY report. In H1 the number fell 23.2% to 192, allied with an 18.0% decline in value to US$ 31.9 billion. Of this total, the 61 outbound transactions accounted for 61.4% (US$ 19.6 billion) of the total H1 business with the oil & gas sector responsible for US$ 11.5 billion (36.0%). Q2 proved even more disappointing with the number of deals down 40.7% to just 80 whilst the value slumped 36.8% to US$ 12.7 billion, compared to the same period in 2016. The main drag factors include low energy prices and regional conflicts.

With the EPL summer transfer window closing today (31 August), the total spend by the league’s 20 teams is over US$ 1.8 billion (last year US$ 1.5 billion), with US$ 270 million changing hands on the last day, (US$ 200 million in 2016). Two of the bigger transfers were the US$ 97 million Manchester United paid Everton for Romelu Lukaku and the US$ 90 million Real Madrid received from Chelsea for Alvaro Morate. The figure could well have been higher if Liverpool had accepted Barcelona’s offer of US$ 147 million for Phillipe Couthino and Arsenal had sold Alexis Sanchez to Manchester City for US$ 71 million. (These figures pale into insignificance when one considers the US$ 258 million PSG paid for Barcelona’s Neymar and Barcelona’s US$ 175 million for Dortmund’s Ousmane Dembele – a player that, just twelve months ago, was sold to the German club  by Rennes for only US$ 17 million).

The long standing friendship between the Guptas and South African president Jacob Zuma seems to be waning. The family has been accused of using their cordial relations with the president to wield undue influence (and supposed looting of state funds). There is no doubt that the once-dominant family, who moved to South Africa in the 1990s, is becoming increasingly isolated as damming allegations mount and their access to banking facilities dry up. Both parties refute these claims of sweetheart deals.

In Q2, the Indian economy grew at an annual rate of 5.7% (down from 6.1% a year earlier) – its slowest pace in three years. There were marked falls in manufacturing at 1.2% (down from 10.7%) and financial services falling 3.0% to 6.4%. It is obvious that last year’s cash ban and July’s introduction of GST are having a drag effect on growth.

Not before time, the new French President, Emmanuel Macron, has begun the overhaul of the country’s rigid and often archaic labour laws. The main aim of his efforts is to make it easier for companies to hire and fire employees. Currently, the unemployment rate of 9.5% is more than double that of some of its European allies and M Macron wants to reduce this to 7.0% within five years. Bonne chance!

The fact that Theresa May has backed down on her manifesto promise to cut back on fat cats’ remuneration packages comes as no surprise. Her efforts to shake up corporate UK has run into several obstacles and not made any easier by her weakened position, following the recent election and the fact that several large corporations are considering moving head offices to mainland Europe following Brexit. There is no escaping the injustice of the massive variance between the average paid UK worker and some top executives.

Meanwhile the Prime Minister is in Japan on a trip that is focused on bilateral trade post-Brexit. Latest figures, with exports at US$ 13.5 billion higher than imports of US$ 12.4 billion, show that the UK has a trade surplus with the world’s fourth largest economy. Interestingly, Japanese interests own about 1.1k companies in the UK that employ 140k and last year the UK benefitted by inward investment of some US$ 34.8 billion. Naturally, Prime Minister Abe is keen to see the business environment remain basically the same come the UK’s divorce from Europe.

In direct contrast, as the US economy grows at its quickest rate in over two years, on the back of increases in business investment and consumer spending, the UK is heading in the opposite direction. Growth has crawled as consumers spend less with inflation markedly higher than wage growth.

Thirty years following the last time the US tax code was updated, President Trump is trying to coax Congress to act on tax reform – by simplifying regulations and lowering rates. Among the changes he would like to see are a reduction in the federal rate from 35% to 15% and amendments to how firms (probably the likes of Amazon, DHL, Google, Starbucks etc) earn profits overseas. Whether the powerful lobby groups get their way, at the expense of at least some reform, remains to be seen!

Meanwhile the impasse between the US and North Korea is worsening with Tuesday’s news that the rogue state had fired a ballistic missile over Japan. Markets were rattled, with stocks retreating, gold reaching nine-month highs and the greenback softening. This problem is not going away as tensions simmer, with neither side wanting to be the first to blink.

The crisis with North Korea has seen the euro touch US$ 1.20 – its highest level since January 2015. This week’s missile launch over Japan has the markets more jittery and the resulting volatility has seen investors flee the riskier investment assets.

Dubai’s latest tourist attraction has been announced – Sky Walk. Located at the twin tower, The Address Sky View, visitors will be able to navigate the 85 mt long corridor – on the outside – linking the two structures. At 220 mt high, safety harnesses will be mandatory for all who choose to Walk on the Wild Side!

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I’m Still Standing!

Damac launched The Trump Estates Park Residence in Dubai, with the 4-bedrooom villas going on sale on 05 August. This comes a week after the developer launched Golf Vita Residential Towers overlooking the Trump International golf course.

With a third  launch – following its US$ 572 million Polo Residence and US$ 117 million Polo Residences, both in Meydan City – Invest Group Overseas is planning to spend a further US$ 136 million on a new residential tower.

Nakheel confirmed that it had awarded four contracts, valued at US$ 117 million, in relation to its Deira Island waterfront project; they encompass a district cooling plant (US$ 26 million), a sewage treatment facility (US$ 62 million), a substation (US$ 25 million) and piling work (US$ 4 million). Having already awarded a US$ 1.1 billion Deira Mall construction contract to United Engineering Construction in April, the developer has already invested over US$ 2.0 billion in the project.

Troubled Arabtec has won a US$ 99 million contract to build a new mall in Dubai South which will serve a new community with 15k residential units. This will be the focal point of the Emaar South project – a JV between Emaar and Dubai World Trade Centre – which will also include a golf course, hotels, parks, schools and other facilities.

ALEC has won a US$ 163 million contract for Jumeirah Living Marina Gate. Located in Dubai Marina, the tower project, to be completed by Q4 2019, will include 389 private residences, 104 serviced apartments and 15 villas.

Dubai Investments Real Estate Company has secured a local US$ 300 million finance package for its US$ 818 million Mirdif Hills development. The Dubai Investment subsidiary has already started work on the only freehold location in Mirdif, with the mixed-use development being launched in clusters over a period of time.

According to the Dubai Land Department, there was a 16.8% increase in the value of H1 transactions, to US$ 36.0 billion, as the total number rose 25.9% to 35.6k, with Business Bay, Al Barsha South 4 and Jebel Ali the main three contributors; in terms of value, the leading locations were Palm Jumeirah, Business Bay, Burj Khalifa and Dubai Marina. DLD confirmed that in H1, 68 real estate projects were registered, with a total value of US$ 5.7 billion, and that 24 projects, which had initiated in previous years, had been completed. Over the past 18 months, the government agency announced that there had been 95k transactions valued at US$ 106.3 billion.

Core Savills expect that there will be further declines in rents covering Dubai’s freehold clusters but the situation will improve in 2018. However, there will be continued pressure on rents in secondary locations, such as Discovery Gardens and Jumeirah Village, (whilst Dubai Marina and JLT show better rental prospects). The agency also commented that these softer rents have yet to have a noticeable impact on demand but prices have remained sluggish.

The number of visitors to Dubai in H1 reached levels of 8.0 million – an impressive 10.6% increase compared to H1 2016. There was no change, with India, Saudi Arabia and the UK the top three source countries, as Western Europeans accounted for 21% of the total. There were notable increases in numbers from China and Russia – up 55% to 413k and 97% to 233k. The emirate’s hotel room portfolio has increased by 5% to 104k and the 676 establishments posted a 1% rise in occupancy levels to 79%.

Although the output index dipped in July (month on month), there were healthy gains in output and new orders (now at 61.0 and 62.0 respectively) according to the Emirates NBD Dubai Economy Tracker Index which was unchanged at 56.3. The best performing sectors were wholesale/retail (57.9), followed by travel/tourism (56.3) and construction (54.8). Firms still had difficulties passing on rising costs, with margins yet again being squeezed, with the end result of flat employment growth.

Last year, Jebel Ali Free Zone reported a 16.7% expansion in its non-oil foreign trade to 27.9 million tonnes, with a value of US$ 80.2 billion. The three main trading partners, accounting for 28.2% in value, were China (US$ 11.3 billion), Saudi Arabia (US$ 7.0 billion) and Vietnam (US$ 4.3 billion). Machinery, electronics and electrical goods accounted for 49% of the total trade followed by petrochemicals (16%) and food/FMCG (8.0%). On a regional basis, Asia Pacific was the leading location accounting for US$ 32.4 billion (40.4%) of total trade with the Middle East (US$ 27.2 billion) and Europe (US$ 9.9 billion).

H1 saw a 2.4% increase in the number of UAE mobile phone subscribers to 18.7 million. etisalat claimed 10.5 million (a 3.0% increase) and du was 1.2% higher at 8.2 million. It is estimated that mobile phone services account for 80% of the telecoms’ revenue. In H1, total sales reached US$ 8.6 billion with etisalat taking the lion’s share – US$ 6.9 billion (79.8%).

H1 short-term monetary deposits at the UAE Central Bank totalled US$ 119.8 billion, as the June value rose US$ 7.6 billion (6.8%) from the beginning of the year. Such deposits account for 30.1% of the total UAE bank deposits which now stand at US$ 397.8 billion.

Dubai Chamber of Commerce expects that consumer spending in the emirate will grow at an annual compound growth rate of 7.5% and that the total spend will top US$ 261 billion within five years. Accounting for about 45% of the country’s GDP, this is a major economic factor, with the UAE posting the highest consumer spend in the region at US$ 103k. The housing sector, at US$ 75.7 billion, accounts for about 41% of the total, followed by food and transport at US$ 24.8 billion and US$ 16.7 billion respectively.

Al Futtaim Capital has increased its stake in the local fit-out specialist Depa to 26.6%, having recently acquired a further 12.6% for US$ 29 million (77.8 million shares). This makes AFC the largest shareholder, followed by Arabtec, with a 24.0% stake. In June, the company announced the resolution of a long-standing US$ 245 million dispute which had a positive impact on its cash flow.

H1 results were a mixed bag. On the plus side, Emaar Properties posted a 14.4% rise in Q2 profits to US$ 395 million, as revenue increased by 1.9% to US$ 1.0 billion. Meanwhile, Emaar Malls, floated in 2014, posted a 5.0% hike in Q2 profits. It is expected that the developer will have a further IPO towards the end of the year – as it hives off 30% of its development business.

Damac Properties posted a US$ 436 million H1 profit on revenue of US$ 954 million (and booked sales of US$ 1.1 billion); in H1, the developer delivered 3.1k units, including 1.1k in Damac Hills. Its reported gross debt was US$ 1.5 billion, with cash balances totalling US$ 2.3 billion.

Even though its revenue declined by 6.0% to US$ 561 million, Arabtec posted a US$ 11 million Q2 profit (following a US$ 51 million loss in the same period last year). H1 comparative figures show a 2.0% hike in revenue to US$ 1.2 billion and net profit at US$ 16 million – compared to a deficit of US$ 63 million last year. Over H1, the contractor had reduced its share capital by US$ 1.3 billion (to wipe out previous losses) and raised US$ 409 million via a rights issue.

Although still in a loss position, Drake & Scull posted a smaller Q2 loss of US$ 50 million (compared to US$ 57 million a year earlier), including a one-off US$ 19 million impairment charge, as revenue fell 18.0% to US$ 180 million; its accumulated losses stand at US$ 515 million. To clean up its balance sheet, the company is proposing a 75% share write-down (to cancel the accumulated losses) along with a US$ 136 million cash injection by its largest shareholder, Tabarak Investments. It will also sell off non-core assets, including its One Palm investment, and attempt to recover some of its receivables, amounting to US$ 354 million.

Locally listed Gulf Navigation posted a 35.7% hike in H1 profits to US$ 5 million. The result sees the company’s balance sheet improving, now with positive net current assets of US$ 31 million, compared to a US$ 25 million deficit six months earlier. It is still aiming to add a further 20 vessels to its fleet, and boost profits by 300%, over the next four years.

With H1 revenue declining by 4.4% to US$ 113 million, Dubai Refreshments’ profit fell 27.4% to US$ 11 million. The company’s Q2 profit was off 11.9% to US$ 7 million compared to a year earlier. It will be interesting to see the effect of the increase in excise duty has when introduced in October.

Losses at DXB Entertainments grew in Q2 to US$ 78 million from US$ 11 million a year earlier, as both operating expenses (up to US$ 77 million from US$ 14 million) and marketing (up from US$ 2 million to US$ 10 million) moved higher. YTD, the park’s losses have widened from US$ 22 million (H1 – 2016) to US$ 157 million. Despite this, it has invited tenders for the construction of the Six Flags project, covering 3.5 million sq ft, that is expected to cost US$ 708 million.

Dubai Investments recorded a 15.1% decline in Q2 profits to US$ 49 million, with revenue falling 11.0% to US$ 159 million. YTD, profits have fallen by 6.5% to US$ 349 million. Over H1, the company posted a 35.5% hike in revenue to US$ 191 million on the back of strong real estate sector projects which account for 55% of turnover.

Amlak Finance recorded a Q2 US$ 1 million profit, compared to a US$ 10 million loss in the same period of 2016, as impairment costs were reduced and operating costs fell by 30.6%.

Amanat Holdings posted a 10.9% fall in Q1 profits to US$ 3 million, as revenue fell 3.0% to US$ 4 million. However, H1 profits moved higher by 12.8% to US$ 7 million.

Shuaa Capital posted a 147% hike in H1 profits to US$ 10 million – its highest half yearly profit return since the halcyon days of 2009 – as revenue jumped 44.8%. Q2 profits were 124% higher at US$ 3.3 million, as revenue dipped 31.9% to US$ 8.3 million. (This month, it has also acquired 11% of Kuwait-based Amwal International Investment).

Aramex, the Middle East’s largest courier company, saw Q2 revenue 3.6% higher at US$ 311 million but net profit declining 22.8% to US$ 26 million. Two major factors impacted the fall in profit – the Egyptian pound devaluation last  November and a one-off adjustment to its investment in Egypt’s AMC Logistics.

Another local company affected by the fact that the Egyptian currency has fallen by almost a half in the past seven months is MAF. The conglomerate indicated that, if forex rates had remained constant over the period, it would have seen revenue 12% higher and ebitda 9% to the good. It still posted healthy numbers with both revenue and ebitda 4% higher – at US$ 4.3 billion and US$ 545 million. Over the next five years, it expects to double the size of its 21 malls and invest US$ 8.2 billion in the country to open ten new City Centre malls, six hotels, 28 cinemas and 40 Carrefour supermarkets.

The DFM opened Sunday (30 July) at 3606 and nudged slightly higher, moving up 16 points (0.4%) to close the on 3624. Volumes improved closing on Thursday – 17 August – on 234 million shares, valued at US$ 79 million, (cf 98 million shares for US$ 36 million, on Thursday, 27 July). Emaar Properties was US$ 0.02 higher at US$ 2.32, with Arabtec dropping US$ 0.01 to US$ 0.89. For the month of July, Emaar was 6.1% higher at US$ 2.25 whilst the revamped Arabtec was trading at US$ 0.94 (from US$ 0.78).

By Thursday, Brent Crude was US$ 1.22 (2.4%) higher from its 27 July close at US$ 52.71, with gold climbing US$ 35 to US$ 1,295 by 17 August 2017. Brent started July trading at US$ 48.77 but recovered well to close on 31 July, 7.7% higher at US$ 52.52. Meanwhile, gold recorded a 2.2% gain in July to close at US$ 1,268.

Q2 results saw Exxon return a 97% jump in Q2 net income to US$ 3.35 billion which would have been greater if not for Imperial Oil’s loss, caused by problems in its Alberta oil sands operations. Meanwhile, Chevron posted a US$ 1.45 billion quarterly profit – a major improvement on its US$ 1.47 billion deficit over the same period in 2016.

British Airways’ owner, IAG (that also has Iberia and Aer Lingus in its portfolio) posted a 37.0% hike in H1 operating profits to US$ 1.1 billion and, after exceptional items, the profit was still 13.8% up on the same period in 2016. The group experienced a massive IT failure in May that resulted in payments of US$ 76 million to affected customers and it “lost” US$ 52 million because of the fall in sterling. Its CEO, Willie Walsh, expects the good news to continue for the rest of the year, especially as its new budget airline, Level, launched in March, has begun to show early signs of traction.

In July, Chinese house prices, on an annual basis, all increased but July data indicates that the worrying growth of the past few years may be ending, as monthly prices in Beijing fell 0.1%. In July, property investment eased 4.1%, down on the 7.9% posted a month earlier – an indicator that this overheated sector may be cooling; this may dampen even further in the coming months and could reach a 2% level within a year.

Authorities have been trying to clamp down on the shadow banking sector and this will have a knock-on effect on real estate. It is estimated that banks have already used up to 80% of their annual credit quota in the first six months of 2017 and, that being the case, lending growth is bound to soften, with the effect of increasing finance costs. At the end of last year, outstanding yuan loans had jumped 13.5% and this is expected to fall to 12.4% by the end of 2017.

In June, Japan’s industrial production jumped 1.6% – an improvement on the 3.6% contraction recorded a month earlier and on an annual basis was 4.9% higher. Industrial output is expected to continue its upward trend in the coming months. The main drivers in the upturn included chemicals, electrical machinery and transport equipment. Consequently, shipments headed north – 2.3% in June and 5.1%, year on year. Both export prices, up 2.5%, and producer prices – 2.6% higher – expanded on an annual basis. More interesting was the fact that the economy grew by 4.0% in Q2 on an annual basis and the 1.0% quarterly increase meant that the economy has grown over each of the past six quarters.

With a marked improvement in its economy and consumer confidence rising to decade-high of 111.2 in July, the only negative factor in the eurozone continues to be its sluggish inflation level. The June rate of 1.3% is expected to remain at around this level for the rest of the year and is still some way off the ECB’s 2.0% target.  Its President, Mario Draghi, will be reluctant to curtail the bank’s unprecedented stimulus package of the past three years, which currently stands at a monthly level of US$ 70.6 billion, until wage levels shift northwards and catch up with inflation.

A Visa study indicated that July UK consumer spending had declined by 0.2%, month on month and 0.8% over the past twelve months; this resulted in falls over the past three months – its longest period of decline in over four years. The main driver behind this result is the fact that wage levels have not kept up with inflation so that the general public have less to spend and what they buy is becoming more expensive. July witnessed major falls in spending on transport (down 6.1%) and clothing – 5.2% off in the month.

The IMF External Sector Report showed concern that some of the major economies – especially those of the US and the UK – were in continuing external current account deficits, whereas the likes of China and Germany headed in the opposite direction with on-going surpluses. Interestingly, the study concluded that the euro’s valuation was in line with the bloc’s fundamentals but that it was probably too low by some 15%, in relation to Germany’s high current account surplus.

Despite almost dire IMF warnings of its economy heading south, including the fact that it considered the greenback overvalued by as much as 20%, the US continues in positive territory posting a 2.6% Q2 annualised growth hike, driven by increased business expenditure and a boost in consumer spending (which accounts for 67% of the country’s economy). Labour costs in Q2 were 0.5% down from 0.8% in the previous quarter. However, the country’s national debt now tops US$ 20 trillion (of which China and Japan both chip in US$ 1.1 trillion) and most agree that this figure should be reined in by a combination of measures, including improving productivity, boosting savings and passing structural reforms that so far have eluded Donald Trump.

There is no doubt that the last eight months have seen a steep learning curve for the US President but he has defied many who thought he would not even last that long. With the appointment of General John Kelly as Chief of Staff – and the demise of many insiders, including the likes of Bannon (Chief Strategist), Coney (FBI Director), Priebus (Chief Strategist) and Scaramucci (Communications Director) – some sort of normality and stability should return to the White House. After 200 days in office, the Donald Trump can tweet I’m Still Standing!

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Handbags And Gladrags

Propertyfinder reports that Jumeirah Lake Towers is now Dubai’s top performing location for apartment rental values, as it was the only area to show an H1 price increase (1.0%). Other more salubrious sectors, such as Palm Jumeirah, Downtown, Jumeirah Beach Residence and Old Town, witnessed falls of 5.8%, 4.7%, 1.0% and 0.8% respectively. Downtown also recorded the highest decline in apartment prices of 6.7% but still remains the most expensive (at US$ 594 per sq ft), followed by Old Town (US$ 570), Palm Jumeirah (US$ 512) and DIFC (US$ 505).

According to Core Savills, there was a 6% increase in Q2 sales transactions, although the value remained flat, indicating an increasing penchant for more affordable housing. Q2 deliveries of 3.5k units brought the total for the year to 6.6k, with estimates that 2017 could see a maximum of 17.5k new residences. As with most other recent reports, there is a feeling that the market has now definitely bottomed out.

Belhasa Engineering and Contracting Company has been awarded a US$ 163 million contract by Deyaar Development to build 1.2k units in the Afnan and Dania districts in Dubai Production City. 70% of the properties have already been sold off plan and completion is slated for H2 2019.

Following the success of its first two projects, Ellington Properties has launched Belgravia III in Jumeirah Village Triangle. This latest release comprises 224 studio, 1 and 2 bedroom apartments.

Two of Al Ghurair’s hotels – the Rayhaan and Arjaan – are being rebranded under the Swissôtel & Swissôtel Living umbrella, managed by AccorHotels. Both properties – totalling 620 rooms – are located at the Al Ghurair Centre complex, which has just undergone a US$ 490 million expansion.

Tecom has been appointed to develop and operate the US$ 1.4 billion Emirates Towers Business Park, in collaboration with Dubai International Financial Centre, launched by HH Sheikh Mohammed bin Rashid Al Maktoum earlier in July.  Located adjacent to Emirates Tower, the development will include a wide range of high-end office space, three 5-star hotels, along with retail and F&B outlets.

BNC Network estimates that the number of active residential and commercial building projects in the country is 24.4% higher at 7.5k, with a total value of US$ 228 billion. Last month, it was estimated that the value of completed projects totalled US$ 3.0 billion, compared to only US$ 559 million in June 2016. 14.1% of the projects (1.1k) involve buildings of 15 storeys or more, with a value of US$ 100 million (44.0% of the total value).

One of the region’s iconic and oldest fashion retailers is shutting down, just four weeks after opening a flagship store in BurJuman. After thirty years, Sana is to close all 35 of its regional outlets, with the loss of 1k jobs.

A recent On The Go Tours study has noted that, with tourist numbers of 15.3 million compared to a residency of 2.7 million (today – 2.82 million), visitors outnumber the “locals” by 459%. Only two other destinations – Paris at 704% (with 18 million tourists and a local population of 2.2 million) and Kuala Lumpur’s 595% (12 million visitors and a population of 1.7 million) – bettered the emirate in this unusual survey.

Despite the holy month of Ramadan falling in June, Dubai International returned a 3.9% hike in passenger numbers to 6.1 million, bringing the YTD total increased by 6.3% to 43.0 million. The average number of passengers per flight grew 4.8% to 218.

Last month, Dubai-based Premier Composite Technologies was in the headlines for building the “largest ever freestanding carbon-fibre roof” on Apple’s Cupertino headquarters in California. It is also famous for the world’s largest clock – in Saudi Arabia – and now it has received further accolades for building the “largest sliding roof on a mosque in the world”, in Makkah; the 38 mt octagonal-shaped roof was built in Dubai and is now in the Holy City, ready for installation.

Local tech company, Eniverse Technologies, has tied up with San Francisco-based Skycart to bring drone home delivery to Dubai. Operations are expected to start next year and will allow packages of up to 5kg to be sent. Initial operations will start in selected locations, including The Meadows, Jumeirah and Umm Suqeim.

DP World reported a 10.7% increase in Q2 gross container volumes, as it has handled 34.0 million TEUs (twenty foot equivalent units) so far this year. Locally, Jebel Ali has operated 7.7 million TEUs (YTD) – this equates to a 4.3% year on year growth. The expansion figures reflect the improvement in global trade.

Government-owned Dubai Aerospace confirmed that it had obtained financing of US$ 2.3 billion, partly to pay for its recent acquisition of the Irish aircraft leasing company, AWAS; the loan was split in three tranches – US$ 500 million – 4% – due in 2020, US$ 800 million – 4.5% – 2022 and US$ 1 billion – 5% – 2024. With the addition of 263 aircraft from the sale, DA’s fleet will grow to 394 units, valued at US$ 14 billion.

Dubai’s trade recovery can be gleaned from the fact that, notwithstanding challenging global economic conditions, Dubai Chamber of Commerce and Industry reported a 6.1% H1 increase in members’ exports and reexports to US$ 40.0 billion. Saudi Arabia was the emirate’s largest partner accounting for 35.4% of trade, equating to US$ 14.1 billion. It also reported that its membership now totals 210k, following a 10.9%, year on year, hike in numbers.

Although its revenue figures have not been disclosed, Nakheel reported a 21.6% fall in Q2 profit to US$ 316 million, year on year, and an H1 10.5% decline to US$ 719 million. The government developer handed over 870 units in the first six months of the year.

Etisalat posted satisfying UAE results with a 3.0% increase in H1 revenue to US$ 4.2 billion, resulting in a 7.0% hike in profit to US$ 1.1 billion. Group aggregate figures saw revenues at US$ 6.9 billion and profit (before Federal Royalty) of US$ 2.4 billion. In relation to its subscriber base, the UAE’s 12.4 million users account for just 8.9% of its aggregate total of 139 million.

Du posted a 0.3% increase in Q2 profit to US$ 122 million helped by a 1.5% rise in its customer base to 8.2 million users, with revenue 6.2% higher at US$ 837 million. The telco is planning to distribute US$ 161 million as an interim dividend, equal to US$ 0.0354 per share.

The DFM posted a 4.0% rise in H1 profit to US$ 40 million, compared to the same period in 2016, on revenue of US$ 65 million – 5.7% higher; however, Q2 profit dived 19.0%. Trading value for the first six months saw a 1.0% increase to US$ 19.1 billion.

The DFM opened Sunday at 3574 and continued its three-week positive trajectory moving 32 points (0.9%) to close the week on 3606. Volumes nosedived, closing on Thursday, trading 98 million shares, valued at just US$ 36 million, (cf 341 million shares for US$ 124 million, the previous Thursday). Emaar Properties was US$ 0.01 higher at US$ 2.22, with Arabtec failing to gain traction dropping US$ 0.03 to US$ 0.94.

By Thursday, Brent Crude was US$ 3.43 to the good (up 7.1%) at US$ 51.49, with gold climbing US$ 15 to US$ 1,260 by 27 July 2017. Brent should continue to trade in positive territory, helped by the political crisis in Venezuela, lower US stocks and a more stringent approach to maintain agreed quota cuts.

BMW has confirmed that production of its new electric version of the Mini will start in 2019 at their UK Cowley plant.

GM’s Q2 profits declined 14.3% to US$ 2.4 billion driven by lower sales (down 1.0% to US$ 37 billion) and extra restructuring expenses, including a US$ 100 million write-off relating to its Venezuelan facility which was taken over by the Maduro government in April. During the quarter, the car giant sold its European operations to the French PSA Group.

Although Q2 sales were 4.0% higher at US$ 245.5 billion, Nissan posted a 1.1% slip in profits to US$ 1.2 billion, resulting from slowing growth, an increase in raw material prices and forex fluctuations. The car maker expects an improvement in H2.

Despite adding a further US$ 1.3 billion provision (US$ 920 million for PPI claims and US$ 380 million to mortgage holders), Lloyds still posted a 4.0% increase in H1 profits to US$ 3.2 billion. This the 17th time that the bank, which received government bailout funds of US$ 26 million, has had to increase provisions for its previous nefarious activities. Of the big five banks, Lloyds has set aside 60% (US$ 23.4 billion) of their total provisions (US$ 39.0 billion) just for PPI claims. Meanwhile, Barclays returned a Q2 US$ 1.8 billion loss, not helped by that bank having to provide a further US$ 910 million in relation to PPI customer compensation.

Airbus has posted a 17.0% fall in H1 profits to US$ 1.8 billion, as it took an impairment provision against cost overruns on the troubled military A400M and ongoing engine issues with Pratt & Whitney for its A320neo. Q2 figures were even more disappointing as profits fell 27.2%, year on year, to US$ 1.0 billion. Despite all these problems, CEO Tom Enders, still expects to deliver 700 commercial aircraft in 2017 – as long as engine manufacturers meet their commitments. Part of this commitment is delivery of 200 A320neos – to date only 50 have left the factory gates.

It is also reported that it will cut the annual production number of its A380 superjumbo from 28 last year and 15 this year to just eight in 2019. At even current levels, it is highly improbable that the company can return a profit let alone recover some of its US$ 30 billion development costs.

Air France has become the latest international carrier to launch a lower cost airline to compete with the likes of easyJet, Norwegian and Ryan Air (and even Emirates). Joon will start flying medium-haul later in the year, with longer flights scheduled for H2 2018. The French carrier also has a low-cost subsidiary – Transavia. Initially the new company, which is targeting millenials, will use Air France deck crew (who will be on the same pay) but will outsource cabin crew and ground staff.

easyJet has announced that it is expanding its cabin crew by 17.4%, as it takes on a further 1.2k to bring its total to 8.1k; at the same time, it is recruiting a further 450 pilots. The airline has 270 aircraft operating 880 routes in 31 countries and has just applied for a new air operator’s certificate in Austria so it will have no hassles flying in the EU after Brexit is finalised.

Late last year, mining giant Rio Tinto contacted authorities over certain 2011 consultancy payments made in relation to their Simandou iron ore project in the Republic of Guinea. It had earlier sold the mine for about US$ 1.3 billion to Chinese firm Chinalco. This week, the UK’s Serious Fraud Squad has opened an investigation into the matter.

Samsung goes from strength, posting a record 72.7% jump in profits to US$ 12.7 billion, as its DRAM and NAND chip sales tripled to US$ 7.2 billion. The only blot on the landscape for Asia’s third largest company, by market cap, and the global leader in memory chips, TVs and smartphones, is the fact that its Vice Chairman, Jay Y Lee, is in detention on trial for a corruption scandal.

Facebook posted an impressive 71% hike in Q2 profit to US$ 3.9 billion, as revenue rose 45% to US$ 9.3 billion, mostly emanating from advertising; expenses were also up 33% to US$ 4.9 billion. Users topped 2 billion – up 17% year on year.

PayPal returned an 18.3% rise in Q2 revenue to US$ 3.1 billion, as it saw accounts up 80% (6.5 million) compared to a year earlier. As a result, its shares jumped 2.9% to US$ 60.50, with the company upping its annual forecast revenue to US$ 12.8 billion and adjusted earnings per share to top US$ 1.80.

The recent US$ 2.7 billion fine by the EC dented Alphabet’s Q2 profit which, at US$ 3.5 billion, was down by around 40% because of this indiscretion; revenue was 21% higher at US$ 26 billion. Over 87% of the revenue (US$ 22.7 billion) is generated from advertising – including its own sites Gmail and YouTube – and was up 18.0%, year on year.

Following concerns from interested parties to Amazon’s recent US$ 13.7 billion bid for Whole Foods, US regulators will take more time to consider their anti-trust concerns and whether consumer choice would be negatively impacted – or whether they could benefit from lower prices and better delivery.

After two years of haggling, the IMF has agreed to a new conditional bailout that will see heavily indebted Greece receive a further US$ 1.8 billion in bailout funds. The agency’s agreement to this disbursement is contingent on further debt relief from its main creditor – the eurozone – since it estimated that even if the Hellenic nation carried out all of its implementation conditions to the letter, it would be unable to restore debt sustainability; furthermore its debt by 2030 would still be in excess of 150% of GDP! For mainly political reasons, the eurozone countries, especially Germany, with an upcoming September election, has balked at a further “haircut” of Greece’s debt.

There was a marginal 0.3% hike in eurozone government debt to GDP in Q1 to 89.5%, whilst the larger EU28 bloc saw a 0.5% rise to 84.1%. Not surprisingly, Greece topped the table with the highest ratio of debt at 176.2% followed by Italy’s 134.7%, Spain’s 99.4%, France’s 96.0% and Germany’s 68.3%.  (The UK’s debt of US$ 2.280 trillion is equivalent to 87.4%).

The UK’s June budget deficit showed a US$ 2.6 billion year on year jump to US$ 9.0 billion driven by debt increase of repaying index-linked bonds, as interest payments expanded by 32.9% to US$ 6.4 billion, driven by higher inflation. YTD, public sector net borrowing jumped 9.1% to US$ 29.6 billion of which 75% of the total related to the cost of the “day-to-day” activities and the US$ 7.4 billion balance being expended on infrastructure. With government spending increasing by 8.3% but its revenue lagging at 4.6%, it is doubtful that Philip Hammond will meet his annual borrowing target of US$ 75.4 billion.

Apart from Brexit negotiations, the Chancellor has also other problems to face, as the country becomes more belligerent after seven years of austerity.  During that time, the deficit has fallen from 10% of GDP to 2.4% but the casualties have been the public sector workers (apart from MPs themselves), the National Health and the education system. All need much wanted money pumping in and it took this year’s disastrous election result to drive the point home. The problem is that if money is spent on these, there is no chance of a future balancing of books and the distinct possibility of public debt climbing from 87% to triple digits.

The country’s Q2 growth was up by 0.3% (compared to 0.2% the previous quarter) underpinned by output falls in both the construction and manufacturing sectors. One area that fared well, motion picture activities, recorded an 8% increase, thanks to the success of films such as the latest Pirates of the Caribbean and Wonder Woman. Slower growth is expected in the coming quarters, driven by real wages not keeping up with inflation and the Brexit factor. Little wonder then why the IMF cut its 2017 growth forecast from 2.0% to 1.7%, blaming “weaker-than-expected activity”, but maintained next year’s figure of 1.5%.

Although the world body also pegged back US growth forecasts from 2.3% to 2.1%, it maintained a brighter picture of the global economy which saw 2017 and 2018 forecasts unchanged at 3.5% and 3.6%.

To the surprise of nobody, the Fed kept US interest rates on hold, noting that it would be “monitoring inflation developments closely” but would soon be reducing its massive bond holdings. Like many other nations, the world’s biggest economy is worrying economists with a conundrum – the US has seen uninterrupted employment growth since the GFC and a historically low 4.4% unemployment rate but, unlike what is studied in Economics 101, wage growth and inflation have remained stubbornly flat. That being the case, it is difficult to see any rate hike this side of Thanksgiving Day. However, expect an early reduction in its portfolio of investment holdings.

Whether this is the straw that will break the camel’s back remains to be seen but there is no doubt that the country’s stock markets are ready for a major correction. Over the past twelve months, all three major bourses have shown massive appreciation – the Nasdaq by 23.8% to 6382, the Dow Jones 18.3% to 18432 and the S&P 500 by 14.4% to 2482. Investors have already filled their boots and those that stay in at these record levels will surely live to regret their greed (and ignorance).

Famous handbag and shoe maker, Jimmy Choo Plc, has been bought by Michael Kirsten Holdings for US$ 1.2 billion. It is the New York high-end fashion company’s first acquisition since it went public in 2011. Recently it has had its trials and tribulations as it lost its exclusive gloss by expanding its market to outlet malls and discount stores. Now with Jimmy Choo on board and a move away from department stores, the firm may regain some of its former brand image.

The world’s largest luxury goods company saw its H1 profits grow at the fastest rate in seven years. LVMH posted a 23.0% increase in H1 profits (from recurring operations) to US$ 4.23 billion, with revenue above market expectations (Q1 13% to the good and Q2 12% higher). The company is confident that the recovery in the luxury goods sector has been global-wide, having recorded double digit turnover growth in key markets such as China, Europe and Japan. This year, it has seen its share value increase by over 20% to become France’s most valuable company, surpassing Total. A sure sign that it is a good time to invest in Handbags And Gladrags!

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Fool If You Think It’s Over!

A Reidin-GCP report indicated that freehold land prices in the emirate had appreciated by 13% in H1, with this figure to rise even more with Expo 2020 on the horizon. Furthermore, 2016 construction permits are 38% higher than the same period a year earlier; however, there has been a reported 23% slump in Q2 residential transactions. The study also estimated that since 2003, land transactional returns had outperformed Dubai residential units by almost 50%.

Dubai Properties has launched the latest phase of its Remraam community, with prices starting at US$ 122k; located in Dubailand, the 1/2 bedroom apartments will be ready by H2 2019. The master development, launched in 2014, comprises 34 clusters, 64 buildings and 4k apartments with the usual add-ons – community centre, retail, dining and leisure activities.

Jumeirah Golf Estates is set to release land encompassing 700 hectares adjacent to the developer’s current 16 mini residential communities and two championship golf courses – Earth and Fire. The land, which is favourably located within 15 minutes of Expo 2020 site and Dubai World Central, will be made available to all interested developers.

Although there have been adjustments to the design, The Royal Atlantis Resort & Residences is still set to open in 2019. Kerzner International Resorts appointed Six Construct (in a JV with Ssangyong Engineering & Construction) to construct the US$ 1.4 billion, 46-storey hotel that will house 800 guest rooms and 239 serviced apartments.

Reef Mall in Deira will be the location for Dubai’s third “outlet” mall. Brands4u, operated by Concept Brands Group and covering an area of 20k sq mt; it will be a stand-alone, multi-brand outlet and will start with an initial investment of only US$ 4 million for purchasing merchandise.

In a joint statement, Emirates and flydubai confirmed an expansive codeshare agreement that will see both airlines working closer, including “integrated network collaboration with coordinated scheduling”. For both airlines, which will still be separately managed, it is a win-win situation, as the international carrier gets access to a strong regional network, whilst flydubai will have “seamless connectivity to Emirates’ worldwide destinations”. Currently, the combined fleet totals 317 aircraft with 259 wide-body units and 58 new-generation Boeing 737s, serving 216 destinations. There are signs that Emirates could be in the market to add the Boeing 787 Dreamliner (or less likely the Airbus A350) to its fleet and could add up to 100 planes to its current portfolio.

DP World’s subsidiary, P&O Ports, has been awarded a three-year contract to manage the Port de Sete container terminal in south of France, as from October. The agreement, which can be converted to a long-term concession, involves a container yard with a draft up to 14.5mt, a 457 mt quay and an adjacent two hectares of land. Initially, it will act as a feeder service for the eastern Mediterranean but later will see more international activity. The Dubai ports operator has also signed an agreement to advise the Indonesian government on the development of a new port in North Sumatra.

DEWA has awarded a US$ 13 million contract to Dutco Balfour Beatty for the first phase of its new Al Jadaf HQ, known as Al Sheraa. To be ready by the end of 2019, the building is slated to become the tallest, largest, and smartest government net Zero Energy Building in the world; generating 5.8k MWh every year, it will have 16.5k sq mt of photovoltaic solar panels on the roof, producing over 3.5k kW.

The first ever Dubai International Hospitality Week in September will see six events occurring at the same time; they are GulfHost, The Hotel Show, The Leisure Show, The Speciality Food Festival, SEAFEX Middle East, and yummex ME which in the past would have been stand-alone exhibitions. It is expected that the event will see 2k of the top global brands on show, with more than 50k visitors expected.

Beauty products continue to big business in Dubai with the emirate’s trade (imports, exports and reexports) totalling US$ 5.6 billion in 2016; in Q1, reexports have already reached US$ 1.4 billion. The country ranked seventh in the world, with a figure of US$ 239 in per capita spend.

A director of Dubai-based UHY Saxena and Matrix Holdings, Shivani Saxena, has been arrested by Indian authorities in relation to the US$ 560 million AgustaWestland VVIP chopper scam. Following allegations of kickbacks, the Indian government cancelled the contract three years ago and registered a case under PLMA (Prevention of Laundering Money Act), naming former Indian Air Force chief S.P. Tyagi and twenty others.

UK authorities have thanked Dubai Police for their efforts in tracking down tax fugitive Geoffrey Johnson in the emirate; he had been caught travelling on a false passport from Kenya in September 2014, he had been sentenced in absentia to 24 years in jail for his involvement in a complex tax theft involving US$ 285 million and laundering money valued at over US$ 2 billion.

The BRL sector at Dubai Economy reported that in H1, it issued a record number of licences, including 71.8k renewals and 10.5 new applications, of which 73.0% were trade related and 23.4% professional permits.

The IMF’s latest country report has forecast a 1.3% growth this year, on the back of subdued economic performance, slowing global trade and lower oil prices, but a marked improvement to 3.4% in 2018. Inflation eased to 1.8% last year from the previous year’s 4.1%, driven by weaker rents and falling domestic demand. UAE’s overall deficit climbed 0.9% to 4.3% in 2016 whilst the current account surplus was down to 2.4% of GDP (4.7% in 2015).

The Dubai Statistics Centre reported that the emirate’s June inflation level rose 0.86%, month on month, and 2.4%, year on year. The main driver behind last month’s increase was a 7.14% hike in transportation prices whilst food/beverages were only 1.5% higher. On an annual basis, the main factors were increases in miscellaneous goods (11.2%), transportation (5.5%) and education (5.2%).

The country’s bank deposits in June fell 1.7% to US$ 433 billion, month on month, as total assets reduced by 1.2% to US$ 723 billion.

With VAT on the horizon next year, the Ministry of Finance is considering the imposition of corporate taxation; the good news for many is that discussions are still in the very early stages. If implemented, the tax will probably add far more than the US$ 3 billion VAT receipts expected in its first year of operation 2018.

Jumeirah Group, owned by Dubai Holding, will manage its first ever property in Saudi Arabia, the five-star Jabal Omar Jumeirah Makkah Hotel. With views of Masjid al Haram (the Grand Mosque), the four-tower structure will have over 1k rooms and almost 100 villas.

Deyaar Development posted a massive 135% hike in H1 revenue to US$ 86 million, compared to the same period last year, as profit dipped 39.8% to US$ 18 million. However H2 may offer some solace when both the company’s The Atria and Mont Rose developments nearing finalisation.

Government-owned Investment Corporation of Dubai, that includes the likes of Emirates, Emirates Global Aluminium, Emirates NBD, flydubai and Jumeirah in its asset portfolio, posted an unsurprising 13.9% decline in 2016 profits to US$ 4.9 billion, with revenue 0.5% lower at US$ 48.0 billion. The fall was largely attributable to “increased competitive pressure on yields”, especially in the transportation sector which accounts for 55% of ICD’s total turnover but only 18.2% of the group’s US$ 210 billion asset portfolio.

The emirate’s largest lender, Emirates NBD, reported a 5.8% rise in Q2 profit to US$ 550 million. Provisions dipped 0.8% to US$ 169 million as overheads declined 7.3% to US$ 311 million, with impairment charges little changed at US$ 169 million. H1 profit came in 4.9% lower at US$ 101 million.

Its sister bank, Emirates Islamic posted a 282% jump in H1 profits to US$ 105 million although total income dipped 3.0% to US$ 324 million. Dubai Islamic Bank filed a 14.9% jump in H1 revenue to US$ 1.32 billion, as profit rose 7.0% to US$ 583 million, with operating expenses flat at US$ 316 million.

Driven by a 22.3% fall in impairment provisions to US$ 172 million, Mashreq reported a 3.0% increase in H1 profit to US$ 300 million; Q2 profits rose at the slower rate of 2.1% to US$ 152 million. Hampered by a 14.7% fall in commission to US$ 208 million and non-interest income by 9.9%, total operating income fell 5.5% to US$ 817 million.

The DFM opened Sunday at 3537 and, having risen 4.0% the previous week, continued its upward trajectory, moving 37 points (1.0%) to close the week on 3574. Volumes improved, closing on Thursday, trading 341 million shares, valued at US$ 124 million, (cf 279 million shares for US$ 69 million, the previous Thursday). Emaar Properties was US$ 0.05 higher to US$ 2.21, with Arabtec gaining a further US$ 0.01 to US$ 0.97.

By Thursday, Brent Crude was US$ 0.36 lower at US$ 48.06, with gold pushing up US$ 28 to US$ 1,245 by 20 July 2017.

The International Energy Agency expects that oil demand will be higher than expected this year, at 98 million bpd, with increased consumption from Germany, India and the USA; next year, the IEA expects demand to increase by 1.7% to 99.4 million bpd. For oil prices to stabilise or even to move higher, this demand increase will have to be met by strict adherence to quota cuts, so that a reduction in supply will help rebalance the market.

The Footsie is facing a quandary as it hopes to become the lead overseas bourse for the upcoming partial 5% flotation of Saudi  Aramco; overseas exchanges such as New York, Tokyo and Singapore all would like a piece of action that could value the Saudi petroleum giant in excess of US$ 1 trillion! However, to qualify for a London FTSE-100 listing, a company needs a “premium listing” which entails that 25% of shares should be publically tradable in the open market. This week, the UK’s Financial Conduct Authority has launched a consultation to discuss bending the rules to accommodate this lucrative IPO.

Despite a mega influx of funds into its low cost index-tracking iShares, with Q2 turnover 462% higher at US$ 74 billion, BlackRock Inc’s quarterly 6% hike in revenue to US$ 3 billion still disappointed analysts. Although the world’s biggest asset manager, with assets of US$ 5.7 trillion, the US company has faced a barrage of reduced performance fees and other price cuts so as to keep pace with its rivals, as investors move to less expensive products.

Reckitt Benckiser has sold its food business, French’s Food, to McCormick & Company for US$ 4.2 billion; proceeds will be used to  part finance RB’s US$ 16.6 billion recent acquisition of baby formula firm Mead Johnson.

Netflix saw its shares jump 10% on news that it had posted a Q2 profit increase of 60.0% to US$ 66 million, on a 32% hike in revenue to US$ 2.8 billion; it also reported a 5.3% jump in subscribers to 104 million.

The Chinese attraction to acquire overseas trophy assets continues with a consortium, led by Nesta Investment Holdings, offering US$ 11.6 billion for Global Logistic Properties Ltd; the Singaporean company provides warehouse space for the likes of Amazon, DHL, FedEx and Walmart. Following last month’s US$ 13.8 billion buyout of Blackstone Group LP’s European logistics business by China Investment Corporation, this will be the second biggest logistics deal YTD. GLP is also one of the world’s largest real estate fund managers (overseeing assets in excess of US$ 27 billion) and is well positioned to take advantage of the increase in on-line trading.

The price of an average Chinese home has risen 10.2% year on year and 0.7% in the month of June, as the property bubble grows bigger, despite official attempts to deflate the soaring market. If June has anything to go by, this has been a futile attempt as sales more than doubled to 21.4%, month on month, with H1 new construction starts up by 10.6%. Household loans – mostly mortgages – rose 21.0% to US$ 109 billion, month on month.

China surprised the market as it posted a 6.9% annual growth rate in Q2 and this despite the government tightening up on real estate transactions and trying to reduce worryingly high debt levels which would normally have the effect of slowing growth. Other data gives the impression that the economy is on the rebound after growing at its weakest pace since 1990 last year. There were marked improvements in both industrial output (up 7.6% in June) and retail spending – up 11% -along with imports/exports posting higher than expected growth figures of 17.2% and 11.3% respectively.

The Australian dollar has hit two-year highs, as the Central Bank noted that it was upbeat about the local economy and happy with recent improvements in the labour market. On Tuesday, it maintained its cash rate of 1.5% – a level that has remained unchanged since August 2016. However, as the global economy slowly improves, there may be moves for a rate increase by the end of the year.

The impetus of the new French President Emmanuel Macron seems to have had a positive impact on the French economy, as the IMF upgrades its 2017 growth forecast to 1.5%. The world body has been impressed by his “ambitious” reform program which includes a tax overhaul and US$ 5.1 billion of public spending cuts; this should result in a reduction in the country’s debt and budget deficit.

Partly because of an improvement in sterling (and a fall in oil prices), UK’s June inflation rate fell 0.3%, month on month, to 2.6% – its first decline since October 2016. As the rate had escalated since Brexit – and topped the Bank of England’s target of 2.0% – it seemed inevitable the end result would be an increase in interest rates. Although inflation is still outrunning wage growth, the chance of any early rise has been extinguished; however, in the longer term, a marked increase in energy prices and a dip in sterling could see circumstances change.

In August 2015, when its shares were at their lowest point in a year, the government sold a 5.4% stake in RBS which raised US$ 2.7 billion for the taxpayer; nearly two years later, the National Audit Office reported a US$ 2.5 billion loss (as opposed to an expected US$ 1.3 billion deficit at the time). Despite share values falling 8% in the three days before the sale and the fact that details had been leaked prior to the official announcement, the public spending watchdog has the nerve to announce that taxpayers received “value for money” from the sale. The government, which still owns over 70% of a bank that has lost over US$ 75 billion since its 2009 bail-out, now has shares valued at US$ 3.30, which it bought at US$ 6.53! Not many enterprises, perhaps with the exception of the banking sector, would get away with such nonsensical business – and, with more of the same to come, Fool If You Think It’s Over!

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Stuck In A Moment You Can’t Get Out Of

Asteco’s latest report points to declines of 7.0%, on an annual basis, and 2.0%, in Q2, in apartment prices. Rentals nosedived in certain locations, most notably in Business Bay, Downtown, Deira and International City, where falls have ranged between 11%-14% over the past year. Declines in areas such as The Greens and JBR were not as severe, coming in at around 4%. Asteco expects that 17.7k units will be handed over this year – more than double the 2016 figure of 8.8k. (Official figures indicate that in Q1, only 2.6k units, valued at US$ 2.4 billion, were completed).

Chestertons has estimated that Q2 property transactions have declined by 23% and that rents for both villas and apartments have fallen by 2.0%, following a promising start to 2017 in Q1. The firm expects a pick-up in the latter part of the year, with both sales prices and rentals nudging higher.

Meanwhile, in line with most other reports, Bayut.com has concluded that over the past twelve months average property sales prices have declined by 7.0%, whilst there was a larger dip in rentals of 10.4%. However, there was some variance in declines over H1 such as a typical 3-bed villa falling by 7.6%, a 1-bed apartment by 6.1% and a studio by only 0.1%.

Having already awarded a US$ 204 million infrastructure project, Emaar Properties this week invited tenders for the construction of its Dubai Creek Harbour development.

To meet the expanding demands of a growing population, and to enhance the emirate’s position as a regional food hub, Dubai Holding has initiated the US$ 1.5 billion Dubai Food Park in Dubai Wholesale City. The park will act as a central wholesale market and will cover all aspects of the food sector, including infrastructure, logistical and ancillary services; it will also host employee accommodation and will see international and local food companies set up their headquarters. There are estimates that the local food industry, which makes up 11% of the country’s GDP, will grow by 70% to US$ 6.3 billion by 2030.

Monday saw the start of the DSS (Dubai Summer Surprises) 72-hour hour sale that will see up to 75% discounts from over 70 brands, including Calvin Klein, Tommy Hilfiger and Victoria’s Secret. The sale will be a weekly event, until its close on 12 August, and participating venues include Dubai Festival City, Dubai Mall, Mall of the Emirates, Mercato and Oasis Centre.

Following a feasibility study by the US-based Parsons Overseas Limited, it appears that Dubai Municipality’s massive US$ 8.2 billion deep drainage project will go ahead in two stages between 2019-2025. Tenders for the work on two tunnels – Bur Dubai, 62 km long and Deira, 16 km – will be released early next year and on completion, more than 100 pump stations, that currently transfers sewage to treatment plants, will become superfluous. The use of micro tunnel technology eliminates the need for digging up roads.

The RTA has advised that the US$ 110 million Airport Street upgrade, already 45% complete, should be opened by H1 next year. This will improve traffic flow around Dubai International where by 2029, it is expected that by 2020, over 92 million passengers will be using the facility.

A recent Campbell-Hill Aviation Group report has estimated that Emirates supports more than 104k jobs in the USA and contributes US$ 21.3 billion to its economy. On top of that, the much maligned airline (in the US) introduced 580k new travellers to the country in 2015 and generated US$ 3.2 billion of new trade-based revenue. Indirect spending by inbound Emirates passengers added US$ 4.6 billion of new revenues for local businesses and created some 30k jobs. Emirates has 135 flights a week (both passenger and cargo) to the US and serves 14 different locations, often utilising some of its 163 Boeing 777 aircraft (made in the USA).

In a bid to cut costs further, it is reported that Emirates has retrenched a number of senior staff including cabin crew, IT and administration. This follows a hiring freeze last summer but the airline continues to fill “critical roles”. Despite this, the Emirates Group reported an 11.0% hike in employee numbers to 105k in their March annual report.

Gulf Navigation is looking at ambitious expansion plans over the next four years, as it doubles its fleet to 20 vessels, and forecasting a 300% leap in revenue. CEO Khamis Bu Amin is also targeting growth opportunities by opening new facilities in Abu Dhabi and Fujairah, as well as fostering joint ventures. To help with financing, the company is set to issue a US$ 250 million sukuk in Q3.

June’s Emirates NBD Dubai Economy Tracker Index showed a marked 1.5 jump to 56.5 from a month earlier – an indicator that the Dubai economy has expanded at a faster rate in H1 than a year earlier. Although showing the slowest improvement, travel/tourism still posted a credible 54.0, whilst wholesale/retail (at 58.0) and construction (57.4) were the standout performers; however, employment in both sectors continues to disappoint, with the former flat at 50.5 and the latter down from 51.1 to 48.4.

Dubai Customs reported that the emirate’s Q1 non-oil trade was up 2.7% to US$ 89.1 billion – and this despite the headwinds felt by the global economy and trade. The IMF’s latest forecast is for Dubai’s economy to expand 4.0% this year, following a 2.7% increase in 2016, aided by Expo 2020 infrastructure spending.

The delayed US$ 272 million Dubai Safari Park project will open in “the next few months”, according to Dubai Municipality. The project, located in Al Warqaa-5, covers an area of 119 hectares and will be home to 1k animal species, 35% of which are rare and endangered.

Etisalat has terminated its management and technical support agreements with Nigerian firm, EMTS, and will phase out the use of its branding in that country. Etisalat Nigeria, the fourth largest operator in Africa, is 40% owned by Etisalat with the other two shareholders being Abu Dhabi’s Mubadala (45%) and the Nigerian-owned MyaCynth (15%). With both UAE parties pulling out of the company’s board and management, the Nigerian government had to step in to save the telecom from collapse, after US$ 1.2 billion loan discussions had failed.

The next company to list on the Dubai bourse could be Kuwait’s Zima Holding after shareholders approved raising its equity from KWD 10 million to KWD 35 million, as well as listing its shares on foreign stock markets.

The first results of the H1 reporting season saw the Commercial Bank of Dubai report a 31.6% net profit decline to US$ 91 million, as it posted higher impairment provisions figure – up 84.1% to US$ 145 million. However, its operating income jumped 9.9% to US$ 357 million, driven by hikes in non-interest (16.3% to US$ 117 million) and net interest (7.1% to US$ 241 million), whilst operating expenses climbed 7.0% to US$ 122 million.

The DFM opened Sunday at 3401 and jumped 4.0% (136 points) to close the week on 3537. Volumes improved, closing on Thursday, trading 279 million shares, valued at US$ 69 million, (cf 88 million shares for US$ 33 million, the previous Thursday). Emaar Properties was US$ 0.04 higher to US$ 2.16, with Arabtec gaining a further US$ 0.08 to US$ 0.96.

By Thursday, Brent Crude was US$ 0.31 higher at US$ 48.42, with gold lower by US$ 6 to US$ 1,217 by 13 July 2017. Oil prices had plummeted almost 4% on Wednesday on the back of reports that OPEC’s exports had risen and this, after prices had risen over 10% in the previous eight sessions, from a ten-month closing low.

Libya and Nigeria were the only two members of OPEC that were exempted from the quota cuts introduced last November. In the light of the current downward trend in prices, they could well be requested to cap future output to help in the organisation’s attempt to rebalance the market. The two countries have been invited to join a St Petersburg meeting, later in the month, of OPEC and non-OPEC producers. Some argue that the 1.8 million bpd cutback has been offset by these two countries’ increased output, along with a marked rise in US shale production.

It seems that Adnoc (Abu Dhabi National Oil Co) is considering to list its 300 service stations and a network of convenience stores (valued at up to US$ 14 billion) in an IPO that could raise US$ 3 billion on the Abu Dhabi bourse. The conglomerate is looking at selling minority stakes in its service units, as well as seeking international entities to expand operations and boost revenue opportunities.

It is reported that Cosco is to acquire OOIL for US$ 6.3 billion which would then make the Chinese shipping conglomerate the third biggest in the world, with over 400 vessels. The Tung Chee-hwa family owns 69% and will benefit from the fact that the bid values the Hong Kong shipper at 38% higher than its last Friday’s market price.

As it moves away from its traditional way of doing business – selling office software licensing – to cloud computing, Microsoft is to slash its sales force by “thousands” from its current payroll of 121.5k. It is estimated that the tech firm’s annual revenue, from commercial cloud services, will top US$ 15 billion despite strong competition from rivals, Amazon and Google.

A French court has ruled that Google does not have to pay over US$ 1.4 billion in back taxes.  It  found that the internet search firm did not have to pay French tax on profits of its Irish subsidiary, even though 700 of its work force operate out of France. Last year, the company paid just US$ 10 million to the French exchequer.

RBS, still 72% owned by the UK taxpayer following a 2008 US$ 58 billion bailout, has agreed  to a US$ 4.8 billion settlement with the US Federal Housing Finance Authority, in connection with its dubious role in the risky mortgage products scandal. The troubled bank is expected to be hit with a similar penalty levied by the US Department of Justice and had already provided for some US$ 8.6 billion to cover these two cases.

Philip Morris failed in its bid to sue the Australian government over its introduction of the world-first plain-packaging laws, introduced in 2012. The tobacco giant was also ordered to pay the government’s legal fees and could be left with a US$ 40 million bill.

With the sale of its two Hartlepool steel pipe mills to Liberty House Group, Tata Steel Ltd has completed an overhaul of its UK operations that will see the Indian conglomerate concentrate on its Port Talbot strip products supply chain; it has also invested US$ 1.3 million in its 20-inch pipe mill there. The company had already divested itself of  mills in Teeside, a Scunthorpe steelworks, some Scottish operations and part of its specialty steel business.

Having failed to find new investors, UK fashion chain, Store Twenty One, has been forced into liquidation, with the closure of 122 stores and the loss of over 900 jobs. The closure of the chain, owned by the Indian manufacturing group Alok, is the latest of several over the past three years, the most notable being BHS.  Competition from the likes of H&M, Primark, e-commerce and supermarket chains has made trading more difficult and eroded margins to the point of no return.

In order to repay some US$ 3 billion of fines and penalties, Alpargatas is selling its world-famous Havaianas brand for a reported US$ 1.1 billion. The company, which makes 200 million pairs of flip-flops every year, is owned by J&F which has been involved in a series of corruption scandals that seems to be bedevilling Brazil.

Former Brazilian president from 2003-2011, Luiz Inacio Lula da Silva, has been sentenced to nine years following corruption charges. He was found guilty of receiving an apartment for assisting in winning contracts with Petrobras, the state oil company.

With an estimated 1 in 30 of the old £1 coin a fake, it is no wonder that in March, the Bank of England  introduced a new 12-sided coin that will make it harder for counterfeiters to copy. The old round currency will cease to be legal tender on 15 October 2017. To date, the Royal Mint in Wales has issued over one billion coins since the £1 note was withdrawn in 1988.

It is a pity that UK wage growth does not keep up with inflation, with the result that although the country’s unemployment level at 4.5% (1.49 million) is at its lowest level since 1975 and its employment rate of 74.9% (32.0 million) its lowest in 46 years, real terms falls in total earnings continue to disappoint. Inflation at 2.9% has hit 4-year highs, whilst wage growth lags somewhat behind at 1.8%, resulting in adjusted for inflation total pay falling 0.7%. Consequently, it is unlikely to see the Bank of England raising interest rates in the short term.

Following a US$ 17.1 billion current account surplus the previous month, Japan posted a weaker US$ 14.5 billion figure in May, whilst its trade balance fell from a US$ 4.8 billion surplus to a US$ 1.0 billion deficit. May imports were 15.8% higher, year on year, at US$ 510 trillion with exports up by 12.9% at US$ 500 trillion; the country’s adjusted trade balance fell 9.8% to US$ 12.3 trillion. However, export prices were 5.6% lower on the year, but less than half of the 11.9% decline in import prices. The Bank of Japan reported that overall bank lending, at US$ 4.5 trillion, was 3.3% up on the previous year.

German exports reached US$ 123.1 billion dollars in May – up 1.4% year on year and hitting a new record high; the country’s biggest export market was the EU, with trade 11.8% higher. Over the same period, imports increased by 1.2% to US$ 100.0 billion.

The Federal Reserve reported “slight to moderate” June growth in the US economy, as any noticeable increase in inflation, currently at 1.4%, is some way off despite record employment figures. Over the recent past, wage growth has been sluggish with June data showing an increase of less than 0.2% in average hourly earnings. It is expected that the third increase in Fed rates this year may occur but not before September.

Carillion is one of UK’s top two contractors to the Highways Agency and Network Rail and employs 40% of its total 50k workforce in the UK. To say it is facing tough times is an understatement; the news, that 2017 financials would be “below management’s previous expectations”, spooked the markets on Monday with its shares tanking 38%, followed by a further 30% on Tuesday. By Thursday, its share value had fallen 72% in just four days, having opened the week on US$ 2.48 and closing on US$ 0.71. The company has a pension deficit of US$ 1.8 billion and has set aside US$ 1.1 billion in provisions of which 55.6% relates to overseas markets, mainly in Canada and the Middle East; it has also suspended its dividend payout. The company, with a 48k workforce, has already intimated that it will be leaving Egypt, Qatar and Saudi Arabia and it is inevitable that parts of the group will be sold or closed. It seems that Carillion is Stuck In A Moment You Can’t Get Out Of!

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Harder, Better, Faster

In line with recent similar industry reports, JLL has also concluded that the Dubai property downturn has probably bottomed out and, that after a subdued Q2 (with little change in rentals and sales prices), positivity could return in H2. The first five months saw an addition of 5.4k residential units to Dubai’s property portfolio, 20% more than the 4.5k in 2016. Although there is a further 25k scheduled for delivery in 2017, it is expected that the actual number handed over will be shy of 13k.

JLL expect that a total of 78k units could be delivered over the next three years or 26k a year. Over the past three years, delivery totals have been in the region of 45k; so going forward, the figure does look on the high side. The Dubai Population Clock shows a 9.14% annual population increase to 2.805 million as at 07 July. If Dubai has a current portfolio of say 500k, a 3.5% increase in supply would see 554k units by July 2020. It would seem logical that, even excluding foreign buyers, domestic demand would indicate a shortfall in supply and an upward movement in sales prices.

The big news of the week was the launch by HH Sheikh Mohammed bin Rashid Al Maktoum of the US$ 1.4 billion Emirates Towers Business Park, to be developed by Dubai Holding in conjunction with DIFC. The development will include three hotels, several grade A office buildings, retail / recreational space and an arena. The four-year development will also have a three-level basement parking and be connected by pedestrian bridges with the DIFC.

Atlantis The Palm is spending US$ 100 million over the next three years to refurbish its 1.5k rooms and suites, so as to be completed in time for Expo 2020. UAE-based WA International was awarded the interior design contract. So far this year, the property has seen occupancy rates at 93% – 11% higher than this time last year.

Dubai Investments announced that it would start work on its US$ 272 million, 70-storey residential tower on SZR by the end of the year. Construction tenders will soon be released for the site adjacent to Al Habtoor City, with all government approvals in place, including the requisite 20% RERA project value deposit.  The company expects to raise US$ 110 million financing per local banks.

Sobha is set to launch its Hartland Estates Forest Villas, located near to the Dubai Water Canal and surrounded by 2.4 million sq ft of greenery. The project is part of the massive US$ 4 billion, 8 million sq ft, Sobha Hartland development in Mohammed bin Rashid Al Maktoum City.

Cityland has managed to raise 44% (US$ 143 million) 7-year bank finance for the development of Cityland Mall on SZR. The developer, already involved in projects such as Dubai Miracle Garden and Dubai Butterfly Garden, is considering building an adjacent hotel. Construction of the 1.8 million sq ft, single storey circular building has already started and should be completed towards the end of next year.

Al Naboodah Co LLC has awarded a US$ 31 million MEP contract to an Arabtec subsidiary, Emirates Falcon Electromechanical Co for work on part of the Dubai Creek Harbour Development, this being a JV between Emaar Properties and Dubai Holding. Work on the two 37-storey residential towers is slated to be finished by Q1 2019. The company has also won a US$ 96 million contract from Abu Dhabi National Media Council to build the UAE Pavilion at Expo 2020. The troubled developer’s successful week was capped off by one of its offshoots, Target Engineering Construction Company, being awarded four projects amounting to US$ 79 million.

Dubai-based Premier Composite Technologies was responsible for manufacturing the world’s ‘largest freestanding carbon-fibre roof’. This was installed on Apple’s new Californian HQ and is a striking focal point of the US$ 5 billion structure.

Tesla will open its Dubai showroom next Wednesday (12 July). Potential customers will be able to order their Models S and X, already in the country, with starting prices at US$ 75k and US$ 94k respectively. The RTA has already an order for 200 vehicles, with Tesla due to invest US$ millions in the UAE’s electric car infrastructure.

Dubai Health Authority expects a 46% increase in the number of hospitals to 38 over the next three years, adding a further 750 beds. The emirate has over 3k private medical health facilities and boasts over 36k licensed physicians.

A recent HSBC report has placed the country the second most expensive global location (after Hong Kong) when it comes to education. It estimates the total cost from primary to the end of secondary schooling is US$ 99k. (That seems very low when some schools are charging in excess of US$ 27k a year, just for tuition and not including any add-ons).

DP World is considering resumption of major developments on its US$ 1.6 billion Jebel Ali fourth terminal, which had been put on hold last year because of a softening container shipping market. The port’s capacity by year-end will have reached 19.3 million TEUs (twenty-foot equivalent units), as T3 is completed. It is expected that phase 1 of T4 would result in capacity being boosted by a further 3.1 million TEUs.

There was good news for Emirates (along with Etihad and Qatar) as the US laptop ban was lifted. The Dubai carrier had introduced more rigorous security measures to meet the requirements of the US Department of Homeland Security.

May witnessed a 1.9%, year on year, increase in passenger numbers at Dubai International to 6.9 million, bringing the 5-month YTD total to 37.0 million – up 6.7% on 2016 returns. Freight volumes continued upwards by 2.6% to 233k tonnes and YTD by 3.0% to 1.1 million tonnes.

ME air cargo volumes have shown a 3.0% monthly increase and a 10.2% jump over the past year (as capacity rose by only 1.7%). The main driver behind these impressive returns was a 19.0% hike in European traffic – slightly offset by a 1.0% decline in Asian volumes. On a global scale, air freight demand was 12.7% higher than in May 2016 and was more than three times higher than the five-year 3.8% average.

The Central Bank announced a 19.6% jump in forex reserves to US$ 86.3 billion over the first five months of the year, with May posting a 3.1% hike. Total assets grew 4.8% to US$ 104.1 billion over the same period.

June’s Emirates NBD PMI rose 1.5, month on month, to 55.8 – an indicator that the country’s non-oil private sector continues its upward momentum. The main drivers, jumps in both new orders and output, saw companies’ inventory levels rise as input prices rebounded; however, fierce local competition resulted in a fall in selling prices, adding pressure to margins. Both export orders and job creation fell for the first time since late 2016.

Both Jumeirah and Emirates NBD lost key personnel this week. The hotel company announced that its Group CEO, Stefan Leser, had left for “personal reasons”, after only 15 months in the position, and that current COO Marc Dardenne would be acting in the position until a replacement was found. Meanwhile the bank has accepted the resignation of its Chief Investment Officer, Gary Dugan, who took over the position some 18 months ago.

Following their March agreement, Amazon has finally completed the acquisition of local on-line retailer, Souq.com; this will allow users to log on to the Dubai site, using their Amazon details.

Already a major player in the African market, having deployed over US$ 3.2 billion, Abraaj Group has reported that it is to acquire the coffee and casual dining chain, Java House Group, for an undisclosed fee. The East African-based company has three main brands – Java House, Planet Yogurt and 360 Degrees Artisan Pizza – along with commercial coffee roasteries. In the past five years, since the private equity firm, Emerging Capital Partners, took a majority stake in the company, it has expanded from 13 Nairobi shops to 60 stores in Kenya, Rwanda and Uganda.

The DFM opened Sunday at 3392 and nudged 9 points higher at 3401 by the end of the week. Volumes were wafer thin, closing on Thursday at just 88 million shares, valued at US$ 33 million, (cf 116 million shares for US$ 50 million, the previous Thursday). Emaar Properties was flat at US$ 2.12, with Arabtec recovering  US$ 0.10 up to US$ 0.88.

By Thursday, Brent Crude was US$ 0.69 higher at US$ 48.11, with gold falling US$ 23 to US$ 1,223 by 06 July 2017. Oil prices had plummeted almost 4% on Wednesday on the back of reports that OPEC’s exports had risen and this, after prices had risen over 10% in the previous eight sessions, from a ten-month closing low.

The EC has given the green light for the PSA Group to take over the Opel and Vauxhall brands and, at the same time, has given Peugeot, which has not made a profit since 1999, unconditional approval to purchase GM’s European division; the French carmaker, which employs 33.5k, has made sixteen years of consecutive losses, racking up a total US$ 15 billion deficit.

Samsung has announced a massive US$ 18 billion, 4-year investment plan, as it aims to expand its two local memory chip plants in Pyeongtaek and Hwaseong, with a third in Xian, China; the move could create 440k new jobs in South Korea. The company has had its fair share of recent problems, including last year’s mass recall of its Galaxy Note 7 smartphones and increased competition from Apple and several Chinese rivals.

Two UK tech companies had different market fortunes this week. Shares in Worldpay, a global leader in on-line and contactless payments, skyrocketed 28% on news that both JP Morgan and Vantiv could be interested in some form of acquisition. By Wednesday, the UK’s biggest payments processor had agreed a deal with Vantiv that valued Worldpay at US$ 10 billion.

Having been hit earlier in the year by “challenging conditions in the UK retail sector”, this week saw Game Digital’s shares plunge 36%, following supply issues affecting Nintendo consoles which are impacting on sales, despite strong demand; in other areas, such as its core Xbox and PlayStation markets, the retailer reported a “continued softness”. In H1, the company posted falls of 18% in sales and profits dropping 27% to US$ 21 million – H2 is expected to see even worse returns, as UK inflation rises and wage growth remains flat.

The May government has suffered another blow with news that the much vaunted Hinkley Point C nuclear power plant is already facing a 15-month delay and an 8.3% (US$ 1.9 billion) cost over-run to US$ 23.2 billion. The project, two thirds owned by the French group, EDF, with the balance by China’s General Nuclear Power Group, has indicated the possibility of a further US$ 1 billion cost blow-out. The National Audit Office has also warned that payments set to be added to consumer bills have quintupled to US$ 38.7 billion.

Coal has come to the rescue of the Australian economy in May as exports were 62% higher than in April – this resulted in the country’s trade surplus jumping from US$ 68 million to US$ 1.88 billion, more than double market expectations. May exports increased by 9.0%, or US$ 2.0 billion, as imports only rose by 1.0% to US$ 166 million.

Latest figures from Australia indicate that the property bubble there continues to be pumped up, except in Perth where prices have fallen 1.8% over the past twelve months. Meanwhile Sydney and Melbourne steam ahead with double-digit growth of 12.6% and 14.1%, with Adelaide and Brisbane recording more modest gains of 2.5% and 3.4%.

On Wednesday, the Pakistani rupee fell 3.1% to 108.1 to the US$ – its lowest level in over three years and its biggest fall in nine years. It seems that the move may have been perpetrated by the government – and if so the devaluation is a means to alleviate pressure on the ailing economy, ahead of elections in 2018. Only last year, the IMF estimated that the rupee was 20% overvalued, with a detrimental effect on the country’s exports; over the past twelve months, its trade gap had jumped nearly 60% to US$ 3.5 billion, with its current account gap almost trebling from US$ 3.2 billion to US$ 8.9 billion.

Japan is still trying to get to grips with the double whammy of years of deflation and slow growth. May saw the fifth straight month of inflation nudging higher but this is still some way off the central bank’s 2% target. However, an unexpected increase in the jobless rate (now at 3.1%) and a fall in industrial production are indicators that the Abe government may well have to reduce its 2017 growth forecast. Wages and inflation will only head north if and when the economy picks up and the labour market tightens.

There is no doubt that on-going political impasse has begun to affect Qatar’s economy as Moody’s downgrades its outlook from stable to negative. Prior to the onset of the current dispute, the nation had already been impacted by the low energy prices; now that diplomatic and economic ties have been severed, there is bound to be mounting pressure on its finances. The local bourse has been spooked and has lost 10% in value.

In June, China’s service sector PMI fell 1.2 to 51.6 from a month earlier, with the Caixin composite output index falling four notches to 51.1. This weakness in services activity ensured that expansion was at its slowest pace in a year and reflects a worrying downward trend in economic activity. A slight improvement in manufacturing activity did little to raise hopes of a quick turnaround in fortunes.

Although China has the third largest global bond market, trading at US$ 9 trillion, only 2% of that total is foreign owned. Now the government is making a concerted effort to rectify this by introducing The Bond Connect programme which will allow bonds to be bought by banks, insurers and fund managers via Hong Kong. HSBC, with a US$ 300 million bond purchase, was the first foreign entity to use the new programme.

Whilst the Chinese President Xi Jinping was in Germany, he signed a US$ 23 billion order for 140 Airbus aircraft – 100 A320s and 40 A350s. The planes – 50% of which will be assembled in China – will initially be bought by the state-owned China Aviation Supplies Holding Company, prior to allocation to various local airlines.

June Eurozone factory output grew at its fastest rate in six years, with the manufacturing Purchasing Managers’ Index rising to 57.4. This equates to an annual growth of some 5.0% which bodes well for upcoming Q2 GDP growth figures. Unsurprisingly, Germany fared well with its headline IHS Markit/BME PMI reading of 59.6 and even France came in at 54.8. Other indicators point to the bloc’s economy gaining momentum. With the HIS Markit PMI returning a June reading of 56.3 and the Q2 average of 56.6 was the best quarterly result in over six years. Such figures indicate a Q2 growth figure of 0.7%, with healthy figures from across the board from most member states.

With a Q1 0.5% fall, The Office for National Statistics reported that UK productivity had declined to its lowest level since 2007. The figures reiterate the point that the country’s productivity is abysmal and is well below the likes of France, Germany and the USA. Although the country’s economy has grown in the intervening period since the GFC, this has been brought about by the actual number of employees rising and that number working longer hours. Interestingly, the report indicates that the output in the capital’s financial industry is seven times higher than in the lowest productivity regional industries. The question is what would happen to the UK’s economy if its total labour force worked Harder, Better, Faster?

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Where Did We Go Wrong?

Propertyfinder has signalled that the three year realty slump may have come to an end, following an 18 month fall in median sales prices of 20% (and rental falls of 21%), up to April 2017. The consultancy estimates that with a further 28k new units being released this year, prices could remain flat into 2018. (That figure of 28k does seem to be on the high side).

Following the success of its first Dubai Healthcare City project – Azizi Aaliyah – Azizi Development has launched the US$ 163 million Farhad Azizi. With 634 studio,1/2 bedroom units, as well as a community centre, schools and pool area – covering an area of 728k sq ft – completion is within two years. It also announced a double launch Azizi Berton and Azizi Pearl in Al Furjan bringing its total developments to date to 19; the former will house 245 apartments and the latter 260, with completion date slated for Q2 2019.

The developer has started on its US$ 460 million Meydan 1 project, encompassing 18 mid-rise towers having 2.3k apartments; this will be followed by phase 2, with 17 towers and 2.2k residential units.

Dubai Properties has launched phase 3 of its 8.2 million sq ft Serena community, Casa Viva, in Dubailand; this follows the success of phases 1 and 2 – Bella Casa and Casa Dora.

A month after launching its DUKES Dubai Sky Collection apartments, developer Seven Tides announced that the 60 apartments on offer have sold out.   With sales prices starting at US$ 271k, investors were lured by the five-year guarantee of an annual 10% return!

Arabtec has started infrastructure work on Dubai Investments’ The Palisades project in Dubai Investment Park. The contract for earthworks, and the grading of roads, is worth US$ 158 million and should be completed within three months. The master plan is for 20 buildings, housing 1.5k units, along with office, recreational and retail space.

It has been a good start to the year for Dubai Investment Park, with 280 new sub-tenants leasing premises in the four months to April, bringing the total number of operational companies to 4.9k. It is estimated that over 98% of its industrial zone is occupied and 95% of land leased. Furthermore, DIP boasts, inter alia, 12k residential units, housing 90k residents, 20 million sq ft of office space, six schools and five hotels.

As indicated in a recent blog, MAF has finally acquired 26 Geant stores, located in UAE, Bahrain and Kuwait, from BMA International. The retail giant has decided to move all these operations to its Carrefour brand, which will see the number of UAE outlets increase overnight by 13 to 80 stores. All employees from the “old” operation will be retained.

The latest report from the World Travel and Tourism Council is upbeat about the country’s travel and tourism sector. It expects that its contribution to GDP will rise by 2.9% this year, to US$ 44.6 billion, whilst it expects increases in employment – direct by 2.3% to 318k and indirect by 1.8% to 629k. Recent figures from Dubai Tourism point to an 11% hike in Q1 traveller numbers to 4.6 million.

The departure this week of C.S. Sea Princess from Port Rashid signified the end of this year’s cruise season. It has been a record year for the sector that has seen the number of liners berthing increasing by 18% to 157 and the number of visitors by 17% to 625k. Jamal Humaid Al Falasi, Director of Dubai Cruise Tourism, is confident of hitting the magical million within four years. Seabourn Encore will open the next season when it arrives on 25 October.

A study by US News and World Report ranks Dubai tenth in its best destinations in the world survey. Not surprisingly, it was the highest placed location in the MENA region and was placed ahead of the likes of Bali, Cape Town, Las Vegas and Venice; Rome topped the list.

In the Bloomberg World Airbnb Cost Index, Dubai is ranked third (behind Miami and Reykjavik) as the most expensive destination using that platform; records indicate that there are 4.2k properties (charging an average of US$ 180) in the emirate. As Dubai Airbnb prices jumped 7% year on year, local hotels recorded a 28% fall to US$ 175.

DEWA has awarded a US$ 68 million contract, covering Al Qudra Street and the Dubai to Al Ain highway, for a 40km extension of water pipes; this expansion will improve water-flow capacity and also service new residential areas.

July will witness a 5.4% reduction in Special 95 petrol to US$ 0.477 per litre, with diesel also heading down by 3.2% to US$ 0.501.

The DFM opened Wednesday at 3402 and traded 0.3% lower at 3392 by the end of the shortened week. Volumes were wafer thin, closing on Thursday at just 116 million shares, valued at US$ 50 million, (cf 350 million shares for US$ 128 million, the previous Thursday). Emaar Properties fell US$ 0.03 to US$ 2.12, with Arabtec trading at US$ 0.78, significantly up from its 22 June close of US$ 0.20; this anomaly arose because of its capital reduction plan that saw US$ 1.25 billion wiped off its share capital to its new level of US$ 409 million. The share price was amended on Wednesday from US$ 0.20 to US$ 0.83; the market was not impressed, with Arabtec losing a further 9.2% in two days of narrow trading.

At the end of June, the bourse closed on 3392, gaining 1.6%, month on month, from 3339 but down 3.9% YTD from its 01 January opening of 3531. Emaar, at US$ 2.12, posted an 8.2% monthly gain, from US$ 1.96, and YTD was 9.3% higher from its year start of US$ 1.94. Arabtec began the year at US$ 0.36 but with its share value greatly diluted on 28 June ended the half year on US$ 0.78.

By Thursday, Brent Crude, having shed almost 14% over the previous four weeks, regained some lost ground up US$ 2.20 (4.9%) to US$ 47.42, with gold again nudging lower by US$ 3 to US$ 1,246 by 29 June 2017. Brent started the year trading at US$ 56.32 and the month of June on US$ 50.76; closing on 30 June on US$ 48.77, it had shed 14.2% of its YTD value and 3.9% for the month. In comparison, gold performed well – 7.8% up YTD having opened on 01 January at US$ 1,151 but down 2.6% on the month from its starting position of US$ 1,275 to close on 30 June at US$ 1,241.

With the exception of Brent and coffee, all commodities, as they did in 2016 have headed upwards in the first six months and this trend will probably continue into H2. Despite the doomsayers predicting the end of sterling, all currencies have strengthened against the greenback. The bourses continue their upward trend, some into record territory, but expect a blip sometime before year end.

  Unit %age 2017 30 Jun 17 31 Dec 16 31 Dec 15 31 Dec 14 31 Dec 13
Gold US$ oz 7.82% 1,241 1,151 1,060 1,186 1,236
Iron Ore US$ lb 5.33% 79 75 47 73 135
Oil – Brent -14.17% 48.77 56.82 36.40 57.33 102.50
Coffee US$ lb -5.26% 126 133 124 161 260
Cotton US$ lb 1.45% 70 69 64 62 86
Silver US$ oz 3.88% 16.62 16.00 13.82 15.77 20.15
Copper US$ lb 9.27% 2.71 2.48 2.14 2.88 3.37
AUD US$ 6.94% 0.77 0.72 0.73 0.81 0.89
GBP US$ 4.84% 1.30 1.24 1.48 1.53 1.64
Euro US$ 8.57% 1.14 1.05 1.09 1.21 1.38
Rouble US$ 6.25% 0.017 0.016 0.014 0.017 0.030
FTSE 100 2.39% 7,313 7,142 6,242 6,548 6,730
CS1300 10.79% 3,667 3,310 3,731 3,532 2,291
S&P 500 8.27% 2,423 2,238 2,044 2,091 1,831
DFMI -3.94% 3,392 3,531 3,151 3,774 3,370
ASX 1.01% 5,722 5,665 5,345 5,415 5,352

Despite the fall in the DFMI , driven by poor performances by the likes of Arabtec and Drake & Scull,  low volumes, and the recent mini collapse of oil prices, brought about by market shenanigans, 2017 to date has been a better year than most “experts” expected. On the local front, realty is moving off its bottom and expect a slight upward movement before year end. The Expo momentum is beginning to take effect and oil prices will again head north for both political reasons and the fact that the Saudis will want higher prices because of the upcoming Aramco IPO. The emirate’s inflation rate will hover around 3.0%, direct foreign trade in H2 will top US$ 130 billion, its population will grow to 2.95 million by year end and its economic growth will reach 2.9%. The hospitality sector will again display world-beating occupancy rates but will have trouble improving revenue returns; travel will see marginal improvements.  Worries still remain in the retail field, particularly eateries.

The 147-year old Holland & Barrett, the UK’s biggest health food retailer, has been acquired by L1 Retail (a fund controlled by Russian billionaire, Mikhail Friedman) for US$ 2.3 billion. The company has 1.3k global outlets and a payroll numbering 4k.

L’Oreal has finally divested itself of The Body Shop (founded by the late Dame Anita Roddick in 1976) to a Brazilian cosmetics group, Natura for a reported US$ 1.1 billion. The French cosmetics chain bought the company, which has 3k stores in 66 countries, eleven years ago for just over US$ 1 billion.

Today, 29 June, is the tenth anniversary for Apple’s iPhone and in the ten years since then, the company has sold more than one billion units. Last year, the tech giant turned over US$ 24.3 billion in sales and it is estimated that two billion people now use smartphones.

After climbing 23% this year, Google shares took a 1.5% dive this week, following the announcement of a US$ 2.7 billion fine from the EC. It has been ordered to stop its “illegal conduct” and to treat all its rival price comparison services on an equal footing. The seven-year investigation concluded that since 2008, Google had systematically given its own search engine prominence over all its rivals, resulting in a significant increase in traffic, at the expense of competitors who suffered permanent losses. Those who consider that the EU appears to target US firms should look at how the boot is on the other foot when it comes to banking.

Two Japanese companies were in trouble this week. Takata has filed for bankruptcy protection in both its home country and the USA, as it faces billions of dollars in compensation claims resulting from use of its defective vehicle airbags. Key Safety Systems has bought all the company’s assets, apart from those relating to air bags, for an estimated US$ 1.6 billion. Already it has agreed to pay out US$ 1 billion in US penalty charges but is facing additional legal action, involving claims in excess of US$ 9 billion. To date, 100 million cars, using the company’s airbags, have been recalled.

Embattled Toshiba has now upped its estimate of 2016 losses by US$ 0.3 billion to US$ 7.0 billion and has again delayed its 2016 return to the end of the month; however, it is known that its liabilities will be greater than its assets and this must place a huge question mark on whether the Japanese electronics giant can continue in business. The company is facing legal claims, having inflated its profit by US$ 1.2 billion for seven consecutive years. Furthermore, it is facing huge losses from its investment in the US nuclear unit, Westinghouse. The company, the world’s second-largest chip manufacturer, will have to sell its prized chip operation, to have any hope of remaining solvent.

Three Australian Crown Casino executives have been jailed in China for illegally promoting gambling in that country. Although casinos can be found in Macau, they are banned in the rest of China. James Packer owns Crown and has operations in both Melbourne and Perth where it is estimated that international “high rollers” gambled almost US$ 47 billion in the last financial year, with Chinese punters making up 50% of the number.

A report by Deloitte Access Economics has valued Australia’s Barrier Reef at US$ 43 billion and has warned that more needs to be done to protect this World Heritage Site. It is facing on-going problems such as climate change, poor water quality, pollution and mass coral bleaching. The huge area is said to add US$ 4.9 billion to the economy every year and employs, directly and indirectly, some 64k.

China’s Yancoal has been gazumped by Glencore, as the race to acquire Rio Tinto’s NSW coal operations, Coal and Allied, hots up. Their latest bid of US$ 2.68 billion was higher than the Chinese initial offer of US$ 2.45 billion but that did come with regulatory approval. The Chinese have now responded with an increased US$ 2.69 billion offer that has received the approval of 97% of shareholders.

With a US$ 190 million investment in a new test bed, Rolls Royce is set to create 200 new jobs and secure its current 7k Derby payroll for five years. The new facility will be used to test large civil aero-engines.

Following the recent World Trade Organisation’s finding in favour of Boeing, the EU has appealed, claiming that Airbus is right to maintain that the US aircraft maker continues to receive unfair state government support. The 13-year old dispute seems set to rumble on, despite the WTO indicating that all but one of its 2012 rulings that Boeing was receiving billions in US$ in illegal subsidies have since been addressed; the exception – a US$ 800 million Washington state aid – still continues. The world body also found that subsidies, totalling billions of US$, have been provided to Airbus.

“Petya”, the latest global ransomware cyber-attack, emanating from the Ukraine, has struck largely across Europe and the US, including the advertising agency WPP, Russia’s biggest oil company, Rosneft, Danish shipping giant AP Moller-Maersk, the Chernobyl nuclear power plant and Kiev airport. The virus takes out affected users’ computers until an untraceable ransom of US$ 300 is paid, using the digital bitcoin. The virus is similar to May’s “WannaCry” cyber-attack that impacted more than 300k computers and includes “Eternal Blue”, a ransomware virus that may have been stolen from the U.S. National Security Agency.

With the possibility of law suits arising because of the Grenfell fire, shares in Arconic, the maker of the cladding used in that and other buildings, fell over 6%. The US firm supplied the material to Reynobond PE and had publicly warned them of the fire risk involved. Now it has also withdrawn this particular cladding from production citing the “inconsistency of building codes across the world”. How authorities allowed this sort of cladding to be used in the first place beggars belief and one can only hope that the proposed public enquiry does not follow the same Hillsboroughesque cover-up antics that has taken 28 years for justice to be seen.

After years of falsifying accounts, by overstating earnings of its Italian operation, the Financial Reporting Council has begun investigations into the auditing of BT by PwC, covering 2015-2017. The UK’s accountancy watchdog will be looking at why the British telecom operator wrote off US$ 680 million for “inappropriate behaviour” involving “a complex set of improper sales, purchase, factoring and leasing transactions”. Casualties from the fall-out include the original auditors now replaced by KPMG and the termination of several senior managers, including the head of BT Europe, Corrado Sciolla, and BT Italy’s chief executive Gianluca Cimini.

With its two main creditors, the EU and the IMF, still in disagreement about the modus operandi of Greece’s bailout payment, it seems that the country may escape a July payment default with the world body compromising, by approving a financing programme “in principle”. This will provide more time for all parties but it is only delaying the inevitable impasse because both sides remain intransigent. The EU will not entertain any further “haircuts”, mainly for domestic political reasons – and the inevitable electorate backlash – despite the obvious economic logic that Greece cannot manage its present repayment schedule; this represents almost 200% of GDP. Meanwhile the IMF has reiterated the nation’s debt is unsustainable and debt reduction is essential for the future progress of the Hellenic country.

Not known for their forecasting, the IMF has cut US growth for this year and 2018 to 2.1%, from 2.3% (2017) and 2.5%. The White House is still going for a 3% expansion, despite some uncertainty about the efficacy of some of their economic policies, including healthcare and spending cuts. The Trump target is an ambitious figure bearing in mind that in this century, annual growth has only averaged 2%. The US Commerce Department upped their initial Q1 findings, reporting that growth was 1.4% (not 1.2%), driven by a 7.0% jump in exports, 4.5% fall in imports and increased consumer spending (which accounts for 67% of the country’s economic activity).

It appears that the Bank of England is asking banks to find a further US$ 14.6 billion over the next 18 months to shore up their capital base in case of a fall-out from bad loans. Its Financial Policy Committee is becoming increasingly worried that loans are becoming too easy, as complacency returns to the lending departments of many financial institutions. There has been a marked 10% increase in rapidly growing consumer borrowing via credit cards, personal loans and, notably, car finance; it is estimated that such lenders are ten times more likely to default than mortgage borrowers.

A week after indicating that “now is not yet the time to begin” raising interest rates, Bank of England supremo, Mark Carney, has suggested that rates could rise if business investment expands. Sterling rose 1.0% to US$ 1.294 – rather ironic for those in the Remain camp, who one year ago were predicting that the currency would fall off the cliff and hit parity.

If the EU thinks they have a problem with Brexit, then wait until the Italian banking system starts to unravel. In order to ensure “the good health of its banks”, the government is to throw US$ 5.8 billion of taxpayers’ money at two failing banks – Venetian Banco and Bianca Popolare di Vicenza – in a belated and futile bailout attempt. Any good assets remaining from this fallout will be taken over by Intelsat Sanpaolo, with the Gentiloni government guaranteeing a further US$ 13.4 billion for potential losses arising from bad debts and risky loans taken over. (This comes six months after the world’s oldest bank, and that country’s fourth largest lender, needed bailout funds).

The Italian banks have an estimated US$ 390 billion of bad loans (a staggering third of the eurozone’s total bad debt). In allowing the country to utilise state funds, the EC’s competition commissioner said this would “avoid an economic disturbance in the Venetian region” and that “these measures will also remove US$ 20 billion in non-performing loans from the Italian banking sector and contribute to its consolidation”. It remains to be seen who actually picks up the bill for this debacle and what happens when the next bank needs bailing out? Could the EU – and the Italian banking system – be in a bigger mess than most people think? It a matter of time before parties start wondering Where Did We Go Wrong?

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