Lost in France

Lost in France                                                                    11 July 2019

Emaar launched its Seashore (Sirdhana by Emaar) development of 1-3 B/R apartments, located in Mina Rashid. The project will also comprise signature hotels, a private beach club, a community park, splash park and a community podium, with a gym and kids’ play area. Interestingly, it will be located in a free zone area that will also include 430 wet berths that can accommodate larger yachts.

Union Properties is to spend US$ 7 million to expand Dubai Autodrome Business Park project in Dubai MotorCity, by building a purpose-built facility for racing teams and other motorsport-related businesses. Spanning 33.9k sq mt, phase 2 will be completed by February 2020 and has already sold out. MotorCity encompasses six projects, each with its distinct environment, including Avenue District, Dubai Autodrome, OIA Residence, Uptown MotorCity, Green Community MotorCity, and Business Park MotorCity.

In December, Al Futtaim will open the country’s biggest Ikea store (covering 30k sq mt), in its new Festival Plaza. Located in Jebel Ali, the new facility will also host ACE, M&S and Lulu Hypermarket, along with a further 120 stores within the 64.8k sq mt retail precinct. It will also have over forty food outlets, as well as parking for 2.3k vehicles.

Dubai will get another tourist attraction, with Nakheel’s announcement that it will add a 240 mt high public observation deck. The View at The Palm will be on the top level (52nd) of The Palm Tower which will have a St Regis hotel and luxury residences; it will be accessible from Nakheel Mall which will house an interactive museum and gallery dedicated to the creation of Palm Jumeirah. The three-minute elevator ride the top of The Palm Tower will be a floor-to-ceiling digital sea, sand and sky experience. Hand-over is expected by Q2 2023.

Dubai Business Events has already secured 118 events for the emirate to take place over the coming years. It is estimated that the mix of conferences and meetings will attract over 75k delegates from around the world and provide a welcome boost for the local economy – especially in the hospitality and retail sectors. This number represents a17% increase on the number of those attending events hosted in Dubai in H1 2018. Majpor events include the Amway China Leadership Seminar 2020, World Hospital Congress, Geospatial Week and the AIPPI World Intellectual Property Congress, among others.

It has been several years since we last heard of a company planning to float an iceberg from Antarctica to these shores. Now, 40-year old Emirati, Abdulla Alshehi, is to spend up to US$ 80 million on a test to float a smaller iceberg  to either Perth or Cape Town on a trial run before deciding the feasibility of moving a larger one to Fujairah; this project would have an estimated cost in the region of US$ 150 million. It is thought that the cost of harvesting fresh water this way would be a lot cheaper than utilising desalination.

It is reported that Barclays may be ditching 20% of its Dubai workforce in its 100-man wealth management business, with potentially more redundancies in the future; some have been offered jobs in other locations such as Geneva or London. The bank did confirm “that it had completed a review of its operational model in the UAE to ensure a sustainable and efficient business platform.” Three years ago, it was reported that Barclays had cut some 150 corporate and investment banking jobs in the emirate. It currently employs about 200 staff in DIFC.

The Federal Tax Authority will launch electronic tracking on the sale of shisha tobacco and e-cigarettes from November. Digital tax stamps will be introduced in a bid to crack down on the sale of contraband products and tax fraud. From March next year, if imported designated excise goods do not bear these stamps, they will not be allowed into the country and by June 2020, it will be illegal to supply, transfer, store, or possess unmarked designated excise goods. Legislation is already in place,covering the sale of all types of imported and locally produced and distributed cigarettes which should have the Digital Tax Stamps.

The country’s May inflation rate has declined to 1.09% over the past twelve months with a CPI reading of 109.87. The main drivers for the fall were price declines in both housing/utilities (5.48%) and ready-made clothing/footwear (3.39%). Prices in telecommunication, transport, and education all nudged higher by 0.62%, 0.85%, and 1.23%, respectively.

The Central Bank is confident that the country’s banking system has sufficient capitalisation and liquidity reserves to meet current requirements. The country’s economic outlook has improved because of various factors including higher energy prices, recently introduced structural reform and an increasingly proactive fiscal strategy. The country’s banks’ performance in Q1, with higher 15% profits, reflected higher operating efficiency in the sector. Although bank lending growth pricked up last year, driven by corporate sector lending, retail sector lending remained in the doldrums.

According to June’s Emirates NBD’s monthly economy tracker, Dubai’s non-oil private sector grew in all sectors, with the stand-out performer being travel and tourism. There was a marked increase in new business activity with a rise in business expectations for the next year. The figures indicate that growth this year will be stronger than it has been over the previous two years. The two canaries in the coal mine are again continued price discount and employment levels in the non-oil economy remaining unchanged not only over the month but for some time now; staffing levels in both tourism/recreation and construction fell.

Efforts to take over Newcastle FC continue with prospective Dubai-based owner, Sheikh Khaled Bin Zayed Al Nahyan, still “working diligently” on a deal with current owner, Mike Ashley. There were reports in May that his Bin Zayed Group had agreed terms in the region of US$ 440 million; it had been bought by Ashley in 2007 for US$ 169 million. However, the club has been on the market on three separate occasions, with each one failing. This latest bid is definitely work in progress.

Depa has been awarded a US$ 27 million fit-out contract for the new headquarters of an unnamed airline in Dubai.

Damac has joined with the Oman Tourism Development Company to develop Port Sultan Qaboos and transform the Mina Sultan Qaboos Waterfront area into a global tourism destination. The development will have two main zones – the tourist port regeneration areas and other sites such as Shotayfi Village and Hay Al Mina. Phase 1, covering 150k sq mt, will comprise 430, residential units, retail space and a 4-star hotel. EFG Hermes painted a worrying future for the Dubai-based developer cutting the target price for its shares to US$ 25.89 from its previous US$ 43.60 guidance and this despite the investment bank’s forecast that Dubai’s property sector will remain stable this year helped by governments initiatives in the pipeline.

After recently acquiring Topaz Energy & Marine, from Oman’s Renaissance Services and Standard Chartered’s private equity unit, it is reported that DP World is to raise US$ 1 billion in an Islamic-bond issue to finance the deal. Over the past eighteen months, the world’s largest port operator has been rapidly expanding its portfolio, acquiring P&O Ferries and P&O Ferrymasters in Europe, Puertos y Logistica in Chile, along with an additional stake in DP World Australia and new JVs in Canada and India.

A CVC Capital Partners’ consortium is set to acquire about 30% of Dubai-based GEMS Education from existing shareholders – no financial information was readily available. It seems that Khazanah Nasional Berhad, a sovereign wealth fund of Malaysia, will retain its 3% stake, whilst a consortium led by Fair Capital Limited including Tactical Opportunities funds managed by Blackstone and Bahrain’s SWF, Mumtalakat Holding Company, will exit. The Varkey Family will remain with the largest shareholding. At the same time, the world’s largest education provider of private K-12 education by revenue is in the midst of a major refinancing programme.

Dubai-listed healthcare and education investment company, Amanat Holdings, has a 13.2% stake in International Medical Centre which has agreed to buy three Jeddah medical facilities for an undisclosed amount; IMC already operates a 300-bed hospital in the city.

The bourse opened on Sunday 07 July at 2661 and gained 25 points (0.9%) to 2686 by 11 July 2019. Emaar Properties closed US$ 0.07 higher at US$ 1.29, with Arabtec up US$ 0.02 to US$ 0.45. Thursday 11 July again witnessed very low trading conditions again of only 88 million shares worth US$ 61 million, (compared to 124 million shares, at a value of US$ 41 million on 11 July).

By Thursday, 11 July, Brent was trading US$ 3.22 (5.1%) higher at US$ 66.52. Gold closed US$ 14 (1.0%) lower at US$ 1,407, still driven by continuing tensions in the Gulf and trade worries prior to this Friday’s G20 meeting in Osaka.

Brazilian mining giant Vale has been ordered to pay US$ 2.9 billion in compensation for all damages caused by the January Brumadinho dam collapse which killed at least 270 people; monies initially will go to affected families and businesses. The judge, Elton Pupo Nogueira, has been unable to put a specific number to the amount Vale will have to pay, indicating that technical and scientific criteria were not enough to quantify the effects of the collapse. However, he did warn that “the value [of the compensation] is not limited to the deaths resulting from the event, it also affects the environment on a local and regional level as well as the economic activity in the affected region.” In other words, Vale will face a huge bill for damages and compensation and could face possible liquidation.

Flyadeal became the first airline to actually cancel an order with Boeing for their troubled 737 Max jets. The Saudi budget carrier has decided to scrap its order for fifty planes and to buy the same number of A320s from Airbus and thus maintaining an entirely Airbus SE fleet. Other airlines have already amended orders in the wake of the global 737 Max grounding in March; they include Garuda, VietJet and Virgin Australia. European regulators have now indicated a previously unknown problem about the jet’s autopilot function which will further slow the return of the 737 to global skies. Interestingly, the European plane maker reported that H1 deliveries were 28% higher (389 planes) than the same period last year, whilst Boeing posted a 37% slump.

Deutsche Bank has launched a US$ 8.4 billion “reinvention” plan, under the auspices of its chief executive Christian Sewing, which is targeting an 8% return on tangible equity (RoTE) by 2022. The markets were none too happy as reflected in a 10% tumble in its share value over just two days, after hitting a record low last month. Among the changes are a slashing of 18k jobs, scrapping the bank’s global equities division and creating a “bad bank” to house billions of euros of costly trading positions and relieve pressure on Deutsche Bank’s stretched balance sheet. Whether these sweeping changes will have a positive impact remains to be seen particularly because of intense competition in the sector and low interest rates.  The bank has not seen revenue streams expand recently and previous attempts to overhaul its sprawling business have ended badly.

Despite the fracas surrounding the current trade dispute with the US, China is confident that its 2019 growth will be between 6.0% – 6.5%. Finance Minister Liu Kun has indicated that although protectionism is having a negative impact on the global economy, China would continue to promote the roles of multilateral organizations such of the WTO, G20 and other multilateral organisations. Meanwhile the country’s inflation level of 2.7% is at a 15-month high because of higher food prices (up 8.3%), caused by bad weather – with fruit prices soaring 42.7% – and African swine fever causing pork prices to jump 21.1%.

A July Sentix report echoed what many already knew – that euro area investor confidence continues to head south – weakening to its lowest level since November 2014, with a reading of -5.8 (compared to -3.3 a month earlier). Furthermore, investor confidence in Germany sank to a 10-year low, a sure sign that recession will shortly hit the biggest euro area economy, with ramifications felt all over Europe.

Following a 0.4% decline the previous month, UK’s May’s GDP was 0.3% higher driven by 1.4% growth in both industrial production and manufacturing; however, the three-month rolling trendslowed to 0.3% in May. Construction as 0.6% higher after posting declines of 0.5% and 1.5% the previous two months. During the month, the total trade deficit declined 37.5% to US$ 2.9 billion, as the UK visible trade deficit narrowed 9.7% to US$ 14.5 billion, month on month. However, there is no doubt that the economy is stalling, and that consumers and businesses await any sort of closure over Brexit; until then sterling will continue its downward trend (having lost 5% in recent weeks) and the economy will continue to nudge higher at a much-reduced rate.

This week, Fed chair, Jerome Powell, gave a downbeat outlook for the US economy which saw the greenback lower but the US markets higher with the S&P briefly hitting a record high of 3,000 points whilst the Dow Jones index lifted to 26,820 and the Nasdaq rose 0.75%. The US central bank chief noted that disappointing data continued to show a “broad” global slowdown, and said that “manufacturing, trade and investment are weak all around the world”; all of this will impact on the US economy, despite strong June jobs growth. The local economy is not being helped by “muted” inflation and only modest wage growth and that “we don’t have any evidence for calling this a hot labour market.”

Another matter worrying President Trump is the fact that France is planning to introduce a digital services tax which he considers is aimed at penalising US tech giants such as Facebook and Google. It is estimated that the tax – a 3% levy on revenue made by any digital company with revenue of more than US$ 840 million of which at least US$ 28 million is generated in France – will raise US$ 450 million and involve some thirty international companies. Retaliatory measures are almost inevitable if US authorities find that the tax is clearly protectionist and unfairly targets American companies in a way that will cost US jobs and harm American workers. It seems that Macron may have wrongly thought he could take the

Posted in Uncategorized | Leave a comment

To Give A Little, Take A Little

To Give A Little, Take A Little                               27 June 2019

It is more than a decade since Deira has seen such building activity, with a reported 2.2k apartments being handed over from mid-2020. Ithra is set to complete phase 1 of its “Deira Enrichment Project” which also includes 800 retail outlets and eight hotels. Located on one side of the Hyatt Regency and on the opposite Gold Souq side, the project will cost US$ 1.1 billion. None of the units will be available freehold, with rents for studio and 1 B/R starting at US$ 9k and US$ 11k respectively; on completion, the new area in old Dubai could house upwards of 12k living and working within the development. The environs will see a lot more new residents, particularly when Nakheel’s Deira Island and Emaar’s Mina Rashid start to transform the area.

Fidu Properties expect to see a 70% hike in Chinese investment in the Dubai realty sector this year, in line with recent annual increases of over 60%. For the first nine months of 2018, the Dubai Land Department ranked China as the fourth biggest source market, with sales of US$ 463 million, equating to just 1.0% of the US$ 44.1 billion total. The outlook is bright as a result of the Dubai Lands Department opening two representative offices in China, with a third in the pipeline. Other factors for the optimism are the 53% increase in Chinese visitors over the past five years and over 4k Chinese companies operating in the emirtae.

With RTA’s approval, Nakheel is to invest US$ 31 million in roads and bridges, giving direct access to its new Al Khail Avenue retail, dining and entertainment development at Jumeirah Village. The link, expected to be completed by the end of 2020, will feed into a 4k multi-storey car park, providing entry to and exit from the mall. The total project will comprise 350 shops, restaurants, entertainment outlets and services, along with a DoubleTree by Hilton 267-room hotel.

China’s The Silk Road Fund has acquired a 49% share in ACWA Power’s renewable energy platform for an undisclosed amount. The entity will take over ACWA Power’s CSP, PV, and wind assets in the UAE and four other countries – Egypt, Jordan, Morocco and South Africa – which in total has a total capacity of 1668MW. This is not the first time that the two companies have co-invested, having already done so in two UAE-based projects – the 2400MW Hassyan clean coal power plant, and the 950MW Hybrid CSP and PV fourth phase of MBR Solar Park.

China’s TenCent, the world’s leading games platform, has opened its MENA regional office in Dubai Internet City. The 16-year old company, a global platform for game development, publishing and operation, has a global payroll of 55k. This comes at a time when the local and regional games industry is exploding, with the current revenue of the country’s ever-expanding game sector at US$ 324 million, with 80%+ of smartphone users playing mobile games.

Following a joint economic policy dialogue held in Washington DC, the US and UAE plan to “fully maintain all aspects” of the 17-year old Open Skies bi-partisan relationship. The agreement, which “reinforced the principle of a fair and equal opportunity to compete in providing international air transportation governed by the ATA,” could see Emirates further expanding its routes into the country. The airline’s CEO and chairman Sheikh Ahmed bin Saeed Al Maktoum reiterated that “under the bilateral agreement, we can, but we won’t expand for no reason”..

With two tenders, totalling US$ 1.2 billion, awarded this week, the prospect of an Abu Dhabi-Dubai rail link moved a step closer. The contracts, covering Packages B and C, will run for 216 km and 94 km, forming part of a 605 km line extension from the UAE-Saudi border in Ghuweifat to the Port of Fujairah. The latest developments, linking Khalifa Port, “Kizad”, and Jebel Ali Port, will involve the China Railway Construction Corporation Ltd, (CRCC), and Ghantoot Transport & General Contracting Company. The whole project is expected to be completed by 2024.

A Xero study estimates that Australian businesses are losing as much as US$ 5 billion because bigger companies are not paying their bills on time. Some of its key findings indicate that big companies pay more than 50% of their invoices late (on average by 23 days) and that 46% of SMEs fail within five years. The study involved 150k entities and ten million invoices, worth US$ 80.5 billion, and concluded that there was a definite link between long payment times and slower growth for small businesses and premature failure. Interestingly, the federal government will start paying SME accounts within twenty days starting from next month. It begs the question on what would happen in Dubai if big companies paid on time; two things are certain – there would be a massive influx of liquidity and it would improve the shelf life of SMEs, the life and blood of the Dubai economy.

Under the Abu Dhabi government’s three-year Ghadan 21 economic stimulus package, a three-year agreement has been signed with the country’s biggest lender, First Abu Dhabi Bank, to extend state-backed loans to SMEs: it will be backed by government guarantees in case of a default of up to 75% of the loan amount. Up to US$ 2.5 billion will be made available to both Emirati and expatriate-owned businesses in Abu Dhabi. This was but one of eight initiatives of a US$ 13.6 billion package put forward by the Abu Dhabi government to stimulate their economy. Others ranged from a thirty-day payment guarantee for suppliers and contractors to eco-tourism development initiatives, and cheaper electricity for industrial companies. Hopefully the knock-on effect will be felt by its northern neighbour, Dubai.

VAT collections, in its first year of operation, were a lot higher than first thought, at US$ 7.4 billion compared to an original projection of US$ 3.3 billion. It would seem that the level of compliance astounded the experts, who had taken a more conservative approach. It is reported that the federal government will retain 30% (US$ 2.2 billion) of collected revenues, whilst the seven emirates will receive US$ 2.4 billion. Moody’s estimate that Dubai received around 60% of the share of revenues attributed to the emirates, and 42% of total VAT revenues in 2018; this is because the emirate has high tourist numbers and a higher daytime population because of the influx of workers from neighbouring emirates.

This year, revenue will inevitably increase but because of such high compliance in its first year of operation, and slower growth prospects, it will only be slightly up on 2018 returns. However, after combined royalties and dividends from the UAE’s government’s holdings in the telecommunications sector, VAT will become the second largest contributor of non-grant revenues to the public coffers this year.

A sign of the times? Q1 saw a marked 11.7% fall in expat remittances from the UAE to US$ 10.5 billion, compared to the same quarter in 2018. Of that total, 65.0% was wired via money exchanges (US$ 6.8 billion) and the balance through banks. The top four countries continue to be India (37.4%), Pakistan (10.2%), Philippines (7.9%) and Egypt (6.0%), accounting for 61.5% of all remittances. They were followed by Bangladesh, US, UK Jordan, China and Switzerland accounting for a further 17.7%.

The Dubai Statistics Centre estimates that the Islamic economy contributes US$ 11.2 billion (10.0%) to the emirate’s GDP, 2.4% higher year on year. The main driver was wholesale/retail trade accounting for 43.6% of the total, followed by financial activities, accommodation/ catering and manufacturing generating US$ 2.6 billion, US$ 2.0 billion and US$ 1.7 billion respectively.

According to research by Emirates NBD, Dubai’s economy will grow faster in 2019 and 2020  (at 3.0% and 3.7% compared to 1.9% last year), driven by expansion in the key sectors of construction/real estate, business services, hotels/restaurants and transport/logistics; this year’s GDP is expected to be at US$ 1.1 billion. However, this could be railroaded by external threats, including trade war escalation, declining global growth and weaker consumer spending/confidence. The country is expected to see growth fall in H2 from H1’s 2.2% and finish the year 2.0% higher, with Q4 growth down at 1.6%.

The country’s first nuclear power station will start generating energy by early 2020, with the opening of the first of four reactors, pending regulatory approval. The Nawah Energy Company, a JV between Emirates Nuclear Energy Corporation (ENEC) and Korea Electric Power Corporation, reported that construction of all four was 93% completed. The overseas partner already operates the Shin Kori 3 and 4 nuclear energy plants in South Korea. Nawah will take charge of all regulatory responsibilities for operations and maintenance of the Barakah plant.

The UAE has become the first regional country to introduce a new anti-money laundering software system this week, developed by the United Nations Office on Drugs and Crime. This means that, as from Wednesday 26 June, all entities under the central bank’s banking supervision department, the Insurance Authority, the Securities and Commodities Authority, Abu Dhabi Global Markets and the Dubai Financial Services Authority, should have registered; to date, 50% of the 900 businesses required have done so.  The goAML system is part of the country’s new regulations against money laundering and terrorist financing that came into effect last year, with fines ranging from US$ 14k to US$ 1.4 million.

On-going reports continue to link Damac Properties with a take-over of luxury fashion brand Roberto Cavalli. The iconic, but bankrupt, Italian brand is up for sale and has seen interest from at least five potential suiters, including Italy’s Diesel-owner OTB and US brand management company Bluestar Alliance. The Dubai-based developer has used the Italian brand in two of their projects – Just Cavalli Villas in Dubailand and Aykon Hotels by Damac Properties.

Arabtec’s wholly owned subsidiary, Target Engineering Construction Company, secured an additional US$ 86 million contract by Tecnicas Reunidas for work on ADNOC’s Bu-Hasa Integrated Field Development Project. This is in addition to work totalling US$ 142 million secured last November.

Although the Investment Corporation of Dubai posted a record 15.7% hike in annual revenue to US$ 63.3 billion, its profit declined 19.3% to US$ 4.4 billion, driven by “the impact of higher fuel and commodity input prices”. Dubai’s sovereign wealth fund, which owns, inter alia, Emirates Airline, Jumeriah Group and ENOC, along with major stakes in Emirates NBD, Dubai Islamic and Noor Bank, recorded a 4.0% hike in total assets to US$ 239.6 billion.

Having been on the cards for some months, Shuaa Capital is set to merge with its largest shareholder, Abu Dhabi Financial Group, creating a new entity with US$ 12.8 billion of assets under management. The Dubai investment bank will issue 1.47 billion new shares to ADFG’s parent company in return for its entire issued share capital; this will see the Abu Dhabi entity owning 58% of the new company, to be known as ADFG, which will still be listed on the DFM. This agreed valuation represents a premium of over 60% to Shuaa’s share price on 21 March 2019, the last trading day ahead of the possible merger announcement.

The bourse opened on Sunday 23 June at 2659 and, having closed 84 points (3.3%) to the good over the previous month’s trading, shed 33 points (1.2%) to 2626 by 27 June 2019. Emaar Properties closed US$ 0.02 higher at US$ 1.20, with Arabtec flat again at US$ 0.41. Thursday 27 June had seen wafer thin trading again of only 75 million shares worth US$ 38 million, (compared to 181 million shares, at a value of US$ 92 million on 20 June). Even for summer, these figures are worryingly low.

By Thursday, 27 June, Brent, having gained US$ 3.05 (5.0%) the previous week, was US$ 1.83 (2.8%) higher at US$ 66.28. Gold, up US$ 100 (3.9%) the previous three weeks, closed US$ 26 (1.9%) higher to US$ 1,423, still driven by continuing tensions in the Gulf and trade worries prior to this Friday’s G20 meeting in Osaka.

To settle US charges that its Brazilian unit violated the Foreign Corrupt Practices Act, Walmart has agreed to pay a US$ 282 million settlement to the US Justice Department (US$ 138 million) and the Securities & Exchange Commission (US$ 144 million). It is alleged that its Brazilian offshoot had paid US$ 527k to an intermediary for assistance in acquiring construction permits. Last year, the retailer indicated that it had spent about US$ 900 million on legal fees and other costs stemming from the investigation, including a global overhaul of its internal compliance system.

A Tokyo paper has published a report that a car distributor in Oman had paid over US$ 3 million in to a Lebanese investment company controlled by former Renault SA Chairman Carlos Ghosn; in addition, money had been channelled into the same account from Renault alliance partner Nissan. If substantiated, there is every chance that the Tokyo authorities will widen the case against Ghosn, who has also been indicted for financial misconduct involving money from Nissan.

Ford announced that it is planning to cut its European workforce by 12k (23.5%) to 39k before the end of 2020 as it restructures to curtail current losses. It indicated that 2k of the jobs would be salaried employees after previously announcing that 7k such positions would be cut on a global scale. One of the five plant closures will be in Bridgend. The whole industry is in turmoil as it takes on the challenge of falling sales, rising costs and the need for higher investment in electric vehicles.

In a US$ 8.7 billion deal, Eldorado Resorts Inc agreed to buy Caesars Entertainment Corp., which, including debt taken on board, puts the deal at US$ 18 billion; the merger will see both parties taking roughly equal shares. On Friday’s price, the deal saw a 30% premium on Caesar’s closing numbers, which is now trading at 24 times reported earnings. Over the past twelve months, Eldorado has seen its market value rise 17%, whilst Caesar’s has headed in the other direction, down 12%.

As the flight date for the comeback of the troubled 737 Max keeps getting pushed back for one reason and another, US regulators have uncovered a possible new flaw, indicating that it had identified the “potential risk” during simulator tests, but did not reveal details. There were initial hopes that the plane would be back in the air next month, but that timetable was subsequently extended towards the end of the year. If what initially was thought to be a software problem becomes a hardware issue, there is every chance that the 737 Max will not be seen in the skies until 2020.

Five people have been arrested by UK’s Serious Fraud Office over alleged accounting fraud at the Patisserie Valerie chain, eight months after the arrest of former finance director Chris Marsh. The café chain, which previously had 206 outlets and 3k staff, went into administration in January with a US$ 120 million black hole; at the time, it was discovered that its cash position was overstated by US$ 39 million and a US$ 13 million overdraft facility was not disclosed. Earlier in the year, the company was acquired for US$ 7 million by Causeway Capital and now has 96 shops.

Bitcoin started the week with a 10% hike to be trading at US$ 11,248 by Sunday – a 15 month high – partly attributable to Facebook launching its own digital currency, Libra. It had a turbulent trading week rising to US$ 13,844 by Wednesday, only to lose 21.6% (US$ 2,996) the following day to close on 27 June on US$ 10,848. Many analysts pointed to Facebook’s entrée to the digital currency sector as a forerunner for major companies adopting cryptocurrencies. Bitcoin, which has doubled in value since March (and trebled since the start of the year), is also being helped by escalating tensions in the Gulf region and the continuing US-China trade war. Slowly, it seems that the currency is becoming acceptable on the world stage.

As reports indicate that annual global car sales have fallen by over four million, Australia vehicles sales, having fallen for the 14th straight month, are heading for its biggest annual decline in nine years; sales are expected to be 7.7% lower with 1.1 million vehicles sold come 30 June year end. The industry is being further hit by slower credit growth (at a six-year low), weakening consumer confidence and household spending. Unfortunately, studies show that when house prices fall, car sales decline in tandem and this adds to the toxic mix. No wonder then that car sharing is becoming more popular with the Australians; GoGet – the biggest company in the country – is claiming that one of its cars can, and will, replace ten vehicles.

Three separate reports point to the fact that the US economy may be weakening. After plunging by a revised 2.8% last month, May new orders fell a further 1.3%, compared to analysts expecting an 0.2% turnaround. However, durable goods orders rose by 0.3% in May after edging down 0.1 percent in April.  

There was an unexpected steep 7.8% fall in May new home sales to 626k, coming on the back of a 3.7% decline a month earlier. The slump was particularly bad in the West and NE where sales dropped by 35.9% to 125k and 17.6% to 28k.

A Conference Board report showed that US consumer confidence deteriorated in June, falling 9.8 to 121.5, month on month; this was its lowest level since September 2017 and mainly driven by the escalation in trade and tariff tensions. Continued uncertainty will inevitably have a negative impact, with the index certain to continue its downward trend over the coming months. On top of all this, median prices were 8.1% lower at US$ 335k – and 2.7% down on the same month in 2018 when prices were at US$ 317k.

This comes after Q1 GDP increased at a healthy 3.1% annualised rate, compared to 2.2% the previous quarter, driven by spending on highways and defence. Q1 trade deficit narrowed to US$ 905.0 billion, with the trade gap contributing 0.94% to GDP. The US-China trade tensions continue to spook the markets and this issue is set to dominate what will be a stormy two-day G20 summit starting tomorrow – 28 June.

To be fair to the US President, he has criticised not only China, saying Beijing wanted to do a deal because its economy was “going down the tubes”, but also some of his allies. India was accused of “unacceptable” tariffs on American goods. He accused Vietnam as the “single worst abuser” on trade, Germany as “delinquent” on its relatively low funding contributions to NATO, and Japan. Tweeting about the host nation – “If Japan is attacked, we will fight World War III. We will go in and protect them with our lives and with our treasure, but if we’re attacked, Japan doesn’t have to help us. They can watch it on a Sony television.” Add to the mix, the current geopolitical problems emanating from places like Iran, North Korea, Venezuela and Yemen and this could be an explosive get together.

Donald Trump may have To Give A Little, Take A Little.

Posted in Uncategorized | Leave a comment

Don’t Leave Your Mark On Me

Don’t Leave Your Mark On Me                                  20 June 2019

Wasl Properties has announced the release of the first building of its Wasl Port Views development in Dubai; it comprises 270 apartments (1 B/R, 2 B/R and 3 B/R) with rents of US$ 24k, US$ 26k and US$ 33k respectively. The whole development, due to be completed next year, will consist of 1.5k residential units, covering 941k sq ft and ten buildings, as well as two hotels with a total of 449 rooms and 84 serviced apartments.

Having handed over 727 homes in its Ghalia development, its first certified Sharia-compliant luxury furnished apartments, Damac is preparing to hand over more than 1.5k units in the coming months. Next week, the Dubai-based developer will launch its premium living Zada range of 1 B/R apartments in Business Bay, with prices starting at US$ 191k. At the end of Q1, Damac estimated that it had handed over 25.1k units, with a further development portfolio of over 30k units and 10k serviced apartments and hotel villas at various stages of progress and planning.

As indicated in earlier blogs, OYO is on an aggressive regional expansion plan, forecasting that by next year, it will have 12k rooms under management in 150 hotels across the UAE. The India-based global hospitality chain has already racked up 100k guests and 1.7k rooms in 80 plus hotels and homes in the country since its launch last year. OYO – backed by several named investors such as SoftBank Vision Fund, Sequoia Capital and China Lodging Group – is working closely with asset owners to accommodate this burgeoning demand of which 25% emanate from India and China.

There is every chance that the Dubai Cricket Stadium could become a regional centre for drone enthusiasts if plans between Airscope and Dubai Sports City materialise. If official approval is granted by Dubai Civil Aviation Authority, then a drone park, with automated air gates and a mix of loops, could soon be in operation by the end of Q3. The stadium, which recently celebrated its 10th anniversary, with matches between Pakistan and Australia, will still be used for its original purpose.

Seed Group, an association of diversified companies owned by Sheikh Saeed bin Ahmed Al Maktoum, has invested in Urent – the first regional peer-to-peer vehicle sharing platform. It will link the private vehicle owner with a potential renter and has been licensed by the Roads and Transport Authority, with its official launch being next week.

May’s seasonally adjusted Emirates NBD Dubai Economy Tracker Index points to the fact that Dubai’s private sector non-oil economy increased at its strongest rate for nine years. Month on month, the index was 0.6 higher at 58.5 showing sharper growth of total activity and new business but the increase in output and new work was mainly attributable to the 13th consecutive month of reduced selling prices, as firms continue to discount in a market that in some cases seems to be in a race to the bottom; this was most notable in the construction and wholesale/retail sectors. The other problem is the fact that the job creation long-term trend remains weak. The three key sectors – wholesale/retail, travel/tourism and construction – had May returns of 61.9, 59.5 and 54.6 respectively.

There was good news from the Department of Economic Development indicating an almost 50% hike in new licences in May at 2.6k which created a total of 8.4k jobs. Of that total, 54.7% were professional, 42.7% commercial, 1.8% related to tourism and 0.8% industry. Real estate, leasing and business services accounted for 35.0% of the new licences issued, followed by trade and repair services at 28.6%.

Renwick Haddow, who duped a reported 150 UAE investors among many others, has admitted to US authorities his role in a sophisticated criminal enterprise selling non-existent office space and operating a fake Bitcoin trading platform. The UK citizen, behind the US$ 50 million scam, could now face forty years in a US jail but the chances of the UAE investors reclaiming their US$ 15 million losses seem remote. The serial fraudster was involved in other dubious business practices, including a milk line, glow in the dark plastics, a hotel ownership plan and even an attempt to buy the world’s oldest newspaper, UK-based The Observer. (It is unlikely that he was the man who has been trying to sell Italian suits, from the back of his car, to UAE residents for the past twenty years).

In a bid to attract more companies, JLT residents are being offered a 40% discount to register a new company by the DMCC. The free zone is hopeful that the offer will attract entrepreneurs and ambitious freelancers to move to JLT which is already home to over 100k. It is estimated that the DMCC, which has 15k member companies, contributes up to 10% to Dubai’s GDP.

As du aims to support 5G connectivity in the UAE, the telecoms operator is expanding its 2019 capex budget by 25% to US$ 409 million, with next year’s allocation to be even higher. With ten data centres currently operating in the country, it plans three more and is set to increase its number of 5G towers by almost six-fold to 700 by year end. Evidently, a large number of smaller antennas or mini towers are required, as 5G waves do not travel long distances, compared with 4G. To take advantage of the new technology – with 5G more than 100 times faster than the current 4G platform – du is currently selling Chinese ZTE 5G smartphones but will receive its first shipments of Huawei handsets and Samsung’s first 5G offering within a month. Safety issues have been allayed, at least in the short-term, as the current roll-out is only on 3.5 Gigahertz and 2.6GHz bandwidths, which are considered safe by regulators. Security concerns are another matter.

Dubai Aerospace Enterprise has announced that it has entered into a purchase and leaseback agreement for three factory new Boeing 777 freighter aircraft with Russia’s cargo airline AirBridgeCargo. DAE, with fifteen owned and committed Boeing 777 freighters, is the world’s largest lessor of 777F aircraft.

It is reported that Tell Group, a boutique investment firm founded by former UBS Group banker Yassine Bouhara, is offering US$ 25 million to transfer the management of seven Abraaj funds to a new entity – 20% owned by Tell and 80% by Abraaj’s unsecured creditors. It seems that Air Arabia and a Kuwaiti pension fund are among the list of unsecured creditors and would become shareholders in the new company, through a debt-for-equity swap. Not surprisingly, it seems that Abraaj management would not be involved in the new firm.

The bourse opened on Sunday 16 June at 2633 and having closed 58 points (2.2%) to the good over the previous three weeks’ trading, gained a further 26 points (1.0%) to 2659 by 20 June 2019. Emaar Properties closed US$ 0.04 lower at US$ 1.18, with Arabtec flat at US$ 0.41. Thursday 20 June had seen wafer thin trading again of 181 million shares worth US$ 92 million, (compared to 176 million shares, at a value of US$ 56 million on 13 June).

By Thursday, 20 June, Brent, having traded down US$ 10.95 (15.1%) the previous three weeks was US$ 3.05 (5.0%) higher at US$ 64.45. Gold, up US$ 47 (3.9%) the previous two weeks, rocketed US$ 53 (3.9%) to US$ 1,397, driven by increasing tensions in the Gulf, and at almost its highest level in five years.

As widely expected, Facebook has finally entered the world of cryptocurrency with its own digital money, Libra. There is no doubt that the world’s biggest social network will help crypto currency become more mainstream and will prove a major boost for existing platforms such as the oft-maligned Bitcoin which will shortly top US$ 10k. The blockchain-based Libra will also have 28 members including Mastercard, Visa, Stripe, Kiva, PayPal, Lyft and Uber, with a Geneva-based eponymous nonprofit association overseeing and maintaining a real-world asset reserve to keep its value stable. Calibra is being built into Facebook’s Messenger and WhatsApp which will allow all users to send Libra as easily as they send a message.

Monsoon Accessorize is restructuring its troubled UK High Street chain of 258 leased stores by asking for rent cuts on 135 stores after a period of “difficult” trading; in return, they are offering them up to US$ 13 million if it trades profitably in the future. Under a Company Voluntary Arrangement, which allows companies to continue trading while reaching agreement with creditors, no stores are to be closed and none of the 4.4k labour force are expected to lose their jobs. If the creditors agree to the scheme, the Group’s owner, Peter Allen, has agreed to a US$ 15 million emergency loan, along with a US$ 24 million interest-free loan.

It seems all but inevitable that the ECB will soon cut interest rates and may well resume its three-year US$ 3 trillion stimulus programme which ended last December. Both these measures would see a fall in the euro and has led to Donald Trump questioning whether the European Central Bank President Mario Draghi is manipulating the currency. As the bloc’s current economic outlook continues to head south, with lingering softness, any improvement in exports and manufacturing are unlikely.

Consequently, Draghi has indicated that “In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required” and that “the APP [asset purchase programme] still has considerable headroom.” Another problem is the ECB target inflation rate of “below, but close to 2%” is still some way off, as the May euro area inflation slowed sharply to 1.2%, its lowest level in over a year – and core price growth eased below 1% to 0.8%. The Eurozone trade surplus declined to a 5-month low in April, as the 2.5% decline in exports exceeded the 0.9% fall in imports. On an annual basis, imports increased by 6.6%, outpacing exports which posted a 5.2% hike. Month on month, its trade surplus fell 17.7% to US$ 17.4 billion and its current account surplus by 15.3% to US$ 23.8 billion.

Driven by lower air travel and falling car prices, UK’s inflation rate finally reached the Bank of England’s 2.0% target. May core inflation – that excludes energy, food, alcoholic beverages and tobacco – slowed to the weakest in more than two years to 1.7%. There is always the danger that a weak sterling may push inflation higher in the coming months, but this could be offset by firms unwinding historically-high stock levels caused by the premature and subsequently delayed 31 March Brexit deadline. Month-on-month, output prices rose 0.3%, the same rate as seen in April, whilst input price inflation eased sharply to 1.3% from 4.5% a month earlier – its lowest since June 2016.

As UK Chancellor Philip Hammond was giving his last Mansion House Speech on Thursday, he was disrupted by some forty lady climate change protesters. Greenpeace later confirmed that forty activists had “gate-crashed” the Chancellor’s speech. Apart from being a major marketing coup, highlighting the world’s environmental problems, it did seem that the “invasion” still did little to increase the ratio of women to men at the event. More so, it showed the other side of a politician – in this case Mark Field, a Foreign Officer Minister of State – that the public will rarely see and does not want to see again. Don’t Leave Your Mark On Me.

Posted in Uncategorized | Leave a comment

A New Day Has Come


The holy month of Ramadan saw a 51.1% jump in off-plan property deals to US$ 1.5 billion compared to the same period in 2018. Property Finder also reported that, surprisingly, the overall average price at US$ 335k was 13.4% higher than last year. The more popular locations were Downtown Dubai, Meydan One and The Lagoons in Dubai Creek Harbour. However, the secondary market was found to be less buoyant, with the total amount of deals at US$ 828 million – 36.0% lower. Compared to the same holiday period last year, the number of transactions actually increased by 15.1% to 3.1k. (Last year, 8.0% of all overall property sales transactions occurred during the Ramadan period).

Recent government moves to boost the emirate’s realty sector seem to have had a positive effect. According to the Dubai Land Department, there was a 33% jump in the value of real estate transactions, to US$ 9.3 billion, during the first five months of 2019. This total was split into three – residential/commercial apartments, land purchases and villas accounting for US$ 4.6 billion, US$ 3.9 billion and US$ 815 million.

Although the realty sector has still not achieved mature status, it has come a long way from the “flipping days”, when substantial profits were made, banks were “giving away” mortgages and every release was sold out in minutes. It is worth noting that historically, prices have tended to over- as well as under – shoot their fair market value for prolonged periods. This is especially the case in rapidly urbanising locations, such as Dubai, as well as during times of increasing interest rates. Despite all the doomsayers, it has to be remembered that an estimated 70k residential units have been handed over in the past four years, with a probable 30k in 2019. That comes to a total 100k – or just 20k a year. With a 30.6% population increase of 3.2 million for the four years to the end of 2018 (2.45 million – 2015), the number of residential units has increased 23.7% from 503k to 622k over the same timeframe.  

It seems that many pessimists, that believe that there is no end in sight to the current downturn, have yet to realise that the economy works through cycles – they will have to start believing that there will be an end to this downturn – and it will be in the next twelve months. It is unlikely that property will ever return to the peaks of five years ago, but they will definitely move north.

Omniyat announced that it expects Anwa, its new Dubai Maritime City development, to be handed over in Q2 2020, six years after breaking ground there. The US$ 163 million project comprises 223 sea-view apartments, along with 8.1k sq ft of retail space.

It is reported that the RTA is seriously studying the possibility of a futuristic elevated rail system that could reach cruising speeds in excess of 100 kph. Skytran, an environmentally friendly electric and highly efficient transport system, moves along the track on a cushion of air; the track, which stands 30’ off the ground and is supported by small concrete foundations and support poles just every 50 mt, is fabricated and assembled off-site.  Accordingly, when a decision has been made, it will take little time for the venture to get off the ground.

Twitter Ads info and privacy

DP World is closely watching developments in Russia, as it mulls over whether to operate ports along the country’s Arctic sea route. The northern sea route is growing in popularity as it shortens shipping times between east and west. This week, the Russian Direct Investment Fund, state nuclear firm Rosatom and nickel and palladium producer Nornickel signed an agreement to develop the area. The Dubai-based operator already has 78 terminals around the world, as well as fifty related businesses in more than forty countries – but as of yet not in Russia.

It seems that Damac Properties is in the running to acquire the Italian luxury fashion company, Roberto Cavalli Group, but is facing stiff competition from another Italian fashion group OTB, the only other candidate in the running. Italian investment fund Clessidra SGR acquired a 90% stake two years ago and relaunched the almost 40-year old company.

HH Sheikh Mohammed bin Rashid Al Maktoum has enacted a new DIFC Insolvency Law which clarifies the requirements of all stakeholders in the context of distressed and bankruptcy related situations as well as facilitating a more efficient and robust bankruptcy restructuring system. The law, which is in line with best international practice, also provides for action to be taken where there is evidence of mismanagement or misconduct. It will be effective from August and comes after the collapse of Dubai-based private equity firm Abraaj, which had a DIFC-regulated entity – Abraaj Capital.

Three more former Abraaj executives have been charged by US authorities for participating in a massive international scheme to defraud investors; they have been named as managing partner Waqar Siddique, vice president Rafique Lakhani and CFO Ashish Dave. The prosecutors allege that from about 2014, executives had lied about the performance of Abraaj’s funds, inflating their value by more than US$ 500 million, with “at least hundreds of millions” of investor funds being misappropriated, either to disguise liquidity shortfalls or for the personal benefit of executives.

The country is going through further consolidation in the already over-banked UAE which has too many entities (over sixty) to cater for a nine million or so population. Recent activity has seen a planned tie-up of three Abu Dhabi institutions (ADCB, Union National Bank and Al Hilal Bank), coming after the government combined two of its largest lenders in 2017 (FGB and NBAD). Now there is continued speculation about the future of FAB and ADIB. Dubai Islamic Bank approved a plan this week to proceed with the acquisition of smaller rival Noor Bank, both of which are controlled by Dubai’s main holding company.

The common factor to date is that most mergers have come about from government-owned banks which in theory is a much easier process than when dealing with publicly-owned institutions However, the need to face increasing competition in the digital age from “disruptors”, along with the urgent requirement to cut costs and improve profitability, will ultimately see increased consolidation in this sector.

What follows next in the financial sector? Insurance companies, accounting firms, property agents and financial advisers are already being lined up in the next wave of much smaller mergers but with the same three aims – increased efficiency, reduced costs and to take advantage of the new digital age.

Despite all the doom and gloom in the market, Dubai saw its Q1 non-oil foreign trade jump by 7.0% to US$ 92.2 billion, compared to the same period in 2018. Of that total, imports were 4.0% higher at US$ 51.8 billion, exports a welcome and impressive 30.0% up at US$ 11.5 billion and reexports 7.0% up at US$ 28.9 billion. Although free zone trade came in 20% higher at US$ 40.0 billion, there were falls of 0.5% and 21.0% in direct trade to US$ 51.5 billion and customs warehousing to US$ 627 million. The top three trading countries by value remain the same – China being the biggest partner, followed by India and the US.

Another report on the local economy is more bullish than some earlier studies indicating that MENA economies are set to expand at their fastest pace since 2016. Focus Economics reckons that local economies will be flat this year at 1.6%, (1.6% and 1.4% in 2018 and 2017), before reaching 2.8% next year. The main drivers behind the downturn are a slowing global economy and trade risks. However, the UAE is the star regional performer with a 2.6% hike expected this year followed by 3.5% in 2020. Three main factors are a raft of business-friendly and cost-effective reforms introduced by the federal government, a US$ 13.6 billion Abu Dhabi stimulus package and a boost from infrastructure expenditure ahead of Expo 2020.

Driven by a surge in new business orders, UAE’s non-oil private sector economy grew at its fastest pace since October 2014; the May headline seasonally adjusted Emirates NBD PMI jumped 1.8 to 59.4, month on month and was the third consecutive month that the index had headed north. Business confidence is still almost at a record high, with solid returns being posted by stronger market demand, marketing activity and the start of new projects. However, with export orders moving higher and price discounting continuing, this helped the jump in both output and new orders. Another worry was that unemployment continued almost flat with no noticeable sign that it will move higher at least in the short term.

Equitativa Limited has posted an US$ 8 million fall in Q1 profit, to US$ 2 million, compared to the same period in 2018, due to the absence of valuation gains; however, there were increases in its property income – up 8.4% to US$ 18 million – and portfolio value, 8.0% higher at US$ 941 million. The company, that manages Emirates REIT Limited, is the largest GCC Reit manager and expects improvements in 2019 results, with the soft opening of Index Mall this month and the opening of DIFC’s Gate Avenue, as well a jump in occupancy at its Index Tower from its current 52% usage.

Following its April listing on the London Stock exchange, Network International has joined the FTSE 250 Index of London-traded equities. The payments company, 51% owned by Emirates NBD and 49% by private equity companies, Warburg Pincus and General Atlantic, is now the biggest digital commerce company on the benchmark measure, compiled by global index provider FTSE Russell. At the time of its listing, the company was valued at US$ 2.2 billion.

The bourse opened after the Eid Al Adha holiday on Sunday 09 June at 2620, having closed 45 points (1.7%) to the good over the previous fortnight’s trading to 31 May 2019. Over the week ending Thursday 13 June, the market was 13 points higher at 2633. Emaar Properties closed flat on US$ 1.22, with Arabtec US$ 0.01 lower at US$ 0.41. Thursday 13 June had seen wafer thin trading again of 176 million shares worth US$ 56 million, (compared to 159 million shares, at a value of US$ 56 million on 31 May).

By Thursday, 13 June, Brent, having traded down US$ 10.95 (15.1%) the previous three weeks was US$ 0.37 (0.6%) lower at US$ 61.40. Gold, up US$ 51 (3.9%) the previous week, lost a little lustre this week trading US$ 4 down to US$ 61.40. Brent had been trading below US$ 60 for most of the week but recovered somewhat on Thursday on news that two oil tankers have been significantly damaged in suspected attacks in the Gulf of Oman; these attacks occurred a month after four oil tankers were struck off the UAE coast.

Norway’s sovereign wealth fund seems likely to pull billions of dollars from many of its investments in coal companies, as well as oil explorers and producers, Parliament has approved a tightening of its investment rules that will see over US$ 8 billion being offloaded in companies, including Anglo American, BHP, South32 and AGL Energy. This follows the US$ 6 billion shed in 2015 when the fund first introduced its coal exclusion criteria. The new rules will also see the SWF investing in in any company that derives more than 30% of its income from coal,as well as entities that mine more than 20 tonnes of coal annually or generate power of more than 10GW.

One company in which the Norwegian fund will not be investing is Adani Enterprises. The Indian company received the go-ahead to start construction of a controversial coal mine, after the Queensland government approved a final permit on ground water management. Adani first acquired the Carmichael mine in 2010 and has since been mired in all sorts of environmental problems and green concerns. The US$ 1.5 billion project is expected to produce 8 -10 million tonnes of thermal coal a year.

There is no doubt that Uber is passing through turbulent times, with the latest news that two top executives will be leaving the ride hailing company. Barney Harford, the chief operating officer, and Rebecca Messina, the chief marketing officer, are on the way out with the former’s position being eliminated, as chief executive Dara Khosrowshahi takes a more hands-on approach.

Pakistan’s “Mr Ten Percent” has been taken into police custody in Islamabad. It is alleged that the husband of assassinated former prime minister Benazir Bhutto, Zadari has laundered vast sums of money through suspect bank accounts and companies, with investigations indicating that at least US$ 400 million had passed through “thousands of false accounts”. If he were found guilty, it would not be the first time that he has seen life behind bars, having once been jailed for eleven years for corruption. He is not the only political foe of Prime Minister Imran Khan to face the law, as former leader Nawaz Sharif is also currently languishing, having been incarcerated for seven years last year – also on corruption charges.

Sir Philip Green lives to fight another day as both landlords and suppliers backed a deal that saved his retail empire, Arcadia whose brands include Topman, Dorothy Perkins and Wallis. A narrow victory saw many landlords reducing their shop rents and creditors agreeing to a deal that would see them take over 20% of the company in a debt reduction scheme.

In May, Australia’s unemployment rate remained on 5.2% and despite a 66% participation rate (indicating a record number in work), hours worked actually fell. Over the month, part-time employment increased by 40k while full-time employment only rose by just over 2k. These figures point to the fact that weaker employment growth, at least in the short-term, will continue.

Lower than expected May employment figures – at 75k – along with slowing wage growth, may be the catalyst for the Fed to drop interest rates sooner rather than later; April figures were revised downwards to 225k. Other indicators – including falling retail sales, factory output and home purchases – show that the economy may be cooling. May also saw companies adding the fewest workers since 2010.

In Germany, April industrial production fell by 1.9%, month on month, as exports dipped 0.5% over the year. These are but two indicators that point to the fact that the economy is heading for major trouble. At the beginning of the year, the Bundesbank was expecting annual growth of 1.6% and have now slashed this forecast to just 0.6% – and even then, it may be a little optimistic. It does expect the economy to decline in Q2 before nudging marginally higher later in the year. The European powerhouse relies a lot on exports to both China and the US and the current impasse between the two countries are having a negative impact on its economy. Their problems will be further exacerbated if President Trump went ahead with tariffs on car imports.

There is every chance that the EU will take Italy to task for not adhering to the bloc’s spending rules. Last year, the Italian public debt had ballooned out to 130% of its GDP – well above the 60% limit set by Brussels. In all likelihood, it will deteriorate even further over the next two years and this has prompted the EC to urge the Giuseppe Conte government to take immediate action to reduce debt, saying there needed to be a “renewed reform effort, not spending more where there is no fiscal space to do so”. Once again, the bloc’s demagogues will bend the rules to accommodate its third biggest economy and will not levy a fine that should have been in the region of US$ 3.4 billion.

The UK economy turned downwards in April, with manufacturing output slumping following the stockpiling that took place prior to the 31 March original Brexit timetable that did not materialise. With car factories also halting work during the month, leading to 45% fewer cars made compared to the preceding April, there was a 1.4% decline in production, month on month – the biggest fall in over two years. Undoubtedly, Q2 growth will reflect these dismal figures and will do well just to avoid a negative return, with a 0.2% expansion the best to hope for.

Interestingly, a 104-year old multinational internet and media group South African company, with a 31% stake, is the largest shareholder in Tencent Holdings, having made an US$ 31 million investment in the Chinese company in 2001. This investment has been the main driver behind the success of Naspers and obviously overshadows the operational aspects of its core business in internet communication, entertainment, gaming and e-commerce.

At the G20 finance ministers’ meeting in Japan, the IMF supremo, Christine Lagarde, has again voiced her concern on the possible impact that the giant tech companies could have on the world’s financial system. She is concerned – and rightly so – that such firms “will use their enormous customer bases and deep pockets to offer financial products based on big data and artificial intelligence”. To drive the point home, it is estimated that Alibaba’s Alipay and WeChat Pay by Tencent Holdings account for 93% of China’s mobile payment segment. Nothing can compete with these two which have been likened to WhatsApp, Facebook, PayPal, Uber, and GrubHub all into one app.  The Chinese are now ahead of the curve and for the tech sector, A New Day Has Come.

Posted in Uncategorized | Tagged | Leave a comment

Do You Believe In Miracles?

Do You Believe In Miracles? 06 June 2019

Developers are doing much to allay fears that there are too many residential units flooding the Dubai market; for the first five months of the year, the latest Reidin-GCP data indicated that last year, 13.7k new off-plan units were released, compared to just 3.2k so far in 2019. When it comes to completed units and handovers, the figures show that the 8.9k number in 2018 was actually higher than the 7.0k figure for the first five months of 2019.  YTD, ready home sales at 5.7k units are comparable to 2018 figures. Once again, the doomsayers are getting ahead of themselves and 2019 will probably be the same as has been the case over the past five years. The much bandied around 50k+ figure, for this year’s handovers, will not happen, with half that figure more of a reality. If there is to be an over-supply problem, we will not see it this year, whilst developers play the market, waiting for demand to catch up with supply – only then will there be an increase in off-plan launches.

Research by Knight Frank indicates that Dubai luxury property prices have fallen 4.7% over the past twelve months – and 1.8% the last quarter. Its Q1 Prime Global Cities Index, which tracks the movement in luxury residential prices across 45 global cities, ranked Dubai 38th.  The global price hike of 1.3% in the year to Q1 is the lowest in a decade, attributable to factors such as political and economic headwinds, allied with rising finance costs and increased property market regulations. The fact that the IMF has predicted that 70% of the world’s economies would see a slowdown in growth this year further exacerbates the problem.

Spinneys is to open a further eight supermarkets in the country this year, including in Damac Hills, Dubai Creek Residences and Jumeirah Golf Estate. This week, it opened its 58th UAE store in Ajman, its second in that emirate.

Madame Tussauds is to bring their famous waxwork museum to Dubai which will be run by Merlin, the operator of the London Eye and Legoland. The project, first muted in 2008, will be located on Bluewaters Island, with the opening date still unknown.

Emaar has signed an MoU with Beijing New Aeropolis Holdings to develop an integrated project, encompassing retail, hospitality, entertainment and lifestyle functions in a one-stop location. The business and tourism complex is to be situated within the Aero-Economic Area of Beijing Daxing International Airport. Such projects can only enhance UAE/Chinese relations, with the Dubai developer actively looking for more developments as part of the Belt Road Initiative.

Al Najah Education’s subsidiary, Horizon Education Asia Limited, has acquired a significant stake in Malaysia-based Regent International Schools; no financial details were made available. The Dubai-based parent company, through HEAL, already has a portfolio of 31 pre-schools and training centres in Singapore and four schools in the UAE and Oman.

The luxury market is one bright light in the troubled local retail sector, as Deloittes report that the “sustained growth” in the Dubai luxury market is attributed to an increase in brand omnichannel strategies and the continued rise of the tourism industry. The consulting firm expects “the luxury market will continue to experience growth as the market matures and adjusts to global trends.” Many of the top one hundred companies, analysed by Deloittes, have a presence in the country; on a global scale, they generated a 10.8% increase in revenues, for the fiscal year ending June 2018, with sales reaching a combined total odUS$ 247 billion.

Cryo Holdings continues with its global expansion plans, having already established new distribution partners this year in Czech Republic, Germany, Hong Kong, Italy, Slovakia, Slovenia, South Korea, Taiwan and the UK. The Dubai-based company, a leading operator in the fledgling global cryotherapy sector, is planning to invest US$ 7 million in three locations in Saudi Arabia and four in India by the end of the year. Cryotherapy, sometimes known as cold therapy, is the local or general use of extremely low temperatures (as low as minus 110 Celsius) in medical therapy and is growing in popularity, especially in the field of sports medicine.

It is estimated the auto sector contributes US$ 16.3 billion to the local economy and now the Dubai Chamber of Commerce wants a piece of the action. It is to form a Car Dealers’ Business Group that will unite the various interested parties – including member companies and private parties – to ensure that the best interests of the sector are served, and global best practices implemented. The Group, whose first chairman will be industry veteran, Michel Ayat, CEO of AW Rostamani Automotive Group, will comment on areas of concern, including regulations.

The bourse was closed for trading all week and will open after the Eid Al Adha holiday on Sunday 09 June at 2620, having closed 45 points (1.7%) to the good over the previous fortnight’s trading to 31 May 2019, Thursday 31 May, at 2620. Emaar Properties closed on US$ 1.22, with Arabtec at US$ 0.42. Thursday 31 May had seen wafer thin trading again of 159 million shares, at a value of US$ 56 million.

By Thursday, 06 June, Brent, having traded down US$ 5.75 (7.9%) the previous fortnight was US$ 5.20 (7.8%) lower at US$ 61.67. Gold leapt in the other direction this week, gaining US$ 51 (3.9%) to US$ 1,343. For the month of May, prices for Brent plummeted US$ 9.61 (13.4%) to US$ 61.99, whilst gold showed some improvement up US$ 38 (3.0%) to US$ 1,310.

No doubt that oil has moved into bullish territory, driven by weak demand, increased trade tensions, rising US stock piles and the nagging worries of a marked slowdown in both US and Chinese economies. There is every possibility that OPEC members, along with other oil producers will beef up their current output cuts into H2.

Only a week after announcing a possible US$ 35.0 billion tie-up with Renault, Fiat Chrysler has pulled the plug. This has not stopped BMW and Jaguar Land Rover announcing that they would be joining forces to develop electric car technologies. With both firms haemorrhaging cash, attributable to falling sales, higher costs and dwindling margins, the need to invest in future technologies has become a necessity. The venture expects to save costs through shared research, shared production planning, and by jointly buying electric car components.

The latest quarterly figures from Uber sees the ride-hailing firm posting a US$ 1 billion loss, even though revenue was 20% higher at US$ 3.12 billion and monthly active users climbed to 93 million. No surprise then to see the firm’s share value has fallen almost 11% since it listed on Wall Street four weeks ago. The main drivers behind the disappointing figures were extra costs for signing up new drivers, establishing the Uber Eats delivery service and increased competition.

Aviva, with offices in sixteen countries, has announced that it will reduce its global workforce by 6.0% to 28.2k over the next three years. The UK insurer is planning to simplify its business – and making it more competitive – by splitting it in two, separating its life and general insurance businesses.

Casino mogul James Packer has sold 20% of his 46% stake in Crown Resorts to Macau’s Melco Resorts and Entertainment for almost US$ 1.8 billion.

What could be the first settlement of many sees JP Morgan paying US$ 5 million in a discrimination case involving parental leave for fathers. It was alleged that the bank had denied a male employee parental leave benefit available to all personnel who are “primary caregivers” of a new-born. A class action followed in the New York courts on behalf of male employees who claimed they were unlawfully denied access to paid parental leave on the same terms as mothers from 2011 to 2017; women were allowed 14 weeks, but fathers were only eligible for two weeks of paid parental leave unless they could show that their spouses or partners were incapacitated or had returned to work.

Following in yhe footsteps of other global bodies, the World Bank has cut its 2019 global economic forecast to 2.6% – 0.3% lower than its previous January prognosis; the downgrade was attributed to a decline in investment levels across the world and a weakening in trade growth. It expects growth to nudge slightly higher over the next two years to 2.7% and 2.8% respectively. The downside risks continue to worry economists including a worse than expected slowdown in most major economies, the worry of increasing tariffs and growing government debt. The forecasts for the two global leaders point lower, with the US slowing to 2.5% this year and 1.7% next, whilst China also slows to 6.1% and 6.0% over the next two years. Meanwhile, the eurozone’s amended forecasts are down at 1.2% and 1.4% respectively, whilst the MENA comes in at 1.3% this year, rising to 3.0% by 2020-21.

At their Seoul meeting this week, IATA slashed its previous 2019 global airline profit forecast by 21.1% to US$ 28.0 billion, on the back of an expanding trade war and higher oil prices; last year, profits touched US$ 30 billion. There are concerns that with the cargo business being badly dented by trade tensions, and international trade at a zero-growth level, this could spill into the passenger market with dire consequences.

There are many warning signs that the Australian economy could be heading for trouble, including falling house prices, slowing wage growth and a worrying depletion in consumer saving levels. Housing accounts for much of the debt and with property prices heading south – declining for the past four years in WA and nearly two years on the east coast – there is an increasing number of house owners treading water, now owing banks more than their houses are worth. It is estimated that 15% of mortgages in WA and the NT are in negative territory – and with unemployment nudging higher – the Reserve Bank had no option but to reduce rates and loosen lending restrictions. It cut its benchmark rate by 0.25% to a record low 1.25% this week – its first rate change in almost three years.

The signs are clear – and have been for some time – that the lucky country is in for a rocky ride. They include a declining world economy, a zero Q1 inflation rate, a sinking currency, worryingly weak credit growth, poor retail sales, plunging vehicle sales, declining building approvals, slowing Q1 GDP growth at 0.4% (its lowest level since 2009), sluggish business investment etc etc. Could it be time for QE to be introduced?

A bad week for one Sir Philip Green started with the chairman of the UK parliamentary Work and Pensions Committee, Frank Field, urging the head of the troubled Arcadia retail empire, to use his own money to support the Group’s pension fund. In a restructuring program to save the empire, that included shop closures and rent cuts, the company’s contribution to the pension fund would be halved from US$ 65 million a year. If this were not to happen, it would be inevitable that the fund would be well short and that the pensions regulator would be forced to step in if members of the pension fund were put at serious risk. On Saturday, the UK retail tycoon was also charged in the US with four counts of misdemeanour assault after a fitness instructor in Arizona alleged that he repeatedly touched her inappropriately. An interesting June lies ahead.

The new Modi government took office on Friday 31 June, with Nirmala Sitharaman as Finance Minister. Unfortunately, the day got worse for India’s first female in that position, as Q1 growth slipped to 5.8% with the fall occurring for the third straight quarter – and well down on the 6.6% return of the preceding three months to December 2018. It is almost certain the bad news will continue into the next quarter, as there is little sign of any improvement occurring in investment growth and consumer spending. Furthermore, labour figures were also released posting an unemployment rate of 6.3% – the worst it has been since 1973. With this sort of news, it is a wonder how Narendra Modi got re-elected! Do You Believe In Miracles?

Posted in Uncategorized | Leave a comment

Down To Earth

Down To Earth                                                            30 May 2019.   

Jumeirah Golf Estates announced that its Alandalus towers A and B have been completed and that Tower C will be handed over in Q4 2019, with the remaining four towers (D – G) ready within twelve months. The whole project encompasses 715 1-4 B/R apartments and 95 townhouses, along with a mosque, hotel, and a community retail centre.

Arabtec’s subsidiary, Target Engineering, has been awarded a 24-month US$ 52 million contract from Ellington Properties for their 12-storey residential twin towers Wilton Park Residence project. Work will include construction, MEP, landscaping and irrigation works.

It has to be Dubai when a developer comes up with such an innovative marketing ploy to sell residential property. UAE developer Kleindienst Group’s Heart of Europe has offered buyers, who spend more than US$ 1.4 million on property in their development, automatic qualification for Moldovan citizenship. It is expected that handover of phase 1 will take place by the end of the year.

UAE-based Azizi Developments has announced plans to incentivise its contractors, with a bonus of up to US$ 2.7 million, to encourage the timely completion of its Dubai projects; this year alone, it hopes to complete nine projects. The company reckons that on-time delivery will cut costs, involved in snagging and hiring new contractors, if a project is delayed, as well as other expenses.

Knight Frank estimated that office rents have fallen 4.3% over the past twelve months – on the back of weakened demand and increased supply – and 2.1% over Q1. However, the falls in the prime sector, at 3.6%, and Grade A rents (at 3.3%), where average rents are at AED240 sq ft per year, seem to indicate that some firms are not willing to relocate to secondary locations in order to reduce costs. However, an increasing number of landlords have introduced rent free incentives and other favourable terms to attract and retain existing tenants.

Himalaya Drug Company is planning to increase its Dubai workforce by 100, as it expands its global research centre in Dubai Science Park. The Indian company produces high quality cosmetics, nutritional supplements, herbal medicines and pharmaceutical-grade Ayurvedic products and sees the expansion as a way to expand in the region.

Emirates National Oil Company is to spend upwards of US$ 600 million on expanding its retail portfolio in the UAE and Saudi Arabia. Enoc see its home base as a profitable market, particularly so because of the removal of government subsidies in 2015 and the fact that local fuel consumption is comparatively high; it estimates that each of its gas stations pumps 60k litres of fuel per day, compared to a daily average of 35k litres per station in other countries. The company, owned by the Dubai government, will grow the number of outlets in the UAE by 11.6% to 144 by the end of the year, with a further 47 stations to be added in 2020.

Arif Naqvi, former Abraaj Group founder, has finally been released from Wandsworth prison in London to effectively go into house arrest, after posting a UK record US$ 19.0 million bail. Part of his bail conditions include surrendering his travel documents, staying in his London home and wearing an electronic tag. He is currently fighting extradition attempts to the US where he is facing a New York trial in connection with inflating the value of Abraaj’s holdings and stealing hundreds of millions of dollars.

US-based Urban Outfitters, with over 240 global stores, is to set up shop in The Dubai Mall – its first foray in the GCC. It appears that the fashion chain will form a partnership with local retail giant Azadea Group which already has rights for many fast fashion brands such as Bershka, Mango, Misguided and Zara.

Dubai-based Careem, recently taken over by Uber, has acquired Cyacle, an Abu Dhabi bike rental services, for an undisclosed amount. The 24-hour a day app operation in the capital has docked bicycles for consumers to use by inputting a ride code to release the bicycles from the docking system.

As part of a joint venture agreement with Hassana Investment Company, Gems Education has acquired Ma’arif Education Group, Saudi Arabia’s largest private school operator, for an undisclosed sum that could be as high as US$ 600 million. The deal involves fourteen schools and will see the Dubai-based education provider’s portfolio rise significantly from its current level of a reported fifty schools in the Mena region, with 124k students.

For the fourth consecutive month, UAE fuel prices are set to increase in June. Special 95 will go up by 3.4% to US$ 0.659, whilst diesel moves 1.2% higher to US$ 0.698. This follows price hikes of 11%, 10% and 4% over the previous three months.

One thing certain is that the IMF is constantly – and usually – downgrading former forecasts and this is still the case that it now expects the UAE economic “growth could exceed” 2% this year after indicating only last month it would be 2.8%. The Central Bank is more bearish, downgrading its 3.4% March forecast to a current 2.0% expectation. It envisages that the non-oil economy will grow by 1.7%, with the oil economy 2.7% lower, from the initial 3.7% forecast, because of a deceleration in oil production from 3.3 million bpd to 3.1 million bpd.

In a bid to cut business costs and increase competitiveness, the federal government has agreed to waive or amend fees of over 1.5k government services in the UAE; there will be reduced consumer costs for services provided by numerous government agencies including the Ministry of Interior, Ministry of Economy and the Ministry of Human Resources and Emiratisation. Not only will it help companies to be more competitive with reduced costs, it will also balance the revenue system of the government, in parallel with the tax system.

From being ranked 15th in 2016, the UAE has climbed to first in the IMD World Competitiveness Rankings for business efficiency and fifth overall, with Singapore heading the table of 63 listed economies; the UAE rates highly and continues to climb the table, when it comes to productivity, digital transformation and entrepreneurship.

The Federal Customs Authority announced that last year, the country’s non-oil trade topped US$ 436.9 billion with direct trade and free zone activity accounting for US$ 272.5 billion and US$ 161.4 billion respectively, customs warehouses making up the total at US$ 3.0 billion. Imports for the year fell 4.2% to US$ 255.6 billion, whilst both exports and reexports headed in the other direction – both 1.8% higher. The value of the two leading export items were raw and half-finished gold at US$ 14.6 billion and raw aluminium reaching US$ 5.1 billion.

The Central Bank reported that the country’s banks’ personal loan book fell 1.2% (quarter on quarter) and an annual 0.9% to US$ 90.9 billion; this reflects soft consumer demand and lower confidence sentiment, because of continuing uncertainties over the labour market. Gross credit climbed 4.2% to US$ 456.4 billion, whilst bank deposits rose 5.3% to US$ 476.3 billion.

The total value of sukuks on Nasdaq Dubai increased by US$ 2 billion this week, as the Indonesian government issued two Shariah-compliant sustainable development bonds – one for US$ 750 million and the other at US$ 1.25 billion. This brings the total of bonds issued by Indonesia to 11, valued at US$ 15 billion. The Dubai bourse has sukuks worth US$ 61.5 billion, making it the largest such exchange in the world.

Dubai-listed Amanat Holdings still has US$ 136 million cash in its kitty to spend on a range of existing investments or on further acquisitions. The company, with a paid-up capital of US$ 680 million, has already spent 80% of that on healthcare and education related investments, with US$ 327 million spent on four additional assets in 2018. It is reportedly looking at Egypt to be its first expansion outside the Gulf region.

Much can be said of figures indicating that banks listed on the Dubai Financial Market accounted for 57% of the total market’s Q1 profits of US$ 2.6 billion (Q1 2018 – US$ 2.6 billion). Compared to Q1 in 2018, this quarter saw these banks’ profits climb 17.5% to US$ 1.5 billion. When the Dubai and Abu Dhabi bourses’ returns are combined, banks account for 57.2% of the total quarterly US$ 5.5 billion profit figure. These figures do not include Bank of Sharjah and Invest Bank who have yet to disclose their financial statements. Over the same period, realty and construction sectors posted total profits of US$ 861 million.

With the local real estate market still in the doldrums, there is little surprise that ENBD Reit saw its net asset value decline 10% to US$ 270 million for the year ending March 2019; however, revenue was US$ 5 million to the good over the twelve months. The Sharia-compliant real estate investment trust saw its total property portfolio value decline by only 2.8%, with average occupancy at a credible 86%.

The bourse opened for trading on Sunday 26 May at 2590 and, having closed 15 points higher a week earlier, closed 30 points (1.1%) to the good on Thursday 30 May at 2620. Emaar Properties, having gained US$ 0.04 the previous week, closed on US$ 1.22, with Arabtec, nudging US$ 0.01 higher to US$ 0.42. Thursday 30 May saw wafer thin trading again (typical of the Ramadan period) of 159 million shares, at a value of US$ 56 million – compared to 122 million shares trading at US$ 48 million the previous week.

Thursday was also the last day of trading in the month of Ramadan and the last day of the month, with the bourse closed all next week to celebrate Eid. Over the month of May, the bourse was 147 points (5.3%) lower at 2620, with both Emaar and Arabtec down US$ 0.14 at US$ 1.22 and by US$ 0.14 to US$ 0.42 respectively. However, YTD the bourse is trading 90 points (3.5%) higher at 2620, with Emaar up US$ 0.10 but Arabtec US$ 0.10 lower.

By Thursday, Brent, having traded down US$ 5.34 (7.4%) the previous week was US$ 0.41 (0.6%) lower at US$ 66.87. Gold headed in the other direction this week, gaining US$ 7 (0.5%) to US$ 1,292.

Following a 3.0% decline the previous month, IATA reported that ME passenger demand bounced back in April – up 2.9%, compared to the same month in 2018. That was the only good news, as most other indicators headed south, including load factor 3.5% lower at 80.5% and available seat kilometre off 1.6%.  ME airlines’ share of the global market at 9.2% is some way off those of Asia Pacific (34.4%) and Europe (26.7%). The ME fared badly when compared to global trends which saw revenue passenger kilometres (RPKs) rise by 4.3%, load factor 0.6% higher at 82.8% and capacity up 3.6%.

Regulators have still to set the date for the return to the skies of the 737 MAX, after global civil aviation regulators failed to decide on whether the plane was fit to return to service. Boeing has held off submitting a proposed software fix for review after the FAA raised additional questions; earlier, it had indicated that the anti-stall Manoeuvring Characteristics Augmentation System update was ready for certification but now, hopes of an early return to operations have been dampened and could be August before the Max flies again. The FAA’s reputation has taken a beating since the March crash, facing accusations of an overly cosy relationship with the aviation giant. Other aviation authorities now appear less likely to follow the US agency. Meanwhile, the US Securities and Exchange Commission has begun investigations whether the plane maker properly disclosed issues tied to the grounded 737 Max jetliner.

Former Jet Airways chairman, Naresh Goyal, was stopped by immigration authorities from leaving Mumbai airport on an Emirates flight bound for London. The 69-year old, who was in charge when the debt-ridden airline grounded its fleet, was not arrested and allowed to leave the airport – but not the country. All of its operations were halted last month when it failed to find a buyer for a 75% stake in what was once the country’s leading operator, along with a consortium of lenders refusing to pay emergency cash. Etihad still have a 24% stake in the airline. Employees have not been paid since January and 20k face a worrying future.

A bad start to the week for President Emanuel Macron who, on Sunday, saw his party beaten by Marie Le Pen in Sunday European elections and the following day learnt that GE was cutting over 1k jobs in the country, even though the French government had requested it not to do so. The move was driven by a fall in demand for gas which saw GE’s energy division’s profit slump 22% last year. When in 2015, the US giant acquired French energy firm Alstom, it promised it would create 1k new jobs. By February 2019, only 25 jobs had been found, at which time GE promised to pay the government US$ 57k for each job it had failed to provide in a US$ 57 million settlement.

Fiat Chrysler has invited Renault to form a 50/50 merger that would create the third biggest carmaker in the world with sales in excess of 8.7 million, still some way off the 10 million+ cars produced by both VW and Toyota. As part of the deal, Fiat will pay a special dividend of US$ 2.9 billion and sell its Comau robotics business. If the deal goes ahead, it will be an accountant’s nightmare as both the French government and Nissan have 15% shares in Renault, whilst Renault has a 43.4% stake in Nissan, as well as having an alliance with the Japanese company, in which research costs and parts are shared.

On top of that, Italy may want to try and match the French government in owning part of the new company. Sector consolidation seems inevitable as individual car makers need to share funds and expertise with the industry moving inextricably to electric models and new technology for autonomous vehicles, as well as having to deal with stricter emissions standards. It is estimated this merger would save US$ 5.6 billion by sharing development costs. Based on 2018 results, combined revenue and net profit comes to US$ 190.5 billion and US$ 9.0 billion.

Arla Foods has acquired Mondelez International’s Kraft cheese business for an undisclosed amount. The Danish company now has full ownership of the Mondelez cheese production site in Bahrain, which produces a range of Kraft products, as well as all Kraft-branded cheese products in the Middle East and Africa markets; it does not include the cream cheese brand Philadelphia and Jocca cottage cheese. It appears to be a win/win situation for both companies – Arla will strengthen its regional market presence and access new products, whilst Mondelez can focus more on faster growing snacks categories, including chocolate, biscuits and powdered beverages such as Tang.

A global mega drug manufacturer has gone on trial in Oklahoma in a multi-billion-dollar lawsuit, accused of deceptively marketing painkillers and downplaying addiction risks, fuelling a so-called “opioid epidemic”. This is the first of an expected 2k cases being brought against US drug companies. Johnson & Johnson are accused of “the worst man-made public health crisis in [the] state’s history,” and had persuaded doctors to prescribe more opioids in the 1990s by using misleading marketing. The state government has accused the company of creating a public nuisance which will cost between US$12.7 billion and US$ 17.5 billion to remedy over the next two decades.

In a bid to cut costs, Walgreens Boots Alliance is considering the future of 200 of its UK outlets, as it reviews “underperforming stores and opportunities for consolidation.” Boots currently has a 56k payroll who operate in nearly 2.5k shops across the UK. The iconic brand has been caught in the middle of a perfect storm, losing customers, who have decided to trade down with discounters (including Aldi, Lidl and Savers), and others trading up to higher end retailers for more expensive items. If the company fails to act and invest more, then it can only be a matter of time that it goes the way of many other famous UK brands. Management only have to look at the likes of Carpetright, Homebase, Mothercare and New Look that have witnessed the closure of hundreds of stores, as well as Maplin, Poundworld and ToysRUs who have disappeared from the UK retail landscape for good.

UK retail sales slowed last month in April and remained flat month on month; the results could have been worse, but the warm weather boosted sales of clothing; quarterly sales were 1.8% higher, with record online sales, up 9.4%, at the highest quarterly growth since records began. There were 0.5% and 2.9% falls for department store sales and household goods stores respectively.

With four English teams in the two major European finals this week, it is little wonder that the EPL is the richest football league in Europe, generating a record US$ 7.5 billion in revenue, as the clubs’ wages-to-revenue ratio rose to 59%.  The European football market is now worth over US$ 32 billion, according to Deloittes latest report, with the leading five leagues accounting for some US$ 18 billion of the total – 6.0% higher than last year.

Facebook has launched its new digital currency, “GlobalCoin”, due to start operation early next year, when it will set up a digital payments system, as a testing exercise, in about a dozen countries. The cryptocurrency could be used by Facebook’s two billion users to transfer money and make purchases through blockchain technology. Some weeks ago, it was reported that talks were being held to seek US$ 1 billion in funding from payment technology companies such as Visa and MasterCard, as well as financial institutions such as First Data Corporation.

So much for the talk about the demise of crypto currencies, as Bitcoin posted a 10% jump in prices on Monday to trade at US$ 8,847 – its highest level in a year that has also doubled since March and up 80% in May. Other similar increases saw prices on the up for other such currencies, including Litecoin and Ether, rising 9% and 6% on the day. Now with more companies introducing their own digital currencies (such as Facebook) and mainstream firms (including Fidelity Investments and AT&T) becoming involved, the future looks rosy for cryptocurrencies.

Another sign that the German economy is in slowdown was the fact that its May unemployment figures moved upwards to 5.0%, for the first time since November 2013 when it reached 6.9%; the figure was 0.1% higher than recorded in the two previous months, with a current 2.24 million unemployed. It comes at a time when its 2019 economic growth forecast has been halved to just 0.5%. It seems inevitable that the worse is yet to come and perhaps German Chancellor Merkel is getting out just at the right time.

In Australia, lawyers are taking a class action against wealth management firm AMP, claiming that 2.5 million of its superannuation accounts have been charged too much in administration fees, and costs could go into hundreds of millions of dollars. The scandal-riddled entity is also facing a shareholder class action, as well as ASIC (Australian Securities and Investments Commission) seeking penalties. This comes after the recent royal commission that claimed AMP routinely charged more in administration fees than they should have, including, for example, applying fees of 1.5%  – at triple the proper rate.

Australian bourses are thanking the “ScoMo surge” for major gains, following the surprise victory of the incumbent Coalition Party, led by Scott Morrison. Since the results were announced, shares have gained over US$ 23 billion, soaring to 12-year highs. The benchmark S&P/ASX 200 index was up 97points, or 1.52 %, on Friday to 6462 points, as the broader All Ordinaries climbed 93 points, (1.44 per cent), to 6553. The market had dropped before the election, with traders factoring in all the bad news that a Labour victory would have brought. The Big 4 banks – ANZ, CBA, NBA and Westpac – were over 9% higher and accounted for 80% of the total market gains. However, the poor performing Aussie dollar is causing concern, languishing around the US$ 0.69 level, which could result in an early rate cut by the RBA.

It has been a tough five months for the incoming far-right Brazilian Jair Bolsonaro, as he grapples with major economic problems. He openly admitted that he knew nothing about economics and appointed a businessman president, Paulo Guedes, as an economic “super-minister”. What has happened since he took office on 01 January is that the economy is still at the same level it was back in 2014 and there is no recovery in sight. After two years of recession (2015-2016), when the country contracted by almost 7%, the next two years have seen annual growth of 1.1% and even though there were expectations that 2019 growth would almost double, it is highly likely that it will just top 1.0%. Matters are not helped that the number of unemployed Brazilians has almost doubled to over 13 million since 2012, although official unemployment survey shows that over 28.3 million are “under-utilised”.

Even more worrying is the mushrooming fiscal debt which has jumped from 51.0% in the boom years to its current level of 77.1%, with fears of it reaching parity within four years if no action is taken. Furthermore, its currency continues to head south (trading at 0.25 real to US$ 1), the stock market, having reached an all-time high in March, has returned most of its gains following disappointing corporate results and since the beginning of Brazil’s recession four years ago, prices have gone up by 25%.

March data sees Japan’s economy slowing, with its leading indicator, measuring future economic activity, down month on month by 1.2 to 95.9 – its lowest reading in three years. The index measuring current conditions also fell – by 1.1 to 99.4, its lowest since September 2015. Meanwhile, April producer prices were 0.9% higher on the year but dipped 0.2% from March’s reading when it advanced 0.7.

Japan has also hosted US president Donald Trump this week where again he broached the trade inequality between the two countries in apparently cordial discussions with Shinzo Abe. At a press conference with the Japanese leader, he again berated China saying “I think they probably wish they made the deal that they had on the table before they tried to renegotiate it. They would like to make a deal. We’re not ready to make a deal.” He also warned that tariffs on Chinese goods “could go up very, very substantially, very easily”. Now the rhetoric has been ratcheted up again since the talks faltered and Trump blacklisted Huawei Technologies Co. and scores of its affiliates earlier this month in a bid to stymie its access to the US market.

In the ongoing trade war between the world’s two superpowers, there is an increasing likelihood that China may restrict the export of rare earth minerals to the United States. Rare earths are a group of seventeen elements used in production in a huge number of sectors, including renewable energy technology, oil refinery and electronics, with China accounting for about 70% of global output and that 80% of US imports emanate from China. Since 2014, there has been a doubling of China’s exports of rare earth oxides. Any retaliatory action cold spell major problems for US industries worth trillions of dollars that rely on rare earth minerals. Could the Chinese be trying to bring the US President Down To Earth?

Posted in Uncategorized | Leave a comment

Cruel Summer

Cruel Summer                                                  21 May 2019

According to Property Finder, there are 136 Dubai projects, encompassing more than 43k residential units, with an expected completion date by the end of 2019: there is also a further 4.1k from 18 other projects, ready for completion by September 2020. Of this total, 33.4 k were apartments, 4.6k villas and 5.6k serviced apartments. This would equate to over 47k over the sixteen months, assuming that all construction has been handed over – historically the figure has been just over 50%. In the first four months of the year, it is estimated that almost 11k have been handed over; last year the number for the twelve months was 23k.

April’s Cavendish Maxwell’s Dubai House Price Index indicates an average 13.2% slump in Dubai property prices over the past twelve months; in certain locations, such as Emirates Living, Dubai Silicon Oasis, Jumeirah Lake Towers and IMPZ, the news was even more depressing with falls in excess of 14%. On a monthly and quarterly comparison, April prices, at US$ 681k, were 1.5% and 4.9% lower.

Arabtec has won another tender from Dubai Properties – this time a US$ 56 million contract to build 322 villas in Villanova, a residential community in Dubailand. This is their sixth project award from the real estate arm of the Ruler of Dubai’s investment vehicle. Completion date should be around early 2021.

Arabtec picked up another contract this week with a US$ 60 million, three-year Indian contract from Raheja Developers for construction in the Navin Minar development. The project will include a 42-storey residential tower and fifteen, fifteen-storey community housing towers, located twenty two km from Delhi airport.

German hotel company, Deutsche Hospitality, has announced its plans to introduce new properties in the UAE and that it will be completely relaunching its luxury brand, Steigenberger Hotels & Resorts; it will also introduce its new brand to Dubai with the 2022 opening of Jaz in the City hotel in Deira, a property with 253 guest rooms.

InterContinental Hotels Group is planning a 30% expansion in its ME room portfolio over the next four years, with 37 properties (and 5.2k rooms) in the pipeline; this will encompass IHG’s many brands including InterContinental Hotels and Resorts, Crowne Plaza, Holiday Inn, Holiday Inn Express, Staybridge Suites and voco. Dubai will see the introduction of yet another brand with opening of the first Hotel Indigo in the Middle East, later in the year. It will also to increase its midscale portfolio in the emirate by the addition of two Staybridge Suites properties.

Due to open between 2021 and 2022, Wyndham Hotels & Resorts will open the country’s first Days Inn and Super 8 branded hotels, as well as a new Wyndham in Dubai; all located on the Deira waterfront, the owner is Ithra, the investment arm of the Dubai government. The hotel group, with 9.2k properties under twenty different brands, has recently acquired the La Quinta label – which has 900 global properties, with a total of 900k keys. Currently, it operates 57 properties (and 11k rooms) in MEA, with a further 21 hotels under development, comprising 4k keys; 23 of these hotels are operated under the Ramada brand.

Landmark Group is set for a major regional expansion as its largest fashion retailer, Centrepoint, plans to open eighteen new outlets over the next twelve months, bringing the total of its shops to 162 in seven countries. The retailer carries four major concepts – Babyshop, Splash, Lifestyle and Shoemart. According to CEO Simon Smith, “our stores of the future will combine features of both online and in-store shopping to offer a seamless and convenient shopping experience.”

Another local casualty of the difficult trading conditions is the Gourmet café chain Pantry Café, closing its three stores in Wasl Square, Jumeirah and Bay Square Business Bay. The four-year old company will shut by the end of May, but no reasons were given. Despite all the problems facing a new entrant in the Dubai F&B sector, last year saw 641 restaurants and 468 cafés open their doors for the first time, bringing the total number to 11.8k in the emirate.

In a bid to protect the wages of its employees, Jebel Ali Free Zone will become the first free zone to return cash and bank guarantees to businesses, via its new Workforce Protection Programme initiative. Commencing in September, it will inject US$ 354 million back into Dubai’s economy that companies can invest in their operations. In the past, companies had to lodge cash or a bank guarantee to provide insurance to their employees in the event of non-payment of wages. Employees will be protected because companies will have to take out insurance to protect the workers in case of wage default.

In recognition of 2019 being designated the Year of Tolerance, JAFZA has decided to waive almost US$ 10 million in fines, owed by its businesses. The authority reckons that this initiative will also support the government’s goal of further enhancing its ease of doing business rating, whilst incentivising new companies and investors. The UAE is currently rated 11th in the World Bank’s Ease of Doing Business ranking.

As DP World continues its expansion of inland operations, it has acquired a 76% stake in the Indian rail logistics company Kribhco Infrastructure, via a JV with India’s sovereign wealth fund; Kribhco will retain the remaining 24% stake. The decade-old company operates container train operations across India, along with three major inland container depots and private freight terminals at Pali in Haryana, Modinagar in Uttar Pradesh and Hazira in Gujarat. DP World already has a large presence in the sub-continent, operating five ports – Mundra, Nhava Sheva, Cochin, Chennai and Visakha,

HH Sheikh Mohammed bin Rashid Al Maktoum has announced that an initial batch of 6.8k people have been granted their new permanent residency status and issued with a gold card. The Ruler indicated that the first tranche of investors and entrepreneurs would hold total investments of US$ 27.2 billion, equating to US$ 4 million per individual. The aim of the exercise is not only to generate foreign investment but also to attract top engineers, scientists, and star students. Sheikh Mohammed also added “Gold Card permanent residence will be awarded to exceptional and talented individuals and to whoever contributes positively to the UAE’s success story. We want those people to be permanent partners in our journey”.

To some, it will come as no surprise to see that Dubai is the most expensive city in the world for internet, at US$ 82 for a month of 8 Mbps internet, according to a recent Deutsche Bank study. Covering 55 cities, the annual survey of global prices and living standards ranks Dubai 14th in monthly salaries (at US$ 2,856) and 11th in disposable income, with San Francisco coming in at number one for both, mainly due to the “rapid growth of the US tech sector”. Interestingly, Dubai was not too expensive for five-star hotel rooms with a view, ranking 29th.

Union Properties has had disastrous Q1 results, reporting a 99% slump in profit to just about breaking even, attributable to mounting finance costs (up 80.4% to US$ 11 million) and losses on investments. The developer, currently in the midst of a restructuring exercise, posted a quarterly loss of US$ 6 million, compared to a US$ 23 million profit over the same period in 2018. So far this year, UP has seen its share price on the DFM down around 22%.

With revenue falling as visitor numbers dip, DXB Entertainments recorded a 3.0% increase in its Q1 deficit to US$ 59 million, as revenue declined 18.0% to US$ 39 million. The operator of the Dubai Parks and Resorts theme parks reported an 11.0% decline in visitor numbers to 760k, of which 45% were from overseas, slightly down on the 60% target; international visitors generally spend more money and bring in higher yields than local residents.

The bourse opened for trading on Sunday 19 May at 2575 and, having ditched 7.6% (212 points) the previous three weeks, closed 15 points higher on Thursday 23 May on 2590. Emaar Properties recovered US$ 0.04 over the week to close on US$ 1.20, with Arabtec, despite the two orders this week, heading in the other direction by US$ 0.03 to US$ 0.41. Thursday 23 May saw wafer thin trading again (typical of the Ramadan period) of 122 million shares, at a value of US$ 48 million, compared to 130 million shares trading at US$ 42 million the previous week.

By Thursday, Brent, having seen 17% swings in both directions over the past three weeks, traded down US$ 5.34 (7.4%) to US$ 67.28. Gold again muddled through the week, shedding only US$ 1 to US$ 1,285.

Huawei was dealt a huge blow earlier in the week when it was announced that their new smartphones will lose access to popular Google apps and that Google has cut it off from some updates to its Android operating system. Furthermore, the Chinese tech firm will also lose Google’s security updates and technical support, and that any of its new devices would no longer have apps such as YouTube and Maps. The previous week, the US President had banned the company from acquiring technology from US firms without government approval. The US is leading a raft of other western countries worried about national security if Huawei has a carte blanche in next-generation 5G mobile networks.

In April 2018, Tesla chief executive Elon Musk confirmed that he had asked his finance team to “comb through every expense worldwide” to find possible cuts. Two months later, 9% of the electric carmaker’s workforce were laid off. In January, a further 7% were shown the door and now he is going to increase scrutiny of expenses to further cut costs at the electric carmaker. Now it seems that after burning US$ 700 million in cash in Q1 – and also just raising a further US$ 2.7 billion via an offering of stock and convertible notes – the company has only to the end of this year to break even. Maybe someone will wake up and see that questions should be asked whether Tesla has the wherewithal to make, sell and deliver enough cars to make a sustainable profit.

Being the largest national operator of Boeing 737 Max aircraft, and the first country in the world to close down their operations, after the second fatal crash in Ethiopia, the Chinese seem to be the first in the queue to file claims against the US plane maker for pay-outs. All of its three airlines -China, China Southern and China Eastern – are claiming compensation for losses incurred by the grounded fleet, and on top of that for delayed deliveries of the 737 Max jets. Boeing has reported that it has completed development of a software update for its 737 Max plane and has subsequently completed over 200 successful flights. The upgrade certification will be handed over to the FAA this week.

The Brazilian cosmetics group Natura, which already owns The Body Shop and Aesop, is to acquire Avon for US$ 2.0 billion in an all-stock deal; the end result is that its shareholders will hold 76% of the new combined entity which will have an annual revenue stream in excess of US$ 10 billion. Now becoming the fourth-largest cosmetics company, it will have 3.2k outlets in over 100 countries. The UK-based direct-selling cosmetics business has been struggling in recent years, as its door to door sales model became outdated and less popular, with e-commerce eating into their market share.

Sir Philip Green‘s retail empire continues to crumble, with an announcement that twenty three Burton, Dorothy Perkins and Topshop stores will close and rents will be cut at another 194 UK stores at his Arcadia group. This is on top of the 200 stores shut over the past three years, as it struggles with a challenging market. Furthermore, the company also plans to shut all its 11 US Topshop and Topman stores. This could be the last throw of the dice for the highly unpopular tycoon as he banks on a US$ 65 million investment from his wife, Tina. Early next month, creditors will vote on whether to accept a series of Company Voluntary Arrangements (CVAs), that will see rents reduced in return for a 20% stake in the company.

Another blow for the UK high street came with news that the Jamie Oliver Restaurant Group – and its subsidiaries Jamie’s Italian, Jamie’s Italian Holdings, One New Change and Fifteen Restaurant – had gone into administration. The owner had already injected US$ 17 million into the failing business in 2017 and has struggled to pay down reported debts of US$ 92 million. Now only three of his twenty-five restaurants remain open, threatening the livelihoods of 1.2k staff. The usual suspects – a soft retail market, economic slowdown and Brexit uncertainty – have been blamed. However, his franchised pizza restaurant in JLT will remain open, as it is a franchise operation licensed by Dubai-based Apparel Group.

Jamie is not alone as the UK high street starts looking like a battlefield, with competitors such as  burger brand Byron, French cuisine chain Cafe Rouge and pizza outlet Prezzo all battling for survival.

Marks & Spencer continue to struggle, with annual pre-tax profits (at 31 March) down by almost 10% to US$ 680 million, as like for like sales dip 2.3% lower; however, figures were somewhat distorted because of Easter falling later than normal. The retailer is in the midst of a major turnaround programme that will see a big store closure program to bring its current number of 1,043 stores down to just above 0.9k within three years.

With its assets’ total at US$ 960 almost equal to that of its liabilities, Thomas Cook’s shares have plummeted 30% to be worth around US$ 0.26; this comes at the same time that the tour operator  issued its third profit warning in less than a year and reported a half-year loss of almost US$ 2.0 billion. Even its auditors, EY, have warned of “material uncertainties” over the group’s sale of its airline, on which a new US$ 400 million bank facility depends. In an attempt to keep the company flying, it is seeking bidders for its fleet of 105 jets, slashing costs and considering the future of its currency arm Thomas Cook Money.

Despite the UK news, it appears that it is business “as usual” in the UAE; the tour operator opened its first regional venture in November 2017 – the Ras Al Khaimah Beach Resort. Three months ago, Thomas Cook India Group invested US$ 41 million for a 51% shareholding in Dubai-based Digiphoto Entertainment Imaging. 

Two major election results this week – in Australia and India. Once again, the polls were proved wrong when Scott Morrison retained his position as the country’s leader. This was good news for the banking sector as shares jumped, with the big four – ANZ, CBA, NBA and Westpac – trading over 5% higher. There had been fears that a Labour victory would see banks suffer because of their pre-election warnings of limiting negative gearing, reducing the capital gains tax discount and tougher restrictions on mortgage brokers. Another sector, healthcare also benefitted with shares in Medibank and NIB up 10% and 9% because the defeated Labour would have limited premium increases to 2%.

By Thursday, it seems that Narendra Modi has won a landslide victory to secure another five years as PM of the world’s largest democracy, India, that saw over 600 million vote in a marathon six-week process. The victory came despite the fact that joblessness is at a record high, farm incomes have plummeted and industrial production has slumped. Furthermore, the economy continues to suffer from Modi’s introduction of a complicated sales tax and his disastrous 2017 demonetisation strategy which was designed to flush out undeclared wealth and black money. The market took the victory in its stride, with the benchmark Sensex index recording a record high of 40,000, with investors gambling that Modi would continue with his business-friendly policies.

The EU technocracy continue to hide their heads in the sand as a major European crisis is brewing that puts the Brexit issue into the second division. The EU growth forecast at 1.4% is just marginally above that of the UK and will be inevitably downgraded if problems persist in two of its powerhouses – Germany and Italy. The former is expected to see growth plummet from 1.8% to just 0.5%, as its manufacturing struggles with slower Chinese demand and disruption caused by the US-China trade war, as well as tougher emissions standards for its car industry.

Italy is the bigger problem as it grapples with recessionary fears, rising government debt and a banking industry in disarray. Its financial credibility lays in tatters as government spending and tax cuts ensure that it will run a deficit and also breach EU rules. Over the last three years, seven banks have been bailed out and estimates put the amount of bad debts on financial institutions’ books at over US$ 300 billion – a comparatively small figure next to the estimated US$ 2 trillion government debt. Then there is France and a summer of discontent in the offing! For many, including Theresa May, the UK Conservative party and some EU governments, 2019 could become a Cruel Summer!

Posted in Uncategorized | Tagged , | Leave a comment