Do You Want To Know A Secret?

Do You Want To Know A Secret?                                                    12 November 2020

Since pandemic-related restriction movements were eased in August, Dubai’s residential property market has reported an increase in transactions, but prices have continued to fall, as a result of weaker macroeconomic conditions and supply concerns. According to consultancy JLL, average sale prices were 9.0% lower in Q3 than in the corresponding period last year. Their Q3 Real Estate Market Overview, noting that investor sentiment globally remained subdued, forecast that “the local residential market is expected to remain under pressure in the short term in light of various macro uncertainties.” However, it does expect potential buyers to be able to take advantage of “a range of incentives (fee waivers, discounts, rent-to-own), as well as partner with banks in offering reasonable home finance options to attract new investors and end-users looking to take advantage of the lower prices.”. Whilst agreeing in principle to their findings, this blog sees a movement north for some villa locations and that they could see a double-digit growth over the six months to March 2021.

The latest residential story concerns the unveiling of the Sea Palace Floating Resort project, a luxury floating resort that is part-yacht, part-hotel, surrounded by six floating and moving houses. Located close to Dubai Marina, the US$ 165 million Seagate Shipyard project uses a glass boat, powered by shaft motors and equipped with a hydraulic system that resists wave movements. The project is reportedly 65% completed, with one of the houses already finished and sold for almost US$ 6 million; it spans two floors and has four en-suite bedrooms, with a glass floor and outdoor swimming pool; it is powered by solar energy and features a self-sterilising air filtration system and a garbage recycling system.

It seems that Azizi is to invest US$ 27 million into the landscaping and further enhancements of Riviera’s phases 1 and 2, to develop lifestyle-enhancing communal spaces; this will include features such as swimming pools, yoga studios and shaded playgrounds. This investment will be at the developer’s expense to add to the “the aesthetics of the community.” The project, encompassing 16k residences in 71 mid-rise buildings, will overlook an extensive retail boulevard, a canal walk, with artisan eateries and boutiques, and Les Jardins — a lush-green social space. The whole project is strategically located adjacent to the Meydan One Mall and the Meydan Racecourse.

There are reports that Morpho Hotels and Resorts will create 1k new jobs, as it enters the UAE market next year and opening five properties. This may be an opportune time as the latest Colliers International’s Mena hotel forecast sees an industry recovery starting in Q4 and continuing into the new year, with occupancy recovering to around 62%. The Indian hospitality firm is looking at acquiring properties for all of its three brands – Morpho, Crystal by Morpho and Vivid by Morpho.

In what can be seen as a bold and innovative move, that will attract more expatriates and foreign investment, the federal government has introduced comprehensive reforms that will have a marked influence on the expatriate social fabric. The wide-ranging – and to some surprising – package covers a myriad of issues, many of which are bringing the country’s legal system on par with key global hubs. Amendments to inheritance laws now indicate that assets would no longer be automatically divided under Islamic law. In future, it will assure people that whatever they own will be transferred according to their will or as per the law of their country of origin; it will also lead to more certainty as the older generation will no longer have to worry.  However, it appears that any property owned in the UAE will come under Sharia law. Such a move will obviously encourage retirees to live here without any fears of the process of dividing their estate according to Sharia and or the UAE laws.

Apart from these substantive changes to inheritance, old legislation will be overhauled and new laws will see radical changes in divorce and alcohol issues. One important amendment sees the laws of a person’s country of origin being used for divorces and inheritance. Under the new laws, a couple married in their home country, but getting a divorce in the UAE, will be able to settled by the laws of the country where the marriage took place; joint assets and joint accounts will see assets split in future local divorce cases.

What some may consider more radical, changes can be seen when it comes to suicide/ attempted suicide and “Good Samaritans”. The former will be decriminalised; in the past, someone who tried to take their life but those who survived could have been prosecuted and anyone found assisting an individual, with an attempted suicide, would face an unspecified jail sentence. Another new law sees “any person who’s committing an act out of good intention, that may end up hurting that person, will not be punished”. In future, there will no longer be a distinction of crimes known as “honour crimes”, where a male relative can get a lighter sentence for assaulting a female relative under the guise of “protecting honour”; now such incidents will be treated as crimes, similar to any other assault. There will be tougher punishments for men who subject women to harassment of any kind, which is thought to cover street harassment or stalking. In future, the punishment for the rape of a minor or someone with limited mental capacity will be execution.

Alcohol consumption is no longer a criminal offence; previously, such prosecutions would be rare but an individual could be charged for consuming alcohol without a licence if they were arrested for another offence. A person still must be at least 21 years old to drink legally in the country. For the first time, the law will allow for the legal cohabitation of unmarried couples, overruling the old law that made this an illegal activity. Furthermore, the new law mandates that translators are provided for defendants and witnesses in court, if they do not speak Arabic.

In a week of major judicial changes, the federal Cabinet approved amendments to the ‘Law on Evidence in Civil and Commercial Transactions,’ in line with Dubai’s ongoing smart digital transformation strategy. Among the reforms are the adoption of digital signatures and documents, with e-signatures being approved and treated as official documents mentioned in the evidence law. Other major changes see the use of e-transactions in notary public procedures. Documents must be created and saved electronically, and will be kept confidential and may not be circulated, copied or deleted from the electronic system without official permission.

Another week and another deal for DP World – this time a global partnership with Germany’s Hypermotion that will drive innovation and the use of digital technology in logistics and mobility. The Dubai-based leading global provider of smart logistics solutions sees this venture as another step for it to use the platform to pursue strategies for strengthening its image, particularly with regard to the logistics string. The Dubai company will support Hypermotion in the form of an exclusive headline sponsorship in events that will bring together innovators, providers and users who set new standards for tomorrow’s logistics and mobility. DP World has grown from a local port operator to a global trade enabler, employing 53k in a global network of 128 business units in sixty countries across six continents.

Just as the world is appearing to enter the second phase of the coronavirus, Dubai’s IHS Markit Purchasing Managers’ Index fell into negative territory by 1.6 to 49.9, following three months of expansion. Dubai’s non-oil economy had slowly moved higher, as the initial Covid phase eased and restrictions were lifted in Q3. Job numbers fell in October, as firms continued to cut costs and revenue streams dried up. Growth in the wholesale and retail sector was the softest since April, whilst output levels in construction, (due to lack of new business), and tourism, (with negligible inward numbers), headed south. Rather surprisingly, the survey found that “firms still expect a rise in activity in the coming 12 months”. Since the start of the pandemic, the emirate has launched various economic stimulus packages, totalling almost US$ 1.9 billion.

Speeded up by the advent of Covid-19, e-commerce transactions will account for 28.2% of total card payments in the UAE this year, higher than the initial 2020 forecast of 21.9%. With an average spend of over US$ 1.6k, the UAE has become the ME’s region biggest annual spend per online shopper and even compared to the US, UK, Australia, Singapore, Brazil, South Africa and Malaysia maintained a healthy average transaction size in online spending. The average 2019/20 transaction value in the UAE was US$ 122 compared to US$ 76 in mature markets and US$ 22 in emerging markets. Studies show that 61% are now using cards to transact online, as nearly 35% of all transactions were made using credit cards. A further survey expects that UAE’s Q4 online retail sales will top US$ 1.5 billion, with the main driver being grocery sales, expected to grow by more than 260% to US$ 300 million.

There are reports that Alvarez & Marsal, NMC Health’s administrators, “have initiated the legal process of making a claim against the company’s auditor, Ernst & Young LLP, by issuing a preliminary notice of potential claim”, which may well be in excess of US$ 1.3 billion. The administrators are in business to assess what legal action can be taken against individuals or third parties to recover some of the money that went missing from the company, founded by the disgraced BR Shetty. This top four global audit firm is also being investigated in the UK by the Financial Reporting Council. The country’s largest private healthcare provider was placed into administration in the UK after investigators highlighted “suspected fraudulent behaviour”, uncovering debts of more than US$ 6.6 billion.

Whilst allowing some of the UAE operations of the company to continue, as normal, the administrators have placed its main UAE business, NMC Healthcare, and thirty-five other local entities, into administration through the Abu Dhabi Global Markets Courts. It is difficult to forecast a recovery figure and a time frame when the process will be completed; however, next month they expect to issue a report outlining “details of the fraud that took place” and identifying “the perpetrators and any colluding parties”. To date, administration costs have reportedly topped US$ 28 million, including US$ 16 million costs for 23k hours worked (which would equate to almost US$ 700 per hour if these figures are correct) and the balance on expenses including legal fees and liability insurance. There appears to be a two-option exit choice – sale of the business (which still employs about 15k staff in the UAE and about 1.8k doctors) or a lender-led restructuring.

US-based Ripple, a digital payment company that uses blockchain to speed up payments, is to open a MENA regional head office at the DIFC. This is an exciting time for the local tech industry, as Ripple will advance the use of blockchain in Dubai and accelerate the Emirates Blockchain Strategy 2021. The company created the world’s third-most actively traded cryptocurrency, which has now been rebranded as XRP. Late last week, the FinTech’s currency was worth US$ 0.26412, having climbed 38% in value so far in 2020; it has a market cap of over US$ 12 billion. A lot of its recent work has involved governments, banks and similar entities trying to replace the older more traditional systems that exist between networks of correspondent banks for cross-border payments, with a simpler system based on blockchain. It has already signed deals with RAKBank and the UAE Exchange. Last week, the UAE Central Bank initiated new regulations with the aim of boosting the country’s digital payment services and help making market access to FinTech companies more manageable and easier, while ensuring that customers’ funds are safe.

With Sheikh Ahmed bin Saeed in attendance, another global company has set up regional headquarters in Dubai, with the Air France KLM Group formally inaugurating its new office at Dubai Airport Freezone. Its entire workforce will operate from the airport location and will be joined by Air France Industries’ management team relocating from the former offices at the Al Shoala Complex in Deira.

Good news for both UK sunseekers and the Dubai economy, as the UK government has agreed to open up the air corridor that will allow Brits to enjoy some winter sun, while also allowing UAE residents with UK links the chance to visit family and friends for Christmas or enjoy a shopping spree in the country. This will be welcome news for the hotel and retail sectors that have always relied so much on inbound travel, as well as Emirates Airline who will be able to increase their flight schedules and better utilise their fleet. In 2019, 1.5 million Britons visited the UAE and although this number will take time to recover any increase is most welcome.

It is estimated that in the first eight months of this year, revenue earned from the UAE’s VAT and excise tax came in at US$ 3.2 billion and US$ 518 million respectively; revenues have been used in the continued implementation of development projects, with 30% allocated to the federal government and 70% to local governments.  The split of excise tax revenue is the same for revenue derived from the tax on energy drinks and other sugary drinks but 45:55 when it comes to tobacco products. In 2019, tax revenue collected in the country rose 7.0% to over US$ 8.4 billion. Saeed Rashid Al Yateem, assistant undersecretary of the ministry’s resource and budget sector, confirmed there were no plans to raise the current VAT rate of 5%, unlike Saudi Arabia which tripled the tax to 15% in July.

Emirates Group announced its H1 results pointing to a 74.3% slump in revenue to US$ 3.7 billion, attributable to the pandemic that saw scheduled passenger flights suspended for eight weeks, during April and May, and global air passenger travel brought to a halt, with countries closing their borders and imposing travel restrictions. As a result, its first ever half yearly loss came in at US$ 3.8 billion, whilst its period-end cash position declined 19.1% to US$ 5.6 billion; its only shareholder injected US$ 2 billion to help with funding requirements. With passenger revenue completely dried up, the airline did see an uptick in air cargo. It is no surprise to see the Group’s payroll decline by 24% to 81.3k over the six months but more of a surprise to see only three aircraft retired. From an almost zero base, the airline restarted scheduled passenger operations on 21 May, and by 30 September was operating passenger and cargo services to 104 cities. Over the six months, it did manage to carry 1.5 million passengers, with Available Seat Kilometres, sinking by 91%, passenger traffic carried measured in Revenue Passenger Kilometres, down by 96%, and average Passenger Seat Factor falling to 38.6% (from 81.1% pre-pandemic).

dnata’s revenue, including other operating income, was 67.6% lower at US$ 644 million, whilst its overall loss position, including impairment charges, (mainly relating to goodwill), of US$ 188 million, was at US$ 396 million, compared to a profit of US$ 85 million over the same period in 2019. Its three main divisions took major financial revenue hits. Its airport operations saw a 54% decline to US$ 454 million, as the number of aircraft handled by dnata dipped sharply by 71% to 102.9k, with cargo 12% lower at 1.3 million tonnes. The travel division fared worse with a 95% slump in revenue to just US$ 26 million, compared to US$ 488 million last year. Following a positive contribution of US$ 1.6 billion last year, the division reported a negative underlying total transactional value sales of US$ 67 million for the first time. Its flight catering operation contributed US$ 116 million down 76%. The number of meals uplifted declined by 84%to 8.3 million meals for the first half of the financial year after last year’s 51.9 million record performance.

SHUAA Capital delivered its financial results, indicating a Q3 net profit of US$ 16 million accounting for 91% of the YTD nine-month profit. The Group also saw continued strong EBITDA generation with Q3 EBITDA standing at US$ 31 million, driven by positive mark-to-market effects on its investment portfolio. By the end of September, its assets under management increased 4.6% to US$ 13.6 billion.

Another bad set of results from Amlak Finance sees revenue at just US$ 68 million (albeit a 31.6% increase on the year) resulting in a US$ 86 million loss – compared to a US$ 11 million deficit in 2019. Impairment charges for the period more than doubled to US$ 43 million, as operating costs declined 14.8% to US$ 20 million. The Islamic real estate financier posted total assets and total liabilities of nearly US$ 1.4 billion and US$ 1.1 billion respectively. It sold 30% of its stake in an associate in Saudi Arabia through a US$ 116 million IPO which subsequently garnered US$ 2 million for the business.

Emaar Properties posted a 26.0% decline in revenue to US$ 3.6 billion, resulting in a 48.0% slump in net profit to US$ 654 million, attributable to the negative impact of Covid-19; property sales were at US$ 2.1 billion, of which US$ 1.2 billion came from domestic sales and the balance from international transactions. For the nine-month period to September, Emaar recorded a revenue of US$ 4.8 billion and net profit of US$ 1.2 billion.  There is some cautious optimism that recent initiatives, including five-year retiree visas, are expected to have a positive effect on the emirate’s property market in the long term; it has been noted that there has been “a marginal increase in property prices for specific unit types in select new developments”.

Emaar Malls, majority owned by its parent Emaar Properties, posted nine-month revenue of US$ 679 million with a profit figure of US$ 160 million. The developer of premium shopping malls and retail assets, including The Dubai Mall, also noted that Namshi, its fully owned regional e-commerce fashion and lifestyle platform, posted nine-month revenue of US$ 254 million, increasing 35%, year-on-year. The business owns The Dubai Mall, Dubai Marina Mall, Gold & Diamond Park, Souk Al Bahar and the Community Retail Centres with these assets posting an impressive 91% occupancy.

Meanwhile, Emaar Development came in with a 34% decline in YTD profit to US$ 371 million on reported revenue of over US$ 1.9 billion. As of September 2020, Emaar’s delivery track record includes more than 45k residential units in Dubai and 23.5k in other international markets. Of the 41k residences currently being developed, 28k are in the UAE.

Although the country’s third biggest developer posted a 43% upturn in nine-month revenue to 30 September, of US$ 349 million, Damac Properties, reported a US$ 148 million loss, on the back of a US$ 14 million profit last year. YTD, the company paid down US$ 126 million worth of debt and has a cash balance of US$ 341 million. It also declared US$ 158 million of write-downs – US$ 144 million against the value of development properties and the balance for bad debts. To date, the developer has built 30.9k homes, with a further 34k in the pipeline on a land bank of 45 million sq ft.

Mashreq Bank posted a Q3 loss of US$ 50 million, down from a US$ 146 million profit in the same period in 2019, driven by impairment allowances almost trebling to US$ 181 million and interest from Islamic financing dipping 38% to US$ 153 million. Over the first nine months of the year, the Dubai lender controlled by the Al Ghurair family, reported an 80% slump in net profit to US$ 96 million, as impairment provisions doubled to US$ 447 million.

The bourse opened on Sunday 08 November and, 78 points (3.4%) lower the previous four weeks, had a great week following the US presidential elections rising 103 points (4.8%) to close on 2,263 by Thursday 12 November. Emaar Properties, US$ 0.02 higher on the previous week, traded up US$ 0.05  at US$ 0.78, whilst Arabtec is now in the throes of liquidation, with its last trading, late in September, at US$ 0.14. Thursday 12 November saw the market trading at 391 million shares, worth US$ 73 million, (compared to 181 million shares, at a value of US$ 43 million, on 05 November).

By Thursday, 12 November, Brent, US$ 7.28 lower the previous four weeks, regained US$ 2.64 (6.5%) in this week’s trading to close on US$ 42.95. Gold, US$ 68 (3.6%) higher the previous week, had its biggest slide in three months losing most of that gain and shedding US$ 64 (3.3%) to close on US$ 1,879, by Thursday 12 November.

In a major blow to a claimant group of 200k Brazilians, a UK court has rejected a US$ 6.6 billion claim against Australia’s BHP, and local partner Vale, seeking damages after the devastating 2015 Fundao dam collapse which left nineteen dead. In what is Brazil’s worst ever environmental disaster, the verdict was claimed to be “fundamentally flawed”, by PGMBM, on behalf of the claimants, and an appeal is all but certain. The case is the latest battle to establish whether multinationals can be held liable for the conduct of subsidiaries abroad and comes eighteen months after the UK Supreme Court ruled that nearly 2k Zambian villagers could sue miner Vedanta in England for alleged pollution in Africa because substantial justice was not obtainable in Zambia. Since the disaster both Vale and BHP have given a total of US$ 3.4 billion to the Renova Foundation, to manage forty-two reparation projects, including providing financial aid to indigenous families, rebuilding villages and establishing new water supply systems.

Second quarter profit, to 30 September, for SoftBank Group’s Vision Fund unit posted a record US$ 7.6 billion, enhanced by a recovery in some start-up valuations and a mega IPO by a Chinese real estate start-up; over the same period last year, the investment business posted a US$ 5.8 billion deficit. However, Masayoshi Son has had to curtail plans for a mega Vision Fund 2, which is being financed entirely by SoftBank, as the sector is still recovering from the record loss in 2019. The major success for the second fund’s portfolio to date has been KE Holdings, a Chinese online property platform that went public in August, and which has seen the fund’s stake almost quintuple to US$ 6.4 billion.

One of the world’s largest airlines is in a battle for survival as its national government has confirmed that it will not receive any further handouts from the state as the government consider extra loan guarantees to be too “risky” and “not defensible”. Struggling Norwegian Air has indicated that it will run out of funds in Q1 2021 and that the airline, which has grounded most of its fleet, faces a “very uncertain future” with “ventilator support” needed to survive the winter. The airline has expressed its disappointment at the lack of public assistance, noting that many of its international competitors were receiving billions in funding from their respective governments.

With its fleet grounded, Singapore Airlines is cutting about 20% of its workforce, having raised US$ 8.2 billion in funds through a rights offering and loans. Having posted a US$ 70 million profit in the same quarter in 2019, it reported Q3 losses of US$ 1.7 billion – its biggest ever quarterly deficit, driven by the impact of Covid-19 which has ravaged travel demand and lifted fleet impairment charges, which came in at US$ 960 million, as the carrier ditched twenty-six older aircraft. As its fuel hedging policy contributed US$ 417 million to its loss, revenue tanked 81% to US$ 581 million. Singapore Airlines suffers more than most international carriers because it has no domestic market to rely on, but all airlines will be impacted on the international state, if IATA’s forecast holds true – passenger demand may not return to pre-Covid levels before 2024. Meanwhile, the carrier expects to be at 16% capacity by the end of January, with flights to New York (direct), Brunei, Kathmandu and Male, and plans for a travel bubble with Hong Kong.

For the first time in its 49-year old history, Southwest Airlines has issued forty-two involuntary furloughs from a 322-employee work group, saying a union declined to discuss concessions aimed at cutting payroll costs. The airline was hoping that the unions would agree to a one-year, 10% reduction in labour expenses, as the airline is looking at ways to save more than half a billion dollars.  To date, 17k employees have left Southwest temporarily or permanently through voluntary programmes.

WH Smith has reported a massive 83% slump in annual revenue for the year ending 31 August, resulting in a pre-tax loss of over US$ 300 million, compared to a US$ 180 profit a year earlier. The hefty loss came after the pandemic outbreak and lockdown measures forced the closure of hundreds of its shops and the fact that its travel outlets – railway stations and airports – saw traffic trickle to almost zero. The good news is that sales have now recovered to 59% of its pre-Covid level. The market was suitably impressed, with the retailer’s share value jumping 41.9% to US$ 19.45, but still well down on its 01 January opening price of US$ 34.50.

Just as the US presidential election race comes to its inevitable end, the EU announces that it is going ahead with its US$ 4 billion tariff plan on US goods in retaliation to US subsidies for Boeing. The taxes, already authorised and cleared by the World Trade Organisation, will affect items such as tractors, ketchup and orange juice but the EU is still keen to settle the dispute, basically between Boeing and Airbus, which saw the US impose tariffs on European products  – including certain whiskeys, wines and cheese – last year. The dispute was ongoing even before Donald Trump’s entry to the White House four years ago but since he took over office, bilateral relations have become more strained. As it stands, US aircraft imported to Europe will face 15% tariffs, with the EU also applying 25% border taxes to a list of other items.

The UK administrators of payday lender Sunny have written to at least half a million borrowers that have been mis-sold loans, noting that they are likely to receive no more than 1% of their compensation entitlement but they should submit a claim. However, all will automatically have negative entries on their credit records cleared by the end of the month, with any notes of defaults on their first five Sunny loans cleared. Sunny is the latest high profile pay day company, following the biggest Wonga as well as WageDay Advance and QuickQuid. The common thread seems to be that all had a huge amount of complaints over the mis-selling of short-term, high-cost loans, when many of them should never have been granted in the first place and were usually unaffordable to repay.

The Japanese game-maker of major franchises such as Resident Evil, Street Fighter, and Mega Man has confirmed that it has become the latest games industry victim of a cyber-attack. Capscom reported that its internal networks had been suspended “due to unauthorised access”, but to date there was no sign that client information had been accessed. Other ‘causalities’ include Ubisoft’s game about hacking, Watch Dogs: Legion, may have been hacked, with its source code stolen and reportedly leaked online, as well as Crytek. There is every chance that the recent hacking campaign may well be a precursor of something much bigger to coincide with the upcoming launches of next-generation consoles.

A recent study by thinkmoney has concluded that the combined terms and conditions of thirteen top apps, including TikTok, WhatsApp and Zoom, comprise a total of 128.4k words and would take 17 hours and five minutes to read. Microsoft led the field, with a total of 18.3k words, followed by Candy Crush (14.2k words), Twitter (11.0k) and Facebook (8.6k). There is no doubt that the conclusion of a 2018 BBC study, that several website policies required university education levels of reading ability, still holds true. Despite this, all users have to agree to the terms before using their services, despite the fact that most will not have understood all the T&Cs. It is also reported that Microsoft Teams does include a sentence in its terms asking children not to create an account if they do not understand the service agreement – but it is more than 1.5k words into the document. Often “I Agree’ at the end of a contract may not mean “I Agree” to the user, as they have either not read the contract or, if they have, not understood some of its content.

In Australia, the consumer advocacy group Choice has held its annual Shonky awards which are given to companies using questionable credit practices, unclear pricing and deceptive sales tactics among other factors. Harvey Norman and InvoCare funerals are the big brands to feature in this year’s awards. Harvey Norman’s partnership with Latitude Finance came under the spotlight and has been named and shamed for targeting vulnerable people with low financial literacy to sign up to credit cards in store in Alice Springs; the cards were charging 22.74% interest rates. Meanwhile Invocare – the company behind forty brands including White Lady Funerals and Simplicity Funerals – “has done everything it can to avoid being upfront with grieving families about cost.” It appears that in some states, the businesses would not provide an itemised list of expenses and they gave wide-ranging quotes for the same services. Bed supplier Revitalife received an award for allegedly breaching Australian consumer law by engaging in misleading and deceptive conduct. Investigations noted that salespeople visited elderly people in their homes and pressured them to buy expensive beds, some worth up to US$ 5k; evidently, “this company promises to help customers with their health needs but then sells them expensive beds with dubious health claims.” Greentech Air Purifiers and floor cleaners from Coles and Bunnings have also been given  Shonky awards for allegedly not performing as advertised.

The New Zealand All Blacks rugby team has lost 47% of its US$ 58 million cash reserves since the onset of Covid-19 and because of the lack action on the rugby field – and loss of revenue from various sources, including TV, advertising and attendance – it is now looking at  alternative sources of funding, such as private equity. There is even the slight chance of it being sold to the highest bidder. Before the pandemic, the brand, the most valuable in the rugby world at US$ 278 million, was looking at a US$ 68 million annual revenue stream. Even prior to the onset of Covid-19, rugby was facing financial problems and private equity firm, CVC Capital Partners, was involved in purchasing parts of the English Premiership and Europe’s Pro14 and is in discussions with the Six Nations tournament for further funding. Investment in rugby is dwarfed by that of football where it is estimated that the European football market alone was worth around US$ 33.0 billion last year. Maybe a piece of the All Blacks could prove to be a good investment, as to an outsider, it does look undervalued with great growth potential.

Already struggling with a US$ 12 billion external debt, Zambia is on the brink of defaulting on its foreign debt, after it missed a payment of more than US$ 40 million last month and if it does not pay tomorrow 13 November, it will become the first African country to default on sovereign debt since the coronavirus pandemic. Although it is obvious that Covid-19 has not helped by depressing economic activities and pushing its health services to the limits, there is evidence that concerns about corruption, along with President Edgar Lungu’s poor economic management, maybe the real reasons behind the country’s financial problems. The external debt includes amounts of US$ 3 billion each from European bonds and China and Chinese institutions. The other side of the coin sees the argument that Zambia was lent money at high interest rates, knowing that repayment would be unlikely. It will be interesting to see the outcome as there will be many other countries, not only in Africa, in the same boat.

As its currency continues its downward spiral, sinking to a record low of 8.5793 to the US$, Turkey’s President Recep Tayyip Erdogan has removed central bank Governor Murat Uysal, replacing him with former Finance Minister Naci Agbal. YTD, it has fallen 30%, becoming the worst-performing emerging market currency tracked by Bloomberg. The former governor, who was only appointed in July 2019, had been raising borrowing costs through a combination of rate increases and back-door measures since August. This approach patently failed, as the currency continued heading south and inflation remained in double digits, compared to the target level of 5%.

It is reported that Australian goods including rock lobster, wine, timber and coal would be blocked at Chinese Customs. Two Australian grain exporters were recently suspended from trading barley to China, and five Australian abattoirs have had exports blocked by China due to quarantine and labelling issues. There is no doubt that bilateral political tensions are a major cause of these recent “problems” and the Chinese are retaliating with increasing trade pressure. Meanwhile, Australia’s winemakers are becoming increasingly worried about losing access to their most valuable overseas market, with reports that imports are struggling to get cleared at Chinese ports. Over the year, the Morrison government has been a vocal critic of some of China’s policies including their stances on Hong Kong and the Uighurs.

With positive signs, China’s economy is moving forwards, with October exports 11.4% higher and imports up 4.7%. If the figures are to be believed, the world’s second-largest economy continued to recover well from the pandemic, leading to a US$ 58.4 billion trade surplus by the end of the month – well above the forecast US$ 46 billion and well up on the previous month’s US$ 37 billion. Its trade surplus with the US widened to US$ 31.4 billion – US$ 0.6 billion on the month. It waits to see whether exports will be impacted by the recent re-introduction of restrictions by trading partners such as Germany, UK and France, as the second wave hits. Another indicator, factory activity, grew at its fastest pace in over a decade. Although the economy is expected to grow at its weakest in over thirty years, at just 2%, it still will be streets ahead of any of the OECD economies all of which will end 2020 in negative territory.

The US economy added 638k jobs in October – its slowest growth in five months, whilst pulling the unemployment rate lower to 6.9% (from 7.9%), helped by the fact that jobs were added in leisure and hospitality, as US lockdown measures were eased; there are still 11.1 million Americans out of work. Over the period, the unemployment rate fell quite sharply, and the labour force participation rate nudged higher. Latest data points to the fact the US economy grew 7.4% in Q3, but that output remained 2.9% lower, compared with the same period in 2019. There are some who consider that the latest rebound may have already run out of steam.

On Monday, at least the global markets appreciated the latest news that Joe Biden was claiming victory in the presidential race, with shares on Japan’s Nikkei 225, up 2.5% and hitting a near thirty-year high. Australian shares have risen to their highest level since the start of the COVID-19 pandemic, buoyed by pharmaceutical company Pfizer announcing early success in a vaccine trial. (This may be considere4d more than a coincidence that the announcement was made at the end of the presidential count and not before). There were healthy gains across the board on Monday; in China, as a Biden win was seen as a positive for trade (with the possibility of another Sino-US trade spat unlikely) and technology policy’ as the thought of another tech war dissipates.

In the wake of the election,  last week, the global stockpile of negative-yielding debt moved higher to its record level of US$ 17.05 trillion, with investors now eying a focus returning to monetary support  rather than a fiscal splurge, According to  the Bloomberg Barclays Global Negative Yielding Debt Index, 26% of the world’s investment grade debt is now sub-zero but this is still 30% lower than the same time last year because of the glut of global issuance since the onset of Covid-19. Traditionally, a Democratic US government is less likely to participate in a massive fiscal spending package, so consequently, treasuries and other high-rated bonds have been on the rise.

September was the fifth straight month of rises in UK home sales, with a total of 98.1k residential transactions, with mortgage approvals also nudging higher at 91.5k – its highest level in thirteen years. Interestingly, since March, apartment prices are up just 2%, compared to the 6% for the typical detached property. With both consumer spending and confidence spiralling downwards, it is almost certain that house prices may have reached their peak for the foreseeable future. October saw the average UK house price reach almost US$ 330k (equating to GBP 250k for the first time ever), driven by three main factors – pent up demand, desire for accommodation with more space (as working from home becomes more of a viable option) and the stamp duty “holiday”. Year on year, October prices were 7.5% higher but only 0.3% on the month – an indicator that the market may be slowing, having gained 4.3% over the previous four months.

UK Chancellor Rishi Sunak said it was going to be “a difficult winter,” but was confident that that England would be able to exit its second lockdown as planned on 02 December. He confirmed that his main aim is to protect as many jobs as possible, with the reintroduction of the furlough scheme, for another five months, and the creation of the Kickstart job scheme for young people helping. It still seems that there will be a marginal 0.5% GDP contraction in Q4, with mixed signals for the start of the new year when you add into the mix possible trade Brexit-related disruptions and whether the pandemic impact reduces. It must be remembered that the UK economy is still over 8% down on its pre-Covid level and that what is currently happening is actually a catch-up rather than a recovery. There is hope that vaccines may become available sooner rather than later and if that were the case, it would provide a much needed to boost to the economy. However, there is one thing that global markets abhor – and that is uncertainty and there is still plenty of that all around the world.

It seems that there has been a leak, now being investigated by both the BoE and the Treasury, concerning the size of the recent QE stimulus package. Evidently, The Sun newspaper had inside knowledge that the programme’s size would be more than economists had estimated, with the paper’s scoop being published hours before the public announcement on Thursday. In what was supposedly a closely guarded secret, the nine-man Monetary Policy Committee decided on the increase on Wednesday, but because of The Sun report, sterling briefly fell 0.4% on Thursday morning, after it was released, because the QE package at US$ 200 million was higher than the US$ 130 million expected. The report is the latest example of potential leaks of sensitive information in the UK, with the government also investigating a recent divulgence of plans to put England in another lockdown, forcing it to bring forward the official announcement before the start of restrictions last Thursday. This led to unnecessary panic-buying in shops and a surge of people visiting restaurants and pubs before they closed for a month. The paper also had ‘secret’ details of policy announcements to be made by the Chancellor later in the day. Check with the Treasury if You Want To Know A Secret!

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Lucy In. The Sky With Diamonds!

Lucy In The Sky With Diamonds!                                                             05 November 2020

Property Finder reports that, quarter on quarter, the value of Q3 property transactions leapt 65% to US$ 4.9 billion, and deals by 55% to 8.7k, indicating that an economic recovery, however slight, is under way; over the first nine months of 2020, there were 24.5k deals, valued at US$ 13.8 billion. The month of September saw monthly rises of 53.3% in the volume of sales to 3.9k and 39.1% in value to over US$ 2.4 billion; of the monthly sales, 46% were off-plan, (up 155.7%) and 54% in the secondary market, 74.2% higher.

For the week ending 05 November, there were over 1.2k Dubai real estate transactions, valued at US$ 790 million. During the week, 854 villas/apartments were sold for US$ 406 million, along with 44 plots for US$ 48 million. The three best-selling properties were an apartment in Marsa Dubai for US$ 70 million, US$ 28 million for a Burj Khalifa apartment and a villa in Al Hebiah Fourth, (US$ 26 million). The week saw mortgaged properties totalling US$ 27 million, with the highest being for land in Nadd Hessa, mortgaged for US$ 54 million. The three locations with high unit sales were Jabal Ali First – 16 units for over US$ 7 million –Nad Al Shiba Third, (5 for US$ 3 million) and Al Merkadh (5 for US$ 17 million).

With the triple aims of improving communication, reducing complaints and boosting transactions, the DLD has initiated the Green List project on its real estate app Dubai Rest. The app will provide “a flexible and transparent communication channel to enhance relations” between real estate owners and brokers. In future, most real estate transaction decisions will take place through an integrated set of digital procedures, with property owners being required to register to be able to communicate with brokers. The initiative is part of Rera’s goals to establish a professional real estate sector and create a highly advanced real estate regulatory platform.

HH Sheikh Mohammed bin Rashid approved the US$ 15.8 billion budget for 2021, (slightly lower than last year’s US$ 16.7 billion record one), following Sunday’s federal Cabinet meeting. In his usual confident and upbeat manner, Sheikh Mohammed commented that “the UAE economy will be among the fastest to recover in 2021, and the government has dealt with the 2020 budget efficiently and has all the tools to continue its financial and operational efficiency in 2021”. Of the total, US$ 11.1 billion will be spent on three sectors – social development/benefits (US$ 7.1 billion), education (US$ 2.6 billion) and healthcare (US$ 1.4 billion). Infrastructure and specific federal projects will see spends of US$ 1.3 billion and US$ 1.1 billion. This year will see the budget fight the double whammy negative impacts of Covid-19 and lower energy prices. In a July restructuring move, it was decided to integrate four separate federal assets – the Federal Water and Electricity Authority, Emirates Post, Emirates Transport and Emirates Real Estate Corporation – into the Emirates Investment Authority. The Cabinet reviewed its performance since then, with Sheikh Mohammed noting “the agency includes all the investment assets of the federal government and is considered an arm to consolidate the strength of our national economy.”

Emirates has announced that it is implementing several initiatives such as unpaid leave and flexible work-time models so as to help cope with the repercussions from Coviod-19 that has seen air travel bludgeoned, with many scheduled flights still cancelled because of international travel restrictions. This includes offering some of its flight crew unpaid leave for up to twelve months, with the possibility of an early recall if and when circumstances change for the better. It is reported that accommodation, medical cover and other allowances will be paid during their enforced absence. To date, the carrier’s passenger network has managed to expand to ninety-five destinations, with hopes that it will be able to serve all of its former network to 143 cities by mid-2021.

The Central Bank has reported that its Targeted Economic Support Scheme has directly impacted 321k, comprising 310k distressed residents, 1.5k companies and 1k SMEs. Launched at the start of the pandemic in March, the US$ 27.2 billion stimulus package comprised US$ 13.6 billion of zero-interest, collateralised loans for UAE-based banks and the same amount freed up from banks’ capital buffers. A total of US$ 12.2 billion, 90% of the liquidity facility provided by the central bank, had been drawn down by UAE lenders until the end of July.

Forecasts  indicate that UAE online  retail sales will top US$ 1.5  billion in Q4, as more shoppers desert bricks and mortar for clicks; this would be almost 50% higher than the same period in 2019, and 15.4% up quarter on quarter, driven to a large extent by the growth in grocery sales; this represents a massive 260% annual increase to US$ 300 million and a quadrupling of e-orders from 20k a day to 85k. Groceries are expected to account for 33% of online sales by the end of the year. Although electronics still has 40% of the overall online retail segment, with sales of US$ 177 million, it will be the slowest growing category in online retail sales in Q4.

DFM-listed Aramex posted a 59% slump in Q3 profit to US$ 13 million, driven mainly by losses to property in Lebanon and Morocco, as revenue came in 19% higher at US$ 408 million; losses of   US$ 14 million were attributable to the August Beirut Port blast in Lebanon and a warehouse fire in Morocco. The region’s biggest courier company, noting that “Covid-19 has accelerated growth in the e-commerce industry, which remains the dominant driver of our top-line growth,” expects strong future demand for its express business, which had already risen by 29% to US$ 192 million in Q3; domestic express business was 29% higher at US$ 95 million, driven by strong e-commerce demand especially in Saudi Arabia and the UAE. In September, ADQ, one of the region’s largest holding companies, acquired 22.25% of Aramex.

Dubai Aerospace Enterprise posted a 42.4% decline in profit to US$ 167 million for the first nine months of the year, as revenue dipped 10.0% to US$ 268 million. YTD, ME’s biggest plane lessor signed agreements to acquire thirty-one aircraft, valued at US$ 1.1 billion, of which US$ 200 million was booked in Q3, with the remainder being booked in the Q4 and early 2021. The aviation industry has been badly mauled by the pandemic and will continue to be economically scarred for the foreseeable future. With the second wave already moving into top gear, cash strapped airlines will face even deeper financial crunches, as passenger demand remains weak and planes continue to be grounded. DAE has indicated that it is working with its customers and has provided relief packages to twenty-one companies, worth US$ 155 million. Furthermore, it has entered into several lease amendments, offering relief totalling US$ 84 million to twelve customers involving near-term relief in exchange for lease extensions. Despite all the turmoil, the Dubai-based company, wholly owned by Investment Corporation of Dubai, achieved 98.3% fleet utilisation at the end of September and ended the period with available liquidity of US$ 2.1 billion, after it repaid a US$ 430 million bond in August.

With no financial details available, it is reported that Dubai-based Khansaheb Investments  has agreed to buy back stakes in three companies – contractor Khansaheb Civil Engineering (45%), oil & gas specialist Khansaheb Hussein (49%) and facilities management company Khansaheb Group (49%) – that were previously held in a JV with UK-based Interserve; this ensures that one of Dubai’s oldest contracting businesses, founded in 1935, is now “the primary owner of all its group companies”. The UK company was placed into administration in March 2019, with liabilities of US$ 1.6 billion, which was then subsequently bought back by a new entity, Interserve Group. Two other examples of Dubai entities buying back stakes in JVs, so as to regain 100% control, are Al Futtaim Construction’s 2018 JV deal with UK-based Carillion and Dutco Group repurchasing from Dutco Balfour Beatty’s two JVs, DBB Contracting and BK Gulf, for US$ 14.3 billion in 2017.

The latest UAE PMI confirms that, in October, business conditions in the country’s non-oil private sector economy deteriorated, indicating a further stalling in the economic recovery; the headline seasonally adjusted index declined 1.5 on the month to 49.5 – with 50 being the threshold between expansion and contraction. A slower rise in output and a sharp reduction in backlog volumes were put down to new business declining for the first time since May. Sales volumes were lower, driven by increased competition and a slow improvement in market activity, with export activity remaining tepid. There was no surprise, given the current economic climate, to see payroll numbers continue to head south, as business expectations sank to a record low, with many still worried about the ongoing impact of the pandemic. Furthermore, some businesses are concerned that costs will outstrip revenue streams, obviously impacting on liquidity, and this has led to marked declines in inventory levels and pressure on margins as selling prices continue to be marked down in order to drum up sales.

Wednesday saw the latest bond listing on Nasdaq Dubai – Commercial Bank of Dubai’s US$ 600 million AT1 6% conventional bond. It was 2.1 times over-subscribed which indicates investors’ confidence not only in CBD itself but also in the Dubai economy. 85% of the issuance was allocated to ME (61%) and European (24%) investors, with the issuance enabling the bank to further support local UAE businesses. The value of new debt listings on the bourse YTD has risen to US$ 17.15 billion – 9% higher from the US$ 15.85 billion over the same period last year.

With its most recent listing – a five-year, US$ 600 million sukuk issued by the Islamic Corporation for the Development of the Private Sector – the total value of sukuk listed on the Dubai Nasdaq has topped US$ 74.0 billion; the ICD is the private sector arm of the Islamic Development Bank (IsDB). The listing, at 140 basis points over the mid-swaps, was three times oversubscribed, with the capital raised being used for development activities in its fifty-five member countries.

There are reports that Emirates NBD is in discussions with Lebanon’s Blom Bank for potential acquisition of its Egyptian subsidiary; although due diligence is still being carried out, there is no certainty that any deal will materialise. Last week, Dubai’s largest bank by assets announced a 68.8% slump in Q3 profit to US$ 425 million, not helped by a jump in impairment charges due to the Covid-19 crisis.

One company that did post positive Q3 figures was Dubai Investments with a 102.9% surge in net profit to US$ 58 million, although nine-month YTD profit was 8.7% lower at US$ 114 million on total revenue of US$ 518 million. Total assets increased 4.4% to US$ 5.9 billion by 30 September 2020. DI is set to launch REIT by Al Mal Capital that is expected to be listed on the DFM in January.

The bourse opened on Sunday 01 November and, 78 points (3.4%) lower the previous four weeks, shed 28 points to close on 2,160 by Thursday 05 November. Emaar Properties, US$ 0.02 higher on the previous week, traded US$ 0.02 higher at US$ 0.73, whilst Arabtec is now in the throes of liquidation, with its last trading, late in September, at US$ 0.14. Thursday 05 November saw the market trading at 181 million shares, worth US$ 43 million, (compared to 181 million shares, at a value of US$ 43 million, on 28 October).

By Thursday, 05 November, Brent, US$ 5.13 lower the previous three weeks had a terrible week slumping US$ 2.15 (5.1%) to US$ 40.31. Gold, US$ 39 (0.2%) lower the previous three weeks, had a better time, mainly thanks to the presidential election, up US$ 68 (3.6%) to close on US$ 1,943, by Thursday 05 November.

Brent started the year on US$ 66.67 and has lost US$ 24.01 (36.0%) YTD but shed a further US$ 2.62 (5.8%) during the month of October to close on US$ 42.66. Meanwhile, the yellow metal gained US$ 380 (20.0%) YTD, having started the year on US$ 1,517 to close at the end of October on US$ 1,897, with October prices down US$ 81 (4.1%) from its month opening of US$ 1,978.

It seems that Chinese authorities may not be so happy with Jack Ma as they cite “major issues” for abruptly halting the stock market debut of his tech giant Ant Group, which should have been selling US$ 34.4 billion worth of shares today – the twin listing in Shanghai and Hong Kong would have been the world’s biggest ever stock market debut. Ant runs Alipay, China’s main online payment system, where the total annual volume of payments on its platforms was US$ 17.6 trillion. The Shanghai Stock Exchange indicated that the Any founder had been called in for “supervisory interviews”, noting that here had been “other major issues”, including changes in “the financial technology regulatory environment” and that the company no longer met “listing conditions or information disclosure requirements”. Maybe the Chinese authorities are concerned that Mr Ma will be able to collect more personal data on the population than they can and that they are losing control of their number one tech giant.

In the six months to 26 September, Marks & Spencer posted a 15.8% decline in revenue to US$ 5.3 billion and sank to its first loss in its ninety-four years as a publicly-listed company, with a deficit of US$ 114 million following a US$ 206 million profit in the same period last year. The main driver behind the disappointing figures was lower clothing and home sales, with clothing sales in city stores over the last quarter tanking 53%; more formal works clothes and occasion-wear bore the brunt of the fall. To further save costs, the retailer cut 7k jobs last August. Online sales were the strongest they have ever been but were still some way off to cover the loss of retail turnover arising from the closure of its six hundred stores during lockdown. Since the start of September, its partnership with Ocado Retail to deliver food has reported a 47.9% hike in sales and rising margins. Until then M&S was one of the few big food retailers without their own internal delivery service.

Ryanair has announced that it would be working to 40% of its capacity this winter but this could drop depending on government restrictions across Europe. Its 2020 forecast, prior to the arrival of the pandemic, was for 150 million passengers, (149 million in 2019), but now it expects to move only 38 million next summer. The airline expects to report a higher H2 loss, to 31 March 2021, compared to H1, but were reluctant to forecast the possible figure. At the end of September, the company had a cash balance of US$ 5.3 billion and is confident that the airline will be able to come through “this unprecedented crisis”. Prior to this year, the airline had only ever posted one annual loss in its thirty-year history.

Dunkin’ and Baskin-Robbins is to be acquired for US$ 11.3 billion by Inspire Bands,  a private equity-backed company in one of the largest-ever transactions in a restaurant industry; The firm, which already owns Arby’s and Buffalo Wild Wings, will take the Dunkin’ Brands Group private at a 23% premium on its 23 October price. Inspire seems to be going against the Covid-19 market trend with its share value already 32% up YTD – and its results heading north, whilst many of its rivals struggle. Inspire, still only two years old, is backed by private equity firm Roark Capital. Its strategy has been to build a collection of restaurant brands serving customers across different markets and has seen it since then buy Sonic and Jimmy John’s.  The latest acquisition increases Inspire’s property portfolio by 12.5k Dunkin’ and 8.0k Baskin-Robbins outlets.

It has been reported in the Oman press that the finance ministry is looking at the introduction of income tax on high earners in 2022 in an effort to reduce its fiscal deficit. It seems that mention of the tax was included in a bond prospectus published by the Ministry of Finance when the Sultanate raised US$ 2.0 billion. This comes at the same time that a Royal Decree announced that VAT would be introduced on 01 April 2021, with Oman becoming the fourth GCC state to introduce the tax after the UAE, Saudi Arabia and Bahrain. Compared to its neighbours, Oman, with the highest breakeven oil price of GCC nations, has the most acute fiscal deficit so it is no surprise to see news of a possible new tax being introduced. The IMF estimates that its economy will contract 10.0% this year, with a 2020 budget deficit forecast of 18.3%, slightly improving to 16.3% next year.

Dominic Chappel, the former owner of troubled BHS, which he acquired from Phillip Green, before seeing the chain collapse in 2015, with the loss of 11k jobs and a pension deficit of US$ 760 million, has been sentenced to six years in jail for tax evasion. He was found guilty of failing to pay tax of over US$ 780k  on the US$ 3 million of income he received after buying the failed chain for US$ 4 (GBP 1). It was alleged that he spent the money on two yachts, a Bentley and a holiday to the Bahamas. Earlier in the year he was ordered to pay US$ 13 million into BHS pension schemes after losing an appeal.

One sector that can thank Covid-19 is gaming, with the pandemic driving a boom in video games because movement restrictions and lockdowns in many countries have left many looking for indoor entertainment, with global industry sales topping US$ 10 billion in March alone and growing every month since then.  One of many companies riding the crest of this wave is Nintendo, as sales of its Switch console, (with 12.5 million units), has helped it to a 259% leap in profits for the last half year ending 30 September to US$ 3.0 billion. Software revenue also jumped with its leader, Animal Crossing: New Horizons, selling 14.3 million. Rival Sony said last week that pre-release demand for its Playstation 5 was higher than expected.

Tuesday saw the 160th running of the Melbourne Cup and punters were not the only ones placing bets on the day. The Reserve Bank also took a gamble cutting interest rates to a record low of 0.1%, with its governor confirming that Australia was not out of recession; it is expected that this rate will stay in place until at least 2024 and it is unlikely to drop below zero because that would not help stimulate spending. It was also confirmed that the RBA will revert to QE and will purchase a further US$ 70 billion government bonds over the next six months to lift inflation and encourage lending and investment. Its governor reiterated that the bonds – to be bought by the central bank on the secondary market and split 80:20, between the federal government and state government – will have to be repaid at maturity. The central bank has also bought US$ 42 billion of three-year government bonds since March. The bank’s main target seems to be to address the high rate of unemployment, expected to peak next year at 8%. The double whammy of bond purchases and lower interest rates will result in reducing financing costs for borrowers, contributing to a lower dollar and supporting asset prices and balance sheets. However, this comes with a caveat – any recovery is dependent on successful containment of the virus. The forecast for inflation over the next two years comes in at 1.0% and 1.5% and whilst that level remains below 3%, cash rates are expected to stay pegged at 0.1%.  With the fiscal year ending 30 June 2021, GDP growth is expected to be at 6.0% and at 4.0% a year later.

To try to reduce the negative impact of the latest second wave of coronavirus infections, the ECB has indicated it will soon increase their purchase programmes and provide more stimulus to an already battered continental economy that will inevitably face a double dip recession. ECB President Christine Lagarde reiterated that “we agreed, all of us, that it was necessary to take action and therefore to recalibrate our instruments at our next Governing Council meeting.” It is likely that the bank will use a lot of weapons in its fiscal armoury including the expansion of the Pandemic Emergency Purchase Programme (PEPP), an extension of the terms of the ECB’s cheap Targeted Longer-Term Refinancing Operations (TLTRO) loans, or even a deposit rate cut.

It is not a good portend to see September Eurozone retail sales plunge – even before the latest Covid lockdowns had been announced that has resulted in non-essential retailers in several member states being forced to close stores. Although still 2.2% higher year on year, they were down on the month by 2.0% – a surprise to the market which had expected a better result. The nineteen countries in the bloc had seen a 4.2% hike in August but these latest figures indicated that the sector was moving southwards, even before the latest lockdowns had happened. Belgium and France witnessed monthly falls of 7.4% and 4.5% respectively, whilst clothing/footwear was the main contributor to the decline, down 7.4%. Non-essential retailers have been forced to close their stores in several countries, including France, Germany and parts of Italy so that will inevitably point to a marked decline in Q4 household consumption, although on-line sale figures will head higher. However, it seems likely that the bigger 28-nation EU will witness a higher Q4 3.0% quarter on quarter contraction with the euro-area economy growing at a lower 4.2% in 2021.

Having earlier forecast a V-shaped recovery for the UK and the Eurozone, Morgan Stanley is betting on a W-shaped or double-dip recovery; their change of heart has been brought about by economies again contracting sharply in Q4, as several European nations enter a second lockdown with the resultant economic slowdown. The US investment bank, expecting the second contraction not to be as severe as the one that started last March, considers that there will be a sharp bounce back, once restrictions are lifted if global governments and central banks give the required fiscal and monetary support. In the UK, a one-month lockdown, starting this week, will hurt some sectors more than others, whilst others may be impacted by the looming Brexit. However, it should not be as severe this time because schools and universities are remaining open, construction and manufacturing work will be allowed to continue, and the furlough scheme has been extended.

To the relief of many UK households, the Johnson administration has extended the mortgage payment holidays for homeowners financially affected by the pandemic for another six months as the initial programme came to a halt on Saturday, 31 October. Borrowers, who have not yet had a mortgage holiday, can request a pause in repayments, that can last up to six months, or those who have had their payments already deferred, can extend their mortgage holiday until they reach the six-month limit. Some 2.5 million people have taken a payment break on their mortgage since the start of the then six-month scheme in May. Last week, a study by the Joseph Rowntree Foundation found that 1.6 million households – or a fifth of all British mortgage-holders – were worried about paying their mortgage over the next three months. Borrowers who have already reached the maximum six-month mortgage holiday, and are still facing difficulty making repayments, are being advised by the FCA to speak to their lender about a tailored support plan.

This is but one financial support measure to try and help the economy from the negative impact of a second lockdown which came into force today, aptly on Guy Fawkes Day.  Another sees the reintroduction of the furlough scheme which will pay out 80% of a person’s pay. However, no mention has been made about those who are self-employed, with pressure groups calling for previously announced winter support grants to be increased from covering 40% of profits to something similar to the support on offer for employees. The Treasury later announced that there would be monthly grants, linked to the rateable value of properties, of between US$ 1.8k and US$ 3.9k.

The news of a further lockdown could not have come at a worse time for many especially those involved in sectors such as the hospitality, aviation and travel along with retailers, who have been stocking up for a now hope-dashed Christmas rush. Also, it will be a torrid time for those households who have taken on extra debt and have seen the depletion of their assets since the onset of the pandemic in March. The Financial Conduct Authority is said to be considering a possible payments holiday for people struggling to pay off debts such as credit cards and personal loans, on the same lines as that offered to mortgagees.

According to analysis from the EY Item Club, in the first eight months of the year, business borrowing from UK banks quintupled, compared to the same period in 2019, climbing to US$ 57.5 billion. The main driver was government-backed loans but firms shoring up their dwindling cash reserves also contributed. By the end of the year, the figure – which excludes lending to other lenders and financial companies but includes repayments – is expected to have risen 11% to US$ 657 billion. It is forecast that many borrowers will not start to repay debt, and reduce their borrowing, until 2022 at the earliest. The contrast to an increase in business lending to business is a dip in consumer borrowing which is expected to decline by 6% – its biggest fall since 2011. The forecast is that consumer credit write-off rates will almost double from 1.3% in 2020 to 2.5% next year.

By Thursday, the Bank of England injected a further US$ 195 billion of stimulus into the UK economy on Thursday and at the same time noting that the recovery from the second wave will be a a slower and bumpier one than that of the first. This was the BoE’s fourth QE measure, since the onset of Covid-19 in March, and takes the nine-month total to US$ 1,300 billion; at the same time, it maintained its benchmark interest rate at a record low of 0.1% – a figure that will not go any higher (and may even move into negative territory) for some time. It is expected that the Monetary Policy Committee will look at further stimulus packages in 2021, whilst the corporate bond-buying target stayed at US$ 27 billion. The BoE also downgraded its growth forecast and now expects that the economy will return to its pre-pandemic levels in early 2022, whilst it cut its Q3 growth forecast by 2.2% to 16.2% and a 2% contraction in Q4, with a 11% fall in GDP for the whole year The central bank has also to deal with the impact of Brexit – and along with the pandemic – their effect on consumer confidence and weaker spending. Both will have to show marked improvements for the UK economy to start expanding again. Any improvement will also help with the unemployment problem, which stood at a relatively high 4.5% in August but is expected to move upwards to a worrying 7.7% by Q2 2021.

With the mine owners, Rio Tinto having decided close its Argyle diamond mine in Western Australia and to mothball the operation before returning the land to its Traditional Owners, there has been a surge in interest and a buy-up from wealthy collectors and investors around the world. Since its opening in 1983, the mine has produced more than 865 million carats of rough diamonds, becoming the world’s largest producer of coloured diamonds and virtually the sole source of a very small but consistent source of rare pink diamonds. Apart from the obvious colour difference, the value of pink diamonds is determined by the vibrancy of their bubble-gum hue, whilst that of the white diamond is graded based on their size, cut and clarity. It is estimated that an investment-worthy stone could start at US$ 14k and could attract up to US$ 2.1 million for a single carat. Later in the year will see the penultimate one of Argyle’s annual tenders – an event for just a handful of global jewellers to bid on stones in a blind auction.

After five years, the founder of green energy firm Ecotricity, Dale Vince, has developed a process that utilises a sky-mining facility, using wind and sun to provide the energy, to pull carbon out of the air to produce diamonds that are physically and chemically identical to those that have been mined in the traditional manner. The Gloucestershire-based company claims it is a unique way to process the “Sky Diamond” that challenges ‘normal’ mining techniques, which cause damage to the planet, whilst their diamonds are negative carbon because their diamond product is a form of atmospheric carbon. Production time is around two weeks and each diamond is certified by the International Gemological Institute. This 21st century technology could well serve as a disruptor to the diamond world and will do its bit to fight the climate and other sustainability crises. The Beatles were ahead of their time with Lucy In The Sky With Diamonds!

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Long Long Winter

Long Long Winter                                                                                         29 October 2020

The DLD released Q3 figures showing that despite the negative impact of the pandemic, the value of property transactions in Dubai jumped, quarter on quarter, by over 65% to over US$ 4.9 billion, as the number of deals were 55% higher at 8.7k. September was the strongest month in Q3, with 3.9k deals topping US$ 2.4 billion. In that month, off plan sales accounted for 46% of the total, with 54% for ready-built homes. For the first nine months of the year, there were 24.5k deals, valued at US$ 13.8 billion, pointing to some sort of V-shaped recovery for Dubai’s property market. It is interesting to note that although transaction numbers are heading north, apartment and villa prices have dropped by around 10% over the past twelve months. But with the supply chain beginning to slow – with fewer new developments – it is inevitable that there will be changes to the supply/demand curve. Since Covid-19, the demand for villas – compared to apartments – has risen and the supply of smaller and cheaper villas has moved higher – and will continue to do so in the future. In the coming months, and if Dubai is successful in enticing entrepreneurs and tech start-ups, the demand for housing will inevitably head north.

Latest figures from Asteco indicate that Dubai residential rents have been falling and will continue to decline in the near future – by 43% since their Q2 2014 peak and 13% over the past twelve months, with more decline expected over the next six months, as new supply hits the market. The consultancy has noted that 23.1k new villas and apartments came to the market in the first nine months of 2020 and that a further 8.4k will enter in Q4, bringing the total for the year to 31.5k. Seven locations – Dubai Sports City, Business Bay, Jumeirah Village, Downtown Dubai, Dubai Marina, Jumeirah Beach Residence, and Deira – reported falls of between 13% – 17%.

It is reported that One Za’abeel is still running on schedule and expects to see the structure finished, along with a top-up ceremony, as early as April next year. Its developer, Ithra Dubai, wholly owned by the Investment Corporation of Dubai, also announced that the final lift of the 230-metre long cantilever, called “The Link”, one hundred metres above the ground level between the structure’s twin towers, has been completed. The mixed-used project, costing over US$ 1 billion, will house offices, residential apartments, commercial units and a 497-key One & Only Resorts hotel. The project, which will be completed in stages starting in the fourth quarter of 2021, is forecast to create 3k jobs.

The latest two decrees from the federal Cabinet see the merging of the Insurance Authority with the country’s Central Bank, as well as the transfer of most of the operational and executive powers of the Securities and Commodities Authority to the two local stock exchanges; however, the market regulator will maintain regulation and oversight of local financial markets. One of the main reasons for the first change was to raise the efficiency of the insurance sector, by giving the sector more flexibility. HH Sheikh Mohammed bin Rashid Al Maktoum commented that “Our goal in all of this is to enhance the competitiveness of our national economy … our government will remain flexible, supportive and fast in making appropriate economic decisions.” Furthermore, there is no doubt that this announcement will bring local regulations and business practices in line with international guidelines and operating procedures. This can only increase consumer confidence in a sector that has had its fair share of run-ins with the general public in the past.

The Ruler’s son, Sheikh Hamdan bin Mohammed, Crown Prince of Dubai has launched a US$ 136 million stimulus package that brings the total of finances added by the government to fight the pandemic to over US$ 1.8 billion. Two of the aims were to accelerate recovery and to establish a new phase of economic growth. The money will be spent on six-month licence extensions to nurseries, clinics and healthcare professionals, with the former also getting a 50% reduction in rents from the Knowledge Fund Establishment and also licence renewal exemptions. Meanwhile, taxi operators will also benefit from a reduction in the concession fee and all companies registered with the Dubai Municipality will get an advertising permit fee exemption for three months. It has also extended the validity of some fee exemptions announced earlier in the year and confirmed that all penalties related to government registrations continue to be waived and market fees for all sectors remain frozen.

There was no surprise to see that UAE retail fuel prices remained unchanged for the eighth straight month, with November prices mirroring those of April. Special 95 and diesel will sell at local petrol stations for US$ 0.490 and US$ 0.561 per litre respectively.

Monday saw the return of the e-scooter to Dubai, as hiring was rolled out in five locations – Downtown’s Boulevard, DIC, 2nd of December Street, Al Rigga and JLT – with dedicated lanes A one-year trial will conclude whether this form of transport is safe and whether it helps ease traffic congestion – and if it does, then the RTA will roll out e-scooters around the emirate. E-scooters will cost US$ 0.817 to unlock and US$ 0.136 for every minute thereafter. Bookings will be done online on the respective applications of the various operators including Careem, Lime and Tier, as well as start-ups such as Arnab and Skurrt. Helmets should be worn but do not come with the scooters.

This week, Dubai picked up yet another global award to put on the emirate’s mantlepiece This time, Dubai Customs won the PMO (Project Management Offices) Global Award which is awarded annually, recognising and honouring the work and efforts by organisations and individuals around the world, whilst celebrating representativeness and diversity of countries, cultures, and experiences. This is the world’s largest professional award for Project Management Offices, their organisations and leaders  – and Dubai won from keen competition from three other short-listed finalists that had won their own regional finals in Africa, Americas and Europe. Dubai Customs had already won their final in the Asia-Pacific region to qualify for the grand final.

DP World posted a 1.9% increase in Q3 gross container volumes, ahead of which it hopes to result in a “relatively stable” financial performance by the end of the year; during the three months, the company handled 3.3% more twenty-foot equivalent units – 18.3 million units. During the first nine months of 2020, the port manager recorded a 2.5% decline on a reported basis and 2.0% lower on a like-for-like basis. Its flagship base, Jebal Ali saw declines on both Q3 and YTD volumes – by 4.2% at 3.4 million TEUs and 5.9% to 10.1 million units.  With the almost certainty of stricter restrictions and lockdowns, the world’s largest ports and cargo terminals may have to trim its expansion plans and focus more on containing costs to protect profitability and managing growth capex to preserve cashflow to weather the inevitable economic storm.

The DFM is to introduce its first Reit offering, Al Mal Capital Reit, which is hoping to raise US$ 136 million from the IPO. The money raised will be invested in a diversified portfolio of income-generating real estate assets backed by secure long-term lease agreements. The asset management firm, a subsidiary of Dubai Investments, will open its subscription period on 08 November with a price of US$ 0.272 (AED 1). The fund is targeting a 7% annual return focusing on real estate properties in the UAE and abroad on sectors including healthcare, education and industrials. There are two other real estate investment trusts listed in Dubai – Emirates Reit and ENBD Reit – but on Nasdaq Dubai.

DFM-listed Amanat Holdings has decided to “unilaterally terminate” a sale and purchase agreement between its subsidiary AHE Alpha, SW Holding and Study World Education Holding to sell its Middlesex University Dubai campus, in order to “protect the best interest of Amanat Holding’s shareholders”. The education and healthcare investment firm, with regional interests across education, health care and property sectors, has also abandoned talks to invest in VPS Healthcare. Earlier this month, Amanat made its first foray into venture capital, investing US$ 5 million in US education technology company BEGiN during a Series C financing round.  Its latest released figures saw the company move into negative territory, posting a Q2 loss of over US$ 1 million, compared to a US$ 4 million Q2 profit in 2019.

The Commercial Bank of Dubai, CBD, has issued a US$ 600 million Additional Tier 1 (AT1) perpetual non-call 6-year bond, at a coupon of 6%, as its first-ever AT1 issuance heralds the return of the bank to the capital markets after almost five years; the bonds will be listed on the Euronext Dublin and NASDAQ Dubai. Because the issue attracted a quality order book – and had interest from over one hundred investors – it allowed CBD to set the yield at 6.0%, lowest coupon from a Dubai bank issuer to date and compares favourably with recent issuances in the region. Bank of Dubai reported a 21% drop in Q3 profit to US$ 78 million, driven by rising impairment allowances, (up 31% to almost US$ 59 million), and net interest income falling. Over the first nine months of 2020, CBD, 20% owned by the Investment Corporation of Dubai, posted a 23% decline in profit to US$ 222 million, obviously not helped by impairments climbing to US$ 193 million; net interest income and Islamic financing income  were 8.7% lower at US$ 373 million, with operating expenses falling 9.4% to US$ 161 million. The bank’s assets had risen 12.4% to US$ 25.3 billion since the beginning of the year.

The DFM posted a 35% Q3 profit of US$ 11 million on the back of a 15.0% hike in revenue to US$ 24 million, as expenses edged 2.1% higher to US$ 13 million. For the nine months YTD, revenue was up12.2% at US$ 74 million, with profit 25.8% higher at US$ 41 million, as expenses were up 3.3% to US$ 41 million. Over the period, the bourse’s trading value jumped 28.3% to US$ 13.9 billion. 51% of trading activity was carried out by foreign investors, equating to 18% of the market capitalisation, whilst the number of new investors increased by 3.2 k.

The bourse opened on Sunday 25 October and, 80 points (3.5%) lower the previous three weeks, was almost flat gaining just 2 points to close on 2,188 by Wednesday 28 October, a day earlier than usual because of the Prophet’s birthday. Emaar Properties, US$ 0.10 lower on the previous five weeks, traded US$ 0.02 higher at US$ 0.73, whilst Arabtec is now in the throes of liquidation, with its last trading, late last month, at US$ 0.14. Wednesday 28 October saw the market trading at 181 million shares, worth US$ 43 million, (compared to 215 million shares, at a value of US$ 50 million, on 22 October).

For the month of October and YTD, the bourse had opened on 2,273 and 2,765 and, having closed the month on 2,188, was down 85 points (3.7%) in October and well down by 577 points (20.9%) YTD. Emaar traded lower from its 01 January and 01 October starting figures of US$ 1.10 and US$ 0.78 – down by US$ 0.37 and US$ 0.01 – to close October on US$ 0.77. Even at the beginning of the year, Arabtec was struggling, trading at US$ 0.35 and by the time stumps were drawn in late September, was trading at US$ 0.14 – a major fall from grace, considering that in May 2014 one Arabtec share was worth US$ 8.03.  .

By Thursday, 29 October, Brent, US$ 0.78 lower the previous fortnight had a terrible week slumping US$ 4.38 (11.3%) to US$ 42.46. Gold, US$ 6 (0.2%) lower the previous fortnight, dropped US$ 33 (1.7%) to close on US$ 1,875, by Thursday 29 October.

Following a Q2 disastrous loss of US$ 6.7 billion, BP returned to profit in Q3 – but only just – of US$ 86 million, well down on the US$ 2.2 billion surplus a year earlier. Although still battered by the economic impact of the pandemic, chief executive Bernard Looney said that despite a “challenging environment”, the firm was “performing while transforming” as well as confirming that a dividend will be paid. The energy giant wants to be “net zero” by 2050 and also to halve the amount of carbon in its products by then.

Exxon Mobil has announced a further cull in their workforce, with a 15% (14k) cut in its work force over the next two years, including 1.9k US jobs, mostly in Houston, as well as reductions in contractors and layoffs previously announced in Europe and Australia. The cuts, which will come through attrition, targeted redundancy programmes in 2021 and scaled-back hiring in some countries, are part of chief executive Darren Woods’s latest effort to curtail spending. Exxon is not the only big energy company to be cutting job numbers, with the likes of BP, Royal Dutch Shell and Chevron shedding 10K, 9k and 6k. The fact that its share value has more than halved this year points to the lack of shareholder confidence in the US company.

The four US tech giants – Amazon, Apple, Facebook and Google – all posted Q3 profit and revenue growth, with no indication of any noticeable slowdown. Amazon returned the best results, with revenue growing 37% to US$ 96.1 billion and profit almost tripling to a record US$ 6.3 billion. The only downside was a US$ 2.5 billion hit in Covid-related expenses, as its reputation suffered with global protests against the firm’s working conditions and other policies.

Meanwhile, Apple sales beat analysts’ expectations reaching US$ 64.7 billion – up slightly from a year ago – driven by a surge in sales of laptops and iPads. Two worrying factors – a 20% decline in iPhone revenue and a 30% sales slump in its Greater China region, where it typically generates about 20% of its sales – saw its share value decline. The tech conglomerate is hoping that buyers are simply holding out for its latest phone, which went on sale later than in prior years. By the end of September, Facebook, owner of Instagram and WhatsApp, boasted a staggering 2.5 billion daily users (15% higher than twelve months earlier) but warned that there was a decline in numbers in its prime market of US and Canada, with the trend to continue into Q4. However, Q3 revenue jumped 22%, with even better sales figures forecast over the near future. Amid the shutdowns earlier this year, many businesses cut advertising spending, and this had resulted in Q2 sales to slow at Alphabet, the parent company of Google and YouTube – and to its first year-on-year decline in quarterly revenue since becoming a publicly-listed company in 2004. However, Q3 saw earnings 14% higher to US$ 38.0 billion (minus traffic acquisition costs), with Cloud and YouTube both beating growth expectations by over 40% to US$ 3.4 billion and US$ 5.0 billion respectively; profits were 59% higher at a mouth-watering US$ 11.0 billion – little wonder the firm’s shares moved 6% higher in after-hours trading.

Although the Big Four’s revenue and profit figures seem to be growing inexorably, next year could see more trouble with the regulators not only in the US but also globally. Their tech dominance not only irks regulators but also competitors who have antitrust concerns and worries that they may already be too big to fail. Even Facebook expects more investigations into their workings noting “headwinds… from the evolving regulatory landscape”.

Troubled Boeing is planning a further 7k job cuts so by the end of the year, the US plane maker will see its payroll having fallen by 30k to 130k since the start of the pandemic, as its losses mount. Boeing is still reeling from the fallout from the two fatal crashed involving its 737 Max jets that have now been grounded for twenty months and has seen a subsequent slump in orders. The company posted its fourth straight quarterly loss in Q3, with a US$ 466 million deficit, whilst nine-month revenue fell by 30% to US$ 42 billion. However, it is expected that 737 deliveries will start again in Q4 but on a much-reduced scale. On a more worrying point, Boeing does not expect travel to return to pre-crisis levels until about 2023 and if that is the case, it will continue trading losses for a few more quarters to come.

It is reported that Mercedes-Benz is to raise its current 5% stake in Aston Martin Lagonda to 20%, as part of the UK carmaker’s recovery plan.Some months ago,Formula One team owner Lawrence Stroll took a majority stake in the British luxury marque which had been devastated by a disastrous 2018 stock market flotation; since then its share valued has tanked from US$ 709.62 to US$ 70.73. This so-called “strategic technology agreement” will give AM access to Mercedes’ electric car technology and will help with its strategy to increase vehicle sales by 70.6% to 10k and revenue (and profit) to US$ 3.3 billion (and US$ 650 million). On Tuesday, Aston Martin posted a US$ 30 million Q3 pre-tax loss – down from a US$ 57 million profit in the same period last year.

Samsung Electronics has reported record Q3 revenues of US$ 59.0 billion, driven by a massive 50% hike in smart phone sales, as profit came in, 49% higher, at US$ 8.3 billion. It is noted that Huawei’s problems with the Trump administration most certainly helped with the quarterly boost in sales. Huawei has been stockpiling chips ahead of possible US sanctions. The South Korean tech conglomerate Samsung also witnessed strong growth in sales of its premium TVs and appliances. The microchip industry is in the midst of major consolidations, with graphics chipmaker Nvidia recently acquiring British mobile chipmaker Arm from Softbank for US$ 40.0 billion and, this week, chipmaking giant AMD reportedly willing to pay US$ 35 billion for its rival Xilinx in a near-record deal.

Europe’s biggest bank, HSBC, posted a 35% Q3 slump in profits to US$ 3.1 billion, as revenues declined 11%, with the bank setting aside impairment provisions of between US$ 8 billion to US$ 13 billion. It has had its fair share of recent problems, including allegations that it aided and abetted fraudsters to transfer millions of dollars around the world, even after learning of the scam, as well US administration criticism from US Secretary of State Mike Pompeo for supporting China’s controversial security legislation. Well before the onset of Covid-19, HSBC was planning massive cuts of US$ 4.5 billion by 2022 and has since been further hit by continuing low interest rates and spiralling impairment losses.

If Gap decides to shift its European operations to franchise-only, there is a possibility that the US retailer could close all of its own UK stores, and, with it the loss of thousands of jobs. It has indicated that UK outlets – along with those in France, Ireland and Italy – could shut next summer, along with its UK-based European distribution centre. The firm was already struggling prior to the onset of the pandemic which has only exacerbated their financial woes which saw a quarterly loss at the end of May at US$ 980 million. Earlier in the year, it was planning to close over 225 unprofitable Gap and Banana Republic stores globally, as part of a restructuring plan which was hoped to see it being competitive with the likes of Zara, H&M and Forever 21, which had been taking business from the US retailer.

Driven by a welcome 23% hike in online sales, Next posted a 3.0% rise in Q3 full price sales and a 1.4% increase in total sales. With this improvement, the retailer has raised its annual profit forecast to US$ 485 million but noted that store sales were down by about 50%, compared to same period last year. However, the retailer has warned that a two-week lockdown in November would see a drop in full-price retail sales of nearly US$ 80 million. Like most retailers, Next is hoping for a bumper Christmas but the way in which Covid-19 is spreading, even this scenario is unlikely. It does seem that Next is better positioned than most of its competitors to weather the upcoming storm and the company will be focussing more on out-of-town retail parks continuing to perform better than its stores on High Streets and in shopping centres.

Australia’s largest non-alcoholic beverage bottler, Coca-Cola Amatil, has received a US$ 6.6 billion takeover bid from its European counterpart, Coca-Cola European Partners, offering an 18.6% premium on last Friday’s closing price, valuing each share at US$ 9.08. With the US parent company owning 30.8% of Amatil, in CCEP, which is 19.4% owned by US-based Coca Cola, wants to acquire the remaining 69.2%. With thirty-two production facilities, the Australian company, which has seen a business improvement in the September quarter in line with restrictions being lifted, along with the mini economic recovery, operates in five more nations – Fiji, Indonesia, New Zealand, PNG and Samoa.

Australian retailer, Mosaic, that owns brands such as Noni-B, Millers, Rivers and Katies is set to close another 250 stores by mid-2021 which will result in significant job losses; this is on top of the 73 stores that have already closed since August. Mosaic is laying the blame for these closures on shopping centre landlords for not giving enough rent relief, as it struggled with the pandemic and the impact on its business. In August, the owner of the Westfield shopping malls locked out hundreds of Mosaic staff from their retail stores over a bitter rent dispute. The retailer posted a US$ 120 million annual loss for the year ended 30 June 2020.

On Thursday, Seek put its shares in a trading halt “pending a further announcement”, when their share value fell 5.9%, having slumped 11.8% earlier. This came after a short seller accused the company of over-inflating (by 200%) the value of its Chinese business — in particular, the job-hunting website Zhaopin. With its last share value of US$ 15.21, the company has a market value of US$ 5.4 billion, whereas a report by Blue Orca indicates this is overvalued and the market value is more like US$ 1.8 billion; it claims that its Chinese jobs website was filled with junk or “zombie” listings.

Perth businessman Chris Marco is on trial accused of running a Ponzi scheme of “significant proportions” which left his investors US$ 1.5 billion short of what they could have earned if he had delivered on his promises. The Australian Securities and Investments Commission claims he ran an unregistered management investment scheme and also ran a financial services business without a licence from 2010, whilst alleging he used some of the money raised to buy, renovate and develop property, as well as invest in shares and buy classic cars. Although it seems that the accused claimed that the 310 investors had contributed US$ 184 million to his investment scheme and he had paid out US$ 151 million to them, this was significantly less than the US$ 1.48 billion which ASIC alleged was owed to the investors if the promised returns of their contracts were fulfilled. Some investors were told that US$ 70k (AUD 100k) was the minimum investment amount and that the money would be pooled and invested overseas with a guaranteed 7% quarterly return.

Qantas confirmed that it would be unlikely to be flying to either the US or UK until the end of 2021 and only then if a vaccine has been made available because these areas continue to have a high prevalence of the virus. Notwithstanding New Zealand, international flights elsewhere will not occur until Q3 2021 except for some very limited repatriation flights. Furthermore, with most domestic borders closed in July, the first month of its financial year – and local domestic flights severely curtailed – the company, which owns both Qantas and Jetstar, is expecting a further US$ 70 million Q1 loss, after posting a US$ 1.4 billion profit last year. The company had expected domestic flights to be at 60% capacity, but because of these restrictions, this has been halved to 30%. The airline continues to harangue state governments for keeping their borders closed for some time, despite very low levels of risk in most states.

Despite nationwide lockdowns that has had a devastating impact on its economy, the Australian wine industry has reported their most valuable yearly export trade since 2007; this came despite the two previous quarters registering declines of 4% and 7%. China continues to be its most lucrative market, and although spending more – 4.0% higher at US$ 815 million – imported a smaller volume of wine, down 12% to 123 million litres. The country exports more than 60% of its wine, equating to 770 million litres, with China its main market, followed some way behind by the US and the UK where the market was worth US$ 310 million and US$ 300 million respectively; the UK market expanded by 18% over the year. The revenue for Australian wine sold in its home country is almost US$ 2.5 billion. It is not all good news for the industry because the 2020 grape crush will be the smallest vintage in a decade because drought, bushfires and smoke taint.

According to the Reserve Bank of Australia, there is a possibility that many Australians could enter “negative equity”, if the pandemic-led recession leads to a big fall in house prices. There is every chance that banks will become more vulnerable as non-performing loans are expected to continue to rise as falling incomes make it more difficult for households to meet repayments. Another reason why residential prices could weaken is that Austria’s population growth is expected to weaken over the next twelve months. It was estimated that in June, 8% of Australian housing loans were on deferred payments – deferred until the end of this month. November will see the carnage in the sector when government income-support policies and loan repayment deferrals end.

With Alibaba Group agreeing to subscribe to more than 22% of Ant Group’s imminent IPO, buying 730 million Shanghai-listed A shares in a placement of 3.3 billion shares, with an estimated value of US$ 35 billion, this will result in the world’s largest ever launch. The financial services giant plans to issue about 1.16 billion Hong Kong-listed or H shares to Alibaba, part of a distribution of about 3.26 billion shares to existing backers. The IPO shares deal helps Alibaba prevent the dilution of its stake after Ant goes public. It is estimated that the Chinese e-commerce giant, co-founded by Jack Ma, will hold about 32% of its affiliate’s shares after the IPO. Early estimates put the value of Ant equivalent to the combined market worth of Bank of America and Goldman Sachs. In the first nine months of 2020, Ant posted a 74% leap in gross profit to US$ 10.4 billion.

Bythe end of the week,, it seemed that every man and his dog want a bite of Ant as the Chinese fintech behemoth sets off an investor frenzy. Bids for the retail portion of Ant’s concurrent listing in Shanghai and Hong Kong totalled a record US$ 2.8 trillion on Thursday, exceeding supply by more than 870 times. The record-breaking US$ 35 billion IPO represents a major vote of confidence in both the company, controlled by Jack Ma, and the Chinese government being able to raise such massive sums without any US input.

Following news that global online payment provider PayPal would allow customers to use cryptocurrencies, Bitcoin surged 8% late last week to break the US$ 13k mark for the first time since 2019. Other digital coins also moved up, including Litecoin, which rose more than 13%, and Bitcoin Cash, 9% higher. Even though PayPal has eventually bowed to the inevitability of cryptocurrency trading, it will be a long time before the likes of Bitcoin take over from fiat currencies. The payments giant will bring cryptocurrencies to its Venmo platform in H1 2021 and also plans to introduce it to certain international markets.

Up to this week, Ngozi Okonjo-Iweala looked a shoo-in to lead the World Trade Organisation but now the US has placed a spanner in the works. Nigeria’s ex-finance minister’s appointment has been thrown into doubt after the US opposed the move after a WTO nominations committee recommended the group’s 164 members appoint her to become the first woman and first African to lead the WTO. The US, for some time critical of the WTO’s handling of global trade, favours another woman South Korea’s trade minister, Yoo Myung-hee, saying she could introduce much-needed reform for the body.

By Tuesday, the Turkish lira hit a record low of 8.15 against the greenback amid investor anxiety about the Turkish economy, hit by coronavirus and friction with NATO allies, especially France and the US.  The currency has lost 26% of its value so far in 2020 with the central bank reportedly pumping in US$ 134 billion to prop up the lira. Their situation has been made worse by rising inflation, climbing to 11.7% in September and the central bank’s refusal to raise its key interest rate. Earlier in the week, President Recep Tayyip Erdogan announced that Turkey had  tested the controversial S-400 missile system, bought from Russia, to the chagrin of both the EU, Turkey’s largest trading partner and which had earlier in the month warned them over Turkish exploration for gas off Cyprus, and the US. These geo-political tensions were the main reason behind the latest decline in the Turkish lire and has spooked investors.

It seems that investors have finally take a dose of reality as yesterday, Wednesday saw global markets tumbling for the second day in the week. The major US indices slumped 3.4%, (the Dow –3.4%, S&P 500 – 3.5% and Nasdaq – 3.7%), whilst Germany’s Dax and the UK’s FTSE 100 slid 4.2% and 2.6% respectively, as investors sold off their shares in favour of less risky assets such as the US$. The US market has further jitters ahead of next week’s presidential election. In Thursday trading, Asian stocks also lost ground – Australia’s ASX 200 – 1.6% and the Hang Seng index – 1.2%. Not surprisingly, the shares that took the brunt of the battering were travel and energy, whilst tech stocks were also hit with the likes of Facebook, Google and Twitter all shedding more than 5% on the day. The latest falls came with news that many countries are reporting record numbers of new coronavirus cases, as both France and Germany reintroduce lockdown measures.

On Thursday, Australian shares fell sharply, after global markets tanked overnight on worries about surging COVID-19 infections worldwide and the possibility of a disputed US election result. Since the beginning of the year, the All Ords (-9.6%) and ASX 200 (-11.1%) have tumbled. By late afternoon, the former had lost 106 points – 1.6% – on the day to 6,162 points and the latter 102 points -1.7% – to 5,956 points. This week’s negativity has erased all the gains it made since early October. Markets in the Asia Pacific also felt the negativity, including New Zealand’s NZX 50 (-0.7pc), Hong Kong’s Hang Seng (-1.2pc), the Shanghai Composite (-0.2pc) and Japan’s Nikkei (-0.7pc). Markets in the Asia Pacific also fell, including New Zealand’s NZX 50 (-0.7%), Hong Kong’s Hang Seng (-1.2%), the Shanghai Composite (-0.2%) and Japan’s Nikkei (-0.7%).

In the unlikely event of a Biden victory next week, one country that will benefit from the change of the guard would be Mexico, as a new trade deal would be almost inevitable. The current Mexican President, Andres Manuel Lopez Obrador, has established an uneasy relationship with Donald Trump, as border tensions remain high, whilst the number of illegal immigrants has fallen – this being a quid pro quo for the Mexicans to keep a lid on illegals with the US going easy on tariffs in return, as well as giving them a relatively free hand to interfere with foreign businesses, especially in the energy sector. Mexico has held upbillions of dollars’ worth of energy sector projects, particularly in renewables, arguing that past governments rigged the power market to favour private companies at the public’s expense. If “Sleepy Joe” were to win, it seems likely that the US will see a lady president sooner than many had imagined.

Following on the worst fall on record in Q2, with the economy contracting at an annualised rate of 31.4%, the US economy bounced back at a record 33.1% in Q3, but the economy still hovers below pre-pandemic levels. However, hopes are that there will be positive GDP growth and job growth in Q4 but because of increasing Covid-19 cases  and the fact that the House of Representatives still cannot agree on a new fiscal stimulus package. Details of the eventual package will be dependent on the result of next week’s presidential election, with probably the best result being a consolidated as against a split government.

The UK has formally signed a trade agreement with Japan – the Johnson administration’s first major post-Brexit deal – that would ensure that nearly all its exports to Japan will be tariff free, while removing British tariffs on Japanese cars by 2026; the deal is similar to that Japan has with the EU but also includes an extra chapter on digital trade.  Some have described it as a “ground-breaking, British-shaped deal”, as it will boost the UK GDP by a mere 0.07% but will see trade reach over US$ 20.0 billion. Currently, Japan is the UK’s 11th biggest trading partner. Some critics point to the fact that the agreement has little  to encourage FDI, bearing in mind that Japan is the world’s largest investor abroad, accounting for 14% of the global total and that the UK  could have shown a strong commitment to Japanese investment by including a comprehensive investment chapter, encompassing investment protection and dispute settlement.

Late last week, UK Chancellor, Rishi Sunak, unveiled three extra financial Covid-19 related support measures for businesses, with a particular focus on supporting the country’s hospitality and leisure sectors; such businesses, located in tier-two areas, where they are open but are operationally restricted, will receive US$ 2.8k a month. He also noted that a significant fall in consumer demand is causing profound economic harm, especially in the hospitality industry; thus, he agreed that businesses will now have to pay only 5% of the cost of wages for unworked hours, compared with the earlier announced figure of 33%. The third measure was to double self-employed grants from 20% to 40%, meaning the maximum grant will go up to US$ 4.9k. Grants are available for all self-employed people (all tiers) who have stopped trading or have a significant fall in trade, with two further payments to come. Despite these government moves, increased Covid-19 cases indicate that a general UK lockdown is all but inevitable. The result is that the economy will be hit once more but this time with a more severe impact. It’s going to be a Long Long Winter.

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All I Need Is A Miracle!

All I Need Is A Miracle!                                                                                  22 October 2020

According to Luxhabitat Sotheby’s International Realty, Q3 saw a 158% hike in the sale of Dubai prime villas to 438, with two of them being the most expensive sales in 2020 – over US$ 20 million for a 42.5k sq ft in Dubai Hills and US$ 19 million for one in Emirates Hills. Over 50% of the most expensive properties sold YTD were in Dubai Hills and District One, sub-communities in MBR City. On an annual basis, the firm estimates that both residential rentals and sales have declined on an annual basis by 12% and 9%. On a quarterly basis, the number of transactions – 2.3k apartments and 438 villas – came in 24% higher than Q2, with the cumulative sales value 49.0% higher at just over US$ 2.0 billion; when it comes to sales the top three locations were MBR City (US$ 599 million), Downtown (US$ 327 million) and Palm Jumeirah (US$ 272 million). The Q3 value of transactions jumped 122% to US$ 1.6 billion, as the off-plan market has been hit by a dearth of new releases; the secondary market recorded Q3 prime sales of villas and apartments both rising on the quarter by 230 to 418 and 657 to 1.2k. By the end of last month, the average price for a prime villa was US$ 1.6 million and US$ 490k for an apartment. With villa prices in some locations beginning to rise again – as are rentals – now must be the best time for anyone to buy their own home in Dubai.

In contrast, JLL’s latest UAE Real Estate Market Performance, Dubai’s residential property market will continue to be a buyer’s market on the back of a wider range of incentives being offered, as the addition of new units is expected to further depress prices in the short-term. To attract new business, developers will have to continue to offer a range of incentives such as fee waivers, discounts, rent-to-own, as well as partnerships with banks to attract new investors. In 2018 and 2019, Dubai’s population grew by 7.3% to 3.193 million and by 5.10% to 3.356 million and so far YTD to 18 October by only 1.43% to 3.404 million. So there is no doubt that the population growth is slowing and this will have an obvious negative impact on Dubai’s real estate sector; other factors in play include high unemployment rates (albeit temporary) and subdued investor interest – both locally and globally.

Although no figures were available, it seems that Sobha Realty had a successful Q3, as the year on year number of international investors increased, tapping new markets such as Nigeria and Canada which showed a 20% hike in business. The Dubai-based luxury real estate developer also noted an uptick in investors from the GCC region, India and China.  Although, in line with other developers, Q2 was an almost write-off, Q3 saw a change in direction, as the government prioritised real estate development – considering it a ‘vital sector’ – and enabled work to continue uninterrupted. Work started in 2014 on Sobha Hartland, an eight million, ten-year sq ft luxury freehold master development, which is located in MBR City and will have 30% of the total land dedicated to green cover and open spaces.

To the surprise of many, the latest Mercer survey, covering five hundred UAE companies, revealed that the actual annual salary increase in the country was 3.8% across the general market, with 19.4% freezing salary levels this year. Other more plausible findings were that one hundred and fifty companies were planning to cut payroll numbers by 10% this year and that around 17% of companies have delayed their 2020 increases due to the Covid-19 pandemic, typically for six months. Two interesting facts were that 55% of companies surveyed expected to continue with flexible working arrangements once the pandemic is over and that 25% reported an increase in productivity as a result of employees working from home. It is hard to visualise that it expects salaries to increase by an average 4.0% in 2021, especially since Dubai’s economy, with 106k companies, is built on trade, travel and tourism where there will be much lower numbers earning much lower remuneration packages.

By paying, its last outstanding US$ 1.5 billion bond, issued a decade ago, DEWA is now debt free. This is no mean feat, considering that the authority  has transmission and distribution infrastructure assets, valued at US$ 47.7 billion. DEWA provides
reliable world class supplies of electricity and water to more than one million customers. Over the next five years, it will be investing a further US$ 21.8 billion on new investments, financed by internal resources and leveraging public private partnerships; it will also focus on disruptive technologies, increasing the share of clean energy and promoting a green economy.

This week, the federal cabinet approved amendments to the provisions of the Federal Law by Decree No. (9) of 2016 on bankruptcy which adds new provisions in relation to “emergency situations” that impinge on trade or investment, in times of, inter alia, pandemics, environmental disasters and wars. The aim is to allow individuals and businesses to overcome credit challenges. The new amendments stipulate that the debtor shall be exempted from commencing procedures to declare bankruptcy and that he could reach a settlement with creditors wherein he may request a grace period or negotiate a debt settlement within a period of not more than one year. Furthermore, if the competent court approves a bankruptcy application, it will not involve the debtors’ funds that are needed to keep businesses running during the set period in case they defaulted on debt for emergency. In certain cases, it also allows the possibility to allow businesses to secure financing to keep them in survival mode.

Following their August announcement, the federal Ministry of Economy will now begin implementing a framework of thirty three initiatives to help boost economic growth and attract investment. Among them include the development of trade, green economy and food security, as well as finance, energy and health sectors – all of which are meant to lift the country’s economy from the impact of Covid-19. Initially, the plan, encompassing three sections, is to focus on fifteen major initiatives, followed by the second phase which will provide complementary support that enables the rapid economic recovery of sectors, with the final one focussing on supporting vital sectors and pave the way for “sustainable and flexible development”. HH Sheikh Mohammed bin Rashid Al Maktoum reiterated that the recovery was the top priority for the country’s economy in the short term, but long-term plans will make it more stable and diversified. He also commented that “we want a competitive national economy, well integrated, acting proactively, and make quality strides.”

NY Koen Group is among the bidders for Israir, Israel’s third largest airline. The Dubai-based holding company’s subsidiary, Aero Private Jet, (with operators and private business jet owners around the world, with access to over 7k planes and 4k airports) will make the bid. The Israeli airline is the country’s biggest tour operator and arranges European and regional travel packages and has reserved slots for commercial flights from Tel Aviv to the UAE, and has already booked eight round-trip flights to Dubai this month. Established in 2003, the NY Koen Group is also involved in various sectors, including jewellery, digital technologies, construction and security.

A lot has gone on in the past month since the UAE normalised diplomatic relations with Israel, with several bi-lateral trade and investment agreements already signed. Recent estimates from Israel forecast that trade with the UAE could eventually create a total of US$ 4 billion and 15k jobs in sectors such as aviation, financial services, security, telecoms, technology and tourism. Trade is also likely to grow for Dubai, as more physical goods with many Asian exports flowing through the emirate en route for Israel. Indeed, last week, the MCC Paris became the first cargo ship to sail between the two countries in what Israeli’s Prime Minister Benjamin Netanyahu called “the beginning of something big”.

With Israel looking to upgrade port facilities at Ashdod and Haifa, DP World is working with Israel’s Dover Tower to expand its presence in the country. The world’s biggest port operator, with 127 global operations and handling 10% of all the shipping containers, posted a 3.9% fall in H1 to 33.9 million TEUs (twenty-foot equivalent units), but this was better than the global average 5.6% decline. With the global economy set to decline by 4.4% this year, DP World, employing 56k worldwide, will post another drop in business in H2 of up to 6%.

In a similar vein to its marine neighbour, dnata continues to expand its global empire and this week entered the Indonesian market, with a partnership with PT UNEX Rajawali. This brings the Dubai-based airport operator’s reach, in ground handling, cargo and catering services to thirteen airports – and eighty airlines – in the Asia-Pacific region. Its new partner is based at Jakarta’s main international airport. UNEX is a leading ground handling and cargo warehouse company and its partnership with dnata, by making joint investments in facilities, equipment and training, will enhance ground handling capacity in Indonesia, the fourth largest country in the world, (with a population of 260 million), and the largest economy in SE Asia. With over 17k islands, it makes air travel the preferred and most efficient transportation method for both passenger and cargo across the nation.

By the end of August, the number of subscribers in the UAE telecommunications services, including mobile phones, landlines and Internet, rose 1.0% on the month to 21.8 million, of which mobile phones accounted for 16.7 million phone subscribers, a monthly  1.3% growth of 206k. Prepaid mobile phone subscriptions totalled 13.1 million, while post-paid mobile phone subscriptions stood at 3.6 million, with landline subscriptions remaining flat at 2.1 million, as did the total number of internet subscriptions at 3.0 million.

Etisalat posted a 6.0% hike in Q3 profit to US$ 654 million on the back of revenue nudging 0.5% higher to over US$ 3.5 billion. Operating expenses at US$ 2.1 billion came in 1.0% lower, whilst overall capital expenditure decreased by 17.0% to US$ 409 million. YTD, its nine-month profit increased 3.7% to US$ 1.9 billion, with revenue 0.5% higher at US$ 10.5 billion. The country’s biggest telecom operator saw its aggregate subscriber base expand 1.0% to reach 149 million by the end of September, as its subscriber base in the UAE grew to 12.1 million. The pandemic was the main attribute that saw UAE revenue down 3.0%, as mobile and fixed voice, outbound roaming, visitor roaming and handset sales declined. However, Etisalat Misr and improvement in its operations in Pakistan drove a 3.0% increase  in international revenues.

Meanwhile Emirates Integrated Telecommunications Company, posted a massive 116.2% in Q3 profit, driven by the sale of its stake in Khazna Data Centres. Better known as du, and the UAE’s second-biggest telecoms operator, last month it signed a US$ 218 million agreement with the Technology Holding Company to sell its minority stake in Khazna which drove the bottom line higher despite a Q3 12.4% revenue fall to US$ 733 million. Its Q3 capex of US$ 139 million equated to about 19% of its revenue. du is owned by Emirates Investment Authority (51.12%), Mubadala Investment Company (10.06%) and Emirates International Telecommunications (19.7%), with the remainder of shares in public hands.

Dubai Islamic Bank posted a 19.0% decline in Q3 profit to US$ 274 million, driven by increases in impairment provisions (by 60.0% to US$ 145 million) and operating expenses (16.0% higher at US$ 181 million). The country’s largest Sharia-compliant lender, following its acquisition of Noor Bank earlier in the year, saw nine-month profit down 21.0% to US$ 845 million, with impairment charges and operating expenses both heading north by 151% to US$ 722 million and 23.5% to US$ 572 million. YTD, customer deposits grew nearly 31% to US$ 58.5 billion, while net financing and sukuk investments during the period rose 27% to US$ 63.9 billion.

Dubai’s biggest lender, by assets, posted a Q3 US$ 695 million decline in profit to US$ 425 million as pandemic-driven impairment allowances climbed 41% to US$ 586 million. Emirates NBD saw its net fee and commission income decline 16% year-on-year to US$ 260 million. The nine-month YTD figures see a 55% slump in profits to US$ 1.5 billion, with impairments jumping 131% to US$ 1.7 billion and the ratio of non-performing loans rising to 6.0%, compared with 5.6% a year earlier. Over the period of the pandemic the bank has provided US$ 1.8 billion of interest and principal deferrals to over 98.5k of its clients.

Emirates Central Cooling Systems Corporation awarded contracts worth Dh190 million to construct a new district cooling plant, with a capacity of 50k refrigeration tonnes, in Business Bay, to be completed by Q3 2021. Last year, it awarded contracts totalling US$ 300 million. The Dubai-based district cooling provider, established in 2003, is a JV between DEWA and Tecom Investments and currently provides the area with 135k refrigeration tonnes, to 62% of the area’s buildings. Overall, the company provides 1.53 million refrigeration tonnes to 1.2k buildings in Dubai. Last year, Empower posted an 8.3% hike in profit to US$ 237 million, on the back of a 7.9% increase in revenue to US$ 597 million.

The bourse opened on Sunday 18 October and, 71 points (1.9%) lower the previous fortnight, lost a further 9 points (0.4%) to close on 2,186 by 22 October. Emaar Properties, US$ 0.09 lower on the previous four weeks, traded US$ 0.01 down to US$ 0.71, whilst Arabtec is now in the throes of liquidation, with its last trading, late last month, at US$ 0.14. Thursday 22 October saw the market trading at 215 million shares, worth US$ 50 million, (compared to 214 million shares, at a value of US$ 45 million, on 15 October).

By Thursday, 22 October, Brent, US$ 0.44 lower the previous week shed US$ 0.32 (0.7%) to US$ 42.46. Gold, US$ 4 (0.2%) lower the previous week, slipped US$ 2 (0.2%) to close on US$ 1,908, by Thursday 22 October.

The Boston-based Fidelity Investments plans to hire a further 4k over the next six months in areas including financial advisers and customer service agents, as it benefits from the pandemic-driven economic turmoil. Although some other asset managers – such as Invesco and Franklin Resources – are struggling, the bigger players, including Fidelity and Blackrock, are reporting record assets, as investors pour their money into more diverse fund firms, especially ones with passive, index-tracking products. Others are cutting payroll numbers, such as Nuveen, with 4% of its staff taking voluntary buyouts this year, and Franklin Templeton ditching 8% of its staff, even though it just acquired Legg Mason. Meanwhile, last week, Morgan Stanley agreed to pay $7 billion for Eaton Vance.

Purdue Pharma has finally settled with the US legislature as a US 8.3 billion settlement was agreed to plead guilty to criminal charges to resolve a probe of its role in fuelling America’s opioid crisis. Despite the fact that the most serious claims against Purdue Pharma have been resolved, the pharma company will have to face thousands of private cases by states and families, impacted by the abuse of the painkiller. There are some critics who consider that the Sackler family got off very lightly considering their company’s contribution to the scandal. Some would argue the settlement too lean on the owners, the Sackler family, for a crisis that has claimed more than 400k US lives over the past twenty years. Most of the US$ 8.3 billion fine will not go to the Department of Justice but to others involved, including the communities ravaged by opioid abuse that have sued the company. Part of the settlement agreement will see the firm admit to conspiring to defraud the US and violating anti-kickback laws in its distribution of the addictive painkillers, including payments made to healthcare companies and doctors to encourage prescribing the drugs. It is also claimed that the Sackler family transferred over US$ 10 billion out of the company in the ten years to 2017, knowing that regulatory scrutiny was increasing.

With its post-pandemic revenue stream drying to almost zero, from a previous year’s US$ 215 million sales figure, the Birmingham-based NEC Group is to cut 450 jobs, equivalent to about 55% of its workforce; it also supports 29k full-time equivalent roles in the supply chain.  The firm, the largest in the UK events sector, runs five venues including the National Exhibition Centre, Resorts World Arena and International Convention Centre. Its biggest venue has been used by the NHS for the Birmingham Nightingale Hospital, free of charge. To make matters worse, it was unable to access the government’s Job Support Scheme and is now forced to close again, with the new strict safety measures in place.

Four of the major supermarkets – Asda, Morrisons, Sainsbury’s and Tesco, with 14.5%, 10.1%, 14.9% and 26.8%, and accounting for 66.3% of the UK supermarket market share, have already cut their prices. Now, Co-op and Waitrose are lowering prices ahead of the Christmas rush. The former is investing US$ 65 million to lower prices on three hundred branded and own-brand products and is launching a value range. Waitrose is reducing prices on two hundred of its most popular own-label products. However, as they only account for 11.7% of the market share, they lack the buying power of the Big Four and the two discounters Aldi and Lidl. Waitrose will also suffer because it is considered to be pricier and more upmarket than the other players in the market and deemed not so attractive to a cost-conscious clientele. Meanwhile, the Big Four will have to pre-empt any attempt by the two German interlopers to grab market share as happened during the GFC of 2009.

As expected, Goldman Sachs, which agreed that it had paid in excess of US$ 1 billion in bribes to win work raising money for 1MDB, has finally agreed to pay nearly US$3 billion to end a probe by US authorities. Goldman Sachs put it down to an “institutional failure”, whilst authorities said it reflected Goldman’s “central” role in a “massive corruption scheme”. Overall the disgraced bank will pay about US$ 5 billion in penalties – about two thirds of its 2019 profits – to regulators around the world. It will also reclaim US$ 174 million in compensation awarded to executives at the time the scandal was unfolding.

Following a year of intensive investigations, the US government has filed charges against Google, on the grounds of abusing its dominance to preserve a monopoly over internet searches and online advertising. This is biggest legal challenge ever undertaken by a US administration, (involving the US Department of Justice and eleven other states), against a major tech company, and comes at a time when the biggest tech firms face intense scrutiny of their practices at home and abroad. The focus of the case is that Google pays each year to ensure its search engine is installed as the default option on browsers and devices such as mobile phones, with the result that Google owns and controls the channels for about 80% of search queries in the US. The lawsuit also indicated that “general search engine competitors are denied vital distribution, scale, and product recognition – ensuring they have no real chance to challenge Google”.  There is no doubt that this is a forerunner of the first of many in the US that challenge the dominance of big tech firms and potentially lead to their break-up and it is an indication that the Trump administration is willing to take on the big tech firms which will have an “Escape from Gaol card” if the incumbent loses the presidential election next month. Google has had problems in Europe and is currently appealing US$ 9.5 billion in fines from the EU, in three separate cases since 2017.

There is no surprise to see that the British Retail Consortium is accusing Visa and Mastercard of cashing in during the coronavirus crisis by charging “excessive fees”, claiming that the fees charged by payment firms have almost doubled in the last two years. It issued a warning that these extra costs will put an additional annual cost of US$ 52 on each card, claiming that “if a phone or energy company increased their fees by such an amount there would uproar. It’s an abuse of a dominant market position by these companies.” Both card companies, that control 98% of the UK market, refute the claims. However, retail and hospitality trade bodies have called for action to tackle card fees, as more of them have been forced to accept only card payments due to the pandemic and social distancing rules. With such market dominance, no wonder their charges were – and still are – so high; the BRC noted that the average cost of a cash transaction to retailers was just US$ 0.0187, accepting payment by debit cards costs retailers US$ 0.0774, while credit cards cost them US$ 0.2423. They seem to have made their card schemes so complex to flummox users (and regulators) and extract more profit – the BRC said the increases in scheme fees over 2017 and 2018 were 39% and 56%.

One of the few sectors to join the likes of gaming, online fashion and grocery, that have actually benefitted from the pandemic, is comics.  The three-year old Geek Retreat – which specialises in “all things geeky” including comics, memorabilia and tabletop games – plans to open another one hundred stores before the end of 2022, creating at least 600 jobs. With fourteen UK sites already, which combine retail space with cafes and areas to play games and hold events, the Glasgow company is hoping to benefit from the expansion of the wider US$ 10.5 billion games and hobby sector, which is expected to increase by at least 3% this year.

A 14.5% rise in July was followed by a15.6% hoist in August in UK house sales, buoyed by the roll-out of the government’s nine-month Stamp Duty Land Tax holiday on properties up to the value of US$ 670k; it is estimated that 90% of all first-time buyers will save an average US$ 6k. HM Treasury data estimated that this move has protected almost 750k jobs in the housing sector and wider supply chain,. such as housebuilders, estate agents, tradespeople, DIY retailers and removal firms (How would a similar move from the DLD work here in Dubai?). Meanwhile, UK house prices increased 3.4% over the year to June   with the average price being US$ 315k. According to a Building Socieities Associations’ study, 37% of Brits say now is a good time to buy a property, compared to 25% in June. However, it is becoming more difficult for first-time buyers because of recent price hikes, and money tightening by banks because of the current recession.

The aviation sector, including major airlines, airports and tour firms, is one of the most vocal sectors in the global economic environment and it has made it known how badly it has been hit by Covid-19. This week, there are even more examples on how revenue, profits and payroll numbers have slumped and the actions taken by some of its leading players. The global industry body warned that hundreds of thousands of aviation jobs are at risk without more state aid, as it downgraded its 2020 traffic forecasts, after “a dismal end to the summer travel season”. IATA has forecast that this year’s traffic will be 66% lower than it was in 2019 and that it will be at least 2024 before air traffic reaches pre-pandemic levels. There is also concern that the pandemic will cause airline losses of more than US$ 84 billion globally in 2020.The expected rebound has not materialised because of a second surge in Covid-19 cases and more government restrictions. IATA chief executive Alexandre de Juniac has called for Covid-19 tests to be routinely carried out on passengers before flights depart, which could have the double whammy of raising consumer confidence in air travel and making governments more willing to open borders.

Cathay Pacific expects to run just 10% of its flight schedule for the remainder of this year and be flying 25% and 50% of capacity in H1 and H2 2021, assuming a vaccine has been made available. September passenger numbers of just 47k, including its budget carrier Cathay Dragon, were 98.1% lower on the year; in 2019, it carried 35 million passengers on 81k flights. Cargo performed slightly better, carrying 109k tonnes, down 36.6% compared to September 2019. The fact that it is still running is the result of a US$ 5.0 billion bailout package from the Hong Kong government.

Meanwhile, the world’s biggest airline indicated it would lose 19k jobs this month, with the 31 October end of the government wage support scheme extended to airlines during the pandemic. This will see the American Airlines payroll at under 100k, 30% smaller than it was in March. In addition to the 19k cuts, about 12.5k employees have voluntarily left the airline since March, whilst another 11k will be on voluntary leave in October. Other global carriers have had to lay of staff including United with a possible 36k, Lufthansa (22k)  and 12k from BA.

At least there was a crumb of good news with a former shareholder stepping in to acquire its remaining assets, it seems that collapsed regional airline Flybe could restart operations, on a smaller scale, early next year. Thyme Opco is taking over a regional airline that until its March demise employed 2.2k, carried eight million passengers a year and ran 40% of regional UK flights, from Southampton, Exeter and Belfast City airports. Other carriers have taken over some their former routes but many flights it operated have not been saved.

Probably the most quintessential of Aussie brands, RM Williams, has been acquired by mining magnate Andrew ‘Twiggy’ Forrest and his wife Nicola and returned to Australian ownership having been acquired by Louis Vuitton-backed private equity firm L Catterton. Founded in 1932 by Reginald Murray Williams, he sold the business in 1988 to another SA business, Bennett & Fisher but was driven into receivership in 1993 by banks worried about a US$ 10 million loan. Later it was placed under the ownership of RM’s long-time friend Ken Cowley, in partnership with business mogul Kerry Stokes, until sold to the French in 2013. Its  sixty-eight Australian outlets were closed in March because of Covid-19 and its Salisbury factory, with 400 employees, temporarily closed; another 500 are employees across the country. It has stores in London, New York City and Copenhagen and markets its boots, jeans and other clothing to thirteen countries.

Earlier in the year it was iron ore and last week barley; now it is its cotton industry’s turn to become the latest casualty of Australia’s ongoing trade tensions with China. There are reports that that a 40% tariff could be imposed with Chinese mills having been “discouraged” from buying Australian cotton. The Australian industry has become increasingly nervous about the US$ 600 million market, which accounts for 65% of the cotton grown nationwide. The Chinese government uses a quota system to control the amount of cotton that each mill in the country can import and it seems that spinning mills have been warned not to use Australian product, or risk their quotas being slashed. The government seem confident enough that it could export the cotton not going to China to other countries such as Vietnam, India and Indonesia.

This week, there are two examples from Australia of how bureaucrats can waste public money and more often than not get away with it. This is not only an Australian problem but a global one that some feel is getting worse. The first concerns Australian Post and sees its Chief Executive, Christine Holgate, standing aside pending an enquiry. It is alleged that the company has handed out millions of dollars in bonuses, including US$ 420 “thank you” payments to posties, as well as Cartier watches to four executives  who worked on a multi-million-dollar deal that meant customers of Commonwealth Bank, Westpac and NAB could do their banking at post offices. (The Cartier watches were not as expensive as the Rolexes that the disgraced FIFA supremo, Sepp Blatter, used to hand out to executive members). The good lady is Australia’s highest paid civil servant with a remuneration package of nearly US$ 1.8 million

James Shipton, the chair of Australia’s ASIC, who has also stood aside after it was revealed the organisation paid more than US$ 80k for him to receive personal tax advice, when he moved from the US to head up the corporate watchdog in 2018. There are also concerns about his deputy, Dan Crennan, about a US$ 45k housing cost payment made over two years following his relocation from Melbourne to Sydney in early 2019. It seems that, in both cases, payments may have exceeded the limits set by the Remuneration Tribunal and that the Commonwealth Procurement Rules were not followed. Both men, whose remunerations totalled US$ 610k and US$ 481k, have indicated that they would repay the money.  Very noble gestures on their part.

US September retail salesretail sales grew at the fastest pace in three months, ensuring a Q3 rebound for consumer spending; over the past two months, overall sales have notched up 1.9% and 0.6%. The main drivers behind this boost were put down to consumers tapping elevated savings, with demand also supported by temporary extra jobless benefits and continued hiring. All but one of the thirteen major categories, except electronics and appliance stores, increased in September. However, the double whammy of a marked increase in coronavirus infections and government funding dwindling, because of Congress’s failure to agree on a fresh stimulus package, may bring this rebound to a screeching halt. Although total retail sales have surpassed their February level,  several industries – including restaurants, clothing and electronics and appliance stores – continue to struggle and have yet to return to their pre-pandemic levels; the money that used to be spent in these sectors is now being expended at grocery stores, online vendors and building material retailers.

It seems that Saxo Bank is using Scrabble to forecast what letter should be used to describe what will happen to the US economy. Their projection is for a K-shaped recovery – in which the performance of different parts of the economy diverges like the arms of the letter K – irrespective of who wins the 03 November presidential election. The expectation is that high-income Americans will see jobs come back and income grow, while middle-and lower-class people will not. The historic fact that the rich will still get richer remains an economic truism, despite the pandemic. But the pandemic has ensured two conclusions – that the world needs a weaker US dollar to recover because most of the global debt is denominated in this currency and that the current economic models will no longer be operational post Covid-19.

Interestingly, the bank has predicted three scenarios on the upcoming election – 40% for a Biden victory, 20% for the incumbent to remain in office and 40% for a contested election The firsdt scenario will probably result in a sell-off in equities, particularly in technology, a rally in green stocks and higher interest rates. A Trump victory would cause four more years of disruption to the global order, trigger a relief rally and result in two split Houses, whilst reducing the potential for a fiscal stimulus. If there is a bitterly contested election, the result will be a spike in volatility, sell-off in equities due to uncertainty, a weaker US dollar and stronger gold.

For the fifth straight month, UK retail sales continued their upward progress, as demand for food and household goods ensured that Q3 was the biggest quarterly jump on record, With the September volume of goods sold in stores and online growing 1.5%, the total sales volume came in 5.5% higher than their pre-pandemic level, with Q3 sales 17.4% higher. However, by next month this recovery may fizzle out somewhat because of the end of the furlough scheme and the expected increase in the unemployment rate; also the recent hike in cases and the tightening of restrictions will not help the cause. Most food stores and online retailers have returned to pre-pandemic levels but that has not been the case for clothing stores they have been slower to recover and with still people working from home, fuel sales have remained subdued. One interesting fact was the proportion of online sales now stands at 27.5%, compared to the 20.1% recorded in February.

After falling into negative territory, following the Covid-19 impact, UK’s inflation rate has subsequently moved north  into positivity, reaching 0.2% in July and 0.5% last month; the September increase was a direct result of the Eat Out to Help Out which only lasted throughout August, making restaurant and café meal prices higher; in catering services, the month on month price increase was 4.1%, compared to a 0.2% rise over the same period in 2019. At the same time, transport costs also went up as demand for second-hand cars rose. With data like this, it is more than probable that the BoE will introduce another QE stimulus package before the end of the year, whilst the UK Chancellor will have to spend more public money to try and counteract the impact of returning increased lockdowns.

Earlier in the week, Moody’s Investors Service cut the UK’s credit ratings to Aa3 from Aa2 relating to long-term issuer and senior unsecured ratings. The agency cited weaker growth, eroding fiscal strength and a weakening in its institutions and governance for the downgrade. One positive was a change in the outlook for the world’s sixth biggest economy from negative to stable. The UK is being impacted on a number of fronts – weak economic growth, an absent post-Brexit deal and a rising number of coronavirus cases. Moody’s is concerned that uncertainty surrounding Brexit could further hamper any economic recovery, as there is the possibility of losing US$ 1.2 trillion worth of annual trade, free of tariffs or quotas from next year. The Johnson government would prefer to negotiate a trade deal similar to the one secured by Canada, with a few tariffs on goods. Unfortunately for the Prime Minister, it seems that he will have to make do with a no-deal Brexit that could render all previous trade agreements null.

Michel Barnier has arrived in London in a final bid to strike a highly unlikely post-Brexit trade deal, warning that time is running out.  It is not known whether the EU’s chief negotiator is in London to negotiate with his UK counterpart Lord David Frost, to save his own job or to negotiate a deal. The UK had earlier called off all future talks with the EU but the Frenchman has changed his tone somewhat, now saying that “compromises on both sides” were needed, whilst he must be thinking All I need Is A Miracle!

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Goodbye To You My Trusted Friend

Goodbye To You My Trusted Friend. 15 October 2020

There are signs that Dubai’s property pipeline is likely to contract in the coming years and more so in the villas and townhouses segment. For example, Core is looking at a residential units’ supply of only 32k by 31 December – about 35% less than the 49k widely forecast at the beginning of the year. With 21.5k units added to Dubai property portfolio in the first nine months of the year, the total residential stock now stands at 571.5k. Allsopp & Allsopp also noted that over the past three years, 334 projects have been completed in Dubai, with almost half that, 176 projects, scheduled for handover over the next five years. Core estimated that property transactions in many areas are 35% down on their 2014 highs, with prices at a cyclical low. Even before the onset of Covid-19, new developments were slowing down markedly, as the market tried to rebalance its over-supply conundrum. Indeed Covid-19 may be the catalyst that pushes the property cycle into some form of equilibrium, as the supply side slows.

Damac Properties has awarded a US$ 49 million contract to Trans Emirates Contracting, LLC, to start main work construction of its Zada development, a 26-storey building located in Business Bay.  Some may consider this a brave move in the current economic climate, as the sector has been battered by the impact of Covid-19. However, recent reports have indicated a slight uptick in the market, along with a notable increase in first time buyers. For example, the DLD reported an 11.3% increase in sales, compared to the same month in 2019, with sales valued at US$ 1.3 billion; various reasons have been expounded why this has happened including historically low mortgage rates, attractive/relatively competitive pricing by the banks and pent up demand.

Seven Tides have decided to rebrand its US$ 272 million JLT development from Seven City JLT to Golf Views Seven City to “fully appreciate” its views overlooking the twin Majlis and Faldo courses. This is its first mixed-use development and, with 2.6k apartments across 14k sq mt of retail space, a hotel and restaurants, its largest to date.

Accor has announced that it is to manage the Rixos resort at the upcoming Jewel of the Creek, after signing an agreement with Dubai Developments. The 770-key property will also house a 3k sq mt conference centre, a commercial zone, sports facilities, as well as the usual accoutrements.The global hospitality group, which currently operates four Rixos properties in the UAE, will have sixty-five properties (18k keys) in the country, following this latest addition, with twenty-nine more projects (7.9k keys) in the pipeline. The actualJewel of the Creek project is a one million sq mt, mixed-use development, featuring residential, commercial, hospitality, sports, entertainment, recreational and marina components; they are connected to the main city area with seven tunnels and almost 7k parking spaces.

Nakheel has indicate that the four-star Riu Dubai, in a JV with Spain’s Riu Hotels and Resorts, is set for a December opening. The 800-key hotel, located on Nakheel’s Deira Island coastal city, will have ten F&B outlets, three pools and a conference centre and is in the final stages of construction and landscaping work under way.

According to Knight Frank Middle East, Dubai prime office rents fell by an average 6.5% during the first nine months of 2020. Prime rents fell 4.7% to US$ 205 per sq ft, grade A rents by 6.1% to US$ 130 per sq ft and average citywide rents by 7.7% to US$ 100 per sq ft. It is obvious that many companies are suspending any expansion plans and adopting a wait-and-see approach until there is more positive news on the pandemic. There are others who are taking advantage of the current economic environment by either negotiating cheaper rents or upgrading. Q4 will see the delivery of additional supply especially in the prime sector, whilst next year, the vast majority of supply scheduled to be delivered is of Grade A quality. It is estimated that there are 25 active projects, valued at US$ 7.6 billion, in the emirate, with delivery dates up to 2024, which are either being executed or in the study or design phase. Office vacancy levels will increase, as latest data, from the Dubai Statistics Centre,  forecast a 7.4% contraction in its GDP and not expected to recover to its pre-pandemic level until 2022; furthermore, employment is set to contract by 9.1% this year, with 6.7% and 5.1% growth rates over the next two years.

The IMF, not known as one of the world’s better forecasters, has projected that the UAE will have negative 1.5% inflation this year, with its current account balance staying in positive territory – 3.6% this year and more than double to 7.5% in 2021.  The world agency also predicts a 6.0% contraction this year, followed by growth of 3.3% growth in 2021 for the oil-exporting ME and Central Asian countries, with forecasts of minus 1.1% contraction in 2020 and 2.5% expansion next year for oil importers. On a global scale, 2020 and 2021 will see a contraction of 4.4% and growth of 5.2%, whilst the advanced economy growth is seen at minus 5.8% and a positive 3.9% this year and next. Location-wise, the US, Eurozone, UK and India will all contract in 2020 by 4.3%, 8.3%, 9.8% and 10.3%, with 2021 growth figures of 3.1%, 5.2%, 5.9% and 8.8%; China will grow over the two years by 1.9% and 8.2%. As a rider, the forecasts are reliant on the pandemic being contained and a workable vaccine is globally available.

This in contrast to the Washington-based Institute of International Finance that has forecast a 5.7% contraction to the UAE’s GDP this year followed by 3.1% growth in 2021. Because of its exposure in the tourism and aviation sectors, the emirate could be looking at an increased weakening in its GDP this year. Despite the 2020 decline in economic activity, its external position should remain strong, whilst its current account surplus, although narrowing, will still remain significant. The report noted that employment has fallen by some 10% since the onset of Covid-19. Interestingly, it commented that a more diversified and knowledge-driven economy is needed and that privatising non-strategic GREs and enforcing competition laws and regulations would improve efficiency and raise productivity. The report posted a bleak picture of the real estate market, citing that the price slump since 2014 has been caused by oversupply, weaker consumer sentiment in the context of prolonged low oil prices, and recently Covid-19. It failed to mention that recent figures indicate that a rebound is on the cards because of historically low mortgage rates, the supply pipeline slowing appreciably, attractive sales promotions and pent up demand.

As it had met its aim to ensure liquidity in the banking system, one of its mandate pillars, that of regulating cash flows and withdrawing cash surplus in order to retain economic resilience, the Central Bank of the UAE withdrew US$ 3.0 billion out of excess liquidity during August; this resulted in increasing the cumulative total of certificates of deposits at the end of July to US$ 42.8 billion. At the beginning of the pandemic, it had injected a considerable amount of funds, before starting to remove excess liquidity as from June.

A new scheme to allow professionals to live in Dubai, while employed by overseas businesses, has been introduced, so as to facilitate such a class to relocate to the emirate; those availing of this new facility will be able to utilise all services available to permanent residents in Dubai, including phone and internet, utilities, and schooling. The annual government fee is US$ 287 plus medical insurance with valid UAE coverage. Other requirements include passport, with at least six-month validity, proof of employment with a current one-year contract and a minimum monthly salary of US$ 5k. This comes a month after the government unveiled a five-year visa that allows residents of other countries to retire in Dubai as long as they are over 55 years old and have valid UAE health insurance. One other condition was that applicants must fulfil one of these three requirements: earn a monthly income of over US$ 5k; have US$ 272k in cash savings; or own US$ 544k worth of property in Dubai.

At the first meeting of the country’s General Budget Committee, the federal budget spending and cash flow for the 2020 fiscal year, in light of the repercussions of the Covid-19 pandemic were discussed. Last month, the cabinet had increased the size of its 2020 budget by 2%, exceeding the largest budgetary plan it unveiled 2019, on top of the US$ 16.4 billion the government had allocated for 2019. The meeting, chaired by Sheikh Hamdan bin Mohammed Al Maktoum, also discussed the draft budget for next year and the cash flow impact of the pandemic on its forecast spend.

Standard Chartered is planning to cut more than one hundred of its 1.7k staff positions in the country, with reductions being centred on its retail and global banking division. It is reported that termination payments will include their equivalent of their salary until the end of year, along with their severance pay. The UAE is the biggest market of Standard Chartered’s MEA business, with the region’s H1 profits tanking by 80% after a slump in oil prices. Other international banks, including Nomura Holdings and Credit Suisse Group, have also been reducing their Dubai presence.

Figures from the UAE Central Bank show that YTD, to the end of August, the Cheque Clearing System dealt with a total of 14 million cheques worth US$ 177.0 billion, being handled by the Cheque Clearing System; this equates to 53% of the total cheques handled in the whole of 2019.  The impact of the pandemic can be seen from comparing Q1 data with Q2 when 6.3 million cheques, valued at US$ 82.1 billion, were much higher than the Q2 figures of 4.3 million cheques, worth US$ 52.5 billion. Another surprise is the high volume of cheques, in these days of online banking, that are still being used in a country which has a high level of IT penetration. Total withdrawals from the CBUAE were valued at US$ 36.7 billion, with deposits reaching US$ 40.8 billion.

A recent KPMG report points to the fact that the H1 profit of the ten leading UAE banks declined by an average 38.9%, driven by higher-than-expected credit losses on loans and advances, which increased by 125.8%, year on year. Over the first six months of the year, the banks’ non-performing loan ratio rose from 3.8% to 4.1%, as they continue facing the double whammy economic challenges from low energy prices and historically low interest rates. The local banks have received support from the Central Bank of the UAE, including a US$ 70 billion stimulus package, as there has been an unprecedented demand for greater liquidity, as well as relief from capital norms and certain accounting guidelines. Do not be surprised if the industry were to see further mergers and acquisitions in the country’s banking sector over the next twelve months.

With a strategy of “achieving a smoke-free future for the GCC”, Philip Morris International has opened UAE’s first IQOS Boutique at Dubai Mall. This comes after the UAE officially legalised the sale and use of electronic cigarettes in April 2019, ensuring that the nicotine components of vaping are 95% less harmful than traditional cigarettes. In the US, the FDA (Food and Drug Administration) has authorised and granted for the first time the marketing of IQOS devices, an electronic alternative to cigarettes. Over the past twelve years, PMI, which has invested US$ 7.2 billion in developing, evaluating and producing reduced-risk alternatives to smoking, has seen the number of global IQOS users jump from zero to fifteen million. PMI estimates that 70% of its investment, and 20% of its generated revenue, are now in smoke-free products; it also aims to see forty million adult smokers switch to PMI’s smoke-free products over the next five years. Furthermore, the global market for e-cigarettes, or vapes, is expected to be worth US$ 53.4 billion by 2024.

Shuaa Capital has recently launched its fourth investment vehicle this year – a $200 million fund, targeting special situations across Gulf countries, has already attracted US$ 68 million in commitments from investors. This is the Dubai investment banking firm’s first dedicated Sharia-compliant financing vehicle aimed, at GCC corporates and developers, Despite the challenges facing any investment bank, Shuaa is still confident that there are opportunities that will result in appropriate risk-adjusted  investor returns for its investors, ”in key sectors including healthcare, real estate, hospitality, construction and shipping.” Shuaa currently manages US$ 13 billion and is aiming to boost this figure to US$ 20 billion over the coming years.

September saw Dubai’s non-oil private sector continue with its recent improvement, with the seasonally adjusted HIS Markit PMI, moving 0.6 higher, month on month, to 51.5, helped by the wholesale and retail recording another sharp rise in new orders. Compared to August, activity and new business rose at faster rates. Unsurprisingly, Q3 only posted a moderate recovery, with the PMI over 50 – the threshold between expansion and contraction – as the gradual easing of restrictions resulted in a marginal rise in business activity. The rate of sales growth posted a ten-month high with higher client demand and the starting of new projects. Travel and tourism remained in the doldrums and although it continued to soften, it did so at the slowest pace since February. Dubai has now opened its borders to overseas visitors. What did continue was the continuation of discounting but at a marked slower pace and although firms continued job cutting, this was also done at a slower rate. There was a general consensus that there would be further growth, mainly linked to a recovery in sales as the pandemic-related restrictions are eased, but firms continue to exercise caution in their business affairs, being wary of expanding too quickly.

More disturbing news continues to pour in from the ongoing administrators’ investigation into the shenanigans related to NMC Healthcare. It seems that a number of financers could be implicated in potential collusion, with the previous management that resulted in billions of dollars in losses to the company. The investigations, whilst also trying to trace stolen property, has compiled evidence which shows that the audited accounts have been misstated since 2012.  The administrators are concerned that “money and property was misappropriated from NMC, the perpetrators sought to make NMC liable for debt of which it never received the benefit, or sufficient benefit, and NMC’s losses are likely to be in the region of billions of dollars”. The investigation is expected to be completed within six months, at which time claims will be launched against the perpetrators.

With a US$ 325 million cash injection, NMC Healthcare is now able to meet short-term payment priorities, including salary obligations for its 13k strong workforce and operational expenses, as well a further US$ 65 million to part pay its creditors; most of this funding came from its main creditor, ADCB, and was released under the mandate of the ADGM. Creditors will be offered a minimum allocation of US$ 1.4 million, while the upper limit must not exceed 20 per cent of their exposure in the old debt, if they have no ongoing legal action against NMC or if they have to agree to a freeze or remove any actions to be eligible. This sets the stage for the administrators to sell its UK healthcare assets, that could bring in an estimated US$ 75 million, and the whole of the Barcelona-based Clinica Eugin’s global assets, that could be worth US$ 850 million, to raise further funding.

There are two apparent options facing the company’s creditors to fully exit from administration. Firstly, go for a reorganisation, sell the non-core assets and focus on the local business which is a viable going concern; run the business for up to five years and then divest, with the facility then being more profitable and more valuable. The end result would be that creditors would receive far more in the future than they would from the other option of a fire sale at today’s prices. The former option would see a much bigger return for creditors than the estimated US$ 0.15 to the dollar, if divested now. Despite a US$ 6.0 billion debt, NMC is still a professionally run local medical operation, with YTD revenue to August of US$ 916 million, with earnings before one-offs and restructuring costs of US$ 51 million. It is a pity that some of the management and shareholders saw a quicker way of obtaining their investment return – by systematic looting and fraudulent action.

This week, Arabtec Holding, in the throes of liquidation, has requested banks for a three-month standstill on debt repayments for its subsidiary Target, that specialises in oil and gas projects and marine work with operations in the region.  Creditors have been advised that this subsidiary is a sustainable business and should be protected from the collapse of the wider group. By the end of H1, Arabtec, which had total liabilities of nearly US$ 2.8 billion, including US$ 500 million to banks, had accumulated losses of almost US$ 400 million.

With Arabtec liquidation now in process, it does not take a financial guru to see that shareholders will receive zilch, considering that there is a 37.4% difference between the developer’s liabilities of US$ 2.8 billion to assets of US$ 2.0 billion. If the liquidators decide on a bulk sale then it is a given, the market value will be much lower.  Arabtec, which had seen the highs and lows during its years with good and bad management periods, was already in trouble even before the arrival of Covid-19; last year, it posted a US$ 211 million deficit attributable to weaker income from its construction business amid tighter liquidity in the construction sector. Some of its assets are already pledged to creditors so will not be thrown into the mix when the actual assets are collated; for example, a US$ 91 million Mashreq loan is backed by land it owns in Dubai valued at US$ 155 million.

Union Properties seems to have had success with its turnaround strategy, as it finally posted a quarterly profit of US$ 139 million, compared to a US$ 22 million loss during the same period last year; its revenue slowed 15.0% to US$ 25 million.  The main factor that resulted in this impressive turnaround was the US$ 224 million gain on fair valuation of investment properties. A statement by the embattled developer noted that “in the span of three months, we have restructured the bulk of our debt, substantially reduced our operating costs and reinstated our credit reputation.” YTD, the company posted a nine-month profit of US$ 95 million, compared to a US$ 45 million loss over the same period in 2019. By the end of last month, its assets were 5.1% higher at US$ 1.7 billion and it had “cleared all losses for 2019 as well as for the first and second quarter of 2020 and reduced its accumulated losses below the critical threshold of 50.0% to 41.8%”.

After receiving shareholders’ approval, the National Central Cooling Company (Tabreed) has advised the Dubai Financial Market that it will raise US$ one billion, through the issuance of bonds or sukuk in one or more tranches over the next twelve months. Finance raised will be used for funding acquisitions or for general corporate purposes. This move comes six months after Tabreed acquired an 80% stake in Emaar’s Downtown Dubai district cooling business for US$ 675 million which then expanded its business by 12.6% to 1,338,602 RT from 83 plants.

The bourse opened on Sunday 11 October and, 52 points (1.9%) lower the previous week, lost a further 19 points (0.9%) to close on 2,195 by 15 October. Emaar Properties, US$ 0.09 lower on the previous three weeks, remained flat at US$ 0.72, whilst Arabtec is now in the throes of liquidation, with its last trading, late last month, at US$ 0.14. Thursday 15 October saw the market trading at a low of 214 million shares, worth US$ 45 million, (compared to 135 million shares, at a value of US$ 31 million, on 08 October).

By Thursday, 15 October, Brent, US$ 2.86 (7.0%) higher the previous week shed US$ 0.44 (1.0%) to US$ 42.78. Gold, US$ 38 (2.0%) higher the previous two weeks, slipped US$ 4 (0.2%) to close on US$ 1,911, by Thursday 15 October.

In order to obtain EU approval for its US$ 27 billion Refinitiv deal, the London Stock Exchange Group has consented to sell Borsa Italiana, to Euronext and two Italian lenders, (Cassa Depositi e Prestiti, a state-backed lender (7.3%), and Italy’s biggest bank Intesa Sanpaolo (1.3%), for more than US$ 5.1 billion in a deal that will create the largest listing venue in Europe. This move will see Euronext handle 25% of all equity trading in Europe and 28 of the Euro Stoxx 50 companies will be listed on its markets, giving the bourse a clearinghouse for the first time as well as a securities depository, stock exchange and bond platform.

IBM has announced that it will split into two public companies – one to cover its higher-margin businesses like cloud computing and artificial intelligence and the other focusing on its legacy IT infrastructure which will be renamed and spun off next year. Last year, the world’s first big computing firm acquired cloud company Red Hat for US$ 34 billion and now it will be focussing on trying to join the two leaders – Amazon Web Services and Microsoft – in the growing market for cloud services. Its shares closed nearly 6% higher after the announcement.

In a sign of things to come – not only in Saudi Arabia but also regionally – the US$ 15 billion merger between the Kingdom’s Commercial Bank and Samba Financial Group has created the country’s largest lender and the Arab world’s third largest bank by assets, totalling US$ 223 billion. Samba shareholders will receive 0.739 newly issued shares of NCB in exchange for each Samba share they hold. Once the transaction is completed, only NCB will survive, while Samba “will cease to exist”, with its shares being cancelled and new shares in NCB will be issued to its shareholders. In these days of tight liquidity, it is inevitable that more mergers will be seen in the coming months because of economies of scale, greater pricing power over both loans and deposits with a bigger financial institution cost synergy.

On the back of a rebound in global financial markets, Morgan Chase & Co posted a 30% Q3 hike in trading revenue to US$ 6.6 billion, as loan impairment provisions of US$ 611 million were well down on the US$ 10.5 billion of the previous quarter. The bank’s net Q3 income rose to 3.3% to US$ 9.4 billion, or $2.92 per share. Because the Fed has maintained rates at nearly zero, to offset the impact of the pandemic, its net interest income fell 9.05 to US$ 13.1 billion.

As the company tries to get to grips with the new post pandemic norm, the luxe division of L’Oréal USA plans to close retail locations, as it starts to restructure its US luxury operations which will see more emphasis in growth areas such as e-commerce, which jumped 65% in H1. L’Oréal confirmed that up to 400 roles in the luxe divisions would be affected in the US, the company’s largest market, but was silent how many of its outlets would close. The French company, with 88k global employees, has seen revenue knocked, (19% lower in Q2), by the fact that spending has decreased for pricey perfumes and makeup as lockdown drastically reduced the number of social occasions.

The WTO has ruled in favour of the EU and has allowed the bloc to impose a further US$ 4.0 billion in annual tariffs in response to the US government providing subsidies granted to Boeing; last year the global body cleared the US to impose tariffs on US$ 7.5 billion of EU items. The US has responded by noting that it had had removed the offending subsidies for Boeing, tax breaks granted by the state of Washington, with the EU countering with the fact that there would no longer be any subsidies for the A380, as it has been taken out of production. This particular trade dispute has been ongoing since 2005, when both sides lodged complaints with the WTO, and now fifteen years later, it seems both sides want to reach a settlement by negotiation rather than tariffs and that “it is time to find a solution now so that tariffs can be removed on both sides of the Atlantic.”

Last Thursday, BA bade farewell to its last two 747s which made a rare double departure from LHR. The jumbos’ premature retirement was brought forward by the Covid-19 impact. The plane first entered service in 1974, with BA taking delivery of its first jet a year later and for over forty years, the ‘Queen of the Skies’ was a firm favourite with passengers. British Airways streamed the take-off live on its Facebook page so that aviation fans from around the world could tune in for the final farewell. Since its first test flight in 1969, Boeing has built 1,558 747s, with the initial programme costs coming at US 1.0 billion (US$ 7.4 billion at today’s prices) Only a few airlines now fly their passengers on a 747, including Lufthansa, Air China, Korean Air, Air India and Thai. The oldest 747, which first flew in 1986, still flying passengers is owned by Iran’s Mahan Air.  it is estimated that 427 747s are still air-borne, most of which are for cargo. Of the five variants of the plane there are nine -100s, 20 -200s, 2 -300s, 266 – 400s and 130 -8s in operation.

Meanwhile, the airline is ditching its current chief executive Alex Cruz to be replaced by Sean Doyle, the Aer Lingus boss for the past two years; before that, he had worked at BA since 1998. The Spaniard, who has been involved in a bitter dispute with unions over redundancies and pay cuts. will stay on as non-executive chairman; towards the end of his four-year tenure, he has overseen 13k staff cuts and been criticised for following a “fire and rehire” policy, which left some employees facing pay cuts of up to 50%. The change at the top of the BA hierarchy comes a month after similar changes with its parent company, IAG, with Luis Gallego, replacing Wille Walsh as chief executive. A case of out with the old and in with the new guard as the airline navigates through the worst crisis in its history. The BA brand has taken a beating of late, with both staff and customer dissatisfaction growing, plus the repeated IT failures and various strikes over “poverty pay” by cabin crew.

The first age of commercial supersonic effectively came to an end in July 2000, with the fatal take-off crash of AF4590 in Paris but was pulled from service three years later. Now it seems there is every chance that the second era is nearly upon us. The Aerion AS2 supersonic business jet, being developed by Aerion and Lockheed Martin, with GE’s Affinity engines, is planning to start flights in 2027; initial flight speeds will top 1,074 mph but later models could see jets travelling at 3k mph (equivalent to almost four times the speed of sound). The company, founded by Texas billionaire Robert Bass and with Boeing a stakeholder, claims it already has a US$ 3.5 billion backlog.

Other players entering the field include Boom Technologies, Virgin Galactic and Spike Aerospace. With thirty jets already ordered by Japan Airlines and Virgin, its US$ supersonic aircraft, slated for a 2030 launch, will travel twice the speed of sound and carry up to eighty-fiver passengers. A third the size demo model, XB-1, powered by three GE J85 engines, will begin test flights next year.  Virgin Galactic Holdings made a surprise announcement in August about its planned 19-seater Mach 3 aircraft as an interim step on the company’s path toward eventual hypersonic point-to-point travel. Meanwhile, Boston-based Spike Aerospace plans an 18-seater supersonic jet that can travel at Mach 1.6 that would be able to fly from Dubai to New York, non-stop. Even Elon Musk’s Space Exploration Technologies has indicated that their eventual high-speed point-to-point aircraft service will operate above earth’s atmosphere, at hypersonic speeds.

In a move that could affect 21k jobs, Edinburgh Woollen Mill, owner of the Peacocks and Jaeger clothing brands, Jane Norman, Ponden Mill and Austin Reed, and with 1.1k stores, is planning to appoint administrators to save the failing business. It will be business as usual until a review of the firm is carried out. EWM posted that this decision was partly taken because of “the harsh trading conditions, caused by the impact of the Covid-19 pandemic and a recent reduction in its credit insurance”. Like most other retailers, the business was severely impacted by the pandemic but more so because it attracts a bigger number of older shoppers, more likely to keep away from the High Street during these troubled times. The 73-year old company, founded in Carlisle, is owned by Dubai-based billionaire Philip Day who also bought Bonmarché out of administration in February – a company that he previously owned; the company is not part of the current restructuring plans.

Restaurant Brands International has posted plans to open a Tim Hortons outlet in “every major city and town” in the UK over the next two years. The Canadian fast food chain, which has only 25 coffee shops in the country, after opening its first in 2017, expects this growth spurt to create over 2k new jobs. Even though the pandemic has severely hit sales, (down some 30% globally among its 4.9k outlets – including nearly 4k in Canada), Tim Hortons sees expansion in the drive-through dining sector. RBI, which also owns Burger King and Popeye’s Chicken, has more than 27k restaurants globally, which it operates through a franchise model; it still harbours ambitions to grow this figure to 40k over a period of time.

Online fashion group Asos has done well because of the pandemic by adding three million customers, to 23.4 million, in the twelve months, as global sales jumped 19.0% with pre-tax profits climbing 329% to US$ 190 million, driven by cost-cutting and buyers returning fewer items amid the pandemic. Its main worries going forward are unemployment hitting young customers, (reducing their consumer spend) and if tariffs were introduced because of a Brexit deal. On Tuesday, the worry concerned its investors so much that Asos’s market value fell 10% on the day.

Boparan Restaurant Group, which owns the Giraffe chain, has agreed to buy part of the restaurant chain Gourmet Burger Kitchen out of administration; the deal covers 35 sites and 669 jobs, but 26 other restaurants and 362 jobs will be lost. GBK, most recently owned by South Africa-based Famous Brands, has been in trouble for some time, having entered into a Company Voluntary Arrangement in November 2018; it appears that Covid-19 was the final nail in its coffin.

By expanding its customer base, adding 800 McDonald’s restaurants and 300 Greggs outlets, Just Eat indicated that its orders had jumped by 43%; the company also did well because of the lockdown, as it delivered 46 million orders in Q3. The takeaway delivery company, which merged with Dutch rival in February, is planning to acquire US rival Grubhub for US$ 7.3 billion – this came about after potential merger negotiations between Grubhub and Uber collapsed. The group also saw demand rise in markets like Germany, Canada and Australia, with global bookings rising 46% to 151.4 million orders in Q3.

Almost half of Australian home loans deferred due to the coronavirus pandemic are now being repaid, but that also means half are not. In June, almost 500k home loans, with major banks, were on a “pause” – the latest figure is around the 270k level. Furthermore, it is estimated that 20% of those 270k are ‘ghosting’ or avoiding communications from their lender.  In March, banks gave an almost blanket offer that allowed people to stop making payments for six months and now that period has ended, and payments have to resume with some now worse off than they were six months ago. Inevitably, there will be defaults and if the number is sizeable, it will have the double whammy of banks posting reduced profits as their impairment provisions go higher, and house prices will head south.

This week has seen casino baron James Packer, son of Kerry, who was born into unimaginable privilege and power, appearing before a NSW inquiry into whether his company Crown Resorts is fit to hold a casino licence. In recent times, he has struggled with alcohol and depression, as well as bipolar disorder, and this week, there were more startling revelations concerning Mossad agents, accusations of negligence in policing and reporting suspected money laundering, illegal or unlawful operations in China that may have had a negative impact on his ability to hold a casino licence. The enquiry also revealed the lack of oversight from Victorian and Western Australian gaming regulators, where Crown has operations. It also showed that even though management and board duties have been relinquished, he still remains the dominant figure at Crown, whilst still retaining a controlling shareholder agreement.

His grandfather was a media magnate but when James took the reins as chairman of Publishing and Broadcasting Ltd, his first deal was to acquire the then ailing Melbourne-based Crown Casino. Seven years later, he linked up with Lawrence Ho, (the son of Stanley who had enjoyed a 30-year monopoly in the Macau casino business until 1999, when the former Portuguese colony was returned to China), to build the first of several new casinos. With casinos still outlawed on the mainland, money-making enterprises proved a magnet for China’s infamous organised crime groups, known as triads. It has been widely reported that Stanley, who controlled Melco International, had been banned in the 1980s from having any involvement in a proposed Sydney casino development and declared unfit to run American gaming operations in Nevada; in fact several governmental and regulatory agencies had noted his links with criminal organisations which included allowing them access to his casinos to carry out illegal activities.

It seems that only weeks before Packer’s JV with Melco, the control of the Macau business was handed over from father to son but despite this the Victorian gaming authority had no problem approving Crown’s Macau joint venture. The due diligence was so slack that nobody bothered to check that the principal shareholder in Melco was a Virgin Islands Trust, with Stanley— personally banned by the NSW Government — being a beneficiary until his recent death. Lawrence Ho has subsequently withdrawn his interest in taking control of Crown and has left James Packer and Crown to pick up the pieces and to do a lot of explaining to the NSW enquiry.

There are reports that Chinese state-owned energy providers and steel mills have been told to stop importing Australian coal, this coming after earlier in the year, China had imposed tariffs on Australian beef and barley exports.  On Thursday, BHP confirmed that Chinese customers have asked for deferrals of their coal orders. It appears that two steel mills were told verbally about the ban and even if not true, some traders believe buyers will avoid Australian coal. Trade Minister Simon Birmingham confirmed that the government had not been able to verify the reports but there had been similar disruptions to coal exports to China before; Prime Minister, Scott Morrison, noted that China sometimes changed its import demand based on how much coal it is receiving domestically and put domestic quotas in place. However, it seems that the procrastinating Birmingham should lift his game and get talking with his Chinese counterparts – more so because the country is home to 48% of Australia’s exports.

As the Australian government starts to taper its coronavirus stimulus measures, the RBA has warned once again that there are distinct possibilities of a substantial rise in business failures, home prices falling further, along with a marked increase in borrower defaults. As the country climbs out from its first recession in almost thirty years, after the coronavirus pandemic had closed parts of the country’s economy, it will face new economic problems,  as mortgage loan repayment holidays begin to expire and income support measures, such as  the JobKeeper wage subsidy, are being wound back; such measures had shielded many from economic reality and had helped with increased cash buffers and lower bankruptcies, which now have been largely withdrawn. The end result will be an increase in business failures which will reverberate around the while economy and impact on creditors, both financial institutions and other businesses, and their employees.

Whilst it appears that most global economies continue to struggle, China comes with impressive economic data once again, noting September exports and imports growing by 9.9% and 13.2% respectively. With imports growing at a quicker rate than exports, the country’s trade surplus dipped by US$ 22 billion, month on month to US$ 37 billion. The world’s second biggest economy has recovered well over the year, after a sharp decline in Q1, because of the then strict lockdown measures, bounced back at the beginning of Q3. The drivers behind this trade improvement, which YTD has reached US$ 3.4 trillion, has been put down to a surge in global demand for medical devices, PPE, home electronics and textiles.

Over the last two months, there have been troubling signs that all is not well with the US labour market and last week applications for US state unemployment benefits unexpectedly jumped by 53k to 898k – as Americans increasingly moved to longer-term jobless aid. The total number of Americans claiming ongoing unemployment assistance fell 1.2 million to 10 million; however, as that number has dropped, the Pandemic Emergency Unemployment Compensation headed in the other direction – by 818k to 2.8 million. There is no doubt that the recovery in the labour market will continue to slow down as the economy and the job market cannot operate at full capacity until a vaccine is widely available.

Reaching its lowest level in a decade, employment in the 37-country Organisation for Economic Co-operation and Development area fell to 64.6% in Q2 and in the 19-nation euro area by 66.2%, with the highest decreases of three percentage points found in Estonia, Ireland and Spain. Over the period, the OECD reported that there were 34 million fewer people, in work by the end of Q2 to 560 million. The age make-up is interesting, as the youth employment rate dropped more sharply (down 5.6 percentage points, to 36.3 per cent) than for people aged 25-54 and those aged 55-64.  Overall, male and female employment rates fell by around 4% (to 72 per cent and 57.3 per cent respectively).

In an attempt to test the waters with the UK banks, the Bank of England has written to them, asking them how ready they are if interest rates were cut to zero or turned negative, as has happened in Japan and Switzerland. There is every chance that this could happen especially since rates were cut to 0.1% last March and the BoE is concerned that the banks would face technological challenges if rates should turn negative; this is vitally important because the banks have had a recent litany of outages and other problems with their computer systems.The idea behind the concept of negative rates is to penalise hoarding of cash and provide incentives to spend and invest; to date, banks depositing cash overnight at the likes of the European Central Bank currently pay 0.5% to do so, whilst the Swiss bank UBS began charging up to 0.75% for cash deposits from wealthy clients. If the BoE were to go down this path, it shows that the English central bank is demonstrating that it has not run out of weapons from its monetary policy armoury, which comprise cutting interest rates,  which in return reduce the cost of borrowing, encourages investment and consumer spending; on the flip side, lower interest rates also reduce the incentive to save, and makes spending more attractive instead.

24k people in the UK have woken up this week to receive unwanted mail from HM Revenue and Customs that questioned whether they received the self-employment support grants and whether they had been trading at the required times. Some 2.7 million people claimed grants from the Coronavirus Self Employed Income Support Scheme (SEISS) which came in the form of two grants of up to US$ 3.4k and those who were trading in the financial year 2018-2019, and the following year, and who planned to continue doing so, but whose business has been hit by coronavirus. HMRC have indicated that up to US$ 350 million in grants may have been fraudulent or paid in error or made by fraudsters making claims under names of innocent people.

Even as the economy continued its growth recovery for the fourth straight month, August’s return of 2.1% was lower than expected and still 9.2% down from pre-pandemic February; the UK economy had grown8.7% and 6.6% in June and July. Three factors – the October end of the generous furlough scheme, Brexit and possible further lockdowns – will almost certainly ensure that Q4 monthly growth rates will ease. The immediate outlook is that the recovery is beginning to peter out, but Q3 will show slowing growth and put an end to the country being in technical recession (being two straight quarters of contraction which was the case in Q1 and Q2). The dream of a V-shaped – and quick – recovery, which was spoken about four months ago, has long gone and with winter approaching and the inevitability of further lockdowns, any rate of growth would be welcome.

With the pandemic not going away and rearing its ugly head again, the UK unemployment rate has surged to its highest level in over three years, standing at 4.5% in the quarter ending 31 August, higher than the 4.1% in the previous quarter; this will get worse and it would be no surprise to see this hit over 8.0% early next year. This equates to 1.5 million, as redundancies were at 227k, mostly in hospitality, travel and recruitment sectors, their highest level since 2009. Overall, unemployment has fallen 500k from its pandemic peak but there may be more with the government having imposed tough local lockdown rules this week. By the end of last month, the number claiming work related benefits had risen to 2.7 million from March’s 1.5 million.

The Chancellor, Rishi Sunak, has announced a scheme that will see UK employees receive 67% of their wages from the government purses, if the firms they work for are forced to shut by law because of coronavirus restrictions. This will run from 01 November, when the furlough scheme comes to an end, and will run for six months – a sure indicator that the government sees the pandemic continuing at least until the end ofApril 2021. Whether this is enough investment for the worst affected areas and sectors remains to be seen. The announcement comes just weeks after the government  .announced its Job Support Scheme top up the wages of staff who have not been able to return to the workplace full time; the grants will be paid up to US$ 2.8k a month However, this will only apply to those businesses told to close rather than those who choose to shut because of the broader impact of restrictions. Furthermore, businesses that are forced to close will receive an increase in business grants – with up to US$ 4k a month paid every fortnight

Even though initial estimates point to the fact that the UK Q3 economy may have grown by as much as 17%, driven by shoppers making up for lost time when the coronavirus lockdown restrictions were initially lifted. However, it seems likely that in comparison, Q4 may be much slower, probably around 1%, especially now that some restrictions are being reintroduced and the generous furlough scheme curtailed. With unemployment expected to rise, consumer spending will slow, with the end result of sluggish growth for the immediate future. Overall, the UK economy will probably not return to pre-pandemic levels until H2 2023.

Apart from all the political, social and economic problems, emanating from Covid-19, the Johnson government has had to deal with the intransigent EU bureaucracy, led by Michel Barnier, in Brexit discussions. The EU is infamous for its last-minute deals but they could be in for a rude awakening and live to regret their apparent unwillingness to discuss topics on fishing rights and state help for business.  Goodbye To You My Trusted Friend.

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Thank You Very Much!

Thank You Very Much!                                                                     09 October 2020

A report by Springfield Real Estate on the Dubai residential market is fairly bullish – not unexpected because that is their job to push the business higher. It expects a strong supply chain next year but in 2022, it sees handovers slowing, as there will be very limited new project launches coming on stream. It is expected that only 40k units will be handed over this year (and the same number next) – a far cry from the figures of up to 80k expounded by some experts earlier in the year. As supply tapers, then is the time that prices will start rising and the demand/supply cycle will move into a new equilibrium and then the cycle will start all over again so as we will see prices moving higher which in turn will see more development and then there will be another oversupply and prices tanking – this will not happen again for at least another six years.

For the week ending 01 October, the value of 1.7k real estate and properties transactions in Dubai was near to US$ 1.1 billion. Of the total, 182 plots were sold for US$ 330 million and 1.14k apartments/villas accounted for US$ 425 million. The most expensive land and building transactions were for a plot in Marsa Dubai sold for US$ 68 million and a Burj Khalifa apartment going for US$ 60 million.  Two other apartments went for a fair whack – in Al Merkadh for US$ 54 million and Al Khairan at US$ 50 million.

Last weekend, HH Sheikh Mohammed bin Rashid Al Maktoum participated in a ceremony to mark the start of the final phase of construction of the US$ 136 million Museum of the Future, located on the SZR-side of Emirates Towers. The Dubai Ruler witnessed the installation of the final piece of the structure’s façade, which is covered by 1k Arabic Calligraphy panels manufactured by robots; the 77 mt high, and seven-storey column-less structure, encompasses an area of 30k sq mt. The museum will house a research centre, with labs and classrooms, as well as being open for museumgoers to experience new technologies. As usual, Sheikh Mohammed added pearls of wisdom including “Our goal is not to merely build engineering icons. Rather, it is to inspire mankind to build a better future,” “Dubai continues to build and the UAE continues on its path of achievements”, and “Progress favours those who know what they want”.

In a bid to ease hassles for both incoming and outgoing passengers, whilst maintaining appropriate safety protocols, the Ruler of Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum, has directed changes to be made. Among them, Emiratis returning to Dubai from overseas are not required to do a PCR test prior to departure, regardless of the country they are coming from and the time spent there but will only need to conduct a PCR test on arrival in Dubai. All residents and inbound tourists will need to take a PCR test prior to departure for Dubai, as will transit passengers from some countries. The pre-travel test is also mandatory for transit passengers if their destination country requires them to do so. Another change sees no need for a PCR test prior to departure for Emiratis, residents and tourists if their destination country does not require a pre-travel negative test certificate.

By the reckoning of some analysts, many jobs have been lost and whilst UAE salaries may have fallen by at least 30% since the onset of Covid-19, it seems that hiring is picking up, as economic activity begins to gain traction in the country. The sectors that are garnering added attention are procurement, sales, e-commerce, legal service, life sciences, healthcare and education, whilst industries such as banking are shipping staff, as the digital age makes its impact. Some companies are also redeploying staff in other internal positions, whilst others appear to be replacing senior level staff with mid-level executives in order to trim costs further. Another cost saving strategy seems to be local – rather than overseas – recruitment in another bid to save money. It does also appear that there is an increasing number of non-working residents – such as housewives, mothers, and other family-dependent members – also looking for work to supplement the breadwinner’s income that may have been reduced (or lost) because of the pandemic. There are others, especially in the hardest-hit sectors such as aviation and hospitality, looking for a career-change as they have been made redundant and their outlook is gloomy However, the hiring rate is still some 20% lower than pre-Covid levels.

It will not be the first time – or the last – that credit agencies get their forecast horribly wrong, but it seems that S&P may have erred again with their 2020 forecast for Dubai. It announced that “S&P Global Ratings expects Dubai’s economy will contract sharply by around 11% in 2020, owing in part to its concentration in travel and tourism, two of the industries most affected by COVID-19.” It also points to the emirate’s already high debt load which will inevitably expand as it supports those sectors that are struggling to rebound from the impact of the coronavirus pandemic. It expects the emirate’s economy to return to its 2019 levels only by 2023.  The agency estimates that Dubai’s gross general government debt stands at US$ 80 billion, or 77% of GDP, rising to 148% when GREs (government-related entities) are added. If the picture, painted by the agency, is to be believed then it is hard to reconcile that to the fact that when Dubai returned to public debt markets last month, for the first time in six years, its US$ 2 billion debt issuance was five times oversubscribed. It has to be remembered that, following the GFC, the US Congress concluded that the “failures” of the Big Three rating agencies, (S&P, Moody’s and Fitch), were “essential cogs in the wheel of financial destruction” and “key enablers of the financial meltdown”. Time will tell!

Driven by the double whammy of the coronavirus pandemic and record low oil prices, the IMF has commented that the current economic crisis will be worse for the ME than that of the 2008 GFC. It also notes that some GCC nations have used the ‘pandemic period’ to reset their economic models. For example, the likes of Saudi Arabia, Oman and Kuwait have markedly reduced their dependence on foreign workers, with more nationals taking on those roles, whereas the UAE heads in the other direction – keeping and attracting expatriates and tourists to resurrect local economic growth. The UAE has also introduced a five-year “retiree visa programme” for high-net- foreigners over the age of 55.

Dubai-based equity firm Al Masah Capital, founded in 2010, has finally hit the wall and has been placed into voluntary liquidation in the Cayman Islands. This comes months after the company and several of its employees were fined by the Dubai Financial Services Authority for misleading investors about fees charged. Al Masah Capital and Al Masah Capital Management were fined US$ 3.0 million and US$ 1.5 million, as were three of its employees – chief executive Shailesh Dash (US$ 225k), CFO Nrupaditya Singhdeo (US$ 150k)  and executive director Dom Lim Jung Chiat (US$ 10k) – and banned them from “performing any function in connection with provision of financial services in or from the DIFC”. It is reported that the two companies had raised US$ 1 billion from investors. The DFSA took the action against both companies a year ago after claiming it had not informed investors of a placement fee equating to 10%of all funds raised from investors.

The Central Bank’s latest report indicates that, in September, residents’ bank deposits at US$ 98.4 billion were some 8.0% higher than their loan balances, with non-resident deposits declining 1.3% to US$ 6.8 billion. Although down by 2.3%, residents’ retail loans, at US$ 90.7 billion, accounted for about 20% of the total banking lending, equating to some 30% of the country’s non-oil GDP. Over the year, property financing came in 2.9% higher, with auto loans heading the other way, declining by 7.6%.

This week, it was noted that the Arab World’s three biggest economies – Egypt, Saudi Arabia and the UAE – had bounced back to life last month, as movement restrictions eased and businesses continued to recover. The UAE headline PMI rise of 1.6 to 51, month on month, in September, indicated an improvement in business conditions, as the country’s non-oil private sector ended Q3 on a high. For the second time since January, export sales moved higher, with rising activity levels being supported by a robust upturn in new business, driven by a further rebound in consumer demand, assisted by continuing discounting which has been a feature now for too many months. Companies have to be careful not to get involved in a race to the bottom to hang on to business at any cost. Export sales were higher for only the second time in eight months, whilst the inflow of new orders slowed. There was also another monthly fall in private sector employment, with work force numbers still heading south, as most companies move heaven and earth to maintain cash flow and slice costs to the bone.

The bourse opened on Sunday 04 October and, 14 points (0.7%) higher the previous week, lost 52 points (1.9%) to close on 2,214 by 08 October. Emaar Properties, US$ 0.04 lower on the previous fortnight, lost US$ 0.05 to close at US$ 0.72, whilst Arabtec is now in the throes of liquidation, with its last trading at US$ 0.14. Thursday 08 October saw the market trading at a low of 135 million shares, worth US$ 31 million, (compared to 212 million shares, at a value of US$ 41 million, on 01 October).

By Thursday, 08 October, Brent, US$ 3.03 (7.0%) lower the previous fortnight regained some of that deficit, gaining US$ 2.86 (7.1%) to US$ 43.22. Gold, US$ 26 (3.4%) higher the previous week, nudged up US$ 12 (0.6%) to close on US$ 1,915, by Thursday 08 October.

Tesla stunned the market by delivering a global record number of cars worldwide in Q3, whilst consolidating its dominance in electric-vehicle sales. During the quarter, it delivered 139.3k vehicles, surpassing its previous record high of 112k cars posted in Q4 2019. The news pushed its share value higher on the day and by last Friday its YTD share value had skyrocketed 435%. In 2019, the company, founded by Elon Musk, had 16% of the global market, a figure that made it the industry leader and figures like these indicate that this will be the same by 31 December. Most of Q3 production was their mass market Model 3 but it also saw the introduction of  its Model Y crossover; all Tesla’s four models – S, X, Y and 3 – are made at its Californian factory with another one in Shanghai also turning out its Model 3; the company is also building plants in Berlin and Austin, Texas.

September was an abysmal month for the UK car trade, with registrations of 328k new vehicles – the worst September this century in what is normally the industry’s second most important month after March (the end of the UK tax year); year on year, this figure was 4.4% lower. Even before the onset of the pandemic, the industry was suffering from declining numbers but Covid-19, which saw factories and showrooms closed, has landed a major economic blow. Any hope of business improvement, because of pent up demand, has not materialised, as it appears that the current climate of uncertainty, exacerbated by Covid-19 and indecisive Brexit discussions, is making the public at large wary of buying big ticket items such as cars.  However, as the market for diesel vehicles is imploding, sales of electric cars are on the increase, despite them being on the expensive side both to build and for potential customers. As a matter of interest, the four best selling cars in the UK last month were Vauxhall Corsa, Ford Fiesta, Mercedes Benz A-Class and VW Polo – with unit sales totalling 10.5k, 9.5k, 8.1k and 7.4k respectively. The industry holds out little hope that it can recover the 615k registrations lost so far this year and is now forecasting a 30.6% sales slump by the end of the year.

The pandemic has resulted in Boeing cutting its forecast, to 2029, for commercial jet deliveries to 18.4k – 11% lower than its 2019 projection; this total has a list price of US$ 2.9 trillion. Over the following decade, this will increase by a further 24.7k jets (valued at US$ 3.9 trillion) to a twenty-year delivery total of 43.1k planes, valued at US$ 6.8 trillion. As international air travel declines, because of lockdown restrictions, the main casualty is the wide-bodied plane used on long haul routes, with the US plane maker seeing narrow-body aircraft leading the way to recovery, as domestic and short-haul routes rebound faster than long-haul travel. In future, because passengers will prefer point-to-point travel, as opposed to routing through hubs, Boeing has upped its twenty-year forecast for twin-engine planes – such as the Boeing 787 Dreamliner and Airbus A350 – by 10.3% to 7.5k deliveries.

In line with all other major airlines, EasyJet is struggling and has announced it could face its first-ever loss – of over US$ 1.0 billion this year – and more worryingly, that it expects to fly at just 25% of normal capacity into next year. It has also warned the government, that has already provided a US$ 785 million loan facility, that it may need more financial support. To help with liquidity, the airline has sold planes for US$ 810 million, raised a further US$ 540 million from the shareholders and cut 4.5k jobs.  Any notion of a post-pandemic recovery was brought to a sudden halt when the government introduced quarantine restrictions on arrivals from abroad. It had started summer operating at 38% capacity with hopes of upping that figure, going into Q3, but government action dashed those hopes.

One company that did well out of the pandemic was Tesco which posted a 28.7% hike in half yearly profits to 28 August of US$ US$ 740 million, with food sales 9.2% higher and online sales more than doubling to 1.5 million slots a week. One sector that did not fare well was clothing, with sales declining 17.2%.  The retailer is divesting itself of its businesses in Thailand, Malaysia and Poland but this is not expected to result in any retrenchments. Tesco Bank still presents problems, posting a half yearly loss of US$ 210 million. It will be a tough quarter for Tesco (and its rivals), as job losses mount and consumer spend will inevitable fall when the furlough scheme ends at the end of the month; on top of that, there will be further problems associated with a no-deal Brexit, the Ocado tie-up with M&S, the late arrival of Amazon into the competitive mix and Aldi’s new click-and-collect service.

The four major supermarkets accounted for 66.3% of the UK market share – Tesco, Sainsbury’s, Asda, Morrisons with shares of 26.8%, 14.9%, 14.5% and 10.1% respectively. The next four, with a combined 26.6% share, were Aldi (8.0%), Lidl (6.9%), Co-op (6.8%) and Waitrose (4.9%).

Despite the pandemic and the increasing trend of online shopping, Ikea (and its franchisees) are feeling confident enough to be opening a record fifty stores this year bringing its worldwide total to almost five hundred. It seems that the lockdown has encouraged many people to improve their homes. Even though YTD revenue to August fell 4.0% to US$ 48.0 billion, it is better than what had been predicted in April. The Swedish company has agreed to pay back government money received from state wage support schemes around the world, including in the US and Ireland, but not the UK as it did not claim any compensation, although 10k of its workers were furloughed.

The anti-virus software entrepreneur, John McAfee, is facing thirty years in prison for tax evasion after being arrested in Spain and now facing extradition to the US. Evidently, he had not filed tax returns for four years, (2014-2018), despite earning a shed load of money for selling the rights to his interesting life story, consulting and dealing in cryptocurrencies. He is alleged to have paid the proceeds from these ventures into bank accounts and cryptocurrency exchange accounts in the names of nominees, as well as hiding assets in the names of others. It is alleged that he made over US$ 23 million by “leveraging his fame” and recommending seven cryptocurrency offerings between 2017 and 2018, which allegedly turned out to be “essentially worthless”, without disclosing that he was paid to do so.

According to the latest WTO reports, global trade is bouncing back, but a complete recovery will take longer than initially forecast because of recent worldwide upticks in infection rates and further restrictions. There has also been an improvement from April’s 12.9% forecast decline in the 2020 volume of world merchandise which now stands at 9.2% – positivity returns next year with an estimated growth figure of 7.2%, but well down on the April prediction of 21.3%. In June, the IMF projected a 4.9% 2020 contraction and this week its managing director, Kristalina Georgieva, said “the picture today is less dire.”

One way or the other, the pandemic has taken its toll – governments and central banks have injected more than twelve trillion dollars  to stimulate their Covid-19 battered economies, (to stabilise financial markets and protect jobs), 36.2 million (0.00046%) of the 7.8 billion population infected, 27.1 million have recovered and 1.06 million have died The UAE has had 103k  cases and 438 deaths to date. With global rate increases mounting by the day, there seems some sort of inevitability that many countries will soon be hit by a second wave, the economic damage of which will be frightening and perhaps worse than the first.

For many years, credit card rates in Australia were among the highest in the world, as that sector was often very reluctant to pass on any rate cuts to their long-suffering customers. Now it seems that they have finally cooked the golden goose, as latest RBA figures show that Australians have eliminated US$ 4.5  billion worth of debt from their credit cards since the pandemic began; August figures indicated that consumers owed US$ 19.0 billion to card providers, 23.5% lower than the figure five months earlier in March., with actual credit card numbers diminishing by 4.3% (584k) over that period and 1.4 million down on August 2019 – the lowest number of accounts since April 2008. Having rested on their laurels – and easily gotten gains – for so many years, the credit card providers are now fighting an uphill battle with the buy now, pay later industry.

This week, the Australian budget’s main aims seemed to be to introduce measures to encourage businesses to hire more employees, (by offering investment tax breaks, wage subsidies and loss carry back tax provisions), and tax cuts for the vast majority of workers. In probably the most stimulatory budget in modern times, the Treasurer handed out tax cuts of around US$ 12.5 billion and US$ 18.8 billion full instant asset write-off for firms with turnovers of less than US$ 3.5 billion. However, there was no movement for bringing forward the next round of personal income tax cuts for high income earners and no mention of a permanent increase in the JobSeeker unemployment benefits. The Treasury’s latest forecast sees a rather optimistic 1.5% decline in GDP and next year by 4.7%. These will mean nothing if there is an increase in the infection rate that in turn would lead to more severe restriction measures. All three of the major credit ratings agencies – Fitch, Moody’s and S&P – reaffirmed Australia’s AAA credit rating., with the latter warning the risk of a downgrade remains and more so if borrowing costs rise sooner than expected.

With a further 661k jobs added in September, the US economy has managed to recover over half of the 22 million jobs lost at the onset of Covid-19; the figure was the smallest increase in jobs since employment started picking up again in May. However, last month’s figures were lower than the 800k expected by the market – maybe a portent that the recovery may not be as quick and robust as first thought. The jobless rate dipped for the fifth straight month, posting a rate of 7.9%, compared to the February figure of 3.5%, but there was little monthly change for the minority workers hit hardest by the pandemic, as the rate remained higher for African American and Hispanic workers than that of white workers. One statistic for the Trump administration to worry about is that 36% of unemployed are now classed as permanent job losers, up from 14% in May.

Earlier in the week, Federal Reserve chairman Jerome Powell warned of “recessionary dynamics” for the North American economy if Congress failed to pass the additional spending, and that the US economy could slip into a downward spiral if the coronavirus is not contained. He emphasised the urgent need for more economic stimulus amid the fallout from Covid-19. Meanwhile President Trump was hospitalised for three days and when he returned to the White House, he announced he was halting talks on coronavirus relief legislation until after the November 3 presidential election, whilst accusing House of Representatives Speaker, Nancy Pelosi, of not negotiating in good faith on new stimulus measures by calling for US$ 2.4 trillion in economic relief.

At last, there is somebody that seems to have time for sterling, with Goldman Sachs advising clients to buy the currency as the bank thinks a Brexit agreement is on the cards in the coming weeks. With the bank anticipating a relatively ‘thin’ trade deal, it is urging  clients to “go long” on sterling versus the euro, despite the fact that many consider there is still a great deal of uncertainty for any “decent” agreement. Earlier in the week, the pound was trading at US$ 1.28, having fallen to its lowest level at US$ 1.15 in thirty-five years last March. There is also every chance that the pound will also benefit from a weaker greenback. However, to the  ever-doubting Thomas, there is a chance of a no deal and, in the unlikely event this were to happen, and add in the Covid-19 impact, this could result in the UK economy contracting by US$ 173 billion,  of which a no deal could cost US$ 108 billion.

With UK employers planning an additional 58k redundancies in August, (150% higher on the same month last year), the number of employees, that are potentially losing their jobs over the first five months of the Covid crisis, stands at 498k. In the three months to August, monthly cuts of 150k, 150k and 58k, were the combined totals from 966 separate employers advising the government of plans to cut twenty or more jobs; this information is an employer requisite to complete an HR1 Advance Notice of Redundancy form. The hardest hit sectors were retail and restaurants.

The economic bounceback noted in August, as lockdown restrictions were eased and schemes like the Eat Out To Help Out restaurant vouchers, has petered out somewhat in September so much so that the chances a quick recovery are now off the table. This month sees the ending of the government’s furlough scheme to be replaced by subsidising the pay of employees who are working fewer than their usual hours due to reduced demand. Other measures to bolster the sagging employment market include a US$ 1.3k retention bonus, to help employees get back to work, with the so-called Kickstart scheme, costing US$ 2.6 billion, and doubling the number of frontline work coaches. Because the government is moving most of the employment payment back to the employer – with a lot less coming out of the Exchequer’s coffers – there is every chance that this increased cost will be too much to bear for many companies. The conclusion is that during the winter months, unemployment levels may scale new heights, as the level of redundancies starts to climb.

According to Boris Johnson, the chances of a deal are “very good” if everyone “exercises some common sense”, following the latest Brexit negotiations breaking down yet again. The main sticking points still appear to concern fishing and government subsidies. The Prime Minister is still confident about a Canada-style relationship and had a Saturday video call with EUC, President Ursula von der Leyen; she had been calling on both sides to “intensify” efforts with time running out, after six months of trade talks, for both parties to meet the October deadline to settle any differences. In January, the UK formally left the EU and had a one-year transition period for both sides to negotiate a trade deal; the EU had stipulated that a deal had to be agreed before the end of October to allow it to be signed off by the member states before the end of the year. Boris Johnson’s riposte has been that both sides should “move on” if agreement was not reached by the middle of the month. If there is no deal, the UK will go on to trade with the bloc on WTO rules.

In the UK, there are estimates that up to 60% of emergency pandemic loans, made under the Bounce Back scheme, may never be repaid and there could be a loss to the taxpayer of as much as US$ 35 billion from fraud, organised crime or default. According to latest official figures, there have been 1.55 million applications for the loans, with 1.26 million approvals. Because of the initial rush to make funds quickly available, checks were not as robust as they should have been so that fraudsters seem to have had a field day. The scheme provided firms with bank loans of up to US$ 67k, 100% backed by the government and did not have to be paid off for ten years. Demand was almost twice as much than initially estimated at up to US$ 64 billion and early signs indicated that fraud risk was heightened because of the speed with which the scheme was rolled out. The government’s largest ever and most risky business support scheme saw banks get 100k applications on first day. Fraudsters soon got in on the act stealing people’s personal data, then setting up fake accounts, to claim the government handout, with many victims not knowing what had happened until repayment letters began arriving in early summer. There is no surprise that banks got in on the act, with reports that the five major ones will pick up US$ 1.3 billion in interest payments from the scheme. But the big winners have been the criminals who may well have helped themselves to billions and have to say to the UK taxpayer – Thank You Very Much!

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The Taxman’s Taken All My Dough! 02 October 2020

The Taxman’s Taken All My Dough.                                                02 October 2020

According to Data Finder, Q3 registered a 55.8% increase in the total of property sales at 8.7k, with transactions worth US$ 5.0 billion, 67.7% higher. YTD figures indicate that there were 24.6k transactions, with a value of US$ 13.5 billion. The current market is a conundrum – low supply in prime areas with high demand where sales prices have nudged northwards whist rents have tended to remain flat rather than the rest of negative still sees rent track lower. The local market seems to be benefitting from three drivers – lower down repayments, pent up demand and historically low mortgage rates.

For the month of September, there were 3.9k property sales transactions, (56.6% and 59.7% higher than August and July), worth US$ 2.4 billion – up 88.4% and 36.0% than the previous two months. September sales were split 46.1:53.9 between off plan and secondary sales, with the Q3 split being 37.5:62.5. On a month on month basis, September off plan sales transactions were up 128.8%, whilst secondary transactions were up 23.2% lower, whilst the value increases were at 140.5% and 79.3%.

Latest data seems to confirm that quarterly rental declines for Dubai apartments hover around the 4.0% level, (9.0% on an annual basis), and slightly less for villas at 2.5%, (7.0% on an annual basis), with some analysts forecasting this trend to continue in the short-term. Over the past quarter, Motor City, Sports City and Dubailand recorded the sharpest quarterly dips in average apartment rents, with International City, Jumeirah Lake Towers and DIFC remaining flat. In relation to villa rentals, Springs, Meadows and Arabian Ranches posted the steepest rental rate drops, whilst Jumeirah Islands, Palm Jumeirah and The Lakes saw the lowest annual declines. It is noted that there is a trend for some of the population actually moving to bigger residences, although others are downsizing to reduce expenses during these turbulent times.

The UPS Global Real Estate Bubble Index places Dubai 25th in a list of cities most at risk of being in “bubble territory”. It concludes that the emirate has seen property prices recording an almost 20% drop in values over the past two years and it considers that Dubai prices are now “fairly valued”. The report also notes that current inflation-adjusted prices are 40% lower than recorded in 2014 and that “Dubai’s property market has reached a cyclical low. What we’re seeing is price effects of high population growth and easier mortgage regulations are being offset by ongoing high supply growth and weaker oil prices”.

After being on life support for some time, the debt ridden Arabtec Holding finally succumbed to its mainly self-inflicted wounds and announced that it will file for liquidation. Its situation was made worse by the adverse market conditions, exacerbated by the onset of Covid-19. Last year, the company posted a US$ 211 million loss, whilst its latest H1 loss came in at US$ 215 million, (compared to a US$ 16 million profit in the same period of 2019); revenue sank 28.0% to US$ 817 million. This is a sad end for a company that had been associated with some of the country’s major projects – including the Burj Khalifa, Dubai International Airport’s expansion and Dubai Living. It also joins the likes of Abraaj Capital, BR Shetty DSI and others that were once beacons of the local economy but the lights have almost gone out – sic transit gloria mundi.

Omniyat, the company that delivered The Opus by Zaha Hadid project last year, confirmed that it is on track with the impressive Dorchester Collection, with which the developer is linking up to run its first ME property. The development, located in Downtown Dubai, and being  built by Roberts Construction, includes a 39-apartment residential component, and will join the company’s portfolio of world-famous hotels in locations, including London, Rome, Beverly Hills and Paris. In addition, the two glass towers, connected by a ground-floor podium and a glass and steel bridge, includes over 56k sq mt of office space, a club and several restaurants.

Five months after its parent company NMC Health was placed into administration in the UK., administrators have now been appointed to the UAE operations of NMC Healthcare and a group of thirty-six trading entities, within the UAE, allowing the company to raise funds and pay the salaries of its employees. The appointment of Alvarez & Marsal, approved by the Abu Dhabi Global Markets Courts, will see the start of a US$ 325 million restructuring process; the largest creditor, ADCB, will provide US$ 250 million of the additional funding. The group of companies has total debts outstanding of about US$ 6.8 billion, of which US$ 5.0 billion is owed to a myriad of eighty banks. NMC Healthcare is the country’s biggest private healthcare company with about 15k staff employees, generating US$ 1.6 billion of revenue.

The President, His Highness Sheikh Khalifa bin Zayed Al Nayhan, has issued a new decree – amending Article 32 of Federal Law No 08 of 1980 – that sees equal pay for men and women in the private sector come into immediate effect; this will ensure that future pay grades will be determined by market standards and not gender. Dr Anwar Gargash, Minister of State for Foreign Affairs, commented that the decree is a “new positive step in the process of empowering women in the Emirates” and that it will help strengthen the country’s regional and international status for upholding gender equality. This move will consolidate the country’s position as the region’s leader in the United Nations Development Programme’s 2019 Gender Inequality Index.

Although times have inexorably changed this year, in 2019, there were some 7.388 million employed throughout the country, with a 2.2% unemployment rate. The working-age population accounts for 82% of the country’s total population, with women accounting for 58 per cent of the workforce, up from 52.7% in 2018. The female unemployment rate   improved over the year from 5.9% to 5.1%.

With estimates that AI will contribute US$ 320 billion to the ME economies by 2030, the UAE is keen to be in the forefront and become its capital. In this regard, HE Mohammed Ahmad Al Bowardi, the UAE’s Minister of State for Defence Affairs, confirmed the country’s willingness

to discuss with friendly countries and international partners in line with fourth industrial revolution. Despite all the global turmoil, the minister also commented “we believe that collaboration with friendly countries and international partners to face various challenges with an aim of achieving security, stability and peace has become a necessity,” It is expected that the global spend on AI next year will be US$ 57.6 billion.

Since April, UAE fuel prices have remained unchanged; so for the seventh straight month, Special 95 and diesel will retail at US$ 0.490 and US$ 0.561 per litre. 

Dubai Customs’ latest statistics show that over the past decade, the emirate’s external trade in coffee has generated more than US$ 950 million. Dubai is the natural hub for this sort of trading, linking some of the major coffee producing nations – such as Ethiopia, India, Indonesia, Uganda, and Vietnam – with regional and European markets. The industry is further helped by the DMCC providing quality logistics support linking coffee producers with buyers. Latest figures indicate that H1 trade grew 5.4% to US$ 69 million, equating to 14k tons, with the three main partners being Switzerland, Italy and Brazil valued at US$ 9 million, US$ 6 million and US$ 6 million respectively; Oman, Saudi Arabia and Kuwait were the main export and re-export markets.

Dragon Mart has rolled out an online platform,, with the shopping mall in International City housing an onsite fulfilment centre. Those shopping online can now select from 35k products across 11 categories , including home furnishings, games/toys, electronics, and fashion. The world’s biggest Chinese trading hub, outside of mainland China, has finally entered the e-commerce sector in a move which will support government-led e-commerce initiatives and help the country in its quest to accelerate digital transformation to meet the demands of 21st century e-commerce societies.

The IMD’s World Digital Competitiveness Ranking 2020 places the UAE 14th in its list – still the best in the region but down two places on the year. The country is rated highly in sub-indices such as talent, international experience, highly skilled foreign personnel, management of cities and net flow of international students. Two areas of possible concern were declines in high-tech exports and investment in telecommunications – down from 43rd to 58th and down to 50th respectively. To enhance its position in this field, the UAE will have to see improvements in training and education and continue to remain attractive to a highly skilled foreign workforce.

UAE’s healthcare industry saw capex at US$ 76 billion last year and this is expected to grow a further 17.1% to US$ 89 billion by the end of 2022. The government spends the most in this sector, funding US$ 16 billion last year, equating to 69% of the total spend. However, this ratio is likely to move, as private care spending is forecast to have a 9.5% cumulative annual growth rate, compared to a 4.4% government annual increase. There will be extra spending seen in fairly “new” technology, including in digital transformation, technology and AI and IoT-based solutions, with other investment increases in wellness and prevention, as well as on ageing. Meanwhile, Dubai is ranked sixth in KPMG’s latest Medical Tourism Index of leading global destinations for medical tourism, with inbound growing steadily over recent times. Covid has had a severe impact on this sector but once some form of normality returns, and lockdown restrictions are removed, this will surely bounce back.

Dubai Airport Free Zone Authority and the Israeli Federation of Chambers of Commerce have signed a memorandum of understanding which will enhance bilateral cooperation between the two sides, with DAFZA encouraging and supporting Israeli companies to establish their businesses in the free zone. DAFZA, home to 5k businesses, is seen as an ideal location for Israeli companies that could use Dubai International as a hub to expand and reach Asian and ME markets. It will also offer incentives for Israeli businesses to establish a presence in Dubai, particularly start-ups, with Israel rated second in the world for emerging companies.

It is interesting to note the role that precious stones and metals plays in both the Dubai and Israeli economies. Last year, they accounted for 38% of the total import value at US$ 8.1 billion and US$ 8.7 billion in exports and re-exports. Israel posted exports of US$ 11.9 billion, (which is 20% of its exports), and imports of US$ 5.2 billion. Another sector, in which they have a common bond, is that of machinery and electronic equipment, which accounts for 55% of DAFZ’s foreign trade, with a value of US$ 10.0 billion for imports and US$ 14.4 billion for exports and re-exports. For Israel, its exports are valued at US$ 8.0 billion, while imports are the same, US$ 8.0 billion.

YTD figures at the end of September show that Arab investors traded US$ 4.2 billion of shares on the country’s bourses, equating to 8.3% of the their total and 48.0% higher on the year. More of the investment – at US$ 3.6 billion – was seen on the Dubai Financial Market –with a split of almost 50.5:49.5 between purchases and sales.

The bourse opened on Sunday 27 September and, 69 points (3.0%) lower the previous week, nudged 14 points (0.7%) higher to close on 2,266 by 01 October. Emaar Properties, US$ 0.03 lower on the previous week, lost US$ 0.01 to close at US$ 0.77, whilst Arabtec, having shed US$ 0.04 the previous three weeks, lost US$ 0.01 to US$ 0.14 – but trading was suspended because of its liquidation announcement. Thursday 01 October saw the market trading at 212 million shares, worth US$ 41 million, (compared to 305 million shares, at a value of US$ 69 million, on 24 September).

For the month of September and YTD, the bourse had opened on 2,245 and 2,765 and, having closed the month on 2,273, was 28 points (1.2%) higher but well down by 17.8% YTD. Emaar and Arabtec both traded lower from their 01 January starting positions of US$ 1.10 and US$ 0.35 – down by US$ 0.34 and US$ 0.21. YTD. However, in the month of September, Emaar was up US$ 0.08 at US$ 0.78, whilst Arabtec headed in the opposite direction, down US$ 0.04 to US$ 0.14. Trading on the last day of September was markedly higher with 301 million shares, valued at US$ 73 million.

By Thursday, 01 October, Brent, US$ 1.38 (3.2%) lower the previous week was US$ 1.65 (4.0%) lower at US$ 40.46. Gold, down US$ 83 (3.4%) the previous week, moved US$ 26 higher (1.8%) to close on US$ 1,903, by Thursday 01 October. Brent started the year on US$ 66.67 and has lost US$ 21.39 (32.1%) YTD but gained US$ 1.96 (4.5%) during the month of September to close on US$ 45.28. Meanwhile, the yellow metal gained US$ 461 (30.3%) YTD, having started the year on US$ 1,517 to close at the end of September on US$ 1,978 from a year start of US$ 1,517, with September prices nudging US$ 2 higher.

Royal Dutch Shell is planning to make 9k (10.8% of its total 83k global workforce) jobs redundant, 1.5k of which would be voluntary as it tries to cut costs, by over US$ 2.0 billion within two years, with revenue slumping because of the Covid-19  fall in oil demand; the oil giant is also trying to become a net-zero emissions energy business by 2050 or sooner. This strategy will mean that Shell’s future revenue streams will predominantly be low-carbon electricity, low-carbon biofuels and hydrogen but will still have some oil and gas in the mix of energy. The past two quarters have seen dire results – Q1 down 46% to US$ 2.9 billion and in Q2, 82% to US$ 638 million respectively; it seems that Q3 earnings will be around US$ 850 million.

With liquidity tightening by the day, because of plunging aircraft sales and rising costs, Boeing is retrenching some 170 mid-level executives who are taking a buyout offer that includes a year’s salary. Having already slashed its payroll numbers by 19k earlier in the year, the troubled plane maker is looking at building the 787 Dreamliner at a single site, most likely at its South Carolina factory, reducing costs in futuristic technology, as well as its businesses and organisational structure, and closing indefinitely its lavish executive retreat, the Boeing Leadership Center. Prior to the resumption of its Max planes in late Q1, it is estimated that Boeing could post a massive US$ 23.3 billion cash outflow. The Chicago-based company is looking at other ways to save money including R&D, phasing out Boeing NeXt, a two-year-old unit focused on futuristic concepts, not proceeding with the Autonomous Flight Research Center and trying to sublease about half of the 100k sq ft space it had secured. In Q4, it will also decide what to do with three of its ventures – Aerion, which is developing a supersonic business jet, SkyGrid, which is making an air-traffic management system for drones and Wisk, a joint venture with Kitty Hawk Corp, an autonomous flight venture. With its revenue forecasts still in the clouds, the company has to save to survive until better times are here again.

It can only be Ireland when its Supreme Court decides that the rolls used in Subway’s hot sandwiches cannot be considered bread because it contains too much sugar. Under the country’s VAT law of 1972, ingredients in bread such as sugar and fat should not exceed 2% of the weight of flour in the dough – as Subway bread contains up to 10%, it will be subject to 13.5% tax and not at zero rate for bread which is considered a staple food. The case was first brought to legal attention in 2006, when a request for a VAT refund was refused. It is not the first time Subway’s bread has been in the spotlight. In 2014, the company announced it was removing azodicarbonamide – the so-called “yoga mat” chemical because it is also used for yoga mats and carpet underlay – to whiten flour and improve the condition of dough. Although no longer used by Subway it is still approved by the US Food and Drug Administration.

After a US$ 390 million Saudi bid fell apart in August due to protracted negotiations, Singapore’s Bellagraph Nova has stepped in with a US$ 375 million offer for Newcastle United. Nothing is straight forward when it comes to dealings with this 128-year old football club that was put up for sale by its owner, Mike Ashley in 2017. The largely unknown Paris-based newly merged group boasts 2019 revenue figures of US$ 12 billion and employs 23k staff; it deals in a wide range across consumer goods, luxury products and healthcare. These figures cannot be verified because Bellagraph Nova and its entities are not publicly listed on any stock exchanges, apart from one linked company called Axington. Some find it hard to believe that such an entity can fly under the radar and appear out of nowhere to bid for the football club – in football terms this will probably last less time than Ali Dia did at Southampton when Graeme Souness was the manager.

The world’s second biggest fashion retailer plans to cut 250 of its 5k stores globally driven by the fact that an increasing number of its customers are going on-line – a trend that had already started prior to the onset of Covid-19 but gained more traction because of global lockdowns. H&M confirmed that sales were moving in the right direction last month but were still 5.0% lower, year on year. For the nine months to August, it posted a decline in profits at US$ 280 million. The Swedish retailer will invest more to increase digital investment to cope with growing online demand and confirmed that it had taken “rapid and decisive action” to manage the impact of the coronavirus, including changes to purchasing, investments, rents, staffing and financing.

The head of Next has commented that he thinks – like many other analysts – that hundreds of thousands of traditional retail jobs may not survive in the wake of the coronavirus crisis. Lord Wolfson blames the lockdown for triggering a permanent shift to online shopping, although the trend was becoming apparent even before the onset of Covid-19. The situation will not improve for workers in that sector in the short-term, as the government’s furlough scheme – which paid up to 80% of a monthly wage to those that could not work because of the lockdown – will close at the end of the month – to a new Job Support Scheme that will pay only 22% of pay to those unable to work full time. Next managed to make a small H1 profit and is seen as one of the more progressive retail groups, already having a robust online business and a strong presence in retail parks.

One of the country’s biggest bakery chains, employing 25k, has indicated its staffing was too high for customer demand and that it expects business activity to “remain below normal for the foreseeable future”. With the closing of the government’s furlough scheme at the end of the month, Greggs now expect that staff in over 50% of its 2k outlets will have to accept fewer hours or face losing their jobs. The company has not clarified whether it will utilise the government’s new Job Support Scheme, which will replace the existing furlough scheme – the vast majority of the payroll was on the scheme, with about 25% still on it. Q3 sales were 28.8% lower than the same period in 2019. Any staff losses are expected to be lower than those of its peers including Pret A Manger and Upper Crust which have made 3k and 5k job cuts.  Despite the bad news on possible redundancies, Greggs did confirm that it will still open twenty new shops this year, “predominantly in locations accessed by car” and noted that it has been encouraged by launched food deliveries, with delivery app Just Eat, and that it had increased investment in its digital investment, with “click & collect” being rolled out at all its stores.

Another retailer in trouble seems to be Hotel Chocolat that posted a 3.0% hike in annual revenue to 30 June of US$ 175 million but a Covid-19-related loss of US$ 10 million, (compared to a US$ 15 million profit in 2019). In a year of two halves – H1 revenue was up 14% but H2 headed in the other direction, down 14%. Prior to the onset of the pandemic, outlets accounted for 70% of revenue but the company was able to make the most of a bad situation by expanding sales via online and through partners who sell its goods. Since the lockdown was lifted, the shops have been reopened but they “are seeing a very patchy picture”.

Despite all the negativity around the UK High Street, discount chain B&M is planning to open up forty-five new stores this year after sales soared during the coronavirus lockdown; goods sold include DIY and foodstuffs. During the pandemic, the retailer, which initially closed sixty stores in shopping centres, but reopened them quite quickly, will open forty-five new outlets in the year to April; on the flip side, some smaller stores could be closed. In the half year to 26 September, sales were 25.3% higher, resulting in a revised earnings forecast for the year from a previous estimate of between US$ 320 million – US$ 350 million to US$ 370 million.

Aldi has initiated its new click and collect trial by which shoppers message their order to the supermarket and then later have their groceries delivered straight to their car. Aldi was originally a disruptor by discounting their produce and pinching customers from the major supermarkets and expanding their market share. The onset of Covid-19 put the German intruder on the back foot and they lost revenue from the huge boom in online sales and increase in convenience store sales. It is now trialling several new on-line concepts to regain their place as the fourth biggest UK supermarket and redefine discount retailing. Last year, it posted an 8.0% increase in revenue to US$ 15.9 billion, along with a 49.0% jump in pre-tax profits. Although Aldi’s sales are 10% up on last year, for the first time in its UK history, it is growing behind the market. Despite all these problems, Aldi will have spent US$ 1.7 billion on investments by the end of the year and will add another one hundred shops (and 4k jobs) over the next two years.

Twenty-one years since being sold to US giant Walmart, there is every chance that Asda could return to UK ownership, with Blackburn-based billionaire brothers, Mohsin and Zuber Issa, with TDR Capital, considered leading contenders to buy the supermarket for a reported US$ 8.4 billion. The brothers’ EG Group already has a relationship with Asda via their petrol forecourt business and recently three of their forecourts were trialled for Asda’s expansion into convenience stores concept, “Asda On the Move”. Sainsbury’s earlier deal to acquire Asda was blocked on competition grounds.

The pandemic has hit Walt Disney hard as it announces it will be laying off 28k employees, most of whom will be US-based, 67% of which are part-time. All its parks were closed at the onset of the pandemic but all, except Disneyland in California, have reopened although visitor numbers are limited to allow for social distancing. Disney’s parks in Shanghai, Hong Kong, Tokyo and Paris are not affected, with Hong Kong reopening last week after closing for the second time in July because of a spike in Covid-19 cases. Q2 was a financial disaster, with revenues from its Parks, Experiences and Products division plummeting 85%, resulting in a US$ 4.7 billion deficit.

Harley-Davidson is downsizing in the world’s biggest motorcycle market, with 17 million annual sales of motorcycles and scooters, as it stops manufacturing and scales back its sales operations in India; the US brand only managed average annual sales of 3k bikes. Last month, Toyota announced that it would stop further expansions in the country due to its high tax regime and this follows GM pulling out in 2017 and Ford agreeing last year to moving most of its assets to a JV with vehicle giant Mahindra & Mahindra. Historically, India has been a tough market for foreign automakers and even US President Donald Trump has previously complained about India’s high taxes, calling it a “tariff king”. Yet another high-profile exit from the market is a blow for Prime Minister Narendra Modi’s efforts to lure or retain foreign manufacturers, not helped by prohibitively high taxes and a slowdown in discretionary spending.

UK betting giant William Hill has received two rival takeover approaches – from US-based private equity firm Apollo, that is also interested in buying Asda, and casino giant Caesars Entertainment. Under UK takeover regulations, both suiters have until 23 October “to announce a firm intention” to make an offer. With a potential bid battle in the offing, its shares have jumped by a third to US$ 3.85. Under the recent lockdowns, betting has continued to shift online and away from the High Street, and in August, the company did not reopen 119 of its 1.5k betting shops. In the US, where Caesars already have a 20% stake and has exclusive rights to operate sports betting under the Caesars brand, it has 170 retail sites in thirteen different states.

Australia’s Banking Code Compliance Committee was set up in the wake of epic failures with the industry exposed at the Hayne royal commission and has turned into an industry watchdog with no teeth. Members are expected to follow certain baking standards which when shove comes to push has no legal force. It holds members to standards set out in a code of practice, a set of guidelines that has no weight in law. This week, the BCCC sanctioned Bendigo and Adelaide Bank for “serious and systemic breaches” in how it has treated customers over four years ending February 2019. The bank and its management received no fines, penalties or court cases and escaped with just a sanction. It did not even apply any of its other limited powers, including imposing staff training, insisting on customers being repaid or referring issues to the Australian Securities and Investments Commission. There is no doubt that the banking industry will continue with historic practices by preferring to deal with its problems away from public view – and often brushing their dirt under the proverbial carpet. No wonder, Australian banks are among the most profitable (and litigated) in the world.

There could be shock about to hit the Australian real estate sector, as the six month mortgage repayment deferral, taken up by over 10% of those with a home loan, comes to an end; a recent study has indicated that 20% of those taking up the mortgage holiday will be requesting a further extension. Worryingly, nine of the top ten areas, for mortgage deferrals with the major banks, are in Queensland, an indicator on how hard the state – and specifically its tourist areas – has been hit by Covid-19. With international flights largely grounded, and state borders closed for months, overseas and interstate tourists have effectively been locked out so that these tourist hotspots felt the hit early and hard and it is still continuing six months from the pandemic onset. The problem is not going away and those locations, with low-wage workers, high unemployment and rocketing household indebtedness, will bear the brunt. One note of concern is that of those requesting a deferral extension 40% overstated their income in their mortgage application, 15% understated other debts, 67% are currently on JobKeeper and 25% are on unemployment benefits. A sure recipe for banks to be worried as their impairment provisions will inevitably skyrocket over the next six months.

It is estimated that the pandemic will have cost Australia US$ 251 billion and there are some who believe that the Morrison government will need to pump more money into the economy to create jobs and escape the recession; this could take the form of personal tax cuts, some form of furlough, major government infrastructure projects, maybe a new business investment allowance and an increase in welfare spending. The situation would be even worse were it not for the high iron ore prices, Australia’s biggest export earner. Over the four financial years ending 30 June 2020, the federal budgets will be in deficit by US$ 60.8 billion, (4.3% of GDP), US$ 140.9, US$ 32.0 billion and US$ 18.2 billion respectively.

Data from the CPB Netherlands Bureau for Economic Policy Analysis notes that global trade has only recovered to 75% of its pre-Covid-19 level, with all regions posting rises. However, the two superpowers recorded the biggest increases, as China’s exports were already at its pre-virus levels as at the end of July, with the US 13% lower than earlier in the year. By the end of September, latest PMI figures pointed to the recovery continuing into Q3. In July, world trade had regained 67% of flows cleaned out by the pandemic, standing at 6.6% below its December 2019 peak – an improvement on the May reading of 17.0%. Latest forecasts indicate that by the end of 2020, trade and foreign direct investment would have contracted by some 20% and 40% respectively, and remittances will be US$ 100 billion lower. With the global economy shrinking by over 4%, there will be a US$ 6 trillion shortfall in global output come 31 December.

In May, the UK government agreed to a US$ 2.1 billion bailout for the London Metro after its income fell by 90% during the coronavirus pandemic. Now with the deal expiring mid-October, Transport for London is now requesting a further US$ 2.7 billion to keep the network running until the end of the year, without which it would have to issue a Section 114 order – the equivalent of bankruptcy for a public company. With their finances “right on the wire”, the Johnson government has promised a letter setting out terms for a fresh bailout. Following what he considered punitive conditions – including extra borrowing, slashing free travel for older people and under 18s and raising fares next year – for the May payout, no doubt London Mayor Sadiq Khan will find something to grumble about when the bailout details are made public but is unlikely to dip into the network’s US$ 1.6 billion reserve fund.

The global press is having a field day dissecting details of Donald Trump’s tax returns, courtesy of a New York Times investigation. The paper claims Mr Trump paid no tax at all in ten of the past fifteen years and has paid just US$ 750 in federal income taxes in 2016 and 2017, after reporting he had lost millions of dollars from his golf courses and had debts of US$ 421 million. Interestingly, over the first two years of his presidency it is alleged that he earned US$ 73 million abroad, from countries such as the Philippines and Turkey. His critics fail to acknowledge that low income tax payments can be perfectly legitimate and employ experts to structure their tax affairs in a more efficient way. The US President said the report was a “total fake” and indeed it was discovered that many of his businesses are struggling and that he relied on heavy losses across his business empire to nullify his federal income tax bill. He is one person, along with the likes of Jeff Bezos, Mark Zuckerberg and Bill Gates who will not be singing The Taxman’s Taken All My Dough.

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From a Distance1

From A Distance!                                                                               24 September2020

Since the UK government introduced an eight-month break in Stamp Duty Land Tax that sees no duty paid on any property transfer less than US$ 640k (GBP 500k),
UK house sales have risen 14.5% and 15.6% in July and August. The stamp duty holiday, which is scheduled to end on 31 March 2021, has reportedly protected almost 750k jobs in the housing sector and wider supply chain such as housebuilders, estate agents, tradespeople, DIY retailers and removal firms. It has also contributed to a 9.9% hike in spending on household goods and home improvements compared to pre-pandemic February levels. Another study by Checkatrade estimates more than 10% of Britons hope to buy a new home by the end of March 2021, with a third of that total using the cash saving from the tax holiday on home improvements and renovations. Maybe a similar “holiday” from the up to 4% registration fee of the value of transferred property here in Dubai may see a similar result and prove a fillip for the sector and the local economy?

Saudi Arabia’s Musharaka REIT Fundhas paid DMCC US$ 13 million for a single 5.4k sq mt plot of land sale, with a self-storage facility, and a total built up area of 13.9k sq mt. Musharaka will lease it to the ‘The Box Self Storage Services Co,’ with an initial 8.7% rental yield.

Despite the pandemic, Dubai manages to keep its head above water, as illustrated by the emirate’s gold and diamond air-cargo trade making US$ 18.3 billion, weighing a total 601.3 tons, in the four months to 30 June. Data from Air Customs Centre Management, at Dubai Customs, shows that imports accounted for 53.0% of the trade (US$ 9.7 billion – 428.8 tons), with reexports accounting for (US$ 8.0 billion – 161.2 tons). Over that period, 31.6k transactions took place.

Al Habtoor Group has agreed a partnership with Mobileye, the independent Jerusalem-based autonomous car division of Intel Corp that may see a fleet of self-driving ‘robotaxis’ on Dubai’s roads within two years. The Israeli input will mainly be to provide mapping technologies for Advanced Driver Assistance Systems (ADAS), self-driving vehicles and smart city solutions to the UAE. Initially, the plan is to equip 1k vehicles with Mobileye’s 8 Connect system to map Dubai – and collect data – with testing starting next year; this will be followed by a pilot programme a year later, followed by a commercial service in 2023.

This week a strategic partnership agreement has been finalised between the Dubai Chamber of Commerce and Industry and Tel Aviv Chamber of Commerce. Following a joint study, identifying synergies and sectors of mutual interest, the parties will look at ways to bring benefits for the public and private sectors across the Middle East and further cross-border collaboration across economic sectors. Both sides will actively encourage and support new businesses, start-ups, and scale-ups in each other’s country.

In another move to further enhance bourgeoning UAE/Israeli relations, and to promote the flow of bilateral trade, DP World and Israel’s Bank Leumi signed an agreement. They will try to identify opportunities to develop Israeli ports and logistics assets, as well as to simplify working capital requirements through trade finance to improve cargo flows. This is the latest in a series of agreements between UAE and Israeli companies, (including DP World and Dove Tower combining to develop trade infrastructure and Bank Leumi working with Emirates NBD), following the signing of the Abraham Accord between the two countries in Washington DC last week. The UAE’s Minister of Economy Abdulla bin Touq expects greater cooperation in sectors such as health care, food security, aviation, finance, tourism, energy, science and technology.

A wholesale market platform, that links buyers and sellers globally, has been formed by a venture between Investment Corporation of Dubai and Dubai South. Dubai Global Connect is a one million square metre purpose-built facility, initially focussed on furniture/living, food and fashion. With no financial details readily available, the development, also known as “City of Trade”, will be constructed in phases, with the first one encompassing 400k sq mt. Located adjacent to Al Maktoum International Airport, and connected to Jebel Ali Port, the infrastructure will also be supported by a digital wholesale trading platform, which will connect online wholesale traders – both sellers and buyers. The main aim is to build a unique trade infrastructure that enhances efficiencies in global trade flows through Dubai. Normal wholesale markets focus on promoting local businesses, but DGC is different as it focuses on a macro audience – regional and global – to trade goods from all around the world. ICD, the principal investment arm of the emirate’s government, owns stakes in some of Dubai’s biggest and best-known names, including Emirates airline, Emirates NBD and Emirates National Oil Corporation, as well as holding minority stakes in Emaar Properties, the Dubai Airport Free Zone and the World Trade Centre.

The Central Bank has amended the country’s 2020 overall GDP forecast to a 5.2% contraction, compared to an earlier -3.6% expected downturn, with the non-oil GDP shrinking slightly less over the year at – 4.5%. In the second quarter, the negative real growth in the GDP slumped to 7.8% and 9.3% for the non-hydrocarbon sector. The bank noted that there were slowdowns in credit growth, real estate prices and employment in Q2 but now expect that a recovery in all three sectors may have started in Q3 and there will be further progress in Q4, assuming that the virus risks are under control. Driven by falling fuel and rent prices, subdued demand and exchange rate appreciation relating to the country’s main trading partners, the consumer price index remained in negative territory in Q2 at -2.3%, with inflation in non-tradeables even lower by -3.9%. The negative trend is expected to continue into 2021.

In a bid to cut costs, including reducing rent and office expenses, Careem is encouraging its office staff – stretched across 36 locations in fourteen countries – to work from home. However, those who prefer to work in the office, for whatever reason, are still able to do so. The ride-hailing app, which also plans to recruit 150 more people to develop new versions of its Super App, also noted that Careem staff were more productive and developed stronger relationships with peers in other countries while working remotely during the earlier lockdown. This new strategy comes five months after Careem laid off a third of its staff as the initial impact of Covid-19 was gaining traction.

An unknown party has offered US$ 109 million to Union Properties for a 40% stake in its subsidiary, Dubai Autodrome. This offer will be tabled at next week’s board meeting which will also discuss the acquisition of real estate assets in the UAE worth US$ 202 million. The developer established the facility, which is the UAE’s first multi-purpose motorsports and entertainment centre, in 2004. Last month, UP announced plans to list three of its subsidiaries – facilities management company ServeU, The FitOut, which specialises in interior fit-outs of offices, hotels and restaurants, and Dubai Autodrome – on the DFM. The developer is keen to cut costs, improve its liquidity and reduce its retained losses.

It is reported that the NMC fraud, that rocked the corporate world, took place over a period of eight years. Apart from the time factor, the current management’s investigation into how all this happened has been hampered by the destruction, by unnamed employees, of thousands of documents. Disgraced BR Shetty’s NMC Health’s troubles started last December when US-based activist investor Muddy Waters alleged the company had inflated its cash balances and understated its debts; four months later, it was placed into administration, (through the Abu Dhabi Global Markets Courts to fend off creditor claims), and the appointment of external investigators who discovered that the company’s debts stood at US$ 6.6 billion – not the US$ 2.1 billion as posted in the accounts.

The bourse opened on Sunday 20 September and, 38 points (1.7%) higher the previous week, shed 69 points (3.0%) to close on 2,252 by 24 September. Emaar Properties, US$ 0.02 up on the previous week, lost US$ 0.03 to close at US$ 0.78, whilst Arabtec, having shed US$ 0.03 the previous fortnight, lost US$ 0.01 to US$ 0.15. Thursday 24 September saw the market trading at 305 million shares, worth US$ 69 million, (compared to 555 million shares, at a value of US$ 397 million, on 17 September).

By Thursday, 24 September, Brent, US$ 3.46 (8.6%) higher the previous week was US$ 1.38 (3.2%) lower at US$ 42.11. Gold, up US$ 29 (2.0%) the previous three weeks, moved markedly lower down US$ 83 higher (0.4%) to close on US$ 1,877, by Thursday 24 September.

It seems that Covid-19 may have put the final nail in the coffin of coal-fired power plants, as General Electric announced plans to exit the market to focus on greener alternatives. GE noted it would close or sell sites, as it prioritised its renewable energy and power generation businesses. It is a huge reversal, bearing in mind that only five years ago, the conglomerate paid US$ 13.4 billion for a business that produced coal-fuelled turbines. Now it seems to be bowing to pressure that mirrors the growing acceptance of cleaner energy sources in US power grids. Furthermore, GE has looked at the current energy economics, as cheaper alternatives such as natural gas, solar and wind gain market traction. The decision comes just weeks prior to the presidential election, with Donald Trump having championed “beautiful, clean coal” and his opponent Joe Biden expounding the complete opposite view.

Meanwhile, the US President has indicated that there is no future for TikTok in the US unless Oracle and Walmart have “total control” of the company; currently, the deal sees the two US companies each holding 10% shares and China-based owner ByteDance retaining an 80% stake in Tik Tok Global. If this deal had not gone through, the app would have been banned from the US on security grounds. Prior to the agreement, Oracle issued a statement that the two US companies would own a combined 20% stake but also added “Americans will be the majority. And ByteDance will have no ownership in TikTok Global.” In contrast, ByteDance maintained that it would be keeping an 80% stake in TikTok Global, and as well as it would not be transferring ownership of the valuable algorithms that power TikTok. The Chinese company also poured water on a US$ 5 billion contribution, requested by the President, from the two companies, towards a new education fund.

ZeniMax Media, the parent company of the video games studio Bethesda Softworks, has been acquired for US$ 7.5 billion by the Xbox owner Microsoft. The deal will add the likes of titles such as Fallout, Doom, Skyrim, Quake and The Elder Scrolls to Xbox’s portfolio. Phil Spencer of Xbox commented that the two firms “shared similar visions for the opportunities for creators and their games to reach more players in more ways”. Xbox has indicated that the publisher’s franchises would be added to its Game Pass subscription package for consoles and PCs, (that already has access to 200 games), which could be seen to make the PlayStation 5 less attractive to some players than the forthcoming Xbox Series X; both machines are due for launch in November.

HSBC is in a spot of bother for past misdeeds following reports that the bank had continued to allow fraudsters to transfer hundreds of millions of dollars, after the bank had discovered the Ponzi scheme scam. The revelations came via the so-called FinCEN Files, (obtained by Buzzfeed), a leak of 2.7k documents, mostly consisting of Suspicious Activity Reports. The files relate to alleged money-laundering transactions, totalling in excess of US$ two trillion and involving several banks that took place over most of this century. The bank’s share value dropped 5.3% on the day adding to its woes, including the impact of Covid-19 outbreak in China and US-Sino geo-political tensions, that has seen its market value halved so far this year. JP Morgan is another bank involved and one other bank implicated in the scam, Standard Chartered, shed 6.2% in Monday’s trading. It seems that on a global scale, banks cannot help themselves. It is reported that US authorities repeatedly flagged transactions as suspicious in the years between 1997 and 2017, yet the banks apparently took little or no action. It does seem like open season for some banks to assist oligarchs and terrorists to allow the flow of trillions of dollars of dirty money through their systems.

Another former stock market favourite, Rolls Royce, appears to be in dire trouble, with its shares hitting their lowest level (8.4% lower at US$ 225) since 2004 on Monday. This comes after the UK company announced it was in talks with several SVWs as it considers “funding options to enhance balance sheet resilience and strength”; it is reported that the maker of aircraft engines is looking for funding in the region of US$ 3.4 billion. Its financial woes, made worse by the pandemic which has turned the aviation sector on its head, sees RR’s liabilities higher than its assets which makes the cost of borrowing higher than it would be for a solvent business. In H1, it posted a US$ 7.3 billion loss. There are other financing methods that the company will be considering including a rights issue (which is probably the least desirous given the low share price) or even a new debt issuance.

Fosun, which owns Club Med and completely took over Thomas Cook when it went bust last year, has released ambitious plans for its post-Covid holiday sector, which it expects to happen once a vaccine has been found.  The Chinese travel firm, which has already dramatically down sized the historic English company, relaunched Thomas Cook in China in July which it describes as a success, with more than 170k customers, and has now relaunched the brand in the UK as an online travel agency. The strategy for the Chinese relaunch is more than an-online operation but a lifestyle platform which offers a range of related products and services, hotels, tickets, entertainment, education and retailers selling gifts and souvenirs. Fosun has also started building ten new Club Med resorts to be ready for the end of 2022.

Because of a slump in hotel guest numbers, the owner of Premier Inn and Beefeater has warned that it may have to make 6k staff redundant. 27k of Whitbread’s 35k staff are still being paid via the government’s furlough scheme.  Their hotels have seen August stays halved, compared to a year earlier, and diner numbers a third down which would have been lower if not for the government’s Eat Out to Help Out scheme in August. Meanwhile, pub chain JD Wetherspoon posted that 50% of its 1k staff working at airport venues could lose their jobs because of the dramatic fall in travel and tourism mainly because of a downturn in trade in these pubs. On Tuesday, the sector was doubly hit by the news that, as from today, Thursday, hospitality venues will have to close at 22.00, to help curb the spread of the virus, and that the government has advised the population to now work from home “if they can” – described by UK Hospitality that this represented “effectively a lockdown” for city centre bars and restaurants.

Little wonder that Cineworld posted an H1 US$ 1.6 billion loss, (compared to a US$ 130 million profit in the same period a year earlier), as its cinemas were closed under lockdown and will now probably have to raise more funds to keep going; group revenues were  down by two thirds at US$ 712 million. The cinema company has reopened 72% of its 778 global sites but six of its UK theatres remain closed. Following new government guidelines, its UK cinemas will now be closed from 25 September until November which just reinforces the urgency of negotiating waivers on banking agreements, which fall due in December and in June next year, to maintain liquidity.

It seems likely that 1k of the 6k Butlin’s employees will have to take either paid or holiday leave when the furlough scheme comes to an end next month. The iconic holiday camp, operator, privately-owned by Bourne Leisure Group, is currently working at 50%, as the UK summer comes to an end and the winter revenue stream starts to dry up. The leisure group, with Haven caravan sites and Warner Leisure Hotels in its portfolio, has managed to secure hundreds of millions of dollars in government support in the form of loans and furlough payments as well as deferred VAT and business rates since the start of the pandemic.

A sign of the times, sees owners Mars Foods changing the name of Uncle Ben’s Rice to Ben’s Original and removing the image of a smiling, grey-haired black man from its packaging. This follows a brand review by the group which concluded that the almost eighty-year old company should change its name and branding.

Expecting little prospect of the UK winning a deal on financial services in Brexit talks, JP Morgan Chase has told about 200 staff to plan to move out of London. These employees, mainly in sales and trading, have been told to prepare for relocation to other European cities and will be given six months commuting and accommodation support. It seems that the EU considers the UK jurisdiction not robust enough rules to enable cross-border trade, a process known as equivalence. Furthermore, in the event of a no deal, banks will be barred from doing investment services business from London with clients such as German and French pension funds. However, some banks are holding out on any move until a decision is known.

To add to its many woes, the people of Lebanon are now facing Zimbabwe-type inflation with consumer prices increasing 112.4% and 120.0% in July and August, as food, clothing/footwear and furnishings/household equipment jumped 367%, 413% and 664% last month. The country, still in comatose from last month’s massive Beirut explosion, is facing its worst economic crisis since the culmination of the fifteen-year civil war that ended in 1990. The country’s gross July public debt was 9.0% higher, on the year, at US$ 94 billion, of which the three major stakeholders were the central bank, commercial bank accounts and foreign investors holding 42.5%, 28.4% and 18.8% of the total debt. Although Lebanon’s current account deficit is narrowing, the central bank’s foreign currency reserves have been losing US$ 1 billion every month in 2020 – and if this continues, at this rate, there may be no reserves by this time next year. The Lebanese pound has lost more than 80% of its value in the black market against the dollar over the past twelve months. If no early positive action is taken, there is no doubt that social and political instability will prevail and there is every chance that the country’s sectarian divisions will deepen with inevitable tragic consequences. The Lebanese deserve a better life and a better government.

Australia’s second largest bank, Westpac, can now boast that it has had to pay a record US$ 0.9 billion in fines for the nation’s biggest breach of money laundering laws and counter-terrorism financing laws. However, the fine could have been a lot worse, as the bank posted 23 million breaches of the law, with each individual breach carrying a maximum penalty of US$ 15 million (AUD 21 million). The reduced fine came after the bank negotiated a deal and apologised for its “failings” but to an outsider it looks as if the cosy establishment relationships continue and it is time for criminal action to be taken. Last year, the bank disclosed to its shareholders that it had self-reported some of the breaches to the Australian Transaction Reports and Analysis Centre and also disclosed the investigation to shareholders, including a forecast penalty. Austrac estimated that the total amount of funds involved was US$ 7.8 billion. On a local scale, Westpac is not the only bank to have been fined – in 2018, Commonwealth Bank was fined US$ 500 for similar offences, but on a smaller scale – whilst on a global scale the list, including HSBC, Danske Bank and Rabobank, is almost endless.

Poor old Alan Joyce has just seen his total pay fall by 83% because of the pandemic which has caused air travel to tank. Two years ago, the Irish-born Qantas Airways boss was Australia’s highest paid chief executive but for the year ending 30 June, he saw his pay slump from US$ 7.2 million to just over US$ 1.2 million. He took no salary from April to July this year as revenues collapsed, before returning to 65% of his base salary in August and also agreed not to receive 345k shares associated with a long-term incentive from 2017 – with the board deciding next August whether he receives them or not. Any guesses?

There are fears that up to 100k Australian businesses could collapse before the end of the tax year next June, not helped by the closing of JobKeeper and an imminent change in insolvency laws. The figure may be higher when it is estimated that the country has 2.4 million businesses – and if only 10% fail, then a lot more would go under.  The new law could see ‘zombie” companies – which have too much debt and poor management and have been ticking along due to emergency COVID-19 support measures – being identified quicker. It is thought that business owners, with liabilities of less than US$ 710k (AUD 1 million), will be allowed to stay in charge while they deal with their debts. For smaller companies in trouble, quicker and easier regulations will allow for almost immediate liquidation.

One major casualty of the pandemic is the loss of so many international university students returning to study in Australia which is virtually under complete lockdown. It is estimated that only forty student-visa holders entered the country in July, as student accommodation providers witness occupancy rates dropping significantly. The seriousness of the problem can be gleaned from the following table:

2019 arrivals2019 departures2020 arrivals2020 departures

Source: ABS

A major problem has been caps the states have put on international arrivals – for example, South Australia has a weekly limit of 500 people. The slump in overseas student numbers sees traditional student accommodation falling from a 95% occupancy to barely 50% and ancillary businesses that rely on students for their income are also suffering. It is estimated that a third of the students’ spending was in retail and hospitality, with another third spent in the property sector. Urbis reckons that there are nearly 113k purpose-built student accommodation beds in Australia, and a further 45k+ in the pipeline, either under construction, in development or planning.

A report by UK-based InfluenceMap has noted that the Minerals Council of Australia is the “single largest negative influence on Australian climate-related policy” and that the country’s current climate policies are consistent with a 3-4 degrees Celsius temperature rise, along with an 8% increase in greenhouse gas emissions, by 2030. The report also noted Australian representative groups – including the main “culprit”, the Australian Chamber of Commerce and Industry, the Minerals Council of Australia and the NSW Minerals Council – featured disproportionately among the world’s most damaging lobbyists on climate, and most responsible for undermining the country’s climate policy. It also claimed that the big four mining giants – BHP, (judged to be the most negatively influential), Glencore, Rio Tinto and Santos – have the most concentrated network of links to industry associations that “continue to work against Paris-aligned policy for Australia”. It appears that over 75% of industry associations are pro-fossil-fuels and take positions against climate regulations and that there has been limited public scrutiny of these activities. Now outside pressure on these policies are coming to the fore, as activists and shareholder groups increase their pressure on companies to be more environmentally friendly and take a more active approach to reducing emissions

A proposed change to money laundering laws could flood the Australian stock exchange with dirty cash, experts have warned, as stockbrokers would not need to identify their clients for up to five days after making a trade. Currently, a new customer must be identified before an account with a stockbroker can be opened. It seems that AUSTRAC has already closed public submissions about identifying the source of funds used to buy and sell ASX stocks. There are global crime syndicates, some of whom have probably used certain international financial institutions in the past, who may take advantage of this rule change, if it goes through, to use the Australian bourse for laundering their ill-gotten gains.

With the government’s furlough programme coming to an end at the end of next month, it is reported Chancellor Rishi Sunak is considering alternative options, including top-up schemes similar to those already operated by governments in France and Germany. Instead of paying 80% of an employee’s wage, this will allow firms to reduce employees’ hours while keeping them in a job, with the government paying part of the lost wages when no work is being carried out. If nothing is done in the meantime, unemployment figures will skyrocket in November. Such a scenario would be cheaper than the US$ 52.5 billion it has cost to run furlough, bearing in mind the bill for Kurzarbeit, which has been extended until the end of 2021 by the German government, has a forecast cost of US$ 40.5 billion by the end of 2021.

With the UK economy under increasing pressure from escalating Covid-19 cases, and the reintroduction of tighter restrictions in many areas, along with apparent little progress in Brexit negotiations, the Chancellor has been in parliament to set out the government’s new support scheme to save millions of jobs and businesses from a winter crisis. Whilst acknowledging that the UK should be prepared for at least six months of hardship and that its economy will undergo a “more permanent adjustment,” he introduced several measures to bolster the sagging economy.

These included more financial support to various industries including extending a VAT cut for hotels, cafes and restaurants until the end of March to support the hospitality and tourism sectors which are struggling with much reduced demand. He replaced the government’s furlough scheme, which will end at the end of next month, (and had helped 32% of eligible jobs since its introduction to 30 June), by paying  a third of the wages of staff in “viable jobs” who are forced to work lower hours due to reduced demand; the government and the employer will each pay a further third of the wages. There will be an extension until 30 November of business loans, such as the ‘bounce back’ and ‘coronavirus business interruption’ support. To date, more than one million businesses have taken out a bounce back loan, with an average loan size of US$ 40k. A new ‘Pay as You Grow’ system allows businesses to repay their loans over a period of up to ten years or switch to interest-only repayments for six months.

August saw the UK government borrowing US$ 46.7 billion – 85% more than the comparable figure of US$ 7.0 billion a year earlier. For the first five months of the fiscal year (April – August), the government has already borrowed US$ 225.6 billion, beating the previous annual record of 2010, following the GFC.  By the end of the year, 31 March 2021, the borrowing could well touch the US$ 500 billion mark, as the government tax revenues slow down considerably, whilst its spending, on keeping the economy turning over, moves in the other direction. Another record set in August saw the country’s debt top US$ 2.6 trillion (GBP 2.0 trillion) for the first time ever, and US$ 324.4 billion higher than in August 2019; the figure now exceeds the size of the UK economy.

September PMI figures from both the UK and the eurozone were disappointing as the Flash UK Composite PMI data dipped to 55.7 from a three-month low 59.1, a month earlier; the eurozone fared worse with a monthly decline of 1.8 to 50.1. (The threshold figure between expansion and contraction is 50.0). Thedecline is a result of rising infections that has led to governments reintroducing more lockdown rules which have had a knock-on impact on various economic sectors. The big losers are those workers in the service sector, whilst data shows that driven by increased demand, factory production is moving northwards.There are concerns, on both sides of the English Channel, that if September figures trend into Q4, there is every possibility that the gains made in Q3 will be lost and recession will return in early 2021.

On the orders of the Pontiff, one of the more high-ranking Vatican officials, Cardinal Giovanni Angelo Becciu has resigned. It is reported that he had been using church funds in a controversial US$ 240 million deal, to invest in a luxury London building. He had also been suspected of giving Church money to his brothers and also propping up a failing Roman hospital which employed his niece. The deposed 72-year old Italian cardinal, a close aide to the Pope had previously held a key job in the Vatican’s Secretariat of State, was called to a showdown meeting with Pope Francis today, following which a communique confirmed that the Pope had accepted Becciu’s resignation as prefect and his renunciation of “all rights connected to the cardinalate”. He had been involved in several controversies and was a major character in conspiracies about alleged attempts to undercut financial reforms, when he suspended an audit of all Vatican departments by PwC. The Vatican has not been immune from scandals in the past and has had probably more than its fair share of financial shenanigans. The latest one may seem to indicate that Pope Francis has had enough and a long-needed clean-up has begun. Someone’s watching From A Distance!

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You Get What You Give!

You Get What You Give!                                                                     17 September 2020

A report by ValuStrat reported a 1.6% monthly price decline, along with strong activity levels, much in line with Property Monitor’s latest findings that the average August property price in Dubai reached its lowest level in eleven years dipping to just US$ 220 per sq ft, with rentals declining at comparative levels. Annually, residential capital values fell 13.8%. These figures see gross rental yields remaining “relatively stable” at 6.49%, still at a healthy return level. August is a traditionally quiet month for this sector, but this year – with monthly sales of 2.5k 1.3% down on the month, (compared to August 2019 sales volumes which were 48.5% lower than July 2019) – this is not the case. Interestingly, 52.8% of last month’s home sales were for properties valued at less than US$ 272k (one million dirhams), with 23.9% of the total for properties under US$ 136k (AED 500k). With developers delaying new launches, it is no surprise to see more completed homes being sold than off plan ones. The report indicated that the two most popular areas for secondary market sales were Town Square and Dubai Marina, while Jumeirah Village Circle, Arjan and International City remained the three more popular for off plan deals.

Colliers International note that the most of Dubai’s new developments are aimed at buyers looking for affordability so that a large proportion of units are townhouse style properties. Accordingly, many of the villas are built on reduced plot sizes and more rooms of a smaller size.The global property management and consultancy pointed out that developers “also cut back on lakes, large parks and have reduced the sizes of communal swimming pools and play areas.”

Investment in a leasehold staff blue-collar worker development, Sakany, located in Dubai South, has now topped US$ 136 million. The project, with ten buildings all equipped with dedicated medical and fit-for-purpose quarantine rooms, is already 80% full, with 7k occupants; the recently launched phase 2 will have nine hundred rooms in six buildings. The development will also house a Grand Supermarket, four restaurants, a cafeteria, barbershop, pharmacy, clinic, retail outlets and a money-exchange. There is no doubt that Sakany, with a 2k seating dining hall and extensive sports facilities, will not only be an ideal location for Expo 2020 site workers but also be a regional benchmark for safe and secure housing. It will also have a female-only building with its own grocery store.

Despite the pandemic, Danube Properties have posted a record H1 18.0% growth in sales of over 300 units, worth US$ 68 million, whilst delivering units, valued at US$ 78 million. In contrast to its peers, who have cut staff numbers and payrolls across the board, the developer appointed sixty more people, bringing its total workforce to 250. The company plans to intensify work over the next two years so as to deliver more than 6k units to the market. Danube has a development portfolio of 6.2k units, valued at over US$ 1.2 billion and expects two of its projects – Miraclz and Bayz – to be handed over by the end of this year, whilst the other three, Jewelz, Elz and Lawnz will be ready by the end of 2022.

The first ever virtual matchmaking event between DMCC and China’s Innoway took place this week. The Beijing and Haidian Government established the platform that, to date, has incubated 3.8k start-ups and raised US$ 11.4 billion in funding; Innoway will soon set up a presence in DMCC’s Jumeriah Lakes Towers. The event, following both parties signing an MoU in May, was joined by UAE companies and Chinese innovators; five “unicorn” companies – Beijing NOBOOK Education Technology, MEGVII, Terminus Group, Guangzhou Hongyu Science & Technology Co. Ltd and Neolix Technologies Co. Ltd – were among the virtual attendees.

On Tuesday, at the White House, the UAE and Israel signed the Abraham Accord to formally normalise relations between the two countries and encourage bilateral trade and investment opportunities in a wide range of sectors. Two days later, an agreement, to develop closer ties, was signed by the diamond exchanges of Dubai and Israel, with the twin aims of promoting bilateral trading opportunities and partnering on initiatives to grow regional trade. Both parties will open representative offices in each other’s country. It is hoped that this new relationship will not only attract new businesses to Dubai but also boost the regional and international trade in diamonds. Last September, the Dubai Diamond Exchange opened the biggest global diamond trading floor at its headquarters in Almas Tower. In 2019, the total value of rough and polished diamonds handled through the emirate stood at US$ 22.9 billion. Another early venture sees Emirates NBD, Dubai’s largest bank, signing an MoU with Israel’s Bank Hapoalim, that country’s largest lender.

Earlier in the month, Etisalat started phase one of rolling out 5G services on fixed-line networks, with the second phase starting in Q3 next year. The Telecommunications Regulatory Authority has allocated a new frequency band (24.25 – 27.5 gigahertz) for the 5G application to be expanded, which will see the country able to deploy applications such as self-driving cars, robots, smart industry, big data and the Internet of Things. This will see the internet speed move from its current 1.2 gigabits per second to an eventual 10Gbps – more than 100 times faster than 4G – and enhance data volume on wireless broadband services.

The recently released 2020 Smart City Index by The Institute for Management Development sees Abu Dhabi and Dubai ranked at 42nd and 43rd in a list of smart cities. Over the year, Dubai has nudged two places higher in the index which ranks 109 cities on a number of factors, including economic and technological data, as well as by their citizens’ perceptions of how “smart” their cities are. It also considers the technological provisions of each city across five key areas – health/safety, mobility, activities, opportunities and governance. Dubai is ahead of Beijing and Tokyo in a list which places Singapore, Helsinki, Zurich, Auckland and Oslo in the top five, with Rabat, Cairo, Abuja, Nairobi and Lagos being at the other end of the scale.

The Central Bank has confirmed the country’s commitment to the Financial Action Task Force standards to combat all types of financial crimes; the FATF is the global watchdog, monitoring and controlling money laundering and terrorism financing. The bank’s new governor, Abdulhamid Alahmadi, reiterated that “we shall continue to adhere to FATF standards in order to ensure the UAE’s financial system is sound and inclusive.” The country has strict laws to deal with money laundering and the financing of terrorism and has recently introduced a smart tool named ‘Fawri Tick’ to monitor and curb terrorism financing. Another recently introduced rule makes it compulsory for all hawala providers – informal funds transfer agents that typically do not use banks – to register with the regulator to “enhance transparency in financial transactions.

Du is expected is expected to make a US$ 142 million profit, as it sells its 26% stake in Khazna Data Centre to Abu Dhabi’s Technology Holding Company, for US$ 218 million. Du’s share in Khazna was held as an “indirect stake”, which includes du’s exposure to shareholder loans, as part of the telco’s “strategy of pursuing data centre development through either full ownership or commercial partnerships”. This profit will boost the company’s Q3 results to be released next month.

The bourse opened on Sunday 13 September and, 12 points (0.5%) lower the previous week, gained 38 points (1.7%) to close on 2,321 by 17 September. Emaar Properties, US$ 0.02 lower the previous week, regained the US$ 0.02 to close at US$ 0.81, whilst Arabtec, having shed US$ 0.03 the previous week, remained flat at US$ 0.16. Thursday 17 September saw the market trading at a much improved 555 million shares, worth US$ 397 million, (compared to 284 million shares, at a value of US$ 111 million, on 10 September).

By Thursday, 17 September, Brent, US$ 6.69 (3.0%) lower the previous fortnight was US$ 3.46 (8.6%) higher at US$ 43.49. Gold, up US$ 20 (1.0%) the previous fortnight, nudged US$ 9 higher (0.4%) to close on US$ 1,960, by Thursday 17 September.

In a December 2015 blog – Move On – wrote

“It was only three months ago that Seb Coe was elected president of the International Association of Athletics Federations, taking over from the 16-year reign of the disgraced and allegedly corrupt 82-year old Lamine Diack. At the time, the former Olympic gold medallist made light of his own six-figure ambassadorial role with Nike and chairmanship of CSM – a leading sport and entertainment agency. There are reports accusing him of lobbying for the Oregon city of Eugene (with close ties with Nike) to host the 2021 World Championships that was granted earlier in the year, without a bidding process taking place.

It has to be remembered that he was also vice president to the Senegalese for the previous eight years and referred to him as the IAAF’s “spiritual leader”. This is the same person who is now charged with taking millions of dollars to cover up positive doping tests and was reprimanded by the IOC 4 years ago for his role in a FIFA scandal”.

This week, the octogenarian has been found guilty of corruption, having accepted bribes from athletes suspected of doping to cover up test results and letting them continue competing, including in the 2012 London Olympics. Lamine Diack’s lawyers will be appealing against the four-year prison sentence, and a US$ 600k fine, indicating it was “unfair and inhumane”. His son, Papa Massata, was sentenced to five years, along with a US$ 1.2 million fine. In November 2015, the current head of the sport, Seb Coe, labelled as “abhorrent” allegations of doping bribery within athletics after his predecessor was arrested by French police.

Another (hopefully former) corrupt sports body FIFA is also in the news, with reports that Zurich-based group, Julius Baer is in “advanced talks” with US regulators to resolve allegations in a corruption and money-laundering case involving the world football body. In 2017, a former employee of the private bank pleaded guilty to facilitating payments from a sports marketing company to FIFA officials. The 2015 investigations by the Department of Justice led to the eventual demise of the disgraced Sepp Blatter – despite more than a decade of rumblings into the shenanigans of the disgraced official and his cronies.

Finally some good news for Lionel Messi, after his clubBarcelona refused to allow him a free transfer, insisting that any team that took him on would have to honour an US$ 850 million release clause; he threatened to take his boyhood club to court but later changed his mind, saying he did not want to face “the club I love” in court. This week his luck changed, with the EU’s top court confirming that he could can register his name as a trademark after a nine-year legal battle against Spanish cycling company Massi and the EU’s intellectual property office, EUIPO. He can now finally trademark his surname as a sportswear brand. The decision could see his annual earnings increase quite significantly from their current US$ 126 million level.

A  damming US report into the two fatal 737 Max crashes has come out with criticism for two of the major stakeholders concluding that “Boeing failed in its design and development of the Max, and the FAA failed in its oversight of Boeing and its certification of the aircraft.” Indeed, it found a series of failures in the plane’s design, combined with “regulatory capture”, an overly close relationship between Boeing and the federal regulator, which compromised the process of gaining safety certification. The 250-page report also pointed to the fact that the regulator was, in effect, in Boeing’s pocket and that the FAA’s management “overruled” its own technical and safety experts “at the behest of Boeing”. It will take years for Boeing to recover its once vaunted position in the aviation sector, whilst fliers will take little comfort from some of the grim reading which narrates how Boeing could well be accused of putting cost saving at the expense of safety and human life – and paid the ultimate penalty. The much-modified plane will probably return to the skies by March 2021 – two years after being universally grounded.

A major faux-pas by mining giant, Rio Tinto, that resulted in the unwarranted destruction of Aboriginal cultural heritage sites earlier in the year, has seen its chief executive Jean-Sebastien Jacques – and two other senior staff members – being forced to leave.  Even chairman Simon Thompson should be a worried man about his Rio future, as yet another conglomerate shows little concern about the microenvironment. It seems that shareholder disquiet played a significant role in the eventual decision to part ways with the three executives who were seen as directly accountable for the Juukan Gorge blasting. In previous times, such actions would have gone largely unnoticed and many would argue that most major mining companies have probably done a lot worse to the environment and local populations in global areas where they have mined. It is exactly fifty ago that Milton Freidman hypothesised that the main purpose of a company is to maximise profits for its shareholders – these days executives have to be very careful and consider all their stakeholders.

SoftBank is set to receive over US$ 40 billion for selling UK chip designer Arm to US-based Nvidia in a cash and stock deal, that will create a mega player in the chip industry; the Japanese company bought Arm in 2016 for US$ 32 billion, as part of its then strategy to expand into the Internet of Things technology. The core business of Nvidia is graphics chips that power video games, but it has recently moved into other sectors including AI, self-driving cars and data centres. It does not make chips itself but licenses out the underlying technology so others can make chips with it.

It is reported that ByteDance, the Chinese owner of video-sharing app TikTok, is planning to make Singapore its Asian headquarters in a move that will see it spend several billion dollars in the city state; it will also boost local employment by hundreds of jobs, in addition to the four hundred already working there. The Beijing-based company has already considered the US, (where it was forced to sell TikTok operations, following pressure by the Trump administration), UK, (where TikTok faces a likely ban from moving local user data out of the country), and India, (where TikTok is banned by the government on security concerns), as  regional hubs, outside of its home base of China.  Last year, ByteDance generated US$ 17.0 billion of revenue and a US$ 3.0 billion profit, driven by the likes of news aggregation app Toutiao, and TikTok’s Chinese twin Douyin, which have more than 1.5 billion monthly active users.

After almost a decade – and sales of over 76 million units – Nintendo has discontinued its 3DS handheld which had the ability to trick the human eye into seeing 3D images like those in some cinema screenings – but without special glasses. The announcement has been long expected, as in 2019, the Japanese company announced it no longer planned to make any new first-party games for the system. Nintendo will now focus their attention on Nintendo Switch – a hybrid handheld-and-home machine.

With November launch dates, it seems that the Sony will match the price of its flagship PlayStation 5 with that of Microsoft’s Xbox Series X. At the last launches, Sony’s PS4 came in with a price lower than the Xbox One and to date they have outsold their US rival by a factor of almost two to one. But this time the tables may be turned when both consoles are launched in the UK on 19 November, a week later than in most other locations. Some analysts point to the fact that Microsoft’s combination of a US$ 340 price for the XBox Series S, allied with the value offered by the Xbox Game Pass subscription service, could give the US firm an advantage.

For the first time in sixty years, the Asian Development Bank has confirmed that the region of forty-five countries has gone into recession. It expects the region to post a 0.7% contraction this year but expects a 6.8% rebound in 2021. South Asia is expected to be worst hit, with big variances between different countries. For example, China will buck the trend, forecast to post a 1.8% hike, whilst India will head in the other direction, with an expected 9.0% contraction, although both economies are expected to rebound next year with expansions of 7.7% and 8.0% respectively. Major economic damage will be felt in tourism-dependent island economies, with the Maldives and Fiji expecting their 2020 economies to shrink by 20.5% and 19.5%.

Questions have to be asked about the state of the German economy as one of its leading companies, MAN, announces 25% job cuts of 9.5k in a bid to save US$ 2.14 billion in costs. The loss-making truck and bus manufacturer, one of the main brands of VW’s truck maker subsidiary Traton, posted a H1 34% slump in revenue, whilst recording a US$ 500 million deficit, compared to a US$ 300 million profit over the same period last year. Eurozone industrial production is slowing, with German expansion faltering, as the bloc’s July growth of 4.1% was more than a half down on the preceding month’s 9.5%, which in turn was 7.7% lower compared to the 2019 return.

If the state of the global countries’ employment sector is anything similar to that of the UK, then we are in for a turbulent twelve months. Latest August figures see the number of people claiming jobless benefits since March rising a massive 121% to 2.7 million. In Q2, the number of young people in employment dipped 156k to 3.6 million. The furlough scheme, which has assisted companies retain about ten million during the pandemic, is expected to close by the end of October and this presents the Chancellor a quandary; for if no further action is taken by Rishi  Sunak then there will be an inevitable sharp rise in the unemployment rate. With the rising unemployment rate, allied with the ever-growing number of payrolls lost, it is clear that the negative labour market impacts of the coronavirus crisis are here to stay for a while longer. The Q4 unemployment figure should be just south of 9.0% before dropping back again during 2021.

In forty-four days, the government’s Job Retention Scheme comes to an end and yesterday was the deadline for employers to give notice of redundancy. There is no doubt that over the next few days there will be a rise in the unemployment ranks. Even in June, a Freedom of Information request showed that 1.8k firms were intending to cut more than 139k jobs. The worrying fact is that since March, nine million people have been furloughed for at least one three-week period whilst over the past five months, only 695k have gone from the payrolls of UK companies. It is unlikely that the government will continue with furlough scheme into November.

In contrast, Germany is extending its Kurzarbeit job subsidy measures until the end of 2021, whilst the French may extend their equivalent scheme by two years. The German scheme is different to that of the UK’s in as much that it is about short-time working. This allows employers to cut the hours worked and the government will pay workers a percentage of the money they would have got for working those lost hours. (The UK scheme was based on paying workers to stay at home and get paid 80% of their normal pay). It is estimated that at the height of the pandemic, half of all German firms had at least some of their staff on the scheme.

In June, the Organisation for Economic Cooperation and Development forecast the global economy was expected to decline 6.0% and this week revised the figure down to 4.5%; although the UK economy is still forecast to contract by 10.1%, down from June’s 11.5%, it is no longer the worst hit in the developed world as the latest forecast sees Italy, India and South Africa posting larger contractions. The OECD is now forecasting a weaker global rebound in 2021, including UK’s expected 7.6% expansion; however, by the end of 2021, the economy will still be smaller than it was in 2019. The US forecast has been upgraded from a 7.3% level in April to the current 3.8%.

Oxford Economics’ latest forecast sees ME GDPs shrinking by 7.6% this year – much higher than their April forecast of a 3.9% contraction. However, it is relatively bullish about the future with annual 4.0% growths predicted for the next two years, assuming that lockdowns are fully eased, global travel picks up and Brent oil prices move closer to US$ 50 per barrel. The report noted that the outlook for the non-oil economy in the GCC countries remains challenging, whilst exports levels in oil-producing countries were experiencing severe damage, caused by the price slump in March and April, and are expected to decline by between 6.0% – 12% this year.

New Zealand is now suffering from being one of the few global nations to have kept a lid on the spread of Covid-19 as is chose lockdown and border closures, and the population’s health, ahead of any economic benefit. Q2 figures show that the country’s GDP shrank 12.2% which has pushed the country into its first recession since 1987. The measures have had a massive impact on many of the country’s industries including retail, accommodation, restaurants, and transport – sectors that were more directly affected by the international travel ban and strict nationwide lockdown. The economy is likely to be a key issue in next month’s election, which was delayed after an unexpected spike in Covid-19 cases in August. Pre-Covid polls had Jacinda Arden’s Labour Party running closely behind the National Party in second place but this has all changed since then with the Labour Party now well ahead in the polls.

The South African economy was struggling even before the onset of Covid-19 which has only exacerbated the problem; in March, the country was in technical recession, with Moody’s downgrading the country’s sovereign credit rating to junk status. The days of up to 5% growth numbers have long gone and current GDP levels are at Q2 2007 GDP levels – with all post-2008 financial crisis growth having been wiped out. Q2 figures were 51% lower, compared to the same period in 2019, and it is expected that South Africa’s GDP will reach US$ 295 billion – a level last seen over a decade ago. Some of the economic damage can be laid at the door of the former president, Jacob Zuma, who will go on trial next month for allowing associates to gain access to state-owned entities and redirecting spending for personal profit. His successor, Cyril Ramaphosa, has estimated that Zuma may have squandered US$ 30 billion in corruption during his tenure. Whether the new administration can rein in corruption remains to be seen. The short-term outlook is not good – tax revenues have fallen to catastrophic levels, the construction industry has just entered its eighth straight quarter of decline and the debt-ridden (of over US$ 40 billion) state-run electricity utility Eskom, overseeing an aged, unreliable and inefficient portfolio of mostly coal-fired stations, has witnessed numerous blackouts and hours of ‘load shedding’.

In the first eleven months of this financial year, the US administration has already spent US$ 6.0 trillion, including US$ 2 trillion on coronavirus relief, whilst tax receipts have totalled  US$ 3 trillion, resulting in  a US$ 3 trillion YTD deficit; the shortfall is more than double the previous full-year record, set in 2009 – and triple the expected figure of US$ 1 trillion forecast pre the onset of the pandemic. With a full-year US$ 3.3 billion shortfall now expected, it will bring the country’s total debt to well over US$ 26 trillion.

By the end of Thursday’s trading, most global markets traded downwards including the three major US bourses – Nasdaq (-1.3% at 10,910), S&P 500 (-0.8% to 3,357) and Dow Jones (-0.5% to 27,902) – along with  Europe – FTSE and DAX, 0.5% lower at 6,050 and 0.4% to 13,208. One of the drags was the fact that the Bank of England indicated there was a chance at cutting interest rates into negative territory, with the UK facing a triple whammy of rising COVID-19 cases, and an increased possibility of a national lockdown, a possible no-deal Brexit and higher unemployment, as the furlough scheme nears to its conclusion.

Meanwhile, the number of Americans filing new claims for unemployment fell 33k to 860k on the week which the Labor Department considers an extremely high level. By the end of last month, it is estimated that almost thirty million Americans were receiving ongoing jobless benefits indicating the devastation Covid-19 has imparted on the US economy. It is fairly obvious that much of the damage may have been averted if the politicians, (on both sides of the House), could have agreed on implementing much-needed fiscal stimulus measures; the knock-on effect will be a slower recovery time period with an economy more scarred that it needed to be. Fed chair Jerome Powell once again confirmed his intention to keep interest rates near zero, for at least the next three years, in an on-going attempt to lift the world’s biggest economy out of a pandemic-induced recession but admitted that central bank’s tools to achieve that were limited.

With the help of a US$ 200 million funding from China, the Maldives built a 2.1 km four lane bridge which linked its capital Male and the airport on the island of Hulumale. Not only did it help with reducing traffic congestion, it also led to a boom in new property and commercial developments on Hulumale. The structure, known as China-Maldives Friendship Bridge, was one of several major projects built under the presidency of Abdullah Yameen. Elected in 2013, he was pro-China and wanted to kickstart the economy, with the help hundreds of millions of dollars from Chinese President Xi Jinping who was embarking on his grand “Belt and Road Initiative” to build road, rail and sea links between China and the rest of the world, excluding the Americas. However, the nation voted in a new president in 2018 and the new government discovered that it was indebted to China for US$ 3.1 billion which included government-to-government loans, money given to state enterprises and private sector loans guaranteed by the Maldivian government. Now it appears that none of the projects had any back-up business plans and there are worries that the cost of projects was inflated and the debt on paper is far greater than the money actually received. Some estimates put the figure at US$ 1.4 billion and even this is far too much for an economy that relies so much on tourism which has been in lockdown since March.

It looks as if the Maldives is following in the footsteps of its neighbour Sri Lanka. That island state owes billions of dollars to China and has defaulted on one loan – US$ 1.5 billion to build a port in Hambantota – which proved to be economically unviable. The end result is that China now has a 70% stake in the port on a 99-year lease and has been given 15k acres around the port for China to build an economic zone. This has given the country an entrée to one of the busiest shipping lanes in the Indian Ocean and a base some hundreds of miles from its rival India. In 2019, US Secretary of State accused China of “corrupt infrastructure deals in exchange for political influence” and using “bribe-fuelled debt-trap diplomacy”.

These are not the only Asian countries involved in acquiring Chinese funding, which also appears rampant in parts of Africa. In 2019, a change of government in Malaysia saw a Chinese-funded railway project, being cut by a third to US$ 11 billion and a year earlier, Myanmar reviewed a Chinese-funded multi-billion-dollar deep-sea port project and scaled it down to 75% of the original cost. Economic history is just repeating itself as this could have been the modus operandi for another superpower in the 1970s in two South American countries and Indonesia. Some governments are now realising that they were wrong to think that You Get What You Give!

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Get The Fire Brigade!

Get The Fire Brigade!                                                                        10 September 2020

Airolink has been appointed by Seven Tides as the main building contractor to complete its US$ 272 million Seven City JLT development. Due for completion in 2023, the 2.7k unit project covers an area of 3.5 million sq ft. Launched in 2004, Seven Tides is a privately-owned luxury property developer and holding company whose CEO is Abdulla Bin Sulayem, who has overall responsibility for the company’s portfolio of luxury five-star properties.

This week saw the lifting of the 192 mt long first section of the Link, now connecting the two towers of the One Za’abeel development. It took twelve days to raise the 8.5k tonne structure, one hundred metres above ground. Ithra Dubai, wholly owned by the Investment Corporation of Dubai, expects the Link to be completed next month, when the final 34 mt is added and, on completion, it will become the longest cantilevered building in the world. Encompassing a built-up area of 471k sq mt, the development will include the world’s first One & Only urban resort, with 497 ultra-luxury hotel rooms and serviced apartments, premium office space, 263 high-end residential units and three floors of retail space. One Za’abeel, due for completion by the end of next year, is the gate to the financial district of the DIFC, with an overhead link to the Dubai World Trade Centre.

Since the March onset of Covid-90 to the end of June, Emirates processed 1.4 million customer refunds, totalling almost US$ 1.4 billion, representing 90% of its backlog. It is also reported that Emirates will return their staff to full salaries as from next month. Earlier in the week, the airline announced that it had added another two routes, Lagos and Abuja, to its Covid-19 truncated schedule bringing its total destinations to eighty-four – more than a half of its pre-pandemic level of 160. The Dubai carrier will continue to restore revenues (and also target new avenues) and be as cost efficient as possible, as it tries to resume flights to all “network destinations” within ten months.

This week, HH Sheikh Mohammed bin Rashid Al Maktoum announced the formation of a Board of Directors of the Dubai Economic Security Centre. His Decision, effective from its date of issuance and will be published in the Official Gazette, will see Talal Humaid Belhoul, serving as the Chairman of the Board, and Awadh Hadher Al Muhairi as the Vice Chairman.

In line with the government’s smart transformation strategy, including the aims of the Dubai Paperless Strategy, the Dubai Land Department has started utilising AI in their smart valuation process for real estate units. The DLD’s Registration and Real Estate Services Sector has completed the project that will contribute to improving the quality, efficiency and readiness of smart government services. The target is for the DLD to raise its global ranking on performance indices in terms of providing DLD users the best valuation services quickly and with complete transparency. Customers can now download the app, Dubai REST, from the App Store or Google Play. The government body expects that this will reduce both current costs, by 20%, and implementation time to fifteen seconds.

DEWA has signed an agreement with Group 42, a leading Artificial Intelligence and cloud computing company, which will enable the three digital DEWA companies – Moro Hub, InfraX and DigitalX – to introduce and implement digital and data transformation initiatives, as well as fostering new services around AI. DEWA becomes the world’s first digital utility utilising autonomous systems for renewable energy, storage, expansion in AI adoption, and digital services. The authority, a Dubai 10X enabler, (a government tech initiative to ensure that the emirate is always ten years ahead of other global cities), will adopt digital technologies with its four pillars; Solar Energy, Energy Storage, Artificial Intelligence, and Digital Services.

At last Friday’s Global Manufacturing and Industrialisation Summit online, the Minister of Industry and Advanced Technology, Dr Sultan Al Jaber, reiterated that the UAE is looking to bolster its position in new high-value growth sectors such as biotechnology, health care and pharmaceuticals. Part of the strategy is also to enhance certain sectors, including water, health, agriculture, energy, petrochemicals and metals, so as to strengthen the country’s self-sufficiency. Technology will play an important role in the country’s move away from being hydrocarbon reliant and the government is keen to cooperate closer with any country that is ready and able to work with the UAE. The country is a pathfinder in certain areas of technology and was the first in the world to appoint a Minister of AI. The Minister stressed that “we can only hope to shape an inclusive and sustainable Fourth Industrial Revolution through building strong multi-stakeholder partnerships with representatives of national governments, multilateral organisations, the private sector, the research community and civil society.”

According to August’s Purchasing Managers’ Index, Dubai’s non-oil private economy is showing further signs of improvement. Business conditions continued to recover from the extreme effects of the pandemic, as output levels headed north, but the index did fall 0.8 to 50.9, indicating only a marginal improvement.  This would seem to indicate that the hopeful swift uptick may not result, as market conditions are still showing signs of depressed market conditions. The PMI covers three sectors – two of which, construction and wholesale/retail showed softer growth, whilst travel/tourism registered a downturn in business. Job cuts speeded up, as companies slashed costs, including the reduction in payroll numbers, to reduce capacity and employee costs. For the tenth consecutive month, margins continued to be pinched with companies chasing business by lowering selling prices.

The federal government posted a US$ 2.7 billion H2 budget surplus, including almost US$ 2.2 billion in Q2. In the first six months of the year, the government spent US$ 6.8 billion and collected revenue of US$ 9.5 billion. Last year, the cabinet had approved a three year zero-deficit US$ 16.7 billion budget. Q2 revenue topped US$ 9.5 billion, including federal revenue at US$ 4.5 billion and Ministry of Human Resources and Emiratisation chipping in over US$ 0.5 million. Expenses for the quarter came in at US$ 7.3 billion with the big four spenders being federal expenses, the Ministry of Education, the Ministry of Health and Ministry of Community Development at US$ 2.3 billion, US$ 0.6 million, US$ 0.4 million and US$ 0.1 million respectively.

DFM-listed Gulf Navigation has appointed a new board, headed by Theyab bin Tahnoon bin Mohammad Al Nahyan and a new group chief financial officer, Rudrik Flikweert. Shareholders are hoping that the new set-up will be able to turn the troubled business around, following tough trading conditions. Even before the advent of Covid-19, the company, with eight vessels, turned in an annual 2019 loss of US$ 82 million, driven by climbing operating costs and the carrying value of some of its vessels being written down by US$ 88 million. The pandemic has also exacerbated the Dubai company’s problems, as global trade contracts 27% in Q2.

The bourse opened on Sunday 06 September and, 199 points (9.5%) higher the previous four weeks, shed 12 points (0.5%) to close on 2,283 by 10 September. Emaar Properties, US$ 0.11 higher the previous five weeks, lost US$ 0.02 to US$ 0.79, whilst Arabtec, having gained US$ 0.02 the previous week, lost US$ 0.03 to US$ 0.16. Thursday 10 September saw the market trading at 284 million shares, worth US$ 111 million, (compared to 373 million shares, at a value of US$ 97 million, on 03 September).

By Thursday, 03 September, Brent, US$ 1.37 (3.0%) lower the previous week lost US$ 3.69 (8.4%) to US$ 40.03. Gold, having nudged US$ 9 (0.4%) the previous week, was US$ 11 higher (0.6%) to close on US$ 1,953, by Thursday 10 September.

After a disastrous Q2, when UK vehicle sales plunged to record lows, July recorded the first gain in sales for 2020, but then August vehicle sales dipped 5.8% to 87k, denting hopes of a recovery in the industry this year; for the first eight months of the year, registrations were down almost 40%. The UK is not alone with similar negative returns recorded across the EU, including France, Germany and Spain. The market is hoping that the market may be boosted by so-called revenge buying – when financially secure people buy luxury cars after saving money during the pandemic but were unable to go on an overseas holiday – along with pent up demand.

As it managed to avoid any further cancellations, Airbus delivered thirty-nine jets, comprising thirty-five A-320 narrow-bodied planes and four twin-aisle planes – ten lower than a month earlier. In contrast, Boeing posted disappointing news of only nine deliveries in the month, made worse with news that handovers of its 787 Dreamliners were slowed because of faults in the plane’s horizontal stabiliser that are wider than specified.  

After successfully completing a US$ 1.6 billion rescue plan, Virgin Atlantic announced a further 1.15k job cuts, in addition to the 3.5k jobs lost earlier in the year, which will see a 46.5% reduction in job numbers to 5.35k. The airline, 49% owned by Delta Airlines, commented that “until travel returns in greater numbers, survival is predicated on reducing costs further and continuing to preserve cash,” and that the outlook for transatlantic flights remains uncertain. Both US and UK courts approved Virgin’s US$ 1.6 billion rescue plan, involving U$S 525 million in new cash, half of which was generated from its main shareholder, Sir Richard Branson’s Virgin Group.

Last Friday, the largest group of Virgin Australia’s 10k creditors agreed to US private equity firm Bain Capital becoming the new owner of Virgin Australia; Bain have agreed to pay out all worker entitlements and honour travel credits, althoughbondholders lose out, probably seeing a meagre 13% return, as well as the “numerous suppliers and investors who will not receive all of the monies owed to them”. Furthermore, there will be no return to Virgin’s major shareholders, which include Singapore Airlines, Etihad Airways, China’s Nanshan Group and HNA and Sir Richard Branson’s Virgin Group. The airline, with a 9k workforce, having seen a third already made redundant, was placed into voluntary administration in April with debts of US$ 4.9 billion, following which its biggest shareholders, as well as the Australian government, refused to add further capital to save the airline. The airline will no longer be a full-service carrier, operating with a far smaller fleet, with up to sixty 737s airborne by the end of H1 2021, dependent on demand, and more limited routes The new airline will keep hold of its key international routes but will no longer operate as a full-service carrier like Qantas.

Singapore Airlines is the latest airline to announce massive staff cuts – by 4.3k, as it looks to restructure in line with the new norm for the industry including a weak travel outlook for the near future. The carrier expects the actual number will be 2.4k, once a recruitment freeze, natural attrition and voluntary departure schemes have been taken into account. Positions will be lost in all three of its flying units – Singapore Airlines, SilkAir and its low-cost carrier Scoot – which posted July passenger numbers down by 98.6%, year on year. Q2 losses amounted to US$ 820 million, compared to a US$ 80 million profit the previous July, with revenue falling 79.0% to US$ 620 million. SQ expects to operate only 50% of its capacity by year-end, with a reduced network to cope with the crisis.

BA has announced that it will be cutting more flights for the rest of the year as it comes to terms with the continuing collapse of air travel demand. IAG, which also operates Aer Lingus and Iberia, expects that autumn capacity will be 60% lower compared to 2019 figures. More worryingly, the company does not expect business to return to pre-pandemic levels until at least 2023. By the end of August, the airline had shed 8.2k of the 13k proposed job losses, “mostly as a result of voluntary redundancy”. IAG also confirmed that, in line with its July announcement, it would tap its shareholders for US$ 3.4 billion to help with its financing, debt reduction and withstanding a prolonged downturn in travel. Existing shareholders, including Qatar Airways, (with a 25.1% stake), will buy new shares at 36% lower than yesterday’s closing price.

LVMH is blaming the proposed US tariffs on French goods the raison d’être of pulling out of a proposed US$ 16 billion deal to acquire Tiffany, who have countered that the French conglomerate “is in breach of its obligations relating to obtaining antitrust clearance.” The French conglomerate indicated that a letter from France’s European and Foreign Affairs minister suggested “in reaction to the threat of taxes on French products by the US, directed the group to defer the acquisition of Tiffany until after 06January 2021”. The New York-based luxury jewellery retailer said there was no contractual basis for LVMH to honour the French government’s request and that LVMH just wanted to avoid its obligation to complete the transaction on the agreed terms because of the downturn in business resulting from the Covid-19 pandemic and  a sharp global downturn in the luxury goods industry.

Campbell is but one of several companies that can thank the onset of the pandemic for stirring up its business as once again its age-old canned soup brands become best-selling items in the supermarket. Q2 US soup sales came in 52% higher, contributing to the company’s 18% surge in revenue and a swing into profit. Initially, panic buying was the main revenue driver but now it seems that with families eating most of their meals at home, Campbell’s products – such as chicken soup, SpaghettiOs and Prego pasta sauce – are making somewhat of a resurgence. It seems that the company should now consider other products that could be eaten outside of the home – if not the soup will quickly turn cold and cans will start collecting dust on supermarket shelves.

Three of the biggest banks in the US have made impairment provisions of US$ 28 billion in relation to the prospect of Covid-19 related defaults on customer loans. The end result sees Citigroup’s Q2 profit plunging 78%, JP Morgan Chase down 50% and Wells Fargo posting its first quarterly loss since the 2009 GFC. Citigroup has set aside a 3.9% provision on its loan book (from 1.9% last year), as it posted a US$ 1.3 billion profit figure on a 5% increase in revenue to US$ 19.8 billion. JP Morgan, which has set aside US$ 10.0 billion for losses, including nearly US$ 9 billion to build its reserves, reported profits of US$ 4.7 billion on the back of a 15% increase in quarterly revenue to US$ 33.0 billion. Having set aside US$ 9.5 billion to cover potential coronavirus-related losses, including US$ 8.4 billion in reserves, Wells Fargo posted a US$ 2.4 billion loss, (compared to a US$ 2.4 billion profit in Q2 2019).

Latest estimates from Lloyds point to a current US$ 5.0 billion pay-out in claims relating to the pandemic, noting that H1 had been “exceptionally challenging for our people, our customers, and for economies around the world”.  Lloyd’s of London, whose results are an aggregate of some ninety syndicate members, expects to settle claims in the region of US$ 2.4 billion in H1. With on-going court cases, their H1 loss of US$ 525 million, (compared to a US$ 3.1 billion profit in the corresponding 2019 period), may well be replicated in H2, with pandemic-related losses stretching well into the future.

A study of the companies trading on the ASX 300 noted that twenty-five companies managed to pay a total of US$ 18 million in executive bonuses, whilst still claiming JobKeeper subsidies. The Business Council of Australia criticised their actions saying companies should not be paying bonuses if they are receiving JobKeeper. It included Star Entertainment Group, which operates Star Casino, which actually received the most in JobKeeper subsidies – US$ 46 million – whilst paying its chief executive, Matt Bekier, a US$ 600k bonus. Footwear company Accent Group — which distributes brands Dr Martens, Athlete’s Foot, Vans, Saucony and Skechers — paid its chief executive Daniel Agostinelli a US$ 860 million bonus, having received over US$ 15 million in wage subsidies, as well as nearly US$ 6 million in rent waivers.

It seems that Amazon has taken time out to work out that it paid US$ 400 million in UK taxes in 2019, (including business rates, corporation tax, stamp duty and other contributions) and has again stressed that it pays “all taxes required in the UK”. The tech giant, which employs 33k, posted a 26% hike in revenue to US$ 376 billion, resulting in a US$ 15.5 billion profit. Little wonder then that Amazon, and its fellow cohorts, are being chased by governments worldwide concerned with the relatively low amounts of money they add to different countries’ exchequers. The UK Chancellor has said that the massive US tech firms need “to pay their fair share of tax” and launched a 2% tax on digital sales to make up for losses incurred when conglomerates re-route their profits through low tax jurisdictions; Rishi Sunak also added that the coronavirus crisis had made tech giants even “more powerful and more profitable”.

Apple has refuted claims, made by Epic Games, that the 30% commission it charges all its users was anti-competitive and monopolistic, pointing the finger at the maker of the Fortnite game being “self-righteous” and “self-interested”. It also accused the game maker of violating its contract – and asked for damages in a lawsuit initiated by Epic last month – following its offering a discount on its virtual currency for purchases made outside of the app, from which Apple receives a 30% cut. This led to the tech giant banning updates that are required to continue progress with the game. Epic has refused to accept Apple’s offer to allow it to use the app on condition it deleted the direct payment feature, (so as comply with its terms and conditions of use) because it would be “to collude with Apple to maintain their monopoly over in-app payments on iOS.” There is no doubt that Epic is not the only problem facing Apple as global scrutiny on the modus operandi of its App Store is gaining traction; legislators in Washington and Brussels are becoming increasingly concerned that competition rules are being stretched and violated.

UK regulators are closely looking at whether fraud, or payment in error, has taken place in relation to the government’s furlough scheme that has cost US$ 48 billion to date, with estimates that up to 10% of that total could have been paid by mistake. The scheme paid laid-off workers a maximum US$ 3.4k a month from government funds.  HMRC is now looking into 27k “high risk” cases where they believe a serious error has been made in the amount employers have claimed. The losses attributable to the furlough scheme are just a portion of the almost US$ 40 billion lost in 2019 due to taxpayer error and fraud.

After weeks of negotiations, the EPL has walked away from a US$ 700 million contract with Chinese digital broadcaster PPTV, who wanted to pay less following the football blackout during lockdown. The UK “suits” refused to back down, despite agreeing to U$ 440 million worth of rebates with other broadcasters over the three-month enforced break. It seems quite understandable that the Chinese company should not continue to pay the full value of the broadcast deal at the “same price and conditions as pre-Covid”. The EPL lost over US$ 1.1 billion last season, attributable to lost match day income with games being played in empty stadia. Pre-Covid, the EPL was forecasting a net US$ 5.7 billion from the sale of international rights for the next three seasons but that now seems a distant hope.

As an indicator that the US economy is on the move, the August unemployment rate fell again for the fourth straight month from its April 14.7% high to under 10% last month, with firms adding 1.4 million new jobs. There are fears that this recovery is unsustainable, with the pace of job growth slowing, so that it would take a further nine months for the twelve million displaced since February 2020 to return to work. The other factor is that the ‘under-employment’ rate is still over 14%, and this may be even slower to fall; the 2008 GFC showed that rapid job losses did not equate to sharp recoveries.

President Emmanuel Macron has unveiled a US$ 120 billion stimulus package – dubbed “France Relaunch” – as the country tries to get to grips with the impact of Covid-19. The aim of the package is to reverse rising unemployment, (by creating 160k new jobs), and counter the massive 13.8% contraction in the Q2 economy and will include major spending on green energy, long-term investments in employment and transport. The plan, equivalent to 4% of the country’s GDP, will be four times more than the 2008 package following the GFC. Not surprisingly, about US$ 47 billion will come from the new European Union Recovery Fund. Whether this boost will be enough to help the French economy escape one of Europe’s worst recessions, with an 11% drop in economic output forecast for 2020, remains to be seen.

The knives were already out and sharpened prior to the announcement that London-born and Rhode scholar, Tony Abbott, former Australian prime minister, had taken up an unpaid position as an adviser to Britain’s Board of Trade. The role involves promoting UK trade interests to other countries and help with setting up trade treaties with various countries, when the UK finally exit the EU without a deal at the end of the year. He has had experience with the likes of China, Japan and South Korea, overseeing free trade agreements with such countries when he was Australia’s prime minister. His current remit involves providing “a range of views to help in its advisory function, promoting free and fair trade and advising on UK trade policy to the International Trade Secretary”. There are many, including Nicola Sturgeon and Keir Starmer, who are against the appointment on the grounds that he is a misogynist, a sexist and a climate change denier.

The week ended with the eighth round of Brexit talks in London having made little or no progress. In typical Johnsonesque brinkmanship, the UK prime minister has rattled EU negotiators, headed by the urbane Michel Barnier. The UK announced that it would be prepared to override the Brexit treaty by using parliament to set aside parts of the protocol on N Ireland enshrined in the withdrawal agreement; this had solved the problem of a hard trade border on the whole of Ireland by ensuring the Six Counties being both close to EU customs union and at the same time being  in the UK’s customs territory. Ironically, the EU, expressing deep concerns about this protocol violation, threatened legal action and said that the move had “seriously damaged trust between the EU and UK”. It is very difficult to put the ‘EU’ and ‘trust’ in the same sentence.

The ECB is becoming increasingly concerned about the implications of a strong euro which has risen to US$ 1.20 due to a myriad of reasons including the knock-on effect of last month’s massive EU pandemic recovery fund and last week’s US Fed’s discretionary inflation-targeting stance. According to its president, Christine Lagarde, the situation is being closely monitored because of the negative pressure on prices; she also confirmed the bank will use its stimulus package in full to help pull the bloc out of recession. There is every possibility that rates may have to be cut further into negative territory as the ECB seems “determined to use all policy tools it has available”. The bank also expects that inflation, which turned negative in August, will continue below zero until later in the year but the average 2020 rate will be 0.3%; however, it has forecast that 2021’s rate will be a highly unlikely 1.0%. The ECB will have to introduce more stimulus measures mainly because of the record Q2 12% output contraction.

These are tough times for the EU having to fight fires on three fronts – an upcoming currency war with the US, finally realising that their previous bullying tactics no longer work in Brexit negotiations and the bloc’s post-pandemic economy is not bouncing back as quickly as first forecast. Time to Get The Fire Brigade!

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