The Land Down Under

Last year, Schon Properties reportedly started work on its US$ 870 million iSuites project in Dubai Investments Park which would comprise 2.6k hotel apartment suites, 52 restaurants, outdoor cafes and a 125k sq ft mall; to cap it all off, it would have been surrounded by a man-made beach and a lagoon spread over five acres. This week, the Dubai Land Department seized properties, land plots and funds deposited in the developer’s escrow account which it will hold until the Dubai Public Prosecution “complete legal procedures to secure the rights of all investors and other parties”.

In 2007, hundreds of investors made partial payments into the developer’s Dubai Lagoon project due for completion by 2008. Last February – more than a decade later – the company announced that it would be transferring parts of the project to another developer, Xanadu Real Estate. Then a year ago came the plan for the US$ 870 million iSuites, due for completion by 2020. Once bitten, twice shy!

Maybe there are other developers in a similar position to Schon – if so, there is no doubt that their day of reckoning nears, with the Dubai Land Department bearing its teeth. More seizures and stricter enforcement will become more prevalent which will be a major boost for the Dubai realty sector which has been struggling for some time.

One developer that seems to firing on all cylinders is Danube Properties which announced that its latest development – the US$ 150 million Lawnz – has sold out within five weeks. Located in International City, the two-year project will see a further 1k units added to bring its total portfolio to 4.7k, with a US$ 1.0 billion development value; prices start at US$ 79k.

Aurora Real Estate has sold all but seven of its twenty townhouses and 122 apartments in its US$ 46 million Hyati Residence development, recently handed over in Jumeirah Village Circle. Later in the year, the private developer will deliver another project in International City. This week it launched its latest – Hyati Avenue, comprising103 apartments and 19 townhouses – due for completion by December 2019. Prices will start at US$ 109k for a studio, US$ 191k for a 1 B/R unit and US$ 754k for a townhouse.

It was reported that the JV between Dubai Holding and Emaar, developing the six km Dubai Creek Harbour, will inaugurate Creek Island Dubai in December. A new development was unveiled this week – Creek Marina will be a city-harbour getaway, located in the centre of Creek Island, the six sq km residential and leisure district. The first Dubai Creek Harbour residents will move in early next year. Creek Marina will also have a 286-key Vida Harbour Point hotel, a pearl-shaped marina with 81 single and double berths, an interactive fountain along with high-end retail and food outlets.

Kleindienst Group have invested US$ 1.4 billion in The Heart of Europe – a six million sq ft development on the man-made World Islands, four km off Dubai’s coast. The project includes the ‘countries’ of Germany (with 32 villas) and Sweden (with ten beach palaces) with a further 131 Floating Seahorse vessels that will be berthed for vacation stays in Russia and Italy. All ten palaces, with a price range of US$ 8.2 million through US$ 20.6 million, have been sold and will be handed over by the end of the year. Most of the villas, with prices of between US$ 3.1 million and US$ 7.1 million, have been sold and hand-overs will start in December. The Floating Seahorses, which are moored at their location, will see delivery start this month.

Propertyfinder Trends reckon that there have been rental falls in both Dubai apartment rents and selling prices of 18.2% and 14.0% over the past two years. There could be some good news on the horizon for certain locations, as villa rentals in Jumeirah Village Circle and Mudon were 5.4% and 2.4% higher over the same period.

The report said some areas in Dubai are showing signs of life, with villas for rent up 5.4% and 2.4% in Jumeirah Village Circle and Mudon, respectively. Arabian Ranches stayed flat over the same period. Since January, Palm Jumeirah has seen villa sale prices move up 5.2%, whilst apartment sales were 2.7% to the good in Dubai Investment Park – the only place to record any improvement. With regard to apartment rentals, Al Furjan was the only location to move higher – 2.7%. Maybe there is light at the end of a very long tunnel in time for Expo 2020.

According to ISS Worldwide, shipping volumes for expats returning home have “come down drastically” by up to 15% in terms of both bookings and enquiries. The conclusion is that the expat exodus may well have slowed down this year, with the shipping company indicating that inbound shipments are on the up and that “more people seem to be coming in compared to 2017”. Time will tell!

A Knight Frank’s Prime Global Cities Index ranks Dubai 35 out of 42 when it comes to real estate performance. According to the consultants, prime property has fallen by under 0.8% over the past year, although the pace of decline quickened since January, falling 0.6% in Q2.

It seems that the UK press have a love-hate relationship with Dubai and often fabricate news stories to give a biased slant on events. Some usually involve “unlucky” tourists, whilst others are related to the economy. This blog was interested to see a recent article in The Sunday Times which advised its readers that it should think twice about investing in local real estate because of an oversupply coming into the market. That may be so, but their estimates of an additional 550k by 2020 seems a little far-fetched, especially if one considers that the present portfolio hovers around 500k and that under 4k were handed over in Q1.

Despite a ruling by a London court in favour of DP World against Djibouti seizing the Doraleh Container Terminal, the African government has refused to recognise the tribunal’s decision. Meanwhile, the Dubai port operator is adamant that the contract to run the port in Djibouti remains in “full force and effect”. In February, the 30-year agreement was cancelled by the African government who seized the facilities designed, built and operated by DP World.

DP World saw its long-term issuer rating upgraded one notch by Moody’s to Baa1, with a stable outlook because of its strong track record, solid profitability and liquidity profile.

There is very little sympathy for the European tourist who managed to rack up fines totaling US$ 46k in the space of three and a half hours on the very early morning Dubai roads. The rent a car company, that leased the US$ 354k Lamborghini Huracan, is taking legal action on the errant motorist to reclaim the money it has had to pay the police for the car’s return.

The Department of Economic Development has estimated that incoming foreign direct investment over the past three years has been over US$ 21.7 billion; this has resulted in the 860 projects creating an extra 54k jobs in the tech sector. This investment, 66% of which emanates from the EU and the US, has boosted Dubai’s drive to become a major knowledge-based economy.

One of the first casualties of the Abraaj Capital downfall is Stanford Marine Group that has failed to meet its debt obligations.  The company, which operates offshore supply vessels, has also been hit by a sharp decline in chartering rates, is in discussions with three potential buyers. Abu Dhabi’s Waha Capital owns a 49% stake in SMG.

Amanat Holdings has spent US$ 300 million this year on three investments, the last of which was US$ 100 million to complete the 100% acquisition of Middlesex University Dubai. This brings the GCC’s largest healthcare and education investment company’s portfolio to three education assets in the UAE, two healthcare assets in Saudi Arabia and another real estate investment.

Shuaa Capital posted a 21.0% hike in Q2 net profit to US$ 4 million and is expected to distribute its first dividend in over a decade. However, the investment bank posted a 28.5% fall in H1 profit to US$ 7 million, with revenue 2.9% to the good at US$ 17 million. Its total asset base has risen by a third to US$ 436 million over the past twelve months.

Although DXB Entertainments posted a narrowing of its Q2 net loss, by 11.0% to US$ 69 million, the result was higher than market expectations. There was a 3.0% decline in revenue to US$ 32 million, although both visitor numbers rose 48.0% to 613k and operating expenses fell 11.0% to US$ 77 million. The company will “evaluate future development plans and capital deployment” and expects “to deliver year-on-year growth compared to the year ended December 31, 2017.”

Arabtec posted a 98.2% jump in H1 profit to US$ 31 million on the back of a 13.0% rise in revenue to US$ 1.3 billion. It had a US$ 9.4 billion backlog of tenders submitted or under preparation. The fact that the company managed to improve debtor days by 17 days and decreased trade and other receivables by US$ 61 million resulted in a US$ 56 million positive cash flow. The company has seen dark times in the past and its share value, at US$ 0.53, is still 43.7% lower than this time last year.

Depa posted disappointing H1 results, with net profit 68.4% lower at US$ 10 million, although revenue nudged 2.0% higher to US$ 232 million; however, last year’s figures benefitted by the fit-out firm recovering two long-standing debts. Expenses were 13.6% higher at US$ 218 million, with an order backlog 5.0% higher at US$ 515 million.

The DFM opened on Sunday, 05 August on 2974 and ended on Thursday 54 points lower, 1.8%, at 2920. Over the week, both Emaar Properties and Arabtec dipped by US$ 0.01 – to US$ 1.44 and US$ 0.53. Volumes improved slightly to 127 million shares, valued at US$ 43 million (compared to the previous Thursday, 02 August, when 68 million shares at US$ 26 million were traded).

By Thursday, 09 August, Brent was trading US$ 1.38 (1.9%) lower at US$ 72.07, whilst gold nudged US$ 4 higher to US$ 1,224.

Driven by higher production and prices, Rosneft posted a significant tripling of Q2 profits to US$ 3.6 billion, with revenue climbing 49.0% to US$ 32.7 billion; H1 profits came in at US$ 4.9 billion. Shares in Russia’s largest oil producer, which pumps 4.6 million bpd, hit record highs on this latest news.

Rolls Royce posted a H1 US$ 1.3 billion loss (after a US$ 1.5 billion profit in the same period last year) as it suffered again from exceptional charges of US$ 720 million to its Trent 1000 power plant. Repairs to the engines, used by the A380 and the Boeing 787, have come about because some have been wearing quicker than expected. With the US$ 650 million sale of its loss making commercial marine business to Norway’s Kongsberg, the Derby based company can now focus on its three core businesses – civil aerospace, defence and power systems.

There is a chance that the US$ 9.1 billion merger between Smiths Group, the FTSE-100 industrial conglomerate, and Nasdaq-listed ICU Medical will not go ahead. It seems that another US player, Baxter International is also interested in acquiring the UK company. Both suiters are major healthcare companies whereas Smiths Medical, which accounts for 30% of the Group’s revenue is but one of five divisions which includes security detection, and John Crane, a provider of engineering solutions for energy and other process industries.

In a bid to diversify and grow its revenue streams, Samsung has announced a US$ 22 billion, three-year investment plan in areas such as artificial intelligence, 5G mobile technology, electronic components for autos and the biopharmaceutical business. This is in response to a slowdown in its two core business sectors – semiconductor and smartphone. Over 72% of the new investment will be spent in South Korea and is expected to add 40k new jobs. The Group’s 62 affiliates have assets totalling in excess of US$ 351 billion.

Toyota shocked the market by posting a 7.2% hike in Q2 profits to US$ 5.9 billion and selling 0.9% more vehicles at 2.2 million. The carmaker reported strong sales in Asia, especially in Thailand, and indicated that it had introduced several cost reductions that boosted its bottom line. In May, Toyota posted that it had made a US$ 23.0 billion profit (36.2% higher than in the previous year) and sold almost 9.0 million units. Whether the introduction of tariffs will have a negative impact on Toyota, and the car industry in general, remains to be seen.

Tesla posted a Q2 record loss of US$ 717 million as it continues to burn cash – this quarter US$ 740 million, 32.7% lower quarter on quarter. The electric car-maker is ramping up production of its Model 3 and expects to raise levels by around 75% to 55k in Q3. However, Elon Musk reckons that this quarter would be the last posting losses and that profits would start forthwith; he also indicated that within a year there would be 10k Model 3s coming off the assembly line every week and that Tesla would be producing 750k vehicles in 2020.

Later in the week, the South African entrepreneur tweeted that he may take the electric car firm private so that he would no longer feel pressured into making short-term decisions to keep shareholders happy; if it were to go ahead, the share could have a 16% premium on today’s prices. If that were so, the company would be valued at US$ 80 billion. Meanwhile, the Financial Times reported that the Saudi sovereign wealth fund had taken a 3%-5% stake in Tesla.

Higher programming costs and a fall in its ESPN sports channel subscribers resulted in Walt Disney not meeting its quarterly profit forecast; the markets were not too happy and its shares fell more than 2% on the news. However, its revenue stream was 7.0% higher at US$ 15.2 billion whilst profit was 22.9% to the good at US$ 2.9 billion.

This week, 21st Century Fox, which already owns 39.1% of the company, posted its offer for Sky plc, owner of Sky News – its price remained unchanged and values the whole company at almost US$ 32 billion. The other interested party, the US cable operator Comcast, will be happy to take just a 50% stake, plus one extra share, of Europe’s largest pay-TV broadcaster.

To add to his investments in Lyft, Twitter and JD.com. and other tech companies, Prince Alwaleed Bin Talal has now paid US$ 250 million for a 2.3% stake in Snap. The social media company seems to be struggling recently with a 1.6% decline in daily active users to 188 million and increased competition for digital ads from the likes of Facebook. The latest quarterly figures show a 44% hike in revenue to US$ 262 million, with losses reducing to US$ 353 million – 20% lower than the same period in 2017.

Every now and then, this blog bemoans the fact that Amazon – and similar mega companies – continue to take the p… out of the UK taxpayers. It managed to cut its latest tax bill by 37.8% to US$ 6 million and only paid 37% of that total, deferring the balance. Having revenue of almost US$ 2.6 billion in the UK, it saw its net profit climb 73.9% to US$ 102 million, which in itself does not seem a particularly high net margin. There is no doubt that Amazon’s approach is both perfectly legal and blatantly unfair. Like Sergio Ramos, Amazon get away with it when the rest of the world looks on bemused.

It would be safe to say that Venezuela is in a bit of an economic mess, with inflation running at 1,000,000%. Hyperinflation sees an egg costing 200k times more than a litre of 91-octane petrol and US$ 1 can be changed for 3.5 million bolivars. The country now produces 1.5 million bpd – less than half the figure of ten years ago. Fuel subsidies cost the impoverished Latin American country US$ 10 billion and now it imports 34k barrels of gasoline and 36k barrels of diesel every day from the US.  In Venezuela’s inflation-hit economy, a single US dollar can buy 3.5 million litres of gasoline!

Public anger in Malaysia led to the defeat of Najib Razak’s long-ruling coalition in May’s vote, ushering in the first change of power since the country gained independence from Britain in 1957. Whilst he was in power, investigations into the running of the state investment fund,1 Malaysia Development Berhad (1MDB), were stifled and only recently reopened when the new government came to power. International investigations claim that billions of dollars were creamed off by the ex-PM’s associates, including his stepson who reportedly used funds to help finance ‘The Wolf of Wall Street’ film. He is now finally facing the court on numerous charges including money laundering and fraud.

At long last, it seems that Japanese consumer spending and inflation are showing signs of pushing upwards. Its workers’ inflation-adjusted real wages showed a 2.8% annual hike in June – when it rose at its fastest pace since 1997 – with increased summer bonuses being the main driver. Most other related indicators headed north over the year – nominal cash earnings by 3.6%, overtime by 3.5% and monthly household income by 9.1% to US$ 7.3k. This data will be good news for the Bank of Japan, as core inflation hovers around 1%, still some way off its 2.0% target, despite five years of massive stimulus. After contracting in Q1, the economy bounced back this quarter and grew at a much faster rate than expected of 1.9%, driven by a jump in private consumption.

In June, Germany’s exports remained flat at US$ 134.0 billion whilst imports rose 1.2% to US$ 109 billion – its highest level since records began in 1950. Consequently, its trade surplus slipped 5.4% to US$ 22.4 billion. The largest economy in Europe saw imports, at 10.2%, grow at a faster rate than the 7.8% for its exports. The question to be asked is whether Germany is doing enough to counteract their surplus which is in direct contrast to the US’s trade deficit – and most EU members.

Following a significant decline in eurozone demand, the country’s manufacturing orders declined in June, with a 4% month on month fall in total factory orders; of that, total foreign orders were 4.7%, with domestic orders 2.8% shy. There is a feeling that current international trade tensions have impacted on business confidence and introduced uncertainty.

The IMF has estimated that India’s economy will grow a credible 7.3% this financial year and 7.5% a year later, driven by resilient investment and solid private consumption. There has been a recent lull following the November 2016 cash ban and the 2017 sales tax introduction but now its economy accounts for a massive 15% of global economic growth. However, it continues to face risks that could derail Prime Minister Modi’s best laid plans including its weakening currency (down 7% to the greenback), higher energy prices, declining tax revenues and the sluggish pace of much needed structural reforms.

To the surprise of some, the Bank of England did unanimously decide to raise its key interest rate to 0.75% from 0.50% – following a similar rise last November. The decision to tighten monetary policy was in line with their bid to curb inflation and return it to “the 2% target at a conventional horizon”. This could be the last tweak with rates for some time. Growth is expected in the region of between 1.4% – 1.8% for the next thirty months.

Although UK housing activity remained soft, July house prices were 1.4% higher, month on month, and 1.3% for the quarter ending July. For the year, prices were 3.3% higher with the average house price now selling at a record high of US$ 299k. For the past three months to June, mortgage approvals rose 1.4% to 65.6k with house sales falling 3.0% in June to 96.3k.

UK Foreign Secretary, Liam Fox, reckons that it is now 60:40 that the UK will fail to agree to a Brexit deal with the EU by next March and is blaming intransigence by the EU for the increased possibility of no deal. He also claimed that Michel Barnier, the EU’s chief negotiator, had already dismissed the proposals, which “makes the chance of no deal greater”. The Brussels mafia has countered by blaming the UK government for failing to make realistic proposals. Even the BoE governor, Mark Carney, has warned that there was a “uncomfortably high” possibility of a no deal Brexit.

Following the US announcing new sanctions on Russia because of their alleged role in the nerve agent attack in the UK in March on Sergei Skripal and his daughter Yulia, the Russian rouble sank to its lowest since November 2016. It fell over 5.3% on Tuesday to 66.7, whilst share values of major Russian companies – including Aeroflot, Rusal and Sberbank – also drifted lower.

President Trump followed up on his re-imposition of Iranian sanctions with a warning to “anyone doing business with Iran will NOT be doing business with the United States”. Earlier in the year, he pulled out of the Iran nuclear deal, described by him the “worst I’ve ever seen” and considers that sanctions will force Iran to agree a new deal.

Not surprisingly, AMP has seen its H1 net profits slump 74.2% to US$ 84 million on the back of its massive compensation and legal costs related to its fee-for-no-service scandal. Australia’s largest financial adviser network may now face criminal charges after it emerged that it had misled the corporate regulator on multiple occasions about a widespread practice of charging many customers fees for services they were not, and could not be, receiving. The country’s financial sector is coming under close scrutiny by a Royal Commission that started its work in March. It has already uncovered many unsavoury and illegal acts carried out by the country’s banks, insurance companies, financial advisers etc, over many years, with a lot more to be revealed. Life is about to become uncomfortable for some of them in The Land Down Under!

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Everybody’s Talkin’

Chestertons latest report indicates that in Q2, there were quarter on quarter declines in both overall rental rates for apartments and villas by 4% and 2% respectively, with sale prices down by 1% and flat. The main driver behind the uptake was in the mid-market sector where buyers took advantage of good deals and attractive packages on offer.

The report also highlighted the improvement in certain areas such as Business Bay where units, having recorded a 9% decline in Q1, bounced back 4% to US$ 334 per sq ft and Jumeriah Village Circle up 6% to US$ 237 per sq ft (from an 8% fall the previous quarter). On the flip side, International City posted a 7% quarterly fall to US$ 160 per sq ft, whilst The Greens was 2% lower at US$ 293. When it comes to villas, only Palm Jumeirah was higher by 4% to US$ 626 per sq ft. The Meadows and The Springs remained flat and there were declines of 1%, 2% and 3% in The Lakes, Arabian Ranches and Jumeirah Park respectively.

Luxhabitat also confirmed that some sort of stability had returned to the secondary residential market in Q2 with 1.4k villas and 6.7k apartments sold for US$ 3.3 billion, compared to US$ 3.9 billion in Q1, traditionally a busier sales period. It also estimated that the five best locations for gross rental yield were Jumeirah Village Circle (8.0%), Jumeirah Lake Towers, Emirates Living, DIFC and Dubai Marina – all around 6.0%.

Central Hotels has had a soft opening of Royal Hotel – a 207-key property on Palm Jumeirah. The five-star hotel, overlooking the Arabian Gulf, will have a variety of recreational facilities and numerous dining options.

With a current portfolio of fifty aircraft, valued at over US$ 4 billion, Dubai-based aircraft lessor, Novus Aviation Capital, is one of the world’s fastest growing aircraft leasing financing platforms. This week it signed a US$ 1.4 billion deal with Boeing for 777-300ERs at the Farnborough International Airshow.

Dubai Parks and Resorts reported a 46% hike in H1 visitor numbers to 1.4 million, with over 300k in April alone. During the period, hotel occupancy at the Lapita Hotel jumped from 24% to 55%.

There are reports that Emaar Properties is in the throes of selling up to US$ 1.4 billion of its non-core assets, half of which will be from the sale of all but two of its hotel portfolio and the balance from the sale of schools and clinics in its residential communities.

Troubled Abraaj Holdings posted a Q1 US$ 188 million loss after having dipped into investors’ money to run its operations, following its delayed sale of K-Electric in Pakistan. Once one of the region’s largest private equity firms, with assets of over US$ 14 billion and now under liquidation, it has total assets of US$ 1 billion – with US$ 148 million net realisations from assets available for the liquidation process. With discussions on the sale of the firm’s asset management business ongoing, it is reported that both Cerberus Capital Management and Colony Capital have made increased offers to acquire some of the Dubai-based firm’s assets. Currently, 89 firms have announced exposure to Abraaj including Air Arabia’s US$ 327 million, Commercial Bank of Dubai (US$ 18 million), Mashreq (US$ 125 million) and Al Qudra Investments.

It seems that Abraaj Holdings used an “unusual” business model as it tried to plug the liquidity gap between the investment management fees and operating expenses. It is reported that the liquidators have had trouble finding key annual financial statements/management accounts and that there had been problems funding its cost base from ongoing revenues. The liquidator has indicated that since 2014, “management fee income and carried interest was insufficient to meet the Abraaj Group’s significant operating costs, with the result that any liquidity shortfall was largely funded through new borrowings.”

To coincide with the visit of President Xi Jinping, Emaar announced its landmark six-square kilometre mega-development which will include the region’s largest Chinatown. The company is to open three offices in Beijing, Shanghai and Guangzhou to promote tourism, education, trading and investment between UAE and China. Emaar also plans to expand its premium luxury hotel and serviced residences brand, Address Hotels + Resorts, to China.

The emirate is trying to boost bilateral relations with China in other aspects. In 2016, it was decided that Chinese visitors could enter the country without a visa – the end result sees visitor numbers topping 400k in the first five months of this year, with that total having doubled over the past three years; overnight Chinese visitors have grown 119% since 2014 and last year saw an annual 42.4% hike in arrivals. There are 200k Chinese living in the country. The Dubai College of Tourism has undertaken Mandarin tour guide training for more than 200 guides and an MoU has been signed with Fliggy, Alibaba’s online travel platform to position Dubai as the preferred destination for Chinese travellers. Another agreement sees Huawei, one of China’s leading smartphone manufacturers, offering useful Dubai content on its travel apps.

After a five-month trial, it seems that Dubai-based ride-hailing app Careem is to launch its own food delivery service, CareemFood. Earlier in the year, it acquired regional online restaurant listing platform RoundMenu and is now in discussions with investors to raise up to US$ 150 million funding. The firm, with 24 million registered users, is expected to start in Pakistan by the end of Q3, followed by the UAE.

Du posted an 18.8% hike in H1 profits to US$ 263 million, as revenue jumped 4.0% to US$ 1.8 billion. As a result, an interim US$ 0.0354 dividend (totalling US$ 160 million) has been recommended, subject to shareholders’ approval.

Mashreq recorded a 5.2% hike in H1 profits to US$ 327 million backed by a 3.7% improvement in operating income to US$ 845 million. There were increases in total assets (up 1.4% to US$ 34.6 billion), loans/advances (7.9% to US$ 18.4 billion) and customer deposits (2.3% to US$ 18.4 billion).

The DFM opened on Sunday (15 July) on 2880, having shed 262 points (8.6%) the previous two weeks, regained some ground, up 59 points (2.1%), closing the fortnight, on 26 July 2018, at 2880. Along with the bourse up 69 points (92.4%) to 2974, both Emaar Properties and Arabtec were trading higher on Thursday 26 July by US$ 0.05 to US$ 1.39 and US$ 0.04 to US$ 0.56 respectively. Volumes were lower, trading 226 million shares, valued at US$ 64 million, (compared to 226 million shares, worth US$ 64 million, Thursday – 12 July).

By Thursday 26 July, Brent Crude, having shed US$ 5.60 (1.9%) the previous two weeks, lost further ground down US$ 3.14 (4.1%) lower to close on US$ 74.25, with gold losing US$ 12 (1.0%) to US$ 1,247.

Google was fined US$ 5.0 billion by the EU’s commission, having concluded that the US tech firm had forced device-makers to pre-install its apps and services. This is the largest-ever fine imposed and Google have been given ninety days to end the “illegal conduct”. Last year, Google was fined US$ 2.8 billion for forcing users away from rival offerings and towards its own comparison-shopping site.

In what was its worst day in its short history, Facebook shares plummeted by over 20% slashing over US$ 120 billion off its market cap and making its founder, Mark Zuckerberg nearly US$ 16 billion poorer but still worth US$ 67 billion! The fall came after the social networking giant warned that profits would be lower, as it would be spending an increased amount on site security, following the Cambridge Analytical fiasco. European users have fallen 1.0% to 279 million, with a slowdown in advertising revenue because of tough new European data protection laws, introduced in May.

The same fate awaited Twitter the following day with their share value plummeting 19% on the back of concerns that it was putting “more effort into producing a “healthy” service and numbers had fallen in the wake of weeding out fake accounts.

Amazon share value went the other way – up 3% after posting a record US$ 2.5 billion Q2 profit, compared to US$ 197 million a year ago. The growth in its top line was not as spectacular – jumping 39.0% to US$ 52.9 billion.

With imports growing faster than exports, by 0.9% to 0.2%, the eurozone trade surplus fell 6.1% (US$ 1.8 billion) to US$ 19.3 billion in May.

There was a marginal 0.1% decline in China’s Q2 economic growth to 6.7% at a time when US trade relations deteriorated. There was impressive year on year growth figures including retail sales (up 9.0%), fixed asset investment (6.0% higher) and industrial production at 6.0%. The urban unemployment rate remained flat at 4.8% in June.

A recent Begbies Traynor report has highlighted the stress facing the UK’s High Street. It estimates that over 30.6k store chains are in trouble and “facing significant financial distress” and the problem is not going away. Over the past five years, 61k shops have closed and 50k retail jobs axed. The situation has been exacerbated by the presence of online retailers, with the major players such as Amazon not facing the high costs associated with a brick and mortar retailer. Instead of seemingly bending over backwards to help these international interlopers, the government should be looking at reforming business rates, cutting exorbitant parking rates and charging the internet sector a fairer tax rate.

To try and level the playing field with Aldi and Lidl, Tesco is to open a new chain of discount stores, called Jack’s. It will be operated separately from its parent company and up to 60 stores could be opened over the next twelve months. Over the past decade, the two German retailers have seen its combined market share more than triple from 2.9% to 9.4% – and still heading north.

Further problems for President Trump came with news that China’s trade surplus of US$ 24.6 billion with the US in June was at a ten-year high and YTD topped US$ 133.8 billion. For June, exports were 11.3% higher and YTD both exports and imports were higher – by 13.6% and 11.8%. It seems that some Chinese companies were trying to move goods before tariffs took effect. There is no doubt that Washington will not be too happy with these figures and will “encourage” China to cut back its trade surplus.

June retail sales were 0.5% higher, following a stellar 1.3% jump in May, driven by a 0.9% rise in vehicle sales and a 2.2% hike in sales by health and personal care stores; on an annual basis, the growth came in at 6.6%. Consumer spending is expected to expand further in the coming months, as job growth strengthens, wage growth begins to pick up and tax cuts start to increase disposable income streams.

There is no doubt that the President’s tax cuts late last year have been the main driver in the economy growing at its fastest quarterly rate in over four years. At an annualised 4.1% rate, even his critics must admit that the economy is booming. However, it will be some time before we know whether it has been all worthwhile – that will happen when the extra growth exceeds the US$ 1.5 trillion cost of the cuts.

July has turned out to be a good month for Russian president, Vladimir Putin. He had a successful meeting in Helsinki’s Hall of Mirrors with Donald Trump at which he managed to be one hour late. Nobody really knows what happened since the main meeting took place behind closed doors with just the two protagonists and their interpreters.

The economy is holding up well in Q2 after impressive Q1 returns on the back of higher energy prices and an uptick in exports, with unemployment remaining at a multi-year low. Retails sales are heading north even before the football circus came to town, Putin also defied his many critics by seeing his country hosting what many observers claim to have been the best-ever staged FIFA World Cup. The event was a showcase for the Russians and they passed with flying colours – both on and – more importantly – off the field. There is no doubt that Everybody’s Talkin’

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We’re Heading For a Train Wreck!

A Cavendish Maxwell report serves to confirm that rent declines will continue for the rest of the year, as new stock will add to Dubai’s property portfolio of some 500k residential units. It estimates that in H1, 7k units have been added, with a possible 13k to follow in H2. In the past twelve months, over 6% falls have been recorded in Al Furjan, Discovery Gardens and The Greens.

No surprise from the latest Bayut.com report that indicated that both buying and renting property have become cheaper over the past six months. Rental decreases averaged between 2% – 9%, with the biggest drops for 1-B/R apartments in Deira down by 15.4% and 2-B/R units in Dubai Sports City 10.6% off. Dubai Marina was the favoured location for rentals, where 1 B/R apartments could be had for US$ 24k, as well as for sales; although 1-2 B/R units have dipped by around 5%, studio prices there still hover around US$ 232k. When it comes to villas, Mirdif, with rentals of US$ 33k for a 3 B/R, was the most popular and for sales Arabian Ranches, where there have been 6% declines, 3 B/R villas will fetch US$ 817k. As prices dip, it is inevitable there will be a point when first-time buyers will enter the market which in turn will see prices nudge higher after three years in the doldrums.

Meanwhile a ValuStrat reported that Q2 prices for residential properties were 3.8% lower – the biggest quarterly dip in four years –  with prices 20% off from 2014. It also suggested that the falling prices may have resulted in a boost in sales, with transaction volumes and average ticket sizes both heading north. In the 26 freehold locations studied, price falls ranged from 0.2% to 6.1%, with 5%+ declines seen in Business Bay, Downtown, Emirates Living, International City, Jumeriah Island and Motor City. There was also a slowdown in rental prices, down 8.4% for the year but only 1.7% over the past three months. Despite the holy month of Ramadan falling in Q2, off plan sales were 18.7% higher (and 10.9% up for the year) whilst secondary property sales were up 10.2% (1.5% on an annual basis).

There was a 15.9% decline to US$ 30.2 billion in the total value of H1 real estate transactions as transaction numbers fell by 22.3% to 27.6k. The three most active locations were Business Bay – 1.9k transactions, valued at US$ 1.14 billion – Dubai Marina (1.4k, US$ 790 million) and Al Merkadh (1.3k, US$ 572 million). Emiratis were the biggest players in the sector – with 3.0k deals worth US$ 1.85 billion – followed by Saudis and Indians.

Marriott International will no longer manage the three hotels – The St Regis, W Dubai Habtoor City and The Westin Dubai Al Habtoor City – owned by the Al Habtoor Group. Located in the heart of Dubai, adjacent to the Dubai Canal, the three properties comprise 1.6k rooms and have been open for about two years.

DEWA has major investment plans that will see the emirate continue to meet increasing customer demand, driven by 8% annual population growth. It has awarded a US$ 286 million contract for the construction of electricity transmission projects including a 400/132kV substations, two 132/11 kV substations, and 75km of 132kV ground cables. Over the next five years, the investment spend is forecast to top US$ 22 billion.

According to an OAG Aviation report, Emirates Dubai-Heathrow route is the world’s third best for generating revenue, producing almost US$ 819 million billion last year, equating to US$ 33k per hour. It comes in behind BA’s London-New York at US$ 1.0 billion and Qantas’ Sydney-Melbourne’s US$ 854 million. Strangely, Virgin Atlantic will cease flying the Dubai-LHR route as from March 2019 because it was no longer economically viable due to a combination of factors.

The four major UAE airports have forecast to spend US$ 23.2 billion on development and expansion, 68.1% of which will be spent on the two Dubai facilities. Developing the Al Maktoum International to be the largest in the world will see a spend of US$ 8.2 billion and expanding phase IV of Dubai International a further US$ 7.6 billion. It is estimated that within five years, capacity at both airports will total 238 million passengers, of which Dubai International will accommodate 118 million.

A month after Dubai Airports announced that it would be setting up a US$ 40 million investment with Crop One Holdings to build the world’s largest vertical farming facility, the Ministry of Climate Change has signed a five-year agreement with Shalimar Biotech Industries to establish twelve vertical farms on the ministry’s land in Dubai. The main aim of the project, encompassing 7.6k sq mt of government land, is to enhance the country’s food security and diversity.

Mall.Global DMCC unveiled its US$ 500 million investment plans for an online retail venture that will go live in various locations, including China, Europe, India and the MENA. Mall.Global will be a digital mall, with over 2.5k branded stores and offer each customer a personalised experience utilising AI and virtual reality. Testing will start early next year before going live, via sequential launches in 2020.

The Dubai Statistics Centre reports that SMEs account for 46.9% of the emirate’s GDP and employs 52.4% of its workforce. Half of the registered SMEs are less than five years old, with a further 20% in the 5-9-year category. SMEs are categorised into three sectors – for trading entities:  micro, with nine or fewer employees and revenue of under US$ 3 million; small, with 35 or fewer employees and revenue of under US$ 14 million; medium, with 75 or fewer employees and revenue of under US$ 28 million. Manufacturing and service sectors use different parameters to differentiate the three groupings. Micro firms contribute 9.2% to GDP and 9.3% to the workforce, small – 25.6% and 30.6% and medium 12.1% and 12.5% respectively.

The Bloomberg Billionaires Index of the world’s 500 richest people include at least three who reside in Dubai – Alexander Abramov, Leonard Fedun and Majid Al Futtaim, all having a net worth of just over US$ 6.0 billion. The index also indicates that Abdulla Al Ghurair and Micky Jagtiani were worth US$ 5.4 billion and US$ 5.0 billion respectively.

One way or another it seems that Noon will be in the grocery delivery business by year end, with the two options either by development or a buy-out. The US$ 1 billion e-commerce site, founded by Mohamed Alabbar, is also looking at expanding into other ME locations. To kick-start its operations in Asia, it has launched two new entities in China, with a permanent office to be opened “soon” and is working closely with several of that country’s manufacturers.

Starting this October, Dubai visitors will be able to reclaim the 5% VAT they have paid on purchases during their stay in the country – this move is in line with most other countries that charge this tax. No doubt it will give much needed impetus to both the hospitality and retails sectors during these difficult times.

Dubai’s June Business growth in the non-oil private sector economy, with the Emirates NBD’s latest economy tracker easing from 57.6 to 56.0, month on month but is still well on the expansion path. Business confidence touched a record high with both wholesale and retail trade, recording 58.6, performing well probably due to the Eid holidays, whilst there was a marked upturn in the construction sector, at 57.1, which could be a lead driver for future economic growth.

Khaldoun Al Tabari has refuted claims that he owes his former company, Drake & Scull International, up to a reported US$ 272 million. An internal enquiry found that there had been “material financial violations from the previous management” but no value was given.

Following the recent government freezing of Dubai private school fees, it is reported that GEMS Education may well delay the company’s London listing which could have happened later in the year. Further reports hinted that Luxembourg’s private equity firm CVC could be interested in buying the Dubai-based education provider.

The Commercial Bank of Dubai posted an impressive 68.7% leap in H1 profits to US$ 246 million, on a 1.1% improvement in operating income to US$ 360 million, comprising a 6.0% increase in net interest to US$ 250 million and a 9.7% decline in non-interest income to US$ 110 million. Over the period, there were increases across the board of 1.5% to US$ 18.8 billion in total assets, 1.9% to US$ 12.9 billion in loans/advances and deposits by 2.6% to US$ 12.8 billion.

The DFM opened on Sunday (08 July) on 2880, having shed 262 points (8.6%) the previous two weeks, regained some ground, up 59 points (2.1%), closing the week, on 12 July 2018, at 2880. Both Emaar Properties and Arabtec were trading higher on Thursday 12 July by US$ 0.05 to US$ 1.39 and US$ 0.04 to US$ 0.56 respectively. Volumes were lower, trading 226 million shares, valued at US$ 64 million, compared to 306 million shares, worth US$ 123 million, the previous Thursday – 05 July).

By Thursday 12 July, Brent Crude, having shed US$ 1.46 (1.9%) the previous week, lost further ground down US$ 3.14 (4.1%) lower to close on US$ 74.25, with gold losing US$ 12 (1.0%) to US$ 1,247. (Latest OPEC forecasts see a 200k bpd slowdown in its oil supply next year to 32.2 million bpd, with non-cartel production up 3.5% at 61.6 million bpd).

Even before the introduction of trade tariffs, the US trade balance in May fell 6.6% to US$ 43.1 billion – its lowest level in 19 months; exports, at US$ 215.3 billion, climbed at a higher rate than imports of US$ 258.4 billion (6.6% v 0.4%). Further encouraging economic data came with a growth in the service sector, as the Institute for Supply Management’s PMI climbed 0.5 in June to 59.1, driven by marked increases in both business activity and new orders index to 63.9 and 63.2 respectively.

There are reports that the US$ 100 billion Saudi Aramco IPO may be delayed among concerns that listing on large international bourses, such as Hong Kong, London and New York, could present too many legal risks. The final decision will be left to the Crown Prince Mohammed bin Salman.

Saudi Arabian Airlines may place a 777X order with Boeing that could help the US plane maker that will probably lose an IranAir order for eighty jets because of Trump’s withdrawal from a nuclear deal. Since the president took office, there have been business deals worth tens of billions of dollars signed between the two long-time allies.

In the week that Rupert Murdoch’s 21st Century Fox is expected to get the green light from UK’s Culture Secretary, Jeremy Wright, to go ahead with its bid, Comcast has come in with a better offer to take over Sky. the renewed offer of US$ 34.5 billion is US$ 2.0 billion than Fox’s, with the owner of NBC also noting that the bid has received the approval of Sky’s independent committee of directors pay TV giant.

Chinese authorities expect H2 growth to slow to around 6.6%, as demand softens and financial market risks become “obvious”; over the same period, retail sales are expected to grow by 9.5% whilst fixed asset investment should come in at 6.5%. The slowdown had already started as the Central Bank took steps to erase riskier lending in the shadow banking sector that in turn has pushed up rates. Now with the US$ 34 billion Trump trade tariffs coming into effect, more money has had to be pushed into the economy. Interestingly, the yuan has lost 7% in value this year which would seem to some to be a deliberate attempt by the government.

China has retaliated with similar moves and also lodged a new complaint with the World Trade Organization, that the US has started the “largest trade war in economic history”. It is estimated that the US tariffs will only impact on 0.6% of global trade and 0.1% on worldwide GDP – this would change somewhat if Donald Trump goes ahead with tariffs of US$ 500 billion!

There was mixed news on the UK economic front in May with a 0.3% increase in GDP growth, driven by hikes in both services (0.3%) and construction (2.9%), whilst production continued its recent declines, down 0.4%. Quarterly growth came in lower at 0.2%, driven by a 1.8% year on year hike in production, with retailing, computer programming and legal services posting strong returns as both house-building and manufacturing contracted. Interestingly, the UK imported 55% of its goods from the EU and exported 49% to the 28-country bloc over the past twelve months.

Eurozone house prices rose by 4.5% in the twelve months to March – its fastest rate since early 2007. Prices in Ireland, Latvia, Portugal, Slovakia and Slovenia posted double digit growth – 12.3%, 13.7%, 12.2%, 13.4% and 13.7% respectively. As rates continue at zero, authorities have had to use other measures to tighten lending to this sector, including caps based on people’s income and the value of the property.

With some seeing Brexit a major problem for the UK they seem to forget that EU countries will also feel its negative impact. This week, the IMF cut Germany’s growth from 2.5% to 2.2% on the back of rising global protectionist tendency and the “renewed financial crisis stress” that it would cause. The world body expressed concerns about the effect of an ageing population and recommended more investment in infrastructure and education.

Meanwhile the US economy continues to grow, with latest figures indicating a higher than expected 213k new jobs created in June, with manufacturing adding 36k; the country has managed to add new jobs every month for the past seven years. The unemployment rate rose 0.2% to 4.0% because more people are looking for jobs in a strong labour market; the annual increase in average hourly earnings was unchanged at 2.7%. It is estimated that there are 6.7 million job openings which is higher than the number of currently unemployed people looking for a job. With business confidence on the up, in an economy heading north, Q2 growth could reach an impressive 4.0%.

US consumer credit climbed US$ 24.5 billion in May, following a US$ 10.3 billion increase a month earlier. Of that total, revolving credit (mainly credit card debt) jumped by US$ 9.7 billion, whilst non-revolving credit (including loans) rose by US$ 14.8 billion. Over the past twelve months, consumer credit has risen by 7.6%, as revolving and non-revolving credit were up 11.4% and 6.2%.

The World Bank Global is increasingly worried that corporate and public debt is becoming a major global problem, now reaching a massive US$ 164 trillion, driven by ten years of low interest. The IIF estimates, that when household debt is added, the total is US$ 237 trillion. Now that rate hikes are looming, and lenders having to pay more interest, there is going to be greater stress on all stakeholders – including emerging markets and developing economies down to the average person with a loan/mortgage to repay. The fall-out will not be pretty –  no doubt, We’re Heading For a Train Wreck!

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Football’s Coming Home!

There has been a 20.1% H1 decline, to 9.4k units, in the number of Dubai off-plan sales transactions (with values 28.0% lower at US$ 3.3 billion), despite a June boost when 2k units were sold. The two top performing locations were Meydan and Jumeirah Village Circle that recorded 1.1k and 0.9k sales respectively. There was more encouraging news on sales for ready property, only dipping 11.8% to US$ 2.8 billion. The market may worsen as mortgage rates start moving north – up 75 bp already this year.

With a US$ 156 million contract awarded to Majed Hilal Contracting, Azizi is expected to start work on phase 4 of Azizi Riviera. Located in Meydan 1, the contract, to build eleven canal-side buildings, comprises over half of phase 4 of the development that will add 4.8k residential units to its flagship project.

Although the offices and commercial side of the iconic Opus building, designed by the late Zaha Hadid, has received their first tenants, it is reported that the opening of the Me by Melia hotel has been delayed twelve months and set to open in Q4 2019. The property – which encompasses 19 floors, including 98 serviced apartments and 19 rooms – would have been the brand’s eighth global location. Melia also announced that it had taken over the running of the Desert Palm Dubai Hotel, formerly managed by the Per Aquum brand by Minor Hotels.

With the market becoming increasingly competitive, as well as hotel revenues and occupancy rates heading south, Rotana is taking active steps to remain viable. The hotel group, with 65 regional properties, has introduced a strategy of cost-cutting and rejigging expansion plans in a bid to stop a decline in revenue levels.

HH Sheikh Mohammed bin Rashid Al Maktoum approved a new human resources law that will see increased annual leave for government employees, by a further three days, with grade 8 employees and above having 25 days’ leave a year; employees will also be entitled to overtime compensation in some cases, have the option to work remotely and receive ticket allowances for all offspring under the age of 21.

In a move to boost customer numbers, Dubai Parks and Resorts have teamed up with Emirates to offer a special two-day access to all four of its theme parks for only 42% of the price. The offer is open to anyone with an Emirates booking.

As part of a new phase of last July’s code-sharing agreement, Emirates and flydubai will utilise the same customer loyalty program, Skywards, from next month. To date, the airlines have a joint network of ninety shared destinations in 48 countries, with a 220 target by 2022.

By acquiring a further 40% stake in Airport Handling, dnata becomes a majority 70% shareholder in the Milan-based ground handler. It manages the passenger, ramp and baggage services to sixty airlines at the city’s two airports, Malpensa and Linate.  The Dubai-based airport operator, with 300 airline customers in 130 airports, made its first investment in the four-year old company in 2016.

Because of the holy month of Ramadan starting in mid-May, monthly traffic at Dubai International was 3.8% lower, at 6.6 million, than in the same month last year; YTD figures of 36.9 million passengers are 0.1% lower than in 2017, whilst figures for the past twelve months are 2.6% higher at 88.2 million. Monthly cargo traffic of 221.4k tonnes was 4.9% down, with YTD returns 3.1% off. Although flight movements have fallen by 5.6% to 32.6k, efficiency has improved, with each flight taking 2.0% more passengers – 209 per flight in May; YTD, a fall of 3.5% resulted in 169k flight movements over the past five months.

It is reported that local ride-hailing service Careem is in talks with Uber about possible collaboration that could take many forms. Uber could try for an outright 100% bid or be satisfied with a majority shareholding or Careem could manage the local business. Uber has been cutting back on business interests outside its core markets in anticipation of a 2019 IPO. It has sold operations mainly in China, Russia and SE Asia but has also retained a share with Russia’s Yandex NV and holds a 27.5% stake in Singapore’s Grab Holdings. Meanwhile, the Dubai firm is a market leader in almost all the ten countries in which it operates and has a regional presence in seventy locations.

Yet again, Dubai scores well in another global poll. According to a recent study by the Boston Consulting Group, Dubai came in sixth in the world that people would move to for work. Cities ahead of the emirate included first place London, New York, Berlin, Barcelona and Amsterdam.

A BMI Research study expects the ME e-commerce sector to expand 80.7% from this year’s total of US$ 26.9 billion to US$ 48.6 billion by 2022. The region’s top two markets are the UAE and Saudi Arabia, where the 20-39 year-old sector account for 50% and 36% of the total population respectively.

Having just extended its title sponsorship of the Irish Open for four more years, Dubai Duty Free has become an Official Partner to the European Tour. It joins a list of well-known global brands – including BMW, Hilton, Rolex and Titleist – that see major golf events as a beneficial marketing tool.

To facilitate logistics to landlocked African countries, DP World will set up a facility in Ethiopia. Goods will be shipped in and out of that country and then transported from there to inland areas. This development will open a whole new trading link that will be a win-win situation for all stakeholders.

The Central Bank reported that for the first five months of the year, 12.1 million shares were handled by the Clearing Cheque System, valued at US$ 161.3 billion; of that total, 4.27% in numbers (515k) and US$ 7.1 billion (4.43%) ‘bounced’. Over the same period in 2017, 12.9 million cheques, valued at US$ 175.4 billion, were cleared and there were 546k cheques not honoured, totalling US$ 7.9 billion (4.48%).

In April, the Central Bank injected US$ 3.8 million into the banking system, reducing its certificates of deposits to US$ 32.2 billion; a month later, in May, it withdrew US$ 1.9 billion excess liquidity from the local market to restore its CD balance to US$ 34.1 billion.

A Truth Economic Consultancy report shows that the country’s s real estate and construction sector added US$ 94.3 billion to the GDP – up 5.9%, compared to a year earlier; it also accounts for almost 31% of UAE’s GDP. Total bank loans to the commercial and industrial sectors rose by 3.4% in the first five months of 2018 to US$ 211.0 billion, equating to 48% of total bank lending.

The Dubai Financial Services Authority has questioned senior executives, including founder Arif Naqvi as well as co-chief executives Omar Lodhi and Selcuk Yorgancioglu, about the alleged misuse of investor funds at Abraaj. In June, the Dubai-based private equity firm stopped fund raising activities and filed for provisional liquidation in the Cayman Islands. Since then, it has been trying to sell the firm’s assets in an orderly manner including its investment management arm to Colony Capital. However, more pressure on the embattled Abraaj came with news that Colony Capital’s deal to take control of four of the buy-out firm’s funds is facing investor resistance.

This week, the DIFC Courts have ruled against the former deputy chief executive of GFH Capital, David Haigh, who was ordered to repay US$ 6 million plus costs; having led GFH Capital’s purchase of Leeds United in 2012, he was convicted of fraud and embezzlement in 2015. He served two years in prison from 2014 and was subsequently deported from the UAE after being convicted for faking some one hundred invoices, with monies being paid into at least four banks here and in the UK. Sir Jeremy Cooke said in his summing up “the court… is satisfied on the evidence that the defendant is a fraudster who caused to be paid into his own bank accounts and that of his close friend, monies belonging to the claimant.   .   .” GFH will now go to the UK courts to try and enforce the judgement.

The number of H1 traded contracts at the Dubai Gold and Commodities Exchange hit a record level of over 11.3 million, valued at US$ 250 billion. DGCX, a derivatives exchange, is a subsidiary of the DMCC.

ServeU will launch its IPO, and be registered on the Dubai Financial Market, in September. There were no further details relating to the size and value of the listing. The Union Properties’ subsidiary, one of the country’s leading five facilities management companies, is also expecting to double the size of its workforce to 10k over the next two years, as its client base expands along with possible local acquisitions.

It seems that troubled retailer, Marka, which has suspended trading on the DFM since late April, will not resume until at least 04 September at which time a restructuring plan will be discussed at a shareholders’ meeting. Since its 2014 establishment, the company, which has exclusive Gulf rights to Real Madrid products, has yet to show any profit returns.

The DFM opened on Sunday (01 July) on 2821, having shed 262 points (8.6%) the previous two weeks, regained some ground, up 59 points (2.1%), closing the week, on 05 July 2018, at 2880. Both Emaar Properties and Arabtec were trading higher on Thursday 05 July by US$ 0.05 to US$ 1.39 and US$ 0.04 to US$ 0.56 respectively. Volumes were lower, trading 226 million shares, valued at US$ 64 million, (compared to 306 million shares, worth US$ 123 million, the previous Thursday – 28 June).

By Thursday 05 July, Brent Crude, having gained US$ 4.80 (6.6%) the previous week, lost some ground down US$ 1.46 (1.9%) to close on US$ 77.39, with gold climbing back, after shedding US$ 52 (4.0%) the previous fortnight, up US$ 8 to US$ 1,259.

Mining giant Glencore is being investigated by US authorities in a money laundering probe relating to business deals over the past decade in Nigeria, Democratic Republic of Congo and Venezuela. The company, which expects to make an annual profit of up to US$ 3.2. billion, saw its share value slump 12% to nearly US$ 4.00, after it was ordered to hand over specific documents.  A day later, the mining giant announced that it would buy back up to US$ 1 billion of its shares – a move that may go some way to placate shareholders who had seen US$ 5 billion written off its market value; shares jumped 4.7% on the news.

After winning a US$ 200 million tank contract with the US Marine Corps last week, BAE Systems has hit the jackpot. It has been awarded a US$ 26.5 billion Australian government contract to build a new generation of warships. Part of the deal is that the frigates will be built down under.

In a two-prong strategy move, Boeing is forming a US$ 4.8 billion 80:20 venture with Brazil’s Embraer SA, that will result in an expansion into the smaller jetliner market, as well as giving it an overseas manufacturing base. It will also help the US company expand into the ever-growing market for 100-seater planes and levels the playing field somewhat with Airbus who, on 01 July, took over control of Bombardier C series jets.

Because of Pratt & Whitney failing to meet an engine delivery deadline, Airbus will supply up to forty less A320neo planes this year and now expects to hand over 170 planes by the end of the year; well-publicised problems have seen a three-month delay that could result in customers claiming penalties. For example, Indigo, the plane maker’s largest customer, with a 430-jet order, has incurred extra costs by having to lease aircraft on short-term contracts. In turn, the Toulouse-based company has had to park planes, without engines, in places such as China, Germany and the US, adding to their costs.

This week has seen the proposed merger between the Indian-owned Tata Steel and Germany’s ThyssenKrupp move a step closer, with the new entity to be known as Thyssenkrupp Tata Steel. The merger will create Europe’s second biggest steelmaker (after Arcelor Mittal) and will lead to a reduction in the combined 48k workforce, in both administration and production; cost savings of up to US$ 580 million are expected. In the UK, Tata employs 4k at its Port Talbot operation and 3k at Deeside. The steel industry will be facing pressure on three fronts – Donald Trump’s introduction of 25% tariffs, dumping by China and the possible fall-out from Brexit.

Although still wearing Nike shoes, Roger Federer has moved his allegiance to Fast Retailing Co.’s Uniqlo, 24 years after signing his first sponsorship deal with the Oregon-based athletic-wear conglomerate. The agreement will see the 36-year old Swiss tennis star earn US$ 300 million over the next decade.

After discovering financial irregularities late last year, Steinhoff International has written off US$ 14.5 billion, emanating from inflated asset deals and other trades “not at arm’s length”. The owner of Conforama in France, Mattress Firm in the US and Kika/Leiner has restated its 2017 figures which saw asset values fall US$ 14.5 billion to US$ 26.1 billion – and the calculation process is still on-going. Little wonder that its shares have fallen 97% since the scandal was discovered and the company is trying to negotiate a US$ 11.0 billion restructuring programme with its creditors. Former chief executive Markus Jooste is being investigated by a South African anti-corruption police unit.

DB, a US subsidiary of troubled Deutsche Bank, was found to have “widespread and critical deficiencies”, as it failed the second part of the US Federal Reserve’s annual stress tests. This news comes after S&P had cut its rating and questioned its plans to return to positive trading. Last month, it did pass a stringent phase 1 test measuring its capital levels against a severe recession. The end result is that the bank, with US$ 133 billion in assets, may cut back on its US operations and that it will need the Fed’s approval to make any distributions to its German parent. Deutsche Bank, has seen its share value fall by over 43% so far in 2018.

June’s IHS Makit Eurozone Manufacturing PMI registered 54.9 – its lowest level in eighteen months – driven by a continued softening in both production and new order intakes. Output and new orders both registered their weakest pace of growth since November 2016 and August 2016, respectively. Consequently, business optimism has slumped to its lowest level in thirty months, whilst the rate of expansion in outstanding business is at a 22-month low. The threat of a trade war will exacerbate the problem of ongoing, weak economic data. Unemployment levels in both the EU28 and the eurozone remain flat at 7.0% and 8.4%, with Czech Republic and Germany posting the lowest levels of 2.3% and 3.4%, with Greece (20.1%) and Spain (15.8%) at the other end of the spectrum.

Strong economic data keeps coming from the US, with the Institute for Supply Management’s June PMI climbing 1.5 to 60.2, partly due to a quickening in production growth from 61.5 to 62.3, whilst the new orders index dipped 0.2 to 63.5. Just as in Europe, there is concern what impact a trade war would have on the economy.

How the mighty have fallen! Worth more than US$ 35 billion only six years ago, Brazilian magnate, Eike Batista, has seen his empire built on oil and mining collapse. He has been found guilty of handing the former Rio governor, Sergio Cabral, US$ 16 million in bribes to secure lucrative projects. It is apparent that his fortune was down to corruption and bribing top officials for their favours.

To ready themselves for an upcoming battle with Amazon, supermarket giants, Tesco and Carrefour, have formed a buying alliance which could result in an annual saving of well over US$ 500 million. The US “invader” spent US$ 14.2 billion last year for niche retailer Whole Foods Market, which already had seven supermarkets within the M25, as well as becoming involved in on-line sales with Morrisons.

The Financial Reporting Council is looking into KPMG’s audit of ex-Bargain Booze owner Conviviality, which went into administration in April. Only last month, the financial watchdog criticised the firm for an “unacceptable deterioration” in the quality of its audits and took the unusual step saying it would inspect 25% more of its audits in the 2018-19 financial year. Earlier in the year, it was also censured over its audit of collapsed construction firm Carillion and, last month, fined over US$ 4 million relating to the audit of insurance firm Quindell.

Turkey’s June inflation level rose by 15.39%, its highest level since January 2004, driven by a slumping currency and hikes in transportation (up by 24.26%) and food products such as non-alcoholic beverages rising 18.89%. The Central Bank has lifted its 2018 forecast to 8.4% but expects a dip next year to 6.5%. Consequently, it is all but inevitable that there will be a rate hike, that could be as high as 100 bp (1%) later this month.

Theresa May will have all her cabinet locked up for the day tomorrow as she tries to agree a united blueprint for the UK’s relationship with the EU post Brexit. This week, several major players have gone out of their way to warn of the catastrophic impact that leaving the EU will have on the UK economy. This is almost a rerun of the many establishment disaster-day comments made before the referendum including Mark Carney’s warning that the risks of leaving “could possibly include a technical recession”; the then Chancellor, George Osborne said that leaving the EU would tip the UK into a year-long recession, with up to 820k jobs lost within two years.

Now, we have the ADS chief executive, the Jaguar boss and the Airbus chief executive all scare-mongering with dire warnings once again. Paul Everitt has said that a no-deal Brexit would be a “worst case scenario”, that could ground aircraft made with UK-made parts. Ralf Speth, of the country’s biggest carmaker, has also warned that a “bad” Brexit deal would threaten US$ 106 billion worth of investment plans for the UK and may force it to close factories. Paul Enders has indicated that the plane-maker could leave if the UK were to leave the single market and customs union without a transition deal.

This is just what the government wants to hear to “soften up” the electorate that has been bamboozled by both sides of the argument. On 27 June 2017, almost one year after the referendum, this blog wrote about Mrs May that:

This his time last year, she was steadfastly in the “Remain” camp but soon moved her position to appear pro-Brexit. The same can be said of her cohort, Chancellor Phillip Hammond as both canvassed for a “Hard” exit after the referendum. Now it looks as if the debate will go full circle and both turncoats will opt for a very soft Brexit resulting in the UK retaining more than one foot in the EU – so much for the PM’s battle cry of “no deal is better than a bad deal”

Since then nothing seems to have changed and the government is no further down the road with its Brexit plans. Instead of worrying about their political careers, it is about time some politicians considered their electorate and the UK population.

Contrary to popular belief, the UK service sector continues to gain momentum with the latest HIS Markit CIPS PMI increasing 1.1 to a healthy 55.1 – the 23rd consecutive month it has stayed above the 50 level which marks the difference between growth and contraction. Positive influencers were the general upturn in demand, a rapid increase in new business inflows and improved economic conditions. Even the Bank of England governor has more confidence in the economy, indicating that weak Q1 figures were down to the weather, and that household spending and sentiment had “bounced back strongly”. With the favourable weather conditions and England’s progress in the World Cup, the feel-good factor will feed into July results, moreso if the team goes all the way – Football’s Coming Home!

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White Flag

There seems to be no stopping Azizi Developments, as it announces that it will deliver five additional projects in the Al Furjan community by the end of this year – having already handed over twelve projects. The extra five – Shaista Azizi, Samia Azizi, Azizi Star, Farishta Azizi, and Azizi Plaza – will add a further 1.7k residential units and bring the developer’s total to over 3.6k, valued at US$ 1.1 billion.

It is reported that the Jumeirah Group is planning to add the Burj Al Arab brand to its portfolio; based in global gateway cities, the first will probably be located in Europe, where some room prices could be in the US$ 2.2k bracket. The Burj itself is to undergo renovation in the summer of 2019. The Group is scheduled to open six new Asian hotels, including in Bali, China and KL, over the next three years, and will see two new properties – next to Jumeirah Beach Hotel and in Abu Dhabi – later this year.

Emaar Hospitality has signed an agreement to expand into the Sub-Saharan Africa’s hospitality market, with its first deal being to operate the 256-key Address Hotel 2 Février Lomé Togo. The Emaar Properties’ subsidiary has also signed five other international agreements – in Bahrain, Egypt, Saudi Arabia, The Maldives and Turkey.

Over the next two years, Novo cinemas expect to open 19 new cinemas across the region, that will see a 26.6% increase in the number of screens to 200 by 2020.

Apart from a place next to Sepp Blatter, the Fairmont Dubai has probably the most expensive seats to view the World Cup Final on 15 July. At a cost of US$ 27.2k, guests can stay in the 548 sq mt Imperial Suite which will be transformed into a grass football field. The six guests will be picked up in a stretch limo, watch the game on a103” LED TV and have their dedicated butler, barman and chef, along with a photographer, available 24/7. After the match, they will have their own VIP table at the hotel’s circus-themed club Cirque Le Soir. Celebrations begin next day, with a live-breakfast station in their own jacuzzi area, and continue into the morning before their afternoon departures in a range of super cars, including McLarens and Lamborghinis.

In 2015, jeweler, Ramachandran, with debts of US$ 150 million, was forced to close thirty of his 48 Atlas shops and served two years in jail. The former film actor has seen the value of his company jump 26% this month alone and has indicated that he has received investment proposals from several private equity parties, who would also pay off his debts. He now plans to open up to ten stores, over the next two years, with the first one in Dubai.

It is likely that some Etihad pilots will be joining Emirates on a two-year secondment which would entail them receiving their salary and benefits, per an Emirates package, but retaining their Etihad job ranking on their return. This move allows both airlines more flexibility in managing their pilot resources at a time when Etihad is restructuring its business model that have resulted in closing some routes and reducing its freighter fleet. It is inevitable that more cooperation between the carriers will continue to take place.

As from 31 March next, year, Virgin Atlantic will no longer operate its London-Dubai route because it has become economically unviable due to a combination of factors.

July fuel prices are set to drop on Sunday, with Special 95 down US$ 0.016 (2.4%) to US$ 0.668, whilst diesel will retail US$ 0.136 lower at US$ 0.725.

In a move that will boost its current level of supplying 2.8 million US gallons of jet fuel daily, Emirates National Oil Company has signed a strategic partnership with Australian-based Raven Energy. The deal will see ENOC expanding its Nigerian operations, as well as enhancing infrastructure in the UAE and improving productivity.

The Dubai World Trade Centre Authority has announced up to 70% reductions on licensing and incorporation fees in a bid to boost business growth; the state-owned convention centre also hopes that it will benefit inward FDI (foreign direct investment).

Figures from the Knowledge and Human Development Authority (KHDA) indicate that Dubai private schools’ 2017 revenue, from tuition fees, was 10.3% higher at US$ 2.0 billion, and 59.6% up from returns five years ago. Although the average school fee is US$ 7.3k, there are some – including GEMS World Academy, King’s School Nad Al Sheba and Repton – charging over US$ 27.2k, with the most expensive being the recently opened North London Collegiate School at fees up to US$ 35.4k. The 194 private schools have an “occupancy rate” of 85.3%, with 281.4k enrolled students. Five countries – India (33.9%), UAE (10.9%), Pakistan (8.0%), Egypt (5.5%) and UK (4.7%) – account for 177.4k (63.0%) of the private student population. When it comes to higher education, enrolments last year were 4.8% higher, with 30.4k students attending the emirate’s thirty-two free zone universities.

To the surprise of some, Dubai has fallen seven places and is now the 26th most expensive location according to the latest Mercer ‘Cost of Living’ survey. It estimates that a two-bedroom apartment monthly rental in Dubai is US$ 3k, compared to New York (US$ 5.7k) and London (US$ 4.3k). One of the main reasons for the decline is attributable to the softening US$ last year. The survey also concludes that because of the lower cost of living, the emirate will continue to attract top talent from around the world. Hong Kong, Tokyo, Zurich, Singapore and Seoul are the top five countries, based on cost of living.

Dubai family conglomerate Majid Al Futtaim has signed a US$ 13 billion JV with the Oman Tourism Development Company to develop a mixed-use community in the western area of Madinat Al Irfan. The development, which will see 30k jobs created in the country, will encompass 11k residential units, 100k sq mt of retail and 700k commercial space. The massive project, to be built in three phases and covering 4.5 million sq mt, will take twenty years to complete.

After divesting the bulk of its investment business to Colony Capital, Omar Lodhi and Selcuk Yorgancioglu, the co-chief executives of Abraaj Investment Management (AIML), have stepped down from the board of the unit. There are also reports that a Sharjah-based prosecutor has issued a warrant against the founder, Arif Naqvi, currently in the UK, in relation to bounced cheques issued as a security for two loans – one for US$ 54 million to the firm and the other for US$ 27 million to the founder – both from the UAE-based Al Jafar family. The case is expected to be tried in his absentia and a conviction could lead to a jail term. He is charged along with fellow director, Muhammed Rafique Lakhani,

The court liquidator is also seeking funds to arrange payroll payments, that could total up to US$ 20 million, to the firm’s ninety employees. On top of that, there are bound to be other indirect overheads that require settlement.

As it tries to consolidate its market position, Amanat is reportedly buying troubled Abraaj’s share in Middlesex University’s Dubai campus for around US$ 100 million. If the sale goes through, Amanat would have 100% ownership in the 13-year-old asset, with 3k students, that has annual revenue of around US$ 40 million. Later in the week, the GCC’s largest healthcare and education investment firm also completed the purchase of London Collegiate School (NLCS) Dubai for US$ 98 million from the Sobha Group; it also committed a further US$ 12 million to its future expansion plans. The Dubai-based firm also has 35% in Abu Dhabi University Holding Co and 21.7% in Taaleem Holdings and has a reported war chest of US$ 490 million to spend in the regional healthcare and education sectors.

Shuua Capital’s board has agreed to repurchase 10% (US$ 30 million) of its shares in order to reoffer them. The Dubai-listed investment firm has a market value of US$ 313 million and posted a 52.9% decline in Q1 profit to just over US$ 3 million.

Monday was a bad day for both the local bourse and Drake & Scull. The DFM shed 2.1% to close at 2868 – its lowest level since January 2016 – whilst the troubled contractor saw its share value slump 10% on the day, the maximum daily decline permissible. Some analysts are of the opinion that stocks, which in the main are attractively valued, are being dragged down because of issues involving corporate governance and a lack of transparency.

The DFM opened on Sunday (24 June), having shed 155 points (5.0%) the previous week, lost a further 107 points (3.7%), closing the week, on 28 June 2018, at 2821; over the past year, the bourse has lost 12.2% in market value. Both Emaar Properties and Arabtec were trading lower on Thursday 28 June by US$ 0.08 to US$ 1.34 and US$ 0.04 to US$ 0.52 respectively; over the past twelve months, these stocks have lost 31.22% and 32.77% respectively.  Volumes were flattish, trading 357 million shares, valued at US$ 97 million, (compared to 306 million shares, worth US$ 123 million, the previous Thursday – 21 June).

By Thursday 28 June, Brent Crude, having declined US$ 9.22 (6.0%) the previous five weeks, headed in the other direction up US$ 4.80 (6.6%) to close on US$ 78.85, with gold continuing on its slippery slope, down another US$ 20 (US$ 32 the previous week) to US$ 1,251.

At last Friday’s meeting, OPEC agreed to cut the compliance level to the production-cut agreement from May’s 152% to 100%; in effect, it gives the cartel flexibility to boost production levels but no specific figures were made available. A day later, non-OPEC producers endorsed a nominal output increase of one million bpd, equivalent to about 600k.

21st Century Fox won US Department of Justice approval to acquire Disney, subject to Disney selling 22 regional sports networks, now owned by Fox. Its rival Comcast could still gazump Fox’s US$ 71.3 billion bid, with the cable and media conglomerate considering a potential partnership to up the ante.

Even the country’s largest coffee chain, with 2.4k shops, Costa is serving fewer customers, as the falling numbers on UK high streets continue to bring misery to many retailers. The coffee chain, owned by Whitbread, reported a 2.0% decline in Q1 like for like sales, although revenue was 5.2% higher because of new openings. It joins many other big names, with falling revenue – including Byron, House of Fraser, Jamie’s Italian, Maplin, Marks & Spencer, Mothercare, New Look, Poundworld, Prezzo and Toy R Us, all of which have closed outlets or shut down completely.

Three other retailers have joined this long list. As part of its company voluntary arrangement, the House of Fraser has received 75%+ creditors’ approval to close 31 of its 59 stores, resulting in 6k job losses, 2k which will be direct staff and 4k across brands and concessions. There is every possibility that C,banner, owned by Hamleys, will buy 51% of the “new” business and invest US$ 94 million in a move that has annoyed some landlords; they argued that they will take the biggest financial hit amongst stakeholders, with the new arrangement favouring the retailer that will have a new lease of life with this investment.

Since arranging a Company Voluntary Arrangement in April, Carpetright has begun to close 81 of its stores and also raised a further US$ 87 million from shareholders. This week, the UK retailer posted an annual loss (to 28 April) of US$ 95 million, with like for like sales 3.6% lower. The underlying loss came in at US$ 11 million (when one-off restructuring costs are taken off), compared to the previous year profit of US$ 19 million; its net debt was 540% higher at US$ 71 million.

John Lewis Partnership, including John Lewis and Waitrose, is also warning that H1 profits may be “close to zero” after posting a US$ 35 million surplus last year. The Group will close five of its 353 Waitrose operations but retain its 50 John Lewis department stores.

One of India’s biggest property developers, Ireo Management, has been accused by two high profile hedge funds of a US$ 1.5 billion fraud. It is alleged that its MD, Lalit Goyal, created a web of shadow companies to siphon money from funds in what could be one the country’s largest ever private equity scams. Some of the investors involved include the UK’s Axon and Children’s Investment Fund Foundation, Notre Dame University and Stanford University.

The Indian rupee is on some kind of free-fall (driven by the hike in energy prices and the global sell-off in emerging markets) and the signs are not looking good for an early improvement. With the currency falling a further 0.7% on Thursday (28 June) to 69.09 to the greenback, bonds were hit, as the benchmark 10-year yield jumped to 7.93%. As the country, the third highest global oil user, imports nearly 70% of its fuel needs, any price increase will have a negative impact on its current account with a net capital outflow. It is estimated that a US$ 10 hike in fuel prices will see India’s GDP contract 0.4% and inflation rates 0.4% higher.

It has indeed been a volatile and eventful six months and from the table, it can be seen that of the 17 listed economic indicators, only four have headed north, with the most notable being the 19.2% increase in Brent. The other three were coffee, the S&P 500 and the ASX All Ord – up by 9.6%, 1.6% and 1.9% respectively. The biggest losers were Bitcoin, DFMI, CSI300 and copper – with double digit deficits of 55.8%, 16.3%, 12.9% and 10.3%. As can be seen, this blog expects minor improvements almost across the board over the next half year. Time will tell.

Forecast  
31 Dec 18 Unit 30 Jun 18 31 Dec 17 31 Dec 16 31 Dec 15 31 Dec 14
1,365 Gold US$ oz 1,254 1,305 1,151 1,060 1,186
67.50 Iron Ore US$ lb 64.80 71.28 75 47 73
84.00 Oil – Brent US$ Bar 79.44 66.62 56.82 36.40 57.33
115.50 Coffee US$ lb 114.90 126.2 133 124 161
89.50 Cotton US$ lb 86.03 78.5 69 64 62
17.00 Silver US$ oz 16.16 16.99 16.00 13.82 15.77
3.05 Copper US$ lb 2.96 3.30 2.48 2.14 2.88
0.77 AUD US$   0.74 0.78 0.72 0.73 0.81
1.34 GBP US$   1.32 1.35 1.24 1.48 1.53
1.15 Euro US$   1.17 1.20 1.05 1.09 1.21
0.015 Rouble US$   0.016 0.017 0.016 0.014 0.017
7,600 FTSE 100     7,637 7,688 7,142 6,242 6,548
3,450 CS1300     3,511 4,031 3,310 3,731 3,532
2,680 S&P 500     2,718 2,674 2,238 2,044 2,091
3,050 DFMI     2,821 3,370 3,531 3,151 3,774
6,200 ASX All Ord     6,290 6,171 5,665 5,345 5,415
6,150 Bitcoin US$   5,791 13,081 998 427 302

In its attempts to control leverage and encourage SMEs, China’s central bank has reduced the required reserve ratio for some financial institutions by 0.5%, equivalent to US$ 108 billion extra cash being made available to the market. This move will give a boost to the economy at a time when there are indications that it is slowing, as a result of US trade sanctions and the government’s policy to clean up the shadow banking sector.

Greece has finally convinced its eurozone creditors for more time to repay a US$ 115 billion debt, with little or no interest, as well giving the country a stop-gap US$ 18 billion loan to help in paying its bills. It has been the recipient of three separate bailouts since 2010 because of continuous massive budget deficits and has faced a series of tough economic reforms and unpopular austerity measures. Although the EU seem to be patting themselves on the back, the country still has problems with 20%+ unemployment, debt equivalent to 180% of GDP and the IMF expressing worries about the long-term situation.

Having borrowed US$ 465 billion from the ECB, at a current minus 0.4% rate, eurozone banks are expected to pay back only US$ 12.8 billion (2.75%), two years ahead of schedule. The idea of the four-year loan facility (known as a targeted longer-term refinancing operation) was to pay the banks a small amount of interest as long as they met their quota of loaning to the real economy. The 2016 TLTRO, the ECB’s second encompassing four tenders, was part of a strategy aimed at fighting off the threat of deflation and boosting growth. It has turned out to be a long and expensive exercise with the banks, once again, the only real winners.

Following a 3.7% decline last month, US new home sales bounced back in May to an annual 6.7% rate of 689k, (with market expectations of only 1.5%), driven by a 17.9% surge to 409k in the South. Median sale prices at US$ 313k were down 1.7%, month on month, and 3.3% on an annual basis.

Driven by several key factors – including its economic diversity, policy flexibility, resilience and the fact that it is the issuer of the world’s leading reserve currency, S&P has affirmed the US ‘AA+’ sovereign credit rating. Whilst pointing out certain difficulties, such as slower decision-making, caused by disagreements across and within the two political parties, as well as the high level of public debt, the agency still forecasts growth this year at 3.0%. Despite all the hot air arising from the President working towards fairer global trade agreements, with the resultant uncertainties and tensions, the agency also expects the general pattern of trade in goods and services will remain broadly unchanged.

The latest salvo in the trade war sees the US threatening a 20% duty on EU imported cars, unless the bloc removes import duties and other barriers to US goods that saw US$ 3.3 billion tariffs placed on US imports to the EU. Last year, the US imported up to US$ 50 billion in vehicles and auto parts from the EU, with almost half from Germany and 18% from the UK.

The 117-year old Harley-Davidson company has upset the US President by announcing plans to move more of its manufacturing overseas. It seems a short-term solution (and a possible excuse to move jobs overseas) as the motorcycle producer is using the higher steel costs (as a result of the Trump tariffs) as well as retaliatory action, making their bikes more expensive in overseas markets, as the main factors for the decision. For example, the EU has hit the company with a 31% extra duty (up from the earlier 6%) which pushes the average price in Europe up by an additional US$ 2.2k. However, if one assumes that the situation is a short-term problem, and that moving production lines can take up to eighteen months (and a probable US$ 100 million), then one has to question their reasoning. No wonder that the President tweeted his surprise that “Harley-Davidson, of all companies, would be the first to wave the White Flag.”

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Whatever It Takes!

Revolution Precrafted has signed an agreement with Bahrain’s Property One Investment Company to supply five hundred modular “eco-villas” for its development on The World Islands. It is estimated that the 4-B/R villas, measuring up to 200 sq mt, will have prices starting at US$ 320k and all should be completed by 2023. The Filipino company already has a massive US$ 3.2 billion contract with Seven Tides to supply and install 2-3 B/R condominium apartments and villas in the same Dubai-offshore location.

Despite the dismal news surrounding the realty sector, Danube reported that almost 85% of its recently launched Jewelz project has been sold. Work on the US$ 81 million development of 393 studio, 1-2 B/R units will start in Q3 and is expected to be completed within two years. Jewelz takes the developer’s total portfolio to 3.7k units (valued at US$ 855 million), of which 22.5% have been handed over, with a further 23.6% to be delivered by year-end.

The latest Rove hotel is to be built in Dubai’s newest beachfront – La Mer. Located in Jumeirah, the 366-key property, a JV between Emaar Properties and Meraas, will be ready in time for Expo 2020.

Jumeirah Group has unveiled a new strategy for its F&B sector that will see the appointment of Michael Ellis in the new position of chief culinary officer. The former Michelin Restaurant and Hotel Guides executive’s brief is to launch new restaurant concepts, introduce culinary talent and enhance/freshen existing outlets.

EY’s latest report points to continuing high occupancy levels in Q1 for Dubai hotels, up 0.8% to 86.9%, with healthy average room rates and RevPAR figures of US$ 293 and US$ 255. Beach-side properties performed even better, with ARR levels topping US$ 559.

With 15.8 million visitors last year, Dubai has secured fourth place in the world when it comes to tourist numbers. It expects to top 20 million by the time Expo starts in 2020 which would indicate an annual 8.2% growth level in numbers over the next three years.

Dubai’s commitment to alternative energy sources is apparent by the fact that the emirate has already committed nearly US$ 5.5 billion to solar power development, with a further US$ 8.2 billion forecast to be spent over the next decade. DEWA has estimated that the emirate will require a production capacity exceeding 42k MW of clean and renewable energy by 2050, of which 5k MW will be provided by the Mohammed bin Rashid Al Maktoum Solar Park within a decade. Meanwhile, FEWA (the Federal Electricity and Water Authority) is to build a 45 million Imperial Gallons per Day (MIGD) Sea Water Reverse Osmosis (SWRO) project to help secure future water supply.

DP World seems intent to go down the legal route – and is not considering an out of court settlement – in its spat with the government of Djibouti over control of the port at Doraleh. There is an ongoing case being heard by the International Court of Arbitration in London, relating to the 2006 concession agreed by both parties.

The ports operator is again active on the world stage – this time, announcing terms of the next Canadian expansion in its Prince Rupert Fairview Container Terminal. Last year, phase 2A saw the terminal’s capacity increase by 58.8% to 1.35 million twenty-foot equivalent units and over the next four years this will rise to 1.8 million TEUs, as well as result in a 37.1% hike in on-dock rail capacity to 24.7k sq ft. This new infrastructure will see Dubai investment boost Canada’s trade and economy – a pity that the country does not make use of similar Dubai-based investment opportunities such as additional Emirates’ links.

Temasek Holdings, one of Singapore’s giant sovereign wealth funds, is reportedly looking at a joint bid with EQT, the Swedish private equity firm, to acquire Cognoita. The UK-based schools’ operator, valued at US$ 2.7 billion and with forty UK schools along with others overseas, is also attracting reported interest from other rivals, including GEMS and Nord Anglia Education.

HSBC is to open its new US$ 250 million Dubai HQ next month, located in Downtown. HSBC Middle East had earlier transferred its place of incorporation and head office from Jersey to Dubai.

The Central Bank has stepped in to cap fees on 43 different types of bank charges, including set maximum limits on home loans and late fees for credit cards, in the latest government move to attract foreign investment and diversify the economy from a reliance on oil revenues. Some would say not before time.

In 2017, the UAE grabbed 67.0% (US$ 10.35 billion) of the GCC’s “pie” when it came to total foreign investments, followed by Oman (12.1%) and Saudi Arabia (9.2%). The country came second among investment attractors, equating to 23.3% of foreign investments, which is set to rise, following recent incentive measures introduced by the government.

Not renowned for their accurate forecasts, the IMF expects the country’s growth to be 2.0% this year and then an annual 3.0% for the ensuing four years. Over the next five years, it is forecast that UAE’s GDP, at constant prices, will grow 16.1% from US$ 389.6 billion to US$ 452.3 billion. The world body estimates that inflation will stabilise to a manageable 2.2%.

Depa Interiors has been awarded a US$ 22 million Saudi Arabian contract to implement a large transport project. This is the second such deal in that country for the Dubai-based company but no further details were made available.

Dubai-listed Air Arabia saw its share value fall over 7% on the first day of trading, following the Eid break, on the back of concerns of the budget airline’s exposure to troubled Abraaj. Confirming that it “has an investment in Abraaj funds”, the Sharjah-based carrier, which has the asset manager’s founder, Arif Naqvi, on its board, confirmed that it had appointed a team of experts, who are actively engaged with all stakeholders and creditors involved with the matter to ensure Air Arabia’s investment and business interest is protected.”

The Grand Court of the Cayman Islands has approved a provisional liquidation of Abraaj Group that should go a long way to ensuring the protection of stakeholders’ rights. Liquidators from PwC and Deloittes have been appointed to manage Abraaj Holdings and its fund management business respectively, in a move that should have a minimum impact on the firm’s day to day running. It should also help in an orderly disposition of assets, rather than a liquidation-triggered fire sale.

Colony Capital has agreed to buy Abraaj’s Latin America, sub-Saharan Africa, North Africa and Turkey Funds management business, as well as to oversee the group’s funds that it is not acquiring. This is just part of the troubled firm’s liquidation and restructuring plan, following court action by stakeholders in the Cayman Islands. The firm, that once managed more than US$ 14 billion of assets, has debts estimated at over US$ 1 billion.

The DFM opened on Monday (18 June), after the Eid holiday break, at 3083, and, having gained gaining 262 points the previous six weeks, lost 155 points (5.0%), closing the week, on 21 June 2018, at 2928. Not surprisingly then, to see both Emaar Properties and Arabtec trading lower on Thursday 21 June by US$ 0.12 to US$ 1.42 and US$ 0.06 to US$ 0.56 respectively. Volumes were higher, trading 306 million shares, valued at US$ 123 million, (compared to 131 million shares, worth US$ 82 million, the previous Thursday – 14 June).

By Thursday 21 June, Brent Crude, having declined US$ 3.4 (2.2%) the previous three weeks lost a further US$ 2.91 (3.8%) to close on US$ 73.05, with gold sinking US$ 32 lower to US$ 1,271.

With oil producers meeting this week to discuss lifting output quotas and the impact of US trade sanctions taking effect, the price of oil has plummeted. The big players, including Saudi Arabia and Russia, were looking for increased oil production, whereas the likes of Iraq and Venezuela want the status quo to remain. On the trade front, US has introduced US$ 50 billion of tariffs, scheduled to start early next month, with China responding in kind.

There was more bad press for Tesla, with news that one of its electric vehicles burst into flames on Santa Monica Blvd in Los Angeles and that it was investigating “an extraordinary unusual occurrence”. Unfortunately, the car was being driven by high profile UK TV director, Michael Morris, and there was instant and dramatic video available. Meanwhile, Elon Musk has accused one of his employees of “extensive and damaging sabotage” who forwarded sensitive data to unnamed third parties and also made unspecified coding changes to its manufacturing operating system. The company is also to lay off a further 3k employees – equivalent to about 9% of the payroll; the retrenchment will not affect factory workers but will focus on salaried staff.

In a shock move, Rupert Stadler, Audi’s chief executive, has been arrested in relation to an on-going investigation into the diesel emissions scandal. Munich prosecutors took this step, as they considered that the executive may suppress evidence. Last year, 850k Audi vehicles were recalled and, only last month a further 60k A6 and A7 models were found to have emission software issues.

Lufthansa is the latest airline to show interest in acquiring Norwegian Air Shuttle ASA, only weeks after BA’s owner, IAG SA, bought a 4.6% stake in the fast-growing Scandinavian discount carrier. With a market value of US$ 1.5 billion, and having already rejected two bid approaches from IAG, the airline, which has extended its low-cost operations to the Americas and Asia, will not be short of interested suiters.

As expected, Rolls Royce is to retrench 4.6k, with its Derby base and middle management level being the main targets. The engineering firm has intimated that the process, that will cost US$ 675 million, will take up to two years to carry out and that it will be concentrating more in the future on civil aerospace, defence and power systems. Once implemented, there will be expected annual cost savings of US$ 540 million.

CYBG, the owner of Clydesdale Bank and Yorkshire Bank, is to pay US$ 2.3 billion to acquire Virgin Money, which will result in it becoming the UK’s sixth largest bank. As a result of the deal, Virgin Money shareholders will own 38% of the new entity, which will shed 13.6% of the current workforce to reduce numbers to 9.5k.

The company Iceland, with 905 UK stores, is not performing as well as Iceland, the football team. Owing to a slowing grocery market, rising staff costs and increased competition, it expects H1 earnings to be lower than in 2017. The supermarket chain noted that although overall revenue levels in the year to 30 March grew 8.0% to US$ 4.1 billion, like for like sales actually contracted. However, it does expect that Q3 will see a “strong scope for profit recovery”. Meanwhile, Tesco, with a 27.7% market share, posted a 1.8% underlying growth figure – its strongest performance since 2011 – on the back of lower prices.

For the third time this year, Debenhams, which runs 182 shops, has issued a profits warning – this time that pre-tax profits will be between US$ 47 million – US$ 54 million, well down on earlier US$ 68 million expectations. (Just five years ago, profits were nearly four times higher at US$ 202 million). Despite the introduction of a turnaround plan, that was expected to hike profits by boosting sales and cutting costs, the retailer continues to blame “increased competitor discounting and weakness in key markets” for the trading slowdown.

Shares in Debenhams fell by over 16%, when the news was released but this fall was nothing compared to sportswear retailer Footasylum, whose market value almost halved, after reporting a decline in revenue growth and indicating that profits would be lower, as it doubles the number of stores to 130 and expands online shopping.

The malaise in the retail sector seems set to continue following store closure announcements earlier in the year by House of Fraser, Marks & Spencer, New Look and Mothercare. All the possible negative factors are coming into play at the same time to create the perfect storm. These include competition from online retailers, higher import costs due to the weaker pound, a rise in business rates and squeezed household incomes which have all combined to make times tough for High Street stores.

Political opposition to reforms to the Indian public banking sector is not helping the government’s bid to clean up the activities of the 21 lenders which, one way or another, have a huge US$ 150 billion bad debt burden. The Modi government is planning to privatise Mumbai’s IDBI which last year posted a US$ 1.2 billion loss and has seen its bad debt balance double to US$ 8.1 billion. Earlier in the year, the country’s second largest state-owned lender, Punjab National Bank, was involved in a US$ 2 billion scam involving billionaire diamond jeweler, Nirav Modi. One major problem, that the government may face, would the possible lack of suiters interested in taking over such problem institutions, without any sovereign backing.

In April, there were conflicting data from European trade balances – the Eurozone return was 6.4% higher, at US$ 19.4 billion, than a year earlier but the EU28 (the 28 members of the EU) posted a US$ 1.2 billion deficit, with exports 6.8% higher, at US$ 179.8 billion, and imports also rising 6.6% to US$ 181.0 billion. Eurozone exports jumped 8.0% to US$ 212.3 billion, as imports were up 8.1% to US$ 192.9 billion. Inflation levels in both zones moved higher – eurozone 0.6% higher to 1.9% and the EU28 touching 2.0%. Within the bloc, inflation was the lowest in Ireland (0.7%) and Greece (0.8%) with Estonia’s 3.1% and Romania (4.6%) at the other end of the spectrum.

The latest from the ECB’s President Mario Draghi indicates that there will be no rate hikes until at least Q3 2019 but that it plans to close its bond purchasing programme by year-end. It is noted that the ECB is still trying to reach its 2.0% inflation target, even after five years of drastic monetary policy, but now expects to hit the mark in 2020.

May was a stellar month for US privately-owned housing starts which rose 5.0%, month on month, to 1.35 million – and a massive 20.3% higher than a year earlier. When it comes to completions, the May figure of 1.291 million was 10.4% higher than in May 2017.

It seems that the trade war has started in earnest, with the EU planning to implement US$ 3.2 billion worth of tariffs next week which sees some US imports, (ranging from agricultural goods to motorbikes), being subject to a 25% tariff; this is in retaliation to the earlier 25% and 10% levies on EU aluminium and steel imports. The European bloc is also considering the feasibility of imposing further tariffs totaling US$ 4.2 billion “at a later stage”.

China responded aggressively to Trump’s decision to push ahead with hefty duties on US$ 50 billion of their imports. One of many sectors that will receive more than a slap in the face is oil; this follows recent growth that has seen a tenfold increase, over the past eighteen months, to US$ 1 billion a month. With US petroleum becoming more expensive in China, expect OPEC (and maybe Russia) to jump in to fill the breach – and global energy prices to head north.

Last year, the US trade deficit widened to its biggest annual level since pre-GFC in 2008, ending the year with import values being US$ 566 billion higher than export levels (and 12% higher compared to a year earlier). Actually, the shortfall for goods was US$ 810 billion offset by a US$ 244 billion trade surplus in services.

A perusal of three of the leading trading blocs – China, The EU and Japan – will put the problem in perspective when they respectively account for US$ 375.6 billion, US$ 151.3 billion and US$ 68.9 billion, equating to US$ 595.8 billion (73.6%) of the trade deficit for goods. US exports to these three blocs of US$ 480.8 billion were a long way short of their imports totalling US$ 1,076.6 billion.  Who can blame Donald Trump for wanting to reduce this to a more manageable and equitable level? It seems most of the world!

It is rather ironic that the Xinhua news agency, in a rare attempt at sarcasm, commented that “the wise man builds bridges, the fool builds walls”. It is about time that the nation, responsible for building the Great Wall, takes a more even-handed and pragmatic approach in its trade dealings, especially with the US. There is no doubt that the situation has deteriorated and that nobody really wins from a trade war. To solve this impasse, all stakeholders should do Whatever It Takes!

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Peace Will Come According To Plan

With three projects – Binghatti Crystals, Binghatti Vista and Binghatti Jewels – due for completion this month and a further three (Binghatti East and West, Binghatti Sapphires and Binghatti Stars), ready by year end, the developer will have completed a credible US$ 300 million worth of projects. Before the end of 2020, Binghatti Developers hope to have handed over more than fifty other developments, with a value of US$ 1.6 billion.

An Arabtec subsidiary has been awarded a MEP works contract in Emaar’s Dubai Creek Harbour Development by the main contractor, AFC. Creek Horizon Plot 19, comprising 130k sq mt, will feature 550 contemporary apartments and should be ready for hand-over by Q1 2020.

The RSG Group has appointed Al Habbai Contracting for its 54-floor SZR building to be completed prior to Expo 2020. The US$ 136 million Sabah Rotana development will comprise a five-star hotel and hotel apartments.

Damac has awarded a US$ 20 million road and infrastructure contract to China State Construction Engineering Corporation, in relation to its massive Akoya Oxygen project which brings the total spend on this particular project to US$ 1.5 billion. Located adjacent to the Tiger Woods-designed Trump International Golf course, the development encompasses 55 million sq ft, with the first residents moving in by year-end.

Nakheel has received eleven proposals for the construction of its twin building residential complex at Dragon City, the lowest of which is US$ 177 million. Linked directly with Dragon Mart, the project will encompass 1,142 1-2 B/R apartments and is slated for a 2021 completion. The developer also announced an 80% completion of the construction of the third expansion at Dragon City – a US$ 46 million showroom and car park complex.

Wade Adams Contracting has been awarded a US$ 122 million Nakheel contract to build a 12-lane, 600 mt bridge connecting Deira Islands (the developer’s new15.3 sq km waterfront city) with the mainland. Work has already started and should be completed within two years.

There will soon be yet another tourist attraction for the emirate – the Dubai Wharf Green Wall, the region’s largest living green wall. The vertical garden, 210 mt long and six mt high, will feature 80k plants with a leaf canopy area equivalent to that of 200 trees. The Dubai Properties’ development, located in the heart of Culture Village, aims to promote sustainable living and will offset an estimated 4.4 tonnes of carbon dioxide annually.

DIFC is to build a state-of-art mosque in Gate Avenue, the heart of its new premium urban retail, leisure and cultural development. Covering 14.5k sq ft, the mosque will offer a modern, non-conformist facility that will host up to 500 worshippers.

Al-Futtaim Automotive International has announced that it has bought a plot of land in Faisalabad’s M-3 Industrial City to construct an assembly plant, capable of building 50k Renault vehicles annually.

A recent CarSwitch report (of 7k seller requests) confirms that Toyota and Nissan – each with an 11% market share – are the most popular car makers when it comes to resales; Ford (8%) and BMW (7%) come ahead of Mercedes. The most popular used car for sale continues to be the Mitsubishi Pajero, with a 3.6% share, but not surprisingly, Toyota models – Civic, Corolla, Camry, Prado and Yaris – take five of the top ten spots in the survey. A further breakdown sees sedans (47%) and SUVs (45%) dominate the used car market which at the end of the school year traditionally reaches its peak.

Last year, Dubai World Trade Centre’s events added US$ 3.4 billion to the emirate’s economy, equating to 3.3% of GDP; the location also captured 56.4% of the total return of major events held in Dubai which totalled US$ 6.0 billion – an 8.0% increase on the previous year. The growing importance of the MICE (Meetings, Incentives, Conferences and Exhibitions) sector to the Dubai economy can be seen from the fact that for every US$ 1 spent in this sector, US$ 4.31 is generated in overall non-trade business activity; furthermore, by supporting 84.2k jobs over the year, DWTC events also produces disposable household income of US$1.1 billion.

In its latest attempt to try and boost the economy, by reducing the cost of doing business in the emirate, the government is to cut Dubai Municipality fees on sales at local restaurants and hotels from 10% to 7%. Some properties in the sector, which adds 4.6% (US$ 40.9 billion) to the national economy, are indeed struggling as RevPAR (revenues per available room) dip for the fourth straight quarter. This follows recent decisions that have seen a 50% reduction in DM’s “market fees” and the freeze on private education fees.

In another bid to stimulate business growth and economic development in the emirate, the Department of Economic Development (DED) has launched a package to help businesses clear fines and renew licences in monthly instalments, rather than in one ‘hit’. This new initiative – which also includes giving businesses the ability to freeze their trade licence for a year, as well as seek amicable settlements with the DED for commercial violations – comes a month after companies were granted exemption from administrative fines for the rest of year. There is no argument that the local economy has gone through a troubled recent past, but recovery has already started with the UAE’s growth this year likely to be 2.7% (up from 1.5%) and 3.1% in 2019.

To reduce corporate costs further, the UAE cabinet has adopted a number of strategic decisions over foreign workers’ insurance in the private sector, as well as introducing measure in relation to the issue of visas. The mandatory US$ 817 deposit per employee will be replaced by a new US$ 16 new insurance policy that will allow businesses to recoup US$ 3.8 billion in previously tied-up cash with the bank.

There will be no charge for transit tourists staying for less than 48 hours, with a further two-day extension to cost US$ 13.62. Furthermore, anyone overstaying their visa will have the option of leaving the country voluntarily without a “no entry” passport stamp – and job seekers, who have overstayed their visa but wish to work in the UAE, will have access to a new six-month visa. There will also be the option of adjusting a person’s visa status, for a minimum fee, without the need for leaving the country. as was the case in the past.

Because of the recent government decision to freeze private education fees for a year, GEMS Education is reportedly planning to delay its London IPO. The Group, which includes Bahrain’s Mumtalakat Holding Co, Blackstone, Fajr Capital and founder Sunny Varkey, is studying the impact of the freeze on future earnings.

After three months of decline, Dubai’s inflation pushed above the 2% level in May (2.01%), driven by the introduction of VAT and year on year price increases of 73.4%, 10.8% and 10.1% in tobacco, restaurants/hotels and transportation respectively.

Emirates SkyCargo has signed a deal with Alibaba to deliver packages across its extensive network of 160 destinations, using Dubai as a hub – one of six that the Chinese e-commerce company plans to develop to expand its global reach. The world’s second biggest airline, after FedEx, is set to benefit from the growth in e-commerce, at a time when the global market appears to be dipping. (Meanwhile, neighbouring Etihad reported that it there had been a narrowing of its annual losses last year from US$ 2.0 billion to US$ 1.5 billion, as its cash flow and revenue streams improved on the back of its expansive turnaround plan, introduced by new management in 2017.

Noon, a US$ 1 billion JV e-commerce site between Mohamed Alabbar and Saudi Arabia’s sovereign wealth fund, is to tie up with eBay which will allow its customers greater access to access products internationally. As regional online shopping is beginning to expand, albeit from a small base, this agreement will see Noon capitalise on this growth trend as well as utilise the US company’s marketing and operational experience and expertise. (The Emaar Chairman has also acquired 51% in online fashion retailer Namshi last year, via Emaar Malls Group, but lost out to Amazon to buy Souq.com outright. He has a stake in Middle East Venture Partners, through one of his funds, whilst Noon also bought market platform JadoPado last year).

Last week, it was Kuwait’s Public Institution for Social Security (PIFSS), starting legal action against embattled Dubai-based Abraaj and now Auctus is the second creditor to seek the restructuring of the private equity firm’s liabilities. At the same time, Abraaj, with debts of US$ 1 billion, is reportedly filing for provisional liquidation in the Cayman Islands. The trouble started late last year when four major investors, including Bill & Melinda Gates Foundation, voiced concerns on how money in a US$ 1 billion global billion healthcare fund was being used. With the region’s largest private equity firm, denying any wrongdoing, a Deloitte report points to the firm “comingling” investor money with its own.

Last month, Dubai Islamic, the country’s largest sharia-compliant lender, increased its capital base, via a rights issue, by 19.5% to US$ 8.5 billion. Consequently, a bullish Moody’s report expects the bank’s credit growth to be up 15% this year, giving DIB strong capital and liquidity buffers until at least the end of 2019, with stable liquidity levels of above 20% of tangible banking assets.

The Investment Corporation of Dubai posted a 13.8% increase in 2017 revenue to US$ 54.7 billion which pushed profit 11.6% higher to US$ 6.7 billion. The main drivers behind the impressive returns included contributions from new acquisitions, as well as improved figures from banking/financial services and transport sectors. Over the year, ICD’s assets rose 9.4% to US$ 23.0 billion and liabilities 10.0% up at US$ 4.6 billion.

The DFM opened on Sunday (10 June), at 3042, and, having gained gaining 180 points the previous four weeks, gained a further 41 points (1.3%), closing the week, on 14 June 2018, at 3083. Emaar Properties was up US$ 0.03 at US$ 1.54 whilst Arabtec jumped US$ 0.12 to US$ 0.63. Volumes were flat, trading 131 million shares, valued at US$ 82 million, (compared to 132 million shares, worth US$ 51 million, the previous Thursday – 07 June).

By Thursday 14 June, Brent Crude, having declined US$ 1.74 (2.2%) the previous fortnight shed a further US$ 1.60 (2.1%) to close on US$ 75.96, with gold US$ 2 lower at US$ 1,303.

Offering a 33% premium, CK Infrastructure Holdings has made an audacious US$ 9.8 billion bid for APA Group, Australia’s biggest gas pipeline company. If successful, it would make the Hong Kong company the leading player in the country’s s east coast gas pipeline network but any deal may have problems clearing Australia’s competition and national security regulators.

In a move to cut costs (and improve the bottom line), as well as restructure the company, Tesla is to retrench about 10% – or 3k – of its labour force. Most of the lay-offs will be salaried employees, rather than factory workers.

A US federal court judge has approved the US$ 85 billion merger between AT&T and Time Warner that will have a major impact on the sector, as well as being a blow to the government who had claimed that the tie-up would harm competition. The administration had argued that the pay-TV market would be less competitive if the merger between the largest US pay TV operator and the media entertainment giant went through.

The AT&T court victory was seen as a green light for Comcast to submit its expected bid which almost immediately renewed its interest in 21st Century Fox’s entertainment businesses, with a US$ 65 billion cash bid – much higher than rival Disney’s US$ 52 billion stock offer. The US cable giant was unsuccessful in a previous offer last year. In the UK, Disney and Comcast are currently battling to take over Sky plc, the owner of Sky News, with authorities there clearing Comcast’s US$ 30.7 billion offer for the 61% of Sky that Rupert Murdoch does not own.

A major South Korean hack has led to a US$ 46 billion sell-off in Bitcoin this week, just when the cryptocurrency was showing signs of relative market stability; over last weekend, it lost over 11% in value to be trading at US$ 6.8k on Monday morning. Estimates put the current value of all cryptocurrencies at US$ 249 billion, well down its January 2018 peak of US$ 830 billion. Now its many critics are claiming, on social media, that the currency is becoming increasingly prone to money laundering, manipulation and outright theft.

In a bid to entice Saudi’s Aramco US$ 2.0 trillion 5% float of its shares on the London Stock Exchange next year, regulators are looking to exempt state-owned entities from rules that apply to privately-held companies; this will give investors the same protections offered by a premium listing. It removes a major obstacle for state-owned companies wanting to list on the LSE and means that Saudi Aramco no longer needs to operate at arm’s length from its biggest investor; this gives the London bourse more than a fighting chance to beat off New York and Hong Kong for this lucrative deal.

A PwC partner, responsible for leading the audit of BHS before its sale by Sir Philip Green, has been hit with a US$ 675k fine, by the UK’s Financial Reporting Council, and a 15-year ban that removes him from the register of statutory auditors. This follows a two-year probe into the audit of the retailer which subsequently collapsed into liquidation in 2016.

Trouble in the UK high street continues unabated with the latest being New Look, reporting an 11.7% fall in UK revenue and its net loss jumping from US$ 23 million to US$ 316 million. The retailer is confident that its turnaround strategy, that will see a change of focus from edgy fashion to basic cheaper clothes, along with the closure of 60 outlets, will result in “significant progress”. Interestingly, it also reported a 19.2% fall in on-line sales at a time when online retailer Boohoo, with brands such as Pretty Little Thing and Nasty Gal, posted a 49% Q2 increase in online UK sales.

Although it will add billions to FIFA’s coffers, this year’s World Cup is unlikely to break any profit records. Furthermore, Russia’s US$ 11.6 billion investment in the tournament is less than the US$ 15 billion expended on the last World Cup in Brazil and a lot less than the US$ 51 billion spent on the Sochi Winter Olympics by the Putin government. Overall income for the four-year commercial cycle tied to the event will be marginally higher than Brazil’s US$ 5.7 billion overall income. However, the footballing body is still recovering from the toxic, corrupt and scandal-ridden Blatter era which has had such a negative impact on mainline sponsorship. With several US, European and Japanese companies pulling out, FIFA have only 12 deals (out of 14) in place for their Partner and Sponsor categories. It was also looking at a further 20 backers in its third-tier category (four each from the five global regions) but have only seven in place (four from Russia and three from China). This time round, FIFA has struck lucky because of the boom in the broadcast rights market. Sponsorship returns are unlikely to improve for the Qatar World Cup in 2022.

Despite its troubles, Turkey’s economy continues to outpace most of the world, with Q1 annual growth of 7.4%, as its GDP topped US$ 207 billion, driven by a 10.0% rise in the value-added services sector, as well as 8.8% and 6.9% increases in its industrial and construction sectors respectively.

It seems likely that embattled Argentina will receive a US$ 50 billion loan to support its battered economy, as the peso hit an all-time low last week. Part of the deal will entail a cut in public spending, slashing the fiscal deficit to zero by 2020 and a new strategy to tackle its double-digit inflation; only last month, interest rates were hiked three times in one week from 27.2% to 40.0%. President Mauricio Macri’s decision to request a loan brings back unhappy memories for some who remember the international body pulling the plug on the country in 2001 which led to an economic collapse.

Despite recent monthly declines, the UK inflation level in May remained at 2.4% with the downward trend abruptly halted by a 3.8% hike in fuel prices – its biggest monthly increase since 2011 – to US$ 1.692 per Litre (UAE – US$ 0.717 – Super 98). The reading was not helped by the strengthening greenback but the good news was that wage growth remains ahead of the inflation level. However, the country’s quarterly industrial production growth, ending April, eased, declining 0.5%, whilst month on month there was an 0.8% fall in total production – the largest decrease since October 2012.

Despite the Trump administration removing a trading ban on China’s tech giant, ZTE, it had a harrowing day on the Hong Kong bourse on its return, after its 17 April 2018 suspension – it shed 39% of its market value. The initial ban saw it being prevented sourcing US parts and supplies after it had been found violating trade bans by dealing with companies in Iran and North Korea.

With public spending outpacing revenues, the US government posted an 8-month deficit in May of US$ 532 billion – 23% higher than the same period in 2017 – and a 66% month on month shortfall of US$ 147 billion. The main driver behind the figures is attributable to the Trump tax cuts late last year. May saw the country’s inflation rate move higher, at its fastest pace in six years – up 0.2% month on month and at an annual 2.8% – whilst wage gains remained flat, despite an 18-year low in unemployment figures; average hourly wages, adjusted for inflation remain static year on year as annual nominal pay was at 2.7%.

As expected, the Federal Reserve lifted its benchmark overnight lending rate 0.25% to a 1.75%-2.0% range and signalled the possibility of a further two rate hikes this year. It also indicated a change in policy that sees it no longer keeping rates low enough to stimulate the economy “for some time” and that it will allow inflation to remain above the 2.0% level until 2020. It noted that “the labor market has continued to strengthen … economic activity has been rising at a solid rate,” and that “household spending has picked up while business fixed investment has continued to grow strongly.”

The US President turned the table on his six colleagues as he attended the first part of Friday’s G7 summit. In a surprising change of face, which would have startled the other six leaders, he suggested the elimination of all barriers to international trade, a complete turnaround on the accusers who have been reproaching the US of wielding protectionist policies. In a later press conference, he once again emphasised “no tariffs, no barriers, that’s the way it should be, and no subsidies.”

Veni, Vidi, Vici – Donald Trump’s truncated visit to the Q7 meeting was not the main event of the week as he was off to Singapore for his historic ‘one-time shot’ meeting with North Korean leader Kim Jong-un. Unlike previous presidents, who have all shied away from addressing the main issue, the denuclearisation of the Korean peninsula, he has gone into talks saying “I think I’m very well prepared, I don’t think I have to prepare very much. It’s about attitude.”

Prior to the meeting, Mr Trump promised that if North Korea gave up its nuclear programme, he would provide “protections” for Mr Kim and his government and that the likes of South Korea, China and Japan would be prepared to invest in the North to boost its besieged economy. Once again, the US President has gone to script and has done what he promised to do in the months prior to his 2016 election. There are not too many world politicians who can claim to have kept to their campaign promises. Hopefully, the outcome from the historic meeting of probably the world’s two most despised leaders is that Peace Will Come (According To Plan).

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