howesdubai.com

If! 27 February 2020

As it extends an offer of a 50% finance facility, Samana Developments has launched its US$ 27 million Saman Golf Avenue project. Located in Dubai Studio City, the development, covering 80k sq mt, features 233 luxury studio, 1 and 2 B/R apartments. The developer also guarantees 24% return over three years and offers a payment scheme, comprising a deposit, followed by 80 months at 1% of the unit’s cost.

A report by Property Finder concludes that the best yield for investors is to be found for apartments in Dubai International City, with 10.6% returns, ahead of the likes of Discovery Gardens, Al Barsha, Barsha Heights/Tecom and Dubai Sports City, with returns of 8.6%, 8.0%, 7.9% and 7.8% respectively. When looking at established locations and villa/townhouse communities, Motor City, Barsha and Arabian Ranches posted smaller returns – 5.2%, 5.0% and 4.9% – whilst newer developments, such as Town Square, Mudon, Reem and JVC, with higher gross returns of 7.6%, 7.3%, 6.4% and 6.3%. All these look a lot more attractive than say Toronto, Singapore, London, Sydney and Hong Kong where average gross rental yields are between 2.8% – 3.9%.

Yet another acquisition for DP World was the purchase of Canadian terminal Fraser Surrey Docks (FSD) from Macquarie Infrastructure Partners. The terminal operates more than 1.2k mt of berth and 189 acres of yard, whilst handling over a million tonnes of grain, (and 250k twenty-foot equivalent shipping containers).

Careem and Uber will face new opposition as Wow Electronic Transport Services started operations last Saturday, after final RTA approval. The ride hailing firm already has a presence in Pakistan, France and four US cities, with massive global expansion plans. Like others, Wow will allow users to order a ride to pick them up and take them to a particular destination and will offer different options such as  Wow stretch limo, Wow ladies and Wow VIP.

Meanwhile, Careem has diversified and, in tandem with the RTA, has launched a bike rental service in the region, with 780 bicycles initially available across 78 solar-powered stations, that will eventually reach 3.5k bikes and 350 stations over the next five years. Dubai currently boasts 425 km of bike tracks, expected to expand a further 50% by 2023.

It is reported that NMC’s BR Shetty has requested Houlihan Lokey to look at a potential debt restructuring, or the sale of some of his group’s assets, which includes NMC, (currently mired in a potential accounting scandal), and financial services firm Finablr Plc. It seems that the holding company had a US$ 1 billion loan used to acquire Travelex Holdings Ltd (now owned by Finalbr); the money travel service owned by Shetty was offline for six weeks, until the end of January, because of a cyberattack, during which time it had to use pen and paper to manually complete transactions. Only last week, this blog noted that Shetty had resigned from the board of NMC, amid investor concerns he faced a margin call and misrepresented his stake in the hospital operator; furthermore, Carson Block’s Muddy Waters also alleged that NMC’s financial statements could have a potential over payment for assets, inflated cash balances and understated debt.

On Thursday, NMC Health suspended trading of its shares on the London Stock Exchange, after a request by the much-depleted board to ensure “the smooth operation of the market”. A day earlier, the UAE healthcare firm had removed its CEO Prasanth Manghat and also granted CFO, Prashanth Shenoy, extended sick leave.

According to the central bank, UAE’s overall real GDP grew by 2.9% last year, driven by  growth in both the non-hydrocarbon and hydrocarbon sectors; this is much higher than the figure of 1.6% bandied about by the IMF. The agency noted that employment in the private sector increased by 2%, year on year, whilst total credit expanded by 6.2%. Because of the 6.5% Q4 decline in oil prices, and continuing falls in rents, the consumer price index declined by 1.6%.

Figures released by the Central Bank showed that 2019 expat remittances, out of the UAE, slowed 2.5% to US$ 45.0 billion – an indicator of how difficult the year had been. Like many other countries, the UAE has had to battle geopolitical tensions, a slowdown in global trade, an oversupplied property sector and now the impact of coronavirus. However, with hiring in the private sector 2.0% higher in Q4, year on year, remittances were up 1.8% – a hopeful sign of what may happen in 2020. There was no change in the countries benefitting from UAE remittances, with the top five being India, Pakistan, Philippines, Egypt and the UK.

Having seen fuel prices remain flat for the first two months of the year – and with oil prices tanking due to the coronavirus – it was no surprise that March prices have fallen; Special 95 will retail 3.8% lower at US$ 0.556 per litre, with diesel down 6.3% to US$ 0.613.

The federal Ministry of Health and Prevention has slashed the prices of 573 medicines by between 47%-68%. These include medicines for diabetes, hypertension, cardiovascular, nervous/respiratory issues and some paediatric problems. This follows discussions between the ministry and 97 major local and international pharmaceutical manufacturers.

A mix of bank sector consolidation, tighter operating margins and digital transformation has resulted in a reduction in the number of branches (by 6.9% to 664) and employees (by 2.6% to 35.5k) as at the end of Q3. Because of the FAB bank merger, the number of licensed commercial banks dropped by one to 59 – thirty-eight of which are foreign banks (including eleven wholesale banks) and the balance “local”. The central bank also noted that the banks remain well capitalised and are sound overall, with a Capital Adequacy Ratio of 17.7% and Tier 1 Capital at 16.5%; the eligible liquid assets at 17.6% remained well above the central bank’s 10% regulatory minimum buffer.

Etisalat has completed the acquisition of cyber security outfit Help AG, which will give the telco enhanced presence in relation to cyber security, as well as strengthening its cloud, internet of things, artificial intelligence, big data and analytics lines of business. The 25-year old German company has had a regional presence since 2004, over which time it has served a plethora of sectors and has become a trusted regional security adviser.

The Majid Al Futtaim Group posted 1.0% growth in both its 2019 revenue, at US$ 9.6 billion, and profit of nearly US$ 1.3 billion, driven by “our diversification efforts by entering new countries and expanding out footprint in priority markets, while maintaining strong financial discipline across our portfolio.” By the end of the year, its asset portfolio topped US$ 17.2 billion, as its operational cash flow amounted to 122% of its EBITDA (earnings before interest, taxes, depreciation and amortisation). Its two major revenue streams had almost flat results with Properties accounting for US$ 1.3 billion of revenue (down 1.0% on the year), as EBITDA remained at US$ 817 million, and the Retail revenue nudging 1.0% higher to US$ 7.7 billion, as EBITDA came in 2.0% up, to US$ 381 million.

Damac Properties is looking to expand operations into Saudi Arabia, whilst continuing to invest in the UK, as its local market remains flat. The Dubai-based investor is also involved in projects in Lebanon, the Maldives and Oman and has entered the North American market for the first time with a JV in Toronto. Although it posted its first annual loss in a decade last year, the developer remains bullish noting that “we’re at the bottom now in Dubai and we’ll see some slight improvement with Expo 2020”.

Probably wishing that it had not, the bourse opened on Sunday 23 February and four points higher (0.1%) the previous week, slumped 148 points (5.4%) to 2590 by 27 February 2020. Emaar Properties, having gained US$ 0.01 the previous week, was US$ 0.11 lower at US$ 0.95, whilst Arabtec, US$ 0.02 higher over the previous week, was US$ 0.03 lower at US$ 0.20. Thursday 27 February saw the market trading 132 million shares, worth US$ 72 million, (compared to 95 million shares, at a value of US$ 49 million, on 20 February). Almost five years ago, Arabtec was trading at US$ 3.13 (AED 11.59 v AED 0.75), and over February shed 25.7% from its month opening of US$ 0.28. Thirty months ago, an Emaar share was at US$ 2.40 – in February it lost 13.3%. in market value to close on US$ 0.95.

By Thursday, 27 February, Brent, having gained US$ 3.61 (6.5%) the previous fortnight fell victim to coronavirus, losing US$ 8.03 (13.6%) to close at US$ 51.01. Gold, US$ 56 (3.6%) to the good the previous two weeks, gained a further US$ 25 (1.5%), closing on Thursday 27 February at US$ 1,646.

Like most other western economies, the Australian retail sector is feeling the stress, attributable to high rents, e-commerce, many business models not changing with the times

and the recent tendency of consumers to pay down debt rather than spend. The combination of these factors has seen the name of Colette join the likes of Jeanswest, McWilliams, Ishka, Bardot and Harris Scarfe to become the latest to call in administrators. Deloittes Restructuring has indicated that 25% of its 140 stores will have to close, over the next three weeks, whilst the firm will try and on-sell the remaining business.

The NSW gaming authority has begun an enquiry into allegations that Australian casino firm Crown Resorts has links to organised crime. The casino, 37% owned by Australian tycoon James Packer, and son of the infamous Kerry Packer, is reportedly defending claims over the use of junkets to encourage mainly overseas big spenders. The gaming authority is looking at two facets – “the vulnerability of junkets to the infiltration of organised crime” and “vulnerabilities of casinos to money laundering both generally and in connection with the use of junkets”. The case follows recent media reports, relating to the conduct of Crown Resorts and its alleged associates. Other allegations include that “Crown Resorts casinos were used to launder money, anti-money laundering controls were not rigorously enforced, gambling laws were breached and Crown Resorts or its subsidiaries were associated with junket operators that had links to drug traffickers, money launderers, human traffickers and organised crime groups.”

A September 2015 howesdubai  blog concluded that “there are reports that FIFA’s Secretary General, Jerome Valcke, has been put on leave by the scandal-ridden world football body. The 54-year old denies any wrongdoing but it is alleged that he was involved in a scheme to sell World Cup tickets for up to five times face value. Sepp Blatter’s right-hand man also reportedly tried to secure a pay-off of several million dollars before this suspension; so it is not difficult to see what the hierarchy are being paid for bringing the game into disrepute and ridicule. Now even his self-deluded boss must realise that The Party Is Over”!

This week, the disgraced so-called French football administrator, along with the chairman of Qatar-based media group BeIN Sports, Nasser Al Khelaifi, have been charged by Swiss prosecutors in relation to the awarding of television rights for the World Cup. Already banned by FIFA’s ethics committee for ten years, Valcke is being investigated for accepting bribes, aggravated criminal mismanagement and falsification of documents, The BeIN Sports chairman, (who is also president of Paris St Germain, and a member of UEFA’s executive committee), – and a third unnamed person – have been charged with inciting Valcke to commit aggravated criminal mismanagement; he no longer faces allegations of bribery after FIFA reached an “amicable agreement” with him to drop a criminal complaint connected to the awarding of rights for the 2026 and 2030 World Cups! No surprise there!

The damage that Valcke (one of many of the then corrupt FIFA hierarchy) has done to football’s reputation will never be fully known. During his eight-year reign, ending in ignominy in 2015, he oversaw organisation of two World Cup tournaments in South Africa and Brazil. Between 2013 and 2015, he exploited his FIFA role “to influence the award of media rights” for various World Cup and Confederations Cup tournaments “to favour media partners that he preferred”. In December 2010, in an unprecedented move, two World Cups were announced at the same time – Russia (2018) and Qatar (2022). Prior to this, world cup hosts were announced around six years before the event – not eight or twelve years and definitely not two at one ceremony. It seems that Valcke was but one in the FIFA “meritocracy” that may now face the full force of the law. How have the others escaped justice??

US investment firm Sycamore Partners has acquired a 55% controlling stake in the ailing retailer, Victoria Secrets, from L Brands, valuing the lingerie brand at US$ 1.1 billion. The main reason for the sale was that it now wanted to focus on its core brand, Bath & Body Works which sells soaps and home fragrances. L Brands, with a market cap of US$ 7.0 billion, had seen sales from Victoria Secrets, which accounted for about 50% of its total US$ 13.2 billion revenue, dwindle as it failed to keep up with both traditional and on-line competitors. Its 83-year-old chief executive, Les Wexner, who owns 13.2% of L Brands, has been in charge since 1963, making him the longest-serving chief executive of a S&P 500 company.

Having finally admitted to opening millions of fake customer accounts and wrongly collecting millions of dollars of fees over a fourteen year period to 2016,, Wells Fargo has agreed to pay US$ 3.0 billion to settle with US government regulators; US$ 500 million of the settlement will be repaid to investors, who were misled by bank disclosures. In January, former chief executive John Stumpf agreed to pay US$ 18 million to settle charges of failing to stop misconduct within the bank, which since 2018 has been under an order from the US Federal Reserve that limits its growth.

Restaurant Group confirmed that it would close up to 90 of its Frankie & Benny’s and Chiquito outlets by the end of next year, (rather than the six-year period indicated last year), as well as suspending its dividend. Whilst the revenue stream has been declining in many of its operations – with like for like sales in its leisure business, which includes Frankie & Benny’s and Chiquito, dipping 2.8% – it appears that its Wagamama and pubs units have been performing better, with sales 8.5% higher. The Group, currently with 360 restaurants, saw its shares falling more than 6% in Tuesday trading, not helped by the ongoing coronavirus crisis, which has been wreaking havoc on the global bourses.

Blaming the move “on a big shift in customer tastes and preferences”, Tesco is set to retrench 1.8k staff, in 58 locations, as the supermarket will make less fresh baking products in-store and bring in fully pre-prepared products, to be then baked on site. It would appear that consumer taste is moving away from traditional loaves, as UK sales of bagels, flatbreads and wraps gain traction.

Lebanon joins the likes of Argentine, DRC and Mozambique,  as its long term foreign currency rating has been cut deeper to junk status by S&P, down two notches to CC and Moody’s to Ca; there is no doubt that the country’s bondholders face a potential default in March. The cuts came on the back of the World Bank warning of an economic “implosion`, as well the country’s Eurobonds seeing yield levels in excess of 1000%. A debt restructuring is almost certain to occur that would result in Lebanese bondholders losing at least 67% of their original investment.

As the UK had been a net contributor, its leaving the EU has resulted in a massive US$ 81 billion gap in the EU’s seven year budget; there was no surprise then to see the bloc ending their recent summit meeting in disarray. It was reported that the “frugal four” – Austria, Denmark, Netherlands and Sweden – were unwilling to accept a budget of more than I% of the total EU GDP. German Chancellor Angela Merkel admitted that the “differences are too big” but warned that “we are going to have to return to the subject.” It appears that the seventeen beneficiary countries – dubbed the “friends of cohesion”, and including Greece, Hungary, Poland, Portugal and Spain – rejected a compromise proposal which would have had the cap at 1.069% of joint GDP and wanted a bigger budget percentage. On top of this squabble, there is further disagreement over how the budget should be spent, with some countries wanting more to cover the migrant crisis, climate change, security and digitisation. Maybe the UK got out of the mess just in time.

Apart from the human cost of coronavirus, 2.8k fatalities and 82k infected at the end of the week, its impact on both the Chinese and global economies is taking its toll. Chinese February car sales have slumped by 96%, to just 811 vehicles a day, as major dealerships remain closed; last year, 21 million cars were sold in the country – the world’s biggest car market. Meanwhile, production has also been disrupted with many of the global carmakers cutting back because of lack of parts made in China. It will take time for such companies to return to full capacity. Fiat has indicated that there was one “critical” supplier of parts that was putting its European production at risk, with three more Chinese suppliers causing concern. Toyota continues to monitor the situation but to date there has been no impact on its operations. Volvo has been forced to switch battery suppliers, whilst Hyundai has temporarily stopped production lines, at its factories in the country closed because of shortages of Chinese parts. Jaguar Land Rover has indicated that it could start to run out of Chinese parts for its UK factories and have been flying in supplies in suitcases. It is estimated that the Chinese economy will grow less than 4% in Q1, a lot less than the 6% level forecast before the onset of the virus; the global economy is expected to grow slightly less, by 0.2%, than it would have done otherwise.

This is but one of many industries suffering from the coronavirus risk and the resultant disruptions from “the world’s factory”. JCB has cut production because of a shortage of components from China. Within China, international companies have been facing the pinch with the likes of Ikea, Starbucks and other global retailers closing all their “local” outlets. Several overseas airlines have stopped all China flights and international hotel chains have been offering refunds – with an inevitable fall in their global revenue and profit. IATA estimate that the virus will result in a 4.7% downward estimate, (from 4.1% growth to 0.6% contraction), compared to what was expected prior to the coronavirus outbreak and that 2020 will now witness the first annual decline in global passenger since the GFC.  This is equivalent to a US$ 30 billion fall-out in revenue.

Other global manufacturers are also facing production delays, with concerns about a breakdown in international supply chains of which China is the main cog. Apple have come out warning that there will be supply shortages that will impact on global iPhones. On the commodity front, prices will fall as the Chinese economy slows; for example, copper prices have dipped 13% as demand slows. It is still too early to quantify the impact of such price reductions, but it will be felt by many emerging and developing economies, where such exports are their main source of income.

By the end of Wednesday, in Australia, the ASX 200 had lost about US$ 90 billion (6.0%) in value on the three days of trading this week, closing at 6,708 and the dollar was hovering around the US$ 0.66 level – near an eleven-year low. Tech and biotech companies suffered the worst of the damage, but many had already been trading probably at too a high price relative to their earnings. Firms such as biotech start-up tanked 20%, whilst tech firms Appen and WiseTech were 10.3% and 8.3% lower. Although 186 of the two hundred listed companies have lost ground, some of the remaining entities posted impressive gains, including healthcare provider, Healius and funeral operator Invocare, up 15.2% and 13.6%.

This week saw the global markets in turmoil, as traders dumped shares on fears that the spreading coronavirus could lead to a worldwide recession. On Thursday, all markets were painted red with Nasdaq, down 4.6%, followed by the Dow Jones and the S&P 500, both 4.4% off; the Dow Jones posted its biggest ever daily loss. Elsewhere the FTSE 100 shed 3.5% and the Nikkei more than 2%. It is estimated that so far this week, the global stock markets are now well into “correction” territory, having lost over 10% (more than US$ 3.5 trillion) by the end of Thursday trading, and potentially heading for a bear market, as global shares sink rapidly from recent record highs.

There is no doubt that the companies (as well as countries and individuals) that will suffer most are those who thought they had taken advantage of cheap debt when it seemed that the global economy could only go one way – and that was north. This blog has often indicated that the biggest economic problem was that of debt which has exploded since the GFC. For example, Australia has the highest household debt in the world, Japan a government debt equivalent to 260% of its GDP, the US Fed holding US$ 4 trillion in debt securities and China with its massive problem of shadow banking. The person who could suffer most is Donald Trump who has espoused the strength of the US economy (and this is where the conspiracy theorists will have a field day). If the US – and global economies – were to go into a tailspin and the world into recession, there is every possibility of a new resident in the White House at the end of the year. It is a big word and a little word – If!

Leave A Light On                                                                                           30 January 2020

Asteco expects that a further 50k residential units, (along with 2.5 million sq ft of office space), will be added to Dubai’s property portfolio this year. Because development costs are approaching their lowest practical level, the property consultancy expects an easing in sale prices for new projects but predicts further falls in the secondary market. The newly formed higher committee, set up by HH Sheikh Mohammed bin Rashid Al Maktoum last September, will no doubt tackle the market’s supply issues and work towards greater collaboration between government-related entities and private-sector companies.

Another consultancy is seeing the first signs of growing market confidence, as rents begin to stabilise and declines in apartment sales prices have slowed to 2% in Q4. Chestertons report that in Q4, the market saw a 60% year on year increase in transaction values, whilst off-plan units recorded a 99% increase; volume-wise the numbers were up 39k and 68k. The firm also expressed concern relating to over-supply, indicating, that this year, twice the amount of units are scheduled to be completed, compared to 2019’s figure of 45k which was the highest annual number in five years. However, 2020 should be a better year for Dubai realty, as rental rates are beginning to level out, whilst there has been a slowdown in sales price declines.

With regard to apartment prices, Chestertons indicated that prices (per sq ft) were flat at US$ 281, US$ 272, US$ 231 and US$ 191 in Dubai Marina, Business Bay, The Greens and Dubailand. On the downside, there were Q4 falls noted in JVC and Motor City – down 9% to US$ 187 and 7% to US$ 159 per sq ft. Meanwhile, average Q4 villa prices were 3% lower. Including Jumeriah Park, The Meadows and The Lakes declining 8% to US$ 202, 3% to US$ 224 and 2% to US$ 271 per sq ft respectively. Arabian Ranches nudged up 1.9% to US$ 220 per sq ft.

Data Finder estimates that Emaar registered 8.6k off-plan property sales in 2019, equating to a 36% market share – a 260% year on year increase; this figure does not include Emaar’s two new launches. The next three developers were Damac accounting for 8.9% of the market – with 2.1k transactions – followed by Dubai Properties and Azizi Developments, with shares of 8% and 6% respectively. Just when most of the developers were battening down their hatches in 2019, focussing on deliveries and selling existing inventory, Emaar continued with major launches including its US$ 6.8 billion project, The Valley, and phase 3 of Arabian Ranches. In the secondary market, Emaar was again at the front with 2.3k transactions last year, followed by Nakheel (2.0k) and Damac.

In relation to the apartment rental market, only Downtown posted an increase in returns, whilst the likes of DIFC, Discovery Gardens, Dubai Silicon Oasis, Dubailand, International City, and The Views remained flat in Q4. Likewise, in the villa segment, rates remained static, including popular locations such as Al Furjan, Jumeirah Golf Estates, Jumeirah Islands, JVT Palm Jumeirah, The Lakes and The Meadows; this is probably an indicator that the market may well have finally bottomed out. However, rents did drop further in Victory Heights and The Springs – down 4% to US$ 34.1k and 3% to US$ 38.5k for an average 3 B/R unit.

Samana Developers’ second Dubai project is a two-year US$ 27 million development in Arjan, adjacent to Dubai Miracle Gardens. Saman Hills, to be built by Atcon Construction, will comprise 250 studio – 2 B/R apartments, with studio prices beginning at US$ 109k and 1 B/R at US$ 163k. Work has already started on its first entrée into the market – the US$ 21 million Samana Greens at Arjan – and handover is expected by the end of March.

In a bid to revolutionise Carrefour’s online orders, MAF has joined up with the US Tech company, Takeoff, as the new venture plans to build several automated micro-fulfilment centres (MFCs), at select stores, over the next two years; the new small warehouses will process online orders, (replacing the current manual method), so that goods can be picked up or readied for delivery. The technology can deal with 2k daily orders.

In line with its improved funding structure and liquidity, Moody’s has upgraded Dubai Aerospace Enterprise’s corporate family rating to ‘Baa3’ from Ba1 and also its senior unsecured rating of subsidiary, DAE Funding LLC, to ‘Baa3’ from ‘Ba2.’ The credit rating agency noted that DAE’s lower leverage and timely repayment of a loan from its parent, the Investment Corporation of Dubai, were reasons for the credit upgrade. In 2018, increased its portfolio to 125 aircraft, valued at US$ 3.5 billion and also issued US$ 1.9 billion of new unsecured debt.

For yet another month, UAE fuel prices have not changed. The Fuel Price Committee has decided that Special 95 remains at US$ 0.578, although diesel goes up US$ 0.005 (0.1%) to US$ 0.654.

Latest news in the Drake & Scull International sorry saga sees the company filing criminal complaints against its former CEO, Khaldoun Tabari, and his daughter, Zeina, both currently in Jordan. The former founder was arrested in Amman, at the Queen Alia International Airport, following an arrest warrant filed by UAE authorities and the issue of an Interpol red notice earlier in the month. Since then, DSI, which confirmed that it had discovered several instances of fund misuse by the previous management, has filed new complaints against the former CEO, his family members and other former executive managers.

2020 has started badly for Bavaguthu Raghuram Shetty, as the Indian billionaire has not only seen shares in his UAE-based hospital operator NMC Health slump, after an influential US asset manager, Muddy Waters Capital, issued a report criticising NMC’s accounts and disclosing a short position, but that the Shetty family had pledged more than 50% of their stake in Finablr to secure loans. The Shetty-backed payment processor’s shares have lost over 34% in value since a cyberattack rocked one of Finablr’s popular brands – Travelex. Overall, it is reported that Shetty may have seen US$ 1.5 billion disappear from his family fortune, as their US$ 3 million stake has been halved since the recent troubles hit.

Fears that the recent escalation of tensions between Iran and the US would have a negative impact on the local aviation sector have proved unfounded. According to the Emirates COO, Adel Ahmad Al Redha, the airline has not been affected by the latest spat and that its capacity remained “healthy” in January – there being no decline in traffic as average seat factor was in excess of 80%.

Saif Al Suwaidi, director general of the UAE’s General Civil Aviation Authority, is “not very optimistic” about the Boeing 737 Max’s return to UAE skies by the middle of the year, the latest target set by the US plane maker for its grounded jet. Once Boeing and the US Federal Aviation Administration have completed their own checks and reviews, the GCAA will conduct its own safety assessment. To date, the local regulator has yet to receive Boeing’s entire fixes to its flight control software, which was implicated in both crashes. Meanwhile, Boeing’s second biggest Max customer, Flydubai, with 250 aircraft on order, will probably have to lease more jets after the latest delay.

Troubled Union Properties is planning a US$ 54 million expansion to Dubai Autodrome and is in the “final stages” of signing a preliminary agreement with China National Chemical Engineering. It also announced that it was considering turning three of its units – ServU, The Fitout and Dubai Autodrome – into private joint stock companies. Its newly appointed chief executive, Khalifa Al Hammadi, has a major challenge to restructure and manage UP’s accumulated losses, as latest results showed Q3 losses expanded by 32% to US$ 22 million on the back of lower revenues; they were down 29% to US$ 30 million, with losses being incurred on some of its investments.

A week after announcing that it will pull operations in Oman, because of “the absence of the regulatory factors that provide us with a healthy investment environment”, Careem confirmed that it was cutting its payroll numbers by 5%, (estimated to be 200), and, at the same time, reassigning a further 10% to new roles. The ride-hailing firm, which recently finalised its US$ 3.1 billion takeover by Uber, indicated that it was “modifying the shape and skills of the team so we can operate even more efficiently to simplify and improve even more lives.”

Following an agreement in Davos, with CV VC and CV Labs, the DMCC is to launch the world’s largest ecosystem for cryptographic, blockchain and distributed ledger technologies – Crypto Valley. The ecosystem will support start-ups and will introduce co-working facilities, innovation services for corporate clients, training (in blockchain and entrepreneurship), mentoring and funding. The three partners will also collaborate on a comprehensive blockchain strategy, aligned with the Dubai Blockchain Strategy.

As an indicator that investor confidence is returning quicker than thought, Dubai Multi Commodities Centre registered almost 2.0k new companies, (an increase of 5.4%, year on year), in 2019, with Q4 showing the highest quarterly return in four years – 20% higher at 559 companies, including 202 in October. FDI from key global markets, such as India and China, continues to move higher.

Emirates NBD posted a 44.0% jump in 2019 net profit to US$ 3.9 billion, as total income came in 29.0% higher at US$ 6.1 billion, driven by increases in loans, (which resulted in net interest 26.0% higher), and fee income. Core operating profit rose 4.0%, mainly attributable to the bank’s 99.85% acquisition of Turkey’s DenizBank.  During the year, in which total assets grew to US$ 186 billion, the bank was allowed to double its foreign ownership to 40% which also helped to push figures higher.

Its sister bank, Emirates Islamic, posted a 15% hike in total annual profit to US$ 289 million, on an 8% rise in total income to US$ 736 million, driven by increased customer deposits and higher investments in Sharia-compliant bonds. Total assets grew 11% to US$ 17.7 billion, as customer deposits were up 9% to US$ 12.3 billion.

Emirates Central Cooling Systems Corporation posted an 8.3% rise in annual net profit to US$ 237 million on the back of a 7.9% increase in revenue to US$ 597 million. During the year, Empower added more district cooling plants, that now supply 1.2k buildings and a 120k customer base. Last year, the company awarded a US$ 54 million contract to build a district cooling plant in Dubai Production City and also launched what it calls the world’s first unmanned cooling plant at Jumeirah Village Circle.

The bourse opened on Sunday 26 January and, 89 points (2.9%) up the previous fortnight, lost some ground, down 48 points (1.7%) to 2790 by 30 January 2020. Emaar Properties, having shed US$ 0.05 the previous week, was US$ 0.02 lower at US$ 1.10, whilst Arabtec, US$ 0.08 lower over the previous five weeks, was down a further US$ 0.03 to US$ 0.28. Thursday 30 January saw the market trading only 308 million shares, worth US$ 119 million, (compared to 106 million shares, at a value of US$ 49 million, on 23 January). In January, the bourse was 25 points (0.9%) higher, as Emaar remained flat over the month, with Arabtec shedding US$ 0.07 from its 2020 opening of US$ 0.35.

By Thursday, 23 January, Brent, losing US$ 5.95 (9.5%) the previous three weeks, ditched another US$ 3.94 (6.3%) to close at US$ 58.40, not helped by the coronavirus alert that has the potential to further disrupt global trade. Gold, up US$ 93 (6.3%) the previous six weeks, rose a further US$ 6 (0.4%), closing on Thursday 30 January at US$ 1,571.

Blaming lower oil prices, Royal Dutch Shell posted a 32% 2019 decline in profits to US$ 15.8 billion, with its CEO Ben van Beurden saying that 2019 witnessed “challenging macroeconomic conditions in refining and chemicals, as well as lower oil and gas prices”. He also confirmed that the petro giant was still committed to strengthen its balance sheet and to continue with plans to complete its US$ 25 billion share buyback programme.

As expected, the Federal Reserve kept rates unchanged at 1.75%, whilst indicating that it was determined to avoid what has been happening in other global economies – a disinflationary downdraft; this could be a forerunner for the central bank to introduce easier monetary policy sometime this year. What is certain is that there will be no rate hike in Q1.

With the appearance of greens shoots of a possible recovery, the Bank of England has held interest rates at 0.75%, backed by seven of the nine members of the Monetary Policy Committee. Even the outgoing Governor, Mark Carney, has indicated “the most recent signs are that global growth has stabilised and that fewer companies in the UK are worried about Brexit”. However, he did warn that “caution is warranted,” as the “pick-up in growth is not yet widespread” and that an event like the coronavirus outbreak was a “reminder of the need to be vigilant” when “it comes to bumps in economic growth around the world.” However, the Bank’s latest economic estimates suggest the UK economy did not grow at all in Q4.

There was a raft of year-end figures posted during the week, including Facebook which recorded its first profit drop in five years – down 16% to US$ 18.4 billion – as costs jumped 51% to US$ 46.7 billion, driven by burgeoning legal expenses. The tech company has been mired in privacy and content concerns but, despite the decline, 2019 revenue was 27% higher at over US$ 70 billion. However, the market was not happy as its share value dipped 6% on the day. During the year, the tech giant was fined US$ 5 billion by US regulators to settle privacy concerns – and this week, it agreed pay US$ 550 million to settle an Illinois lawsuit over its use of photos for its facial recognition technology. In December, it was estimated that 1.7 billion people were active daily users and that an average of 2.3 billion people were active on its family of platforms each day.

Apple’s latest quarterly net profit jumped 11.3%, year-on-year, to a record US$ 22.2 billion, on the back of an 8.9% hike in revenue at US$ 91.8 billion, driven by enhanced earnings from iPhone, (7.6% up to US$ 56.0 billion), and services; this led to its share value rising 4.3% on the day. Global revenue outside the US accounted for 55% of total revenue, as China sales were 3.1% higher at US$ 13.6 billion. With the tech company aiming to “reach a net cash neutral position over time”, it returned almost US$ 25 billion to its shareholders in the quarter. Apple lost its second place in the global smartphones’ shipment race (with a 12.4% share) to Huawei’s 18.2%, still some way behind Samsung, again leading the pack with 21.3%.

To nobody’s surprise, Boeing posted its first annual loss – at US$ 636 million – in more than two decades, as the fallout from the 737 Max crisis continues to pummel the firm; latest estimates indicate that the bill for the grounding will be more than double that was initially expected at over US$ 18 billion and rising. Q4 sales at US$ 17.9 billion came in 17.5% lower than analysts’ predictions. In the understatement of the week, the newly appointed Boeing head, David Calhoun, said “we recognize we have a lot of work to do.” He has to focus on two major issues – to get the plane back in the air and to restore confidence in a much-tarnished brand. Boeing has a total backlog in orders worth US$ 464.4 billion.

Despite great pressure from the US, the Johnson government is to permit China’s Huawei to be used in UK’s 5G networks, with restrictions that will see the firm from supplying kit to “sensitive parts” of the network, known as the core; one other would be allowed to account only for 35% of the kit in a network’s periphery, which includes radio masts. It will also be excluded from military bases and nuclear sites, to partly placate US concern of a spying risk. The ever-optimistic Foreign Secretary Dominic Raab is confident that it would not affect the UK’s intelligence-sharing relationship with the “disappointed” US and other close allies. His decision was prompted by Beijing warning the UK there could be “substantial” repercussions to other trade and investment plans if no participation were allowed.

All the bad news from the aviation sector has recently pointed towards Boeing but Airbus is likely to have to pay up to US$ 3.3 billion in a settlement agreed with French, British and US authorities, alleging bribery and corruption – and the use of the ubiquitous middleman. Investigations started in 2016 after Airbus reported itself for being involved in “fraud, bribery and corruption”. It requested the regulator to look at documentation about its use of overseas agents in deals involving the use of export credits that were used by many governments to support exporters, including in this case Airbus.

Finally, the Indian government has announced that it plans to sell its entire stake in the national carrier. Although it carries liabilities, in excess of US$ 8 billion, the deal will also involve taking over some of Air India’s debt – US$ 3.2 billion of a US $ 8.0 billion total  – and comes a year after the government offer of only a 76% controlling stake garnered no buyer interest. The airline is but one government asset that is up for sale as the country goes through its slowest economic growth in a decade and needs to offload loss-making companies to improve its balance sheet. The airline, which owns 56% of its 146-plane fleet and has lucrative international and domestic landing and parking slots, employs 14k and faces increased competition from lower cost carriers.

Every week it seems that another sorry story, in one way or another, appears to reflect the dire state of the Australian banking sector. This time it is reported that sixty current and former Macquarie employees, including its current chief executive Shemara Wikramanayake, who was then head of asset management, appear to have been involved into short-selling activities, being named as suspects in a German investigation. A total of some 400 suspects are being investigated for their roles in “cum-ex trades”, where two parties simultaneously claim ownership of the same shares and therefore claim tax rebates they are not entitled to. The practice was banned in Germany eight years ago and authorities are seeking to recover billions of dollars from traders and banks that allegedly profited from such schemes. It seems that Macquarie acted as a lender to a group of funds involved in the share trading in 2011, from which it withdrew in 2012.

Following a global investigation into money laundering and tax evasion, involving an unnamed Central American bank, several hundred Australian tax avoiders are in danger of facing civil or criminal charges. Multi-country raids from a joint task force, including tax agencies in United States, UK, Canada, Australia and the Netherlands has discovered a sophisticated network established to conceal tax and launder criminal proceeds. Now the Australian Tax Office is looking into the affairs of hundreds of Australian individuals (as opposed to companies) suspected of having channelled undeclared income through the scheme.

It is not only the tourist, farming and wine sectors left reeling from the Australian bushfires but also the US$ 2 billion timber industry. For example, almost 50k hectares of pine plantations in the Riverina, owned by Forestry Corporation, were burnt in the Dunns Road bushfire and this could well lead to a shortage of timber, woodchips, and paper. It is estimated that the Riverina region in NSW has seen the loss of 330 hectares.

Friday finally sees the UK exit the EU, a bloc that has deep-seated structural problems and continues to be beset by bureaucracy. One remarkable fact is that the EU accounts for 7% of the global population but is responsible for over 50% of all welfare spending worldwide. Even its flagship member, Germany has been teetering on recession, with any growth progressing at a snail’s pace, not helped by its crisis-hit car industry and disappointing export figures. Two of the other leading economies, France and Italy, are also struggling, with the Macron government facing major problems in its attempt to reform unaffordable pension schemes and streamline the public sector. Meanwhile, Italy has been wallowing in a state of economic paralysis and perma-recession and has the highest debt – at 135% of GDP – in the EU; there is no doubt that this will continue at high levels in the absence of prudent economic management, specifically in relation to pension reform and overhauling trade unions by the Conte government. There is no doubt that the bloc is in a very fragile shape, with growth forecast of only 1.2% this year.

There will be envious eyes looking over the Channel, as the UK starts its new life with the IMF forecasting that it will be the fastest growing G7 economy.  The country will be run by a government, with a heathy mandate to make Brexit work, and no longer having to face an establishment, that ran a fear campaign to try and keep the country in the hands of a meddlesome and unelected EU bureaucracy. It is almost four years since the referendum, following which the doomsayers were forecasting that sterling would sink to be on par with the greenback and that the economy would fall off the cliff.  History shows otherwise. The UK will now be able to set their own trade terms, with the likes of the US, China, India and other fast-growing economies, and not have to rely on bureaucrats and twenty eight other meddling and slow-moving countries to decide for them, most of whom take more from the EU treasury than they put in. Who is going to pay them now that the UK, which pays up to 13% of the bloc’s budget, has left?  Hopefully the EU will Leave A Light On.

       Is This The World We Created? 23 January 2020 .

According to Valustrat, the average value of Dubai properties declined 10.4% last year, with larger 15% falls noted in Discovery Gardens and Dubai Production City and single digit declines in four of the twenty-six locations surveyed – villas in the Meadows, Palm Jumeirah and Emirates Hills, as well as apartments in Dubai Sports City. (Strangely, last week’s blog noted that another consultancy indicated that there were price falls of 23.0% and 24.3% in Discovery Gardens and the Meadows respectively – a marked and worrying variance between the two studies). Residential rents were 9.1% lower, year on year, and 3.8% in Q4; the average annual Dubai residential rent was almost US$ 24k ($23,951) – apartments at US$ 18.5k and villas at US$ 57.5k. Valustrat noted that in 2019, “cash sale volumes of ready homes grew 29.7% and off-plan sales jumped 68.3%,” with investor demand boosted by attractive prices, fewer off-plan launches and delayed project completions. It estimated that last year 19.5k apartments and 5.1k villas were completed, making a total of 24.6k residential units.

Azizi Developments confirmed that it has already sold 81% of its inventory, across all 54 ongoing projects in Dubai, whilst projects such as Aliyah in Dubai Healthcare City and Plaza in Al Furjan have seen 90% of units sold prior to completion. To date, the developer has sold 12k units, and delivered 14 projects across Palm Jumeirah, Dubai Healthcare City and Al Furjan, valued at a total of over US$ 680 million.

Emaar’s latest Chinese foray sees the developer signing a MoU with Chinese giant Xiaomi to launch ‘Emaar Smart Home’, The latest smart home technology, powered by AI, will be launched in an exclusive set of digitally enabled Emaar residential developments and will offer “connectivity, comfort and convenience for the customers of tomorrow, today;” it will be controlled and monitored through Xiaomi’s Mi Home app.

According to Knight Frank’s latest Global Residential Cities Index, Dubai was ranked 146th out of 150 countries surveyed, with an annual 7.3% price drop in the twelve months to 30 September 2019 – and some 30% off since 2014. Budapest led the field with residential price rises of 24%. On average, the index rose 3.2% – its weakest annual rate since Q2 2015.

Emirates NBD is seeking to sell an undeveloped plot in the Dubai International Financial Centre, after becoming frustrated by the pace of assets sales under Al Jaber’s debt restructuring, according to people familiar with the matter and an enforcement letter sent by the bank; the land, valued in the region of US$ 70 million, was used as collateral for a loan which has yet to be paid off. In 2019, it was agreed that Al Jaber would raise up to US$ 445 million from asset sales, with other stakeholders pledging a further US$ 210 million. The Group, involved in sectors such as in construction, engineering and shipping, ran into trouble following the 2008 GFC; last year, the company agreed to restructure about US$ 1.5 billion. Lenders, including Abu Dhabi Commercial Bank and First Abu Dhabi Bank, have already recouped some money by forcing through the sale of the Al Jaber family-owned, 42-storey Shangri-La hotel in Dubai. operated by Hong Kong’s Shangri-La Group, which sold for US$ 191 million.

It is reported that the 800 MW phase 3 of the Mohammed bin Rashid Al Maktoum Solar Park will become operational in April.  By 2030, and costing US$ 13.6 billion, it will become the world’s largest single-site solar park, with a capacity of 5k MW. The first two phases became operational in 2018, with phases 1 and 2 having capacities of 200 MW and 300 MW.

Fajr Capital has divested its major minority share in Brunei’s largest bank, Bank Islam Brunei Darussalam to Brunei Investment Agency. The Dubai-based asset management company acquired its share in 2010, with the aim of transforming Brunei’s largest bank into a world-class financial services institution. Over the recent past, Fajr has exited its stakes in GEMS Education and National Petroleum Services.

In an interesting move, Mohammed Al Shaibani, CEO of Investment Corp of Dubai and director general of the city’s ruler’s court, has taken over as chairman of developer Nakheel. The current incumbent Ali Lootah, who had been in the position for the past decade, resigned this week after having steered the state-owned developer through a US$ 10.5 billion debt restructuring during his tenure. Al Shaibani is also joined by three other new board members – former Nakheel chairman Sultan bin Sulayem, Khalifa Al Daboos, and Issam Galadari. Nakheel, currently with billions of dirhams of projects and infrastructure development in progress, posted a 2018 US$ 1.2 billion profit, down 22.8%, year on year.

With banks having to follow what some might consider tight regulations when it comes to residential lending, it seems that some private developers are becoming de facto mortgage providers. As an example, Pantheon is offering ten-year plans for its Jumeirah Village Circle project, due to be delivered by mid-year. Their rates appear to be lower than traditional banks on a 30:70 payment plan, (30% to be paid, usually in instalments, by handover). Likewise, Samana has been offering 50% finance for its soon-to-launch project in Dubai Studio City. These come at a time when the UAE Central Bank has withdrawn the 20% upper limit on banks’ exposure to the real estate sector.

Next month, Meydan will host The Girlgamer Esports Festival World Finals a first for the ME area. The Government of Dubai Media Office is supporting the event as part of its strategy to drive the development of the region’s esports industry and to put Dubai firmly on the global map for competitive esports. The event, with a US$ 100k prize pool, is to be organised by Galaxy Racer Esports, in partnership with Evoloop and presented by Grow uP eSports. Nine of the world’s best all-female gaming teams will be participating, with Team Dignitas favourites to win for the third year in a row.

This week, Dubai Government professional employees have been awarded a pay rise of between 9% – 16%, under a new salary scheme that will also introduce flexible working hours, telework and part-time employment, as well as specifying a minimum wage for Emirati graduates. Furthermore, Sheikh Hamdan bin Mohammed, the Crown Prince, also approved the formation of a career-grade placement committee, to be chaired by Abdulla Al Falasi, which will approve the career-grade placement lists based on the grades and salaries.

Dubai welcomed a record 16.73 million international overnight visitors – a 5.1% increase in tourism volumes. Its top six source markets were India, Saudi Arabia, UK, Oman, China and Russia — delivering over seven million visitors; the top nine countries each attracted more than 500k visitors, as India retained its top position with over two million.

Following directives by the Crown Prince, Sheikh Hamdan bin Mohammed, camping will be allowed on Dubai beaches, designated for this purpose; on-line permits, from Dubai Municipality, will be required but there will be no charges. It has been more than a decade since beaches became no-go areas for camping enthusiasts and caravan owners.  Further good news on the waterfront was that all Dubai public beaches have attained the international accreditation of the Blue Flag programme,

Shuaa Capital reported that that one of its offshore units has finalised a deal to manage an investment portfolio of assets worth US$ 400 million which increases its total to US$ 13.4 billion. Last August, the Dubai-based investment bank completed a merger with Abu Dhabi Financial Group and this helped it post a Q3 profit, helped by a US$ 8 million contribution from its new owner.

DP World continues its recent acquisition foray, with buying a 44% share in Swissterminal Holding, a container terminal operator in Switzerland;  no details were made available except that the founders, the Mayer family, remain the majority shareholders.  The Swiss company operates three terminals, connected to Europe’s major container ports in Rotterdam and Antwerp, along with other ports. Last year, the port operator bought the likes of UK transport and logistics company P&O Ferries, Indian rail logistics company Kribhco Infrastructure and Chilean ports operator Puertos y Logistica; it currently has 150 operations in more than fifty countries.

Dubai Aerospace Enterprise has signed a US$ 300 million, four-year unsecured loan with China Construction Bank (DIFC Branch) and China Construction Bank (Asia) Corporation Limited; this could rise by a further US$ 200 million, if required. The funds will be used to support DAE’s future financing needs. The Dubai-based leasing company serves 125 global airlines from its seven locations in Dubai, Dublin, Amman, Singapore and the US.

With the latest news from Boeing that the 737 Max is unlikely to get approval to fly until the middle of this year, it is reported that their second-biggest customer, flydubai, is considering leasing more jets. With a timeframe that may go into Q3, the Dubai airline is “looking at short to medium-term leasing options to add more capacity for the coming few months”. The grounding has already cost Boeing more than US$ 9.0 billion.

The bourse opened on Sunday 19 January and, 79 points (2.9%) up the previous week, was  a further 10 points (0.3%) higher to 2838 by 23 January 2020. Emaar Properties, having gained US$ 0.06 the previous week, was US$ 0.05 lower at US$ 1.12, whilst Arabtec, US$ 0.06 lower the previous four weeks, was down US$ 0.02 to US$ 0.31. Thursday 23 January saw the market trading only 106 million shares, worth US$ 49 million, (compared to 175 million shares, at a value of US$ 84 million, on 16 January).

By Thursday, 23 January, Brent, losing US$ 3.69 (5.4%) the previous fortnight, shed US$ 2.26 (3.5%) to close at US$ 62.34 Gold, up US$ 84 (5.8%) the previous five weeks, rose a further US$ 9 (0.6%), closing on Thursday 23 January at US$ 1,565.

2019 was a record year with a 5.8% increase, to US$ 7.4 billion, being spent on global transfers in men’s football. The FIFA report noted that although English clubs were the biggest single spender in the market, at over US$ 2.0 billion, the figure was down 22.1% on the year. Of the 18k global moves during the year, involving 15.5k players of 178 different nationalities, only 18.6% were permanent club-to-club transfers, whilst the most common type of transfer saw 64.3% of the total players out of contract. In terms of net value, Portugal generated the most with US$ 503 million, as England came in worst in that category with minus US$ 715 million.

There is still no news when Travelex’s main UK website will return to service, following a cyber-attack on New Year’s Eve; however, it seems that the system used by staff is back in operation. A gang of hackers, known as Dodinokibi, has since held its systems to ransom, and are demanding a US$ 6 million repayment to unlock digital files that it had earlier encrypted. Until the impasse is resolved, customers will be unable to order currency online, either from Travelex itself or through the network of banks that use its services.

Following a Deloitte investigation, troubled Ted Baker has confirmed that it had overstated the value of its stock by over US$ 75 million, somewhat higher than the US$ 33 million estimate made in December. The fashion retailer has yet to confirm how the stock discrepancy arose but with its former boss of over thirty years, Ray Kelvin, stepping down over misconduct claims; it has seen sales and H1 profits slump from a US$ 32 million profit to a US$ 30 million deficit. It seems that its auditors, KPMG, had uncovered mis-statements but concluded they were too small to affect the fashion label’s accounts.

As its share value has doubled over the past three months, Tesla has pushed its market value to over US$ 100 million and, in doing so, displaced Volkswagen as the world’s second most valuable carmaker behind Toyota, with a market value of US$ 230 million. The other three companies, making the top five list, are Volkswagen, GM and Honda with stock values of US$ 89.7 billion, US$ 49.9 billion and US$ 49.7 billion respectively. In 2018, Elon Musk’s company delivered more than 367k cars, 50% higher than a year earlier, but still miles behind Volkswagen and Toyota with their numbers of 11 million and 9 million for the first eleven months of 2019.

As a result of ongoing economic uncertainty, with slower than forecast rates of growth for its Evoque and Discovery Sport models, Jaguar Land Rover is cutting 12.5% of its Halewood plant payroll to 3.5k; this is part of the carmaker’s strategy to cut 4.5k global jobs in a bid to save US$ 3.3 billion to reverse recent losses. With this latest “fresh blow to the car industry”, the UK’s industry continues to experience severe challenges.

In the midst of a major financial crisis, South African Airways has reportedly cancelled nine of its total of thirty domestic and international flights. In December, the national airline was placed into bankruptcy protection and is expecting to receive a US$ 138 million government finance package to enable the airline to keep flying. It has not made a profit since 2012 and has been bedevilled by not only running an aging, expensive to run and inefficient fleet but also by high taxes, political interference and corruption scandals.

The fall-out from the 2018 Royal Commission on Banking continues unabated with the latest being the National Australia Bank’s superannuation trustees, (MLC and NULIS Nominees), being charged with a new class action for allegedly ripping off more than 330k clients by failing to move them into lower cost default products. It seems that the greedy financial institution left clients’ money in funds with higher fees and lower returns – obviously failing to act in their clients’ best interests The Commission had earlier castigated the trustees’ parent company NAB for repeated breaches of superannuation laws. It is reported that the trustees failed to transfer US$ 4.5 billion of clients’ retirement funds to the low cost default MySuper in a timely fashion, leaving them in “idling in products” with higher fees and commissions to financial advisers that are outlawed.

AMP is another company in trouble because it reported that it has delayed returning money to clients it “stole” in the fees-for-no-service scandal. The wealth manager has written to former clients informing them their refunded fees had been placed in new AMP superannuation accounts, including its Eligible Rollover Fund, which according to Super Consumers Australia has underperformed to comparable funds; although this does not charge entry and exit fees, it does have administration and investment fees. The Australian company has been forced to refund hundreds of millions of dollars following revelations at the royal commission. Despite this, last year they wrote to clients advising then they were owed money, because of these irregularities, and instead of asking them where they would like the money sent, AMP opened a new super account in their name.

Despite her fall from grace, Isabel dos Santos is still Africa’s richest woman  and now it seems that the daughter of Jose Eduardo dos Santos, the former president of Angola,, has made her fortune by exploiting her own country and corruption; her father had a dictatorial grip on the country for 38 years until his 2017 retirement – enough time to plunder the oil-rich country. His daughter was given enough slack to take basically what she wanted and had ready access to lucrative deals involving land, oil, diamonds and telecoms and was allowed to buy valuable state assets in a series of suspicious deals. In 2016, her father decreed that she be put in charge of the country’s struggling state oil company Sonangol. On the day she was fired by the new president, Joao Lourenço, she approved fifty invoices totalling US$ 58 million of suspicious payments to Matter Business Solutions, an off-shore company, run by her business manager and owned by a friend. It seems that they included two identical invoices for US$ 676k for exactly the same work on the same day.

This week also saw two other related events, the first was the sudden deathofNuno Ribeiro da Cunha,a banker implicated in the embezzlement and money-laundering case against Isabel dos Santos; he managed the account of oil firm Sonangol, formerly chaired by Ms Dos Santos, at the small Portuguese lender EuroBic. Earlier Angolan prosecutors named him as a suspect. It was also reported that a top PWC executive had left the firm after revelations of PwC links with Isabel Dos Santos, with the firm involved with auditing, consultancy and tax advice for her companies.

A recent World Economic Forum study has stressed the importance of countries Increasing their social mobility – defined as providing people with equal opportunities to raise their living standards, regardless of their socio-economic background. 82 economies were analysed and measured against five key criteria, including health, access to and quality of education, technology, work conditions and inclusive institutions. It considers that countries such as China, US, India, Japan and Germany, would stand to benefit most from upward social mobility. It states that if developed and emerging economies, that lag in four areas, (low wages, poor education, inadequate working conditions and lack of social protection), improved and lifted their social mobility score by just ten points, global GDP would jump by 4.4% by the end of the decade.

Latest figures from down under sees the top 1% of Australians (250k) having more than double the wealth (US$ 1.6 trillion) of the entire bottom 50%. The country has seen the number of billionaires decrease by seven to 36, year on year, but they grew their average wealth by an average US$ 460 million in 2019. (Globally, the wealthiest 1% of people have more than double the wealth of 6.9 billion people and the 2.2k billionaires have more wealth than 4.6 billion people). Oxfam note that the rich are getting richer and the poor poorer and that the richest 22 men in the world own more wealth than all the women in Africa, whilst half the world’s population have to survive on less than US$ 5.50 a day. The two most telling facts, in the Oxfam study, are that taxing an additional 0.5% of the wealth of the richest 1% over the next decade is equal to investments needed to create 117 million jobs in education, health, elderly care and other sectors to close care deficits. The other was that developing countries lose an estimated US$ 100 billion a year in tax revenue, as a result of tax avoidance by multinationals. Is This The World We Created?

Hey Ho Silver Lining!                                                                                    16 January 2020

The latest study from Core indicates that 32k units were brought to the market last year and that a further 8.9% 49k units this year will bring Dubai’s total residential stock to 600k. The real estate firm estimates that the market oversupply in the emirate looks likely to continue, with the three top locations for the new supply being MBR City, Dubailand and Dubai South. But to the optimistic observer, a pick-up in global trade, the current regional geo-political uncertainty stabilising and the Expo halo may see the demand needle moving in the opposite direction. Interestingly, there was a 58% decline in the number of new launches in 2019, year on year; that will surely see a much-needed slowdown in the supply chain.

As property prices continue to scrape the bottom, allied with historically low interest rates and more accessible bank financing, the knock-on effect is that the number of mortgage enquiries jumped 59% over the year. Mortgage Finder also found that there was an 11% inquiry increase from those earning between US$ 2.7k – US$ 3.3k (AED 10k – AED 12k) and that the average property price, that those in this bracket consider, is US$ 217k (AED 795k).

Bayut.com estimate that Dubai Marina, with apartment prices per sq ft 11.7% lower on the year at US$ 361, was the most popular location in Dubai for new buyers, whilst Palm Jumeirah attracted the highest number of buyers and investors for villas, where prices fell 16.6% to US$ 380 per sq ft.  Last year, sales in Dubai Marina were 59.5% higher at US$ 2.2 billion. With prices continuing to head south, allied with mortgage rates decreasing, Dubai is still a buyer’s market as the number and value of property transactions increased in 2019. There were marginal 5% declines recorded in Business Bay, whilst JVC posted average 13.8% declines to US$ 163 per sq ft. The more popular locations in the secondary market were found in Palm Jumeirah, Dubai Marina, Downtown Dubai and JVC, whilst the primary segment saw Dubai South, MBR City and Dubai Hills come out in front.

HH Sheikh Mohammed bin Rashid Al Maktoum has enacted the DIFC Leasing Law No 1 of 2020, stipulating requirements that provide a protection framework for owners and tenants in the financial hub. It is hoped that the new law “will enhance the DIFC’s property market and reflect the centre’s commitment to maintaining a legal and regulatory framework, aligned with international best practice”. Among the new regulations are a maximum 10% limit on security deposits of the annual rent of a residential lease and that the landlord has to give a tenant written notice of a proposed rent increase at least ninety days prior to the expiry of a lease. There are also other guidelines, including the introduction of a tenancy deposit scheme, and residential leases to be administered by the registrar, requiring the production of condition reports, and specifying provisions relating to the termination of leases.

According to HH Sheikh Mohammed bin Rashid Al Maktoum, “We, at Dubai Council, will double our work in the next period — 2020 will be the year of major changes and real transformations in our journey towards the next 10 years”.  He was speaking as Dubai set up a new “economic district” on SZR for the next generation of businesses – much similar to the way the DIFC free zone has become one of the major global financial centres over the past two decades from ground zero. The government is planning a US$ 545 billion (two trillion dirhams) trading hub over the next five years; in H1, trading volumes totalled US$ 184 million. The District will have a “future economies” research centre and be a base for business incubators and financing institutions for New Economy enterprises. It will be no surprise to see the Dubai Ruler’s tweet – “We are the new capital of the New Economy” – soon become reality. He has also issued a directive to further enhance Dubai’s presence on the world stage by setting up fifty global offices for promoting Dubai’s commercial, tourist and investment position.

The UAE has bailed out the US by deciding to finance the world’s biggest economy’s Expo pavilion, after Congress failed to approve federal funds to construct the US$ 60 million pavilion; the US bars public financing for such international gatherings. Secretary of State, Mike Pompeo, was a keen supporter for US participation at the world fair fearing that the country’s absence would demonstrate weakness at an event where an increasingly powerful China would showcase its technological prowess in a key region – whereas US would have lost out “to showcase American freedom, ideals, enterprise, culture and global leadership.” The US building will demonstrate 3-D printing for prosthetics and organs, a journey to Mars and an idealised future city with minimal traffic.

A report from investment advisory, Julius Baer, has ranked Dubai as 17^th out of 28 countries as the most expensive for luxury goods and services – and sixth from twelve countries in the EMEA region. The three most expensive global cities were Hong Kong, Shanghai and Tokyo – with Mumbai coming in the lowest at 28^th; London, Paris and Milan were akso among the most expensive for luxury goods and services. Dubai is the most expensive place in the Europe, Middle East and Africa (EMEA) region to buy a lady’s handbag or a piano, whereas it is the cheapest for a wedding banquet – 89% lower than it would cost in New York. When it comes to prime residential property, (only 9% of that in Monaco, the most expensive in the survey), business class flights (55% of Sydney prices) and cars (64% cheaper than Singapore), Dubai scored well. If nothing else, the survey debunks the myth that the emirate is such an expensive place to live in or visit, compared to other global cities.

Business activity in Dubai’s December non-oil private sector economy saw a month on month 1.2 dip to 52.3 – a figure that still indicates that business activity remains strong; the market is forecasting that the level of investments will improve on the back of Expo 2020, with higher sales expected. There appears to be a lot of hope being put on the world fair, starting in October, to boost both investment and spending in the emirate. However, new order growth did come in at its slowest rate in nearly four years. The month also saw a weaker increase in new orders, driven by the fact that the slow economy negatively impacted on clients’ spending power. On the plus side, employment increased for the fourth month in succession.

This week, Sheikh Ahmed bin Saeed Al Maktoum, chairman of Dubai Silicon Oasis Authority, laid the foundation stone for W Motors – a US$ 100 million investment for the seven-year old high-performance luxury sports cars facility. The 120k sq ft project will be built in three stages, with phase one comprising a workshop, assembly area, and a “concept and prototype” manufacturing zone. Production of all W Motors vehicles will now take place in DSO, including its limited series Fenyr SuperSport.

DMCC reported that the number of newly registered companies last year was 5.4% higher, year on year, bringing the total to over 17k. Over 100k people live and work in JLT, which has quickly become a major global hub for trade and an interconnected business district.

Dubai Economy estimates that over 184k new jobs were created last year, as it saw new business licences jump 90.8% to 38.4k, year on year.; over 2019, the number of licences cancelled was down 1.7% to 4.9k. These figures seem to indicate that there has been a marked uptick in the emirate’s economic competitiveness and that the recent Foreign Direct Investment Law has enhanced overseas business interest.

For the sixth time, a tribunal of the London Court of International Arbitration has found in favour of DP World, in their case against the Government of Djibouti over the Doraleh Container Terminal. On this occasion, it was found that Djibouti had acted illegally when it forcibly removed DP World from management of the terminal in February 2018 and was ordered to restore the rights and benefits, under the 2006 Concession Agreement to DP World, by the end of March or pay damages. It has been estimated that the Dubai port operator has incurred losses of over US$ 1 billion. The Doraleh Container Terminal, a third owned by DP World, is the largest employer and biggest source of revenue in the country and has operated at a profit every year since it opened.

According to the General Civil Aviation Authority, the UAE has thus far invested US$ 272 billion in airport infrastructure development projects, spanning development projects across the country, and a fleet of 884 commercial aircraft. As the industry grows, (with latest numbers indicating 4.4.% growth in global passenger numbers this year to 4.72 billion), there is the need to keep up with the latest developments, especially in the ME which is one of the world’s fastest expanding markets.

An interesting statistic from Dubicars.com sees used car values rising for the first time in the UAE – up by between 4% – 10% – while sales are accelerating. The study, analysing three million searches, also shows dealers selling vehicles 7.5 days faster than in 2018 and privately-owned cars are selling in 17.8 days, from 24.4 days. It also indicated that a new car will experience a drop in value of between 15% – 30%, within the first year,but that used cars are not depreciating as fast they used to. There is no doubt that sales of new cars over the past four years have slumped by up to 40% and that the average age of a car on Dubai roads is eight years. This shows that consumers are holding on to their cars longer, rather than trading in for a new model, which in turn has increased the demand for used cars and have started to push their prices upwards.

The founder and former CEO of embattled Drake & Scull International, Khaldoun Al Tabari, has been arrested in Amman, after failing to turn up before Abu Dhabi’s Public Funds Prosecution over criminal charges filed by DSI for fund mismanagement/misappropriation. This arrest will send shock waves for those corporate chiefs and senior personnel who have carried out financial misdemeanours in the past. It is believed that DSI itself hasfiled “15 criminal complaints against the previous management, members of the previous board of directors and some of their family members.” It has been reported that accumulated losses at DSI top US$ 1.1 billion and that their scale and nature were kept secret by previous management. The UAE authorities had issued a directive to freeze the bank accounts of Al Tabari and his wife, as well as to seize properties registered under their names.

There are reports that Amanat Holdings is considering a potential acquisition of a strategic stake in the ME operations of VPS Healthcare. If this were to go ahead, it would be in line with the ethos of the Dubai-based healthcare and education investment company to buy into established platforms to grow and scale profitably. VPS was founded in 2007, by Dr Shamsheer Vayalil, and is now an integrated private healthcare service provider in the UAE, with a growing foothold in Oman. Interestingly, Dr Vayalil is also Vice Chairman and Managing Director at Amanat Holdings but will not be involved in any discussions regarding this particular deal.

The bourse opened on Sunday 12 January and, 21 points down the previous week, was up 79 points (2.9%) to 2828 by 16 January 2020. Emaar Properties, having lost US$ 0.03 the previous three weeks, was US$ 0.06 higher at US$ 1.17, whilst Arabtec, US$ 0.06 lower the previous three weeks, was flat at US$ 0.33. Thursday 16 January saw the market trading only 175 million shares, worth US$ 84 million, (compared to 164 million shares, at a value of US$ 61 million, on 09 January).

By Thursday, 16 January, Brent, losing US$ 3.15 (2.6%) the previous week, shed US$ 0.54 (0.8%) to close at US$ 64.60. Gold, up US$ 80 (5.4%) the previous four weeks, rose a further US$ 4, closing on Thursday 16 January at US$ 1,556.

Following the death of Sultan Qaboos, his cousin Haitham bin Tariq has been sworn in as the new sultan of Oman. “After a meeting of the family which decided to appoint the one who was chosen by the sultan”, the 65-year old was sworn in on Saturday, a day after Sultan Qaboos, the longest-reigning leader of the modern Arab world, passed away. Having died unmarried and leaving no children or heir apparent, and following royal protocol, the royal family had three days to determine the successor and if they had failed to agree, the person chosen by Qaboos in a letter addressed to the family would be the successor. Many had theorised that another cousin, Asad bin Tariq, was the favourite to take over.

Abu Dhabi Crown Prince, Mohamed Bin Zayed Al Nahyan, has been appointed to chair a panel to oversee the construction of a new Indonesian capital, with SoftBank chief executive and founder, Masayoshi Son, and former UK Prime Minister, the ubiquitous Tony Blair. The appointment was made by the Indonesian President, Joko Widodo, on a state visit to Abu Dhabi.  The panel will advise on building the new US$ 34 billion capital, to be located on the island of Borneo, to ease the burden on the sinking and congested current capital Jakarta, with a thirty million population. SoftBank has already shown interest in part financing the establishment of a smart and green city and investment deals, worth an impressive US$ 22.8 billion, were signed between companies from the UAE and Indonesia.

2019 plane sales at Boeing slumped to just 380 jets – its lowest level in eleven years, as its main protagonist, Airbus managed to deliver more than twice that number at 863. Bearing in mind that orders – which deduct cancellations in their calculations – reported that new orders in 2019 were a miserly 54, compared to its European rival’s 768 planes. The main driver behind the dismal news was the grounding of its 737 Max in March, following two fatal crashes; ten months later, there is still no concrete news on when the model will fly again. Boeing has an order backlog of 5.4k, across its range of jets, as at the end of 2019. It is estimated that the US plane maker is bleeding US$ 1 billion a month and posted a US$ 3 billion negative cash flow in Q3. It will also face astronomic penalties and compensation payments in the months ahead.

2020 started no differently for the UK High Street which has been in the doldrums now for several years. Beales, founded in 1881 and one of the country’s oldest department stores, has warned that it could collapse into administration. If that were to happen, twenty-two stores and 1k jobs will be at risk if a buyer cannot be found; the company is in talks with two potential buyers – a rival retailer and a venture capital investor – and is also in negotiations with landlords regarding rent reductions. This week has also witnessed Debenhams closing nineteen shops and Mothercare’s 79 UK stores ceasing trading.

There was no surprise to discover that 2019 was the High Street’s worst on record, with retail sales falling for the first time in twenty-five years, declining 0.9% over the last two months of the year. Two major players have issued warnings. Superdry said that its profits could be wiped out after sales fell sharply over Christmas. Meanwhile, John Lewis has warned that its staff bonus may be in doubt, as Christmas sales, at its department stores, were 2% lower for stores open at least a year.

Having opened its first store in 1972 in Perth, the Australian-founded, Hong Kong-owned denim label Jeanswest is in a crisis that could see the end of the iconic brand and the closure of its 146 outlets in its home country.(Its overseas operations, in countries such as China, Hong Kong, Vietnam, Russia and Indonesia, are not affected by the administration). Two other retailers are closing stores – Bardot with 58, over the next two months, and Harris Scarfe closing 21. Meanwhile Mosaic, with brands such as Noni B, Rivers, Millers and Katies clothing chains, noted that its sales took a hit in H2, especially in the 32% of its stores in regional areas, where the company said “consumer confidence has been particularly fragile”, being “directly impacted” by the bushfires. Its share value sank 20%, in two days’ trading, on Tuesday and Wednesday. Any upward movement in economic growth has been hampered by weak household consumption, with latest ANZ data seeing Christmas period sales 5% down year on year.

YTD, the Australian stock market has proved to be the best performing global bourse, as the ASX jumped 5.3% to exceed the 7,000 barrier (to 7,048) for the first time, driven by record interest rate lows and a recent improvement in US-Sino trade relations. The Central Bank has had to slash rates last year in a bid to stimulate a sluggish Australian economy. With investors earning next to nothing on cash, but being able to borrow cheaper money, they are turning to the share market which has meant that the ASX has a very expensive 18.2x price-to-earnings ratio. One consequence of this has seen the total Australian superannuation portfolio reach US$ 2.1 billion (AUD 3 billion) – up 13.8% on the year – with the average super fund returning 15.2%, the best since 2013. It has to be noted that because the local financial markets are relatively small, an increasing amount of “Australian money” is to be found invested in international markets.

Aided by enhanced household spending, the German economy managed to grow by just 0.6% in 2019 – its weakest performance in six years – as Q4 is expected to see growth of between 0.1% – 0.2%. There were weaker returns in business investment for machinery/equipment and an 0.5% decline in industrial production, excluding construction, whilst exports grew at a lower rate (0.9%) than in recent years. Despite marginally better returns in Q4, having nearly moved into recession the previous two periods, there is no doubt that Europe’s mainstay economy is struggling to generate growth.

A monthly 0.2% decline in December’s inflation rate to just 1.3%, (its lowest rate in over three years), makes am increase later in the month much more likely, as it is well below the Bank of England’s 2.0% target. There were price falls noted for women’s clothes and hotel room costs, although energy prices climbed 4.9% in December. However, with the UK economy barely crawling forward, there is little immediate chance of rates returning to the 2.0% mark in the near future.

A third member of the nine-man Bank of England’s Monetary Policy Committee has come out indicating a willingness to cut interest rates further depending on how the economy has performed since the December election and whether economic weakness persists. Currently, the rate is at 0.75% and there is now the possibility of this being reduced to 0.50% when the next MPC meeting takes place on 30 January.

Positive news from Washington should help ease the tensions between the US and China, as regulators reversed their earlier decision to brand the world’s second biggest economy a currency manipulator, following an agreement that the yuan would not be devalued so as to make Chinese exports cheaper on the global stage. The facts that the Chinese currency had appreciated since August, at the height of the trade war, and the IMF confirming that the yuan was valued fairly, may have helped the decision. The Treasury Secretary, Steven Mnuchin, confirmed that “China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability.”

Subsequently, the two superpowers signed a pact that was well received by both parties, with Donald Trump saying it would be “transformative” for the US economy and Chinese leaders calling it a “win-win” deal, that would help foster better bi-lateral relations. Part of phase 1 of the deal sees China agreeing to boost US imports by US$ 200 billion above 2017 levels and strengthen intellectual property rules, with the US agreeing to halve some of the new tariffs; the four way split will see manufacturing, energy, services and agriculture benefitting by US$ 78 billion, US$ 52 billion, US$ 38 billion and US$ 32 billion respectively. The two-year tit-for-tat trade war has seen tariffs of more than US$ 450 billion being levied on traded goods, with a negative impact on global economic growth and trade.

A Cavendish Maxwell report concludes that the falling prices in a sluggish property market represent a “silver lining”, with more buyer interest being generated by lower prices. The consultancy estimated that 2019 apartment declines averaged 15%, although some areas, including Discovery Gardens and JVT, posted bigger falls of 23%. Price declines for villas and townhouses averaged 18%, although bigger ones were noted in the Meadows (24.3%), JVT (22.8%) and Victory Heights (22.3%). In a simple equation, with incomes nudging higher (or even remaining flat) as property prices sink (and supply increases), the customer base is expanding. Add to the mix Expo, and more potential buyers, along with lower mortgage rates, then it is only a matter of time before equilibrium returns to the Dubai property sector. Hey Ho Silver Lining!

 

 

So You Win Again                                                                                          09 January 2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Don’t Stop Me Now!                                                                                       O2 January 2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Forecast				%age
2020			Unit	2019	2019	2018	2017	2016	2015	2014
1,610	Gold	US$	oz	18.05%	1,517	1,285	1,305	1,151	1,060	1,186
102.00	Iron Ore	US$	lb	28.37%	91.53	71.30	71.28	75.00	47.00	73.00
69.45	Oil -Brent			23.92%	66.67	53.8	66.62	56.82	36.4	57.33
136.50	Coffee	US$	lb	26.74%	129.15	101.90	126.20	133.00	124.00	161.00
66.00	Cotton	US$	lb	-4.50%	68.95	72.20	78.50	69.00	64.00	62.00
18.20	Silver	US$	oz	14.78%	17.86	15.56	16.99	16.00	13.82	15.77
2.85	Copper	US$	lb	6.06%	2.80	2.64	3.30	2.48	2.14	2.88
0.680	AUD	US$		0.21%	0.702	0.700	0.780	0.720	0.730	0.810
1.41	GBP	US$		4.41%	1.326	1.27	1.35	1.24	1.48	1.53
1.09	Euro	US$		-1.93%	1.12	1.14	1.20	1.05	1.09	1.21
0.017	Rouble	US$		14.29%	0.016	0.014	0.017	0.016	0.014	0.017
7,777	FTSE 100			12.22%	7,542	6,721	7,688	7,142	6,242	6,548
4,250	CSI300			30.39%	4,097	3,142	4,031	3,310	3,731	3,532
3,400	S&P 500			28.88%	3,231	2,507	2,674	2,238	2,044	2,091
3,200	DFMI			9.29%	2,765	2,530	3,370	3,531	3,151	3,774
6,900	ASX			20.35%	6,802	5,652	6,171	5,665	5,345	5,415
9,800	Bitcoin	US$		94.94%	7,201	3,694	13,081	998	427	302

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

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

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

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

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

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

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