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Play The Game                                                         01 August 2019

For a welcome change, there was some good news on Dubai’s realty front, with Allsopp & Allsopp noting that the rise in sales prices was “very encouraging for the market”, following months of falling prices. The firm noted that it had witnessed Q2 buyer registration 37% higher, year on year, and up 19% on the previous quarter, as tenant registrations rose 31 % on the year and by 16.5% on a quarterly basis, with transactions rising by 3%. These figures indicate “that the market is either at or heading towards the bottom of the price curve.” The consultancy also noted that there was a 23% increase in Q2 secondary market sales compared to Q1, while sales in the off-plan sector dropped by 30%.

Despite all doomsayers preaching that the end of the Dubai realty sector is nigh, there is still money to be made in the market. According to ValuStrat, the top ten net rental yields range from 6.0% to 8.2%, with International City, Remraam and The Greens posting 8.2%, 7.6% and 7.5% respectively. The average net returns are estimated to be 4.6% for villas and 5.8% for apartments. With rent being the highest cash outlay for many expats – and residential prices continuing to head south – it seems a no-brainer for many to consider buying, especially as interest rates are on a downward trend. Two main factors holding some potential buyers away from the market are job security and high down payment rates. There is no doubt that there has been – and is – an economic slowdown but history will tell that we have always lived in an economic cycle and things will change for the better. The other factor of high entry costs (including the requisite 25% bank down payment) could be changed tomorrow if authorities thought fit. When this happens, prices will automatically start moving north.

Deyaar Development is confident that it will complete two districts – Afnan and Dania – within its five million sq ft Midtown community mega development, by year-end; the whole development comprises 26 buildings. Located in Dubai Production City, Afnan’s seven buildings will house 659 apartments with Dania’s 579 apartments being in six buildings. The developer also announced that its other development – the 18-storey Bella Rose in Dubai Science Park and comprising 478 units – is 28% complete.

Nakheel has launched the first phase of its Nad Al Sheba gated community which will house 1.6k Mediterranean and Moroccan style 4-5 B/R villas. Annual rents start at US$ 32.4k and US$ 34.9k for the two villa models. The development will also have a 5km cycle and jogging track, pool and a community centre, with 200 retail outlets, currently under construction.

Kleindienst Group posted H1 revenue of US$ 155 million for villas in its The Heart of Europe project off the coast of Dubai. The developer, which estimates that here is a latent market demand for over 50k second homes in the UAE alone, announced that two of the islands, in the US$ 5 billion project, are almost 70% complete. Germany Island will have 32 villas, as well as twelve Floating Seahorse villas – underwater living residences. The heart-shaped Honeymoon Island will host over 100 Floating Seahorse villas, four restaurants and bars, adult infinity pool, children’s pool and play area, dive centre and health spa. Phase one is sold out with phases two and three underway.

The recently completed seven-storey Millennium Al Barsha Hotel, operated by Millennium Hotels & Resorts, is scheduled to open this month. The 4-star property, built by Dubai-based Deyaar, will house 109 serviced apartments (93 1 B/R and 16 2 B/R), and 299 hotel rooms (with 15 suites). The same combination was responsible for the Millennium Atria Business Bay, that opened earlier in the year, and will see Millennium Mont Rose serviced apartments in Dubai Science Park opening by year-end.

Luxhabitat reported that the highest value property sold in Q1 was for over US$ 20 million – at The One, Palm Jumeirah. Of the others in the top ten, four were in Emirates Hills (ranging from US$ 10 – US$ 17 million), two Palm Jumeriah Signature Villas (at US$ 11 million and US$ 13 million), a Royal Atlantis Residences apartment for US$ 12 million and two properties in Il Primo, Downtown Dubai for US$ 16 million and US$ 17 million.

In the prime residential market, Arabian Ranches 1, Jumeirah Golf Estates and Downtown Dubai saw transaction values grow by 45.5%, 42.1% percent and 40.5% respectively; values were 3.2% higher at US$ 2.8 million. In Q1, the value of transactions in the secondary market was 5.8% higher at US$ 3.7 billion, with off-plan transactions declining 11.8% to US$ 1.8 billion, quarter on quarter. In Q2, 1.7k villas and 6.4k apartments were sold.

It is estimated business tourism at Dubai World Trade Centre generated a record US$ 3.5 billion, equating to 3.3% of the emirate’s GDP. The latest Economic Impact Assessment’ report indicates that for every US$ 1 spent at the 97 large scale exhibitions and events held last year, a further US$ 4.4 in sales value was generated for ancillary sectors and Dubai’s wider economy. In addition, 1.6 million attended events, that created a total of 879k jobs, which generated an aggregate US$ 1.14bn in disposable household income.

Dubai’s hotels posted their worst quarterly results since 2009, with STR reporting a 0.9% decline in Occupancy to 67.1%, with supply outgrowing demand for the sixth consecutive quarter. Even worse news saw both Average Daily Rate (down 12.3% to US$ 140) and Revenue per Available Room (13.1% lower at US$ 94) at their lowest levels since 2003. It is reported that 500 jobs have recently been cut from Jumeirah Group’s payroll, attributable to a marked decline in the emirate’s tourism sector. The government-owned hotel chain has a portfolio of 24 properties in eight countries.

Most other sectors are feeling the pinch, driven by three main factors – regional geopolitical tensions, relatively low oil prices and a slowdown in global trade. The economy is still in a sluggish phase but could be moving off its bottom. The improvement will be helped by certain government measures, including reducing many business fees and issuing longer-term visas. In a move to attract more foreign investment, enhance the national economy, further boost the business environment and help with liquidity, the Ministry of Economy is to waive or at least reduce fees on 115 of its services, ranging from US$ 27 to US$ 1.4k. They include service fees relating to the national patent programme, trademarks, industrial license services, auditing accounts and commercial agencies.

On 01 August, petrol prices moved higher, following a decision by the UAE’s Fuel Price Committee. Special 95 and diesel will be 3.7% higher at US$ 0.616 a litre and 3.0% to US$ 0.659 respectively.

Al Maktoum International Airport benefitted by the recent closure of Dubai International for 45 days of runway closures, as its H1 passenger traffic increased by 141% to 1.2 million. Over the period, the airport handled 900k passengers (equating to its total 2018 number) and up to eighty daily flights, compared to its normal ten. Russia (with 293k passengers) Saudi Arabia, India and Germany were the top destinations. Citing a “softening of the overall air cargo market”, cargo declined 5.3% to 450k tonnes.

A partnership between Dubai-headquartered Jetex Flight Support and US start-up Wright Electric could see electric planes flying over the emirate as early as next year. Jetex has a network of fixed-based operators in nearly forty global locations and the latest agreement will see it install electric charging infrastructure for electric jets in its extensive network of FBOs; it will also invest in the production of the first electric private business jets.

It is reported that DSA Investments may be forming a venture with a South African labour union to bid for former Glencore coal mines that were sold in 2015 to the once powerful Gupta family. The JV between DSA’s subsidiary, Orchid Mining, and Nehawu Investment Holdings, is expected to bid for Teesta Exploration & Resources (Pty) Ltd, currently under administration. This coal asset had been owned by the Guptas and the son of then President, Jacob Zuma.

DEWA is to invest US$ 2.2 billion, over the next three years, building 68 132/11 kilovolt (kV) substations, as it continues to expand its infrastructure to meet Dubai’s growing power demand At the end of 2018, the emirate had 258 main substations, eighteen of which were commissioned last year at a cost of US$ 600 million. On a global efficiency comparison, DEWA performs well, having managed to reduce losses from electricity transmission and distribution networks to 3.3% (cf 6-7% in Europe and the US), while water network losses have been reduced to 6.5%, compared to 15% in North America. It also achieved the lowest customer minutes lost per year in the world, at 2.39, compared to 15 minutes in Europe.

Last week, Mohammed Alabbar’s Symphony Investments and others established a partnership across the MENA region and China with Didi Chuxing. This week, Toyota announced that it would be investing US$ 600 million in the Beijing-based mobile transportation platform with 550 million users. The Abu Dhabi-based JV will promote sharing economy and internet consumer services in the region. Compared to Uber, the Chinese firm is well ahead when it comes to numbers – 550 million users and 30 million rides per day dwarfs the US entity’s 93 million users and 17 million daily trips.

YTD total loans provided by Emirati banks were 4.3% higher, by US$ 19.2 billion to US$ 461.2 billion, of which loans provided to the private sector were 2.7% up at US$ 272.5 billion. Government and the public sector loans were 11.5% higher by US$ 54.9 billion.

The Dubai Financial Services Authority has fined the collapsed private-equity firm Abraaj Group US$ 315 million for deceiving investors and carrying out unauthorised activities. The authority’s chief executive, Bryan Stirewalt, reiterated that investigations will continue and “those guilty of wrongdoing will be brought to account.” However, the authority has admitted that “the question of whether the DFSA will ever recover any of the fines imposed on them is not clear, for the time being.”

It seems that the Abraaj executives must have been on a basic accounting course when it had insufficient funds to pay all of its creditors. (The top echelon had apparently taken a shed load of money for their personal use but wanted to keep the business afloat). The firm, that once “managed” funds of over US$ 14 billion, prioritised “payments in order of importance, noise makers and those that will come back, with the latest being legacy investors and passive voices.”

The DIFC registered 250 new companies – an 11.0% hike in numbers -bringing the total of active registered firms to 2.3k and a workforce up almost 3% to over 24k. Management is hoping to  increase the number of finance firms by 49% to 1k, to double employees to 50k and increase assets under management to US$ 250 billion by 2024.

Emaar Malls posted a 3.0% hike in H1 profit to US$ 308 million on the back of revenue, being 6.0% higher at US$ 609 million (with Q2 sales 8.0% higher at US$ 314 million). Occupancy amongst its properties – including The Dubai Mall, Dubai Marina Mall, Gold & Diamond Park, Souq Al Bahar and the Community Retail Centres – stood at a credible 92%; total footfall for the first six months of the year was at 2.0% higher at 41 million. The Emaar Properties subsidiary paid a 10% cash dividend of US$ 354 million for the fourth consecutive year.

Due to the implementation of the accounting standard IFRS16 (relating to the treatment of leases), Aramex posted a marginal 0.8% increase in Q2 profit to US$ 27 million. The logistics company posted a 2.5% increase in revenue to US$ 272 million that could have reached 7.0%, if not for currency fluctuations (mainly involving the Australian dollar and South African rand).  Its H1 revenue came in 3.2% higher at US$ 681 million.

DFM-listed Dubai Insurance posted a 49.4% rise in H1 profit to US$ 12 million on the back of a 66.1% jump in total comprehensive income to US$ 15 million. On a quarterly basis, consolidated interim profits nudged 1.9% higher to US$ 5 million. At the end of June, the firm saw its total assets 21.2% higher at US$ 436 million, compared to six months earlier.

The bourse opened on Sunday 28 July at 2851 and having gained 190 points (7.1%) over the past three weeks added a further 49 points (1.7%) to 2900 by 01 August 2019.  Emaar Properties closed US$ 0.06 higher at US$ 1.48, with Arabtec flat again at US$ 0.48. Thursday 01 August witnessed low trading conditions of 115 million shares worth US$ 46 million, (compared to 199 million shares, at a value of US$ 58 million on 25 July).

For the month of July, Emaar climbed US$ 0.29 to US$ 1.51 and US$ 0.38 YTD from its US$ 1.13 starting point. Arabtec was up US$ 0.07 in July to US$ 0.48 but down YTD by US$ 0.04 from its January opening figure of US$ 0.52. YTD, the bourse is trading 370 points (14.6%) higher from its January opening of 2530 and in July gained 259 points (9.7%) from 2659 to its month closing of 2918.

By Thursday, 01 August, Brent, having gained US$ 1.15 (1.9%) the previous week, nudged up US$ 0.12 (0.2%) to US$ 62.05. Gold, having shed US$ 26 (1.8%) the previous week, traded US$ 30 (2.1%) higher on Thursday at US$ 1,444. For the month of July, Brent shed US$ 0.63 (1.0%) to US$ 64.42 but for the first seven months of the year gained US$ 10.62 (19.7%) to US$ 64.42 from its January opening of US$ 53.80. Gold was flat for the month of July – up US$ 2.0 to US$ 1,416 – but gained US$ 131 (10.2%) from its year opening of US$ 1,285 to its 31 July close of US$ 1,416.

If the proposed merger between Just Eat and Dutch rival, Takeaway, takes place, it would create one of the biggest global food delivery firms, valued at US$ 10 billion and processing 360 million orders, worth US$ 8.2 billion. The UK company, which is thought to be the market leader in its home country but is facing stiff competition from the likes of Deliveroo and Uber Eats, trades in overseas locations such as Canada, Europe and Australia where it is known as Skip the Dishes, Just Eat and Menulog respectively. News of the possible merger saw the UK’s company shares jump 25% to almost US$ 10 which had fallen in May, following Amazon’s US$ 710 million investment in Deliveroo.

Airbus seem to be taking advantage of Boeing’s woes, posting a 72% rise in adjusted profit before interest and tax to US$ 2.2 billion. The plane-maker ramped up production of its Neo version of the A320 (a direct competitor to Boeing’s troubled Max 737), with almost 240 being handed over in H1. The company confirmed full year guidance that will see a 15% hike in EBITDA, 890 aircraft deliveries and over US$ 4.5 billion of free cash flow. Its shares have surged over 53% already this year, compared to Boeing’s 7.7%.

Another country has finally seen the light that all is not well with the global economy, by slashing its forecast to 0.9% (from an earlier 1.3%). The Japanese government pointed to weaker exports (at 0.5% compared to the 3.0% expected earlier in the year), as the main driver, not helped by the ongoing US-China trade spat. However, other pundits in the private sector were more pessimistic with predictions of almost half this new figure. In Q1, the world’s third largest economy posted annualised growth of 2.2% but this is expected to slow somewhat over the remainder of 2019, due to increasing external pressure. Latest figures from Japan see industrial output down 3.6% in June, following a 2.0% increase the previous month. On an annualised basis, industrial production slumped 4.1%.

On Monday, the Australian Stock Exchange hit a record 6,826 which had been set in November 2007, just before the GFC. By comparison, the US S&P Index took less than half the time (1,386 days v 2,974 days) to top its pre-GFC high of October 2007 and is now at nearly double that high at 3,026 points. It seems that the Australian companies pay out more dividends and faces higher interest rates which slows its growth somewhat.

Pending US home sales in June rose 2.8% to 108.3, after a 1.1% rise the previous month. The surprising – but welcome – news is an indicator that the US economy is still performing well. With job growth at record levels, and the stock market at an all-time high, along with historic low interest rates, it favours well for the sector in the coming months. Furthermore, after a poor June, with a consumer confidence reading of 124.3, July bounced back to 135.7 – its highest level in 2019. According to officials, “consumers are once again optimistic about current and prospective business and labour market conditions.”

The French economy is grinding to a halt and could prove another nail in the eurozone economic coffin, following a manufacturing slump in the bloc’s largest economy, Germany. Despite the Macron-enforced tax cuts (following the Yellow Vests protests) and a US$ 18.9 billion stimulus package, consumer spending growth has slowed. Q2 growth of only 0.2% disappointed the markets and, with the rest of the eurozone on a downward trend, the ECB chief pointed to another monetary boost by next month, warning the outlook is getting “worse and worse”; Q2 growth is estimated at only 0.2% with Germany now in probable recession.

Meanwhile, July eurozone business confidence fell 0.6, month on month, to 102.7 – a 40-month low. The decline was felt across the board with most indicators – including industrial sentiment, services confidence, consumer sentiment – all heading lower. Construction has been badly hit, with reports of a sharp decrease in managers’ employment expectations, and a marked deterioration in their assessment of the level of order books; the construction sentiment index decreased to 5.0 in July from 7.6 a month earlier. Euro area expanded at the slower pace of 0.2% in Q2, (following 0.4% in Q1), with inflation, at 1.1%, easing to a seventeen-month low, emphasising the need for an updated significant stimulus package; year on year, growth is at 1.1%.

On Wednesday, the Fed lowered the target range for federal funds rate by 25 basis points to 2% to 2.25% – its first rate cut since December 2008. Although not unanimous, with two members preferring no change, the reasons cited for the cut were the implications of global developments for the economic outlook, as well as muted inflation pressures.  Fed Chairman Jerome Powell did indicate that although their assessment of the economy remained largely unchanged, the rate cut was “essentially as a mid-cycle adjustment to policy.”

The CBI confirmed that the UK private sector activity has continued to fall in the quarter to July; with firms posting growth at -9% resulted in the ninth straight rolling quarter of either flat or falling volumes. However, there was a marked decrease in both distribution and manufacturing volumes, whilst services activity showed a slower decline. Whether the advent of a new Prime Minister will impact on these figures, over the next three months, remain to be seen.

Boris Johnson assumed the position of Prime Minister of the United Kingdom on 24 July and how things have changed since the departure of Theresa May. In his first Westminster address, he put the Brussels mafia on the back foot by saying (quite rightly) that “no country that values its independence and, indeed, its self-respect could agree to a treaty that signed away our economic independence and self-government, as this backstop does” The EU wanted a sovereign nation to surrender political control over parts of its territory in ways it could never recover – unless the EU gave permission. The EU will have to give leeway, including no back-stop and other amendments. At long last, Brussels will be dealing with an adversarial negotiator who will stand up to the likes of Jean Claude Juncker and Michel Barnier. The rules of engagement have changed and now on a level playing field, both parties can properly start to Play The Game.

You Ain’t Seen Nothing Yet                     25 July 2019

Having sold out phase 1 of its Seven City JLT project, Seven Tides has announced that 652 apartments have already been bought, with a value of US$ 82 million. The development will be home to 2.7k studio and 1-3 B/R apartments, with prices starting at US$ 113k, US$ 197k, US$ 272k and US$ 400k respectively. The Dubai developer, whose CEO is Abdulla Bin Sulayem, has advised that the completion of the US$ 272 million project, encompassing 3.5 million sq ft, will be at the end of 2021.

In Q2, the only significant addition to Dubai’s commercial sector was the expansion of Dragon Mall that brought the emirate’s portfolio to 3.8 million sq mt. According to JLL’s latest report, rents are 14% lower in primary malls and 24% down in secondary malls, over the past twelve months; during the same period, market rise vacancies have risen 4% to 18%. Naturally, the two worries facing the sector are an obvious over-supply issue and the growing prominence of e-commerce which will badly impact on future footfall for existing malls. New malls on the horizon include Meydan Mall, Dubai Hills Estate Mall and Nakheel Mall on Palm Jumeirah.

This week saw the launch of Dubai’s first official sales and rental price index with the DLD signing an MoU with Property Finder. The index, to be known as Mo’asher, will provide Dubai consumers with more transparency in their realty dealings and better insights to help them, when taking property-buying and renting decisions.

June’s Property Monitor’s Dubai House Price Index estimates that over the past two months, the average Dubai house has lost US$ 10k, now standing at US$ 670k; year on year, prices are 15.3% lower and 1.6%, month on month, with average house and apartment prices  now at US$ 1.19 million and US$ 455k respectively. Since starting the index in September 2015, it has seen falls of 22.4% and 21.4%. Losses were higher in locations such as Arabian Ranches, Discovery Gardens, Dubai Silicon Oasis, Emirates Living and IMPZ, with prices sinking by more than 16%.

In a strategic partnership between public and private sectors, Dubai Land Department has launched the Manzili initiative. It involves a calculator that displays all properties that match a customer’s financial capabilities and also taking in preferential options. These include the customer’s current financial situation, and their preferred options, including location, space and monthly savings capacity among other considerations. The Manzili team will also hold awareness workshops on financial management and real estate investment.

Emaar is moving into the sphere of advanced construction technologies, with news that the developer is to 3D print a model home in Arabian Ranches, using a yet unknown local contractor. With this advancement, Emaar will be able to reduce waste of construction materials and noise pollution, as well as to decrease costs and speed up construction delivery times.

As mentioned in a recent blog, Emaar Properties has now signed a preliminary agreement that will see it develop 10% of Beijing’s new Daxing International Airport, comprising a business and tourism complex. The entire project, that will cost US$ 11.0 billion, will integrate retail, entertainment, office, hotel, convention and leisure space. The airport itself could become the busiest in the world, as it will be able to handle up to 120 million passengers.

An MoU has been signed between Noon.com and China’s Neolix that will see autonomous delivery technology soon come to the streets of Dubai. The Beijing-based tech company, with over a decade in smart technology, will build the driverless vehicles. It is estimated that their introduction will see up to a 90% reduction in costs associated with the last mile of delivery. Its founder, and chairman of Emaar Properties, Mohamed Alabbar, did not divulge further details.

A UK private equity firm has reportedly assumed the management rights of two funds of Abraaj, with sizes of more than US$1 billion. Actis, which already manages more than US$ 12 billion of assets, acquired Abraaj Private Equity Fund IV and Abraaj Africa Fund III for an undisclosed fee. Liquidators of the embattled Dubai firm have been trying to offload the entity’s assets and this deal has been their first success. The Dubai Financial Services Authority confirmed it is investigating the collapsed Group and will be focusing on the buyout firm’s senior management and people who failed to report irregularities.  

The saga about the Sheikh and Newcastle FC continues, with the latest development being that Fortress Investment Group, an American hedge fund, is in talks with Sheikh Khaled bin Zayed Al Nahyan’s Dubai-based Bin Zayed Group. This is in relation to a potential US$ 350 million takeover of the EPL club, currently owned by Mike Ashley.  Whether the deal is kicked over the line before the start of the EPL season next month remains to be seen.

DP World recorded a 0.5% H1 rise in both gross container volumes, on a reported basis, and on a like-for-like basis at 35.8 million twenty-foot equivalent units. Although Asia Pacific, the Indian subcontinent and Africa performed well during the period, both UAE and Australia returned disappointing results because of a loss of lower-margin cargo and challenging market conditions. At a consolidated level, DP World’s terminals handled 19.5 million TEUs in H1, as Q2 consolidated volumes grew by 10.6% on a reported basis, but down 0.6% on a like-for-like basis.

Two agreements signed in Indonesia this week by HH Sheikh Mohammed bin Zayed Al Nahyan, and Joko Widodo, President of Indonesia, see DP World and Indonesian conglomerate Maspion Group aiming to create a US$ 1.2 billion container port and industrial logistics park in East Java. The Maspion International Container Port in Gresik, with a 3 million TEU capacity, and using electric power, will start commercial operations in H1 2022.

Emirates Islamic is the first bank to join the US$ 27 million Credit Guarantee Scheme, initiated by the Emirates Development Bank, that supports the goals of the National Agenda under UAE Vision 2021. The scheme will focus on SMEs, by offering new start-ups US$ 545k, through partner banks, with the EDB guaranteeing up to 85% of the amount. Existing SMEs can apply for up to US$ 1.4 million, with a 70% bank guarantee. SMEs form an integral part of the country’s economy, accounting for 94% of the total number of companies in the country and employing 86% of its private workforce. The aim of this new initiative is to drive the contribution made by SMEs to 70% of GDP by 2021.

Both major telecoms posted June results this week. Etisalat posted a 3.1% H1 profit rise to US$ 1.2 billion, as consolidated revenue reached US$ 7.1 billion, with EBITDA coming in 2.0% higher at US$ 3.5 billion. Globally, Etisalat now has 143 million subscribers, as its UAE base stands at 12.4 million.

Meanwhile, du posted a 2.5% increase in Q2 net profit, after royalty to US$ 126 million on the back of a 4.8% fall in revenue to US$ 869 million; H1 revenue and profit reached US$ 1.7 billion and US$ 249 million. Although fixed revenue climbed 5.8% to US$ 168 million, mobile revenue dipped 6.8% to US$ 460 million. A US$ 160 million interim dividend was announced, equating to US$ 0.035 per share. Capex investment was 93% higher in Q2 at US$ 78 million and US$ 127 for the six months to 30 June.

Noor Bank posted a 29% hike in H1 income to US$ 112 million, as revenue grew by 7.0%, on the back of income from net financing and investments, as well as non-funded income. The bank, which is in the process of a merger with Dubai Islamic, posted increases in total assets, customer financing and customer deposits of 4%, 5% and 11%.

Because impairment charges more than tripled to climb to US$ 37 million, Emirates Islamic posted a 5.3 % decline to US$ 71 million in Q2 net income. The Sharia-compliant subsidiary of Dubai’s biggest lender Emirates NBD did post a H1 profit of US$ 183 million, driven by a strong balance sheet and tighter cost control. Its total assets balance came in 5% higher at US$ 16.6 billion.

Mashreq posted a 5.2% hike in H1 profit to US$ 327 million, as total operating income dipped 1.3% to US$ 837 million. The Q2 return saw a 5.4% rise in profit to US$ 162 million, although the bank’s operating profit came in 3.4% lower at US$ 229 million. As at 30 June 2019, total provisions for loans and advances neared US$ 1.1 billion, equating to 128% coverage for non-performing loans, whilst Its non-performing-loans-to-gross-loans ratio declined slightly to 3.5%. Over the next five years, the Al Ghurair-controlled bank plans to invest US$ 136 million on digital transformation.

The DFM announced a 21.4% fall in H1 profit to US$ 18 million, with revenue of US$ 45 million. Trading revenue tumbled 31.5% to US$ 6.8 billion in line with 74% of global bourses which also saw half-yearly falls. However, the DFM General Index did advance 5% over the first six months of 2019, as its investor base climbed to 844k. Although owning just 17.5% in value, foreign investors have an active presence in 50% of trading.

The bourse opened on Sunday 21 July at 2763 and having gained 102 points (3.8%) over the past fortnight added a further 88 points (3.2%) to 2851 by 25 July 2019.  Emaar Properties closed US$ 0.10 higher at US$ 1.42, with Arabtec flat at US$ 0.48. Thursday 25 July again witnessed low trading conditions of 199 million shares worth US$ 58 million, (compared to 167 million shares, at a value of US$ 92 million on 18 July).

By Thursday, 25 July, Brent, having shed US$ 4.59 (6.9%) the previous week, gained US$ 1.15 (1.9%) to US$ 61.93. Gold lost some of the US$ 33 (2.3%) gained the previous week, closing US$ 26 (1.8%) lower at US$ 1,414, as it slid on Thursday by the most in a year after Trump and Xi’s trade truce renews investors’ confidence.

This week ,the International Energy Agency downgraded its oil growth forecast to 1.1 million bpd, attributable to the weakening global economy and declining Chinese demand. Last year, the IEA had 2019 forecast growth at 1.5 million bpd and earlier this year to 1.3 million bpd. Because of the changing circumstances, it is unlikely to see Brent climb much above US$ 70 unless a major incident happens – currently there is enough stock available, with any slack being taken up by rising US supply.

As prices of some items have risen at a quicker rate than the 2.0% UK inflation level, it is reported that Tesco has increased the price of more than 1k products over the past fortnight; shop prices for the likes of milk powder, potatoes and pork are all up by 11%. The main driver behind these increases is the recent fall in sterling making imports dearer. Tesco is confident that “for the majority of products that have increased in price over the last three weeks, we still beat or match the cheapest of the big 4”. However, it will still face tough competition from both Aldi and Lidl and has still some way to reach their own internal target of hitting profit margins of 3.5%- 4% by 2020.

As the Japanese car-maker posts a horrific 94.5% slump in Q2 profits to US$ 59 million, with revenue declining by 12.7% to US$ 15.9 billion, Nissan announced that it plans to cut 10.0% (12.5k) of its workforce. The embattled firm, which has seen poor sales returns in Europe and US, has not been helped by the scandal of financial misconduct charges against former boss Carlos Ghosn and rising costs, including exchange fluctuations. The car-maker has also been having problems with its 43% partner, Renault.

Since its October 2018 listing, Aston Martin has lost 45% in its share value, including 20% since it announced that it was cutting its 2019 sales forecast by around 10% to between 6.3k – 6.5k. H1 sales to Europe and MENA  have fallen by 19% and the UK 17%, with the luxury carmaker indicating  a “challenging external environment” had worsened, as had “macro-economic uncertainties”.

Boeing is expecting a Q2 loss as a result of a one-off US$ 4.9 billion charge, driven mainly by costs of compensating airlines for disruptions and plane delivery delays due to the March MAX grounding, and a further US$ 1.7 billion in costs due to the 737 MAX’s lower production rate. The US manufacturer is confident that the plane will return to the skies in early Q4, but some experts think it could be next year.

In Australia, a leading financial planner, who hosted his own TV show and wrote for top newspapers, has been banned for three years by regulator ASIC on providing financial services in the country. It was found that Sam Henderson “failed to act in the best interests of clients” or to “provide appropriate advice”. One of his clients would have been US$ 350k worse off if she had taken his advice.  He had also “recommended the use of in-house Henderson Maxwell products without providing product comparisons or justifying why the in-house products were better than his clients’ existing products”.

The Financial Planning Association were reluctant to act on the complaint so much so that after a year, it still had not been finalised. In trying to look after its prize member, the FPA not only went against the recommendation of its own investigation, it also wrote to the royal commission asking it to keep the matter under wraps. The association listed reasons for the need to keep the matter confidential, including that publication of Mr Henderson’s name would “cause significant damage to the reputation of Mr Henderson”!

Another Australian in the news is Mark Horton, who finished second in the 400m freestyle at the World Aquatic Championship. He refused to shake hands with the winner, China’s Sun Yang, who had previously refused to take a urine sample and then smashed vials of his own blood, when visited by dope-testers. The world governing body, FINA went soft on the suspect swimmer, so it was left to Horton to show his displeasure and for that he was accused of “unacceptable” behaviour. There are similarities between this and Australia’s FPA and there is something wrong when clean athletes are disciplined whilst little is done about cheats. Unfortunately, the sporting, political and financial world is full of such examples of corrupt practices.

Worried about certain online platforms being engaged in unfairly restricting competition, the US Justice Department is opening an investigation following “widespread concerns” about “search, social media, and some retail services online.” Although no names were mentioned, there is no doubt that tech giants such as Amazon, Apple, Facebook and Google will come under close scrutiny.

This week also saw Alphabet and Amazon release impressive Q2 figures, both with near 20%+ hikes in revenue – to US$ 38.9 billion and US$ 63.4 billion respectively. However, Amazon’s profit of US$ 2.6 billion disappointed the market as it focused on investing more to cut delivery times. On the flip side, Alphabet, profit tripled to US$ 9.9 billion with increased returns from both its traditional and new tech services such as AI.

Despite the Brexit hullabaloo, June UK retail sales recovered, up 1.0% on the previous month, attributable to the growth in average wages boosting household spending. Non-food sales were up 1.7%, compared to the lesser growth of 0.2% for food items. On an annualised basis, growth was at 3.6% in June (2.2% a month earlier). These figures may have helped the economy from slipping into contraction in Q2 and more of the same will help the country deal with all the problems expected pre the 31 October Brexit deadline.

A major indicator that all is not well with the world’s economy is that global manufacturing has almost hit contraction levels as it reached a three-year low. Germany is probably the main reason why European output has already moved into reverse gear. The latest JP Morgan global PMI is hovering around the 50 level – the demarcation point between expansion and contraction – and is almost guaranteed to drop within the next two months; already, the forward-looking “new orders” PMI has dropped under 50 – the first time this has happened since 2012. Consequently, many of the international central banks are considering rate cuts over the next three months, with South Korea, Indonesia and South Africa already on the bandwagon. The outlook is that business confidence is sliding and business investment is likely to stay weak for the foreseeable future.

Indeed, the ECB has warned it could cut interest rates to tackle a slowdown in the eurozone economy, attributable to a sluggish manufacturing sector, uncertainty about Brexit and global trade tariffs threatening to derail growth in the bloc. It may even be considering the reintroduction of QE that will see the central bank pumping money into the economy via the purchase of bonds and other assets. Its boss, the soon to be departed Mario Draghi, has indicated that “the outlook is getting worse and worse”.

Turkey announced that it had slashed its interest rate by an almost unprecedented 4.25% to 19.75%, only three weeks after the new central banker, Murat Uysal, took over the reins. The reasons behind the move, not surprisingly, were “weaker global economic activity and heightened downside risks to inflation.”

Following Jerome Powell’s recent warning that “uncertainties about the outlook have increased”, it is likely the US will soon see a rate cut. The US economy, per se, is in good health but it is being affected by weakness in other major economies and trade war worries.

The IMF has cut its 2019 and 2020 growth forecasts, both by 0.1%, for the global economy – to 3.2% and 3.5% – as growth “remains subdued” and there is an urgent need to reduce trade and technology tensions. Interestingly, it raised the UK growth estimates by the same amounts to 1.3% and 1.4%, based on the premise of a smooth Brexit but also highlighted a no-deal Brexit as one of the key risks to global economic growth, along with further US-China tariffs and US auto tariffs. US recent growth is expected to slow to 1.9%, as the boost, brought about by the tax cuts introduced by President Trump early in his tenure, loses its momentum.

The Brussels old boys club, led by EU’s chief Brexit negotiator, Michel Barnier, and Commission President Jean-Claude Juncker, have rebuffed the Brexit policy of new UK prime minister, Boris Johnson. In reiterating the EU’s position that the already-negotiated withdrawal agreement was the best one possible and that removing the backstop guarantee was unacceptable, the EU once again demonstrated their intransigence. They have indicated that the PM’s move to “getting rid” of the backstop was “of course unacceptable”, and labelling Mr Johnson’s speech “rather combative”. The next three months will be interesting and the message to the EU is You Ain’t Seen Nothing Yet!

Wrong Side Of The Tracks 18 July 2019

According to Valustrat, average Dubai property prices have slumped 29.3% over the past five years, of which 11.5% has occurred this year and 2.9% in Q2; over the past three months, the declines have ranged from 1.2% to 4.2%. During the preceding twelve months, the best performing of the 26 locations analysed were villas in Palm Jumeirah and Al Furjan, as well as apartments in Dubai Sports City, which all recorded single digit falls. On the flip side, apartments in Palm Jumeirah, Discovery Gardens, and The Greens all posted 15%+ declines. In line with sales, rentals have also seen huge falls. – 26.1% since 2014, 10.7% for the past year and 3.4% in Q2. For those that think there are too many units in the emirate, it must be sobering to see that the consultancy estimates that only 8.5k have been completed so far this year – a long way off initial forecasts of 45k.

On the other hand, a JLL report indicated that both apartment sales and rents fell year on year by 9% and 11% respectively, as villas saw declines of 9% and 5% over the same period. The market is not expected to show much change over the next year and will continue to face downward pressure. However, there will be a shift to more people buying properties rather than renting, as the economics make the former more financially attractive.  Any hope of a boost from the Expo factor is becoming less likely, as its impact has already been factored in current prices.

Their report also expects that recent government initiatives will have a positive impact on Dubai’s real estate sector. The federal government has recently introduced customer-friendly schemes such as the freehold law and the permanent residence system called ‘Golden Card’, the visa fees exemption for children under 18 and free SIM cards for tourists on arrival.

To try and boost the realty sector, twenty foreign investors from across the world have been granted five-year renewable visas; the so-called golden visas were made available to real estate investors whose individual investments in the local real estate market exceeded US$ 1.3 million. Investors can also sponsor family members as part of the deal.

Having announced a bounce in Q1 sales to US$ 136 million, Sobha is targeting to be a US$ 1 billion company within two years. When this milestone occurs, the developer will be looking to a probable IPO. The company is currently developing an eight million sq ft waterfront community which, when completed in four years, will be home to 400 villas, 5k apartments, three hotels, two schools and a 150k sq ft community centre. Sobha is currently planning a second development in a new unnamed Dubai location, with land sales almost finalised.

Emaar is to start construction of the first residential cluster ‘Breeze’, located within its Creek Beach District, adjacent to the Ras Al Khor Wildlife sanctuary. The waterfront project will comprise three clusters of 1-4 B/R apartments, inspired by traditional Middle Eastern architecture. SSH will act as lead consultant, architectural partner and structural engineer.

Of the total H1 18.7k realty transactions, valued at US$ 11.0 billion, Emaar accounted for 25.5% of deals and 29.9% (US$ 3.2 billion) in value. The next two developers, some way behind, were Damac at 1.5k transactions (7.9%), valued at US$ 463 million (4.2%), and Nakheel with 1.1k deals (6.0%) worth US$ 600 million (5.6%). Emaar was also the runaway leader in the off-plan stakes, posting 3.6k transaction worth US$ 2.1 billion and accounting for 46% of the market transactions and 61% in value. They were followed some way off by Dubai Hills Estate LLC, with 1.1k transactions worth US$ 409 million, and Damac posting only 840 transactions, with a total value of US$ 235 million. Making the top five were Azizi (682 deal at US$ 118 million) and Dubai Properties selling 441 units worth US$ 210 million.

Oyo Hotels are launching its Capital O brand in the UAE, with two business premium properties – Capital O 167 Moon Valley Hotel Apartments in Bur Dubai and Capital O 187 Action Hotel in Ras Al Khaimah. Their product price range will be between US$ 55 – US$ 80. The Indian chain, with over 700 hotels in its home country, entered the UAE market last year and hopes to offer 12k rooms in 150 properties by the end of 2020.

Dubai’s June CPI fell by 2.68% to 107.95 over the previous twelve months. The main drivers pushing the inflation rate lower were declines in housing services etc (6.40%) and miscellaneous goods/services (2.26%). On the flip side, there were increases in recreation/culture and tobacco products of 3.29% and 1.93%.

The RTA is to hold its latest online number plate auction for 200 distinctive plates on Sunday. Whether this sale reaches the giddy heights of 2017, when an eighty-plate sale raised US$ 7.6 million (with R13 going for US$ 796k), remains to be seen.

Despite attempts by the local carrier Aeromexico, Emirates will launch a new flight to Mexico City, via Barcelona, starting on 09 December. Flying a two class Boeing 777-200LR, it will carry 302 passengers (including 38 in business class) and 14 tonnes of cargo. Emirates has been flying into the city for the past five years, as a cargo carrier, and last year carried over 22.5k tonnes. Because of the height of Mexico City (at 2.25k metres above sea level), it would have been impossible to fly direct so Emirates were allowed to introduce a fifth freedom flight which allows an airline to  fly between two foreign countries, so long as the flight originates or ends in the airline’s home country.

The RTA has announced that the work being carried out at the junction of Umm Sequim Street and Al Khail Road will be completed by the end of H1 2020. The project includes twelve bridges (spanning 3.7k sq mt) and ramps and will ease the traffic that will be generated when the two million sq ft Dubai Hills Mall opens and Dubai Hills Estate starts to fill up with new residents.

The Ministry of Economy has cancelled fees for 102 government services in the country, as well as halving eight service fees, in a move to boost the country’s business environment. No doubt these moves will help stimulate and strengthen economic growth and, hopefully, generate more job opportunities. Some of the fees that have been reduced include registration and renewal of a trademark or trademarks, down 33% to US$ 1.8k, and the fee for publishing official announcements by foreign private joint stock companies has been halved to US$ 2.7k.

Emirates NBD posted a 49.0% hike in H1 profit to over US$ 2.0 billion, as income climbed to US$ 2.6 billion – an 11.3% increase, compared to the same period in 2018. Net interest was 10.0% higher at US$ 1.9 billion, driven by a 13.0% growth in assets, although costs were up some 7.0% to US$ 780 million. There were also increases in loans by 3% to US$ 91.8 billion, with deposits 5% higher at US$ 100 billion.

This week, Dubai’s largest bank also announced plans to open twenty more branches in Saudi Arabia, in addition to the two already open in Jeddah and Khobar, Dubai’s biggest bank will also expand its operations in Egypt and only last month received regulatory approvals to buy Moscow-based Sberbank’s wholly-owned unit in Turkey.

The Ministry of Economy has cancelled fees for 102 government services in the country, as well as halving eight service fees, in a move to boost the country’s business environment. No doubt these moves will help stimulate and strengthen economic growth and, hopefully, generate more job opportunities. Some of the fees that have been reduced include registration and renewal of a trademark or trademarks down 33% to US$ 1.8k and the fee of publishing official announcements by foreign private joint stock companies has been halved to US$ 2.7k.

In Australia, a NSW government report has highlighted the regular occurrence of a “loyalty tax” in the insurance sector, with discounts bEmirates NBD DP World eing offered to new customers while long-term ones pay more for the same policy. It is estimated that in some cases the “gap” could be as high as 34%! The same practice seems to be prevalent in both the banking and energy sectors. In the UK, the CMA estimates the total cost of “loyalty taxes” – in mortgage, savings, home insurance, mobile phone contracts and broadband – is over US$ 5.3 billion a year. It would be interesting to see what is happening in the UAE.

Nasdaq listed a US$ 1.3 billion combined sukuk (US$ 1.0 billion) and conventional bond (US$ 300 million) package for DP World., making the port operator the bourse’s largest client with listings of US$ 8.1 billion.   Nasdaq, two-thirds owned by the DFM and the balance with Borse Dubai, is one of the largest global exchanges for Sukuk listings, with a total of US$ 62.4 billion.  

The Commercial Bank of Dubai confirmed that it had provided a secured credit facility to Abraaj Holdings, including a legal charge over shares that controlled Spinneys Egypt. When the Egyptian entity is sold, funds will be routed back to the bank in partial settlement of the debt. CBD also denied that it had ever owned the Egyptian supermarket.Nasdaq

Emirates NBD posted a 49.0% hike in H1 profit to over US$ 2.0 billion, as income climbed to US$ 2.6 billion – an 11.3% increase, compared to the same period in 2018. Net interest was 10.0% higher at US$ 1.9 billion, driven by a 13.0% growth in assets, although costs were up some 7.0% to US$ 780 million. There were also increases in loans by 3% to US$ 91.8 billion, with deposits 5% higher at US$ 1.0 billion.

This week, Dubai’s largest bank also announced plans to open twenty more branches in Saudi Arabia, in addition to the two already open in Jeddah and Khobar, Dubai’s biggest bank will also expand its operations in Egypt and only last month received regulatory approvals to buy Moscow-based Sberbank’s wholly-owned unit in Turkey.

Amlak Finance is confident that its second restructuring plan will soon be in place. The amended deal will see creditors rescheduling US$ 1.2 billion of loan repayments over the originally agreed period that ends in 2026. The company, 45% owned by Emaar, first agreed to new terms on US$ 2.7 billion of loans in 2014. The hope is that next year’s Expo and rising energy prices, may start to revive the lacklustre Dubai real estate sector which has seen property prices slump by nearly 30% since its 2014 peak.

Dubai Parks and Resorts has posted a 4.7% hike in Q2 numbers to 641k, helped by the fact that that 92k attended over a four-day June celebration for the Philippines Independence Day. Over the first six month of the year, numbers dipped 0.8% to 1.4 million; of that total around 40% were international visitors. In June, a new 579-key Rove Hotel opened and will be competition to the existing Lapita Hotel which saw H1 occupancy levels 8% higher at 63%.

The bourse opened on Sunday 14 July at 2686 and having gained 25 points (0.9%) a week earlier added a further 77 points (2.9%) to 2763 by 18 July 2019. Emaar Properties closed US$ 0.04 higher at US$ 1.33, with Arabtec up US$ 0.03 to US$ 0.48. Thursday 18 July again witnessed very low trading conditions of only 167 million shares worth US$ 92 million, (compared to 88 million shares, at a value of US$ 61 million on 11 July).

By Thursday, 18 July, Brent, having traded US$ 3.22 (5.1%) higher the previous week lost more than that this week, down US$ 4.59 (6.9%) to US$ 61.93. Gold closed US$ 33 (2.3%) higher at US$ 1,440, still driven by continuing tensions in the Gulf and trade worries.

It seems highly likely that Rio Tinto’s massive copper and gold mine in Mongolia could be facing a cost blow-out of almost US$ 2 billion, along with a thirty-month delay. The underground mine – a JV with Rio and a Canadian miner, along with the Mongolian government – could cost US$ 7.0 billion by 2023 as a result of the possibility of stability risk with the mine design. Worryingly, there is every chance that costs could rise even further.

Reports indicate that luxury department store Barneys New York Inc is going the way of Sears Holdings Inc, Toys “R” Us Inc and Gymboree Group Inc. The usual drivers of high rents and changing consumer demands are the reasons for the nearly century-old department store, considering a bankruptcy filing. Apart from its flagship department store on Madison Avenue in Manhattan, the retailer has other interests including BarneRio Tintoys Warehouse outlets, as well as Freds restaurants, in 28 nationwide locations.

Because of its backlisting by the Trump administration, Huawei is planning extensive layoffs in the country. The Chinese telecoms equipment company is looking to cutting large numbers from its 850-workfotrce R&D subsidiary, Futurewei Technologies. Although, the Commerce Department has put Huawei on its so-called entity list, Commerce Secretary Wilbur Ross has indicated that the government would issue licences to companies seeking to sell goods to Huawei where there was no threat to national security.

It is reported that Facebook could face a penalty of over US$ 5 billion to settle an investigation into data privacy violations in relation to its role with political consultancy Cambridge Analytica prior to the last US presidential election The Federal Trade Commission has been investigating allegations that the company improperly obtained the data of up to 87 million Facebook users. Facebook had signed a 2011 agreement which it was required to clearly notify users and gain “express consent” to share their data which in this case never occurred. The tech company has already provided for this fine in its previous accounts. Last October, Mark Zuckerberg received a slap on the wrist from the UK authorities who issued a US$ 650 million fine for a “serious breach” of the law.

Another problem facing Facebook is theFacebook US Treasury is concerned that, as is the case with other cryptocurrencies, its planned Libra e-currency could be used by “money launderers and terrorist financiers” and is was a national security issue. Indeed, US Treasury Secretary, Steven Mnuchin has indicated that he was “not comfortable today” about digital currency and that Facebook was a “long way away from” securing approval.

Christine Lagarde has resigned her position as MD of the IMF in a move that will speed up her likely appointment as head of the European Central Bank; it is a position she has held since 2011 when she replaced the disgraced Dominique Strauss Khan. Post-war protocol would point to an appointment of a European appointment as there is an unwritten agreement that a US candidate always fills the position at the World Bank, whilst the IMF nominee comes from the other side of the “pond”.

Pakistan’s central bank raised its main policy rate by 100 bp to 13.25%, attributable to increased inflationary pressures (currently at 8.9% but expected to climb as high as 12% this fiscal year), as higher utility costs kick in. Earlier in the month, the Imran Khan government received a US$ 6.0 billion IMF loan package that came with tough conditions aimed at increasing the country’s shrinking currency reserves (now at US$ 8 billion following receipt of the first tranche of the IMF loan) and cutting the country’s worryingly high fiscal and current account deficits. Over the next twelve months, GDP growth is expected to be 3.5%.

It seems that Germany’s economy will remain in the doldrums for the immediate future, with the Economic Ministry indicating that “the current economic indicators signal a subdued development in the second quarter”. After a relatively strong 0.4% growth in Q1, the Bundesbank downgraded its growth outlook for 2019 to 0.6% from 1.6% and that for next year to 1.2% from 1.6%. In line with other major countries, the economy is facing headwinds blown in by Brexit uncertainty, a slowing global trade and geopolitical factors.

As the lead indicator that US consumer spending is improving even more, retail sales (3.4% year on year) increased more than expected in June. Add rising underlying inflation and a tight labour market to the mix, it seems unlikely that the Fed will make any move to cutting rates at their 30 July meeting. This week, Jerome Powell indicated that the Fed would “act as appropriate” to protect the economy from the impact of the spat with China and slowing global growth. It must be remembered that comparative annual figures will be slightly skewed becauseof the impact of President Trump’s 2017 massive tax cuts losing their impetus and a slowdown in government spending.

Despite Brexit, UK annual wage growth at 3.8% was at its highest rate since 2008, as wages continue to outpace inflation which has been the case since March 2018. With a record 32.75 million in the workforce, 1.29 million were unemployed – its lowest level since 1992. Furthermore, the number of self-employed climbed above 1.5 million – more than double the figure of twenty-five years ago. Two recent initiatives have helped this improvement – the new National Living Wage and National Minimum Wage rates being introduced and some NHS staff receiving pay increases. The question now is for how long can it last?

In the UK, the Office for Budget Responsibility seems to have joined the “Brexit-fear camp”, by claiming that public borrowing could double to over US$ 78 billion next year if there is a no-deal with the EU. It based its forecast on assumptions, from the IMF, that a no-deal Brexit would cause a UK recession that would see a 2.0% GDP contraction next year. The IMF, not known for accurate predictions, expect that 4% tariffs will impact on UK’s trade, with the OBR concerned that “heightened uncertainty and declining confidence” would deter investment and that sterling will sink, resulting in a recession bigger than that of 2008. However, these warnings seem in line with the Bank of England’s and the Chancellor’s forecasts pre the Brexit referendum three years ago. Six months later, Mark Carney was left eating humble pie, admitting that his dire predictions of the economy had been hopelessly wrong and based on “wrong” assumptions. Once again, the so-called “experts”  are on the Wrong Side Of The Tracks.

Lost in France                                                                    11 July 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

To Give A Little, Take A Little                               27 June 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Don’t Leave Your Mark On Me                                  20 June 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Do You Believe In Miracles? 06 June 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Down To Earth                                                            30 May 2019.   

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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