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Do You Believe In Magic?

Posted on May 15, 2016 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum has approved the construction of a 60k capacity sports arena in Al Aweer. The Mohammed bin Rashid Stadium, costing US$ 817 million, will be the world’s first fully air-conditioned and raised off the ground stadium, and will include conference halls and a sports museum.

CBRE’s latest report points to strengthening demand in the Dubai prime office sector as the supply pool continues to fall, with only 800k sq mt of new property expected to come to the market over the next three years. There has been a slight increase in quality office rentals to US$ 522 per sq mt, as vacancy rates continue to decline and demand points upwards.

Chesterton’s latest study indicates mixed Dubai real estate transactions, with residential up 11.0% to US$ 7.3 billion, whilst office deals were down 7.0% to US$ 211 million. Although rental rates remained flat, quarter on quarter, apartments still gave average 7.5% yields, with villas lower at 4.7%. The report also confirmed the available supply of Dubai residential units at 471k but also a move by a segment of the market to consider relocation to secondary cheaper markets.

Already with a 1.7k property portfolio, valued at US$ 490 million, Danube Properties has launched the US$ 82 million, 418-unit Glamz 1 Project in Al Furjan. The company expects a further two releases this year.

With its three theme parks opening in October, Meraas has launched the Outlet Village, encompassing 25k sq mt and 100 brands. The upscale outlet mall will be located adjacent to Dubai Parks and Resorts and be open for business by September.

It is no surprise to see that Lamborghini has opened its largest ever showroom and service centre in Dubai. Located on SZR, and featuring an external glass façade suspended by steel cables, the 30k sq ft outlet was designed by Uruguayan architect Carlos Ott.

DEWA announced that it has selected five bidders – Abu Dhabi’s Masdar, China’s Jinko Solar, France’s EDF, Japan’s Marubeni Corporation and Saudi’s Acwa Power – for phase 3 of its Sheikh Mohammed bin Rashid al Maktoum Solar Park. The 5k-megawatt solar park will be completed by 2030, with phase 3 adding 800 megawatts. It is reported that the lowest bid (unnamed) came in at US$ 2.99 kilowatt-hour (kWh).

Dubai Holding released plans of its proposed International Centre for 3D Printing in Dubai International City, as it bids to become the worldwide centre for 3D printing technology. Its aim is to provide a suitable infrastructure environment for all interested stakeholders, including innovators, designers, suppliers and educators, to serve a myriad of sectors, such as medical, construction and consumer products.

The DED has confirmed that no government entity is empowered to take action against anyone making negative comments about the local economic situation and also rejected rumours that the public could be fined for expressing their opinions. However, the Department did warn the public “not to pay attention to unconfirmed reports and hearsay”.

Although still well in positive territory, April’s UAE Purchasing Managers’ Index (PMI), at 52.8, continues to weaken from the previous month’s level of 54.5. Although the main cause was a marked slowdown in employment, output, new orders and input stocks all headed south.

After failing to pay a US$ 35 million fine to a group of Kuwaiti investors, for mis-selling financial products, the DIFC-based Bank Sarasin Alpen (ME) will face a non-voluntary winding-up brought by its creditors. The liquidation order is not subject to appeal and ends a six-year legal battle.

Despite weak market sentiments, Emaar Properties posted a 17.5% hike in Q1 profit to US$ 330 million, on revenue of US$ 962 million, as property sales jumped 70.0% to US$ 1.1 billion. The main revenue drivers were the property unit – up 22.0% to US$ 537 million – and hospitality at US$ 197 million.

As Q1 trading activity improved, with trades up 7.7% to US$ 11.1 billion, the Dubai Financial Market posted a 27.0% hike in Q1 profits to US$ 23 million.

The DFM opened on Sunday at 3492 and lost 5.3% – or 184 points – to close the shortened week on 3308 by Wednesday (04 May 2016). Bellwether stocks, Emaar Properties and Arabtec, lost ground falling US$ 0.13 to US$ 1.71, and US$ 0.04 to US$ 0.40. The index fell 1.4% in the month from its opening April mark of 3356 but was still 5.0% up YTD from its January start of 3151.Trading volumes were marginally higher on Wednesday at 433 million shares, valued at US$ 137 million, changing hands, (cf 304 million shares for US$ 131 million, the previous Thursday).

Brent crude slipped this week – down 3.7% (US$ 1.71) to US$ 44.32 – whilst gold rose US$ 5 to US$ 1,272 by the Thursday (05 May) close. Brent has confounded most analysts in 2016 – it has risen YTD by 30.8% from US$ 36.40 to US$ 47.30 by 30 April and 26.1% from US$ 37.52 for April. In the first four months of the year, gold has jumped 22.4% from US$ 1,060 to US$ 1,297 and in April nudged US$ 55 (4.4%) higher from its month starting position of US$ 1,242.

After announcing a 54.0% fall in Q1 underlying profits to US$ 1.6 billion, and net profits by 89.0% to US$ 484 million, Shell has cut its capital investment programme by US$ 3 billion to US$ 30 billion. The oil giant is also closing three UK offices, with 1.6k staff, in a bid to further slash its costs.

Having agreed in March with Brazilian authorities to a US$ 2.3 billion settlement in relation to the Samarco mine disaster, it now seems likely that Australia’s BHP Billiton, with its JV partner, Vale, will face further federal proceedings for a massive US$ 43 billion. No wonder then that their shares tanked by 9.4% to US$ 14.10, with US$ 4.3 billion being wiped off its market value.

Based on claims that its talc-powder products could have caused ovarian cancer, Johnson & Johnson has lost two US cases this year and ordered to pay US$ 72 million and US$ 96 million in compensation. It is reported that the company could be facing a further 1.2k lawsuits.

As its parent company, BMW, reported record sales of 558k vehicles, Rolls Royce disappointed the market with only 551 vehicles handed over in Q1 – down 29.4%. Fortunately for the German carmaker, its total revenue was only 0.3% marginally down to US$ 24.2 billion, as EBIT fell 2.5% to US$ 2.8 billion.

US vehicle sales soared to US$ 36.9 billion on 1.5 million vehicles in April, with all major carmakers, excluding GM, Hyundai and VW, posting improving results. Honda recorded a 14.4% sales increase followed by the likes of Nissan – 12.8% – Fiat Chrysler, 6.0%, Ford, 4.0%, and Toyota, 3.8%.

It is reported that the Saudi Binladin Group, with bank debts of US$ 30 billion, will lay off 77k foreign workers, as well as 12k Saudi staff – an indicator of the problems facing the Saudi construction sector, as well as the national economy, with the government trying to reduce its budget deficit that reached US$ 100 billion last year.

Australian banks are posting mixed returns. Westpac saw a 3.3% hike in cash profits to US$ 2.9 billion, on the back of rises in both business and home loans, although it set aside a further US$ 190 million for bad loans. ANZ has seen half year cash profits slump 24.3% to US$ 2.1 billion, as bad loans’ provisions increased. The country’s leading lender, National Australia Bank, recorded a 6.5% rise in half-year cash profits to US$ 2.5 billion, with a double-digit growth in its wealth business sector, although bad loans increased.

After the sale of its 47.4% stake in the Chinese online car sales company, Autohome, Telstra is planning to pay back more than US$ 1.1 billion to its shareholders.

In line with most financial institutions, Europe’s biggest lender, HSBC, has blamed tough market conditions and volatility for its 14.0% decrease in Q1 pre-tax profits to US$ 6.1 billion, as its revenue stream dropped 4% to US$ 13.9 billion. As with other major banks, HSBC has yet to finalise past misdemeanours including PPI misspelling and other legacy issues.

Because of a US$ 1.7 billion government payment to cancel its Dividend Access Share, RBS, 73% owned by the UK taxpayer, posted a US$ 1.4 billion Q1 loss; this was more than double the US$ 660 million deficit recorded in the same 2015 period. Since its 2008 US$ 65 billion bailout, the bank has recorded 8 straight years of losses, including a US$ 2.9 billion shortfall in 2015.

The three April Markit/CIPS UK PMIs indicate that all is not well with the UK economy. The manufacturing index was at its weakest in three years, sinking below the 50-mark threshold – an indicator of contraction and falling output. The sector has seen over 20k jobs lost in Q1, as new orders and manufacturing exports continued their downward trend whilst the UK economy recorded a slowdown in growth to just 0.4% over the past quarter.

There is no doubt that the upcoming Brexit vote is having a negative impact on UK business confidence. The latest PMI for the service sector shows a reading of 52.3 (53.7 last month) – its lowest in over three years, as the pace of employment was at its slowest since August 2013. Meanwhile the manufacturing index reported its steepest decline since 2013.

With its quarterly CPI dropping a further 0.2%, it was no surprise to see the RBA cutting its cash rate by 0.25% to a record low 1.75% in a move to push inflation rate to its target of 2% – 3%. The Australian economy is struggling with a sluggish global economy that is impacting on its commodity sector, and continuing subdued growth in labour costs. Whether this marginal change in monetary policy, after a 12-month hiatus, comes too late or is sufficient to boost the economy remains to be seen; rarely will low interest rates be a panacea for solving low inflation.

This week’s budget saw a lifeline thrown to Australian SMEs, in the form of a 2.5% cut in tax to 27.5% for 870k companies. The US$ 4.0 billion tax break over four years will be offset by a crackdown on tax dodgers; bigger companies – with a turnover of US$ 8 million – will have to wait a further six years to reap the full benefits of a tax reduction. The government coffers have been hit by the energy sector’s downturn and subsequent lower tax receipts.

To make up for some of the loss in tax revenue, there will be an increased penalty from 30% to 40% for companies caught contravening tax regulations through moving Australian-sourced profits offshore. The ATO will recruit 1k tax specialists to target suspected corporate and individual dodgers. Treasurer Morrison has to start to rein in the ballooning US$ 28 billion national deficit.

With US on-going intransigence, it seems that the Transatlantic Trade and Investment Partnership with the EU may collapse. The French are concerned that its agricultural sector would suffer if no changes were made to the trade deal, whilst a Greenpeace leak also indicates that EU public health standards would be undermined to the bloc’s detriment. The TTIP has also been criticised because of its bias to bigger business and weaker regulation requirements. According to a recent study, the EU could benefit by US$ 137 billion and the US by US$ 109 billion, if all 28 EU countries accepted the wide-ranging agreement.

The big news of the week was Leicester winning the EPL championship under Italian manager, Claudio Ranieri, who has been in that position for only 294 days – the shortest time ever for a manager being appointed and winning the English title. The team won by dint of current champions Chelsea drawing with Tottenham thanks to a late goal by Eden Hazard, whose transfer fee was US$ 44 million. In comparison, the cost of the usual 11 Leicester players was a paltry US$ 35 million. With 5,000 – 1 odds at the beginning of the season to win the title, under a 64-year old manager that had never won any, Do You Believe In Magic?

Posted in Finance | Tagged Arabtec, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

With A Little Help From My Friends

Posted on May 2, 2016 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum has set up the Dubai Economic Security Centre whose main aims are to combat bribery, corruption, financing of terrorism, money laundering and fraud. As well as protecting the emirate’s position as a global financial hub, the Centre will have wide-ranging power that gives it authority over all companies operating in Dubai and local government bodies.

It’s business as usual this week – two property reports with two different findings. Standard & Poor’s estimate a 10% drop in 2016 prices, with no immediate improvement in sight. Cluttons forecast further declines – 5% for villas and up to 4% for apartments – in residential prices for the rest of the year, following a 2.2% Q1 fall and 7% over the past 12 months. Interestingly, they estimate that in the 45-month period to December 2019, 43.2k units will be handed over. Given that Dubai’s 2015 population was 2.5 million which is expected to grow at 6% per annum, there will be a 650k increase in numbers by 2019. Where will they live?

As part of its strategy to triple in size by 2024, Dubai International Financial Centre will self-finance its own US$ 129 million Gate Avenue mixed use project. Encompassing 660k sq ft, the development, linking the residential and commercial areas, will house 150 retail and dining outlets and will be completed by the end of next year.

Work on all ten villas on Sweden – one of six island’s making up The Heart of Europe on Dubai’s The World – will be completed by year end. Developed by Kleindienst, all the seven-bedroom beachfront villas will be furnished by Bentley Home – that company’s first project in Dubai.

Naresco has won a US$ 50 million contract to build Danube Properties’ Glitz Residence 3. The US$ 95 million project, based in Dubai Studio City, will comprise 352 residential units and is slated for completion by late 2017.

Emaar Hospitality Group is set to open its latest – and first in six years – Address hotel, the 196-key Address Boulevard, by the end of the year. Linked to the Dubai Mall, it will be located on the lower floors of the new 72-storey Downtown Dubai Tower. The upper floors will house 530 serviced apartments, with the top 2 levels reserved for a ‘lifestyle dining’ restaurant and bar.

The developer will also add a further 35 properties to its portfolio over the next five years, covering both local and international sectors, as well as its various brands – The Address, Vida and Rove. Last year, the division, with four hotels and two serviced residences, contributed 12.0% – US$ 447 million – to the Group’s revenue. Three Rove hotels will open this year in Dubai Mall, Downtown and Port Saeed, in conjunction with Meraas Holdings.

Due for completion in 2019, the 5-star Taj Exotica Resort and Spa, located on the western crescent of The Palm, will have 325 rooms. The property, owned by Dubai’s Arenco Group, will be the Indian operator’s second in Dubai, after its opening of the Taj Dubai in Business Bay last year.

Another property on the Burj Khalifa Boulevard has been announced for opening next year. The 40-floor Mövenpick Hotel Apartments Al Burj Business Bay will have 300 apartments and become the Swiss operator’s 7^th hotel, with a further two in Downtown and Media City, to open within the next two years.

The first of Dubai’s new theme parks is set to open in August. The 1.5 million sq ft US$ 1 billion IMG Worlds of Adventure – the largest indoor facility in the world – expects 4.5 million visitors in its first year of operations and to be profitable within a year.

CEO Raed Al Nuaimi has reiterated that the US$ 2.9 billion Dubai Parks & Resorts, due to open in October, will generate US$ 654 million in its first year of operations and will break even within 8 years. It is expected that first year numbers will top 6.7 million, with the figure growing 3% annually thereafter; the current daily capacity of the resort is estimated at 55k.

Nasdaq Dubai-listed Emirates Reit posted a 57.8% surge in Q1 profit to US$ 14.3 million as portfolio occupancy levels grew by 17.3% to 77.4%. Its asset value also rose – by 2.8% to US$ 692 million – whilst outstanding debt stood at US$ 251 million.

Dubai Opera – overlooking the Burj Khalifa and Dubai Fountain – is set to host Placido Domingo for its first event on 31 August. Reflecting the emirate’s maritime history, its design depicts vintage dhows. In the coming months, there will be world class line ups for both opera and ballet buffs, with the theatre having a 2k capacity.

La Perle, MENA’s first permanent water show, will open by year-end. The aqua theatre, with 1.3k seats, and a stage filled with 2.5 million litres of water, will be located in the new Al Habtoor City; it is scheduled to show 450 performances in its first year.

This week witnessed the 4-day Arabian Travel Market, with an expected 26k+ global travel executives and operators descending on the emirate. Dubai reported a 7.5% 2015 increase in overnight visitors to 14.2 million and is on track to reach its target of 20 million by 2020. There will be a tweaking in strategy which will see a little more emphasis on the mid-market segment, to expand the pool of visitors. The oil crisis, international sanctions and the strong US$ have had a negative impact on visitors from Russia – with the slack being taken up by rising numbers of Chinese and Indian travellers.

Latest Q1 figures are encouraging with a 5.1% rise in overnight visitors to 4.1 million, compared to the same period in 2015, with GCC accounting for 25% of the total. The two main contributors were Saudi Arabia and India with 476k (up 14.0%) and India’s 467k visitors, up 17.0% – both well ahead of 3^rd place UK’s 334k.

Although Dubai Q1 room rates have fallen10.1% over the past year to US$ 235, they remain the highest in the world, as occupancy still hovers around the 80% mark. At the end of March, the emirate had 82.8k hotel rooms.

It is estimated that the travel and tourism sectors add US$ 194.5 billion, equivalent to 8%, to the GDP of ME countries; this is expected to grow at an annual 3.5% over the next decade. The UAE ranks 28^th in the global tourism economy, generating US$ 36.5 billion, equating to 8.7% of GDP.

Fuel prices are set to increase next Sunday, 01 May, with Special up 10.6% to US$ 0.455 per litre.

Al Futtaim Motors has won a US$ 33 million, 1.5k-vehicle order from Dubai Taxi Corporation. 83% of the current taxi fleet of 4.8k cars are Toyota, most of which are Camry branded.

Passenger numbers at Dubai International continue to grow with a 7.4% jump last month to 7.24 million – and 21.0 million in Q1. In March, freight traffic was flat at 217k tonnes but 3.1 higher in Q1 to 615k tonnes. It is noted that most of the cargo is now routed via DWC.

The Federal Customs Authority reported that the country’s 2015 non-oil trade reached US$ 425.1 billion, of which 67.9% was direct trade and the balance emanated from the various free zones. Exports jumped 17.0% to US$ 50.5 billion, as imports totalled US$ 259.5 billion. The UAE is ranked 20^th in the WTO’s list of the top global trading economies, accounting for 1.9% of the worldwide total.

According to UK reports, Dubai International Capital is planning to auction off one of its trophy assets, the UK-based Doncasters. The engineering aerospace group, which has been impacted by the low oil prices, reported a 6% fall in 2015 revenue to US$ 918 million, whilst EBITDA also fell by 12% to US$ 172 million.

Nasdaq Dubai-listed Emirates Reit posted a 57.8% surge in Q1 profit to US$ 14.3 million, as portfolio occupancy levels grew by 17.3% to 77.4%. Its asset value also rose – by 2.8% to US$ 692 million – whilst outstanding debt stood at US$ 251 million.

Contrasting results this week from two Dubai banks, with Noor Bank posting a credible 40.0% surge in Q1 profits to US$ 153 million, as assets rose by 34.5% to US$ 10.6 billion.

Meanwhile Mashreq saw its Q1 profit fall by 18.3% to US$ 145 million on the back of an 86.7% hike (US$ 100 million) in net impairments, mostly related to non-performing loans. The emirate’s 3^rd largest lender reported increases in both its loans and advances, up 7.9% to US$ 16.6 billion, and deposits up 6.3% to US$ 20.6 billion.

Emaar Malls returned a 22.2% increase in Q1 profit to US$ 144 million, as rental income was up 14.0% to US$ 227 million, compared to a year earlier. Occupancy rates remained at the 96% level.

Dubai-based Aramex posted a healthy 11.9% hike in Q1 profits to US$ 26 million, as revenue expanded 12.9% to US$ 286 million. The courier company indicated that the profit would have been 50% higher but for its January acquisition of Fastway Couriers’ New Zealand and Australian businesses for US$ 86 million.

As expected, and mainly because of increased forex losses, Etisalat posted an 8.3% fall in Q1 profit to US$ 545 million.

It is reported that Hapag-Lloyd is in merger discussions with Dubai-based United Arab Shipping Company that would see the German container shipper holding 72% and UASC the balance. If the deal goes through, the new entity would become the 4^th biggest in the world – behind MSC, Maersk and CMA CGM.

There were impressive 2015 growth figures from Jebel Ali Free Zone with an 8.5% increase in the workforce to 144k and an 8.0% rise in company numbers. During the year, Jafza One was opened and will be followed this year by Jafza Two – 24-level twin towers.

As the result of a one-off project loss relating to a fertiliser plant in the USA, Orascom Construction reported a US$ 334 million loss, despite revenue of US$ 3.9 billion. The Dubai Nasdaq-listed contractor made provisions of US$ 159 million including a US$ 136 million charge against “onerous contracts”.

DP World has been awarded a 25-year concession to operate the main port in Cyprus, Limassol, with its 25% JV partner, GAP Vassilopoulos Public. The Dubai port operator’s subsidiary, P&O Maritime Cyprus, also has a similar 15-year agreement to manage the port’s marine services.

Dubai’s largest listed company by market value is also planning to buy back 29.05 million US$ 2 shares, equivalent to 3.5% of the company’s total shareholding. The shares have been hovering around the US$ 19 level on Nasdaq Dubai. DP World also reported a 2.4% increase in Q1 gross container volumes to 15.5 million TEUs (20’ equivalent units), despite its Latin American operations posting a 5.9% decline to 3.6 million TEUs.

As pledged at last year’s Sharm El-Sheikh conference, the UAE has now allocated US$ 4 billion to Egypt, by dint of a 50% investment and a 50% deposit with the Central Bank, to support the country’s dwindling foreign reserves.

The DFM opened on Sunday at 3584 and lost 92 points to close on 3492 by Thursday (28 April 2016). Bellwether stocks, Emaar Properties and Arabtec, lost ground falling US$ 0.04 to US$ 1.84, and US$ 0.03 to US$ 0.44. Trading volumes were much lower on Thursday at 304 million shares, valued at US$ 131 million, changing hands, (cf 825 million shares for US$ 285 million, the previous Thursday).

Brent crude had another good week – surging 6.6% (US$ 2.85) to US$ 46.03 – whilst gold rose US$ 17 to US$ 1,267 by Thursday (28 April) close.

Over the past 21 months, Schlumberger NV, the leading oil services provider, has slashed its workforce by 26.2% to 93k in response to a slump in energy prices. Its Q1 revenue and profit continued to slide down – by 36.4% to US$ 6.52 billion and 48.6% to US$ 501 million respectively.

In a similar vein, Halliburton Co reported a Q1 US$ 39 million operating loss in North America, its largest region, on revenue of US$1.8 billion, as it booked a massive US$ 2.1 billion impairment provision for write-offs and job cuts. The world’s second largest oil services provider has delayed full Q1 reporting until 03 May, so as to try and finalise its US$ 25 billion takeover of Baker Hughes.

A recent US government report estimates that US onshore oil producers have lost US$ 67 billion over the past 12 months, as a result of the slowdown in the energy sector, their over dependence on debt and working on sliding margins. Even if oil prices rebounded, some companies will be financially unable to resume “normal” business. Having doubled production over the past five years to 10 million bpd, latest figures indicate a fall off to under 9 million – with more of the same to come. It is no surprise to read that there was a fourfold increase in US oil company bankruptcies last year.

VW has had to increase its provision relating to the diesel emissions scandal from US$ 7.5 billion to US$ 18.3 billion, resulting in a 2015 loss of US$ 6.2 billion, compared to a US$ 2.8 billion profit a year earlier. The problem is spreading as similar irregularities are being discovered with other global car makers.

A German government report has indicated irregularities in 16 global car brands but none were found to have the “defeat device” technology used by VW. Currently Daimler and Mitsubishi are facing US investigations, whilst Peugeot offices in France have been raided. Five German brands – Audi, Mercedes, Opel, Porsche and Mercedes – have agreed to recall 630k vehicles to reset technology.

Having been sold by retail billionaire, Sir Philip Green, for US$ 1.44 last year, to Retail Acquisitions, BHS has called in administrators which might see the loss of 11k jobs in the UK. The struggling retailer operates 164 shops and 74 franchise stores in 18 countries and its demise will be the biggest retail collapse since Woolworths went under in 2008. Also this week, another high street name, Austin Reed, employing over 1k, went into administration.

Although Starbucks Q1 revenue was up 9.0% to US$ 5.0 billion and like to like sales rose 6.0%, Starbucks has had to overhaul its loyalty programme to boost future sales growth. Another interesting development was the coffee retailer’s US food sales surpassing the 20% level of total sales for the first time.

Google’s parent company, Alphabet, saw its shares drop 4%, despite a 17.4% hike in revenue to US$ 20.26 billion. The web search company reported that its profit was affected by the strong greenback.

Troubled times continue for Twitter as its shares sank 13.6%, following the release of disappointing Q1 results. Although there were 5 million more monthly users, recent growth has been stagnant and its Q1 revenue of US$ 594 million is relatively low considering its 310 million client base.

Microsoft also reported falls in both March quarter revenue, by 5.5% to US$ 20.53 billion, and profit by 24.6% to US$ 3.76 billion, as EPS dropped US$ 0.14 to US$ 0.47. The tech company is being dragged down by a continued softening in its core PC market, although its cloud business revenue was up 3.3% to US$ 6.1 billion.

After 13 years of continuous growth, Apple’s quarterly revenue took a dive, falling on the back of a 16.1% drop in iPhone sales to 51.2 million, compared to the same quarter in 2015. Despite this slowdown, the tech giant still came in with credible numbers – US$ 50.6 million in revenue (of which 66% emanated from iPhone sales) and US$ 10.5 billion in profit.

Despite past conflicting national interests, that have seen individual countries decide their own policy to deal with overseas tax locations, the 28-bloc EU has agreed to draft a common blacklist of tax havens and to introduce sanctions for non-cooperative jurisdictions. The EU president, Jean-Claude Juncker, was prime minister of Luxembourg for 17 years to 2013, during which time some would say he turned the country into a major centre of corporate tax avoidance – almost a case of the poacher turning gamekeeper.

This week the Saudi government unveiled a massive economic restructuring plan – Vision 2030 – for the kingdom. The blueprint is based on three pillars – use of its strategic location, its own investment capabilities and an Arab and Islamic division.

There was some good data from the eurozone with a 0.6% Q1 growth rate (up from 0.3% in Q4) and a fall in the 19-country bloc’s unemployment rate to 10.2% – its lowest level in nearly 5 years. On the negative side, deflation returned with April showing a negative 0.2% rate, from zero the previous month – still some way off the ECB’s 2.0% target. However, with political turmoil and sluggish global growth, confidence remains fragile.

Likewise the US saw slowing growth with Q1’s 0.5% rate well down on the previous quarter’s 1.4%. The main drivers appear to be the strong greenback and a fall in domestic demand, with consumer spending increasing at the much slower rate of 1.9%. Furthermore, business investment fell by 5.9% – its biggest quarterly fall since the GFC.

Thursday saw both Japanese and Chinese currencies registering huge daily gains, as the dollar weakened. The yen had its best daily gain in six years to close over 3% up at 107.3, whilst the People’s Bank of China raised its rate by 0.56% to 6.46 – its biggest increase in 11 years. There is no way that the Bank of Japan, or the country’s exporters, can afford to let the yen become too strong and another dose of QE is inevitable.

Much to Japan’s disappointment, the French company DCNS won a US$ 39 billion, 35-year contract to build 12 submarines in Adelaide for the Royal Australian Navy. The Japanese had been recent front runners for the contract and PM Abe had been confident of success – the rejection will do nothing to enhance bilateral relations. No doubt he is thinking that he could have done With A Little Help From My Friends.

Posted in Finance | Tagged Arabtec, DFM, Drake & Scull, Dubai, Dubai Financial Market, Dubai Parks, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

Throw It All Away!

Posted on April 25, 2016 by howesdubai

JLL reported that house prices have fallen 10% over the past 12 months but indicate that the market may now be returning into positive territory. Over the past quarter, rents for apartments dropped by 3%, whilst villas have remained flat in Q1, and down 5% over the past year. The consultancy estimates that 2.2k units were handed over in Q1 with a further 27k expected over the next 9 months – we will have to wait and see!

Already with four active projects, and ten others in the pipeline, Ellington Properties has announced plans to build 10k residential units by 2020. The developer expects its 181-unit Belgravia project in JVC to be completed by year-end, whilst work on three others is under way. These are a 17-storey tower, DT1, in Downtown, the Ellington Collection of luxury villas on Palm Jumeirah and Belgravia II in JVC.

Hotel operator Rotana is expanding operations, ahead of Expo 2020, with plans to add two properties in Dubai – the 600-key Wafi Rotana and a 400-room hotel on SZR, along with 200 serviced apartments and 400 residential units.

Azizi Developments is another company to move into the hospitality sector with two towers – Candace Aster and Candace Acacia – to be managed by Candace Hotel and Resorts. Work on the US$ 125 million project, located in Al Furjan, has already started and, on completion in Q3 2017, will add 460 units to the ever growing serviced apartment sector.

Hilton Worldwide has announced that a management agreement has been signed with Ward Holdings to open the Waldorf Astoria Dubai International Financial Centre. The property is slated for completion by Q4 2017.

Louvre Hotels Group is planning to expand its 60-property MENA operations by adding a further 40 budget hotels to its portfolio. The French company has several brands including Golden Tulip (4-star) and Royal Tulip (5-star) but will be focusing on the lower segment, with its Première Classe and Campanile products.

Because of a trademark infringement, Danube Properties has had to amend the name of its latest US$ 82 million Ritz Tower by Danube to Starz Tower by Danube.

With three new theme parks – Bollywood, Legoland and Motiongate – set to open this October, Dubai Parks & Resorts has announced plans for a 4^th – Six Flags. Meraas Holding owns 60% of the Dubai-listed company which is proposing a US$ 458 million rights issue to finance the new venture, with 1.68 billion shares of US$ 0.272, on offer; on Thursday, these were trading at US$ 0.376. Current shareholders will be entitled to 1 new share for every 3.767 held.

Majid Al Futtaim has signed a JV with international fashion retailer, Monsoon Accessorize, to expand in the GCC. The London-based entity – comprising two brands, Monsoon founded in 1973, and Accessorize – has 1k stores in 70 countries and will take advantage of MAF’s regional experience.

Damac Properties announced a 15% cash dividend, as both its revenue and net profit jumped – the former doubled to US$ 2.32 billion and the latter by 29.6% to US$ 1.23 billion.

Amanat Holdings has paid US$ 38 million to acquire a 16% share in Madaares, a Dubai education provider, with six schools, having 6.9k students, and 4 nurseries. It is estimated that over the next five years, the private education sector will witness annual growth of 9%. The company also declared a 1.5% cash dividend, following last week’s announcement that, in its first year of operations, it posted a US$ 14 million profit.

Another company on the acquisition trail is Arcapita, spending US$ 100 million on a Dubai 630k sq ft logistics park in Al Quoz. The investment management firm is planning to lease out all 10 premium warehousing facilities to a large company, ensuring a future steady recurring investment income; this will also see attractive capital appreciation, if the 20% increase over the past 20 months continues.

Moss Bros, founded in 1851, is to open its first overseas store in Ibn Battuta later in the month. The UK plc, with over 150 UK outlets, specialises in men’s dress wear for formal occasions.

Earlier in the week, the world’s first 7-star VIP private air terminal had its inaugural flight. An Embraer Legacy aircraft, with 13 Maldives-bound passengers, took off from the 5.6k sq mt terminal at Dubai South’s Aviation District. Solely for private use, the facility will operate 24 hours every day.

After four years in the position, Alan Liebman has stepped down as CEO of Kerzner International Holdings; last April the Investment Corporation of Dubai acquired a significant equity interest in the company, with Mohammed Al Shaibani taking over as Chairman from the founder, Sol Kerzner. At that time, Istithmar World paid US$ 250 million to buy out the remaining 50% in Dubai Atlantis hotel.

Forbes’ latest report sees six local businessmen make their billionaire ranking. These include Majid Al Futtaim (US$ 5.0 billion), Abdulla bin Ahmad Al Ghurair and family (US$ 4.9 billion), Hussain Sajwani (US$ 3.2 billion), Abdulla Al Futtaim (US$ 3.1 billion), Saif Al Ghurair and family (US$ 2.2 billion) and Abdul Wahid Al Rostamani (US$ 1.3 billion).

Over the next decade the Abdulla al-Ghurair Foundation for Education will provide 15k scholarships for MENA students in need of financial assistance. Launched by Abdul Aziz al-Ghurair, the fund will use US$ 1.14 billion for education grants, in a bid to ensure that every Arab youth has the means to a tertiary education. Last year, the Emirati billionaire businessman pledged to donate 33% of the family business assets over the coming years to charity. (In 1967, his father – Abdullah Al Ghurair – started the country’s oldest commercial and largest private bank – now known as Mashreq – and three years earlier had opened its first boarding school in Masafi).

(The latest philanthropic billionaire is Pony Ma, the Chinese founder of Tencent Holdings Ltd. He is reportedly donating over 11% of his US$ 18.8 billion fortune to his charity foundation by dint of 100 million company shares, currently valued at US$ 2.1 billion).

Three years after exiting the Russian market, and following this January’s agreement to invest US$ 2 billion with the Russian Direct Investment Fund, DP World Russia is now studying suitable locations. The JV, 80% owned by the Dubai partner, is considering potential investments in Vladivostok, the Baltic and the Black Sea.

With just over two months to go before mandatory health insurance for all Dubai employees becomes reality, a reported 25% of employees are still not covered.

Humaid Al-Qatami, the chairman and director-general of Dubai Health Authority, has indicated that the emirate is planning to open 22 new healthcare centres (18 private and 4 public) in the coming five years. These form part of Dubai Health Strategy 2021 to improve the quality and cost effectiveness of local health services as well as to boost medical tourism, with expectations of numbers increasing from the 2014 level of 135k to 500k by 2020.

Q1 traffic on the Metro and Dubai Tram continued to grow, with reported 49.9 million and 1.3 million users respectively.

The world’s largest district cooling services provider, Emirates Central Cooling Systems Corporation, will add a further 30k refrigeration tonnes to its capacity. Empower currently operates more than 1 million 100 thousands RT and provides over 70% of Dubai’s district cooling market.

There was a slight 0.08% rise in Dubai’s year on year March inflation rate to 1.51% but still well down on the 4% level seen in early 2015. It is expected that the downward trend will continue in the short-term, as housing and utility charges will weaken.

Emirates NBD was one of the first major local companies out with Q1 results posting an 8.4% hike in profits to US$ 493 million. The bank, 55.6% owned by Investment Corporation of Dubai, was helped by a 24.6% reduction in its bad debts provision to US$ 226 million. In the past month, the bank has made 300 staff redundant in a bid to cut costs. Both deposits, as well as loans and advances, rose by 12% to US$ 79.3 billion and US$ 76.0 billion respectively.

CBD’s Q1 profit disappointed, with a 0.8% fall in revenue to US$ 157 million and profit by 18.3% to US$ 66 million; operating expenses jumped 8.3% to US$ US$ 57 million, as impairment allowances rose 35% to US$ 37 million. Total assets surged 21.6% to US$ 16.1 billion, with loans and advances up 15.9% to US$ 10.6 billion.

Nakheel recorded an 8.0% jump in Q1 profits to US$ 401 million as its hospitality, residential and retail sectors have expanded, resulting in improved rental returns. The major impact has come with the February opening of Dragon Mart 2, effectively doubling its size to 2.2 million sq ft.

Deyaar Developments reported a 7.6% fall in Q1 profit to US$ 14 million.

Dubai Islamic Bank (DIB) said it has listed $500 million (Dh1.836 billion) of sukuk on Nasdaq Dubai, bringing the bank’s total listing on the bourse to $3.25 billion.

Now that the final dissenting creditor, Stonehill Capital Management, has sold its US$ 15 million debt to DIB, an existing stakeholder, Limitless should be able to finalise its US$ 1.2 billion debt restructuring. If all parties agree, this will include extending the debt timeline to December 2018 and the Dubai-based property developer making an advance payment of US$ 518 million to the banks and US$ 48 million to trade creditors.

Dubai-listed Gulf Navigation is aiming to repay its outstanding debts of US$ 35 million, as it undergoes a new strategy, including a cost cutting exercise and an expansion of services as well as a US$ 60 million convertible bond programme. Two shareholders – Diamond Line General Trading and Tabarak Constructions – have recently increased their shareholdings to 8.55% and 10.35% respectively.

The UAE Central Bank reported that, as the demand for business loans has increased, banks are increasingly reluctant to meet it– probably in light of the economic environment and a rise in debt defaults. This is a problem that needs addressing as SMEs are the lifeblood of the economy but if finance becomes unavailable – or only at exorbitant rates – then growth will be held back.

After its first 15 years, based in the World Trade Centre, the DFM is to build a tailor-made office in Business Bay on a 10.2k sq mt plot valued at US$ 63 million. The new bourse is expected to be ready for business by 2015.

The exchange opened on Sunday at 3547 and nudged 37 points higher to close on 3584 by Thursday (21 April 2016). Bellwether stocks, Emaar Properties and Arabtec, had a mixed week with the former up US$ 0.04 at US$ 1.88, and the latter again unchanged at US$ 0.47. Trading volumes on Thursday were at 825 million shares, valued at US$ 285 million, changing hands, (cf 554 million shares for US$ 257 million, the previous Thursday).

Brent crude had another good week – jumping 4.0% (US$ 1.68) to US$ 43.18 – whilst gold rose US$ 24 to US$ 1,250 by Thursday (21 April) close.

In the first meeting of its kind in 15 years, 16 major oil producers (both OPEC members and others) failed to reach any agreement in Doha on Sunday. It was hoped that some sort of compromise on production quotas could be reached but no deal was attained. OPEC members are set to meet again to try and thrash out some sort of compromise that would be agreeable to all parties, including Saudi Arabia and Iran.

Following on from Hyundai’s 2014 falsification, and the VW scandal last year, Mitsubishi has admitted that it has falsified fuel economy data on 600k vehicles sold in Japan; this includes 470k units it made for Nissan. The Korean company has already settled a US$ 350 million penalty payment with US regulators, whilst VW has set aside almost US$ 7.0 billion to cover costs. This week it reached a deal with US lawmakers that saw every affected customer receiving a US$ 5k compensation payment. along with the carmaker having to fix nearly 600k vehicles at their expense.

An international consortium, including Brookfield, CVC Capital Partners and the Qatar Investment Authority (which has a 25% stake holding), has reportedly cancelled proposals to acquire the UK’s second largest supermarket chain, J Sainsbury. It seems that the US$ 8.6 billion takeover plan was aborted after the supermarket made a US$ 2.0 billion offer for Home Retail Group, the owner of Argos.

Yahoo reported disappointing Q1 results, with revenue down 11.6% to US$ 1.08 billion and a loss of US$ 99 million. The struggling company is looking for buyers for its core internet sector and potential suitors include UK’s Daily Mail, TGP, Verizon and YP Holdings; earlier plans to sell to Alibaba fell through.

Another US tech company facing problems is Intel which has set aside a US$ 1.2 billion charge to cover restructuring costs, as it plans to shed 12k from its payroll, equivalent to 11% of its work force. With global PC shipments falling 11.5% in Q1, the company is trying to move away from this declining sector into the higher-margin data centre business.

The board of Lexmark has agreed to be taken over by an Asian consortium for a reported US$ 3.6 billion, subject to shareholders’ and regulatory approval. Chinese-based Apex Technology, maker and distributor of ink jet and laser cartridge components, is the lead company in the acquisition that also includes PAG Asia Capital and Legend Capital of China.

Last week, the three largest US financial institutions, JP Morgan, Bank of America and Wells Fargo, posted disappointing Q1 results. Now its 4^th biggest bank, Citigroup, has reported a 27.1% plunge in quarterly profits to US$ 3.5 billion, as both its fixed income markets and investment banking revenue dipped – by 11.5% to US$ 3.1 billion and 27.2% to US$ 875 million respectively.

With the EPL coming to its year end climax, Deloittes reported that its 20 clubs made a total pre-tax profit of US$ 170 million in the 2014-2015 season – 36.9% down on the previous season. The clubs received US$ 4.9 billion from broadcast rights, due to rise by US$ 2.4 billion next year; this has helped pay the league’s massive US$ 8.6 billion wage bill.

The IMF has warned that Greece’s growth plans are unrealistic and doubted whether the country could meet its forecast 3.5% budget surplus. It still has unemployment levels at over 25% and is in urgent need of major structural reforms, especially in the area of tax reform. It is estimated that tax collection rates are dropping and that 5% of Greek households are exempt from tax – compared to say Portugal where the figure is only 2%.

Indian tax collection is only slightly better, with just under 6% of earning individuals paying tax and its 16.6% tax to GDP ratio is one of the lowest globally. It is estimated that the uncollected outstanding tax could be a staggering US$ 117 billion – six times higher than the figure in 2010. Any modicum of success in collection could help the government’s target of reducing its fiscal deficit from 3.9% to 3.5%.

Having cut its global growth forecast last week, the IMF met with representatives of the 25 largest economies in an attempt to boost the flagging world economy. Some of the issues discussed included certain countries weakening their currencies to gain more competitive export prices along with the needs to boost public spending and avoid continuous deflation.

As the world experiences a global steel glut, China reports a record month in March with a 70.7 million tonne output and exports up 30.0% to 10 million tonnes. Meanwhile, an OECD meeting, with trade officials from 30 affected countries, could not come to any agreement on how to tackle the overcapacity problem facing the industry, whilst the US indicated that the problem lay with China and their need to cut back or face international trade sanctions. It is estimated that the annual global capacity is 2.37 million tonnes but 2015 usage continues to fall – from 70.9% to 67.5%.

George Osborne fell US$ 2.6 billion short on his target to keep annual government borrowing below US$ 106.6 billion. Public sector net debt at 83.5% to GDP remains relatively high, having risen 3.1% over the year to US$ 2,296 billion.

Ahead of its June Brexit poll, there were mixed economic signals from March data points. Month on month retail sales figures dipped 1.3%, despite Easter falling late in the month – sure signs that economic activity is dipping and low inflation is here to stay for most of this year. Latest unemployment figures show a slight 21k increase in unemployment levels to 1.7 million, as the rate remains steady at 5.1% – but down from 5.6%, year on year. Earnings, at 1.8%, slowed from the 2.1% posted in the previous quarter, indicating a slowdown in the labour market.

The Cameron government has called in the big guns – including the US president, the IMF chief executive, the German Chancellor and the Treasury – in a bid to ensure that the UK stays with the EU. From the outside, it very much looks like the fear card is being played remorselessly. To anybody who does not understand why there is growing dissent against the European bureaucracy and a possibility that the country will vote for exit, the following may help.

Pythagoras’ theorem – 24 words
Lord’s Prayer – 66 words
Archimedes’ Principle – 67 words
10 Commandments – 179 words
Gettysburg address – 286 words
US Declaration of Independence – 1,300 words
US Constitution with all 27 Amendments – 7,818 words
EU regulations on the sale of cabbage – 26,911 words

Maybe it is time to Throw It All Away!

Posted in Finance | Tagged Arabtec, Brexit, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

The Long And Winding Road

Posted on April 21, 2016 by howesdubai

Emaar is in the news on several fronts this week. The Spanish architect, Santiago Calatrava Valls, will be responsible for building its latest project – a US$ 1 billion tower, supported by a matrix of cables. Slated to be taller than the 828 mt Burj Khalifa, the project will be completed in time for Expo 2020. Located on The Creek, the structure will be more of an architectural tower (similar to the Eiffel Tower), than a working building, with perhaps only 20 upper floors for a hotel and observation tower.

In conjunction with Abu Dhabi-based Eagle Hills, it has launched The Address Fujairah Resort + Spa, including a luxury hotel and four residential buildings which will house 177 apartments and 10 villas. It is reported that the Dubai developer is also in talks with Rixos to become a 50% partner in a US$ 420 million Turkish theme park in Belek. To be fully completed over the next five years, phase 1 includes a 5-star 200-key hotel, retail outlets and an aqua park. This week, Emaar confirmed that it planned to demerge from its Indian JV partner, MGF Developments, but will continue to develop on-going projects and carry out new business in the country.

In direct contrast to pre-GFC, when developers seemed to collect most of the payments before and during development, the RERA CEO, Marwan bin Galita, is concerned that many plans now see up to 60% payments after delivery. This may result in buyers defaulting which could cause financial stress to developers.

Already with 75 Airbus 380s in service, and a further 65 on firm order, Emirates has arranged to acquire two more, valued at US$ 865 million, for delivery in Q4 2017. Over the intervening period, the airline plans to introduce 33 A380s and 24 Boeing 777s, as it retires 30 older aircraft.

A CBRE report has ranked UAE residents as the 3^rd highest F&B spenders in retail malls – outlaying US$ 18.5 per person per visit, and only just behind Switzerland (US$ 20) and Norway (US$ 19). However, the country is in 8^th place (US$ 57) when it comes to retail spend per visit – behind the top two, Switzerland (US$ 78) and Belgium (US$ 77).

A report by IHS Global Insight ranks the country as one of the 15 top EMEA investment hotspots and indicates that over the next decade, annual growth will be in the region of 3.5%. The UAE has benefitted from its oil diversification strategy, especially in the tourism, trade and travel sectors, which have seen it become a global hub.

Having earlier posted 2015 profits of US$ 327 million, Dubai Investments has declared a 12% dividend, amounting to US$ 132 million. Its latest strategy is to buy units in a US$ 46 million fund to develop industrial parks in Saudi Arabia, with phase 1 spend estimated to be up to US$ 136 million. The company’s 2015 asset base totalled US$ 4.2 billion and this is forecast to expand by 30.9%, to US$ 5.45 billion, over the next four years.

The Investment Corporation of Dubai has estimated that the emirate received over US$ 5.4 billion in foreign direct investment inflows last year – with 279 new projects established. 75% of the total emanated from five countries – Saudi Arabia, US, UK, India and Kuwait.

In a move to attract more Chinese business, Dubai Gold & Commodities Exchange has agreed to collaborate with two major banks – Agricultural Bank of China and Industrial and Commercial Bank of China – a month after becoming a settlement bank for the Bank of China. These moves will speed up the process, so that yuan transactions can be cleared locally, with the centre becoming a more attractive environment for Chinese investors.

A recent report by the Arab Petroleum Investment Corporation has estimated that US$ 611 billion will be invested in MENA energy projects over the next five years. The spend will be split between power (US$ 194 billion), oil (US$ 190 billion), gas (US$ 149 billion) and petrochemicals (US$ 78 billion). The UAE is slated to spend US$ 49 billion, of which US$ 20 billion is under contract bidding.

Emirates NBD is financing a US$ 225 million loan for two power plants to be built by the Egyptian Electric Holding Company.

The latest Emirates NBD Dubai Economy Tracker Index reinforces that the economy is heading in the right direction. March’s reading of 52.5 is a lot stronger than the 48.9 recorded a month earlier – any score over 50 indicates economic expansion and below – contraction. Encompassing the non-oil private sector, the survey pointed to an upturn in employment numbers, new order expansion and a general rebound in business activity. This goes hand in hand with news that the oil price continues to head north whilst the DFM seems to be in a bullish environment – 36.9% higher, compared to its 2591 low of 21 January 2016.

The bourse had a good week opening Sunday at 3386 to close 161 points higher at 3547 by Thursday (14 April 2016). Bellwether stocks, Emaar Properties and Arabtec, had a mixed week with the former well up by US$ 0.20 at US$ 1.84, and the latter unchanged at US$ 0.47. Trading volumes on Thursday were at 554 million shares, valued at US$ 257 million, changing hands, (cf 910 million shares for US$ 215 million, the previous Thursday).

Brent crude had a magical week – surging 10.6% (US$ 3.98) to US$ 41.50 – whilst gold dropped US$ 16 to US$ 1,226 by Thursday (14 April) close.

Despite its biggest ever loss of US$ 5.2 billion, its payroll slashed by 5k and its share value having fallen 23% over the past year, BP’s chief executive, Bob Dudley, was hoping for a 20% pay rise to US$ 19.6 million! The company consider it justified following an “excellent” operating performance, whilst many shareholders think differently.

In the wake of falling prices and unable to pay its debts, the world’s largest privately owned coal miner, Peabody Energy, has filed for bankruptcy. Like others in the industry, the company, which bought the Australian miner MacArthur for US$ 3.8 billion in 2011, has been hit by low energy prices, a shift to natural gas and enhanced environmental regulations. According to official data, producers accounting for 45% of US coal output have already filed for bankruptcy – maybe the frackers are next on the list?

Its bid, to escape paying US$ 128 billion in US tax, has collapsed with news that the US$ 160 billion Pfizer/Allergan deal has been abandoned. The merger would have seen the world’s largest tax inversions deal but its failure has now seen similar arrangements, totalling US$ 376 billion, being scrapped so far in 2016. US legislators may now block the proposed US$ 25 billion takeover of Baker Hughes by Halliburton – a deal that would have seen the 2^nd and 3^rd largest oil service providers combining. Earlier attempts by the two largest cable TV companies – Comcast and Time Warner Cable – to merge were also thwarted by Washington regulators.

It seems that the ailing internet company, Yahoo, may have a buyer in the UK’s “Daily Mail”. The company is going through a torrid time and has seen its share value fall 30% in the past two years. Consequently, Starboard Value, a major investor, is trying to oust CEO Marissa Mayer and the company board who have overseen the payroll slashed by 15% to under 10k as it continues to haemorrhage business to Google and Facebook.

Due to declining revenue (falling 3.0% to US$ 24.1 billion), mainly from trading and investment banking as well as potential losses from its energy-based clients, JP Morgan posted a year on year 6.6% fall in Q1 profits to US$ 5.52 billion, as its loan loss provision surged 87.7% to US$ 1.8 billion.

Bank of America, the country’s second largest bank, fared even worse with an 18.4% drop in Q1 profits to US$ 2.2 billion as they made a 30% increase in provisions, equivalent to US$ 1 billion. Revenue fell 6.6% to US$ 19.7 billion.

After a decade’s absence, Argentina is expected to re-enter the global bond markets, following clearance by a US court to overturn claims by dissident creditors, unwilling to settle the country’s US$ 9 billion offer to settle its long-standing debt. Next week, the Mauricio Macri government will raise a further US$ 12.5 billion in new bonds, partly to pay off this debt.

As the AUD hits a 9-month high of 0.77 this week, the country reports a 4.0% month on month fall in consumer confidence, following a 2.2% dip in March. A rising currency sees exports become more expensive, and less competitive, whilst overseas tourist numbers will inevitably drop. Both will have an adverse impact on the country’s future growth prospects.

Meanwhile Chinese investment in the “lucky country” has hit its highest level since 2008 and, of the US$ 11.6 billion total, 45.6% is in real estate, most of which is in New South Wales. Although the country is China’s second most favoured location for investment, it is still a long way off the US$ 118 billion that is spent in the US.

China continues to spook global markets as the country tries to get to grips with its transition to a more consumer driven economy and managing slowing growth in its economy. The IMF has highlighted a potential US$ 1.3 trillion black hole of risky bank loans in the Chinese banking system – both official and shadow.

However, this week was full of good news for the Chinese economy as March exports jumped 18.7% – year on year – and with imports down 1.7%, the country posted a US$ 30 billion trade surplus. Although marginally down on the previous quarter’s 6.8%, Q1 growth figure of 6.7% was in line with exceptions. Positive figures, including a 10.7% jump in infrastructure investment and March consumer spending up 10.5%, point to the fact that the country’s transition is taking shape and the economy may be on the rebound. . . if the figures are accurate!

Rising debt levels and low inflation rates are both drivers that could further stall global growth, with the IMF urging more to be done by central banks and governments to restore consumer confidence. The organisation is not renowned for its forecasting, as it seems to change its outlook every other month. It has cut its previous January global growth by 0.2% to 3.2%, with emerging markets down 0.5% to 4.1%, G7 down to 1.9%, the UAE falling to 2.4% (from 2.6%) whilst China actually nudges up 0.2% to 6.5%. For some countries, recovery is going to be a Long And Winding Road.

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Expo 2020, Dubai Financial Market, Dubai Metro, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

The Taxman’s Taken All My Dough

Posted on April 19, 2016 by howesdubai

Dubai’s first major affordable lifestyle community, Town Square, will welcome its first residents in 2017. Nshama, the developer, has already sold over 2k units and started work on 1.05k townhouses and 1.1k apartments. Prices for the former will start at US$ 272k, whilst 1-bedroom units will sell for US$ 167k. The development is planned to have a 2.5 million sq ft retail district, with over 600 stores as well as many other leisure facilities.

Radiant Star has indicated that its Riah Towers project, located in Dubai Culture Village, will be completed by Q4 2016. The 17-storey US$ 90 million building will house 156 apartments and four retail units.

Despite a slowdown in the 5-star hotel sector, Dubai’s largest property, JW Marquis, managed to buck the trend. The 1.6-key hotel recorded a 13.0% jump in room revenues and had occupancy rates in excess of 73%; it also saw 2015 demand jump 12%, despite overall Dubai supply, at 6.7%, outstripping the 4.3% growth in demand.

It is expected that Dubai’s retail sector will generate more than US$ 52 billion by 2020, as annual growth rate nears 8.0%. Of the 2015 sales figure, totalling US$ 35.4 billion, store based shopping accounted for 93.8%, split between non-grocery (US$ 22.3 billion) and grocery (US$ 10.9 billion).

Savills Global Retail Destination Index 2016 sees Dubai Mall ranked higher than some of its global retail competition, including the likes of Champs-Elysees, London’s Regent Street and New York’s Fifth Avenue. Furthermore, the report expects Dubai to register the strongest future global growth in retail sales over the next five years and could then be in a position to challenge London’s West End’s current leading global position.

According to a New World Wealth’s report, Dubai’s millionaire population rose by 5% last year to 42k, with many coming from North Africa. Whilst Australian cities, Sydney and Melbourne, saw increases of 4k and 3k, on the flip side Paris saw a 7k exodus of millionaires.

Last month, DEWA announced a 3-year plan to build 64 substations, at a cost of US$ 1.8 billion. This week, it announced a spend of US$ 178 million to enhance Dubai’s expanding water supply, by laying down 373km of transmission network.

The emirate has launched its own high-end tea brand – Shay Dubai – with three flavours (Arabic Breakfast, Dubai Spirit and Khaliji Blend). The DMCC, which manages its own Tea Centre handling 41 million tons, is keen to tap into the ever expanding global tea market, estimated at 5.2 million tons.

Following a 4-year low in January, the Dubai non-oil business environment has edged forward, with the latest reading from the Emirates NBD PMI survey showing a 54.5 reading (up from February’s 53.1). Although exports fell, there was slight growth recorded in sectors such as employment, new work and input stocks.

Nasdaq Dubai, the world’s largest Islamic bond centre, valued at US$ 39.6 billion, has seen the issue of two Indonesian government sukuks totalling US$ 2.5 billion. The emirate also has ambitions to become the Islamic Economy’s global capital.

The bourse had a flat week opening Sunday at 3356 to close 30 points up at 3386 by Thursday (07 April 2016). Bellwether stocks, Emaar Properties and Arabtec, had a flat week with the former unchanged at US$ 1.64, and the latter up US$ 0.02 to US$ 0.47. Trading volumes on Thursday were well up at 910 million shares, valued at US$ 215 million, changing hands, (cf 394 million shares for US$ 198 million, the previous Wednesday).

Brent crude traded lower – down 1.5% (US$ 0.59) to US$ 37.52 – whilst gold moved up US$ 7 to US$ 1,242 by Thursday (07 April) close.

With this week’s acquisition of Richard Branson’s Virgin America, Alaska Airlines will become the 5^th largest carrier in the US (with a 280-plane fleet). The deal is valued at US$ 4 billion, with a cash payment of US$ 2.6 billion (equivalent to US$ 57 per share) and the US$ 1.4 billion balance taking over the debt of the 9-year old airline.

The fight for Starwood Hotels & Resorts Worldwide rumbles on with Marriott International lodging a US$ 14.4 billion bid as its rival, China’s Anbang Insurance Group, finally pulls out. The deal has still to be approved by regulatory authorities in the EU and China. Marriott will then become the largest hotel chain in the world (with 5.5k properties and 1.1 million rooms), after adding the Sheraton, St Regis and Westin brands to its portfolio.

What is left of the UK steel industry is now in tatters as the Tata Group plans to exit, only 8 years after buying plants from Corus. Despite on-going problems of over-manning and underinvestment, the main problems were the flood of cheap Chinese steel into the market, which has seen prices plummet to US$ 320 per metric tonne, allied with a global economic slowdown. (Coincidentally, there are reports that the Indian steel conglomerate may have made up to US$ 1 billion windfall profits by selling carbon emissions permits it was given for free through the EU emissions trading scheme).

There is no doubt that cheap consumer finance has been a major fillip for the UK car industry, as it enjoyed its second best ever sales month in March. With sales growing by 5.3%, 519k vehicles were registered – only bettered by August 1997’s 526k units.

A sure sign that UK exports are becoming more of a problem came with its February trade deficit – in goods and services – of US$ 6.8 billion, whilst the trade gap with the EU widened to a record level of US$ 12.2 billion. Other data point to more economic problems – industrial output and manufacturing output fell 0.5% and 1.8% respectively, year on year. Indeed industrial output is now 10.7% below its 2008 peak – just before the GFC – whilst there were monthly decreases in 11 of the 13 manufacturing sub-sections. This would indicate that Q1 growth will be no more than 0.3%, compared to 0.6% recorded in the preceding quarter.

Japan’s latest strategy to kick start its faltering economy – negative interest rates – has backfired. Instead of weakening its currency to make exports cheaper and more competitive, the yen has surged to an 18-month high at 112. There is no doubt that markets are beginning to doubt the efficacy of Prime Minister’s “Abenomics”, after 3 years of monetary easing, and it will be interesting to see what happens next.


Q1 %			Unit	31 Mar 16	31 Dec 15	30 Sep 15	30 Jun 15	31 Dec 14	31 Dec 13
17.17%	Gold	US$	oz	1,242	1,060	1,114	1,174	1,186	1,236
17.02%	Iron Ore	US$	lb	55	47	57	62	73	135
3.08%	Oil – Brent	US$	Bar	37.52	36.40	48.70	63.05	57.33	102.50
3.23%	Coffee	US$	lb	128	124	121	131	161	260
-9.38%	Cotton	US$	lb	58	64	60	68	62	86
11.79%	Silver	US$	oz	15.45	13.82	14.57	15.68	15.77	20.15
1.87%	Copper	US$	lb	2.18	2.14	2.38	2.62	2.88	3.37
5.48%	AUD	US$		0.77	0.73	0.71	0.77	0.81	0.89
-2.70%	GBP	US$		1.44	1.48	1.52	1.57	1.53	1.64
4.59%	Euro	US$		1.14	1.09	1.11	1.11	1.21	1.38
0.00%	Rouble	US$		0.01	0.01	0.02	0.02	0.017	0.03
-1.07%	FTSE 100			6,175	6,242	6,061	6,521	6,548	6,730
-13.86%	CS1300			3,214	3,731	3,195	4,409	3,532	2,291
0.78%	S&P 500			2,060	2,044	1,887	2,063	2,091	1,831
6.51%	DFMI			3,356	3,151	3,593	4,087	3,774	3,370
-4.90%	ASX All Ord			5,083	5,345	5,021	5,451	5,415	5,352

Despite all the global gloom, an upbeat Q1 saw rises for six of the seven commodities tracked by this blog, with double digit growth for gold (17.17%), iron ore (17.02%) and silver (11.79%). In relation to the currencies, both the AUD and the Euro headed north whilst sterling weakened again, ahead the prospect of a June Brexit. The local DFM was the big winner this quarter rising by 6.51%, as many of the other global bourses struggled.

The big news of the week was the release of 11.5 million confidential documents allegedly emanating from the Panama-based law firm Mossack Fonseca. The “Panama Papers” seem to indicate how the firm aided some of its clients to dodge sanctions, evade tax and launder money. There were 214k offshore companies listed, many with details of shareholders and directors. The five main countries of incorporation were BVI (113k) and Panama (49k), followed by Bahamas, Seychelles and Nieu.

It has been estimated that over US$ 245 billion of UK property is held overseas and that about 10% of the tax haven companies set up for this role have been linked with this Panamanian legal company. What used to be seen as a private matter has now become public domain much to the embarrassment and chagrin of many including world leaders, politicians along with other powerful and rich members of society. Sunny Afternoon – The Taxman Has Taken All My Dough.

Footprint In The Sand

Posted on April 3, 2016 by howesdubai

This week, HH Sheikh Mohammed bin Rashid Al Maktoum launched the official logo for Dubai Expo 2020. The winning design, out of 19k entries, is an authentic Emirati logo based on the 2002 find of a 4k-year old ring, at the Al Marmum archaeological site.

Following on from reports that local banks had lost a potential US$ 1.4 billion in bad debts, as people left the country, it was welcome news to see that these financial institutions have agreed to suspend any legal action against struggling SMEs for a period of three months. Such companies contribute over 60% to the country’s GDP and could further benefit from certain banks reducing seemingly exorbitant interest rates as well as a change in the law relating to insolvency.

Dubai Holding has added a new business unit – Family Entertainment and New Media – which will be responsible for Global Village and Arab Media Group, as well as any family destinations and new international production business communities. The new CEO will be Mohamed Al Mulla, who will be tasked to firm up investments in a mixed range of knowledge-based sectors.

The importance of the MICE (meetings, incentives, conferences and exhibitions) sector to the Dubai economy was demonstrated by a 12.0% hike in delegate numbers to 2.74 million, visiting Dubai World Trade Centre. Last year, the venue held 396 trade events, with 38.9% (1.1 million) of the attendees being overseas visitors – adding value to the local travel, retail and hospitality sectors.

A recent report by real estate consultancy Core, the UAE affiliate of Savills, has concluded what many already knew – Dubai affordable housing is anything but. Although some banks will arrange mortgages for those on US$ 4k a month, that does not seem enough to buy a studio apartment for say US$ 170k. There are reports that legislation could be introduced for a mandatory 15% housing in all future residential projects – but even if that reduced purchase prices, it would still be out of range for the vast majority.

As has been the case in recent months, the Dubai hospitality sector continues to struggle. February STR Global data sees falls across the board, including occupancy rates down 3.5% to 82.5% and a 11.6% decrease in ADR to US$ 227, causing RevPAR to drop 14.7% to US$ 187. (These are still much better than ME hotels which show falls of 5.3% to 70.2%, 10.5% to US$ 50 and 15.2% to US$ 36 respectively.

Following a 5-year delay, it has been announced that Dubai’s 2^nd tallest building, Marina 101, will open by the end of 2016. The 427 mt tower, costing US$ 355 million, will include the Hard Rock hotel (encompassing the first 33 floors), apartments (from floors 34 -100) and a Hard Rock Café & Lounge on the 101^st deck.

The 110-bed Clemenceau Medical Centre will become the third general hospital in Dubai Healthcare City. The US$ 109 million facility, affiliated with Johns Hopkins Medicine International, will be built in conjunction with Khansaheb Investment and is expected to be finished by 2018.

The UAE – as chair of the Kimberley Process (a programme to stop the trade in blood diamonds) – is spearheading a drive to regulate the pricing of rough diamonds. According to experts, in the absence of such pricing, there is an increased potential for abuse in the supply chain.

It is interesting to note that three car rental companies have been closed for violating regulations that only allow rentals for a minimum of 24 hours; the three companies had been renting on an hourly basis, via a smartphone app.

After seven months of falling pump charges, April will see a hike in petrol prices. For example, Special 95 jumps 11.0% to US$ 0.41 per litre, whilst diesel increases by 11.4% to US$ 0.425. The upward movement is a direct result of the recent increase in oil prices, with Brent crude now hovering around US$ 40 per barrel.

A new Executive Council Resolution No (8) of 2016 will see departing passengers – including those in transit – from Dubai airports paying a US$ 9.50 fee.

Local philanthropist, Rajen Kilachand should be a happy man, as his Dodsal Group announces a gas find in Tanzania, with reported deposits of 2.7 trillion cu ft of natural gas which could rise to 3.8 trillion cu ft. That being the case, the discovery could be worth between US$ 8 – US$ 11 billion. The Dubai-based company signed a production sharing agreement with the Tanzanian government in 2007 and the chairman is confident that this find will boost the local economy and create new job opportunities. Dodsal is in bank negotiations to raise an additional US$ 300 million finance for further gas exploration and production.

It was reported that US$ 980 million, of which 50% was foreign sourced, was invested in Dubai Silicon Oasis last year. Projects included the Fakeeh Academic Medical Centre (US$ 272 million), Avenues Mall (US$ 136 million) and Axiom Telecom (US$ 54 million). The number of companies rose by 38.0% to 1.9k, with 78% of that total specialising in technology.

In order to improve and enhance existing and new networks, DEWA is planning to build 64 new substations; the 3-year project will cost US$ 490 million.

At the recent Etisalat AGM, the telecom operator, which posted a US$ 2.3 billion net profit after federal royalty, announced a US$ 0.022 dividend. The company also appointed Saleh Al Abdooli to replace Ahmad Julfar as its CEO.

Dipping 3.4%, Dubai’s 2015 trade total of US$ 350 billion of non-oil foreign trade can be split between imports (US$ 217 billion), reexports (US$ 97 billion) and exports (US$ 36 billion). The three leading trading partners, accounting for over US$ 96 billion (or 27.5% of all trade) were China, India and the US, with the former contributing US$ 48 billion. With a value of US$ 50 billion, phones remained Dubai’s most traded commodity, with gold (US$ 32 billion), diamonds (US$ 26 billion), vehicles (US$ 18 billion) and jewellery (US$ 18 billion) making major trade contributions.

Dubai Investments has injected a further US$ 27 million in troubled Union Properties which will see it increase its share in Property Investments by 20% to 70%. PI build and own property in Dubai Investment Park, including the Green Community and Courtyard by Marriott.

Dubai Parks & Resorts is expecting to raise US$ 458 million in an April rights issue, with the funds being used to finance the development of its 4^th theme park, under the Six Flags brand. It is expected that the total cost of the new facility will be US$ 728 million, with the balance (US$ 270 million) being debt financed. The Meraas park operator plans to open its first three parks in October.

The bourse had a flat week opening Sunday at 3319 to close 6 points up at 3325 by Wednesday (30 March 2016). Bellwether stocks, Emaar Properties and Arabtec, had mixed fortunes with the former down US$ 0.06 to US$ 1.60, and the latter up US$ 0.04 to US$ 0.45. Trading volumes on Wednesday were slightly down at 394 million shares, valued at US$ 138 million, changing hands, (cf 441 million shares for US$ 131 million, the previous Thursday).

Brent crude continued in negative territory, falling 3.3% (US$ 1.30) to US$ 38.62, whilst gold moved up US$ 10 to US$ 1,229, by Wednesday (30 March) close.

Chinese insurance company, Anbang, is slugging it out with Marriott as both try to acquire Starwood Hotels. It seemed that the extended battle had finally been won by the American company, when they tabled a US$ 13.6 billion revised offer last week. This has now been bettered by a US$ 14 billion bid but it is likely that an increased counter offer will be on the table shortly. Interestingly, Starwood would have to pay Marriott a US$ 450 million fee, if it were to accept another offer.

Despite a 7.5 year backlog of orders for 5.8k planes, Boeing plans to cut its workforce by 2.8% to 156.5k, with most redundancies being in its commercial aircraft division. The world’s largest manufacturer has been losing market share to its arch rival, Airbus, whilst seeing a slowdown in the number of new orders.

Taiwanese manufacturer, Foxconn has acquired 66% of Sharp for a reported US$ 3.5 billion, with the electronics company becoming the first ever major Japanese entity to be sold to overseas interests.

Acting before hostile moves are made, Yahoo is trying to sell its core business, including its internet arm and Asian businesses. The struggling internet company put the business up for sale last month, with possible suitors including Time Inc and Verizon Communications. It has also undergone a major cost cutting exercise which has seen its payroll cut by 15% to 11.5k.

Having bought the then Perot Systems in 2009 for US$ 3.9 billion, Dell Inc is now planning to sell the renamed Dell Services to Japanese-based NT Data Inc, for just over US$ 3 billion. As part of its restructuring strategy, the privately owned IT company is broadening its horizon and is in discussions to buy data storage provider, EMC, for US$ 67 billion.

The US Q4 growth figures were amended upwards from 1.0% to 1.4%, as consumer spending rose quicker than originally reported; however this is down on the 2.0% reported in the previous quarter. Consumer spending also moved up from 2.0% – initially reported – to 2.4% on the back of increased employment and rising wage rates. This good news was dampened by the fact that corporate profits recorded their biggest drop (at 11.5%), since the onset of the GFC, as pre-tax earnings fell 3.1% – the most in 7 years. Exports also fell by 2.0%. These disappointing returns could be a portent for companies to consider cost-cutting measures, including investment and hiring, as they are feeling the impact of the strong greenback.

Federal chair, Janet Yellen, remains cautious in her outlook for the US economy, indicating a slower pace for future rate hikes. The main drivers, as usual, were the volatile commodity markets and the economic slowdown in China. She did intimate that, in the event of problems in the US, the Fed would consider tools, such as negative rates and asset purchases.

It is reported that Omani officials have declared the US$ 6 billion Wahat Oman project to be a fake. Touted last year to become the region’s largest yacht port, along with five luxury hotels, residences, hospital and other leisure facilities, the scheme will remain a Footprint In The Sand.

Posted in Finance | Tagged Arabtec, DFM, Drake & Scull, Dubai, Dubai Expo 2020, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

Here’s To The Good Times!

Posted on March 27, 2016 by howesdubai

With the launch of three projects, it was a week of “1s” – One at Palm Jumeirah, One Central and 1/JBR. The developer, Omniyat, has appointed Brookfield Multiplex as the main contractor for the US$ 544 million One at Palm Jumeirah. The 108k sq mt development will house only 90 luxury apartments, with prices ranging from US$ 4 million to US$ 54 million.

The 54-year old construction company was one of the first international entrants to Dubai and built the original towers in The Marina. Under its now Executive Chairman, John Ferguson, it has built some of Dubai’s most famous landmarks, including Emirates Towers (2000), The Index (2011) and JW Marriott Marquis (2013). In 2007, the Australian company, Multiplex, was taken over by the Canadian Brookfield Asset Management.

HH Sheikh Mohammed bin Rashid Al Maktoum has approved plans for the US$ 2.1 billion One Central development. Located in the CBD, adjacent to the Dubai World Central, the project, covering 500k sq mt, includes 4 hotels (with 2k keys) and 1.3k residential units.

Dubai Properties has started enabling work on its 1/JBR project, located at the entrance to JBR. The 46-storey building, with 153 apartments ranging from 2-5 bedrooms, will be completed within 3 years.

The US$ 163 million Union Museum will be finished in September and will be officially opened during the 45th National Day celebrations in December. Located in Jumeirah 1, the museum highlights the origins of the country from pre-union times to the present.

Al Jaber LEGT Engineering and Contracting (Alec) has been awarded phase 1 of the planned passenger terminal building expansions at Al Maktoum International Airport. Within a year, the built up area will increase by 120% to 146k sq mt. By 2030, the facility will have the capacity to handle 220 million passengers a year.

Emphasising the importance of the retail sector to Dubai, latest figures indicate that 2016 sales will top US$ 43 billion in the emirate. Furthermore, wholesale and retail trade accounts for more than 11% of the UAE’s GDP – and almost 30% for Dubai.

Network International estimates that card spending in the country increased by 9.0% last year, and this despite Russian spend down by 50% and Chinese declining by 13%. Notwithstanding all the doom and gloom merchants around, domestic consumer spending jumped by 13%.

The UAE has moved up to 2^nd place, behind Malaysia, in the MasterCard-CrescentRating Global Muslim Travel Index (GMTI) 2016. The report, covering 130 countries, estimates that the 117 million annual Muslim travellers account for about 10% of the total market; by 2020, this percentage is set to increase to 11%, with a market value of US$ 200 billion.

Al Islami Foods is to open an office in Sao Paulo, as the Dubai-based company moves to expand its international operations, with a planned poultry processing plant in Brazil.

Last December, Dubai business tycoon, Khalaf Al Habtoor, made a US$ 8.5 billion investment proposal for a mixed-use development in Cairo; to date, he is still awaiting a response from the Al Sisi government.

Dubai’s Telecommunications Regulatory Authority reported that there was a 41.5% jump in 2015 online blackmail cases to 300.

With one of the highest malware infection rates in the world, it is no surprise to see that US-based cyber security company Malwarebytes plans to open an office in Dubai next month. The company estimates that over the past 3 years, ME countries have witnessed double the number of infected systems than the worldwide average.

There was another boost for embattled developer Arabtec, with the announcement that it had won a US$ 463 million contract to build 1.1k villas in Fujairah; so far this year, the company, 36.1% owned by Abu-Dhabi government’s Aabar Investments, has won four contracts, totalling US$ 2.3 billion. It was also reported that the company has recommenced legal action against Meydan to recover 50% of its US$ 763 million claim; dating back to 2009, the dispute involves work carried out at the home of the Dubai World Cup.

Troubled Dubai-based contractor, Drake & Scull International, 12.8% owned by Emirates Islamic Bank, has won a US$ 93 million MEP building services contract on phase 1 of the Doha Metro project.

It is reported that the 2007 JV, between DP World and MGM Mirage, has sold City Center’s The Shops at Crystals in Las Vegas for US$ 1.1 billion to Invesco Real Estate and the Simon Property Group. The 324k sq ft luxury mall was part of the massive US$ 8.5 billion CityCenter project which opened in 2009.

Limitless has finally started work in Vietnam on a US$ 550 million residential and tourism project, announced nearly ten years ago. Located in Halong Bay, the development includes a 5-star hotel, 340 residential units along with retail and leisure facilities.

Dubai-listed retailer Marka is planning to issue a 7%, 5 year US$ 68 million bond to finance future expansion. The company has acquired both Retailcorp (from Istithmar World) and Reem Al Bawadi and has majority shareholdings in Cheeky Monkeys and Icons.

Abraaj Group is involved in a US$ 150 million fundraising exercise, with an Indian online grocery business, Big Basket. This is its third foray in the e-commerce sector, already having stakes in the local taxi service, Careem, and the Turkish online retailer, Hepsiburada.

There are at least three Dubai entities considering IPOs. After the 2014 success of a US$ 1.6 billion float of its Malls division, there are reports that Emaar is to consider listing its overseas units, in India and Turkey, as well as its hotel division. Al Masah Capital Management is also deliberating on whether to go public, with both its Al Najah Education and Avivo Group. Its education company, established in 2012, operates schools and nurseries in the UAE, as well as Oman and Singapore. Its healthcare service is looking at a US$ 300 million London listing next year. Al Shafar General Contracting has completed “90% of preparations” ahead of a planned October public offering.

MAF Properties reported impressive 2015 figures, with both revenue and profit heading north, by 3.9% to US$ 1.09 billion and 29.6% to US$ US$ 954 million respectively. This helped the parent company, Majid Al Futtaim’s revenue jump 9.2% to US$ 7.4 billion.

Dubai-based Topaz reported a 53% slump in 2015 profits to US$ 21 million, as revenue dipped 10.3% to US$ 362 million. The shipping company, a wholly owned subsidiary of Muscat-listed Renaissance Services, also posted a US$ 71 million impairment charge, as the value of their ships fell in tandem with the oil industry slump.

There are reports that Dubai Police is investigating an alleged fraud in which 60 Gold AE clients have been unable to access their funds totalling US$ 3.2 million; consequently a further 200 (from a client base of 1.2k) have come forward with the same complaint. The company suspended trading last October and, a month later, the Dubai Multi Commodities Centre cancelled its trade licence.

A total of US$ 354 million has already been pledged to the newly created Mohammed Bin Rashid Global Centre for Endowment Consultancy. Based on the model of sustainable charitable endowment, it will centre on a mix of philanthropic causes. The Dubai Ruler has also donated land for the construction of a new Dubai Awqaf and Endowment District which will be devoted to charity and long-term endowments. (GEMS Education has already announced that 4% – 3k students – will benefit from endowment scholarships in support of this initiative).

The bourse ended its recent bullish run closing after opening Sunday at 3385 to close 66 points at 3319 by Thursday (24 March 2016). Bellwether stocks, Emaar Properties and Arabtec, both fell – the former by US$ 0.05 to US$ 1.66, and the latter down US$ 0.03 to US$ 0.41. Trading volumes on Thursday were slightly up on last week at 441 million shares, valued at US$ 131 million, changing hands, (cf 410 million shares for US$ 257 million, the previous Thursday).

Brent crude returned to negative territory falling 3.8% (US$ 1.58) to US$ 39.92, whilst gold was also down US$ 46 to US$ 1,219, by Thursday (24 March) close.

The decline in US oil exploration can be gauged from the fact that the number of rigs has fallen 55.5% to 476 over the past year; of this total, 387 are exploring for oil and the balance for gas. Crude production is at its lowest level since 2014, as imports (8.4 million barrels) rose to a 3-year high.

PetroChina posted a 66.9% decline in 2015 profits to US$ 5.46 billion. The Beijing-based conglomerate is one of the largest global producers and the oil price slump has impacted on both its exploration and production sectors.

Petrobas reported a Q4 US$ 10.2 billion loss, after a massive write-down in assets, following the collapse of oil prices. The Brazilian state-owned company has been stuck in a corruption scandal, involving senior executives and government officials.

Woodside has shelved a massive US$ 40 billion gas project in W Australia. It is estimated that, over the past two years, global energy projects totalling US$ 400 billion have been delayed.

At least two Australian banks are suffering from increased bad debt charges, blaming slower economic growth and a sluggish resources sector. ANZ and CBA have provisions of US$ 675 million and US$ 423 million whilst the markets expect even worse news slashing US$ 15 billion off the market value of the Big 4 (including Westpac and NAB) this week.

Lloyd’s recorded a 30% slump in 2015 profits to just over US$ 3 billion citing “challenging market conditions and a turbulent macro-economic backdrop” as the main drivers. The world’s specialist insurance market is underwritten by more than 80 syndicates and is considering expansion into Dubai and Beijing.

Just when it seemed that Marriott had been gazumped by Anbang, a Chinese insurance company, to acquire Starwood, the American hotelier has upped its offer to US$ 14.4 billion; this equates to US$ 21 cash, US$ 0.8 shares of Marriott International Inc. Class A stock and Interval Leisure Group stock valued at $5.83 per share for each Starwood share.

Now that Steinhoff International has withdrawn from the race to acquire the Home Retail Group (owner of Argos), it seems that the way is clear for Sainsbury’s to make a formal US$ 2.0 billion offer. The supermarket chain’s cash and share offer values HRG shares at US$ 2.46 each. Although the South African rival withdrew from the UK bid, it has made a US$ 975 million offer for Darty – Europe’s 3^rd largest electrical goods retailer.

Following reports that Virgin America, an offshoot of Richard Branson’s empire, is up for sale, its shares jumped 15% to nearly US$ 35 on Wednesday. The company only went public in November 2014, when its shares were valued at US$ 23 and its market cap was US$ 1.24 billion.

Although Nike’s latest quarterly figures showed increases in revenue (8.0% to US$ 8 billion) and profit (US$ 950 million), its shares fell 7% on Tuesday. The market was expecting better results and is wary that the next quarter will see more pressure on sales because of the strong greenback and the global economic slowdown.

The same two factors have also has hit Tiffany’s, with the luxury retailer announcing a 9.0% fall in profit to US$ 494 million for the year ended 31 January 2016. In Q4, all major regions – excluding Japan and the UK – witnessed deteriorating performances; the downward trend is expected to continue into the new financial year.

Following a 2015 annual loss of US$ 2.4 billion (its first since the GFC), Credit Suisse has followed last month’s 4k job cut with another tranche of 2k. This will help the bank achieve its planned US$ 820 million cost cutting exercise.

Australian shareholders have seen a 23.1% fall in dividend payments to US$ 14.5 billion, with the drop attributable to the big commodity companies cutting back on pay-outs in the wake of falling profits. According to CommSec economists, these payments equate to 1.2% of the country’s GDP. The three companies with the largest dividend pay-outs are Commonwealth Bank, Telstra and Wesfarmers, distributing dividends totalling US$ 2.6 billion, US$ 1.5 billion and US$ 0.9 billion respectively. Next week will see a boost to consumer spending, as over 50% of total dividends will be paid out.

The former head of Tabcorp, Australia’s biggest bookmaker, the grandly named Elmer Funke-Kupper, has resigned his position as head of the country stock exchange – the ASX. It has been alleged that, in 2010, Tabcorp paid US$ 150k to the family of the Cambodian PM’s family as part of its attempt to gain quick entry into the country’s lucrative online gaming business, ahead of the 2010 FIFA World Cup.

From a recent Repucom European Football Jersey Report, shirt sponsorship in the top six European football leagues has jumped 12.7% to US$ 933 million. 19.6% of this revenue emanated from the UAE, with Emirates being the largest sponsor. The EPL recorded a 35% surge in shirt revenue to US$ 371 million, with the Bundesliga lagging in 2^nd place at US$ 153 million.

Finally someone agrees with this blog that the property market is not facing an oversupply and that prices are set to rise! Interestingly, leading brokerage, Allsopp & Allsopp, has reported its highest sales volume since starting operations in 2008 and claims that a property oversupply is patently false. Further good news came with reports that on Thursday, the Dubai Land Department dealt with 170 transactions totalling US$ 401 million – one of their busiest days on record. There’s no doubt that market equilibrium is fast returning to the Dubai real estate sector so Here’s To The Good Times!

Posted in Finance | Tagged Arabtec, Brookfield Multiplex, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, Omniyat, UAE | Leave a comment

We Are Family

Posted on March 23, 2016 by howesdubai

Fast becoming known as an extreme sports location, there are reports that the emirate will soon see a 325 mt base-jump tower. At its lower levels, the building will house an activity plaza, catering for family actions. The mid-levels will be for the more adventurous with external abseiling and climbing opportunities, along with climbing walls, free fall facilities, base jumping and assisted high diving. The top level will see the opportunity for climbers to experience replicating various ice climbs, including Everest.

After acquiring land, overlooking the Dubai Canal, only last month, Damac have acted quickly, by announcing a limited release of hotel rooms in its Aykon City project; initial room pricing is in the region of US$ 272k. The 4 million sq ft development will comprise six towers, including the 80-storey Aykon Hotel and Residences – with the top ten floors housing the 280-key hotel.

Wasl Properties has completed its 170k sq ft Karama wasl hub project comprising 312 apartments, 70 retail outlets and 32 eating establishments. Over the past 7 years, the developer has completed 12 projects, with 3.6k residential units, in Karama and Muhaisnah.

With 13 Dubai properties, covering 2.6k keys, hotel group Carlson Rezidor is due to open its first brand Radisson RED in Dubai Silicon Oasis. The 171-key hotel will open in Q2 2018.

It seems that property prices have begun to stabilise and are showing signs of a long-awaited recovery. The latest ValuStrat report indicates that prices in the 8 months to February 2016 hardly moved, with upward movements noted in the middle-end segment locations such as IMPZ, Motor City and The Greens. Compared to its base position of 100 in January 2014, the ValuStrat Price Index stood at 98 last month.

According to Core Savills’ latest Dubai Office Market report, the emirate’s office supply runs at 8.4 million sq mt, of which the prime areas – DIC, DIFC, DMC, Downtown and SZR – account for 28% of the total. The bulk of the portfolio – 51% – is in the secondary sector comprising Bur Dubai, Business Bay, Deira, DHC, JLT and Tecom. Supply growth in these two sectors was estimated at 5% last year, which will increase by 7% in 2016, with much of the activity found in Business Bay, as 318k sq mt of office space was added last year.

More than 27k visitors attended this week’s Taste of Dubai festival – a record number for the 3-day event.

In order to finance on-going infrastructure projects, Meydan Group has signed a US$ 477 million package with Commercial Bank International and Qatar National Bank. It is also reported that state-backed Meraas Holding LLC has arranged a 10-year US$ 381 million loan, which equates to about 50% of the total value of its Marsa Al Seef project on the Creek.

Limitless LLC’s attempt, at a second restructure of its US$ 1.2 billion debt, has reached an impasse. Needing all of its creditors to agree to the new terms, it seems that 98% have but Stonehill Capital, with US$ 15 million outstanding, has not. The company is expected to source funds from land sales – US$ 517 million has already been raised from selling half of its land bank in Saudi and the balance from receipts from similar sales in Jebel Ali.

Dubai Holding Commercial Operations Group has cancelled a US$ 354 million tender to repurchase part of a 2017 6% bond issue, as the pricing offered by security holders was higher than at what the company was prepared to settle.

Big Brands, the Dubai luxury goods retailer, is planning to invest US$ 27 million, to add a further 40 outlets in the country. Currently, the company has 10 shops employing 130 staff and, with the announced addition, will require a further 500 on its payroll.

Parking at 23k of the 130k total meters in Dubai has become more expensive, with hourly parking rates doubling to US$ 1.09 and 4-hour rates up 45% to US$ 4.36. Furthermore, the usage of meters will run for 14 hours (8am – 10pm), rather than the current 10 hours.

Dubai International Airport had its best ever month in January with passenger numbers topping 7.3 million – 6.3% higher than a year earlier. If this upward trend continues, the airport could reach 85 million passengers by year end. With aircraft movements up 3.7%, cargo traffic increased by 8.2% to 201k tonnes – and this despite the new Al Maktoum airport taking on more freight.

Following the NYE fire at The Address hotel, and more stringent building codes, Alubond USA has started manufacturing fire-resistant cladding. According to the Sharjah-based supplier, there are at least 1k buildings in the country, where the panels used are made of aluminium filled with highly flammable low-density polythene. Such structures are high risk, with the possibility of the rapid spreading of flames, as seen in the Downtown incident.

The lure of Dubai attracted 22k new SMEs last year – an 18.0% hike on 2014. The emirate has many advantages for such business units but one nagging problem is the banks. It seems to be very difficult in today’s tough environment for SMEs to obtain facilities and when they can, some financial institutions are charging rates upwards of 20% – a possible death knell for many start-ups, as well as a potential loss for Dubai’s economy.

Dubai Investments, 11.5% owned by the Investment Corp of Dubai, has announced a 12% cash dividend – the same as last year, although then it also issued a 6% bonus issue of shares.

As transportation costs continue to decline, down 6.6% year on year, it was no surprise to see Dubai’s February inflation rate drop again from January’s 1.91% to 1.43%. This time last year, the rate was over 4%.

Dubai-listed Amanat Holdings reported a US$ 14 million profit for its first 14 months of operation ending 31 December 2015.The healthcare and education company made two major investments during the year – US$ 53 million for a 35% shareholding in Saudi’s Sukoon International and US$ 68 million for a 4% stake in Al Noor Hospitals.

There were encouraging numbers from DP World with 2015 revenue and profit both up – by 16.4% to US$ 3.97 billion and 30.8% to US$ 883 million respectively. Consequently, the port operator increased its dividend payout by 12.8% to US$ 0.30.

The bourse continued its bullish run, opening Sunday at 3355 and rose 30 points to 3385 by Thursday (17 March 2016). Bellwether stocks, Emaar Properties and Arabtec, had mixed fortunes – the former up by US$ 0.05 to US$ 1.71, with the latter down US$ 0.03 to US$ 0.44. Trading volumes on Thursday were well down on last week at 410 million shares, valued at US$ 257 million, changing hands, (cf 795 million shares for US$ 141 million, the previous Thursday).

Brent crude again confounded the doomsayers by jumping a further 2.5% (US$ 2.98) to US$ 41.50, whilst gold was down US$ 8 to US$ 1,265, by Thursday (17 March) close.

After two failed attempts over the past decade, there has finally been a US$ 30.4 billion merger agreement between Europe’s two major stock exchanges – LSE and Deutsche Boerse. The new group arrangement, which will be 54% German owned, is to be finalised by the end of the year, with headquarters in both London and Frankfurt.

Vijay Mallya is presently living in London but has tweeted that he has not absconded his home country, despite creditors appealing to the Indian Supreme Court for over US$ 1.4 billion in unpaid accounts. The Indian MP – and also a stakeholder in F1 team Force India – sold a major share in his family’s drinks company, United Spirits, to Diageo last year and was due to receive a US$ 75 million pay-out, after being ousted from the company last month.

Following a plethora of legal actions in the US, 278 global investors have joined forces to bring a US$ 3.7 million suit against Volkswagen AG in Germany, for their failure to publish timely information about the emissions scandal.

Canadian pharmaceutical company, Valeant, saw its shares fall 51% this week, as it missed its revenue forecast and recorded a Q4 loss of US$ 337 million. Last month, it announced a delay in its annual report so as to consider internal accounting practices and confirmed that it would resubmit financial statements for the past two years. After several recent acquisitions, the company is carrying US$ 30 billion of debt on its balance sheet.

Having sold most of its North American business to asset management firm company Cerberus last year, the cosmetics company Avon is planning to move its head office from New York to London. This was part of the strategy to improve the 130-year old company’s sales that would also see its payroll number cut by 8.8% to 25.8k.

Far from being the fait accompli it seemed earlier in the year, Marriott International Inc’s offer – valued at US$ 65 per share – for Starwood Hotels & Resorts Worldwide Inc has apparently been gazumped. It seems that a Chinese consortium, including Anbang Insurance Group, is prepared to offer cash equating to US$ 76 per share; this values Starwood, which includes St Regis, W and Westin, at US$ 12.9 billion.

Anbang has also bought Strategic Hotels Resorts (which has 16 luxury resorts and hotels in the US) from Blackstone for a reported US$ 6.5 billion. The US private equity firm only acquired the hotel group in December 2015, for a reported US$ 3.9 billion (or about US$ 6 billion including debt).

Hackers, suspected to be Chinese, have had a field day in Bangladesh, resulting in the central bank’s governor resigning this week. They have managed to steal US$ 101 million, 80% of which found its way to four private accounts at a branch of the Rizal Commercial Banking Corp in Manila, with the balance transferred to Sri Lanka.

An official audit has found that the Nigerian National Petroleum Corporation has defrauded the government of US$ 16 billion in a suspected fraud.

There were two interesting regional stories this week. To reduce its budget deficit, slated to be US$ 40.7 billion (50% higher than the previous year), the Kuwait government has brought in a 10% corporate tax on profits; its introduction date is unknown. The cabinet is also considering cutting subsidies on food, fuel and utilities, as well as privatising some government assets, in a bid to increase its revenue stream.

Meanwhile, the Saudi government has reportedly ordered all ministries to cut their contracts’ spending by 5%, with immediate effect. This move will not be well received in most sectors that are being hit by weakening cash flows and rising costs – and it will lead to an inevitable fall in the Kingdom’s economic growth.

The Bank of Japan has refrained from introducing any further economic stimulus, as it waits for any signs of improvement from its January introduction of negative interest rates. This inactivity may point to the fact that the bank has already fired its “big bazooka” – with its massive QE strategy – and this has failed to stimulate the flagging economy.

On Monday, Egyptian authorities surprised the market with a 13.5% devaluation which saw the pound fall from 8.95 to 7.83 to the US$. In the short run, this will help both exports and tourism but the country’s prime problem is the lack of foreign reserves, which have halved over the past five years to US$ 16 billion. This is despite the fact that GCC countries have pumped in more than US$ 20 billion over that period.

As expected, the Fed kept rates on hold and, as a result, the S&P 500 has jumped nearly 12%, since hitting a new low on 11 February. Chairman Janet Yellen did indicate that there could be just two rate hikes this year, mindful of the drag factor emanating from sluggish global growth and its negative impact on the US economy. (A day later, the BoE also confirmed that rates would hold steady).

This week’s UK budget had one major surprise – a tax on sugary drinks that will raise US$ 750 million ostensibly to fight child obesity. Other key points in George Osborne’s last budget before the Brexit referendum, saw cuts in CGT, excluding residential property, an increase in personal allowance and raising of higher rate threshold and a US$ 1 billion upgrade for flood defences. Strangely, two education–related issues were included – compulsory maths lessons up to the age of 18 and all schools to become academies.

Not known for its success rate, the UK’s Serious Fraud Squad has closed the books on its forex investigation into banks’ manipulation due to “insufficient evidence”. Last May, five international banks, including Barclays and RBS, were fined US$ 5.3 billion by US authorities for rigging forex rates, having settled with UK and US regulators for more than US$ 3.2 billion in November 2014. (As a matter of interest, a Sky News report indicates that the government, which injected US$ 65.8 billion into the troubled RBS in 2008, may only recoup US$ 34.1 billion were it to dispose of its 73% stake).

Another example of the cosy relationship between government and big business reared its ugly head again – this time involving Lord Maude and Lord Deighton. After stepping down from his role as Trade Minister this week, the former will set up a consultancy to help foreign governments, with cutting their procurement budgets. The latter, another treasury minister, has just been reportedly appointed chairman of Heathrow – at a time when the government is deciding whether to approve a third runway. A new twist on We Are Family!

This Time Around

Posted on March 21, 2016 by howesdubai

Yet again there is talk of returning the QE2 to its former glory – this time as the focal point of the new Port Rashid Marina. As part of Dubai’s 2021 plan, DP World will develop the location specifically for luxury yachts. Phase 1, to be completed by 2018, will accommodate 400 smaller yachts up to 55 metres, whilst the second phase will have berths for 100 bigger vessels. The area will also include mixed-use residential and retail space.

The recent downward trend in the hospitality sector continues into January as average room rates, in 4/5 star properties, posted an annual 9.3% decline to US$ 313, according to the latest HotStats survey. Consequently, other key indicators headed south – including revenue per available room, 9.7%, total revenue per available room, 7.3%, and profit per room by 13.5%. The burgeoning mid-scale sector added a further 1k keys last year and is attracting more budget-conscious travellers away from the luxury side.

It seems that developers are taking little notice of predictions from the likes of CBRE and Cluttons. The former estimated that prices dropped by 15% last year and forecast a 10% fall this year, whilst the latter indicated that the 3%-5% fall last year would be replicated in 2016. Despite this mixed and negative news, Emaar, with a US$ 6.6 billion project backlog, is not about to change its plans, with Damac not slowing its construction strategy either – citing it has to meet demand. There is no doubt that the property market has bottomed out and the only question is when, in 2016, will it head north again?

Troubled construction company Arabtec has been awarded a US$ 300 million contract for twin 50-storey towers in Dubai. Work on the 228k sq mt site will start immediately and will be completed by Q4 2018.

Advet Bhambani Ventures is to start building the region’s first 5-star luxury hospital this year. The Nucleus Hospital, next to Dubai International Airport, will be a 150-suite facility which will include top of the range dining and concierge services. The company also has plans for a privately-funded critical care hospital and a paediatrics hospital. The three projects are expected to cost US$ 600 million.

In a bid to help struggling SMEs, the UAE Banks Federation has suggested the introduction of loan restructuring and suspension of payments in certain cases. Many companies are experiencing problems because of a struggling economy, low oil prices and high interest rates – in some cases at over 20%. Some entities have already defaulted on payment, with the owners leaving the country, owing banks an estimated US$ 1.4 billion.

After a 4-month slowdown, the headline Emirates NBD UAE PMI nudged higher in February to 53.1 (from January’s reading of 52.7), with expansions noted in output, new orders and employment. Although any mark of 50 indicates growth, it is noted this is some way off the 58.1 of February 2015.

With marked declines in the tourism and travel sectors – and only slight deterioration in the construction and retail areas – it was no surprise that the February Emirates NBD Dubai Economy Tracker Index fell from 50.7 to 48.9, month on month. Overall business activity in the private sector witnessed its first fall in over six years – but Dubai is still more likely to rebound quicker than most.

Standard & Poor’s is reviewing for a downgrade the credit ratings of some major oil-producing countries, including the UAE. This move is a belated attempt to reflect the impact that low oil prices have had on a country’s creditworthiness – any downgrade will result in higher borrowing costs.

By the end of Q2, work will start on the 14.5km extension to the Metro’s Red Line, 4km of which will be underground; the so-called Route 2020 will connect with the Expo site near Al Maktoum International Airport and its seven stops will include Discovery Gardens, Dubai Investment Park and Jumeirah Golf Estates. Work will start in 2017 on the 20.6km extension to the Green Line, connecting Al Jaddaf with Dubai Academic City. The RTA has also announced that Dubai Tram will see a 5km expansion, taking in Madinat Jumeirah, Burj Al Arab and Mall of the Emirates.

Adeptio, the Dubai-based investor group, headed by Mohammed Alabbar, has valued Kuwait Food Co at around US$ 4 billion. The company is looking to buy out the private company, known as Americana, and, at this price, it would be paying a 36% premium, based on the most recent stock price.

Following a September 2015 agreement with Harrison Street, to invest US$ 275 million in Dublin student accommodation, Dubai-based Global Student Accommodation will invest US 55 million in a second facility. The seven-storey building will house 500 students and should be ready by September 2017.The JV already has permission for a US$ 51.8 million student building in the south of the city.

There are reports that the UAE’s General Civil Aviation Authority is planning to apply for fifth-freedom rights that would see Budapest being used as a gateway for onward flights to the Americas. If successful, carriers – such as Emirates – could use the Hungarian capital as a staging point and this could be a precursor for similar arrangements in countries such as Portugal and Greece. For the past three years, the Dubai airline has extended its Milan flight to New York and there could soon be such flights from Switzerland to Mexico. If this gains any traction, expect some hostility from the European legacy airlines.

Etisalat, whose largest shareholder is the federal government, has a new chief executive. The current incumbent, Ahmad Julfar, resigned with immediate effect and will be replaced by former Vodafone Egypt chairman Hatem Dowidar, on an acting basis, ahead of the telecom’s June restructuring.

Having jumped 4.0% the previous week, the bourse opened Sunday at 3250 and was up again by 3.2% to 3355 by Thursday (10 March 2016). Bellwether stocks, Emaar Properties and Arabtec, rose – the former up by US$ 0.08 to US$ 1.66 and the latter by US$ 0.03 to US$ 0.47. Trading volumes on Thursday were slightly higher on last week at 795 million shares, valued at US$ 281 million, changing hands, (cf 671 million shares for US$ 263 million, the previous Thursday).

Brent crude again confounded the doomsayers by jumping a further 8.0% (US$ 2.98) to US$ 40.05, whilst gold was up US$ 15 to US$ 1,273, by Thursday (10 March) close. On 20 January, crude prices had fallen to US$ 27.10 – their lowest level in 12 years. If the UAE pumps 2.9 million barrels a day, a rough calculation shows it is earning an extra US$ 37.55 million every day, equating to an annual US$ 13.7 billion, because of this price turnaround.

Despite having slumped to its biggest ever loss last year of US$ 6.5 billion, and announcing thousands more job cuts, the BP chief executive, Bob Dudley, saw his total remuneration package jump 20% to a staggering US$ 19.6 million! It’s a Crazy Mixed Up World.

For some years, Facebook has avoided paying UK tax by routing major sales through Ireland, where the tax rate is much lower. In a turnaround, it has decided that most of its advertising revenue, initiated in the country, will now be now taxed there at the current 20% rate. Whether other major multinationals, such as Amazon, Google and Starbucks, follow suit remains to be seen.

BMW has reported a 10.0% hike in annual profits to US$ 6.7 billion on the back of a 14.6% surge in revenue to US$ 102.7 billion. The 100-year old company saw its vehicle sales rise by 6.1% to 2.24 million.

Another German company did not fare as well, with energy firm, E.On announcing a second consecutive loss of US$ 7.8 billion (2014 US$ 3.5 billion), after a write down of assets totalling US$ 9.8 billion. With wholesale electricity prices at their lowest in 14 years, the other three German energy companies have also had to write down the value of their power plants.

As part of its probe into corruption and money laundering at state oil company, Petrobras, Brazilian authorities have questioned former President Luiz Inacio Lula da Silva. He is just one of many leading politicians and executives who are under investigation, who allegedly used the money obtained by overcharging contracts to pay for bribes and electoral campaigns.

Although wage levels dropped by 0.1%, February saw 242k new jobs created in the US – well above market expectations of 195k. Unemployment levels remained at 4.9%, an 8-year low. However the trade deficit (US$ 45.7 billion) headed south again, as exports fell 2.1% to US$ 176.5 billion, with imports down 1.3% to US$ 222.1 billion – its lowest level in four years. The main drivers were the strong greenback and the global slowdown.

The ECB has been found to be treading water as its previous attempts to boost the eurozone have failed whilst it sinks to an inevitable downward path to deflation; the bank has amended its forecast from 1.0% to 0.1% inflation this year. In a last desperate attempt to turn the bloc’s fortunes around, the 1-year-old QE programme has been lifted by a third to US$ 89 billion a month, whilst the bank deposit rate has been cut by 10 points to negative 0.4% and the main rate down from 0.5% to zero. Previous measures by Mario Draghi to boost inflation and get the economy moving have failed – and this seems to be heading in the same direction.

At its annual meeting of parliament, Chinese authorities have indicated that 2016 growth will be at or above 6.5%, with more emphasis on the services sector. Last year’s figure of 6.9% was the weakest since 1990 which was driven by sluggish domestic demand, stalling investment and manufacturing overcapacity. Its latest 5-year plan will see the government attempt to improve the management and operation of both its interest rate and exchange rate markets and to introduce more regulation and private investment in the banking sector. Meanwhile, February trade figures reflect the problems facing China, as year on year exports sank 25.4% to US$ 126 billion and imports were down by 13.8%.

The FIFA scandals continue with Franz Beckenbauer being implicated in multi-million dollar payments to ensure the World Cup for Germany in 2006. The investigation centres on a US$ 10 million payment made in 2002 to a company owned by to the Qatari FIFA member, Mohamed Bin Hammam, which was then forwarded to former Adidas leader, Robert Louis-Dreyfus. It is alleged that this was to repay a loan used to buy votes in the 2000 election for the 2006 World Cup. Although the former German international refutes the claims, both FIFA and the German FA disagree with him.

Gianni Infantino has become the 9th FIFA president and follows in the steps of Joao Havelange and Sepp Batter who, between them, reigned over the corrupt, secretive and nepotistic football empire for 41 years. It is reported that 41 individuals and entities are facing corruption-related offences in the US. Maybe things will be different This Time Around.

The Wrong Direction!

Posted on March 20, 2016 by howesdubai

On Tuesday, HH Sheikh Mohammed bin Rashid Al Maktoum launched the ambitious Dubai Wholesale City, located close to the new Al Maktoum International Airport. The emirate’s ruler wants to tap into the burgeoning global wholesale trade sector, said to be worth US$ 4.3 trillion. The Dubai Holding project, covering 550 million sq ft and costing up to US$ 8.2 billion, will become the largest such hub in the world.

The first phase of Dubai Properties Group’s new affordable Serena property project, Bella Casa, was sold out within hours on Saturday. The total project, encompassing 8.2 million sq ft, will be built in five phases.

Mawarid Finance and AccorHotels have signed a management agreement that will see a 200-key Ibis Styles Al Jaddaf hotel opening in 2018. The hospitality giant already operates two other properties under this brand – in Jumeirah and Dragon Mart.

Last year, many banks reported larger provisions and impairment costs pertaining to bad debts and, indeed in October 2014, Standard Chartered unilaterally closed many local SME accounts. Now as the effect of low oil prices become more apparent, many banks have started to cut off credit lines. As SMEs account for over 60% of the country’s GDP (and only 3.8% of banks’ loans), this will have a negative impact on the local economy – if finance becomes unavailable or too expensive with some banks charging 20% + interest. With estimates of losses of US$ 1.4 billion last year from people leaving the country, the banks have a fine balancing act but they cannot just stop lending to SMEs.

A significant move in the telecoms sectors will see Etisalat and du sharing costs of installing landlines in all new developments, starting with Dubai Sustainable City. It will be a win win situation for both stakeholders – consumers will then have the option to choose either of the services and Etisalat and du will see their capital costs slashed by up to 50%. (Du posted a 10.1% fall in Q4 profits, as its royalty fee jumped 30.1%, with its annual payments rising 20.6% to US$ 523 million).

With the ME e-commerce market forecast to reach US$ 20 billion, lead player, Souq.com, is confident of increasing its revenue by up to 90%. This week, the company obtained US$ 272 million financing, from a range of international investors, to expand its operations – this was the biggest e-commerce fundraising ever in the ME.

This month saw fuel prices at their lowest level since subsidies were cut last July. Special 95 will sell for US$ 0.37 per litre – down 7.4% from February.

A new survey by Alliance Business Centres Network ranks Dubai as the leading expansion target on a global scale, with 21% of companies placing it ahead of the likes of Singapore, Hong Kong, New York and London. Major factors that put Dubai in the top spot were the ease of establishing companies and doing business.

Six people have been arrested by Dubai police in connection with a huge US$ 270 million international airline ticket fraud that has been ongoing for the past two years. The ruse involved the use of fake or stolen credit cards and then on-selling to duped customers at discounted prices; to date nearly 400 arrests have been made.

The bourse opened Sunday at 3124 and surged 4.0% to 3250 by Thursday (03 March 2016). Bellwether stocks, Emaar Properties and Arabtec, both rose with the former up by US$ 0.05 to US$ 1.58 and the latter, a spectacular 41.9% higher by US$ 0.13 to US$ 0.44. Trading volumes on Thursday improved on last week at 671 million shares, valued at US$ 263 million, changing hands, (cf 671 million shares for US$ 263 million, the previous Thursday).

Brent crude again confounded the doomsayers by jumping 4.5% (US$ 1.59) to US$ 37.07, whilst gold was up US$ 24 to US$ 1,258, by Thursday (03 March) close. On 20 January, crude prices had fallen to US$ 27.10 – their lowest level in 12 years. A senior International Energy Agency analyst considers that oil prices have bottomed out with further increases expected over the next 12 months before returning to normality, as US producers exit the market.

According to a recent HSBC study, it is claimed, that over the next two years, US$ 94 billion in bonds and syndicated loans must be repaid or refinanced in the GCC. The payees are a mix of sovereign, financial and corporate borrowers, with UAE heading the list followed by Qatar and Bahrain. This will be made worse if oil prices do not rebound and then there would be inevitable fiscal and current account deficits with the shortfalls having to be made good out of SWFs.

Barclays has announced that by 2019, the bank will be restructured with two core divisions – Barclays UK and Barclays Corporate and International. Its underlying 2015 profits were down 2.0% to US$ 7.7 billion which includes a further US$ 3.9 billion for PPI mis-selling, bringing this total to US$ 10.6 billion to date.

John Longworth, head of the British Chambers of Commerce, has been suspended after having suggested that the UK would be better off outside the EU. His voice is one of many that indicate opposition to Brexit may be softening, as the crucial 23 June referendum approaches. The official government approach is that the country would be better served if it were to remain in a reformed EU and it has published a report of the options available if it left the bloc – this has been dismissed by the leave campaigners as a “dodgy dossier”.

There was some good news emanating from the eurozone as unemployment rates fell to 10.3% (16.65 million) – its lowest since August 2011. Although Germany had the lowest rate, at 4.3%, Greece (24.6%) and Spain (20.5%) still have problems. However, there was more sober reading – manufacturing activity expanded at its slowest rate in a year, whilst Markit’s manufacturing PMI fell from 52.3 to 51.2. The eurozone fell back into deflation in February – a sure sign that the ECB will introduce more QE measures, probably starting next week. There is also the possibility of further bank deposit rate cuts which are already in negative territory.

Despite the country reeling from low commodity prices, Australia’s economy still grew by 3%, compared to a year earlier, and by 0.6% quarter on quarter. Accordingly, interest rates seem set at 2.0% for the foreseeable future, although the low inflation rate, currently at 1.7%, needs close monitoring; moreso, if it does not reach the 2.9% expected by the end of the year. For the time being, it remains the “Lucky Country”.

The world’s 7^th largest economy, Brazil, has hit the ropes and is now in a period of stagflation – the perfect economic storm when recession (3.8% contraction last year) meets high inflation, now topping 11% – and this, despite the Selic rate being at a high 14.25%. Although sluggish global growth and low commodity prices explain some of the difficulties, the economy has suffered more from internal factors – political paralysis and rampant high-level corruption and its budget deficit is now 10.8% of GDP.

The Russian economy is in a financial quagmire as it contracted by 3.7% last year (and is unlikely to improve in 2016) whilst the rouble has more than halved in value over the past two years, since its annexation of Ukraine’s Crimean Peninsula; it now stands at 72 to the US$. Low oil prices and international sanctions continue to dog any progress and it is thought that if budget cuts are not implemented soon, the currency could collapse as it did in 1998.

With the country forecasting 7.6% growth this year, many eyes were on the Indian finance minister Jaitley as he brought down his 2016 budget. He gave a much needed boost to infrastructure, with a US$ 32 billion spend mainly on roads and railways, and introduced specific reforms to help SMEs, as well as giving them favourable tax treatment. He also will have to find US$ 8.3 billion by selling public assets which may be a welcome precursor to start a privatisation programme in earnest. Overall hopes were dashed that the third budget would introduce major economic reforms.

A bellwether indicator shows how economic conditions in China have deteriorated with manufacturing PMI falling to 49 – its lowest level in 7 years. Other indices also fell – a sure sign that stimulus measures have yet to gain traction which may need the introduction of further action to boost the flagging economy. As the country’s economy continues to lose steam and vacillation on reforms continues, Moody’s has cut its outlook from “stable” to “negative” but retains its Aa3 rating.

South Africa joined BRIC in 2010 but was always the poor relative as the other four economies were always growing at a much faster rate, with the new member only posting 2.0%, 1.0% and 0.5% over the first three years. Last year, the economy deteriorated even further, as growth was down to 0.5%, the rand trading down at around 15 to the US$ and government bonds expected to be soon rated junk status. And then there is the president Jacob Zuma, who never went to school and has only ever worked for the ruling African National Congress. However, he has still managed to amass a personal fortune of at least US$ 30 million – small change compared to certain other African leaders.

Only five years ago the BRICS were a powerful economic force and looked as if they would become a dominant global player. This has all changed with only India and China heading north whilst the other three have taken The Wrong Direction.