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According to the 2016 RERA (Real Estate Regulatory Authority) official index, apartment rents have fallen by between 4.5% -11.0% in some areas such as Business Bay (11.0%), International City and JLT (both – 10.0%), Downtown and Palm Jumeirah  (both – 5.5%) and Discovery Gardens (5.9%). In most other locations, rentals have remained flat.

For the second straight month, Dubai property values remained flat according to the ValuStrat Price Index, registering 97.9 (compared to a January 2014 base of 100). The report indicated 4.5% and 5.6% yields for villas and apartments respectively.

HSBC became the first major bank to lift mortgage rates, in the UAE, by 0.25%, in line with the recent US Fed hike. Other financial institutions are expected to follow suit in the coming weeks, with rates as high as 7.0% likely. This seems a little out of kilter with the current EIBOR which ranges between 0.20% (overnight) to 1.52% (1 year).

The start of the New Year has seen the first tenants move into the US$ 300 million Sustainable City. The Diamond Developers’ project has a community farm and currently two operational biodome greenhouses – with a further nine by April – for home-grown produce for exclusive use of the residents. The 5 million sq ft development will house five clusters of residences, each with a communal area, playground and a central wind-tower.

Saudi-based Abdul Rahman Saad Al-Rashid & Sons is launching Mada Residences in Downtown – its first foray in the Dubai real estate sector. The project will contain 193 apartments but no other details – including cost and completion date – were made available.

AccorHotels will open its 3^rd hotel within the Dubai World Trade Centre area. The 588-key ibis One Central will almost double the number of rooms that the operator manages in that location.

SRG Holding, a Dubai-based developer has paid US$ 200 million to Blackstone, for High Holborn Estate in London. It is reported that this could be four times the amount the US private equity firm paid for the 9-property office building in 2012 but it has since seen extensive refurbishment. The Abdul Salam Al Rafi Group also has a Dubai property portfolio including the Sheraton Grand, Chelsea Tower, Du Tower, Burj Al Salam and the Marquis Square development in Business Bay.

Dutco has landed the contract to restore fire-hit The Address Downtown to its former glory. No timetable has been released but it is expected that it will be speedily carried out.

Dubai Shopping Festival started on 01 January, with one of its major supporters, Damac Properties, yet again announcing attractive deals. The real estate developer is offering latest model BMWs or Lamborghinis to buyers of selected properties during the one-month event.

Krzysztof Kotala is still keen to build an underwater tennis stadium off Dubai’s coast. He has indicated that the project, now in its final stage, involves seven arenas, with a carbon-glass glazed dome. The Polish architect is in talks with US investors.

Dubai Duty Free recorded a marginal US$ 16 million increase in 2015 revenue to US$ 1.93 billion with average daily sales transactions of 73.6k. Perfume (US$ 310 million), liquor (US$ 291 million), cigarettes (US$ 161 million), confectionary (US$ 152 million) and gold (US$ 150 million) accounted for 55.2% of all sales.

DEWA’s 2016 budget sees a spend of US$ 6.4 billion, with US$ 2.4 billion being for capex – a 3.4% increase on last year. Power and transmission will account for 39.2% of the total (US$ 931 million), followed by generation (US$ 806 million). The authority will also utilise PPPs (public private partnerships) to help finance other projects as it moves to ensure that by 2050, 75% of Dubai’s energy will be “clean”.

The latest Emirates NBD PMI’s reading of 53.3 indicates that the country’s non-oil private sector is growing at its slowest rate since September 2012. More worryingly is that although any figure over 50 shows expansion, the latest is well down on the 59.3 recorded 12 months ago. Most indicators headed south pointing to lower demand – both domestic and external.

For some time, DFM volumes have been wafer thin – down 60.3% year on year to an average daily value of US$ 164 million – so it is little wonder that the current 49 brokerages are feeling the pinch. It is inevitable that brokers will be forced to close and / or consolidate. Nothing exciting will happen in this bourse until liquidity returns to the market, which has not materialised, as when expected because of its 2014 MSCI upgrade to emerging market status.

The DFM opened Sunday at 3151 and closed the week on Thursday (07 January 2016), taking a 5.9% tumble to 2966. Both bellwether stocks, Emaar Properties and Arabtec, were in negative territory down US$ 0.15 to US$ 1.40 and US$ 0.03 to US$ 0.31 respectively. Trading volumes on Thursday were up on last week at 317 million shares, valued at US$ 106 million, changing hands, (cf 182 million shares for US$ 74 million, the previous Thursday).

The first week of the New Year was a disaster for oil, as with Brent crude sank 9.3% (US$ 2.65) to US$ 33.75 whilst gold surged US$ 48 to US$ 1,108 by Thursday (07 January) close. Latest research from Deutsche Bank indicates that the UAE breakeven price is US$ 65 per barrel – almost half the current price. Put another way – if the country is pumping 2.9 millions barrels a day it will have an annual shortfall of US$ 38.1 billion (2.9 million * 365 * US$ 31.25).

The financial markets started the year in spectacular fashion with China’s CS1300 share index falling 7% in its first session before trade was suspended for the day. Two factors caused the problem – disappointing factory activity and the early prospect of the share sales ban being lifted some five months after its imposition on listed companies’ major shareholders.

There are reports that two of France’s four telecoms operators – Orange and Bouygues – are in merger talks. If the deal, valued at US$ 10.7 billion, were to go ahead, the new entity would control almost half the national market.

Another potential takeover would see Sainsbury’s take control of Home Retail Group (owners of Argos and Homebase). A November bid was rejected so that the group, which has 16.7% share of the UK grocery market, has until next month to return with a better offer. Coincidentally, Sainsbury’s co-founded Homebase but sold it in 2000 for US$ 1.4 billion.

Following years of losses, the Netherlands’ largest department store chain has declared itself insolvent. With 67 stores, Vroom & Dreesman employs 10k staff and could partially be saved, if restructuring is successful. The current owners, Sun Capital, a US private equity firm, bought the flagging business in 2010. (The country is the 18^th largest global economy, with growth slowing from its current 2.1% level whilst its unemployment is on the high side at 6.8%).

The US retail giant, Macy’s, is struggling to keep up with technology changes in the sector, as it reported a difficult holiday season. For the year, the company expects same store sales to drop by 2.9% so as to maintain profit margins it has to look at drastic cost cutting measures. In Q1, 4.7% (or 36) of its outlets will close, there will be 600 back office staff made redundant and its St Loud call centre will close; all in all, this will cost an extra US$ 200 million in one-off costs.

Hyundai / Kia reported a 2.3% fall in forecast 2015 vehicle sales at 8 million units – the first time the group has missed its annual target since the GFC. There is no doubt that the South Korean carmaker is suffering from intense competition, a Chinese slowdown and very weak sales in countries such as Brazil and Russia. Meanwhile, whilst car sales in the US headed north. (UAE is expecting to show a drop in 2015 numbers).

UK car sales are expected to reach the record level of 2.63 million – up 6.0% on 2014 (and could have been higher if not for declines in VW sales in Q4).  The sector benefitted from low interest rates, a strong £ v euro and strengthening consumer confidence.

VW expects 2015 sales of 5.8 million units – its first annual fall since 2004. Meanwhile it is reported that the company may have to buy back 115k vehicles (or 20% of its diesel vehicles affected) because of the emission scandal. This is petty cash compared to Monday’s announcement that the US Justice Department would be suing the German carmaker for US$ 48 billion for allegedly violating US environmental laws.

A huge financial scandal is brewing in India as a property investment company is accused of defrauding 55 million investors of US$ 6.8 billion. The founder of PACL Ltd, Nirmal Singh Bhangoo, claimed that he was selling land but has allegedly been running an illegal investment scheme.

Jermyn Street Real Estate Fund, a group of international investors including from the UAE, has spent US$ 434 million to buy Astir Palace, a luxury seaside resort, from Greece’s privatisation agency. 75% of the total is expected to go to the National Bank, which owns 85% of the resort, with the balance to the agency.

Despite a target of US$ 54.2 billion to raise from government asset sales, to date only US$ 3.8 billion has landed in government coffers. Meanwhile the country will continue to face a difficult year, as it needs to introduce unpopular economic measures; these include pension and tax reforms, so as to meet the requirements of its US$ 93.4 billion bailout funds from the troika, the IMF, EC and the ECB.

Turkey reported that its 2015 trade deficit contracted by 25.5% to US$ 63.1 billion – as exports fell 10.1% to US$ 11.7 billion and imports were down 14.5% to US$ 207.1 billion.

Germany’s December unemployment rate remained at a record low of 6.3%, indicating that the economy is on the right track for growth in 2016 – and this despite the recent influx of an estimated 1.1 million migrants. With this record employment and annual inflation at its lowest ever level, it appears that the main growth driver will be private consumption because of increased consumer purchasing power.

Prior to this week’s economic meltdown, the World Bank had cut its 2016 global growth forecast from 3.3% to 2.9%, in the wake of weak data from emerging countries. With the exception of India (which also has its problems), the BRICS are all slowing down simultaneously which could have a negative impact on other global economies.

Markets do not like uncertainty and volatility and this week saw an abundance of both. The first four days of 2016 trading have witnessed:

• US$ 2.5 trillion being wiped off the value of global stock markets
• S&P having its worst ever opening in history
• the FTSE losing US$ 2.5 trillion by Thursday’s close
• Brent crude dropping to its lowest level since June 2004
• China actively moving to weaken its currency, with the Yuan now at 6.565 to the US$, dipping to an 6-year low, as weak economic data becomes its norm
• on-going regional problems
• North Korea’s claims to have tested a hydrogen bomb
• increasing tensions and a diplomatic impasse between OPEC’s dominant partner, Saudi Arabia, and fellow cartel member Iran

I Wasn’t Expecting That!

In a bid to make the emirate a global centre for clean energy and green economy, HH Sheikh Mohammed bin Rashid Al Maktoum has launched the US$ 13.6 billion Dubai Clean Energy Strategy 2050. Its main target is to ensure that clean energy sources contribute over 75% of Dubai’s energy requirements to make the city have the least carbon footprint in the world. At the launch, the Dubai Ruler also revealed plans for the Dubai Green Zone, to attract industry research and development expertise as well as establishing a US$ 272 billion Dubai Green Fund.

The Palm is set to have yet another 5-star property – this time developer Nakheel has contracted Starwood Hotels & Resorts Worldwide to operate The St Regis Dubai. The 289-room, 23-suite hotel will be located on the first 18 floors of the US$ 223 million, 52-storey Palm Tower – the remaining floors will house 504 luxury apartments.

Twelve years after its launch, the long-stalled and much-changed Dubai Peal development, overlooking Jumeirah Palm, may spring back to life. Canada Business Holdings is considering this project, along with other distressed realty opportunities in Dubai, and has a war chest of US$ 6 billion to reportedly spend in the emirate. Last year, Hong Kong’s Chow Tai Fook Endowment Industry Investment Development (CTFE) took a US$ 1.9 billion stake in the 4-tower project which includes plans for 1.5k apartments, seven 5-star hotels, 60 restaurants, retail outlets and a 1.6k seat theatre.

Dubai Sports City will see yet another residential complex open by H2 next year. Fortuna Village, built around the Els Golf Course and comprising only 30 four-bedroom luxury villas, will be Victory Heights 8^th community, bringing the total amount of villas to 1k.

The world’s largest indoor theme park is set to open, almost 2 years later than planned, in Q1 2016. The IMG Worlds of Adventure, covering 1.5 million sq ft, encompasses four distinct zones – Cartoon Network, IMG Boulevard, Lost Valley – Dinosaur Adventure and MARVEL. The owners – brothers, Ilyas and Mustafa Galadari – expect 20k daily visitors.

The Dutco Group has signed an agreement with the UK-based Snoozebox – a company that converts shipping containers into portable hotel ‘on-site’ accommodation. The rooms do not require water or mains electricity but still come with en-suite wet rooms with shower, basin and toilet. They can be quickly assembled and, being fully operational within days, are in demand for major events.

HNC Healthcare Group will be spending US$ 82 million over the next five years. The Dubai-based company will start with ten new facilities in the UAE, expanding to 100 by 2020 in the GCC and India.

Schlumberger becomes the first free zone company to be licensed by DWTC as it takes up office space in the Dubai Trade Centre District. The building is already 70% pre-let, with a 588-key Ibis hotel, due to be open next year, as part of phase 2 of the development; this will also include two more office buildings.

A recent study indicates that Emirates has already contributed US$ 848 million to the Indian GDP, despite restrictions on flights. It is estimated that if the airline were allowed a further 4.5k extra weekly seats, the Indian economy would benefit by an additional 40k tourists and 4.8k new jobs. If this entitlement were to be tripled to 13.5k weekly seats, 100k new jobs would be created, that would be a boost to the GDP and foreign exchange earnings of US$ 2 billion. Despite this, there is reluctance from the Indian government to increase Emirates current weekly quota of 183 flights. (This week, Spice Jet announced plans to start Dubai flights from both Hyderabad and Jaipur).

Emirates has signed a code-sharing agreement with Malaysia Airlines which will stop flying to Paris and Amsterdam and will use Dubai as a future base. The deal sees EK passengers using MH for connections within the Asia Pacific region. Meanwhile Emirates has been ranked 6^th in a global survey by Airlinrratings.com, with Air New Zealand maintaining its top position, for the third year in a row, followed by Qantas.

Although still on the rise, with October demand up 8.3% and 11.6% on the same month last year, the rate of cargo growth has slowed in the ME. IATA reported that October global airfreight was up by only 0.5% compared to the same month last year, as measured by freight tonne kilometres.

Dubai-based hospitality group, Rotana, is planning to expand its global footprint by a further 27% extra capacity, with the addition of 3.8k rooms. The addition of 14 new hotels next year would bring its total number of properties under management to 100.

Emaar Properties has agreed a joint venture with Bitexco Group to develop a 427-hectare site in Ho Chi Minh City over the next 15 years. The US$ 1.4 billion project will be the Dubai company’s first foray in Vietnam but its 11^th in the international market that includes Egypt, India, Saudi Arabia and Turkey.

Latest figures from the Federal Customs Authority indicated a 2.4% hike in H1 non-oil foreign trade to US$ 145.5 billion as imports dipped 0.9% to US$ 92 billion, whilst exports surged 28.0% to US$ 22.2 billion. Gold, raw aluminum and jewellery accounted for 55.6% of exports, contributing US$ 7.8 billion, US$ 2.4 billion and US$ 2.1 billion respectively. Native gold, vehicles and non-composite diamonds led the imports, with 28.9% of the total, with US$ 13.8 billion, US$ 6.8 billion and US$ 6.0 billion respectively.  Reexports dropped 2.0% to US$ 31.4 billion.

There was some good news for the UAE economy as its 2015 budget deficit forecast is set to be lower than expected. Because of spending cuts, abolishing certain subsidies and higher than expected revenue streams, its deficit will be 2.1% of GDP, down from the original 2.5%.  The fiscal H1 deficit was US$ 5.7 billion and, at the current rate of spending, this will easily fall short of the earlier 2015 projection total of US$ 33.8 billion.

It is reported that online commodity trader, Gold AE’s trade licence has been terminated by the DMCC, following bitter disputes between its shareholders. The company had suspended its online services late last month and dissatisfied clients are being advised to take any complaints to the courts or DIFC, where the company’s parent, Gold Holding Limited, is registered.

Union Insurance has raised its stake holding in Depa by 4.7% to 11.41% – a sign that it has confidence in the troubled fit-out company’s future, despite the fact that it has lost over 25% of its market capitalisation this year; it had also reported a 44.0% decline in H1 profits to US$ 4 million. Following a Q3 loss of US$ 6 million on a 32.0% slump in revenue to US$ 95 million, the company is undergoing a restructuring which will inevitably involve staff cuts.

The DFM opened Sunday at 3204 and closed at the same 3204 by the end of the shortened week (30 November) because of National Day holidays. Of the bellwether stocks, Emaar Properties lost US$ 0.03 to US$ 1.57, whilst Arabtec fell US$ 0.01 to US$ 0.30. Trading volumes on Tuesday were marginally up but still very weak, at only 169 million shares, valued at US$ 92 million changing hands, (cf 165 million shares for US$ 54 million, the previous Thursday). In November, both shares recorded dramatic falls – Emaar by US$ 0.18 to US$ 1.57 and Arabtec US$ 0.14 to US$ 0.30 – as the index slid 300 points to 3204.

Both Brent crude and gold headed south again this week by US$ 1.62 to US$ 43.84 and US$ 9 to US$ 1,061 at Thursday (03 December) close. At the end of November, YTD, both commodities had slumped – Brent crude by 22.2% (US$ 12.72) to US$ 44.61 and gold by 10.2% (US$ 121) to US$ 1,065.

Iran has apparently overhauled the way it offers energy contracts to overseas companies, as the lifting of sanctions will see the country’s energy investment reaching US$ 30 billon. Previous oil contracts often deterred foreign participation but new ones will give investors a greater share in long-term profits. Once sanctions are finally lifted, the country plans to immediately increase production by 16.7% to 3.5 million bpd, increasing to 5 million bpd by 2020.

Every week there are never-ending stories of corruption in governments, sporting bodies, financial institutions and business entities. The latest company to come under the bribery spotlight is British American Tobacco. According to a BBC Panorama investigation, the company illegally paid off politicians and civil servants in East Africa for a number of years with one of its employees, turned whistleblower, indicating, “it was the cost of doing business there”.

The Serious Fraud Office reported that Sweett Group had admitted two 2013 bribery charges in the Middle East. The UK company provides professional services for the construction and infrastructure projects.

Fast food chain MacDonald’s is the latest international company to be investigated over its tax policy, with the European Commission claiming it has avoided paying tax in both Luxemburg and US on European royalties. The company has paid no tax in Luxemburg since 2009 despite large profits, the last one recorded being over US$ 250 million in 2013.

Ten months after Japan’s Mitsubishi Heavy Industries and Kawasaki Heavy Industries were a shoo-in to build Australia’s new submarines, without a competitive tender process, two European competitors have joined the fray. France’s DCNS and Germany’s ThyssenKrupp Marine Systems have now entered bids for a contract that could be worth US$ 36 billion. A final decision is expected in 2016 and whoever wins the project, it will prove a huge stimulant for the local economy.

Atlassian, founded in 2002 on a US$ 7k credit card debt, is expected to be valued at US$ 3.6 billion, as it goes public on New York’s Nasdaq Stock Market. The Australian software maker, whose latest revenue figures are at US$ 320 million, plans to sell 20 million Class A shares. The two Australian founders – Scott Farquhar and Mike Cannon-Brookes – are expected to retain a 67.2% stake in the new public company.

Despite the current inflation rate of 1.8%, being below its 2% – 3% target, the RBA has decided to leave rates unchanged, at the historically low level of 2.0%. Although its currency is at the relatively low 0.71 to the US$ and employment is nudging higher, the economy is still reeling from sinking commodity prices and sluggish investment. However, with signs of the economy gaining some sort of traction – quarterly company profits and wages up 2.4 and 1.0% – it is unlikely that the RBA will risk tinkering with interest rates in the short-term.

A new report indicates that over the next four years, the Australian economy will be over US$ 27 billion worse off because of the Chinese economic slowdown. The main cause of the US$ 3.8 billion increase in the current budget deficit to US$ 29.0 billion is down to China. Furthermore, it is expected that economic growth will also dip from Its May forecast of 3.0% to 2.7%.

The ECB’s moves to boost the flagging eurozone economy – by cutting deposit rates to minus 0.3% and extending the monthly US$ 65 billion QE strategy a further six months to March 2017 – seems to have been a damp squib. Even the faltering euro gained over 2% reaching 1.08 to the US$, whilst markets were left unimpressed falling over 2% on the news. More needs to be done by Mr Draghi and urgently – perhaps by lifting the monthly stimulus amount to say US$ 90 billion and cutting rates further to minus 0.5%.

On the other hand, Fed Chair, Janet Yellen, seemed to rubber stamp the first US rate increase in 9 years, expected later in the month.

With the Olympics fast approaching, the Brazilian economy continues in the doldrums with a Q3 1.7% contraction. South America’s largest economy, reeling from spiralling inflation, rising unemployment and sinking domestic demand, is being hamstrung by the massive Petrobas corruption scandal. It is expected that, over the next nine months, benchmark rates will stay at around the 14% mark, whilst the recession will continue well into 2016, following a 3.2% fall this year.

There was more disappointing news out of China – this time its PMI fell from 49.8 to 49.6 in November, indicating another downturn in its manufacturing sector which fell to a 3-year low. The world’s second largest economy is heading for a growth level of less than 7.0% which would be its lowest since 1990. The government, in actively trying to change to a consumption-based economy from its traditional export-driven one, has cut interest rates six times over the past year.

Conversely, India is heading in the other direction, as Q3 returns show an annual growth rate of 7.4%, making it the fastest growing major economy. Both domestic demand and manufacturing have increased, buoyed by lower oil and gold prices and the recent 50-point cut in interest rates to 6.75%.

In a bid to make the emirate a global centre for clean energy and a green economy, HH Sheikh Mohammed bin Rashid Al Maktoum has launched the US$ 13.6 billion Dubai Clean Energy Strategy 2050. Its main target is to ensure that clean energy sources contribute over 75% of Dubai’s energy requirements to make it the city with the least carbon footprint in the world. At the launch, HH also revealed plans for the Dubai Green Zone, to attract industry research and development expertise, as well as establishing a US$ 272 billion Dubai Green Fund. Over the next 15 years, the Dubai ruler expects every building in the emirate to have solar panels on their roofs, connected to the local grid. Let The Sun Shine In!

Austrian developer, Kleindienst is set to complete its St Petersburg project, part of the 300-island The World, by October 2016. This 3rd phase will comprise the 109-room Tzar Hotel and 40 ‘Floating Seahorses’ – floating villas including 269 sq ft of underwater glazing. This location will be the focal point of the developer’s Heart of Europe resort including adjacent islands – Germany, Monaco, Sweden and Switzerland. The first two phases, encompassing 51 similar villas, have already been sold out, with the first scheduled for handover next month.

A Saudi / Qatari US$ 545 million venture on Palm Jumeirah sees the Al Sharq Group and Al Mana Global development including a ‘W’ hotel and 104 Alef luxury apartments, with prices ranging between US$ 3.3 million and US$ 13.6 million. The project, covering 46.8k sq mt and with a 475 mt beachfront, will be ready within 18 months and is already 30% complete.

The first of three Starwood properties being built on the old Metropolitan Hotel SZR site is opening on Friday. The 358-room W in Q1 and the larger 1k-room Westin will join the 234-key St Regis Dubai, including 54 suites and the US$ 33k per night Royal Suite, by the end of June 2016. The Khalaf Al Habtoor hotel group will also see a fourth Starwood property by the end of next year – St Regis Dubai Al Habtoor Polo Resort.

Dubai-based and much-troubled builder Arabtec is hoping to win a contract for 13k housing units in Egypt; this figure is a long way off from the 1 million it was expecting to build earlier in the year. The contractor, 36%-owned by Aabar, has seen its share value plummet 85% over the past 18 months, whilst its annual losses to 30 September hve broached US$ 561 million.

Next month, Emirates will introduce its two class A380 and, with the absence of first class, its capacity will rise to 615 passengers – well above Air France; that airline has the current highest configuration for an A380 with 538 seats. The initial routes to be used will be Bangkok, Copenhagen and Kuala Lumpur.

The RTA will spend US$ 59 million in upgrading internal roads at Nad Al Sheba 4 and Al Khawaneej 2 that should be completed by early 2017. This is part of the authority’s 5-year, US$ 282 million plan to improve road infrastructure in a number of Dubai residential districts. It has already spent US$ 150 million for work in 13 different areas.

Drake & Scull, 12.8% owned by Emirates Investment Bank, made a Q3 loss of US$ 268 million, compared to a small US$ 3 million profit last year. The main driver behind this setback was the increase in impairment provisions.

The Jassim Al Ali Group has acquired the daily deals site, Nail the Deal, from Cosmos Group for an undisclosed sum. This is another indicator of the rude health of Dubai-based e-commerce sites, with the sector attracting both local and overseas investment activity and interest.

DP World’s BBB- issuer default rating agency has been raised by Fitch from stable to positive, based on improved cash flows (although still negative because of increased capex) and acquisition completions for Fairview Container Terminal and EZ World. With a 9% share of the global market, the company is the 4^th largest container operator in the world and expects to improve this position by capex spending US$ 5.3 billion over the next three years.

It is estimated that UAE expats remit over US$ 30 billion every year to their home countries, with India being the main beneficiary accounting for more than 40% of that total. The cost of remittances can be as high as 10% but the UAE is one of the lowest countries at under 3%. This figure is set to grow, as the population forecast is a further 20% ahead of Expo 2020.

This population growth – along with increased tourism and rising incomes – are the main factors behind Knight Frank’s latest finding that the local retail sector has a healthy future. Its UAE Retail Focus Autumn 2015 report noted that there is a move towards local community centres which now account for 12% of total retail supply space. However, with recent expansions to the Mall of the Emirates and Dubai Mall, along with the planned 80 million sq ft Mall of the World, the mega centres still dominate the sector.

A new Deloitte report has estimated that Dubai receives a US$ 670 million economic benefit from sport-related events, with a spend of nearly US$ 1.8 billion. Of this total, 40% is spent on the emirate’s “magnificent 7” – Dubai Rugby 7s, Dubai World Cup, Dubai Marathon, Dubai Desert Classic, DP World Tournament, Dubai Duty Free Tennis and the Dubai Tour (cycling). 14.0% of the total is spent on facilities and 9.8% on the14.5k employed in the sector.

Dubai’s October inflation rate eased to 3.3%, helped by a fall in transport costs to 1.2% (from 5.5% in September) and housing by 0.4%; however, according to latest UBS Prices and Earnings study, housing remains a major cost driver with Dubai rated the 4^th most expensive city in the world (after Geneva, Zurich and New York).

As noted in a recent blog, banks are taking a major hit from absconding owners of failed SMEs. It has been estimated that, so far this year, US$ 1.4 billion could be the potential impairment, as the low oil prices and declining liquidity take traction. Even at this total, it is less than 0.4% of the banks’ total outstanding debt balance of US$ 381.4 billion. It is a Catch 22 for the financial institutions because SMEs form a major client base sector, accounting for 60% of the UAE’s GDP.

With an investment group, led by Al Ramz Capital, acquiring 82.4% of the shares in Dubai Development Company, the company resumed trading on the DFM on Thursday. With 10 million shares, DDC has a market value of US$ 12.4 million at US$ 1.24 per share.

The DFM opened the week at 3265 and, after a disastrous Sunday, managed to close 8 points up at 3273 by Thursday (19 November). Of the bellwether stocks, Emaar Properties lost US$ 0.06 to US$ 1.68, whilst Arabtec crept up US$ 0.01 to US$ 0.33. Trading volumes on Thursday were down and still comparatively weak, at only 219 million shares, valued at US$ 91 million changing hands, (cf 264 million shares for US$ 87 million, the previous Thursday).

After a month of falling prices, it was a flat week for both oil and gold – by Thursday (19 November), Brent crude was up US$ 0.12 to US$ 44.18, whilst gold dipped US$ 4 to US$ 1,077.

There was disappointing news for those hoping that the price of oil – which has more than halved over the past 18 months – would increase in the short-term. According to the International Energy Agency, oil stock piles have reached 3 billion barrels – an all-time high. Although daily demand has risen 2 million barrels over the past five years, supply is not in equilibrium, since OPEC has failed to cut quotas and US production of shale oil has risen. Consequently, with a slowdown in global growth, demand will inevitably decrease – and even if the US shale producers close operations, there will be continued downward pressure on prices.

Australian explosives maker, Orica managed to turn an annual 2014 profit of US$ 436 million to a loss of US$ 917 million this year because of a massive US$ 1.22 billion write down. Its 1% reduction in revenue to US$ 4.1 billion has been attributed to lower Australian ammonium nitrate volumes aligned with reduced demand.

Springleaf, the second largest personal loan provider in the US, is set to acquire OneMain from its parent company Citigroup for a reported US$ 4.25 billion. Following approval from the Department of Justice and state regulators, the new entity will have 1.8k branches, dealing mainly with low cost loans under US$ 6k.

Intercontinental Hotels, with 5k hotels, will lose their number 1 spot as Marriott International has agreed to buy Starwood Hotels for US$ 12.2 billion. The new entity will boast 5.5k properties and its 1.1 million rooms will generate US$ 2.7 billion in revenue. Only US$ 300 million cash will change hands, as the rest of the deal will be equity financed.

In the UK grocery sector, German discount supermarket chains, Aldi and Lidl, now hold 10% of the market segment, as the likes of Tesco Morrisons and Asda see revenue continuing to fall by 2.5%, 1.7% and 3.5% respectively. The two relative newcomers have doubled their market share over the past 3 years. To add insult to injury, Lidl has become the “official supermarket” to England FC – along with Wales and Scotland – in multi-million dollar deals.

The UK government is to sell US$ 19.8 billion worth of the former Northern Rock mortgages to investment firm Cerberus. Following this sale, which values the asset at US$ 426 million above its current book value, the UK government has managed to sell 85% of assets of the Newcastle-based lender which collapsed in 2007, but was then bailed out by taxpayers.

The world’s 3^rd biggest economy fell back into recession in Q3 for the 4^th time since the GFC. Japan recorded a 0.8% contraction on an annualised basis – after a 0.7% fall the previous quarter. There is the urgent need for the government to take action to boost the flagging economy, as business spending fell 1.3%.

The Chinese Yuan’s rise as a global currency took another step forward with news that it will join the IMF’s basket of reserve currencies, having met its criteria of being “freely available” and “widely used”.

The weekend’s G20 meeting in Turkey was overshadowed by terrorist attacks in both Beirut and Paris. However the 2-day meeting did pledge to use all available policy tools to address uneven economic growth and to endorse the “BEPS” measures to overhaul the global tax system.

Eurozone Q3 economic growth slowed from 0.4% to 0.3%, probably signifying the extension of the QE programme by the end of the year. Whilst Germany and France recorded 0.3% growth, the other two main economies – Spain and Italy – saw figures of 0.8% and 0.2% respectively. Portugal, Greece and Finland fared even worse at 0%, minus 0.5% and minus 0.6%. The most recent data indicates the eurozone inflation rate at zero – some way off the target of 2.0%!

Since January, the ECB has pumped in US$ 64 billion monthly and is committed to continue the same until next September all in a bid to boost growth and avoid deflation. On both counts this has not worked and hence the need for further monetary action.

Following recent strong employment figures, if the US Fed wanted a further sign that a December interest hike is on the cards, it came with a rise in the country’s October consumer prices by 0.2%, with the core CPI up 1.9% on the year.

This could be yet another case of the all too cosy relationship between government and big business. The executives, who ran HBOS into the ground in 2006, will not face prosecution because of the six-year statute of limitations. It has taken banking regulators so long that their report into the financial institution’s demise will see senior management escaping any financial penalties. As the UK’s biggest mortgage lender collapsed, taxpayers – in a US$ 31 billion capital injection into Lloyds TSB – bailed it out. It will be interesting to hear why the enquiry took so long! It is heartening to read that ex-Chief Executive James Crosby subsequently relinquished his knighthood and took a cut in his US$ 880k annual pension. Halleluiah!  

Nakheel has announced its latest development for Deira Islands – a JV with Centara Hotels & Resorts for a 550-key resort, complete with a waterpark. This would bring the Dubai developer’s room portfolio on the man-made location to 1.8k whilst it will be the Thai company’s first venture in the country. Also this week, Nakheel opened its Golden Mile Galleria – a 400k sq ft development on Palm Jumeirah, with numerous retail and eating outlets and room for 1.2k vehicles.

Deloitte have released its latest tourism report for 2014 confirming that the number of Russian visitors had fallen by 15%, whilst the top three visitors were from Saudi Arabia (1.5 million), India (0.9 million) and UK (0.8 million). On the plus side, the number of Iranian and Chinese visitors grew by 41% and 24%.

It is estimated that Dubai has 369 hotels with an inventory of 75.6k rooms, with an expected 6.7% increase in supply as demand dips to 5.1%. Consequently, it is expected that both occupancy levels and average daily rates will fall slightly.

Al Ahli Holding Group is to build a Twentieth Century Fox-branded theme park over an area of 4 million sq ft. Work will start in 2018 and is slated for completion prior to Expo 2020. The designer and operator of the facility will be the US-based Rethink Leisure and Entertainment and, if successful, Al Ahli has secured the option to build three similar projects which could be in Latin America, India and East Asia.

It appears that the Al Habtoor Group is planning to hive off its shareholding in construction company, Habtoor Leighton Group. The decision to split with its Australian partner was made so that the local conglomerate can focus on its core businesses, including real estate, hotels, schools and car distributorships.

According to the latest Phidar Advisory Report, villa and apartment rentals in Dubai have fallen by 1.5% and 0.5% whilst sale prices dipped 3.4% and 3.6% respectively. Consequently, yields are now 4.8% (villas) and 7.5% (apartments). These figures differ from those that an earlier Cavendish Maxwell report espoused – 2.0% Q3 falls for both property types (the same as recorded in Q2), whilst Q3 rents had stabilised. Interestingly, over the next five years, Phidar estimates that Dubai annual demand will be at 5.8%, whilst supply could range from 2.8% – based on actual starts – and 6.7%, if all launch projects were to be included.

Of the 22.4k transactions, totalling US$ 50.7 billion, recorded by the Dubai Land Department for the first nine months of the year, 50% were mortgages (US$ 25.6 billion) and 42% cash. The Land Department also refuted rumours that it would be doubling the current 4% transfer fee.

Next week will see two major biennial events – the Dubai Air Show and Dubai International Motor Show. The latter comes on the back of UAE vehicle sales increasing by 13.0% last year and with strong H1 figures of 890k units. This year, the event, which is 30% bigger than in 2013, expects to have over 100k visitors. H1 figures show that automobiles account for 5.3% of all Dubai trade, equating to US$ 9.5 billion – a sure sign of the healthy state of this sector.

For the third year in a row, UAE has been ranked as the leading GCC country in the World Bank Group’s Annual Ease of Doing Business Report. However, its global 31^st listing was slightly lower than in 2014.

The latest Prosperity Index from the Legatum Institute ranks Norway, Switzerland and Denmark as the top three with the UAE at 30^th – ten places lower than the 2014 report. Its position fell mainly because of low oil prices and regional instability but it still remains the leading country in the MENA region.

Dubai Silicon Oasis Authority posted increases in both H1 revenue and profit – 16% to US$ 67 million and US$ 26 million respectively. Furthermore the number of operating companies increased by 11.6% to 1.2k over the same period.

DP World announced that it has acquired the remaining 49% stake in Southampton terminal and has extended its licence agreement there with Associated British Ports until 2047.

Zodiac Aerospace Services will launch its 4.5k sq mt facility, located in Dubai South. The French supplier of aircraft systems and equipment expects to generate 100 new jobs.

Largely because of the strong greenback, Emirates’ H1 revenue dipped 2.3% to US$ 12.6 billion but the airline still posted a stellar 65.0% growth in profit to a tad over US$ 1.0 billion. Over the period, manpower within the group, including Emirates and dnata, rose 4.0% to 87k. Not surprisingly, fuel prices were 45% lower than the corresponding 2014 period and although this was still the prime cost drag, at 28% of total operating expenditure, it was well down compared to the 38% figure last year.
Emirates’ subsidiary, Transguard reported a 20% increase in business over the past year. Established in 2001, to provide facilities management services, including security, recruitment and cargo handling, the company now employs 30k staff. It also manages the cash for more than 80% of Dubai’s ATMs.

H1 figures from Dubai Customs indicate that the emirate is performing well despite the slide in oil prices. Its H1 non-oil foreign trade reached US$ 177.7 billion, with imports, exports and reexports recording US$ 109.6 billion, US$ 17.7 billion and US$ 50.4 billion respectively. Surprisingly, phones accounted for 14.6% of all commodities traded, totalling US$ 25.9 billion. China (US$ 24.5 billion), India (US$ 13.6 billion) and US (US$ 10.7 billion) were the three main trading partners carving up 27.5% of the total.

The latest Emirates NBD UAE Purchasing Managers’ Index indicates a slowdown in business conditions as it drops 2 points to 54.0 in October. Although still in positive territory (signified by any reading over 50), output and new orders expansion dipped.

With the continued softening of the local market, banks are reporting an increasing amount of debt defaults by individuals and SMEs. It is estimated that over the past quarter, defaults have increased by up to US$ 1 billion, resulting in many banks having to increase their impairment losses. It seems that the smaller financial institutions are taking the hit but it is only a matter of time before the contagion impacts on the bigger banks.

The Dutch bank ABN Ambro received a slap on the wrist from Dubai authorities when it it received a US$ 640k fine for breaching anti-money laundering rules. The Dubai Financial Services Authority noted that the bank’s failings were widespread and subsequently nine employees have been reportedly terminated and 80 client accounts closed.

It is reported that venture capital firm Beco Capital has acquired a 14.8% shareholding in JadoPado for US$ 4.0 million, effectively valuing the Dubai-based online market place at US$ 28 million; the additional funding will be used for ambitious expansion plans. Beco has already invested in two other similar local entities – Careem and Propertyfinder.

As its international revenue fell and expenses rose, Etisalat recorded an 8.5% fall in Q3 net profit to US$ 531 million, as total revenue also dipped 1.0% to US$ 3.5 billion. Operating expenses were 5.4% higher at US$ 2.3 billion.

Telecom operator Du saw a 12.3% dip in Q3 profits to US$ 133 million, with revenue flat at US$ 831 million. One of the main reasons for this was a 16.6% jump in government royalty payments to US$ 131 million. The telecom operator, established in 2007, is taxed on two fronts – 12.5% on regulated revenue and 30% on regulated profit – both of which have risen this year from 10% and 25% in 2014.

Aramex reported a 7.3% increase in Q3 profit to US$ 20 million on the back of a 2.0% rise in revenue to US$ 255 million. The Dubai-based courier expects at least two acquisitions over the next six months and has already secured a US$ 150 million bank credit line to cover these purchases.

Emirates Investment Bank posted a 27.9% fall in nine months profit to US$ 80 million as at 30 September. There were marginal increases in both client deposits (1.0% to US$ 823 million) and total assets (0.8% to US$ 2.12 billion).

Q3 profits for Dubai Investments rose 30.2% to US$ 67 million, as its total assets and net worth balances rose to US$ 4.1 billion and US$ 2.8 billion. However, the company’s nine-month profit fell 24.4% to US$ 205 million because of a one-off gain of US$ 129 million from the sale of Globalpharma in the corresponding period in 2014.

Despite announcing a 123% rise in nine-month profits to US$ 4.3 million, on a 11.0% increase in revenue to US$ 28.5 million, shares in troubled Gulf Navigation fell 4.0% on Sunday to US$ 0.136.

Although Emaar Properties reported a 30.7% hike in Q3 profits to US$ 230 million, on a 56.0% jump in revenue to US$ 899 million, the figures were below market expectations. The profit figure for the first nine months of the year headed north – by 16.4% to US$ 831 million – with assets totalling US$ 42.5 billion and a land bank covering 195 million sq mt.

The DFM opened Sunday at 3503 and fell a further 1.5% to 3451 by the end of the week (05 November). Of the bellwether stocks, Emaar Properties was flat at US$ 1.75, whilst Arabtec fell US$ 0.04 to US$ 0.40. Yet again, trading volumes on Thursday were wafer thin, at only 106 million shares, valued at US$ 42 million changing hands, (cf 174 million shares for US$ 73 million, the previous Thursday).

Oil and gold had mixed weeks so that by Thursday (05 November), Brent crude had closed 1.9% down on the week at US$ 47.88, whilst gold continued heading south, falling US$ 60 to US$ 1,087.

Two international banks returned Q3 profits. HSBC posted an unexpectedly high 32.6% hike in pre-tax profit to US$ 6.1 billion. Although market conditions were tough and revenue was 4% off at US$ 14 billion, major cost reduction measures – including job cuts and selling loss-making businesses – ensured a healthy bottom line for Q3.

Due to a US$ 1.7 billion gain RBS, 73% owned by the UK government, was able to post a 6.3% increase in Q3 profit to US$ 1.5 billion. However the bank did see a 15.6% slide in revenue to US$ 4.7 billion, whilst restructuring costs rose to US$ 1.3 billion.

Toyota reported an 11.8% hike in H1 profits to US$ 10.2 billion, buoyed by a weakening yen – with a double whammy of making its export prices more attractive and inflating the value of incoming overseas profits. The world’s largest carmaker saw a marginal fall in unit sales to 4.97 million and although it is going through a major cost cutting exercise, it still has plans to build a US$ 1 billion plant in Mexico.

General Electric has finally acquired the energy assets of the conglomerate, Alstom for US$ 10.6 billion which includes three JVs – electricity grids, nuclear power and renewable power. As part of the deal, the French company bought a rail signalling division for US$ 800 million from GE.

Mainly because of the low fuel prices, eurozone inflation returned to zero in October. In the 28-member EU bloc, unemployment fell to its lowest level in almost four years by 0.1% to 9.3%, with a wide range from Germany’s 4.5% to an estimated Greek figure of 21.6%. There are still discussions in the corridors of power that the ECB may extend its QE programme to boost the sagging economy.

Just as indicators point to a US interest rate hike next month, the Bank of England has signalled that the UK rate will probably remain static at least for the next 12 months. The current rate will thus remain flat at 0.5% – the longest unchanged period in more than 65 years. At the same time, it is unlikely that it will be out in the market selling the US$ 577 billion bonds it bought via its recent QE programme until rates rise to above the 2% mark. The Bank also marginally lowered its 2015 growth rate and also forecast that the immediate inflation rate will hover around the zero level – in the long term this is No Good For You.