A Change Is Gonna Come!

Posted on November 4, 2015 by howesdubai

delta-emiratesThe big retail battle between Apple and Samsung is on in Dubai. This week, Samsung completed a major overhaul and expansion of its 9.2k sq ft flagship store in Dubai Mall ensuring that it was the electronics company’s largest global store outside of Seoul. Meanwhile on Thursday Apple launched its first ME store in the Mall of the Emirates.

Latest data shows that the world’s largest smartphone maker is losing market share, at the quarterly rate of 11.5%, whilst its American rival is expanding sales of its iPhone units by 35% a year. Q3 results indicated a 30% jump in profit to US$ 11.1 billion, on the back of the sale of 48 million iPhones; with the recent introduction of the 6S and 6S+, Q4 sales may see a record 75 million units being sold. (As an aside, Sharp is expecting to report a US$ 970 million six-month loss at the end of September, as demand for its smartphone screens dries up).

Recent estimates indicate that there are over 29k serviced apartments in Dubai, with a further 18% increase to 34.2k expected before 2020. Colliers also estimate 36% of that total is managed by international brands, the same ratio unbranded and the remaining 28% managed by local brands. 2014 occupancy rates fell by 3.3% but still registered a creditable 79.0%.

Accor Hotels and the Manazil Group are planning three new Dubai properties, and 1.1k rooms, for completion by 2019. The three hotels will be built in Jumeirah Village Triangle, being a Majlis Grand Mercure hotel, a Mercure hotel and an Adagio aparthotel.

Damac announced that it expects to open its 1k-key Damac Towers by Paramount in Q4 2016. Three of the four towers will be serviced apartments, whilst the other will be known as the Paramount Hotel & Resorts; all four structures will share a common central podium / reception area.

The 3-day Gulfood Manufacturing 2015 opened on Tuesday, attracting an estimated 1.5k exhibitors (a 35% increase on last year) and over 30k visitors, most of whom will be from overseas. As usual, the hospitality, retail and travel sectors will benefit from this influx which shows the benefit of a strong and vibrant MICE sector for the economy.

The UAE ranks 5th in the Global Built Asset Wealth Index. The Arcadis index measures the value of built assets for every citizen with the UAE, recording a figure of US$ 141k, behind Qatar’s US$ 198k, Singapore, Hong Kong and Japan.

Emirates reached a major milestone this week when it celebrated its 30th anniversary. Although Dubai is now the world’s largest international airport, HH Sheikh Mohammed bin Rashid Al Maktoum’s vision so long ago was not this target but to build “the aviation capital of the world”. Furthermore his strategy for the airline is one of continued innovation so that aviation can be reinvented with “new products, technologies and services”.

September passenger numbers at Dubai International increased 8.2% to 6.4 million, with YTD traffic up 12.0% at 58.7 million. Even though much of the freight traffic has been transferred to Al Maktoum International, the “old” airport still saw freight traffic up 0.3% to 207k tonnes.

It is reported that flydubai will record a 35.2% jump in the number of passengers this year to 9.8 million, despite seeing flight disruptions because of regional conflicts. Last month, the airline received the last of its 50 737s, ordered seven years ago and has a current backlog of 111 outstanding from an order made at the 2013 Dubai air show.

DP World announced a 3.2% rise in gross container volumes to 46.5 million TEUs (twenty-foot equivalent units) for the nine months to 30 September. Growth areas were the UAE (up by 4%) and Europe.

Empower has won a US$ 34 million contract to supply the US$ 1.6 billion Bluewaters project with 25k refrigeration tonnes for the island’s residential and commercial units.

Majid Al Futtaim has launched a 10-year, US$ 500 million sukuk at 255 basis points over midswaps. The wakala Islamic bond was more than three times oversubscribed.

According to a Deloitte & Touche report, the UAE design sector – including fashion (the largest contributor at 74%), architecture and furniture design – is valued at US$ 27.6 billion, ahead of Saudi (US$ 21.9 billion) and Qatar (US$11.9 billion). Over the next four years, it is expected to grow a further 30.4% to US$ 36 billion. In an attempt to rival the likes of London, Paris and New York, Dubai has already completed phase 1 of d3 (Dubai Design District) – comprising 11 buildings, 500 companies and 10k professionals. Phase 2 will be completed by 2017.

Since the beginning of August, when the petrol subsidy was abolished, fuel prices have been amended every month in line with global trends. In the first month, prices jumped 24.4% to US$ 0.58 per litre but since then, they have been pared back so that November prices will be lower than they were when the subsidy was in place. September and October saw prices fall 8.4% to US$ 0.53 and to US$ 0.49 respectively whilst November prices for Special 95 have been cut by a further 5.0% to US$ 0.46.

UAE’s oil production in September rose 0.8% to 2.9 million bpd as a US federal review indicates that the country could expand production by a further 30%. Currently, the country is the third largest producer within the OPEC cartel.

On Sunday, the federal cabinet approved the 2016 US$ 13.2 billion federal budget, with a zero deficit. Despite the low oil price, the government is still keen to go ahead with major projects in key sectors such as education, social development, public services and healthcare; these four areas accounted for 55.6% of the 2016 spend, being allocated US$ 2.8 billion, US$ 2.0 billion, US$ 1.5 billion and US$ 1.0 billion respectively.

The UAE and UK are looking at doubling bilateral trade, to US$ 25 billion, over the next five years – an ambitious programme considering that five years ago this figure was only US$ 7.5 billion; more business, such as the recent US$ 9.2 billion order for Rolls Royce engines for 50 A380s, will help achieve this target.

Union Properties is arranging a 50:50 JV with the Saudi company, Naif Al Rajhi Investment Company. Based in Riyadh, the new entity will make use of the Saudi’s company huge land bank, with the first project likely to be mixed-use, including 210 town houses and 16 apartments.

Emirates NBD reported a 7.1% rise in Q3 profits to US$ 455 million, with a 27.6% increase, to US$ 1.36 billion, for the first nine months of the year. Dubai’s largest lender, 55.6% owned by the Investment Corporation of Dubai, saw increases in loans and advances plus deposits – of 5.6% to US$ 71.3 billion and 8.0% to US$ 73.3 billion respectively. Its related bank, Emirates Islamic, announced a 109% jump in net profit to US$ 145 million.

Emaar Malls, 85% owned by its parent Emaar Properties, recorded a 17.1% hike in Q3 profits to US$ 102 million. The remaining 15% shareholding was hived off in a US$ 1.6 billion IPO last September.

This week, there were also disappointing Q3 results. Deyaar Development reported a 37.7% slump in Q3 profits to US$ 13 million, which brings its nine months’ earnings figure to US$ 52 million. Meanwhile Dubai Financial Market saw quarterly profits sink 70.4% to US$ 12 million, on the back of a serious slowdown in trading activity.

The DFM opened Sunday at 3588 and fell 2.3% to 3503 by the end of the week (29 October) and for the month, the index fell 90 points. Of the bellwether stocks, Emaar Properties was down US$ 0.05 to US$ 1.75, whilst Arabtec fell US$ 0.02 to US$ 0.44. Yet again, trading volumes on Thursday were dismally low, at only 174 million shares, valued at US$ 73 million changing hands, (cf 148 million shares for US$ 80 million, the previous Thursday).

Oil and gold had mixed weeks so that by Thursday (29 October), Brent crude had closed 0.9% up on the week at US$ 48.80, whilst gold continued heading south, falling US$ 19 to US$ 1,147. By the end of October, oil and gold were trading at US$ 46.39 and US$1,141 respectively – down US$ 2.31 and up US$ 27 on the month.

BP reported woeful Q3 profit figures as it announced a slump of 48.1% to US$ 1.23 billion and that it was cutting a further US$ 1 billion off its already reduced 2015 capital spending to US$ 19 billion. It also has to take a further US$ 426 million hit, in relation to the 2010 Deepwater Horizon accident, which brings its total cost to a staggering US$ 55 billion. Meanwhile, Shell joined BP with Q3 figures that both would like to forget – a US$ 6 billion loss following a US$ 5.3 billion profit over the same period in 2014. The company took a US$ 8 billion impairment charges after failing to find oil in the Alaskan Chukchi Sea.

To add to VW’s troubles, it has lost its top spot to Toyota in global vehicle sales for the first 9 months of the year. The Japanese carmaker recorded 7.5 million sales to the German’s 7.43 million (with GM coming in 3rd with 7.2 million sales). The gap will be greater by the end of the year as the full impact of the emissions scandal comes into play.

With a marked slowdown in global trade, the world’s largest container carrier has trimmed its 2015 profit forecast by 15% to US$ 3.4 billion. The Danish shipping line, Maersk blames low capacity utilisation and competitive pricing which has resulted in loss-making rates on some routes.

IBM is reportedly facing investigation by regulators in three countries – US, UK and Ireland. The probe is apparently related to the way the tech company accounts for certain of its revenue transactions.

It is reported that five major banks – Barclays, BNP Paribas, Goldman Sachs, HSBC and RBS – will be fined a total of US$ 1.2 billion by US regulators. The penalty is in relation to their involvement in the foreign exchange rigging trading scandal and is the latest in a string of claims by affected stakeholders.

Despite there being no change for some time in Australian benchmark rates, most of the banks, including ANZ, CBA, NAB and Westpac, have decided to raise mortgage rates. This will cost consumers US$ 400 pa, as the average rate rises to 5.6%. Next Tuesday, the country is on holiday for the Melbourne Cup and this is always a good time for the RBA to tinker with rates – this time downwards.

Growth in the UK fell in Q3 from 0.7% to 0.5%, with the service sector, accounting for almost 80% of the economy, up 0.7% over Q2. However, construction has decreased 2.2% whilst manufacturing is in recession, having fallen in the previous two quarters. Despite the global slowdown gaining traction, the UK is still in comparatively good shape and will see a 2.3% expansion this year whilst next year may prove a little more difficult.

Any country that has cut its benchmark interest rate six times already this year is in a financial quagmire. At the beginning of the week, China shaved a further 25 points off the index to 4.35%, as well as cutting the amount of local currency banks have to maintain. The government is treading a fine line between stimulating consumer confidence and creating another higher level of debt which could easily turn into a major financial headache. In China, the latest Westpac MNI indicator – measuring consumer sentiment – fell by 7.25% to its lowest level in 8 years.

However, this week China did sign a US$ 17 billion deal with Airbus for 100 A-320s and 30 A-330s – a sure indicator that at least the travel sector in the country is booming. A recent Boeing report indicated that, over the next 20 years, Chinese airlines will need to spend US$ 950 billion buying 6.3k new planes.

Although the global slowdown has hit some of the country’s exports, including carmaker Hyundai, South Korea’s economy is now growing at an annual rate of 2.5% – its highest level in over five years. Although hamstrung earlier in the year because of the negative impact of the Mers virus on tourism and weak consumer confidence, latest figures beat analysts’ estimates.

In February, the second largest US carrier will stop flying between Atlanta and Dubai because of “unfair” competition from “heavily subsidised” Gulf carriers, particularly Emirates. Delta will use the extra capacity to fly where it “where it can compete on a level playing field that’s not distorted by subsidised state-owned airlines”. Delta is one of three major carriers lobbying the US government to take draconian action against the local airlines, claiming they have been the beneficiaries of US$ 42 billion in government subsidies. As this route has a reported 85% average seat load, it would appear that Delta’s chief executive, Richard Anderson, has no economic argument to cut this link – only political reasons to keep Emirates’ presence in the US to a bare minimum. No doubt A Change Is Gonna Come!

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Don’t Let Me Be Understood!

Posted on October 25, 2015 by howesdubai

batmobile-dubaiIf you thought that Dubai had enough shopping malls, think again! Nakheel has awarded contracts, totalling US$ 627 million, for three retail projects – Deira Islands Night Souk (US$ 319 million), Warsan Souk (US$ 211 million) and The Circle Mall (US$ 97 million).

United Engineering Construction will build in Deira Islands with the project having 5.3k shops and 100 dining outlets, whilst stretching over 2 km on the man-made waterfront. Due for completion by 2018, all 1.2 million sq ft of leasable space has already been let. Warsan Souk, covering 650k sq ft of retail area, will have 1.2k shops and form part of a 930-home gated community. The Circle Mall – to be built by Gulf Technical Construction Company, a division of Drake & Scull – will comprise 235 shops in its 432k sq ft of retail space.

Jumeirah Golf Estates has awarded Al Habtoor STFA Soil Group the contract to build its Alandalus collection of 54 townhouses and 674 apartments. Work will start immediately.

Emaar will launch phase 2 of its Maple townhouses on Saturday. The project, with 666 townhouses at starting prices of US$ 545k, is located within Mohammed bin Rashid City.

Nakheel was one of the first of Dubai’s big companies to announce their 9 month results – an impressive US$ 983 million profit, equivalent to a 39.0% hike on the corresponding 2014 figures. No other details were released.

Business Bay is the initial location for Dubai’s first 7-Eleven convenience store, with bold plans to introduce a national chain of 800 outlets over the next decade. The master franchise holder, Seven Emirates Investment, will have 40 stores open by the end of 2016 and is recruiting 600 new employees, mainly from the Philippines and India.

Tecom has announced that DuBiotech (Dubai Biotechnology and Research Park) and En Park Energy  (Environment Park) will combine to form DSP (Dubai Science Park). The new facility will continue to offer SMEs and international companies a regional hub and facilitate innovation strategy.

A Dubai car dealer is planning to sell the Batmobile, featured in the Dark Knight Trilogy, for a reported US$ 1 million. Although it will not fly, the 5.7 litre vehicle, with a top speed of 250 kph, could soon be seen on Dubai roads.

Lower Russian demand, a strong greenback and suspended flights to Ukraine, Yemen and Syria are the main reasons why flydubai reported a US$ 40 million H1 loss, compared to a US$ 14 million profit for the same period in 2014. The airline, with a 17.2% jump in passenger numbers to 4.2 million, posted a healthy 8.7% increase in H1 revenue to US$ 599 million, although capacity had jumped 33.6% over the same period, resulting in a 12% fall in yields. Nevertheless, CEO, Ghaith Al Ghaith, has indicated that, with strong Q3 results, the budget airline is now back in the black.

This week sees the GITEX Technology Week with one of the highlights being the announcement of Yvolv, a JV between Meraas Holding and the Alibaba Group. The new IT consulting company will be an industry leader in cloud computing solutions for MENA-based enterprises.

At long last, it seems that Etisalat and du will compete directly in fixed-line business and television services. This follows on from July’s announcement that allows consumers a choice, when selecting fixed phone line and broadband services.

Dubai-based Aster DM Healthcare now has a 97% stake in Riyadh’s Sanad Hospital, after acquiring a further 57% shareholding for US$ 245 million. With five other hospitals in the GCC, the healthcare company also operates in Jordan, India and the Philippines.

TaskSpotting, a 2014 Dubai-based start-up, is already looking at expansion plans and has raised US$ 1.2 million funding from MENA Venture Investments and numerous individuals. The app gives local businesses the ability to access directly customer experiences and already has 35k users.

Aramex’s plans for setting up five Egyptian logistics sites with Orascom Telecom Media and Technology have been put on hold for the foreseeable future. The US$ 126 million proposed JV would have seen the Egyptian partner holding a 51% majority shareholding.

The Italian export credit company, Sace has granted a US$ 1.1 billion credit facility to help with the development of the emirate’s new city, Dubai South. The funding agreement was signed at the site of the Milan 2015 Expo and will help Italian companies seeking a business presence in the UAE. Dubai South – a 145 sq km new city with a US$ 32 billion mega airport being built along with a US$ 25 billion residential area – will provide a lucrative source of revenue for many companies as it gears up for Expo 2020.

As H1 bilateral trade between Japan and the GCC sank 41.7% to US$ 50.4 billion, UAE trade figures at US$ 16.3 billion were down 37.2%, with falls in both exports (9.5% to US$ 3.3 billion) and imports (43.2% to US$ 12.1 billion). The declines are attributable to a combination of low oil prices – with fuels accounting for 76% of all trade – and the weak yen.

Dubai’s September inflation rate rose slightly to 4.28% as housing costs, utility charges and beverage prices for the first nine months of the year jumped by 8.0%, 7.25% and 6.68% respectively. However for the month, the rate fell marginally to 3.9%.

Marka, the retailer that listed on the Dubai bourse twelve months ago, currently operates 38 regional stores, with the latest addition being House of Dinh Van. Its ambitious expansion plans will see a further 26 stores added over the next 15 months. Q3 returns are expected to be an improvement on Q1 losses of US$ 2.3 million and Q2’s US$ 583k.

Mashreq reported a 7.6% fall in profit to US$ 150 million – a sure indicator that lower oil prices is taking an inevitable toll on local business and that banks are beginning to suffer, with lower fees and commission income.

The DFM opened Sunday at 3698 and fell 3.0% to 3588 by the end of the week (22 October). Of the bellwether stocks, Emaar Properties was down US$ 0.07 to US$ 1.80, whilst Arabtec fell US$ 0.05 to US$ 0.46. Yet again, trading volumes on Thursday were dismally low, at only 148 million shares, valued at US$ 80 million changing hands, (cf 200 million shares for US$ 57 million, the previous Wednesday).

Oil and gold had a bad week and by Thursday (22 October), Brent crude had closed lower again, down on the week 2.8%, at US$ 48.36, whilst gold lost some of its lustre, after recent weekly gains, falling US$ 21 to US$ 1,166.

FBI staff are investigating claims that East European hackers infiltrated Dow Jones to extract sensitive market information, prior to general release. The data was then sold on to investors who make money from unpublished embargoed financial information. Also this week Talk Talk, a UK telecoms firm, has been hit by cyber criminals who have may have accessed personal and banking details of up to 4 million customers. The Met Police are carrying out investigations.

It is expected that over 8.5 million VW vehicles will be recalled in the 28-member state EU following the diesel emission scandal. Next week Q3 results are expected to show that Europe’s largest carmaker has made a US$ 3.9 billion operating loss, whilst making a US$ 7.2 billion provision in relation to this self-inflicted problem. The potential financial damage could run as high as US$ 40 billion.

In line with its peer group, Morgan Stanley returned disappointing Q3 figures, as net sales fell 13.0% to US$ 7.77 billion and profits nosedived 42.4% to US$ 939 million.

Apple has lost a case against the University of Wisconsin and has been ordered to pay US$ 234 million in damages. The Californian tech company was found guilty of infringing mobile chip technology already patented by the educational facility in 1998; it is set to appeal the verdict.

The EU Competition Commissioner has ordered both Starbucks and Fiat Chrysler to pay back up to US$ 30 million in taxes, having decided that tax deals with Netherlands and Luxembourg respectively were state aid. It found that any measures to artificially reduce a company’s tax liability are illegal and not in line with EU legislation. These two decisions represent the tip of the iceberg and could see other companies such as Amazon and Apple falling foul and ultimately left with huge tax bills.

A mega e-commerce delivery business tie-up is expected to get the green light from the EU. The deal will see FedEx pay US$ 5.0 billion to acquire its Dutch rival, TNT Express, and could be finalised early next year.

Hugo Boss has blamed the double whammy of US and Chinese economic slowdowns, along with weakening Asian consumer confidence, as it revised its Q4 profit forecast downwards to as low as 3%. As news of a 1% fall in Q3 sales reached the markets, its shares fell by almost 10%. Last week Burberry shares sank 8% on the back of poor Asian data and particularly from China where trading had become “increasingly challenging”. The slowdown in China’s economy will continue to hit demand for many luxury brands.

The Australian housing market is beginning to flat line with a marked decline in the rate of realty price growth in both Sydney and Melbourne. The quarterly growth in median house prices more than halved in both cities to 3.2% (from 7.7%) and 2.8% (from 6.0%) respectively. This slowdown comes after annual increases of 21.7% and 15.6% in these two locations, as prices in Brisbane remained flat whilst Perth and Adelaide headed south.

Despite the Chinese economic slowdown, Australian miner, Rio Tinto, recorded a 17% increase in Q3 iron ore shipments – well on its way to meeting its annual target of 340 million tonnes. This is despite the massive fall in prices, over the past 18 months, which on Thursday (22 October) stood at US$ 54.17.

China is expected to invest over US$ 46 billion in the UK, including a 30% investment in a nuclear power plant to be built by a consortium comprising France’s EDF and the Chinese state company CGN. This could produce 25k new jobs and, when completed in 2025, will provide all the energy requirements for 6 million homes. China’s investment splurge and trade deals were announced during President Xi Jinping’s 4-day state visit. (In a bid to boost the number of Chinese tourists, David Cameron’s government is considering a move to cut two-year visa costs by 74% to US$ 130. How about doing the same for UAE applicants?).

As widely expected, Chinese Q3 growth fell below 7% in Q3 – the 6.9% return was the lowest since the GFC. (There are doubts whether this figure is correct and, when other factors are considered, this could easily be halved). There is an urgent need of structural changes as the world’s second largest economy continues to soften with major indicators – including manufacturing, imports and inflation – heading south. Continuing volatility in the stock markets, following the summer collapse, only adds further pressure on Premier Li Keqiang to introduce measures to shore up the flagging economy. To further exacerbate the problem, there is the huge debt bubble to consider, allied with the country’s highly unregulated shadow banking sector.

Talking of wonky figures – for some time this blog has questioned the veracity of some data emanating from the local realty sector – be it from so called consultants, financial institutions, agents, brokers or other interested stakeholders, often with a vested interest! This year, for example, some reports were indicating over 25k units would be handed over in the Dubai supply chain – it seems that less than 10k will be nearer the mark as the two major developers – Emaar and Damac – will only be releasing 2.3k units in 2015.

Over the past two years, Dubai’s population has grown at an annual rate of 7.6%, with official data indicating that the number of Dubai households at the end of last year stood at 448k. If the construction labour content (say 800k) were taken out of Dubai’s current population of 2.4 million, a 7.6% increase would see an additional 122k new residents.  At that rate, Dubai would need to find an extra 30k residences a year. Don’t Let Me Be Understood!

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Fast Car

Posted on October 20, 2015 by howesdubai

ferrariCivil Engineering and Contracting has already started work on The Rosemont Hotel & Residences, located in Tecom. The 47-storey twin tower project will not only have 450 hotel rooms and 280-serviced apartments but will also boast an artificial beach and a rain forest environment on the top of its 5-storey podium.

The building of the Emerald Palace Kempinski Hotel on Palm Jumeirah will definitely take place now that Sunrise Properties has obtained finance for the deal. A US$ 140 million Islamic loan has been secured but no other details have been made available.

Dubai Industrial City is expanding at a fast rate, with latest YTD figures indicating a 28% rise in revenue and an even bigger 59% jump in gross profit. The 55 sq km development – located adjacent to Al Maktoum International Airport and JAFZ – has welcomed an additional 700 new companies so far this year.

Dubai Duty Free has announced that it will sponsor golf’s Irish Open for a further three years, following the success of its initial involvement, earlier in June. Consequently, 2016 prize money will jump 60% to US$ 4.5 million, making it one of the more lucrative purses on the European tour.  Rory McIlroy will again host the tournament on behalf of his charity, the Rory Foundation.

Buroj Property Development is planning to invest US$ 1 billion in the first phase of a US$ 4.9 billion Bosnian tourist resort project. Located near Sarajevo, the Dubai-based developer will start work on the 1.3 million sq mt ‘Buroj Ozone’ in H2 2016 and estimates that the entire project will be completed within 8 years.

The RTA is set to increase the number of operating taxis by 34.4% to 12.8k vehicles over the next five years, so as to meet the expected increased demand.

DEWA will be spending over US$ 16 billion over the next five years to meet increasing consumption; it is expected that water and power demands will see annual growth levels of 6.8% and 6.4% respectively.

The first phase of DEWA’s US$ 1.8 billion Hassyan contract – a 1.2k mw clean coal power plant – has been awarded to a syndicate, led by China’s Harbin Electric and ACWA Power from Saudi Arabia. The bulk of the financing – US$ 1.6 billion – will be shouldered by consortium members, with DEWA investing the remainder; however, the utility provider will maintain a 51% shareholding. Phase 1 should be finalised by 2021, with phases 2 and 3 – bringing on line a further 2.4k mw – will be introduced at a later stage.

Hadeed Emirates Contracting Company has won a DEWA contract to construct the Solar Innovation Centre at the MBR Solar Park. To be opened within 18 months, the facility will be an exhibition centre for solar and renewable energy – attracting academics, tourists and other interested stakeholders.

UK-based Brand Finance has ranked “Brand UAE” as the third in the world after Singapore and Switzerland, with a value in excess of US$ 400 billion. The 2015 list sees the country move up 18 places and measures countries’ global brand and strength, taking into account factors such as quality of life, security and the ease of doing business. Emirates continues to be both the region’s – and the airline industry’s – most valuable brand. This year, it has jumped 38 places to 196, with its value increasing by 20.4% to US$ 6.6 billion.

Restructuring discussions have restarted in London between creditors (owed US$ 2.3 billion) and Dry Docks World; 35% of this debt falls due in 2018, with the balance nine years later. The six-man steering committee, comprising three persons chosen by the banks and three hedge fund investors, represents about 70% of the outstanding balance, with the hedge funds owning a large portion of the debt. This is the second restructuring plan, subsequent to the first in 2012, when the company was having financial problems, following large-scale expansion, mainly in SE Asian shipyards.

The DMCC (Dubai Multi Commodities Centre) – housing 11k companies and 85k people in offices and apartments – has been named as 2015’s “Global Free Zone of the Year” by the FT’s fDi Magazine. The award serves as a confirmation of its prime position as a global hub.

According to the latest Emirates NBD UAE PMI, there has been a slowdown in business growth, with the September index falling from 57.1 to 56.0; as any reading over 50 equates to expansion, there should not be much need for concern. However, indicators to watch over the coming months will include the relatively high inflation rate (which has seen output charges increase), foreign orders, growth of new work and the rate of hiring.

The Dubai International Financial (DIFC) Court has seen a massive 482% hike, to US$ 1.44 billion, in the value of cases heard in the first nine months of the year. The average value of claims rose by 137% to US$ 26 million.

On Sunday, trading in the Saudi telecom, Mobily, 27.5% owned by Etisalat, was again suspended by that country’s market regulator. The Capital Market Authority was awaiting details about shareholders’ compensation claims, arising from losses because of last year’s accounting irregularities, before deciding to allow trading to continue on Tuesday. Following revelations last year that the company’s earnings had been misstated, Mobily has seen more than US$ 5 billion wiped off its market value.

Following an 11.6% month on month slide in August, the DFM market capitalisation dropped a further 0.7% in September to US$ 89.0 billion. The DFM opened Sunday at 3706 and slid 8 points to 3698 by the end of the shortened week (14 October) because of the Islamic New Year. Of the bellwether stocks, Emaar Properties was down US$ 0.02 to US$ 1.87, whilst Arabtec fell US$ 0.01 to US$ 0.51. Yet again, trading volumes on Wednesday were desperately low, at only 200 million shares, valued at US$ 57 million changing hands, (cf 134 million shares for US$ 64 million, the previous Thursday).

Oil and gold had mixed weeks and by Thursday (15 October), Brent crude had closed noticeably lower, down on the week 6.3% at US$ 49.73, whilst gold continued its recent upward trend, jumping US$ 43 to US$ 1,187.

IATA has noted that the average global airfare has fallen by 13% in the first 7 months of the year. Although low oil prices are the main downward driver, the strong greenback and increased capacity are other factors at work.

Further disappointing September trade figures emanating from China showed annual exports and imports down 1.1% and a worrying 17.7% respectively. The country is in the throes of a fundamental economic shift to a consumer-led economy from being an export driven one. China recently downgraded its annual growth forecast to 7.3% but this could turn out to be lower come the end of the year.

Largely because of an annual 14.9% decline in the cost of fuel – and a smaller fall in food prices of 2.5% – the UK returned to negative inflation (-0.1%) in September. In the short-term, at least, this is good news for the average person, as the consumer can buy more for the same amount of money. It also reduces the possibility of an interest hike this year. The country’s September jobless rate at 5.4% is the lowest in seven years.

The OECD recently reported that laws allowing companies to move from high to low tax regimes resulted in the loss of global tax revenues of up to US$ 240 billion. Now it seems that Facebook, with advertising revenue of US$ 3.6 billion and global profits in excess of US$ 2.9 billion, only paid US$ 6.6k UK corporation tax; this was after having made a US$ 44 million loss and paying staff bonuses of US$ 54 million. No wonder that the likes of Google, Amazon and Starbucks (which between 1998-2012 paid US$ 13 million tax on revenue of US$ 4.6 billion!) are subject to on-going EC investigations.

Following the collapse of the Anglo Irish Bank in 2009, which cost the Irish taxpayer US$ 34 billion in bailout funds, its boss David Drumm fled to the US, where he filed for bankruptcy. With the failure of his bid in the Boston courts, he could be liable for debts of US$ 12 million and has been arrested on an extradition warrant from Ireland.

Last week, Deutsche Bank’s Q3 results showed a US$ 1.3 billion provision for legal fees. This week, JP Morgan Chase did exactly the same as it reported a 23.6% hike in net profits, to US$ 6.8 billion, despite a 6.0% decline in revenue to US$ 23.5 billion but helped by a US$ 2.2 billion tax credit.

It is reported that the Malaysian Central Bank has recommended criminal action against the state investment fund 1MDB which has invested over US$ 1.8 billion overseas, without formal documentation. Strangely enough, it seems that the fund, set up in 2009 by Prime Minister, Najib Razak, has recently been mired in controversy when it was discovered that some US$ 700 million had been transferred to his personal account from entities linked to 1MDB. Furthermore, the fund has alleged debts of US$ 11.5 billion.

It seems that the major Petrobas fraud in Brazil could top US$ 5.4 billion. The scandal is estimated to have cost the state-owned oil company at least US$ 1.7 billion, over a ten-year period, as it paid out a combination of bribes, fake invoices and inflated contracts to politicians, executives and suppliers.  Over time, the corrupt practice extended into other sectors resulting in the implication of many senior people. Dilma Rousseff was the chair of Petrobas at the time, prior to becoming the country’s President.

A strain of malware, known as Dridex, has allowed East European cyber criminals to steal at least US$ 33 million from UK bank accounts. Their modus operandi is to initially infect computers and then harvest on-line bank details to steal money from unsuspecting victims.

The world’s biggest luxury goods giant, LVMH Moët Hennessy Louis Vuitton, reported an 18.0% surge in revenue to US$ 28.7 billion for the first nine months of the year, boosted by a weaker euro. The French company recorded growth in both Europe and the US but its standout market was Japan.

VW is cutting next year’s investment programme by US$ 1.1 billion, as it starts to come to terms with the consequences of the diesel emissions scandal, involving at least 11 million vehicles. The disgraced German car-maker has already made provisions of US$ 7.2 billion but with the prospect of huge penalties, from various governments, numerous lawsuits and possible criminal cases, the ultimate figure could be higher than US$ 40 billion. To make matters worse for ‘Das Auto’, it appears that Leonardo DiCaprio is considering a Hollywood film about the German debacle.

Troubled Glencore is set to shed 1.5k jobs as its cuts both its lead and zinc production – in Australia, Kazakhstan and South America – by 33%. Ironically, the price of zinc climbed 12%, to US$ 1,875 per tonne, on the news that the Swiss conglomerate was to reduce output by 500k tonnes, equivalent to 4% of global supply. In order to reduce its US$ 30 billion debt burden further, the company is also selling two of its copper mines – in Australia (Cobar) and Chile (Bayas).

There were two massive corporate deals and two minor ones this week. In the largest ever technology acquisition, Dell has paid US$ 67 billion for EMC Corp. Consequently there would be synergy between the buyer’s second position in servers with EMC’s supremacy in storage data devices.

Meanwhile it appears more likely that Anheuser-Busch InBev, with 20.8% of the global beer market, will take over the world’s second brewer SABMiller (9.7%) in a US$ 70 billion tie-up. The enlarged company will have a dominant market share (30.5%) compared to the 21.2% of its three remaining rivals combined – Heineken – 9.1%, Carlsberg – 6.1% and China Resources Enterprise – 6.0%.

This week, Melbourne boutique brewer, Mountain Goat Beer also sold out – to the Japanese-based Asahi for an undisclosed amount. However Australia’s Treasury Wine Estates – which includes Penfolds, Rosemont Estate and Wolf Blass in its portfolio – has acquired a majority shareholding in the UK’s Diageo’s wine business. TWE is the biggest global publicly listed winemaker. Last week Diageo sold two of its brewing companies to Heineken for US$ 780 million.

Fiat has announced that it is planning a New York IPO for the sale of about 9% of Ferrari.  It is expected that 17.2 million shares will be on offer, at a price of between US$ 48 – US$ 52, valuing the issue in the region of US$ 825 million – US$ 894 million. At this level, Ferrari would be valued at just under US$ 10 billion for a company which only sold 7.2k vehicles last year and whose latest figures indicate an annual profit of US$ 787 million. This IPO represents a lot of money for a Fast Car!

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Something In The Air

Posted on October 18, 2015 by howesdubai

royal-atlantisHH Sheikh Mohammed bin Rashid Al Maktoum has announced his global foundation – a programme that aims to consolidate 28 organisations and coordinate 1.4k development projects in 116 countries. With an initial US$ 272 million budget, its immediate targets are to combat both poverty and unemployment, spread knowledge, encourage innovation and empower communities.

Despite all the doom and gloom surrounding the local realty sector, it is interesting to note the impressive Q3 turnover in Emirates Hills. Eight sales, totalling US$ 87 million, were recorded including one for US$ 25 million (equating to US$ 621 per sq ft). This is in contrast to Palm Jumeirah where only two deals took place, totalling US$ 10.1 million.

Two realty reports this week confirm the continued softening of the market. JLL estimated that apartment prices have fallen 11% over the past 12 months – and 3% in Q3. Furthermore both sale numbers, at 4k, and value, US$ 1.6 billion, were at their lowest levels in four years. Meanwhile Tasweek reckoned that the annual fall in prices was at 12.7%. The industry consultancy firm also forecast an additional supply of 26.1k apartments and 2.6k villas by the end of 2016 – hard to square up when only 1.7k units were delivered in Q3, according to JLL.

Perhaps the gloomy picture painted by most analysts is not as bad as many think! Although oil prices are low, the currency strong and inflation relatively high, the IMF still forecast the country’s 2015 growth of 3%, whilst downgrading its global forecast. The plethora of upcoming projects, (both public and private), the airline sector continuing to boom and the raft of new companies being established point to an increased demand for housing that might not be met by an apparently flexible supply curve.

However, there is a definite over-supply in the office sector with estimates that 26% of all space is vacant. With the forecast that the portfolio will expand by 10.5%, over the 15 months, there could be a massive 2.7 million sq mt laying empty by December 2016.

The Investment Corporation of Dubai and Kerzner International are currently developing the Royal Atlantis Resort and Residences, adjacent to the current Atlantis The Palm. Enabling work on the US$ 1.4 billion project has already started and the 800-room hotel, with 250 luxury residences, is slated to open in 2018. According to Knights Frank, the hotel is already listed in the top ten influencers for new luxury development.

Nakheel moved a step further in the building of its 52-storey Palm Tower, by awarding a US$ 223 million joint contract to Trojan General Contracting and National Projects & Construction LLC. The 240 mt 5-star, 290-key hotel, and 504-unit residential complex, will also have catering and leisure facilities, commensurate with such a development.

Traffic congestion has become synonymous with Dubai but two projects announced this week set to ameliorate the problem. Parsons have won a contract to build the Shindagha Corridor, involving a 12-lane freeway. This will by and large replace the 40-year old, 4-lane Shindagha Tunnel that has to cope every year with 38 million cars. The other sees Dubai Properties appointing a consultant to look at traffic flow around the 8-year old JBR – a development with 20k residents and 10 million annual visitors.

The RTA has indicated that work on the Route 2020 metro expansion project, to link the Expo 2020 site, will start in H2 2016. The additional 15 km of track will connect the current Nakheel Harbour and Tower Metro Station with DIP, one of seven new stations which will include Discovery Gardens, Furjan and Jumeirah Golf Estate.

The RTA, along with Meraas Holding, has already started work on roads and bridges around the upcoming Dubai Parks & Resorts location. The US$ 68 million project will link the theme parks with SZR and will include one 1.5k mt 3-lane bridge and another 2-lane 1k mt, along with the extension of a 16 km dual carriageway.

This week, the operator announced that 50% of rides and engineering work have been completed in Legoland and is well on track to open in Q4 next year; the resort’s first roller coaster – the 16 mt high Dragon roller, the biggest in the park – has already been installed.

There is every chance that a new theme park will be announced shortly. It seems that Al Ahli Holding Group is planning a movie-themed resort which will only add to Dubai’s growing list of tourist attractions.

The UK-based Elegant Resorts was sold for US$ 22 million in 2014 by Thomas Cook to the Al Tayyar Travel Group. The Saudi-owned operator is now planning to invest US$ 1.5 million to open a Dubai office by the end of the year.

Next month’s air show is forecast to be the biggest ever with 1.1k exhibitors (up 5.2% on 2013) and over 65k trade visitors. However, one record unlikely to be broken is the massive US$ 206.1 billion in orders taken last time. Despite the recent negative sound bites form its three leading airlines, the US pavilion will be double the size seen at the 2013 exhibition. So much for biting the hand that feeds you!

The trading arm of Dubai Holding, Dubai Holding Commercial Operations Group, has four main operating units – Dubai Properties Group, Emirates International Telecommunications (including Axiom and du), Jumeirah and TECOM. Without any further details available, the company has forecast a 17.5% hike in 2015 net profit to US$ 1.5 billion, following a H1 24.0% profit jump to US$ 708 million.

Avivo Group, with 32 regional health care centres, is planning a 2017 London IPO and to this effect, the Dubai-based private equity firm has invested US$ 300 million to finance expansion plans in the GCC, Malaysia and Singapore. The company, formerly known as Healthcare Mena and founded in 2011, employs 1.3k professionals and treats over 1.3 million patients annually.

As it plans to increase its shareholding from 25% to 40% in Indonesia’s Bank Panin Syariah, Dubai Islamic Bank is hoping to tap into the ever-growing Sharia-banking sector in that country.

Established in Berlin in October 2014, foodora is already testing the waters here in Dubai. The company only deals with high-class restaurants (30 to date) and arranges motor cycle deliveries to Dubai residents, within 35 minutes. Nothing new here then.

The Dubai government repaid a 5-year US$ 500 million Fixed Rate Note; the paper was part of a US$ 4 billion 2009 facility which matured on Monday.

Next month, Dubai will see the introduction of new legislation covering public-private partnerships that will allow the private sector to partly fund major government projects. This will be a major fillip for the economy that is being hamstrung by low oil prices, with resulting budgetary constraints on spending. The RTA, DEWA and other GREs will benefit by the availability of this additional form of new finance. For once, Dubai is not leading the GCC – similar legislation already exists in Bahrain and Kuwait.

The Mohammed bin Rashid Fund for SME Support, launched six months ago, has doubled its seed capital loan limit to US$ 272k  but maintained its credit scheme loan cap at US$ 1.4 million. This will boost this sector for Emirati entrepreneurs who have had financing problems from traditional sources.

UAE’s Energy Minister, HE Suhail bin Mohammed Al Mazroui, has announced that the country will be investing US$ 35 billion to boost natural gas production, so as to reduce imports, whilst diversifying its current energy resources.

The Minister of Economy, HE Sultan bin Saeed Al Mansouri, has forecast that UAE’s 2015 GDP will grow 3.5% to US$ 436 billion – and this despite the slump in oil prices. Because of its diversification strategy, the country has seen double digit expansion in the industrial sector, with expectations that this would increase twofold over the next five years.

Abraaj Capital renewed its interest in the Americas by raising US$ 191 million in Certificates of Development Capital (CKD). The monies will be used in mid-sized Mexican companies with expansion potential in a range of sectors, including health and education. The Dubai-based private equity firm has already carried out 14 investments in Columbia, Mexico and Peru.

The government is actively considering the establishment of a Dubai Ex-Im bank which would be the first Sharia-compliant of its kind in the world. Such a facility would certainly boost the emirate’s goal to become the global Islamic finance capital. A recent Reuters report estimated the current value of the Islamic financial market at US$ 1.8 trillion, set to rise over 80% by 2020.

The DFM opened Sunday at 3619 and jumped 2.4% to 3706 by Thursday (08 October). Of the bellwether stocks, Emaar Properties was up US$ 0.11 to US$ 1.89, whilst Arabtec fell US$ 0.01 to US$ 0.52. Yet again, trading volumes on Thursday were desperately low, at only 134 million shares, valued at US$ 64 million changing hands, (cf 219 million shares for US$ 108 million, the previous week).

Oil and gold both regained ground on the previous week’s losses so that by Thursday (08 October), Brent crude closed a creditable 11.4% higher at US$ 53.05, with gold up US$ 31 to US$ 1,144.

It is estimated by Financial Fraud Action UK that the country’s H1 financial fraud totalled US$ 91 million, with telephone banking scams up 95%, over the same period, and on-line banking losses up 27%, to US$ 78 million. It would be interesting to ascertain the figures in this region. (Currently, the DFSA has issued an alert about a scam involving a US$ 150k payment to the (non-existent) ‘Financial Services Authority (Dubai Regional Office)’. The fraudulent scheme gives a bank account and issues a tax receipt and requests a contribution to ensure a certain Dubai road project goes ahead).

Later in the month, Deutsche Bank is expected to disappoint investors when it declares a US$ 6.9 billion Q3 loss, with analysts initially forecasting at least a US$ 1.1 billion profit. Three main reasons for the loss were unexpected impairment charges of US$ 6.4 billion, a US$ 1.3 billion provision for legal fees and a US$ 660 million write down on its 20% stake in Hua Xia Bank.

Air France is an airline in trouble as it needs to shed 2.9k positions (1.7k ground staff, 900 cabin and 300 pilots) and cut 10% of its long haul routes to maintain commercial viability. Staff voiced their disapproval at recent talks which ended with two dishevelled senior managers taking evasive action by climbing a high fence.

During the GFC, the UK taxpayers pumped in more than US$ 30.6 billion to save Lloyds Bank and now Chancellor George Osborne is planning to sell over US$ 3 billion of shares on the open market early next year. They will be sold at a 5% discount, followed by a 10% bonus share issue, if held for more than a year.

Weakness in the Chinese markets was the main driver of an 18% fall in the shares of Yum Brands on Wednesday The company, that has Pizza Hut and KFC in its portfolio, has seen Chinese sales up only 2%, compared to a double digit forecast. It has been dogged by bad press including reports of the use of excessive levels of antibiotics in its products.

Five years after the Deepwater Horizon oil spill in the Gulf of Mexico – and a budget spend in excess of US$ 54 billion – BP has finally settled with the federal and five state governments. The final bill has risen a further US$ 2 billion, from a July agreement, to US$ 20.8 billion.

It is reported that the troubled Swiss conglomerate, Glencore, could have more than US$ 100 billion of exposure to global banks, much of which is unsecured. This is more than triple the US$ 30 billion touted by the company and this exposure could present a major problem if their situation deteriorates. A further warning for banks came from the IMF that estimated that there is a potential US$3.3 trillion “over borrowing” by banks and companies in emerging markets.

The world body also indicated that the strengthening greenback is causing economic problems in many countries – including Chile, Hungary, Indonesia and Mexico. Payments become more onerous as dollar debt repayments become more expensive to settle.

At the annual meeting of the IMF and World Bank in Peru, Christine Lagarde has espoused the need for a tax on carbon emissions. This would have the double whammy of bringing more funds for cash-strapped governments, as well helping the fight against global warming.

There were disappointing figures emanating from the US with only 142k jobs created in September – well down on the 205k estimate – as July and August figures were cut by a combined 59k to 245k and 136k respectively. The poor figures seem to highlight the fact that the Chinese slowdown is having a negative impact and the probability that any Fed interest hikes will wait until early next year.

German trade is going through a rocky period, with its economic performance weakening in the light of recent slumps in exports and imports; August data reported a 5.2% drop in exports (its steepest fall in over six years), a 38.8% fall in its trade surplus to US$ 17.3 billion, and a halving in its current account surplus to US$ 13.8 billion. The VW crisis will not help matters in a country where most indicators are heading south and this year’s growth will be lucky to reach 2.0%.

A major economic bloc was formed this week – the Trans-Pacific Partnership. The free trade deal – which includes the likes of the US, Japan and Australia among the 12 participating Pacific Rim countries – will see tariffs cut and common trade standards introduced. The TPP, which still needs ratification from all 12 governments, covers almost 40% of the global economy – and this despite the absence of China.

Only two major sponsors – Adidas and Gazprom – continue to support Sepp Blatter whilst Budweiser, Coca Cola, McDonalds and Visa have called on the deluded FIFA president to resign immediately. This follows the news last week that Swiss proceedings were imitated against him on the grounds of making a “disloyal payment” to UEFA president Michel Platini and signing a contract that was “unfavourable to FIFA”. The former involved the payment of US$ 2.3 million to the Frenchman in 2011 for work as Blatter’s technical adviser, carried out a decade earlier – between 1999 and 2002. Sensibly, both men have been subsequently suspended for 90 days by FIFA and maybe at last There’s Something In The Air.

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When All Is Said And Done

Posted on October 5, 2015 by howesdubai

dubai-airportThe Dubai Corporation for Tourism and Commerce Marketing reported a 9.3% increase in overnight visitors – to 8.2 million – for the first seven months of 2015. Although Dubai’s hotel occupancy level has been flat, at under 80%, it remains among the highest in the world, despite an increased supply of new inventory.

Next April, Dubai will host the 10th World Retail Congress, which will help cement its place as the world’s second retail destination, after London. As home to over 55% of the leading international retail brands and some of the biggest malls on the planet, this sector boasts turnover of well over US$ 20 billion and is a major driver for Dubai’s growing economy.

According to the MasterCard Muslim Travel Shopping Index 2015, Dubai is the world leader for Muslim travelling shoppers. It ranked ahead of Kuala Lumpur, Singapore, London and Istanbul that made up the rest of the top five positions.

It is estimated that the fast-expanding UAE MICE (meetings, incentives, conferences and exhibitions) sector is valued at US$ 653 million and is an important contributor to both the retail and hospitality sectors. Next week, GITEX Shopper will mark its 25th anniversary and there is confidence that the event will better last year when there were 211k visitors, spending US$ 71 million; later in the month, the 35th GITEX Technology Week will witness the influx of 150k visitors from 150 countries. In Q4 alone, Dubai World Trade Centre will host sixty exhibitions and conferences, attracting 820k visitors.

Next week, Dubai will also host the Global Islamic Economy Summit (GIES). It is estimated that the current global Muslim market travel spend of US$ 142 billion will reach US$ 233 billion by 2020. Dubai is vying with the likes of Malaysia and Turkey to expand their share of this burgeoning Sharia-compliant market segment. Other sectors that would be of interest to the local market include halal food, with huge growth potential, and fashion, now that the emirate is promoting its Dubai Design District, d3.

A recent HSBC survey places Dubai as the number two city in the world after Singapore to start a business, based on business environments, infrastructure and work-life balance. It indicated that Dubai attracts 9% of expats looking to start their own business, compared to a global average of only 4%.

The UAE has dropped five places to 17th (out of 140 economies surveyed) in the latest Global Competitiveness Index. Although performing well in most sectors, it lost points because of the addition of a new indicator on tertiary education, in which scores were disappointing

Yet another report on the state of Dubai realty indicates that the downward price correction continues. Bayut.com indicated a huge variance in the sales “performance” over the past twelve months, covering studio apartments in different localities. Strangely, whilst prices jumped 29% in Dubai Marina, they were down in Business Bay to US$ 291k (13%), JLT to US$ 203k (12%) and Downtown (3%). Rents have remained relatively flat over the past year.

Reidin’s latest report shows annual falls to August of 10.4% in apartments and 8.0% for villas. JLL are a little more pessimistic, amending their 2015 forecast to a 15% fall in Dubai property prices. Earlier in the year, Standard & Poor’s forecast a 20% slump in the wake of the sinking oil price. Take your pick!

This week, Majid Al Futtaim announced a US$ 272 million “vertical” expansion of the 10-year old Mall of the Emirates. The project, covering 36k sq mt of the facility’s third floor, will make room for 40 retail outlets and an additional 12 for dining. This is just one part of the conglomerate’s strategy to double the size of its retail empire by 2020.

Further to three recent contract signings, totalling US$ 278 million, Drake & Scull Engineering has won a US$ 34 million tender for a mixed-use development in Jumeirah. The project, covering 72k sq mt, will include full MEP works and will be completed next year.

The 55-year old Dubai International announced another record month in August, with traveller numbers up 9.5% to 7.2 million, compared to the same period last year. With a YTD total up 12.4% to 52.2 million, it is well on its way to reach its 79 million target for 2015. Despite a shift of freight movements to the new Al Maktoum facility, cargo was also up – 5.3% to 207.4k tonnes.

Dnata has bought a 30% share – with an option to acquire a further 40% – in Airport Handling, a Milan-based ground handler; it will control operations at the city’s two airports and will take over the management of the 1.8k employees. This is another European investment by the Dubai-based company, where it now operates in over 40 airports covering cargo, catering and passenger handling.

There are currently 169 private schools in Dubai with a capacity of 255k students. By September 2016, this number will increase by 12.4% to 190 but whether this will see a reduction in school fees is highly unlikely.

There has been a shakeup in the country’s labour laws which will offer increased protection to employees and see the introduction of three new rules. These will cover the issuing of new work permits, labour contracts for workers from abroad and terminating contracts between employers and employees. It will also mark the end of the much criticised “kafala” system that strictly regulated entry and residence requirements and required employers’ approval for the changing of jobs.

The DFM opened Sunday at 3625 to eventually move 6 points lower to 3619 by Thursday (01 October). Of the bellwether stocks, Emaar Properties was up US$ 0.01 to US$ 1.78, with Arabtec gaining US$ 0.03 to US$ 0.53. As expected, trading volumes on Thursday were again disappointingly low, but up to 219 million shares, valued at US$ 108 million, (cf 160 million shares for US$ 70 million, the previous week).

Oil and gold both moved south this week so that by Thursday (01 October), Brent crude had closed 1.1 % lower at US$ 47.64, with gold falling US$ 34 to US$ 1,113.

Mick Jagtiani, the chairman of Dubai-based Landmark Group, with over 2k regional retail outlets, is also a major investor in the UK’s Debenhams. He is one of several stakeholders who are unhappy with the company’s CEO, Michael Sharp, and his attempts to boost flagging sales and restore the department store giant to its former profitability levels.

Another week sees another political scandal – this time involving Northern Ireland’s former First Minister Peter Robinson. It seems that both the UK’s National Crime Agency, along with the US Department of Justice, are investigating allegations concerning US$ 23 million of “success fees” in the sale of Project Eagle, owned by Nama (National Asset Management Agency) – Ireland’s “bad bank”. It is reported that the fee would be split between five parties, including Mr Robinson who has refuted all allegations. The 850-unit portfolio was eventually sold off in April 2014 for US$ 1.9 billion to Cerebus.

Discredited German carmaker Volkswagen continues to take flak over its diesel emission testing scandal, as its CEO Martin Winterkorn resigns. By Thursday, its preference shares were trading at US$ 99 – a huge drop over the past six months, when in March the value was US$ 291. Following the revelation last week, the company had lost more than US$ 22 billion in market value. It faces fines of US$ 18 billion in the US at a time when the Paris prosecutor is investigating “aggravated deception” and the Swiss banning the sale of new VW diesel cars. It is a fair bet that the scandal will inevitably envelop other manufacturers but for now VW faces massive fines, possible criminal charges and class actions from a pack of hungry US lawyers.

Interestingly, the EU’s Transparency Agency estimates that the auto industry is second only to the finance sector in the use of lobbyists. Furthermore, the Germans are considered the most powerful, spending at least a reported US$ 10 billion, with VW employing 43 to cover their interests in the European corridors of power. Another example maybe of the uncomfortably cosy relationship between big business and politicians!

With the slump in commodity prices, the Swiss conglomerate, Glencore has seen its share value dive from a November high last year of US$ 506 to US$ 139 on Thursday (01 October). This is better than its position on Monday morning when 17.4% of its value was wiped off in the first two hours of trading, as its share price fell to US$ 102.

The company employs 180k in over 50 countries with the main sectors being energy (turning over US$ 132 billion), metals (US$ 66 billion) and agriculture (US$ 26 billion). Despite its massive position in the market, some analysts see its 2015 revenue falling at least 25%, from its US$ 12.9 billion in 2014.

When two heavyweights, like VW and Glencore, go into meltdown simultaneously, the financial world is in deep trouble. The following table is a good indicator that the world is not only facing huge political problems but also is in an economic quagmire.

    Unit %age 30 Sep 15 30 Jun 31 Mar 01 Jan 15 01 Jan 14
      3 mth          
Gold US$ oz -5.11% 1,114 1,174 1,182 1,186 1,236
Iron Ore US$ lb -8.06% 57 62 63 73 135
Oil – Brent US$ Bar -22.76% 48.70 63.05 54.93 57.33 102.50
Coffee US$ lb -7.63% 121 131 134 161 260
Cotton US$ lb -11.76% 60 68 83 62 86
Silver US$ oz -7.08% 14.57 15.68 16.62 15.77 20.15
Copper US$ lb -9.16% 2.38 2.62 2.75 2.88 3.37
AUD US$   -7.79% 0.71 0.77 0.76 0.81 0.89
GBP US$   -3.18% 1.52 1.57 1.48 1.53 1.64
Euro US$   0.00% 1.11 1.11 1.08 1.21 1.38
Rouble US$   -16.67% 0.02 0.02 0.017 0.017 0.03
FTSE 100     -7.05% 6,061 6,521 6772 6548 6730
CS1300     -27.53% 3,195 4,409 3480 3532 2291
S&P 500     -8.53% 1,887 2,063 1990 2091 1831
DFMI     -12.09% 3,593 4,087 3600 3774 3370
ASX All Ord     -7.89% 5,021 5,451 5450 5415 5352

There have been no positive signs in Q3, with all the above indices in negative territory. The short-term view is grim, with economic slowdowns endemic in most countries, as growth rates in emerging markets are forecast to fall to 3.6% this year. Add the on-going problems in China, which can only worsen, continuing low commodity prices, recession in Japan and Russia and worrying signs from the US and the perfect storm is fast approaching – When All Is Said And Done.

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The Writing’s On The Wall!

Posted on October 3, 2015 by howesdubai

vw-carThere was sad news at the beginning of the week, with the announcement of the death of Sheikh Rashid bin Mohammed bin Rashid Al Maktoum, the eldest son of the Dubai Ruler, HH Sheikh Mohammed. He died on Saturday, at the age of 33, following a heart attack.

With a debut property in Abu Dhabi starting operations next year, Dubai Properties and Marriott International will open their first Edition hotel in Dubai in Q1 2018. Located in JBR, the 258-key hotel will also encompass a beach club, business centre and food outlets.

The ME aviation market was the only global market showing double digit growth last year as its total market share rose to 5.2%, with passenger numbers up over 10.0% to 173 million. The figures also show that Emirates (with 2.3 million tonnes) was the third largest cargo carrier, somewhat behind FedEx (7.1 million tonnes) and UPS (4.2 million tonnes). These three accounted for 26.5% of the total global cargo (51.3 million tonnes) lifted in 2014.

In 2004 its Private Bank moved to the DIFC and next year will see HSBC Holdings ME relocate there from its current its headquarters in Jersey; it will be regulated by the Dubai Financial Services Authority. Initially it is thought this will see an influx of about 100 staff.

The DFM opened Sunday at 3625 to eventually move 8 points higher to 3633 by Tuesday (22 September); the bourse was closed for two days because of the Eid Al Adha holiday. Of the bellwether stocks, Emaar Properties was up US$ 0.02 to US$ 1.77, with Arabtec gaining US$ 0.01 to US$ 0.50. As expected, trading volumes on Tuesday were again disappointingly low, and were down to 160 million shares, valued at US$ 70 million, (cf 236 million shares for US$ 139 million, the previous Thursday).

Oil and gold had mixed weeks so that by Thursday (24 September), Brent crude had closed 1.9 % lower at US$ 48.17, with gold up US$ 20 at US$ 1,147.

There was little surprise with the news from Janet Yellen that the US Federal Reserve had decided to keep interest rates on hold, despite weaker oil prices.

Coca Cola executives received a shock earlier in the week when it received a bill of US$ 3.3 billion for taxes owing from 2007 – 2009, plus interest. The Atlanta-based drinks company refutes the claim which came after a 5-year audit by the IRS.

Following a 4th consecutive drop in sales, Caterpillar announced that it was slashing costs by US$ 1.5 billion. As sales fell another 2% to US$ 48 billion, the construction and mining equipment maker were planning a further 10k reduction in manpower – and this after losing 31k employees, after a 2012 restructure.

The UK steel industry has been hit by the perfect storm with the double whammy of falling prices and increasing foreign competition. An early casualty was the retrenchment of 2k workers as the Thai steel maker SSI halved production in their English Teesside plant.

UK Chancellor, George Osborne is in China on a five-day trade mission and he has garnered the support of two Chinese companies – China General Nuclear Corporation and China National Nuclear Corporation – to invest in a UK nuclear power station. A final decision on the US$ 39 billion Hinkley Point power station will be made later in the year with the UK government already guaranteeing US$ 3.1 billion initial support.

In January 2012, France lost its AAA grading and now Moody’s has continued to downgrade its credit rating – this time another notch to Aa2 and changed its outlook from stable to negative. The main reasons given were the country’s debt burden and the inability of the Hollande government to boost the economy quicker and to introduce much needed structural reforms. The current budget deficit is well above the EU threshold of 3.0% and even the most optimistic forecast for this year will see the deficit at 3.8%. The government also expects to see growth at its highest level since 2011 but even then 1.0% is not enough to solve the country’s economic problems.

Turkey saw its Fitch rating remain at BBB-, investment grade, with a stable outlook. It was noted that despite the political environment worsening and a slowing of economic reforms, the government had maintained a “strong balance sheet”. Of the other two major rating agencies, Moody’s maintained its investment grading whereas S&P rated the country’s sovereign debt as junk status.

The optimistic Spanish government is forecasting a welcome 3.3% economic expansion this year but the fact remains that the Spanish unemployment rate is at a crippling 22%+ and a more severe 50% for those under 25. Prime Minister Mariano Rajoy can boast that 18 million employment contracts are being signed every year; however, it is estimated that 25% of those are for less than a week’s work!

Italy is also showing signs of improvement with forecast growth of 0.9% and 1.6% over the next two years, following three years of recession. Matteo Renzi’s government has seen the economy boosted by the low oil prices and the weakening euro, along with a marked step-up in domestic demand. However, it still has an issue with its debt to GDP ratio which at its 2015 forecast level of 132.8% is still on the high side.

The big news of the week involved the scandal surrounding Germany’s largest carmaker, Volkswagen, which has rocked not only the business world but has the potential of damaging the country’s economy and political standing. VW has been rigging its US diesel emission testing for years and is now facing penalties in excess of US$ 18 billion from the US Environmental Protection Agency – and this is only the beginning.

Any fallout will have a negative impact, as falling sales will see redundancies in its 270k German workforce and even more cuts for those working for its suppliers. The contagion for other German companies is yet unknown but is bound to see the country’s trade suffer, since the auto industry accounts for 20% of exports, totalling US$ 225 billion, and employs 775k. Its economy has withstood both the eurozone debt crisis and the slowing Chinese economy but now the Berlin government could be scuppered by one of its own companies. The Writing’s On The Wall!

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The Party Is Over

Posted on September 20, 2015 by howesdubai

Blatter_ValckeIn the latest UBS study, Dubai is ranked a global 4th in two categories – the most expensive cities in the world and most expensive rental for a 3-bedroom apartment. In the former, it is behind Zurich, Geneva and New York, whilst in the latter its annual rental of US$ 38.9k is only lower than New York (US$ 51.8k), Hong Kong (US$ 50.6k) and London (US$ 40.2k).

Jumeirah Golf Estates is planning to add a new community centre, along with retail outlets and a hotel, in the upcoming Al Andalus District. This will be the focal point of the new project which will include eight apartment buildings, two of which – one 10-storey and the other 12 – will have 180 units. Completion date for phase 1 is set at Q2 2018.

Nakheel has appointed three contractors to construct a total of 1.5k villas and serviced residences in Nad Al Sheba. The contracts awarded to Metac General, Trojan General and United Engineering were for 468 villas (US$ 213 million), 489 villas (US$ 227 million) and 789 units (US$ 215 million) respectively. The project, covering 2.5 million sq ft, will be completed by Q1 2018 and will include a community centre, with 30 retail and food outlets.

As the Dubai Water Canal project begins to take shape, it seems that the four Crystal Lagoon towers, located on the redeveloped Safa Park and comprising 1.2k residences, will have their own man-made beaches. In addition, the Gate Tower development will also include 500k sq ft of retail and food outlets.

A year after its first property in Dubai, on Beach Road, Four Seasons have announced that its next one will be a 106-key hotel in DIFC, to be opened in 2017.

In line with the recent past, Dubai’s hotels had another disappointing month, with August returns showing a 1.7% fall in average occupancy rates to 74.2% and larger declines in average room rates (12.5%) to US$ 160, along with revenue per available room (13.9%) to US$ 119. New supply, at 6.0%, once again outstripped the 4.3% rise in demand. Short-term prospects point to much of the same, as the number of Russian and eurozone tourists continues to fall. Whether the sector can cope with an estimated 46% jump in room inventory to 95k, over the next two years, remains to be seen.

IMG’s Worlds of Adventure is fast approaching completion, as the theme park installs 69 automated dinosaurs in its largest of four zones, the Lost Valley – Dinosaur Adventure. The facility, located in Dubailand, has three other connected zones – Cartoon Network, IMG Boulevard and Marvel.

The RTA is hoping for a PPP (public private partnership) for developing Union Oasis, a former public park. Tenders are now open to complete the prequalification requirements for this 15k sq mt project that includes residential apartments, commercial and leisure facilities, along with open areas.

Dubai-based Home Centre plans to open 50 outlets in the MENA region over the next five years. Their US$ 272 million investment will see the 20-year old company expand its number of stores to 90 and create at least 3k new jobs.

Local company, Khushi Group will invest US$ 64 million in various projects in three sectors – education, sports infrastructure and transport. These include two schools in Sharjah and an Ajman cricket academy.

DP World is becoming greener as it introduces photovoltaic solar panels on buildings to generate electricity. Initially, the port operator will install solar panels on its buildings in JAFZA and Port Rashid terminal. This is the first phase of a project that, when fully rolled out, will generate up to 40MWP.

The 10th World Retail Congress will be held in Dubai next year, thus cementing the emirate’s increasing importance in the global MICE (meetings, incentives, conferences and exhibitions) sector. It will also enhance Dubai’s position as a leading retail destination. There is no doubting the importance of the retail sector to Dubai’s economy, accounting for some 29% (or US$ 22.9 billion) of GDP.

There are reports that Abraaj Capital may be selling its 49% shareholding in locally based payments provider, Network International. The private equity company bought its stake in 2011 for US$ 545 million and would probably be looking at a deal – either through an IPO or a private sale – in the region of US$ 1 billion. Emirates NBD holds the remaining 51% shareholding.

Dubizzle has reportedly invested US$ 1 million in the fashion mobile app, Shedd, developed by two of its former employees, Alex Hutley and Tariq Zabian. The Dubai developed mobile site not only trades in fashion items but also allows buyers and sellers to discuss sale items on line.

Just as First Gulf Bank announced that it had raised a US$ 1 billion loan for general financing purposes, the shareholders of Commercial Bank of Dubai rejected a proposal for the bank to raise a US$ 750 million Basel III-compliant bond. The bank’s two major shareholders are Abdullah Hamad Al Futtaim (26.3%) and the Investment Corporation of Dubai (20.0%) and it is reported that over 39% of the roughly 80% of shareholders present at the meeting were against the proposal.

Latest Central Bank figures for July confirm a slowdown in the economy as deposits fall, whilst borrowings are on the rise. Outstanding loans show a 10.0% jump, year on year, to US$ 370 billion as government deposits fell 6.2% over the same timeframe.

Dubai’s August CPI rose 0.82% to 4.41%, mainly due to the phasing out of the fuel subsidy that led to transportation prices increasing by 10.4%.

Du will return US$ 286 million to its shareholders by way of a US$ 0.035 interim and a US$ 0.027 special dividend.

Nasdaq Dubai witnessed its largest ever-sovereign sukuk listing with an Indonesian government issuance of Global Sukuk valued at US$ 6 billion. With US$ 12.6 billion of sukuk listings so far this year, the bourse is fast approaching last year’s total record figure of US$ 13.4 billion.

It was a second flat week on the DFM, opening Sunday at 3621 to eventually move 4 points higher to 3625 by Thursday (17 September). Of the bellwether stocks, Emaar Properties was up US$ 0.01 to US$ 1.75, whilst Arabtec lost US$ 0.03 to US$ 0.49. Although trading volumes on Thursday were again disappointingly low, they were up with 236 million shares, valued at US$ 139 million, being exchanged (cf 134 million shares for US$ 72 million, the previous Thursday).

Both oil and gold had a positive week so that by Thursday, Brent crude had closed 0.5 % higher at US$ 49.10, with gold closing up US$ 17 at US$ 1,127.

If the potential merger between the world’s two largest brewers, Anheuser-Busch InBev taking over SAB Miller, goes ahead, the result would be a drinks company, worth US$ 230 billion and responsible for 33% of the global beer supply.

As soon as the 2009 deal was signed, the tie up between Suzuki and Volkswagen seemed doomed for failure. At the time, the German carmaker became Suzuki’s largest shareholder, with both parties agreeing to cooperation and expansion plans into emerging markets such as India. But the deal never really worked, culminating this week with Suzuki’s buyback of 120 million shares, valued at US$ 31.8 per share.

Following his arrest early last month, Tokyo police have now charged Mark Karpeles with embezzlement. The Frenchman founded Mt.Gox – which only last year was rated the leading global bitcoin exchange but to be quickly followed by bankruptcy, with losses of almost US$ 400 million (the equivalent of 850k bitcoins at February 2014 prices).

Germany’s biggest bank is the latest with staff layoffs, announcing massive 25% job cuts which would trim its personnel numbers to 75k. Most of Deutsche Bank’s redundancies will be by spinning off its PostBank division, slashing back office positions and IT activities and closing 90% of its Russian operations. Incoming Chief Executive, John Cryan is being true to his word that he would cut costs!

Another company undertaking a massive redundancy program is Hewlett Packard which hopes to save US$ 2.7 billion by slashing 25k off staff numbers. This is in addition to the 55k it already plans to lay off, as part of a 2012 restructure. At the same time, the tech giant is also splitting the company into two divisions with HP Enterprises becoming a separate entity from its printer and PC business.

As the country has seen its currency sink 20% against the US$ and its stock market fall 9% this year, the troubled Malaysian government is spending US$ 4.6 billion, in a bid to boost its flagging economy. Apart from a political scandal – involving Prime Minister, Najib Razak, the state investment firm 1MDB and the mysterious US$ 700 million – the country is suffering from the collapse of commodity prices, the high greenback and the slowdown in China. Last November, three of Moldova’s biggest banks became insolvent having lost over US$ 1 billion, through fraudulent loans. The impoverished country’s central bank then injected US$ 660 million in new capital but, with a GDP of only US$ 8 billion, the country had to literally print extra money. The consequences have been catastrophic – inflation has doubled to 8%, the leu has fallen 20% to the US$, interest rates have almost doubled to 15.5% this year and GDP is forecast to contract 4.6%. In the wake of endemic corruption and mismanagement in the banking sector, both the EU and World Bank, along with other international agencies, have refused any further financial assistance, until the deep-rooted problem of corruption in Moldova is addressed.

Having entered into negative inflation for the first time in 55 years in April, the UK’s CPI fell back to 0% in August. Two of the main drivers for the country’s inflation, remaining flat this year, are the low oil price and the on-going supermarket price war. The end result is that, as the 2.0% government target is still a long way off, the chances of a hike in interest rates this year are minimal.

With increasing concerns about the sluggish global growth, volatility in the equity markets, Chinese uncertainty and low oil prices, the Federal Reserve decided not to raise US interest rates. The august body seems to have more sense than the many analysts who have been predicting rate hikes all this year.

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

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Forever Blowing Bubbles!

Posted on September 16, 2015 by howesdubai

omniyat-oneThere is one major problem with Dubai’s most expensive penthouse at US$ 49.3 million – it has yet to be built! However, a contract will soon be awarded by the developer, Omniyat, to build the One at Palm Jumeirah. With an internal area of 25k sq ft, including 8 bathrooms and 7 bedrooms, plus a 16.6k sq ft terrace, along with interior design by Japan’s Super Potato, it will be ready in Q1 2018.

As the residential market continues to stabilise, CBRE estimate that prices have fallen 6% over the past year – and 2% in Q2. The firm indicated that it expects up to 20k new units this year – and a total of 62k (of which 50.2k will be apartments), coming on stream over the next three years.

Despite all the doom and gloom surrounding the real estate market, it is interesting to note that the UAE was ranked 2nd globally for residential investment, based on CBRE’s criteria of market recovery and economic growth. In an upbeat tone, the firm considered Dubai a good buying opportunity, as it expects a 2016 rebound and strong growth potential going towards Expo 2020. However, in the past year, total Dubai property sales have fallen 19.8% to US$ 8.65 billion.

Asteco’s latest report has some interesting findings indicating recent increases in prices of more affordable properties including Discovery Gardens (6%), IMPZ (3%) and Silicon Oasis (2%). At the other end of scale, there were annual declines of around 10% noted in Dubai Marina, JBR and Palm Jumeirah. The company expects further softening in the sector as an expected 7k units will be ready this year and 13k apartments will hit the market in 2016.

Meanwhile, the Lookup.ae report forecasts that of the 65k units, currently under construction, 29k will be handed over in the next 18 months. The current supply chain will see both dips in prices and rentals until some sort of equilibrium is reached before Expo 2020 – but Dubai will not see another 2008 crash.

Over the past month, there would have been at least ten industry reports, all with apparently different findings – both on the supply and demand sides. The average man in the street is left baffled with the diverse range of conclusions and continues, by and large to rely on hearsay.

As with housing data, there seems to be no certainty on the number of hotel rooms in the pipeline and what would be the optimum number. Khalaf Al Habtoor has urged a note of caution as the emirate heads towards Expo 2020. He is concerned that if too many rooms are added to the portfolio, then there could be major problems with over-supply and a distinct possibility of bankruptcies. The current stock of rooms is about 65k, with estimates of a further 30k to 65k required before 2020. Simple arithmetic tells you that if the plan is to increase the number of visitors by 60% to 20 million, then a further 39k rooms are required; if the number was to be 25 million, then an extra 65k rooms would be needed.

Following a raft of new projects last week, prior to the opening of Cityscape Global on Tuesday, Dubai Investments announced its Mirdif Hills development, slated for completion by 2018. The project will include 1.5k apartments and a hotel.

As expected, DMCC revealed its plans for the Burj 2020 District which will cover over 1 million sq mt, with its focal point being the world’s tallest commercial tower. It is expected that at least 100k sq mt will be used for retail space.

Nakheel is planning a 1.5km Palm Promenade to stretch the entire trunk of Palm Jumeirah; the walkway will connect all thirty apartment towers with Al Ittihad Park, the beach and outlets.

In a bid to entice interest in The Villages project, located in Dubai South, Dubai Properties is to introduce a rent-to-own scheme. The US$ 6.8 billion development will be split into five different locations, with a total of some 20k residential units. Construction is expected to start in Q1 next year and be completed by 2019.

It appears that one-bedroom apartments in Al Habtoor City will sell for between US$ 817k and US$ 1.36 million. It is estimated that the project will cost in the region of US$ 545 million and will have three luxury hotels – St Regis, W and Westin – within the vicinity.

Saudi developer, Tanmiyat Global has released details of its 34-storey Skyline twin towers to be built in Dubailand. The 750 residential and hotel apartments, as well as 150 outlets, will be phase 1 of its Living Legends project and should be completed by 2018. The company had even grander plans, when it first launched in 2007, but hit problems with the arrival of GFC.

It seems that the US$ 6.8 billion Mall of the World project is in the throes of redevelopment and is still viable. The mega mall, to be located on the current Police Academy site, will cover an area of 8 million sq ft and will include three urban malls, 20k hotel rooms and the world’s largest theme park, tobe covered by a glass dome.

It is reported that the Investment Corp of Dubai is looking at a US$ 500 million loan facility to finance the expansion of Atlantis, The Palm. The new Royal Atlantis Resort and Residences is expected to cost US$ 1.4 billion and will include a 800-key hotel and 250 luxury residences.

Subsequent to its May agreement with the Spanish RIU Hotels & Resorts for a 750-key hotel, Nakheel has signed another JV with Thailand’s Minor Hotel Group to build a 500-room property on Deira Islands. The developer is currently negotiating with other interested parties for more hotels on the 15.3 sq km beachfront location. Following last year’s agreement with Premier Inn to build a 372-key hotel at Ibn Battuta Mall, Nakheel is to build a second one. Located in Dragon City, the 250-room property will be completed by 2018.

Deyaar has also signed a MoU with Millennium & Copthorne Hotels to develop and operate hotels in Dubai and the region. Initially, the aim is for the introduction of 1k rooms. The Dubai-based developer already has three hospitality projects in Dubai.

Last month, it was revealed that Bentley would be responsible for the interior furnishings for Sweden Island on The World Islands. Now Damac has acquired the services of a luxury car maker with the launch of its ETTORE 971 Bugatti Styled Villas in its 55 million sq ft Akoya Oxygen development. The 7-bedroom villas will have a starting price of US$ 9.8 million.

Tecom’s expansion plans continue unabated with a further 2 million sq ft being added before year end, including 11 towers in Dubai Design District and a further three in International Media Production Zone. Its 1.8 million sq ft “Innovation Hub” will open in Q1 2017. The current number of 4.7k companies, employing 74K, is set to increase.

Despite an agreement signed last year for the construction of one million homes in Egypt, it seems that the country’s Housing Minister Moustafa Madbouly has decided on the building of only 100k units over the next five years. The initial Arabtec agreement put the project cost at US$ 40 billion.

Azizi Holdings has indicated that it faces no problems in financing its current 20 Dubai projects, valued at US$ 1.23 billion. Of that total, 17 are located in Al Furjan – the 8 residential blocks are in progress whilst 4 of the 9 hotel / hotel apartment towers will soon break ground. The Group hopes to have 1k rooms under management within four years, including a 400-key 5 star US$ 300 million property in Dubai Healthcare City and a smaller US$ 200 million hotel on Palm Jumeirah Crescent.

The Dubai International Financial Centre continues to expand with the number of companies in H1 increasing by 8.3% to over 1.3k and a 4.8% hike in employee numbers to 18.5k. During the period, work started on The Gate District’s 11th office building and a further 178k sq ft of commercial space was leased.

In Q1, Dubai received 119k medical tourists and has plans to push the annual number up to 500k by 2020. Currently, this sector contributes 0.26% to the emirate’s GDP and a look at past figures indicates the great strides being made. In 2012, the 107k patients generated revenue of US$ 178 million – the 260k in H1 added US$ 272 million. According to the Medical Tourism Destination Index, Dubai is ranked 17th in the world for medical tourism.

It is reported that Dubai Islamic Bank is planning a Q1 IPO on the Karachi bourse to sell 25% of its shareholding in its Pakistani arm of the bank. In Q2, the bank made a US$ 104 million profit – down 49.0% on the comparative 2014 period – and carried assets valued at US$ 1.2 billion at 30 June 2015.

The Dubai-based pay-TV company OSN, owned by Kuwait Projects Company and the Saudi Mawarid Group, has raised a US$ 400 million, 5-year loan to fund further expansion plans. It operates paid subscription TV services in the MENA region.

The World Bank has forecast that the UAE will return to a 0.2% budget surplus (and 1.5% in 2017) following a 2.9% deficit this year, due to the crash in oil prices. The improvement will be largely as a result of increased emphasis to boost the non-oil sectors, significant cuts in public spending programs and implementing a tax regime.

According to a Ministry of Justice official, corporate tax is on the radar, with discussions currently taking place with local governments and with GCC members about a coordinated approach to VAT. The IMF has suggested a widening of the current 10% selective corporate tax net to catch more companies, as well as the introduction of a 15% duty on motor vehicles. (A rough calculation of a US$ 50 reduction in the oil price – and assuming that the UAE’s production is 2.8 million bpd – sees the country “lose” US$ 140 million daily or US$ 36.5 billion a year). The 7.4% contribution to the non-hydrocarbon domestic product that the IMF calculates that tax would generate would go some way to offset the current oil deficit.

There are reports that Al Shafar General Contracting is planning to list on the DFM. The co-founders of the Dubai-based company, established in 1989, are Mohamed Seif Bin Shafar and Egyptian national, Emad Azmy.

It was a flat week on the DFM, opening Sunday at 3648 to eventually close 0.7% lower at 3621 by Thursday (10 September). Of the bellwether stocks, Emaar Properties lost ground, dropping US$ 0.01 to US$ 1.74, whilst Arabtec actually rose US$ 0.01 to US$ 0.52. Trading volumes on Thursday were again disappointingly low on seven days earlier, with only 134 million shares, valued at US$ 72 million, being exchanged (cf 119 million shares for US$ 107 million, the previous Thursday).

Both oil and gold had a miserable week so that by Thursday, Brent crude had closed 4.0% down at US$ 48.83, with gold closing US$ 15 lower at US$ 1,110.

The low oil prices are taking their toll on US shale producers as estimates of H1 losses come in at a massive US$ 30 billion. According to Factset, in H1 alone, US independents had a cash deficit of about US$ 32 billion; this is on top of the US$ 37.7 billion cash shortfall reported for the whole of 2014. In the current economic climate, it is impossible for the US shale oil industry to recover its net debt of US$ 169 billion as at 30 June 2015 – a liability that has more than doubled from the 2010 figure of US$ 81 billion. A sign of the times is that the number of operating rigs in the country has fallen 59% since its October 2014 peak. Perhaps this development will result in another US banking crisis?

In the UK, 14.8% (or 75k) of oil-related jobs, supported by direct and indirect employees, have been lost, attributable to the slide in prices.

Low commodity prices and the need to slash its estimated US$ 30 billion net debt has seen Glencore planning to sell US$ 2 billion of assets and raise a further US$ 2.5 billion, via a new share issue. Already this year, the Swiss-based mining conglomerate has shed 50% of its market value, with Standard & Poor’s cutting its rating from stable to negative.

Just when United was one of three US carriers claiming that Emirates were being supported by government subsidies and competing unfairly in the US market, its chief executive has stood down. Jeff Smisek, who is also chairman of the board, and two other senior executives, have quit as the carrier is being investigated for corruption, allegedly involving the head of the Port Authority of New York and New Jersey.

Troubled supermarket company, Tesco is expected to raise US$ 6.1 billion with the sale of its South Korean business to MBK Partners. The world’s third largest retailer has been losing business in its home market, with its credit rating now considered junk status.

Toshiba, having overstated its profits by US$ 1.22 billion over the past six years, posted a net annual loss of US$ 318 million as at 31 March. The 5-month delay in announcing its results was as a result of the sale of its 4.6% stake in the Finnish lift manufacturer Kone that raised US$ 946 million.

The financial and political woes facing President Dilma Rousseff continue unabated as Standard & Poor’s cuts Brazil’s credit rating to junk status. Latin America’s major – and the world’s 7th largest – economy is now in recession, as a result of mounting corruption, political turmoil, sinking commodity prices and escalating inflation.

Despite the slowdown in China, German July trade figures, assisted by a weakening euro, were the best since records began in 1991; exports rose 2.4% to US$ 115.5 billion, whilst imports climbed 2.2% to US$ 90.0 billion. Whether this will continue for the rest of the year is unlikely, particularly since Germany is China’s leading European trading partner. With growth continuing at similar sluggish rates as the previous two quarters – 0.2% and 0.4% – and the immediate prospect of one million new immigrants, the country will face difficult economic times.

Just as Germany was declaring record exports, the UK saw its exports sink 9% (or US$ 3.5 billion) in July, as manufacturing output also dipped 0.8%. The sector is not helped by competitors’ weak currencies, making their exports more attractive, and the continuing Chinese slowdown, where their July imports were 13.8% lower than a year earlier and exports off by 6.2%.

In January, the ECB introduced a massive US$ 1.25 trillion QE package, in an attempt to boost the flagging eurozone economy but this could backfire. There is always the danger that European governments will solely rely on this form of monetary policy and neglect much needed economic and structural reforms. Just printing money will make some people rich – and some governments breathe easier – in the short-term but is not a panacea for solving the underlying problems. The bank’s president, Mario Draghi, should exercise caution and ensure that he – and his crony bureaucrats – are not Forever Blowing Bubbles!

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Both Sides Now

Posted on September 7, 2015 by howesdubai

wayne-rooneyValuStrat’s latest report shows an 11% drop in Q2 Dubai residential property prices, but only a 3% drop in rentals, compared to a year earlier. The research firm also indicated that 26.1k apartments and 2.4k villas will be added this year, with a further 28.5k units in 2016. Yet another report seemed to imply that currency movements in the home countries of Dubai’s three main source markets – India, UK and Pakistan – affect the local realty sector.

However, Knight Frank’s Global House Price Index indicated that annual, H1 and Q2 prices had fallen by 12.2%, 6.4% and 2.8% respectively. In fact, of the 56 markets surveyed, Dubai was ranked as the worst performing over the past 12 months. Cluttons has reported that 41k off-plan units have already been announced this year and of the 20k units to be handed over, within the next two years, only 6k would be apartments, with the balance being villas!

It does seem that the market is flooded with so many companies reporting on the state of the sector and all coming out with different findings – on both the demand and supply sides!

Next Tuesday, Cityscape Global will open and many local developers will be showing off their new projects. Meraas will be displaying a model of its Marsa Al Seef, located on the Creek, that will extend 1.8km and include three hotels, a museum, amphitheatre and art galleries, along with floating markets and retail outlets.

Emaar is planning to release discounted apartments in its Emirates Living cluster whilst Deyaar will be selling units in its upcoming US$ 817 million Midtown project. Both Damac and Nshama will be in the mix, with the former launching more residences for sale from its Akoya Oxygen development and its 29-floor Merano Tower. The latter will showcase its huge Midtown project, including Jenna apartments that will see 2-bedroom units on the market at the bargain price of US$ 204k.

Property developer, Seven Tides, has reported that 80% of its 227-key serviced apartments, being built in conjunction with a 273-room 5-star hotel, have already been sold. Located on Palm Jumeirah, Dukes Oceana will be the UK-based Dukes London’s first foray into the international market.

RP Global has appointed Jumeirah Group to manage a US$ 1 billion project, encompassing a 200-room hotel, 350 serviced apartments and 290 residences. The mixed-use development, with a built-up area of 3 million sq ft, will be located in Business Bay and is slated for completion by 2019. 

The Juma Al Majid Group has cancelled a management contract, which had run for 14 years, with Taj Hotels Resorts and Palaces; the Dubai company has taken back the Taj Palace Hotel, now renamed Al Doon Palace, located in Deira.

Dubai Tourism already has licensed 37 operators to rent out some 800 holiday homes. The government body will be responsible for issuing permits and ensuring that high standards are set and followed. The number of registered holiday homes is set to rise, as Dubai gets ready for Expo 2020. 

Both DuBiotech (Dubai Biotechnology and Research Park) and EnPark (Energy and Environment Park) reported 20%+ increases in the number of businesses opening in H1, bringing the combined total in the two free zones to 270. It is expected that the new twin-tower DuBiotech headquarters, encompassing over 500k sq ft of office space, will be ready by next year. 

JAFZA reported a 15.4% hike in H1 profits to US$ 141 million, as revenue increased by 9.0% to US$ 245 million. During the period, the free zone welcomed 313 new companies, compared to 346 in H1 2014.

DEWA will spend US$ 29 million in building a new 132/11kV substation in Dubai Academic City to meet the growing energy demand in that area.

According to a recent Ventures Onsite report, there will be a 1.0% fall, to US$ 194 billion, in the number of GCC construction projects this year. Of that total, the UAE expects awards to top US$ 60 billion, slightly lower than Saudi Arabia’s US$ 85 billion but higher than Qatar’s US$ 21 billion.

SKAI has secured a US$ 300 million syndicated finance package for its three Dubai projects – Viceroy Dubai Palm Jumeirah, Viceroy Dubai Jumeirah Village and a third one to be announced shortly. 

Deyaar Development is seeking up to US$ 245 million finance, as it starts development work on the US$ 817 million Midtown project in the IMPZ (International Media Production Zone). The development, covering 5 million sq ft, will include 2.5k apartments, 400k sq ft of landscaping and a 1km stretch of outlets, including retail, restaurants and cafés. It is anticipated that this will be completed by 2018, well in time for Expo 2020.

Locally based GEMS Education has managed to refinance a 2013 US$ 817 million, 7-year loan facility on improved terms. With over 50 schools in its portfolio – and major plans for international expansion – the company introduced two separate units, one focusing on the MENA region and Asia, with the other concentrating on Europe and North America. In 2014, Blackstone, Fajr Capital and Mumtalakat acquired significant minority shareholdings in the former entity.

A year after a US$ 35.8 billion agreement in principle to build one million homes in Egypt, Arabtec has announced that nothing has yet materialised between the two parties and no progress has been made.

Although no figures were available, the iMENA Group has bought a significant minority stake in the 7-year old JRD Group that includes JustRentals.com and JustProperty.com portals. It is reported that the company plans to invest US$ 25 million in online real estate over the next twenty-four months.

 

Abraaj Group has sold its stake in Peru’s Condor Travel to the Carlyle Group for an undisclosed amount. The Dubai-based asset management company has been involved in South America for the past seven years and currently has two investments in Peru – Acurio Restaurantes and logistics provider Urbano. 

Police have reportedly detained two family members of Atlas Jewellery over bounced cheques, following complaints by up to five banks.  The Dubai-based chain, with nearly fifty regional outlets, also has involvement with the realty and healthcare sectors. According to one newspaper, Atlas may have debts of over US$ 163 million, including one of US$ 19 million with the Bank of Baroda.

With a 42.3% surge, to 443k tonnes, in H1 cargo traffic, the Al Maktoum International is now ranked as 19th in the list of global cargo airports. Dubai International recorded 6.7 million passengers in July, bringing the YTD total to 45 million – up 12.9% on last year. Freight for the month reached 206k tonnes and YTD rose 2.7% to 1.44 million tonnes. 

Not many carriers receive four aircraft in one day but Emirates did just that this week. The arrival of three Boeing 777s and one Airbus A380, costing a combined US$ 1.5 billion, brings the fleet size to 238 with a further 270  – a mix of 777s and 74 A380s – on order.

Following the recent announcement that Jennifer Aniston would be the face of Emirates, it has been confirmed that she will appear in TV adverts – and not in print. The airline plans to spend US$ 20 million on this particular TV worldwide advertising campaign.

The Federal Customs Authority reported a 6.0% increase in Q1 non-oil trade to US$ 73.6 billion, with imports at US$ 46.5 billion, re-exports – US$ 16.0 billion and exports up 35% to US$ 11.1 billion. 

There is no doubt that the country’s industrial sector is growing in importance and is now second, only to oil and gas, contributing 14% of the national output. The sector’s 6k entities, with an estimated US$ 34.6 billion investment, employ an estimated 433k.

The UAE’s August non-oil PMI – up 1.3 to 57.1 – shows that the low oil prices are having minimal effect on business confidence. Although indicators  – such as output up to 63.1 and new orders to 61.3 – moved north, it is only a matter of time before the low oil price take their toll.

A year after listing on the DFM, Marka, with 34 stores, continues its expansion with recent launches of international brands – including City Chic, Essentiel Antwerp Laurel, Sonia and Weill. The company has also been active in acquiring major stakes in Cheeky Monkeys, Icons and Reem Al Bawadi, as well acquiring Retailcorp from Istithmar.

In line with global markets, the DFMI had a topsy turvy week – opening Sunday at 3648 and eventually closed only 2.1% lower at 3570 by Thursday (03 September). It closed the month of August down 11.6% on 3663 and was 2.9% off YTD, having opened the year on 3774. 

Of the bellwether stocks, Emaar Properties lost ground, dropping US$ 0.03 to US$ 1.75, whilst Arabtec fell US$ 0.04 to US$ 0.51. Trading volumes on Thursday were at rock bottom, well down on seven days earlier, with only 119 million shares, valued at US$ 107 million, being exchanged (cf 331 million shares for US$ 262 million, the previous Thursday). For the month of August and YTD, both stocks lost ground – Emaar 14.4% (US$ 0.31) to US$ 1.84 – and 7.0% YTD with Arabtec sinking even further – 16.9% (US$ 0.11) to US$ 0.54 and 32.8% YTD.

Just as happened for the past few weeks, both oil and gold had another turbulent time so that by Thursday, Brent crude had closed 7.0% up at US$ 50.89, with gold closing US$ 4 higher at US$ 1,125. Over the month of August, oil was marginally lower at 0.3% (US$ 0.15) to US$ 54.15 – and YTD 5.5% off.  Gold climbed US$ 47 during the month to close on US$ 1,134 but YTD was 4.4% or US$ 52 lower.

As sluggish demand continues for the Galaxy smartphones, Samsung has seen US$ 44 billion wiped off its share value since April.

It seems that Malaysian Prime Minister, Najib Razak, has received a US$ 700 million payment into his personal bank account, with allegations that the money came from the state investment fund 1MDB. (Both parties have refuted the charge). This week Swiss authorities got in on the act by freezing tens of millions of US$ in certain 1MDB accounts in that country and are investigating certain parties on suspicion of money laundering and corruption.

Argentina is far from happy with the shenanigans of HSBC who have been accused of threatening the country’s stability by helping its 4k alleged tax-evading clients there to repatriate US$ 3.5 billion of funds. Following a March raid on the bank’s local offices, the authorities found that most of the relevant documents had been stored with a company, called Iron Mountain, which ironically had suffered an arson attack a year earlier. Other countries’ tax authorities are taking note of the bank that a UK legislator has said appeared to be “rich in bureaucracy and very, very short on common sense” – and probably other attributes.

The world’s 7th largest economy has gone into recession in the midst of a myriad of corruption probes, political instability and falling commodity prices. Brazil, which hosted the FIFA World Cup last year and will hold the Olympics next year, has seen its economy contract by 0.7% and 1.9% in the first two quarters of the year. Other economic indicators – rising unemployment (at 7.5%), a 25% fall in the real against the greenback, a 2.7% drop in agriculture and escalating inflation, now at 9.6% – point to the fact that there is no short-term solution.

Although reaching the 7.0% level, India’s latest quarterly growth figures disappointed the markets, down from the 7.5% mark at 31 March 2015. Since coming to power in May 2014, Prime Minister Narendra Modi has still much work to revive a flagging economy, beset by bureaucracy and corruption.

There is still a myriad of depressing economic news emanating from China, with the latest being the August PMI falling to 49.7, a usual sign of contraction in the economy, whilst the private Caixin/ Markit index, at 47.3, was at its lowest level in six years. Furthermore, the equity markets have lost almost 40% of its value since June. 

Canada has fallen victim to being blessed with natural resources, including oil, as it struggles from the negative impact of the Chinese slowdown. Having contracted 0.8% in Q1, the economy continued in negative territory falling a further 0.5% in Q2, so as now to be in recession for the second time in six years.

Just like Canada, and for mainly the same reasons, Australia’s economy is struggling. After a 0.9% growth in the March quarter, the latest figure of 0.2% disappointed the markets. The 3.0% decline in mining production, weakness in the construction sector and a fall in exports have seen the currency fall to 7-year lows, at around the 0.70 mark to the greenback. The end results are that the RBA had no alternative but to maintain interest rates on hold at 2% and that growth this year will be lucky to top the 2% level.

Although the ADP National Employment Report indicated a disappointing 190k increase in US August private payroll numbers, it was still 19k higher than a month earlier; early forecasts point to a slight decline in the current unemployment rate down to 5.3%, whilst productivity was revised up to 3.3% (from 1.3% in July) – and a major improvement on the Q1 contraction of 1.1%. Despite the global slowdown, the US economy is showing positive signs of strength and momentum. Whether this is enough for the Fed to raise interest rates this month seems unlikely.

There was good news out of Egypt, with the discovery of a “supergiant” natural gas field that could be holding up to 30 trillion cu ft of gas. Potentially, it could supply Egypt for decades but size wise is dwarfed by Qatar’s estimated 900 trillion cu ft reserves.

Unemployment rates in the eurozone are improving but are still at the unacceptable high level of 10.9% (down from 11.1% in July). There was a wide divergence between different countries with Germany at 4.7% with Spain and Greece at other end of the scale on 25.0% and 22.2% respectively. Probably the most disturbing figure was the bloc’s youth unemployment level of 21.9%.

The ECB introduced its US$ 67.4 billion monthly bond buying exercise with the express aims of boosting the economy and lifting the inflation rate to its target of 2.0%. It seems to have failed on both counts – growth is still sluggish and the inflation rate is still way off at 0.2%. This week, both the ECB and the IMF downgraded eurozone’s growth forecast for the next two years resulting in an expansion of QE being all but inevitable.

It has been estimated that English Premier League teams spent US$ 1.33 billion during the summer transfer window that closed on Tuesday. The Etihad-sponsored Manchester City accounted for 18.4% of that total, with an outlay of US$ 245 million. The fact is that this league can spend more than double that of any other European league because in Q1, Sky and BT Sport paid a record US$ 7.85 billion for live TV rights, to 168 games, for the next three seasons; this equates to US$ 15.6 million per match and represented a massive 70% increase on the existing deal. With the average player earning US$ 3.5 million – and the likes of Wayne Rooney US$ 24 million – playing in the EPL is very lucrative for Both Sides Now.

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One Way Or Another

Posted on September 1, 2015 by howesdubai

beijing-fogThere is no doubt that there is a slowdown in the Dubai realty sector and, according to Moody’s, it seems that the main cause is the emirate’s tighter property rules (including the recent doubling of registration fees to 4% and raising the minimum mortgage deposit) – rather than the oil price tanking. The credit agency reiterated that property prices had fallen since Q4 2014 and expected further declines before prices return to stability.

Meanwhile Cluttons estimated that up to 2013, prices had jumped by 51%, before declining 3.4% in 2014 – with more of the same this year. The company sees some form of equilibrium in the sector, with its debatable forecast of only 20k units coming into the market until 2017, whilst the population increases 16.7% to 2.8 million.

The first phase of the US$ 191 million MAG 5 Boulevard affordable housing project, comprising over 1k units, has already reported an 80% take-up. Work will soon start on the 800k sq ft development in Dubai South, slated for handover in Q1 2018.

Following last month’s announcement that United Engineering Co was to build phase 1, (Zahra and Safi apartments), Gulf Beaver Group has won the Nshama Town Square construction of its Zahra and Hayat Townhouses. When the total 750-acre project is completed, it will encompass 18k apartments and 3k townhouses.

The long-awaited 2k-seat Dubai Opera House is scheduled to open next March. The building, which will be the hub of The Opera District, will not only be a concept hall but could be transformed into either a theatre or a 1k-seat banquet hall.

In October, Madinat Jumeirah plans to open their 1.75k sq mt Fort Island that will be able to cater for up to 1.4k guests. As such, it is destined to become the largest hotel event space in the country and will be connected to the mainland by four bridges.

Omniyat has appointed Langham Hospitality Group to manage its proposed Business Bay property, due to open in 2017. Langham Place will have a 167-key hotel, along with 271 apartments.

It is reported that the Al Habtoor Group is considering a US$ 409 million loan to finance overseas property acquisitions. The Khalaf Al Habtoor conglomerate is busy in Dubai with the building of Al Habtoor City – comprising three 5-star hotels – and two other Dubai projects, a 4-star hotel and St Regis Dubai Polo & Resort Club.

The world’s largest indoor theme park, IMG World of Adventure, is on track to be completed by the end of the year. The 1.5 million sq ft project will encompass four zones, viz Cartoon Network, IMG Boulevard, Lost Valley – Dinosaur Adventure and Marvel.

MAF plans to open three Lego certified stores in Dubai – MoE, City Centre Mirdiff and Dubai Mall. Within 12 months, Legoland Dubai will also open as part of phase 1 of Dubai Parks & Resorts master development in Jebel Ali. The 3 million sq ft facility will include 15k Lego model structures, using over 60 million Lego parts.

Last month saw the abolition of petrol subsidies with pump prices up 24.4% to US$ 0.58 per litre, whilst diesel fell 29.0% to US$ 0.56.  The September price has been set with cuts across the board, including Special 95 petrol down 8.4% to US$ 0.53 and diesel falling 7.8% to US$ 0.51.

In August, it was reported that three major Hollywood films will be partly shot in the country – Star Wars, Episode VII: The Force Awakens, Kung Fu Yoga (with Jackie Chan) and War Machine (starring Brad Pitt). With government backing, this sector can only grow and has the potential to become a lucrative income source.

The ex-Leeds United FC director, David Haigh, has been sentenced to two years in jail for “breach of trust”, being accused of embezzling US$ 5 million from his former company, GFH. The 38-year old is to appeal but is also facing a civil case from his Dubai-based employer, where he was deputy CEO.

Abraaj Group was in the news again, this time it has finalised a US$ 375 million North African fund focused on “well-managed, mid-market businesses” in the consumer goods, education and healthcare sectors.

Surprisingly, ISC Research has concluded that the UAE – with a population of 9.6 million – has the most international schools in the world. With 511 facilities, it heads the likes of China (480), Pakistan (439) and India (411).

The troubled fit-out company Depa reported falls in both H1 revenue (down 4.0% to US$ 229 million) and profits that plummeted 44% to US$ 4 million. However, it has a project backlog totalling US$ 632 million, which is 12.0% higher than at 01 January 2015. The Dubai-based entity has a market capitalisation of US$ 307 million and a current share price of US$ 0.46.

Global port operator, DP World, recorded a 22.0% hike in H1 profits to US$ 405 million, with revenue up 14.4% at US$ 1.9 billion, assisted by the recent acquisition of logistics infrastructure firm EZW. Consolidated throughput increased by 3.5% to 14.4 million TEUs (20’ equivalent units).

In line with global markets, the DFMI had a turbulent week but managed to shed only 1.7% to close on 3648 by Thursday (27 August), having been down 8.3% to 3401 in early Monday trading. Of the bellwether stocks, Emaar Properties lost ground, dropping US$ 0.06 to US$ 1.78, whilst Arabtec inched forward US$ 0.01 to US$ 0.55. Trading volumes on Thursday continued to disappoint, but were up again on seven days earlier, with 331 million shares, valued at US$ 262 million, being exchanged (cf 307 million shares, for US$ 164 million, the previous Thursday). This week may see some consolidation as relative calm returns.

As with the equity markets, both oil and gold had a roller coaster week so that by Thursday, oil, thanks to a sudden late 10.25% spike, actually closed 2.5% up at US$ 47.56. There could be a downward market adjustment this week. The yellow metal shed recent gains to close 1.7% down at US$ 1,121; coincidentally, the UAE Central Bank continues to rebuild its stock of gold with a June balance totalling US$ 174 million – up 84.1% on last year’s figure.

As a major commodity currency, the Australian dollar, neared US$ 0.705, to hit six-year lows this week, one of its largest companies, BHP Billiton, posted a 52.0% fall in 2015 profits to US$ 6.4 billion. Consequently, the mining giant has announced 35.3% cuts in capex this year to US$ 11 billion. Australia’s close economic ties with China, and its reliance on commodity exports, will ensure that any Chinese meltdown will be felt moreso down under than in most other western economies.

Ryanair faces a major financial headache as a UK court has ruled that the world’s largest budget airline will now have to pay money to passengers who have experienced delayed flights over the past six years – as opposed to the former rule of two years. It is estimated that under the court’s decision, 2.26 million passengers could claim a total of US$ 951 million. This could also impact other airlines that have formerly relied on the two-year rule.

As a result of delivering a US$ 374 million profit last year, Qantas chief, Alan Joyce’s annual remuneration came in at US$ 8.5 million, including US$ 4.9 million in shares.

It is reported that Visa Inc is in negotiations to buy out its European sister company, Visa Europe, for US$ 20.9 billion. Strangely, the asking price is more than double the US-based company’s valuation envisioned only four months ago!

For the first time in three years, the UK recorded a fiscal surplus in July – US$ 2.0 billion – compared to a US$ 156 million deficit this time last year. Income tax revenues at US$ 28.9 billion were at their highest level in 18 years but the country’s debt level – at 87% of GDP – is still a worry.

One of the fastest growing countries in the eurozone is Spain, with recorded growth levels of 0.9% and 1.0% over the past two quarters – and similar forecasts for the remainder of 2015. The main drivers behind this turnaround have been an increase in tourism, a jump in exports and a boost in consumer confidence, which has encouraged more spending. However, the country still has an unacceptably high unemployment rate of 22.4%, eurozone’s second highest to Greece.

It is interesting to look at the worrying levels of public debt among certain countries. The current US national debt stands at a whopping US$ 18.1 trillion and it has a public debt of 74% to GDP. This compares favourably to the likes of Greece, France and the UK where the levels are at 177%, 98% and 87% respectively. One of the conditions of the Maastricht accord, to join the common currency was that a country’s ratio was no higher than 60%! Growth will help in improving debt levels but with China on the edge of a precipice, that seems unlikely in the short-term.

Since 11 August, when Chinese authorities allowed its currency to float more freely, the global equity markets have shed a staggering US$ 8 trillion in value, as the yuan has weakened. The world is faced with uncertain, and probably erroneous, economic data emanating from China, a bearish stock market (despite massive government support), dwindling consumer confidence and a shadow banking system that could implode with dire consequences. Recent forays into both the currency and equity markets by Premier Li Keqiang have resulted in abject failure and the contagion from impairments in the country’s growth rates will have very significant repercussions for the global economy.

Just as major questions are being asked about the veracity of China’s official figures, US Q2 data has been upgraded with GDP growth amended from 2.3% to 3.7%. Other statistics also point to an upward trend with consumer spending growing by 3.1%, the same percentage increase in non-residential structures and 7.8% in residential construction. However, it is the events in China that will dictate how the global economy fares in the coming months. Since the Chinese statisticians have been rumbled, it is time that the rest of the world is given the country’s true economic picture – One Way Or Another.

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