Welcome To Our World!

Posted on August 27, 2015 by howesdubai

florence-2Narendra Modi became the first Indian prime minister in 37 years to visit the country and during his 2-day visit, plans were raised for a US$ 75 billion fund for infrastructure projects in India. Modi is particularly keen to see the likes of roads, railways, airports and sea terminals being modernised quicker than they are now. The country, having slipped behind China, wants to regain its position as UAE’s leading trading partner, by a 60% expansion in bilateral trade over the next five years.

Naresco General Contracting has been awarded the US$ 82 million Danube contract to build both its Glitz 1 and 2 projects. Located at Studio City, the development comprises 300 apartments, ranging from studio to 3-bedroom. Both phases have been sold out, whilst earthworks on Glitz 3 have started.

A 12k sq ft Spinneys supermarket became the first of 70 shops to open for business on Nakheel’s Golden Mile Galleria on Palm Jumeirah. The complex will also have a medical centre, gym and numerous dining outlets.

Next month, Majid Al Futtaim will open its 12th regional City Centre – a 325k sq ft mall in the Me’aisem area of International Media Production Zone. The one-level mall has 23.9k sq mt of gross leasable space.

With demand at 32.0%, outstripping a 4.8% supply, it was no surprise to see July occupancy up across the board. 4 and 5-star hotels reported a 26% year on year rise to 57.6%. Although average daily rate fell 2.9% to US$ 167, revenue per available room surged 22.4% to US$ 96. Meanwhile, JW Marriott Marquis Dubai, with 1.6k rooms, reported a 21% hike in H1 revenue and had 80%+ occupancy in the period leading into Ramadan.

As the inflow of Russian tourists dries up, the hospitality sector has been helped by a 25% H1 jump in the number of Chinese visitors to 241k. Now the icing on the cake is that the emirate has beaten off international competition to host the International Dragon Award (IDA) Annual Meeting that will see 6k Chinese finance professionals descend on these shores next week.

The medical tourist sector continues to expand with Q1 figures of 119k patients, bringing in revenue of US$ 212 million – a near fivefold increase on the total 2012 revenue of US$ 178 million.

Meydan Sobha has taken to the road to sell property in its upcoming Mohammed Bin Rashid Al Maktoum City – District One. Its first stop was London where 200 invitees were shown details of the luxurious US$ 14 million mansions and villas up for sale; similar events are lined up across Europe and Asia.

Sweden Island is the latest development on Dubai’s The World project, with the launch this week of villas, at a starting price of US$ 15 million. The 21.2k sq ft residences, furnished by Bentley Homes, are scheduled for completion by Q4 2016.

Emirates has announced that it will fly to Panama, as from 01 February 2016. The 17 hour 35 minute flight will be the longest non-stop commercial flight in the world, using a Boeing 777-200LR aircraft, with a 266-passenger and 15 tonne cargo load.

Drydocks World is a huge operation and this was reflected in the fact that this month its 9k employees had managed to service 40 vessels simultaneously.

Although no further details are available, Dow Chemicals has signed a storage and shipping contract with DP World. The deal will see US$ 1.5 billion worth of products being stored at JAFZA and a tenfold increase in the US company’s storage requirements.

June witnessed the UAE lose a staggering 649k mobile phone subscribers – as TRA numbers fell to 17.2 million. The main reason for this monthly decline – the country’s largest ever – was a massive exodus of 673k prepaid GSM phone subscribers.

Abraaj has boosted its investment portfolio in South America by acquiring a majority shareholding in Urbano, a leading courier and logistics company. The Dubai-based private equity firm has managed assets of over US$ 9 billion, including stakes in local companies such as Aramex, Spinneys and Air Arabia.

There are conflicting reports on whether Apple has been granted an exemption from UAE foreign ownership laws, as it plans to open its first ME outlet in Dubai. Located in the Mall of the Emirates, and with a floor area of 50k sq ft, this will be Apple’s largest-ever store.

It is reported that Dubai H1 sales of Mercedes Benz vehicles rose by more than 15%, bringing total turnover to 4k units. A good indicator of business confidence is the fact that overall 2015 UAE vehicle sales are expected to rise 5.6% to 1.88 million.

It was another torrid quarter for Arabtec, with reported losses of US$ 196 million – down from a US$ 28 million profit over Q2 2014. Dubai’s largest listed construction company also posted an 8.1% fall in year-on-year revenue to US$ 490 million, whilst direct costs jumped by 31.0%.

Emirates REIT reported a 2.8% rise in H1 profit to US$ 35 million, as net property income increased 6.4% to US$ 45 million and total assets 5.3% to US$ 626 million. The sharia-compliant real estate investment trust is spending US$ 57 million on building a facility, located within Damac’s Akoya, which will be leased out to Jebel Ali School.

Empower has announced that it has paid off two loan instalments earlier than planned  – US$ 40 million due to be repaid in December and US$ 13 million, due next February.

Among the interested parties to purchase Dunia – an Abu Dhabi-based partnership established in 2008 between five parties including Waha Capital, Mubadala and Al Moosa Enterprises – are reportedly UAE Exchange and Majid Al Futtaim. The finance company – with a paid up capital of US$ 160 million and H1 profits of US$ 33 million – is expected to sell for at least US$ 660 million.

The IMF has forecast a 1.2% growth in the country’s GDP over the next five years, from its 2015 estimate of 3.4% to 4.6% in 2020. However, it does warn that the Dubai GRE debt at US$ 143 billion is on the high side and caution should be exercised with the financing of some mega projects. This equates to 136% of Dubai’s GDP, with US$ 7 billion repayable this year.

It is interesting to note that this year’s budget sees some US$ 1.44 billion set aside for infrastructure whilst there will be huge expenditure on the likes of Dubai World Central (US$ 32 billion), Dubai International Airport – US$ 7.8 billion – and Mall of the World (US$ 6.8 billion), along with The Metro expansion and Meydan 1. Consequently, Dubai has passed a new law to encourage public-private partnerships to fund these new infrastructure projects.

Dubai South is the new name given to the upcoming city, with a forecast population of 1 million, that was formerly known as Dubai World Central. It will cover an area of some 145 sq km and will be home to the world’s largest airport – Al Maktoum International Airport – and Expo 2020. Meanwhile Parsons has won the tender for infrastructure design and construction supervision work for the 438-hectare Expo site. (The US company is also carrying out similar services for the Dubai Water Canal Project).

One thing is certain – VAT will be introduced to UAE but its implementation date is uncertain and will not start until 2017 at the earliest. Also on the horizon is corporate tax – currently limited to parts of the banking and oil sectors – that could be rolled out across the board. Three other areas that could be considered are payroll tax, a duty on new vehicle purchases and stamp duty. The recent abolition of some subsidies is a portent of things to come as the country has to try and balance a budget that has been badly hit by falling oil prices.

As the oil price plummets, the DFMI remains deep in bear territory, starting the week at 3985, to fall 7.0% to 3710 by Thursday (20 August). Bellwether stocks, Emaar Properties and Arabtec both lost ground dropping US$ 0.20 to US$ 1.84 and US$ 0.07 to US$ 0.54. Trading volumes on Thursday (20 August) continued to disappoint, but were slightly up on seven days earlier, with 307 million shares, valued at US$ 164 million, being exchanged (cf 219 million shares, for US$ 107 million, the previous Thursday). Some investors will surely see this as a buy opportunity as many return to the emirate.

Oil and gold have had a mixed week so that by Thursday, oil had nosedived 7.6% to US$ 46.41, whilst the yellow metal took advantage of the worrying global economy to close 2.0% up at US$ 1,140. However, YTD Brent crude is now 19.0% lower than its 01 January opening of US$ 57.33 whilst the yellow metal has fallen 3.9%. But this should be considered as a fool’s gold price; although the metal is looking at its biggest monthly gain this year, it will surely come under pressure again over the coming weeks.

Recent research indicates that the UK’s top 100 FTSE companies pay their chief executives 183 times more than their typical worker. In 2014, the median pay was US$ 6.1 million, with the average being US$ 7.8 million – 20.2% higher than five years earlier.

Low profitability and sluggish growth are the main drivers that have seen Twitter shares sink to an all-time low, The company, that has s never posted a quarterly profit, came to the market in November 2013, at US$ 26 .00 per share, and quickly surged to over US$ 70; this week the share is trading at US$ 25.92.

IndiGo has given Airbus its biggest ever-individual order – US$ 26.5 billion for 250 A320neo aircraft. India’s leading airline has almost 40% of the domestic market and this order will bring its fleet size to 530.

Qantas has finally turned the corner as it reports a 2015 profit of US$ 374 million, compared to a US$ 2.4 billion loss last year. In a plan to replace its aging 747 fleet, the airline will receive 8 787-9 Dreamliners by 2017, with an option for a further 45.

Canadian conglomerate, Brookfield Infrastructure, is in the process of buying out Asciano, Australia’s largest rail and freight operator, for US$ 6.5 billion. The company, which has a Dubai presence in major contractor, Brookfield Multiplex (a former Australian company), plans to list on Sydney’s ASX.

The mega mining company, Glencore has seen its share value more than halve in the past year and has had a whopping US$ 17.8 billion wiped off since May alone. Its latest results will not help the cause as it recorded a US$ 527 million H1 loss (compared to a US$ 2.5 billion profit for the comparative 2014 return).

It seems that despite the weak yen, Japan’s economy continues to struggle mainly because of weak exports, especially to China and the US, and flat consumer spending. Q2 growth data sees GDP 0.4% off from the previous quarter. The shrinking economy gives Prime Minister Shinzo Abe a headache and he will have to introduce major structural overhauls in the labour market and certain industry sectors.

As the Chinese and global economies slow, markets are becoming increasingly nervous. Even the Fed has stated that the US could suffer as a result of a Chinese “material slowdown”. The fact is that China has a crucial role in the global economy and when its economic indicators head south, then there are major negative repercussions for commodities, equity markets and currencies. The hope must be that the world’s second biggest economy does not fall into a recession.

Despite the possible knock-on effect of a Chinese slowdown, German authorities appear in a bullish mood expecting the country to build on its Q2 0.4% GDP growth.

In the UK, July’s CPI just returned to positive territory moving to 0.1% as the RPI remained flat at 1.0%. There is every chance that these indices will fall especially since oil prices continue to dip. With this data as a guideline, it is unlikely that interest rates, currently at historical lows of 0.5%, will rise until next year at the earliest.

It seems that once again politics has put one over economics as the eurozone consented to the latest Greek bailout deal – its third in five years. (Following the agreement, the first thing on the agenda of Prime Minister, Alexis Tsipras, was to call a September general election).

In return for new loans totalling US$ 95 billion, over the next three years, Greece has to introduce tax rises and public spending cuts. With these funds, the country’s debt currently stands at US$ 450 billion. It will be interesting to see how European Commission President Jean-Claude Juncker and the bumbling bureaucrats work out Greece’s repayment schedule and how long the process will take. Not In My Life.

 

On Wednesday, our first grandchild was born in Oslo.  She has arrived at a time when the world is beset by crashing stock markets, plunging commodity prices, a dysfunctional eurozone, a currency war, a scandal-ridden banking system and a potential global recession. “Floberry” – Welcome To Our World!

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Are You With Me?

Posted on August 16, 2015 by howesdubai

dubai-museum-2The most recent project to be announced by HH Sheikh Mohammed bin Rashid Al Maktoum is the Museum of the Future, to be located next to Emirates Towers on SZR. According to the new law, a US$ 2.72 innovation fee will be levied by certain government agencies to help support both the building and its projects. The museum will be the focal point of the emirate’s innovation drive and will showcase the latest inventions.

The Q2 Knight Frank’s Prime Global Cities Index indicates a  4.5% fall in prime property prices, as luxury realty fell by 2.5%. Out of the 35 markets surveyed, Dubai found itself ranked 30th, mainly because of its strong currency, falling Russian and eurozone demand, along with geo-political issues.

Figures from Hotstats confirm that the local hospitality sector is going through a rough patch, with 4 – 5 star properties returning 9% falls in June occupancy levels to 68.4%. All indicators headed south, with total revenue per available room, revenue per available room and gross operating profit per available room all falling by 16.1%, 2.1% (to US$ 206) and 36.4% (to US$ 62) respectively.

Starwood Hotels & Resorts Worldwide has endorsed an agreement with Dubai Properties to open four new mid-range properties by 2018. Under the Aloft and Element brands, this will add 816 rooms to Dubai’s portfolio and bring the number of its Starwood properties in the emirate to 19.

The Jumeirah Group has signed a management agreement with Oxley Holdings to operate the Jumeirah Kuala Lumpur Hotel – with 190 rooms and 273 residential apartments. The development will be completed by 2021.

Despite its Al Khail Avenue shopping precinct not due to open until 2018, Nakheel has announced that almost 60% of the retail space has already been pre-let. The latest agreement sees the Al Tayer Group taking 54k sq ft of the total 1.2 million sq ft available in the new mall which will have 350 shops.

It appears that Nakheel is also considering a second mall for its Al Furjan development – with the first having been fully leased even before its opening next year. This is part of the developer’s strategy to quadruple its retail portfolio, to 11 million sq ft, before 2020.

As the UAE has won the rights to host the 2019 Asian Cup, it now seems likely that a 60k-seater stadium will be built in Sports City, to host some of the matches.

Every week, it seems that the IMF has something different to recommend to the country. The latest includes a special 15% tax on vehicles, the introduction of some form of VAT and an extension of the existing 10% corporate tax to encompass most companies. If implemented, the world body estimates that an additional 7.4% of non-hydrocarbon domestic product could be generated.

The IMF also forecast this week that the UAE’s planned spending cuts would shave 1% off GDP growth each year until 2020. On the flip side, it expects that the country will benefit from the lifting of Iranian sanctions, with major fillips for the trade, tourism and realty sectors. It has been estimated that, in energy investment only, Iran will be spending US$ 167 billion.

Although still in positive territory, July’s Dubai Economy Tracker fell 0.9 points to 53.3 on the back of a strong currency and lower oil prices. However, the outlook is still bullish and business confidence remains at a relatively high level.

The emirate’s July inflation rate remained flat at 4.2%. However, with the recent deregulation of petrol prices, there may be a slight rise when August figures are available.

For the second year in a row, a LinkedIn survey indicates that the UAE is the global leader in attracting talent, with the four main source countries being India, UK, Pakistan and USA.

It has been confirmed that ‘Friends’ star, Jennifer Aniston, is being paid US$ 5 million to be the new face of Emirates. The newly married TV and film star follows on the heels of Nicole Kidman, who has recently signed a similar deal with Etihad.

Delta is cutting back on the number of its Dubai winter flights blaming the strong US dollar and “overcapacity operated by government-owned and subsidized airlines”. It is about time that such airlines stop finding inane excuses for poor performance and start providing what customers want – something they could learn well from the likes of Emirates.

A long outstanding dispute between Etisalat and the Pakistani government may soon be settled. In 2005, the UAE telecom provider purchased a 26% shareholding in Pakistan Telecommunication Corporation Limited for US$ 2.6 billion. The initial payment of US$ 1.8 billion was made but the balance has been left outstanding because of a dispute over certain properties to be handed to PTCL.

Dubai Customs announced a 7.1% increase in the number of processed transactions in H1 to 4.5 million, as it becomes the first fully smart Dubai-government entity. According to its Executive Director of Customs Development Division, Juma Al Ghaith, transactions can be delivered by channels, including smart phone apps, mobile, B2G and Dubai Trade, on a 24/7 basis.

There have been top-level management changes at Dubai Holding, with the appointments of Abdul Latif Al Mulla as Group CEO of Dubai Properties Group, Naaman Atta Allah as CEO for Dubai Properties and Ton van Vilsteren as CFO of the Jumeirah Group.

The world’s largest chemicals distributor, Brenntag has acquired a 51% shareholding in Jebel Ali-based distributor, Trychem, for an undisclosed sum.  Tristar, who bought the company from ENOC in 2013, have also announced a JV with the Greek company, Skeberis Plastics, to build a 350k sq ft warehouse, at a cost of US$ 20 million.

Dubai-based Abraaj Group extended its interest in Turkey by acquiring a share in the medical supplies manufacturer, Yu-Ce Medical – its second foray into the country. Earlier in the year, it bought a share in the mattress maker, BRN Sleep Products. To date, the private company has invested over US$ 900 million (equivalent to 10% of its portfolio) in 28 global healthcare companies.

Dubai-based Investra Investments, along with the Banyan Investment Group, has acquired the Comfort Suites in Newport, Kentucky, with plans for a US$ 2 million renovation. This is the fifth deal between the two companies over the past 18 months, bringing their total spend to US$ 80 million.

There were disappointing results for four Dubai-based companies. Amlak Finance recorded an 87.1% fall in Q2 profit to US$ 2.0 million. Union Properties posted a 95.3% plummet in quarterly profit to US$ 5 million, as property management and sales revenue fell 59.5% to US$ 5 million. Drake & Scull released Q2 results indicating a 60.2% drop in profit to US$ 2.8 million, despite revenue jumping 18.2% to US$ 354 million. Meanwhile, Shuaa Capital reported falls in both Q2 revenue and profit – by 12.9% to US$ 14 million and 62.9% to US$ 463k respectively.

Troubled Gulf Navigation has seen a 72.5% jump in H1 profits to US$ 3.5 million, on the back of a 14.5% hike in revenue to US$ 19 million. It also announced that it had reached a settlement with one of its major creditors, Nordic American Tankers Limited.

Amanat Holdings reported a US$ 400k quarterly profit and that it was planning to buy a 35% shareholding in the Saudi healthcare company, Sukoon International. In May, it had acquired a 4.14% share in Abu Dhabi’s Al Noor Hospitals Group for US$ 68 million.

Since it is still in the pre-opening stage, it is no surprise to see Dubai Parks and Resorts post an US$ 8 million Q2 loss. The leisure complex is over 50% completed and still on track to open in Q4 next year, with over US$ 1 billion having already been spent on the project.

The 39-year old Emirates Investment Bank posted a 21.1% reduction in H1 profits to US$ 7.6 million, as Q2 profit was 58.1% down to US$ 1.8 million. Whilst deposits remained flat at US$ 816 million, total assets rose 9.0% to US$ 2.3 billion.

The DFMI started the week at 4123 and had fallen 3.3% by Thursday (13 August) to close at 3985. Bellwether stocks, Emaar Properties and Arabtec both lost ground dropping US$ 0.12 to US$ 2.04 and US$ 0.02 to US$ 0.61. Trading volumes on Thursday (13 August) continued to disappoint, edging lower compared to seven days earlier, with 219 million shares, valued at US$ 107 million, being exchanged (cf 253 million shares, for US$ 150 million, the previous Thursday).

Oil and gold have reversed recent weekly falls and were both up by Thursday – 1.4% to US$ 50.24 and 3.0% to US$ 1,118 respectively. However, YTD Brent crude is 12.4% lower from its 01 January opening of US$ 57.33 whilst he yellow metal has fallen 5.7%.

Two drug companies, Pfizer and Flynn Pharma, have been accused by the UK’s Competition and Markets Authority of pushing up the price of phenytoin sodium capsules, an epilepsy treatment. It is alleged that the former sold the drug to Flynn at between 8-17 times its historic price who then sold it on to customers, at over 25 times the price previously charged by Pfizer. Consequently, the NHS saw its annual bill surge US$ 3.6 million to over US$ 77 million.

FIFA has apparently instigated another internal enquiry into alleged corruption within the footballing charity. It is hoped that the enquiry, to be undertaken by US legal firm, Quinn Emanuel Urquhart & Sullivan, will have better success – and a larger circulation – than the previous US attorneys’ report authored by Michael Garcia of Kirkland & Ellis. In May, nine FIFA officials and five marketing executives were implicated and indicted on taking more than US$150 million in bribes and kickbacks for media and marketing rights.

Charity is in the UK news for all the wrong reasons, including the latest potential scandal involving “Kids Company”, which was closed down last week. The Charity Commission is investigating allegations of mismanagement and “inappropriate spending”, with reports that, for example, MD, Camila Batmanghelidjh, had a personal chauffeur who received financial support for his daughter at a private school, with fees of US$ 47k. In addition, the vice-chairman, Richard Handover, had two of his children on the payroll, receiving in total US$ 78k.

Earlier in the year, it was reported that of the leading 150 organisations surveyed, at least 32 UK charity executives were paid over US$ 312k, with a median level of US$ 257k. When giving to charity, it is always a wise move to check where the money is being spent and how much goes on “administration”.

With less than a year to the Olympics, Brazil’s economic woes worsen. The world’s 7th largest economy saw its inflation rate of 9.6% hit a 12-year high – well above the government’s target of 4.5%; in a bid to reduce rising prices, the Central Bank has raised interest rates to 14.25%. The economy is set to contract by 1.5% this year, as the Chinese slowdown takes effect, whilst the unemployment level is at its highest level in over five years – slowing moving up with 1.9 million (or 6.9%) out of work in June. To make matters worse, the government is embroiled in numerous graft scandals, involving some of the country’s most powerful politicians – including current and former presidents, Dilma Rousseff and Luiz Inacio Lula Da Silva – and major companies, such as Petrobas and construction giant Odebrecht.

To add to China’s current economic malaise, its July inflation rate of 1.4% is still a long way from the government’s target of 3.0%. Furthermore, with 8%+ falls in both July exports and imports, its producer prices, falling again for the 40th straight month, (and 5.4% lower than a year ago), along with July Caixin’s Purchasing Managers’ Index figure of 47.8 pointed to the urgent need for further measures to boost the flagging economy.

The yuan started Monday at 6.21 to the US$ and, by close on Thursday, was 3.1% lower at 6.40, following three days of currency intervention by the Central Bank. However some action was urgently required particularly when the currency had surged 13.5% over the past 12 months and when compared to Japan, a major export competitor, where the yen was over 60% lower than it was three years earlier.

This triple dip devaluation caught the market unawares and, as it has given a boost to the greenback, there is a possibility that there may now be a delay in the Fed’s decision to hike up interest rates. There is also every chance that a new currency war will occur, as countries take to defending their own economies.

Despite some good economic news emanating from the US, national debt now stands at US$ 18.1 trillion – just below the current debt limit. Once more, it will not be long before the government will stop operating as Congress bickers and forces President Obama to accept some of their legislative goals, prior to raising the debt limit.

Following a 2.2% Q1 contraction, the recession in Russia has deepened as Q2 sees its GDP fall by 4.6%, compared to the same period in 2014. The main drivers for this remain unchanged – international sanctions, low oil prices and a falling rouble.

The German Halle Institute for Economic Research has estimated that the country has saved a staggering US$ 109 billion, equivalent to 3% of GDP, in lower borrowing costs, as a result of the Greek crisis – with investors using Germany for a safe haven.

Meanwhile, a third bailout, for US$ 95 billion, was being discussed in detail this week, with Germany having reservations about Greek debt sustainability and the IMF role; the German Chancellor is keen to force through privatisation plans and pension reforms. The IMF is highly sceptical of the deal indicating that the country’s public debt was “highly unsustainable”; the global body estimated that it would take at least 30 years for all its debt to be cleared and there maybe the need for “deep upfront haircuts”. Prime Minister Alexis Tsipras will be hoping for an affirmative response from both Angela Merkel and Christine Lagarde to the question – Are You With Me?

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Those Were The Days

Posted on August 9, 2015 by howesdubai

bill-clintonThe big story of the week is the proposed Meydan One. Being Dubai, the 3,671k sq mt development will include three world firsts – tallest residential tower (at 711 mt), largest indoor ski slope (three times bigger than the current Ski Dubai) and the largest dancing water fountain at 420 mt long. The project will be home to 78k residents and will include the usual leisure, residential and hospitality facilities, along with a 60k capacity civic plaza, a 9 km walkway, a 4km canal and a 100-berth marina. Despite being located between Meydan and Al Khail Road, it will also boast a 300 mt beach. 

HH Sheikh Mohammed bin Rashid Al Maktoum has approved the construction of 1.4k villas in Wadi Safa (Nad Al Sheba) and 1.0k in Al Tai (Al Aweer). Eligible citizens will be entitled to a block of land, measuring 12k sq ft, and both communities will be fully serviced. 

Dubai Land Department indicated that in H1, 19.9k investors spent over US$ 14.4 billion in real estate transactions, equating to US$ 728k per transaction. Of that total, 23.6% were either Indian or UK nationals spending US$ 2.1 billion and US$ 1.3 billion respectively; however Emiratis were the leading buyers purchasing property, valued at US$ 3.1 billion.

Landmark Zenath Group is expecting to open four 4-star properties over the next two years – two, totalling 370 keys – in Dubai Investment Park, one in the Mazaya Centre on SZR (185 rooms) and the fourth, a 175-room hotel in Deira. The Dubai-based developer will invest US$ 27 million.

Local operator, Rotana, is planning to open its 16th Dubai property in Dubai – a 598-key, 5-star hotel with serviced apartments – on SZR. This will bring its portfolio of rooms in the emirate to 4.6k.

DWC has reportedly signed an agreement with Emaar for a Golf District project, encompassing an area of 1.4 hectares. Work on the integrated urban centre and golf destination will start in 2017 and will include a golf course community and several hotels.

There is no doubt that the local hospitality sector is under pressure on several fronts, including the strong dollar, falling oil prices and a marked decline in the number of Russian visitors. It is not surprising then to see numerous international hotel chains recording disappointing regional results. For example, IHG had a 9.0% increase in H1 global operating profit to US$ 337 million, yet reported weaker UAE business – without giving any further details – but a 9.9% growth in Saudi Arabia. Starwood, operator of the Westin and Sheraton brands, posted falls in MENA average room rates to US$ 184 (down 6.2%) and revenue per available room to US$ 115 (minus 8.25%). Accor also announced weaker figures for the region, as its H1 global profits rose 68% to US$ 100 million.

The decline in Russian tourists is also the main reason for a slowdown in luxury retail sales. JLL’s latest report indicated that this was the main driver for the recent slowdown in annual rental growth levels and retail sales. Over the next four months, extensions to MoE, Ibn Battuta and Dragon Mart will see an additional 194k sq mt of gross leasable area added to Dubai’s burgeoning retail sector.

Emirates REIT will finance and build a new Jebel Ali School within Damac’s Akoya project. The Sharjah-based sharia-compliant trust has bought the freehold land for US$ 27 million and will build the facility for an estimated US$ 30 million. The school will then take a 26-year lease on the property. (The company’s H1 profit rose by 7.9% to US$ 19 million).

The latest IMF forecast puts UAE 2015 growth at 3.2%, slightly down on last year’s 3.6% but still one of the best performing economies in the ME. However, the world body estimates that, because of the fall in oil prices, the current balance surplus to GDP will contract from 12.1%, last year, to 5.3% in 2015, whilst average general price inflation will be 2.1% – marginally lower than this year’s 2.3%.

According to the latest Nielsen Report, UAE consumer confidence had its biggest quarterly drop in six years, as it fell 7 points to 108. Nevertheless, it still remains the best in the region but there are increasing worries about the effect of government spending cuts and job security, in the wake of falling oil prices.

Emirates NBD UAE Purchasing Managers’ Index, a leading indicator on the health of the economy, recorded a bounce back in July with a 1.1 point month on month improvement to 55.8.

It seems that Arabtec is still in discussions with Egyptian authorities about the implementation of phase 1 for the construction of one million homes, at a cost of US$ 40 billion. 

For six years, ENOC (with 54% of the shares) have been trying to buy out the remaining Dragon Oil minority investors and have now finally succeeded, with their latest US$ 12.51 per share offer – 6.7% higher than their last attempt in June. Baillie Gifford held 7% of the equity and has seen the value of its 35.5 million shares jump 58.8% to US$ 444 million since April, just before Enoc’s latest buyout offer.

Dubai Investments Park has seen a 9% increase in the number of companies to 4.5k in the first five months of 2015. DIP is home to 90k residents and 20 residential buildings, with the community boasting 6 schools, 3 hotels (with 8 more planned) and other facilities.

UAE’s second telecom operator, Du saw Q2 profits down 8.3% to US$ 137 million, on revenue of US$ 842 million, whilst its royalty payments to the government went up 18.7% to US$ 130 million. 

MAF announced that H1 profits were flat at US$ 490 million, as revenue rose 7.0% to US$ 3.7 billion, mainly because of a sluggish hospitality sector and higher promotional expenses. Its shopping malls recorded 97% occupancy as footfall rose 2% to 85 million.

The Dubai government owned Noor Bank released its H1 results, with a record 26% increase in profits to US$ 74 million, as total assets expanded 28.6% to US$ 10.2 billion.

H1 has seen Damac increase its Q2 profit by some 50% to US$ 381 million, as revenue rose12% to US$ 627 million. So far this year, the developer has booked a credible US$ 1.39 billion of new business. The good news was reflected in its share value which jumped limit up 15% to US$ 1.00 on the day and closed the week marginally down at US$ 0.99. 

Emaar also kept the markets happy with an impressive 15.7% increase in Q2 profits to US$ 322 million, although revenue was only up 4.2% to US$ 948 million. Over H1, both revenue and profit increased – by 13% to US$ 1.77 billion and 12% to US$ 602 million.

Following its disappointing start on the Cairo Bourse, Emaar Misr has announced the resignations of both its Chief Investment Officer, Ahmed Fathallah, and Chief Development Officer, Walid El-Hindi. The bourse has been notified that Mohammed Alabbar was now non-executive chairman – and no longer managing director. As of Sunday (02 August), its share value had fallen 9.2% to US$ 0.44 from its debut price on 05 July. Despite this dismal performance on the Cairo bourse, Emaar Misr reported a massive 283% surge in H1 profit to US$ 67 million, as revenue grew 56% to US$ 199 million. It also indicated that committed net sales were up 20% to US$ 498 million.

The DFMI started the week at 4143 and edged down 0.5% by Thursday (06 August) to close at 4123. Bellwether stocks, Emaar Properties rose 0.1% US$ 2.16 whilst Arabtec moved down US$ 0.02 to US$ 0.63. Trading volumes on Thursday were up compared to seven days earlier but still on the low side, with 253 million shares, valued at US$ 150 million, being exchanged (cf 140 million shares for US$ 95 million, the previous Thursday).

Both oil and gold have continued their on-going falls and, by Thursday, were both down on the week, a huge 8.7% to US$ 49.56 and 0.2% to US$ 1,085 respectively. Despite the low oil prices, OPEC continues to maintain high production levels with July averaging 32 million barrels daily. In a bid to defend market share in a volatile market, with falling demand, the cartel has ramped up production by 5.6% since November and now it is at its highest level since 2008 (when prices were at record highs of US$ 147).

On Wednesday, President Al Sisi officially opened the new Suez Canal. It will double capacity to 100 vessels and it is hoped that annual revenue will also double to US$ 11 billion – by 2023 – as well as cutting down shipping times. However, whether the US$ 8.2 billion spent is a wise investment remains to be seen – no doubt the capacity is there but whether the demand will match the supply is open to question. (Over the past 14 years, the annual rate of growth for global merchandise has only been estimated at 3.4%).

The highly successful German supermarket chain is planning a further 130 new stores in the UK and an increase in manpower by almost 30% to 35k. The US$ 960 million expansion plan will see the fast growing company continue to increase its market share from its current level of 5.3%. Such an enterprise would surely be a welcome addition to the Dubai retail sector! 

Airbus has returned with a 34% surge in H1 profits to US$ 1.63 billion, as group revenue was up 6.0% to US$ 31.4 billion. Its order book over the period rose 20.0% to 348 commercial aircraft. 

IAG, owners of BA, has posted a 40.0% jump in quarterly operating profits to US$ 576 million The international operator, which also owns Iberia and Vueling, is hoping to soon close the sale of Aer Lingus and is awaiting Ryan Air’s formal acceptance for its 30% share.

Despite disappointing global results, ME carriers recorded strong cargo of 15.3% growth in H1, with capacity expanding at the faster rate of 19.2%. IATA indicated that June witnessed global growth of only 1.2%, compared to the previous year, with many carriers reporting declines or, at best, flat returns.

The German car triumvirate – Mercedes, BMW and Audi – is buying Nokia’s Here mapping service for US$ 4 billion. Not one of the three will have a majority share and will not interfere in the everyday running of the company. 

With quarterly revenue up 7.2%, Dutch brewer, Heineken, posted a 81.0% surge in profit to US$ 1.25 billion, helped by a tax gain on the recent US$ 1.3 billion sale of its Mexican packaging facility for US$ 1.3 billion.

Apple pie is a staple American dessert but now Apple crumble could take over as shares in the world’s most valuable public company begin to tumble. It does seem incongruous that Apple has become a victim of its own success and will be unable to keep up its spectacular sales growth levels, as iPhone and smartwatch sales fail to meet market expectations. By Thursday, its share value had fallen 14.5% to US$ 115.05 from its 28 April high of US$ 134.54, equivalent to a staggering US$ 113 billion loss in market capitalisation.

Banks are still in the news. Tom Hayes, the so-called ringmaster behind the Libor rigging scandal, has been sentenced to 14 years in jail. The 35 year old worked for RBS, RBC and UBS before joining Citibank in 2009, where he earned US$ 5.5 million in nine months. It is not hard to believe that he has become a fall guy for an industry where many would have had their noses in the proverbial trough.

Although there was a 38% jump in Lloyds H1 profit to US$ 1.9 billion, it was well below market expectations. Furthermore, the bank has put an extra US$ 2.2 billion provision to deal with claims relating to misselling PPI, with its total provision now over a staggering US$ 21 billion. 

Last week, Barclays revealed that it was setting aside a further US$ 1.17 billion provision for PPI misselling, bringing its total to US$ 9.4 billion – still well behind that of Lloyds Bank. This week, HSBC has announced a US$ 15.6 billion profit, despite taking another provision of US$ 1 billion to cover its role in the forex rigging scandal. More hefty fines for the scandal-ridden banks are expected.

The UK government divested itself of 5.4% of its 78.3%  shareholding in RBS. With 333k shares sold at US$ 5.15, the exchequer has lost US$ 1.7 billion on its 2008 enforced purchase, when the shares were at US$ 7.83. The bank was then bailed out to safeguard the country’s financial security at the height of the GFC.

It seems that the Swiss Central Bank has taken a H1 US$ 51.4 billion hit as their currency continues to climb against the euro since abandoning its 4-year peg in January. Then it was capped at 1.20 but now 1.06 francs will buy 1 euro. Furthermore there has been a negative impact for the country’s exports (down 2.6% this year) with a decline in tourist numbers. Swiss consumer prices continue to go down with latest July figures indicating a 1.3% fall from the same month in 2014 – its largest ever fall since 1959.

The Australian unemployment rate is on the rise again with July’s 6.3% almost at a 13-year high and 0.2% higher than the June return.

China continues to spook the markets as July factory activity fell again amidst concern that 2015 will be more disappointing than expected. Hopes for an upturn in capital spending and exports have been dampened, whilst the stock market antics have been doing little for consumer confidence.

Recent returns from China continue to disappoint with the July Caixin’s Purchasing Managers’ Index posting a figure of 47.8 – down 1.6 points month on month. This key indicator shows that the contraction in the manufacturing sector is beginning to cause concern, as China’s growth loses traction. Last year’s figure of 7.4% was the weakest since 1990 and this year will probably dip again to end at around the 7.0% level.  

Indonesia has been dogged by sluggish growth and Q2’s figure of 4.67% was the country’s lowest quarterly return since 2009. Most indicators – including mining, trade and manufacturing – are heading south. President Widodo’s ambitious 5.2% target for this year seems a pipe dream as Indonesia, like other countries, is not being helped by China’s slowdown and falling commodity prices.  

The July eurozone inflation remains flat at 0.2% – still well down on the 2.0% target – showing that any growth has been, at best, modest. Unemployment continues at the relatively high 11.1% level, with 17.8 million out of work, but an improvement on last year’s comparative figure of 11.8%.

Greece is still negotiating with the troika for a third bailout agreement – this time for US$ 95 billion. Its next deadline payment is 20 August when it has to repay US$ 3.8 billion to the ECB. The country has already spent most of its recent US$ 7.8 billion bridging loan as it had to repay the IMF and the ECB US$ 2.2 billion and US$ 4.5 billion respectively.  It seems inevitable that there will have to be some form of debt relief (maybe as high as 45%) as the country will never have the capacity to repay its total outstanding balance of US$ 350 billion.  

The Athens bourse opened on Monday after a six-week hiatus and, by Thursday, the General Index was at 667, down 16.4% from its 26 June closure level, following the introduction of capital controls. The banks have been badly hit, with the Athens banking index now worth only 4% of its pre-GFC value in 2008. Worst hit of the four major banks is NBG that has seen its share value diminish by 98.6% over the same period, costing its poor shareholders over US$ 110 billion in the process. It is obvious that more than one bank will fail in the coming weeks, with Piraeus and Alpha looking vulnerable.

The Dubai-based GEMS Foundation works with former leaders such as Bill Clinton, Tony Blair and Bertie Ahern – a member of its Global Advisory Board. It has been reported that, over the past four years, Bill Clinton, in his role as honorary chairman of its charity foundation, has received payments, totalling US$ 5.6 million. In his recent tax return, the former US president also disclosed that he was paid US$ 500k for a 2013 speech in Abu Dhabi which was included in the US$ 139 million income the Clintons have earned since 2007. The ex-US president used to have an annual salary of US$ 400k salary – Those Were The Days!

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It Is Time To Say Goodbye

Posted on August 3, 2015 by howesdubai

platini-sarkozyA recent Central Bank report indicates that the government is planning a 4.1% cut in public spending to US$ 125.5 billion, in the wake of the massive fall in oil revenue. This is in sharp contrast to recent annual hikes of up to 10%. The main driver behind this is oil that has seen government revenue fall by 22%, leaving a US$ 8.4 billion shortfall. Part of the cuts will be in scaling back subsidies, by 34%, to US$ 3.5 billion, and 48% in grants to US$ 3.1 billion. It also seems likely that some form of taxation (maybe corporate, payroll or VAT) could be introduced in the not too distant future.

01 August will see the petrol subsidy abolished and pump prices up 24.4% to US$ 0.58 per litre, whilst diesel heads the other way down 29.0% to US$ 0.56. Moody’s has estimated that it will cost each of the country’s 9.6 million residents an annual average of US$ 387, equating to a total of US$ 3.7 billion boost for public funds; this has been based on the former annual subsidy rate of US$ 7.3 billion being discounted by 47% for “external” costs – such as congestion and environmental.

The Dubai government-owned Emirates National Oil Co has long been losing millions of dollars because of its requirement to sell fuel at well below market rates. With the subsidy now lifted, it is in a position to go ahead with expansion plans, both locally and regionally. (Ironically, ADNOC has indicated that it will use profits accrued from this to fund 125 new petrol stations).

According to a recent report by ADIB and MPM, the current stock of Dubai’s residential units is 479k, of which 6.7k came on stream in Q2. It also indicated that average rents fell by 3% – a sign of a softening market, with villa rents falling by some 5% over the past twelve months. However, some areas fared worse than others with JBR, SZR and Palm Jumeirah falling 7%, 7% and 6% respectively, with increases of between 6% – 12% witnessed in DSC, DSO and IMPZ.

This week the Land Department released figures that would seem to indicate that the slowdown in real estate is not as bad as most pundits would let us believe. In H1, there were 23k real estate transactions, totalling US$ 35.1 billion, which compares favourably to the whole of 2014’s value of US$ 59.4 billion. 50.4%, or US$ 17.7 billion, of deals were mortgage-related. Of that total, there were 15.4k buildings and units transactions, with a total value of US$ 5.5 billion, with the balance attributable to land sales. The 7.4k residential unit sales in H1 were worth US$ 3.5 billion.

The UAE/Greek Al Ghandi and Consolidated Contractors International (AGCC) has won a US$ 230 million Emaar contract for The Hills project. The four-tower project, two of which will be Vida-run hotel and serviced apartments and the other two residential, is located by Emirates Golf Club and will be handed over late next year.

One casualty of the property slowdown has been S&K Estate Agents, which has filed for liquidation. The company, with a staff of 80, could not generate enough revenue to cover its costs (including an office in Los Angeles), as competition became more intense, with increased undercutting in commission income.

The government-owned Wasl Hospitality and Leisure is planning to double its room portfolio to 10k, with plans to build 14 new hotels over the next five years. It will offer a mix of 3, 4 and 5 star properties with its flagship being the Wasl Tower, due to be built on the Toyota Building site on SZR. The 60-storey construction has been described as a vertical tower with a 5-star hotel, 100k sq ft of office space and apartments, along with landscaped park areas. In addition, the company will start work on three other projects which will bring its spend to US$ 10.9 billion; these will be the 6 million sq ft Nad Al Hammar Gardens, the 12-tower Al Wasl Park 1 and Al Wasl Gate.

The Ajman-based R Holding has awarded ANC Contracting the second phase of its US$ 136 million Palm Jumeirah property. The 4-star, 253-key hotel will be the first sharia compliant facility on the Palm.

Drake & Scull has won a US$ 59 million MEP contract for work for a Kuwaiti educational centre. The company has gained US$ 428 million of work in the first seven months of 2015.

The tender for the long-awaited construction of Dubai World Central’s staff village, to house up to 52k, should now be awarded in Q4.

DEWA has awarded a US$ 3 million, 6-month contract for a further 8.3 km of glass reinforced epoxy pipeline to connect Al Qudra with the MBR Solar Park.

The Dubai Health Authority estimated that public hospitals treated more than one million patients in 2014. Already in H1, it has issued licences for 171 health facilities and 6.2k professionals.

flydubai has refuted media reports that it is in negotiations to purchase a share in the Indian carrier SpiceJet. At the same time, it seems that Qatar Airways is in possible investment discussions with its owner, Ajay Singh.

Two of Dubai’s waterparks featured in the top seven best facilities in the world as per TripAdvisor Travellers’ Choice; Aquaventure, located at the Atlantis hotel, was ranked 5th with Wild Wadi coming in 7th position.

DP World started work this week on its new US$ 1.6 billion Jebel Ali container terminal – T4. Phase 1 will see the addition of 3.1 million 20’ equivalent units, bringing the port’s capacity to 22.1 million TEUs. T4 will be located on a reclaimed island that requires the building of a 3k mt causeway. In H1, DP terminals handled 7.9 million TEUs – a 6% growth.

A JV between Dubai Aluminium and Emirates Aluminium, Emirates Global Aluminium, has reported a 75% hike in net profit, as its gross revenue jumped 30% to US$ 5.4 billion. Although the metal price has fallen 24.0%, over the past year to US$ 0.76 / lb, the company is going ahead with an ambitious US$ 3 billion alumina refinery, as well spending US$ 5 billion to develop a Guinea bauxite mine.

With the acquisition of Schiphol’s cargo handling operations from Aviapartner, dnata now manages 26 such facilities worldwide, including 10 in Europe. The Dubai operator currently handles over 2 million tonnes of cargo globally.

In June, Dubai International recorded a 16.7% increase in passenger numbers to 5.9 million and, with a YTD total of 38.3 million (up 10.4%), is well on the way to meet its record target of 79 million by year end.

H1 saw a 3.34% rise in the number of people using Dubai public transport to 271.3 million. The Metro showed the biggest increase – 8.4% to 88.2 million – whilst taxis, buses and water transport carried 107.5 million, 66.5 million and 7.4 million respectively.

According to Dubai Trade, there was a 12.5% Q1 increase in the number of new companies to 9.3k, bringing the total number of registered entities to 106k.

It seems likely that the proposed RBS sale of its UAE business to the ADCB will not now go ahead. What the troubled bank (62% owned by the UK government) will do now is uncertain but two options would be to close the local operation and refer clients to BNP Paribas or hold an auction. It has already divested itself of much of its ME business and had sold US$ 817 million of loans to CBD three months ago.

The reporting season is in full swing with more companies releasing their latest results, including Nakheel with an impressive H1 53.0% surge in profits to US$ 771 million.

Following the accounting scandal of its Saudi affiliate company, Mobily, it was no surprise to see Etisalat Q2 profits sink 40.2% to US$ 409 million, although revenue was 6.0% higher at US$ 3.6 billion. Last month, the telecom operator warned that profits would be affected by the restatement of profits by Mobily (of which it has a 27.5% share).

The country’s largest sharia-compliant lender, Dubai Islamic Bank, surprised the market by posting impressive Q2 results – profit up 35% to US$ 246 million, with impairment losses falling 12.6% to US$ 28 million.

Courier company, Aramex posted a 14.6% increase in Q2 profit to US$ 25 million, as revenue rose by 5.7% to US$ 263 million, due mainly to a growth in online shopping.

Dubai Investments, 11.5% owned by the Investment Corp of Dubai, saw its Q2 profits sink 58.6% to US$ 61 million, attributable mainly to the one-off gain last year on the sale of Globalpharma for US$ 47 million. H1 profits were down 37.2% to US$ 138 million.

As its trading volume slumped dramatically in Q2, the Dubai Financial Market (79.6% owned by the Dubai government) reported a 47.6% slump in net profit to US$ 36 million, as revenue fell 40.0% to US$ 49 million. H1 trading volume has dropped significantly by 56.5% to US$ 28.1 billion, resulting in a 57.0% fall in profit to US$ 54 million.

The DFMI started the week at 4201 to close 1.4% down on Thursday (30 July) at 4143. Bellwether stocks were both down with Emaar Properties, lower by US$ 0.04 (to US$ 2.15), and Arabtec by US$ 0.03 (at US$ 0.65). Trading volumes on Thursday were very low with only 140 million shares, valued at US$ 95 million being exchanged. The market started the year on 3774, and this month on 4087, which has resulted in a YTD increase of 9.8% and rise of 1.4% in July.

Both oil and gold have continued their on-going falls and, by Thursday, were both down on the week, 3.1% to US$ 54.30 and 0.6% to US$ 1,087 respectively.  (YTD and monthly, the percentage falls have been 5.3% and a huge 13.9% for Brent crude, with 8.3% and 7.4% for the yellow metal). Notwithstanding an expected drawdown of US stock, there are still major concerns about a global oversupply and, with OPEC maintaining production levels at 30 million barrels, downward price pressure will continue.

Despite announcing a H1 25% profit increase to US$ 4.8 billion, Barclays is still paying for all its past wrongdoings. The bank has put aside a further US$ 1.56 billion provision – US$ 390 million for customer redress on packaged accounts and an additional US$ 1.17 billion relating to the PPI scandal, bringing that particular provision to US$ 9.4 billion. The bank has already announced 19k job cuts, with perhaps 30k more in the offing.

It has been a bad week for Fiat Chrysler who have been forced to recall 1.4 million vehicles in the US. Hackers have been able to remotely control cars from afar even when they are in operation, so new software is needed to rectify the problem.

Ford Motor Co reported a 44.0% hike in Q2 profits to US$ 1.9 billion as revenue fell slightly to US$ 37.3 billion – although unit sales were 2% higher at 1.7 million. Although the strong greenback saw the company take a US$ 2 billion hit in revenue, it is confident of attaining its 2015 profit target of around US$ 9 billion.

A week ago, Pearson surprised some analysts by selling the Financial Times to the Japanese media group Nikkei for US$ 1.4 billion; this week there are reports that it is planning to sell a 50% share in The Economist for an undisclosed amount, but probably in the region of US$ 620 million. The Italian investment firm Exor could be one of the interested parties. The UK company has indicated that it wants to focus on its prime business interest – education publishing.

Following Amazon’s Q2 results which saw revenue up 20% to US$ 23.2 billion, its share value (US$ 568) rocketed 19% higher giving the company a market cap of US$ 267 billion. Based on this value, it would make Amazon the most valuable retailer in the US, eclipsing Walmart’s market value of US$ 235 billion. The 20 year-old company has seen its shares up 55% so far in 2015, with its Chief Executive, Jeff Bezos now reportedly worth US$ 43 billion. (With his money, Mr Bezos could just afford to acquire the 5-year old Uber that seems to be too highly priced and ready for a major fall).

Rather bizarrely, it is reported that Google is interested in buying a vegetarian burger business for US$ 300 million. However, Impossible Foods has rejected their bid as being too low.

Low oil prices, together with a further US$ 10.8 billion charge relating to the Deepwater Horizon disaster, are the two main factors why BP recorded a 64% slump in Q2 profits, as revenue tumbled 35.5% to US$ 61.8 billion. It has slashed its annual capex to below US$ 20 billion, following a 13% cut earlier in the year.

On Monday, Shanghai’s CSI300 index fell 8.1% – its biggest drop in 8 years. On Thursday, it closed at 3777, still 9.5% up YTD and 65.0% over the past twelve months but a huge 29.8% down on its June high of 5380. There are still major concerns over the level of borrowing in this sector, along with the role of the grey market; however, the central government will never allow the market to collapse and the past month’s trading can be seen as a much needed market correction.

As discussions continue about the third Greek bailout of US$ 95 billion, the ECB has decided to leave its emergency credit lifeline unchanged. Earlier in the week, the Emergency Liquidity Assistance increased its funding by US$ 1 billion to US$ 99 billion.

UK’s economic growth is back on track and at levels last seen prior to the 2008 GFC. Q2 growth of 0.7% indicates that the annual forecast of a 2.6% expansion in GDP will be achieved. The 1% jump in industrial production is the biggest in five years, whilst higher wage growth and low inflation have been important drivers.

An Iranian government official has indicated that the country has total foreign reserves of US$ 125 billion, with 80% held by the Central Bank, 15% by the National Development Fund and the balance by government entities and private companies. Furthermore, according to US officials a further US$ 100 billion is still blocked overseas by sanctions.

The Iranian government has announced ambitious US$ 85 billion investment plans to reboot its petrochemical industry and ramp up production by 30% to 60 million tonnes over the next six months. It is estimated that when the country is working at full capacity it will be producing 180 million tonnes per annum. Along with Russia, Iran has one of the largest gas reserves in the world and will be able to export 75% of its petrochemicals production.

It seems incongruous that a former protégé of disgraced FIFA president Sepp Blatter is reportedly standing to replace him. UEFA head, Michel Platini, has been on the FIFA executive committee for 13 years and surely association must have tainted his credentials, at least. It is obvious that a new independent leadership, untainted by past practices and corruption, is required. For the Frenchman and the rest of the senior executives, who apparently have done little to improve corporate governance, transparency and accountability at the scandal-ridden organisation, It Is Time To Say Goodbye.

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Nowhere Man

Posted on August 3, 2015 by howesdubai

sepp-blatter-moneyAlthough local petrol prices, at US$ 0.47 per litre, are the highest in the GCC, they still have to go a long way to match the likes of Hong Kong, Norway, Netherlands and the UK, where they stand at between US$ 1.81 and US$ 1.96.  However, things are going to change on 01 August, as the long-standing oil subsidy is being abolished. According to the International Energy Agency, the cost of UAE government subsidies for oil, gas and electricity equates to 5.6% of the country’s GDP, or US$ 2.4k for every resident, every year. One estimate for the cost of the fuel subsidy would be in the region of US$ 1 billion. Assuming that there are two million vehicles in the country, the average contribution per vehicle to recoup this amount would be US$ 500 per annum.

Another week sees yet another real estate report – this time from Bayut.com. Their H1 study is one of the first to indicate that the Dubai property slowdown has been “exaggerated and inflated”, pointing to a 5% – 10% correction. Also it brought some realism to the supply factor this year, with estimates of some 15k units, compared to recent reports of up to 30k, as well as forecasting an upturn in 2016.

In 1982, Damac started business in the catering business and only entered the property sector 20 years later. Danube started in in 1993, as a small trading company, before becoming the largest building materials company in the region but only became a property developer in 2014. Now the supermarket group, Lulu, is planning to open a 365-room hotel, to be operated by the German group, Steignenberger. The 5-star hotel will be located in Business Bay.

Emaar Malls Group goes from strength to strength as it announces a 37% growth in H1 profit to US$ 230 million, with revenue up 16% to US$ 398 million. Q2 contributed US$ 112 million to the bottom line – up 43.0% on Q2 2014. Foot traffic for H1 was 11.0% higher, with more than 62 million visitors. However, there was little movement with tenant sales, which remained flat at USS 2.6 billion. 

Sister company, Emaar Properties is winding down its Indian JV with MGF Development. In 2005, the Dubai developer invested US$ 1.5 billion and it is reported that there are currently 55 projects in progress, a land bank of 3k hectares and saleable land of some 6 million sq mt – all with a total estimated value of US$ 5 billion.

IFA Hotelier Investments is to build a US$ 200 million, 600 sq mt housing complex to accommodate 10k hospitality staff. The project, which will include indoors sports facilities, will be completed by September 2016.

Habtoor Leighton Group has won a US$ 72 million contract from Abu Dhabi’s Khalifa Industrial Zone for infrastructure work on a 52 sq km site. The project, including road, water and sewage work, should be completed by March 2017.

The skewed ratio 44:56 of 5-star hotels to other properties is fast changing with JLL reporting that 69% of new rooms this year will be 4-star or less. By the end of 2015, the portfolio will rise to over 69k rooms with the increasing trend for budget hotels carrying on in the coming years.

Over the Ramadan period, occupancy rates continued to disappoint, dropping 15.4% to 63.0%, with daily rates and revenue per available room heading south by 8.6% to US$ 161 and 3.3% to US$ 60. With growth in supply up 4.6%, and demand falling 11.6%, this was always going to be a difficult time for Dubai’s hospitality sector.

Following its recent sale of StandardAero, Dubai Aerospace Enterprise has taken the opportunity to fully repay a US$ 705 million loan. The company, whose main shareholder is the Investment Corporation of Dubai, has a leasing portfolio of 63 planes, with a value of US$ 3.6 billion. 

Last week, three other local banks – NBD, Emirates Islamic and Mashreq – returned more impressive results but Commercial Bank of Dubai will be happy with a 4.9% hike in H1 profits to US$ 166 million. The bank recorded a H1 18.2% rise in loans and advances to US$ 10.3 billion, with new loans totalling US$ 3.0 billion. 

It can only be Dubai when it is announced that, within seven years, Al Maktoum International Airport will increase its capacity from its current level of 5k to becoming the world’s largest facility, managing 120 million passengers. Meanwhile, the existing airport is undergoing a US$ 32 billion expansion, so as to cope with traffic expected to hit the 100 million mark.

The latest JOC report once again ranked Jebel Ali Port as the most productive port in the world, as it handled 131 moves per ship – 10.1% better than the previous year. 

Arcadis has listed the UAE as the 8th best global retail market, with Hong Kong, Singapore and the US in the top 3. Major plus points were the country’s advanced infrastructure and its vibrant economic environment.

MAZ Gulf has signed a distribution agreement with WaterMicronWorld to set up an assembly plant in Jebel Ali, for a cheaper and more productive water generation system. The Dubai-based company is confident that it will be a great boon for countries, with major water shortages, and will prove to be a profitable venture.

The DFMI rose 17 points starting the shortened week on Monday at 4184 to close on Thursday (23 July) at 4201. Bellwether stocks were mixed with Emaar Properties up US$ 0.03 (to US$ 2.19) and Arabtec down US$ 0.01 (at US$ 0.68). 

Both oil and gold have continued their on-going falls and, by Thursday, were both down on the week, 2.0% to US$ 56.06 and a worrying 4.6% to US$ 1,094 respectively.  (Over the past year, the falls have been 15.7% and 20.2%). Oil prices slipped as Iran and six world powers finalised a nuclear deal. In the short-term, Iran could add 200k barrels in exports which will only exacerbate the current daily surplus of an estimated 2.6 million barrels.

As the US economic recovery gathers pace, the Fed’s Janet Yellen has indicated that there will be a rate increase this year. This will only see the greenback becoming even stronger – and with that comes more pressure on the oil price as most countries will have to pay more for oil as their currencies weaken to the US$.

This week saw three mega IT companies announce mixed results. Having taken a US$ 7.5 billion impairment charge, relating to its Nokia acquisition, it was no surprise to see Microsoft with a US$ 3.2 billion loss, compared to a US$ 4.6 billion profit for the corresponding period in 2014. This effectively takes the tech firm out of the smartphone sector, now dominated by Samsung and Apple.

On the other hand, both Apple and Google returned impressive results. The former, despite a continuing fall in sales of its its iPads (18% to 10.9 million units), reported a Q2 profit of US$ 10.7 billion, as a result of impressive sales of its iPhones (up 35% to US$ 36.4 billion)), Mac PCs and even the new Apple Watch. Quarterly revenue was up 32.6% to US$ 49.6 billion, compared to the same quarter last year.

Having reported a 11.1% increase in Q2 revenue to US$ 17.7 billion and net profit rising 17.3% to US$ 4.8 billion, Google saw its share value jump 16.3% (equivalent to US$ 65.0 billion) which equates to a market capitalisation of US$ 471.5 billion. It is fast catching up with Apple’s market cap of US$ 740 billion, especially when watch time in YouTube jumped 60% over the quarter and its video service has the most viewers, aged between 18 -49, in the US.

Another tech savvy company in the news was PayPal which was acquired by eBay in 2002 for US$ 1.5 billion. Last week, the company was spun off as a separate entity on the Nasdaq exchange and, at Monday’s close, was valued at US$ 49 billion! eBay Shareholders received one share in PayPal for every share they held. Last year, PayPal processed payments to the value of US$ 235 billion, generating over US$ 8 billion in revenue.

Toshiba, the 140-year old Japanese maker of nuclear reactors, appliances and chips, has seen mass resignations following the discovery of an accounting scandal. Over the past six years, the company has been overstating its profits by US$ 1.2 billion, by delaying booking losses in order to meet unrealistic profit targets.

Boeing recorded a 22.7% fall in Q2 profit to US$ 1.11 billion as it took a US$ 536 million charge relating to a fuel system problem on its military KC-46A tanker plane. However the news was better from its commercial division as revenue jumped 11% to US$ 24.5 billion, with airplane deliveries rising to 197. This week, it also secured a US$ 10.0 billion order from FedEx for 50 767Fs.

Despite opposition from his own party, prime minister, Alexis Tsipras managed to pass a bill approving drastic changes to the country’s tax, pension and labour laws. These were part of the conditions that the troika had demanded before further negotiations on a third bailout could continue. Despite the IMF indicating that Greece needed debt relief, the EU will see that this will not happen. That being the case, Greece should use this time to prepare for an orderly exit from the eurozone sooner rather than waiting for the problem to deteriorate even further.

New Zealand has cut its borrowing rate by 25 basis points to 3.0%, as the country continues to face slower economic growth and low inflation. Compared to other countries, this rate is still on the high side and it is highly likely that more cuts are in the offing basically to support the country’s flagging exports. 

Coincidentally, several companies associated with the tarnished and scandal-ridden FIFA have had disappointing financial results.  Last week, two major sponsors of FIFA, Coca Cola and MacDonald’s, announced Q2 profit falls – 6.8% to US$ 3.4 billion and 16.0% to US$ 1.74 billion respectively. This week, Hyundai reported a 23.8% plunge in quarterly profits to US$ 1.55 billion, blaming the strengthening won and increased competition. These three companies, along with other sponsors, are now demanding urgent reform of the world football body. This can only be done when its head – and his cronies – depart the organisation. In late May, Sepp Blatter announced that “I am now president of everybody” – now he is nothing more than a Nowhere Man.

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The Last Time!

Posted on August 2, 2015 by howesdubai

QE2_dubaiWith an expected opening later in the year, Al Habtoor City has started a major recruitment campaign for its mega hospitality and residential project. The multi-use development, located on SZR, includes three 5-star hotels, three residential towers, retail and restaurant outlets, tennis academy and a choreographed water-themed theatre.

Three Dubai banks returned impressive Q2 figures this week. Emirates NBD, 55.6% owned by the Investment Corporation of Dubai, reported a 26.0% hike in Q2 profits to US$ 450 million. Although the dip in oil prices has had a negative knock-on effect in the private sector, the bank has been able to reduce its impairment charges by 24%, as well to increase both its loan portfolio (up 6.0% to US$ 69.8 billion) and fee income.

Its sister bank, Emirates Islamic saw a massive 97% surge in H1 profit to US$ 122 million, on a 33% rise in total operating income to US$ 332 million.

Meanwhile the emirate’s 3rd biggest lender, Mashreq, reported a 10.9% increase in its Q2 profit to US$ 177 million bringing its H1 profit to US$ 354 million. The main profit drivers were a 12.7% hike in net interest and a 3.6% rise in fees and commission.

Since the November 2008 US$ 100 million purchase of the QE2 by Istithmar, the vessel has been docked in Dubai, gathering more than dust. Over the years, there have been plans to renovate the 48-year old liner to a luxury floating hotel but nothing has resulted. Now it seems that the Scottish government is backing a campaign for its return to its country of origin.

There is no doubt that Arabtec is going through a time of great changes, in order to return the construction company to profitability. This week has seen the resignations of three senior staff – CFO, Iyad Abdalrahim, Yazan Hatamleh, Chief Human Resources Officer, and Wassel Al Fakhoury, General Counsel. In May, Mohamed Thani Murshed Ghannam Al Rumaithi replaced Khadem Abdulla Al Qubais as Chairman.

WCT, the Malaysian contracting company with a JV agreement with Arabtec to build Meydan, won its long standing dispute. The company was awarded a US$ 1.25 billion, 2-year contract in 2007 to build the racecourse by October 2009. In December 2008, the contract was cancelled and a month later a claim was lodged with the Dubai International Arbitration Centre. This week the ruling went the Malaysian way, with a final settlement of US$ 300 million and costs of almost US$ 10 million. (Arabtec had withdrawn from legal action in February 2013).

With Q1 imports at US$ 55.9 billion, reexports of US$ 25.6 billion and exports reaching US$ 8.7 billion, Dubai’s Q1 foreign trade balance rose 2.5% to US$ 90.2 billion. The emirate’s four main trading partners were China (US$ 12.8 billion), India (US$ 6.7 billion), USA (US$ 5.3 billion) and Saudi Arabia (US$ 4.7 billion).

The DIFC legal system is gaining traction with H1 claims showing a massive 447% jump in value to US$ 618.5 million; the value of each individual claim also rose – up 490% to US$ 29.0 million.

Following last week’s US$ 500 million Noor Bank sukuk, the value of the sharia-compliant bonds on Dubai’s two bourses – Nasdaq and DFM – has reached a total of US$ 36.7 billion. This fivefold increase, over the past two years, has seen Dubai now surpass the likes of Kuala Lumpur (US$ 26.6 billion), Dublin (US$ 25.7 billion) and London (US$ 25.1 billion) as the leading global sukuk financial centre.

Subsequent to its Sunday launch on the Cairo bourse, Emaar Misr shares fell by 14% on Tuesday leading to a brief suspension, before closing 9.0% down. Consequently, there have been reports that the company has offered to buy back its own shares to stem any further declines.

The DFMI jumped 4.2%, starting on Sunday at 4,017 to close the shortened week on Wednesday (15 July) at 4184. Bellwether stocks headed north with both Emaar Properties and Arabtec up US$ 0.07 (to US$ 2.16) and US$ 0.01 (to US$ 0.69) respectively. 

The week that two major sponsors, McDonald’s and Coca Cola, have called for major reforms  within FIFA, their profits have taken a tumble. The 75-year old burger chain has reported a 16.0% fall in Q2 profit to US$ 1.74 billion, as revenues continue to sink by 10.7% to US$ 12.4 billion.  Coca Cola is expecting another quarterly profit fall – this time, 6.8% to US$ 3.4 billion. It appears that these two companies want to see a healthier FIFA, whilst some of its customers just want to eat healthier.

Both oil and gold have continued their on-going falls and, by Thursday, were both down 3.0% to US$ 57.20 and 1.0% to US$ 1,147 respectively. Oil prices slipped as Iran and six world powers finalised a nuclear deal. In the short-term, Iran could add 200k barrels in exports which will only exacerbate the current daily surplus of an estimated 2.6 million barrels.

One casualty of the low oil price is Canada whose economy has every chance of falling into recession, once Q2 figures are released. With Q1 showing a 0.6% contraction, there is every likelihood that this quarter will see similar negative figures. The country has not been helped by relatively high unemployment figures, a property bubble that will burst once the record low interest rates begin to rise and consumer credit at dangerous over-borrowing levels. Prime Minister, Stephen Harper, will be lucky to hang on to power at the upcoming October general election.

The Chinese stock markets continued their recent downward trend, despite government efforts including caps on short selling, postponing IPOs and a six-month ban on large investors selling shares in companies. In addition, over 1k companies have suspended trading as share values sank. Unlike most global bourses, over 90% of daily trading is initiated by retail investors with 10% institutional (compared to 90% institutional elsewhere). Furthermore, two months ago margin financing reached a staggering US$355 billion and when a market falls 33% in just four weeks there is bound to be blood on the trading floor.

Following the Greek referendum, Prime Minister Alexis Tsipras announced that his country had secured a US$ 38 billion financing deal with its creditors and would be staying in the eurozone. He expects, rather naively, that this will help the nation pull out of its long recession. In reality, the eurozone leaders have brought the country more time but in doing so have not solved the underlying problem, so that in the future the debt problem will be bigger. In short, Greece cannot afford to repay its debts and it seems that monies received will be used to pay back the same parties who are providing the finance in the first place! This third patched-up bailout plan is bound to fail and for Greece, this is definitely not The Last Time.

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So Far Away!

Posted on July 9, 2015 by howesdubai

sport-city-dubaiIt seems that Dubai Sports City is in serious discussions with financiers for a new 60k-seat football stadium, that would complement their existing 25k-capacity cricket ground and the Els Golf Course. Design work has been completed and the proposed facility meets all FIFA guidelines.

There is a possibility that fashion house Versace will team up with Dubai-based Damac Properties to help in developing the so-called ‘Jenga’ Tower in London. The 50-storey building was recently bought for US$ 930 million and will have 450 apartments (as well as offices and retail outlets); this will be Damac’s first foray into the UK market.

Following last year’s acquisition of JAFZ by DP World for US$ 2.6 billion, Fitch has upgraded the port operator to BBB-/Stable in line with its new parent company. The company accounts for up to 20% of Dubai’s GDP and reported a 10.0% jump in 2014 revenue to US$ 460 million.

Drydocks World has just completed the world’s largest turret mooring system at 100 mt high, 11k tonnes and with a 26 mt diameter. The FLNG (floating liquefied natural gas) facility, requiring over 5 million LTI-free man-hours to construct, will be used by Shell off the NW coast of Australia; it is the 5th  and last module to be delivered.

DIFC has started work on its 11th office tower which is slated for completion within two years. Gate Building 11, costing US$ 55 million, will be located in the Gate District.

In line with the holy month of Ramadan – a season of giving – Dubai’s Abdullah Ahmad Al Ghurair is planning to spend a third of his wealth (US$ 1.1 billion) in setting up an education foundation. Part of his business empire includes Mashreq Bank which he set up 40 years ago, with US$ 1.6 million capital.

Abraaj has sold its 13.6% stake, in the East African-based UAP Holdings, to the financial group Old Mutual for an undisclosed fee. This investment, one of 19 the Dubai company has in East Africa, was purchased in 2012 and was part of the US$ 3 billion it has invested in the continent since 2006.

June Emirates NBD UAE Purchasing Managers’ Index (PMI) fell 1.9 points to 54.7 – its lowest level in almost two years. One of the main drivers to this slowdown in the non-oil sector is the start of the holy month of Ramadan.

The federal cabinet has finally approved a new bankruptcy law which will probably result in bounced cheques being decriminalised. It has long been felt that the current legislation is too rigid and does not actively help troubled companies from going under. In some ways, it was seen as a disincentive for businesses to set up in the country but with the planned legislation, it will make the UAE a more attractive place for investors, as well as partially emptying the jails.

After 18 years of legal dispute, the Dubai Cassation Court finally ruled on the ownership of theHamarain Centre and JW Marriott Hotel in Dubai. The Kuwaiti Bu Rousli family now own 80% of the two buildings with the balance belonging to the Emirati Hamarain family.

The DFMI fell 1.1%, starting on Sunday at 4,089 to close on Tuesday (07 July) at 4041. Bellwether stocks headed south with both Emaar Properties and Arabtec down US$ 0.02 to US$ 2.10) and US$ 0.69 respectively. 

Both oil and gold have fallen dramatically since last Thursday – down 12.0% to US$ 55.91 and 1.8% to US$ 1,153 respectively

In an US$ 890 million agreement, online payment provider, PayPal, has bought Xoom, at a 32% premium. The acquisition will help PayPal expand in the money transfer and remittance sector as well as have greater access in countries such as Brazil, China, India, Mexico and the Philippines.

As sales of its new smartphone continue to disappoint, Samsung has issued another profit warning indicating a 4.9% fall to US$ 7.6 billion – 4% lower than the same period last year. The Galaxy S6 has been outgunned by competition from both Apple and Chinese companies such as Xiaomi.

Over five years after the Deepwater Horizon oil spill, BP has finalised a US$ 18.7 billion settlement with the federal government and the five states that were affected. The deal sees US$ 8.1 billion going to the various governments and US$ 5.5 billion in fines and will bring BP’s total expenditure to US$ 53.8 billion.

Another iconic British company has hit a rough patch with news that Rolls Royce has downgraded its profit forecast again – this time by 5% to around US$ 2.2 billion. In April, the UK engineering company won a major US$ 6.1 billion engine order for 50 Emirates’ Airbus A380 superjumbos. The company has not been helped by a marked weakening in the oil and gas sector, together with reduced demand for jet engines. 

It was only a matter of time and now Brazil has got into the act with authorities probing forex market rigging by 15 international (but no local) banks, including the usual suspects such as Barclays,Citigroup, Credit Suisse,  HSBC, RBS and UBS. The alleged offences went on for over seven years and the investigation also involves some 30 individuals.

Since reaching its peak on 12 June, the Shenzhen Composite Index has plunged over 38% and has lost a massive US$ 3.2 trillion in market value. Now some listed firms have come up with a novel way to stop the rout – and an erosion of their share value. Some 26%, or 750 entities, of all firms registered on Chinese mainland bourses have suspended trading, locking up US$ 1.4 trillion of shares, equivalent to 21% of the country’s market capitalisation.

Sunday’s referendum moved Greece closer to leaving the eurozone with the German response that there was no basis to enter into new negotiations and that the ball is in the Greek court. As of Tuesday, the Tsipras government had not come up with any new proposals. Whilst the Germans were playing the role of bad cop, France was acting in a more conciliatory manner, as was the IMF, with Christine Lagarde offering assistance, if asked. Greece’s debt stands at US$ 356 billion and they would be hoping for a ‘haircut’ of up to 30% and a rather extensive grace period. Whether their European partners would agree to such generous concessions remains to be seen but is highly unlikely as both sides are So Far Away!

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Giving It All Away

Posted on July 6, 2015 by howesdubai

Paramount towerDubai has announced the construction of the first functional 3-D building in the world. The whole 2k sq ft project – building, fit-out and furniture – will be printed on a massive 20’ high 3D printer. This development is an initiative of Dubai’s Museum of the Future, in liaison with WinSun Global. The developers are looking at savings in time (60%), labour costs (80%) and waste (50%) on traditional methods.

It is estimated that the value of three of Dubai’s current mega projects is in the region of US$ 34.2 billion, the biggest of which is the Metro worth US$ 14.4 billion. The other two are the RTA’s Emirates Road master plan (US$ 12.0 billion) and the Dubai Airport expansion (US$ 7.8 billion).

Dubai Land Department reported that Q1 property transactions reached US$ 17.4 billion, of which US$ 10.1 billion resulted from new mortgages and US$ 6.5 billion from land and property sales.

Damac has added another project to its Dubai collaboration with Paramount Hotels & Resorts – a 64-storey, 824-room hotel and residences. Located on SZR, building of the luxury development – with an iconic rooftop infinity pool – has already started and slated for completion by 2019. The developer is currently building the four-Damac Towers by Paramount Hotels & Resorts as well as the Paramount Hotel Jumeirah Waterfront in Maritime City.

The first of five exclusive villas on Palm Jumeirah’s Frond M has been sold for US$ 19.1 million to a Briton of Indian descent. The residence will include six bedrooms, a cinema, 17 mt infinity pool and a 51 mt private beach.

Dutch contractor, Van Oord, has won a US$ 150 million, 2-year Nakheel contract to deliver 23.5 km of coastline and breakwaters at Deira Islands. When the whole project is complete, Dubai will have an additional 40km of coastline. This development is an integral part of the 15.3 sq km waterfront city which will have numerous hotels, apartments, retail outlets and a huge marina.

Being Dubai, it is no surprise that Reef Worlds has submitted its final design for the approval of the world’s largest sustainable underwater tourism site – “Pearl of Dubai”. Its exact location is not known but will probably be off one of The World islands and will now include a Hamour Habitat.

Emaar’s chairman has released plans for a world class centre for training real estate professionals. HE Mohammed Alabbar will fully fund the non-for-profit educational facility.

There is more worrying news for the hospitality sector with latest reports indicating a 6.5% fall in average daily rates over the past year to US$ 272, with even bigger monthly falls in April (12.8%) and May (10.8%). The main drivers are the increased supply of inventory, a drastic fall in Russian tourists and the weakening euro (down 19.6% over the past 18 months). Although occupancy levels rose by 1.9% to 83.8%, driven by a double-digit surge in Chinese visitors, Dubai is still perceived an expensive destination. In June, the emirate ranked in the top 10 most expensive destinations in a TripAdvisor survey and this week Bloomberg rated Dubai the 4th most expensive in the world. The emirate (at US$ 255 per night) came in behind San Francisco (US$ 397), Geneva (US$ 292) and Milan (US$ 271).

Following a 2014 10.0% growth in annual visitor numbers to 2.45 million, covering 93 exhibitions, DWTC will see a similar expansion pattern this year, as it will host 28 new events. This will be a fillip for the MICE sector and will be a boost for Dubai’s hospitality industry.

It took over two years for the three American airlines – American, Delta and United – to prepare a report for the US government, claiming state subsidies and unfair competition by Gulf carriers, including Emirates. In less than three months, the Dubai-based airline has refuted all allegations made and submitted their own 380+ page testimony to the US Departments of State, Transportation, and Commerce. Just like the NRA and AIPAC, the US airlines will have strong lobbying powers in the Capitol but if truth and logic are the main considerations then Emirates will win hands down. But remember the trouble with P&O and its ownership of some eastern US ports? (Ironically these three airlines are under an anti-trust US government investigation for illegal collusion to inflate seat prices).

Having only been open for five years, DWC is now ranked in the top 20 global busiest cargo hubs as well as expanding its passenger turnover. The facility recorded 825k tonnes of cargo carried last year and expects to top over 1 million tonnes in 2015, as more operators move from Dubai International. The latter facility has seen a 9.4% YTD increase in passenger traffic to 32.4 million as at the end of May.

It is forecast that the 23 free zones in Dubai will generate at least 5.3% more trade this year reaching a total of US$ 140.3 billion. The free zones, with JAFZA accounting for 80% of the total, have over 20k companies, employing 200k whilst contributing 25% to the emirate’s GDP.

dubizzle may find a rival with the local e-trader, EZHeights.com, setting up the country’s first online Barter Shop. The company estimates that it has US$ 71.9 billion worth of items in their system, with sale property accounting for 94.3% of that total – US$ 67.8 billion.

Local on-line shopping will soon receive a boost when two major supermarkets – LuLu and Geant – upgrade their delivery services. The former has spent US$ 5 million on a new website and app and will extend its deliveries in the UAE, Kuwait and Qatar. Further enhancements will be made by the French-based supermarket chain.

Dubai-based on-line clothes retailer, Namshi.com, has received US$ 11 million Silicon Valley venture capital funding to develop a new app. Fetchr will offer consumers improved service levels and, at the same time, enhance e-commerce firms’ efficiency by tracking down details more effectively.

Also on the e-commerce front, Dubai start-up, Bayzat, has completed a US$ 900k funding exercise. The company is primarily a medical insurance comparison website but is also involved with credit cards, finance loans and car insurance.

Trussbridge, a Dubai-based independent financial services firm, is the lead arranger for an investment consortium that has just bought a majority shareholding in the Canadian food producer, La Maison Cannelle. The Quebec company, established in 2005, focuses on gluten-free goods.

Centum Investment Company and Dubai-based Investbridge Capital will provide funds for SABIS Holdings to build at least 20 schools in Africa over the next five years. Each school is estimated to cost up to US$ 35 million.

It is reported that the once troubled developer Limitless will soon repay its creditors US$ 564 million; it has also arranged to extend its remaining debt of US$ 648 million to December 2018.

The government-owned Investment Corporation of Dubai (ICD) recorded an impressive 63.0% increase in 2014 profit to US$ 6.5 billion. Its revenue rose 11.3% to US$ 54.1 billion, whilst both assets and liabilities increased by 10.5% to US$ 18.3 billion and 8.1% to US$ 13.1 billion respectively.

A Ministry of Finance official has confirmed that there have been discussions relating to  corporate and value added tax laws, with a draft expected this quarter. Hopefully, it will be some time before any tax is levied but it will be a necessary addition if oil prices remain at their current low levels.

Although not hitting the levels of 2007, when Q1 personal borrowing reached US$ 137 billion, latest Central Bank figures show that such lending in the twelve months ending 31 March amounted to US$ 354 billion – up 6.5% on the previous year.

It seems that several UAE banks were targeted this week by a co-ordinated cyber-attack, temporarily bringing down operations and websites.

It was no surprise to see that the 12.99% Emaar Misr IPO has been heavily oversubscribed. Of the 600 million US$ 0.50 shares on offer, the first tranche of 510 million – for institutional investors – was 11 times oversubscribed with tranche 2 of 90 million – for retail –  had subscriptions totalling 3.23 billion shares. It is reported that the company carries a portfolio amounting to almost US$ 7 billion.

Etisalat has advised the Abu Dhabi bourse that its Q2 revenue and profit will be dented by US$ 168 million and US$ 56 million respectively, as a result of a restatement of Mobily’s inaccurate 2014 and Q1 financials. Etisalat holds a 28% shareholding in the Saudi telecom which had been investigated over certain of its clients’ contracts.

This week, the Bank of China listed a conventional 2 billion yuan bond, equivalent to US$ 322 million, with Nasdaq Dubai, bringing the bourse’s total listings of such bonds to a record high of US$ 11.64 billion.

The DFMI fell 1.4%, starting on Sunday at 4,147 to close on Thursday (02 July) at 4089. Bellwether stocks headed south with Emaar (down US$ 0.06 to US$ 2.12) whilst Arabtec closed US$ 0.03 lower at US$ 0.71. Thursday saw decreased activity with 539 million shares, valued at US$ 751 million, traded – compared to the 745 million, worth US$ 1.0 billion, the previous week. 

Both gold and oil continued their recent downward trend with the yellow metal down US$ 25 to US$ 1,174 and Brent crude off US$ 1.17 to US$ 63.56 at Thursday’s close.

Founded less than seven years ago, Airbnb is now valued in excess of US$ 25.5 billion. Recently, the so-called community marketplace has raised US$ 1.5 billion, from several investment funds, to expand operations in Asia. There is every possibility that the company, which does not own any hotel but has 35 million guests in over 160 countries, will go public. Its revenue – normally 3% commission from property owners and 6% from guests – has surged 340% over the past two years to US$ 850 million.

The following chart highlights how certain benchmark indices have fared over the past 18 months and, more specifically, over the past quarter. Interestingly, seven of the fifteen listed are in negative territory whilst only three – including the Dubai Financial Market General  Index – show double digit growth over the past three months.

 

 

Unit

%age

30 Jun 15

31 Mar 15

01 Jan 15

01 Jan 14

 

 

 

3 mth

 

 

 

 

Gold

US$

oz

-0.68%

1,174

1,182

1,186

1,236

Iron Ore

US$

lb

-1.59%

62

63

73

135

Oil – Brent

US$

Barrel

14.78%

63.05

54.93

57.33

102.50

Coffee

US$

lb

-2.24%

131

134

161

260

Cotton

US$

lb

-18.07%

68

83

62

86

Silver

US$

oz

-5.66%

15.68

16.62

15.77

20.15

Copper

US$

lb

-4.73%

2.62

2.75

2.88

3.37

AUD

US$

 

1.32%

0.77

0.76

0.81

0.89

GBP

US$

 

6.08%

1.57

1.48

1.53

1.64

Euro

US$

 

2.78%

1.11

1.08

1.21

1.38

Rouble

US$

 

5.88%

0.02

0.017

0.017

0.03

FTSE 100

 

 

-3.71%

6,521

6,772

6,548

6,730

CS1300

 

 

26.70%

4,409

3,480

3,532

2,291

S&P 500

 

 

3.67%

2,063

1,990

2,091

1,831

DFMI

 

 

13.53%

4,087

3,600

3,774

3,370

ASX All Ord

 

 

0.02%

5,451

5,450

5,415

5,352

Australian house prices continue to head north with latest figures indicating an annual increase in capital cities of 9.8% – down slightly from the previous year’s 10.1%. The housing shortage and historically low interest rates are the main drivers blowing up this property balloon.

In the UK, Q1 household disposable income rose at an annualised rate of 4.5% (its best return since 2001), largely attributable to a rise in wage growth and low inflation – up slightly to 0.4%. Conflicting signals saw GDP growth forecast revised upwards to 2.9%, whilst the current account deficit, at 5.9% of GDP, was at its highest level since records began in1948.

June’s eurozone inflation rate dipped to 0.3%, despite the March introduction of the ECB’s massive US$ 1.1 trillion stimulus package. Latest unemployment figures see the 11.1% rate unchanged in May – with Greece having the highest level at 25.6% and Germany the lowest at 4.7%.

Puerto Rico is following Greece having trouble with their finances. The US territory has declared that it is unable to pay its debts of US$ 72 billion and is on the verge of defaulting. It is unlikely that the federal government will offer any assistance to the self-governing US island which would normally file for bankruptcy but by law cannot do so.

Greece’s major banks – Alpha, Eurobank Ergasias, NBG and Piraeus – have seen Fitch slash their credit ratings from CCC to ‘restricted default’ because all four would have failed without this week’s imposition of capital controls, in the wake of the ECB action. On Tuesday, the eurozone ministers ruled out a bailout extension and it also became the first advanced country not to repay an outstanding loan to the IMF, amounting to US$ 1.7 billion. Now the financial world is waiting the outcome of this Sunday’s referendum – a no vote will inevitably see the Hellenic country leaving the eurozone.

A leading member of the Saudi royal family – and nephew of King Salman – has pledged his entire fortune to a trust fund to ensure that all his wealth will be used for “humanitarian projects and initiatives”. It appears that the chairman of Kingdom Holding Company has already donated US$ 3.5 billion to Alwaleed Philanthropies and now Prince Waleed bin Talal Al Saud, the 34th richest person in the world according to the Forbes list, with a US$ 34 billion fortune, is Giving It All Away!

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Hungry Eyes!

Posted on June 30, 2015 by howesdubai

Uncle-SamS&P is yet another company with a dire forecast that Dubai property prices will fall by up to 20%, from last year’s highs. The rating agency points to the fact that so many new units will come on line in H2 but any downturn will be softened because the economy is in a better position than it was six years ago, when prices fell by over 50%.

It does appear that many contracts are going the way of the Chinese. This week, the China State Construction Engineering Corporation Middle East won a US$ 67 million RTA tender to build access roads for the upcoming US$ 2.7 billion Dubai Parks and Resorts project.

The impact that the MICE (meetings, incentives, conferences and exhibitions) sector has on the hospitality sector cannot be underestimated. Last year, the Dubai World Trade Centre Authority recorded a 10.0% annual visitor growth to 2.45 million; based on the 93 exhibitions held, that would indicate over 26.3k visitors per exhibition, many of whom would be staying in hotels and eating out.

A recent study estimates that there will be a 56.2% rise in the number of hotel rooms to 101k over the next five years. Currently, there are 96 new hospitality projects in the pipeline – a third of which are due to open in 2017.

Meanwhile TripAdvisor ranks Dubai as one of the 10 most expensive cities in the world. Eight other cities were listed above Dubai, with the top four being Cancun, Zurich, New York and London. The study indicated that a typical 3-day Dubai stay for two costs US$ 1,524 – with dinner at US$167 being rated the most expensive on the planet. What could be a worry is that “local” rival, Sharm El Sheikh, at US$ 820, came in as the third cheapest destination.

With the holiday season ready to start in earnest, Dubai is expecting to cement its position as the world’s busiest international airport. (However, when domestic passengers are included in the total, the likes of Atlanta – 96 million, Beijing – 86 million and Heathrow – 73 million are still more than Dubai). 2015 Traffic for the first four months – 26.1 million passengers – is 6.5% higher than the same period last year; however, cargo has fallen 4.7% to 799k tonnes as much of the operations is being shifted to the new DWC.

It seems that a possible equity partnership agreement between Emirates and South African Airways has hit minor problems. The deal that would have netted the African carrier US$ 164 million, and access to EK’s global network, was not signed at the recent Paris Air Show, as was expected.

The country’s CPI (Consumer Price Index) recorded a 0.27% May monthly increase, and a 4.32% hike over the past twelve months as it reached the 123.27 level (with 2007 as the base 100). With a May monthly hike of 0.7%, Dubai’s annual inflation rate rose to 4.7% – its highest level in six years. The main driver was housing and utility costs up by 7.8% which account for 44% of the total “basket” used for calculation purposes.

At the beginning of the week, HH Sheikh Mohammad Bin Rashid Al Maktoum wrote about the economy. In the bullish review, he highlighted the country’s economic achievements whilst looking forward to a prosperous future. Interestingly, he indicated that one of his aims is to make the country less dependent on oil – currently, the non-oil sector contributes 68.6% of the constant price GDP with an 80.0% target by 2021. This has been aided by both public and private investment, of some US$ 96.2 billion last year, with more of the same expected this year. There will be even more money poured into the ‘3Ts’ – trade, tourism and transport – with increased emphasis on the knowledge economy.

Unilever announced that it had started construction of a US$ 272 million plant in Dubai Industrial City, due to be completed by Q3 2016. The factory, expected to generate 400 new jobs, will be mainly producing personal-care products.

Nestlé is another multinational investing in Dubai – this time a US$ 120 million factory in DWC. The facility, making coffee and culinary products, will open within six months and will eventually generate 400 new employment positions.

Dubai Investments announced that it has acquired a further 59.66% shareholding (in addition to its existing 1.20%) in Al Mal Capital for an undisclosed fee. The acquisition will see DI obtain an opening in the financial services sector, including risk management.

The Argentine restaurant chain, Gaucho is to combine with Add-Mind to add the Indie brand to the ever-growing Dubai lounge scene. The new outlet, in DIFC, will open in Q3.

The Pure Gold Group expects to double its number of outlets to 250 over the next five years. The Dubai-based retailer, with operations in twelve countries, will invest US$ 136 million and is also considering a move into the hospitality sector.

The Al Masah Capital acquisition of Al Faris Restaurant became the third local food-related take-over in the past month; the other two involved Marka’s purchase of Reem Al Bawadi and Audacia’s 30% stake in Al Safadi Restaurants. Al Faris owns the Oman and UAE franchise rights for the Californian-based Johnny Rockets, which has 14 UAE operations, including eight in Dubai.

Souq.com, established in 2005, has reportedly received funding from the US-based Tiger Global Management as it tries to raise a total of US$ 300 million to take advantage of current economic conditions. Dubai’s largest e-commerce company deals with some 400k products and has over 275 million annual website visitors.

Despite the fall in oil prices, the HSBC’s Purchasing Managers’ Index still heads northwards with a May reading up an impressive 0.8 to 62.8 points.

DP World listed a US$ 500 million conventional bond on Nasdaq Dubai, bringing the total of such paper on that bourse to US$ 11.8 billion. This was the third time that the port operator has utilised the bourse following two 2007 listings – a US$ 1.5 billion sukuk and a US$ 1.75 billion conventional bond.

Etisalat, 60% owned by Emirates Investment Authority, has announced that foreign ownership of its shares, to a maximum of 20%, will now be allowed.

Since recommencing trading on the local bourse, six years after its delisting, Amlak has had a tumultuous first 18 days of trading. Since 02 June, its shares have gone up and down on an almost daily basis with nine days of double-digit increases and four days of almost 10% decreases, along with two days of “normal” trading. On Monday, when the Islamic mortgage lender notified the bourse that it was in partnership discussions with Emaar Properties, which already has a 45% shareholding in the company, its shares hit a new peak of US$ 0.70; by Thursday the shares had jumped even to US$ 0.85.

The DFMI rose 2.0%, starting on Sunday at 4064, to close on Thursday (25 June) at 4147. Bellwether stocks had mixed results with Emaar (down US$ 0.01 to US$ 2.18) whilst Arabtec closed US$ 0.03 higher at US$ 0.74. Thursday saw increased activity with 745 million shares, valued at US$ 1.0 billion, traded – compared to the 245 million, worth US$ 488 million, the previous week.

Both gold and oil continued their recent downward trend with the yellow metal down US$ 25 to US$ 1,174 and Brent crude off US$ 1.17 to US$ 63.56 at Thursday’s close.

China’s June HSBC/Markit flash manufacturing purchasing managers’ index continued in negative territory with a reading of 49.6. (Any reading below 50 denotes contraction, above that expansion). This is yet another economic indicator that signifies the need for the authorities in the world’s second largest economy to introduce more stimulus measures to boost growth: Q1 data shows that it had dipped to 7.0% – a six-year low. Other worrying signs are a fall in exports as well a marked increase in lay-offs. Even though rates have been cut three times since December, it seems inevitable that a fourth reduction is on the cards.

In the light of the need for stimulus in a slowing economy, there is no doubt that this could be a tipping point for the Chinese equity market. As liquidity dries up, and with an official crackdown on illegal margin trading, the share bubble, that has seen the Shanghai Composite Index surge 122% over the past year, is set to burst. On Thursday, it closed on 4528, compared to 2016 points 12 months ago.

May saw UK government borrowing down 18.0% to US$ 16.0 billion – its lowest level in over eight years. Total public spending for the year to 31 March was down 9.6% at US$ 140.0 billion, equivalent to 4.9% of the UK’s GDP. This is expected to improve even further with the Chancellor, George Osborne, planning cuts of US$ 47.1 billion in departmental spending and US$ 18.8 billion in welfare payments.

The likes of Amazon make a mockery of countries’ tax regimes. In the UK, the company employs 7.7k, has sales of US$ 8.3 billion (up 14% in a year), makes a profit of US$ 54.1 million and pays tax of US$ 18.7 million – equivalent to 0.2% of revenue! Not too many companies can work on a O.65% net margin. Such entities are not breaking the law as they are allowed to move profits to other countries with more favourable tax rates.

Greece is also doing its best to make a mockery of the EU. The country needs to pay US$ 1.8 billion to the IMF by next Tuesday, as well as requiring over US$ 6 billion for domestic requirements. A return to the drachma would normally be inevitable but the bureaucrats have a way of fudging their way out of an impasse and politics may get the better of economics and common sense.

Some US expats are in for a nasty surprise! Following an agreement signed by the UAE Ministry of Finance, it seems that all US citizens residing in the UAE will have their bank and finance details made available to US authorities. This is in line with the 2010 Foreign Account Tax Compliance Act, targeting US citizens not adhering to US law by hiding funds in overseas accounts. It now requires banks and other institutions to provide account information when so directed by the US Treasury Department’s Hungry Eyes.

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Tragedy!

Posted on June 27, 2015 by howesdubai

burj2020The Dubai doomsayers, who were predicting a 2015 30% property crash, still await their day in the sun, as latest figures from Knight Frank’s Global House Price Index indicate only a 6.1% annual slowdown. However, on a global scale the emirate was ranked 53 out of 56 with only Ukraine (15.5%), Cyprus (8.2%) and China (6.4%) having bigger price slides. Interestingly, the index had its weakest annual growth – at only 0.3% – in three years.

According to Reidin.com, there has been a slowing down in the number of property launches in the first five months of 2015. During this period, there have been 14 new projects, covering 4.8k units, compared to 37 projects and 11.3k units over the same period last year. In the past three years, it is estimated that 52k units have been opened in Dubai.

Having seen its first two releases of 463 units sell out within hours, Danube’s Glitz3 development reflected the slowdown in the local market. The company announced that last Saturday’s launch saw about 55% of the 352 apartments on offer actually sold to investors. Prices for the units in Studio City range from US$ 129k to US$ 327k. All three developments are slated for completion within 30 months, with main contractors being appointed in Q3.

Arco General Contracting has won a US$ 78 million, 18-month contract from Limitless to carry out infrastructure work – including lighting, sewerage and roads – on its Downtown Jebel Ali project. The development, encompassing 300 mixed-use blocks, stretches 11km and covers 200 hectares.

Al Fara’a Properties has confirmed that it was in a detailed design phase to build a residential development in Dubai Maritime City.

The Director General and Chairman of the Roads and Transport Authority, HE Mattar Al Tayer, estimates that properties within 1.5km of the Metro have seen prices surge by between 13% – 41% and their rentals up in the region of 10%. In a similar vein, a recent ValuStrat study put the premium at 15%.. Other recent studies have pointed the other way.

Plans are going ahead for the world’s biggest commercial tower to be built in JLT. Design of the Burj 2020 will be carried out by Adrian Smith + Gordon Gill Architecture – the same firm responsible for both the Burj Khalifa and the Kingdom Tower in Saudi Arabia. The tower will be the focal point of the 1.3 million sq mt Burj 2020 District which will include commercial, retail and hospitality areas. 

Damac’s MD, Ziad El Chaar, is hosting 22 senior staff members from China’s third largest property broker, 5i5j. The company has been appointed to market Damac’s portfolio in China, an expanding market for the local realty sector. It is estimated that in H1 2014, Chinese bought over US$ 5.1 billion of overseas property, half of which were private investors and the balance by state-linked enterprises. The developer is also opening a ladies-only sales office in Damac Maison, near to Dubai Mall. 

It seems likely that Airbus will bow to Emirates’ pressure and introduce an A380neo which could be a longer aircraft with up to fifty more passenger capacity. Although recent sales have been sluggish, and no new activity is expected at this week’s Paris Air Show, Airbus estimates that it could sell more than 1.5k units over the next 20 years.

A combination of 9% more students – to 98k – and increased fees has seen Gems Education’s annual revenue, at 31 March, jump 20.6% to US$ 675 million. The Varkey-led education provider operates over 50 schools in 19 different countries.

The week Twitter’s Chief Executive, Don Costolo, stands down to be replaced by co-founder, Jack Dorsey, the social messaging service is reportedly to open an office in Dubai in Q3. At the same time, Benjamin Ampen has been appointed their new head of MENA sales.

Recording a 29% jump in Land Rover sales and a marginal 2% rise in its Jaguar turnover, Dubai-based Al Tayer Motors now sells more of these models than any of the other 2.7k showrooms in the world. The dealer also announced astronomic annual rises of 82% and 61% in the Jaguar F-Type and Range Rover vehicles respectively. 

Dubai-based Cars Taxi Group is expanding its overseas presence, by investing up to US$ 54 million on 1k new cars, to set up in Saudi Arabia and Singapore; it currently has operations in India, Kuwait, Malaysia and Qatar. The company has more than 7k vehicles in the UAE.

Eros Group, established in 1967, was voted UAE’s best brand for the 5th year in a row. Over the past decade, the Dubai-based electronic company has seen revenue jump from US$ 163 million to over US$ 1.36 billion. Only 55 of the 1.5k leading brands, who applied, were declared Superbrands by the Brand Council.

The GCC’s second biggest cable manufacturer, Ducab will become a 60% shareholder in a new US$ 60 million aluminium plant in Abu Dhabi, to be known as Ducab Aluminium; the new entity will have a 50k metric tonne capacity for aluminium rods and overhead conductors. The remaining 40% shareholding will be with Abu Dhabi’s Senaat which already is a 50% owner of Ducab, with the other 50% owned by the Investment Corporation of Dubai.

Following a decree by HH Sheikh Mohammad Bin Rashid Al Maktoum, the Dubai Technology and Media Free Zone Authority is now to be known as Dubai Creative Clusters Authority. The authority will still be responsible for licensing, visa and zoning regulations for such free zones as Dubai Internet City, Dubai Media City, Dubai Studio City, Dubai Academic City, Dubai Knowledge Village, Dubai Biotechnology and Research Park, Dubai Outsource Zone, Dubai International Academic City, Dubai Design District (d3), International Media Production Zone and Energy and Environment Park (EnPark).

According to research by the National Bank of Abu Dhabi, the recent drop in oil and gas prices, which have halved since September 2014, could lose US$ 240 billion for the six GCC countries; this is slightly less than the IMF forecast of US$ 300 billion. The big losers would be Saudi Arabia (US$ 160 billion) and the UAE (US$ 55 billion). To soften the impact of this loss of revenue, governments should look at cutting budgets, reducing subsidies and closely monitoring project expenditure.

With the notable exception of Baille Gifford, with a 7% holding, Dragon Oil’s 46% minority shareholders have finally agreed to Emirates National Oil Co’s offer of US$ 11.72 per share – a 12% premium on last Friday’s close. It was no surprise then that when trading reopened on Monday the shares were up 9.6%. This new Dubai-government owned oil-producer is valued at US$ 5.75 billion. Also this week ENOC secured a 9-year US$ 1.5 billion bank facility to support long-term funding requirements. 

Shuaa Capital’s subsidiary, Gulf Finance, which obtained a US$ 136 million syndicated loan late last year, expects to raise a further US$ 163 million in 2015. The company’s primary business is to lend much-needed funds to SMEs, mainly in the UAE.

Emaar Properties has decided the IPO share price of US$ 0.50 for its floating of 12.99% of its Egyptian arm, Emaar Misr. 85% of the 600 million shares on offer have been offered to institutions and has been 11 times oversubscribed. Trading will start on the Cairo bourse on 02 July.

The DFMI had a flat week starting on Sunday at 4073 to close on Thursday at 4064. Bellwether stocks, Emaar and Arabtec, did likewise both rose – unchanged at US$ 2.19 and down US$ 0.01 to US$ 0.71 respectively. Thursday saw only 280 million shares, valued at US$ 488 million traded – a massive downturn compared to the 1.30 billion, worth US$ 2.56 billion, the previous week. 

Over the week ending 18 June, gold regained some of its lost lustre up US$ 20 to US$ 1,199  whilst Brent crude was marginally down US$ 0.22 at US$ 64.73.

As David Cameron discusses EU membership with anybody who wants to listen, Standard & Poor’s maintained the UK’s AAA rating but amended its outlook to negative from stable. The ratings agency is concerned that UK’s growth potential could be negatively impacted by the upcoming referendum, due within the next two years. S&P also pointed out that the government will have to closely scrutinise the growing private external debt and its increasing twin deficits. The UK’s inflation rate in May returned to positive – 0.1% – having fallen to minus 0.1% in April – the first time for a negative reading since 1960. Furthermore, average weekly earnings rose 2.7% – its largest increase in over six years.

Even after seven years of near zero rates, the Fed is still reticent to move. Janet Yellen, the Fed supremo, has indicated that both the labour market and inflation conditions do not warrant any immediate action and that any future changes will be gradual.

Japan’s recovery from last year’s recession continues on course with its May trade deficit, of US$ 1.75 billion, 76.5% down on this time last year. Although exports were up 2.4%, lower than expected, imports have fallen by 8.7%. But Shinzo Abe will be concerned that a global slowdown could cut back Japanese factory output, that the weak yen will inevitably push up import prices and the country still has to pull itself out of its years-long deflationary cycle. 

The Australian property bubble continues to be blown up by historically low interest rates, with industry experts predicting it could be another year before the unavoidable crash. Even Glenn Stevens, the Reserve Bank governor, is on record describing Sydney house prices as “crazy”. 

In the Mercer’s 2015 Cost of Living Survey, Dubai has moved up 44 places to 23rd. However, this is just another example of the glaring variances between similar reports with findings having to be taken with a pinch of salt. In this case, the Mercer report comes up with Luanda, Hong Kong, Zurich, Singapore and Geneva as the most expensive cities globally whereas the Economist Intelligence Unit ranks Singapore, Paris, Oslo, Zurich and Sydney as the top five. At the other end of the scale, Mercer ranks Bishkek, Windhoek, Karachi, Tunis and Skopje in their bottom five: EIU rates Mumbai, Karachi, New Delhi, Kathmandu and Damascus. Which one has more credence?

Another example of the cosy relationship between government and the finance sectors comes with the news that the former FCA director of supervision, Clive Adamson, is reportedly becoming a non-executive director of JP Morgan International Bank. Two years ago, the ex-City regulator was involved in fining this bank over US$ 3 million for inadequate client advice. Since leaving his old employment late in 2014, he has also become a non-executive director of Prudential’s UK.

Meanwhile Michael Gove is looking at appointing a wealthy party donor to his Justice department’s board, having just released four independent directors from the Ministry of Justice. The recently knighted Theodore Agnew, who founded the private equity firm Somerton Capital, is a close ally of the new Justice Secretary and was on the board of the Department of Education when Mr Gove was in charge there.

With the EU regulators currently investigating its Luxemburg tax arrangements, another Amazon probe will be in relation to its business practices in the distribution of e-books. The review will look at whether Amazon is “preventing other e-book distributors from innovating and competing effectively”.

Greece is not bowing to German, EU and IMF pressure as it refuses to budge on important conditions relating to certain austerity demands, pension cuts or energy tax increases being demanded by the troika, before any further funds are made available. In a no win situation, the Greek leader, Alexis Tsipras, has accused its creditors of trying to humiliate his country whilst EC president, Jean-Claude Juncker, reproached the government for misleading voters and giving out misinformation on the troika’s demands. 

Over the next three months, Greece has to find US$ 19.2 billion to pay creditors and other demands but, in the longer term, its total debt is US$ 360 billion, of which US$ 240 billion is owed to the ECB, including US$ 62 billion to Germany alone. The situation is exacerbated by the fact that its unemployment levels continue upwards – currently at 26% – whilst youth unemployment is more than double at 55%; further its public debt to GDP is at a massive 177%. If the country defaults, fails to pay its creditors and exits the eurozone, it will not only be a Greek Tragedy!

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