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Something In The Air

Posted on October 18, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

When All Is Said And Done

Posted on October 5, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Writing’s On The Wall!

Posted on October 3, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Party Is Over

Posted on September 20, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Forever Blowing Bubbles!

Posted on September 16, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Both Sides Now

Posted on September 7, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

One Way Or Another

Posted on September 1, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted in Finance | Tagged Al Habtoor Group, Arabtec, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, MAG 5, Nakheel, Omniyat, UAE | Leave a comment

Welcome To Our World!

Posted on August 27, 2015 by howesdubai

Narendra 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 12^th 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!

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

Are You With Me?

Posted on August 16, 2015 by howesdubai

The 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 30^th, 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 7^th 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 40^th 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?

Posted in Finance | Tagged Arabtec, Delta, DFM, Dubai, Dubai Financial Market, Dubai Museum, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Jumeirah Group, Nakheel, UAE | 1 Comment

Those Were The Days

Posted on August 9, 2015 by howesdubai

The 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 16^th 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!

Posted in Finance | Tagged Arabtec, DFM, Drake & Scull, Du, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, ENOC, HH Sheikh Mohammed bin Rashid Al Maktoum, Landmark Zenath Group, Meydan One, Nakheel, Rotana, UAE | Leave a comment