It Is Time To Say Goodbye

Posted on August 3, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Nowhere Man

Posted on August 3, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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The Last Time!

Posted on August 2, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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So Far Away!

Posted on July 9, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Giving It All Away

Posted on July 6, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

Unit

%age

30 Jun 15

31 Mar 15

01 Jan 15

01 Jan 14

 

 

 

3 mth

 

 

 

 

Gold

US$

oz

-0.68%

1,174

1,182

1,186

1,236

Iron Ore

US$

lb

-1.59%

62

63

73

135

Oil – Brent

US$

Barrel

14.78%

63.05

54.93

57.33

102.50

Coffee

US$

lb

-2.24%

131

134

161

260

Cotton

US$

lb

-18.07%

68

83

62

86

Silver

US$

oz

-5.66%

15.68

16.62

15.77

20.15

Copper

US$

lb

-4.73%

2.62

2.75

2.88

3.37

AUD

US$

 

1.32%

0.77

0.76

0.81

0.89

GBP

US$

 

6.08%

1.57

1.48

1.53

1.64

Euro

US$

 

2.78%

1.11

1.08

1.21

1.38

Rouble

US$

 

5.88%

0.02

0.017

0.017

0.03

FTSE 100

 

 

-3.71%

6,521

6,772

6,548

6,730

CS1300

 

 

26.70%

4,409

3,480

3,532

2,291

S&P 500

 

 

3.67%

2,063

1,990

2,091

1,831

DFMI

 

 

13.53%

4,087

3,600

3,774

3,370

ASX All Ord

 

 

0.02%

5,451

5,450

5,415

5,352

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

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

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

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

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

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

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Hungry Eyes!

Posted on June 30, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Tragedy!

Posted on June 27, 2015 by howesdubai

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Say Goodbye

Posted on June 24, 2015 by howesdubai

spinnaker_tower_portsmouthIn a busy week, HH Sheikh Mohammed bin Rashid Al Maktoum has met with Queen Elizabeth, the Polish president, Bronislaw Komorowski, (on a two-day trade visit) and visited the Milano Expo for a further two days; there he announced that he wanted the next Expo in Dubai  to “dazzle the world”. Back home, he also visited his own Mohammed bin Rashid Housing Establishment and confirmed new  projects totalling US$ 981 million; he also reviewed 16 previous projects, which had seen 4.4k houses built, at a cost of US$ 1.3 billion.

The US$ 123 million contract for Union Properties’ Dubai Investment Park, phase 3, has been awarded to Shapoorji Pallonji Mideast. Slated for completion by Q3 2017, the 227 Green Community villas, will be sold off plan in September and when completed will bring the total of residential units there to almost 1.8k.

With apartment and villa prices starting at US$ 137k and US$ 272k respectively, it was no surprise that hundreds of people queued all Friday night to be first to put their names on the Nshama’s Town Square’s sales documents. However, many were left more than disappointed when only ten units were released.

WSP / Parsons Brinckerhoff  have been appointed by Meraas to be lead consultant for the Bulgari Resort in Dubai, due to open within two years. The 7-star 101-key hotel, encompassing 158k sq mt, with 43 villas and 165 apartments, will be located on Jumeirah Bay Island. 

The Japanese convenience store, 7-Eleven, is set to establish a presence in the emirate. Currently, the brand has 56k outlets in 16 countries and it has just signed a franchise agreement with Seven Emirates Investment. The Dubai-based company is hoping to have more than 820 stores operating in the region by 2020.

If there were not enough dining outlets already, Applebee’s Grill Restaurants will add a further 16 more in the country to bring their total to 26. The Californian-based chain expects to add a further 900 staff to its payroll. 

Fast Logistic Solutions Group is ramping up its business and plans an 86% expansion in its staff numbers to 1.4k, including 400 in the UAE. In addition, it will have new offices in DAFZA, DWC, Al Qusais and Rashadiya as it merges its two entities – Fast Forward and First Priority next month. 

Dubai-based Hotbrands International announced a further two fast food outlets in DAFZA – its flagship brand Shamiana and Magic Wok. The 23-year old company already has fifty outlets in the GCC, India and the USA. 

Emirates has signed a three-year US$ 5.4 million deal for naming rights of the 170-metre high Portsmouth’s Spinnaker Tower. One minor problem is that the proposed red facade will not go down too well with Pompey supporters whose team play in blue. The structure looks very similar to the Burj Al Arab and is the focal point of the city’s harbour which will host the America’s Cup World Series next month; one of the challenging boats will be the airline’s sponsored Emirates Team New Zealand. 

Nakheel has confirmed that it plans a US$ 60 million profit payment next week on its on-going US$ 1.2 billion trade credit sukuk.

The recently established investment bank, Audacia Capital, has been quick out of the blocks by acquiring 30% of the Lebanese casual dining chain, Al Safadi. The company has ambitious expansion plans to add to its current three Dubai locations and one in Erbil, Kurdistan.

The Dubai International Financial Centre hopes to see a tripling in size over the next decade, with the number of firms expanding to 1k and staff numbers from 18k to 50k. Over this period, office space will more than double to 5.5 million sq ft. More impressive is the target to see assets under management jump from US$ 10.4 billion to a staggering US$  250 billion – stranger things have happened.

Dubai Islamic Bank’s latest foray into the sukuk market was heavily over-subscribed – the 5-year US$ 750 million bond will carry a 2.92% profit rate.

For the first time in six years, the UAE will post a fiscal deficit due to the halving of oil prices over the past twelve months. The IMF estimates that this year, the deficit will be 2.3% of GDP, compared to a 5.0% surplus in 2014, but a tightening of spending, and the introduction of new taxes, could see the country return to surplus in 2016. At the same time, the international body predicts a 2015 growth slowdown from 4.6% to 3.0%.

The DFMI had its second week of marginal gains – up 0.9% – having started on Sunday at 4032 to close on Thursday at 4073. Bellwether stocks, Emaar and Arabtec, both rose – up US$ 0.02 to US$ 2.19 and US$ 0.10 to US$ 0.72 respectively. Thursday saw 1.30 billion shares, valued at US$ 2.56 billion traded – a massive increase compared to the 593 million, worth US$ 789 million, the previous week. The holy month of Ramadan starts next Wednesday which may see a slowdown in activity on the Dubai exchange.

There would have to be some eyes raised by the recent performances of Amlak and Arabtec. The former returned  to the bourse on 02 June and had jumped 128% in the ensuing eight trading days whilst Arabtec had a two-day rise of 27.0% before falling 9.9% on Thursday. 

Over the week ending 11 June, gold softened even further from US$ 1,194 to US$ 1,179 whilst Brent crude was up US$ 0.35 to US$ 64.95.

Abdel Fattah El-Sisi’s Egypt will be thankful for the recent US$ 35 billion pledges made by GCC countries. This comes at an opportune time, as its current account deficit, in the nine months to March, has ballooned from US$ 543 million to US$ 8.4 billion.

Many recent reports point to a slowdown in global growth. The IMF, who seem to change their forecasts on a regular basis (and usually downwards), has cut the US expected growth from 3.1% (in April) to 2.5%, two months later. In the light of these figures, it seems unlikely that the Fed will consider a rate hike until at least September, even though the labour market appears to be strengthening (including 280k new jobs in May) and low oil prices continue. Any Fed decision always has a huge impact not only in the US but also on a global scale.

In the UK, the Confederation of British Industry has cut their February growth forecast of 2.7% to 2.4%; the Bank of England did likewise. 

China has seen its May exports fall a further 2.5% whilst imports dropped 17.6%, compared to the same month last year. It seems highly unlikely that the country’s forecast 6.0% trade growth will be attained this year. Although interest rates have been cut three times since December, this has failed to boost economic activity. No wonder then that China’s trade surplus jumped 75% in one month to US$ 59.5 billion.

The IMF has also cut its forecast for Australia in the wake of major falls in commodity prices which inevitably has had a major impact on that country’s short-term economic outlook. The RBA’s governor, Glenn Stevens, has not ruled out any further rate cuts.

Japan bucked the trend by recording positive figures, with Q1 growth of 1.0% (compared to the 0.6% initial guesstimate) and an annualised growth rate up from 2.7% to 3.9%. Last year, the world’s third biggest economy had fallen into recession but has climbed out by a boost in business spending, low oil prices and rising exports. 

Whilst global financial eyes are on Greece, the last country to renege on its debt has been ordered to pay US$ 5.2 billion to over 500 creditors. A US judge has ruled that Argentina has to treat a group of hedge funds and bondholders, who refused to sign the original settlement agreement, the same rights as those who agreed to an earlier restructuring.

It is reported that Germany may agree to an extension of the current Greek aid package but has rejected the possibility of an amended third one. But it seems that Athens is still balking at the substantial reforms that are being requested by the troika so by the end of the week, there were still major differences between the parties. After five years of wrangling and negotiations going nowhere, maybe it is time to Say Goodbye!

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Someone New

Posted on June 9, 2015 by howesdubai

sepp-blatterAs expected, April turned out to be a dismal month for the hospitality sector as profitability indices sank by 19.5%. Occupancy, Average  Room Rates and Rev PAR all headed south – 0.5% to 84.9%, 12.8% to US$ 374 and 13.5% to US$ 317 respectively. Total Revenue per Available Room (TRevPAR) dropped 15.7% because of revenue falls in food (19.8%) and Beverage (26.7%). Signs are that the golden goose may have laid too many eggs!

However if a report from Network International is indicative then it seems that more money is being spent by tourists; Q1 expenditure  on credit and debit cards rose by 5%, compared to the same period in 2014. Dubai is again moving up the charts – this time to 4th (out of 132 locations) in MasterCard Global Destination Cities Index, behind London, Bangkok and Paris. This year, the emirate is expecting an 8.0% jump in tourist numbers to 24.3 million. 

Abu Dhabi’s Manazel is studying the feasibility of investing US$ 817 million in a hospitality project, located on the borders of the capital and Dubai. The developer is already credited with developments in both emirates, including Dune Village in Dubai.

A sign that the retail section is still moving north is Nakheel’s proposed 766k sq mt expansion, adding a further 600 outlets and a new 370-key hotel, to its Ibn Batuta Mall. Extending 1.2km, the mall is already the largest themed shopping mall in the world and attracts over 19 million visitors a year. 

HH Sheikh Mohammed bin Rashid Al Maktoum reviewed Emaar’s latest project – a US$ 2.72 billion mixed use development in Al Mamzar. The developer has signed a memorandum of understanding with Dubai Municipality, to build 4k residences, 300 hotel rooms and retail outlets encompassing 230k sq mt.  

According to Meydan Sobha, phase 1 of its Mohammed Bin Rashid Al Maktoum City project, comprising 267 villas, has been sold out whilst the 364-villa phase 2 is selling well. Villas are priced at between US$ 4.2 million to US$ 6.9 million, with a few higher ranged properties going for up to US$ 25 million. The US$ 10 billion project, encompassing 1,100 acres, has a further two phases to build and will also include a 7km lagoon with beach, an 8.8km cycle track and a hotel along with retail/ dining outlets.

Ajman-based R Holdings is planning to invest US$ 68 million to build two community malls in Dubai. The malls will be under its CityLife brand which already operate in Ajman and will have the Dutch supermarket chain Spar as an anchor tenant.

Drake & Scull announced that its Omani subsidiary had won several MEP (mechanical, electrical and plumbing) contracts, valued at US$ 95 million. Work on the Seeb convention centre and two hotels will start in Q3 and be completed by 2017.

A new investment banking advisory firm is due to shortly set up in Dubai. Trussbridge Group, headed by ex-investment bankers Rody Yared and Samer Katerji, will focus on the regional mid-market sector.

Another finance-related firm is opening in Dubai. The UK’s IG Group deals in forex trading and became infamous when hundreds of its clients, who had bet against the Swiss franc, were left with huge losses when the Central Bank unexpectedly scrapped its Euro 1.2 to the US$ cap earlier this year.

It seems that the Investment Corporation of Dubai is one of the leading contenders to buy Hyde Park Barracks in London from the Ministry of Defence. No bids from interested parties have yet been submitted.

Dubai-based Al Ittihad Drug Store announced a 28% rise in Q1 revenue, compared to the sector’s average of 12%, whilst shipping 1.3 million packaged units. IDS, established in 1968, is one of the main regional pharmaceutical distributors and has recently acquired rights to market the anti-aging product Fillerina, and Medcoll, a Collagen product.

Masharie LLC, a division of Dubai Investments, has sold its 51% shareholdings in two entities for a reported US$ 100k; these were International Rubber Company and Techno Rubber Company. The private equity firm has eight operating companies in its portfolio and is considering further investments in the healthcare and hospitality sectors.

The UAE Minister of Public Works, HE Abdullah bin Mohammed Balhaif Al Nuaimi, has indicated that an inter-city metro line is being actively considered. If given the green light, it is almost certain that it will be in place in time for Expo 2020 and that it would link all seven emirates.

Emirates has just had its second sukuk listed on Nasdaq Dubai. The US$ 913 million faculty, to be used for financing new Airbus A380s, brings the total sukuk value on the bourse to US$ 35 billion. 

Figures from Dubai Customs show that last year there was a 10.0% rise in auto parts and accessories to US$ 12.1 billion.with the value of exports and re-exports up to US$ 4.9 billion. The four top trading partners were Japan, South Korea, China and Germany with values of US$ 1.7 billion, US$ 902 million, US$ 861 million and US$ 847 million.

Emaar Properties will soon float 12.99% of its Egyptian unit, Emaar Misr, on the Cairo exchange. 86% of the 600 million shares will be made available for institutions, with retail accounting for the balance. Shares will be listed at between US$ 0.46 and US$ 0.56.

After being delisted from the Dubai bourse in November 2008, when its share value was at US$ 0.28, Amlak Finance, resumed trading on Tuesday. Within hours, the Islamic mortgage provider saw its value fall 23.5% before a recovery closing its first day on US$ 0.24 and the week on US$ 0.36.

Following four weeks of losses, the DFMI clawed back 32 points to close the week marginally higher at 4032. Thursday saw increased business with 593 million shares, totalling US$ 789 million, changing hands – compared to 474 million and US$ 297 million the previous Thursday. Whilst Emaar Properties shares rose – by US$ 0.04 to US$ 2.17 – Arabtec remained flat at US$ 0.63. For the month of May, the index fell 7.2%, closing at 3923, having risen 20.2% in April. 

Both gold and Brent crude prices have been dipping, with the former ending the month of May at US$1,194 and the week even lower on US$ 1,183. Ahead of the OPEC meeting in Vienna, crude was trading at US$ 65.30, at the end of last month, and fell to US$ 63.92 by the end of the Thursday’s trading.

One bank that is facing mounting problems is HSBC. It seems inevitable that the bank will leave its London base, probably for Hong Kong, as UK lenders are suffering from the government’s Bank Levy. In 2012, the bank expensed US$ 4.2 billion to cover costs associated with past illegal activity – US$ 2.3 billion for misselling products in the UK and US$ 1.9 billion for money laundering. It is reported that the bank still employs 5k legal consultants just to keep up with all the flak. (Despite these problems that year, the bank’s top 16 executives averaged an annual remuneration of US$ 4.9 million). It still faces massive penalties from US regulators, for forex manipulation, and is still involved with the Swiss tax evasion issue.

It seems odd that it takes two months for the US authorities to finally arrive at its Q1 GDP figures. The end result is that the economy actually contracted by 0.7% as opposed to the original release of marginal 0.2% growth. Bad weather and a rising dollar were the main attributes for the disappointing figures as most indicators were further revised downwards, such as consumer spending, business inventory and trade balance. The Q2 outlook is for sluggish growth as the two main drivers – weather and a strong greenback – are still in play.

Indicators are that the UK economy is also softening with Q1 growth of 0.3% – half of what it was in Q4 – its lowest in four years. Its latest overseas trade deficit has also jumped 37.5% to US$ 20.2 billion. In a similar vein, but on a bigger scale, China’s growth slowed to 7.0% and the economy has not been helped by disappointing PMI data and weak retail sales.

Australia’s trade deficit more than trebled in April to almost US$ 3 billion from its March level of US$ 945 million. Exports fell 6% and imports were also down 4%, as retail spending remained flat at US$ 18.5 billion. At the same time, the OECD issued a warning that there could be a risk of a sharp correction in the housing market as cheap credit (2.0%), housing shortage and over-generous tax breaks continue to inflate the asset bubble.

This time last year, three major economies were suffering. Now India is outpacing China, with latest 7.3% growth figures, despite the government having lowered their forecast to 6.6% last December. (However the method of calculating the country’s GDP has recently changed and this may be distorting data returns).

Japan and eurozone are slowly heading in same northerly direction, reporting encouraging data with Q1 annualised growth of 2.4% and 1.6% respectively. Both have reaped the benefits of a combination of low oil prices, weak currencies v the US$ and QE stimulus.

Greece has moved one step closer to Grexit as it will not make its US$ 335 million IMF payment tomorrow (05 June) but intends to pay a combination of four outstanding payments, totalling US$ 2.5 billion,at the end of the month. The Tsipras-led government is dissatisfied with the IMF demands for further austerity measures before any more funds are released.

Whilst FIFA’s reputation lays in tatters, the same cannot be said of the English Premier League which recorded record profits in season 2013-14. The 20 teams’ revenue was up 29.0% to US$ 5.0 billion – US$ 1.5 billion more than its nearest rival, Germany’s Bundesliga. The biggest revenue earner was the US$ 2.6 billion paid for broadcast rights.

The FIFA debacle will continue until the cancer is cut away. BBC reports that, between 2011 – 2015, this registered charity made a profit of US$ 338 million based on a revenue of US$ 5.72 billion and expenses of US$ 5.38 billion. The prime profit driver is the World Cup with US$ 2.50 billion, based on revenue of US$ 4.83 billion and expenses of US$ 2.31 billion. And what about all the money that has gone the way of graft, scams and kickbacks to Blatter’s cronies? No doubt when all is said and done, this figure could be greater than US$ 1 billion.

With Emirates pulling out last year, FIFA has five main sponsors – Adidas, Coca Cola, Hyundai/Kia, McDonalds and Visa – who each contribute about US$ 30 million per annum. The value of marketing rights to FIFA is US$ 1.6 billion and if sponsors were to follow Emirates’ example and pull out, this would put even more pressure on the organisation to take note and start the process of long needed reforms and urgent management changes. (But with Blatter still pulling the strings, it is the equivalent of putting Dracula in charge of a blood bank). 

Even more damaging would be for the TV companies, who pay US$ 2.4 billion for broadcast rights, to refuse to show the competition.  Now that the self-proclaimed, hypocritical “commander” has jumped his sinking ship, whatever happens hereon, the scandal-hit sporting body quickly needs both something and Somebody New! 

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Livin’ On Borrowed Time

Posted on May 29, 2015 by howesdubai

howes-dubai-blogThis weekend, Emaar will launch its latest project, located in the Opera District of Dubai. The twin towers – of 50 and 70 storeys – will comprise 1-4 bedroom apartments and will overlook the upcoming 2k-seat opera house.

Al Barari has released phase 2 of its Ashjar project – 84 luxury apartments, ranging in size from 1.4k sq ft to 4.1k sq ft, with prices starting at US$ 600k. The 18.4 million sq ft development already boasts 189 luxury residences and 28 bespoke villas, with a further 157 Seventh Heaven homes under construction, along with the Ashjar development, which will have 300 units when completed.

Dubai Properties has announced the sale of 200 apartments in one of its planned four-tower mixed use project in its mega development in the centre of Dubai Creek.

Arabian Gulf Properties and Time Properties have reported details of its 23-storey AG Tower in Business Bay. Prices for the 437 apartments will range from US$ 191k to US$ 616k.

Nakheel expects to see the number of hotel rooms on Palm Jumeirah more than quadruple before 2020, as the portfolio is forecast to rise from the current level of 3.5k to over 15k. The number of properties is expected to increase from 8 to 32 over the same period; six are already under construction.

It seems likely that the emirate will house the 5th Lego-themed hotel in the world with plans to build one in the upcoming Legoland Dubai theme park. The venue, covering 27 hectares, is a part of the US$ 2.7 billion Dubai Parks and Resorts project due to open in Q4 2016.

Hilton Worldwide becomes the latest operator to announce a new property to be located near to Dubai World Central. The proposed 535-key hotel is set to open in 2019 and hopes to tap into the expanding traffic using Al Maktoum International Airport.

An Abu Dhabi operator will open its first hotel in Dubai next year – a 3-star property which will cater for the expected increased demand in affordable accommodation. Jannah Hotels has a 318-room Burj Al Sarab in Abu Dhabi to meet the specific requirements of the halal tourism sector.

Already with 18 properties in the country, the InterContinental Hotels Group (IHG) has just opened its 132-room Dubai Marina.

Following news earlier in the year that British hotel group Yotel was planning a development in Business Bay, it is now considering a property on Palm Jumeirah. No further details were made available.

On 01 September, Emirates will fly daily to their 10th US destination – Orlando, with a flying time ten minutes shy of 16 hours. In a decade of operations to the country, the airline has maintained over an 80% load factor and last year flew over 2.3 million passengers.

As an indicator of the buoyancy in the local vehicle sector, Nissan reported that 2014 regional sales were up 18.1% to 185.1k units and increased its market share by 0.8% to 10.3%. 34.0% of all sales were from the UAE where it maintained its second position to Toyota with a 15.3% market share.

The latest Nielsen Global Survey confirms that the UAE consumer confidence still rates the highest in the ME with an index score of 115. The second best is Saudi Arabia with 107 whilst the global average is a lot lower, at 97. Globally, there are some odd results such as the UK’s 97 and France, with 60, whilst the likes of India, Indonesia and Philippines came in with 130, 123, and 115 respectively.

Although the UAE is the top performing country in the region in the latest IMD world competitiveness report, it has slipped four places to 12th in the global ranking. Although it scored highly in categories such as government efficiency and economic performance, it slipped in areas such as health and education.

Unilever, the Anglo-Dutch conglomerate, is planning to invest US$ 82 million in a new factory to be built in Dubai, adding a further 600 jobs to its payroll. When completed within 2 years, the facility will make shampoos, shower gels and other personal care products.

Conares, the region’s second largest  steel manufacturer, is to invest US$ 54 million to expand capacity at its Jebel Ali factory to 1 million tonnes. The company, established in 1990, estimates that it has cornered 20% of the UAE rebar market and 25% of the regional steel pipes sector.

The UK fragrance house, CPL Aromas, has opened a US$ 8 million factory in Jebel Ali, producing 200 metric tonnes of concentrates monthly.

The Dubai-listed company Aramex has paid US$ 2.5 million for a 25% stake in the US-based consolidator, WS One Investment. This follows recent acquisitions for the South African PostNet (US$ 17 million) and the Australian courier company, Mail Call, for US$ 33 million.

In March, Emirates National Oil Co offered US$ 7.92 a share to buy the remaining 46% of Dragon Oil shares it did not own. Now ENOC has raised this offer by 44.2% to US$ 11.43.

The Ministry of Finance reported that in Q1, the 23 local and 34 foreign banks operating in the UAE increased their asset base by 9.0% to US$ 392.3 billion, whilst lending showed an 8.2% jump to US$ 392.4 billion. As at 31 March 2015, the Central Bank held foreign currency assets, totalling US$ 83.4 billion – 3.1% higher than the same period in 2014.

The UAE Space Agency has introduced ambitious plans to place the country in the forefront of space exploration and research. Its first target is to send the country’s “Hope” probe mission to Mars by 2021 – the year of the UAE’s golden anniversary. The government is determined to make the country one of the global leaders in space technology, with the knock-on effect of adding great value and increased employment opportunities to the national economy.

With an eye on supporting regional SMEs, Abraaj Capital, with a US$ 30 million commitment, will become the leading investor in Auvest MENASA Opportunities Fund. The fund, to be managed by the 8-year old Auvest Group, aims to raise up to US$ 300 million to boost this expanding sector.

Following three weeks of losses, the DFMI continued its downward trend to close the week 2.9% lower at 4000. Thursday saw increased business with  474 million shares, totalling US$ 297 million, changing hands – compared to 245 million and US$ 114 million the previous Thursday. Both Emaar Properties and Arabtec shares fell – by US$ 0.10 to US$ 2.13 and US$ 0.03 to US$ 0.63 respectively

IAG, the owners of British Airways, has reached an agreement with the Irish government to purchase 25% of their 29% shareholding in Aer Lingus. This will now allow IAG to go ahead with their US$ 1.5 billion offer to buy the Irish national carrier.

The proposed US$ 55 billion acquisition of Time Warner by Charter Communications will result in the new entity becoming the second largest cable company in the US. It was only last year that a US$ 37 billion Charter offer was rejected and a subsequent US$ 45 billion deal with Comcast fell through.

Germany, Italy, Spain and the UK will be the main beneficiaries of Amazon’s decision to declare sales (and consequently pay tax) made in those countries. Prior to 01 May, the company had used Luxembourg to be the recipient of all sales and hence paid tax there which has a lower tax regime. Whether the likes of other so-called tax-dodging companies – Amazon, Apple, Fiat and Starbucks – follow suit remains to be seen.

Following encouraging recent economic data, the Bank of Japan has decided not to proceed further with more fiscal stimulus but has maintained its US$ 422 billion QE programme in place. Q1 data indicated that the country was out of recession but whether this can continue remains a moot point. Furthermore, its current 0.2% inflation rate is well below Shinzo Abe’s target of 2.0% and if the situation is not corrected, it is inevitable that the rate of asset purchases will have to be expanded.

If this has occurred in Australia there is a good chance it is happening elsewhere. It appears that credit cardholders have paid an extra US$ 2 billion over the past four years for the simple reason that greedy banks have not passed on interest rate cuts. Although the RBA started cutting rates in November 2011, the customer is still paying on average 17.0% – instead of 14.25% if the bank had dropped rates in synch.

Latest figures from Australia indicate that the economy is still slowing. Q3 business investment (to March) fell 4.4%, whilst the current annual forecast spend of US$ 115 billion would be 30.7% higher than the US$ 80 billion estimated for the 2015/16 year.

The OECD has reported that the rich are getting richer as the poor go in the other direction. For example, over the past five years, US household disposable income for the country’s top 10% rose by 10.6%, whilst the bottom 10% dropped 3.2%. Furthermore, the OECD overall average of the difference between the incomes of the top 10% and lowest 10% was 9.6 times – in the US 19 times. Inevitably this will ultimately result in both an economic and social backlash with a detrimental impact on growth; a 20-year study (between 1985 – 2005) estimated that income inequality reduced growth by 4.7%.  

Another group that has become rich at the expense of the masses is FIFA. The secretive body, overseen by the 79 year-old Sep Blatter, has allegedly been the centre of numerous financial scandals. The so-called mafia-like supremo, Don Blatterone, has been associated with the football organisation for 40 years, 17 of which has been as President. Despite seven top officials being indicted on fraud, money laundering and racketeering charges, the man in charge refuses to take any responsibility for their actions. Although the deluded gentleman thinks he is the only person fit enough to run FIFA and he  will get elected this Friday for another term, his days are surely numbered. This meglomaniac despot is Livin’ On Borrowed Time!

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