Summer In The City

Posted on May 24, 2015 by howesdubai

DPWorld-championshipAnother report shows that the much vaunted major correction in residential prices has yet to arrive. Cluttons indicated that Dubai prices fell by only 0.8% in Q1, and only 0.5% lower over the past twelve months. However, it was noted that 2014 activity, with only 1.3k villa sales, was 52% down year on year whilst Q1 has been 36% lower. The main driving forces have been the Dubai 2014 introduction of a 4% registration fee and the federal mortgage cap, whereby bank lending has been topped, in most cases, at 75%.

It is estimated that over the next decade, Dubai World Central will add 20k hotel rooms to the ever growing Dubai portfolio, as the US$ 32.7 billion Al Maktoum International Airport starts to increase its capacity to an expected 200 million. To date, four hotels – Studio M (750 rooms), Holiday Inn (700), Millennium (400) and Aloft (150) – have confirmed that properties will be built in the area.

At the same time, MAG Property Development and MBM Holding have announced the launch of a US$ 191 million affordable homes project in DWC which will encompass over 1k housing units. Phase 1 of the 800k sq ft development will start in Q4 and be completed within 30 months.

There were two real estate developments announced this week. Jumeirah Golf Estate’s AlAndalus, with 75 townhouses and 550 apartments on offer, will have prices starting at US$ 163k. (The company also reported a 68.0% hike in 2014 profits to US$ 117 million). Dubai Properties will launch its  Arabella Townhouses, located close to Mudon Central Park, on Saturday; GEMS is expected to open a school in September 2016 and there are plans for a 64k sq ft community centre.

IMG Worlds of Adventure has appointed Novo Cinemas to open a multiplex cinema in their temperature controlled indoor theme park – the biggest in the world. The park, set to open later in the year, will also have four separate  themed  zones – Cartoon Network, IMG Boulevard, Lost Valley and Marvel – and expects to host 20k visitors daily.

Meanwhile MAF Cinemas has announced a US$ 272 million enhancement and expansion plan with the aim of attracting an additional 50 million patrons over the next five years. In Q1, Vox Cinemas reported a 50% increase in cinema admissions in its ten UAE and three regional venues.

Although the number of Russian tourists fell by 23.5% last year, its impact on Dubai’s tourism sector will not be as bad as some analysts had forecast. Numbers from the other top ten source markets have increased by over 8% and emerging markets – such as Brazil, China and Nigeria – have showed double digit growth. As Russia and the CIS accounted for only 3% of total inbound figures, any shortfall has been made up from increased numbers from other countries.

Landmark Group has given a massive boost to Nakheel’s upcoming Al Khail Avenue by agreeing to operate 25 brands, including Centrepoint, Emax, Home Centre and SportsOne. Waitrose and Reel Cinemas will also feature in the massive 1.2 million sq ft retail area which will have over 350 outlets.

One of the most popular burger chains in North America, with over 1.2k locations, is set to soon open in Dubai. The 30-year old Five Guys will open its first ME outlet in Dubai Mall, in partnership with the franchiser, Rise.

Emrill, a JV between Al Futtaim, Carillion and Emaar, has launched a new business unit, Emrill Specialist Services, catering for the growing need for a more focussed approach to facilities management, including consultation and engineering solutions. The company is the leading entity in this sector and hopes that this new initiative will enable it to have a bigger share of the market that is expected to reach US$ 5.5 billion by next year.

According to a recent CBRE report, London is the number one shopping destination in the world with Dubai again in second slot followed by Shanghai, New York and Singapore. Last year, the emirate attracted 55.7% of international retailers including 55 new brands to Dubai.

The CEO of the 130-store Lals Group, Jayant Ganwani, thinks that Dubai is becoming too expensive for the retail shopper citing that there has been a 20% reduction at the top end of the market. The smart shopper who used to come to Dubai to bag a bargain now realises that prices elsewhere are cheaper and that the emirate could be pricing itself out of the market. He expects that there could be further decline this year – up to 10% in the mid-market sector and even more at the luxury end.

This “fear” factor might even be spreading into the hospitality sector which may be smarting from the decline in Russian tourists, a strong currency (being pegged to the US$) and regional problems which have been reflected by lower occupancy rates and revenue reduction.

The there is the on-going debate about the high cost of rentals, education and other living costs rising a lot quicker than remunerations.

Not surprisingly, the Burj Al Arab has won the Daily Telegraph’s Best Hotel in the World for the third year in a row.

Benfica is the latest beneficiary of Emirates’ largesse as the airline has just signed a three-year shirt deal with Portugal’s most popular club. The airline has been flying to Lisbon for almost three years and has confirmed a second daily flight to the capital.

This week, DP World extended its sponsorship, to 2020, of the US$ 8 million World Tour Championship. This is the final event of golfing’s The Race to Dubai which attracted 55k spectators last year and added over US$ 50 million to the local economy.

Dubai World Trade Centre became the latest in a long list of Dubai’s free zones this week. The aim of the exercise is to boost conferences and exhibitions in the emirate as well as to attract investment.

Citigroup reported that its credit card base in the UAE expanded 2.5 times over the past year, as its consumer lending rose by 10.0% in Q1.

The DIFC has licensed another investment bank. Audacia Capital, founded by Emad Mansour, has a US$ 27 million capital base and will target regional investment opportunities of between US$ 15 – US$ 50 million.

The United Investment Bank Limited has been fined US$ 56k by the Dubai Financial Services Authority for contravening a number of the authority’s regulations relating to money laundering systems and controls.

Following its November 2008 delisting and a long debt restructuring process, involving US$ 2.7 billion, Amlak Finance will rejoin the DFM on 02 June.The mortgage lender, 45% owned by Emaar Properties, reported Q1 profit down 62.5% to US$ 1.6 million.

The Dubai health and education investment company, Amanat Holdings, has purchased a 4.14% shareholding in Al Noor Hospitals for US$ 68 million. The company listed on the Dubai bourse in November with a share value of US$ 0.22 – at Thursday’s close, the share was trading at US$ 0.18.

Following two weeks of losses, the DFMI returned to profit to close the week 1.1% up at 4119. Thursday saw continued soft business with only 245 million shares, totalling US$ 114 million, changing hands – it does seem that summer has arrived early this year. Emaar Properties rose US$ 0.09 to US$ 2.23 whilst Arabtec Holdings stayed flat at US$ 0.66. 

Over the week, both Brent crude and gold headed south by US$0.79 to US$ 66.59 and US$ 17 to US$ 1,209 respectively. The benchmark oil price has had a roller coaster year reaching US$ 115 last June before sinking to US$ 46 earlier this year. It is anybody’s guess what will happen at the upcoming OPEC seminar in Vienna but it is unlikely that any firm agreement can be reached about setting quotas for producing countries – both in and out of OPEC. With so much apparent manipulation in the gold market, it is impossible to gauge what will happen to prices of the yellow metal.

The US$ continues to post strong gains against most other leading currencies. Since November, the US Dollar Index – a wighted basket of six currencies to the US$ – has risen from 85 to 95. With the eurozone still struggling and the ECB beginning its quantitative easing programme in earnest, a further strengthening of the greenback would not be a surprise.

As expected, and not for the first or last time, international banks have been hit with mega fines for cheating. This time, Barclays, Citigroup, JP Morgan, RBS and UBS will have to pay US, UK and Swiss regulators a total of US$ 5.7 billion for on-going manipulation of the forex market and rigging benchmark interest rates. It is about time that the perpetrators – and not the victims (consumers and investors) – are called to task and that grovelling apologies will no longer suffice.

This week the Japanese Nikkei hit a 15-year high mainly due to the low yen and an economy growing at a faster rate (2.4% for the year and 0.6% in Q1) than expected. However, this may be a blip for an economy that only came out of recession last year with problem areas such as stagnant wages, falling industrial production and weaker capital  spending to be resolved before Abenomics can finally be declared a success.

May’s preliminary HSBC purchasing managers’ index for China came in at a disappointing 49.1 – any number over 50 indicates expansion, below contraction.This reading shows that the economy is still sluggish and that authorities should be considering further stimulus measures. 

For the first time since 1960, the UK CPI moved into negative territory at -0.1%. Although both Chancellor George Osborne and Bank of England supremo, Mark Carney, reckoned that this was not damaging to the economy, there are fears that it is a portent that all is not well. Although falling prices and rising wages are good news to consumers, in the long term an economy has to grow and with deflation this cannot happen. 

Unless something drastic occurs, there is no way that Greece can meet its short-term debts, amounting to over US$ 19 billion, including to the IMF (US$ 2.4 billion), ECB (US$ 7.5 billion) and other external creditors (US$ 9.1 billion). At the end of June, it will also need to find US$ 2.4 billion to pay public sector salaries and pensions. It would seem that social discontent will be inevitable so Athens is one place not to go this year for a Summer In The City.

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Art For Art’s Sake

Posted on May 20, 2015 by howesdubai

picassoThe latest annual US$ 1.5 billion profit from Emirates has given two major stakeholders a welcome boost. The owners, ICD, saw its dividend increase to US$ 1 billion, whilst the 84.2k staff members were rewarded with a US$ 272 million bonus – equivalent to nine weeks’ salary. Emirates Airline contributed 83.3% of the Group’s profit, as its revenue jumped 7.0% to US$ 24.2 billion with dnata’s profit share being US$ 247 million, with revenue soaring 36.0% to US$ 2.8 billion.

Dubai welcomed 8.2% more tourists last year as the figure reached 13.2 million, well up on the global increase of 4.7%. Major growth markets saw double digit increases from countries such as Brazil, China and Nigeria, with 55% of the total coming from ten source markets.

Spain’s RIU Hotels & Resorts, in conjunction with Nakheel, is to build Dubai’s first all-inclusive beach resort on the developer’s 15.3 sq km Deira Islands. This 750-room 4-star project is just one of ten hotels that Nakheel’s burgeoning hospitality sector plans to build in Dubai before 2020.

Next year, Four Seasons will open its second Dubai property in DIFC, following the success of its 2014 launch of its Jumeirah Beach Resort, whilst Rixos will also open a new hotel in JBR.

Starwood Hotels is planning three further Dubai properties totalling 550 rooms – under its Aloft and Element brands. Two will be located near to the Dubai Airport, with the other being the 150-key Aloft Dubai World Central.

With 18 hotels already in its Dubai portfolio, InterContinental Hotels Group has plans for a further ten, scheduled to open over the next five years.

Juma Al Majid currently has one hotel but is expected to add three more, totalling 1k rooms, over the next three years.

The latest announcement from Damac is the proposed 1 million sq ft entertainment and cultural Vista Lux which will include 1.5km of walkways and a canal, as well as 2k hotel apartments and residences. The entertainment and retail district will be the focal point of Damac’s Akoya Oxygen development.

With almost 50% of its infrastructure already in place, the US$ 2.9 billion theme park, being developed by Dubai Parks & Resorts, is on track to be ready by October 2016. The 2.3 million sq mt development, comprising three separate branded parks and a Marriott-run hotel, is expected to attract 6.7 million visitors, with revenue of US$ 654 million in its first year of operation.

The luxury residential property crash expected by many analysts has so far failed to materialise. Latest figures from Knights Frank show an annual fall of just 1.1% and a half-yearly drop of 1.9%.

Diamond Developers expect to complete phase 1 (comprising five residential clusters totalling 500 villas) of its US$ 300 million Sustainable City project in Q3. The second phase – including an eco-resort, country club, museum and a school – will be ready by December 2016. When finished, the 46-hectare development, located in Dubailand, will be home to 2.7k residents.

Two related companies – Arabtec and Drake & Scull – are going through a rough patch. The former reported a US$ 76 million Q1 loss (compared to a US$ 35 million profit over the same period in 2014) whilst the latter saw its Q1 profit tumble 37.7% to US$ 7 million, as revenue fell 11.2% to US$ 302 million. (However, the mechanical, electrical and plumbing contractor did receive some good news with the award of a US$ 79 million contract for a local mixed use development, bringing this year’s order book to US$ 272 million).

Amlak Finance came in with disappointing Q1 results, with a 76.9% fall in Q1 profit to US$ 1 million, due to amortisation charges. The company is still on track to recommence trading on the Dubai bourse, after being delisted in November 2008.

Enoc is investing up to US$ 136 million, as it adds a further 30 new Zoom stores this year to bring its total number of outlets to 200. The Dubai-based fuel retailer has also acquired franchise rights to an Italian coffee range and the US Paavo’s Pizza, as it moves aggressively into the F&B segment. Not forgetting its core business, Enoc plans to open a further 50 gas stations before 2020 which will see its portfolio increase by 83% to 110.

Dubai-based Pure Gold is planning a US$ 136 million investment that will see the jeweller double its outlets to 250 by 2020. This expansion will see its staff numbers grow by 75% to 5.5k. The company also owns factories in India and China.

Mediclinic ME is to spend US$ 191 million to build a 150-bed general hospital, ready for opening in 2018. The company currently has 12 medical facilities in Dubai, including two hospitals in Healthcare City and Al Garhoud, with Mediclinic City hospital due to open next year.

It has not taken long for Al Maktoum International to become one of the 20 busiest cargo airports in the world. Q1 freight volumes were up an impressive 177% to 213k tonnes, whilst passenger traffic was up 40.4% to 143k.

Q1 was a busy time for the RTA with 44.4 million passengers using the Metro and a surprisingly high number – 944k – riding the recently launched tram. The three busiest stations on the Metro were Deira City Centre (1.83 million passengers), Union (1.80 million) and Al Fahidi (1.79 million).

DP World is hoping to raise a further US$ 500 million funding by dint of a 5-year bond but no definite plans have been released.

The recently listed Marka Hospitality has bought Reem Al Bawardi for a reported US$ 86 million. Its founder, Ayman Abdel Jaber, who turned the company into one of the largest home grown hospitality brands, will join Marka in an advisory capacity. Seven new outlets are planned for this year, with two in Dubai and five in the MENA region.

Following five consecutive weeks of gains, the DFMI has reversed the trend in the first two weeks of May to close Thursday (14 May) 3.7% down on 4073. This represents a fairly mild correction after the Index had jumped 20.3% in April. Bellwether stocks, Emaar Properties and Arabtec, fell by US$ 0.10 and US$ 0.15 to close on US$ 2.14 and US$ 0.66 respectively.

Brent crude, ending the week on US$ 66.59, still heads north but these relatively high prices will encourage more supply to enter the market. Rising production – allied with high inventory levels – will probably see prices peaking at the US$ 70 level.

Gold ended the week on US$ 1,226 having broken out to three-month highs, with the possibility of adding a further US$ 60 in the near future. The main drivers for this surge are a raft of negative US economic data, which reduces the chance of an early interest hike, and the on-going Greek crisis.

The Greek tragedy continues and its final day of reckoning is fast approaching. The country has still not come to grips with the troika’s demand for labour market deregulation, the rehiring of 4k civil servants and pension reform, before it can receive a further payment of US$ 8.1 billion. With a debt to GDP ratio of 177%, a 26% unemployment rate and a 25% fall in its GDP since 2010, the outlook is bleak.

The art world witnessed two records this week with the most expensive auction sales of a painting and a sculpture. Picasso’s “Women of Algeria” sold for US$ 160 million (exc the 12% commission) beating the previous record of US$ 142.4 million for Francis Bacon’s “Three Studies of Lucian Freud”. Alberto Giacometti’s “Pointing Man” went under the hammer for US$ 141 million. Paul Gaugin’s “When Will You Marry” holds the current record price for a painting when it sold earlier this year for US$ 474 million.

As with gold, art is an illiquid asset and one that does not pay interest or dividends, with no guarantee of capital appreciation. (However, a Peter Doig painting “The Architect’s Home in the Ravine”, sold at auction in 2002 for US$ 497k and then again in 2013 for US$ 12.2 million). In 2014, the global art market sales topped US$ 70 billion – a sure sign that investors are not just buying Art For Art’s Sake.

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Would I Lie To You?

Posted on May 4, 2015 by howesdubai

arsenal-facupEmirates is on the verge of signing a 3-year US$ 46 million deal with the English FA to sponsor the FA Cup from 2016. Last year, the airline decided not to renew its World Cup sponsorship with FIFA but has deals with several European teams such as Arsenal, AC Milan, Paris Saint-Germain and Real Madrid.

Emirates is planning to expand its cabin crew by a further 25% to 25k by the end of this year as it ratchets up the number of new aircraft to service its increasing route network. This year, the airline will see 15 new A380s which will bring its total number to 72, with a further 68 on order.

With the supply of hotel inventory at 6.9% being higher than the 4.5% March demand, occupancy rates faced another monthly fall of 2.2% to 85.7%. Other indicators – including average daily rate (US$ 267) and revenue per available room (down 8.1% to US$ 228) – headed south. The main drivers for this downturn are declining numbers of Russian tourists and an uplift in tourism in regional rivals such as Egypt and Lebanon. Overall, the outlook is still promising and 2014 did witness a 5.6% hike in guest numbers to 11.6 million and a 9.8% surge in revenue to US$ 6.5 billion.

M.State by Ocean Breeze is planning to build five villas, with a starting price of US$ 9.1 million on frond M of Palm Jumeirah. Each property will encompass 1.25k sq mt,  with at least five bedrooms and their own 28 mt beachfront.

Emaar announced that its first townhouse community sale of 118 units in Mohammed Bin Rashid City was sold out last Saturday – 25 April. Starting prices were listed at US$ 613k.

SKAI has upgraded its planned hotel by signing an agreement with Viceroy to run its Dubai Jumeirah Village property. The US$ 349 million 60-storey building will house a 221-key 5-star hotel, as well as 254 apartments and will open in 2018.

Bloom, a subsidiary of Abu Dhabi’s National Holding, has announced a 30-month project to build a 279-apartment residential tower in Dubai Marina. Work on the new Stella Maris will start next month. 

The Meraas Holding / Bulgari 101-key luxury hotel, being built on Jumeirah Bay Island, should be completed by 2017 – two years later than originally planned. The entire 158k sq mt project will also include 43 large villas, 165 apartments and a marina.

Emaar Malls Group recorded a 31.6% jump in Q1 profit to US$ 118 million, as revenue rose 21.5% to US$ 200 million.

Although Q1 revenue was up 3.2%, to US$ 831 million, du reported a 0.6% reduction in its profit to US$ 133 million, in the wake of higher royalty fees and a 0.9% fall in subscribers to 7.48 million. (This week the telecom operator sold mobile number – 052 222 2222 – to a Mohamed Hilal for US$ 2.2 million, with some of the proceeds going to charity).

DIFC Investments’ Q1 results were mixed with revenue up 22.0% to US$ 182 million but profits dropping 13.6% to US$ 176 million. The main reason for the fall was a 50% decrease in the fair value gain on investments to US$ 33.0 million.

Dubai Holding, a subsidiary of the Investment Corporation of Dubai, reported a US$ 654 million 2014 profit, as its net assets closed the year on US$ 4.55 billion. Another government-owned company, developer Nakheel, more than doubled its Q1 profit to US$ 368 million, as its retail and leasing businesses continued to grow as well as an increasing number of property handovers. At the end of 2014, the company had an outstanding US$ 1.2 billion trade creditor sukuk due for repayment in 2016.

Q1 saw DP World handling 15 million 20-foot equivalent units – a 4.4% quarterly increase and 7.7% year on year. This week, its shareholders approved a motion for the port operator to buy back a limited amount of its shares, although the company stated it had no immediate plans to proceed further with any such purchase. It is reported that DP World is planning a ten year bond up to a value of US$ 1 billion. As with other entities, the port operator seems to be taking advantage of the favourable rates currently at historically low levels.

In 1998, Dubai received 10k cruise visitors and the 2014 figure is over 500k, with an estimated 20% hike in numbers this year. The boom in this sector looks set to continue as the emirate enhances existing facilities.

HH Sheikh Mohammed bin Rashid Al Maktoum has endorsed the building of the US$ 136 million, 25k sq mt  Union Museum, to be built next to Union House – the location of the 1971 signing  of the country’s federation.

Q1 data from the Land Department indicates that property transactions, totalling 11.6k, were over US$ 17.4 billion. Yet again, Indian investors are the leading property buyers in the Dubai market, accounting for 4.8% of all Q1 transactions, totalling US$ 828 million, followed by Pakistanis and British on 2.9% and 2.2% respectively. Land transactions totalled US$ 14.2 billion, with commercial land accounting for US$ 8.2 billion. Over the quarter, there were US$ 3.0 billion of building transactions of which 76.3% (US$ 2.3 billion) related to housing and US$ 600k to commercial. The two most popular buying locations were Business Bay (1.2k transactions totalling US$ 501 million) and Dubai Marina (524 deals worth US$ 493 million).

The Dubai-based investment bank, Arqaam is raising further finance to expand its operations in Saudi Arabia and Africa. The institution has recently acquired several operations, including Bahrain asset manager Instrata Capital, Libya’s Al Rashad Finance and Management Advisory and Egyptian El Rashad Securities Brokerage.

David Haye has apparently had his passport retained by the police following a reported US$ 490k cheque being “referred to drawer”. The former British heavyweight is planning a boxing gym in Dubai and this payment relates to construction costs; he has put the problem down to a minor administration error.

In a bid to ensure that Dubai’s power generation will expand by 20% over the next five years, DEWA is planning to invest US$ 16.3 billion in major projects. Much of the development will be made through private-public partnerships.

A recent BCCI report indicated that the 2014 UAE GDP was some US$ 40 million better off because the IPL playing twenty games in the country. Some 250k spectators watched the game live, with millions viewing worldwide on TV.

A recent Reuters poll has reiterated that growth in the GCC will be lower than initially estimated in 2015 as a result of the fall in oil prices. Dubai’s forecasts for the next two years have been cut from 3.8% to 3.4% and 3.9% to 3.7% respectively.

The DFM was a major casualty of low trading on the local bourse in Q1 which saw net income sink from US$ 59 million to US$ 18 million, as revenue dropped 55.2% to US$ 31 million. Average daily trading was 64.4% down from US$ 463 million to US$ 165 million, mainly because of investor worries over low oil prices.

Following four consecutive weeks of healthy gains, the DFMI rose a further 5.5% to close this week on 4229. Over the month of April, the index has rocketed 20.3% from its 01 April opening of 3514. On Thursday, 30 April, 9.33 million shares were traded with a value of US$ 349 million. Bellwether stocks, Emaar Properties and Arabtec, rose by US$ 0.08 and US$ 0.04 to close the week on US$ 2.24 and US$ 0.81 respectively.

It may be that time of the economic cycle when some zany schemes are put forward. Polish architect, Krzysztof Kotala, has drawn up plans to build an underwater tennis centre in the Gulf. This comes hard on the heels of the Kleindienst Group’s plans to build 42 “floating seahorses” as part of Dubai the World. These 3-storey residences, to be located in The Heart of Europe islands, will have one floor submerged and the other two above the sea line and will cost over US$ 1.4 million. Another developer, the US-based Reef Worlds, has shown interest in constructing “sustainable underwater tourism sites” in the emirate.

The Abu Dhabi-based developer, Eagle Hills, led by Emaar’s Chairman, Mohammed Alabbar, has signed an agreement with the Serbian government to develop central Belgrade. The agreement sees the Abu Dhabi company investing US$ 163 million in share capital, a similar amount as an advance as well as a US$ 141 million loan. In return, it will own 68% of the 1.8 million sq mt development; the project will have 5.7 residential units, 8 hotels and a 140k sq mt shopping mall.

Apple reported impressive Q1 results as revenue jumped 27.0% to US$ 58.0 billion (as it sold 61.1 million iPhones) and profit spiked over 33.0% to US$ 13.6 billion. The technology giant had cash funds of US$ 195 billion. The only downside was the fact that sales of its iPad tablets, at 12.6 million units, were down 23.0% compared to Q1 2014. On the other hand, Samsung saw both its quarterly revenue and profit drop, with its bottom line disappointing analysts, down 40.0% to US$ 4.2 billion. Apple and Chinese competition, along with the appreciation in the South Korean won, were the main drivers behind this slump.

Electronics company, Panasonic returned a 49% increase in Q1 profit to US$ 1.5 billion, despite a marginal 0.3% fall in revenue to US$ 23.6 billion. The weaker yen is helping growth in Japanese exports. One Japanese company that will have its first loss ever will be Asia’s biggest drugmaker. Takeda have agreed to pay US$ 2.4 billion to settle thousands of US lawsuits over claims that it tried to hide cancer risks associated with its diabetes drug Actos.

Chinese authorities will have to introduce measures to stimulate its economy following a surprise slump in March. Latest data indicates that export sales fell by 15.0% whilst imports, down 12.7%, indicate both continuing weakness in domestic demand and that the expected 7.0% growth forecast may not be reached this year. The contagion impact – both regionally and globally – remains to be seen.

It is not all bad news out of China – the country is, after Spain’s 2.51 million acres, the second largest wine growing area at 1.97 million acres. It is estimated that the global trade in wine is US$ 28.6 billion and China expects to take more of the market in the coming years. 

Australia’s terms of trade continue to disappoint the market, down 9.5% for the 12 months ending March. There has been no improvement in this indicator for more than two years.   

US Q1 GDP grew at a meagre 0.2% (down from 2.2% the previous quarter) with authorities still pointing to harsh weather conditions as the prime mover for this unexpected slowdown. The strong greenback and labour disputes on the West Coast added to the country’s economic woes. This has reduced the possibility of any Fed interest rate hike until at least September

Germany’s largest bank, Deutsche Bank, has settled a transatlantic rate-rigging scandal by agreeing to pay a total of US$ 2.5 billion, of which US$ 340 million will be paid to the UK’s FCA and the balance to US authorities. Amazingly, the bank qualified for a 30% reduction for settling the case early.

Barclays has provided a further US$ 1.2 billion to cover the costs relating to forex charges, which now stands at over US$ 3 billion, as well as a further US$ 225 million to cover claims in its payment protection insurance (PPI) mis-selling. Meanwhile RBS has already incurred US$ 5.7 billion to settle allegations of currency rigging as the bank reported a Q1 loss of US$ 675 million, compared to a US$ 1.8 billion profit a year earlier.

Standard & Poor’s has estimated that the four major UK banks – Barclays, HSBC, Lloyds and RBS – have incurred costs of US$ 63 billion over the past five years in relation to conduct and litigation charges. The PPI scandal costs have already reached US$ 39 billion, whilst currency market manipulation and money laundering will add to the banks’ woes. The ratings agency reckons that the banks will incur further charges of US$ 30 billion over the next two years.  The cosy relations between governments and major financial institutions has become an epidemic and take care when either a politician or bankers asks Would I Lie To You?

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Things Can Only Get Better!

Posted on April 27, 2015 by howesdubai

blackpoolfcEmirates is reportedly looking at ordering a further 200 neo Airbus 380s but is still awaiting further information from the European plane maker on enhancement details. Last week, the airline confirmed the US$ 9.2 billion Rolls Royce order to supply engines for fifty of these aircraft (along with service and maintenance) – at the expense of the existing JV of GE and Pratt & Whitney. Emirates is still mulling over an order for between 50 – 70 A350s or 787s.

Reel Cinemas will open a 2-storey, 76k sq ft entertainment centre in Nakheel’s upcoming Al Khail Avenue development, located adjacent to Jumeirah Village Triangle. The facility will host 14 theatres with a combined total of 1.5k seats. The Nakheel development will include 1.25 million sq ft of retail space, 50% of which has already been taken up by tenants.

On Saturday, Emaar – in a JV with Meraas Holding – will launch the sale of 118 Maple townhouses, its first such community in Dubai Hills Estate, located in Mohammed Bin Rashid City.  Meanwhile its Egyptian arm, Emaar Misr, recorded a 562% jump in Q1 profits to US$ 23 million, as revenue rose 110% to US$ 99 million. The Cairo-listed company has an estimated portfolio of investments, totalling US$ 6.95 billion.

The InterContinental Group has signed a agreement with Sunflower to manage a 285-key Hotel Indigo in Business Bay. The boutique hotel, due to open in 2017, will be InterCon’s 19th Dubai property but the first for both the Indigo brand and Sunflower in the emirate.

Government-owned Meraas Holding has awarded a US$ 406 million contract to the UK’s Dutco Balfour Beatty for its Marsa Al Seef development on Dubai Creek. The mixed use project will cover 670 metres of the creek and will include several hotels, along with retail and dining outlets.

Al Mazaya is the latest developer that sees a booming market in the affordable housing sector. The company is launching a US$ 708 million development in Liwan, Dubailand, with studio apartments starting at US$ 95k. The so-called Q Line project will comprise 500 units, housed in four towers and will be completed by 2017.

Arabtec is seeking out finance options in relation to the US$ 36.7 billion development for 1 million housing units in Egypt. Phase 1 will involve the construction of 100k residences.

Dubai-based Habtoor Leighton Group has won a US$ 95 million contract to build the 112-key Saraya Bandar Jissah hotel in Oman, to be managed by Jumeirah Group. Completion is expected within two years.

Another week sees another two housing reports. Surprisingly, the expected fall in rentals did not materialise in Q1 with the largest quarter on quarter increase of 15.3% recorded for studios. Bayut reports that Dubai apartment prices rose by up to 5.8% (to an average US$ 58.6k) in Q1 but that with 25k new properties entering the market this year, there will be the inevitable downward pressure on rents.

Q1 reporting season has started in earnest with five of the heavyweights reporting impressive results. Dubai’s largest financial institution, Emirates NBD (55.6% owned by the Investment Corporation of Dubai), posted a 60.6% hike in quarterly profits to US$ 455 million. Etisalat recorded a 7.6% rise in net profit to US$ 594 million, as revenue grew by 30.3% to US$ 3.52 billion. Dubai’s third largest bank, Mashreq posted a 13.2% jump in Q1 profits to US$ 177 million. Aramex reported a 9% rise in Q1 revenue to US$ 253 million, as its net profit jumped 10.0% to US$ 24 million. Commercial Bank of Dubai returned a 3.6% hike in Q1 profit to US$ 80 million, as operating income rose 9.7% to US$ 158 million.

Despite Damac’s Q1 profit dropping 38.1% to US$ 216 million, revenue was well up to US$ 488 million. Last year the developer benefitted from a one-off credit gain and if this is taken out, its Q1 profit would have been 3% higher than the corresponding 2014 figure.

Although Dubai Aerospace Enterprise saw only a marginal increase in Q1 revenue to US$ 2.11 billion, its bottom line surged 42.9% to US$ 160 million. The government-owned aircraft maintenance and leasing company employs 3.5k and has a portfolio net value of US$ 3.65 billion, with an order for 40 new ATR-600 aircraft.

Last year, BMW recorded a 23% hike in ME luxury car sales and Q1 continues with a  positive 11% rise, as 8.3k vehicles were traded. The UAE remains its largest market with 58% of its total ME sales of which Abu Dhabi accounts for 3.4k units and Dubai 1.4k.

Dubai World Trade Centre is planning to increase its footprint by 14.5% to 122k sq mt. Construction on the three new halls and a 300 car park area will commence shortly and completion is expected within a year.

Sheikh Mohammed bin Rashid Al Maktoum has introduced a new law controlling charity collections and fund raising. In future, prior written approval has to be attained from the Islamic Affairs and Charitable Activities Department and violation penalties include a jail term of two months to one year and fines of between US$1.4k to US$ 27.2k.

Siemens has won a 3-year, US$ 400 million DEWA contract to expand Jebel Ali’s M-Station power plant by 34% to 2.76k MW. The original power and desalination plant, the largest in the emirate, cost US$ 2.72 billion.

The UAE Energy Minister, HE Suhail bin Mohammed Faraj Faris Al Mazrouei, has confirmed that the country is planning to raise oil production to 3.5 million bpd over the next two years, along with a 55% increase in local refining capacity to 1.1 million bpd. Interestingly, the UAE holds 4% of the global oil reserves and 3.5% of global gas. The country’s future demand for energy is expected to increase by 9% per annum, in line with growth forecasts.

The latest World Trade Organisation’s Report confirms UAE’s ranking as the 16th top global exporter, as well as being the leading MENA merchandise exporter at US$ 359 billion, accounting for 1.9% of all world trade. In relation to import services, it ranks at 19th at US$ 72 billion, equivalent to 1.5% of all global imports of services.

Noor Bank, whose shareholders include Dubai Holding and the Investment Corporation of Dubai, has joined a growing list of Dubai entities tapping into the sukuk market. Its first foray into the sector sees a 5-year US$ 500 million issue, priced at a spread rate of 130bp.

Dubai-listed retailer, Marka has acquired a 60% share in Cheeky Monkeys Playland and Sweet Surprises for a reported US$ 8 million. Late last year, it had also spent US$ 60 million on the purchase of Retailcorp from the government-owned Istithmar.

Following three consecutive weeks of healthy gains of 6.1%, 4.0% and 8.7%, the DFMI still managed a marginal 8 point rise to close this week on 4088. However bellwether stocks, Emaar Properties and Arabtec, were down by 2.7% and 3.7% (US$ 0.06 and US$ 0.03) to close the week on US$ 2.16 and US$ 0.77 respectively.

One casualty of the low oil prices is the huge reduction in the ME mergers and acquisitions sector which fell over 71.8% to its lowest quarterly levels in three years. Qatar accounted for 83.3% in value, amounting to US$ 1.5 billion, of activity, all related to the recent Orascom Construction demerger. Qatar also dominated this sector, outside of the ME, with two deals valued at US$ 1.9 billion accounting for 46.4% of total investment.

UK high frequency trader, Navinder Singh Sarao, has been arrested in connection with his role in the now infamous 06 May 2010 “flash crash”, which saw US equities lose over 400 points – and almost US$ 1 trillion – for a matter of minutes. US authorities want him extradited for wire fraud, commodities fraud and market manipulation and his misuse of automated computer software to influence prices.

After five years, the EU has finally lodged a statement of objections against Google on the grounds of market manipulation over the use of its Android mobile platform. It seems that the Competition Commissioner, Margrethe Vestager, has no issue with Google’s dominance in the sector but the way its puts its own products, ahead of competitors, when its search engine is being used.

The UK’s biggest retailer, Tesco, has joined the likes of Cable & Wireless, Lloyds Banking Group, RBS and Vodafone as recording the fifth biggest loss in UK corporate history. The company, founded in 1919, recorded a massive deficit of US$ 9.5 billion largely because of a US$ 10.4 billion write down of the supermarket’s value. Its actual trading profit was down 57.6% to US$ 2.0 billion.

There are reports that the UK’s biggest – and until recently its most successful – payday lender, Wonga is heading for an annual loss of US$ 51 million as its revenue nosedives 31.7% to US$ 312 million. Last year, it had to pay US$ 3.7 million in compensation to 45k customers for sending out demand letters from non-existent law firms and it has made a US$ 29 million provision to cover future legal costs. The company – like the other estimated 400 payday lenders in the country – is facing difficult times, as new legislation has seen an official price cap on loan and repayment charges. Like the two football clubs it sponsors, Blackpool and Newcastle United, it could be on its way down.

Russia recorded its first quarterly contraction in six years as the economy shrank 2.0%, mainly as the result of the international sanctions. Prime Minister Dmitry Medvedev estimated that that they were responsible for the GDP falling 1.5% and a loss of US$ 26.7 billion in potential exports.

There was some good news out of Tokyo this week with Japan recording its first trade surplus – US$ 1.9 billion – in three years, as exports rose 8.5% and imports fell 14.5%. Despite this good news – largely as a result of a weak yen and cheap oil – the annual overall trade deficit came in at US$ 7.6 billion.

On Friday, Greece could default on its loans which could see the country edge closer to leaving the eurozone. Over the next three weeks, it needs to find money to cover interest payments of US$ 85 million (ECB), US$ 213 million (IMF – 01 May) and US$ 810 million (IMF – 12 May). If Friday’s negotiations are successful then Greece could receive an interim US$ 7.7 billion pay-out – if not then the country has finally run out of cash and time. There will be then a massive run on the banking system, an immediate devaluation, double digit inflation and the reintroduction of the drachma. Then watch out for the Russians and / or Chinese entering with so-called international aid (and possible contagion in other Mediterranean countries). Maybe then for Greece, Things Can Only Better!

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Free Fallin’

Posted on April 21, 2015 by howesdubai

tiger-woods-dubaiTomorrow (Friday), Emirates will award a massive engine order for fifty of its Airbus 380s to Rolls Royce, in a deal estimated to be worth in the region of US$ 9.2 billion. That being the case, it will be a massive blow to its current supplier, GE-Pratt Whitney, whose GP7200s are to be found on all its 59 380s currently in use.

HH Sheikh Mohammed bin Rashid Al Maktoum has approved the 2020 Masar Project – an expansion of the Red Line to link with the 2020 Expo site. Starting from the Harbour & Tower terminus, seven new stations and 15km of track, 4km of which will be underground, will be added.

Arabtec will be looking for a new chairman since the current incumbent, Khadem Al Qubaisi, has not been listed on board nominees for upcoming shareholders’ approval. Also missing from the listing is Riad Kamal who founded the company forty years ago and who had resigned as chief executive in February 2013.

Any confusion relating to the future of Mohammed Alabbar’s position as chairman of Emaar Properties was laid to rest as he was re-elected at this week’s AGM. There had been concern that his non-executive positionss with other companies such as Capital City Partners, Eagle Hills and Tradewinds Corporation could be an obstacle to his carrying out his Emaar role. He did disclose that the company had a 235 million sq mt land bank – more than enough for development “for decades to come”. The AGM also approved a US$ 292 million interim dividend payment equivalent to US$ 0.041 per share.

A surprising revelation from Nakheel was that 7.8% of the 9k homes it has built in Dubai have not been claimed by their owners and the government developer has no idea of their current whereabouts.

As already announced, Nakheel is planning to extend the largest overseas Chinese trading hub outside of its mainland. Dragon City will see an expansion, comprising 2.2 million sq ft of retail, 1.3 million sq ft of commercial, 1,120 residential units and a 250-key hotel. On completion, the development will cover an area in excess of 11 million sq ft.

Saudi company, Binladin Contracting Group has been awarded the deep service contract for the Town Square project, including the recently launched Zahra and Hayat Townhouse developments. Nshama is the developer of the mega project encompassing 750 acres, including a 2.5 million sq ft retail area for 600 shops. Meanwhile Al Naboodah Contracting has won a US$ 6.0 million contract for grading works covering the whole project.

Despite marginal Q1 falls in villa prices (1%) and apartments (2%), JLL is still predicting a 10% drop for the year. According to the property company, only 730 residential units were delivered in Q1 with a further 22k due over the next nine months to bring Dubai’s total residential inventory to 401k The office sector is still a problem although vacancy rates fell 3% to 23% in prime locations, as year-on-year rents rose 1% to US$ 512 per sq mt.

LuxHabitat estimates that almost 20% of Dubai’s upmarket residences are normally vacant as overseas owners only use them for holiday homes or just as investment vehicles.

Mövenpick plan to increase its Dubai portfolio to eight with this week’s announcement of a 251-room property in Dubai Media City, following an earlier report of a 246-key hotel in Downtown; both are due to open in 2017.

Almost seven years after receiving payments of US$ 55 million for a golf course that did not materialise, Tiger Woods has reportedly designed a new course at the same location. Damac is developing the Trump World Golf Club which will be the focal point of its 1.5k home-Akoya Oxygen project. The golfer’s design plans will be released in Q2, once tenders have been issued.

A new law will ensure that all found property must be handed in to police within 48 hours – and that finders will be entitled to the lower of US$ 13.6k or 10% of the value of the property.

Another law saw the establishment of the Mohammed bin Rashid Fund for SMEs, with assets totalling US$ 163 million. Two types of funding will be made to Emirati entrepreneurs between the ages of 21 – 65. The Seed Capital Loan will allow direct payments of between US$ 13.6k – US$ 136k whilst the Credit Scheme Loan acts as a guarantor for both start-ups and existing businesses requiring between US$ 136k and US$ 1.36 million. 

The UAE Ministry of Labour reported that the country’s 2014 employment rate rose by about 10% to 4.4 million. Of that total, labourers accounted for 34.0% (1.5 million), the business sector 23.8% (1.05 million) and industry 11.3% (500k). Last year, 1.21 million work permits were issued and 821k terminated. 

Dubai’s inflation rate fell again in March to 4.0%, as a result of the strong greenback and lower global food prices which are at their lowest level in five years. Housing costs – at 7.5% higher than a year ago – are set to fall in 2015 which will see an inevitable dip in the emirate’s inflation but the same cannot be assumed for education expenses and their impact in 2015 remains to be seen.

Although no revenue figures were available, Deyaar Development recorded a 6.0% rise in Q1 profit to US$ 15 million.

Tecom Investments, a unit of Dubai Holding, has closed a US$ 1.09 billion eight-year loan facility. The business park operator will use the funds for general corporate requirements and new developments.

The Investment Corporation of Dubai is back buying hotels with the recent purchase of the W Hotel in Washington DC, a majority stake in New York’s Mandarin Hotel and a minority share in the One & Only in Cape Town.

According to CBRE, the ME sovereign wealth funds cut their 2014 overseas real estate  investment by 33.0%, to US$ 5.84 billion, with the two main drivers being lower oil prices and property becoming over expensive in certain prime locations. Overall investment from all sources fell to US$ 14.1 billion with Qatar (US$ 4.87 billion – 34.5%), Saudi Arabia (US$ 2.30 billion – 16.3%) and UAE (US$ 1.63 billion – 11.6%) accounting for 62.4% of total ME investment. London, Paris and New York were the favoured locations with investments of US$ 4.42 billion, US$ 2.22 billion and US$ 1.35 billion respectively.  (Abu Dhabi holds the second largest SWF, with a value of US$ 771 billion, behind the US$ 817 billion held by the Norwegian Government Pension Fund).

Having already signed agreements, in Australia, Kenya, Singapore and the Southern District of New York, with their respective courts on mutual enforcement of legal decisions, the Dubai International Financial Centre is hoping for a similar Chinese deal.

The Dubai Financial Services Authority slapped a US$ 8.4 million fine on the local branch of Deutsche Bank AG for serious infringements. These included misleading the Authority and failures in internal control procedures.

Qatar has beaten Dubai to become the first ME country to host a yuan clearing and settlement facility in a recent deal with the People’s Bank of China. As 2015 trade with China is set to hit US$ 60 billion, it is inevitable that the UAE will soon follow suit with the DIFC opening a similar set-up with its biggest trading partner.

An agreement between Dubai’s Abraaj Group and Saudi’s TPG sees the two equity houses take a majority shareholding in Kudu, one of he Kingdom’s leading fast food chains. No financial details were made available.

Amlak shareholders have approved a plan for the Dubai-based sharia compliant mortgage lender to re-join the DFMI, six years after its delisting. Last August, the company – 45% owned by Emaar Properties – restructured its outstanding liabilities of US$ 2.7 billion.

Having gained 6.1% and 4.0% over the previous two weeks, the DFMI started trade on Sunday at 3774 and jumped an impressive 8.7% to close at 4080 on Thursday – up 8.11% on its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, both rocketed by over 14% (US$ 0.27 and US$ 0.10) to close the week on US$ 2.22 and US$ 0.80 respectively. The last day’s trading saw volumes at 123.4 million shares, valued at US$ 583 million. 

As Nokia looks certain to acquire Alcatel-Lucent for more than US$ 13 billion, it was no surprise to see shares in the French telecommunications equipment maker fall 8.3% as its Finnish rival’s share price initially jumped more than 18%. If the purchase goes through, the new entity will overtake both Ericsson and Huawei as the biggest global player in the sector. 

The IMF has cut UAE’s 2015 growth forecast to 3.5% citing the main cause of the dramatic fall in oil prices since its last October report. Other factors include the weakening eurozone and political uncertainty in the region. Allied to this is the World Trade Organisation reducing its global trade growth from 4.0% to 3.3% which will again impact on the UAE’s economic performance. It is perhaps significant that this figure is only the second time since WW2 that growth has been so weak; the other time was between 1980 – 1984.

It seems that a US$ 20 billion bilateral oil for goods agreement will mean 500k bpd of Iranian oil being traded for Russian grain, equipment and construction materials. A more significant deal is on the cards after President Putin lifted a self-imposed 2010 ban on the delivery of a S-300 anti-missile rocket system to Iran and this could put Russia in pole position when international sanctions are lifted. 

More worrying economic data from China as March exports dropped by 15%, with import shipments at their lowest level in six years – and 12.7% down on the corresponding 2014 return. As global and domestic demand continues at a sluggish pace, the short-term outlook for the Chinese economy does not augur well.

Iron ore is probably the biggest loser as the result of the Chinese slowdown. S&P has slashed its 2015 price forecast by 30.8% to US$ 45 as the metal’s price has slumped 60% over the past twelve months.. Prices have not been helped by the fact that the world’s four biggest producers – BHP Billiton, Fortescue, Rio Tinto and Vale – continue to increase production to maintain export share.  Australia, for one, is hoping that prices do not keep on Free Fallin’!

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Don’t Ask Me Why

Posted on April 12, 2015 by howesdubai

greece-nazi-germansHH Sheikh Mohammed bin Rashid Al Maktoum made a visit to Nakheel offices this week and was updated on their future developments. Over the next three years, the company expects to spend US$ 3.8 billion on various projects, including the massive 9 million sq ft Deira Boulevard, which will have 3k retail outlets, 2.5k apartments, hotels and a 500 mt long glass dome. The developer anticipates to hand over 1.2k villas this year with a 32.1% increase in the value of new construction contracts to US$ 1.91 billion.

Currently home to three hotels, Dubai Investment Park announced that another eight properties will be added over the next five years in the run-up to Expo 2020. Three of these will include a Premier Inn (303 rooms), Armada Hotel (252) and Courtyard by Marriott (165), as the number of total rooms will increase by 2k. Estimates are that Dubai will require a further 45k rooms, with a US$ 7 billion investment, to meet the Expo demand.

Nshama has launched Zahra apartments with a starting price of just US$ 95k. Phase 1 will see 306 apartments being built on the 750 acre site close to Town Square, near to Al Barsha, which itself will house 18k apartments.

The UAE has become the latest country to join the Asian Infrastructure Investment Bank as one of the 35 founding members. The new financial institution, instigated by China as a potential rival to the World Bank, has a US$ 50 billion capital. Initially, the bank will fund infrastructure projects in Asia and will foster regional and international collaboration to support developing countries.

It is reported that HH Sheikh Mohammed bin Rashid Al Maktoum is planning to build a US$ 30 million car park, adjacent to the Battersea heliport in London.

Later in the month, the DIFC Wills and Probate Registry will become reality. This will allow expats, with assets in Dubai, to register their wills, in English, which will ensure that their final wishes are carried out, thus finally creating legal certainty. Initially, the charges for this new service will be in the region of US$ 2.7k.

Damac has opened two more properties in Downtown – Damac Maison The Vogue and NAIA Breeze – adding 500 rooms to their portfolio in this location. The company has a further 10k hotel rooms and serviced hotel apartments under development.

Habtoor Leighton won a US$ 608 million Qatar contract to build five reservoirs and pumping stations as part of a mega project. This was the 7th project awarded to the Dubai-based company by that country’s Electricity and Water Authority. HLG is 55% owned by the Al Habtoor Group and 45% by the Australian Leighton Contractors (which has just sold its John Holland Group to China Communications Construction Group for a reported US$ 879 million).

Speculation seems to be mounting over the future of Mohamed Alabbar’s position with Emaar Misr, an offshoot of Emaar Properties. He has run the Dubai property developer since its 1997 inception but his other commitments include being a founding member of Capital City Partners who have just won a US$ 45 billion contract to help in building a new city in Cairo.

Recently, there have been major local staff changes at Standard Chartered with the latest being the surprise resignations of its MD, Bejan Roohi, and UAE chief executive, Mohsin Nathani, along with several senior staff. The bank upset many of its SME clients last October by unilaterally closing thousands of company accounts, with little notice.

The UAE has become the latest country to join the Asian Infrastructure Investment Bank as one of the 35 founding members. The new financial institution, instigated by China as a potential rival to the World Bank, has a US$ 50 billion capital. Initially, the bank will fund infrastructure projects in Asia and will foster regional and international collaboration to support developing countries.

Despite the savage cuts in oil prices, the UAE economy continues to show robust signs of growth as March’s HSBC Purchasing Managers Index maintains a level of 56.3 – a score above 50 indicates a net expansion in economic activity. Although the IMF has cut its growth forecast for the country to 3.5%, the dirham – being pegged to the greenback – has risen some 20% over a basket of major global currencies. Furthermore as inflation slows, costs have gone down.

Dubai-based Pacific Control Systems has taken out a six-year US$ 272 million loan facility to finance further expansion activities.

Having gained 6.1% the previous week, the DFMI started the week trading on Sunday at 3615 and jumped a further 4.0% to close at 3761 on Wednesday, and only 0.03% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both up – by US$ 0.04 – to US$ 1.96 and US$ 0.70 respectively.

Two years after UPS pulled out of a US$ 5.8 billion bid for TNT, rival logistics firm FedEx is scheduled to bid US$ 4.4 billion for the Dutch outfit, valuing it at a premium of 33% of its share price of US$ 8.80. Last year TNT reported a loss of US$ 215 million, as its revenue fell 3.2% to US$ 7.2 billion.

Samsung recorded a Q1 revenue of US$ 43.3 billion and a profit of US$ 5.44 billion – 30% down on the corresponding 2014 period. The Korean conglomerate has been struggling to compete with Apple and other Chinese rivals.

Inflation is getting worse in Russia as March data indicates a 16.9% rate, as growth may contract by around 4% this year. Last month, the Central Bank cut rates by 1% to 14.0%, with the rouble strengthening to around the 56 mark to the US$.

Corruption charges against former President Mahinda Rajapaksa continue unabated. The latest involves the 95% government-owned Sri Lankan Airlines, where an enquiry has alleged irregularities in the US$ 2.3  billion purchase of ten aircraft with the former chairman, Nishantha Wickramasinghe, being accused of a “gross abuse of power”; he is the ex-president’s brother-in-law.

A KPMG study has estimated that five banks – Barclays, HSBC, Lloyds, RBS and Standard Chartered – have incurred penalties equivalent to 60% of their total profits over the past three years! This equates to almost US$ 58.0 billion paid out in fines and remedying customer complaints.

Following the near collapse of its banking sector in March 2013, Cyprus became the only eurozone country to introduce capital controls, which have now been lifted. At the time, the country received bailout funds of US$ 11 billion. The divided island lost US$ 4.8 billion – or 25% of its GDP – because of its exposure to Greek government bonds.

In another twist in the on-going row between the Greeks and Germans, the Syriza government is claiming US$ 303 billion, in compensation for wartime occupation and looting by the Nazis during WW2. With no hope that the Merkel administration agreeing to these demands, it seems that Prime Minister Alexis Tsipras will have to explore other avenues to settle his country’s US$ 407 billion outstanding debt.

Following the near collapse of its banking sector in March 2013, Cyprus became the only eurozone country to introduce capital controls, which have now been lifted. At the time, the country received bailout funds of US$ 11 billion. The divided island lost US$ 4.8 billion – or 25% of its GDP – because of its exposure to Greek government bonds.

The UK has introduced the Diverted Profits Tax aimed at companies, like Amazon, Apple, Facebook and Google, who have used ingenious methods to reduce their tax liability. In 2013, these four companies paid a combined UK tax of US$ 48 million on revenue of US$ 25.2 billion. The new levy will see a 25% charge on profits seen to be siphoned off overseas.

In the late 1960s, the then president of Ford, Lee Iacocca, was responsible for the fast tracking of its Pinto model that was known to have safety design problems. The end result was that between 1971 – 1978, there were several fatal accidents that could have been avoided if the required petrol tank modification had been carried out. In 1978, Iacocca was ousted from Ford and joined Chrysler. Nearly 40 years later, the family of a 4 year old boy has been awarded US$ 150 million following his death in a Chrysler Jeep following the rupture of its rear fuel tank. The jury indicted the company for not warning its customers that the tank’s position increased the chance of a fire risk. History should have taught the automaker a lesson but it apparently did not – Don’t Ask Me Why.

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No Shelter From The Storm

Posted on April 7, 2015 by howesdubai

dubai-sandA recent bullish report by the influential Oxford Business Group indicates that Dubai is set for steady growth over the next two years. The study Indicated that investment in five sectors – capital markets, maritime, transport, real estate and retail – will be the main drivers as the emirate moves into a new growth phase. Investor interest will be further strengthened as Dubai plans to introduce PPP (public private partnerships) in many areas.

As usual, there are conflicting reports on the state of the local real estate sector.  Most agree that prices are falling but it is difficult to ascertain by how much and impossible to estimate for how long. The reality is that there is not enough stock coming online to meet current demand and it will be at least another 18 months before any sort of equilibrium is reached. The market will soften over the summer months but will return to normality in Q4 – unless external factors dictate otherwise. 

Having stopped building at the height of the 2008 property crash, Tanmiyat Global has announced that all 500 villas and 67% of the units in its 12 apartment towers have been sold. The US$ 1.9 billion, 14.4 million sq ft, Living Legends development will see 150 villas handed over in Q4 whilst the balance, as well as a 9-hole golf course, hotel, schools and shopping mall, will be added later.

The Cayan Group and Shuaa Capital have tied up to establish a US$ 272 million fund to develop a residential and hotel apartment project on Umm Suqeim Road, due for completion within three years. The Saudi developer, who built the world’s tallest twisted building, the 307 mt Cayan Tower in JBR, will be the main developer whilst the Dubai-based Shuaa will act as investment manager.

The hospitality returns continued to soften into February with falls in room yields (1.3%), yields (5.6%) and occupancy (2.3%), as average room rates stood at US$ 275. Dubai currently has an inventory of 64.2k rooms with an expected 42% increase to 91.2k over the next four years.

Indian hotels are beginning to regain their feel for the Dubai market. The Taj opened its second hotel – a 296-key property in Deira – 14 years after opening here. Mumbai-based Hiranandani Group is planning a 2017 opening for an Accor hotel in Business Bay whilst Suba opened a 4-star property in Deira last year and expects to open a second near the new airport. Interestingly, 809k Indians make up the largest nationality group passing through Dubai International, and the emirate’s second largest source market for visitors.

Emaar has a Saturday sales launch for Downtown Views – a 55-story tower – comprising 418 apartments. The development will be connected, by a travellator, with Dubai Mall and the Metro. 

This week saw the Al Barari launch of The Nest – a 99 villa project. Prices for the four-bedroom residences will start at US$ 2.1 million and will probably be that estate’s final residences to be built.

Dubai Properties announced that all 120 4-bedroom townhouses in its Mudon development have been sold. Hand-overs for phase 1, the 72-townhouse Al Salam, and phase 2, Al Nassem with 112 units, started in January.

Al Shafar General Contracting Co has won a US$ 133 million contract to build Dubai’s Union Museum.

Arabtec has confirmed that a deal has now been reached with Egyptian authorities to start work on the US$ 40 billion project to construct one million homes. Phase 1 will see 100k units being built in Badr and Obour on the outskirts of Cairo.

Union Properties is looking at a US$ 191 million local bank facility to finance upcoming projects.

MAF has announced that it plans to expand its Carrefour outlets into Africa. The Dubai-based conglomerate will open a supermarket in Nairobi in Q4 and expects to double the number of stores over the next five years. The company will soon be opening its Mall of Egypt – covering 163 sq mt, with 400 shops. On the local front, MAF estimates that it has 24% of the 3 million sq ft of planned retail currently in the Dubai pipeline and, this week, announced a Carrefour hypermarket for Dubailand.

A lot of money has been spent on upgrading Dubai International. The new US$ 517 million Concourse D, due to open in Q3, will manage 100 airlines that presently use Concourse C. The facility, with 21 contact and 4 remote stands, will also feature open gates which will allow passengers to board directly from the waiting areas. A further US$ 490 million is being spent on refurbishing Terminal 1 whilst upgrading Terminal 2 will cost US$ 163 million.

Meanwhile Dubai International reported a 5.3% increase in February’s passenger traffic to 5.97 million, despite a marked 35.6% reduction in numbers from Russia and the CIS states. Cargo traffic increased by 1.2% to 191k tonnes, with much of this freight being moved to the new Dubai World Central.

The Canadian Fairview Container Terminal in British Columbia has been bought by DP World for US$ 457 million and will become the Dubai port operator’s second operation in that country, following the Centrem Terminal in Vancouver.

It is reported that there is a new chairman at Drydocks World with the DG of Dubai’s Department of Finance, Abdulrahman Al Saleh, taking over from Khamis Buamim, who had been in the post for nearly five years.

The London Sunday Times reports that Rory Mcllroy has left Monaco to become a Dubai resident. It appears that he will live on Palm Jumeirah but will still pay 12.5% Irish corporate tax on his royalty payments, whilst other income could become tax free.

Lionsgate, responsible for The Hunger Games franchise, has teamed up with Dubai Parks and Resorts to open a dedicated zone at the upcoming motiongate theme park. Opening in Q4 2016, it will feature both related theme park attractions and retail and will form part of the 25 million sq ft, US$ 2.86 billion project.

The Dubai Investment Development Agency reported that 2014 foreign direct investment into the emirate stood at US$ 7.8 billion. 83.6% of business, totalling US$ 6.5 billion, emanated from six countries – US, UK, India, Netherlands, Germany and Italy. Real estate, financial services, hotels and tourism, alternative/renewable energy, business services and IT services accounted for 76.9% – US$ 6.0 billion – of the total.

It seems that plans to allow 100% foreign investment in certain sectors for on-shore companies are progressing. Currently the law is that at least 51% of the shareholding in a limited liability company has to be held by a local, whilst off-shore companies are allowed 100% foreign ownership.

VAT could be a step closer for Dubai and GCC residents as authorities have agreed a general framework for its introduction which will be on the May agenda of a meeting of Ministers of Finance and Economy. The possible rate has yet to be finalised but could be around 5%.

A survey by TNS, the largest global custom market research entity, concluded what the majority of customers already know – there has been a weakening in banks’ client dealings. It concluded that customer expectations were not being met and they are reluctant to recommend any banks. Perhaps these financial institutions could pay their junior staff more and spend some of their profits on proper training.

The Commercial Bank of Dubai is spending US$ 817 million buying UAE company loans from the Royal Bank of Scotland. This comes as the 79% UK-government owned bank is moving out of the MENA region to focus more on its domestic market.

Credit Suisse has amended its grading for UAE equity markets from neutral to overweight. The banks’ analysts indicated that shares’ annual forward earnings estimates were discounted 35%, compared to the MSCI World Index.

Dubai Islamic Bank, 86.5% owners of Tamweel, has made a US$ 0.34 per share offer to buy the remaining balance. With the realty sector continuing to weaken, the bank may be regretting not buying these two years ago when it acquired the majority shareholding in the Sharia-compliant mortgage lender.

The DFMI started the week trading on Sunday at 3407 and, after a slow start, jumped 6.1% to close at 3615 on Thursday, but still 4.2% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both up – by US$ 0.17 and US$ 0.06 – to US$ 1.92 and US$ 0.66 respectively. On Thursday, 565.3 million shares, valued at US$ 228.7 million, were traded.

Many of the Q1 indicators were down on their January opening, with, among commodities, only cotton and silver heading north whilst the London and Sydney bourses did likewise.

 

 

Curr

Unit

01 Jan 15

01 Jan 14

%age

 

31 Mar 15

%age

 

 

 

 

 

 

2014

 

 

2015

Iron Ore

 

US$

lb

73

135

-45.93%

 

63

-8.63%

Rouble

 

US$

 

0.017

0.030

-43.33%

 

0.017

0%

Oil – Brent

 

US$

Barrel

57.33

102.5

-44.07%

 

54.93

-4.19%

Coffee

 

US$

lb

161

260

-38.08%

 

134

-16.77%

Cotton

 

US$

lb

62

86

-27.91%

 

83

33.87%

Silver

 

US$

oz

15.77

20.15

-21.74%

 

16.62

5.39%

Copper

 

US$

lb

2.88

3.37

-14.54%

 

2.75

-4.51%

AUD

 

US$

 

0.81

0.89

-8.99%

 

0.76

-6.17%

GBP

 

US$

 

1.53

1.64

-6.71%

 

1.48

-3.27%

Euro

 

US$

 

1.21

1.38

-8.77%

 

1.08

-10.74%

Gold

 

US$

oz

1,186

1,236

-4.05%

 

1,182

-0.34%

FTSE 100

 

 

 

6548

6730

-2.70%

 

6772

3.40%

 

CS1300

 

 

 

3532

2291

54.17%

 

3480

-1.47%

S&P 500

 

 

 

2091

1831

14.20%

 

1990

-4.83%

DFMI

 

 

 

3774

3370

11.99%

 

3600

-4.61%

ASX All Ord

 

 

 

5415

5352

1.18%

 

5450

0.06%

The top 200 Australian companies saw their H1 profits (to December 2014) sink 26.0% to US$ 19.5 billion as revenues nudged 0.2% higher to US$ 226.6 billion. The February inflation rate of 1.5% is well down on the RBA’s target of 2% – 3%, as the economy remains sluggish, despite the housing bubble.

As some commodity prices slump to new record lows, it will be no surprise to see Australian interest rates cut 25bp to 2.0% sometime in April. Analysts had expected the dollar to fall in tandem with commodity prices but as this has not happened, the RBA could be forced to help out sooner than expected. The flip side of the coin is that lower rates will encourage more speculation in the country’s property market, especially in Sydney where prices rose 3% last month.

Following a 12-month run of posting monthly growth of over 200k jobs, reality set in as the US recorded a disappointing 126k figure for March, with the unemployment rate remaining steady at 5.5%. In March only 62.7% of eligible Americans were actually working or looking for employment – its lowest rate since 1978. Such returns may see a delay in the Fed hiking interest rates.

Just as the UK revised their Q4 growth figures upwards to 2.8%, its highest level in nine years, reports indicated that labour productivity in the country fell 0.2% and, at this level, it is still below 2007 figures. Furthermore, unit labour costs have only risen 1% over the past five years. The disappointing productivity data, along with business underinvestment, may point to the reason why the economy is carrying 1.5% slack. Without a productivity recovery, there will be no marked boost in earnings, tax revenues will remain flat and the government will struggle to reduce the record current account deficit of US$ 37.4 billion.

Former EC president, Jose Manuel Barroso is the latest to attack the efforts of the Greek government in trying to sort out their economic malaise. He accused the Syriza administration of “making completely unrealistic promises” and that its demands were “completely unacceptable to other countries”. Despite a promise to crack down on tax evasion and fraud, it still wants to spend more on raising the minimum wage and increasing pension payments. With the distinct possibility of a sovereign debt default, Fitch dropped the Hellenic country’s credit rating two notches from B to CCC.

On Thursday, Dubai experienced its worst sandstorm for many years but by next day it had cleared. Greece will not be as lucky as its economic time is fast running out and its troubles will not blow away; the country can find No Shelter From The Storm.

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What We Ain’t Got!

Posted on March 29, 2015 by howesdubai

sydney-opera-bridgeHH Sheikh Mohammed bin Rashid Al Maktoum launched the 22 million sq ft phase 2 expansion of Dubai Healthcare City which will cost up to US$ 1.36 billion. It will include the Nashami health project as well as retail and hospitality outlets. This will be a major boost for Dubai as it aims to become a major player in the global healthcare and medical tourism sector.

Union Properties expect work to commence on the five-tower The Vertex in Q1 2016. Located in Motor City, the US$ 300 million project will have 700 residential units and 66k sq ft of retail space, with the first tower ready by early 2018. A separate US$ 117 million, 4-tower development, also in Motor City, will have 200 apartments, with work starting in September.

Arabtec reported disappointing 2014 net profits, down 49.4% to US$ 66 million, largely because of a H1 blow out in general and administrative costs which soared 74.7% to US$ 204 million. The board indicated that it had intervened in June to curb unnecessary expenses – such as suspending some non-core operations including in Pakistan and Russia – at the time the then CEO Hasan Ismaik stepped down. Revenue was up 46.0% to US$ 2.26 billion, with gross profit showing a healthy 68.0% hike to US$ 250 million and the order book up at US$ 2.62 billion. However, Q4 results indicated a US$ 26 million loss which sent the developer’s shares sharply down. Subsequently, the Board has decided to streamline operations and started with plans to sell four of its five Saudi operations in which it has major shareholdings.

As the bottom was falling out of its share price early in the week, Arabtec announced a US$ 283 million Saudi order to build 380 villas in Dhahran for Aramco. The company is also set to soon conclude an Egyptian contract to build 1 million housing units, initially estimated at US$ 40 billion.

For the first time, the British Export Credit Agency has guaranteed a sukuk issue. Emirates has set the initial price for the US$ 913 million facility which will be in the region of 100 basis points over midswaps. The Dubai carrier will use the funds for the acquisitions of four new Airbus 380s.

MAF currently operates over US$ 10 billion worth of property, including 17 shopping malls, 11 hotels and 3 mixed-use communities in the MENA. The Dubai retailer has just appointed Bertrand Julien-Laferriere as its CEO.

Dubai Holding Commercial Operations Group, which manages several entities including Jumeirah Group, Tecom and Dubai Properties Group, saw its 2014 net profits up 42.0% to US$ 1.28 billion, as revenue rose 14.0% to US$ 3.60 billion.

Dubai Investments has gone into a 50:50 JV with the Saudi/Lebanese realty firm, RED House, to manage projects in the Kingdom, the first of which will be a Riyadh industrial park. The set-up, similar to that of Dubai Investments Park, will cover an expanse of 11 million sq mt.

The first tender for work on Nakheel’s Al Khail Avenue will be released later in the month. Located adjacent to the Al Khail Road, the 3.6 million sq ft dining, entertainment and retail hub, with over 350 outlets, will open in 2018.

Ahead of the final formalities in the Dubai World US$ 14.6 billion debt restructure, it seems that Lloyds and Natixis have sold their outstanding debts, whilst RBS has reduced its exposure.

DP World is liaising with the Maldives to further develop that country’s ports and logistics facilities. Negotiations have been going on for some time, as 2013 reports indicated that a JV was to be established with the local government to build an international port.

The Dubai-based port operator has also launched a new company, P&O Ports, to develop and operate marine and inland ports. The company has already signed agreements with clients in Albania, Madagascar and Somaliland to improve their port infrastructure.

According to recent statistics from the Permanent Committee for Labour Affairs, Dubai has 569k labourers working for 3,039 companies.

China – with a 29.0% increase in trade to US$ 47.7 billion – now tops India as Dubai’s leading trade partner. The emirate’s non-oil foreign trade of US$ 362.7 billion comprised imports (US$ 230.2 billion), reexports (US$ 101.4 billion) and exports (US$ 31.1 billion). Further analysis indicates that direct trade US$ 223.1 billion accounted for 61.5% of the total with free zones contributing US$ 133.2 billion (36.7%) and customs warehouses US$ 6.4 billion (1.8%).

In 2014, Dubai International recorded 15.1k flights of the Airbus 380 – 42.3% up on the previous year and well ahead of second placed Heathrow with 5.4k. Meanwhile the airport had an 11.0% rise in revenue, with help from a 15.0% jump in non-aeronautical revenue, accounting for 53.0% of total revenue. The balance came from aeronautical revenue, including aircraft parking fees, which had a 7.0% rise.

UK’s Leslie Jones Architecture has been appointed to carry out commercial design work on the US$ 32 billion expansion at Dubai World Central. Dubai’s second airport will eventually have the capacity for 200 million passengers. DWC, which started passenger flights 18 months ago, will be developed in two phases, with the initial phase, covering 56 sq km, due for completion before Expo 2020.

Unsecured creditors in the liquidation of ES Bankers (Dubai) Ltd discovered there was no money left for them, despite being owed US$ 14 million. Depositors were luckier receiving an 82.7% payment on the US$ 93.5 million owed. The fallen bank was the Dubai arm of the Portuguese Espirito Santo, recipient of a US$ 5.35 billion bailout payment in August 2014.

Al Etihad Credit Bureau seems to have captured a lot of data since its January official opening. It is reported that the company already has information on 2.8 million individuals, representing 97% of the country’s population with a credit history. It estimates that 16.3% (or 65k) of all UAE-registered companies have credit facilities and the bureau is now in a position to give enquirers up to date and detailed information on companies’ financial standing.

Aster DM Healthcare will issue an IPO later in the year with the favoured locations being Mumbai, Dubai or London. It is estimated that 90% of the privately-held company’s revenue of US$ 600 million was from its GCC operations.

Damac Properties announced a 10% bonus share issue.

Borse Dubai, owned by Investment Corporation of Dubai, has sold its 17.4% share in the London Stock Exchange at a share price of US$ 33.6. In 1997, it had bought 28% of the LSE from Nasdaq at US$ 21.1 per share so this sale for US$ 2 billion has returned a tidy profit. There appears to be no hurry to divest itself of its interests in Nasdaq OMX and other stock exchanges, including an 80% holding in the Dubai Financial Market.

Amlak Finance, 48% owned by Emaar, is to have a 16 April shareholder meeting to approve a move for it to resume trading on the Dubai bourse. The company was delisted in November 2008 – at the height of the local real estate collapse and the GFC – as its shares sank to US$ 0.28, having fallen 79% over the preceding six months. Last November, it finally signed a creditors’ restructuring deal.

The DFMI started the week trading on Sunday at 3473 and dropped 1.9% to close at 3407 on Thursday, and 9.7% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both well down – by US$ 0.17 and US$ 0.11 – to US$ 1.75 and US$ 0.60 respectively. Trading on the day was at 488 million shares, valued at US$ 179 million, being transacted. The market was not helped by the escalating problems in Yemen and had dropped 6% in early morning trade on Thursday before recovering. More of the same is on the cards for next week.

Brent crude closed on Thursday at US$ 59.12 – 8.6% up on last Thursday’s close of US$ 54.43. There are fears that the conflict could see Gulf oil supplies being disrupted as Yemen is an important location with European oil supplies passing through the Red Sea, between Aden and Djibouti.

Lloyds is selling its remaining 50% share in TSB to Sabadell, as the Spanish bank made a share offer of US$ 5.08 – 4% higher than the market close last week. TSB has agreed to the US$ 2.54 billion deal that still remains to be approved by the various regulatory authorities in the UK and Europe. Since Sabadell’s offer, the share price has risen 27% in the past two weeks.

A week after the US rebuked the UK for supporting the recently formed China-led Asian Infrastructure Investment Bank, Christine Lagarde has indicated that the IMF would be “delighted” to cooperate with the new banking facility. Now it seems that Germany and France are set to join, much to US chagrin who see the bank as a rival to their “baby”, the World Bank and a method for China to expand its global reach.

According to reports, close allies of the former Sri Lankan president, Mahinda Rajapaksa, have managed to park more than US$ 2 billion in Dubai accounts. This represents only 20% of monies allegedly stashed away overseas. Needless to say, claims have been rejected by Mr Rajapaksa’s cronies.

For the first time since records started in 1988, UK inflation rate dropped to 0% in February, with obvious signs that it may soon fall into negative territory. The rate will hover around the zero level for most of this year, with the worry being that if prices fall much further than the danger of stagflation becomes more probable. A drop in economic activity will occur as companies and individuals defer purchasing.

A mega deal will see Kraft and Heinz, owned by Warren Buffett’s Berkshire Hathaway Inc and the Brazilian private equity firm, 3G Capital, merging to form the 5th largest food and drinks company in the world.  Kraft Heinz will have combined revenue of US$ 28 billion and expects to save US$ 1.5 billion in annual costs.

In the complicated global telecoms world, it has been announced that Spain’s Telefonica will hive off UK’s O2 to Hutchinson Whampoa from Hong Kong for a reported US$ 15.4 billion. The deal, which will take over a year to finalise, is subject to regulatory approval as the buyer already controls the 3 Network in the UK. Last November, BT pulled out of talks to buy O2 and bought EE for US$ 18.6 billion, whilst five months earlier Vodafone paid US$ 8.0 billion for the Spanish cable firm Ono.

As Australian property prices, particularly in Sydney and Melbourne, hit record highs, it seems that a big correction will occur sooner rather than later. When a property bubble is inflating, speculators tend to push prices up in the hope of a quick capital gain and this is exactly what is happening. For the past two years, 50% of all new lending in NSW is by investors which have pushed prices up beyond what would be considered a true market price. Just like Dubai six years ago, there could be major fall-out when the inevitable correction occurs.

It is no surprise to see that Greece’s February state revenue was down 11% from its target, at US$ 8.43 billion – a shortfall of US$ 1.04 billion. As it is still in the throes of finalising term and payment details with its creditors, the outstanding bail-out funds from the troika remain unpaid until an agreement has been completed.

On Wednesday, eurozone authorities advised the Tsipras government that it would not be receiving an expected US$ 1.3 billion for its bank recapitalisation fund. In the absence of incoming funds that come 09 April, the date it needs to repay the IMF part of its bailout loan, there is the distinct possibility that, for Greeks, money is What We Ain’t Got!

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The Times They Are A Changin’

Posted on March 21, 2015 by howesdubai

pyramids-egyptProperty developer Nakheel has defended its right to increase villa extension application fees which, in some cases, have risen quite dramatically. Prior to September 2014, the standard tariff ranged from US$ 41 per sq ft in its Jumeirah Village development to US$ 163 in Palm Jumeirah. Then it was announced that the fee would be raised to US$ 545 per sq ft for Palm residents wishing to add an extension to their existing property. Although its tenants are none too happy with this development, Nakheel is holding firm. (In contrast, residents living in an Emaar development are subject to a flat US$ 545 fee).

St Regis Hotel announced Dubai’s first polo resort in association with the Al Habtoor Group. The 136-room hotel will be the focal point of the development that will include a polo club, 24 luxury bungalows, 138 villas, 500 stables and several restaurants.

A new Knight Frank report estimates that H2 Dubai villa prices fell 6.2% but for the year showed a marginal 0.8% increase.

Landmark Group is planning to invest US$ 41 million, over the next three years, in adding a further 20 iCARE clinics to its current Dubai portfolio of six.

Dubai Investment Properties (DIP) has signed an agreement with Yotel to operate a 42-storey, 438-key hotel adjacent to the new Dubai Water Canal Project. The development will also include 127 serviced apartments and should be finished within three years. The Kuwait-managed company currently runs four establishments in New York and has seven more under development.

A new  US$ 108 million JV between two Dubai-based companies – Habtoor Leighton Specon and Drake & Scull – will carry out all the mechanical, electrical and plumbing on the upcoming US$ 1.1 billion Jewel of the Creek project. The work involves five tower blocks (of between 15-19 storeys), including residential, hotel and serviced apartments, and is slated for completion by June 2017.

It is reported that the Al Futtaim Group will close three of its stores in Singapore citing that there are too many malls and not enough shoppers in that city. One Marks & Spencer outlet and two John Little stores will soon shut down. The Dubai-based company still controls Robinson & Co which includes John Little, Marks & Spencer, Principles, Trucco, River Island and Fat Face in its portfolio.

MAF announced that it is planning to invest a further US$ 590 million in Egypt, in addition to the US$ 2.4 billion already scheduled for projects earlier. This last tranche will be used for the construction of four shopping malls and several VOX cinemas in Greater Cairo. The property developer is not the only Dubai entity that sees great opportunities in rebuilding that country’s shattered economy and infrastructure.

Egypt is planning to spend nearly US$ 45 billion establishing a new capital for 7 million. Located east of Cairo, the area will cover 700 sq km and should be completed by 2022. The announcement was made at a major investment conference in Sharm el-Sheikh attended by HH Sheikh Mohammed bin Rashid Al Maktoum and Egypt’s president, Abdel Fattah El Sisi. Emaar chairman, Mohamed Alabbar, signed the land deal with Minister of Housing, Mustafa Madbuli.

However, despite all the recent hype relating to mega projects in Egypt, it is reported that Emaar is not involved in the development of the new capital city. It appears that Capital City Partners, a private real estate investment fund headed by its founding partner, Mohamed Alabbar, will manage the new city’s construction.

According to reports, Arabtec has already agreed some of the terms with Egypt’s Housing Ministry relating to the US$ 40 billion project to build one million houses. A potential sticking point, prior to the final contract being signed, is the number of gratis units to be handed over in lieu of the land payment.

JAFZA reported a 9.8% hike in 2014 revenue to US$ 458 million, as its debt level fell 6.2% to US$ 1.23 billion. Profits were higher following a one-off gain from Dubai World which acquired the Economic Zones World, the parent company of JAFZA, for US$ 2.6 billion last December. (It appears that DP World will also take over the US$ 859 million net debt).

Meanwhile DP World recorded an 11.7% jump in profit to US$ 675 million, as revenue rose by 11.5% to US$ 3.41 billion. A US$ 0.235 dividend was approved.  At the end of 2014, the company had 77 million TEU capacity, with a further 8 million twenty-foot equivalent units to be added this year, with new facilities coming on line in Turkey, India and the Netherlands as well at Jebel Ali.

It seems that DP World’s majority shareholder, Port and Free Zone World, (a subsidiary of DP World) has finalised a US$ 1.1 billion, 5-year loan to be utilised for meeting its upcoming financial commitments. The facility is reportedly priced at 2.25% points above Libor – a much better rate than the 3.5% it paid on a September 2011 loan.

Dubai Silicon Oasis reported 2014 revenue of US$ 138 million as profit jumped 43%. Over the year, the freezone operator saw a 28.9% increase in operating companies to 1.15k, 63% of which were in the IT sector.

Several government related enterprises (GREs) are planning a seven-day exhibition in Beijing to showcase what Dubai has to offer, with the aim of expanding trade and tourist links. Over the past year, trade has risen by 27.0% and now stands at over US$ 34 billion for the first nine months of 2014. It is estimated that Dubai is home to at least 200k Chinese who run over 3k companies. Tourist numbers have shown healthy increases in recent years and the 25% rise last year saw numbers top 344k.

Du shareholders approved a dividend of US$ 0.054 per share, in addition to the US$ 0.033 interim paid earlier. This follows the 22.8% hike in 2014 net profit before royalty of US$ 1.01 billion.

Dubai-government owned Enoc is looking at buying out the remaining 46% shares it does not currently own in Dragon Oil. The offer made last Friday was at the market price (US$ 7.37) plus an undisclosed premium. Since then the share price has risen and closed on Thursday at US$ 8.72 – 17.2% up on its 15 March price of US$ 7.44.

Dubai has a monorail, a metro and a tram system and now Emaar is currently testing a trolley tram for use in Downtown. When testing is finished and stations built, the hydrogen and electric-powered trolley trams will operate across the whole 7km span of the area.

The latest business to be listed on the local bourse will be Daman Investments. The asset management firm, established in 1998, will sell 55% of its shares in the IPO with listing taking place in April; the company will be hoping that market conditions have improved by then. Three years ago, the company privately sold a 22.7% stake for US$ 120 million.

The DFMI started the week trading on Sunday at 3708 and dropped 6.3% to close at 3473 on Thursday, and 8.0% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both down by US$ 0.14 and US$ 0.08 to US$ 1.92 and US$ 0.71 respectively. Trading on the day was low with 196 million shares, valued at US$ 157 million, being transacted; total market capitalisation was at US$ 25.4 billion.

Another major bank has been caught for illegal activity. Germany’s Commerzbank has had to pay US authorities US$ 1.45 billion for breaking sanctions in dealings with Iranian and Sudanese businesses. Belatedly, the country’s second biggest bank has indicated that it will address the deficiencies highlighted by the US authorities. Last year, BNP Paribas paid a massive US$ 8.9 billion whilst the likes of Standard Chartered HSBC and Credit Suisse have been apprehended for similar illegal behaviour. 

Although Cold Play’s Chris Martin and Gwyneth Paltrow had a successful decoupling last year, it seems that the US is having difficulty in decoupling from the rest of the global economies. The outcome from this week’s long-awaited Fed meeting was that it was in no hurry to lift rates and the pace of any future rises would be slower than initially expected.The dollar’s strength is curtailing economic growth, making US exports more expensive and not helping the country’s too-low inflation – 0.2% in January. However, the first rate hike since 2007 will still occur this year but a little later than analysts had expected and then watch what capital outflows from emerging economies will do to the markets.

The IMF chief, Christine Lagarde reiterated what many already know – the global recovery “is too slow, too brittle and too lopsided”. She warned eurozone and Japanese authorities of the risk of continuing low growth and low inflation which, in turn, will result in high unemployment and rising debt levels.

Brent closed on Thursday (19 March) at US$ 54.43, as market indicators point to more turmoil in the market. Kuwait reiterated OPEC’s stance that there is no other alternative but to continue to produce at current levels in an oversupplied market just as Saudi sees recent output up some 3%, touching 10 million barrels per day, and exports rising to 7.5 million. Furthermore US stock levels – at 458 million barrels – are at record highs. The dollar plays an important role in pricing oil – a strong greenback will result in reduced demand for commodities, including oil, denoted in US$, with the opposite impact when the currency weakens.

An embarrassing week for Lufthansa’s CEO Casfar Spohr. The German airline has apparently joined three major American airlines in alleging that Emirates receives an unfair advantage with fictitious government subsidies. As a result, he thinks that this gives the Dubai operator an unfair advantage which could ultimately destroy its competitors and eliminate consumer choice. A day later, Lufthansa pilots began a 3-day strike action beginning Wednesday, and affecting the whole of the carrier’s schedule. Maybe Herr Spohr should put his own house in order first and stop blaming non-existent external factors for Lufthansa’s deficiencies. The Times They are A Changin’.

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Shake It Off

Posted on March 18, 2015 by howesdubai

nakheel-monorailAlthough Abu Dhabi recorded a 14.7% 2014 growth in the luxury residential property sector, Dubai only managed a marginal 0.3% price increase, compared to 17.0% the previous year. The Knight Frank’s Prime International Residential Index had Muscat, at 13.2%, the best performing in the GCC and ranked 8th globally. New York topped the ranking with an 18.8% hike whilst, at the other end of the scale Singapore contracted by 12.4%.

According to Luxhabitat, there were surprisingly only 420 sales of villas and 356 apartments, costing more than US$ 1.36 million, in Dubai last year. The most popular sale areas for villas were Arabian Ranches, Palm Jumeirah and Emirates Hills whilst Downtown, Dubai Marina and Palm Jumeirah were the top three locations for apartment sales.

Meanwhile the Palm’s first large scale commercial project will incorporate a 200m observation tower and will have the existing monorail run through the middle of the upcoming Nakheel Mall. Covering an area of 300k sq mt, the project will also include a 200-key 5-star hotel and 500 serviced apartments.

Nakheel also announced the completion of 90 villas in Jumeirah Village Circle, with delivery slated to start in April. This is part of a 570 hectare development, which will eventually house 250k people; 615 villas have already been handed over in 2013 and the 1 million sq ft retail and dining Circle Mall is due to be completed by 2017.

Hilton Worldwide is the latest hotel chain to announce a new Dubai property, following a management agreement with AIG Investments. The 336-room Hilton Garden Inn Dubai Al Jadaf will open in 2017.

On Monday, there was the launch of the Trump PRVT residences, part of the Akoya by Damac development. With villa prices starting at US$ 1.77 million, there will be gated access to the island location.

Now in its 19th season, the ever-popular Global Village will have attracted over five million visitors and generated US$ 463 million by the time it closes on 11 April, after running for 159 days. The massive extravaganza has over 3.5k outlets, as well as 31 pavilions, 25 restaurants, and 150 kiosks.

The Chinese seem to be taking over the mantle of the Russians – with Chinese tourist numbers to Dubai expected to double within a decade to 545k whilst in January there 27.3% fewer Russian visitors. Last year, the Chinese spent US$ 488 million in Dubai and stayed, on average for 3.3 days.

The Dubai Airport Freezone has had to lease a 17k sq mt Al Ghusais block from the government-owned Al Wasl to meet pent-up demand. DAFZA will build 32 light industrial units to add to the 260, already operating at the airport, and hope to acquire more land to build a business park in the area.

Emirates Group company, dnata, has bought a 51% share in UK-based Imaging Cruising – a major player in not only the cruise market but also in other aspects of stay holiday distributorship.

Saturday was the last day of the Dubai International Boat Show which attracted over 26k visitors and 800 exhibitors, as well as generating sales of US$ 50 million. The exhibition highlighted the progress made by local shipbuilders including Al Shaali Group, whose showcase luxury yacht is the US$ 5.45 million AS100, and Al Hareb Marine which came away with four sales totalling US$ 2.2 million.

The Korath Group is to spend US$ 27 million in introducing the Hawes & Curtis brand to the MENA, with an ambitious expansion strategy of 25 outlets. The first men’s retail shop, located in the Wafi Mall, was launched this month by Bollywood star, Shahid Kapoor.

Last year, New World Wealth estimated that 26k millionaires resided in Dubai. A new Knight Frank report has ranked Dubai as the 8th most important city for the ultra-rich, only behind London, New York, Hong Kong, Singapore, Shanghai, Miami and Paris.

It has been reported that a subsidiary of Dubai World (which itself has a US$ 14.6 billion debt), Drydocks World, may request creditors for a restructuring of its US$ 2.3 billion outstanding balance. As did its parent company, the shipyard may opt for an early repayment, and better terms, for the balance of the debt, followed by a repayment extension. US$ 800 million is due for settlement in August 2017, with the remaining US$ 1.5 billion in 2027.

Celebrating its 50th year, Dubai Chamber of Commerce reported that its members were involved in US$ 49.0 billion of export and re-export trade within the GCC. Saudi Arabia accounted for 54% of the business – US$ 26.4 billion – with Qatar (13%) and Kuwait (12%) the other major players.

Union Properties declared its first dividend in over twelve years; patient shareholders will receive US$ 0.008 cash and a 5% bonus issue.

Official approval has been given for a 20% hike in the price of bottled water.

February saw a 3% increase in volumes on the Dubai Gold & Commodities Exchange, with 929k contracts valued at US$ 35 billion. There was a 103% surge in Indian Rupee Options to 7.2k, as well as a 22% increase in the Exchange’s Indian Equities portfolio.

Earlier in the week, Orascom Construction began trading for the first time on NASDAQ Dubai and rose 3% on the day.

Bad news for the public sector with reports that there will be no pay rises for those employees between Grades 7 – 14. The Finance Minister, HE Obaid Al Tayer, indicated to the FNC that he considered the current salary levels as sufficient.

Following an internal enquiry, it seems that six Dubai-based employees of ABN Ambro have resigned or been dismissed for apparent fraudulent behaviour and contravening the bank’s policies and procedures.

Next month will see Amlak Finance returning to the DFMI over six years since its November 2008 suspension. The mortgage lender reported a 22.2% rise in 2014 attributable profit to US$ 16 million including a US$ 572 million write off on its portfolio and a US$ 518 million gain on its restructuring deal on a mudaraba instrument

Having recorded a 2014 US$ 207 million profit, compared to US$ 78 million a year earlier, the Dubai Financial Market has approved a 7% dividend, equivalent to a total pay-out of US$ 153 million.

The DFMI started the week trading on Sunday at 3747 and dropped 1.0% to close at 3708 on Thursday, and 1.7% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both down by US$ 0.02 and US$ 0.01 to US$ 1.92 and US$ 0.79 respectively.

Subsequent to February’s devaluation of the pound, it is no surprise to see Egypt’s inflation rate hit double digits – up 0.9% to 10.6% – as imports became more expensive. The currency slipped to 7.6 to the US$, compared to 7.2 at the beginning of the year but perhaps the currency has to fall even further for Egyptian exports to compete in the global arena.

There was mixed US market news with February data indicating 295k new jobs (following January’s revised figure of 239k) and a fall in the unemployment rate to 5.5%. If this trend were to continue, it is inevitable that the Fed will lift interest rates by July, particularly because of the strong dollar. On the flip side, some analysts are cutting US Q1 growth estimates from 2.3% to 1.5%, as several indicators point to some problems ahead. These include wholesale inventories rising 0.3%, wholesale sales declining 3.1% (the biggest fall in nearly six years), slowing construction spending and poor auto sales. Whether this is just a blip remains to be seen.

Even the ever optimistic ECB have got in on the act forecasting a stronger 2015 growth in the eurozone from 1.0% to 1.5% and that the current low negative inflation would turn the corner by the end of the year. This Monday (09 March), the long-overdue QE programme, with over US$ 1.25 trillion of assets being bought over the next 18 months, started as the euro was trading at the 1.09 level to the greenback. By Thursday it had sank even further to 1.05 – its lowest level in over 12 years, as Deutsche Bank forecast a further drop to 0.85 by the end of 2017.

In December, EC President, Jean-Claude Juncker introduced a US$ 341 billion investment plan to encourage growth by financing numerous projects. To date, Germany has promised US$ 16.2 billion, France US$ 8.7 billion and Spain US$ 1.6 billion.

February data from China indicates a record trade surplus of US$ 60.6 billion, with exports up 48.3% and imports down by 20.5%. However, the figures may be skewed somewhat by the fact that the Chinese New Year occurred mid-February. Where the export figures may indicate a rise in demand for Chinese goods, imports highlight the problem of weak domestic demand and the worry of deflation taking hold.

Brazilian president Dilma Rousseff’s government is being tainted by the expanding Petrobras scandal, with 54 people accused of taking bribes including many senior politicians. Although she chaired the petroleum company’s board for seven years, the president has been cleared of any charges!

It does seem incongruous that HSBC top management was unaware of the illegal activities of their Swiss private bank. Details of the scandal, involving some 30k accounts, were made known to the French authorities in 2007 and passed on by them to their UK counterparts. It was only last month that the information came into the public domain and since then the HSBC executives have been ducking and weaving.

The latest data from Baker Hughes Inc indicates that the number of US operational drilling rigs fell for the 13th straight week to 922 – 42.7% down on the October figure of 1,609. Thanks to the shale oil revolution US production, over the past five years, has risen by 67.3% from 5.2 million bpd to 8.8 million bpd. The worry is that if prices keep falling (and they were at US$ 55 at the end of the week), shale oil production becomes a loss making venture and bankruptcy becomes a fact of life. If the financial institutions have been bankrolling these ventures willy-nilly, the economic fall-out could be much worse than the sub-prime crisis and more difficult to Shake It Off. 

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