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So This Is Christmas

Posted on December 26, 2014 by howesdubai

With the aim of synchronising and integrating all the emirate’s different public services, HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, has established the Dubai Open Data Committee. RTA’s Abdulla Al Madani will chair the agency which will include high-powered representatives from the likes of Dubai Police, Department of Economic Development, Dubai Tourism and Dubai Municipality.

One of the emirate’s success stories, Dubai Duty Free, celebrated its 31^st anniversary with a three-day discount across a wide range of its products. Coinciding with the airport’s busiest ever traffic day – with 80k passengers – it was little wonder that the US$ 51.5 million revenue was 21.8% higher than last year’s comparative figures. Earlier in the week, the company donated US$ 54 million towards the building of the new Dubai Autism Centre.

In its first month, Global Village has already welcomed more than 1 million visitors. Now in its 19^th season, and its 10^th in Dubailand, the 3 million sq ft family and entertainment park expects to have record attendances of over 5 million, before it closes in early April.

It seems that Nakheel is serious in its bid to become the prime retail operator in the emirate, as it plans to launch several new projects, valued in the region of US$ 2 billion. Early next year, the developer will issue a tender for the construction of the 2.85 million sq ft, US$ 463 million Deira Islands Mall. The planned extension of an additional 640k sq ft to its Ibn Batuta Mall will see the facility covering almost 2 million sq ft. Then it already has retail projects in the pipeline on Palm Jumeirah and some of its residential locations (including The Circle Mall – with Waitrose as the anchor store – at JVC and a mall in neighbouring Jumeirah Village Triangle) as well as the expansion of Dragon Mart.

Danube Properties will go ahead with its US$ 82 million, 300-apartment project in Q1. Located in Dubai Silicon Oasis, phase 1 of the sale of the twin-tower Glitz launched this week, with the release of 146 units. Completion date is slated for mid-2017.

Despite being the most expensive office market location in the ME, Dubai’s prices – at US$ 92.6 per sq ft – are still much lower than London’s US$ 274 and other locations. Indeed Dubai comes in 23^rd in the recently released CBRE’s Global Prime Office Occupancy Costs. With regard to the residential sector, and notwithstanding a flat Q3, Dubai still shows the highest annual rental increase in the world, with a 12.4% hike, ahead of the global 2.1% average.

DP World runs four port facilities in Australia and has been locked in bitter disputes with trade unions over pay and working conditions. The Dubai-based operator is hoping that negotiations, with the Maritime Union of Australia, due to take place in January, will bring some sort of resolution – but a speedy conclusion seems some way off.

Emirates REIT has informed Nasdaq Dubai that it intends to propose a US$ 12 million dividend, equating to US$ 0.04 per share. The Shariah-compliant real estate investment trust, which only went public in April 2014, intends to distribute dividends twice a year.

DEWA released its 2015 budget which saw an 11.1% annual increase to US$ 6.2 billion, with capital expenditure up 17.3% to US$ 2.3 billion. Currently, the utility’s installed power capacity stands at 9,656MW – which includes a buffer of 2,423MW – and water capacity of 470 MIGD, with a reserve margin of 154 MIGD. (In an effort to cut energy consumption by 30% by 2030, Dubai plans to invest US$ 13.6 billion, mainly on new energy strategies including solar).

The Federal Customs Authority released H1 trade figures indicating that non-oil trade reached US$143.0 billion. Of this total, imports accounted for US$ 92.7 billion (64.8%), reexports US$ 33.1 billion (23.1%) and exports US$ 17.2 billion (12.1%).

For a market that has seen major falls (October – 9.9%, November – 9.8% and opening on Sunday 20.0% down on the month of December), this week saw some sort of seasonal goodwill. The DFMI had a recovery week surging 11.9% from Sunday’s opening of 3427 to close on Wednesday at 3834. Bellwether stocks, Emaar Properties and Arabtec, were up 11.9% and 10.7%, trading at US$ 2.07 and US$ 0.83 respectively.

As usual, corporate misdemeanours seem to occur on a weekly basis. French engineering company Alstom has accepted to pay a US$ 772 million fine imposed by the US Department of Justice. This – the largest such fine to be levied by the DoJ – was in connection with government-related bribery charges in markets such as Indonesia and Egypt. A preliminary hearing to other charges, brought by the UK’s Serious Fraud Squad, is due to be heard in London next month.

Auditors PwC and their client Tesco’s will have a nervous start to 2015 as the UK’s Financial Reporting Council is set to check the company’s accounts for the past three years. The watchdog’s enquiry follows the supermarket’s surprise September announcement that it had misstated half year profits by over US$ 400 million.

Chinese authorities came calling for Avon, as the cosmetic direct seller was hit with a US$ 135 million fine for bribery charges. The US company admitted that it had paid off Chinese officials in return for business benefits, that included the lifting of the ban on direct selling and obtaining a direct selling licence.

The Hong Kong Kwok brothers, said to be worth over US$ 14 billion, were in court this week on corruption charges. Although Raymond was cleared of all charges, Thomas was sentenced to five years in jail for bribing a government official US$ 1.2 million for confidential information on land sales.

It could take another two years for the RBS Shareholder Action Group to take the beleaguered Royal Bank of Scotland to court over a US$ 18.5 billion 2008 rights issue. The irate investor group – including the likes of Standard Life and M&G, as well as thousands of private stakeholders – is seeking US$ 6 billion in damages over alleged false claims made on the bank’s viability at the time. Shortly after, the bank was on the verge of collapse before the government came in with a US$ 70 billion rescue package.

Trust Bank is the first of probably many financial Russian institutions to hit the rails as a result of the meltdown in the country’s economy. The Central Bank has placed the bank under supervision and has paid in bailout funds of US$ 530 million, so that bankruptcy is avoided. There is no doubt that the sanctions imposed over the Ukraine crisis will push the country into recession next year and could see government debt downgraded to junk status.

South Korea is Asia’s 4^th largest economy and becomes the latest to cut its growth forecast, now amended to 3.4%, with 2015 at 3.8%. The government expects a boost in domestic consumption as a result of falling oil prices and increasing investment.

Latest employment data from Australia indicates a weakening in the labour market with unemployment levels set to increase 0.2% to 6.4% in 2015. The currency continues in free-fall reaching 81 cents to the US$ 1 – way down on May government budget estimates of 93 cents. With 2.5% and 3.0% growth forecasts for the next two years, the currency will have to fall a further 8% to have any impact on shortening the country’s dole queues. At that level, tourism and manufacturing will become more competitive on the world stage.

Luxembourg’s PM, Xavier Bettel, has caved in to EU demands that his country release details of the many companies with which it has favourable tax deals. It saves some embarrassment for the newly elected EC president, Jean-Claude Juncker, who was that country’s leader for 18 years, until 2013. During that time, he must have been involved in deals that oversaw tax arrangements, with at least 400 multinationals, some of which reportedly got way with tax rates of 1%! Amazon, for example, pays their tax bill for UK purchases in the duchy which has the highest GDP in the EU.

Even the relatively high flying UK economy was off the pace this week, with Q3 returns showing a 2.6% hike, down on the 3.0% estimate. As a result, the economy is now only 2.9% bigger than it was before the GFC. The country is not being helped by the problems in the eurozone which is deteriorating by the month. The latest UK current account deficit of 6% to GDP continues to be of concern in a country that, according to some analysts, has total debts of a staggering 500% of GDP!

Following the release of better than expected economic data, showing that the rate of Q3 growth at 5% is the fastest in 11 years, the two main US bourses continued their upward momentum on Tuesday. The S&P 500 surged to a record high of 2085 (and up over 16% this year) whilst the Dow topped 18,000. Since March 2009, both exchanges have shown remarkable growth – over 300% and 175% respectively. How long can this 5-year bear run continue?

At the end of the year, there are still wars and major conflicts on many fronts including Syria, Afghanistan, IS, Ukraine, Libya and South Sudan. Not only is the world in economic turmoil, it has major social problems, that have a direct impact on the population when it is estimated that:

· every year one million die from malaria, of which 90% are in Africa

· 2.6 billion people lack basic sanitation

· more than 359 million live on less than US$ 1 per day

· 150k have died in the on-going Mexican drugs war

· earlier in this century 3.8 million died in the 2^nd Congo War

· 10.6 million Britons (23.2% of the population) live in relative poverty

As usual, it is the children who suffer most as:

· 22k children die each day due to poverty

· 28% of all children in the developing world are underweight.

· 72 million children of primary school age do not receive an education

· 1.8 million children die from diarrhoea each year

Then what is happening to them in Palestine, Pakistan, Nigeria and Syria, because of a mix of terrorism, political strife and intransigence, beggars belief. It is a disgrace that in 2014 many must be wondering So This Is Christmas!

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

Another Brick In The Wall

Posted on December 19, 2014 by howesdubai

This week, HH Sheikh Mohammed bin Rashid Al Maktoum launched the Dubai Plan 2021 – a detailed roadmap outlining the emirate’s development over the next seven years. The six themes on the strategic agenda include:

· a city of happy, creative and empowered people

· an inclusive and cohesive society

· the preferred place to live, work and visit

· a smart and sustainable city

· a pivotal hub in the global economy

· a pioneering and excellent government

Yet another Knights Frank report forecasts a 10% fall in Dubai prime realty in 2015, as the emirate slips to bottom of the ladder of eight cities surveyed. The fall would be even greater if it were not for the increased interest from Indian buyers. In the same vein, CBRE reported that villa prices have risen 7% this year compared to 24% a year earlier and expect the market to soften next year, as 20k new units come on to the market.

On the other hand, Global Property Guide reports that Dubai still remains at the top of its ranking of the world’s best performing property markets – for the 7^th straight quarter. Q3 annual increases have softened to 23.7%, compared to Q1’s 31.6% and Q2’s 33.3%.

Cluttons also reported that prime office rents are heading northwards – up 25% for the year ended September 2014, as a supply of quality property falls short of demand.

The first phase of wasl’s foray into the freehold market has been sold out. The 43-storey Hyatt Regency Creek Heights Residences has a total of over 400 units and is located adjacent to the 443-room hotel of the same name.

The World’s latest country to be developed is Sweden (part of the six-country Heart of Europe) with Kleindienst Group announcing a 10-vllla project, based on Viking history. The 7-bedroom villas will each have a sauna, private beach and personal pool and the island will have a floating restaurant, akin to Stockholm’s iconic Saluhall Market.

Action Hotels is paying US$ 15.7 million, to the Dubai government, for a 13k sq ft plot of land in Dubai Healthcare City. The developer is planning to build its first property in Dubai – a 240-key, 3-star hotel to cater for the increasing activity in this health free zone.

The recently launched property firm Muraba, headed by Ibrahim Al Ghurair, is going ahead with a 50-apartment building on Palm Jumeirah. The US$ 82 million development will have units starting at US$ 1.3 million, with 4 penthouses at US$ 6.8 million.

Al Ghurair Investments will open at least thirty new stores in the GCC, bringing its total to over 100. The Dubai-based retailer is expected to add two new fashion brands to its portfolio, as it strives to get a bigger share of the estimated US$ 240 billion GCC retail market.

It is reported that construction company, ALEC, will complete the US$ 1.1 billion Dubai International Airport expansion – including the new Concourse D – within four months. Testing is currently being held on the train system that will connect the renovated Terminal 1 with the new 340k sq mt concourse.

Apple is set to unveil its largest ever store next February – the new outlet in Mall of the Emirates will be bigger than its 23k sq ft flagship New York location.

Onetools has opened a US$ 4.1 million, 100k sq ft facility in Dubai Investment Park, as part of its strategy to double its revenue to US$ 82 million by 2015. The hardware and machinery distributor has 12 outlets in the country and a presence in Oman, Qatar and India.

Aramex announced that it had paid OneLogix Group US$ 16.5 million for the master franchise of the retailer, PoshNet – its second foray in South Africa following the 2011 purchase of the logistics firm, Berco Express. The printing and courier service company has 287 franchised stores in the country.

Dubai-based BR Shetty is looking to add a major stake in Travelex Holdings to his portfolio and has reportedly received financing of US$ 750 million to fund the acquisition. The Indian billionaire already has major interests in UAE Exchange, NMC Health plc and Neopharma.

Inkas Vehicles – one of four armoured vehicle manufacturers in Dubai Investment Park – is planning to spend US$ 15 million to expand its business. Currently, the four companies produce 1,600 units a year but all are trying to get a larger share of this market which is expected to be worth over US$ 28 billion over the next five years.

The US shoemaker – Skechers – is to invest around US$ 30 million, as it plans to triple the number of ME stores to 180, within three years. GCC revenue currently accounted for only 2.7% of the global total in 2013 but it is estimated that this will increase to 3.9% this year as sales jump to 2.5 million pairs of shoes, totalling US$ 95 million.

Dubai-based Middle East Development LLC has been awarded the contract to build the Al Noor Tower in Casablanca. The 540-metre, 114-storey building will become the tallest structure in Africa, currently held by the 223-metre Carlton Centre in Johannesburg, and should be completed by 2018. Whether this comes to fruition remains to be seen!

Drake & Scull has added a further US$ 22.5 million, to bring their 2014 total jobs procured to an impressive US$ 1.53 billion with the award of a health-care project in Abu Dhabi. The Dubai-based company has an international backlog of projects, totalling US$ 4.2 billion, which hopefully will boost their bottom line which, in Q3, was a disappointing US$ 6.9 million. (The company is also rumoured to be soon buying back 10% of its shares).

To the surprise of some, Dubai’s inflation rate fell to 4.15% – down from October’s 4.38% reading. The two drivers behind this are lower oil prices and the strong US$ which makes imports cheaper. According to latest IMF estimates, UAE GDP is expected to be 4.3% this year – down from 5.2% in 2013.

DEWA do not expect to have to return to the bond market next year as an increased number of projects will be activated and a US$ 1 billion loan has to be repaid in April. Currently, all Dubai electricity plants are run on gas but the long term plan will see some diversity, with the introduction of coal, nuclear and solar providing 12%, 12% and 5% of local power requirements.

The Dubai-owned Limitless is again looking at restructuring its debt by proposing to extend the loan tenure by a further two years to 2018, instead of 2016. The former property division of Dubai World may well sell a plot of land to raise funds to help repay a US$ 1.2 billion loan. The company is still suffering from the excesses of the emirate’s boom times and then found that they had taken on too much debt when the GFC hit.

DP World shareholders have approved the purchase of Economic Zones World from its majority 80.45% shareholder, Dubai World. The sale value of the logistics infrastructure company will be in the region of US$ 2.6 billion. DP World will also delist from the London Stock Exchange.

As Brent dropped to US$ 65 last Thursday, and the Dubai Financial Market tanked to close at 3595 (down 27.5% in three months), it was estimated that the Gulf equity markets had lost US$ 150 billion since the beginning of November. However, there seems to be a cushioning effect in the UAE as the local real estate sector is more mature and in a healthier position then it was when the lest recession came knocking in 2008. Furthermore the banks have far stronger balance sheets and the country has huge reserves which could allow budget deficits to be run without too much collateral damage.(At close of business on Thursday, 18 December, oil was trading a smidgen under US$ 60).

Whilst both total November bank assets and bank loans fell by 0.7% and 0.4%, to US$ 625.3 billion and US$ 374.9 billion respectively, bank deposits rose 0.4% to US$ 385.6 billion. Resident deposits accounted for 90.8% of this total, equivalent to US$ 350.1 billion.

On Sunday, the local market shed 7.6%, to 3321, its biggest one day fall in six years and also dropped to below its year opening level of 3371 points. By close on Wednesday, the market was in turmoil closing at 3033 but Thursday saw some reprieve with a 12.98% surge.

Emaar, which has been battered over recent times, brought a little Christmas cheer to its investors by announcing it would pay the promised US$ 2.45 billion dividend on 23 December. It is little compensation that, over the past three months, the share value has fallen 35.4% from US$ 3.05 to Sunday’s US$ 1.97. As an aside, it is reported that there has been a major reshuffle in the Dubai company, with some senior managers moving to Abu Dhabi developer, Eagle Hills, of which Emaar chairman, Mohammed Alabbar, is a board member.

Although the local bourse had a shaky November, falling 9.4% to 4281, following a 9.9% slump in October, the market index has fallen 20.0% so far this month. Having dropped a massive 16.1% the previous week, the DFMI was saved somewhat by Thursday’s bounce back but even then was 4.7% down from its Sunday opening of 3595 points, to close Thursday on 3427. Bellwether stocks, Emaar Properties and Arabtec, were down 6.1% and 13.8%, trading at US$ 1.85 and US$ 0.75 respectively.

In the US, the Claims Administrator, appointed by GM, has received 251 death claims and 2,072 injury claims in relation to ignition switch defects in their vehicles. It appears that at least 42 people have died and 58 injured as a result of these faults. The car manufacturer has already been fined US$ 35 million for not recalling vehicles earlier and has already set aside US$ 400 for future claims. Wheteher this is a big enough provision in such a litigious country remains to be seen.

Software malfunctions and malpractice were in the news this week and the need for tighter security highlighted. A glitch with RepricerExpress, designed to automatically reprice items to make them cheaper than competitors, saw some products on Amazon being sold for 1p. Amazon did not lose out but its sellers were left counting the cost, with some reporting losses that could result in bankruptcy.

Despite warnings in August, a computer problem at NATS control centre saw massive travel disruption as more than 300 flights into London airports were cancelled. The air traffic control centre blamed an unprecedented systems failure.

Hackers – that may be linked with North Korea – have managed to carry out a cyber-attack on Sony Pictures. The end result is that at least five unreleased films have emerged online, scripts – including the latest Bond film, Spectre – have been stolen and thousands of embarrassing documents have been made public.

Even the UAE telecom provider, Etisalat, did not escape as its main commercial website was defaced on Thursday.

Fitch has downgraded France to AA credit rating as the Gallic country struggles to reduce its budget deficit of 4.1%, in line with the EC target of 3.0%. The credit agency considers some of the assumptions of the 2015 budget to be slightly exaggerated, including government debt to GDP being higher than 100% and uncertainty on inflation and actual GDP growth estimates.

Italy has seen major strikes as unions rebel against long-needed labour legislation which is badly needed, as the country tries to escape from years of recession to reduce its huge debt. Europe’s 4^th largest economy is reeling from the fact that 43% of its under 25s are unemployed.

Another struggling EU economy, Belgium plans to save US$ 14 billion in cost cutting measures. These have not been well received by the unions, as they hit the country with a crippling nationwide strike this week. In an austerity drive to boost the economy, PM Charles Michel wants to scrap the annual cost of living wage rises, increase the retirement age to 67 and to slash public spending.

Yannis Stournaras, head of the Central Bank, has indicated that there will be further economic turmoil in Greece if there is no speedy settlement of the current political crisis. Even though the country has just come out of a six-year recession, its economy is still only 75% of the size it was in 2008 and if political uncertainty continues, Greece could see another downturn

Australia has been hit by a larger than expected drop in its terms of trade, exacerbated by weak wage growth and major reductions in commodity prices, especially iron ore and coal. Accordingly, its budget deficit forecast for this year has surged 35.6% to US$ 33.2 billion – up from May’s figure of US$ 24.5 billion. The end result is that the 1.5% GDP growth this year will be the weakest in fifty years.

Following October’s bi-lateral free trade agreement, China has wasted no time in buying up John Holland, one of Australia’s largest construction companies.China Communications Construction International (CCCI) will buy the Leighton Holdings building unit for US$ 950 million.How times have changed! Only a year ago, analysts were singing the praises of the BRIC bloc – four countries that were going to set the financial world alight. Now they all seem to be on a lippery slide.

Corruption seems to be endemic in Brazil with 35 executives, from six large construction companies, being charged for channelling kickbacks into a Petrobas scheme to pay off politicians. To make matters worse, President Dilma Rousseff was on the state-run oil company’s board for seven years and some of the illegal monies have been directed to her ruling Worker’s Party. Furthermore the facts that the country recorded a meagre Q3 0.1% growth, following two quarters of contraction, and the real sank to a nine-year low, indicate why Standard & Poor’s have reduced Latin America’s largest economy to one notch above junk status.

The Russian currency goes from bad to worse with the central bank hoisting its key interest rate from 10.5% to 17%. The rouble has lost 87% of its value to the US$ over the past year, trading on Thursday at 62. Earlier in the week it had sank as low as 79, but despite this temporary boost, there is no apparent end to the crisis in sight. The US$ 100 billion + spent, trying to bolster the currency, has been an abject failure.

India has recorded mixed November economic data as industrial output contracted by 4.2% and the 4.4% inflation figure fell to three year lows -well down on the RBI’s 8.0% target. Following two years of under 5% growth, the country saw Q3 expansion of 5.3% but this was much lower than Q2 returns. It seems certain that the RBI governor, Raghuram Rajan, will be pushing for a reduction of the 8.0% borrowing rate in a bid to add impetus to consumer spending and investment.

The latest HSBC/Markit Manufacturing PMI proved bad news for China with a recording of 49.5 – down from November’s 50.3. (Any reading below 50 indicates an economic contraction). There is now inevitability that the country will see growth below 7.5% for the first time since 1999 – and may even struggle to record 7.0%. This slowdown – allied with a property bubble ready to burst – could spell even worse news for the global economy in 2015.

There is no doubt that like most other economies the BRIC nations are off the economic pace. There is an urgent need for Brazil, Russia, India and China to lift their game and strengthen their softening economies. No doubt they will need a lot more than Another Brick In The Wall!

Posted in Finance | Tagged Arabtec, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, JAFZA, Nakheel, Sony, UAE | 1 Comment

Runnin Scared

Posted on December 14, 2014 by howesdubai

Founded only two years ago in December 2012, Careem, the locally based chauffeur booking service, has received a US$ 10 million investment boost from the Saudi travel group, Al Tayyar. The internet service provider is looking to use the additional funds to expand on the 14 cities in which it currently operates. (It has a long way to go to catch up with the 5-year old Uber which, having just finalised its latest fund raising, has a valuation in excess of US$ 40 billion).

Dubai Properties is planning to build another hotel at the Bay Square development in Business Bay. The 238-room Double Tree by Hilton is scheduled to open in Q1 2017.

Designed to represent a traditional Arabic town, Jumeirah Group’s Madinat extension will have 430 rooms on its 430 hectare site, when it opens late next year.

Once again Khalaf Al Habtoor has shown faith in the Dubai economic miracle as his Group announce three new projects, located near the former Metropolitan SZR. His Polo Resort & Club will feature a 136-room 5-star hotel,162 residential units and a riding school, with 500 stables and three polo pitches. With the other two projects, a 4-star, 334-key hotel and the 74-property Oasis Villas, his total investment of US$ 545 million will be largely self-financed.

Rixos is planning to move its headquarters to Dubai. With 30 properties under its management – and a similar number in the pipeline – the Turkish hotel operator considers that the emirate is the natural centre for the region’s expanding hospitality sector.

Having already being paid a reported US$ 55.4 million for the 2008 abandoned Tatweer golf course, Tiger Woods has tied up with Damac to design a new facility on the same 55 million sq ft plot of land. The 18-hole championship course and club, including a world class restaurant, will open within three years.

Following the December launch of the Dubai tram system in JBR, Emaar will introduce the Dubai Trolley system – a 7 km tram network for Downtown. Phase 1 will be completed by the end of next year.

Over the next two years, Glosanté, the recently launched Dubai-based healthcare company, is planning to invest US$ 100 million on ambitious expansion plans. Of the 50 offices to be opened in the MENA region, four will be located in Dubai, employing 30 doctors and 50 support staff.

The Investment Corporation of Dubai is reportedly planning to expand its shareholding in Dubai Aerospace Enterprise to 70% by purchasing a 15% share, currently held by Istithmar World. Other DAE minority shareholders include Dubai International Capital, Dubai Silicon Oasis and Emaar.

To satisfy the ever-growing demand for its products, Mars will spend a further US$ 60 million on expansion plans to its Jebel Ali factory to increase production capacity by 66.7% to 100k tonnes per annum. It is expected that the MENA chocolate sales will top US$ 5.8 billion by 2016.

Access MEA has won a US$ 17 million contract to build a 10 megawatt solar plant in Uganda. The Dubai-based company estimates that the project will provide power to 40k homes in Uganda – a country where 85% of the population do not have this utility.

Abraaj Investment Management is facing stiff completion from Kellogg in its attempt to buy the Egyptian biscuit maker, Bisco Misr. The world’s largest cereal maker has again topped the latest UAE firm’s bid of US$ 11.27 by US$ 0.23 and this has to be matched by 24 December.

November’s PMI continues to paint a rosy picture for the UAE economy with a 58 rating. Although down on October’s record 61.2, because of the slide in oil prices and a slowdown in global trade, it still represents a marked improvement in the country’s business environment.

The contagion, as the rouble continues its downward spiral, is now being felt in both the hospitality and retail sectors. The currency which has lost over 40% in value this year to the US$ (and consequently the dirham) has seen the number of Russian tourists fall, whilst those who are still coming to Dubai are spending less.

Abdulrahman Al Saleh, Head of Dubai’s Department of Finance, has indicated that Dubai will be still be able to finance all its upcoming projects, despite the recent dip in the oil price. He also reiterated that GDP growth, in the coming years, will be between 4.0% – 5.0%.

Some 40k, or 13% of, UAE companies are in default with the federal Ministry of Labour, who are owed some US$ 777 million in unpaid fines. To help defaulting companies, there will be a 6-month amnesty which will see all fines, whatever the amount, being reduced to US$ 272.

Despite an attempt by RBS to derail Dubai World’s latest debt restructure proposal, it seems that the bank – unhappy with the fact that the US$ 10.5 billion loan tenure will be extended by four years to 2022 – does not have enough of the debt to block the plan. Under Decree 57, only 67% of the creditors have to agree the arrangement – and this appears to be already the case. Under the new terms, US$ 4.4 billion will be repaid in May 2015 and this will be partly financed by the November US$ 2.6 billion sale of Emirates Zones World to DP World.

Knights Frank has valued Jebel Ali Free Zone at US$ 4.45 billion. The complex covers 32 million sq mt and has 14k tenants occupying over 1k warehouses and 2 million sq ft of office space.

The same firm reported that Dubai realty hit the skids in Q3 with its first quarterly loss in Q3 for four years. Although 5.2% down, it was still 12.5% up on the corresponding period in 2013.

Latest October figures from IATA indicate a stunning performance by ME airlines with a 10.3% growth recorded. However as capacity was up 13.5%, load factor fell 2.1% to 73.5% compared to the global return of a 5.5% hike in capacity and a 0.1% rise in load factor to 79.1%.

The country is well on the way to become the capital of Islamic finance by 2016, being currently second to Malaysia, a country with 17 million Muslims. It is estimated that US$ 2 trillion was spent on Islamic consumer goods in 2013, with annual double digit growth expected in the coming years, as Islamic assets topped US$ 1.66 trillion.

Omniyat Group has started work on its project in Dubai Maritime City. The US$ 164 million seafront development will include 225 apartments, along with 8.1k sq ft of retail outlets. ANWA by Omniyat is an integral part of DMC’s proposed 53-mixed use developments including ten parks, hotels and shopping malls.

UAE has over 130 money exchange firms and some are struggling as compliance regulations become more costly and onerous and the refusal of certain banks to do business with them. At the beginning of the year, the Central Bank introduced a minimum capital requirement of US$ 1.36 million – as industry sources indicate that costs have gone up as much as 40%. With UAE expats remitting some US$ 18 billion annually, it seems that there will be fewer exchanges for them to use in the future.

A potential game changer in the local financial world is the announcement that the UAE and China will finally activate a 2012 US$ 5.7 billion (35 billion yuan) currency swap agreement. This will see bilateral trade and investment being enhanced and follows a similar agreement that China recently signed with Qatar.

Given the circumstances, it was no surprise that the much awaited debut of Dubai Parks and Resorts on the local bourse saw the stock open on Wednesday 6.9% down on par, at US$ 0.25, which then dropped further, to US$ 0.23, by the end of the week’s trading. The IPO was for 40% of DPR and, at US$ 689 million, the theme park project had been heavily oversubscribed.

Although the local bourse had major falls in October (9.9%) and November (9.4%, closing at 4281), nobody could have predicted this week’s bloodbath. Having fallen 6.8% in the first week of December, the DFM tanked over the last seven days, plunging a disastrous 13.6% from its Sunday opening of 4161 points to close Thursday on 3595. Bellwether stocks, Emaar Properties and Arabtec, were down 24.2% and 14.7%, trading at US$ 1.97 and US$ 0.87, respectively.

Citibank has confirmed that it will be making a US$ 2.7 billion provision for legal costs in relation to its nefarious role in the Libor rate scandal and money laundering. Following Q3 results, the bank had to write off US$ 600 million for “rapidly evolving regulatory inquiries”.

The US economy received a boost with November Labour Department figures showing an extra 321k jobs, bringing the 2014 monthly average to 241k – the longest period of labour growth in nine years. Despite a slowdown in the global economy, the US would continue to expand, albeit at a slower pace with Q4 growth estimated at 2.5% – down from the previous return of 4.3%. On Thursday, the House of Representatives passed a US$ 1.1 trillion budget that will ensure government funding until September 2015. (If the 219 – 206 vote had gone the other way, the government would have had no money and vital services closed – what a way to run a country).

Despite Russian authorities spending more than US$ 70 billion this year – and US$ 4.5 billion this week – in an attempt to shore up the troubled rouble, the currency is still in dire trouble at all-time lows of 54.55 to the US$. The economy has been dragged down on three fronts – the 40%+ fall in oil prices, the impact of western sanctions and a surging inflation rate, currently at 9.1%. This week the central bank lifted interest rates a further 1% to 10.5%. Latest World Bank data estimates that the country will have a 0.7% contraction next year.

Those who thought that Greece had finally escaped from the economic doldrums have been proved wrong even though the country had just announced that it was finally out of its 6-year recession. Investors were surprised when Antonis Samaras announced early presidential elections for 17 December and the stock exchange opened on Monday more than 15% down. The conservative government, wanting to exit the US$ 305 billion bailout, has Stavros Dimas as its candidate. However the left wing Syriza party wants the troika to cut some of the debt and if they were to win the election, it would return the country to another crisis and prolong the recession.

In the first decade of the century, only two countries – Haiti and Zimbabwe – had lower GDP growth than Italy! The country is still in recession and latest figures indicate a 0.4% contraction. It still has a major hurdles to surmount, including a major overhaul of its archaic labour laws and ways to bring in jobs for the 43% of under 25s that are unemployed. Then there is France with an unemployment rate of 10.2% and beset by sluggish growth and labour laws that make the Italians look progressive. The country has consistently failed to meet the EU requirement that a country’s budget deficit does not exceed 3% of GDP.

China’s CPI fell again in November to 1.4% – down 0.2% from October – with producer prices down for the 33^rd consecutive month. The figures are another indicator that the slowdown is gaining traction, despite the central bank cutting interest rates last month.

Meanwhile Japan’s Q3 GDP figures were revised down to minus 1.9% as the country sinks deeper into an economic mire. The world’s third largest economy is in recession, following a 7.3% contraction in Q2, and there is little confidence in the market as the country soon goes to the polls.

In Australia, the November unemployment rate of 6.3% was at its highest since 2002 – despite 43k jobs being added to the economy. It must only be a matter of time before the Reserve Bank moves to cut the 2.5% interest rate which has remained unchanged since July 2013. For the only G20 member to have avoided a recession in the past 25 years, Australia is now struggling in the wake of a much vaunted weakening of its mining sector.

The fear for the local market is that of contagion. Most indicators are positive with growth at 4.0%+, great infrastructure already in place, major projects in the pipeline and the debt problem being more realistically managed. However, the country does rely on oil (with prices nosediving and associated revenue heading south), as well as the 3 ‘Ts” – trade, travel and tourism. Unfortunately, any downturn will have a negative impact on the country’s short-term economic prospects and there is little that can be done but to batten down the hatches. Although the economies of US and UK are performing well they too will be affected by events around the world that are outside their control.

As global fears of a major slowdown gather momentum, Brent crude closing on Thursday at US$ 65.04, the Russian currency in danger of meltdown, stock markets swimming in a sea of red and markets readying themselves for the inevitable recession, no wonder the financial world is Running Scared!

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

These Boots Are Made For Walkin!

Posted on December 5, 2014 by howesdubai

There were fireworks this week as the country celebrated its 43^rd National Day on 02 December and Burj Al Arab lit up the sky for its 15^th birthday, a day earlier. Later in the week sees the Emirates Rugby 7s, the most popular event in the Dubai sporting calendar, with Fiji again providing the pyrotechnics.

The CEO of Dubai-based hotel group, Hospitality Management Holdings, is another voice raising concern about the emirate’s high land and building costs. Laurent Voivenel is worried that these will have a direct influence on returns and could have a negative impact on Dubai’s target of 20 million visitors by 2020. The ten year old company is looking to double its number of UAE hotels to 14 by the end of the decade.

Meraas Holding is partnering with Nikki Beach, the US luxury beach club brand, to open a 52k sq mt resort in Dubai Pearl, by the end of next year. The facility will have 132 apartments, 75 villas, 3 restaurants and 400 mt of beachfront.

It is reported that Dubai’s Al Habtoor Investment is to buy the President Abraham Lincoln Hotel in Springfield – its first foray into the US hospitality sector. The company already owns four hotels in Dubai – with three more 5-star properties being built on SZR. Earlier in the year it bought the Intercontinental in Budapest.

There is the possibility that the upcoming Floyd Mayweather / Manny Pacquiao fight could be held in Dubai, as a consortium of UAE investors have offered US$ 110 million to the champion to stage the fight in the country.

Dubai International reported that October passenger traffic reached 6 million and was 5.7% higher than the same period last year, with the YTD number of 58.4 million also up 6.1%. At these rates, it should top 71 million by year end with a possibility of overtaking London Heathrow as the busiest international airport in the world. As an increasing volume of cargo has been moving to the new Al Maktoum airport, friegt has softened being 6.2% down in October to 196k tonnes and YTD off 2.2% at 1.96 million tonnes.

The contribution of Indians to the local economy cannot be underestimated. According to the president of the Indian Business and Professional Council, that country’s nationals have invested over US$ 68 billion, of which US$ 13.6 billion has been in the real estate sector. Paras Shahdadpuri estimates that Indians own over 40k companies in the country, employing nearly one million people.

There are reports that Dubai International Capital is in talks to sell the UK aircraft component company, Doncasters, which saw its 2013 profits up 13% to US$ 210 million. The engineering company was bought in 2006 and would be expected to sell for over US$ 1.5 billion.

Falling oil prices may have been the main reason why Dragon Oil has exited from its US$ 785 million bid for the Dublin-based Petroceltic. Emirates National Oil Company (ENOC) is a majority shareholder in the Dubai energy company.

In London, 70% of Dubai World’s creditors seem to have agreed to the revised terms of the 2011 US$ 25 billion debt restructuring scheme. The plan is to repay the US$ 4.4 billion due in May 2015 and extend the outstanding balance of US$ 10.3 billion from 2018 to 2022, with a higher interest of 425 basis points over Libor – up from the existing 300bps.

To raise funds for general operations, Dubai Aluminium is set to arrange a 7-year, US$ 1.8 billion loan facility. Last year, Dubal merged with Emirates Aluminium to form Emirates Global Aluminium – the fifth largest such facility in the world, with a value in excess of US$ 15 billion. It is thought that two other Dubai entities – Dubai Festival City and Tecom Investments – are sourcing loan facilities in the region of US$ 1.1 billion each.

The new kid on the block had a nightmare introduction to the capital markets. Amanat, whose IPO was nearly tenfold oversubscribed, fell 21% at the start of its first day of trading before recovering somewhat to see the week out on US$ 0.24. There has to be some market worry with the latest IPO, Dubai Parks and Resorts, which closed subscriptions on Sunday, 30 November, reportedly 70 times oversubscribed.

Following this massive over subscription, it was announced that DFM listing will start next Wednesday, 10 December. The Meraas Holding company was selling 40% of its shareholding to the public with the US$ 681 million sale of 2.5 billion US$ 0.27 shares being allocated 60% to institutions and 40% to individuals.

The local bourse had another shaky month falling 9.4% in November to 4281, following a 9.9% slump in October. Having fallen 1.5% the previous seven days, the DFM fared little better this shortened National Day week sliding 6.8% from its Sunday opening of 4494 points to close Monday on 4186. Bellwether stocks, Emaar Properties and Arabtec, were down 19.1% and 5.6%, trading at US$ 2.41 and US$ 1.02 respectively.

Berlin-based Transparency International has issued its 2014 Corruption Perceptions Index which highlights the “performance” of 175 countries in relation to public sector corruption. No surprise to see the worst five countries being Somalia, N Korea, Sudan, Afghanistan and South Sudan. The top five least corrupt nations were Denmark, New Zealand, Finland, Sweden and Norway. The UAE is seen as the most transparent of all Arab countries in this survey.

It is difficult not to imagine that there are sinister forces moving the bullion market. On Monday, morning the yellow metal surged 6.2% to US$ 1,219 in a matter of hours whilst silver jumped 11.1% to US$ 16.69. Closing prices on Thursday stood at US$ 1,024.5 and US$ 16.45 respectively.

As the November inflation rate in the eurozone dipped to 0.3%, deflation continues to be a real threat especially now that energy prices are falling. Over the past three years, the rate has dropped from 3% and is well off the ECB’s target of 2.0% and less than the 1% rate that the central bank considers to be in the “danger zone”. Not helping the EU economic malaise is the fact that the unemployment level remains at a stubborn 11.5% – or 18.4 million. The vacillating Mario Draghi once again cut the eurozone forecast to 0.8% this year and 1.0% in 2015

Growth rates in other major global economies are also giving rise for concern. Both India and the Philippines both recorded Q3 GDP expansion of 5.3% – but down from the previous quarter, when the returns were 5.7% and 6.4% respectively. Australia has recorded weak Q3 data as the economy only grew by a disappointing 0.3% with the currency falling to a four year low as a consequence. Chinese growth slipped to 7.3% as its PMI dipped to 50.3 in November as factory output slowed yet again with the main drag factors being an increase in costs and falling demand. As Moody’s cut Japan’s credit rating, because of increasing worries about the country’s debt levels, the yen fell to seven year lows.

Russian officials have forecast a 0.8% contraction in its 2015 GDP in light of the continuing economic sanctions, a plunging rouble and sinking oil prices, with real incomes sliding 2.8%. The Russian currency lost 9% in value on Monday and then hit new lows on Wednesday, as it plunged to 54.8 to the US$. Oil prices have seen both the Nigerian naira and Angolan kwanza under pressure. Nigeria has devalued its currency and raised interest rates to 13% to try and stem further depletion of its falling foreign reserves, as did the Angolan officials as the kwanza hit an all-time low on Tuesday.

But back to Dubai where a pair of world’s most expensive boots, valued at over US$ 3.1 million, is on show at the 19^th Dubai International Jewellery Week. The footwear – covered by over 39k diamonds and weighing 1,527 carats – has been designed by AF Vandervorst. No doubt the buyer of the size 38 boots will stand out in the crowd but it is unlikely that These Boots Are Made For Walkin!

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

So Wake Me Up When It’s All Over!

Posted on December 3, 2014 by howesdubai

It is five years ago this week (25 November 2009) when the emirate shook the financial world as Dubai World declared that it was not in a position to repay its then debts. A lot has obviously changed since then – but it does seem that mega projects are back. Some estimate that GREs (government related entities) are set to spend up to US$ 200 billion over the next decade, including US$ 93 billion already confirmed for projects such as Dubai World Central, Mohammed bin Rashid City and Expo 2020.

Not before time, work is scheduled to restart next month on the much troubled US$ 6 billion Dubai Pearl project, overlooking Palm Jumeirah. An investment consortium, headed by the Al Fahim Group, is to go ahead with the existing plans of 1.5k apartments, seven 5-star hotels, a 1.6k seat theatre and 60 restaurants and now expect to complete by 2018 – some 15 years after its 2003 launch. Earlier in the year, Hong Kong’s Chow Tai Fook Endowment Industry Investment Development (CTFE) bought a US$ 1.9 billion stake in the venture.

As widely expected, the Emaar board approved a special US$ 2.45 billion cash dividend which equates to roughly US$ 0.36 per share. This comes seven months after the US$ 2.2 billion dividend in April, comprising a 15% cash dividend and a 10% bonus share issue. Interestingly, the company reported a US$ 678 million 9-month profit ending 30 September (equivalent to just over 30% of the latest payout) but had a hugely successful IPO of its Malls Group which has helped to finance this windfall for investors.

The Nakheel eight-building Warsan Souk, located near International City, has been almost fully leased. The project – comprising over 1k shops and 30 food outlets – is directed mainly at local businesses and SMEs.

The six-year old Wasl, an asset management group owned by the government’s Dubai Real Estate Corporation, has announced that it will sell 405 freehold apartments in its already completed Creek Heights development. Initially built by Dubai Properties to be a hotel, it was taken over by Dubai Land Department, under its 2011 Tanmia initiative (which saw DLD act as a mediator to solve any issues, between investors and developers, when the progress of certain projects had reached an impasse). Wasl will also take over the running of the 5-star Hyatt Regency Dubai Creek Heights along with the conference facilities.

Flydubai – via its parent, Dubai Aviation Corporation – has raised US$ 500 million through a heavily subscribed landmark 5-year sukuk at a 3.776% profit rate – an indicator of how well the market rates the budget carrier ( and the Dubai economy). The 5-year old airline has just received a major award being recognised as the “world’s most innovative and influential low cost carrier” by CAPA.

Dubai World Central is planning to build a significant number of warehouses in its 21 sq km logistics park and will try to attract a blend of SMEs and multinationals before 2016. In Q3, the new facility moved 243k tonnes of freight and expects considerable expansion. IATA recently reported that ME cargo growth was up 17%, in direct contrast to Europe where there was a 1.6% contraction.

Damac announced that it expects to open two new hotels in Q1 2015. The Cour Jardin and Capital Bay will be located in Downtown, with the Dubai-based developer expecting to have a portfolio of 10k serviced hotel rooms by 2018.

With the cruise season in full flow, it is expected that Dubai will see a 19% jump in arrivals this year to 381k and an increase in cruise ships to 110. This number is expected to rise to over 450k passengers next year, as lines like Royal Caribbean, Costa, MSC and TUI return to the Dubai market – with Mina Rashid’s new 27k sq mt terminal allowing the handling of five cruise ships at any one time. Meanwhile DP World is in talks with the world’s seventh busiest container terminal, Qingdao, not only to expand trade between Dubai and the Chinese port but also to develop a cruise link.

Having being closed for the past ten months, in order to carry out a US$ 27 million refurbishment, the Pullman Deira City Centre has reopened its residences.

Following a US$ 31 million settlement with the Egyptian government, over a protracted land sale dispute, the Al Futtaim Group is planning to invest US$ 700 million in phase 2 of its 32 million sq ft Cairo Festival City development. The project has been delayed since 2010 and will include 500 residential units, 100 shops and a hotel.

The Dubai Gold and Commodities Exchange (DGCX) saw October business up 28% compared to a year earlier, with monthly volumes topping the one million mark for the second time this year. As usual, the currency segment dominated with 93.7% – or 978k – of total contracts.

Depa, 24% owned by Arabtec and listed on Nasdaq Dubai, reported a Q3 profit of US$ 5.2 million, despite a 10.4% fall in revenue to US$ 141 million, compared to a US$ 6.0 million loss in the same period last year. Its order backlog of US$ 717 million was 8.9% up, quarter on quarter, with the main drivers being interior contracting for the hospitality sector accounting for US$ 354 million, and its Asian business, a further US$ 260 million.

Troubled developer, Union Properties, has announced the launch of phase 3 of the Green Community – 210 villas and 22 duplex apartments Completion of the Dewan Architects-designed development is expected within 30 months.

As expected, Dubai Investments’ first foray into the burgeoning education sector is to build a non-profit making university in Dubai Investment Park. A MoU was signed with the Lebanese University of Balamand, which will offer 70 undergraduate and 55 postgraduate programmes.

Destinations of the World, a Dubai-based B2B travel operator, has sold 57.5% of its business to Gulf Capital. It was the Abu Dhabi equity firm’s biggest management buyout to date.

The Dubai-based Islamic mortgage lender, Amlak, 44% owned by Emaar, has finally signed a US$ 2.7 billion debt restructure deal with its creditors. The company was suspended from the DFM in 2008 but with this settlement its shares should soon be tradable again.

In order to refinance an existing US$ 380 million facility and to provide for future expansion, Dubai-based Topaz Energy and Marine hopes to raise a US$ 550 million, 7-year bank facility in Q1 next year.

Following the recent sale of 16% of Arabtec Holdings, it is reported that the former chief executive, Hasan Ismaik, is planning to sell the remainder of his share portfolio (11.8%). The 38-year old Jordanian will be lucky to get the same return of US$ 1.36 per share this time, as the current market price is currently 20.6% lower at US$ 1.08.

Having fallen 2.0% the previous seven days, the DFM fared little better this week dropping 1.5% from its Sunday opening of 4563 points to close Thursday on 4494. Bellwether stocks, Emaar Properties and Arabtec, were little changed, trading at US$ 2.98 and US$ 1.08 respectively.

It is difficult to ascertain how much banks make from their customers’ foreign currency transactions. It seems that HSBC has been charging what they consider too much and have refunded some UAE clients amounts that were contrary to their terms and conditions. Generally, banks will have to become competitive and transparent with such fees as money changers tend to have lower transfer fees, better exchange rates on offer and an increasing number of dissatisfied bank customers.

With the 02 December National Day fast approaching, HE Sultan Al Mansouri, the Minister of Economy, highlighted the fact the UAE has expanded 236-fold in its 43 year history. Over that period, the country’s GDP has grown from just US$ 488 million to its current level of US$ 114.2 billion. The minister expects the economy to grow by 4.8% this year – and at similar levels over the next five years – with inflation rates of between 2% to 3% over the same timeframe.

Russia’s economy is reeling under the cost of falling oil prices (US$ 100 billion) and the Ukraine sanctions (US$ 40 billion). Finance Minister, Anton Siluanov can do little to stop the rouble tumbling to all-time lows, trading on Thursday at 45.2 to the US$ (compared to 33.1 a year earlier). The Q3 24.0% fall in Sberbank’s (the country’s largest bank) profit to US$ 1.53 billion is reflective of the economic malaise facing Russia with the prognosis that there is a long winter ahead for the nation.

Oil prices continue to fall following OPEC’s decision on Thursday not to tinker with the supply valve. With Brent crude trading at around the US$ 73 level, the two big losers could be Russia and the US shale oil sector – both suffering because they are losing as these prices are well below their break even points.

Globally, business confidence has taken a hit as Markit Global Business Outlook Survey recorded its lowest ever level. There are numerous factors in play with the main ones being geo-political problems, especially in the Ukraine and the ME, the inevitable interest rate rise in the US and UK and the global slowdown, especially in the eurozone and emerging markets.

Despite Germany’s protestations, it is increasingly likely that ECB president, Mario Draghi will finally bite the bullet and belatedly start a program of government bond purchases, in a vain attempt to pull the eurozone from the abyss of a deflationary spiral. Even the OECD has suggested that the bloc could be stuck in persistent stagnation because growth has been undermined by insufficient policy stimulus.

To get some growth traction in the flagging eurozone, Jean-Claude Juncker, the newly appointed EC President, has released plans of a US$ 393 billion investment plan. This includes US$ 26 billion (or 6.6% of the total) of EU-funded seed money, with which he thinks that private investors will be lured to invest the balance of US$ 367 billion. It must be remembered that when QE3 ended in October, the US Fed had bought up to US$ 4.5 trillion in financial assets. If Juncker were to make this work it would be bigger than the miracle of the five loaves and two fishes. So Wake Me Up When It’s All Over!

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

Red Light Spells Danger!

Posted on November 30, 2014 by howesdubai

Dubai Land Department, through its 2011 Tanmia initiative, has announced the revival of a further 43 previously stalled projects, valued at US$ 2.72 billion. The DLD has been acting as a mediator to solve any issues, between investors and developers, when the progress of certain projects had reached an impasse.

With two hotels already under their banner, and two more coming on stream, Ajman-based R Hotels have announced the launch of their fifth Dubai property. The US$ 136 million project will be a 259-room, 4-star hotel and be the first sharia-compliant hotel to be located on Palm Jumeirah.

China State Construction Engineering Corporation (ME) LLC is confident that it will complete construction of Skai Holdings’ US$ 1 billion Viceroy Dubai Palm Jumeirah on time in 2016. The project includes a 479-room 5-star hotel together with 222 residences and ten restaurants.

Space in the 418k sq mt Nakheel Mall is already 50% booked and this week it was announced that Vox Cinemas will have a 15-theatre facility in this Palm Jumeirah location. When completed in 2017, there will also be 300 retail outlets, a medical centre and parking for 4k, together with roof plaza eateries.

Following four years of legal wrangling, there has been an out of court agreement between IFA Hotels & Resorts and Istithmar World, a JV for a mixed-use development (including ten 11-storey towers housing 860 units and 430k sq ft of retail and office space) on Palm Jumeirah. The partners, Nakheel and Souq Residences FZCO, have agreed that all the unsold units in the Golden Mile project will be taken over by Nakheel whilst the Kuwaiti entity will be relieved of substantial liabilities. There are at least 30 retailers who have waited for this settlement so that they can now open outlets.

G & Co has announced its newest development – the US$ 763 million Millennium Square, located in Meydan City. The 3.5k sq ft semi-detached 4-bedroom villas will have a starting price of US$ 1.2 million and will be completed by 2017. It is reported that the asking price will be under US$ 1.2 million.

Both Arabtec and Drake & Scull have reported disappointing Q3 results. Dubai’s largest contractor saw a 31.8% fall in profit to US$ 18.7 million. Despite a 23.7% surge in revenue to US$ 654 million, there was an 89.0% jump in administrative expenses to US$ 66 million.

DSI’s profit fell 10.1% to US$ 5.8 million, despite a 24.6% surge in revenue to US$ 338 million. The Dubai-based company also announced it had received a US$ 120 million facility, by dint of a 5-year sukuk.

With the construction sector a major driver in Dubai’s impressive economic growth, the 35^th annual Big 5 exhibition boasted more than 2.7k exhibitors from over 60 countries. The four-day building construction event, opened by HH Maktoum bin Mohammed bin Rashid Al Maktoum, closed on Thursday.

Two GREs (government related entities) are in the news this week. Dubai World is reportedly extending their loans of US$ 10.5 billion until 2022 and this will ameliorate a US$ 4.4 billion repayment due next year. Meanwhile the Dubai Aviation Corp’s flydubai has begun discussions with potential lenders, with the aim of issuing a US$ Islamic bond in the near future. The budget carrier has just reported a 40.0% jump in H1 profits to US$ 14 million, on the back of a 17.1% increase in revenue to US$ 515 million. The latest figures indicate that the five-year old airline has outstanding debts of US$ 1.05 billion, with capital commitments totalling US$ 11.4 billion.

A report from Oxford Economics has found that the aviation and tourism sectors contribute almost 27% (or US$ 26.7 billion) to Dubai’s GDP. This is expected to almost double over the next six years, resulting in a 37.5% contribution to the emirate’s GDP (US$ 53.1 billion) by 2020. More significantly, it will support over 754k Dubai-based jobs.

The emirate’s Al Rashudeen Trading Co has formed a JV with Moroccan partners to build a cigarette factory in Tangier. Planning permission has already been granted for work to start on the 60k sq mt site as well as for the new company to establish 20 storage units and 38k sales points in the country.

As the US$ 5.25 billion expansion of the 77 km Panama Canal draws to a close, DP World is in discussions with the aim of building up infrastructure there, as trade volumes will inevitably surge. The Central American republic is interested in exploring ways in which the two parties can cooperate, especially now that the widened canal can manage vessels with a capacity of 13.5k – well up from its current capacity 5k unit vessels.

The Department of Economic Development (DED) issued 4,688 new trade licences in Q3 – up 3% on the same period last year.

It seems that only 29 of the 51 banks operating in the country have subscribed to the reporting services of the newly opened Al Etihad Credit Bureau. Furthermore, eight banks have still to submit their customers’ credit details.

DFM’s latest IPO began subscriptions this week. 40% of Meraas Holding’s Dubai Parks and Resorts is up for sale with over 2.53 billion US$ 0.27 shares on offer. Funds raised – along with a US$ 1.5 billion project financing loan from Goldman Sachs – will be used to develop the mega theme park in Jebel Ali.

Having climbed 5.7% the previous seven days, the DFM reversed some of those gains by falling 2.0% from its Sunday opening of 4657 points to close Thursday on 4563. Bellwether stocks, Emaar Properties and Arabtec, fell in tandem trading at US$ 2.97 and US$ 1.08 respectively.

The Indian taxman lost an important battle this week when the court ruled that Royal Dutch Shell were not liable to pay tax on interest that the company would have earned when transferring shares in February 2013. The oil giant was accused of under-pricing a share transfer to its parent company by US$ 2.5 billion.

Despite the EU indicating that their tax agreement with Starbucks may contravene the law, by representing illegal state aid, the Dutch government thinks differently. The EU is concerned that the Dutch tax rules result in Starbucks lowering its taxable profit and hence its tax bill which are not in line with standard accounting practices. Other countries – Belgium, Cyprus, Gibraltar, Ireland, Luxembourg and Malta – are also involved in nefarious tax schemes with multinationals and facing probes from the EU regulators.

It is interesting to note that the President of the EC, Herman Van Rompuy, is a former Belgian prime minister whilst the newly appointed Jean-Claude Juncker was in charge in his native Luxembourg for 18 years until 2013, as well as Finance Minister from 1989 – 2009. Both men have played leading roles in making their countries tax havens and there must be questions on their independence in any future EU enquiry.

This week sees another three banks in trouble. The Belgian authorities have charged HSBC with assisting hundreds of wealthy nationals to avoid tax by moving money to offshore havens, including Panama and the Virgin Islands. The country has lost hundreds of millions of dollars in potential tax revenue and it is likely that the bank will face significant penalties. To make matters worse, French authorities are also investigating the same bank. The New York regulators have fined the Bank of Tokyo-Mitsubishi US$ 315 million for diluting a PwC report about transactions involving Iran. In Australia, ANZ have suspended seven traders whilst regulatory investigations into rate rigging take place.

Some of these bankers make Sepp Blatter look a saint!

China and Australia have signed a massive free trade agreement which will see increasing ties between the two countries. Chinese President Xi Jinping and PM Tony Abbott signed a MoU in Canberra. Currently, bilateral trade amounts to US$ 130 billion, with a further fourteen company agreements signed, totalling US$ 17.6 billion. One major benefit for Australia is that 95% of their exports will eventually be duty free into China.

On Monday, the Indian PM, Narendra Modi was in the Australian capital to push forward a free trade deal that would expand the current bilateral US$ 13 billion trade links between the two nations.

Following May’s coup, Thailand’s PM, Prayut Chan-O-Cha has seen his country’s Q3 growth fall to 0.6% as the promised revival has stalled.

As another indicator that all is not well, the third largest global economy, Japan has technically gone into recession with the economy contracting at an annualised rate of 1.6% in Q3, (as opposed to the expected 2.1% rise), following on the disastrous revised 7.2% fall in the previous quarter. This is a sure sign that Abenomics is not working as the inflow of billions of dollars of stimulus spending has failed to pull the economy out of its 20-year deflationary spiral. Prime Minister Shinzo Abe, who curtailed business confidence and consumer spending by gambling in April, as he lifted the Sales Tax rate, could soon be out of a job, after next month’s snap elections.

There is no doubt that any growth in the eurozone has ground to an ignominious halt, as the flagship German economy just avoids a recession, with a marginal Q3 growth rate of 0.1%. It is estimated that the bloc accounts for almost 20% of the global economy so the contagion will be felt not only locally but also worldwide. The ECB has still done very little to stimulate any sort of recovery and some firm action is now urgently required, as inflation rates are less than 25% of their 2.0% target. These falling prices, along with continuing high unemployment levels and sluggish growth, indicate that a third recession is just around the corner.

The few bright lights among the gloom are beginning to dim. US and UK still expect future growth rates of 3%+, whilst China, although slowing down, still sees levels of over 7%. Most other countries in the developed world, with the probable exceptions of India and Mexico, are flatlining. The recent G20 meeting in Brisbane failed to address the main economic issues, with no direct references to any new spending or trade initiatives.

No wonder that Prime Minister David Cameron is concerned that another recession, only six years after the last one, is a distinct possibility and that “red warning lights are once again flashing on the dashboard of the global economy”. There is no doubt that Red Light Spells Danger!

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

God Bless America!

Posted on November 24, 2014 by howesdubai

Tuesday saw HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum officially open phase 1 of the US$ 1.1 billion Dubai Tram system. Eleven must be somebody’s lucky number because the operation started on the 11^th day of the 11^th month, serving 11 stations with 11 trams whilst covering almost 11 kilometres.

(Two of the UK companies involved with its development seem to be having domestic problems. The UK Serious Fraud Office has accused an ex-senior manager of Alstom Network UK of paying “inducements”, totalling US$ 4.2 million, to Delhi Metro Rail Corporation officials. More charges against the company and other officials will follow. Meanwhile Serco, who won a US$ 29 million contract to run the network, has announced its fourth profit warning this year, when cutting its 2014 forecast to US$ 210 million, whilst also proposing a US$ 875 million rights issue. Their shares, listed on the FTSE, plummeted 35% on Monday, as it also highlighted problems with certain UK and Australian government contracts, and a possible impairment write down of almost US$ 2.4 billion).

Seven is obviously the lucky number of an unnamed Emirati who has just paid US$ 627 million for the mobile number 056 7777777, having already paid US$ 2.1 million for 050 7777777 in March. All proceeds from the auction have gone to the Khalifa bin Zayed Humanitarian Foundation.

Over 1k world leaders in government, academia, business and media congregated in Dubai this week for the 7^th Summit on the Global Agenda – a prelude to the upcoming World Economic Forum in Davos. The meeting comprised 80 Global Agenda Councils, with six meta-councils, all tasked with resolving specific global problems.

Following last month’s announcement of a JV with Dubai Holding, Emaar is adding a further two towers to its Dubai Creek Harbour at The Lagoons development. Four towers were recently released for sale to strong demand and these two 30 and 35-storey buildings will have a combined 240 units, going on sale this Saturday, 15 November 2014. When the whole US$ 817 million project is complete by 2016, it will have 39k residential units, 3.7k offices, 8 million sq ft retail area and 22 hotels, with 4.4k rooms.

Overseas AST Company LLC has won a US$ 41 million contract to build The Boardwalk – a 11 km waterfront promenade on Palm Jumeirah, with a completion date by mid-2016. Located on the breakwater, the walkway will have 30 kiosks and be accessible from fourteen different points.

Damac has reported record Q3 earnings, as both revenue at US$ 157 million and profit of US$ 61 million were 159.5% and 165.7% better than for the corresponding 2013 period. 90% of the revenue was derived from its UAE operations.

Despite numerous disruptive issues, such as the Ebola epidemic, geo-political problems, the global economic slowdown, and a part 80-day closure of its runways, Emirates reported an 11.0% jump in H1 revenue to US$ 12.04 billion and an 8.0% increase in profit to US$ 518 million. Over the six-month period to 30 September, the airline carried over 23 million souls, with capacity up 6.5% and Revenue Passenger Kilometres increasing by 9.8%.

Having seen house prices up 35% in 2013, the IMF has indicated that Dubai has been able to control its property sector and there is now little chance of a housing bubble, after last year’s warning that prices were becoming unsustainable. The world body was satisfied that large projects were being carried out “at a much more gradual and measured pace” but some may disagree with this synopsis.

According to figures released by International Property Show, Kuwaitis possess 59.1% (or nearly 7k) of the 11.8k Dubai properties, owned by GCC nationals.

Latest STR Global figures show that the hospitality sector recorded a year on year 1.6% reduction in October average daily room rates to US$ 282 and a 2.3% fall in revenue per available room to US$ 230. The supply of new rooms, at 7.3%, continues to outstrip demand – 6.3% – as occupancy rates dip 0.9% to 81.7%.

In line with most international hotel groups, Jumeirah has introduced its new lifestyle brand, Venu, to the market. It is reported that the first of these will be located on Bluewaters Island, located off JBR, currently being developed by the government-owned Meraas Holding.

Starwood Hotels & Resorts, already operating 14 properties in Dubai, is also considering a Bluewaters location. Next week, it will open its Sheraton Grand Hotel.

A report from Knights Frank noted that office inventory in the emirate has reached 7.5 million sq mt and is expected to increase by a further 6.7% next year. Vacancy rates continue to fall marginally and currently stand at 18%. Prime office rents rose by 2.0% in Q3 and showed a marked 23.0% jump year on year but with only 6 of the highlighted 13 districts showing double digit growth – Business Bay (31%), Tecom (31%), DFC (26%), Downtown (23%), Bur Dubai (13%) and JLT (10%). DIFC, DMC, DIC, Knowledge Village and Deira witnessed no change over the year.

A new Colliers International report that, at present growth trends, the emirate will require 51 new schools to teach 77k additional students by 2020. The consultancy firm estimates that a further US$ 2 billion will have to be spent over the next six years, bringing the total investment in private schools to over US$ 8.0 billion.

Government-owned Union Cooperative is to spend more than US$ 545 million in ambitious expansion plans that will include eight new hypermarkets, as well as numerous convenience stores in partnership with another, as yet unnamed, GRE (government-related entity). This will see the workforce jump from its present 3.8k employees to 6k.

Zack Shahin, along with three others who were tried in absentia have been sentenced to ten years in jail, fined a combined US$ 8.2 million and have been ordered to repay the same amount. The former CEO of property developer, Deyaar, was accused of taking US$ 5.4 million in bribes from a Canadian construction company, Thermo.

Masharie’s two subsidiaries – Emirates Extrusion Factory and White Aluminium Extrusion – are planning major expansion as the demand for their products rises; over the past year, there has been a significant 13.1% increase to 27.25k metric tonnes. EEF is adding a further production line to expand capacity by 6k metric tonnes and a powder coating plant that will see an increase of 7.2k metric tonnes, whilst WAE’s new anodising plenty will lift production by 4.8k metric tonnes. (Masharie is the private investment division of Dubai Investments).

The Investment Corporation of Dubai has established a new subsidiary, known as Dubai Holding, to manage its 50% shareholding in Emirates Global Aluminium, which was formed when Dubal and Emal merged last year. Currently, the company is responsible for over 50% of the GCC’s aluminium production. The rationale behind the new subsidiary is for Dubai government to have a uniform approach, when managing the emirate’s energy assets.

Limitless has to meet a December deadline to restructure a US$ 1.2 billion sukuk and it looks likely that the troubled Dubai GRE will use future receipts to service current repayments. The other option for the cash-strapped company is to negotiate a longer loan tenure.

Government-owned Port and Free Zone World has agreed a US$ 2.6 billion sale of Economic Zones World – along with an assumed net debt of US$ 859 million – to DP World. EZW, including JAFZ and JAFZA Enterprises among its interests, has gross assets of US$ 3.7 billion and latest June returns indicate a profit of US$ 221 million. The sale of the massive industrial and logistics complex will give the financially troubled Dubai World a welcome cash injection as the US$ 3.459 billion raised from the sale will help towards next year’s repayment of a US$ 4.4 billion loan repayment.

Troubled Standard Chartered Bank is reportedly considering the closure of some ME branches as it tries to shut 8% of its 1,250 global locations, in order to cut global costs by US$ 400 million. The way that this bank has treated some of its Dubai customers of late may help to partly explain why it has had to issue three profit warnings and its shares have lost 30% in value.

Emirates NBD is initiating a US$ 1 billion unsecured bond with a price at around 150 basis points over midswaps.

The Central Bank reported a 2.2% increase in September loans to US$ 376.0 billion, as the economy continues to flourish and interest remains at historic low levels. Meanwhile total bank assets rose to US$ 629.4 trillion – 1.7% up month on month and 21.2% for the year – whilst both bank deposits and non-resident deposits saw marginal decreases to US$ 384.2 billion and US$ 299.7 billion respectively.

Since its inception in 2004, Dubai International Financial Centre has grown to almost 1,150 companies, employing over 17K, operating under its umbrella. Its expansion plans include 67% more office and other space to 15.2 million sq ft, with an increase in the number of hotels and retail space along, with a doubling in the number of companies over the next ten years.

HE Suhail Al Mazroui, UAE Energy Minister, confirmed that the oil market fundamentals remain basically the same, despite the recent 31.4% slide in oil prices (on Thursday, Brent Crude was trading at US$ 78.89). The current oversupply is the direct result of increased production in shale oil, mainly emanating from the US.

Nasdaq Dubai is in talks with Misr for Central Clearing, Depository and Registry (MCDR) that could result in dual listings here in Dubai and in Egypt. If this proves successful, then it could lead to similar arrangements with other overseas bourses.

Another sign of the rude health of Dubai’s economy came with news that DFM’s latest IPO was ten times oversubscribed. Amanat Holdings – a healthcare and education provider – collected US$ 3.7 billion for its actual requirement of US$ 375 million. Shares will be proportionally allocated to all subscribers and trading will commence later in the month.

Dubai Parks and Resorts is the latest company to test the market with a proposed IPO on the DFM. The Meraas subsidiary, currently planning the mega Jebel Ali theme park, is offering 40% of the entity to the public by issuing 2.53 billion US$ 0.27 shares which values the IPO at US$ 689 million and the entire entity at US$ 1.72 billion. (The company is also expected to shortly agree a US$ 1.15 billion project financing facility with Goldman Sachs).The development, slated for completion by Q3 2016, will consist of three distinct theme parks, a 4-star hotel and a centrally located retail and dining district, and will cover some 16 million sq ft of land.

On Sunday, the Union Properties board failed to approve the Q3 accounts. Subsequently, the DFM suspended trading in their shares until the problem had been resolved. Three days later, the amended figures showed a 171.6% surge in nine-month profits to US$ 227 million, despite an 18.8% fall in revenue to US$ 471 million. Actual Q3 returns were disappointing with both revenue (at US$ 121 million) and profit (at US$ 35 million) down, 62.8% and 25.6%, respectively.

The DFM confirmed that Arabtec’s former chief executive, Hassan Ismaik, has sold a further tranche of shares (reportedly at a premium price of US$ 1.36 per share) in a US$ 1 billion deal. Consequently, Aabar Investments now own 34.93% of the company with Mr Ismaik still retaining an 11.8% shareholding.

Having fallen 3.1% the previous seven days, the DFM recovered those losses and more by surging 5.7% from its Sunday opening of 4406 points to close the week on 4657. Thursday saw 392.6 million shares trade with a value of US$ 281 million. Bellwether stocks, Emaar Properties and Arabtec, were well up, trading at US$ 3.00 and US$ 1.16 respectively.

Denmark’s third largest company, and the leading global ship fuel supplier, OW Bunker, has filed for bankruptcy just eight months after going public on the Copenhagen Nasdaq. Only last month, it published figures indicating a US$ 24 million trading loss which has since been updated to US$ 150 million, following the discovery of a major fraud in its Singapore subsidiary, Dynamic Oil Trading. Without additional credit lines, it cannot survive but further financial assistance is unlikely as banks are owed US$ 750 million.

Hyundai / Kia have made a US$ 100 million settlement with US authorities for overstating the fuel economy on 1.2 million of its vehicles. Not only will this cost the company the actual fine but it is set to lose a further US$ 250 million. This is by dint of underestimating greenhouse gas emissions by 4.75 million metric tons (US$ 200 million) and taking preventative measures so such transgressions will not reoccur (US$ 50 million).

As was widely expected, UK and US regulators have fined six banks for manipulation of the forex market which turns over US$ 5.3 trillion of currency daily. The banks involved – Bank of America, Citibank, HSBC, JP Morgan, RBS and UBS – will have to pay punitive penalties totalling US$ 4.1 billion. A seventh institution – Barclays – has yet to agree a settlement with the lawmakers

In the UK, the Big 4 – Barclays, HSBC, Lloyds and RBS – account for 77% of all UK current accounts, in a segment valued at nearly US$ 20 billion, as well as 85% of all SME accounts. Not before time, they are now facing a Competition and Markets Authority enquiry to ensure that their dominant position is not being abused which is an unlikely scenario, judging on their past records!. These leading institutions had been reluctant to assist but have agreed to cooperate whilst the CMA wish to see more competition and greater transparency in this sector.

The Dow Jones Industrial Average continues in record territory, closing on Thursday on 17653 whilst the S&P 500 and Nasdaq are still flirting with all-time highs, currently trading at 2039 and 4680 respectively. There is no doubt that, following the market’s recovery from last month’s 10% falls, the US equity market is heavily overbought and ready for an imminent major correction.

It is also interesting to compare the latest US and Chinese economic data.

China USA

Growth 7.3% 3.3%

Trade Surplus US$ 45.4 billion 43.0 billion Deficit

Exports US$ 206.9 billion 195.6 billion

Imports US$ 161.5 billion 238.6 billion

Forex Reserves US$ 4.056 trillion 138.1 billion

Furthermore, the US budget deficit of US$ 121 billion (receipts – US$ 213 billion and outlays of US$ 334 billion) is the highest in three years and 34% up on the same period in 2013. Finally, the US public debt topped a massive US$ 18 trillion this week which makes each of the country’s 320 million inhabitants liable for US$56,250. God Bless America!

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

Hey, That’s No Way To Say Goodbye!

Posted on November 16, 2014 by howesdubai

At long last, there appeared to be some action taking place in Great Britain – an island on The World project. Drydocks World reportedly signed an agreement earlier in the week with the Q Group to provide technical support for further development on the proposed 5-star resort island. A day later, Nakheel, the master developer of World Islands, indicated that there were some outstanding issues that needed to be resolved before any further progress could be made. How long it will take GB to join Lebanon and Central Europe as the huge project’s only developed islands remains to be seen.

In order to add even more dining and leisure activities for the 30k inhabitants and countless more visitors to Jumeirah Palm, Nakheel is letting out a further 17 plots in their Azure Residence and Club Vista Mare developments.

The same developer has already completely leased out its 5.3k retail and 93 food spaces for their Deira Islands Night Souk, covering a massive 15.3 sq km area, including 1.9 km of shoreline. When completed, the area will be a vibrant tourist destination, along with scores of new hotels, residential buildings and waterfront activities, as well as an amphitheatre for 30k. The whole Deira Island project will see 280k residents and 50k new hotel rooms.

Engineering Contracting Company has been appointed as the main contractor by Dubai Properties for their US$ 218 million Dubai Wharf project. The four towers, housing 582 residential and 150 retail units, will be completed by 2017 and will form an integral part of DP’s Cultural Village master development.

Spanish operator, Parques Reunidos has been awarded the contract to operate motiongate Dubai and Bollywood Parks for Dubai Parks and Resorts. These are two of the four unique zones that will comprise the mega theme park being built in Jebel Ali.

October witnessed a record high in business activity with the HSBC UAE Purchasing Managers’ Index reaching 61.2 – its highest ever level since the series began over five years ago. This indicates that the local economy is steaming ahead, despite low oil prices (Brent crude currently trading at US$ 83.0) and international geo-political factors.

The awarding of a US$ 47 million district cooling plant in Abu Dhabi has pushed the total new business for Drake & Scull Engineering to over US$ 218 million this year. The project, including design and building, will be completed within a year.

Dnata, which operates in all six UK airports, into which Emirates flies, plus East Midland, have expanded their Manchester operation, by adding ground handling services there. Initially, it will service Emirates and then next month Cathay Pacific. This expansion has seen its workforce more than double to around 220 employees.

With much of the cargo traffic now moving to Dubai World Central, the new facility recorded Q3 returns of 243k tonnes (YTD – 520k tonnes). The airport saw 156k passengers in the quarter with a YTD total of 734k.

Since introducing Wi-Fi three years ago on some of its flights, Emirates has seen its usage literally take off with over 500k users. The airline’s aim is to make the service free of charge on all its flights; currently, only its entire A-380 fleet of 54 aircraft and 27 of its 100 Boeing 777s have the service available.

Next Tuesday, 11/11, will see the official opening of the RTA’s new tram service which is expected to run twenty hours from 0500 to 0100. Initially there will be eight vehicles used on the 10.6km tramway which is expected to transport 27k passengers on a daily basis. Built by a consortium of Alstom, Besix and Parsons, phase 1 will have cost US$ 866 million.

The latest Knights Frank report points to a further decline in the luxury home market, as prices slipped a marginal 0.3% in Q3. As has been the case all year, the Central Bank tightening of the mortgage cap for properties over US$ 1.36 million, along with the doubling of the transfer fee to 4%, have been the main reasons attributed for the slowdown. Over the past twelve months, prices were up by only 2.6% compared to 6.3% in the preceding 12-month period.

The government has repaid the US$ 1.93 billion it raised in a 5-year sukuk in October 2009 – at the beginning of the financial crisis. Earlier in the year, Abu Dhabi agreed to refinance a US$ 20 billion loan, for a further five years, at a 1% rate.

Following last week’s announcement of the TECOM expansion, the company is now planning to raise a 7-year US$ 1.09 billion loan. The funds will be used by this unit of Dubai Holding, for its growth plans, and with some funding for its parent company.

The newly incorporated Emaar Malls Group announced a 55.2% increase in Q3 net profit to nearly US$ 88 million, as revenue jumped 19.7% to US$ 177 million. The company raised US$ 1.58 billion when it went public in September.

Last week’s equine trade biennial fair, organised by Al Fajer Information and Services, attracted a record number of trade visitors (5k) and 215 exhibitors – 85% of whom have already booked for Al Fares 2016. The 2013 imports of equine products and accessories reached US$ 327 million.

Abraaj Investment Management has made a US$ 119 million offer for Bisco Misr, an Egyptian bakery. The affiliate of Abraaj Capital is awaiting further advice from the Egyptian Financial Supervisory Authority on the proposed sale. Abraaj, which manages assets of over US$ 7.5 billion, also bought into Wine Connection, a leading SE Asia food and drink chain, with its fourth foray into that regional market.

EIIB Rasmala is planning to expand its investment range by enhancing its local property portfolio. The Dubai-based asset manager – 76.3% owned by The European Islamic Investment Bank, with the balance to Rasmala Holdings – is hoping to raise US$ 1.6 billion. US$ 1 million will be invested in its leasing and alternatives business with the residue in the UK property segment.

Dubai Health Authority has imposed a 4.2% cap on any healthcare service increase as from 2015, in line with the forecast inflation rate. Hospitals and clinics, along with services provided to local insurance policies, will be covered by this welcome new regulation.

DEWA has started an US$ 18 million project to upgrade the efficiency of its water transmission networks. This will cover thirteen locations where surge protection systems will be installed.

Following their August US$ 300 million fine from the New York banking regulator, it seems that there will be further investigations into potential sanction violations by the troubled Standard Chartered Bank. There will not be too many of their former Dubai SME clients, who were given just 30 days’ notice to close their accounts, losing sleep over the bank’s latest troubles. Investors are not happy either – as the share price of US$ 15.24 is 37.0% down on 52-week highs and less than half of what it was in November 2010.

It looks like another international bank is pulling the plug on its ME operations with reports that RBS is considering the sale of its corporate loan book. As the recipient of the biggest bailout funds following the GFC, the bank – 81% owned by the UK government – is focusing more of its attention in its home market.

The latest company to go public on the Dubai Financial Market is Daman Investments which is planning a 55% share float in Q1 2015. The exact amount of the IPO – along with the ratio of retail and institutional buyers – will be known later in the month. This is a sure sign that the Dubai economy is on the upswing especially after the two recent IPOs – Emaar Malls Group and Amanat – which raised US$ 1.6 billion were oversubscribed.

The Saudi bourse has been rocked by news that telecom operator, Mobily has had to restate its audited earnings from the past 18 months because of accounting irregularities. As a result, Etisalat – a 27.5% shareholder in the company – has had to follow suit and has trimmed its 2013 profits and H1 2014 by US$ 381 million.

Having fallen 0.6% the previous seven days, the DFM had a dismal week falling 3.1% from its Sunday opening of 4545 points to close Thursday on 4406. Bellwether stocks, Emaar Properties and Arabtec, were trading at US$ 2.68 and US$ 1.04 respectively.

The UK Serious Fraud Office, not known for its success rate in prosecuting offenders, has accused Robert Hallett of two counts of corruption. The ex-senior manager of Alstom Network UK is to face two charges of paying “inducements” totaling US$ 4.2 million to Delhi Metro Rail Corporation officials. More charges against the company and other officials will follow.

More bad news for the South African economy with the government almost halving its 2014 growth forecast from 2.7% to 1.4%. With a 4.1% budget deficit, the country, that spends over half of its income on the public sector and welfare payments, needs to raise an additional US$ 1.36 billion.

The current economic outlook in Australia is causing concern as its September trade deficit more than doubled to almost US$ 2.0 billion as exports rose by 1% but imports jumped by 6%. A plunge in commodity prices – as global demand falls – has seen a 40% fall in iron ore over the past year and thermal coal prices at five-year lows; these are the country’s two main exports.

Indonesia has seen a marked slowdown in its GDP growth which, at a still credible 5.01%, is at its lowest level since the GFC. Both Q3 exports, 0.7%, and imports, 3.63%, were down on the same period last year. Their on-going long-term economic problems – a widening current account deficit and weakening global demand – continue to beset the newly elected president, Joko Widodo.

With real estate accounting for 16% of the China’s GDP and housing sales in the first nine months of 2014 falling 10.8%, there is some credence in the belief that a property bubble is about to burst. If that were to happen, the contagion will be felt locally – initially in the steel and cement sectors – and across the world. One interesting fact on the impact of a property bubble collapse is that, in the past three years, China has used 6.6 billion tonnes of cement – in the whole of the twentieth century, USA consumed only 4.5 billion tonnes! With its total debt spiraling out of control, the whole world is hoping that the Beijing government will manage a soft landing when the inevitable housing correction occurs.

Even though Spain’s recession is officially over, as more jobs are being created, consumer demand has picked up quicker than expected and the 2015 growth forecast rose to 2.0%. Unfortunately, the headline figures hide the fact that the country is facing dire social problems. Not only is unemployment at over 25%, public debt stands at 100% of GDP and companies owe more than 120% of GDP but 1.5 million Spaniards rely on food banks, 700k households – that generate no income – are unable to claim government benefits and 2.4 million have been unemployed for more than two years.

Having been FIFA’s airline partner for the past three world cups, Emirates has finally pulled the plug and will not renew sponsorship with the world football body which has been beset by numerous scandals and reported financial misdemeanours. It is estimated that partner sponsors pay over US$ 1.6 billion into the pot for a 4-year World Cup cycle. The Dubai-based airline was one of six partner sponsors – along with adidas, Coca Cola, Hyundai/Kia, Sony and Visa– and the first to realise that there may be some toxicity with links to Sepp Blatter’s FIFA and its alleged ever- increasing corruption scandals. Emirates has now shown FIFA a deserved red card and the sooner other sponsors follow suit, the quicker the world game can rid itself of its tarnished reputation and regain credibility. Then the FIFA cabal can moan that Hey That’s No Way To Say Goodbye!

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

I Can’t Explain!

Posted on November 3, 2014 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum opened the 10^th World Islamic Economic Forum this week in Dubai. The three-day event was attended by nine heads of state, along with over 2k delegates, and showcased the importance of the city as a global financial centre.

The Dubai Ruler was also in attendance when plans for further developing Dubai Internet City and Dubai Media City were unveiled. The US$ 1.23 billion project, covering 10 million sq mtrs, will see TECOM with an additional 5.5k companies, to 10k, and an extra 30k workforce to 100k. The main aims of this initiative are to actively encourage the expansion of SMEs, develop new technologies and create sustainable infrastructure, thus making Dubai a smarter and more innovative location.

Although not up to market expectations, Emaar Properties reported a 20.7% hike in Q3 profits to US$ 191 million despite a 15.2% fall in revenue to US$ 537 million. The company has witnessed a marked slowdown in property handovers as well as holding on to plots of land for their own development use. Furthermore, the sector has been affected by the recent moves to raise the property transfer fee from 2% to 4% and the banks introducing tighter mortgage controls.

Despite this, Emaar has announced a multi-million US$ development with Dubai Holdings which will include 600 mtr + twin towers which will dwarf Petronas Towers in Kuala Lumpur. The Creek Harbour, located in The Lagoons, will be bigger than Downtown Dubai and will encompass a massive 1.5k acres. Phase 1, costing an estimated US$ 817 million, will incorporate six towers with harbour and city line views.

Hard Rock is to have a 281-room hotel in Marina 101 which is currently the world’s largest residential building. To be open within nine months, the 33-storey hotel will have a lounge area on the 101^st floor, overlooking JBR and Jumeirah Palm. It will be managed by Hard Rock International for the developer, Sheffield Holdings, and Abu Dhabi Finance Group.

Following recent announcements by the Meraas subsidiary, Dubai Parks & Resorts, the company has appointed Marriott International to run its Polynesian-themed hotel in its massive Jebel Ali theme park project. The 503-key hotel will be open in 2016 and will be the base for many tourists slated to visit the Bollywood, Legoland and motiongate Dubai park attractions.

Both telecom operators came out with Q3 results this week. Etisalat announced a 21.3% rise in profits to US$ 605 million – slightly down on market estimates – as revenue surged 37.6% to US$ 3.6 billion; 48.5% of sales (US$ 1.74 billion) originated overseas in the 19 countries that Etisalat carry out operations. Meanwhile Du posted a 17.9% hike in net profits to US$ 152 million, in line with a 14.8% rise in revenue to US$ 826 million.

Dubai International saw a 9.9% rise in September passenger traffic to 5.94 million as the YTD returns were up 6.2% to 52.4 million. Although freight saw a slight 2.8% increase in September to 202.4 million tonnes, the 9-month figures, at 1,763 million tonnes, are marginally down because of the on-going move to Dubai World Central airport.

DP World reported a creditable 9.9% rise in Q3 container volume from 14.17 million TEUs (20’ equivalent units) to 15.44 million, with a YTD total of 44.8 million units. Capacity at its home port, Jebel Ali, is expected to reach 19 million TEUs by Q1 2015.

Dubai’s latest IPO has already been over-subscribed despite not closing until next Tuesday. The Belhoul Group – a leading healthcare provider – has received the US$ 375 million required for 55% of its company.

There are reports that Dubai Investments is also planning to enter this ever-increasingly lucrative market. It is expected that it will build a school and university in its Dubai Investment Park in the near future and should have no funding with both its profits (up 17.4% in Q3) and a cash balance heading north. It is also considering the opening of a medical facility.

The Dubai Financial Market returned impressive quarterly results with net profit 85.4% up at US$ 42 million on the back of the value of traded shares surging 60.0% to US$ 21.4 billion during the quarter.

Having gained 7.1% the previous week, the DFM returned to negative territory, with the market falling 0.6% from its Sunday opening of 4573 points to close on Thursday on 4545. The index had a poor October falling 9.9% from its monthly opening of 5043 but is still up 34.9% this year. Bellwether stocks, Emaar Properties and Arabtec, were trading at US$ 2.72 and US$ 1.15 respectively.

It has not been a good year so far for gold as prices dropped to their lowest levels since 2010. This week alone, the yellow metal has fallen 5.3% to US$ 1,166 per oz despite the fact that the Fed had ended its QE programme. Whether its 28% 2013 fall will be replicated this year remains to be seen but the outlook, short-term at least, remains bleak.

A recent Independent Commission for Aid Impact report has concluded that UK overseas aid has failed in its aims to meet the needs of the poor and to reduce corruption levels in countries receiving aid. These include the top six receiving nations – Pakistan (US$ 540 million), Ethiopia (US$ 526 million), Bangladesh (US$ 435 million), India (US$ 430 million), Nigeria (US$ 398 million) and Afghanistan (US$ 339 million).

Following this week’s revelation that the EU is demanding a US$ 2.72 billion surcharge from the UK, there was more disturbing news for Prime Minister Cameron. In 2013, his country paid more than US$ 13.8 billion into the union’s coffers than it received – in 2007, this figure was US$ 6.4 billion!

RBS and Barclays have announced that they have each set aside US$ 800 million to cover possible fines and fees relating to their roles in manipulating the US$ 1.36 trillion–a–day currency markets. Other financial institutions, including Citi, JP Morgan and UBS, have already done likewise and all expect to know their fate from the British financial regulator in November.

Ebola has been with us for almost over 40 years but it has taken the World Health Organisation a long time to wake up to one of the world’s most acute public health emergencies. Back in April, MSF were warning that the spread of the epidemic was unprecedented and becoming uncontrollable but the world organisation rejected the severity of the warning. Even now it seems that the disease, that has officially killed 4.5k, but probably a lot more, is out of control with the French-based charity still in the firing line. What the WHO has been doing – I Can’t Explain!

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Financial Market, Dubai Media City, Emaar, Emirates, emirates airline, Emirates NBD, Hard Rock, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, The Who, UAE, World Islamic Economic Forum | Leave a comment

If I Were A Rich Man

Posted on October 26, 2014 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum announced a seven-year plan to make the UAE one of the leading innovative countries in the world. His National Innovation Strategy will focus on seven main areas – education, health, renewable energy, space, technology, transport and water. The main target is to set up an environment that actively encourages innovation and entrepreneurship between the public and private sectors.

The first ever UAE-built satellite is expected to be launched in 2017, as Emirates Institution for Advanced Science and Technology (EIAST) announced that it had completed its design of KhalifaSat. This will be followed by actually manufacturing the unit that will then put Dubai well and truly on the map, as a leader in space technology.

As part of the move to make the emirate a Smart City, Dubai Municipality has signed an agreement with du to introduce free Wi-Fi for all its beaches, parks and public places.

Atlantis The Palm becomes the latest government related entity to make use of the favourable debt market conditions. The luxury hotel, owned by the Investment Corporation of Dubai (ICD), is to refinance its US$ 880 million loan at the new rate of 375 basis points over Libor (compared to its original September 2013 facility at 500 bps). Furthermore, it has increased its principal to US$ 1.2 billion and extended the tenure from five to seven years.

Over the past three months, both Dubai Duty Free and DP World have done likewise. DDF repriced its US$ 1.75 billion loan, for the second time in a year, to take advantage of better terms whilst the port operator refinanced and amended its loan from US$ 1 billion to US$ 3 billion.

Jumeirah Group announced that it had signed three new hotel management agreements with Chinese operators – in Hainan, Hankou and Nanjing. The luxury hotel company, owned by Dubai Holding, operates the Jumeirah Himalayas Hotel in Shanghai and has a further seven Chinese properties in the pipeline whilst currently managing 22 properties, half of which are in the ME, six in Europe and five in Asia.

The hospitality sector has seen better Septembers with latest figures indicating falls in both average daily rate, down 4.0% to US$ 183, and revenue per available room, 3.7% to US$ 140. At the same time, occupancy rose marginally to 76.3% as demand was up 7.8% just outstripping the supply increase of 7.4%.

After its highly successful Decmber 2013 launch of Maison Dubai Mall Street, Damac has just opened Canal Views in the Burj Area. The 211 luxury hotel suites tower will be operated by Damac Maison, one of the company’s two hospitality brands – the other being NAIA by Damac.

2014 continues to see a slowdown in the real estate market with the third straight quarter that both sales and rentals have fallen. There is no doubt that the 2013 introduction of the mortgage cap (75% for expats and 80% for locals) and the doubling – to 4% – of the DLD transfer fee have taken the froth off the top of the market.

As the residential sector appears to be flat lining, it seems a strange time for Christies International Real Estate to open its first regional office in Dubai. Just to let the market know of its arrival, the company’s first major sale is a US$ 99 million Arabic palace.

Coincidentally, Christie’s auction house is selling over 200 items this week, including 125 modern and contemporary Arabic art pieces. The three-day sale is expected to raise almost US$ 10 million.

With its shares losing over 20% last week, Arabtec bounced back on Sunday with a jump of 10% in valuation following positive news about its role in the US$ 40 billion Egyptian housing project. The company announced that work will start in Q4 on the first phase of the one million homes project.

MAF, the exclusive franchisee for Carrefour in the ME, is extending the French supermarket brand by introducing Carrefour City – The Neighboring Store. The new smaller outlet concept will see its first opening next month in conjunction with the RTA Metro and will carry up to 4,000 line items, for a quick and convenient shopping experience.

Dubai Parks & Resorts have announced a tie-up with Sony Pictures Studio and Smurfs Zone for one of their proposed theme parks in Jebel Ali. It will host 12 themed attractions in one of the planned four parks, encompassing 4 million sq ft. It also reported that its Bollywood venture, covering 3 million sq ft, will comprise five movie theme zones and 16 other attractions. Phase 1 of this mega project, also including Legoland and a hotel, will be completed by the end of 2016.

Three local banks reported September results this week – all heading north in line with the resurgent Dubai economy and an uplift in consumer confidence.

Emirates NBD will keep their 55.6% majority shareholder, Investment Corporation of Dubai, happy with an impressive 101.3% surge in Q3 net profit to US$ 425 million. Deposits rose by 9.2% to US$ 68 billion whilst total loans were at US$ 67.5 billion. Meanwhile Dubai Islamic Bank saw Q3 net profits up 55.7% to US$ 184 million. Commercial Bank of Dubai recorded an 18.4% net profit jump in the first nine months of the year to US$ 243 million despite a 14.6% hike in operating expenses to US$ 143 million. Loans and advances were up 3.5% to US$ 8.58 billion whilst deposits jumped 10.6% to US$ 8.66 billion.

According to a recent MEED report, 2014 will be a bumper year for GCC construction projects, with over US$ 180 billion of contracts – up 15.4% on last year and the highest figure since the GFC.

Dnata has obtained UK regulatory approval to buy Stella Travel Services which includes TravelBag. The Chester-based company has long been an important contributor to Dubai’s inbound tourism sector.

Gaureng Desai has been appointed temporary CEO of the Dubai Gold and Commodities Exchange (DGCX) in the wake of the resignation of the current incumbent, Gary Anderson, due to ill health.

Last week it was Lego and now another Danish company is about to expand its Dubai presence. Ready by Q3 2015, Ikea is building a regional distribution centre at Dubai World Central, capable of handling 50k 20’ equivalent containers every year.

Along with TPG Capital, Dubai-based private equity firm, Abraaj Group, is planning to buy a controlling share in Kudu. The Saudi fast food chain is reportedly valued in the region of US$ 530 million and is currently owned by four Saudi shareholders.

Following a seemingly unstructured buying spree prior to the GFC, Dubai International Capital is planning to divest itself of the two remaining trophy assets still on their books. In 2012, it was forced into a US$ 2.5 billion restructuring programme and has a current net debt in the region of US$ 1 billion. Sale of these two assets – the UK engineering aerospace company, Doncasters, and the German alumina products maker, Almatis – will provide sufficient funds to meet these liabilities within the next eighteen months.

As part of a New York legal settlement, in which it was fined US$ 300 million, Standard Chartered was ordered to close high risk SME accounts in the UAE. Accordingly, the bank has notified thousands of effected clients here and given them 30 days’ notice to find another bank. Many are not too happy with this unilateral action.

ES Bankers (Dubai), a unit of the disgraced Portuguese Banco Espirito Santo, has been closed down by the Dubai International Financial Centre court. Earlier in the year, major accounting irregularities led to a US$ 6.3 billion Portuguese government bailout of what was that country’s largest financial institution.

There are some out there who consider that prices in Dubai are heading northwards too fast and if the latest Shake Shack Index is anything to go by, they may have some credibility. Dubai International Airport came out as the most expensive burger meal, at US$ 23.22, from a list of 56 different global sites.

Not unexpectedly, Dubai’s September inflation rate hit a five-year high rising to 4.2% year on year. Housing and utility costs, which account for 44% of the “inflation basket”, recorded a 6.5% surge.

With due respect to neighbouring countries – Bahrain, Oman and Qatar – it is hard to agree with a recent HSBC Expat Explorer survey that ranked them more popular than the UAE. Bahrain came in 5^th – ten ahead of the UAE as the latter lost marks for a rising cost of living and increased education expenses.

In the wake of last week’s major sell-off, when the market dropped 13.6%, the DFM regained 303 points – or 7.1% – as the index rose from its Sunday opening of 4270 to its Thursday close of 4573. This week, Emaar and Arabtec shares recovered from US$ 2.70 to US$ 2.81 and from US$ 0.98 to US$ 1.14 respectively. So far this year, the market has jumped 35.7% from its 01 January opening of 3370.

The French government is waiting to see whether the EU will reject their 2015 budget plans because it will be unable to bring its deficit below the EU required target of 3% of output. The country seems to be doing very little in the urgent requirements of structural reforms and a speeding up of reducing the deficit.

It has not taken that long for the trade sanctions against Russia to make a negative corporate impact with Rolls Royce reporting that its revenue will be down up to 4%. The reason given is that customers, who are experiencing worsening market conditions, have delayed or cancelled certain projects.

Although recent forecasts from both the Bank of England and the IMF are bullish on British growth forecasts, there are increasing signs that the future is not as rosy as it first appears. The effect of sluggish growth on the continent – UK’s biggest trading partner – and geopolitical problems, especially in the Ukraine and ME, will inevitably have a drag on future growth prospects. The country would be doing exceptionally well if it were to meet the current forecast expansion of 3.0% next year.

The Chinese economy had its lowest growth level since the GFC with Q3 GDP up by 7.2% year on year – down on the forecast 7.5%. The main areas of concern are the reduced demand for its products – especially from Europe – and a property slow-puncturing bubble. When its economy hit the rails in 2008, the government introduced a US$ 630 billion stimulus package but the introduction of a similar measure is currently unlikely. But it did inject some US$ 80 billion into the banking system for relending purposes last month.

Despite the best efforts of Abenomics, Japan’s economy is still causing concern as its September trade deficit balloons out to almost US$ 9 billion – 35% higher than this time last year. Furthermore the IMF has just cut its growth forecast for the world’s third largest economy from 1.6% to 0.9%. Prime Minister Shinzo Abe had raised the sales tax in Q2 with the aims of reducing the country’s debt burden and hope that a weakening yen would result in stronger exports – but neither has transpired.

It seems that three financial institutions have got off lightly as the European Commission issued fines for their participation in banking cartels. JP Morgan, UBS and Credit Suisse have to pay US$ 91 million, US$ 17 million and US$ 12 million respectively whilst RBS were let off any penalties because they were the first to notify the EC of any wrongdoings! To further prove the cosy relationship banks have with the regulatory authorities, they all received a 10% discount for admitting their transgressions.

If they have problems paying these fines, the banks could turn to Microsoft boss, Satya Nadella, for assistance whose current pay package tops US$ 85 million. If I were A Rich Man!

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