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Foxy Lady

Posted on September 1, 2014 by howesdubai

There is no doubt that the aviation sector is feeling the pinch from current geo-political, health and climatic issues. With conflict areas – such as eastern Ukraine and northern Iraq – becoming no-fly zones, airlines have had to take expensive detours.

For example, Emirates’ fuel bill last year came in at US$ 8.4 billion – or over 30% of operational costs. In addition, they have cancelled flights to both Erbil and Kiev and have seen reduced passenger loads to other troubled areas. The Ebola scare in western Africa has had a similar effect on air travel and, now looms the Icelandic Bardarbunga volcanic threat. In 2010, the Eyjafjallajokull eruption saw 100k flights cancelled and a US$ 1.7 billion loss to the industry. All these factors will have a negative impact on Emirates’ (and many other carriers’) top and bottom lines.

One of many airlines struggling is Qantas which has just reported its biggest ever loss of US$ 2.6 billion (which did include a US$ 2.4 billion write down on its international fleet). In addition, the usual suspects – high fuel prices and weak domestic demand – added to the airline’s woes.

Ryanair, the world’s largest budget carrier seems to be taking a leaf out of flydubai’s book. Over a year ago, CEO Ghaith Al Ghaith introduced business class on many of its routes and now the Michael O’Leary airline is following suit. Imitation is the sincerest form of flattery.

Established in 2006, the Emirates Institution for Advanced Science and Technology is finalising the first phase of its Dubai facility that will eventually build satellites. When completed, manufacturing will move from its current S Korean location to the emirate where further development of the Khalifa Sat will take place. So far, the EAIST has successfully launched DubaiSat 1 and 2.

As the population grows so do the manpower needs of the medical sector resulting in Dubai Health Authority recruiting a further 531 nurses for work in the ever-expanding public hospitals and clinics. A recent report by Alpen Capital indicates that the UAE is the fastest growing GCC market in this sector. Indeed there has been a doubling of the UAE healthcare budget over the past six years but despite that, it is estimated that the country still spends US$ 2 billion in sending Emiratis for overseas treatment.

October will see the launch of medical tourism packages, involving a host of government departments and Emirates Holidays. The aim of the exercise is to see the number of medical tourists surge from 2012’s total of 107k, generating US$ 178 million, to 500k, and US$ 708 million, by 2020.

There was no surprise to discover that phase 1 of Damac’s Akoya Oxygen project was sold out in a day particularly when prices of 5-bedroom villas were going for US$ 681k. The development is branded as Dubai’s first green master development and will cover an area of 55 million sq ft. The company has already delivered 11k units to the market with a further 26k in the pipeline.

Dubai Properties also announced that its recent launch of Naseem townhouses has sold out and consequently the company is putting extra units onto the market. The same developer is also releasing a further 200 units in its Remraam development, following similar success with its May launch.

Tecom, one of the emirate’s largest commercial developers operating eleven business parks, is now moving into the residential market. It has announced that it will build 440 units in its Villa Lantana development, with prices starting at US$ 647k. Located near to its DuBiotech business park, the project will be finished by the end of 2015.

Already managing European operations in France, Germany, Romania and Spain, DP World is expanding its Belgian business by acquiring Euroports shares to take over the running of a planned container terminal in Liège. Due for completion next year, the new facility is expected to provide employment for 1k.

DP World recorded a 25.8% hike in H1 net profit to US$ 332 million, with a 9.9% increase in revenue to US$ 1.66 billion. The company operates 65 terminals around the world and has seen an 8.5% rise in throughput to 13.9 million TEUs (20’ equivalent units).

Jumeirah Palm is currently awash with 5-star hotels only but Byblos Hospitality is set to change this by developing a 144-room 4-star brand. The US$ 49 million hotel will be located on the island’s trunk, opposite the One and Only Royal Mirage. Interestingly Dubai has 351 hotels (70k rooms), of which only 38 (7.7k rooms) fall in the economy to upper mid-scale bracket.

Despite the abysmal July data, Dubai’s 634 hotels (and hotel apartments) had a mighty fine H1 as all indicators headed north, albeit at a reduced rate. The record number of visitors – at 5.8 million – rose by 2.3% (compared to 11% in 2013) and produced US$ 3.47 billion in revenues, with room sales up by 15.3% and F&B 3.8%. Saudi Arabia, India and UK were the top three contributors to visitor numbers.

Dubai Summer Surprises closes next week on 05 September and has reported a 39% surge in special festival promotions. The 27 participating malls have reported a 10% increase in footfall whilst hotels and Emirates have recorded major increases in traffic.

Atlantis, The Palm, becomes the latest government entity to consider refinancing its current loan facility. Last September, the hotelier, 100% owed by the Investment Corporation of Dubai, signed a US$ 880 million, five-year syndicated loan at 500 basis points over Libor. Last week it was reported that Dubai Duty Free was refinancing their US$ 1.75 billion loan at 175 bps.

Dubai World is hoping that smaller investors will buy into their new US$ 10.3 billion debt restructuring proposal which reportedly proposes an early repayment of US$ 4.4 billion, followed by a four-year extension, to 2022, for the repayment of the balance at a high rate than the average 2.4 % currently agreed.

The 32-year old Emirates General Transport and Services Corporation has announced 2013 revenue of US$ 409 million, maintaining its 18% average annual growth over the past five years. The corporation, with a fleet of 13.5k vehicles, also reported total assets valued at US$ 545 million, spread over 41 sites across the country.

A recent report by G4S has estimated that the value of the facilities management sector could reach US$ 5.5 billion in 2015. The survey covered the likes of cleaning, pest control and building management but excluded security.

Dubai’s H1 foreign trade dipped 3.7% to US$ 178 billion, with imports at US$ 111 billion, exports – US$ 16 billion – and reexports of US$ 51 billion. The emirate’s biggest trade partners were China (US$ 21.9 billion), India (US$ 14.4 billion) and the US (US$ 11.1 billion).

Nasdaq Dubai has only two companies trading shares – DP World and Depa. On Monday the Dubai-based interior specialist company saw its trading suspended in relation to technicalities concerning the composition of its six-member board of directors, half of whom have links with Arabtec, their largest shareholder with a 24% stake. Depa is without a chairman as the former incumbent, Arabtec’s ex managing director, Hasan Ismaik, resigned in June. (Coincidentally, Mr Ismaik is reportedly interested in selling some of his 27.90% stake holding in Arabtec but he values each share at above the current market value).

Having risen 2.0% the previous week, the Dubai bourse opened on Sunday at 4908 – and closed the week marginally up 20 points at 4928. So far this year, the market has jumped 46.2% from its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec closed on US$ 2.79 and US$ 1.28 respectively.

If the proposed US$ 11.4 billion Burger King takeover of Tim Hortons goes through, the big loser would be Uncle Sam. Currently, the company, based in Miami, that gave the world “The Whopper” pays 35% corporation tax in the US but a move to Canada would result in a 15% tax burden. Strangely, Warren Buffet, a strong critic of companies using tax loopholes, is investing US$ 3 billion in the JV which will be domiciled in Ontario. Another tax inversion deal rears its ugly head!

A week after Bank of America’s US$ 16.65 billion legal settlement in its role of selling questionable mortgage securities, Goldman Sachs has been hit with a net US$ 1.2 billion penalty for similar offences involving Fanny Mae and Freddie Mac. Having already reached sixteen settlements with various defaulting financial institutions, the Federal Housing Finance Agency is still pursuing similar cases against HSBC, RBS and Nomura.

With over a 25% unemployment rate – equivalent to 8.3 million – South Africa has major economic problems. Despite a Q2 recovery which saw a GDP growth of 0.6%, compared to a 0.6% contraction in Q1, Africa’s second biggest economy recorded contractions of 9.4% in mining and 2.1% in manufacturing.The country needs to drastically cut its unemployment level before any meaningful recovery can take place.

Attending the Jackson Hole meeting earlier in the week, the ECB’s Mario Draghi is confident that his current polices will put the EU economy back on track but he reiterated that individual governments would have to get their own house in order. This may mean them going ahead with unpopular economic measures and introducing structural economic reform in many areas.

It is inevitable that the ECB has to introduce drastic measures to push up the eurozone inflation – well down at 0.4%, compared to their 2.0% target – and a major asset purchase by the central bank is becoming inevitable. Quantitative easing has already proved of some benefit to the US and UK economies but it seems that the eurozone may be coming to the party a little too late.

The French PM, Manual Valls, has had enough of François Hollande’s dithering with the country’s economy and has handed in his resignation. There is little chance of the Gallic country making a quick economic recovery, especially since there has been no growth this year and unemployment levels still hover over the 10% level. With a 0.8% July jump, there are now 3.42 million in the dole queue – a rise of 4.3% in the past year.

Another French personality has had a bad week with news that ex-finance minister – and now IMF chief – Christine Lagarde has been formally investigated in a political fraud involving Bernard Tapie and his ally, and former president, Nicolas Sarkozy. It appears that she signed off a more than favourable US$ 530 million payment to Tapie in an arbitration dispute with the then state-owned Credit Lyonnais. Foxy Lady!

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

Non, Je Ne Regrette Rien!

Posted on August 31, 2014 by howesdubai

The boom in the luxury vehicle sector continues at an ever-increasing pace. Rolls Royce recorded a July sales hike of 117% and Lexus came in with a 26% rise in H1 revenue, whilst Bentley recorded a 29% jump in UAE H1 sales; their regional figures were helped by huge rises in Oman and Bahrain at 114% and 90% but interestingly, the UAE and Saudi Arabia still remain that company’s biggest two global markets.

Last month proved a stellar one for Nissan which reported that its Patrol model showed a 103% surge in sales of almost 3.9k models in the Middle East of which 39.1% (or 1.5k units) emanated from the UAE. This is yet another indicator of the buoyancy in the motor segment as H1 figures indicate a 17.6% jump in Japanese passenger car imports to US$ 1.6 billion.

In the wake of its recent 80-day maintenance and upgrade, Dubai International will soon have the capability to handle 36% more aircraft from 33 to 45 an hour. This is as a result of the introduction of an expanded facility for “high speed turn-off”. Within a decade, the airport will double its current 600k annual movements to 1.2 million. With these figures, the new airport at Jebel Ali could be under-utilised.

As local consumer confidence continues to bubble, it is predictable – and slightly worrying – that there has been a 21% increase in outstanding credit card bills, according to a new Lafferty Group report.

Azizi Developments has launched a US$ 37 million, 99 apartment development, a month after releasing a similar project in the same Al Furjan location. The Azizi.Iris project follows the Azizi.Orchid Residences, ready for completion by the end of next year.

Following its successful 2013 launch of Akoya by Damac, the Dubai developer has announced Akoya Oxygen, a residential development surrounding yet another golf course. Covering a massive 55 million sq ft, the project is slated to have the “greenest living spaces in Dubai” with parks, open spaces and even a forest of four thousand trees.

Likewise, Indigo Properties hope to start work on their 350-villa, US$ 409 million Zen project, adjacent to Arabian Ranches, early next year. The price of the villas will be around US$ 1.4 million and the 4.5 million sq ft development will have a Far East theme with parks, meditation zones and running waterways. However, the company is concerned that, because of a backlog in the approvals process, caused by the high number of new developments, there could be a long delay in finalsing all the required paperwork; this, in turn, could put back the construction start date.

According to a recent EC Harris report, there is currently US$ 212 billion of UAE projects under construction, with the 2014 total of both announced and planned projects coming in at a staggering US$ 315 billion. Another report – by Jones Lang LaSelle – indicated that US$ 5.4 billion of residential contracts were awarded in the emirate in H1. With these figures, it is little wonder that there will be an inevitable backlog in start-ups.

Following their first UAE investment in Dubai, Star Tower, the Italian developer, Preatoni, has opened a local sales office. The company has already invested over US$ 3.3 billion in the MENA region and will be likely to announce more Dubai projects.

Nakheel has awarded infrastructure work to the value of US$ 16 million to Ghantoot Road Contracting. The work will be carried out in the developer’s phase 2 Al Furjan master community, covering 1.2 million sq mt, and should be completed within the year. The company also awarded a US$ 38 million contract to Metac General Contracting to build 84 villas, and eight retail blocks, on its upcoming Jumeirah Islands waterfront park project.

As expected, Nakheel has announced the early repayment of its entire bank debt of US$ 1.50 billion, having repaid US$ 650 million in February. Of the total, 62.3%, or US$ 940 million, will go to local banks, whilst the balance of US$ 560 million being paid to overseas financial institutions.

Brookfield Multiplex has won a US$ 75 million contract to build phase 1 MAF’s new City Centre in International Media Production Zone. The initial stage will see sixty international retail outlets, covering 1 million sq ft, and will include a 92k sq ft Carrefour Hypermarket, as well as a 750-space car park.

It seems that Indian nationals are pouring more money into local realty as latest Dubai Land Department figures show a 31.3% increase in their property investment to US$ 2.86 billion in H1, compared to the same period in 2013. In turn, Indians were the biggest foreign investors accounting for 28.0% of the total of US$ 10.2 billion, followed by British and Pakistanis at US$ 1.58 billion and US$ 1.23 billion respectively. Overall, H1 property deals were up 4.6% to US$ 30.8 billion. Rather surprisingly, Russian and Chinese investors were ranked 6^th and 8^thbehind nationals from Iran and Canada.

As reported earlier in the month, July was a disastrous month for Dubai hoteliers as occupancy rates – for the 70k rooms in the 351 hotels – sank to 45% – an 18-year low. With a further 83 hotels – totalling 24.3k rooms – coming on stream, it is inevitable that hotels will struggle to maintain previous years’ levels. At least for the short-term, the premium end of the market may have reached saturation level emphasising the need for more budget-rated establishments.

Dubai Investments Park reported a 10.5% rise in H1 warehouse leases with 86 new companies taking up space. Having launched phase 8 only last year, the park is now almost 100% occupied, having leased nearly 1 million sq ft of warehousing in H1.

To take advantage of the more favourable terms currently on offer, Dubai Duty Free has decided again to reprice its July 2012, six-year US$ 1.75 billion split loan and its September 2013 US$ 750k loan. The former was divided evenly between US$ and dirham, both at 325 basis points over Libor, which was further negotiated last year to 250 and 225 bps and now further renegotiated to both be at 175 bps. The later loan was initially at 225 bps and has now been reduced to 175 bps.

Although Emaar Properties has yet to take a final decision on its retail business IPO, there are indications that the announcement could come as early as next month. The listing could be on the local bourse and with a figure of US$ 2.5 billion being bandied around, it would bring a welcome boost to the local market.

DEWA has released tender documents, for phase 2 of the 100MW MBR Solar Park, to a 24-developer short list; the value of the contract is in the region of US$ 272 million. When completed in 2030, the park is expected to have cost US$ 3.3 billion and will produce 1k MW. DEWA is actively looking for a 49% partner for this massive project.

Gulf General Investments Co reported a 23.2% hike in Q2 net profit to US$ 8.5 million as H1 profits actually dropped 7.0% to US$ 14.8 million.

It has taken Apple six months after their CEO, Tim Cook’s February visit, to announce that the company will be opening a ME store – with Dubai the obvious choice.

The country’s Q1’s non-oil trade reflects its continuing economic growth as it reached US$ 69.7 billion with imports at US$ 45.3 billion, exports – US$ 8.2 billion and reexports – US$ 16.2 billion.

Forbes has ranked Dubai as the world’s 7^th most influential city, only bettered by the likes of London, New York and Paris but ahead of Beijing, Sydney and Los Angeles. Some of the criteria used included air connectivity, racial diversity, number of regional head offices and the amount of FDI (foreign direct investment) it generates.

In a bold move to attract major asset managers, the DIFC has created a new class of funds that can be managed by senior and experienced managers which will require less supervision and regulations. The aim of the exercise is to attract more funds than the nine that are already domiciled in Dubai. The newly created QIF (qualified investor fund) is more flexible with a lower minimum subscription of only US$ 500k and can only be offered via private placements, with a maximum of fifty investors allowed.

Meanwhile, Jeff Singer, chief executive of the DIFC Authority, resigned with immediate effect after only two years in the position. Prior to that, he had been in charge of Nasdaq Dubai.

There was some disappointing news for Dubai SMEs with Standard Chartered announcing that it was planning to largely exit this segment. This follows a US$ 300 million settlement with New York authorities for their failure to closely monitor high risk transactions originating mainly from Hong Kong and Dubai. It seems that certain low risk, higher return clients will be retained by the Dubai-franchised bank.

The DFM reported that, with the exception of Amlak Finance, which is currently suspended from trading, the remaining forty-one listed public joint stock companies have followed regulations and all have issued their H1 financial results.

With a 1.6% rise the previous week, the Dubai bourse opened on Sunday at 4813 – and closed the week up 2.0%, again on very thin trading, at 4908. So far this year, the market has jumped 45.6% from its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec closed on US$ 2.85 and US$ 1.16 respectively.

Following an agreement to merge with Irish-based Fyffes, to form a company, with over US$ 4.6 billion in revenue, US-based banana producer Chiquita has subsequently rejected a US$ 611 million takeover bid by Brazilian companies – Cutrale and investment bank, Safra. One benefit for Chiquita would be that it could relocate its HQ to Ireland and, by utilising tax inversion, it could reduce its tax liability – a loss for the US Treasury but a gain for the Irish exchequer.

Going against current thinking, BHP Billiton, the world’s biggest miner, wants to contract so as to make operations quicker and to improve efficiency. The “Big Australian”, that saw its latest annual profits up 23% to US$ 14 billion, wants to demerge US$ 14 billion of its assets and form a spin-off metals and mining company, to be based in Perth.

Allied with a softening in July growth, China’s economy received a further knock with an H1 drop in incoming foreign investment to US$ 71.1 billion and a July return of US$ 7.8 billion – its lowest in the past two years.

Time is quickly running out for the eurozone as unemployment levels still remain stubbornly at double-digit levels, business growth stalls, manufacturing is losing traction and geo-political problems are beginning to take their toll. The bloc will have to take drastic steps to address the problems of low inflation (currently at 0.4%), patchy investment growth, high public debt levels and the over-valued euro. Quantitative easing can only be a matter of weeks away – if not, we will see its third recession in the past six years. Even then, the eurozone will see the start of a phenomenon known as secular stagnation which will result in the continent falling further and further behind the rest of the world and will not return to the halcyon days of pre-GFC.

Having lost public confidence and his economic policies in tatters, Francois Hollande, has promised to accelerate long-needed structural reforms, cut back on red tape and introduce tax reforms. With France recording another quarterly zero growth in Q2, its lowest housing starts since 1999, unemployment at 10.2% and a budget deficit of 3.8%, that exceeds EU targets, the beleaguered president is struggling to placate his electorate and is facing possible sanctions from his continental peers. He is blaming the eurozone’s austerity programme for his country’s problems and he will probably never admit that many of France’s economic woes can be laid at his door – Non, Je Ne Regrette Rien!

Posted in Finance | Tagged Arabtec, DFM, DIFC, Dubai, Dubai Financial Market, Dubai Investments Park, Emaar, Emirates, emirates airline, Emirates NBD, Gulf General Investments Co, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, Rolls Royce, UAE | Leave a comment

Just Can’t Get Enough

Posted on August 23, 2014 by howesdubai

Damac reported a healthy 39% boost in H1 profits to US$ 463 million as revenue jumped 59% to US$ 991 million, with Q2 returns of US$ 253 million and US$ 556 million respectively – both up on Q1’s US$ 210 million and US$ 435 million. Over the half year, the developer’s asset base expanded by 41% to US$ 4.29 billion whilst it has already booked sales of US$ 1.44 billion for its much vaunted Akoya project. (Last month, the company announced that it would soon list on the local bourse and, with a market cap of some US$ 3.5 billion, it will soon become a big player on the DFM).

Dubai Refreshments Company posted a healthy 14.1% rise in H1 profits to US$ 18.7 million. The Pepsi distributor in Dubai and Northern Emirates saw sales increase by 11.7% to US$ 130 million.

Drake & Scull reported disappointing Q2 earnings with a 41.0% drop in profit to US$ 7.1 million, compared to the same quarter in 2013, as revenue dipped by 17.9% to US$ 300 million. The main reason given was delays in some projects in Saudi Arabia.

Although there has been a marked slowdown in the realty sector, Dubai Land Department reported that Emiratis splurged out US$ 3.4 billion on local real estate in H1, with a further US$ 1.8 billion being spent by nationals from the rest of the GCC. Reports indicate that prime property price rises have fallen from 11.7% to 6.3%, year on year ending 30 June 2014.

Even though July is recognised as a flat month for the hospitality industry, latest figures still come as a major jolt with occupancy rates of 45.4%, which, according to STR Global, are at their lowest in eighteen years. The figures were made worse because the holy month of Ramadan fell mostly in July. The 11.8% fall in occupancy was the result of the double whammy of an 8.3% surge in supply, allied with a 4.5% drop in demand. Consequently RevPAR (revenue per available room) dropped 5% to US$ 79, whilst conversely average daily rate rose 5% to US$ 174.

Emaar Middle East has awarded the locally-based Arabian Construction Company a contract for three buildings in its Emaar Square development in Jeddah, with handover for the first offices by 2016. No financial details were available.

The Telecommunications Regulatory Authority confirmed that there are over 16 million active mobile subscribers in the country giving an impressive penetration rate of almost 193% – one of the highest in the world. This is in addition to the 2.1 million land lines in use. Pakistan was the leading country for outgoing calls, with a staggering 2.1 billion minutes recorded.

Emirates has signed a five-year maintenance agreement with BAE Systems to provide technical support for its Boeing fleet of aircraft. No costs were available but this a major contract for the UK company, as the airline operates the largest 777 fleet in the world.

The airline has also arranged loan facilities, totalling US$ 425 million, from three local banks to finance the purchase of two Airbus 380s which brings their total to fifty one.

Following China, the UAE is now considered the world’s second fastest growing air passenger traffic hub, with an 11.7% hike in numbers to 45.3 million last year.

The latest project for the ever-expanding Jumeirah Village Circle is Al Manara Tower. Tiger Properties has already started work on the 300 apartments with the US$ 55 million project slated for completion by 2016.

Only two years after going international, Dubai-founded Doner Kebab now has presence not only in the GCC but also Pakistan, India and a London base. It plans a US$ 5.5 million investment to open a further twelve outlets in Dubai and build a factory here. It employs more than 300 in its 20+ outlets.

Max Hypermarket, part of the Dubai-based Landmark Group, and the French retailer, Auchan, have pulled out of arrangements to operate hypermarkets in India. The initial 2012 arrangement was for the Indian partner to operate the French chain of outlets and have up to 80 stores open by 2015.

By the end of June 2015, Dubai Municipality hopes to have completed the naming of all streets in the emirate. In total, 7.5k streets and roads will bear names that take into account Dubai’s history, heritage and culture.

In line with the emirate’s recent economic growth, Dubai Customs has reported a 9.8% H1 expansion in transactions to 4.5 million. Among the various delivery channels in use, Dubai Trade portal and Business to Government (B2G) saw transactions up 37% and 11% respectively.

Emirates District Cooling – a JV between Dubai Investments and Union Properties – obtained a US$ 245 million, 12-year loan facility from Dubai Islamic Bank. Emicool will use the funds largely for refinancing purposes, as well as for expansion plans.

There are rumours that Meraas Holding, backed by the Dubai government, is considering an IPO that would help finance its ever-growing order book. Major projects include its massive JV with Emaar Properties for building Mohammed bin Rashid City, the US$ 1.6 billion Bluewaters Island off JBR, US$ 535 million Dubai Creek development and partnership with Six Flags to develop a theme park.

A recent ISC report indicated that almost 47% (439) of all GCC international schools are based in the UAE, more than the combined total of the next three countries – Saudi Arabia (195), Qatar (130) and Kuwait (80). The total fees for all 982 schools were estimated at around a staggering US$ 6 billion.

There was no surprise news from Dubai Statistics Centre confirming a monthly increase in the emirate’s inflation rate from June’s 2.8% to 3.4%. This was the highest it has been since July 2009.

Better late than never, UNCTAD (United Nations Conference on Trade and Development) highlights that the UAE still maintains its second position in the Middle East, after Turkey, for foreign direct investment. The 2013 return of US$ 10.5 billion is a 9% increase on the previous year. FDI outflows last year were up 14.6% to US$ 2.9 billion.

The country’s official credit bureau – Al Etihad Credit Bureau – will start the first phase of its long-delayed operations next month by issuing consumer credit reports. Having processed six months of credit data from all the banks in the UAE, it will be able to give current information on all the banks’ clients who need to have their credit checked – a total of 5.2 million individual records are now on file.

All twenty eight of its financiers have approved Amlak Finance’s restructuring package, which is a forerunner for the institution to recommence trading on the Dubai Financial Market in early 2015 – almost six years after being delisted. The deal will see Amlak make an initial US$ 545 million payment to the financiers with the balance (a reported US$ 2.15 billion) being repaid over twelve years, including a US$ 380 million convertible bond; the outstanding debt due to the federal government will be repaid over six years. The deal has to be approved by the Sharia-compliant mortgage lender’s shareholders, of which Emaar Properties is a 45% stakeholder.

It is reported that DIFC Investments could issue a sukuk as early as next month and that proceeds therefrom could be used to refinance the US$ 1.2 billion syndicated loan taken out in May 2012.

Having dropped 2.0% the previous week, the Dubai bourse opened on Sunday at 4735 – and closed the week up 1.6%, on very thin trading, at 4813. Thursday saw total transactions at 301 million shares valued at US$ 108 million. Bellwether stocks, Emaar and Arabtec closed on US$ 2.74 and US$ 1.16 respectively.

Dubai Nasdaq is set to have a new listing as the Bahraini-based Gulf Finance House is planning a US$ 200 million sukuk. The money raised will be used to repay an existing Islamic bond of US$ 84 million and project development. Last month, the company signed a land sale agreement with Dubai Properties Group.

Poor economic news shows a 0.2% Q2 contraction in Germany and zero growth in France – a sure indicator that all is not well in the eurozone. Under the circumstances, France will not meet its 2014 deficit, as the country reels from lack of business investment and archaic labour laws. The 18-country bloc is being further hampered by worryingly low inflation and the on-going crisis in the Ukraine. It begs the question on who came up with the idea of sanctions against Putin’s Russia without realising that this is a double-edged sword and can work both ways.

As expected, Japan’s economy contracted by 6.8% in Q2 – its largest fall since the 2011 tsunami – mainly as the result of the government lifting the sales tax rate from 5% to 8% in April. On a quarterly basis, GDP fell by 1.7% following a 1.5% Q1 rise but this blip is only temporary as the economy will return to growth in Q3 as indicators, such as industrial production and retail sales, head north.

As a result of not achieving their budget deficit target, Fitch has cut Croatia’s rating one notch to BB. The recently admitted EU nation had earlier announced that it would cut its deficit from 4.9% to 3.8% but has failed to do so and has a public debt problem that may blow out – if action is not taken.

Another country not hitting their target is China with a July inflation rate of 2.3% – well down on the estimate. With July returns indicating a 14.5% hike in exports, compared to a year earlier, and a healthy trade surplus of US$ 47.3 billion, the Chinese economy is set to grow at a rate above 7.0% but slightly less than official estimates. The government has been proactive in moving the economy forward by such steps as reducing tax, making finance more available, cutting red tape and improving the country’s infrastructure.

Because of shady operations in its pre-GFC sale of mortgage-backed securities, it seems that the Bank of America will finally receive its full come-uppance. The disgraced financial institution is nearing a record US$ 17 billion settlement with the US Justice Department – 47% of which will be paid to the struggling home-owners who lost homes to foreclosures due to the banks’ rash actions.

This is the third major settlement arising from the same scandal with JP Morgan paying out US$ 13 billion last year and Citigroup US$ 7 billion last month. It was the junk status of these loans, packaged as commercial value by major banks, that was a precursor for the GFC.

It appears that Australian banks are following the example of their European and American brothers with legal proceedings being brought against the Big Five – ANZ, BankSA, Citibank, St George and Westpac. An Australian legal firm has instigated proceedings over late credit card fees that could run into hundreds of millions of dollars. More and more bankers Just Can’t Get Enough!

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

We Can Work It Out

Posted on August 11, 2014 by howesdubai

The Indian-based Hiranandani Group has signed a management agreement with Accor to develop a 350-room Ibis hotel in Downtown Dubai. This is yet another indicator that Dubai’s hospitality sector is in need for hotels in the budget price range, as the 5-star bracket continues to dominate the market. The hotel – slated for a 2016 completion – will be the French Accor’s 16^th property in Dubai.

SKAI Holdings has announced that it has sold all 234 hotel rooms, 234 apartments and 33 penthouses in its recently launched US$ 306 million Jumeirah Village Circle project. The Dubai-based developer reported that sales proceeds were US$ 253 million and that it would retain the likes of 17k sq ft of retail space, restaurants and spa facilities. The project will take three years to complete, with work commencing next month.

Dubai’s move into the health and fitness market received a timely boost with the opening of the Hayemaker Gym, with the support of Dubai Investment Development Agency, in liaison with David Haye, the ex-world boxing champion. The new centre of excellence for sports and performance coaching will help the emirate’s push to becoming a global health tourism destination.

Meanwhile it is reported that Dubai may well submit a bid to host the 2024 Olympics but will probably bid for the Youth Olympics and / or the Asia Games earlier.

Further apparent good news for Dubai Investments with H1 profits more than doubling to US$ 219 million from US$ 101 million, in the same period last year. However, it has to be noted that US$ 129 million of the profit came from the May sale of its 66% share in Globalpharma to the French pharmaceutical company, Sanofi. The company is expecting that its credit rating will soon be lifted to BBB, a move that would help it raise future funds at more favourable rates.

According to OAG, Emirates is ranked first globally when it comes to a premium class capacity ranking known as ASKMs (available seat kilometres) having recorded a weekly 876 million in April, with 191k seats available in business and first class.

Having already launched thirteen new routes this year, flydubai is to start flying to destinations in Iran – Tehran and Mashhad.

Emaar Properties reported a 40.6% rise in H1 profit to US$ 472 million, on revenue figures of US$ 1.38 billion. 52.3% of total revenue, equivalent to US$ 721 million, came from the company’s malls, leisure and hospitality businesses. Furthermore, revenue from international operations came to US$ 205 million, contributing 14.9% to the company’s top line. The Dubai developer has indeed come a long way from its origins, as a builder of villas, in new Dubai, some fourteen years ago.

Shuaa Capital saw Q2 revenue and profit weaker than in Q1. Revenue at US$ 14.2 million was 18.75% down whilst profit at US$ 1.7 million was off 24.4%. The main reason for this was the fall-out from the Q2 22.1% drop on the Dubai bourse.

Dubai International Capital racked up a tidy profit with the sale of Mauser Group to Clayton, Dubilier & Rice for a reported US$ 1.7 billion. Owned by Dubai Holding, DIC bought the German packaging company for US$ 1.1 billion in 2007.

It will come as no surprise to many to see that Gems Education has reported a 78.6% jump in annual profit to US$ 75 million although its cash holdings dropped 8.6% to US$ 24.6 million. Bloomberg reported in May that Fajr Capital and Investcorp were considering a minority stake holding in the parent company which would have valued it in excess of US$ 1.5 billion.

The Department of Economic Development renewed 31.3k licences in Q2 and issued 5.8k new licences in H1 – a 17.0% increase on last year – of which 74.2% (or 4.3k) were trade licences.

With 8.7k new companies joining in H1, the Dubai Chamber of Commerce can now boast a staggering 160k members. The Chamber, the largest in the MENA region, is planning to shortly open a further three international offices – in Erbil (Kurdistan), Ghana and Mozambique.

The importance of SMEs to the local economy was highlighted by figures from the Dubai Economic Council which estimated that 42% of Dubai’s workforce is employed by that sector. The biggest hurdle facing SMEs is the lack of finance and unfortunately they do not seem to get too much help from the banks here.

Ventures Onsite estimates that new 2014 GCC infrastructure projects will be in excess of US$ 86 billion – a massive 78% increase over 2013 returns. The company expects to see a fivefold surge in UAE projects to US$ 15.2 billion, only topped by Saudi Arabia (US$ 29.3 billion) and Qatar (US$ 26.2 billion).

Empower provided 174.3 million refrigerating tonnes per hour (RTH) in July – a 9.5% increase compared to 2013. The largest district cooling service provider in the world has a capacity for 1 million RTH, following its January acquisition of Palm District Cooling and is building a third district cooling plant in Business Bay.

Following July’s recovery that saw the bourse gain 22.6% in the month, the Dubai Financial Market General Index opened on Sunday at 4833 – and closed the week 2.0% down at 4735. Bellwether stocks, Emaar and Arabtec were trading at US$ 2.66 and US$ 1.12 respectively.

Following its buy-out of Autonomy in 2011 for US$ 11.1 billion, and then finding out that it had bought a lemon, Hewlett Packard is to sue the UK company’s former chief executive, Michael Lynch, and CFO, Sushovan Hussain, for fraud. This is after HP had to write down US$ 8.8 billion of the company’s value within a year of the sale. So much for due diligence!

Almost on the same subject, some may consider F1 supremo, Bernie Ecclestone, a lucky man.The 83 year old had admitted making a payment to German banker, Gerhard Gribkowsky to facilitate the sale of a major stake in his F1 business. The German banker is currently in jail whilst Mr Ecclestone has agreed to pay US$ 100 million as settlement to end his trial on bribery charges. This could be considered one law for the rich and one for the poor.

HSBC has a lot to thank this region for as MENA (Middle East and North Africa) accounted for US$ 989 million, or 8.0%, of its H1 profit (up 8.8% from 2013 H1’s figure of US$ 909 million). On a global scale, the bank reported a 12.7% fall in its profit, down from US$ 14.1 billion to US$ 12.3 billion, as its revenue figures dropped 9.3% to US$ 31.2 billion.

Standard Chartered fared even worse with a 20.0% fall in H1 profit to US$ 3.3 billion and now faces the real threat of takeover bids from larger European or Australian banks.

But HSBC and Standard Chartered are not the only banks with unhappy shareholders. Credit Suisse announced its biggest quarterly loss (US$ 780 million), since the GFC, which included a US$ 1.78 billion provision for US tax evasion charges. Meanwhile Bank of America came in with a 43% quarterly fall in net income to US$ 2.3 billion. In recent times, the financial institution has been hit with a massive US$ 9.5 billion fine for its impropriety in its dealings with Fannie Mae and Freddie Mac and US$ 783 million for mis-selling.

The Portuguese Banco Espirito Santo has had to be split in two with the “good” bank, Novo Banco, receiving an extra US$ 6.6 billion in capital and taking over the branches, deposits and other healthy assets whilst the “bad” bank will inherit the bank’s loan portfolio and be wound down over time. This comes after H1 losses of US$ 4.8 billion and is bad news for both shareholders and some creditors who will lose money on the new set-up. The troika – EC, ECB and IMF – gave Portugal US$ 105 billion in bailout funds and it seems that they, along with the local government and the bank, have been negligent and have still not fixed the banking system. If it can happen here, there is another Banco Espirito Santo on the European horizon.

Although there are many who consider that the US economy is well into its recovery phase, recent data seems to indicate otherwise. Slowdowns in July growth figures and nonfarm payrolls (from 298k to 209k), as well as a marginal increase in unemployment figures from 6.1% to 6.2%, are giving rise for some concern.

The Australian government is hoping that July’s 6.4% unemployment rate, its highest level since 2002, was a glitch but, if not, the country could be heading for a downturn. With 789k unemployed, it seems that the country’s jobless rate is now greater than the US which last occurred more than seven years ago.

With a 0.2% Q2 contraction, Italy has returned to recession as numbers have deteriorated since the beginning of the year. Since the GFC, its economy has shrunk by over 9.0% and their economic troubles have been further exacerbated by huge government debt and a complete lack of reform to their archaic labour laws.

The last thing the eurozone wanted was the Ukraine crisis to worsen. Now Vladamir Putin is piling the pressure on the West as he retaliates by cutting back on food imports and restricting the use of Russian air space in a move that will have severe economic repercussions for some major carriers. Mario Draghi, the ECB president, will have to introduce some form of quantitative easing sooner rather than later. Failure to act now will see the bloc inevitably go into recession.

Despite the continuing optimism for the Dubai economy, there are some niggling signs that all may not be rosy in the garden and that the emirate may be operating a two-sided economy. Public sector leverage remains high with some estimates putting the emirate’s debt this side of US$ 150 billion compared to a GDP of US$ 110 billion. Up to 65% of this total relates to GREs (government related entities).

The Dubai debt problem will not go away and latest reports indicate that Dubai World is once again restructuring its US$ 25 billion loan and Amlak its US$ 2.7 billion facility; both are looking at an early first repayment and for an extension to the loan tenure. Latest results from Arabtec, Emaar and Shuaa Capital all indicate that Q2 results were not as good as those of Q1. Add to this the recent volatility in the stock market, increased rents, rising costs, a flat housing market and regional ge0-political problems then some may consider that light clouds are on the horizon. But then again this is Dubai and, as usual, We Can Work It Out.

Posted in Finance | Tagged Arabtec, David Haye, DFM, Dubai, Dubai Financial Market, Dubai International Capital, Dubai Investments, Emaar, Emirates, emirates airline, Emirates NBD, GEMS Education, Hayemaker Gym, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, Skai Holdings, UAE | 1 Comment

Danger Zone

Posted on August 7, 2014 by howesdubai

The last week of July saw the Q2 reporting season in full swing with Arabtec, Emirates NBD, Emirates Islamic and Du announcing their latest results. Arabtec – which has dominated the financial press recently for all the wrong reasons – came in with a 51.0% hike in Q2 revenue to US$ 657 million to generate a quarterly profit of US$ 28 million (H1 revenue and profit were US$ 1.24 billion and US$ 65 million).

Emirates NBD saw its Q2 profit up 34.8% with H1 profit at US$ 640 million on total income of US$ 1.92 billion. At the end of June, its total assets were US$ 94.9 billion, with customer loans and deposits both marginally up at US$ 65.9 billion and US$ 68.9 billion respectively. Its related bank, Emirates Islamic, reported impressive H1 increases in both income (28.0% to US$ 250 million) and profit (101.8% to US$ 62 million).

Du’s revenue was 13.7% higher at US$ 823 million with jumps in both EBITDA (17.9% to US$ 351 million) and net profit by 22.0% to US$ 259 million. The Dubai-based telecom company is proposing an interim dividend of US$ 0.033 on the back of these figures.

Despite its recent partial 80-day closure for maintenance and refurbishment – and reduced June passenger numbers of 5.1 million (cf 5.6 million in June 2013) – Dubai International was still able to record an impressive H1 growth of 6.2% to 34.7 million. It is highly likely that the world’s busiest international airport will top a record 70 million passengers by the end of the year.

DP World handled 29.4 million TEUs in H1 – 10.7% up on like to like traffic over the same period last year with 25.2% originating at its home base – a rise of 14.1%. This figure is set to grow even further as an extra 66.7% capacity will be added by the end of the year so that Jebel Ali will be able to handle in excess of 10 million TEUs.

The long-awaited Marina 101 – slated to be Dubai’s second tallest tower at 425 metres – is due to open early next year. It was expected that Hampshire Hotels, in association with the Wyndham Group, would operate the 300-room Dubai Dream hotel – the focal point of the development – but it now seems that the search is on for new management of the hotel.

Dubai has always put a lot of emphasis on 5-star tourism with an estimated 62% of all properties falling into that category. Premier Inn is one company that is planning to redress the balance with plans to open a further four budget hotels adding 1,090 rooms – Ibn Batuta (370 rooms), Jadaf (300), Healthcare City (220) and Al Maktoum International Airport (200). The UK-based hotel brand, established in 1987, entered a JV agreement with Emirates Group in 2006 to launch in the Gulf and has already opened three properties in Dubai.

Having reported a 12% fall in H1 revenue to US$ 17.6 billion, JP Morgan Chase & Co is cutting staff numbers by 2%, including a number in its Dubai operation.

A recent report by Knights Frank shows a massive 25% increase in Dubai industrial rents with Class 2 buildings in Dubai Investment Park, Jebel Ali and Ras Al Khor posting gains of over 40%. With an increasing dearth of quality buildings available, there is growing demand for second-rate units.

The Dubai World Hospitality Championship is to establish a sector to develop best training methods to global standards in the hospitality segment. This comes in the form of a directive from the Crown Prince, Sheikh Hamdan bin Mohammed Al Maktoum, as Dubai ratchets up its efforts to ready the emirate for Expo 2020 and the influx of 20 million visitors.

The Dubai Financial Market General Index opened on Sunday at 4652 – and closed the shortened week up 3.9% at 4833. Because of the Eid Al Fitr holidays, there were only two days’ trading – Monday and Thursday – with thin volumes; Thursday saw only 335 million shares, equivalent to US$ 240 million, being transacted. The market has recovered 22.6% in July from its monthly opening of 3943.

A US lawsuit has now named Deutsche Bank, HSBC and Bank of Nova Scotia of trying to fix the price of silver and abusing their position in the market. Every day, in an apparent veil of secrecy, these three banks, appointed by the London Bullion Market Association, fix the price of silver in a practice that has been going on since 1897.

Thursday saw Argentina default on its foreign currency debt as last-minute talks failed to end the impasse. A US federal court has urged its government to resolve this debt crisis through negotiations as it blocked the Latin American country from making interest payments to creditors, who exchanged their bonds in 2005 and 2010 for securities of a lesser amount. The court ordered that it should settle the US$ 1.5 billion owed to US hedge funds, led by NML Capital, that bought up the cheap defaulted debt but did not agree to a “haircut”. Until this dispute is settled, the country’s precarious economy could be further damaged which will then have a negative impact on the world’s financial markets.

It was only last year that the IMF was advising the UK government that their economic policies were not working. Not for the first time has the august world body got it wrong as the British economy goes from strength to strength. This week, it reported a 0.8% rise in GDP, with latest data forecasting that annual growth is set to be around the 3.2% level – the highest of any developed country. In contrast, the German economy is slowing dramatically, not helped by geo-political developments in the Ukraine, with even the moist optimistic growth estimate being south of 2.0%. Meanwhile France’s economy is stagnating as the Hollande government fails to get to grips with archaic labour laws and too much red tape.

The July eurozone inflation rate dipped yet again to 0.40% – its lowest level since the financial crisis. Over the past ten months, annualised prices have risen at less than 1.0% and the monthly trend continues to head south. This figure is well below the European Central Bank’s target of 2.0% and the risk of a deflation spiral will become reality unless the ECB Governor Mario Draghi takes a more proactive approach to the problem. There is no doubt that the bloc is in the Danger Zone.

Posted in Finance | Tagged Arabtec, DFM, DP World, Du, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Marina 101, Nakheel, UAE, Wyndham Group | Leave a comment

Good Riddance (Time of Your Life)

Posted on July 24, 2014 by howesdubai

Dubai Land Department reported that H1 real estate transactions totalled US$ 30.8 billion, of which US$ 14.2 billion occurred in Q2 indicating a slowdown compared to the previous quarter. The 6.9k mortgage deals, totalling US$ 12.9 billion, accounted for nearly 42% of all transactions. During the period, 16.0k units were sold, totalling US$ 6.7 billion of which 2.6k, amounting to US$ 1.6 billion, took place in Dubai Marina.

Office rents are still on the rise but increases have slowed in Q2 to around 3% compared to 25% over the past twelve months. 40% of stock is still vacant but space in prime locations is filling fast where rents average US$ 513 per sq mt. Secondary office space has seen prices jump 24.2% to US$ 312 over the past year.

Abdulla Al Moosa’s Arenco Real Estate has just awarded the China State Construction Engineering Co (CSCEC) contracts to build two 5-star hotels on Palm Jumeirah. The world’s third largest construction company expects to complete construction of the two 13-storey buildings by the end of 2016.

Marina 101, standing at 425 mt, is expected to be handed over early next year. What will then be the tallest tower in Dubai Marina – and second only to Burj Khalifa – will comprise a 420-room, 5-star hotel, 60 3-bedroom apartments and 8 duplexes.

Damac Properties’ latest Loretto project sold out at its Monday’s launch. The 300 luxury apartments – part of the massive Akoya development – will finally be completed by 2018, with hand over on the early starts by the end of next year.

Deyaar saw Q2 profits skyrocket 229% to reach US$ 17.0 million – a sure sign that the Dubai-based property developer has recovered well from its dark days following the GFC. Sales were buoyed by the April launch of its Atria hotel apartments, located in Downtown.

Dubai-listed Emirates Reit Limited reported a 194% surge in H1 net profits to US$ 34.1 million compared to the same period in 2013. The Shariah-compliant real estate investment trust also saw its portfolio increase by 73.1% to US$ 561 million. Over this period, REIT raised US$ 200 million in an IPO which has funded US$ 32 million and US$ 167 million for the purchase of Le Grand Community Mall in the Marina and office and parking space in the DIFC’s Index Tower respectively.

Commercial Bank of Dubai reported satisfying H1 figures with Operating Profit up 4.4% to US$ 196 million and Net Profit up 17.0% to US$ 158 million over the same period in 2013. Loans and advances surged 6.8% to US$ 8.5 billion whilst deposits were up 12.1% to US$ 8.8 billion. Another indicator that consumer confidence has returned to the market was the fact that CBD’s gross loans climbed 40.4% to US$ 1.0 billion.

Mashreq went even better with a 45.3% jump in Q2 net profits to US$ 159 million, with H1 at US$ 316 million.

Following its 80-day partial closure for refurbishment and maintenance, Dubai International services returned to normal this week with 31% more flights. Even with its reduced workload in June, it was still the busiest international airport in the world and will probably carry more than 70 million passengers this year.

Of the 1,226 billionaires listed by Forbes, four come from Dubai – Abdul Aziz Al Ghurair (Mashreq bank) has a wealth fund estimated at US$ 2.9 billion, Saif Al Ghurair – US$ 2.0 billion, Abdullah Al Futtaim (Al Futtaim Group) – US$ 1.6 billion and his cousin, Majid Al Futtaim – US$ 1.1 billion. The latter’s MAF Group reported a 14% H1 hike in revenue to US$ 3.5 billion resulting in EBITDA being US$ 490 million – an increase of 13.0%. Most units performed well, including retail with revenue up 15.0% to US$ 2.9 billion, with EBITDA at US$ 151 million.

A recent Q2 survey by Morgan McKinley indicated that demand was greater than supply when it came to professional job opportunities in the UAE; it found that there was a 21.1% increase in job opportunities, to 8.1k, compared to Q1, whilst the number of professionals looking for work jumped by 29.7% to 45.6k. There was no surprise to see that construction was the primary driver and these figures underlie the continuing strength of the economy which is growing at its fastest rate since the halcyon days of 2007.

The Dubai Financial Market General Index opened on Thursday at 4667 – down 4.8% on Sunday’s opening of 4903. Emaar and Arabtec, were at US$ 2.65 and US$ 1.15 respectively.

If not so serious, it would be laughable, that despite all the rhetoric about the imposition of tough sanctions against Russia, the UK is still exporting arms to the value of US$ 225 million. No doubt some of these are being used for “illegal” activities as well as for military and security purposes. It is about time that western governments toughened up and imposed more severe restrictions that will damage the Russian economy, rather than individuals and small companies. Why has Robert Mugabe faced the full force of sanctions whilst Vladimir Putin has not? The answer is simple!

Analysts are keeping a close eye on developments in the eurozone as a Bundesbank report expects that the German economy has stagnated in Q2 with growth at a pitiful 0.2%. Apart from the inevitability of further bad news from bloc members, external factors – such as the Russian / Ukraine stand-off and the immoral expansive Israeli ground offensive in Gaza – are slowing down European economic growth and are primary reasons for German economic indicators heading southwards.

It is indeed a matter of when – and not if – the ECB introduces QE (quantitative easing) as current growth is at best patchy and consumer confidence is weak. The troika of high public debt, very low inflation and minimal expansion will leave countries marginalised, with high unemployment levels and reduced tax revenue, which will continue to spiral ever downwards, unless immediate positive measures are taken. The central bank has to act now and start buying government bonds – this is the only way to kick start the eurozone economy.

Unlike its European neighbours, the UK economy is beginning to build up a head of steam with a forecast 2014 growth rate of 3.1% – the highest in the G7 and over 70% higher than Germany’s forecast of 1.8%. Although sterling is strong (at over 1.70 to the US$), unemployment levels are plummeting and business investment – rather than consumer spending – is the main economic growth driver, interest rates will probably remain at their historical lows until at least the end of the year. One drawback to some is that house prices will continue to head upwards – probably as high as 10% in certain hot spots.

A defeat in the World Cup final could well be followed by another loss that could have ramifications not only for Argentine but for the global bond market. The country is refusing to follow a US court decision that it pay all its creditors – including a minority that have refused to take a hair-cut of up to 70%. \if the current impasse continues into next month then Argentine will again be in default for the second time in the past decade.

Improprieties and banks seem to go hand in hand, whether it be gold price fixing, money laundering, manipulation of Libor rates, mis-selling of mortgage-backed bonds – the list goes on. Indeed it is estimated that UK’s four largest banks’ exposure in the PPI scandal runs at over US$ 34 billion! Now that country’s Senior Fraud Office is to investigate whether currency traders have been rigging forex rates to their advantage – and customers’ disadvantage. 40% of the daily US$ 5.3 trillion market is carried out in London and it would be against the grain if no manipulation has been taking place. It seems that people in this business cannot help but help themselves and already almost forty staff from ten banks are on garden – or permanent – leave. Good Riddance (Time of Your Life).

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

Life On Mars

Posted on July 22, 2014 by howesdubai

Following Emirates’ announcement earlier in the month, confirming its order for 150 Boeing 777X aircraft, the airline has signed a 12-year, US$ 13 billion maintenance and repair agreement with GE for the 300 GE9X engines that it ordered last November, at a list price of US$ 15 billion. (The GP7200 engines, used on the entire Emirates 380 fleet, are made by Engine Alliance, owned by GE and Pratt & Whitney).

The week it received its 50^th Airbus 380, and with a further 140 on order, Emirates intimated that it could be in the market for another 80 if the manufacturer could be convinced to overhaul the existing model by 2020. Any revamp would include using the more fuel efficient Rolls Royce engines and other modifications which could slash operating costs by more than 8%.

DP World is the latest GRE to make use of the improved debt market conditions by signing a 5-year US$ 3 billion loan. It is reported that the global port operator has agreed to a US$ 2.39 billion conventional loan, at 150bps over Libor, with the balance being a Sharia compliant instrument.

To ensure a continuing reliable supply of water, and improve operating efficiency, DEWA has invested US$ 18 million in a two-year project that will see the introduction of surge protection devices in its pumping stations.

The fact that Dubai’s inflation rate in H1 rose over 71% to 2.74%, compared to the same period in 2013, comes as no surprise when residential rent and utilities account for 44% of total consumer expenses. Three major price rises in H1 were gas (11.89%), rents (5.03%) and education (4.43%).

Shuaa Capital posted Q2 profit figures of US$ 1.7 million, up US$ 1.3 million on a year earlier, as Revenue jumped 19.8% to US$ 14.2 million. Although the investment bank’s figures are up on the same 2013 period, they are slightly down on Q1 Revenue and Profit of US$ 17.5 million and US$ 2.2 million.

There is some indication that Aabar Investments is interested in acquiring more shares in Arabtec from its former CEO, Hasan Ismaik, so as to bring its holding to around 30%. The Abu Dhabi government-owned investment company is currently Arabtec’s second largest shareholder with a 18.94% stake. Belatedly, the authorities have taken some positive action and suspended trading in the company’s shares at the start of Thursday’s business, whilst it awaited further clarification from the main stakeholders.

The Dubai Financial Market had a stellar Q2 with Profit up 363% from US$ 18.9 million to US$ 68.8 million whilst the value of securities traded in the quarter rose by 234% to US$ 34.6 billion.

The bourse, opening on Sunday at 4575 points, had another mega week to close Thursday up 7.2%, or 328 points, at 4903. Emaar and Arabtec ended the week on US$ 2.70 and US$ 1.35 respectively. The DFM alsobconfirmed that it had approved a move by Drake & Scull to issue a US$ 15 million convertible bond to an unnamed investor, keen to buy into the company.

According to a recent Thomson Reuters’ report, H1 debt capital market activity in the ME fell some US$ 4 billion to US$ 22 billion. Over US$ 12.1 billion of this business originated in the UAE with Saudi being a distant second with US$ 6.2 billion.

The Brics group – which represents over 40% of the global population – now has its own development bank with the principle aim of financing infrastructure projects in the five member nations – Brazil, Russia, India, China and South Africa – without having to rely on the Western banking system. All countries will each pay in US$ 10 billion capital for the new financial institution which will be headquartered in Shanghai. Furthermore, there will be a US$ 100 billion Contingent Reserve Arrangement to reduce any economic fall-out as US continues tapering its QE policy, which started the year at a monthly US$ 85 billion and is expected to be finally closed down by November.

HH the President Sheikh Khalifa announced the creation of a UAE Space Agency, as the country enters the space race to send an unmanned craft to study Mars. This project will be the main driver of the agency but it will also be tasked with developing Emirati talent in the space and aeronautical sector as well as making the country a space technology centre. Only eight other countries have plans to explore this planet that will involve a 60 million km journey over a nine month period.

The launch date, 2021, coincides with the country’s 50^th anniversary of its formation and UAE will be the first Arab nation to explore outer space. There are no costs available but the UAE has already spent US$ 5.5 billion on its satellite and space development programme – and this will cost a lot more. HH Sheikh Mohammed bin Rashid Al Maktoum is quoted as saying: “We chose the epic challenge of reaching Mars because epic challenges inspire us and motivate us. The moment we stop taking on such challenges is the moment we stop moving forward.” One wonders what Dubai could do to the red planet if its probe did find Life On Mars.

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

I Heard It Through The Grapevine

Posted on July 16, 2014 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum stunned everybody with his latest announcement – the world’s largest (covering 48 million sq ft) and first temperature-controlled city – Mall of the World. There will be many components to the new US$ 6.8 billion project including the world’s largest shopping mall, at 8 million sq ft, the world’s largest indoor theme park, with a dome that can be opened in the winter months, 100 hotels and serviced apartments (comprising 20k rooms), a cultural area and a Wellness District.

The proposed location on SZR will not do much for traffic flow, the timing may be a problem, especially with all the work that Expo 2020 will entail, and funding such a massive project will tax the minds of financing gurus. Apart from these potential problems, this can only be a tremendous boost, in the long run, for the Dubai brand.

Another property update – this time by Asteco – confirms that Q2 prices were flat (by Dubai standards), with 6% growth for apartments and half that for villas. Current hotspots include Dubai Marina, Downtown and Jumeirah Village that have posted annuals gains of 62%, 52% and 46% respectively.

The owners of Lamcy Plaza, Lals, and Regal Group, a textiles company, have formed Signature Developers in a surprise move to enter the burgeoning residential and hospitality sector. Their initial foray will be a 220 metre tower block, located near Dubai Mall, and priced at the luxury end of the market whilst the second will be a mixed-use 44-storey building in JLT, including a 170-room 5-star hotel.

Construction has already started on two residential developments in Al Furjan which are expected to be completed by the end of next year. The 11-storey buildings were initially planned prior to the GFC but have now been unveiled again by Azizi Developments.

The 4^th MasterCard Global Destinations Cities Index sees Dubai move into the top five as it sees a 7.5% rise in overnight visitors to 12 million. Only London, Bangkok, Paris and Singapore will have more visitors. Last year data from the Department of Tourism and Commerce Marketing showed a 10.6% rise in visitor numbers to 11 million.

According to the Sunday Times, there is a consortium, headed by Dubai’s Khalaf Al Habtoor, planning to spend US$ 1.7 billion buying iconic hotels in the UK capital. Although no specifics have been revealed, it is known that the Al Habtoor Group is keen to expand their hotel ownerships in Europe, especially London and Paris.

Having recently cancelled a US$ 16 billion order for 70 Airbus 350s, Emirates has finalised a US$ 56 billion order for 150 Boeing 777s, with purchase rights of a further fifty. With this order, the 777 fleet will have 208 planes making the Dubai-based airline its largest operator in the world.

As part of their 2012-2016 plan, the RTA have completed work, valued at US$ 109 million, on 193 km of internal roads in Al Quoz, Barsha, Khawaneej and Hatta. Further work on roads in Al Warqaa and Muhaisnah should be completed by the end of the year. Despite all this, the highways are as busy as ever – testament to the booming economy and influx of people.

This is borne out by official H1 figures from the General Directorate of Residency and Foreigners Affairs in Dubai which issued 571k new residency visas – up 30.6%. With 515k residency visas renewed and 382k cancelled in this period, it indicates that there is a big increase in people living in the city.

In H1, Dubai Auto Zone – part of the government’s Economic Zones World – recorded a 64.0% increase in trade to US$ 1.48 billion. DAZ currently houses 420 companies, with its key trading partners being found in Russia and Africa.

The Dubai Multi Commodities Centre has reported a 30% annual hike in the number of companies to 8.9k, of which just over 1k have established over the past six months. The free zone is the largest in the region and currently comprises some 65 tower blocks and this does not include the Burj 2020 which will become the world’s tallest commercial tower; work is expected to start next year.

Nakheel reported a 54.2% jump in H1 profits to US$ 504 million. The company announced that it would repay an outstanding US$ 1.5 billion debt four years earlier than scheduled – a sure sign that the government-owned developer considers that the good times are back.

DP World, which operates some 65 ports all over the world, is involved in a spat with Djibouti authorities who have failed in court attempts to stop the port operator operating Doraleh Container Terminal in that country. The dispute is all about how the initial 2000 contract was awarded and how payments were made.

Troubled Gulf Navigation, Dubai’s only listed crude oil shipper, has cut its capital base from US$ 452 million to US$ 150 million in a move to solve its debt difficulties. By a reverse stock split (three former shares now equal one share), the company has managed to write off US$ 300 million in losses. The sale of two vessels and the issue of a US$ 130 million convertible bond will help cash flow.

With an additional capital inflow, Emaar Economic City – a consortium of Emaar Properties and Saudi investors – now holds 50% (or US$ 693 million) of Port Development Company, with Huta Marine Company holding the balance. The cash injection will be used to internally finance the second phase of work on the King Abdullah Economic City port, located on the Red Sea. The facility has a capacity of 1.3 million teus (twenty-foot equivalent units), set to rise to 4 million by 2016.

Limitless has confirmed that its Vietnamese JV partner, Sovico Holdings, had received an investment certificate from the Quang Ninh state which now allows the Dubai developer to move a step closer to start infrastructure work. The Halong Star project, in the country’s north-east , includes housing, retail and a hotel.

Dubai-based Metito Holdings has signed a partnership agreement with three Japanese companies – Mitsubishi Corporation, Mitsubishi Heavy Industries and Japan Bank for International Corporation. The Japanese triumvirate will invest heavily in the water management solutions company as the bank will provide funds of US$ 92 million and the two other companies have purchased 38.4% of the shares for an undisclosed amount.

Not surprisingly after the recent stock market mini-crash, the authorities are planning to tighten up procedures and supervision to avoid “another” Arabtec. The Securities and Commodities Authority will set up a technical committee to look into share trading integrity and preventive stock manipulation measures.

The DFM, opening on Sunday at 4400 points, had another eventful week to close Thursday up 4.0%, or 175 points, at 4575. Emaar and Arabtec, ended the week on US$ 2.62 and US$ 1.14 respectively.

Two recent studies – from the IMF and Bank of America – indicate that Dubai’s economy has gained traction and is heading to growth levels in the region of 5%. The usual drivers – tourism, high oil prices, a turnaround in the realty sector and trade – play a big part in this positive and solid outlook. Although there has been some welcome restructuring in the GRE debt, this still needs close monitoring, as does property speculation – if it starts to get out of hand again.

Meanwhile, the IMF has again lowered its French growth forecast to 0.7%, only three months after its previous revised estimate of 1.0%. There is no doubt that Europe’s second largest economy needs major structural reforms, as unemployment hits a new high of 3.39 million and the Hollande government struggles to cut the country’s public deficit to 4.0% – as opposed to 3.0% as laid down by eurozone rules. Whether the government will be able to slash public spending by US$ 68 billion, within the next three years, remains to be seen – if not, any future growth plans and reduced unemployment go out of the window.

Even the once mighty German economy is under the cosh as its industrial output dropped for a third consecutive month. This comes after the latest ECB’s warning that a prolonged period of low inflation in the bloc will hamper any meaningful recovery. The odds are increasing that the central bank will loosen its monetary policy sooner rather than later in a bid to reverse the worrying downward inflation spiral and the low patchy growth.

With inflation nudging upwards and its QE program tapering downwards (now at US$ 35 billion per month from its January total of US$ 85 billion), there is no surprise to see pressure on the US dollar. Because Q1 saw the GDP contract by 2.9%, it seems highly unlikely that the Fed’s 2014 target will be met unless the US economy can show 5% quarterly growth over the next three quarters. The Fed has a difficult balancing act – if they were to end QE, there is every chance the economy would fall into recession and if they continue with QE, at current levels, inflation would inevitably rise.

The UK largest drug conglomerate – GlaxoSmithKline – is having a bad time in China. There is a possibility that the company could be thrown out of the country if the massive bribery case, now going on, goes against GSK. Former country head Mark Reilly, and Peter Humphrey, GSK’s own internal investigator, are in detention.

The SCA (Securities and Commodities Authority) has advised investors to ignore rumours about Arabtec Holding. This warning could be of use in many cases as Dubai sometimes seems to thrive on rumours spread mainly though the social media. Obviously, interested stakeholders will look after their own interests and may spread rumours that a certain market is going up or down, a certain company (or individual) is in trouble etc. Even General Sheikh Mohamed bin Zayed Al Nayahan has come out about the President’s health rumours and urged all citizens to validate the transfer of information. Hopefully there will come a time in Dubai when we can rely on fact and not I Heard It Through The Grapevine.

Posted in Finance | Tagged Arabtec, Asteco, DFM, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, Expo 2020, HH Sheikh Mohammed bin Rashid Al Maktoum, I Heard It Through The Grapevine, Khalaf Al Habtoor, Mall of the World, Nakheel, UAE | Leave a comment

A Hard Rain’s Gonna Fall

Posted on July 6, 2014 by howesdubai

It seems that the government has been successful in its aim to take the heat out of the burgeoning property market. A mere 1% hike in Q1 prices indicates that the introduction of a mortgage cap, along with the doubling of transfer fees to 4%, has had the desired impact. Q2 is likely to see similar returns but, with current demand outstripping new supply, H2 may well see higher price hikes.

Although local commercial rents continue to escalate so much so that Dubai is now the costliest regional market, CBRE’s latest report indicates that Dubai is still relatively cheap on the global scale. The emirate is ranked 23^rd, with costs of US$ 92.56 per sq ft – a long way behind the likes of London’s West End, Hong Kong and Beijing with rates of US$ 277, US$ 242 and US$ 194 respectively.

Another report by Knight Frank shows that there was a 6% increase in residential prime rentals in Q1 – the fastest rate anywhere in the world. There are some estimates that put rental increases over the past two years at 45% and, if this trend were to continue, it could mean a mini-exodus, as residents move to other emirates for more affordable property.

Three Dubai developers have joined forces to build a major development that will have 2k residential units, a hotel, office buildings and retail outlets. Aristocrat Star Real Estate Development, PAL Developments and Pacific Ventures have yet to announce the complex’s location or price but hope to start work in September.

RSP Architects have won a US$ 10.9 million design and supervision contract for Nakheel’s 620k sq mt entertainment hub on Deira Islands. When completed, the 15.3 sq km site will have added 21 km of new beach and is set become a world-standard resort.

Following a slight decline the previous month, May has seen a further drop for Dubai’s hotel occupancy rates from 84.3% to 82.2%. This fall was compensated by a 4.6% jump in profitability to US$ 309 and a 3.5% increase in RevPAR (revenue per available room) to US$ 248.

Sheikh Hamdan bin Rashid Al Maktoum, deputy ruler of Dubai, has ordered that landowners, who have suffered property damage caused by Dubai Municipality expansion work in the CBD, can now claim damages. Depending on the size of the claim, compensation can take the form of cash up to a value of US$ 545k, the option to have an additional floor built on their building or a new plot of land.

This week, Emirates increased its fuel surcharge to reflect recent rises in oil prices. In its latest annual accounts, for the year ending 31 March 2014, the airline had seen its fuel bill up 10.4% to US$ 8.4 billion, accounting for 39.2% of its total operating costs of US$ 21.3 billion.

With still another three weeks before the 80-day runway maintenance is completed, it was not surprising that May passenger numbers dropped 2.5% to just over 5 million; airport movements reduced by 26.6% to 22.9k. Dubai Airport has announced that trial runs will start next month for Concourse D. This new terminal, linked by train to Terminal 1, will be used by 100 airlines and will help to increase the airport capacity to 90 million passengers.

Although global air cargo in May showed a 4.7% expansion, year on year, the Middle East growth was almost double at 9.3%. This is a sure indicator that the regional economic climate and business confidence are improving at a much quicker rate than say North America, Europe and the Asia Pacific where growth rates were much lower at 2.4%, 3.4% and 5.3% respectively.

The RTA is planning to spend a further US$ 10 million on ten footbridges with the aim of reducing pedestrian accidents.Over the past seven years, fatality rates have dropped from 9.5 per 100k to 1.2k. as footbridges have increased sevenfold to 100 over the same period.

Following their move two years ago, introducing formal assessments and licensing of all real estate agents, RERA have now announced annual testing. In future, all property brokers have to pass an exam set by the Dubai Real Estate Institution (DREI) for annual renewal purposes.

Surprisingly, 7-Eleven convenient stores – with almost 53k outlets worldwide – will make their Dubai début next year. The local company, Seven Emirates Investments, expects to roll out a further 100 stores in the UAE by 2017.

Already with a US$ 100 million Indian order book, Dubai-based Drake & Scull International has won a US$ 83 million contract to build a 400 kV 152 km transmission line for the Uttarakhand Project.

Local developer, Eagle Hills has announced a US$ 5.5 billion investment that will see the regeneration of the run-down Belgrade Waterfront. The project in Savamala, due to start next year, will include a 200 mt tower and is set to become the residential and commercial hub for the Serbian capital. With Emaar’s chairman, Mohamed Alabbar, an executive director, there is every chance that the 1 million sq mt project will be a success.

Following the April acquisition of Dubai-based National Petroleum Services, for a reported US$ 500 million, Abu Dhabi’s Waha Capital has acquired 20.56% of the company for US$ 76 million. NPS employs over 1,300 and is primarily involved in oil well servicing and testing in several countries in the Mena region and Malaysia.

As a result of a major improvement in its liquidity following the February the issue of a 5-year, US$ 300 million sukuk, S&P have upgraded Dubai Investment Park Development Company’s rating to BB+. DIP, wholly owned by Dubai Investments, is a 23 sq km mixed-use complex comprising residential, commercial and industrial interests.

Amlak Finance, 45% owned by Emaar, is proposing to restructure up to US$ 2.7 million in debt by which if agreed, by the stakeholders, will see the Islamic mortgage provider make an immediate cash payment of US$ 545 million and repay the balance over a 12-year period. Depositors have been given two months to agree to this proposal.

Another company, Limitless, part of Dubai World, is requesting creditors for a two year deferral on the first tranche of a US$ 1.2 billion loan due in December. The debt was initially restructured some three years ago since when rates have dropped and more favourable terms are now being requested.

Q2 had promised so much and delivered so little for the local bourse. Having started the period at 5059, it recorded its first quarterly loss in three years to drop 22.1% to close on 3943 with Arabtec the big loser shedding 59.2% to US$ 0.71 whilst Emaar was down 12.2% at US$ 2.32. Apparent lack of transparency, profit taking, margin trading, even unsubstantiated rumours and certain banks actively encouraging loans for local stock trading are some of the reasons espoused for this bloodbath.

The DFM, opening on Sunday at 4223 points, had another turbulent week to close Thursday up 4.2%, or 177 points, to 4400. Although the market is 30.6% up on its 01 January opening of 3370, it is 18.1% down on its 2014 high of 5374 recorded on 06 May. Bellwether stocks, Emaar and Arabtec, ended the week on US$ 2.05 and US$ 0.96 respectively.

Whilst not performing to its expected high standards, the Argentine football team is in better shape than the country’s economy. Its diminishing foreign reserves have declined to US$ 30.4 billion despite the de Kirchner government introducing measures such as a 35% tax on overseas credit card transactions and a 50% tax on overseas online purchases. The country is in recession and is expected to remain so, well into next year, as is its high inflation rate, currently running at over 25%.

Short-term, the Latin American country is facing a bigger threat emanating from its financial collapse at the turn of the century when it reneged on US$ 100 billion of sovereign loans and devalued the peso. Following two restructuring schemes in 2005 and 2010 the majority of bondholders accepted a 66% haircut on payments. However “vulture funds” – NML and Aurelius – bought some of the remaining distressed debt at a heavily discounted rate and now a New York court has agreed that they should receive a US$ 1.5 billion down payment. This is in addition to a US$ 800 million interest payment due to the creditors who had settled previously.

In contrast to Argentine’s high inflation, the eurozone is concerned with the possibility of deflation as rates still hover around 0.5% – well below the 2.0% target. This figure is at its lowest level in almost six years – at that time, inter-bank lending almost ground to a halt, causing recession in the some of the bloc. The ECB has to stop the vicious downward spiral that can occur which may see falling demand, arrested growth, increased unemployment and reduced investment. The bank’s president, Mario Draghi, does not see too much improvement in the short-term and there is a possibility that a quantitive easing programme could be introduced that would mean an injection of cash into the economy and an upward movement in prices.

The French, keen to secure a stalled major defence order with India, are quick off the blocks and are proposing a US$ 1.4 billion soft 3-year loan for major infrastructure projects. Foreign Minister Laurent Fabius is the first of many overseas politicians trying to curry favour with the new Narendra Modi government. The French need every assistance to maintain its position as the second largest economy in the eurozone as all indicators point to the country lagging further and further behind its European partners.

In the US, both the Dow Jones Industrial Average and the S&P 500 are testing record levels with the former breaking through the 17000 mark for the first time ever. Meanwhile, the S&P is nearing the 2000 level – an all-time high. No doubt the US economy is in recovery mode as unemployment rates – at 6.5% – are at their lowest since the collapse of Lehman Brothers in September 2008. Undoubtedly, the market has been aided by low interest rates and economic stimulus measures but the times are changing. As the market is now heading for a major correction downwards, what we are seeing is the calm before the inevitable storm. As Dubai swelters in the summer heat, elsewhere A Hard Rain’s Gonna Fall!

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

Down, Down (Deeper and Down)

Posted on June 30, 2014 by howesdubai

Following his May US$ 2.2 billion endorsement for Dubai Holding’s Jumeirah Group’s expansion plans, HH Sheikh Mohammed bin Rashid has approved the addition of a further 350 rooms for the 15-year old Jumeirah Beach Hotel. The complex, due to open in 2018, will have the usual recreational and retail outlets.

Further adding to its burgeoning hotel portfolio, Al Habtoor Group has purchased the 400-room InterContinental Budapest for an undisclosed sum, two years after buying Le Méridien in the same city. The Group is currently building three hotels on its Al Habtoor City site – St Regis, W and The Westin – which will double the number of hotels it owns and manages in Dubai.

Although there has been limited progress on The World Project to date, a further six islands – known as The Heart of Europe – are being developed by Kleindienst Group. It is expected that Drydocks World will be employed to provide offshore marine management – including provision of power, water and sewerage – as well dredging facilities to the Austrian enterprise.

By August, Nakheel plans to clear all of its bank debts, totalling US$ 1.5 billion – some four years ahead of schedule. The company has generated the cash internally and has not received any financial assistance from its owner, the Dubai government. However, it still has outstanding balances with its numerous trade creditors and this sukuk is due for repayment in 2016. Over the next three years, the government-owned developer plans to bring 2,900 hotel rooms into the market as it aims to concentrate more on recurring income-generating assets.

At the top end of the housing ladder, Damac Properties has launched the sale of 34 Fendi-styled villas with prices starting at US$ 9.8 million. The Italian-styled villas will be located in the Akoya development, overlooking the Donald Trump golf course, and will be ready to move in within three years.

Dubai Properties is releasing a further 200 apartments in its Remraam development, located between JAFZA and the new Al Maktoum airport.

Dubai Investments has sold a 66% share in Goldalpharma to Sanofi for an undisclosed amount but it will equate to a 26% IRR over a ten-year period. The French drug-maker will manage and promote the company’s generic drugs at a time when these can cut up to 85% of costs of patented medicines that can have a competition-free run of ten years or more, charging premium prices.

A week after cancelling its 2007 US$ 16 billion order for 70 A350s, Emirates has announced that it will hold talks with both Boeing and Airbus to discuss which model, the Dreamliner or the A350, it will select to add to its fleet.

Ducab, partly owned by Investment Corporation of Dubai, has won a contract to supply fire and halogen cables for a major US$ 27 billion project for the Grand Mosque in Mecca. There was no indication on the value of the order.

Dubai will have to wait another year before UNESCO decides whether to include The Creek as a World Heritage Site. The organisation has requested further details, as it noted that many of the old architecture had been demolished and then reconstructed in places. A final decision is expected next year.

The RTA has announced that the new Dubai Tram system is 93% complete and will be ready for its scheduled November opening. The tramway will have eleven stations along its 10.6 km circuitous route covering JBR, Al Sufouh and three Metro stations on SZR. Phase 1 will have cost US$ 1.09 billion and is expected to carry 27k passengers a day.

Latest data from the Federal Customs Authority reports a 5% increase in the value of goods passing through the country’s ports; the total of 198.3 million tonnes had a value of US$ 430.5 billion. 2013 imports jumped 5.6% to US$ 264.6 billion with gold, phones and vehicles being the three leading items. Reexports surged by 10.9% to US$ 120.8 billion – a sure indicator of the growing importance of the country’s status as a commercial hub for international trade. Non-oil exports saw a disappointing 8.0% fall to US$ 46.6 billion.

Last year, there was a 15.7% increase, to 79.5k, in the number of Dubai police cases involving bounced cheques, of which only 25.2% were resolved before further action was taken.

It is reported that a CBD employee, with his wife and 11 others, have been charged with defrauding the bank of US$ 9.5 million. The scam, which involved contriving false trades, had been on-going for the past eight years.

The DFM, opening on Sunday at 4593 points, had another turbulent week to close Thursday 8.1% down, or 370 points, to 4223. Although the market is still 25.3% up on its 01 January opening of 3370, it is 21.4% down on its 2014 high of 5374 recorded on 06 May.

The seven-year old Borse Dubai – the holding company for the emirate’s two stock exchanges, DFM and NASDAQ Dubai – is set to refinance a US$ 500 million loan on more favourable terms. This three-year loan – at 90 basis points – is a better deal than the previous facility priced at 220 bps over LIBOR. The company, with a reported 20.6% shareholding in the London Stock Exchange and 16.0% in NASDAQ, saw its Q1 net profit surge more than eightfold to US$ 58.6 million.

Yet again, Barclays finds itself in trouble with the authorities. This time New York prosecutors are investigating fraud charges against the bank in relation to so-called “dark pool” operations in which it “showed disregard for its investors in a systematic pattern of fraud and deceit.” The bank should have protected its clients from aggressive high speed trading firms but seemed to do the exact opposite. Over the past two months, the financial institution has been fined US$ 280 million, for its shady role in dealings with Fanny Mae and Freddie Mac, and US$ 26 million for fixing the gold price. This could be a lot more serious and penalties could be in the same league as BNP.

The French bank will apparently be hit with a massive US$ 8.9 billion fine for its violation of international sanctions against countries such as Iran, Cuba and Sudan, between 2002 – 2008. Earlier in the year, the bank had set aside a US$ 1.1 billion provision but now will have to slash proposed dividends and issue bonds to make up the shortfall. No doubt senior managers would have picked up huge bonuses from this illicit trade but it is the shareholders and clients who eventually pay for their misdemeanours.

Mining conglomerates, Anglo American, Lonmin and Impala have finally settled with the unions to end a damaging seven-month strike in South Africa’s platinum mines. The end result is that the lowest paid workers will see their pay increase by US$ 55 a month over the next three years, along with additional benefits.

Moody’s has put a negative outlook on Russia whilst keeping its bond credit rating at Baa1 – at the low end of the investment spectrum. The agency cites the lack of positive economic reform, the recent cut in the 3-year growth forecast, from 3.0% to 1.7%, and the possibility of further international sanctions, if the Crimean crisis worsens, as the main drivers for their warning.

It seems that the era of low interest rates may be coming to an end as the governor of the Bank of England, Mark Carney, hinted higher rates could come sooner than markets expect whilst the US Fed is facing increasing pressure to do likewise. Two factors are in play here – falling inflation and asset bubbles.

Japan is a good example of the problems that can arise when a country is experiencing low inflation – as is now the case in the eurozone and the US. A slowdown in growth will result in higher unemployment which, in turn, leads to a reduction in consumer and investment spending, a dampening of business confidence and a cut back in government tax receipts, allied with an increase in social spending. When inflation is low, companies will face difficulties raising prices so they turn to cost-cutting measures, including retrenchment of staff and lower wages, as well as seeing lower growth levels. The end result is that the troika of government, companies and consumers have less money to spend and for those who have will probably hold off as prices will continue to fall. It is thought that a 3% inflation level is probably the best scenario for economies – that being the case the US at 1.5% and the eurozone at 0.5% have a lot of catching up.

Already the eurozone authorities have introduced negative interest rates, whereby banks have to pay the central bank 0.1% for holding their money, and a US$ 545 billion targeted lending programme, to entice banks to lend money to its stakeholders. The ECB might soon have to purchase private sector asset-backed bonds (rather than government securities as favoured by the Fed and the Bank of England) to get the inflation level back on track.

Dubai-based Arabtec Holdings is still the big news-maker as its share value continues to plummet. It has been reported that following the departure last week of its CEO, (and 28.85% shareholder), Hasan Ismaik, there have been subsequent dismissals of a raft of senior managers and other employees. This comes on top of its then major shareholder, Aabar Investments, reducing its stake earlier in the month.

By 14 May, the company had seen its 2014 share price skyrocket by 361%, from a 01 January opening of US$ 0.56 to US$ 2.02. Following this record high, its price has crashed to close on Thursday at US$ 0.84 – down 29.1% on its week’s opening of US$ 1.19, down 53.7% on its 01 June opening of US$ 1.83 and 58.2% down on its 14 May close.

The company is in turmoil and this has had a negative impact for the local bourse, as other listed companies have been affected. The market is well off its 2014 06 May peak of 5374 and the lack of communication and transparency both from the company and the SCA (Securities and Commodities Authority) is not being well received by investors. Any damage has been exacerbated by the fact that DFM has just been upgraded from frontier to emerging status by the MSCI and international fund managers will not take kindly to seeing the Arabtec drama being played out as the market takes on casino-like status, being driven by speculation and rumours rather than market fundamentals. If nothing positive arises by early next week, Arabtec shares – and the DFM’s credibility – will continue to go Down, Down (Deeper and Down).

Posted in Finance | Tagged Al Habtoor Group, Arabtec, Damac, DFM, Dubai, Dubai Financial Market, Ducab, Emaar, Emirates, emirates airline, Emirates NBD, Hasan Ismaik, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE, Union Properties | Leave a comment