From Russia With Love

Posted on May 3, 2014 by howesdubai

dubai-police-museumOn Thursday, Dubai International started 80 days’ runway maintenance that will see services curtailed, cancelled or moved to Dubai World Central. (Emirates have announced that it will cut 5.4k flights over this period).  Consequently, it is unlikely that passenger traffic will reach the March numbers of 6.3 million – up 7.5% on the previous year. Q1 traffic – at 18.4 million – shows an 11.4% increase on the same quarter of 2013. Despite sluggish global trade, cargo traffic was up 6.7% in March, to 228k tonnes, and 5.0% in Q1 to 614k tonnes.

DP World announced a 9.2% increase in consolidated container traffic to 7.76 million TEUs (20 ft equivalent units). The world’s third biggest port operator handled a further 7.54 million TEUs in other locations in which they operate but not actually own.

As the emirate is steeped in maritime industry, it is perhaps not surprising to learn that this ever-expanding sector now contributes 4.6%, or almost US$ 4 billion, to Dubai’s GDP. As Dubai Maritime City matures, this influence will surely play an important role in Dubai’s economic progress.

Emirates NBD recorded a 25% surge in Q1 profits to US$ 284 million, despite having to provide US$ 346 million for bad loans. The impressive results from Dubai’s biggest lender, 55.6% owned by the Investment Corporation of Dubai, is yet another indicator that the local economy is progressing well. Loans and advances rose by 9%, to US$ 65.3 billion, whilst deposits were up 13% to US$ 68.5 billion.

Dubai’s third biggest bank, Mashreq, recorded a 35% rise in Q1 net profit to US$ 157 million. Significantly, its loans and advances rose by 5.8% to US$ 14.5 billion whilst its total assets stood at US$ 25.6 billion.

Deyaar is another developer benefiting from the local property boom as it announces a 268% hike in Q1 profits to US$ 14.2 million, on a 55% increase in revenue. The Dubai-based company had total assets of US$ 1.75 billion at 31 March 2014.

Dubai Aerospace Enterprises, whose shareholders include Investment Corporation of Dubai, Dubai International Capital and Emaar Properties, recorded a fourteen-fold increase in annual profit to US$ 112 million, as revenue rose 8.3% to US$ 2.11 billion. The company has two divisions, Capital – involved in aircraft leasing – and Engineering, dealing with repair and maintenance.

Etisalat has taken up a US$ 4.84 billion loan to pay for its purchase of the 53% shareholding in Maroc Telecom from Vivendi. This comes the same time as it announced an 11% hike in Q1 net profit to US$ 545 million on revenue of US$ 2.7 billion.

UK company, ISG, has won a US$ 35 million contract to refurbish the Kempinski Mall of The Emirates hotel. The fit-out company will be responsible for interior work, including all 393 rooms, as well the external façade of the hotel.

Plans are well advanced on the composition of the huge 438 hectare Expo site in Jebel Ali. Covering almost a third of this area, the focus will be the actual gated Expo site which will be surrounded by residential, logistics and hospitality areas – all will be linked by new roads and an extension to the Metro’s Red Line.

Despite empirical evidence indicating that there are more empty villas now than say six months ago, Standard and Poor’s is confident that the increasing supply of new units will be easily absorbed by new residents and a short-term over supply will not occur.  Because of their positive outlook, it has given local developer Damac a BB credit rating.

It is expected that Emaar Properties will offer up to 25% of its shopping malls unit on the Dubai Financial Market – and not on Nasdaq Dubai, as originally expected. The listing – expected to raise US$ 2.5 billion – will probably take place later in the year and will provide a huge boost for the local bourse.

Dubai-based retailer Lulu Group is planning to open a further fourteen stores in Dubai and Northern Emirates over the next two years. The company operates 110 stores in the region with 31.5k employees, and is now expanding into Malaysia.

The world’s third largest supermarket chain, Tesco, has signed a partnership agreement with Choithrams to sell their branded goods in 31 Dubai supermarkets. It is hoped that Tesco has better luck here than its recent overseas forays in China, Japan and the US. Despite recent profit falls, the UK supermarket chain still managed a pretax bottom line of US$ 5.1 billion and has a market cap of US$ 38.2 billion.

Meydan will soon have the largest man-made park of its kind in the world, covering 25k sq ft. No costs have been revealed but WL Hospitality Group has indicated  that the Wire World Adventure Park will include a bike park and an adventure rope and zip wire obstacle course.

Tecom is making the best of the booming economy and has announced that it will develop projects valued at US$ 273 million over the next two years. The Butterfly is a two tower office building, covering 255k sq ft, to be located between DMC and DIC whilst the new DuBiotech HQ will cater for both retail and commercial. The nine-storey Publishing Pavilion and the four tower-Makateb will prove useful additions for the rapidly expanding media sector.

Dubai Police expect to commission a state of the art, US$ 100 million forensic science and criminology laboratory by the end of the year. The four-storey building, encompassing 420 sq mt, will house six departments and nine laboratories along with training and conference facilities. In addition, it has plans to build its own museum; not only will it be shaped like a policeman’s hat but, being Dubai, it will become the biggest hat in the world.

Leisurecorp has sold Turnberry golf resort to Donald Trump. The Dubai government unit, which paid a reported US$ 93 million for the Scottish complex in 2008, disclosed no details of the sales price but is probably less than what was paid for in those halcyon days. Maybe members of the upcoming Trump Akoya golf club in Dubai will get reciprocal rights to play on the iconic Open golf course.

Two bond issues occurred this week. The Dubai government placed a 15-year sukuk on the DFM which brings the total value of sukuks listed locally to US$ 20.4 billion. Majid Al Futtaim has issued a ten-year US$ 500 million bond, which has been heavily oversubscribed, priced at around 195 basis points.

Because of a supposed accessibility risk to international investors, MSCI is reportedly planning to cut the weightings of four stocks on the DFM. This comes ahead of their formal transfer of the UAE bourses from frontier market to emerging markets status later in the month. Consequently an adjustment factor will be placed on Emaar, Arabtec, Dana Gas and Dubai Islamic Bank. Nevertheless it is estimated that up to US$ 2 billion could flood into the local market as overseas investment increases.

The DFM fell back 0.2% from its Sunday opening of 5088 points to close on Thursday at 5078. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.69 – down US$ 0.25 on the week – and up US$ 0.08 at US$ 2.47 respectively. During April, the bourse moved northwards 13.6% from 4451 points to close the month on 5059. So far this year, the best performing global stock market has skyrocketed over 50% from its January opening of 3370.

Outsourcing company Serco has hit bad times since being found out last year that it was defrauding the UK exchequer. The scandal cost the firm US$ 113 million, a loss of consumer confidence and a ban on further government contracts. Now to replenish its dwindling finances, it plans to raise US$ 280 million in a placement of 9.9% of its stock. It is a wonder then that its market valuation has only halved in the past twelve months.

The UK economy is now growing at its fastest rate in seven years as Q1 growth figures reached 0.8% with the good news spread among all sectors including manufacturing at 1.3%. In comparison, the likes of Germany, France, Italy and Spain are faring a lot worse so much so that ECB president, Mario Draghi, has indicated that he may have to start a radical quantitative easing program.

Meanwhile in Washington, the Fed will continue to cut back a further US$ 10 billion to US$ 45 billion on its QE policy, despite US Q1 growth figures coming in at a miserly 0.1%.

Also this week, the US Treasury found out that it had lost US$ 11.2 billion on its US$ 49.5 billion 2008 bailout of General Motors.  Maybe Treasury spokesman, Adam Hodge, could have done better than his quote that the goal of Treasury’s investment in GM was never to make a profit! Since the Treasury sold its last remaining shares, in December, the company’s market cap has fallen 16% over the past four months as it has had to recall 2.6 million cars, with potentially faulty ignition switches, which could be linked  to at least thirteen deaths.

With Russia still calling all the shots in the Crimea, the IMF has approved a US$ 17 billion bail-out fund for Ukraine, with 20% immediately available and the balance paid out over the next two years. In return, Kiev will have to implement stringent and unpopular reforms which will see both oil prices and taxes increased. A further US$ 15 billion will become available from other sources including the World Bank and the EU.

It seems that the West is giving Vladimir Putin carte blanche to do as he wishes in the region as pro-Russian forces continue to take over many government buildings in Eastern Ukraine, with tens of thousands of troops stationed menacingly on the border. The only riposte seems to be minor economic sanctions on several Russian officials and a pledge to recover the billions of dollars allegedly stolen by the country’s ex-president Yanukovych. From Russia with Love.

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Fire and Rain

Posted on May 1, 2014 by howesdubai

dubai-expo-siteEmaar Properties showed a US$ 235 million Q1 profit, up 55.2% year on year, on a 7% hike in revenue to US$ 615 million. Furthermore sales at US$ 1.61 billion were a massive 94% higher than the corresponding period in 2013. The company is still expected to raise up to US$ 2.5 billion in a secondary offering of shares in its Malls Group later in the year. The company has also signed a Memorandum of Understanding with Dubai World Central to develop a staggering 13.6 million sq mt residential estate adjacent to the Expo site.

The proposed Expo site at Jebel Ali, will be the largest ever and will cost in the region of US$ 3 billion. There will be a further US$ 7 billion earmarked for infrastructure, including US$ 1.4 billion to be spent on expanding the Metro’s Red Line.

A further project in Dubailand was announced by Dubai Properties. Condor Building Contracting won a tender to build a 20k sq mt retail and community centre in its Mudon location, due to open late next year.

It is reported that Dubai’s National Petroleum Services will be sold to a Gulf-based syndicate for up to US$ 700 million. The oilfield service company, which operates in the MENA region as well as Malaysia and Brunei, will have the likes of Arab Petroleum Investment Corporation and Fajr Capital among its new owners.

Dragon Oil, 51% owned by ENOC, is set to spend US$ 1.5 billion in surveying an Afghan oil concession, covering an area of almost 1.3k km.

It seems likely that the Dubai government will once again test the sukuk market with a US$ 500 million, 15-year, 5% Islamic bond. The last sovereign bond, issued in January 2013, was for US$ 1.25 billion and was 12 times over-subscribed. With the buoyant state of the local economy, more of the same is expected this time.

This week saw HH Sheikh Mohammed bin Rashid Al Maktoum on an official visit to Latin America with his seven-day whirlwind tour taking in Mexico, Chile, Argentine and Brazil. It is no surprise to see that these four countries were chosen as 2013 figures indicate a 25.4% annual leap in trade to US$ 4.71 billion. Mexico (US$ 2.2 billion) and Brazil (US$ 2.0 billion) were by far the largest trading partners.

The DFM had a massive week up 6.85% from its Sunday opening of 4762 points to close on Thursday at 5088. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.94 and US$ 2.38 respectively. No wonder the market is currently the best performing bourse in the world already 50.98% up this year from its 01 January opening of 3370 points. Traditionally, the market cools once the outside temperature rises and this could be welcome news.

UK bonus payments are back in the news with Barclays leading the pack. Despite a 32% fall in profits, the investment bank has actually increased its bonus pool by 10% to almost US$ 4 billion – almost three times the dividend pay-out to shareholders! Meanwhile retiring chairman of the gas conglomerate, BG Group, has walked away with a compensation package in excess of US$ 37 million. Despite dismal results and falling sales, Morrison’s chief executive, Dalton Philips, is in line for a US$ 3.8 million share bonus. These examples beg the question – who’s in charge?

One of the major success stories of modern times is Airbnb which started in 2008 and is now valued at US$ 10 billion. To date, the company, founded by Brian Chesky, Nathan Blecharczyk and Joe Gebbia, has facilitated accommodation for over 11 million customers in nearly 200 countries. Its main source of revenue is a 3% charge on all rentals made. Certainly a good role model for any of the local SMEs to follow.

There is no doubt that the Chinese economy is slowing and, with it, a marked escalation in their banks’ tapering and tightening of credit facilities to both local and international consumers. Allied with the fact that many international banks are becoming reluctant to lend money – and even closing clients’ accounts – this can only spell bad news for the global economy.

What is the world coming to when there is every possibility that the ECB may well cut central banks’ deposit rates to below the current zero level? This would mean that customers would have to pay banks for looking after their cash; if this were to happen, mattress sales would surely surge.

There is disturbing news from the Australian Bureau of Meteorology which has forecast that El Niño may start within the next three months. This weather pattern could have a disastrous effect on economies especially in those countries bordering the Pacific Ocean with a knock effect on trade and travel throughout the world.  As better financial news is beginning to filter through, this is not the best time for Fire and Rain.

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Livin’ On The Edge

Posted on April 27, 2014 by howesdubai

Palm-Jumeirah-BoardwalkNakheel has announced a tender for the design and construction of a 6 mt wide, 11 km long boardwalk on the outer side of the Palm Jumeirah crescent. It will also include two 100 mt long piers which will encompass dining and leisure facilities.

The developer has also appointed AE7 Associates to design and supervise the master planning of its 15.3 sq km development on Deira Island in a US$ 7.6 million contract. Like Palm Jumeirah, there will be a boardwalk included on the 4.5 million sq mt south island, as well as a shopping mall, ampitheatre and marina.

The Kuwaiti developer, Al Mazaya Holdings, is set to launch the second phase of its Q-Point residential development located in Dubailand. Q-1 is now almost 80% complete with hand-over slated within the next twelve months.

The Kuwait subsidiary of Dubai-based Drake & Scull has won two contracts totalling US$ 34.9 million for engineering work in that country.

Emaar Properties launched the latest phase of its Mir Oasis development in Arabian Ranches. Sales of the 480 townhouses will take place this Saturday at three locations – Dubai, Abu Dhabi and Karachi – and  strong investor demand is expected as Dubai’s property continues to boom.

At next week’s AGM, it is expected that Emaar will announce a cash dividend of US$ 0.041 per share together with a 10% bonus share issue. This follows a highly successful 2013 when the property developer announced profits of US$ 700 million on revenue of US$ 2.81 billion.

With the 80-day refurbishment of the runways at Dubai International due to start on 01 May, and the subsequent curtailing of some flights, Emirates has announced that it could lose up to US$ 272 million in revenue as it reduces flights to over forty destinations.

A useful indicator of the flourishing MICE sector is the increased activity recorded by Dubai World Trade Centre. In 2013, the number of both trade delegates – over 2.2 million – and the 373 exhibitions showed double digit growth. Nearly 900k of trade visitors came from overseas which has significantly helped growth in the hospitality sector.

April and May are expected to be bumper months for Dubai hotels. Still reeling from the influx of 19.5k Chinese visitors from one company Nu Skin, the industry is gearing up for Easter, the IPL and ATM – all expected to fill the current inventory of 85k rooms. It is estimated that both months will see over 1 million hotel visitors.

Inflation figures for both the UAE and Dubai continue to edge northwards which many expect to reach 3% by the end of the year, compared to 1.1% last year. Even then, the figures will be on the low side as home rents and education fees escalate at a much higher level.

Latest figures from Dubai Exports show that the fragrance, beauty and fashion-related industry is now worth in excess of US$ 56.1 billion – up over 8.0% on the year. By far the largest contributor was fashion which accounted for US$ 52.6 billion in 2013. Both the fragrance and cosmetics sectors showed double digit growth to US$ 1.50 billion and US$ 2.00 billion respectively. This week two new industry bodies – Fashion Group Arabia and Cosmetics Foundation Arabia – have been established.

The DFM had a relatively quiet week up only 0.04% from its Sunday opening of 4744 points to close on Thursday at 4762. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.79 and US$ 1.90 respectively. No wonder the market is currently the best performing bourse in the world already 41.31% up this year from its 01 January opening of 3370 points. More good news is imminent as the DFM is set to be reclassified to emerging market status in May which will result in extra liquidity entering the local market.

Certain European countries are facing difficulties in meeting their financial obligations. Portugal received a US$ 1.17 billion IMF / EU /ECB bailout payment this week which brings the total of the rescue package to US$ 25.7 billion over the past three years. The programme should have terminated in May but has been extended.

Meanwhile Italy has requested a further year to reach budget targets set as a condition for earlier funds. The country continues to struggle as its 2014 fiscal deficit is expected to reach 2.6% of GDP and its public debt is a massive US$ 2.9 trillion or the equivalent of 134.9% of GDP. The past three prime ministers, Berlusconi, Monti and Renzi promised balanced budgets by 2013, 2015 and 2016 respectively; 2020 is a more realistic assumption.

Greece’s unemployment rate continues at around the 28% level whilst its debt stands at 175% of GDP. There cannot be any sort of recovery there until steady economic growth returns to the country.

There is no doubt that things will have to get better not only for these three countries but most others in the eurozone. For too long now, they have been Livin’ On The Edge.

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On The Road Again

Posted on April 20, 2014 by howesdubai

willienelson2The importance of the gold trade to the local economy was reinforced with news that almost 40% of the global market in the precious metal was carried out in Dubai. It is amazing to consider that only ten years ago, the local trade accounted for about US$ 6 billion – latest figures indicate that it is now worth US$ 75 billion! To ensure that the highest standards are applicable, the Dubai Multi Commodities Centre is planning to tighten policies and procedures to ensure that they are in line with international best practice.

Equally impressive is the growth in the local diamond market with business growing from an almost zero base at the beginning of the millennium to over US$ 40 billion. Dubai is now considered one of the global leaders in both the gold and diamond trade; with first class infrastructure and its unique location, things can only get better.

There was confirmation from Shaikh Holdings that it would be handing over 97 villas in its Sanctuary Falls development in the Jumeirah Golf Estates by the end of the year. It is reported that Bollywood celebrities and other high profile individuals have bought villas.

Majid Al Futtaim and Starwood Hotels & Resorts Worldwide have signed an agreement to launch two new hotels in Bahrain – the Westin and Le Méridien. The Dubai-based conglomerate currently has 11 regional hotels in its portfolio.

Ducab, jointly owned by the Investment Corporation of Dubai and Senaat from Abu Dhabi, recorded a 22% jump in 2013 revenue to US$ 1.36 billion. Cable sales accounted for 58% of the business with rods and wires making up the balance.

Q1 Nakheel profits showed an impressive 28.1% hike to US$ 171.4 million on revenue of US$ 373 million – a reflection of the buoyancy in the economy. Despite increased profits, and that it expects to hand over 1,200 residential units this year, the developer still has very high borrowings that will have to be eventually paid off.

Now managed by Nakheel, the troubled developer, Limitless has apparently requested a moratorium on the first instalment of a US$ 1.2 billion debt. Due for repayment this December, the developer has requested a further one year’s grace but has offered a payment of US$ 55 million towards the US$ 400 million due. The company currently has developments in Jebel Ali, Russia, Saudi Arabia and Vietnam.

With business confidence in the local market growing by the day, Emirates NBD is planning to reverse a US$ 123 million non-performing loan provision. This relates to a 5% charge made on a US$ 2.45 billion loan made to Dubai World and, if carried out, would probably add 50% to the bank’s quarterly bottom line.

While no figures have been revealed, Dnata, which did own 100% of Mercator, has divested some of its shares to make Warburg Pincus a majority shareholder. The New York private investment company has a current portfolio of around 130 companies managing more than US$ 37 billion in assets.

Already managing US$ 650 million in assets, Dubai-based Al Masah Capital expects a further 33% expansion in 2014. Its investments include 19 educational facilities, 18 healthcare studios and 9 food outlets.

Although still subject to Central Bank approval, it seems that Barclays has sold its retail banking division, with a 110k client base, to Abu Dhabi Islamic Bank for a reported US$ 177 million.

The banking authority has also introduced the Interim Marginal Lending Facility as from next week. This will allow financial institutions to engage in overnight borrowing and will be a boost to banks managing their liquidity.

Despite reports to the contrary, the DFM continues to deny that it is not in merger discussions with the Abu Dhabi Stock Exchange.

The DFM had another great week jumping 4.7% from its Sunday opening of 4618 points to close on Thursday at 4839. Bellwether stockThe market is already 55% up this year and 10% up in the first ten days of April and earlier had a Q1 gain of 32.08% from its 01 January opening of 3370 points to 4451.

Another indicator on the slowdown in the Chinese economy came with the release of March trade figures indicating year on year falls of 6.6% in exports (after a 11.3%) drop in February) and 11.3% in imports. Latest forecasts from the World Bank have seen a reduction in 2014 growth to 7.5% – slightly down on last year. There is no doubt that the weakening Chinese economy, together with the on-going crisis in the Ukraine and the possibility of eurozone deflation, are three major flashpoints that could derail future global growth.

According to the latest IMF forecast, Dubai’s 2014  growth is expected to be 4.4%, noting that the rapid expansion in the realty sector and the knock-on effect of Expo 2020 have boosted the local economy. More worrying is the predicted rise in inflation from 1.1% to 2.2% which, even at that figure, looks very much on the low side.

The CEO of Dubai Trade, Mahmoud Al Bastaki, has predicted that Dubai’s foreign trade, currently standing at US$ 379 billion, could reach the US$ 1.09 trillion mark by 2020. Already contributing almost 30% to the local economy, this will grow to nearer 35% over the next six years.

A Dubai delegation, led by the chief executive of Investment Corporation of Dubai, Mohammed Al Shaibani, is currently on a road show in London to drum up business and is impressing international financiers with what is on offer. Despite having a medium term debt overhang of some US$ 78 billion, the emirate is expanding with a GDP currently at US$ 97 billion, set to grow by 11.3% within the next two years to US$ 108 billion – almost three times the figure it was in 2005. There is no doubt that the emirate is a success story and it is edifying to see that Dubai Is On The Road Again!

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Catch Us If You Can

Posted on April 7, 2014 by howesdubai

dubai-terminal3Following its September 2013 off plan sale, when 262 townhouses were sold in a day, Nakheel has finally awarded Ginco General Contracting a US$ 191 million contract for the construction of 936 units in its Warsan Village development. The project will also include a shopping centre with over 350 outlets.

Select Group has given details of its planned US$ 817 million, three- tower development in Dubai Marina, with sales slated to start later this month. The developer already has two other projects on the go in this location – West Avenue due for completion this quarter and a 320-room Intercontinental Hotel expected to open early next year.

A JV between Parsons and Halcrow has been appointed by the RTA to manage the US$ 545 million Dubai Water Canal development. This infrastructure includes the creation of a 2.8 km canal, a 1 km bridge on SZR and raising the 3 main affected roads – SZR, Al Wasl and Jumeirah Beach. This is a huge project when one considers that the SZR will have to be elevated by up to 8.5 mtr to allow marine traffic to pass through.

Damac was heavily oversubscribed as it went to the London market with a US$ 650 million sukuk sale to finance their growing order book, at a price of midswaps plus 310 points. Although this was the company’s first foray into Islamic finance, late last year it raised US$ 350 million in an IPO.

Meanwhile Emirates Reit’s IPO was heavily oversubscribed as 128.67 million shares were snapped up at a unit price of US$ 1.36. This offering brought in US$ 175 million in new funds which will be used to capitalise further on the fast growing real estate market in the emirate.

Two conglomerates reported their 2013 results. The government-owned Dubai Holdings Commercial Operations Group, which includes Jumeirah, Tecom and miscellaneous property in their portfolio, saw a threefold jump in net profits to US$ 900 million, on a 27% revenue rise of US$ 3.19 billion.

With growth of 14% in its properties division, allied with retail growing 6%, Majid Al Futtaim released 2013 results showing an 11% hike in profits to US$ 900 million. Its assets, including 56 Carrefour hypermarkets, 53 supermarkets, 16 Magic Planets and 92 VOX cinema screens, are valued at US$ 10.6 billion.

Dubai’s 4 and 5 star hotels continue their upward trend with February figures showing occupancy rates at 87.6% along with rises in all other key indicators – average room rates up 8.7% to US$ 367, revenue per available room 7.3% to US$ 322, total revenue per available room 5.8% to US$ 555 and gross operating profit per available room 8.6% to US$ 282.

The industry will receive a boost next week when the Chinese company, Nu Skin China, treats 19,500 staff to a 10-day holiday in the emirate. It is reported that it will take 77 flights to bring them here where they will stay in one of 39 nominated hotels.

Meanwhile about 100 equine personnel have left here for Chengdu to manage the first official racehorse meeting there at the new Meydan track. This is the first step to try and promote horse racing in China, along with other facets of the equine industry.

HH Sheikh Hamdan bin Rashid Al Maktoum announced the launch of a US$ 7.9 million Hatta Heritage Inn and Market project, to be completed within a year. Located on the Hatta / Oman highway, it will comprise 34 hotel rooms, along with 46 retails units and three restaurants.

With previous reports predicting up to 40% increases in Dubai property prices, the latest one from HSBC errs on the side of caution with a 10% – 15% guesstimate. Even as we enter Q2, the reality is that nobody really knows what is exactly going. It does seem that the ones with an interest in the market, including estate agents and financial institutions, are those who are talking up the market.  However, some sectors have seen little or no rises over the past six months which may indicate that prices have flattened.

The local financial institution, AE Exchange, estimates that in excess of US$ 14 billion is remitted annually from the UAE, with the four leading beneficiary countries being India, Bangladesh, Pakistan and Philippines. On a global scale, it is estimated by the World Bank that total remittances are over US$ 550 billion, of which 75% is bound for the developing world countries.

Having reported 2013 turnover of US$ 1.1 billion, Dubai Duty Free looks certain to reach new heights this year as its Q1 revenue increased 10% to US$ 477 million. Sales at Terminal 3, which accounts for 62% of all sales, rose by 11%.

Dubai is regarded as a global hub for many types of economic activity and now they can add tea to that ever growing list. Last year, trade in this beverage surged over 34% to US$ 463 million, with the Dubai Multi Commodities Centre reporting a doubling in volumes.

Since its 2010 US$ 25 billion debt restructuring programme, Dubai World has begun settling part of the debt and indeed has paid back US$ 285 million, ahead of schedule. However, with massive repayments of US$ 4.4 billion, due next year, and a further US$ 10 billion three years later, the company has sought advice from the US investment bank, Blackstone.

Investment Corporation of Dubai expanded their interest in Kerzner International Holdings this week by purchasing a reported 46% of the hotel management company’s shares from the founder, Sol Kerzner. Dubai’s sovereign wealth fund now owns 71% of KIHL.

The DFM had another great week jumping 5.41% from its Sunday opening of 4381 points to close on Thursday at 4618. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.75 and US$ 1.68 respectively. The market is already 39.25% up this year and earlier had a Q1 gain of 32.08% from its 01 January opening of 3370 points to 4451.

Christine Lagarde, head of the IMF, has painted a bleak picture of the global economy. Three of the critical factors that she has highlighted are the worrying low inflation in the eurozone (currently at 0.5%), the continuing market volatility and the on-going crisis in the Ukraine. She is also rightly concerned about the negative impact of the Fed’s tapering of its monthly monetary stimulus, which has been cut by US$ 30 billion to US$ 55 billion from the beginning of the year. This has resulted in massive amounts of monies being withdrawn from emerging markets back to the US.

Another potential fraud is being investigated by the FBI, involving what is known as high frequency trading. Although not unlawful, and is used in about half of all business on New York exchanges, the practice involves super-fast computer systems carrying out trades in fractions of a second. The worry is that they are being exploited, in an illegal manner, to manipulate the market including what is known as spoofing the market, phantom trading and insider trading.

February finally saw Heathrow losing its crown as the world’s busiest international airport, being superseded by Dubai.  This is a reflection of the local economy which is brimming with consumer confidence and growing at double the rate of most other countries. On behalf of the emirate, the message from Dubai International Airport to the rest of the world is Catch Us If You Can!

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On Top Of The World

Posted on March 29, 2014 by howesdubai

meydanFebruary proved another lucrative month for Dubai’s hospitality sector with impressive rises in occupancy, 0.7% to 88.6%, ADR (average daily rate), 10.7% to US$ 300, and RevPAR (revenue per available room), 11.5% to US$ 266. Increases in demand at 7.1% continue to outstrip the 6.3% rise in supply of units but is fast approaching equilibrium.

Currently building two shopping malls on Palm Jumeirah and Deira Islands, Nakheel is planning two more. The one at Jumeirah Village Triangle, at 1 million sq ft, will be twice the size of the other at Jumeirah Village Circle.

At long last, there seems to be some action from Nakheel’s Deira Islands with 94 of 500 plots, ranging from 50k sq ft to 670k sq ft, being released in phase 1. To be located on two of the four main islands, it will be mainly for hotel and resort projects. When completed, this development will have 23k hotel rooms and 31k apartments.

Dubai-based Habtoor Leighton Group, in a JV with Al Jaber Engineering, secured a major US$ 1.7 billion contract in Qatar. The project covers the design and construction of 56 km of the country’s New Orbital Highway and Truck Route, including five main interchanges.

Dubai’s Wasl Properties have completed a three-tower development in Deira, two of which house 217 apartments and the third being a 210-room 4 star hotel.

February was another bumper month for Dubai International with impressive growth in both passenger traffic and cargo. Compared to the same month in 2013, numbers were up 11.7% to almost 5.7 million and freight by 3.4% to 188.7k tonnes.

The troubled Gulf Navigation suffered another blow when it was forced to restate its 2013 results, after it had lost an arbitration case. Having already announced a US$ 190 million loss, it had to add a further US$ 62 million to its bottom line to report a loss of US$ 252 million.

Bahraini asset leasing company, Hanco, has paid US$ 164 million to buy Byrne Investments Limited, including Byrne Equipment Rental and Spacemaker. The long-established Dubai company, formed by Seamus Byrne, is the region’s largest rental company, employing 450 staff.

As part of its cash flow strategy, Dubai International Capital, part of Dubai Holding, is reportedly divesting itself of one of its major assets to raise funds to help with its debt repayment programme. It seems that of the four potential suitors, Clayton, Dubilier & Rice, a private equity firm, is favoured to purchase German-based packaging group Mauser for around US$ 1.5 billion.

Meanwhile, another arm of Dubai Holding, Tecom added another 233 companies in 2013 to bring the total number to over 2,000. It is estimated that an additional 622k sq ft of space was brought on line in Dubai Media City, Studio City and International Media Production Zone, to cope with this expansion.

Ithmar Capital, founded in 2005, expects to expand its portfolio by up to 33% this year. Currently, the Dubai-based private equity firm manages investments of around US$ 800 million and expects new deals to originate mainly from the education and health-care sectors.

One sector of the Dubai travel industry, that is set to expand over the next three years, is medical tourism. Health bosses estimate that revenue generated from this segment could grow from US$ 178 million to US$ 300 million, as numbers increase from today’s 107k to 170k.

A recent study by MasterCard seems to indicate that the UAE has the largest percentage of online shoppers in the region. Some estimate that within five years this sector will generate more than US$ 10 billion with the likes of souq.com and Cobone leading the way. PayPal estimate GCC on-line sales to top US$ 15 billion in 2015 – a 66.7% surge from 2012’s US$ 9 billion.

Apparently with little else to do, the IMF has again flagged the region as prone to a boom / bust cycle. Reiterating its October 2013 report, it considers that the realty sector could become a bubble, if not managed properly, and suggested that regulators, including the Central Bank, take further steps to ameliorate any future problems.

In May, the UAE bourses will be upgraded by MSCI Inc, a US-based provider of equity, fixed income and hedge fund indices. This important reclassification sees the country being moved from Frontier Markets status to Emerging Markets and could result in more than US$ 1 billion being invested locally. The significance of this upgrade is that international investors will be able to trade directly in the local markets.

Next month, Emirates Reit is going public on Nasdaq Dubai with an issue price of between US$ 1.36 and US$ 1.56, valuing the company at between US$ 356 million and US$ 408 million. The Dubai-based real estate investment trust is partly owned by Dubai Islamic Bank (30.9%) and Dubai Holding (27.1%).

Nearly six years after having its shares suspended on the DFM, Amlak is hoping to start trading again later in the year. The outlook for Dubai’s real estate sector is a lot rosier now than it was in November 2008 when villa prices tanked, by as much as 60%, whilst available credit was just an illusion

After a massive 8.2% surge last week, the bourse rose by 1.7% from its Sunday opening of 4306 points to close on Thursday at 4381. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.68 and US$ 1.62 respectively. The market is already 31.87% up this year.

China’s shadow banking segment is still a major problem for the economy as it continues to expand because of the tight regulations, high interest rates and lending restrictions in the official banking sector. In January, a wealth management fund nearly defaulted which did little to foster consumer confidence. A banking crisis is imminent and collateral damage across the globe is inevitable.

The Crimean squabble between Russia and the West will have a negative effect especially on the European economies. As the political stalemate continues, both sides have upped the rhetoric and imposed sanctions with no apparent appeasement on the agenda. Furthermore the UN Security Council has little or no influence since Russia has the right of veto. The World Bank has estimated that the Russian economy could shrink by 1.8% this year if there is the impasse continues. The cost to the eurozone could be infinitely higher.

With World Earth Day occurring this Saturday, Dubai is using an increasing amount of both electricity and water. The former used saw a 3.3% annual increase to 6,857 MW whilst there was a 3.85% jump in average daily water usage to 296 million gallons. DEWA announced that it will spend US$ 5.45 billion over the next six years on three major projects to ensure that future demand will be met. One of these will be a clean coal plant, costing US$ 3.54 billion with a 1,200 MW capacity.

Coinciding with World Earth Day is the Dubai World Cup, the world’s richest horse race. With 70k spectators filling Meydan to the rafters, and millions watching on global TV, this event adds millions of dollars to the local economy as well as prize pool on the night of US$ 30 million to the winning connections. Watch out for a Dubai winner, either African Story or Mukhadram, or the Irish interloper, Ruler of the World. Whoever wins will be On Top Of The World!

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Won’t Get Fooled Again

Posted on March 26, 2014 by howesdubai

Mike_AshleyThis week, HH Sheikh Mohammed bin Rashid al Maktoum approved a US$ 136 million plan to build a 1.4 km bridge from JBR to the upcoming Bluewaters Island, with further access by footbridge and monorail.  The US$ 1.6 billion project, encompassing a five star hotel, residential units and retail and dining outlets, is to have the world’s largest Ferris wheel, surpassing that of Singapore’s 165 metres.

In yet another survey, this time by Knight Frank, Dubai is rated as having the best performing real estate in the world. Overall, 2013 prices were up 34.8%, compared to the global average of 8.4%. Their report also figures that prices are still 25% below the 2008 zenith but this has to be considered a little on the high side.

Good news for Emaar shareholders came with its Board proposing a 15% dividend as well as a 10% bonus share issue, to be discussed at April’s AGM. The company is also considering a dual listing of 25% of its retail division on Nasdaq Dubai and in London, at a price in the region of US$ 2.3 billion. It is also expected to carry out a similar exercise for its Egyptian operation. The market reacted favourably on Sunday with its shares on the DFM up 5.1% to US$ 2.48 on the day.The developer also launched the sale of its recently announced BLVD Crescent, including two towers – one 39 floors and the other 21 levels. It also awarded a US$ 354 million contract to Dutco Balfour Beatty to build the new Fashion Avenue extension in Dubai Mall.

There was plenty of other activity on the construction front. Nakheel awarded two contracts, totalling US$ 143.3 million, for construction of 401 residential units in its Al Furjan community, to be completed by the end of 2015. Deyaar managed to sell all 219 residential units in its 30-floor Atria project in one day, raising over US$ 136 million in receipts on its Business Bay development, to be completed by 2017.  A week after winning a US$ 208 million contract from Meraas for The Avenue Phase 2 City Walk, Al Futtaim Carillion has another order, for US$ 102 million from the Dubai World Trade Centre, for a 588-room hotel along with an eight-storey office building, slated for completion by mid-2015. Green Valley International Real Estate is planning to invest US$ 409 million in the country including an apartment building in Dubai Sports City. DIFC is set to launch a 128-room boutique hotel, costing US$ 68 million, near its Gate Village.

Arabtec’s Q4 profits rose a staggering 381% to US$ 33 million on revenue of US$ 627 million. So far this year, the company has increased its order book by US$ 49.0 billion! Based on a 2013 profit of US$ 103 million, the developer is expected to declare a dividend of US$ 0.002 per share plus bonus shares equivalent to 30% of its capital.

Dubai Industrial City announced a 67.1% jump in 2013 profits to US$ 56 million on a 33% hike in revenue. A further 158 new companies opened during the year – a sure sign that the industrial sector is becoming an increasingly important driver for Dubai’s burgeoning economy.

Dubai Silicon Oasis Authority increased 2013 profits by 23.5% to US$ 55.7 million. To help with making the DSO a truly global smart city, the government has earmarked US$ 654 million for further investment over the next three years.

Majid Al Futtaim will be spending US$ 204 million on its VOX Cinemas, including four new international locations – Bahrain, Egypt, Oman and Qatar. In Dubai, Shindagha and Burjuman will be new locations and there is to be a new 24-screen facility in MoE.

It appears that Thuraya Telecommunications wants to expand its operations into the US so as to increase its revenue stream. Last year, the Dubai-based company posted sales of US$ 122 million and is looking at double-digit growth over the next five years.

DP World recorded disappointing 2013 results even though there was a 10.8% rise in profits to US$ 604 million which included a US$ 158 million profit on sale of assets. But overall their profit, after including separately disclosed items, actually fell 13.3% to US$ 640 million on revenue of US$ 3.07 billion.

After two weeks of losses, the bourse returned to some sort of Dubai normality by jumping 8.2% from its Sunday opening of 3981 points to close on Thursday at 4306. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.36 and US$ 1.31 respectively – 17% and 12% up on the week.

Another new local listing this week on Nasdaq Dubai; the US$ 300 million Dubai Investments Park’s sukuk brought the number of new listings to the bourse to US$ 12.5 billion over the past fifteen months.

The Department of Economic Development is seriously looking at setting up an Islamic export/import bank to boost foreign investment and trade. The proposed financial institution would be the world’s first Shariah-compliant Exim bank.

As widely expected, the Central Bank has agreed to refinance Dubai’s US$ 20 billion debt facility for a further five years at 1% over EIBOR. Half of the debt was maturing this month with the balance due for repayment in November.

Official figures indicate that in February, Dubai inflation, at 2.6%, was at its highest level in over four years. With housing and utility costs accounting for 44% of expenses, many would have thought that this figure would be higher than the 4.5% recorded.

Property prices are also shooting up in Australia which has some of most expensive realty in the world. With it being estimated that the Chinese are pouring in US$ 4.5 billion every year, the Abbott government is considering ways to curtail overseas purchasers pushing up prices even further. Is there any chance of Dubai doing likewise?

It is no surprise that the Federal Reserve saw its 2013 net assets jump by  US$ 1.1 trillion, inflating its total assets to over US$ 4 trillion. Courtesy of QE, every month last year, the US government made asset purchases of US$ 85 billion. Consequently, the US Treasury’s coffers increased by US$ 79.6 billion – the Fed’s net profit for the year. On Wednesday, the QE program was further tapered by a further US$ 10 billion to US$ 55 billion.

This phasing out of quantitative easing is having a negative impact on emerging markets, including the “fragile five” – Brazil, India, Indonesia, South Africa and Turkey. The turning off of the tap of easy money will expose such economies to capital outflows and will add to their already inflated current accounts and external debt. As currencies weaken, servicing debts, in say dollars or euros, becomes more expensive and local interest rates move higher to attract investment. The problem is further exacerbated every time the Fed decides to reduce QE and when confidence goes, a liquidity crisis will be unfortunately followed by a fully blown financial crisis.

Is there any doubt that the rich are getting richer with the gap between rich and poor becoming larger by the year? It is inequitable to see that, in the UK, the five richest families – Grosvenors (US$ 13.1 billion), the Reuben brothers (US$ 11.5 billion), the Hinduja brothers (US$ 10.0 billion), the Cadogan family (US$ 6.6 billion) and Mike Ashley (US$ 5.5 billion) have more money than 12.6 million – or about 20% – of the country’s population.

Ominous signs are looming for the eurozone as it heads towards deflation with February inflation figures of 0.7% – well down on the ECB’s 2.0% target and its December 2011 return of over 3.0%. Despite the bank’s president, Mario Draghi, insisting otherwise, this is a problem that will not go away and will inevitably cause economic problems for the 18-nation bloc. Surely he Won’t Get Fooled Again!

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How Bizarre

Posted on March 15, 2014 by howesdubai

malaysia-airlinesBoeing seem to be having continuous problems with its new 787 Dreamliner – the latest being hairline cracks in the wings, manufactured by Mitsubishi. Another minor problem is that Emirates apparently have yet to sign off on their US$ 76 billion order for 150 777X aircraft. It seems that further negotiations have to take place, on items such as technical support, performance guarantees and warranties, before the final contract is signed.

Although better known for its electronics retail operations, Jumbo Group has ambitious plans for both its engineering and B2B divisions which they expect to become increasingly important parts of their future strategy. Not forgetting their core business, they are also looking at expanding in markets such as India, Iran and the GCC.

Staggering news from Arabtec was the awarding of a US$ 40.23 billion contract to build one million houses for the Egyptian army! Expected to be completed within six years, the development will spread across thirteen sites and cover an area of 160 million sq mt.

Damac Properties have been quick off the block announcing the launch of Celestia, which will be located at the EXPO 2020 site. The development will comprise eight floors of luxury serviced hotel apartments with the usual amenities such as restaurants, retail outlets and a health club.

Dubai Silicon Oasis announced a US$ 300 million smart city project, comprising 100k sq mt, which will have areas for commercial, residential, a 115-room business hotel, retail and restaurants. The unique feature of this development is that it will be only serviced by electric cars.

Following a favourable response to its first sale of units in Mulberry at Park Heights, Emaar is going ahead with a further one for 330 apartments in its Dubai Hills Estate. Located in the new Mohammed bin Rashid City, this huge development is a JV with Meraas Holding. The sale will take place this week on-line and in various locations – Dubai, Abu Dhabi, Baku and Hong Kong.

Al Futtaim Carillion is set to build The Avenue Phase 2 City Walk, having been awarded the US$ 208 million contract by Meraas. Phase 1 was finished last year whilst this stage – including entertainment and retail – is set to complete by mid-2015.

Since the June 2013 launch of its Dubai Design District, TECOM has received more than 500 enquiries from entities wanting a presence in this new area. Some licence applications are well under way despite the first phase, of what is known as d3, not being ready for another year. Located adjacent to Dubai Mall, the total project cost is estimated at US$ 1 billion.

Two GCC companies are planning to invest in Dubai. This week, Saudi’s Al Hokair Group opened its eighth Sparky’s leisure centre, at a cost of US$ 8.2 million, and will invest a further US$ 41 million in the country over the next two years. Kuwait’s IFA Hotels and Resorts is going to build an eight-storey mixed use development, including 300 units. The project, known as The 8, is estimated to cost US$ 272 million and will be located on Palm Jumeirah and should be finished by 2016.

The RTA is going ahead with enhancing the road infrastructure in Barsha. The US$ 27.2 million contract is part of the US$ 272 million Phase II of the 2012-2016 road network plans. It is estimated that the RTA has been responsible for the construction of over 500 km of roads since 2011.

Further to the issue last May of a US$ 500 million bond, Commercial Bank of Dubai has obtained shareholders’ approval for a US$ 2 billion bond. Last year, the funds raised were used for general corporate purposes but there is no information on CBD’s latest foray into the bond market.

Turnover has almost halved on some days to around US$ 170 million as investors turn their back on the DFM. After sixteen weeks of continuous growth, the bourse disappointed for a second straight week falling 4.2% from its Sunday opening of 4154 points to close on Thursday at 3981. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.36 and US$ 1.31 respectively.

The emirate’s 2013 non-oil trade witnessed a 7.1% rise to US$ 359.7 billion, reflecting the current boom in Dubai’s economy. India, China and US were the top three in total trade at US$ 37.3 billion, 36.8 billion and 23.4 billion respectively. Imports were up 10.0% to US$ 221 billion whilst exports and reexports rose by 4.0% to US$ 14.1 billion.

Acting on behalf of 38 failed banks, , the US Federal Deposit Insurance Corporation is suing sixteen major financial institutions, including Bank of America, JP Morgan Chase, HSBC and Barclays,  for allegedly manipulating Libor. The sums involved are massive and estimated to be above US$ 300 trillion with the banks facing possible penalties of up to US$ 40 billion.

A further Chinese slowdown is almost inevitable following the February trade figures as exports dropped 18.1% year on year, imports rose 10.1% and the trade balance fell into negative territory, from a January surplus of US$ 32.0 billion to a deficit of US$ 23.0 billion. One slither of good news was the fact that China has overtaken the US as the in relation to the trading of physical goods which totalled US$ 4.16 trillion last year.

Japanese economic data is more than disappointing as weak numbers continue such as a marginal Q4 growth of 0.2% and a huge 30.3% annual surge in imports. This may be a good indicator that Abenomics is not working for the world’s third biggest economy. However, with a sales tax increase from 5% to 8% due in April, consumer spending has rocketed.

The ‘Is’ have it! A quick look at four countries – Ireland, Italy, India and Indonesia – will demonstrate how precarious is the state of the global economy.

With several pharmaceutical patents expiring last year, there was a knock on effect on Ireland’s net exports, which fell 10.9%. The Gaelic economy sank 2.3% from Q3 to Q4, with the problem being further exacerbated by a 5.8% increase in imports  a brain drain of its young talent and a slight 1.1% fall in personal consumption. A 0.3% contraction in 2013 GDP shows that the country is still technically in recession.

The fact that the Italian economy in 2013 is smaller than it was in 2000 is an indicator on the massive challenges facing the new prime minister, Matteo Renzi. A few of the problems facing Europe’s third biggest economy include a government debt equivalent to 130% of GDP, unemployment at 12.7%, youth unemployment at 56%, a 2013 contraction of 1.3% and a record number of businesses going bankrupt or closing. No wonder even the EU has downgraded its outlook for the economy. Just to add to Italian woes, UniCredit, the country’s biggest bank, has just announced a record 2013 loss of over US$ 19 billion, most of which is attributable to the write off of bad loans.

Indian growth forecast has been further reduced to 4.5% this year – down from the government’s estimate of 4.9%. As the RBI is keen to maintain rates high for the immediate future – with the aim of keeping a lid on inflation – some sectors, such as manufacturing and agriculture, will continue posting disappointing returns.

Latest data from Indonesia show a January trade balance deficit of US$ 430 million. An appreciating rupiah, up over 7% this year, and inflation at 7.75%, do little to help the country’s competitiveness. Furthermore global uncertainty may result in capital outflows from Jakarta which will have a further damaging impact.

Whilst on the letter ‘I’, it is inevitable that interest rates will start rising earlier than many expect. That being the case, those who have overextended and taken on too much debt could find themselves in financial trouble. This applies to governments, companies and individuals.

A week after its disappearance from the skies, the whereabouts of the Boeing 777 of Malaysian Airlines is still unknown. It does seem strange that, in this day and age, such a big aircraft can disappear from sight without anyone knowing what has happened. Just like American Airlines flight 77, a Boeing 757, which crashed into the Pentagon, the aircraft manufacturer is involved in another mystery. How Bizarre!

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Back In The USSR

Posted on March 9, 2014 by howesdubai

putinKnight Frank’s 2014 Wealth Report shows that Dubai had the seventh biggest annual increase in the global prime luxury market. At 17.0%, it was a lot lower than the likes of the top three – Jakarta, Auckland and Bali at 37.7%, 28.8% and 22.0%. It was also classified as the 19th most expensive city for such property. Surprisingly, the report showed that a US$ 1 million outlay would purchase 146 sq mt in Dubai compared to 15 sq mt in Monaco, 20.6 sq mt in Hong Kong and 25.2 sq mt in London.

Yet another survey points to the fact that all is well on the realty front and that a bubble is unlikely. This time, Citigroup indicated that Dubai can absorb the extra annual supply of 25k properties coming  to the market although other reports have concluded that the number of new builds will be greater.

Dubai developer Damac saw its 2013 profits more than triple to US$ 642 million as revenue rose 77% to US$ 1.2 billion. With booked sales having almost quadrupled, from US$ 661 million to US$ 2.5 billion, no wonder the shareholders, who bought at the developer’s LSE December IPO, are smiling. It is expected that the company will deliver more than 5,000 units to the Dubai market in 2014.

Diamond Developers announced that the first phase – being 100 town houses – of Dubai Sustainable City will be completed by the end of this year. The US$ 300 million development, which will include 500 units, a school, community centre and a country club, will be finished by 2015. Located in Dubailand, it will also have 20k trees, a canal and a 600k sq ft solar park.

Emaar have awarded a US$ 283 million contract to Arabtec for the construction of 1,500 townhouses. The project is due for completion by Q1 2016.

Following the February Sharjah launch of the first My Community Centre, retail conglomerate, Majid Al Futtaim, has announced a similar project in the International Media Production Zone. The initial phase of the proposed 1 million sq ft shopping mall will be completed by the end of 2015. This could be the first of up to 20 such malls, to be opened by the company in Dubai over the coming years.

Last year, hotel guests in Dubai rose 10.6% to 11.0 million – a sure indicator that the emirate’s tourism sector is in rude health. The impact of the Emirates / Qantas tie up can be seen from the number of Australian guests rising 39.4% to 269k. Almost I in 8 of visitors emanated from Saudi Arabia which had a 19.9% increase to 1.35 million. Total hotel revenue was up 16.1% to US$ 5.95 billion whilst total guest nights increased from 37.5 million to 41.6 million over the year. The number of available rooms increased by 5.1% to 84.5k whilst establishments rose  2.0% to 611. Over the next three years, a further 141 hotels / hotel apartments, with 29.5k rooms, will come on stream.

With the opening of its second tower this week, the world tallest hotel, JW Marriott Marquis Hotel expanded its inventory from 804 to 1,098 rooms. By September, this will increase by a further 510.

A new entrant is expected to move into the burgeoning hospitality sector. Deyaar Developments is planning several hotel and serviced apartment projects and have reportedly allocated 1 million sq ft in Business Bay and around the 2020 Expo site for construction. The Dubai-based company currently has a portfolio of 20,400 units which generates rental earnings of US$ 177 million.

Already owning four properties in Dubai, including Carlton Tower Hotel and Four Points Sheraton, First Investor is looking at bringing in a new budget brand to the Dubai market, as well as building a new hotel on SZR.

In the wake of the success of its first auction, Nakheel will shortly hold another one for residential plots from the same locale – Jumeirah Park. It raised US$ 9.3 million last month on eight plots.

The RTA is to spend US$ 27 million on the 14km Jumeirah Corniche project which will comprise a five meter walking path, a four metre wide jogging track and rest areas. The development will spread over six beach communities.

Following acceptance, by 91% of shareholders, of a US$ 88 million offer by the Al Futtaim Group, it seems that a Kenyan car retailer will soon be a Dubai-based company. CMC Holdings is that country’s distributor for Ford, Volkswagen and Suzuki.

With 2013 revenue topping US$ 1 billion for the first time in its short 4-year history, flydubai recorded another stellar year reporting a 47% leap in profit to US$ 60.7 million. Passenger traffic surged 38% to 6.8 million, helped by the arrival of seven new aircraft, seventeen new routes and the introduction of a business class cabin during the year. At last November’s Dubai air show, the carrier ordered 75 Boeing 737 MAX 8s and 11 737-800s to add to its existing fleet of 43 aircraft.

Last month, the new Dubai Tram project started pre operation trials. Phase 1, which has cost US$ 1.09 billion and covers 10.6 km, will be finished by November whilst the tenders for phase 2 will not take place until late 2015. Covering a further 5 km, it will extend the track to the Burj Al Arab and MoE. The third phase will see the tramway reach all the way down to the end of Jumeirah Beach Road.

EFG Hermes have sold their 19% stake in Damas to Qatar’s Mannai Group which now owns 85% of the Dubai-based jeweller.

So as to refinance existing loans on more favourable terms, as well as for capex requirements, du has borrowed US$ 1.17 billion in three separate deals for US$ 720 million, US$ 300 million and US$ 150 million respectively. All three loans to the telecom provider are set at 140 basis points over the Libor rate.

The other provider, Etisalat disappointed the market even though Q4 were up 70% to US$ 395 million and this after taking provisions of US$ 278 million for losses in their operations in Indonesia and Nigeria.

As reported earlier, the Dubai Islamic Bank saw a 42.1% increase in 2013 profits to US$ 469 million. At this week’s AGM, it was decided to declare a 25% cash dividend.

In February, Nakheel paid US$ 640 million which represented more than a third of a loan that was not due for repayment until September 2015. This week, it is reported that Dubai World has made outstanding payments to creditors, totalling US$ 285 million, as part of the requirements of its US$ 25 billion debt restructuring plan.

Having so far invested in excess of US$ 1 billion in India, DP World has just started work on its US$ 200 million Mumbai cargo terminal. The Dubai government-owned already operates  five container ports in the country.

Drake & Scull’s German subsidiary, Passavant-Roediger GmBH has expanded its Indian footprint – this time for two contracts relating to water and wastewater treatment, valued at US$ 13.6 million.

Coincidentally, Drake & Scull was the last company to join the Dubai Financial Market. Five years on, it seems that Marka is set to become the latest member, as well as UAE’s first listed retailer, with a US$ 136 million IPO. The company’s founders would buy 45% of the shares whilst the balance – 275 million shares – would be offered to the public at US$ 0.27 per share.

The Dubai General Market Index opened on Sunday at 4220 points and by Thursday close had fallen back 1.2% to 4154 – but still up 23.3% on its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.47 and US$ 1.29 respectively.

It can only happen in Dubai – a smart city, powered by solar power, is being planned for Emirati residents. Due for completion by 2020, the city will be home to 160k and cover an area of 14k acres. It will be fully sustainable and will be self-sufficient in all its resource requirements, including energy and transport.

Last week, Qantas came in with a US$ 211 million H1 loss and announced plans to slash staff numbers by 5k, as part of a US$ 1.8 billion cost cutting exercise. This week, the airline was hit by further bad news when the Australian government rejected its request for a US$ 2.7 billion loan facility. However, it did agree to lift the airline’s foreign ownership restrictions which will  open the gate for foreign investment.

Now the Bank of England has been dragged into the currency rigging row – along with at least ten banks. There is little doubt that this fraudulent manipulation could become a major problem and prove bigger than the Libor scandal which cost banks, including Barclays and RBS, more than US$ 6 billion in fines.

Shanghai Chaori  has reportedly defaulted on a US$ 15 million interest payment relating to a US$ 1 billion loan The solar panel maker becomes the first Chinese entity to renege on an onshore bond – and this could be a precursor of more of the same. Traditionally, the Chinese government has always manged to “save” defaulting companies but now with such bonds totalling an estimated US$ 1.5 trillion, the Chinese government has indicted that some firms will have to go under.

There is no doubt that Vladamir Putin is playing hardball over the Ukraine crisis. With an economy that is in steady decline, a fall in consumer confidence, a sinking stock market and a currency that is going down the toilet, the Russian leader has done something drastic. He is gambling that the G7 will not impose economic sanctions for his escapade into the Crimea, where Russia has a lease until 2042 on the major Crimean port of Sevastopol.

HE Sultan bin Saeed Al Mansouri, Minister of Economy, confirmed that the UAE economy is now valued at US$ 381.5 billion, having grown by over 4% in 2013. Although the figures are impressive, he did make the point that they would have been better if the US and European economies had performed better. One thing certain is that the whole global economy – including that of Dubai – will suffer if the Ukranian problem is not sorted quickly and Putin sends his troops Back In The USSR.

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The Show Must Go On

Posted on March 5, 2014 by howesdubai

MugabeOn Sunday, Nakheel paid off more than a third of a loan that was not due for repayment until September 2015. The US$ 640 million early settlement is an indicator that the developer has recovered from its enforced August 2011 restructure as a result of the mess left behind after the GFC. The company has also just raised US$ 9.3 million by auctioning eight plots in its Jumeirah Park project.

First launched some eight years ago, before the GFC, Schion Properties finally expects to complete the Dubai Lagoon project by 2016. The first of seven zones – which encompass some 5.7 million sq ft – is expected to be handed over by the end of this year.

Deyaar added a further 2,600 units to its inventory last year bringing its total to just under 20,400, with rental earnings of US$ 177 million. The developer expects to add a further 2,000 properties to its portfolio in 2014.

MAG Group is certainly embracing the current wave of optimism in the real estate sector, with plans for a City of Arabia residential development, worth US$ 236 million, and a US$ 191 million art centre in Barsha. This is in addition to the US$ 1.36 billion already invested, including its US$ 545 million Meydan project for both townhouses and low rise apartment buildings.

Not only is Dubai aiming to be a global Islamic financial centre but also a hub for halal food, personal care products and cosmetics with TECOM launching a dedicated Halal Cluster in Dubai Industrial City. The centre – spread over 6.8 million sq ft – will also be concerned with logistics.

The success of the Metro can be seen with passenger numbers almost doubling over the past two years to 138 million in 2013. Overall the RTA estimate that public transport – including the Metro, buses, taxis and water transport – carried 441 million passengers, 27.2% more than in 2012.

January was another record month for Dubai International with traffic up 15.1% to 6.4 million passengers, compared to a year earlier. Emirates’ alliance partner Qantas is not faring well and is expected to announce a US$ 235 million half year loss. Consequently, boss Alan Joyce has to cut costs by US$ 1.8 billion which may entail axing 5,000 jobs in the struggling airline.

It comes as no surprise to see that Emirates is once again the world’s leading airline brand, valued at US$ 5.48 billion; this amount was 34% higher than  2012 and pushed the airline from 287 to 234 in the global top 500 brands. The only other ranked UAE company was Etisalat at 432.

Emirates SkyCargo has commenced moving all its operations to the new Dubai World Central. As an interim measure, it has signed a five-year contract with Allied Transport to provide 45 trucks to ferry goods between the two facilities, as freight will still be coming into Dubai International, via passenger aircraft.

Rumours abound that Arabtec will probably acquire the Kuwaiti Kharafi Group, in a deal expected to be around the US$ 1 billion mark. This would be another piece in the jigsaw as the Dubai-based contractor aims to become the leading construction company in the region. Coincidentally Arabtec’s shares were suspended on Wednesday by the Securities and Commodities Authority, with no formal reason given.

The Dubai General Market Index opened the week at 4183 points and rose 1.0%, when closing on Thursday at 4220 and is already up 850 points, or 25.2%, on its January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.48 and US$ 1.31 respectively.

The Dubai Gold and Commodities Exchange has launched yet a new futures contract – this time for polypropylene. Sized at five metric tons, and priced in US$, this is a first for the region.

Meanwhile the Dubai Multi Commodities Centre (DMCC) has refuted allegations that it acted improperly over the Kaloti Group’s apparent lack of transparency in its dealings with conflict gold trades. The company, the largest regional gold refiner, has been accused of paying more than US$ 5 billion in cash, without the requisite documentation, to several hundred customers.

With the lifting of EU sanctions on diamonds from Zimbabwe’s Marange field, there is every chance that some of the precious stones will soon be traded in Dubai. The authorities are seemingly satisfied that there is no forced labour or corrupt behaviour by the Zimbabwean mining chiefs.

Earlier in the month, Dubai rolled over a maturing US$ 10 billion loan from the Central Bank at more favourable rates. Whilst this will assuage concerns over payments of current liabilities, there is still a question mark over the timing, scale and financing of future mega projects. If this were carried out, without some sort of formal strategy, there is the inevitability of a bubble that would be bigger and more damaging than what occurred in 2009.

December bank lending rose 7.1% – its quickest rate since 2010 – reflecting increased consumer confidence in the buoyant Dubai market. Bank deposits, loans and advances and assets have all headed north rising by 0.4% to US$ 348.5 billion, 0.3% to US$ 320.8 billion and 1.7% to US$ 552.0 billion respectively.

The 81% UK government-backed RBS has announced a staggering 2013 loss of US$ 13.7 billion but, in true banking arrogance, will go ahead with bonuses amounting to US$ 960 million – and this after six straight years of losses!

Despite protestations by Brussels bureaucrats that all is well in the eurozone, nothing could be further from the truth.  Italy is still mired in a deep recession and not helped by the fact that Europe’s third biggest economy witnessed a record 2.1% fall in retail sales last year. With consumer confidence low, a large public debt, high unemployment and an increased tax burden, it would seem that 2014 will not be any better. Spain’s economy contracted a further 1.2% in 2013 and any sign of a recovery is at best patchy.

Q4 growth in US has been revised downwards by 25% to 2.4%, as consumer spending, which accounts for almost 70% of all economic activity, came in a lot less than forecast. As expected, new Federal Reserve chief, Janet Yellen, confirmed the continuance of existing stimulus measures which currently sees the Fed purchasing bonds at the rate of US$ 65 billion a month, with the aim of stimulating the economy.

A weak currency, a marked fall in foreign investment and high inflation have seen India’s growth rate drop to 4.7% in Q4. This is the fifth quarter in a row that Asia’s third biggest economy has had growth of under 5% – and it was only two years ago that 8%+ was the norm.

Corporate debt in China has hit record levels with some estimates as high as US$ 12 trillion – or 120% of the country’s GDP. If the current growth rate continues, then there is the inevitability of a  credit crisis which would spell global economic trouble. Stocks in Beijing fell during the week as did the yuan which saw its biggest drop in three years. There are some who see a link between the decline in the currency and the slowdown in the Chinese economy.

Globally, shares were at a six-year high but investors’ euphoria cannot continue indefinitely. In the US, the S&P 500 reached an intra day record whilst the Nasdaq hit levels not seen this century. In Japan, the Nikkei topped the 15,000 mark whilst Australia’s stock market continues its upward spiral. Unfortunately, a correction is long overdue: this will be sooner, rather than later, but nobody knows for how long The Show Must Go On!

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