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Don’t Cry For Me Argentina

Posted on February 2, 2014 by howesdubai

Reporting season is in full flow with four major Dubai banks announcing their 2013 results. The emirate’s largest lender, Emirates NBD, witnessed a 27% jump in profits to US$ 888 million along with loans up 9% to US$ 64.9 billion whilst a 12% rise saw deposits at US$ 65.2 billion. However, the bank, 55.6% owned by the Investment Corporation of Dubai, had profits dragged down by an 18% increase in impairment write-offs of US$ 1.28 billion. Dubai Islamic did well with a 42.1% surge in 2013 net profit to US$ 469 million whilst its total assets rose by 36.6% to US$ 32.9 billion. Meanwhile Mashreq reported an impressive 32.1% spike in 2013 profits to US$ 493 million. Emirates Islamic announced a massive 72.0% leap in net profit to US$ 38 million, with bank assets up 6.7% at US$ 10.8 billion.

Dubai Investments’ 2013 profits more than doubled to US$ 224 million on a 21.7% rise in revenue to US$ 763 million. Sovereign wealth fund, Investment Corporation of Dubai, owns 11.5% of the company.

The region’s largest shopping mall developer, Majid Al Futtaim, is set to splash out US$ 817 million over the next five years on developments in Dubai. These will include two new hotels, four new Carrefour supermarkets and the renovation of both the Mall of the Emirates and Deira City Centre. The family-owned unlisted company reported a 12% profit rise to US$ 900 million on revenue up 10% to US$ 6.3 billion. The group also bought a one million sq ft plot from Tecom, a unit of the Ruler’s Dubai Holding group, to build a shopping mall in the International Media Production Zone.

There is no doubt that Emaar’s Dubai Mall is the biggest and best in the world as they announce that 2013 footfall rose by more than 15% to 75 million visitors – streets ahead of the competition with Mall of America and Birmingham’s Bullring, both with 40 million. Sales in the 1,200 outlets increased by more than 26%.

Dubai Land Department has recorded total 2013 real estate transactions of US$ 64.3 billion, of which 48.3% – or US$ 31.1 billion – were from foreign investors. Five countries accounted for 27.8% of the sales – UAE (US$ 6.5 billion), India (US$ 4.9 billion), UK (US$ 2.9 billion), Pakistan (US$ 2.4 billion) and Saudi Arabia (US$ 1.2 billion).

It seems that the recent introduction of both the 4% property transfer fee and new mortgage cap rules have had some effect on the market. A recent Knight Frank report indicates a marked slowdown with growth levels of 15% in Q4 – down on the 21% reported for the preceding four quarters.

The US$ 89 million final phase 8 of Dubai Investment Park is scheduled to open in March. The park, owned by Dubai Investments, has nearly 3.5k tenants and covers an area of 2.4k hectares.

Dubai-based investment company, Skai Holdings has arranged a US$ 200 million finance package with the Industrial and Commercial Bank of China to help develop their US$ 1 billion Viceroy Palm Jumeirah development.

Emirates’ love affair with sport continues with the announcement of further rugby sponsorship. The world’s leading airline has signed an agreement with Rugby World Cup Limited for the next two world cups – England (2015) and Japan (2019). At the same time, it extended its branding of match officials’ kit to 2019.

Dubai International is fast catching up on London’s Heathrow to become the busiest international airport in the world. With a 2013 15.2% increase in passenger numbers to 66.4 million, it expects to overtake the ailing London airport this year despite the fact that May and June will see a partial closure as major maintenance is carried out on its two runways.

It was almost impossible to find an empty hotel room in Dubai as the four-day Arab Health Exhibition and Congress got under way. With a captive audience, and an inequilibrium in supply and demand, some hoteliers took advantage of the situation and pushed up room rates. The region’s largest healthcare convention has seen a 10% increase in exhibiting companies to 3.9k and expects around 85k visitors.

Hotel management company, HMH (Hospitality Management Holdings) have signed a contract with Mohammed Tayyeb Khoory & Sons to operate a new 228-room hotel in Barsha, due to open within two years. This will be the third Dubai property that HMH manage for MTK.

Two district cooling providers have been in the news. Empower has signed a six-year US$ 600 million loan facility with four banks including Mashreq and Emirates NBD. National Central Cooling Company reported a 15.3% hike in profits to US$ 74 million, with chilled water revenue up 3.5% to US$ 280 million.

It was a busy week for the Dubai Ruler. HH Sheikh Mohammed bin Rashid Al Maktoum opened the US$ 850 million remote controlled container terminal that has a capacity of four million TEUs. This expands the port’s capacity to nineteen million units.

He was also on hand to launch District One – the first phase of the US$ 8.2 billion Mohammed bin Rashid City. When completed in 2019, the new urban area will cover 54 million sq ft including 7 km of lagoons and 14 km of beaches.

HH Sheikh Mohammed issued a decree to establish the Dubai Investment Development Agency with one of its main aims to attract overseas investment into the emirate. Another decree saw the creation of the Dubai Corporation for Tourism and Commerce, with a dual purpose of attracting both tourists and commercial activity.

Dubai Healthcare City and Dubai-based MAG Group have formed a US$ 218 million joint venture. The project will comprise two hospitals along with apartments and retail outlets.

The highly successful Aster DM Healthcare is expected to go to market this year with a share sale in the region of US$ 100 million. The Moopen family is the largest shareholder in the healthcare company that operates throughout the Gulf and India.

The Dubai General Market Index opened the week at 3809 points and dropped 1.03% when closing on Thursday at 3770; despite this not unexpected fall, it is still up 11.87% on its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.18 and US$ 1.17 respectively.

Banks are once again in the news with RBS, the UK bank 80% owned by the taxpayer, announcing that it has provided US$ 5 billion for upcoming legal claims. These include US$ 3.1 billion for iffy US mortgage backed investments, US$ 830 million for misselling rate swaps to SMEs and US$ 772 million for misselling payment protection insurance to its UK customers.

The apparent cosy relationship between big business and government once again reared its ugly head as the US Justice Department settled with HSBC for alleged money laundering. For dealing in billions of dollars from Mexican and Columbian drug cartels, and breaking other serious laws, the bank was not prosecuted but received a penalty of US$ 1.9 billion!

2013 has not been a good year for Francois Hollande with the latest bad news being French unemployment levels hitting record highs of 3.3 million registered out of work. This represents 11.1% of the work force and comes despite the French President’s earlier promise that joblessness would fall by the end of 2013: this year he has promised to put the economy back into shape. (What shape remains to be seen).

Another person who could end up red-faced is the European Central Bank head, Mario Draghi. Speaking at Davos, he indicated that there had been a dramatic improvement in the eurozone economy over the past two years and was confident that, despite the current inflation level of 0.8%, the 2.0% target would be met in the medium term.

Japanese prime minister, Shinzi Abe has finally realised that a coin has two sides as a weak currency does indeed makes exports cheaper but it also results in more expensive imports. The end result for Abenomics is the country’s worst ever annual trade deficit of US$ 111 billion, compared to US$ 66.7 billion in 2012 and US$ 25.1 billion in 2011 – and this for a country that had recorded surpluses for all thirty years to 2010.

As widely expected, the US Federal Reserve continued to cut back on QE and reduced its monthly bond purchases by a further US$ 10 billion to US$ 65 billion. It indicated that it had seen an improvement in both economic activity and employment levels. Whilst QE was going at full whack, interest rates remained low and this resulted in investors looking for higher returns in emerging economies. Now tapering has begun in earnest, monies are flowing back into the US market along with the increasing likelihood of global interest rate hikes.

In recent weeks, the Argentine peso has plummeted to new depths not seen since the 2002 economic disaster. The main causes for this debacle include economic mismanagement, a massive current account deficit, sinking foreign reserves and rising domestic inflation. The country has become an epitome of the economic malaise which seems to be mounting across developing countries, including the Fragile Five; emerging markets are in for a rough ride! President Fernandez de Kirchner is no Eva Peron but she for one can disregard Tim Rice’s Don’t Cry For Me Argentina.

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Financial Market, Dubai Mall, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, MAG Group, Majid Al Futtaim, Nakheel, Skai Holdings, UAE | Leave a comment

Bring It On!

Posted on January 26, 2014 by howesdubai

Some analysts speak of a glut in the residential market but with the current major population influx, it is difficult to agree when only 9.7k units came on stream in 2013 and an estimated 28k coming to the market this year.

Dubai Land Department’s 2013 real estate transactions showed a healthy 53.2% surge to top US$ 64 billion, including US$ 45.2 billion of land sales and US$ 16.9 billion of housing units. It is interesting to note that of the estimated US$ 8.4 billion in 2013 residential sales, only 41.3% were via mortgage lending – an indicator that perhaps the banks could do more in this sector. There is no doubt that last year was extraordinary and such growth is unlikely to continue in 2014, although both major property developers remain bullish.

Saturday sees the launch of Emaar’s latest development – the 63-storey Boulevard Point in Downtown. Comprising 297 one to three bedroom luxury apartments, it will have its own dedicated bridge link with Dubai Mall. (There are reports that Emaar’s new Group Chief Executive is Abdulla Lahej, having replaced Singaporean Low Ping late last year).

Nakheel’s chairman, Ali Rashid Lootah, has indicated that he expects the government-owned developer to launch projects to the value of US$ 2.2 billion this year alone. In 2013, Nakheel delivered 3,150 units – a lot more than the 1,600 planned for this year. In addition to its already announced 2 million sq ft shopping mall, the company is expected to build nine hotels, some of which will be located on its Deira Island (aka Palm Deira), as it seems to be emulating a similar strategy that saw Emaar’s successful foray into the hospitality sector.

As the company recovers from its huge debt overhang as a result of the GFC, the chairman is confident that he is getting his house in order, having already settled with 80% of purchasers of previously stalled projects.

Nakheel’s 2008 development, The World – with its 300 man-made islands – is seeing more projects starting with news that the Kleindienst Group has commenced compaction work on six of the islands that represent the heart of Europe. Work is slated for completion within three years and the islands will reflect the architecture and ambience of different European countries.

A subsidiary of National Bonds, National Properties, is planning a major development in Motor City which will include over 150 luxury villas and 58 apartments. Work is expected to get under way in Q2 and be complete by the end of 2015.

Istithmar World has sold Palm Utilities, that includes Palm District Cooling, to Empwer for an undisclosed amount.

Arabtec has won yet another huge contract – this time for the construction of a resort in Jordan. Located in Aqaba, the US$ 1.55 billion project will include four hotels, a Star Trek themed park and a man-made lagoon with an opening by the end of 2017.

Abraaj is planning its seventh investment in Turkey – this time to buy a majority shareholding in dairy company Yorsan for an undisclosed sum. Late last year, the Dubai-based company spent US$ 300 million for African Fan Milk International – West Africa’s biggest frozen dairy producer.

Majid Al Futtaim’s Chief Executive, Iyad Malas, has indicated that the Dubai-based conglomerate is planning to spend a further US$ 2.3 billion in Egypt. This is in addition to its US$ 460 million Mall of Egypt project, ready for completion next year.

It seems that the government owned utility company, Dubai Electricity and Water Authority, will not be tapping the markets for funds this year. With a US$ 1 billion bond, due for an April 2015 repayment, DEWA has enough reserves to cover their 2014 capital and operating requirements. (Incidentally, Energy Minister HE Suhail bin Mohamed Al Mazrouei has hinted of increased energy prices as a way to cut back on very high consumption rates in the country).

Dubai Group has finally managed to restructure its US$ 10 billion debt with US$ 4 billion soon to be repaid to creditors. The balance is being restructured, with payments extended to 2016 for secured debt and to 2024 for unsecured facilities.

The Dubai General Market Index opened the week at 3609 points and gained a massive 5.54% when closing on Thursday at 3809 and is already up 13.02% on its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.19 and US$ 1.13 respectively. Such surges cannot continue indefinitely!

As China tries to move from an investment fuelled growth strategy to a consumer driven one, it will have to pull out all stops to shore up its banking system. Latest figures show that official non-performing loans, lodged with financial institutions, reached over US$ 88 billion, or almost 1% of all outstanding balances. This is at a time when the Chinese economy is expanding at its slowest rate this century as the country’s bureaucrats attempt difficult but necessary reforms to revamp its financial structures. A reduced 2013 growth of 7.7% will be followed by even smaller levels of 7.5% and 7.3% over the next two years.

Even the US banks are facing problems with their three largest – JP Morgan Chase, Wells Fargo and Bank of America – reporting double digit declines in their mortgage business, with more of the same expected in 2014. Furthermore, mortgage rates have begun to edge up and now average around the 4.5% level, reducing the number of future mortgages as potential clients get priced out of the market.

The IMF has revamped its global growth forecasts, mostly upwards, but with a caveat that deflation could easily reverse any upcoming growth. Overall global growth for the next two years will be 3.7% and 3.9% respectively. However the eurozone and the ‘fragile five’ will continue having problems. The former has too much debt and many of its member countries are reluctant to introduce long-needed economic reform. The latter will not be helped by the scaling back of quantitative easing in the US with a potential outflow of funds not helping already inflated current accounts.

The rumour mill is working overtime with unsubstantiated reports that the 35 km of the SZR – from Jebel Ali to the Creek – will become a double decker highway. Bring It On!

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Financial Market, Dubai Group, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, JP Morgan Chase, Majid Al Futtaim, Nakheel, National Properties, UAE | Leave a comment

Isn’t It Ironic, Don’t You Think?

Posted on January 20, 2014 by howesdubai

With Jaguar Land Rover, Volkswagen and Rolls Royce announcing impressive regional 2013 growth of 46%, 30% and 17% respectively, there is no doubt that the Dubai motor trade is progressing well. Although final figures for last year have yet to be collated, Business Monitor International forecast that year on year sales will be 16.7% up at 362k units, with further growth expected in 2014.

Dubai Taxi Corporation has just signed a contract with Al Futtaim Motors to supply 1,638 taxis or over 90% of DTC’s latest tender. With this order, over 85% of the company’s taxis will be Toyota Camry or Innova vehicles.

It may surprise some to note that the UAE-based Gulf Craft has been listed as one of the leading superyacht building yards in the world with fifteen craft currently being built. Less surprising is that the UAE makes the top ten global superyacht countries.

Following last year’s sale of 170 apartments in the Anantara The Palm Resort and Spa, Dubai-based developer, Seven Tides, is now gearing up to sell units in the adjacent Anantara The Palm Residence.

Damac has announced that Waitrose will open an anchor store in its upcoming Akoya project. Located in the 95k sq ft Damac Retail Centre, the store will be the UK company’s eighth shop in the UAE.

It seems that scarcely a week goes by without Arabtec announcing a new project. This time the Dubai builder has won a US$ 705 million construction tender on Reem Island which will include a hotel and residential tower in one of Abu Dhabi’s prime locations. Slated for completion by 2017, this development has extended the company’s backlog to US$ 9.0 billion.

From a 2012 loss of US$ 16.1 million, Shuaa Capital managed to eke out a US$ 763k profit last year in a major turnaround in their fortunes, with a 153% jump in Q4 revenue figures to US$ 17.2 million, giving rise to a quarterly US$ 1 million profit.

Deyaar Development has sold its 50% share in Alarko Gayrimenkul Gelistirme to its Turkish JV partner for an undisclosed amount. It appears that the Dubai-based company wants to focus more on local business interests in the future.

Drydocks World has announced it won a US$ 730 million contract to build the North Sea’s largest ever oil rig, known as CJ-80. The order from Drill One Capital may prove even more lucrative for the Dubai company with further potential work amounting to US$ 670 million in the pipeline. Its chairman, Khamis Juma Buamin is also bullish about the company’s operation in Iran if, and when, a political solution is reached.

Although bilateral trade with Iran has dipped by as much as 12.2% to US$ 2.94 billion, as at H1 2013, HH Sheikh Mohammed bin Rashid Al Maktoum sees a win win situation if sanctions are lifted. The UAE would see a major fillip in trade whilst Iran would be able to access US$ 4.2 billion in frozen assets, as well see almost normal trade resume.

Apart from an impressive BBC interview this week, Sheikh Mohammed also launched the country’s National Agenda programme for the next seven years. One of the aims was to grow the GDP by 65% over that period which would increase the figure from US$ 42k to just under US$ 70k.

In 2013, it is reported that Dubai’s financing costs were US$ 8.4 billion – equivalent to 8.9% of GDP. Over the next three years, certain loans will be maturing (including US$ 20 billion to Abu Dhabi) and some analysts expect Dubai to take advantage of favourable lending conditions and participate in a bond issue – maybe a long-term sukuk will be considered. Latest newspaper reports that Dubai Group may be finalising a long-standing US$ 10 billion restructuring deal with banks and its creditors.

The Dubai General Market Index opened the shortened week at 3505 points and rose 2.97% when closing on Thursday at 3609 and is already up 7.09% on its January opening of 3370. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.16 and US$ 0.93 respectively.

Recent figures from the UK indicate the speed of expansion in online trading with a 19.2% year on year growth in December – compared to a 0.4% rise in traditional retail shopping. In fact, 18.2% of all non-food sales were carried out away from a retail outlet, with furniture at 32.4%, and clothing (21.2%) being the internet favourites.

If you believe some experts, the unthinkable will happen – the UK, with growth levels in excess of 3%, will be the best performing economy of the G7 nations. Despite some speculation of late, base rates have remained at 0.5% – unchanged since March 2009. Unemployment levels have dropped to 7.4% as the growth gains traction and may fall below the 7.0% mark, earlier than estimated by the Bank of England, and this could trigger a rethink on rates. The trade gap between the exports and imports of goods has fallen to US$ 15.3 billion – another indicator that the UK economy is on the upturn.

The UK Chancellor took a justified swipe at the EU saying that its treaties were “not fit for purpose” and would have to be rewritten to keep up with other global economies. His simple message to the 28-country bloc was reform or decline – and it seems that some of the major players, including France and Spain, prefer the latter strategy. Over the past six years as European economies have stalled, those of China and India have seen growth levels of 70% and 33% respectively.

The European Central Bank president, Mario Draghi, is less bullish on the continuing eurozone crisis indicating that he considers any recovery “weak, fragile and modest”. Latest quarterly figures show the bloc with a meagre 0.1% growth. The ECB has no option but to keep rates at 0.25% at least for most of 2014, but may be forced to take a more aggressive approach to bolster the weak growth levels. Another area of concern is the inflation rate dropping under 1% with the prospect of deflation rearing its ugly head.

Following several high profile legal cases and settlements, it was no surprise to see JP Morgan Chase announce a 16% dip in net profit to US$ 17.9 billion. The latest fine, totalling over US$ 2 billion, was for their alleged complicity with the disgraced Bernie Madoff and his Ponzi scheme. The bank has a US$ 23 billion provision to deal with future claims and legal costs.

It does seem rather strange that one of the country’s leading bankers is not blaming the financial institutions but their customers for over borrowing and racking up debt. Former CEO of the National Bank of Abu Dhabi, Michael Tomalin, has reportedly indicated that customers – and not banks – have been reckless! Isn’t it Ironic, Don’t You Think?

Posted in Finance | Tagged Arabtec, Deyaar, DFM, Dubai, Dubai Financial Market, Dubai Taxi Corporation, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, National Bank of Abu Dhabi, Seven Tides, UAE | Leave a comment

Only Fools Rush In

Posted on January 13, 2014 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum has issued a decree appointing his son, the Crown Prince, HH Sheikh Hamdan, to head up the committee to supervise preparations for Expo 2020. His great uncle, HH Sheikh Ahmed bin Saeed Al Maktoum, president of the Department of Civil Aviation and Chairman of Emirates Airline, will be the chairman.

Emirates Cargo had a record 2013, with an 8% increase in revenue to US$ 2.8 billion and an impressive 16% rise in tonnage to 2.1 million tonnes, in a moribund sector where global increases were less than 2%. Not surprisingly, the airline, which operates ten B777 Fs and two B747s, is the world’s biggest in scheduled Freight Tonnes flown. The carrier is expected to move to Dubai World Central as from this April.

Qantas is becoming a harbinger of bad news as Moody’s downgrades its credit rating to junk status following S&P’s similar earlier decision. The immediate impact is that financing costs will increase adding to the airline’s woes that indicated a US$ 267 million half year loss plus the axing of one thousand jobs. It seems that last year’s partnership agreement with Emirates has failed to lift the carrier out of the doldrums.

Dubai Land Department’s Sultan bin Mejren has reportedly indicated that property prices in the emirate may increase by as much as 40% in 2014. Measures will be put in place to avoid any undue speculation and may include new regulations concerning properties sold on before they have been built.

As Dubai has more than fifty hotels – with 16.6k rooms – currently being built, it is no surprise to note that Rotana is planning to double the number of its UAE hotels over the next five years to sixty properties and over 17k rooms. Already with a presence in Dubai, the Hong Kong-based Shangri-La group is expected to open further hotels here and in the GCC. In similar expansion mode is Accor which plans to increase its UAE room inventory by 45% to 8k over the next two years.

With the global digital signage business worth around US$ 15 billion, there was much interest in this week’s SGI Dubai (Sign and Graphic Imaging) exhibition. In its 17^th year, the 400-exhibitor show is expected to attract over 10k visitors from 75 countries.

Dubai Silicon Oasis announced the launch of the US$ 272 million University Hospital – a combined medical and learning facility to be developed by the Saudi Dr Soliman Fakeeh Hospital. Covering 150 sq mt, the facility will be built in two phases, with the 300-bed hospital ready by 2017 and the college two years later. This will prove a welcome boost for the local economy on two fronts – creating 4k jobs and complementing the medical tourism sector which is growing at an annual rate of 15%.

Emaar are adding to the burgeoning Arabian Ranches with a further 219 Lila villas which follows closely on recent successful releases there such as CASA, Palma and Rosa. No doubt the offering will be sold out on their release this Saturday.

According to its Chairman, Ali Rashid Lootah, government-owned Nakheel plans to repay US$ 1.09 billion of its bank debt this year – 12 months ahead of schedule. This sends a strong signal to the market that the formerly troubled developer is on the road to recovery following its US$ 15.5 billion bailout in 2011. It was also revealed that the company is planning to spend US$ 1.28 billion in 2014 on new retail and hospitality projects, including four hotels.

Another government entity performing well is Dubai Investments which expects a massive 150% surge in its 2013 profits to around US$ 220 million.

Meanwhile Emirates Extrusion Factory, part of Dubai Investments, is spending US$ 3.5 million to enlarge its aluminium extrusion plant. The facility, located in Techno Park, is looking at expanding its exports which currently account for almost 70% of its production. UAE accounts for 35% of the GCC’s current demand of 500 metric tonnes.

Shareholders in the troubled Gulf Navigation have finally agreed to a rescue package that includes writing off accumulated losses of US$ 300 million, a US$ 130 million convertible bond sale as well as agreeing to the sale of two VLCC (very large crude carriers). Shares in the listed crude shipper slipped 6.9% following the announcement.

Dubai Mercantile Exchange (DME), with over sixty active traders, had a record year in 2013. The region’s leading commodities and energy futures exchange saw its premier product, Oman Crude Oil Futures contracts, up over 36% in 2013,trading over 1.6 billion barrels.

With an Islamic population of an estimated 1.6 billion, it is no surprise to see that Dubai Municipality is planning to establish an international accreditation centre, specifically targeting Halal food. The aim of the centre would be to issue compliance certificates once products have been found to comply with Islamic law and be acceptable on a global scale.

The Egyptian investment bank, EFG-Hermes, has sold the 7^th floor of Index Tower to Emirates Reit, a US$ 327 million property investment trust, in return for a 4% stake in the trust fund. Last year, the company increased its capital base by a further 9%, with Emirates NBD taking 5%.

The Securities and Commodities Authority (SCA) is keen to tighten regulations in relation to unofficial lending to investors on the local bourses. It appears that over 75% of the forty-eight brokerages have no authority to offer margin trading which allows their clients to leverage their shareholdings. Initial fines will be up to US$ 27k.

Al Ansari Exchange estimate that last year, the 6.6 million UAE expatriates repatriated US$ 35.4 billion with India, Pakistan, Bangladesh and Philippines being the main beneficiaries. Saudi Arabia, home to some 9 million foreigners, saw over US$ 67 billion leave the kingdom. The other four countries of the GCC – Bahrain, Kuwait, Oman and Qatar – with almost 5 million expatriates saw remittances total almost US$ 28 billion.

Not before time, the UAE is set to launch the Al Etihad Credit Bureau which will allow consumer creditworthiness to be checked by financial institutions. The idea behind the scheme is that all banks will be able to access a database to verify online whether potential borrowers present a risk prior to extending any loan / credit card type facility.

After profit taking earlier in the week, the Dubai Financial Market General Index bounced back to close on 3505 points – 2.4% up from its Sunday opening. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.13 and US$ 0.79 respectively.

It has been a torrid twelve months for JP Morgan Chase. Having already paid US$ 18 billion in government penalties for various misdemeanours, it is set to settle with US authorities regarding its nefarious role in its dealings with Bernie Madoff. The reported US$ 1.7 billion fine will help the US’s biggest bank by assets avoid further government action. (Madoff ran a so-called Ponzi scheme and when he was busted in 2008, it was found that he had claimed that his company had US$ 65 billion in client assets whereas the true figure was closer to US$ 300 million).

Although unemployment remains the biggest problem facing the eurozone, as one in eight of the working population (or 19.24 million) remain without a job, another dilemma is the danger of deflation. December inflation rate fell to 0.8% which is worryingly low when compared to the target 2.0% rate. On the positive side, the 17-country bloc saw a 1.4% jump in retail sales – the fastest monthly increase in twelve years. Any revival in the economy this year will be at best muted and a meaningful recovery can only take place when more people get back to the workplace.

In contrast, the US has witnessed a December job growth of a highly respectable 238k, following a revised 215k for November. Although most of the jobs were at the lower end of the scale, an economic recovery will be helped by reducing the jobless numbers.

The cronies running world football appear to be in some disagreement after FIFA’s Secretary General, Jerome Vaicke indicated that the 2022 Qatar World Cup would have to move to later in the year. With Sepp Blatter heading an apparent fiefdom of an organisation that seems to lack any transparency and corporate governance, two questions will have to be answered. How on earth did Qatar win the bid for a July event in the first place and why was the decision made four years earlier than normal? Only Fools Rush In!

Posted in Finance | Tagged Al Ansari Exchange, Arabtec, DFM, Dubai, Dubai Financial Market, Dubai Silicon Oasis, Emaar, Emirates, emirates airline, Emirates Cargo, Emirates NBD, FIFA, HH Sheikh Mohammed bin Rashid Al Maktoum, JP Morgan, Nakheel, Qantas, Sepp Blatter, UAE | Leave a comment

Rock The Boat

Posted on January 7, 2014 by howesdubai

HH Sheikh Mohammed bin Rashid Al Maktoum issued a decree allowing rental increase of up to 20% dependent on circumstances. Rent hikes can come into play, once the rent being charged is 11% below the official RERA guidelines, with incremental rises at predetermined levels. Between 11% – 20%, a 5% rise is permitted followed by 10%, 15% and 20% if the prices are between 10% – 20%, 20% – 30% and 30% – 40%. This comes on the back of an estimated 17.8% jump in 2013 residential rents.

At the same time, as property prices have surged more than 20% in 2013, Knight Frank’s Prime Global current year forecast is predicting that, although growth levels will weaken, Dubai will still lead the world with another annual double digit growth forecast of up to 15%, well ahead of Beijing, Shanghai, Paris and Sydney, with estimated rises of between 5 – 10%.

There have been moves afoot to curb too much real estate speculation by the UAE Central Bank doubling its stamp duty equivalent to 4%, banks discussing mortgage deposit increases to 25% and Emaar banning agents selling off plan inventory before completion.

Meanwhile commercial property is beginning to fight back with Dubai now the 23^rd most expensive city according to a CBRE report. At US$ 93 per sq ft, prime Dubai office space has still a long way to go to equal the most expensive location, London’s West End, at US$ 259 per sq ft, followed by Hong Kong (US$ 234) and Beijing (US$ 198).

With the groundwork now complete, Nakheel is expected to award the construction tender for its 136k sq mt The Pointe. The entertainment and retail complex, with over 800 outlets, will be located opposite Atlantis on Palm Jumeirah. The company has also recently sold 91 plots in its Al Furjan project for US$ 19.1 million and a further 45 in Jumeirah Village Triangle for US$ 17.9 million.

Reports indicate that local airlines are cashing in on next year’s FIFA World Cup by increasing prices to Brazil by as much as 70% in June (as compared to March). As an official “FIFA partner”, Emirates June economy fares are quoted at US$ 2.9k, whilst business class comes in at US$ 8.3k.

November saw yet another record month for Dubai International with a 9.5% year on year jump in passenger numbers to 5.34 million. With YTD figures of 60.4 million, 2013 should prove yet another record year, with numbers nudging 66 million by the end of December.

These numbers explain the surge in Dubai Duty Free results as the company announced an annual 11.4% increase in its 2013 sales to US$ 1.81 billion. 20 December saw the operator celebrate its 30th anniversary, with sales on the special day reaching over US$ 30 million, with some items being sold at a 30% discount.

There is no stopping the current on-going hospitality boom with the release of official November figures. These indicate hikes in RevPAR (revenue per available room), occupancy and ADR (average daily rate) by 11.5% to US$ 264, 1.7% to 87.5% and 9.8% to US$ 301 respectively. Supply was also up by 6.9% which was more than offset by an 8.8% jump in demand. It would be no surprise to see guest numbers test the 11 million level by the end of the year.

The 19th edition of Dubai Shopping Festival takes place from 02 January for a month, during which time it is expected to welcome over 4.4 million visitors. It is estimated that since its opening in 1996, it has attracted over 51 million visitors who have added over US$ 35 billion to the local economy.

Arabtec announced that it would set up a real estate development company in Dubai to take advantage of any local projects. The Dubai-based company has over US$ 8.1 billion in its order book. Among its investments to date is a 24% holding in Depa Limited, whose shares have shot up over 8% since Arabtec announced it was interested in more investments and acquisitions.

Majid Al Futtaim (MAF) is planning a US$ 467 million investment for a shopping centre in Muscat. The Mall of Oman will cover an area of 157k sq mt and host over 350 retail outlets. Meanwhile, Al Futtaim Group has just signed a JV – with Marjana Holding and Portugal’s Sonae Sierra – to develop Morocco’s largest shopping mall. 21.7% of the retail space of 126k sq mt will be taken up by Ikea. This is the Dubai-based conglomerate’s fourth shopping centre, with the others located in Oman, Qatar and Egypt

Dubai-based Drake & Scull has won a US$ 110 million contract for MEP work on the Mall of Qatar, due for completion within eighteen months. The company was also successful with a US$ 16 million contract for similar work on the four-tower New Culffe Project in Mumbai.

The Dubai Financial Market capped a boom year by closing at 3370 points – 21.96% up on Q4 and 107.7% for the year. On Thursday, the first day of trading in 2014, it showed a daily jump of 3.04% to close the week on 3472.The last time the local bourse had such a stellar year, the exact opposite happened the following year. History is unlikely to repeat itself but the market will definitely slow this year, with a possible correction on the cards.

Gold lost its glitter in 2013 with an annual fall of 28.9% from US$ 1,694 to US$ 1,204, bringing to an end a 12 year bull run. Gold is no longer considered a safe haven during troubled economic times. It is set for another difficult year and would do well to test the US$ 1,300 mark in coming months, especially if inflation takes hold on the back of global monetary policy and devaluing exchange rates, causing reductions in purchasing power.

All the so-called “fragile five” economies with widening current account deficits – Brazil, India, Indonesia, South Africa and Turkey – will face major problems in 2014, mainly as a result of the Fed’s cutting back on its QE policy of easy money. Turkey has been worst hit as the lira falls to record lows, not helped byan increase in political turmoil and its biggest ever corruption scandal involving sons of three cabinet ministers.

For the past three years, oil prices have remained static, averaging US$ 108. With an expected increased output and slowing demand, as the world economy continues to struggle, 2014 will be a volatile year and Brent prices should even out to around US$ 100 later in Q1.

There is no doubt that the global stock market rally seen in 2013 will run its course early in the new year, as the five-year US equity bull market, with record highs for both the S&P 500 and Dax, comes to the end of its cycle.

Two factors that will trouble the Chinese authorities are a marked slowdown in manufacturing, as a result of a weak demand for exports, and a massive surge in public debt, that has fuelled a real estate boom. A 2013 growth rate of 7.6% is the slowest in twenty three years and no improvement is expected in 2014.

Although the UK economy is set to strengthen even further in 2014, the same cannot be said for most of its European neighbours including France and Italy. President Francoise Hollande has had a torrid year with the country falling further behind under a “too heavy” tax burden as unemployment hovers at 10.9% and manufacturing output worsens. He would do well to still be in the job at the end of 2014. In a similar vein, Italy has much to do to reduce red tape and introduce much-needed economic reforms, so as to improve productivity.

Dubai will remain streets ahead of most other economies in 2014 and the only note of caution is that the emirate cannot expect extraordinary growth in the stock market, property and other sectors of the economy to continue at current levels. Furthermore if the Iranian entente cordiale were to come to fruition, it will be a huge boost for the region.

In the global arena, economies will be sluggish at best. What is not wanted is a catastrophic incident to occur that would derail any progress that has been made since the GFC. Fingers crossed that there are no problems with the Winter Olympics and the FIFA World Cup and that some major financial scandal does not Rock The Boat!

Posted in Finance | Tagged DFM, Drake & Scull, Dubai, Dubai Financial Market, dubai shopping festival, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Jumeirah Village Triangle, Nakheel, UAE | Leave a comment

It’s All Over Now

Posted on December 20, 2013 by howesdubai

Damac Properties were quick out of the blocks as they announced the launch of their 270-unit Tenora Tower, adjacent to the Expo site near to Dubai World Central. Prices will start from US$ 166k and should be completed within eighteen months.

Emaar is making great use of the current buoyancy in the property sector. At the beginning of the month, the first batch of 70 properties in its up-market Dubai Hills Project was sold out, within minutes, at prices ranging from US$ 7 million – US$ 10 million. The same sales mania occurred this week with its two-tower Vida Residence Project, comprising 136 units, at starting prices of US$ 790k, selling within minutes of release.

It is expected that Deyaar Development’s Fairview Residency will be complete by March next year. The 18-storey, 172-apartment building is located in Business Bay. The Dubai-based developer is fast recovering from its troubles, following the GFC and Dubai property collapse; the company’s shares surged the next day by 10% on this news.

Dubai’s latest five star hotel is set to open on Christmas Eve. The Al Habtoor Group announced that the Waldorf Astoria, located on Palm Jumeirah, will become the group’s seventh hotel, four of which are in Dubai. Three more are currently under construction on the Metropolitan site on SZR.

The RTA has announced the arrival of the first batch of eleven coaches for use on the upcoming Sufouh Tram System – with the official opening due late next year. 27k passengers are expected on a daily basis, with each coach having a capacity of three hundred users.

Designed to handle 7k passengers at any one time, Mina Rashid has been voted the best cruise port in the world for the sixth consecutive year. The DP World facility, covering an area of 24k sq mt, has recently been upgraded.

Majid Al Futtaim Group (MAF) has announced a US$ 5 billion investment programme as it launched a single branding for its numerous entities, including Mall of the Emirates, Carrefour, Ski Dubai and VOX cinemas. The conglomerate is planning to double its size within the next five years, to an asset size of US$ 20 billion. Part of the plan includes several ski slopes in the MENA region, similar to those of the eight-year old Ski Dubai, and Ski Egypt, which is due to open in 2016.

Following their 2010 release of a US$ 500 million convertible bond, Emaar Properties has issued 18.7 million new shares at a reduced price of US$ 1.29. This is because bondholders wanted to cash in with the share value having now reached a 5-year high of US$ 2.00.

Arabtec Holdings have refuted claims that it was considering purchasing Drake & Scull – this despite the two companies working together on several local projects, including the Louvre in Abu Dhabi.

It does seem surprising that the UAE is the 11^th largest importer of clothes with a value in excess of US$ 4 billion (or 0.89% of the global total). With the retail sector set to increase to US$ 41.1 billion by 2015, it seems inevitable that the clothing industry will continue to grow in tandem.

A sign that Dubai is getting more of a profile as a hub centre was news that Hino Motors Limited has opened its new parts facility in Dubai World Central. The bus and truck manufacturer will use the 5.4k sq mt facility to import directly from Japan to expedite deliveries with the GCC and surrounding region.

It has to be Dubai when a bra, costing US$ 10 million, goes on display in the Dubai Mall. Loaded with 4,200 gems, and a 52-carat ruby, the garment was designed by Mouawad, the Swiss-based jeweller.

The Dubai Investments subsidiary, Glass LLC, estimates that it has seen a marked improvement in business and has picked up at least US$ 38 million of new business in Q4.

There is no doubt that the local auto sector is thriving and set to hit record high sales by the end of the year. This expansion is set to continue into 2014 and, as a result, Arabian Automobiles, the Nissan, Infiniti and Renault exclusive dealer, has announced that it will be taking on an extra 250 staff to meet the increasing demand.

Thirteen years ago, fast food chain ChicKing did not exist. Now the Dubai-based fast food chain has 100 outlets in thirty countries and has plans to increase this number tenfold by 2020; it has just signed an MoU with Malaysia’s Dual Super Food to set up stores in that country and others in SE Asia.

Dubai Health Authority have indicated that all companies, with more than 1,000 employees, will have to introduce mandatory staff health insurance before October 2014 with smaller companies (100 – 999 employees) having to follow suit by July 2015, with another year’s grace given to entities below that size.

There was a welcome bonus this week for many in the Dubai public sector with salary increases of between 30% and 100%, paid retrospectively from June. It is reported that some doctors and financial controllers will see their pay packets double!

With his recent decree, HH Sheikh Mohammed bin Rashid Al Maktoum has laid down his three-year plan to make Dubai the centre of a potential US$ 6.7 trillion Islamic global economy. The Dubai Islamic Economy Development Centre will be set up with the specific aim of making this a reality.

The Dubai Financial Market General Index continues to flourish and is up 109.1% YTD. It started the week on 3158 points and moved 2.7% higher to close at 3243.

The Institute of International Finance have estimated that Expo 2020 will add an annual 1.5% to Dubai’s GDP for the next six years whilst official figures estimate a spend of US$ 24 billion which will inevitably add to the emirate’s debt. The end result seems to indicate an 18.7% jump in debt to US$ 168.5 billion. However with an estimated 5.5% annual growth, Dubai’s debt to GDP ratio will actually fall from its 106% level last year to 70% in 2020. Funding will be from a variety of sources including internal (profit and sale of assets), local (federal and Abu Dhabi assistance) and global capital markets.

It is reported that Istithmar World, Part of Dubai World, has sold its 50% share in the celebrated Fontainebleau Hotel in Miami which it acquired for US$ 375 in the halcyon days of 2008. (In 1976, Muhammad Ali stayed at the hotel, when filming ‘The Greatest’). The amount paid by the Florida property developer is unknown but should bring in a profit for the Dubai GRE.

European golf received a major boost with Emirates announcing that it would sponsor another nine tournaments, making nineteen in all, as well as becoming the tour’s official airline. The airline’s agreement is for the next four years, running until 2017.

Good news and bad news for Ireland as the country formally exited its 3-year US$ 115 billion bailout programme but it will still face several years of painful austerity programmes, as it battles an unemployment rate of 12.8% and depressed market conditions. Fellow eurozone strugglers – Cyprus, Greece and Portugal – are still under the control of the troika (IMF, EU and ECB) and will continue to have reduced input into their own finance policy.

In recession for six years, Greece has been relying on bailout funds for over three years and again this week, Prime Minister Antonis Samaras was requesting a further write-off of his country’s debt. This will be dependent on whether the troika consider that Greece has fulfilled the terms of its bailout deal.

There is no doubt that the Chinese economy is undergoing problems as growth levels, although still high on an international comparison, are expected to fall below a two-decade low of 7.5%. The world’s second largest market is set for a bumpy 2014 and this, in turn, will be depressing news for the global economy, with many countries still reeling from the effects of the GFC.

On the back of a slowing China, the Australian economy is going into a tailspin, as it faces a possible US$ 42 billion deficit this financial year, unless immediate action is taken. A major driver in this turnaround in fortunes is a softening in resource investment along with a weakening economy. The sorry state of the national airline, Qantas, increasing unemployment levels and a collapsing auto industry are further indicators that the lucky country is facing turbulent times.

As expected, the US Federal Reserve has announced the scaling back of its quantitative easing policy by US$ 10 billion a month, with the taper being equally split between mortgage-backed securities and treasury bonds which will both fall by US$ 5 billion in the first month to US$ 35 billion and US$ 40 billion respectively. As the markets have become addicted to so much cheap money (US$ 85 billion a month), it comes as a relief to some that the days of easy money have ended. It’s All Over Now.

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

Nobody Does It Better

Posted on December 16, 2013 by howesdubai

Early signs of the positive impact of Dubai Expo 2020 were evident this week. Marriott International announced plans to increase its number of rooms, over the next six years, to 10k from its current portfolio of 2.7k. Emaar Properties have signed an MoU with Dubai World Central to establish an urban and leisure destination at the centre of the proposed Expo location. Encompassing 13.6 million sq mt, there will also be a business park, along with the usual sporting and shopping centres. It is expected that this will be the forerunner of several similar world-class developments in Dubai’s new city.

Having issued US$ 4.5 billion worth of sukuks to date, Nakheel has just made a US$ 59.4 million profit payment. Since its last US$ 16 billion restructure in 2011, the government-owned developer has paid creditors US$ 354 million in interest and profit payments and US$ 3.0 billion to creditors. As its nine-month profit figure at the end of September was US$ 482 million, it seems there is a long way to go pay off all its debts.

Moody’s expects the UAE’s annual growth to average 4.8% over the next three years, as it maintained its country rating at a stable Aa2. It is becoming less dependent on hydrocarbons as its non-oil sectors continue to flourish with the economy being further helped by a low government debt ratio to GDP of 23%, excluding government-related enterprises (GREs). It is interesting to note that the debt level of Abu Dhabi’s GREs is greater than that of Dubai. Currently it is estimated that Dubai government’s direct debt is equivalent to 30% of its GDP whilst that of its GREs is 113%, making the outstanding debt at 143% of GDP.

The Director General of the Department of Economic Development, Sami Al Qamzi, is expecting tourist spend to reach US$ 9.0 billion over the next three years, as the current boom gains increasing traction. It is expected that retail sales will increase from US$ 27.2 billion to US$ 32.5 billion over the same period. These figures highlight the impact that the retail sector has on the local economy.

Two local hotel chains have announced overseas management contracts. Jumeirah Group has just signed a management agreement with Saraya Bandar Jissah to develop a two-hotel and residential complex on a 2.2 million sq mt site in Muscat. The resort, due to open in 2017, is a JV between the Dubai-based Saraya Holdings and Omran, part of Oman’s tourism ministry. Meanwhile, Jebel Ali Resorts and Hotels made their first foray away from Dubai as it signed to manage a luxury 10-villa beach resort in the Seychelles. The UAE is that country’s fifth biggest market which is set to grow at a faster rate than the current 10%, as both Emirates (twice daily) and Etihad (daily) fly into the capital, Mahe.

It was no surprise to see Habtoor Leighton Group being awarded a US$ 395 million contract to build the Residential Towers associated with the upcoming US$ 3 billion Habtoor City development on SZR.

With over 12.9 million contracts, Dubai Gold and Commodities Exchange (DGCX) has witnessed a credible 51% surge in YTD selling. Most of the bourse’s dealings are involved with the Indian rupee futures trade which accounts for over 40% of the total global trade in that currency.

The need for more spending on infrastructure was brought home by the 48.6% increase in DEWA’s 2014 budget to US$ 5.6 billion with projects accounting for US$ 1.92 billion. Its existing capacity of 9.6 megawatts (MW) easily meets its current requirements (with the peak load this year of 6.9 MW) whilst it produces 470 million imperial gallons of desalinated water daily.

For the first nine months of the year, there have been 9.9% increases in both trade, to US$ 272.4 billion, and tourism numbers to 7.9 million. Both these major drivers in Dubai’s economic growth should see even bigger rises as the emirate readies itself for 2020. India (21%), Turkey (13%) and Switzerland (7%) were Dubai’s main export partners. It is no surprise to see that the country’s private sector has seen faster growth than any of the BRICS nations – Brazil, Russia, India, China and South Africa.

The Dubai Financial Market General Index continues to set a blistering pace closing on Thursday 6.9% up on the week at 3158 points. So far this year, the market has risen by 103.57% with bellwether stocks, Emaar and Arabtec, closing strongly at US$ 2.01 and 0.75 respectively.

Blackstone management certainly know how to earn money as they have more than doubled their initial 2007 US$ 6.4 billion investment in Hilton, the world’s largest hotel operator. With this week’s IPO, the company’s 76.2% shareholding is now valued in the region of US$ 15 billion.

Latest UK reports indicate that the economy is steaming ahead with 2014 growth forecasts being upped from August’s 2.2% to 2.7%, following this year’s expected 1.3% expansion. Many analysts see this as a property-led growth with little movement in exports, manufacturing and business investment, whilst the finance and insurance sectors still struggle. Unemployment levels continue to fall with the BoE target of 7.0% expected within the next eighteen months at which time there will be inevitable rises in interest rates.

Another week equals more banking scandals. Despite there being sanctions in place, the behemoth that is RBS flaunted the law by dealing with the likes of Sudan, Myanmar and Iran by assisting with bank transfers of around US$ 34 million. This week the US regulators fined the troubled bank US$ 100 million. In comparison, Lloyds Bank got off lightly with a US$ 45 million fine for selling unnecessary financial products to the value of US$ 3.2 billion to some 700k customers.

Visa and MasterCard have been fined US$ 5.7 billion in the US for fixing credit and debit card fees charged to merchants. There will be more headaches for these two companies as individual lawsuits have been taken out by some merchants, which will lead to further penalties.

Although its cricket team is enjoying an Indian summer, the Australian economy is showing signs of weakness, with November unemployment rising to 5.8%, some major energy projects facing delays and cost overhangs as well as Holden planning to stop vehicle production in the country.In WA, Chevron’s LNG project has seen a further 3.8% leakage in cost overruns to US$ 54 billion and start up delayed four months to the middle of 2015. This comes after a cost overrun that saw the December 2012 expenditure rise from US$ 37 billion to US$ 52 billion!

With Ford already committed to shutting its Australian business and now GM confirming the closure of its Holden assembly operations in Adelaide and its Melbourne engineering facility, it may result in Toyota quitting as well. If that were to happen, not only direct jobs (2,900 because of the Holden decision) but some 45,000 in the supply and support industries would be forced to close as a result. Because of the relatively high currency, its crippling labour rates, small market and a cut-back in government subsidies, it now seems that cars can be made cheaper in Japan.

New Year’s celebrations will once again put Dubai in the record books with what should be the world’s biggest ever pyrotechnic display. The 6-minute spectacular will cover most of the emirate’s coast, The World and Burj Khalifa and will use 450k fireworks and feature a musical soundtrack. It is bound to usurp Sydney as the number one viewing destination at the turn of this year; yet again when it comes to Dubai, Nobody Does It Better!

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Expo 2020, Dubai Financial Market, Dubai World Central, Emaar, Emirates, emirates airline, Emirates NBD, Expo, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

All Together Now

Posted on December 12, 2013 by howesdubai

Amazingly, there were ten thousand applicants for the first viewing of Dubai Hills – a luxury development with villa prices reportedly starting at US$ 8.2 million! Emaar have selected just seventy to attend the first viewing on 08 December at a secret location in Dubai, when plans and pricing will be revealed. The project – a JV between Emaar and Meraas – will be limited to about 600 plots and will be part of phase 1 of Mohammed bin Rashid City.

As a direct result of Dubai’s successful bid for the 2020 Expo, Al Mazaya Holding is expected to invest over US$ 2.8 billion in real estate projects in the emirate. Last year, the Kuwait-based developer cut back on its activity here but now will concentrate up to 85% of their expenditure in Dubai.

Meanwhile, Nakheel has awarded contracts for construction of two projects on Palm Jumeirah. United National Engineering Company will build the 170-apartment Azure Residences for US$ 36.9 million whilst the building of the Club Vista Mare will be carried out by Al Ghurair Contracting & Engineering in a deal worth US$ 10.5 million.

Although still in its infancy, there are signs that on-line property auctions will become increasingly popular. For the first time, the Land Department is getting involved by releasing seventeen properties on their new, easily accessed, portal, eMart.

This week Sheikh Majid bin Mohammed Al Maktoum opened Dubai International Jewellery Week 2013 which has attracted 360 exhibitors from thirty countries.

With their November US$ 23 billion order for 50 Airbus 380s, Emirates now have 100 on order and 40 in operation, taking total investment in this jumbo to US$ 45 billion. This week, the airline made history by becoming the longest A-380 air service in the world with its 16 hours, 20 minutes daily flight to Los Angeles, covering 13,420 km. (Distance wise, both Qantas and Delta fly further – Sydney / Dallas being 13,804 km and Joburg / Atlanta 13,582 km; the latter, a 777-200LR, flies longer at 16 hours 55 minutes).

All is not well with the Flying Kangaroo as Qantas announced job cuts of 1,000 and issued a profit warning with indications that the half year loss could top US$ 270 million, It has been fighting, and now losing the battle on three fronts – high fuel costs, a strong dollar (although it has recently dropped 8.6% to just over AUD1 = US$ 0.9) and stiff competition, especially from Virgin. What Chief Executive Joyce must realise is that the other airlines also face a strong dollar and high fuel costs.

Still facing debt repayment problems, in the range of US$ 25 billion, Dubai World has sold Atlantis Palm Hotel to the Investment Corporation of Dubai for an undisclosed sum. Built in 2008, the hotel was a JV between Istithmar World and Kirzner International, before the latter sold their 50% share in April 2012.

Inchcape Shipping Services, bought in 2006 for US$ 285 million, by Istithmar World, a Dubai World subsidiary, is reportedly under investigation by US authorities for overcharging the US navy. Consequently, it has been suspended from any new contracts whilst investigations continue on work carried out since 2002.

Damac’s initial foray in the London capital market saw their global depository receipts (GDRs) priced at the lower end of the spectrum – US$ 12.25 – which valued the Dubai-based developer at US$ 2.65 billion. Although well down on some initial expectations, it still valued the company at US$ 2.65 billion and was the biggest UAE offering since DP’s 2007 sale of 20% of its equity for US$ 4.96 billion.

Arabtec Construction – along with Constructora San Jose SA – have won a US$ 1.2 billion contract to build the 719-bed Al Ain Hospital.

Fortnum & Mason is planning to open their first overseas store in Dubai in a franchise operation with Al Khayyat Investments. The iconic high-end store opened in London’s Piccadilly in 1707 and is known for its luxury products and services.

Yet another record was set by the Dubai Mercantile Exchange (DME) in November, with crude oil average daily volumes (ADV) of 7.5 million barrels. This represented an 80.0% jump on the same month last year and a 36.1% increase in ADVs, compared to 2012.

The HSBC local PMI (Purchasing Managers’ Index) jumped to a new high in November rising to 58.1 points. Any figure above 50 indicates economic expansion and, compared to most global economies, these results are spectacular.

Safi Qurashi, who spent US$ 60 million in 2008 for the United Kingdom on Nakheel’s The World, finally received justice when the Dubai court ordered his former partner (SD) to repay him US$ 10.9 million. The UK citizen spent three years in jail for security cheques that SD wrongly presented for payment that subsequently bounced.

The Dubai Financial Market General Index opened a shortened week on Monday at 2955 points and, having reached a five–year high of 3019, closed on Thursday 2.0% up at 3013. Although it is still 94% up so far this year, it has to be noted that, on 31 December 2005, it was trading at 7426!

After fifteen years of deliberation, there seems to be little chance of a common GCC currency. However there were unsubstantiated reports this week that four of the six-member bloc – Saudi Arabia, Kuwait, Qatar and Bahrain – may announce a common currency this month.

Speedy Hire has launched an internal enquiry into a US$ 8.2 million accounting irregularity that has seen the resignation of its CEO and the suspension of its Finance Director. The UK company supplies construction equipment in the region.

On the international front, Tommy Suharto, the son of Indonesia’s second president, has denied any involvement in an alleged US$ 20 million bribe from Rolls Royce. The UK’s Serious Fraud Squad is investigating that there was corrupt activity in the sale of RR engines to Garuda. Having lived there, I find this hard to believe!

Recent events seem to indicate that banks and corruption are synonymous. The EU has just fined six banks – including JP Morgan, RBS and Deutsche Bank – US$ 2.3 billion for fixing two global interest rate benchmarks – Libor and Eurobor. Surprisingly UBS and Barclays escaped punishment, despite being involved, because they both turned whistle-blowers.

It is interesting (and to some worrying) to know that the price of gold is fixed by five participating banks – Barclays, HSBC, Société Générale, Deutsche Bank and Scotia-Mocatta. The price is set twice a day (10.30am and 3.00pm).

This week gold dipped to 5-month lows and some even expected the yellow metal to test the US$ 1,200 level on fears of the Fed cutting back on its third phase QE policy. It seems that gold will have fallen 30% by the end of this year (including a 5.4% drop last month) and almost 40% from its September 2012 high of US$ 1,920 – its first annual decline in thirteen years. By Thursday close, the price was US$ 1,230. As equity markets have surged, gold markets have tanked.

Latest eurozone data indicates that there is overall weak growth in the 17-couhtry bloc but a downturn in some of the southern countries, particularly France and Spain, continues to worry the markets. November’s PMI in France fell from 49.1 to 48.4 whilst Spain dropped below the 50 level – an indicator of economic contraction.

In a recent blog, HH Sheikh Mohammed bin Rashid Al Maktoum has invited all of UAE society to think collectively of creative solutions to education and health concerns in the country. Asking for ideas and suggestions, he wants every man, woman and child to join him and his cabinet in the biggest ever national brainstorm session. All Together Now!

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

Dancin’ In The Streets

Posted on December 3, 2013 by howesdubai

The week ended with the inevitable announcement that Dubai would become the first city in the MENA region to host a World Expo. The news will add further impetus to an economy that is already beginning to outshine most others in the world. An estimated US$ 7.0 billion will be spent on related infrastructure projects and 270k jobs will be created as a result of the BIE’s decision. The main site – covering 438 hectares – will be located next to the new Dubai World Central airport. (Incidentally the planned world’s tallest commercial tower, to be built in JLT, will be known as Burj 2020).

There is no doubt that the thaw in international relations with Iran will greatly benefit Dubai’s trade as Sunday’s Geneva deal with key world powers will see a gradual lifting of sanctions. Short-term, this may prove a bigger fillip to the local economy than this week’s Expo news.

OSN, the Dubai-based pay-TV network, was planning an IPO and had been valued at US$ 4.3 billion, by Arqaam Capital. Only five months ago, its worth was put at US$ 2.5 billion so it seems that the August acquisition of Pehla Media & Entertainment (for an undisclosed sum) has definitely added some value! At the end of the week, the company surprisingly stated that it was no longer seeking to list.

It appears that work on the US$ 3 billion Al Habtoor City on SZR is steaming ahead with phase 1 due for completion by 2015. The company has appointed Atkins to carry out multidisciplinary design services on the three proposed towers – two at 75-storeys and the other will be a 52-storey building – that will comprise 1,460 apartments, 11 penthouses, along with leisure, retail and entertainment facilities.

With the emirate’s residential sector booming, Dubai Properties Group wants to see business and entertainment hubs expanding in tandem. Accordingly, it has plans for Dubailand that includes dedicated business centres and a specific business park for the logistics industry. To satisfy the requirements of the ever-growing tourist sector, it will continue to ensure that their needs are met by the latest entertainment and leisure facilities.

There has been progress on the IMG Worlds of Adventures, the second phase of the popular Akar’s eco-tourist attraction ‘Miracle Garden’ and The Sustainable City, a net zero energy project being built by Diamond Developers. Dubailand’s first hotel will open next year and two other projects will be the Safa British Academy and a FIFA approved football centre.

Following the Monday launch of two hundred of its luxury villas at Akoya Park, Damac Properties announced that it would add a further 14 million sq ft (or 50%) to the project area which will include 4.3 million sq ft of parkland, as well as various sporting facilities and an open-air ampitheatre.

Wednesday should have seen 18.8% of Damac shares – in the form of GDRs (global depositary receipts) – on offer for the first time but this was extended for a further four days to take into account any impact from the Expo 2020 decision. Initially, the company had offered shares equivalent to about US$ 500 million, with a price range hovering around the US$ 13 mark. However, at the last minute, the IPO size was dropped to US$ 400 million and the price set at a lower level of US$ 12.25.

Dubai Municipality has confirmed that the eagerly awaited ‘Dubai Frame’ (‘Barwaz Dubai’ in Arabic) will be completed within two years, following the planned start of construction next month. The 150m tall window frame will be located in Zabeel Park and will include a museum and will showcase both ‘old’ and ‘new’ Dubai. Costing US$ 33 million, it is expected to draw in two million visitors every year.

JAFZA announced this week that it had completed work on the first phase (43k sq mt) of its US$ 518 million convention centre whilst Habtoor Leighton has been awarded a US$ 75 million contract for the next phase. The 34–storey JafzaOne tower will receive its first tenants next week, with the whole project (covering 73k sq mt) due for completion by the end of 2014 – seven years after work first started. Its close proximity to the Expo site will make this an attractive location.

This week, the emirate hosted the Global Islamic Economy Summit, attended by over 3,200 delegates. There is no doubt that Dubai’s aim to become the capital of Islamic economy makes financial sense especially when a recent study puts the potential market value at a staggering US$ 6.7 trillion!

The Big 5 was opened on Monday by the Deputy Ruler of Dubai, HH Sheikh Hamdan bin Rashid Al Maktoum. The four-day event attracted over 60,000 visitors and proved another boom week for the emirate’s hospitality sector.

The expected agreement that would have seen Majid Al Futtaim pay US$ 272 million to acquire Egypt’s largest supermarket chain collapsed. No reason was given for the deal to fall through that would have seen the Dubai conglomerate take over 48 Metro supermarkets and Kheir Zaman, the grocery chain.

Damas, the Dubai jeweller, plans a further 11% expansion in its retail outlets with the addition of 34 new shops by the end of H1 2014 – 28 in the UAE and 6 in Saudi Arabia.

Having recently purchased the Index Retail Tower in DIFC, Emirates Reits, a UAE real estate trust company, has bought Gems World Academy in Dubai. Gems will still operate the 1,800 pupil educational facility which opened in 2008. Weeks ago, the Dubai-based education provider sold one of its unnamed schools to PineBridge Investments ME in a similar sale and leaseback arrangement. Last week, it was also reported that GEMS Education’s first foray in the London sukuk market raised US$ 200 million – a third less than was initially targeted.

NPS Energy is apparently up for sale again following a failed 2012 attempt by Norway’s Aker Solutions. It appears that a consortium, including Fajr Capital, could bid up to US$ 700 million for the Dubai-based oil service company.

Two local unnamed construction companies faced the wrath of the immigration court and were fined US$ 534 million and US$ 136 million respectively for hiring 565 workers who were not on their direct sponsorship. The labourers had been sponsored by companies, registered in another emirate, and the Dubai entities had failed to get the appropriate permits from the Ministry of Labour.

Arabtec announced that it had paid US$ 74 million for a further 38% in Target Engineering Construction that will bring its stake in the oil and gas construction company to 98%.

Another record month at Dubai International with both passenger and cargo traffic up by 15.1% (to 5.7 million) and 3.0% to 209k tonnes respectively. With over 55 million passengers to the end of October, the airport will inevitably top a record 65 million this year.

HH Sheikh Mohammed bin Rashid Al Maktoum has approved a law making health insurance compulsory for all expatriates. The Dubai Health Authority will be responsible for its implementation which will take place in several phases over the next three years.

Dubai’s Ruler also approved Dubai’s 2014 budget which sees spending 11% up to US$ 10.3 billion offset by a 13% hike in revenue to US$ 10.1 billion. Dubai expects to have a 41.1% reduction in the deficit to US$ 240 million.

It is estimated that, over the next three years, government and quasi-government entities will have to repay up to US$ 50 billion – most of the debt emanating from the GFC. With that in mind, it is reported that DIC, the private equity division of Dubai Holding, is in talks to sell Mauser, the German packaging company, which it bought in 2007 for a reported US$ 1.2 billion and will probably sell for slightly more. Furthermore Technocorp Holding – a Swatch Group subsidiary – has bought an additional 18% (bringing its shareholding to 58%) of DIC’s share in Rivoli Investments which was bought in 2007.

The Dubai Financial Market General Index opened on Sunday on 2891 points and ended an eventful week 2.2% up at 2955. Over the month, it has gained 1.1% and in 2013 a massive 90.91%! Bellwether stock, Emaar Properties is 71.90% higher YTD, closing at US$ 1.73.

Scarcely a week goes by without some financial institution showing how badly they treat their customers. This time, the much-troubled RBS has been accused of unprincipled behaviour as it allegedly caused the demise of some small firms by charging them high fees and rates. Its property division would then purchase their assets at ‘fire-sale’ prices.

It seems that the Australian dollar is weakening in anticipation of the US Fed’s imminent announcement that it will begin to cut back on its stimulus measures that has resulted in the markets being flooded with ‘easy’ money.

The global economy continues to stutter along and it is unlikely that anything like the required growth needed will be seen in the foreseeable future. It is ironic that in a world where probably 99% of all economists in the history of mankind are still living, they cannot guide governments to follow a road that equalises the right balance of growth and austerity. Five years on from the last crisis, the global economy is without any perceived plan or direction.

Dubai is the place to be this weekend – with the euphoria from the Expo announcement, the Emirates Airlines rugby 7s and the 42^nd national day, the place will be buzzing more than usual. There will be Dancin’ In The Street!

Posted in Finance | Tagged Al Habtoor City, Arabtec, Arqaam Capital, DFM, Dubai, Dubai Expo 2020, Dubai Financial Market, Dubai Properties Group, Emaar, Emirates, emirates airline, Emirates NBD, Expo 2020, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, OSN, UAE, World Expo | Leave a comment

Singin In The Rain

Posted on November 24, 2013 by howesdubai

Although the week started with a sandstorm and ended with a rainstorm, the big news was the massive US$ 99 billion new plane orders made by Emirates at the start of the Dubai Air Show with US$ 76 billion being spent on 150 new Boeing 777-Xs. A further US$ 23 billion went on an order for 50 Airbus 380s, and along with the 51 previously ordered and the 39 already in service bring its investment in the super jumbo to US$ 45 billion. Budget carrier, flydubai surprised the market by a larger than expected order of 100 Boeing 737 MAXs and 11 next generation 737-800s, valued at US$11.4 billion at current prices.

Next door neighbours, Etihad announced a US$ 25.2 billion Boeing order for 82 wide body aircraft including 777-Xs and 787s whilst Qatar Airways waded in with a US$ 19 billion, 50-plane order. By Tuesday, the order book from this air show topped US$200 billion – a record.

Increasing prices and higher rents continue to dominate the real estate sector. According to a recent local report, the average price of a Dubai villa (US$1.39 million) is US$ 0.500 million higher than its Abu Dhabi equivalent. Although property surveys seem to have different findings, they all agree that the local housing boom continues unabated. The latest such report, from Cluttons, indicates a 23% Q2 property price rise has been followed by an 8% jump in Q3; over the past twelve months, values have risen an impressive 53%!

A relatively new entrant into the housing market is National Properties – a subsidiary of National Bonds Corporation – with the launch of 69 upmarket ‘Al Andalus’ units located in The Villa. The Andalusia Collection will be 5-6 bedroom villas, with built-up areas of between 7k – 8k sq ft – built on large block sizes.

Even before this week’s rains, Nakheel’s Al Furjan project, currently with 800 villas occupied, had been troubled by flooding. Despite these problems, the developer had sold a further 400 plots in September and, this week, another 500 blocks for US$ 215 million.

With a September 2015 US$ 5.5 billion loan repayment due, Istithmar, a division of Dubai World, has numerous options to consider from its investment portfolio. If it needed to sell, to raise funds, there is the Atlantis hotel on Palm Jumeirah, with the company having bought out its JV partner’s share earlier in the year.

This week saw the first of two openings for the Hilton Worldwide luxury brand as the Conrad Dubai opened its doors, to be followed next month by the Waldorf Astoria Palm Jumeirah. With the strength of the local hospitality sector, the company may be considering further properties in the near future.

GEMS Education’s foray into the sukuk market raised US$ 200 million – a third less than was initially targeted when the non-call hybrid sukuk was first launched. Because the company was unrated and issuing a subordinated bond, the Dubai-based educator had to pay a premium, with the deal probably priced nearer 12%, than the 8% first estimated. (Only last month, Majid Al Futtaim issued a similar perpetual non-call five note at par, for US$ 500 million, at a 7.5% yield). Dubai Investments are looking at a US$ 300 million Islamic bond issue by the end of the year – this has been delayed from earlier in the year because of the rising interest rates.

Mainly because of the booming economy and subsequent increase in its population, it comes as no surprise to read statistics from Dubai Customs indicating high growth in the emirate’s fruit and vegetable trade that jumped 18.5% in H1 to US$ 1.74 billion. Of this total, imports accounted for US$ 1.25 billion – a rise of 17.9% – and exports and reexports rose by 20.0% to US$ 490 million.

A subsidiary of Drake & Scull, Passavant-Roediger GmbH, is part of a three-company consortium that has won a US$ 148 million contract to construct phase 2 of the Gabal Al Asfar wastewater treatment plant in Egypt.

With the much awaited Expo 2020 announcement due out next Wednesday, HH Sheikh Ahmed bin Saeed Al Maktoum has indicated that the government would invest in excess of US$ 8 billion, if their bid was successful. Although there is conjecture about the economic impact hosting the exposition would bring to Dubai, the cost of infrastructure would be in the region of 9% of GDP – offset by economic growth which could be the equivalent of 2% by 2020, with smaller contributions in the years leading up to the big day. Dubai could also see nearly 300k new jobs created mainly in the construction and hospitality sectors, with visitor numbers in excess of 22 million. (Even without Expo 2020, consulting firm, EC Harris estimate that the value of major construction projects being handed over in 2016 may top US$ 40 billion).

Since the GCC produces more than 20% of the world’s plastic, and the UAE is one of the world’s largest producers of polypropylene, it makes sense for the DGCX to start trading in plastics futures as from February 2014; this initiative sees the first ever plastics contract in the MENA region.

The Dubai Financial Market General Index returned to the black this week closing 2.3% higher, or 66 points, at 2891 on its Sunday opening of 2825 points. Although it is 1.06% down on the month, the YTD gain of 86.38% makes it one of the best performing global bourses.

For example, the Dow Jones hit 16000 for the first time ever whilst the S&P 500 did likewise at 1800 points. Meanwhile the FTSE All World Equity Index reached a 6-year high as the Nikkei in Japan, having risen 7.7% the previous week, was testing 6-month highs. The current bull run is largely attributable to the Fed’s easy money policy which has kept interest rates artificially low and enticed many investors into equity markets. There is now inevitability that the Fed will shortly start easing back on its QE program of pumping US$ 85 billion every month into bond purchases which in turn will see a realignment of the global equity markets – southwards.

A bad week for JP Morgan Chase with confirmation that the bank was hit with a US$ 13 billion fine by the US regulators for their investment role with risky mortgages between 2005 – 2008. It has not been a good H2 for the financial institution as July started with a US$ 0.4 billion penalty for manipulation of the Californian energy market, followed in September by two fines of US$ 0.47 billion and US$ 0.92 billion for erroneous billing to its credit card customers and its now infamous ‘London Whale’ debacle respectively, topped off last month by US$ 4.5 billion for manipulating mortgage bonds to pension funds. How are they still in business?

There is no doubt that economic growth is slowing down in most Asian countries. Thailand, for example, recorded a reduced growth of 2.7% in Q3 – the third straight quarter of economic slowdown. It is expected that the country’s annual growth for the year may reach 3.0% – a lot lower than the August forecast of 4.3% and 54% down on the 2012 figure of 6.5%. One positive factor is the 26.1% annual expansion in the tourist sector which will be hoping that the kingdom can escape serious civil unrest in the coming months.

France is quickly becoming the sick man of Europe and the state of its economy is causing more concern to some than that of say Spain and Italy. The latest Flash Composite Output Index, at 48.5, is down from 50.5 last month – any figure below 50 equates to contraction. It is still in contravention of EU deficit rules and its public debt – at 53% of GDP – is one of the worst in the eurozone.

As Dubai gears up for Wednesday’s Expo 2020 announcement, and if the the correct and logical choice is made, the party starts and we will all be Singin In The Rain!

Posted in Finance | Tagged Arabtec, Atlantis Hotel, Boeing, DFM, Drake & Scull, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, GEMS Education, HH Sheikh Mohammed bin Rashid Al Maktoum, JP Morgan, UAE | Leave a comment